11262	----	Copyright (C) 2007 by Lidija Rangelovska. Please see the corresponding RTF file for this eBook. RTF is Rich Text Format, and is readable in nearly any modern word processing program. 
10612	----	SUPPLY AND DEMAND By Hubert D. Henderson M.A. With an Introduction by J.M. Keynes M.A., C.B. 1922. INTRODUCTION The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions. It is not difficult in the sense in which mathematical and scientific techniques are difficult; but the fact that its modes of expression are much less precise than these, renders decidedly difficult the task of conveying it correctly to the minds of learners. Before Adam Smith this apparatus of thought scarcely existed. Between his time and this it has been steadily enlarged and improved. Nor is there any branch of knowledge in the formation of which Englishmen can claim a more predominant part. It is not complete yet, but important improvements in its elements are becoming rare. The main task of the professional economist now consists, either in obtaining a wide knowledge of _relevant_ facts and exercising skill in the application of economic principles to them, or in expounding the elements of his method in a lucid, accurate and illuminating way, so that, through his instruction, the number of those who can think for themselves may be increased. This Series is directed towards the latter aim. It is intended to convey to the ordinary reader and to the uninitiated student some conception of the general principles of thought which economists now apply to economic problems. The writers are not concerned to make original contributions to knowledge, or even to attempt a complete summary of all the principles of the subject. They have been more anxious to avoid obscure forms of expression than difficult ideas; and their object has been to expound to intelligent readers, previously unfamiliar with the subject, the most significant elements of economic method. Most of the omissions of matter often treated in textbooks are intentional; for as a subject develops, it is important, especially in books meant to be introductory, to discard the marks of the chrysalid stage before thought had wings. Even on matters of principle there is not yet a complete unanimity of opinion amongst professors. Generally speaking, the writers of these volumes believe themselves to be orthodox members of the Cambridge School of Economics. At any rate, most of their ideas about the subject, and even their prejudices, are traceable to the contact they have enjoyed with the writings and lectures of the two economists who have chiefly influenced Cambridge thought for the past fifty years, Dr. Marshall and Professor Pigou. J.M. Keynes. CONTENTS CHAPTER I THE ECONOMIC WORLD §1. THEORY AND FACT §2. THE DIVISION OF LABOR §3. THE EXISTENCE OF ORDER §4. SOME REFLECTIONS UPON JOINT PRODUCTS §5. SOME REFLECTIONS UPON CAPITAL §6. THE FUNDAMENTAL CHARACTER OF MANY ECONOMIC LAWS CHAPTER II THE GENERAL LAWS OF SUPPLY AND DEMAND §1. PRELIMINARY STATEMENT OF THREE LAWS §2. DIAGRAMS AND THEIR USES §3. AMBIGUITIES OF THE EXPRESSIONS, "INCREASE IN DEMAND," ETC. §4. REACTIONS OF CHANGES IN DEMAND AND SUPPLY ON PRICE §5. SOME PARADOXICAL REACTIONS OF PRICE CHANGES ON SUPPLY §6. THE DISTURBANCES OF MONETARY CHANGES §7. THE TRADE CYCLE CHAPTER III UTILITY AND THE MARGIN OF CONSUMPTION §1. THE FORCES BEHIND SUPPLY AND DEMAND §2. THE LAW OF DIMINISHING UTILITY §3. THE RELATION BETWEEN PRICE AND MARGINAL UTILITY §4. THE MARGINAL PURCHASER §5. THE BUSINESS MAN AS PURCHASER §6. THE DIMINISHING UTILITY OF MONEY CHAPTER IV COST AND THE MARGIN OF PRODUCTION §1. AN ILLUSTRATION FROM COAL §2. THE VARIOUS ASPECTS OF MARGINAL COST §3. THE DANGERS OF IGNORING THE MARGIN §4. A MISINTERPRETATION §5. SOME CONSEQUENCES OF A HIGHER PRICE LEVEL §6. GENERAL RELATION BETWEEN PRICE, UTILITY AND COST CHAPTER V JOINT DEMAND AND SUPPLY §1. MARGINAL COST UNDER JOINT SUPPLY §2. MARGINAL UTILITY UNDER JOINT DEMAND §3. A CONTRAST BETWEEN COTTON AND COTTON-SEED, AND WOOL AND MUTTON §4. THE IMPORTANCE OF BEING UNIMPORTANT §5. CAPITAL AND LABOR §6. CONCLUSIONS AS TO JOINT SUPPLY AND JOINT DEMAND §7. COMPOSITE SUPPLY AND COMPOSITE DEMAND §8. ULTIMATE REAL COSTS CHAPTER VI LAND §1. THE SPECIAL CHARACTERISTICS OF LAND §2. THE SCARCITY ASPECT §3. THE DIFFERENTIAL ASPECT §4. THE MARGIN OF TRANSFERENCE §5. THE NECESSITY OF RENT §6. THE QUESTION OF REAL COSTS §7. RENT AND SELLING PRICE CHAPTER VII RISK-BEARING AND ENTERPRISE §1. PROFITS AND EARNINGS OF MANAGEMENT §2. THE PAYMENT FOR RISK-BEARING §3. MONTE CARLO AND INSURANCE §4. RISK UNDER LARGE SCALE ORGANIZATION §5. THE ENTREPRENEUR §6. RISK-TAKING AND CONTROL §7. GENERAL ANALYSIS OF PROFITS CHAPTER VIII CAPITAL §1. A REFERENCE TO MARX §2. WAITING FOR PRODUCTION §3. WAITING FOR CONSUMPTION §4. CAPITAL NOT A STOCK OF CONSUMABLE GOODS §5. THE ESSENCE OF WAITING §6. INDIVIDUAL AND SOCIAL SAVING §7. THE NECESSITY OF INTEREST §8. THE SUPPLY OF CAPITAL §9. INVOLUNTARY SAVING §10. INTEREST AND DISTRIBUTION CHAPTER IX LABOR §1. A RETROSPECT ON LAISSEZ-FAIRE §2. IDEAS AND INSTITUTIONS §3. THE GENERAL WAGE-LEVEL §4. THE SUPPLY OF LABOR IN GENERAL §5. THE APPORTIONMENT OF LABOR AMONG PLACES §6. THE APPORTIONMENT OF LABOR AMONG SOCIAL GRADES §7. THE APPORTIONMENT OF LABOR AMONG OCCUPATIONS §8. WOMEN'S WAGES CHAPTER X THE REAL COSTS OF PRODUCTION §1. COMPARATIVE COSTS §2. THE ALLOCATION OF RESOURCES §3. UTILITY AND WEALTH §4. CRITERIA OF POLICY SUPPLY AND DEMAND CHAPTER I THE ECONOMIC WORLD §1. _Theory and Fact_. The controversy between the "Theorist" and the "Practical Man" is common to all branches of human affairs, but it is more than usually prevalent, and perhaps more than usually acrid in the economic sphere. It is always a rather foolish controversy, and I have no intention of entering into it, but its prevalence makes it desirable to emphasize a platitude. Economic theory must be based upon actual fact: indeed, it must be essentially an attempt, like all theory, to _describe_ the actual facts in proper sequence, and in true perspective; and if it does not do this it is an imposture. Moreover, the facts which economic theory seeks to describe are primarily economic facts, facts, that is to say, which emerge in, and are concerned with, the ordinary business world; and it is, therefore, mainly upon such facts that the theory must be based. People sometimes speak as though they supposed the economist to start from a few psychological assumptions (e. g. that a man is actuated mainly by his own self-interest) and to build up his theories upon such foundations by a process of pure reasoning. When, therefore, some advance in the study of psychology throws into apparent disrepute such ancient maxims about human nature, these people are disposed to conclude that the old economic theory is exploded, since its psychological premises have been shown to be untrue. Such an attitude involves a complete misunderstanding not merely of economics, but of the processes of human thought. It is quite true that the various branches of knowledge are interrelated very intimately, and that an advance in one will often suggest a development in another. By all means let the economist and psychologist avoid a pedantic specialism and let each stray into the other's province whenever he thinks fit. But the fact remains that they are primarily concerned with different things: and that each is most to be trusted when he is upon his own ground. When, therefore, the economist indulges in a generalization about psychology, even when he gives it as a reason for an economic proposition, in nine cases out of ten the economics will not depend upon the psychology; the psychology will rather be an inference (and very possibly a crude and hasty one) from the economic facts of which he is tolerably sure. But the purpose of economic theory is not merely to describe the facts of the economic world; it is to describe them in their proper sequence and true perspective. It must begin with those facts which are most general and which have the widest possible significance. Those are not likely to be the facts which our practical experience forces most insistently upon our notice. For it is the particular and not the general, the differences between things rather than their resemblances, that concern us most in daily life. Nor are we likely to find the universal facts which we require in the sphere of public controversy. We must rather look for them in the dark recesses of our consciousness, where are stored those truths which are so obvious that we hardly notice them, which are so indisputable that we seldom examine them, which seem so trite that we are apt to miss their full significance. §2. _The Division of Labor_. There is one such truth in the economic sphere which it is essential to appreciate vividly and fully, with the widest sweep of the imagination and the sharpest clarity of thought. Man lives by cooperating with his fellow-men. In the modern world, that cooperation is of a boundless range and an indescribable complexity. Yet it is essentially undesigned and uncontrolled by man. The humblest inhabitant of the United States or Great Britain depends for the satisfaction of his simplest needs upon the activities of innumerable people, in every walk of life and in every corner of the globe. The ordinary commodities which appear upon his dinner table represent the final product of the labors of a medley of merchants, farmers, seamen, engineers, workers of almost every craft. But there is no human authority presiding over this great complex of labor, organizing the various units, and directing them towards the common ends which they subserve. Wheel upon wheel, in a ceaseless succession of interdependent processes, the business world revolves: but no one has planned and no one guides the intricate mechanism whose smooth working is so vital to us all. Man, indeed, can organize and has organized much. Within a large factory the efforts of thousands of work-people, each engaged on the repetition of a single small process, are fitted together so as to form an ordered whole by the conscious direction of the management. Sometimes factory is joined with factory, with farms, fisheries, mines, with transport and distributing agencies, as one gigantic business unit, controlled by a common will. These giant businesses are remarkable achievements of man's organizing gifts. The individuals who control them wield an immense power, which so impresses the public imagination that we dub them "kings," "supermen," "Napoleons of industry." But how small a portion of man's economic life is dominated by such men! Even as regards the affairs of their own businesses, how narrow, after all, are the limits of their influence! The prices at which they can buy their materials and borrow their capital, the quantities of their products which the public will consume, are factors at once vital to their prosperity and outside their own control. A great business, like a nation, may cherish visions of self-sufficiency, may stretch its tentacles forward to the consumer and backwards to its supplies of raw material; but each fresh extension of its activities serves only to multiply its points of contact with the outside world. When those points are reached, the largest business, like the smallest, is out on the open sea of an economic system immeasurably larger and more powerful than itself. There it must meet--the better perhaps for its inherent strength and accumulated knowledge--the impact of rude forces, which it is powerless to control. Beneath the blasts of a trade depression, or some other tendency of world-wide scope, the authority of the mightiest industrial magnate, and equally of any Government, assumes the same essential insignificance as the pride of a man humbled by contact with the elemental powers of nature. §3. _The Existence of Order_. The parallel can be pursued further with advantage. Just as in the world of natural phenomena, which for long seemed to man so wayward and inexplicable, we have come gradually to perceive an all-pervading uniformity and order; so there is manifest in the economic world, uniformity, order, of a similar if less majestic kind. Upon the cooperation of his fellowmen, man depends for the very means of life: yet he takes this cooperation for granted, with a complacent confidence and often with a naive unconsciousness, as he takes the rising of to-morrow's sun. The reliability of this unorganized cooperation has powerfully impressed the imagination of many observers. "On entering Paris which I had come to visit," exclaimed Bastiat some seventy years ago, "I said to myself--Here are a million of human beings who would all die in a short time if provisions of every kind ceased to flow towards this great metropolis. Imagination is baffled when it tries to appreciate the vast multiplicity of commodities which must enter to-morrow through the barriers in order to preserve the inhabitants from falling a prey to the convulsions of famine, rebellion, and pillage. And yet all sleep at this moment, and their peaceful slumbers are not disturbed for a single instant by the prospect of such a frightful catastrophe. On the other hand, eighty departments have been laboring to-day, without concert, without any mutual understanding, for the provisioning of Paris." The theme may well excite wonder. But wonder should always be watched with a wary eye; for he is apt to bring in his train a hanger-on called worship, who can do nothing but mischief here. It is a short step from a passage like that quoted above to a glorification of the existing system of society, to a defence of all manner of indefensible things; and a cross-grained attitude towards all projects of reform. It is a short step; but it is one which it is quite unjustifiable to take. For the evils of our economic system are too plain to be ignored; too many people have harsh personal experience of the wastefulness of its production, the injustice of its distribution; of its sweating, its unemployment and slums. And when the attempt is made to plaster over evils, such as these with obsequious rhetoric about the majesty of economic law, it is not surprising that the spirit of many men should revolt and that they should retort by denying the existence of order in the business world, by declaring that the spectacle which _they_ see is one of discord, confusion and chaos. And then we are engulfed in a controversy as stale, flat and unprofitable as that between the "theorist" and the "practical man." The truth is that the language of praise and obloquy is quite inappropriate. In the first place, it may be well to note that the order of which I have spoken manifests itself not merely in those economic phenomena which are beneficial to man, but hardly less in those which work to his hurt. Even in those alternations of good and bad trade, which spell so much unemployment and misery, there is discernible a rhythmic regularity like that of the process of the seasons, or the ebb and flow of the tide. This is not an elegance to be admired. Furthermore, in so far as the order comprises adjustments and tendencies which are beneficial (as, indeed, is mainly true), there is no warrant for assuming that these are either adequate to secure a prosperous community or dependent upon the social arrangements which happen to exist. Let us, therefore, refrain from premature polemics and examine in a spirit of detachment some further aspects of the elaborate, but yet unorganized, cooperation of which so much has been already said. §4. _Some Reflections upon Joint Products_. A quite inadequate idea of the complexity of this coöperation is obtained by dwelling on the numbers of people who participate in it, or the immense distances over which it extends. The deficiency can be partially supplied by referring to some of the more obvious of the many subtle interconnections which exist between different commodities and different trades. There are innumerable groups of commodities (which it is customary to term "joint products") such that the production of one commodity belonging to the group necessarily implies or very greatly facilitates the production of the others. Wool and mutton; beef and hides; cotton and cotton-seed are a few familiar illustrations. The important feature of these "joint products" is the fairly precise relation which must exist between the quantities in which the different products are supplied. If you plant a certain crop of cotton, it will yield you so much cotton lint and so much cotton-seed. You can, of course, if you choose, throw away part of the seed, as indeed at one time planters used to do; but unless you do this, you cannot vary the proportions of the two things which you will have for sale. Similarly, if you keep a flock of sheep, or a herd of cattle, you will obtain wool and mutton in the one case, or beef and hides in the other, in proportions, which indeed you can vary within certain limits by choosing a different breed,[1] but which you cannot radically transform. When, however, we turn to the uses to which these products are put, no similar relation is to be discovered. Cotton lint is used chiefly for making articles of clothing; cotton-seed for crushing into oil, on the one hand, and cake for cattle fodder on the other. There is no apparent connection of any kind between the demands for these different things, and still less is there any obvious reason why these demands should bear to one another the particular proportions which characterize their respective supplies. It is very much the same with wool and mutton; with beef and hides; with all "joint products." Why should we consume mutton on the one hand and woolen clothing on the other, in a ratio at all commensurate with that in which they are yielded by the sheep? [Footnote 1: These possibilities of small variation are of very great importance as will be shown in Chapter V, but they do not affect the present argument.] What, then, might we expect to find if order was nonexistent in the economic world? Surely that some things such as wool would be produced in quantities many times in excess of the demand for them, quite possibly five, ten, or twenty times in excess; while conversely the supplies of others such as mutton might fall far short of what was required. But in practice we find nothing of the sort. Somehow it comes about that an equilibrium is established between the demand for and the supply of every commodity; and that this applies to wool and mutton, to beef and hides, as surely as to commodities which are produced quite independently. It is true that this equilibrium is a rough, imperfect one; and it may happen that what is called a "glut" of wool may co-exist for a short period with what is called a scarcity of mutton. But qualifications of this nature are in the strictest sense of the phrase, the exceptions which prove the rule. For the departures from equilibrium which gluts and scarcities represent are always transient and are usually confined within narrow limits. A strong prevailing trend towards an adjustment of demand and supply is unmistakably manifest amid all the vagaries of changing circumstance. Let me carry the argument a step further for the benefit of any reader who is restrained by a repugnance too deep and instinctive to be readily overcome, from admitting fairly to his mind that conception of order which I am endeavoring to emphasize. He will in all probability be one who, cherishing ideals of a better and fairer system of society, looks forward to a time when an organized coöperation will be substituted for what he regards as the existing chaos. Let us suppose that his visions were fulfilled as completely as he could desire; and that an immense system of Socialism were in existence, embracing not one country only, but the whole world. Suppose all the difficulties of human perversity and administrative technique to have been surmounted and a wise, disinterested executive to be in supreme control of our business life. Let us suppose all this, and ask only the question: How would this executive treat the humdrum case of wool and mutton? How would it decide the number of sheep it would maintain? Shall we suppose that it is inspired by the ideal "to each according to his need," and that it resolves accordingly that the commodities which people require for a decent standard of life shall be supplied to them as a matter of course? How, then, would it proceed? It might estimate the amount of woolen clothing which a normal family requires, allowing for differences in climate, and possibly indulging somewhat the caprices of human taste. On this basis, a certain number of sheep would be indicated. It might perform a similar calculation for mutton, and again a certain number of sheep would be indicated. But it would be an extraordinary coincidence if the numbers which resulted from these independent calculations were nearly equal to one another, or were even of the same order of magnitude; and, if they differed widely, what number would our world executive select? Would it decide to waste an immense quantity of either wool or mutton; or would it decide that it could not, after all, supply the full human needs for one or other of the commodities? Of course, if the executive were sensible it could solve the problem satisfactorily enough. It could retain the monetary system we know to-day and it could supply the commodities to the consumers, not as a matter of right, but by selling them to them _at a price_. This price it could then move upwards or downwards, raising, say, the price of mutton and reducing that of wool, until it found that the consumption of the two things was adjusted in the required ratio. But if it acted in this manner, what essentially would it be doing? It would be seeking by deliberate contrivance to reproduce, in respect of this particular problem, the very conditions which occur to-day without aim or effort on the part of anyone at all. The moral of this illustration must not be misinterpreted. It does not show the folly of Socialism or the superiority of Laissez-faire. What it does show is the existence in the economic world of an order more profound and more permanent than any of our social schemes, and equally applicable to them all. §5. _Some Reflections upon Capital_. Another aspect of the great cooperation is of even greater significance. It embraces not only a multitude of living men, but it links the present together with the future and the past. The goods and services which we enjoy to-day we owe only in part to the labors of the week, the month, or the year, only in part even to the efforts of our contemporaries. The men, long since dead and forgotten, who built our railways, or sunk our coal mines, or engaged in any of a great variety of tasks, are still contributing to the satisfaction of our daily wants. The expression is not altogether fanciful; for, had it not been reasonable to expect that those labors would be of use to us to-day, many of them in all probability would never have been undertaken. It was to meet our present wants, and even our future wants, that many men toiled on monotonous tasks ten, twenty, thirty years ago. And yet, of course, we should deceive ourselves if we supposed that this was the motive of these men, that our welfare was the centre of their heart's desire. We in our turn dedicate to the future, and often to a distant future, an immense portion of our energies. Let any reader who doubts this, study the statistics of the occupations of the people, and reflect on how long a period must elapse before the labors of this trade or that can fulfil their ultimate function. How long would the period be in the case of a man making bricks, which will later be employed in the erection of a factory, where machinery will be made, to equip an electrical generating station designed to supply, over a period of many years, light, heat, and power to people living in a remote Continent? A longer time, it may be hazarded, than he is accustomed to look ahead. Like the daily cooperation of living men, this cooperation of past, present and future is essential to the well-being of mankind, and yet it is undesigned and unorganized. As private individuals, men do, indeed, deliberately provide for their own future, and for that of their kith and kin: as the directors of businesses, they try to forecast the trend of demand. But such conscious calculations and deliberate acts would avail little if they stood alone. They are hardly more than the necessary spokes in the great wheel which regulates the relations of past, present and future. The hub of the wheel is an elaborate system of borrowing and lending, essentially similar to the buying and selling of commodities. The private individual in order to provide for his family or for his old age "saves" and "invests." But what exactly does this mean? It means that he transfers so much purchasing power, which he might have spent on his personal pleasures, to some one else in return for the expectation of receiving, year by year in the future, he and his heirs after him, a certain smaller quantity of purchasing power. The other party to the transaction will be, we may suppose, a business man who enters into it because he sees the opportunity of a promising industrial development, to undertake which he requires more purchasing power than he himself possesses. And, because this transaction is entered into, a smaller number of us will shortly be engaged in making motorcars, or gramaphones, and a larger number of us in making factories and machinery, which will later enhance the world's productive power. Many transactions of the kind take place daily in modern communities, and their multiplicity gives rise to a mass of phenomena with which we are all tolerably familiar. We recognize a short-loan market, a stock exchange, a number of "markets" where lenders and borrowers are brought together by the aid of various intermediaries, such as banks, bill brokers, and stock jobbers, who correspond to dealers in commodities. Between these different specialized markets, we are aware of an interconnection so close and strong that we speak more generally of a Capital Market, of which the stock exchange, the short-loan market and so forth, are the component parts. Now, "market" is a word which was originally used to denote a place where tangible commodities were bought and sold; and the more closely we examine the phenomena of the Capital Market, the more closely do we perceive the profound resemblance between the mechanism of borrowing and lending, and that of buying and selling. Corresponding to the price of a commodity is the rate of interest (in the short-loan market we actually call the rate of Discount "the price of money," and speak of money being cheap or dear); and between the rate of interest, the demand for and the supply of capital there exist relations precisely similar to those between price, demand, and supply in commodity markets. Above all there is the same strong prevailing trend towards an adjustment of demand and supply. This fundamental resemblance between two such apparently incommensurable things as the buying of material commodities and the borrowing of capital is highly significant; it is another instance of that order in the economic world, of which the reader may now be growing weary. But so difficult is it to see clearly and fully something which one sees, as it were, every day of one's life, that a few more moments of reflection on the special case of capital will be time well spent. Let us revert then to our fantasy of a world socialist commonwealth; and humbly submit another poser to its supreme executive. The question this time will be whether some great constructional work, such, let us say, as the recently mooted Severn barrage scheme, should or should not be undertaken. Let us suppose that the costs and future benefits of the undertaking can be estimated accurately; and that the problem reduces itself to one of expending now a sum, let us say, of $100,000,000, with the prospects of obtaining in the future an income of power, or whatever it may be, worth $5,000,000 per annum. I have assumed for the sake of simplicity that we shall still be reckoning in terms of money, though possibly the executive may have substituted Marxian labor units; but it is quite immaterial to the present argument what the measuring rod may be. The point to be observed is, that it is impossible to tackle the problem at all without the conception of a rate of interest. For suppose that you tried to do without it, and said, "We shall take a long view. The interests of the future are no less our concern than those of the present; we shall not discriminate between them. We shall regard as an enterprise worthy to be undertaken whatever promises to yield in the course of time a return larger than the outlay." Where will this lead you? The particular proposal set out above would clearly pass the test; for in twenty years the resultant benefits would have added up to a figure equivalent to the initial cost. But equally clearly, the cost might have been more than $100,000,000; it might have been $250,000,000, $500,000,000, whatever figure you care to take, and if you extend the period similarly to fifty or one hundred years, sooner or later the gains would top the cost. Now there is no limit to the enterprises which would pay their way on this basis; and it would be quite impossible to undertake them all. For they would swallow up all and more than all your labor and your materials, and would leave you with no resources with which to meet the recurrent daily wants of men. Clearly, then, in some way or other, you must pick and choose, you must reject some enterprises as _insufficiently_ worth while. But how would you proceed to choose? Without a clear principle, a simple criterion to guide you, you would be plunged in utter chaos. You could not say, "Let all proposals involving capital expenditure be submitted to a central committee, who shall compare them with one another in a sort of competitive examination and, after deciding the number of applications they can pass on the basis of the volume of resources which they can devote to the future, award the places to those which head the list." Such a prospect is a nightmare of officialism and delay. You would be driven to formulate a simple, intelligible rule or measure, and leave that rule to be applied by the unfettered judgment of innumerable men to individual problems, as and when they arose. And for such a rule or measure, you could not do better than a rate of interest; you would have to lay it down that only those projects should be approved which promised a return of 6 per cent, or whatever it might be. Even in deciding what it should be, the limits of your choice would be narrowly confined. If, for instance, you fixed on 1 or 2 per cent, you would probably discover that you had not achieved your object, that the undertakings for distant returns which passed this test, still consumed far more resources than you could spare. You would be compelled then to raise the rate until it had cut these enterprises down within manageable limits. But, once more, what essentially would you be doing? You would be using the instrument of the rate of interest to adjust the demand for and supply of capital, though indeed the interest might not be paid away as now to private individuals. You would be reproducing by the method of deliberate trial and error, the adjustments which occur automatically as things are, in the actual world. Once again the most perfectly contrived Utopia would be compelled to pay to the unorganized coöperation of our epoch the sincerest flattery of imitation. §6. _The Fundamental Character of many Economic Laws_. But again perhaps a word of warning may be desirable. There is much controversy in these days about something called "Capitalism" or "The capitalist system." When these words are used with any precision, they usually refer to the arrangement so prevalent at present, whereby the ownership and sole ultimate control of a business rests with those who hold its stocks and shares. There is much to be said upon the merits and demerits of this system; something will perhaps be said upon the matter in the fifth volume of this series; but I shall not discuss it here. Nothing that I have said so far has any real bearing on it whatsoever; to suppose that it has, is indeed to miss the whole point of this chapter. The order, which I have sought to reveal, pervading and moving the most diverse phenomena of the economic world, would be a far less noteworthy and impressive thing were it merely the peculiar product of capitalism. Merchant adventurers, companies, and trusts; Guilds, Governments and Soviets may come and go. But under them all, and, if need be, in spite of them all, the profound adjustments of supply and demand will work themselves out and work themselves out again for so long as the lot of man is darkened by the curse of Adam. CHAPTER II THE GENERAL LAWS OF SUPPLY AND DEMAND §1. _Preliminary Statement of Three Laws_. The recognition of order in any branch of natural phenomena is but the prelude to the formulation of a set of laws, the simpler as the order is more universal, which describe, and as we say, explain it. Thus the perception of the even, elliptical courses of the heavenly bodies led to the statement of the law of gravitation and the laws of motion. In economics, similar laws have long since been enunciated, and have proved themselves such valuable instruments for the understanding of the daily problems of the workaday world, that they have been woven into the texture of our ordinary speech and thought. I have already touched upon them in the preceding chapter. But it is now desirable to set them out in order, in the most concise and formal manner possible. LAW I. When, at the price ruling, demand exceeds supply, the price tends to rise. Conversely when supply exceeds demand the price tends to fall. LAW II. A rise in price tends, sooner or later, to decrease demand and to increase supply. Conversely a fall in price tends, sooner or later, to increase demand and to decrease supply. LAW III. Price tends to the level at which demand is equal to supply. These three laws are the cornerstone of economic theory. They are the framework into which all analysis of special, detailed problems must be fitted. Their scope is very wide. I have purposely refrained from introducing into my statement of them any reference to commodities; for they extend far beyond commodities. Subject to an important qualification, they apply to capital, the price paid for the use of capital being what we call the rate of interest. They apply hardly less to "services," to the remuneration of labor of every kind and grade. People sometimes protest warmly against the idea of treating labor "like a commodity." If this indignation expresses no more than a belief that in matters concerning conditions of work, and relations between employees and the management, the sensibilities of human nature should be taken into due account, it is based on elementary decency and commonsense. But if, as sometimes appears, it is directed against the fact that the remuneration of labor is controlled by the laws of supply and demand, it is a mere baying at the moon, with singularly little provocation. For these laws are in no way peculiar to commodities, and it is no one's fault that they include commodities too within their scope. But let us go back to the laws themselves, and probe them and dissect them, and turn them this way and that, so that we may perceive their full content, and grasp it firmly in our minds. The third law implies a prevailing tendency for demand to be equal to supply. This tendency, as was suggested in Chapter I, can be verified by anyone from his experience and observation (provided he is a reasonable person, and not the tiresome kind who would dispute the law of gravitation because he sees that a feather falls to the ground more slowly than a stone). But it can also be deduced as a corollary from the two preceding laws; and to regard it in this way will help us to appreciate its significance. Start, for instance, by supposing that demand is in excess of supply. Then the price will tend to rise. After the price has risen, the supply will become larger, while the demand will fall away. The excess of demand with which we started will thus clearly be diminished. But if there remains any portion of this excess, the same reactions will continue; the price will rise further, and for the same reason; demand will be further checked and supply further stimulated. In other words, these forces must persist until the entire excess of demand over supply is eliminated. If we start by supposing supply to exceed demand, the converse chain of sequences will operate. Now these very simple steps of reasoning illuminate the nature of the normal equilibrium of demand and supply. They reveal that the equilibrium is established and maintained by the agency of _changes in price_, and they enable us to lay it down as perhaps the most important thing that can be said about the price of anything that it will tend to be such as will equate demand and supply. But that is not all that they reveal. They reveal also the extreme dependence of both demand and supply upon price. Now this is a fact which it is most important to realize vividly. It is apt to be obscured by customary modes of speech. In ordinary times the prices of most commodities and services do not change by very much, unless indeed over a long period of years; the amounts demanded and supplied may therefore seem to maintain a fairly constant level; and we may be tempted to speak of Great Britain producing so many million tons of coal, or America consuming so many millions of motor-cars per annum, almost as though these quantities were independent of price considerations. But we should never forget that there is no service or commodity produced by man, however essential it may seem, the demand for or the supply of which might not be reduced to nothing, if the price were sufficiently raised on the one hand, or lowered on the other. How easy it is sometimes to forget this simple truth may be seen from the mistake so commonly made of supposing, because the peoples of Central Europe were left, on the cessation of the war, starving and destitute of the means of life and the materials of work, that they must necessarily become heavy purchasers of imported goods; without pausing to consider whether the prices were such as they could afford to pay. §2. _Diagrams and their Uses_. It will help to prevent mistakes like this and more generally to make sharp and clear the fundamental relations which exist between demand, supply and price, if we exhibit them pictorially in the form of a diagram. Such diagrams are of great service in many parts of economic theory, not because they can prove anything which could not be proved otherwise, but because, being really a simpler medium of expression than words, they enable the mind to grasp more readily and to retain more vividly the essential facts of complex relations. Figure 1: Y | | S' | * D | ** |* ** | ** * | ** * | * * | ** ** | ** * | ** * | ** ** | ** * | ** Q ** _l_|--------------*------------* R | |*** ** | | ** P ** _m_|--------------------*** | | *** |*** _k_|--------------***----+---** _r_ | _q_*| | *** | *** | | **** | *** | | **** | *** | | *** S |**** | | **** | | | ** D' | | | | | | | | | | | | 0+-------------------------------------------------------- X' N M. Figure 1 In Fig. 1 the curve DD' represents the conditions of demand. It is supposed to be drawn in such a way that if any point, Q, be taken on the curve, and the perpendicular QN be drawn to meet the base line, or axis OX, then ON will represent the amount that will be demanded at a price represented by QN (or O_l_). In other words, distances measured along OY represent prices, and distances measured along OX represent quantities of the commodity, or service, or whatever it may be. Clearly, then, the demand curve, DD', must slope downwards from left to right, since the lower the price asked, the greater will be the amount demanded. Similarly the curve SS' represents the conditions of supply. It is supposed to be so drawn that if any point _q_ be taken upon it, and the perpendicular _q_N be drawn to meet OX, then ON will represent the amount that will be supplied at a price represented by _q_N (or O_k_). Equally clearly this supply curve must slope upwards from left to right, since the higher the price obtainable, the greater will be the quantity offered. Take the point P where the two curves meet, and draw the perpendicular PM to meet OX. Then the third law enunciated at the beginning of this chapter corresponds to the statement that PM or O_m_ will represent the price at which the commodity or service will be exchanged. It can readily be seen that no other price could be maintained. For suppose the price to be less than O_m_, suppose it to be O_k_, then, at this price, ON (or _kq_) will be the amount supplied, and _kr_ the amount demanded. The demand will thus exceed the supply, and the price will tend to rise, i.e. to move upwards towards O_m_. Similarly if we suppose the price to be O_l_, which is larger than O_m_, the supply (_l_R) will exceed the demand (_l_Q) and the price will fall downwards towards O_m_. Thus, again, we have deduced Law III from Laws I and II with the form and precision of a proposition in Euclid. Now, when once the eye has become familiar with this diagram, it ought to be impossible for the mind to lose even momentarily its grip on the fact that demand and supply are both dependent upon price. For these curves do not represent any particular amounts; they represent a series of _relations_ between amount and price; if the price is QN the amount demanded is ON, and so forth. The terms demand and supply in the sense, in which I have been using them, of the respective amounts demanded and supplied are, indeed, strictly meaningless without reference to some particular price. The reference may sometimes be implicit; but, whenever there is a chance of ambiguity, it should be explicitly made. §3. _Ambiguities of the Expressions, "Increase in Demand," etc_. It is the more important to be precise upon this point, in that there is a further possible confusion which we have now to consider. Demand and supply, as we have seen, are dependent upon price; but equally clearly they are dependent upon other things as well. Demand depends upon the needs, tastes and habits of the people, as well as upon the length of their purse; supply depends upon such things as the cost of production in the case of commodities. None of these things are constant factors, all of them are liable to change, and it may well happen that we shall want to consider in some concrete problem the probable consequences of such a change. Now the most usual and natural way of describing such changes in the medium of words is to use the expression "increase" or "decrease in demand," and "increase" or "decrease in supply," the same expressions, which we employed before to describe the consequences of a change in price. This identity of language conceals a fundamental distinction between the phenomena described; and to make this distinction plain we cannot do better than revert to our diagrammatic presentation of the laws. Figure 2: Y | | _d_| |. | . | . _s'_ | . . D | . . |** . . * S' | ** .. . * | ** . . * | ** . .. * | * .. . ** | ** . . ** | ** .. .. ** | * . . * | ** . . * | ** .. . ** | ** .. .. ** | ** .. .. ** | ** . .. ** | ** p' .. ** | **.. .. ** | ..|**p **._p_ | .. | **** | .. | ... |**|** | .. | .. *| | *| .. | ..... *** | | |** . _s_|...... *** | | | ** .. | *** | | | ** ... | ***** | | | ** ... S |***** | | | ** .. | | | | *** .._d'_ | | | | *** | | | | ** | | | | **D' | | | | | | | | 0+--------------------------------------------------------- M' M _m_ Figure 2 In Fig. 2 we start as before with our demand curve, and supply curve, cutting one another at the point P. We then suppose that some alteration takes place in the conditions of demand; there has been a growth in the general taste for the commodity or service, and the demand, as we say, has increased accordingly. How is this fact to be represented in the diagram? Plainly not by taking another point on the curve, DD', at a further distance from OY. For this would merely indicate the larger amount that would be taken, if the conditions of demand had remained unaltered but the sellers had reduced their prices. The correct way of representing the change we have supposed is to construct a new demand curve (in the figure, the dotted curve _dd'_), lying at every point above the old demand curve. For this indicates that larger quantities will be purchased at the old prices, which is exactly what we want to represent. Similiarly if we wish to represent a change in the conditions of supply, such as might result, in the case of a commodity, from a tax imposed on its production, we must draw a new supply curve, _ss'_, which in the case supposed, must lie everywhere above the old supply curve. On the other hand, the decrease or increase in demand or supply, _resulting_ from a change in price, is represented simply by a shifting of the equilibrium from one point to another on the same curve. The striking pictorial contrast between a movement from one curve to another, and a movement along the same curve should help to make vivid to our minds the fundamental distinction between a change in the _conditions_ of demand, arising from new tastes, enhanced purchasing power, etc.; and a mere change in the amount purchased resulting from an alteration in the price which the sellers ask. Words, as this necessarily cumbrous sentence shows, are a clumsy instrument for the expression of abstract relations; it is not very easy to see which words in a sentence are the significant, commanding ones, and which are performing, as it were, ordinary routine duties. A diagram is not exposed to similar ambiguities of emphasis. The particular distinction, to which attention has been called, is important. The reader who has grasped it clearly will be able to perceive many instances of the confusion arising out of its neglect in the ordinary discussions of economic questions which take place in the press and on the platform. It is not uncommon, for instance, for an argument to run something like this: "The effect of a tax on this commodity might seem at first sight to be an advance in price. But an advance in price will diminish the demand; and a reduced demand will send the price down again. It is not certain, therefore, after all, that the tax will really raise the price." A glance at the diagram will keep us out of such a bog of sophistry and muddle. For if we suppose the amount of the tax per unit of the commodity to be represented by S_s_, the curve _ss'_ (drawn, as it is, roughly parallel to SS') will represent the new conditions of supply after the tax has been imposed. The new position of equilibrium will be given by the point P', where _ss'_ cuts DD', the demand curve. Now P' lies to the left of P the old point of equilibrium; hence, since DD' _must_ slope downwards from left to right, it is clear that, if, as it is fair here to assume, the _conditions_ of demand have remained unaltered, the new price P'M', must be greater than the old. §4. _Reactions of Changes in Demand and Supply on Price_. Having now made clear the meaning that must be attached to the terms, let us consider the question which naturally arises, whether we can lay down any general propositions or laws as to the effect upon price, of an increase or decrease in demand or supply. Another glance at the diagram suggests that we can. An increase in demand is represented in Fig. 2 by a movement from DD' to _dd'_, which cuts the supply curve, SS', at _p_, to the right of P. Since the supply curve (drawn, as it is best to draw it, to represent the amount which will be supplied in response to a given price) must always slope upwards from left to right, the new price, _pm_, must be greater than the old, PM. Conversely a decrease in demand is represented by a movement from _dd'_ to DD', and the new price is seen to be less than the old. We have already seen that a decrease in supply, which is represented by a movement from SS' to _ss'_ results in a higher price; and it is the obvious converse that an increase in supply will have the opposite effect. It would seem then that we might lay down quite generally that an increase in demand or a decrease in supply will raise the price while a decrease in demand or an increase in supply will lower it. But here it is necessary to be cautious. All conclusions as to the effects of causes are necessarily based, implicitly, if not explicitly, upon the assumption "other things being equal." This method of reasoning, which some people appear to find so irritating in the economic sphere, and as they say so "theoretical" and "unreal," is one which they adopt readily enough in every other department of life. No one, for instance, objects to the statement that the sun, when it comes out, makes a room warmer, although it may very well happen, if a fire is dying at the same time, that the room grows colder in point of fact. For in our general statement we assume implicitly that "other things" such as fires, are unchanged. But assumptions of this kind are legitimate only when there is no reason to suppose that the cause, the effects of which are being studied, will itself produce a change in the "other things." If (as I have often been told; I really do not know if it is true) the rays of the sun help to put a fire out, the statement made above would be the better for some qualification. Now we can only say that an increase in demand raises price if we assume the conditions of supply (as represented by the supply curve) to remain unchanged. But in practice, an increase in demand may cause a change in the _conditions_ of supply. An increase, for instance, in the demand for a commodity may give rise to a revolution in the methods of production, to the introduction of labor-saving machinery and so forth, which will eventually result in the commodity being produced more cheaply. It will certainly take a considerable time before reactions of this kind can exert an appreciable influence; and we can, therefore, feel reasonably sure that over a short period an increase in demand will raise the price. But we cannot be sure what the ultimate effect will be. A similar alteration in the condition of demand is less likely to result from an increase or decrease in supply; but it may conceivably occur. We must, therefore, be careful to qualify any general propositions which we lay down in this connection, by explicit reference to a short period of time. We can add the following to our body of laws:-- LAW IV. An increase in demand, or a decrease in supply will tend to raise the price for a short period at least. Conversely a decrease in demand, or an increase in supply will tend to lower the price for a short period at least. This law, like the others, applies to commodities, services, capital, to anything which can be said, literally, or by analogy, to have a price. "A short period" is, however, a vague expression and, since precision is the hallmark of an important law, we must accord to this one a status inferior to that which the preceding three can rightly claim. §5. _Some paradoxical reactions of price changes on supply_. Let us turn, though, once more to these earlier laws, and with a heightened critical sense let us submit them to the test of the whole gamut of our experience, and see if in any of them we can find the smallest flaw. The first of them will pass through the ordeal--let each reader prove it for himself--unscathed. The second will emerge with a few hairs, as it were, singed. It tells us, for instance, that a rise in price will tend to augment the supply. Now there are some things the supply of which cannot possibly be augmented; these are the capital resources of nature, of which land is the most important for our present purpose. Land is bought and sold, it commands a price. In a certain sense, it may be said to be possible to increase the supply of land, in response to a rise in price, by drainage and reclamation schemes; and it will certainly happen that a rise in the price which land can command for any particular purpose will increase the amount which is devoted to that purpose. But, speaking broadly, the supply of land available for purposes of every kind is a fixed unvarying factor, with an inertia which the cajolery of price-changes is powerless to disturb. This is a most important fact, and it gives rise to some peculiar features of the price and rent of land, which we shall have to consider later as a separate problem. It constitutes a limiting case rather than an exception to the general law. But we have not yet done with the reactions of price upon supply. In the case of capital, the nature of those reactions has been much discussed as a highly controversial question. That a rise in the rate of interest will cause some people to save more than before, is generally admitted; but it is pointed out that the effect upon others may be the exact opposite, because it means that they do not need to save so much to acquire the same future annual income. It is unwise to say dogmatically that the former tendency outweighs the latter; though upon the whole it seems highly probable that it does. We cannot, therefore, in this case feel confident that a change in price will react upon supply in the manner which our law indicates. Similarly it is possible to argue that a rise in the general level of real wages may reduce the supply of labor, even, or some might say particularly, if the term is used to denote not the number of workpeople, but the quantity of work done. For there may be a tendency for workpeople, when more comfortably off, to work less regularly or less hard. Here again we cannot be sure. In none of these cases, however, including that of land, is there any reason to doubt that a rise in price will diminish _demand_, or conversely that a fall will increase it. Since, therefore, in the reasoning by which we deduced the third law, the conclusion will hold good, even if the effects of price-changes on supply are of the above paradoxical kind, provided that they do not continually outweigh the effects upon demand, there is no reason to cast doubt on the solidity of Law III, which, indeed, as we suggested before, commends itself directly to experience. But Law II seems now, perhaps, somewhat the worse for wear. The damage, however, is not considerable. For in each case the uncertainty arises only when we are dealing with one of the factors of production, land, labor or capital, _regarded as a whole_. If we are dealing with the capital available for a particular industry, a rise in the rate of profit in that industry will certainly increase the supply of capital available there; for it will tend to attract savings that might otherwise have been employed elsewhere. We can even be fairly sure that an increase in the general rate of interest prevailing in any particular country will increase the total supply of capital available for the businesses of that country, since capital has in modern times acquired a considerable migratory power. In the case of labor, we cannot go so far as this; but here, too, there is no doubt that an increase in the remuneration offered in any particular occupation will attract an increased labor supply (always supposing, of course, that "other things are equal"). No similar difficulty arises for land, labor or capital, as regards the effect of price-changes on demand; while for ordinary commodities there is no such difficulty on the side either of demand or of supply. Hence the only qualification which the strictest accuracy would require us in this connection to attach to our statement of Law II is the postscript:-- "Except that, in the case of land, the aggregate supply is unalterable; while in the case of capital or labor we cannot be sure how price-changes will affect the aggregate supply." Much significance attaches to these exceptions, as later will appear. §6. _The Disturbances of Monetary Changes_. But let us still keep a critical eye on Law II, and submit it to another flashlight from our practical experience. The recent world war made us all acutely aware of a remarkable rise in the price of almost everything, which yet did not seem to diminish appreciably the demand. The explanation of this paradox is not difficult to find. There was an immense increase in the volume of nominal purchasing power, due to a complex set of causes, of which "currency inflation" may be taken as the symbol. Now perhaps we are entitled to assume the absence of such currency changes as part of the "other things being equal" which is always understood as implied. But it is rash to take this particular assumption for granted, more especially in these days. Already people are too apt to speak as though the trade depression (which as these pages are written holds us in its grip) cannot pass away until pre-war prices are restored, ignoring altogether the great and probably permanent increase in nominal purchasing power which the war has left behind it. It would be safer, therefore, to add explicitly to Law II the reservation, "Assuming that there is no change in the general volume of purchasing power." Monetary and allied questions will form the subject of the second volume of this series. It must not be supposed that our general laws have no bearing on them. On the contrary, Law I, which all this time has remained serene and undisturbed by the occasional discomfitures of Law II, is the gateway through which all questions of currency, banking and the foreign exchanges should be approached. It is well to note, as an inexorable corollary of Law I, that prices can rise _only_ if demand exceeds supply, and fall _only_ if supply exceeds demand; and hence that it is only through the agency of changes in the demand for and supply of commodities and services that an inflation or deflation of the currency can influence the price level. Further, since a condition of things in which supply generally exceeds demand spells what we know and fear as a trade depression, it may be well to note at once that falling prices and unemployment are inseparable bedfellows. For we are far too apt to shut our eyes to these unpleasant truths. But we cannot pursue them further here; and in the remainder of this volume we shall not be concerned (except, perhaps, incidentally) with questions affecting the general level of prices or of purchasing power; but rather with the relation which the price of one commodity bears to that of another, with the rate of interest (which being a rate per cent is not essentially dependent on the price level), with "real" wages (as distinct from money wages) and the like. §7. _The Trade Cycle_. But our reference to trade depressions suggests a final comment on Law II. One small qualification was embodied in our original statement of it, namely the words "sooner or later." A rise in price may not check the demand immediately (even if the printing presses are standing idle in the Treasuries); it may actually stimulate it for a time. For people may fear that the price will rise further still, and hasten to buy what they _must_ buy before very long. Sellers may share the same opinion, and be reluctant on their side to part. When prices are falling the roles are reversed, and we are likely to see the sellers tumbling over one another in a frantic eagerness to sell, the buyers wary and aloof. Sooner or later, indeed, these tendencies must dissolve and disappear; but they may persist for a longer period than might seem probable at first. For the raw material of one trade is, as we say, the finished product of another. The demand for one thing gives rise to a demand for other things, for the labor with which to make them, and so on in an expanding circle. A sympathy, subtle and intense, unites the business world, and a wave of depression or animation arising in any quarter may spread itself far and wide, heightened by the gusts of human hope and fear, and continue long before its influence is spent. Here we are upon the threshold of one of the most striking and formidable of economic facts, the regular alternation of periods of good and bad trade, each very widespread, if not world-wide, in its range, each comprising certain regular phases of acceleration and decay, and each infallibly yielding sooner or later to the other. The details of these phenomena are highly complex, some of them obscure; an immense literature has already been devoted to the subject, yet its systematic study is hardly more than begun. The account given in the preceding paragraph is incomplete and meagre. It is inserted here in the hope that it will impress the reader with a sense both of the fact of these alternations and of the deeply rooted nature of the causes from which they spring. They take a heavy toll of human happiness and wealth; and there is no object that more urgently calls for concerted human effort than that of mitigating them, and of alleviating the misery which they bring in their train. Still better, of eradicating them if that is possible; but let none suppose that it can be lightly done. Meanwhile, let us always remember that they form the atmosphere and medium in which the enduring tendencies of the business world must work themselves out. It is often convenient to speak of "normal conditions" in this trade or that; but hardly ever can it be truly said of a particular moment that conditions are normal. The normal is rather a mean level about which oscillations to and fro, round and about, are constantly taking place, but which itself is reached only by accident, if at all. Whenever we say that some new factor should in the long run lower the price of this or that commodity or service, the picture which these words should convey to our mind is one of the price rising less on times of boom, and falling more in times of depression than is the case with other things. And if ever our faith in some honored economic law is shaken by the apparent ease with which, perhaps, in times of active trade, sellers are able to advance their prices to whatever figure (so it almost seems) they choose to name, let us rally our sense of economic rhythm, and reserve our judgment until the trade cycle has run its course. CHAPTER III UTILITY AND THE MARGIN OF CONSUMPTION §1. _The Forces behind Supply and Demand_. The laws enunciated in the preceding chapter constitute the framework and skeleton of all economic analysis; but they do not carry us very far. It is only through the agency of these laws that any influence can affect the price of anything: but what influences may so affect it is a question which we have still to consider. Let us begin with ordinary commodities and ask ourselves, in the light of experience and common sense, upon what factors their price seems mainly to depend? Two factors spring to mind at once; their cost of production and their usefulness. As regards the former, the case seems clear enough. We may indeed sometimes grumble that the price of this or that commodity is unconscionably high in comparison with its cost; but this only goes to show that we conceive a relation between price and cost as the normal, governing rule. If one commodity cost only a half as much to produce as another, we should think that something had gone very wrong indeed, if the former commodity were sold for the higher price. But, when we turn to the usefulness of commodities, the case is not so clear. Usefulness has some connection with price, so much is certain; for an entirely useless thing, fit only for the dust-bin (and known to be such, it may be well to add) will fetch no price at all, however costly it may be to produce. But it is not easy to express the connection in quantitative terms. It seems reasonable enough to say that the prices of commodities are roughly proportionate to their costs of production. But directly we contemplate saying a similar thing of their usefulness, we are pulled up short. As we look round the world, and enumerate the commodities which by common consent are the most useful, salt, water, bread, and so forth, the striking paradox presents itself that these are among the cheapest of all commodities; far cheaper than champagne, motor-cars or ball-dresses, which we could very well get on without. As things are, of course, a ball-dress, or a motor-car costs more to produce than a loaf of bread or a packet of salt; and the common-sense explanation of the paradox seems, therefore, to be that the cost of production is a more weighty influence than the usefulness, or utility, as we will henceforth call it (so as to include the satisfaction we derive from not strictly useful things). We are thus tempted to conclude that, provided a commodity possesses some utility, its price will be determined by the cost of production, the degree of utility being unimportant. This was exactly how the position was gummed up for many years in systematic treatises upon Political Economy; and it was not until fully half a century after the _Wealth of Nations_ that a discovery was made which threw a fresh light on the whole matter. First of all, let it be clearly observed how very unsatisfactory is the above account. In Chapter II where we were treading surely, with a sense of solid ground beneath us, we drew no such invidious distinction between supply and demand. They seemed then to possess an equal status. But cost of production is the chief factor which, in the case of commodities, ultimately determines the conditions of supply. Utility, similarly, is the chief factor which ultimately determines the conditions of demand. Must not then the symmetrical relations between demand and supply be reflected in a corresponding symmetry between the utility and the costs which underlie them? Demand springs obviously from utility; the only motive for buying anything is that it will serve some real or fancied use. Can we then accord to demand so dignified and to utility so subordinate a place? There is here an inconsistency which we must somehow reconcile. It will not serve as a solution to distinguish between different periods of time, and to say, as economists used to say not very long ago, that price is governed over a short period by demand and supply, but in the long run by the cost of production. This still leaves our sense of symmetry unsatisfied. Moreover, the conception of cost of production, when we consider it as ruling over a long period, frequently seems to lose any precision, as an independent factor, which it may otherwise possess. Motor-cars, we have agreed, are more costly to produce than loaves of bread; but, as we know well, the cost of producing motor-cars varies enormously, accordingly as they are produced on a small or a large scale. By the methods of mass production they can be turned out at a relatively low cost per car. But this requires that they should be purchased in large numbers and this in turn throws us back to the demand for motor-cars, and plainly enough, to people's judgment as to their utility. In some cases, the opposite phenomenon occurs. In the case of British coal, for instance, the average cost of production would be much lower than it is if the output were reduced to a fraction of its present volume, and if only the richer seams of the more fertile mines were worked. Once again, therefore it is difficult to measure the cost of production until we know the magnitude of the demand, which in a manner, which we have still to elucidate, clearly depends upon the utility. If we take the problem of joint products, the conception of cost of production fails us still more conspicuously. For what is the cost of producing wool, or the cost of producing mutton? We can speak of the cost of rearing sheep: but it is hardly possible to allot this cost, except quite arbitrarily, between the two products. How, then, can we explain the separate prices of these things by reference to cost alone? Instances of joint production are becoming so common in the modern world, or at least, with the growing attention to the utilization of by-products, are assuming so much more heightened a significance, that an explanation of price, which does not apply to them, is a very feeble one indeed. §2. _The Law of Diminishing Utility_. Let us turn back, then, to the factor of utility, and see if we cannot put on a more satisfactory basis the relation between utility and price. The clue to the puzzle is to be found in a brief reflection on the implications of the second general law propounded in Chapter II. A rise in price, it was there stated, will sooner or later diminish the demand. This was asserted as a matter of fact, observed from and confirmed by experience. But what does it signify? To what causes is this familiar fact to be attributed? The first stage of the answer is very ample. The many individuals, whose purchases make up the demand for the commodity, will buy smaller quantities now that the price is higher. Possibly some of them may cease to buy it altogether; but as a rule it would be reasonable to suppose that most people continue to buy a certain amount though a smaller amount than hitherto. Let us turn our attention, then, to the individual purchaser, and ask ourselves why he (or let us say she) acts in the manner indicated. The obvious answer is that the more she already has of anything, the less urgently does she require a little more of it. If she buys 6 pounds of sugar every week when the price is 7 cents a pound, but only 5 pounds when the price is 8 cents, she shows by her action that she does not consider that the additional utility she will derive from buying 6 pounds a week rather then 5 pounds is worth as much as 8 cents. But she shows at the same time that she thinks it worth 7 cents. For, when the price is 7 cents, no one compels her to buy that sixth pound. She could stop, if she chose, at five; and it may serve to make the point quite plain if we suppose her actually to hesitate before she buys the sixth. She has hitherto, let us say, been buying 5 pounds a week at 8 cents. To-day she enters the shop and finds the price is down to 7 cents. She asks for her customary 5 pounds; then she pauses, and a minute later turns her order into six. What are the alternatives which she has been weighing one against the other in that momentary pause? Not the utility of the whole 6 pounds of sugar against the total price of 42 cents. For she has already ordered the first 5 pounds; and the decision to buy the sixth is taken independently and subsequently. She has been sizing up the _increment_ of utility which a sixth pound would yield, and she decides that this is worth the expenditure of a further 7 cents. Again, when the price was 8 cents she need not have bought as many as 5 pounds. She could have stopped at 4 had she chosen, and the fact that she did buy 5 pounds shows that the increment of utility derived from buying a fifth pound, when she might be said already to have 4, was worth at least 8 cents in her judgment. This trite illustration enables us to lay down two important laws relating to utility. To state them shortly, it is convenient to employ one or two technical terms, which, unlike every term employed hitherto, are not very commonly used in their present sense in everyday life. Their adoption is desirable not merely for the sake of convenience, but because they help to stamp clearly on the mind a most illuminating conception, that of the "margin," which supplies the clue to many complicated problems. The last pound of sugar which the housewife purchased, the fifth pound when the price was 8 cents, or the sixth pound when the price was 7 cents, we call the "marginal" pound of sugar. And the increment of utility which she derives from buying this marginal pound we call the "marginal utility" of sugar to her. We are thus able to state the fact that the more a person has of anything the less urgently does he require a little more of it, in the following formal terms:-- LAW V. The marginal utility of a commodity to anyone diminishes with every increase in the amount he has. The total utility will, of course, increase with an increase in the amount, but at a diminishing rate. This law is usually called The Law of Diminishing Utility. §3. _Relation between Price and Marginal Utility_ But this is not all. We are now in a position to perceive the true relation between utility and price. The relation is one which exists not between price and total utility, but between price and marginal utility. If we know only that a housewife will buy weekly 5 pounds of sugar at 8 cents per pound, but 6 pounds at 7 cents, we know nothing of the total utility of sugar to her. We do not know how much she might be prepared to pay rather than go without 3 pounds, 2 pounds, or any sugar at all. But we do know that, when she buys 6 pounds, the marginal utility of sugar is in her judgment worth something which does not differ greatly from the price. We can, therefore, say in general terms that the price of a commodity measures approximately its marginal utility to the purchaser. This statement is perfectly consistent with the paradox noted above that the most useful commodities such as bread, salt and water are very cheap. For when we say that these commodities are supremely useful, we mean only that their total utility is very great; that, rather than do without them altogether, we would offer for them a large proportion of our means. But we would not value very highly a small addition to the bread, water or salt that we habitually consume; nor would most of us feel it as a very serious deprivation if our consumption of these things were curtailed by a small percentage. In other words, their _marginal_ utilities are small, and it is only the _marginal_ utility that has any relation to price. §4. _The Marginal Purchaser_. A possible objection to the preceding argument deserves to be considered. Some readers may find the picture I have drawn of the hesitating housewife entirely unconvincing. They may declare that her mind does not work at all in the manner I have indicated. She will have formed certain habits in regard to her weekly purchases of sugar, which are connected very vaguely, if at all, with any conscious processes of thought. She will buy so many pounds of sugar weekly without troubling her head over the specific utility of the last pound she buys. When the price falls she may, indeed, buy more; but it will not be because she separates out and considers by itself the extra utility of an additional pound. She may buy more, because she has formed the habit of spending so much money on sugar; and now that the price has fallen, the same amount of money will enable her to buy more pounds. Or, perhaps, she may be moved by instinctive and irresistible attraction to buy more of a thing when it is cheaper, similar to that which inspires so many people to face with ardor the horrors of a bargain sale. In any case the fine calculations I have imagined convey a fantastic picture of her state of mind. And how much more fantastic, the critic may continue, of the state of mind in which things of a different kind are bought by less careful people. When, for instance, one of us happy-go-lucky males (more liberally supplied, perhaps, than the housewife with the necessary cash), decides to buy a motor bicycle, or to replenish his stock of collars or ties, does the above analysis bear any resemblance to the actual facts? In the case of the motor bicycle, the purchaser may, indeed, weigh the price fairly carefully against the pleasure and benefit, though contrariwise he may be a rich enough gentleman hardly to bother about this. But, one motor bicycle is as much as he is at all likely to buy, and what becomes, then, of the distinction between total and marginal utility? In the case of the ties and collars, the vagueness of many of us about the price will be extreme. We probably have been uneasily conscious for some time of an inconvenient shortage of these troublesome articles and eventually will go off (or perhaps will be sent off with ignominy) to the nearest suitable shop to make good the deficiency. How can we speak here with a straight face of the relation between marginal utility and price? These are very pertinent criticisms; but they do not make nearly as much nonsense of the notion of marginal utility as may seem at first. The last point, indeed, serves rather to give it a fresh aspect of much significance. Those of us who do not bother about the price we pay for our ties and collars owe a debt of gratitude, of which we are insufficiently conscious, to the more careful people who do; as well as to the custom which prevails in shops in Western countries (as distinct from the bazaars of the East) of charging as a rule a uniform price to all customers. If _we_ were the only people who bought these things, an enterprising salesman would be able to charge us very much what he chose. He could put up his price, and we would hardly be aware of it. And, as by lowering his price he could not tempt us to buy any more, price reductions would be few and far between. But fortunately there are always some people who do know what the price is, even when they are buying collars and ties; and who will adjust the amount they buy in accordance with the price. It is these worthy people who make the laws of demand work out as we well know they do. It is they who will curtail their consumption if the price has fallen and it is they who constitute the seller's problem, and help to keep down prices for the rest of us. The rest of us--it is well to be quite blunt about it--simply do not count in this connection. We have no cause then to plume ourselves that we have disproved the truth of economic laws when we declare that we seldom weigh the utility of anything against its price. All that this shows is that our actions are too insignificant to be described by economic laws since they exert no appreciable influence on the price of anything. And this in turn shows the extreme importance of grasping clearly the conception of the margin. Just as it is the marginal purchase, so it is the marginal purchaser who matters. It is the man who, before he buys a motor bicycle, weighs the matter up very carefully indeed and only just decides to buy it, whose demand affects the price of motor bicycles. It is the utility which _he_ derives that constitutes the marginal utility, which is roughly measured by the price. As to the housewife, I am not prepared to concede that my picture is in essentials very fanciful. She may be a creature of habits and instincts like the rest of us, but most habits and instincts affecting household expenditure are based ultimately on _some_ calculation, if not one's own, and reason has a way of paying, as it were, periodic visits of inspection, and pulling our habits and instincts into line, if they have gone far astray. I am not satisfied that the housewife does not envisage the utility of a sixth pound of sugar as something distinct from the utility of the other five; she may buy it, for example, with the definite object of giving the children some sugar on their bread, and she may have a very clear idea as to the price which sugar must not exceed before she will do any such thing. Possibly I may exaggerate. I have the profound respect of the incorrigibly wasteful male for the care and skill she displays in laying out her money to the best advantage. §5. _The Business Man as Purchaser_. But if the reader still finds the picture unconvincing, let us shift the scene from domestic economy to commerce, and substitute for the careful housewife an enterprising business man. Now, as anyone who has a business man for his father will have often heard him say, the vagueness and caprice which characterize our personal expenditure would be quite intolerable in business affairs. There you must weigh and measure with the utmost possible precision. You must be for ever watching the several channels of your expenditure, careful to see that in none does the stream rise higher than the level at which further expenditure ceases to be profitable. You will not even engage typists or install a telephone in your office without weighing up fairly carefully the number of typists or the number of switches that it is worth your while to have. And in deciding whether to employ say, five typists, or six, you will not vaguely lump the services of the whole six typists together, and consider whether as a whole they are worth to you the wages you must give them. You will, in the most direct and literal manner, weigh up the _additional_ benefit you would derive from a sixth typist, and if that does not seem to you equivalent to her wage, you will not engage her, however essential it may be to you to have one or two typists in your office. If on the other hand, the utility of having a sixth typist seems to you worth much more than her pay, the chances are that you will be well advised to consider the employment of a seventh. And so, where you stop employing further typists, the utility to you of the last one, of the "marginal typist" as it were, is unlikely to differ greatly from her pay. Now this is not a fancy picture of some remote abstraction called an "economic man." Allowing for the over-emphasis which is necessary to drive home the central point, it is a bald account of the aims and methods of the actual man of business. To ascertain the margin of profitable expenditure in each direction, to go thus and no further, is the very essence of the business spirit, as the business man himself conceives it. When he condemns the extravagance of Government departments, it is their lack of just this marginal sense that he chiefly has in mind. "The lore of nicely calculated less or more" may be rejected by High Heaven and Whitehall, but no one can afford to despise it in the business world. The transition from household to business expenditure involves an extended use of the word utility, which is worth noting. Commodities like bread, sugar, or privately owned motor-cars are sometimes called "consumers' goods" in contrast to "producers' goods," which comprise things such as raw materials, machinery, the services of typists and so forth, which are bought by business men for business purposes. The line of division between the two classes is not a sharp one, and we need not trouble with fine-spun questions as to whether a particular commodity should in certain circumstances be included under the one head or the other. But, broadly speaking, things of the former type yield a direct utility; they contribute directly to the satisfaction of our pleasures or our wants. Things of the latter type yield rather an indirect utility. Their utility to the business man who buys them lies in the assistance they give him in making something else from which he will derive a profit. The utility of these things is therefore said to be _derived_ from that of the consumers' goods or services to which they ultimately contribute. This conception of derived utility leads to certain complications which we shall have to notice later. §6. _The Diminishing Utility of Money_. But one important point must be emphasized in this chapter. The utility which a business man derives from the things which he buys for business purposes is the extra receipts which he obtains thereby. Derived utility, in other words, is expressed in terms of money, and the idea of its relation to price presents no difficulty. But the utility of things which are bought for personal consumption means the _satisfaction_ which they yield, and this is clearly not a thing which is commensurable with money. When, therefore, it is said that the prices measure their respective marginal utilities, what exactly is meant? What was it that the argument of §3 went to show? That the utility of the marginal pound of sugar would seem to the housewife just worth the price that she must pay for it; in other words, that it would be roughly equal to the utility she could obtain by spending the money in other ways. The respective marginal utilities which _she_ obtains from the different things she buys will thus be proportionate to their prices. But if she were to receive a legacy which gave her a much larger income to spend, she might buy larger quantities of practically every commodity; and, though she would obtain a greater total utility thereby, the marginal utility she would obtain in each direction would be smaller, in accordance with the law of diminishing utility. The prices might not have changed; the respective marginal utilities to her of the different things would again be proportionate to their prices, but they would constitute a smaller satisfaction than before. Thus we can only say that the prices of commodities will be proportionate to their real marginal utilities, when we are considering the different purchases of one and the same individual. The amounts of money which different people are prepared to pay for different consumers' goods are no reliable indication of the real utilities, the amounts of human satisfaction which they yield. Here we must take account not only of varying needs and capacities for enjoyment, but of the very unequal manner in which purchasing power is distributed among the people. The cigars which a rich man may buy will yield him an immeasurably smaller satisfaction than that which a poor family could obtain by spending the same amount of money on boots, or clothes or milk. When, therefore, we compare commodities which are bought by essentially different consuming publics, their respective prices may bear no close relation to their _real_ utility, whether marginal or otherwise. Thus the law of diminishing utility applies to money or purchasing power, as well as to particular commodities. The more money a man has the less is the marginal utility which it yields him; and, where the marginal utility of money to a man is small, so also will be the real marginal utility he derives in each direction of his expenditure. The extreme inequality of the distribution of wealth gives immense importance to this consideration. Its practical implications will be discussed in Chapter V. Meanwhile, we may express the conclusions of the present chapter by the statement that the price of a commodity tends to equal its marginal utility, _as measured in terms of money_, i.e. relatively to the marginal utility of money to its purchaser. CHAPTER IV COST AND THE MARGIN OF PRODUCTION §1. _An Illustration from Coal_. We have already had occasion to note the symmetry which characterizes the relations of demand and supply to price. This symmetry was apparent throughout the argument of Chapter II, and it was a striking feature of the diagrams which we employed to illustrate the argument. We shall do well to cultivate a lively sense of this symmetry, for it will frequently save us from ignoring factors which have a vital bearing on the problems we are considering. We should never leave an important feature of demand without turning to see whether it has a counterpart on the supply side, though indeed we may not always find one. In the last chapter we examined the relation between utility and price, and found that the true relation was between the price and what we termed the marginal utility. Corresponding to utility on the demand side is cost of production on the supply side. The question should thus at once suggest itself--"Can we speak appropriately of the marginal cost of production, and will this serve to make clear the relation between cost and price?" To answer these questions, let us take one of the instances in which we found that price could not be explained satisfactorily by the bare phrase "cost of production." An important feature of the coal industry, which recent events have brought into sharp prominence, is the great diversity of conditions between different coalfields and different collieries. We speak of rich seams and poor seams, of fertile and unfertile mines, and we are aware that the costs of raising coal to the surface differ very widely in accordance with these diverse natural conditions. Nor must we confine our attention to the cost price at the pit-head. If we wish to speak of cost of production as a factor determining price, we must use the term in a broad sense to include the transport and other charges necessary to bring the coal to market. In this respect also one coalfield differs greatly from another. Some are well situated close to a large market, or within easy reach of the seaboard; others must incur very heavy transport charges to bring their coal to any considerable centre of consumption. These varying conditions lead, as we well know, to great variations in the financial prosperity of different colliery concerns. In Great Britain, under the abnormal conditions which prevailed during the war, and subsequently, these variations were so huge as to constitute a most formidable embarrassment and to contribute, more perhaps than any other single factor, to the unrest and instability by which the industry has been afflicted. But they are always with us, if usually upon a more modest scale. What, then, is the normal relation between price and cost in the case of coal? Should we direct our attention to the average costs over the whole industry, or the costs incurred by the richer and better situated mines, or, lastly, that of the poorer and worse situated? Now, as things are, it is clear enough that no concern will continue indefinitely producing at a loss. It may do so for a time, rather than close down altogether, hoping to recoup itself later when the market has taken a more favorable turn. But, in the long run, taking good years with bad, it must expect to obtain receipts sufficient not only to cover its necessary expenditure, but to provide also a reasonable profit on the capital employed. Of course, once the capital has been sunk and embodied in plant and buildings, which are of little use for any other purpose, a business may continue for many years, with a rate of profit far below what it had anticipated. But plant and buildings gradually wear out, and need to be replaced; the course of technical improvement calls continually for fresh capital outlay, which a business in a bad way is reluctant to undertake. The tendency, therefore, when profits rule low over a considerable period, is for the plant to fall gradually into disrepair and obsolescence, and finally for the business to disappear. We can thus include an ordinary rate of profit under the head of cost of production, and say with substantial accuracy that for no business can this cost for long exceed the price if the business is to continue to exist. If then the relatively poor and badly situated mines are to be worked, the price of coal, taking good years together with bad, must cover the costs at which these mines can produce. If the price rules lower than this, sooner or later they will close down, and we will be left with a smaller number of mines, among which great variations of conditions will still prevail. Once more, the price must cover the cost incurred by the least profitable of these remaining mines, unless their number is still further to be diminished. Thus we can conceive of a "margin of production" which will shift backwards to more profitable or forwards to include less profitable mines, according as the demand for coal contracts or expands. But, wherever this margin may be, there is no escaping the conclusion that it is the cost of production of the "marginal mines," of those that is to say which it is only just worth while to work, to which the price of coal will approximate. It follows that there is no real connection between price and cost of production throughout the industry as a whole. It follows incidentally that those concerns which can market their coal at an appreciably lower cost than the marginal concerns, are likely to reap more than an ordinary rate of profit, though royalties may absorb part of the excess. §2. _The Various Aspects of Marginal Cost_. This relation cuts much deeper than the particular system under which the mines are at present owned and worked. If, for instance, we supposed that the various mines were amalgamated together in a few giant concerns, each of which comprised some of the richer and some of the poorer mines, the preceding argument would need to be recast in form, but its substance would be unaffected. For though a great coal trust could in a sense _afford_ to sell at a price lower than the marginal cost, setting its losses on the poorer against its gains on the better pits, is it likely it would do so? Why should it dissipate its profits in this way? It is clearly more reasonable to suppose that it would close down the poorer pits (unless it could advance the price of coal), and thereby maintain its profits at a higher figure. If, indeed, the mines were nationalized the deliberate policy might be pursued of selling coal at a price which left the industry no more than self-supporting as a whole. Some coal might thus be sold at less than its cost price, and the selling price would conform roughly to the _average_ cost. But such a policy, though in special circumstances it might be justified, would represent a very dangerous principle, which could not be applied widely without the most serious results. Nothing could be more fatal to any enterprise, whether it be in the hands of an individual, a joint-stock company, a State department, or a Guild, than that the management should content themselves with results which in the lump seem satisfactory, and regard losses here or there with an indifferent eye. That way lies stagnation, waste, progressive inefficiency and ultimate disaster. To inquire searchingly into every nook and cranny of the business, to construct, as it were, for each part a separate balance-sheet of profit and loss, to expand in those directions where further development promises good results, and to curtail activity where loss is already evident, is the very essence of good management. Here, it will be observed, we are using language very similar to that in which we described the principles which govern a business man's expenditure. The resemblance is inevitable and significant, for we are dealing here with what is essentially another aspect of the same thing. The object is to secure that nowhere does expenditure fail to yield a commensurate return. This we express, when we consider a business in its aspect as a consumer, by saying that its consumption of anything will not be carried beyond the point at which the marginal utility exceeds the price it will have to pay. When we consider it as a producer, we say that its production of anything will not be carried beyond the point at which the marginal cost exceeds the price it will obtain. §3. _The Dangers of Ignoring the Margin_. This at least is the general rule. A business may decide deliberately to sell part of its output below cost, because, for instance, this will serve as an advertisement, bring it connections, and enable it to obtain a larger profit at a later date, or immediately on other portions of its sales. In so acting, it recognizes that the price obtained for a thing may be an inadequate measure of the real return it yields. In the same way, though for different reasons, a nationalized coal industry might conceivably be justified in selling some coal below cost price, because, let us say, it held that the price which the immediate purchasers were willing to pay was an inadequate measure of the utility of coal to the community as a whole. But in all such cases it is essential to be very clear as to what exactly you are doing; so that you may be at least moderately clear as to whether the policy is well advised. It may be sound enough to lose on the swings and make good this loss on the roundabouts, but only if your loss on the swings _helps_ you to a larger profit on the roundabouts. If you would get the same return on the roundabouts in any case, it would be better to cut the swings out altogether. So, if you are directing the policy of a nationalized coal industry, and decide to make a loss on a portion of your sales, you will need to know that the indirect benefit which the community will derive from this particular part of your coal output is worth the loss which you incur. You will certainly come to grief, if you pursue a vague ideal of lumping all results together, and regarding a profit somewhere as a sufficient excuse or a positive reason for making a loss elsewhere. It is quite true that in big undertakings, where there are large standing charges, and where the organization possesses some of the characteristics of an integral whole, it is not easy to measure accurately the specific costs which should be assigned to any particular portion of the output. But this difficulty is one of the most serious weaknesses of large undertakings; precise detailed measurement is the great prophylactic of business efficiency, and, where it is lacking the bacilli of waste will enter in and multiply. So clearly is this recognized, that the development of large scale business has led to the evolution of new methods of accountancy, designed to make detailed mensuration possible. We have most of us heard of them vaguely under such names as "comparative costings," but too few of us appreciate their full significance. It is hardly too much to say that the issue as to whether the size of the typical business unit will continue to become larger and larger, or whether it has already overshot the point of maximum efficiency will turn largely upon the capacity of accountancy to supply large and complex undertakings with more accurate instruments of detailed financial measurement. §4. _A Misinterpretation_. The price, then, of a commodity tends roughly to equal its marginal cost of production; and this marginal cost (in perfect symmetry with what we observed as regards marginal utility), may be conceived as applying either to the marginal producer or to the marginal output of any producer. In the former aspect it is open to a misinterpretation, against which it will be well to guard. Some advocates of socialism have argued, as one of the counts in their indictment of the present industrial system, that the price of a commodity is determined by the cost at which the least efficient concern in the industry can produce. They say, in effect, "Under the present competitive regime, you have to pay for everything you buy a price which far exceeds the necessary cost to a concern which is managed with ordinary ability. For, as economic theory has shown, it is the cost of the _marginal_ concern, i.e. the concern managed by the most incompetent, and half-witted fellow in the trade; it is the cost incurred by him, together with a profit on his capital, that the price has got to cover. The producer of no more than average capacity is therefore making out of you a surplus profit, which would be quite unnecessary in any well-arranged society." Such an argument is a gross caricature of the marginal conception. The half-witted incompetent will, as we know well enough, speedily disappear under the stress of competition, and his place will be taken by more efficient men. There is an essential difference between him and the "marginal coal mine" of which we spoke above. For the probabilities are that of the coal resources, whose existence is clearly known, the more fertile and better situated parts will already be in process of exploitation; and there is not likely, therefore, to be a supply of substantially better seams which can be substituted for the worst of those in actual use. There _is_ likely, on the other hand, to be available a supply of decent business capacity which can be substituted for the most inefficient of existing business men. The marginal concern, in other words, must be conceived as that working under the least advantageous conditions in respect of the assistance it derives from the strictly limited resources of nature, but under average conditions as regards managerial capacity and human qualities in general. Thus in agriculture we can speak of a marginal farm, which we should conceive as the least fertile and worst situated farm which it is just worth while to cultivate (of which more will be said when we come to the phenomenon of rent), but we must assume it to be cultivated by a farmer of average ability. §5. _Some Consequences of a Higher Price Level_. The foregoing controversy will be of service to us, if it makes clear the manner and the spirit in which the marginal conception should be handled. It should be regarded not as a rigid formula which we can apply to diverse problems without considering the special features they present, but rather as a signpost which will enable us to find our way, a compass by which we may steer between the shoals of triviality and sophistry to the crux of any problem with which we have to deal. Let us illustrate its practical uses by an example which is of great interest and far-reaching practical importance at the present day. As has been already observed, the war has left behind it in all countries a great and almost certainly permanent increase in nominal purchasing power. Since the armistice prices have moved upwards and downwards with unprecedented violence; and it would be very rash to prophesy the precise level at which they will ultimately settle (using that word with considerable relativity). But, for reasons for which the reader is referred to Volume II in this series, it is safe enough to say that the general level of post-war will greatly exceed that of pre-war prices. Now this will apply not only to consumers' goods like milk and clothes, or to raw materials like pig-iron and cotton, but in very much the same degree to things like factories and machinery. Things of this last type are sometimes called "capital goods," because it is in them that a large part of the capital of a business is embodied. Now the fact that it will cost much more than it did before the war to construct fresh capital goods, has a significance which very few people appreciate. An existing factory cost, let us say, $500,000 to build and equip with machinery before the war. To construct a similar factory to-day would cost, let us assume (it is probably a moderate assumption) $1,000,000. Suppose 10 per cent to be the gross profit that is necessary to attract capital to the particular industry. Then it will not pay to construct this new factory unless the trade prospects point to the probability of a profit of about $100,000 per annum. But if the old factory is equally well managed, it too should be able to earn this $100,000, which upon the capital actually sunk would represent a rate of 20 per cent. The particular figures given are, of course, purely illustrative; the conclusion to which they point is that, if new enterprises are to be undertaken, pre-war enterprises are likely to yield a rate of profit, on their fixed capital at least, increased in rough proportion to the price-level. Of course, in years when trade is bad, the factory which dates from pre-war times will not earn a profit of this kind, it may very likely make an actual loss. At those times it is very certain that few new factories will be erected. But it is difficult to reconcile a condition of trade activity, in which the constructional industries are busily employed, with a rate of profit to pre-war businesses on the fixed part of their capital of a lesser order of magnitude than has been indicated. It makes no difference, it should be observed, whether we suppose the new enterprises to take the form of starting of new concerns or extending old ones; in neither case will they be undertaken, unless there is reason to expect an adequate return on the capital which they require at post-war constructional prices. High profits (taking always good years together with bad) on capital sunk before the war in buildings and machinery are thus a likely consequence of an increase in the price-level. This fact is, indeed, the counterpart or complement of another phenomenon with which we are more familiar. While prices are actually rising, profits, as we have come to recognize, necessarily rule high, because every trader or manufacturer is constantly in the position of selling at a higher price-level, stock which he purchased, or goods made from materials which he purchased at a lower level. He thus acquires an abnormal profit on his circulating capital, which is essentially similar to the profit on fixed capital, which we have just examined. The difference is that the former profit is crowded into the years when prices are actually on the increase, and thus is very noticeable indeed; while the latter profit continues to accrue in smaller instalments after prices have settled down, as it were, at the higher level, and is not exhausted until the buildings and machinery have become obsolete. But the two profits are essentially similar, and in the long run should be commensurate. In the one case, stock can be sold for a large profit, because it cannot be replaced except at a higher price; in the other case, plant and buildings yield a higher income because _they_ cannot be replaced except at a higher price. Indeed, if the owners choose, the plant and building can, like the stock, be sold at their appreciated value, as has been widely done by the owners of cotton mills in Great Britain since the armistice. There is nothing in these considerations that should surprise us, or even shock our moral sense. For what they have indicated is an increase of money profits in rough proportion to the price-level, so that the aggregate profits will represent about as much real income as before.[1] The conclusion therefore amounts to no more than this, that you cannot alter fundamentally the distribution of wealth between labor and capital by merely inflating the currency, or otherwise juggling with the price-level. And this is only what we should expect, if there are any laws of distribution of sufficient importance and permanence to justify the many volumes which have been devoted to them. [Footnote 1: Assuming that the rate of interest has remained unaltered. In fact it has greatly increased since pre-war days, and this points to a still further increase of money profits, and an increase in the real income which they represent. See Chapter VIII, §10] But this somewhat tame conclusion does not make it any less important to grasp clearly the significance of the appreciation in the value of capital goods. A failure to realize it lies at the root of our bewildered muddling of many crucial problems of the day. In the matter of housing, for instance, we know we cannot build houses at less than two or three times their prewar cost, and yet we cannot endure to see the owners of pre-war houses obtaining a commensurate increase of rent. And so, in Great Britain, we pass Rent Restriction Acts, and Housing Acts, and then, in a fit of economy we suspend the latter, and let the former stand, while the housing shortage becomes steadily more acute. When we hand the railways back from State control to private hands, our horror at the idea of the companies receiving larger money profits than they did before the war leads us to lay down principles for the fixing of fares and freight charges, which take no account of post-war construction costs; and then, in alarm lest we may have thereby made it unprofitable for the companies to spend a single penny of fresh capital upon further development, we seek to provide for capital expenditure by cumbrous and dubious expedients. Doubtless we shall muddle through somehow with such policies: and, public opinion being what it is, they may perhaps have been about the best policies that were practicable. But the problems would have been easier to handle, if the public generally were a little less disposed to think in terms of averages, and a little more in terms of margins, if we all of us instinctively realized that the cost that really matters is the cost at which additional production is profitable under the conditions ruling at the time, or in the immediate future. §6. _General Relation between Price, Utility and Cost_. Let us conclude this chapter by summing up the conclusions which have emerged as to the relations of utility and cost to price. The price of a commodity is determined by the conditions of both supply and demand; and neither can logically be said to be the superior influence, though it may sometimes be convenient to concentrate our attention on one or other of them. The chief factor on which the conditions of demand depend is the utility (as measured in terms of money). The chief factor on which the conditions of supply depend is the cost of production (again as measured in terms of money). The prevailing trend towards an equilibrium of demand and supply can thus be expressed as follows:-- LAW VI. A commodity tends to be produced on a scale at which its marginal cost of production is equal to its marginal utility, as measured in terms of money, and both are equal to its price. CHAPTER V JOINT DEMAND AND SUPPLY §1. _Marginal Cost under Joint Supply_. Several references have been made above to joint products, a relation which it will be convenient now to describe as that of Joint Supply. Our sense of symmetry should make us look for a parallel relation on the side of demand; and it is not far to seek. There is a "joint demand" for carriages and horses, for golf clubs and golf balls, for pens and ink, for the many groups of things which we use together in ordinary life. But the most important instances of Joint Demand are to be found when we pass from consumers' to producers' goods. There, indeed, Joint Demand is the universal rule. Iron ore, coal and the services of many grades of operatives are all jointly demanded for the production of steel; wool, textile machinery and again the services of many operatives are jointly demanded for the production of woollen goods (to mention in each case only a few things out of a very extensive list). Now we have already noted that, when commodities are jointly supplied, there is an obvious difficulty in allocating to each of them its proper share of the joint cost of production. There is a similar difficulty in estimating the utility of a commodity which is demanded jointly with others. Thus, the utility of wool is derived from that of the woollen goods which it helps to make. But the utility of the factories, the machinery and the operatives employed in the woollen and worsted industries is derived from precisely the same source. How much, then, of the utility of woollen goods should be attributed to the wool and how much to the textile machinery? Can we make any sense of the notion of utility as applying to one of these things, taken by itself? And, if not, how can we explain the price of a thing like wool in terms of utility and cost, since we cannot disentangle its cost from that of mutton, nor its utility from that of a great variety of other things? Here the conception of the margin enables us to grapple with a problem which would otherwise be insoluble. For, while it is impossible to separate out the total utility and cost of wool, it is not impossible to disentangle its marginal utility and its marginal cost. The proportion in which wool and mutton are supplied cannot be radically transformed; but it can be varied within certain limits, by rearing, for instance, a different breed of sheep. Variations of this kind have been an important feature of the economic history of Australasia, where sheep farming is the leading industry. Before the days of cold storage, Australia and New Zealand could not export their mutton to European markets, though they could export their wool. Wool was accordingly much the most valuable product; the mutton was sold in the home markets, where, the supply being very plentiful, the price was very low. In the circumstances, the Australasian farmers naturally concentrated on breeding a variety of sheep whose wool-yielding were superior to their mutton-yielding qualities. The development of the arts of refrigeration led in the eighties to an important change. It became possible to obtain relatively high prices for frozen mutton in overseas markets. There was, therefore, a marked tendency, especially in New Zealand, to substitute, for the merino, the crossbred sheep which yields a larger quantity of mutton and a smaller quantity of wool of poorer quality. Now if we calculate the cost of maintaining the number of merino sheep which will yield a given quantity of wool, and calculate the cost of maintaining the larger number of crossbred sheep which will be required to yield the _same_ quantity of wool (allowing for differences of quality) the extra cost which would be incurred in the latter case must be attributed entirely to the extra mutton that would be obtained. This extra cost we can regard as constituting the marginal cost of mutton. So long as this marginal cost falls short of the price of mutton, it will be profitable to extend further the substitution of crossbred for merino sheep. The process of substitution will in fact be continued until we reach the point at which the marginal cost is about equal to the price. Similarly by starting with the numbers of merino and crossbred sheep which would yield the same quantity of mutton, we can calculate the marginal cost of wool; and again the tendency will be for this marginal cost to be equal to the price.[1] [Footnote 1: It may be found difficult to grasp this point when stated in general terms. The following arithmetical example may make it plainer:-- Suppose a merino sheep yields 9 units of mutton and 10 units of wool. Suppose a crossbred sheep yields 10 units of mutton and 8 units of wool. Suppose, further, that a merino sheep and a crossbred sheep each cost the same sum, say, for convenience, £10, to rear and maintain; and that there are no special costs assignable to the wool and the mutton respectively, as, of course, in fact there are. Then 10 merino sheep, yielding 90 units of mutton + 100 units of wool, cost £100; while 9 crossbred sheep, yielding 90 units of mutton + 72 units of wool, cost £90. Hence you could obtain an extra 28 units of wool for an extra cost of £10, by maintaining 10 merino sheep rather than 9 crossbred sheep. The marginal cost of wool is thus £ 10/28 per unit. Similarly 8 merino sheep, yielding 72 units of mutton + 80 units of wool, cost £80; while 10 crossbred sheep, yielding 100 units of mutton + 80 units of wool, cost £100. Hence you could obtain an extra 28 units of mutton for an extra cost of £20, by maintaining 10 crossbred sheep in place of 8 merinos. The marginal cost of mutton is thus £ 20/28 per unit. So long as the price obtainable for wool exceeds £ 10/28, and that obtainable for mutton does not exceed £ 20/28 per unit, it will pay to substitute merino for crossbred; and conversely. If the price of wool exceeds £ 10/28 and the price of mutton also exceeds £ 20/28, it will be profitable to expand the supply of both breeds, until as the result of the increased supply, one of the above conditions ceases to obtain. Conversely, if the prices of both products are less than the figures indicated, sheep farming of both kinds will be restricted. The resultant of the processes of expansion or restriction, and substitution, will be that, unless one of the breeds is eliminated, the prices of mutton and wool will equal their respective marginal costs. These marginal costs may, of course, alter as the process of substitution extends. For the relative cost of maintaining merinos and crossbreds will not be the same for every farmer. Here again it is the costs at the "margin of substitution" that matter.] §2. _Marginal Utility under Joint Demand_. On the side of demand there exist as a rule similar possibilities of variation. _Some_ machinery, _some_ labor, _some_ materials of various kinds, are all indispensable in the production of any manufactured commodity. But the proportions in which these factors are combined together can be varied, and are frequently varied in practice as the result of the ceaseless pursuit of economy by business men. To produce pig-iron, you need both coal and iron ore; but, if coal becomes more costly, it is possible to economize its use. Machinery and labor must be used together, in some cases in proportions which are absolutely fixed. But there is in nearly every industry a debated question as to whether the introduction of some further labor-saving machine would be worth while, or some improved machine which would represent the substitution of more capital plus less labor for less capital plus more labor. A farmer can cultivate his land, to use a common expression, more intensively or less intensively; in other words, he can apply larger or smaller quantities of capital and labor (the proportion between which he can also vary) to the same amount of land. The problem is essentially the same as that of the substitution of the crossbred for the merino. We can take the various possible combinations of the factors of production, and contrast two cases in which different quantities of one factor are employed, together with equal quantities of the others. The extra product which will be yielded in the case in which the larger quantity of the varying factor is employed can then be regarded as the marginal product (or marginal utility) of the extra quantity of that factor; and we can say that the employment of this factor will be pushed forward to the point where this marginal product will be roughly equal to the price that must be paid for it. We can thus lay down the most important proposition that the relation between marginal utility and price holds good generally of the ultimate agents of production; that the rent of land, the wages of labor, and, we can even add, the profits of capital tend to equal their (derived) marginal utilities, or, as it is sometimes expressed, their marginal net products. Whenever, therefore, the proportions in which two or more things are produced or used together can be varied, the relations of joint supply and joint demand are perfectly consistent with a specific marginal cost and marginal utility for each commodity. §3. _A contrast between Cotton and Cotton-seed, and Wool and Mutton_. But it sometimes happens that such variations cannot be made. Thus, it has not been found possible (so far as I am aware) to alter the proportions in which cotton lint and cotton-seed are yielded by the cotton plant. Roughly speaking, you get about 2 pounds of cotton-seed for every 1 pound of cotton lint (or raw cotton), and though this proportion may vary somewhat from plantation to plantation, it is upon the knees of the gods, and not upon the will of the planter that the variation depends. We cannot, therefore, speak with accuracy of the separate marginal costs of raw cotton and cotton-seed. It is true that some plantations are so far distant from any seed-crushing mill that it is not worth while to sell the seed as a commercial product; and it might seem, therefore, as though we might regard the entire costs of cotton growing on _such_ plantations as constituting the marginal costs of raw cotton. But planters, so situated, derive a considerable value from their cotton-seed by using it as fodder for their live stock or as a manure. You can, of course, argue that proper allowance is automatically made for this factor, as a deduction from the costs of raw cotton, when you add up the expenses of the plantation. In the same way you can deduct the price which a planter who sells his cotton-seed obtains for it, from the total costs of the plantation, and call the remainder the costs of the raw cotton. But this is really to reason in a circle. For in either case the magnitude of the deduction depends on the marginal utility of the cotton-seed. And the notion of the cost of anything becomes blurred and blunted if we so use it that it must be deduced from the utility of something else, which is not an agent in the production of the thing in question. This point is not merely an academic one. It means that we cannot explain the _relative_ prices of cotton lint and cotton-seed in terms of cost at all, whether marginal or otherwise. The influence of cost will be confined to the _sum_ of the prices of the two things. Upon this sum it will exert precisely the same influence as it exerts upon price in general, by affecting the total quantities of the two things that will be supplied. But upon the distribution of this sum between lint and seed, cost will exert no influence whatever, because it cannot affect the proportions in which they are supplied. It may assist some readers if I state the matter in more concrete terms. Cost of production will be one of the factors which will result in the production of an annual cotton crop in the United States of, let us say, 10 million tons of seed cotton. This crop will yield roughly 6-2/3 million tons of cotton-seed, and 3-1/3 million tons (or rather more than 13 million bales) of lint. The combined price received by the planter of (let us say) 14.4 cents for 1 pound of lint plus 2 pounds of seed should correspond roughly to the marginal joint costs of production. But the factor of cost has no influence at all in determining that this combined price is made up of a price of 12 cents per pound for lint, and only 1.2 cents per pound (or $24 per ton) for cotton-seed. To account for this we must rely entirely upon demand. We can say, shortly, that the respective prices must be such as will enable the demand to carry off 6-2/3 million tons of seed, and 3-1/3 million tons of raw cotton. Or we can go further and say that the marginal utility of a pound of raw cotton, when 3-1/3 million tons are supplied, is ten times as great as that of a pound of seed when 6-2/3 million tons are supplied. If accordingly the demand for cotton-seed were to expand considerably owing, say, to the discovery of some new use for the oil, which is its most valuable constituent; the effect would be first a rise in the price of cotton-seed, and, subsequently, by stimulating cotton growing, a more plentiful supply and a lower price for raw cotton. And so far at least as the increased supply is concerned, this must necessarily be the effect, "other things being equal"; though, to be sure, it might be outweighed and obscured by other influences such as the boll-weevil. But it is _not_ the case that an increased demand for mutton must necessarily increase the supply or lower the price of wool; and it is most unlikely to do so in any similar degree. For, here, the separate marginal costs of the two things exert their influence. An increased demand for mutton will stimulate sheep farming, but it will also stimulate the substitution of crossbred for merino breeds; and the resultant of these two opposite tendencies upon the supply of wool is logically indeterminate. As a matter of history we know that the development of cold storage in the eighties (which we may regard for the present purpose as equivalent to an increased demand for Australian mutton) caused considerable perturbation in the woollen and worsted industries of Yorkshire. They were faced with a dwindling supply and a soaring price of merino wool; and the adaptability with which they met the situation, and won prestige for the crossbred tops, and yarns and fabrics, to which they largely turned is a matter of just pride in the trade to-day. The fact, however, that this alteration in the supply of wool was a matter not only of quantity but of quality, while it takes nothing from the substance of the preceding argument, makes it difficult to draw a clear moral, bearing on the present issue, from this incursion into history. §4. _The Importance of being Unimportant_. The above contrast between cases in which variation is possible, and those in which it is not possible, is reproduced with a heightened significance when we turn back to joint demand. The cases are perhaps less common in which it is _impossible_ to alter the proportions in which different commodities are jointly demanded, but there are many cases in which it is not nearly worth while to do so (and this amounts to very much the same thing). Cases of this sort are especially likely to occur when we are dealing with a commodity which accounts for only a tiny fraction of the costs of the industry which is its chief consumer. Sewing cotton, for example, is jointly demanded, with many other things, by the tailoring and other clothing trades; but the money which these trades spend on sewing cotton is so small a part of their total expenditure, that no ordinary variation in its price is likely to make it worth while to study the ways and means of using it in smaller quantities. When sewing cotton is bought by the domestic consumer, considerations which are fundamentally the same, though somewhat different in form, point to a similar conclusion. It is thus very difficult to assign to sewing cotton a specific marginal utility. This difficulty is of great importance in connection with the possibilities of monopolistic exploitation. For it means that the demand blade of the scissors upon which we rely to cut off excrescences of price is blunted, and if accordingly the producers constitute a strong enough combination to control the supply blade, they will possess an unusual power of advancing their selling prices as they choose. I am far from suggesting that Messrs. J. & P. Coats are to be condemned as an extortionate monopoly. On the contrary, during 1919, when the profits in highly competitive industries like the main branches of the cotton and woollen trades, soared exuberantly, the record of this concern seems to me one of distinct moderation. But the present point is that they possess an exceptional _power_ to fix the price of sewing cotton as they choose, and that this is attributable in no small degree to the fact that sewing cotton constitutes an essential but relatively trifling item in the expenses of the processes in which it is employed. Perhaps the point will be made clearer if we turn from the selling prices of commercial products, in regard to which there is a strong and not ineffective public sentiment against "profiteering," to the remuneration of different classes of labor. With an instinctive disposition towards megalomania, it is often claimed in Great Britain that the miners, being a very numerous and well-organized body of workpeople, were in a stronger strategic position than most workpeople for exacting the remuneration they desire. It is quite true that a stoppage of work in the coal industry causes us a high degree of inconvenience, and temporary concessions may thereby be obtained which might otherwise have been refused. But this is a dubious advantage, and we grossly exaggerate its real importance. The truth is that the strategic position of the miners in regard to wages questions is by no means strong. For their wages constitute a very large percentage of the cost of coal; and the price of coal in its turn is a most important element in the costs of many of the industries which are its principal consumers. Great Britain, moreover, is far from possessing a monopoly of coal. If, accordingly, the wages of the miners are temporarily pushed up to a high point, the result will certainly be a diminished demand for British coal, which will lead before long to their fighting a losing battle to maintain the concessions they have won. Contrast their position with that of the steel smelters, whose wages (high though the wage rates are) constitute a very small percentage of the costs of steel production, and we must agree I think that we have in this distinction the main reason why the steel smelters, though they hardly ever go on strike, have as a rule been able to do so much better for themselves than the miners. When a commodity or service is such that an appreciable alteration in its price has only a slight effect upon the quantity demanded, the demand is said to be _inelastic_. Conversely, when a small change in price greatly alters the quantity demanded, we call the demand _elastic_. In the former case, it is worth nothing, a larger aggregate sum of money will be spent upon the thing when its price is high than when it is low, while the opposite is true in the latter case. This distinction is of considerable importance in connection with many problems (e.g. of taxation); and the terms, elastic demand and inelastic demand, are worth remembering. We may thus express the above conclusions by saying that the demand for sewing-cotton is highly inelastic, and that the demand for coal miners is more elastic than that for steel smelters. §5. _Capital and Labor_. Cases in which it is impracticable to make any variation in the proportions in which different things are used together are, however, the exception rather than the rule. Where variation is possible, we are confronted with an uncertainty as to the way in which an increased supply of one thing will react on the demand for another, similar to our uncertainty as to whether an increased demand for mutton would augment or diminish the supply of wool. It is, for instance, of the highest importance to give a clear answer, if we can, to the question whether an increased supply of capital will increase the demand for labor. The chief effect of an increased supply of capital is to facilitate the extended use of expensive machines: to some extent these machines will increase the demand for labor; to some extent they will be substituted for it. Which of these two tendencies will outweigh the other we cannot be absolutely sure. But fortunately we can be far more nearly sure than was possible in the analogous case of wool and mutton. An increase in the supply of capital increases the demand for the commodities, from which the demand for labor is derived, in both the senses discussed in Chapter II. First it makes them cheaper to buy, and thus increases the quantity that will be bought. It is this that is parallel to the effect of an increased demand for mutton in making it more profitable to breed sheep. But it also serves to increase the purchasing power with which to buy commodities, because it increases the aggregate real wealth of the community, and it thus serves to raise the whole demand curve. This last consideration is so important as to make it overwhelmingly probable, apart from the evidence of history, that an increase in the supply of capital (and the same may be said of an increase in the supply of the other agents of production) will on balance increase the demand for labor. The evidence of history points to the same conclusion. The history of the last hundred years displays an unprecedented accumulation of capital, and an unprecedented extension of machinery, associated with an unprecedented improvement in the standard of living throughout the whole community. This is powerful testimony in favor of the view that an increase in the supply of capital and the use of machinery will usually enhance on balance the demand for labor. Moreover, though this is not conclusive, there is little room for doubt that an obstructive attitude towards the extension of machinery in a particular country, or a particular district, is misguided. For its effect must be to make production more costly there than it is elsewhere, and to lead, slowly perhaps, but very surely, to the transference of the industry to other regions. §6. _Conclusions as to Joint Supply and Joint Demand_. Here, however, we are beginning to digress. Let us sum up in a general form our conclusions as to the way in which changes in the supply or demand of a commodity react upon the demand or supply of the other things with which it is jointly demanded or supplied. Everything turns, as we have seen, on the possibility of variation in the proportions in which the things are used or produced together; and this, it is also clear, is a matter of degree. Our conclusions, therefore, had best take the following form:-- LAW VII. When two or more things are jointly demanded, in proportions which cannot easily be varied, the tendency will be for an increase (or decrease) in the supply of one of them to increase (or decrease) the demand for the others. These results will be more certain, and more marked, the more difficult it is to vary the proportions in which the things are used. Similarly, when two or more things are jointly supplied, in proportions which cannot easily be varied, the tendency will be for an increase (or decrease) in the demand for one of them to increase (or decrease) the supply of the others. These results again will be more certain and more marked, the more difficult it is to vary the proportions in which the things are supplied. §7. _Composite Supply and Composite Demand_. Joint Demand and Joint Supply do not complete the list of relations between the demand and supply of different things. Between tea and coffee, or beef and mutton there is a relation of a different kind. These things are in large measure what we call "substitutes" for one another. An increased supply, and a lower price of mutton, will probably induce us to consume less beef. This relation it is convenient to describe as Composite Supply. Beef and mutton make up a composite supply of meat; tea and coffee a composite supply of a certain type of beverage. For any group of things, between which the relation of Composite Supply exists, we can say, with complete generality, that an increased supply of one of them will tend to diminish the demand for the others. Parallel to the relation of Composite Supply is that of Composite Demand. There are frequently several alternative uses in which a commodity or service can be employed; and these alternative uses make up a composite demand for the thing in question. Thus railways, gasworks, private households and a great variety of industries contribute to a Composite Demand for coal. It is worth noting that there is frequently an association in practice between Joint Demand and Composite Supply on the one hand; and between Joint Supply and Composite Demand on the other. Wool and mutton, for instance, we have described as an instance of Joint Supply; but, in so far as the proportions of wool and mutton can be varied, we can regard these things as constituting a Composite Demand for sheep. And this conception may help us to retain a clearer and more orderly picture of the problems we have discussed above. We can regard the fact that wool and mutton are produced together as their Joint Supply aspect, and the fact that these proportions can be varied as their Composite Demand aspect; and the question as to whether an increased demand for mutton will increase the supply of wool turns upon whether the former aspect is more important than the latter. Similarly labor and machinery, employed together for the same purpose, form an instance of Joint Demand; but in so far as they can be substituted for one another, they constitute a Composite Supply of alternative agents of production. These four relations of Joint Demand, Joint Supply, Composite Demand and Composite Supply are well worth remembering and distinguishing from one another. They are of immense importance in every branch of economic affairs. There are hardly any economic problems upon which we are fitted to express an opinion, unless we have a lively sense of the far-reaching ramifications of cause and consequence, of the subtle and often unexpected interconnections between different industries and different markets. To gape at these complexities in a confused stupor is as foolish as it is to ignore them. But confusion and stupor are only too likely to represent our final state of mind, if we attempt to deal with these complications, one by one as they occur to us, in a piecemeal and haphazard fashion. We need a clear method, a systematic plan by which we may search them out, and fit them into place. The four relations which we have enumerated supply us with such a plan and method. For they represent something more than a series of pompous names for familiar notions. They constitute a classification of the various ways in which the demand and supply of one thing can affect the demand and supply of others; a classification which is exhaustive when we add the relation of derived demand, and an analogous relation on the supply side which we must now notice. §8. _Ultimate Real Costs_. Just as the utility of "producers' goods" is derived from that of the "consumers' goods" which they help to make; so the cost of any commodity is derived from the cost of the things which help to make it. Moreover, just as we recognize that the utility of "consumers' goods" lies at the back of all demand, and constitutes the ultimate end of all production; so we cannot but feel, however obscurely, that behind the phenomena of money costs, there must lie certain ultimate costs, of which all money costs are but the measure. But when we try to explain what the nature of these real costs may be, we are plunged in difficulty. Wages, it may indeed seem at first sight, present no trouble. There is the effort and the fatigue, the unpleasantness of human labor, to represent real costs. But can we suppose that these things are measured with any approach to accuracy by the wages which are paid in actual fact? Is it true, even as a broad general rule, that the services which are most arduous and most disagreeable command the highest price? And wages are not the only ingredient of money costs. There are profits: to what real costs do profits correspond? More difficult still, to what does rent correspond? These plainly are not questions upon which he who runs may read. It will be necessary to devote the next four chapters to their elucidation. CHAPTER VI LAND §1. _The Special Characteristics of Land_. In the great process of co-operation by which the wants of mankind are supplied, Nature is an indispensable participant. She renders her assistance in an infinite variety of ways, of which the properties of the soil which man cultivates form only one; but the sunshine and rain which enable the farmer to grow his crops; the coal and iron ore beneath the surface of the earth, can be regarded for our present purpose as forming part of the land with which they are associated. We can thus concentrate upon land as the representative of the free gifts of nature, which are of economic significance. Land in modern communities is for the most part privately owned. It can be bought and sold for a price, and acquired by inheritance. Moreover, it is a common practice, particularly in the United Kingdom, for an owner who does not wish himself to cultivate or otherwise use the land, not to sell it to the man who does, but to lease it to him for a term of years for an annual payment which we term rent. It is therefore natural and convenient to envisage the problems, which we shall consider in this chapter, as problems concerning the price and rent of land. But, once again, the laws and principles which we shall state and illustrate in terms of the current systems of ownership and tenure, possess a much deeper significance than this terminology might suggest. The fact that land is a free gift of Nature distinguishes it in various ways from commodities which are produced by man. The peculiarities which are most important from the economic standpoint are (1) that the supply of land is, broadly speaking, fixed and unalterable, and (2) that its quality and value vary, from piece to piece, with a variation which is immense in its range, but fairly continuous in its gradation. These are thus two aspects from which the phenomena of price and rent can be regarded; aspects which it is usual to call, (1) the scarcity aspect, (2) the differential aspect. §2. _The Scarcity Aspect_. The fact that the supply of land is fixed has the following significance. If the demand for land increases, the price will tend to rise. This is also true, for a short period at least, of an ordinary commodity. But, in the latter case, there would ensue an increase in supply which would serve to check the rise in price, and possibly, if production on a larger scale led to improved methods of production, bring the price down eventually below its original level. In the case of land, no such reaction is possible. There is nothing, therefore, to restrain the price (and the rent) of land from rising indefinitely, and without limit, if the demand for it should continue to increase. Conversely, if the demand for land falls off, there is nothing to check the consequent fall in price and rent. In the case of ordinary commodities, the supply would be diminished, because most things are either consumed by being used, or wear out in the course of time, and a regular annual production is therefore necessary to sustain their supply at the existing level. But land remains, whether it is used or not; and its supply is, broadly speaking, just as incapable of being diminished, as it is of being increased. Changes in the demand for land in either direction are thus likely to affect its price in a much greater degree than that in which the price of an ordinary commodity will be affected by a corresponding change in its demand. For most purposes, however, it is of more interest to compare land with other agents of production, especially with capital and labor, rather than with ordinary commodities. Now, as we have already noted, there is some doubt as to the manner in which the supply of capital or labor is likely to be affected by alterations in demand price. But the supply of capital and the supply of labor, even if we suppose them to be as entirely unresponsive to price changes as is the supply of land, are at any rate not fixed. Not only _may_ they vary for many reasons, but they are in fact likely to vary in direct proportion to the population. An increase in population implies an increase in the supply of labor; and it is likely to be accompanied by an increase in the supply of capital; in other words, the supply of these agents will expand, as the demand for them expands. But the supply of land will remain what it was. This fact is enormously important in connection with the broad problem of population, which will form the theme of Volume VI. But it is important also in other connections. It has been the dominating factor in many absorbing controversies upon high policy regarding the ownership of land, or the taxation of land values, upon which we can touch but lightly here. It has seemed to many writers a reasonable proposition to lay down, that the ordinary course of the progress of society, the increase of population and industry, must mean, as a broad general rule, a constant increase in the demand for land. And, if that be granted, it seems to follow that the price and rent of land will tend constantly to increase. John Stuart Mill, accordingly, in the middle of the last century, asserted that "the ordinary progress of a society, which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay, incurred by themselves,"[1] and upon the strength of this assertion, he justified the policy of imposing a special tax upon what we have come to call the "unearned increment" of land. But how far does actual experience bear his assertion out? In Great Britain we have seen in the last half-century an undoubted increase in urban rents; but over long periods at least, there was a marked fall in both the prices and rents of agricultural land, despite the fact that the country was "increasing in wealth" as rapidly as ever before. This was due, of course, in the main to the increased supplies of wheat and other foodstuffs coming from the New World: and if, accordingly, we choose to lump together not only our own urban and agricultural land, but the land of other countries as well, and to speak vaguely of the demand for land as a whole, it might seem as though we could argue that Mill's generalization still holds good. But even this is by no means certain and in any case such a generalization is of very little service: what the illustration should rather suggest to us, is the danger of speaking of land vaguely as a whole, and the importance of turning our attention to the variations in value between different kinds and different pieces. [Footnote 1: _Principles of Political Economy_, by John Stuart Mill.] §3. _The Differential Aspect_. Most ordinary commodities are not produced on a single, uniform pattern. As a rule there are many variations of grade and quality, and consequently of price. But these variations are usually designed to meet the differences of taste among the purchasers, and we do not expect to find that any variety of an ordinary commodity will be produced, which is so poor in quality as to be entirely valueless. But since it is nature which has produced the land, without any assistance or guidance from man, there are many pieces of land which are so unfertile, or are otherwise so unsuitable for productive purposes, as to be quite valueless from the economic standpoint. Even in a densely populated country like Great Britain, there are considerable tracts of land which it is unprofitable to employ for any economic purpose whatsoever, and which possess no further value than what the mere pride of ownership may give them. This fact makes it possible to apply the conception of the margin to the case of land with particularly illuminating results. In the first place, however, it should be observed that the value of any piece of land does not depend solely on the intrinsic fertility of the soil. The fact that land is an immobile thing makes its _situation_ a factor of great importance. In the case of urban land, situation is, of course, the only thing that counts. The value of a site in Bond Street or the City is entirely unaffected by its capacity or incapacity for potato-growing purposes. But even for agricultural land, situation is a most important matter. A farm, which is so remote that considerable transport charges must be incurred to bring its produce to market, will be less sought after, and less valuable, than one which is much better situated though somewhat less fertile. In what follows, therefore, we must speak of the "quality" of a piece of land in a broad sense to include advantages of situation, as well as of fertility. Let us now, imagine the different pieces of land in Great Britain to be arranged in order of quality, so that we have a long series, with land of the best quality at one end, and of the poorest quality at the other. At the latter end, we will have such land as is found near the top of Snowden or Ben Nevis, which it clearly does not pay to cultivate at all. Somewhere, then, between these two extremes, we shall come to a point where the land is just, but only just, worth cultivating, or where, to revert to a form of words we previously employed, it is a matter of _doubt_, whether the land is really worth using for a productive purpose. Such land we can regard as the "marginal land"; and since the variety of nature is at once infinite and fairly minutely graduated we shall probably find that on one side of this margin there is much land which is only slightly superior, and on the other, much which is only slightly inferior, to the marginal land itself. What, then, is likely to be the value and the rent of this marginal land, this land which is just on the "margin of cultivation"? Some readers may find the answer startling. The rent of the marginal land will be nil, because it will not pay to cultivate it, if any appreciable rent is charged. A piece of land for which it is worth a tenant's while to pay an appreciable rent, will not be the marginal land, because there will be land just slightly inferior to it which it will also pay to cultivate if a somewhat lower rent is charged. And so we can pass to poorer and poorer qualities of land, with an ever diminishing rent, until at the margin of cultivation the derived utility of the land is negligible and the rent vanishes. This certainly is a somewhat abstract conception; but it is by no means so remote from reality as may at first sight appear. The reader may protest that in the course of an extensive and varied acquaintance with landowners, he has not yet run across this peculiar marginal type, who lets his land for no rent at all. But there, if his experience is really extensive, I think he is mistaken. It so happens that the ordinary agricultural landowner leases out his land, not by itself, but together with a variety of other things such as farm buildings, which it costs him a considerable sum of money to provide. He will not as a rule be willing to go to this expense, unless he sees his way to obtain for the farm an annual payment, which represents at least a fair return on this capital outlay, as big a return as he could have got, for instance, by investing the same amount of money in some gilt-edged security. This annual payment will, it is true, be called rent; but the significance of this is that what we term rent in ordinary life is usually a complex thing, made up of two essentially distinct elements, viz. the normal return on the capital goods supplied together with the land, and what we may call the "net rent," or the "pure rent" attributable to the land itself. Now will any reader make so bold as to say that there is no land under cultivation, in respect of which this net rent is either nil or negligible? The landowners will not agree with him. It is not a question, it should be observed, as to whether the rent obtained represents more than a fair return on the purchase price paid for the land; that is quite another matter. The question is whether the rent obtained exceeds a fair return on the capital sum spent on the buildings, etc.; with which every farm must be equipped to let at all. In fact there are not a few farms where there is no such excess, and where accordingly there is no "net rent" or "pure rent" which can be attributed to the land. The question whether it would be profitable to cultivate any piece of land, turns upon whether the receipts which would be obtained by selling the produce would exceed the costs of cultivation: and under these costs of cultivation we must include, of course, the remuneration of the farmer's services. Farmers, like other people, have to live; and they would not take on the troublesome job of farming, unless there seemed a prospect of making a living out of it. The remuneration of the farmer takes, of course, the form not of a salary, but of profits: and these profits vary very much from year to year, and from place to place, and from man to man. But they are essentially payment for work done, and an ordinary profit must be regarded therefore as part of the necessary costs of farming. Thus it will not be worth while to cultivate a piece of land, and the land will in fact lie unused, upon which a careful farmer might obtain a profit in the ordinary sense, of no more than $50 or $100 a year. The marginal land will be land which yields a decent profit to a decent farmer, as well as a gross rent to the landowner, sufficient to compensate him for his capital outlay, but nothing further. What, then, will be the rent of a fertile and well-situated farm, about which there is no doubt that it is well worth cultivating? Part of the gross rent which the landowner receives must again be regarded as merely a return for the capital expended in equipping the farm for use; but in this case, there will be a residue left over, which constitutes the net rent of the land. The net rent will measure the derived utility of the land to its occupier, and will in general represent (very roughly, of course, in practice) the differential advantage of cultivating the land in question rather than land on the "margin of cultivation." This differential advantage may take either, or both, of the forms, of a larger produce per acre, or a lower cost of production and marketing. But, in any case, the extra profit, which, if no rent were charged, a decent farmer could obtain by cultivating the farm in question, rather than a marginal farm, will be roughly equal to the net rent which his landlord can exact from him, if his landlord so chooses. The landlord may, of course, not choose to exact a rent as high as this; and as a matter of fact, in a country like Great Britain landlords often content themselves with less. The traditions associated with the ownership of agricultural land, and with the relations between landlord and tenant serve to soften the edge of economic law, and to subject the rents which are actually fixed to the control in no small measure of the general sense of what is fair or customary. In such cases the landlord makes the farmer a present, for the time being, of part of the economic rent. On the other hand, as Irish agrarian history well illustrates, the landlord may sometimes expropriate under the name of rent, permanent improvements which are due to the labors or the expenditure of the tenant. This is, of course, particularly likely to happen, whenever it is the custom to leave to the tenant the obligation of providing the capital equipment of the farm, which in Great Britain is, for the most part, the recognized duty of the owner. Again, in the case of urban land in the South of England, expropriations of this kind are an essential and well-understood feature of the leasehold system. The owner grants a lease for a long period of time, usually ninety-nine years, for a ground rent, which is notoriously below the true economic rent of the land, subject to the condition that the leaseholder must erect upon the land and keep in good repair certain buildings, which on expiry of the lease will become the property of the ground owner. Here the nominal ground rent is only part of the total rent which is really paid; the ultimate transference of the buildings representing often the more important part. There is, in fact, a great variety of systems of land tenure, some of which are highly complex, the respective merits of which vary greatly, and which constitute a most important problem for statesmen and legislators. Considerations of this kind in no way diminish the importance of the general analysis of rent, which we are pursuing in the present chapter. Rather they make it the more important, because we cannot properly weigh the merits of any system of land tenure, until we have grasped clearly the principles governing the rent of land in the purest form. But certainly we must never forget that the rent we are discussing may differ very greatly from, though it will vitally influence, the money payments which are called rent in actual life. It is the pure economic rent, the rent which represents the _full_ annual payment which it would be worth paying to obtain the use of the land alone, which will measure, as we have said, the differential advantage of the land in question over land on the margin of cultivation. A clear grasp of this relation helps us to perceive that an increase in the prosperity of the community may sometimes influence rents in an unexpected way. It all depends on the causes which have given rise to the increased prosperity. An advance, for instance, in agricultural science will facilitate a more abundant supply of foodstuffs; but it will not necessarily increase the aggregate rents of agricultural land. For if it takes the form, say, of the discovery of some new artificial manure, it will very likely facilitate production on the less fertile soils far more than it will on the more fertile soils where artificial manures are not so necessary. It will thus tend to diminish the differential advantages of working on the more fertile farms, and their rents will accordingly fall, possibly by much more in the aggregate than any increase in the rents of the farms near the margin of cultivation. The point may, perhaps, be better understood if we pass from agricultural to urban land, and ask what would be the effect on site values of a great improvement in the facilities of internal transport. Push the case to an extreme, and suppose passenger transport to become so cheap and so quick that there ceases to be any advantage in living in a town so as to be near your place of work. Urban landlords would no longer be able to obtain the high rents they now receive for the sites of houses in or near a town. For most people would prefer to move out into the country where sites can be obtained at little more than an agricultural rent. The country covers so large an area relatively to the towns that the supply of rural sites would be still very plentiful as compared with the demand. Their rents would not, therefore, rise by very much, although the rents of the housing sites in towns would fall heavily. Of course, there are other factors to be taken into account before we could pronounce upon the effect on aggregate rents. Central sites for shops might, for instance, fetch a higher rental than before. The purpose of this discussion is not to generalize but to show the danger of generalizing about rents in the aggregate, or land as a whole. §4. _The Margin of Transference_. The last illustration may serve, however, to remind us of an obvious fact which we must now take into account. The same piece of land may be used for a variety of purposes. It may have been used for growing corn, and later it may be devoted to the building of houses, or, as at Slough, to a repair depot for motor vehicles. It need hardly be said that the land will, as a general rule, be put to the use in which its value is greatest; or to speak more strictly, in which the biggest rent, or the biggest selling price can be obtained. But the notion of the differential advantages which a piece of land possesses over the marginal land becomes decidedly more complicated when we take account of this variety of uses. Let us turn our attention, for instance, to the sites used for shop and office purposes, and consider what we can regard as the marginal site in this connection. Clearly it will not be the marginal land of which we spoke above, which it only just paid to cultivate, and which yielded no rent at all. For this will probably be agricultural land in an out-of-the-way district, where no one would dream of setting up an office or a shop. Any site upon which a sane man would contemplate setting up a shop will certainly possess value for other purposes, such as house-building. Hence the marginal site for shopkeeping purposes will not be like our marginal farm, a site which yields no rent. As regards many pieces of land, there is no doubt as to the purposes for which they can most profitably be used. This piece will command a much higher rent as a shop site than in any other capacity; for that piece house-building is the obvious employment; for another, agriculture. But in quite a number of instances there is considerable uncertainty. It is not clear whether upon this site it will be better to erect a house or a shop, or if the latter, what kind of a shop. It is not clear whether it will pay to use that farm land for a building scheme; and, within the domain of agriculture, which of course comprises an immense variety of really different industries, it is often a very moot point indeed whether a certain field should be left under grass, or brought under the plow. Cases of this sort are not phantoms of the imagination; they emerge on every side as concrete problems with which some one or other is dealing every day, and it is these cases which constitute the marginal land for the purposes of a particular occupation. The marginal sites for shops are the sites for which it is only just worth while to pay rents sufficient to entice them away from houses. And the rent for a site in Bond Street, or elsewhere, which is so much more suitable for shop purposes that no alternative use would be worth considering, will exceed the rent paid for one of these marginal sites by, roughly speaking, the extra advantage it possesses for shop purposes. Or will fall short of it, it may be well to add, to the extent of its comparative disadvantage. For there may be many such marginal sites, some of which will fetch low rents, and others very high rents indeed; the same site being often of great potential utility for a large variety of occupations. Between any two occupations there will thus usually be a _margin of transference_, which we must conceive not as a point, but as an irregular line, upon or near to which there will be many pieces of land, differing greatly in the rents which they fetch. These variations of rent will correspond to the differences between the advantages or derived utilities which the sites possess for _both_ the occupations in question. The position of such margins of transference will of course alter as industrial conditions change, and, when they alter, the rents of sites which are not near any margin of transference will be affected also. Thus an increased demand for the products of any particular industry will make it profitable for that industry to offer higher rents, and thus draw land away from other occupations. This will have the effect of raising, though possibly to a very slight extent, the rents of sites which still remain in other uses; for there will be fewer of them available; and their derived utilities will consequently be increased. But here, as everywhere, it is upon the margin that our attention should be focussed, because it is round about the margin (wherever it is found) that the changes are taking place which really matter for society. When Mr. Mallaby-Deeley buys an estate in Covent Garden from the Duke of Bedford, the transaction hardly deserves the degree of public interest it excites. Nothing has happened which is of material consequence to anyone except the two gentlemen concerned; the various sites are still used for the various purposes for which they were used before; nothing has occurred that really matters. But when houses are pulled down for the erection of a cinema, or when a field is diverted from tillage to pasture, something has happened which affects for good or ill the interests of the whole community. Conversion from tillage to pasture represents, indeed, a tendency which has been very marked in Great Britain during the last generation, and has aroused misgivings in many public-spirited observers. Possibly for a variety of reasons, these misgivings may be justified; certainly the problem is well worthy of attention. But when in this way the issue is raised of tillage versus pasture, it is essential, if we are to discuss it rationally, that we should envisage it clearly as applying only to a limited portion of agricultural land, to the portion which lies somewhere near the margin of transference, as things are now, between the two forms of agriculture. It might be socially desirable to bring under the plow a field which the farmer finds it only _slightly_ more profitable to lease under grass; but this would be highly improbable in the case of a field where the balance of argument to the farmer in favor of pasture is overwhelming. The position of the margin of transference between different uses may, in other words, be somewhat out of place from the social point of view, and it may be desirable by appeals and propaganda, even conceivably by the devices of State subsidy and compulsion, to push it forwards or backwards in greater or less degree. But it will be necessarily a matter of degree, and nothing could be more foolish than to speak as though there was, or could be, some ideal method of cultivation equally applicable to all lands, without regard to their climatic and other conditions. Needless to say, none of the agricultural experts who sometimes deplore the decline of arable farming are guilty of such foolishness. But the sense of the diversity of nature which is very vivid to them may sometimes be lacking in people who live in towns, and a firm grasp of the marginal notion may serve best to keep the latter from forgetting it. §5. _The Necessity of Rent_. Behind all such detailed applications there lies a more general consideration which deserves attention. The way in which the land of a country is used, the way in which it is apportioned between the countless alternative employments that are possible, is a most important matter, more important perhaps than any questions as to the size of the incomes which particular landowners receive by virtue of their rights of ownership. How is this apportionment effected as things are now? The answer is clear: mainly by the agency of either rent or price. The business which finds it worth while to offer the highest rent or the highest price for any piece of land will, as a rule, be able to command its use. And, with this as the governing principle, an apportionment is secured between shops, offices, factories, agriculture, between the immense variety of different employments covered by each of these broad headings; not a rigid unvarying apportionment, but one which constantly changes as economic circumstances change, and as the margin of transference between different occupations moves hither and thither. This apportionment takes place at present as the result of the independent decisions and bargains of many private individuals, who are thinking mainly of their own interests, and not of those of the community. But this state of affairs might be altered. The land might be nationalized and allocated to its various uses by the co-ordinated labors of a great State department, or some other agency of the collective will. However improbable such a change, it is perfectly conceivable. But what is not conceivable is that any State department should handle the job with a success even approaching that of the present system, unless it continued to use, as its main instrument, the criterion of either rent or price. That a piece of land would yield a higher rent in one occupation than in any other is not conclusive evidence that it is best to devote it to the former purpose, but it is very good evidence, and it should be allowed to prevail unless it is demonstrably outweighed, as it possibly might often be, by considerations of a different kind. That it would not be well for the community to employ land in the city of London for corn-growing purposes, however desirable might be a revival of home agriculture, is so obvious that it may seem to have no bearing on the present issue. But it is only an extreme indication of the absurd and wasteful use of our natural resources, which would grow up slowly but surely, if we dispensed with ideas of rent and price as sordid irrelevancies, and allocated our land on the basis of a balancing of the loftiest arguments of a vague and sentimental character. If you are prepared for the distribution of land to become stereotyped, for each piece to continue indefinitely in its present use, then indeed you might dispense with rent, as primitive societies very largely do. That would mean stagnation and, for an industrial country, decay. But if changes are ever to be contemplated, a simple quantitative measure is the only safeguard against utter chaos. Thus rent, like interest, will be found indispensable as a measure under any efficient system of society, even if it might not always represent the payment of sums of money to private individuals. And that is why the principles governing rent possess, as I indicated at the outset of this chapter, an importance more fundamental than our present system of ownership and tenure. §6. _The Question of Real Costs_. But we must not forget the preliminary question that started us upon our analysis of the agents of production. The rent which a manufacturer or farmer has to pay for his land he naturally includes in his cost of production. But does this money cost to the individual correspond to, and measure, any real cost to the community as a whole? Here let us note in the first place that if only we could disregard the variety of uses to which land is put, if we could suppose that all industry was agriculture, and that agriculture was a single industry with a single product, we could argue that rent does not enter into marginal costs at all. For we could regard the marginal producer as the one working on a marginal farm, whereas we have seen there is no pure rent. The rent which other producers have to pay would thus represent merely the destination of the surplus profits which arise wherever actual costs fall short of marginal costs. This way of looking at the matter has proved attractive to some thinkers, not in the least because of a desire to palliate the effects of landlordism, but because it fits in so well with our general sense of rent as a "surplus," and a surplus as something distinct from a necessary price. But it is clearly illegitimate in an economic theory which professes "to describe the facts." The marginal land for many purposes fetches, as we have seen, a considerable rent; and this rent is certainly part of the marginal costs and of the necessary price of the products of the particular industry. The answer to our question is, however, not now very difficult to see. Land, greatly as it differs in many respects from the other agents of production, resembles them in the very important respect that, being used for one purpose, it is not available for other purposes, and that the productive powers of the community in other directions are thereby diminished. This is the real cost to the community, which attaches to the products of any industry, in virtue of the land which it occupies; not any human labors or sacrifices required to produce the land itself, but the curtailment of the natural resources available for productive use elsewhere. This is the real cost of which rent is the money measure, and generally speaking an accurate measure at the margin of transference between one occupation and another. A somewhat fanciful use of the term cost, this may seem perhaps, one not quite in accordance with our instinctive sense of what real costs should be. But possibly the real costs represented by wages and profits may turn out to be not so very different, and we had best leave the matter there, until we have examined the nature of these other costs. §7. _Rent and Selling Price_. In this chapter we have spoken mainly of the rent rather than the price of land: the relation between the two things is fairly obvious and well understood, but it will be well not to close the chapter without a brief account of it. The price of any piece of land is affected by all the considerations on which its rent depends, but it is also affected by another factor which has no influence whatever upon rent. This factor is the rate of interest. The higher the rate of interest, the higher the return which a man could obtain by buying gilt-edged securities, the lower will be the price that he will pay for a piece of land which yields a given rent. We can express the relation more precisely by the formula Price = (Rent * 100)/(Rate of Interest), though we must be careful, in applying this formula in practice to allow for the possible deviations between the nominal and the true rent, and similar complications. The price, it must be observed, is derived in this way from the rent, not the rent from the price.[1] Rent is thus logically the simpler, price the more complex thing. It is well, therefore, to analyze in the first instance the principles of rent, if we live in a country where the practice of leasing land for annual rent is less common than it is in Great Britain, even if, for whatever reason, it is the price of land with which we are concerned in practice. The problem of price contains two distinct elements which it is not easy to handle when mixed up together. For the rate of interest represents in itself an important branch of economics, which will require a separate chapter to itself. [Footnote 1: In this the rent of land differs fundamentally from that of other things, such as houses. For the price of a house is largely influenced by the costs of construction of new houses, and should correspond closely to them in the long run. The same relation between rent, price and rate of interest will hold good; but the rents will be affected by changes in the rate of interest, owing to the reactions of such changes on the supply of houses.] CHAPTER VII RISK-BEARING AND ENTERPRISE §1. _Profits and Earnings of Management_. The profits of a business, as they are ordinarily reckoned, whether for the purposes of income tax or of a balance sheet, comprise several elements which are fundamentally distinct. The relative importance of these various elements varies greatly from one type of business to another. The profits of a private business include, for instance, the remuneration of the work of management, which in the case of a Joint Stock Company is mostly paid for by salaries or directors' fees. It is to their profit that farmers, small shopkeepers, and the partners of a private firm look not merely for a return upon their capital, but for the reward of their own labors. "Earnings of Management," as they are usually termed (though in truth they often cover other and humbler forms of labor) are thus frequently one of the ingredients of profits. §2. _The Payment for Risk-bearing_. There is another element of great importance about which our ordinary ideas are apt to be so vague that it will be well to devote a chapter to its examination. This is the element of payment for risk, or rather the reward of risk-bearing. Risk is inherent in all business, as it is inherent in all life. The vagaries of nature and the vagaries of man are alike responsible. The farmer may find his harvest ruined by a drought or by a deluge; the coal or the gold, for the extraction of which you have perhaps set up an extensive mining plant, may come to an end which is unexpectedly abrupt. You may put your money into roller-skating rinks and find that cinemas have become the rage with the fickle public; sometimes "the market" may decline for causes which remain obscure but with consequences which are disagreeably plain. But while risk is always present in some degree, the degree varies enormously from one industry to another. Now, it is obvious enough that in an exceptionally risky industry, where there is a considerable possibility that the capital invested will yield no return at all, the profits of those concerns which succeed are likely to exceed the rate of interest on gilt-edged securities. But what is likely to be the magnitude of this excess? Is risk-taking rewarded if there is any such excess, however small? Or will it suffice that the gains and losses should average out to a fair rate of interest over the whole industry? To enable us to think closely let us suppose for a moment that we can measure accurately what the chances are. Suppose, then, that there were a precisely equal chance of success on the one hand and failure on the other in any enterprise, failure involving a complete loss of all the capital invested. Suppose, further, 6 per cent to be at the time a fair return on a perfectly secure investment. What would be the return which must be expected from the risky enterprise, in the event of its succeeding, before it will be undertaken? The reader may be tempted to answer, 12 per cent. But 12 per cent would not suffice. An equal chance of 12 per cent or nothing, as compared with a certainty of 6 per cent, does not mean that the risk in the former case is paid for to the tune of 6 per cent. It means that it is not paid for at all. In each case what a mathematician would call the _expectation_ is a return of 6 per cent. The odds are evenly balanced; in the long run, over a large number of cases, if the law of averages works as we assume it does, you would get just as much from the one type of investment as the other. Now, risky enterprises will not, as a rule, be undertaken on terms like these; investors and business men will not take risks with the odds precisely equal; they must have them, or believe that they have them, in their favor. §3. _Monte Carlo and Insurance_. To assert this is not to ignore the strength of the appeal which the gambling instinct makes to many, if not to most of us. The taste for gambling is, indeed, so deep and widespread that it would be foolish to leave it out of account in this connection. It is clear enough that at places like Monte Carlo people are prepared to have the odds unmistakably against them, apparently for the sheer pleasure and exhilaration of taking risks. Moreover, though for most people play at Monte Carlo represents a mere holiday indulgence, it would be unsafe to assume that what appeals to them there will not also appeal to them in their business affairs. But what exactly is the secret of the charm of Monte Carlo? It is the great attractive force of a small chance of a large gain, as compared with the deterrent force of a large chance of a small loss. People will readily pay $5 for one chance in a hundred of making no more, perhaps, than $400 or $450. And it is very likely that this holds good in the world of business. If, for example, we were to suppose that the promoters of a new enterprise were confronted with one chance in fifty of a profit of 50 per cent per annum on their capital, as against forty-nine chances of a profit of 5 per cent, this might well prove a more attractive prospect than a certain return of 6 per cent, although the strict _expectation_ of profit would be smaller in the former case. But the risks of business enterprise are not often of this type. They conform more usually to the opposite type of a large chance of a relatively small gain, balanced by a small chance of serious loss or entire failure. Now for almost everyone the possibility of a great loss will count as a deterrent (just as the possibility of a great gain may count as an attraction) for much more than its strict actuarial value. The truth of this proposition is demonstrated by the existence of institutions more impressive than Monte Carlo--the Insurance Companies, which play so large a part in the economic life of modern times. Every year, and upon an ever-growing scale, both private individuals and business concerns pay sums of money, which reach in the aggregate a colossal sum, as premiums to insure themselves against loss by Fire, Shipwreck, Burglary, Death, Death Duties, against every risk which Insurance Companies will cover. Now Insurance Companies are not, as we say, in business for their health. They find their business profitable, and pay good dividends to their shareholders. Moreover, they incur a considerable expenditure on offices, on clerical staff, on agents, and the like. All these payments must be defrayed out of the premiums they receive; so that it is plain that the premiums greatly exceed the _expectation_ of the risks insured. The odds are heavily in favor of the Insurance Company--of that the stupidest person can have no shadow of doubt. Yet we continue to insure, as private individuals and as business men, and so far from being ashamed of our proceedings as a weak and nerveless folly, which somehow we are unable to resist, we blazon them forth in the strong accents of conscious pride. We preach insurance to our neighbors as the core of self-regarding duty, and, if ever we feel a twinge of uneasiness, it is lest we, too, may have omitted in some particular to practice what we preach. The significance of this is unmistakable. Be our psychology what it may, however deep and irrepressible our taste for derring-do, however inadequate the scope which the dull routine of modern life affords for our adventurous impulses, we are most of us anxious to avoid the risk of great financial loss. We are very glad to find someone to take it off our shoulders if we can; so glad that we are prepared to pay him for the service, to pay him a sum which covers not only the actuarial equivalent of the risk, but something substantial over and above. In this we are entirely rational. Our conduct is justified by the law of the diminishing utility of money, which was noted at the end of Chapter III. It would be plainly foolish, for instance, to substitute for the certainty of an income of $2500 per annum an even chance of $5000 or nothing, since the utility to us of $5000 is not twice as great as that of $2500. The majority of business risks are not of a kind against which it is possible to insure. Insurance companies confine themselves to risks which are mainly a matter of what we call objective rather than subjective chance, i.e. risks in respect of which knowledge of detailed facts peculiar to the individual case is of minor importance. But such knowledge is of paramount importance in the case of ordinary business risks. If, for example, a new enterprise is to be undertaken, the special knowledge and experience which its promoters possess is a vital factor in determining their estimate of the risk involved. An outsider with no special knowledge would necessarily require to estimate the risk far more highly if we were to form a rational opinion on the basis of _his_ knowledge. So great, indeed, would be the risk to him, that we can lay it down as a sound maxim that people are extremely rash who invest their money in risky undertakings about which they know very little. This subjective aspect of business risk has a significance to which it will be necessary to revert. But, though most business risks are not and cannot be a matter for premiums and policies, the principle, which the practice of insurance illustrates, applies none the less. In the light of their knowledge and experience, the promoters of a new undertaking must weigh up the chances of failure and success, though they will not do so by the precise methods of an actuary. They will require that any chances of serious loss should be balanced by such chances of exceptional gain, as would raise the _expectation_ of profit well above the normal return on secure investments. The more risky the project seems the greater, generally speaking, must be the _expectation_ of profit required to induce people to undertake it. If we suppose business men to calculate reasonably, it follows that the average profits in any industry over a long period of years, reckoning in the losses of the concerns which disappear altogether, are likely to be higher, the more risky is the industry. Such a result will not, of course, occur in every case. Even when the calculations are reasonable, they may be entirely falsified by the event. Moreover, business men may not calculate reasonably on the information which they have. But, unless we suppose their judgment to be subject to a prevailing bias in one direction, i.e. to be unduly optimistic as a general rule, _we_ should expect, and in any case _they_ must expect, profits above the ordinary in a risky industry. This conclusion is sufficiently important. Far too many people, though they admit it when it is expressly stated and dismiss it even as a tiresome commonplace, are apt to neglect it when the occasion for applying it arises. For example, the great importance to any industry of good management is generally recognized, and the consequent desirability of paying adequate salaries to the managerial staff. The importance of securing a supply of capital is very widely recognized, and the practical necessity of paying a fair rate of interest is thus, however grudgingly, conceded. But the "residuary profits," as they are called, which accrue at present to the owners of a business, are denounced in some quarters in a sweeping fashion, which seems to ignore altogether the all-pervading element of risk. People speak as though you might appropriately limit profits in every industry to some uniform percentage on the capital employed, without making it clear whether you would even be allowed to make up in good years for the losses incurred in bad. The effect of introducing any such crude device into our present industrial system could only be to paralyze enterprises of an unusually risky kind, which, so far from being pushed to an excess at present, are more probably curtailed unduly from the standpoint of what is socially desirable. Like the fixing of a low maximum price for a commodity it would cause the supply to wither up and disappear. §4. _Risk under Large-scale Organization_. While this is true of the present economic system, the question is worth considering whether it represents a fundamental necessity, whether, for instance, under our world socialist commonwealth the factor of risk-bearing need play so important a part as it does in the actual business world. This question cannot be answered with a conclusive simplicity; opposing considerations present themselves, between which it is not easy to strike a balance. On the one hand, in accordance with the law of averages gains and losses tend to cancel out over a large series of transactions, _when reasonable calculations have been made_. Thus Insurance Companies, while they take heavy risks off the shoulders of policy-holders, incur relatively trifling risks themselves; they can predict the aggregate sums which they will be called upon to pay within a small margin of error. In the same way it might seem that every enlargement of the scale of business would make for an automatic insurance and a consequent economy of risk; and thus that if all businesses were comprised in a single financial unit, gains and losses would cancel out over so wide a range that the degree of risk remaining would be almost negligible. This might indeed happen, if business risks were mainly of that objective kind in which the insurance companies specialize; for then we could assume that the chances of success or failure would be estimated reasonably. But, in fact, most business risks, not being of this kind, must be estimated by processes of human judgment, which are very fallible. And here we must take account of the law of averages in another aspect, with a different bearing on the argument. When an industry comprises a large number of separate concerns, and the decisions accordingly are taken by many men, acting independently of one another, the errors of calculation will tend to some extent to cancel one another out. The undue optimism of one man will be balanced by the undue pessimism of another; and, if there is no prevailing bias in either direction, the errors of judgment will not affect the results for the industry as a whole. But where the effective decisions are taken by very few men, the chances are far greater of a preponderating balance of error in one direction. The risks dependent on the factor of human judgment tend therefore to increase. This truth can be illustrated by a phenomenon which is fairly familiar. It is recognized by intelligent persons that the risks of speculation in a particular commodity market or stock market increase more than proportionately to the scale of operations. A man who sets out as a "bull" upon a small scale can buy without sending up the price against him in the process, and, if he decides later that his judgment is mistaken, he can at any time cut his losses and sell out without much difficulty. But a "bull" on a very large scale cannot complete his purchases except at a price which has been raised in consequence of his own action, and he cannot count on being able to "unload" at or near the market price, should he decide to do so. If, accordingly, he miscalculates, he cannot save himself from serious loss as a smaller man might do by a prompt discovery of his error. His difficulties spring from the fundamental fact that the effects of his calculations are too great to be offset by those of the different, and often opposite, calculations of other men. Upon the issue whether a growth in the size of the business unit is likely to diminish risk, the law of averages thus cuts both ways. The risks arising from the element of pure chance are more likely, those arising from miscalculation are less likely, to cancel out. Upon these grounds alone, it would be unsafe to conclude that there would be on balance an economy of risk under any system of national or world socialism. §5. _The Entrepreneur_. There remains, however, an aspect of the problem which is perhaps more important than those discussed above. It is probable that risks would be estimated and undertaken more wisely or less wisely under a different system of society or of industrial organization? Upon this issue, methods of precise analysis are out of place, but we may have something to learn from the emphatic testimony of tradition. It has become an axiom of business men that, while Governments can manage with more or less competence a safe and routine business like a Postal Service, their success would be unlikely to prove conspicuous in undertakings where the element of risk is great. There, it is said, we owe everything in the past to the enterprise of individual men (for even joint-stock companies have not been notable as pioneers) adventuring their own fortunes in accordance with their own unfettered judgment. This contention, however much we may desire to qualify it, has unquestionably a large measure of truth, and the explanation is not difficult to discover. For the wise taking of risks in industrial development of an experimental character, peculiar conditions and special qualities are required. First, it is necessary to envisage distinctly the promising though risky opportunity, and this calls not infrequently for imagination of a none too common order. Then it must be studied with insight and expert knowledge and weighed by processes which are as much intuitive as intellectual. The reasons for or against taking a particular business risk are seldom such as can adequately be expressed in terms of arithmetic, or even by clear arguments the soundness of which is proportioned to their logical cogency. The mysterious faculty of judgment enters in; and from mental processes which defy analysis there emerge ultimately conviction and the will to act. But it is precisely here that Government Departments are apt to fail. It is here that the individual, who need consult no one but himself, has a pull over any form of organization, where decisions are reached by the method of debate and agreement among a heterogeneous committee. Hence it is that we have come to regard exceptional risk-taking as the peculiar province of individual enterprise. It is probable that these deficiencies of corporate organization are tending to diminish, and it is an interesting question how far it may be found possible to eliminate them in the future. Meanwhile the above considerations have an important bearing on the rewards which can often be obtained from risky enterprises. The number of individuals who are in a position to envisage a business opportunity, and to assess with some confidence the chances of success and failure is very limited. Not only must they possess special knowledge, ability, imagination, confidence in their own judgment, and the capacity to act on it; they must also have at their disposal considerable financial resources. To combine all these advantages represents a union of circumstances which is distinctly rare. The fortunate few, who do combine them, are thus generally able to extract in the form of profits a high price for their services, a price which covers not only the strict reward of risk-bearing, and the necessary remuneration of their own service, but a handsome payment for the special qualities and advantages which have been indicated. Profits, moreover, may vary between one industry and another, not only in accordance with the real risk which is entailed, but with the degree to which the supply of special knowledge, etc., is scarce or abundant. This consideration goes a long way to explain the large fortunes which enterprising business men are often able to amass. It also throws some much-needed light upon the functions which such men discharge. They perform to a large extent the work of management; they supply capital on what may be a considerable scale; but it is the taking of business risk which is perhaps their most characteristic function. It is the union of these functions which distinguishes them as an essentially different type from the salaried manager who has invested his savings in rubber or in oil. In other languages there is a specific name for the man who combines all these three functions; in French he is called an "entrepreneur," in German an "Unternehmer." It is much to be regretted that in English we have no clear corresponding word. The word "capitalist" is not uncommonly employed to do duty in this connection, but this is a source of much confusion. For the word is also used, and more appropriately, to include all investors, whether or not they are active business men. §6. _Risk-taking and Control_. But there is an allied confusion of more importance. We commonly suppose it to be a leading feature of our present "capitalist system" that the control of industry rests in the hands of those who supply the capital. Nor, as a general statement, is this untrue. But it conceals the essential point. Strictly speaking, it is risk-taking with which control is associated. The mere lending of money carries with it no title to control. Governments and municipalities concede no such title to the subscribers to their loans; nor does a company to its debenture holders. The shareholders' ultimate control is based upon the fact that they bear the financial risks of the concern. Nor is this a matter of mere legal form. It is not uncommon for ordinary shares to carry with them a greater voting power than the preference shares of a corresponding value. The principle which such arrangements endeavor to express is clear: control should rest with him who bears the risk. It is with this principle rather than with a mulish insistence on the rights of property, that advocates of "workers' control" and the like have got to reckon. It is upon this ground that (as they may quite conceivably do) they must make good their case. §7. _General Analysis of Profits_. Let us conclude this chapter by clearing the ground for the next. Earnings of management, payments for risk-taking and for the special knowledge and advantages associated with it, are ingredients of the gross profits of a business. The chief element that remains is that of interest on capital. Frequently, indeed, it is not the only one. As we saw in the last chapter, a farmer may not be required by his landlord to pay the full economic rent for his farm; and he may therefore make profits above the normal level, above the ordinary return for his own services, his own capital expenditure, and the risks to which he is necessarily exposed. In such a case the farmer is really the recipient, as we have already suggested, of part of the economic rent of the land; and an element of rent accordingly enters into his gross profits. But profits may include a surplus element which may arise in a great variety of other ways. A business may possess some decided advantage which is not open to competitors; and it may reap high profits accordingly. You can, for instance, if you choose, regard the high money profits, which, as was suggested in Chapter IV, are likely to accrue in future to the owners of pre-war factories, as a surplus profit of this kind. But while, as this illustration indicates, the phenomenon of surplus profits becomes of very great importance when we seek to study the distribution of wealth, it need not detain us here. For the surplus element arises only in so far as the costs of a business are lower than the marginal costs; and it is the marginal costs, which, with good reason, we are now endeavoring to analyze. The marginal costs must include a normal profit, i.e. a profit which will cover earnings of management, the reward of risk and enterprise, interest on capital, but nothing further. It remains, then, only to consider this last element of interest. CHAPTER VIII CAPITAL §1. _A Reference to Marx_. Interest is the price paid simply for the use of capital. But what is capital, and in what does its use consist? What claim has it to be regarded as an independent factor of production? Our very familiarity with the term, our habit of employing it with the rich looseness of every-day life is an obstacle to the clearness of thought, which is again essential. We recognize, most of us, clearly enough that capital, although we reckon it in terms of money, consists, like income, of real things; factories, machinery, materials and the like. It is quite obvious that these things are of use, are, indeed, indispensable for production; what more natural than that capital should command a price? It almost seems as though we might pass, without further ado, to a detailed discussion of the forces which determine the amount of this price. But this account does not bring out the essential point as brief reference to a very famous controversy will show. Some ingenious writers in the last century, the most notable of whom was Karl Marx, set out to prove that, in our modern society, workpeople are "exploited," robbed of the "whole produce of their labor," to the full extent of the return which accrues to capital. The argument was exceedingly complex in detail; but it boils down to this: The factories and machinery which are admittedly essential to production were themselves produced in exactly the same way as consumable goods. They were produced by labor, working with the assistance of nature, and, again, if you choose, of capital in the form of further factories, machinery, etc. But these further capital goods can in their turn be regarded as the product of labor, nature and capital; and so we can proceed until it seems as though the element of capital must disappear in the last analysis, as though labor and nature were the sole ultimate agents of production, and the reward of capital represented no more than the exercise of the exploiter's power. In one form or another this argument still dominates the minds of a large proportion of the so-called "rebels" against the existing social order. If we are to meet this argument, if, which is perhaps more important, we are to understand the true nature of capital, we cannot rest content with saying that it consists of factories and machinery, and that these are essential to the worker. Just as it was well to get behind the money terms, in which we often think of capital, to the real goods; so we have now to get behind the real goods to something else. What this something else is, the first chapter may have already done something to reveal. §2. _Waiting for Production_. Between production and consumption there is an interval of time. All productive processes take time to accomplish. The farmer must plow the soil and sow the seed months before he can reap the harvest which will reward him for his efforts. Meanwhile, he must live, and in order that he may live he must consume. If he employs laborers he must pay them wages, that they too may consume and live. For both purposes he requires purchasing power, which represents of course command over real things; and if he has not sufficient purchasing power of his own, he must borrow from someone else who has. In either case it is not enough that the farmer and his laborers should work; no less essential is it that someone should _wait_. The farmer must wait till he has sold his crops, both for the reward of his own labor and for the repayment of the wages he advances in the meantime to his laborers. Or, if he cannot afford to wait, and borrows in anticipation of the harvest, then the lender must wait, until the farmer, having sold his crop, is able to repay him. Thus the period of time involved in all production gives rise to a demand for _waiting_, which someone or other must supply, if the production is to take place. It is this waiting which is the essential reality underlying the phenomena of capital and interest. It is really this which constitutes an independent factor of production, distinct from labor and nature, and equally necessary. §3. _Waiting for Consumption_. But let us carry the argument a step further. After the farmer has sold his crops, there are many stages through which they must pass, at each of which more waiting is required, before they reach the ultimate consumer. But then the waiting is at an end. This, however, is by no means the case with a great number of commodities. Let us take the case of a speculative builder. While he is building a house he, like the farmer, must wait (or find someone to wait on his behalf), for his own reward, and for the repayment of his expenditure on wages and materials. But, after the house is built, if he lets it to a tenant for an annual rent, his waiting is far from over. Not until many years have passed will the rent payments add up to a sum which equals or exceeds his outlay. He may, of course, sell the house, and thus bring his waiting to an end. But then the purchaser must wait, no matter whether or not he is the occupier. For no one would consider the use of a house for a day, a month, or a year as an adequate return for the price it cost to buy. The occupier-owner pays for the prospect of its use for a long and perhaps indefinite number of years ahead, and he must wait to enjoy the benefits for which he pays now in full. Waiting is as inherent in the consumption of durable things as it is in all production. Now most industries are consumers of durable things of a very expensive kind. Here we come back to the factories and machinery which ordinarily spring to our mind at the mention of the word capital. Not merely does the construction of these things involve waiting; their consumption involves waiting on a vastly larger scale. Just as with a house, many years must elapse before their derived utility can even approximate to their purchase price. It is mainly to supply the waiting involved in the consumption of such durable goods, that a typical joint-stock company issues shares for public subscription. The waiting required to cover the period of time, which its own productive process requires, is largely supplied by means of bank overdrafts or other forms of short-period borrowing. More strictly, fixed capital represents the waiting involved in the consumption of durable things; circulating capital the waiting involved in current production. This distinction loses its sharpness when we consider not the affairs of a particular business, but the industrial system as a whole. Then the period of time involved in the consumption of durable instruments falls into place as part of the time required for the production of the ultimate consumers' goods. We can even, perhaps, conceive of an "average period of production" for industry and commerce as a whole; and this conception is not without its uses. For it serves to bring out the fact that the period of consumption, and the period of production in the narrower sense, are only two aspects of the same fundamental thing, the interval of time which elapses between work and the utility, which is its ultimate purpose. It serves, moreover, to make clear that anything which lengthens this interval of time increases the demand for waiting, or in other words, the demand for capital; and, conversely, that anything which shortens this interval diminishes the demand for capital. §4. _Capital not a Stock of Consumable Goods_. But the distinction between the two forms of waiting, though not fundamental, is none the less worth noting. It enables us to keep our theory in conformity with fact, to look at the phenomenon of capital the right way up; and it is easy, if we are not careful, to slip into the habit of looking at it upside down. People sometimes speak as though the commodities which constitute our capital, instead of being mainly, as our plain sense tells us that they are, factories, machinery and other durable instruments, were rather a _store_ or _stock_ of immediately consumable goods. The argument takes the following form. It is consumers' goods, things like food and clothes, which the farmer, the builder and their workpeople consume while they are working. To enable them to work, therefore, it is vital that such things should not in the past have been consumed as soon as they were made; part of them must have been saved, and carried forward for future use. Furthermore, the longer the time that the work on which people are now engaged takes to yield its product, the larger must be this store of consumers' goods. For these products, when they are completed, will serve (taking society as a whole) to replace the store which in the meantime is being used up, so that the longer this replacement takes, the larger must be the initial store. Conversely, the larger the store of consumers' goods available, the more distant is the future for which we can afford to work. It is thus the store or stock of consumers' goods which represents our real capital; for it is the magnitude of this store which determines how far we can devote our energies to purposes which are remote in time. Now this is pure mysticism. Regarded literally, it is in direct conflict with the facts. The processes of industry are fairly regular and continuous. At any moment, large quantities of consumers' goods of almost every kind are on the point of completion; at the same moment equally large quantities are consumed. The things which we buy were finished, very likely, only recently; or, if in fact they have lain idle for some time in stock, there is nothing essential or at all helpful in that fact. It represents rather a defect--a maladjustment which should be rectified. Even many kinds of agricultural produce do not need to be carried forward from one year to another, for they are produced in many parts of the world, where the seasons come at different periods of the year. It is conceivable, therefore, that we might consume all non-durable things the moment they were ready, and the degree to which we approximate to this ideal is a mark of the efficiency of our economic system. A large store of consumable goods is thus _not_ a fundamental necessity of a prosperous society. What _is_ necessary is plainly the power to produce these things in large quantities as they are required. And this power is furnished by the durable instruments of production, which we thus rightly regard as the true representatives of modern capital. If it is argued that this power to produce consumable goods may be regarded as being _in effect_ a store of consumable goods, it must be sternly replied that this is the language of symbolism, not of science, and that symbolism is highly dangerous in this connection. The false conception of capital as essentially a store of consumers' goods has led and still leads to many serious fallacies. It was this that gave rise to the notorious doctrine of the Wages Fund; the notion that the sum which can at any time be paid in wages is equal to the quantity of capital, _alias_ consumable goods, which happens to exist. To this day it blocks, with an undergrowth of obscurantist controversies, the way to a straightforward account of the problem of trade cycles. §5. _The Essence of Waiting_. But it is with positive conclusions that we must here concern ourselves. What is the essence of this waiting, as we have called it? What are its results from the point of view of the community? The individual, who saves and lends, waits in the obvious sense that he postpones consumption. He foregoes his right to purchase now a quantity of consumers' goods in consideration of the prospect of purchasing a larger quantity of such things in the future. From the standpoint of the whole community, there is a similar postponement of consumption, though it need not commence so soon. The store of consumable goods is what it is: the quantity of goods in _process_ of manufacture, which will shortly be coming forward, is also what it is. For some time, therefore, a sudden access of saving cannot affect the quantity of goods available for consumption; and if, in fact, they should be consumed less rapidly, that will represent an unfortunate defect, not an essential condition of a smoothly working system. The _necessary_ consequence comes later. The increased saving will cause labor, materials, land, agents of production generally, to be devoted to distant purposes. Men will be set to work producing durable goods, largely durable instruments of production like ships or railways or factories or plant. If the increased saving is considerable, the labor, materials, etc., required for these purposes will be withdrawn even under our present system, as under a smoothly working system they clearly must be, from the production of other and more immediately consumable things. Hence, some time later, the supplies of consumable things will be diminished, while at a later period still they will be more than correspondingly increased as the result of the assistance of the new durable instruments. That is the essence of saving from the social standpoint. An early future is sacrificed to a more remote future. The aggregate consumable income of the present is unaffected; the aggregate consumable income of the near future is actually diminished; it is not until at least some years later that the aggregate consumable income is increased. §6. _Individual and Social Saving_. This conclusion is important: but there is an obvious misinterpretation against which it will be well to guard. It is customary for social moralists to preach thrift and saving as a public duty, and to impart to their appeals a special note of urgency in times like the present, when, as the result of the havoc of the war, destitution is widespread over Europe. Now obviously these advisers do not mean to recommend something which will impoverish the world next year and the year after and the benefit of which will accrue only in a distant future: it is the immediate urgency of the world's needs which is rather the substance of their case. Nor would it be right to conclude that these wise men are the victims of a delusion, and advocate a course, the consequence of which they do not understand. The explanation of the paradox is simple. The more the community as a whole saves now, the less in the near future will be the aggregate consumable income of the whole community: but not of the _remainder_ of the community, exclusive of the savers. It is the saver who must wait, whose consumption must be postponed to perhaps a distant future; but _at no time_ does his saving result in a smaller income of consumable goods for other people. The aggregate consumable income of the near future will be diminished, but it may be better distributed, and it may consist of things of a different _kind_. For consumers' goods, we must remember, comprise champagne and motor cars as well as food and clothes; and, if a rich man saves, it may be purely articles of luxury, the production of which will shortly be diminished. Moreover, if his saving has the effect of transferring purchasing power to impoverished people, like those in Central Europe, it will not be devoted to a distant future; it will very likely be devoted to quite immediate ends. In other words, it may not result in any "creation of capital"; it may not represent any saving on the part of the community as a whole. A relatively rich man waits, and a relatively poor man _anticipates_ his income to a corresponding extent; and it is precisely this that is so urgently desirable in a time of widespread poverty and chaos. This is no matter of hair-splitting, and making plain things obscure. While it is always better for the _rest_ of us that an individual, who can afford to save, should save rather than spend (though it might be better for us still if we could have his money to spend ourselves) and while this is the more important the greater is the poverty which generally prevails; yet, as a community we cannot save so much, we _ought_ not to save so much, when we are impoverished as when we are prosperous. It is vital to appreciate this truth, because, as we shall see, by no means all the saving of the world is done by individuals. There are many forms of "collective saving," which take place in actual fact; still more which we are often urged to undertake. And it is of practical importance to realize that the very considerations, which call most urgently for individual thrift, forbid a great indulgence in such projects. A time of national poverty is not a time when it is suitable for the State to embark on large schemes of capital development: we require our resources for more immediate ends. Faced with such problems, our practical sense may no doubt suffice to keep us straight; but it is apt to do so at the expense of a complete inversion of the real issues. If, for instance, we call for Governmental retrenchment on what we deem extravagant policies of housing and education, we usually speak as though they represented the profligacy of a spendthrift as contrasted with the saving that is indispensable. The truth is rather that these policies represent a saving, an investment for future purposes, which may conceivably be greater (this must not be taken as representing my personal opinion) than the community can properly afford. This is another instance of what I mean by looking at the problem of capital the right way up. §7. _The Necessity of Interest_. It is only now that we are in a position to appreciate the true functions of a rate of interest, and the nature of its claims to be regarded as a "real cost." Interest, it is sometimes said, is necessary to provide for the future. It is far more certain that interest is necessary to provide for the present. It is a matter of legitimate doubt how far it is necessary to _pay_ interest to secure a supply of capital; there is no doubt at all that it is necessary to _charge_ interest to limit the demand for it. As we saw in Chapter I, a world socialist commonwealth would require to retain a rate of interest, if only as a matter of bookkeeping, in order to choose between the various capital undertakings that were technically possible. And this is the primary function which the fate of interest fulfils in our present-day society. It separates the sheep from the goats. It serves as a screen, by means of which capital projects are sifted, and through which only those are allowed to pass which will benefit the future in a high degree. For this essential purpose it is hard to imagine how a better instrument could be devised. §8. _The Supply of Capital_. Let us dwell for a moment on this image of a screen, or sieve. One condition of a good sieve is that its meshes should all be of the same size. This condition the rate of interest almost perfectly fulfils. But it is also important that the meshes should be of the _right_ size. Whether this is true of the actual rate of interest is a far more doubtful matter. It is, indeed, plain that it is not altogether devoid of merit in this respect. In times of general world poverty, like those which follow upon a great war, it is desirable, as has been argued, that more of our productive resources should be devoted to immediately useful purposes, and a smaller portion dedicated to a distant future. This readjustment the rate of interest helps to bring about. For it rises to a higher level, and there is accordingly a strong inducement to all manufacturers and traders to economize their use of capital, and thus to set free productive resources for more urgent needs. But, while the meshes of the sieve, as it were, contract in times when it is desirable that they should contract, we have no reason for supposing that they will contract in just the degree that is desired, neither more nor less; or, indeed, that at any time they approximate to the right size. We in the twentieth century owe much of the material wealth that we enjoy to the fact that over the last century men saved as largely as they did. But our natural gratitude should not restrain us from doubting whether they were really well advised to do so. If we ask the question _how_ they managed to do so, our doubts are deepened. For first place among the explanations must be assigned to the inequality in the then distribution of wealth. It was because many men in England were rich enough to save that our railways were built, and the resources of new Continents were opened up. But England, a century or even half a century ago, was not really a rich community. And if the national income in those days had been distributed more evenly among the people, can we doubt that they would have spent a far larger proportion of it on immediate needs; can we doubt that they would have been right to do so? We may rather doubt, in view of the reactions of poverty on physical and mental efficiency, on social harmony, even possibly on population, whether we to-day would have been really injured as much as might appear. How, then, can we suppose that the sum of the amounts which it suits individuals to save will bear any close relation to the resources which the community can properly devote to future ends? Are we to regard an unjust distribution of wealth as a mysterious dispensation of Providence for securing perfect harmony between the future and the present? The point need not be labored further. There are no grounds for assuming that we save, as a community, even roughly what we ought to save. If we wish to believe we do, we must turn for support from economics to theology. It is important to be clear upon this issue in order to distinguish it from another, with which it sometimes seems to be confused. This is the question, briefly outlined in Chapter II, of the effect of changes in the rate of interest on the supply of capital. As was there indicated, there are good reasons for supposing that a fall in the rate of interest would induce some people to save more, and conversely. But the balance of probability is in favor of the conclusion that the _net_ effect of changes in the rate of interest, though perhaps slight, is usually of the more ordinary kind. The decisive argument in this connection is the fact, upon which we have just touched, that savings are supplied largely by people who are relatively rich, and who become richer when the rate of interest rises. For at this point it is necessary to be careful. It is easy to slide from the above conclusion into an argument of the following kind. A higher rate of interest leads to more saving; it is thus necessary to _evoke_ more saving; it is thus required as an _incentive_ to induce people to incur the _sacrifice_ of waiting; this sacrifice represents the "real cost" for which interest is paid. This terminology of incentive, inducement and sacrifice is of very dubious validity. A rich man, who is made richer by a rise in the rate of interest, will probably save more, but it will be rather because he has become richer than because he is tempted by the higher rate: and the less we talk about his sacrifice the better. Nor is it clear that the attraction of a high rate of interest is an operative factor on the mind of a man to whom saving means a real sacrifice of immediate comfort or enjoyment. Certainly it is only one among many factors, and seldom an important one. A really poor man will think not so much of the annual income which will accrue from his savings, as of the capital sum upon which he or his family can fall back if a rainy day should come. And for this purpose he might save as much as he saves now, even if there were no interest to be obtained thereby. He might even be prepared to lend what he had saved, at least to banks (a deposit with a bank is in effect a loan), for the mere advantage of safe custody. The people who save rather for the sake of the capital sum that can be realized than for that of the annual interest are very numerous, and probably include many men in receipt of quite considerable earned incomes. Moreover, those who consider mainly the future annual income which their savings will yield them, are usually more concerned with its absolute amount than with the ratio it bears to the amount they must save in order to acquire it. For this reason, as has been often recognized, they may save less when the rate of interest rises, since a smaller quantity of savings will insure to them the future annual income they desire to obtain. There is no need to be dogmatic upon any of these points. The psychology of saving is both complex and obscure. Our conclusion must be the negative one that we have insufficient evidence to warrant the assertion that the particular rate of interest which happens to prevail is a measure of the sacrifice involved in saving, even in the case of what we might regard as the "marginal saving." And, if we cannot assert this, we must be careful not to assume it as the basis of other arguments, or as part of a general analysis of price or exchange value. It is of some interest to observe that the difficulties which our world socialist commonwealth would encounter if it attempted to dispense with the rate of interest, would not necessarily include that of obtaining a supply of capital. It might, indeed, not find it easy to determine the proportions in which it should allocate its productive resources between immediate and distant ends. Our present system cannot be said to have evolved satisfactory principles for the solution of this question; and the socialist commonwealth would have to work out its own solution. But when it directed that labor and materials should be devoted to purposes of long-period utility, there would be an automatic collective saving, of which no one would be conscious as an individual sacrifice. Even at the present time, our capital is not supplied entirely by the savings of individuals, but to an extent, which though quite incalculable is yet certainly considerable, by involuntary saving of an essentially similar type to the above. §9. _Involuntary Saving_. When a municipality embarks on a municipal tramways scheme or any other industrial enterprise, and pays off by means of a sinking-fund the capital which it borrows in the first instance, the proceeding amounts, as the defenders of municipal trading have rightly claimed, to a compulsory and unconscious saving on the part of the citizens. Their consumption has been postponed willy-nilly as the result of the increased rates or the high charges which they have had to pay; and, when the subscribers to the original loan have been paid off, the capital of the community is enhanced to the extent of that loan. Central governments might similarly increase the supply of capital by devoting annual revenue to capital purposes; though their actual record, as it happens, is mainly of a different kind. But what is chiefly a possibility in the case of Governments has actually been carried out on an enormous scale by other institutions. The development of the joint-stock company system has introduced a new factor into the problem of the supply of capital, which is of immense though but dimly perceived importance. The directors of a company are technically no more than the servants of the shareholders. It is the profit of the shareholders that it is the directors' duty to promote with a single mind, and the whole capital of the concern, including its reserves both open and concealed, is the shareholders' exclusive property. But realities have a way of differing from forms, and just as in political affairs it is common to regard the State as a very different thing to the people who compose it, as a sublime entity with a separate existence of its own, so directors are apt to distinguish between the company and the shareholders. It is the company to which they owe allegiance. To pay away in dividends to shareholders money which they could employ in extending the business or strengthening the position of the company appears to some directors a necessity hardly less unpleasant than an increased wages bill, or an Excess Profits Duty. Concessions must indeed be made to the shareholders' rapacity: but when something has been done in this direction, dust can easily be thrown in their not very observant eyes. Reserves, which within limits are a necessity of sound finance, can be accumulated beyond those limits, and, when the further limits of an extreme but just arguable conservatism have been passed, there remain the innumerable devices, known to every resourceful Board, of hidden reserves, the secret of which is unmenaced by the meager information of a balance-sheet. In all this the shareholder, as the directors occasionally assure themselves, has no real grievance, for he will gain in the long run, from the appreciation in the capital value of his shares, all and perhaps more than all that he foregoes in the meantime in the way of dividends. In the long run the shareholder is not injured; but in the meantime he is in effect compelled, without any consciousness of the proceeding, to save and to reinvest in the company a portion of the dividends, which he might otherwise have spent. The reserves which are accumulated are not allowed to lie idle: they are employed either in what are really capital extensions of the business, or in the purchase of outside securities, and in either case they represent an increase in the total supply of capital. The principal which these proceedings represent is capable of indefinite extension. But however possible it might be to secure a supply of capital without the inducement of a rate of interest, that rate is indispensable for dealing with the demand. It is no good saying, "Three per cent seems a fair rate of interest; let us try and limit it to that." Given the amount of savings which are supplied, the rate of interest must be allowed to reach whatever figure is necessary to confine the demand to that amount. Given the quantity of resources which you have available for future needs, the meshes of the sieve must be made as narrow as is necessary to confine the projects that pass through within those limits. And so, indeed, it becomes necessary for any particular business to pay for its capital interest at the market rate, not so much to secure the saving of it as to secure its allocation from the common pool. §10. _Interest and Distribution_. It is unavoidable that this interest should accrue to whoever it is that supplies the capital. If the capital were supplied, as it might conceivably be, collectively by the community, the interest would accrue to the community, and all would be well. But as things are, the capital is supplied mainly by the savings of individuals, and largely by individuals confined to a relatively narrow class. The profits of Capital have thus a vital influence on the very serious matter of the distribution of wealth between social classes. Now, as experience shows, there is no element in profits which is capable of such radical change in so short a space of time, as is the rate of interest. Even before the war it had become hard for people in Great Britain to realize that 3 per cent Consols had stood at 114 as late as 1896. "How blest," wrote two cynical satirists of society in the same period: "How blest the prudent man, the maiden pure, Whose income is both ample and secure, Arising from Consolidated Three Per cent Annuities, paid quarterly."[1] It is impossible to read those lines now without a sense of irony, different from that which they were intended to convey. Not only is the rate of interest now double what it was a generation ago; we have no good reason to suppose that the present high level will quickly be reduced. The havoc of the war, of which the widespread poverty of Europe and the huge debts of Governments are but two different aspects, makes it almost inevitable that the rate should rule high in the present decade. This cannot but exercise a profound influence, of a most disquieting character on the general level of profits, and to a lesser extent (for here we must allow for the effects of high taxation) on the distribution of real wealth between social classes. Here we are on the threshold of tremendous issues. We almost feel the earth quake beneath our feet. We hear the muffled roar of far-reaching social controversy: "And 'mid this tumult Kubla heard from far Ancestral voices prophesying war." [Footnote 1: _Narcissus_, by Samuel Butler and Henry Festing Jones.] CHAPTER IX LABOR §1. _A Retrospect on Laissez-faire_. When, a century and a half ago, the foundations were being laid in the Western world of systematic economic theory, the public attention was much occupied with a subject, which indeed has not ceased to hold it: that of the failings of Governments. The general interest in that topic was shared by the pioneers of economic thought, of whom, in Great Britain, Adam Smith was the most notable. It was indeed their practical concern with the concrete economic issues of the day which very naturally gave the impetus to their scientific quest. It was hardly less natural that they should have expressed their opinions on these concrete issues with considerable emphasis. Now the keynote of their practical conclusions was that Governments were doing immense mischief by meddling with a great many matters, which they would have done better to leave alone. In this they were in general agreement with one another; incidentally--let there be no mistake about it--they were right. But, as invariably happens in public controversy, their opinions became crystallized in a compact formula, or cry, with unduly sweeping implications. This was the cry of "_laissez-faire_." Let Governments preserve law and order; and leave the economic sphere alone. The economists picked no quarrel with this formula; it served well enough for workaday purposes to indicate the lines of policy which they rightly thought essential in their day. The history of this cry is the history of every cry which has won a wide acceptance from mankind. It did good work for perhaps half a century; but then many crimes were committed in its name. The instrument which had been forged to clear away a noxious tariff jungle and the monstrous laws of Settlement, was turned against Lord Shaftesbury and the Factory Acts. Not only was inaction recommended to Governments as the highest wisdom; other institutions, like trade unions, were warned off the economic grass. An ideal of perfect competition became an idol to which much human flesh and blood were sacrificed. But, what is more to our present purpose, the idea took root of an intimate association between the laws of economics and the policy of _laissez-faire_. People who opposed some long-overdue measure of State regulation believed themselves to be justified by the eternal verities of economic law, and this claim even the advocates of the measure seldom ventured to dispute. They took refuge rather in a conception of economic law as a dangerous monster, whose claws must be clipped in the interests of the higher good. This notion that all interference with so-called "free competition," is a violation (though very likely fully justified) of economic laws has sunk deep into our common thought. So that to this day, whenever we see at work the hand of a State department, a trust or a trade union, we are apt to say "Demand and supply are here in abeyance," and possibly we add "A good thing too." Since in the matter of wages, the hand of the trade union is very generally evident, it is impossible to discuss the subject-matter of this chapter, until we have rid our minds of this quite baseless prepossession. To sweep away this cobweb, I urge the reader to recall here the general tenor of the analysis of the preceding chapters. Whether we were dealing with the price of an ordinary commodity, with joint products, land or capital, we came across relationships which seemed altogether more fundamental than our present industrial system; nor, we may incidentally observe, were we ever required to suppose that the present system was one of "perfect competition." These relationships were almost invariably such that even a world socialist commonwealth would find it necessary to maintain them. It was not suggested, and most certainly it must not be thought, that a world socialist commonwealth, or even a more modest remodeling of the social order would not effect great changes, possibly for good, and possibly for ill. The same economic laws might be made to bear very different fruits, but they themselves would remain unchanged. What is true in all these other fields--this should be our predisposition--is not likely to be quite untrue in the field of labor. §2. _Ideas and Institutions_. Another point is worth noting here. We are sometimes advised to distinguish sharply between "What should be" and "What is"; often two very different things. The advice is pertinent and useful, particularly in the sphere of sociology. But our incorrigible habit of confusing the two things together is not without justification, or at least excuse. For, in fact, they gravitate towards one another with a force which is just as strong as the capacity of man for understanding and controlling his environment. When we have a system which is clearly bad, _and_ when we see our way to make it better, we generally make the change however tardily. Our sense of "What should be" thus reacts upon "What is." Meanwhile, until we can make the system better, our appreciation of "What is" affects our sense of "What should be." And the more so, as we are sensible. For "What should be" is pre-eminently an affair of relativity. A man may hold very strongly that equal pay to every individual is desirable, as he puts it, as an ideal. But this will not prevent him, in a world in which managers are paid far more than manual workers, from maintaining hotly (at any rate, if he is sensible) that to pay the manager of a particular concern a manual worker's wage would be monstrously unfair. He would also argue that it would be highly inexpedient. Equity and expediency are, in fact, intricately intertwined in our sense of "What should be"; and our sense of "What should be" in the particular is governed by our knowledge of "What is" in the general. These may seem unnecessary commonplaces. But they have a vital bearing on the _modus operandi_ of economic laws. These laws do not work _in vacuo_. They work through the medium of the acts of men. The acts of men are greatly influenced by their institutions, and by their ideas of right and wrong. Both institutions and ideas may serve to smooth rather than obstruct the path of economic laws; because the laws may represent either "what should be" in the general, or "what is" in the general, and therefore "what should be" in the particular. This may hold true even of a trade union or a sense of "fair wages." The business of economic theory is not to justify a regime of _laissez-faire_, still less to show the folly of bringing morals into business. Its value is rather that it may help us, by improving our understanding, to shape our institutions, and to adopt our moral sentiments so as to promote the public welfare. With these general notions in our minds, let us turn to see how stands the case with Labor. §3. _The General Wage Level_. The term Labor may be used in a broad or in a narrow sense. It may be confined to weekly wage-earners: it may be extended to include all those who work, as the phrase goes, "with either hand or brain." It is with all classes of Labor, in the broadest sense of the term, that we must here concern ourselves. It will be convenient, however, in the first instance to ignore the differences between them, and to consider the forces which determine what we may regard as the general wage-level. The general laws of supply and demand hold good. The wages of labor tend to a level at which the demand is equal to the supply. For, if the demand exceeds the supply, if, in other words, labor is scarce, wages tend to rise, sooner or later in any case, and the more promptly in proportion as the workpeople are organized. Conversely, if the supply exceeds the demand, if in other Words there is general unemployment, wages tend to fall, and the strongest trade unions cannot resist the tendency, though they may delay it. Moreover, the higher the wages that must be paid, the smaller, other things being equal, is the demand for labor. For, even if we leave foreign competition out of account, and consider, as it were, labor throughout the world as a whole, the demand for labor is by no means inelastic. It is derived along with the demand for the other agents of production in the manner described in Chapter V. As was there shown, the greater the supply of the other agents of production, the greater is likely to be the demand for labor; but these other agents can be substituted for labor in a great variety of ways, and an increase in wages (unless accompanied by increased efficiency) will make it profitable for employers to effect such a substitution, where it was not profitable before. Thus, higher wages for the same labor efficiency must stimulate the tendency for capital to act as a substitute for labor at the expense necessarily (since the aggregate supply of capital will not be increased thereby) of its tendency to serve as a complement; and this must mean a decrease in the volume of employment. Hence the power of labor to secure a general advance of wages by concerted or simultaneous trade union action, applied if you will, not merely to every industry, but to every country, is necessarily very limited. Beyond a certain point, such a policy must result in general unemployment; and, if pushed sufficiently far, in unemployment so extensive that it would continue even in periods of active trade. Such a policy could neither be maintained in practice nor would it be a wise policy from the workers' point of view. In other words, given on the one hand the conditions of the demand for labor (i.e. the supply of capital, natural resources, business ability, risk-bearing and knowledge of technical processes, etc., which happens to exist), and given on the other hand the supply of labor (i.e. both the numbers of workpeople and their efficiency), the wage-level in the long run is fairly rigidly determined. The introduction of the phrase "in the long run" in this connection is apt to provoke comment which may be pertinent, but may be misconceived. The worker, it is pointed out, is deeply concerned with "the short run" in which he has to live. It is very true; and it is this that supplies one of the many justifications of trade unionism. To secure for the workers advances of wages, which economic conditions justify, sooner than would otherwise have been obtained, is certainly no trivial or contemptible function. But it is none the less an illusion to suppose that the general wage-level can be appreciably and permanently raised by trade union action, except in so far as it increases the efficiency of the workers or incidentally stimulates the efficiency of the employers. §4. _The Supply of Labor in General_. The efficiency of labor may be regarded as affecting either the demand for labor on the one hand or the supply of it on the other, according as we look at the matter from the worker's or the employer's standpoint. The employer is concerned with the labor costs per unit of his output, the worker is concerned with the wages he receives. An increase in the efficiency of labor may, and usually will, mean both a decrease in labor costs to the employer and an increase in the earnings of the worker. It is thus wholly to the good. But the effects of an increase in the supply of labor in the sense of a growth in the numbers of the population are far more dubious. Unaccompanied by an increase in the _demand_ for labor, it _must_ result in a diminished remuneration for the individual worker. To some extent indeed the demand for labor would almost certainly be increased. The supply of Capital may expand, perhaps proportionately, perhaps more than proportionately to the increase in population. But one factor of production, as we have seen, is not capable of such expansion. This is the factor of Land, or Natural Resources. It is the limitation of this factor which gives rise to what we have most of us heard of as The Law of Diminishing Returns. It is this that is the essence of the problem of Population, portrayed in somber hues more than a hundred years ago by Malthus. This problem will form the subject of the sixth volume of the present series. In the meantime it may be suggested that we are easily credulous if we suppose that the problem has been finally disposed of by the peculiar progress of an abnormal century. But that experience has at least destroyed the view that there _need be_, or even is in fact in Western countries, a relation between real wages and the numbers of the people so close and direct that an improved standard of living must be temporary only, doomed to destroy itself by the increased population it engenders. One may perhaps go further and say that it is doubtful even in what direction changes in remuneration will influence the aggregate supply of labor. When we pass to "what should be," it is plain that there is nothing whatever to be said for the sort of relation indicated above. The view once widely held that the principle of population must inevitably keep the mass of people close to the verge of the bare means of subsistence was no statement of a desirable ideal. It was a nightmare; a nightmare none the less though it may haunt us yet. It is far from fanciful to suggest that it is because this relation is so obviously _not_ "what should be" that it may be ceasing to hold true in fact. But it would be very fanciful indeed to maintain that as yet "what should be" is represented by the actual population. Thus, just as with capital, so with labor, there is no reason to suppose that the aggregate supply is determined by any fundamental economic law, or corresponds in practice to what is socially desirable. §5. _The Apportionment of Labor among Places_. Again, as with capital, it is when we turn to the _apportionment_ of labor between different employments that both economic law and social ideal make their appearance. It will be well, however, to consider briefly in the first instance the different question of its apportionment between places. This was hardly necessary in the case of capital, because the possibilities of foreign investment are very numerous and easy: the mobility of capital is thus sufficiently strong (once again it is only _marginal_ adjustment that is necessary) to establish over at least a large part of the world something near to a uniform rate of interest. But this is not the case with labor. People do indeed move from place to place within a country, and from one country to another, in response to economic opportunities. That even the latter movement may be a considerable thing, the present population of the United States is a striking testimony. But obviously the mobility is very incomplete. Here, then, we have what we might _loosely_ call an economic law that labor tends to "flow" (as it is sometimes unhappily phrased) to those places where it can command the highest reward; we have this tendency in evidence, but it is far too weak to enable us to lay down what would deserve more strictly the title of an economic law, that in the long run the reward of the same kind of labor is roughly equal in all places. Perhaps we can say this for many districts in a single country; but for few countries is this true as between all their districts. As between countries, it is not remotely true. Here, however, the imperfection of economic law is balanced by an extreme uncertainty as to the ideal. Perfect mobility of labor may be _economically_ desirable in a very narrow sense of the term; but it opens out a vista of racial, national and cultural problems, into which it will be better for us not to enter here. We must take for granted the population of a country, like that of the world, as a given fact. When we do this, the question of its remuneration is on all fours with the more general question discussed above. That the remuneration of the labor of a country is mainly governed by the relations between demand and supply is an inexorable fact. In view of the international mobility of capital, the main distinctive factor in the demand for the labor of a particular country is the supply of natural resources, which it knows how to use. Where the natural resources are great relatively to the population, there wages will rule high; where the converse is true, wages will rule low. This result of economic analysis is abundantly confirmed by experience. The relatively high wages in the new world, the low standard of living in the densely populated East; the economic history of Ireland are so many object-lessons of its truth. §6. _The Apportionment of Labor among Social Grades_. The question of the apportionment of the labor of a country among different employments falls under two heads. Some differences of occupation are associated particularly in Great Britain with differences of what we know as class. The movement of labor between different social grades is clearly a very different thing from its movement between different occupations in the same grade. The grades themselves are not easy to define: not a little ingenuity has been expended on the attempt, and perhaps the best brief classification that has been put forward is one which divides labor into the following four grades:-- (1) Automatic manual labor. (2) Responsible manual labor. (3) Automatic brain workers. (4) Responsible brain workers. But the matter is one perhaps for the satirist of manners rather than the economist. It suffices for our purpose that the distinctions, however vague, are very real. It is obvious the mobility of labor between the occupations of a platelayer and a barrister is not very great. It may seem perhaps to be even smaller than it is. For here it is important to bear in mind a general consideration which is equally applicable to horizontal movements within any social grade. There may be a considerable movement of labor between different employments without any individual worker having to change his occupation. The personnel of any industry is constantly changing. At one end, men die, retire, or are pensioned off; at the other end, young recruits are taken on. By a diversion of the new recruits from one employment to another, a radical change can be made in the occupational census in a comparatively short space of time. It is in this manner that such movement as takes place is largely effected at the present time. Within the ranks of the professional classes, a man does not commonly leave the profession to which he has been trained. But his _choice_ of profession is determined by him or his parents not solely on pecuniary grounds but usually with an anxious scanning of the general prospects, which include pecuniary advantages together with many other things. The same thing is true in no small measure of manual wage-earners. This general consideration must be borne in mind throughout the remainder of this chapter. But even the sons of platelayers do not commonly practise at the bar. The obstacles in the way are various and subtle. Many of them are ideas, inherited from a bygone epoch, about keeping other people "in their proper stations," which the whole drift of circumstance, and the spirit of the age are rapidly wearing down. In the new world such obstacles are rare. But an obstacle of a more tangible and formidable kind arises from the fact that the liberal professions and many business careers require a long and expensive education and training, which the platelayer is quite unable to afford to give his son. Now this expense of training is highly relevant not only to "what is," but to "what should be." It includes, it should be observed, a negative as well as a positive element; a long period of waiting before income begins, as well as the actual outlay on educational and other charges. When the burden both of the waiting and the positive costs must be borne either by the individual or the family, there are few people who would seriously dispute that this goes to justify, on grounds of fairness as well as of expediency, a higher level of annual remuneration later on; though many people would doubtless argue that the amenities and dignities of the professions should be taken into account on the other side. But the same consideration makes it a matter of legitimate doubt whether it would be desirable, even as an ideal, that the community should provide so completely the costs of training and of maintenance in the waiting period, as to make it no longer "fair" that the individual should be remunerated more highly than workers in less expensive occupations. For this would mean that more labor would be absorbed in the former employments than in principle would be socially desirable, for reasons which the argument of the next chapter will make plain. But the most desirable number of doctors, barristers, teachers, etc., is not a thing which can be settled on purely economic grounds, and it is unprofitable to carry further this particular line of thought. Few people would advocate, as an ultimate ideal, that the remuneration of the professional grades of labor should exceed that of lower grades by _more_ than the extra expense of training and waiting they involve. That the excess is usually greater than this at the present time seems very probable: though it is a matter on which it is very hard to generalize. But it would certainly be far greater than it is if the principle of _laissez-faire_ ruled supreme in these affairs. Fortunately it does not, and has never done so. Even before the days of free elementary education, the endowment of education was not unknown. The ancient public schools and universities, which have come down to us from the Middle Ages, are a standing witness to what in this field a far poorer community thought fit to do. Their systems of scholarships and exhibitions, no less than their courts and towers, deserve our notice. For these were designed to form what we now call "a ladder" by which talent could climb from the humblest origins to the callings which then seemed the summit either of spiritual or of worldly ambition. This reference to "talent" makes it well to consider here a factor which necessarily complicates, though it does not substantially affect, the whole argument of the present chapter. There are differences of natural ability, which no education or training can obliterate, which it should rather be their business to excite. These differences are associated to a great extent with differences of occupation; they _should be_ so associated far more closely than in fact they are. They are also associated with differences of remuneration even within the same occupation; "what should be" here is a question which we may excuse ourselves from discussing. The principle which, however vague, is sufficient for our present purpose is that the same _natural ability_ should command the same reward in all occupations, subject to differences which should not exceed the differences of educational cost and initial waiting they involve. We cannot assert, as an economic law, that this is generally true in fact. If ever it becomes true, it will be due not to "_laissez-faire_," or "free competition," but to social arrangements, which express a sense of what is right. §7. _The Apportionment of Labor among Occupations_. When we pass to the apportionment of labor among different occupations in the same social grade, the same principle as to "what should be" applies in a simpler form. Equal natural ability should command an equal reward in all occupations; assuming that differences in cost of training can be ignored. The reward must, of course, be interpreted not in terms of money only but of "real wages," with allowance for the varying amenities of different tasks. Now it was here that the extreme advocates of _laissez-faire_ made one of their cardinal mistakes. They assumed that this ideal would be best secured by "perfect competition." The employer would choose the worker who would come for the lowest wage; the worker would choose the employer who would pay him the highest wage; and so, by a process similar to the higgling of a commodity market, the desirable uniform wage-level would become established. But in fact the conditions of the labor market differ greatly from those of a commodity market. People are ignorant, do not look ahead, cannot afford to risk the loss of a job, however wretched, which they happen to have got. For reasons such as these, a considerable departure from _laissez-faire_ is necessary in order to realize the theoretical results of _laissez-faire_. To prevent the putting of boys in large numbers into "blind alley" occupations, you must supplement the foresight of parents with Juvenile Employment Exchanges and After-Care Committees. To secure a proper uniformity of wages within the same occupation, you must have trade unions. To secure a proper uniformity between different occupations, you must have again trade unions, or, failing them, Trade Boards. That the actions of trade unions are very largely of this type is a fact insufficiently appreciated by the middle-class public. The elaborate system of piece-rate lists which has been evolved in the Lancashire cotton industry is primarily designed to secure the same wage for workers of equal efficiency in all mills, irrespective of the degree to which the machinery is antiquated or up to date. This result is wholly to the good: not only does it secure "fairness" for the worker, it stimulates the employer wonderfully to efficiency. The same result could never be secured so effectively by the free play of competition. But this tendency, which is easily the predominant element in the trade union regulations of the cotton trade, is at least an important element in the policy of "The Common Rule" of all trade unions, though it may often be mixed up with the more questionable tendency to eliminate differences of pay for differences of natural ability, and the unquestionably bad tendency to discourage output. As between different occupations, the insistence of a trade union that wages must be leveled up towards the wages obtaining in similar trades acts again as a far more powerful force than competition. But the actions of trade unions are by no means wholly of this type. They often serve rather to secure still higher wages for workers who, comparatively speaking, are already highly paid. It makes little difference whether this effect is secured directly by wage demands, or indirectly by restricting the right of the entry to the trade. In either case the consequences are the same, and there should be no ambiguity as to their nature. They are certainly bad for the community, certainly bad for the _other_ workers of the grade, almost certainly bad for the workers of the grade regarded as a whole. The higher wages must raise the money costs of production, and result, sooner or later, in fewer workpeople being employed in that occupation; larger numbers must accordingly seek employment elsewhere; and this cannot but depress the wage rates of less strongly organized trades. Thus the effect is twofold: a larger proportion of workpeople will be employed in badly paid occupations; and the wages there will be lessened. The power of a strong trade union to secure wage advances of this type is considerable, but it must not be exaggerated. Trade unions employ as a matter of course devices which, in the case of trusts, we regard as the extremest weapons of monopoly. To say, "If you buy from anyone except us, you must not buy at a lower price than ours," which Messrs. J. & P. Coats are represented as having done, is analogous to insisting that if non-unionists are employed, it shall be at the trade union rate, as every trade union very properly insists. To say, "You must buy _only_ from us," the method of the boycott, as it is called, is analogous to the very common refusal to work with non-unionists at all. But in one important respect the tactical position of a trade union is weaker than that of an ordinary combination. It has usually got a buyers' combination up against it, in the shape of an association of employers. The latter will be governed in their attitude towards the workpeople's demands, not only by immediate expediency, but also by their own sense of "what should be"; and they will usually resist demands for wages greatly in excess of those obtaining in comparable trades. In this way, the tendency for workers of the same efficiency to receive the same real wages in all employments is far stronger than might at first sight appear. If we had to rely for this result upon trade unions alone, it would be highly problematical. For here a psychological curiosity emerges, which, familiar and intelligible as it is, is none the less a curiosity. So far from still higher wages for well-paid workpeople being regarded in the world of manual labor as detrimental to the interests of other workpeople, it has become almost a point of honor to believe the contrary. A wage dispute in a particular trade is conceived as an engagement in a far-flung battle between Capital and Labor, in which success at any part of the line will facilitate the victory of the whole army. This conception contains a measure of truth, as regards immediate and purely temporary effects; though, even here, it is made to seem unduly plausible by the recurrence of trade cycles, which cause wages at any time to move in the same direction all along the line. But, if the foregoing analysis has been appreciated, the essential falsity of this notion should be evident. It is an illusion, which should receive no endorsement, either tacit or express, in any work on economics. The general wage level of a country cannot be regarded (except temporarily, and within narrow limits) as a function of the efficiency of labor organization; it depends on the far deeper economic facts set out in §3 above. Let us now try to summarize the conclusions of this section. There _is_ a tendency towards a uniformity of real wages for workers of the same grade and of the same efficiency. This tendency is not due to competition alone. It is helped by many acts of a collective kind, arising from a sense of "what should be"; it is obstructed by other acts of a like kind, where the sense of "what should be" is based on imperfect understanding. The more people act in accordance with "what should be," and the better their understanding, the more will this tendency approximate to an accurate economic law. §8. _Women's Wages_. The wages of women represent a problem of great public interest, upon which the principles laid down in this chapter have a most important bearing, and which in its turn serves to illustrate these principles further. It has been suggested that male and female labor can be regarded as a strong case of Joint Supply, and the suggestion is not merely facetious. The essential point, that the proportions of available male and female labor are fairly constant (not that they may not alter with time and circumstances, but that they are essentially independent of the conditions of demand) holds true not only of a country as a whole, but hardly less of a particular district. If men and women are to be regarded as separate grades, they are grades between which immobility is complete. Now men and women differ in many ways which affect both the demand for and the supply of their services. On the one hand, far fewer women wish to enter business employments of any kind, as women have plenty of work that must be done at home. On the other hand, though women can do many kinds of work as well as or better than men, it so happens that for much the greater number of services, which are in large demand in the business world, men are the more efficient. Incidentally, it happens that many occupations which women _might_ do as well as men are closed to them by exclusive regulations. The resultant of these forces is that men and women are for the most part employed in different occupations, and the scale of payment in women's occupations is far lower than that in men's. Of this last fact singularly small complaint is made. It is otherwise, however, when we come to occupations where men are either wholly or partially employed, where women are at least approximately as efficient as men, and where the barriers to their entry are at least formally removed. There a ferocious controversy rages over what is known as the principle of "equal pay for equal work." It is easy to understand why the male trade unionists in, let us say, the engineering trades, should support this claim. It is also, indeed, _intelligible_ why the enthusiasts for Women's Rights should urge it; but it is much more doubtful whether they are wise. Possibly they are wise enough in their generation, since it might not serve them on this matter to get across the men. But it is clearly not prudential considerations of this kind by which they are mainly actuated. They make the demand, with extreme intensity of feeling, as a demand for fundamental justice. They are also very obviously inspired with the belief (similar to the illusion which is a point of honor with the male trade unionist) that high wages for women in well-paid occupations will help to raise the wages of sweated women workers in other trades. Now, here again, any lack of candor would be inexcusable. The effect of this policy on the wages in women's trades is certainly to reduce them. The policy serves, as powerfully as any trade union custom, to restrict the entry of women into the men's employments, and often spells virtual exclusion. For the "equal efficiency" may be approximate only, and there may be advantages in male labor from the employer's standpoint which are none the less important, because they are not easy to define. Moreover, from the employer's standpoint, the efficacy of female labor will be largely a matter for _experiment_, and "equal pay" will give him no inducement to experiment at all. The diminished number of women in these occupations (as compared with what might have been) increases the number who must fall back on the purely women's trades; and it _must_ serve to reduce the wages there, where organization is by no means strong. I am far from asserting that this consideration is conclusive against the principle of "equal pay for equal work" (though I think it conclusive against a rigid interpretation of it); for other matters, such as the standpoint of the male trade unionist must be taken into account. But the reactions on the wages in women's trades permit of no ambiguity. In occupations of another type, the issue takes a somewhat different form. In the teaching profession, "equal pay" would not exclude the women; it would be far more likely to exclude the men. For, though the advocates of the principle would declare that their intention is that the salaries of women should be leveled up to those of men, it is more probable that the ultimate outcome would be a leveling down. Educational authorities have the ratepayer and the taxpayer to consider; and, apart from this, they have their own interpretation of "what should be." To pay a woman less than a man for the same work may seem glaringly unfair; but it is not very clear why a woman, who is an elementary school teacher, should be paid much more than, say, a hospital nurse, merely because in the former case a number of men happen also to be employed. In fact, there is a clashing of equities in this connection; and there is little doubt which of them the educational authorities would prefer. A leveling down of the men's salaries would make it all but impossible to attract men of the desired type into the profession, and would thus lead to the virtual extinction of the male elementary school teacher. This might seem in a narrow sense to be economically desirable. Why should not men take their services to the tasks for which they can command a higher reward, and which women cannot do as well? But whether this would be desirable in the true interests of education is a far more doubtful matter. And this is the real problem of "equal pay for equal work" for male and female school teachers. The reader will notice that I have refrained from alluding to the controversy as to whether men should receive more on the grounds that they have wives and families to maintain. That, although a most absorbing issue, is not the real issue in practice at the present time. The real issue is a clashing between a sense of "what should be" on obvious general grounds and a sense of "what should be" in the particular, derived from the very patent and general "what is" that men receive as a rule far higher pay than women. CHAPTER X THE REAL COSTS OF PRODUCTION §1. _Comparative Costs_. Beneath the great diversity of the considerations which are applicable to the different agents of production, certain general conclusions emerge from the analysis of the last four chapters. In no case did we find that the aggregate supply of the agent was determined by clear and certain economic laws, possessing any fundamental significance. The supply of natural resources is a fixed thing, quite independent of the efforts or the desires of man. However the supply of capital and the supply of labor may react under present conditions towards economic stimuli, these reactions possess no quality of inevitability and bear no clear relation to "what should be." The supply of risk-bearing responds perhaps more decidedly to the prospects of increased reward; but it is so intimately associated with special knowledge and the qualities of business enterprise, as to leave some uncertainty attaching even to this conclusion. When, on the other hand, we turn to the apportionment of these factors among different uses, we find relations which are both clear and fundamental. Laws emerge which state at once not only "what is" or at least "what tends to be," but also "what should be"; and it is the fact that they taste "what should be" that gives them their fundamental character. These conclusions enable us to give a general answer to the question which was raised at the end of Chapter V: What are the ultimate real costs to which the money cost of production correspond? The attempt has often been made to relate money costs to such things as the effort of working and the sacrifice of waiting. The existence of such costs is beyond dispute. Much saving does mean a sacrifice of immediate enjoyment to the man who saves. Most labor is irksome and disagreeable in itself, and involves strain and wear and tear; while all labor means a deprivation of the utility of leisure. Workpeople, moreover, do not grow on gooseberry bushes, but must be fed and clothed from the cradle; and their rearing and maintenance represents a real cost which someone must incur. But the existence (or the importance) of such costs is one thing, their relation to money costs is another. In Chapter VIII we saw how difficult it was to establish any clear relation between the rate of interest and the sacrifice of saving. The costs of labor present similar difficulties. The relative irksomeness of two occupations may affect the relative wages which will rule in the two cases; so, certainly, will the differences in the cost of education and training which they require. But these are matters which concern the _apportionment_ of labor between different employments. There is no good reason to suppose that the general wage-level would be reduced, merely because work as a whole became less irksome, or involved a smaller physical or mental strain. The supply of people is not determined by the same kind of influences as is the supply of a commodity. Parents do not produce children for the sake of the wages which the children will receive when they go out to work; or, if this happens, we rightly regard it as a horrible anomaly. In so far as parents are affected by economic conditions it is by their own economic conditions; the question is rather one of how many children they can afford to have, than of a balancing of the cost to them against the incomes which their children may subsequently acquire. But other considerations enter in; and, in fact, it is doubtful how the aggregate supply of labor will react to changes in prosperity. Finally, the supply of land involves neither effort nor sacrifice; and, among our money costs, we have to account for the item of the rent of land. To dispose of this difficulty by arguing that rent does not enter into marginal costs (in any sense which is not equally true of wages and profits) is to lose contact with reality. Thus the attempt to explain money costs in terms of the costs of producing the ultimate agents of production leads us into a quagmire of unreality and dubious hypothesis. For a systematic theory, which will rest on firm foundations, we must interpret money costs in very different terms. The real costs which the price of a commodity measures are not absolute, but comparative. Marginal money costs reduce themselves in the last analysis to the payments which must be made to secure the use of the requisite agents of productions. These payments _tend_ to equal the payments which the same agents could have commanded in alternative employments. The payments which they could have commanded in alternative employments, tend in their turn to equal the derived marginal utilities of their services in those employments. It is thus the loss of _Utility_ which arises from the fact that these agents of production are not available for alternative employments that is measured by the money costs of a commodity at the margin of production. This conception of ultimate costs encounters an instinctive repugnance, arising from a mistaken sense of logical symmetry, which it will be well to examine. Cost, it is objected, so interpreted loses its character as an independent entity. It is merely something derived from utility. Now in the earlier chapters of this volume, we found reason to be impressed with the general symmetry which pervades the relations of demand and supply. Moreover, when we considered the case of ordinary commodities we found that at the back of demand and giving rise to it was utility; at the back of supply, and limiting it, was cost. The general symmetry between demand and supply thus seemed almost to imply a fundamental symmetry between utility and cost. If, then, cost in the last analysis is derived from utility, does not this make nonsense of the symmetry between demand and supply, or, if we cling to this last symmetry as a demonstrable truth, must we not refuse to admit that cost can be derived from utility? This is one of those false dilemmas which supply the wiseacres of the world with a plausible case for distrusting the logical faculty. If we have good reason for believing that both of two apparently inconsistent things are true, the explanation is seldom that one of them is really false; it is more usually that they are not really inconsistent. So it is here. The symmetry between demand and supply is very great, and we should always look to see if it holds good, but it is by no means perfect, and it is in the last analysis that it most notably fails. It is most important to distinguish clearly between the utility and the cost of a commodity as two separate and independent things. In Chapter V, it will be remembered, we did not permit ourselves to derive the costs of producing cotton lint from the utility of cotton-seed. The refusal to do so was essential to clear thought; it led to some very useful practical corollaries. But to derive the cost of a commodity from the utility of something which is produced _with_ it, as part of the same productive process; and to derive the cost from the utilities which the agents, which help to produce it, possess for other purposes, are two entirely different things. In works on International Trade, the reader will discover that the comparative nature of real costs is so unmistakable that a Doctrine of Comparative Costs is expounded with much formality at the outset. This doctrine is apt to prove somewhat puzzling, when we have to deal with it as an apparent exception to the general tenor of economic theory. Its difficulties disappear when we realize clearly that the real cost of _anything_ is the curtailment of the supply of other useful things, which the production of that particular thing entails. §2. _The Allocation of Resources_. However strange the above conception may seem, there should be no doubt that this cost is very "real." Here the irregularities and maladjustments of the economic world, the recurrence of trade depressions and the like, do much to obscure a clear vision of the essential realities. At a time when there is much unemployment, and much machinery standing idle, it is so clear to common sense that we _could_ produce more of some particular thing without diminishing the supply of other things, that any apparent statement to the contrary may perhaps seem the height of academic pedantry. But let me ask the reader to consider with an open mind a familiar parallel. During the recent war there was inevitably much waste and muddle in the utilization of the military resources of the Allies. Some regiments would be kept inactive for long periods, not for purposes of rest or training, but owing to some defect of organization. In the manufacture of munitions, an insufficient appreciation of the principles of joint demand led to the piling up of excessive stores of certain materials, which were useless until commensurate supplies of the complementary factors could be obtained. It is unnecessary to multiply examples. The waste of both man-power and material was immense. But the allocation of these resources between, for instance, the various theaters of war was none the less a very real problem, which gave rise to much engrossing controversy. It was an axiom that the more resources you employed in Mesopotamia or in Palestine, the less resources remained available for France. No one thought of maintaining that, as long as there was any waste of these resources, so long as there remained any men to be "combed out" of unessential industries, you could pour troops and munitions into Salonika without stopping to consider the needs of other theaters of war. Such a notion would have been clearly imbecile, for the sufficient reason that the sending of armies to Salonika would do nothing in itself to secure (however much it might incidentally stimulate) the more efficient use of the resources which remained. Now this is precisely analogous to the problem of the allocation of our resources for the purpose of peace. Notwithstanding all the wastes and maladjustments of the economic system, the use of resources to produce one commodity _does_ in general curtail the production of others. The mere launching of a new business enterprise does no more than the sending of an army to Salonika, to eliminate waste in the remainder of the economic organism. Unemployment, broadly speaking, is a function not of the magnitude of the normal demand for labor (which affects rather the wage-level), but of fluctuations in the demand for labor; fluctuations from one day to another as at the docks, from one season to another as in the building trades, above all from one period of years to another as in the cycles of general trade boom and depression. Nothing will diminish unemployment which does not serve to diminish these fluctuations. A new business will not, as a rule, have any such effect. If it is launched during a trade depression (a most unusual proceeding), it may temporarily absorb unemployed labor and idle materials. But when the next boom comes, it will be using, though presumably to greater advantage, labor and materials which, but for it, would have been employed for other purposes. Meanwhile the causes making for unemployment will be unaffected. Miscalculations will still be made, the building trades will still become slack in the winter, the casual methods of engaging dock laborers will still continue, trade cycles will still recur, while beneath them, and concealed by them, some industries will expand and others will decay. Thus, like the armies at Salonika, the new business would in effect divert resources from elsewhere. This truth needs to be firmly grasped in mind. It is this that makes it in general unsound policy to subsidize industries, either directly or indirectly, by means of a protective tariff. It is this, indeed, that supplies the answer to half the economic fallacies that are always current. The allocation of resources so as to yield the maximum effect was rightly recognized as one of the most vital and difficult of our war-time problems. To cope with it, the Allied peoples devised one instrument after another, and finally evolved the Supreme Allied Council. The analogous problem in the economic world of peace time is no less important and far more difficult; but there is nothing to correspond to the Supreme Allied Council. There we rely upon a co-operation which, as was stressed in Chapter I, is unco-ordinated. That co-operation has been evolved by the mutual competition of innumerable business concerns, controlled by men largely animated by the motive of pecuniary profit. But it has not been evolved wholly by such means: and how far that competition or that motive of profit is essential to its efficiency are questions with which this volume has not been in any way concerned. The economic laws, the relations between utility, and price and cost, with which it has been occupied, are an entirely different matter; and these _are_ essential to the efficiency of any system of society. For if the marginal utility of a commodity is equal to its marginal cost, and if this marginal cost is composed of payments to the various agents of production at least as great as they could have obtained if they had been used otherwise, this amounts to saying that the agents of production are so utilized as to yield the maximum utility; and this is the same thing as saying that they are so utilized as to produce the maximum wealth. §3. _Utility and Wealth_. Upon this last point it is important to be quite clear. An increase in wealth seems a solid, tangible reality; something, which, however much we may scorn it in our more precious moods, we recognize, for a rather poor community, to be an important object of endeavor. But an increase in utility seems a vague, impalpable notion, hardly deserving the same practical concern. None the less the two things are identical. We greatly deceive ourselves if we suppose wealth to be an objective reality. It is true that, when we get behind the money in which it is measured, we come upon commodities, like food and clothes and houses and factories, which seem comfortably solid and objective things; but we also come upon many services, like those of gardeners and doctors and hospital nurses, which we are bound to reckon as part of our wealth, although they are not embodied in any tangible commodities. Moreover, although material commodities are objective realities in themselves, and in many of their properties, they are _not_ objective realities in their property as wealth. A pair of boots is an objective fact; so is the number of pairs in existence at any time, so is their size, their weight, the quantity of leather or of paper which they happen to contain. But the wealth which those boots represent is not an objective fact. It depends upon the opinion which men and women entertain as to their utility; and these opinions take us into the subjective regions of human psychology. Let us suppose, for instance, that we calculated, on the basis of present prices, that the boots in existence at the present time represented 1/1000 part of our total wealth. Suppose, then, that a miracle were to happen; that the skies opened and rained boots upon us, of every size and shape and pattern, until we had 1000 times as many boots as we had before. Could we say that our total real wealth had been doubled? Clearly we could not. To obtain boots for nothing, and to wear a new pair every week, would make us somewhat better off, but not twice as well off as we were previously. In other words, the real wealth of a thousand times as many boots as we have now, is not a thousand times as great as the wealth of the present number of boots. We are, indeed, practically restating the Law of Diminishing Utility; and this perhaps is enough to show that wealth is fundamentally the same thing as utility. Another point, however, is worth noting. Our real wealth would be somewhat increased in the case supposed; but if we were to turn to the money measure of wealth, the opposite result would be far more likely, For the price of boots would most likely fall to nothing, and the total value of boots, in the commercial sense, would accordingly be nothing also. This shows that money values may be a most imperfect measure of aggregate wealth; for what money values represent is the product of the quantity of the commodity and its _marginal_ utility, while aggregate wealth is _total_ utility, which is a very different thing. This, it may be observed, makes all attempts to compare the wealth of different countries or different times, and no less to construct Index Numbers of Prices, imperfect of necessity, and arbitrary in their foundations. §4. _Criteria of Policy_. The point has now been reached at which we must take into account the very important fact which was mentioned at the close of Chapter III. The maximum utility which the laws of supply and demand tend to bring about is a maximum _total_ utility indeed, but one still measured in terms of money. An unequal distribution of wealth destroys any necessary correspondence between that and the maximum _real_ utility. This consideration, however, does not affect the general validity of the conclusion that the laws of supply and demand represent what is socially desirable now or under any system. For what is at fault here is the distribution of wealth; and it is that which should be changed, in so far as it is possible to do so. Now it is important to realize that whenever it is possible to supply a commodity to poor people below cost price, it is possible to alter the distribution of wealth, for that in effect is what is done. Purchasing power, which may be taken from richer people by taxation, or which may be obtained from "collective" profits on other trading, is in effect transferred to the poor people in question, though the transference is coupled with the condition that the purchasing power must be expended in a particular way. It is _in general_ desirable that the transference should be made without this condition being attached. To this general statement, exceptions indeed exist so numerous and important as possibly to justify a great extension of social expenditure of this type. Education should certainly be provided free of charge, there are strong arguments for subsidizing housing; the provision of milk to expectant mothers, the feeding of school children, such instances can be multiplied into a very extensive list. But it is important to observe that in each case the justification of the policy rests in the presumption that the service supplied is one which it is particularly important that the beneficiaries should have, _as compared with_ the other things upon which they might have preferred to expend the equivalent purchasing power, had it been transferred to them without conditions. Where there is no such presumption, as surely there is none in the case of the great bulk of commodities, the relation between price and marginal cost should be rigidly maintained; it is the distribution of purchasing power which we should rather seek to alter. How far is it possible to alter that? I suppose that it is inevitable that many readers will have concluded that the preceding chapters must be taken to mean that the distribution of wealth is not susceptible of any appreciable change. I would remind those readers of an important distinction upon which impatient people have sometimes based a complaint against economists. The economist, it is said, analyses with great pomp and ceremony the laws governing the distribution of wealth among the agents of production, but says practically nothing about the distribution between individuals and classes, which is the only thing of any real interest to practical people. Now the economist concentrates on the agents of production for the very good reason that it is only with respect to them that any clear and certain laws as to distribution can be laid down. Into the distribution between individuals and classes there enter other and variable factors, governed by no fundamental economic law; and _here_, the conclusion should at once suggest itself, is the field for action designed to alter the distribution of wealth. What is possible or desirable in this field, it is again not the purpose of this volume to discuss. It is an obvious, even if not a very helpful conclusion that an increase in the habit of saving among weekly wage-earners might, without appreciably affecting the distribution between Capital and Labor, greatly modify the resulting distribution between social classes. But questions as to how far it might be possible or justifiable to achieve a similar result by the use of the weapon of taxation, by changes in inheritance laws, or by the public ownership of industry take us into a far more uncertain and controversial sphere. The difficulties and objections which present themselves are familiar and formidable; but they are of quite a different order from the economic laws which we have been examining. The laws themselves do not entitle us to make any dogmatic pronouncement upon these large issues of social policy. But this is not to deprive these laws of practical importance. They represent essential criteria of sound policy in the sphere of social reorganization no less than in ordinary business. In our days a curious obsession has led many people to disparage these criteria, as though they were the sordid prejudices of a stupid tradesman. Because it has been found a matter of obvious practical convenience to maintain the roads out of taxation or of rates, and to dispense with charges for their use, it is suggested that the same principle should be applied to the railways. Or, more commonly, because it has been found convenient to make the same charge for the carrying of letters between Land's End and John o' Groats as between Hampstead and Highgate, it is suggested that _this_ principle should be applied to railway rates and fares. It may be well, therefore, to point out that the justification of uniform postal charges rests upon the facts: (1) that the costs of collection, sorting, etc., are so large a part of the costs of carrying a letter, that the real cost between John o' Groats and Land's End does not differ from that between Hampstead and Highgate by as much as might at first sight appear, (2) that the charges in any case are very small; so that (3) the avoidance of the small degree of taxes and bounties which the present system implies is not worth the book-keeping expenses which differential charges would involve. It should be obvious that these considerations apply to the railways with a greatly diminished force. They might possibly justify what is known as the "zone" system of charges, i.e. uniform rates within certain narrow areas. But the notion of uniform rates throughout Great Britain conjures up a vision of trains taking coal from South Wales to Scotland, and others taking coal from Scotland to South Wales, in accordance with the slightest preferences of the consumers, and without regard to the extra real cost involved, on a scale to which the "wastes of competition" afford no parallel. It would in fact achieve the essential folly of "sending coals to Newcastle." These considerations, however, are not what interest the advocates of the postal principle. They seem to recommend the obliteration or the confusion of the relations between price and cost as a superior ideal. It is important to be clear what exactly this ideal involves. It involves, in the first place, as the whole argument of this volume has gone to show, a less economical employment of our productive resources; they would be diverted to ends of less utility, and so produce less real wealth. But this is not the worst. There is plenty of waste and maladjustment in our economic system at the present time. The desirable relation of price to marginal cost is but imperfectly attained. The further departures from this relation, which would follow from any likely applications of the postal principle, might not matter in themselves so very much. What is far more serious is that the criteria of efficiency would become blunted, and the clear aims of management would be confused in fog. It is essential that every manager should be on the alert to eliminate waste and to improve efficiency, that he should be always trying to secure the best results; but how can he do this if he has no simple means of _measuring_ what results are good and what are bad? The measure which he has at present is that of price, cost and the resultant profit, and it would be fatal to take that away, unless an equally simple and more accurate measure could be substituted for it. This is not a question, it should be observed, of motive or incentive. Very likely we much exaggerate the importance of the profit motive. It may be true that men would work, perhaps that they already work in fact, as zealously for a fixed salary, as for personal gain. But aim and motive are two somewhat different things, and the _aim_ of profit, is, and will remain, essential to the efficient conduct of business. In a game the players are not animated by the motive of scoring runs or points, but they aim at them; and the zest disappears very speedily from the game, if that aim ceases to be of interest. Moreover, while a scoring system is always a somewhat arbitrary thing, measuring imperfectly the true merits of the play, if it measures them with the roughest accuracy, we prefer the issue of our games to be decided so, rather than by the decisions of an impartial judge, who can take into account the finest points of skill. So it is in the world of business. The scoring-board of profits may be an imperfect one; let us, by all means, where we can, alter the rules of the game so as to make it better. But let us not imagine that it displays a finer insight or a superior intellect to speak as though the scoring-board could be dispensed with, and the test of profit and loss treated as irrelevant. Quantitative measurement is essential to efficiency. Let us be careful to remember all that this implies. INDEX Ability Accountancy Allocation of resources Ambiguities Australasia Bastiat, Frederic Beef and hides Borrowing and lending, system of Business efficiency Business man as a purchaser Business risk Capital; as representing a period of waiting; distribution; distribution and rate of interest; effect on labor of an increased supply; not a stock of consumable goods; reaction of price charges on; reflections upon; supply; supply as affected by charges in interest rate Capital goods Capital market Capitalism Capitalist Chance Coal industry, cost of production and price; miners' wages Coats, J. & P. Collective saving Commodities; labor as a commodity Competition Composite demand Composite supply Consumable goods Consumers' goods and producers' goods Consumption, margin of; waiting for Control and risk-taking Controversy Coöperation; unorganized Cost, general relation of price, utility and cost; price relation to; rent as factor in real costs; ultimate; utility and Cotton and cotton-seed; contrast to wool and mutton Cotton industry Criteria of policy Currency inflation Cycles Demand, ambiguity of expression "increase in demand,"; derived; elastic and inelastic; _see also_ Composite demand; Joint demand; Supply and demand Derived demand Derived utility Diagrams, use of Diminishing utility; money and Directors Distribution of wealth; interest rate and Dividends Division of labor Economic laws; fundamental character Economic theory; fact and Economic world, orderly nature Education Efficiency Elastic demand Employers' associations Enterprise Entrepreneur "Equal pay for equal work," Expectation Fact and theory Farmers Fortunes Gambling Government, enterprises; failings Hides and beef Houses Housewife as purchaser Housing Ideas and institutions Incompetents Increase in demand, ambiguity Index numbers Inelastic demand Inflation Institutions and ideas Insurance companies; significance Interest; necessity of Interest rate; changes and their effect on supply of capital; distribution and; price of land and Intuition Joint demand; importance of the unimportant; marginal utility under; summary of considerations Joint products; cost of production Joint-stock company Joint supply, marginal cost under; summary of considerations Keynes, J. M. Labor; apportionment among occupations; apportionment among places; apportionment among social grades; as a commodity; cost, difficulty of estimating; division; effect of increased supply of capital; four grades; mobility; product of; reaction of price changes on; supply in general _Laissez-faire_; retrospect on Land, characteristics; differential aspect; margin of transference; marginal; price and rent, relation; question of real costs; scarcity aspect; supply; tenure; urban; _see also_ Rent Landlords Large scale business Laws, fundamental Malthus, T.R. Management Margin, danger of ignoring Margin of consumption Margin of production Margin of transference Marginal cost, aspects; misinterpretation; under joint supply Marginal land Marginal purchaser Marginal utility; price relation to; under joint demand Market Marshall, Alfred Marx, Karl Mill, J. S. Miners Monetary changes, disturbances of Money, diminishing utility Monte Carlo Mutton. _See_ Wool and Mutton Natural ability Normal conditions Occupations; apportionment of labor among Order, economic Pasture versus tillage Pigou, A. C. Policy, criteria Population Postal charges Poverty; national Price, consequences of higher; general relation with utility and cost; law of tendency; marginal utility and; post-war; reaction of changes in demand and supply; relation of demand and supply to; utility and Producers' goods Production, power of; real costs; waiting for Professions Profiteering Profits; elements; general analysis; in risky industries Protective tariff Psychology and economics Purchasers, business man; housewife; marginal Purchasing power Railway rates Railways Rate of interest. _See_ Interest rate Rent; complex character; marginal land; necessity; rate of interest and Reserves Residuary profits Resources, allocation Risk, reward for; under large-scale organization Satisfaction Saving; individual; involuntary; psychology; social School teachers Service Serving cotton Shareholders Sinking-fund Situation Smith, Adam Social grades, labor movement among Socialism Speculation Steel smelters Subsidies, industrial Substitutes Supply, reactions of price changes on; _see also_ Composite supply; Joint supply Supply and demand, changes in, and their reaction on price; forces behind; general laws; relation of price to; wages and Supreme Allied Council Teachers Theory, economic Thrift Tillage versus pasture Trade cycles Trade depression Trade unions; actions; wage level and Ultimate real costs Unearned increment Unemployment; trade union policy and Utility; cost and; derived; general relation of price, utility and cost; law of diminishing utility; law of diminishing utility as applied to money; marginal; price relation to; wealth and Wages, general wage level; trade unions and; women's Wages Fund Waiting, essence of; for consumption; for production Waste, economic Wealth, distribution; utility and "What should be" and "What is," Women's wages Wool and mutton; contrast to cotton and cotton-seed Workers' control 
20743	----	The Marx He Knew [Illustration: KARL MARX.] The Marx He Knew BY JOHN SPARGO Author of "The Bitter Cry of the Children," "Socialism, A Summary and Interpretation of Socialist Principles," "The Common Sense of Socialism," "Karl Marx: His Life and Work," Etc., Etc., Etc. CHICAGO CHARLES H. KERR & COMPANY 1909 Copyright, 1909 BY CHARLES H. KERR & COMPANY TO MADAME LAURA LAFARGUE DAUGHTER OF KARL MARX List of Illustrations KARL MARX, FROM A PHOTOGRAPH _Frontispiece_ FACING PAGE HIS BIRTHPLACE AT TRIER, FROM AN OLD PRINT 10 JOHANNA BERTHA JULIE VON WESTPHALEN, FROM A PAINTING FROM LIFE 19 FREDERICK ENGELS, FROM A PHOTOGRAPH 32 FERDINAND LASSALLE, FROM A PHOTOGRAPH 47 THE MARX FAMILY GRAVE, FROM A PHOTOGRAPH 83 THE MARX HE KNEW I The pale, yellow light of the waning day streamed through the dusty window panes of the little cigar shop, and across the bench where old Hans Fritzsche worked and hummed the melody of _Der Freiheit_ the while. The Young Comrade who sat in the corner upon a three-legged stool seemed not to hear the humming. His eyes were fixed upon a large photograph of a man which hung in a massive oak frame above the bench where Old Hans rolled cigars into shape. The photograph was old and faded, and the written inscription beneath it was scarcely legible. The gaze of the Young Comrade was wistful and reverent. "Tell me about _him_, Hans," he said at last. Old Hans stopped humming and looked at the Young Comrade. Then his eyes wandered to the portrait and rested upon it in a gaze that was likewise full of tender reverence. Neither spoke again for several seconds and only the monotonous ticking of the clock upon the wall broke the oppressive silence. "Ach! he was a wonderful man, my comrade," said Old Hans at length. "Yes, yes, he was a wonderful man--one of the most wonderful men that ever lived," responded the Young Comrade in a voice that was vibrant with religious enthusiasm. Both were silent again for a moment and then the Young Comrade continued: "Yes, Marx was a wonderful man, Hans. And you knew him--saw him smile--heard him speak--clasped his hand--called him comrade and friend!" "Aye, many times, many times," answered Old Hans, nodding. "Hundreds of times did we smoke and drink together--me and him." "Ah, that was a glorious privilege, Hans," said the Young Comrade fervently. "To hear him speak and touch his hand--the hand that wrote such great truths for the poor working people--I would have gladly died, Hans. Why, even when I touch your hand now, and think that it held _his_ hand so often, I feel big--strong--inspired." "Ach, but my poor old hand is nothing," answered Old Hans with a deprecating smile. "Touching the hand of such a man matters nothing at all, for genius is not contagious like the smallpox," he added. "But tell me about him, Hans," pleaded the Young Comrade again. "Tell me how he looked and spoke--tell me everything." "Well, you see, we played together as boys in the Old Country, in Treves. Many a time did we fight then! Once he punched my eye and made it swell up so that I could hardly see at all, but I punched his nose and made it bleed like--well, like a pig." "What! you made him _bleed_?" "Ach! that was not much; all boys fight so." "Well?" "My father was a shoemaker, you see, and we lived not far away from where Karl's people lived. Many a time my father sent me to their house--on the Bruckergrasse--with mended shoes. Then I would see Karl, who was just as big as I was, but not so old by a year. Such a fine boy! Curly-headed he was, and fat--like a little barrel almost. [Illustration: BIRTHPLACE OF KARL MARX.] "So, when I took the shoes sometimes I would stop and play with him a bit--play with Karl and the girls. He was always playing with girls--with his sister, Sophie, and little Jenny von Westphalen. "Sometimes I liked it not so--playing with girls. They were older than we boys and wanted everything to go their way, and I liked not that girls should boss boys. So once I teased him about it--told him that he was a baby to play with girls. Then it was that we fought and he gave me a black eye and I gave him a bloody nose in return. "Sometimes the Old Man, Karl's father, would come into my father's shop and stay a long while chatting. He was a lawyer and father only a shoemaker; he was quite rich, while father was poor, terribly poor. But it made no difference to Herr Marx. He would chat with father by the hour. "You see, he was born a Jew, but--before Karl was born--he turned Christian. Father had done the same thing, years before I was born. Why he did it father would never tell me, but once I heard him and Heinrich Marx--that was the name of Karl's father--talking about it, so I got a pretty good idea of the reason. "'Of course, I am not a believer in the Christian doctrines, friend Wilhelm.' he said to my father. 'I don't believe that Jesus was God, nor that he was a Messiah from God. But I do believe in a God--in one God and no more. "'And I'm not so dishonorable as to have become a Christian, and to have had my children baptized as Christians, simply to help me in my profession,' he said. 'Some of our Hebrew friends have said that, but it is not true at all. As I see it, friend Wilhelm, Judaism is too narrow, too conservative. Christianity makes for breadth, for culture, for freedom. And it is keeping to ourselves, a people set apart, which makes us Jews hated and despised, strangers in the land. To become one with all our fellow citizens, to break down the walls of separation, is what we need to aim at. That is why I forsook Judaism, Wilhelm.' "From the way that father nodded his head and smiled I could tell, though he said little, that he was the same sort of a Christian." "But it was about _him_, the son, that you were speaking, Hans." "Ach, be patient. Time is more plentiful than money, boy," responded Hans, somewhat testily. "Well, of course, we went to the same school, and though Karl was younger than me we were in the same class. Such a bright, clever fellow he was! Always through with his lessons before any of the rest of us, he was, and always at the top of the class. And the stories he could tell, lad! Never did I hear such stories. In the playground before school opened we used to get around him and make him tell stories till our hair stood on end." "And was his temper cheerful and good--was he well liked?" asked the Young Comrade. "Liked? He was the favorite of the whole school, teachers and all, my boy. Never was he bad tempered or mean. Nobody ever knew Karl to do a bad thing. But he was full of mischief and good-hearted fun. He loved to play tricks upon other boys, and sometimes upon the teachers, too. "He could write the funniest verses about people you ever heard in your life, and sometimes all the boys and girls in the school would be shouting his rhymes as they went through the streets. If another boy did anything to him, Karl would write some verses that made the fellow look like a fool, and we would all recite them just to see the poor fellow get mad. Such fun we had then. But, I tell you, we were awfully afraid of Karl's pin-pricking verses! "Once, I remember well, we had a bad-tempered old teacher. He was a crabbed old fellow, and all the boys got to hate him. Always using the rod, he was. Karl said to me one day as we were going home from school: 'The crooked old sinner! I'll make him wince with some verses before long, Hans,' and then we both laughed till we were sore." "And did he write the verses?" asked the Young Comrade. "Write them? I should say he did! You didn't know Karl, or you would never ask such a question as that. Next morning, when we got in school, Karl handed around a few copies of his poem about old Herr von Holst, and pretty soon we were all tittering. The whole room was in a commotion. "Of course, the teacher soon found out what was wrong and Karl was called outside and asked to explain about them. 'I'm a poet, Herr teacher,' he said, 'and have a poet's license. You must not ask a poet to explain.' Of course, we all laughed at that, and the poor Herr von Holst was like a great mad bull." "And was he disciplined?" "To be sure he was! His father was very angry, too. But what did we care about that? We sang the verses on the streets, and wrote them on the walls or anywhere else that we could. We made it so hot for the poor teacher that he had to give up and leave the town. I wish I could remember the verses, but I never was any good for remembering poetry, and it was a long, long time ago--more than three score years ago now. "We thought it was funny that Karl never gave over playing with the girls--his sister and Jenny von Westphalen. When we were all big boys and ashamed to be seen playing with girls, he would play with them just the same, and sometimes when we asked him to play with us he would say, 'No, boys, I'm going to play with Jenny and Sophie this afternoon.' We'd be mad enough at this, for he was a good fellow to have in a game, and sometimes we would try to tease him out of it. But he could call names better than we could, and then we were all afraid of his terrible verses. So we let him alone lest he make us look silly with his poetry. "Well, I left school long before Karl did. My father was poor, you see, and there were nine of us children to feed and clothe, so I had to go to work. But I always used to be hearing of Karl's cleverness. People would talk about him in father's shop and say, 'That boy Marx will be a Minister of State some day.' "By and by we heard that he had gone to Bonn, to the University, and everybody thought that he would soon become a great man. Father was puzzled when Heinrich Marx came in one day and talked very sadly about Karl. He said that Karl had wasted all his time at Bonn and learned nothing, only getting into a bad scrape and spending a lot of money. Father tried to cheer him up, but he was not to be comforted. 'My Karl--the child in whom all my hopes were centered--the brightest boy in Treves--is a failure,' he said over and over again. [Illustration: JOHANNA BERTHA JULIE JENNY VON WESTPHALEN.] "Soon after that Karl came home and I saw him nearly every day upon the streets. He was most always with Jenny von Westphalen, and people smiled and nodded their heads when the two passed down the street. My! What a handsome couple they made! Jenny was the beauty of the town, and all the young men were crazy about her. They wrote poems about her and called her all the names of the goddesses, but she had no use for any of the fellows except Karl. And he was as handsome a fellow as ever laughed into a girl's eyes. He was tall and straight as a line, and had the most wonderful eyes I ever saw in my life. They seemed to dance whenever he smiled, but sometimes they flashed fire--when he was vexed, I mean. But I suppose that what the girls liked best was his great mass of coal black curls. "The girls raved about Karl, and he could have had them all at his feet if he would. I know, for I had two sisters older than myself, and I heard how they and their friends used to talk about him. But Karl had no eyes for any girl but Jenny, except it was his sister. "Folks all said that Karl and Jenny would marry. Rachel--that's my oldest sister--said so one night at the supper table, but our good mother laughed at her. 'No, Rachel, they'll never marry,' she said. 'Jenny might be willing enough, but the old Baron will never let her do it. Karl's father is rich alongside of poor people like us, but poor enough compared with Jenny's father. Karl is no match for the beautiful Jenny.' "Then father spoke up. 'You forget, mother, that Heinrich Marx is the best friend that old Baron von Westphalen has, and that the Baron is as fond of Karl as of Jenny. And anyway he loves Jenny so much that he'd be sure to let her marry whoever she loved, even if the man had not a thaler to his name.' "Soon Karl went away again to the University at Berlin, not back to Bonn. Thought he'd get on better at Berlin, I suppose. He might have been gone a year or more when his father came into father's little shop one day while I was there. He said that Karl wasn't doing as well at Berlin as he had expected. He tried to laugh it off, saying that the boy was in love and would probably settle down to work soon and come out all right, upon top as usual. "It was then that we learned for the first time that Karl and Jenny were betrothed, and that the old Baron had given his blessing to his daughter and her lover. Very soon all the gossips of the town were talking about it. Some said that there had been quite a romance about it; that the young folks had been secretly engaged for nearly a year, being afraid that the Baron would object. 'Twas even said that Karl had been made ill by the strain of keeping the secret. Then, when at last Karl wrote to old Westphalen about it, and asked for Jenny in a manly fashion, the old fellow laughed and said that he had always hoped it would turn out that way. So the silly young couple had suffered a lot of pain which they could have avoided. "Of course, lots of folks said that it wasn't a 'good match,' that Jenny von Westphalen could have married somebody a lot richer than Karl; but they all had to admit that she couldn't get a handsomer or cleverer man than Karl in all the Rhine Province. "But things seemed to be going badly enough with Karl at the University. Herr Heinrich Marx cried in our little shop one evening when my father asked him how Karl was doing. He said that, instead of studying hard to be a Doctor of Laws, as he ought to do, Karl was wasting his time. 'He writes such foolish letters that I am ashamed of him,' said the old man. 'Wastes his time writing silly verses and romances and then destroying most of them; talks about becoming a second Goethe, and says he will write the great Prussian drama that will revive dramatic art. He spends more money than the sons of the very rich, and I fear that he has got into bad company and formed evil habits.' "Then father spoke up. 'Don't be afraid,' he said. 'I'll wager that Karl is all right, and that he will do credit to the old town yet. Some of our greatest men have failed to pass their examinations in the universities you know, Herr Marx, while some of the most brilliant students have done nothing worthy of note after leaving the universities crowned with laurels. There is nothing bad about Karl, of that you may be sure.' "The old man could hardly speak. He took father's hand and shook it heartily: 'May it be so, friend Wilhelm, may it be so,' he said. I never saw the old man again, for soon after that he died. "Karl came home that Easter, looking pale and worn and thin. I was shocked when he came to see me, so grave and sad was he. We went over to the old Roman ruins, and he talked about his plans. He had given up all hopes of being a great poet then and wanted to get a Doctor's degree and become a Professor at the University. I reminded him of the verses he wrote about some of the boys at school, and about the old teacher, Herr von Holst, and we laughed like two careless boys. He stood upon a little mound and recited the verses all over as though they had been written only the week before. Ach, he looked grand that night in the beautiful moonlight! "Then came his father's death, and I did not see him again, except as the funeral passed by. He went back to Berlin to the University, and I went soon after that away from home for my wanderjahre, and for a long time heard nothing about Karl. II "Two or three years after that I was working in Cologne, where I had a sweetheart, when I read in a paper, the _Rhenische Zeitung_, that there would be a democratic meeting. I liked the democratic ideas which I found in the paper, for they were all in the interest of poor toilers like myself. So I made up my mind to go to the meeting. "So that night I went to the meeting and listened to the speeches. Presently _he_ came in. I didn't see him at first, but heard a slight noise back of me and heard someone near me say 'Here comes Doctor Marx.' Then I turned and saw Karl making his way to the front, all eyes fastened upon him. I could see in a moment that he was much beloved. "Then Karl made a speech. He was not a great orator, but spoke clearly and right to the point in very simple language. The speaker who spoke before him was very eloquent and fiery, and stirred the audience to a frenzy. But never a sound of applause greeted Karl's speech; he was listened to in perfect silence. "This made me feel that Karl's speech was a great failure, but next day I found that the only words I remembered of all that were spoken that evening were the words Karl spoke. It was the same way with the other men in the shop where I worked. As they discussed the meeting next day, it was Karl's speech they remembered and discussed. That was like Karl: he had a way somehow of saying things you couldn't forget. "When the meeting was over I was slinking away without speaking to him. I suppose that I was bashful and a bit afraid of the grave 'Doctor Marx,' the great man. But he saw me going out and shouted my name. 'Wait a minute, Hans Fritzsche,' he cried, and came running to me with outstretched hands. Then he insisted upon introducing me to all the leaders. 'This is my good friend, Herr Fritzsche, with whom I went to school,' he said to them. "Nothing would satisfy him but that I should go with the other leaders and himself for a little wine, and though I was almost afraid lest in such company I seem foolish, I went. You should have heard Karl talk to those leaders, my boy! It was wonderful, and I sat and drank in every word. One of the great men was urging that the time had come for some desperate action. 'Nothing but a bloody revolution can help the working people, Herr Marx,' he said. But Karl smiled quietly, and I thought I could see the old scornful curl of his lip as he said: 'Revolution? Yes, but not yet, Herr, not yet, and perhaps not a bloody one at all.' Ach, what quiet power seemed to go with his words! "After the little crowd broke up Karl took me with him to his office. Then I learned that he was the editor of the _Rhenische Zeitung_, and that the articles I had read in the paper pleading for the poor and oppressed and denouncing the government were written by him. I felt almost afraid of him then, so wonderful it seemed that he should have become so great and wise. But Karl soon put all my fears to rest, and made me forget everything except that we were boys from home enjoying the memories of old times. "Well, I saw him often after that, for I joined the Democratic Club. Then the government suppressed the paper, and Karl went away to Paris. Before he went he came to say good bye and told me that he was to marry Jenny von Westphalen before going to Paris, and I told him that I was going to marry, too. "But we never thought that we should meet each other upon our honeymoons, as we did. I was at Bingen with my Barbara the day after our wedding when I heard someone calling my name, and when I turned to see who it was that called me there stood Karl and his Jenny laughing at me and my Barbara, and all of us were blushing like idiots. Such happy days those were that we spent at old Bingen! "I went back to Cologne, to work in the shop belonging to my Barbara's father, and Karl went to Paris. That was in forty-three. We heard from him sometimes, and later on we used to get copies of a paper, _Vorwarts_, which published articles by Karl and other great men. Bakunin wrote for it, I remember, and so did Heine and Herwegh, our sweet singers. "That paper was stopped, too. We heard that Guizot had suppressed the paper and ordered Karl and some of the other writers to be expelled from France. It was Alexander von Humboldt who persuaded Guizot, so it was said. I got a letter from Karl to say that he had settled in Brussels with his wife and that there was a baby, a little Jenny, eight months old. Our little Barbara was just the same age. "Not long after that letters came to the club asking for Karl's address. They were from Engels, of whom I had never heard before. I would not give the address until we found out that Engels was a true friend and comrade. We were all afraid, you see, lest some enemy wanted to hurt Karl. It was good, though, that I could send the address to Engels, for I believe that he sent some money to help Karl out of a very hard struggle. If we had known that he was in trouble we, his friends in Cologne, would have sent money to help, but Karl was too proud I suppose to let his trouble be known to us. III "It was in the winter of 1847 that I saw him again, in London. For months all the workingmen's societies had been agitated over the question of forming an international association with a regular programme, which Karl had been invited to draw up. A congress was to be held in London for the purpose of considering Karl's programme and I was sent by the Cologne comrades as a delegate. All the members 'chipped in' to pay my expenses, and I was very happy to go--happy because I should see him again. [Illustration: FREDERICK ENGELS.] "So I was present at the rooms of the Arbeiterbildungsverein, in Great Windmill Street, when Karl read the declaration of principles and programme he had prepared. That was the _Communist Manifesto_, you know." "What! were you really present when that immortal declaration of the independence of our class was read, Hans?" "Aye, lad, I was present during all the ten days the congress lasted. Never, never shall I forget how our Karl read that declaration. Like a man inspired he was. I, who have heard Bernstein and Niemann and many another great actor declaim the lines of famous classics, never heard such wonderful declamation as his. We all sat spellbound and still as death while he read. Tears of joy trickled down my cheeks, and not mine alone. When he finished reading there was the wildest cheering. I lost control of myself and kissed him on both cheeks, again and again. He liked not that, for he was always ashamed to have a fuss made over him. "But Karl--he always insisted that I should call him 'Karl,' as in boyhood days--had shown us that day his inner self; bared the secret of his heart, you might say. The workers of all countries must unite--only just that, unite! And that night, after the long session of the congress, when he took me away with Engels and a few other friends--I remember that Karl Pfander was one--he could speak of little else: the workers must be united somehow, and whoever proposed further divisions instead of unity must be treated as a traitor. "Some there were who had not his patience. Few men have, my lad, for his was the patience of a god. They wanted 'action,' 'action,' 'action,' and some of them pretended that Karl was just a plain coward, afraid of action. There was one little delegate, a Frenchman, who tried to get me to vote against the 'coward Marx'--me that had known Karl since we were little shavers together, and that knew him to be fearless and lion-hearted. I just picked the creature up and shook him like a terrier shakes a rat and he squealed bitterly. I don't think he called Karl a coward again during the congress. "Of course, Karl had courage enough for anything. But he was too wise to imagine that any good could come from a few thousand untrained workingmen, armed with all sorts of implements, dangerous most to themselves, challenging the trained hosts of capitalist troops. That was the old idea of 'Revolution,' you know, and it took more courage to advocate the long road of patience than it would take to join in a silly riot. And Karl showed them that, too, by his calm look and scornful treatment of their cry for 'action.' The way he silenced the noisy followers of Wilhelm Weitling--who was not a bad fellow, mind--was simply wonderful to see. Oh, he was a born leader of men, was Karl. "When the congress was all over, I meant to stay a few days in London to see the great city. Barbara had a sister living over in Dean street and so it would cost me nothing to stay. But Karl came to me and begged me to go back by way of Brussels. He and Engels were returning there at once, and would like to have me go with them. I didn't want to go at first, but when Karl said that there were some messages he wanted me to take back to Cologne, why, of course, I went. "Ach, what a glorious time we had on that journey to Brussels! Sometimes Karl and Engels would talk seriously about the great cause, and I just listened and kept my mouth shut while my ears were wide open. At other times they would throw off their seriousness as a man throws off a coat, and then they would tell stories and sing songs, and of course I joined in. People say--people that never knew the real Karl--that he was gloomy and sad, that he couldn't smile. I suppose that is because they never saw the simple Karl that I knew and loved, but only Marx, the great leader and teacher, with a thousand heavy problems burdening his mind. But the Marx that I knew--my friend Karl--was human, boy, very human. He could sing a song, tell a good story, and enjoy a joke, even at his own expense." A smile lit up the face of the Young Comrade. "I'm so glad of that, Hans," he said. "I've always been told that he was a sad man, without a sense of humor; that he was never known to unbend from his stiff gravity. But you say that he was not so; that he could laugh and joke and sing: I like him better so." Old Hans seemed not to hear the words of the Young Comrade, though he was silent while they were spoken. A faint smile played around his lips, and the far-away expression of his eyes told that the smile belonged to the memory of other days. It was dark now in the little shop; only the flickering light of the fitful fire in the tiny grate enabled the Young Comrade to see his friend. It was the Young Comrade who broke the silence at last: "Tell me more, Hans, for I am still hungry to learn about him." The old man nodded and turned to put some chips upon the fire in the grate. Then he continued: "It was about the last of February, 1848, that we got the first copies of the _Communist Manifesto_ at Cologne. Only a day or two before that we had news of the outbreak of the Revolution in Paris. I have still my copy of the _Manifesto_ which Karl sent me from Paris. "You see, he had been expelled from Brussels by order of the Government. Prussia had requested this, so Karl wrote me, and he was arrested and ordered to leave Belgium at once. So he went at once to Paris. Only a week before that the Provisional Government had sent him an official invitation to come back to the city from which Guizot had expelled him. It was like a conqueror that he went, you may imagine. "Boy, you can never understand what we felt in those days. Things are not so any more. We all thought that the day of our victory was surely nigh. Karl had made us believe that when things started in France the proletariat of all Europe would awaken: 'When the Gallican cock crows the German workers will rise,' he used to say. And now the cock's crowing had been heard! The Revolution was successful in France--so we thought--and the people were planting trees of liberty along the boulevards. "Here in England, too, the Spirit of the Revolution was abroad with her flaming torch. The Chartists had come together, and every day we expected to hear that the monarchy had been overthrown and a Social Republic established. Of course, we knew that Chartism was a 'bread and butter question' at the bottom, and that the Chartists' cause was ours. "Well, now that we had heard the Gallican cock, we wanted to get things started in Germany, too. Every night we held meetings at the club in Cologne to discuss the situation. Some of us wanted to begin war at once. You see, the Revolution was in our blood like strong wine: we were drunk with the spirit, lad. "When Karl wrote that we must wait, that we must have patience, there was great disappointment. We thought that we should begin at once, and there were some who said that Karl was afraid, but I knew that they were wrong, and told them so. There was a fierce discussion at the meeting one night over a letter which I had received from Karl, and which he wanted me to read to the members. "George Herwegh was in Paris, so the letter said, and was trying hard to raise a legion of German workingmen to march into the Fatherland and begin the fight. This, Karl said, was a terrible mistake. It was useless, to begin with, for what could such a legion of tailors and cigarmakers and weavers do against the Prussian army? It was plain that the legion would be annihilated. Besides, it would hurt the cause in another way by taking out of Paris thousands of good revolutionists who were needed there. "'Tell the comrades,' he wrote, 'that it is not a question of cowardice or fear, but of wisdom. It takes more courage to live for the long struggle than to go out and be shot.' He wanted the comrades to wait patiently and to do all they could to persuade their friends in Paris not to follow Herwegh's advice. Most of the Germans in Paris followed Karl's advice, but a few followed Herwegh and marched into Baden later on, to be scattered by the regular troops as chaff is scattered by the wind. "The German comrades in Paris sent us a special manifesto, which Karl wrote, and we were asked to distribute it among the working people. That would be a good way to educate the workers, Karl wrote to our committee, but I tell you it seemed a very small thing to do in those trying times, and it didn't satisfy the comrades who were demanding more radical revolutionary action. Why, even I seemed to forget Karl's advice for a little while. "On the 13th of March--you'll remember that was the day on which more than a hundred thousand Chartists gathered on Kennington Common--the revolution broke out in Vienna. Then things began to move in Cologne, too. As soon as the news came from Vienna, August von Willich, who had been an artillery officer, led a big mob right into the Cologne Council Chamber. I was in the mob and shouted as loud as anybody. We demanded that the authorities should send a petition to the King, in the name of the city, demanding freedom and constitutional government. "And then on the 18th, the same day that saw the people of Berlin fighting behind barricades in the streets--a great multitude of us Cologne men marched through the streets, led by Professor Gottfried Kinkel, singing the _Marseillaise_ and carrying the forbidden flag of revolution, the black, red and gold tricolor." "And where was he--Marx--during all this time?" asked the Young Comrade. "In Paris with Engels. We thought it strange that he should be holding aloof from the great struggle, and even I began to lose faith in him. He had told us that the crowing of the Gallican cock would be the sign for the revolution to begin, yet he was silent. It was not till later that I learned from his own lips that he saw from the start that the revolution would be crushed; that the workers opportunity would not come until later. IV "He told me that when he came to Cologne with Engels. That was either the last of April or the beginning of May, I forget which. My wife rushed in one evening and said that she had seen Karl going up the street. I had heard that he was expected, but thought it would not be for several days. So when Barbara said that she had seen him on the street, I put on my things in a big hurry and rushed off to the club. There was a meeting that night, and I felt pretty sure that Karl would get there. [Illustration: FERDINAND LASSALLE.] "When the meeting was more than half through, I heard a noise in the back of the hall and turned to see Karl and Engels making their way to the platform. There was another man with them, a young fellow, very slender and about five feet six in height, handsome as Apollo and dressed like a regular dandy. I had never seen this young man before, but from what I had heard and read I knew that it must be Ferdinand Lassalle. "They both spoke at the meeting. Lassalle's speech was full of fire and poetry, but Karl spoke very quietly and slowly. Lassalle was like a great actor declaiming, Karl was like a teacher explaining the rules of arithmetic to a lot of schoolboys." "And did you meet Lassalle, too?" asked the Young Comrade in awed tones. "Aye, that night and many times after that. Karl greeted me warmly and introduced me to Lassalle. Then we went out for a drink of lager beer--just us four--Karl, Lassalle, Engels and me. They told me that they had come to start another paper in the place of the one that had been suppressed five years before. Money had been promised to start it, Karl was to be the chief editor and Engels his assistant. The new paper was to be called the _Neue Rhenische Zeitung_ and Freiligrath, George Weerth, Lassalle, and many others, were to write for it. So we drank a toast to the health and prosperity of the new paper. "Well, the paper came out all right, and it was not long before Karl's attacks upon the government brought trouble upon it. The middle class stockholders felt that he was too radical, and when he took the part of the French workers, after the terrible defeat of June, they wanted to get rid of their chief editor. There was no taming a man like Karl. "One day I went down to the office with a notice for a committee of which I was a member, and Karl introduced me to Michael Bakunin, the great Russian Anarchist leader. Karl never got along very well with Bakunin and there was generally war going on between them. "Did you ever hear of Robert Blum, my lad? Ever read the wonderful verses Freiligrath wrote about him? I suppose not. Well, Blum was a moderate Democrat, a sort of Liberal who belonged to the Frankfort National Assembly. When the insurrection of October, 1848, broke out in Vienna Blum was sent there by the National Assembly, the so-called 'parliament of the people.' "He assumed command of the revolutionary forces and was captured and taken prisoner by the Austrian army and ordered to be shot. I remember well the night of the ninth of February when the atrocious deed was committed. We had a great public meeting. The hall was crowded to suffocation. I looked for Karl, but he was nowhere to be seen. He was a very busy man, you see, and had to write a great deal for his paper at night. "It was getting on for ten o'clock when Karl appeared in the hall and made his way in silence to the platform. Some of the comrades applauded him, but he raised his hand to silence them. We saw then that he held a telegram in his hand, and that his face was as pale as death itself. We knew that something terrible had happened, and a great hush fell over the meeting. Not a sound could be heard until Karl began to read. "The telegram was very brief and very terrible. Robert Blum had been shot to death in Vienna, according to martial law, it said. Karl read it with solemn voice, and I thought that I could see the murder taking place right there in the hall before my eyes. I suppose everybody felt just like that, for there was perfect silence--the kind of silence that is painful--for a few seconds. Then we all broke out in a perfect roar of fury and cheers for the Revolution. "I tried to speak to Karl after the meeting, but he brushed me aside and hurried away. His face was terrible to behold. He was the Revolution itself in human shape. As I looked at him I knew that he would live to avenge poor Blum. "Blum's death was followed by the _coup de' etat_. The King appointed a new ministry and the National Assembly was dissolved. The _Neue Rhenische Zeitung_ came out then with a notice calling upon all citizens to forcibly resist all attempts to collect taxes from them. That meant war, of course, war to the knife, and we all knew it. "Karl was arrested upon a charge of treason, inciting people to armed resistance to the King's authority. We all feared that it would go badly with him. There was another trial, too, Karl and Engels and a comrade named Korff, manager of the paper, were placed on trial for criminal libel. I went to this trial and heard Karl make the speech for the defence. The galleries were crowded and when he got through they applauded till the rafters shook. 'If Marx can make a speech like that at the 'treason' trial, no jury will convict,' was what everybody in the galleries said. "When we got outside--oh, I forgot to say that the three defendants were acquitted, didn't I? Well, when we got outside, I told Karl what all the comrades, and many who were not comrades at all, were saying about his defence. He was pleased to hear it, I believe, but all that he would say was, 'I shall do much better than that, Hans, much better than that. Unless I'm mistaken, I can make the public prosecutor look like an idiot, Hans.' "You can bet that I was at the 'treason' trial two days later. I pressed Karl's hand as he went in, and he looked back and winked at me as mischievously as possible, but said not a word. The lawyers for the government bitterly attacked Karl and the two other members of the executive of the Democratic Club who were arrested with him. But their abuse was mostly for Karl. He was the one they were trying to strike down, any fool could see that. "Well, when the case for the prosecution was all in, Karl began to talk to the jury. He didn't make a speech exactly, but just talked as he always did when he sat with a few friends over a glass of lager. In a chatty sort of way, he explained the law to the jury, showed where the clever lawyers for the government had made big mistakes, and proved that he knew the law better than they did. After that he gave them a little political lecture, you might say. He explained to them just how he looked at the political questions--always from the standpoint of the working people. "Sitting beside me was an old man, a Professor of Law they told me he was. He sat there with his eyes fastened upon Karl, listening with all his ears to every word. 'Splendid! Splendid! Wonderful logic,' I heard him say to himself. 'What a lawyer that man would make!' I watched the faces of the jury and it was plain to see that Karl was making a deep impression upon them, though they were all middle class men. Even the old judge forgot himself and nodded and smiled when Karl's logic made the prosecution look foolish. You could see that the old judge was admiring the wonderful mind of the man before him. "Well, the three prisoners were acquitted by the jury and Karl was greatly pleased when the jury sent one of their members over to say that they had passed a vote of thanks to 'Doctor Marx' for the very interesting and instructive lecture he had given them. I tell you, boy, I was prouder than ever of Karl after that, and went straight home and wrote letters to half a dozen people in Treves that I knew, telling them all about Karl's great speech. You see, I knew that he would never send word back there, and I wanted everybody in the old town to know that Karl was making a great name in the world. "The government got to be terribly afraid of Karl after that trial, and when revolutionary outbreaks occurred all through the Rhine Province, the following May, they suppressed the paper and expelled Karl from Prussia. "We had a meeting of the executive committee to consider what was to be done. Karl said that he was going to Paris at once, and that his wife and children would follow next day. Engels was going into the Palatinate of Bavaria to fight in the ranks, with Annecke, Kinkel, and Carl Schurz. All the debts in connection with the paper had been paid, he told us, so that no dishonor could attach to its memory. "It was not until afterward that we heard how the debts of the paper had been paid. Karl had pawned all the silver things belonging to his wife, and sold lots of furniture and things to get the money to pay the debts. They were not his debts at all, and if they were his expulsion would have been a very good reason for leaving the debts unpaid. But he was not one of that kind. Honest as the sun, he was. It was just like him to make the debts his own, and to pinch himself and his family to pay them. More than once Karl and his family had to live on dry bread in Cologne in order to keep the paper going. My Barbara found out once in some way that Karl's wife and baby didn't have enough to eat, and when she came home and told me we both cried ourselves to sleep because of it." "Could none of the comrades help them, Hans?" "Ach, that was pretty hard, my boy, for Karl was very proud, and I guess Jenny was prouder still. Barbara and I put our heads together and says she: 'We must put some money in a letter and send it to him somehow, in a way that he will never know where it came from, Hans.' Karl knew my writing, but not Barbara's, so she wrote a little letter and put in all the money she had saved up. 'This is from a loyal comrade who knows that Doctor Marx and his family are in need of it,' she wrote. Then we got a young comrade who was unknown to Karl and Engels to deliver the letter to Karl just as he was leaving for his office one morning. "Barbara and I were very happy that day when we knew that Karl had received the money, but bless your life I don't believe it did him any good at all. He just gave it away." "Gave away the money--that was giving away his children's bread--almost. Did he do _that_?" "Well, all I know is that I heard next day that Karl had visited that same evening, a comrade who was sick and poor and in deep distress, and that when he was leaving he had pressed money into the hand of the comrade's wife, telling her to get some good food and wine for her sick husband. And the amount of the money he gave her was exactly the same as that we had sent to him in the morning. "Karl was always so. He was the gentlest, kindest-hearted man I ever knew in my life. He could suffer in silence himself, never complaining, but he could not stand the sight of another's misery. He'd stop anything he was doing and go out into the street to comfort a crying child. Many and many a time have I seen him stop on the street to watch the children at play, or to pick up some crying little one in his great strong arms and comfort it against his breast. Never could he keep pennies in his pocket; they all went to comfort the children he met on the streets. Why, when he went to his office in the mornings he would very often have from two to half a dozen children clinging around him, strange children who had taken a fancy to him because he smiled kindly at them and patted their heads. "I heard nothing from Karl for quite a while after he went to Paris. We wondered, Barbara and I, why he did not write. Then, one day, about three months after he had gone to Paris, came a letter from London and we saw at once that it was in his handwriting. He'd been expelled from Paris again and compelled to leave the city within twenty-four hours, and he and his family were staying in cheap lodgings in Camberwell. He said that everything was going splendidly, but never a word did he say about the terrible poverty and hardship from which they were suffering. V "Well, a few months after that, I managed to get into trouble with the authorities at Cologne, along with a few other comrades. We heard that we were to be arrested and knew that we could expect no mercy. So Barbara and I talked things over and we decided to clear out at once, and go to London. We sold our few things to a good comrade, and with the money made our way at once to join Barbara's sister in Dean street. I never dreamed that we should find Karl living next door to us. "But we did. Nobody told me about him--I suppose that nobody in our house knew who he was--but a few days after we arrived I saw him pass and ran out and called to him. My, he looked so thin and worn out that my heart ached! But he was glad to see me and grasped my hand with both of his. Karl could shake hands in a way that made you feel he loved you more than anybody else in all the world. "In a little while he had told me enough for me to understand why he was so pale and thin. If it were not for hurting his feelings, I could have cried at the things he told me. He and the beautiful Jenny without food sometimes, and no bed to lie upon! And it seemed all the worse to me because I knew how well they had been reared, how they had been used to solid comfort and even luxury. "But it was not from Karl that I learned the worst. He was always trying to hide the worst. Never did I hear of such a man as he was for turning things bright side upwards. But Conrad Schramm, who was related to Barbara--a sort of second cousin, I think--lodged in the same house with us. Schramm was the closest friend Karl and Jenny had in London then, and he told me things that made my heart bleed. Why, when a little baby was born to them, soon after they came to London, there was no money for a doctor, nor even to buy a cheap cradle for the little thing. "For years that poverty continued. I used to see Karl pretty near every day until I fell and hurt my head and broke my leg in two places and was kept in the hospital many months. Barbara had to go out to work then, washing clothes for richer folks, and we couldn't offer to help dear old Karl as we would. So we just pretended that we didn't know anything about the poverty that was making him look so haggard and old. Karl would have died from the worry, I believe, if it had not been for the children. They kept him young and cheered him up. He might not have had anything but dry bread to eat for days, but he would come down the street laughing like a great big boy, a crowd of children tugging at his coat and crying 'Daddy Marx! Daddy Marx! Daddy Marx!' at the top of their little voices. "He used to come and see me at the hospital sometimes. No matter how tired and worried he might be--and I could tell that pretty well by looking at his face when he didn't know that I was looking--he always was cheerful with me. He wanted to cheer me up, you see, so he told me all the encouraging news about the movement--though there wasn't very much that was encouraging--and then he would crack jokes and tell stories that made me laugh so loud that all the other patients in the room would get to laughing too. "I told him one day about a little German lad in a bed at the lower end of the ward. Poor little chap, he had been operated on several times, but there was no hope. He was bound to die, the nurse told me. When I told Karl the tears came into his eyes and he kept on moaning, 'Poor little chap! So young! Poor little chap!' He went down and talked with him for an hour or more, and I could hear the boy's laughter ring through the long hospital ward. We'd never heard him laugh before, for no one ever came to see him, poor lonesome little fellow. "Karl always used to spend some of his time with the little chap after that. He would bring books and read to him in his mother tongue, or tell him wonderful stories. The poor little chap was so happy to see him and always used to kiss 'Uncle Nick,' as Karl taught the boy to call him. And when the little fellow died, Karl wept just as though the lad had been his own kin, and insisted upon following him to the grave." "Ah, that was great and noble, Hans! How he must have felt the great universal heart-ache!" "I used to go to the German Communist Club to hear Karl lecture. That was years later, in the winter of 1856, I think. Karl had been staying away from the club for three or four years. He was sick of their faction fights, and disgusted with the hot-heads who were always crying for violent revolution. I saw him very often during the time that he kept away from the club, when Kinkel and Willich and other romantic middle-class men held sway there. Karl would say to me: 'Bah! It's all froth, Hans, every bit of it is froth. They cry out for revolution because the words seem big and impressive, but they mustn't be regarded seriously. Pop-gun revolutionists they are!' "Well, as I was saying, I heard the lectures on political economy which Karl gave at the club along in fifty-six and fifty-seven. He lectured to us just as he talked to the juries, quietly and slowly--like a teacher. Then he would ask us questions to find out how much we knew, and the man who showed that he had not been listening carefully got a scolding. Karl would look right at him and say: 'And did you _really_ listen to the lecture, Comrade So-and-So?' A fine teacher he was. "I think that Karl's affairs improved a bit just them. Engels used to help him, too. At any rate, he and his family moved out into the suburbs and I did not see him so often. My family had grown large by that time, and I had to drop agitation for a few years to feed and clothe my little ones. But I used to visit Karl sometimes on Sundays, and then we'd talk over all that had happened in connection with the movement. I used to take him the best cigars I could get, and he always relished them. "For Karl was a great smoker. Nearly always he had a cigar in his mouth, and, ugh!--what nasty things he had to smoke. We used to call his cigars 'Marx's rope-ends,' and they were as bad as their name. That the terrible things he had to smoke, because they were cheap, injured his health there can be no doubt at all. I used to say that it was helping the movement to take him a box of decent cigars, for it was surely saving him from smoking old rope-ends.' "Poor Jenny! She was so grateful whenever I brought Karl a box of cigars. 'So long as he must smoke, friend Fritzsche, it is better that he should have something decent to smoke. The cheap trash he smokes is bad for him, I'm sure.' She knew, poor thing, that the poverty he endured for the great Cause was killing Karl by inches, as you might say. And I knew it, too, laddie, and it made my heart bleed." "Ah, he was a martyr, Hans--a martyr to the cause of liberty. And 'the blood of the martyrs is the seed of the Church,' always and everywhere," said the Young Comrade. VI Old Hans was silent for a few seconds. He gazed at the photograph above his bench like one enraptured. The Young Comrade kept silent, too, watching old Hans. A curious smile played about the old man's face. It was he who broke the silence at length. "Of course, you've heard about the International, lad? Karl had that picture taken just about the time that the International was started. Always promised me a picture he had, for years and years. And when he brought me that one Sunday he seemed half ashamed of himself, as if he thought it was too sentimental a thing for a serious man to do. 'You'll soon get tired looking at it, Hans,' he said. "Ach, I remember that afternoon as though it were only day before yesterday. We were sitting smoking and talking after dinner when Karl said: 'Hans, I've made up my mind that it is time things begun to move a bit--in connection with the movement I mean. We must unite, Hans. All the workers ought to unite--can unite--_must_ unite! We've got a good start in the visit of these French and German workingmen to the Universal Exhibition. The bourgeoisie have shown the way. It must be done.' Then he explained to me how the movement was to be launched, and I promised to help as much as possible in my union. Karl always wanted to get the support of the unions, and many a time did he come to me to get me to introduce some motion in my union. "It was that way when the great Civil War broke out in America. Karl was mad at the way in which Gladstone and the middle class in general sided with the slave-holders of the South. You see, he not only took the side of the slaves, but he loved President Lincoln. He seemed never to get tired of praising Lincoln. One day he came to me and said with that quiet manner he had when he was most in earnest, 'Hans, we must do something to offset Gladstone's damned infernal support of the slave-traders. We must show President Lincoln that the working class in this country feel and know that he is in the right. And Abraham Lincoln belongs to us, Hans; he's a son of the working class.' "He said a lot more in praise of Lincoln, and told me how proud he was that the German Socialists had gone to the war, all enlisted in the Northern army; said he'd like to join with Weydemeyer, his old friend, who was fighting under Fremont. So earnest he was about it! Nobody could have guessed that the war meant ruin to him by cutting off his only regular income, the five dollars a week he got for writing for the _New York Tribune_--I think that was the name of the paper. "Well, he begged me to get resolutions passed at our union condemning Gladstone and supporting President Lincoln, and I believe that our union was the first body of workingmen in England to pass such resolutions. But Karl didn't stop at that. He got the International to take the matter up with the different workingmen's societies, and meetings were held all over the country. And he kept so much in the background that very few people ever knew that it was Karl Marx who turned the tide of opinion in England to the side of Lincoln. And when Lincoln was murdered by that crazy actor, Booth, Karl actually cried. He made a beautiful speech, and wrote resolutions which were adopted at meetings all over the country. Ah, boy, Lincoln appreciated the support we gave him in those awful days of the war, and Karl showed me the reply Lincoln sent to the General Council thanking them for it. "Karl was always like that; always guiding the working people to do the right thing, and always letting other people get the credit and the glory. He planned and directed all the meetings of the workers demanding manhood suffrage, in 1866, but he never got the credit of it. All for the cause, he was, and never cared for personal glory. For years he gave all his time to the International and never got a penny for all he did, though his enemies used to say that he was 'getting rich out of the movement.' "Ach, that used to make me mad--the way they lied about Karl. The papers used to print stories about the 'Brimstone League,' a sort of 'inner circle' connected with the International, though we all knew there was never such a thing in existence. Karl was accused of trying to plan murders and bloody revolutions, the very thing he hated and feared above everything else. Always fighting those who talked that way, he was; said they were spies and hired agents of the enemy, trying to bring the movement to ruin. Didn't he oppose Weitling and Herwegh and Bakunin on that very ground? "I was with Karl when Lassalle visited him, in 1862, and heard what he said then about foolish attempts to start revolutions by the sword. Lassalle had sent a Captain Schweigert to Karl a little while before that with a letter, begging Karl to help the Captain raise the money to buy a lot of guns for an insurrection. Karl had refused to have anything to do with the scheme, and Lassalle was mad about it. 'Your ways are too slow for me, my dear Marx,' he said. 'Why, it'll take a whole generation to develop a political party of the proletariat strong enough to do anything.' "Karl smiled in that quiet way he had and said: 'Yes, it's slow enough, friend Lassalle, slow enough. But we want brains for the foundation of our revolution--brains, not powder. We must have patience, lots of patience. Mushrooms grow up in a night and last only a day; oaks take a hundred years to grow, but the wood lasts a thousand years. And it's oaks we want, not mushrooms.'" "How like Marx that was, Hans," said the Young Comrade then, "how patient and far-seeing! And what did Lassalle think of that?" "He never understood Karl, I think. Anyhow, Karl told me that Lassalle ceased to be his friend after that meeting. There was no quarrel, you understand, only Lassalle realized that he and Karl were far apart in their views. 'Lassalle is a clever man all right,' Karl used to say, 'but he wants twelve o'clock at eleven, like an impatient child.' And there's lots of folks like Lassalle in that respect, my lad; folks that want oaks to grow in a night like mushrooms. "Well, I stayed in the International until the very last, after the Hague Congress when it was decided to make New York the headquarters. That was a hard blow to me, lad. It looked to me as if Karl had made a mistake. I felt that the International was practically killed when the General Council was moved to America, and told Karl so. But he knew that as well as I did, only he couldn't help himself. "'Yes, Hans, I'm afraid you're right. The International can't amount to much under the circumstances. But it had to be, Hans, it had to be. My health is very poor, and I'm about done for, so far as fighting is concerned. I simply can't keep on fighting Bakunin and his crowd, Hans, and if I drop the fight the International will pass into Bakunin's control. And I'd rather see the organization die in America than live with Bakunin at the head; it's better so, better so, Hans.' And it was then, when I heard him talk like that, and saw how old-looking he had grown in a few months, that I knew we must soon lose Karl." VII "But he did not die soon--he lived more than ten years after that, Hans," said the Young Comrade. "And ten years is a good long time." "Ach, ten years! But what sort of years were they? Tell me that," demanded old Hans with trembling voice. "Ten years of sickness and misery--ten years of perdition, that's what they were, my lad! Didn't I see him waste away like a plant whose roots are gnawed by the worms? Didn't I see his frame shake to pieces almost when that cough took hold of him? Aye, didn't I often think that I'd be glad to hear that he was dead--glad for his own sake, to think that he was out of pain at last? "Yes, he lived ten years, but he was dying all the while. He must have been in pain pretty nearly all the time, every minute an agony! 'Oh, I'd put an end to it all, Hans, if I didn't have to finish _Capital_,' he said to me once as we walked over Hampstead Heath, he leaning upon my arm. 'It's Hell to suffer so, year after year, but I must finish that book. Nothing I've ever done means so much as that to the movement, and nobody else can do it. I must live for _that_, even though every breath is an agony.' "But he didn't live to finish his task, after all. It was left for Engels to put the second and third volumes in shape. A mighty good thing it was for the movement that there was an Engels to do it, I can tell you. Nobody else could have done it. But Engels was like a twin brother to Karl. Some of the comrades were a bit jealous sometimes, and used to call Karl and Engels the 'Siamese twins,' but that made no difference to anybody. If it hadn't been for Engels Karl wouldn't have lived so long as he did, and half his work would never have been done. I never got so close to the heart of Engels as I did to Karl, but I loved him for Karl's sake, and because of the way he always stood by Karl through thick and thin. "I can't bear to tell about the last couple of years--how I used to find Karl sick abed in one room and his wife, the lovely Jenny, in another room tortured by cancer. Terrible it was, and I used to go away from the house hoping that I might hear they were both dead and out of their misery forever. Only Engels seemed to think that Karl would get better. He got mad as a hatter when I said one day that Karl couldn't live. But when Jenny died Engels said to me after the funeral, 'It's all over with Marx now, friend Fritzsche; his life is finished, too.' And I knew that Engels spoke the truth. "And then Karl died. He died sitting in his arm chair, about three o'clock in the afternoon of the fourteenth of March, 1883. I heard the news that evening from Engels and went over to the house in Maitland Park Road, and that night I saw him stretched out upon the bed, the old familiar smile upon his lips. I couldn't say a word to Engels or to poor Eleanor Marx--I could only press their hands in silence and fight to keep back the sobs and tears. [Illustration: THE MARX FAMILY GRAVE IN HIGHGATE CEMETERY.] "And then on the Saturday, at noon, he was buried in Highgate Cemetery, in the same grave with his wife. And while Engels was speaking over the grave, telling what a wonderful philosopher Karl was, my mind was wandering back over the years to Treves. Once more we were boys playing together, or fighting because he would play with little Jenny von Westphalen; once more I seemed to hear Karl telling stories in the schoolyard as in the old days. Once again it seemed as if we were back in the old town, marching through the streets shouting out the verses Karl wrote about the old teacher, poor old Herr von Holst. "And then the scene changed and I was in Bingen with my Barbara, laughing into the faces of Karl and his Jenny, and Karl was picking the bits of rice from his pockets and laughing at the joke, while poor Jenny blushed crimson. What Engels said at the grave I couldn't tell; I didn't hear it at all, for my mind was far away. I could only think of the living Karl, not of the corpse they were giving back to Mother Earth. "It seemed to me that the scene changed again, and we were back in Cologne--Karl addressing the judge and jury, defending the working class, I listening and applauding like mad. And then the good old Lessner took my arm and led me away. "Ah, lad, it was terrible, terrible, going home that afternoon and thinking of Karl lying there in the cold ground. The sun could no longer shine for me, and even Barbara and the little grandchild, our Barbara's little Gretchen, couldn't cheer me. Karl was a great philosopher, as Engels said there at the graveside, but he was a greater man, a greater comrade and friend. They talk about putting up a bronze monument somewhere to keep his memory fresh, but that would be foolish. Little men's memories can be kept alive by bronze monuments, but such men as Karl need no monuments. So long as the great struggle for human liberty endures Karl's name will live in the hearts of men. "_Aye, and in the distant ages--when the struggle is over--when happy men and women read with wondering hearts of the days of pain which we endure--then Karl's name will still be remembered. Nobody will know then that I, poor old Hans Fritzsche, went to school with Karl; that I played with him--fought with him--loved him for nearly sixty years. But no matter; they can never know Karl as I knew him._" Tears ran down the old man's cheeks as he lapsed into silence once more, and the Young Comrade gently pressed one of the withered and knotted hands to his lips and went out into the night. * * * * * 
25300	----	None 
29673	----	generously made available by The Internet Archive/Canadian Libraries) _Barbara Weinstock Lectures on The Morals of Trade_ HIGHER EDUCATION AND BUSINESS STANDARDS. By WILLARD EUGENE HOTCHKISS. CREATING CAPITAL: MONEY-MAKING AS AN AIM IN BUSINESS. By FREDERICK L. LIPMAN. IS CIVILIZATION A DISEASE? By STANTON COIT. SOCIAL JUSTICE WITHOUT SOCIALISM. By JOHN BATES CLARK. THE CONFLICT BETWEEN PRIVATE MONOPOLY AND GOOD CITIZENSHIP. By JOHN GRAHAM BROOKS. COMMERCIALISM AND JOURNALISM. By HAMILTON HOLT. THE BUSINESS CAREER IN ITS PUBLIC RELATIONS. By ALBERT SHAW. CREATING CAPITAL MONEY-MAKING AS AN AIM IN BUSINESS By FREDERICK L. LIPMAN BOSTON AND NEW YORK HOUGHTON MIFFLIN COMPANY _The Riverside Press Cambridge_ 1918 COPYRIGHT, 1918, BY THE REGENTS OF THE UNIVERSITY OF CALIFORNIA ALL RIGHTS RESERVED _Published March 1918_ _The Riverside Press_ CAMBRIDGE · MASSACHUSETTS U · S · A BARBARA WEINSTOCK LECTURES ON THE MORALS OF TRADE This series will contain essays by representative scholars and men of affairs dealing with the various phases of the moral law in its bearing on business life under the new economic order, first delivered at the University of California on the Weinstock foundation. CREATING CAPITAL MONEY-MAKING AS AN AIM IN BUSINESS The object of this paper is to discuss money-making; to examine its prevalence as an aim among people generally and the moral standards which obtain among those who consciously seek to make money. The desire to make money is common to most men. Stronger or weaker, in some degree it is present in the mind of nearly every one. Now, how far does this desire grow to be an aim or object in our lives, and to what extent is such an aim a worthy one? The typical money-maker as commonly pictured in our imagination is a narrow, grasping, selfish individual who has chosen to follow lower rather than higher ideals and who often is tempted, and always may be tempted, to employ illegitimate means for the attainment of his ends. The aims he has adopted are made to stand in opposition to the practice of certain virtues. Thus we contrast profits and patriotism; enriching one's self and philanthropy; getting all the law allows and justice; taking advantage of the other fellow and honesty; becoming engrossed in acquisition and love of family. Now, such contrasts obviously prove nothing more than that money-making is and would be a vicious aim if pursued regardless of these virtues, and it could well be replied that consideration of patriotism, philanthropy, love of family, etc., must in themselves impel one to earn and to save. "The love of money is the root of all evil" implies an exclusive devotion to acquisition that may well be criticized. But aside from this there is no doubt that amid the confused ideas held on the subject, aiming to make money is commonly regarded as in some sort of antagonism to the social virtues. That there are other sides to the picture is recognized, however, even by the loose thought of the day. The man who earns his living, for instance, it views as one who in so far is performing a fundamental duty. Indeed, the world scorns him who cannot or will not support himself and his family. But this is only to say that one must work to-day to meet the expenditures of to-day. Is this the limit? Is it a virtue for him to work in order to spend, but a vice for him to work in order to save? What are the considerations to be observed by a man in deciding whether or not he should adopt money-making--that is, the acquisition of a surplus beyond his current needs--as one of his definite aims in life? One consideration relates to our country. The United States is now understood to be spending about $25,000,000 per day in carrying on the war. In the last analysis this amount must be paid out of the past savings and the savings from current earnings of the people of the United States. The wealth of the nation consists mainly of the sum of the wealth of its citizens. We are therefore told to seek increased earnings and to economize in our expenditures in order to enhance the national wealth. The duty here is perfectly clear, but even if we did not have war conditions to teach us as a patriotic responsibility the necessity of earning and saving a surplus, the obligation would still be there. We owe a similar debt to our state and to our city or district. And nearer still comes the duty to one's family and to one's own future, the duty of providing for the rainy day, for old age. And it will be observed that money-making in this sense is directed to the acquisition of _net_ income, it relates to that portion of one's earnings which is saved from current expenditure and becomes capital. Then we must also consider the duty to society. As we look out upon the surrounding evidences of civilization--buildings and railroads and highly cultivated fields, the machinery of production and distribution, the shops full of useful commodities--and then cast our thought backward to a time not very many years ago when all this country was a natural wilderness, we may begin to realize the magnitude of the wealth, the capital, that has come into being since then, every particle of which is due to the earnings and savings of somebody, to the surplus not consumed by the workers of the past, their unexpended and unwasted net balances year by year. Universities, churches, libraries, parks, are included in the wealth thus handed down to us. Our lives to-day may be richer and broader through this inheritance created by the industry and abstinence of our forefathers. Their business careers, now closed, we regard as the more successful in that they earned and saved a surplus, that they had a _net_ income to show as the result of their work. But these savings of the past were accumulated, after all, by comparatively few of the workers; not by the many, who lived from hand to mouth, happy-go-lucky, spending and enjoying in time of abundance, suffering in time of poverty and stress, making no provision even for their own future, still less recognizing any duty to their country or to posterity to produce economically and regulate their expenditure wisely so as to carry forward a surplus. As far as this majority is concerned we might yet be living among rocks and trees, without shelter, lacking sure supplies of food, with fig leaves to cover our nakedness. And to-day the same conditions obtain. How many persons are to be found among one's acquaintance who feel and act upon any responsibility for doing their "bit" in the creation of capital? Very few. Rather than exert himself to work with this in view, on the one hand, and to abstain from unnecessary consumption, on the other hand, the ordinary man will make to himself every excuse. He will contemn money-making as a sordid aim, readily exaggerating itself into a vice; he will dwell upon the obligations and other considerations of a higher life, this being defined as something generous and noble, a something compared with which money-making cannot be regarded as a worthy object but must be included in the class of unpleasant necessities, not to say indecencies, which ought to be relegated to the background of life; he will summon up pictures of extreme poverty, where any money received must be expended forthwith to meet urgent needs, as justifying that which in his case is the gratification of shiftless indulgence. Above all, this typical individual will not accept and act upon the idea that his affairs, his small income and expenditure, have any bearing upon the prosperity and progress of his country. The most he will keep before him is that he should pay his bills, and perhaps in some few cases, will extend the notion to the future to include provision for the bills and possible emergencies then to be met by himself and his family. Nor is this improvident attitude confined to the young, to the professional and the other non-business classes. In the business world we see it all around us; among those who "work for a living," among clerks and employees and among the so-called laboring classes it appears to be the normal attitude. People who work for salaries or wages seem characteristically to use up all their earnings in their current expenditure, to live up to their incomes without any serious attempt to save. If they pride themselves upon trying to keep out of debt, it is as much as they expect of themselves, and among them the man who attempts to go beyond this in his money affairs is certainly the exception. One of the effects of a world-wide war is an enormously increased demand for labor at high and advancing wages, a condition that we might suppose would be greatly to the advantage of the laborer. But that will depend upon his own attitude and policy. From England, and from American towns here and there, we hear stories of the wage-earner on whom increasing income has had the effect of lessening the effort to work; who stops during the week when the higher wage scale has paid him the amount he is accustomed to regard as a week's earnings. Now, would it not seem natural to expect that any man encountering improved market conditions for his output, whether of commodity or service, would seek to turn the situation to advantage by increasing that output as largely as lay in his power? If, for instance, I can manufacture shoes to sell for $4.00 a pair and a change in market conditions is such that I can obtain $5.00 a pair, I would endeavor to produce more shoes in order to profit by the favorable market; and if thereafter the price should rise to $6.00 and $7.00 and $8.00 a pair, at each increment my efforts would be still further intensified. That, indeed, is the normal economic attitude. Fluctuations in the price level due to changes in the demand for a commodity are expected to affect, and do affect, the market supply. At a higher price, production is stimulated and more units of the commodity are brought to the market, both from new sources and from old sources. Under falling prices, on the other hand, the supply offered in the market would become automatically diminished. This is an elementary commonplace in economics, yet the laborer to whom we have just referred does not seem to recognize it. He may find that he can earn in, say four days, an amount equal to his former earnings in six days and, therefore, at the end of the fourth day he quits work for the week. Now, obviously under such increasing wage scale, he might do one of three things: He could quit at the end of the fourth day, having received a week's income. He could continue working for the six days and use his surplus earnings for comforts, pleasures, and luxuries which previously he had been unable to afford. He might work for the six days and save as much as possible of his excess earnings. Now, what is the wise choice for the laborer? Leaving out of account special cases where he has a large family, or sickness at home, or is under some other disability which in his individual case would reduce his earning power or increase his minimum expenses, ought he not to work for the six days, putting aside all he could of the excess as savings for the future? It will be generally conceded that this is self-evident. If, viewing the narrow conditions under which the workman ordinarily lives, it should be claimed that during a period of unusual earnings self-gratification would be not only natural but measurably justifiable, the reply could be made that this is merely specious, involving assumption not in accord with the facts. Excuses of this kind we often make for ourselves in the endeavor to justify our indulgence in present pleasure rather than perform the irksome duty of self-restraint. The laborer whose ideals are such that he quits at the end of the fourth day is not the type of man who is going to spend the two holidays in pursuing higher aims in life; he is going to pass them in inaction, quite likely at the grog-shop. The man who fails to take advantage of the security for the future offered him and his family through the opportunity of saving from extraordinary earnings is one who is adding to the abnormal demand for such things as phonographs, jewelry, spirits, and tobacco. And this helps to explain the tremendous market for luxuries during wartime. Doubtless there are many workmen who follow a more rational course, who are reaping and storing the harvest for the comfort and security of themselves and their families during the winter of life. Could any one think that this policy involved an aim that was sordid, tending to draw them down, and away from higher considerations of life? Certainly a course of careful planning in one's affairs would be in so far a better course and on a higher plane than indulgence in idleness or shiftless expenditure of surplus for present luxuries, regardless of future need. This case of the workmen under conditions of abnormal wages seems exceptional; yet the choice so presented to him is not very different fundamentally from the choice normally presented to all the rest of us. The young man starting out in life may be as negligent of his opportunities as the workman who quits at the end of the fourth day. Or if he devotes himself properly to his vocation he may consume his earnings in current self-gratification. If, however, he will both concentrate on his work and practice self-restraint with the purpose of creating a saved surplus, all will agree in considering him as so far headed on the road towards success. In the case of the beginner this seems clear enough, but, after all, the same considerations apply to everybody else, whether in business or profession, beginners or experienced, young or old; to all of us is the same choice presented daily, and at our peril we must make it wisely. The physician, for instance, although he cannot afford to pay more attention to money-making than to the welfare of his patients, to his studies, to his professional ideals, must not, on the other hand, leave out of account these business duties and considerations which belong to him as an economic member of society. He must produce and must consume with his family, reasonably, decently and thriftily. He must aim at a surplus to store away for the future. These aims are, as a matter of course, secondary to his professional ideals, but there need be no conflict of duty. The point is that there exists a department of his activity devoted, and to be devoted, by him to his business affairs. In any event, as a man, a husband, a father, a citizen, he cannot escape from the responsibility of these business affairs. They must be conducted in some way. Shall it be well or ill? If he fails herein it may involve failure in any or all these relations--as a man, husband, father, citizen. And obviously these same considerations apply to all other men and women, whatever may be their professions, occupations, or major interests in life. Why do so many allow themselves to be dragged along, living from hand-to-mouth, in fear of the knock of the bill collector at the door? Why do we associate money questions with that which is unhappy, unfortunate, down-at-the-heel, with fear and misery? Barring mere accidents, it is because we are careless, shiftless; because we do not face the problem manfully, practice reasonable self-restraint, consider the subject in its complexity and decide upon, and carry out, a constructive programme. Even if one happens to possess wealth, he is not exempt. Indeed, large wealth involves still greater necessity for care in the conduct of one's pecuniary affairs. The rich man is said to have perplexities and responsibilities which are unknown to those in moderate circumstances. In fine, everyone must face these money questions or be driven by them. Those who live on fixed incomes, whether from salary or investment, may find it impossible to make any direct attempt to make money; for them the problem is to be confronted and mastered on its other side, the side of spending and saving, that the income may be apportioned as wisely as possible for the purposes of living. But during the last few years a new factor has entered into the money problems of the individual, often adding to his trials, often adding to his self-made excuses, and especially burdensome to the man on fixed income. We refer to the high cost of living. Here it is, however, that the wage earner can do something in self-protection, for the level of prices may be in some measure affected by his policy in handling his earnings. A period of high wages is accompanied by and is in some sense an incident of a high level of prices. Now we recognize high wages, considered in itself, as beneficial to the community, for it gives opportunity, at least, for comforts in life and a provision for the future that otherwise would be lacking. But if prices have advanced as much as wages, the apparent improvement to the laborer is merely in nominal wages, while that which alone can benefit him is higher real wages. Now let us see what the workman could do to advance real wages as contrasted with nominal wages. What will be the effect on prices of the use of surplus earnings during a period of high wages? If the surplus earnings are expended, they will be used either in meeting the higher prices of customary commodities, or in meeting these advanced prices and also in purchasing additional commodities. The first case will occur only if, and when, the advance in price equals the advance in wages, for only in that event will the new wages just cover the new cost of customary commodities. Then this expenditure of the entire income in customary commodities tends to keep up the price level and any benefit from higher wages disappears. In the second case, so far as the worker spends his surplus earnings in meeting advanced prices for customary commodities, he tends to maintain prices at the higher level, and so far as he buys additional commodities, he increases the demand for them and tends further to advance the price level. If, on the other hand, the worker will save from his surplus earnings, he will increase the community's capital, and this will tend, directly or indirectly, to cause the production of further commodities, so increasing the supply of commodities and therefore tending to reduce prices. In any case, the worker should save as much as possible, as this tends to reduce the price level and so to better his condition. Or, putting it more simply, in time of high wages the worker ought to produce as much as possible and consume as little as possible, both influences tending to increase the stock of commodities for his ultimate gain and for that of the community. In fact, a high level of prices may be due measurably to some wasting of the world's capital--as in war, for instance--and then the only antidote is to restore the capital, a movement that would doubtless occur anyway in time but which could be greatly accelerated through a general adoption of habits of thrift and saving throughout a community. This then, though small, is something definite that we can contribute to the material advancement of mankind and, like the duty in this connection to our nation, to our families and ourselves, it consists in creating capital; that is, earning as much as we can and, in any event, even if our earnings are fixed, managing the income thriftily, and carrying forward as large a net result as possible. We turn now from the mass of mankind, on the whole so singularly neglectful of these responsibilities, to the few in number who constitute the creators of capital, to whom are due so much of the comforts, the conveniences, and the material advantages that go to make civilized life possible. Now these few are found in every rank in life. They may be rich or poor, professional or business men, employer or employee, old or young, male or female. The characteristic is their habit of thrift, of definitely adopting money-making as an aim, of spending less than they earn. It is astonishing what a small percentage of mankind they are. The Income Tax returns in the United States for 1916 showed that out of a population of 104,000,000 people those with taxable incomes aggregated only 336,652, about one in three hundred. But whatever be the rank of the individual practicing this thrift he is headed in the right direction and he tends to reach the point of relative competence, of independence in his pecuniary affairs. Preëminent in the class of the thrifty we think of the man of affairs; the business enterprise indeed is supposed to be the money-maker, _par excellence_. Money-making is in fact considered as its _raison d'être_; it is as a money-maker that the business man is contemned by some and envied by many. Now money-making and money values occupy a special place in business enterprise, due to the fact that on economic principles such money value becomes the best test--perhaps the only true test--of the workableness and success of business efforts. In the complicated activities of the world's work, where each man, each undertaking, each business unit, respectively, is striving primarily for its own advantage, how is it, among all this pulling and pushing, this competition, that the social income is distributed so nearly in accordance with the individual contribution? Even if we admit that many persons fail to get a fair share, that there is gross inequality here and there, still after all, a student of mankind's activities in production, distribution, and consumption must marvel at the extent to which the rewards approximate the value of contribution. Now this is made possible by money considered as a measure of relative values, by the standard or test of fitness embodied in the thought, Will it pay, and to what extent will it pay? If I have in mind some new invention that will perhaps confer benefits on mankind, the best test of its practicability and utility will be, Will it pay, will people buy it, pay money for it? If an improvement in process is proposed, the question is, Will it pay? If the young man starts out in life with high ideals and a reasonably good opinion of his own abilities, an opinion fostered perhaps by fond parents and admiring friends, the question is, Will these abilities fit in with the world's needs? Will they supply a real demand, will they be serviceable? The best means of ascertaining this, although it may be only a rough estimate and although errors occasionally creep in is, will they pay? Can he sell these services for real money? This criterion is practically omnipresent in the world of affairs. It is based on economic necessity, and although here and there it may be charged with cruelties, with serious blunders, it is, on the whole, a remarkably accurate standard. We see this more clearly where we attempt to substitute some other criterion for ranking the soldiers in the battle of life. We can note, for instance, the inferior type and character, generally speaking, of men elected to office by the suffrages of their fellow citizens, compared with men who reach positions of authority in business and other enterprises through the pressure of these economic principles. Again, consider the nation that has attempted to improve on economic distribution of power by evolving a government which places the power in the hands of those best fitted to govern, a ruling class which aims directly at efficiency, a select class but necessarily self-selected, thus supplanting an economic régime by a military régime--successful truly in certain forms of economic efficiency through a more rigid and compact organization, but destructive of the initiative, the evolutionary growth, the fundamental development, the liberties of the people. Contrast this with the freedom, happiness, and progress of a nation of shop-keepers. Now this economic régime, with its individual instances of cruelty, like the cruelties of nature, does on the whole tend to develop men, to require their best efforts, to make them come forward and upward. Thus, in this interplay of economic forces, wealth, or money, or profits stands out as a primary object of attainment, and becomes the incentive to the complex efforts which tend to benefit the individual, the community, and the nation. The business enterprise then directs its attention to profits, because, from mere economic necessity, profits are the criterion of the true success of the enterprise, that is, its serviceability to mankind. Here we distinguish between the shortsighted man, who aims at immediate returns, and the farsighted man, whose eye is fixed on the future, who verily desires the profits, but desires them in the long run. But this is only a manifestation of human nature as we find it in every field. We always note a deficiency in the man whose life is lived for the present, for immediate enjoyment: in him we see the typical pleasure-seeker, peculiarly prone to temptation, to break the rules of life, to indulge himself at the expense of others or of his own future. He is characteristically the weakling, the wrongdoer. And we contrast him with the man of character, who stands superior to an immediate environment, who will not disregard the distant future, the absent neighbor, the invisible God. And so in the economic world it is the whole life period which is to be regarded when aims are chosen. Profits as a goal for the long run do not antagonize moral principles. "Honesty is the best policy" and "Do unto others as you would have others do unto you" are maxims of good business; and that economic principles do not conflict with them is shown by the fact that they tend towards profits in the long run. This is not to assert that mankind in business is perfect. In every period of economic advance into a new environment, men try new experiments, as during the development of the great modern corporation in the period following the Civil War in this country and, earlier than that, in the era of railroad building. They have tried new experiments in ethics as they have in physics, in chemistry, in economics. They have attempted to replace honesty by camouflage, the golden rule by self-aggrandizement. But these attempts are not successful and so they become discredited; they do not work because inherently they cannot last, and inability to endure is fatal to the purposes of any economic undertaking. We are emphasizing the fact that business is necessarily conducted for the long run, the very nature of success implying permanence. A man may take some criminal advantage of an opportunity: he may abscond with money entrusted to him; he may abuse the confidence reposed in him by an employer, by a customer; he may obtain an immediate profit by misrepresentation. But no one could expect such things to last; he could not possibly be building an enduring structure; such a course could not in the end promise him profits, or any other kind of success. A properly conducted business enterprise then is concerned with making profits in the long run; that is to say, in accordance with accepted notions of business conduct; in short, according to rules of the game, and this involves conformity with a standard, a standard of giving good value for what one gets. We must next distinguish between gross profits and net profits. The merchant or manufacturer naturally desires to do a large business, he points with pride to the increase in his sales this year over last year. The larger his turnover the smaller the proportionate amount of his overhead expenses that must be borne per unit of product, and other economies follow large-scale production or distribution. He may occasionally be desirous of increasing his output even when it entails a disproportionate increase in his expenditures, with the idea that he can later occupy himself with reducing these expenses and in the meanwhile the goodwill of his enterprise will have gained from the larger circle of customers. Such is the case with a new enterprise that often starts out with the expectation of little or no profits during its early years, when it is gathering a clientèle and learning to distribute its product with economy. All these, however, are special cases. The normal situation is that the business enterprise is aiming at net profits, having an interest in large sales, heavy transactions and gross profits only so far as these are expected to lead finally to net profits, the real goal. Now these net profits are, of course, the remainder of earnings left on hand after providing for all costs and expenses, for depreciation and every other factor causing loss, destruction, and deterioration during the business period under consideration. In short, the business capital as it was at the beginning of the period is first fully restored and made intact at the end of the period before a net profit emerges. This net profit therefore becomes in a true sense a creation of new capital and may indeed be retained in the business as an addition to capital funds. Even when it is paid out in dividends, partly or wholly, it becomes new capital in the hands of the individual stockholders who then in their private capacity may of course spend it, but by proper investment may keep it permanently stored as capital. It is the creation of capital then, that is in reality the ultimate money-making aim of the business enterprise. We can now summarize the attitude and policy of the typical business man in his money-making aim as follows: In seeking profits he is actuated by economic necessity. His goal is profits in the long run, which involves conformity with economic and ethical standards, and net profits, which implies the creation of capital. The creation of capital we cannot fail to recognize as a worthy aim. It has given mankind much of all that mankind possesses and constitutes the foundation upon which civilization largely rests. The advancement in the arts and sciences has been in no small degree stimulated by the demands of business enterprise for new methods of creating capital and we may believe that should the time arrive when this motive should fail, when men should grow to be indifferent in their attitude towards profits, the ensuing stagnation would affect every department of human endeavor. Of this we may be assured even when we remember that money-making, and what goes with it, is not the only aim in life. After cataloguing so much that is virtuous in the pursuit of money-making the suggestion is inevitable that there must be some other side to it, that the common views of the rapacity of the money-maker cannot be wholly unfounded. What then are the vices of the money-making aim? In examining this question we shall first brush aside some things to which we have already referred. The pathological cases of mere crime, of sharp practice, of taking advantage of others, while mounting up into distressingly high figures considered absolutely, are much less important relatively; that is, they are infrequent and scarce enough to avoid obscuring the rule which they violate, the rule that honesty is indispensable in economics as well as in ethics. What we must now investigate is any vicious tendencies that may be found in the money-making aim when followed normally and according to its own accepted principles. Of such degenerative tendencies we seem to find two: first, the tendency to that excess which becomes a vice; and second, the tendency to a disregard of other considerations in life through too exclusive a devotion to acquisitiveness. But upon further thought we must see that these two tendencies flow together and become one, for too much devotion to money-getting and too little attention to the other purposes of life are, after all, expressions of the same thing. Perhaps a man may err in excessive devotion to any object of life but we must admit that in the pursuit of gain the evil tendency to exaggerated absorption in the one aim is promoted through a coöperation with his natural selfishness. Of all the fields of human endeavor, here is one that peculiarly fits in with self-seeking, with disregard for others, which may drag a man downward, making him small and mean, unhappy and uncharitable, while apparently attaining the goal at which he has aimed. Not every man, while concentrating upon money-making, is consciously seeking his country's welfare, the amelioration of life for the many, the uplift of posterity, even if he rigidly adheres to the accepted rules of the game, to the code of business honor. This brings us back to the popular picture of the money-maker, grasping, sordid, narrow-minded. There are such people. I believe them to be rare, but whether there are many of them to-day or not, it is a type tending to disappear in the environment of modern business which offers its inducements and rewards to him who does, who becomes, who renders service, not to the sordid seeker for gain. Barring an occasional exception, such an exclusive aim is not that of the man of large affairs, the business leader, the conspicuously successful man. It is not Harriman, nor Edison, nor Weinstock, nor Marshall Field, nor Peabody, nor is it the heads of our big corporations of to-day. Such men are money-makers, creators of capital, builders of large enterprise, but their aim at profits while genuine is only incidental to their main purpose of doing, of becoming better able to achieve, of rendering service. When the beginner in business approaches an experienced friend for advice, he is told to work as hard and as faithfully as possible, to study his business, to seek to improve himself--in other words, to concentrate his whole strength on the giving of service, for his wages or salary will take care of itself. The experienced man knows well that this holds just as truly for all ranks in the business world and that the higher one ascends in responsibilities, the more he must give and do; indeed the leading positions in the business world are occupied by men who produce tremendously, whose value to themselves and others lies in what they accomplish, and this--not what they get--is the criterion of success among men of experience, among those in charge of enterprises, who are on the lookout for leaders of this type. Here we have the remedy for the tendency backed by natural selfishness towards undue devotion to gain: such narrowness simply does not work, it is crowded out by competition with the superior efficiency of broader motives. And while, here and there, the type continues to exist, its development in new cases is discouraged by every instance illustrating the relative success--in all senses--attained by those who make it their chief aim to produce, to render service. Just as the physician bestows his first thought upon his patient, these superior business men give first consideration to their profession, for so they regard it, and this tends to assure their success, just as it does that of the physician, and to become the standardized ideal for lesser men. It is indeed clearly self-evident that on many accounts the man in business must give attention primarily to the service he is trying to render. The clerk in the store must devote himself mainly to his customers, to his merchandise, to his other duties, not to his salary. And so with the department manager, and so with the general manager, whether of a store, a railroad company, or other activity; the immediate daily problem for all lies in the rendering of a service, the producing of a commodity, or the doing of the thing for which the business enterprise exists. This concentration upon output is furthermore required by competition which whips the producer into line and often makes it a matter of business life and death that one should make progress in method and quality. That his shoes wear is a matter of pride to the shoe manufacturer. "Blank tires are good tires" is not to be regarded as merely a boastful advertisement. If it was it would not pay the advertising cost. Money-making as an aim thus becomes subsidiary to the characteristic activities of the enterprise, it is in a sense a by-product. But the money-making aim is there, although perhaps in the background. It is furnishing the power under which the enterprise operates. More than that, it is the gauge indicating the prosperity or lack of prosperity of the enterprise, its progress, its fitting in with the needs of life. In short, the money-making aim spurs on the business enterprise, just as the weekly or monthly pay spurs on the humble worker; but in each case the main attention is given, and necessarily given, to the work to be performed. Let us now consider some of the implications of this concentration on rendering service. The directed effort of each man to the production of the utility characteristic of his business, tends to result in his learning to conduct that specific activity with a high degree of skill, and with an increasingly valuable fund of experience. So highly specialized does he become that it will be quite impossible for any one hitherto a stranger in that sphere to conduct it as well. Therefore in an age of coördinated effort the more a man has of accumulated knowledge and facility in handling a certain kind of affair and the better fitted, therefore, he is to continue and to progress along that line, the less relatively he is able to undertake the affairs of some other kind with which he is not familiar. We commonly feel free to criticize a railroad, a newspaper, a large business house, perhaps a university, with which we may have casual contact, but the fact is there are few competent critics outside of the ranks of the enterprise itself or of those carrying on activities that are directly similar. In a word, through this focusing of attention, a man will come to be exhaustively familiar with his own occupation, while possessing a merely superficial acquaintance with the theories, customs, and responsibilities of those of others. The wise man therefore argues the necessity of confining himself to the field in which he has become expert and will avoid taking chances in some outside direction wherein he is not familiar. One of the most common and disheartening experiences in the money-making and money-saving of the thrifty is that after having both worked hard and practiced self-restraint, the resultant savings are often put into some enterprise that turns out badly, and the whole effort is thus thrown away. Generally this happens because he has violated the rule we have just stated; he has ventured his savings in unfamiliar fields, ignorantly he has rushed in where the better informed would have feared to tread. Such so-called investments are in reality highly speculative. They involve risks which are unknown and altogether to be avoided. Now no one speculates in his own legitimate business, for there he is acquainted with the hazards which, he has learned, require the best of knowledge and the greatest of prudence. It is the allurement of the unknown that tempts him to seek unearned profits through speculation in outside regions where, in the nature of the case, the chances must be against him. Now speculation has its proper place in business: there are certain inherent hazards that must be undertaken, mainly to be found in the risk of the seasons in the production of crops, and the risk of the future in undeveloped enterprise. These risks must be carried by somebody, but clearly they constitute an activity for specialists who study conditions, becoming relatively expert in determining how and when to act. These specialists are drawn principally from two classes: First, the professional speculator, who knows his markets and makes a business of buying and selling future risks; such men perform a great service in handling our seasonal crops and in other directions, and are entitled to a reasonable profit. Second, the man of wealth who may use part of his surplus in the risks of undeveloped enterprise; although it is probable that in the end his losses and expenses will outweigh his gains, he can afford to take chances of such experiments in the hope that success will follow in some of them; furthermore, he can regard the outlay as a contribution to the advancement of mankind. For the rest of us, however, outside of these two classes, it is our business to keep away from speculation whether in oil wells, flying machines, in new factories, or in real estate: in the long run, we cannot get something for nothing and money-making efforts that are ethically valid thus coincide with those that are selfishly desirable, namely, the efforts to obtain the payment, the profit, that arises from a valuable service performed or commodity produced. Too often men who follow this rule in their regular occupation depart from it in the use of their saved surplus funds. They feel that their savings ought to make them money, as they say. Now savings can be employed in one of three ways: They may be used as capital by the owner; or they may be put out in investments--that is, used or utilized as capital in the business of another; or, third, they may be wasted in gambling or speculation. As a matter of course, the employment as additional capital in one's own enterprise is generally the most desirable wherever applicable, but this is a use of limited scope, relating to but few of the people engaged in productive activity who earn and save a surplus. The main resource for such accumulations is in safe investments, in the bonds and securities of our own country and those of well established enterprises. Not many among our embryo capitalists possess the experience or skill requisite for the safe and proper investment of their funds, they must rely upon the advice of others. But whom can they trust? The demand for investment advice has not failed to call forth a supply of advisers, and elaborate are the schemes designed to lure the unwary. But, generally speaking, the man who falls into the clutches of these birds of prey has himself to blame, for the reason that the temptations they offer are appeals to the illegitimate desire to get something for nothing or to the foolish notion that one can get-rich-quick in some way whispered about by a stranger, and out of sheer benevolence. The fact is that the wise man will dismiss all thought of making money out of his investments; he will seek only the moderate return which alone is consistent with safety; and with this policy, will turn a deaf ear to any so-called opportunity which promises big profits. We can summarize the matter by saying that concentration upon one's business and service implies that one should not attempt to make money elsewhere. This concentration on one's affairs therefore grows into a sort of practical system in which each member of the business community is looking after some function or activity to the exclusion of other things. And so the world's work is carried on to the best advantage, each function being filled by those particular men who have become relatively expert therein. From this system arises a business habit or method not always understood by the young and inexperienced, by the non-business person. We refer to the practice in trade of leaving to each individual, to each enterprise, to each organization, the responsibility for looking out for its own interests when having dealings with others. _Caveat emptor_--let the buyer beware--expresses an extreme development of this, and in its common signification, that each side is to be permitted and expected to take any advantage of the other side that it may be able to secure, it describes a state of warfare rather than of business. In buying and selling, in aiming to obtain the most favorable terms for each line of his activity, in meeting conditions of competition, in all these relations, the business man is endeavoring to better himself and may doubtless be tempted here and there to forget the interests of the other party to the transaction. But to yield to such temptation would merely be to abuse a principle which on the whole is sanctioned by the requirements of economic efficiency. This principle is that the nearest approximation to effective justice in business transactions is reached when on each side the parties devote themselves to their respective interests and points of view. If _A_ has a house for sale and _B_ is a prospective buyer, the essence of the possible transaction between the two is that _A_'s idea of the value of the property is different from _B_'s idea of that value; or at any rate that _A_ sees less value in it to him than does _B_ to _B_. This is of course typical of all business transactions--the seller desires the money above the commodity, the buyer prefers the commodity to the money. The seller and the buyer each dwells naturally upon his own idea of value. This is altogether desirable, not to say indispensable, and is characteristic of every relation of business, wherever two men buy and sell, employ one another, or have other dealings together. The situation is somewhat the same as in a law suit where the duty of the attorney for the plaintiff is to make every point that fairly can be made for the plaintiff, while the attorney on the other side must correspondingly make every point that can properly be made for the defendant. Each side is supposed to look after the interest of that side. Similarly, in a business organization, say a railroad, when some new project is under consideration it will be submitted to the engineer, to the chemist, to the attorney, to the practical transportation man, and in each of these departments it is expected that the wisdom born of experience in the particular function will be brought to bear. The engineer speaks with authority on engineering questions, the lawyer on legal questions, the transportation man on the practical working out of the project; and, normally, the criticisms and contribution of each are confined to his own function. In short, the régime of economic self-interest results in leaving to each the responsibility which he is most competent to assume, that in which he is most expert, which thereby receives the best attention that generally speaking it could have. Nor are correctives lacking for the abuses which may enter in through an overdevelopment of self-interest. _Caveat emptor_ becomes discredited as an unmodified basis of human action. The golden rule is increasingly seen to constitute a foundation demanded by economics as well as by ethics. The trend to-day is away from indifference to the interests of those with whom we deal. The successful merchant will not attempt to make a profit through sales which he knows would not benefit the purchaser, for that would not measure up to the test, Will it pay? The value of a business depends largely on its goodwill and too much money and effort are spent in advertising and other means of building up a clientèle to make men conceive it to be to their interest to deal sharply with their customers. In the efforts of scientists to seek out and establish new methods, new principles, the success of an experiment is to be determined, I suppose, by the test, Will it work? Does it yield effective results? Similarly, in economics, the science of mankind in its production, distribution and consumption of material things, the test of utility and efficiency is, Will it pay? that being the standard of workableness in the application of that science. We have attempted, therefore, in this analysis of money-making to apply this test, because the practice or habit or influence that pays is that which is in accord so far with the principles underlying this branch of social science. We have seen, according to this standard, that it is the duty of all to adopt money-making as a conscious aim; that the money is to be economically used, the final object being net profit, that balance or remainder which is carried forward as created capital. Inability to increase a fixed income does not absolve one from the duty of doing one's part in the creation of capital through thrift and saving. The business enterprise, moreover, is required by economic necessity to aim at money-making--meaning, however, profits in the long run rather than immediate or temporary gains. Such permanent returns can only be sought through adherence to ethical principles and although this aim at profits becomes the power plant which drives the business machine, the latter gives its energies and attention more directly to the rendering of service. Concentration upon service tends to make a man relatively efficient therein, but argues a relative unfamiliarity with the field of others, from which we infer the advisability of confining one's activity to the thing he has learned to do best. As an example of this, he should avoid placing his surplus capital or savings in outside enterprises where they will partake of risks that are unknown to him, nor should he attempt to employ his savings at all with the purpose of making money, unless, indeed, he can use them as capital in his own business. The focusing of attention on one's own function also implies and explains the custom of placing upon participants in a business transaction the responsibility each for his own side, a custom which is economically justified but which must be kept within proper limits, as is fully recognized by the business men who are successful and who therefore become models or examples for the guidance of other men, influencing the latter towards high ideals. We have found, on the other hand, that apart from men in charge of business enterprise, the burden of providing thus for man's welfare and development is assumed by very few, the vast majority, whether in professional or business employment, treating it with neglect and contempt. They think, perhaps, that they are aiming at higher things, or that their efforts would not sufficiently count, or they do not give the matter any sturdy thought; while the underlying motive, often unconscious, is simply an unwillingness to practice self-restraint. It is self-indulgence, we must conclude, that is to be overcome if we are to meet this responsibility in a manly way, visualizing it with sufficient clearness to see that thrift, the creation of capital for one's self and for the race, comes into no necessary conflict with any other proper aim in life, but on the contrary constitutes a fundamental duty to society, to the state, to one's family, to his own future, to his self-respect. 
12004	----	ESSAYS ON SOME UNSETTLED QUESTIONS OF POLITICAL ECONOMY by JOHN STUART MILL 1844 PREFACE. Of these Essays, which were written in 1829 and 1830, the fifth alone has been previously printed. The other four have hitherto remained in manuscript, because, during the temporary suspension of public interest in the species of discussion to which they belong, there was no inducement to their publication. They are now published (with a few merely verbal alterations) under the impression, that the controversies excited by Colonel Torrens' _Budget_ have again called the attention of political economists to the discussions of the abstract science: and from the additional consideration, that the first paper relates expressly to the point upon which the question at issue between Colonel Torrens and his antagonists has principally turned. From that paper it will be seen that opinions identical in principle with those promulgated by Colonel Torrens (there would probably be considerable difference as to the extent of their practical application) have been held by the writer for more than fifteen years: although he cannot claim to himself the original conception, but only the elaboration, of the fundamental doctrine of the Essay. A prejudice appears to exist in many quarters against the theory in question, on the supposition of its being opposed to one of the most valuable results of modern political philosophy, the doctrine of Freedom of Trade between nation and nation. The opinions now laid before the reader are presented as corollaries necessarily following from the principles upon which Free Trade itself rests. The writer has also been careful to point out, that from these opinions no justification can be derived for any _protecting_ duty, or other preference given to domestic over foreign industry. But in regard to those duties on foreign commodities which do not operate as protection, but are maintained solely for revenue, and which do not touch either the necessaries of life or the materials and instruments of production, it is his opinion that any relaxation of such duties, beyond what may be required by the interest of the revenue itself, should in general be made contingent upon the adoption of some corresponding degree of freedom of trade with this country, by the nation from which the commodities are imported. CONTENTS. ESSAY I. Of the Laws of Interchange between Nations; and the Distribution of the Gains of Commerce among the Countries of the Commercial World ESSAY II. Of the Influence of Consumption upon Production ESSAY III. On the Words Productive and Unproductive ESSAY IV. On Profits, and Interest ESSAY V. On the Definition of Political Economy; and on the Method of Investigation proper to it ESSAY I. OF THE LAWS OF INTERCHANGE BETWEEN NATIONS; AND THE DISTRIBUTION OF THE GAINS OF COMMERCE AMONG THE COUNTRIES OF THE COMMERCIAL WORLD. Of the truths with which political economy has been enriched by Mr. Ricardo, none has contributed more to give to that branch of knowledge the comparatively precise and scientific character which it at present bears, than the more accurate analysis which he performed of the nature of the advantage which nations derive from a mutual interchange of their productions. Previously to his time, the benefits of foreign trade were deemed, even by the most philosophical enquirers, to consist in affording a vent for surplus produce, or in enabling a portion of the national capital to replace itself with a profit. The futility of the theory implied in these and similar phrases, was an obvious consequence from the speculations of writers even anterior to Mr. Ricardo. But it was he who first, in the chapter on Foreign Trade, of his immortal _Principles of Political Economy and Taxation_, substituted for the former vague and unscientific, if not positively false, conceptions with regard to the advantage of trade, a philosophical exposition which explains, with strict precision, the nature of that advantage, and affords an accurate measure of its amount. He shewed, that the advantage of an interchange of commodities between nations consists simply and solely in this, that it enables each to obtain, with a given amount of labour and capital, a greater quantity of all commodities taken together. This it accomplishes by enabling each, with a quantity of one commodity which has cost it so much labour and capital, to purchase a quantity of another commodity which, if produced at home, would have required labour and capital to a greater amount. To render the importation of an article more advantageous than its production, it is not necessary that the foreign country should be able to produce it with less labour and capital than ourselves. We may even have a positive advantage in its production: but, if we are so far favoured by circumstances as to have a still greater positive advantage in the production of some other article which is in demand in the foreign country, we may be able to obtain a greater return to our labour and capital by employing none of it in producing the article in which our advantage is least, but devoting it all to the production of that in which our advantage is greatest, and giving this to the foreign country in exchange for the other. It is not a difference in the _absolute_ cost of production, which determines the interchange, but a difference in the _comparative_ cost. It may be to our advantage to procure iron from Sweden in exchange for cottons, even although the mines of England as well as her manufactories should be more productive than those of Sweden; for if we have an advantage of one-half in cottons, and only an advantage of a quarter in iron, and could sell our cottons to Sweden at the price which Sweden must pay for them if she produced them herself, we should obtain our iron with an advantage of one-half, as well as our cottons. We may often, by trading with foreigners, obtain their commodities at a smaller expense of labour and capital than they cost to the foreigners themselves. The bargain is still advantageous to the foreigner, because the commodity which he receives in exchange, though it has cost us less, would have cost him more. As often as a country possesses two commodities, one of which it can produce with less labour, comparatively to what it would cost in a foreign country, than the other; so often it is the interest of the country to export the first mentioned commodity and to import the second; even though it might be able to produce both the one and the other at a less expense of labour than the foreign country can produce them, but not less in the same degree; or might be unable to produce either except at a greater expense, but not greater in the same degree. On the contrary, if it produces both commodities with greater facility, or both with greater difficulty, and greater in exactly the same degree, there will be no motive to interchange. "If the cloth and the corn, each of which required 100 days' labour in Poland, required each 150 days' labour in England; it would follow, that the cloth of 150 days' labour in England, if sent to Poland, would be equal to the cloth of 100 days' labour in Poland: if exchanged for corn, therefore, it would exchange for the corn of only 100 days' labour. But the corn of 100 days' labour in Poland, was supposed to be the same quantity with that of 150 days' labour in England. With 150 days' labour in cloth, therefore, England would only get as much corn in Poland as she could raise with 150 days' labour at home; and she would, in importing it, have the cost of carriage besides. In these circumstances no exchange would take place. "If, on the other hand, while the cloth produced with 100 days' labour in Poland was produced with 150 days' labour in England, the corn which was produced in Poland with 100 days' labour could not be produced in England with less than 200 days' labour; an adequate motive to exchange would immediately arise. With a quantity of cloth which England produced with 150 days' labour, she would be able to purchase as much corn in Poland as was there produced with 100 days' labour; but the quantity, which was there produced with 100 days' labour, would be as great as the quantity produced in England with 200 days' labour. "The power of Poland would be reciprocal. With a quantity of corn which cost her 100 days' labour, equal to the quantity produced in England by 200 days' labour, she could in the supposed case purchase in England the produce of 200 days' labour in cloth." But "the produce of 150 days' labour in England in the article of cloth would be equal to the produce of 100 days' labour in Poland [1]." The remainder of what Mr. Ricardo has done for the philosophical exposition of the principles of foreign trade, is to shew, that the truth of the propositions now recapitulated is not affected by the introduction of money as a medium of exchange; the precious metals always tending to distribute themselves in such a manner throughout the commercial world, that every country shall import all that it would have imported, and export all that it would have exported, if exchanges had taken place, as in the example above supposed, by barter. To this branch of the subject we shall, in the sequel of this essay, return. At present it will be more convenient that we should continue to suppose, that exchanges take place by the direct trucking of one commodity against another. It is established, that the advantage which two countries derive from trading with each other, results from the more advantageous employment which thence arises, of the labour and capital--for shortness let us say the labour--of both jointly. The circumstances are such, that if each country confines itself to the production of one commodity, there is a greater total return to the labour of both together; and this increase of produce forms the whole of what the two countries taken together gain by the trade. It is the purpose of the present essay to inquire, in what proportion the increase of produce, arising from the saving of labour, is divided between the two countries. This question was not entered into by Mr. Ricardo, whose attention was engrossed by far more important questions, and who, having a science to create, had not time, or room, to occupy himself with much more than the leading principles. When he had done enough to enable any one who came after him, and who took the necessary pains, to do all the rest, he was satisfied. He very rarely followed out the principles of the science into the ramifications of their consequences. But we believe that to no one, who has thoroughly entered into the spirit of his discoveries, will even the minutiae of the science offer any difficulty but that which is constituted by the necessity of patience and circumspection in tracing principles to their results. Mr. Ricardo, while intending to go no further into the question of the advantage of foreign trade than to show what it consisted of, and under what circumstances it arose, unguardedly expressed himself as if each of the two countries making the exchange separately gained the whole of the difference between the comparative costs of the two commodities in one country and in the other. But, the whole gain of both countries together, consisting in the saving of labour; and the saving of labour being exactly equal to the difference between the costs, in the two countries, of the one commodity as compared with the other; the two countries taken together gain no more than this difference: and if either country gains the whole of it, the other country derives no advantage from the trade. Suppose, for example, that 10 yards of broad cloth cost in England as much labour as 15 yards of linen, and in Germany as much as 20. If England sends 10 yards of broad cloth to Germany, and is able to exchange them for linen according to the German cost of production, she will get 20 yards of linen, with a quantity of labour with which she could not have produced more than 15; and will gain, therefore, 5 yards on every 15, or 33-1/3 per cent. But in this case Germany would obtain only 10 yards of cloth for 20 of linen. Now, 10 yards of cloth cost exactly the same quantity of labour in Germany as 20 of linen; Germany, therefore, derives no advantage from the trade, more than she would possess if it did not exist. So, on the other hand, if Germany sends 15 yards of linen to England, and finding the relative value of the two articles in that country determined by the English costs of production, is enabled to purchase with 35 yards of linen 10 yards of cloth; Germany now gains 5 yards, just as England did before,--for with 15 yards of linen she purchases 10 yards of cloth, when to produce these 10 yards she must have employed as much labour as would have enabled her to produce 20 yards of linen. But in this case England would gain nothing: she would only obtain, for her 10 yards of cloth, 15 yards of linen, which is exactly the comparative cost at which she could have produced them. This, which was not an error, but a mere oversight of Mr. Ricardo, arising from his having left the question of the division of the advantage entirely unnoticed, was first corrected in the third edition of Mr. Mill's _Elements of Political Economy_. It can hardly, however, be said that Mr. Mill has prosecuted the inquiry any further; which, indeed, would have been quite as inconsistent with the nature of his plan as of Mr. Ricardo's. 1. When the trade is established between the two countries, the two commodities will exchange for each other at the same rate of interchange in both countries--bating the cost of carriage, of which, for the present, it will be more convenient to omit the consideration. Supposing, therefore, for the sake of argument, that the carriage of the commodities from one country to another could be effected without labour and without cost, no sooner would the trade be opened than, it is self-evident, the value of the two commodities, estimated in each other, would come to a level in both countries. If we knew what this level would be, we should know in what proportion the two countries would share the advantage of the trade. When each country produced both commodities for itself, 10 yards of broad cloth exchanged for 15 yards of linen in England, and for 20 in Germany. They will now exchange for the same number of yards of linen in both. For what number? If for 15 yards, England will be just as she was, and Germany will gain all. If for 20 yards, Germany will be as before, and England will derive the whole of the benefit. If for any number intermediate between 15 and 20, the advantage will be shared between the two countries. If, for example, 10 yards of cloth exchange for 18 of linen, England will gain an advantage of 3 yards on every 15, Germany will save 2 out of every 20. The problem is, what are the causes which determine the proportion in which the cloth of England and the linen of Germany will exchange for each other? This, therefore, is a question concerning exchangeable value. There must be something which determines how much of one commodity another commodity will purchase; and there is no reason to suppose that the law of exchangeable value is more difficult of ascertainment in this case than in other cases. The law, however, cannot be precisely the same as in the common cases. When two articles are produced in the immediate vicinity of one another, so that, without expatriating himself, or moving to a distance, a capitalist has the choice of producing one or the other, the quantities of the two articles which will exchange for each other will be, on the average, those which are produced by equal quantities of labour. But this cannot be applied to the case where the two articles are produced in two different countries; because men do not usually leave their country, or even send their capital abroad, for the sake of those small differences of profit which are sufficient to determine their choice of a business, or of an investment, in their own country and neighbourhood. The principle, that value is proportional to cost of production, being consequently inapplicable, we must revert to a principle anterior to that of cost of production, and from which this last flows as a consequence,--namely, the principle of demand and supply. In order to apply this principle, with any advantage, to the solution of the question which now occupies us, the principle itself, and the idea attached to the term demand, must be conceived with a precision, which the loose manner in which the words are used generally prevents. It is well known that the quantity of any commodity which can be disposed of, varies with the price. The higher the price, the fewer will be the purchasers, and the smaller the quantity sold. The lower the price, the greater will in general be the number of purchasers, and the greater the quantity disposed of. This is true of almost all commodities whatever: though of some commodities, to diminish the consumption in any given degree would require a much greater rise of price than of others. Whatever be the commodity--the supply in any market being given, there is some price at which the whole of the supply exactly will find purchasers, and no more. That, whatever it be, is the price at which, by the effect of competition, the commodity will be sold. If the price be higher, the whole of the supply will not be disposed of, and the sellers, by their competition, will bring down the price. If the price be lower, there will be found purchasers for a larger supply, and the competition of these purchasers will raise the price. This, then, is what we mean, when we say that price, or exchangeable value, depends on demand and supply. We should express the principle more accurately, if we were to say, the price so regulates itself that the demand shall be exactly sufficient to carry off the supply. Let us now apply the principle of demand and supply, thus understood, to the interchange of broadcloth and linen between England and Germany. As exchangeable value in this case, as in every other, is proverbially fluctuating, it does not matter what we suppose it to be when we begin; we shall soon see whether there be any fixed point about which it oscillates--which it has a tendency always to approach to, and to remain at. Let us suppose, then, that by the effect of what Adam Smith calls the higgling of the market, 10 yards of cloth, in both countries, exchange for 17 yards of linen. The demand for a commodity, that is, the quantity of it which can find a purchaser, varies, as we have before remarked, according to the price. In Germany, the price of 10 yards of cloth is now 17 yards of linen; or whatever quantity of money is equivalent in Germany to 17 yards of linen. Now, that being the price, there is some particular number of yards of cloth, which will be in demand, or will find purchasers, at that price. There is some given quantity of cloth, more than which could not be disposed of at that price,--less than which, at that price, would not fully satisfy the demand. Let us suppose this quantity to be, 1000 times 10 yards. Let us now turn our attention to England. There, the price of 17 yards of linen is 10 yards of cloth, or whatever quantity of money is equivalent in England to 10 yards of cloth. There is some particular number of yards of linen, which, at that price, will exactly satisfy the demand, and no more. Let us suppose that this number is 1000 times 17 yards. As 17 yards of linen are to 30 yards of cloth, so are 1000 times 17 yards to 1000 times 10 yards. At the existing exchangeable value, the linen which England requires, will exactly pay for the quantity of cloth which, on the same terms of interchange, Germany requires. The demand on each side is precisely sufficient to carry off the supply on the other. The conditions required by the principle of demand and supply are fulfilled, and the two commodities will continue to be interchanged, as we supposed them to be, in the ratio of 17 yards of linen for 10 yards of cloth. But our supposition might have been different. Suppose that, at the assumed rate of interchange, England had been disposed to consume no greater quantity of linen than 800 times 17 yards; it is evident that, at the rate supposed, this would not have sufficed to pay for the 1000 times 10 yards of cloth, which we have supposed Germany to require at the assumed value. Germany would be able to procure no more than 800 times 10 yards, at that price. To procure the remaining 200, which she would have no means of doing but by bidding higher for them, she would offer more than 17 yards of linen in exchange for 10 yards of cloth; let us suppose her to offer 18. At that price, perhaps, England would be inclined to purchase a greater quantity of linen. She could consume, possibly, at that price, 900 times 18 yards. On the other hand, cloth having risen in price, the demand of Germany for it would, probably, have diminished. If, instead of 1000 times 10 yards, she is now contented with 900 times ten yards, these will exactly pay for the 900 times 18 yards of linen which England is willing to take at the altered price: the demand on each side will again exactly suffice to take off the corresponding supply; and 10 yards for 18 will be the rate at which, in both countries, cloth will exchange for linen. The converse of all this would have happened if instead of 800 times 17 yards, we had supposed that England, at the rate of 10 for 17, would have taken 1200 times 17 yards of linen. In this case, it is England whose demand is not fully supplied; it is England who, by bidding for more linen, will alter the rate of interchange to her own disadvantage; and 10 yards of cloth will fall, in both countries, below the value of 17 yards of linen. By this fall of cloth, or what is the same thing, this rise of linen, the demand of Germany for cloth will increase, and the demand of England for linen will diminish, till the rate of interchange has so adjusted itself that the cloth and the linen will exactly pay for another; and when once this point is attained, values will remain as they are. It may be considered, therefore, as established, that when two countries trade together in two commodities, the exchangeable value of these commodities relatively to each other will adjust itself to the inclinations and circumstances of the consumers on both sides, in such manner that the quantities required by each country, of the article which it imports from its neighbour, shall be exactly sufficient to pay for one another. As the inclinations and circumstances of consumers cannot be reduced to any rule, so neither can the proportions in which the two commodities will be interchanged. We know that the limits within which the variation is confined are the ratio between their costs of production in the one country, and the ratio between their costs of production in the other. Ten yards of cloth cannot exchange for more than 20 yards of linen, nor for less than 15. But they may exchange for any intermediate number. The ratios, therefore, in which the advantage of the trade may be divided between the two nations, are various. The circumstances on which the proportionate share of each country more remotely depends, admit only of a very general indication. It is even possible to conceive an extreme case, in which the whole of the advantage resulting from the interchange would be reaped by one party, the other country gaining nothing at all. There is no absurdity in the hypothesis, that of some given commodity a certain quantity is all that is wanted at any price, and that when that quantity is obtained, no fall in the exchangeable value would induce other consumers to come forward, or those who are already supplied to take more. Let us suppose that this is the case in Germany with cloth. Before her trade with England commenced, when 10 yards of cloth cost her as much labour as 20 yards of linen, she nevertheless consumed as much cloth as she wanted under any circumstances, and if she could obtain it at the rate of 10 yards of cloth for 15 of linen, she would not consume more. Let this fixed quantity be 1000 times 10 yards. At the rate, however, of 10 for 20, England would want more linen than would be equivalent to this quantity of cloth. She would consequently offer a higher value for linen; or, what is the same thing, she would offer her cloth at a cheaper rate. But as by no lowering of the value could she prevail on Germany to take a greater quantity of cloth, there would be no limit to the rise of linen, or fall of cloth, until the demand of England for linen was reduced by the rise of its value, to the quantity which one thousand times ten yards of cloth would purchase. It might be, that to produce this diminution of the demand, a less fall would not suffice, than one which would make 10 yards of cloth exchange for 15 of linen. Germany would then gain the whole of the advantage, and England would be exactly as she was before the trade commenced. It would be for the interest, however, of Germany herself, to keep her linen a little below the value at which it could be produced in England, in order to keep herself from being supplanted by the home producer. England, therefore, would always benefit in some degree by the existence of the trade, though it might be in a very trifling one. But in general there will not be this extreme inequality in the degree in which the demand in the two countries varies with variations in the price. The advantage will probably be divided equally, oftener than in any one unequal ratio that can be named; though the division will be much oftener, on the whole, unequal than equal. 2. We shall now examine whether the same law of interchange, which we have shown to apply upon the supposition of barter, holds good after the introduction of money. Mr. Ricardo found that his more general proposition stood this test; and as the proposition which we have just demonstrated is only a further developement of his principle, we shall probably find that it suffers a little, by a mere change in the mode (for it is no more) in which one commodity is exchanged against another. We may at first make whatever supposition we will with respect to the value of money. Let us suppose, therefore, that before the opening of the trade, the price of cloth is the same in both countries, namely, six shillings per yard [2]. As 10 yards of cloth were supposed to exchange in England for 5 yards of linen, in Germany for 20, we must suppose that linen is sold in England at four shillings per yard, in Germany at three. Cost of carriage and importer's profit are left as before, out of consideration. In this state of prices, cloth, it is evident, cannot yet be exported from England into Germany. But linen can be imported from Germany into England. It will be so, and, in the first instance, the linen will be paid for in money. The efflux of money from England, and its influx into Germany, will raise money prices in the latter country, and lower them in the former. Linen will rise in Germany above three shillings per yard, and cloth above six shillings. Linen in England being imported from Germany, will (since cost of carriage is not reckoned) sink to the same price as in that country, while cloth will fall below six shillings. As soon as the price of cloth is lower in England than in Germany, it will begin to be exported, and the price of cloth in Germany will fall to what it is in England. As long As the cloth exported does not suffice to pay for the linen imported, money will continue to flow from England into Germany, and prices generally will continue to fall in England, and rise in Germany. By the fall, however, of cloth in England, cloth will fall in Germany also, and the demand for it will increase. By the rise of linen in Germany, linen must rise in England also, and the demand for it will diminish. Although the increased exportation of cloth takes place at a lower price, and the diminished importation of linen at a higher, yet the total money value of the exportation would probably increase, that of the importation diminish. As cloth fell in price and linen rose, there would be some particular price of both articles at-which the cloth exported, and the linen imported, would exactly pay for each other. At this point prices would remain, because money would then cease to move out of England into Germany. What this point might be, would entirely depend upon the circumstances and inclinations of the purchasers on both sides. If the fall of cloth did not much increase the demand for it in Germany, and the rise of linen did not diminish very rapidly the demand for it in England, much money must pass before the equilibrium is restored; cloth would fall very much, and linen would rise, until England, perhaps, had to pay nearly as much for it as when she produced it for herself. But if, on the contrary, the fall of cloth caused a very rapid increase of the demand for it in Germany, and the rise of linen in Germany reduced very rapidly the demand in England from what it was under the influence of the first cheapness produced by the opening of the trade; the cloth would very soon suffice to pay for the linen, little money would pass between the two countries, and England would derive a large portion of the benefit of the trade. We have thus arrived at precisely the same conclusion, in supposing the employment of money, which we found to hold under the supposition of barter. In what shape the benefit accrues to the two nations from the trade, is clear enough. Germany, before the commencement of the trade, paid six shillings per yard for broad-cloth. She now obtains it at a lower price. This, however, is not the whole of her advantage. As the money prices of all her other commodities have risen, the money incomes of all her producers have increased. This is no advantage to them in buying from each other; because the price of what they buy has risen in the same ratio with their means of paying for it: but it is an advantage to them in buying any thing which has not risen; and still more, any thing which has fallen. They therefore benefit as consumers of cloth, not merely to the extent to which cloth has fallen, but also to the extent to which other prices have risen. Suppose that this is one-tenth. The same proportion of their money incomes as before, will suffice to supply their other wants, and the remainder, being increased one-tenth in amount, will enable them to purchase one-tenth more cloth than before, even though cloth had not fallen. But it has fallen: so that they are doubly gainers. If they do not choose to increase their consumption of cloth, this does not prevent them from being gainers. They purchase the same quantity with less money, and have more to expend upon their other wants. In England, on the contrary, general money-prices have fallen. Linen, however, has fallen more than the rest; having been lowered in price, by importation from a country where it was cheaper, whereas the others have fallen only from the consequent efflux of money. Notwithstanding, therefore, the general fall of money-prices, the English producers will be exactly as they were in all other respects, while they will gain as purchasers of linen. The greater the efflux of money required to restore the equilibrium, the greater will be the gain of Germany; both by the fall of cloth, and by the rise of her general prices. The less the efflux of money requisite, the greater will be the gain of England; because the price of linen will continue lower, and her general prices will not be reduced so much. It must not, however, be imagined that high money-prices are a good, and low money-prices an evil, in themselves. But the higher the general money-prices in any country, the greater will be that country's means of purchasing those commodities which, being imported from abroad, are independent of the causes which keep prices high at home. 3. We have hitherto supposed the carriage to be performed without labour or expense. If we abandon this supposition, we must correct the statement of the case in a slight degree. The prices of the two articles will no longer, when the trade is opened, be the same in both countries, nor will the articles exchange for one another at the same rate in both. Ten yards of cloth will purchase in Germany a quantity of linen greater than in England by a per-centage equal to the entire cost of conveyance both of the cloth to Germany and of the linen to England. The money-price of linen will be higher in England than in Germany, by the cost of carriage of the linen. The money-price of cloth will be higher in Germany than in England, by the cost of carriage of the cloth. The expense of the carriage is evidently a deduction _pro tanto_ from the saving of labour produced by the establishment of the trade. The two countries together, therefore, have their gains by the trade diminished, by the amount of the cost of carriage of both commodities. But here the question arises, which of the two countries bears this deduction, or in what proportion it is divided between them. At the first inspection it would appear that each country bears its own cost of carriage, that is, that each country pays the carriage of the commodity which it imports. Upon this supposition, each country would gain whatever share of the joint saving of labour would otherwise fall to its lot, _minus_ the cost of bringing from the other country the commodity which it imports. This solution is rendered plausible by the circumstance just now mentioned, that the price of the commodity will be higher in the country which imports it, than in the country which exports it, by the amount of the cost of carriage. If linen is sold in England at a higher price than in Germany, by a per-centage equal to the cost of carriage of the linen, it appears obvious that England pays for the carriage of the linen, and Germany, by parity of reason, for that of the cloth. But if we apply to these questions the principles already explained, we shall see that this is not by any means a universal law: the fact may correspond with it, or it may not. For suppose that the prices have adjusted themselves, no matter how, and that the imports and exports balance one another, each commodity, of course, being dearer by the cost of carriage, in the country which imports than in that which exports it: and suppose now that the cost of carriage, both of the one and of the other, were suddenly and miraculously annihilated, and that the commodities could pass from country to country without expense. If each country bore its own cost of carriage before, each country will save its own cost of carriage now. Cloth, in Germany, will in that case fall exactly to what it is in England; linen in England, to what it is in Germany. Now this fall of price, supposing it to happen, will probably affect the demand on both sides; and it will either affect it alike in both countries, or it will affect it unequally. It will affect it alike, if the fall of price does not affect the demand at all, or if it affects it equally in both countries. If either of these results should take place, the cloth and the linen would continue to balance each other as before: no money would pass from one country to the other; prices in both would continue at the point to which they had fallen, and each country would exactly save the cost of carriage on the commodity which it imports from the other. But the result might be, that the fall of price might not have an effect exactly equal, on the demand in the two countries. Suppose, for instance, that the fall of cloth in Germany owing to the saving of the cost of carriage, did not increase the demand for cloth in Germany; but that the fall of linen in England from a like cause, did increase the demand for linen in England. The linen imported would be more than could be paid for by the cloth exported: the difference must be paid in money: the change in the distribution of the precious metals between the two countries would lower the price of cloth in England, (and consequently in Germany), while it would raise the price of linen in Germany, (and consequently in England). Germany, therefore, by the annihilation of cost of carriage, would save in price more than the cost of carriage of the cloth; England would save less in price than the cost of carriage of the linen. But if by the miraculous annihilation of cost of carriage, England would not _save_ the whole of the carriage of her imports, it follows that England did not previously _pay_ the whole of that cost of carriage. Thus, the division of the cost of trade, and the division of the advantage of trade, are governed by precisely the same principles; and the only general proposition which can be affirmed respecting the cost is, that it is _pro tanto_ a deduction from the advantage. It cannot even be maintained that the cost is shared in the same proportion as the advantage is; because the increase of the demand for a commodity as its price falls, is not governed by any fixed law. Suppose, for instance, that the advantage happened to be divided equally: this must be because the greater cheapness arising from the establishment of the trade, either did not affect the demand at all, or affected it in an equal proportion on both sides. Now, because such is the effect of the degree of increased cheapness resulting from importation burthened with cost of carriage, it would not follow that the still greater degree of cheapness, produced by the additional saving of the cost of carriage itself, would also affect the demand of both countries in precisely an equal degree. But we cannot be said to bear an expense, which, if saved, would be saved to somebody else, and not to us. Two countries may have equal shares of the clear benefit of the trade, while, if the cost of carriage were saved, they would divide that saving unequally. If so, they divide the gross gain in one unequal ratio, the cost in another unequal ratio, though their shares of the cost being deducted from their shares of the gain leave equal remainders. 4. The question naturally suggests itself, whether any country, by its own legislative policy, can engross to itself a larger share of the benefits of foreign commerce, than would fall to it in the natural or spontaneous course of trade. The answer is, it can. By taxing exports, for instance, we may, under certain circumstances, produce a division of the advantage of the trade more favourable to ourselves. In some cases, we may draw into our coffers, at the expense of foreigners, not only the whole tax, but more than the tax: in other cases, we should gain exactly the tax,--in others, less than the tax. In this last case, a part of the tax is borne by ourselves: possibly the whole, possibly even, as we shall show, more than the whole. Suppose that England taxes her export of cloth: the tax not being supposed high enough to induce Germany to produce cloth for herself. The price at which cloth can be sold in Germany is augmented by the tax. This will probably diminish the quantity consumed. It may diminish it so much, that even at the increased price, there will not be required so great a money value as before. It may diminish it in such a ratio, that the money value of the quantity consumed will be exactly the same as before. Or it may not diminish it at all, or so little, that, in consequence of the higher price, a greater money value will be purchased than before. In this last case, England will gain, at the expense of Germany, not only the whole amount of the duty, but more. For the money value of her exports to Germany being increased, while her imports remain the same, money will flow into England from Germany. The price of cloth will rise in England, and consequently in Germany; but the price of linen will fall in Germany, and consequently in England, We shall export less cloth, and import more linen, till the equilibrium is restored. It thus appears, what is at first sight somewhat remarkable, that, by taxing her exports, England would, under some conceivable circumstances, not only gain from her foreign customers the whole amount of the tax, but would also get her imports cheaper. She would get them cheaper in two ways,--for she would obtain them for less money, and would have more money to purchase them with. Germany, on the other hand, would suffer doubly: she would have to pay for her cloth a price increased not only by the duty, but by the influx of money into England, while the same change in the distribution of the circulating medium would leave her less money to purchase it with. This, however, is only one of three possible cases. If, after the imposition of the duty, Germany requires so diminished a quantity of cloth, that its total money value is exactly the same as before, the balance of trade will be undisturbed; England will gain the duty, Germany will lose it, and nothing more. If, again, the imposition of the duty occasions such a falling off in the demand, that Germany requires a less pecuniary value than before, our exports will no longer pay for our imports, money must pass from England into Germany, and Germany's share of the advantage of the trade will be increased. By the change in the distribution of money, cloth will fall in England; and therefore it will, of course, fall in Germany. Thus Germany will not pay the whole of the tax. From the same cause, linen will rise in Germany, and consequently in England. When this alteration of prices has so adjusted the demand, that the cloth and the linen again pay for one another, the result is, that Germany has paid only a part of the tax, and the remainder of what has been received into our treasury has come indirectly out of the pockets of our own consumers of linen, who pay a higher price for that imported commodity, in consequence of the tax on our exports, which at the same time they, in consequence of the efflux of money and consequent fall of prices, have smaller money incomes wherewith to pay for the linen at that advanced price. It is not an impossible supposition that, by taxing our exports, we might not only gain nothing from the foreigner, the tax being paid out of our own pockets, but might even compel our own people to pay a second tax to the foreigner. Suppose, as before, that the demand of Germany for cloth falls off so much on the imposition of the duty, that she requires a smaller money value than before, but that the case is so different with linen in England, that when the price rises the demand either does not fall off at all, or so little that the money value required is greater than before. The first effect of laying on the duty is, as before, that the cloth exported will no longer pay for the linen imported. Money will, therefore, flow out of England into Germany. One effect is to raise the price of linen in Germany, and, consequently, in England. But this, by the supposition, instead of stopping the efflux of money, only makes it greater, because the higher the price, the greater the money value of the linen consumed. The balance, therefore, can only be restored by the other effect, which is going on at the same time, namely, the fall of cloth in the English, and, consequently, in the German market. Even when cloth has fallen so low that its price with the duty is only equal to what its price without the duty was at first, it is not a necessary consequence that the fall will stop; for the same amount of exportation as before will not now suffice to pay the increased money value of the imports; and although the German consumers have now not only cloth at the old price, but likewise increased money incomes, it is not certain that they will be inclined to employ the increase of their incomes in increasing their purchases of cloth. The price of cloth, therefore, must perhaps fall, to restore the equilibrium, more than the whole amount of the duty; Germany may be enabled to import cloth at a lower price when it is taxed, than when it was untaxed: and this gain she will acquire at the expense of the English consumers of linen, who, in addition, will be the real payers of the whole of what is received at their own custom-house under the name of duties on the export of cloth. Such are the extremely various effects which may result to ourselves, and to our customers, from the imposition of taxes on our exports [3]: and the determining circumstances are of a nature so imperfectly ascertainable, that it must be almost impossible to decide with any certainty, even after the tax has been imposed, whether we have been gainers by it or losers. It is certain, however, that whatever we gain, is lost by somebody else, and there is the expense of the collection besides: if international morality, therefore, were rightly understood and acted upon, such taxes, as being contrary to the universal weal, would not exist. Moreover, the imposition of such a tax frequently will, and always may, expose a country to lose this branch of its trade altogether, or to carry it on with diminished advantage, in consequence of the competition of untaxed exporters from other countries, or of the domestic producers in the country to which it exports. Even on the most selfish principles, therefore, the benefit of such a tax is always extremely precarious. 5. We have had an example of a tax on exports, that is, on foreigners, falling in part on ourselves. We shall, therefore, not be surprised if we find a tax on imports, that is, on ourselves, partly falling upon foreigners. Instead of taxing the cloth which we export, suppose that we tax the linen which we import. The duty which we are now supposing must not be what is termed a protecting duty, that is, a duty sufficiently high to induce us to produce the article at home. If it had this effect, it would destroy entirely the trade both in cloth and in linen, and both countries would lose the whole of the advantage which they previously gained by exchanging those commodities with one another. We suppose a duty which might diminish the consumption of the article, but which would not prevent us from continuing to import, as before, whatever linen we did consume. The equilibrium of trade would be disturbed if the imposition of the tax diminished in the slightest degree the quantity of linen consumed. For, as the tax is levied at our own custom-house, the German exporter only receives the same price as formerly, though the English consumer pays a higher one. If, therefore, there be any diminution of the quantity bought, although a larger sum of money may be actually laid out in the article, a smaller one will be due from England to Germany: this sum will no longer be an equivalent for the sum due from Germany to England for cloth, the balance therefore must be paid in money. Prices will fall in Germany, and rise in England; linen will fall in the German market; cloth will rise in the English. The Germans will pay higher price for cloth, and will have smaller money incomes to buy it with; while the English will obtain linen cheaper, that is, its price will exceed what it previously was by less than the amount of the duty, while their means of purchasing it will be increased by the increase of their money incomes. If the imposition of the tax does not diminish the demand, it will leave the trade exactly as it was before. We shall import as much, and export as much; the whole of the tax will be paid out of our own pockets. But the imposition of a tax on a commodity, almost always diminishes the demand more or less; and it can never, or scarcely ever increase the demand. It may, therefore, be laid down as a principle, that a tax on imported commodities, when it really operates as a tax, and not as a prohibition, either total or partial, almost always falls in part upon the foreigners who consume our goods: and that this is a mode in which a nation may be almost sure of appropriating to itself, at the expense of foreigners, a larger share than would otherwise belong to it of the increase in the general productiveness of the labour and capital of the world, which results from the interchange of commodities among nations. It is scarcely necessary to observe, that no such advantage can result from the duty, if it operate as a protecting duty; if it induce the country which imposes it, to produce for herself that which she would otherwise have imported. The saving of labour--the increase in the general productiveness of the capital of the world--which is the effect of commerce, and which a non-protecting duty would enable the country imposing it to engross, could not be engrossed by a protecting duty, because such a duty prevents any such increased production from existing. With a view to practical legislation, therefore, duties on importation may be divided into two classes: those which have the effect of encouraging some particular branch of domestic industry, and those which have not. The former are purely mischievous, both to the country imposing them, and to those with whom it trades. They prevent a saving of labour and capital, which, if permitted to be made, would be divided in some proportion or other between the importing country and the countries which buy what that country does or might export. The other class of duties are those which do not encourage one mode of procuring an article at the expense of another, but allow interchange to take place just as if the duty did not exist--and to produce the saving of labour which constitutes the motive to international as to all other commerce. Of this kind, are duties on the importation of any commodity which could not by any possibility be produced at home; and duties not sufficiently high to counterbalance the difference of expense between the production of the article at home, and its importation. Of the money which is brought into the treasury of any country by taxes of this last description, a part only is paid by the people of that country; the remainder by the foreign consumers of their goods. Nevertheless, this latter kind of taxes are in principle as ineligible as the former, although not precisely on the same ground. A protecting duty can never be a cause of gain, but always and necessarily of loss, to the country imposing it, just so far as it is efficacious to its end. A non-protecting duty on the contrary would, in most cases, be a source of gain to the country imposing it, in so far as throwing part of the weight of its taxes upon other people is a gain; but it would be a means of gain which it could seldom be advisable to adopt, being so easily counteracted by a precisely similar proceeding on the other side. If England, in the case already supposed, sought to obtain for herself more than her natural share of the advantage of the trade with Germany, by imposing a duty upon cloth, Germany would only have to impose a duty upon linen, sufficient to diminish the demand for that article about as much as the demand for cloth had been diminished in England by the tax. Things would then be as before, and each country would pay its own tax. Unless, indeed, the sum of the two duties exceeded the entire advantage of the trade; for in that case the trade, and its advantage, would cease entirely. There would be no advantage, therefore, in imposing duties of this kind, with a view to gain by them, in the manner which has been pointed out. But so long as any other kind of taxes on commodities are retained, as a source of revenue, these may often be as unobjectionable as the rest. It is evident, moreover, that considerations of reciprocity, which are quite unessential when the matter in debate is a protecting duty, are of material importance when the repeal of duties of this other description is discussed. A country cannot be expected to renounce the power of taxing foreigners, unless foreigners will in return practise towards itself the same forbearance. The only mode in which a country can save itself from being a loser by the duties imposed by other countries on its commodities, is to impose corresponding duties on theirs. Only it must take care that these duties be not so high as to exceed all that remains of the advantage of the trade, and put an end to importation altogether; causing the article to be either produced at home, or imported from another and a dearer market. It is not necessary to apply the principles which we have stated to the case of bounties on exportation or importation. The application is easy, and the conclusions present nothing of particular interest or importance. 6. Any cause which alters the exports or imports from one country into another, alters the division of the advantage of interchange between those two countries. Suppose the discovery of a new process, by which some article of export, or some article not previously exported, can be produced so cheap as to occasion a great demand for it in other countries. This of course produces a great influx of money from other countries, and lowers the prices of all articles imported from them, until the increase of importation produced by this cause has restored the equilibrium. Thus, the country which acquires a new article of export gets its imports cheaper. This is not a case of mere alteration in the division of the advantage; it is a new advantage created by the discovery. But suppose that the invention, to which the nation is indebted for this increase of the return to its industry, comes into use also in the other country, and that the process is one which can be as perfectly and as cheaply performed in the one country as in the other. The new exportation will cease; trade will revert to its old channels, the money which flowed in will again flow out, and the country which invented the process will lose that increase of its gain by trade, which it had derived from the discovery. Now the exportation of machinery comes within the case which we have just described. If the fact be, that by allowing to foreigners a participation in our machinery, we enable them to produce any of our leading articles of export, at a lower money price than we can sell those articles, it is certain that unless we possess as great an advantage in the production of the machinery itself as we have in the production of other articles by means of machinery, the permitting of its exportation would alter to our disadvantage the division of the benefit of trade. Our exports being diminished, we should have to pay a balance in money. This would raise, in foreign countries, the price of everything which we import from thence: while our incomes, being reduced in money value, would render us less able to buy those articles even if they had not risen. The equilibrium of exports and imports would only be restored, when either some of the latter became so dear that we could produce them cheaper at home, or some articles not previously exported became exportable from the fall of prices. In the one case, we lose the benefit of importation altogether, and are obliged to produce at home, at a greater cost. In the other case, we continue to import, but pay dearer for our imports. Notwithstanding what has now been observed, restrictions on the exportation of machinery are not, in our opinion, justifiable, either on the score of international morality or of sound policy. It is evidently the common interest of all nations that each of them should abstain from every measure by which the aggregate wealth of the commercial world would be diminished, although of this smaller sum total it might thereby be enabled to attract to itself a larger share. And the time will certainly come when nations in general will feel the importance of this rule, and will so direct their approbation and disapprobation as to enforce observance of it. Moreover, a country possessing machines should consider that if a similar advantage were extended to other countries, they would employ it above all in the production of those articles, in which they had already the greatest natural advantages; and if the former country would be a loser by their improvements in the production of articles which it sells, it would gain by their improvements in those which it buys. The exportation of machinery may, however, be a proper subject for adjustment with other nations, on the principle of reciprocity. Until, by the common consent of nations, all restrictions upon trade are done away, a nation cannot be required to abolish those from which she derives a real advantage, without stipulating for an equivalent. 7. The case which we have just examined, is an example in how remarkable a manner every cause which materially influences exports, operates upon the prices of imports. According to the ancient theory of the balance of trade, and to the associations of the generality of what are termed practical men to this day, the sole benefit derived from commerce consists in the exports, and imports are rather an evil than otherwise. Political economists, seeing the folly of these views, and clearly perceiving that the advantage of commerce consists and must consist solely of the imports, have occasionally suffered themselves to employ language evincing inattention to the fact, that exports, though unimportant in themselves, are important by their influence on imports. So real and extensive is this influence, that every new market which is opened for any of our goods, and every increase in the demand for our commodities in foreign countries, enables us to supply ourselves with foreign commodities at a smaller cost. Let us revert to our earliest and simplest example, but which displays the real law of interchange more luminously than any formula into which money enters; the case of simple barter. We showed, that if at the rate of 10 yards of cloth for 17 of linen, the demand of Germany amounted to 1000 times 10 yards of cloth, the two nations will trade together at that rate of interchange, provided that the linen required in England be exactly 1000 times 17 yards, neither more nor less. For the cloth and the linen will then exactly pay for one another, and nobody on either side will be obliged to offer what he has to sell at a lower rate, in order to procure what he wants to buy. Now if the increase of wealth and population in Germany should greatly increase the demand in that country for cloth, the demand for linen in England not increasing in the same ratio,--if, for instance, Germany became willing, at the above rate, to take 1500 times 10 yards; is it not evident, that to induce England to take in exchange for this the only article which Germany by supposition has to give, the latter must offer it at a rate more advantageous to England--at 18, or perhaps 19 yards, for 10 of cloth? So that the division of the advantage becomes more and more favourable to a country, in proportion as the demand for its commodities increases in foreign countries. It is not even necessary that the country which takes its goods, should supply it with any commodity whatever. Suppose that a country should be opened to our merchants, disposed to buy from us in abundance, but which can sell to us scarcely anything, as every commodity which it affords could be got cheaper by us from some other quarter. Nevertheless, our trade with this country will enable us to obtain from all other countries their commodities at a lower price. At the first opening of this commerce of mere exportation, we must have received in payment a large quantity of money; for which our customer will have been indemnified by other countries, in exchange for her commodities. Prices must consequently be lower in all other countries, and higher with us, than before the opening of the new branch of trade; and we therefore obtain the commodities of other countries at a less cost, both as we pay less money for them, and as that money is lower in value. 8. Another obvious application of the same principle will enable us to explain, and to bring within the dominion of strict science, the rivality of one exporting nation and another, or what is called, in the language of the mercantile system, _underselling_: a subject which political economists have taken little trouble to elucidate, from the habit before alluded to of disregarding almost entirely, in their purely scientific inquiries, those circumstances which affect the trade of a country by operating immediately upon the exports. Let us revert to our old example, and to our old figures. Suppose that the trade between England and Germany in cloth and linen is established, and that the rate of interchange is 10 yards of cloth for 17 of linen. Now suppose that there arises in another country, in Flanders, for example, a linen manufacture; and that the same causes, the working of which in England and Germany has made 10 yards exchange for 17, would in England and Flanders, putting Germany out of the question, have made the rate of interchange 10 for 18. It is evident that Germany also must give 18 yards of linen for 10 of cloth, and so carry on the trade with a diminished share of the advantage, or lose it altogether. If the play of demand in England and Flanders had made the rate of interchange not 10 for 18 but 10 for 21, (10 to 20 being in Germany the comparative cost of production,) it is evident that Germany could not have maintained the competition, and would have lost, not part of her share of the advantage, but all advantage, and the trade itself. It would be no answer to say, that Germany could probably still have found the means of importing cloth from England, by exporting something else. If she had purchased cloth with anything else, she would have purchased it dearer: as is proved by the fact, that having free choice, she found it most advantageous to purchase it with linen. When she could get 10 yards of cloth for 17 of linen, that was the mode in which she could get it with least labour. Being pressed by competition, she gave successively 17, 18, 18; but rather than give 19 yards of linen, she perhaps would prefer to give, as costing her rather less labour, 10 yards of silk, (which we will suppose to be the quantity which in England will purchase 10 yards of cloth.) It is obvious that, although Germany has found the means of supplying herself with cloth, by exporting a different article from that in which she was undersold, yet the advantage of the trade between her and England is now shared in a proportion much less favourable to Germany. There is no difficulty in showing that the same series of consequences takes place in exactly the same manner through the agency of money. The trade in cloth and linen between England and Germany being supposed to exist as before, Flanders produces linen at a lower price than that at which Germany has hitherto afforded it. The exportation from Germany is suspended; and Germany, continuing to import cloth, pays for it in money. By so doing she lowers her own prices, and raises those in England: she has to pay more money for cloth, and to pay it in a currency of higher value. She thus suffers more and more as a consumer of cloth, until by the fall of her prices she can either afford to sell linen as cheap as Flanders, or to export some other commodity which she could not export before. In either case, her trade resumes its course, but with diminished advantage on her side. [4] It is in the mode just described, that those countries which formerly supplied Europe with manufactures, but which owed their power of doing so not to any natural and permanent advantages, but to their more advanced state of civilization as compared with other countries, have lost their pre-eminence as other countries successively attained an equal degree of civilization. Lombardy and Flanders, in the middle ages, produced some descriptions of clothing and ornament for all Europe: Holland, at a much later period, supplied ships, and almost all articles which came in ships, to most other parts of the world. All these countries have probably at this moment a much larger amount of capital than ever they had, but having been undersold by other countries, they have lost by far the greater part of the share which they had engrossed to themselves of the benefit which the world derives from commerce; and their capital yields to them in consequence a smaller proportional return. We are aware that other causes have contributed to the same effect, but we cannot doubt that this is a principal one. As much as is really true of the great returns alleged to have been made to capital during the last war, must have arisen from a similar cause. Our exclusive command of the sea excluded from the market all by whom we should have been undersold. The adoption by France, Russia, the Netherlands, and the United States, of a more severely restrictive commercial policy, subsequently to 1815, has done great injury undoubtedly to those countries; for the duties which they have established are intended to be, and really are, of the class termed _protecting_; that is to say, such as force the production of commodities by more costly processes at home, instead of suffering them to be imported from abroad. But these duties, though chiefly injurious to the countries imposing them, have also been highly injurious to England. By diminishing her exportation, or preventing it from increasing as it would otherwise have done, they have kept up the prices of all imported commodities in England, above what those prices would have fallen to if trade had been left free. By another obvious application of the same reasoning, it will be seen, that there is a real foundation for the notion, that a country may be benefited by receiving from another country the concession of what used to be termed commercial advantages, or by restraining its colonies from purchasing goods of any country except itself. In the figured illustration last used (p. 34) [not available, M.D.], it is evident, that if England had been bound by a treaty with Germany to buy linen exclusively from her, Germany would have retained the trade which we supposed her to lose, and would have continued to purchase cloth at a comparatively cheap rate from England, instead of producing it by a more costly process at home. Suppose that England had been a colony of Germany, and we see that by compelling colonies to deal at her shop, she may obtain a real advantage, though of a nature which we may hazard the assertion that the founders of our colonial policy little dreamt of. Such an advantage, however, being gained at the expense of another country, is, at the least, simply equivalent to a tax, or tribute. Now, if a country has just grounds, or deems superiority of power a sufficient ground, for exacting a tribute from another country, the most direct mode is the best. First, because it is the most intelligible, and has least of trick or disguise. Secondly, because it allows the people of the country paying the tribute, to raise the money in whatever way they consider least oppressive to themselves. Thirdly, because the indirect mode of taxing a country, by restrictions on its commerce, disturbs the distribution of industry most advantageous to the world at large, and occasions a greater loss to the restricted country, and to the other countries with which that country would have traded, than gain to the country in whose favour the restrictions are imposed. And lastly, because a country never could obtain such privileges from an independent nation, and has seldom been so undisguised an oppressor as to demand them even from its colonies, without subjecting itself to restrictions in some degree equivalent, for the benefit of those whom it has thus taxed. Each country, therefore, usually pays tribute to the other; and to produce this fruitless reciprocity of exaction, the industry and trade of both countries are diverted from the most advantageous channels, and the return to the labour and capital of both is diminished, in pure loss. 9. The same principles which have led to the above conclusions, also suggest a remark of some importance with respect to the probable effect of a change from a restricted to a comparatively free trade. There is no doubt that our prohibiting the importation of a particular article, which, but for the prohibition, would have been imported, enables us to obtain our other imports at smaller cost. The article for which we have the greatest demand, and for which our demand is most increased by cheapness, is that which we should naturally import preferably to any other; now of this article we should import the quantity necessary to pay for our exports, on terms of interchange less advantageous to us than in the case of any other commodity. If our legislature prohibits this commodity, the other country will be obliged to offer any other article on easier terms, in order to force a sufficient demand for it to be an equivalent to what she purchases from us. The steps of the process, money being used, would be these:--We prohibit the importation of linen. The exportation of cloth continues, but is paid for in money. Our prices rise, those in Germany fall, until silk, or some other article, can be imported from Germany cheaper than it can be produced at home, and in sufficient abundance to balance the export of cloth. Thus by sacrificing the cheapness of one commodity, we gain the cheapness of another: but we sacrifice a greater cheapness to gain a less, and we sacrifice cheapness in the article which we most want, and would import by preference, while our compensation is cheapness in an article which we either could produce more advantageously at home, or which we have so little desire for, that it requires a species of bounty on the article to create a demand. Restrictions on importation do, however, tend to keep down the value and price of our remaining imports, and to keep up the nominal or money prices of all our other commodities, by retaining a greater quantity of money in the country than would otherwise be there. From this it obviously follows, that if the restrictions were removed, we should have to pay rather more for some of the articles which we now import, while those which we are now prevented from importing would cost us more than might be inferred from their _present_ price in the foreign market. And general prices would fall; to the benefit of those who have fixed sums to receive; to the disadvantage of those who have fixed sums to pay; and giving rise, as a general fall of prices always does, to an appearance, though a temporary and fallacious one, of general distress. [5] It is right to observe that the measures of the British Legislature which have been falsely characterised as measures of free trade, must, from their extremely insignificant extent, have produced far too little effect in increasing our importation, to have actually led, in any degree worth mentioning, to the results specified above. It is of greater importance to take notice, that these effects may be entirely obviated, if foreign countries can be prevailed upon simultaneously to relax their restrictive systems, so as to create an immediate increase of demand for our exports at the present prices. It is true that exports and imports must, in the end, balance one another, and if we increase our imports, our exports will of necessity increase too. But it is a forced increase, produced by an efflux of money and fall of prices; and this fall of prices being permanent, although it would be no evil at all in a country where credit is unknown, it may be a very serious one where large classes of persons, and the nation itself, are under engagements to pay fixed sums of money of large amount. 10. The only remaining application of the principle set forth in this essay, which we think it of importance to notice specially, is the effect produced upon a country by the annual payment of a tribute or subsidy to a foreign power, or by the annual remittance of rents to absentee landlords, or of any other kind of income to its absent owners. Remittances to absentees are often very incorrectly likened in their general character to the payment of a tribute; from which they differ in this very material circumstance, that tribute, if not paid to a foreign country, is not paid at all, whereas rents are paid to the landlord, and consumed by him, even if he resides at home. The two kinds of payment, however, have a perfect resemblance to each other in such parts of their effects as we are about to point out. The tribute, subsidy, or remittance, is always in goods; for, unless the country possesses mines of the precious metals, and numbers those metals among its regular articles of export, it cannot go on, year after year, parting with them, and never receiving them back. When a nation has regular payments to make in a foreign country, for which it is not to receive any return, its exports must annually exceed its imports by the amount of the payments which it is bound so to make. In order to force a demand for its exports greater than its imports will suffice to pay for, it must offer them at a rate of interchange more favourable to the foreign country, and less so to itself, than if it had no payments to make beyond the value of its imports. It therefore carries on the trade with less advantage, in consequence of the obligations to which it is subject towards persons resident in foreign countries. The steps of the process are these. The exports and imports being in equilibrium, suppose a treaty to be concluded, by which the country binds itself to pay in tribute to another country, a certain sum annually. It makes, perhaps, the first payment by a remittance of money. This lowers prices in the paying country, and raises them in the receiving one: the exports of the tributary country increase, its imports diminish. When the efflux of money has altered prices in the requisite degree, the exports exceed the imports annually, by the amount of the tribute; and the latter, being added to the sum of the payments due, restores the balance of payments between the two countries. The result to the tributary country is a diminution of her share in the advantage of foreign trade. She pays dearer for her imports, in two ways, because she pays more money, and because that money is of higher value, the money incomes of her inhabitants being of smaller amount. Thus the imposition of a tribute is a double burthen to the country paying it, and a double gain to that which receives it. The tributary country pays to the other, first, the tax, whatever be its amount, and next, something more, which the one country loses in the increased cost of its imports, the other gains in the diminished cost of its own. Absenteeism, moreover, though not burthensome in the former of these ways, since the money is paid whether the receiver be an absentee or not, is yet disadvantageous in the second of the two modes which have been mentioned. Ireland pays dearer for her imports in consequence of her absentees; a circumstance which the assailants of Mr. M'Culloch, whether political economists or not, have not, we believe, hitherto thought of producing against him. 11. If the question be now asked, which of the countries of the world gains most by foreign commerce, the following will be the answer. If by gain be meant advantage, in the most enlarged sense, that country will generally gain the most, which stands most in need of foreign commodities. But if by gain be meant saving of labour and capital in obtaining the commodities which the country desires to have, whatever they may be; the country will gain, not in proportion to its own need of foreign articles, but to the need which foreigners have of the articles which itself produces. Let us take, as an illustration of our meaning, the case of France and England. Those two nations, in consequence of the restrictions with which they have loaded their commercial intercourse, carry on so little trade with each other, as may almost, regard being had to the wealth and population of the two countries, be called none at all. If these fetters were at once taken off, which of the two countries would be the greatest gainer? England without doubt. There would instantly arise in France an immense demand for the cottons, woollens, and iron of England; while wines, brandies, and silks, the staple articles of France, are less likely to come into general demand here, nor would the consumption of such productions, it is probable, be so rapidly increased by the fall of price. The fall would probably be very great before France could obtain a vent in England for so much of her exports as would suffice to pay for the probable amount of her imports. There would be a considerable flow of the precious metals out of France into England. The English consumer of French wine would not merely save the amount of the duty which that wine now pays, but would find the wine itself falling-in prime cost, while his means of purchasing it would be increased by the augmentation of his own money income. The French consumer of English cottons, on the contrary, would not long continue to be able to purchase them at the price they now sell for in England. He would gain less, as the English would gain more, than might appear from a mere comparison between the present prices of commodities in the two countries. Various consequences would flow from opening the trade between France and England, which are not expected, either by the friends or by the opponents of the present restrictive system. The wine-growers of France, who imagine that free trade would relieve their distress by raising the price of their wine, might not improbably find that price actually lowered. On the other hand, our silk manufacturers would be surprised if they were told that the free admission of our cottons and hardware into the French market, would endanger _their_ branch of manufacture: yet such might very possibly be the effect. France, it is likely, could most advantageously pay us in silks for a portion of the large amount of cottons and hardware which we should sell to her; and though our silk manufacturers may now be able to compete advantageously, in some branches of the manufacture, with their French rivals, it by no means follows that they could do so when the efflux of money from France, and its influx into England, had lowered the price of silk goods in the French market, and increased all the expenses of production here. On the whole, England probably, of all the countries of Europe, draws to herself the largest share of the gains of international commerce: because her exportable articles are in universal demand, and are of such a kind that the demand increases rapidly as the price falls. Countries which export food, have the former advantage, but not the latter. But our own colonies, and the countries which supply us with the materials of our manufactures, maintain a hard struggle with us for an equal share of the advantages of their trade; for _their_ exports are also of a kind for which there exists a most extensive demand here, and a demand capable of almost indefinite extension by a fall of price. Contrary, therefore, to common opinion, it is probable that our trade with the colonies, and with the countries which send us the raw materials of our national industry, is not more but less advantageous to us, in proportion to its extent, than our trade with the continent of Europe. We mean in respect to the mere amount of the return to the labour and capital of the country; considered abstractedly from the usefulness or agreeableness of the particular articles on which the receivers may choose to expend it. NOTES: [1] _Elements of Political Economy_, by James Mill, Esq., 3rd edit., pp. 120-1. [2] The figures used are of course arbitrary, having no reference to any existing prices. [3] We have not deemed it necessary to enter minutely into all the circumstances which might modify the results mentioned in the text. For example, let us revert to the first case, that in which the demand for cloth in Germany is so little affected by the rise of price in consequence of the tax, that the quantity bought exceeds in pecuniary value what it was before. As the German consumers lay out more money in cloth, they have less to lay out in other things; other money prices will fall; among the rest that of linen; and this may so increase the demand for linen in England as to restore the equilibrium of exports and imports without any passage of money. But England's treasury will still gain from Germany the whole of the tax, and the English people will buy their linen cheaper besides. Again, in the opposite case, where the tax so diminishes the demand, that a smaller pecuniary value is required than before. The German consumers have, therefore, more to expend in other things; these, and among the rest linen, will rise; and this may so diminish the demand for linen in England, as to restore the equilibrium without the transmission of money. But the effect, as respects the division of the advantage, is still as stated in the text. [4] The world at large, sellers and buyers taken together, is always a gainer by underselling. If, in the case supposed, England were compelled by a commercial treaty to exclude the linen of Flanders from her market, the total wealth of the world, if affected at all, would be diminished. For, what is the cause which enables Flanders to undersell Germany? That Flanders, if she had the trade, would exchange linen for cloth at a rate of interchange more advantageous to England. And why can Flanders do so? It must be either because Flanders can produce the article with a less comparative quantity of labour than Germany, and therefore the total advantage to be divided between the two countries is greater in the case of Flanders than of Germany; or else because, though the total advantage is not greater, Flanders obtains a less share of it, her demand for cloth being greater, at the same rate of interchange, than that of Germany. In the former case, to exclude Flemish linen from England would be to prevent the world at large from making a greater saving of labour instead of a less. In the latter, the exclusion would be inefficacious for the only end it could be intended for, viz., the benefit of Germany, unless Flemish money were excluded from England as well as Flemish linen. For Flanders would buy English cloth, paying for it in money, until the fall of her prices enabled her to pay for it with something else: and the ultimate result would be that, by the rise of prices in England, Germany must pay a higher price for her cloth, and so lose a part of the advantage in spite of the treaty; while England would pay for German linen the same price indeed, but as the money incomes of her own people would be increased, the same money price would imply a smaller sacrifice. [5] This last possible effect of a sudden introduction of free trade, was pointed out in an able article on the Silk question, in a work of too short duration, the _Parliamentary Review_. ESSAY II. OF THE INFLUENCE OF CONSUMPTION ON PRODUCTION. Before the appearance of those great writers whose discoveries have given to political economy its present comparatively scientific character, the ideas universally entertained both by theorists and by practical men, on the causes of national wealth, were grounded upon certain general views, which almost all who have given any considerable attention to the subject now justly hold to be completely erroneous. Among the mistakes which were most pernicious in their direct consequences, and tended in the greatest degree to prevent a just conception of the objects of the science, or of the test to be applied to the solution of the questions which it presents, was the immense importance attached to consumption. The great end of legislation in matters of national wealth, according to the prevalent opinion, was to create consumers. A great and rapid consumption was what the producers, of all classes and denominations, wanted, to enrich themselves and the country. This object, under the varying names of an extensive demand, a brisk circulation, a great expenditure of money, and sometimes _totidem verbis_ a large consumption, was conceived to be the great condition of prosperity. It is not necessary, in the present state of the science, to contest this doctrine in the most flagrantly absurd of its forms or of its applications. The utility of a large government expenditure, for the purpose of encouraging industry, is no longer maintained. Taxes are not now esteemed to be "like the dews of heaven, which return again in prolific showers." It is no longer supposed that you benefit the producer by taking his money, provided you give it to him again in exchange for his goods. There is nothing which impresses a person of reflection with a stronger sense of the shallowness of the political reasonings of the last two centuries, than the general reception so long given to a doctrine which, if it proves anything, proves that the more you take from the pockets of the people to spend on your own pleasures, the richer they grow; that the man who steals money out of a shop, provided he expends it all again at the same shop, is a benefactor to the tradesman whom he robs, and that the same operation, repeated sufficiently often, would make the tradesman's fortune. In opposition to these palpable absurdities, it was triumphantly established by political economists, that consumption never needs encouragement. All which is produced is already consumed, either for the purpose of reproduction or of enjoyment. The person who saves his income is no less a consumer than he who spends it: he consumes it in a different way; it supplies food and clothing to be consumed, tools and materials to be used, by productive labourers. Consumption, therefore, already takes place to the greatest extent which the amount of production admits of; but, of the two kinds of consumption, reproductive and unproductive, the former alone adds to the national wealth, the latter impairs it. What is consumed for mere enjoyment, is gone; what is consumed for reproduction, leaves commodities of equal value, commonly with the addition of a profit. The usual effect of the attempts of government to encourage consumption, is merely to prevent saving; that is, to promote unproductive consumption at the expense of reproductive, and diminish the national wealth by the very means which were intended to increase it. What a country wants to make it richer, is never consumption, but production. Where there is the latter, we may be sure that there is no want of the former. To produce, implies that the producer desires to consume; why else should he give himself useless labour? He may not wish to consume what he himself produces, but his motive for producing and selling is the desire to buy. Therefore, if the producers generally produce and sell more and more, they certainly also buy more and more. Each may not want more of what he himself produces, but each wants more of what some other produces; and, by producing what the other wants, hopes to obtain what the other produces. There will never, therefore, be a greater quantity produced, of commodities in general, than there are consumers for. But there may be, and always are, abundance of persons who have the inclination to become consumers of some commodity, but are unable to satisfy their wish, because they have not the means of producing either that, or anything to give in exchange for it. The legislator, therefore, needs not give himself any concern about consumption. There will always be consumption for everything which can be produced, until the wants of all who possess the means of producing are completely satisfied, and then production will not increase any farther. The legislator has to look solely to two points: that no obstacle shall exist to prevent those who have the means of producing, from employing those means as they find most for their interest; and that those who have not at present the means of producing, to the extent of their desire to consume, shall have every facility afforded to their acquiring the means, that, becoming producers, they may be enabled to consume. These general principles are now well understood by almost all who profess to have studied the subject, and are disputed by few except those who ostentatiously proclaim their contempt for such studies. We touch upon the question, not in the hope of rendering these fundamental truths clearer than they already are, but to perform a task, so useful and needful, that it is to be wished it were oftener deemed part of the business of those who direct their assaults against ancient prejudices, --that of seeing that no scattered particles of important truth are buried and lost in the ruins of exploded error. Every prejudice, which has long and extensively prevailed among the educated and intelligent, must certainly be borne out by some strong appearance of evidence; and when it is found that the evidence does not prove the received conclusion, it is of the highest importance to see what it does prove. If this be thought not worth inquiring into, an error conformable to appearances is often merely exchanged for an error contrary to appearances; while, even if the result be truth, it is paradoxical truth, and will have difficulty in obtaining credence while the false appearances remain. Let us therefore inquire into the nature of the appearances, which gave rise to the belief that a great demand, a brisk circulation, a rapid consumption (three equivalent expressions), are a cause of national prosperity. If every man produced for himself, or with his capital employed others to produce, everything which he required, customers and their wants would be a matter of profound indifference to him. He would be rich, if he had produced and stored up a large supply of the articles which he was likely to require; and poor, if he had stored up none at all, or not enough to last until he could produce more. The case, however, is different after the separation of employments. In civilized society, a single producer confines himself to the production of one commodity, or a small number of commodities; and his affluence depends, not solely upon the quantity of his commodity which he has produced and laid in store, but upon his success in finding purchasers for that commodity. It is true, therefore, of every particular producer or dealer, that a great demand, a brisk circulation, a rapid consumption, of the commodities which he sells at his shop or produces in his manufactory, is important to him. The dealer whose shop is crowded with customers, who can dispose of a product almost the very moment it is completed, makes large profits, while his next neighbour, with an equal capital but fewer customers, gains comparatively little. It was natural that, in this case, as in a hundred others, the analogy of an individual should be unduly applied to a nation: as it has been concluded that a nation generally gains in wealth by the conquest of a province, because an individual frequently does so by the acquisition of an estate; and as, because an individual estimates his riches by the quantity of money which he can command, it was long deemed an excellent contrivance for enriching a country, to heap up artificially the greatest possible quantity of the precious metals within it. Let us examine, then, more closely than has usually been done, the case from which the misleading analogy is drawn. Let us ascertain to what extent the two cases actually resemble; what is the explanation of the false appearance, and the real nature of the phenomenon which, being seen indistinctly, has led to a false conclusion. * * * * * We shall propose for examination a very simple case, but the explanation of which will suffice to clear up all other cases which fall within the same principle. Suppose that a number of foreigners with large incomes arrive in a country, and there expend those incomes: will this operation be beneficial, as respects the national wealth, to the country which receives these immigrants? Yes, say many political economists, if they save any part of their incomes, and employ them reproductively; because then an addition is made to the national capital, and the produce is a clear increase of the national wealth. But if the foreigner expends all his income unproductively, it is no benefit to the country, say they, and for the following reason. If the foreigner had his income remitted to him in bread and beef, coats and shoes, and all the other articles which he was desirous to consume, it would not be pretended that his eating, drinking, and wearing them, on our shores rather than on his own, could be of any advantage to us in point of wealth. Now, the case is not different if his income is remitted to him in some one commodity, as, for instance, in money. For whatever takes place afterwards, with a view to the supply of his wants, is a mere exchange of equivalents; and it is impossible that a person should ever be enriched by merely receiving an equal value in exchange for an equal value. When it is said that the purchases of the foreign consumer give employment to capital which would otherwise yield no profit to its owner, the same political economists reject this proposition as involving the fallacy of what has been called a "general glut." They say, that the capital, which any person has chosen to produce and to accumulate, can always find employment, since the fact that he has accumulated it proves that he had an unsatisfied desire; and if he cannot find anything to produce for the wants of other consumers, he can for his own. It is impossible to contest these propositions as thus stated. But there is one consideration which clearly shews, that there is something more in the matter than is here taken into the account; and this is, that the above reasoning tends distinctly to prove, that it does a tradesman no good to go into his shop and buy his goods. How can he be enriched? it might be asked. He merely receives a certain value in money, for an equivalent value in goods. Neither does this give employment to his capital; for there never exists more capital than can find employment, and if one person does not buy his goods another will; or if nobody does, there is over-production in that business, he can remove his capital, and find employment for it in another trade. Every one sees the fallacy of this reasoning as applied to individual producers. Every one knows that as applied to them it has not even the semblance of plausibility; that the wealth of a producer does in a great measure depend upon the number of his customers, and that in general every additional purchaser does really add to his profits. If the reasoning, which would be so absurd if applied to individuals, be applicable to nations, the principle on which it rests must require much explanation and elucidation. Let us endeavour to analyse with precision the real nature of the advantage which a producer derives from an addition to the number of his customers. For this purpose, it is necessary that we should premise a single observation on the meaning of the word capital. It is usually defined, the food, clothing, and other articles set aside for the consumption of the labourer, together with the materials and instruments of production. This definition appears to us peculiarly liable to misapprehension; and much vagueness and some narrow views have, we conceive, occasionally resulted from its being interpreted with too mechanical an adherence to the literal meaning of the words. The capital, whether of an individual or of a nation, consists, we apprehend, of all matters possessing exchangeable value, which the individual or the nation has in his or in its possession for the purpose of reproduction, and not for the purpose of the owner's unproductive enjoyment. All unsold goods, therefore, constitute a part of the national capital, and of the capital of the producer or dealer to whom they belong. It is true that tools, materials, and the articles on which the labourer is supported, are the only articles which are directly subservient to production: and if I have a capital consisting of money, or of goods in a warehouse, I can only employ them as means of production in so far as they are capable of being exchanged for the articles which conduce directly to that end. But the food, machinery, &c, which will ultimately be purchased with the goods in my warehouse, may at this moment not be in the country, may not be even in existence. If, after having sold the goods, I hire labourers with the money, and set them to work, I am surely employing capital, though the corn, which in the form of bread those labourers may buy with the money, may be now in warehouse at Dantzic, or perhaps not yet above ground. Whatever, therefore, is destined to be employed reproductively, either in its existing shape, or indirectly by a previous (or even subsequent) exchange, is capital. Suppose that I have laid out all the money I possess in wages and tools, and that the article I produce is just completed: in the interval which elapses before I can sell the article, realize the proceeds, and lay them out again in wages and tools, will it be said that I have no capital? Certainly not: I have the same capital as before, perhaps a greater, but it is locked up, as the expression is, and not disposable. When we have thus seen accurately what really constitutes capital, it becomes obvious, that of the capital of a country, there is at all times a very large proportion lying idle. The annual produce of a country is never any thing approaching in magnitude to what it might be if all the resources devoted to reproduction, if all the capital, in short, of the country, were in full employment. If every commodity on an average remained unsold for a length of time equal to that required for its production, it is obvious that, at any one time, no more than half the productive capital of the country would be really performing the functions of capital. The two halves would relieve one another, like the semichori in a Greek tragedy; or rather the half which was in employment would be a fluctuating portion, composed of varying parts; but the result would be, that each producer would be able to produce every year only half as large a supply of commodities, as he could produce if he were sure of selling them the moment the production was completed. This, or something like it, is however the habitual state, at every instant, of a very large proportion of all the capitalists in the world. The number of producers, or dealers, who turn over their capital, as the expression is, in the shortest possible time, is very small. There are few who have so rapid a sale for their wares, that all the goods which their own capital, or the capital which they can borrow, enables them to supply, are carried off as fast as they can be supplied. The majority have not an _extent of business_, at all adequate to the amount of the capital they dispose of. It is true that, in the communities in which industry and commerce are practised with greatest success, the contrivances of banking enable the possessor of a larger capital than he can employ in his own business, to employ it productively and derive a revenue from it notwithstanding. Yet even then, there is, of necessity, a great quantity of capital which remains fixed in the shape of implements, machinery, buildings, &c, whether it is only half employed, or in complete employment: and every dealer keeps a stock in trade, to be ready for a possible sudden demand, though he probably may not be able to dispose of it for an indefinite period. This perpetual non-employment of a large proportion of capital, is the price we pay for the division of labour. The purchase is worth what it costs; but the price is considerable. Of the importance of the fact which has just been noticed there are three signal proofs. One is, the large sum often given for the goodwill of a particular business. Another is, the large rent which is paid for shops in certain situations, near a great thoroughfare for example, which have no advantage except that the occupier may expect a larger body of customers, and be enabled to turn over his capital more quickly. Another is, that in many trades, there are some dealers who sell articles of an equal quality at a lower price than other dealers. Of course, this is not a voluntary sacrifice of profits: they expect by the consequent overflow of customers to turn over their capital more quickly, and to be gainers by keeping the whole of their capital in more constant employment, though on any given operation their gains are less. The reasoning cited in the earlier part of this paper, to show the uselessness of a mere purchaser or customer, for enriching a nation or an individual, applies only to the case of dealers who have already as much business as their capital admits of, and as rapid a sale for their commodities as is possible. To such dealers an additional purchaser is really of no use; for, if they are sure of selling all their commodities the moment those commodities are on sale, it is of no consequence whether they sell them to one person or to another. But it is questionable whether there be any dealers in whose case this hypothesis is exactly verified; and to the great majority it is not applicable at all. An additional customer, to most dealers, is equivalent to an increase of their productive capital. He enables them to convert a portion of their capital which was lying idle (and which could never have become productive in their hands until a customer was found) into wages and instruments of production; and if we suppose that the commodity, unless bought by him, would not have found a purchaser for a year after, then all which a capital of that value can enable men to produce during a year, is clear gain--gain to the dealer, or producer, and to the labourers whom he will employ, and thus (if no one sustains any corresponding loss) gain to the nation. The aggregate produce of the country for the succeeding year is, therefore, increased; not by the mere exchange, but by calling into activity a portion of the national capital, which, had it not been for the exchange, would have remained for some time longer unemployed. Thus there are actually at all times producers and dealers, of all, or nearly all classes, whose capital is lying partially idle, because they have not found the means of fulfilling the condition which the division of labour renders indispensable to the full employment of capital,--viz., that of exchanging their products with each other. If these persons could find one another out, they could mutually relieve each other from this disadvantage. Any two shopkeepers, in insufficient employment, who agreed to deal at each other's shops so long as they could there purchase articles of as good a quality as elsewhere, and at as low a price, would render the nation a service. It may be said that they must previously have dealt, to the same amount, with some other dealers; but this is erroneous, since they could only have obtained the means of purchasing by being previously enabled to sell. By their compact, each would gain a customer, who would call his capital into fuller employment; each therefore would obtain an increased produce; and they would thus be enabled to become better customers to each other than they could be to third parties. It is obvious that every dealer who has not business sufficient fully to employ his capital (which is the case with all dealers when they commence business, and with many to the end of their lives), is in this predicament simply for want of some one with whom to exchange his commodities; and as there are such persons to about the same degree probably in all trades, it is evident that if these persons sought one another out, they have their remedy in their own hands, and by each other's assistance might bring their capital into more full employment. We are now qualified to define the exact nature of the benefit which a producer or dealer derives from the acquisition of a new customer. It is as follows:-- 1. If any part of his own capital was locked up in the form of unsold goods, producing (for a longer period or a shorter) nothing at all; a portion of this is called into greater activity, and becomes more constantly productive. But to this we must add some further advantages. 2. If the additional demand exceeds what can be supplied by setting at liberty the capital which exists in the state of unsold goods; and if the dealer has additional resources, which were productively invested (in the public funds, for instance), but not in his own trade; he is enabled to obtain, on a portion of these, not mere interest, but profit, and so to gain that difference between the rate of profit and the rate of interest, which may be considered as "wages of superintendance." 3. If all the dealer's capital is employed in his own trade, and no part of it locked up as unsold goods, the new demand affords him additional encouragement to save, by enabling his savings to yield him not merely interest, but profit; and if he does not choose to save (or until he shall have saved), it enables him to carry on an additional business with borrowed capital, and so gain the difference between interest and profit, or, in other words, to receive wages of superintendance on a larger amount of capital. This, it will be found, is a complete account of all the gains which a dealer in any commodity can derive from an accession to the number of those who deal with him: and it is evident to every one, that these advantages are real and important, and that they are the cause which induces a dealer of any kind to desire an increase of his business. It follows from these premises, that the arrival of a new unproductive consumer (living on his own means) in any place, be that place a village, a town, or an entire country, is beneficial to that place, if it causes to any of the dealers of the place any of the advantages above enumerated, without withdrawing an equal advantage of the same kind from any other dealer of the same place. This accordingly is the test by which we must try all such questions, and by which the propriety of the analogical argument, from dealing with a tradesman to dealing with a nation, must be decided. Let us take, for instance, as our example, Paris, which is much frequented by strangers from various parts of the world, who, as sojourners there, live unproductively upon their means. Let us consider whether the presence of these persons is beneficial, in an _industrial_ point of view, to Paris. We exclude from the consideration that portion of the strangers' incomes which they pay to natives as direct remuneration for service, or labour of any description. This is obviously beneficial to the country. An increase in the funds expended in employing labour, whether that labour be productive or unproductive, tends equally to raise wages. The condition of the whole labouring class is, so far, benefited. It is true that the labourers thus employed by sojourners are probably, in part or altogether, withdrawn from productive employment. But this is far from being an evil; for either the situation of the labouring classes is improved, which is far more than an equivalent for a diminution in mere production, or the rise of wages acts as a stimulus to population, and then the number of productive labourers becomes as great as before. To this we may add, that what the sojourners pay as wages of labour or service (whether constant or casual), though expended unproductively by the first possessor, may, when it passes into the hands of the receivers, be by them saved, and invested in a productive employment. If so, a direct addition is made to the national capital. All this is obvious, and is sufficiently allowed by political economists; who have invariably set apart the gains of all persons coming under the class of domestic servants, as real advantages arising to a place from the residence there of an increased number of unproductive consumers. We have only to examine whether the purchases of commodities by these unproductive consumers, confer the same kind of benefit upon the village, town, or nation, which is bestowed upon a particular tradesman by dealing at his shop. Now it is obvious that the sojourners, on their arrival, confer the benefit in question upon some dealers, who did not enjoy it before. They purchase their food, and many other articles, from the dealers in the place. They, therefore, call the capital of some dealers, which was locked up in unsold goods, into more active employment. They encourage them to save, and enable them to receive wages of superintendance upon a larger amount of capital. These effects being undeniable, the question is, whether the presence of the sojourners deprives any others of the Paris dealers of a similar advantage. It will be seen that it does; and nothing will then remain but a comparison of the amounts. It is obvious to all who reflect (and was shown in the paper which precedes this) that the remittances to persons who expend their incomes in foreign countries are, after a slight passage of the precious metals, defrayed in commodities: and that the result commonly is, an increase of exports and a diminution of imports, until the latter fall short of the former by the amount of the remittances. The arrival, therefore, of the strangers (say from England), while it creates at Paris a market for commodities equivalent in value to their funds, displaces in the market other commodities to an equal value. To the extent of the increase of exports from England into France in the way of remittance, it introduces additional commodities which, by their cheapness, displace others formerly produced in that country. To the extent of the diminution of imports into England from France, commodities which existed or which were habitually produced in that country are deprived of a market, or can only find one at a price not sufficient to defray the cost. It must, therefore, be a matter of mere accident, if by arriving in a place, the new unproductive consumer causes any net advantage to its industry, of the kind which we are now examining. Not to mention that this, like any other change in the channels of trade, may render useless a portion of fixed capital, and so far injure the national wealth. A distinction, however, must here be made. The place to which the new unproductive consumers have come, may be a town or village, as well as a country. If a town or village, it may either be or not be a place having an export trade. If the place had no previous trade except with the immediate neighbourhood, there are no exports and imports, by the new arrangement of which, the remittance can be made. There is no capital, formerly employed in manufacturing for the foreign market, which is now brought into less full employment. Yet the remittance evidently is still made in commodities, but in this case without displacing any which were produced before. To shew this, it is necessary to make the following remarks. The reason why towns exist, is that _ceteris paribus_ it is convenient, in order to save cost of carriage, that the production of commodities should take place as far as practicable in the immediate vicinity of the consumer. Capital finds its way so easily from town to country and from country to town, that the amount of capital in the town will be regulated wholly by the amount which can be employed there more conveniently than elsewhere. Consequently the capital of a place will be such as is sufficient 1st. To produce all commodities which from local circumstances can be produced there at less cost than elsewhere: and if this be the case to any great extent, it will be an exporting town. When we say _produced_, we may add, or _stored_. 2nd. To produce and retail the commodities which are consumed by the inhabitants of the town, and the place of whose production is in other respects a matter of indifference. To the inhabitants of the town must be added such dwellers in the adjoining country, as are nearer to that place than to any other equally well furnished market. Now, if new unproductive consumers resort to the place, it is clear that for the latter of these two purposes, more capital will be required than before. Consequently, if less is not required for the former purpose, more capital will establish itself at the place. Until this additional capital has arrived, the producers and dealers already on the spot will enjoy great advantages. Every particle of their own capital will be called into the most active employment. What their capital does not enable them to supply, will be got from others at a distance, who cannot supply it on such favourable terms; consequently they will be in the predicament of possessing a partial monopoly --receiving for every thing a price regulated by a higher cost of production than they are compelled to pay. They also, being in possession of the market, will be enabled to make a large portion of the new capital pass through their hands, and thus to earn wages of superintendance upon it. If, indeed, the place from whence the strangers came, previously traded with that where they have taken up their abode, the effect of their arrival is, that the exports of the town will diminish, and that it will be supplied from abroad with something which it previously produced at home. In this way an amount of capital will be set free equal to that required, and there will be no increase on the whole. The removal of the court from London to Birmingham would not necessarily, though it would probably [6], increase the amount of capital in the latter place. The afflux of money to Birmingham, and its efflux from London, would render it cheaper to make some articles in London for Birmingham consumption; and to make others in London for home consumption, which were formerly brought from Birmingham. But instead of Birmingham, an exporting town, suppose a village, or a town which only produced and retailed for itself and its immediate vicinity. The remittances must come thither in the shape of money; and though the money would not remain, but would be sent away in exchange for commodities, it would, however, first pass through the hands of the producers and dealers in the place, and would by them be exported in exchange for the articles which they require--viz. the materials, tools, and subsistence necessary for the increased production now required of them, and articles of foreign luxury for their own increased unproductive consumption. These articles would not displace any formerly made in the place, but on the contrary, would forward the production of more. Hence we may consider the following propositions as established: 1. The expenditure of absentees (the case of domestic servants excepted,) is not necessarily any loss to the _country_ which they leave, or gain to the _country_ which they resort to (save in the manner shown in Essay I.): for almost every _country_ habitually exports and imports to a much greater value than the incomes of its absentees, or of the foreign sojourners within it. 2. But sojourners often do much good to the _town_ or village which they resort to, and absentees harm to that which they leave. The capital of the petty tradesman in a small town near an absentee's estate, is deprived of the market for which it is conveniently situated, and must resort to another to which other capitals lie nearer, and where it is consequently outbid, and gains less; obtaining only the same price, with greater expenses. But this evil would be equally occasioned, if, instead of going abroad, the absentee had removed to his own capital city. If the tradesman could, in the latter case, remove to the metropolis, or in the former, employ himself in producing increased exports, or in producing for home consumption articles now no longer imported, each in the place most convenient for that operation; he would not be a loser, though the place which he was obliged to leave might be said to lose. Paris undoubtedly gains much by the sojourn of foreigners, while the counteracting loss by diminution of exports from France is suffered by the great trading and manufacturing towns, Rouen, Bordeaux, Lyons, &c, which also suffer the principal part of the loss by importation of articles previously produced at home. The capital thus set free, finds its most convenient seat to be Paris, since the business to which it must turn is the production of articles to be unproductively consumed by the sojourners. The great trading towns of France would undoubtedly be more flourishing, if France were not frequented by foreigners. Rome and Naples are perhaps purely benefited by the foreigners sojourning there: for they have so little external trade, that their case may resemble that of the village in our hypothesis. Absenteeism, therefore, (except as shown in the first Essay,) is a local, not a national evil; and the resort of foreigners, in so far as they purchase for unproductive consumption, is not, in any commercial country, a national, though it may be a local good. From the considerations which we have now adduced, it is obvious what is meant by such phrases as a _brisk demand_, and a rapid circulation. There is a brisk demand and a rapid circulation, when goods, generally speaking, are sold as fast as they can be produced. There is slackness, on the contrary, and stagnation, when goods, which have been produced, remain for a long time unsold. In the former case, the capital which has been locked up in production is disengaged as soon as the production is completed; and can be immediately employed in further production. In the latter case, a large portion of the productive capital of the country is lying in temporary inactivity. From what has been already said, it is obvious that periods of "brisk demand" are also the periods of greatest production: the national capital is never called into full employment but at those periods. This, however, is no reason for desiring such times; it is not desirable that the whole capital of the country should be in full employment. For, the calculations of producers and traders being of necessity imperfect, there are always some commodities which are more or less in excess, as there are always some which are in deficiency. If, therefore, the whole truth were known, there would always be some classes of producers contracting, not extending, their operations. If _all_ are endeavouring to extend them, it is a certain proof that some general delusion is afloat. The commonest cause of such delusion is some general, or very extensive, rise of prices (whether caused by speculation or by the currency) which persuades all dealers that they are growing rich. And hence, an increase of production really takes place during the progress of depreciation, as long as the existence of depreciation is not suspected; and it is this which gives to the fallacies of the currency school, principally represented by Mr. Attwood, all the little plausibility they possess. But when the delusion vanishes and the truth is disclosed, those whose commodities are relatively in excess must diminish their production or be ruined: and if during the high prices they have built mills and erected machinery, they will be likely to repent at leisure. In the present state of the commercial world, mercantile transactions being carried on upon an immense scale, but the remote causes of fluctuations in prices being very little understood, so that unreasonable hopes and unreasonable fears alternately rule with tyrannical sway over the minds of a majority of the mercantile public; general eagerness to buy and general reluctance to buy, succeed one another in a manner more or less marked, at brief intervals. Except during short periods of transition, there is almost always either great briskness of business or great stagnation; either the principal producers of almost all the leading articles of industry have as many orders as they can possibly execute, or the dealers in almost all commodities have their warehouses full of unsold goods. In this last ease, it is commonly said that there is a general superabundance; and as those economists who have contested the possibility of general superabundance, would none of them deny the possibility or even the frequent occurrence of the phenomenon which we have just noticed, it would seem incumbent on them to show, that the expression to which they object is not applicable to a state of things in which all or most commodities remain unsold, in the same sense in which there is said to be a superabundance of any one commodity when it remains in the warehouses of dealers for want of a market. This is merely a question of naming, but an important one, as it seems to us that much apparent difference of opinion has been produced by a mere difference in the mode of describing the same facts, and that persons who at bottom were perfectly agreed, have considered each other as guilty of gross error, and sometimes oven misrepresentation, on this subject. In order to afford the explanations, with which it is necessary to take the doctrine of the impossibility of an excess of all commodities, we must advert for a moment to the argument by which this impossibility is commonly maintained. There can never, it is said, be a want of buyers for all commodities; because whoever offers a commodity for sale, desires to obtain a commodity in exchange for it, and is therefore a buyer by the mere fact of his being a seller. The sellers and the buyers, for all commodities taken together, must, by the metaphysical necessity of the case, be an exact equipoise to each other; and if there be more sellers than buyers of one thing, there must be more buyers than sellers for another. This argument is evidently founded on the supposition of a state of barter; and, on that supposition, it is perfectly incontestable. When two persons perform an act of barter, each of them is at once a seller and a buyer. He cannot sell without buying. Unless he chooses to buy some other person's commodity, he does not sell his own. If, however, we suppose that money is used, these propositions cease to be exactly true. It must be admitted that no person desires money for its own sake, (unless some very rare cases of misers be an exception,) and that he who sells his commodity, receiving money in exchange, does so with the intention of buying with that same money some other commodity. Interchange by means of money is therefore, as has been often observed, ultimately nothing but barter. But there is this difference--that in the case of barter, the selling and the buying are simultaneously confounded in one operation; you sell what you have, and buy what you want, by one indivisible act, and you cannot do the one without doing the other. Now the effect of the employment of money, and even the utility of it, is, that it enables this one act of interchange to be divided into two separate acts or operations; one of which may be performed now, and the other a year hence, or whenever it shall be most convenient. Although he who sells, really sells only to buy, he needs not buy at the same moment when he sells; and he does not therefore necessarily add to the _immediate_ demand for one commodity when he adds to the supply of another. The buying and selling being now separated, it may very well occur, that there may be, at some given time, a very general inclination to sell with as little delay as possible, accompanied with an equally general inclination to defer all purchases as long as possible. This is always actually the case, in those periods which are described as periods of general excess. And no one, after sufficient explanation, will contest the possibility of general excess, in this sense of the word. The state of things which we have just described, and which is of no uncommon occurrence, amounts to it. For when there is a general anxiety to sell, and a general disinclination to buy, commodities of all kinds remain for a long time unsold, and those which find an immediate market, do so at a very low price. If it be said that when all commodities fall in price, the fall is of no consequence, since mere money price is not material while the relative value of all commodities remains the same, we answer that this would be true if the low prices were to last for ever. But as it is certain that prices will rise again sooner or later, the person who is obliged by necessity to sell his commodity at a low money price is really a sufferer, the money he receives sinking shortly to its ordinary value. Every person, therefore, delays selling if he can, keeping his capital unproductive in the mean time, and sustaining the consequent loss of interest. There is stagnation to those who are not obliged to sell, and distress to those who are. It is true that this state can be only temporary, and must even be succeeded by a reaction of corresponding violence, since those who have sold without buying will certainly buy at last, and there will then be more buyers than sellers. But although the general over-supply is of necessity only temporary, this is no more than may be said of every partial over-supply. An overstocked state of the market is always temporary, and is generally followed by a more than common briskness of demand. In order to render the argument for the impossibility of an excess of all commodities applicable to the case in which a circulating medium is employed, money must itself be considered as a commodity. It must, undoubtedly, be admitted that there cannot be an excess of all other commodities, and an excess of money at the same time. But those who have, at periods such as we have described, affirmed that there was an excess of all commodities, never pretended that money was one of these commodities; they held that there was not an excess, but a deficiency of the circulating medium. What they called a general superabundance, was not a superabundance of commodities relatively to commodities, but a superabundance of all commodities relatively to money. What it amounted to was, that persons in general, at that particular time, from a general expectation of being called upon to meet sudden demands, liked better to possess money than any other commodity. Money, consequently, was in request, and all other commodities were in comparative disrepute. In extreme cases, money is collected in masses, and hoarded; in the milder cases, people merely defer parting with their money, or coming under any new engagements to part with it. But the result is, that all commodities fall in price, or become unsaleable. When this happens to one single commodity, there is said to be a superabundance of that commodity; and if that be a proper expression, there would seem to be in the nature of the case no particular impropriety in saying that there is a superabundance of all or most commodities, when all or most of them are in this same predicament. It is, however, of the utmost importance to observe that excess of all commodities, in the only sense in which it is possible, means only a temporary fall in their value relatively to money. To suppose that the markets for all commodities could, in any other sense than this, be overstocked, involves the absurdity that commodities may fall in value relatively to themselves; or that, of two commodities, each can fall relatively to the other, A becoming equivalent to B-_x_, and B to A-_x_, at the same time. And it is, perhaps, a sufficient reason for not using phrases of this description, that they suggest the idea of excessive production. A want of market for one article may arise from excessive production of that article; but when commodities in general become unsaleable, it is from a very different cause; there cannot be excessive production of commodities in general. The argument against the possibility of general over-production is quite conclusive, so far as it applies to the doctrine that a country may accumulate capital too fast; that produce in general may, by increasing faster than the demand for it, reduce all producers to distress. This proposition, strange to say, was almost a received doctrine as lately as thirty years ago; and the merit of those who have exploded it is much greater than might be inferred from the extreme obviousness of its absurdity when it is stated in its native simplicity. It is true that if all the wants of all the inhabitants of a country were fully satisfied, no further capital could find useful employment; but, in that case, none would be accumulated. So long as there remain any persons not possessed, we do not say of subsistence, but of the most refined luxuries, and who would work to possess them, there is employment for capital; and if the commodities which these persons want are not produced and placed at their disposal, it can only be because capital does not exist, disposable for the purpose of employing, if not any other labourers, those very labourers themselves, in producing the articles for their own consumption. Nothing can be more chimerical than the fear that the accumulation of capital should produce poverty and not wealth, or that it will ever take place too fast for its own end. Nothing is more true than that it is produce which constitutes the market for produce, and that every increase of production, if distributed without miscalculation among all kinds of produce in the proportion which private interest would dictate, creates, or rather constitutes, its own demand. This is the truth which the deniers of general over-production have seized and enforced; nor is it pretended that anything has been added to it, or subtracted from it, in the present disquisition. But it is thought that those who receive the doctrine accompanied with the explanations which we have given, will understand, more clearly than before, what is, and what is not, implied in it; and will see that, when properly understood, it in no way contradicts those obvious facts which are universally known and admitted to be not only of possible, but of actual and even frequent occurrence. The doctrine in question only appears a paradox, because it has usually been so expressed as apparently to contradict these well-known facts; which, however, were equally well known to the authors of the doctrine, who, therefore, can only have adopted from inadvertence any form of expression which could to a candid person appear inconsistent with it. The essentials of the doctrine are preserved when it is allowed that there cannot be permanent excess of production, or of accumulation; though it be at the same time admitted, that as there may be a temporary excess of any one article considered separately, so may there of commodities generally, not in consequence of over-production, but of a want of commercial confidence. NOTE: [6] Probably; because most articles of an ornamental description being still required from the same makers, these makers, with their capital, would probably follow their customers, Besides, from place to place within the same country, most persons will lather change their habitation than their employment. But the moving on this score would be reciprocal. ESSAY III. ON THE WORDS PRODUCTIVE AND UNPRODUCTIVE. It would probably be difficult to point out any two words, respecting the proper use of which political economists have been more divided, than they have been concerning the two words _productive_ and _unproductive_; whether considered as applied to _labour_, to _consumption_, or to _expenditure_. Although this is a question solely of nomenclature, it is one of sufficient importance to be worth another attempt to settle it satisfactorily. For, although writers on political economy have not agreed in the ideas which they were accustomed to annex to these terms, the terms have generally been employed to denote ideas of very great importance, and it is impossible that some vagueness should not have been thrown upon the ideas themselves by looseness in the use of the words by which they are habitually designated. Further, so long as the pedantic objection to the introduction of new technical terms continues, accurate thinkers on moral and political subjects are limited to a very scanty vocabulary for the expression of their ideas. It therefore is of great importance that the words with which mankind are familiar, should be turned to the greatest possible advantage as instruments of thought; that one word should not be used as the sign of an idea which is already sufficiently expressed by another word; and that words which are required to denote ideas of great importance, should not be usurped for the expression of such as are comparatively insignificant. The phrases _productive labour_, and _productive consumption_, have been employed by some writers on political economy with very great latitude. They have considered, and classed, as productive labour and productive consumption, all labour which serves any _useful_ purpose--all consumption which is not _waste_. Mr. M'Culloch has asserted, _totidem verbis_, that the labour of Madame Pasta was as well entitled to be called productive labour as that of a cotton spinner. Employed in this sense, the words _productive_ and _unproductive_ are superfluous, since the words _useful_ and _agreeable_ on the one hand, _useless_ and _worthless_ on the other, are quite sufficient to express all the ideas to which the words _productive_ and _unproductive_ are here applied. This use of the terms, therefore, is subversive of the ends of language. Those writers who have employed the words in a more limited sense, have usually understood by productive or unproductive labour, labour which is productive of wealth, or unproductive of wealth. But what is wealth? And here the words productive and unproductive have been affected with additional ambiguities, corresponding to the different extension which different writers have given to the term wealth. Some have given the name of wealth to _all things_ which tend to the use or enjoyment of mankind, and which possess exchangeable value. This last clause is added to exclude air, the light of the sun, and any other things which can be obtained in unlimited quantity without labour or sacrifice; together with all such things as, though produced by labour, are not held in sufficient general estimation to command any price in the market. But when this definition came to be explained, many persons were disposed to interpret "_all things_ which tend to the use or enjoyment of man," as implying only all _material_ things. _Immaterial_ products they refused to consider as wealth; and labour or expenditure which yielded nothing but immaterial products, they characterised as unproductive labour and unproductive expenditure. To this it was, or might have been, answered, that according to this classification, a carpenter's labour at his trade is productive labour, but the same individual's labour in learning his trade was unproductive labour. Yet it is obvious that, on both occasions, his labour tended exclusively to what is allowed to be production: the one was equally indispensable with the other, to the ultimate result. Further, if we adopted the above definition, we should be obliged to say that a nation whose artisans were twice as skilful as those of another nation, was not, _ceteris paribus_, more wealthy; although it is evident that every one of the results of wealth, and everything for the sake of which wealth is desired, would be possessed by the former country in a higher degree than by the latter. Every classification according to which a basket of cherries, gathered and eaten the next minute, are called wealth, while that title is denied to the acquired skill of those who are acknowledged to be productive labourers, is a purely arbitrary division, and does not conduce to the ends for which classification and nomenclature are designed. In order to get over all difficulties, some political economists seem disposed to make the terms express a distinction sufficiently definite indeed, but more completely arbitrary, and having less foundation in nature, than any of the former. They will not allow to any labour or to any expenditure the name of productive, unless the produce which it yields returns into the hands of the very person who made the outlay. Hedging and ditching they term productive labour, though those operations conduce to production only indirectly, by protecting the produce from destruction; but the necessary expenses incurred by a government for the protection of property are, they insist upon it, consumed unproductively: though, as has been well pointed out by Mr. M'Culloch, these expenses, in their relation to the national wealth, are exactly analogous to the wages of a hedger or a ditcher. The only difference is, that the farmer, who pays for the hedging and ditching, is the person to whom the consequent increase of production accrues, while the government, which is at the expense of police officers and courts of justice, does not, as a necessary consequence, get back into its own coffers the increase of the national wealth resulting from the security of property. It would be endless to point out the oddities and incongruities which result from this classification. Whether we take the words wealth and production in the largest, or in the most restricted sense in which they have ever yet been employed, nobody will dispute that roads, bridges, and canals, contribute in an eminent degree, and in a very direct manner, to the increase of production and wealth. The labour and pecuniary resources employed in their construction would, according to the above theory, be considered productive, if every occupier of land were compelled by law to construct so much of the road, or canal, as passes through his own farm. If, instead of this, the government makes the road, and throws it open to the public toll-free, the labour and expenditure would be, on the above system, clearly unproductive. But if the government, or an association of individuals, made the road, and imposed a toll to defray the expense, we do not see how these writers could refuse to the outlay the title of productive expenditure. It would follow, that the very same labour and expense, if given gratuitously, must be called unproductive, which, if a charge had been made for it, would have been called productive. When these consequences of the purely arbitrary classification to which we allude have been pointed out and complained of, the only answer which we have ever seen made to the objection is, that the line of demarcation must be drawn somewhere, and that in every classification there are intermediate cases, which might have been included, with almost equal propriety, either in the one class or in the other. This answer appears to us to indicate the want of a sufficiently accurate and discriminating perception, what is the kind of inaccuracy which generally cannot be avoided in a classification, and what is that other kind of inaccuracy, from which it always may be, and should be, exempt. The classes themselves may be, mentally speaking, perfectly definite, though it may not always be easy to say to which of them a particular object belongs. When it is uncertain in which of two classes an object should be placed, if the classification be properly made, and properly expressed, the uncertainty can turn only upon a matter of fact. It is uncertain to which class the object belongs, because it is doubtful whether it possesses in a greater degree the characteristics of the one class or those of the other. But the characteristics themselves may be defined and distinguished with the nicest exactness, and always ought to be so. Especially ought they in a case like the present, because here it is only the distinction between the ideas which is of any importance. That we should be able with ease to portion out all employments between the two classes, does not happen to be of any particular consequence. It is frequently said that classification is a mere affair of convenience. This assertion is true in one sense, but not if its meaning be, that the most proper classification is that in which it is easiest to say whether an object belongs to one class or to the other. The use of classification is, to fix attention upon the distinctions which exist among things; and that is the best classification, which is founded upon the most important distinctions, whatever be the facilities which it may afford of ticketing and arranging the different objects which exist in nature. In fixing, therefore, the meaning of the words productive and unproductive, we ought to endeavour to render them significative of the most important distinctions which, without too glaring a violation of received usage, they can be made to express. We ought further, when we are restricted to the employment of old words, to endeavour as far as possible that it shall not be necessary to struggle against the old associations with those words. We should, if possible, give the words such a meaning, that the propositions in which people are accustomed to use them, shall as far as possible still be true; and that the feelings habitually excited by them, shall be such as the things to which we mean to appropriate them ought to excite. We shall endeavour to unite these conditions in the result of the following enquiry. In whatever manner political economists may have settled the definition of productive and unproductive labour or consumption, the consequences which they have drawn from the definition are nearly the same. In proportion to the amount of the productive labour and consumption of a country, the country, they all allow, is enriched: in proportion to the amount of the unproductive labour and consumption, the country is impoverished. Productive expenditure they are accustomed to view as a gain; unproductive expenditure, however useful, as a sacrifice. Unproductive expenditure of what was destined to be expended productively, they always characterise as a squandering of resources, and call it profusion and prodigality. The productive expenditure of that which might, without encroaching upon capital, be expended unproductively, is called saving, economy, frugality. Want, misery, and starvation, are described as the lot of a nation which annually employs less and less of its labour and resources in production; growing comfort and opulence as the result of an annual increase in the quantity of wealth so employed. Let us then examine what qualities in expenditure, and in the employment of labour, are those from which all the consequences above mentioned really flow. The end to which all labour and all expenditure are directed, is twofold. Sometimes it is _enjoyment_ immediately; the fulfilment of those desires, the gratification of which is wished for on its own account. Whenever labour or expense is not incurred _immediately_ for the sake of enjoyment, and is yet not absolutely wasted, it must be incurred for the purpose of enjoyment _indirectly_ or mediately; by either repairing and perpetuating, or adding, to the _permanent sources_ of enjoyment. Sources of enjoyment may be accumulated and stored up; enjoyment itself cannot. The wealth of a country consists of the sum total of the permanent sources of enjoyment, whether material or immaterial, contained in it: and labour or expenditure which tends to augment or to keep up these permanent sources, should, we conceive, be termed productive. Labour which is employed for the purpose of directly affording enjoyment, such as the labour of a performer on a musical instrument, we term unproductive labour. Whatever is consumed by such a performer, we consider as unproductively consumed: the accumulated total of the sources of enjoyment which the nation possesses, is diminished by the amount of what he has consumed: whereas, if it had been given to him in exchange for his services in producing food or clothing, the total of the permanent sources of enjoyment in the country might have been not diminished but increased. The performer on the musical instrument then is, so far as respects that act, not a productive, but an unproductive labourer. But what shall we say of the workman who made the musical instrument? He, most persons would say, is a productive labourer; and with reason; because the musical instrument is a permanent source of enjoyment, which does not begin and end with the enjoying, and therefore admits of being accumulated. But the _skill_ of the musician is a permanent source of enjoyment, as well as the instrument which he plays upon: and although skill is not a material object, but a quality of an object, viz., of the hands and mind of the performer; nevertheless skill possesses exchangeable value, is acquired by labour and capital, and is capable of being stored and accumulated. Skill, therefore, must be considered as wealth; and the labour and funds employed in acquiring skill in anything tending to the advantage or pleasure of mankind, must be considered to be productively employed and expended. The skill of a productive labourer is analogous to the machinery he works with: neither of them is enjoyment, nor conduces directly to it, but both conduce indirectly to it, and both in the same way. If a spinning-jenny be wealth, the spinner's skill is also wealth. If the mechanic who made the spinning-jenny laboured productively, the spinner also laboured productively when he was learning his trade: and what they both consumed was consumed productively, that is to say, its consumption did not tend to diminish, but to increase the sum of the permanent sources of enjoyment in the country, by effecting a new creation of those sources, more than equal to the amount of the consumption. The skill of a tailor, and the implements he employs, contribute in the same way to the convenience of him who wears the coat, namely, a remote way: it is the coat itself which contributes immediately. The skill of Madame Pasta, and the building and decorations which aid the effect of her performance, contribute in the same way to the enjoyment of the audience, namely, an immediate way, without any intermediate instrumentality. The building and decorations are consumed unproductively, and Madame Pasta labours and consumes unproductively; for the building is used and worn out, and Madame Pasta performs, immediately for the spectators' enjoyment, and without leaving, as a consequence of the performance, any permanent result possessing exchangeable value: consequently the epithet unproductive must be equally applied to the gradual wearing out of the bricks and mortar, the nightly consumption of the more perishable "properties" of the theatre, the labour of Madame Pasta in acting, and of the orchestra in playing. But notwithstanding this, the architect who built the theatre was a productive labourer; so were the producers of the perishable articles; so were those who constructed the musical instruments; and so, we must be permitted to add, were those who instructed the musicians, and all persons who, by the instructions which they may have given to Madame Pasta, contributed to the formation of her talent. All these persons contributed to the enjoyment of the audience in the same way, and that a remote way, viz., by the production of a _permanent source of enjoyment_. The difference between this case, and the case of the cotton spinner already adverted to, is this. The spinning-jenny, and the skill of the cotton spinner, are not only the result of productive labour, but are themselves productively consumed. The musical instrument and the skill of the musician are equally the result of productive labour, but are themselves unproductively consumed. Let us now consider what kinds of labour, and of consumption or expenditure, will be classed as productive, and what as unproductive, according to this rule. The following are always productive: Labour and expenditure, of which the direct object or effect is the creation of some material product useful or agreeable to mankind. Labour and expenditure, of which the direct effect and object are, to endow human or other animated beings with faculties or qualities useful or agreeable to mankind, and possessing exchangeable value. Labour and expenditure, which without having for their direct object the creation of any useful material product or bodily or mental faculty or quality, yet tend indirectly to promote one or other of those ends, and are exerted or incurred solely for that purpose. The following are partly productive and partly unproductive, and cannot with propriety be ranged decidedly with either class: Labour or expenditure which does indeed create, or promote the creation of, some useful material product or bodily or mental faculty or quality, but which is not incurred or exerted for that sole end; having also for another, and perhaps its principal end, enjoyment, or the promotion of enjoyment. Such are the labour of the judge, the legislator, the police-officer, the soldier; and the expenditure incurred for their support. These functionaries protect and secure mankind in the exclusive possession of such material products or acquired faculties as belong to them; and by the security which they so confer, they indirectly increase production in a degree far more than equivalent to the expense which is necessary for their maintenance. But this is not the only purpose for which they exist; they protect mankind, not merely in the possession of their permanent resources, but also in their actual enjoyments; and so far, although highly useful, they cannot, conformably to the distinction which we have attempted to lay down, be considered productive labourers. Such, also, are the labour and the wages of domestic servants. Such persons are entertained mainly as subservient to mere enjoyment; but most of them occasionally, and some habitually, render services which must be considered as of a productive nature; such as that of cookery, the last stage in the manufacture of food; or gardening, a branch of agriculture. The following are wholly unproductive: Labour exerted, and expenditure incurred, directly and exclusively for the purpose of enjoyment, and not calling into existence anything, whether substance or quality, but such as begins and perishes in the enjoyment. Labour exerted and expenditure incurred uselessly, or in pure waste, and yielding neither direct enjoyment nor permanent sources of enjoyment. It may be objected, that expenditure incurred even for pure enjoyment promotes production indirectly, by inciting to exertion. Thus the view of the splendour of a rich establishment is supposed by some writers to produce upon the mind of an indigent spectator an earnest desire of enjoying the same luxuries, and a consequent purpose of working with vigour and diligence, and saving from his earnings, thus increasing the productive capital of the country. It is true that mankind are, for the most part, excited to productive industry solely by the desire of subsequently consuming the result of their labour and accumulation. The consumption called unproductive, viz., that of which the direct result is enjoyment, is in reality the end, to which production is only the means; and a desire for the end, is what alone impels any one to have recourse to the means. But, notwithstanding this, it is of the greatest importance to mark the distinction between the labour and the consumption which have enjoyment for their immediate end, and the labour and the consumption of which the immediate end is reproduction. Though the sight of the former may still further stimulate that desire for the enjoyments afforded by wealth, which the mere knowledge, without the immediate view, would suffice to excite (and without dwelling on the consideration that if the example of a large expenditure excites one individual to accumulation, it encourages two to prodigal expense); still, if we look only to the effects which are intended, or to those which immediately follow from the consumption, and whose connexion with it can be distinctly traced, it evidently renders a country poorer in the permanent sources of enjoyment; while reproductive consumption leaves the country richer in these same sources. Besides, if what is spent for mere pleasure promotes indirectly the increase of wealth, it can only be by inducing others _not_ to expend on mere pleasure. Before quitting the subject, one more observation should be added. It must not be supposed that what is expended upon unproductive labourers is necessarily, the whole of it, unproductively consumed. The unproductive labourers may save part of their wages, and invest them in a productive employment. It is not unusual to speak of what is paid in wages to a labourer as being thereby _consumed_, as if all profit and loss to the nation were to be seen in the capitalist's account-book. What is paid for productive labour is said to be productively consumed; what is paid for unproductive labour is said to be consumed unproductively. It would be proper to say, not that it is productively or unproductively _consumed_, but productively or unproductively _expended_; otherwise, we shall be obliged to say that it is consumed twice over; the first time unproductively, perhaps, and the second, it may be, productively. To pronounce in which way the wages of the labourer are consumed, we must follow them into the labourer's own hands. As much as is necessary to keep the productive labourer in perfect health and fitness for his employment, may be said to be consumed productively. To this should be added what he expends in rearing children to the age at which they become capable of productive industry. If the state of the market for labour be such as to afford him more, this he may either save, or, as the common expression is, he may spend it. If he saves any portion, this (unless it be merely hoarded) he intends to employ productively, and it will be productively consumed. If he spends it, the consumption is for enjoyment immediately, and is therefore unproductive. This suggests another correction in the established language. Political economists generally define the "net produce" to be that portion of the gross annual produce of a country which remains after replacing the capital annually consumed. This, as they proceed to explain, consists of profits and rent; wages being included in the other portion of the gross produce, that which goes to replace capital. After this definition, they usually proceed to tell us that the net produce, and that alone, constitutes the fund from which a nation can accumulate, and add to its capital, as also that which it can, without retrograding in wealth, expend unproductively, or for enjoyment. Now, it is impossible that both the above propositions can be true. If the net produce is that which remains after replacing capital, then net produce is not the only fund out of which accumulation may be made: for accumulation may be made from wages; this is in all countries one of the great sources, and in countries like America perhaps the greatest source of accumulation. If, on the other hand, it is desirable to reserve the name of net produce to denote the fund available for accumulation or for unproductive consumption, we must define net produce differently. The definition which appears the best adapted to render the ordinary doctrines relating to net produce true, would be this: The net produce of a country is whatever is annually produced beyond what is necessary for maintaining the stock of materials and implements unimpaired, for keeping all productive labourers alive and in condition for work, and for just keeping up their numbers without increase. What is required for these purposes, or, in other words, for keeping up the productive resources of the country, cannot be diverted from its destination without rendering the nation as a whole poorer. But all which is produced beyond this, whether it be in the hands of the labourer, of the capitalist, or of any of the numerous varieties of rent-owners, may be taken for immediate enjoyment, without prejudice to the productive resources of the community; and whatever part of it is not so taken, constitutes a clear addition to the national capital, or to the permanent sources of enjoyment. ESSAY IV. ON PROFITS, AND INTEREST. The profits of stock are the surplus which remains to the capitalist after replacing his capital: and the ratio which that surplus bears to the capital itself, is the _rate_ of profit. This being the definition of profits, it might seem natural to adopt, as a sufficient theory in regard to the rate of profit, that it depends upon the productive power of capital. Some countries are favoured beyond others, either by nature or art, in the means of production. If the powers of the soil, or of machinery, enable capital to produce what is necessary for replacing itself, and twenty per cent more, profits will be twenty per cent; and so on. This, accordingly, is a popular mode of speaking on the subject of profits; but it has only the semblance, not the reality, of an explanation. The "productive power of capital," though a common, and, for some purposes, a convenient expression, is a delusive one. Capital, strictly speaking, has no productive power. The only productive power is that of labour; assisted, no doubt, by tools, and acting upon materials. That portion of capital which consists of tools and materials, may be said, perhaps, without any great impropriety, to have a productive power, because they contribute, along with labour, to the accomplishment of production. But that portion of capital which consists of wages, has no productive power of its own. Wages have no productive power; they are the price of a productive power. Wages do not contribute, along with labour, to the production of commodities, no more than the price of tools contributes along with the tools themselves. If labour could be had without purchase, wages might be dispensed with. That portion of capital which is expended in the wages of labour, is only the means by which the capitalist procures to himself, in the way of purchase, the use of that labour in which the power of production really resides. The proper view of capital is, that anything whatever, which a person possesses, constitutes his capital, provided he is able, and intends, to employ it, not in consumption for the purpose of enjoyment, but in possessing himself of the means of production, with the intention of employing those means productively. Now the means of production are labour, implements, and materials. The only productive power which anywhere exists, is the productive power of labour, implements, and materials. We need not, on this account, altogether proscribe the expression, "productive power of capital;" but we should carefully note, that it can only mean the quantity of real productive power which the capitalist, by means of his capital, can command. This may change, though the productive power of labour remains the same. Wages, for example, may rise; and then, although all the circumstances of production remain exactly as they were before, the same capital will yield a less return, because it will set in motion a less quantity of productive labour. We may, therefore, consider the capital of a producer as measured by the means which he has of possessing himself of the different essentials of production: namely, labour, and the various articles which labour requires as materials, or of which it avails itself as aids. The ratio between the price which he has to pay for these means of production, and the produce which they enable him to raise, is the _rate_ of his _profit_. If he must give for labour and tools four-fifths of what they will produce, the remaining fifth will constitute his profit, and will give him a rate of one in four, or twenty-five per cent, on his outlay. It is necessary here to remark, what cannot indeed by any possibility be misunderstood, but might possibly be overlooked in cases where attention to it is indispensable, viz., that we are speaking now of the _rate_ of profit, not the gross profit. If the capital of the country is very great, a profit of only five per cent upon it may be much more ample, may support a much larger number of capitalists and their families in much greater affluence, than a profit of twenty-five per cent on the comparatively small capital of a poor country. The _gross_ profit of a country is the actual amount of necessaries, conveniences, and luxuries, which are divided among its capitalists: but whether this be large or small, the rate of profit may be just the same. The rate of profit is the proportion which the profit bears to the capital; which the surplus produce after replacing the outlay, bears to the outlay. In short, if we compare the _price paid_ for labour and tools with what that labour and those tools will _produce_, from this ratio we may calculate the rate of profit. As the gross profit may be very different though the rate of profit be the same; so also may the absolute price paid for labour and tools be very different, and yet the proportion between the price paid and the produce obtained may be just the same. For greater clearness, let us omit, for the present, the consideration of tools, materials, &c, and conceive production as the result solely of labour. In a certain country, let us suppose, the wages of each labourer are one quarter of wheat per year, and 100 men can produce, in one year, 120 quarters. Here the price paid for labour is to the produce of that labour as 100 to 120, and profits are 20 per cent. Suppose now that, in another country, wages are just double what they are in the country before supposed; namely, two quarters of wheat per year, for each labourer. But suppose, likewise, that the productive power of labour is double what it is in the first country; that by the greater fertility of the soil, 100 men can produce 240 quarters, instead of 120 as before. Here it is obvious, that the real price paid for labour is twice as great in the one country as in the other; but the produce being also twice as great, the ratio between the price of labour and the produce of labour is still exactly the same: an outlay of 200 quarters gives a return of 240 quarters, and profits, as before, are 20 per cent. Profits, then (meaning not gross profits, but the rate of profit), depend (not upon the price of labour, tools, and materials--but) upon the ratio between the price of labour, tools, and materials, and the produce of them: upon the proportionate share of the produce of industry which it is necessary to offer, in order to purchase that industry and the means of setting it in motion. * * * * * We have hitherto spoken of tools, buildings, and materials, as essentials of production, co-ordinate with labour, and equally indispensable with it. This is true; but it is also true that tools, buildings, and materials, are themselves the produce of labour; and that the only cause (cases of monopoly excepted) of their having any value, is the labour which is required for their production. If tools, buildings, and materials were the spontaneous gifts of nature, requiring no labour either in order to produce or to appropriate them; and if they were thus bestowed upon mankind in indefinite quantity, and without the possibility of being monopolized; they would still be as useful, as indispensable as they now are; but since they could, like air and the light of the sun, be obtained without cost or sacrifice, they would form no part of the expenses of production, and no portion of the produce would be required to be set aside in order to replace the outlay made for these purposes. The whole produce, therefore, after replacing the wages of labour, would be clear profit to the capitalist. Labour alone is the primary means of production; "the original purchase-money which has been paid for everything." Tools and materials, like other things, have originally cost nothing but labour; and have a value in the market only because wages have been paid for them. The labour employed in making the tools and materials being added to the labour afterwards employed in working up the materials by aid of the tools, the sum total gives the whole of the labour employed in the production of the completed commodity. In the ultimate analysis, therefore, labour appears to be the only essential of production. To replace capital, is to replace nothing but the wages of the labour employed. Consequently, the whole of the surplus, after replacing wages, is profits. From this it seems to follow, that the ratio between the wages of labour and the produce of that labour gives the rate of profit. And thus we arrive at Mr. Ricardo's principle, that profits depend upon wages; rising as wages fall, and falling as wages rise. To protect this proposition (the most perfect form in which the law of profits seems to have been yet exhibited) against misapprehension, one or two explanatory remarks are required. If by wages, be meant what constitutes the real affluence of the labourer, the _quantity_ of produce which he receives in exchange for his labour; the proposition that profits vary inversely as wages, will be obviously false. The rate of profit (as has been already observed and exemplified) does not depend upon the price of labour, but upon the proportion between the price of labour and the produce of it. If the produce of labour is large, the price of labour may also be large without any diminution of the rate of profit: and, in fact, the rate of profit is highest in those countries (as, for instance, North America) where the labourer is most largely remunerated. For the wages of labour, though so large, bear a less proportion to the abundant _produce_ of labour, there than elsewhere. But this does not affect the truth of Mr. Ricardo's principle as he himself understood it; because an increase of the labourer's real comforts was not considered by him as a rise of wages. In his language wages were only said to rise, when they rose not in mere quantity but in _value_. To the labourer himself (he would have said) the _quantity_ of his remuneration is the important circumstance: but its _value_ is the only thing of importance to the person who purchases his labour. The rate of profits depends not upon absolute or real wages, but upon the _value_ of wages. If, however, by value, Mr. Ricardo had meant _exchangeable_ value, his proposition would still have been remote from the truth. Profits depend no more upon the exchangeable value of the labourer's remuneration, than upon its quantity. The truth is, that by the exchangeable value is meant the quantity of commodities which the labourer can purchase with his wages; so that when we say the exchangeable value of wages, we say their quantity, under another name. Mr. Ricardo, however, did not use the word value in the sense of exchangeable value. Occasionally, in his writings, he could not avoid using the word as other people use it, to denote value in exchange. But he more frequently employed it in a sense peculiar to himself, to denote cost of production; in other words, the _quantity of labour_ required to produce the article; that being his criterion of cost of production. Thus, if a hat could be made with ten days' labour in France and with five days' labour in England, he said that the value of a hat was double in France of what it was in England. If a quarter of corn could be produced a century ago with half as much labour as is necessary at present, Mr. Ricardo said that the value of a quarter of corn had doubled. Mr. Ricardo, therefore, would not have said that wages had risen, because a labourer could obtain two pecks of flour instead of one, for a day's labour; but if last year he received, for a day's labour, something which required eight hours' labour to produce it, and this year something which requires nine hours, then Mr. Ricardo would say that wages had risen. A rise of wages, with Mr. Ricardo, meant an increase in the cost of production of wages; an increase in the number of hours' labour which go to produce the wages of a day's labour; an increase in the _proportion_ of the fruits of labour which the labourer receives for his own share; an increase in the ratio between the wages of his labour and the produce of it. This is the theory: the reasoning, of which it is the result, has been given in the preceding paragraphs. Some of Mr. Ricardo's followers, or more properly, of those who have adopted in most particulars the views of political economy which his genius was the first to open up, have given explanations of Mr. Ricardo's doctrine to nearly the same effect as the above, but in rather different terms. They have said that profits depend not on _absolute_, but on _proportional_ wages: which they expounded to mean the proportion which the labourers _en masse_ receive of the total produce of the country. It seems, however, to be rather an unusual and inconvenient use of language to speak of anything as depending upon the wages of labour, and then to explain that by wages of labour you do not mean the wages of an individual labourer, but of all the labourers in the country collectively. Mankind will never agree to call anything a rise of wages, except a rise of the wages of individual labourers, and it is therefore preferable to employ language tending to fix attention upon the wages of the individual. The wages, however, on which profits are said to depend, are undoubtedly _proportional_ wages, namely, the proportional wages of one labourer: that is, the ratio between the wages of one labourer, and (not the whole produce of the country, but) the amount of what one labourer can produce; the amount of that portion of the collective produce of the industry of the country, which may be considered as corresponding to the labour of one single labourer. Proportional wages, thus understood, may be concisely termed the cost of production of wages; or, more concisely still, the cost of wages, meaning their cost in the "original purchase money," labour. We have now arrived at a distinct conception of Mr. Ricardo's theory of profits in its most perfect state. And this theory we conceive to be the basis of the true theory of profits. All that remains to do is to clear it from certain difficulties which still surround it, and which, though in a greater degree apparent than real, are not to be put aside as wholly imaginary. Though it is true that tools, materials, and buildings (it is to be wished that there were some compact designation for all these essentials of production taken together,) are themselves the produce of labour, and are only on that account to be ranked among the expenses of production; yet the _whole_ of their value is not resolvable into the wages of the labourers by whom they were produced. The wages of those labourers were paid by a capitalist, and that capitalist must have the same profit upon his advances as any other capitalist; when, therefore, he sells the tools or materials, he must receive from the purchaser not only the reimbursement of the wages he has paid, but also as much more as will afford him the ordinary rate of profit. And when the producer, after buying the tools and employing them in his own occupation, comes to estimate his gains, he must set aside a portion of the produce to replace not only the wages paid both by himself and by the tool-maker, but also the profits of the tool-maker, advanced by himself out of his own capital. It is not correct, therefore, to state that all which the capitalist retains after replacing wages forms his profit. It is true the whole return to capital is either wages or profits; but profits do not compose merely the surplus after replacing the outlay; they also enter into the outlay itself. Capital is expended partly in paying or reimbursing wages, and partly in paying the profits of other capitalists, whose concurrence was necessary in order to bring together the means of production. If any contrivance, therefore, were devised by which that part of the outlay which consists of previous profits could be either wholly or partially dispensed with, it is evident that more would remain as the profit of the immediate producer; while, as the quantity of _labour_ necessary to produce a given quantity of the commodity would be unaltered, as well as the quantity of produce paid for that labour, it seems that the ratio between the price of labour and its produce would be the same as before; that the cost of production of wages would be the same, proportional wages the same, and yet profits different. To illustrate this by a simple instance, let it be supposed that one-third of the produce is sufficient to replace the wages of the labourers who have been immediately instrumental in the production; that another third is necessary to replace the materials used and the fixed capital worn out in the process; while the remaining third is clear gain, being a profit of 50 per cent. Suppose, for example, that 60 agricultural labourers, receiving 60 quarters of corn for their wages, consume fixed capital and seed amounting to the value of 60 quarters more, and that the result of their operations is a produce of 180 quarters. When we analyse the price of the seed and tools into its elements, we find that they must have been the produce of the labour of 40 men: for the wages of those 40, together with profit at the rate previously supposed (50 per cent) make up 60 quarters. The produce, therefore, consisting of 180 quarters is the result of the labour altogether of 100 men: namely, the 60 first mentioned, and the 40 by whose labour the fixed capital and the seed were produced. Let us now suppose, by way of an extreme case, that some contrivance is discovered, whereby the purposes to which the second third of the produce had been devoted, may be dispensed with altogether: that some means are invented by which the same amount of produce may be procured without the assistance of any fixed capital, or the consumption of any seed or material sufficiently valuable to be worth calculating. Let us, however, suppose that this cannot be done without taking on a number of additional labourers, equal to those required for producing the seed and fixed capital; so that the saving shall be only in the profits of the previous capitalists. Let us, in conformity with this supposition, assume that in dispensing with the fixed capital and seed, value 60 quarters, it is necessary to take on 40 additional labourers, receiving a quarter of corn each, as before. The rate of profit has evidently risen. It has increased from 50 per cent to 60 per cent. A return of 180 quarters could not before be obtained but by an outlay of 120 quarters; it can now be obtained by an outlay of no more than 100. Here, therefore, is an undeniable rise of profits. Have wages, in the sense above attached to them, fallen or not? It would seem not. The produce (180 quarters) is still the result of the same quantity of labour as before, namely, the labour of 100 men. A quarter of corn, therefore, is still, as before, the produce of 10/18 of a man's labour for a year. Each labourer receives, as before, one quarter of corn; each, therefore, receives the produce of 10\18 of a year's labour of one man, that is, the same cost of production; each receives 10/18 of the produce of his own labour, that is, the same proportional wages; and the labourers collectively still receive the same proportion, namely 10/18, of the whole produce. The conclusion, then, cannot be resisted, that Mr. Ricardo's theory is defective: that the rate of profits does _not_ exclusively depend upon the value of wages, in his sense, namely, the quantity of labour of which the wages of a labourer are the produce; that it does _not_ exclusively depend upon proportional wages, that is, upon the proportion which the labourers collectively receive of the whole produce, or the ratio which the wages of an individual labourer bear to the produce of his individual labour. Those political economists, therefore, who have always dissented from Mr. Ricardo's doctrine, or who, having at first admitted, ended by discarding it, were so far in the right; but they committed a serious error in this, that, with the usual one-sidedness of disputants, they knew no medium between admitting absolutely and dismissing entirely; and saw no other course than utterly to reject what it would have been sufficient to modify. It is remarkable how very slight a modification will suffice to render Mr. Ricardo's doctrine completely true. It is even doubtful whether he himself, if called upon to adapt his expressions to this peculiar case, would not have so explained his doctrine as to render it entirely unobjectionable. It is perfectly true, that, in the example already made use of, a rise of profits takes place, while wages, considered in respect to the quantity of labour of which they are the produce, have not varied at all. But though wages are still the produce of the same _quantity of labour_ as before, the _cost of production_ of wages has nevertheless fallen; for into cost of production there enters another element besides labour. We have already remarked (and the very example out of which the difficulty arose presupposes it) that the cost of production of an article consists generally of two parts,--the _wages_ of the labour employed, and the _profits_ of those who, in any antecedent stage of the production, have advanced any portion of those wages. An article, therefore, may be the produce of the same quantity of labour as before, and yet, if any portion of the profits which the last producer has to make good to previous producers can be economized, the cost of production of the article is diminished. Now, in our example, a diminution of this sort is supposed to have taken place in the cost of production of corn. The production of that article has become less costly, in the ratio of six to five. A quantity of corn, the means of producing which could not previously have been secured but at an expense of 120 quarters, can now be produced by means which 100 quarters are sufficient to purchase. But the labourer is supposed to receive the same quantity of corn as before. He receives one quarter. The cost of production of wages has, therefore, fallen one-sixth. A quarter of corn, which is the remuneration of a single labourer, is indeed the produce of the same quantity of labour as before; but its cost of production is nevertheless diminished. It is now the produce of 10/18 of a man's labour, and nothing else; whereas formerly it required for its production the conjunction of that quantity of labour with an expenditure, in the form of reimbursement of profit, amounting to one-fifth more. If the cost of production of wages had remained the same as before, profits could not have risen. Each labourer received one quarter of corn; but one quarter of corn at that time was the result of the same cost of production, as 1 1/5 quarter now. In order, therefore, that each labourer should receive the same cost of production, each must now receive one quarter of corn, _plus_ one-fifth. The labour of 100 men could not be purchased at this price for less than 120 quarters; and the produce, 180 quarters, would yield only 50 per cent, as first supposed [7]. It is, therefore, strictly true, that the rate of profits varies inversely as the cost of production of wages. Profits cannot rise, unless the cost of production of wages falls exactly as much; nor fall, unless it rises. The proof of this position has been stated in figures, and in a particular case: we shall now state it in general terms, and for all cases. We have supposed, for simplicity, that wages are paid in the finished commodity. The agricultural labourers, in our example, were paid in corn, and if we had called them weavers, we should have supposed them to be paid in cloth. This supposition is allowable, for it is obviously of no consequence, in a question of value, or cost of production, what precise article we assume as the medium of exchange. The supposition has, besides, the recommendation of being conformable to the most ordinary state of the facts; for it is by the sale of his own finished article that each capitalist obtains the means of hiring labourers to renew the production; which is virtually the same thing as if, instead of selling the article for money and giving the money to his labourers, he gave the article itself to the labourers, and they sold it for their daily bread. Assuming, therefore, that the labourer is paid in the very article he produces, it is evident that, when any saving of expense takes place in the production of that article, if the labourer still receives the same cost of production as before, he must receive an increased quantity, in the very same ratio in which the productive power of capital has been increased. But, if so, the outlay of the capitalist will bear exactly the same proportion to the return as it did before; and profits will not rise. The variations, therefore, in the rate of profits, and those in the cost of production of wages, go hand in hand, and are inseparable. Mr. Ricardo's principle, that profits cannot rise unless wages fall, is strictly true, if by low wages be meant not merely wages which are the produce of a smaller quantity of labour, but wages which are produced at less cost, reckoning labour and previous profits together. But the interpretation which some economists have put upon Mr. Ricardo's doctrine, when they explain it to mean that profits depend upon the proportion which the labourers collectively receive of the aggregate produce, will not hold at all; for that, in our first example, remained the same, and yet profits rose. The only expression of the law of profits, which seems to be correct, is, that they depend upon the cost of production of wages. This must be received as the ultimate principle. From this may be deduced all the corollaries which Mr. Ricardo and others have drawn from his theory of profits as expounded by himself. The cost of production of the wages of one labourer for a year, is the result of two concurrent elements or factors,--viz., 1st, the quantity of commodities which the state of the labour market affords to him; 2ndly, the cost of production of each of those commodities. It follows, that the rate of profits can never rise but in conjunction with one or other of two changes,--1st, a diminished remuneration of the labourer; or, 2ndly, an improvement in production, or an extension of commerce, by which any of the articles habitually consumed by the labourer may be obtained at smaller cost. (If the improvement be in any article which is not consumed by the labourer, it merely lowers the price of that article, and thereby benefits capitalists and all other people so far as they are consumers of that particular article, and may be said to increase gross profit, but not the rate of profit.) So, on the other hand, the rate of profit cannot fall, unless concurrently with one of two events: 1st, an improvement in the labourer's condition; or, 2ndly, an increased difficulty of producing or importing some article which the labourer habitually consumes. The progress of population and cultivation has a tendency to lower profits through the latter of these two channels, owing to the well known law of the application of capital to land, that a double capital does not _caeteris paribus_ yield a double produce. There is, therefore, a tendency in the rate of profits to fall with the progress of society. But there is also an antagonist tendency of profits to rise, by the successive introduction of improvements in agriculture, and in the production of those manufactured articles which the labourers consume. Supposing, therefore, that the actual comforts of the labourer remain the same, profits will fall or rise, according as population, or improvements in the production of food and other necessaries, advance fastest. The rate of profits, therefore, tends to _fall_ from the following causes:--1. An increase of capital beyond population, producing increased competition for labour; 2. An increase of population, occasioning a demand for an increased quantity of food, which must be produced at a greater cost. The rate of profits tends to _rise_ from the following causes:--1. An increase of population beyond capital, producing increased competition for employment; 2. Improvements producing increased cheapness of necessaries, and other articles habitually consumed by the labourer. * * * * * The circumstances which regulate the rate of interest have usually been treated, even by professed writers on political economy, in a vague, loose, and unscientific manner. It has, however, been felt that there is some connexion between the rate of interest and the rate of profit; that (to use the words of Adam Smith) much will be given for money, when much can be made of it. It has been felt, also, that the fluctuations in the market-rate of interest from day to day, are determined, like other matters of bargain and sale, by demand and supply. It has, therefore, been considered as an established principle, that the rate of interest varies from day to day according to the quantity of capital offered or called for on loan; but conforms on the average of years to a standard determined by the rate of profits, and bearing some proportion to that rate--but a proportion which few attempts have been made to define. In consequence of these views, it has been customary to judge of the general rate of profits at any time or place, by the rate of interest at that time and place: it being supposed that the rate of interest, though liable to temporary fluctuations, can never vary for any long period of time unless profits vary; a notion which appears to us to be erroneous. It was observed by Adam Smith, that profits may be considered as divided into two parts, of which one may properly be considered as the remuneration for the use of the capital itself, the other as the reward of the labour of superintending its employment; and that the former of these will correspond with the rate of interest. The producer who borrows capital to employ it in his business, will consent to pay, for the use of it, all that remains of the profits he can make by it, after reserving what he considers reasonable remuneration for the trouble and risk which he incurs by borrowing and employing it. This remark is just; but it seems necessary to give greater precision to the ideas which it involves. The difference between the profit which can be made by the use of capital, and the interest which will be paid for it, is rightly characterized as wages of superintendance. But to infer from this that it is regulated by entirely the same principles as other wages, would be to push the analogy too far. It is wages, but wages paid by a commission upon the capital employed. If the general rate of profit is 10 per cent, and the rate of interest 5 per cent, the wages of superintendance will be 5 per cent; and though one borrower employ a capital of 100,000_l_., another no more than 100_l_., the labour of both will be rewarded with the same per centage, though, in the one ease, this symbol will represent an income of 5_l_., in the other case, of 5000_l_. Yet it cannot be pretended that the labour of the two borrowers differs in this proportion. The rule, therefore, that equal quantities of labour of equal hardness and skill are equally remunerated, does not hold of this kind of labour. The wages of any other labour are here an inapplicable criterion. The wages of superintendance are distinguished from ordinary wages by another peculiarity, that they are not paid in advance out of capital, like the wages of all other labourers, but merge in the profit, and are not realized until the production is completed. This takes them entirely out of the ordinary law of wages. The wages of labourers who are paid in advance, are regulated by the number of competitors compared with the amount of capital; the labourers can consume no more than what has been previously accumulated. But there is no such limit to the remuneration of a kind of labour which is not paid for out of wealth previously accumulated, but out of that produce which it is itself employed in calling into existence. When these circumstances are duly weighed, it will be perceived, that although profit may be correctly analyzed into interest and wages of superintendance, we ought not to lay it down as the law of interest, that it is profits _minus_ the wages of superintendance. Of the two expressions, it would be decidedly the more correct, that the wages of superintendance are regulated by the rate of interest, or are equal to profits _minus_ interest. In strict, propriety, neither expression would be allowable. Interest, and the wages of superintendance, can scarcely be said to depend upon one another. They are to one another in the same relation as wages and profits are. They are like two buckets in a well: when one rises, the other descends, but neither of the two motions is the cause of the other; both are simultaneous effects of the same cause, the turning of the windlass. * * * * * There are among the capitalists of every country a considerable number who are habitually, and almost necessarily, lenders; to whom scarcely any difference between what they could receive for their money and what could be made by it, would be an equivalent for incurring the risk and labour of carrying on business. In this predicament is the property of widows and orphans; of many public bodies; of charitable institutions; most property which is vested in trustees; and the property of a great number of persons unused to business, and who have a distaste for it, or whose other occupations prevent their engaging in it. How large a proportion of the property lent to the nation comes under this description, has been pointed out in Mr. Tooke's _Considerations on the State of the Currency._ There is another large class, consisting of bankers, bill-brokers, and others, who are money-lenders by profession; who enter into that profession with the intention of making such gains as it will yield them, and who would not be induced to change their business by any but a very strong pecuniary inducement. There is, therefore, a large class of persons who are habitually lenders. On the other hand, all persons in business may be considered as habitually borrowers. Except in times of stagnation, they are all desirous of extending their business beyond their own capital, and are never desirous of lending any portion of their capital except for very short periods, during which they cannot advantageously invest it in their own trade. There is, in short, a productive class, and there is, besides, a class technically styled the monied class, who live upon the interest of their capital, without engaging personally in the work of production. The class of borrowers may be considered as unlimited. There is no quantity of capital that could be offered to be lent, which the productive classes would not be willing to borrow, at any rate of interest which would afford them the slightest excess of profit above a bare equivalent for the additional risk, incurred by that transaction, of the evils attendant on insolvency. The only assignable limit to the inclination to borrow, is the power of giving security: the producers would find it difficult to borrow more than an amount equal to their own capital. If more than half the capital of the country were in the hands of persons who preferred lending it to engaging personally in business, and if the surplus were greater than could be invested in loans to Government, or in mortgages upon the property of unproductive consumers; the competition of lenders would force down the rate of interest very low. A certain portion of the monied class would be obliged either to sacrifice their predilections by engaging in business, or to lend on inferior security; and they would accordingly accept, where they could obtain good security, an abatement of interest equivalent to the difference of risk. This is an extreme case. Let us put an extreme case of a contrary kind. Suppose that the wealthy people of any country, not relishing an idle life, and having a strong taste for gainful labour, were generally indisposed to accept of a smaller income in order to be relieved from the labour and anxiety of business. Every producer in flourishing circumstances would be eager to borrow, and few willing to lend. Under these circumstances the rate of interest would differ very little from the rate of profit. The trouble of managing a business is not proportionally increased by an increase of the magnitude of the business; and a very small surplus profit above the rate of interest, would therefore be a sufficient inducement to capitalists to borrow. We may even conceive a people whose habits were such, that in order to induce them to lend, it might be necessary to offer them a rate of interest fully equal to the ordinary rate of profit. In that case, of course, the productive classes would scarcely ever borrow. But government, and the unproductive classes, who do not borrow in order to make a profit by the loan, but from the pressure of a real or supposed necessity, might still be ready to borrow at this high rate. Although the inclination to borrow has no _fixed_ or _necessary_ limit except the power of giving security, yet it always, in point of fact, stops short of this; from the uncertainty of the prospects of any individual producer, which generally indisposes him to involve himself to the full extent of his means of payment. There is never any permanent want of market for things in general; but there may be so for the commodity which any one individual is producing; and even if there is a demand for the commodity, people may not buy it of him but of some other. There are, consequently, never more than a portion of the producers, the state of whose business encourages them to add to their capital by borrowing; and even these are disposed to borrow only as much as they see an _immediate_ prospect of profitably employing. There is, therefore, a practical limit to the demands of borrowers at any given instant; and when these demands are all satisfied, any additional capital offered on loan can find an investment only by a reduction of the rate of interest. The amount of borrowers being given, (and by the amount of borrowers is here meant the aggregate sum which people are willing to borrow at some given rate,) the rate of interest will depend upon the quantity of capital owned by people who are unwilling or unable to engage in trade. The circumstances which determine this, are, on the one hand, the degree in which a taste for business, or an aversion to it, happens to be prevalent among the classes possessed of property; and on the other hand, the amount of the annual accumulation from the earnings of labour. Those who accumulate from their wages, fees, or salaries, have, of course, (speaking generally) no means of investing their savings except by lending them to others: their occupations prevent them from personally superintending any employment. Upon these circumstances, then, the rate of interest depends, the amount of borrowers being given. And the counter-proposition equally holds, that, the above circumstances being given, the rate of interest depends upon the amount of borrowers. Suppose, for example, that when the rate of interest has adjusted itself to the existing state of the circumstances which affect the disposition to borrow and to lend, a war breaks out, which induces government, for a series of years, to borrow annually a large sum of money. During the whole of this period, the rate of interest will remain considerably above what it was before, and what it will be afterwards. Before the commencement of the supposed war, all persons who were disposed to lend at the then rate of interest, had found borrowers, and their capital was invested. This may be assumed; for if any capital had been seeking for a borrower at the existing rate of interest, and unable to find one, its owner would have offered it at a rate slightly below the existing rate. He would, for instance, have bought into the funds, at a slight advance of price; and thus set at liberty the capital of some fundholder, who, the funds yielding a lower interest, would have been obliged to accept a lower interest from individuals. Since, then, all who were willing to lend their capital at the market rate, have already lent it, Government will not be able to borrow unless by offering higher interest. Though, with the existing habits of the possessors of disposable capital, an increased number cannot be found who are willing to lend at the existing rate, there are doubtless some who will be induced to lend by the temptation of a higher rate. The same temptation will also induce some persons to invest, in the purchase of the new stock, what they would otherwise have expended unproductively in increasing their establishments, or productively, in improving their estates. The rate of interest will rise just sufficiently to call forth an increase of lenders to the amount required. This we apprehend to be the cause why the rate of interest in this country was so high as it is well known to have been during the last war. It is, therefore, by no means to be inferred, as some have done, that the general rate of profits was unusually high during the same period, because interest was so. Supposing the rate of profits to have been precisely the same during the war, as before or after it, the rate of interest would nevertheless have risen, from the causes and in the manner above described. The practical use of the preceding investigation is, to moderate the confidence with which inferences are frequently drawn with respect to the rate of profit from evidence regarding the rate of interest; and to shew that although the rate of profit is one of the elements which combine to determine the rate of interest, the latter is also acted upon by causes peculiar to itself, and may either rise or fall, both temporarily and permanently, while the general rate of profits remains unchanged. * * * * * The introduction of banks, which perform the function of lenders and loan-brokers, with or without that of issuers of paper-money, produces some further anomalies in the rate of interest, which have not, so far as we are aware, been hitherto brought within the pale of exact science. If bankers were merely a class of middlemen between the lender and the borrower; if they merely received deposits of capital from those who had it lying unemployed in their hands, and lent this, together with their own capital, to the productive classes, receiving interest for it, and paying interest in their turn to those who had placed capital in their hands; the effect of the operations of banking on the rate of interest would be to lower it in some slight degree. The banker receives and collects together sums of money much too small, when taken individually, to render it worth while for the owners to look out for an investment, but which in the aggregate form a considerable amount. This amount may be considered a clear addition to the productive capital of the country; at least, to the capital in activity at any moment. And as this addition to the capital accrues wholly to that part of it which is not employed by the owners, but lent to other producers, the natural effect is a diminution of the rate of interest. The banker, to the extent of his own private capital, (the expenses of his business being first paid,) is a lender at interest. But, being subject to risk and trouble fully equal to that which belongs to most other employments, he cannot be satisfied with the mere interest even of his whole capital: he must have the ordinary profits of stock, or he will not engage in the business: the state of banking must be such as to hold out to him the prospect of adding, to the interest of what remains of his own capital after paying the expenses of his business, interest upon capital deposited with him, in sufficient amount to make up, after paying the expenses, the ordinary profit which could be derived from his own capital in any productive employment. This will be accomplished in one of two ways. 1. If the circumstances of society are such as to furnish a ready investment of disposable capital; (as for instance in London, where the public funds and other securities, of undoubted stability, and affording great advantages for receiving the interest without trouble and realizing the principal without difficulty when required, tempt all persons who have sums of importance lying idle, to invest them on their own account without the intervention of any middleman;) the deposits with bankers consist chiefly of small sums likely to be wanted in a very short period for current expenses, and the interest on which would seldom be worth the trouble of calculating it. Bankers, therefore, do not allow any interest on their deposits. After paying the expenses of their business, all the rest of the interest they receive is clear gain. But as the circumstances of banking, as of all other modes of employing capital, will on the average be such as to afford to a person entering into the business a prospect of realizing the ordinary, and no more than the ordinary, profits upon his own capital; the gains of each banker by the investment of his deposits, will not on the average exceed what is necessary to make up his gains on his own capital to the ordinary rate. It is, of course, competition, which brings about this limitation. Whether competition operates by lowering the rate of interest, or by dividing the business among a larger number, it is difficult to decide. Probably it operates in both ways; but it is by no means impossible that it may operate in the latter way alone: just as an increase in the number of physicians does not lower the fees, though it diminishes an average competitor's chance of obtaining them. It is not impossible that the disposition of the lenders might be such, that they would cease to lend rather than acquiesce in any reduction of the rate of interest. If so, the arrival of a new lender, in the person of a banker of deposit, would not lower the rate of interest in any considerable degree. A slight fall would take place, and with that exception things would be as before, except that the capital in the hands of the banker would have put itself into the place of an equal portion of capital belonging to other lenders, who would themselves have engaged in business (e.g., by subscribing to some joint-stock company, or entering into commandite). Bankers' profits would then be limited to the ordinary rate chiefly by the division of the business among many banks, so that each on the average would receive no more interest on his deposits than would suffice to make up the interest on his own capital to the ordinary rate of profit after paying all expenses. 2. But if the circumstances of society render it difficult and inconvenient for persons who wish to live upon the interest of their money, to seek an investment for themselves, the bankers become agents for this specific purpose: large as well as small sums are deposited with them, and they allow interest to their customers. Such is the practice of the Scotch banks, and of most of the country banks in England. Their customers, not living at any of the great seats of money transactions, prefer entrusting their capital to somebody on the spot, whom they know, and in whom they confide. He invests their money on the best terms he can, and pays to them such interest as he can afford to give; retaining a compensation for his own risk and trouble. This compensation is fixed by the competition of the market. The rate of interest is no further lowered by this operation, than inasmuch as it brings together the lender and the borrower in a safe and expeditious manner. The lender incurs less risk, and a larger proportion, therefore, of the holders of capital are willing to be lenders. When a banker, in addition to his other functions, is also an issuer of paper money, he gains an advantage similar to that which the London bankers derive from their deposits. To the extent to which he can put forth his notes, he has so much the more to lend, without himself having to pay any interest for it. If the paper is convertible, it cannot get into circulation permanently without displacing specie, which goes abroad and brings back an equivalent value. To the extent of this value, there is an increase of the capital of the country; and the increase accrues solely to that part of the capital which is employed in loans. If the paper is inconvertible, and instead of displacing specie depreciates the currency, the banker by issuing it levies a tax on every person who has money in his hands or due to him. He thus appropriates to himself a portion of the capital of other people, and a portion of their revenue. The capital might have been intended to be lent, or it might have been intended to be employed by the owner: such part of it as was intended to be employed by the owner now changes its destination, and is lent. The revenue was either intended to be accumulated, in which case it had already become capital, or it was intended to be spent: in this last case, revenue is converted into capital: and thus, strange as it may appear, the depreciation of the currency, when effected in this way, operates to a certain extent as a forced accumulation. This, indeed, is no palliation of its iniquity. Though A might have spent his property unproductively, B ought not to be permitted to rob him of it because B will expend it on productive labour. In any supposable case, however, the issue of paper money by bankers increases the proportion of the whole capital of the country which is destined to be lent. The rate of interest must therefore fall, until some of the lenders give over lending, or until the increase of borrowers absorbs the whole. But a fall of the rate of interest, sufficient to enable the money market to absorb the whole of the paper-loans, may not be sufficient to reduce the profits of a lender who lends what costs him nothing, to the ordinary rate of profit upon his capital. Here, therefore, competition will operate chiefly by dividing the business. The notes of each bank will be confined within so narrow a district, or will divide the supply of a district with so many other banks, that on the average each will receive no larger amount of interest on his notes than will make up the interest on his own capital to the ordinary rate of profit. Even in this way, however, the competition has the effect, to a certain limited extent, of lowering the rate of interest; for the power of bankers to receive interest on more than their capital attracts a greater amount of capital into the banking business than would otherwise flow into it; and this greater capital being all lent, interest will fall in consequence. NOTE: [7] It would be easy to go over in the same manner any other case. For instance, we may suppose, that, instead of dispensing with the _whole_ of the fixed capital, material, &c, and taking on labourers in equal number to those by whom these were produced, _half_ only of the fixed capital and material is dispensed with; so that, instead of 60 labourers and a fixed capital worth 6O quarters of corn, we have 80 labourers and a fixed capital worth 30. The numerical statement of this case is more intricate than that in the text, but the result is not different. ESSAY V. ON THE DEFINITION OF POLITICAL ECONOMY; AND ON THE METHOD OF INVESTIGATION PROPER TO IT. It might be imagined, on a superficial view of the nature and objects of definition, that the definition of a science would occupy the same place in the chronological which it commonly does in the didactic order. As a treatise on any science usually commences with an attempt to express, in a brief formula, what the science is, and wherein it differs from other sciences, so, it might be supposed, did the framing of such a formula naturally precede the successful cultivation of the science. This, however, is far from having been the case. The definition of a science has almost invariably not preceded, but followed, the creation of the science itself. Like the wall of a city, it has usually been erected, not to be a receptacle for such edifices as might afterwards spring up, but to circumscribe an aggregation already in existence. Mankind did not measure out the ground for intellectual cultivation before they began to plant it; they did not divide the field of human investigation into regular compartments first, and then begin to collect truths for the purpose of being therein deposited; they proceeded in a less systematic manner. As discoveries were gathered in, either one by one, or in groups resulting from the continued prosecution of some uniform course of inquiry, the truths which were successively brought into store cohered and became agglomerated according to their individual affinities. Without any intentional classification, the facts classed themselves. They became associated in the mind, according to their general and obvious resemblances; and the aggregates thus formed, having to be frequently spoken of as aggregates, came to be denoted by a common name. Any body of truths which had thus acquired a collective denomination, was called a _science_. It was long before this fortuitous classification was felt not to be sufficiently precise. It was in a more advanced stage of the progress of knowledge that mankind became sensible of the advantage of ascertaining whether the facts which they had thus grouped together were distinguished from all other facts by any common properties, and what these were. The first attempts to answer this question were commonly very unskilful, and the consequent definitions extremely imperfect. And, in truth, there is scarcely any investigation in the whole body of a science requiring so high a degree of analysis and abstraction, as the inquiry, what the science itself is; in other words, what are the properties common to all the truths composing it, and distinguishing them from all other truths. Many persons, accordingly, who are profoundly conversant with the details of a science, would be very much at a loss to supply such a definition of the science itself as should not be liable to well-grounded logical objections. From this remark, we cannot except the authors of elementary scientific treatises. The definitions which those works furnish of the sciences, for the most part either do not fit them--some being too wide, some too narrow--or do not go deep enough into them, but define a science by its accidents, not its essentials; by some one of its properties which may, indeed, serve the purpose of a distinguishing mark, but which is of too little importance to have ever of itself led mankind to give the science a name and rank as a separate object of study. The definition of a science must, indeed, be placed among that class of truths which Dugald Stewart had in view, when he observed that the first principles of all sciences belong to the philosophy of the human mind. The observation is just; and the first principles of all sciences, including the definitions of them, have consequently participated hitherto in the vagueness and uncertainty which has pervaded that most difficult and unsettled of all branches of knowledge. If we open any book, even of mathematics or natural philosophy, it is impossible not to be struck with the mistiness of what we find represented as preliminary and fundamental notions, and the very insufficient manner in which the propositions which are palmed upon us as first principles seem to be made out, contrasted with the lucidity of the explanations and the conclusiveness of the proofs as soon as the writer enters upon the details of his subject. Whence comes this anomaly? Why is the admitted certainty of the results of those sciences in no way prejudiced by the want of solidity in their premises? How happens it that a firm superstructure has been erected upon an unstable foundation? The solution of the paradox _is_, that what are called first principles, are, in truth, _last_ principles. Instead of being the fixed point from whence the chain of proof which supports all the rest of the science hangs suspended, they are themselves the remotest link of the chain. Though presented as if all other truths were to be deduced from them, they are the truths which are last arrived at; the result of the last stage of generalization, or of the last and subtlest process of analysis, to which the particular truths of the science can be subjected; those particular truths having previously been ascertained by the evidence proper to their own nature. Like other sciences, Political Economy has remained destitute of a definition framed on strictly logical principles, or even of, what is more easily to be had, a definition exactly co-extensive with the thing defined. This has not, perhaps, caused the real bounds of the science to be, in this country at least, practically mistaken or overpassed; but it has occasioned--perhaps we should rather say it is connected with --indefinite, and often erroneous, conceptions of the mode in which the science should be studied. We proceed to verify these assertions by an examination of the most generally received definitions of the science. 1. First, as to the vulgar notion of the nature and object of Political Economy, we shall not be wide of the mark if we state it to be something to this effect:--That Political Economy is a science which teaches, or professes to teach, in what manner a nation may be made rich. This notion of what constitutes the science, is in some degree countenanced by the title and arrangement which Adam Smith gave to his invaluable work. A systematic treatise on Political Economy, he chose to call an _Inquiry into the Nature and Causes of the Wealth of Nations_; and the topics are introduced in an order suitable to that view of the purpose of his book. With respect to the definition in question, if definition it can be called which is not found in any set form of words, but left to be arrived at by a process of abstraction from a hundred current modes of speaking on the subject; it seems liable to the conclusive objection, that it confounds the essentially distinct, though closely connected, ideas of _science_ and _art_. These two ideas differ from one another as the understanding differs from the will, or as the indicative mood in grammar differs from the imperative. The one deals in facts, the other in precepts. Science is a collection of _truths_; art, a body of _rules_, or directions for conduct. The language of science is, This is, or, This is not; This does, or does not, happen. The language of art is, Do this; Avoid that. Science takes cognizance of a _phenomenon_, and endeavours to discover its _law_; art proposes to itself an _end_, and looks out for _means_ to effect it. If, therefore, Political Economy be a science, it cannot be a collection of practical rules; though, unless it be altogether a useless science, practical rules must be capable of being founded upon it. The science of mechanics, a branch of natural philosophy, lays down the laws of motion, and the properties of what are called the mechanical powers. The art of practical mechanics teaches how we may avail ourselves of those laws and properties, to increase our command over external nature. An art would not be an art, unless it were founded upon a scientific knowledge of the properties of the subject-matter: without this, it would not be philosophy, but empiricism; [Greek: empeiria,] not [Greek: technae,] in Plato's sense. Rules, therefore, for making a nation increase in wealth, are not a science, but they are the results of science. Political Economy does not of itself instruct how to make a nation rich; but whoever would be qualified to judge of the means of making a nation rich, must first be a political economist. 2. The definition most generally received among instructed persons, and laid down in the commencement of most of the professed treatises on the subject, is to the following effect:--That Political Economy informs us of the laws which regulate the production, distribution, and consumption of wealth. To this definition is frequently appended a familiar illustration. Political Economy, it is said, is to the state, what domestic economy is to the family. This definition is free from the fault which we pointed out in the former one. It distinctly takes notice that Political Economy is a science and not an art; that it is conversant with laws of nature, not with maxims of conduct, and teaches us how things take place of themselves, not in what manner it is advisable for us to shape them, in order to attain some particular end. But though the definition is, with regard to this particular point, unobjectionable, so much can scarcely be said for the accompanying illustration; which rather sends back the mind to the current loose notion of Political Economy already disposed of. Political Economy is really, and is stated in the definition to be, a science: but domestic economy, so far as it is capable of being reduced to principles, is an art. It consists of rules, or maxims of prudence, for keeping the family regularly supplied with what its wants require, and securing, with any given amount of means, the greatest possible quantity of physical comfort and enjoyment. Undoubtedly the beneficial _result_, the great practical _application_ of Political Economy, would be to accomplish for a nation something like what the most perfect domestic economy accomplishes for a single household: but supposing this purpose realised, there would be the same difference between the rules by which it might be effected, and Political Economy, which there is between the art of gunnery and the theory of projectiles, or between the rules of mathematical land-surveying and the science of trigonometry. The definition, though not liable to the same objection as the illustration which is annexed to it, is itself far from unexceptionable. To neither of them, considered as standing at the head of a treatise, have we much to object. At a very early stage in the study of the science, anything more accurate would be useless, and therefore pedantic. In a merely initiatory definition, scientific precision is not required: the object is, to insinuate into the learner's mind, it is scarcely material by what means, some general preconception of what are the uses of the pursuit, and what the series of topics through which he is about to travel. As a mere anticipation or _ébauche_ of a definition, intended to indicate to a learner as much as he is able to understand before he begins, of the nature of what is about to be taught to him, we do not quarrel with the received formula. But if it claims to be admitted as that complete _definitio_ or boundary-line, which results from a thorough exploring of the whole extent of the subject, and is intended to mark the exact place of Political Economy among the sciences, its pretension cannot be allowed. "The science of the laws which regulate the production, distribution, and consumption of wealth." The term wealth is surrounded by a haze of floating and vapoury associations, which will let nothing that is seen through them be shewn distinctly. Let us supply its place by a periphrasis. Wealth is defined, all objects useful or agreeable to mankind, except such as can be obtained in indefinite quantity without labour. Instead of all objects, some authorities say, all material objects: the distinction is of no moment for the present purpose. To confine ourselves to production: If the laws of the production of all objects, or even of all material objects, which are useful or agreeable to mankind, were comprised in Political Economy, it would be difficult to say where the science would end: at the least, all or nearly all physical knowledge would be included in it. Corn and cattle are material objects, in a high degree useful to mankind. The laws of the production of the one include the principles of agriculture; the production of the other is the subject of the art of cattle-breeding, which, in so far as really an art, must be built upon the science of physiology. The laws of the production of manufactured articles involve the whole of chemistry and the whole of mechanics. The laws of the production of the wealth which is extracted from the bowels of the earth, cannot be set forth without taking in a large part of geology. When a definition so manifestly surpasses in extent what it professes to define, we must suppose that it is not meant to be interpreted literally, though the limitations with which it is to be understood are not stated. Perhaps it will be said, that Political Economy is conversant with such only of the laws of the production of wealth as are applicable to _all_ kinds of wealth: those which relate to the details of particular trades or employments forming the subject of other and totally distinct sciences. If, however, there were no more in the distinction between Political Economy and physical science than this, the distinction, we may venture to affirm, would never have been made. No similar division exists in any other department of knowledge. We do not break up zoology or mineralogy into two parts; one treating of the properties common to all animals, or to all minerals; another conversant with the properties peculiar to each particular species of animals or minerals. The reason is obvious; there is no distinction _in kind_ between the general laws of animal or of mineral nature and the peculiar properties of particular species. There is as close an analogy between the general laws and the particular ones, as there is between one of the general laws and another: most commonly, indeed, the particular laws are but the complex result of a plurality of general laws modifying each other. A separation, therefore, between the general laws and the particular ones, merely because the former are general and the latter particular, would run counter both to the strongest motives of convenience and to the natural tendencies of the mind. If the case is different with the laws of the production of wealth, it must be because, in this case, the general laws differ in kind from the particular ones. But if so, the difference in kind is the radical distinction, and we should find out what that is, and found our definition upon it. But, further, the recognised boundaries which separate the field of Political Economy from that of physical science, by no means correspond with the distinction between the truths which concern all kinds of wealth and those which relate only to some kinds. The three laws of motion, and the law of gravitation, are common, as far as human observation has yet extended, to all matter; and these, therefore, as being among the laws of the production of all wealth, should form part of Political Economy. There are hardly any of the processes of industry which do not partly depend upon the properties of the lever; but it would be a strange classification which included those properties among the truths of Political Economy. Again, the latter science has many inquiries altogether as special, and relating as exclusively to particular sorts of material objects, as any of the branches of physical science. The investigation of some of the circumstances which regulate the price of corn, has as little to do with the laws common to the production of all wealth, as any part of the knowledge of the agriculturist. The inquiry into the rent of mines or fisheries, or into the value of the precious metals, elicits truths which have immediate reference to the production solely of a peculiar kind of wealth; yet these are admitted to be correctly placed in the science of Political Economy. The real distinction between Political Economy and physical science must be sought in something deeper than the nature of the subject-matter; which, indeed, is for the most part common to both. Political Economy, and the scientific grounds of all the useful arts, have in truth one and the same subject-matter; namely, the objects which conduce to man's convenience and enjoyment: but they are, nevertheless, perfectly distinct branches of knowledge. 3. If we contemplate the whole field of human knowledge, attained or attainable, we find that it separates itself obviously, and as it were spontaneously, into two divisions, which stand so strikingly in opposition and contradistinction to one another, that in all classifications of our knowledge they have been kept apart. These are, _physical_ science, and _moral_ or psychological science. The difference between these two departments of our knowledge does not reside in the subject-matter with which they are conversant: for although, of the simplest and most elementary parts of each, it may be said, with an approach to truth, that they are concerned with different subject- matters--namely, the one with the human mind, the other with all things whatever except the mind; this distinction does not hold between the higher regions of the two. Take the science of politics, for instance, or that of law: who will say that these are physical sciences? and yet is it not obvious that they are conversant fully as much with matter as with mind? Take, again, the theory of music, of painting, of any other of the fine arts, and who will venture to pronounce that the facts they are conversant with belong either wholly to the class of matter, or wholly to that of mind? The following seems to be the _rationale_ of the distinction between physical and moral science. In all the intercourse of man with nature, whether we consider him as acting upon it, or as receiving impressions from it, the effect or phenomenon depends upon causes of two kinds: the properties of the object acting, and those of the object acted upon. Everything which can possibly happen in which man and external things, are jointly concerned, results from the joint operation of a law or laws of matter, and a law or laws of the human mind. Thus the production of corn by human labour is the result of a law of mind, and many laws of matter. The laws of matter are those properties of the soil and of vegetable life which cause the seed to germinate in the ground, and those properties of the human body which render food necessary to its support. The law of mind is, that man desires to possess subsistence, and consequently wills the necessary means of procuring it. Laws of mind and laws of matter are so dissimilar in their nature, that it would be contrary to all principles of rational arrangement to mix them up as part of the same study. In all scientific methods, therefore, they are placed apart. Any compound effect or phenomenon which depends both on the properties of matter and on those of mind, may thus become the subject of two completely distinct sciences, or branches of science; one, treating of the phenomenon in so far as it depends upon the laws of matter only; the other treating of it in so far as it depends upon the laws of mind. The physical sciences are those which treat of the laws of matter, and of all complex phenomena in so far as dependent upon the laws of matter. The mental or moral sciences are those which treat of the laws of mind, and of all complex phenomena in so far as dependent upon the laws of mind. Most of the moral sciences presuppose physical science; but few of the physical sciences presuppose moral science. The reason is obvious. There are many phenomena (an earthquake, for example, or the motions of the planets) which depend upon the laws of matter exclusively; and have nothing whatever to do with the laws of mind. Many, therefore, of the physical sciences may be treated of without any reference to mind, and as if the mind existed as a recipient of knowledge only, not as a cause producing effects. But there are no phenomena which depend exclusively upon the laws of mind; even the phenomena of the mind itself being partially dependent upon the physiological laws of the body. All the mental sciences, therefore, not excepting the pure science of mind, must take account of a great variety of physical truths; and (as physical science is commonly and very properly studied first) may be said to presuppose them, taking up the complex phenomena where physical science leaves them. Now this, it will be found, is a precise statement of the relation in which Political Economy stands to the various sciences which are tributary to the arts of production. The laws of the production of the objects which constitute wealth, are the subject-matter both of Political Economy and of almost all the physical sciences. Such, however, of those laws as are purely laws of matter, belong to physical science, and to that exclusively. Such of them as are laws of the human mind, and no others, belong to Political Economy, which finally sums up the result of both combined. Political Economy, therefore, presupposes all the physical sciences; it takes for granted all such of the truths of those sciences as are concerned in the production of the objects demanded by the wants of mankind; or at least it takes for granted that the physical part of the process takes place somehow. It then inquires what are the phenomena of _mind_ which are concerned in the production and distribution [8] of those same objects; it borrows from the pure science of mind the laws of those phenomena, and inquires what effects follow from these mental laws, acting in concurrence with those physical one. [9] From the above considerations the following seems to come out as the correct and complete definition of Political Economy:--"The science which treats of the production and distribution of wealth, so far as they depend upon the laws of human nature." Or thus--science relating to the moral or psychological laws of the production and distribution of wealth." For popular use this definition is amply sufficient, but it still falls short of the complete accuracy required for the purposes of the philosopher. Political Economy does not treat of the production and distribution of wealth in all states of mankind, but only in what is termed the social state; nor so far as they depend upon the laws of human nature, but only so far as they depend upon a certain portion of those laws. This, at least, is the view which must be taken of Political Economy, if we mean it to find any place in an encyclopedical division of the field of science. On any other view, it either is not science at all, or it is several sciences. This will appear clearly, if, on the one hand, we take a general survey of the moral sciences, with a view to assign the exact place of Political Economy among them; while, on the other, we consider attentively the nature of the methods or processes by which the truths which are the object of those sciences are arrived at. Man, who, considered as a being having a moral or mental nature, is the subject-matter of all the moral sciences, may, with reference to that part of his nature, form the subject of philosophical inquiry under several distinct hypotheses. We may inquire what belongs to man considered individually, and as if no human being existed besides himself; we may next consider him as coming into contact with other individuals; and finally, as living in a state of _society_, that is, forming part of a body or aggregation of human beings, systematically co-operating for common purposes. Of this last state, political government, or subjection to a common superior, is an ordinary ingredient, but forms no necessary part of the conception, and, with respect to our present purpose, needs not be further adverted to. Those laws or properties of human nature which appertain to man as a mere individual, and do not presuppose, as a necessary condition, the existence of other individuals (except, perhaps, as mere instruments or means), form a part of the subject of pure mental philosophy. They comprise all the laws of the mere intellect, and those of the purely self-regarding desires. Those laws of human nature which relate to the feelings called forth in a human being by other individual human or intelligent beings, as such; namely, the _affections_, the _conscience_, or feeling of duty, and the love of _approbation_; and to the conduct of man, so far as it depends upon, or has relation to, these parts of his nature--form the subject of another portion of pure mental philosophy, namely, that portion of it on which _morals_, or _ethics_, are founded. For morality itself is not a science, but an art; not truths, but rules. The truths on which the rules are founded are drawn (as is the case in all arts) from a variety of sciences; but the principal of them, and those which are most nearly peculiar to this particular art, belong to a branch of the science of mind. Finally, there are certain principles of human nature which are peculiarly connected with the ideas and feelings generated in man by living in a state of _society_, that is, by forming part of a union or aggregation of human beings for a common purpose or purposes. Few, indeed, of the elementary laws of the human mind are peculiar to this state, almost all being called into action in the two other states. But those simple laws of human nature, operating in that wider field, give rise to results of a sufficiently universal character, and even (when compared with the still more complex phenomena of which they are the determining causes) sufficiently simple, to admit of being called, though in a somewhat looser sense, _laws_ of society, or laws of human nature in the social state. These laws, or general truths, form the subject of a branch of science which may be aptly designated from the title of _social economy_; somewhat less happily by that of _speculative politics_, or the _science_ of politics, as contradistinguished from the art. This science stands in the same relation to the social, as anatomy and physiology to the physical body. It shows by what principles of his nature man is induced to enter into a state of society; how this feature in his position acts upon his interests and feelings, and through them upon his conduct; how the association tends progressively to become closer, and the co-operation extends itself to more and more purposes; what those purposes are, and what the varieties of means most generally adopted for furthering them; what are the various relations which establish themselves among human beings as the ordinary consequence of the social union; what those which are different in different states of society; in what historical order those states tend to succeed one another; and what are the effects of each upon the conduct and character of man. This branch of science, whether we prefer to call it social economy, speculative politics, or the natural history of society, presupposes the whole science of the nature of the individual mind; since all the laws of which the latter science takes cognizance are brought into play in a state of society, and the truths of the social science are but statements of the manner in which those simple laws take effect in complicated circumstances. Pure mental philosophy, therefore, is an essential part, or preliminary, of political philosophy. The science of social economy embraces every part of man's nature, in so far as influencing the conduct or condition of man in society; and therefore may it be termed speculative politics, as being the scientific foundation of practical politics, or the art of government, of which the art of legislation is a part. [10] It is to _this_ important division of the field of science that one of the writers who have most correctly conceived and copiously illustrated its nature and limits,--we mean M. Say,--has chosen to give the name Political Economy. And, indeed, this large extension of the signification of that term is countenanced by its etymology. But the words "political economy" have long ceased to have so large a meaning. Every writer is entitled to use the words which are his tools in the manner which he judges most conducive to the general purposes of the exposition of truth; but he exercises this discretion under liability to criticism: and M. Say seems to have done in this instance, what should never be done without strong reasons; to have altered the meaning of a name which was appropriated to a particular purpose (and for which, therefore, a substitute must be provided), in order to transfer it to an object for which it was easy to find a more characteristic denomination. What is now commonly understood by the term "Political Economy" is not the science of speculative politics, but a branch of that science. It does not treat of the whole of man's nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth. It makes entire abstraction of every other human passion or motive; except those which may be regarded as perpetually antagonizing principles to the desire of wealth, namely, aversion to labour, and desire of the present enjoyment of costly indulgences. These it takes, to a certain extent, into its calculations, because these do not merely, like other desires, occasionally conflict with the pursuit of wealth, but accompany it always as a drag, or impediment, and are therefore inseparably mixed up in the consideration of it. Political Economy considers mankind as occupied solely in acquiring and consuming wealth; and aims at showing what is the course of action into which mankind, living in a state of society, would be impelled, if that motive, except in the degree in which it is checked by the two perpetual counter-motives above adverted to, were absolute ruler of all their actions. Under the influence of this desire, it shows mankind accumulating wealth, and employing that wealth in the production of other wealth; sanctioning by mutual agreement the institution of property; establishing laws to prevent individuals from encroaching upon the property of others by force or fraud; adopting various contrivances for increasing the productiveness of their labour; settling the division of the produce by agreement, under the influence of competition (competition itself being governed by certain laws, which laws are therefore the ultimate regulators of the division of the produce); and employing certain expedients (as money, credit, &c.) to facilitate the distribution. All these operations, though many of them are really the result of a plurality of motives, are considered by Political Economy as flowing solely from the desire of wealth. The science then proceeds to investigate the laws which govern these several operations, under the supposition that man is a being who is determined, by the necessity of his nature, to prefer a greater portion of wealth to a smaller in all cases, without any other exception than that constituted by the two counter-motives already specified. Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. When an effect depends upon a concurrence of causes, those causes must be studied one at a time, and their laws separately investigated, if we wish, through the causes, to obtain the power of either predicting or controlling the effect; since the law of the effect is compounded of the laws of all the causes which determine it. The law of the centripetal and that of the tangential force must have been known before the motions of the earth and planets could be explained, or many of them predicted. The same is the case with the conduct of man in society. In order to judge how he will act under the variety of desires and aversions which are concurrently operating upon him, we must know how he would act under the exclusive influence of each one in particular. There is, perhaps, no action of a man's life in which he is neither under the immediate nor under the remote influence of any impulse but the mere desire of wealth. With respect to those parts of human conduct of which wealth is not even the principal object, to these Political Economy does not pretend that its conclusions are applicable. But there are also certain departments of human affairs, in which the acquisition of wealth is the main and acknowledged end. It is only of these that Political Economy takes notice. The manner in which it necessarily proceeds is that of treating the main and acknowledged end as if it were the sole end; which, of all hypotheses equally simple, is the nearest to the truth. The political economist inquires, what are the actions which would be produced by this desire, if, within the departments in question, it were unimpeded by any other. In this way a nearer approximation is obtained than would otherwise be practicable, to the real order of human affairs in those departments. This approximation is then to be corrected by making proper allowance for the effects of any impulses of a different description, which can be shown to interfere with the result in any particular case. Only in a few of the most striking cases (such as the important one of the principle of population) are these corrections interpolated into the expositions of Political Economy itself; the strictness of purely scientific arrangement being thereby somewhat departed from, for the sake of practical utility. So far as it is known, or may be presumed, that the conduct of mankind in the pursuit of wealth is under the collateral influence of any other of the properties of our nature than the desire of obtaining the greatest quantity of wealth with the least labour and self-denial, the conclusions of Political Economy will so far fail of being applicable to the explanation or prediction of real events, until they are modified by a correct allowance for the degree of influence exercised by the other cause. Political Economy, then, may be defined as follows; and the definition seems to be complete:-- "The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object." But while this is a correct definition of Political Economy as a portion of the field of science, the didactic writer on the subject will naturally combine in his exposition, with the truths of the pure science, as many of the practical modifications as will, in his estimation, be most conducive to the usefulness of his work. * * * * * The above attempt to frame a stricter definition of the science than what are commonly received as such, may be thought to be of little use; or, at best, to be chiefly useful in a general survey and classification of the sciences, rather than as conducing to the more successful pursuit of the particular science in question. We think otherwise, and for this reason; that, with the consideration of the definition of a science, is inseparably connected that of the _philosophic method_ of the science; the nature of the process by which its investigations are to be carried on, its truths to be arrived at. Now, in whatever science there are systematic differences of opinion --which is as much as to say, in all the moral or mental sciences, and in Political Economy among the rest; in whatever science there exist, among those who have attended to the subject, what are commonly called differences of principle, as distinguished from differences of matter-of-fact or detail,--the cause will be found to be, a difference in their conceptions of the philosophic method of the science. The parties who differ are guided, either knowingly or unconsciously, by different views concerning the nature of the evidence appropriate to the subject. They differ not solely in what they believe themselves to see, but in the quarter whence they obtained the light by which they think they see it. The most universal of the forms in which this difference of method is accustomed to present itself, is the ancient feud between what is called theory, and what is called practice or experience. There are, on social and political questions, two kinds of reasoners: there is one portion who term themselves practical men, and call the others theorists; a title which the latter do not reject, though they by no means recognise it as peculiar to them. The distinction between the two is a very broad one, though it is one of which the language employed is a most incorrect exponent. It has been again and again demonstrated, that those who are accused of despising facts and disregarding experience build and profess to build wholly upon facts and experience; while those who disavow theory cannot make one step without theorizing. But, although both classes of inquirers do nothing but theorize, and both of them consult no other guide than experience, there is this difference between them, and a most important difference it is: that those who are called practical men require _specific_ experience, and argue wholly _upwards_ from particular facts to a general conclusion; while those who are called theorists aim at embracing a wider field of experience, and, having argued upwards from particular facts to a general principle including a much wider range than that of the question under discussion, then argue _downwards_ from that general principle to a variety of specific conclusions. Suppose, for example, that the question were, whether absolute kings were likely to employ the powers of government for the welfare or for the oppression of their subjects. The practicals would endeavour to determine this question by a direct induction from the conduct of particular despotic monarchs, as testified by history. The theorists would refer the question to be decided by the test not solely of our experience of kings, but of our experience of men. They would contend that an observation of the tendencies which human nature has manifested in the variety of situations in which human beings have been placed, and especially observation of what passes in our own minds, warrants us in inferring that a human being in the situation of a despotic king will make a bad use of power; and that this conclusion would lose nothing of its certainty even if absolute kings had never existed, or if history furnished us with no information of the manner in which they had conducted themselves. The first of these methods is a method of induction, merely; the last a mixed method of induction and ratiocination. The first may be called the method _à posteriori;_ the latter, the method _à priori_. We are aware that this last expression is sometimes used to characterize a supposed mode of philosophizing, which does not profess to be founded upon experience at all. But we are not acquainted with any mode of philosophizing, on political subjects at least, to which such a description is fairly applicable. By the method _à posteriori_ we mean that which requires, as the basis of its conclusions, not experience merely, but specific experience. By the method _à priori_ we mean (what has commonly been meant) reasoning from an assumed hypothesis; which is not a practice confined to mathematics, but is of the essence of all science which admits of general reasoning at all. To verify the hypothesis itself _à posteriori_, that is, to examine whether the facts of any actual case are in accordance with it, is no part of the business of science at all, but of the _application_ of science. In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an _abstract_ science, and its method as the method _à priori_. Such is undoubtedly its character as it has been understood and taught by all its most distinguished teachers. It reasons, and, as we contend, must necessarily reason, from assumptions, not from facts. It is built upon hypotheses, strictly analogous to those which, under the name of definitions, are the foundation of the other abstract sciences. Geometry presupposes an arbitrary definition of a line, "that which has length but not breadth." Just in the same manner does Political Economy presuppose an arbitrary definition of man, as a being who invariably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained in the existing state of knowledge. It is true that this definition of man is not formally prefixed to any work on Political Economy, as the definition of a line is prefixed to Euclid's Elements; and in proportion as by being so prefixed it would be less in danger of being forgotten, we may see ground for regret that this is not done. It is proper that what is assumed in every particular case, should once for all be brought before the mind in its full extent, by being somewhere formally stated as a general maxim. Now, no one who is conversant with systematic treatises on Political Economy will question, that whenever a political economist has shown that, by acting in a particular manner, a labourer may obviously obtain higher wages, a capitalist larger profits, or a landlord higher rent, he concludes, as a matter of course, that they will certainly act in that manner. Political Economy, therefore, reasons from _assumed_ premises--from premises which might be totally without foundation in fact, and which are not pretended to be universally in accordance with it. The conclusions of Political Economy, consequently, like those of geometry, are only true, as the common phrase is, _in the abstract_; that is, they are only true under certain suppositions, in which none but general causes--causes common to the _whole class_ of cases under consideration--are taken into the account. This ought not to be denied by the political economist. If he deny it, then, and then only, he places himself in the wrong. The _à priori_ method which is laid to his charge, as if his employment of it proved his whole science to be worthless, is, as we shall presently show, the only method by which truth can possibly be attained in any department of the social science. All that is requisite is, that he be on his guard not to ascribe to conclusions which are grounded upon an hypothesis a different kind of certainty from that which really belongs to them. They would be true without qualification, only in a case which is purely imaginary. In proportion as the actual facts recede from the hypothesis, he must allow a corresponding deviation from the strict letter of his conclusion; otherwise it will be true only of things such as he has arbitrarily supposed, not of such things as really exist. That which is true in the abstract, is always true in the concrete with proper _allowances_. When a certain cause really exists, and if left to itself would infallibly produce a certain effect, that same effect, _modified_ by all the other concurrent causes, will correctly correspond to the result really produced. The conclusions of geometry are not strictly true of such lines, angles, and figures, as human hands can construct. But no one, therefore, contends that the conclusions of geometry are of no utility, or that it would be better to shut up Euclid's Elements, and content ourselves with "practice" and "experience." No mathematician ever thought that his definition of a line corresponded to an actual line. As little did any political economist ever imagine that real men had no object of desire but wealth, or none which would not give way to the slightest motive of a pecuniary kind. But they were justified in assuming this, for the purposes of their argument; because they had to do only with those parts of human conduct which have pecuniary advantage for their direct and principal object; and because, as no two individual cases are exactly alike, no _general_ maxims could ever be laid down unless _some_ of the circumstances of the particular case were left out of consideration. But we go farther than to affirm that the method _à priori_ is a legitimate mode of philosophical investigation in the moral sciences: we contend that it is the only mode. We affirm that the method _à posteriori_, or that of specific experience, is altogether inefficacious in those sciences, as a means of arriving at any considerable body of valuable truth; though it admits of being usefully applied in aid of the method _à priori_, and even forms an indispensable supplement to it. There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. In chemistry and natural philosophy, we can not only observe what happens under all the combinations of circumstances which nature brings together, but we may also try an indefinite number of new combinations. This we can seldom do in ethical, and scarcely ever in political science. We cannot try forms of government and systems of national policy on a diminutive scale in our laboratories, shaping our experiments as we think they may most conduce to the advancement of knowledge. We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation. The consequence of this unavoidable defect in the materials of the induction is, that we can rarely obtain what Bacon has quaintly, but not unaptly, termed an _experimentum crucis_. In any science which admits of an unlimited range of arbitrary experiments, an _experimentum crucis_ may always be obtained. Being able to vary all the circumstances, we can always take effectual means of ascertaining which of them are, and which are not, material. Call the effect B, and let the question be whether the cause A in any way contributes to it. We try an experiment in which all the surrounding circumstances are altered, except A alone: if the effect B is nevertheless produced, A is the cause of it. Or, instead of leaving A, and changing the other circumstances, we leave all the other circumstances and change A: if the effect B in that case does _not_ take place, then again A is a necessary condition of its existence. Either of these experiments, if accurately performed, is an _experimentum crucis_; it converts the presumption we had before of the existence of a connection between A and B into proof, by negativing every other hypothesis which would account for the appearances. But this can seldom be done in the moral sciences, owing to the immense multitude of the influencing circumstances, and our very scanty means of varying the experiment. Even in operating upon an individual mind, which is the case affording greatest room for experimenting, we cannot often obtain a _crucial_ experiment. The effect, for example, of a particular circumstance in education, upon the formation of character, may be tried in a variety of cases, but we can hardly ever be certain that any two of those cases differ in all their circumstances except the solitary one of which we wish to estimate the influence. In how much greater a degree must this difficulty exist in the affairs of states, where even the _number_ of recorded experiments is so scanty in comparison with the variety and multitude of the circumstances concerned in each. How, for example, can we obtain a crucial experiment on the effect of a restrictive commercial policy upon national wealth? We must find two nations alike in every other respect, or at least possessed, in a degree exactly equal, of everything which conduces to national opulence, and adopting exactly the same policy in all their other affairs, but differing in this only, that one of them adopts a system of commercial restrictions, and the other adopts free trade. This would be a decisive experiment, similar to those which we can almost always obtain in experimental physics. Doubtless this would be the most conclusive evidence of all if we could get it. But let any one consider how infinitely numerous and various are the circumstances which either directly or indirectly do or may influence the amount of the national wealth, and then ask himself what are the probabilities that in the longest revolution of ages two nations will be found, which agree, and can be shown to agree, in all those circumstances except one? Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the _à priori_ one, or that of "abstract speculation." Although sufficiently ample grounds are not afforded in the field of politics, for a satisfactory induction by a comparison of the effects, the causes may, in all cases, be made the subject of specific experiment. These causes are, laws of human nature, and external circumstances capable of exciting the human will to action. The desires of man, and the nature of the conduct to which they prompt him, are within the reach of our observation. We can also observe what are the objects which excite those desires. The materials of this knowledge every one can principally collect within himself; with reasonable consideration of the differences, of which experience discloses to him the existence, between himself and other people. Knowing therefore accurately the properties of the substances concerned, we may reason with as much certainty as in the most demonstrative parts of physics from any assumed set of circumstances. This will be mere trifling if the assumed circumstances bear no sort of resemblance to any real ones; but if the assumption is correct as far as it goes, and differs from the truth no otherwise than as a part differs from the whole, then the conclusions which are correctly deduced from the assumption constitute _abstract_ truth; and when completed by adding or subtracting the effect of the non-calculated circumstances, they are true in the concrete, and may be applied to practice. Of this character is the science of Political Economy in the writings of its best teachers. To render it perfect as an abstract science, the combinations of circumstances which it assumes, in order to trace their effects, should embody all the circumstances that are common to all cases whatever, and likewise all the circumstances that are common to any important class of cases. The conclusions correctly deduced from these assumptions, would be as true in the abstract as those of mathematics; and would be as near an approximation as abstract truth can ever be, to truth in the concrete. When the principles of Political Economy are to be applied to a particular ease, then it is necessary to take into account all the individual circumstances of that case; not only examining to which of the sets of circumstances contemplated by the abstract science the circumstances of the case in question correspond, but likewise what other circumstances may exist in that case, which not being common to it with any large and strongly-marked class of cases, have not fallen under the cognizance of the science. These circumstances have been called _disturbing causes_. And here only it is that an element of uncertainty enters into the process--an uncertainty inherent in the nature of these complex phenomena, and arising from the impossibility of being quite sure that all the circumstances of the particular case are known to us sufficiently in detail, and that our attention is not unduly diverted from any of them. This constitutes the only uncertainty of Political Economy; and not of it alone, but of the moral sciences in general. When the disturbing causes are known, the allowance necessary to be made for them detracts in no way from scientific precision, nor constitutes any deviation from the _à priori_ method. The disturbing causes are not handed over to be dealt with by mere conjecture. Like _friction_ in mechanics, to which they have been often compared, they may at first have been considered merely as a non-assignable deduction to be made by guess from the result given by the general principles of science; but in time many of them are brought within the pale of the abstract science itself, and their effect is found to admit of as accurate an estimation as those more striking effects which they modify. The disturbing causes have their laws, as the causes which are thereby disturbed have theirs; and from the laws of the disturbing causes, the nature and amount of the disturbance may be predicted _à priori_, like the operation of the more general laws which they are said to modify or disturb, but with which they might more properly be said to be concurrent. The effect of the special causes is then to be added to, or subtracted from, the effect of the general ones. These disturbing causes are sometimes circumstances which operate upon human conduct through the same principle of human nature with which Political Economy is conversant, namely, the desire of wealth, but which are not general enough to be taken into account in the abstract science. Of disturbances of this description every political economist can produce many examples. In other instances the disturbing cause is some other law of human nature. In the latter case it never can fall within the province of Political Economy; it belongs to some other science; and here the mere political economist, he who has studied no science but Political Economy, if he attempt to apply his science to practice, will fail. [11] As for the other kind of disturbing causes, namely those which operate through the same law of human nature out of which the general principles of the science arise, these might always be brought within the pale of the abstract science if it were worth while; and when we make the necessary allowances for them in practice, if we are doing anything but guess, we are following out the method of the abstract science into minuter details; inserting among its hypotheses a fresh and still more complex combination of circumstances, and so adding _pro hác vice_ a supplementary chapter or appendix, or at least a supplementary theorem, to the abstract science. Having now shown that the method _à priori_ in Political Economy, and in all the other branches of moral science, is the only certain or scientific mode of investigation, and that the _à posteriori_ method, or that of specific experience, as a means of arriving at truth, is inapplicable to these subjects, we shall be able to show that the latter method is notwithstanding of great value in the moral sciences; namely, not as a means of discovering truth, but of verifying it, and reducing to the lowest point that uncertainty before alluded to as arising from the complexity of every particular case, and from the difficulty (not to say impossibility) of our being assured _à priori_ that we have taken into account all the material circumstances. If we could be quite certain that we knew all the facts of the particular case, we could derive little additional advantage from specific experience. The causes being given, we may know what will be their effect, without an actual trial of every possible combination; since the causes are human feelings, and outward circumstances fitted to excite them: and, as these for the most part are, or at least might be, familiar to us, we can more surely judge of their combined effect from that familiarity, than from any evidence which can be elicited from the complicated and entangled circumstances of an actual experiment. If the knowledge what are the particular causes operating in any given instance were revealed to us by infallible authority, then, if our abstract science were perfect, we should become prophets. But the causes are not so revealed: they are to be collected by observation; and observation in circumstances of complexity is apt to be imperfect. Some of the causes may lie beyond observation; many are apt to escape it, unless we are on the look-out for them; and it is only the habit of long and accurate observation which can give us so correct a preconception what causes we are likely to find, as shall induce us to look for them in the right quarter. But such is the nature of the human understanding, that the very fact of attending with intensity to one part of a thing, has a tendency to withdraw the attention from the other parts. We are consequently in great danger of adverting to a portion only of the causes which are actually at work. And if we are in this predicament, the more accurate our deductions and the more certain our conclusions in the abstract, (that is, making abstraction of all circumstances except those which form part of the hypothesis,) the less we are likely to suspect that we are in error: for no one can have looked closely into the sources of fallacious thinking without being deeply conscious that the coherence, and neat concatenation of our philosophical systems, is more apt than we are commonly aware to pass with us as evidence of their truth. We cannot, therefore, too carefully endeavour to verify our theory, by comparing, in the particular cases to which we have access, the results which it would have led us to predict, with the most trustworthy accounts we can obtain of those which have been actually realized. The discrepancy between our anticipations and the actual fact is often the only circumstance which would have drawn our attention to some important disturbing cause which we had overlooked. Nay, it often discloses to us errors in thought, still more serious than the omission of what can with any propriety be termed a disturbing cause. It often reveals to us that the basis itself of our whole argument is insufficient; that the data, from which we had reasoned, comprise only a part, and not always the most important part, of the circumstances by which the result is really determined. Such oversights are committed by very good reasoners, and even by a still rarer class, that of good observers. It is a kind of error to which those are peculiarly liable whose views are the largest and most philosophical: for exactly in that ratio are their minds more accustomed to dwell upon those laws, qualities, and tendencies, which are common to large classes of cases, and which belong to all place and all time; while it often happens that circumstances almost peculiar to the particular case or era have a far greater share in governing that one case. Although, therefore, a philosopher be convinced that no general truths can be attained in the affairs of nations by the _à posteriori_ road, it does not the less behove him, according to the measure of his opportunities, to sift and scrutinize the details of every specific experiment. Without this, he may be an excellent professor of abstract science; for a person may be of great use who points out correctly what effects will follow from certain combinations of possible circumstances, in whatever tract of the extensive region of hypothetical cases those combinations may be found. He stands in the same relation to the legislator, as the mere geographer to the practical navigator; telling him the latitude and longitude of all sorts of places, but not how to find whereabouts he himself is sailing. If, however, he does no more than this, he must rest contented to take no share in practical politics; to have no opinion, or to hold it with extreme modesty, on the applications which should be made of his doctrines to existing circumstances. No one who attempts to lay down propositions for the guidance of mankind, however perfect his scientific acquirements, can dispense with a practical knowledge of the actual modes in which the affairs of the world are carried on, and an extensive personal experience of the actual ideas, feelings, and intellectual and moral tendencies of his own country and of his own age. The true practical statesman is he who combines this experience with a profound knowledge of abstract political philosophy. Either acquirement, without the other, leaves him lame and impotent if he is sensible of the deficiency; renders him obstinate and presumptuous if, as is more probable, he is entirely unconscious of it. Such, then, are the respective offices and uses of the _à priori_ and the _à posteriori_ methods--the method of abstract science, and that of specific experiment--as well in Political Economy, as in all the other branches of social philosophy. Truth compels us to express our conviction that whether among those who have written on, these subjects, or among those for whose use they wrote, few can be pointed out who have allowed to each of these methods its just value, and systematically kept each to its proper objects and functions. One of the peculiarities of modern times, the separation of theory from practice--of the studies of the closet, from the outward business of the world--has given a wrong bias to the ideas and feelings both of the student and of the man of business. Each undervalues that part of the materials of thought with which he is not familiar. The one despises all comprehensive views, the other neglects details. The one draws his notion of the universe from the few objects with which his course of life has happened to render him familiar; the other having got demonstration on his side, and forgetting that it is only a demonstration _nisi_--a proof at all times liable to be set aside by the addition of a single new fact to the hypothesis --denies, instead of examining and sifting, the allegations which are opposed to him. For this he has considerable excuse in the worthlessness of the testimony on which the facts brought forward to invalidate the conclusions of theory usually rest. In these complex matters, men see with their preconceived opinions, not with their eyes: an interested or a passionate man's statistics are of little worth; and a year seldom passes without examples of the astounding falsehoods which large bodies of respectable men will back each other in publishing to the world as facts within their personal knowledge. It is not because a thing is _asserted_ to be true, but because in its nature it _may_ be true, that a sincere and patient inquirer will feel himself called upon to investigate it. He will use the assertions of opponents not as evidence, but indications leading to evidence; suggestions of the most proper course for his own inquiries. But while the philosopher and the practical man bandy half-truths with one another, we may seek far without finding one who, placed on a higher eminence of thought, comprehends as a whole what they see only in separate parts; who can make the anticipations of the philosopher guide the observation of the practical man, and the specific experience of the practical man warn the philosopher where something is to be added to his theory. The most memorable example in modern times of a man who united the spirit of philosophy with the pursuits of active life, and kept wholly clear from the partialities and prejudices both of the student and of the practical statesman, was Turgot; the wonder not only of his age, but of history, for his astonishing combination of the most opposite, and, judging from common experience, almost incompatible excellences. Though it is impossible to furnish any test by which a speculative thinker, either in Political Economy or in any other branch of social philosophy, may know that he is competent to judge of the application of his principles to the existing condition of his own or any other country, indications may be suggested by the absence of which he may well and surely know that he is not competent. His knowledge must at least enable him to explain and account for what _is_, or he is an insufficient judge of what ought to be. If a political economist, for instance, finds himself puzzled by any recent or present commercial phenomena; if there is any mystery to him in the late or present state of the productive industry of the country, which his knowledge of principle does not enable him to unriddle; he may be sure that something is wanting to render his system of opinions a safe guide in existing circumstances. Either some of the facts which influence the situation of the country and the course of events are not known to him; or, knowing them, he knows not what ought to be their effects. In the latter case his system is imperfect even as an abstract system; it does not enable him to trace correctly all the consequences even of assumed premises. Though he succeed in throwing doubts upon the reality of some of the phenomena which he is required to explain, his task is not yet completed; even then he is called upon to show how the belief, which he deems unfounded, arose; and what is the real nature of the appearances which gave a colour of probability to allegations which examination proves to be untrue. When the speculative politician has gone through this labour--has gone through it conscientiously, not with the desire of finding his system complete, but of making it so--he may deem himself qualified to apply his principles to the guidance of practice: but he must still continue to exercise the same discipline upon every new combination of facts as it arises; he must make a large allowance for the disturbing influence of unforeseen causes, and must carefully watch the result of every experiment, in order that any residuum of facts which his principles did not lead him to expect, and do not enable him to explain, may become the subject of a fresh analysis, and furnish the occasion for a consequent enlargement or correction of his general views. The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must _analyze_ the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the _law_ of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of _synthesis_; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but, as they can be performed only with a certain approximation to correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability; according as they are better or worse apprised what the causes are,--have learnt with more or less accuracy from experience the law to which each of those causes, when acting separately, conforms, --and have summed up the aggregate effect more or less carefully. With all the precautions which have been indicated there will still be some danger of falling into partial views; but we shall at least have taken the best securities against it. All that we can do more, is to endeavour to be impartial critics of our own theories, and to free ourselves, as far as we are able, from that reluctance from which few inquirers are altogether him to expect, and do not enable him to explain, may become the subject of a fresh analysis, and furnish the occasion for a consequent enlargement or correction of his general views. The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must _analyze_ the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the _law_ of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of _synthesis_; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but, as they can be performed only with a certain approximation to correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability; according as they are better or worse apprised what the causes are,--have learnt with more or less accuracy from experience the law to which each of those causes, when acting separately, conforms,--and have summed up the aggregate effect more or less carefully. With all the precautions which have been indicated there will still be some danger of falling into partial views; but we shall at least have taken the best securities against it. All that we can do more, is to endeavour to be impartial critics of our own theories, and to free ourselves, as far as we are able, from that reluctance from which few inquirers are altogether exempt, to admit the reality or relevancy of any facts which they have not previously either taken into, or left a place open for in, their systems. If indeed every phenomenon was generally the effect of no more than one cause, a knowledge of the law of that cause would, unless there was a logical error in our reasoning, enable us confidently to predict all the circumstances of the phenomenon. We might then, if we had carefully examined our premises and our reasoning, and found no flaw, venture to disbelieve the testimony which might be brought to show that matters had turned out differently from what we should have predicted. If the causes of erroneous conclusions were always patent on the face of the reasonings which lead to them, the human understanding would be a far more trustworthy instrument than it is. But the narrowest examination of the process itself will help us little towards discovering that we have omitted part of the premises which we ought to have taken into our reasoning. Effects are commonly determined by a _concurrence_ of causes. If we have overlooked any one cause, we may reason justly from all the others, and only be the further wrong. Our premises will be true, and our reasoning correct, and yet the result of no value in the particular case. There is, therefore, almost always room for a modest doubt as to our practical conclusions. Against false premises and unsound reasoning, a good mental discipline may effectually secure us; but against the danger of _overlooking_ something, neither strength of understanding nor intellectual cultivation can be more than a very imperfect protection. A person may be warranted in feeling confident, that whatever he has carefully contemplated with his mind's eye he has seen correctly; but no one can be sure that there is not something in existence which he has not seen at all. He can do no more than satisfy himself that he has seen all that is visible to any other persons who have concerned themselves with the subject. For this purpose he must endeavour to place himself at their point of view, and strive earnestly to see the object as they see it; nor give up the attempt until he has either added the appearance which is floating before them to his own stock of realities, or made out clearly that it is an optical deception. * * * * * The principles which we have now stated are by no means alien to common apprehension: they are not absolutely hidden, perhaps, from any one, but are commonly seen through a mist. We might have presented the latter part of them in a phraseology in which they would have seemed the most familiar of truisms: we might have cautioned inquirers against too extensive _generalization_, and reminded them that there are _exceptions_ to all rules. Such is the current language of those who distrust comprehensive thinking, without having any clear notion why or where it ought to be distrusted. We have avoided the use of these expressions purposely, because we deem them superficial and inaccurate. The error, when there is error, does _not_ arise from generalizing too extensively; that is, from including too wide a range of particular cases in a single proposition. Doubtless, a man often asserts of an entire class what is only true of a part of it; but his error generally consists not in making too wide an assertion, but in making the wrong _kind_ of assertion: he predicated an actual result, when he should only have predicated a _tendency_ to that result--a power acting with a certain intensity in that direction. With regard to _exceptions_; in any tolerably ably advanced science there is properly no such thing as an exception. What is thought to be an exception to a principle is always some other and distinct principle cutting into the former: some other force which impinges against the first force, and deflects it from its direction. There are not a _law_ and an _exception_ to that law--the law acting in ninety-nine cases, and the exception in one. There are two laws, each possibly acting in the whole hundred cases, and bringing about a common effect by their conjunct operation. If the force which, being the less conspicuous of the two, is called the disturbing force, prevails sufficiently over the other force in some one case, to constitute that case what is commonly called an exception, the same disturbing force probably acts as a modifying cause in many other cases which no one will call exceptions. Thus if it were stated to be a law of nature, that all heavy bodies fall to the ground, it would probably be said that the resistance of the atmosphere, which prevents a balloon from falling, constitutes the balloon an exception to that pretended law of nature. But the real law is, that all heavy bodies _tend_ to fall; and to this there is no exception, not even the sun and moon; for even they, as every astronomer knows, tend towards the earth, with a force exactly equal to that with which the earth tends towards them. The resistance of the atmosphere might, in the particular case of the balloon, from a misapprehension of what the law of gravitation is, be said to _prevail_ over the law; but its disturbing effect is quite as real in every other case, since though it does not prevent, it retards the fall of all bodies whatever. The rule, and the so-called exception, do not divide the cases between them; each of them is a comprehensive rule extending to all cases. To call one of these concurrent principles an exception to the other, is superficial, and contrary to the correct principles of nomenclature and arrangement. An effect of precisely the same kind, and arising from the same cause, ought not to be placed in two different categories, merely as there does or does not exist another cause preponderating over it. It is only in art, as distinguished from science, that we can with propriety speak of exceptions. Art, the immediate end of which is practice, has nothing to do with causes, except as the means of bringing about effects. However heterogeneous the causes, it carries the effects of them all into one single reckoning, and according as the sum-total is _plus_ or _minus_, according as it falls above or below a certain line, Art says, Do this, or Abstain from doing it. The exception does not run by insensible degrees into the rule, like what are called exceptions in science. In a question of practice it frequently happens that a certain thing is either fit to be done, or fit to be altogether abstained from, there being no medium. If, in the majority of cases, it is fit to be done, that is made the rule. When a case subsequently occurs in which the thing ought not to be done, an entirely new leaf is turned over; the rule is now done with, and dismissed: a new train of ideas is introduced, between which and those involved in the rule there is a broad line of demarcation; as broad and _tranchant_ as the difference between Ay and No. Very possibly, between the last case which comes within the rule and the first of the exception, there is only the difference of a shade: but that shade probably makes the whole interval between acting in one way and in a totally different one. We may, therefore, in talking of art, unobjectionably speak of the _rule_ and the _exception_; meaning by the rule, the cases in which there exists a preponderance, however slight, of inducements for acting in a particular way; and by the exception, the cases in which the preponderance is on the contrary side. THE END. NOTES: [8] We say, the _production_ and _distribution_, not, as is usual with writers on this science, the production, distribution, and _consumption_. For we contend that Political Economy, as conceived by those very writers, has nothing to do with the consumption of wealth, further than as the consideration of it is inseparable from that of production, or from that of distribution. We know not of any _laws_ of the _consumption_ of wealth as the subject of a distinct science: they can be no other than the laws of human enjoyment. Political economists have never treated of consumption on its own account, but always for the purpose of the inquiry in what manner different kinds of consumption affect the production and distribution of wealth. Under the head of Consumption, in professed treatises on the science, the following are the subjects treated of: 1st, The distinction between _productive_ and _unproductive_ consumption; 2nd, The inquiry whether it is possible for _too much_ wealth to be _produced_, and for too great a portion of what has been produced to be applied to the purpose of further _production_; 3rd, The theory of taxation, that is to say, the following two questions--by whom each particular tax is paid (a question of _distribution_), and in what manner particular taxes affect _production_. [9] The physical laws of the production of useful objects are all equally presupposed by the science of Political Economy: most of them, however, it presupposes in the gross, seeming to say nothing about them. A few (such, for instance, as the decreasing ratio in which the produce of the soil is increased by an increased application of labour) it is obliged particularly to specify, and thus seems to borrow those truths from the physical sciences to which they properly belong, and include them among its own. [10] The _science_ of legislation is an incorrect and misleading expression. Legislation is _making laws_. We do not talk of the _science_ of _making_ anything. Even the _science of government_ would be an objectionable expression, were it not that _government_ is often loosely taken to signify, not the act of governing, but the state or condition of _being governed_, or of living under a government. A preferable expression would be, the science of _political society_; a principal branch of the more extensive science of society, characterized in the text. [11] One of the strongest reasons for drawing the line of separation clearly and broadly between science and art is the following:--That the principle of classification in science most conveniently follows the classification of _causes_, while arts must necessarily be classified according to the classification of the _effects_, the production of which is their appropriate end. Now an effect, whether in physics or morals, commonly depends upon a concurrence of causes, and it frequently happens that several of these causes belong to different sciences. Thus in the construction of engines upon the principles of the science of _mechanics_, it is necessary to bear in mind the _chemical_ properties of the material, such as its liability to oxydize; its electrical and magnetic properties, and so forth. From this it follows that although the necessary foundation of all art is science, that is, the knowledge of the properties or laws of the objects upon which, and with which, the art dons its work; it is not equally true that every art corresponds to one particular science. Each art presupposes, not one science, but science in general; or, at least, many distinct sciences. (Editor's note:) Essays on some Unsettled Questions of Political Economy These five essays represent Mill's earliest thoughts on economic matters and were first composed in 1829 and 1830 before his reputation had been established by the publication of _Logic_ in 1843. Their successful reception no doubt hastened the composition of his comprehensive work the _Principles of Political Economy_ (1848). 
14943	----	[Illustration: Carleton H. Parker] AN AMERICAN IDYLL THE LIFE OF CARLETON H. PARKER _By_ CORNELIA STRATTON PARKER [Illustration] BOSTON THE ATLANTIC MONTHLY PRESS 1919 _The poem on the opposite page is here reprinted with the express permission of Messrs. Charles Scribner's Sons, publishers of Robert Louis Stevenson's Works._ _Yet, O stricken heart, remember, O remember, How of human days he lived the better part. April came to bloom, and never dim December Breathed its killing chill upon the head or heart. Doomed to know not Winter, only Spring, a being Trod the flowery April blithely for a while, Took his fill of music, joy of thought and seeing, Came and stayed and went, nor ever ceased to smile. Came and stayed and went, and now when all is finished, You alone have crossed the melancholy stream, Yours the pang, but his, O his, the undiminished, Undecaying gladness, undeparted dream. All that life contains of torture, toil, and treason, Shame, dishonor, death, to him were but a name. Here, a boy, he dwelt through all the singing season And ere the day of sorrow departed as he came._ _Written for our three children. Dedicated to all those kindred souls, friends of Carl Parker whether they knew him or not, who are making the fight, without bitterness but with all the understanding, patience, and enthusiasm they possess, for a saner, kindlier, and more joyous world. And to those especially who love greatly along the way._ PREFACE It was a year ago to-day that Carl Parker died--March 17, 1918. His fortieth birthday would have come on March 31. His friends, his students, were free to pay their tribute to him, both in the press and in letters which I treasure. I alone of all,--I who knew him best and loved him most,--had no way to give some outlet to my soul; could see no chance to pay _my_ tribute. One and another have written of what was and will be his valuable service to economic thought and progress; of the effects of his mediation of labor disputes, in the Northwest and throughout the nation; and of his inestimable qualities as friend, comrade, and teacher. "He gave as a Federal mediator,"--so runs one estimate of him,--"all his unparalleled knowledge and understanding of labor and its point of view. That knowledge, that understanding he gained, not by academic investigation, but by working in mines and woods, in shops and on farms. He had the trust and confidence of both sides in disputes between labor and capital; his services were called in whenever trouble was brewing. . . . Thanks to him, strikes were averted; war-work of the most vital importance, threatened by misunderstandings and smouldering discontent, went on." But almost every one who has written for publication has told of but one side of him, and there were such countless sides. Would it then be so out of place if I, his wife, could write of all of him, even to the manner of husband he was? I have hesitated for some months to do this. He had not yet made so truly national a name, perhaps, as to warrant any assumption that such a work would be acceptable. Many of his close friends have asked me to do just this, however; for they realize, as I do so strongly, that his life was so big, so full, so potential, that, even as the story of a man, it would be worth the reading. And, at the risk of sharing intimacies that should be kept in one's heart only, I long to have the world know something of the life we led together. An old friend wrote: "Dear, splendid Carl, the very embodiment of life, energized and joyful to a degree I have never known. And the thought of the separation of you two makes me turn cold. . . . The world can never be the same to me with Carl out of it. I loved his high spirit, his helpfulness, his humor, his adoration of you. Knowing you and Carl, and seeing your life together, has been one of the most perfect things in my life." An Eastern professor, who had visited at our home from time to time wrote: "You have lost one of the finest husbands I have ever known. Ever since I have known the Parker family, I have considered their home life as ideal. I had hoped that the too few hours I spent in your home might be multiplied many times in coming years. . . . I have never known a man more in love with a woman than Carl was with you." So I write of him for these reasons: because I must, to ease my own pent-up feelings; because his life was so well worth writing about; because so many friends have sent word to me: "Some day, when you have the time, I hope you will sit down and write me about Carl"--the newer friends asking especially about his earlier years, the older friends wishing to know of his later interests, and especially of the last months, and of--what I have written to no one as yet--his death. I can answer them all this way. And, lastly, there is the most intimate reason of all. I want our children to know about their father--not just his academic worth, his public career, but the life he led from day to day. If I live till they are old enough to understand, I, of course, can tell them. If not, how are they to know? And so, in the last instance, this is a document for them. C.S.P. March 17, 1919 AN AMERICAN IDYLL CHAPTER I Such hosts of memories come tumbling in on me. More than fifteen years ago, on September 3, 1903, I met Carl Parker. He had just returned to college, two weeks late for the beginning of his Senior year. There was much concern among his friends, for he had gone on a two months' hunting-trip into the wilds of Idaho, and had planned to return in time for college. I met him his first afternoon in Berkeley. He was on the top of a step-ladder, helping put up an awning for our sorority dance that evening, uttering his proverbial joyous banter to any one who came along, be it the man with the cakes, the sedate house-mother, fellow awning-hangers, or the girls busying about. Thus he was introduced to me--a Freshman of two weeks. He called down gayly, "How do you do, young lady?" Within a week we were fast friends, I looking up to him as a Freshman would to a Senior, and a Senior seven years older than herself at that. Within a month I remember deciding that, if ever I became engaged, I would tell Carl Parker before I told any one else on earth! After about two months, he called one evening with his pictures of Idaho. Such a treat as my mountain-loving soul did have! I still have the map he drew that night, with the trails and camping-places marked. And I said, innocence itself, "_I'm_ going to Idaho on my honeymoon!" And he said, "I'm not going to marry till I find a girl who wants to go to Idaho on her honeymoon!" Then we both laughed. But the deciding event in his eyes was when we planned our first long walk in the Berkeley hills for a certain Saturday, November 22, and that morning it rained. One of the tenets I was brought up on by my father was that bad weather was _never_ an excuse for postponing anything; so I took it for granted that we would start on our walk as planned. Carl telephoned anon and said, "Of course the walk is off." "But why?" I asked. "The rain!" he answered. "As if that makes any difference!" At which he gasped a little and said all right, he'd be around in a minute; which he was, in his Idaho outfit, the lunch he had suggested being entirely responsible for bulging one pocket. Off we started in the rain, and such a day as we had! We climbed Grizzly Peak,--only we did not know it for the fog and rain,--and just over the summit, in the shelter of a very drippy oak tree, we sat down for lunch. A fairly sanctified expression came over Carl's face as he drew forth a rather damp and frayed-looking paper-bag--as a king might look who uncovered the chest of his most precious court jewels before a courtier deemed worthy of that honor. And before my puzzled and somewhat doubtful eyes he spread his treasure--jerked bear-meat, nothing but jerked bear-meat. I never had seen jerked anything, let alone tasted it. I was used to the conventional picnic sandwiches done up in waxed paper, plus a stuffed egg, fruit, and cake. I was ready for a lunch after the conservative pattern, and here I gazed upon a mess of most unappetizing-looking, wrinkled, shrunken, jerked bear-meat, the rain dropping down on it through the oak tree. I would have gasped if I had not caught the look of awe and reverence on Carl's face as he gazed eagerly, and with what respect, on his offering. I merely took a hunk of what was supplied, set my teeth into it, and pulled. It was salty, very; it looked queer, tasted queer, _was_ queer. Yet that lunch! We walked farther, sat now and then under other drippy trees, and at last decided that we must slide home, by that time soaked to the skin, and I minus the heel to one shoe. I had just got myself out of the bath and into dry clothes when the telephone rang. It was Carl. Could he come over to the house and spend the rest of the afternoon? It was then about four-thirty. He came, and from then on things were decidedly--different. How I should love to go into the details of that Freshman year of mine! I am happier right now writing about it than I have been in six months. I shall not go into detail--only to say that the night of the Junior Prom of my Freshman year Carl Parker asked me to marry him, and two days later, up again in our hills, I said that I would. To think of that now--to think of waiting two whole days to decide whether I would marry Carl Parker or not!! And for fourteen years from the day I met him, there was never one small moment of misunderstanding, one day that was not happiness--except when we were parted. Perhaps there are people who would consider it stupid, boresome, to live in such peace as that. All I can answer is that it was _not_ stupid, it was _not_ boresome--oh, how far from it! In fact, in those early days we took our vow that the one thing we would never do was to let the world get commonplace for us; that the time should never come when we would not be eager for the start of each new day. The Kipling poem we loved the most, for it was the spirit of both of us, was "The Long Trail." You know the last of it:-- The Lord knows what we may find, dear lass, And the Deuce knows what we may do-- But we're back once more on the old trail, our own trail, the out trail, We're down, hull down, on the Long Trail--the trail that is always new! CHAPTER II After we decided to get married, and that as soon as ever we could,--I being a Freshman at the ripe and mature age of, as mentioned, just eighteen years, he a Senior, with no particular prospects, not even sure as yet what field he would go into,--we began discussing what we might do and where we might go. Our main idea was to get as far away from everybody as we could, and live the very fullest life we could, and at last we decided on Persia. Why Persia? I cannot recall the steps now that brought us to that conclusion. But I know that first Christmas I sent Carl my picture in a frilled high-school graduation frock and a silk Persian flag tucked behind it, and that flag remained always the symbol for us that we would never let our lives get stale, never lose the love of adventure, never "settle down," intellectually at any rate. Can you see my father's face that sunny March day,--Charter Day it was,--when we told him we were engaged? (My father being the conventional, traditional sort who had never let me have a real "caller" even, lest I become interested in boys and think of matrimony too young!) Carl Parker was the first male person who was ever allowed at my home in the evening. He came seldom, since I was living in Berkeley most of the time, and anyway, we much preferred prowling all over our end of creation, servant-girl-and-policeman fashion. Also, when I married, according to father it was to be some one, preferably an attorney of parts, about to become a judge, with a large bank account. Instead, at eighteen, I and this almost-unknown-to-him Senior stood before him and said, "We are going to be married," or words to that general effect. And--here is where I want you to think of the expression on my conservative father's face. Fairly early in the conversation he found breath to say, "And what, may I ask, are your prospects?" "None, just at present." "And where, may I ask, are you planning to begin this married career you seem to contemplate?" "In Persia." Can you see my father? "_Persia_?" "Yes, Persia." "And what, for goodness' sake, are you two going to do in _Persia_?" "We don't know just yet, of course, but we'll find something." I can see my father's point of view now, though I am not sure but that I shall prefer a son-in-law for our daughter who would contemplate absolute uncertainty in Persia in preference to an assured legal profession in Oakland, California. It was two years before my father became at all sympathetic, and that condition was far from enthusiastic. So it was a great joy to me to have him say, a few months before his death, "You know, Cornelia, I want you to understand that if I had had the world to pick from I'd have chosen Carl Parker for your husband. Your marriage is a constant source of satisfaction to me." I saw Carl Parker lose his temper once, and once only. It was that first year that we knew each other. Because there was such a difference between his age and mine, the girls in my sorority house refused to believe there could be anything serious about our going together so much, and took great pains to assure me in private that of course Carl meant nothing by his attentions,--to which I agreed volubly,--and they scolded him in private because it would spoil a Freshman to have a Senior so attentive. We always compared notes later, and were much amused. But words were one thing, actions another. Since there could be nothing serious in our relationship, naturally there was no reason why we should be left alone. If there was to be a rally or a concert, the Senior sitting at the head of the dinner-table would ask, "How many are going to-night with a man?" Hands. "How many of the girls are going together?" Hands. Then, to me, "Are you going with Carl?" A faint "Yes." "Then we'll all go along with you." Carl stood it twice--twice he beheld this cavalcade bear away in our wake; then he gritted his teeth and announced, "Never again!" The next college occasion was a rally at the Greek Theatre. Again it was announced at the table that all the unescorted ones would accompany Carl and me. I foresaw trouble. When I came downstairs later, with my hat and coat on, there stood Carl, surrounded by about six girls, all hastily buttoning their gloves, his sister, who knew no more of the truth about Carl and me than the others, being one of them. Never had I seen such a look on Carl's face, and I never did again. His feet were spread apart, his jaw was set, and he was glaring. When he saw me he said, "Come on!" and we dashed for the door. Sister Helen flew after us. "But Carl--the other girls!" Carl stuck his head around the corner of the front door, called defiantly, "_Damn_ the other girls!" banged the door to, and we fled. Never again were we molested. Carl finished his Senior year, and a full year it was for him. He was editor of the "Pelican," the University funny paper, and of the "University of California Magazine," the most serious publication on the campus outside the technical journals; he made every "honor" organization there was to make (except the Phi Beta Kappa); he and a fellow student wrote the successful Senior Extravaganza; he was a reader in economics, and graduated with honors. And he saw me every single day. I feel like digressing here a moment, to assail that old principle--which my father, along with countless others, held so strongly--that a fellow who is really worth while ought to know by his Junior year in college just what his life-work is to be. A few with an early developed special aptitude do, but very few. Carl entered college in August, 1896, in Engineering; but after a term found that it had no further appeal for him. "But a fellow ought to stick to a thing, whether he likes it or not!" If one must be dogmatic, then I say, "A fellow should never work at anything he does not like." One of the things in our case which brought such constant criticism from relatives and friends was that we changed around so much. Thank God we did! It took Carl Parker until he was over thirty before he found just the work he loved the most and in which his soul was content--university work. And he was thirty-seven before he found just the phase of economic study that fired him to his full enthusiasm--his loved field of the application of psychology to economics. And some one would have had him stick to engineering because he started in engineering! He hurt his knee broad-jumping in his Freshman year at college, and finally had to leave, going to Phoenix, Arizona, and then back to the Parker ranch at Vacaville for the better part of a year. The family was away during that time, and Carl ran the place alone. He returned to college in August, 1898, this time taking up mining. After a year's study in mining he wanted the practical side. In the summer of 1899 he worked underground in the Hidden Treasure Mine, Placer county, California. In 1900 he left college again, going to the gold and copper mines of Rossland, British Columbia. From August, 1900, to May, 1901, he worked in four different mines. It was with considerable feeling of pride that he always added, "I got to be machine man before I quit." It was at that time that he became a member of the Western Federation of Miners--an historical fact which inimical capitalists later endeavored to make use of from time to time to do him harm. How I loved to listen by the hour to the stories of those grilling days--up at four in the pitch-dark and snow, to crawl to his job, with the blessing of a dear old Scotch landlady and a "pastie"! He would tell our sons of tamping in the sticks of dynamite, till their eyes bulged. The hundreds of times these last six months I've wished I had in writing the stories of those days--of all his days, from early Vacaville times on! Sometimes it would be an old Vacaville crony who would appear, and stories would fly of those boy times--of the exploits up Putah Creek with Pee Wee Allen; of the prayer-meeting when Carl bet he could out-pray the minister's son, and won; of the tediously thought-out assaults upon an ancient hired man on the place, that would fill a book and delight the heart of Tom Sawyer himself; and how his mother used to sigh and add to it all, "If only he had _ever_ come home on time to his meals!" (And he has one son just like him. Carl's brothers tell me: "Just give up trying to get Jim home on time. Mamma tried every scheme a human could devise to make Carl prompt for his meals, but nothing ever had the slightest effect. Half an hour past dinner-time he'd still be five miles from home.") One article that recently appeared in a New York paper began:-- "They say of him that when he was a small boy he displayed the same tendencies that later on made him great in his chosen field. His family possessed a distinct tendency toward conformity and respectability, but Carl was a companion of every 'alley-bum' in Vacaville. His respectable friends never won him away from his insatiable interest in the under-dog. They now know it makes valid his claim to achievement." After the British Columbia mining days, he took what money he had saved, and left for Idaho, where he was to meet his chum, Hal Bradley, for his first Idaho trip--a dream of theirs for years. The Idaho stories he could tell--oh, why can I not remember them word for word? I have seen him hold a roomful of students in Berlin absolutely spellbound over those adventures--with a bit of Parker coloring, to be sure, which no one ever objected to. I have seen him with a group of staid faculty folk sitting breathless at his Clearwater yarns; and how he loved to tell those tales! Three and a half months he and Hal were in--hunting, fishing, jerking meat, trailing after lost horses, having his dreams of Idaho come true. (If our sons fail to have those dreams!) When Hal returned to college, the _Wanderlust_ was still too strong in Carl; so he stopped off in Spokane, Washington, penniless, to try pot-luck. There were more tales to delight a gathering. In Spokane he took a hand at reporting, claiming to be a person of large experience, since only those of large experience were desired by the editor of the "Spokesman Review." He was given sport, society, and the tenderloin to cover, at nine dollars a week. As he never could go anywhere without making folks love him, it was not long before he had his cronies among the "sports," kind souls "in society" who took him in, and at least one strong, loyal friend,--who called him "Bub," and gave him much excellent advice that he often used to refer to,--who was the owner of the biggest gambling-joint in town. (Spokane was wide open in those days, and "some town.") It was the society friends who seem to have saved his life, for nine dollars did not go far, even then. I have heard his hostesses tell of the meal he could consume. "But I'd been saving for it all day, with just ten cents in my pocket." I met a pal of those days who used to save Carl considerable of his nine dollars by "smooching" his wash into his own home laundry. About then Carl's older brother, Boyd, who was somewhat fastidious, ran into him in Spokane. He tells how Carl insisted he should spend the night at his room instead of going to a hotel. "Is it far from here?" "Oh, no!" So they started out with Boyd's suitcase, and walked and walked through the "darndest part of town you ever saw." Finally, after crossing untold railroad tracks and ducking around sheds and through alleys, they came to a rooming-house that was "a holy fright." "It's all right inside," Carl explained. When they reached his room, there was one not over-broad bed in the corner, and a red head showing, snoring contentedly. "Who's that?" the brother asked. "Oh, a fellow I picked up somewhere." "Where am I to sleep?" "Right in here--the bed's plenty big enough for three!" And Boyd says, though it was 2 A.M. and miles from anywhere, he lit out of there as fast as he could move; and he adds, "I don't believe he even knew that red-headed boy's name!" The reporting went rather lamely it seemed, however. The editor said that it read amateurish, and he felt he would have to make a change. Carl made for some files where all the daily papers were kept, and read and re-read the yellowest of the yellow. As luck would have it, that very night a big fire broke out in a crowded apartment house. It was not in Carl's "beat," but he decided to cover it anyhow. Along with the firemen, he managed to get upon the roof; he jumped here, he flew there, demolishing the only suit of clothes he owned. But what an account he handed in! The editor discarded entirely the story of the reporter sent to cover the fire, ran in Carl's, word for word, and raised him to twelve dollars a week. But just as the crown of reportorial success was lighting on his brow, his mother made it plain to him that she preferred to have him return to college. He bought a ticket to Vacaville,--it was just about Christmas time,--purchased a loaf of bread and a can of sardines, and with thirty cents in his pocket, the extent of his worldly wealth, he left for California, traveling in a day coach all the way. I remember his story of how, about the end of the second day of bread and sardines, he cold-bloodedly and with aforethought cultivated a man opposite him, who looked as if he could afford to eat; and how the man "came through" and asked Carl if he would have dinner with him in the diner. To hear him tell what and how much he ordered, and of the expression and depression of the paying host! It tided him over until he reached home, anyhow--never mind the host. All his mining experience, plus the dark side of life, as contrasted with society as he saw them both in Spokane, turned his interest to the field of economics. And when he entered college the next spring, it was to "major" in that subject. May and June, 1903, he worked underground in the coal-mines of Nanaimo. In July he met Nay Moran in Idaho for his second Idaho camping-trip; and it was on his return from this outing that I met him, and ate his jerked meat and loved him, and never stopped doing that for one second. CHAPTER III There were three boys in the Parker family, and one girl. Each of the other brothers had been encouraged to see the world, and in his turn Carl planned fourteen months in Europe, his serious objective being, on his return, to act as Extension Secretary to Professor Stephens of the University of California, who was preparing to organize Extension work for the first time in California. Carl was to study the English Extension system and also prepare for some Extension lecturing. By that time, we had come a bit to our senses, and I had realized that since there was no money anyhow to marry on, and since I was so young, I had better stay on and graduate from college. Carl could have his trip to Europe and get an option, perhaps, on a tent in Persia. A friend was telling me recently of running into Carl on the street just before he left for Europe and asking him what he was planning to do for the future. Carl answered with a twinkle, "I don't know but what there's room for an energetic up-and-coming young man in Asia Minor." I stopped writing here to read through Carl's European letters, and laid aside about seven I wanted to quote from: the accounts of three dinners at Sidney and Beatrice Webb's in London--what knowing them always meant to him! They, perhaps, have forgotten him; but meeting the Webbs and Graham Wallas and that English group could be nothing but red-letter events to a young economic enthusiast one year out of college, studying Trade-Unionism in the London School of Economics. Then there was his South-African trip. He was sent there by a London firm, to expert a mine near Johannesburg. Although he cabled five times, said firm sent no money. The bitter disgust and anguish of those weeks--neither of us ever had much patience under such circumstances. But he experted his mine, and found it absolutely worthless; explored the veldt on a second-hand bicycle, cooked little meals of bacon and mush wherever he found himself, and wrote to me. Meanwhile he learned much, studied the coolie question, investigated mine-workings, was entertained by his old college mates--mining experts themselves--in Johannesburg. There was the letter telling of the bull fight at Zanzibar, or Delagoa Bay, or some seafaring port thereabouts, that broke his heart, it was such a disappointment--"it made a Kappa tea look gory by comparison." And the letter that regretfully admitted that perhaps, after all, Persia would not just do to settle down in. About that time he wanted California with a fearful want, and was all done with foreign parts, and declared that any place just big enough for two suited him--it did not need to be as far away as Persia after all. At last he borrowed money to get back to Europe, claiming that "he had learned his lesson and learned it hard." And finally he came home as fast as ever he could reach Berkeley--did not stop even to telegraph. I had planned for months a dress I knew he would love to have me greet him in. It was hanging ready in the closet. As it was, I had started to retire--in the same room with a Freshman whom I was supposed to be "rushing" hard--when I heard a soft whistle--our whistle--under my window. My heart stopped beating. I just grabbed a raincoat and threw it over me, my hair down in a braid, and in the middle of a sentence to the astounded Freshman I dashed out. My father had said, "If neither of you changes your mind while Carl is away, I have no objection to your becoming engaged." In about ten minutes after his return we were formally engaged, on a bench up in the Deaf and Dumb Asylum grounds--our favorite trysting-place. It would have been foolish to waste a new dress on that night. I was clad in cloth of gold for all Carl knew or cared, or could see in the dark, for that matter. The deserted Freshman was sound asleep when I got back--and joined another sorority. Thereafter, for a time, Carl went into University Extension, lecturing on Trade-Unionism and South Africa. It did not please him altogether, and finally my father, a lawyer himself, persuaded him to go into law. Carl Parker in law! How we used to shudder at it afterwards; but it was just one more broadening experience that he got out of life. Then came the San Francisco earthquake. That was the end of my Junior year, and we felt we had to be married when I finished college--nothing else mattered quite as much as that. So when an offer came out of a clear sky from Halsey and Company, for Carl to be a bond-salesman on a salary that assured matrimony within a year, though in no affluence, and the bottom all out of the law business and no enthusiasm for it anyway, we held a consultation and decided for bonds and marriage. What a bond-salesman Carl made! Those who knew him knew what has been referred to as "the magic of his personality," and could understand how he was having the whole of a small country town asking him to dinner on his second visit. I somehow got through my Senior year; but how the days dragged! For all I could think of was Carl, Carl, Carl, and getting married. Yet no one--no one on this earth--ever had the fun out of their engaged days that we did, when we were together. Carl used to say that the accumulated expenses of courting me for almost four years came to $10.25. He just guessed at $10.25, though any cheap figure would have done. We just did not care about doing things that happened to cost money. We never did care in our lives, and never would have cared, no matter what our income might be. Undoubtedly that was the main reason we were so blissful on such a small salary in University work--we could never think, at the time, of anything much we were doing without. I remember that the happiest Christmas we almost ever had was over in the country, when we spent under two dollars for all of us. We were absolutely down to bed-rock that year anyway. (It was just after we paid off our European debt.) Carl gave me a book, "The Pastor's Wife," and we gloated over it together all Christmas afternoon! We gave each of the boys a ten-cent cap-pistol and five cents' worth of caps--they were in their Paradise. I mended three shirts of Carl's that had been in my basket so long they were really like new to him,--he'd forgotten he owned them!--laundered them, and hung the trio, tied in tissue paper and red ribbon, on the tree. That _was_ a Christmas! He used to claim, too, that, as I got so excited over five cents' worth of gum-drops, there was no use investing in a dollar's worth of French mixed candy--especially if one hadn't the dollar. We always loved tramping more than anything else, and just prowling around the streets arm-in-arm, ending perhaps with an ice-cream soda. Not over-costly, any of it. I have kept some little reminder of almost every spree we took in our four engaged years--it is a book of sheer joy from cover to cover. Except always, always the need of saying good-bye: it got so that it seemed almost impossible to say it. And then came the day when it did not have to be said each time--that day of days, September 7, 1907, when we were married. Idaho for our honeymoon had to be abandoned, as three weeks was the longest vacation period we could wring from a soulless bond-house. But not even Idaho could have brought us more joy than our seventy-five-mile trip up the Rogue River in Southern Oregon. We hired an old buckboard and two ancient, almost immobile, so-called horses,--they needed scant attention,--and with provisions, gun, rods, and sleeping-bags, we started forth. The woods were in their autumn glory, the fish were biting, corn was ripe along the roadside, and apples--Rogue River apples--made red blotches under every tree. "Help yourselves!" the farmers would sing out, or would not sing out. It was all one to us. I found that, along with his every other accomplishment, I had married an expert camp cook. He found that he had married a person who could not even boil rice. The first night out on our trip, Carl said, "You start the rice while I tend to the horses." He knew I could not cook--I had planned to take a course in Domestic Science on graduation; however, he preferred to marry me earlier, inexperienced, than later, experienced. But evidently he thought even a low-grade moron could boil rice. The bride of his heart did not know that rice swelled when it boiled. We were hungry, we would want lots of rice, so I put lots in. By the time Carl came back I had partly cooked rice in every utensil we owned, including the coffee-pot and the wash-basin. And still he loved me! That honeymoon! Lazy horses poking unprodded along an almost deserted mountain road; glimpses of the river lined with autumn reds and yellows; camp made toward evening in any spot that looked appealing--and all spots looked appealing; two fish-rods out; consultation as to flies; leave-taking for half an hour's parting, while one went up the river to try his luck, one down. Joyous reunion, with much luck or little luck, but always enough for supper: trout rolled in cornmeal and fried, corn on the cob just garnered from a willing or unwilling farmer that afternoon, corn-bread,--the most luscious corn-bread in the world, baked camper-style by the man of the party,--and red, red apples, eaten by two people who had waited four years for just that. Evenings in a sandy nook by the river's edge, watching the stars come out above the water. Adventures, such as losing Chocolada, the brown seventy-eight-year-old horse, and finding her up to her neck in a deep stream running through a grassy meadow with perpendicular banks on either side. We walked miles till we found a farmer. With the aid of himself and his tools, plus a stout rope and a tree, in an afternoon's time we dug and pulled and hauled and yanked Chocolada up and out onto dry land, more nearly dead than ever by that time. The ancient senile had just fallen in while drinking. We made a permanent camp for one week seventy-five miles up the river, in a spot so deserted that we had to cut the road through to reach it. There we laundered our change of overalls and odds and ends, using the largest cooking utensil for boiling what was boiled, and all the food tasted of Ivory soap for two days; but we did not mind even that. And then, after three weeks, back to skirts and collars and civilization, and a continued honeymoon from Medford, Oregon, to Seattle, Washington, doing all the country banks _en route_. In Portland we had to be separated for one whole day--it seemed nothing short of harrowing. Then came Seattle and house-hunting. We had a hundred dollars a month to live on, and every apartment we looked at rented for from sixty dollars up. Finally, in despair, we took two wee rooms, a wee-er kitchen, and bath, for forty dollars. It was just before the panic in 1907, and rents were exorbitant. And from having seventy-five dollars spending money a month before I was married, I jumped to keeping two of us on sixty dollars, which was what was left after the rent was paid. I am not rationalizing when I say I am glad that we did not have a cent more. It was a real sporting event to make both ends meet! And we did it, and saved a dollar or so, just to show we could. Any and every thing we commandeered to help maintain our solvency. Seattle was quite given to food fairs in those days, and we kept a weather eye out for such. We would eat no lunch, make for the Food Show about three, nibble at samples all afternoon, and come home well-fed about eight, having bought enough necessities here and there to keep our consciences from hurting. Much of the time Carl had to be on the road selling bonds, and we almost grieved our hearts out over that. In fact, we got desperate, and when Carl was offered an assistant cashiership in a bank in Ellensburg, Washington, we were just about to accept it, when the panic came, and it was all for retrenchment in banks. Then we planned farming, planned it with determination. It was too awful, those good-byes. Each got worse and harder than the last. We had divine days in between, to be sure, when we'd prowl out into the woods around the city, with a picnic lunch, or bummel along the waterfront, ending at a counter we knew, which produced, or the man behind it produced, delectable and cheap clubhouse sandwiches. The bond business, and business conditions generally in the Northwest, got worse and worse. In March, after six months of Seattle, we were called back to the San Francisco office. Business results were better, Carl's salary was raised considerably, but there were still separations. CHAPTER IV On July 3, the Marvelous Son was born, and never was there such a father. Even the trained nurse, hardened to new fathers by years of experience, admitted that she never had seen any one take parenthood quite so hard. Four times in the night he crept in to see if the baby was surely breathing. We were in a very quiet neighborhood, yet the next day, being Fourth of July, now and then a pop would be heard. At each report of a cap-pistol a block away, Carl would dash out and vehemently protest to a group of scornful youngsters that they would wake our son. As if a one-day-old baby would seriously consider waking if a giant fire-cracker went off under his bed! Those were magic days. Three of us in the family instead of two--and separations harder than ever. Once in all the ten and a half years we were married I saw Carl Parker downright discouraged over his own affairs, and that was the day I met him down town in Oakland and he announced that he just could not stand the bond business any longer. He had come to dislike it heartily as a business; and then, leaving the boy and me was not worth the whole financial world put together. Since his European experience,--meeting the Webbs and their kind,--he had had a hankering for University work, but he felt that the money return was so small he simply could not contemplate raising a family on it. But now we were desperate. We longed for a life that would give us the maximum chance to be together. Cold-bloodedly we decided that University work would give us that opportunity, and the long vacations would give us our mountains. The work itself made its strong appeal, too. Professor Henry Morse Stephens and Professor Miller of the University of California had long urged Carl to go into teaching; and at last we decided that, even if it meant living on husks and skimmed milk all our days, at least we would be eating what there was to eat together, three meals a day every day. We cashed in our savings, we drew on everything there was to draw on, and on February 1, 1909, the three of us embarked for Harvard--with fifty-six dollars and seventy-five cents excess-baggage to pay at the depot, such young ignoramuses we were. That trip East was worth any future hardship we might have reaped. Our seven-months-old baby was one of the young saints of the world--not once in the five days did he peep. We'd pin him securely in the lower berth of our compartment for his nap, and back we would fly to the corner of the rear platform of the observation car, and gloat, just gloat, over how we had come into the inheritance of all creation. We owned the world. And I, who had never been farther from my California home town than Seattle, who never had seen real snow, except that Christmas when we spent four days at the Scenic Hot Springs in the Cascades, and skied and sledded and spilled around like six-year-olds! But stretches and stretches of snow! And then, just traveling, and together! And to be in Boston! We took a room with a bath in the Copley Square Hotel. The first evening we arrived, Nandy (Carleton, Jr.) rolled off the bed; so when we went gallivanting about Boston, shopping for the new home, we left him in the bath-tub where he could not fall out. We padded it well with pillows, there was a big window letting in plenty of fresh air, and we instructed the chambermaid to peep at him now and then. And there we would leave him, well-nourished and asleep. (By the time that story had been passed around by enough people in the home town, it developed that one day the baby--just seven months old, remember--got up and turned on the water, and was found by the chambermaid sinking for the third time.) Something happened to the draft from the home bank, which should have reached Boston almost at the same time we did. We gazed into the family pocket-book one fine morning, to find it, to all intents and purposes, empty. Hurried meeting of the finance committee. By unanimous consent of all present, we decided--as many another mortal in a strange town has decided--on the pawnshop. I wonder if my dear grandmother will read this--she probably will. Carl first submitted his gold watch--the baby had dropped it once, and it had shrunk thereby in the eyes of the pawnshop man, though not in ours. The only other valuable we had along with us was my grandmother's wedding present to me, which had been my grandfather's wedding present to her--a glorious old-fashioned breast-pin. We were allowed fifty dollars on it, which saved the day. What will my grandmother say when she knows that her bridal gift resided for some days in a Boston pawnshop? We moved out to Cambridge in due time, and settled at Bromley Court, on the very edge of the Yard. We thrilled to all of it--we drank in every ounce of dignity and tradition the place afforded, and our wild Western souls exulted. We knew no one when we reached Boston, but our first Sunday we were invited to dinner in Cambridge by two people who were, ever after, our cordial, faithful friends--Mr. and Mrs. John Graham Brooks. They made us feel at once that Cambridge was not the socially icy place it is painted in song and story. Then I remember the afternoon that I had a week's wash strung on an improvised line back and forth from one end of our apartment to the other. Just as I hung the last damp garment, the bell rang, and there stood an immaculate gentleman in a cutaway and silk hat, who had come to call--an old friend of my mother's. He ducked under wet clothes, and we set two chairs where we could see each other, and yet nothing was dripping down either of our necks; and there we conversed, and he ended by inviting us both to dinner--on Marlborough Street, at that! He must have loved my mother very dearly to have sought further acquaintance with folk who hung the family wash in the hall and the living-room and dining-room. His house on Marlborough Street! We boldly and excitedly figured up on the way home, that they spent on the one meal they fed us more than it cost us to live for two weeks--they honestly did. Then there was the dear "Jello" lady at the market. I wish she would somehow happen to read this, so as to know that we have never forgotten her. Every Saturday the three of us went to the market, and there was the Jello lady with her samples. The helpings she dished for us each time! She brought the man to whom she was engaged to call on us just before we left. I wonder if they got married, and where they are, and if she still remembers us. She used to say she just waited for Saturdays and our coming. Then there was dear Granny Jones, who kept a boarding-house half a block away. I do not remember how we came to know her, but some good angel saw to it. She used to send around little bowls of luscious dessert, and half a pie, or some hot muffins. Then I was always grateful also--for it made such a good story, and it was true--to the New England wife of a fellow graduate student who remarked, when I told her we had one baby and another on the way, "How interesting--just like the slums!" We did our own work, of course, and we lived on next to nothing. I wonder now how we kept so well that year. Of course, we fed the baby everything he should have,--according to Holt in those days,--and we ate the mutton left from his broth and the beef after the juice had been squeezed out of it for him, and bought storage eggs ourselves, and queer butter out of a barrel, and were absolutely, absolutely blissful. Perhaps we should have spent more on food and less on baseball. I am glad we did not. Almost every Saturday afternoon that first semester we fared forth early, Nandy in his go-cart, to get a seat in the front row of the baseball grandstand. I remember one Saturday we were late, front seats all taken. We had to pack baby and go-cart more than half-way up to the top. There we barricaded him, still in the go-cart, in the middle of the aisle. Along about the seventh inning, the game waxed particularly exciting--we were beside ourselves with enthusiasm. Fellow onlookers seemed even more excited--they called out things--they seemed to be calling in our direction. Fine parents we were--there was Nandy, go-cart and all, bumpety-bumping down the grandstand steps. I remember again the Stadium on the day of the big track meet. Every time the official announcer would put the megaphone to his mouth, to call out winners and time to a hushed and eager throng, Nandy, not yet a year old, would begin to squeal at the top of his lungs for joy. Nobody could hear a word the official said. We were as distressed as any one--we, too, had pencils poised to jot down records. Carl studied very hard. The first few weeks, until we got used to the new wonder of things, he used to run home from college whenever he had a spare minute, just to be sure he was that near. At that time he was rather preparing to go into Transportation as his main economic subject. But by the end of the year he knew Labor would be his love. (His first published economic article was a short one that appeared in the "Quarterly Journal of Economics" for May, 1910, on "The Decline of Trade-Union Membership.") We had a tragic summer. Carl felt that he must take his Master's degree, but he had no foreign language. Three terrible, wicked, unforgivable professors assured him that, if he could be in Germany six weeks during summer vacation, he could get enough German to pass the examination for the A.M. We believed them, and he went; though of all the partings we ever had, that was the very worst. Almost at the last he just could not go; but we were so sure that it would solve the whole A.M. problem. He went third class on a German steamer, since we had money for nothing better. The food did distress even his unfinicky soul. After a particularly sad offering of salt herring, uncooked, on a particularly rough day, he wrote, "I find I am not a good Hamburger German. The latter eat all things in all weather." Oh, the misery of that summer! We never talked about it much. He went to Freiburg, to a German cobbler's family, but later changed, as the cobbler's son looked upon him as a dispensation of Providence, sent to practise his English upon. His heart was breaking, and mine was breaking, and he was working at German (and languages came fearfully hard for him) morning, afternoon, and night, with two lessons a day, his only diversion being a daily walk up a hill, with a cake of soap and a towel, to a secluded waterfall he discovered. He wrote a letter and a postcard a day to the babe and me. I have just re-read all of them, and my heart aches afresh for the homesickness that summer meant to both of us. He got back two days before our wedding anniversary--days like those first few after our reunion are not given to many mortals. I would say no one had ever tasted such joy. The baby gurgled about, and was kissed within an inch of his life. The Jello lady sent around a dessert of sixteen different colors, more or less, big enough for a family of eight, as her welcome home. About six weeks later we called our beloved Dr. J---- from a banquet he had long looked forward to, in order to officiate at the birth of our second, known as Thomas-Elizabeth up to October 17, but from about ten-thirty that night as James Stratton Parker. We named him after my grandfather, for the simple reason that we liked the name Jim. How we chuckled when my father's congratulatory telegram came, in which he claimed pleasure at having the boy named after his father, but cautioned us never to allow him to be nicknamed. I remember the boresome youth who used to call, week in week out,--always just before a meal,--and we were so hard up, and got so that we resented feeding such an impossible person so many times. He dropped in at noon Friday the 17th, for lunch. A few days later Carl met him on the street and announced rapturously the arrival of the new son. The impossible person hemmed and stammered: "Why--er--when did it arrive?" Carl, all beams, replied, "The very evening of the day you were at our house for lunch!" We never laid eyes on that man again! We were almost four months longer in Cambridge, but never did he step foot inside our apartment. I wish some one could have psycho-analyzed him, but it's too late now. He died about a year after we left Cambridge. I always felt that he never got over the shock of having escaped Jim's arrival by such a narrow margin. And right here I must tell of Dr. J----. He was recommended as the best doctor in Cambridge, but very expensive. "We may have to economize in everything on earth," said Carl, "but we'll never economize on doctors." So we had Dr. J----, had him for all the minor upsets that families need doctors for; had him when Jim was born; had him through a queer fever Nandy developed that lasted some time; had him through a bad case of grippe I got (this was at Christmastime, and Carl took care of both babies, did all the cooking, even to the Christmas turkey I was well enough to eat by then, got up every two hours for three nights to change an ice-pack I had to have--that's the kind of man he was!); had him vaccinate both children; and then, just before we left Cambridge, we sat and held his bill, afraid to open the envelope. At length we gathered our courage, and gazed upon charges of sixty-five dollars for everything, with a wonderful note which said that, if we would be inconvenienced in paying that, he would not mind at all if he got nothing. Such excitement! We had expected two hundred dollars at the least! We tore out and bought ten cents' worth of doughnuts, to celebrate. When we exclaimed to him over his goodness,--of course we paid the sixty-five dollars,--all he said was: "Do you think a doctor is blind? And does a man go steerage to Europe if he has a lot of money in the bank?" Bless that doctor's heart! Bless all doctors' hearts! We went through our married life in the days of our financial slimness, with kindness shown us by every doctor we ever had. I remember our Heidelberg German doctor sent us a bill for a year of a dollar and a half. And even in our more prosperous days, at Carl's last illness, with that good Seattle doctor calling day and night, and caring for me after Carl's death, he refused to send any bill for anything. And a little later, when I paid a long overdue bill to our blessed Oakland doctor for a tonsil operation, he sent the check back torn in two. Bless doctors! When we left for Harvard, we had an idea that perhaps one year of graduate work would be sufficient. Naturally, about two months was enough to show us that one year would get us nowhere. Could we finance an added year at, perhaps, Wisconsin? And then, in November, Professor Miller of Berkeley called to talk things over with Carl. Anon he remarked, more or less casually, "The thing for you to do is to have a year's study in Germany," and proceeded to enlarge on that idea. We sat dumb, and the minute the door was closed after him, we flopped. "What was the man thinking of--to suggest a year in Germany, when we have no money and two babies, one not a year and a half, and one six weeks old!" Preposterous! That was Saturday afternoon. By Monday morning we had decided we would go! Thereupon we wrote West to finance the plan, and got beautifully sat upon for our "notions." If we needed money, we had better give up this whole fool University idea and get a decent man-sized job. And then we wrote my father,--or, rather, I wrote him without telling Carl till after the letter was mailed,--and bless his heart! he replied with a fat God-bless-you-my-children registered letter, with check enclosed, agreeing to my stipulation that it should be a six-per-cent business affair. Suppose we could not have raised that money--suppose our lives had been minus that German experience! Bless fathers! They may scold and fuss at romance, and have "good sensible ideas of their own" on such matters, but--bless fathers! CHAPTER V We finished our year at Harvard, giving up the A.M. idea for the present. Carl got A's in every subject and was asked to take a teaching fellowship under Ripley; but it was Europe for us. We set forth February 22, 1909, in a big snowstorm, with two babies, and one thousand six hundred and seventy-six bundles, bags, and presents. Jim was in one of those fur-bags that babies use in the East. Everything we were about to forget the last minute got shoved into that bag with Jim, and it surely began to look as if we had brought a young and very lumpy mastodon into the world! We went by boat from Boston to New York, and sailed on the Pennsylvania February 24. People wrote us in those days: "You two brave people--think of starting to Europe with two babies!" Brave was the last word to use. Had we worried or had fears over anything, and yet fared forth, we should perhaps have been brave. As it was, I can feel again the sensation of leaving New York, gazing back on the city buildings and bridges bathed in sunshine after the storm. Exultant joy was in our hearts, that was all. Not one worry, not one concern, not one small drop of homesickness. We were to see Europe together, year before we had dreamed it possible. It just seemed too glorious to be true. "Brave"? Far from it. Simply eager, glowing, filled to the brim with a determination to drain every day to the full. I discovered that, while my husband had married a female who could not cook rice (though she learned), I had taken unto myself a spouse who curled up green half a day out on the ocean, and stayed that way for about six days. He tried so desperately to help with the babies, but it always made matters worse. If I had turned green, too--But babies and I prospered without interruption, though some ants did try to eat Jim's scalp off one night--"sugar ants" the doctor called them. "They knew their business," our dad remarked. We were three days late getting into Hamburg--fourteen days on the ocean, all told. And then to be in Hamburg in Germany--in Europe! I remember our first meal in the queer little cheap hotel we rooted out. "_Eier_" was the only word on the bill of fare we could make out, so Carl brushed up his German and ordered four for us, fried. And the waiter brought four each. He probably declared for years that all Americans always eat four fried eggs each and every night for supper. We headed for Leipzig at once, and there Carl unearthed the Pension Schröter on Sophien Platz. There we had two rooms and all the food we could eat,--far too much for us to eat, and oh! so delicious,--for fifty-five dollars a month for the entire family, although Jim hardly ranked as yet, economically speaking, as part of the consuming public. We drained Leipzig to the dregs--a good German idiom. Carl worked at his German steadily, almost frantically, with a lesson every day along with all his university work--a seven o'clock lecture by Bücher every morning being the cheery start for the day, and we blocks and blocks from the University. I think of Carl through those days with extra pride, though it is hard to decide that I was ever prouder of him at one time than another. But he strained and labored without ceasing at such an uninspiring job. All his hard study that broken-hearted summer at Freiburg had given him no single word of an economic vocabulary. In Leipzig he listened hour by hour to the lectures of his German professors, sometimes not understanding an important word for several days, yet exerting every intellectual muscle to get some light in his darkness. Then, for, hours each day and almost every evening, it was grammar, grammar, grammar, till he wondered at times if all life meant an understanding of the subjunctive. Then, little by little, rays of hope. "I caught five words in ----'s lecture to-day!" Then it was ten, then twenty. Never a lecture of any day did he miss. We stole moments for joy along the way. First, of course, there was the opera--grand opera at twenty-five cents a seat. How Wagner bored us at first--except the parts here and there that we had known all our lives. Neither of us had had any musical education to speak of; each of us got great joy out of what we considered "good" music, but which was evidently low-brow. And Wagner at first was too much for us. That night in Leipzig we heard the "Walküre!"--utterly aghast and rather impatient at so much non-understandable noise. Then we would drop down to "Carmen," "La Bohême," Hoffman's "Erzäblung," and think, "This is life!" Each night that we spared for a spree we sought out some beer-hall--as unfrequented a one as possible, to get all the local color we could. Once Carl decided that, as long as we had come so far, I must get a glimpse of real European night-life--it might startle me a bit, but would do no harm. So, after due deliberation, he led me to the Café Bauer, the reputed wild and questionable resort of Leipzig night-life, though the pension glanced ceiling-wards and sighed and shook their heads. I do not know just what I did expect to see, but I know that what I saw was countless stolid family parties--on all sides grandmas and grandpas and sons and daughters, and the babies in high chairs beating the tables with spoons. It was quite the most moral atmosphere we ever found ourselves in. That is what you get for deliberately setting out to see the wickedness of the world! From Leipzig we went to Berlin. We did not want to go to Berlin--Jena was the spot we had in mind. Just as a few months at Harvard showed us that one year there would be but a mere start, so one semester in Germany showed us that one year there would get us nowhere. We must stay longer,--from one to two years longer,--but how, alas, how finance it? That eternal question! We finally decided that, if we took the next semester or so in Berlin, Carl could earn money enough coaching to keep us going without having to borrow more. So to Berlin we went. We accomplished our financial purpose, but at too great a cost. In Berlin we found a small furnished apartment on the ground floor of a Gartenhaus in Charlottenburg--Mommsen Strasse it was. At once Carl started out to find coaching; and how he found it always seemed to me an illustration of the way he could succeed at anything anywhere. We knew no one in Berlin. First he went to the minister of the American church; he in turn gave him names of Americans who might want coaching, and then Carl looked up those people. In about two months he had all the coaching he could possibly handle, and we could have stayed indefinitely in Berlin in comfort, for Carl was making over one hundred dollars a month, and that in his spare time. But the agony of those months: to be in Germany and yet get so little Germany out of it! We had splendid letters of introduction to German people, from German friends we had made in Leipzig, but we could not find a chance even to present them. Carl coached three youngsters in the three R's; he was preparing two of the age just above, for college; he had one American youth, who had ambitions to burst out monthly in the "Saturday Evening Post" stories; there was a class of five middle-aged women, who wanted Shakespeare, and got it; two classes in Current Events; one group of Christian Scientists, who put in a modest demand for the history of the world. I remember Carl had led them up to Pepin the Short when we left Berlin. He contracted everything and anything except one group who desired a course of lectures in Pragmatism. I do not think he had ever heard of the term then, but he took one look at the lay of the land and said--not so! In his last years, when he became such a worshiper at the shrine of William James and John Dewey, we often used to laugh at his Berlin profanity over the very idea of ever getting a word of such "bunk" into his head. But think of the strain it all meant--lessons and lessons every day, on every subject under heaven, and in every spare minute continued grinding at his German, and, of course, every day numerous hours at the University, and so little time for sprees together. We assumed in our prosperity the luxury of a maid--the unparalleled Anna Bederke aus Rothenburg, Kreis Bumps (?), Posen, at four dollars a month, who for a year and a half was the amusement and desperation of ourselves and our friends. Dear, crooked-nosed, one-good-eye Anna! She adored the ground we walked on. Our German friends told us we had ruined her forever--she would never be fit for the discipline of a German household again. Since war was first declared we have lost all track of Anna. Was her Poland home in the devastated country? Did she marry a soldier, and is she too, perhaps, a widow? Faithful Anna, do not think for one minute you will ever be forgotten by the Parkers. With Anna to leave the young with now and then, I was able to get in two sprees a week with Carl. Every Wednesday and Saturday noon I met him at the University and we had lunch together. Usually on Wednesdays we ate at the Café Rheingold, the spot I think of with most affection as I look back on Berlin. We used to eat in the "Shell Room"--an individual chicken-and-rice pie (as much chicken as rice), a vegetable, and a glass of beer each, for thirty-five cents for both. Saturdays we hunted for different smaller out-of-the-way restaurants. Wednesday nights "Uncle K." of the University of Wisconsin always came to supper, bringing a thirty-five-cent rebate his landlady allowed him when he ate out; and we had chicken every Wednesday night, which cost--a fat one--never more than fifty cents. (It was Uncle K. who wrote, "The world is so different with Carl gone!") Once we rented bicycles and rode all through the Tiergarten, Carl and I, with the expected stiffness and soreness next day. Then there was Christmas in Berlin. Three friends traveled up from Rome to be with us, two students came from Leipzig, and four from Berlin--eleven for dinner, and four chairs all told. It was a regular "La Bohême" festival--one guest appearing with a bottle of wine under his arm, another with a jar of caviare sent him from Russia. We had a gay week of it after Christmas, when the whole eleven of us went on some Dutch-treat spree every night, before going back to our studies. Then came those last grueling months in Berlin, when Carl had a breakdown, and I got sick nursing him and had to go to a German hospital; and while I was there Jim was threatened with pneumonia and Nandy got tonsillitis. In the midst of it all the lease expired on our Wohnung, and Carl and Anna had to move the family out. We decided that we had had all we wanted of coaching in Berlin,--we came to that conclusion before any of the breakdowns,--threw our pride to the winds, borrowed more money from my good father, and as soon as the family was well enough to travel, we made for our ever-to-be-adored Heidelberg. CHAPTER VI Here I sit back, and words fail me. I see that year as a kaleidoscope of one joyful day after another, each rushing by and leaving the memory that we both always had, of the most perfect year that was ever given to mortals on earth. I remember our eighth wedding anniversary in Berkeley. We had been going night after night until we were tired of going anywhere,--engagements seemed to have heaped up,--so we decided that the very happiest way we could celebrate that most-to-be-celebrated of all dates was just to stay at home, plug the telephone, pull down the blinds, and have an evening by ourselves. Then we got out everything that we kept as mementos of our European days, and went over them--all the postcards, memory-books, theatre and opera programmes, etc., and, lastly, read my diary--I had kept a record of every day in Europe. When we came to that year in Heidelberg, we just could not believe our own eyes. How had we ever managed to pack a year so full, and live to tell the tale? I wish I could write a story of just that year. We swore an oath in Berlin that we would make Heidelberg mean Germany to us--no English-speaking, no Americans. As far as it lay in our power, we lived up to it. Carl and I spoke only German to each other and to the children, and we shunned our fellow countrymen as if they had had the plague. And Carl, in the characteristic way he had, set out to fill our lives with all the real German life we could get into them, not waiting for that life to come of itself--which it might never have done. One afternoon, on his way home from the University, he discovered in a back alley the Weiser Boch, a little restaurant and beer-hall so full of local color that it "hollered." No, it did not holler: it was too real for that. It was sombre and carved up--it whispered. Carl made immediate friends, in the way he had, with the portly Frau and Herr who ran the Weiser Boch: they desired to meet me, they desired to see the Kinder, and would not the Herr Student like to have the Weiser Boch lady mention his name to some of the German students who dropped in? Carl left his card, and wondered if anything would come of it. The very next afternoon,--such a glowing account of the Amerikaner the Weiser Boch lady must have given,--a real truly German student, in his corps cap and ribbons, called at our home--the stiffest, most decorous heel-clicking German student I ever was to see. His embarrassment was great when he discovered that Carl was out, and I seemed to take it quite for granted that he was to sit down for a moment and visit with me. He fell over everything. But we visited, and I was able to gather that his corps wished Herr Student Par-r-r-ker to have beer with them the following evening. Then he bowed himself backwards and out, and fled. I could scarce wait for Carl to get home--it was too good to be true. And that was but the beginning. Invitation after invitation came to Carl, first from one corps, then from another; almost every Saturday night he saw German student-life first hand somewhere, and at least one day a week he was invited to the duels in the Hirsch Gasse. Little by little we got the students to our Wohnung; then we got chummier and chummier, till we would walk up Haupt Strasse saluting here, passing a word there, invited to some student function one night, another affair another night. The students who lived in Heidelberg had us meet their families, and those who were batching in Heidelberg often had us come to their rooms. We made friendships during that year that nothing could ever mar. It is two years now since we received the last letter from any Heidelberg chum. Are they all killed, perhaps? And when we can communicate again, after the war, think of what I must write them! Carl was a revelation to most of them--they would talk about him to me, and ask if all Americans were like him, so fresh in spirit, so clean, so sincere, so full of fun, and, with it all, doing the finest work of all of them but one in the University. The economics students tried to think of some way of influencing Alfred Weber to give another course of lectures at the University. He was in retirement at Heidelberg, but still the adored of the students. Finally, they decided that a committee of three should represent them and make a personal appeal. Carl was one of the three chosen. The report soon flew around, how, in Weber's august presence, the Amerikaner had stood with his hands in his pockets--even sat for a few moments on the edge of Weber's desk. The two Germans, posed like ramrods, expected to see such informality shoved out bodily. Instead, when they took their leave, the Herr Professor had actually patted the Amerikaner on the shoulder, and said he guessed he would give the lectures. Then his report in Gothein's Seminar, which went so well that I fairly burst with pride. He had worked day and night on that. I was to meet him at eight after it had been given, and we were to have a celebration. I was standing by the entrance to the University building when out came an enthused group of jabbering German students, Carl in their midst. They were patting him on the back, shaking his hands furiously; and when they saw me, they rushed to tell me of Carl's success and how Gothein had said before all that it had been the best paper presented that semester. I find myself smiling as I write this--I was too happy that night to eat. The Sunday trips we made up the Neckar: each morning early we would take the train and ride to where we had walked the Sunday previous; then we would tramp as far as we could,--meaning until dark,--have lunch at some untouristed inn along the road, or perhaps eat a picnic lunch of our own in some old castle ruin, and then ride home. Oh, those Sundays! I tell you no two people in all this world, since people were, have ever had _one_ day like those Sundays. And we had them almost every week. It would have been worth going to Germany for just one of those days. There was the gay, glad party that the Economic students gave, out in Handschusheim at the "zum Bachlenz"; first, the banquet, with a big roomful of jovial young Germans; then the play, in which Carl and I both took part. Carl appeared in a mixture of his Idaho outfit and a German peasant's costume, beating a large drum. He represented "Materialindex," and called out loudly, "Ich bitte mich nicht zu vergessen. Ich bin auch da." I was "Methode," which nobody wanted to claim; whereat I wept. I am looking at the flashlight picture of us all at this moment. Then came the dancing, and then at about four o'clock the walk home in the moonlight, by the old castle ruin in Handschusheim, singing the German student-songs. There was Carnival season, with its masque balls and frivolity, and Faschings Dienstag, when Hauptstrasse was given over to merriment all afternoon, every one trailing up and down the middle of the street masked, and in fantastic costume, throwing confetti and tooting horns, Carl and I tooting with the rest. As time went on, we came to have one little group of nine students whom we were with more than any others. As each of the men took his degree, he gave a party to the rest of us to celebrate it, every one trying to outdo the other in fun. Besides these most important degree celebrations, there were less dazzling affairs, such as birthday parties, dinners, or afternoon coffee in honor of visiting German parents, or merely meeting together in our favorite café after a Socialist lecture or a Max Reger concert. In addition to such functions, Carl and I had our Wednesday night spree just by ourselves, when every week we met after his seminar. Our budget allowed just twelve and a half cents an evening for both of us. I put up a supper at home, and in good weather we ate down by the river or in some park. When it rained and was cold, we sat in a corner of the third-class waiting-room by the stove, watching the people coming and going in the station. Then, for dessert, we went every Wednesday to Tante's Conditorei, where, for two and a half cents apiece, we got a large slice of a special brand of the most divine cake ever baked. Then, for two and a half cents, we saw the movies--at a reduced rate because we presented a certain number of street-car transfers along with the cash, and then had to sit in the first three rows. But you see, we used to remark, we have to sit so far away at the opera, it's good to get up close at something! Those were real movies--no danger of running into a night-long Robert W. Chambers scenario. It was in the days before such developments. Then across the street was an "Automat," and there, for a cent and a quarter apiece, we could hold a glass under a little spigot, press a button, and get--refreshments. Then we walked home. O Heidelberg--I love your every tree, every stone, every blade of grass! But at last our year came to an end. We left the town in a bower of fruit-blossoms, as we had found it. Our dear, most faithful friends, the Kecks, gave us a farewell luncheon; and with babies, bundles, and baggage, we were off. Heidelberg was the only spot I ever wept at leaving. I loved it then, and I love it now, as I love no other place on earth and Carl felt the same way. We were mournful, indeed, as that train pulled out. CHAPTER VII The next two weeks were filled with vicissitudes. The idea was for Carl to settle the little family in some rural bit of Germany, while he did research work in the industrial section of Essen, and thereabouts, coming home week-ends. We stopped off first at Bonn. Carl spent several days searching up and down the Rhine and through the Moselle country for a place that would do, which meant a place we could afford that was fit and suitable for the babies. There was nothing. The report always was: pensions all expensive, and automobiles touring by at a mile a minute where the children would be playing. On a wild impulse we moved up to Clive, on the Dutch border. After Carl went in search of a pension, it started to drizzle. The boys, baggage, and I found the only nearby place of shelter in a stone-cutter's inclosure, filled with new and ornate tombstones. What was my impecunious horror, when I heard a small crash and discovered that Jim had dislocated a loose figure of Christ (unconsciously Cubist in execution) from the top of a tombstone! Eight marks charges! the cost of sixteen Heidelberg sprees. On his return, Carl reported two pensions, one quarantined for diphtheria, one for scarlet fever. We slept over a beer-hall, with such a racket going on all night as never was; and next morning took the first train out--this time for Düsseldorf. It is a trifle momentous, traveling with two babies around a country you know nothing about, and can find no one to enlighten you. At Düsseldorf Carl searched through the town and suburbs for a spot to settle us in, getting more and more depressed at the thought of leaving us anywhere. That Freiburg summer had seared us both deep, and each of us dreaded another separation more than either let the other know. And then, one night, after another fruitless search, Carl came home and informed me that the whole scheme was off. Instead of doing his research work, we would all go to Munich, and he would take an unexpected semester there, working with Brentano. What rejoicings, oh, what rejoicings! As Carl remarked, it may be that "He travels fastest who travels alone"; but speed was not the only thing he was after. So the next day, babies, bundles, baggage, and parents went down the Rhine, almost through Heidelberg, to Munich, with such joy and contentment in our hearts as we could not describe. All those days of unhappy searchings Carl had been through must have sunk deep, for in his last days of fever he would tell me of a form of delirium in which he searched again, with a heart of lead, for a place to leave the babies and me. I remember our first night in Munich. We arrived about supper-time, hunted up a cheap hotel as usual, near the station, fed the babies, and started to prepare for their retirement. This process in hotels was always effected by taking out two bureau-drawers and making a bed of each. While we were busy over this, the boys were busy over--just busy. This time they both crawled up into a large clothes-press that stood in our room, when, crash! bang!--there lay the clothes-press, front down, on the floor, boys inside it. Such a commotion--hollerings and squallings from the internals of the clothes-press, agitated scurryings from all directions of the hotel-keeper, his wife, waiters, and chambermaids. All together, we managed to stand the clothes-press once more against the wall, and to extricate two sobered young ones, the only damage being two clothes-press doors banged off their hinges. Munich is second in my heart to Heidelberg. Carl worked hardest of all there, hardly ever going out nights; but we never got over the feeling that our being there together was a sort of gift we had made ourselves, and we were ever grateful. And then Carl did so remarkably well in the University. A report, for instance, which he read before Brentano's seminar was published by the University. Our relations' with Brentano always stood out as one of the high memories of Germany. After Carl's report in Brentano's class, that lovable idol of the German students called him to his desk and had a long talk, which ended by his asking us both to tea at his house the following day. The excitement of our pension over that! We were looked upon as the anointed of the Lord. We were really a bit overawed, ourselves. We discussed neckties, and brushed and cleaned, and smelled considerably of gasoline as we strutted forth, too proud to tell, because we were to have tea with Brentano! I can see the street their house was on, their front door; I can feel again the little catch in our breaths as we rang the bell. Then the charming warmth and color of that Italian home, the charming warmth and hospitality of that white-haired professor and his gracious, kindly wife. There were just ourselves there; and what a momentous time it was to the little Parkers! Carl was simply radiating joy, and in the way he always had when especially pleased, would give a sudden beam from ear to ear, and a wink at me when no one else was looking. Not long after that we were invited for dinner, and again for tea, this time, according to orders, bringing the sons. They both fell into an Italian fountain in the rear garden as soon as we went in for refreshments. By my desk now is hanging a photograph we have prized as one of our great treasures. Below it is written: "Mrs. and Mr. Parker, zur freundlichen Erinnerrung--Lujio Brentano." Professor Bonn, another of Carl's professors at the University, and his wife, were kindness itself to us. Then there was Peter, dear old Peter, the Austrian student at our pension, who took us everywhere, brought us gifts, and adored the babies until he almost spoiled them. From Munich we went direct to England. Vicissitudes again in finding a cheap and fit place that would do for children to settle in. After ever-hopeful wanderings, we finally stumbled upon Swanage in Dorset. That was a love of a place on the English Channel, where we had two rooms with the Mebers in their funny little brick house, the "Netto." Simple folk they were: Mr. Meber a retired sailor, the wife rather worn with constant roomers, one daughter a dressmaker, the other working in the "knittin" shop. Charges, six dollars a week for the family, which included cooking and serving our meals--we bought the food ourselves. Here Carl prepared for his Ph.D. examination, and worked on his thesis until it got to the point where he needed the British Museum. Then he took a room and worked during the week in London, coming down to us week-ends. He wrote eager letters, for the time had come when he longed to get the preparatory work and examination behind him and begin teaching. We had an instructorship at the University of California waiting for us, and teaching was to begin in January. In one letter he wrote: "I now feel like landing on my exam, like a Bulgarian; I am that fierce to lay it out." We felt more than ever, in those days of work piling up behind us, that we owned the world; as Carl wrote in another letter: "We'll stick this out [this being the separation of his last trip to London, whence he was to start for Heidelberg and his examination, without another visit with us], for, _Gott sei dank!_ the time isn't so fearful, fearful long, it isn't really, is it? Gee! I'm glad I married you. And I want more babies and more you, and then the whole gang together for about ninety-two years. But life is so fine to us and we are getting so much love and big things out of life!" November 1 Carl left London for Heidelberg. He was to take his examination there December 5, so the month of November was a full one for him. He stayed with the dear Kecks, Mother Keck pressing and mending his clothes, hovering over him as if he were her own son. He wrote once: "To-day we had a small leg of venison which I sneaked in last night. Every time I note that I burn three quarters of a lampful of oil a day among the other things I cost them, it makes me feel like buying out a whole Conditorei." I lived for those daily letters telling of his progress. Once he wrote: "Just saw Fleiner [Professor in Law] and he was _fine_, but I must get his Volkerrecht cold. It is fine reading, and is mighty good and interesting every word, and also stuff which a man ought to know. This is the last man to see. From now on, it is only to _study_, and I am tickled. I do really like to study." A few days later he wrote: "It is just plain sit and absorb these days. Some day I will explain how tough it is to learn an entire law subject in five days in a strange tongue." And then, on the night of December 5, came the telegram of success to "Frau Dr. Parker." We both knew he would pass, but neither of us was prepared for the verdict of "_Summa cum laude_," the highest accomplishment possible. I went up and down the main street of little Swanage, announcing the tidings right and left. The community all knew that Carl was in Germany to take some kind of an examination, though it all seemed rather unexplainable. Yet they rejoiced with me,--the butcher, the baker, the candlestick-maker,--without having the least idea what they were rejoicing about. Mrs. Meber tore up and down Osborne Road to have the fun of telling the immediate neighbors, all of whom were utterly at a loss to know what it meant, the truth being that Mrs. Meber herself was in that same state. But she had somehow caught my excitement, and anything to tell was scarce in Swanage. So the little family that fared forth from Oakland, California, that February 1, for one year at Harvard had ended thus--almost four years later a Ph.D. _summa cum laude_ from Heidelberg. Not Persia as we had planned it nine years before--a deeper, finer life than anything we had dreamed. We asked Professor Miller, after we got back to California, why in the world he had said just "one year in Europe." "If I had said more, I was afraid it would scare you altogether out of ever starting; and I knew if you once got over there and were made of the right stuff, you'd stay on for a Ph.D." On December 12 Carl was to deliver one of a series of lectures in Munich for the Handelshochschule, his subject being "Die Einwanderungs und Siedelungspolitik in Amerika (Carleton Parker, Privatdocent, California-Universität, St. Francisco)." That very day, however, the Prince Regent died, and everything was called off. We had our glory--and got our pay. Carl was so tired from his examination, that he did not object to foregoing the delivery of a German address before an audience of four hundred. It was read two weeks later by one of the professors. On December 15 we had our reunion and celebration of it all. Carl took the Amerika, second class, at Hamburg; the boys and I at Southampton, ushered thither from Swanage and put aboard the steamer by our faithful Onkel Keck, son of the folk with whom Carl had stayed in Heidelberg, who came all the way from London for that purpose. It was not such a brash Herr Doktor that we found, after all: the Channel had begun to tell on him, as it were, and while it was plain that he loved us, it was also plain that he did not love the water. So we gave him his six days off, and he lay anguish-eyed in a steamer-chair while I covered fifty-seven miles a day, tearing after two sons who were far more filled with Wanderlust than they had been three years before. When our dad did feel chipper again, he felt very chipper, and our last four days were perfect. We landed in New York on Christmas Eve, in a snowstorm; paid the crushing sum of one dollar and seventy-five cents duty,--such a jovial agent as inspected our belongings I never beheld; he must already have had just the Christmas present he most wanted, whatever it was. When he heard that we had been in Heidelberg, he and several other officials began a lusty rendering of "Old Heidelberg,"--and within an hour we were speeding toward California, a case of certified milk added to our already innumerable articles of luggage. Christmas dinner we ate on the train. How those American dining-car prices floored us after three years of all we could eat for thirty-five cents! CHAPTER VIII We looked back always on our first semester's teaching in the University of California as one hectic term. We had lived our own lives, found our own joys, for four years, and here we were enveloped by old friends, by relatives, by new friends, until we knew not which way to turn. In addition, Carl was swamped by campus affairs--by students, many of whom seemed to consider him an oasis in a desert of otherwise-to-be-deplored, unhuman professors. Every student organization to which he had belonged as an undergraduate opened its arms to welcome him as a faculty member; we chaperoned student parties till we heard rag-time in our sleep. From January 1 to May 16, we had four nights alone together. You can know we were desperate. Carl used to say: "We may have to make it Persia yet." The red-letter event of that term was when, after about two months of teaching, President Wheeler rang up one evening about seven,--one of the four evenings, as it happened, we were at home together,--and said: "I thought I should like the pleasure of telling you personally, though you will receive official notice in the morning, that you have been made an assistant professor. We expected you to make good, but we did not expect you to make good to such a degree quite so soon." Again an occasion for a spree! We tore out hatless across the campus, nearly demolishing the head of the College of Commerce as we rounded the Library. He must know the excitement. He was pleased. He slipped his hand into his pocket saying, "I must have a hand in this celebration." And with a royal gesture, as who should say, "What matter the costs!" slipped a dime into Carl's hand. "Spend it all to-night." Thus we were started on our assistant professorship. But always before and always after, to the students Carl was just "Doc." I remember a story he told of how his chief stopped him one afternoon at the north gate to the university, and said he was discouraged and distressed. Carl was getting the reputation of being popular with the students, and that would never do. "I don't wish to hear more of such rumors." Just then the remnants of the internals of a Ford, hung together with picture wire and painted white, whizzed around the corner. Two slouching, hard-working "studes" caught sight of Carl, reared up the car, and called, "Hi, Doc, come on in!" Then they beheld the Head of the Department, hastily pressed some lever, and went hurrying on. To the Head it was evidence first-hand. He shook his head and went his way. Carl was popular with the students, and it is true that he was too much so. It was not long before he discovered that he was drawing unto himself the all-too-lightly-handled "college bum," and he rebelled. Harvard and Germany had given him too high an idea of scholarship to have even a traditional university patience with the student who, in the University of California jargon, was "looking for a meal." He was petitioned by twelve students of the College of Agriculture to give a course in the Economics of Agriculture, and they guaranteed him twenty-five students. One hundred and thirty enrolled, and as Carl surveyed the assortment below him, he realized that a good half of them did not know and did not want to know a pear tree from a tractor. He stiffened his upper lip, stiffened his examinations, and cinched forty of the class. There should be some Latin saying that would just fit such a case, but I do not know it. It would start, "Exit ----," and the exit would refer to the exit of the loafer in large numbers from Carl's courses and the exit from the heart of the loafer of the absorbing love he had held for Carl. His troubles were largely over. Someone else could care for the maimed, the halt, and the blind. It was about this time, too, that Carl got into difficulties with the intrenched powers on the campus. He had what has been referred to as "a passion for justice." Daily the injustice of campus organization grew on him; he saw democracy held high as an ideal--lip-homage only. Student affairs were run by an autocracy which had nothing to justify it except its supporters' claim of "efficiency." He had little love for that word--it is usually bought at too great a cost. That year, as usual, he had a small seminar of carefully picked students. He got them to open their eyes to conditions as they were. When they ceased to accept those conditions just because they were, they, too, felt the inequality, the farce, of a democratic institution run on such autocratic lines. After seminar hours the group would foregather at our house to plot as to ways and means. The editor of the campus daily saw their point of view--I am not sure now that he was not a member of the seminar. A slow campaign of education followed. Intrenched powers became outraged. Fraternities that had invited Carl almost weekly to lunch, now "couldn't see him." One or two influential alumnæ, who had something to gain from the established order, took up the fight. Soon we had a "warning" from one of the Regents that Carl's efforts on behalf of "democracy" were unwelcome. But within a year the entire organization of campus politics was altered, and now there probably is not a student who would not feel outraged at the suggestion of a return to the old system. Perhaps here is where I can dwell for a moment on Carl's particular brand of democracy. I see so much of other kinds. He was what I should call an utterly unconscious democrat. He never framed in his own mind any theory of "the brotherhood of man"--he just lived it, without ever thinking of it as something that needed expression in words. I never heard him use the term. To him the Individual was everything--by that I mean that every relation he had was on a personal basis. He could not go into a shop to buy a necktie hurriedly, without passing a word with the clerk; when he paid his fare on the street car, there was a moment's conversation with the conductor; when we had ice-cream of an evening, he asked the waitress what was the best thing on in the movies. When we left Oakland for Harvard, the partially toothless maid we had sobbed that "Mr. Parker had been more like a brother to her!" One of the phases of his death which struck home the hardest was the concern and sorrow the small tradespeople showed--the cobbler, the plumber, the drug-store clerk. You hear men say: "I often find it interesting to talk to working-people and get their view-point." Such an attitude was absolutely foreign to Carl. He talked to "working-people" because he talked to everybody as he went along his joyous way. At a track meet or football game, he was on intimate terms with every one within a conversational radius. Our wealthy friends would tell us he ruined their chauffeurs--they got so that they didn't know their places. As likely as not, he would jolt some constrained bank president by engaging him in genial conversation without an introduction; at a formal dinner he would, as a matter of course, have a word or two with the butler when he passed the cracked crab, although at times the butlers seemed somewhat pained thereby. Some of Carl's intimate friends were occasionally annoyed--"He talks to everybody." He no more could help talking to everybody than he could help--liking pumpkin-pie. He was born that way. He had one manner for every human being--President of the University, students, janitors, society women, cooks, small boys, judges. He never had any material thing to hand out,--not even cigars, for he did not smoke himself,--but, as one friend expressed it, "he radiated generosity." Heidelberg gives one year after passing the examination to get the doctor's thesis in final form for publication. The subject of Carl's thesis was "The Labor Policy of the American Trust." His first summer vacation after our return to Berkeley, he went on to Wisconsin, chiefly to see Commons, and then to Chicago, to study the stockyards at first-hand, and the steel industry. He wrote: "Have just seen Commons, who was _fine_. He said: 'Send me as soon as possible the outline of your thesis and I will pass upon it according to my lights.' . . . He is very interested in one of my principal subdivisions, i.e. 'Technique and Unionism,' or 'Technique and Labor.' Believes it is a big new consideration." Again he wrote: "I have just finished working through a book on 'Immigration' by Professor Fairchild of Yale,--437 pages published three weeks ago,--lent me by Professor Ross. It is the very book I have been looking for and is _superb_. I can't get over how stimulating this looking in on a group of University men has been. It in itself is worth the trip. I feel sure of my field of work; that I am not going off in unfruitful directions; that I am keeping up with the wagon. I am now set on finishing my book right away--want it out within a year from December." From Chicago he wrote: "Am here with the reek of the stockyards in my nose, and just four blocks from them. Here lived, in this house, Upton Sinclair when he wrote 'The Jungle.'" And Mary McDowell, at the University Settlement where he was staying, told a friend of ours since Carl's death about how he came to the table that first night and no one paid much attention to him--just some young Westerner nosing about. But by the end of the meal he had the whole group leaning elbows on the table, listening to everything he had to say; and she added, "Every one of us loved him from then on." He wrote, after visiting Swift's plant, of "seeing illustrations for all the lectures on technique I have given, and Gee! it felt good. [I could not quote him honestly and leave out his "gees"] to actually look at things being done the way one has orated about 'em being done. The thing for me to do here is to see, and see the things I'm going to write into my thesis. I want to spend a week, if I can, digging into the steel industry. With my fine information about the ore [he had just acquired that], I am anxious to fill out my knowledge of the operation of smelting and making steel. Then I can orate industrial dope." Later: "This morning I called on the Vice-President of the Illinois Steel Company, on the Treasurer of Armour & Co., and lunched with Mr. Crane of Crane Co.--Ahem!" The time we had when it came to the actual printing of the thesis! It had to be finished by a certain day, in order to make a certain steamer, to reach Heidelberg when promised. I got in a corner of a printing-office and read proof just as fast as it came off the press, while Carl worked at home, under you can guess what pressure, to complete his manuscript--tearing down with new batches for me to get in shape for the type-setter, and then racing home to do more writing. We finished the thesis about one o'clock one morning, proof-reading and all; and the next day--or that same day, later--war was declared. Which meant just this--that the University of Heidelberg sent word that it would not be safe for Carl to send over his thesis,--there were about three or four hundred copies to go, according to German University regulations,--until the situation had quieted down somewhat. The result was that those three Or four hundred copies lay stacked up in the printing-office for three or four years, until at last Carl decided it was not a very good thesis anyway, and he didn't want any one to see it, and he would write another brand-new one when peace was declared and it could get safely to its destination. So he told the printer-man to do away with the whole batch. This meant that we were out about a hundred and fifty dollars, oh, luckless thought!--a small fortune to the young Parkers. So though in a way the thesis as it stands was not meant for publication, I shall risk quoting from Part One, "The Problem," so that at least his general approach can be gathered. Remember, the title was "The Labor Policy of the American Trust." "When the most astute critic of American labor conditions has said, 'While immigration continues in great volume, class lines will be forming and reforming, weak and instable. To prohibit or greatly restrict immigration would bring forth class conflict within a generation,' what does it mean? "President Woodrow Wilson in a statement of his fundamental beliefs has said: 'Why are we in the presence, why are we at the threshold, of a revolution? . . . Don't you know that some man with eloquent tongue, without conscience, who did not care for the nation, could put this whole country into a flame? Don't you know that this country, from one end to the other, believes that something is wrong? What an opportunity it would be for some man without conscience to spring up and say: "This is the way; follow me"--and lead in paths of destruction!' What does it mean? "The problem of the social unrest must seek for its source in all three classes of society! Two classes are employer and employee, the third is the great middle class, looking on. What is the relationship between the dominating employing figure in American industrial life and the men who work? "A nation-wide antagonism to trade-unions, to the idea of collective bargaining between men and employer, cannot spring from a temperamental aversion of a mere individual, however powerful, be he Carnegie, Parry, or Post, or from the common opinion in a group such as the so-called Beef Trust, or the directorate of the United States Steel Corporation. Such a hostility, characterizing as it does one of the vitally important relationships in industrial production, must seek its reason-to-be in economic causes. Profits, market, financing, are placed in certain jeopardy by such a labor policy, and this risk is not continued, generation after generation, as a casual indulgence in temper. Deep below the strong charges against the unions of narrow self-interest and un-American limitation of output, dressed by the Citizens' Alliance in the language of the Declaration of Independence, lies a quiet economic reason for the hostility. Just as slavery was about to go because it did not pay, and America stopped building a merchant marine because it was cheaper to hire England to transport American goods, so the American Trust, as soon as it had power, abolished the American trade-union because it found it costly. What then are these economic causes which account for the hostility? "What did the union stand in the way of? What conditions did the trust desire to establish with which the union would interfere? Or did a labor condition arise which allowed the employer to wreck the union with such ease, that he turned aside for a moment to do it, to commit an act desirable only if its performance cost little danger or money? "The answer can be found only after an analysis of certain factors in industrial production. These are three:-- "(_a_) The control of industrial production. Not only, in whose hands has industrial capitalism for the moment fallen, but in what direction does the evolution of control tend? "(_b_) The technique of industrial production. Technique, at times, instead of being a servant, determines by its own characteristics the character of the labor and the geographical location of the industry, and even destroys the danger of competition, if the machinery demanded by it asks for a bigger capital investment than a raiding competitor will risk. "(_c_) The labor market. The labor market can be stationary as in England, can diminish as in Ireland, or increase as in New England. "If the character of these three factors be studied, trust hostility to American labor-unions can be explained in terms of economic measure. One national characteristic, however, must be taken for granted. That is the commercialized business morality which guides American economic life. The responsibility for the moral or social effect of an act is so rarely a consideration in a decision, that it can be here neglected without error. It is not a factor." * * * * * At the close of his investigation, he took his first vacation in five years--a canoe-trip up the Brulé with Hal Bradley. That was one of our dreams that could never come true--a canoe-trip together. We almost bought the canoe at the Exposition--we looked holes through the one we wanted. Our trip was planned to the remotest detail. We never did come into our own in the matter of our vacations, although no two people could have more fun in the woods than we. But the combination of small children and no money and new babies and work--We figured that in three more years we could be sure of at least one wonderful trip a year. Anyway, we had the joy of our plannings. CHAPTER IX The second term in California had just got well under way when Carl was offered the position of Executive Secretary in the State Immigration and Housing Commission of California. I remember so well the night he came home about midnight and told me. I am afraid the financial end would have determined us, even if the work itself had small appeal--which, however, was not the case. The salary offered was $4000. We were getting $1500 at the University. We were $2000 in debt from our European trip, and saw no earthly chance of ever paying it out of our University salary. We figured that we could be square with the world in one year on a $4000 salary, and then need never be swayed by financial considerations again. So Carl accepted the new job. It was the wise thing to do anyway, as matters turned out. It threw him into direct contact for the first time with the migratory laborer and the I.W.W. It gave him his first bent in the direction of labor-psychology, which was to become his intellectual passion, and he was fired with a zeal that never left him, to see that there should be less unhappiness and inequality in the world. The concrete result of Carl's work with the Immigration Commission was the clean-up of labor camps all over California. From unsanitary, fly-ridden, dirty makeshifts were developed ordered sanitary housing accommodations, designed and executed by experts in their fields. Also he awakened, through countless talks up and down the State, some understanding of the I.W.W. and his problem; although, judging from the newspapers nowadays, his work would seem to have been almost forgotten. As the phrase went, "Carleton Parker put the migratory on the map." I think of the Wheatland Hop-Fields riot, or the Ford and Suhr case, which Carl was appointed to investigate for the Federal government, as the dramatic incident which focused his attention on the need of a deeper approach to a sound understanding of labor and its problems, and which, in turn, justified Mr. Bruère in stating in the "New Republic": "Parker was the first of our Economists, not only to analyse the psychology of labor and especially of casual labor, but also to make his analysis the basis for an applied technique of industrial and social reconstruction." Also, that was the occasion of his concrete introduction to the I.W.W. He wrote an account of it, later, for the "Survey," and an article on "The California Casual and His Revolt" for the "Quarterly Journal of Economics," in November, 1915. It is all interesting enough, I feel, to warrant going into some detail. The setting of the riot is best given in the article above referred to, "The California Casual and His Revolt." "The story of the Wheatland hop-pickers' riot is as simple as the facts of it are new and naïve in strike histories. Twenty-eight hundred pickers were camped on a treeless hill which was part of the ---- ranch, the largest single employer of agricultural labor in the state. Some were in tents, some in topless squares of sacking, or with piles of straw. There was no organization for sanitation, no garbage-disposal. The temperature during the week of the riot had remained near 105°, and though the wells were a mile from where the men, women, and children were picking, and their bags could not be left for fear of theft of the hops, no water was sent into the fields. A lemonade wagon appeared at the end of the week, later found to be a concession granted to a cousin of the ranch owner. Local Wheatland stores were forbidden to send delivery wagons to the camp grounds. It developed in the state investigation that the owner of the ranch received half of the net profits earned by an alleged independent grocery store, which had been granted the 'grocery concession' and was located in the centre of the camp ground. . . . "The pickers began coming to Wheatland on Tuesday, and by Sunday the irritation over the wage-scale, the absence of water in the fields, plus the persistent heat and the increasing indignity of the camp, had resulted in mass meetings, violent talk, and a general strike. "The ranch owner, a nervous man, was harassed by the rush of work brought on by the too rapidly ripening hops, and indignant at the jeers and catcalls which greeted his appearance near the meetings of the pickers. Confused with a crisis outside his slender social philosophy, he acted true to his tradition, and perhaps his type, and called on a sheriff's posse. What industrial relationship had existed was too insecure to stand such a procedure. It disappeared entirely, leaving in control the instincts and vagaries of a mob on the one hand, and great apprehension and inexperience on the other. "As if a stage had been set, the posse arrived in automobiles at the instant when the officially 'wanted' strike-leader was addressing a mass meeting of excited men, women, and children. After a short and typical period of skirmishing and the minor and major events of arresting a person under such circumstances, a member of the posse standing outside fired a double-barreled shot-gun over the heads of the crowd, 'to sober them,' as he explained it. Four men were killed--two of the posse and two strikers; the posse fled in their automobiles to the county seat, and all that night the roads out of Wheatland were filled with pickers leaving the camp. Eight months later, two hop-pickers, proved to be the leaders of the strike and its agitation, were convicted of murder in the first degree and sentenced to life imprisonment. Their appeal for a new trial was denied." In his report to the Governor, written in 1914, Carl characterized the case as follows:-- "The occurrence known as the Wheatland Hop-Fields riot took place on Sunday afternoon, August 3, 1913. Growing discontent among the hop-pickers over wages, neglected camp-sanitation and absence of water in the fields had resulted in spasmodic meetings of protest on Saturday and Sunday morning, and finally by Sunday noon in a more or less involuntary strike. At five o'clock on Sunday about one thousand pickers gathered about a dance pavilion to listen to speakers. Two automobiles carrying a sheriff's posse drove up to this meeting, and officials armed with guns and revolvers attempted to disperse the crowd and to arrest, on a John Doe warrant, Richard Ford, the apparent leader of the strike. In the ensuing confusion shooting began and some twenty shots were fired. Two pickers, a deputy sheriff, and the district attorney of the county were killed. The posse fled and the camp remained unpoliced until the State Militia arrived at dawn next morning. "The occurrence has grown from a casual, though bloody, event in California labor history into such a focus for discussion and analysis of the State's great migratory labor-problem that the incident can well be said to begin, for the commonwealth, a new and momentous labor epoch. "The problem of vagrancy; that of the unemployed and the unemployable; the vexing conflict between the right of agitation and free speech and the law relating to criminal conspiracy; the housing and wages of agricultural laborers; the efficiency and sense of responsibility found in a posse of country deputies; the temper of the country people faced with the confusion and rioting of a labor outbreak; all these problems have found a starting point for their new and vigorous analysis in the Wheatland riot. In the same report, submitted a year before the "Quarterly Journal" article, and almost a year before his study of psychology began, Carl wrote:-- "The manager and part-owner of the ranch is an example of a certain type of California employer. The refusal of this type to meet the social responsibilities which come with the hiring of human beings for labor, not only works concrete and cruelly unnecessary misery upon a class little able to combat personal indignity and degradation, but adds fuel to the fire of resentment and unrest which is beginning to burn in the uncared-for migratory worker in California. That ---- could refuse his clear duty of real trusteeship of a camp on his own ranch, which contained hundreds of women and children, is a social fact of miserable import. The excuses we have heard of unpreparedness, of alleged ignorance of conditions, are shamed by the proven human suffering and humiliation repeated each day of the week, from Wednesday to Sunday. Even where the employer's innate sense of moral obligation fails to point out his duty, he should have realized the insanity of stimulating unrest and bitterness in this inflammable labor force. The riot on the ---- ranch is a California contribution to the literature of the social unrest in America." As to the "Legal and Economic Aspects" of the case, again quoting from the report to the Governor:-- "The position taken by the defense and their sympathizers in the course of the trial has not only an economic and social bearing, but many arguments made before the court are distinct efforts to introduce sociological modifications of the law which will have a far-reaching effect on the industrial relations of capital and labor. It is asserted that the common law, on which American jurisprudence is founded, is known as an ever-developing law, which must adapt itself to changing economic and social conditions; and, in this connection, it is claimed that the established theories of legal causation must be enlarged to include economic and social factors in the chain of causes leading to a result. Concretely, it is argued:-- "First, That, when unsanitary conditions lead to discontent so intense that the crowd can be incited to bloodshed, those responsible for the unsanitary conditions are to be held legally responsible for the bloodshed, as well as the actual inciters of the riot. "Second, That, if the law will not reach out so far as to hold the creator of unsanitary, unlivable conditions guilty of bloodshed, at any rate such conditions excuse the inciters from liability, because inciters are the involuntary transmitting agents of an uncontrollable force set in motion by those who created the unlivable conditions. . . . "Furthermore, on the legal side, modifications of the law of property are urged. It is argued that modern law no longer holds the rights of private property sacred, that these rights are being constantly regulated and limited, and that in the Wheatland case the owner's traditional rights in relation to his own lands are to be held subject to the right of the laborers to organize thereon. It is urged that a worker on land has a 'property right in his job,' and that he cannot be made to leave the job, or the land, merely because he is trying to organize his fellow workers to make a protest as to living and economic conditions. It is urged that the organizing worker cannot be made to leave the job because the job is _his_ property and it is all that he has." As to "The Remedy":-- "It is obvious that the violent strike methods adopted by the I.W.W. type agitators, which only incidentally, although effectively, tend to improve camp conditions, are not to be accepted as a solution of the problem. It is also obvious that the conviction of the agitators, such as Ford and Suhr, of murder, is not a solution, but is only the punishment or revenge inflicted by organized society for a past deed. The Remedy lies in prevention. "It is the opinion of your investigator that the improvement of living conditions in the labor camps will have the immediate effect of making the recurrence of impassioned, violent strikes and riots not only improbable, but impossible; and furthermore, such improvement will go far towards eradicating the hatred and bitterness in the minds of the employers and in the minds of the roving, migratory laborers. This accomplished, the two conflicting parties will be in a position to meet on a saner, more constructive basis, in solving the further industrial problems arising between them. . . . "They must come to realize that their own laxity in allowing the existence of unsanitary and filthy conditions gives a much-desired foothold to the very agitators of the revolutionary I.W.W. doctrines whom they so dread; they must learn that unbearable, aggravating living conditions inoculate the minds of the otherwise peaceful workers with the germs of bitterness and violence, as so well exemplified at the Wheatland riot, giving the agitators a fruitful field wherein to sow the seeds of revolt and preach the doctrine of direct action and sabotage. "On the other hand, the migratory laborers must be shown that revolts accompanied by force in scattered and isolated localities not only involve serious breaches of law and lead to crime, but that they accomplish no lasting constructive results in advancing their cause. "The Commission intends to furnish a clearinghouse to hear complaints of grievances, of both sides, and act as a mediator or safety-valve." In the report to the Governor appear Carl's first writings on the I.W.W. "Of this entire labor force at the ---- ranch, it appears that some 100 had been I.W.W. 'card men,' or had had affiliations with that organization. There is evidence that there was in this camp a loosely caught together camp local of the I.W.W., with about 30 active members. It is suggestive that these 30 men, through a spasmodic action, and with the aid of the deplorable camp conditions, dominated a heterogeneous mass of 2800 unskilled laborers in 3 days. Some 700 or 800 of the force were of the 'hobo' class, in every sense potential I.W.W. strikers. At least 400 knew in a rough way the--for them curiously attractive--philosophy of the I.W.W., and could also sing some of its songs. "Of the 100-odd 'card men' of the I.W.W., some had been through the San Diego affair, some had been soap-boxers in Fresno, a dozen had been in the Free Speech fight in Spokane. They sized up the hop-field as a ripe opportunity, as the principal defendant, 'Blackie' Ford, puts it, 'to start something.' On Friday, two days after picking began, the practical agitators began working through the camp. Whether or not Ford came to the ---- ranch to foment trouble seems immaterial. There are five Fords in every camp of seasonal laborers in California. We have devoted ourselves in these weeks to such questions as this: 'How big a per cent of California's migratory seasonal labor force know the technique of an I.W.W. strike?' 'How many of the migratory laborers know when conditions are ripe to "start something"?' We are convinced that among the individuals of every fruit-farm labor group are many potential strikers. Where a group of hoboes sit around a fire under a railroad bridge, many of the group can sing I.W.W. songs without the book. This was not so three years ago. The I.W.W. in California is not a closely organized body, with a steady membership. The rank and file know little of the technical organization of industrial life which their written constitution demands. They listen eagerly to the appeal for the 'solidarity' of their class. In the dignifying of vagabondage through their crude but virile song and verse, in the bitter vilification of the jail turnkey and county sheriff, in their condemnation of the church and its formal social work, they find the vindication of their hobo status which they desire. They cannot sustain a live organization unless they have a strike or free-speech fight to stimulate their spirit. It is in their methods of warfare, not in their abstract philosophy or even hatred of law and judges, that danger lies for organized society. Since every one of the 5000 laborers in California who have been at some time connected with the I.W.W. considers himself a 'camp delegate' with walking papers to organize a camp local, this small army is watching, as Ford did, for an unsanitary camp or low wage-scale, to start the strike which will not only create a new I.W.W. local, but bring fame to the organizer. This common acceptance of direct action and sabotage as the rule of operation, the songs and the common vocabulary are, we feel convinced, the first stirring of a class expression. "Class solidarity they have not. That may never come, for the migratory laborer has neither the force nor the vision nor tenacity to hold long enough to the ideal to attain it. But the I.W.W. is teaching a method of action which will give this class in violent flare-ups, such as that at Wheatland, expression. "The dying away of the organization after the outburst is, therefore, to be expected. Their social condition is a miserable one. Their work, even at the best, must be irregular. They have nothing to lose in a strike, and, as a leader put it, 'A riot and a chance to blackguard a jailer is about the only intellectual fun we have.' "Taking into consideration the misery and physical privation and the barren outlook of this life of the seasonal worker, the I.W.W. movement, with all its irresponsible motive and unlawful action, becomes in reality a class-protest, and the dignity which this characteristic gives it perhaps alone explains the persistence of the organization in the field. "Those attending the protest mass-meeting of the Wheatland hop-pickers were singing the I.W.W. song 'Mr. Block,' when the sheriff's posse came up in its automobiles. The crowd had been harangued by an experienced I.W.W. orator--'Blackie' Ford. They had been told, according to evidence, to 'knock the blocks off the scissor-bills.' Ford had taken a sick baby from its mother's arms and, holding it before the eyes of the 1500 people, had cried out: 'It's for the life of the kids we're doing this.' Not a quarter of the crowd was of a type normally venturesome enough to strike, and yet, when the sheriff went after Ford, he was knocked down and kicked senseless by infuriated men. In the bloody riot which then ensued, District Attorney Manwell, Deputy Sheriff Riordan, a negro Porto Rican and the English boy were shot and killed. Many were wounded. The posse literally fled, and the camp remained practically unpoliced until the State Militia arrived at dawn the next day. "The question of social responsibility is one of the deepest significance. The posse was, I am convinced, over-nervous and, unfortunately, over-rigorous. This can be explained in part by the state-wide apprehension over the I.W.W.; in part by the normal California country posse's attitude toward a labor trouble. A deputy sheriff, at the most critical moment, fired a shot in the air, as he stated, 'to sober the crowd.' There were armed men in the crowd, for every crowd of 2000 casual laborers includes a score of gunmen. Evidence goes to show that even the gentler mountainfolk in the crowd had been aroused to a sense of personal injury. ----'s automobile had brought part of the posse. Numberless pickers cling to the belief that the posse was '----'s police.' When Deputy Sheriff Dakin shot into the air, a fusillade took place; and when he had fired his last shell, an infuriated crowd of men and women chased him to the ranch store, where he was forced to barricade himself. The crowd was dangerous and struck the first blow. The murderous temper which turned the crowd into a mob is incompatible with social existence, let alone social progress. The crowd at the moment of the shooting was a wild and lawless animal. But to your investigator the important subject to analyze is not the guilt or innocence of Ford or Suhr, as the direct stimulators of the mob in action, but to name and standardize the early and equally important contributors to a psychological situation which resulted in an unlawful killing. If this is done, how can we omit either the filth of the hop-ranch, the cheap gun-talk of the ordinary deputy sheriff, or the unbridled, irresponsible speech of the soap-box orator? "Without doubt the propaganda which the I.W.W. had actually adopted for the California seasonal worker can be, in its fairly normal working out in law, a criminal conspiracy, and under that charge, Ford and Suhr have been found guilty of the Wheatland murder. But the important fact is, that this propaganda will be carried out, whether unlawful or not. We have talked hours with the I.W.W. leaders, and they are absolutely conscious of their position in the eyes of the law. Their only comment is that they are glad, if it must be a conspiracy, that it is a criminal conspiracy. They have volunteered the beginning of a cure; it is to clean up the housing and wage problem of the seasonal worker. The shrewdest I.W.W. leader we found said: 'We can't agitate in the country unless things are rotten enough to bring the crowd along.' They evidently were in Wheatland." He was high ace with the Wobbly for a while. They invited him to their Jungles, they carved him presents in jail. I remember a talk he gave on some phase of the California labor-problem one Sunday night, at the Congregational church in Oakland. The last three rows were filled with unshaven hoboes, who filed up afterwards, to the evident distress of the clean regular church-goers, to clasp his hand. They withdrew their allegiance after a time, which naturally in no way phased Carl's scientific interest in them. A paper hostile to Carl's attitude on the I.W.W. and his insistence on the clean-up of camps published an article portraying him as a double-faced individual who feigned an interest in the under-dog really to undo him, as he was at heart and pocket-book a capitalist, being the possessor of an independent income of $150,000 a year. Some I.W.W.'s took this up, and convinced a large meeting that he was really trying to sell them out. It is not only the rich who are fickle. Some of them remained his firm friends always, however. That summer two of his students hoboed it till they came down with malaria, in the meantime turning in a fund of invaluable facts regarding the migratory and his life. A year later, in his article in the "Quarterly Journal," and, be it remembered, after his study of psychology had begun, Carl wrote:-- "There is here, beyond a doubt, a great laboring population experiencing a high suppression of normal instincts and traditions. There can be no greater perversion of a desirable existence than this insecure, under-nourished, wandering life, with its sordid sex-expression and reckless and rare pleasures. Such a life leads to one of two consequences: either a sinking of the class to a low and hopeless level, where they become, through irresponsible conduct and economic inefficiency, a charge upon society; or revolt and guerrilla labor warfare. "The migratory laborers, as a class, are the finished product of an environment which seems cruelly efficient in turning out beings moulded after all the standards society abhors. Fortunately the psychologists have made it unnecessary to explain that there is nothing willful or personally reprehensible in the vagrancy of these vagrants. Their histories show that, starting with the long hours and dreary winters of the farms they ran away from, through their character-debasing experience with irregular industrial labor, on to the vicious economic life of the winter unemployed, their training predetermined but one outcome. Nurture has triumphed over nature; the environment has produced its type. Difficult though the organization of these people may be, a coincidence of favoring conditions may place an opportunity in the hands of a super-leader. If this comes, one can be sure that California will be both very astonished and very misused." I was told only recently of a Belgian economics professor, out here in California during the war, on official business connected with aviation. He asked at once to see Carl, but was told we had moved to Seattle. "My colleagues in Belgium asked me to be sure and see Professor Parker," he said, "as we consider him the one man in America who understands the problem of the migratory laborer." That winter Carl got the city of San José to stand behind a model unemployed lodging-house, one of the two students who had "hoboed" during the summer taking charge of it. The unemployed problem, as he ran into it at every turn, stirred Carl to his depths. At one time he felt it so strongly that he wanted to start a lodging-house in Berkeley, himself, just to be helping out somehow, even though it would be only surface help. It was also about this time that California was treated to the spectacle of an Unemployed Army, which was driven from pillar to post,--or, in this case, from town to town,--each trying to outdo the last in protestations of unhospitality. Finally, in Sacramento the fire-hoses were turned on the army. At that Carl flamed with indignation, and expressed himself in no mincing terms, both to the public and to the reporter who sought his views. He was no hand to keep clippings, but I did come across one of his milder interviews in the San Francisco "Bulletin" of March 11, 1914. "That California's method of handling the unemployed problem is in accord with the 'careless, cruel and unscientific attitude of society on the labor question,' is the statement made to-day by Professor Carleton H. Parker, Assistant Professor of Industrial economy, and secretary of the State Immigration Committee. "'There are two ways of looking at this winter's unemployed problem,' said Dr. Parker; 'one is fatally bad and the other promises good. One way is shallow and biased; the other strives to use the simple rules of science for the analysis of any problem. One way is to damn the army of the unemployed and the irresponsible, irritating vagrants who will not work. The other way is to admit that any such social phenomenon as this army is just as normal a product of our social organization as our own university. "'Much street-car and ferry analysis of this problem that I have overheard seems to believe that this army created its own degraded self, that a vagrant is a vagrant from personal desire and perversion. This analysis is as shallow as it is untrue. If unemployment and vagrancy are the product of our careless, indifferent society over the half-century, then its cure will come only by a half-century's careful regretful social labor by this same tardy society. "'The riot at Sacramento is merely the appearance of the problem from the back streets into the strong light. The handling of the problem there is unhappily in accord with the careless, cruel attitude of society on this question. We are willing to respect the anxiety of Sacramento, threatened in the night with this irresponsible, reckless invasion; but how can the city demand of vagrants observance of the law, when they drop into mob-assertion the minute the problem comes up to them?'" The illustration he always used to express his opinion of the average solution of unemployment, I quote from a paper of his on that subject, written in the spring of 1915. "There is an old test for insanity which is made as follows: the suspect is given a cup, and is told to empty a bucket into which water is running from a faucet. If the suspect turns off the water before he begins to bail out the bucket, he is sane. Nearly all the current solutions of unemployment leave the faucet running. . . . "The heart of the problem, the cause, one might well say, of unemployment, is that the employment of men regularly or irregularly is at no time an important consideration of those minds which control industry. Social organization has ordered it that these minds shall be interested only in achieving a reasonable profit in the manufacture and the sale of goods. Society has never demanded that industries be run even in part to give men employment. Rewards are not held out for such a policy, and therefore it is unreasonable to expect such a performance. Though a favorite popular belief is that we must 'work to live,' we have no current adage of a 'right to work.' This winter there are shoeless men and women, closed shoe-factories, and destitute shoemakers; children in New England with no woolen clothing, half-time woolen mills, and unemployed spinners and weavers. Why? Simply because the mills cannot turn out the reasonable business profit; and since that is the only promise that can galvanize them into activity, they stand idle, no matter how much humanity finds of misery and death in this decision. This statement is not a peroration to a declaration for Socialism. It seems a fair rendering of the matter-of-fact logic of the analysis. "It seems hopeless, and also unfair, to expect out-of-work insurance, employment bureaus, or philanthropy, to counteract the controlling force of profit-seeking. There is every reason to believe that profit-seeking has been a tremendous stimulus to economic activity in the past. It is doubtful if the present great accumulation of capital would have come into existence without it. But to-day it seems as it were to be caught up by its own social consequences. It is hard to escape from the insistence of a situation in which the money a workman makes in a year fails to cover the upkeep of his family; and this impairment of the father's income through unemployment has largely to be met by child-and woman-labor. The Federal Immigration Commission's report shows that in not a single great American industry can the average yearly income of the father keep his family. Seven hundred and fifty dollars is the bare minimum for the maintenance of the average-sized American industrial family. The average yearly earnings of the heads of families working in the United States in the iron and steel industry is $409; in bituminous coal-mining $451; in the woolen industry $400; in silk $448; in cotton $470; in clothing $530; in boots and shoes $573; in leather $511; in sugar-refining $549; in the meat industry $578; in furniture $598, etc. "He who decries created work, municipal lodging-houses, bread-lines, or even sentimental charity, in the face of the winter's destitution, has an unsocial soul. The most despicable thing to-day is the whine of our cities lest their inadequate catering to their own homeless draw a few vagrants from afar. But when the agony of our winter makeshifting is by, will a sufficient minority of our citizens rise and demand that the best technical, economic, and sociological brains in our wealthy nation devote themselves with all courage and honesty to the problem of unemployment?" Carl was no diplomat, in any sense of the word--above all, no political diplomat. It is a wonder that the Immigration and Housing Commission stood behind him as long as it did. He grew rabid at every political appointment which, in his eyes, hampered his work. It was evident, so they felt, that he was not tactful in his relations with various members of the Commission. It all galled him terribly, and after much consultation at home, he handed in his resignation. During the first term of his secretaryship, from October to December, he carried his full-time University work. From January to May he had a seminar only, as I remember. From August on he gave no University work at all; so, after asking to have his resignation from the Commission take effect at once, he had at once to find something to do to support his family. This was in October, 1914, after just one year as Executive Secretary. We were over in Contra Costa County then, on a little ranch of my father's. Berkeley socially had come to be too much of a strain, and, too, we wanted the blessed sons to have a real country experience. Ten months we were there. Three days after Carl resigned, he was on his way to Phoenix, Arizona,--where there was a threatened union tie-up,--as United States Government investigator of the labor situation. He added thereby to his first-hand stock of labor-knowledge, made a firm friend of Governor Hunt,--he was especially interested in his prison policy,--and in those few weeks was the richer by one more of the really intimate friendships one counts on to the last--Will Scarlett. He wrote, on Carl's death, "What a horrible, hideous loss! Any of us could so easily have been spared; that he, who was of such value, had to go seems such an utter waste. . . . He was one of that very, very small circle of men, whom, in the course of our lives, we come _really_ to love. His friendship meant so much--though I heard but infrequently from him, there was the satisfaction of a deep friendship that was _always there_ and _always the same_. He would have gone so far! I have looked forward to a great career for him, and had such pride in him. It's too hideous!" CHAPTER X In January, 1915, Carl took up his teaching again in real earnest, commuting to Alamo every night. I would have the boys in bed and the little supper all ready by the fire; then I would prowl down the road with my electric torch, to meet him coming home; he would signal in the distance with his torch, and I with mine. Then the walk back together, sometimes ankle-deep in mud; then supper, making the toast over the coals, and an evening absolutely to ourselves. And never in all our lives did we ask for more joy than that. That spring we began building our very own home in Berkeley. The months in Alamo had made us feel that we could never bear to be in the centre of things again, nor, for that matter, could we afford a lot in the centre of things; so we bought high up on the Berkeley hills, where we could realize as much privacy as was possible, and yet where our friends could reach us--if they could stand the climb. The love of a nest we built! We were longer in that house than anywhere else: two years almost to the day--two years of such happiness as no other home has ever seen. There, around the redwood table in the living-room, by the window overlooking the Golden Gate, we had the suppers that meant much joy to us and I hope to the friends we gathered around us. There, on the porches overhanging the very Canyon itself we had our Sunday tea-parties. (Each time Carl would plead, "I don't have to wear a stiff collar, do I?" and he knew that I would answer, "You wear anything you want," which usually meant a blue soft shirt.) We had a little swimming-tank in back, for the boys. And then, most wonderful of all, came the day when the June-Bug was born, the daughter who was to be the very light of her adoring father's eyes. (Her real name is Alice Lee.) "Mother, there never really _was_ such a baby, _was_ there?" he would ask ten times a day. She was not born up on the hill; but in ten days we were back from the hospital and out day and night through that glorious July, on some one of the porches overlooking the bay and the hills. And we added our adored Nurse Balch as a friend of the family forever. I always think of Nurse Balch as the person who more than any other, perhaps, understood to some degree just what happiness filled our lives day in and day out. No one assumes anything before a trained nurse--they are around too constantly for that. They see the misery in homes, they see what joy there is. And Nurse Balch saw, because she was around practically all the time for six weeks, that there was nothing but joy every minute of the day in our home. I do not know how I can make people understand, who are used to just ordinary happiness, what sort of a life Carl and I led. It was not just that we got along. It was an active, not a passive state. There was never a home-coming, say at lunch-time, that did not seem an event--when our curve of happiness abruptly rose. Meals were joyous occasions always; perhaps too scant attention paid to the manners of the young, but much gurglings, and "Tell some more, daddy," and always detailed accounts of every little happening during the last few hours of separation. Then there was ever the difficulty of good-byes, though it meant only for a few hours, until supper. And at supper-time he would come up the front stairs, I waiting for him at the top, perhaps limping. That was his little joke--we had many little family jokes. Limping meant that I was to look in every pocket until I unearthed a bag of peanut candy. Usually he was laden with bundles--provisions, shoes from the cobbler, a tennis-racket restrung, and an armful of books. After greetings, always the question, "How's my June-Bug?" and a family procession upstairs to peer over a crib at a fat gurgler. And "Mother, there never really _was_ such a baby, _was_ there?" No, nor such a father. It was that first summer back in Berkeley, the year before the June-Bug was born, when Carl was teaching in Summer School, that we had our definite enthusiasm over labor-psychology aroused. Will Ogburn, who was also teaching at Summer School that year, and whose lectures I attended, introduced us to Hart's "Psychology of Insanity," several books by Freud, McDougall's "Social Psychology," etc. I remember Carl's seminar the following spring--his last seminar at the University of California. He had started with nine seminar students three years before; now there were thirty-three. They were all such a superior picked lot, some seniors, mostly graduates, that he felt there was no one he could ask to stay out. I visited it all the term, and I am sure that nowhere else on the campus could quite such heated and excited discussions have been heard--Carl simply sitting at the head of the table, directing here, leading there. The general subject was Labor-Problems. The students had to read one book a week--such books as Hart's "Psychology of Insanity," Keller's "Societal Evolution," Holt's "Freudian Wish," McDougall's "Social Psychology,"--two weeks to that,--Lippmann's "Preface to Politics," Veblen's "Instinct of Workmanship," Wallas's "Great Society," Thorndike's "Educational Psychology," Hoxie's "Scientific Management," Ware's "The Worker and his Country," G.H. Parker's "Biology and Social Problems," and so forth--and ending, as a concession to the idealists, with Royce's "Philosophy of Loyalty." One of the graduate students of the seminar wrote me: "For three years I sat in his seminar on Labor-Problems, and had we both been there ten years longer, each season would have found me in his class. His influence on my intellectual life was by far the most stimulating and helpful of all the men I have known. . . . But his spirit and influence will live on in the lives of those who sat at his feet and learned." The seminar was too large, really, for intimate discussion, so after a few weeks several of the boys asked Carl if they could have a little sub-seminar. It was a very rushed time for him, but he said that, if they would arrange all the details, he would save them Tuesday evenings. So every Tuesday night about a dozen boys climbed our hill to rediscuss the subject of the seminar of that afternoon--and everything else under the heavens and beyond. I laid out ham sandwiches, or sausages, or some edible dear to the male heart, and coffee to be warmed, and about midnight could be heard the sounds of banqueting from the kitchen. Three students told me on graduation that those Tuesday nights at our house had meant more intellectual stimulus than anything that ever came into their lives. One of these boys wrote to me after Carl's death:-- "When I heard that Doc had gone, one of the finest and cleanest men I have ever had the privilege of associating with, I seemed to have stopped thinking. It didn't seem possible to me, and I can remember very clearly of thinking what a rotten world this is when we have to live and lose a man like Doc. I have talked to two men who were associated with him in somewhat the same manner as I was, and we simply looked at one another after the first sentences, and then I guess the thoughts of a man who had made so much of an impression on our minds drove coherent speech away. . . . I have had the opportunity since leaving college of experiencing something real besides college life and I can't remember during all that period of not having wondered how Dr. Parker would handle this or that situation. He was simply immense to me at all times, and if love of a man-to-man kind does exist, then I truthfully can say that I had that love for him." Of the letters received from students of those years I should like to quote a passage here and there. An aviator in France writes: "There was no man like him in my college life. Believe me, he has been a figure in all we do over here,--we who knew him,--and a reason for our doing, too. His loss is so great to all of us! . . . He was so fine he will always push us on to finding the truth about things. That was his great spark, wasn't it?" From a second lieutenant in France: "I loved Carl. He was far more to me than just a friend--he was father, brother, and friend all in one. He influenced, as you know, everything I have done since I knew him--for it was his enthusiasm which has been the force which determined the direction of my work. And the bottom seemed to have fallen out of my whole scheme of things when the word just came to me." From one of the young officers at Camp Lewis: "When E---- told me about Carl's illness last Wednesday, I resolved to go and see him the coming week-end. I carried out my resolution, only to find that I could see neither him nor you. [This was the day before Carl's death.] It was a great disappointment to me, so I left some flowers and went away. . . . I simply could not leave Seattle without seeing Carl once more, so I made up my mind to go out to the undertaker's. The friends I was with discouraged the idea, but it was too strong within me. There was a void within me which could only be filled by seeing my friend once more. I went out there and stood by his side for quite a while. I recalled the happy days spent with him on the campus. I thought of his kindliness, his loyalty, his devotion. Carl Parker shall always occupy a place in the recesses of my memory as a true example of nobility. It was hard for me to leave, but I felt much better." From one of his women students: "Always from the first day when I knew him he seemed to give me a joy of life and an inspiration to work which no other person or thing has ever given me. And it is a joy and an inspiration I shall always keep. I seldom come to a stumbling-block in my work that I don't stop to wonder what Carl Parker would do were he solving that problem." Another letter I have chosen to quote from was written by a former student now in Paris:-- "We could not do without him. He meant too much to us. . . . I come now as a young friend to put myself by your side a moment and to try to share a great sorrow which is mine almost as much as it is yours. For I am sure that, after you, there were few indeed who loved Carl as much as I. "Oh, I am remembering a hundred things!--the first day I found you both in the little house on Hearst Avenue--the dinners we used to have . . . the times I used to come on Sunday morning to find you both, and the youngsters--the day just before I graduated when mother and I had lunch at your house . . . and, finally, that day I left you, and you said, both of you, 'Don't come back without seeing some of the cities of Europe.' I'd have missed some of the cities to have come back and found you both. "Some of him we can't keep. The quaint old gray twinkle--the quiet, half-impudent, wholly confident poise with which he defied all comers--that inexhaustible and incorrigible fund of humor--those we lose. No use to whine--we lose it; write it off, gulp, go on. "But other things we keep, none the less. The stimulus and impetus and inspiration are not lost, and shall not be. No one has counted the youngsters he has hauled, by the scruff of the neck as often as not, out of a slough of middle-class mediocrity, and sent careering off into some welter or current of ideas and conjecture. Carl didn't know where they would end, and no more do any of the rest of us. He knew he loathed stagnation. And he stirred things and stirred people. And the end of the stirring is far from being yet known or realized." I like, too, a story one of the Regents told me. He ran into a student from his home town and asked how his work at the University was going. The boy looked at him eagerly and said, "Mr. M----, I've been born again! ["Born again"--those were his very words.] I entered college thinking of it as a preparation for making more money when I got out. I've come across a man named Parker in the faculty and am taking everything he gives. Now I know I'd be selling out my life to make money the goal. I know now, too, that whatever money I do make can never be at the expense of the happiness and welfare of any other human being." CHAPTER XI About this time we had a friend come into our lives who was destined to mean great things to the Parkers--Max Rosenberg. He had heard Carl lecture once or twice, had met him through our good friend Dr. Brown, and a warm friendship had developed. In the spring of 1916 we were somewhat tempted by a call to another University--$1700 was really not a fortune to live on, and to make both ends meet and prepare for the June-Bug's coming, Carl had to use every spare minute lecturing outside. It discouraged him, for he had no time left to read and study. So when a call came that appealed to us in several ways, besides paying a much larger salary, we seriously considered it. About then "Uncle Max" rang up from San Francisco and asked Carl to see him before answering this other University, and an appointment was made for that afternoon. I was to be at a formal luncheon, but told Carl to be sure to call me up the minute he left Max--we wondered so hard what he might mean. And what he did mean was the most wonderful idea that ever entered a friend's head. He felt that Carl had a real message to give the world, and that he should write a book. He also realized that it was impossible to find time for a book under the circumstances. Therefore he proposed that Carl should take a year's leave of absence and let Max finance him--not only just finance him, but allow for a trip throughout the East for him to get the inspiration of contact with other men in his field; and enough withal, so that there should be no skimping anywhere and the little family at home should have everything they needed. It seemed to us something too wonderful to believe. I remember going back to that lunch-table, after Carl had telephoned me only the broadest details, wondering if it were the same world. That Book--we had dreamed of writing that book for so many years--the material to be in it changed continually, but always the longing to write, and no time, no hopes of any chance to do it. And the June-Bug coming, and more need for money--hence more outside lectures than ever. I have no love for the University of California when I think of that $1700. (I quote from an article that came out in New York: "It is an astounding fact which his University must explain, that he, with his great abilities as teacher and leader, his wide travel and experience and training, received from the University in his last year of service there a salary of $1700 a year! The West does not repay commercial genius like that.") For days after Max's offer we hardly knew we were on earth. It was so very much the most wonderful thing that could have happened to us. Our friends had long ago adopted the phrase "just Parker luck," and here was an example if there ever was one. "Parker luck" indeed it was! This all meant, to get the fulness out of it, that Carl must make a trip of at least four months in the East. At first he planned to return in the middle of it and then go back again; but somehow four months spent as we planned it out for him seemed so absolutely marvelous,--an opportunity of a lifetime,--that joy for him was greater in my soul than the dread of a separation. It was different from any other parting we had ever had. I was bound that I would not shed a single tear when I saw him off, even though it meant the longest time apart we had experienced. Three nights before he left, being a bit blue about things, for all our fine talk, we prowled down our hillside and found our way to our first Charlie Chaplin film. We laughed until we cried--we really did. So that night, seeing Carl off, we went over that Charlie Chaplin film in detail and let ourselves think and talk of nothing else. We laughed all over again, and Carl went off laughing, and I waved good-bye laughing. Bless that Charlie Chaplin film! It would not take much imagination to realize what that trip meant to Carl--and through him to me. From the time he first felt the importance of the application of modern psychology to the study of economics, he became more and more intellectually isolated from his colleagues. They had no interest in, no sympathy for, no understanding of, what he was driving at. From May, when college closed, to October, when he left for the East, he read prodigiously. He had a mind for assimilation--he knew where to store every new piece of knowledge he acquired, and kept thereby an orderly brain. He read more than a book a week: everything he could lay hands on in psychology, anthropology, biology, philosophy, psycho-analysis--every field which he felt contributed to his own growing conviction that orthodox economics had served its day. And how he gloried in that reading! It had been years since he had been able to do anything but just keep up with his daily lectures, such was the pressure he was working under. Bless his heart, he was always coming across something that was just too good to hold in, and I would hear him come upstairs two steps at a time, bolt into the kitchen, and say: "Just listen to this!" And he would read an extract from some new-found treasure that would make him glow. But outside of myself,--and I was only able to keep up with him by the merest skimmings,--and one or two others at most, there was no one who understood what he was driving at. As his reading and convictions grew, he waxed more and more outraged at the way Economics was handled in his own University. He saw student after student having every ounce of intellectual curiosity ground out of them by a process of economic education that would stultify a genius. Any student who continued his economic studies did so in spite of the introductory work, not because he had had one little ounce of enthusiasm aroused in his soul. Carl would walk the floor with his hands in his pockets when kindred spirits--especially students who had gone through the mill, and as seniors or graduates looked back outraged at certain courses they had had to flounder through--brought up the subject of Economics at the University of California. Off he went then on his pilgrimage,--his Research Magnificent,--absolutely unknown to almost every man he hoped to see before his return. The first stop he made was at Columbia, Missouri, to see his idol Veblen. He quaked a bit beforehand,--had heard Veblen might not see him,--but the second letter from Missouri began, "Just got in after thirteen hours with Veblen. It went wonderfully and I am tickled to death. He O.K.s my idea entirely and said I could not go wrong. . . . Gee, but it is some grand experience to go up against him." In the next letter he told of a graduate student who came out to get his advice regarding a thesis-subject in labor. "I told him to go to his New England home and study the reaction of machine-industry on the life of the town. That is a typical Veblen subject. It scared the student to death, and Veblen chuckled over my advice." In Wisconsin he was especially anxious to see Guyer. Of his visit with him he wrote: "It was a whiz of a session. He is just my meat." At Yale he saw Keller. "He is a wonder and is going to do a lot for me in criticism." Then began the daily letters from New York, and every single letter--not only from New York but from every other place he happened to be in: Baltimore, Philadelphia, Cambridge--told of at least one intellectual Event--with a capital E--a day. No one ever lived who had a more stimulating experience. Friends would ask me: "What is the news from Carl?" And I would just gasp. Every letter was so full of the new influences coming into his life, that it was impossible to give even an idea of the history in the making that was going on with the Parkers. In the first days in New York he saw T.H. Morgan. "I just walked in on him and introduced myself baldly, and he is a corker. A remarkable talker, with a mind like a flash. I am to see him again. To-morrow will be a big day for me--I'll see Hollingworth, and very probably Thorndike, and I'll know then something of what I'll get out of New York." Next day: "Called on Hollingworth to-day. He gave me some invaluable data and opinions. . . . To-morrow I see Thorndike." And the next day: "I'm so joyful and excited over Thorndike. He was so enthusiastic over my work. . . . He at once had brass-tack ideas. Said I was right--that strikes usually started because of small and very human violations of man's innate dispositions." Later he called on Professor W.C. Mitchell. "He went into my thesis very fully and is all for it. Professor Mitchell knows more than any one the importance of psychology to economics and he is all for my study. Gee, but I get excited after such a session. I bet I'll get out a real book, my girl!" After one week in New York he wrote: "The trip has paid for itself now, and I'm dead eager to view the time when I begin my writing." Later: "Just got in from a six-hour session with the most important group of employers in New York. I sat in on a meeting of the Building Trades Board where labor delegates and employers appeared. After two hours of it (awfully interesting) the Board took me to dinner and we talked labor stuff till ten-thirty. Gee, it was fine, and I got oceans of stuff." Then came Boas, and more visits with Thorndike. "To-night I put in six hours with Thorndike, and am pleased plum to death. . . . Under his friendly stimulus I developed a heap of new ideas; and say, wait till I begin writing! I'll have ten volumes at the present rate. . . . This visit with Thorndike was worth the whole trip." (And in turn Thorndike wrote me: "The days that he and I spent together in New York talking of these things are one of my finest memories and I appreciate the chance that let me meet him.") He wrote from the Harvard Club, where Walter Lippmann put him up: "The Dad is a 'prominent clubman.' Just lolled back at lunch, in a room with animals (stuffed) all around the walls, and waiters flying about, and a ceiling up a mile. Gee!" Later: "I just had a most wonderful visit with the Director of the National Committee for Mental Hygiene, Dr. Solman, and he is a wiz, a wiz!" Next day: "Had a remarkable visit with Dr. Gregory this A.M. He is one of the greatest psychiatrists in New York and up on balkings, business tension, and the mental effect of monotonous work. He was so worked up over my explanation of unrest (a mental status) through instinct-balkings other than sex, that he asked if I would consider using his big psychopathic ward as a laboratory field for my own work. Then he dated me up for a luncheon at which three of the biggest mental specialists in New York will be present, to talk over the manner in which psychiatry will aid my research! I can't say how tickled I am over his attitude." Next letter: "At ten reached Dr. Pierce Bailey's, the big psychiatrist, and for an hour and a half we talked, and I was simply tickled to death. He is really a wonder and I was very enthused. . . . Before leaving he said: 'You come to dinner Friday night here and I will have Dr. Paton from Princeton and I'll get in some more to meet you.' . . . Then I beat it to the 'New Republic' offices, and sat down to dinner with the staff plus Robert Bruère, and the subject became 'What is a labor policy?' The Dad, he did his share, he did, and had a great row with Walter Lippmann and Bruère. Walter Lippmann said: 'This won't do--you have made me doubt a lot of things. You come to lunch with me Friday at the Harvard Club and we'll thrash it all out.' Says I, 'All right!' Then says Croly, 'This won't do; we'll have a dinner here the following Monday night, and I'll get Felix Frankfurter down from Boston, and we'll thrash it out some more!' Says I, 'All right!' And says Mr. Croly, private, 'You come to dinner with us on Sunday!'--'All right,' sez Dad. Dr. Gregory has me with Dr. Solman on Monday, and Harry Overstreet on Wednesday, Thorndike on Saturday, and gee, but I'll beat it for New Haven on Thursday, or I'll die of up-torn brain." Are you realizing what this all meant to my Carl--until recently reading and pegging away unencouraged in his basement study up on the Berkeley hills? The next day he heard Roosevelt at the Ritz-Carton. "Then I watched that remarkable man wind the crowd almost around his finger. It was great, and pure psychology; and say, fool women and some fool men; but T.R. went on blithely as if every one was an intellectual giant." That night a dinner with Winston Churchill. Next letter: "Had a simply superb talk with Hollingworth for two and a half hours this afternoon. . . . The dinner was the four biggest psychiatrists in New York and Dad. Made me simply yell, it did. . . . It was for my book simply superb. All is going so wonderfully." Next day: "Now about the Thorndike dinner: it was grand. . . . I can't tell you how much these talks are maturing my ideas about the book. I think in a different plane and am certain that my ideas are surer. There have come up a lot of odd problems touching the conflict, so-called, between intelligence and instinct, and these I'm getting thrashed out grandly." After the second "New Republic" dinner he wrote: "Lots of important people there . . . Felix Frankfurter, two judges, and the two Goldmarks, Pierce Bailey, etc., and the whole staff. . . . Had been all day with Dr. Gregory and other psychiatrists and had met Police Commissioner Woods . . . a wonderfully rich day. . . . I must run for a date with Professor Robinson and then to meet Howe, the Immigration Commissioner." Then a trip to Ellis Island, and at midnight that same date he wrote: "Just had a most truly remarkable--eight-thirty to twelve--visit with Professor Robinson, he who wrote that European history we bought in Germany." Then a trip to Philadelphia, being dined and entertained by various members of the Wharton School faculty. Then the Yale-Harvard game, followed by three days and two nights in the psychopathic ward at Sing Sing. "I found in the psychiatrist at the prison a true wonder--Dr. Glueck. He has a viewpoint on instincts which differs from any one that I have met." The next day, back in New York: "Just had a most remarkable visit with Thomas Mott Osborne." Later in the same day: "Just had an absolutely grand visit and lunch with Walter Lippmann . . . it was about the best talk with regard to my book that I have had in the East. He is an intellectual wonder and a big, good-looking, friendly boy. I'm for him a million." Then his visit with John Dewey. "I put up to him my regular questions--the main one being the importance of the conflict between MacDougall and the Freudians. . . . He was cordiality itself. I am expecting red-letter days with him. My knowledge of the subject is increasing fast." Then a visit with Irving Fisher at New Haven. The next night "was simply remarkable." Irving Fisher took him to a banquet in New York, in honor of some French dignitaries, with President Wilson present--"at seven dollars a plate!" As to President Wilson, "He was simply great--almost the greatest, in fact is the greatest, speaker I have ever heard." Then a run down to Cambridge, every day crammed to the edges. "Had breakfast with Felix Frankfurter. He has the grand spirit and does so finely appreciate what my subject means. He walked me down to see a friend of his, Laski, intellectually a sort of marvel--knows psychology and philosophy cold--grand talk. Then I called on Professor Gay and he dated me for a dinner to-morrow night. Luncheon given to me by Professor Taussig--that was _fine_. . . . Then I flew to see E.B. Holt for an hour [his second visit there]. Had a grand visit, and then at six was taken with Gay to dinner with the visiting Deans at the Boston Harvard Club." (Mr. Holt wrote: "I met Mr. Parker briefly in the winter of 1916-17, briefly, but so very delightfully! I felt that he was an ally and a brilliant one.") I give these many details because you must appreciate what this new wonder-world meant to a man who was considered nobody much by his own University. Then one day a mere card: "This is honestly a day in which no two minutes of free time exist--so superbly grand has it gone and so fruitful for the book--the best of all yet. One of the biggest men in the United States (Cannon of Harvard) asked me to arrange my thesis to be analyzed by a group of experts in the field." Next day he wrote: "Up at six-forty-five, and at seven-thirty I was at Professor Cannon's. I put my thesis up to him strong and got one of the most encouraging and stimulating receptions I have had. He took me in to meet his wife, and said: 'This young man has stimulated and aroused me greatly. We must get his thesis formally before a group.'" Later, from New York: "From seven-thirty to eleven-thirty I argued with Dr. A.A. Brill, who translated all of Freud!!! and it was simply wonderful. I came home at twelve and wrote up a lot." Later he went to Washington with Walter Lippmann. They ran into Colonel House on the train, and talked foreign relations for two and a half hours. "My hair stood on end at the importance of what he said." From Washington he wrote: "Am having one of the Great Experiences of my young life." Hurried full days in Philadelphia, with a most successful talk before the University of Pennsylvania Political and Social Science Conference ("Successful," was the report to me later of several who were present), and extreme kindness and hospitality from all the Wharton group. He rushed to Baltimore, and at midnight, December 31, he wrote: "I had from eleven-thirty to one P.M. an absolute supergrand talk with Adolph Meyer and John Watson. He is a grand young southerner and simply knows his behavioristic psychology in a way to make one's hair stand up. We talked my plan clear out and they are _enthusiastic_. . . . Things are going _grandly_." Next day: "Just got in from dinner with Adolph Meyer. He is simply a wonder. . . . At nine-thirty I watched Dr. Campbell give a girl Freudian treatment for a suicide mania. She had been a worker in a straw-hat factory and had a true industrial psychosis--the kind I am looking for." Then, later: "There is absolutely no doubt that the trip has been my making. I have learned a lot of background, things, and standards, that will put their stamp on my development." Almost every letter would tell of some one visit which "alone was worth the trip East." Around Christmastime home-longings got extra strong--he wrote five letters in three days. I really wish I could quote some from them--where he said for instance: "My, but it is good for a fellow to be with his family and awful to be away from it." And again: "I want to be interrupted, I do. I'm all for that. I remember how Jim and Nand used to come into my study for a kiss and then go hastily out upon urgent affairs. I'm for that. . . . I've got my own folk and they make the rest of the world thin and pale. The blessedness of babies is beyond words, but the blessedness of a wife is such that one can't start in on it." Then came the Economic-Convention at Columbus--letters too full to begin to quote from them. "I'm simply having the time of my life . . . every one is here." In a talk when he was asked to fill in at the last minute, he presented "two arguments why trade-unions alone could not be depended on to bring desirable change in working conditions through collective bargaining: one, because they were numerically so few in contrast to the number of industrial workers, and, two, because the reforms about to be demanded were technical, medical, and generally of scientific character, and skilled experts employed by the state would be necessary." Back again in New York, he wrote: "It just raises my hair to feel I'm not where a Dad ought to be. My blessed, precious family! I tell you there isn't anything in this world like a wife and babies and I'm for that life that puts me close. I'm near smart enough to last a heap of years. Though when I see how my trip makes me feel alive in my head and enthusiastic, I know it has been worth while. . . ." Along in January he worked his thesis up in writing. "Last night I read my paper to the Robinsons after the dinner and they had Mr. and Mrs. John Dewey there. A most superb and grand discussion followed, the Deweys going home at eleven-thirty and I stayed to talk to one A.M. I slept dreaming wildly of the discussion. . . . Then had an hour and a half with Dewey on certain moot points. That talk was even more superb and resultful to me and I'm just about ready to quit. . . . I need now to write and read." I quote a bit here and there from a paper written in New York in 1917, because, though hurriedly put together and never meant for publication, it describes Carl's newer approach to Economics and especially to the problem of Labor. "In 1914 I was asked to investigate a riot among 2800 migratory hop-pickers in California which had resulted in five deaths, many-fold more wounded, hysteria, fear, and a strange orgy of irresponsible persecution by the county authorities--and, on the side of the laborers, conspiracy, barn-burnings, sabotage, and open revolutionary propaganda. I had been teaching labor-problems for a year, and had studied them in two American universities, under Sidney Webb in London, and in four universities of Germany. I found that I had no fundamentals which could be called good tools with which to begin my analysis of this riot. And I felt myself merely a conventional if astonished onlooker before the theoretically abnormal but manifestly natural emotional activity which swept over California. After what must have been a most usual intellectual cycle of, first, helplessness, then conventional cataloguing, some rationalizing, some moralizing, and an extensive feeling of shallowness and inferiority, I called the job done. "By accident, somewhat later, I was loaned two books of Freud, and I felt after the reading, that I had found a scientific approach which might lead to the discovery of important fundamentals for a study of unrest and violence. Under this stimulation, I read, during a year and a half, general psychology, physiology and anthropology, eugenics, all the special material I could find on Mendelism, works on mental hygiene, feeblemindedness, insanity, evolution of morals and character, and finally found a resting-place in a field which seems to be best designated as Abnormal and Behavioristic Psychology. My quest throughout this experience seemed to be pretty steadily a search for those irreducible fundamentals which I could use in getting a technically decent opinion on that riot. In grand phrases, I was searching for the Scientific Standard of Value to be used in analyzing Human Behavior. "Economics (which officially holds the analysis of labor-problems) has been allowed to devote itself almost entirely to the production of goods, and to neglect entirely the consumption of goods and human organic welfare. The lip-homage given by orthodox economics to the field of consumption seems to be inspired merely by the feeling that disaster might overcome production if workers were starved or business men discouraged. . . . So, while official economic science tinkers at its transient institutions which flourish in one decade and pass out in the next, abnormal and behavioristic psychology, physiology, psychiatry, are building in their laboratories, by induction from human specimens of modern economic life, a standard of human values and an elucidation of behavior fundamentals which alone we must use in our legislative or personal modification of modern civilization. It does not seem an overstatement to say that orthodox economics has cleanly overlooked two of the most important generalizations about human life which can be phrased, and those are,-- "That human life is dynamic, that change, movement, evolution, are its basic characteristics. "That self-expression, and therefore freedom of choice and movement, are prerequisites to a satisfying human state." After giving a description of the instincts he writes:-- "The importance to me of the following description of the innate tendencies or instincts lies in their relation to my main explanation of economic behavior which is,-- "First, that these tendencies are persistent, are far less warped or modified by the environment than we believe; that they function quite as they have for several hundred thousand years; that they, as motives, in their various normal or perverted habit-form, can at times dominate singly the entire behavior, and act as if they were a clear character dominant. "Secondly, that if the environment through any of the conventional instruments of repression, such as religious orthodoxy, university mental discipline, economic inferiority, imprisonment, physical disfigurement,--such as short stature, hare-lip, etc.,--repress the full psychological expression in the field of these tendencies, then a psychic revolt, slipping into abnormal mental functioning, takes place, and society accuses the revolutionist of being either willfully inefficient, alcoholic, a syndicalist, supersensitive, an agnostic, or insane." I hesitate somewhat to give his programme as set forth in this paper. I have already mentioned that it was written in the spring of 1917, and hurriedly. In referring to this very paper in a letter from New York, he said, "Of course it is written in part _to call out_ comments, and so the statements are strong and unmodified." Let that fact, then, be borne in mind, and also the fact that he may have altered his views somewhat in the light of his further studies and readings--although again, such studies may only have strengthened the following ideas. I cannot now trust to my memory for what discussions we may have had on the subject. "Reform means a militant minority, or, to follow Trotter, a small Herd. This little Herd would give council, relief, and recuperation to its members. The members of the Herd will be under merciless fire from the convention-ridden members of general society. They will be branded outlaws, radicals, agnostics, impossible, crazy. They will be lucky to be out of jail most of the time. They will work by trial and study, gaining wisdom by their errors, as Sidney Webb and the Fabians did. In the end, after a long time, parts of the social sham will collapse, as it did in England, and small promises will become milestones of progress. "From where, then, can we gain recruits for this minority? Two real sources seem in existence--the universities and the field of mental-disease speculation and hospital experiment. The one, the universities, with rare if wonderful exceptions, are fairly hopeless; the other is not only rich in promise, but few realize how full in performance. Most of the literature which is gripping that great intellectual no-man's land of the silent readers, is basing its appeal, and its story, on the rather uncolored and bald facts which come from Freud, Trotter, Robinson, Dewey, E.B. Holt, Lippmann, Morton Prince, Pierce, Bailey, Jung, Hart, Overstreet, Thorndike, Campbell, Meyer and Watson, Stanley Hall, Adler, White. It is from this field of comparative or abnormal psychology that the challenge to industrialism and the programme of change will come. "But suppose you ask me to be concrete and give an idea of such a programme. "Take simply the beginning of life, take childhood, for that is where the human material is least protected, most plastic, and where most injury to-day is done. In the way of general suggestion, I would say, exclude children from formal disciplinary life, such as that of all industry and most schools, up to the age of eighteen. After excluding them, what shall we do with them? Ask John Dewey, I suggest, or read his 'Schools of To-morrow,' or 'Democracy and Education.' It means tremendous, unprecedented money expense to ensure an active trial and error-learning activity; a chance naturally to recapitulate the racial trial and error-learning experience; a study and preparation of those periods of life in which fall the ripening of the relatively late maturing instincts; a general realizing that wisdom can come only from experience, and not from the Book. It means psychologically calculated childhood opportunity, in which the now stifled instincts of leadership, workmanship, hero-worship, hunting, migration, meditation, sex, could grow and take their foundation place in the psychic equipment of a biologically promising human being. To illustrate in trivialities, no father, with knowledge of the meaning of the universal bent towards workmanship, would give his son a puzzle if he knew of the Mecano or Erector toys, and no father would give the Mecano if he had grasped the educational potentiality of the gift to his child of $10 worth of lumber and a set of good carpenter's tools. There is now enough loose wisdom around devoted to childhood, its needed liberties and experiences, both to give the children of this civilization their first evolutionary chance, and to send most teachers back to the farm. "In the age-period of 18 to 30 would fall that pseudo-educational monstrosity, the undergraduate university, and the degrading popular activities of 'beginning a business' or 'picking up a trade.' Much money must be spent here. Perhaps few fields of activity have been conventionalized as much as university education. Here, just where a superficial theorist would expect to find enthusiasm, emancipated minds, and hope, is found fear, convention, a mean instinct-life, no spirit of adventure, little curiosity, in general no promise of preparedness. No wonder philosophical idealism flourishes and Darwin is forgotten. "The first two years of University life should be devoted to the Science of Human Behavior. Much of to-day's biology, zoölogy, history, if it is interpretive, psychology, if it is behavioristic, philosophy, if it is pragmatic, literature, if it had been written involuntarily, would find its place here. The last two years could be profitably spent in appraising with that ultimate standard of value gained in the first two years, the various institutions and instruments used by civilized man. All instruction would be objective, scientific, and emancipated from convention--wonderful prospect! "In industrial labor and in business employments a new concept, a new going philosophy must be unreservedly accepted, which has, instead of the ideal of forcing the human beings to mould their habits to assist the continued existence of the inherited order of things, an ideal of moulding all business institutions and ideas of prosperity in the interests of scientific evolutionary aims and large human pleasures. As Pigou has said, 'Environment has its children as well as men.' Monotony in labor, tedium in officework, time spent in business correspondence, the boredom of running a sugar refinery, would be asked to step before the bar of human affairs and get a health standardization. To-day industry produces goods that cost more than they are worth, are consumed by persons who are degraded by the consuming; it is destroying permanently the raw-material source which, science has painfully explained, could be made inexhaustible. Some intellectual revolution must come which will _de_-emphasize business and industry and _re_-emphasize most other ways of self-expression. "In Florence, around 1300, Giotto painted a picture, and the day it was to be hung in St. Mark's, the town closed down for a holiday, and the people, with garlands of flowers and songs, escorted the picture from the artist's studio to the church. Three weeks ago I stood, in company with 500 silent, sallow-faced men, at a corner on Wall Street, a cold and wet corner, till young Morgan issued from J.P. Morgan & Company, and walked 20 feet to his carriage.--We produce, probably, per capita, 1000 times more in weight of ready-made clothing, Irish lace, artificial flowers, terra cotta, movie-films, telephones, and printed matter than those Florentines did, but we have, with our 100,000,000 inhabitants, yet to produce that little town, her Dante, her Andrea del Sarto, her Michael Angelo, her Leonardo da Vinci, her Savonarola, her Giotto, or the group who followed Giotto's picture. Florence had a marvelous energy--re-lease experience. All our industrial formalism, our conventionalized young manhood, our schematized universities, are instruments of balk and thwart, are machines to produce protesting abnormality, to block efficiency. So the problem of industrial labor is one with the problem of the discontented business man, the indifferent student, the unhappy wife, the immoral minister--it is one of maladjustment between a fixed human nature and a carelessly ordered world. The result is suffering, insanity, racial-perversion, and danger. The final cure is gaining acceptance for a new standard of morality; the first step towards this is to break down the mores-inhibitions to free experimental thinking." If only the time had been longer--if only the Book itself could have been finished! For he _had_ a great message. He was writing about a thousand words a day on it the following summer, at Castle Crags, when the War Department called him into mediation work and not another word did he ever find time to add to it. It stands now about one third done. I shall get that third ready for publication, together with some of his shorter articles. There have been many who have offered their services in completing the Book, but the field is so new, Carl's contribution so unique, that few men in the whole country understand the ground enough to be of service. It was not so much to be a book on Labor as on Labor-Psychology--and that is almost an unexplored field. CHAPTER XII Three days after Carl started east, on his arrival in Seattle, President Suzzallo called him to the University of Washington as Head of the Department of Economics and Dean of the College of Business Administration, his work to begin the following autumn. It seemed an ideal opportunity. He wrote: "I am very, very attracted by Suzzallo. . . . He said that I should be allowed to plan the work as I wished and call the men I wished, and could call at least five. I cannot imagine a better man to work with nor a better proposition than the one he put up to me. . . . The job itself will let me teach what I wish and in my own way. I can give Introductory Economics, and Labor, and Industrial Organization, etc." Later, he telegraphed from New York, where he had again seen Suzzallo: "Have accepted Washington's offer. . . . Details of job even more satisfactory than before." So, sandwiched in between all the visits and interviews over the Book, were many excursions about locating new men for the University of Washington. I like to think of what the three Pennsylvania men he wanted had to say about him. Seattle seemed very far away to them--they were doubtful, very. Then they heard the talk before the Conference referred to above, and every one of the three accepted his call. As one of them expressed it to his wife later: "I'd go anywhere for that man." Between that Seattle call and his death there were eight universities, some of them the biggest in the country, which wished Carl Parker to be on their faculties. One smaller university held out the presidency to him. Besides this, there were nine jobs outside of University work that were offered him, from managing a large mine to doing research work in Europe. He had come into his own. It was just before we left Berkeley that the University of California asked Carl to deliver an address, explaining his approach to economics. It was, no doubt, the most difficult talk he ever gave. There under his very nose sat his former colleagues, his fellow members in the Economics Department, and he had to stand up in public and tell them just how inadequate he felt most of their teaching to be. The head of the Department came in a trifle late and left immediately after the lecture. He could hardly have been expected to include himself in the group who gathered later around Carl to express their interest in his stand. I shall quote a bit from this paper to show Carl's ideas on orthodox economics. "This brings one to perhaps the most costly delinquency of modern Economics, and that is its refusal to incorporate into its weighings and appraisals the facts and hypotheses of modern psychology. Nothing in the postulates of the science of Economics is as ludicrous as its catalogue of human wants. Though the practice of ascribing 'faculties' to man has been passed by psychology into deserved discard, Economics still maintains, as basic human qualities, a galaxy of vague and rather spiritual faculties. It matters not that, in the place of the primitive concepts of man stimulated to activity by a single trucking sense, or a free and uninfluenced force called a soul, or a 'desire for financial independence,' psychology has established a human being possessed of more instincts than any animal, and with a psychical nature whose activities fall completely within the causal law. "It would be a great task and a useless one to work through current economic literature and gather the strange and mystical collection of human dispositions which economists have named the springs of human activity. They have no relation to the modern researches into human behavior of psychology or physiology. They have an interesting relation only to the moral attributes postulated in current religion. "But more important and injurious than the caricaturing of wants has been the disappearance from Economics of any treatment or interest in human behavior and the evolution of human character in Economic life. This is explained in large part by the self-divorce of Economics from the biological field; but also in an important way by the exclusion from Economics of considerations of consumption. "Only under the influence of the social and educational psychologists and behaviorists could child-labor, the hobo, unemployment, poverty, and criminality be given their just emphasis; and it seems accurate to ascribe the social sterility of Economic theory and its programme to its ignorance and lack of interest in modern comparative psychology. "A deeper knowledge of human instincts would never have allowed American economists to keep their faith in a simple rise of wages as an all-cure for labor unrest. In England, with a homogeneous labor class, active in politics, maintaining university extension courses, spending their union's income on intricate betterment schemes, and wealthy in tradition--there a rise in wages meant an increase in welfare. But in the United States, with a heterogeneous labor class, bereft of their social norms by the violence of their uprooting from the old world, dropped into an unprepared and chaotic American life, with its insidious prestige--here a rise in wages could and does often mean added ostentation, social climbing, superficial polishing, new vice. This social perversion in the consuming of the wage-increase is without the ken of the economist. He cannot, if he would, think of it, for he has no mental tools, no norms applicable for entrance into the medley of human motives called consumption. "For these many reasons economic thinking has been weak and futile in the problems of conservation, of haphazard invention, of unrestricted advertising, of anti-social production, of the inadequacy of income, of criminality. These are problems within the zone of the intimate life of the population. They are economic problems, and determine efficiencies within the whole economic life. The divorcing for inspection of the field of production from the rest of the machinery of civilization has brought into practice a false method, and the values arrived at have been unhappily half-truths. America to-day is a monument to the truth that growth in wealth becomes significant for national welfare only when it is joined with an efficient and social policy in its consumption. "Economics will only save itself through an alliance with the sciences of human behavior, psychology, and biology, and through a complete emancipation from 'prosperity mores.' . . . The sin of Economics has been the divorce of its work from reality, of announcing an analysis of human activity with the human element left out." One other point remained ever a sore spot with Carl, and that was the American university and its accomplishments. In going over his writings, I find scattered through the manuscripts explosions on the ways, means, and ends, of academic education in our United States. For instance,-- "Consider the paradox of the rigidity of the university student's scheme of study, and the vagaries and whims of the scholarly emotion. Contemplate the forcing of that most delicate of human attributes, _i.e._, interest, to bounce forth at the clang of a gong. To illustrate: the student is confidently expected to lose himself in fine contemplation of Plato's philosophy up to eleven o'clock, and then at 11.07, with no important mental cost, to take up a profitable and scholarly investigation into the banking problems of the United States. He will be allowed by the proper academic committee German Composition at one o'clock, diseases of citrus fruit trees at two, and at three he is asked to exhibit a fine sympathy in the Religions and Customs of the Orient. Between 4.07 and five it is calculated that he can with profit indulge in gymnasium recreation, led by an instructor who counts out loud and waves his arms in time to a mechanical piano. Between five and six, this student, led by a yell-leader, applauds football practice. The growing tendency of American university students to spend their evenings in extravagant relaxation, at the moving pictures, or in unconventional dancing, is said to be willful and an indication of an important moral sag of recent years. It would be interesting also to know if Arkwright, Hargreaves, Watt, or Darwin, Edison, Henry Ford, or the Wrights, or other persons of desirable if unconventional mechanical imagination, were encouraged in their scientific meditation by scholastic experiences of this kind. Every American university has a department of education devoted to establishing the most effective methods of imparting knowledge to human beings." From the same article:-- "The break in the systematization which an irregular and unpredictable thinker brings arouses a persistent if unfocused displeasure. Hence we have the accepted and cultivated institutions, such as our universities, our churches, our clubs, sustaining with care mediocre standards of experimental thought. European critics have long compared the repressed and uninspiring intellect of the American undergraduate with the mobile state of mind of the Russian and German undergraduates which has made their institutions the centre of revolutionary change propaganda. To one who knows in any intimate way the life of the American student, it becomes only an uncomfortable humor to visualize any of his campuses as the origins of social protests. The large industry of American college athletics and its organization-for-victory concept, the tendency to set up an efficient corporation as the proper university model, the extensive and unashamed university advertising, and consequent apprehension of public opinion, the love of size and large registration, that strange psychological abnormality, organized cheering, the curious companionship of state universities and military drill, regular examinations and rigidly prescribed work--all these interesting characteristics are, as is natural in character-formation, both cause and effect. It becomes an easy prophecy within behaviorism to forecast that American universities will continue regular and mediocre in mental activity and reasonably devoid of intellectual bent toward experimental thinking." Perhaps here is where I may quote a letter Carl received just before leaving Berkeley, and his answer to it. This correspondence brings up several points on which Carl at times received criticism, and I should like to give the two sides, each so typical of the point of view it represents. _February 28_, 1917 MY DEAR CARLETON PARKER,-- When we so casually meet it is as distressing as it is amusing to me, to know that the God I intuitively defend presents to you the image of the curled and scented monster of the Assyrian sculpture. He was never that to me, and the visualization of an imaginative child is a remarkable thing. From the first, the word "God," spoken in the comfortable (almost smug) atmosphere of the old Unitarian congregation, took my breath and tranced me into a vision of a great flood of vibrating light, and _only_ light. I wonder if, in your childhood, some frightening picture in some old book was not the thing that you are still fighting against? So that, emancipated as you are, you are still a little afraid, and must perforce--with a remainder of the brave swagger of youth--set up a barrier of authorities to fight behind, and, quite unconsciously, you are thus building yourself into a vault in which no flowers can bloom--because you have sealed the high window of the imagination so that the frightening God may not look in upon you--this same window through which simple men get an illumination that saves their lives, and in the light of which they communicate kindly, one with the other, their faith and hopes? I am impelled to say this to you, first, because of the responsibility which rests upon you in your relation to young minds; and, second, I like you and your eagerness and the zest for Truth that you transmit. You are dedicated to the pursuit of Truth, and you afford us the dramatic incidents of your pursuit. Yet up to this moment it seems to me you are accepting Truth at second-hand. I counted seventeen "authorities" quoted, chapter and verse (and then abandoned the enumeration), in the free talk of the other evening; and asked myself if this reverence of the student for the master, was all that we were ultimately to have of that vivid individual whom we had so counted upon as Carl Parker? I wondered, too, if, in the great opportunity that has come to you, those simple country boys and girls of Washington were to be thus deprived,--were to find not you but your "authorities,"--because Carl Parker refused (even ever so modestly) to learn that Truth, denied the aid of the free imagination, takes revenge upon her disciple, by shutting off from him the sources of life by which a man is made free, and reducing his mind--his rich, variable, potential mind--to the mechanical operation of a repetitious machine. I feel this danger for you, and for the youths you are to educate, so poignantly that I venture to write with this frankness. Your present imprisonment is not necessarily a life sentence; but your satisfaction in it--your acceptance of the routine of your treadmill--is chilling to the hopes of those who have waited upon your progress; and it imperils your future--as well as that hope we have in the humanities that are to be implanted in the minds of the young people you are to instruct. We would not have you remain under the misapprehension that Truth alone can ever serve humanity--Truth remains sterile until it is married to Goodness. That marriage is consummated in the high flight of the imagination, and its progeny is of beauty. _You_ need beauty--you need verse and color and music--you need all the escapes--all the doors wide open--and this seemingly impertinent letter is merely the appeal of one human creature to another, for the sake of all the human creatures whom you have it in your power to endow with chains or with wings. Very sincerely yours, BRUCE PORTER. MY DEAR BRUCE PORTER,-- My present impatient attitude towards a mystic being without doubt has been influenced by some impression of my childhood, but not the terror-bringing creatures you suggest. My family was one of the last three which clung to a dying church in my country town. I, though a boy of twelve, passed the plate for two years while the minister's daughter sang a solo. Our village was not a happy one, and the incongruity of our emotional prayers and ecstasies of imagery, and the drifting dullness and meanness of the life outside, filtered in some way into my boy mind. I saw that suffering was real and pressing, and so many suffered resignedly; and that imagery and my companionship with a God (I was highly "religious" then) worked in a self-centred circle. I never strayed from the deadly taint of some gentle form of egotism. I was then truly in a "vault." I did things for a system of ethics, not because of a fine rush of social brotherly intuition. My imagination was ever concerned with me and my prospects, my salvation. I honestly and soberly believe that your "high window of the imagination" works out in our world as such a force for egotism; it is a self-captivating thing, it divorces man from the plain and bitter realities of life, it brings an anti-social emancipation to him. I can sincerely make this terrible charge against the modern world, and that is, that it is its bent towards mysticism, its blinding itself through hysteria, which makes possible in its civilization its desperate inequalities of life-expression, its tortured children, its unhappy men and women, its wasted potentiality. We have not been humble and asked what is man; we have not allowed ourselves to weigh sorrow. It is in such a use that our powers of imagination could be brotherly. We look on high in ecstasy, and fail to be on flame because 'of the suffering of those whose wounds are bare to our eyes on the street. And that brings me to my concept of a God. God exists in us because of our bundle of social brother-acts. Contemplation and crying out and assertions of belief are in the main notices that we are substituting something for acts. Our God should be a thing discovered only in retrospect. We live, we fight, we know others, and, as Overstreet says, our God sins and fights at our shoulder. He may be a mean God or a fine one. He is limited in his stature by our service. I fear your God, because I think he is a product of the unreal and unhelpful, that he has a "bad psychological past," that he is subtly egotistical, that he fills the vision and leaves no room for the simple and patient deeds of brotherhood, a heavenly contemplation taking the place of earthly deeds. You feel that I quote too many minds and am hobbled by it. I delight just now in the companionship of men through their books. I am devoted to knowing the facts of the lives of other humans and the train of thought which their experiences have started. To lead them is like talking to them. I suspect, even dread, the "original thinker" who knows little of the experiments and failures of the thinkers of other places and times. To me such a stand denies that promising thing, the evolution of human thought. I also turn from those who borrow, but neglect to tell their sources. I want my "simple boys and girls of Washington" to know that to-day is a day of honest science; that events have antecedents; that "luck" does not exist; that the world will improve only through thoughtful social effort, and that lives are happy only in that effort. And with it all there will be time for beauty and verse and color and music--far be it from me to shut these out of my own life or the lives of others. But they are instruments, not attributes. I am very glad you wrote. Sincerely yours, Carleton H. Parker. CHAPTER XIII In May we sold our loved hill nest in Berkeley and started north, stopping for a three months' vacation--our first real vacation since we had been married--at Castle Crags, where, almost ten years before, we had spent the first five days of our honeymoon, before going into Southern Oregon. There, in a log-cabin among the pines, we passed unbelievably cherished days--work a-plenty, play a-plenty, and the family together day in, day out. There was one little extra trip he got in with the two sons, for which I am so thankful. The three of them went off with their sleeping-bags and rods for two days, leaving "the girls" behind. Each son caught his first trout with a fly. They put the fish, cleaned, in a cool sheltered spot, because they had to be carried home for me to see; and lo! a little bear came down in the night and ate the fish, in addition to licking the fat all off the frying-pan. Then, like a bolt from the blue, came the fateful telegram from Washington, D.C.--labor difficulties in construction-work at Camp Lewis--would he report there at once as Government Mediator. Oh! the Book, the Book--the Book that was to be finished without fail before the new work at the University of Washington began! Perhaps he would be back in a week! Surely he would be back in a week! So he packed just enough for a week, and off he went. One week! When, after four weeks, there was still no let up in his mediation duties,--in fact they increased,--I packed up the family and we left for Seattle. I had rewound his fishing-rod with orange silk, and had revarnished it, as a surprise for his home-coming to Castle Crags. He never fished with it again. How that man loved fishing! How he loved every sport, for that matter. And he loved them with the same thoroughness and allegiance that he gave to any cause near his heart. Baseball--he played on his high-school team (also he could recite "Casey at the Bat" with a gusto that many a friend of the earlier days will remember. And here I am reminded of his "Christopher Columnibus." I recently ran across a postcard a college mate sent Carl from Italy years ago, with a picture of a statue of Columbus on it. On the reverse side the friend had written, quoting from Carl's monologue: "'Boom Joe!' says the king; which is being interpreted, 'I see you first.' 'Wheat cakes,' says Chris, which is the Egyptian for 'Boom Joe'"). He loved football, track,--he won three gold medals broad-jumping,--canoeing, swimming, billiards,--he won a loving cup at that, tennis, ice-skating, hand-ball; and yes, ye of finer calibre, quiver if you will--he loved a prize-fight and played a mighty good game of poker, as well as bridge--though in the ten and a half years that we were married I cannot remember that he played poker once or bridge more than five times. He did, however, enjoy his bridge with Simon Patton in Philadelphia; and when he played, he played well. I tell you there was hardly anything the man could not do. He could draw the funniest pictures you ever saw--I wish I could reproduce the letters he sent his sons from the East. He was a good carpenter--the joy it meant to his soul to add a second-hand tool ever so often to his collection! Sunday morning was special carpenter-time--new shelves here, a bookcase there, new steps up to the swimming-tank, etc. I have heard many a man say that he told a story better than any one they ever heard. He was an expert woodsman. And, my gracious! how he did love babies! That hardly fits in just here, but I think of it now. His love for children colored his whole economic viewpoint. "There is the thing that possessed Parker--the perception of the destructive significance of the repressed and balked instincts of the migratory worker, the unskilled, the casuals, the hoboes, the womanless, jobless, voteless men. To him their tragedy was akin to the tragedy of child-life in our commercialized cities. More often than of anything else, he used to talk to me of the fatuous blindness of a civilization that centred its economic activities in places where child-life was perpetually repressed and imperiled. The last time I saw him he was flaming indignation at the ghastly record of children killed and maimed by trucks and automobiles. What business had automobiles where children should be free to play? What could be said for the human wisdom of a civilization that placed traffic above child-life? In our denial to children, to millions of men and women, of the means for satisfying their instinctive desires and innate dispositions, he saw the principal explanation of crime, labor-unrest, the violence of strikes, the ghastly violence of war[1]." [Footnote 1: Robert Bruère, in the _New Republic_, May 18, 1918.] He could never pass any youngster anywhere without a word of greeting as from friend to friend. I remember being in a crowded car with him in our engaged days. He was sitting next to a woman with a baby who was most unhappy over the ways of the world. Carl asked if he could not hold the squaller. The mother looked a bit doubtful, but relinquished her child. Within two minutes the babe was content on Carl's knees, clutching one of his fingers in a fat fist and sucking his watch. The woman leaned over to me later, as she was about to depart with a very sound asleep offspring. "Is he as lovely as that to his own?" The tenderness of him over his own! Any hour of the day or night he was alert to be of any service in any trouble, big or little. He had a collection of tricks and stories on hand for any youngster who happened along. The special pet of our own boys was "The Submarine Obo Bird"--a large flapper (Dad's arms fairly rent the air), which was especially active early in the morning, when small boys appeared to prefer staying in bed to getting up. The Obo Bird went "Pak! Pak!" and lit on numerous objects about the sleeping porch. Carl's two hands would plump stiff, fingers down, on the railing, or on a small screw sticking out somewhere. Scratches. Then "Pak!" and more flaps. This time the Obo Bird would light a trifle nearer the small boy whose "turn" it was--round eyes, and an agitated grin from ear to ear, plus explosive giggles and gurglings emerging from the covers. Nearer and nearer came the Obo Bird. Gigglier and gigglier got the small boy. Finally, with a spring and a last "Pak! Pak! Pak!" the Obo Bird dove under the covers at the side of the bed and pinched the small boy who would not get up. (Rather a premium on not rising promptly was the Obo Bird.) Final ecstatic squeals from the pinched. Then, "Now it's my turn, daddo!" from the other son.--The Submarine Obo Bird lived in Alaska and ate Spooka biscuits. There was just developing a wee Obo Bird, that made less vehement "paks!" and pinched less agitatedly--a special June-Bug Obo Bird. In fact, the baby was not more than three months old when the boys demanded a Submarine Obo Bird that ate little Spooka biscuits for sister. * * * * * His trip to Camp Lewis threw him at once into the midst of the lumber difficulties of the Northwest, which lasted for months. The big strike in the lumber industry was on when he arrived. He wrote: "It is a strike to better conditions. The I.W.W. are only the display feature. The main body of opinion is from a lot of unskilled workers who are sick of the filthy bunk-houses and rotten grub." He wrote later of a conference with the big lumbermen, and of how they would not stay on the point but "roared over the I.W.W. I told them that condemnation was not a solution, or businesslike, but what we wanted was a statement of how they were to open their plants. More roars. More demands for troops, etc. I said I was a college man, not used to business; but if business men had as much trouble as this keeping to the real points involved, give me a faculty analysis. They laughed over this and got down to business, and in an hour lined up the affair in mighty good shape." I wish it were proper to go into the details here of the various conferences, the telegrams sent to Washington, the replies. Carl wrote: "I am saving all the copies for you, as it is most interesting history." Each letter would end: "By three days at least I should start back. I am getting frantic to be home." Home, for the Parkers, was always where we happened to be then. Castle Crags was as much "home" as any place had ever been. We had moved fourteen times in ten years: of the eleven Christmases we had had together, only two had been in the same place. There were times when "home" was a Pullman car. It made no difference. One of the strange new feelings I have to get used to is the way I now look at places to live in. It used to be that Carl and I, in passing the littlest bit of a hovel, would say, "We could be perfectly happy in a place like that, couldn't we? Nothing makes any difference if we are together." But certain kinds of what we called "cuddly" houses used to make us catch our breaths, to think of the extra joy it would be living together tucked away in there. Now, when I pass a place that looks like that, I have to drop down some kind of a trap-door in my brain, and not think at all until I get well by it. Labor conditions in the Northwest grew worse, strikes more general, and finally Carl wrote that he just must be indefinitely on the job. "I am so home-sick for you that I feel like packing up and coming. I literally feel terribly. But with all this feeling I don't see how I can. Not only have I been telegraphed to stay on the job, but the situation is growing steadily worse. Last night my proposal (eight-hour day, non-partisan complaint and adjustment board, suppression of violence by the state) was turned down by the operators in Tacoma. President Suzzallo and I fought for six hours but it went down. The whole situation is drifting into a state of incipient sympathetic strikes." Later: "This is the most bull-headed affair and I don't think it is going to get anywhere." Still later: "Things are not going wonderfully in our mediation. Employers demanding everything and men granting much but not that." Again: "Each day brings a new crisis. Gee, labor is unrestful . . . and gee, the pigheadedness of bosses! Human nature is sure one hundred per cent psychology." Also he wrote, referring to the general situation at the University and in the community: "Am getting absolutely crazy with enthusiasm over my job here. . . . It is too vigorous and resultful for words." And again: "The mediation between employers and men blew up to-day at 4 P.M. and now a host of nice new strikes show on the horizon. . . . There are a lot of fine operators but some hard shells." Again: "Gee, I'm learning! And talk about material for the Book!" An article appeared in one of the New York papers recently, entitled "How Carleton H. Parker Settled Strikes":-- "It was under his leadership that, in less than a year, twenty-seven disputes which concerned Government work in the Pacific Northwest were settled, and it was his method to lay the basis for permanent relief as he went along. . . . "Parker's contribution was in the method he used. . . . Labor leaders of all sorts would flock to him in a bitter, weltering mass, mouthing the set phrases of class-hatred they use so effectually in stirring up trouble. They would state their case. And Parker would quietly deduce the irritation points that seemed to stand out in the jumbled testimony. "Then it would be almost laughable to the observer to hear the employer's side of the case. Invariably it was just as bitter, just as unreasoning, and just as violent, as the statement of their case by the workers. Parker would endeavor to find, in all this heap of words, the irritation points of the other side. "But when a study was finished, his diagnosis made, and his prescription of treatment completed, Parker always insisted in carrying it straight to the workers. And he did not just tell them results. He often took several hours, sometimes several meetings of several hours each. In these meetings he would go over every detail of his method, from start to finish, explaining, answering questions, meeting objections with reason. And he always won them over. But, of course, it must be said that he had a tremendously compelling personality that carried him far." CHAPTER XIV At the end of August the little family was united again in Seattle. Almost the clearest picture of Carl I have is the eager look with which he scanned the people stepping out of our car at the station, and the beam that lit up his face as he spied us. There is a line in Dorothy Canfield's "Bent Twig" that always appealed to us. The mother and father were separated for a few days, to the utter anguish of the father especially, and he remarked, "It's Hell to be happily married!" Every time we were ever separated we felt just that. In one of Carl's letters from Seattle he had written: "The 'Atlantic Monthly' wants me to write an article on the I.W.W.!!" So the first piece of work he had to do after we got settled was that. We were tremendously excited, and never got over chuckling at some of the moss-grown people we knew about the country who would feel outraged at the "Atlantic Monthly" stooping to print stuff by that young radical. And on such a subject! How we tore at the end, to get the article off on time! The stenographer from the University came about two one Sunday afternoon. I sat on the floor up in the guest-room and read the manuscript to her while she typed it off. Carl would rush down more copy from his study on the third floor. I'd go over it while Miss Van Doren went over what she had typed. Then the reading would begin again. We hated to stop for supper, all three of us were so excited to get the job done. It _had_ to be at the main post-office that night by eleven, to arrive in Boston when promised. At ten-thirty it was in the envelope, three limp people tore for the car, we put Miss Van Doren on,--she was to mail the article on her way home,--and Carl and I, knowing this was an occasion for a treat if ever there was one, routed out a sleepy drug-store clerk and ate the remains of his Sunday ice-cream supply. I can never express how grateful I am that that article was written and published before Carl died. The influence of it ramified in many and the most unexpected directions. I am still hearing of it. We expected condemnation at the time. There probably was plenty of it, but only one condemner wrote. On the other hand, letters streamed in by the score from friends and strangers bearing the general message, "God bless you for it!" That article is particularly significant as showing his method of approach to the whole problem of the I.W.W., after some two years of psychological study. "The futility of much conventional American social analysis is due to its description of the given problem in terms of its relationship to some relatively unimportant or artificial institution. Few of the current analyses of strikes or labor violence make use of the basic standards of human desire and intention which control these phenomena. A strike and its demands are usually praised as being law-abiding, or economically bearable, or are condemned as being unlawful, or confiscatory. These four attributes of a strike are important only as incidental consequences. The habit of Americans thus to measure up social problems to the current, temporary, and more or less accidental scheme of traditions and legal institutions, long ago gave birth to our national belief that passing a new law or forcing obedience to an old one was a specific for any unrest. The current analysis of the I.W.W. and its activities is an example of this perverted and unscientific method. The I.W.W. analysis, which has given both satisfaction and a basis for treating the organization, runs as follows: the organization is unlawful in its activity, un-American in its sabotage, unpatriotic in its relation to the flag, the government, and the war. The rest of the condemnation is a play upon these three attributes. So proper and so sufficient has this condemnatory analysis become, that it is a risky matter to approach the problem from another angle. But it is now so obvious that our internal affairs are out of gear, that any comprehensive scheme of national preparedness would demand that full and honest consideration be given to all forces determining the degree of American unity, one force being this tabooed organization. "It would be best to announce here a more or less dogmatic hypothesis to which the writer will steadfastly adhere: that human behavior results from the rather simple, arithmetical combination of the inherited nature of man and the environment in which his maturing years are passed! Man will behave according to the hints for conduct which the accidents of his life have stamped into his memory mechanism. A slum produces a mind which has only slum incidents with which to work, and a spoiled and protected child seldom rises to aggressive competitive behavior, simply because its past life has stored up no memory imprints from which a predisposition to vigorous life can be built. The particular things called the moral attributes of man's conduct are conventionally found by contrasting this educated and trained way of acting with the exigencies and social needs or dangers of the time. Hence, while his immoral or unpatriotic behavior may fully justify his government in imprisoning or eliminating him when it stands in some particular danger which his conduct intensifies, this punishment in no way either explains his character or points to an enduring solution of his problem. Suppression, while very often justified and necessary in the flux of human relationship, always carries a social cost which must be liquidated, and also a backfire danger which must be insured against. The human being is born with no innate proclivity to crime or special kind of unpatriotism. Crime and treason are habit-activities, educated into man by environmental influences favorable to their development. . . . "The I.W.W. can be profitably viewed only as a psychological by-product of the neglected childhood of industrial America. It is discouraging to see the problem to-day examined almost exclusively from the point of view of its relation to patriotism and conventional ventional commercial morality. . . . "It is perhaps of value to quote the language of the most influential of the I.W.W. leaders. "'You ask me why the I.W.W. is not patriotic to the United States. If you were a bum without a blanket; if you left your wife and kids when you went West for a job, and had never located them since; if your job never kept you long enough in a place to qualify you to vote; if you slept in a lousy, sour bunk-house, and ate food just as rotten as they could give you and get by with it; if deputy sheriffs shot your cooking-cans full of holes and spilled your grub on the ground; if your wages were lowered on you when the bosses thought they had you down; if there was one law for Ford, Suhr, and Mooney, and another for Harry Thaw; if every person who represented law and order and the nation beat you up, railroaded you to jail, and the good Christian people cheered and told them to go to it, how in hell do you expect a man to be patriotic? This war is a business man's war and we don't see why we should go out and get shot in order to save the lovely state of affairs that we now enjoy.' "The argument was rather difficult to keep productive, because gratitude--that material prerequisite to patriotism--seemed wanting in their attitude toward the American government. Their state of mind could be explained only by referring it, as was earlier suggested, to its major relationships. The dominating concern of the I.W.W. is what Keller calls the maintenance problem. Their philosophy is, in its simple reduction, a stomach-philosophy, and their politico-industrial revolt could be called without injustice a hunger-riot. But there is an important correction to this simple statement. While their way of living has seriously encroached on the urgent minima of nutrition, shelter, clothing, and physical health, it has also long outraged the American laboring-class traditions touching social life, sex-life, self-dignity, and ostentation. Had the food and shelter been sufficient, the revolt tendencies might have simmered out, were the migratory labor population not keenly sensitive to traditions of a richer psychological life than mere physical maintenance." The temper of the country on this subject, the general closed attitude of mind which the average man holds thereon, prompt me to add here a few more of Carl's generalizations and conclusions in this article. If only he were here, to cry aloud again and yet again on this point! Yet I know there are those who sense his approach, and are endeavoring in every way possible to make wisdom prevail over prejudice. "Cynical disloyalty and contempt of the flag must, in the light of modern psychology, come from a mind which is devoid of national gratitude, and in which the United States stirs no memory of satisfaction or happiness. To those of us who normally feel loyal to the nation, such a disloyal sentiment brings sharp indignation. As an index of our own sentiment and our own happy relations to the nation, this indignation has value. As a stimulus to a programme or ethical generalization, it is the cause of vast inaccuracy and sad injustice. American syndicalism is not a scheming group dominated by an unconventional and destructive social philosophy. It is merely a commonplace attitude--not such a state of mind as Machiavelli or Robespierre possessed, but one stamped by the lowest, most miserable labor-conditions and outlook which American industrialism produces. To those who have seen at first-hand the life of the western casual laborer, any reflections on his gratitude or spiritual buoyancy seem ironical humor. "An altogether unwarranted importance has been given to the syndicalist philosophy of the I.W.W. A few leaders use its phraseology. Of these few, not half a dozen know the meaning of French syndicalism or English guild socialism. To the great wandering rank and file, the I.W.W. is simply the only social break in the harsh search for work that they have ever had; its headquarters the only competitor of the saloon in which they are welcome. . . . "It is a conventional economic truism that American industrialism is guaranteeing to some half of the forty millions of our industrial population a life of such limited happiness, of such restrictions on personal development, and of such misery and desolation when sickness or accident comes, that we should be childish political scientists not to see that from such an environment little self-sacrificing love of country, little of ethics, little of gratitude could come. It is unfortunate that the scientific findings of our social condition must use words which sound strangely like the phraseology of the Socialists. This similarity, however, should logically be embarrassing to the critics of these findings, not to the scientists. Those who have investigated and studied the lower strata of American labor have long recognized the I.W.W. as purely a symptom of a certain distressing state of affairs. The casual migratory laborers are the finished product of an economic environment which seems cruelly efficient in turning out human beings modeled after all the standards which society abhors. The history of the migratory workers shows that, starting with the long hours and dreary winters on the farms they ran away from, or the sour-smelling bunk-house in a coal village, through their character-debasing experience with the drifting 'hire and fire' life in the industries, on to the vicious social and economic life of the winter unemployed, their training predetermined but one outcome, and the environment produced its type. "The I.W.W. has importance only as an illustration of a stable American economic process. Its pitiful syndicalism, its street-corner opposition to the war, are the inconsequential trimmings. Its strike alone, faithful as it is to the American type, is an illuminating thing. The I.W.W., like the Grangers, the Knights of Labor, the Farmers' Alliance, the Progressive Party, is but a phenomenon of revolt. The cure lies in taking care of its psychic antecedents; the stability of our Republic depends on the degree of courage and wisdom with which we move to the task." In this same connection I quote from another article:-- "No one doubts the full propriety of the government's suppressing ruthlessly any interference of the I.W.W. with war-preparation. All patriots should just as vehemently protest against all suppression of the normal protest activities of the I.W.W. There will be neither permanent peace nor prosperity in our country till the revolt basis of the I.W.W. is removed. And until that is done, the I.W.W. remains an unfortunate, valuable symptom of a diseased industrialism." * * * * * I watch, along with many others, the growth of bitterness and hysteria in the treatment of labor spreading throughout our country, and I long, with many others, for Carl, with his depth and sanity of understanding, coupled with his passion for justice and democracy, to be somewhere in a position of guidance for these troublous times. I am reminded here of a little incident that took place just at this time. An I.W.W. was to come out to have dinner with us--some other friends, faculty people, also were to be there. About noon the telephone rang. Carl went. A rich Irish brogue announced: "R---- can't come to your party to-night." "Why is that?" "He's pinched. An' he wants t' know can he have your Kant's 'Critique of Pure Reason' to read while he's in jail." CHAPTER XV I am forever grateful that Carl had his experience at the University of Washington before he died. He left the University of California a young Assistant Professor, just one rebellious morsel in a huge machine. He found himself in Washington, not only Head of the Department of Economics and Dean of the College of Commerce, and a power on the campus, but a power in the community as well. He was working under a President who backed him in everything to the last ditch, who was keenly interested in every ambition he had for making a big thing of his work. He at last could see Introductory Economics given as he wanted to have it given--realizing at the same time that his plans were in the nature of an experiment. The two textbooks used in the first semester were McDougall's "Social Psychology" and Wallas's "Great Society." During part of the time he pinned the front page of the morning paper on the board, and illustrated his subject-matter by an item of news of that very day. His theory of education was that the first step in any subject was to awaken a keen interest and curiosity in the student; for that reason he felt that pure theory in Economics was too difficult for any but seniors or graduates; that, given too soon, it tended only to discourage. He allowed no note-taking in any of his courses, insisted on discussion by the class, no matter how large it was, planned to do away with written examinations as a test of scholarship, substituting instead a short oral discussion with each student individually, grading them "passed" and "not passed." As it was, because of the pressure of Government work, he had to resort to written tests. The proportion of first sections in the final examination, which was difficult, was so large that Carl was sure the reader must have marked too leniently, and looked over the papers himself. His results were the same as the reader's, and, he felt, could justifiably be used as some proof of his theory that, if a student is interested in the subject, you cannot keep him from doing good work. I quote here from two letters written by Washington students who had been under his influence but five months. "May I, as only a student, add my inadequate sympathy for the loss of Dr. Parker--the most liberal man I have known. While his going from my educative life can be nothing as compared to his loss from a very beautiful family group, yet the enthusiasm, the radiance of his personality--freely given in his classes during the semester I was privileged to know him--made possible to me a greater realization of the fascination of humanity than I obtained during my previous four years of college study. I still look for him to enter the classroom, nor shall I soon forget his ideals, his faith in humanity." From the second letter: "To have known Mr. Parker as well as I did makes me feel that I was indeed privileged, and I shall always carry with me the charm and inspiration of his glorious personality. The campus was never so sad as on the day which brought the news of his death--it seemed almost incredible that one man in five short months could have left so indelible an impress of his character on the student body." Besides being of real influence on the campus, he had the respect and confidence of the business world, both labor and capital; and in addition, he stood as the representative of the Government in labor-adjustments and disputes. And--it was of lesser consequence, but oh it _did_ matter--_we had money enough to live on!!_ We had made ourselves honestly think that we had just about everything we wanted on what we got, plus outside lectures, in California. But once we had tasted of the new-found freedom of truly enough; once there was gone forever the stirring around to pick up a few extra dollars here and there to make both ends meet; once we knew for the first time the satisfaction and added joy that come from some responsible person to help with the housework--we felt that we were soaring through life with our feet hardly touching the ground. Instead of my spending most of the day in the kitchen and riding herd on the young, we had our dropped-straight-from-heaven Mrs. Willard. And see what that meant. Every morning at nine I left the house with Carl, and we walked together to the University. As I think of those daily walks now, arm-in-arm, rain or shine, I'd not give up the memory of them for all creation. Carl would go over what he was to talk about that morning in Introductory Economics (how it would have raised the hair of the orthodox Econ. I teacher!), and of course we always talked some of what marvelous children we possessed. Carl would begin: "Tell me some more about the June-Bug!" He would go to his nine o'clock, I to mine. After my ten-o'clock class, and on the way to my eleven-o'clock lecture, I always ran in to his office a second, to gossip over what mail he had got that morning and how things were going generally. Then, at twelve, in his office again. "Look at this telegram that just came in." "How shall I answer Mr. ----'s about that job?" And then home together; not once a week, but _every day_. Afternoons, except the three afternoons when I played hockey, I was at home; but always there was a possibility that Carl would ring up about five. "I am at a meeting down-town. Can't get things settled, so we continue this evening. Run down and have supper with me, and perhaps, who knows, a Bill Hart film might be around town!" There was Mrs. Willard who knew just what to do, and off I could fly to see my husband. You can't, on $1700 a year. I hear people nowadays scold and roar over the pay the working classes are getting, and how they are spending it all on nonsense and not saving a cent. I stand it as long as I can and then I burst out. For I, too, have tasted the joy of at last being able to get things we never thought we would own and of feeling the wings of financial freedom feather out where, before, all had been cold calculation: Can we do this? if so, what must we give up? I wish every one on earth could feel it. I do not care if they do not save a cent. Only I do wish my Carl could have experienced those joys a little longer. It was so good--so good, while it lasted! And it was only just starting. Every new call he got to another university was at a salary from one to two thousand dollars more than what we were getting, even at Seattle. It looked as if our days of financial scrimping were gone forever. We even discussed a Ford! nay--even a four-cylinder Buick! And every other Sunday we had fricasseed chicken, and always, always a frosting on the cake. For the first two months in Seattle we felt as if we ought to have company at every meal. It did not seem right to sit down to food as good as that, with just the family present. And it was such fun to bring home unexpected guests, and to know that Mrs. Willard could concoct a dream of a dish while the guests were removing their hats; and I not having to miss any of the conversation from being in the kitchen. Every other Sunday night we had the whole Department and their wives to Sunday supper--sixteen of them. Oh dear, oh dear, money does make a difference. We grew more determined than ever to see that more folk in the world got more of it. And yet, in a sense, Carl was a typical professor in his unconcern over matters financial. He started in the first month we were married by turning over every cent to me as a matter of course; and from the beginning of each month to the end, he never had the remotest idea how much money we possessed or what it was spent for. So far as his peace of mind went, on the whole, he was a capitalist. He knew we needed more money than he was making at the University of California, therefore he made all he could on the outside, and came home and dumped it in my lap. From one year's end to the next, he spent hardly five cents on himself--a new suit now and then, a new hat, new shirts at a sale, but never a penny that was not essential. On the rest of us--there he needed a curbing hand! I discovered him negotiating to buy me a set of jade when he was getting one hundred dollars a month. He would bring home a box of peaches or a tray of berries, when they were first in the market and eaten only by bank presidents and railway magnates, and beam and say, "Guess what surprise I have for you!" Nothing hurt his feelings more than to have him suggest I should buy something for myself, and have me answer that we could not afford it. "Then I'll dig sewers on the side!" he would exclaim. "You buy it, and I'll find the money for it somewhere." If he had turned off at an angle of fifty degrees when he first started his earthly career, he would have been a star example of the individual who presses the palms of his hands together and murmurs, "The Lord will provide!" I never knew a man who was so far removed from the traditional ideas of the proper position of the male head of a household. He felt, as I have said, that he was not the one to have control over finances--that was the wife's province. Then he had another attitude which certainly did not jibe with the Lord-of-the-Manor idea. Perhaps there would be something I wanted to do, and I would wait to ask him about it when he got home. Invariably the same thing would happen. He would take my two hands and put them so that I held his coat-lapels. Then he would place his hands on my shoulders, beam all over, eyes twinkling, and say:-- "Who's boss of this household, anyway?" And I _had_ to answer, "I am." "Who gets her own way one hundred per cent?" "I do." "Who never gets his own way and never wants to get his own way?" "You." "Well, then, you know perfectly well you are to do anything in this world you want to do." With a chuckle he would add, "Think of it--not a look-in in my own home!" * * * * * Seattle, as I look back on it, meant the unexpected--in every way. Our little sprees together were not the planned-out ones of former years. From the day Carl left Castle Crags, his time was never his own; we could never count on anything from one day to the next--a strike here, an arbitration there, government orders for this, some investigation needed for that. It was harassing, it was wearying. But always every few days there would be that telephone ring which I grew both to dread and to love. For as often as it said, "I've got to go to Tacoma," it also said, "You Girl, put on your hat and coat this minute and come down town while I have a few minutes off--we'll have supper together anyhow." And the feeling of the courting days never left us--that almost sharp joy of being together again when we just locked arms for a block and said almost nothing--nothing to repeat. And the good-bye that always meant a wrench, always, though it might mean being together within a few hours. And always the waving from the one on the back of the car to the one standing on the corner. Nothing, nothing, ever got tame. After ten years, if Carl ever found himself a little early to catch the train for Tacoma, say, though he had said good-bye but a half an hour before and was to be back that evening, he would find a telephone-booth and ring up to say, perhaps, that he was glad he had married me! Mrs. Willard once said that after hearing Carl or me talk to the other over the telephone, it made other husbands and wives when they telephoned sound as if they must be contemplating divorce. But telephoning was an event: it was a little extra present from Providence, as it were. And I think of two times when we met accidentally on the street in Seattle--it seemed something we could hardly believe: all the world--the war, commerce, industry--stopped while we tried to realize what had happened. Then, every night that he had to be out,--and he had to be out night after night in Seattle,--I would hear his footstep coming down the street; it would wake me, though he wore rubber heels. He would fix the catch on the front-door lock, then come upstairs, calling out softly, "You awake?" He always knew I was. Then, sitting on the edge of the bed, he would tell all the happenings since I had seen him last. Once in a while he'd sigh and say, "A little ranch up on the Clearwater would go pretty well about now, wouldn't it, my girl?" And I would sigh, and say, "Oh dear, wouldn't it?" I remember once, when we were first married, he got home one afternoon before I did. When I opened the door to our little Seattle apartment, there he was, walking the floor, looking as if the bottom had dropped out of the universe. "I've had the most awful twenty minutes," he informed me, "simply terrible. Promise me absolutely that never, never will you let me get home before you do. To expect to find you home and then open the door into empty rooms--oh, I never lived through such a twenty minutes!" We had a lark's whistle that we had used since before our engaged days. Carl would whistle it under my window at the Theta house in college, and I would run down and out the side door, to the utter disgust of my well-bred "sisters," who arranged to make cutting remarks at the table about it in the hope that I would reform my "servant-girl tactics." That whistle was whistled through those early Seattle days, through Oakland, through Cambridge, Leipzig, Berlin, Heidelberg, Munich, Swanage, Berkeley, Alamo in the country, Berkeley again (he would start it way down the hill so I could surely hear), Castle Crags, and Seattle. Wherever any of us were in the house, it meant a dash for all to the front door--to welcome the Dad home. One evening I was scanning some article on marriage by the fire in Seattle--it was one of those rare times that Carl too was at home and going over lectures for the next day. It held that, to be successful, marriage had to be an adjustment--a giving in here by the man, there by the woman. I said to Carl: "If that is true, you must have been doing all the adjusting; I never have had to give up, or fit in, or relinquish one little thing, so you've been doing it all." He thought for a moment, then answered: "You know, I've heard that too, and wondered about it. For I know I've given up nothing, made no 'adjustments.' On the contrary, I seem always to have been getting more than a human being had any right to count on." It was that way, even to the merest details, such as both liking identically the same things to eat, seasoned the identical way. We both liked to do the identical things, without a single exception. Perhaps one exception--he had a fondness in his heart for firearms that I could not share. (The gleam in his eyes when he got out his collection every so often to clean and oil it!) I liked guns, provided I did not have to shoot at anything alive with them; but pistols I just plain did not like at all. We rarely could pass one of these shooting-galleries without trying our luck at five cents for so many turns--at clay pigeons or rabbits whirling around on whatnots; but that was as wild as I ever wanted to get with a gun. We liked the same friends without exception, the same books, the same pictures, the same music. He wrote once: "We (the two of us) love each other, like to do things together (absolutely anything), don't need or want anybody else, and the world is ours." Mrs. Willard once told me that if she had read about our life together in a book, she would not have believed it. She did not know that any one on earth could live like that. Perhaps that is one reason why I want to tell about it--because it was just so plain wonderful day in, day out. I feel, too, that I have a complete record of our life. For fourteen years, every day that we were not together we wrote to each other, with the exception of two short camping-trips that Carl made, where mail could be sent out only by chance returning campers. Somehow I find myself thinking here of our wedding anniversaries,--spread over half the globe,--and the joy we got out of just those ten occasions. The first one was back in Oakland, after our return from Seattle. We still had elements of convention left in us then,--or, rather, I still had some; I don't believe Carl had a streak of it in him ever,--so we dressed in our very best clothes, dress-suit and all, and had dinner at the Key Route Inn, where we had gone after the wedding a year before. After dinner we rushed home, I nursed the son, we changed into natural clothes, and went to the circus. I had misgivings about the circus being a fitting wedding-anniversary celebration; but what was one to do when the circus comes to town but one night in the year? The second anniversary was in Cambridge. We always used to laugh each year and say: "Gracious! if any one had told us a year ago we'd be here this September seventh!" Every year we were somewhere we never dreamed we would be. That first September seventh, the night of the wedding, we were to be in Seattle for years--selling bonds. What a fearful prospect in retrospect, compared to what we really did! The second September, back in Oakland, we thought we were to be in the bond business for years in Oakland. More horrible thoughts as I look back upon it. The third September seventh, the second anniversary, lo and behold, was in Cambridge, Massachusetts! Whoever would have guessed it, in all the world? It was three days after Carl's return from that awful Freiburg summer--we left Nandy with a kind-hearted neighbor, and away we spreed to Boston, to the matinée and something good to eat. Then, whoever would have imagined for a moment that the next year we would be celebrating in Berlin--dinner at the Café Rheingold, with wine! The fourth anniversary was at Heidelberg--one of the red-letter days, as I look back upon those magic years. We left home early, with our lunch, which we ate on a bed of dry leaves in a fairy birch forest back--and a good ways up--in the Odenwald. Then we walked and walked--almost twenty-five miles all told--through little forest hamlets, stopping now and then at some small inn along the roadside for a cheese sandwich or a glass of beer. By nightfall we reached Neckarsteinach and the railroad, and prowled around the twisted narrow streets till train-time, gazing often at our beloved Dilsberg crowning the hilltop across the river, her ancient castle tower and town walls showing black against the starlight. The happiness, the foreign untouristed wonder of that day! Our fifth anniversary was another red-letter day--one of the days that always made me feel, in looking back on it, that we must have been people in a novel, an English novel; that it could not really have been Carl and I who walked that perfect Saturday from Swanage to Studland. But it was our own two joyous souls who explored that quaint English thatched-roof, moss-covered corner of creation; who poked about the wee old mouldy church and cemetery; who had tea and muffins and jam out under an old gnarled apple tree behind a thatched-roof cottage. What a wonder of a day it was! And indeed it was my Carl and I who walked the few miles home toward sunset, swinging hands along the downs, and fairly speechless with the glory of five years married and England and our love. I should like to be thinking of that day just before I die. It was so utterly perfect, and so ours. Our sixth anniversary was another, yes, yet another red-letter memory--one of those times that the world seemed to have been leading up to since it first cooled down. We left our robust sons in the care of our beloved aunt, Elsie Turner,--this was back in Berkeley,--and one Saturday we fared forth, plus sleeping-bags, frying-pan, fishing-rod, and a rifle. We rode to the end of the Ocean Shore Line--but first got off the train at Half Moon Bay, bought half a dozen eggs from a lonely-looking female, made for the beach, and fried said eggs for supper. Then we got back on another train, and stepped off at the end of the line, in utter darkness. We decided that somewhere we should find a suitable wooded nook where we could sequester ourselves for the night. We stumbled along until we could not see another inch in front of us for the dark and the thick fog; so made camp--which meant spreading out two bags--in what looked like as auspicious a spot as was findable. When we opened our eyes to the morning sunlight, we discovered we were on a perfectly barren open ploughed piece of land, and had slept so near the road that if a machine passing along in the night had skidded out a bit to the side, it would have removed our feet. That day, Sunday, was our anniversary, and the Lord was with us early and late, though not obtrusively. We got a farmer out of bed to buy some eggs for our breakfast. He wanted to know what we were doing out so early, anyhow. We told him, celebrating our sixth wedding anniversary. Whereat he positively refused to take a cent for the eggs--wedding present, he said. Around noon we passed a hunter, who stopped to chat, and ended by presenting us with a cotton-tail rabbit to cook for dinner. And such a dinner!--by a bit of a stream up in the hills. That afternoon, late, we stumbled on a deserted farmhouse almost at the summit--trees laden with apples and the ground red with them, pears and a few peaches for the picking, and a spring of ice-cold water with one lost fat trout in it that I tried for hours to catch by fair means or foul; but he merely waved his tail slowly, as if to say, "One wedding present you don't get!" We slept that night on some hay left in an old barn--lots of mice and gnawy things about; but I could not get nearly as angry at a gnawy mouse as at a fat conceited trout who refused to be caught. Next day was a holiday, so we kept on our way rejoicing, and slept that night under great redwoods, beside a stream where trout had better manners. After a fish breakfast we potted a tin can full of holes with the rifle, and then bore down circuitously and regretfully on Redwood City and the Southern Pacific Railway, and home and college and dishes to wash and socks to darn--but uproarious and joyful sons to compensate. The seventh anniversary was less exciting, but that could not be helped. We were over in Alamo, with my father, small brother, and sister visiting us at the time--or rather, of course, the place was theirs to begin with. There was no one to leave the blessed sons with; also, Carl was working for the Immigration and Housing Commission, and no holidays. But he managed to get home a bit early; we had an early supper, got the sons in bed, hitched up the old horse to the old cart, and off we fared in the moonlight, married seven years and not sorry. We just poked about, ending at Danville with Danville ice-cream and Danville pumpkin pie; then walked the horse all the way back to Alamo and home. Our eighth anniversary, as mentioned, was in our very own home in Berkeley, with the curtains drawn, the telephone plugged, and our Europe spread out before our eyes. The ninth anniversary was still too soon after the June-Bug's arrival for me to get off the hill and back, up our two hundred and seventeen steps home, so we celebrated under our own roof again--this time with a roast chicken and ice-cream dinner, and with the entire family participating--except the June-Bug, who did almost nothing then but sleep. I tell you, if ever we had chicken, the bones were not worth salvaging by the time we got through. We made it last at least two meals, and a starving torn cat would pass by what was left with a scornful sniff. Our tenth and last anniversary was in Seattle. Carl had to be at Camp Lewis all day, but he got back in time to meet me at six-thirty in the lobby of the Hotel Washington. From there we went to our own favorite place--Blanc's--for dinner. Shut away behind a green lattice arbor-effect, we celebrated ten years of joy and riches and deep contentment, and as usual asked ourselves, "What in the world shall we be doing a year from now? Where in the world shall we be?" And as usual we answered, "Bring the future what it may, we have _ten years_ that no power in heaven or earth can rob us of!" * * * * * There was another occasion in our lives that I want to put down in black and white, though it does not come under wedding anniversaries. But it was such a celebration! "Uncle Max" 'lowed that before we left Berkeley we must go off on a spree with him, and suggested--imagine!--Del Monte! The twelve-and-a-half-cent Parkers at Del Monte! That was one spot we had never seen ourselves even riding by. We got our beloved Nurse Balch out to stay with the young, and when a brand-new green Pierce Arrow, about the size of our whole living-room, honked without, we were ready, bag and baggage, for a spree such as we had never imagined ourselves having in this world or the next. We called for the daughter of the head of the Philosophy Department. Max had said to bring a friend along to make four; so, four, we whisked the dust of Berkeley from our wheels and--presto--Del Monte! Parents of three children, who do most of their own work besides, do not need to be told in detail what those four days meant. Parents of three children know what the hours of, say, seven to nine mean, at home; nor does work stop at nine. It is one mad whirl to get the family ears washed and teeth cleaned, and "Chew your mush!" and "Wipe your mouth!" and "Where's your speller?" and "Jim, come back here and put on your rubbers!" ("Where are my rubbers?" Ach Gott! where?) Try six times to get the butcher--line busy. Breakfast dishes to clear up; baby to bathe, dress, feed. Count the laundry. Forget all about the butcher until fifteen minutes before dinner. Laundry calls. Telephone rings seven times. Neighbor calls to borrow an egg. Telephone the milkman for a pound of butter. Make the beds,--telephone rings in the middle,--two beds do not get made till three. Start lunch. Wash the baby's clothes. Telephone rings three times while you are in the basement. Rice burns. Door-bell--gas and electric bill. Telephone rings. Patch boys' overalls. Water-bill. Stir the pudding. Telephone rings. Try to read at least the table of contents of the "New Republic." Neighbor calls to return some flour. Stir the pudding again. Mad stamping up the front steps. Sons home. Forget to scrape their feet. Forget to take off their rubbers. Dad's whistle. Hurray! Lunch.--Let's stop about here, and return to Del Monte. This is where music would help. The Home _motif_ would be--I do not know those musical terms, but a lot of jumpy notes up and down the piano, fast and never catching up. Del Monte _motif_ slow, lazy melody--ending with dance-music for night-time. In plain English, what Del Monte meant was a care-free, absolutely care-free, jaunt into another world. It was not our world,--we could have been happy forever did we never lay eyes on Del Monte,--and yet, oh, it was such fun! Think of lazing in bed till eight or eight-thirty, then taking a leisurely bath, then dressing and deliberately using up time doing it--put one shoe on and look at it a spell; then, when you are good and ready, put on the next. Just feeling sort of spunky about it--just wanting to show some one that time is nothing to you--what's the hurry? Then--oh, what _motif_ in music could do a Del Monte breakfast justice? Just yesterday you were gulping down a bite, in between getting the family fed and off. Here you were, holding hands under the table to make sure you were not dreaming, while you took minutes and minutes to eat fruit and mush and eggs and coffee and waffles, and groaned to think there was still so much on the menu that would cost you nothing to keep on consuming, but where, oh, where, put it? After rocking a spell in the sun on the front porch, the green Pierce Arrow appears, and all honk off for the day--four boxes of picnic lunch stowed away by a gracious waiter; not a piece of bread for it did you have to spread yourself. Basking in the sun under cypress trees, talking over every subject under heaven; back in time for a swim, a rest before dinner; then dinner (why, oh, why has the human such biological limitations?). Then a concert, then dancing, then--crowning glory of an unlimited bank-account--Napa soda lemonade--and bed. Oh, what a four days! In thinking over the intimate things of our life together, I have difficulty in deciding what the finest features of it were. There was so much that made it rich, so much to make me realize I was blessed beyond any one else, that I am indebted to the world forever for the color that living with Carl Parker gave to existence. Perhaps one of the most helpful memories to me now is the thought of his absolute faith in me. From the time we were first in love, it meant a new zest in life to know that Carl firmly believed there was nothing I could not do. For all that I hold no orthodox belief in immortality, I could no more get away from the idea that, if I fail in anything now--why I _can't_ fail--think of Carl's faith in me! About four days before he died, he looked up at me once as I was arranging his pillow and said, so seriously, "You know, there isn't a university in the country that wouldn't give you your Ph.D. without your taking an examination for it." He was delirious, it is true; but nevertheless it expressed, though indeed in a very exaggerated form, the way he had of thinking I was somebody! I knew there was no one in the world like him, but I had sound reasons for that. Oh, but it is wonderful to live with some one who thinks you are wonderful! It does not make you conceited, not a bit, but it makes a happy singing feeling in your heart to feel that the one you love best in the world is proud of you. And there is always the incentive of vowing that some day you will justify it all. The fun of dressing for a party in a hand-me-down dress from some relative, knowing that the one you want most to please will honestly believe; and say on the way home, that you were the best-looking one at the party! The fun of cooking for a man who thinks every dish set before him is the best food he _ever_ ate--and not only say it, but act that way. ("That was just a sample. Give me a real dish of it, now that I know it's the best pudding I ever tasted!") CHAPTER XVI As soon as the I.W.W. article was done, Carl had to begin on his paper to be read before the Economic Association, just after Christmas, in Philadelphia. That was fun working over. "Come up here and let me read you this!" And we'd go over that much of the paper together. Then more reading to Miss Van Doren, more correctings, finally finishing it just the day before he had to leave. But that was partly because he had to leave earlier than expected. The Government had telegraphed him to go on to Washington, to mediate a threatened longshoremen's strike. Carl worked harder over the longshoremen than over any other single labor difficulty, not excepting the eight-hour day in lumber. Here again I do not feel free to go into details. The matter was finally, at Carl's suggestion, taken to Washington. The longshoremen interested Carl for the same reason that the migratory and the I.W.W. interested him; in fact, there were many I.W.W. among them. It was the lower stratum of the labor-world--hard physical labor, irregular work, and, on the whole, undignified treatment by the men set over them. And they reacted as Carl expected men in such a position to react. Yet, on the side of the workers, he felt that in this particular instance it was a case of men being led by stubborn egotistical union delegates not really representing the wishes of the rank and file of union members, their main idea being to compromise on nothing. On the other hand, be it said that he considered the employers he had to deal with here the fairest, most open-minded, most anxious to compromise in the name of justice, of all the groups of employers he ever had to deal with. The whole affair was nerve-racking, as is best illustrated by the fact that, while Carl was able to hold the peace as long as he was on the job, three days after his death the situation "blew up." On his way East he stopped off in Spokane, to talk with the lumbermen east of the mountains. There, at a big meeting, he was able to put over the eight-hour day. The Wilson Mediation Commission was in Seattle at the time. Felix Frankfurter telephoned out his congratulations to me, and said: "We consider it the single greatest achievement of its kind since the United States entered the war." The papers were full of it and excitement ran high. President Wilson was telegraphed to by the Labor Commission, and he in turn telegraphed back his pleasure. In addition, the East Coast lumbermen agreed to Carl's scheme of an employment manager for their industry, and detailed him to find a man for the job while in the East. My, but I was excited! Not only that, but they bade fair to let him inaugurate a system which would come nearer than any chance he could have expected to try out on a big scale his theories on the proper handling of labor. The men were to have the sanest recreation devisable for their needs and interests--out-of-door sports, movies, housing that would permit of dignified family life, recreation centres, good and proper food, alteration in the old order of "hire and fire," and general control over the men. Most employers argued: "Don't forget that the type of men we have in the lumber camps won't know how to make use of a single reform you suggest, and probably won't give a straw for the whole thing." To which Carl would reply: "Don't forget that your old conditions have drawn the type of man you have. This won't change men over-night by a long shot, but it will at once relieve the tension--and see, in five years, if your type itself has not undergone a change." From Washington, D.C., he wrote: "This city is one mad mess of men, desolate, and hunting for folks they should see, overcharged by hotels, and away from their wives." The red-letter event of Washington was when he was taken for tea to Justice Brandeis's. "We talked I.W.W., unemployment, etc., and he was oh, so grand!" A few days later, two days before Christmas, Mrs. Brandeis telephoned and asked him for Christmas dinner! That was a great event in the Parker annals--Justice Brandeis having been a hero among us for some years. Carl wrote: "He is all he is supposed to be and more." He in turn wrote me after Carl's death: "Our country shares with you the great loss. Your husband was among the very few Americans who possessed the character, knowledge, and insight which are indispensable in dealing effectively with our labor-problem. Appreciation of his value was coming rapidly, and events were enforcing his teachings. His journey to the East brought inspiration to many; and I seek comfort in the thought that, among the students at the University, there will be some at least who are eager to carry forward his work." There were sessions with Gompers, Meyer Bloomfield, Secretary Baker, Secretary Daniels, the Shipping Board, and many others. Then, at Philadelphia, came the most telling single event of our economic lives--Carl's paper before the Economic Association on "Motives in Economic Life." At the risk of repeating to some extent the ideas quoted from previous papers, I shall record here a few statements from this one, as it gives the last views he held on his field of work. "Our conventional economics to-day analyzes no phase of industrialism or the wage-relationship, or citizenship in pecuniary society, in a manner to offer a key to such distressing and complex problems as this. Human nature riots to-day through our economic structure, with ridicule and destruction; and we economists look on helpless and aghast. The menace of the war does not seem potent to quiet revolt or still class cries. The anxiety and apprehension of the economist should not be produced by this cracking of his economic system, but by the poverty of the criticism of industrialism which his science offers. Why are economists mute in the presence of a most obvious crisis in our industrial society? Why have our criticisms of industrialism no sturdy warnings about this unhappy evolution? Why does an agitated officialdom search to-day in vain among our writings, for scientific advice touching labor-inefficiency or industrial disloyalty, for prophecies and plans about the rise in our industrialism of economic classes unharmonious and hostile? "The fair answer seems this: We economists speculate little on human motives. We are not curious about the great basis of fact which dynamic and behavioristic psychology has gathered to illustrate the instinct stimulus to human activity. Most of us are not interested to think of what a psychologically full or satisfying life is. We are not curious to know that a great school of behavior analysis called the Freudian has been built around the analysis of the energy outbursts brought by society's balking of the native human instincts. Our economic literature shows that we are but rarely curious to know whether industrialism is suited to man's inherited nature, or what man in turn will do to our rules of economic conduct in case these rules are repressive. The motives to economic activity which have done the major service in orthodox economic texts and teachings have been either the vague middle-class virtues of thrift, justice, and solvency, or the equally vague moral sentiments of 'striving for the welfare of others,' 'desire for the larger self,' 'desire to equip one's self well,' or, lastly, the labor-saving deduction that man is stimulated in all things economic by his desire to satisfy his wants with the smallest possible effort. All this gentle parody in motive theorizing continued contemporaneously with the output of the rich literature of social and behavioristic psychology which was almost entirely addressed to this very problem of human motives in modern economic society. Noteworthy exceptions are the remarkable series of books by Veblen, the articles and criticisms of Mitchell and Patten, and the most significant small book by Taussig, entitled 'Inventors and Money-makers.' It is this complementary field of psychology to which the economists must turn, as these writers have turned, for a vitalization of their basic hypotheses. There awaits them a bewildering array of studies of the motives, emotions, and folkways of our pecuniary civilization. Generalizations and experiment statistics abound, ready-made for any structure of economic criticism. The human motives are isolated, described, compared. Business confidence, the release of work-energy, advertising appeal, market vagaries, the basis of value computations, decay of workmanship, the labor unrest, decline in the thrift habit, are the subjects treated. "All human activity is untiringly actuated by the demand for realization of the instinct wants. If an artificially limited field of human endeavor be called economic life, all its so-called motives hark directly back to the human instincts for their origin. _There are, in truth, no economic motives as such._ The motives of economic life are the same as those of the life of art, of vanity and ostentation, of war and crime, of sex. Economic life is merely the life in which instinct gratification is alleged to take on a rational pecuniary habit form. Man is not less a father, with a father's parental instinct, just because he passes down the street from his home to his office. His business raid into his rival's market has the same naïve charm that tickled the heart of his remote ancestor when in the night he rushed the herds of a near-by clan. A manufacturer tries to tell a conventional world that he resists the closed shop because it is un-American, it loses him money, or it is inefficient. A few years ago he was more honest, when he said he would run his business as he wished and would allow no man to tell him what to do. His instinct of leadership, reinforced powerfully by his innate instinctive revulsion to the confinement of the closed shop, gave the true stimulus. His opposition is psychological, not ethical." He then goes on to catalogue and explain the following instincts which he considered of basic importance in any study of economics: (1) gregariousness; (2) parental bent, motherly behavior, kindliness; (3) curiosity, manipulation, workmanship; (4) acquisition, collecting, ownership; (5) fear and flight; (6) mental activity, thought; (7) the housing or settling instinct; (8) migration, homing; (9) hunting ("Historic revivals of hunting urge make an interesting recital of religious inquisitions, witch-burnings, college hazings, persecution of suffragettes, of the I.W.W., of the Japanese, or of pacifists. All this goes on often under naïve rationalization about justice and patriotism, but it is pure and innate lust to run something down and hurt it"); (10) anger, pugnacity; (11) revolt at confinement, at being limited in liberty of action and choice; (12) revulsion; (13) leadership and mastery; (14) subordination, submission; (15) display, vanity, ostentation; (166) sex. After quoting from Professor Cannon, and discussing the contributions that his studies have made to the subject of man's reaction to his immediate environment, he continues:-- "The conclusion seems both scientific and logical, that behavior in anger, fear, pain, and hunger is a basically different behavior from behavior under repose and economic security. The emotions generated under the conditions of existence-peril seem to make the emotions and motives generative in quiet and peace pale and unequal. It seems impossible to avoid the conclusion that the most vital part of man's inheritance is one which destines him to continue for some myriads of years ever a fighting animal when certain conditions exist in his environment. Though, through education, man be habituated in social and intelligent behavior or, through license, in sexual debauchery, still, at those times when his life or liberty is threatened, his instinct-emotional nature will inhibit either social thought or sex ideas, and present him as merely an irrational fighting animal. . . . "The instincts and their emotions, coupled with the obedient body, lay down in scientific and exact description the motives which must and will determine human conduct. If a physical environment set itself against the expression of these instinct motives, the human organism is fully and efficiently prepared for a tenacious and destructive revolt against this environment; and if the antagonism persist, the organism is ready to destroy itself and disappear as a species if it fail of a psychical mutation which would make the perverted order endurable." And in conclusion, he states:-- "The dynamic psychology of to-day describes the present civilization as a repressive environment. For a great number of its inhabitants a sufficient self-expression is denied. There is, for those who care to see, a deep and growing unrest and pessimism. With the increase in knowledge is coming a new realization of the irrational direction of economic evolution. The economists, however, view economic inequality and life-degradation as objects in truth outside the science. Our value-concept is a price-mechanism hiding behind a phrase. If we are to play a part in the social readjustment immediately ahead, we must put human nature and human motives into our basic hypotheses. Our value-concept must be the yardstick to measure just how fully things and institutions contribute to a full psychological life. We must know more of the meaning of progress. The domination of society by one economic class has for its chief evil the thwarting of the instinct life of the subordinate class and the perversion of the upper class. The extent and characteristics of this evil are to be estimated only when we know the innate potentialities and inherited propensities of man; and the ordering of this knowledge and its application to the changeable economic structure is the task before the trained economist to-day." A little later I saw one of the big men who was at that Economic Association meeting, and he said: "I don't see why Parker isn't spoiled. He was the most talked-about man at the Convention." Six publishing houses wrote, after that paper, to see if he could enlarge it into a book. Somehow it did seem as if now more than ever the world was ours. We looked ahead into the future, and wondered if it could seem as good to any one as it did to us. It was almost _too_ good--we were dazed a bit by it. It is one of the things I just cannot let myself ever think of--that future and the plans we had. Anything I can ever do now would still leave life so utterly dull by comparison. CHAPTER XVII One of the days in Seattle that I think of most was about a month before the end. The father of a great friend of ours died, and Carl and I went to the funeral one Sunday afternoon. We got in late, so stood in a corner by the door, and held hands, and seemed to own each other especially hard that day. Afterwards we prowled around the streets, talking of funerals and old age. Most of the people there that afternoon were gray-haired--the family had lived in Seattle for years and years, and these were the friends of years and years back. Carl said: "That is something we can't have when you and I die--the old, old friends who have stood by us year in and year out. It is one of the phases of life you sacrifice when you move around at the rate we do. But in the first place, neither of us wants a funeral, and in the second place, we feel that moving gives more than it takes away--so we are satisfied." Then we talked about our own old age--planned it in detail. Carl declared: "I want you to promise me faithfully you will make me stop teaching when I am sixty. I have seen too much of the tragedy of men hanging on and on and students and education being sacrificed because the teacher has lost his fire--has fallen behind in the parade. I feel now as if I'd never grow old--that doesn't mean that I won't. So, no matter how strong I may be going at sixty, make me stop--promise." Then we discussed our plans: by that time the children would be looking out for themselves,--very much so,--and we could plan as we pleased. It was to be England--some suburb outside of London, where we could get into big things, and yet where we could be peaceful and by ourselves, and read and write, and have the young economists who were traveling about, out to spend week-ends with us; and then we could keep our grandchildren while their parents were traveling in Europe! About a month from that day, he was dead. * * * * * There is a path I must take daily to my work at college, which passes through the University Botanical Garden. Every day I must brace myself for it, for there, growing along the path, is a clump of old-fashioned morning glories. Always, from the time we first came back to teach in Berkeley and passed along that same path to the University, we planned to have morning glories like those--the odor came to meet you yards away--growing along the path to the little home we would at last settle down in when we were old. We used always to remark pictures in the newspapers, of So-and-so on their "golden anniversary," and would plan about our own "golden wedding-day"--old age together always seemed so good to think about. There was a time when we used to plan to live in a lighthouse, way out on some point, when we got old. It made a strong appeal, it really did. We planned many ways of growing old--not that we talked of it often, perhaps twice a year, but always, always it was, of course, _together_. Strange, that neither of us ever dreamed one would grow old without the other. And yet, too, there is the other side. I found a letter written during our first summer back in Berkeley, just after we had said good-bye at the station when Carl left for Chicago. Among other things he wrote: "It just makes me feel bad to see other folks living put-in lives, when we two (four) have loved through Harvard and Europe and it has only commenced, and no one is loving so hard or living so happily. . . . I am most willing to die now (if you die with me), for we have lived one complete life of joy already." And then he added--if only the adding of it could have made it come true: "But we have fifty years yet of love." Oh, it was so true that we packed into ten years the happiness that could normally be considered to last a lifetime--a long lifetime. Sometimes it seems almost as if we must have guessed it was to end so soon, and lived so as to crowd in all the joy we could while our time together was given us. I say so often that I stand right now the richest woman in the world--why talk of sympathy? I have our three precious, marvelously healthy children, I have perfect health myself, I have all and more than I can handle of big ambitious maturing plans, with a chance to see them carried out, I have enough to live on, and, greatest of all, fifteen years of perfect memories--And yet, to hear a snatch of a tune and know that the last time you heard it you were together--perhaps it was the very music they played as you left the theatre arm-in-arm that last night; to put on a dress you have not worn for some time and remember that, when you last had it on, it was the night you went, just the two of you, to Blanc's for dinner; to meet unexpectedly some friend, and recall that the last time you saw him it was that night you two, strolling with hands clasped, met him on Second Avenue accidentally, and chatted on the corner; to come across a necktie in a trunk, to read a book he had marked, to see his handwriting--perhaps just the address on an old baggage-check--Oh, one can sound so much braver than one feels! And then, because you have tried so hard to live up to the pride and faith he had in you, to be told: "You know I am surprised that you haven't taken Carl's death harder. You seem to be just the same exactly." What is _seeming_? Time and time again, these months, I have thought, what do any of us know about what another person _feels_? A smile--a laugh--I used to think of course they stood for happiness. There can be many smiles, much laughter, and it means--nothing. But surely anything is kinder for a friend to see than tears! When Carl returned from the East in January, he was more rushed than ever--his time more filled than ever with strike mediations, street-car arbitrations, cost of living surveys for the Government, conferences on lumber production. In all, he had mediated thirty-two strikes, sat on two arbitration boards, made three cost-of-living surveys for the Government. (Mediations did gall him--he grew intellectually impatient over this eternal patching up of what he was wont to call "a rotten system." Of course he saw the war-emergency need of it just then, but what he wanted to work on was, why were mediations ever necessary? what social and economic order would best ensure absence of friction?) On the campus work piled up. He had promised to give a course on Employment Management, especially to train men to go into the lumber industries with a new vision. (Each big company east of the mountains was to send a representative.) It was also open to seniors in college, and a splendid group it was, almost every one pledged to take up employment management as their vocation on graduation--no fear that they would take it up with a capitalist bias. Then--his friends and I had to laugh, it was so like him--the afternoon of the morning he arrived, he was in the thick of a scrap on the campus over a principle he held to tenaciously--the abolition of the one-year modern-language requirement for students in his college. To use his own expression, he "went to the bat on it," and at a faculty meeting that afternoon it carried. He had been working his little campaign for a couple of months, but in his absence in the East the other side had been busy. He returned just in time for the fray. Every one knows what a farce one year of a modern language is at college; even several of the language teachers themselves were frank enough to admit it. But it was an academic tradition! I think the two words that upset Carl most were "efficiency" and "tradition"--both being used too often as an excuse for practices that did more harm than good. * * * * * And then came one Tuesday, the fifth of March. He had his hands full all morning with the continued threatened upheavals of the longshoremen. About noon the telephone rang--threatened strike in all the flour-mills; Dr. Parker must come at once. (I am reminded of a description which was published of Carl as a mediator. "He thought of himself as a physician and of an industry on strike as the patient. And he did not merely ease the patient's pain with opiates. He used the knife and tried for permanent cures.") I finally reached him by telephone; his voice sounded tired, for he had had a very hard morning. By one o'clock he was working on the flour-mill situation. He could not get home for dinner. About midnight he appeared, having sat almost twelve hours steadily on the new flour-difficulty. He was "all in," he said. The next morning, one of the rare instances in our years together, he claimed that he did not feel like getting up. But there were four important conferences that day to attend to, besides his work at college. He dressed, ate breakfast, then said he felt feverish. His temperature was 102. I made him get back into bed--let all the conferences on earth explode. The next day his temperature was 105. "This has taught us our lesson--no more living at this pace. I don't need two reminders that I ought to call a halt." Thursday, Friday, and Saturday he lay there, too weary to talk, not able to sleep at all nights; the doctor coming regularly, but unable to tell just what the trouble was, other than a "breakdown." Saturday afternoon he felt a little better; we planned then what we would do when he got well. The doctor had said that he should allow himself at least a month before going back to college. One month given to us! "Just think of the writing I can get done, being around home with my family!" There was an article for Taussig half done to appear in the "Quarterly Journal of Economics," a more technical analysis of the I.W.W. than had appeared in the "Atlantic Monthly"; he had just begun a review for the "American Journal of Economics" of Hoxie's "Trade-Unionism." Then he was full of ideas for a second article he had promised the "Atlantic"--"Is the United States a Nation?"--"And think of being able to see all I want of the June-Bug!" Since he had not slept for three nights, the doctor left powders which I was to give him for Saturday night. Still he could not sleep. He thought that, if I read aloud to him in a monotonous tone of voice, he could perhaps drop off. I got a high-school copy of "From Milton to Tennyson," and read every sing-songy poem I could find--"The Ancient Mariner" twice, hardly pronouncing the words as I droned along. Then he began to get delirious. It is a very terrifying experience--to see for the first time a person in a delirium, and that person the one you love most on earth. All night long I sat there trying to quiet him--it was always some mediation, some committee of employers he was attending. He would say: "I am so tired--can't you people come to some agreement, so that I can go home and sleep?" At first I would say: "Dearest, you must be quiet and try to go to sleep."--"But I can't leave the meeting!" He would look at me in such distress. So I learned my part, and at each new discussion he would get into, I would suggest: "Here's Will Ogburn just come--he'll take charge of the meeting for you. You come home with me and go to sleep." So he would introduce Will to the gathering, and add: "Gentlemen, my wife wants me to go home with her and go to sleep--good-bye." For a few moments he would be quiet. Then, "O my Lord, something to investigate! What is it this time?" I would cut in hastily: "The Government feels next week will be plenty of time for this investigation." He would look at me seriously. "Did you ever know the Government to give you a week's time to begin?" Then, "Telegrams--more telegrams! Nobody keeps their word, nobody." About six o'clock in the morning I could wait no longer and called the doctor. He pronounced it pneumonia--an absolutely different case from any he had ever seen: no sign of it the day before, though it was what he had been watching for all along. Every hospital in town was full. A splendid trained nurse came at once to the house--"the best nurse in the whole city," the doctor announced with relief. Wednesday afternoon the crisis seemed to have passed. That whole evening he was himself, and I--I was almost delirious from sheer joy. To hear his dear voice again just talking naturally! He noticed the nurse for the first time. He was jovial--happy. "I am going to get some fun out of this now!" he smiled. "And oh, won't we have a time, my girl, while I am convalescing!" And we planned the rosiest weeks any one ever planned. Thursday the nurse shaved him--he not only joked and talked like his dear old self--he looked it as well. (All along he had been cheerful--always told the doctor he was "feeling fine"; never complained of anything. It amused the doctor so one morning, when he was leaning over listening to Carl's heart and lungs, as he lay in more or less of a doze and partial delirium. A twinkle suddenly came into Carl's eye. "You sprung a new necktie on me this morning, didn't you?" Sure enough, it was new.) Thursday morning the nurse was preparing things for his bath in another room and I was with Carl. The sun was streaming in through the windows and my heart was too contented for words. He said: "Do you know what I've been thinking of so much this morning? I've been thinking of what it must be to go through a terrible illness and not have some one you loved desperately around. I say to myself all the while: 'Just think, my girl was here all the time--my girl will be here all the time!' I've lain here this morning and wondered more than ever what good angel was hovering over me the day I met you." I put this in because it is practically the last thing he said before delirium came on again, and I love to think of it. He said really more than that. In the morning he would start calling for me early--the nurse would try to soothe him for a while, then would call me. I wanted to be in his room at night, but they would not let me--there was an unborn life to be thought of those days, too. As soon as I reached his bed, he would clasp my hand and hold it oh, so tight. "I've been groping for you all night--all night! Why _don't_ they let me find you?" Then, in a moment, he would not know I was there. Daytimes I had not left him five minutes, except for my meals. Several nights they had finally let me be by him, anyway. Saturday morning for the first time since the crisis the doctor was encouraged. "Things are really looking up," and "You go out for a few moments in the sun!" I walked a few blocks to the Mudgetts' in our department, to tell them the good news, and then back; but my heart sank to its depths again as soon as I entered Carl's room. The delirium always affected me that way: to see the vacant stare in his eyes--no look of recognition when I entered. The nurse went out that afternoon. "He's doing nicely," was the last thing she said. She had not been gone half an hour--it was just two-fifteen--and I was lying on her bed watching Carl, when he called, "Buddie, I'm going--come hold my hand." O my God--I dashed for him, I clung to him, I told him he could not, must not go--we needed him too terribly, we loved him too much to spare him. I felt so sure of it, that I said: "Why, my love is enough to _keep_ you here!" He would not let me leave him to call the doctor. I just knelt there holding both his hands with all my might, talking, talking, telling him we were not going to let him go. And then, at last, the color came back into his face, he nodded his head a bit, and said, "I'll stay," very quietly. Then I was able to rush for the stairs and tell Mrs. Willard to telephone for the doctor. Three doctors we had that afternoon. They reported the case as "dangerous, but not absolutely hopeless." His heart, which had been so wonderful all along, had given out. That very morning the doctor had said: "I wish my pulse was as strong as that!" and there he lay--no pulse at all. They did everything: our own doctor stayed till about ten, then left, with Carl resting fairly easily. He lived only a block away. About one-thirty the nurse had me call the doctor again. I could see things were going wrong. Once Carl started to talk rather loud. I tried to quiet him and he said: "Twice I've pulled and fought and struggled to live just for you [one of the times had been during the crisis]. Let me just talk if I want to. I can't make the fight a third time--I'm so tired." Before the doctor could get there, he was dead. * * * * * With our beliefs what they were, there was only one thing to be done. We had never discussed it in detail, but I felt absolutely sure I was doing as he would have me do. His body was cremated, without any service whatsoever--nobody present but one of his brothers and a great friend. The next day the two men scattered his ashes out on the waters of Puget Sound. I feel it was as he would have had it. * * * * * "Out of your welded lives--welded in spirit and in the comradeship that you had in his splendid work--you know everything that I could say. "I grieve for you deeply--and I rejoice for any woman who, for even a few short years, is given the great gift in such a form." THE END 
12920	----	THE "GOLDFISH" Being the Confessions af a Successful Man EDITED BY ARTHUR TRAIN 1921 [Illustration: Arthur Train from the drawing by S.J. Woolf] "They're like 'goldfish' swimming round and round in a big bowl. They can look through, sort of dimly; but they can't get out?"--_Hastings_, p. 315. CONTENTS MYSELF MY FRIENDS MY CHILDREN MY MIND MY MORALS MY FUTURE "We have grown literally afraid to be poor. We despise any one who elects to be poor in order to simplify and save his inner life. We have lost the power of even imagining what the ancient idealization of poverty could have meant--the liberation from material attachments; the unbribed soul; the manlier indifference; the paying our way by what we are or do, and not by what we have; the right to fling away our life at any moment irresponsibly--the more athletic trim, in short the moral fighting shape.... It is certain that the prevalent fear of poverty among the educated class is the worst moral disease from which our civilization suffers." William James, p. 313. CHAPTER I MYSELF "My house, my affairs, my ache and my religion--" I was fifty years old to-day. Half a century has hurried by since I first lay in my mother's wondering arms. To be sure, I am not old; but I can no longer deceive myself into believing that I am still young. After all, the illusion of youth is a mental habit consciously encouraged to defy and face down the reality of age. If, at twenty, one feels that he has reached man's estate he, nevertheless, tests his strength and abilities, his early successes or failures, by the temporary and fictitious standards of youth. At thirty a professional man is younger than the business man of twenty-five. Less is expected of him; his work is less responsible; he has not been so long on his job. At forty the doctor or lawyer may still achieve an unexpected success. He has hardly won his spurs, though in his heart he well knows his own limitations. He can still say: "I am young yet!" And he is. But at fifty! Ah, then he must face the facts! He either has or has not lived up to his expectations and he never can begin over again. A creature of physical and mental habit, he must for the rest of his life trudge along in the same path, eating the same food, thinking the same thoughts, seeking the same pleasures--until he acknowledges with grim reluctance that he is an old man. I confess that I had so far deliberately tried to forget my approaching fiftieth milestone, or at least to dodge it with closed eyes as I passed it by, that my daughter's polite congratulation on my demicentennial anniversary gave me an unexpected and most unpleasant shock. "You really ought to be ashamed of yourself!" she remarked as she joined me at breakfast. "Why?" I asked, somewhat resenting being thus definitely proclaimed as having crossed into the valley of the shadows. "To be so old and yet to look so young!" she answered, with charming _voir-faire_. Then I knew the reason of my resentment against fate. It was because I was labeled as old while, in fact, I was still young. Of course that was it. Old? Ridiculous! When my daughter was gone I gazed searchingly at myself in the mirror. Old? Nonsense! I saw a man with no wrinkles and only a few crow's-feet such as anybody might have had; with hardly a gray hair on my temples and with not even a suggestion of a bald spot. My complexion and color were good and denoted vigorous health; my flesh was firm and hard on my cheeks; my teeth were sound, even and white; and my eyes were clear save for a slight cloudiness round the iris. The only physical defect to which I was frankly willing to plead guilty was a flabbiness of the neck under the chin, which might by a hostile eye have been regarded as slightly double. For the rest I was strong and fairly well--not much inclined to exercise, to be sure, but able, if occasion offered, to wield a tennis racket or a driver with a vigor and accuracy that placed me well out of the duffer class. Yes; I flattered myself that I looked like a boy of thirty, and I felt like one--except for things to be hereinafter noted--and yet middle-aged men called me "sir" and waited for me to sit down before doing so themselves; and my contemporaries were accustomed to inquire jocularly after my arteries. I was fifty! Another similar stretch of time and there would be no I. Twenty years more--with ten years of physical effectiveness if I were lucky! Thirty, and I would be useless to everybody. Forty--I shuddered. Fifty, I would not be there. My room would be vacant. Another face would be looking into the mirror. Unexpectedly on this legitimate festival of my birth a profound melancholy began to possess my spirit. I had lived. I had succeeded in the eyes of my fellows and of the general public. I was married to a charming woman. I had two marriageable daughters and a son who had already entered on his career as a lawyer. I was prosperous. I had amassed more than a comfortable fortune. And yet-- These things had all come, with a moderate amount of striving, as a matter of course. Without them, undoubtedly I should be miserable; but with them--with reputation, money, comfort, affection--was I really happy? I was obliged to confess I was not. Some remark in Charles Reade's Christie Johnstone came into my mind--not accurately, for I find that I can no longer remember literally--to the effect that the only happy man is he who, having from nothing achieved money, fame and power, dies before discovering that they were not worth striving for. I put to myself the question: _Were_ they worth striving for? Really, I did not seem to be getting much satisfaction out of them. I began to be worried. Was not this an attitude of age? Was I not an old man, perhaps, regardless of my youthful face? At any rate, it occurred to me sharply, as I had but a few more years of effective life, did it not behoove me to pause and see, if I could, in what direction I was going?--to "stop, look and listen"?--to take account of stock?--to form an idea of just what I was worth physically, mentally and morally?--to compute my assets and liabilities?--to find out for myself by a calm and dispassionate examination whether or not I was spiritually a bankrupt? That was the hideous thought which like a deathmask suddenly leered at me from behind the arras of my mind--that I counted for nothing--cared really for nothing! That when I died I should have been but a hole in the water! The previous evening I had taken my two distinctly blasé daughters to see a popular melodrama. The great audience that packed the theater to the roof went wild, and my young ladies, infected in spite of themselves with the same enthusiasm, gave evidences of a quite ordinary variety of excitement; but I felt no thrill. To me the heroine was but a painted dummy mechanically repeating the lines that some Jew had written for her as he puffed a reeking cigar in his rear office, and the villain but a popinjay with a black whisker stuck on with a bit of pitch. Yet I grinned and clapped to deceive them, and agreed that it was the most inspiriting performance I had seen in years. In the last act there was a horserace cleverly devised to produce a convincing impression of reality. A rear section of the stage was made to revolve from left to right at such a rate that the horses were obliged to gallop at their utmost speed in order to avoid being swept behind the scenes. To enhance the realistic effect the scenery itself was made to move in the same direction. Thus, amid a whirlwind of excitement and the wild banging of the orchestra, the scenery flew by, and the horses, neck and neck, raced across the stage--without progressing a single foot. And the thought came to me as I watched them that, after all, this horserace was very much like the life we all of us were living here in the city. The scenery was rushing by, time was flying, the band was playing--while we, like the animals on the stage, were in a breathless struggle to attain some goal to which we never got any nearer. Now as I smoked my cigarette after breakfast I asked myself what I had to show for my fifty years. What goal or goals had I attained? Had anything happened except that the scenery had gone by? What would be the result should I stop and go with the scenery? Was the race profiting me anything? Had it profited anything to me or anybody else? And how far was I typical of a class? A moment's thought convinced me that I was the prototype of thousands all over the United States. "A certain rich man!" That was me. I had yawned for years at dozens of sermons about men exactly like myself. I had called them twaddle. I had rather resented them. I was not a sinner--that is, I was not a sinner in the ordinary sense at all. I was a good man--a very good man. I kept all the commandments and I acted in accordance with the requirements of every standard laid down by other men exactly like myself. Between us, I now suddenly saw, we made the law and the prophets. We were all judging ourselves by self-made tests. I was just like all the rest. What was true of me was true of them. And what were we, the crowning achievement of American civilization, like? I had not thought of it before. Here, then, was a question the answer to which might benefit others as well as myself. I resolved to answer it if I could--to write down in plain words and cold figures a truthful statement of what I was and what they were. I had been a fairly wide reader in my youth, and yet I did not recall anywhere precisely this sort of self-analysis. Confessions, so called, were usually amatory episodes in the lives of the authors, highly spiced and colored by emotions often not felt at the time, but rather inspired by memory. Other analyses were the contented, narratives of supposedly poverty-stricken people who pretended they had no desires in the world save to milk the cows and watch the grass grow. "Adventures in contentment" interested me no more than adventures in unbridled passion. I was going to try and see myself as I was--naked. To be of the slightest value, everything I set down must be absolutely accurate and the result of faithful observation. I believed I was a good observer. I had heard myself described as a "cold proposition," and coldness was a _sine qua non_ of my enterprise. I must brief my case as if I were an attorney in an action at law. Or rather, I must make an analytical statement of fact like that which usually prefaces a judicial opinion. I must not act as a pleader, but first as a keen and truthful witness and then as an impartial judge. And at the end I must either declare myself innocent or guilty of a breach of trust--pronounce myself a faithful or an unworthy servant. I must dispassionately examine and set forth the actual conditions of my home life, my business career, my social pleasures, the motives animating myself, my family, my professional associates, and my friends --weigh our comparative influence for good or evil on the community and diagnose the general mental, moral and physical condition of the class to which I belonged. To do this aright, I must see clearly things as they were without regard to popular approval or prejudice, and must not hesitate to call them by their right names. I must spare neither myself nor anybody else. It would not be altogether pleasant. The disclosures of the microscope are often more terrifying than the amputations of the knife; but by thus studying both myself and my contemporaries I might perhaps arrive at the solution of the problem that was troubling me--that is to say, why I, with every ostensible reason in the world for being happy, was not! This, then, was to be my task. * * * * * I have already indicated that I am a sound, moderately healthy, vigorous man, with a slight tendency to run to fat. I am five feet ten inches tall, weigh a hundred and sixty-two pounds, have gray eyes, a rather aquiline nose, and a close-clipped dark-brown mustache, with enough gray hairs in it to give it dignity. My movements are quick; I walk with a spring. I usually sleep, except when worried over business. I do not wear glasses and I have no organic trouble of which I am aware. The New York Life Insurance Company has just reinsured me after a thorough physical examination. My appetite for food is not particularly good, and my other appetites, in spite of my vigor, are by no means keen. Eating is about the most active pleasure that I can experience; but in order to enjoy my dinner I have to drink a cocktail, and my doctor says that is very bad for my health. My personal habits are careful, regular and somewhat luxurious. I bathe always once and generally twice a day. Incidentally I am accustomed to scatter a spoonful of scented powder in the water for the sake of the odor. I like hot baths and spend a good deal of time in the Turkish bath at my club. After steaming myself for half an hour and taking a cold plunge, an alcohol rub and a cocktail, I feel younger than ever; but the sight of my fellow men in the bath revolts me. Almost without exception they have flabby, pendulous stomachs out of all proportion to the rest of their bodies. Most of them are bald and their feet are excessively ugly, so that, as they lie stretched out on glass slabs to be rubbed down with salt and scrubbed, they appear to be deformed. I speak now of the men of my age. Sometimes a boy comes in that looks like a Greek god; but generally the boys are as weird-looking as the men. I am rambling, however. Anyhow I am less repulsive than most of them. Yet, unless the human race has steadily deteriorated, I am surprised that the Creator was not discouraged after his first attempt. I clothe my body in the choicest apparel that my purse can buy, but am careful to avoid the expressions of fancy against which Polonius warns us. My coats and trousers are made in London, and so are my underclothes, which are woven to order of silk and cotton. My shoes cost me fourteen dollars a pair; my silk socks, six dollars; my ordinary shirts, five dollars; and my dress shirts, fifteen dollars each. On brisk evenings I wear to dinner and the opera a mink-lined overcoat, for which my wife recently paid seven hundred and fifty dollars. The storage and insurance on this coat come to twenty-five dollars annually and the repairs to about forty-five. I am rather fond of overcoats and own half a dozen of them, all made in Inverness. I wear silk pajamas--pearl-gray, pink, buff and blue, with frogs, cuffs and monograms--which by the set cost me forty dollars. I also have a pair of pearl evening studs to wear with my dress suit, for which my wife paid five hundred and fifty dollars, and my cuff buttons cost me a hundred and seventy-five. Thus, if I am not an exquisite--which I distinctly am not--I am exceedingly well dressed, and I am glad to be so. If I did not have a fur coat to wear to the opera I should feel embarrassed, out of place and shabby. All the men who sit in the boxes at the Metropolitan Opera House have fur overcoats. As a boy I had very few clothes indeed, and those I had were made to last a long time. But now without fine raiment I am sure I should be miserable. I cannot imagine myself shabby. Yet I can imagine any one of my friends being shabby without feeling any uneasiness about it--that is to say, I am the first to profess a democracy of spirit in which clothes cut no figure at all. I assert that it is the man, and not his clothes, that I value; but in my own case my silk-and-cotton undershirt is a necessity, and if deprived of it I should, I know, lose some attribute of self. At any rate, my bluff, easy, confident manner among my fellow men, which has played so important a part in my success, would be impossible. I could never patronize anybody if my necktie were frayed or my sleeves too short. I know that my clothes are as much a part of my entity as my hair, eyes and voice--more than any of the rest of me. Based on the figures given above I am worth--the material part of me--as I step out of my front door to go forth to dinner, something over fifteen hundred dollars. If I were killed in a railroad accident all these things would be packed carefully in a box, inventoried, and given a much greater degree of attention than my mere body. I saw Napoleon's boots and waistcoat the other day in Paris and I felt that he himself must be there in the glass case beside me. Any one who at Abbotsford has felt of the white beaver hat of Sir Walter Scott knows that he has touched part--and a very considerable part--of Sir Walter. The hat, the boots, the waistcoat are far less ephemeral than the body they protect, and indicate almost as much of the wearer's character as his hands and face. So I am not ashamed of my silk pajamas or of the geranium powder I throw in my bath. They are part of me. But is this "me" limited to my body and my clothes? I drink a cup of coffee or a cocktail: after they are consumed they are part of me; are they not part of me as I hold the cup or the glass in my hand? Is my coat more characteristic of me than my house--my sleeve-links than my wife or my collie dog? I know a gentlewoman whose sensitive, quivering, aristocratic nature is expressed far more in the Russian wolfhound that shrinks always beside her than in the aloof, though charming, expression of her face. No; not only my body and my personal effects but everything that is mine is part of me--my chair with the rubbed arm; my book, with its marked pages; my office; my bank account, and in some measure my friend himself. Let us agree that in the widest sense all that I have, feel or think is part of me--either of my physical or mental being; for surely my thoughts are more so than the books that suggest them, and my sensations of pleasure or satisfaction equally so with the dinner I have eaten or the cigar I have smoked. My ego is the sum total of all these things. And if the cigar is consumed, the dinner digested, the pleasure flown, the thought forgotten, the waistcoat or shirt discarded--so, too, do the tissues of the body dissolve, disintegrate and change. I can no more retain permanently the physical elements of my personality than I can the mental or spiritual. What, then, am I--who, the Scriptures assert, am made in the image of God? Who and what is this being that has gradually been evolved during fifty years of life and which I call Myself? For whom my father and my mother, their fathers and mothers, and all my ancestors back through the gray mists of the forgotten past, struggled, starved, labored, suffered, and at last died. To what end did they do these things? To produce me? God forbid! Would the vision of me as I am to-day have inspired my grandfather to undergo, as cheerfully as he did, the privations and austerities of his long and arduous service as a country clergyman--or my father to die at the head of his regiment at Little Round Top? What am I--what have I ever done, now that I come to think of it, to deserve those sacrifices? Have I ever even inconvenienced myself for others in any way? Have I ever repaid this debt? Have I in turn advanced the flag that they and hundreds of thousands of others, equally unselfish, carried forward? Have I ever considered my obligation to those who by their patient labors in the field of scientific discovery have contributed toward my well-being and the very continuance of my life? Or have I been content for all these years to reap where I have not sown? To accept, as a matter of course and as my due, the benefits others gave years of labor to secure for me? It is easy enough for me to say: No--that I have thought of them and am grateful to them. Perhaps I am, in a vague fashion. But has whatever feeling of obligation I may possess been evidenced in my conduct toward my fellows? I am proud of my father's heroic death at Gettysburg; in fact I am a member, by virtue of his rank in the Union Army, of what is called The Loyal Legion. But have I ever fully considered that he died for me? Have I been loyal to him? Would he be proud or otherwise--_is_ he proud or otherwise of me, his son? That is a question I can only answer after I have ascertained just what I am. Now for over quarter of a century I have worked hard--harder, I believe, than most men. From a child I was ambitious. As a boy, people would point to me and say that I would get ahead. Well, I have got ahead. Back in the town where I was born I am spoken of as a "big man." Old men and women stop me on the main street and murmur: "If only your father could see you now!" They all seem tremendously proud of me and feel confident that if he could see me he would be happy for evermore. And I know they are quite honest about it all. For they assume in their simple hearts that my success is a real success. Yet I have no such assurance about it. Every year I go back and address the graduating class in the high school--the high school I attended as a boy. And I am "Exhibit A"--the tangible personification of all that the fathers and mothers hope their children will become. It is the same way with the Faculty of my college. They have given me an honorary degree and I have given them a drinking fountain for the campus. We are a mutual-admiration society. I am always picked by my classmates to preside at our reunions, for I am the conspicuous, shining example of success among them. They are proud of me, without envy. "Well, old man," they say, "you've certainly made a name for yourself!" They take it for granted that, because I have made money and they read my wife's name in the society columns of the New York papers, I must be completely satisfied. And in a way I _am_ satisfied with having achieved that material success which argues the possession of brains and industry; but the encomiums of the high-school principal and the congratulations of my college mates, sincere and well-meaning as they are, no longer quicken my blood; for I know that they are based on a total ignorance of the person they seek to honor. They see a heavily built, well-groomed, shrewd-looking man, with clear-cut features, a ready smile, and a sort of brusque frankness that seems to them the index of an honest heart. They hear him speak in a straightforward, direct way about the "Old Home," and the "Dear Old College," and "All Our Friends"--quite touching at times, I assure you--and they nod and say, "Good fellow, this! No frills--straight from the heart! No wonder he has got on in the city! Sterling chap! Hurrah!" Perhaps, after all, the best part of me comes out on these occasions. But it is not the _me_ that I have worked for half a century to build up; it is rather what is left of the _me_ that knelt at my mother's side forty years ago. Yet I have no doubt that, should these good parents of mine see how I live in New York, they would only be the more convinced of the greatness of my success--the success to achieve which I have given the unremitting toil of thirty years. * * * * * And as I now clearly see that the results of this striving and the objects of my ambition have been largely, if not entirely, material, I shall take the space to set forth in full detail just what this material success amounts to, in order that I may the better determine whether it has been worth struggling for. Not only are the figures that follow accurate and honest, but I am inclined to believe that they represent the very minimum of expenditure in the class of New York families to which mine belongs. They may at first sight seem extravagant; but if the reader takes the trouble to verify them--as I have done, alas! many times to my own dismay and discouragement--he will find them economically sound. This, then, is the catalogue of my success. I possess securities worth about seven hundred and fifty thousand dollars and I earn at my profession from thirty to forty thousand dollars a year. This gives me an annual income of from sixty-five thousand to seventy-five thousand dollars. In addition I own a house on the sunny side of an uptown cross street near Central Park which cost me, fifteen years ago, one hundred and twenty thousand dollars, and is now worth two hundred and fifty thousand. I could sell it for that. The taxes alone amount to thirty-two hundred dollars--the repairs and annual improvements to about twenty-five hundred. As the interest on the value of the property would be twelve thousand five hundred dollars it will be seen that merely to have a roof over my head costs me annually over eighteen thousand dollars. My electric-light bills are over one hundred dollars a month. My coal and wood cost me even more, for I have two furnaces to heat the house, an engine to pump the water, and a second range in the laundry. One man is kept busy all the time attending to these matters and cleaning the windows. I pay my butler eighty dollars a month; my second man fifty-five; my valet sixty; my cook seventy; the two kitchen maids twenty-five each; the head laundress forty-five; the two second laundresses thirty-five each; the parlor maid thirty; the two housemaids twenty-five each; my wife's maid thirty-five; my daughter's maid thirty; the useful man fifty; the pantry maid twenty-five. My house payroll is, therefore, six hundred and fifty dollars a month, or seventy-eight hundred a year. We could not possibly get along without every one of these servants. To discharge one of them would mean that the work would have to be done in some other way at a vastly greater expense. Add this to the yearly sum represented by the house itself, together with the cost of heating and lighting, and you have twenty-eight thousand four hundred dollars. Unforeseen extras make this, in fact, nearer thirty thousand dollars. There is usually some alteration under way, a partition to be taken out, a hall to be paneled, a parquet floor to be relaid, a new sort of heating apparatus to be installed, and always plumbing. Generally, also, at least one room has to be done over and refurnished every year, and this is an expensive matter. The guest room, recently refurnished in this way at my daughter's request, cost thirty-seven hundred dollars. Since we average not more than two guests for a single night annually, their visits from one point of view will cost me this year eighteen hundred and fifty dollars apiece. Then, too, styles change. There is always new furniture, new carpets, new hangings--pictures to be bought. Last season my wife changed the drawing room from Empire to Louis Seize at a very considerable outlay. Our food, largely on account of the number of our servants, costs us from a thousand to twelve hundred dollars a month. In the spring and autumn it is a trifle less--in winter it is frequently more; but it averages, with wine, cigars, ice, spring water and sundries, over fifteen thousand dollars a year. We rent a house at the seashore or in the country in summer at from five to eight thousand dollars, and usually find it necessary to employ a couple of men about the place. Our three saddle-horses cost us about two thousand dollars for stabling, shoeing and incidentals; but they save me at least that in doctors' bills. Since my wife and daughters are fond of society, and have different friends and different nightly engagements, we are forced to keep two motors and two chauffeurs, one of them exclusively for night-work. I pay these men one hundred and twenty-five dollars each a month, and the garage bill is usually two hundred and fifty more, not counting tires. At least one car has to be overhauled every year at an average expense of from two hundred and fifty to five hundred dollars. Both cars have to be painted annually. My motor service winter and summer costs on a conservative estimate at least eight thousand dollars. I allow my wife five thousand dollars; my daughters three thousand each; and my son, who is not entirely independent, twenty-five hundred. This is supposed to cover everything; but it does not--it barely covers their bodies. I myself expend, having no vices, only about twenty-five hundred dollars. The bills of our family doctor, the specialists and the dentist are never less than a thousand dollars, and that is a minimum. They would probably average more than double that. Our spring trip to Paris, for rest and clothing, has never cost me less than thirty-five hundred dollars, and when it comes to less than five thousand it is inevitably a matter of mutual congratulation. Our special entertaining, our opera box, the theater and social frivolities aggregate no inconsiderable sum, which I will not overestimate at thirty-five hundred dollars. Our miscellaneous subscriptions to charity and the like come to about fifteen hundred dollars. The expenses already recited total nearly seventy-five thousand dollars, or as much as my maximum income. And this annual budget contains no allowance for insurance, books, losses at cards, transportation, sundries, the purchase of new furniture, horses, automobiles, or for any of that class of expenditure usually referred to as "principal" or "plant." I inevitably am obliged to purchase a new motor every two or three years--usually for about six thousand dollars; and, as I have said, the furnishing of our city house is never completed. It is a fact that for the last ten years I have found it an absolute impossibility to get along on seventy-five thousand dollars a year, even living without apparent extravagance. I do not run a yacht or keep hunters or polo ponies. My wife does not appear to be particularly lavish and continually complains of the insufficiency of her allowance. Our table is not Lucullan, by any means; and we rarely have game out of season, hothouse fruit or many flowers. Indeed, there is an elaborate fiction maintained by my wife, cook and butler that our establishment is run economically and strictly on a business basis. Perhaps it is. I hope so. I do not know anything about it. Anyhow, here is the smallest budget on which I can possibly maintain my household of five adults: ANNUAL BUDGET--MINIMUM--FOR FAMILY OF FIVE PERSONS Taxes on city house $ 3,200 Repairs, improvements and minor alterations 2,500 Rent of country house--average 7,000 Gardeners and stablemen, and so on 800 Servants' payroll 7,800 Food supplies 15,000 Light and heat--gas, electricity, coal and wood 2,400 Saddle-horses--board and so on 2,000 Automobile expenses 8,000 Wife's allowance--emphatically insufficient 5,000 Daughters' allowance--two 6,000 Son's allowance 2,500 Self--clubs, clothes, and so on 2,500 Medical attendance--including dentist 1,000 Charity 1,500 Travel--wife's annual spring trip to Paris 3,500 Opera, theater, music, entertaining at restaurants, and so on 3,500 _____ Total $74,200 A fortune in itself, you may say! Yet judged by the standards of expenditure among even the unostentatiously wealthy in New York it is moderate indeed. A friend of mine who has only recently married glanced over my schedule and said, "Why, it's ridiculous, old man! No one could live in New York on any such sum." Any attempt to "keep house" in the old-fashioned meaning of the phrase would result in domestic disruption. No cook who was not allowed to do the ordering would stay with us. It is hopeless to try to save money in our domestic arrangements. I have endeavored to do so once or twice and repented of my rashness. One cannot live in the city without motors, and there is no object in living at all if one cannot keep up a scale of living that means comfort and lack of worry in one's household. The result is that I am always pressed for money even on an income of seventy-five thousand dollars. And every year I draw a little on my capital. Sometimes a lucky stroke on the market or an unexpected fee evens things up or sets me a little ahead; but usually January first sees me selling a few bonds to meet an annual deficit. Needless to say, I pay no personal taxes. If I did I might as well give up the struggle at once. When I write it all down in cold words I confess it seems ridiculous. Yet my family could not be happy living in any other way. It may be remarked that the item for charity on the preceding schedule is somewhat disproportionate to the amount of the total expenditure. I offer no excuse or justification for this. I am engaged in an honest exposition of fact--for my own personal satisfaction and profit, and for what lessons others may be able to draw from it. My charities are negligible. The only explanation which suggests itself to my mind is that I lead so circumscribed and guarded a life that these matters do not obtrude themselves on me. I am not brought into contact with the maimed, the halt and the blind; if I were I should probably behave toward them like a gentleman. The people I am thrown with are all sleek and well fed; but even among those of my friends who make a fad of charity I have never observed any disposition to deprive themselves of luxuries for the sake of others. Outside of the really poor, is there such a thing as genuine charity among us? The church certainly does not demand anything approximating self-sacrifice. A few dollars will suffice for any appeal. I am not a professing Christian, but the church regards me tolerantly and takes my money when it can get it. But how little it gets! I give frequently--almost constantly--but in most instances my giving is less an act of benevolence than the payment of a tax upon my social standing. I am compelled to give. If I could not be relied upon to take tickets to charity entertainments and to add my name to the subscription lists for hospitals and relief funds I should lose my caste. One cannot be _too_ cold a proposition. I give to these things grudgingly and because I cannot avoid it. Of course the aggregate amount thus disposed of is really not large and I never feel the loss of it. Frankly, people of my class rarely inconvenience themselves for the sake of anybody, whether their own immediate friends or the sick, suffering and sorrowful. It is trite to say that the clerk earning one thousand dollars deprives himself of more in giving away fifty than the man with an income of twenty thousand dollars in giving away five thousand. It really costs the clerk more to go down into his pocket for that sum than the rich man to draw his check for those thousands. Where there is necessity for generous and immediate relief I occasionally, but very rarely, contribute two hundred and fifty or five hundred dollars. My donation is always known and usually is noticed with others of like amount in the daily papers. I am glad to give the money and I have a sensation of making a substantial sacrifice in doing so. Obviously, however, it has cost me really nothing! I spend two hundred and fifty dollars or more every week or so on an evening's entertainment for fifteen or twenty of my friends and think nothing of it. It is part of my manner of living, and my manner of living is an advertisement of my success--and advertising in various subtle ways is a business necessity. Yet if I give two hundred and fifty dollars to a relief fund I have an inflation of the heart and feel conscious of my generosity. I can frankly say, therefore, that so far as I am concerned my response to the ordinary appeal for charity is purely perfunctory and largely, if not entirely, dictated by policy; and the sum total of my charities on an income of seventy-five thousand dollars a year is probably less than fifteen hundred dollars, or about two per cent. Yet, thinking it over dispassionately, I do not conclude from this that I am an exceptionally selfish man. I believe I represent the average in this respect. I always respond to minor calls in a way that pleases the recipient and causes a genuine flow of satisfaction in my own breast. I toss away nickels, dimes and quarters with prodigality; and if one of the office boys feels out of sorts I send him off for a week's vacation on full pay. I make small loans to seedy fellows who have known better days and I treat the servants handsomely at Christmas. I once sent a boy to college--that is, I promised him fifty dollars a year. He died in his junior term, however. Sisters of Mercy, the postman, a beggar selling pencils or shoelaces--almost anybody, in short, that actually comes within range--can pretty surely count on something from me. But I confess I never go out of my way to look for people in need of help. I have not the time. Several of the items in my budget, however, are absurdly low, for the opera-box which, as it is, we share with several friends and which is ours but once in two weeks, alone costs us twelve hundred dollars; and my bill at the Ritz--where we usually dine before going to the theater or sup afterward--is apt to be not less than one hundred dollars a month. Besides, twenty-five hundred dollars does not begin to cover my actual personal expenses; but as I am accustomed to draw checks against my office account and thrust the money in my pocket, it is difficult to say just what I do cost myself. Moreover, a New York family like mine would have to keep surprisingly well in order to get along with but two thousand dollars a year for doctors. Even our dentist bills are often more than that. We do not go to the most fashionable operators either. There does not seem to be any particular way of finding out who the good ones are except by experiment. I go to a comparatively cheap one. Last month he looked me over, put in two tiny fillings, cleansed my teeth and treated my gums. He only required my presence once for half an hour, once for twenty minutes, and twice for ten minutes--on the last two occasions he filched the time from the occupant of his other chair. My bill was forty-two dollars. As he claims to charge a maximum rate of ten dollars an hour--which is about the rate for ordinary legal services--I have spent several hundred dollars' worth of my own time trying to figure it all out. But this is nothing to the expense incident to the straightening of children's teeth. When I was a child teeth seemed to take care of themselves, but my boy and girls were all obliged to spend several years with their small mouths full of plates, wires and elastic bands. In each case the cost was from eighteen hundred to two thousand dollars. A friend of mine with a large family was compelled to lay out during the tooth-growing period of his offspring over five thousand dollars a year for several years. Their teeth are not straight at that. Then, semioccasionally, weird cures arise and seize hold of the female imagination and send our wives and daughters scurrying to the parlors of fashionable specialists, who prescribe long periods of rest at expensive hotels--a room in one's own house will not do--and strange diets of mush and hot water, with periodical search parties, lighted by electricity, through the alimentary canal. One distinguished medico's discovery of the terra incognita of the stomach has netted him, I am sure, a princely fortune. There seems to be something peculiarly fascinating about the human interior. One of our acquaintances became so interested in hers that she issued engraved invitations for a fashionable party at which her pet doctor delivered a lecture on the gastro-intestinal tract. All this comes high, and I have not ventured to include the cost of such extravagances in my budget, though my wife has taken cures six times in the last ten years, either at home or abroad. And who can prophesy the cost of the annual spring jaunt to Europe? I have estimated it at thirty-five hundred dollars; but, frankly, I never get off with any such trifling sum. Our passage alone costs us from seven hundred to a thousand dollars, or even more and our ten-days' motor trip--the invariable climax of the expedition rendered necessary by the fatigue incident to shopping--at least five hundred dollars. Our hotel bills in Paris, our taxicabs, theater tickets, and dinners at expensive restaurants cost us at least a thousand dollars, without estimating the total of those invariable purchases that are paid for out of the letter of credit and not charged to my wife's regular allowance. Even in Paris she will, without a thought, spend fifty dollars at Reboux' for a simple spring hat--and this is not regarded as expensive. Her dresses cost as much as if purchased on Fifth Avenue and I am obliged to pay a sixty per cent duty on them besides. The restaurants of Paris--the chic ones--charge as much as those in New York; in fact, chic Paris exists very largely for the exploitation of the wives of rich Americans. The smart French woman buys no such dresses and pays no such prices. She knows a clever little modiste down some alley leading off the Rue St. Honoré who will saunter into Worth's, sweep the group of models with her eye, and go back to her own shop and turn out the latest fashions at a quarter of the money. A French woman in society will have the same dress made for her by her own dressmaker for seventy dollars for which an American will cheerfully pay three hundred and fifty. And the reason is, that she has been taught from girlhood the relative values of things. She knows that mere clothes can never really take the place of charm and breeding; that expensive entertainments, no matter how costly and choice the viands, can never give equal pleasure with a cup of tea served with vivacity and wit; and that the best things of Paris are, in fact, free to all alike--the sunshine of the boulevards, the ever-changing spectacle of the crowds, the glamour of the evening glow beyond the Hôtel des Invalides, and the lure of the lamp-strewn twilight of the Champs Elysées. So she gets a new dress or two and, after the three months of her season in the Capital are over, is content to lead a more or less simple family life in the country for the rest of the year. One rarely sees a real Parisian at one of the highly advertised all-night resorts of Paris. No Frenchman would pay the price. An acquaintance of mine took his wife and a couple of friends one evening to what is known as L'Abbaye, in Montmartre. Knowing that it had a reputation for being expensive, he resisted, somewhat self-consciously, the delicate suggestions of the head waiter and ordered only one bottle of champagne, caviar for four, and a couple of cigars. After watching the dancing for an hour he called for his bill and found that the amount was two hundred and fifty francs. Rather than be conspicuous he paid it--foolishly. But the American who takes his wife abroad must have at least one vicarious taste of fast life, no matter what it costs, and he is a lucky fellow who can save anything out of a bill of exchange that has cost him five thousand dollars. After dispassionate consideration of the matter I hazard the sincere opinion that my actual disbursements during the last ten years have averaged not less than one hundred thousand dollars a year. However, let us be conservative and stick to our original figure of seventy-five thousand dollars. It costs me, therefore, almost exactly two hundred dollars a day to support five persons. We all of us complain of what is called the high cost of living, but men of my class have no real knowledge of what it costs them to live. The necessaries are only a drop in the bucket. It is hardly worth while to bother over the price of rib roast a pound, or fresh eggs a dozen, when one is smoking fifty-cent cigars. Essentially it costs me as much to lunch off a boiled egg, served in my dining room at home, as to carve the breast off a canvasback. At the end of the month my bills would not show the difference. It is the overhead--or, rather, in housekeeping, the underground--charge that counts. That boiled egg or the canvasback represents a running expense of at least a hundred dollars a day. Slight variations in the cost of foodstuffs or servants' wages amount to practically nothing. And what do I get for my two hundred dollars a day and my seventy-five thousand dollars a year that the other fellow does not enjoy for, let us say, half the money? Let us readjust the budget with an idea to ascertaining on what a family of five could live in luxury in the city of New York a year. I could rent a good house for five thousand dollars and one in the country for two thousand dollars; and I would have no real-estate taxes. I could keep eight trained servants for three thousand dollars and reduce the cost of my supplies to five thousand almost without knowing it. Of course my light and heat would cost me twelve hundred dollars and my automobile twenty-five hundred. My wife, daughters and son ought to be able to manage to dress on five thousand dollars, among them. I could give away fifteen hundred dollars and allow one thousand for doctors' bills, fifteen hundred for my own expenses, and still have twenty-three hundred for pleasure--and be living on thirty thousand dollars a year in luxury. I could even then entertain, go to the theater, and occasionally take my friends to a restaurant. And what would I surrender? My saddle-horses, my extra motor, my pretentious houses, my opera box, my wife's annual spending bout in Paris--that is about all. And I would have a cash balance of forty-five thousand dollars. REVISED BUDGET Rent--City and country $7,000 Servants 3,000 Supplies 5,000 Light and heat 1,200 Motor 2,500 Allowance to family 5,000 Charity 1,500 Medical attendance 1,000 Self 1,500 Travel, pleasure, music and sundries 2,300 ______ Total $30,000 In a smaller city I could do the same thing for half the money--fifteen thousand dollars; in Rome, Florence or Munich I could live like a prince on half the sum. I am paying apparently forty-five thousand dollars each year for the veriest frills of existence--for geranium powder in my bath, for fifteen extra feet in the width of my drawing room, for a seat in the parterre instead of the parquet at the opera, for the privilege of having a second motor roll up to the door when it is needed, and that my wife may have seven new evening dresses each winter instead of two. And in reality these luxuries mean nothing to me. I do not want them. I am not a whit more comfortable with than without them. If an income tax should suddenly cut my bank account in half it would not seriously inconvenience me. No financial cataclasm, however dire, could deprive me of the genuine luxuries of my existence. Yet in my revised schedule of expenditure I would still be paying nearly a hundred dollars a day for the privilege of living. What would I be getting for my money--even then? What would I receive as a _quid pro quo_ for my thirty thousand dollars? I am not enough of a materialist to argue that my advantage over my less successful fellow man lies in having a bigger house, men servants instead of maid servants, and smoking cigars alleged to be from Havana instead of from Tampa; but I believe I am right in asserting that my social opportunities--in the broader sense--are vastly greater than his. I am meeting bigger men and have my fingers in bigger things. I give orders and he takes them. My opinion has considerable weight in important matters, some of which vitally affect large communities. My astuteness has put millions into totally unexpected pockets and defeated the faultily expressed intentions of many a testator. I can go to the White House and get an immediate hearing, and I can do more than that with judges of the Supreme Court in their private chambers. In other words I am an active man of affairs, a man among men, a man of force and influence, who, as we say, "cuts ice" in the metropolis. But the economic weakness in the situation lies in the fact that a boiled egg only costs the ordinary citizen ten cents and it costs me almost its weight in gold. Compare this de-luxe existence of mine with that of my forebears. We are assured by most biographers that the subject of their eulogies was born of poor but honest parents. My own parents were honest, but my father was in comfortable circumstances and was able to give me the advantages incident to an education, first at the local high school and later at college. I did not as a boy get up while it was still dark and break the ice in the horsetrough in order to perform my ablutions. I was, to be sure, given to understand--and always when a child religiously believed--that this was my father's unhappy fate. It may have been so, but I have a lingering doubt on the subject that refuses to be dissipated. I can hardly credit the idea that the son of the village clergyman was obliged to go through any such rigorous physical discipline as a child. Even in 1820 there were such things as hired men and tradition declares that the one in my grandparents' employ was known as Jonas, had but one good eye and was half-witted. It modestly refrains from asserting that he had only one arm and one leg. My grandmother did the cooking--her children the housework; but Jonas was their only servant, if servant he can be called. It is said that he could perform wonders with an ax and could whistle the very birds off the trees. Some time ago I came upon a trunkful of letters written by my grandfather to my father in 1835, when the latter was in college. They were closely written with a fine pen in a small, delicate hand, and the lines of ink, though faded, were like steel engraving. They were stilted, godly--in an ingenuous fashion--at times ponderously humorous, full of a mild self-satisfaction, and inscribed under the obvious impression that only the writer could save my father's soul from hell or his kidneys from destruction. The goodness of the Almighty, as exemplified by His personal attention to my grandfather, the efficacy of oil distilled from the liver of the cod, and the wisdom of Solomon, came in for an equal share of attention. How the good old gentleman must have enjoyed writing those letters! And, though I have never written my own son three letters in my life, I suppose the desire of self-expression is stirring in me now these seventy-eight years later. I wonder what he would have said could he read these confessions of mine--he who married my grandmother on a capital of twenty-five dollars and enough bleached cotton to make half a dozen shirts! My annual income would have bought the entire county in which he lived. My son scraped through Harvard on twenty-five hundred dollars a year. I have no doubt that he left undisclosed liabilities behind him. Most of this allowance was spent on clothes, private commons and amusement. Lying before me is my father's term bill at college for the first half year of 1835. The items are: To tuition $12.00 Room rent 3.00 Use of University Library 1.00 Servants' hire, printing, and so on 2.00 Repairs .80 Damage for glass .09 Commons bill, 15-1/2 weeks at $1.62 a week 25.11 Steward's salary 2.00 Public fuel .50 Absent from recitation without excuse--once .03 ------- Total $46.53 The glass damage at nine cents and the three cents for absence without excuse give me joy. Father was human, after all! Economically speaking, I do not think that his clothes cost him anything. He wore my grandfather's old ones. There were no amusements in those days, except going to see the pickled curios in the old Boston Museum. I have no doubt he drove to college in the family chaise--if there was one. I do not think that, in fact, there was. On a conservative estimate he could not have cost my grandfather much, if anything, over a hundred dollars a year. On this basis I could, on my present income, send seven hundred and fifty fathers to college annually! A curious thought, is it not? Undoubtedly my grandfather went barefoot and trudged many a weary mile, winter and summer, to and from the district school. He worked his way through college. He married and reared a family. He educated my father. He watched over his flock in sickness and in health, and he died at a ripe old age, mourned by the entire countryside. My father, in his turn, was obliged to carve out his own fate. He left the old home, moved to the town where I was born, and by untiring industry built up a law practice which for those days was astonishingly lucrative. Then, as I have said, the war broke out and, enlisting as a matter of course, he met death on the battlefield. During his comparatively short life he followed the frugal habits acquired in his youth. He was a simple man. Yet I am his son! What would he say could he see my valet, my butler, my French cook? Would he admire and appreciate my paintings, my _objets d'art,_ my rugs and tapestries, my rare old furniture? As an intelligent man he would undoubtedly have the good taste to realize their value and take satisfaction in their beauty; but would he be glad that I possessed them? That is a question. Until I began to pen these confessions I should have unhesitatingly answered it in the affirmative. Now I am inclined to wonder a little. I think it would depend on how far he believed that my treasures indicated on my own part a genuine love of art, and how far they were but the evidences of pomp and vainglory. Let me be honest in the matter. I own some masterpieces of great value. At the time of their purchase I thought I had a keen admiration for them. I begin to suspect that I acquired them less because I really cared for such things than because I wished to be considered a connoisseur. There they hang--my Corots, my Romneys, my Teniers, my Daubignys. But they might as well be the merest chromos. I never look at them. I have forgotten that they exist. So have the rest of my family. It is the same way with my porcelains and tapestries. Of course they go to make up the _tout ensemble_ of a harmonious and luxurious home, but individually they mean nothing to me. I should not miss them if they were all swept out of existence tomorrow by a fire. I am no happier in my own house than in a hotel. My pictures are nothing but so much furniture requiring heavy insurance. It is somewhat the same with our cuisine. My food supply costs me forty dollars a day. We use the choicest teas, the costliest caviar and relishes, the richest sterilized milk and cream, the freshest eggs, the choicest cuts of meat. We have course after course at lunch and dinner; yet I go to the table without an appetite and my food gives me little pleasure. But this style of living is the concrete expression of my success. Because I have risen above my fellows I must be surrounded by these tangible evidences of prosperity. I get up about nine o'clock in the morning unless I have been out very late the night before, in which case I rest until ten or later. I step into a porcelain tub in which my servant has drawn a warm bath of water filtered by an expensive process which makes it as clear and blue as crystal. When I leave my bath my valet hands me one by one the garments that have been carefully laid out in order. He is always hovering round me, and I rather pride myself on the fact that I lace my own shoes and brush my own hair. Then he gives me a silk handkerchief and I stroll into my upstairs sitting room ready for breakfast. My daughters are still sleeping. They rarely get up before eleven in the morning, and my wife and I do not, as a rule, breakfast together. We have tried that arrangement and found it wanting, for we are slightly irritable at this hour. My son has already gone downtown. So I enter the chintz-furnished room alone and sit down by myself before a bright wood fire and glance at the paper, which the valet has ironed, while I nibble an egg, drink a glass of orange juice, swallow a few pieces of toast and quaff a great cup of fragrant coffee. Coffee! Goddess of the nerve-exhausted! Sweet invigorator of tired manhood! Savior of the American race! I could not live without you! One draft at your Pyrenean fountain and I am young again! For a moment the sun shines as it used to do in my boyhood's days; my blood quickens; I am eager to be off to business--to do, no matter what. I enter the elevator and sink to the ground floor. My valet and butler are waiting, the former with my coat over his arm, ready to help me into it. Then he hands me my hat and stick, while the butler opens the front door and escorts me to my motor. The chauffeur touches his hat. I light a small and excellent Havana cigar and sink back among the cushions. The interior of the car smells faintly of rich upholstery and violet perfume. My daughters have been to a ball the night before. If it is fine I have the landaulette hood thrown open and take the air as far as Washington Square--if not, I am deposited at the Subway. Ten o'clock sees me at my office. The effect of the coffee has begun to wear off slightly. I am a little peevish with my secretary, who has opened and arranged all my letters on my desk. There are a pile of dividend checks, a dozen appeals for charity and a score of letters relating to my business. I throw the begging circulars into the waste-basket and dictate most of my answers in a little over half an hour. Then come a stream of appointments until lunchtime. On the top floor of a twenty-story building, its windows commanding a view of all the waters surrounding the end of Manhattan Island, is my lunch club. Here gather daily at one o'clock most of the men with whom I am associated--bankers, railroad promoters and other lawyers. I lunch with one or more of them. A cocktail starts my appetite, for I have no desire for food; and for the sake of appearances I manage to consume an egg Benedictine and a ragout of lamb, with a dessert. Then we wander into the smoking room and drink black coffee and smoke long black cigars. I have smoked a cigar or two in my office already and am beginning, as usual, to feel a trifle seedy. Here we plan some piece of business or devise a method of escaping the necessity of fulfilling some corporate obligation. Two or half-past finds me in my office again. The back of the day is broken. I take things more easily. Later on I smoke another cigar. I discuss general matters with my junior partners. At half-past four I enter my motor, which is waiting at the Wall Street entrance of the building. At my uptown club the men are already dropping in and gathering round the big windows. We all call each other by our first names, yet few of us know anything of one another's real character. We have a bluff heartiness, a cheerful cynicism that serves in place of sincerity, and we ask no questions. Our subjects of conversation are politics, the stock market, "big" business, and the more fashionable sports. There is no talk of art or books, no discussion of subjects of civic interest. After our cocktails we usually arrange a game of bridge and play until it is time to go home to dress for dinner. Until this time, usually, I have not met my wife and daughters since the night before. They have had their own individual engagements for luncheon and in the afternoon, and perhaps have not seen each other before during the day. But we generally meet at least two or three times a week on the stairs or in the hall as we are going out. Sometimes, also, I see my son at this time. It will be observed that our family life is not burdensome to any of us:--not that we do not wish to see one another, but we are too busy to do so. My daughters seem to be fond of me. They are proud of my success and their own position; in fact they go out in the smartest circles. They are smarter, indeed, than their mother and myself; for, though we know everybody in society, we have never formed a part of the intimate inner Newport circle. But my daughters are inside and in the very center of the ring. You can read their names as present at every smart function that takes place. From Friday until Monday they are always in the country at week-end parties. They are invited to go to Bermuda, Palm Beach, California, Aiken and the Glacier National Park. They live on yachts and in private cars and automobiles. They know all the patter of society and everything about everybody. They also talk surprisingly well about art, music and international politics. They are as much at home in Rome, Paris and London as they are in New York, and are as familiar with Scotland as Long Island. They constantly amaze me by the apparent scope of their information. They are women of the world in a sense unheard of by my father's generation. They have been presented at court in London, Berlin and Rome, and have had a social season at Cairo; in fact I feel at a great personal disadvantage in talking with them. They are respectful, very sweet in a self-controlled and capable sort of way, and, so far as I can see, need no assistance in looking out for themselves. They seem to be quite satisfied with their mode of life. They do as they choose, and ask for no advice from either their mother or myself. My boy also leads his own life. He is rarely at home except to sleep. I see less of him than of my daughters. During the day he is at the office, where he is learning to be a lawyer. At wide intervals we lunch together; but I find that he is interested in things which do not appeal to me at all. Just at present he has become an expert--almost a professional--dancer to syncopated music. I hear of him as dancing for charity at public entertainments, and he is in continual demand for private theatricals and parties. He is astonishingly clever at it. Yet I cannot imagine Daniel Webster or Rufus Choate dancing in public even in their leisure moments. Perhaps, however, it is better for him to dance than to do some other things. It is good exercise; and, to be fair with him, I cannot imagine Choate or Webster playing bridge or taking scented baths. But, frankly, it is a far cry from my clergyman grandfather to my ragtime dancing offspring. Perhaps, however, the latter will serve his generation in his own way. It may seem incredible that a father can be such a stranger to his children, but it is none the less a fact. I do not suppose we dine together as a family fifteen times in the course of the winter. When we do so we get along together very nicely, but I find myself conversing with my daughters much as if they were women I had met casually out at dinner. They are literally "perfect ladies." When they were little I was permitted a certain amount of decorous informality, but now I have to be very careful how I kiss them on account of the amount of powder they use. They have, both of them, excellent natural complexions, but they are not satisfied unless their noses have an artificial whiteness like that of marble. I suspect, also, that their lips have a heightened color. At all events I am careful to "mind the paint." But they are--either because of these things or in spite of them--extraordinarily pretty girls--prettier, I am forced to admit, than their mother was at their age. Now, as I write, I wonder to what end these children of mine have been born into the world--how they will assist in the development of the race to a higher level. For years I slaved at the office--early, late, in the evenings, often working Sundays and holidays, and foregoing my vacation in the summer. Then came the period of expansion. My accumulations doubled and trebled. In one year I earned a fee in a railroad reorganization of two hundred thousand dollars. I found myself on Easy Street. I had arrived--achieved my success. During all those years I had devoted myself exclusively to the making of money. Now I simply had to spend it and go through the motions of continuing to work at my profession. My wife and I became socially ambitious. She gave herself to this end eventually with the same assiduity I had displayed at the law. It is surprising at the present time to recall that it was not always easy to explain the ultimate purpose in view. Alas! What is it now? Is it other than that expressed by my wife on the occasion when our youngest daughter rebelled at having to go to a children's party? "Why must I go to parties?" she insisted. "In order," replied her mother, "that you may be invited to other parties." It was the unconscious epitome of my consort's theory of the whole duty of man. CHAPTER II MY FRIENDS By virtue of my being a successful man my family has an established position in New York society. We are not, to be sure--at least, my wife and I are not--a part of the sacrosanct fifty or sixty who run the show and perform in the big ring; but we are well up in the front of the procession and occasionally do a turn or so in one of the side rings. We give a couple of dinners each week during the season and a ball or two, besides a continuous succession of opera and theater parties. Our less desirable acquaintances, and those toward whom we have minor social obligations, my wife disposes of by means of an elaborate "at home," where the inadequacies of the orchestra are drowned in the roar of conversation, and which a sufficient number of well-known people are good-natured enough to attend in order to make the others feel that the occasion is really smart and that they are not being trifled with. This method of getting rid of one's shabby friends and their claims is, I am informed, known as "killing them off with a tea." We have a slaughter of this kind about once in two years. In return for these courtesies we are invited yearly by the élite to some two hundred dinners, about fifty balls and dances, and a large number of miscellaneous entertainments such as musicales, private theatricals, costume affairs, bridge, poker, and gambling parties; as well as in the summer to clambakes--where champagne and terrapin are served by footmen--and other elegant rusticities. Besides these _chic_ functions we are, of course, deluged with invitations to informal meals with old and new friends, studio parties, afternoon teas, highbrow receptions and _conversaziones_, reformers' lunch parties, and similar festivities. We have cut out all these long ago. Keeping up with our smart acquaintances takes all our energy and available time. There are several old friends of mine on the next block to ours whom I have not met socially for nearly ten years. We have definitely arrived however. There is no question about that. We are in society and entitled to all the privileges pertaining thereto. What are they? you ask. Why, the privilege of going to all these balls, concerts and dinners, of course; of calling the men and women one reads about in the paper by their first names; of having the satisfaction of knowing that everybody who knows anything knows we are in society; and of giving our daughters and son the chance to enjoy, without any effort on their part, these same privileges that their parents have spent a life of effort to secure. Incidentally, I may add, our offspring will, each of them--if I am not very much mistaken--marry money, since I have observed a certain frankness on their part in this regard, which seems to point that way and which, if not admirable in itself, at least does credit to their honesty. Now it is undubitably the truth that my wife regards our place among the socially elect as the crowning achievement--the great desideratum--of our joint career. It is what we have always been striving for. Without it we--both of us--would have unquestionably acknowledged failure. My future, my reputation, my place at the bar and my domestic life would have meant nothing at all to us, had not the grand cordon of success been thrown across our shoulders by society. * * * * * As I have achieved my ambition in this respect it is no small part of my self-imposed task to somewhat analyze this, the chief reward of my devotion to my profession, my years of industrious application, my careful following of the paths that other successful Americans have blazed for me. I must confess at the outset that it is ofttimes difficult to determine where the pleasure ends and work begins. Even putting it in this way, I fear I am guilty of a euphemism; for, now that I consider the matter honestly, I recall no real pleasure or satisfaction derived from the various entertainments I have attended during the last five or ten years. In the first place I am invariably tired when I come home at night--less perhaps from the actual work I have done at my office than from the amount of tobacco I have consumed and the nervous strain attendant on hurrying from one engagement to another and keeping up the affectation of hearty good-nature which is part of my stock in trade. At any rate, even if my body is not tired, my head, nerves and eyes are distinctly so. I often feel, when my valet tells me that the motor is ordered at ten minutes to eight, that I would greatly enjoy having him slip into the dress-clothes he has so carefully laid out on my bed and go out to dinner in my place. He would doubtless make himself quite as agreeable as I. And then--let me see--what would I do? I sit with one of my accordion-plaited silk socks half on and surrender myself to all the delights of the most reckless imagination! Yes, what would I choose if I could do anything in the world for the next three hours? First, I think, I would like an egg--a poached egg, done just right, like a little snowball, balanced nicely in the exact center of a hot piece of toast! My mouth waters. Aunt Jane used to do them like that. And then I would like a crisp piece of gingerbread and a glass of milk. Dress? Not on your life! Where is that old smoking-jacket of mine? Not the one with Japanese embroidery on it--no; the old one. Given away? I groan aloud. Well, the silk one will have to do--and a pair of comfortable slippers! Where is that old brier pipe I keep to go a-fishing? Now I want a book--full of the sea and ships--of pirates and coral reefs--yes, Treasure Island; of course that's it--and Long John Silver and the Black Spot. "Beg pardon, sir, but madam has sent me up to say the motor is waiting," admonishes my English footman respectfully. Gone--gone is my poached egg, my pipe, my dream of the Southern Seas! I dash into my evening clothes under the solicitous guidance of my valet and hastily descend in the electric elevator to the front hall. My wife has already taken her seat in the motor, with an air of righteous annoyance, of courteously suppressed irritation. The butler is standing on the doorstep. The valet is holding up my fur coat expectantly. I am sensible of an atmosphere of sad reproachfulness. Oh, well! I thrust my arms into my coat, grasp my white gloves and cane, receive my hat and wearily start forth on my evening's task of being entertained; conscious as I climb into the motor that this curious form of so-called amusement has certain rather obvious limitations. For what is its _raison d'être_? It is obvious that if I know any persons whose society and conversation are likely to give me pleasure I can invite them to my own home and be sure of an evening's quiet enjoyment. But, so far as I can see, my wife does not invite to our house the people who are likely to give either her or myself any pleasure at all, and neither am I likely to meet such people at the homes of my friends. The whole thing is a mystery governed by strange laws and curious considerations of which I am kept in utter ignorance; in fact, I rarely know where I am going to dine until I arrive at the house. On several occasions I have come away without having any very clear idea as to where I have been. "The Hobby-Smiths," my wife will whisper as we go up the steps. "Of course you've heard of her! She is a great friend of Marie Van Duser, and her husband is something in Wall Street." That is a comparatively illuminating description. At all events it insures some remote social connection with ourselves, if only through Miss Van Duser and Wall Street. Most of our hosts are something in Wall Street. Occasionally they are something in coal, iron, oil or politics. I find a small envelope bearing my name on a silver tray by the hatstand and open it suspiciously as my wife is divested of her wraps. Inside is a card bearing in an almost illegible scrawl the words: Mrs. Jones. I hastily refresh my recollection as to all the Joneses of my acquaintance, whether in coal, oil or otherwise; but no likely candidate for the distinction of being the husband of my future dinner companion comes to my mind. Yet there is undoubtedly a Jones. But, no! The lady may be a divorcée or a widow. I recall no Mrs. Jones, but I visualize various possible Miss Joneses--ladies very fat and bursting; ladies scrawny, lean and sardonic; facetious ladies; heavy, intelligent ladies; aggressive, militant ladies. My spouse has turned away from the mirror and the butler has pulled back the portières leading into the drawing room. I follow my wife's composed figure as she sweeps toward our much-beplumed hostess and find myself in a roomful of heterogeneous people, most of whom I have never seen before and whose personal appearance is anything but encouraging. "This is very _nice_!" says our hostess--accent on the nice. "So _nice_ of you to think of us!" answers my wife. We shake hands and smile vaguely. The butler rattles the portières and two more people come in. "This _is_ very nice!" says the hostess again--accent on the is. It may be here noted that at the conclusion of the evening each guest murmurs in a simpering, half-persuasive yet consciously deprecatory manner--as if apologizing for the necessity of so bald a prevarication--"Good-night! We have had _such_ a good time! _So_ good of you to ask us!" This epilogue never changes. Its phrase is cast and set. The words may vary slightly, but the tone, emphasis and substance are inviolable. Yet, disregarding the invocation good-night! the fact remains that neither have you had a good time nor was your host in any way good or kind in asking you. Returning to the moment at which you have made your entrance and been received and passed along, you gaze vaguely round you at the other guests, greeting those you know with exaggerated enthusiasm and being the conscious subject of whispered criticism and inquiry on the part of the others. You make your way to the side of a lady whom you have previously encountered at a similar entertainment and assert your delight at revamping the fatuous acquaintanceship. Her facetiousness is elephantine, but the relief of conversation is such that you laugh loudly at her witticisms and simper knowingly at her platitudes--both of which have now been current for several months. The edge of your delight is, however, somewhat dulled by the discovery that she is the lady whom fate has ordained that you shall take in to dinner--a matter of which you were sublimely unconscious owing to the fact that you had entirely forgotten her name. As the couples pair off to march to the dining room and the combinations of which you may form a possible part are reduced to a scattering two or three, you realize with a shudder that the lady beside you is none other than Mrs. Jones--and that for the last ten minutes you have been recklessly using up the evening's conversational ammunition. With a sinking heart you proffer your arm, wondering whether it will be possible to get through the meal and preserve the fiction of interest. You wish savagely that you could turn on her and exclaim honestly: "Look here, my good woman, you are all right enough in your own way, but we have nothing in common; and this proposed evening of enforced companionship will leave us both exhausted and ill-tempered. We shall grin and shout meaningless phrases over the fish, entrée and salad about life, death and the eternal verities; but we shall be sick to death of each other in ten minutes. Let's cut it out and go home!" You are obliged, however, to escort your middle-aged comrade downstairs and take your seat beside her with a flourish, as if you were playing Rudolph to her Flavia. Then for two hours, with your eyes blinded by candlelight and electricity, you eat recklessly as you grimace first over your left shoulder and then over your right. It is a foregone conclusion that you will have a headache by the time you have turned, with a sensation of momentary relief, to your "fair companion" on the other side. Have you enjoyed yourself? Have you been entertained? Have you profited? The questions are utterly absurd. You have _suffered_. You have strained your eyes, overloaded your stomach, and wasted three hours during which you might have been recuperating from your day's work or really amusing yourself with people you like. This entirely conventional form of amusement is, I am told, quite unknown in Europe. There are, to be sure, occasional formal banquets, which do not pretend to be anything but formal. A formal banquet would be an intense relief, after the heat, noise, confusion and pseudo-informality of a New York dinner. The European is puzzled and baffled by one of our combined talk-and-eating bouts. A nobleman from Florence recently said to me: "At home, when we go to other people's houses it is for the purpose of meeting our own friends or our friend's friends. We go after our evening meal and stay as long as we choose. Some light refreshment is served, and those who wish to do so smoke or play cards. The old and the young mingle together. It is proper for each guest to make himself agreeable to all the others. We do not desire to spend money or to make a fête. At the proper times we have our balls and _festas_. "But here in New York each night I have been pressed to go to a grand entertainment and eat a huge dinner cooked by a French chef and served by several men servants, where I am given one lady to talk to for several hours. I must converse with no one else, even if there is a witty, beautiful and charming woman directly opposite me; and as I talk and listen I must consume some ten or twelve courses or fail to do justice to my host's hospitality. I am given four or five costly wines, caviar, turtle soup, fish, mousse, a roast, partridge, pâté de fois gras, glacés, fruits, bonbons, and cigars costing two francs each. Not to eat and drink would be to insult the friend who is paying at least forty or fifty francs for my dinner. But I cannot enjoy a meal eaten in such haste and I cannot enjoy talking to one strange lady for so long. "Then the men retire to a chamber from which the ladies are excluded. I must talk to some man. Perhaps I have seen an attractive woman I wish to meet. It is hopeless. I must talk to her husband! At the end of three-quarters of an hour the men march to the drawing room, and again I talk to some one lady for half an hour and then must go home! It may be only half-past ten o'clock, but I have no choice. Away I must go. I say good-night. I have eaten a huge dinner; I have talked to one man and three ladies; I have drunk a great deal of wine and my head is very tired. "Nineteen other people have had the same experience, and it has cost my host from five hundred to a thousand francs--or, as you say here, from one hundred to two hundred dollars. And why has he spent this sum of money? Pardon me, my friend, if I say that it could be disbursed to much better advantage. Should my host come to Florence I should not _dare_ to ask him to dinner, for we cannot afford to have these elaborate functions. If he came to my house he would have to dine _en famille_. Here you feast every night in the winter. Why? Every day is not a feast day!" I devote space and time to this subject commensurate with what seems to me to be its importance. Dining out is the metropolitan form of social entertainment for the well-to-do. I go to such affairs at least one hundred nights each year. That is a large proportion of my whole life and at least one-half of all the time at my disposal for recreation. So far as I can see, it is totally useless and a severe drain on one's nervous centers. It has sapped and is sapping my vitality. During the winter I am constantly tired. My head aches a large part of the time. I can do only a half--and on some days only a third--as much work as I could at thirty-five. I wake with a thin, fine line of pain over my right eye, and a heavy head. A strong cup of coffee sets me up and I feel better; but as the morning wears on, especially if I am nervous, the weariness in my head returns. By luncheon time I am cross and upset. Often by six o'clock I have a severe sick headache. When I do not have a headache I am usually depressed; my brain feels like a lump of lead. And I know precisely the cause: It is that I do not give my nerve-centers sufficient rest. If I could spend the evenings--or half of them--quietly I should be well enough; but after I am tired out by a day's work I come home only to array myself to go out to saw social wood. I never get rested! My head gets heavier and heavier and finally gives way. There is no immediate cause. It is the fact that my nervous system gets more and more tired without any adequate relief. The feeling of complete restedness, so far as my brain is concerned, is one I almost never experience. When I do wake up with my head clear and light my heart sings for joy. My effectiveness is impaired by weariness and overeating, through a false effort at recuperation. I have known this for a long time, but I have seen no escape from it. Social life is one of the objects of living in New York; and social life to ninety per cent of society people means nothing but eating one another's dinners. Men never pay calls or go to teas. The dinner, which has come to mean a heavy, elaborate meal, eaten amid noise, laughter and chatter, at great expense, is the expression of our highest social aspirations. Thus it would seem, though I had not thought of it before, that I work seven or eight hours every day in order to make myself rather miserable for the rest of the time. "I am going to lie down and rest this afternoon," my wife will sometimes say. "We're dining with the Robinsons." Extraordinary that pleasure should be so exhausting as to require rest in anticipation! Dining with these particular and other in-general Robinsons has actually become a physical feat of endurance--a _tour de force_, like climbing the Matterhorn or eating thirteen pounds of beefsteak at a sitting. Is it a reminiscence of those dim centuries when our ancestors in the forests of the Elbe sat under the moss-hung oaks and stuffed themselves with roast ox washed down with huge skins of wine? Or is it a custom born of those later days when, round the blazing logs of Canadian campfires, our Indian allies gorged themselves into insensibility to the sound of the tom-tom and the chant of the medicine-man--the latter quite as indispensable now as then? If I should be called on to explain for what reason I am accustomed to eat not wisely but too well on these joyous occasions, I should be somewhat at a loss for any adequate reply. Perhaps the simplest answer would be that I have just imbibed a cocktail and created an artificial appetite. It is also probable that, in my efforts to appear happy and at ease, to play my part as a connoisseur of good things, and to keep the conversational ball in the air, I unconsciously lose track of the number of courses I have consumed. It is also a matter of habit. As a boy I was compelled to eat everything on my plate; and as I grew older I discovered that in our home town it was good manners to leave nothing undevoured and thus pay a concrete tribute to the culinary ability of the hostess. Be that as it may, I have always liked to eat. It is almost the only thing left that I enjoy; but, even so, my palate requires the stimulus of gin. I know that I am getting fat. My waistcoats have to be let out a little more every five or six months. Anyhow, if the men did not do their part there would be little object for giving dinner parties in these days when slender women are the fashion. After the long straight front and the habit back, social usage is frowning on the stomach, hips and other heretofore not unadmired evidences of robust nutrition. Temperance, not to say total abstinence, has become _de rigueur_ among the ladies. My dinner companion nibbles her celery, tastes the soup, waves away fish, entrée and roast, pecks once or twice at the salad, and at last consumes her ration of ice-cream with obvious satisfaction. If there is a duck--well, she makes an exception in the case of duck--at six dollars and a half a pair. A couple of hothouse grapes and she is done. It will be observed that this gives her all the more opportunity for conversation--a doubtful blessing. On the other hand, there is an equivalent economic waste. I have no doubt each guest would prefer to have set before her a chop, a baked potato and a ten-dollar goldpiece. It would amount to the same thing, so far as the host is concerned. * * * * * I had, until recently, assumed with some bitterness that my dancing days were over. My wife and I went to balls, to be sure, but not to dance. We left that to the younger generation, for the reason that my wife did not care to jeopardize her attire or her complexion. She was also conscious of the fact that the variety of waltz popular thirty years ago was an oddity, and that a middle-aged woman who went hopping and twirling about a ballroom must be callous to the amusement that followed her gyrations. With the advent of the turkey trot and the tango, things have changed however. No one is too stout, too old or too clumsy to go walking solemnly round, in or out of time to the music. I confess to a consciousness of absurdity when, to the exciting rhythm of Très Moutard, I back Mrs. Jones slowly down the room and up again. "Do you grapevine?" she inquires ardently. Yes; I admit the soft impeachment, and at once she begins some astonishing convolutions with the lower part of her body, which I attempt to follow. After several entanglements we move triumphantly across the hall. "How beautifully you dance!" she pants. Aged roisterer that I am, I fall for the compliment. She is a nice old thing, after all! "Fish walk?" asks she. I retort with total abandon. "Come along!" So, grabbing her tightly and keeping my legs entirely stiff--as per instructions from my son--I stalk swiftly along the floor, while she backs with prodigious velocity. Away we go, an odd four hundred pounds of us, until, exhausted, we collapse against the table where the champagne is being distributed. Though I have carefully followed the directions of my preceptor, I am aware that the effect produced by our efforts is somehow not the same as his. I observe him in a close embrace with a willowy young thing, dipping gracefully in the distance. They pause, sway, run a few steps, stop dead and suddenly sink to the floor--only to rise and repeat the performance. So the evening wears gaily on. I caper round--now sedately, now deliriously--knowing that, however big a fool I am making of myself, we are all in the same boat. My wife is doing it, too, to the obvious annoyance of our daughters. But this is the smartest ball of the season. When all the world is dancing it would be conspicuous to loiter in the doorway. Society has ruled that I must dance--if what I am doing can be so called. I am aware that I should not care to allow my clients to catch an unexpected glimpse of my antics with Mrs. Jones; yet to be permitted to dance with her is one of the privileges of our success. I might dance elsewhere but it would not be the same thing. Is not my hostess' hoarse, good-natured, rather vulgar voice the clarion of society? Did not my wife scheme and plot for years before she managed to get our names on the sacred list of invitations? To be sure, I used to go to dances enough as a lad; and good times I had too. The High School Auditorium had a splendid floor; and the girls, even though they were unacquainted with all these newfangled steps, could waltz and polka, and do Sir Roger de Coverley. Good old days! I remember my wife--met her in that old hall. She wore a white muslin dress trimmed with artificial roses. I wonder if I properly appreciate the distinction of being asked to Mrs. Jones' turkey-trotting parties! My butler and the kitchen-maid are probably doing the same thing in the basement at home to the notes of the usefulman's accordion--and having a better time than I am. It is a pleasure to watch my son or my daughters glide through the intricacies of these modern dances, which the natural elasticity and suppleness of youth render charming in spite of their grotesqueness. But why should I seek to copy them? In spite of the fact that I am still rather athletic I cannot do so. With my utmost endeavor I fail to imitate their grace. I am getting old. My muscles are stiff and out of training. My wind has suffered. Mrs. Jones probably never had any. And if I am ridiculous, what of her and the other women of her age who, for some unknown reason, fatuously suppose they can renew their lost youth? Occasionally luck gives me a débutante for a partner when I go out to dinner. I do my best to entertain her--trot out all my old jokes and stories, pay her delicate compliments, and do frank homage to her youth and beauty. But her attention wanders. My tongue is stiff, like my legs. It can wag through the old motions, but it has lost its spontaneity. One glance from the eye of the boy down the long table and she is oblivious of my existence. Should I try to dance with her I should quickly find that crabbed middle-age and youth cannot step in time. My place is with Mrs. Jones--or, better, at home and in bed. Apart, however, from the dubious delight of dancing, all is not gold that glitters socially. The first time my wife and I were invited to a week-end party at the country-house of a widely known New York hostess we were both much excited. At last we were to be received on a footing of real intimacy by one of the inner circle. Even my valet, an imperturbable Englishman who would have announced that the house was on fire in the same tone as that my breakfast was ready, showed clearly that he was fully aware of the significance of the coming event. For several days he exhibited signs of intense nervous anxiety, and when at last the time of my departure arrived I found that he had filled two steamer trunks with the things he regarded as indispensable for my comfort and well-being. My wife's maid had been equally assiduous. Both she and the valet had no intention of learning on our return that any feature of our respective wardrobes had been forgotten; since we had decided not to take either of our personal servants, for the reason that we thought to do so might possibly be regarded as an ostentation. I made an early getaway from my office on Friday afternoon, met my wife at the ferry, and in due course, but by no means with comfort, managed to board the train and secure our seats in the parlor car before it started. We reached our destination at about half-past four and were met by a footman in livery, who piloted us to a limousine driven by a French chauffeur. We were the only arrivals. In my confusion I forgot to do anything about our trunks, which contained our evening apparel. During the run to the house we were both on the verge of hysteria owing to the speed at which we were driven--seventy miles an hour at the least. And at one corner we were thrown forward, clear of the seats and against the partition, by an unexpected stop. An interchange of French profanity tinted the atmosphere for a few moments and then we resumed the trajectory of our flight. We had expected to be welcomed by our hostess; but instead we were informed by the butler that she and the other guests had driven over to watch a polo game and would probably not be back before six. As we had nothing to do we strolled round the grounds and looked at the shrubbery for a couple of hours, at the end of which period we had tea alone in the library. We had, of course, no sooner finished than the belated party entered, the hostess full of vociferous apologies. I remember this occasion vividly because it was my first introduction to that artificially enforced merriment which is the inevitable concomitant of smart gatherings in America. The men invariably addressed each other as Old Man and the women as My Dear. No one was mentioned except by his or her first name or by some intimate diminutive or abbreviation. It seemed to be assumed that the guests were only interested in personal gossip relating to the marital infelicities of the neighboring countryside, who lost most at cards, and the theater. Every remark relating to these absorbing subjects was given a feebly humorous twist and greeted with a burst of hilarity. Even the mere suggestion of going upstairs to dress for dinner was a sufficient reason for an explosion of merriment. If noise was an evidence of having a good time these people were having the time of their lives. Personally I felt a little out of my element. I had still a lingering disinclination to pretend to a ubiquity of social acquaintance that I did not really possess, and I had never learned to laugh in a properly boisterous manner. But my wife appeared highly gratified. Delay in sending to the depot for our trunks--the fault of the butler, to whom we turned over our keys--prevented, as we supposed, our getting ready in time for dinner. Everybody else had gone up to dress; so we also went to our rooms, which consisted of two huge apartments connected by a bathroom of similar acreage. The furniture was dainty and chintz-covered. There was an abundance of writing paper, envelopes, magazines and French novels. Superficially the arrangements were wholly charming. The baggage arrived at about ten minutes to eight, after we had sat helplessly waiting for nearly an hour. The rooms were plentifully supplied with buttons marked: Maid; Valet; Butler's Pantry--and so on. But, though we pressed these anxiously, there was no response. I concluded that the valet was hunting or sleeping or otherwise occupied. I unpacked my trunks without assistance; my wife unpacked hers. But before I could find and assemble my evening garments I had to unwrap the contents of every tray and fill the room knee-high with tissue-paper. Unable to secure any response to her repeated calls for the maid, my wife was nearly reduced to tears. However, in those days I was not unskillful in hooking up a dress, and we managed to get downstairs, with ready apologies on our lips, by twenty minutes of nine. We were the first ones down however. The party assembled in a happy-go-lucky manner and, after the cocktails had been served, gathered round the festive board at five minutes past nine. The dinner was the regulation heavy, expensive New York meal, eaten to the accompaniment of the same noisy mirth I have already described. Afterward the host conducted the men to his "den," a luxurious paneled library filled with rare prints, and we listened for an hour to the jokes and anecdotes of a semiprofessional jester who took it on himself to act as the life of the party. It was after eleven o'clock when we rejoined the ladies, but the evening apparently had only just begun; the serious business of the day--bridge--was at hand. But in those days my wife and I did not play bridge; and as there was nothing else for us to do we retired, after a polite interval, to our apartments. While getting ready for the night we shouted cheerfully to one another through the open doors of the bathroom and, I remember, became quite jolly; but when my wife had gone to bed and I tried to close the blinds I discovered that there were none. Now neither of us had acquired the art of sleeping after daylight unless the daylight was excluded. With grave apprehension I arranged a series of makeshift screens and extinguished the lights, wandering round the room and turning off the key of each one separately, since the architect had apparently forgotten to put in a central switch. If there had been no servants in evidence when we wanted them before dinner, no such complaint could be entered now. There seemed to be a bowling party going on upstairs. We could also hear plainly the rattle of dishes and a lively interchange of informalities from the kitchen end of the establishment. We lay awake tensely. Shortly after one o'clock these particular sounds died away, but there was a steady tramp of feet over our heads until three. About this hour, also, the bridge party broke up and the guests came upstairs. There were no outside doors to our rooms. Bells rang, water ran, and there was that curious vibration which even hairbrushing seems to set going in a country house. Then with a final bang, comparative silence descended. Occasionally still, to be sure, the floor squeaked over our heads. Once somebody got up and closed a window. I could hear two distant snorings in major and minor keys. I managed to snatch a few winks and then an alarm-clock went off. At no great distance the scrubbing maid was getting up. I could hear her every move. The sun also rose and threw fire-pointed darts at us through the windowshades. By five o'clock I was ready to scream with nerves; and, having dug a lounge suit out of the gentlemen's furnishing store in my trunk, I cautiously descended into the lower regions. There was a rich smell of cigarettes everywhere. In the hall I stumbled over the feet of the sleeping night-watchman. But the birds were twittering in the bushes; the grassblades threw back a million flashes to the sun. Not before a quarter to ten could I secure a cup of coffee, though several footmen, in answer to my insistent bell, had been running round apparently for hours in a vain endeavor to get it for me. At eleven a couple of languid younger men made their appearance and conversed apathetically with one another over the papers. The hours drew on. Lunch came at two o'clock, bursting like a thunder-storm out of a sunlit sky. Afterward the guests sat round and talked. People were coming to tea at five, and there was hardly any use in doing anything before that time. A few took naps. A young lady and gentleman played an impersonal game of tennis; but at five an avalanche of social leaders poured out of a dozen shrieking motors and stormed the castle with salvos of strident laughter. The cannonade continued, with one brief truce in which to dress for dinner, until long after midnight. _Vox, et praeterea nihil!_ I look back on that house party with vivid horror. Yet it was one of the most valuable of my social experiences. We were guests invited for the first time to one of the smartest houses on Long Island; yet we were neglected by male and female servants alike, deprived of all possibility of sleep, and not the slightest effort was made to look after our personal comfort and enjoyment by either our host or hostess. Incidentally on my departure I distributed about forty dollars among various dignitaries who then made their appearance. It is probable that time has somewhat exaggerated my recollections of the miseries of this our first adventure into ultrasmart society, but its salient characteristics have since repeated themselves in countless others. I no longer accept week-end invitations;--for me the quiet of my library or the Turkish bath at my club; for they are all essentially alike. Surrounded by luxury, the guests yet know no comfort! After a couple of days of ennui and an equal number of sleepless nights, his brain foggy with innumerable drinks, his eyes dizzy with the pips of playing cards, and his ears still echoing with senseless hilarity, the guest rises while it is not yet dawn, and, fortified by a lukewarm cup of faint coffee boiled by the kitchen maid and a slice of leatherlike toast left over from Sunday's breakfast, presses ten dollars on the butler and five on the chauffeur--and boards the train for the city, nervous, disgruntled, his digestion upset and his head totally out of kilter for the day's work. Since my first experience in house parties I have yielded weakly to my wife's importunities on several hundred similar occasions. Some of these visits have been fairly enjoyable. Sleep is sometimes possible. Servants are not always neglectful. Discretion in the matter of food and drink is conceivable, even if not probable, and occasionally one meets congenial persons. As a rule, however, all the hypocrisies of society are intensified threefold when heterogeneous people are thrown into the enforced contact of a Sunday together in the country; but the artificiality and insincerity of smart society is far less offensive than the pretentiousness of mere wealth. * * * * * Not long ago I attended a dinner given on Fifth Avenue the invitation to which had been eagerly awaited by my wife. We were asked to dine informally with a middle-aged couple who for no obvious reason have been accepted as fashionable desirables. He is the retired head of a great combination of capital usually described as a trust. A canopy and a carpet covered the sidewalk outside the house. Two flunkies in cockaded hats stood beside the door, and in the hall was a line of six liveried lackeys. Three maids helped my wife remove her wraps and adjust her hair. In the salon where our hostess received us were hung pictures representing an outlay of nearly two million dollars--part of a collection the balance of which they keep in their house in Paris; for these people are not content with one mansion on Fifth Avenue and a country house on Long Island, but own a palace overlooking the Bois de Boulogne and an enormous estate in Scotland. They spend less than ten weeks in New York, six in the country, and the rest of the year abroad. The other male guests had all amassed huge fortunes and had given up active work. They had been, in their time, in the thick of the fray. Yet these men, who had swayed the destinies of the industrial world, stood about awkwardly discussing the most trivial of banalities, as if they had never had a vital interest in anything. Then the doors leading into the dining room were thrown open, disclosing a table covered with rosetrees in full bloom five feet in height and a concealed orchestra began to play. There were twenty-four seats and a footman for each two chairs, besides two butlers, who directed the service. The dinner consisted of hors-d'oeuvre and grapefruit, turtle soup, fish of all sorts, elaborate entrées, roasts, breasts of plover served separately with salad, and a riot of ices and exotic fruits. Throughout the meal the host discoursed learnedly on the relative excellence of various vintages of champagne and the difficulty of procuring cigars suitable for a gentleman to smoke. It appeared that there was no longer any wine--except a few bottles in his own cellar--which was palatable or healthful. Even coffee was not fit for use unless it had been kept for six years! His own cigars were made to order from a selected crop of tobacco he had bought up entire. His cigarettes, which were the size of small sausages, were prepared from specially cured leaves of plants grown on "sunny corners of the walls of Smyrna." His Rembrandts, his Botticellis, his Sir Joshuas, his Hoppners, were little things he had picked up here and there, but which, he admitted, were said to be rather good. Soon all the others were talking wine, tobacco and Botticelli as well as they could, though most of them knew more about coal, cotton or creosote than the subjects they were affecting to discuss. This, then, was success! To flounder helplessly in a mire of artificiality and deception to Tales of Hoffmann! If I were asked what was the object of our going to such a dinner I could only answer that it was in order to be invited to others of the same kind. Is it for this we labor and worry--that we scheme and conspire--that we debase ourselves and lose our self-respect? Is there no wine good enough for my host? Will God let such arrogance be without a blast of fire from heaven? * * * * * There was a time not so very long ago when this same man was thankful enough for a slice of meat and a chunk of bread carried in a tin pail--content with the comfort of an old brier pipe filled with cut plug and smoked in a sunny corner of the factory yard. "Sunny corners of the walls of Smyrna!" It is a fine thing to assert that here in America we have "out of a democracy of opportunity" created "an aristocracy of achievement." The phrase is stimulating and perhaps truly expresses the spirit of our energetic and ambitious country; but an aristocracy of achievement is truly noble only when the achievements themselves are fine. What are the achievements that win our applause, for which we bestow our decorations in America? Do we honor most the men who truly serve their generation and their country? Or do we fawn, rather, on those who merely serve themselves? It is a matter of pride with us--frequently expressed in disparagement of our European contemporaries--that we are a nation of workers; that to hold any position in the community every man must have a job or otherwise lose caste; that we tolerate no loafing. We do not conceal our contempt for the chap who fails to go down every day to the office or business. Often, of course, our ostentatious workers go down, but do very little work. We feel somehow that every man owes it to the community to put in from six to ten hours' time below the residential district. Young men who have inherited wealth are as chary of losing one hour as their clerks. The busy millionaire sits at his desk all day--his ear to the telephone. We assume that these men are useful because they are busy; but in what does their usefulness consist? What are they busy about? They are setting an example of mere industry, perhaps--but to what end? Simply, in seven cases out of ten, in order to get a few dollars or a few millions more than they have already. Their exertions have no result except to enable their families to live in even greater luxury. I know at least fifty men, fathers of families, whose homes might radiate kindliness and sympathy and set an example of wise, generous and broad-minded living, who, already rich beyond their needs, rush downtown before their children have gone to school, pass hectic, nerve-racking days in the amassing of more money, and return after their little ones have gone to bed, too utterly exhausted to take the slightest interest in what their wives have been doing or in the pleasure and welfare of their friends. These men doubtless give liberally to charity, but they give impersonally, not generously; they are in reality utterly selfish, engrossed in the enthralling game of becoming successful or more successful men, sacrificing their homes, their families and their health--for what? To get on; to better their position; to push in among those others who, simply because they have outstripped the rest in the matter of filling their own pockets, are hailed with acclamation. It is pathetic to see intelligent, capable men bending their energies not to leading wholesome, well-rounded, serviceable lives but to gaining a slender foothold among those who are far less worthy of emulation than themselves and with whom they have nothing whatsoever in common except a despicable ambition to display their wealth and to demonstrate that they have "social position." In what we call the Old World a man's social position is a matter of fixed classification--that is to say, his presumptive ability and qualifications to amuse and be amused; to hunt, fish and shoot; to ride, dance, and make himself generally agreeable--are known from the start. And, based on the premise that what is known as society exists simply for the purpose of enabling people to have a good time, there is far more reason to suppose that one who comes of a family which has made a specialty of this pursuit for several hundred years is better endowed by Nature for that purpose than one who has made a million dollars out of a patent medicine or a lucky speculation in industrial securities. The great manufacturer or chemist in England, France, Italy, or Germany, the clever inventor, the astute banker, the successful merchant, have their due rewards; but, except in obvious instances, they are not presumed to have acquired incidentally to their material prosperity the arts of playing billiards, making love, shooting game on the wing, entertaining a house party or riding to hounds. Occasionally one of them becomes by special favor of the sovereign a baronet; but, as a rule his so-called social position is little affected by his business success, and there is no reason why it should be. He may make a fortune out of a new process, but he invites the same people to dinner, frequents the same club and enjoys himself in just about the same way as he did before. His newly acquired wealth is not regarded as in itself likely to make him a more congenial dinner-table companion or any more delightful at five-o'clock tea. The aristocracy of England and the Continent is not an aristocracy of achievement but of the polite art of killing time pleasantly. As such it has a reason for existence. Yet it can at least be said for it that its founders, however their descendants may have deteriorated, gained their original titles and positions by virtue of their services to their king and country. However, with a strange perversity--due perhaps to our having the Declaration of Independence crammed down our throats as children--we in America seem obsessed with an ambition to create a social aristocracy, loudly proclaimed as founded on achievement, which, in point of fact, is based on nothing but the possession of money. The achievement that most certainly lands one among the crowned heads of the American nobility is admittedly the achievement of having acquired in some way or other about five million dollars; and it is immaterial whether its possessor got it by hard work, inheritance, marriage or the invention of a porous plaster. In the wider circle of New York society are to be found a considerable number of amiable persons who have bought their position by the lavish expenditure of money amassed through the clever advertising and sale of table relishes, throat emollients, fireside novels, canned edibles, cigarettes, and chewing tobacco. The money was no doubt legitimately earned. The patent-medicine man and the millionaire tailor have my entire respect. I do not sneer at honest wealth acquired by these humble means. The rise--if it be a rise--of these and others like them is superficial evidence, perhaps, that ours is a democracy. Looking deeper, we see that it is, in fact, proof of our utter and shameless snobbery. Most of these people are in society not on account of their personal qualities, or even by virtue of the excellence of their cut plug or throat wash which, in truth, may be a real boon to mankind--but because they have that most imperative of all necessities--money. The achievement by which they have become aristocrats is not the kind of achievement that should have entitled them to the distinction which is theirs. They are received and entertained for no other reason whatever save that they can receive and entertain in return. Their bank accounts are at the disposal of the other aristocrats--and so are their houses, automobiles and yachts. The brevet of nobility--by achievement--is conferred on them, and the American people read of their comings and goings, their balls, dinners and other festivities with consuming and reverent interest. Most dangerously significant of all is the fact that, so long as the applicant for social honors has the money, the method by which he got it, however reprehensible, is usually overlooked. That a man is a thief, so long as he has stolen enough, does not impair his desirability. The achievement of wealth is sufficient in itself to entitle him to a seat in the American House of Lords. A substantial portion of the entertaining that takes place on Fifth Avenue is paid for out of pilfered money. Ten years ago this rhetorical remark would have been sneered at as demagogic. To-day everybody knows that it is simply the fact. Yet we continue to eat with entire unconcern the dinners that have, as it were, been abstracted from the dinner-pails of the poor. I cannot conduct an investigation into the business history of every man who asks me to his house. And even if I know he has been a crook, I cannot afford to stir up an unpleasantness by attempting in my humble way to make him feel sorrow for his misdeeds. If I did I might find myself alone--deserted by the rest of the aristocracy who are concerned less with his morality than with the vintage of his wine and the _dot_ he is going to give his daughter. The methods by which a newly rich American purchases a place among our nobility are simple and direct. He does not storm the inner citadel of society but at the start ingratiates himself with its lazy and easy-going outposts. He rents a house in a fashionable country suburb of New York and goes in and out of town on the "dude" train. He soon learns what professional people mingle in smart society and these he bribes to receive him and his family. He buys land and retains a "smart" lawyer to draw his deeds and attend to the transfer of title. He engages a fashionable architect to build his house, and a society young lady who has gone into landscape gardening to lay out his grounds. He cannot work the game through his dentist or plumber, but he establishes friendly relations with the swell local medical man and lets him treat an imaginary illness or two. He has his wife's portrait painted by an artist who makes a living off similar aspirants, and in exchange gets an invitation to drop in to tea at the studio. He buys broken-winded hunters from the hunting set, decrepit ponies from the polo players, and stone griffins for the garden from the social sculptress. A couple of hundred here, a couple of thousand there, and he and his wife are dining out among the people who run things. Once he gets a foothold, the rest is by comparison easy. The bribes merely become bigger and more direct. He gives a landing to the yacht club, a silver mug for the horse show, and an altar rail to the church. He entertains wisely--gracefully discarding the doctor, lawyer, architect and artist as soon as they are no longer necessary. He has, of course, already opened an account with the fashionable broker who lives near him, and insured his life with the well-known insurance man, his neighbor. He also plays poker daily with them on the train. This is the period during which he becomes a willing, almost eager, mark for the decayed sport who purveys bad champagne and vends his own brand of noxious cigarettes. He achieves the Stock Exchange Crowd without difficulty and moves on up into the Banking Set composed of trust company presidents, millionaires who have nothing but money, and the élite of the stockbrokers and bond men who handle their private business. The family are by this time "going almost everywhere"; and in a year or two, if the money holds out, they can buy themselves into the inner circles. It is only necessary to take a villa at Newport and spend about one hundred thousand dollars in the course of the season. The walls of the city will fall down flat if the golden trumpet blows but mildly. And then, there they are--right in the middle of the champagne, clambakes and everything else!--invited to sit with the choicest of America's nobility on golden chairs--supplied from New York at one dollar per--and to dance to the strains of the most expensive music amid the subdued popping of distant corks. In this social Arabian Nights' dream, however, you will find no sailors or soldiers, no great actors or writers, no real poets or artists, no genuine statesmen. The nearest you will get to any of these is the millionaire senator, or the amateur decorators and portrait painters who, by making capital of their acquaintance, get a living out of society. You will find few real people among this crowd of intellectual children. The time has not yet come in America when a leader of smart society dares to invite to her table men and women whose only merit is that they have done something worth while. She is not sufficiently sure of her own place. She must continue all her social life to be seen only with the "right people." In England her position would be secure and she could summon whom she would to dine with her; but in New York we have to be careful lest, by asking to our houses some distinguished actor or novelist, people might think we did not know we should select our friends--not for what they are, but for what they have. In a word, the viciousness of our social hierarchy lies in the fact that it is based solely upon material success. We have no titles of nobility; but we have Coal Barons, Merchant Princes and Kings of Finance. The very catchwords of our slang tell the story. The achievement of which we boast as the foundation of our aristocracy is indeed ignoble; but, since there is no other, we and our sons, and their sons after them, will doubtless continue to struggle--and perhaps steal--to prove, to the satisfaction of ourselves and the world at large, that we are entitled to be received into the nobility of America not by virtue of our good deeds, but of our so-called success. We would not have it otherwise. We should cry out against any serious attempt, outside of the pulpit, to alter or readjust an order that enables us to buy for money a position of which we would be otherwise undeserving. It would be most discouraging to us to have substituted for the present arrangement a society in which the only qualifications for admittance were those of charm, wit, culture, good breeding and good sportsmanship. CHAPTER III MY CHILDREN I pride myself on being a man of the world--in the better sense of the phrase. I feel no regret over the passing of those romantic days when maidens swooned at the sight of a drop of blood or took refuge in the "vapors" at the approach of a strange young man; in point of fact I do not believe they ever did. I imagine that our popular idea of the fragility and sensitiveness of the weaker sex, based on the accounts of novelists of the eighteenth century, is largely a literary convention. Heroines were endowed, as a matter of course, with the possession of all the female virtues, intensified to such a degree that they were covered with burning blushes most of the time. Languor, hysteria and general debility were regarded as the outward indications of a sweet and gentle character. Woman was a tendril clinging to the strong oak of masculinity. Modesty was her cardinal virtue. One is, of course, entitled to speculate on the probable contemporary causes for the seeming overemphasis placed on this admirable characteristic. Perhaps feminine honesty was so rare as to be at a premium and modesty was a sort of electric sign of virtue. I am not squeamish. I have always let my children read what they would. I have never made a mystery of the relations of the sexes, for I know the call of the unseen--the fascination lent by concealment, of discovery. I believe frankness to be a good thing. A mind that is startled or shocked by the exposure of an ankle or the sight of a stocking must be essentially impure. Nor do I quarrel with woman's natural desire to adorn herself for the allurement of man. That is as inevitable as springtime. But unquestionably the general tone of social intercourse in America, at least in fashionable centers, has recently undergone a marked and striking change. The athletic girl of the last twenty years, the girl who invited tan and freckles, wielded the tennis bat in the morning and lay basking in a bathing suit on the sand at noon, is gradually giving way to an entirely different type--a type modeled, it would seem, at least so far as dress and outward characteristics are concerned, on the French demimondaine. There are plenty of athletic girls to be found on the golf links and tennis courts; but a growing and large minority of maidens at the present time are too chary of their complexions to brave the sun. Big hats, cloudlike veils, high heels, paint and powder mark the passing of the vain hope that woman can attract the male sex by virtue of her eugenic possibilities alone. It is but another and unpleasantly suggestive indication that the simplicity of an older generation--the rugged virtue of a more frugal time--has given place to the sophistication of the Continent. When I was a lad, going abroad was a rare and costly privilege. A youth who had been to Rome, London and Paris, and had the unusual opportunity of studying the treasures of the Vatican, the Louvre and the National Gallery, was regarded with envy. Americans went abroad for culture; to study the glories of the past. Now the family that does not invade Europe at least every other summer is looked on as hopelessly old-fashioned. No clerk can find a job on the Rue de Rivoli or the Rue de la Paix unless he speaks fluently the dialect of the customers on whose trade his employer chiefly relies--those from Pennsylvania, New York and Illinois. The American no longer goes abroad for improvement, but to amuse himself. The college Freshman knows, at least by name, the latest beauty who haunts the Folies Bergères, and his father probably has a refined and intimate familiarity with the special attractions of Ciro's and the Trocadero. I do not deny that we have learned valuable lessons from the Parisians. At any rate our cooking has vastly improved. Epicurus would have difficulty in choosing between the delights of New York and Paris--for, after all, New York is Paris and Paris is New York. The chef of yesterday at Voisin's rules the kitchen of the Ritz-Carlton or the Plaza to-day; and he cannot have traveled much who does not find a dozen European acquaintances among the head waiters of Broadway. Not to know Paris nowadays is felt to be as great a humiliation as it was fifty years ago not to know one's Bible. Beyond the larger number of Americans who visit Paris for legitimate or semilegitimate purposes, there is a substantial fraction who go to do things they either cannot or dare not do at home. And as those who have not the time or the money to cross the Atlantic and who still itch for the boulevards must be kept contented, Broadway is turned into Montmartre. The result is that we cannot take our daughters to the theater without risking familiarizing them with vice in one form or another. I do not think I am overstating the situation when I say that it would be reasonably inferred from most of our so-called musical shows and farces that the natural, customary and excusable amusement of the modern man after working hours--whether the father of a family or a youth of twenty--is a promiscuous adventuring into sexual immorality. I do not regard as particularly dangerous the vulgar French farce where papa is caught in some extraordinary and buffoonlike situation with the washerwoman. Safety lies in exaggeration. But it is a different matter with the ordinary Broadway show, where virtue is made--at least inferentially--the object of ridicule, and sexuality is the underlying purpose of the production. During the present New York theatrical season several plays have been already censored by the authorities, and either been taken off entirely or so altered as to be still within the bounds of legal pruriency. Whether I am right in attributing it to the influence of the French music halls or not, it is the fact that the tone of our theatergoing public is essentially low. Boys and girls who are taken in their Christmas holidays to see plays at which their parents applaud questionable songs and suggestive dances, cannot be blamed for assuming that there is not one set of morals for the stage and another for ordinary social intercourse. Hence the college boy who has kept straight for eight months in the year is apt to wonder: What is the use? And the débutante who is curious for all the experiences her new liberty makes possible takes it for granted that an amorous trifling is the ordinary incident to masculine attention. This is far from being mere theory. It is a matter of common knowledge that recently the most prominent restaurateur in New York found it necessary to lock up, or place a couple of uniformed maids in, every unoccupied room in his establishment whenever a private dance was given there for young people. Boys and girls of eighteen would leave these dances by dozens and, hiring taxicabs, go on slumming expeditions and excursions to the remoter corners of Central Park. In several instances parties of two or four went to the Tenderloin and had supper served in private rooms. This is the childish expression of a demoralization that is not confined simply to smart society, but is gradually permeating the community in general. From the ordinary dinner-table conversation one hears at many of the country houses on Long Island it would be inferred that marriage was an institution of value only for legitimatizing concubinage; that an old-fashioned love affair was something to be rather ashamed of; and that morality in the young was hardly to be expected. Of course a great deal of this is mere talk and bombast, but the maid-servants hear it. I believe, fortunately--and my belief is based on a fairly wide range of observation--that the Continental influence I have described has produced its ultimate effect chiefly among the rich; yet its operation is distinctly observable throughout American life. Nowhere is this more patent than in much of our current magazine literature and light fiction. These stories, under the guise of teaching some moral lesson, are frequently designed to stimulate all the emotions that could be excited by the most vicious French novel. Some of them, of course, throw off all pretense and openly ape the _petit histoire d'un amour_; but essentially all are alike. The heroine is a demimondaine in everything but her alleged virtue--the hero a young bounder whose better self restrains him just in time. A conventional marriage on the last page legalizes what would otherwise have been a liaison or a degenerate flirtation. The astonishingly unsophisticated and impossibly innocent shopgirl who--in the story--just escapes the loss of her honor; the noble young man who heroically "marries the girl"; the adventures of the debonaire actress, who turns out most surprisingly to be an angel of sweetness and light; and the Johnny whose heart is really pure gold, and who, to the reader's utter bewilderment, proves himself to be a Saint George--these are the leading characters in a great deal of our periodical literature. A friend of mine who edits one of the more successful magazines tells me there are at least half a dozen writers who are paid guaranteed salaries of from twelve thousand dollars to eighteen thousand dollars a year for turning out each month from five thousand to ten thousand words of what is euphemistically termed "hot stuff." An erotic writer can earn yearly at the present time more than the salary of the president of the United States. What the physical result of all this is going to be does not seem to me to matter much. If the words of Jesus Christ have any significance we are already debased by our imaginations. * * * * * We are dangerously near an epoch of intellectual if not carnal debauchery. The prevailing tendency on the part of the young girls of to-day to imitate the dress and makeup of the Parisian cocotte is unconsciously due to this general lowering of the social moral tone. Young women in good society seem to feel that they must enter into open competition with their less fortunate sisters. And in this struggle for survival they are apparently determined to yield no advantage. Herein lies the popularity of the hobble skirt, the transparent fabric that hides nothing and follows the move of every muscle, and the otherwise senseless peculiarities and indecencies of the more extreme of the present fashions. And here, too, is to be found the reason for the popularity of the current style of dancing, which offers no real attraction except the opportunity for a closeness of contact otherwise not permissible. "It's all in the way it is done," says Mrs. Jones, making the customary defense. "The tango and the turkey trot can be danced as unobjectionably as the waltz." Exactly! Only the waltz is not danced that way; and if it were the offending couple would probably be put off the floor. Moreover, their origin and history demonstrates their essentially vicious character. Is there any sensible reason why one's daughter should be encouraged to imitate the dances of the Apache and the negro debauchee? Perhaps, after all, the pendulum has merely swung just a little too far and is knocking against the case. The feet of modern progress cannot be hampered by too much of the dead underbrush of convention. The old-fashioned prudery that in former days practically prevented rational conversation between men and women is fortunately a thing of the past, and the fact that it is no longer regarded as unbecoming for women to take an interest in all the vital problems of the day--municipal, political and hygienic--provided they can assist in their solution, marks several milestones on the highroad of advance. On the other hand the widespread familiarity with these problems, which has been engendered simply for pecuniary profit by magazine literature in the form of essays, fiction and even verse, is by no means an undiluted blessing--particularly if the accentuation of the author is on the roses lining the path of dalliance quite as much as on the destruction to which it leads. The very warning against evil may turn out to be in effect only a hint that it is readily accessible. One does not leave the candy box open beside the baby even if the infant has received the most explicit instructions as to the probable effect of too much sugar upon its tiny kidneys. Moreover, the knowledge of the prevalence of certain vices suggests to the youthful mind that what is so universal must also be rather excusable, or at least natural. It seems to me that, while there is at present a greater popular knowledge of the high cost of sinning, there is at the same time a greater tolerance for sin itself. Certainly this is true among the people who make up the circle of my friends. "Wild oats" are regarded as entirely a matter of course. No anecdote is too broad to be told openly at the dinner table; in point of fact the stories that used to be whispered only very discreetly in the smoking room are now told freely as the natural relishes to polite conversation. In that respect things are pretty bad. One cannot help wondering what goes on inside the villa on Rhode Island Avenue when the eighteen-year-old daughter of the house remarks to the circle of young men and women about her at a dance: "Well, I'm going to bed--_seule_!" The listener furtively speculates about mama. He feels quite sure about papa. Anyhow this particular mot attracted no comment. Doubtless the young lady was as far above suspicion as the wife of Caesar; but she and her companions in this particular set have an appalling frankness of speech and a callousness in regard to discussing the more personal facts of human existence that is startling to a middle-aged man like myself. I happened recently to overhear a bit of casual dinner-table conversation between two of the gilded ornaments of the junior set. He was a boy of twenty-five, well known for his dissipations, but, nevertheless, regarded by most mothers as a highly desirable _parti_. "Oh, yes!" he remarked easily. "They asked me if I wanted to go into a bughouse, and I said I hadn't any particular objection. I was there a month. Rum place! I should worry!" "What ward?" she inquired with polite interest. "Inebriates', of course," said he. I am inclined to attribute much of the questionable taste and conduct of the younger members of the fast set to neglect on the part of their mothers. Women who are busy all day and every evening with social engagements have little time to cultivate the friendship of their daughters. Hence the girl just coming out is left to shift for herself, and she soon discovers that a certain _risqué_ freedom in manner and conversation, and a disregard of convention, will win her a superficial popularity which she is apt to mistake for success. Totally ignorant of what she is doing or the essential character of the means she is employing, she runs wild and soon earns an unenviable reputation, which she either cannot live down or which she feels obliged to live up to in order to satisfy her craving for attention. Many a girl has gone wrong simply because she felt that it was up to her to make good her reputation for caring nothing for the proprieties. As against an increasing looseness in talk and conduct, it is interesting to note that heavy drinking is clearly going out of fashion in smart society. There can be no question as to that. My champagne bills are not more than a third of what they were ten years ago. I do not attribute this particularly to the temperance movement. But, as against eight quarts of champagne for a dinner of twenty--which used to be about my average when we first began entertaining in New York--three are now frequently enough. I have watched the butler repeatedly at large dinner parties as he passed the wine and seen him fill only four or five glasses. Women rarely drink at all. About one man in three takes champagne. Of course he is apt to drink whisky instead, but by no means the same amount as formerly. If it were not for the convention requiring sherry, hock, champagne and liquors to be served the modern host could satisfy practically all the serious liquid requirements of his guests with a quart bottle of Scotch and a siphon of soda. Claret, Madeira, sparkling Moselles and Burgundies went out long ago. The fashion that has taught women self-control in eating has shown their husbands the value of abstinence. Unfortunately I do not see in this a betterment in morals, but mere self-interest--which may or may not be the same thing, according to one's philosophy. If a man drinks nowadays he drinks because he wants to and not to be a good fellow. A total abstainer finds himself perfectly at home anywhere. Of course the fashionables, if they are going to set the pace, have to hit it up in order to head the procession. The fastness of the smart set in England is notorious, and it is the same way in France, Russia, Italy, Germany, Scandinavia--the world over; and as society tends to become unified mere national boundaries have less significance. The number of Americans who rent houses in London and Paris, and shooting boxes in Scotland, is large. Hence the moral tone of Continental society and of the English aristocracy is gradually becoming more and more our own. But with this difference--that, as the aristocracy in England and Continental Europe is a separate caste, a well-defined order, having set metes and bounds, which considers itself superior to the rest of the population and views it with indifference, so its morals are regarded as more or less its own affair, and they do not have a wide influence on the community at large. Even if he drinks champagne every night at dinner the Liverpool pickle merchant knows he cannot get into the king's set; but here the pickle man can not only break into the sacred circle, but he and his fat wife may themselves become the king and queen. So that a knowledge of how smart society conducts itself is an important matter to every man and woman living in the United States, since each hopes eventually to make a million dollars and move to New York. With us the fast crowd sets the example for society at large; whereas in England looseness in morals is a recognized privilege of the aristocracy to which the commoner may not aspire. The worst feature of our situation is that the quasi-genteel working class, of whom our modern complex life supports hundreds of thousands--telephone operators, stenographers, and the like--greedily devour the newspaper accounts of the American aristocracy and model themselves, so far as possible, after it. It is almost unbelievable how intimate a knowledge these young women possess of the domestic life, manner of speech and dress of the conspicuous people in New York society. I once stepped into the Waldorf with a friend of mine who wished to send a telephone message. He is a quiet, unassuming man of fifty, who inherited a large fortune and who is compelled, rather against his will, to do a large amount of entertaining by virtue of the position in society which Fate has thrust on him. It was a long-distance call. "Who shall I say wants to talk?" asked the goddess with fillet-bound yellow hair in a patronizingly indifferent tone. "Mr.----," answered my companion. Instantly the girl's face was suffused with a smile of excited wonder. "Are you Mr.----, the big swell who gives all the dinners and dances?" she inquired. "I suppose I'm the man," he answered, rather amused than otherwise. "Gee!" she cried, "ain't this luck! Look here, Mame!" she whispered hoarsely. "I've got Mr. ---- here on a long distance. What do you think of that!" One cannot doubt that this telephone girl would unhesitatingly regard as above criticism anything said or done by a woman who moved in Mr. ---- 's circle. Unfortunately what this circle does is heralded in exaggerated terms. The influence of these partially true and often totally false reports is far-reaching and demoralizing. The other day the young governess of a friend of my wife gave up her position, saying she was to be married. Her employer expressed an interest in the matter and asked who was going to perform the ceremony. She was surprised to learn that the functionary was to be the local country justice of the peace. "But why aren't you going to have a clergyman marry you?" asked our friend. "Because I don't want it too binding!" answered the girl calmly. So far has the prevalence of divorce cast its enlightening beams. * * * * * I have had a shooting box in Scotland on several different occasions; and my wife has conducted successful social campaigns, as I have said before, in London, Paris, Rome and Berlin. I did not go along, but I read about it all in the papers and received weekly from the scene of conflict a pound or so of mail matter, consisting of hundreds of diaphanous sheets of paper, each covered with my daughters' fashionable humpbacked handwriting. Hastings, my stenographer, became very expert at deciphering and transcribing it on the machine for my delectation. I was quite confused at the number and variety of the titles of nobility with which my family seemed constantly to be surrounded. They had a wonderful time, met everybody, and returned home perfected cosmopolitans. What their ethical standards are I confess I do not know exactly, for the reason that I see so little of them. They lead totally independent lives. On rare occasions we are invited to the same houses at the same time, and on Christmas Eve we still make it a point always to stay at home together. Really I have no idea how they dispose of their time. They are always away, making visits in other cities or taking trips. They chatter fluently about literature, the theater, music, art, and know a surprising number of celebrities in this and other countries--particularly in London. They are good linguists and marvelous dancers. They are respectful, well mannered, modest, and mildly affectionate; but somehow they do not seem to belong to me. They have no troubles of which I am the confidant. If they have any definite opinions or principles I am unaware of them; but they have the most exquisite taste. Perhaps with them this takes the place of morals. I cannot imagine my girls doing or saying anything vulgar, yet what they are like when away from home I have no means of finding out. I am quite sure that when they eventually select their husbands I shall not be consulted in the matter. My formal blessing will be all that is asked, and if that blessing is not forthcoming no doubt they will get along well enough without it. However, I am the constant recipient of congratulations on being the parent of such charming creatures. I have succeeded--apparently--in this direction as in others. Succeeded in what? I cannot imagine these girls of mine being any particular solace to my old age. Recently, since writing these confessions of mine, I have often wondered why my children were not more to me. I do not think they are much more to my wife. I suppose it could just as well be put the other way. Why are _we_ not more to _them_? It is because, I fancy, this modern existence of ours, where every function and duty of maternity--except the actual giving of birth--is performed vicariously for us, destroys any interdependence between parents and their offspring. "Smart" American mothers no longer, I am informed, nurse their babies. I know that my wife did not nurse hers. And thereafter each child had its own particular French _bonne_ and governess besides. Our nursery was a model of dainty comfort. All the superficial elegancies were provided for. It was a sunny, dustless apartment, with snow-white muslins, white enamel, and a frieze of grotesque Noah's Ark animals perambulating round the wall. There were huge dolls' houses, with electric lights; big closets of toys. From the earliest moment possible these three infants began to have private lessons in everything, including drawing, music and German. Their little days were as crowded with engagements then as now. Every hour was provided for; but among these multifarious occupations there was no engagement with their parents. Even if their mother had not been overwhelmed with social duties herself my babies would, I am confident, have had no time for their parent except at serious inconvenience and a tremendous sacrifice of time. To be sure, I used occasionally to watch them decorously eating their strictly supervised suppers in the presence of the governess; but the perfect arrangements made possible by my financial success rendered parents a superfluity. They never bumped their heads, or soiled their clothes, or dirtied their little faces--so far as I knew. They never cried--at least I was never permitted to hear them. When the time came for them to go to bed each raised a rosy little cheek and said sweetly: "Good night, papa." They had, I think, the usual children's diseases--exactly which ones I am not sure of; but they had them in the hospital room at the top of the house, from which I was excluded, and the diseases progressed with medical propriety in due course and under the efficient management of starchy trained nurses. Their outdoor life consisted in walking the asphalt pavements of Central Park, varied with occasional visits to the roller-skating rink; but their social life began at the age of four or five. I remember these functions vividly, because they were so different from those of my own childhood. The first of these was when my eldest daughter attained the age of six years. Similar events in my private history had been characterized by violent games of blind man's buff, hide and seek, hunt the slipper, going to Jerusalem, ring-round-a-rosy, and so on, followed by a dish of ice-cream and hairpulling. Not so with my offspring. Ten little ladies and gentlemen, accompanied by their maids, having been rearranged in the dressing room downstairs, were received by my daughter with due form in the drawing room. They were all flounced, ruffled and beribboned. Two little boys of seven had on Eton suits. Their behavior was impeccable. Almost immediately a professor of legerdemain made his appearance and, with the customary facility of his brotherhood, proceeded to remove tons of débris from presumably empty hats, rabbits from handkerchiefs, and hard-boiled eggs from childish noses and ears. The assembled group watched him with polite tolerance. At intervals there was a squeal of surprise, but it soon developed that most of them had already seen the same trickman half a dozen times. However, they kindly consented to be amused, and the professor gave way to a Punch and Judy show of a sublimated variety, which the youthful audience viewed with mild approval. The entertainment concluded with a stereopticon exhibition of supposedly humorous events, which obviously did not strike the children as funny at all. Supper was laid in the dining room, where the table had been arranged as if for a banquet of diplomats. There were flowers in abundance and a life-size swan of icing at each end. Each child was assisted by its own nurse, and our butler and a footman served, in stolid dignity, a meal consisting of rice pudding, cereals, cocoa, bread and butter, and ice-cream. It was by all odds the most decorous affair ever held in our house. At the end the gifts were distributed--Parisian dolls, toy baby-carriages and paint boxes for the girls; steam engines, magic lanterns and miniature circuses for the boys. My bill for these trifles came to one hundred and twelve dollars. At half-past six the carriages arrived and our guests were hurried away. I instance this affair because it struck the note of elegant propriety that has always been the tone of our family and social life. The children invited to the party were the little boys and girls whose fathers and mothers we thought most likely to advance their social interests later on. Of these children two of the girls have married members of the foreign nobility--one a jaded English lord, the other a worthless and dissipated French count; another married--fifteen years later--one of these same little boys and divorced him within eighteen months; while two of the girls--our own--have not married. Of the boys one wedded an actress; another lives in Paris and studies "art"; one has been already accounted for; and two have given their lives to playing polo, the stock market, and elevating the chorus. * * * * * Beginning at this early period, my two daughters, and later on my son, met only the most select young people of their own age in New York and on Long Island. I remember being surprised at the amount of theatergoing they did by the time the eldest was nine years old. My wife made a practice of giving a children's theater party every Saturday and taking her small guests to the matinée. As the theaters were more limited in number then than now these comparative infants sooner or later saw practically everything that was on the boards--good, bad and indifferent; and they displayed a precocity of criticism that quite astounded me. Their real social career began with children's dinners and dancing parties by the time they were twelve, and their later coming out changed little the mode of life to which they had been accustomed for several years before it. The result of their mother's watchful care and self-sacrifice is that these two young ladies could not possibly be happy, or even comfortable, if they married men unable to furnish them with French maids, motors, constant amusement, gay society, travel and Paris clothes. Without these things they would wither away and die like flowers deprived of the sun. They are physically unfit to be anything but the wives of millionaires--and they will be the wives of millionaires or assuredly die unmarried. But, as the circle of rich young men of their acquaintance is more or less limited their chances of matrimony are by no means bright, albeit that they are the pivots of a furious whirl of gaiety which never stops. No young man with an income of less than twenty thousand a year would have the temerity to propose to either of them. Even on twenty thousand they would have a hard struggle to get along; it would mean the most rigid economy--and, if there were babies, almost poverty. Besides, when girls are living in the luxury to which mine are accustomed they think twice before essaying matrimony at all. The prospects of changing Newport, Palm Beach, Paris, Rome, Nice and Biarritz for the privilege of bearing children in a New York apartment house does not allure, as in the case of less cosmopolitan young ladies. There must be love--plus all present advantages! Present advantages withdrawn, love becomes cautious. Even though the rich girl herself is of finer clay than her parents and, in spite of her artificial environment and the false standards by which she is surrounded, would like to meet and perhaps eventually marry some young man who is more worth while than the "pet cats" of her acquaintance, she is practically powerless to do so. She is cut off by the impenetrable artificial barrier of her own exclusiveness. She may hear of such young men--young fellows of ambition, of adventurous spirit, of genius, who have already achieved something in the world, but they are outside the wall of money and she is inside it, and there is no way for them to get in or for her to get out. She is permitted to know only the _jeunesse dorée_--the fops, the sports, the club-window men, whose antecedents are vouched for by the Social Register. She has no way of meeting others. She does not know what the others are like. She is only aware of an instinctive distaste for most of the young fellows among whom she is thrown. At best they are merely innocuous when they are not offensive. They do nothing; they intend never to do anything. If she is the American girl of our plays and novels she wants something better; and in the plays and novels she always gets him--the dashing young ranchman, the heroic naval lieutenant, the fearless Alaskan explorer, the tireless prospector or daring civil engineer. But in real life she does not get him--except by the merest fluke of fortune. She does not know the real thing when she meets it, and she is just as likely to marry a dissipated groom or chauffeur as the young Stanley of her dreams. The saddest class in our social life is that of the thoroughbred American girl who is a thousand times too good for her de-luxe surroundings and the crew of vacuous la-de-da Willies hanging about her, yet who, absolutely cut off from contact with any others, either gradually fades into a peripatetic old maid, wandering over Europe, or marries an eligible, turkey-trotting nondescript--"a mimmini-pimmini, Francesca da Rimini, _je-ne-sais-quoi_ young man." The Atlantic seaboard swarms in summertime with broad-shouldered, well-bred, highly educated and charming boys, who have had every advantage except that of being waited on by liveried footmen. They camp in the woods; tutor the feeble-minded sons of the rich; tramp and bicycle over Swiss mountain passes; sail their catboats through the island-studded reaches and thoroughfares of the Maine coast, and grow brown and hard under the burning sun. They are the hope of America. They can carry a canoe or a hundred-pound pack over a forest trail; and in the winter they set the pace in the scientific, law and medical schools. Their heads are clear, their eyes are bright, and there is a hollow instead of a bow window beneath the buttons of their waistcoats. The feet of these young men carry them to strange places; they cope with many and strange monsters. They are our Knights of the Round Table. They find the Grail of Achievement in lives of hard work, simple pleasures and high ideals--in college and factory towns; in law courts and hospitals; in the mountains of Colorado and the plains of the Dakotas. They are the best we have; but the poor rich girl rarely, if ever, meets them. The barrier of wealth completely hems her in. She must take one of those inside or nothing. When, in a desperate revolt against the artificiality of her existence, she breaks through the wall she is easy game for anybody--as likely to marry a jockey or a professional forger as one of the young men of her desire. One should not blame a rich girl too much for marrying a titled and perhaps attractive foreigner. The would-be critic has only to step into a Fifth Avenue ballroom and see what she is offered in his place to sympathize with and perhaps applaud her selection. Better a year of Europe than a cycle of--shall we say, Narragansett? After all, why not take the real thing, such as it is, instead of an imitation? I believe that one of the most cruel results of modern social life is the cutting off of young girls from acquaintanceship with youths of the sturdy, intelligent and hardworking type--and the unfitting of such girls for anything except the marriage mart of the millionaire. I would give half of all I possess to see my daughters happily married; but I now realize that their education renders such a marriage highly difficult of satisfactory achievement. Their mother and I have honestly tried to bring them up in such a way that they can do their duty in that state of life to which it hath pleased God to call them. But unfortunately, unless some man happens to call them also, they will have to keep on going round and round as they are going now. We did not anticipate the possibility of their becoming old maids, and they cannot become brides of the church. I should honestly be glad to have either of them marry almost anybody, provided he is a decent fellow. I should not even object to their marrying foreigners, but the difficulty is that it is almost impossible to find out whether a foreigner is really decent or not. It is true that the number of foreign noblemen who marry American girls for love is negligible. There is undoubtedly a small and distinguished minority who do so; but the transaction is usually a matter of bargain and sale, and the man regards himself as having lived up to his contract by merely conferring his title on the woman he thus deigns to honor. I should prefer to have them marry Americans, of course; but I no longer wish them to marry Americans of their own class. Yet, unfortunately, they would be unwilling to marry out of it. A curious situation! I have given up my life to buying a place for my children that is supposed to give them certain privileges, and I now am loath to have them take advantage of those privileges. The situation has its amusing as well as its pathetic side--for my son, now that I come to think of it, is one of the eligibles. He knows everybody and is on the road to money. He is one of the opportunities that society is offering to the daughters of other successful men. Should I wish my own girls to marry a youth like him? Far from it! Yet he is exactly the kind of fellow that my success has enabled them to meet and know, and whom Fate decrees that they shall eventually marry if they marry at all. When I frankly face the question of how much happiness I get out of my children I am constrained to admit that it is very little. The sense of proprietorship in three such finished products is something, to be sure; and, after all, I suppose they have--concealed somewhere--a real affection for their old dad. At times they are facetious--almost playful--as on my birthday; but I fancy that arises from a feeling of embarrassment at not knowing how to be intimate with a parent who crosses their path only twice a week, and then on the stairs. My son has attended to his own career now for some fourteen years; in fact I lost him completely before he was out of knickerbockers. Up to the time when he was sent away to boarding school he spent a rather disconsolate childhood, playing with mechanical toys, roller skating in the Mall, going occasionally to the theater, and taking music lessons; but he showed so plainly the debilitating effect of life in the city for eight months in the year that at twelve he was bundled off to a country school. Since then he has grown to manhood without our assistance. He went away undersized, pale, with a meager little neck and a sort of wistful Nicholas Nickelby expression. When he returned at the Christmas vacation he had gained ten pounds, was brown and freckled, and looked like a small giraffe in pantalets. Moreover, he had entirely lost the power of speech, owing to a fear of making a fool of himself. During the vacation in question he was reoutfitted and sent three times a week to the theater. On one or two occasions I endeavored to ascertain how he liked school, but all I could get out of him was the vague admission that it was "all right" and that he liked it "well enough." This process of outgrowing his clothes and being put through a course of theaters at each vacation--there was nothing else to do with him--continued for seven years, during which time he grew to be six feet two inches in height and gradually filled out to man's size. He managed to hold a place in the lower third of his class, with the aid of constant and expensive tutoring in the summer vacations, and he finally was graduated with the rest and went to Harvard. By this time he preferred to enjoy himself in his own way during his leisure and we saw less of him than ever. But, whatever his intellectual achievements may be, there is no doubt as to his being a man of the world, entirely at ease anywhere, with perfect manners and all the social graces. I do not think he was particularly dissipated at Harvard; on the other hand, I am assured by the dean that he was no student. He "made" a select club early in his course and from that time was occupied, I suspect, in playing poker and bridge, discussing deep philosophical questions and acquiring the art of living. He never went in for athletics; but by doing nothing in a highly artistic manner, and by dancing with the most startling agility, he became a prominent social figure and a headliner in college theatricals. From his sophomore year he has been in constant demand for cotillions, house parties and yachting trips. His intimate pals seem to be middle-aged millionaires who are known to me in only the most casual way; and he is a sort of gentleman-in-waiting--I believe the accepted term is "pet cat"--to several society women, for whom he devises new cotillion figures, arranges original after-dinner entertainments and makes himself generally useful. Like my two daughters he has arrived--absolutely; but, though we are members of the same learned profession, he is almost a stranger to me. I had no difficulty in getting him a clerkship in a gilt-edged law firm immediately after he was admitted to the bar and he is apparently doing marvelously well, though what he can possibly know of law will always remain a mystery to me. Yet he is already, at the age of twenty-eight, a director in three important concerns whose securities are listed on the stock exchange, and he spends a great deal of money, which he must gather somehow. I know that his allowance cannot do much more than meet his accounts at the smart clubs to which he belongs. He is a pleasant fellow and I enjoy the rare occasions when I catch a glimpse of him. I do not think he has any conspicuous vices--or virtues. He has simply had sense enough to take advantage of his social opportunities and bids fair to be equally successful with myself. He has really never done a stroke of work in his life, but has managed to make himself agreeable to those who could help him along. I have no doubt those rich friends of his throw enough business in his way to net him ten or fifteen thousand dollars a year, but I should hesitate to retain him to defend me if I were arrested for speeding. Nevertheless at dinner I have seen him bullyrag and browbeat a judge of our Supreme Court in a way that made me shudder, though I admit that the judge in question owed his appointment entirely to the friend of my son who happened to be giving the dinner; and he will contradict in a loud tone men and women older than myself, no matter what happens to be the subject under discussion. They seem to like it--why, I do not pretend to understand. They admire his assurance and good nature, and are rather afraid of him! I cannot imagine what he would find to do in my own law office; he would doubtless regard it as a dull place and too narrow a sphere for his splendid capabilities. He is a clever chap, this son of mine; and though neither he nor his sisters seem to have any particular fondness for one another, he is astute at playing into their hands and they into his. He also keeps a watchful eye on our dinner invitations, so they will not fall below the properly exclusive standard. "What are you asking old Washburn for?" he will ask. "He's been a dead one these five years!" Or: "I'd cut out the Becketts--at least if you're asking the Thompsons. They don't go with the same crowd." Or: "Why don't you ask the Peyton-Smiths? They're nothing to be afraid of if they do cut a dash at Newport. The old girl is rather a pal of mine." So we drop old Washburn, cut out the Becketts, and take courage and invite the hyphenated Smiths. A hint from him pays handsome dividends! and he is distinctly proud of the family and anxious to push it along to still greater success. However, he has never asked my help or assistance--except in a financial way. He has never come to me for advice; never confided any of his perplexities or troubles to me. Perhaps he has none. He seems quite sufficient unto himself. And he certainly is not my friend. It seems strange that these three children of mine, whose upbringing has been the source of so much thought and planning on the part of my wife and myself, and for whose ultimate benefit we have shaped our own lives, should be the merest, almost impersonal, acquaintances. The Italian fruit-vender on the corner, whose dirty offspring crawl among the empty barrels behind the stand, knows far more of his children than do we of ours, will have far more influence on the shaping of their future lives. They do not need us now and they never have needed us. A trust company could have performed all the offices of parenthood with which we have been burdened. We have paid others to be father and mother in our stead--or rather, as I now see, have had hired servants to go through the motions for us; and they have done it well, so far as the mere physical side of the matter is concerned. We have been almost entirely relieved of care. We have never been annoyed by our children's presence at any time. We have never been bothered with them at meals. We have never had to sit up with them when they could not go to sleep, or watch at their bedsides during the night when they were sick. Competent nurses--far more competent than we--washed their little dirty hands, mended the torn dresses and kissed their wounds to make them well. And when five o'clock came three dainty little Dresden figures in pink and blue ribbons were brought down to the drawing room to be admired by our guests. Then, after being paraded, they were carried back to the nursery to resume the even tenor of their independent existences. No one of us has ever needed the other members of the family. My wife has never called on either of our daughters to perform any of those trifling intimate services that bring a mother and her children together. There has always been a maid standing ready to hook up her dress, fetch her book or her hat, or a footman to spring upstairs after the forgotten gloves. And the girls have never needed their mother--the governess could read aloud ever so much better, and they always had their own maid to look after their clothes. When they needed new gowns they simply went downtown and bought them--and the bill was sent to my office. Neither of them was ever forced to stay at home that her sister might have some pleasure instead. No; our wealth has made it possible for each of my children to enjoy every luxury without any sacrifice on another's part. They owe nothing to each other, and they really owe nothing to their mother or myself--except perhaps a monetary obligation. But there is one person, technically not one of our family, for whom my girls have the deepest and most sincere affection--that is old Jane, their Irish nurse, who came to them just after they were weaned and stayed with us until the period of maids and governesses arrived. I paid her twenty-five dollars a month, and for nearly ten years she never let them out of her sight--crooning over them at night; trudging after them during the daytime; mending their clothes; brushing their teeth; cutting their nails; and teaching them strange Irish legends of the banshee. When I called her into the library and told her the children were now too old for her and that they must have a governess, the look that came into her face haunted me for days. "Ye'll be after taking my darlin's away from me?" she muttered in a dead tone. "'T will be hard for me!" She stood as if the heart had died within her, and the hundred-dollar bill I shoved into her hand fell to the floor. Then she turned quickly and hurried out of the room without a sob. I heard afterward that she cried for a week. Now I always know when one of their birthdays has arrived by the queer package, addressed in old Jane's quaint half-printed writing, that always comes. She has cared for many dozens of children since then, but loves none like my girls, for she came to them in her young womanhood and they were her first charges. And they are just as fond of her. Indeed it is their loyalty to this old Irish nurse that gives me faith that they are not the cold propositions they sometimes seem to be. For once when, after much careless delay, a fragmentary message came to us that she was ill and in a hospital my two daughters, who were just starting for a ball, flew to her bedside, sat with her all through the night and never left her until she was out of danger. "They brought me back--my darlin's!" she whispered to us when later we called to see how she was getting on; and my wife looked at me across the rumpled cot and her lips trembled. I knew what was in her mind. Would her daughters have rushed to her with the same forgetfulness of self as to this prematurely gray and wrinkled woman whose shrunken form lay between us? Poor old Jane! Alone in an alien land, giving your life and your love to the children of others, only to have them torn from your arms just as the tiny fingers have entwined themselves like tendrils round your heart! We have tossed you the choicest blessings of our lives and shouldered you with the heavy responsibilities that should rightfully have been our load. Your cup has run over with both joy and sorrow but you have drunk of the cup, while we are still thirsty! Our hearts are dry, while yours is green--nourished with the love that should belong to us. Poor old Jane? Lucky old Jane! Anyhow God bless you! CHAPTER IV MY MIND I come of a family that prides itself on its culture and intellectuality. We have always been professional people, for my grandfather was, as I have said, a clergyman; and among my uncles are a lawyer, a physician and a professor. My sisters, also, have intermarried with professional men. I received a fairly good primary and secondary education, and graduated from my university with honors--whatever that may have meant. I was distinctly of a literary turn of mind; and during my four years of study I imbibed some slight information concerning the English classics, music, modern history and metaphysics. I could talk quite wisely about Chaucer, Beaumont and Fletcher, Thomas Love Peacock and Ann Radcliffe, or Kant, Fichte and Schopenhauer. I can see now that my smattering of culture was neither deep nor broad. I acquired no definite knowledge of underlying principles, of general history, of economics, of languages, of mathematics, of physics or of chemistry. To biology and its allies I paid scarcely any attention at all, except to take a few snap courses. I really secured only a surface acquaintance with polite English literature, mostly very modern. The main part of my time I spent reading Stevenson and Kipling. I did well in English composition and I pronounced my words neatly and in a refined manner. At the end of my course, when twenty-two years old, I was handed an imitation-parchment degree and proclaimed by the president of the college as belonging to the Brotherhood of Educated Men. I did not. I was an imitation educated man; but, though spurious, I was a sufficiently good counterfeit to pass current for what I had been declared to be. Apart from a little Latin, a considerable training in writing the English language, and a great deal of miscellaneous reading of an extremely light variety, I really had no culture at all. I could not speak an idiomatic sentence in French or German; I had the vaguest ideas about applied mechanics and science; and no thorough knowledge about anything; but I was supposed to be an educated man, and on this stock in trade I have done business ever since--with, to be sure, the added capital of a degree of bachelor of laws. Now since my graduation, twenty-eight years ago, I have given no time to the systematic study of any subject except law. I have read no serious works dealing with either history, sociology, economics, art or philosophy. I am supposed to know enough about these subjects already. I have rarely read over again any of the masterpieces of English literature with which I had at least a bowing acquaintance when at college. Even this last sentence I must qualify to the extent of admitting that I now see that this acquaintance was largely vicarious, and that I frequently read more criticism than literature. It is characteristic of modern education that it is satisfied with the semblance and not the substance of learning. I was taught _about_ Shakspere, but not Shakspere. I was instructed in the history of literature, but not in literature itself. I knew the names of the works of numerous English authors and I knew what Taine and others thought about them, but I knew comparatively little of what was between the covers of the books themselves. I was, I find, a student of letters by proxy. As time went on I gradually forgot that I had not, in fact, actually perused these volumes; and to-day I am accustomed to refer familiarly to works I never have read at all--not a difficult task in these days of handbook knowledge and literary varnish. It is this patent superficiality that so bores me with the affected culture of modern social intercourse. We all constantly attempt to discuss abstruse subjects in philosophy and art, and pretend to a familiarity with minor historical characters and events. Now why try to talk about Bergson's theories if you have not the most elementary knowledge of philosophy or metaphysics? Or why attempt to analyze the success or failure of a modern post-impressionist painter when you are totally ignorant of the principles of perspective or of the complex problems of light and shade? You might as properly presume to discuss a mastoid operation with a surgeon or the doctrine of _cypres_ with a lawyer. You are equally qualified. I frankly confess that my own ignorance is abysmal. In the last twenty-eight years what information I have acquired has been picked up principally from newspapers and magazines; yet my library table is littered with books on modern art and philosophy, and with essays on literary and historical subjects. I do not read them. They are my intellectual window dressings. I talk about them with others who, I suspect, have not read them either; and we confine ourselves to generalities, with a careful qualification of all expressed opinions, no matter how vague and elusive. For example--a safe conversational opening: "Of course there is a great deal to be said in favor of Bergson's general point of view, but to me his reasoning is inconclusive. Don't you feel the same way--somehow?" You can try this on almost anybody. It will work in ninety-nine cases out of a hundred; for, of course, there is a great deal to be said in favor of the views of anybody who is not an absolute fool, and most reasoning is open to attack at least for being inconclusive. It is also inevitable that your cultured friend--or acquaintance--should feel the same way--somehow. Most people do--in a way. The real truth of the matter is, all I know about Bergson is that he is a Frenchman--is he actually by birth a Frenchman or a Belgian?--who as a philosopher has a great reputation on the Continent, and who recently visited America to deliver some lectures. I have not the faintest idea what his theories are, and I should not if I heard him explain them. Moreover, I cannot discuss philosophy or metaphysics intelligently, because I have not to-day the rudimentary knowledge necessary to understand what it is all about. It is the same with art. On the one or two isolated varnishing days when we go to a gallery we criticize the pictures quite fiercely. "We know what we like." Yes, perhaps we do. I am not sure even of that. But in eighty-five cases out of a hundred none of us have any knowledge of the history of painting or any intelligent idea of why Velasquez is regarded as a master; yet we acquire a glib familiarity with the names of half a dozen cubists or futurists, and bandy them about much as my office boy does the names of his favorite pugilists or baseball players. It is even worse with history and biography. We cannot afford or have not the decency to admit that we are uninformed. We speak casually of, say, Henry of Navarre, or Beatrice D'Este, or Charles the Fifth. I select my names intentionally from among the most celebrated in history; yet how many of us know within two hundred years of when any one of them lived--or much about them? How much definite historical information have we, even about matters of genuine importance? * * * * * Let us take a shot at a few dates. I will make it childishly easy. Give me, if you can, _even approximately_, the year of Caesar's Conquest of Gaul; the Invasion of Europe by the Huns; the Sack of Rome; the Battle of Châlons-sur-Marne; the Battle of Tours; the Crowning of Charlemagne; the Great Crusade; the Fall of Constantinople; Magna Charta; the Battle of Crécy; the Field of the Cloth of Gold; the Massacre of St. Bartholomew; the Spanish Armada; the Execution of King Charles I; the Fall of the Bastile; the Inauguration of George Washington; the Battle of Waterloo; the Louisiana Purchase; the Indian Mutiny; the Siege of Paris. I will look out of the window while you go through the mental agony of trying to remember. It looks easy, does it not? Almost an affront to ask the date of Waterloo! Well, I wanted to be fair and even things up; but, honestly, can you answer correctly five out of these twenty elementary questions? I doubt it. Yet you have, no doubt, lying on your table at the present time, intimate studies of past happenings and persons that presuppose and demand a rough general knowledge of American, French or English history. The dean of Radcliffe College, who happened to be sitting behind two of her recent graduates while attending a performance of Parker's deservedly popular play "Disraeli" last winter, overheard one of them say to the other: "You know, I couldn't remember whether Disraeli was in the Old or the New Testament; and I looked in both and couldn't find him in either!" I still pass socially as an exceptionally cultured man--one who is well up on these things; yet I confess to knowing to-day absolutely nothing of history, either ancient, medieval or modern. It is not a matter of mere dates, by any means, though I believe dates to be of some general importance. My ignorance is deeper than that. I do not remember the events themselves or their significance. I do not now recall any of the facts connected with the great epoch-making events of classic times; I cannot tell as I write, for example, who fought in the battle of the Allia; why Caesar crossed the Rubicon, or why Cicero delivered an oration against Catiline. As to what subsequently happened on the Italian peninsula my mind is a blank until the appearance of Garibaldi during the last century. I really never knew just who Garibaldi was until I read Trevelyan's three books on the Resorgimento last winter, and those I perused because I had taken a motor trip through Italy the summer before. I know practically nothing of Spanish history, and my mind is a blank as to Russia, Poland, Turkey, Sweden, Germany, Austria, and Holland. Of course I know that the Dutch Republic rose--assisted by one Motley, of Boston--and that William of Orange was a Hollander--or at least I suppose he was born there. But how Holland came to rise I know not--or whether William was named after an orange or oranges were named after him. As for central Europe, it is a shocking fact that I never knew there was not some interdependency between Austria and Germany until last summer. I only found out the contrary when I started to motor through the Austrian Tyrol and was held up by the custom officers on the frontier. I knew that an old emperor named William somehow founded the German Empire out of little states, with the aid of Bismarck and Von Moltke; but that is all I know about it. I do not know when the war between Prussia and Austria took place or what battles were fought in it. The only battle in the Franco-Prussian War I am sure of is Sedan, which I remember because I was once told that Phil Sheridan was present as a spectator. I know Gustavus Adolphus was a king of Sweden, but I do not know when; and apart from their names I know nothing of Theodoric, Charles Martel, Peter the Hermit, Lodovico Moro, the Emperor Maximilian, Catherine of Aragon, Catherine de' Medici, Richelieu, Frederick Barbarossa, Cardinal Wolsey, Prince Rupert--I do not refer to Anthony Hope's hero, Rupert of Hentzau--Saint Louis, Admiral Coligny, or the thousands of other illustrious personages that crowd the pages of history. I do not know when or why the Seven Years' War, the Thirty Years' War, the Hundred Years' War or the Massacre of St. Bartholomew took place, why the Edict of Nantes was revoked or what it was, or who fought at Malplaquet, Tours, Soissons, Marengo, Plassey, Oudenarde, Fontenoy or Borodino--or when they occurred. I probably did know most if not all of these things, but I have entirely forgotten them. Unfortunately I manage to act as if I had not. The result is that, having no foundation to build on, any information I do acquire is immediately swept away. People are constantly giving me books on special topics, such as Horace Walpole and his Friends, France in the Thirteenth Century, The Holland House Circle, or Memoires of Madame du Barry; but of what use can they be to me when I do not know, or at least have forgotten, even the salient facts of French and English history? We are undoubtedly the most superficial people in the world about matters of this sort. Any bluff goes. I recall being at a dinner not long ago when somebody mentioned Conrad II. One of the guests hazarded the opinion that he had died in the year 1330. This would undoubtedly have passed muster but for a learned-looking person farther down the table who deprecatingly remarked: "I do not like to correct you, but I think Conrad the Second died in 1337!" The impression created on the assembled company cannot be overstated. Later on in the smoking room I ventured to compliment the gentleman on his fund of information, saying: "Why, I never even _heard_ of Conrad the Second!" "Nor I either," he answered shamelessly. It is the same with everything--music, poetry, politics. I go night after night to hear the best music in the world given at fabulous cost in the Metropolitan Opera House and am content to murmur vague ecstasies over Caruso, without being aware of who wrote the opera or what it is all about. Most of us know nothing of orchestration or even the names of the different instruments. We may not even be sure of what is meant by counterpoint or the difference between a fugue and an arpeggio. A handbook would give us these minor details in an hour's reading; but we prefer to sit vacuously making feeble jokes about the singers or the occupants of the neighboring boxes, without a single intelligent thought as to why the composer attempted to write precisely this sort of an opera, when he did it, or how far he succeeded. We are content to take our opinions and criticisms ready made, no matter from whose mouth they fall; and one hears everywhere phrases that, once let loose from the Pandora's Box of some foolish brain, never cease from troubling. In science I am in even a more parlous state. I know nothing of applied electricity in its simplest forms. I could not explain the theory of the gas engine, and plumbing is to me one of the great mysteries. Last, but even more lamentable, I really know nothing about politics, though I am rather a strong party man and my name always appears on important citizens' committees about election time. I do not know anything about the city departments or its fiscal administration. I should not have the remotest idea where to direct a poor person who applied to me for relief. Neither have I ever taken the trouble to familiarize myself with even the more important city buildings. Of course I know the City Hall by sight, but I have never been inside it; I have never visited the Tombs or any one of our criminal courts; I have never been in a police station, a fire house, or inspected a single one of our prisons or reformatory institutions. I do not know whether police magistrates are elected or appointed and I could not tell you in what congressional district I reside. I do not know the name of my alderman, assemblyman, state senator or representative in Congress. I do not know who is at the head of the Fire Department, the Street Cleaning Department, the Health Department, the Park Department or the Water Department; and I could not tell, except for the Police Department, what other departments there are. Even so, I do not know what police precinct I am living in, the name of the captain in command, or where the nearest fixed post is at which an officer is supposed to be on duty. As I write I can name only five members of the United States Supreme Court, three members of the Cabinet, and only one of the congressmen from the state of New York. This in cold type seems almost preposterous, but it is, nevertheless, a fact--and I am an active practicing lawyer besides. I am shocked to realize these things. Yet I am supposed to be an exceptionally intelligent member of the community and my opinion is frequently sought on questions of municipal politics. Needless to say, the same indifference has prevented my studying--except in the most superficial manner--the single tax, free trade and protection, the minimum wage, the recall, referendum, or any other of the present much-mooted questions. How is this possible? The only answer I can give is that I have confined my mental activities entirely to making my legal practice as lucrative as possible. I have taken things as I found them and put up with abuses rather than go to the trouble to do away with them. I have no leisure to try to reform the universe. I leave that task to others whose time is less valuable than mine and who have something to gain by getting into the public eye. The mere fact, however, that I am not interested in local politics would not ordinarily, in a normal state of civilization, explain my ignorance of these things. In most societies they would be the usual subjects of conversation. People naturally discuss what interests them most. Uneducated people talk about the weather, their work, their ailments and their domestic affairs. With more enlightened folk the conversation turns on broader topics--the state of the country, politics, trade, or art. It is only among the so-called society people that the subjects selected for discussion do not interest anybody. Usually the talk that goes on at dinners or other entertainments relates only to what plays the conversationalists in question have seen or which of the best sellers they have read. For the rest the conversation is dexterously devoted to the avoidance of the disclosure of ignorance. Even among those who would like to discuss the questions of the day intelligently and to ascertain other people's views pertaining to them, there is such a fundamental lack of elementary information that it is a hopeless undertaking. They are reduced to the commonplaces of vulgar and superficial comment. "'Tis plain," cry they, "our mayor's a noddy; and as for the corporation--shocking!" The mayor may be and probably is a noddy, but his critics do not know why. The average woman who dines out hardly knows what she is saying or what is being said to her. She will usually agree with any proposition that is put to her--if she has heard it. Generally she does not listen. I know a minister's wife who never pays the slightest attention to anything that is being said to her, being engrossed in a torrent of explanation regarding her children's education and minor diseases. Once a bored companion in a momentary pause fixed her sternly with his eye and said distinctly: "But I don't give a --- about your children!" At which the lady smiled brightly and replied: "Yes. Quite so. Exactly! As I was saying, Johnny got a--" But, apart from such hectic people, who run quite amuck whenever they open their mouths, there are large numbers of men and women of some intelligence who never make the effort to express conscientiously any ideas or opinions. They find it irksome to think. They are completely indifferent as to whether a play is really good or bad or who is elected mayor of the city. In any event they will have their coffee, rolls and honey served in bed the next morning; and they know that, come what will--flood, tempest, fire or famine--there will be forty-six quarts of extra xxx milk left at their area door. They are secure. The stock market may rise and fall, presidents come and go, but they will remain safe in the security of fifty thousand a year. And, since they really do not care about anything, they are as likely to praise as to blame, and to agree with everybody about everything. Their world is all cakes and ale--why should they bother as to whether the pothouse beer is bad? I confess, with something of a shock, that essentially I am like the rest of these people. The reason I am not interested in my country and my city is because, by reason of my financial and social independence, they have ceased to be my city and country. I should be just as comfortable if our Government were a monarchy. It really is nothing to me whether my tax rate is six one-hundredths of one per cent higher or lower, or what mayor rules in City Hall. So long as Fifth Avenue is decently paved, so that my motor runs smoothly when I go to the opera, I do not care whether we have a Reform, Tammany or Republican administration in the city. So far as I am concerned, my valet will still come into my bedroom at exactly nine o'clock every morning, turn on the heat and pull back the curtains. His low, modulated "Your bath is ready, sir," will steal through my dreams, and he will assist me to rise and put on my embroidered dressing gown of wadded silk in preparation for another day's hard labor in the service of my fellowmen. Times have changed since my father's frugal college days. Have they changed for better or for worse? Of one thing I am certain--my father was a better-educated man than I am. I admit that, under the circumstances, this does not imply very much; but my parent had, at least, some solid ground beneath his intellectual feet on which he could stand. His mind was thoroughly disciplined by rigid application to certain serious studies that were not selected by himself. From the day he entered college he was in active competition with his classmates in all his studies, and if he had been a shirker they would all have known it. In my own case, after I had once matriculated, the elective system left me free to choose my own subjects and to pursue them faithfully or not, so long as I could manage to squeak through my examinations. My friends were not necessarily among those who elected the same courses, and whether I did well or ill was nobody's business but my own and the dean's. It was all very pleasant and exceedingly lackadaisical, and by the time I graduated I had lost whatever power of concentration I had acquired in my preparatory schooling. At the law school I was at an obvious disadvantage with the men from the smaller colleges which still followed the old-fashioned curriculum and insisted on the mental discipline entailed by advanced Greek, Latin, the higher mathematics, science and biology. In point of fact I loafed delightfully for four years and let my mind run absolutely to seed, while I smoked pipe after pipe under the elms, watching the squirrels and dreaming dreams. I selected elementary--almost childlike--courses in a large variety of subjects; and as soon as I had progressed sufficiently to find them difficult I cast about for other snaps to take their places. My bookcase exhibited a collection of primers on botany, zoölogy and geology, the fine arts, music, elementary French and German, philosophy, ethics, methaphysics, architecture, English composition, Shakspere, the English poets and novelists, oral debating and modern history. I took nothing that was not easy and about which I did not already know a little something. I attended the minimum number of lectures required, did the smallest amount of reading possible and, by cramming vigorously for three weeks at the end of the year, managed to pass all examinations creditably. I averaged, I suppose, outside of the lecture room, about a single hour's desultory work a day. I really need not have done that. When, for example, it came time to take the examination in French composition I discovered that I had read but two out of the fifteen plays and novels required, the plots of any one of which I might be asked to give on my paper. Rather than read these various volumes, I prepared a skeleton digest in French, sufficiently vague, which could by slight transpositions be made to do service in every case. I committed it to memory. It ran somewhat as follows: "The play"--or novel--"entitled ---- is generally conceded to be one of the most carefully constructed and artistically developed of all ----'s"--here insert name of author--"many masterly productions. The genius of the author has enabled him skilfully to portray the atmosphere and characters of the period. The scene is laid in ---- and the time roughly is that of the --th century. The hero is ----; the heroine, ----; and after numerous obstacles and ingenious complications they eventually marry. The character of the old ----"--here insert father, mother, uncle or grandparent, gardener or family servant--"is delightfully whimsical and humorous, and full of subtle touches. The tragic element is furnished by ----, the ----. The author touches with keen satire on the follies and vices of the time, while the interest in the principal love affair is sustained until the final dénouement. Altogether it would be difficult to imagine a more brilliant example of dramatic--or literary--art." I give this rather shocking example of sophomoric shiftlessness for the purpose of illustrating my attitude toward my educational opportunities and what was possible in the way of dexterously avoiding them. All I had to do was to learn the names of the chief characters in the various plays and novels prescribed. If I could acquire a brief scenario of each so much the better. Invariably they had heroes and heroines, good old servants or grandparents, and merry jesters. At the examination I successfully simulated familiarity with a book I had never read and received a commendatory mark. This happy-go-lucky frame of mind was by no means peculiar to myself. Indeed I believe it to have been shared by the great majority of my classmates. The result was that we were sent forth into the world without having mastered any subject whatsoever, or even followed it for a sufficient length of time to become sincerely interested in it. The only study I pursued more than one year was English composition, which came easily to me, and which in one form or another I followed throughout my course. Had I adopted the same tactics with any other of the various branches open to me, such as history, chemistry or languages, I should not be what I am to-day--a hopelessly superficial man. Mind you, I do not mean to assert that I got nothing out of it at all. Undoubtedly I absorbed a smattering of a variety of subjects that might on a pinch pass for education. I observed how men with greater social advantages than myself brushed their hair, wore their clothes and took off their hats to their women friends. Frankly that was about everything I took away with me. I was a victim of that liberality of opportunity which may be a heavenly gift to a post-graduate in a university, but which is intellectual damnation to an undergraduate collegian. The chief fault that I have to find with my own education, however, is that at no time was I encouraged to think for myself. No older man ever invited me to his study, there quietly and frankly to discuss the problems of human existence. I was left entirely vague as to what it was all about, and the relative values of things were never indicated. The same emphasis was placed on everything--whether it happened to be the Darwinian Theory, the Fall of Jerusalem or the character of Ophelia. I had no philosophy, no theory of morals, and no one ever even attempted to explain to me what religion or the religious instinct was supposed to be. I was like a child trying to build a house and gathering materials of any substance, shape or color without regard to the character of the intended edifice. I was like a man trying to get somewhere and taking whatever paths suited his fancy--first one and then another, irrespective of where they led. The Why and the Wherefore were unknown questions to me, and I left the university without any idea as to how I came to be in the world or what my duties toward my fellowmen might be. In a word the two chief factors in education passed me by entirely--(a) my mind received no discipline; (b) and the fundamental propositions of natural philosophy were neither brought to my attention nor explained to me. These deficiencies have never been made up. Indeed, as to the first, my mind, instead of being developed by my going to college, was seriously injured. My memory has never been good since and my methods of reading and thinking are hurried and slipshod, but this is a small thing compared with the lack of any philosophy of life. I acquired none as a youth and I have never had any since. For fifty years I have existed without any guiding purpose except blindly to get ahead--without any religion, either natural or dogmatic. I am one of a type--a pretty good, perfectly aimless man, without any principles at all. They tell me that things have changed at the universities since my day and that the elective system is no longer in favor. Judging by my own case, the sooner it is abolished entirely, the better for the undergraduate. I should, however, suggest one important qualification--namely, that a boy be given the choice in his Freshman year of three or four general subjects, such as philosophy, art, history, music, science, languages or literature, and that he should be compelled to follow the subjects he elects throughout his course. In addition I believe the relation of every study to the whole realm of knowledge should be carefully explained. Art cannot be taught apart from history; history cannot be grasped independently of literature. Religion, ethics, science and philosophy are inextricably involved one with another. But mere learning or culture, a knowledge of facts or of arts, is unimportant as compared with a realization of the significance of life. The one is superficial--the other is fundamental; the one is temporal--the other is spiritual. There is no more wretched human being than a highly trained but utterly purposeless man--which, after all, is only saying that there is no use in having an education without a religion; that unless someone is going to live in the house there is not much use in elaborately furnishing it. I am not attempting to write a treatise on pedagogy; but, when all is said, I am inclined to the belief that my unfortunate present condition, whatever my material success may have been, is due to lack of education--in philosophy in its broadest sense; in mental discipline; and in actual acquirement. It is in this last field that my deficiencies and those of my class are superficially most apparent. A wide fund of information may be less important than a knowledge of general principles, but it is none the less valuable; and all of us ought to be equipped with the kind of education that will enable us to understand the world of men as well as the world of nature. It is, of course, essential for us to realize that the physical characteristics of a continent may have more influence on the history of nations than mere wars or battles, however far-reaching the foreign policies of their rulers; but, in addition to an appreciation of this and similar underlying propositions governing the development of civilization, the educated man who desires to study the problems of his own time and country, to follow the progress of science and philosophy, and to enjoy music, literature and art, must have a certain elementary equipment of mere facts. The Oriental attitude of mind that enabled the Shah of Persia calmly to decline the invitation of the Prince of Wales to attend the Derby, on the ground that "he knew one horse could run faster than another," is foreign to that of Western civilization. The Battle of Waterloo is a flyspeck in importance contrasted with the problem of future existence; but the man who never heard of Napoleon would make a dull companion in this world or the next. We live in direct proportion to the keenness of our interest in life; and the wider and broader this interest is, the richer and happier we are. A man is as big as his sympathies, as small as his selfishness. The yokel thinks only of his dinner and his snooze under the hedge, but the man of education rejoices in every new production of the human brain. Advantageous intercourse between civilized human beings requires a working knowledge of the elementary facts of history, of the achievements in art, music and letters, as well as of the principles of science and philosophy. When people go to quarreling over the importance of a particular phase of knowledge or education they are apt to forget that, after all, it is a purely relative matter, and that no one can reasonably belittle the value of any sort of information. But furious arguments arise over the question as to how history should be taught, and "whether a boy's head should be crammed full of dates." Nobody in his senses would want a boy's head crammed full of dates any more than he would wish his stomach stuffed with bananas; but both the head and the stomach need some nourishment--better dates than nothing. If a knowledge of a certain historical event is of any value whatsoever, the greater and more detailed our knowledge the better--including perhaps, but not necessarily, its date. The question is not essentially whether the dates are of value, but how much emphasis should be placed on them to the exclusion of other facts of history. "There is no use trying to remember dates," is a familiar cry. There is about as much sense in such a statement as the announcement: "There is no use trying to remember who wrote Henry Esmond, composed the Fifth Symphony, or painted the Last Supper." There is a lot of use in trying to remember anything. The people who argue to the contrary are too lazy to try. * * * * * I suppose it may be conceded, for the sake of argument, that every American, educated or not, should know the date of the Declaration of Independence, and have some sort of acquaintance with the character and deeds of Washington. If we add to this the date of the discovery of America and the first English settlement; the inauguration of the first president; the Louisiana Purchase; the Naval War with England; the War with Mexico; the Missouri Compromise, and the firing on Fort Sumter, we cannot be accused of pedantry. It certainly could not do any one of us harm to know these dates or a little about the events themselves. This is equally true, only in a lesser degree, in regard to the history of foreign nations. Any accurate knowledge is worth while. It is harder, in the long run, to remember a date slightly wrong than with accuracy. The dateless man, who is as vague as I am about the League of Cambray or Philip II, will loudly assert that the trouble incident to remembering a date in history is a pure waste of time. He will allege that "a general idea"--a very favorite phrase--is all that is necessary. In the case of such a person you can safely gamble that his so-called "general idea" is no idea at all. Pin him down and he will not be able to tell you within _five hundred years_ the dates of some of the cardinal events of European history--the invasion of Europe by the Huns, for instance. Was it before or after Christ? He might just as well try to tell you that it was quite enough to know that our Civil War occurred somewhere in the nineteenth century. I have personally no hesitation in advancing the claim that there are a few elementary principles and fundamental facts in all departments of human knowledge which every person who expects to derive any advantage from intelligent society should not only once learn but should forever remember. Not to know them is practically the same thing as being without ordinary means of communication. One may not find it necessary to remember the binomial theorem or the algebraic formula for the contents of a circle, but he should at least have a formal acquaintance with Julius Caesar, Hannibal, Charlemagne, Martin Luther, Francis I, Queen Elizabeth, Louis XIV, Napoleon I--and a dozen or so others. An educated man must speak the language of educated men. I do not think it too much to demand that in history he should have in mind, at least approximately, one important date in each century in the chronicles of France, England, Italy and Germany. That is not much, but it is a good start. And shall we say ten dates in American history? He should, in addition, have a rough working knowledge of the chief personages who lived in these centuries and were famous in war, diplomacy, art, religion and literature. His one little date will at least give him some notion of the relation the events in one country bore to those in another. I boldly assert that in a half hour you can learn by heart all the essential dates in American history. I assume that you once knew, and perhaps still know, something about the events themselves with which they are connected. Ten minutes a day for the rest of the week and you will have them at your fingers' ends. It is no trick at all. It is as easy as learning the names of the more important parts of the mechanism of your motor. There is nothing impossible or difficult, or even tedious, about it; but it seems Herculean because you have never taken the trouble to try to remember anything. It is the same attitude that renders it almost physically painful for one of us to read over the scenario of an opera or a column biography of its composer before hearing a performance at the Metropolitan. Yet fifteen minutes or half an hour invested in this way pays about five hundred per cent. And the main thing, after you have learned anything, is not to forget it. Knowledge forgotten is no knowledge at all. That is the trouble with the elective system as usually administered in our universities. At the end of the college year the student tosses aside his Elements of Geology and forgets everything between its covers. What he has learned should be made the basis for other and more detailed knowledge. The instructor should go on building a superstructure on the foundation he has laid, and at the end of his course the aspirant for a diploma should be required to pass an examination on his entire college work. Had I been compelled to do that, I should probably be able to tell now--what I do not know--whether Melancthon was a painter, a warrior, a diplomat, a theologian or a dramatic poet. I have instanced the study of dates because they are apt to be the storm center of discussions concerning education. It is fashionable to scoff at them in a superior manner. We all of us loathe them; yet they are as indispensable--a certain number of them--as the bones of a body. They make up the skeleton of history. They are the orderly pegs on which we can hang later acquired information. If the pegs are not there the information will fall to the ground. For example, our entire conception of the Reformation, or of any intellectual or religious movement, might easily turn on whether it preceded or followed the discovery of printing; and our mental picture of any great battle, as well as our opinion of the strategy of the opposing armies, would depend on whether or not gunpowder had been invented at the time. Hence the importance of a knowledge of the dates of the invention of printing and of gunpowder in Europe. It is ridiculous to allege that there is no minimum of education, to say nothing of culture, which should be required of every intelligent human being if he is to be but a journeyman in society. In an unconvincing defense of our own ignorance we loudly insist that detailed knowledge of any subject is mere pedagogy, a hindrance to clear thinking, a superfluity. We do not say so, to be sure, with respect to knowledge in general; but that is our attitude in regard to any particular subject that may be brought up. Yet to deny the value of special information is tantamount to an assertion of the desirability of general ignorance. It is only the politician who can afford to say: "Wide knowledge is a fatal handicap to forcible expression." This is not true of the older countries. In Germany, for instance, a knowledge of natural philosophy, languages and history is insisted on. To the German schoolboy, George Washington is almost as familiar a character as Columbus; but how many American children know anything of Bismarck? The ordinary educated foreigner speaks at least two languages and usually three, is fairly well grounded in science, and is perfectly familiar with ancient and modern history. The American college graduate seems like a child beside him so far as these things are concerned. We are content to live a hand-to-mouth mental existence on a haphazard diet of newspapers and the lightest novels. We are too lazy to take the trouble either to discipline our minds or to acquire, as adults, the elementary knowledge necessary to enable us to read intelligently even rather superficial books on important questions vitally affecting our own social, physical intellectual or moral existences. If somebody refers to Huss or Wyclif ten to one we do not know of whom he is talking; the same thing is apt to be true about the draft of the hot-water furnace or the ball and cock of the tank in the bathroom. Inertia and ignorance are the handmaidens of futility. Heaven forbid that we should let anybody discover this aridity of our minds! My wife admits privately that she has forgotten all the French she ever knew--could not even order a meal from a _carte de jour_; yet she is a never-failing source of revenue to the counts and marquises who yearly rush over to New York to replenish their bank accounts by giving parlor lectures in their native tongue on _Le XIIIme Siècle_ or Madame Lebrun. No one would ever guess that she understands no more than one word out of twenty and that she has no idea whether Talleyrand lived in the fifteenth or the eighteenth century, or whether Calvin was a Frenchman or a Scotchman. Our clever people are content merely with being clever. They will talk Tolstoi or Turgenieff with you, but they are quite vague about Catherine II or Peter the Great. They are up on D'Annunczio, but not on Garibaldi or Cavour. Our ladies wear a false front of culture, but they are quite bald underneath. * * * * * Being educated, however, does not consist, by any means, in knowing who fought and won certain battles or who wrote the Novum Organum. It lies rather in a knowledge of life based on the experience of mankind. Hence our study of history. But a study of history in the abstract is valueless. It must be concrete, real and living to have any significance for us. The schoolboy who learns by rote imagines the Greeks as outline figures of one dimension, clad in helmets and tunics, and brandishing little swords. That is like thinking of Jeanne d'Arc as a suit of armor or of Theodore Roosevelt as a pair of spectacles. If the boy is to gain anything by his acquaintance with the Greeks he must know what they ate and drank, how they amused themselves, what they talked about, and what they believed as to the nature and origin of the universe and the probability of a future life. I hold that it is as important to know how the Romans told time as that Nero fiddled while his capital was burning. William the Silent was once just as much alive as P.T. Barnum, and a great deal more worth while. It is fatal to regard historical personages as lay figures and not as human beings. We are equally vague with respect to the ordinary processes of our daily lives. I have not the remotest idea of how to make a cup of coffee or disconnect the gas or water mains in my own house. If my sliding door sticks I send for the carpenter, and if water trickles in the tank I telephone for the plumber. I am a helpless infant in the stable and my motor is the creation of a Frankenstein that has me at its mercy. My wife may recall something of cookery--which she would not admit, of course, before the butler--but my daughters have never been inside a kitchen. None of my family knows anything about housekeeping or the prices of foodstuffs or house-furnishings. My coal and wood are delivered and paid for without my inquiring as to the correctness of the bills, and I offer the same temptations to dishonest tradesmen that a drunken man does to pickpockets. Yet I complain of the high cost of living! My family has never had the slightest training in practical affairs. If we were cast away on a fertile tropical island we should be forced to subsist on bananas and clams, and clothe ourselves with leaves,--provided the foliage was ready made and came in regulation sizes. These things are vastly more important from an educational point of view than a knowledge of the relationship of Mary Stuart to the Duke of Guise, however interesting that may be to a reader of French history of the sixteenth century. A knowledge of the composition of gunpowder is more valuable than of Guy Fawkes' Gunpowder Plot. If we know nothing about household economies we can hardly be expected to take an interest in the problems of the proletariat. If we are ignorant of the fundamental data of sociology and politics we can have no real opinions on questions affecting the welfare of the people. The classic phrase "The public be damned!" expresses our true feeling about the matter. We cannot become excited about the wrongs and hardships of the working class when we do not know and do not care how they live. One of my daughters--aged seven--once essayed a short story, of which the heroine was an orphan child in direst want. It began: "Corrine was starving. 'Alas! What shall we do for food?' she asked her French nurse as they entered the carriage for their afternoon drive in the park." I have no doubt that even to-day this same young lady supposes that there are porcelain baths in every tenement house. I myself have no explanation as to why I pay eighty dollars for a business suit any my bookkeepers seems to be equally well turned out for eighteen dollars and fifty cents. That is essentially why the people have an honest and well-founded distrust of those enthusiastic society ladies who rush into charity and frantically engage in the elevation of the masses. The poor working girl is apt to know a good deal more about her own affairs than the Fifth Avenue matron with an annual income of three hundred and fifty thousand dollars. If I were doing it all over again--and how I wish I could!--I should insist on my girls being taught not only music and languages but cooking, sewing, household economy and stenography. They should at least be able to clothe and feed themselves and their children if somebody supplied them with the materials, and to earn a living if the time came when they had to do it. They have now no conception of the relative values of even material things, what the things are made of or how they are put together. For them hats, shoes, French novels and roast chicken can be picked off the trees. * * * * * This utter ignorance of actual life not only keeps us at a distance from the people of our own time but renders our ideas of history equally vague, abstract and unprofitable. I believe it would be an excellent thing if, beginning with the age of about ten years, no child were allowed to eat anything until he was able to tell where it was produced, what it cost and how it was prepared. If this were carried out in every department of the child's existence he would have small need of the superficial education furnished by most of our institutions of learning. Our children are taught about the famines of history when they cannot recognize a blade of wheat or tell the price of a loaf of bread, or how it is made. I would begin the education of my boy--him of the tango and balkline billiards--with a study of himself, in the broad use of the term, before I allowed him to study about other people or the history of nations. I would seat him in a chair by the fire and begin with his feet. I would inquire what he knew about his shoes--what they were made of, where the substance came from, the cost of its production, the duty on leather, the process of manufacture, the method of transportation of goods, freight rates, retailing, wages, repairs, how shoes were polished--this would begin, if desired, a new line of inquiry as to the composition of said polish, cost, and so on--comparative durability of hand and machine work, introduction of machines into England and its effect on industrial conditions. I say I would do all this; but, of course, I could not. I would have to be an educated man in the first place. Why, beginning with that dusty little pair of shoes, my boy and I might soon be deep in Interstate Commerce and the Theory of Malthus--on familiar terms with Thomas A. Edison and Henry George! And the next time my son read about a Tammany politician giving away a pair of shoes to each of his adherents it would mean something to him--as much as any other master stroke of diplomacy. I would instruct every boy in a practical knowledge of the house in which he lives, give him a familiarity with simple tools and a knowledge of how to make small repairs and to tinker with the water pipes. I would teach him all those things I now do not know myself--where the homeless man can find a night's lodging; how to get a disorderly person arrested; why bottled milk costs fifteen cents a quart; how one gets his name on the ballot if he wants to run for alderman; where the Health Department is located, and how to get vaccinated for nothing. By the time we had finished we would be in a position to understand the various editorials in the morning papers which now we do not read. Far more than that, my son would be brought to a realization that everything in the world is full of interest for the man who has the knowledge to appreciate its significance. "A primrose by a river's brim" should be no more suggestive, even to a lake-poet, than a Persian rug or a rubber shoe. Instead of the rug he will have a vision of the patient Afghan in his mountain village working for years with unrequited industry; instead of the shoe he will see King Leopold and hear the lamentations of the Congo. My ignorance of everything beyond my own private bank account and stomach is due to the fact that I have selfishly and foolishly regarded these two departments as the most important features of my existence. I now find that my financial and gastronomical satisfaction has been purchased at the cost of an infinite delight in other things. I am mentally out of condition. Apart from this brake on the wheel of my intelligence, however, I suffer an even greater impediment by reason of the fact that, never having acquired a thorough groundwork of elementary knowledge, I find I cannot read with either pleasure or profit. Most adult essays or histories presuppose some such foundation. Recently I have begun to buy primers--such as are used in the elementary schools--in order to acquire the information that should have been mine at twenty years of age. And I have resolved that in my daily reading of the newspapers I will endeavor to look up on the map and remember the various places concerning which I read any news item of importance, and to assimilate the facts themselves. It is my intention also to study, at least half an hour each day, some simple treatise on science, politics, art, letters or history. In this way I hope to regain some of my interest in the activities of mankind. If I cannot do this I realize now that it will go hard with me in the years that are drawing nigh. I shall, indeed, then lament that "I have no pleasure in them." * * * * * It is the common practice of business men to say that when they reach a certain age they are going to quit work and enjoy themselves. How this enjoyment is proposed to be attained varies in the individual case. One man intends to travel or live abroad--usually, he believes, in Paris. Another is going into ranching or farming. Still another expects to give himself up to art, music and books. We all have visions of the time when we shall no longer have to go downtown every day and can indulge in those pleasures that are now beyond our reach. Unfortunately the experience of humanity demonstrates the inevitability of the law of Nature which prescribes that after a certain age it is practically impossible to change our habits, either of work or of play, without physical and mental misery. Most of us take some form of exercise throughout our lives--riding, tennis, golf or walking. This we can continue to enjoy in moderation after our more strenuous days are over; but the manufacturer, stock broker or lawyer who thinks that after his sixtieth birthday he is going to be able to find permanent happiness on a farm, loafing round Paris or reading in his library will be sadly disappointed. His habit of work will drive him back, after a year or so of wretchedness, to the factory, the ticker or the law office; and his habit of play will send him as usual to the races, the club or the variety show. One cannot acquire an interest by mere volition. It is a matter of training and of years. The pleasures of to-day will eventually prove to be the pleasures of our old age--provided they continue to be pleasures at all, which is more than doubtful. As we lose the capacity for hard work we shall find that we need something to take its place--something more substantial and less unsatisfactory than sitting in the club window or taking in the Broadway shows. But, at least, the seeds of these interests must be sown now if we expect to gather a harvest this side of the grave. What is more natural than to believe that in our declining years we shall avail ourselves of the world's choicest literature and pass at least a substantial portion of our days in the delightful companionship of the wisest and wittiest of mankind? That would seem to be one of the happiest uses to which good books could be put; but the hope is vain. The fellow who does not read at fifty will take no pleasure in books at seventy. My club is full of dozens of melancholy examples of men who have forgotten how to read. They have spent their entire lives perfecting the purely mechanical aspects of their existences. The mind has practically ceased to exist, so far as they are concerned. They have built marvelous mansions, where every comfort is instantly furnished by contrivances as complicated and accurate as the machinery of a modern warship. The doors and windows open and close, the lights are turned on and off, and the elevator stops--all automatically. If the temperature of a room rises above a certain degree the heating apparatus shuts itself off; if it drops too low something else happens to put it right again. The servants are swift, silent and decorous. The food is perfection. Their motors glide noiselessly to and fro. Their establishments run like fine watches. They have had to make money to achieve this mechanical perfection; they have had no time for anything else during their active years. And, now that those years are over, they have nothing to do. Their minds are almost as undeveloped as those of professional pugilists. Dinners and drinks, backgammon and billiards, the lightest opera, the trashiest novels, the most sensational melodrama are the most elevating of their leisure's activities. Read? Hunt? Farm? Not much! They sit behind the plate-glass windows and bet on whether more limousines will go north than south in the next ten minutes. If you should ask one of them whether he had read some book that was exciting discussion among educated people at the moment, he would probably look at you blankly and, after remarking that he had never cared for economics or history--as the case might be--inquire whether you preferred a "Blossom" or a "Tornado." Poor vacuous old cocks! They might be having a green and hearty old age, surrounded by a group of the choicest spirits of all time. Upstairs in the library there are easy-chairs within arm's reach of the best fellows who ever lived--adventurers, story-tellers, novelists, explorers, historians, rhymers, fighters, essayists, vagabonds and general liars--Immortals, all of them. You can take your pick and if he bores you send him packing without a word of apology. They are good friends to grow old with--friends who in hours of weariness, of depression or of gladness may be summoned at will by those of us who belong to the Brotherhood of Educated Men--of which, alas! I and my associates are no longer members. CHAPTER V MY MORALS The concrete evidence of my success as represented by my accumulated capital--outside of my uptown dwelling house--amounts, as I have previously said, to about seven hundred and fifty thousand dollars. This is invested principally in railroad and mining stocks, both of which are subject to considerable fluctuation; and I have also substantial holdings in industrial corporations. Some of these companies I represent professionally. As a whole, however, my investments may be regarded as fairly conservative. At any rate they cause me little uneasiness. My professional income is regular and comes with surprisingly little effort. I have as clients six manufacturing corporations that pay me retainers of twenty-five hundred dollars each, besides my regular fees for services rendered. I also represent two banks and a trust company. All this is fixed business and most of it is attended to by younger men, whom I employ at moderate salaries. I do almost no detail work myself, and my junior partners relieve me of the drawing of even important papers; so that, though I am constantly at my office, my time is spent in advising and consulting. I dictate all my letters and rarely take a pen in my hand. Writing has become laborious and irksome. I even sign my correspondence with an ingenious rubber stamp that imitates my scrawling signature beyond discovery. If I wish to know the law on some given point I press a button and tell my managing clerk what I want. In an hour or two he hands me the authorities covering the issue in question in typewritten form. It is extraordinarily simple and easy. Yet only yesterday I heard of a middle-aged man, whom I knew to be a peculiarly well-equipped all-around lawyer, who was ready to give up his private practice and take a place in any reputable office at a salary of thirty-five hundred dollars! Most of my own time is spent in untangling mixed puzzles of law and fact, and my clients are comparatively few in number, though their interests are large. Thus I see the same faces over and over again. I lunch daily at a most respectable eating club; and here, too, I meet the same men over and over again. I rarely make a new acquaintance downtown; in fact I rarely leave my office during the day. If I need to confer with any other attorney I telephone. There are dozens of lawyers in New York whose voices I know well--yet whose faces I have never seen. My office is on the nineteenth floor of a white marble building, and I can look down the harbor to the south and up the Hudson to the north. I sit there in my window like a cliffdweller at the mouth of his cave. When I walk along Wall Street I can look up at many other hundreds of these caves, each with its human occupant. We leave our houses uptown, clamber down into a tunnel called the Subway, are shot five miles or so through the earth, and debouch into an elevator that rushes us up to our caves. Only between my house and the entrance to the Subway am I obliged to step into the open air at all. A curious life! And I sit in my chair and talk to people in multitudes of other caves near by, or caves in New Jersey, Washington or Chicago. Louis XI used to be called "the human spider" by reason of his industry, but we modern office men are far more like human spiders than he, as we sit in the center of our webs of invisible wires. We wait and wait, and our lines run out across the length and breadth of the land--sometimes getting tangled, to be sure, so that it is frequently difficult to decide just which spider owns the web; but we sit patiently doing nothing save devising the throwing out of other lines. We weave, but we do not build; we manipulate, buy, sell and lend, quarrel over the proceeds, and cover the world with our nets, while the ants and the bees of mankind labor, construct and manufacture, and struggle to harness the forces of Nature. We plan and others execute. We dicker, arrange, consult, cajole, bribe, pull our wires and extort; but we do it all in one place--the center of our webs and the webs are woven in our caves. I figure that I spend about six hours each day in my office; that I sleep nearly nine hours; that I am in transit on surface cars and in subways at least one hour and a half more; that I occupy another hour and a half in bathing, shaving and dressing, and an hour lunching at midday. This leaves a margin of five hours a day for all other activities. Could even a small portion of this time be spent consecutively in reading in the evening, I could keep pace with current thought and literature much better than I do; or if I spent it with my son and daughters I should know considerably more about them than I do now, which is practically nothing. But the fact is that every evening from the first of November to the first of May the motor comes to the door at five minutes to eight and my wife and I are whirled up or down town to a dinner party--that is, save on those occasions when eighteen or twenty people are whirled to us. * * * * * This short recital of my daily activities is sufficient to demonstrate that I lead an exceedingly narrow and limited existence. I do not know any poor men, and even the charities in which I am nominally interested are managed by little groups of rich ones. The truth is, I learned thirty years ago that if one wants to make money one must go where money is and cultivate the people who have it. I have no petty legal business--there is nothing in it. If I cannot have millionaires for clients I do not want any. The old idea that the young country lawyer could shove a pair of socks into his carpetbag, come to the great city, hang out his shingle and build up a practice has long since been completely exploded. The best he can do now is to find a clerkship at twelve hundred dollars a year. Big business gravitates to the big offices; and when the big firms look round for junior partners they do not choose the struggling though brilliant young attorney from the country, no matter how large his general practice may have become; but they go after the youth whose father is a director in forty corporations or the president of a trust. In the same way what time I have at my disposal to cultivate new acquaintances I devote not to the merely rich and prosperous but to the multi-millionaire--if I can find him--who does not even know the size of his income. I have no time to waste on the man who is simply earning enough to live quietly and educate his family. He cannot throw anything worth while in my direction; but a single crumb from the magnate's table may net me twenty or thirty thousand dollars. Thus, not only for social but for business reasons, successful men affiliate habitually only with rich people. I concede that is a rather sordid admission, but it is none the truth. * * * * * Money is the symbol of success; it is what we are all striving to get, and we naturally select the ways and means best adapted for the purpose. One of the simplest is to get as near it as possible and stay there. If I make a friend of a struggling doctor or professor he may invite me to draw his will, which I shall either have to do for nothing or else charge him fifty dollars for; but the railroad president with whom I often lunch, and who is just as agreeable personally, may perhaps ask me to reorganize a railroad. I submit that, selfish as it all seems when I write it down, it would be hard to do otherwise. I do not deliberately examine each new candidate for my friendship and select or reject him in accordance with a financial test; but what I do is to lead a social and business life that will constantly throw me only with rich and powerful men. I join only rich men's clubs; I go to resorts in the summer frequented only by rich people; and I play only with those who can, if they will, be of advantage to me. I do not do this deliberately; I do it instinctively--now. I suppose at one time it was deliberate enough, but to-day it comes as natural as using my automobile instead of a street car. We have heard a great deal recently about a so-called Money Trust. The truth of the matter is that the Money Trust is something vastly greater than any mere aggregation of banks; it consists in our fundamental trust in money. It is based on our instinctive and ineradicable belief that money rules the destinies of mankind. Everything is estimated by us in money. A man is worth so and so much--in dollars. The millionaire takes precedence of everybody, except at the White House. The rich have things their own way--and every one knows it. Ashamed of it? Not at all. We are the greatest snobs in the civilized world, and frankly so. We worship wealth because at present we desire only the things wealth can buy. The sea, the sky, the mountains, the clear air of autumn, the simple sports and amusements of our youth and of the comparatively poor, pleasures in books, in birds, in trees and flowers, are disregarded for the fierce joys of acquisition, of the ownership in stocks and bonds, or for the no less keen delight in the display of our own financial superiority over our fellows. We know that money is the key to the door of society. Without it our sons will not get into the polo-playing set or our daughters figure in the Sunday supplements. We want money to buy ourselves a position and to maintain it after we have bought it. We want house on the sunny side of the street, with façades of graven marble; we want servants in livery and in buttons--or in powder and breeches if possible; we want French chefs and the best wine and tobacco, twenty people to dinner on an hour's notice, supper parties and a little dance afterward at Sherry's or Delmonico's, a box at the opera and for first nights at the theaters, two men in livery for our motors, yachts and thirty-footers, shooting boxes in South Carolina, salmon water in New Brunswick, and regular vacations, besides, at Hot Springs, Aiken and Palm Beach; we want money to throw away freely and like gentlemen at Canfield's, Bradley's and Monte Carlo; we want clubs, country houses, saddle-horses, fine clothes and gorgeously dressed women; we want leisure and laughter, and a trip or so to Europe every year, our names at the top of the society column, a smile from the grand dame in the tiara and a seat at her dinner table--these are the things we want, and since we cannot have them without money we go after the money first, as the _sine qua non_. We want these things for ourselves and we want them for our children. We hope our grandchildren will have them also, though about that we do not care so much. We want ease and security and the relief of not thinking whether we can afford to do things. We want to be lords of creation and to pass creation on to our descendants, exactly as did the nobility of the _Ancien Régime_. At the present time money will buy anything, from a place in the vestry of a swell church to a seat in the United States Senate--an election to Congress, a judgeship or a post in the diplomatic service. It will buy the favor of the old families or a decision in the courts. Money is the controlling factor in municipal politics in New York. The moneyed group of Wall Street wants an amenable mayor--a Tammany mayor preferred--so that it can put through its contracts. You always know where to find a regular politician. One always knew where to find Dick Croker. So the Traction people pour the contents of their coffers into the campaign bags. Until very recently the Supreme Court judges of New York bought their positions by making substantial contributions to the Tammany treasury. The inferior judgeships went considerably cheaper. A man who stood in with the Big Boss might get a bargain. I have done business with politicians all my life and I have never found it necessary to mince my words. If I wanted a favor I always asked exactly what it was going to cost--and I always got the favor. No one needs to hunt very far for cases where the power of money has influenced the bench in recent times. The rich man can buy his son a place in any corporation or manufacturing company. The young man may go in at the bottom, but he will shoot up to the top in a year or two, with surprising agility, over the heads of a couple of thousand other and better men. The rich man can defy the law and scoff at justice; while the poor man, who cannot pay lawyers for delay, goes to prison. These are the veriest platitudes of demagogy, but they are true--absolutely and undeniably true. We know all this and we act accordingly, and our children imbibe a like knowledge with their mother's or whatever other properly sterilized milk we give them as a substitute. We, they and everybody else know that if enough money can be accumulated the possessor will be on Easy Street for the rest of his life--not merely the Easy Street of luxury and comfort, but of security, privilege and power; and because we like Easy Street rather than the Narrow Path we devote ourselves to getting there in the quickest possible way. We take no chances on getting our reward in the next world. We want it here and now, while we are sure of it--on Broadway, at Newport or in Paris. We do not fool ourselves any longer into thinking that by self-sacrifice here we shall win happiness in the hereafter. That is all right for the poor, wretched and disgruntled. Even the clergy are prone to find heaven and hell in this world rather than in the life after death; and the decay of faith leads us to feel that a purse of gold in the hand is better than a crown of the same metal in the by-and-by. We are after happiness, and to most of us money spells it. The man of wealth is protected on every side from the dangers that beset the poor. He can buy health and immunity from anxiety, and he can install his children in the same impregnable position. The dust of his motor chokes the citizen trudging home from work. He soars through life on a cushioned seat, with shock absorbers to alleviate all the bumps. No wonder we trust in money! We worship the golden calf far more than ever did the Israelites beneath the crags of Sinai. The real Money Trust is the tacit conspiracy by which those who have the money endeavor to hang on to it and keep it among themselves. Neither at the present time do great fortunes tend to dissolve as inevitably as formerly. Oliver Wendell Holmes somewhere analyzes the rapid disintegration of the substantial fortunes of his day and shows how it is, in fact, but "three generations from shirtsleeves to shirtsleeves." A fortune of two hundred thousand dollars divided among four children, each of whose share is divided among four grandchildren, becomes practically nothing at all--in only two. But could the good doctor have observed the tendencies of to-day he would have commented on a new phenomenon, which almost counteracts the other. It may be, and probably is, the fact that comparatively small fortunes still tend to disintegrate. This was certainly the rule during the first half of the nineteenth century in New England, when there was no such thing as a distinctly moneyed class, and when the millionaire was a creature only of romance. But when, as to-day, fortunes are so large that it is impossible to spend or even successfully give away the income from them, a new element is introduced that did not exist when Doctor Holmes used to meditate in his study on the Back Bay overlooking the placid Charles. At the present time big fortunes are apt to gain by mere accretion what they lose by division; and the owner of great wealth has opportunities for investment undreamed of by the ordinary citizen who must be content with interest at four per cent and no unearned increment on his capital. This fact might of itself negative the tendency of which he speaks; but there is a much more potent force working against it as well. That is the absolute necessity, induced by the demands of modern metropolitan life, of keeping a big fortune together--or, if it must be divided, of rehabilitating it by marriage. There was a time not very long ago when one rarely heard of a young man or young woman of great wealth marrying anybody with an equal fortune. To do so was regarded with disapproval, and still is in some communities. To-day it is the rule instead of the exception. Now we habitually speak in America of the "alliances of great families." There are two reasons for this--first, that being a multi-millionaire is becoming, as it were, a sort of recognized profession, having its own sports, its own methods of business and its own interests; second, that the luxury of to-day is so enervating and insidious that a girl or youth reared in what is called society cannot be comfortable, much less happy, on the income of less than a couple of million dollars. As seems to be demonstrated by the table of my own modest expenditure in a preceding article, the income of but a million dollars will not support any ordinary New York family in anything like the luxury to which the majority of our young people--even the sons and daughters of men in moderate circumstances--are accustomed. Our young girls are reared on the choicest varieties of food, served with piquant sauces to tempt their appetites; they are permitted to pick and choose, and to refuse what they think they do not like; they are carried to and from their schools, music and dancing lessons in motors, and are taught to regard public conveyances as unhealthful and inconvenient; they never walk; they are given clothes only a trifle less fantastic and bizarre than those of their mothers, and command the services of maids from their earliest years; they are taken to the theater and the hippodrome, and for the natural pleasures of childhood are given the excitement of the footlights and the arena. As they grow older they are allowed to attend late dances that necessitate remaining in bed the next morning until eleven or twelve o'clock; they are told that their future happiness depends on their ability to attract the right kind of man; they are instructed in every art save that of being useful members of society; and in the ease, luxury and vacuity with which they are surrounded their lives parallel those of demi-mondaines. Indeed, save for the marriage ceremony, there is small difference between them. The social butterfly flutters to the millionaire as naturally as the night moth of the Tenderloin. Hence the tendency to marry money is greater than ever before in the history of civilization. Frugal, thrifty lives are entirely out of fashion. The solid, self-respecting class, which wishes to associate with people of equal means, is becoming smaller and smaller. If an ambitious mother cannot afford to rent a cottage at Newport or Bar Harbor she takes her daughter to a hotel or boarding house there, in the hope that she will be thrown in contact with young men of wealth. The young girl in question, whose father is perhaps a hardworking doctor or business man, at home lives simply enough; but sacrifices are made to send her to a fashionable school, where her companions fill her ears with stories of their motors, trips to Europe, and the balls they attend during the vacations. She becomes inoculated with the poison of social ambition before she comes out. Unable by reason of the paucity of the family resources to buy luxuries for herself, she becomes a parasite and hanger-on of rich girls. If she is attractive and vivacious so much the better. Like the shopgirl blinded by the glare of Broadway, she flutters round the drawing rooms and country houses of the ultra-rich seeking to make a match that will put luxury within her grasp; but her chances are not so good as formerly. To-day the number of large fortunes has increased so rapidly that the wealthy young man has no difficulty in choosing an equally wealthy mate whose mental and physical attractions appear, and doubtless are, quite as desirable as those of the daughter of poorer parents. The same instinct to which I have confessed myself, as a professional man, is at work among our daughters and sons. They may not actually judge individuals by the sordid test of their ability to purchase ease and luxury, but they take care to meet and associate with only those who can do so. In this their parents are their ofttimes unconscious accomplices. The worthy young man of chance acquaintance is not invited to call--or, if he is, is not pressed to stay to dinner. "Oh, he does not know our crowd!" explains the girl to herself. The crowd, on analysis, will probably be found to contain only the sons and daughters of fathers and mothers who can entertain lavishly and settle a million or so on their offspring at marriage. There is a constant attraction of wealth for wealth. Poverty never attracted anything. If our children have money of their own that is a good reason to us why they should marry more money. We snarl angrily at the penniless youth, no matter how capable and intelligent, who dares cast his eyes on our daughter. We make it quite unambiguous that we have other plans for her--plans that usually include a steam yacht and a shooting box north of Inverness. There is nothing more vicious than the commonly expressed desire of parents in merely moderate circumstances to give their children what are ordinarily spoken of as "opportunities." "We wish our daughters to have every opportunity--the best opportunities," they say, meaning an equal chance with richer girls of qualifying themselves for attracting wealthy men and of placing themselves in their way. In reality opportunities for what?--of being utterly miserable for the rest of their lives unless they marry out of their own class. The desire to get ahead that is transmitted from the American business man to his daughter is the source of untold bitterness--for, though he himself may fail in his own struggle, he has nevertheless had the interest of the game; but she, an old maid, may linger miserably on, unwilling to share the domestic life of some young man more than her equal in every respect. There is a subtle freemasonry among those who have to do with money. Young men of family are given sinecures in banks and trust companies, and paid many times the salaries their services are worth. The inconspicuous lad who graduates from college the same year as one who comes from a socially prominent family will slave in a downtown office eight hours a day for a thousand dollars a year, while his classmate is bowing in the ladies at the Fifth Avenue Branch--from ten to three o'clock--at a salary of five thousand dollars. Why? Because he knows people who have money and in one way or another may be useful sometime to the president in a social way. The remuneration of those of the privileged class who do any work at all is on an entirely different basis from that of those who need it. The poor boy is kept on as a clerk, while the rich one is taken into the firm. The old adage says that "Kissing goes by favor"; and favors, financial and otherwise, are given only to those who can offer something in return. The tendency to concentrate power and wealth extends even to the outer rim of the circle. It is an intangible conspiracy to corner the good things and send the poor away empty. As I see it going on round me, it is a heartless business. Society is like an immense swarm of black bees settled on a honey-pot. The leaders, who flew there first, are at the top, gorged and distended. Round, beneath and on them crawl thousands of others thirsting to feed on the sweet, liquid gold. The pot is covered with them, layer on layer--buzzing hungrily; eager to get as near as possible to the honey, even if they may not taste it. A drop falls on one and a hundred fly on him and lick it off. The air is alive with those who are circling about waiting for an advantageous chance to wedge in between their comrades. They will, with one accord, sting to death any hapless creature who draws near. * * * * * Frankly I should not be enough of a man to say these things if my identity were disclosed, however much they ought to be said. Neither should I make the confessions concerning my own career that are to follow; for, though they may evidence a certain shrewdness on my own part, I do not altogether feel that they are to my credit. When my wife and I first came to New York our aims and ideals were simple enough. I had letters to the head of a rather well-known firm on Wall Street and soon found myself its managing clerk at one hundred dollars a month. The business transacted in the office was big business--corporation work, the handling of large estates, and so on. During three years I was practically in charge of and responsible for the details of their litigations; the net profit divided by the two actual members of the firm was about one hundred and fifty thousand dollars. The gross was about one hundred and eighty thousand, of which twenty thousand went to defray the regular office expenses--including rent, stenographers and ordinary law clerks--while ten thousand was divided among the three men who actually did most of the work. The first of these was a highly trained lawyer about forty-five years of age, who could handle anything from a dog-license matter before a police justice to the argument of a rebate case in the United States Supreme Court. He was paid forty-five hundred dollars a year and was glad to get it. He was the active man of the office. The second man received thirty-five hundred dollars, and for that sum furnished all the special knowledge needed in drafting railroad mortgages and intricate legal documents of all sorts. The third was a chap of about thirty who tried the smaller cases and ran the less important corporations. The two heads of the firm devoted most of their time to mixing with bankers, railroad officials and politicians, and spent comparatively little of it at the office; but they got the business--somehow. I suppose they found it because they went out after it. It was doubtless quite legitimate. Somebody must track down the game before the hunter can do the shooting. At any rate they managed to find plenty of it and furnished the work for the other lawyers to do. I soon made up my mind that in New York brains were a pretty cheap commodity. I was anxious to get ahead; but there was no opening in the firm and there were others ready to take my place the moment it should become vacant. I was a pretty fair lawyer and had laid by in the bank nearly a thousand dollars; so I went to the head of the firm and made the proposition that I should work at the office each day until one o'clock and be paid half of what I was then getting--that is, fifty dollars a month. In the afternoons an understudy should sit at my desk, while I should be free. I then suggested that the firm might divide with me the proceeds of any business I should bring in. My offer was accepted; and the same afternoon I went to the office of a young stockbroker I knew and stayed there until three o'clock. The next day I did the same thing, and the day after. I did not buy any stocks, but I made myself agreeable to the group about the ticker and formed the acquaintance of an elderly German, who was in the chewing-gum business and who amused himself playing the market. It was not long before he invited me to lunch with him and I took every opportunity to impress him with my legal acumen. He had a lawyer of his own already, but I soon saw that the impression I was making would have the effect I desired; and presently, as I had confidently expected, he gave me a small legal matter to attend to. Needless to say it was accomplished with care, celerity and success. He gave me another. For six months I dogged that old German's steps every day from one o'clock in the afternoon until twelve at night. I walked, talked, drank beer and played pinochle with him, sat in his library in the evenings, and took him and his wife to the theater. At the end of that period he discharged his former attorney and retained me. The business was easily worth thirty-five hundred dollars a year, and within a short time the Chicle Trust bought out his interests and I became a director in it and one of its attorneys. I had already severed my connection with the firm and had opened an office of my own. Among the directors in the trust with whom I was thrown were a couple of rich young men whose fathers had put them on the board merely for purposes of representation. These I cultivated with the same assiduity as I had used with the German. I spent my entire time gunning for big game. I went after the elephants and let the sparrows go. It was only a month or so before my acquaintance with these two boys--for they were little else--had ripened into friendship. My wife and I were invited to visit at their houses and I was placed in contact with their fathers. From these I soon began to get business. I have kept it--kept it to myself. I have no real partners to steal it away from me. I am now the same kind of lawyer as the two men who composed the firm for which I slaved at a hundred dollars a month. I find the work for my employees to do. I am now an exploiter of labor. It is hardly necessary for me to detail the steps by which I gradually acquired what is known as a gilt-edged practice; but it was not by virtue of my legal abilities, though they are as good as the average. I got it by putting myself in the eye of rich people in every way open to me. I even joined a fashionable church--it pains me to write this--for the sole purpose of becoming a member of the vestry and thus meeting on an intimate footing the half-dozen millionaire merchants who composed it. One of them gave me his business, made me his trustee and executor; and then I resigned from the vestry. I always made myself _persona grata_ to those who could help me along, wore the best clothes I could buy, never associated with shabby people, and appeared as much as possible in the company of my financial betters. It was the easier for me to do this because my name was not Irish, German or Hebraic. I had a good appearance, manners and an agreeable gloss of culture and refinement. I was tactful, considerate, and tried to strike a personal note in my intercourse with people who were worth while; in fact I made it a practice--and still do so--to send little mementos to my newer acquaintances--a book or some such trifle--with a line expressing my pleasure at having met them. I know a considerable number of doctors, as well as lawyers, who have built up lucrative practices by making love to their female clients and patients. That I never did; but I always made it a point to flatter any women I took in to dinner, and I am now the trustee or business adviser for at least half a dozen wealthy widows as a direct consequence. One reason for my success is, I discovered very early in the game that no woman believes she really needs a lawyer. She consults an attorney not for the purpose of getting his advice, but for sympathy and his approval of some course she has already decided on and perhaps already followed. A lawyer who tells a woman the truth thereby loses a client. He has only to agree with her and compliment her on her astuteness and sagacity to intrench himself forever in her confidence. A woman will do what she wants to do--every time. She goes to a lawyer to explain why she intends to do it. She wants to have a man about on whom she can put the blame if necessary, and is willing to pay--moderately--for the privilege. She talks to a lawyer when no one else is willing to listen to her, and thoroughly enjoys herself. He is the one man who--unless he is a fool--cannot talk back. Another fact to which I attribute a good deal of my professional éclat is, that I never let any of my social friends forget that I was a lawyer as well as a good fellow; and I always threw a hearty bluff at being prosperous, even when a thousand or two was needed to cover the overdraft in my bank account. It took me about ten years to land myself firmly among the class to which I aspired, and ten years more to make that place impregnable. To-day we are regarded as one of the older if not one of the old families in New York. I no longer have to lick anybody's boots, and until I began to pen these memoirs I had really forgotten that I ever had. Things come my way now almost of themselves. All I have to do is to be on hand in my office--cheerful, hospitable, with a good story or so always on tap. My junior force does the law work. Yet I challenge anybody to point out anything dishonorable in those tactics by which I first got my feet on the lower rungs of the ladder of success. It may perhaps be that I should prefer to write down here the story of how, simply by my assiduity and learning, I acquired such a reputation for a knowledge of the law that I was eagerly sought out by a horde of clamoring clients who forced important litigations on me. Things do not happen that way in New York to-day. Should a young man be blamed for getting on by the easiest way he can? Life is too complex; the population too big. People have no accurate means of finding out who the really good lawyers or doctors are. If you tell them you are at the head of your profession they are apt to believe you, particularly if you wear a beard and are surrounded by an atmosphere of solemnity. Only a man's intimate circle knows where he is or what he is doing at any particular time. I remember a friend of mine who was an exceedingly popular member of one of the exclusive Fifth Avenue clubs, and who, after going to Europe for a short vacation, decided to remain abroad for a couple of years. At the end of that time he returned to New York hungry for his old life and almost crazy with delight at seeing his former friends. Entering the club about five o'clock he happened to observe one of them sitting by the window. He approached him enthusiastically, slapped him on the shoulder, extended his hand and cried: "Hello, old man! It's good to see you again!" The other man looked at him in a puzzled sort of way without moving. "Hello, yourself!" he remarked languidly. "It's good to see you, all right--but why make so much damned fuss about it?" The next sentence interchanged between the two developed the fact that he was totally ignorant that his friend had been away at all. This is by no means a fantastic illustration. It happens every day. That is one of the joys of living in New York. You can get drunk, steal a million or so, or run off with another man's wife--and no one will hear about it until you are ready for something else. In such a community it is not extraordinary that most people are taken at their face value. Life moves at too rapid a pace to allow us to find out much about anybody--even our friends. One asks other people to dinner simply because one has seen them at somebody's else house. I found it at first very difficult--in fact almost impossible--to spur my wife on to a satisfactory cooperation with my efforts to make the hand of friendship feed the mouth of business. She rather indignantly refused to meet my chewing-gum client or call on his wife. She said she preferred to keep her self-respect and stay in the boarding-house where we had resided since we moved to the city; but I demonstrated to her by much argument that it was worse than snobbish not to be decently polite to one's business friends. It was not their fault if they were vulgar. One might even help them to enlarge their lives. Gradually she came round; and as soon as the old German had given me his business she was the first to suggest moving to an apartment hotel uptown. For a long time, however, she declined to make any genuine social effort. She knew two or three women from our neighborhood who were living in the city, and she used to go and sit with them in the afternoons and sew and help take care of the children. She said they and their husbands were good enough for her and that she had no aspirations toward society. An evening at the theater--in the balcony--every two weeks or so, and a rubber of whist on Saturday night, with a chafing-dish supper afterward, was all the excitement she needed. That was twenty-five years ago. To-day it is I who would put on the brakes, while she insists on shoveling soft coal into the social furnace. Her metamorphosis was gradual but complete. I imagine that her first reluctance to essay an acquaintance with society arose out of embarrassment and bashfulness. At any rate she no sooner discovered how small a bluff was necessary for success than she easily outdid me in the ingenuity and finesse of her social strategy. It seemed to be instinctive with her. She was always revising her calling lists and cutting out people who were no longer socially useful; and having got what she could out of a new acquaintance, she would forget her as completely as if she had never made her the confidante of her inmost thoughts about other and less socially desirable people. It seems a bit cold-blooded--this criticism of one's wife; but I know that, however much of a sycophant I may have been in my younger days, my wife has outdone me since then. Presently we were both in the swim, swept off our feet by the current and carried down the river of success, willy-nilly, toward its mouth--to a safe haven, I wonder, or the deluge of a devouring cataract? * * * * * The methods I adopted are those in general use, either consciously or unconsciously, among people striving for success in business, politics or society in New York. It is a struggle for existence, precisely like that which goes on in the animal world. Only those who have strength or cunning survive to achieve success. Might makes right to an extent little dreamed of by most of us. Nobody dares to censure or even mildly criticize one who has influence enough to do him harm. We are interested only in safeguarding or adding to the possessions we have already secured. We are wise enough to "play safe." To antagonize one who might assist in depriving us of some of them is contrary to the laws of Nature. Our thoughts are for ourselves and our children alone. The devil take everybody else! We are safe, warm and comfortable ourselves; we exist without actual labor; and we desire our offspring to enjoy the same ease and safety. The rest of mankind is nothing to us, except a few people it is worth our while to be kind to--personal servants and employees. We should not hesitate to break all ten of the Commandments rather than that we and our children should lose a few material comforts. Anything, save that we should have really to work for a living! There are essentially two sorts of work: first--genuine labor, which requires all a man's concentrated physical or mental effort; and second--that work which takes the laborer to his office at ten o'clock and, after an easy-going administrative morning, sets him at liberty at three or four. The officer of an uptown trust company or bank is apt to belong to the latter class. Or perhaps one is in real estate and does business at the dinner tables of his friends. He makes love and money at the same time. His salary and commissions correspond somewhat to the unearned increment on the freeholds in which he deals. These are minor illustrations, but a majority of the administrative positions in our big corporations carry salaries out of all proportion to the services rendered. These are the places my friends are all looking for--for themselves or their children. The small stockholder would not vote the president of his company a salary of one hundred thousand dollars a year, or the vice-president fifty thousand dollars; but the rich man who controls the stock is willing to give his brother or his nephew a soft snap. From what I know of corporate enterprise in these United States, God save the minority stockholder! But we and our brothers and sons and nephews must live--on Easy Street. We must be able to give expensive dinners and go to the theater and opera, and take our families to Europe--and we can't do it without money. We must be able to keep up our end without working too hard, to be safe and warm, well fed and smartly turned out, and able to call in a specialist and a couple of trained nurses if one of the children falls ill; we want thirty-five feet of southerly exposure instead of seventeen, menservants instead of maid-servants, and a new motor every two years. We do not object to working--that is to say, we pride ourselves on having a job. We like to be moderately busy. We would not have enough to amuse us all day if we did not go to the office in the morning; but what we do is not _work_! It is occupation perhaps--but there is no labor about it, either of mind or body. It is a sinecure--a "cinch." We could stay at home and most of us would not be missed. It is not the seventy-five-hundred-dollar-a-year vice-president but the eight-hundred-and-fifty-dollar clerk for want of whom the machine would stop if he were sick. Our labor is a kind of masculine light housework. We probably have private incomes, thanks to our fathers or great uncles--not large enough to enable us to cut much of a dash, to be sure, but sufficient to give us confidence--and the proceeds of our daily toil, such as it is, go toward the purchase of luxuries merely. Because we are in business we are able to give bigger and more elegant dinner parties, go to Palm Beach in February, and keep saddle-horses; but we should be perfectly secure without working at all. Hence we have a sense of independence about it. We feel as if it were rather a favor on our part to be willing to go into an office; and we expect to be paid vastly more proportionately than the fellow who needs the place in order to live: so we cut him out of it at a salary three times what he would have been paid had he got the job, while he keeps on grinding at the books as a subordinate. We come down late and go home early, drop in at the club and go out to dinner, take in the opera, wear furs, ride in automobiles, and generally boss the show--for the sole reason that we belong to the crowd who have the money. Very likely if we had not been born with it we should die from malnutrition, or go to Ward's Island suffering from some variety of melancholia brought on by worry over our inability to make a living. I read the other day the true story of a little East Side tailor who could not earn enough to support himself and his wife. He became half-crazed from lack of food and together they resolved to commit suicide. Somehow he secured a small 22-caliber rook rifle and a couple of cartridges. The wife knelt down on the bed in her nightgown, with her face to the wall, and repeated a prayer while he shot her in the back. When he saw her sink to the floor dead he became so unnerved that, instead of turning the rifle on himself, he ran out into the street, with chattering teeth, calling for help. This tragedy was absolutely the result of economic conditions, for the man was a hardworking and intelligent fellow, who could not find employment and who went off his head from lack of nourishment. Now "I put it to you," as they say in the English law courts, how much of a personal sacrifice would you have made to prevent this tragedy? What would that little East Side Jewess' life have been worth to you? She is dead. Her soul may or may not be with God. As a suicide the Church would say it must be in hell. Well, how much would you have done to preserve her life or keep her soul out of hell? Frankly, would you have parted with five hundred dollars to save that woman's life? Five hundred dollars? Let me tell you that you would not voluntarily have given up smoking cigars for one year to avoid that tragedy! Of course you would have if challenged to do so. If the fact that the killing could be avoided in some such way or at a certain price, and the discrepancy between the cost and the value of the life were squarely brought to your particular attention, you might and probably would do something. How much is problematical. Let us do you the credit of saying that you would give five hundred dollars--and take it out of some other charity. But what if you were given _another_ chance to save a life for five hundred dollars? All right; you will save that too. Now a third! You hesitate. That will be spending fifteen hundred dollars--a good deal. Still you decide to do it. Yet how embarrassing! You find an opportunity to save a fourth, a fifth--a hundred lives at the same price! What are you going to do? We all of us have such a chance in one way or another. The answer is that, in spite of the admonition of Christ to sell our all and give to the poor, and others of His teachings as contained in the Sermon on the Mount, you probably, in order to save the lives of persons unknown to you, would not sacrifice a single substantial material comfort for one year; and that your impulse to save the lives of persons actually brought to your knowledge would diminish, fade away and die in direct proportion to the necessity involved of changing your present luxurious mode of life. Do you know any rich woman who would sacrifice her automobile in order to send convalescents to the country? She may be a very charitable person and in the habit of sending such people to places where they are likely to recover health; but, no matter how many she actually sends, there would always be eight or ten more who could share in that blessed privilege if she gave up her motor and used the money for the purpose. Yet she does not do so and you do not do so; and, to be quite honest, you would think her a fool if she did. What an interesting thing it would be if we could see the mental processes of some one of our friends who, unaware of our knowledge of his thoughts, was confronted with the opportunity of saving a life or accomplishing a vast good at a great sacrifice of his worldly possessions! Suppose, for instance, he could save his own child by spending fifty thousand dollars in doctors, hospitals and nurses. Of course he would do so without a moment's hesitation, even if that was his entire fortune. But suppose the child were a nephew? We see him waver a little. A cousin--there is a distinct pause. Shall he pauperize himself just for a cousin? How about a mere social acquaintance? Not much! He might in a moment of excitement jump overboard to save somebody from drowning; but it would have to be a dear friend or close relative to induce him to go to the bank and draw out all the money he had in the world to save that same life. The cities are full of lives that can be saved simply by spending a little money; but we close our eyes and, with our pocket-books clasped tight in our hands, pass by on the other side. Why? Not because we do not wish to deprive ourselves of the necessaries of life or even of its solid comforts, but because we are not willing to surrender our _amusements_. We want to play and not to work. That is what we are doing, what we intend to keep on doing, and what we plan to have our children do after us. Brotherly love? How can there be such a thing when there is a single sick baby dying for lack of nutrition--a single convalescent suffocating for want of country air--a single family without fire or blankets? Suggest to your wife that she give up a dinner gown and use the money to send a tubercular office boy to the Adirondacks--and listen to her excuses! Is there not some charitable organization that does such things? Has not his family the money? How do you know he really has consumption? Is he a _good_ boy? And finally: "Well, one can't send every sick boy to the country; if one did there would be no money left to bring up one's own children." She hesitates--and the boy dies perhaps! So long as we do not see them dying, we do not really care how many people die. Our altruism, such as it is, has nothing abstract about it. The successful man does not bother himself about things he cannot see. Do not talk about foreign missions to _him_. Try his less successful brother--the man who is _not_ successful because you can talk over with him foreign missions or even more idealistic matters; who is a failure because he will make sacrifices for a principle. It is all a part of our materialism. Real sympathy costs too much money; so we try not to see the miserable creatures who might be restored to health for a couple of hundred dollars. A couple of hundred dollars? Why, you could take your wife to the theater forty times--once a week during the entire season--for that sum! Poor people make sacrifices; rich ones do not. There is very little real charity among successful people. A man who wasted his time helping others would never get on himself. * * * * * It will, of course, be said in reply that the world is full of charitable institutions supported entirely by the prosperous and successful. That is quite true; but it must be remembered that they are small proof in themselves of the amount of real self-sacrifice and genuine charity existing among us. Philanthropy is largely the occupation of otherwise ineffective people, or persons who have nothing else to do, or of retired capitalists who like the notoriety and laudation they can get in no other way. But, even with philanthropy to amuse him, an idle multi-millionaire in these United States has a pretty hard time of it. He is generally too old to enjoy society and is not qualified to make himself a particularly agreeable companion, even if his manners would pass muster at Newport. Politics is too strenuous. Desirable diplomatic posts are few and the choicer ones still require some dignity or educational qualification in the holders. There is almost nothing left but to haunt the picture sales or buy a city block and order the construction of a French château in the middle of it. I know one of these men intimately; in fact I am his attorney and helped him make a part of his money. At sixty-four he retired--that is, he ceased endeavoring to increase his fortune by putting up the price of foodstuffs and other commodities, or by driving competitors out of business. Since then he has been utterly wretched. He would like to be in society and dispense a lavish hospitality, but he cannot speak the language of the drawing room. His opera box stands stark and empty. His house, filled with priceless treasures fit for the Metropolitan Museum, is closed nine months in the year. His own wants are few. His wife is a plain woman, who used to do her own cooking and, in her heart, would like to do it still. He knows nothing of the esthetic side of life and is too old to learn. Once a month, in the season, we dine at his house, with a mixed company, in a desert of dining room at a vast table loaded with masses of gold plate. The peaches are from South Africa; the strawberries from the Riviera. His chef ransacks the markets for pheasants, snipe, woodcock, Egyptian quail and canvasbacks. And at enormous distances from each other--so that the table may be decently full--sit, with their wives, his family doctor, his clergyman, his broker, his secretary, his lawyer, and a few of the more presentable relatives--a merry party! And that is what he has striven, fought and lied for for fifty years. Often he has told me of the early days, when he worked from seven until six, and then studied in night school until eleven; and of the later ones when he and his wife lived, like ourselves, in a Fourteenth Street lodging house and saved up to go to the theater once a month. As a young man he swore he would have a million before he died. Sunday afternoons he would go up to the Vanderbilt house on Fifth Avenue and, shaking his fist before the ornamental iron railing, whisper savagely that he would own just such a house himself some day. When he got his million he was going to retire. But he got his million at the age of forty-five, and it looked too small and mean; he would have ten--then he would stop! By fifty-five he had his ten millions. It was comparatively easy, I believe, for him to get it. But still he was not satisfied. Now he has twenty. But apart from his millions, his house and his pictures, which are bought for him by an agent on a salary of ten thousand dollars a year, he has nothing! I dine with him out of charity. Well, recently Johnson has gone into charity himself. I am told he has given away two millions! That is an exact tenth of his fortune. He is a religious man--in this respect he has outdone most of his brother millionaires. However, he still has an income of over a million a year--enough to satisfy most of his modest needs. Yet the frugality of a lifetime is hard to overcome, and I have seen Johnson walk home--seven blocks--in the rain from his club rather than take a cab, when the same evening he was giving his dinner guests peaches that cost--in December--two dollars and seventy-five cents apiece. The question is: How far have Johnson's two millions made him a charitable man? I confess that, so far as I can see, giving them up did not cost him the slightest inconvenience. He merely bought a few hundred dollars' worth of reputation--as a charitable millionaire--at a cost of two thousand thousand dollars. It was--commercially--a miserable bargain. Only a comparatively few people of the five million inhabitants of the city of New York ever heard of Johnson or his hospital. Now that it has been built, he is no longer interested. I do not believe he actually got as much satisfaction out of his two-million-dollar investment as he would get out of an evening at the Hippodrome; but who can say that he is not charitable? * * * * * I lay stress on this matter of charity because essentially the charitable man is the good man. And by good we mean one who is of value to others as contrasted with one who is working, as most of us are, only for his own pocket all the time. He is the man who is such an egoist that he looks on himself as a part of the whole world and a brother to the rest of mankind. He has really got an exaggerated ego and everybody else profits by it in consequence. He believes in abstract principles of virtue and would die for them; he recognizes duties and will struggle along, until he is a worn-out, penniless old man, to perform them. He goes out searching for those who need help and takes a chance on their not being deserving. Many a poor chap has died miserably because some rich man has judged that he was not deserving of help. I forget what Lazarus did about the thirsty gentleman in Hades--probably he did not regard him as deserving either. With most of us a charitable impulse is like the wave made by a stone thrown into a pool--it gets fainter and fainter the farther it has to go. Generally it does not go the length of a city block. It is not enough that there is a starving cripple across the way--he must be on your own doorstep to rouse any interest. When we invest any of our money in charity we want twenty per cent interest, and we want it quarterly. We also wish to have a list of the stockholders made public. A man who habitually smokes two thirty-cent cigars after dinner will drop a quarter into the plate on Sunday and think he is a good Samaritan. The truth of the matter is that whatever instinct leads us to contribute toward the alleviation of the obvious miseries of the poor should compel us to go further and prevent those miseries--or as many of them as we can--from ever arising at all. So far as I am concerned, the division of goodness into seven or more specific virtues is purely arbitrary. Virtue is generic. A man is either generous or mean--unselfish or selfish. The unselfish man is the one who is willing to inconvenience or embarrass himself, or to deprive himself of some pleasure or profit for the benefit of others, either now or hereafter. By the same token, now that I have given thought to the matter, I confess that I am a selfish man--at bottom. Whatever generosity I possess is surface generosity. It would not stand the acid test of self-interest for a moment. I am generous where it is worth my while--that is all; but, like everybody else in my class, I have no generosity so far as my social and business life is concerned. I am willing to inconvenience myself somewhat in my intimate relations with my family or friends, because they are really a part of _me_--and, anyway, not to do so would result, one way or another, in even greater inconvenience to me. Once outside my own house, however, I am out for myself and nobody else, however much I may protest that I have all the civic virtues and deceive the public into thinking I have. What would become of me if I did not look out for my own interests in the same way my associates look out for theirs? I should be lost in the shuffle. The Christian virtues may be proclaimed from every pulpit and the Banner of the Cross fly from every housetop; but in business it is the law of evolution and not the Sermon on the Mount that controls. The rules of the big game are the same as those of the Roman amphitheater. There is not even a pretense that the same code of morals can obtain among corporations and nations as among private individuals. Then why blame the individuals? It is just a question of dog eat dog. We are all after the bone. No corporation would shorten the working day except by reason of self-interest or legal compulsion. No business man would attack an abuse that would take money out of his own pocket. And no one of us, except out of revenge or pique, would publicly criticize or condemn a man influential enough to do us harm. The political Saint George usually hopes to jump from the back of the dead dragon of municipal corruption into the governor's chair. We have two standards of conduct--the ostensible and the actual. The first is a convention--largely literary. It is essentially merely a matter of manners--to lubricate the wheels of life. The genuine sphere of its influence extends only to those with whom we have actual contact; so that a breach of it would be embarrassing to us. Within this qualified circle we do business as "Christians & Company, Limited." Outside this circle we make a bluff at idealistic standards, but are guided only by the dictates of self-interest, judged almost entirely by pecuniary tests. I admit, however, that, though I usually act from selfish motives, I would prefer to act generously if I could do so without financial loss. That is about the extent of my altruism, though I concede an omnipresent consciousness of what is abstractly right and what is wrong. Occasionally, but very rarely, I even blindly follow this instinct irrespective of consequences. There have been times when I have been genuinely self-sacrificing. Indeed I should unhesitatingly die for my son, my daughters--and probably for my wife. I have frequently suffered financial loss rather than commit perjury or violate my sense of what is right. I have called this sense an instinct, but I do not pretend to know what it is. Neither can I explain its origin. If it is anything it is probably utilitarian; but it does not go very far. I have manners rather than morals. Fundamentally I am honest, because to be honest is one of the rules of the game I play. If I were caught cheating I should not be allowed to participate. Honesty from this point of view is so obviously the best policy that I have never yet met a big man in business who was crooked. Mind you, they were most of them pirates--frankly flying the black flag and each trying to scuttle the other's ships; but their word was as good as their bond and they played the game squarely, according to the rules. Men of my class would no more stoop to petty dishonesties than they would wear soiled linen. The word lie is not in their mutual language. They may lie to the outside public--I do not deny that they do--but they do not lie to each other. There has got to be some basis on which they can do business with one another--some stability. The spoils must be divided evenly. Good morals, like good manners, are a necessity in our social relations. They are the uncodified rules of conduct among gentlemen. Being uncodified, they are exceedingly vague; and the court of Public Opinion that administers them is apt to be not altogether impartial. It is a "respecter of persons." One man can get away with things that another man will hang for. A Jean Valjean will steal a banana and go to the Island, while some rich fellow will put a bank in his pocket and everybody will treat it as a joke. A popular man may get drunk and not be criticized for it; but the sour chap who does the same thing is flung out of the club. There is little justice in the arbitrary decisions of society at large. In a word we exact a degree of morality from our fellowmen precisely in proportion to its apparent importance to ourselves. It is a purely practical and even a rather shortsighted matter with us. Our friend's private conduct, so far as it does not concern us, is an affair of small moment. He can be as much of a roue as he chooses, so long as he respects our wives and daughters. He can put through a gigantic commercial robbery and we will acclaim his nerve and audacity, provided he is on the level with ourselves. That is the reason why cheating one's club members at cards is regarded as worse than stealing the funds belonging to widows and orphans. So long as a man conducts himself agreeably in his daily intercourse with his fellows they are not going to put themselves out very greatly to punish him for wrongdoing that does not touch their own bank accounts or which merely violates their private ethical standards. Society is crowded with people who have been guilty of one detestable act, have got thereby on Easy Street and are living happily ever after. I meet constantly fifteen or twenty men who have deliberately married women for their money--of course without telling them so. According to our professed principles this is--to say the least--obtaining money under false pretenses--a crime under the statutes. These men are now millionaires. They are crooks and swindlers of the meanest sort. Had they not married in this fashion they could not have earned fifteen hundred dollars a year; but everybody goes to their houses and eats their dinners. There are others, equally numerous, who acquired fortunes by blackmailing corporations or by some deal that at the time of its accomplishment was known to be crooked. To-day they are received on the same terms as men who have been honest all their lives. Society is not particular as to the origin of its food supply. Though we might refuse to steal money ourselves we are not unwilling to let the thief spend it on us. We are too busy and too selfish to bother about trying to punish those who deserve punishment. On the contrary we are likely to discover surprising virtues in the most unpromising people. There are always extenuating circumstances. Indeed, in those rare instances where, in the case of a rich man, the social chickens come home to roost, the reason his fault is not overlooked is usually so arbitrary or fortuitous that it almost seems an injustice that he should suffer when so many others go scot-free for their misdeeds. Society has no conscience, and whatever it has as a substitute is usually stimulated only by motives of personal vengeance. It is easier to gloss over an offense than to make ourselves disagreeable and perhaps unpopular. We have not even the public spirit to have a thief arrested and appear against him in court if he has taken from us only a small amount of money. It is too much trouble. Only when our pride is hurt do we call loudly on justice and honor. Even revenge is out of fashion. It requires too much effort. Few of us have enough principle to make ourselves uncomfortable in attempting to show disapproval toward wrongdoers. Were this not so, the wicked would not be still flourishing like green bay trees. So long as one steals enough he can easily buy our forgiveness. Honesty is not the best policy--except in trifles. CHAPTER VI MY FUTURE When I began to pen these wandering confessions--or whatever they may properly be called--it was with the rather hazy purpose of endeavoring to ascertain why it was that I, universally conceded to be a successful man, was not happy. As I reread what I have written I realize that, instead of being a successful man in any way, I am an abject failure. The preceding pages need no comment. The facts speak for themselves. I had everything in my favor at the start. I had youth, health, natural ability, a good wife, friends and opportunity; but I blindly accepted the standards of the men I saw about me and devoted my energies to the achievement of the single object that was theirs--the getting of money. Thirty years have gone by. I have been a leader in the race and I have secured a prize. But at what cost? I am old--a bundle of undesirable habits; my health is impaired; my wife has become a frivolous and extravagant woman; I have no real friends: my children are strangers to me, and I have no home. I have no interest in my family, my social acquaintances, or in the affairs of the city or nation. I take no sincere pleasure in art or books or outdoor life. The only genuine satisfaction that is mine is in the first fifteen-minutes' flush after my afternoon cocktail and the preliminary course or two of my dinner. I have nothing to look forward to. No matter how much money I make, there is no use to which I can put it that will increase my happiness. From a material standpoint I have achieved everything I can possibly desire. No king or emperor ever approximated the actual luxury of my daily life. No one ever accomplished more apparent work with less actual personal effort. I am a master at the exploitation of intellectual labor. I have motors, saddle-horses, and a beautiful summer cottage at a cool and fashionable resort. I travel abroad when the spirit moves me; I entertain lavishly and am entertained in return; I smoke the costliest cigars; I have a reputation at the bar, and I have an established income large enough to sustain at least sixty intelligent people and their families in moderate comfort. This must be true, for on the one hundred and twenty-five dollars a month I pay my chauffeur he supports a wife and two children, sends them to school and on a three-months' vacation into the country during the summer. And, instead of all these things giving me any satisfaction, I am miserable and discontented. The fact that I now realize the selfishness of my life led me to-day to resolve to do something for others--and this resolve had an unexpected and surprising consequence. Heretofore I had been engaged in an introspective study of my own attitude toward my fellows. I had not sought the evidence of outside parties. What has just occurred has opened my eyes to the fact that others have not been nearly so blind as I have been myself. James Hastings, my private secretary, is a man of about forty-five years of age. He has been in my employ fifteen years. He is a fine type of man and deserves the greatest credit for what he has accomplished. Beginning life as an office boy at three dollars a week, he educated himself by attending school at night, learned stenography and typewriting, and has become one of the most expert law stenographers in Wall Street. I believe that, without being a lawyer, he knows almost as much law as I do. Gradually I have raised his wages until he is now getting fifty dollars a week. In addition to this he does night-work at the Bar Association at double rates, acts as stenographer at legal references, and does, I understand, some trifling literary work besides. I suppose he earns from thirty-five hundred to five thousand dollars a year. About thirteen years ago he married one of the woman stenographers in the office--a nice girl she was too--and now they have a couple of children. He lives somewhere in the country and spends an unconscionable time on the train daily, yet he is always on hand at an early hour. What happened to-day was this: A peculiarly careful piece of work had been done in the way of looking up a point of corporation law, and I inquired who was responsible for briefing it. Hastings smiled and said he had done so. As I looked at him it suddenly dawned on me that this man might make real money if he studied for the bar and started in practice for himself. He had brains and an enormous capacity for work. I should dislike losing so capable a secretary, but it would be doing him a good turn to let him know what I thought; and it was time that I did somebody a good turn from an unselfish motive. "Hastings," I said, "you're too good to be merely a stenographer. Why don't you study law and make some money? I'll keep you here in my office, throw things in your way and push you along. What do you say?" He flushed with gratification, but, after a moment's respectful hesitation, shook his head. "Thank you very much, sir," he replied, "but I wouldn't care to do it. I really wouldn't!" Though I am fond of the man, his obstinacy nettled me. "Look here!" I cried. "I'm offering you an unusual chance. You had better think twice before you decline such an opportunity to make something of yourself. If you don't take it you'll probably remain what you are as long as you live. Seize it and you may do as well as I have." Hastings smiled faintly. "I'm very sorry, sir," he repeated. "I'm grateful to you for your interest; but--I hope you'll excuse me--I wouldn't change places with you for a million dollars! No--not for ten million!" He blurted out the last two sentences like a schoolboy, standing and twisting his notebook between his fingers. There was something in his tone that dashed my spirits like a bucket of cold water. He had not meant to be impertinent. He was the most truthful man alive. What did he mean? Not willing to change places with me! It was my turn to flush. "Oh, very well!" I answered in as indifferent a manner as I could assume. "It's up to you. I merely meant to do you a good turn. We'll think no more about it." I continued to think about it, however. Would not change places with me--a fifty-dollar-a-week clerk! Hastings' pointblank refusal of my good offices, coming as it did hard on the heels of my own realization of failure, left me sick at heart. What sort of an opinion could this honest fellow, my mere employee--dependent on my favor for his very bread--have of me, his master? Clearly not a very high one! I was stung to the quick--chagrined; ashamed. * * * * * It was Saturday morning. The week's work was practically over. All of my clients were out of town--golfing, motoring, or playing poker at Cedarhurst. There was nothing for me to do at the office but to indorse half a dozen checks for deposit. I lit a cigar and looked out the window of my cave down on the hurrying throng below. A resolute, never-pausing stream of men plodded in each direction. Now and then others dashed out of the doors of marble buildings and joined the crowd. On the river ferryboats were darting here and there from shore to shore. There was a bedlam of whistles, the thunder of steam winches, the clang of surface cars, the rattle of typewriters. To what end? Down at the curb my motor car was in waiting. I picked up my hat and passed into the outer office. "By the way, Hastings," I said casually as I went by his desk, "where are you living now?" He looked up smilingly. "Pleasantdale--up Kensico way," he answered. I shifted my feet and pulled once or twice on my cigar. I had taken a strange resolve. "Er--going to be in this afternoon?" I asked. "I'm off for a run and I might drop in for a cup of tea about five o'clock." "Oh, will you, sir!" he exclaimed with pleasure. "We shall be delighted. Mine is the house at the crossroads--with the red roof." "Well," said I, "you may see me--but don't keep your tea waiting." As I shot uptown in my car I had almost the feeling of a coming adventure. Hastings was a good sort! I respected him for his bluntness of speech. At the cigar counter in the club I replenished my case. Then I went into the reception room, where I found a bunch of acquaintances sitting round the window. They hailed me boisterously. What would I have to drink? I ordered a "Hannah Elias" and sank into a chair. One of them was telling about the newest scandal in the divorce line: The president of one of our largest trust companies had been discovered to have been leading a double life--running an apartment on the West Side for a haggard and _passée_ showgirl. "You just tell me--I'd like to know--why a fellow like that makes such a damned fool of himself! Salary of fifty thousand dollars a year! Big house; high-class wife and family; yacht--everything anybody wants. Not a drinking man either. It defeats me!" he said. None of the group seemed able to suggest an answer. I had just tossed off my "Hannah Elias." "I think I know," I hazarded meditatively. They turned with one accord and stared at me. "There was nothing else for him to do," I continued, "except to blow his brains out." The raconteur grunted. "I don't just know the meaning of that!" he remarked. "I thought he was a friend of yours!" "Oh, I like him well enough," I answered, getting up. "Thanks for the drink. I've got to be getting home. My wife is giving a little luncheon to thirty valuable members of society." I was delayed on Fifth Avenue and when the butler opened the front door the luncheon party was already seated at the table. A confused din emanated from behind the portières of the dining room, punctuated by shouts of female laughter. The idea of going in and overloading my stomach for an hour, while strenuously attempting to produce light conversation, sickened me. I shook my head. "Just tell your mistress that I've been suddenly called away on business," I directed the butler and climbed back into my motor. "Up the river!" I said to my chauffeur. We spun up the Riverside Drive, past rows of rococo apartment houses, along the Lafayette Boulevard and through Yonkers. It was a glorious autumn day. The Palisades shone red and yellow with turning foliage. There was a fresh breeze down the river and a thousand whitecaps gleamed in the sunlight. Overhead great white clouds moved majestically athwart the blue. But I took no pleasure in it all. I was suffering from an acute mental and physical depression. Like Hamlet I had lost all my mirth--whatever I ever had--and the clouds seemed but a "pestilent congregation of vapors." I sat in a sort of trance as I was whirled farther and farther away from the city. At last I noticed that my silver motor clock was pointing to half-past two, and I realized that neither the chauffeur nor myself had had anything to eat since breakfast. We were entering a tiny village. Just beyond the main square a sign swinging above the sidewalk invited wayfarers to a "quick lunch." I pressed the button and we pulled to the gravel walk. "Lunch!" I said, and opened the wire-netted door. Inside there were half a dozen oilcloth-covered tables and a red-cheeked young woman was sewing in a corner. "What have you got?" I asked, inspecting the layout. "Tea, coffee, milk--eggs any style you want," she answered cheerily. Then she laughed in a good-natured way. "There's a real hotel at Poughkeepsie--five miles along," she added. "I don't want a real hotel," I replied. "What are you laughing at?" Then I realized that I must look rather civilized for a motorist. "You don't look as you'd care for eggs," she said. "That's where you're wrong," I retorted. "I want three of the biggest, yellowest, roundest poached eggs your fattest hen ever laid--and a schooner of milk." The girl vanished into the back of the shop and presently I could smell toast. I discovered I was extremely hungry. In about eight minutes she came back with a tray on which was a large glass of creamy milk and the triple eggs for which I had prayed. They were spherical, white and wabbly. "You're a prize poacher," I remarked, my spirits reviving. She smiled appreciatively. "Going far?" she inquired, sitting down quite at ease at one of the neighboring tables. I looked pensively at her pleasant face across the eggs. "That's a question," I answered. "I can't make out whether I've been moving on or just going round and round in a circle." She looked puzzled for an instant. Then she said shrewdly: "Perhaps you've really been _going back_." "Perhaps," I admitted. I have never tasted anything quite so good as those eggs and that milk. From where I sat I could look far up the Hudson; the wind from the river swayed the red maples round the door of the quick lunch; and from the kitchen came the homely smells of my lost youth. I had a fleeting vision of the party at my house, now playing bridge for ten cents a point; and my soul lifted its head for the first time in weeks. "How far is it to Pleasantdale?" "A long way," answered the girl; "but you can make a connection by trolley that will get you there in about two hours." "Suits me!" I said and stepped to the door. "You can go, James; I'll get myself home." He cast on me a scandalized look. "Very good, sir!" he answered and touched his cap. He must have thought me either a raving lunatic or an unabashed adventurer. A moment more and the car disappeared in the direction of the city. I was free! The girl made no attempt to conceal her amusement. Behind the door was a gray felt hat. I took it down and looked at the size. It was within a quarter of my own. "Look here," I suggested, holding out a five-dollar bill, "I want a Wishing Cap. Let me take this, will you?" "The house is yours!" she laughed. Over on the candy counter was a tray of corncob pipes. I helped myself to one, to a package of tobacco and a box of matches. I hung my derby on the vacant peg behind the door. Then I turned to my hostess. "You're a good girl," I said. "Good luck to you." For a moment something softer came into her eyes. "And good luck to you, sir!" she replied. As I passed down the steps she threw after me: "I hope you'll find--what you're looking for!" * * * * * In my old felt hat and smoking my corncob I trudged along the road in the mellow sunlight, almost happy. By and by I reached the trolley line; and for five cents, in company with a heterogeneous lot of country folks, Italian laborers and others, was transported an absurdly long distance across the state of New York to a wayside station. There I sat on a truck on the platform and chatted with a husky, broad-shouldered youth, who said he was the "baggage smasher," until finally a little smoky train appeared and bore me southward. It was the best holiday I had had in years--and I was sorry when we pulled into Pleasantdale and I took to my legs again. In the fading afternoon light it indeed seemed a pleasant, restful place. Comfortable cottages, each in its own yard, stood in neighborly rows along the shaded street. Small boys were playing football in a field adjoining a schoolhouse. Presently the buildings became more scattered and I found myself following a real country road, though still less than half a mile from the station. Ahead it divided and in the resulting triangle, behind a well-clipped hedge, stood a pretty cottage with a red roof--Hastings', I was sure. I tossed away my pipe and opened the gate. A rather pretty woman of about thirty-five was reading in a red hammock; there were half a dozen straw easy chairs and near by a teatable, with the kettle steaming. Mrs. Hastings looked up at my step on the gravel path and smiled a welcome. "Jim has been playing golf over at the club--he didn't expect you until five," she said, coming to meet me. "I don't care whether he comes or not," I returned gallantly. "I want to see you. Besides, I'm as hungry as a bear." She raised her eyebrows. "I had only an egg or so and a glass of milk for luncheon, and I have walked--miles!" "Oh!" she exclaimed. I could see she had had quite a different idea of her erstwhile employer; but my statement seemed to put us on a more friendly footing from the start. "I love walking too," she hastened to say. "Isn't it wonderful to-day? We get weeks of such weather as this every autumn." She busied herself over the teacups and then, stepping inside the door for a moment, returned with a plate piled high with buttered toast, and another with sandwiches of grape jelly. "Carmen is out," she remarked; "otherwise you should be served in greater style." "Carmen?" "Carmen is our maid, butler and valet," she explained. "It's such a relief to get her out of the way once in a while and have the house all to oneself. That's one of the reasons I enjoy our two-weeks' camping trip so much every summer." "You like the woods?" "Better than anything, I think--except just being at home here. And the children have the time of their lives--fishing and climbing trees, and watching for deer in the boguns." The gate clicked at that moment and Hastings, golf bag on shoulders, came up the path. He looked lean, brown, hard and happy. "Just like me to be late!" he apologized. "I had no idea it would take me so long to beat Colonel Bogey." "Your excuses are quite unnecessary. Mrs. Hastings and I have discovered that we are natural affinities," said I. My stenographer, quite at ease, leaned his sticks in a corner and helped himself to a cup of tea and a couple of sandwiches, which in my opinion rivaled my eggs and milk of the early afternoon. My walk had made me comfortably tired; my lungs were distended with cool country air; my head was clear, and this domestic scene warmed the cockles of my heart. "How is the Chicopee & Shamrock reorganization coming on?" asked Hastings, striving to be polite by suggesting a congenial subject for conversation. "I don't know," I retorted. "I've forgotten all about it until Monday morning. On the other hand, how are your children coming on?" "Sylvia is out gathering chestnuts," answered Mrs. Hastings, "and Tom is playing football. They'll be home directly. I wonder if you wouldn't like Jim to show you round our place?" "Just the thing," I answered, for I guessed she had household duties to perform. "Of course you'll stay to supper?" she pressed me. I hesitated, though I knew I should stay, all the time. "Well--if it really won't put you out," I replied. "I suppose there are evening trains?" "One every hour. We'll get you home by ten o'clock." "I'll have to telephone," I said, remembering my wife's regular Saturday-night bridge party. "That's easily managed," said Hastings. "You can speak to your own house right from my library." Again I barefacedly excused myself to my butler on the ground of important business. As we strolled through the gateway we were met by a sturdy little boy with tousled hair. He had on an enormous gray sweater and was hugging a pigskin. "We beat 'em!" he shouted, unabashed by my obviously friendly presence. "Eighteen to nothing!" "Tom is twelve," said Hastings with a shade of pride in his voice. "Yes, the schools here are good. I expect to have him ready for college in five years more." "What are you going to make of him?" I asked. "A civil engineer, I think," he answered. "You see, I'm a crank on fresh air and building things--and he seems to be like me. This cooped-up city life is pretty narrowing, don't you think?" "It's fierce!" I returned heartily, with more warmth than elegance. "Sometimes I wish I could chuck the whole business and go to farming." "Why not?" he asked as we climbed a small rise behind the house. "Here's my farm--fifteen acres. We raise most of our own truck." Below the hill a cornfield, now yellow with pumpkins, stretched to the farther road. Nearer the house was a kitchen garden, with an apple orchard beyond. A man in shirtsleeves was milking a cow behind a tiny barn. "I bought this place three years ago for thirty-nine hundred dollars," said my stenographer. "They say it is worth nearer six thousand now. Anyhow it is worth a hundred thousand to me!" A little girl, with bulging apron, appeared at the edge of the orchard and came running toward us. "What have you got there?" called her father. "Oh, daddy! Such lovely chestnuts!" cried the child. "And there are millions more of them!" "We'll roast 'em after supper," said her father. "Toddle along now and wash up." She put up a rosy, beaming face to be kissed and dashed away toward the house. I tried to remember what either of my two girls had been like at her age, but for some strange reason I could not. Across the road the fertile countryside sloped away into a distant valley, hemmed in by dim blue hills, below which the sun had already sunk, leaving only a gilded edge behind. The air was filled with a soft, smoky haze. A church bell in the village struck six o'clock. "_The curfew tolls the knell of parting day, The lowing herd winds slowly o'er the lea, The plowman homeward plods his weary way_," I murmured. "For 'plowman' read 'golfer,'" smiled my host. "By George, though--it is pretty good to be alive!" The air had turned crisp and we both instinctively took a couple of deep breaths. "Makes the city look like thirty cents!" he ejaculated. "Of course it isn't like New York or Southampton." "No, thank God! It isn't!" I muttered as we wandered toward the house. "I hope you don't mind an early supper," apologized Mrs. Hastings as we entered; "but Jim gets absolutely ravenous. You see, on weekdays his lunch is at best a movable feast." Our promptly served meal consisted of soup, scrambled eggs and bacon, broiled chops, fried potatoes, peas, salad, apple pie, cheese, grapes plucked fresh from the garden wall, and black coffee, distilled from a shining coffee machine. Mrs. Hastings brought the things hot from the kitchen and dished them herself. Tom and Sylvia, carefully spruced up, ate prodigiously and then helped clear away the dishes, while I produced my cigar case. Then Hastings led me across the hall to a room about twelve feet square, the walls of which were lined with books, where a wood fire was already crackling cozily. Motioning me to an old leather armchair, he pulled up a wooden rocker before the mantel and, leaning over, laid a regiment of chestnuts before the blazing logs. I stretched out my legs and took a long pull on one of my Carona-Caronas. It all seemed too good to be true. Only six hours before in my marble entrance hall I had listened disgustedly to the cackle of my wife's luncheon party behind the tapestry of my own dining room. After all, how easy it was to be happy! Here was Hastings, jolly as a clam and living like a prince on--what? I wondered. "Hastings," I said, "do you mind telling me how much it costs you to live like this?" "Not at all," he replied--"though I never figured it out exactly. Let's see. Five per cent on the cost of the place--say, two hundred dollars. Repairs and insurance a hundred. That's three hundred, isn't it? We pay the hired man thirty-five dollars and Carmen eighteen dollars a month, and give 'em their board--about six hundred and fifty more. So far nine hundred and fifty. Our vegetables and milk cost us practically nothing--meat and groceries about seventy-five a month--nine hundred a year. "We have one horse; but in good weather I use my bicycle to go to the station. We cut our own ice in the pond back of the orchard. The schools are free. I cut quite a lot of wood myself, but my coal comes high--must cost me at least a hundred and fifty a year. I don't have many doctors' bills, living out here; but the dentist hits us for about twenty-five dollars every six months--that's fifty more. My wife spends about three hundred and the children as much more. Of course that's fairly liberal. One doesn't need ballgowns in our village. "My own expenses are, railroad fare, lunches, tobacco--I smoke a pipe mostly--and clothes--probably about five hundred in all. We go on a big bat once a month and dine at a table-d'hôte restaurant, and take in the opera or the play. That costs some--about ten dollars a clip--say, eighty for the season; and, of course, I blow the kids to a camping trip every summer, which sets me back a good hundred and fifty. How does that come out?" I had jotted the items down, as he went along, on the back of an envelope. "Thirty-three hundred and eighty dollars," I said, adding them up. "It seems a good deal," he commented, turning and gazing into the fire; "but I have usually managed to lay up about fifteen hundred every year--besides, of course, the little I give away." I sat stunned. Thirty-three hundred dollars!--I spent seventy-two thousand!--and the man lived as well as I did! What did I have that he had not? But Hastings was saying something, still with his back toward me. "I suppose you thought I must be an ungrateful dog not to jump at the offer you made me this morning," he remarked in an embarrassed manner. "It's worried me a lot all day. I'm really tremendously gratified at your kindness. I couldn't very well explain myself, and I don't know what possessed me to say what I did about my not being willing to exchange places with you. But, you see, I'm over forty. That makes a heap of difference. I'm as good a stenographer as you can find, and so long as my health holds out I can be sure of at least fifty dollars a week, besides what I earn outside. "I've never had any kink for the law. I don't think I'd be a success at it; and frankly, saving your presence, I don't like it. A lot of it is easy money and a lot of it is money earned in the meanest way there is--playing dirty tricks; putting in the wrong a fellow that's really right; aggravating misunderstandings and profiting by the quarrels people get into. You're a high-class, honorable man, and you don't see the things I see." I winced. If he only knew, I had seen a good deal! "But I go round among the other law offices, and I tell you it's a demoralizing profession. "It's all right to reorganize a railroad; but in general litigation it seems to me as if the lawyers spend most of their time trying to make the judge and jury believe the witnesses are all criminals. Everything a man says on the stand or has ever done in his life is made the subject of a false inference--an innuendo. The law isn't constructive--it's destructive; and that's why I want my boy to be a civil engineer." He paused, abashed at his own heat. "Well," I interjected, "it's a harsh arraignment; but there's a great deal of truth in what you say. Wouldn't you like to make big money?" "Big money! I do make big money--for a man of my class," he replied with a gentle smile. "I wouldn't know what to do with much more. I've got health and a comfortable home, the affection of an honest woman and two fine children. I work hard, sleep like a log, and get a couple of sets of tennis or a round of golf on Saturdays and Sundays. I have the satisfaction of knowing I give you your money's worth for the salary you pay me. My kids have as good teachers as there are anywhere. We see plenty of people and I belong to a club or two. I bear a good reputation in the town and try to keep things going in the right direction. We have all the books and magazines we want to read. What's more, I don't worry about trying to be something I'm not." "How do you mean?" I asked, feeling that his talk was money in my moral pocket. "Oh, I've seen a heap of misery in New York due to just wanting to get ahead--I don't know where; fellows that are just crazy to make 'big money' as you call it, in order to ride in motors and get into some sort of society. All the clerks, office boys and stenographers seem to want to become stockbrokers. Personally I don't see what there is in it for them. I don't figure out that my boy would be any happier with two million dollars than without. If he had it he would be worrying all the time for fear he wasn't getting enough fun for his money. And as for my girl I want her to learn to do something! I want her to have the discipline that comes from knowing how to earn her own living. Of course that's one of the greatest satisfactions there is in life anyway--doing some one thing as well as it can be done." "Wouldn't you like your daughter to marry?" I demanded. "Certainly--if she can find a clean man who wants her. Why, it goes without saying, that is life's greatest happiness--that and having children." "Certainly!" I echoed with an inward qualm. "Suppose she doesn't marry though? That's the point. She doesn't want to hang round a boarding house all her life when everybody is busy doing interesting things. I've got a theory that the reason rich people--especially rich women--get bored is because they don't know anything about real life. Put one of 'em in a law office, hitting a typewriter at fifteen dollars a week, and in a month she'd wake up to what was really going on--she'd be _alive_!" "'_The world is so full of a number of things I'm sure we should all be as happy as kings_!'" said I. "What's Sylvia going to do?" "Oh, she's quite a clever little artist." He handed me some charming sketches in pencil that were lying on the table. "I think she may make an illustrator. Heaven knows we need 'em! I'll give her a course at Pratt Institute and then at the Academy of Design; and after that, if they think she is good enough, I'll send her to Paris." "I wish I'd done the same thing with my girls!" I sighed. "But the trouble is--the trouble is--You see, if I had they wouldn't have been doing what their friends were doing. They'd have been out of it." "No; they wouldn't like that, of course," agreed Hastings respectfully. "They would want to be 'in it'" I looked at him quickly to see whether his remark had a double entendre. "I don't see very much of my daughters," I continued. "They've got away from me somehow." "That's the tough part of it," he said thoughtfully. "I suppose rich people are so busy with all the things they have to do that they haven't much time for fooling round with their children. I have a good time with mine though. They're too young to get away anyhow. We read French history aloud every evening after supper. Sylvia is almost an expert on the Duke of Guise and the Massacre of St. Bartholomew." We smoked silently for some moments. Hastings' ideas interested me, but I felt that he could give me something more personal--of more value to myself. The fellow was really a philosopher in his quiet way. "After all, you haven't told me what you meant by saying you wouldn't change places with me," I said abruptly. "What did you mean by that? I want to know." "I wish you would forget I ever said it, sir," he murmured. "No," I retorted, "I can't forget it. You needn't spare me. This talk is not _ex cathedra_--it's just between ourselves. When you've told me why, then I will forget it. This is man to man." "Well," he answered slowly, "it would take me a long time to put it in just the right way. There was nothing personal in what I said this morning. I was thinking about conditions in general--the whole thing. It can't go on!" "What can't go on?" "The terrible burden of money," he said. "Terrible burden of money!" I repeated. What did he mean? "The weight of it--that's bowing people down and choking them up. It's like a ball and chain. I meant I wouldn't change places with any man in the millionaire class--I couldn't stand the complexities and responsibilities. I believe the time is coming when no citizen will be permitted to receive an income from his inherited or accumulated possessions greater than is good for him. You may say that's the wildest sort of socialism. Perhaps it is. But it's socialism looked at from a different angle from the platform orators--the angle of the individual. "I don't believe a man's money should be taken away from him and distributed round for the sake of other people--but for the protection of the man himself. There's got to be a pecuniary safety valve. Every dollar over a certain amount, just like every extra pound of steam in a boiler, is a thing of danger. We want health in the individual and in the state--not disease. "Let the amount of a man's income be five, ten, fifteen or twenty thousand dollars--the exact figure doesn't matter; but there is a limit at which wealth becomes a drag and a detriment instead of a benefit! I'd base the legality of a confiscatory income tax on the constitutionality of any health regulation or police ordinance. People shouldn't be permitted to injure themselves--or have poison lying round. Certainly it's a lesson that history teaches on every page. "Besides everybody needs something to work for--to keep him fit--at least that's the way it looks to me. Nations--let alone mere individuals--have simply gone to seed, died of dry rot because they no longer had any stimulus. A fellow has got to have some idea in the back of his head as to what he's after--and the harder it is for him to get it, the better, as a rule, it is for him. Good luck is the worst enemy a heap of people have. Misfortune spurs a man on, tries him out and develops him--makes him more human." "Ever played in hard luck?" I queried. "I? Sure, I have," answered Hastings cheerfully. "And I wouldn't worry much if it came my way again. I could manage to get along pretty comfortably on less than half I've got. I like my home; but we could be happy anywhere so long as we had ourselves and our health and a few books. However, I wasn't thinking of myself. I've got a friend in the brokering business who says it's the millionaires that do most of the worrying anyhow. Naturally a man with a pile of money has to look after it; but what puzzles me is why anybody should want it in the first place." He searched along a well-filled and disordered shelf of shabby books. "Here's what William James says about it: "'We have grown literally afraid to be poor. We despise any one who elects to be poor in order to simplify and save his inner life. We have lost the power of even imagining what the ancient idealization of poverty could have meant--the liberation from material attachments; the unbribed soul; the manlier indifference; the paying our way by what we are or do, and not by what we have; the right to fling away our life at any moment irresponsibly--the more athletic trim, in short the moral fighting shape.... It is certain that the prevalent fear of poverty among the educated class is the worst moral disease from which our civilization suffers.'" "I guess he's about right," I agreed. "That's my idea exactly," answered Hastings. "As I look at it the curse of most of the people living on Fifth Avenue is that they're perfectly safe. You could take away nine-tenths of what they've got and they'd still have about a hundred times more money than they needed to be comfortable. They're like a whole lot of fat animals in an inclosure--they're fed three or four times a day, but the wire fence that protects them from harm deprives them of any real liberty. Or they're like goldfish swimming round and round in a big bowl. They can look through sort of dimly; but they can't get out! If they really knew, they'd trade their security for their freedom any time. "Perfect safety isn't an unmixed blessing by any means. Look at the photographs of the wild Indians--the ones that carried their lives in their hands every minute--and there's something stern and noble about their faces. Put an Indian on a reservation and he takes to drinking whisky. It was the same way with the chaps that lived in the Middle Ages and had to wear shirts of chainmail. It kept 'em guessing. That's merely one phase of it. "The real thing to put the bite into life is having a Cause. People forget how to make sacrifices--or become afraid to. After all, even dying isn't such a tremendous trick. Plenty of people have done it just for an idea--wanted to pray in their own way. But this modern way of living takes all the sap out of folks. They get an entirely false impression of the relative values of things. It takes a failure or a death in the family to wake them up to the comparative triviality of the worth of money as compared, for instance, to human affection--any of the real things of life. "I don't object to inequality of mere wealth in itself, because I wouldn't dignify money to that extent. Of course I do object to a situation where the rich man can buy life and health for his sick child and the poor man can't. Too many sick babies! That'll be attended to, all right, in time. I wouldn't take away one man's money for the sake of giving it to others--not a bit of it. But what I would do would be to put it out of a man's power to poison himself with money. "Suicide is made a crime under the law. How about moral and intellectual suicide? It ought to be prevented for the sake of the state. No citizen should be allowed to stultify himself with luxury any more than he should be permitted to cut off his right hand. Excuse me for being didactic--but you said you'd like to get my point of view and I've tried to give it to you in a disjointed sort of way. I'd sooner my son would have to work for his living than not, and I'd rather he'd spend his life contending with the forces of nature and developing the country than in quarreling over the division of profits that other men had earned." I had listened attentively to what Hastings had to say; and, though I did not agree with all of it, I was forced to admit the truth of a large part. He certainly seemed to have come nearer to solving the problem than I had even been able to. Yet it appeared to my conservative mind shockingly socialistic and chimerical. "So you really think," I retorted, "that the state ought to pass laws which should prevent the accumulation--or at least the retention--of large fortunes?" Hastings smiled apologetically. "Well," he answered, "I don't know just how far I should advocate active governmental interference, though it's a serious question. You're a thousand times better qualified to express an opinion on that than I am. "When I spoke about health and police regulations I was talking metaphorically. I suppose my real idea is that the moral force of the community--public opinion--ought to be strong enough to compel a man to live so that such laws would be unnecessary. His own public spirit, his conscience, or whatever you call it, should influence him to use whatever he has above a certain amount for the common good--to turn it back where he got it, or somebody else got it, instead of demoralizing the whole country and setting an example of waste and extravagance. That kind of thing does an awful lot of harm. I see it all round me. But, of course, the worst sufferer is the man himself, and his own good sense ought to jack him up. "Still you can't force people to keep healthy. If a man is bound to sacrifice everything for money and make himself sick with it, perhaps he ought to be prevented." "Jim!" cried Mrs. Hastings, coming in with a pitcher of cider and some glasses. "I could hear you talking all the way out in the kitchen. I'm sure you've bored our guest to death. Why, the chestnuts are burned to a crisp!" "He hasn't bored me a bit," I answered; "in fact we are agreed on a great many things. However, after I've had a glass of that cider I must start back to town." "We'd love to have you spend the night," she urged. "We've a nice little guestroom over the library." The invitation was tempting, but I wanted to get away and think. Also it was my duty to look in on the bridge party before it became too sleepy to recognize my presence. I drank my cider, bade my hostess good night and walked to the station with Hastings. As we crossed the square to the train he said: "It was mighty good of you to come out here to see us and we both appreciate it. Hope you'll forgive my bluntness this morning and for shooting off my mouth so much this evening." "My dear fellow," I returned, "that was what I came out for. You've given me something to think about. I'm thinking already. You're quite right. You'd be a fool to change places with anybody--let alone a miserable millionaire." * * * * * In the smoker of the accommodation, to which I retired, I sat oblivious of my surroundings until we entered the tunnel. So far as I could see, Hastings had it on me at every turn--at thirty-three hundred a year--considerably less than half of what I paid out annually in servants' wages. And the exasperating part of it all was that, though I spent seventy-two thousand a year, I did not begin to be as happy as he was! Not by a jugful. Face to face with the simple comfort of the cottage I had just left, its sincerity and affection, its thrifty self-respect, its wide interests, I confessed that I had not been myself genuinely contented since I left my mother's house for college, thirty odd years before. I had become the willing victim of a materialistic society. I had squandered my life in a vain effort to purchase happiness with money--an utter impossibility, as I now only too plainly saw. I was poisoned with it, as Hastings had said--sick _with_ it and _sick of_ it. I was one of Hastings' chaingangs of prosperous prisoners--millionaires shackled together and walking in lockstep; one of his school of goldfish bumping their noses against the glass of the bowl in which they were confined by virtue of their inability to live outside the medium to which they were accustomed. I was through with it! From that moment I resolved to become a free man; living my own life; finding happiness in things that were worth while. I would chuck the whole nauseating business of valets and scented baths; of cocktails, clubs and cards; of an unwieldy and tiresome household of lazy servants; of the ennui of heavy dinners; and of a family the members of which were strangers to each other. I could and would easily cut down my expenditures to not more than thirty thousand a year; and with the balance of my income I would look after some of those sick babies Hastings had mentioned. I would begin by taking a much smaller house and letting half the servants go, including my French cook. I had for a long time realized that we all ate too much. I would give up one of my motors and entertain more simply. We would omit the spring dash to Paris, and I would insist on a certain number of evenings each week which the family should spend together, reading aloud or talking over their various plans and interests. It did not seem by any means impossible in the prospect and I got a considerable amount of satisfaction from planning it all out. My life was to be that of a sort of glorified Hastings. After my healthy, peaceful day in the quiet country I felt quite light-hearted--as nearly happy as I could remember having been for years. It was raining when I got out at the Grand Central Station, and as I hurried along the platform to get a taxi I overtook an acquaintance of mine--a social climber. He gave me a queer look in response to my greeting and I remembered that I had on the old gray hat I had taken from the quick lunch. "I've been off for a tramp in the country," I explained, resenting my own instinctive embarrassment. "Ah! Don't say! Didn't know you went in for that sort of thing! Well, good night!" He sprang into the only remaining taxi without asking me to share it and vanished in a cloud of gasoline smoke. I was in no mood for waiting; besides I was going to be democratic. I took a surface car up Lexington Avenue and stood between the distended knees of a fat and somnolent Italian gentleman for thirty blocks. The car was intolerably stuffy and smelled strongly of wet umbrellas and garlic. By the time I reached the cross-street on which I lived it had begun to pour. I turned up my coat collar and ran to my house. Somehow I felt like a small boy as I threw myself panting inside my own marble portal. My butler expressed great sympathy for my condition and smuggled me quickly upstairs. I fancy he suspected there was something discreditable about my absence. A pungent aroma floated up from the drawing room, where the bridge players were steadily at work. I confess to feeling rather dirty, wet and disreputable. "I'm sorry, sir," said my butler as he turned on the electric switch in my bedroom, "but I didn't expect you back this evening, and so I told Martin he might go out." A wave of irritation, almost of anger, swept over me. Martin was my perfect valet. "What the devil did you do that for!" I snapped. Then, realizing my inconsistency, I was ashamed, utterly humiliated and disgusted with myself. This, then, was all that my resolution amounted to after all! "I am very sorry, sir," repeated my butler. "Very sorry, sir, indeed. Shall I help you off with your things?" "Oh, that's all right!" I exclaimed, somewhat to his surprise. "Don't bother about me. I'll take care of myself." "Can't I bring you something?" he asked solicitously. "No, thanks!" said I. "I don't need anything that you can give me!" "Very good, sir," he replied. "Good night, sir." "Good night," I answered, and he closed the door noiselessly. I lit a cigarette and, tossing off my coat, sank into a chair. My mere return to that ordered elegance seemed to have benumbed my individuality. Downstairs thirty of our most intimate friends were amusing themselves at the cardtables, confident that at eleven-thirty they would be served with supper consisting of salads, ice-cream and champagne. They would not hope in vain. If they did not get it--speaking broadly--they would not come again. They wanted us as we were--house, food, trappings--the whole layout. They meant well enough. They simply had to have certain things. If we changed our scale of living we should lose the acquaintance of these people, and we should have nobody in their place. We had grown into a highly complicated system, in which we had a settled orbit. This orbit was not susceptible of change unless we were willing to turn everything topsy-turvy. Everybody would suppose we had lost our money. And, not being brilliant or clever people, who paid their way as they went by making themselves lively and attractive, it would be assumed that we could not keep up our end; so we should be gradually left out. I said to myself that I ought not to care--that being left out was what I wanted; but, all the same, I knew I did care. You cannot tear yourself up by the roots at fifty unless you are prepared to go to a far country. I was not prepared to do that at a moment's notice. I, too, was used to a whole lot of things--was solidly imbedded in them. My very house was an overwhelming incubus. I was like a miserable snail, forever lugging my house round on my back--unable to shake it off. A change in our mode of life would not necessarily in itself bring my children any nearer to me; it would, on the contrary, probably antagonize them. I had sowed the seed and I was reaping the harvest. My professional life I could not alter. I had my private clients--my regular business. Besides there was no reason for altering it. I conducted it honorably and well enough. Yet the calm consideration of those very difficulties in the end only demonstrated the clearer to me the perilous state in which I was. The deeper the bog, the more my spirit writhed to be free. Better, I thought, to die struggling than gradually to sink down and be suffocated beneath the mire of apathy and self-indulgence. Hastings' little home--or something--had wrought a change in me. I had gone through some sort of genuine emotional experience. It seemed impossible to reform my mode of life and thought, but it was equally incredible that I should fall back into my old indifference. Sitting there alone in my chamber I felt like a man in a nightmare, who would give his all to be able to rise, yet whose limbs were immovable, held by some subtle and cruel power. I had read in novels about men agonized by remorse and indecision. I now experienced those sensations myself. I discovered they were not imaginary states. My meditations were interrupted by the entrance of my wife, who, with an anxious look on her face, inquired what was the matter. The butler had said I seemed indisposed; so she had slipped away from our guests and come up to see for herself. She was in full regalia--elaborate gown, pearls, aigret. "There's nothing the matter with me," I answered, though I know full well I lied--I was poisoned. "Well, that's a comfort, at any rate!" she replied, amiably enough. "Where's Tom?" I asked wearily. "I haven't any idea," she said frankly. "You know he almost never comes home." "And the girls?" "Visiting the Devereuxs at Staatsburg," she answered. "Aren't you coming down for some bridge?" "No," I said. "To tell you the truth I never want to see a pack of cards again. I want to cut the game. I'm sick of our life and the useless extravagance. I want a change. Let's get rid of the whole thing--take a smaller house--have fewer servants. Think of the relief!" "What's the matter?" she cried sharply. "Have you lost money?" Money! Money! "No," I said, "I haven't lost money--I've lost heart!" She eyed me distrustfully. "Are you crazy?" she demanded. "No," I answered. "I don't think I am." "You act that way," she retorted. "It's a funny time to talk about changing your mode of life--right in the middle of a bridge party! What have you been working for all these years? And where do I come in? You can go to your clubs and your office--anywhere; but all I've got is the life you have taught me to enjoy! Tom is grown up and never comes near me. And the girls--why, what do you think would happen to them if you suddenly gave up your place in society? They'd never get married so long as they lived. People would think you'd gone bankrupt! Really"--her eyes filled and she dabbed at them with a Valenciennes handkerchief--"I think it too heartless of you to come in this way--like a skeleton at the feast--and spoil my evening!" I felt a slight touch of remorse. I had broached the matter rather roughly. I laid my hand on her shoulder--now so round and matronly, once so slender. "Anna," I said as tenderly as I could, "suppose I _did_ give it all up?" She rose indignantly to her feet and shook off my hand. "You'd have to get along without me!" she retorted; then, seeing the anguish on my face, she added less harshly: "Take a brandy-and-soda and go to bed. I'm sure you're not quite yourself." I was struck by the chance significance of her phrase--"Not quite yourself." No; ever since I had left the house that morning I had not been quite myself. I had had a momentary glimpse--had for an instant caught the glint of an angel's wing--but it was gone. I was almost myself--my old self; yet not quite. "I didn't mean to be unkind," I muttered. "Don't worry about me. I've merely had a vision of what might have been, and it's disgusted me. Go on down to the bridge fiends. I'll be along shortly--if you'll excuse my clothes." "Poor boy!" she sighed. "You're tired out! No; don't come down--in those clothes!" * * * * * I laughed a hollow laugh when she had gone. Really there was something humorous about it all. What was the use even of trying? I did not seem even to belong in my own house unless my clothes matched the wall paper! I lit cigarette after cigarette, staring blankly at my silk pajamas laid out on the bed. I could not change things! It was too late. I had brought up my son and daughters to live in a certain kind of way, had taught them that luxuries were necessities, had neglected them--had ruined them perhaps; but I had no moral right now to annihilate that life--and their mother's--without their consent. They might be poor things; but, after all, they were my own. They were free, white and twenty-one. And I knew they would simply think me mad! I had a fixed place in a complicated system, with responsibilities and duties I was morally bound to recognize. I could not chuck the whole business without doing a great deal of harm. My life was not so simple as all that. Any change--if it could be accomplished at all--would have to be a gradual one and be brought about largely by persuasion. Could it be accomplished? It now seemed insuperably difficult. I was bound to the wheel--and the habits of a lifetime, the moral pressure of my wife and children, the example of society, and the force of superficial public opinion and expectation were spinning it round and round in the direction of least resistance. As well attempt to alter my course as to steer a locomotive off the track! I could not ditch the locomotive, for I had a trainload of passengers! And yet-- I groaned and buried my face in my hands. I--successful? Yes, success had been mine; but success was failure--naught else--failure, absolute and unmitigated! I had lost my wife and family, and my home had become the resort of a crew of empty-headed coxcombs. I wondered whether they were gone. I looked at the clock. It was half-past twelve--Sunday morning. I opened my bedroom door and crept downstairs. No; they were not gone--they had merely moved on to supper. My library was in the front of the house, across the hall from the drawing room, and I went in there and sank into an armchair by the fire. The bridge party was making a great to-do and its strident laughter floated up from below. By contrast the quiet library seemed a haven of refuge. Here were the books I might have read--which might have been my friends. Poor fool that I was! I put out my hand and took down the first it encountered--John Bunyan's Pilgrim's Progress. It was a funny old volume--a priceless early edition given me by a grateful client whom I had extricated from some embarrassment. I had never read it, but I knew its general trend. It was about some imaginary miserable who, like myself, wanted to do things differently. I took a cigar out of my pocket, lit it and, opening the book haphazard, glanced over the pages in a desultory fashion. "_That is that which I seek for, even to be rid of this heavy Burden; but get it off myself, I cannot; nor is there any man in our country that can take it off my shoulders_--" So the Pilgrim had a burden too! I turned back to the beginning and read how Christian, the hero, had been made aware of his perilous condition. "_In this plight therefore he went home, and refrained himself as long as he could, that his Wife and Children should not perceive his distress, but he could not be silent long, because that his trouble increased: Wherefore at length he brake his mind to his Wife and Children; and thus he began to talk to them: 'Oh, my dear Wife,' said he, 'and you the Children of my bowels, I, your dear Friend, am in myself undone by reason of a Burden that lieth hard upon me.' ... At this his_ _Relations were sore amazed; not for that they believed that what he had said to them was true, but because they thought that some frenzy distemper had got into his head; therefore, it drawing toward night, and they hoping that sleep might settle his brains, with all haste they got him to bed: But the night was as troublesome to him as the day; wherefore, instead of sleeping, he spent it in sighs and tears_." Surely this Pilgrim was strangely like myself! And, though sorely beset, he had struggled on his way. "_Hast thou a Wife and Children_? "_Yes, but I am so laden with this Burden that I cannot take that pleasure in them as formerly; methinks I am as if I had none_." Tears filled my eyes and I laid down the book. The bridge party was going home. I could hear them shouting good-bys in the front hall and my wife's shrill voice answering Good night! From outside came the toot of horns and the whir of the motors as they drew up at the curb. One by one the doors slammed, the glass rattled and they thundered off. The noise got on my nerves and, taking my book, I crossed to the deserted drawing room, the scene of the night's social carnage. The sight was enough to sicken any man! Eight tables covered with half-filled glasses; cards everywhere--the floor littered with them; chairs pushed helter-skelter and one overturned; and from a dozen ash-receivers the slowly ascending columns of incense to the great God of Chance. On the middle table lay a score card and pencil, a roll of bills, a pile of silver, and my wife's vanity box, with its chain of pearls and diamonds. Fiercely I resolved again to end it all--at any cost. I threw open one of the windows, sat myself down by a lamp in a corner, and found the place where I had been reading. Christian had just encountered Charity. In the midst of their discussion I heard my wife's footsteps in the hall; the portières rustled and she entered. "Well!" she exclaimed. "I thought you had gone to bed long ago. I had good luck to-night. I won eight hundred dollars! How are you feeling?" "Anna," I answered, "sit down a minute. I want to read you something." "Go ahead!" she said, lighting a cigarette, and throwing herself into one of the vacant chairs. "_Then said Charity to Christian: Have you a family? Are you a married man_?" "CHRISTIAN: _I have a Wife and_ ... _Children_." "CHARITY: _And why did you not bring them along with you_?" "_Then Christian wept and said: Oh, how willingly would I have done it, but they were all of them utterly averse to my going on Pilgrimage_." "CHARITY: _But you should have talked to them, and_ _have endeavored to have shown them the danger of being behind_. "CHRISTIAN: _So I did, and told them also what God had shewed to me of the destruction of our City; but I seemed to them as one that mocked, and they believed me not_. "CHARITY: _And did you pray to God that He would bless your counsel to them_? "CHRISTIAN: _Yes, and that with much affection; for you must think that my Wife and poor Children were very dear unto me_. "CHARITY: _But did you tell them of your own sorrow and fear of destruction?--for I suppose that destruction was visible enough to you_. "CHRISTIAN: _Yes, over and over, and over. They might also see my fears in my countenance, in my tears, and also in my trembling under the apprehension of the Judgment that did hang over our heads; but all was not sufficient to prevail with them to come with me_. "CHARITY: _But what could they say for themselves, why they come not_? "CHRISTIAN: _Why, my Wife was afraid of losing this World, and my Children were given to the foolish Delights of youth; so, what by one thing and what by another, they left me to wander in this manner alone_." An unusual sound made me look up. My wife was weeping, her head on her arms among the money and débris of the card-table. "I--I didn't know," she said in a choked, half-stifled voice, "that you really meant what you said upstairs." "I mean it as I never have meant anything since I told you that I loved you, dear," I answered gently. She raised her face, wet with tears. "That was such a long time ago!" she sobbed. "And I thought that all this was what you wanted." She glanced round the room. "I did--once," I replied; "but I don't want it any longer. We can't live our lives over again; but"--and I went over to her--"we can try to do a little better from now on." She laid her head on my arm and took my hand in hers. "What shall we do?" she asked. "We must free ourselves from our Burden," said I; "break down the wall of money that shuts us in from other people, and try to pay our way in the world by what we are and do rather than by what we have. It may be hard at first; but it's worth while--for all of us." She disengaged one hand and wiped her eyes. "I'll help all I can," she whispered. "That's what I want!" cried I, and my heart leaped. Again I saw the glint of the angel's wing! 
20435	----	THE WORLD IN CHAINS * * * * * But should we stay to speak, noontide would come, And thwart Silenus find his goats undrawn, And grudge to sing those wise and lovely songs Of Fate, and Chance, and God, and Chaos old, And Love, and the Chained Titan's woeful doom, And how he shall be loosed, and make the earth One brotherhood.... * * * * * THE WORLD IN CHAINS SOME ASPECTS OF WAR AND TRADE BY JOHN MAVROGORDATO M.A. LONDON: MARTIN SECKER NUMBER FIVE JOHN STREET ADELPHI _First Published 1917_ * * * * * IN MEMORIAM AMICORUM _R. F. C. GELDERD SOMERVELL IVAR CAMPBELL: T. R. A. H. NOYES: J. W. BAILEY_ QVI ANTE DIEM PERIERVNT * * * * * Note _There may be some exaggeration in this book. I firmly believe that England and her Allies entered this War with the noblest intentions. If I have done less than justice to these, it is because my chief purpose in this essay has been to express my equally firm belief that all these fine emotions have been and are being exploited by the basest forms of Imperialism and Capitalism._ _J. M._ _January 1st, 1917._ Contents CHAPTER I THE MASSACRE OF COLLEAGUES, 3 THE WIDENING SPHERE OF MORALITY, 4 THE RECEDING GOD, 6 THE PHILOSOPHER LOOKS AT SOCIETY, 8 HOMO HOMINI LUPUS, 8 TRIBE AGAINST TRIBE, 10 THE CITY STATE, 12 THE NATIONS OF EUROPE "FERAE NATURAE," 14 THE CONVENIENCE OF DIPLOMACY, 15 A NOTE ON DEMOCRACY, 18 DIPLOMACY NOT BAD IN ITSELF, 19 MANNERS NO SUBSTITUTE FOR MORALS, 21 WAR A MORAL ANACHRONISM, 21 CHAPTER II THE ARMAMENT RING, 27 EUGENICS? 29 PATRIOTISM, 31 THE MORAL TEST, 36 TRADE, 39 TRADE IN TIME OF PEACE, 42 DUTIES OF COMMERCE TO THE STATE, 44 RESTRICTED SPHERE OF GOVERNMENT CORRESPONDING TO RESTRICTED SPHERE OF MORALITY, 51 CHAPTER III TRADE DURING THE WAR, 57 TRADE LIVES ON INCREASING DEMAND, 65 WAR A FORM OF DESTRUCTION, 66 WAR STANDS TO BENEFIT NEUTRAL AS WELL AS BELLIGERENT NATIONS BUT NOT TO THE SAME EXTENT, 69 THE GREATER THE CAPITAL, THE GREATER THE WAR PROFIT, 71 THE BLESSINGS OF INVASION, 72 THE LUXURY TRADES DON'T DO SO BADLY, 74 TRADE PROFITS IN WAR NOT SHARED BY THE NATION BUT CONFINED TO EMPLOYERS, 77 TRADE PROFIT AND NATIONAL LOSS, 82 APPENDIX: SOME TYPICAL WAR PROFITS, 125 CHAPTER IV DIALECTICS ROUND THE DEATH-BED, 89 GERMAN RESPONSIBILITY FOR THE WAR, 90 THE VALUE OF GERMAN CULTURE, 95 THE MANUFACTURE OF HATRED, 102 IMPERIALISM THE ENEMY, 107 POSSIBLE OBJECTS OF WAR, 112 PHYSICAL FORCE IN A MORAL WORLD, 118 IMPERIALISM AND CAPITALISM THROUGH WAR AND TRADE THE ENEMIES: SOCIALISM TO THE RESCUE, 122 * * * * * CHAPTER I [Greek: môros de thnêtôn ostis ekporthôn poleis naous de tumbous th, iera tôn kekmêktôn, erêmiadous autos ôleth usteron.] Euripides: Tro. 95. §1 The Massacre of Colleagues The existence of war in the modern world is primarily a question for the moral philosopher. It may be of interest to the anthropologist to consider war as a gallant survival with an impressive ritual and a code of honour curiously detached from the social environment, like the Hindu suttee; or with a procedure euphemistically disguised, like some chthonic liturgy of ancient Athens. But it is a problem too broad for the anthropologist when we consider that we have reached a stage of civilisation which regards murder as the most detestable of crimes and deprives the murderer of all civil rights and often even of the natural right to live: while in the same community the organised massacre of our colleagues in civilisation is not only tolerated but assumed to be necessary by the principal expositors of law and religion, is the scientific occupation of the most honoured profession in the State, and constitutes the real sanction of all international intercourse. §2 The Widening Sphere of Morality The existence of war stimulates the astonished watcher in the tower of ivory to examine the development, if any, of human morality; and to formulate some law of the process whereby political man has been differentiated from the savage. Morality being a relation between two or more contracting parties, he will notice that the history of mankind is marked by a consistent tendency to extend this relation, to include in the system of relationships more numerous and more distant objects, so that the moral agent is surrounded by a continually widening sphere of obligations. This system of relationship, which may be called the moral sphere, has grown up under a variety of influences, expediency, custom, religious emotion and political action; but the moral agents included in it at any given time are always bound to each other by a theoretical contract involving both rights and duties, and leading each to expect and to apply in all his dealings with the others a certain standard of conduct which is approximately fixed by the enlightened opinion of the majority for the benefit of the totality. The moral sphere then is a contractual unit of two or more persons who agree to moderate their individual conduct for their common good: and the State itself is only a stage in the growth of this moral unit from its emergence out of primitive savagery to its superannuation in ultimate anarchy, commonly called the Millennium. The State indeed is a moral sphere, a moral unit, which has long been outgrown by enlightened opinion; and the trouble is that we are now in a transition stage in which the boundaries of the State survive as a limitation instead of setting an ideal of moral conduct.[1] FOOTNOTES: [Footnote 1: This conception of the gradually extending and still to be extended sphere of morality, or from another aspect of law, was implied, I think, by Lord Haldane in his Address on Higher Nationality. (_The Conduct of Life, and Other Addresses_, p. 99.) In this address Lord Haldane distinguished in the State three sanctions of conduct. 1. Law. 2. The Moral Sanction, Kant's Categorical Imperative "that rules the private and individual conscience, but that alone." 3. The force of social habit or _sittlichkeit_, "less than legal and more than merely moral, and sufficient in the vast majority of the events of daily life, to secure observance of general standards of conduct without any question of resort to force." The Lord Chancellor adds, "If this is so within a nation, can it be so as between nations?" But although Lord Haldane distinguishes three sanctions of conduct, the resultant line of conduct is one. And it seems to me unimportant to analyse the sanctions if we can only estimate the sum of their obligations. It is this totality of obligations, the whole systematisation of conduct in human life, that in my adumbrated analysis I call the moral sphere. Curiously enough Lord Haldane was hounded from the Government on the paradoxical ground that he knew too much about the enemy against whom we are fighting. It is certainly true that he has a better understanding than any other statesman of the Prussian perversion of aristocracy and of the true function of science in the State. But it is too much to hope that philosophers should remain Ministers of a State in which journalists are become dictators.] §3 The Receding God I don't know that it is necessary to drag God into the argument. But if you like to regard God as the sanction and source of morality, or if you like to call the moral drift in human affairs God, it is possible to consider this "Sphere of Morality" from His point of view. His "point of view" is precisely what, in an instructive fable, we may present as the determining factor in morality. When He walked in the garden or lurked hardly distinguishable among the sticks and stones of the forest, morality was just an understanding between a man and his neighbour, a temporary agreement entered on by any two hunting savages whom He might happen to espy between the tree-trunks. When He dwelt among the peaks of Sinai or Olympus, the sphere of morality had extended to the whole tribe that occupied the subjacent valley. It came to include the nation, all the subjects of each sovereign state, by the time He had receded to some heavenly throne above the dark blue sky. And it is to be hoped that He may yet take a broader view, so that His survey will embrace the whole of mankind, if only we can banish Him to a remoter altitude in the frozen depths of space, whence He can contemplate human affairs without being near enough to interfere. The moral of this little myth of the Receding God may be that the Sphere of Morality is extended in inverse proportion to the intensity of theological interference. Not that theology necessarily or always deliberately limits the domain of morality: but because the extension of moral relations and the relegation of anthropomorphic theology are co-ordinate steps in human advancement. § 4 The Philosopher looks at Society The philosopher is apt to explain the growth and interrelation of ideas by tabulating them in an historical form, which may not be narrowly, chronologically, or "historically" true. The notion of the Social Contract may be philosophically true, though we are not to imagine the citizens of Rousseau's State coming together on a certain day to vote by show of hands, like the members of the Bognor Urban District Council. So we may illustrate a theory of moral or social evolution by a sort of historical pageant, which will not be journalistically exact, but will give a true picture of an ideal development, every scene of which can be paralleled by some actually known or inferred form of human life. § 5 Homo Homini Lupus Our imagination, working subconsciously on a number of laboriously accumulated hints, a roomful of chipped or polished stones, the sifted debris of Swiss palafittes, a few pithecoid jawbones, some painted rocks from Salamanca, produces a fairly definite picture of the earliest essentially human being on earth: and we recognise a man not unlike one of ourselves; with a similar industry interrupted from time to time by the arbitrary stirrings of a similar artistic impulse; so close to us indeed that some of his habits still survive among us. Some of us at least have made a recreation of his necessity, and still go hunting wild or hypothetically wild animals for food. But when this primeval hunter emerged from his lair in the forest or his valley-cave, he was prepared to attack at sight any man he happened to meet: and he thought himself a fine fellow if he succeeded in cracking the skull of a possible rival in love or venery. This was the age of preventive aggression with a vengeance. We still feel a certain satisfaction in a prompt and crushing blow, and in the simplicity of violence. But we no longer attack our neighbour in the street, as dogs fight over a bone or over nothing at all: though some of us reserve the right to snarl. § 6 Tribe against Tribe But this fighter's paradise was too exciting to last long; and indeed it is hard to visualise steadily the feral solitary man who lived without any social organisation at all.[2] Consideration like an angel came and did not indeed drive the offending devil out of him but taught him to guide it into more profitable channels, by co-operating with his neighbour. When a man first made peace with the hunter in the next cave in order to go out with him against the bear at the head of the valley, or even to have his assistance in carrying off a couple of women from the family down by the lake, on that day the social and moral unit was constituted, the sphere of morality, destined, who knows how soon, to include the whole of mankind in one beneficent alliance, began with what Professor McDougal has called "the replacement of individual by collective pugnacity." The first clear stage in this progress is the tribe or clan, the smallest organised community, sometimes no larger than the self-contained village or camp, which can still be found in the wild parts of the earth. Tribe against tribe is the formula of this order of civilisation. Within the limits of the community man inhibits his natural impulses and settles his personal disputes according to the rules laid down by the headman or chief. But once outside the stockade he can kill and plunder at will, though owing to the similarly strong organisation of the next village he will usually reserve his predatory exploits for the official and collective raids of village against village and tribe against tribe. Of course the family is a step leading up to the tribal stage of morality, and it may be that the idea of incest marks the social stage in which the moral sphere was conterminous with the family, corresponding to the institution of exogamy in the moral system of the tribe. It may be added that even in the modern family the feeling which unites the members often consists less, very much less, of affection than of a sort of obligation to hang together for mutual defence. FOOTNOTES: [Footnote 2: Cf. Plato's myth of Protagoras (_Prot_. 322 B ff.).] § 7 The City State The City State, self-contained, self-supporting, truly democratic, is marked by a similar pugnacity. Only full citizenship conferred full moral rights, and any ferocity could be justified in war against another city. Athens wore herself out in the long struggle with Sparta, and Greece was lured to destruction by the devil of Imperialism, whose stock argument is to suggest that a State can extend its rights without extending its obligations. But the limitation of the moral sphere by the boundaries of the city is less apparent in the Greek States, because in the historical period at least they were already in transition to a larger view, and enlightened opinion certainly believed in a moral system which should include all Greek States, to the exclusion of course of all "barbarians": but this larger view was even more definitely limited, and the demarcation of those within from those outside the moral sphere was never more sharply conceived, than in the difference commonly held to exist between Greeks and Barbarians. Yet even so Greece can maintain her pre-eminence in thought; for Plato and Euripides at least glimpsed the conception, by which we do not yet consent to be guided, of the moral equality of all mankind.[3] For all these reasons the City State as a limited moral sphere is better seen perhaps in Mediæval Italy, where, I imagine, a Florentine might kill a native of Pisa whenever he liked; whereas if he killed a fellow Florentine he risked at least the necessity of putting himself outside the moral sphere, of having that is to leave Florence and stay in Pisa till the incident was forgotten.[4] FOOTNOTES: [Footnote 3: Even Aristotle probably had some suspicion of it; so in his anxiety to justify the institution of slavery he had to make out that slaves were not men at all but only machines.] [Footnote 4: Duelling might be classified theoretically as a survival of the wolfish condition sketched in § 5. But the persistent institution of single combat should not be regarded as in itself a survival, but rather as an outlet for the surviving instinct, a concession justified by political or social considerations that vary from age to age. Even Plato in his _Republic_ (465 A) agreed that the citizen might in certain circumstances take the law into his own hands, probably regarding such action as a sort of equity, what Aristotle calls [Greek: epanorthôma nomou êlleipei dia ton katholou], a rectification of certain special cases not covered by law. In modern states again, e.g. in Austria and Germany, duelling is not so much a survival as a corollary of militarism, which involves a fetichistic veneration of the military uniform or of military "honour."] § 8 The Nations of Europe _ferae naturae_ In the next and latest stage in the expansion of the moral system we find it again conterminous with the frontiers of the State. But it is now no longer the small city state of Ancient Greece and Mediæval Italy, but the large political unit, roughly and hypothetically national,[5] which constitutes the modern State, whether Kingdom, Republic, or Empire. I have called this the latest stage in the extension of the sphere of morality because it is the one which actually prevails and limits our national conduct. For the paradox of legal murder and massacre in the modern world is resolved as soon as we realise that war is a conflict between two or more isolated moral systems, each of which only regards violence as a crime to be suppressed within the limits of its own validity. International warfare in its crudest form is only a manifestation of the original wolfish state of man, the "state of nature" which exists between two moral agents who have no moral obligation to each other (but only to themselves). The fact that the primitive savage was an individual moral agent having no moral obligation to anyone but himself, while the modern fighting nation is a moral agent of who knows how many millions, does not alter the essential character of the conflict. FOOTNOTES: [Footnote 5: See below, Chapter IV, § 4. _Nationalism True and False_.] § 9 The Convenience of Diplomacy As a matter of fact this original wolfish attitude of nations is already obsolete, if it ever existed. The expansion and growth of political and moral relations is a gradual process, and the fact that for the sake of brevity and clearness we fix and describe certain arbitrary points in that process must not be taken to imply that it is discontinuous. Anyhow there is no doubt that the specifically wolfish attitude of one nation to another can hardly be found in its pure state, being already tempered and mitigated by the practice and custom of diplomacy: and this diplomatic mitigation, however superficial, does something to break down that windowless isolation which is the essential cause of violence between two independent moral entities. Pacificists of the democratic school sometimes present a fallacious view of international diplomacy, and almost imply that the present war was made inevitable by the fact that Viscount Grey was educated at Harrow, or that peace could have been preserved with Germany if only Sir Edward Goschen had begun life as a coal heaver, or had at least been elected by the National Union of Boilermakers. Their panacea they vaguely call the democratic control of Foreign Affairs, though it is not clear why we should expect twenty million still ignorant voters to be more enlightened than one educated representative who is, as a matter of fact, usually so much oppressed by a due sense of his responsibility that he is in danger of bungling only from excessive timidity. The experience of the Law Courts shows that twelve men, be they never so good and true, cannot _at present_ be trusted to weigh and discriminate as nicely as one[6]; and the fact that the _Daily Mail_ has the largest circulation of any morning paper is a sufficient mark of the present capacity and inclination of the majority to control public affairs more directly than they do. It is said that the secrecy of diplomatic affairs breeds an atmosphere of suspicion; and it might be said with equal truth that all secrecy of every kind is always and everywhere the most unnecessary thing in the world.[7] But the fundamental fallacy of all these arguments is that they treat diplomacy as an essential of international relations, whereas it is only an accident, a trapping, a convenience, or a common form. Its defects are the result and the reflection of national opinion. Diplomatists are no more responsible for the defects of international relationship than seconds are responsible for the practice of duelling: and we may note incidentally that duels are if anything more frequent when the place of the seconds in estimating their necessity is taken by a democratic court of honour. FOOTNOTES: [Footnote 6: The duties of a jury are, of course, very carefully limited by law. But even in this reduced sphere they are remarkable chiefly for their incompetence, prejudice, inattention, and stupidity. See particularly André Gide's _Souvenirs de la Cour d'Assises_, all the implied criticisms in which apply, _mutatis quibusdam mutandis_, with equal force to English and indeed to all juries.] [Footnote 7: It is possible to argue, though of course impossible to prove, that if every diplomatic document of recent years had been immediately made public, the relations between the Powers would have remained very much what they are with "secret diplomacy"; that "public diplomacy" would if anything have intensified the existing jealousy and distrust. As a matter of fact anyone who takes the trouble can approximately discover the diplomatic situation existing at a particular moment between any two Powers, even if he cannot know the verbal text of a particular treaty. And if the supporters of "public diplomacy" reasonably point out that "publicity" is desired only as a means to ensure the democratic control of Foreign policy, the answer is that the only way to ensure the democratic control of diplomats or any other public servants is to educate the people.] § 10 A Note on Democracy The outcry for "democratic" control demands, I think, a note, if not a volume,[8] on the limitations of democracy. We are all, I suppose, agreed nowadays that the government of the future must be democratic, in the sense that every adult has a _right_ to full citizenship, and every citizen can claim a vote. But it is obviously impossible for a modern State to be governed directly by the voices of say fifty or a hundred million citizens: there must always be a small legislative and a still smaller executive body; and these bodies should obviously be composed of the finest and most capable citizens. If then Aristocracy means, as it does mean, a government of the whole by the best elements, it follows that we are all equally agreed that the government of the future must be aristocratic. The solution of this antinomy is of course that democracy is not an end in itself, but only a means for the selection and sanction of aristocracy.[9] The best elements in the population can only come to the top if every man has an opportunity of using his voice and his intelligence. We may note in passing that a common objection, raised by writers like Emile Faguet, to the effect that democracy puts a premium on incompetence by choosing its officials almost fortuitously from the mob, is the exact opposite of the truth. It is our present regime that leaves the selection of our rulers to the chances of birth or wealth or forensic success. Real democracy will stimulate the selection of the best, just as trade union standardisation of wages encourages the employment of the better workmen.[10] FOOTNOTES: [Footnote 8: Such a volume or something very much like it has actually made its appearance, since these lines were written, in Professor Robert Michels' _Political Parties_ (Jarrold, 1916).] [Footnote 9: Cf. Bernard Shaw, in Pease, _History of the Fabian Society_, p. 268: "Sooner or later, unless democracy is to be discarded in a reaction of disgust such as killed it in ancient Athens, democracy itself will demand that only such men should be presented to its choice as have proved themselves qualified for more serious and disinterested work than 'stoking up' election meetings to momentary and foolish excitement. Without qualified rulers a Socialist State is impossible."] § 11 Diplomacy not bad in itself The real importance of diplomacy, as I have said, is in the fact that it is a mitigation of primary ferocity, a symptom of readiness to negotiate, a recognition of the fact that disputes need not be settled by immediate violence: and as such it points to a time when war may be superseded, as personal combat has been superseded by litigation. The man who puts a quarrel with his neighbour into the hands of a legal representative is a stage higher in social civilisation than the man who fights it out at sight. Diplomats are the legal representatives of nations--only there is no supernational court before which they can state their case. Of course, it is perfectly true that the ultimate sanction of diplomacy is always force, that international negotiations may always be resolved into a series of polite threats, and that the envoy of the small and weak nation rarely has any influence. Indeed there are few less enviable situations than that of the minister of a very small State at the court of a very large one. But the mere fact that force is their sanction does not _ipso facto_ dispose of diplomatic and arbitrational methods. We all know that the force at the disposal of the Sovereign is the ultimate sanction of Law. But that force never has to be fully exerted because there is a common consent to respect the Law and its officers. FOOTNOTES: [Footnote 10: Cf. Webb, _Industrial Democracy_, p. 718.] § 12 Manners no Substitute for Morals The real difference between legal methods and the methods of diplomacy (in which I here include international conversations of every sort) is that the latter take place, as it were, in a vacuum. There is no Sovereign, no common denominator, no unifying system in which both parties are related by their common obligations. They exist and act in two separate moral spheres, and no real intercourse is possible between them. For all their ambassadors and diplomatic conferences the nations of Europe are only wolves with good manners. And manners, as we all know, are no substitute for morals. § 13 War a Moral Anachronism Thus we come back to our thesis that war is not only possible but inevitable so long as the extent of the moral sphere is conterminous with the frontiers of the State. But merely to explain laboriously that all this organised killing is not really a paradox but the natural accompaniment of a certain stage of moral development, and to leave it at that, would be rather to exaggerate our philosophic detachment. The point is that we are long past the stage of regarding any but our fellow-subjects as moral outlaws. For some years, to say the least, it has been generally received that the sphere of morality is co-extensive with mankind. In spite of certain lingering exceptions, it is to-day a commonplace of thought that every human being on the earth is our colleague in civilisation; is a member that is of the human race, which finding itself on this earth has got somehow to make the best of it; is a shareholder in the human asset of self-consciousness which we are called upon to exploit. It would certainly be hard to find a man of what we have called enlightened opinions who would not profess, whatever his private feelings, that it is as great a crime to kill a Hottentot or a Jew as to kill an Englishman. With certain lingering exceptions then we already regard the foreigner as a member of our own moral system. The moral sphere has already extended or is at least in course of extension to its ultimate limits: and war is a survival from the penultimate stage of morality. War, to put it mildly, is a moral anachronism. War between European nations is civil war. Logically all war should be recognised at once, at any rate by enlightened opinion, as the crime, the disaster, the ultimate disgrace that it obviously is. Why then do we cling to the implications of a system that we have grown out of? Why do we affect the limitation of boundaries that have been already extended? Or is our prison so lovely that though the walls fall down we refuse to walk out into the air? CHAPTER II A sociologist wrote to the Vali of Aleppo, asking: What are the imports of Aleppo? What is the nature of the water-supply? What is the birth-rate, and the death-rate? The Vali replied: It is impossible for anyone to number the camels that kneel in the markets of Aleppo. The water is sufficient; no one ever dies of thirst in Aleppo. How many children shall be born in this great city is known only to Allah the compassionate, the merciful. And who would venture to inquire the tale of the dead? For it is revealed only to the Angels of death who shall be taken and who shall be left. O idle Frank, cease from your presumptuous questioning, and know that these things are not revealed to the children of men. The _Bustan of Mahmud Aga el-Arnauty_. § 1 The Armament Ring What, in short, are the forces that make for the anachronistic survival of war--apart of course from the defect that it is always with us, the habit of inertia, sometimes called Conservatism? The obvious answer is not, I think, the correct one. At least it is correct as far as it goes, but leaves us very far from a complete explanation of this unpleasant survival. So scandalous is the interrelation of the armament firms[11] which has developed the world's trade in munitions and explosives into one obscene cartel; so cynical is the avidity with which their agents exchange their trade secrets, sell ships and guns, often by means of diplomatic blackmail, to friend or foe alike, and follow those pioneers of civilisation the missionary, the gin merchant and the procurer,[12] into the wildest part of the earth; so absurd on the face of it is the practice of allowing the manufacture of armaments to remain in the hands of private companies; that it is very tempting to see in the great Armament Firms the principal if not the only cause of modern war. Examiners of German militarism, most of them stupid enough to quote Nietzsche, may be pardoned for emphasising the political influence of Krupp; and since every great Power has a more or less efficiently organised Krupp of its own, it would be permissible to suggest that war would be already obsolete but for the intensive cultivation it receives for the benefit of Krupp, Creusot, Elswick and the rest. But it would be wrong; our syllogism would have a badly undistributed middle. It is true that Krupp in particular, who is the actual owner of more than one popular German newspaper, and other armament firms in a smaller degree, exercise an enormous influence on national opinion, create their own markets by the threat of war, and would go bankrupt if wars should cease. You may also say that their shareholders live by prostituting the patriotism of their fellow-citizens: in short, you may denounce them with the most expensive rhetoric to be had without doing them any injustice. But the fact remains that their position with regard to war is exactly analogous to that of the great breweries with regard to drunkenness. They live by taking advantage of human weakness. It is quite accurate, therefore, to describe their earnings as immoral, but they are no more the cause of the immorality they exploit and undoubtedly encourage, than makers of seismological instruments are responsible for the occurrence of earthquakes. The interests of one trade alone, however powerful in itself, would never be strong enough to plunge a nation into war. They are, of course, accessories to the crime; but the militarism they are guilty of fostering has other primary explanations. FOOTNOTES: [Footnote 11: Several books have been published giving details of the Armament Ring and international "Kruppism." I don't think that the language here used does any injustice to the facts.] [Footnote 12: See below, § 7.] § 2 Eugenics? In this brief investigation of the possible causes of war, it must be understood that what we want to find is what is called a "sufficient reason" for its continued existence. The armament trades may supply the means, the occasion, the stimulant, but their relation to it is not essentially causal. Many writers of another school have attempted to prove that the sufficient reason of war is a beneficent function of which they believe it to be capable. This imaginary function is none other than that of improving the race, and we may admit at once that, if there were the slightest scientific basis for such a belief, the bloodiest war would be morally justified, and it would be the religious duty of every individual to kill as many as possible of his fellows for the benefit of their descendants. But of course modern warfare so far from improving the race must sensibly exhaust it. In ancient Sparta, and generally whenever the conditions of warfare approximated to those of personal combat, courage and the allied characteristics of mental as well as of physical nobility must have had a survival value; whereas in modern warfare which makes for the indiscriminate extermination of all combatants, the result is exactly reversed. Our semi-scientific militarists forget that the "survival of the fittest"[13] is in nature essentially a process of selective elimination; and modern war is a process of inverted selection which eliminates the brave, the adventurous and the healthy; precisely those members of the community who are best fitted to survive, that is to propagate their kind, in the ordinary environment of political life. Conscription, indeed, spreading a wider net than the voluntary system, may be described as an institution for exposing the best citizens of a state to abnormal risks of annihilation. As a matter of historic fact we are told, though I don't know on what authority, that the Napoleonic wars, how much less deadly than our own, reduced by an inch the average height of the French nation. So much, in brief, for the "scientific" justification of war. It is evident that by the eugenic argument war could be defended only if we agreed to send into battle precisely those men whom our recruiting officers disqualify. A good deal might be said, from the sociologist's point of view, in favour of a system of cathartic conscription which would rejuvenate England with a watchword of "The Unfit to the Trenches." FOOTNOTES: [Footnote 13: They usually add to their mental confusion the elementary blunder of using the word "fittest" in a moral instead of in its biological sense.] § 3 Patriotism If again there were any evidence to show that war and war alone kept alive the spirit of true patriotism, it would be less easy to denounce its manifold wickedness. For true patriotism, although like all passionate emotion it involves a certain mental distortion, a slight disturbance of the rational orbit, is yet one of those happy diseases which relieve the colourlessness of strict normality. It is a magic, a glamour, of the nature of personal affection, which only great poetry can fully express, and volumes of bad poetry cannot quite destroy. It has besides a real political value, binding the State together, and giving it a stronger moral coherence than can be attained by any legal or constitutional authority; a fact that is illustrated by those distressful countries in which its limits are not conterminous with the political boundaries of the State. I am inclined to think that just because true patriotism is of the nature of a personal affection, it is an emotion that cannot be inspired by an empire, any more than personal affection can be inspired by a corporation or a joint-stock company.[14] Certainly Imperialism more often gives rise to a sentimental worship of force and a certain promiscuous lust for mere extension of territory which are quite alien to the steady devotion of the patriot to the land he knows.[15] Unless one be a poet, it is difficult, as may perhaps be gathered from the preceding paragraph, sufficiently to praise genuine patriotism without falling into vague rhetoric. But I submit that there is nothing to show that this political emotion is created, stimulated, or even discovered by war. Actually it seems that the reverse is the case, if one may judge by the fact that war is invariably accompanied by an overwhelming outbreak of every spurious form of patriotism that was ever invented by the devil to make an honest man ashamed of his country. True patriotism is a calm and lovely orientation of the spirit towards the vital beauty of England. It has no noisy manifestations and consequently one may not be able to find it among the crowds who shout most loudly for war. One finds instead a sort of violent fever and calenture which not merely deflects, as any emotion may, but totally inhibits the rational operations of the mind. The newspapers supply a legion of witnesses. Thus the _Evening Standard_ perorates against some pacificist lecturer (who had attempted to clear his views from all sorts of misrepresentations) with the magnificent comment that he had not "repudiated his remarks as to the pleasure which the tune of the Austrian National Anthem gave him."[16] But I should weary you were I to transcribe a tithe of the stupid remarks made by persons in authority under the influence of war. The record, I believe, in England is held at present by Mr. Bodkin, K.C. It may be said of course that men, and newspapers, are equally stupid in time of peace; and I fear that fundamentally this is true. War does not change their nature, but only brings to the bubbling surface the dregs and vileness and scum. War does not change any one's nature; and that is why it is vain to expect that under its influence those crowds will love their country who never loved anything before. But if war cannot create it may at least be supposed to discover and test the existent patriotism of the nation. And this supposition is corroborated at first sight by the realisation that hundreds of thousands, that actually millions of previously ordinary young men have implied by enlisting their willingness to die for England. One might, of course, reason that no individual recruit really believes he is going to be killed, that each boy thinks he will be one of the lucky ones who escape all the bullets unhurt to enjoy an honoured return, that recruiting would have failed entirely if the barracks were explicitly a grave and enlistment the certainty of violent death or mutilation. But somehow I don't think that would be a fair argument. It is more pertinent if less easy to remember that a readiness to die for one's country is not the highest form of political virtue. If it be, as it is, a solemn and wonderful thing to be willing to die for the salvation (_ex hypothesi_) of England, it must be much more wonderful and solemn to be willing to die in order slightly to increase the income of one's family. And every schoolboy knows that the Chinaman of the old regime was willing to have his head cut off for the payment of a few dollars to his next of kin. Let no one ever deny our soldiers the honour of their courage and nobility; but the fact remains that the readiness to die for England is a less adequate test of patriotism than a readiness to live for England; and if the readiness to live for the State rather than for private interests had been for a hundred years a social virtue whose votaries could be numbered by the million, then indeed England would be to-day a nation worth dying for. FOOTNOTES: [Footnote 14: If anyone were to suggest that this is disproved by the unparalleled nobility of Australians, New Zealanders, Canadians and Indians in the present campaign, I should reply that they are actuated by devotion not to the Empire but to England, not to the Company but to the Chairman of the Company. This may be a quibble, but I think the distinction is real. Anyhow, I leave it at that, as the point has no primary relevance.] [Footnote 15: See below, Chapter IV, § 5.] [Footnote 16: The paragraph is worth preserving in its entirety: "Mr. W. N. Ewer, who lectured at Finchley for the Union of Democratic Control, has explained that the report which we published of his speech is unfair, and that he is really in substantial agreement with Mr. Asquith. This is disingenuous, and Mr. Ewer knows it is. He has not repudiated the correctness of the report, which stated that he dilated on the danger of British navalism, and declared that we must give up singing 'Rule Britannia!' nor has he repudiated his remarks as to the pleasure which the tune of the Austrian National Anthem gave him. Does he think that Mr. Asquith would substantially agree with that? Or the country?"--_The Evening Standard_, July 26, 1915.] § 4 The "Moral Test" The theory that war is beneficial as a moral test, a furnace in which character is proved--_ut fulvum spectatur in ignibus aurum_--is that generally adopted by the Christian Churches, who may be said without disrespect to have taken every advantage of their founder's unique reference to the sword. I cannot help thinking that there is something fundamental in this ecclesiastical advocacy of war; that some psychological theory could be outlined to correlate this almost uniform advocacy with the facts that such religious men as Tennyson and Ruskin were among the loudest in their support of the Crimean War, that such a militarist as Rudyard Kipling in his best work (in _Kim_, in _Puck of Pook's Hill_ and the intercalated poems, in the most successful of his short stories) shows himself to be at heart a deeply religious mystic; and that in France the very active Clerical party, one consequence of a disestablished Church, is always closely supported by the Chauvinists. In many cases, however, I have no doubt that the pious Christian, finding himself confronted with war, and not having the moral courage or the political detachment to condemn it, only applies automatically to its justification the arguments which he habitually uses to explain the existence of evil and pain. It is certain at least that the theories of war as a Moral Test or a School of Character bear a strong resemblance to the commonplaces of religious consolation which almost any good Christian will offer to the bereaved and afflicted. Any one who has seen an innocent friend slowly tortured to death by some vile disease will know the futility of the Christian defence (for these religious consolations amount theologically to a defence) that pain ennobles the character and "proves" the moral courage of the sufferer.[17] The leading fallacy of the defence that war, or pain, is valuable as a moral test is akin to the common misunderstanding of the word "prove" in the saying that "the exception proves the rule"; the truth being that a strong and noble character, one of whose corollary qualities is a capacity to bear pain, is not less strong and noble if it is never called upon to exercise that capacity. The San Francisco earthquake was not a blessing in disguise because it happened to "test" and "prove" the strength and flexibility of modern American architecture. FOOTNOTES: [Footnote 17: I cannot help reproducing here a letter which originally appeared in the _Manchester Guardian_ at the time of the Boer War, and is quoted by Mr. Norman Angell in _The Great Illusion_, p. 281. "SIR,--I see that 'The Church's Duty in Regard to War' is to be discussed at the Church Congress. This is right. For a year the heads of our Church have been telling us what war is and does--that it is a school of character; that it sobers men, cleans them, strengthens them, knits their hearts; makes them brave, patient, humble, tender, prone to self-sacrifice. Watered by 'war's red rain,' one Bishop tells us, virtue grows; a cannonade, he points out, is an 'oratorio'--almost a form of worship. True; and to the Church men look for help to save their souls from starving for lack of this good school, this kindly rain, this sacred music. Congresses are apt to lose themselves in wastes of words. This one must not, surely cannot, so straight is the way to the goal. It has simply to draft and submit a new Collect for war in our time, and to call for the reverent but firm emendation, in the spirit of the best modern thought, of those passages in Bible and Prayer Book by which even the truest of Christians and the best of men have at times been blinded to the duty of seeking war and ensuing it. Still, man's moral nature cannot, I admit, live by war alone; nor do I say with some that peace is wholly bad. Even amid the horrors of peace you will find little shoots of character fed by the gentle and timely rains of plague and famine, tempest and fire; simple lessons of patience and courage conned in the schools of typhus, gout, and stone; not oratorios, perhaps, but homely anthems and rude hymns played on knife and probe in the long winter nights. Far from me to 'sin our mercies,' or to call mere twilight dark. Yet dark it may become; for remember that even these poor makeshift schools of character, these second-bests, these halting substitutes for war--remember that the efficiency of every one of them, be it hunger, accident, ignorance, sickness, or pain, is menaced by the intolerable strain of its struggles with secular doctors, plumbers, inventors, schoolmasters, and policemen. Every year thousands who would once have been braced and steeled by manly tussles with small-pox or diphtheria are robbed of that blessing by the great changes made in our drains. Every year thousands of women and children must go their way bereft of the rich spiritual experience of the widow and the orphan."] § 5 Trade I shall never forget the tones of hoarse satisfaction with which a vendor of the _Evening News_ disturbed the twilight of a May evening in London, triumphantly proclaiming a "Great Troop Train Disaster." I had often noticed with what apparent joy the newspapers announced the sinking of a British cruiser; with what entirely neutral delight they welcomed or invented the report of Terrible Slaughter on either side. But somehow that hoarse and rufous man with the loose lip remained in my memory and became for me a type of one element in the population to which war was not unwelcome; the journalistic element that lives by exploiting the sadistic curiosity, the craving for mean excitements, and all the gladiatorial instinct of the modern world.[18] It soon became clear that the newspapers were not alone in the commercial exploitation of war. They were not even the worst offenders. The publishers were hurriedly producing volume after volume of faked memoirs badly written by imaginary governesses. The production of spurious memoirs and "autobiographies," even if they are skilfully composed, is always grossly immoral; and of the specimens occasioned by this war one may say that if they had been genuine it would have been possible to attribute the low morality of some Germanic princes to the literary style of the English governesses who had had a share in their education. The catchpenny manoeuvres of publishers are really only a branch of journalism,[19] and such trivial offences were not, after all, unexpected, because the very profession of journalism is to take advantage. But the journalist is a man of straw who shows which way the wind blows, and his raucous exultation over disaster was the manifest symbol of a commercial exploitation of war by tradesmen and speculators which soon became sensible from one end of belligerent Europe to the other. Like the Vali of Aleppo, I am not good at statistics. It is well known however without the assistance of a mathematician that in England during the winter of 1915, when the cost of living had already risen by nearly 50 per cent, wholesale dealers often kept provisions of all sorts rotting in their stores rather than break the artificial scarcity they had created; farmers would not sell fresh eggs when the price was twopence-halfpenny, because they knew that in a week or two the price for the same eggs would have risen to threepence. Here is a cartoon from a Hungarian paper[20] showing the bloated profiteer of The Sugar Trust laughing at the women who feebly attack his barricade of sugar loaves. I mention it here because it is sufficiently remote from English affairs, and because it happens to come to hand, and because it is a good fragment of evidence, there being no reason why sugar should be scarce in Hungary as an immediate result of the war. And from every country between England and Hungary, from every country in Europe, can be heard the same complaint, unmistakable but how much too feeble, the cry of the people who discover that one of the horrors of war is Trade.[21] FOOTNOTES: [Footnote 18: Cf. the present writer's introduction to Whyte-Melville's _Gladiators_ in _Everyman's Library_, 1911.] [Footnote 19: It was certainly, for example, the Headline Instinct which caused Mr. John Lane, a publisher of some repute, to impose on Mr. Ford Madox Hueffer's novel _The Saddest Story_, one of the most remarkable novels of the century, such an absurdly irrelevant title as _The Good Soldier_. _The Good Soldier_ was published in April, 1915. The evidence that the publisher must have changed the title just before publication is that an instalment of it had appeared serially as _The Saddest Story_ in the summer of 1914, and that as _The Saddest Story_ it actually figured in Mr. John Lane's catalogue at the end of the book.] [Footnote 20: _Matyas Diak_ of Budapest.] § 6 Trade in Time of Peace It would not however be correct to infer that the sacrifice of national welfare to commercial manoeuvres is a condition peculiar to war. Modern commerce is essentially an art; the art of making people pay more than they are worth for things which they do not require. And it is with all the selfishness of the artist that it performs its usual operations. Among all the unpublished detail of modern life hardly any class of facts is more disquieting than that of commercial procedure and achievement. The subject is too large to be reviewed in less than a volume; and I can do no more here than suggest a few instances that might be acquired by anyone who devotes his time to not reading the daily papers. The distribution and exchange of commodities are necessary to the existence of the State; so necessary that it might be supposed that their regulation would be one of the primary functions of government. Proper systems of distribution and exchange correspond to the digestive processes of the body, on which depend the proper nutrition of all the parts and the real prosperity of the State as a whole; yet any comprehensive plan for their control is still regarded as the most unattainable dream of Utopia, and they are left to carry on as best they can in the interstices of private acquisitiveness. National well-being is not to be measured by mere volume of trade, which is the means and not the essence of prosperity;[22] and prosperity can certainly never exist when equitable distribution is hindered by a sort of fatty degeneration of capitalism. But trade in itself is a necessary aliment of the State, and its abuses ought not to be beyond remedy. A few of these abuses are fairly obvious without a full inquiry, and may be illustrated here because their existence in time of peace may throw light on the operations of trade in belligerent states, and indirectly, by suggesting a few of the results of war, may lead us to some of its motives and occasions. Such abuses may be most easily identified in opposition to the national rights which they infringe. FOOTNOTES: [Footnote 21: So in Germany the fixing of maximum prices for pigs and potatoes was immediately followed by an almost complete withdrawal from the market of potatoes and pigs--the German farmers refused to sell except at their own inflated prices. Cf. quotations from the German Press in _The New Statesman_ of January 29, 1916.] [Footnote 22: "Ces choses sont plutôt des moyens que l'on emploie pour travailler à faire prospérer l'Etat qu'ils ne sont l'essence de sa prospérité."--Rousseau, _Political Writings_, I, 345 (C. E. Vaughan's edition).] § 7 Duties of Commerce to the State The State has a primary right to be fairly served. Prices should not be arbitrarily raised by any wholesale merchant who happens to be in a position to do so, or by any cartel of dealers in league for that purpose. Prices should be regulated by the cost of production, and should not be an indication of demand; they should rise beyond the cost of production augmented by a fair profit only when the supply is insufficient (production not being artificially restrained) to meet some abnormal demand, and only as a means of checking and regulating the excessive demand. We find instead that any dealer or group of dealers will raise their prices almost absent-mindedly as soon as they are in a position to meet a demand which cannot be postponed. Thus it is that governments are habitually overcharged in all their contracts and purchases; because governments have neither the time nor the opportunity for casual dealings, and because they do not undertake such transactions at all unless their absolute necessity has already been decided.[23] So at the beginning of the war English warehouses were full of all sorts of commodities required by the governments of the Allies; but the urgency of war prevented any sort of bargaining; and the private merchants took advantage of the situation to the amount of about two hundred per cent. At present however I am dealing with trade in time of peace and I must not flavour the ordinary facts with any consideration of War Office contracts. It is enough to state the fact that in ordinary times the private tradesman regards a special demand as an opportunity for raising prices rather than as the stimulus of supply; a rule which is most easily detected in the experience of Government departments. The State, through its individual citizens, has a primary right to obtain the particular commodity which it happens to prefer, without restrictions imposed for the benefit of any particular tradesman. We find instead that the ordinary purchaser no longer has any effective, or selective, demand. He has to buy what he is given. The informal organisation of the Trust system, primarily a financial operation,[24] has involved the whole market in a network of interdependent industries. The sale of the finished product is controlled and restricted by the vendors of the raw material. Corn is imported by shipbuilders; ships are built by iron merchants; iron furnaces are controlled by coal owners, and coal mines are secured by money-lenders. The system of the tied house, originally an indigenous corruption of the liquor trade, is being extended to every industry in the land. We can no longer buy the bread we like, but have to eat whatever by-product least interferes with the miller's profits. The consumer's loss of any power of effective demand would not necessarily be of national importance, if at least there were any guarantee that the unique commodity offered by the average trust system were genuine and of good quality. One of the State's most elementary rights is that of ensuring to its citizens a pure supply of elementary commodities. Yet Commerce has taken no steps, even in its own interests, to suppress the horrid arts of adulteration, in which the motives of the thief usurp the methods of the poisoner, with results which may be inferred from the meagre chronicles of the analyst.[25] Education is the life of the State.[26] It is therefore of the gravest importance that Commerce should in no circumstances whatever be allowed to interfere with the education of the future citizens. Yet, before the war, in spite of the legislation of the last fifty years,[27] no less than a quarter of a million children of school age were exempted from school attendance for employment in various occupations.[28] Even apart from such improper exemptions the "School Age" fixed by law in itself gives quite insufficient protection. The brain of a girl hardly begins to wake up, or take any natural interest in the acquisition of general ideas, before she comes to puberty. But all over London girls of thirteen or fourteen leave school and are sent by their mothers to earn half a crown a week matching patterns or sewing on sequins. More generally, the State is entitled to demand from Commerce that it should co-operate sincerely with the other elements in the State in pursuing the real objects of civilisation, inspired by an altruistic regard for the whole of which it is a part, that is by what is really "enlightened self-interest"; by what Plato has called Temperance[29] and Mr. H. G. Wells "a sense of the State."[30] We find instead that the trader has "day and night held on indignantly" in his disastrous hunt for markets, destroying by accident or design whatever amenity in the world does not contribute to his "one aim, one business, one desire." After all, in our present pre-occupation with the horrors of war, we must not exaggerate their extent. War at its maddest rivals but cannot, at present, surpass the mortality caused by tuberculosis, alcoholism and syphilis, which peaceful Commerce, hand in hand with Christianity, carries into the remotest parts of the earth. Some reader may have noticed by this time that I am not a collector of statistics, but gather my illustrations as I go from any scrap of paper that comes to hand. It is a lazy trick; but at any rate one escapes the fallacy of over-elaborated evidence, by calling as witness the man who happens to be in the street at the moment. So at this point I happen to notice in the _Manchester Guardian_ an extract from the report of the Resident Commissioner in the Gilbert and Ellice Islands Protectorate. This is what it says of the natives:-- The cotton smock for women and the cotton trousers and shirts for men, which in the mind of the people seem now so indispensable to professed Christianity, while reducing the endurance of the skin, render it the more susceptible to the chills which wet clothing engenders. The result is colds, pneumonia, influenza--eventually tuberculosis. We may notice a not unexpected coincidence which the Resident Commissioner apparently omits to mention. It is that "professed Christianity," by insisting on the propriety of cotton garments for the islanders hitherto well clad in a film of coco-nut oil and a "_riri_ or kilt of finely worked leaves," is conferring a very appreciable benefit on the Manchester trade in "cotton goods." "Our colonial markets have steadily grown," says the Encyclopædia, "and will yearly become of greater value." ... On the same day as the issue of the _Manchester Guardian_ just quoted there appeared in the _Times Literary Supplement_ a review of Canon C. H. Robinson's _History of Christian Missions_, "a very sound introduction to a vast and fascinating study." From this I gather that there are few stories more romantic than the founding of the Uganda Christian Church in British East Africa. At first progress was very slow, and ... in 1890 there were scarcely 200 baptized Christians in the country; yet by 1913 those associated with the Christian Churches were little short of half a million. So before Europe has shown many signs of convalescence, Africa is already virulently infected. And "our markets will yearly become of greater value." FOOTNOTES: [Footnote 23: See, for instance, the Report of the Committee of Public Accounts (commenting on the extravagance of Admiralty and War Contracts), summarised in _The Times_ of August 19, 1916.] [Footnote 24: See Orage, _National Guilds_, p. 170 ff.] [Footnote 25: Unfortunately I can find no authority for the amusing report that the annual export of "wine" from Paris is _greater_ than the annual import.] [Footnote 26: That is, of course, of the modern or democratic state. Democracy and education are interdependent.] [Footnote 27: As a matter of fact, no serious attempt to protect children was made before the Factory and Workshops Act of 1878.] [Footnote 28: Since the war there have been the most determined attempts to destroy all the social legislation so painfully acquired. See G. D. H. Cole, _Labour in War Time_, pp. 254-274.] [Footnote 29: _Republic_; 432 A. [Greek: armouia tiui ê sôphrosunê ômiôtai, k.t.l.]] [Footnote 30: See _The Future in America_, and _New Worlds for Old, passim_.] § 8 Restricted Sphere of Government corresponding to Restricted Sphere of Morality But to return to our sheep, or rather to those who fleece them,--there is one cardinal proof that trade, in so far as it depends on private enterprise, is a danger to the State, and is recognised as such. It is that as soon as war comes, the nation in danger instinctively adopts whatever measure of Socialism can be introduced during the temporary inhibition of capitalistic methods. The actual coming of war induces a brief panic in the marketplace, and during this momentary paralysis of private acquisitors the State makes a desperate attempt to subdue their activities to its own needs. By the mere instinct of self-preservation it clutches at some rudiment of Socialism, and makes a diffident gesture in the direction of nationalisation--(of the railways, for instance). But the capitalists of England can point with pride to the fact that they very soon pulled themselves together. I hope to show in the following chapter that by the time the war was in full swing they had made it their own, and had banished every trace of socialism, with the relics of sanity and truth, to the confines of the Labour press.[31] But still the danger was for the moment realised, and the attempt was made, the desperate and unsuccessful attempt to pull and squeeze and bind the institutions of capitalism into an organised system of political obligations. It failed because the very abuses and intemperances of our commercial system are a sign that the sphere of government has not expanded with the growing complications of the modern community. Nevertheless the attempt was made: but no corresponding effort is being made to extend the system of moral obligations in which we live. For it is just as the sphere of morality is unduly restricted and fails to correspond to the needs of humanity, that, on the political plane, the unduly restricted sphere of government has never been extended to include all the interrelations of industrial citizenship. Capitalism is a survival of the penultimate stage of political development, as war is a survival of the penultimate stage of morality. The attempts both spasmodic and continuous to extend the sphere of government, which now begin to affect nearly all serious legislation, must remain incomplete without an analogous and indeed corollary expansion of the moral system which will involve the obsolescence of war. FOOTNOTES: [Footnote 31: This seems to apply to all belligerent states. Certainly very little sanity finds its way into Germany except through the pages of _Vorwaerts_. It is therefore humiliating to be told that _Vorwaerts_ has a much larger circulation than any socialist paper in England.] CHAPTER III Hinc usura uorax auidumque in tempora fenus et concussa fides et MULTIS UTILE BELLUM. Lucan, I, 181. Individuals are constantly trying to decrease supply for their own advantage.--_Fabian Essays_, 1889, p. 17. § 1 Trade during the War Trade during the war seems to have had a remarkably good time. In the first year of warfare I began to collect a few facts in support of what then seemed the paradoxical view that war was, in essence if not in origin, a very profitable capitalistic manoeuvre; a view deduced from the opinion I had formed _a priori_ of the nature of all modern warfare.[32] Instead of a few corroborating voices I found testimony abundant in every paper I picked up, besides the live evidence received in private letters and conversations. This pamphlet being rather philosophic than statistical, I have taken the easy course of printing a selection of these testimonies, crude and undigested, in an appendix--a cold storage of facts and figures that allows me to repeat with a quiet conscience that trade is booming. The greater the war, apparently, the greater the profits. In the words of the _Manchester Guardian_:-- The first full calendar year of war has been a period of unparalleled industrial activity and, generally speaking, prosperity in this country. Heavy losses and bad times have been encountered in a few important industries, but these are balanced by unprecedented profits made by a large variety of industries, whether directly or indirectly affected by the war.[33] ... But it would be a mistake to suppose that, while war manufactures prospered, all other FOOTNOTES: [Footnote 32: See, for instance, my article "A Footnote to the Balkan War," published in the _Asiatic Review_ for July 1, 1914. This opinion is there expressed in the following words which I still think substantially true, though one or two phrases are rhetorically exaggerated. "England and the rest of Western Europe have outgrown by about three hundred years the time in the development of nations when fighting is natural and even necessary. England, of course, continues to contemplate war, and to be bluffed by the threat of war in the circumlocutions of diplomacy. But her national welfare no longer requires war; and, if she ever undertakes it, it will be at the bidding of merchants and usurers, who do not represent even the baser instincts of the specifically national spirit, but are wholly foreign and parasitic. On that occasion the _Daily Mail_ and the Foreign Office will no doubt assure the British people that the war in question involves the whole honour and welfare of the State; and the people will believe it. But it will not be true. For England is happily not, or not yet, a nation of shopkeepers; and it will be only the shopkeepers whose welfare is concerned."] industry languished and decayed. To prove the contrary and show that only here and there were there heavy losses, we may quote some figures compiled by the _Economist_.... And so forth.[34] To this I will add only two typical paragraphs as a text for my subsequent remarks, as I believe they suggest the general economic process which enriches the particular industries to which they refer. The first is taken from _the Sunday Pictorial_, of all papers.[35] Immense increases in the profits of two shipping companies are, as a result of the ceaseless rise in freights, disclosed in the reports of two Newcastle lines published yesterday. The high cost of freights is largely responsible for the dearness of food, coal, and other necessities of life. The gross profits of the Cairn Line of Steamships, Ltd., amounted to £292,108, and the net profits, after deducting the special war taxation and other items, were £162,689. A dividend of 10 per cent, with bonus of 4s. per share, is recommended. This makes a total of 30 per cent, free of income tax, as against 10 per cent last year, when the total profits amounted to £97,335. Less than half of this company's capital is paid up, the total authorised being £600,000; there are also debentures of about £150,000. The next quotation is from the _New Statesman_:--[36] Glasgow is exceedingly prosperous, and iron and steel manufacturers tell me that the next three or four years, peace or war, must mean a period of prosperity for them. Government orders now absorb so large a proportion of output that outside requirements are simply not being met. Owing to the scarcity of shipping this deficiency is not being filled by imports from America (the only other possible source of supply), so that unfilled orders are accumulating. A waggon manufacturer told me he had sufficient work in sight to keep him going for five years. It must be remembered that part of the cost of the war is being met temporarily by depreciation--railway tracks, rolling stock, locomotives, etc., _to mention only one industry_,[37] not being replaced as they wear out, or being maintained to the minimum degree necessary. This means that, although less obvious than the reconstruction of ruined parts of Belgium, France, Poland, and Eastern Prussia, repairs and replacements aggregating many millions sterling in cost will have to be carried out after the war in countries that have not been invaded. A peace boom in the iron and steel and shipbuilding trades appears certain. Here, before passing on to more general considerations, we may notice incidentally--it is brought out in the first quotation--that the taxation of war profits reduces them proportionately but can never annul or quite overtake them. That is sufficiently obvious; but the fact must be preliminarily emphasised because it is quite commonly assumed that the mere imposition of a tax of 50 or 60 or 75 per cent automatically solves the problem of war profits. As a matter of fact, taxation so far from solving the problem leaves it essentially unchanged, and really connives at and recognises the practice. The problem remains, in spite of taxation, that one section of the nation is enriched by a process which necessitates the misery and death of other sections. We may therefore in a broad discussion of the problem leave out of account the proposed and adopted palliatives of taxation. Secondly, we may notice--this is brought out in the second quotation--that profits directly produced by the war are not limited to the period of the war. This again is really axiomatic, being only another form of the platitude that it takes longer to construct than to destroy: but it means that even a short war of sufficient intensity will ensure a long period of profits, and therefore it noticeably aggravates the conclusions to which I hope to lead. A fundamental point is that the profit on freights, excused immediately by the destruction of shipping,[38] leads indirectly to profits on such other commodities as food and coal, not only on account of the actual scarcity resulting, but also because any reason for increasing prices is made a pretext for increasing profits. But the scarcity of all general commodities is caused not only indirectly by the primary scarcity of ships, but also directly by the same conditions of warfare as those which affect shipping. That is to say, just as the intensified activity of the nation at war creates a livelier demand for ships, so it also creates a greater demand for all the ordinary commodities of living: and just as war by destroying ships reduces the available supply, so by its general destructiveness it reduces the supply of other commodities: and just as war by destroying ships makes extraordinary profits for shipowners, so by destroying tables and teacups it makes unusual profits for the makers of tables and teacups. In short, destruction creates demand, and demand gives occasion for profit. This is a disquieting statement; because though one might hesitate to deduce from it that any particular merchant must be in his commercial capacity a conscious advocate of war for the sake of gain, it certainly suggests that the body of trade must automatically and by a sort of instinct of self-preservation be an element in the nation that makes for war. That is the kernel of my thesis;[39] and it is certainly a happy coincidence that the possibility of its truth seems at last to be dawning on another writer, and one more expert than myself in the handling of commercial theory. On the very morning after the last few sentences were written the following paragraph occurred in Mr. Emil Davies' "City" article in the _New Statesman_:--[40] It is only as the reports and accounts for 1915 come out that a correct idea can be formed of the benefit this catastrophic war has been to the majority of our large industrial concerns. The following is a list of companies whose reports and accounts have appeared during the past few days. The difference between the profits for the two years shown is even greater than appears, for in practically every case the 1915 profit is stated after allowing for the excess profits tax, additional depreciation or extra reserves, most companies now adopting these and other devices to render less conspicuous their war-time prosperity. 1914 1915 £ £ Smithfield and Argentine Meat Co. 25,732 142,055 Waring and Gillow 35,217 100,885 Projectile Co. 30,739 194,136 Lanarkshire Steel 28,144 45,985 Frederick Leyland Steamship 337,188 1,196,683 Sutherland Steamship 94,600 295,200 Waring and Gillow's sudden prosperity is not due to any better business in the ordinary furniture trade, but to war contracts. The Projectile Company figures are astonishing even for an armament company; after applying £47,500 in satisfying the balance of the prior claims of the Debentures, the Ordinary Shares receive their first dividend--one of 50 per cent. No sane man would accuse leaders of these great industrial concerns of doing anything to bring about an outbreak of war; many of them have, indeed, paid a heavy price for their prosperity in the shape of the loss of sons or near relatives; but when all is said and done, the fact that a war should put many half-bankrupt concerns on their legs, and make fairly prosperous companies three or four times more prosperous than before the war, is an influence in an undesirable direction. FOOTNOTES: [Footnote 33: Moreover, as I hope to suggest later, even these losses to a few individual _industries_ do not necessarily imply losses to the _capital_ involved, which in some cases has been diverted or adapted to other industries more appropriate to the times. For a review of Trade profits in 1916 see the _Manchester Guardian_, January 1, 1917.] [Footnote 34: See Appendix I.] [Footnote 35: Quoted in the _New Age_, March 16, 1916.] [Footnote 36: April 8, 1916, from the "City" article by Emil Davies.] [Footnote 37: My italics.] [Footnote 38: The rise in freights is a good example of the way in which abnormal profits are extorted from the public as soon as any scarcity puts them at the mercy of the trader. (See above, p. 45.) The rise in freights is unalloyed profit, for the shipping companies have no increased risk, since the Insurance Companies are guaranteed by the State.] [Footnote 39: Which was first drafted in a letter to _The Garton Foundation_ more than a year ago.] [Footnote 40: April 29, 1916. One might also mention for its verisimilitude the situation described at the end of Mr. F. Brett Young's novel _The Iron Age_ (Secker, 1916), in which the insolvent ironworks of Mawne are saved in the nick of time by the declaration of war.] § 2 Trade lives on Increasing Demand All war, whatever temporary dislocation of business it may involve, must ultimately, as a principal form of destruction, assist the intensive cultivation of demand which constitutes nearly the whole of modern trade. The industrial revolution of the nineteenth century with all its labour-saving machines was originally an economy of necessary production; by the middle of the century it overshot its mark, and hastened the world to the brink of the opposite disaster of over-production. In the present commercial era we are still suspended over that dreadful brink. Nothing can stop the accelerated flux of mechanical production; and we are saved from falling into the abyss only by the unnatural increase of ordinary consumption. The consumption of the ordinary markets, even when stimulated by the most violent tonics of advertisement, is strictly limited, and the limits have long been overtaken. The accelerated consumption could only be maintained by the discovery of new markets, which was undertaken by means of the political catch-words of Imperialism and Colonial Expansion;[41] or else by the wholesale destruction of existing supplies. As the number of new markets and their capacity for consuming things they don't want is ultimately just as limited as the number and capacity of home markets (for obviously the time must come when all the Chinamen and Koutso-Vlachs and South Sea Islanders have already been supplied with ready-made brown boots and tinned salmon), only one method remained by which Commerce and Industry might escape, or at least postpone, the penalty of half a century of over-production. This was by the partial destruction of the world's existing supplies. If this could be arranged, there might be a genuine demand for them to be replaced. § 3 War a form of Destruction Now as a form of destruction war is easily first. Quite apart from the obvious destruction of commodities that takes place when a country is ravaged and invaded, as in the case of Belgium and Northern France, it should be remembered that the methods of supplying an army in the field involve the sheer waste or destruction of very nearly half the food and equipment provided.[42] This is not necessarily the result, as might be expected, of official incompetence. It may on the contrary be the result of official foresight, which must allow in warfare for all the changes and chances of communication, and knows that it is better to waste a million tons of beef than to risk the starvation of a single regiment. Such waste, in other words, is a condition of warfare. Add to this the preventive destruction of stores and baggage which takes place whenever troops are compelled to retreat: in this way about a million pounds' worth of stores were carefully burned before the evacuation of Gallipoli; and not a hundred yards of trench is ever abandoned without the jettison of about a hundred pounds' worth of equipment. Add to this the fact that every shot fired, from the mere rifle bullet to the largest shell, does a proportionate amount of material damage when it finds its billet: the bursting of a six-inch shell will do, I suppose, on an average, as much damage in half a second as an ordinary fire can do in twenty-four hours. Add to this again the fact that the very force which propels every bullet and every shell is released by destroying by instantaneous combustion a certain amount of valuable chemical products. Then, besides all this direct destruction of commodities which must ultimately be replaced, or which at least some kind contractor may plausibly offer to replace, consider for a moment the increased wear and tear of every sort of equipment both civil and military, from steam-rollers and rolling-stock to boots and bandages and walking-sticks, which a state of war must involve. Or consider again that the mere mobilisation of an army implies that several hundred thousand men, whose annual income before was less than £100 a year, are now living at the rate of £400 a year.[43] Anyone who cares to examine in detail all these forms of waste and destruction, and all these forms of unnatural and feverish consumption, will begin to understand to what an extent war stimulates the demand by which alone Trade can survive. FOOTNOTES: [Footnote 41: Also, of course, by the campaign for Preferential Tariffs, which, it was hoped, would have increased consumption by excluding a few foreign competitors from colonial markets.] [Footnote 42: Cf. the many stories of beef and other rations being supplied to troops in such quantities that the units responsible for their consumption were obliged to bury them. These stories come mostly from Flanders. At home the same superabundance may have been the undoing of many a Quartermaster-Sergeant, who, not knowing what to do with such a plethora of beef, and having a proper superstition against throwing away good food, was tempted to sell it for about a penny a pound to the local butcher.] [Footnote 43: And the fact that they are doing so at the public expense is, of course, only an additional advantage to the traders who supply their needs; as they do not risk losing any of their money through bad debts.] § 4 War stands to benefit Neutral as well as Belligerent Nations but not to the same extent In Western Europe at least all markets are practically open markets. No tariff however scientifically graduated will really divert the natural flow of trade to any considerable extent.[44] Consequently it might appear that all nations stand to benefit in the same way, but in varying degrees, from the intense local demand set up in the nation at war. Thus British Trade was exhorted in a sincerely rapacious article by Captain Dixon-Johnson[45] to snatch the opportunity presented by the Balkan War; and the unparalleled boom in American trade during the present war is another obvious example. This suggests at once that the benefit occasioned by war is not a national benefit, diffused vertically through every class of the belligerent nation; but a class benefit diffused as it were horizontally through the commercial strata of all nations within supplying distance of the centre of disturbance. On the other hand, of course, the immediate local demand is stronger than the demand communicated to remoter markets and more easily supplied; in other words the commercial class of the belligerent nation are more immediately and more intensely benefited by the state of war than the same classes of neighbouring nations, although in war as in peace the commercial classes of every nation are one.[46] Also the outbreak of war, even if it does not entirely sever a country from foreign sources of supply, is bound to cause a certain dislocation; if communications are not altogether interrupted they are more difficult and uncertain than in normal times; so that the trade of the belligerent country is always given a greater impetus than that of its neutral neighbours, and in such cases a particular industry which has been threatened by the competition of foreign imports may be actually rescued from extinction. Even the temporary dislocation of trade is a benefit to trade in the nation at war; for it enables existing stocks to be sold at exaggerated prices.[47] FOOTNOTES: [Footnote 44: From this it follows incidentally that a high tariff is of no advantage to the community as a whole, but only to a particular section of the community. For the idea that it will benefit the whole community is based on the assumption that it is possible to divert a particular sort of foreign import; actually the tariff will not exclude the import if there is a natural demand for it, but it will provide an excuse for every dealer wholesale or retail to increase his profit on the article taxed by about double the amount of the tax; i.e. if an imported article pays a duty of sixpence, the price to the consumer of all such articles whether imported or home-made will be raised a shilling.] [Footnote 45: In the July, 1914, issue of the _Asiatic Review_, to which I have already referred.] [Footnote 46: I need hardly say that in speaking of the commercial class I do not include its instrument the workers. The international Socialist movement has not yet succeeded in uniting _them_; but the exhortation addressed to them by Marx has been obeyed instead by the capitalists.] § 5 The greater the Capital, the greater the War Profit? The over-production in modern industrial states, from which Trade can only be saved by some such catastrophic remedy as war, may be attributed not only to the tyranny of machines, but also to the financial jugglery known as over-capitalisation. If it could be shown that over-capitalisation were a consequence of national wealth it would follow that the richer nations would enjoy a greater benefit from war than their poorer neighbours. But this will only be true if we do not measure national wealth by the average wealth of every citizen; if we speak in this case of national wealth quite apart from any question of its equitable distribution, and are careful to distinguish it from national welfare; a wealthy nation in this case would have to mean a nation blessed with a class of wealthy capitalists, or supporting a large parasitic colony of the persons described as financiers; and such a nation would have as a corollary to be blessed with a class of workers disproportionately large and disproportionately poor. For if industrial conditions are fair over-production is impossible. FOOTNOTES: [Footnote 47: Here, for instance, is an illuminating sentence from a private report on Greek trade during the Balkan Wars: "I commercianti Greci hanno guadagnato molto durante la guerra, perchè hanno venduto tutte le merci che avevano in deposito a prezzi molto piu alti, che la gente era obbligata di comperare a cagione che non potevano importare merci straniere."] § 6 The Blessings of Invasion If war is regarded primarily as a commercial stimulant, we might carry the argument farther and conclude that invasion and even ravage are actually beneficial to the trade of a country that suffers them; for ultimately they must make way for a direct demand on the spot for the primary commodities of life. Houses, fences, roads, factories will all have to be replaced. It is obvious that the war will have to be followed by a time of rebuilding.[48] It might be urged that such a phase of convalescence would be retarded or altogether prevented by the lack of private capital for such an enormous enterprise. But private capital, thanks to the credit system, is practically inexhaustible so long as it is required for a genuinely productive purpose: and even if it failed in this case to come forward, the money required would certainly be advanced out of the indemnity which will have to be provided for the invaded provinces, or would be guaranteed in some other way by the Government concerned. In which case Trade, even after the conclusion of peace, would rejoice in another period of Government contracts. If it be admitted, however, that we have not sufficient data to make this suggestion more than probable, we can at any rate be certain of the effect produced by the mere numbers of an invading army or a defensive garrison. The Jewish traders of Salonica enjoyed a time of unexampled prosperity in 1912 and 1913, owing to the mere presence of the Turkish, the Greek and the Bulgarian armies, to whom they sold out at their own prices.[49] They are now repeating the process with the English and French armies; and in the interval they were kept busy restocking the Macedonian villages depleted or destroyed during the campaign of 1912. As for the small shopkeepers of Flanders any member of the British Expeditionary Force will tell you that they are at present so prosperous that even a German bombardment will hardly drive them from their counters. FOOTNOTES: [Footnote 48: Since this chapter was written I have seen a pamphlet with the following title: "The Chance for British Firms in the Rebuilding of Belgium, by a Belgian Contractor. London, Technical Journals, Limited, 27-29 Tothill Street, Westminster."] § 7 The Luxury Trades don't do so badly The most obvious if not the only exception to our tale of war profits is to be found in the case of the parasitic industries which specialise in the production of the unnecessary. It is not easy rigidly to define the luxury trade, for the luxury of one generation is the necessity of the next; but it is enough to suggest a broad idea of the industries that fall under this heading. "The income-tax assessments show," says _The Times_,[50] speaking of Berlin after nine months of war, "that among the trades which have suffered most are fruiterers, breweries, public-houses, bars, cafés, chemists and perfumers, goldsmiths and silversmiths, jewellers, milliners, furniture and piano dealers, and music and booksellers. Landowners, land speculators, builders and the carrying trade have also suffered." We may also notice that in the early months of the war Florence, the great market of the shoddy "souvenir" and the "tourist's delight," suffered a good deal more than London, although Italy still remained neutral. In London itself a good example of the parasitic industry are the firms which make ingeniously useless silver toys for rich people to give each other at Christmas.[51] Many such industries may indeed have suffered in England, although many of the trades mentioned in the Berlin list have not been affected in London, and at least two of them have made conspicuous profits. But in any case it is probable that they suffered if at all only during the first period of the war, when the general feeling of strangeness and insecurity was strong enough to inhibit the shopping instinct of the wealthier classes. As soon as these became accustomed to the state of war they reverted with even greater energy to their old pastime of spending money: and meanwhile the luxury trades had acquired an entirely new set of customers, for a large part of the profits accumulated in other trades were now being spent by a newly enriched class who were unaccustomed to save, for the simple reason that they had never before been in a position to do so. Consequently the luxury trades after a year of war had not only recouped their temporary losses but were doing a bigger business than ever. The natural adaptability of the trades which pander to fashion must also be taken into account. A number of them after the first panic recaptured the failing demand by advertising very simple modifications of their ordinary supply. Some, for instance, turned to the manufacture of equally plausible superfluities of military equipment--such as silver and gold identity disks and watches with luminous dials and queer little hieroglyphs in place of the ordinary figures. Trades already so well organised for exploitation could easily defeat any general attempt at social economy. Thus for women of the upper middle class the most obvious form of war economy was to carry on with only a slight alteration of last year's dresses; and such was their declared intention when their hands were forced by the Dressmakers' revolutionary change in the fashion which substituted the full skirt for the tight skirt of 1913-14. The extraordinary ingenuity of this move was, not only that it thwarted any good intention of not buying a new dress this year, it being manifestly impossible to "alter" a tight skirt into a crinoline, but also that the extra cloth required for the unusually full skirts more than compensated the trade for the continued abstention of a few unfashionable obstinates, as well as for the extra cost of labour.[52] FOOTNOTES: [Footnote 49: One Jewish contractor supplied corn and fodder to all three armies. As soon as his Turkish customers had capitulated, he tendered for the supply of the victorious Greeks, and he still had enough to spare for the Bulgarians when they entered the town.] [Footnote 50: May 17, 1915.] [Footnote 51: Such "labour-saving devices," for instance, as "poached egg servers."] § 8 Trade Profits in war not shared by the Nation but confined to Employers The trade profits which are thus directly stimulated by the conditions of war, do not imply the prosperity of the Trade as a whole, if a Trade is understood to mean a certain section of the nation including in a sort of guild or hierarchy representatives of every class engaged in a particular Trade. They do imply the prosperity of a particular class, for they are all employers' profits, profits on the capital involved. Unfortunately the profits of the Capitalists do not involve the profits of the Labourers, and cannot therefore be tested by statistics of unemployment. But of course the fluctuations of unemployment do very materially affect the opportunities of Trade, and it might reasonably be argued that the apparent profits created by War are really modified by the conditions of the Labour market or otherwise equitably distributed among the general population. Unfortunately it is quite easy to show that the one policy of employers during the present war has been to maintain their profits without any concern for the general population, and that the effect of war has been to increase the profits of Capital not only by increasing the demand but also by making the Employers increasingly independent of the labourers' claims. At the beginning of War the Employer, on the grounds of general insecurity and "not knowing what was going to happen next," cut down wages and raised the cry of "Business as Usual"; which meant that business was so much better than usual that he was afraid it could not possibly last. So he cut down wages, laughed at buyers who offered him the usual prices, and charged £48 a ton for hides and 6s. 10d. for a yard of cloth that usually cost half a crown. If the private buyer would not pay his prices the Government would. It was indeed too good to last, for such prosperity became impossible to conceal:[53] it also reduced the margin of unemployment on which he had always depended, and he soon found himself obliged to return to the normal rate of wages which he had paid before the war. He was disappointed to find that "Business as Usual" meant wages as usual, but he struggled on, imploring the assistance of the Government in order to "capture Germany's Trade." Worse was to follow: after nine months of war recruiting for the army had begun in earnest, and "there was on the whole less unemployment in Great Britain than at any previous moment in the present century."[54] But he was determined to "carry on," and for the sake of the Government introduced child labour into his workshops.[55] Meanwhile, however, the cost of living was steadily rising, and after a year of war, and of profits, the labourers' demand for an increase of wages could not be altogether ignored. The employer decided to carry the war into the enemy's country. The nation must hang together, he said, and all work was practically national work. So he boldly accused his workmen of lack of patriotism, and roundly declared that "but for the trade unions the war would probably have been over by this time, with a victory for the Allies.... Organised labour is the rotten limb of the body politic, which must be cut off if health is to be restored to the system."[56] It was hard work, but in spite of the shortage of labour and in spite of the rise in the cost of living, he managed to hold wages down by repeating that any demand for a rise in wages was unpatriotic.[57] One by one, on the plea of urgent Government work, he obtained the suspension of all Trade Union rules and thus deprived his workmen of even the natural rights of negotiation; and when after fifteen months of war they again ventured to raise their voices on the Clyde, he openly accused them of being paid by German agitators.[58] On the whole therefore he has been extraordinarily successful in keeping his profits to himself, and as the present demand is likely to continue for some time after the war, his chief anxiety at present is to maintain after the war the compulsory relaxation of Trade Union rules which nothing less than war could accomplish. The slight danger that a prolonged war may kill off a considerable part of his margin of unemployment is more than balanced by his successful introduction of women's labour: and he means that War, in addition to the actual profits of his Trade, shall give him the enormous potential advantage of having broken the Trade Unions.[59] FOOTNOTES: [Footnote 52: As a matter of fact, nearly all the luxury trades cut down their scale of wages during the first year of the war; and many of these ostentatiously gave to some War Charity a fraction of the sum thus extracted from their employees. I suppose it would be libellous to give examples.] [Footnote 53: Though frantic attempts to conceal it have been made since the Tax on War Profits was introduced.] [Footnote 54: The _New Statesman_, May 22, 1915.] [Footnote 55: See above, p. 47, note 4. Some illuminating details are given in the _Nation_, May 22, 1915, concerning the unscrupulous plea of Government work in order to excuse the employment of children.] [Footnote 56: The _Saturday Review_, September 18, 1915.] [Footnote 57: "The shortage" too was a permanent excuse just as good for holding prices up as for holding wages down. Cf. a correspondent in _The Times_, May 17, 1916: "This position of affairs makes one doubt if the shortage in these articles (bottles, jars, tins, boxes, etc.) is as stated, or that the shortage pays better and the various trades do not wish the tension to be in any way relieved."] [Footnote 58: I hope it will not soon be forgotten that _Punch_ was not ashamed to endorse this charge.] [Footnote 59: Cf. Mr. Emil Davies in the _New Statesman_, April 8, 1916: "My impression is that the annoyance of Clyde manufacturers at the present labour troubles is not wholly free from a certain grim satisfaction. They are not anxious to see carried out the pledge that shop conditions should go back to the pre-war basis, and, they argue, if the men are discredited with the public, it will be all to the good of the employers in the big industrial struggle they look upon as inevitable after the war. They regard this struggle without anxiety and are accumulating funds; some of them talk of special funds being created for the purpose by the employers in association. These are the impressions gained from conversations with prominent members of the Glasgow business world."] § 9 Trade Profit and National Loss It need not therefore be supposed that the War Profits, of which there is such abundant evidence, conflict at all with Mr. Norman Angell's contention[60] that all modern war, even if the military operations end in a military success, is futile and unprofitable from the national point of view. The general truth seems to be that War, whether it be apparently victorious or apparently unsuccessful, is always profitable for a small commercial class in each belligerent nation.[61] Unfortunately the profits thus earned by the economic effects of war are not diffused vertically throughout the whole nation from top to bottom, but rather horizontally along a shallow commercial stratum in every nation. In every nation war diminishes the national wealth, but concentrates the residue with greater inequality in one particular class. The representative of this class, commonly called the Capitalist, is the real cosmopolitan, because his interests in each belligerent nation are identical, and the war, successful or not, contributes to his financial advantage. It is an illuminating coincidence that the classes in every nation which most enthusiastically demand the violent prosecution of the war seem to be proportionately anxious to annul the hardly-won privileges of democracy. Thus the _Saturday Review_, in a passage already quoted, solemnly, openly and unforgettably declares the secret wishes of the militarists; and we may be surprised to consider how many safeguards of democracy, how many rights of free thought and free speech, how many of the precarious limitations of sweating and child-labour and wage-slavery have been quietly suppressed since the beginning of the war. But if war is ultimately unprofitable for the nation as a whole, it might be argued that Trade itself must ultimately be involved in the national loss. The answer is that even if the Trader's interests were identical with those of the nation and were ultimately bound to suffer with the nation as a whole, he would undoubtedly ignore the possibility of a loss so much remoter than his immediate and obvious profits; especially as he is certainly ignorant of the economic fact that in modern times military victory and military defeat are equally unprofitable, and if he ever did pause to consider the results for the whole nation he would certainly, perhaps in good faith, identify the national interest with his own, and assume, for psychological rather than economic reasons, that his own interests demanded a military victory; real ignorance and emotional excitement sufficing to explain his apparently hypocritical professions of patriotism. As a matter of fact however his private interests are not dependent on those of the whole nation; for commercial wealth is not the same as national wealth, and prosperous Trade is quite consistent with national unhappiness. The average citizen of Switzerland is more contented than the average citizen of any of the great commercial powers of the world; and some of the causes that make for commercial prosperity, causes of which War is not the least effective, actually decrease the civic efficiency of the greater number of the population, and reduce their chances of happiness. "If an expanding trade," writes Mr. R. B. Cunninghame Graham,[62] "is the sure sign of national happiness clearly the four countries, the figures of whose trade are tabulated (Chile, Peru, Brazil and Argentine) should be amongst the happiest in the world. Yet still a doubt creeps in whether expanding Trade is the sure test of happiness; for recently I have revisited some of the countries of the River Plate that I knew thirty years ago, and it appears to me that they were happier then. True, they were not so rich.... Wealth has increased, but so has poverty...." War is an artificial process for accelerating that concentration of wealth in the hands of a small class which distinguishes the present unholy stage of political development.[63] FOOTNOTES: [Footnote 60: _The Great Illusion, passim_.] [Footnote 61: This is not necessarily inconsistent with H. N. Brailsford's similar remark (_The War of Steel and Gold_, p. 163): "War is a folly from the standpoint of national self-interest; it may none the less be perfectly rational from the standpoint of a small but powerful governing class."] [Footnote 62: Reviewing a work on South America in _The Nation_, November 6, 1915.] [Footnote 63: This process is further accelerated by the fact that the War is being paid for very largely by means of Loans, subscribed naturally by the richer classes; in future the richer classes will be receiving the interest on these loans. But in order to pay this interest the State will have to resort to taxation, some part of which will fall presumably on the poor. See Professor Pigou's _Economy and Finance of the War_.] CHAPTER IV Candide était étendu dans la rue et couvert de débris. Il disait à Pangloss: Hélas! procure-moi un pen de vin et d'huile; je me meurs. Ce tremblement de terre n'est pas une chose nouvelle, répondit Pangloss; la ville de Lima éprouva les mêmes secousses en Amérique l'année passée; mêmes causes, mêmes effets: il y a certainement une traînée de souphre sous terre depuis Lima jusqu'à Lisbonne. Rien n'est plus probable, dit Candide; mais, pour Dieu, un peu d'huile et de vin. Comment, probable? répliqua le philosophe; je soutiens que la chose est démontrée. Candide perdit connaissance, ... et Pangloss lui apporta un peu d'eau d'une fontaine voisine. VOLTAIRE, _Candide_. § 1 Dialectics round the Death-bed Philosophical aloofness is all very well in its way, but while we argue about economic causes and attempt to induce a philosophy of earthquakes, our bright young democracy lies bleeding under the ruins. The urgent necessity is a little first aid, a little cessation of the killing. I don't know how many young men in different parts of the world have been deliberately and scientifically murdered during the writing of this protest. England alone, who has been criticised for her delay in exposing her youth to the slaughter, is having about half a million of her best citizens stabbed or pierced or crushed or mutilated or poisoned or torn to pieces in one year[64] of modern warfare. And life is not the only instrument of vital progress that is being thrown away. Britannia has beaten her trident into a shovel, and with it is shovelling gold; and not only gold, but youth and love and happiness into the deep sea. The belligerent nations are frantically engaged in destroying two thousand years of education and all the accumulated capital of humanity. Only the enemies of civilisation, the sellers of arms and the sowers of hatred, are growing rich on its ruins. It is impossible to deny that the longer the war continues the greater will be the subsequent sufferings, spiritual and material, of every nation engaged. It is impossible to maintain that any nation or class or individual will be any better in any respect for the Great War, with the single exception of that parasitic class who, as a class, and therefore perhaps not consciously, are chiefly responsible for its inception. We must have Peace first and congresses afterwards. The survivors of civilisation cannot discuss a lasting settlement while they are still under fire. FOOTNOTES: [Footnote 64: The total British casualties from the beginning of the war till July 18, 1915, were given as 321,889, of whom 61,384 were killed.] § 2 German Responsibility for the War Nor is it necessary to continue the slaughter while we argue about which belligerent must bear the chief responsibility for the outbreak. The dialectical exercises of the German Chancellor and Mr. Asquith are so futile that they remind us only of two naughty children who drag out their squabble with stubborn outcries of "He began it." The first consideration is to stop fighting. Such academic discussions are necessarily endless, for the simple reason that every nation has its faults, to which criminal motives can always be attached: every nation has its fools, whom its enemies can describe as typical representatives. The question of responsibility for the Great War must be left to the historians of the future. I am quite confident (though even Viscount Grey or Professor Gilbert Murray cannot prove) that they will hold Germany responsible: but I am equally confident that the blame they throw on the nation responsible for the war will be less pronounced than the praise they will reserve for the nation which first has the courage to speak of peace. My belief in Germany's responsibility is based largely on German apologetics and strengthened by the evidence of commercial conditions in Germany before the outbreak. Professor Millioud, for instance, has shown that "German industry was built up on a top-heavy system of credit, unable to keep solvent without expansion, and unable to expand sufficiently without war."[65] Or if a good working test of German responsibility were needed it would be sufficient to point out that no nation innocent of aggressive intentions would have drafted such an ultimatum as that which Austria, with German connivance, sent to Serbia; and that no nation anxious for war would have drafted such a conciliatory reply as that which Serbia returned to Austria by Russia's instructions. It is in fact clear that as long ago as 1913 Austria had determined to crush Serbia, and that in 1913 that determination was only postponed; and postponed not, as we thought at the time, by the tact of Lord Grey at the Conference of London, but only by Italy's refusal to join in the adventure, as we now know from the revelations of San Giuliano and Salandra. Similarly, knowing as we do that England is no exception to the rule that no imperial nation can be wholly compact of righteousness, we might hesitate to accept _The Times'_ version of British innocence, and we might hesitate to accept Lord Bryce's report on the German atrocities in Belgium, knowing as we do that it is based almost entirely on the hearsay evidence of refugees who would be anxious to distinguish themselves as witnesses from the general ruck of destitution; but it happens that the general charges of German aggressiveness and German brutality are fully corroborated by German literature.[66] Unfortunately these distinctions between brutal and chevaleresque methods of warfare remain only questions of method; they concern manners rather than morals, and are as irrelevant to our hopes for the abolition of war as the questions of diplomatic method already mentioned.[67] Equally irrelevant, in any discussion of the possibility of substituting "compulsory arbitration" for war, is the attempt to distinguish between aggressive and defensive war, or to throw all the blame of aggression on either of the two belligerents; for the simple reason that each belligerent will perhaps never believe and will quite certainly never admit that his own intentions were anything but defensive or altruistic.[68] The _locus classicus_ for such protestations of innocence occurs in the Italian Green Book, where Austrian diplomats may be found declaring, _with every appearance of sincerity_, that the invasion of Serbia was a purely defensive measure. And in a sense, in such a well-armed continent, every aggression is indeed a fore-arming against the future. It might also be suggested that the crime of aggression is an offence not against an individual but against the peace of the community: and until the European community is constituted the guilt of such a crime cannot be brought home to either of the belligerents. FOOTNOTES: [Footnote 65: _The Ruling Caste and Frenzied Trade in Germany_, by Maurice Millioud, Professor of Sociology in the University of Lausanne. (1915.) Reviewed in the _Manchester Guardian_ by R. C. K. E.] [Footnote 66: All that we need know, for instance, of German military conduct in Belgium is contained in the following communication made to the _Kölnische Zeitung_ by Captain Walter Brum, adjutant to the Governor-General of Belgium, who may be presumed to know the inner history of these appalling transactions:-- "The principle according to which the whole community must be punished for the fault of a single individual is justified by the theory of _terrorisation_. The innocent must suffer with the guilty; if the latter are unknown the innocent must even be punished in their place, and note that the punishment is applied not _because_ a misdeed has been committed, but _in order that_ no more shall be committed. To burn a neighbourhood, shoot hostages, decimate a population which has taken up arms against the army--all this is far less a reprisal than the sounding of a _note of warning_ for the territory not yet occupied. Do not doubt it; it was as a note of warning that Baltin, Herve, Louvain, and Dinant were burned. The burnings and bloodshed at the opening of the war showed the great cities of Belgium how perilous it was for them ..." etc.] [Footnote 67: Chapter I, §§ 9-11.] [Footnote 68: See below, note on p. 113; and compare Brailsford, _The War of Steel and Gold_, p. 22, on "preparations which are always supposed to be defensive," and p. 264, on the methods used to support the plea that large navies are purely "defensive."] § 3 The Value of German Culture The question whether Germany is actually attempting or would be justified in attempting to impose her culture on the rest of Europe; or whether England has good reasons for the limitation or suppression of German culture, is another side-issue. German culture (in Matthew Arnold's correct use of the word, meaning, that is, the average of intellectual and social civilisation), has not on a general inspection much to be proud of. The modern literature of Germany is largely a transcription of Russian, French and English authors, and it is significant that among foreign authors the widest success is reserved for purveyors of _le faux bon_, writers whose work is distinguished by its spirited failure quite to attain the first-class.[69] The most promising of modern authors writing in the German language, Schnitzler, is an Austrian Jew. Hauptmann, the most distinguished and original of German dramatists, has for thirty years been writing plays which would pass for imitations of Mr. John Galsworthy's failures. Sudermann's style reminds one of a snail crawling over the Indian lilies which he describes.... Germany, it is true, has reason to be proud of her theatres, but that is a matter of State enterprise, rather than an indication of national culture. The German State has been efficient enough to perceive that good theatres are a fundamental necessity of national education, and that good theatres, owing to the excessive rents they have to pay, can never be kept going without a State subsidy. But these admirable theatres can hardly be called the vehicles of a high native culture. Their famous Reinhardts are more efficient only because more acquisitive than our own Jewish impresarios. The ideas they have acquired are chiefly Russian or English: and they have profited by the ideas of Granville Barker and Gordon Craig in order to produce the plays of Shakespeare and Shaw--(just as industrial Germany profited by the ideas of Bessemer[70] and Perkins). Germany's claim to artistic vitality, to genuinely original culture, can be supported only by a certain distinct excellence in sculpture and caricature, two arts which often seem to go hand in hand, perhaps because both are based on a precise simplification of form. But for the activity of a small band of sculptors and caricaturists centred for the most part in Munich,[71] we might be content to regard Germany not as a fount of culture but rather as one of the world's workshops, a well-organised _ergastulum_ for dealing with the drudgery of modern civilisation, for manipulating secondary products and extracting derivatives, a large factory for the production of dictionaries, drugs and electrical machinery.[72] The extraordinary efficiency of Germany, _as a workshop_, is not due to any intellectual pre-eminence of the nation as a whole. It is most clearly and emphatically due to the fact that the German autocracy, whatever its political iniquity, has had the intelligence and the national solidarity to choose its business men from among the brains of the community. In Germany any man of conspicuous intellectual capacity may be picked out, roughly speaking, and assigned to the direction of a particular industry. In England we achieve inefficiency by the contrary process, and are only willing to regard a man as capable and revere him as an "expert" if he happens to have been occupied exclusively for a certain number of years in the narrow routine of a particular subject. This pernicious fallacy of the "Expert" is actually preached in England as a means to the very Efficiency which in fact it almost invariably excludes. It is commonly assumed that no man can write a good play unless he has been a bad actor, or that a retired admiral, quite incapable of grasping any general idea that was not popular in the Navy twenty years ago or in the smoking-room of his club, would be better able to direct the affairs of the Navy than Mr. Winston Churchill or Mr. Balfour.[73] There is a similar outcry for a government of "Business Men," although anyone who happens to have heard a couple of average business men discuss a problem of their own business in one of their own offices will hardly be able to deny that a capable poet and a capable painter would have settled the question in a quarter of the time. Instead of superstitiously believing that only "Business Men" can be efficient, Germany picks out her business men (and her bureaucrats) for their general efficiency. She has attained efficiency by abandoning the fallacy of the Expert in favour of the maxim of Confucius--"the Higher type of man is not like a vessel which is designed for some special use."[74] But from the fact that German industry and German theatres are better managed than our own it does not follow that there is any natural or national antagonism between England and Germany. The real hatred of Germany if it exists in England at all should be found among what it is becoming the fashion to call "the intelligentsia." Such a purely intellectual hatred of the sentimental melodrama of _Faust_ and of the semitic luxuriance of Wagner and Reinhardt is not likely to become a democratic motive in England. Here brains are always unpopular, and Park Lane will never be stormed by the mob until it is inhabited by the Bernard Shaws, the Lowes Dickinsons and the Bertrand Russells, instead of by German financiers. There is no national hatred between England and Germany. The two peoples are natural friends. Even the men in the trenches (or perhaps I should say particularly the men in the trenches), fraternise with their opponents whenever they get the chance.[75] Even now a press campaign of a few months would suffice to make Germany popular in England; and if that were ever to happen, which is not improbable, only the "intellectuals," who are most strongly opposed to this war, would still find much to dislike, but not to fight about, in the national culture produced by the German character. FOOTNOTES: [Footnote 69: E.g. Oscar Wilde and Artzibashev.] [Footnote 70: "The whole industrial expansion of Germany dates from the introduction of the Bessemer process in 1879, by which its supplies of iron became possible to work at a profit."--_Bertrand Russell_.] [Footnote 71: It is unnecessary to refer at length to the world-famous caricaturists of _Simplicissimus_, although it may be noted that the best of them, Gulbrannson, is a Norwegian, while his chief rival, Heine, is a Jew. Munich sculptors whose names might be mentioned are Hildebrand, Taschner, Hahn, and Wrba.] [Footnote 72: Even such scientific achievements as those of Ehrlich and Ostwald should be regarded as results of regulated industry and diligent experiment.] [Footnote 73: Another instance of the fallacy is the quite unjustified prejudice in the Army in favour of "Regular" officers.] [Footnote 74: The foundation of German business efficiency not on the practical science of the specialist but on theoretic and general mental exercise is further illustrated by the great and increasing prevalence of Latin and Greek in German education ... while again our own "Business Experts" are reversing the process. The passages that follow are quoted from a letter of Dr. Rice Holmes in _The Times_ of August 11, 1916. "In German schools not only are classics taught more systematically and more thoroughly than in all but a few of our own, but they are learned by a greater proportion of the population; and, moreover, the hours devoted to natural science in those schools in which it is taught are fewer than in our public schools.... Since 1903 the number of German boys receiving a classical education has steadily increased. In 1904 there were 196,175 pupils in schools (_Gymnasien_ and _Realgymnasien_) where Latin is compulsory, of whom 153,680 belonged to the classical schools (_Gymnasien_), and therefore learned Greek as well (W. Lexis, _Unterrichtswesen im Deutschen Reich_, ii. 218); in 1911, as Mr. R. W. Livingstone has shown (_The Times Educational Supplement_, April 4, p. 49, col. 2), the corresponding figures were 240,000 and 170,000; and in 1908, 'out of a total of 31,622 students entering 18 out of 21 German universities (Munich, Erlangen, and Wurzburg not reporting), ... only 7-1/2 per cent entered without Latin or Greek' (Professor Francis W. Kelsey, _Latin and Greek in American Education_, 1911, p. 43). "Möge das Studium der griechischen und römischen Literatur immerfort die Basis der höheren Bildung bleiben." So wrote the greatest of the Germans; and the countrymen of Goethe, whose genius was scientific as well as poetical, have not forgotten his words. On the other hand, in the modern schools (_Realgymnasien_ and _Oberrealschulen_) only a small fraction of the time-table--from two hours a week (out of twenty-five) to six (out of thirty-one)--is devoted to natural science. To anyone who has read Matthew Arnold's _Higher Schools and Universities in Germany_, or Dr. M. E. Sadler's _The Realschulen in Berlin_, or who is acquainted with the opinions expressed by Helmholtz, A. W. Hofmann, Bauer, and other 'eminent scientific professors,' it will not appear paradoxical that the object of thus restricting the hours devoted to the teaching of natural science in schools is to promote the scientific efficiency of the German nation. It was with this object that by the regulations published in 1901 the time devoted to Latin in the _Realgymnasien_ was increased. And those who do not learn natural science learn what for the nation is equally important--the value of scientific method."] [Footnote 75: The Daily News, October 20, 1915:-- "A pathetic story is told in the _Vorwärts_ by Herr Adolf Köster (who acts as war correspondent for the German Socialist Press) in connection with the recent fighting at Hooge. A German soldier told him of a young Scotsman whom he had killed with a hand-grenade in whose pocket he had found a little pocket-book:-- "'We looked through the booklet. It contained postcards from the front, from home, from a sister and from a sweetheart--photographs from the battlefields of brave soldiers and from home. There was also a small amateur photograph, rather badly made, of a young girl sitting at a typewriter. She had blonde hair and on the back of the photo she had written: "Look at the waves of my hair and note also how very diligent I am" (English in the original). One of us asked the soldier to give him this photograph. But he replied: "You can take the whole book, photos, postcards, etc. But this picture I will keep in memory of my friend." By "his friend" he meant the Scotsman whom he had killed by his hand-grenade.'"] § 4 The Manufacture of Hatred But if there is no natural hatred between the two belligerent protagonists, there is a feverish production of the artificial variety. Indeed this diligent manufacture of hatred is probably the most demoralising result of warfare, particularly disastrous in its ethical effect on the individual. It proceeds by the ordinary methods of deceit, suppression of the true and suggestion of the untrue, and by means of the newspapers this process of moral degeneration is sometimes actively directed, sometimes only permitted or encouraged by the Governments concerned. The London press is always ready to swallow the pathetic fabrications of unscrupulous refugees, and publishes with joy any Rotterdam rumour about German bestiality; but refuses to print any report however authentic which ventures to suggest that the Germans are as human as ourselves. There was, for instance, a Canadian woman, Dr. Scarlett-Synge, who under the aegis of her medical diploma, returned from Serbia through Germany, and discovered that some of the German internment camps are not as bad as they are commonly believed to be. Whatever her qualifications and opportunities for forming a correct opinion, and they happen to have been particularly good, there is no doubt that this woman's report was of the highest interest. Yet not a single daily paper in England would consider its publication, on the ground presumably that it might reduce the national inflammation and thereby "prejudice recruiting." As if true patriotism, sane and lovely, had anything to do with the pathological condition of hatred. "Recruiting be damned," says the patriotic philosopher, "_odium nunquam potest esse bonum_."[76] The method of distortion is also abundantly used by journalists of both parties. German hatred of England has often been stoked up by isolated mistranslations of sentences from _The Times_, and English and French journalists have not been slow in following the German example. It is said that after the fall of Antwerp the _Koelnische Zeitung_ announced that "as soon as the fall of Antwerp was known the church bells in Germany were rung," a harmless message which was successively distorted by the _Matin_, the _Daily Mail_, and the _Corriere della Sera_, until it finally reappeared in the _Matin_ in the following form: "According to the information of the _Corriere della Sera_ from London and Cologne it is confirmed that the barbaric conquerors of Antwerp punished the unfortunate Belgian priests for their heroic refusal to ring the church bells by hanging them as living clappers to the bells with their heads downwards."[77] The Manufacture of Hatred is unfortunately become a part of the Nationalist Movement in nearly all modern European States. The spurious Nationalism which is the result not of race but of education, depends for its existence almost entirely on so-called ethnological propaganda and continues to thrive by the cultivation of two propositions, neither of which is true: that all the members of one national group are racially different from all the members of the neighbouring group; and that this racial difference naturally and necessarily and properly implies the mutual hatred of the two nations. They proclaim, in fact, that certain nations are the "natural enemies " of certain others, by hating which they are only fulfilling the national function of self-realisation. By such arguments, which have no genuine ethnological foundation, the false prophets of nationalism are filling Europe with the racial prejudice of artificial Kelts, artificial Poles, and artificial Teutons. Of course race hatred between Slav and Teuton is no more "natural" than family hatred between Jones and Robinson; and even if it were, even that is if the cultures of two neighbouring races were mutually exclusive, it could still be argued--as it must in any case be argued--that no nation is racially pure. The last "Pole" I met proudly professed that the hatred of Russia was _in his blood_. Yet he was born in Bessarabia, and it was therefore not surprising that his facial type was distinctly Roumanian; he came, that is, if race means anything at all, of a Græco-Latin stock, and his hatred of Russia, which seemed to be the beginning and the end of his programme of "Polish nationalism," was the result of a few years of neglected education. Half the conflicting "Nationalisms" of Europe are programmes of artificial hatred, the propagandists of which may actually be of the same blood as their opponents; a single generation suffices for the manufacture of the racial enthusiast, which is often completed by a modification of the family name. Even Greeks and Bulgars are frequently of common descent. When a Macedonian village changes hands the Greek Karagiozes has been known to develop into the Bulgarian Karagiozoff; and a Mazarakis will boast a racial incompatibility with his second cousin Madjarieff. The same process for the manufacture of nationalism may be detected at the other end of Europe: at Mons of glorious memory there was a Walloon with the good old Walloon name of Le Grand, whose grandfather had been an equally enthusiastic Fleming with the good old Flemish name of De Groodt. True nationalism may indeed be differentiated by the absence of this artificial element of ethnological hatred. True nationalism is simply the feeling for the small independent community, a movement for the autonomy of the local group. No true manifestation of the nationalist movement in Europe is ever opposed to other nationalisms; but all alike are involved in a desperate political conflict with their common enemy Imperialism. FOOTNOTES: [Footnote 76: Spinoza, _Ethica_, IV, 45.] [Footnote 77: _Labour Leader_, March 30, 1916, quoting an address by Mr. Arthur Ponsonby, M.P.--I have not been able to verify these references, so I give the story only as an example of the method of progressive distortion, and not as one that actually occurred, though it may have done so.] § 5 Imperialism the Enemy Imperialism, on the other hand, is the feeling for large dominions and is very often only an unreasoning lust for the possession of territory:[78] surviving perhaps from the time when the land of the community was regarded as the reserved hunting-ground of the tribal chief, or at least as the private estate of the national monarch. But in so far as this passionate desire for extending the superficial territory under the central government is a reasoning desire, in so far that is as attempts have been made to justify by retrospective theories the almost instinctive achievements of painting the map red, it is fairly clear (although the issues have been confused by altruistic and Kiplingesque but not by any means unfounded views about the White Man's Burden) that Imperialism is based on the insatiable claims of over-productive commerce. Commerce at any rate is the _ex post facto_ excuse for the foundation of the British Empire, and if it can no longer be pleaded as a reason for the maintenance of the British Empire, it is simply because the British Empire is no longer an empire, but for the most part a federation of autonomous states.[79] But Imperialism has only been scotched by the unconscious wisdom of English political development. It still unhappily survives not only in the intermittent demand for the acquisition of fresh colonial territory, but also, in its crudest form, without even the shadow of an excuse commercial or altruistic, in the continued subjection of Ireland to English rule. We must not be surprised if the imperialistic elements of the State receive after the war a new lease of life from the mutual encouragement of commerce and militarism. The commercial classes of course support Imperialism because, with an obtuseness permitted only to our "business men," they believe that the acquisition of more colonies still means the discovery of new markets.[80] They have not yet realised that nowadays all markets are practically open markets, and that no tariff can effectively exclude goods for which there is any demand, for the simple reason that an effective demand cheerfully pays an increased price. All nations in fact stand to share fairly the commercial advantage of each other's colonial markets: and it might even be shown by a little simple book-keeping that the particular balance any nation gains from trading with a colony of its own must be debited with the expense of governing that colony. In short, the commercial excuse for Imperialism is actually obsolete. Yet commerce continues to support Imperialism, and although the original reason for this support is no longer valid, it is still, unconsciously perhaps but very methodically, serving its own interests by this support, in so far as Imperialism involves militarism (or "navalism") and so leads to the probability of war. But even if the commercial reasons which constitute the only possible excuse for Imperialism were still valid, it would still remain equally valid and much more important that Imperialism is bad in itself, the enemy of liberty and the begetter of arrogance. Imperialism is bad on general grounds because it implies a centralisation of authority which violates the natural rights of nationalities. A nationality, as has already been suggested, means not necessarily a pure racial enclave, but simply a small local group, in the formation of which similarity of "race," religion, and culture will not be ignored but will naturally be considered as modifications of primarily geographical boundaries. The right of nationalities to local autonomy, to deal again only with the simplest general reason, is based on the idea of democracy, the exercise of a political voice being regarded as a natural and inalienable right of the free citizen. Democracy means representative government, and representative government simply does not work in a large and mixed community of more than twenty millions.[81] Hence the right of nationalities to local autonomy is fundamental, and is inconsistent with Imperialism as such. Imperialism is bad because it is based on conquest, implies a "subject race," and sooner or later will have to be maintained by war. It breeds a conquering and commercial spirit, which is never satisfied unless it is carrying some one else's burden (at a high freight). The imperialist plutocracy will then find itself so much occupied with other people's affairs that it will be neglecting domestic politics altogether: and this neglect will be the more disastrous in so far as poverty and servitude will have increased at the same rate as luxury. The citizens of an Imperialist state will be unable to control their commercial masters, and, as Rousseau said of the English, will soon find themselves a nation of slaves[82]: and that not only because a policy of conquest is incompatible with democracy; but also because the lust of conquest and the arrogance of FOOTNOTES: [Footnote 78: H. N. Brailsford (_The War of Steel and Gold_, p. 125) speaks of an "indifferent democracy." Unhappily our democracy is not indifferent to Imperialism, for it is misled to believe that mere expansion is somehow grand and good; the only geography it learns at school is miscalled "patriotic" because it is designed to encourage this belief.] [Footnote 79: I.e. as a real "Empire," the British Empire was a failure, as all Empires must be. It has been a success since it ceased to be an Empire about a hundred years ago. Cf. Professor H. E. Egerton's remark:-- "The British Colonial Empire of to-day is not the Empire which was the outcome of seventeenth-century methods. So far as the colonists themselves were concerned, English colonisation (in the seventeenth and eighteenth centuries) was a complete success, but from the point of view of the mother country it was a failure, and the rock on which it foundered was the same rock which lost America to Spain and caused Canada to acquiesce in separation from France."] [Footnote 80: I am ashamed to say that when I wrote these chapters I had not read Mr. H. N. Brailsford's _War of Steel and Gold_. But Mr. Brailsford's brilliant examination of the connection between War and Finance is quite consistent with my supplementary theory of War and Trade. "Trade supplies no explanation of Imperialism," says Mr. Brailsford (p. 75). It does, in so far as Traders support Imperialism because they think it is good for Trade: while financiers, as Mr. Brailsford shows, support Imperialism because they know it is good for investments.] [Footnote 81: "What is vital to any real Democracy in a densely-peopled, economically-complicated modern State, is that the Government should not be one. The very concentration of authority which is essential in war is, in peace, fatally destructive not of freedom alone, but also of that maximum individual development which is the very end and purpose for which society exists."--Sidney Webb, _Towards Social Democracy?_, 1916.] militarism acquire strength with each fresh licence until the community as a whole is quite unable to control its own baser passions--a condition which more than any other merits the name of servitude.[83] Imperialism is a form of political corruption in which a nation is consoled for its own slavery by the pride of enslaving its neighbours. The attainment of permanent peace connotes the abandonment of Imperialism. FOOTNOTES: [Footnote 82: "Les Anglais veulent être conquérants; donc ils ne tarderont pas d'être esclaves."--_Political Writings_, C. E. Vaughan, I, 373.] § 6 Possible Objects of War If the nations are prepared to abandon the claims of Imperialism there will be very little else left to fight about. An examination of the documents connected with any war of the last century shows that the object of a belligerent in prolonging the agony is usually expressed in vague language that can be dissolved by a little analysis. Sometimes a government will propose, in the interests of peace and good government, to crush the enemy's aggressiveness by a purely defensive aggression, an excuse for bloodshed which only the most fanatical pacifist could confuse with Mr. Asquith's blunt watchword of "crushing German militarism." The logical fallacy of such an excuse which is almost invariably pleaded by powerful belligerents,[84] a fallacy of which no one could wish to accuse Mr. Asquith's solid intellect, lies (quite apart from any question of the priority of aggression) in the fact that any attempt to crush by force the Will to Conquer inevitably breeds more militarism. The tag about taking a lesson from the enemy, _fas est et ab hoste doceri_, is only one half of the unhappy truth that the fighter is fatally bound to acquire his enemy's worst characteristics. The object undertaken apparently in the interests of democracy can only be accomplished by the wholesale suppression of democratic rights, and involves an organised manufacture of imperialistic emotion which ends by delegating the authority of the State to a reactionary triumvirate of bureaucracy, jingoism and vulgarity (or Tory, Landowner and Journalist). The guarantees of democracy, the rights of free thought and free speech, every sort of civil liberty and every defence against the servile state, will all have to be suppressed in the interests of the nation at war. It is the old story of the conversion of Thais by Paphnutius: the preacher snatches lovely Thais from the burning, but himself is damned--"si hideux qu'en passant la main sur son visage, il sentit sa laideur." A is white and finds it necessary to whitewash B, who is black: after several years of hopeless grey, A finds that he has indeed put some very satisfactory daubs of whitewash all over B, but that his own coat has been blackened in the course of the struggle. It is as if a gardener, having heard of the cannibalistic habit of earwigs, proposed to exterminate the earwig in his rose-garden by importing a special army of five million earwigs collected at great expense from the surrounding country. Other belligerent governments will raise the plea of checking the spread of a hostile and dangerous culture; a plausible because apparently philosophical justification of war as the only means of extirpating a heresy that might pervert the whole future of European civilisation. Unfortunately such a moral effect, such a "conversion by shock," could only be accomplished by a very sudden, complete and shattering victory; and it is now beginning to be recognised that spectacular triumphs are not to be expected in modern warfare. But even if it were as possible by violence as it might conceivably be desirable to extirpate or even to limit the propagation of a particular form of mental culture, the achievement would certainly not be worth the cost to the unhappy survivors and their posterity. It would indeed be a crime against humanity to eliminate the better part of the younger generation, the flower of human brains, in the monstrous pedantry of attempting to correct an intellectual error. For the risks of modern warfare are not ordinary. It is not sufficiently realised that in six months of offensive tactics under modern conditions no man in the front line has more than one chance in a million of escaping death or mutilation. There may remain the plea that a prolonged campaign is necessary in order by exhaustion to compel the enemy to evacuate some territory that he may have wrongfully occupied. The inevitable answer to such a plea would be that if a war had arrived at a stage in which there was a clear possibility of coercing the enemy by a process of exhaustion, that possibility, if it were well-founded, would certainly not have escaped the intelligence of the enemy, who would consequently be prepared to save his face by coming to terms. The evacuation of the occupied territory, or whatever it is that was to be achieved by the coercive exhaustion of another year or two of battle, might then be obtained by negotiation at once, and at the cost of a certain amount of paper and ink, instead of being forced on a revengeful and embittered opponent by the expensive process of killing young men, a process which has the disadvantage of working both ways. The conclusion of these general considerations seems to be that all the arguments that are likely to be put forward in the course of a war in order to excuse and ensure its continuation, are only excuses to gain time, put forward in hope that the chances of a further campaign may enable the government concerned to retrieve some apparent advantage out of the disastrous muddle through which they drifted into the first declaration of war. Having drawn the sword in a moment of embarrassment, they have now jolly well got to pretend that it was the right thing to do, and are not going to sheathe it till they see a chance of proving that they are glad they drew it. In short, there comes a point in all modern wars in which the belligerents are fighting for nothing at all, except for a more or less advantageous position from which to discuss a way to stop fighting.[85] FOOTNOTES: [Footnote 83: Spinoza, _Ethica_, IV, _praefat. ad init._ Humanam impotentiam in moderandis et coercendis affectibus servitutem voco.] [Footnote 84: See above, § 2, on "defensive" war, and compare a passage from Mr. C. Grant Robertson's letter in _The Times_ of August 15, 1916:-- "Bismarck repeatedly and explicitly in the Reichstag justified the wars of 1864, 1866, and 1870 as 'defensive'--i.e. as not 'willed' by Prussia. On the contrary, they were wars 'forced' on a peace-loving State denied its 'rights' by Denmark, Austria, and France. The argument, briefly, on Bismarckian principles is this. Prussia's policy is an '_Interessenpolitik_'--a policy of 'interests.' An 'interest' confers a 'right.' The satisfaction of 'national interest' is therefore the achievement of 'national rights.' If these 'rights' can be achieved by a compromise--i.e. by the complete surrender of Prussia's opponents to the demands based on these 'rights'--that is a proof of her peace-loving nature. But if her opponents refuse, then the war by which the 'rights' are secured is a war 'forced' on Prussia. She has not 'willed' it. It is a 'defensive' war to prevent the robbery of her 'rights' by others; Bismarck, not without difficulty, converted his Sovereign to this argument. In each case--1864, 1866, 1870--William I was ultimately convinced that Denmark, Austria, and France were resisting the 'rights' of Prussia, and that war to secure them was 'defensive,' 'forced' on the King, and just. The successful issues confirmed William's conscience and proved that Bismarckian principles had the Divine sanction."] [Footnote 85: This attitude is well illustrated by the history of the Crimean War. In January, 1855, "peace seemed impossible until some of the disgrace was wiped away, and the pacificists, Cobden and Bright, were burned in effigy.... The prolongation of the war called out no protest from the public." Yet "the popular war produced an unpopular peace." When after another year of fighting our French allies finally insisted on peace, "'there was no indication,' said a Frenchman, 'as to which was the victor and which the vanquished.' Reviews and illuminations could not obscure the truth; Britain had sacrificed lives and treasure and obtained little in return."--Alice Green's Epilogue to J. R. Green's _Short History of the English People_.] § 7 Physical Force in a Moral World The explanation of all this seems to lie in the simple fact that it is for ever impossible to solve questions of moral or political principle by the expenditure of physical force. Anyone at all conversant with philosophical thought, if I may adopt a simile used by Mr. H. G. Wells, "would as soon think of trying to kill the square root of 2 with a rook rifle." Physical violence can only solve purely physical problems. But as man no longer exists, if he ever did exist, in the completely unsocial "state of nature,"[86] the relations of one individual with another are no longer purely physical: their position as members of one society has given them a moral relation, questions affecting which can only be settled by reference to the judgment of the society as a whole. Within the limits of the State this fact is already clearly recognised by the common voice of public opinion. If Smith quarrels with his neighbour Robinson, because Smith's old English sheep-dog is suspected of having scratched up Robinson's lawn, and Smith says the poor dog would never do such a thing, and anyhow Robinson had no business to leave his back gate open, while Robinson declares that that brute is becoming a damned nuisance, and so provokes Smith to express a hope that now perhaps that grass of Robinson's won't want so much godless mowing on Sunday morning: if two neighbours, in short, have a difference of opinion they both know perfectly well that the rights of the argument can never be decided by a free fight in the middle of the road, even if one of them happens to be a heavy-weight champion. Moreover, if they do come to blows it is perfectly certain that the opinion of the whole road will be against them, and that the Law, to which they might have appealed in the first instance, will intervene as the embodiment of that opinion. The street fight is clearly recognised as not only futile but immoral; it not only settles no questions of principle but it constitutes a breach of the moral relation between two members of one community; it is become merely a rather sordid exhibition of irrelevant physical facts. The average citizen of England or Germany would never think of encouraging a fight between two sides of a street: why does he not recognise with equal directness the futility and immorality of a fight between two sides of a continent?[87] It is only because public opinion has not yet effectively realised that the moral sphere includes not only the citizens of one city and the cities of one nation, but the nations of a continent and the continents of the world. But it is a fact that the moral sphere does include the whole of humanity, who are colleagues in the task of civilisation, inspired by the twentieth-century corollary of gloomy nineteenth-century religious agnosticism, the cheerful corollary that it is Man's duty rather than God's to improve the habitable earth. The truth of this fact is already recognised by the better thought of all the nations concerned, and there is no reason why it should be withheld any longer from the people who suffer most by its suppression. As soon as public opinion is allowed to grasp this truth--and it is only too willing to clutch at any generalisation that is emotionally encouraged by its governors--there need be no difficulty at all in embodying that opinion in some form of international government: for, as Rousseau might have said, where there's a General Will, there's a way. As a matter of fact the way has already been admirably mapped by several parties of surveyors.[88] On the constitution of an International Authority, even on the general aspiration of Europe towards some form of supernational judicature, war will cease to have any more attraction or justification than the street brawl. For war is actually in the community of nations what the street fight is between individual citizens. War is futile, because it can settle no questions of principle; it is immoral, because it is an offence against the membership of a moral community. There is abundant evidence in Blue Books and in the overt acts of Germany that war releases and encourages the elementary brutality of the individual which is normally inhibited by the consciousness of social relations. I have tried to show in a former chapter that war serves the lowest interests of a parasitic commercial class at the expense of the better part of the community. War fosters at the same time the basest elements in the individual, and the basest individuals in the community. War is a crime against the peace of the people. FOOTNOTES: [Footnote 86: _Supra_, I, § 5.] [Footnote 87: Mr. Gilbert Cannan has noted somewhere that "a 'straight' fight between Great Britain and Germany will be like a fight between two drunken women in a slum."] [Footnote 88: See, for example, the quite definite and complete report on _International Government_, published by the Fabian Society (1916): and compare Mr. J. A. Hobson's book _Towards International Government_, and Mr. H. G. Wells' _The World Set Free_.] § 8 Imperialism and Capitalism through War and Trade the Enemies: Socialism to the Rescue It is the most remarkable fact in political bibliography that all the Utopias worth mentioning have been written by Socialists. The fact is not surprising to anyone who has considered that the Socialists are the only political party in the State who ever attempt to look more than a dozen years ahead. The ordinary politician steers the ship by keeping a look-out for rocks and squalls, and does not trouble to make for any distant landmark. Only the Socialist looks ahead to a harbour attainable perhaps in a hundred years, from which a happier voyage may be begun. Only the Socialist seems to realise that in the world conceived, as modern thought must conceive it, as a continuous process, Government rather than Trade, Science and Art rather than Industry are the chief activities of the citizen. Government is nothing less than the organisation of the State to take its place among the other States of the world. It includes of course education, being itself a form of education: for the State must be educated to fulfil its duty to other States, just as the citizen must be (and more or less is) educated in duty towards his neighbour. The first task of education is naturally to eliminate violence, to inhibit, by inducing in the young citizen the recognition of mutual rights, those acts of ferocity by which primitive man instinctively expresses his solipsistic passions. But where, it may well be asked, is the authority which is to begin the neglected education of the nations of Europe? Where is what Mr. Boon (or Mr. Bliss) would call "the Mind of the Race"? At present the only body of doctrine with any conception of the nature of government for the collective benefit of humanity is International Socialism. It is the International Socialists who must lead the attack on War, if only because the only instigators of war themselves form an international body in so far as the only occasions for war are contrived by the Imperialists and Capitalists who are to be found in every nation. To Socialism belongs the duty of educating Europe against Imperialism, as it has begun to educate the nation against Capitalism; for Imperialism is only an allotropic form of Capitalism, manifesting itself in the exploitation of fellow-nations instead of in the exploitation of fellow-citizens. The first step in that education must be the fight not only against "private" or profiteering Trade, but against "private" or profiteering War: and "private war" is every war that is not authorised by an International Authority and waged by an International army. I seem to have heard it said before that there is only one way to break the chains that bind us: and that Amalgamation is the mother of Liberty. The need for the education of Europe is a call to the Trade Unionists and Fabians and Collectivists and Guildsmen of every Nation: SOCIALISTS OF THE WORLD UNITE. * * * * * APPENDIX TO CHAPTER III SOME TYPICAL WAR PROFITS I. _The Manchester Guardian_, January 3, 1916: BRITISH INDUSTRY IN WAR The first full calendar year of war has been a period of unparalleled industrial activity and, generally speaking, prosperity in this country. Heavy losses and bad times have been encountered in a few important industries, but these are balanced by unprecedented profits made by a large variety of industries, whether directly or indirectly affected by the war. One frequently finds that the neutral visitor carries away with him an impression of industrial England as one great living arsenal. That is not surprising, as since July last the Munitions Ministry has erected (or improvised) and started a large number (it is not permissible to say how many) of State munitions works, and it has also mobilised the whole engineering resources of the nation to such an extent that in the first week of December no fewer than 2026 manufacturing establishments had been declared "controlled firms." But it would be a mistake to suppose that, while war manufactures prospered, all other industry languished and decayed. To prove the contrary and show that only here and there were there heavy losses, we may quote some figures compiled by the _Economist_, which show that 720 industrial concerns publishing their reports during the first nine months of 1915, and having a capital of £531,678,701, made profits amounting to £52,881,300, or under 2-1/4 millions less than in the previous year (which in the case of almost all the reports was a year before the war). Dissecting these figures, we find that not only iron, coal, steel, and shipping companies report enormous profits, but that increased earnings were shown by breweries, gas, rubber, oil, and trust companies, and others. The large exceptions which depressed the total profits were textile companies (other than those engaged on war contracts), catering, and cement companies. Shipping leads the van of prosperity owing to phenomenal freight rates, while iron and steel and shipbuilding, as direct and established purveyors of armaments, are close behind. As showing the industrial tendency of the year, one may quote the remarks of a trust company chairman at a recent meeting. Of 150 home investments possessed by his company, he remarked that a hundred had since the war yielded the same as in the year before war, while thirty had paid less and twenty more. Into the circle of munition producers have been drawn cycle and motor, machinery, electrical, and many other branches of manufacture. Of other industries driven to fever heat by the war may be mentioned woollen and leather factories. Secondary effects of the war also produced a boom in several unexpected quarters. For instance, the high wages earned by war workers, and too generously spent in a vast number of cases, led to a strong demand for cheap furniture, pianos and many types of household goods which in normal times are usually out of reach of the purse of most wage-earners. But one trouble has beset all industries in common--a shortage of labour, which cannot but grow with every increase to the numbers of men drafted from the ranks of productive industry into the army or the munitions works. From all quarters comes the tale of orders, both from home and from abroad, that cannot be accepted. In the case of foreign orders that have to be refused, the labour shortage has what one fears may be lasting consequences. For custom once diverted to America or elsewhere is not easily regained. 2. _The Manchester Guardian_, March 3, 1916: MORE GREAT PROFITS HOLT LINE'S ENORMOUS SURPLUS The China Mutual Steam Navigation Company (Holt Line) has had a greater year than ever. It has been supposed that regular liners were getting little benefit from the boom in freights, but a profit of £591,005, as against about £294,000 in 1914 and £386,418 in 1913, can only be explained by a very large participation in special war-time gains. The dividend and bonus on the ordinary shares make 106 per cent for the fourth year in succession, and a still larger sum is being kept in hand, £200,000 being put to the reserve, as against £50,000 for 1914 and £100,000 for each of two years before that, and the balance forward is raised from £81,014 to £201,367. Most of the Company's capital, however, only bears 6 per cent interest. The ordinary shares (which we believe are held privately) only amount to a little over £83,000. 3. _Pall Mall Gazette_, September 24, 1915: WAR PROFITS The other taxes are accepted by the public and traders alike as inevitable, but special interest is being taken in the excess war profits tax. That Mr. McKenna is likely to find his estimate of £30,000,000 largely exceeded is admitted. The _Daily Chronicle_ publishes a table in which the City Editor compares the last profits announced by some of our greatest undertakings, covering a considerable portion of the war period in most and some portion of it in all cases, with the average of the previous three years. It will be seen that in every instance the war has brought greatly increased prosperity. Last Average Profit. Previous Increase. 3 years. £ £ £ ARMSTRONG WHITWORTH 802,000 624,000 178,000 (Engineering, Shipb., etc.) WM. BEARDMORE 219,000 185,000 34,000 (Engineering, Shipb., etc.) JOHN BROWN 586,000 347,000 239,000 (Engineers, Shipbuilders, etc.) BEYER PEACOCK 83,000 35,000 48,000 (Locomotive Builders) BRUNNER MOND 824,000 770,000 54,000 (Alkali Manufacturers) CAMMELL, LAIRD 238,000 147,000 91,000 (Iron, Steel, and Shipb.) HAWTHORN LESLIE 202,000 102,000 100,000 (Sh'b. & Marine Engin'ring) KYNOCH'S 153,000 114,000 39,000 (Explosives) LAMBERT BROS. 142,000 84,000 58,000 (Coal Exporters, etc.) POWELL DUFFRYN 422,000 279,000 143,000 (Collieries) SAMUEL FOX 66,000 39,000 27,000 (Engineers) SPILLERS & BAKERS 367,000 140,000 227,000 (Millers) VICKERS, LTD. 1,019,000 809,000 210,000 (Eng. and Shipbuilding) This table indicates that the Chancellor may expect to receive far more than the sum he estimated from the war profits tax. 4. _The Manchester Guardian_, Feb. 28, 1916: COAL PROFITS NEARLY DOUBLED The tale of colliery war profits is continued by the report of North's Navigation Collieries (Glamorganshire). The output for 1915 was actually less by 87,810 tons (1,141,900 tons against 1,229,710), but the profit was nearly doubled--£130,071 against £65,578. With the £10,496 brought into the account the directors had their biggest total in recent years available for distribution. The ordinary shareholders get 10 per cent and a bonus of 2-1/2 per cent, which is the best payment since the 15 per cent paid for 1907. Advantage is taken of a prosperous year to place £35,000 to the reserve fund, which has been rather overlooked recently, only one allocation of £20,000 having been made in four years. It now stands at £155,000, against £650,000 of share capital. For depreciation, with regard to which item substantial provision is made each year, £15,000 is written off. This leaves £10,567 to be carried forward. The Company has the reputation of being well managed, and its coal properties are regarded as being very valuable. The recently opened St. John's pits are being developed satisfactorily, it appears, a further increase in output being shown. Despite a decrease in output of nearly 400,000 tons, the Powell Duffryn Steam Coal Company is enabled to show a profit for 1915 of £438,799, as compared with £422,204 for 1914 and £364,421 for 1913. The usual 20 per cent is distributed on the ordinary shares, free of income tax, and last year's allocation of £50,000 to the reserve fund is repeated. In addition, the reserve for income tax benefits to the extent of £50,052, and there remains £120,236 to carry forward. The decrease in output, it should be noted, is due to the enlistment of the miners, and its restoration to the normal and probable increase after the war should balance the decline in profit that may be expected to attend the decreased demand. 5. The Times, May 19, 1916: SOAPMAKERS' "RECORD" PROFITS Presiding yesterday at the annual meeting of Joseph Watson and Sons (Limited), soapmakers, Leeds, Mr. Joseph Watson said that the company's profits for the year amounted to £122,000, or £19,000 in excess of any previous year's profits. Their turnover had largely increased because they were now supplying soap to France, Belgium, Scandinavia, and a small amount to Spain and Italy. It was not a question to-day of getting orders; it was a question of refusing them. They had at the present time three months' orders on the books. 6. _The New Witness_: THE SCANDAL OF WAR PROFITS It is a sinister and deplorable fact--one of the most ironical with which the continuance of the War has yet confronted us--that there has grown up in Great Britain a number of firms and businesses to whom a successful prosecution of the campaign would mean ruin, and who have an actual vested interest in the indecisive continuance of hostilities. This is due entirely to the lack of grip and resolution which the Government have displayed in dealing with the ugly phenomenon of War Profits. We know, of course, what happens to those profits at present. Half is taken by the State: half passes to the firms who are getting "rich quick" out of its necessities. In theory, it is an anomalous arrangement, indefensible in logic, and opposed to every canon alike of justice and of taxation. In practice it works out in the way we have indicated: that certain privileged firms and individuals are amassing huge fortunes out of the gravest crisis through which the nation has passed, and which will pinch us all before it is over. Let us give some examples of the mammoth profits that some of these concerns are making. There is first of all the famous old English firm of Levinstein--Messrs. Levinstein of Manchester--to be considered. This "all-British" concern has not done badly out of the terrible situation through which we are slowly toiling. While mere vulgar English Tommies have been dying in the trenches or have returned incapacitated to England--to find that their country cannot afford them a pension--Levinsteins have been pocketing several thousands of that country's cash. Levinsteins' are dye-makers, and in 1914-15 they made a profit of £80,000 _on a capital of_ £90,000: a profit large enough to make the mouth of the deceased usurer Kirkwood dry with envy. But, while our legislature passed laws to restrain the usurer in his exactions, the "war profiteer" has no restriction placed on him. His workmen can, in certain cases, be fined or sent to prison if they absent themselves from work, and hundreds have been proceeded against under the Defence of the Realm Act. But the profiteer himself is immune! It is childish to say that the State can recover half of the profit he has wrung from the country's necessity. What right has he to the other half? In the case of Levinstein, this £80,000 profit enables the company to pay 14-1/2 years' preference dividend, to distribute a dividend of 30 per cent on its ordinary shares, and to write off £21,000 for depreciation! It is merely fatuous to pretend, or to endeavour to pretend, that the appropriation of half these profits squares matters between the community and the British firm in question. As with Levinstein, so with other firms. Messrs. Cammell, Laird & Co. averaged profits of £146,000 for the three years before the war. Since last year those profits have risen to £237,000. Those profits, of course, are subject to war profits taxation. But most manifestly that taxation is utterly inadequate. So it is in the case of Messrs. W. Beardmore, whose profits rose from £184,000 (three years' pre-war average) to £219,000; of the British Westinghouse Co., which rose from £56,000 to £151,000; and of Beyer Peacock's, which increased from £57,000 to £109,000. In all these cases the deduction of 50 per cent by the Government is entirely inadequate and utterly misleading. It is at once an admission that the firm in question has no right to amass huge profits out of the welter and tragedy of the European War, and that the State is content to stultify itself by surrendering the other half. Many of these profits have been made by covering rises in raw material far in excess of the actual increases. Many have been wrung from the poor and the needy, who are now being enjoined by the Government to eat less meat. Messrs. Spillers & Baker, of South Wales, increased their profits from an average of £140,000 (three years' pre-war average) to £367,000 in 1914-15. We do not blame them. The rise in price was beyond their control. They could hardly help benefiting. But it is mere madness for the Government to leave them in possession of these vast accretions of wealth. Firms that paid 8 per cent before the war, now paying 22-1/2 per cent (such as Messrs. Richard Dickeson & Co., the Army contractors) are able to pocket tens of thousands that ought to go to strengthen the resources of the nation. Others, like the Mercantile Steamship Co., increase their dividend from 20 per cent to 35 per cent; and some are able to pay dividends actually larger than the capital of the company itself! It is ludicrous for the Government to allow this condition of affairs to continue. Their course is quite clear. They should limit profits to the average of three years before the war, and add at the most 5 per cent. Anything short of this is a betrayal of the national interests to private firms. 7. _The New Statesman_, March 25, 1916: An innocent person might think that when a manufacturing company is faced with an enormous rise in the cost of the principal commodity it consumes, its profits would be diminished. Some law must be in operation which has escaped the attention of economists, for so far from this being the case, what appears to happen is that the profits of manufacturers rise in a greater degree than the price of the raw material. Thus, so far from being hit by the enormous rise in the price of flour, Peek, Frean & Co., the well-known biscuit manufacturers, made a net profit of £107,478 last year, as compared with £99,578 in 1914, and £98,607 in 1913. After paying the usual 5 per cent on the £300,000 of preference shares no less than 25 per cent is paid on the £230,000 of ordinary share capital, which has been issued. This company raised its money very cheaply from the public, which paid 102 per cent for its 4 per cent debenture stock and par for the 5 per cent preference shares. The investing public does not benefit by the big dividend on the ordinary shares. These were never offered to the public, but are privately held. Another shipping company, sister to the Court Line, mentioned in these notes last week, has issued its report. This is the Cressington Steamship Company, which owns two modern tramp steamers of slightly over 7,000 tons each. The company was very fortunate in that one of these vessels was delivered in February, 1915, it having been contracted for at pre-war prices. The profits for the year amounted to £50,015, as compared with £6,861 in 1914 (when only one vessel was trading). The dividend for the year is 15 per cent, £7,072 is allocated to depreciation, £22,000 for special war profits and income-tax, whilst about £3,000 is being carried forward. The financial position of the company is such that if its ships were sold at £2 15s. per ton, shareholders would receive the return of their capital in full. On present prices, however, they would probably fetch over £15 per ton. The shares are now quoted at 28s. The Bengal Iron and Steel Company, whose report has also been issued during the week, has had an interesting career; it works large iron ore and coalmining areas in Bengal. At first the company did well, but then it went in for an unfortunate steel venture and fell into arrears with its preference dividend. This was overcome, and during the past few years the company has done well, particularly from its coal business. The report for the year ended September 30th, 1915, shows a working profit of £144,913, as compared with £79,200 during the previous year. This considerable improvement enables the company, after writing off various old items, to place to a general reserve £20,000, and to declare a dividend payable quarterly of 24 per cent on the £224,850 of ordinary shares, which compares with 12 per cent a year ago. By way of a change, the report states that the trading results would have been even better had war conditions not prevailed. EMIL DAVIES. 8. _The New Statesman_, May 27, 1916: Markets have displayed unwonted cheerfulness during the past week, and all sorts of peace rumours are in circulation. It is more than likely, however, that it is the firmness of the market which is responsible for the rumours, and not _vice versa_. There is a steady stream of orders from the Midlands and the North, where people are making money, and these have the effect of putting up prices in several of the markets. The Brazilian Funding Loan, which was recommended here on the 29th April at 74, has been noticeably firm, and is now 77-1/4. It still appears to be the cheapest Government Loan. Brazilian securities are attracting more attention, and Brazil Traction Common, which a year ago was below 50, now stands at 64. There has been a large business in Castner Kellner on the working agreement between that chemical company and Brunner, Mond & Co., the shares having jumped four or five shillings to their present price of 69s. 6d. Precisely a year ago they were recommended in these notes at 66s. 10-1/2d. Shipping shares have been exceptionally firm; Court Lines have risen another few shillings to 34s., the large business in them being probably due to the fact that they are one of the few shipping shares which can be obtained. Rubber shares are equally firm. Nobel's Explosive Company has just issued its report for last year, showing a profit of £529,738 _after_ providing for excess profits duty. The dividend is 15 per cent, free of income-tax, or 5 per cent more than last year. This increase in the dividend came as a surprise to the market, and the price of the shares (which are a favourite investment in Glasgow) jumped from 31s. to 38s. 3d. The profits of the Oceanic Steam Navigation Company (the White Star Line) for last year have attracted a good deal of attention. They were stated as being £1,968,285, as compared with £887,548 in 1914 and £1,121,268 in 1913, which was the Company's record year; but the figure given for 1915 does not indicate the full profit, for it is arrived at "after providing for excess profits taxation and contingent liabilities." Replying to a question asked in the House of Commons by Mr. W. C. Anderson, Captain Pretyman stated that the Company informed him that the profit mentioned was before deduction of debenture interest and depreciation. Captain Pretyman added that the sum divided as dividend was £487,500, the same amount as in the year 1913 before the war. Where people are protesting against large war profits it may, at first sight, appear an adequate answer to point out that a Company is not paying out more in dividends than it did in the year preceding the war. As a statement of fact it is perfectly correct, but it has no bearing upon the amount of profit that has been made, as the following calculation will show. We now know that the 1915 profit shown in the accounts is _after_ allowing for excess profits taxation, deferred repairs, contingent liabilities, debenture interest and depreciation. Since 1913 the Company has increased its debenture issue, and last year had to pay in debenture interest £109,536, as compared with £65,211 in 1914. How much has been placed on one side for depreciation before showing the profits can only be known to very few people, but the amount the Company must have put on one side for excess profits taxation must be at least half a million, and possibly a great deal more. The actual profits for last year were therefore probably in the neighbourhood of three millions, if not more. As indicated above, out of the £1,968,285 shown as profit, only £487,500 is paid out in dividends, the remainder going to various reserves. The dividend works out at 65 per cent, but all goes to the International Mercantile Marine Company, the much-talked-of American shipping trust associated with the name of the late J. Pierpont Morgan, which holds all the Ordinary Shares. The trust was in a bankrupt condition prior to the war, but the present state of affairs is radically altering its position. It must be annoying to the American holders that a large slice of the profits of an American-owned concern has to go to the British Government in the shape of war taxation. 9. _The New Statesman_, June 24, 1916: Another firm which has apparently benefited by the war is Ruston, Proctor & Co., the well-known Lincoln manufacturers of agricultural implements. A final dividend of 5-1/2 per cent is declared, plus a bonus of 2 per cent, making 10 per cent for the year, which still allows the Company to place £45,000 to reserve and to carry over £16,300. This dividend is 3 per cent more than was paid last year, and is the highest in the twenty-six years' history of the Company. Shipping shares remain firm, and it is almost impossible to purchase any of the best shares. As an illustration of the profits that are being made, the Nitrate Producers' Steamship Company's accounts for the year ended April 30th last show a gross profit of £404,022, as compared with £151,905 and £135,986 in 1914 and 1913 respectively. The dividend is 25 per cent, free of income tax, £100,000 is placed to reserve, £200,000 to a special fund for excess profits tax, income tax, etc., £30,000 is added to the insurance fund, and the carry forward is increased by some £7000. The Company owned a fleet of ten steamers, which has, however, been reduced to five by the sinking of one last September by an enemy submarine and by the sale of four vessels. A new vessel is under construction, and should be ready for delivery in August. The capital of the Company consists of £200,000 in Ordinary Shares and £200,000 in 5 per cent Cumulative Preference Shares. 10. _The New Witness_, June 15, 1916: WAR PROFITS AND THE GOVERNMENT It is essential that a determined effort should be made to rouse the nation to a sense of the gross and scandalous injustice of the huge profits that are at present being "earned" by certain firms piling up wealth which is really amazing to contemplate. This is not mere empty rhetoric; the figures support the description up to the hilt. Let us take the case of five well-known companies, all engaged in "war work," and see to what account they have turned our soldiers' sacrifices:-- FIRMS. PROFITS. 1913 1914 1915 £ £ £ Cammell, Laird 171,700 235,500 301,500 Curtis & Harvey 48,100 77,800 143,800 Projectile 14,000 40,400 192,700 Webley & Scott 9,500 16,400 61,300 Thornycroft 13,000 107,640 267,333 (6 mos.) These figures can only be described as staggering--staggering, that is, to anyone who cherishes a faint, lingering belief that "equality of sacrifice" is to be a reality and not merely a bitter jest. Look for a moment at the tale that these profits show! The Projectile Company has multiplied its 1913 profit _thirteen times over_! Five or six years ago its affairs were in so parlous a state that 19s. had to be written off as lost from each 20s. share. Now, as Mr. Charles Duguid reminds us, "it is paying a first dividend of 50 per cent and is returning to the shareholders 3s. 6d. out of the 19s. they regarded as lost." The return on the shares, according to the same financial authority, is 400 per cent!!! Look at the case of Thornycrofts. The profits for the first half of 1915 are twenty times as big as the profit for the whole of 1913--an increase, as Mr. Duguid reminds us, _of 3800 per cent upon the year_, a year that will spell blank financial ruin, impoverishment and destitution to the families of thousands and tens of thousands of our fighting men! Thornycrofts are by no means peculiarly fortunate; Nobels, for instance, have managed to earn quite a tidy little profit. Their net profit for 1915 comes out, we learn, at over half a million sterling (£529,800), exclusive of £213,900 brought forward out of the large profit of the preceding year, and this makes the total amount available for distribution as much as £743,700. Even after paying a dividend of 10 per cent and a bonus of 5 per cent, making 15 per cent, all free of income tax, the Company has still £424,700 unallocated. In its most prosperous year, 1913-1914, the net profit of the Nobel Dynamite Trust did not amount to more than £381,300. We have, we need hardly say, no feeling against Nobels or Thornycrofts or the Projectile Company. We only want fair play in this matter. If this aggregation of profits is not stopped the wealth of England will be in the hands of men who will regard the triumphant conclusion of the War as spelling ruin to themselves and who will see in victory only the cessation of profits that in normal times they have never dared to contemplate. The remedy for this is simple. The Government have refused to the workman the right to extort unearned increment out of the country in its dire necessity. The workman may not strike or cease work or even change employment without the permission of the State. Assuredly the State has the right to exact that obedience from him. But it is essential that it should, and at no distant date, lay its restraining hands also upon the employers who are earning these huge dividends, otherwise we shall have enacted in England the tragedy that we have seen in Ireland. We shall have a Government without moral authority, a Government which will, therefore, be perpetually embarrassed in the conduct of war. 11. _The New Witness_, June 15, 1916: WILLIAM CORY & SON This famous coal company has taken every advantage of the demand for coal, and can show a record profit. After providing for excess profits, the balance of profit is £453,136, or £237,808 more than last year. As I have again and again pointed out, I do not think the Government should allow such huge profits to be made in war time. The coal trade is in a few hands, and firms like Corys may be said to control it. The directors content themselves with raising the dividend 5 per cent to 15 per cent; but they place £100,000 to reserves, making them £500,000; £30,000 goes to staff pensions and £25,000 to a war fund for employees. The carry forward is raised £30,740 to £88,969. The steamers, tugs and barges are now to be formed as separate companies; and the French business is also to be transferred to a subsidiary. The balance-sheet shows creditors up £204,971, presumably to meet the excess profits liability. Debit balances have increased £509,840, and now include Treasury bills. War loans have been increased £280,652, and the total assets are up £451,183, at £4,541,601, and have earned 10 per cent. When all creditors have been paid the quick assets amount to £930,654, and amply protect the debentures, £900,000 which are an admirable security. I do not suppose the present Ministry will do anything to control the profits made out of the War by those who run the coal trade; and, therefore, we may expect that 1916-17 will be as good a year as that just ended. But I am not in agreement with a policy of _laissez-faire_ in war time unless the policy is carried out stringently. HOLBROOKS Apparently the sauce trade has not been seriously injured by the War, for Holbrooks have increased their trading profit £4,694 to £35,170; but income tax is higher, and £5,000 has been used as a special reserve for investments, so the available profit is only £23,046, as against £25,055 in the previous year. The dividend remains at 20 per cent, but £3,072 more is carried forward than was brought in, and the Board say that the unsettled state of the world justifies them in doing this. I suspect that they are building up a reserve for the purpose of attacking the Yankee trade which for so many years has been in the hands of Lea & Perrins. The business is well managed by the two managing directors, who have been in the firm since it was promoted. The alterations in the balance-sheet are not of any moment. Quick assets total £151,557 when liabilities have been met, and the assets have earned 7-1/2 per cent on their book value--not a very splendid profit for a sauce. JAMES HINKS & SON This famous firm of lamp makers should benefit largely by the complete absence of German competition all over the world, and the eleven months show the satisfactory profit of £13,595. The dividend for the previous thirteen months was only 6 per cent, but the report now issued declares 10 per cent and a bonus of 1s. 6d., or 17-1/2 per cent--a record distribution. Also £2,250 is placed to reserve and the carry forward is raised from £3,603 to £6,399. As long as the War lasts we may expect this remarkable prosperity to continue. The reserves are now in excess of the capital. The company has earned 7-1/2 per cent on the book value of its assets, which, in spite of goodwill and patents having been written off, looks as though they were fully valued at £179,765. The shares are a fair industrial speculation. 12. _The Manchester Guardian_, June 19, 1916: While everybody knows that the immense disbursements on the War have led to a greater demand for labour than it is possible to meet at present and that employers have done well, in spite of their difficulties, it is perhaps not generally known how greatly the profits of nearly all the public companies have increased during the last year. They have had to pay higher wages in many cases, though not in all, their materials have been much more costly, and their foreign trade has been hampered by restrictions, in furtherance of the policy of preventing the enemy from getting goods which he requires and which it is in our power to control. Many, however, have done a large business for Allied Governments as well as our own, especially in army equipment, and the demand for coal has been greater than our power of supplying it. All our production has commanded high prices, and profit margins have in most cases been very large. It is a way that chairmen of companies have to take big profits as being in the natural order of things, and dwell mostly on the difficulties which have prevented them from showing even better results. If this has obscured the real state of affairs it is desirable that the other side of the picture should be clearly presented, for it is impossible to understand the economic side of the War without a thorough comprehension of its industrial effects. We give below a tabular statement of profits which have been declared this year, with the figures for two preceding years added so as to show their true significance. Some are gross and others net profits, but in this we have simply followed the methods adopted by the directors in their reports, that being in practice the only way of showing how the comparison stands. In some cases the capital has been increased during the three years, but the extent to which that has occurred does not affect the tables if they are regarded comprehensively. Some did very badly in the first few months of the war, and the profits they declared in 1915 look very small in comparison with those in the first column of the tables. In those cases the third column will act as a corrective, for in the main it shows the companies' normal earnings. It will be noticed that some of these were very small. Here and there the company was in the development stage, but as a rule it may be taken that the concern was not a very profitable one in peace times. Possibly it was over-capitalised, or over-weighted with debentures, or its plant was out of date, or it could not get sufficient business to make full use of its productive capacity. We shall not attempt the invidious task of singling out which come in these categories, but we call attention to the cases in which small pre-war profits have been converted into large ones since because they are really the most instructive of the whole series. For very large increases upon profits which were already good the most notable are the shipping companies. Our list is typical rather than exhaustive. Some of the small concerns, with only one ship, or up to half a dozen, have done better relatively than several of the big lines, as they were more at liberty to take advantage of the big freight-rates which were going. We have not set these out, however, because it does not appear to be necessary. The dividends in virtually all cases have been substantial, and in some cases very large indeed. It would be useless, however, to show these in tables, as some of the leading companies use reserves greatly exceeding their nominal capital, and quite a number have devoted a larger proportion of their profits to strengthening their position than to the payment of dividends. In the case of the Moor line we are unable to give the amount of the profit reported last year, as the balance-sheets are not issued publicly, although we have been favoured with them occasionally. Coal, iron, engineering companies and shipbuilding companies are bracketed together because so many of them are concerned in at least two of those fields of industry. As our table shows, they have had a great revival, many having been used by the Government, while all have felt the effect of the great demand for munitions. The miscellaneous list offers an interesting field of study, and the rubber and tea companies' results are in some respects more striking still. We have only given a selection of these, but they suffice to show that rubber and tea have been very profitable since the War began. An appeal was made some time ago with a view to the "young" rubber companies being relieved of the excess profits tax, but our list shows how unnecessary it was to make any special concession to the industry they represent. In the last two months a great many of the companies have indicated that they were setting some thousands of pounds aside for the tax. Among the other concerns which have announced their appropriations to meet the excess profits tax the most notable one that we recall is the British Oil and Cake Mills Company, which expected to have to pay £225,000. The Nitrate Producers' Steamship Company is putting £200,000 to a reserve for the excess profits duty and income tax. Most of the big companies have provided for the tax before striking the profit balance, and as this is strictly correct it would hardly be fair to say that they have concealed part of their profits. The figures would have been more striking, however, if the gross sums had been given. As we read the White Star line's figures they indicate that the company has had to pay much more than the British Oil and Cake Mills Company, but the Cunard line has probably had to pay much less. The amount payable in any given case is the excess over the pre-war standard, which is fixed by taking the best two of the three immediately preceding years. Speaking generally, the companies do not appear to have hurried in their payment of the tax. For the year ended March last the total yield was estimated at £6,000,000, but the actual sum received was only £140,000, and the £6,000,000 has not been got yet, the yield from April 1 to June 10 being only £3,556,000. A sharp increase is bound to come, however, in the course of the financial year. The Chancellor of the Exchequer expects to get £86,000,000 in excess profits tax and munitions levies by the end of March next, and he cannot possibly have made so enormous a mistake as the receipts to date would suggest if we did not know that thousands of firms have still to pay very considerable sums. In the tables appended the years at the tops of columns are those in which the profits mentioned were announced. A large proportion of the results shown in the 1916 columns are for the year ended December last. Some, however, are for years which have ended since then, while a few, relating to companies which carry on business abroad, are for years which began soon after the outbreak of the War:-- SHIPPING 1916 1915 1914 £ £ £ British and African 94,388 64,464 41,357 Booth Line 328,127 225,267 154,828 China Mutual 591,005 286,725 381,729 Court 137,446 25,034 23,890 Cunard 1,579,170 1,286,948 1,187,831 Cairn 152,152 85,988 102,318 Elder, Dempster 349,444 326,122 307,605 Eagle Oil Transport 325,928 302,897 92,866 Elder 66,266 55,305 38,975 Field 71,393 11,881 -- France, Fenwick 179,100 64,900 76,800 Gulf 188,093 39,436 65,014 Houlder Bros 118,802 95,587 102,893 Indo-China 109,089 16,020 45,364 India Gen 65,738 41,974 118,379 King 102,319 17,426 90,392 Leyland (Fredk.) 1,441,690 620,839 589,810 Lamport & Holt 332,897 149,108 200,691 London & Northern 586,299 118,419 135,541 Mercantile 259,159 93,391 129,946 Moor 335,349 -- 254,000 Neptune 146,718 73,310 112,563 Nitrate Producers 381,599 134,826 125,990 Pool 601,338 118,000 -- Pyman 165,078 72,504 62,413 Royal Mail 808,731 98,232 436,470 Redcroft 117,953 13,125 21,396 Sutherland 295,220 74,841 41,779 White Star 1,968,285 887,548 1,121,268 COAL, IRON AND ENGINEERING Albion Steam Coal 44,536 36,820 24,094 Arrol (Sir W.) & Co 119,060 49,756 51,096 Brown, Bayley's Steel 32,017 1,578 29,758 Barrow Hematite 119,377 51,518 104,664 British Aluminium 180,057 156,066 154,488 Beyer, Peacock 54,177 109,783 87,843 British Westinghouse 176,752 151,627 106,494 Brit.Ins. & Helsby 295,131 277,428 247,351 Bell Bros 145,360 45,969 128,736 Bessemer (Hy.) 55,348 35,826 23,308 Cammell, Laird 303,841 237,899 174,126 Cory (W.) and Son 453,136 215,328 313,906 Cargo Fleet 162,276 131,142 124,219 Callender's Cable 113,266 98,692 91,861 Carlton M. Colliery 188,545 128,413 177,025 Clayton & Shuttleworth 72,787 44,643 53,496 Consolidated Cambrian 185,139 140,097 147,648 Crossley Bros 65,337 15,347 42,517 D. Davis 200,127 215,744 217,970 Dorman, Long 404,524 237,579 257,863 Edinburgh Collier's 64,807 17,420 63,969 Fife Coal 224,058 89,866 -- Gt. West. Colliery 137,008 111,821 158,420 Hadfields 265,403 139,301 109,513 Henley's Tel 153,224 112,898 106,380 Howard & Bullough 136,152 32,766 163,066 Jessop (W.) & Sons 103,726 60,354 87,343 Knowles (A.) & Sons 47,199 18,329 29,140 Leyland Motors 252,107 85,037 -- Lysaght (John) 414,764 313,707 330,576 Locket's Merthyr Colleries 45,635 6,229 22,238 Met'n Carriage 372,140 321,091 365,739 Newton, Chambers 60,669 4,182 89,523 N. B. Locomotive 174,241 160,644 140,889 North's Nav. Coal 130,071 65,578 100,144 Parkgate Iron 107,344 66,643 85,169 Projectile 194,136 30,739 18,880 Powell Duffryn 438,799 422,204 364,421 Pease & Partners 435,772 248,216 385,975 Rhymney Iron 127,733 52,488 131,901 S. Durham Steel 239,868 150,257 302,955 Shelton 109,554 63,465 81,185 Stewarts & Lloyds 256,308 233,420 246,065 Swan, Hunter, etc 305,083 217,498 264,124 United Collieries 216,065 57,600 100,503 Wigan Coal, etc 143,288 44,829 138,118 MISCELLANEOUS Angus (Geo.) & Co 54,461 43,574 32,123 Burmah Oil 1,413,170 1,411,279 1,363,389 Bradford Dyers 568,623 387,923 430,081 Bleachers' Association 416,394 197,835 423,416 Bryant and May 115,159 101,616 90,158 Broxburn Oil 46,729 22,252 57,046 British Cotton and Wool Dyers 93,524 42,297 9,290 Brunner, Mond 1,011,590 799,322 769,343 Bovril 168,796 137,584 119,813 Buttons 63,297 38,880 32,834 Borax Consolidated 205,825 195,449 235,285 Barlow & Jones 46,798 38,936 33,584 British Oil, etc., Mills 243,110 111,203 116,541 British and Argentine Meat 651,289 67,288 -- Curtis's & Harvey 143,830 77,754 48,117 Courtaulds 741,668 520,349 474,154[89] Calico Prin. (half yr.) 176,521 -- 55,495 E. Velvet, etc., Dyers 70,833 61,161 72,467 Fore St. Warehouse 48,957 28,597 -- Forestal Land 900,947 234,065 383,362 Fine Spinners 535,854 391,057 613,415 Gas Light & Coke 604,314 449,510 522,710 Hollins (W.) & Co 105,639 65,786 65,986 Henry (A. and S.) 249,713 104,098 122,528 Imperial Tobacco 3,699,891 3,533,360 3,354,476 Lever Bros 1,265,933 1,152,107 988,238 Linen Thread 257,418 188,773 189,142 Lennards 41,300 34,457 30,377 Lister and Co 133,874 94,403 151,458 Lyons (J.) & Co 278,293 276,403 353,303 Maypole Dairy 528,274 488,026 489,643 Mandleberg (J.) 74,506 52,049 57,964 Pumpherston Oil 134,927 74,010 140,025 Rylands & Sons (half yr.) 120,032 55,179 -- Rotherham (Jer.) 104,925 74,638 59,692 Salt Union 140,524 89,443 82,791 Sears (J.) & Co 82,070 65,032 57,061 Stead & Simpson 59,898 32,762 30,357 Samnuggur Jute 299,829 44,307 86,574 Spillers & Bakers 217,416 367,866 89,351 United Alkali 341,986 217,081 193,604 Winterbottom Book Cloth 171,191 119,795 165,213 Webley & Scott 61,277 16,376 9,511 Whiteaway, Laidlaw 131,577 107,952 129,790 Watson (Joseph) 122,001 89,290 103,999 Young's Paraffin 47,953 24,139 80,152 RUBBER, &c. 1916 1915 1914 £ £ £ Anglo-Malay 121,224 76,931 104,583 Assam-Dooars 51,674 22,269 -- Amalgamated Tea 157,818 98,176 78,787 Batu Tiga 56,293 22,315 24,762 Bukit Sembawang 33,989 14,344 6,090 Consolidated Tea 479,815 289,262 247,633 Chersonese 59,602 35,019 29,081 Ceylon Tea 163,899 108,300 93,900 Damansara 48,680 30,580 29,081 Eastern Produce 126,406 71,724 69,004 Grand Central 248,201 132,019 87,554 Highlands & Lowlands 108,343 75,425 79,079 Jorehaut Tea, 64,508 43,204 34,088 Jhanzie Tea 35,881 17,286 15,113 Klanang 37,918 20,458 24,257 Kuala Selangor 47,748 42,013 32,798 Kanan Devan 208,612 120,119 106,909 Linggi 125,739 78,899 83,746 Lunuva 32,994 12,599 12,602 Malacca 252,006 144,224 131,156 Nuwara Eliya 49,915 21,921 -- Nordanal 39,658 36,686 49,344 Panawatte Tea 38,167 23,833 -- Rub. Est., Johore 42,703 22,541 10,931 Rani Travancore 63,791 35,349 32,259 Singlo Tea 68,857 36,166 31,449 Sungei Way 38,532 36,533 25,624 Straits 157,678 164,750 185,426 Sungei Kapar 59,966 39,426 42,364 Selangor 55,457 58,007 41,940 Seremban 43,410 24,198 22,471 Sunnygama 63,688 43,142 31,931 13. _The New Witness_, June 22, 1916: The Tenth Ordinary General Meeting of the Forestal Land, Timber, and Railways Co. (Ltd.) was held on Friday last, at Winchester House, E.C., Baron Emile B. d'Erlanger (chairman of the company), presiding. The chairman said that the share capital remained unaltered, and the debenture debt had only been decreased by the yearly amortisation. No less than £143,600 had been added to the depreciation account, making it £634,170. Credit balances had swollen by the sum of £175,589. The profit on the year was £900,947, as against £234,064 last year. On the credit side, properties stood at £4,405,917, and had increased by the new properties acquired. The live stock stood at £34,000 less than last year, due to a smaller stock of "Invernada" cattle. The stocks of extract and felled timber had risen by £115,000, principally owing to a larger stock of felled timber. Debit balances had risen to £156,000. In the profit and loss account the trading profit was £1,281,299, as compared with £614,879 last year, and, after deducting London charges, debenture interest, depreciation, and legal reserve, there was left a profit of £900,947. 14. _The Westminster Gazette_, July 15, 1916: The accounts of the W. and C. T. Jones Steamship Company, Limited, of Cardiff, for the year ended June 30, show that, with a fleet of thirteen steamers, £524,855 profit has been earned, representing 187 per cent on the capital of £280,000. The previous year's earnings were £87,105. A dividend of 15 per cent, making, with 10 per cent interim dividend, 25 per cent for the year, free of income tax, is declared. 15. _The New Statesman_, July 1, 1916: The prolonged debate in the House of Commons on the Excess Profits Tax ended on Monday in a vote which found Mr. McKenna's critics in a small though substantial minority. The point actually at issue was not very simple, and in spite of repeated explanations several of the most persistent speakers never grasped it. The demand was that all "controlled establishments" should be exempt from the excess profits tax in consideration of the patriotic services they were rendering to their country and of the "bargain" alleged to have been concluded with the Ministry of Munitions whereby any profits they may make in excess of 20 per cent above their normal profits are in any event taken by the State. This meant, of course, that a controlled firm which made a profit of £50,000 in 1914, and of £60,000 (due to war contracts) in 1916, would retain the whole of their excess profits without reduction. Mr. McKenna argued that such firms, having the advantages of practically compulsory labour and freedom from Trade Union restrictions, ought, at any rate, not to be let off more lightly than uncontrolled firms. It is amazing that such a proposition should have to be stated at all. The point of view of the ordinary member of the public undoubtedly is that excess profits on the making of munitions simply ought not to exist. If engineering firms are permitted to maintain their old standard of profit and dividend (with fair arrangements, of course, for new capital and depreciation), they ought to be more than satisfied. Great heat was developed on the debate by the representatives of various capitalist interests, notably Sir Arthur Markham, Mr. J. M. Henderson, Sir Croydon Marks, and Sir Alfred Mond; and some of them were not even ashamed to hint that if their demands were not agreed to there might be a diminution of output. At a moment when tens of thousands of men are giving up their whole incomes as well as their savings, in order to fight for their country, it is impossible to imagine any spectacle more unedifying for the wage-earning class than that of these malcontent capitalist legislators angrily fighting for their extra war-profits. When one remembers that it was these same gentlemen who were so enthusiastic for compelling younger and poorer men to sacrifice everything they possess, it is hard to find words to say what ought to be said of them. We hope, at all events, that the names of those who voted against the Government on the division will not be allowed to be forgotten in the constituencies. 16. _Pall Mall Gazette_, January 31, 1916: _From Our Own Correspondent._ PARIS, _Saturday_. The trouble that has been brewing for months past at the Central Markets has now come to a head. A well-known dealer was suspended by the Prefect of Police; the Home Office thought this insufficient and revoked his licence; and there is now talk of a prosecution. The Central Markets are not a place which the habitual Parisian cares to venture into. Apart from its own peculiar and particularly pungent odours, the markets are peopled with a class of stallkeeper who do not exactly keep their tongue in their pocket, as the French say. They have, in fact, a flow of language, and it requires a brave man to make a stand against it--and all the brave men are at the front just now. But the Central Markets not only have a language of their own; they have ways and methods of dealing that require long years of acquaintance to fathom, so only experts venture to make head or tail of them. All this means that between the Central Markets, at the depository, and most of all that Paris wants to eat, and the actual consumer as represented by the ordinary housewife starting out on her daily round of shopping, there move and live a host of intermediaries. Large as their number is, they cannot compare with the middlemen who squeeze in between the Central Markets and the actual grower, breeder, or producer. With so many hands for produce to pass through, each one eager to grab all that it can for itself before it passes the stuff along, it is small wonder that prices grow, not taking into account the burden of taxes and other charges the goods have to bear on their journey from the farm to the household. ARMY OF INSPECTORS The police have an army of inspectors for watching and superintending the work of the markets. The rules drawn up for their regulation would more than fill an old-fashioned three-volume novel, and each one provides for penalties severer and stricter than the other. Yet the profitable game of rigging the market and everything connected with it is in full swing, and no one is more fooled than the police, unless it be the public. Since the war broke out, the State, the city, and the public alike, backed up by the small retail trader, have done their best to get even with the Central Markets. The more they try to put things right the worse they seem to get. Prices appear to ease for a brief space, but they soon become inflated once more. Or, if they do not, the particular commodity concerned simply disappears in some mysterious fashion until the "powers that be" submit to the inevitable, and shut their eyes to scheming they are helpless to prevent. AS MUCH FOOD AS USUAL The worst of it is that statistics can always be produced to show that the rise in prices is purely and simply the outcome of a falling off in supplies. Arrivals of fruits, vegetables, and fish in the last quarter of the past year were exactly half the average supply of an ordinary year; eggs were two-thirds below the proper figures, meat some 4,000 tons short, butter six tons, cheeses only a ton. Of course, the population of the city has diminished also to a certain extent, but not so much as might be expected considering that there is practically no single family that has not one or more members at the front. They have been replaced by refugees, sick and wounded soldiers, huge war administrations of one kind and another. Paris consequently wants almost as much feeding as in ordinary times, not taking any account of the fact that portions of both the British and French Armies still buy provisions on the Paris markets. Notwithstanding the legitimate reasons that can be put forward to explain the upward trend of prices, the authorities know well enough that all is not so innocent and above board as it appears. One or two more glaring instances than usual of manipulation have put them on the right track at last. Other steps may also be expected, for public opinion has got to the point that either the "inside ring" must be broken up or popular resentment will take a form that no Government can afford to overlook or affect to ignore. 17. _The Daily News_, August 16, 1915: A YEAR OF ECONOMIC WAR The _Vorwaerts_, without boasting, as Dr. Helfferich has been doing, of Germany's financial invincibility, yet sees cause for satisfaction in the economic condition of the Empire after twelve months of war. The upheaval of the first week of war was indeed serious, and the grim spectre of unemployment was in the air. But it was soon laid. The best results were obtained in the sphere of unemployment. At the beginning of the war it was about 22-1/2 per cent, in October only 10·9 per cent, and in May it had further sunk to 2·9 per cent. The figures for June were 2·6 per cent as against 2·5 per cent in the previous June.... Similarly the daily output of coal of the Rhenish Westphalian Coal Syndicate, which in July, 1914, reached 327,974 tons, sank in August to 170,816 tons, in September rose again to 211,995, and in October to 223,760, the figures for that month being 60 per cent of those of the previous October.... In later months, in spite of the calling up of more and more workers, it has only been 25 to 27 per cent below the normal. The writer tells the same story of the iron and textile industries, and traces the good results to the fact that the supplies of raw materials were far greater than had been thought. For instance, there were about 700,000 bales of cotton more than are needed in a normal year. Besides which the stores of conquered countries were at the disposal of the conquerors. The only trades which really suffered were those in luxuries. The article concludes thus: The German trade has survived the shocks of the first year of war better than the most convinced optimist could have hoped, and better than the organisation of other belligerents. All fears of immediate inevitable industrial collapse which haunted us at the beginning of the war have been dissipated. Instead of this we meet in all industrial circles with the consciousness [often much exaggerated] that "We can endure." The words in brackets are significant. 18. _Pall Mall Gazette_, November 10, 1916: LIVING ON WAR KRUPPS' PROFIT JUMPS FROM 1-1/2 MILLIONS TO 4-1/2 AMSTERDAM, _Tuesday Night_. An Essen telegram states that the clear profit last year of Krupps amounted to 86,400,000 marks (£4,320,000), as compared with a profit of 33,900,000 marks (£1,695,000) in the preceding year. A dividend of 12 per cent has been distributed.--Reuter. _19. Pall Mall Gazette:_ GERMAN DIVIDENDS ECONOMIC POSITION OF SOME OF HER COMPANIES The 1914 dividends of over sixty limited companies, nearly all German, and the remainder Austrian, show that in the case of sixteen companies the dividends amounted to 20 per cent or over, the average being 25-3/16 per cent. These companies (says the _Morning Post_) are mainly engaged in the production of leather, dynamite, explosives, india-rubber, arms, ammunition, and powder. In one case, that of an explosives company in Hamburg, the dividend attained 40 per cent. Germany is still barring the Swiss frontier, and for the last five days the German post arrived at Berne very late or not at all, thus pointing to great activity in military matters beyond the German-Swiss frontier. As further proof, if proof were needed, of the sufficiency of Germany's food supplies, it is pointed out that she now offers to send to Switzerland large quantities of potatoes. 20. _The Times_, July 5, 1916: WAR PROFIT-MONGERS IN RUSSIA _From our Correspondent._ PETROGRAD, _July 2_. The clergy will to-morrow publicly anathematise the "freebooters of the rear," who are amassing huge fortunes at the expense of the public. 21. _The Westminster Gazette_, Aug. 28, 1916: GERMAN WAR SCANDALS 700 PER CENT PROFIT FOR EAST PRUSSIAN LANDOWNERS ZURICH, _Sunday_. Details of several recent corrupt affairs which have come to light in Germany have reached Switzerland. At Mainz a timber merchant was arrested for bribing army officers to secure contracts for his firm. The official investigation revealed that he had paid a total of £50,000 in bribes to army officers. Some of the individual bribes were as high as £2,500. This timber merchant, who was almost a poor man before the war, has accumulated in two years a fortune which compelled him to pay income-tax on an income of £25,000 per annum. Another scandalous affair was discovered in Herr von Batocki's new Imperial Food Department. One of his officials, Bernot by name, was bribed by numerous East Prussian landowners to have the crops from their estates bought by the Government at exorbitant prices. Bernot pocketed some £15,000, and the landowners in question sold their wheat at a profit of 700 per cent.--Wireless Press. FOOTNOTES: [Footnote 89: Net loss of £276,560 in first half 1914-15.] * * * * * _BY THE SAME AUTHOR_ LETTERS FROM GREECE F'cap 8vo. 2s. _net_ CASSANDRA IN TROY Sm. 4to. 5s. _net_ _MARTIN SECKER_ _HIS COMPLETE CATALOGUE MCMXVII_ _The Books in this list should be obtainable from all Booksellers and Libraries, and if any difficulty is experienced the Publisher will be glad to be informed of the fact. He will also be glad if those interested in receiving from time to time Announcement Lists, Prospectuses, &c, of new and forthcoming books from Number Five John Street will send their names and addresses to him for this purpose. Any book in this list may be obtained on approval through the booksellers, or direct from the Publisher, on remitting him the published price, plus the postage. All prices indicated in this Catalogue are NET. MARTIN SECKER Publisher Number Five John Street Adelphi London Telephone Gerrard 4779 Telegraphic Address: Psophidian London_ Martin Secker's Catalogue PART ONE INDEX OF AUTHORS ABERCROMBIE, LASCELLES SPECULATIVE DIALOGUES. _Cr. 8vo. 5s._ HARDY: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ THE EPIC (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ AFLALO, F. G. BEHIND THE RANGES. _Wide Demy 8vo. 10s. 6d._ REGILDING THE CRESCENT. _Demy 8vo. 10s. 6d._ BIRDS IN THE CALENDAR. _Crown 8vo. 3s. 6d._ ALLSHORN, LIONEL STUPOR MUNDI. _Medium Octavo. 16s._ APPERSON, G. L. THE SOCIAL HISTORY OF SMOKING. _Post 8vo. 6s._ ARMSTRONG, DONALD THE MARRIAGE OF QUIXOTE. _Crown 8vo. 6s._ ARTZIBASHEF, MICHAEL SANINE. _Preface by Gilbert Cannan._ _Crown 8vo. 6s._ BREAKING-POINT. _Crown 8vo. 6s._ THE MILLIONAIRE. _Intro. by the Author._ _Crown 8vo. 6s._ TALES OF THE REVOLUTION. _Crown 8vo. 6s._ BARRINGTON, MICHAEL GRAHAME OF CLAVERHOUSE. _Imperial 8vo. 30s._ _Edition de Luxe _63s._ BENNETT, ARNOLD THOSE UNITED STATES. _Post 8vo. 2s. 6d._ BLACK, CLEMENTINA THE LINLEYS OF BATH. _Medium 8vo. 16s._ THE CUMBERLAND LETTERS. _Med. 8vo. 16s._ BOULGER, D. C. THE BATTLE OF THE BOYNE. _Med. 8vo. 21s._ BROWN, IVOR YEARS OF PLENTY. _Crown 8vo. 6s._ SECURITY. _Crown 8vo. 6s._ BURROW, C. KENNETT CARMINA VARIA. _F'cap 8vo. 2s. 6d._ CALDERON, GEORGE (With St. John Hankin) THOMPSON: A COMEDY. _Sq. Cr. 8vo. 2s._ CANNAN, GILBERT BUTLER: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ SATIRE (_Art and Craft of Letters_). _F'cap 8vo. 1s._ CHESTERTON, G. K. MAGIC: A FANTASTIC COMEDY. _Sq. Cr. 8vo. 2s._ COKE, DESMOND THE ART OF SILHOUETTE. _Demy 8vo. 10s. 6d._ CRAVEN, A. SCOTT THE FOOL'S TRAGEDY. _Crown 8vo. 6s._ CROSLAND, T. W. H. THE ENGLISH SONNET. _Demy 8vo. 7s. 6d._ COLLECTED POEMS. _Small 4vo. 7s. 6d._ WAR POEMS. _Crown 8vo._ 1s._ THE BOOK OF ENGLISH SONNETS. (_Edited with an Introduction._) _Pott 8vo. 5s._ DAWSON, WARRINGTON THE TRUE DIMENSION. _Crown 8vo. 6s._ DE SELINCOURT, BASIL WHITMAN: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ RHYME (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ DOUGLAS, NORMAN FOUNTAINS IN THE SAND. _Wide Dy. 8vo. 7s. 6d._ OLD CALABRIA. _Demy. 8vo. 15s._ SOUTH WIND. _Crown 8vo. 6s._ DRAYCOTT, G. M. MAHOMET: FOUNDER OF ISLAM. _Dy. 8vo. 12s. 6d._ DRINKWATER, JOHN MORRIS: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ ROSSETTI: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ THE LYRIC (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ FALLS, CYRIL KIPLING: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ FEA, ALLAN OLD ENGLISH HOUSES. _Demy 8vo. 10s. 6d._ NOOKS AND CORNERS OF OLD ENGLAND. _5s._ FLECKER, J. E. COLLECTED POEMS. _Small 4to. 7s. 6d._ THE GOLDEN JOURNEY TO SAMARKAND. _5s._ FRANCIS, RENÉ EGYPTIAN ÆSTHETICS. _Wide Demy 8vo. 7s .6d._ GRETTON, R. H. HISTORY (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ HANKIN, ST. JOHN THE DRAMATIC WORKS, with an Introduction by John Drinkwater. _Small 4to. Definitive Limited Edition in Three Volumes._ _25s._ THE RETURN OF THE PRODIGAL. _Sq. Cr. 8vo. 2s._ THE CASSILIS ENGAGEMENT. _Sq. Cr. 8vo. 2s._ HANKIN, ST. JOHN (_continued_) THE CHARITY THAT BEGAN AT HOME. _2s._ THE CONSTANT LOVER, ETC. _Sq. Cr. 8vo. 2s._ HAUPTMANN, GERHART THE COMPLETE DRAMATIC WORKS. _6 vols. Crown 8vo. 5s. per volume._ HEWLETT, WILLIAM TELLING THE TRUTH. _Crown 8vo. 6s._ UNCLE'S ADVICE: A NOVEL IN LETTERS. _Cr. 8vo. 6s._ THE CHILD AT THE WINDOW. _Crown 8vo. 6s._ INTRODUCING WILLIAM ALLISON. _Crown 8vo. 6s._ HORSNELL, HORACE THE BANKRUPT. _Crown 8vo. 6s._ HOWE, P. P. THE REPERTORY THEATRE. _Cr. 8vo. 2s. 6d._ DRAMATIC PORTRAITS. _Crown 8vo. 5s._ SHAW: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ SYNGE: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ CRITICISM (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ HUEFFER, FORD MADOX JAMES: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ COLLECTED POEMS. _Demy 8vo. 6s._ IBSEN, HENRIK PEER GYNT. A New Translation by R. Ellis Roberts. _Wide Crown 8vo. 5s._ JACOB, HAROLD PERFUMES OF ARABY. _Wide Demy 8vo. 7s. 6d._ JAMES, HENRY THE TURN OF THE SCREW. THE LESSON OF THE MASTER. THE DEATH OF THE LION. THE ASPERN PAPERS. DAISY MILLER. THE COXON FUND. JAMES, HENRY (continued) THE REVERBERATOR. THE ALTAR OF THE DEAD. THE BEAST IN THE JUNGLE. THE FIGURE IN THE CARPET. GLASSES. THE PUPIL. _Each F'cap 8vo. 2s. 6d._ JOHNSON, OWEN THE SALAMANDER. _Crown 8vo. 6s._ MAKING MONEY. _Crown 8vo. 6s._ LAMONT, L. M. A CORONAL: AN ANTHOLOGY. _F'cap 8vo. 2s. 6d._ LEWISOHN, L. THE MODERN DRAMA. _Crown 8vo. 5s._ LLUELLYN, RICHARD THE IMPERFECT BRANCH. _Crown 8vo. 6s._ LOW, IVY THE QUESTING BEAST. _Crown 8vo. 6s._ LYNCH, BOHUN UNOFFICIAL. _Crown 8vo. 6s._ THE COMPLETE GENTLEMAN. _Crown 8vo. 6s._ McFEE, WILLIAM CASUALS OF THE SEA. _Crown 8vo. 6s._ MACHEN, ARTHUR HIEROGLYPHICS. _F'cap 8vo. 2s. 6d._ MACKENZIE, COMPTON THE PASSIONATE ELOPEMENT. _Cr. 8vo. 6s. and 2s._ CARNIVAL. _Crown 8vo. 6s. and 2s._ SINISTER STREET. Volume I. _Cr. 8vo. 6s. and 2s._ SINISTER STREET. Volume II. _Crown 8vo. 6s._ GUY AND PAULINE. _Crown 8vo. 6s._ KENSINGTON RHYMES. _Crown 4to. 5s._ MAVROGORDATO, JOHN LETTERS FROM GREECE. _F'cap 8vo. 2s._ CASSANDRA IN TROY. _Small 4to. 5s._ THE WORLD IN CHAINS _Crown 8vo. 2s._ MELVILLE, LEWIS SOME ECCENTRICS AND A WOMAN. _Dy. 8vo. 10s. 6d._ METHLEY, VIOLET CAMILLE DESMOULINS: A Biography. _Dy. 8vo. 15s._ MEYNELL, VIOLA LOT BARROW. _Crown 8vo. 6s._ MODERN LOVERS. _Crown 8vo. 6s._ COLUMBINE. _Crown 8vo. 6s._ NARCISSUS. _Crown 8vo. 6s._ MURRY, J. MIDDLETON DOSTOEVSKY: A Critical Study. _Dy. 8vo. 7s. 6d._ NORTH, LAURENCE IMPATIENT GRISELDA _Crown 8vo. 6s._ THE GOLIGHTLYS: FATHER AND SON. _Cr. 8vo. 6s._ ONIONS, OLIVER WIDDERSHINS. _Crown 8vo. 6s. and 2s._ IN ACCORDANCE WITH THE EVIDENCE. _Cr. 8vo. 6s._ THE DEBIT ACCOUNT. _Crown 8vo. 6s._ THE STORY OF LOUIE. _Crown 8vo. 6s._ PAIN, BARRY ONE KIND AND ANOTHER. _Cr. 8vo. 6s. and 2s._ COLLECTED TALES: Volume I. _Medium 8vo. 5s._ COLLECTED TALES: Volume II. _Medium 8vo. 5s._ THE SHORT STORY (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ PALMER, JOHN PETER PARAGON. _Crown 8vo. 6s._ THE KING'S MEN. _Crown 8vo. 6s._ COMEDY (_The Art and Craft of Letters_). _F'cap 8vo. 1s._ PERUGINI, MARK E. THE ART OF BALLET. _Demy 8vo. 15s._ PHILIPS, AUSTIN BATTLES OF LIFE. _Crown 8vo. 6s._ PRESTON, ANNA THE RECORD OF A SILENT LIFE. _Crown 8vo. 6s._ REID, FORREST YEATS: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ ROBERTS, R. ELLIS IBSEN: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ PEER GYNT: A NEW TRANSLATION. Cr. 8vo. 5s._ SABATINI, RAFAEL THE SEA-HAWK. _Cr. 8vo. 6s. and 2s._ THE LION'S SKIN. _Crown 8vo. 2s._ THE BANNER OF THE BULL. _Crown 8vo. 6s._ THE SNARE. _Crown 8vo. 6s._ SAND, MAURICE THE HISTORY OF THE HARLEQUINADE. _Two Volumes._ _Med. 8vo. 25s. the set._ SCOTT-JAMES, R. A. PERSONALITY IN LITERATURE. Demy 8vo. 7s. 6d._ SIDGWICK, FRANK THE BALLAD (_Art and Craft of Letters_). _1s._ SIMMS, EVELYN A VISION OF CONSOLATION. _Crown 8vo. 1s._ THE CROWNING PURPOSE. _Crown 8vo. 1s._ SOLOGUB, FEODOR THE OLD HOUSE. _Crown 8vo. 6s._ THE LITTLE DEMON. _Crown 8vo. 6s._ THE CREATED LEGEND. _Crown 8vo. 6s._ SQUIRE, J. C. GEORGIAN POETS. _Crown 8vo. 5s._ TRICKS OF THE TRADE. _Crown 8vo. 2s. 6d._ THE GOLD TREE. Demy 8vo. 7s. 6d._ STONE, CHRISTOPHER THE BURNT HOUSE. _Crown 8vo. 6s._ PARODY (_Art and Craft of Letters_). _1s._ STRAUS, RALPH CARRIAGES AND COACHES. _Med. 8vo. 18s._ SWINNERTON, FRANK GISSING: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ STEVENSON: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ SWINNERTON, FRANK (_continued_) NOCTURNE. THE CHASTE WIFE. _Each Cr. 8vo. 6s._ TAYLOR, G. R. STIRLING _Mary Wollstonecraft._ Demy 8vo. 7s. 6d._ TAYLOR, UNA MAETERLINCK: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ THOMAS EDWARD SWINBURNE: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ PATER: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ THE TENTH MUSE. _F'cap 8vo. 2s. 6d._ VAUGHAN, H. M. MELEAGER. _Crown 8vo. 6s._ THE DIAL OF AHAZ. _Crown 8vo. 6s._ AN AUSTRALASIAN WANDER-YEAR. _Dy. 8vo. 10s. 6d._ WALPOLE, HUGH FORTITUDE. _Crown 8vo. 6s._ THE DUCHESS OF WREXE. _Crown 8vo. 6s._ THE DARK FOREST. _Crown 8vo. 6s._ WEST, JULIUS CHESTERTON: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ WILLIAMS, ORLO VIE DE BOHÈME. _Demy 8vo. 15s._ MEREDITH: A CRITICAL STUDY. _Dy. 8vo. 7s. 6d._ THE ESSAY (_The Art and Craft of Letters_). _1s._ YOUNG, FILSON NEW LEAVES. _Wide Crown 8vo. 5s._ A CHRISTMAS CARD. _Demy 16mo. 1s._ YOUNG, FRANCIS BRETT DEEP SEA. _Crown 8vo. 6s._ THE DARK TOWER. _Crown 8vo. 6s._ THE IRON AGE. _Crown 8vo. 6s._ FIVE DEGREES SOUTH _Crown 8vo. 1s._ YOUNG, F. & E. BRETT UNDERGROWTH. _Crown 8vo. 6s._ BRIDGES: A CRITICAL STUDY. _Dy. 8vo 7s. 6d._ PART TWO: CLASSIFIED INDEX OF TITLES _General Literature_ ART OF BALLET, THE. _By Mark E. Perugini._ ART OF SILHOUETTE, THE. _By Desmond Coke._ BATTLE OF THE BOYNE, THE. _By D. C. Boulger._ BEHIND THE RANGES, _By F. G. Aflalo._ BIRDS IN THE CALENDAR. _By F. G. Aflalo._ CAMILLE DESMOULINS. _By Violet Methley._ CARRIAGES AND COACHES. _By Ralph Straus._ CHRISTMAS CARD, A. _By Filson Young._ CUMBERLAND LETTERS, THE. _By Clementina Black._ DRAMATIC PORTRAITS. _By P. P. Howe._ ENGLISH SONNET, THE. _By T. W. H. Crosland._ GEORGIAN POETS. _By J. C. Squire._ GOLD TREE, THE. _By J. C. Squire._ GRAHAME OF CLAVERHOUSE. _By Michael Barrington._ HIEROGLYPHICS. _By Arthur Machen._ HISTORY OF THE HARLEQUINADE, THE. _By M. Sand._ LETTERS FROM GREECE. _By John Mavrogordato._ LINLEYS OF BATH, THE. _By Clementina Black._ MAHOMET. _By G. M. Draycott._ MARY WOLLSTONECRAFT. _By G. R. Stirling Taylor._ NEW LEAVES. _By Filson Young._ PERSONALITY IN LITERATURE. _By R. A. Scott-James._ REGILDING THE CRESCENT. _By F. G. Aflalo._ SOCIAL HISTORY OF SMOKING, THE. _By G. L. Apperson._ SOME ECCENTRICS AND A WOMAN. _By Lewis Melville._ SPECULATIVE DIALOGUES. _By Lascelles Abercrombie._ STUPOR MUNDI. _By Lionel Allshorn._ TENTH MUSE, THE. _By Edward Thomas._ TRICKS OF THE TRADE. _By J. C Squire._ THOSE UNITED STATES. _By Arnold Bennett._ VIE DE BOHÈME. _By Orlo Williams._ WORLD IN CHAINS, THE. _By J. Mavrogordato._ _Verse_ BOOK OF ENGLISH SONNETS, THE. CARMINA VARIA. _By C. Kennett Burrow._ COLLECTED POEMS OF T. W. H. CROSLAND. COLLECTED POEMS OF J. E. FLECKER. COLLECTED POEMS OF F. M. HUEFFER. CORONAL, A. A NEW ANTHOLOGY. _By L. M. Lamont._ CROWNING PURPOSE, THE. _By Evelyn Simms._ FIVE DEGREES SOUTH. _By F. Brett Young._ GOLDEN JOURNEY TO SAMARKAND, THE. _By J. E. Flecker._ KENSINGTON RHYMES. _By Compton Mackenzie._ VISION OF CONSOLATION, A. _By Evelyn Simms._ WAR POEMS BY 'X.' _Drama_ DRAMATIC WORKS OF ST. JOHN HANKIN. _3 vols._ DRAMATIC WORKS OF GERHART HAUPTMANN. _6 vols._ CASSANDRA IN TROY. _By John Mavrogordato._ MAGIC. _By G. K. Chesterton._ MODERN DRAMA, THE. _By L. Lewisohn._ PEER GYNT. _Translated by R. Ellis Roberts._ REPERTORY THEATRE, THE. _By P. P. Howe._ THOMPSON. _By St. John Hankin and G. Calderon._ _Travel_ AUSTRALASIAN WANDER-YEAR, AN. _By H. M. Vaughan._ EGYPTIAN ÆSTHETICS. _By Rene Francis._ FOUNTAINS IN THE SAND. _By Norman Douglas._ NOOKS AND CORNERS OF OLD ENGLAND. _By Allan Fea._ OLD CALABRIA. _By Norman Douglas._ OLD ENGLISH HOUSES. _By Allan Fea._ PERFUMES OF ARABY. _By Harold Jacob._ _Martin Secker's Series of Critical Studies_ ROBERT BRIDGES. _By F. & E. Brett Young._ SAMUEL BUTLER. _By Gilbert Cannan._ G. K. CHESTERTON. _By Julius West._ FYODOR DOSTOEVSKY. _By J. Middleton Murry._ GEORGE GISSING. _By Frank Swinnerton._ THOMAS HARDY. _By Lascelles Abercrombie._ HENRIK IBSEN. _By R. Ellis Roberts._ HENRY JAMES. _By Ford Madox Hueffer._ RUDYARD KIPLING. _By Cyril Falls._ MAURICE MAETERLINCK. _By Una Taylor._ GEORGE MEREDITH. _By Orlo Williams._ WILLIAM MORRIS. _By John Drinkwater._ WALTER PATER. _By Edward Thomas._ D. G. ROSSETTI. _By John Drinkwater._ BERNARD SHAW. _By P. P. Howe._ R. L. STEVENSON. _By Frank Swinnerton._ A. C. SWINBURNE. _By Edward Thomas._ J. M. SYNGE. _By P. P. Howe._ WALT WHITMAN. _By Basil de Selincourt._ W. B. YEATS. _By Forrest Reid._ _The Art and Craft of Letters_ BALLAD, THE. _By Frank Sidgwick._ COMEDY. _By John Palmer._ CRITICISM. _By P. P. Howe._ EPIC, THE. _By Lascelles Abercrombie._ ESSAY, THE. _By Orlo Williams._ HISTORY. _By R. H. Gretton._ LYRIC, THE. _By John Drinkwater._ PARODY. _By Christopher Stone._ SATIRE. _By Gilbert Cannan._ SHORT STORY, THE. _By Barry Pain._ _The Tales of Henry James_ ALTAR OF THE DEAD, THE. ASPERN PAPERS, THE. BEAST IN THE JUNGLE, THE. COXON FUND, THE. DAISY MILLER. DEATH OF THE LION, THE. FIGURE IN THE CARPET, THE. GLASSES. LESSON OF THE MASTER, THE. PUPIL, THE. REVERBERATOR, THE. TURN OF THE SCREW, THE. _Martin Secker's Series of Two-Shilling Novels_ CARNIVAL. _By Compton Mackenzie._ SINISTER STREET: VOL. I. _By Compton Mackenzie._ THE PASSIONATE ELOPEMENT. _By Compton Mackenzie._ THE SEA-HAWK. _By Rafael Sabatini._ SANINE. _By Michael Artzibashef._ FORTITUDE. _By Hugh Walpole._ THE LION'S SKIN. _By Rafael Sabatini._ WIDDERSHINS. _By Oliver Onions._ ONE KIND AND ANOTHER. _By Barry Pain._ _Fiction_ BANKRUPT, THE. _By Horace Horsnell._ BANNER OF THE BULL, THE. _By Rafael Sabatini._ BATTLES OF LIFE. _By Austin Philips._ BREAKING-POINT. _By Michael Artzibashef._ BURNT HOUSE, THE. _By Christopher Stone._ CARNIVAL. _By Compton Mackenzie._ CASUALS OF THE SEA. _By William McFee._ CHASTE WIFE, THE. _By Frank Swinnerton._ COLLECTED TALES: VOL. I. _By Barry Pain._ COLLECTED TALES: VOL. II. _By Barry Pain._ COLUMBINE. _By Viola Meynell._ COMPLETE GENTLEMAN, THE. _By Bohun Lynch._ CREATED LEGEND, THE. _By Feodor Sologub._ DARK FOREST, THE. _By Hugh Walpole._ DARK TOWER, THE. _By F. Brett Young._ DEBIT ACCOUNT, THE. _By Oliver Onions._ DEEP SEA. _By F. Brett Young._ DIAL OF AHAZ, THE. _By H. M. Vaughan._ DUCHESS OF WREXE, THE. _By Hugh Walpole._ FOOL'S TRAGEDY, THE. _By A. Scott Craven._ FORTITUDE. _By Hugh Walpole._ GOLIGHTLYS, THE. _By Laurence North._ GUY AND PAULINE. _By Compton Mackenzie._ IMPATIENT GRISELDA. _By Laurence North._ IMPERFECT BRANCH, THE. _By Richard Lluellyn._ IN ACCORDANCE WITH THE EVIDENCE. _By O. Onions._ INTRODUCING WILLIAM ALLISON. _By William Hewlett._ IRON AGE, THE. _By F. Brett Young._ KING'S MEN, THE. _By John Palmer._ LION'S SKIN, THE. _By Rafael Sabatini._ LITTLE DEMON, THE. _By Feodor Sologub._ LOT BARROW. _By Viola Meynell._ MARRIAGE OF QUIXOTE, THE. _By Donald Armstrong._ MAKING MONEY. _By Owen Johnson._ MELEAGER. _By H. M. Vaughan._ MILLIONAIRE, THE. _By Michael Artzibashef._ MODERN LOVERS. _By Viola Meynell._ NARCISSUS. _By Viola Meynell._ NOCTURNE. _By Frank Swinnerton._ OLD HOUSE, THE. _By Feodor Sologub._ ONE KIND AND ANOTHER. _By Barry Pain._ PASSIONATE ELOPEMENT, THE. _By Compton Mackenzie._ PETER PARAGON. _By John Palmer._ QUESTING BEAST, THE. _By Ivy Low._ RECORD OF A SILENT LIFE, THE. _By Anna Preston._ SALAMANDER, THE. _By Owen Johnson._ SANINE. _By Michael Artzibashef._ SEA HAWK, THE. _By Rafael Sabatini._ SECURITY. _By Ivor Brown._ SINISTER STREET. I. _By Compton Mackenzie._ SINISTER STREET. II. _By Compton Mackenzie._ SNARE, THE. _By Rafael Sabatini._ SOUTH WIND. _By Norman Douglas._ STORY OF LOUIE, THE. _By Oliver Onions._ TALES OF THE REVOLUTION. _By M. Artzibashef._ TELLING THE TRUTH. _By William Hewlett._ TRUE DIMENSION, THE. _By Warrington Dawson._ UNCLE'S ADVICE. _By William Hewlett._ UNDERGROWTH. _By F. & E. Brett Young._ UNOFFICIAL. _By Bohun Lynch._ WIDDERSHINS. _By Oliver Onions._ YEARS OF PLENTY. _By Ivor Brown._ PRINTED BY WM. BRENDON AND SON, LTD. PLYMOUTH, ENGLAND. 
13488	----	AN ESSAY ON MEDIÆVAL ECONOMIC TEACHING by GEORGE O'BRIEN, LITT.D., M.R.I.A. Author of 'The Economic History of Ireland in the Seventeenth Century,' and 'The Economic History of Ireland in the Eighteenth Century' 1920 TO THE REV. MICHAEL CRONIN, M.A., D.D. UNIVERSITY COLLEGE, DUBLIN AUTHOR'S NOTE I wish to express my gratitude to the Rev. Dr. Cronin for his kindness in reading the manuscript, and for many valuable suggestions which he made; also to Father T.A. Finlay, S.J., and Mr. Arthur Cox for having given me much assistance in the reading and revision of the proofs. CONTENTS CHAPTER I INTRODUCTORY SECTION 1. AIM AND SCOPE OF THE ESSAY SECTION 2. EXPLANATION OF THE TITLE § 1. Mediæval § 2. Economic § 3. Teaching SECTION 3. VALUE OF THE STUDY OF THE SUBJECT SECTION 4. DIVISION OF THE SUBJECT CHAPTER II PROPERTY SECTION 1. THE RIGHT TO PRODUCE AND DISPENSE PROPERTY SECTION 2. DUTIES REGARDING THE ACQUISITION AND USE OF PROPERTY SECTION 3. PROPERTY IN HUMAN BEINGS CHAPTER III DUTIES REGARDING THE EXCHANGE OF PROPERTY SECTION 1. THE SALE OF GOODS § 1. The Just Price § 2. The Just Price when Price fixed by Law § 3. The Just Price when Price not fixed by Law § 4. The Just Price of Labour § 5. Value of the Conception of the Just Price § 6. Was the Just Price Subjective or Objective? § 7. The Mediæval Attitude towards Commerce § 8. _Cambium_ SECTION 2. THE SALE OF THE USE OF MONEY § 1. Usury in Greece and Rome § 2. Usury in the Old Testament § 3. Usury in the First Twelve Centuries of Christianity § 4. The Mediæval Prohibition of Usury § 5. Extrinsic Titles § 6. Other Cases in which more than the Loan could be repaid § 7. The Justice of Unearned Income § 8. Rent Charges § 9. Partnership § 10. Concluding Remarks on Usury SECTION 3. THE MACHINERY OF EXCHANGE CHAPTER IV CONCLUSION INDEX CHAPTER I INTRODUCTORY SECTION 1.--AIM AND SCOPE OF THE ESSAY It is the aim of this essay to examine and present in as concise a form as possible the principles and rules which guided and regulated men in their economic and social relations during the period known as the Middle Ages. The failure of the teaching of the so-called orthodox or classical political economists to bring peace and security to society has caused those interested in social and economic problems to inquire with ever-increasing anxiety into the economic teaching which the orthodox economy replaced; and this inquiry has revealed that each system of economic thought that has from time to time been accepted can be properly understood only by a knowledge of the earlier system out of which it grew. A process of historical inquiry of this kind leads one ultimately to the Middle Ages, and it is certainly not too much to say that no study of modern European economic thought can be complete or satisfactory unless it is based upon a knowledge of the economic teaching which was accepted in mediæval Europe. Therefore, while many will deny that the economic teaching of that period is deserving of approval, or that it is capable of being applied to the conditions of the present day, none will deny that it is worthy of careful and impartial investigation. There is thus a demand for information upon the subject dealt with in this essay. On the other hand, the supply of such information in the English language is extremely limited. The books, such as Ingram's _History of Political Economy_ and Haney's _History of Economic Thought_, which deal with the whole of economic history, necessarily devote but a few pages to the Middle Ages. Ashley's _Economic History_ contains two excellent chapters dealing with the Canonist teaching; but, while these chapters contain a mass of most valuable information on particular branches of the mediæval doctrines, they do not perhaps sufficiently indicate the relation between them, nor do they lay sufficient emphasis upon the fundamental philosophical principles out of which the whole system sprang. One cannot sufficiently acknowledge the debt which English students are under to Sir William Ashley for his examination of mediæval opinion on economic matters; his book is frequently and gratefully cited as an authority in the following pages; but it is undeniable that his treatment of the subject suffers somewhat on account of its being introduced but incidentally into a work dealing mainly with English economic practice. Dr. Cunningham has also made many valuable contributions to particular aspects of the subject; and there have also been published, principally in Catholic periodicals, many important monographs on special points; but so far there has not appeared in English any treatise, which is devoted exclusively to mediæval economic opinion and attempts to treat the whole subject completely. It is this want in our economic literature that has tempted the author to publish the present essay, although he is fully aware of its many defects. It is necessary, in the first place, to indicate precisely the extent of the subject with which we propose to deal; and with this end in view to give a definition of the three words, '_mediæval, economic, teaching_.' SECTION 2.--EXPLANATION OF THE TITLE § 1. _Mediæval_. Ingram, in his well-known book on economic history, following the opinion of Comte, refuses to consider the fourteenth and fifteenth centuries as part of the Middle Ages.[1] We intend, however, to treat of economic teaching up to the end of the fifteenth century. The best modern judges are agreed that the term Middle Ages must not be given a hard-and-fast meaning, but that it is capable of bearing a very elastic interpretation. The definition given in the _Catholic Encyclopædia_ is: 'a term commonly used to designate that period of European history between the Fall of the Roman Empire and about the middle of the fifteenth century. The precise dates of the beginning, culmination, and end of the Middle Ages are more or less arbitrarily assumed according to the point of view adopted.' The eleventh edition of the _Encyclopædia Britannica_ contains a similar opinion: 'This name is commonly given to that period of European history which lies between what are known as ancient and modern times, and which has generally been considered as extending from about the middle of the fifth to about the middle of the fifteenth centuries. The two dates adopted in old text-books were 476 and 1453, from the setting aside of the last emperor of the west until the fall of Constantinople. In reality it is impossible to fix any exact dates for the opening and close of such a period.' [Footnote 1: _History of Political Economy_, p. 35.] We are therefore justified in considering the fifteenth century as comprised hi the Middle Ages. This is especially so in the domain of economic theory. In actual practice the fourteenth and fifteenth centuries may have presented the appearance rather of the first stage of a new than of the last stage of an old era. This is Ingram's view. However true this may be of practice, it is not at all true of theory, which, as we shall see, continued to be entirely based on the writings of an author of the thirteenth century. Ingram admits this incidentally: 'During the fourteenth and fifteenth centuries the Catholic-feudal system was breaking down by the mutual conflicts of its own official members, while the constituent elements of a new order were rising beneath it. The movements of this phase can scarcely be said to find an echo in any contemporary economic literature.'[1] We need not therefore apologise further for including a consideration of the fourteenth and fifteenth centuries in our investigations as to the economic teaching of the Middle Ages. We are supported in doing so by such excellent authorities as Jourdain,[2] Roscher,[3] and Cossa.[4] Haney, in his _History of Economic Thought_,[5] says: 'It seems more nearly true to regard the years about 1500 as marking the end of mediæval times.... On large lines, and from the viewpoint of systems of thought rather than systems of industry, the Middle Ages may with profit be divided into two periods. From 400 down to 1200, or shortly thereafter, constitutes the first. During these years Christian theology opposed Roman institutions, and Germanic customs were superposed, until through action and reaction all were blended. This was the reconstruction; it was the "stormy struggle" to found a new ecclesiastical and civil system. From 1200 on to 1500 the world of thought settled to its level. Feudalism and scholasticism, the corner-stones of mediævalism, emerged and were dominant.' [Footnote 1: _Op. cit._, p. 35.] [Footnote 2: _Mémoires sur les commencements de l'économie politique dans les écoles du moyen âge_, Académie des Inscriptions et Belles-Lettres, vol. 28.] [Footnote 3: _Geschichte zur National-Ökonomik in Deutschland_.] [Footnote 4: _Introduction to the Study of Political Economy_.] [Footnote 5: P. 70.] We shall not continue the study further than the beginning of the sixteenth century. It is true that, if we were to refer to several sixteenth-century authors, we should be in possession of a very highly developed and detailed mass of teaching on many points which earlier authors left to some extent obscure. We deliberately refrain nevertheless from doing so, because the whole nature of the sixteenth-century literature was different from that of the fourteenth and fifteenth; the early years of the sixteenth century witnessed the abrogation of the central authority which was a basic condition of the success of the mediæval system; and the same period also witnessed 'radical economic changes, reacting more and more on the scholastic doctrines, which found fewer and fewer defenders in their original form.'[1] [Footnote 1: Cossa, _op. cit._, p. 151. Ashley warns us that 'we must be careful not to interpret the writers of the fifteenth century by the writers of the seventeenth' (_Economic History_, vol. i. pt. ii. p. 387). These later writers sometimes contain historical accounts of controversies in previous centuries, and are relevant on this account.] § 2. _Economic_. It must be clearly understood that the political economy of the mediævals was not a science, like modern political economy, but an art. 'It is a branch of the virtue of prudence; it is half-way between morality, which regulates the conduct of the individual, and politics, which regulates the conduct of the sovereign. It is the morality of the family or of the head of the family, from the point of view of the good administration of the patrimony, just as politics is the morality of the sovereign, from the point of view of the good government of the State. There is as yet no question of economic laws in the sense of historical and descriptive laws; and political economy, not yet existing in the form of a science, is not more than a branch of that great tree which is called ethics, or the art of living well.'[1] 'The doctrine of the canon law,' says Sir William Ashley, 'differed from modern economics in being an art rather than a science. It was a body of rules and prescriptions as to conduct, rather than of conclusions as to fact. All art indeed in this sense rests on science; but the science on which the canonist doctrine rested was theology. Theology, or rather that branch of it which we may call Christian ethics, laid down certain principles of right and wrong in the economic sphere; and it was the work of the canonists to apply them to specific transactions and to pronounce judgment as to their permissibility.'[2] The conception of economic laws, in the modern sense, was quite foreign to the mediæval treatment of the subject. It was only in the middle of the fourteenth century that anything approaching a scientific examination of the phenomena of economic life appeared, and that was only in relation to a particular subject, namely, the doctrine of money.[3] [Footnote 1: Rambaud, _Histoire des Doctrines Économiques_, p. 39. 'It is evident that a household is a mean between the individual and the city or Kingdom, since just as the individual is part of the household, so is the household part of the city or Kingdom, and therefore, just as prudence commonly so called which governs the individual is distinct from political prudence, so must domestic prudence (oeconomica) be distinct from both. Riches are related to domestic prudence, not as its last end, but as its instrument. On the other hand, the end of political prudence is a good life in general as regards the conduct of the household. In _Ethics_ i. the philosopher speaks of riches as the end of political prudence, by way of example, and in accordance with the opinion of many.' Aquinas, _Summa II_. ii. 50. 3, and see _Sent. III_. xxxiii. 3 and 4. 'Practica quidem scientia est, quae recte vivendi modum ac disciplinae formam secundum virtutum institutionem disponit. Et haec dividitur in tres, scilicet: primo ethicam, id est moralem; et secundo oeconomicam, id est dispensativam; et tertio politicam, id est civilem' (Vincent de Beauvais, _Speculum_, VII. i. 2).] [Footnote 2: _Op. cit._, vol. i. part. ii. p. 379.] [Footnote 3: Rambaud, _op. cit._, p. 83; Ingram, _op. cit._, p. 36. So marked was the contrast between the mediæval and modern conceptions of economics that the appearance of this one treatise has been said by one high authority to have been the signal of the dawn of the Renaissance (Espinas, _Histoire des Doctrines Économiques_, p. 110).] To say that the mediæval method of approaching economic problems was fundamentally different from the modern, is not in any sense to be taken as indicating disapproval of the former. On the contrary, it is the general opinion to-day that the so-called classical treatment of economics has proved disastrous in its application to real life, and that future generations will witness a retreat to the earlier position. The classical economists committed the cardinal error of subordinating man to wealth, and consumption to production. In their attempt to preserve symmetry and order in their generalisations they constructed a weird creature, the economic man, who never existed, and never could exist. The mediævals made no such mistake. They insisted that all production and gain which did not lead to the good of man was not alone wasteful, but positively evil; and that man was infinitely more important than wealth. When he exclaims that 'Production is on account of man, not man of production,' Antoninus of Florence sums up in a few words the whole view-point of his age.[1] 'Consumption,' according to Dr. Cunningham, 'was the aspect of human nature which attracted most attention.... Regulating consumption wisely was the chief practical problem in mediæval economics.'[2] The great practical benefits of such a treatment of the problems relating to the acquisition and enjoyment of material wealth must be obvious to every one who is familiar with the condition of the world after a century of classical political economy. 'To subordinate the economic order to the social order, to submit the industrial activity of man to the consideration of the final and general end of his whole being, is a principle which must exert on every department of the science of wealth, an influence easy to understand. Economic laws are the codification of the material activity of a sort of _homo economicus_; of a being, who, having no end in view but wealth, produces all he can, distributes his produce in the way that suits him best, and consumes as much as he can. Self interest alone dictates his conduct.'[3] Economics, far from being a science whose highest aim was to evolve a series of abstractions, was a practical guide to the conduct of everyday affairs.[4] 'The pre-eminence of morality in the domain of economics constitutes at the same time the distinctive feature, the particular merit, and the great teaching of the economic lessons of this period.'[5] [Footnote 1: _Irish Theological Quarterly_, vol. vii. p. 151.] [Footnote 2: _Christianity and Economic Science_, p. 10.] [Footnote 3: Brants, _Les Théories économiques aux xiii^{e} et xii^{e} siècles, p_. 34.] [Footnote 4: Gide and Rist, _History of Economic Doctrines_, Eng. trans., p. 110.] [Footnote 5: Brants, _op. cit._, p. 9.] Dr. Cunningham draws attention to the fact that the existence of such a universally received code of economic morality was largely due to the comparative simplicity of the mediæval social structure, where the _relations of persons_ were all important, in comparison with the modern order, where the _exchange of things_ is the dominant factor. He further draws attention to the changes which affected the whole constitution of society in the sixteenth and seventeenth centuries, and proceeds: 'These changes had a very important bearing on all questions of commercial morality; so long as economic dealings were based on a system of personal relationships they all bore an implied moral character. To supply a bad article was morally wrong, to demand excessive payment for goods or for labour was extortion, and the right or wrong of every transaction was easily understood.'[1] The application of ethics to economic transactions was rendered possible by the existence of one universally recognised code of morality, and the presence of one universally accepted moral teacher. 'In the thirteenth century, the ecclesiastical organisation gave a unity to the social structure throughout the whole of Western Europe; over the area in which the Pope was recognised as the spiritual and the Emperor as the temporal vicar of God, political and racial differences were relatively unimportant. For economic purposes it is scarcely necessary to distinguish different countries from one another in the thirteenth century, for there were fewer barriers to social intercourse within the limits of Christendom than there are to-day.... Similar ecclesiastical canons, and similar laws prevailed over large areas, where very different admixtures of civil and barbaric laws were in vogue. Christendom, though broken into so many fragments politically, was one organised society for all the purposes of economic life, because there was such free intercommunication between its parts.'[2] 'There were three great threads,' we read later in the same book, 'which ran through the whole social system of Christendom. First of all there was a common religious life, with the powerful weapons of spiritual censure and excommunication which it placed in the hands of the clergy, so that they were able to enforce the line of policy which Rome approved. Then there was the great judicial system of canon law, a common code with similar tribunals for the whole of Western Christendom, dealing not merely with strictly ecclesiastical affairs, but with many matters that we should regard as economic, such as questions of commercial morality, and also with social welfare as affected by the law of marriage and the disposition of property by will....'[3] 'To the influence of Christianity as a moral doctrine,' says Dr. Ingram, 'was added that of the Church as an organisation, charged with the application of the doctrine to men's daily transactions. Besides the teaching of the sacred books there was a mass of ecclesiastical legislation providing specific prescriptions for the conduct of the faithful. And this legislation dealt with the economic as well as with other provinces of social activity.'[4] [Footnote 1: _Growth of English Industry and Commerce_, vol. i. p. 465.] [Footnote 2: Cunningham, _Western Civilisation_, vol. ii. pp. 2-3.] [Footnote 3: _Ibid._, p. 67.] [Footnote 4: _Op. cit._, p. 27.] The teaching of the mediæval Church, therefore, on economic affairs was but the application to particular facts and cases of its general moral teaching. The suggestion, so often put forward by so-called Christian socialists, that Christianity was the exponent of a special social theory of its own, is unfounded. The direct opposite would be nearer the truth. Far from concerning itself with the outward forms of the political or economic structure, Christianity concentrated its attention on the conduct of the individual. If Christianity can be said to have possessed any distinctive social theory, it was intense individualism. 'Christianity brought, from the point of view of morals, an altogether new force by the distinctly individual and personal character of its precepts. Duty, vice or virtue, eternal punishment--all are marked with the most individualist imprint that can be imagined. No social or political theory appeared, because it was through the individual that society was to be regenerated.... We can say with truth that there is not any Christian political economy--in the sense in which there is a Christian morality or a Christian dogma--any more than there is a Christian physic or a Christian medicine.'[1] In seeking to learn Christian teaching of the Middle Ages on economic matters, we must therefore not look for special economic treatises in the modern sense, but seek our principles in the works dealing with general morality, in the Canon Law, and in the commentaries on the Civil Law. 'We find the first worked out economic theory for the whole Catholic world in the _Corpus Juris Canonici_, that product of mediæval science in which for so many centuries theology, jurisprudence, philosophy, and politics were treated....'[2] [Footnote 1: Rambaud, _op. cit._, pp. 34-5; Cunningham, _Western Civilisation_, vol. ii. p. 8.] [Footnote 2: Roscher, _op. cit._, p. 5. It must not be concluded that all the opinions expressed by the theologians and lawyers were necessarily the official teaching of the Church. Brants says: 'It is not our intention to attribute to the Church all the opinions of this period; certainly the spirit of the Church dominated the great majority of the writers, but one must not conclude from this that all their writings are entitled to rank as doctrinal teaching' (_Op. cit._, p. 6).] There is not to be found in the writers of the early Middle Ages, that is to say from the eighth to the thirteenth centuries, a trace of any attention given to what we at the present day would designate economic questions. Usury was condemned by the decrees of several councils, but the reasons of this prohibition were not given, nor was the question made the subject of any dialectical controversy; commerce was so undeveloped as to escape the attention of those who sought to guide the people in their daily life; and money was accepted as the inevitable instrument of exchange, without any discussion of its origin or the laws which regulated it. The writings of this period therefore betray no sign of any interest in economic affairs. Jourdain says that he carefully examined the works of Alcuin, Rabanas Mauras, Scotus Erigenus, Hincmar, Gerbert, St. Anselm, and Abelard--the greatest lights of theology and philosophy in the early Middle Ages--without finding a single passage to suggest that any of these authors suspected that the pursuit of riches, which they despised, occupied a sufficiently large place in national as well as in individual life, to offer to the philosopher a subject fruitful in reflections and results. The only work which might be adduced as a partial exception to this rule is the _Polycraticus_ of John of Salisbury; but even this treatise contained only some scattered moral reflections on luxury and on zeal for the interest of the public treasury.[1] [Footnote 1: Jourdain, _op. cit._, p. 4.] Two causes contributed to produce this almost total lack of interest in economic subjects. One was the miserable condition of society, still only partially rescued from the ravages of the barbarians, and half organised, almost without industry and commerce; the other was the absence of all economic tradition. The existence of the _Categories_ and _Hermenia_ of Aristotle ensured that the chain of logical study was not broken; the works of Donatus and Priscian sustained some glimmer of interest in grammatical theory; certain rude notions of physics and astronomy were kept alive by the preservation of such ancient elementary treatises as those of Marcian Capella; but economics had no share in the heritage of the past. Not only had the writings of the ancients, who dealt to some extent with the theory of wealth, been destroyed, but the very traces of their teaching had been long forgotten. A good example of the state of thought in economic matters is furnished by the treatment which money receives in the _Etymologies_ of Isidore of Seville, which was regarded in the early Middle Ages as a reliable encyclopædia. 'Money,' according to Isidore, 'is so called because it warns, _monet_, lest any fraud should enter into its composition or its weight. The piece of money is the coin of gold, silver, or bronze, which is called _nomisma_, because it bears the imprint of the name and likeness of the prince.... The pieces of money _nummi_ have been so called from the King of Rome, Numa, who was the first among the Latins to mark them with the imprint of his image and name.'[1] Is it any wonder that the early Middle Ages were barren of economic doctrines, when this was the best instruction to which they had access? [Footnote 1: _Etymol_. xvi. 17.] In the course of the thirteenth century a great change occurred. The advance of civilisation, the increased organisation of feudalism, the development of industry, and the extension of commerce, largely under the influence of the Crusades, all created a condition of affairs in which economic questions could no longer be overlooked or neglected. At the same time the renewed study of the writings of Aristotle served to throw a flood of new light on the nature of wealth. The _Ethics_ and _Politics_ of Aristotle, although they are not principally devoted to a treatment of the theory of wealth, do in fact deal with that subject incidentally. Two points in particular are touched on, the utility of money and the injustice of usury. The passages of the philosopher dealing with these subjects are of particular interest, as they may be said, with a good deal of truth, to be the true starting point of mediæval economics.[1] The writings of Aristotle arrested the attention, and aroused the admiration of the theologians of the thirteenth century; and it would be quite impossible to exaggerate the influence which they exercised on the later development of mediæval thought. Albertus Magnus digested, interpreted, and systematised the whole of the works of the Stagyrite; and was so steeped in the lessons of his philosophic master as to be dubbed by some 'the ape of Aristotle.' Aquinas, who was a pupil of Albertus, also studied and commented on Aristotle, whose aid he was always ready to invoke in the solution of all his difficulties. With the single and strange exception of Vincent de Beauvais, Aristotle's teaching on money was accepted by all the writers of the thirteenth century, and was followed by later generations.[2] The influence of Aristotle is apparent in every article of the _Summa_, which was itself the starting point from which all discussion sprang for the following two centuries; and it is not too much to say that the Stagyrite had a decisive influence on the introduction of economic notions into the controversies of the Schools. 'We find in the writings of St. Thomas Aquinas,' says Ingram, 'the economic doctrines of Aristotle reproduced with a partial infusion of Christian elements.'[3] [Footnote 1: Jourdain, _op. cit._, p. 7.] [Footnote 2: _Ibid._, p. 12.] [Footnote 3: _Op. cit._, p. 27. Espinas thinks that the influence of Aristotle in this respect has been exaggerated. (_Histoire des Doctrines Économiques_, p. 80.)] In support of the account we have given of the development of economic thought in the thirteenth century, we may quote Cossa: 'The revival of economic studies in the Middle Ages only dates from the thirteenth century. It was due in a great measure to a study of the _Ethics_ and _Politics_ of Aristotle, whose theories on wealth were paraphrased by a considerable number of commentators. Before that period we can only find moral and religious dissertations on such topics as the proper use of material goods, the dangers of luxury, and undue desire for wealth. This is easily explained when we take into consideration (1) the prevalent influence of religious ideas at the time, (2) the strong reaction against the materialism of pagan antiquity, (3) the predominance of natural economy, (4) the small importance of international trade, and (5) the decay of the profane sciences, and the metaphysical tendencies of the more solid thinkers of the Middle Ages.'[1] [Footnote 1: _Op. cit._, p. 14; Espinas, _op. cit._, p. 80.] The teaching of Aquinas upon economic affairs remained the groundwork of all the later writers until the end of the fifteenth century. His opinions on various points were amplified and explained by later authors in more detail than he himself employed; monographs of considerable length were devoted to the treatment of questions which he dismissed in a single article; but the development which took place was essentially one of amplification rather than opposition. The monographists of the later fifteenth century treat usury and sale in considerable detail; many refinements are indicated which are not to be found in the _Summa_; but it is quite safe to say that none of these later writers ever pretended to supersede the teaching of Aquinas, who was always admitted to be the ultimate authority. 'During the fourteenth and fifteenth centuries, the general political doctrine of Aquinas was maintained with merely subordinate modifications.'[1] 'The canonist doctrine of the fifteenth century,' according to Sir William Ashley, 'was but a development of the principles to which the Church had already given its sanction in earlier centuries. It was the outcome of these same principles working in a modified environment. But it may more fairly be said to present a _system_ of economic thought, because it was no longer a collection of unrelated opinions, but a connected whole. The tendency towards a separate department of study is shown by the ever-increasing space devoted to the discussion of general economic topics in general theological treatises, and more notably still in the manuals of casuistry for the use of the confessional, and handbooks of canon law for the use of ecclesiastical lawyers. It was shown even more distinctly by the appearance of a shoal of special treatises on such subjects as contracts, exchange, and money, not to mention those on usury.'[2] In all this development, however, the principles enunciated by Aquinas, and through him, by Aristotle, though they may have been illustrated and applied to new instances, were never rejected. The study of the writers of this period is therefore the study of an organic whole, the germ of which is to be found in the writings of Aquinas.[3] [Footnote 1: Ingram, _op. cit._, p. 35.] [Footnote 2: _Op. cit._, vol. i. pt. ii. p. 382.] [Footnote 3: The volume of literature which bears more or less on economic matters dating from the fourteenth and fifteenth centuries is colossal. By far the best account of it is to be found in Endemann's _Studien in der Romanisch-canonistischen Wirthschafts- und Rechtslehre_, vol. i. pp. 25 _et seq_. Many of the more important works written during the period are reprinted in the _Tractatus Universi Juris_, vols. vi. and vii. The appendix to the first chapter of Reseller's _Geschichte_ also contains a valuable account of certain typical writers, especially of Langenstein and Henricus de Hoyta. Brants gives a useful bibliographical list of both mediæval and modern authorities in the second chapter of his _Théories économiques aux xiii^{e} et xiv^{e} siècles_. Those who desire further information about any particular writer of the period will find it in Stintzing, _Literaturgeschichte des röm. Rechts_, or in Chevallier's _Répertoire historique des Sources du moyen âge; Bio-bibliographie_. The authorship of the treatise _De Regimine Principum_, from which we shall frequently quote, often attributed to Aquinas, is very doubtful. The most probable opinion is that the first book and the first three chapters of the second are by Aquinas, and the remainder by another writer. (See Franck, _Réformateurs et Publicistes_, vol. i. p. 83.)] § 3. _Teaching_. We shall confine our attention in this essay to the economic teaching of the Middle Ages, and shall not deal with the actual practice of the period. It may be objected that a study of the former without a study of the latter is futile and useless; that the economic teaching of a period can only be satisfactorily learnt from a study of its actual economic institutions and customs; and that the scholastic teaching was nothing but a casuistical attempt to reconcile the early Christian dogmas with the ever-widening exigencies of real life. Endemann, for instance, devotes a great part of his invaluable books on the subject to demonstrating how impracticable the canonist teaching was when it was applied to real life, and recounting the casuistical devices that were resorted to in order to reconcile the teaching of the Church with the accepted mercantile customs of the time. Endemann, however, in spite of his colossal research and unrivalled acquaintance with original authorities, was essentially hostile to the system which he undertook to explain, and thus lacked the most essential quality of a satisfactory expositor, namely, sympathy with his subject. He does not appear to have realised that development and adaptability to new situations, far from being marks of impracticability, are rather the signs of vitality and of elasticity. This is not the place to discuss how far the doctrine of the late fifteenth differed from that of the early thirteenth century; that is a matter which will appear below when each of the leading principles of scholastic economic teaching is separately considered; it is sufficient to say here that we agree entirely with Brants, in opposition to Endemann, that the change which took place in the interval was one of development, and not of opposition. 'The law,' says Brants, 'remained identical and unchanged; justice and charity--nobody can justly enrich himself at the expense of his neighbour or of the State, but the reasons justifying gain are multiplied according as riches are developed.'[1] 'The canonist doctrine of the fifteenth century was but a development of the principles to which the Church had already given its sanction in earlier centuries. It was the outcome of these same principles working in a modified environment.'[2] With these conclusions of Brants and Ashley we are in entire agreement. [Footnote 1: Brants, _op. cit._, p. 9.] [Footnote 2: Ashley, _op. cit._, p. 381.] Let us say in passing that the assumption that the mediæval teaching grew out of contemporary practice, rather than that the latter grew out of the former, is one which does not find acceptance among the majority of the students of the subject. The problem whether a correct understanding of mediæval economic life can be best attained by first studying the teaching or the practice is possibly no more soluble than the old riddle of the hen and the egg; but it may at least be argued that there is a good deal to be said on both sides. The supporters of the view that practice moulded theory are by no means unopposed. There is no doubt that in many respects the exigencies of everyday commercial concerns came into conflict with the tenets of canon law and scholastic opinion; but the admission of this fact does not at all prove that the former was the element which modified the latter, rather than the latter the former. In so far as the expansion of commerce and the increasing complexity of intercourse raised questions which seemed to indicate that mercantile convenience conflicted with received teaching, it is probable that the difficulty was not so much caused by a contradiction between the former and the latter, as by the fact that an interpretation of the doctrine as applied to the facts of the new situation was not available before the new situation had actually arisen. This is a phenomenon frequently met with at the present day in legal practice; but no lawyer would dream of asserting that, because there had arisen an unprecedented state of facts, to which the application of the law was a matter of doubt or difficulty, therefore the law itself was obsolete or incomplete. Examples of such a conflict are familiar to any one who has ever studied the case law on any particular subject, either in a country such as England, where the law is unwritten, or in continental countries, where the most exhaustive and complete codes have been framed. Nevertheless, in spite of the occurrence of such difficulties, it would be foolish to contend that the laws in force for the time being have not a greater influence on the practice of mercantile transactions than the convenience of merchants has upon the law. How much more potent must this influence have been when the law did not apply simply to outward observances, but to the inmost recesses of the consciences of believing Christians! The opinion that mediæval teaching exercised a profound effect on mediæval practice is supported by authorities of the weight of Ashley, Ingram, and Cunningham,[1] the last of whom was in some respects unsympathetic to the teaching the influence of which he rates so highly. 'It has indeed,' writes Sir William Ashley, 'not infrequently been hinted that all the elaborate argumentation of canonists and theologians was "a cobweb of the brain," with no vital relation to real life. Certain German writers have, for instance, maintained that, alongside of the canonist doctrine with regard to trade, there existed in mediæval Europe a commercial law, recognised in the secular courts, and altogether opposed to the peculiar doctrines of the canonists. It is true that parts of mercantile jurisprudence, such as the law of partnership, had to a large extent originated in the social conditions of the time, and would have probably made their appearance even if there had been no canon law or theology. But though there were branches of commercial law which were, in the main, independent of the canonist doctrine, there were none that were opposed to it. On the fundamental points of usury and just price, commercial law in the later Middle Ages adopted completely the principles of the canonists. How entirely these principles were recognised in the practice of the courts which had most to do with commercial suits, viz. those of the towns, is sufficiently shown by the frequent enactments as to usury and as to reasonable price which are found in the town ordinances of the Middle Ages; in England as well as in the rest of Western Europe.... Whatever may have been the effect, direct or indirect, of the canonist doctrine on legislation, it is certain that on its other side, as entering into the moral teaching of the Church through the pulpit and the confessional, its influence was general and persistent, even if it were not always completely successful.'[2] 'Every great change of opinion on the destinies of man,' says Ingram, 'and the guiding principles of conduct must react in the sphere of material interests; and the Catholic religion had a profound influence on the economic life of the Middle Ages.... The constant presentations to the general mind and conscience of Christian ideas, the dogmatic bases of which were as yet scarcely assailed by scepticism, must have had a powerful effect in moralising life.'[3] According to Dr. Cunningham: 'The mediæval doctrine of price was not a theory intended to explain the phenomena of society, but it was laid down as the basis of rules which should control the conduct of society and of individuals. At the same time current opinion seems to have been so fully formed in accordance with it that a brief enumeration of the doctrine of a just price will serve to set the practice of the day in clearer light. In regard to other matters, it is difficult to determine how far public opinion was swayed by practical experience, and how far it was really moulded by Christian teaching--this is the case in regard to usury. But there can be little doubt about the doctrine of price--which really underlies a great deal of commercial and gild regulations, and is constantly implied in the early legislation on mercantile affairs.'[4] The same author expresses the same opinion in another work: 'The Christian doctrine of price, and Christian condemnation of gain at the expense of another man, affected all the mediæval organisation of municipal life and regulation of inter-municipal commerce, and introduced marked contrasts to the conditions of business in ancient cities. The Christian appreciation of the duty of work rendered the lot of the mediæval villain a very different thing from that of the slave of the ancient empire. The responsibility of proprietors, like the responsibility of prices, was so far insisted on as to place substantial checks on tyranny of every kind. For these principles were not mere pious opinions, but effective maxims in practical life. Owing to the circumstances in which the vestiges of Roman civilisation were locally maintained, and the foundations of the new society were laid, there was ample opportunity for Christian teaching and example to have a marked influence on its development.'[5] In Dr. Cunningham's book entitled _Politics and Economics_ the same opinion is expressed:[6] 'Religious and industrial life were closely interconnected, and there were countless points at which the principles of divine law must have been brought to bear on the transaction of business, altogether apart from any formal tribunal. Nor must we forget the opportunities which directors had for influencing the conduct of penitents.... Partly through the operation of the royal power, partly through the decisions of ecclesiastical authorities, but more generally through the influence of a Christian public opinion which had been gradually created, the whole industrial organism took its shape, and the acknowledged economic principles were framed.' We have quoted these passages from Dr. Cunningham's works at length because they are of great value in helping us to estimate the rival parts played by theory and practice in mediæval economic teaching; in the first place, because the author was by no means prepossessed in favour of the teaching of the canonists, but rather unsympathetic to it; in the second place, because, although his work was concerned primarily with practice, he found himself obliged to make a study of theory before he could properly understand the practice; and lastly, because they point particularly to the effect of the teaching on just price. When we come to speak of this part of the subject we shall find that Dr. Cunningham failed to appreciate the true significance of the canonist doctrine. If an eminent author, who does not quite appreciate the full import of this doctrine, and who is to some extent contemptuous of its practical value, nevertheless asserts that it exercised an all-powerful influence on the practice of the age in which it was preached, we are surely justified in asserting that the study of theory may be profitably pursued without a preliminary history of the contemporary practice. [Footnote 1: Even Endemann warns his readers against assuming that the canonist teaching had no influence on everyday life. (_Studien_, vol. ii. p. 404.)] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 383-85. Again: 'The later canonist dialectic was the midwife of modern economics' (_ibid._, p. 397).] [Footnote 3: _History of Political Economy_, p. 26.] [Footnote 4: Cunningham, _Growth of English Industry and Commerce_, vol. i. p. 252.] [Footnote 5: Cunningham, _Western Civilisation_, vol. ii. pp. 9-10.] [Footnote 6: P. 25.] But we must not be taken to suggest that there were no conflicts between the teaching and the practice of the Middle Ages. As we have seen, the economic teaching of that period was ethical, and it would be absurd to assert that every man who lived in the Middle Ages lived up to the high standard of ethical conduct which was proposed by the Church.[1] One might as well say that stealing was an unknown crime in England since the passing of the Larceny Act. All we do suggest is that the theory had such an important and incalculable influence upon practice that the study of it is not rendered futile or useless because of occasional or even frequent departures from it in real life. Even Endemann says: 'The teaching of the canon law presents a noble edifice not less splendid in its methods than in its results. It embraces the whole material and spiritual natures of human society with such power and completeness that verily no room is left for any other life than that decreed by its dogmas.'[2] 'The aim of the Church,' says Janssen, 'in view of the tremendous agencies through which it worked, in view of the dominion which it really exercised, cannot have the impression of its greatness effaced by the unfortunate fact that all was not accomplished that had been planned.'[3] The fact that tyranny may have been exercised by some provincial governor in an outlying island of the Roman Empire cannot close our eyes to the benefits to be derived from a study of the code of Justinian; nor can a remembrance of the manner in which English law is administered in Ireland in times of excitement, blind us to the political lessons to be learned from an examination of the British constitution. [Footnote 1: The many devices which were resorted to in order to evade the prohibition of usury are explained in Dr. Cunningham's _Growth of English Industry and Commerce_, vol. i. p. 255. See also Delisle, _L'Administration financière des Templiers_, Académie des Inscriptions et Belles-Lettres, 1889, vol. xxxiii. pt. ii., and Ashley, _Economic History_, vol. i. pt. ii. p. 426. The _Summa Pastoralis_ of Raymond de Pennafort analyses and demolishes many of the commoner devices which were employed to evade the usury laws. On the part played by the Jews, see Brants, _op. cit._, Appendix I.] [Footnote 2: _Die Nationalökonomischen Grundsätze der canonistischen Lehre_, p. 192.] [Footnote 3: _History of the German People_ (Eng. trans.), vol. ii. p. 99.] SECTION 3.--VALUE OF THE STUDY OF THE SUBJECT The question may be asked whether the study of a system of economic teaching, which, even if it ever did receive anything approaching universal assent, has long since ceased to do so, is not a waste of labour. We can answer that question in the negative, for two reasons. In the first place, as we said above, a proper understanding of the earlier periods of the development of a body of knowledge is indispensable for a full appreciation of the later. Even if the canonist system were not worth studying for its own sake, it would be deserving of attention on account of the light it throws on the development of later economic doctrine. 'However the canonist theory may contrast with or resemble modern economics, it is too important a part of the history of human thought to be disregarded,' says Sir William Ashley. 'As we cannot fully understand the work of Adam Smith without giving some attention to the physiocrats, nor the physiocrats without looking at the mercantilists: so the beginnings of mercantile theory are hardly intelligible without a knowledge of the canonist doctrine towards which that theory stands in the relation partly of a continuation, partly of a protest.'[1] [Footnote 1: _Op. cit._, vol. i. pt. ii. p. 381.] But we venture to assert that the study of canonist economics, far from being useful simply as an introduction to later theories, is of great value in furnishing us with assistance in the solution of the economic and social problems of the present day. The last fifty years have witnessed a reaction against the scientific abstractions of the classical economists, and modern thinkers are growing more and more dissatisfied with an economic science which leaves ethics out of account.[1] Professor Sidgwick, in his _Principles_ _of Political Economy_, published in 1883, devotes a separate section to 'The Art of Political Economy,' in which he remarks that 'The principles of Political Economy are still most commonly understood even in England, and in spite of many protests to the contrary, to be practical principles--rules of conduct, public or private.'[2] The many indications in recent literature and practice that the regulation of prices should be controlled by principles of 'fairness' would take too long to recite. It is sufficient to refer to the conclusion of Devas on this point: 'The notion of just price, worked out in detail by the theologians, and in later days rejected as absurd by the classical economists, has been rightly revived by modern economists.'[3] Not alone in the sphere of price, but in that of every other department of economics, the impossibility of treating the subject as an abstract science without regard to ethics is being rapidly abandoned. 'The best usage of the present time,' according to the _Catholic Encyclopædia_, 'is to make political economy an ethical science--that is, to make it include a discussion of what ought to be in the economic world as well as what is.'[4] We read in the 1917 edition of Palgrave's _Dictionary of Political Economy_, that 'The growing importance of distribution as a practical problem has led to an increasing mutual interpenetration of economic and ethical ideas, which in the development of economic doctrine during the last century and a half has taken various forms.' [5] The need for some principle by which just distribution can be attained has been rendered pressing by the terrible effects of a period of unrestricted competition. 'It has been widely maintained that a strictly competitive exchange does not tend to be really fair--some say cannot be really fair--when one of the parties is under pressure of urgent need; and further, that the inequality of opportunity which private property involves cannot be fully justified on the principle of maintaining equal freedom, and leads, in fact, to grave social injustice.'[5] In other words, the present condition of affairs is admitted to be intolerable, and the task before the world is to discover some alternative. The day when economics can be divorced from ethics has passed away; there is a world-wide endeavour to establish in the place of the old, a new society founded on an ethical basis.[7] There are two, and only two, possible ways to the attainment of this ideal--the way of socialism and the way of Christianity. There can be no doubt the socialist movement derives a great part of its popularity from its promise of a new order, based, not on the unregulated pursuit of selfish desires, but on justice. 'To this view of justice or equity,' writes Dr. Sidgwick, 'the socialistic contention that labour can only receive its due reward if land and other instruments of production are taken into public ownership, and education of all kinds gratuitously provided by Government--has powerfully appealed; and many who are not socialists, nor ignorant of economic science, have been led by it to give welcome to the notion that the ideally "fair" price of a productive service is a price at least rendering possible the maintenance of the producers and their families in a condition of health and industrial efficiency.' This is not the place to enter into a discussion as to the merits or practicability of any of the numerous schemes put forward by socialists; it is sufficient to say that socialism is essentially unhistorical, and that in our opinion any practical benefits which it might bestow on society would be more than counterbalanced by the innumerable evils which would be certain to emerge in a system based on unsatisfactory foundations. [Footnote 1: We must guard against the error, which is frequently made, that, because the classical economists assumed self-interest as the sole motive of economic action, they therefore approved of and inculcated it.] [Footnote 2: P. 401, and see Marshall's Preface to Price's _Industrial Peace_, and Ashley, _op. cit._, vol. i. pt. i. p. 137.] [Footnote 3: _Political Economy_, p. 268.] [Footnote 4: Tit., 'Political Economy.'] [Footnote 5: Vol. iii. p. 138.] [Footnote 6: _Ibid._] [Footnote 7: See Laveleye, _Elements of Political Economy_ (Eng. trans.), pp. 7-8. On the general conflict between the ethical and the non-ethical schools of economists see Keynes, _Scope and Method_, pp. 20 _et seq_.] The other road to the establishment of a society based on justice is the way of Christianity, and, if we wish to attempt this path, it becomes vitally important to understand what was the economic teaching of the Church in the period when the Christian ethic was universally recognised. During the whole Middle Ages, as we have said above, the Canon Law was the test of right and wrong in the domain of economic activity; production, consumption, distribution, and exchange were all regulated by the universal system of law; once before economic life was considered within the scope of moral regulation. It cannot be denied that a study of the principles which were accepted during that period may be of great value to a generation which is striving to place its economic life once more upon an ethical foundation. One error in particular we must be on our guard to avoid. We said above that both the socialists and the Christian economists are agreed in their desire to reintroduce justice into economic life. We must not conclude, however, that the aims of these two schools are identical. One very frequently meets with the statement that the teachings of socialism are nothing more or less than the teachings of Christianity. This contention is discussed in the following pages, where the conclusion will be reached that, far from being in agreement, socialism and Christian economics contradict each other on many fundamental points. It is, however, not the aim of the discussion to appraise the relative merits of either system, or to applaud one and disparage the other. All that it is sought to do is to distinguish between them; and to demonstrate that, whatever be the merits or demerits of the two philosophies, they are two, and not one. SECTION 4.--DIVISION OF THE SUBJECT The opinion is general that the distinctive doctrine of the mediæval Church which permeated the whole of its economic thought was the doctrine of usury. The holders of this view may lay claim to very influential supporters among the students of the subject. Ashley says that 'the prohibition of usury was clearly the centre of the canonist doctrine.'[1] Roscher expresses the same opinion in practically the same words;[2] and Endemann sees the whole economic development of the Middle Ages and the Renaissance as the victorious destruction of the usury law by the exigencies of real life.[3] However impressed we may be by the opinions of such eminent authorities, we, nevertheless, cannot help feeling that on this point they are under a misconception. There is no doubt that the doctrine of the canonists which impresses the modern mind most deeply is the usury prohibition, partly because it is not generally realised that the usury doctrine would not have forbidden the receipt of any of the commonest kinds of unearned revenue of the present day, and partly because the discussion of usury occupies such a very large part of the writings of the canonists. It may be quite true to say that the doctrine of usury was that which gave the greatest trouble to the mediæval writers, on account of the nicety of the distinctions with which it abounded, and on account of the ingenuity of avaricious merchants, who continually sought to evade the usury laws by disguising illegal under the guise of legal transactions. In practice, therefore, the usury doctrine was undoubtedly the most prominent part of the canonist teaching, because it was the part which most tempted evasion; but to admit that is not to agree with the proposition that it was the centre of the canonist doctrine. [Footnote: 1 _Op. cit._, vol. i. pt. ii. p. 399.] [Footnote: 2 'Bekanntlich war das Wucherverbot der praktische Mittelpunkt der ganzen kanonischen Wirthschaftspolitik,' _Op. cit._, p. 8.] [Footnote: 3 _Studien_, vol. i. p. 2 and _passim_. At vol. ii. p. 31 it is stated that the teaching on just price is a corollary of the usury teaching. But Aquinas treats of usury in the article _following_ his treatment of just price.] Our view is that the teaching on usury was simply one of the applications of the doctrine that all voluntary exchanges of property must be regulated by the precepts of commutative justice. In one sense it might be said to be a corollary of the doctrine of just price. This is apparently the suggestion of Dr. Cleary in his excellent book on usury: 'It seems to me that the so-called loan of money is really a sale, and that a loan of meal, wine, oil, gunpowder, and similar commodities--that is to say, commodities which are consumed in use--is also a sale. If this is so, as I believe it is, then loans of all these consumptible goods should be regulated by the principles which regulate sale contracts. A just price only may be taken, and the return must be truly equivalent.'[1] This statement of Dr. Cleary's seems well warranted, and finds support in the analogy which was drawn between the legitimacy of interest--in the technical sense--and the legitimacy of a vendor's increasing the price of an article by reason of some special inconvenience which he would suffer by parting with it. Both these titles were justified on the same ground, namely, that they were in the nature of compensations, and arose independently of the main contract of loan or sale as the case might be. 'Le vendeur est en présence de l'acheteur. L'objet a pour lui une valeur particulière: c'est un souvenir, par exemple. A-t-il le droit de majorer le prix de vente? de dépasser le juste prix convenu? ... Avec l'unanimité des docteurs on peut trouver légitime la majoration du prix. L'évaluation commune distingue un double élément dans l'objet: sa valeur ordinaire à laquelle répond le juste prix, et cette valeur extraordinaire qui appartient au vendeur, dont il se prive et qui mérite une compensation: il le fait pour ainsi dire l'objet d'un second contrat qui se superpose au premier. Cela est si vrai que le supplément de prix n'est pas dû au même titre que le juste prix.'[2] The importance of this analogy will appear when we come to treat just price and usury in detail; it is simply referred to here in support of the proposition that, far from being a special doctrine _sui generis_, the usury doctrine of the Church was simply an application to the sale of consumptible things of the universal rules which applied to all sales. In other words, the doctrines of the just price and of usury were founded on the same fundamental precept of justice in exchange. If we indicate what this precept was, we can claim to have indicated what was the true centre of the canonist doctrine. [Footnote 1: _The Church and Usury_, p. 186.] [Footnote 1: Desbuquois, 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 174.] The scholastic teaching on the subject of the rules of justice in exchange was founded on the famous fifth book of Aristotle's _Ethics_, and is very clearly set forth by Aquinas. In the article of the _Summa_, where the question is discussed, 'Whether the mean is to be observed in the same way in distributive as in commutative justice?' we find a clear exposition: 'In commutations something is delivered to an individual on account of something of his that has been received, as may be seen chiefly in selling and buying, where the notion of commutation is found primarily. Hence it is necessary to equalise thing with thing, so that the one person should pay back to the other just so much as he has become richer out of that which belonged to the other. The result of this will be equality according to the _arithmetical_ mean, which is gauged according to equal excess in quantity. Thus 5 is the mean between 6 and 4, since it exceeds the latter, and is exceeded by the former by 1. Accordingly, if at the start both persons have 5, and one of them receives 1 out of the other's belongings, the one that is the receiver will have 6, and the other will be left with 4: and so there will be justice if both are brought back to the mean, I being taken from him that has 6 and given to him that has 4, for then both will have 5, which is the mean.'[1] In the following article the matter of each kind of justice is discussed. We are told that: 'Justice is about certain external operations, namely, distribution and commutation. These consist in the use of certain externals, whether things, persons, or even works: of things as when one man takes from or restores to another that which is his: of persons as when a man does an injury to the very person of another...: and of works as when a man justly enacts a work of another or does a work for him.... Commutative justice directs commutations that can take place between two persons. Of these some are involuntary, some voluntary.... Voluntary commutations are when a man voluntarily transfers his chattel to another person. And if he transfer it simply so that the recipient incurs no debt, as in the case of gifts, it is an act not of justice, but of liberality. A voluntary transfer belongs to justice in so far as it includes the notion of debt.' Aquinas then goes on to distinguish between the different kinds of contract, sale, usufruct, loan, letting and hiring, and deposit, and concludes, 'In all these actions the mean is taken in the same way according to the equality of repayment. Hence all these actions belong to the one species of justice, namely, commutative justice.'[2] [Footnote 1: ii. ii. 61, 2.] [Footnote 2: ii. ii. 61, 3. The reasoning of Aristotle is characteristically reinforced by the quotation of Matt. vii. 12; ii. ii. 77,1.] This is not the place to discuss the precise meaning of the equality upon which Aquinas insists, which will be more properly considered when we come to deal with the just price. What is to be noticed at present is that all the transactions which are properly comprised in a discussion of economic theory--sales, loans, etc.--are grouped together as being subject to the same regulative principle. It therefore appears more correct to approach the subject which we are attempting to treat by following that principle into its various applications, than by making one particular application of the principle the starting-point of the discussion. It will be noticed, however, that the principles of commutative justice all treat of the commutations of external goods--in other words, they assume the existence of property of external goods in individuals. Commutations are but a result of private property; in a state of communism there could be no commutation. This is well pointed out by Gerson[1] and by Nider.[2] It consequently is important, before discussing exchange of ownership, to discuss the principle of ownership itself; or, in other words, to study the static before the dynamic state.[3] [Footnote 1: _De Contractibus_, i. 4 'Inventa est autem commutatio civilis post peccatum quoniam status innocentias habuit omnia communia.'] [Footnote 2: _De Contractibus_, v. 1: 'Nunc videndum est breviter unde originaliter proveniat quod rerum dominia sunt distincta, sic quod hoc dicatur meum et illud tuum; quia illud est fundamentum omnis injustitiae in contractando rem alienam, et post omnis injustitia reddendo eam.'] [Footnote 3: See l'Abbé Desbuquois, _op. cit._, p. 168.] We shall therefore deal in the first place with the right of private property, which we shall show to have been fully recognised by the mediæval writers. We shall then point out the duties which this right entailed, and shall establish the position that the scholastic teaching was directed equally against modern socialistic principles and modern unregulated individualism. The next point with which we shall deal is the exchange of property between individuals, which is a necessary corollary of the right of property. We shall show that such exchanges were regulated by well-defined principles of commutative justice, which applied equally in the case of the sale of goods and in the case of the sale of the use of money. The last matter with which we shall deal is the machinery by which exchanges are conducted, namely, money. Many other subjects, such as slavery and the legitimacy of commerce, will be treated as they arise in the course of our treatment of these principal divisions. In its ultimate analysis, the whole subject may be reduced to a classification of the various duties which attached to the right of private property. The owner of property, as we shall see, was bound to observe certain duties in respect of its acquisition and its consumption, and certain other duties in respect of its exchange, whether it consisted of goods or of money. The whole fabric of mediæval economics was based on the foundation of private property; and the elaborate and logical system of regulations to ensure justice in economic life would have had no purpose or no use if the subject matter of that justice were abolished. It must not be understood that the mediæval writers treated economic subjects in this order, or in any order at all. As we have already said, economic matters are simply referred to in connection with ethics, and were not detached and treated as making up a distinct body of teaching. Ashley says: 'The reader will guard himself against supposing that any mediæval writer ever detached these ideas from the body of his teaching, and put them together as a modern text-book writer might do; or that they were ever presented in this particular order, and with the connecting argument definitely stated.'[1] [Footnote 1: _Op. cit._, vol. i. pt. ii. p. 387.] CHAPTER II PROPERTY SECTION 1.--THE RIGHT TO PROCURE AND DISPENSE PROPERTY The teaching of the mediæval Church on the subject of property was perfectly simple and clear. Aquinas devoted a section of the _Summa_ to it, and his opinion was accepted as final by all the later writers of the period, who usually repeat his very words. However, before coming to quote and explain Aquinas, it is necessary to deal with a difficulty that has occurred to several students of Christian economics, namely, that the teaching of the scholastics on the subject of property was in some way opposed to the teaching of the early Church and of Christ Himself. Thus Haney says: 'It is necessary to keep the ideas of Christianity and the Church separate, for few will deny that Christianity as a religion is quite distinct from the various institutions or Churches which profess it....' And he goes on to point out that, whereas Christianity recommended community of property, the Church permitted private property and inequality.[1] Strictly speaking, the reconciliation of the mediæval teaching with that of the primitive Church might be said to be outside the scope of the present essay. In our opinion, however, it is important to insist upon the fundamental harmony of the teaching of the Church in the two periods, in the first place, because it is impossible to understand the later without an understanding of the earlier doctrine from which it developed, and secondly, because of the widespread prevalence, even among Catholics, of the erroneous idea that the scholastic teaching was opposed to the ethical principle laid down by the Founder of Christianity. [Footnote 1: _Op. cit._, p. 73.] Amongst the arguments which are advanced by socialists none is more often met than the alleged socialist teaching and practice of the early Christians. For instance, Cabet's _Voyage en Icarie_ contains the following passage: 'Mais quand on s'enfonce sérieusement et ardemment dans la question de savoir comment la société pourrait être organisée en Démocratie, c'est-à-dire sur les bases de l'Égalité et de la Fraternité, on arrive à reconnaître que cette organisation exige et entraîne nécessairement la communauté de biens. Et nous hâtons d'ajouter que cette communauté était également proclamée par Jésus-Christ, par tous ses apôtres et ses disciples, par tous les pères de l'Église et tous les Chrétiens des premiers siècles.' The fact that St. Thomas Aquinas, the great exponent of Catholic teaching in the Middle Ages, defends in unambiguous language the institution of private property offers no difficulties to the socialist historian of Christianity. He replies simply that St. Thomas wrote in an age when the Church was the Church of the rich as well as of the poor; that it had to modify its doctrines to ease the consciences of its rich members; and that, ever since the conversion of Constantine, the primitive Christian teaching on property had been progressively corrupted by motives of expediency, until the time of the _Summa_, when it had ceased to resemble in any way the teaching of the Apostles.[1] We must therefore first of all demonstrate that there is no such contradiction between the teaching of the Apostles and that of the mediæval Church on the subject of private property, but that, on the contrary, the necessity of private property was at all times recognised and insisted on by the Catholic Church. As it is put in an anonymous article in the _Dublin Review_: 'Among Christian nations we discover at a very early period a strong tendency towards a general and equitable distribution of wealth and property among the whole body politic. Grounded on an ever-increasing historical evidence, we might possibly affirm that the mediæval Church brought her whole weight to bear incessantly upon this one singular and single point.'[2] [Footnote 1: See, _e.g._, Nitti, _Catholic Socialism_, p. 71. 'Thus, then, according to Nitti, the Christian Church has been guilty of the meanest, most selfish, and most corrupt utilitarianism in her attitude towards the question of wealth and property. She was communistic when she had nothing. She blessed poverty in order to fill her own coffers. And when the coffers were full she took rank among the owners of land and houses, she became zealous in the interests of property, and proclaimed that its origin was divine' ('The Fathers of the Church and Socialism,' by Dr. Hogan, _Irish Ecclesiastical Record_, vol. xxv. p. 226).] [Footnote 2: 'Christian Political Economy,' _Dublin Review_, N.S., vol. vi. p. 356] The alleged communism of the first Christians is based on a few verses of the Acts of the Apostles describing the condition of the Church of Jerusalem. 'And they that believed were together and had all things common; And sold their possessions and goods, and parted them to all men, as every man had need.'[1] 'And the multitude of them that believed were of one heart and of one soul: neither said any of them that aught of the things which he possessed was his own; but they had all things common. Neither was there any amongst them that lacked: for as many as were possessors of land or houses sold them, and brought the price of the things that were sold, And laid them down at the apostles' feet: and distribution was made unto every man according as he had need.'[2] [Footnote 1: ii. 44-45.] [Footnote 2: iv. 32, 34, 35.] It is by no means clear whether the state of things here depicted really amounted to communism in the strict sense. Several of the most enlightened students of the Bible have come to the conclusion that the verses quoted simply express in a striking way the great liberality and benevolence which prevailed among the Christian fraternity at Jerusalem. This view was strongly asserted by Mosheim,[1] and is held by Dr. Carlyle. 'A more careful examination of the passages in the Acts,' says the latter,[2] 'show clearly enough that this was no systematic division of property, but that the charitable instinct of the infant Church was so great that those who were in want were completely supported by those who were more prosperous.... Still there was no systematic communism, no theory of the necessity of it.' Colour is lent to this interpretation by the fact that similar words and phrases were used to emphasise the prevalence of charity and benevolence in later communities of Christians, amongst whom, as we know from other sources, the right of private property was fully admitted. Thus Tertullian wrote:[3] 'One in mind and soul, we do not hesitate to share our earthly goods with one another. All things are common among us but our wives.' This passage, if it were taken alone, would be quite as strong and unambiguous as those from the Acts; but fortunately, a few lines higher up, Tertullian had described how the Church was supported, wherein he showed most clearly that private property was still recognised and practised: 'Though we have our treasure-chest, it is not made up of purchase-money, as of a religion that has its price. On the monthly collection day, if he likes, each puts in a small donation; but only if he has pleasure, and only if he be able; all is voluntary.' This point is well put by Bergier:[4] 'Towards the end of the first century St. Barnabas; in the second, St. Justin and St. Lucian; in the third, St. Clement of Alexandria, Tertullian, Origen, St. Cyprian; in the fourth, Arnobius and Lactantius, say that among the Christians all goods are common; there was then certainly no question of a communism of goods taken in the strict sense.' [Footnote 1: _Dissert. ad Hist. Eccles._, vol. ii. p. 1.] [Footnote 2: 'The Political Theory of the Ante-Nicene Fathers,' _Economic Review_, vol. ix.] [Footnote 3: _Apol._ 39.] [Footnote 4: _Dictionnaire de Théologie_, Paris, 1829, tit. 'Communauté.'] It is therefore doubtful if the Church at Jerusalem, as described in the Acts, practised communism at all, as apart from great liberality and benevolence. Assuming, however, that the Acts should be interpreted in their strict literal sense, let us see to what the so-called communism amounted. In the first place, it is plain from Acts iv. 32 that the communism was one of use, not of ownership. It was not until the individual owner had sold his goods and placed the proceeds in the common fund that any question of communism arose. 'Whiles it remained was it not thine own,' said St. Peter, rebuking Ananias, 'and after it was sold was it not in thine own power?'[1] This distinction is particularly important in view of the fact that it is precisely that insisted on by St. Thomas Aquinas. There is no reason to suppose that the community of use practised at Jerusalem was in any way different from that advocated by Aquinas--namely, 'the possession by a man of external things, not as his own, but in common, so that, to wit, he is ready to communicate them to others in their need.' [Footnote 1: Roscher, _Political Economy_ (Eng. trans.), vol. i. p. 246; _Catholic Encyclopædia_, tit. 'Communism.'] In the next place, we must observe that the communism described in the Acts was purely voluntary. This is quite obvious from the relation in the fifth chapter of the incident of Ananias and Sapphira. There is no indication that the abandonment of one's possessory rights was preached by the Apostles. Indeed, it would be difficult to understand why they should have done so, when Christ Himself had remained silent on the subject. Far from advocating communism, the Founder of Christianity had urged the practice of many virtues for which the possession of private property was essential. 'What Christ recommended,' says Sudre,[1] 'was voluntary abnegation or almsgiving. But the giving of goods without any hope of compensation, the spontaneous deprivation of oneself, could not exist except under a system of private property ... they were one of the ways of exercising such rights.' Moreover, as the same author points out, private property was fully recognised under the Jewish dispensation, and Christ would therefore have made use of explicit language if he had intended to alter the old law in this fundamental respect. 'Think not that I am come to destroy the law or the prophets: I am not come to destroy, but to fulfil.'[2] At the time of Christ's preaching, a Jewish sect, the Essenes, were endeavouring to put into practice the ideals of communism, but there is not a word in the Gospels to suggest that He ever held them up as an example to His followers. 'Communism was never preached by Christ, although it was practised under His very eyes by the Essenes. This absolute silence is equivalent to an implicit condemnation.'[3] [Footnote 1: _Histoire du Communisme_, p. 39.] [Footnote 2: Matt. v. 17.] [Footnote 3: Sudre, _op. cit._, p. 44. On the Essenes see 'Historic Phases of Socialism,' by Dr. Hogan, _Irish Ecclesiastical Record_, vol. xxv. p. 334. Even Huet discounts the importance of this instance of communism, _Le Règne social du Christianisme_, p. 38.] Nor was communism preached as part of Christ's doctrine as taught by the Apostles. In Paul's epistles there is no direction to the congregations addressed that they should abandon their private property; on the contrary, the continued existence of such rights is expressly recognised and approved in his appeals for funds for the Church at Jerusalem.[1] Can it be that, as Roscher says,[2] the experiment in communism had produced a chronic state of poverty in the Church at Jerusalem? Certain it is the experiment was never repeated in any of the other apostolic congregations. The communism at Jerusalem, if it ever existed at all, not only failed to spread to other Churches, but failed to continue at Jerusalem itself. It is universally admitted by competent students of the question that the phenomenon was but temporary and transitory.[3] [Footnote 1: _e.g._ Rom. xv. 26, 1 Cor. xvi. 1.] [Footnote 2: _Political Economy_, vol. i. p. 246.] [Footnote 3: Sudre, _op. cit._; Salvador, _Jésus-Christ et sa Doctrine_, vol. ii. p. 221. See More's _Utopia_.] The utterances of the Fathers of the Church on property are scattered and disconnected. Nevertheless, there is sufficient cohesion in them to enable us to form an opinion of their teaching on the subject. It has, as we have said, frequently been asserted that they favoured a system of communism, and disapproved of private ownership. The supporters of this view base their arguments on a number of isolated texts, taken out of their context, and not interpreted with any regard to the circumstances in which they were written. 'The mistake,' as Devas says,[1] 'of representing the early Christian Fathers of the Church as rank socialists is frequently made by those who are friendly to modern socialism; the reason for it is that either they have taken passages of orthodox writers apart from their context, and without due regard to the circumstances in which they were written, and the meaning they would have conveyed to their hearers; or else, by a grosser blunder, the perversions of heretics are set forth as the doctrine of the Church, and a sad case arises of mistaken identity.' A careful study of the patristic texts bearing on the subject leads one to the conclusion that Mr. Devas's view is without doubt the correct one.[2] [Footnote 1: _Dublin Review_, Jan. 1898.] [Footnote 2: Dr. Hogan, in an article entitled 'The Fathers of the Church and Socialism,' in the _Irish Ecclesiastical Record_, vol. xxv. p. 226, has examined all the texts relative to property in the writings of Tertullian, St. Justin Martyn, St. Clement of Rome, St. Clement of Alexandria, St. Basil, St. Ambrose, St. John Chrysostom, St. Augustine, and St. Gregory the Great; and the utterances of St. Basil, St. Ambrose, and St. Jerome are similarly examined in 'The Alleged Socialism of the Church Fathers,' by Dr. John A. Ryan. The patristic texts are also fully examined by Abbé Calippe in 'Le Caractère sociale de la Propriété' in _La Semaine Sociale de France_, 1909, p. 111. The conclusion come to after thorough examinations such as these is always the same. For a good analysis of the patristic texts from the communistic standpoint, see Conrad Noel, _Socialism in Church History_.] The passages from the writings of the Fathers which are cited by socialists who are anxious to support the proposition that socialism formed part of the early Christian teaching may be roughly divided into four groups: first, passages where the abandonment of earthly possessions is held up as a work of more than ordinary devotion--in other words, a counsel of perfection; second, those where the practice of almsgiving is recommended in the rhetorical and persuasive language of the missioner--where the faithful are exhorted to exercise their charity to such a degree that it may be said that the rich and the poor have all things in common; third, passages directed against avarice and the wrongful acquisition or abuse of riches; and fourth, passages where the distinction between the natural and positive law on the matter is explained. The following passage from Cyprian is a good example of an utterance which was clearly meant as a counsel of perfection. Isolated sentences from this passage have frequently been quoted to prove that Cyprian was an advocate of communism; but there can be no doubt from the passage as a whole, that all that he was aiming at was to cultivate in his followers a high detachment from earthly wealth, and that, in so far as complete abandonment of one's property is recommended, it is simply indicated as a work of quite unusual devotion. It is noteworthy that this passage occurs in a treatise on almsgiving, a practice which presupposes a system of individual ownership:[1] 'Let us consider what the congregation of believers did in the time of the Apostles, when at the first beginnings the mind flourished with greater virtues, when the faith of believers burned with a warmth of faith yet new. Thus they sold houses and farms, and gladly and liberally presented to the Apostles the proceeds to be dispersed to the poor; selling and alienating their earthly estate, they transferred their lands thither where they might receive the fruits of an eternal possession, and there prepared houses where they might begin an eternal habitation. Such, then, was the abundance in labours as was the agreement in love, as we read in the Acts--"Neither said any of them that aught of the things which he possessed was his own; but they had all things common." This is truly to become son of God by spiritual birth; this is to imitate by the heavenly law the equity of God the Father. For whatever is of God is common in our use; nor is any one excluded from His benefits and His gifts so as to prevent the whole human race from enjoying equally the divine goodness and liberality. Thus the day equally enlightens, the sun gives radiance, the rain moistens, the wind blows, and the sleep is one to those who sleep, and the splendour of Stars and of the Moon is common. In which examples of equality he who as a possessor in the earth shares his returns and his fruits with the fraternity, while he is common and just in his gratuitous bounties, is an imitator of God the Father.' [Footnote 1: _De Opere et Eleemosynis_, 25.] There is a much-quoted passage of St. John Chrysostom which is capable of the same interpretation. In his commentary on the alleged communistic existence of the Apostles at Jerusalem the Saint emphasises the fact that their communism was voluntary: 'That this was in consequence not merely of the miraculous signs, but of their own purpose, is manifest from the case of Ananias and Sapphira.' He further insists on the fact that the members of this community were animated by unusual fervour: 'From the exceeding ardour of the givers none was in want.' Further down, in the same homily, St. John Chrysostom urges the adoption of a communistic system of housekeeping, but purely on the grounds of domestic economy and saving of labour. There is not a word to suggest that a communistic system was morally preferable to a proprietary one.[1] [Footnote 1: _Hom, on Acts xi_. That voluntary poverty was regarded as a counsel of perfection by Aquinas is abundantly clear from many passages in his works, _e.g. Summa_, I. ii. 108, 4; II. ii. 185, 6; II. ii. 186, 3; _Summa cont. Gent_., iii. 133. On this, as on every other point, the teaching of Aquinas is in line with that of the Fathers.] The second class of patristic texts which are relied on by socialists are, as we have said, those 'where the practice of almsgiving is recommended in the rhetorical and persuasive language of the missioner--where the faithful are exhorted to exercise their charity to such a degree that it may be said that the rich and poor have all things in common.' Such passages are very frequent throughout the writings of the Fathers, but we may give as examples two, which are most frequently relied on by socialists. One of these is from St. Ambrose:[1] 'Mercy is a part of justice; and if you wish to give to the poor, this mercy is justice. "He hath dispersed, he hath given to the poor; his righteousness endureth for ever."[2] It is therefore unjust that one should not be helped by his neighbour; when God hath wished the possession of the earth to be common to all men, and its fruits to minister to all; but avarice established possessory rights. It is therefore just that if you lay claim to anything as your private property, which is really conferred in common to the whole human race, that you should dispense something to the poor, so that you may not deny nourishment to those who have the right to share with you.' The following passage from Gregory the Great[3] is another example of this kind of passage: 'Those who rather desire what is another's, nor bestow that is their own, are to be admonished to consider carefully that the earth out of which they are taken is common to all men, and therefore brings forth nourishment for all in common. Vainly, then, do they suppose themselves innocent who claim to their own private use the common gift of God; those who in not imparting what they have received walk in the midst of the slaughter of their neighbours; since they almost daily slay so many persons as there are dying poor whose subsidies they keep close in their own possession.' [Footnote 1: _Comm. on Ps. cxviii._, viii. 22.] [Footnote 2: Ps. cxii. 9.] [Footnote 3: _Lib. Reg. Past._, iii. 21.] The third class of passages to which reference must be made is composed of the numerous attacks which the Fathers levelled against the abuse or wrongful acquisition of riches. These passages do not indicate that the Fathers favoured a system of communism, but point in precisely the contrary direction. If property were an evil thing in itself, they would not have wasted so much time in emphasising the evil uses to which it was sometimes put. The insistence on the abuses of an institution is an implicit admission that it has its uses. Thus Clement of Alexandria devotes a whole treatise to answering the question 'Who is the rich man who can be saved?' in which it appears quite plainly that it is the possible abuse of wealth, and the possible too great attachment to worldly goods, that are the principal dangers in the way of a rich man's salvation. The suggestion that in order to be saved a man must abandon all his property is strongly controverted. The following passage from St. Gregory Nazianzen[1] breathes the same spirit: 'One of us has oppressed the poor, and wrested from him his portion of land, and wrongly encroached upon his landmarks by fraud or violence, and joined house to house, and field to field, to rob his neighbour of something, and has been eager to have no neighbour, so as to dwell alone on the earth. Another has defiled the land with usury and interest, both gathering where he has not sowed and reaping where he has not strewn, farming not the land but the necessity of the needy.... Another has had no pity on the widow and orphans, and not imparted his bread and meagre nourishment to the needy; ... a man perhaps of much property unexpectedly gained, for this is the most unjust of all, who finds his very barns too narrow for him, fining some and emptying others to build greater ones for future crops.' Similarly Clement of Rome advocates _frugality_ in the enjoyment of wealth;[2] and Salvian has a long passage on the dangers of the abuse of riches.[3] [Footnote 1: _Orat_., xvi. 18.] [Footnote 2: _The Instructor_, iii. 7.] [Footnote 3: _Ad Eccles._, i. 7.] The fourth group of passages is that in which the distinction between the natural and positive law on the matter is explained. It is here that the greatest confusion has been created by socialist writers, who conclude, because they read in the works of some of the Fathers that private property did not exist by natural law, that it was therefore condemned by them as an illegitimate institution. Nothing could be more erroneous. All that the Fathers meant in these passages was that in the state of nature--the idealised Golden Age of the pagans, or the Garden of Eden of the Christians--there was no individual ownership of goods. The very moment, however, that man fell from that ideal state, communism became impossible, simply on account of the change that had taken place in man's own nature. To this extent it is true to say that the Fathers regarded property with disapproval; it was one of the institutions rendered necessary by the fall of man. Of course it would have been preferable that man should not have fallen from his natural innocence, in which case he could have lived a life of communism; but, as he had fallen, and communism had from that moment become impossible, property must be respected as the one institution which could put a curb on his avarice, and preserve a society of fallen men from chaos and general rapine. That this is the correct interpretation of the patristic utterances regarding property and natural law appears from the following passage of _The Divine Institution_ of Lactantius--'the most explicit statement bearing on the Christian idea of property in the first four centuries':[1] '"They preferred to live content with a simple mode of life," as Cicero relates in his poems; and this is peculiar to our religion. "It was not even allowed to mark out or to divide the plain with a boundary: men sought all things in common,"[2] since God had given the earth in common to all, that they might pass their life in common, not that mad and raging avarice might claim all things for itself, and that riches produced for all might not be wanting to any. And this saying of the poet ought so to be taken, not as suggesting the idea that individuals at that time had no private property, but it must be regarded as a poetical figure, that we may understand that men were so liberal, that they did not shut up the fruits of the earth produced for them, nor did they in solitude brood over the things stored up, but admitted the poor to share the fruits of their labour: "Now streams of milk, now streams of nectar flowed."[3] And no wonder, since the storehouses of the good literally lay open to all. Nor did avarice intercept the divine bounty, and thus cause hunger and thirst in common; but all alike had abundance, since they who had possessions gave liberally and bountifully to those who had not. But after Saturnus had been banished from heaven, and had arrived in Latium ... not only did the people who had a superfluity fail to bestow a share upon others, but they even seized the property of others, drawing everything to their private gain; and the things which formerly even individuals laboured to obtain for the common use of all were now conveyed to the powers of a few. For that they might subdue others by slavery, they began to withdraw and collect together the necessaries of life, and to keep them firmly shut up, that they might make the bounties of heaven their own; not on account of kindness (_humanitas_), a feeling which had no existence for them, but that they might sweep together all the instruments of lust and avarice.'[4] [Footnote 1: 'The Biblical and Early Christian Idea of Property,' by Dr. V. Bartlett, in _Property, its Duties and Rights_ (London, 1913).] [Footnote 2: _Georg._, i. 126.] [Footnote 3: Ovid, _Met._, I. iii.] [Footnote 4: Lactantius, _Div. Inst._, v. 5-6.] It appears from the above passage that Lactantius regarded the era in which a system of communism existed as long since vanished, if indeed it ever had existed. The same idea emerges from the writings of St. Augustine, who drew a distinction between divine and human right. 'By what right does every man possess what he possesses?' he asks.[1] 'Is it not by human right? For by divine right "the earth is the Lord's, and the fullness thereof." The poor and the rich God made of one clay; the same earth supports alike the poor and the rich. By human right, however, one says, This estate is mine, this servant is mine, this house is mine. By human right, therefore, is by right of the Emperor. Why so? Because God has distributed to mankind these very human rights through the emperors and kings of the world.' [Footnote 1: _Tract in Joh. Ev._, vi. 25.] The socialist commentators of St. Augustine have strained this, and similar passages, to mean that because property rests on human, and not on divine, right, therefore it should not exist at all. It is, of course true that what human right has created human right can repeal; and it is therefore quite fair to argue that all the citizens of a community might agree to live a life of communism. That is simply an argument to prove that there is nothing immoral in communism, and does not prove in the very slightest degree that there is anything immoral in property. On the contrary, so long as 'the emperors and kings of the world' ordain that private property shall continue, it would be, according to St. Augustine, immoral for any individual to maintain that such ordinances were wrongful. The correct meaning of the patristic distinction between natural and positive law with regard to property is excellently summarised in Dr. Carlyle's essay on _Property in Mediæval Theology_:[1] 'What do the expressions of the Fathers mean? At first sight they might seem to be an assertion of communism, or denunciation of private property as a thing which is sinful or unlawful. But this is not what the Fathers mean. There can be little doubt that we find the sources of these words in such a phrase as that of Cicero--"Sunt autem privata nulla natura"[2]--and in the Stoic tradition which is represented in one of Seneca's letters, when he describes the primitive life in which men lived together in peace and happiness, when there was no system of coercive government and no private property, and says that man passed out of this primitive condition as their first innocence disappeared, as they became avaricious and dissatisfied with the common enjoyment of the good things of the world, and desired to hold them as their private possession.[3] Here we have the quasi-philosophical theory, from which the patristic conception is derived. When men were innocent there was no need for private property, or the other great conventional institutions of society, but as this innocence passed away, they found themselves compelled to organise society and to devise institutions which should regulate the ownership and use of the good things which men had once held in common. The institution of property thus represents the fall of man from his primitive innocence, through greed and avarice, which refused to recognise the common ownership of things, and also the method by which the blind greed of human nature might be controlled and regulated. It is this ambiguous origin of the institution which explains how the Fathers could hold that private property was not natural, that it grew out of men's vicious and sinful desires, and at the same time that it was a legitimate institution.' Janet takes the same view of the patristic utterances on this subject:[4] 'What do the Fathers say? It is that in Jesus Christ there is no mine and thine. Nothing is more true, without doubt; in the divine order, in the order of absolute charity, where men are wholly wrapt up in God, distinction and inequality of goods would be impossible. But the Fathers saw clearly that such a state of things was not realisable here below. What did they do? They established property on human law, positive law, imperial law. Communism is either a Utopia or a barbarism; a Utopia if one imagine it founded on universal devotion; a barbarism if one imposes it by force.'[5] [Footnote 1: _Property, Its Duties and Rights_ (London, 1913).] [Footnote 2: _De Off._, i. 7.] [Footnote 3: Seneca, _Ep._, xiv. 2.] [Footnote 4: _Histoire de la Science politique_, vol. i. p. 330.] [Footnote 5: See also Jarrett, _Mediæval Socialism_.] It must not be concluded that the evidence of the approbation by the Fathers of private property is purely negative or solely derived from the interpretation of possibly ambiguous texts. On the contrary, the lawfulness of property is emphatically asserted on more than one occasion. 'To possess riches,' says Hilary of Poictiers,[1] 'is not wrongful, but rather the manner in which possession is used.... It is a crime to possess wrongfully rather than simply to possess.' 'Who does not understand,' asks St. Augustine,[2] 'that it is not sinful to possess riches, but to love and place hope in them, and to prefer them to truth or justice?' Again, 'Why do you reproach us by saying that men renewed in baptism ought no longer to beget children or to possess fields and houses and money? Paul allows it.'[3] According to Ambrose,[4] 'Riches themselves are not wrongful. Indeed, "redemptio animae* viri divitiae* ejus," because he who gives to the poor saves his soul. There is therefore a place for goodness in these material riches. You are as steersmen in a great sea. He who steers his ship well, quickly crosses the waves, and comes to port; but he who does not know how to control his ship is sunk by his own weight. Wherefore it is written, "Possessio divitum civitas firmissima."' A Council in A.D. 415 condemned the proposition held by Pelagius that 'the rich cannot be saved unless they renounced their goods.'[5] [Footnote 1: _Comm. on Matt. xix._ 9.] [Footnote 2: _Contra Ad._, xx. 2.] [Footnote 3: _De Mor. Eccl. Cath._, i. 35.] [Footnote 4: _Epist._, lxiii. 92.] [Footnote 5: _Revue Archéologique_, 1880, p. 321.] The more one studies the Fathers the more one becomes convinced that property was regarded by them as one of the normal and legitimate institutions of human society. Benigni's conclusion, as the result of his exceptionally thorough researches, is that according to the early Fathers, 'property is lawful and ought scrupulously to be respected. But property is subject to the high duties of human fellowship which sprang from the equality and brotherhood of man. Collectivism is absurd and immoral.'[1] Janet arrived at the same conclusion: 'In spite of the words of the Fathers, in spite of the advice given by Christ to the rich man to sell all his goods and give to the poor, in spite of the communism of the Apostles, can one say that Christianity condemned property? Certainly not. Christianity considered it a counsel of perfection for a man to deprive himself of his goods; it did not abrogate the right of anybody.'[2] The same conclusion is reached by the Abbé Calippe in an excellent article published in _La Semaine Sociale de France_, 1909. 'The right of property and of the property owner are assumed.'[3] 'It is only prejudiced or superficial minds which could make the writers of the fourth century the precursors of modern communists or collectivists.'[4] [Footnote 1: _L'Economia Sociale Christiana avanti Costantino_ (Genoa, 1897).] [Footnote 2: _Histoire de la Science politique_, vol. i. p. 319.] [Footnote 3: P. 114.] [Footnote 4: P. 121.] When we turn to St. Thomas Aquinas, we find that his teaching on the subject of property is not at all out of harmony with that of the earlier Fathers of the Church, but, on the contrary, summarises and consolidates it. 'It remained to elaborate, to constitute a definite theory of the right of property. It sufficed to harmonise, to collaborate, and to relate one to the other these elements furnished by the Christian doctors of the first four or five centuries; and this was precisely the work of the great theologians of the Middle Ages, especially of St. Thomas Aquinas.... In establishing his thesis St. Thomas did not borrow from the Roman jurisconsults through the medium of St. Isidore more than their vocabulary, their formulas, their juridical distinctions; he also borrowed from Aristotle the arguments upon which the philosopher based his right of property. But the ground of his doctrine is undoubtedly of Christian origin. There is, between the Fathers and him, a perfect continuity.'[1] 'Community of goods,' he writes, 'is ascribed to the natural law, not that the natural law dictates that all things should be possessed in common, and that nothing should be possessed as one's own; but because the division of possession is not according to the natural law, but rather arose from human agreement, which belongs to positive law. Hence the ownership of possessions is not contrary to the natural law, but an addition thereto devised by human reason.' This is simply another way of stating St. Augustine's distinction between natural and positive law. If it speaks with more respect of positive law than St. Augustine had done, it is because Aquinas was influenced by the Aristotelian conception of the State being itself a natural institution, owing to man being a social animal.[2] [Footnote 1: Abbé Calippe, _op. cit._, 1909, p. 124.] [Footnote 2: See Carlyle, _Property in Mediæval Theology_. Community of goods is said to be according to natural law in the canon law, but certain titles of acquiring private property are also said to be natural, so that the passage does not help the discussion very much (_Corp, Jur. Can._, Dec. 1. Dist. i. c. 7.)] The explanation which St. Thomas gives of the necessity for property also shows how clearly he agreed with the Fathers' teaching on natural communism: 'Two things are competent to man in respect of external things. One is the power to procure and dispense them, and in this regard it is lawful for a man to possess property. Moreover, this is necessary to human life for three reasons. First, because every man is more careful to procure what is for himself alone than that which is common to many or to all: since each one would shirk the labour, and would leave to another that which concerns the community, as happens when there is a great number of servants. Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everybody had to look after any one thing indeterminately. Thirdly, because a more peaceful state is ensured to man if each one is contented with his own. Hence it is to be observed that quarrels more frequently occur when there is no division of the things possessed.[1] It is quite clear from this passage that Aquinas regarded property as something essential to the existence of society in the natural condition of human nature--that is to say, the condition that it had acquired at the fall. It is precisely the greed and avarice of fallen man that renders property an indispensable institution. [Footnote 1: II. ii. 66, 2.] There was another sense in which property was said to be according to human law, in distinction to the natural law, namely, in the sense that, whereas the general principle that men should own things might be said to be natural, the particular proprietary rights of each individual were determined by positive law. In other words, the _fundamentum_ of property rights was natural, whereas the _titulus_ of particular property rights was according to positive law. This distinction is stated clearly by Aquinas:[1] 'The natural right or just is that which by its very nature is adjusted to or commensurate with another person. Now this may happen in two ways; first, according as it is considered absolutely; thus the male by its very nature is commensurate with the female to beget offspring by her, and a parent is commensurate with the offspring to nourish it. Secondly, a thing is naturally commensurate with another person, not according as it is considered absolutely, but according to something resultant from it--for instance, the possession of property. For if a particular piece of land be considered absolutely, it contains no reason why it should belong to one man more than to another, but if it be considered in respect of its adaptability to cultivation, and the unmolested use of the land, it has a certain commensuration to be the property of one and not of another man, as the Philosopher shows.' Cajetan's commentary on this article clearly emphasises the distinction between _fundamentum_ and _titulus_: 'In the ownership of goods two things are to be discussed. The first is why one thing should belong to one man and another thing to another. The second is why this particular field should belong to this man, that field to that man. With regard to the former inquiry, it may be said that the ownership of things is according to the law of nations, but with regard to the second, it may be said to result from the positive law, because in former times one thing was appropriated by one man and another thing by another.' It must not be supposed, however, from what we have just said, that there are no natural titles to property. Labour, for instance, is a title flowing from the natural law, as also is occupancy, and in certain circumstances, prescription. All that is meant by the distinction between _fundamentum_ and _titulus_ is that, whereas it can be clearly demonstrated by natural law that the goods of the earth, which are given by God for the benefit of the whole of mankind, cannot be made use of to their full advantage unless they are made the subject of private ownership, particular goods cannot be demonstrated to be the lawful property of this or that person unless some human act has intervened. This human act need not necessarily be an act of agreement; it may equally be an act of some other kind--for instance, a decree of the law-giver, or the exercise of labour upon one's own goods. In the latter case, the additional value of the goods becomes the lawful property of the person who has exerted the labour. Aquinas therefore pronounced unmistakably in favour of the legitimacy of private property, and in doing so was in full agreement with the Fathers of the Church. He was followed without hesitation by all the later theologians, and it is abundantly evident from their writings that the right of private property was the keystone of their whole economic system.[2] [Footnote 1: II. ii. 57, 3.] [Footnote 2: A community of goods, more or less complete, and a denial of the rights of private property was part of the teaching of many sects which were condemned as heretical--for instance, the Albigenses, the Vaudois, the Bégards, the Apostoli, and the Fratricelli. (See Brants, _Op. cit._, Appendix II.)] Communism therefore was no part of the scholastic teaching, but it must not be concluded from this that the mediævals approved of the unregulated individualism which modern opinion allows to the owners of property. The very strength of the right to own property entailed as a consequence the duty of making good use of it; and a clear distinction was drawn between the power 'of procuring and dispensing' property and the power of using it. We have dealt with the former power in the present section, and we shall pass to the consideration of the latter in the next. In a later chapter we shall proceed to discuss the duties which attached to the owners of property in regard to its exchange. SECTION 2.--DUTIES REGARDING THE ACQUISITION AND USE OF PROPERTY We referred at the end of the last section to the very important distinction which Aquinas draws between the power of procuring and dispensing[1] exterior things and the power of using them. 'The second thing that is competent to man with regard to external things is their use. In this respect man ought to possess external things, not as his own, but as common, so that, to wit, he is ready to communicate them to others in their need.'[2] These words wherein St. Thomas lays down the doctrine of community of user of property were considered as authoritative by all later writers on the subject, and were universally quoted with approval by them,[3] and may therefore be taken as expressing the generally held view of the Middle Ages. They require careful explanation in order that their meaning be accurately understood.[4] Cajetan's gloss on this section of the _Summa_ enables us to understand its significance in a broad sense, but fuller information must be derived from a study of other parts of the _Summa_ itself. 'Note,' says Cajetan, 'that the words that community of goods in respect of use arises from the law of nature may be understood in two ways, one positively, the other negatively. And if they are understood in their positive sense they mean that the law of nature dictates that all things are common to all men; if in their negative sense, that the law of nature did not establish private ownership of possessions. And in either sense the proposition is true if correctly understood. In the first place, if they are taken in their positive sense, a man who is in a position of extreme necessity may take whatever he can find to succour himself or another in the same condition, nor is he bound in such a case to restitution, because by natural law he has but made use of his own. And in the negative sense they are equally true, because the law of nature did not institute one thing the property of one person, and another thing of another person.' The principle of community of user flows logically from the very nature of property itself as defined by Aquinas, who taught that the supreme justification of private property was that it was the most advantageous method of securing for the community the benefits of material riches. While the owner of property has therefore an absolute right to the goods he possesses, he must at the same time remember that this right is established primarily on his power to benefit his neighbour by his proper use of it. The best evidence of the correctness of this statement is the fact that the scholastics admitted that, if the owner of property was withholding it from the community, or from any member of the community who had a real need of it, he could be forced to apply it to its proper end. If the community could pay for it, it was bound to do so; but if the necessitous person could not pay for it, he was none the less entitled to take it. The former of these cases was illustrated by the principle of the _dominium eminens_ of the State; and the latter by the principle that the giving of alms to a person in real need was a duty not of charity, but of justice.[5] We shall see in a moment that the most usual application of the principle enunciated by Aquinas was in the case of one person's extreme necessity which required almsgiving from another's superfluity, but, even short of such cases, there were rules of conduct in respect of the user of property on all occasions which were of extreme importance in the economic life of the time. [Footnote 1: Goyau insists on the importance of the words 'procure' and 'dispense.' 'Dont le premier éveille l'idée d'une constante sollicitude, et dont le second évoque l'image d'une générosité sympathetique' (_Autaur du Catholicisme Sociale_, vol. ii. p. 93).] [Footnote 2: II. ii. 66, 2. In another part of the _Summa_ the same distinction is clearly laid down. 'Bona temporalia quae* homini divinitus conferuntur, ejus quidem sunt quantum ad proprietatem; sed quantum ad usum non solum desent esse ejus, sed aliorum qui en eis sustentari possunt en eo quod ei superfluit,' II. ii. 32, 6, ad 2.] [Footnote 3: Janssen, _op. cit._, vol. ii. p. 91.] [Footnote 4: The Abbé Calippe summarises St. Thomas's doctrine as follows: 'Le droit de propriété est un droit réel; mais ce n'est pas un droit illimité, les propriétaires ont des devoirs; ils ont des devoirs parce que Dieu qui a créé la terre ne l'a pas créée pour eux seuls, mais pour tous' (_Semaine Sociale de France_, 1909, p. 123). According to Antoninus of Florence, goods could be evilly acquired, evilly distributed, or evilly consumed (_Irish Theological Quarterly_, vol. vii. p. 146).] [Footnote 5: On the application of this principle by the popes in the thirteenth and fifteenth centuries in the case of their own estates, see Ardant, _Papes et Paysans_, a work which must be read with a certain degree of caution (Nitti, _Catholic Socialism_, p. 290).] These principles for the guidance of the owner of property are not collected under any single heading in the _Summa_, but must be gathered from the various sections dealing with man's duty to his fellow-men and to himself. One leading virtue which was inculcated with great emphasis by Aquinas was that of temperance. 'All pleasurable things which come within the use of man,' we read in the section dealing with this subject, 'are ordered to some necessity of this life as an end. And therefore temperance accepts the necessity of this life as a rule or measure of the things one uses, so that, to wit, they should be used according as the necessity of this life requires.'[1] St. Thomas explains, moreover, that 'necessary' must be taken in the broad sense of suitable to one's condition of life, and not merely necessary to maintain existence.[2] The principles of temperance did not apply in any special way to the user of property more than to the enjoyment of any other good;[3] but they are relevant as laying down the broad test of right and wrong in the user of one's goods. [Footnote 1: II. ii. 141, 5.] [Footnote 2: _Ibid._, ad. 2. As Buridan puts it (_Eth._, iv. 4), 'If any man has more than is necessary for his own requirements, and does not give away anything to the poor, and to his relations and neighbours, he is acting against right reason.'] [Footnote 1: 'Rationalis creaturae* vera perfectio est unamquamque rem tanti habere quanti habenda est, sicut pluris est anima quam esca; fides et aequitas* quam pecunia' (Gerson, _De. Cont._).] More particularly relevant to the subject before us is the teaching of Aquinas on liberality, which is a virtue directly connected with the user of property. Aquinas defines liberality as 'a virtue by which men use well all those exterior things which are given to us for sustenance.'[1] The limitations within which liberality should be practised are stated in the same article: 'As St. Basil and St. Ambrose say, God has given to many a superabundance of riches, in order that they might gain merit by their dispensing them well. Few things, however, suffice for one man; and therefore the liberal man will advantageously expend more on others than on himself. In the spiritual sphere a man must always care for himself before his neighbours; and also in temporal things liberality does not demand that a man should think of others to the exclusion of himself and those dependent on him.'[2] [Footnote 1: II. ii. 117, 1.] [Footnote 2: _Ibid._, ad. 1.] 'It is not necessary for liberality that one should give away so much of one's riches that not enough remains to sustain himself and to enable him to perform works of virtue. This complete giving away without reserve belongs to the state of the perfection of spiritual life, of which we shall treat lower down; but it must be known that to give one's goods liberally is an act of virtue which itself produces happiness.'[1] The author proceeds to discuss whether making use of money might be an act of liberality, and replies that 'as money is by its very nature to be classed among useful goods, because all exterior things are destined for the use of man, therefore the proper act of liberality is the good use of money and other riches.'[2] Moreover, 'it belongs to a virtuous man not simply to use well the goods which form the matter of his actions, but also to prepare the means and the occasions to use them well; thus the brave soldier sharpens his blade and keeps it in the scabbard, as well as exercising it on the enemy; in like manner, the liberal man should prepare and reserve his riches for a suitable use.'[3] It appears from this that to save part of one's annual income to provide against emergencies in the future, either by means of insurance or by investing in productive enterprises, is an act of liberality. [Footnote 1: II. ii. 117, ad. 2.] [Footnote 2: _Ibid._, ad. 3.] [Footnote 3: _Ibid._, ad. 2. 'Potest concludi quod accipere et custodire modificata sunt acta liberalitatis.... Major per hoc probatur quod dantem multotiens et consumentem, nihil autem accipientem et custodientem cito derelinqueret substantia temporalis; et ita perirent omnis ejus actus quia non habent amplius quid dare et consumere.... Hic autem acceptio et custodia sic modificari debet. Primo quidem oportet ut non sit injusta; secundo quod non sit de cupiditate vel avaritia suspecta propter excessum; tertio quod non permittat labi substantiam propter defectum ... Dare quando oportet et custodire quando oportet dare contrariantur; sed dare quando oportet et custodire quando oportet non contrariantur' (Buridan, _Eth._, iv. 2).] The question is then discussed whether liberality is a part of justice. Aquinas concludes 'that liberality is not a species of justice, because justice renders to another what is his, but liberality gives him what is the giver's own. Still, it has a certain agreement with justice in two points; first that it is to another, as justice also is; secondly, that it is about exterior things like justice, though in another way. And therefore liberality is laid down by some to be a part of justice as a virtue annexed to justice as an accessory to a principal.'[1] Again, 'although liberality supposes not any legal debt as justice does, still it supposes a certain moral debt considering what is becoming in the person himself who practises the virtue, not as though he had any obligation to the other party; and therefore there is about it very little of the character of a debt.'[2] [Footnote 1: II. ii. 117, art. 5.] [Footnote 2: _Ibid._, ad. 1.] It is important to draw attention to the fact that _liberalitas_ consists in making a good use of property, and not merely in distributing it to others, as a confusion with the English word 'liberality' might lead us to believe. It is, as we said above, therefore certain that a wise and prudent saving of money for investment would be considered a course of conduct within the meaning of the word _liberalitas_, especially if the enterprise in which the money were invested were one which would benefit the community as a whole. 'Modern industrial conditions demand that a man of wealth should distribute a part of his goods indirectly--that is, by investing them in productive and labour-employing enterprises.'[1] [Footnote 1: Ryan, _The Alleged Socialism of the Church Fathers_, p. 20, and see Goyau, _Le Pape et la Question Sociale_, p. 79.] The nature of the virtue of _liberalitas_ may be more clearly understood by an explanation of the vices which stand opposed to it. The first of these treated by Aquinas is avarice, which he defines as 'superfluus amor habendi divitias.' Avarice might be committed in two ways--by harbouring an undue desire of acquiring wealth, or by an undue reluctance to part with it--'primo autem superabundant in retinendo ... secundo ad avaritiam pertinet superabundare in accipiendo.'[1] These definitions are amplified in another part of the same section. 'For in every action that is directed to the attainment of some end goodness consists in the observance of a certain measure. The means to the end must be commensurate with the end, as medicine with health. But exterior goods have the character of things needful to an end. Hence human goodness in the matter of these goods must consist in the observance of a certain measure, as is done by a man seeking to have exterior riches in so far as they are necessary to his life according to his rank and condition. And therefore sin consists in exceeding this measure and trying to acquire or retain riches beyond the due limit; and this is the proper nature of avarice, which is defined to be an immoderate love of having.'[2] 'Avarice may involve immoderation regarding exterior things in two ways; in one way immediately as to the receiving or keeping of them when one acquires or keeps beyond the due amount; and in this respect it is directly a sin against one's neighbour, because in exterior things one man cannot have superabundance without another being in want, since temporal goods cannot be simultaneously possessed by many. The other way in which avarice may involve immoderation is in interior affection....' These words must not be taken to condemn the acquisition of large fortunes by capitalists, which is very often necessary in order that the natural resources of a country may be properly exploited. One man's possession of great wealth is at the present day frequently the means of opening up new sources of wealth and revenue to the entire community. In other words, superabundance is a relative term. This, like many other passages of St. Thomas, must be given a _contemporanea expositio_. 'There were no capitalists in the thirteenth century, but only hoarders.'[3] [Footnote 1: II. ii. 118, 4.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: Rickaby, _Aquinas Ethicus_, vol. ii. p. 234.] It must also be remembered that what would be considered avarice in a man in one station of life would not be considered such in a man in another. So long as one did not attempt to acquire an amount of wealth disproportionate to the needs of one's station of life, one could not be considered avaricious. Thus a common soldier would be avaricious if he strove to obtain a uniform of the quality worn by an officer, and a simple cleric if he attempted to clothe himself in a style only befitting a bishop.[1] [Footnote 1: Aquinas, _In Orat. Dom. Expos_., iv. Ashley gives many quotations from early English literature to show how fully the idea of _status_ was accepted (_Economic History_, vol. i. pt. ii. p. 389). On the warfare waged by the Church on luxury in the Middle Ages, see Baudrillard, _Histoire du Luxe privé et publique_, vol. iii. pp. 630 _et seq._] The avaricious man offended against liberality by caring too much about riches; the prodigal, on the other hand, cared too little about them, and did not attach to them their proper value. 'In affection while the prodigal falls short, not taking due care of them, in exterior behaviour it belongs to the prodigal to exceed in giving, but to fail in keeping or acquiring, while it belongs to the miser to come short in giving, but to superabound in getting and in keeping. Therefore it is clear that prodigality is the opposite of covetousness.'[1] A man, however, might commit both sins at the same time, by being unduly anxious to acquire wealth which he distributed prodigally.[2] Prodigality could always be distinguished from extreme liberality by a consideration of the circumstances of the particular case; a truly liberal man might give away more than a prodigal in case of necessity.[3] Prodigality, though a sin, was a sin of a less grievous kind than avarice.[4] [Footnote 1: II. ii. 119, 1.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: _Ibid._, ad. 3.] [Footnote 4: _Ibid._, art. 3. 'Per prodigalitatem intelligimus habitum quo quis præter vel contra dictamen rectae rationis circa pecunias excedit in datione vel consumptione vel custodia; et per illiberalitatem intelligimus habitum quo quis contra dietamen rectae rationis deficit circa pecunias in datione vel consumptione, vel superabundat in acceptione vel custodia ipsarum' (Buridan, _Eth._, iv. 3).] In addition to the duties which were imposed on the owners of property in all circumstances there was a further duty which only arose on special occasions, namely, _magnificentia_, or munificence. This virtue is discussed by Aquinas[1], but we shall quote the passages of Buridan which explain it, not because they depart in any way from the teaching of Aquinas, but because they are clearer and more scientific. 'By munificence, we understand a habit inclining one to the performance of great works, or to the incurring of great expenses, when, where, and in the manner in which they are called for (_fuerit opportunum_), for example, building a church, assembling great armies for a threatened war, and giving splendid marriage feasts.' He explains that 'munificence stands in the same relation to liberality as bravery acquired by its exercise in danger of death in battle does to bravery simply and commonly understood.' Two vices stand opposed to munificentia: (1) _parvificentia_, 'a habit inclining one not to undertake great works, when circumstances call for them, or to undertaking less, or at less expense, than the needs of the situation demand,' and (2) (_[Greek: banousia]_,) 'a habit inclining one to undertaking great works, which are not called for by circumstances, or undertaking them on a greater scale or at a greater expense than is necessary[2].' [Footnote 1: II. ii. 134.] [Footnote 2: _Eth._, iv. 7.] Both in the case of avarice and prodigality the offending state of mind consisted in attaching a wrong value to wealth, and the inculcation of the virtue of liberality must have been attended with good results not alone to the souls of individuals, but to the economic condition of the community. The avaricious man not only imperilled his own soul by attaching too much importance to temporal gain, but he also injured the community by monopolising too large a share of its wealth; the prodigal man, in addition to incurring the occasion of various sins of intemperance, also impoverished the community by wasting in reckless consumption wealth which might have been devoted to productive or charitable purposes. He who neglected the duty of munificence, either by refusing to make a great expenditure when it was called for (_parvificentia_) or by making one when it was unnecessary (_[Greek: banousia]_) was also deemed to have done wrong, because in the one case he valued his money too highly, and in the other not highly enough. In other words, he attached a wrong value to wealth. Nothing could be further from the truth than the suggestion that the schoolmen despised or belittled temporal riches. Quite on the contrary, they esteemed it a sin to conduct oneself in a manner which showed a defective appreciation of their value[1]. Riches may have been the occasion of sin; but so was poverty. 'The occasions of sin are to be avoided,' says Aquinas, 'but poverty is an occasion of evil, because theft, perjury, and flattery are frequently brought about by it. [Footnote 1: 'Non videtur secundum humanam rationem esse boni et perfecti divitias abjicere totaliter, sed eis uti bene et reficiendo superfluas pauperibus subvenire et amicis' (Buridan, _Eth._, iv. 3).] Therefore poverty should not be voluntarily undertaken, but rather avoided.'[1] Buridan says: 'There is no doubt that it is much more difficult to be virtuous in a state of poverty than in one of moderate affluence;'[2] and Antoninus of Florence expresses the opinion that poverty is in itself an evil thing, although out of it good may come.[3] Even the ambition to rise in the world was laudable, because every one may rightfully desire to place himself and his dependants in a participation of the fullest human felicity of which man is capable, and to rid himself of the necessity of corporal labour.[4] Avarice and prodigality alike offended against liberality, because they tended to deprive the community of the maximum benefit which it should derive from the wealth with which it was endowed. Dr. Cunningham may be quoted in support of this view. 'One of the gravest defects of the Roman Empire lay in the fact that its system left little scope for individual aims, and tended to check the energy of capitalists and labourers alike. But Christian teaching opened up an unending prospect before the individual personally, and encouraged him to activity and diligence by an eternal hope. Nor did such concentration of thought on a life beyond the grave necessarily divert attention from secular duties; Christianity did not disparage them, but set them in a new light, and brought out new motives for taking them seriously.... The acceptance of this higher view of the dignity of human life as immortal was followed by a fuller recognition of personal responsibility. Ancient philosophy had seen that man is the master of material things; but Christianity introduced a new sense of duty in regard to the manner of using them.... Christian teachers were forced to protest against any employment of wealth that disregarded the glory of God and the good of man.'[5] It was the opinion of Knies that the peculiarly Christian virtues were of profound economic value. 'Temperance, thrift, and industry--that is to say, the sun and rain of economic activity---were recommended by the Church and inculcated as Christian virtues; idleness as the mother of theft, gambling as the occasion of fraud, were forbidden; and gain for its own sake was classed as a kind of robbery[6].' [Footnote 1: _Summa cont. Gent._, iii. 131.] [Footnote 2: _Eth._, iv. 3.] [Footnote 3: _Summa_, iv. 12, 3.] [Footnote 4: Cajetan, _Comm._ on II. ii. 118, 1.] [Footnote 5: _Western Civilisation_, vol. ii. pp. 8-9.] [Footnote 6: _Politische Oekonomie vom Standpuncte der geschichtlichen Methode_, p. 116, and see Rambaud, _Histoire_, p. 759; Champagny, _La Bible et l'Economie politique_; Thomas Aquinas, _Summa_, II. ii. 50, 3; Sertillanges, _Socialisme et Christianisme_, p. 53. It was nevertheless recognised and insisted on that wealth was not an end in itself, but merely a means to an end (Aquinas, _Summa_, I. ii. 2, 1).] The great rule, then, with regard to the user of property was liberality. Closely allied with the duty of liberality was the duty of almsgiving--'an act of charity through the medium of money.'[1] Almsgiving is not itself a part of liberality except in so far as liberality removes an obstacle to such acts, which may arise from excessive love of riches, the result of which is that one clings to them more than one ought[2]. Aquinas divides alms-deeds into two kinds, spiritual and corporal, the latter alone of which concern us here. 'Corporal need arises either during this life or afterwards. If it occurs during this life, it is either a common need in respect of things needed by all, or is a special need occurring through some accident supervening. In the first case the need is either internal or external. Internal need is twofold: one which is relieved by solid food, viz. hunger, in respect of which we have to _feed the hungry_; while the other is relieved by liquid food, viz. thirst, in respect of which we have to _give drink to the thirsty_. The common need with regard to external help is twofold: one in respect of clothing, and as to this we have to _clothe the naked_; while the other is in respect of a dwelling-place, and as to this we have to _harbour the harbourless_. Again, if the need be special, it is either the result of an internal cause like sickness, and then we have to _visit the sick_, or it results from an external cause, and then we have to _ransom the captive_. After this life we _give burial to the dead_.[3] Aquinas then proceeds to explain in what circumstances the duty of almsgiving arises. 'Almsgiving is a matter of precept. Since, however, precepts are about acts of virtue, it follows that all almsgiving must be a matter of precept in so far as it is necessary to virtue, namely, in so far as it is demanded by right reason. Now right reason demands that we should take into consideration something on the part of the giver, and something on the part of the recipient. On the part of the giver it must be noted that he must give of his surplus according to Luke xi. 4, "That which remaineth give alms." This surplus is to be taken in reference not only to the giver, but also in reference to those of whom he has charge (in which case we have the expression _necessary to the person_, taking the word _person_ as expressive of dignity).... On the part of the recipient it is necessary that he should be in need, else there would be no reason for giving him alms; yet since it is not possible for one individual to relieve the needs of all, we are not bound to relieve all who are in need, but only those who could not be succoured if we did not succour them. For in such cases the words of Ambrose apply, "Feed him that is dying of hunger; if thou hast not fed him thou hast slain him." Accordingly we are bound to give alms of our surplus, as also to give alms to one whose need is extreme; otherwise almsgiving, like any other greater good, is a matter of counsel.'[4] In replying to the objection that it is lawful for every one to keep what is his own, St. Thomas restates with emphasis the principle of community of user: 'The temporal goods which are given us by God are ours as to the ownership, but as to the use of them they belong not to us alone, but also to such others as we are able to succour out of what we have over and above our needs.'[5] Albertus Magnus states this in very strong words: 'For a man to give out of his superfluities is a mere act of justice, because he is rather then steward of them for the poor than the owner;'[6] and at an earlier date St. Peter Damian had affirmed that 'he who gives to the poor returns what he does not himself own, and does not dispose of his own goods.' He insists in the same passage that almsgiving is not an act of mercy, but of strict justice.[7] In the reply to another objection the duty of almsgiving is stated by Aquinas with additional vigour. 'There is a time when we sin mortally if we omit to give alms--on the part of the recipient when we see that his need is evident and urgent, and that he is not likely to be succoured otherwise--on the part of the giver when he has superfluous goods, which he does not need for the time being, so far as he can judge with probability.'[8] [Footnote 1: II. ii. 32, 1.] [Footnote 2: _Ibid._, ad. 4.] [Footnote 3: II. ii. 32, art. 2.] [Footnote 4: II. ii. 32, art. 5.] [Footnote 5: _Ibid._, ad. 2.] [Footnote 6: Jarrett, _Mediæval Socialism_, p. 87.] [Footnote 7: _De Eleemosynis_, cap. 1.] [Footnote 8: II. ii. 32, 5, ad. 3.] The next question which St. Thomas discusses is whether one ought to give alms out of what one needs. He distinguishes between two kinds of 'necessaries.' The first is that without which existence is impossible, out of which kind of necessary things one is not bound to give alms save in exceptional cases, when, by doing so, one would be helping a great personage or supporting the Church or the State, since 'the common good is to be preferred to one's own.' The second kind of necessaries are those things without which a man cannot live in keeping with his social station. St. Thomas recommends the giving of alms out of this part of one's estate, but points out that it is only a matter of counsel, and not of precept, and one must not give alms to such an extent as to impoverish oneself permanently. To this last provision, however, there are three exceptions: one, when a man is entering religion and giving away all his goods; two, when he can easily replace what he gives away; and, three, when he is in presence of great indigence on the part of an individual, or great need on the part of the common weal. In these three cases it is praiseworthy for a man to forgo the requisites of his station in order to provide for a greater need.[1] [Footnote 1: II. ii. 32, 6.] The mediæval teaching on almsgiving is very well summarised by Fr. Jarrett,[1] as follows: '(1) A man is obliged to help another in his extreme need even at the risk of grave inconvenience to himself; (2) a man is obliged to help another who, though not in extreme need, is yet in considerable distress, but not at the risk of grave inconvenience to himself; (3) a man is not obliged to help another when necessity is slight, even though the risk to himself should be quite trifling.' [Footnote 1: _Mediæval Socialism_, p. 90.] The importance of the duty of almsgiving further appears from the section where Aquinas lays down that the person to whom alms should have been given may, if the owner of the goods neglects his duty, repair the omission himself. 'All things are common property in a case of extreme necessity. Hence one who is in dire straits may take another's goods in order to succour himself if he can find no one who is willing to give him something.'[1] The duty of using one's goods for the benefit of one's neighbours was a fit matter for enforcement by the State, provided that the burdens imposed by legislation were equitable. 'Laws are said to be just, both from the end, when, to wit, they are ordained to the common good--and from their author, that is to say, when the law that is made does not exceed the power of the law-giver--and from their form, when, to wit, burdens are laid on the subjects according to an equality of proportion and with a view to the common good. For, since every man is part of the community, each man in all that he is and has belongs to the community: just as a part in all that it is belongs to the whole; wherefore nature inflicts a loss on the part in order to save the whole; so that on this account such laws, which impose proportionate burdens, are just and binding in conscience.'[2] [Footnote 1: _Ibid._, art. 7 ad. 3.] [Footnote 2: I. ii. 96,4.] There can be no doubt that the practice of the scholastic teaching of community of user, in its proper sense, made for social stability. The following passage from Trithemius, written at the end of the fifteenth century, is interesting as showing how consistently the doctrine of St. Thomas was adhered to two hundred years after his death, and also that the failure of the rich to put into practice the moderate communism of St. Thomas was the cause of the rise of the heretical communists, who attacked the very foundations of property itself: 'Let the rich remember that their possessions have not been entrusted to them in order that they may have the sole enjoyment of them, but that they may use and manage them as property belonging to mankind at large. Let them remember that when they give to the needy they only give them what belongs to them. If the duty of right use and management of property, whether worldly or spiritual, is neglected, if the rich think that they are the sole lords and masters of that which they possess, and do not treat the needy as their brethren, there must of necessity arise an inner shattering of the commonwealth. False teachers and deceivers of the people will then gain influence, as has happened in Bohemia, by preaching to the people that earthly property should be equally distributed among all, and that the rich must be forcibly condemned to the division of their wealth. Then follow lamentable conditions and civil wars; no property is spared; no right of ownership is any longer recognised; and the wealthy may then with justice complain of the loss of possessions which have been unrighteously taken from them; but they should also seriously ask themselves the question whether in the days of peace and order they recognised in the administration of these goods the right of their superior lord and owner, namely, the God of all the earth.'[1] [Footnote 1: Quoted in Janssen, _op. cit._, vol. ii. p. 91.] It must not, however, be imagined for a moment that the community of user advocated by the scholastics had anything in common with the communism recommended by modern Socialists. As we have seen above, the scholastic communism did not at all apply to the procuring and dispensing of material things, but only to the mode of using them. It is not even correct to say that the property of an individual was _limited_ by the duty of using it for the common good. As Rambaud puts it: 'Les devoirs de charité, d'équité naturelle, et de simple convenance sociale peuvent affecter, ou mieux encore, commander un certain usage de la richesse; mais ce n'est pas le même chose que limiter la propriété.'[1] The community of user of the scholastics was distinguished from that of modern Socialists not less strongly by the motives which inspired it than by the effect it produced. The former was dictated by high spiritual aims, and the contempt of material goods; the latter is the fruit of over-attachment to material goods, and the envy of their possessors.[2] [Footnote 1: _Op. cit._, p. 43. The same writer shows that there is no authority in Christian teaching for the proposition, advanced by many Christian Socialists, that property is a 'social function' (_ibid._, p. 774). The right of property even carried with it the _jus abutendi_, which, however, did not mean the right to _abuse_, but the right to destroy by consumption (see Antoine, _Cours d'Economie sociale_, p. 526).] [Footnote 2: Roscher, _op. cit._, p. 5: 'Vom neuern Socialismus freilich unterscheidet sich diese Auffassung nicht blosz durch ihre religiöse Grundlage, sondern auch durch ihre, jedem Mammonsdienst entgegengesetze, Verachtung der materiellen Güter.'] The large estates which the Church itself owned have frequently been pointed to as evidence of hypocrisy in its attitude towards the common user of property. This is not the place to inquire into the condition of ecclesiastical estates in the Middle Ages, but it is sufficient to say that they were usually the centres of charity, and that in the opinion of so impartial a writer as Roscher, they rather tended to make the rules of using goods for the common use practicable than the contrary.[1] [Footnote 1: Roscher, _op. cit._, p. 6.] SECTION 3.--PROPERTY IN HUMAN BEINGS Before we pass from the subject of property, we must deal with a particular kind of property right, namely, that of one human being over another. At the present day the idea of one man being owned by another is repugnant to all enlightened public opinion, but this general repugnance is of very recent growth, and did not exist in mediæval Europe. In dealing with the scholastic attitude towards slavery, we shall indicate, as we did with regard to its attitude towards property in general, the fundamental harmony between the teaching of the primitive and the mediæval Church on the subject. No apology is needed for this apparent digression, as a comparison of the teaching of the Church at the two periods of its development helps us to understand precisely what the later doctrine was; and, moreover, the close analogy which, as we shall see, existed between the Church's view of property and slavery, throws much light on the true nature of both institutions. Although in practice Christianity had done a very great deal to mitigate the hardships of the slavery of ancient times, and had in a large degree abolished slavery by its encouragement of emancipation,[1] it did not, in theory, object to the institution itself. There is no necessity to labour a point so universally admitted by all students of the Gospels as that Christ and His Apostles did not set out to abolish the slavery which they found everywhere around them, but rather aimed, by preaching charity to the master and patience to the slave, at the same time to lighten the burden of servitude, and to render its acceptance a merit rather than a disgrace. 'What, in fact,' says Janet, 'is the teaching of St. Peter, St. Paul, and the Apostles in general? It is, in the first place, that in Christ there are no slaves, and that all men are free and equal; and, in the second place, that the slave must obey his master, and the master must be gentle to his slave.[2] Thus, although there are no slaves in Christ, St. Paul and the Apostles do not deny that there may be on earth. I am far from reproaching the Apostles for not having proclaimed the immediate necessity of the emancipation of slaves. But I say that the question was discussed in precisely the same terms by the ancient philosophers of the same period. Seneca, it is true, proclaimed not the civil, but the moral equality of men; but St. Paul does not speak of anything more than their equality in Christ. Seneca instructs the master to treat the slave as he would like to be treated himself.[3] Is not this what St. Peter and St. Paul say when they recommended the master to be gentle and good? The superiority of Christianity over Stoicism in this question arises altogether from the very superiority of the Christian spirit....'[4] The article on 'Slavery' in the _Catholic Encyclopædia_ expresses the same opinion: 'Christian teachers, following the example of St. Paul, implicitly accept slavery as not in itself incompatible with the Christian law. The Apostle counsels slaves to obey their masters, and to bear with their condition patiently. This estimate of slavery continued to prevail until it became fixed in the systematised ethical teaching of the schools; and so it remained without any conspicuous modification until the end of the eighteenth century.' The same interpretation of early Christian teaching is accepted by the Protestant scholar, Dr. Bartlett: 'The practical attitude of Seneca and the early Christians to slavery was much the same. They bade the individual rise to a sense of spiritual freedom in spite of outward bondage, rather than denounce the institution as an altogether illegitimate form of property.'[5] [Footnote 1: See Roscher, _Political Economy_, s. 73.] [Footnote 2: _Eph._, vi. 5, 6, 9.] [Footnote 3: _Ep. ad Luc._, 73.] [Footnote 4: Janet, _op. cit._, p. 317.] [Footnote 5: 'Biblical and Early Christian Idea of Property,' _Property, Its Duties and Rights_ (London, 1915), p. 110; Franck, _Réformateurs et Publicistes de l'Europe: Moyen âge_--Renaissance, p. 87. On the whole question by far the best authority is volume iii. of Wallon's _Histoire de l'Esclavage dans l'Antiquité_.] Several texts might be collected from the writings of the Fathers which would seem to show that according to patristic teaching the institution of slavery was unjustifiable. We do not propose to cite or to explain these texts one by one, in view of the quite clear and unambiguous exposition of the subject given by St. Thomas Aquinas, whose teaching is the more immediate subject of this essay; we shall content ourselves by reminding the reader of the precisely similar texts relating to the institution of property which we have examined above, and by stating that the corresponding texts on the subject of slavery are capable of an exactly similar interpretation. 'The teaching of the Apostle,' says Janet, 'and of the Fathers on slavery is the same as their teaching on property.'[1] The author from whom we are quoting, and on whose judgment too much reliance cannot be placed, then proceeds to cite many of the patristic texts on property, which we quoted in the section dealing with that subject, and asks: 'What conclusion should one draw from these different passages? It is that in Christ there are no rich and no poor, no mine and no thine; that in Christian perfection all things are common to all men, but that nevertheless property is legitimate and derived from human law. Is it not in the same sense that the Fathers condemned slavery as contrary to divine law, while respecting it as comformable to human law? The Fathers abound in texts contrary to slavery, but have we not seen a great number of texts contrary to property?'[2] The closeness of the analogy between the patristic treatment of slavery and of property appears forcibly in the following passage of Lactantius: 'God who created man willed that all should be equal. He has imposed on all the same condition of living; He has produced all in wisdom; He has promised immortality to all; no one is cut off from His heavenly benefits. In His sight no one is a slave, no one a master; for if we have all the same Father, by an equal right we are all His children; no one is poor in the sight of God but he who is without justice, no one rich but he who is full of virtue.... Some one will say, Are there not among you some poor and others rich; some servants and others masters? Is there not some difference between individuals? There is none, nor is there any other cause why we mutually bestow on each other the name of brethren except that we believe ourselves to be equal. For since we measure all human things not by the body but by the spirit, although the condition of bodies is different, yet we have no servants, but we both regard them, and speak of them as brothers in spirit, in religion as fellow-servants.'[3] Slavery was declared to be a blessing, because, like poverty, it afforded the opportunity of practising the virtues of humility and patience.[4] The treatment of the institution of slavery underwent a striking and important development in the hands of St. Augustine, who justified it as one of the penalties incurred by man as a result of the sin of Adam and Eve. 'The first holy men,' writes the Saint, 'were rather shepherds than kings, God showing herein what both the order of the creation desired, and what the deserts of sin exacted. For justly was the burden of servitude laid upon the back of transgression. And therefore in all the Scriptures we never read the word _servus_ until Noah laid it as a curse upon his offending son. So that it was guilt, and not nature, that gave origin to that name.... Sin is the mother of servitude and the first cause of man's subjection to man.'[5] St. Augustine also justifies the enslavement of those conquered in war--'It is God's decree to humble the conquered, either reforming their sins herein or punishing them.'[6] [Footnote 1: _Op. cit._, p. 318.] [Footnote 2: _Ibid._, p. 321.] [Footnote 3: _Div. Inst_., v. 15-16.] [Footnote 4: Chryst., _Genes._, serm. v. i.; _Ep. ad Cor._, hom. xix. 4.] [Footnote 5: _De Civ. Dei_, xix. 14-15.] [Footnote 6: _Ibid._] Janet ably analyses and expounds the advance which St. Augustine made in the treatment of slavery: 'In this theory we must note the following points: (1) Slavery is unjust according to the law of nature. This is what is contrary to the teaching of Aristotle, but conformable to that of the Stoics. (2) Slavery is just as a consequence of sin. This is the new principle peculiar to St. Augustine. He has found a principle of slavery, which is neither natural inequality, nor war, nor agreement, but sin. Slavery is no more a transitory fact which we accept provisionally, so as not to precipitate a social revolution: it is an institution which has become natural as a result of the corruption of our nature. (3) It must not be said that slavery, resulting from sin, is destroyed by Christ who destroyed sin.... Slavery, according to St. Augustine, must last as long as society.'[1] [Footnote 1: Janet, _op. cit._, p. 302.] Nowhere does St. Thomas Aquinas appear as clearly as the medium of contact and reconciliation between the Fathers of the Church and the ancient philosophers as in his treatment of the question of slavery. His utterances upon this subject are scattered through many portions of his work, but, taken together, they show that he was quite prepared to admit the legitimacy of the institution, not alone on the grounds put forward by St. Augustine, but also on those suggested by Aristotle and the Roman jurists. He fully adopts the Augustinian argument in the _Summa_, where, in answer to the query, whether in the state of innocence all men were equal, he states that even in that state there would still have been inequalities of sex, knowledge, justice, etc. The only inequalities which would not have been present were those arising from sin; but the only inequality arising from sin was slavery.[1] 'By the words "So long as we are without sin we are equal," Gregory means to exclude such inequality as exists between virtue and vice; the result of which is that some are placed in subjection to others as a penalty.'[2] In the following article St. Thomas distinguishes between political and despotic subordination, and shows that the former might have existed in a state of innocence. 'Mastership has a twofold meaning; first as opposed to servitude, in which case a master means one to whom another is subject as a slave. In another sense mastership is commonly referred to any kind of subject; and in that sense even he who has the office of governing and directing free men can be called a master. In the first meaning of mastership man would not have been ruled by man in the state of innocence; but in the latter sense man would be ruled over by man in that state.'[3] In _De Regimine Principum_ Aquinas also accepts what we may call the Augustinian view of slavery. 'But whether the dominion of man over man is according to the law of nature, or is permitted or provided by God may be certainly resolved. If we speak of dominion by means of servile subjection, this was introduced because of sin. But if we speak of dominion in so far as it relates to the function of advising and directing, it may in this sense be said to be natural.'[4] [Footnote 1: i. 96, 3.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: i. 96, 4.] [Footnote 4: _De Reg. Prin._, iii. 9. This is one of the chapters the authorship of which is disputed.] St. Thomas was therefore willing to endorse the argument of St. Augustine that slavery was a result of sin; but he also admits the justice of Aristotle's reasoning on the subject. In the section of the _Summa_ where the question is discussed, whether the law of nations is the same as the natural law, one of the objections to be met is that 'Slavery among men is natural, for some are naturally slaves according to the philosopher. Now "slavery belongs to the law of nations," as Isidore states. Therefore the right of nations is a natural right.'[1] In answer to this objection St. Thomas draws the distinction between what is natural absolutely, and what is natural _secundum quid_, the passage which we have quoted in treating of property rights.[2] He then goes on to apply this distinction to the case of slavery. 'Considered absolutely, the fact that this particular man should be a slave rather than another man, is based, not on natural reason, but on some resultant utility, in that it is useful to this man to be ruled by a wise man, and to the latter to be helped by the former, as the philosopher states. Wherefore slavery which belongs to the law of nations is natural in the second way, but not in the first.'[3] It will be noted from this passage that St. Thomas partly admits, though not entirely, the opinion of Aristotle. In the _De Regimine Principum_ he goes much further in the direction of adopting the full Aristotelian theory: 'Nature decrees that there should be grades in men as in other things. We see this in the elements, a superior and an inferior; we see in every mixture that some one element predominates.... For we see this also in the relation of the body and the mind, and in the powers of the mind compared with one another; because some are ordained towards ordering and moving, such as the understanding and the will; others to serving. So should it be among men; and thus it is proved that some are slaves according to nature. Some lack reason through some defect of nature; and such ought to be subjected to servile works because they cannot use their reason, and this is called the natural law.'[4] In the same chapter the right of conquerors to enslave their conquered is referred to without comment, and therefore implicitly approved by the author. [Footnote 1: II. ii. 57, 3.] [Footnote 2: _Supra_, p. 64.] [Footnote 3: II. ii 57, ad. 2.] [Footnote 4: _De Reg. Prin._, ii. 10.] 'Thus,' according to Janet, 'St. Thomas admits slavery as far as one can admit it, and for all the reasons for which one can admit it. He admits with Aristotle that there is a natural slavery; with St. Augustine that slavery is the result of sin; with the jurisconsult that slavery is the result of war and convention.'[1] 'The author justifies slavery,' says Franck, 'in the name of St. Augustine, and in that of Aristotle; in the name of the latter by showing that there are two races of men, one born to command, and the other to obey; in the name of the former in affirming that slavery had its origin in original sin; that by sin man has forfeited his right to liberty. Further, we must admit slavery as an institution not only of nature and one of the consequences of the fall, we must admit a third principle of slavery which appears to St. Thomas as legitimate as the other two. War is necessary; therefore it is just; and if it is just we must accept its consequences. One of these consequences is the absolute right of the conqueror over the life, person, and goods of the conquered.'[2] [Footnote 1: _Op. cit._, vol. i. p. 431.] [Footnote 2: Franck, _op cit_., p. 69.] Aquinas returns to the question of slavery in another passage, which is interesting as showing that he continued to make use of the analogy between slavery and property which we have seen in the Fathers. 'A thing is said to belong to the natural law in two ways. First, because nature inclines thereto, _e.g._ that one should not do harm to another. Secondly, because nature did not bring in the contrary; thus we might say that for man to be naked is of the natural law because nature did not give him clothes, but art invented them. In this sense the possession of all things in common and universal freedom is said to be of the natural law, because, to wit, the distinction of possession and slavery were not brought in by nature, but devised by human reason for the benefit of human life. Accordingly, the law of nature was not changed in this respect, but by addition.'[1] [Footnote 1: I. ii. 94, 5, ad. 3.] Ægidius Romanus closely follows the teaching of his master on the subject of slavery. 'What does Ægidius do? He unites Aristotle and St. Augustine against human liberty. He declares with the latter that man has lost the right of belonging to himself, since he has fallen from the primitive order established by God Himself in nature. He admits with Aristotle the existence of two races of men, the one designed for liberty, the other for servitude.... This is not all--to this servitude which he calls natural, the author joins another, purely legal, but which does not seem to him less just, namely, that which is founded on the right of war, and which obliges the conquered to become the slaves of the conquerors--to give up their liberty in exchange for their lives. Our author admits it is just in itself, because in his opinion it is useful to the defence of one's country; it excites warriors to courage by placing before their eyes the terrible consequences of cowardice.'[1] The teachings of St. Thomas and Ægidius were accepted by all the later scholastics.[2] Biel, whose opinion is always very valuable as being that of the last of a long line, says that there are three kinds of slaves--slaves of God, of sin, and of man. The first kind of slavery is wholly good, the second wholly bad, while the third, though not instituted by, is approved by the _jus gentium_. He proceeds to state the four ways in which a man may become enslaved: namely, _ex necessitate_, or by being born of a slave mother; _ex bello_, by being captured in war; _ex delicto_, or by sentence of the law in the case of certain crimes committed by freedmen; and _ex propria voluntate_, or by the sale of a man of himself into slavery.[3] [Footnote 1: Franck, _op. cit._, p. 90.] [Footnote 2: Franck, _op. cit._, p. 91.] [Footnote 3: Biel, _Inventarium seu Repertorium generale super qualuor libros Sententiarum_, iv. xv. I; and see Carletus, _Summa Angelica_, q. ccxii.] It must not be forgotten that we are dealing purely with theory. In fact the Church did an inestimable amount of good to the servile classes, and, at the time that Aquinas wrote, thanks to the operation of Christianity in this respect, the old Roman slavery had completely disappeared. The nearest approach to ancient slavery in the Middle Ages was serfdom, which was simply a step in the transition from slavery to free labour.[1] Moreover, the rights of the master over the slave were strictly confined to the disposal of his services; the ancient absolute right over his body had completely disappeared. 'In those things,' says St. Thomas, 'which appertain to the disposition of human acts and things, the subject is bound to obey his superior according to the reason of the superiority; thus a soldier must obey his officer in those things which appertain to war; a slave his master in those things which appertain to the carrying out of his servile works.'[2] 'Slavery does not abolish the natural equality of man,' says a writer who is quoted by the _Catholic Encyclopædia_ as correctly stating the Catholic doctrine on the subject prior to the eighteenth century, 'hence by slavery one man is understood to become subject to the dominion of another to the extent that the master has a perfect right to the services which one man may justly perform for another.'[3] Biel, who lays down the justice of slavery so unambiguously, is no less clear in his statement of the limitations of the right. 'The body of the slave is not simply in the power of the master as the body of an ox is; nor can the master kill or mutilate the slave, nor abuse him contrary to the law of God. The temporal gains derived from the labour of the slave belong to the master; but the master is bound to provide the slave with the necessaries of life.'[4] Rambaud very properly points out that the reason that the scholastic writers did not fulminate in as strong and as frequent language against the tyranny of masters, was not that they felt less strongly on the subject, but that the abuses of the ancient slave system had almost entirely disappeared under the influence of Christian teaching.[5] [Footnote 1: Wallon, _op. cit._, vol. iii. p. 93; Brants, _op. cit._, p. 87.] [Footnote 2: II. ii. 104, 5.] [Footnote 3: Gerdil., _Comp. Inst. Civ. I._, vii.] [Footnote 4: Biel, _op. cit._, iv. xv. 5.] [Footnote 5: _Op. cit._, p. 83.] On the other hand, it must not be imagined, as has sometimes been suggested, that the slavery defended by Aquinas was not real slavery, but rather the ordinary modern relation between employer and employed. Such an interpretation is definitely disproved by a passage of the article on justice where Aquinas says that 'inducing a slave to leave his master is properly an injury against the person ... and, since the slave is his master's chattel, it is referred to theft.'[1] [Footnote 1: II. ii. 61,3. Brants, _op. cit._, pp. 87 _et seq_., is inclined to take a more liberal view of the scholastic doctrine on slavery, but we cannot agree with him in view of the contemporary texts.] CHAPTER III DUTIES REGARDING THE EXCHANGE OF PROPERTY SECTION 1.--THE SALE OF GOODS § 1. _The Just Price_. We dealt in the last chapter with the duties which attached to property in respect of its acquisition and use, and we now pass to the duties which attached to it in respect of its exchange. As we indicated above, the right to exchange one's goods for the goods or the money of another person was, according to the scholastics, one of the necessary corollaries of the right of private property. In order that such exchange might be justifiable, it must be conducted on a. basis of commutative justice, which, as we have seen, consisted in the observance of equality according to the arithmetical mean. We further drew attention to the fact that exchanges might be divided into sales of goods and sales of the use of money. In the former case the regulating principle of the equality of justice was given effect to by the observance of the _just price_; in the latter by that of the _prohibition of usury_. We shall deal with the former in the present and with the latter in the following section. The mediæval teaching on the just price, about which there has been so much discussion and disagreement among modern writers, was simply the application to the particular contract of sale of the principles which regulated contracts in general. Exchange originally took the form of barter; but, as it was found impossible accurately to measure the values of the objects exchanged without the intervention of some common measure of value, money was invented to serve as such a measure. We need not further refer to barter in this section, as the principles which applied to it were those that applied to sale. Indeed all sales when analysed are really barter through the medium of money. That Aquinas simply regarded his article on just price[1] as an explanation of the application of his general teaching on justice to the particular case of the contract of sale is quite clear from the article itself. 'Apart from fraud, we may speak of buying and selling in two ways. First, as considered in themselves; and from this point of view buying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and _vice versa_. Now whatever is established for the common advantage should not be more of a burden to one part than to the other, and consequently all contracts between them should observe equality of thing and thing. Again, the quality of a thing that comes into human use is measured by the price given for it, for which purpose money was invented. Therefore, if either the price exceed the quantity of the thing's worth, or conversely the worth of the thing exceed the price, there is no longer the equality of justice; and consequently to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful.'[2] When two contracting parties make an exchange through the medium of money, the price is the expression of the exchange value in money. 'The just price expresses the equivalence, which is the foundation of contractual justice.'[3] [Footnote 1: II. ii. 77, 1.] [Footnote 2: This opinion was accepted by all the later writers, _e.g._ Gerson, _De Cont._, ii. 5; Biel, _op. cit._, IV. xv. 10: 'Si pretium excedit quantitatem valoris rei, vel e converso tolleretur equalitas, erit contractus iniquus.'] [Footnote 3: Desbuquois, 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 167. Gerson says: 'Contractus species est justitiae commutativae quae respicit aequalitatem rei quae venditur ad rem quae emitur, ut servetur aequalitas justi pretii; propter quam aequalitatem facilius observandum inventa est moneta, vel numisma, vel pecunia,' _De Cont._, ii. 5.] The conception of the just price, though based on Aristotelian conceptions of justice, is essentially Christian. The Roman law had allowed the utmost freedom of contract in sales; apart from fraud, the two contracting parties were at complete liberty to fix a price at their own risk; and selfishness was assumed and allowed to be the animating motive of every contracting party. The one limitation to this sweeping rule was in favour of the seller. By a rescript of Diocletian and Maximian it was enacted that, if a thing were sold for less than half its value, the seller could recover the property, unless the buyer chose to make up the price to the full amount. Although this rescript was perfectly general in its terms, some authors contended that it applied only to sales of land, because the example given was the sale of a farm.[1] However, the rescript was quoted by the Fathers as showing that even the Roman law considered that contracts might be questioned on equitable grounds in certain cases.[2] The distinctively Christian notion of just price seems to have its origin in a passage of St. Augustine;[3] but the notion was not placed on a philosophical foundation until the thirteenth century. Even Aquinas, however, although he treats of the just price at some length, and expresses clear and categorical opinions upon many points connected with it, does not state the principles on which the just price itself should be arrived at. This omission is due, not to the fact that Aquinas was unfamiliar with these principles, but to the fact that he took them for granted as they were not disputed or doubted.[4] We have consequently to look for enlightenment upon this point in writings other than those of Aquinas. The subject can be most satisfactorily understood if we divide its treatment into two parts: first, a consideration of what constituted the just price in the sale of an article, the price of which was fixed by law; and second, a consideration of what constituted the just price of an article, the price of which was not so fixed. [Footnote 1: Hunter, _Roman Law_, p. 492.] [Footnote 2: Ashley, _op. cit._, p. 133.] [Footnote 3: 'Scio ipse hominem quum venalis codex ei fuisset oblatus, pretiique ejus ignarum ideo quiddam exiguum poscentem cerneret venditorem, justum pretium, quod multo amplius erat nec opinanti dedisse' (_De Trin._, xiii. 3).] [Footnote 4: Palgrave, _Dictionary of Political Economy_, tit. 'Justum Pretium.'] § 2. _The Just Price when Price fixed by Law_. Regarding the power of the State to fix prices, the theologians and jurists were in complete agreement. According to Gerson: 'The law may justly fix the price of things which are sold, both movable and immovable, in the nature of rents and not in the nature of rents, and feudal and non-feudal, below which price the seller must not give, or above which the buyer must not demand, however they may desire to do so. As therefore the price is a kind of measure of the equality to be observed in contracts, and as it is sometimes difficult to find that measure with exactitude, on account of the varied and corrupt desires of man, it becomes expedient that the medium should be fixed according to the judgment of some wise man.... In the civil state, however, nobody is to be decreed wiser than the lawgiving authority. Therefore it behoves the latter, whenever it is possible to do so, to fix the just price, which may not be exceeded by private consent, and which must be enforced.'...[1] Biel practically paraphrases this passage of Gerson, and contends that it is the duty of the prince to fix prices, mainly on account of the difficulty which private contractors find in doing so.[2] [Footnote 1: _De Cont._, i. 19.] [Footnote 2: _Op. cit._, IV. xv. 11.] The rules which we find laid down for the guidance of the prince in fixing prices are very interesting, as they show that the mediæval writers had a clear idea of the constituent elements of value. Langenstein, whose famous work on contracts was considered of high authority by later writers, says that the prince should take account of the condition of the place for which the price was to be fixed, the circumstances of the time, the condition of the mass of the people. The different kinds of need which may be felt for goods must also be considered, _indigentice naturæ_, _status_, _voluptatis_, and _cupiditatis_; and a distinction drawn between extensive and intensive need--the former is greater 'quanto plures re aliqua indigent,' the latter 'quanto minus de illa re habetur.' The general rule is that the prince must seek to find a medium between a price so low as to render labourers, artisans, and merchants unable to maintain themselves suitably, and one so high as to disable the poor from obtaining the necessaries of life. When in doubt, Langenstein concludes, the price should err on the low rather than the high side.[1] Biel gives similar rules: The legislator must regard the needs of man, the abundance or scarcity of things, the difficulty, labour, and risks of production. When all these things are carefully considered the legislator is in a position to fix a just price.[2] According to Endemann, the labour of production, the cost and risk of transport, and the condition of the markets had all to be kept in mind when a fair price was being fixed.[3] We may mention in passing that the power of fixing the just price might be delegated; prices were frequently fixed by the town authorities, the guilds, and the Church.[4] [Footnote 1: Roscher, _Geschichte_, p. 19.] [Footnote 2: _Op. cit._, IV. xv. 10.] [Footnote 3: _Studien_, vol. ii. p. 43.] [Footnote 4: Endemann, _Studien_, vol. i. p. 40; Roscher, _Political Economy_, s. 114.] The passage from Gerson which we quoted above shows that, when a just price had been fixed by the competent authority, the parties to a contract were bound to keep to it. In other words, the _pretium legitimum_ was _ipso facto_ the _justum pretium_. On this point there is complete agreement among the writers of the period. Caepolla says, 'When the price is fixed by law or statute, that is the just price, and nobody can receive anything, however small, in excess of it, because the law must be observed';[1] and Biel, 'When a price has been fixed, the contracting parties have sufficient certainty about the equality of value and the justice of the price.'[2] Cossa draws attention to the necessity of the fixed price corresponding with the real price in order that it should maintain its validity. 'The schoolmen talk of the legitimate and irreducible price of a thing which was fixed by authority, and was for obvious reasons of special importance in the case of the necessaries of life.... The legitimate price of a thing as fixed by authority had to be based upon the natural price, and therefore lost its validity and became a dead letter the moment any change of circumstances made it unfair.'[3] [Footnote 1: _De Contractibus Simulatis_, 69.] [Footnote 2: _Op. cit._, IV. xv. 10.] [Footnote 3: _Op. cit._, p. 143.] § 3. _The Just Price when Price not fixed by Law_. When the just price was not fixed by any outside authority, the buyer and seller had to arrive at it themselves. The problem before them was to equalise their respective burdens, so that there would be equality of burden between them, or, in other words, to reduce the value of the article sold to terms of money. In order that we may understand how this equality was arrived at, it is important to know the factors which were held to enter into the determination of value. The first thing upon which the mediæval teachers insist is that value is not determined by the intrinsic excellence of the thing itself, because, if it were, a fly would be more valuable than a pearl, as being intrinsically more excellent.[1] Nor is the value to be measured by the mere utility of the object for satisfying the material needs of man, for in that case, corn should be worth more than precious stones.[2] The value of an object is to be measured by its capacity for satisfying men's wants. 'Valor rerum aestimatur secundum humanam indigentiam.... Dicendum est quod indigentia humana est mensura naturalis commutabilium; quod probatur sic: bonitas sive valor rei attenditur ex fine propter quem exhibetur: unde commentator secundo Metaphysicae _nihil est bonum nisi propter causas finales_; sed finis naturalis ad quem justitia commutativa ordinet exteriora commutabilia est supplementum indigentiae humanae...; igitur supplementum indigentiae humanae est vera mensura commutabilium. Sed supplementum videtur mensurari per indigentiam; majoris enim valoris est supplementum quod majorem supplet indigentiam.... Item hoc probatur signo, quia videmus quod illo tempore quo vina deficiunt quia magis indigeremus eis ipsa fiunt cariora....[3] [Footnote 1: 'In justitia commutativa non estimatur pretium commutabilium secundum naturalem valorem ipsorum, sic enim musca plus valeret quam totus aurum mundi' (Buridan, _op. cit._, v. 14).] [Footnote 2: Slater, 'Value in Theology and Political Economy,' _Irish Ecclesiastical Record_, Sept. 1901.] [Footnote 3: Buridan, _op. cit._, v. 14 and 16. Antoninus of Florence says that value is determined by three factors, _virtuositas_, _raritas_, and _placibilitas_ (_Summa_, ii. 1, 16.)] The capacity of an object for satisfying man's needs could not be measured by its capacity for satisfying the needs of this or that individual, but by its capacity for satisfying the needs of the average member of the community.[1] The Abbé Desbuquois, in the article from which we have already quoted, finds in this elevation of the common estimation an illustration of the general principle of the mediævals, which we have seen at work in their teaching on the use of property, that the individual benefit must always be subordinated to the general welfare. According to him, it is but one application of the duty of using one's goods for the common good. 'In the same way, in allowing the right of exchange--a right, let us remark in passing, which is but an application of the right of property--and in allowing it as a means of life necessary to everybody, nature does not lose sight of the universal destination of economic goods. One conceives then that the variations of exchange are not permitted to be left to the arbitrary judgment of a single man, nor to be affected by the whims and abuses of individuals; that value is defined in view of the general good. The exchange value, as it is in the general or social order, proceeds from the judgment of the social environment (_milieu social_).'[2] [Footnote 1: 'Indigentia istius hominis vel illius non mensurat valorem commutabilium; sed indigentia communis eorum qui inter se commutare possunt,' Buridan, _op. cit._, v. 16. 'Prout communiter venditur in foro,' Henri de Gand, _Quod Lib._, xiv. 14; Nider, _De Cont. Merc._, ii. 1.] [Footnote 2: 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 168.] The writers of the Middle Ages show a very keen perception of the elements which invest an object with the value which is accorded to it by the general estimation. In Aquinas we find certain elements recognised--'diversitas loci vel temporis, labor, raritas'--but it is not until the authors of the fourteenth and fifteenth centuries that we find a systematic treatment of value.[1] First and foremost there is the cost of production of the article, especially the wages of all those who helped to produce it. Langenstein lays down that every one can determine for himself the just price of the wares he has to sell by reckoning what he needs to support himself in the status which he occupies.[2] According to the _Catholic Encyclopædia_,[3] the just price of an article included enough to pay fair wages to the worker--that is, enough to enable him to maintain the standard of living of his class. This, though not stated in so many words by Aquinas, was probably assumed by him as too obvious to need repetition.[4] 'The cost of production of manufactured products,' says Brants, 'is a legitimate constituent element of value; it is according to the cost that the producer can properly fix the value of his product and of his work.'[5] [Footnote 1: Brants, _op. cit._, p. 69.] [Footnote 2: _De Cont._, quoted by Roscher, _Geschichte_, p. 20.] [Footnote 3: Tit. 'Political Economy.'] [Footnote 4: Palgrave, _Dictionary_, tit. 'Justum Pretium.'] [Footnote 5: Brants, _op. cit._, p. 202.] The cost of the labour of production was, however, by no means the only factor which was admitted to enter into the determination of value. The passage from Gerson dealing with the circumstances to which the prince must have regard in fixing a price, which we quoted above, shows quite clearly that many other factors were recognised as no less important. This appears with special clearness in the treatise of Langenstein, whose authority on this subject was always ranked very high. Bernardine of Siena is careful to point out that the expense of production is only one of the factors which influence the value of an object.[1] Biel explains that, when no price has been fixed by law, the just price may be arrived at by a reference to the cost of the labour of production, and to the state of the market, and the other circumstances which we have seen above the prince was bound to have regard to in fixing a price. He also allows the price to be raised on account of any anxiety which the production of the goods occasioned him, or any danger he incurred.[2] [Footnote 1: 'Res potest plus vel minus valere tribus modis; primo secundum suam virtutem; secondo modo secundum suam caritatem; tertio modo secundum suam placibilitatem et affectionem.... Primo observat quemdam naturalem ordinem utilium rerum, secundo observat quemdam communem cursum copiae et inopiae, tertio observat periculum et industriam rerum seu obsequiorum' (Funk, _Zins und Wucher_, p. 153).] [Footnote 1: 'Sollicitudo et periculum,' _Op. cit._, IV. xv. 10.] It will be apparent from the whole trend of the above that, whereas the remuneration of the labour of all those who were engaged in the production of an article, was one of the elements to be taken into account in reckoning its value, and consequently its just price, it was by no means the only element. Certain so-called Christian socialists have endeavoured to find in the writings of the scholastics support for the Marxian position that all value arises from labour.[1] This endeavour is, however, destined to failure; we shall see in a later chapter that many forms of unearned income were tolerated and approved by the scholastics; but all that is necessary here is to draw the attention of the reader to the passages on value to which we have referred. One of the most prominent exponents of the untenable view that the mediævals traced all value to labour is the Abbé Hohoff, whose argument that there was a divorce between value and just price in the scholastic writings, is ably controverted by Rambaud, who remarks that nobody would have been more surprised than Aquinas himself at the suggestion that he was the forerunner of Karl Marx.[2] [Footnote 1: Even Ashley states that 'the doctrine had thus a close resemblance to that of modern Socialists; labour it regarded both as the sole (human) cause of wealth, and also as the only just claim to the possession of wealth' (_Op. cit._, vol. i. part ii. p. 393).] [Footnote 2: _Op. cit._, p. 50.] The idea that the scholastics traced all value to the labour expended on production is rejected by many of the most prominent writers on mediæval economic theory. Roscher draws particular attention to the fact that the canonist teaching assigned the correct proportions in production to land, capital, and labour, in contrast to all the later schools of economists, who have exaggerated the importance of one or the other of these factors.[1] Even Knies, who was the first modern writer to insist on the importance of the cost of production as an element of value, states that the Church sought to fix the price of goods in accordance with the cost of production (_Herstellungskosten_) _and_ the consumption value (_Gebrauchswerte_).[2] Brants takes the same view. 'The expenses of production are in practice the norm of the fixing of the sale price in the great majority of cases, above all in a very narrow market, where competition is limited; moreover, they can, for reasons of public order, form the basis of a fixing that will protect the producer and the consumer against the disastrous consequences of constant oscillations. The vendor can in principle be remunerated for his trouble. It is well that he should be so remunerated; it is socially useful, and is used as a basis for fixing price; but it cannot in any way be said that this forms the _objective measure of value_, but that the work and expense are a sufficient title of remuneration for the fixing of the just price of the sale of a thing. Some writers have tried to conclude from this that the authors of the Middle Ages saw in labour the measure of value. This conclusion is exaggerated. We may fully admit that this element enters into the sale price; but it is in no way the general measure of value.... The expenses of production constitute, then, _one_ of the legitimate elements of just price; they are not the _measure_ of value, but a factor often influencing its determination.'[3] 'Labour,' according to Dr. Cronin, 'is one of the most important of all the determinants of value, for labour is the chief element in cost of production, and cost of production is one of the chief elements in determining the level at which it is useful to buy or sell. But labour is not the only determinant of value; there is, _e.g._, the price of the raw materials, a price that is not wholly determined by the labour of producing those materials.'[4] [Footnote 1: _Political Economy_, s. 48.] [Footnote 2: _Politische Oekonomie vom Standpuncte der geschichtlichen Methode_, p. 116.] [Footnote 3: _Op. cit._, p. 112.] [Footnote 4: _Ethics_, vol. ii. p. 181.] The just price, then, in the absence of a legal fixing, was held to be the price that was in accordance with the _communis estimatio_. Of course, this did not mean that a plebiscite had to be taken before every sale, but that any price that was in accordance with the general course of dealing at the time and place of the sale was considered substantially fair. 'A thing is worth what it can generally be sold for--at the time of the contract; this means what it can be sold for generally either on that day or the preceding or following day. One must look to the price at which similar things are generally sold in the open market.'[1] 'We must state precisely,' says the Abbé Desbuquois, 'the character of this common estimation; it did not mean the universal suffrage; although it expresses the universal interest, it proceeds in practice from the evaluation of competent men, taken in the social environment where the exchange value operates. If one supposes a sovereign tribunal of arbitration where all the rights of all the weak and all the strong economic factors are taken into account, the just price appears as the sentence or decision of this court.'[2] 'For the scholastics, the common estimation meant an ethical judgment of at least the most influential members of the community, anticipating the markets and fixing the rate of exchange.'[3] [Footnote 1: Caepolla, _De Cont. Sim._, 72.] [Footnote 2: _Op. cit._, pp. 169-70.] [Footnote 3: Fr. Kelleher in the _Irish Theological Quarterly_, vol. xi. p. 133.] It is quite incorrect to say, as has been sometimes said, that the mediæval just price was in no way different from the competition price of to-day which is arrived at by the higgling of the market. Dr. Cunningham is very explicit and clear on this point. 'Common estimation is thus the exponent of the natural or normal or just price according to either the mediæval or modern view; but, whereas we rely on the higgling of the market as the means of bringing out what is the common estimate of any object, mediæval economists believed that it was possible to bring common estimation into operation beforehand, and by the consultation of experts to calculate out what was the just price. If common estimation was thus organised, either by the town authorities or guilds or parliament, it was possible to determine beforehand what the price should be and to lay down a rule to this effect; in modern times we can only look back on the competition prices and say by reflection what the common estimation has been.'[1] 'The common estimation of which the Canonists spoke,' says Dr. Ryan, 'was conscious social judgment that fixed price beforehand, and was expressed chiefly in custom, while the social estimate of to-day is in reality an unconscious resultant of the higgling of the market, and finds its expression only in market price.'[2] The phrase 'res tanti valet quanti vendi potest,' which is so often used to prove that the mediæval doctors permitted full competitive prices in the modern sense, must be understood to mean that a thing could be sold at any figure which was within the limits of the minimum and maximum just price.[3] [Footnote 1: _Growth of English Industry and Commerce_, vol. i. p. 353.] [Footnote 2: _Living Wage_, p. 28.] [Footnote 3: Lessius, _De Justitia et Jure_, xxi. 19.] The last sentence suggests that the just price was not a fixed and unalterable standard, but was somewhat wide and elastic. On this all writers are agreed. 'The just price of things,' says Aquinas, 'is not fixed with mathematical precision, but depends on a kind of estimate, so that a slight addition or subtraction would not seem to destroy the equality of justice,'[1] Caepolla repeats this dictum, with the reservation that, when the just price is fixed by law, it must be rigorously observed.[2] 'Note,' says Gerson, 'that the equality of commutative justice is not exact or unchangeable, but has a good deal of latitude, within the bounds of which a greater or less price may be given without justice being infringed;'[3] and Biel insists on the same latitude, from which he draws the conclusion that the just price is constantly varying from day to day and from place to place.[4] Generally it was said that there was a maximum, medium, and minimum just price; and that any price between the maximum and minimum was valid, although the medium was to be aimed at as far as possible. [Footnote 1: II. ii. 77, 1, ad. 1.] [Footnote 2: _De Cont. Sim._, 58.] [Footnote 3: _De Cont._, ii. 11.] [Footnote 4: _Op. cit._, IV. xv. 10.] The price fixed by common estimation was therefore the one to be observed in most cases, and it was at all times a safe guide to follow. If, however, the parties either knew or had good reason to believe that the common estimation had fixed the price wrongly, they were not bound to follow it, but should arrive at a just price themselves, having regard to the various considerations given above.[1] [Footnote 1: Nider, _De Cont. Merc._ ii.: 'Si vero scit vel credit communitatem errare in estimatione pretii rei; tunc nullo modo debet eam sequi; quia etiam si reciperet verum et justum pretium, tamen faceret contra conscientiam.'] It did not make any difference whether the price was paid immediately or at some future date. To increase the price in return for the giving of credit was not allowed, as it was deemed usurious--as indeed it was. It was held that the seller, in not taking his money immediately, was simply making a loan of that amount to the buyer, and that to receive anything more than the sum lent would be usury. Aquinas is quite clear on this point. 'If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury; because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. In like manner, if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is likewise a sin of usury; because again this anticipated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand, if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.'[1] If, however, the seller, by giving credit, suffered any damage, he was entitled to be recompensed; this, as we shall see, was an ordinary feature of usury law. It could not be said that the price was raised. The price remained the same; but the seller was entitled to something further than the price by way of damages.[2] It was by the application of this principle that a seller was justified in demanding more than the current price for an article which possessed some individual or sentimental value for him. 'In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller.... No man should sell what is not his, though he may charge for the loss he suffers.'[3] On the other hand, it was strictly forbidden to raise the price on account of the individual need of the buyer.[4] [Footnote 1: II. ii. 78, 2, ad. 7. See _Decret. Greg._, v. 19, _de usuris_, cc. 6 and 10.] [Footnote 2: Endemann, _Studien_, vol. ii. pp. 49; Desbuquois, _op. cit._, p. 174.] [Footnote 3: II. ii. 77, 1.] [Footnote 4: _Ibid._] § 4. _The Just Price of Labour_. Particular rules were laid down for determining the just price of certain classes of goods. These need not be treated in detail, as they were merely applications of the general principle to particular cases, and whatever interest they possess is in the domain of practice rather than of theory. In the sale of immovable property the rule was that the value should be arrived at by a consideration of the annual fruits of the property.[1] The only one of the particular contracts which need detain us here is that of a contract of service for wages (_locatio operarum_). Wages were considered as ruled by the laws relating to just price. 'That is called a wage (_merces_) which is paid to any one as a recompense for his work and labour. Therefore, as it is an act of justice to give a just price for a thing taken from another person, so also to pay the wages of work and labour is an act of justice.'[2] Again, 'Remuneration of service or work ... can be priced at a money value, as may be seen in the case of those who offer for hire the labour which they exercise by work or by tongue.'[3] Biel insists that the value of labour is subject to the same influences as the value of any other commodity which is offered for sale, and that therefore a just price must be observed in buying it.[4] [Footnote 1: Caepolla, _de Cont. Sim._, 78; Carletus, _Summa Angelica_, lxv.] [Footnote 2: Aquinas, _Summa_, II. ii. 114, 1.] [Footnote 3: II. ii. 78, 2, ad. 3.] [Footnote 4: _Op. cit._, IV. xv. 10. Modern Socialists caricature the correct principle 'that labour is a commodity' into 'the labourer is a commodity'--a great difference, which is not sufficiently understood by many present-day writers. (See Roscher, _Political Economy_, s. 160.)] This, according to Brants,[1] is essentially a matter upon which more enlightenment will be found in histories of the working classes[2] than in books dealing with the enunciation of abstract theories; nevertheless, it is possible to state generally that it was regarded as the duty of employers to give such a wage as would support the worker in accordance with the requirements of his class. In the great majority of cases the rate of wages was fixed by some public--municipal or corporative--authority, but Langenstein enunciates a rule which seems to approach the statement of a general theory. According to him, when a man has something to sell, and has no indication of the just price from its being fixed by any outside authority, he must endeavour to get such a price as will _reasonably_ recompense him for any outlay he may have incurred, and will enable him to provide for his needs, spiritual and temporal.[3] It was not until the sixteenth century that the fixing of the just price of wages was submitted to scientific discussion;[4] in the fourteenth and fifteenth centuries there is little to be found bearing on this subject except the passage of Langenstein which we have quoted, and some strong exhortations by Antoninus of Florence to masters to pay good wages.[5] The reason for this paucity of authority upon a subject of so much importance is that in practice the machinery provided by the guilds had the effect of preserving a substantially just remuneration to the artisan. When a man is in perfect health he does not bother to read medical books. In the same way, the proper remuneration of labour was so universally recognised as a duty, and so satisfactorily enforced, that it seems to have been taken for granted, and therefore passed over, by the writers of the period. One may agree with Brants in concluding that, 'the principle of just price in sales was applied to wages; fluctuations in wages were not allowed; the just price, as in sales, rested on the approximate equality of the services rendered; and that this equality was estimated by common opinion.'[6] Of course, in the case of slave labour it could not be said that any wage was paid. The master was entitled to the services of the slave, and in return was bound to furnish him with the necessaries of life.[7] [Footnote 1: _Op. cit._, p. 103.] [Footnote 2: An excellent bibliography of books dealing with the history of the working classes in the Middle Ages is to be found in Brants, _op. cit._, p. 105. The need for examining concrete economic phenomena is insisted on in Ryan's _Living Wage_, p. 28.] [Footnote 3: _De Cont._ We have here a recognition of the principle that the value of labour is not to be measured by anything extrinsic to itself, _e.g._ by the value of the product, but by its own natural function and end, and this function and end is the supplying of the requirements of human life. The wage must, therefore, be capable of supplying the same needs that the expenditure of a labourer's energy is meant to supply. (See Cronin, _Ethics_, vol. ii. p. 390.)] [Footnote 4: Brants, _op. cit._, p. 118.] [Footnote 5: The passages from the _Summa_ of Antoninus bearing on the subject are reprinted in Brants, _op. cit._, p. 120.] [Footnote 6: _Op. cit._, p. 125.] [Footnote 7: Brants, _op. cit._, p. 116, quoting _Le Lime du Trésor_ of Brunetto Latini.] § 5. _Value of the Conception of the Just Price_. It is probably correct to say that the canonical teaching on just price was negative rather than positive; in other words, that it did not so much aim at positively fixing the price at which goods should be sold, as negatively at indicating the practices in buying and selling which were unjust. 'The doctrine of just price,' according to Dr. Ryan, 'may sometimes have been associated with incorrect views of industrial life, but all competent authorities agree that it was a fairly sound attempt to define the equities of mediæval exchanges, and that it was tolerably successful in practice.'[1] The condition of mediæval markets was frequently such that the competition was not really fair competition, and consequently the price arrived at by competition would be unfair either to buyer or seller. 'This,' according to Dr. Cunningham, 'was the very thing which mediæval regulation had been intended to prevent, as any attempt to make gain out of the necessities of others, or to reap profit from unlooked-for occurrences would have been condemned as extortion. It is by taking advantage of such fluctuations that money is most frequently made in modern times; but the whole scheme of commercial life in the Middle Ages was supposed to allow of a regular profit on each transaction.'[2] There might be some doubt as to the positive justice of this or that price; but there could be no doubt as to the injustice of a price which was enhanced by the necessities of the poor, or the engrossing of a vital commodity.[3] Merely to buy up the whole supply of a certain commodity, even if it were bought up by a 'ring' of merchants, provided that the commodity was resold within the limits of the just price, was not a sin against justice, though it might be a sin against charity.[4] If the authorities granted a monopoly, they must at the same time fix a just price.[5] A monopoly which was not privileged by the State, and which had for its aim the raising of the price of goods above the just price was regarded with universal reprobation.[6] 'Whoever buys up corn, meat, and wine,' says Trithemius, 'in order to drive up their price and to amass money at the cost of others is, according to the laws of the Church, no better than a common criminal. In a well-governed community all arbitrary raising of prices in the case of articles of food and clothing is peremptorily stopped; in times of scarcity merchants who have supplies of such commodities can be compelled to sell them at fair prices; for in every community care should be taken that all the members should be provided for, and not only a small number be allowed to grow rich, and revel in luxury to the hurt and prejudice of the many.[7] Thus the doctrine of the just price was a deadly weapon with which to fight the 'profiteer.' The engrosser was looked upon as the natural enemy of the poor; and the power of the trading class was justly reckoned so great, that in cases of doubt prices were always fixed low rather than high. In other words, the buyer--that is to say, the community--was the subject of protection rather than the seller.[8] [Footnote 1: _The Living Wage_, p. 27.] [Footnote 2: _Growth of English Industry and Commerce_, vol. i. p. 460.] [Footnote 3: Endemann, _Studien_, vol. ii. p. 60.] [Footnote 4: Lessius, _De Justitia et Jure_, II. xx. 1, 21.] [Footnote 5: _Ibid._] [Footnote 6: Langenstein, _De Cont._; Biel, _op. cit._, iv. xv. 11.] [Footnote 7: Quoted in Janssen, _op. cit._, vol. ii. p. 102.] [Footnote 8: Roscher, _Geschichte_, p. 12.] It must at the same time be clearly kept in mind that the seller was also protected. All the authorities are unanimous that it was as sinful for the buyer to give too little as for the seller to demand too much, and it is this aspect of the just price which appears most favourable in comparison with the theory of price of the classical economists. In the former case prices were fixed having regard to the wages necessary for the producer; in the latter the wages of the producer are determined by the price at which he can sell his goods, exposed to the competition of machinery or foreign--possibly slave--labour.[1] According to the _Catholic Encyclopædia_: 'To the mediæval theologian the just price of an article included enough to pay fair wages to the worker--that is, enough to enable him to maintain the standard of living of his class.'[2] 'The difference,' says Dr. Cunningham, 'which emerges according as we start from one principle or the other comes out most distinctly with reference to wages. In the Middle Ages wages were taken as a first charge; in modern times the reward of the labourer cannot but fluctuate in connection with fluctuations in the utility and market price of the things. There must always be a connection between wages and prices, but in the olden times wages were the first charge, and prices on the whole depended on them, while in modern times wages are, on the other hand, directly affected by prices.'[3] Dr. Cunningham draws attention to the fact that the labouring classes rejected the idea of the fixing of a just price for their services when, from a variety of causes, a situation arose when they were able to earn by open competition a reward higher than what was necessary to support them according to their state in life.[4] Nowadays the reverse has taken place; unrestricted competition has in many cases resulted in the reduction of wages to a level below the margin of subsistence; and the general cry of the working classes is for the compulsory fixing of minimum rates of wages which will ensure that their subsistence will not be liable to be impaired by the fluctuations of the markets. What the workers of the present day look to as a desirable, but almost unattainable, ideal, was the universal practice in the ages when economic relations were controlled by Christian principles. [Footnote 1: Ashley, _op. cit._, vol. i. pt. i. p. 129.] [Footnote 2: Art. 'Political Economy.'] [Footnote 3: _Growth of English Industry and Commerce_, vol. i. p. 461.] [Footnote 4: _Christianity and Economic Science_, p. 29.] § 6. _Was the Just Price Subjective or Objective_? The question whether the just price was essentially subjective or objective has recently formed the subject matter of an interesting and ably conducted discussion, provoked by certain remarks in Dr. Cunningham's _Western Civilisation_.[1] Dr. Cunningham, although admiring the ethical spirit which animated the conception of the just price, thought at the same time that the economic ideas underlying the conception were so undeveloped and unsound that the theory could not be applied in practice at the present day. 'Their economic analysis was very defective, and the theory of price which they put forward was untenable; but the ethical standpoint which they took is well worth examination, and the practical measures which they recommended appear to have been highly beneficial in the circumstances in which they had to deal. Their actions were not unwise; their common-sense morality was sound; but the economic theories by which they tried to give an intellectual justification for their rules and their practice were quite erroneous.... The attempt to determine an ideal price implies that there can and ought to be stability in relative values and stability in the measure of values--which is absurd. The mediæval doctrine and its application rested upon another assumption which we have outlived. Value is not a quality which inheres in an object so that it can have the same worth for everybody; it arises from the personal preference and needs of different people, some of whom desire a thing more and some less, some of whom want to use it in one way and some in another. Value is not objective--intrinsic in the object--but subjective, varying with the desire and intentions of the possessors or would-be possessors; and, because it is thus subjective, there cannot be a definite ideal value which every article ought to possess, and still more a just price as the measure of that ideal value.' In these and similar observations to be found in the _Growth of English History and Commerce_, Dr. Cunningham showed that he profoundly misunderstood the doctrine of the just price; the objectivity which he attributed to it was not the objectivity ascribed to it by the scholastics. It was to correct this misunderstanding that Father Slater contributed an article to the _Irish Theological Quarterly_[2] pointing out that the just price was subjective rather than objective. This article, which was afterwards reprinted in _Some Aspects of Moral Theology_, and the conclusions of which were embodied in the same writer's work on Moral Theology, was controverted in a series of articles by Father Kelleher in the _Irish Theological Quarterly_.[3] [Footnote 1: Pp. 77-9.] [Footnote 2: Vol. iv. p. 146.] [Footnote 1: 'Market Prices,' vol. ix. p. 398 and vol. x. p. 163; and 'Father Slater on Just Price and Value,' vol. xi. p. 159.] Father Slater draws attention to the fact that Dr. Cunningham overlooked to some extent the importance of common estimation in arriving at the just price. He points out that, far from objects being invested with some immutable objective value, their value was in fact determined by the price which the community as a whole was willing to pay for them: 'As the value in exchange will be determined by what the members of the community at the time are prepared to give, ... it will be determined by the social estimation of its utility for the support of life and its scarcity. It will depend upon its capacity to satisfy the wants and desires of the people with whom commercial transactions are possible and practicable. Father Slater then goes on categorically to refute Dr. Cunningham's presentation of the objectivity of price: 'All that that doctrine asserts is that there should be, and that there is, an equivalent in social value between the commodity and its price at a certain time and in a certain place; it says nothing whatever about the stability or permanence of prices at different times and at different places. By maintaining that the just price did not depend upon the valuation of the individual buyer or seller the mediæval doctors did not dream of making it intrinsic to the object.' In the work on Moral Theology, to which we have referred, expressions occur which lead one to believe that Father Slater did not see any great difference between the mediæval just price arrived at by common estimation and the modern normal or market price arrived at by open competition. Thus, in endeavouring to correct Dr. Cunningham's misunderstanding, Father Slater seems to have gone too far in the other direction, and his position has been ably and, in our judgment, successfully, controverted by Father Kelleher. The point at issue between the upholders of the two opposing views on just price is well stated by Father Kelleher in the first of his articles on the subject: 'We must try to find out whether the just and fair price determined the rate of exchange, or whether the rate of exchange, being determined without an objective standard and merely according to the play of human motives, determines what we call the just and fair price.'[1] We have already demonstrated that the common estimation referred to by the mediæval doctors was something quite apart from the modern higgling in the market; and that, far from being merely the result of unbridled competition on both sides, it was rather the considered judgment of the best-informed members of the community. As we have seen, even Dr. Cunningham admits that there was a fundamental difference between the common estimation of the scholastics and the modern competitive price. This is clearly demonstrated by Father Kelleher, who further establishes the proposition that the modern price is purely subjective, and that no subjective price can rest on an ethical basis. The question at issue therefore between what we may call the subjective and objective schools is not whether the sale price was determined by competition in the modern sense, but whether the common estimation of those best qualified to form an opinion on the subject in itself determined the just price, or whether it was merely the most reliable evidence of what the just price in fact was at a particular moment. [Footnote 1: _Irish Theological Quarterly_, vol. ix. p. 41.] Father Kelleher draws attention to the fact that Aquinas in his article on price did not specifically affirm that the just price was objective, but he explains this omission by saying that the objectivity of the price was so well and universally understood that it was unnecessary expressly to restate it. Indeed, as we saw above, the teaching of Aquinas on price left a great deal to be supplied by later writers, not because he was in any doubt about the subject, but because the theory was so well understood. 'Not even in St. Thomas can we find a formal discussion of the moral obligation of observing an objective equivalence in contracts of buying and selling. He simply took it for granted, as, indeed, was inevitable, seeing that, up to his time and for long after, all Catholic thought and legislation proceeded on that hypothesis. But that he actually did take it for granted, he has given many clear indications in his article on Justice which leave us no room for reasonable doubt.'[1] As Father Kelleher very cogently points out, the discussion in Aquinas's article on commerce, whether it was lawful to buy cheap and sell dear, very clearly indicates that the author maintained the objective theory, because if the just price were simply determined by what people were willing to give, this question could not have arisen. [Footnote 1: _Irish Theological Quarterly_, vol. x. p. 165.] Nor is the fact that the just price admitted of a certain elasticity an argument in favour of its being subjective. Father Kelleher fully admits that the common estimation was the general criterion of just price, and, of course, the common estimation could not, of its very nature, be rigid and immutable. Commodities should, indeed, exchange according to their objective value, but, even so, commodities could not carry their value stamped on their faces. Even if we assume that the standard of exchange was the cost of production, there would still remain room for a certain amount of difference of opinion as to what exactly their value would be in particular instances. Suppose that the commodity offered for sale was a suit of clothes, in estimating its value on the basis of the cost of production, opinions might differ as to the precise amount of time required for making it, or as to the cost of the cloth out of which it was made. Unless recourse was to be had to an almost interminable process of calculations, nobody could say authoritatively what precisely the value was, and in practice the determination of value had perforce to be left to the ordinary human estimate of what it was, which of its very nature was bound to admit a certain margin of fluctuation. Thus we can easily understand how, even with an objective standard of value, the just price might be admitted to vary within the limits of the maximum as it might be expected to be estimated by sellers and the minimum as it would appear just to buyers. The sort of estimation of which St. Thomas speaks is therefore nothing else than a judgment, which, being human, is liable to be slightly in excess or defect of the objective value about which it is formed.'[1] As Father Kelleher puts it on a later page, 'There is a sense certainly in which, with a solitary exception in the case of wages, it may be said with perfect truth that the common estimation determines the just price. That is, the common estimation is the proximate practical criterion.'[2] [Footnote 1: _Irish Theological Quarterly_, vol. x. p. 166.] [Footnote 2: P. 173.] Father Kelleher uses in support of his contention a very ingenious argument drawn from the doctrine of usury. As we said in the first chapter, and as we shall prove in detail in the next section, the prohibition of usury was simply one of the applications of the theory of equivalence in contracts--in other words, it was the determination of the just price to be paid in an exchange of money for money. If, asks Father Kelleher, the common estimation was the final test of just price, why was not moderate usury allowed? That the general opinion of the community in the Middle Ages was undoubtedly in favour of allowing a reasonable percentage on loans is shown by the constant striving of the Church to prevent such a practice. Nevertheless the Church did not for a moment relax its teaching on usury in spite of the almost universal judgment of the people. Here, therefore, is a clear example of one contract in which the standard of value is clearly objective, and it is only reasonable to draw the conclusion that the same standard which applied in contracts of the exchange of money should apply in contracts of the sale of other articles. Father Kelleher's contention seems to be completely supported by the passage from Nider which we have cited above, to the effect that the common estimation ceases to be the final test of the just price when the contracting parties know or believe that the common estimation has erred.[1] This seems to us clearly to show that the common estimation was but the most generally received test of what the just price in fact was, but that it was in no sense a final or irrefutable criterion.[2] [Footnote 1: _De Cont. Merc._, ii. xv. Nider was regarded as a very weighty authority on the subject of contracts (Endemann, _Studien_, vol. ii. p. 8).] [Footnote 2: The argument in favour of what we have called the 'objective' theory of the just price is strengthened by the consideration that goods do not satisfy mere subjective whims, but supply real wants. For example, food supplies a real need of the human being, as also does clothing; in the one case hunger is appeased, and in the other cold is warded off, just as drugs used in medical practice produce real objective effects on the person taking them.] The theory that the just price was objective seems to be accepted by the majority of the best modern students of the subject. Sir William Ashley says: 'The fundamental difference between the mediæval and modern point of view is... that with us value is something entirely subjective; it is what each individual cares to give for a thing. With Aquinas it was entirely objective; something outside the will of the individual purchaser or seller; something attached to the thing itself, existing whether he liked it or not, and that he ought to recognise.'[1] Palgrave's _Dictionary of Political Economy_, following the authority of Knies, expresses the same opinion: 'Perhaps the contrast between mediæval and modern ideas of value is best expressed by saying that with us value is usually something subjective, consisting of the mental determination of buyer and seller, while to the schoolmen it was in a sense objective, something intrinsically bound up with the commodity itself.'[2] Dr. Ryan agrees with this view: 'The theologians of the sixteenth and seventeenth centuries assumed that the objective price would be fair, since it was determined by the social estimate. In their opinion the social estimate would embody the requirements of objective justice as fully as any device or institution that was practically available. For the condition of the Middle Ages and the centuries immediately following, this reasoning was undoubtedly correct. The agencies which created the social estimate and determined prices--namely the civil law, the guilds, and custom--succeeded fairly in establishing a price that was equitable to all concerned.'[3] Dr. Cleary says: 'True, the _pretium legale_ is regarded as being a just price, but in order that it may be just, it supposes some objective basis--in other words, it rather declares than constitutes the just price.'[4] Haney is also strongly of opinion that the just price was objective. 'Briefly stated, the doctrine was that every commodity had some one true value which was objective and absolute.'[5] The greater number of modern students therefore who have given most care and attention to the question are inclined to the opinion that the just price was not subjective, but objective, and we see no valid reason for disagreeing with this view, which seems to be fully warranted by the original authorities. [Footnote 1: _Op. cit._, vol. i. pt. i. p. 140.] [Footnote 2: Art. 'Justum Pretium.'] [Footnote 3: 'The Moral Aspect of Monopoly,' by J.A. Ryan, D.D., _Irish Theological Quarterly_, in. p. 275; and see _Distributive Justice_, pp. 332-4.] [Footnote 4: _Op. cit._, p. 193.] [Footnote 5: _History of Economic Thought_, p. 75.] §7. _The Mediæval Attitude towards Commerce_. Before passing from the question of price, we must discuss the legitimacy of the various occupations which were concerned with buying and selling. The principal matter which arises for consideration in this regard is the attitude of the mediæval theologians towards commerce. Aquinas discusses the legitimacy of commerce in the same question in which he discusses just price, and indeed the two subjects are closely allied, because the importance of the observance of justice in buying and selling grew urgent as commerce extended and advanced. In order to understand the disapprobation with which commerce was on the whole regarded in the Middle Ages, it is necessary to appreciate the importance of the Christian teaching on the dignity of labour. The principle that, far from being a degrading or humiliating occupation, as it had been regarded in Greece and Rome, manual labour was, on the contrary, one of the most noble ways of serving God, effected a revolution in the economic sphere analogous to that which the Christian sanctification of marriage effected in the domestic sphere. The Christian teaching on labour was grounded on the Divine precepts contained in both the Old and New Testaments,[1] and upon the example of Christ, who was Himself a working man. The Gospel was preached amongst the poor, and St. Paul continued his humble labours during his apostolate.[2] A life of idleness was considered something to be avoided, instead of something to be desired, as it had been in the ancient civilisations. Gerson says it is against the nature of man to wish to live without labour as usurers do,[3] and Langenstein inveighs against usurers and all who live without work.[4] 'We read in Sebastian Brant that the idlers are the most foolish amongst fools, they are to every people like smoke to the eyes or vinegar to the teeth. Only by labour is God truly praised and honoured; and Trithemius says "Man is born to labour as the bird to fly, and hence it is contrary to the nature of man when he thinks to live without work."'[5] The example of the monasteries, where the performance of all sorts of manual labour was not thought inconsistent with the administration of the sacred offices and the pursuit of the highest intellectual exercises, acted as a powerful assertion to the laity of the dignity of labour in the scheme of things.[6] The value of the monastic example in this respect cannot be too highly estimated. 'When we consider the results of the founding of monasteries,' says Dr. Cunningham, 'we find influences at work that were plainly economic. These communities can be best understood when we think of them as Christian industrial colonies, and remember that they moulded society rather by example than by precept. We are so familiar with the attacks and satires on monastic life that were current at the Reformation period, that it may seem almost a paradox to say that the chief claim of the monks to our gratitude lies in this, that they helped to diffuse a better appreciation of the duty and dignity of labour.'[7] [Footnote 1: Gen. iii. 19; Ps. cxxvii. 2; 2 Thess. iii. 10. The last-mentioned text is explained, in opposition to certain Socialist interpretations which have been put on it, by Dr. Hogan in the _Irish Ecclesiastical Record_, vol. xxv. p. 45.] [Footnote 2: Wallon, _op. cit._, vol. iii. p. 401.] [Footnote 3: _De Cont._, i. 13.] [Footnote 4: _De Cont._] [Footnote 5: Janssen, _op. cit._, vol. ii. pp. 93-4.] [Footnote 6: Levasseur, _Histoire des Classes ouvrières en France_, vol. i. pp. 182 _et seq_.] [Footnote 7: _Western Civilisation_, vol. ii. p. 35.] The result of this teaching and example was that, in the Middle Ages, labour had been raised to a position of unquestioned dignity. The economic benefit of this attitude towards labour must be obvious. It made the working classes take a direct pride and interest in their work, which was represented to be a means of sanctification. 'Labour,' according to Dr. Cunningham, 'was said to be pregnant with a double advantage--the privilege of sharing with God in His work of carrying out His purpose, and the opportunity of self-discipline and the helping of one's fellow-men.'[1] 'Industrial work,' says Levasseur, 'in the times of antiquity had always had, in spite of the institutions of certain Emperors, a degrading character, because it had its roots in slavery; after the invasion, the grossness of the barbarians and the levelling of towns did not help to rehabilitate it. It was the Church which, in proclaiming that Christ was the son of a carpenter, and the Apostles were simple workmen, made known to the world that work is honourable as well as necessary. The monks proved this by their example, and thus helped to give to the working classes a certain consideration which ancient society had denied them. Manual labour became a source of sanctification.'[2] The high esteem in which labour was held appears from the whole artistic output of the Middle Ages. 'Many of the simple artists of the time represented the saints holding some instrument of work or engaged in some industrial pursuit; as, for instance, the Blessed Virgin spinning as she sat by the cradle of the divine Infant, and St. Joseph using a saw or carpenter's tools. "Since the Saints," says the _Christian Monitor_, "have laboured, so shall the Christian learn that by honourable labour he can glorify God, do good, and save his own soul."'[3] Work was, alongside of prayer and inseparable from it, the perfection of Christian life.[4] [Footnote 1: _Christianity and Economic Science_, pp. 26-7.] [Footnote 2: _Op. cit._, vol. i. p. 187.] [Footnote 3: Janssen, _op. cit._, vol. ii. p. 9.] [Footnote 4: Wallon, _op. cit._, vol. i. p. 410.] It must not be supposed, however, that manual labour alone was thought worthy of praise. On the contrary, the necessity for mental and spiritual workers was fully appreciated, and all kinds of labour were thought equally worthy of honour. 'Heavy labourer's work is the inevitable yoke of punishment, which, according to God's righteous verdict, has been laid upon all the sons of Adam. But many of Adam's descendants seek in all sorts of cunning ways to escape from the yoke and to live in idleness without labour, and at the same time to have a superfluity of useful and necessary things; some by robbery and plunder, some by usurious dealings, others by lying, deceit, and all the countless, forms of dishonest and fraudulent gain, by which men are for ever seeking to get riches and abundance without toil. But while such men are striving to throw off the yoke righteously imposed on them by God, they are heaping on their shoulders a heavy burden of sin. Not so, however, do the reasonable sons of Adam proceed; but, recognising in sorrow that for the sins of their first father God has righteously ordained that only through the toil of labour shall they obtain what is necessary to life, they take the yoke patiently on them.... Some of them, like the peasants, the handicraftsmen, and the tradespeople, procure for themselves and others, in the sweat of their brows and by physical work, the necessary sustenance of life. Others, who labour in more honourable ways, earn the right to be maintained by the sweat of others' brows--for instance, those who stand at the head of the commonwealth; for by their laborious exertion the former are enabled to enjoy the peace, the security, without which they could not exist. The same holds good of those who have the charge of spiritual matters....'[1] 'Because,' says Aquinas, 'many things are necessary to human life, with which one man cannot provide himself, it is necessary that different things should be done by different people; therefore some are tillers of the soil, some are raisers of cattle, some are builders, and so on; and, because human life does not simply mean corporal things, but still more spiritual things, therefore it is necessary that some people should be released from the care of attending to temporal matters. This distribution of different offices amongst different people is in accordance with Divine providence.'[2] [Footnote 1: Langenstein, quoted in Janssen, _op. cit._, p. 95.] [Footnote 2: _Summa Cont. Gent_., iii. 134.] All forms of labour being therefore admitted to be honourable and necessary, there was no difficulty felt about justifying their reward. It was always common ground that services of all kinds were entitled to be properly remunerated, and questions of difficulty only arose when a claim was made for payment in a transaction where the element of service was not apparent.[1] The different occupations in which men were engaged were therefore ranked in a well-recognised hierarchy of dignity according to the estimate to which they were held to be entitled. The Aristotelean division of industry into _artes possessivae_ and _artes pecuniativae_ was generally followed, the former being ranked higher than the latter. 'The industries called _possessivae_, which are immediately useful to the individual, to the family, and to society, producing natural wealth, are also the most natural as well as the most estimable. But all the others should not be despised. The natural arts are the true economic arts, but the arts which produce artificial riches are also estimable in so far as they serve the true national economy; the commutation of the exchanges and the _cambium_ being necessary to the general good, are good in so far as they are subordinate to the end of true economy. One may say the same thing about commerce. In order, then, to estimate the value of an industrial art, one must examine its relation to the general good.'[2] Even the _artes possessivae_ were not all considered equally worthy of praise, but were ranked in a curious order of professional hierarchy. Agriculture was considered the highest, next manufacture, and lastly commerce. Roscher says that, whereas all the scholastics were agreed on the excellence of agriculture as an occupation, the best they could say of manufacture was _Deo non displicet_, whereas of commerce they said _Deo placere non potest_; and draws attention to the interesting consequence of this, namely, that the various classes of goods that took part in the different occupations were also ranked in a certain order of sacredness. Immovables were thought more worthy of protection against execution and distress than movables, and movables than money.[3] Aquinas advises the rulers of States to encourage the _artes possessivae_, especially agriculture.[4] The fullest analysis of the order in which the different _artes possessivae_ should be ranked is to be found in Buridan's _Commentaries on Aristotle's Politics_. He places first agriculture, which comprises cattle-breeding, tillage, and hunting; secondly, manufacture, which helps to supply man's corporal needs, such as building and architecture; thirdly, administrative occupations; and lastly, commerce. The Christian Exhortation, quoted by Janssen,[5] says, 'The farmer must in all things be protected and encouraged, for all depend on his labour, from the monarch to the humblest of mankind, and his handiwork is in particular honourable and well pleasing to God.' [Footnote 1: Aquinas, _Summa_, II. ii. 77, 4; Nider, _op. cit._, II. x.] [Footnote 2: Brants, _op. cit._, p. 82.] [Footnote 3: _Geschichte_, p. 7.] [Footnote 4: _De Regimine Principum_, vol. ii. chaps, v. and vi.] [Footnote 5: _Op. cit._, vol. i. p. 297.] The division of occupations according to their dignity adopted by Nicholas Oresme is somewhat unusual. He divides professions into (1) honourable, or those which increase the actual quantity of goods in the community or help its development, such as ecclesiastical offices, the law, the soldiery, the peasantry, artisans, and merchants, and (2) degrading--such as _campsores, mercatores monetae sen billonatores.'_[1] No occupation, therefore, which involved labour, whether manual or mental, gave any ground for difficulty with regard to its remuneration. The business of the trader or merchant, on the other hand, was one which called for some explanation. It is important to understand what commerce was taken to mean. The definition which Aquinas gives was accepted by all later writers: 'A tradesman is one whose business consists in the exchange of things. According to the philosopher, exchange of things is twofold; one natural, as it were, and necessary, whereby one commodity is exchanged for another, or money taken in exchange for a commodity in order to satisfy the needs of life. Such trading, properly speaking, does not belong to traders, but rather to housekeepers or civil servants, who have to provide the household or the State with the necessaries of life. The other kind of exchange is either that of money for money, or of any commodity for money, not on account of the necessities of life, but for profit; and this kind of trade, properly speaking, regards traders.' It is to be remarked in this definition, that it is essential, to constitute trade, that the exchange or sale should be for the sake of profit, and this point is further emphasised in a later passage of the same article: 'Not every one that sells at a higher price than he bought is a trader, but only he who buys that he may sell at a profit. If, on the contrary, he buys, not for sale, but for possession, and afterwards for some reason wishes to sell, it is not a trade transaction, even if he sell at a profit. For he may lawfully do this, either because he has bettered the thing, or because the value of the thing has changed with the change of place or time, or on account of the danger he incurs in transferring the thing from one place to another, or again in having it carried by hand. In this sense neither buying nor selling is unjust.'[2] The importance of this definition is that it rules out of the discussion all cases where the goods have been in any way improved or rendered more valuable by the services of the seller. Such improvement was always reckoned as the result of labour of one kind or another, and therefore entitled to remuneration. The essence of trade in the scholastic sense was selling the thing unchanged at a higher price than that at which it had been bought, for the sake of gain.[3] [Footnote 1: _Tractatus de Origine, etc., Monetarum_.] [Footnote 2: _Tractatus de Origine, etc., Monetarum_, ad. 2.] [Footnote 3: 'Fit autem mercatio cum non ut emptor ea utatur sed ut earn carius vendat etiam non mutatam suo artificio; illa mercatio dicitur proprie negotiatio' (Biel, _op. cit._, IV. xv. 10.)] The legitimacy of trade in this sense was only gradually admitted. The Fathers of the Church had with one voice condemned trade as being an occupation fraught with danger to the soul. Tertullian argued that there would be no need of trade if there were no desire for gain, and that there would be no desire for gain if man were not avaricious. Therefore avarice was the necessary basis of all trade.[1] St. Jerome thought that one man's gain in trading must always be another's loss; and that, in any event, trade was a dangerous occupation since it offered so many temptations to fraud to the merchant.[2] St. Augustine proclaimed all trade evil because it turns men's minds away from seeking true rest, which is only to be found in God, and this opinion was embodied in the _Corpus Juris Canonici_.[3] This early view that all trade was to be indiscriminately condemned could not in the nature of things survive experience, and a great step forward was taken when Leo the Great pronounced that trade was neither good nor bad in itself, but was rendered good or bad according as it was honestly or dishonestly carried on.[4] [Footnote 1: _De Idol_., xi.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 129.] [Footnote 3: See _Corpus Juris Canonici_, Deer. I.D. 88 c. 12.] [Footnote 4: _Epist. ad Rusticum_, c. ix.] The scholastics, in addition to condemning commerce on the authority of the patristic texts, condemned it also on the Aristotelean ground that it was a chrematistic art, and this consideration, as we have seen above, enters into Aquinas's article on the subject.[1] [Footnote 1: Rambaud, _op. cit._, p. 52.] The extension of commercial life which took place about the beginning of the thirteenth century, raised acute controversies about the legitimacy of commerce. Probably nothing did more to broaden the teaching on this subject than the necessity of justifying trade which became more and more insistent after the Crusades.[1] [Footnote 1: On the economic influence of the Crusades the following works may be consulted: Blanqui, _Histoire de l'Economie politique_; Heeren, _Essai sur l'Influence politique et sociale des Croisades_; Scherer, _Histoire du Commerce_; Prutz, _Culturgeschichte der Kreuzzüge_; Pigonneau, _Histoire du Commerce de la France_; List, _Die Lehren der Handelspolitischen Geschichte_.] By the time of Aquinas the necessity of commerce had come to be fully realised, as appears from the passage in the _De Regimine Principum_: 'There are two ways in which it is possible to increase the affluence of any State. One, which is the more worthy way, is on account of the fertility of the country producing an abundance of all things which are necessary for human life, the other is through the employment of commerce, through which the necessaries of life are brought from different places. The former method can be clearly shown to be the more desirable.... It is more admirable that a State should possess an abundance of riches from its own soil than through commerce. For the State which needs a number of merchants to maintain its subsistence is liable to be injured in war through a shortage of food if communications are in any way impeded. Moreover, the influx of strangers corrupts the morals of many of the citizens... whereas, if the citizens themselves devote themselves to commerce, a door is opened to many vices. For when the desire of merchants is inclined greatly to gain, cupidity is aroused in the hearts of many citizens.... For the pursuit of a merchant is as contrary as possible to military exertion. For merchants abstain from labours, and while they enjoy the good things of life, they become soft in mind and their bodies are rendered weak and unsuitable for military exercises.... It therefore behoves the perfect State to make a moderate use of commerce.'[1] [Footnote 1: ii. 3.] Aquinas, who, as we have seen, recognised the necessity of commerce, did not condemn all trade indiscriminately, as the Fathers had done, but made the motive with which commerce was carried on the test of its legitimacy: 'Trade is justly deserving of blame, because, considered in itself, it satisfies the greed for gain, which knows no limit, and tends to infinity. Hence trading, considered in itself, has a certain debasement attaching thereto, in so far as, by its very nature, it does not imply a virtuous or necessary end. Nevertheless gain, which is the end of trading, though not implying, by its nature, anything virtuous or necessary, does not, in itself, connote anything sinful or contrary to virtue; wherefore nothing prevents gain from being directed to some necessary or even virtuous end, and thus trading becomes lawful. Thus, for instance, a man may intend the moderate gain which he seeks to acquire by trading for the upkeep of his household, or for the assistance of the needy; or again, a man may take to trade for some public advantage--for instance, lest his country lack the necessaries of life--and seek gain, not as an end, but as payment for his labour.'[1] This is important in connection with what we have said above as to property, as it shows that the trader was quite justified in seeking to obtain more profits, provided that they accrued for the benefit of the community. This justification of trade according to the end for which it was carried on, was not laid down for the first time by Aquinas, but may be found stated in an English treatise of the tenth century entitled _The Colloquy of Archbishop Alfric_, where, when a doctor asks a merchant if he wishes to sell his goods for the same price for which he has bought them, the merchant replies: 'I do not wish to do so, because if I do so, how would I be recompensed for my trouble? but I wish to sell them for more than I paid for them so that I might secure some gain wherewith to support myself, my wife, and family.'[2] [Footnote 1: II. ii. 77, 4.] [Footnote 2: Loria, _Analysi de la proprietà, capitalista_, ii. 168.] In spite of the fact that the earlier theory that no commercial gain which did not represent payment for labour could be justified was still maintained by some writers--for instance, Raymond de Pennafort[1]--the teaching of St. Thomas Aquinas was generally accepted throughout the later Middle Ages. Canonists and theologians accepted without hesitation the justification of trade formulated by Aquinas.[2] Henri de Gand,[3] Duns Scotus,[4] and François de Mayronis [5] unhesitatingly accepted the view of Aquinas, and incorporated it in their works.[6] 'An honourable merchant,' says Trithemius, 'who does not only think of large profits, and who is guided in all his dealings by the laws of God and man, and who gladly gives to the needy of his wealth and earnings, deserves the same esteem as any other worker. But it is no easy matter to be always honourable in all mercantile dealings and not to become usurious. Without commerce no community can of course exist, but immoderate commerce is rather hurtful than beneficial, because it fosters greed of gain and gold, and enervates and emasculates the nation through love of pleasure and luxury.'[7] Nider says that to buy not for use but for sale at a higher price is called trade. Two special rules apply to this: first, that it should be useful to the State, and second, that the price should correspond to the diligence, prudence, and risk undertaken in the transaction.[8] [Footnote 1: _Summa Theologica_, II. vii. 5.] [Footnote 2: Ashley, _op. cit._, p. 55.] [Footnote 3: _Quodlib_., i. 40.] [Footnote 4: _Lib. Quat. Sent._, xv. 2.] [Footnote 5: iv. 16, 4.] [Footnote 6: See Jourdain, _op. cit._, p. 20 _et seq_.] [Footnote 7: Quoted in Janssen, _op. cit._, vol. ii. p. 97.] [Footnote 8: _Op. cit._, iv. 10.] The later writers hi the fifteenth century seem to have regarded trade more liberally even than Aquinas, although they quote his dictum on the subject as the basis of their teaching. Instead of condemning all commerce as wrong unless it was justified by good motives, they were rather inclined to treat commerce as being in itself colourless, but capable of becoming evil by bad motives. Carletus says: 'Commerce in itself is neither bad nor illegal, but it may become bad on account of the circumstances and the motive with which it is undertaken, the persons who undertake it, or the manner in which it is conducted. For instance, commerce undertaken through avarice or a desire for sloth is bad; so also is commerce which is injurious to the republic, such as engrossing.'[1] [Footnote 1: _Summa Angelica_, 169: 'Mercatio non est mala ex genere, sed bona, humano convictui necessaria dum fuerit justa. Mercatio simpliciter non est peccatum sed ejus abusus.' Biel, _op. cit._, iv. xv. 10.] Endemann, having thoroughly studied all the fifteenth-century writers on the subject, says that commerce might be rendered unjustifiable either by subjective or objective reasons. Subjective illegality would arise from the person trading--for instance, the clergy--or the motive with which trade was undertaken; objective illegality on account of the object traded in, such as weapons in war-time, or the bodies of free men.[1] Speculative trading, and what we to-day call profiteering, were forbidden in all circumstances.[2] [Footnote 1: _Studien_, vol. ii. p. 18.] [Footnote 2: _The Ayenbite of Inwit_, a thirteenth-century confessor's manual, lays it down that speculation is a kind of usury. (Rambaud, _Histoire_, p. 56.)] We need not dwell upon the prohibition of trading by the clergy, because it was simply a rule of discipline which has not any bearing upon general economic teaching, except in so far as it shows that commerce was considered an occupation dangerous to virtue. Aquinas puts it as follows: 'Clerics should abstain not only from things that are evil in themselves, but even from those that have an appearance of evil. This happens in trading, both because it is directed to worldly gain, which clerics should despise, and because trading is open to so many vices, since "a merchant is hardly free from sins of the lips." [1] There is also another reason, because trading engages the mind too much with worldly cares, and consequently withdraws it from spiritual cares; wherefore the Apostle says:[2] "No man being a soldier to God entangleth himself with secular business." Nevertheless it is lawful for clerics to engage in the first-mentioned kind of exchange, which is directed to supply the necessaries of life, either by buying or by selling.'[3] The rule of St. Benedict contains a strong admonition to those who may be entrusted with the sale of any of the products of the monastery, to avoid all fraud and avarice.[4] [Footnote 1: Eccles. xxvi. 28.] [Footnote 2: 2 Tim. ii. 4.] [Footnote 3: _Summa_, II. ii. 77, 4, ad. 3.] [Footnote 4: _Beg. St. Ben._, 57.] On the whole, the attitude towards commerce seems to have grown more liberal in the course of the Middle Ages. At first all commerce was condemned as sinful; at a later period it was said to be justifiable provided it was influenced by good motives; while at a still later date the method of treatment was rather to regard it as a colourless act in itself which might be rendered harmful by the presence of bad motives. This gradual broadening of the justification of commerce is probably a reflection of the necessities of the age, which witnessed a very great expansion of commerce, especially of foreign trade. In the earlier centuries remuneration for undertaking risk was prohibited on the authority of a passage in the Gregorian Decretals, but the later writers refused to disallow it.[1] The following passage from Dr. Cunningham's _Growth of English Industry and Commerce_ correctly represents the attitude of the Church towards commerce at the end of the Middle Ages: 'The ecclesiastic who regarded the merchant as exposed to temptations in all his dealings would not condemn him as sinful unless it were clear that a transaction were entered on solely for greed, and hence it was the tendency for moralists to draw additional distinctions, and refuse to pronounce against business practices where common sense did not give the benefit of the doubt.'[2] We have seen that one motive which would justify the carrying on of trade was the desire to support one's self and one's family. Of course this motive was capable of bearing a very extended and elastic interpretation, and would justify increased commercial profits according as the standard of life improved. The other motive given by the theologians, namely, the benefit of the State, was also one which was capable of a very wide construction. One must remember that even the manual labourer was bound not to labour solely for avaricious gain, but also for the benefit of his fellow-men. 'It is not only to chastise our bodies,' says Basil, 'it is also by the love of our neighbour that the labourer's life is useful so that God may furnish through us our weaker brethren';[3] and a fifteenth-century book on morality says: 'Man should labour for the honour of God. He should labour in order to gain for himself and his family the necessaries of life and what will contribute to Christian joy, and moreover to assist the poor and the sick by his labours. He who acting otherwise seeks only the pecuniary recompense of his work does ill, and his labours are but usury. In the words of St. Augustine, "thou shalt not commit usury with the work of thy hands, for thus wilt thou lose thy soul,"'[4] The necessity for altruism and regard for the needs of one's neighbour as well as of one's self were therefore motives necessary to justify labour as well as commerce; and it would be wrong to conclude that the teaching of the scholastics on the necessity for a good motive to justify trade operated to damp individual enterprise, or to discourage those who were inclined to launch commercial undertakings, any more than the insistence on the need for a similar motive in labourers was productive of idleness. What the mediæval teaching on commerce really amounted to was that, while commerce was as legitimate as any other occupation, owing to the numerous temptations to avarice and dishonesty which it involved, it must be carefully scrutinised and kept within due bounds. It was more difficult to insure the observance of the just price in the case of a sale by a merchant than in one by an artificer; and the power which the merchant possessed of raising the price of the necessaries of life on the poor by engrossing and speculation rendered him a person whose operations should be carefully controlled. [Footnote 1: Cunningham, _Growth of English Industry and Commerce_, vol. i. p. 255.] [Footnote 2: P. 255.] [Footnote 3: _Reg. Fus. Tract._, XXXVII. i.] [Footnote 4: Quoted in Janssen, _op. cit._, vol. ii. p. 9.] Finally, it must be clearly understood that the attempt of some modern writers to base the mediæval justification of commerce on an analysis of all commercial gains as the payment for labour rests on a profound misunderstanding. As we have already pointed out, Aquinas distinctly rules out of consideration in his treatment of commerce the case where the goods have been improved in value by the exertions of the merchant. When the element of labour entered into the transaction the matter was clearly beyond doubt, and the lengthy discussion devoted to the question of commerce by Aquinas and his followers shows that in justifying commercial gains they were justifying a gain resting not on the remuneration for the labour, but on an independent title. § 8. _Cambium_. There was one department of commerce, namely, _cambium_, or money-changing, which, while it did not give any difficulty in theory, involved certain difficulties in practice, owing to the fact that it was liable to be used to disguise usurious transactions. Although _cambium_ was, strictly speaking, a special branch of commerce, it was nevertheless usually treated in the works on usury, the reason being that many apparent contracts of _cambium_ were in fact veiled loans, and that it was therefore a matter of importance in discussing usury to explain the tests by which genuine and usurious exchanges could be distinguished. Endemann treats this subject very fully and ably;[1] but for the purpose of the present essay it is not necessary to do more than to state the main conclusions at which he arrives. [Footnote 1: _Studien_, vol. i. p. 75.] Although the practice of exchange grew up slowly and gradually during the later Middle Ages, and, consequently, the amount of space devoted to the discussion of the theory of exchange became larger as time went on, nevertheless there is no serious difference of opinion between the writers of the thirteenth century, who treat the subject in a fragmentary way, and those of the fifteenth, who deal with it exhaustively and systematically. Aquinas does not mention _cambium_ in the _Summa_, but he recognises the necessity for some system of exchange in the _De Eegimine Principum_.[1] All the later writers who mention _cambium_ are agreed in regarding it as a species of commerce to which the ordinary rules regulating all commerce apply. Francis de Mayronis says that the art of _cambium_ is as natural as any other kind of commerce, because of the diversity of the currencies in different kingdoms, and approves of the campsor receiving some remuneration for his labour and trouble.[2] Nicholas de Ausmo, in his commentary on the _Summa Pisana_, written in the beginning of the fifteenth century, says that the campsor may receive a gain from his transactions, provided that they are not conducted with the sole object of making a profit, and that the gain he may receive must be limited by the common estimation of the place and time. This is practically saying that _cambium_ may be carried on under the same conditions as any other species of commerce. Biel says that _cambium_ is only legitimate if the campsor has the motive of keeping up a family or benefiting the State, and that the contract may become usurious if the gain is not fair and moderate.[3] The right of the campsor to some remuneration for risk was only gradually admitted, and forms the subject of much discussion amongst the jurists.[4] This hesitation in allowing remuneration for risk was not peculiar to _cambium_, but, as we have seen above, was common to all commerce. Endemann points out how the theologians and jurists unanimously insisted that _cambium_ could not be justified except when the just price was observed, and that, when the doctrine attained its full development, the element of labour was but one of the constituents in the estimation of that price.[5] [Footnote 1: 'Cum enim extraneae monetae communicantur in permutationibus oportet recurrere ad artem campsoriam, cum talia numismata non tantum valeant in regionibus extraneis quantum in propriis (_De Reg. Prin._, ii. 13).] [Footnote 2: In _Quot. Lib. Sent._, iv. 16, 4.] [Footnote 3: _Op. oil_., IV. xv. 11.] [Footnote 4: Endemann, _Studien_, vol. i. pp. 123-36.] [Footnote 5: _Ibid._, p. 213.] All the writers who treated of exchange divided it into three kinds; ordinary exchange of the moneys of different currencies (_cambium minutum_), exchange of moneys of different currencies between different places, the justification for which rested on remuneration for an imaginary transport (_cambium per litteras_), and usurious exchange of moneys of the same currency (_cambium siccum_). The former two species of cambium were justifiable, whereas the last was condemned.[1] [Footnote 1: Laurentius de Rodulfis, _De Usuris_, pt. iii. Nos. 1 to 5.] The most complete treatise on the subject of money exchange is that of Thomas da Vio, written in 1499. The author of this treatise divides money-changing into three kinds, just, unjust, and doubtful. There were three kinds of just change; _cambium minutum_, in which the campsor was entitled to a reasonable remuneration for his labour; _cambium per litteras_, in which the campsor was held entitled to a wage (_merces_) for an imaginary transportation; and thirdly, when the campsor carried money from one place to another, where it was of higher value. The unjust change was when the contract was a usurious transaction veiled in the guise of a genuine exchange. Under the doubtful changes, the author discusses various special points which need not detain us here. Thomas da Vio then goes on to discuss whether the justifiable exchange can be said to be a species of loan, and concludes that it can not, because all that the campsor receives is an indemnity against loss and a remuneration for his labour, trouble, outlay, and risk, which is always justifiable. He then goes on to state the very important principle, that in _cambium_ money is not to be considered a measure of value, but a vendible commodity,[1] a distinction which Endemann thinks was productive of very important results in the later teaching on the subject.[2] The last question treated in the treatise is the measure of the campsor's profit, and here the contract of exchange is shown to be on all fours with every other contract, because the essential principle laid down for determining its justice is the observance of the equivalence between both parties.[1] [Footnote 1: 'Numisma quamvis sit mensura et instrumentum in permutationibus; tamen per se aliquid esse potest.' It is this principle that justifies the treatment of _cambium_ in this section rather than the next.] [Footnote 2: _Studien_, vol. ii. p. 212.] SECTION 2.--THE SALE OF THE USE OF MONEY § 1. _Usury in Greece and Rome_. The prohibition of usury has always occupied such a large place in histories of the Middle Ages, and particularly in discussions relating to the attitude of the Church towards economic questions, that it is important that its precise foundation and extent should be carefully studied. The usury prohibition has been the centre of so many bitter controversies, that it has almost become part of the stock-in-trade of the theological mob orators. The attitude of the Church towards usury only takes a slightly less prominent place than its attitude towards Galileo in the utterances of those who are anxious to convict it of error. We have referred to this current controversy, not in order that we might take a part in it, but that, on the contrary, we might avoid it. It is no part of our purpose in our treatment of this subject to discuss whether the usury prohibition was or was not suitable to the conditions of the Middle Ages; whether it did or did not impede industrial enterprise and commercial expansion; or whether it was or was not universally disregarded and evaded in real life. These are inquiries which, though full of interest, would not be in place in a discussion of theory. All we are concerned to do in the following pages is to indicate the grounds on which the prohibition of usury rested, the precise extent of its application, and the conceptions of economic theory which it indicated and involved. [Footnote 1: Brants has a very luminous and interesting section on _Cambium, Op. cit._, p. 214 _et seq_.] We must remark in the first place that the prohibition of usury was in no sense peculiar to the Catholic Church in the Middle Ages, but, on the contrary, was to be found in many other religious and legal systems--for instance, in the writings of the Greek and Roman philosophers, amongst the Jews, and the followers of Mohammed. We shall give a very brief account of the other prohibitions of usury before coming to deal with the scholastic teaching on the subject. We can find no trace of any legal prohibition of usury in ancient Greece. Although Solon's laws contained many provisions for the relief of poor debtors, they did not forbid the taking of interest, nor did they limit the rate of interest that might be taken.[1] In Rome the Twelve Tables fixed a maximum rate of interest, which was probably ten or twelve per cent, per annum, but which cannot be determined with certainty owing to the doubtful signification of the expression '_unciarum foenus_.' The legal rate of interest was gradually reduced until the year 347 B.C., when five per cent, was fixed as a maximum. In 342 B.C. interest was forbidden altogether by the Genucian Law; but this law, though never repealed, was in practice quite inoperative owing to the facility with which it could be evaded; and consequently the oppression of borrowers was prevented by the enactment, or perhaps it would be more correct to say the general recognition, of a maximum rate of interest of twelve per cent. per annum. This maximum rate--the _Centesima_--remained in operation until the time of Justinian.[2] Justinian, who was under the influence of Christian teaching, and who might therefore be expected to have regarded usury with unfavourable eyes, fixed the following maximum rates of interest--maritime loans twelve per cent.; loans to ordinary persons, not in business, six per cent.; loans to high personages (_illustres_) and agriculturists, four per cent.[3] [Footnote 1: Cleary, _The Church and Usury_, p. 21.] [Footnote 2: Hunter, _Roman Law_, pp. 652-53; Cleary, _op. cit._, pp. 22-6; Roscher, _Political Economy_, s. 90.] [Footnote 3: _Code_ 4, 32, 26, 1.] While the taking of interest was thus approved or tolerated by Greek and Roman law, it was at the same time reprobated by the philosophers of both countries. Plato objects to usury because it tends to set one class, the poor or the borrowers, against another, the rich or the lenders; and goes so far as to make it wrong for the borrower to repay either the principal or interest of his debt. He further considers that the profession of the usurer is to be despised, as it is an illiberal and debasing way of making money.[1] While Plato therefore disapproves in no ambiguous words of usury, he does not develop the philosophical bases of his objection, but is content to condemn it rather for its probable ill effects than on account of its inherent injustice. [Footnote 1: _Laws_, v. ch. 11-13.] Aristotle condemns usury because it is the most extreme and dangerous form of chrematistic acquisition, or the art of making money for its own sake. As we have seen above, in discussing the legitimacy of commerce, buying cheap and selling dear was one form of chrematistic acquisition, which could only be justified by the presence of certain motives; and usury, according to the philosopher, was a still more striking example of the same kind of acquisition, because it consisted in making money from money, which was thus employed for a function different from that for which it had been originally invented. 'Usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended. For it was devised for the sake of exchange, but usury multiplies it. And hence usury has received the name of [Greek: tokos], or produce; for whatever is produced is itself like its parents; and usury is merely money born of money; so that of all means of money-making it is the most contrary to nature.'[1] We need not pause here to discuss the precise significance of Aristotle's conceptions on this subject, as they are to us not so much of importance in themselves, as because they suggested a basis for the treatment of usury to Aquinas and his followers.[2] [Footnote 1: Aristotle, _Politics_, i. 10.] [Footnote 2: Cleary, _op. cit._, p. 29.] In Rome, as in Greece, the philosophers and moralists were unanimous in their condemnation of the practice of usury. Cicero condemns usury as being hateful to mankind, and makes Cato say that it is on the same level of moral obliquity as murder; and Seneca makes a point that became of some importance in the Middle Ages, namely, that usury is wrongful because it involves the selling of time.[1] Plutarch develops the argument that money is sterile, and condemns the practices of contemporary money-lenders as unjust.[2] The teaching of the philosophers as to the unlawfulness of usury was reflected in the popular feeling of the time.[3] [Footnote 1: Cleary, _op. cit._, p. 29.] [Footnote 2: _De Vitando Aere Alieno_.] [Footnote 3: Espinas, _op. cit._, pp. 81-2; Roscher, _Political Economy_, s. 90.] § 2. _Usury in the Old Testament_. The question of usury therefore attracted considerable attention in the teaching and practice of pagan antiquity. It occupied an equally important place in the Old Testament. In Exodus we find the first prohibition of usury: 'If thou lend money to any of my people being poor, thou shalt not be to him as a creditor, neither shall ye lay upon him usury.'[1] In Leviticus we read: 'And if thy brother be waxen poor, and his hand fail with thee; then, thou must uphold him; as a stranger and a sojourner shall he live with thee. Take thou no money of him or increase, but fear thy God that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor give him victuals for increase.'[2] Deuteronomy lays down a wider prohibition: 'Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury; unto a foreigner thou mayest lend upon usury, but unto thy brother thou mayest not lend upon usury.'[3] It will be noticed that the first and second of these texts do not forbid usury except in the case of loans to the poor, and, if we had them alone to consider, we could conclude that loans to the rich or to business men were allowed. The last text, however, extends the prohibition to all loans to one's brother--an expression which was of importance in Christian times, as Christian writers maintained the universal brotherhood of man. [Footnote 1: Exod. xxii. 25.] [Footnote 2: Lev. xxv. 35.] [Footnote 3: Deut. xxiii. 19.] It is unnecessary for us to discuss the underlying considerations which prompted these ordinances. Dr. Cleary, who has studied the matter with great care, concludes that: 'The legislator was urged mostly by economic considerations.... The permission to extract usury from strangers--a permission which later writers, such as Maimonides, regarded as a command--clearly favours the view that the legislator was guided by economic principles. It is more difficult to say whether he based his legislation on the principle that usury is intrinsically unjust--that is to say, unjust even when taken in moderation. There is really nothing in the texts quoted to enable us to decide. The universality of the prohibition when there is question solely of Jews goes to show that usury as such was regarded as unjust; whilst its permission as between Jew and Gentile favours the contradictory hypothesis.'[1] Modern Jewish thought is inclined to hold the view that these prohibitions were based upon the assumption that usury was intrinsically unjust, but that the taking of usury from the Gentiles was justified on the principle of compensation; in other words, that Jews might exact usury from those who might exact it from them.[2] It is at least certain that usury was regarded by the writers of the Old Testament as amongst the most terrible of sins.[3] [Footnote 1: _Op. cit._, pp. 5-6.] [Footnote 2: _Jewish Encyclopaedia_, art. 'Usury.'] [Footnote 3: Ezek. xviii. 13; Jer. xv. 10; Ps. xiv. 5, cix. 11, cxii. 5; Prov. xxviii. 8; Hes. xviii. 8; 2 Esd. v. I _et seq._] The general attitude of the Jews towards usury cannot be better explained than by quoting Dr. Cleary's final conclusion on the subject: 'It appears therefore that in the Old Testament usury was universally prohibited between Israelite and Israelite, whilst it was permitted between Israelite and Gentile. Furthermore, it seems impossible to decide what was the nature of the obligations imposed--whether the prohibition supposed and ratified an already existing universal obligation, in charity or justice, or merely imposed a new obligation in obedience, binding the consciences of men for economic or political reasons. So, too, it seems impossible to decide absolutely whether the decrees were intended to possess eternal validity; the probabilities, however, seem to favour very strongly the view that they were intended as mere economic regulations suited to the circumstances of the time. This does not, of course, decide the other question, whether, apart from such positive regulations, there already existed an obligation arising from the natural law; nor would the passing of the positive law into desuetude affect the existence of the other obligation.'[1] [Footnote 1: _Op. cit._, pp. 17-18.] Before we pass from the consideration of the Old Testament to that of the New, we may mention that the taking of interest by Mohammedans is forbidden in the Koran.[2] [Footnote 2: ii. 30. This prohibition is universally evaded. (Roscher, _Political Economy_, s. 90.)] § 3. _Usury in the First Twelve Centuries of Christianity_. The only passage in the Gospels which bears directly on the question of usury is a verse of St. Luke, the correct reading of which is a matter of considerable difference of opinion.[1] The Revised Version reads: 'But love your enemies, and do them good, and lend, never despairing (_nihil desperantes_); and your reward shall be great.' If this be the true reading of the verse, it does not touch the question of usury at all, as it is simply an exhortation to lend without worrying whether the debtor fail or not.[2] The more generally received reading of this verse, however, is that adopted by the Vulgate, 'mutuum date, nihil inde sperantes'--'lend hoping for nothing thereby.' If this be the correct reading, the verse raises considerable difficulties of interpretation. It may simply mean, as Mastrofini interprets it, that all human actions should be performed, not in the hope of obtaining any material reward, but for the love of God and our neighbour; or it may contain an actual precept or counsel relating to the particular subject of loans. If the latter be the correct interpretation, the further question arises whether the recommendation is to renounce merely the interest of a loan or the principal as well. We need not here engage on the details of the controversy thus aroused; it is sufficient to say that it is the almost unanimous opinion of modern authorities that the verse recommends the renunciation of the principal as well as the interest; and that, if this interpretation is correct, the recommendation is not a precept, but a counsel.[3] Aquinas thought that the verse was a counsel as to the repayment of the principal, but a precept as to the payment of interest, and this opinion is probably correct.[4] With the exception of this verse, there is not a single passage in the Gospels which prohibits the taking of usury. [Footnote 1: Luke vi. 35.] [Footnote 2: Cleary, _op. cit._, p. 33, following Knabenbaur.] [Footnote 3: Cleary, _op. cit._, p. 34.] [Footnote 4: _Ibid._, p. 35.] We must now give some account of the teaching on usury which was laid down by the Fathers and early councils of the Church; but at the same time we shall not attempt to treat this in an exhaustive way, because, although the early Christian teaching is of interest in itself, it exercised little or no influence upon the great philosophical treatment of the same subject by Aquinas and his followers, which is the principal subject to be discussed in these pages. The first thing we must remark is that the prohibition of usury was not included by the Council of Jerusalem amongst the 'necessary things' imposed upon converts from the Gentiles.[1] This would seem to show that the taking of usury was not regarded as unlawful by the Apostles, who were at pains expressly to forbid the commission of offences, the evil of which must have appeared plainly from the natural law--for instance, fornication. The _Didache_, which was used as a book of catechetical instruction for catechumens, does not specifically mention usury; the forcing of the repayment of loans from the poor who are unable to pay is strongly reprobated; but this is not so in the case of the rich.[2] Clement of Alexandria expressly limits his disapprobation of usury to the case of loans between brothers, whom he defines as 'participators in the same word,' _i.e._ fellow-Christians; and in any event it is clear that he regards it as sin against charity, but not against justice.[3] [Footnote 1: Acts xv. 29.] [Footnote 2: _Didache_, ch. i.; Cleary, _op. cit._, p. 39.] [Footnote 3: _Stromata_, ii. 18.] Tertullian is one of the first of the Fathers to lay down positively that the taking of usury is sinful. He regards it as obviously wrong for Christians to exact usury on their loans, and interprets the passage of St. Luke, to which we have referred, as a precept against looking for even the repayment of the principal.[1] On the other hand, Cyprian, writing in the same century, although he declaims eloquently and vigorously against the usurious practices of the clergy, does not specifically express the opinion that the taking of usury is wrong in itself.[2] [Footnote 1: _Ad Marcion_, iv. 17.] [Footnote 2: _Le Lapsis_, ch. 5-6; Cleary, _op. cit._, pp. 42-3.] Thus, during the first three centuries of Christianity, there does not seem to have been, as far as we can now ascertain, any definite and general doctrine laid down on the subject of usury. In the year 305 or 306 a very important step forward was taken, when the Council of Elvira passed a decree against usury. This decree, as given by Ivo and Gratian, seems only to have applied to usury on the part of the clergy, but as given by Mansi it affected the clergy and laity alike. 'Should any cleric be found to have taken usury,' the latter version runs, 'let him be degraded and excommunicated. Moreover, if any layman shall be proved a usurer, and shall have promised, when corrected, to abstain from the practice, let him be pardoned. If, on the contrary, he perseveres in his evil-doing, he is to be excommunicated.'[1] Although the Council of Elvira was but a provincial Council, its decrees are important, as they provided a model for later legislation. Dr. Cleary thinks that Mansi's version of this decree is probably incorrect, and that, therefore, the Council only forbade usury on the part of the clergy. In any event, with this one possible and extremely doubtful exception, there was no conciliar legislation affecting the practice of usury on the part of the laity until the eighth century. Certain individual popes censured the taking of usury by laymen, and the Council of Nice expressed the opinion that such a practice was contrary to Christ's teaching, but there is nowhere to be found an imperative and definite prohibition of the taking of usury except by the clergy.[2] [Footnote 1: Cleary, _op. cit._, p. 43.] [Footnote 2: Cleary, _op. cit._, pp. 44-8.] The inconclusive result of the Christian teaching up to the middle of the fourth century is well summarised by Dr. Cleary: 'Hitherto we have encountered mere prohibitions of usury with little or no attempt to assign a reason for them other than that of positive legislation. Most of the statements of these early patristic writers, as well as possibly all of the early Christian legislative enactments, deal solely with the practice of usury by the clergy; still, there is sufficient evidence to show that in those days it was reprobated even for the Christian laity, for the _Didache_ and Tertullian clearly teach or presuppose its prohibition, while the oecumenical Council of Nice certainly presupposed its illegality for the laity, though it failed to sustain its doctrinal presuppositions with corresponding ecclesiastical penalties. With the exception of some very vague statements by Cyprian and Clement of Alexandria, we find no attempt to state the nature of the resulting obligation--that is to say, we are not told whether there is an obligation of obedience, of justice, or of charity. The prohibition indeed seems to be regarded as universal; and it may very well be contended that for the cases the Fathers consider it was in fact universal--for the loans with which they are concerned, being necessitous, should be, in accordance with Christian charity, gratuitous--even if speculatively usurious loans in general were not unjust.'[1] [Footnote 1: _Op. cit._, pp. 48-9.] The middle of the fourth century marked the opening of a new period--'a period when oratorical denunciations are profuse, and when consequently philosophical speculation, though fairly active, is of too imaginative a character to be sufficiently definite.'[1] St. Basil's _Homilies on the Fourteenth Psalm_ contain a violent denunciation of usury, the reasoning of which was repeated by St. Gregory of Nyssa[2] and St. Ambrose.[3] These three Fathers draw a terrible picture of the state of the poor debtor, who, harassed by his creditors, falls deeper and deeper into despair, until he finally commits suicide, or has to sell his children into slavery. Usury was therefore condemned by these Fathers as a sin against charity; the passage from St. Luke was looked on merely as a counsel in so far as it related to the repayment of the principal, but as a precept so far as it related to usury; but the notion that usury was in its very essence a sin against justice does not appear to have arisen. The natural sterility of money is referred to, but not developed; and it is suggested, though not categorically stated, that usury may be taken from wealthy debtors.[4] [Footnote 1: Cleary, _op. cit._, p. 49.] [Footnote 2: _Contra Usurarios_.] [Footnote 3: _De Tobia_.] [Footnote 4: Cleary, _op. cit._, p. 52.] The other Fathers of the later period do not throw very much light on the question of how usury was regarded by the early Church. St. Hilary[1] and Jerome[2] still base their objection on the ground of its being an offence against charity; and St. Augustine, though he would like to make restitution of usury a duty, treats the matter from the same point of view.[3] On the other hand, there are to be found patristic utterances in favour of the legality of usury, and episcopal approbations of civil codes which permitted it.[4] The civil law did not attempt to suppress usury, but simply to keep it within due bounds.[5] The result of the patristic teaching therefore was on the whole unsatisfactory and inconclusive. 'Whilst patristic opinion,' says Dr. Cleary, 'is very pronounced in condemning usury, the condemnation is launched against it more because of its oppressiveness than for its intrinsic injustice. As Dr. Funk has pointed out, one can scarcely cite a single patristic opinion which can be said clearly to hold that usury is against justice, whilst there are, on the contrary, certain undercurrents of thought in many writers, and certain explicit statements in others, which tend to show that the Fathers would not have been prepared to deal so harshly with usurers, did usurers not treat their debtors so cruelly.... Of keen philosophical analysis there is none.... On the whole, we find the teachings of the Fathers crude and undeveloped.'[6] [Footnote 1: In Ps. xiv.] [Footnote 2: _Ad Ezech._] [Footnote 3: Cleary, _op. cit._, p. 56.] [Footnote 4: _Ibid._ pp. 56-7.] [Footnote 5: _Justinian Code_, iv. 32.] [Footnote 6: _Op. cit._, pp. 57-9. On the patristic teaching on usury, see Espinas, _Op. cit._, pp. 82-4; Roscher, _Political Economy_, s. 90; Antoine, _Cours d'Economie sociale_, pp. 588 _et seq_.] The practical teaching with regard to the taking of usury made an important advance in the eighth and ninth centuries, although the philosophical analysis of the subject did not develop any more fully. A capitulary canon made in 789 decreed 'that each and all are forbidden to give anything on usury'; and a capitulary of 813 states that 'not only should the Christian clergy not demand usury, laymen should not.' In 825 it was decreed that the counts were to assist the bishops in their suppression of usury; and in 850 the Synod of Ticinum bound usurers to restitution.[1] The underlying principles of these enactments is as obscure as their meaning is plain and definite. There is not a single trace of the keen analysis with which Aquinas was later to illuminate and adorn the subject. [Footnote 1: These are but a few of the enactments of the period directed against usury (Cleary, _op. cit._, p. 61; Favre, _Le prêt à intérêt dans l'ancienne France_).] § 4. _The Mediæval Prohibition of Usury_. The tenth and eleventh centuries saw no advance in the teaching on usury. The twelfth century, however, ushered in a new era. 'Before that century controversy had been mostly confined to theologians, and treated theologically, with reference to God and the Bible, and only rarely with regard to economic considerations. After the twelfth century the discussion was conducted on a gradually broadening economic basis--appeals to the Fathers, canonists, philosophers, the _jus divinum_, the _jus naturale_, the _jus humanum_, became the order of the day.'[1] Before we proceed to discuss the new philosophical or scholastic treatment of usury which was inaugurated for all practical purposes by Aquinas, we must briefly refer to the ecclesiastical legislation on the subject. [Footnote 1: Böhm-Bawerk, _Capital and Interest_, p. 19.] In 1139 the second Lateran Council issued a very strong declaration against usurers. 'We condemn that disgraceful and detestable rapacity, condemned alike by human and divine law, by the Old and the New Testaments, that insatiable rapacity of usurers, whom we hereby cut off from all ecclesiastical consolation; and we order that no archbishop, bishop, abbot, or cleric shall receive back usurers except with the very greatest caution, but that, on the contrary, usurers are to be regarded as infamous, and shall, if they do not repent, be deprived of Christian burial.'[1] It might be argued that this decree was aimed against immoderate or habitual usury, and not against usury in general, but all doubt as regards the attitude of the Church was set at rest by a decree of the Lateran Council of 1179. This decree runs: 'Since almost in every place the crime of usury has become so prevalent that many people give up all other business and become usurers, as if it were lawful, regarding not its prohibition in both Testaments, we ordain that manifest usurers shall not be admitted to communion, nor, if they die in their sins, be admitted to Christian burial, and that no priest shall accept their alms.'[2] Meanwhile, Alexander III., having given much attention to the subject of usury, had come to the conclusion that it was a sin against justice. This recognition of the essential injustice of usury marked a turning-point in the history of the treatment of the subject; and Alexander III. seems entitled to be designated the 'pioneer of its scientific study.'[3] Innocent III. followed Alexander in the opinion that usury was unjust in itself, and from his time forward there was but little further disagreement upon the matter amongst the theologians.[4] [Footnote 1: Cleary, _op. cit._, p. 64.] [Footnote 2: _Ibid._] [Footnote 3: Cleary, _op. cit._, p. 65.] [Footnote 4: _Ibid._, p. 68.] In 1274 Gregory X., in the Council of Lyons, ordained that no community, corporation, or individual should permit foreign usurers to hire houses, but that they should expel them from their territory; and the disobedient, if prelates, were to have their lands put under interdict, and, if laymen, to be visited by their ordinary with ecclesiastical censures.[1] By a further canon he ordained that the wills of usurers who did not make restitution should be invalid.[2] This brought usury definitely within the jurisdiction of the ecclesiastical courts.[3] In 1311 the Council of Vienne declared all secular legislation in favour of usury null and void, and branded as heresy the belief that usury was not sinful.[4] The precise extent and interpretation of this decree have given rise to a considerable amount of discussion,[5] which need not detain us here, because by that time the whole question of usury had come under the treatment of the great scholastic writers, whose teaching is more particularly the subject matter of the present essay. [Footnote 1: _Liber Sextus_, v. 5, 1.] [Footnote 2: _Ibid._, c. 2.] [Footnote 3: Ashley, _op. cit._, vol. i. pt. i. p. 150.] [Footnote 4: _Clementinarum_, v. 5, 1.] [Footnote 5: Cleary, _op. cit._, pp. 74-8.] Even as late as the first half of the thirteenth century there was no serious discussion of usury by the theologians. William of Paris, Alexander of Hales, and Albertus Magnus simply pronounced it sinful on account of the texts in the Old and New Testaments, which we have quoted above.[1] It was Aquinas who really put the teaching on usury upon the new foundation, which was destined to support it for so many hundred years, and which even at the present day appeals to many sympathetic and impartial inquirers. Mr. Lecky apologises for the obscurity of his account of the argument of Aquinas, but adds that the confusion is chiefly the fault of the latter;[2] but the fact that Mr. Lecky failed to grasp the meaning of the argument should not lead one to conclude that the argument itself was either confused or illogical. The fact that it for centuries remained the basis of the Catholic teaching on the subject is a sufficient proof that its inherent absurdity did not appear apparent to many students at least as gifted as Mr. Lecky. We shall quote the article of Aquinas at some length, because it was universally accepted by all the theologians of the fourteenth and fifteenth centuries, with whose opinions we are concerned in this essay. To quote later writings is simply to repeat in different words the conclusions at which Aquinas arrived.[3] [Footnote 1: Jourdain, _op. cit._, p. 15.] [Footnote 2: _Rise and Influence, of Rationalism in Europe_, vol. ii. p. 261.] [Footnote 3: Endemann, _Studien_, vol. i. p. 17.] In answer to the question 'whether it is a sin to take usury for money lent,' Aquinas replies: 'To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality, which is contrary to justice. 'In order to make this evident, we must observe that there are certain things the use of which consists in their consumption; thus we consume wine when we use it for drink, and we consume wheat when we use it for food. Wherefore in such-like things the use of the thing must not be reckoned apart from the thing itself, and whoever is granted the use of the thing is granted the thing itself; and for this reason to lend things of this kind is to transfer the ownership. Accordingly, if a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice. In like manner he commits an injustice who lends wine or wheat, and asks for double payment, viz. one, the return of the thing in equal measure, the other, the price of the use, which is called usury. 'On the other hand, there are other things the use of which does not consist in their consumption; thus to use a house is to dwell in it, not to destroy it. Wherefore in such things both may be granted; for instance, one man may hand over to another the ownership of his house, while reserving to himself the use of it for a time, or, _vice versa_, he may grant the use of a house while retaining the ownership. For this reason a man may lawfully make a charge for the use of his house, and, besides this, revendicate the house from the person to whom he has granted its use, as happens in renting and letting a house. 'But money, according to the philosopher,[1] was invented chiefly for the purpose of exchange; and consequently the proper and principal use of money is its consumption or alienation, whereby it is sunk in exchange. Hence it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury; and, just as a man is bound to restore other ill-gotten goods, so he is bound to restore the money which he has taken in usury.'[2] [Footnote 1: _Eth._ v. _Pol_. 1.] [Footnote 2: II. ii. 78, 1.] The essential thing to notice in this explanation is that the contract of _mutuum_ is shown to be a sale. The distinction between things which are consumed in use (_res fungibiles_), and which are not consumed in use (_res non fungibiles_) was familiar to the civil lawyers; but what they had never perceived was precisely what Aquinas perceived, namely, that the loan of a fungible thing was in fact not a loan at all, but a sale, for the simple reason that the ownership in the thing passed. Once the transaction had been shown to be a sale, the principle of justice to be applied to it became obvious. As we have seen above, in treating of sales, the essential basis of justice in exchange was the observance of _aequalitas_ between buyer and seller--in other words, the fixing of a just price. The contract of _mutuum_, however, was nothing else than a sale of fungibles, and therefore the just price in such a contract was the return of fungibles of the same value as those lent. If the particular fungible sold happened to be money, the estimation of the just price was a simple matter--it was the return of an amount of money of equal value. As money happened to be the universal measure of value, this simply meant the return of the same amount of money. Those who maintained that something additional might be claimed for the use of the money lost sight of the fact that the money was incapable of being used apart from its being consumed.[1] To ask for payment for the sale of a thing which not only did not exist, but which was quite incapable of existence, was clearly to ask for something for nothing--which obviously offended against the first principles of commutative justice. 'He that is not bound to lend,' says Aquinas in another part of the same article, 'may accept repayment for what he has done, but he must not exact more. Now he is repaid according to equality of justice if he is repaid as much as he lent, wherefore, if he exacts more for the usufruct of a thing which has no other use but the consumption of its substance, he exacts a price of something non-existent, and so his exaction is unjust.'[2] And in the next article the principle that _mutuum_ is a sale appears equally clearly: 'Money cannot be sold for a greater sum than the amount lent, which has to be paid back.'[3] [Footnote 1: Aquinas did not lose sight of the fact that money might, in certain cases, be used apart from being consumed--for instance, when it was not used as a means of exchange, but as an ornament. He gives the example of money being sewn up and sealed in a bag to prevent its being spent, and in this condition lent for any purpose. In this case, of course, the transaction would not be a _mutuum_, but a _locatio et conductio_, and therefore a price could be charged for the use of the money (_Quaestiones Disputatae de Malo_, Q. xiii. art. iv. ad. 15, quoted in Cronin's _Ethics_, vol. ii. p. 332).] [Footnote 2: II. ii. 78, 1, ad. 5.] [Footnote 3: II. ii. 78, 2, ad. 4. Biel distinguishes three kinds of exchange: of goods for goods, or barter; of goods for money, or sale; and of money for money; and adds, 'In his contractibus ... generaliter justitia in hoc consistit quod fiant sine fraude, et servetur aequalitas substantiae, qualitatis, quantitatis in commutatis (_Op. cit._, IV. xv. 1). Buridan says that usury is contrary to natural law 'ex conditione justitiae quae in aequalitate damni et lucri consistit; quoniam injustum est pro re semel commutata pluries pretium recipere' (In _Lib. Pol._, iv. 6).] The difficulty which moderns find in understanding this teaching, is that it is said to be based on the sterility of money. A moment's thought, however, will convince us that money is in fact sterile until labour has been applied to it. In this sense money differs in its essence from a cow or a tree. A cow will produce calves, or a tree will produce fruit without the application of any exertion by its owner; but, whatever profit is derived from money, is derived from the use to which it is put by the person who owns it. This is all that the scholastics meant by the sterility of money. They never thought of denying that money, when properly used, was capable of bringing its employer a profit; but they emphatically asserted that the profit was due to the labour, and not to the money. Antoninus of Florence clearly realised this: 'Money is not profitable of itself alone, nor can it multiply itself, but it may become profitable through its employment by merchants';[1] and Bernardine of Sienna says: 'Money has not simply the character of money, but it has beyond this a productive character, which we commonly call capital.'[2] 'What is money,' says Brants, 'if it is not a means of exchange, of which the employment and preservation will give a profit, if he who possesses it is prudent, active, and intelligent? If this money is well employed, it will become a capital, and one may derive a profit from it; but this profit arises from the activity of him who uses it, and consequently this profit belongs to him--it is the fruit, the remuneration of his labour.... Did they (the scholastics) say that it was impossible to draw a profit from a sum of money? No; they admitted fully that one might _de pecunia lucrari_; but this _lucrum_ does not come from the _pecunia_, but from the application of labour to the sum.'[3] [Footnote 1: Quoted in Brants, _op. cit._, p. 134.] [Footnote 2: _Ibid._] [Footnote 3: Brants, _op. cit._, pp. 133-5; Nider, _De Cont. Merc._ iii. 15.] Therefore, if the borrower did not derive any profit from the loan, the sum lent had in fact been sterile, and obviously the just price of the loan was the return of the amount lent; if, on the contrary, the borrower had made a profit from it, it was the reward of his labour, and not the fruit of the loan itself. To repay more than the sum lent would therefore be to make a payment to one person for the labour of another.[1] The exaction of usury was therefore the exploitation of another man's exertion.[2] [Footnote 1: Gerson, _De Cont._, iv. 15.] [Footnote 2: Neumann, when he says that 'it was sinful to recompense the use of capital belonging to another' (_Geschichte des Wuchers in Deutschland_, p. 25), seems to miss the whole point of the discussion. The teaching of the canonists on rents and partnership shows clearly that the owner of capital might draw a profit from another's labour, and the central point of the usury teaching was that money which has been lent, and employed so as to produce a profit by the borrower, belongs not 'to another,' but to the very man who employed it, namely, the borrower.] It is interesting to notice how closely the rules applying in the case of sales were applied to usury. The raising of the price of a loan on account of some special benefit derived from it by the borrower is precisely analogous to raising the sale price of an object because it is of some special individual utility to the buyer. On the other hand, as we shall see further down, any special damage suffered by the lender was a sufficient reason for exacting something over and above the amount lent; this was precisely the rule that applied in the case of sales, when the seller suffered any special damage from parting with the object sold. Thus the analogy between sales and loans was complete at every point. In both, equality of sacrifice was the test of justice. Nor could it be suggested that the delay in the repayment of the loan was a reason for increasing the amount to be repaid, because this really amounted to a sale of time, which, of its nature, could not be owned.[1] [Footnote 1: Rambaud, _op. cit._, p. 63; Aquinas(?), _De Usuris_, i. 4.] The scholastic teaching, then, on the subject was quite plain and unambiguous. Usury, or the payment of a price for the use of a sum lent in addition to the repayment of the sum itself, was in all cases prohibited. The fact that the payment demanded was moderate was irrelevant; there could be no question of the reasonableness of the amount of an essentially unjust payment.[1] Nor was the payment of usury rendered just because the loan was for a productive purpose--in other words, a commercial loan. Certain writers have maintained that in this case usury was tolerated;[2] but they can easily be refuted. As we have seen above, _mutuum_ was essentially a sale, and, therefore, no additional price could be charged because of some special individual advantage enjoyed by the buyer (or borrower). It was quite impossible to distinguish, according to the scholastic teaching, between taking an additional payment because the lender made a profit by using the loan wisely, and taking it because the borrower was in great distress, and therefore derived a greater advantage from the loan than a person in easier circumstances. The erroneous notion that loans for productive purposes were entitled to any special treatment was finally dispelled in 1745 by an encyclical of Benedict XIV.[3] [Footnote 1: Jourdain, _op. cit._, p. 35.] [Footnote 2: _E.g._ Périn, _Premiers Principes d'Économie politique_, p. 305; Claudio Jannet, _Capital Spéculation et Finance_, p. 83; De Metz-Noblat, _Lois économiques_, p. 293.] [Footnote 3: Rambaud, _op. cit._, p. 69.] § 5. _Extrinsic Titles_. Usury, therefore, was prohibited in all cases. Many people at the present day think that the prohibition of usury was the same thing as the prohibition of interest. There could not be a greater mistake. While usury was in all circumstances condemned, interest was in every case allowed. The justification of interest rested on precisely the same ground as the prohibition of usury, namely, the observance of the equality of commutative justice. It was unjust that a greater price should be paid for the loan of a sum of money than the amount lent; but it was no less unjust that the lender should find himself in a worse position because of his having made the loan. In other words, the consideration for the loan could not be increased because of any special benefit which it conferred on the borrower, but it could be increased on account of any special damage suffered by the lender--precisely the same rule as we have seen applied in the case of sales. The borrower must, in addition to the repayment of the loan, indemnify the lender for any damage he had suffered. The measure of the damage was the difference between the lender's condition before the loan was made and after it had been repaid--in other words, he was entitled to compensation for the difference in his condition occasioned by the transaction--_id quod interest_. Before we discuss interest properly so called, we must say a word about another analogous but not identical title of compensation, namely, the _poena conventionalis_. It was a very general practice, about the legitimacy of which the scholastics do not seem to have had any doubt, to attach to the original contract of loan an agreement that a penalty should be paid in case of default in the repayment of the loan at the stipulated time.[1] The justice of the _poena conventionalis_ was recognised by Alexander of Hales,[2] and by Duns Scotus, who gives a typical form of the stipulation as follows: 'I have need of my money for commerce, but shall lend it to you till a certain day on the condition that, if you do not repay it on that day, you shall pay me afterwards a certain sum in addition, since I shall suffer much injury through your delay.'[3] The _poena conventionalis_ must not be confused with either of the titles _damnum emergens_ or _lucrum cessans_, which we are about to discuss; it was distinguished from the former by being based upon a presumed injury, whereas the injury in _damnum emergens_ must be proved; and for the latter because the damage must be presumed to have occurred after the expiration of the loan period, whereas in _lucrum cessans_ the damage was presumed to have occurred during the currency of the loan period. The important thing to remember is that these titles were really distinct.[4] The essentials of a _poena conventionalis_ were, stipulation from the first day of the loan, presumption of damage, and attachment to a loan which was itself gratuitous.[5] The _Summa Astesana_ clearly maintained the distinction between the two titles of compensation,[6] as also did the _Summa Angelica_.[7] [Footnote 1: Ashley, _op. cit._, vol. i. pt. i. p. 399.] [Footnote 2: Biel, _op. cit._, iv. 15, 11.] [Footnote 3: Cleary, _op. cit._, p. 93.] [Footnote 4: _Ibid._, p. 95.] [Footnote 5: Cleary, _op. cit._, p. 94.] [Footnote 6: Endemann, _Studien_, vol. i. p. 20.] [Footnote 7: ccxl.] The first thing to be noted on passing from the _poena conventionalis_ to interest proper is that the latter ground of compensation was generally divided into two kinds, _damnum emergens_ and _lucrum cessans_. The former included all cases where the lender had incurred an actual loss by reason of his having made the loan; whereas the latter included all cases where the lender, by parting with his money, had lost the opportunity of making a profit. This distinction was made at least as early as the middle of the thirteenth century, and was always adopted by later writers.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 399.] The title _damnum emergens_ never presented any serious difficulty. It was recognised by Albertus Magnus,[1] and laid down so clearly by Aquinas that it was not afterwards questioned: 'A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money, but to avoid a loss. It may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained.'[2] The usual example given to illustrate how _damnum emergens_ might arise, was the case of the lender being obliged, on account of the failure of the borrower, to borrow money himself at usury.[3] [Footnote 1: Roscher, _Geschichte_, p. 27.] [Footnote 2: II. ii. 78, 2, ad. 1.] [Footnote 3: Ashley, _op. cit._, vol. i. pt. i. p. 400.] Closely allied to the title of _damnum emergens_ was that of _lucrum cessans_. According to some writers, the latter was the only true interest. Dr. Cleary quotes some thirteenth-century documents in which a clear distinction is made between _damnum_ and _interesse_;[1] and it seems to have been the common custom in Germany at a later date to distinguish between _interesse_ and _schaden_.[2] Although the division between these two titles was very indefinite, they did not meet recognition with equal readiness; the title _damnum emergens_ was universally admitted by all authorities; while that of _lucrum cessans_ was but gradually admitted, and hedged round with many limitations.[3] [Footnote 1: _Op. cit._, p. 95.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 401.] [Footnote 3: Cleary, _op. cit._, p. 98; Endemann, _Studien_, vol. ii. p. 279; Bartolus and Baldus said that _damnum emergens_ and _lucrum cessans_ were divided by a very narrow line, and that it was often difficult to distinguish between them. They suggested that the terms _interesse proximum_ and _interesse remotum_ would be more satisfactory, but they were not followed by other writers (Endemann, _Studien_, vol. ii, pp. 269-70).] The first clear recognition of the title _lucrum cessans_ occurs in a letter from Alexander III., written in 1176, and addressed to the Archbishop of Genoa: 'You tell us that it often happens in your city that people buy pepper and cinnamon and other wares, at the time worth not more than five pounds, promising those from whom they received them six pounds at an appointed time. Though contracts of this kind and under such a form cannot strictly be called usurious, yet, nevertheless, the vendors incur guilt, unless they are really doubtful whether the wares might be worth more or less at the time of payment. Your citizens will do well for their own salvation to cease from such contracts.'[1] As Dr. Cleary points out, the trader is held by this decision to be entitled to a recompense on account of a probable loss of profit, and the decision consequently amounts to a recognition of the title _lucrum cessans_.[2] The title is also recognised by Scotus and Hostiensis.[3] [Footnote 1: _Decr. Greg._ v. 5, 6.] [Footnote 2: _Op. cit._, p. 67.] [Footnote 3: _Ibid._, p. 99.] The attitude of Aquinas to the admission of _lucrum cessans_ is obscure. In the article on usury he expressly states that 'the lender cannot enter an agreement for compensation through the fact that he makes no profit out of his money, because he must not sell that which he has not yet, and may be prevented in many ways from having.'[1] Two comments must be made on this passage; first, that it only refers to making a stipulation in advance for compensation for profit lost, and does not condemn the actual payment of compensation;[2] second, that the point is made that the probability of gaining a profit on money is so problematical as to make it unsaleable. As Ashley points out, the latter consideration was peculiarly important at the time when the _Summa_ was composed; and, when in the course of the following two centuries the opportunities for reasonably safe and profitable business investments increased, the great theologians conceived that they were following the real thought of Aquinas by giving to this explanation a pure _contemporanea expositio_. The argument in favour of this construction is strengthened by a reference to the article of the _Summa_ dealing with restitution,[3] where it is pointed out that a man may suffer in two ways--first, by being deprived of what he actually has, and, second, by being prevented from obtaining what he was on his way to obtain. In the former case an equivalent must always be restored, but in the latter it is not necessary to make good an equivalent, 'because to have a thing virtually is less than to have it actually, and to be on the way to obtain a thing is to have it merely virtually or potentially, and so, were he to be indemnified by receiving the thing actually, he would be paid, not the exact value taken from him, but more, and this is not necessary for salvation. However, he is bound to make some compensation according to the condition of persons and things.' Later in the same article we are told that 'he that has money has the profit not actually, but only virtually; and it may be hindered in many ways.'[4] It seems quite clear from these passages that Aquinas admitted the right to compensation for a profit which the lender was hindered from making on account of the loan; but that, in the circumstances of the time, the probability of making such a profit was so remote that it could not be made the basis of pecuniary compensation. The probability of there being a _lucrum cessans_ was thought small, but the justice of its reward, if it did in fact exist, was admitted. [Footnote 1: II. ii. 78, 2, ad. 1.] [Footnote 2: Rambaud, _op. cit._, p. 67.] [Footnote 3: II. ii. 62, 4.] [Footnote 4: _Ibid._, ad. 1 and 2.] This interpretation steadily gained ground amongst succeeding writers; so that, in spite of some lingering opposition, the justice of the title _lucrum cessans_ was practically universally admitted by the theologians of the fifteenth century.[1] [Footnote 1: Ashley, _op. cit._, p. 99. _Lucrum cessans_ was defined by Navarrus as 'amissio facta a creditore per pecuniam sibi non redditam' (Endemann, _Studien_, vol. ii. p. 279).] Of course the burden of proving that an opportunity for profitable investment had been really lost was on the lender, but this onus was sufficiently discharged if the probability of such a loss were established. In the fifteenth century, with the expansion of commerce, it came to be generally recognised that such a probability could be presumed in the case of the merchant or trader.[1] The final condition of this development of the teaching on _lucrum cessans_ is thus stated by Ashley:[2] 'Any merchant, or indeed any person in a trading centre where there were opportunities of business investment (outside money-lending itself) could, with a perfectly clear conscience, and without any fear of molestation, contract to receive periodical interest from the person to whom he lent money; _provided only_ that he first lent it to him gratuitously, for a period that might be made very short, so that technically the payment would not be reward for the use, but compensation for the non-return of the money.' At a later period than that of which we are treating in the present essay the short gratuitous period could be dispensed with, but until the end of the fifteenth century it seems to have been considered essential.[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 402.] [Footnote 2: _Ibid._] [Footnote 3: Ashley, _op. cit._ vol. i. pt. ii. p. 402; Endemann, _Studien_, vol. ii. pp. 253-4; Cleary, _op. cit._, p. 100.] Of course the amount paid in respect of _lucrum cessans_ must be reasonable in regard to the loss of opportunity actually experienced; 'Lenders,' says Buridan, 'must not take by way of _lucrum cessans_ more than they would have actually made by commerce or in exchange';[1] and Ambrosius de Vignate explains that compensation must only be made for 'the time and just _interesse_ of the lost gain, which must be certain and proximate.'[2] [Footnote 1: _Eth._, iv. 6.] [Footnote 2: _De Usuris_, c. 10.] There was another title on account of which more than the amount of the loan could be recovered, namely, _periculum sortis_. In one sense it was a contradiction in terms to speak of the element of risk in connection with usury, because from its very definition usury was gain without risk as opposed to profit from a trading partnership, which, as we shall see presently, consisted of gain coupled with the risk of loss. It could not be lost sight of, however, that in fact there might be a risk of the loan not being repaid through the insolvency of the borrower, or some other cause, and the question arose whether the lender could justly claim any compensation for the undertaking of this risk. 'Regarded as an extrinsic title, risk of losing the principal is connected with the contract of _mutuum_, and entitles the lender to some compensation for running the risk of losing his capital in order to oblige a possibly insolvent debtor. The greater the danger of insolvency, the greater naturally would be the charge. The contract was indifferent to the object of the loan; it mattered not whether it was intended for commerce or consumption; it was no less indifferent to profit on the part of the borrower; it took account simply of the latter's ability to pay, and made its charge accordingly. It resembled consequently the contracts made by insurance companies, wherein there is a readiness to risk the capital sum for a certain rate of payment; the only difference was that the probabilities charged for were not so much the likelihood of having to pay, as the likelihood of not receiving back.'[1] [Footnote 1: Cleary, _op. cit._, p. 115.] We have referred above, when dealing with the legitimacy of commercial profits, to the difficulty which was felt in admitting the justice of compensation for risk, on account of the Gregorian Decretal on the subject. The same decree gave rise to the same difficulty in connection with the justification of a recompense for _periculum sortis_. There was a serious dispute about the actual wording of the decree, and even those who agreed as to its wording differed as to its interpretation.[1] The justice of the title was, however, admitted by Scotus, who said that it was lawful to stipulate for recompense when both the principal and surplus were in danger of being lost[2]; by Carletus;[3] and by Nider.[4] The question, however, was still hotly disputed at the end of the fifteenth century, and was finally settled in favour of the admission of the title as late as 1645.[5] [Footnote 1: _Ibid._] [Footnote 2: Cleary, _op. cit._, p. 117.] [Footnote 3: _Summa Angelica Usura_, i. 38.] [Footnote 4: _De Cont. Merc._, iii. 15.] [Footnote 5: Cleary, _op. cit._, p. 117.] § 6. _Other Cases in which more than the Loan could be repaid_. We have now discussed the extrinsic titles--_poena conventionalis, damnum emergens, lucrum cessans_, and _periculum sortis_. There were other grounds also, which cannot be reduced to the classification of extrinsic titles, on which more than the amount of the loan might be justly returned to the lender. In the first place, the lender might justly receive anything that the borrower chose to pay over and above the loan, voluntarily as a token of gratitude. 'Repayment for a favour may be done in two ways,' says Aquinas. 'In one way, as a debt of justice; and to such a debt a man may be bound by a fixed contract; and its amount is measured according to the favour received. Wherefore the borrower of money, or any such thing the use of which is its consumption, is not bound to repay more than he received in loan; and consequently it is against justice if he is obliged to pay back more. In another way a man's obligation to repayment for favour received is based on a debt of friendship, and the nature of this debt depends more on the feeling with which the favour was conferred than on the question of the favour itself. This debt does not carry with it a civil obligation, involving a kind of necessity that would exclude the spontaneous nature of such a repayment.'[1] [Footnote 1: II. ii. 78, 2, ad. 2.] It was also clearly understood that it was not wrongful to borrow at usury under certain conditions. In such cases the lender might commit usury in receiving, but the borrower would not commit usury in paying an amount greater than the sum lent. It was necessary, however, in order that borrowing at usury might be justified, that the borrower should be animated by some good motive, such as the relief of his own or another's need. The whole question was settled once and for all by Aquinas: 'It is by no means lawful to induce a man to sin, yet it is lawful to make use of another's sin for a good end, since even God uses all sin for some good, since He draws some good from every evil.... Accordingly it is by no means lawful to induce a man to lend under a condition of usury; yet it is lawful to borrow for usury from a man who is ready to do so, and is a usurer by profession, provided that the borrower have a good end in view, such as the relief of his own or another's need.... He who borrows for usury does not consent to the usurer's sin, but makes use of it. Nor is it the usurer's acceptance of usury that pleases him, but his lending, which is good.'[1] [Footnote 1: II. ii. 78, 4.] We should mention here the _montes pietatis_, which occupied a prominent place among the credit-giving agencies of the later Middle Ages, although it is difficult to say whether their methods were examples of or exceptions to the doctrines forbidding usury. These institutions were formed on the model of the _montes profani_, the system of public debt resorted to by many Italian States. Starting in the middle of the twelfth century,[1] the Italian States had recourse to forced loans in order to raise reserves for extraordinary necessities, and, in order to prevent the growth of disaffection among the citizens, an annual percentage on such loans was paid. A fund raised by such means was generally called a _mons_ or heap. The propriety of the payment of this percentage was warmly contested during the fourteenth and fifteenth centuries--the Dominicans and Franciscans defending it, and the Augustinians attacking it. But its justification was not difficult. In the first place, the loans were generally, if not universally, forced, and therefore the payment of interest on them was purely voluntary. As we have seen, Aquinas was quite clear as to the lawfulness of such a voluntary payment. In the second place, the lenders were almost invariably members of the trading community, who were the very people in whose favour a recompense for _lucrum cessans_ would be allowed.[2] Laurentius de Rodulphis argued in favour of the justice of these State loans, and contended that the bondholders were entitled to sell their rights, but advised good Christians to abstain from the practice of a right about the justice of which theologians were in such disagreement[3]; and Antoninus of Florence, who was in general so strict on the subject of usury, took the same view.[4] [Footnote 1: Endemann, _Studien_, vol. i. p. 433.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 448.] [Footnote 3: _De Usuris_.] [Footnote 4: Ashley, _op. cit._, p. 449.] It was probably the example of these State loans, or _montes profani_, that suggested to the Franciscans the possibility of creating an organisation to provide credit facilities for poor borrowers, which was in many ways analogous to the modern co-operative credit banks. Prior to the middle of the fifteenth century, when this experiment was initiated, there had been various attempts by the State to provide credit facilities for the poor, but these need not detain us here, as they did not come to anything.[1] The first of the _montes pietatis_ was founded at Orvieto by the Franciscans in 1462, and after that year they spread rapidly.[2] The _montes_, although their aim was exclusively philanthropic, found themselves obliged to make a small charge to defray their working expenses, and, although one would think that this could be amply justified by the title of _damnum emergens_, it provoked a violent attack by the Dominicans. The principal antagonist of the _montes pietatis_ was Thomas da Vio, who wrote a special treatise on the subject, in which he made the point that the _montes_ charged interest from the very beginning of the loan, which was a contradiction of all the previous teaching on interest.[3] [Footnote 1: Cleary, _op. cit._, p. 108; Brants, _op. cit._, p. 159.] [Footnote 2: Perugia, 1467; Viterbo, 1472; Sevona, 1472; Assisi, 1485; Mantua, 1486; Cesana and Parma, 1488; Interamna and Lucca, 1489; Verona, 1490; Padua, 1491, etc. (Endemann, _Studien_, vol. i. p. 463).] [Footnote 3: _De Monte Pietatis_.] The general feeling of the Church, however, was in favour of the _montes_. It was felt that, if the poor must borrow, it was better that they should borrow at a low rate of interest from philanthropic institutions than at an extortionate rate from usurers; several _montes_ were established under the direct protection of the Popes;[1] and finally, in 1515, the Lateran Council gave an authoritative judgment in favour of the _montes_. This decree contains an excellent definition of usury as it had come to be accepted at that date: 'Usury is when gain is sought to be acquired from the use of a thing, not fruitful in itself, without labour, expense, or risk on the part of the lender.'[2] [Footnote 1: Cleary, _op. cit._, p. 111.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 451.] It was generally admitted by the theologians that the taking of usury might be permitted by the civil authorities, although it was insisted that acting in accordance with this permission did not absolve the conscience of the usurer. Albertus Magnus conceded that 'although usury is contrary to the perfection of Christian laws, it is at least not contrary to civil interests';[1] and Aquinas also justified the toleration of usury by the State: 'Human laws leave certain things unpunished, on account of the condition of those who are imperfect, and who would be deprived of many advantages if all sins were strictly forbidden and punishments appointed for them. Wherefore human law has permitted usury, not that it looks upon usury as harmonising with justice, but lest the advantage of many should be hindered.'[2] Although this opinion was controverted by Ægidius Romanus,[3] it was generally accepted by later writers. Thus Gerson says that 'the civil law, when it tolerates usury in some cases, must not be said to be always contrary to the law of God or the Church. The civil legislator, acting in the manner of a wise doctor, tolerates lesser evils that greater ones may be avoided. It is obviously less of an evil that slight usury should be permitted for the relief of want, than that men should be driven by their want to rob or steal, or to sell their goods at an unfairly low price.'[4] Buridan explains that the attitude of the State towards usury must never be more than one of toleration; it must not actively approve of usury, but it may tacitly refuse to punish it.[5] [Footnote 1: Rambaud, _op. cit._, p. 65; Espinas, _op. cit._, p. 103.] [Footnote 2: II. ii. 78, 1, ad. 3.] [Footnote 3: _De Reg. Prin._, ii. 3, 11.] [Footnote 4: _De Cont._, ii. 17.] [Footnote 5: _Quaest. super. Lib. Eth._, iv. 6.] § 7. _The Justice of Unearned Income_. Many modern socialists--'Christian' and otherwise--have asserted that the teaching of the Church on usury was a pronouncement in favour of the unproductivity of capital.[1] Thus Rudolf Meyer, one of the most distinguished of 'Christian socialists,' has argued that if one recognises the productivity of land or stock, one must also recognise the productivity of money, and that therefore the Church, in denying the productivity of the latter, would be logically driven to deny the productivity of the former.[2] Anton Menger expresses the same opinion: 'There is not the least reason for attacking from the moral and religious standpoints loans at interest and usury more than any other form of unearned income. If one questions the legitimacy of loans at interest, one must equally condemn as inadmissible the other forms of profit from capital and lands, and particularly the feudal institutions of the Middle Ages.... It would have been but a logical consequence for the Church to have condemned all forms of unearned revenue.'[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 427.] [Footnote 2: _Der Kapitalismus fin de siècle_, p. 29.] [Footnote 3: _Das Recht auf den Arbeiterstrag_. See the Abbé Hohoff in _Démocratie Chrétienne_, Sept. 1898, p. 284.] No such conclusion, however, can be properly drawn from the mediæval teaching. The whole discussion on usury turned on the distinction which was drawn between things of which the use could be transferred without the ownership, and things of which the use could not be so transferred. In the former category were placed all things which could be used, either by way of enjoyment or employment for productive purposes, without being destroyed in the process; and in the latter all things of which the use or employment involved the destruction. With regard to income derived from the former, no difficulty was ever felt; a farm or a house might be let at a rent without any question, the return received being universally regarded as one of the legitimate fruits of the ownership of the thing. With regard to the latter, however, a difficulty did arise, because it was felt that a so-called loan of such goods was, when analysed, in reality a sale, and that therefore any increase which the goods produced was in reality the property, not of the lender, but of the borrower. That money was in all cases sterile was never suggested; on the contrary, it was admitted that it might produce a profit if wisely and prudently employed in industry or commerce; but it was felt that such an increase, when it took place, was the rightful property of the owner of the money. But when money was lent, the owner of this money was the borrower, and therefore, when money which was lent was employed in such a way as to produce a profit, that profit belonged to the borrower, not the lender. In this way the schoolmen were strictly logical; they fully admitted that wealth could produce wealth; but they insisted that that additional wealth should accrue to the owner of the wealth that produced it. The fact is, as Böhm-Bawerk has pointed out, that the question of the productivity of capital was never discussed by the mediæval schoolmen, for the simple reason that it was so obvious. The justice of receiving an income from an infungible thing which was temporarily lent by its owner, was discussed and supported; but the justice of the owner of such a thing receiving an income from the thing so long as it remained in his own possession was never discussed, because it was universally admitted.[1] It is perfectly correct to say that the problems which have perplexed modern writers as to the justice of receiving an unearned income from one's property never occurred to the scholastics; such problems can only arise when the institution of private property comes to be questioned; and private property was the keystone of the whole scholastic economic conception. In other words, the justice of a reward for capital was admitted because it was unquestioned. [Footnote 1: _Capital and Interest_, p. 39.] The question that caused difficulty was whether money could be considered a form of capital. At the present day, when the opportunities of industrial investment are wider than they ever were before, the principal use to which money is put is the financing of industrial enterprises; but in the Middle Ages this was not the case, precisely because the opportunities of profitable investment were so few. This is the reason why the mediæval writers did not find it necessary to discuss in detail the rights of the owner of money who used it for productive purposes. But of the justice of a profit being reaped when money was actually so employed there was no doubt at all. As we have seen, the borrower of a sum of money might reap a profit from its wise employment; there was no question about the justice of taking such a profit; and the only matter in dispute was whether that profit should belong to the borrower or the lender of the money. This dispute was decided in favour of the borrower on the ground that, according to the true nature of the contract of _mutuum_, the money was his property. It was, therefore, never doubted that even money might produce a profit for its owner. The only difference between infungible goods and money was that, in the case of the former, the use might be transferred apart from the property, whereas, in the case of the latter, it could not be so transferred. The recognition of the title _lucrum cessans_ as a ground for remuneration clearly implies the recognition of the legitimacy of the owner of money deriving a profit from its use; and the slowness of the scholastics to admit this title was precisely because of the rarity of opportunities for so employing money in the earlier Middle Ages. The nature of capital was clearly understood; but the possibility of money constituting capital arose only with the extension of commerce and the growth of profitable investments. Those scholastics who strove to abolish or to limit the recognition of _lucrum cessans_ as a ground for remuneration did not deny the productivity of capital, but simply thought the money had not at that time acquired the characteristics of capital.[1] [Footnote 1: See Ashley, _op. cit._, vol. i. pt. ii. pp. 434-9.] If there were any doubt about the fact that the scholastics recognised the legitimacy of unearned income, it would be dispelled by an understanding of their teaching on rents and partnership, in the former of which they distinctly acknowledged the right to draw an unearned income from one's land, and in the latter of which they acknowledged the same right in regard to one's money.[1] [Footnote 1: On this discussion see Ashley, _Economic History_, vol. i. pt. ii. pp. 427 _et seq._; Rambaud, _Histoire_, pp. 57 _et seq._; Funk, _Zins und Wucher_; Arnold, _Zur Geschichte des Eigenthums_, pp. 92 _et seq._; Böhm-Bawerk, _Capital and Interest_ (Eng. trans.), pp. 1-39.] § 8. _Rent Charges_. There was never any difficulty about admitting the justice of receiving a rent from a tenant in occupation of one's lands, because land was understood to be essentially a thing of which the use could be sold apart from the ownership; and it was also recognised that the recipient of such a rent might sell his right to a third party, who could then demand the rent from the tenant. When this was admitted it was but a small step to admit the right of the owner of land to create a rent in favour of another person in consideration for some payment. The distinctions between a _census reservativus_, or a rent established when the possession of land was actually transferred to a tenant, and a _census constitutivus_, or a rent created upon property remaining in the possession of the payer, did not become the subject of discussion or difficulty until the sixteenth century.[1] The legitimacy of rent charges does not seem to have been questioned by the theologians; the best proof of this being the absence of controversy about them in a period when they were undoubtedly very common, especially in Germany.[2] Langenstein, whose opinion on the subject was followed by many later writers,[3] thought that the receipt of income from rent charges was perfectly justifiable, when the object was to secure a provision for old age, or to provide an income for persons engaged in the services of Church or State, but that it was unjustifiable if it was intended to enable nobles to live in luxurious idleness, or plebeians to desert honest toil. It is obvious that Langenstein did not regard rent charges as wrongful in themselves, but simply as being the possible occasions of wrong.[4] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 409.] [Footnote 2: Endemann, _Studien_, vol. ii. p. 104.] [Footnote 3: Endemann, _Studien_, vol. ii. p. 109.] [Footnote 4: Roscher, _Geschichte_, p. 20.] In the fifteenth century definite pronouncements on rent charges were made by the Popes. A large part of the revenue of ecclesiastical bodies consisted of rent charges, and in 1425 several persons in the diocese of Breslau refused to pay the rents they owed to their clergy on the ground that they were usurious. The question was referred to Pope Martin V., whose bull deciding the matter was generally followed by all subsequent authorities. The bull decides in favour of the lawfulness of rent charges, provided certain conditions were observed. They must be charged on fixed property ('super bonis suis, dominiis, oppidis, terris, agris, praediis, domibus et hereditatibus') and determined beforehand; they must be moderate, not exceeding seven or ten per cent.; and they must be capable of being repurchased at any moment in whole or in part, by the repayment of the same sum for which they were originally created. On the other hand, the payer of the rent must never be forced to repay the purchase money, even if the goods on which the rent was charged had perished--in other words, the contract creating the rent charge was one of sale, and not of loan. The bull recites that such conditions had been observed in contracts of this nature from time immemorial.[1] A precisely similar decree was issued by Calixtus III. in 1455.[2] [Footnote 1: _Extrav. Commun._, iii. 5, i.] [Footnote 2: _Ibid._, c. 2.] These decisions were universally followed in the fifteenth century.[1] It was always insisted that a rent could only be charged upon something of which the use could be separated from the ownership, as otherwise it would savour of usury.[2] In the sixteenth century interesting discussions arose about the possibility of creating a personal rent charge, not secured on any specific property, but such discussions did not trouble the writers of the period which we are treating. The only instance of such a contract being considered is found in a bull of Nicholas V. in 1452, permitting such personal rent charges in the kingdoms of Aragon and Sicily, but this permission was purely local, and, as the bull itself shows, was designed to meet the exigencies of a special situation.[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 410.] [Footnote 2: Biel, _op. cit._, Sent. IV. xv. 12.] [Footnote 3: Cleary, _op. cit._, p. 124.] § 9. _Partnership_. The teaching on partnership contains such a complete disproof of the contention that the mediæval teaching on usury was based on the unproductivity of capital, that certain writers have endeavoured to prove that the permission of partnership was but a subterfuge, consciously designed to justify evasions of the usury law. Further historical knowledge, however, has dispelled this misconception; and it is now certain that the contract of partnership was widely practised and tolerated long before the Church attempted to insist on the observance of its usury laws in everyday commercial life.[1] However interesting an investigation into the commercial and industrial partnerships of the Middle Ages might be, we must not attempt to pursue it here, as we have rigidly limited ourselves to a consideration of teaching. We must refer, however, to the _commenda_, which was the contract from which the later mediæval partnership (_societas_) is generally admitted to have developed, because the _commenda_ was extensively practised as early as the tenth century, and, as far as we know, never provoked any expression of disapproval from the Church. This silence amounts to a justification; and we may therefore say that, even before Aquinas devoted his attention to the subject, the Church fully approved of an institution which provided the owner of money with the means of procuring an unearned income. [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 411; Weber, _Handelsgesellschaften_, pp. 111-14.] The _commenda_ was originally a contract by which merchants who wished to engage in foreign trade, but who did not wish to travel themselves, entrusted their wares to agents or representatives. The merchant was known as the _commendator_ or _socius stans_, and the agent as the _commendatarius_ or _tractator_. The most usual arrangement for the division of the profits of the adventure was that the _commendatarius_ should receive one-fourth and the _commendator_ three-fourths. At a slightly later date contracts came to be common in which the _commendatarius_ contributed a share of capital, in which case he would receive one-fourth of the whole profit as _commendatarius_, and a proportionate share of the remainder as capitalist. This contract came to be generally known as _collegantia_ or _societas_. Contracts of this kind, though originally chiefly employed in overseas enterprise, afterwards came to be utilised in internal trade and manufacturing industry.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 412-14.] The legitimacy of the profits of the _commendator_ never seems to have caused the slightest difficulty to the canonists. In 1206 Innocent III. advised the Archbishop of Genoa that a widow's dowry should be entrusted to some merchant so that an income might be obtained by means of honest gain.[1] Aquinas expressly distinguishes between profit made from entrusting one's money to a merchant to be employed by him in trade, and profit arising from a loan, on the ground that in the former case the ownership of the money does not pass, and that therefore the person who derives the profit also risks the loan. 'He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk, and is bound to pay it all back: wherefore the lender must not exact more. On the other hand, he that entrusts his money to a merchant or craftsman so as to form a kind of society does not transfer the ownership of the money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand, as something belonging to him, part of the profits derived from his money.'[2] This dictum of Aquinas was the foundation of all the later teaching on partnership, and the importance of the element of risk was insisted on in strong terms by the later writers. According to Baldus, 'when there is no sharing of risk there is no partnership';[3] and Paul de Castro says, 'A partnership when the gain is shared, but not the loss, is not to be permitted.'[4] 'The legitimacy,' says Brants, 'of the contract of _commenda_ always rested upon the same principle; capital could not be productive except for him who worked it himself, or who caused it to be worked on his own responsibility. This latter condition was realised in _commenda_.'[5] [Footnote 1: _Greg. Decr._, iv. 19, 7.] [Footnote 2: II. ii. 78, 2, ad. 5.] [Footnote 3: Brants, _op. cit._, p. 167.] [Footnote 4: _Consilia_, ii. 55; also Ambrosius de Vignate, _De Usuris_, i. 62; Biel, _Op. cit._, IV. xv. 11.] [Footnote 5: _Op. cit._, p. 172.] Although the contract of partnership was fully recognised by the scholastics, it was not very scientifically treated, nor were the different species of the contract systematically classified. The only classification adopted was to divide contracts of partnership into two kinds--those where both parties contributed labour to a joint enterprise, and those where one party contributed labour and the other party money. The former gave no difficulty, because the justice of the remuneration of labour was admitted; but, while the latter was no less fully recognised, cases of it were subjected to careful scrutiny, because it was feared that usurious contracts might be concealed under the appearance of a partnership.[1] The question which occupied the greatest space in the treatises on the subject was the share in which the profits should be divided between the parties. The only rule which could be laid down, in the absence of an express contract, was that the parties should be remunerated in proportion to the services which they contributed--a rule the application of which must have been attended with enormous difficulties. Laurentius de Rodulphis insists that equality must be observed;[2] and Angelus de Periglis de Perusio, the first monographist on the subject, does not throw much more light on the question. The rule as stated by this last writer is that in the first place the person contributing money must be repaid a sum equal to what he put in, and the person contributing labour must be paid a sum equal to the value of his labour, and that whatever surplus remains must be divided between the two parties equally.[3] The question of the shares in which the profits should be distributed was not one, however, that frequently arose in practice, because it was the almost universal custom for the partners to make this a term of their original contract. Within fairly wide limits it was possible to arrange for the division of the profits in unequal shares--say two-thirds and one-third. The shares of gain and loss must, however, be the same; one party could not reap two-thirds of the profit and bear only one-third of the loss; but it might be contracted that, when the loss was deducted from the gain, one party might have two-thirds of the balance, and the other one-third.[4] In no case, of course, could the party contributing the money stipulate that his principal should in all cases be returned, because that was a _mutuum_. The party contributing the labour might validly contract that he should be paid for his labour in any case, but, if this was so, the contract ceased to be a _societas_ and became a _locatio operarum_, or ordinary contract of work for wages. In all cases, common participation in the gains and losses of the enterprise was an essential feature of the contract of partnership.[5] [Footnote 1: _Summa Astesana_, iii. 12.] [Footnote 2: _De Usuris_, i. 19.] [Footnote 3: _De Societatibus_, i. 130.] [Footnote 4: _De Societatibus_, i. 130.] [Footnote 5: _Ibid._] Before concluding the subject of partnership, we must make reference to the _trinus contractus_, which caused much discussion and great difficulty. As we have seen, a contract of partnership was good so long as the person contributing money did not contract that he should receive his original money back in all circumstances. A contract of insurance was equally justifiable. There was no doubt that A might enter into partnership with B; he could further insure himself with C against the loss of his capital, and with D against damage caused by fluctuations in the rate of profits. Why, then, should he not simultaneously enter into all three contracts with B? If he did so, he was still B's partner, but at the same time he was protected against the loss of his principal and a fair return upon it--in other words, he was a partner, protected against the risks of the enterprise. The legitimacy of such a contract--the _trinus contractus_, as it was called--was maintained by Carletus in the _Summa Angelica_, which was published about 1476, and by Biel.[1] Early in the sixteenth century Eck, a young professor at Ingolstadt, brought the question of the legitimacy of this contract before the University of Bologna, but no formal decision was pronounced, and, had it not been for the reaction following the Reformation, the _trinus contractus_ would probably have gained general acceptance. As it was, it was condemned by a provincial synod at Milan in 1565, and by Sixtus V. in 1585.[2] [Footnote 1: _Op. cit._, IV. xv. 11. Lecky attributed the invention of the _trinus contractus_ to the Jesuits--who were only founded in 1534 (_History of Rationalism_, vol. ii. p. 267).] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 439 _et seqq._; Cleary, _op. cit._, pp. 126 _et seqq._] We should also refer to the contract of bottomry, which consisted of a loan made to the owner--or in some cases the master--of a ship, on the security of the ship, to be repaid with interest upon the safe conclusion of a voyage. This contract could not be considered a partnership, inasmuch as the property in the money passed to the borrower; but it probably escaped condemnation as usurious on the ground that the lender shared in the risk of the enterprise. The payment of some additional sum over and above the money lent might thus be justified on the ground of _periculum sortis_. The contract, moreover, was really one of insurance for the shipowner, and contracts of insurance were clearly legitimate. In any event the legitimacy of loans on bottomry was not questioned before the sixteenth century.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 421-3; Palgrave, _Dictionary of Political Economy_, art. 'Bottomry'; Cunningham, _Growth of English Industry and Commerce_, vol i. p. 257.] § 10. _Concluding Remarks on Usury_. It is to be hoped that the above exposition of the mediæval doctrine on usury will dispel the idea that the doctrine was founded upon the injustice of unearned income. Far from the receipt of an unearned income from money or other capital being in all cases condemned, it was unanimously recognised, provided that the income accrued to the owner of the capital, and not to somebody else, and that the rate of remuneration was just. The teaching on partnership rested on the fundamental assumption that a man might trade with his money, either by using it himself, or by allowing other people to use it on his behalf. In the latter case, the person making use of the money might be either assured of being paid a fixed remuneration for his services, in which case the contract was one of _locatio operarum_, or he might be willing to let his remuneration depend upon the result of the enterprise, in which case the contract was one of _societas_. In either case the right of the owner of the money to reap a profit from the operation was unquestioned, provided only that he was willing to share the risks of loss. But if, instead of making use of his money for trading either by his own exertions or by those of his partner or agent, he chose to sell his money, he was not permitted to receive more for it than its just price--which was, in fact, the repayment of the same amount. This was what happened in the case of a _mutuum_. In that case the ownership of the money was transferred to the borrower, who was perfectly at liberty to trade with it, if he so desired, and to reap whatever gain that trade produced. The prohibition of usury, far from being proof of the injustice of an income from capital, is proof of quite the contrary, because it was designed to insure that the income from capital should belong to the owner of that capital and to no other person.[1] Although, therefore, no price could be paid for a loan, the lender must be prevented from suffering any damage from making the loan, and he might make good his loss by virtue of the implied collateral contract of indemnity, which we discussed above when treating of extrinsic titles. If the lender, through making the loan, had been prevented from making a profit in trade, he might be indemnified for that loss. All through the discussions on usury we find express recognition of the justice of the owner of money deriving an income from its employment; all that the teaching of usury was at pains to define was who the person was to whom money, which was the subject matter of a _mutuum_, belonged. It is quite impossible to comprehend how modern writers can see in the usury teaching of the scholastics a fatal discouragement to the enterprise of traders and capitalists; and it is equally impossible to understand how socialists can find in that doctrine any suggestion of support for the proposition that all unearned income is immoral and unjust. [Footnote 1: See Rambaud, _op. cit._, p. 59.] SECTION 3.--THE MACHINERY OF EXCHANGE We have already drawn attention to the fact that there was no branch of economics about which such profound ignorance ruled in the earlier Middle Ages as that of money. As we stated above, even as late as the twelfth century, the theologians were quite content to quote the ill-founded and erroneous opinions of Isidore of Seville as final on the subject. It will be remembered that we also remarked that the question of money was the first economic question to receive systematic scientific treatment from the writers of the later Middle Ages. This remarkable development of opinion on this subject is practically the work of one man, Nicholas Oresme, Bishop of Lisieux, whose treatise, _De Origine, Natura, Jure et Mutationibus Monetarum_, is the earliest example of a pure economic monograph in the modern sense. 'The scholastics,' says Roscher, 'extended their inquiries from the economic point of view further than one is generally disposed to believe; although it is true that they often did so under a singular form.... We can, however, single out Oresme as the greatest scholastic economist for two reasons: on account of the exactitude and clarity of his ideas, and because he succeeded in freeing himself from the pseudo-theological systematisation of things in general, and from the pseudo-philosophical deduction in details.'[1] [Footnote 1: Quoted in the Introduction to Wolowski's edition of Oresme's _Tractatus_ (Paris, 1864).] Even in the thirteenth century natural economy had not been replaced to any large extent by money economy. The great majority of transactions between man and man were carried on without the intervention of money payments; and the amount of coin in circulation was consequently small.[1] The question of currency was not therefore one to engage the serious attention of the writers of the time. Aquinas does not deal with money in the _Summa_, except incidentally, and his references to the subject in the _De Regimine Principum_--which occur in the chapters of that work of which the authorship is disputed--simply go to the length of approving Aristotle's opinions on money, and advising the prince to exercise moderation in the exercise of his power of coining _sive in mutando sive in diminuendo pondus_.[2] [Footnote 1: Brants, _op. cit._, p. 179; Rambaud, _op. cit._, p. 73.] [Footnote 2: _De Reg. Prin._, ii. 13.] As is often the case, the discussion of the rights and duties of the sovereign in connection with the currency only arose when it became necessary for the public to protest against abuses. Philip the Fair of France made it part of his policy to increase the revenue by tampering with the coinage, a policy which was continued by his successors, until it became an intolerable grievance to his subjects. In vain did the Pope thunder against Philip;[1] in vain did the greatest poet of the age denounce 'him that doth work With his adulterate money on the Seine.'[2] [Footnote 1: Le Blant, _Traité historique des Monnaies de France_, p. 184.] [Footnote 2: Dante, _Paradiso_, xix.] Matters continued to grow steadily worse until the middle of the fourteenth century. During the year 1348 there were no less than eleven variations in the value of money in France; in 1349 there were nine, in 1351 eighteen, in 1353 thirteen, and in 1355 eighteen again. In the course of a single year the value of the silver mark sprang from four to seventeen livres, and fell back again to four.[1] The practice of fixing the price of many necessary commodities must have aggravated the natural evil consequences of such fluctuations.[2] [Footnote 1: Wolowski's Introduction to Oresme's _Tractatus_, p. xxvii.] [Footnote 2: See Endemann, _Studien_, vol. ii. p. 34.] This grievance had the good result of fixing the attention of scholars on the money question. 'Under the stress of facts and of necessity,' says Brants, 'thinkers applied their minds to the details of the theory of money, which was the department of economics which, thanks to events, received the earliest illumination. Lawyers, bankers, money-changers, doctors of theology, and publicists of every kind, attached a thoroughly justifiable importance to the question of money. We are no doubt far from knowing all the treatises which saw the light in the fourteenth century upon this weighty question; but we know enough to affirm that the monetary doctrine was very developed and very far-seeing.'[1] Buridan analysed the different functions and utilities of money, and explained the different ways in which its value might be changed.[2] He did not, however, proceed to discuss the much more important question as to when the sovereign was entitled to make these alterations. This was reserved for Nicholas Oresme, who published his famous treatise about the year 1373. The merits of this work have excited the unanimous admiration of all who have studied it. Roscher says that it contains 'a theory of money, elaborated in the fourteenth century, which remains perfectly correct to-day, under the test of the principles applied in the nineteenth century, and that with a brevity, a precision, a clarity, and a simplicity of language which is a striking proof of the superior genius of its author.'[3] According to Brants, 'the treatise of Oresme is one of the first to be devoted _ex professo_ to an economic subject, and it expresses many ideas which are very just, more just than those which held the field for a long period after him, under the name of mercantilism, and more just than those which allowed of the reduction of money as if it were nothing more than a counter of exchange.'[4] 'Oresme's treatise on money,' says Macleod, 'may be justly said to stand at the head of modern economic literature. This treatise laid the foundations of monetary science, which are now accepted by all sound economists.'[5] 'Oresme's completely secular and naturalistic method of treating one of the most important problems of political economy,' says Espinas, 'is a signal of the approaching end of the Middle Ages and the dawn of the Renaissance.'[6] Dr. Cunningham adds his tribute of praise: 'The conceptions of national wealth and national power were ruling ideas in economic matters for several centuries, and Oresme appears to be the earliest of the economic writers by whom they were explicitly adopted as the very basis of his argument.... A large number of points of economic doctrine in regard to coinage are discussed with much judgment and clearness.'[7] Endemann alone is[8] inclined to quarrel with the pre-eminence of Oresme; but on this question, he is in a minority of one.[9] [Footnote 1: _Op. cit._, p. 186.] [Footnote 2: _Quaest. super Lib. Eth._, v. 17; _Quaest. super Lib. Pol._, i. 11.] [Footnote 3: Quoted in Wolowski, _op. cit._, and see Roscher, _Geschichte_, p. 25.] [Footnote 4: _Op. cit._, p. 190.] [Footnote 5: _History of Economics_, p. 37.] [Footnote 6: _Op. cit._, p. 110.] [Footnote 7: _Growth of English Industry and Commerce_, vol. i. p. 359.] [Footnote 8: _Grundsätze_, p. 75.] [Footnote 9: See an interesting note in Brants, _op. cit._, p. 187.] The principal question which Oresme sets out to answer, according to the first chapter of this treatise, is whether the sovereign has the right to alter the value of the money in circulation at his pleasure, and for his own benefit. He begins the discussion by going over the same ground as Aristotle in demonstrating the origin and utility of money, and then proceeds to discuss the most suitable materials which can be made to serve as money. He decides in favour of gold and silver, and shows himself an unquestioning bimetallist. He further admits the necessity of some token money of small denominations, to be composed of the baser metals. Having drawn attention to the transition from the circulation of money, the value of which is recognised solely by weight, to the circulation of that which is accepted for its imprint or superscription, the author insists that the production of such an imprinted coinage is essentially a matter for the sovereign authority in the State. Oresme now comes to the central point of his thesis. Although, he says, the prince has undoubtedly the power to manufacture and control the coinage, he is by no means the owner of it after it has passed into circulation, because money is a thing which in its essence was invented and introduced in the interests of society as a whole. Oresme then proceeds to apply this central principle to the solution of the question which he sets himself to answer, and concludes that, as money is essentially a thing which exists for the public benefit, it must not be tampered with, nor varied in value, except in cases of absolute necessity, and in the presence of an uncontroverted general utility. He bases his opposition to unnecessary monetary variation on the perfectly sound ground that such variation is productive of loss either to those who are bound to make or bound to receive fixed sums in payment of obligations. The author then goes on to analyse the various kinds of variation, which he says are five--_figurae_, _proportionis_, _appellationis_, _ponderis_, and _materiae_. Changes of form (_figurae_) are only justified when it is found that the existing form is liable to increase the damage which the coins suffer from the wear and tear of usage, or when the existing currency has been degraded by widespread illegal coining; changes _proportionis_ are only allowable when the relative value of the different metals constituting the coinage have themselves changed; simple changes of name (_appellationis_), such as calling a mark a pound, are never allowed. Changes of the weight of the coins (_ponderis_) are pronounced by Oresme to be just as gross a fraud as the arbitrary alteration of the weights or measures by which corn or wine are sold; and changes of matter (_materiae_) are only to be tolerated when the supply of the old metal has become insufficient. The debasement of the coinage by the introduction of a cheaper alloy is condemned. In conclusion, Oresme insists that no alteration of any of the above kinds can be justified at the mere injunction of the prince; it must be accomplished _per ipsam communitatem_. The prince exercises the functions of the community in the matter of coinage not as _principalis actor_, but as _ordinationis publicae executor_. It is pointed out that arbitrary changes in the value of money are really equivalent to a particularly noxious form of taxation; that they seriously disorganise commerce and impoverish many merchants; and that the bad coinage drives the good out of circulation. This last observation is of special interest in a fourteenth-century writer, as it shows that Gresham's Law, which is usually credited to a sixteenth-century English economist, was perfectly well understood in the Middle Ages.[1] [Footnote 1: The best edition of Oresme's _Tractatus_ is that by Wolowski, published at Paris in 1864, which includes both the Latin and French texts.] This brief account of the ground which Oresme covered, and the conclusions at which he arrived, will enable us to appreciate his importance. Although his clear elucidation of the principles which govern the questions of money was not powerful enough to check the financial abuses of the sovereigns of the later Middle Ages, they exercised a profound influence on the thought of the period, and were accepted by all the theologians of the fifteenth century.[2] [Footnote 2: Biel, _op. cit._, IV. xv. 11; _De Monetarum Potestate et Utilitate_, referred to in Jourdain, _op. cit._, p. 34.] CHAPTER IV CONCLUSION We have now passed in review the principal economic doctrines of the mediæval schoolmen. We do not propose to attempt here any detailed criticism of the merits or demerits of the system which we have but briefly sketched. All that we have attempted to do is to present the doctrines in such a way that the reader may be in a position to pass judgment on them. There is one aspect of the subject, however, to which we may be allowed to direct attention before concluding this essay. It is the fashion of many modern writers, especially those hostile to the Catholic Church, to represent the Middle Ages as a period when all scientific advance and economic progress were impeded, if not entirely prevented, by the action of the Church. It would be out of place to inquire into the advances which civilisation achieved in the Middle Ages, as this would lead us into an examination of the whole history of the period; but we think it well to inquire briefly how far the teaching of the Church on economic matters was calculated to interfere with material progress. This is the lowest standard by which we can judge the mediæval economic teaching, which was essentially aimed at the moral and spiritual elevation of mankind; but it is a standard which it is worth while to apply, as it is that by which the doctrines of the scholastics have been most generally condemned by modern critics. To test the mediæval economic doctrine by this, the lowest standard, it may be said that it made for the establishment and development of a rich and prosperous community. We may summarise the aim of the mediæval teaching by saying that, in the material sphere, it aimed at extended production, wise consumption, and just distribution, which are the chief ends of all economic activity. It aimed at extended production through its insistence on the importance and dignity of manual labour.[1] As we showed above, one of the principal achievements of Christianity in the social sphere was to elevate labour from a degrading to an honourable occupation. The example of Christ Himself and the Apostles must have made a deep impression on the early Christians; but no less important was the living example to be seen in the monasteries. The part played by the great religious orders in the propagation of this dignified conception cannot be exaggerated. St. Anthony had advised his imitators to busy themselves with meditation, prayer, and the labour of their hands, and had promised that the fear of God would reside in those who laboured at corporal works; and similar exhortations were to be found in the rules of Saints Macarius, Pachomius, and Basil.[2] St. Augustine and St. Jerome recommended that all religious should work for some hours each day with their hands, and a regulation to this effect was embodied in the Rule of St. Benedict.[3] The example of educated and holy men voluntarily taking upon themselves the most menial and tedious employments must have acted as an inspiration to the laity. The mere economic value of the monastic institutions themselves must have been very great; agriculture was improved owing to the assiduity and experiments of the monks;[4] the monasteries were the nurseries of all industrial and artistic progress;[5] and the example of communities which consumed but a small proportion of what they produced was a striking example to the world of the wisdom and virtue of saving.[6] Not the least of the services which Christian teaching rendered in the domain of production was its insistence upon the dominical repose.[7] [Footnote 1: See Sabatier, _L'Eglise et le Travail manuel_, and Antoine, _Cours d'Economie sociale_, p. 159.] [Footnote 2: Levasseur, _Histoire des Classes ouvrières en France_, vol. i. pp. 182-3.] [Footnote 3: _Reg. St. Ben._, c. 48.] [Footnote 4: List, _National System of Political Economy_, ch. 6.] [Footnote 5: Janssen, _History of the German People_, vol. ii. p. 2.] [Footnote 6: _Dublin Review_, N.S., vol. vi. p. 365; see Goyau, _Autour du Catholicisme sociale_, vol. ii. pp. 79-118; Gasquet, _Henry VIII. and the English Monasteries_, vol. ii. p. 495.] [Footnote 7: _Dublin Review_, vol. xxxiii. p. 305. See Goyau, _Autour du Catholicisme sociale_, vol. ii. pp. 93 _et seq._] The importance which the scholastics attached to an extended and widespread production is evidenced by their attitude towards the growth of the population. The fear of over-population does not appear to have occurred to the writers of the Middle Ages;[1] on the contrary, a rapidly increasing population was considered a great blessing for a country.[2] This attitude towards the question of population did not arise merely from the fact that Europe was very sparsely populated in the Middle Ages, as modern research has proved that the density of population was much greater than is generally supposed.[3] [Footnote 1: Brants, _op. cit._, p. 235, quoting Sinigaglia, _La Teoria Economica della Populazione in Italia_, Archivio Giuridico, Bologna, 1881.] [Footnote 2: _Catholic Encyclopædia_, art. 'Population.' Brants draws attention to the interesting fact that a germ of Malthusianism is to be found in the much-discussed _Songe du Vergier_, book ii. chaps. 297-98, and Franciscus Patricius de Senis, writing at the end of the fifteenth century, recommends emigration as the remedy against over-population (_De Institutione Reipublicae_, ix.).] [Footnote 3: Dureau de la Malle, 'Mémoire sur la Population de la France au xiv^e Siècle,' _Mémoires de l'Académie des Inscriptions et Belles-Lettres_, vol. xiv. p. 36.] The mediæval attitude towards population was founded upon the sanctity of marriage and the respect for human life. The utterances of Aquinas on the subject of matrimony show his keen appreciation of the natural social utility of marriage from the point of view of increasing the population of the world, and of securing that the new generation shall be brought up as good and valuable citizens.[1] While voluntary virginity is recommended as a virtue, it is nevertheless distinctly recognised that the precept of virginity is one which by its very nature can be practised by only a small proportion of the human race, and that it should only be practised by those who seek by detachment from earthly pleasures to regard divine things.[2] Aquinas further says that large families help to increase the power of the State, and deserve well of the commonwealth,[3] and quotes with approbation the Biblical injunction to 'increase and multiply.'[4] Ægidius Romanus demonstrates at length the advantages of large families in the interests of the family and the future of the nation.[5] [Footnote 1: _Summa Cont. Gent._, iii. 123, 136.] [Footnote 2: _Summa_, II. ii. 151 and 152.] [Footnote 3: _De Reg. Prin._, iv. 9.] [Footnote 4: Gen. i. 28.] [Footnote 5: _De Reg. Prin._, ii. 1, 6.] The growth of a healthy population was made possible by the reformation of family life, which was one of the greatest achievements of Christianity in the social sphere. In the early days of the Church the institution of the family had been reconstituted by moderating the harshness of the Roman domestic rule (_patria potestas_), by raising the moral and social position of women, and by reforming the system of testamentary and intestate successions; and the great importance which the early Church attached to the family as the basic unit of social life remained unaltered throughout the Middle Ages.[5] [Footnote 5: Troplong, _De l'Influence du Christianisme sur le Droit civil des Romains_; Cossa, _Guide_, p. 99; Devas, _Political Economy_, p. 168; Périn, _La Richesse dans les Sociétés chrétiennes_, i. 541 _et seq._; Hettinger, _Apologie du Christianisme_, v. 230 _et seq._] The Middle Ages were therefore a period when the production of wealth was looked upon as a salutary and honourable vocation. The wonderful artistic monuments of that era, which have survived the intervening centuries of decay and vandalism, are a striking testimony to the perfection of production in a civilisation in which work was considered to be but a form of prayer, and the manufacturer was prompted to be, not a drudge, but an artist. In the Middle Ages, however, as we have said before, man did not exist for the sake of production, but production for the sake of man; and wise consumption was regarded as at least as important as extended production. The high estimation in which wealth was held resulted in the elaboration of a highly developed code of regulation as to the manner in which it should be enjoyed. We do not wish to weary the reader with a repetition of that which we have already fully discussed; it is enough to call attention to the fact that the golden mean of conduct was the observance of liberality, as distinguished, on the one hand, from avarice, or a too high estimation of material goods, and, on the other hand, from prodigality, or an undue disregard for their value. Social virtue consisted in attaching to wealth its proper value. Far more important than its teaching either on production or consumption was the teaching of the mediæval Church on distribution, which it insisted must be regulated on a basis of strict justice. It is in this department of economic study that the teaching of the mediævals appears in most marked contrast to the teaching of the present day, and it is therefore in this department that the study of its doctrines is most valuable. As we said above, the modern world has become convinced by bitter experience of the impracticability of mere selfishness as the governing factor in distribution; and the economic thought of the time is concentrated upon devising some new system of society which shall be ruled by justice. On the one hand, we see socialists of various schools attempting to construct a Utopia in which each man shall be rewarded, not in accordance with his opportunities of growing rich at the expense of his fellow-man, but according to the services he performs; while, on the other hand, we find the Christian economists striving to induce a harassed and bewildered world to revert to an older and nobler social ethic. It is no part of our present purpose to estimate the relative merits of these two solutions for our admittedly diseased society. Nor is it our purpose to attempt to demonstrate how far the system of economic teaching which we have sketched in the foregoing pages is applicable at the present day. We must, however, in this connection draw attention to one important consideration, namely, that the mediæval economic teaching was expressly designed to influence the only constant element in human society at every stage of economic development. Methods of production may improve, hand may give place to machine industry, and mechanical inventions may revolutionise all our conceptions of transport and communication; but there is one element in economic activity that remains a fixed and immutable factor throughout the ages, and that element is man. The desires and the conscience of man remain the same, whatever the mechanical environment with which he is encompassed. One reason which suggests the view that the mediæval teaching is still perfectly applicable to economic life is that it was designed to operate upon the only factor of economic activity that has not changed since the Middle Ages--namely, the desires and conscience of man. It is important also to draw attention to the fact that the acceptance of the economic teaching of the mediæval theologians does not necessarily imply acceptance of their teaching on other matters. There is at the present day a growing body of thinking men in every country who are full of admiration for the ethical teaching of Christianity, but are unable or unwilling to believe in the Christian religion. The fact of such unbelief or doubt is no reason for refusing to adopt the Christian code of social justice, which is founded upon reason rather than upon revelation, and which has its roots in Greek philosophy and Roman law rather than in the Bible and the writings of the Fathers. It has been said that Christianity is the only religion which combines religion and ethics in one system of teaching; but although Christian religious and ethical teaching are combined in the teaching of the Catholic Church, they are not inseparable. Those who are willing to discuss the adoption of the Socialist ethic, which is not combined with any spiritual dogmas, should not refuse to consider the Christian ethic, which might equally be adopted without subscribing to the Christian dogma. As we said above, it is no part of our intention to estimate the relative merits of the solutions of our social evils proposed by socialists and by Catholic economists. One thing, however, we feel bound to emphasise, and that is that these two solutions are not identical. It is a favourite device of socialists, especially in Catholic countries, to contend that their programme is nothing more than a restatement of the economic ideals of the Catholic Church as exhibited in the writings of the mediæval scholastics. We hope that the foregoing pages are sufficient to demonstrate the incorrectness of this assertion. Three main principles appear more or less clearly in all modern socialistic thought: first, that private ownership of the means of production is unjustifiable; second, that all value comes from labour; and, third, that all unearned income is unjust. These three great principles may or may not be sound; but it is quite certain that not one of them was held by the mediæval theologians. In the section on property we have shown that Aquinas, following the Fathers and the tradition of the early Church, was an uncompromising advocate of private property, and that he drew no distinction between the means of production and any other kind of wealth; in the section on just price we have shown that labour was regarded by the mediævals as but a single one of the elements which entered into the determination of value; and in the section on usury we have shown that many forms of unearned income were not only tolerated, but approved by the scholastics. We do not lose sight of the fact that socialism is not a mere economic system, but a philosophy, and that it is founded on a philosophical basis which conflicts with the very foundations of Christianity. We are only concerned with it here in its character of an economic system, and all we have attempted to show is that, as an economic system, it finds no support in the teaching of the scholastic writers. We do not pretend to suggest which of these two systems is more likely to bring salvation to the modern world; we simply wish to emphasise that they are two systems, and not one. One's inability to distinguish between Christ and Barabbas should not lead one to conclude that they are really the same person. INDEX Abelard, 14. _Acts of the Apostles_, 168. communism in, 44, 46. Adam, 140. and Eve, slavery the result of their sin, 92. Administrative occupations, position in _artes possessivae_, 143. Ægidius Romanus, 98, 197, 225. Agriculture, position in _artes possessivae_, 142, 143. its encouragement recommended, 143. Albertus Magnus, 16, 82, 176, 186, 197. Albigenses, the, belief in communism, 66. Alcuin, 14. Alexander of Hales, 176, 185. Alexander III., Pope, 187. attitude to usury, 174. Alfric, see _Colloquy of Archbishop, The_. Almsgiving, as justice, not charity, 69. duty of, 80. enforcement by the State, 85. summary of mediæval teaching on, 84. the early Church on, 52. Ambition, a virtue, 79. Ambrosius de Vignate, 191, 208. Ananias, 46, 52. Ancients, loss of economic teaching of, 15. Angelus de Periglis de Perusio, 209, 210. Antoine, 87, 172, 223. Antoninus of Florence, 9, 68, 79, 110, 122, 181, 196. Ape of Aristotle, the, _see_ Albertus Magnus. Apostles, the, attitude to manual labour, 223. attitude to private property and communism, 48. attitude to usury, 168. Apostles, the, fornication expressly forbidden by, 168. teaching regarding slavery, 89. Apostoli, the, belief in communism, 66. Aquinas, _see_ Thomas Aquinas. Aragon, personal rent charges permitted in, 205. Architecture, _see_ Manufacture. Archivio Giuridico, 225. Ardant, 69. Aristotle, 14, 16, 36, 97, 98, 142, 146, 169, 215, 219. as source for Thomas Aquinas, 62. attitude of Thomas Aquinas to his opinion, 94 _et seq._ Cossa on his influence, 17. his principles maintained through Thomas Aquinas, 19. his theory of slavery opposed to that of St. Augustine, 93. influence on controversies of the schools, 17. influence on mediæval thought, 16. renewed study of, 16. Arnold, 203. _Artes pecuniativae_, 142. _Artes possessivae_, 142. encouragement recommended by Aquinas, 143. Arnobius, 45. Ashley, Sir W.H., 3, 6, 7, 18, 21, 23, 27, 29, 30, 33, 40, 76, 105, 113, 126, 134, 146, 149, 175, 185, 186, 187, 188, 190, 191, 195, 196, 197, 198, 202, 203, 205, 206, 207, 211, 212. Augustinians, the, 195. Ausmo, Nicholas de, 156. Avarice, an offence against liberality, 79. a sin towards the individual himself and the community, 78. relativity of, 75. Avarice, the necessary basis of trade, 145. _Ayenbite of Inwit, The_, 151. Baldus, 187, 208. [Greek: banousia], a sin, 77, 78. Barabbas, 231. Bartlett, Dr. V., 56, 90. Bartolus, 187. Baudrillard, 76. Beauvais, Vincent de, 7, 16. Bégards, the, belief in communism, 66. Benedict XIV., Pope, an encyclical of, 183. Benigni, 61. Bergier, 45. Bernardine of Siena, 112, 181. Biel, 99, 100, 104, 106, 107, 108, 112, 118, 121, 124, 145, 150, 156, 180, 185, 205, 208, 211, 221. Bimetallism, Oresme's support of, 219. Blanqui, 146. Bohemia, communistic teaching in, 86. Böhm-Bawerk, 174, 200, 203, 211. Bottomry, contract of, 211. Brant, Sebastian, 137. Brants, V.L.J.L., 9, 10, 13, 19, 21, 66, 101, 111, 112, 114, 121, 122, 123, 142, 159, 181, 208, 215, 216, 217, 218, 225. Breslau, refusal to pay rent in, 204. Brunetto Latini, 123. Building, _see_ Manufacture. Buridan, 70, 72, 76, 77, 78, 109, 110, 143, 180, 191, 198, 217. Cabet, 42. Caepolla, 108, 118, 120. Cajetan, 65, 79. on the _Summa_, 68. Calippe, Abbé, 49, 62. on Thomas Aquinas, 68. Calixtus III., Pope, decree regarding rent, 205. _Cambium_, 155. conditions justifying, 157. dealt with by Brants, 159. _minutum_, 157, 158. motives justifying, 157. _per litteras_, 157, 158. _siccum_, 157. the three kinds of, 157, 158. when justifiable, not a loan, 158. Campsor, the, his remuneration approved, 156. Canon law the source of knowledge of Christian economic teaching, 13. Canonist doctrine, dealt with by Sir W. Ashley, 2. Dr. Cunningham's estimate of its importance, 27. its impracticability demonstrated by Endemann, 20. value of the study of, 29. Canonists, the, 117. Capital, question of the productivity of, 198 _et seq._ Carletus, 120, 150, 193, 211. Carlyle, Dr., 44, 58, 63. Castro, Paul, 208. _Catholic Encyclopaedia, The_, definition of 'Middle Ages,' 3. on Communism, 46. on Just Price, 112, 126. on Political Economy, 30. on Population, 225. on Slavery, 90, 100. Cato, 162. Cattle-breeding, _see_ Agriculture. _Census constitutivus_, 203. _reservativus_, 203. _Centesima_, the maximum rate of interest in Borne, 161. Cesana, _montes pietatis_ at, 196. Champagny, 80. Change, see _Cambium_. Chevallier, 20. Christ, 42, 231. a working man, 137. attitude to manual labour, 223. attitude to private property and communism, 47. teaching regarding slavery, 89. Christendom, economic unity of, 11. Christian economic teaching, 13. economists, their attempts to reinstitute mediæval economics, 228. _Christian Monitor, The_, 139. Christian Exhortation, The, on the protection of the farmer, 143. Christianity, as providing an ethical basis of society, 31. attitude to manual labour, 137, 223. attitude to slavery, 88. foundations and origin of its code of social justice, 229. Christianity, influence in abolition of Roman slavery, 99 _et seq._ possibility of adopting ethics without dogmas of, 229. reformation of family life by, 226. relation of economic teaching of, to socialism, 33. social theory of, 12. Church, economic teaching of the mediæval, 12. the, attitude to commerce at end of the Middle Ages, 152. the, attitude to _monies pietatis_, 197. the, effect of economic teaching of, on material progress, 223. the, necessity for understanding economic teaching of, 32. the, principles followed by, in fixing price, 114. the, prohibition of usury not peculiar to, 160. the, socialist view of its teaching on usury, 198. the early, 230. the early teaching on usury, 167 _et seq._ Cicero, 56, 58, 162. Civil Law, Commentaries on, a source of knowledge of Christian economic teaching, 13. Civilisation, result of its advance in the thirteenth century, 15. Classical economists, recent reaction against, 29. Cleary, Dr., 35, 135, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 185, 186, 187, 188, 191, 192, 193, 196, 197, 205. Clement of Alexandria, _see_ St. Clement. of Rome, _see_ St. Clement. Clergy, the, and usury, 169. the, prohibition of trading by, 151. Coinage, _see_ Money. _Collegantia_, 207. _Colloquy of Archbishop Alfric, The_, 149. _Commenda_, the, 206. _Commendatarius_, the, 207. _Commendator_, the, 207. Common estimation, of just price not the final criterion, 134. Commerce, attitude of later fifteenth century to, 150. attitude of mediæval theologians to, 136. attitude of the Church at end of Middle Ages, 152. condemnation of, by early Christians, 145. condemnation of, by scholastics, 146. dangerous to virtue, 145, 151. definition of, 144. extension of, in thirteenth century, 15. factors making for its illegality, 151. gradual change of mediæval attitude to, 152. justification of, not based on payment for labour, 154. legitimacy dependent on methods, 146. legitimacy dependent on motives, 148. motives regarded as justifying, 153. necessity for, realised, 147. necessity of controlling its operations, 154. not dealt with by early writers, 13. position in the _artes possessivae_, 143. prohibition of speculative, 151. rules applying to, defined by Nider, 150. Communism, alleged, of early Christians, 43. not part of scholastic teaching, 66. Community of user, doctrine of, 85. no relation to modern socialistic communism, 86. Commutations, _see_ Exchange. Compensation, for failure to repay loans by date stipulated, 185. for profit hindered, 189. Competition, effect of unrestricted, 31. Comte, his definition of 'Middle Ages' followed by Dr. Ingram, 3. Conquerors, their right to enslavement of the conquered adopted by Aquinas, 96. Constantine, 43. Constantinople, fall of, regarded as end of the Middle Ages, 4. Consumption, regulation of, 32. wise, importance of, 227. wise, the aim of mediæval teaching, 223. Contract, Thomas Aquinas on, 38. _Corinthians, Epistle to the_, 48. Corpus Juris Canonici, 13, 146. Cossa, L.,5, 6, 17, 108, 220. Credit, 119. Crusades, the, influence of, 15. the, influence on trade, 146. Cunningham, Dr. W., 2, 9, 10, 11, 13, 23, 24, 26, 27, 79, 116, 122, 124, 126, 127, 128, 129, 130, 138, 139, 152, 212, 218. Currency, _see_ Money. Cyprian, 168, 170. attitude to property, 50. Damnum emergens, 185, 196. nature of, 186. universal admission of, 187. Dante, 216. _De Regimine Principum_, doubtful authorship of, 20. Delisle, 27. _Démocratie Chrétienne_, 199. Deposit, Thomas Aquinas on, 38. Desbuquois, Abbé, 36, 39, 104, 110, 116, 120. _Deuteronomy_, 163. Devas, 30, 49, 226. _Dictionary of Political Economy_, 30, 105, 112, 135, 212. _Dictionnaire de Théologie_, 45. _Didache_, the, attitude to usury, 168, 170. Diocletian rescript, regarding sales, 104. Distribution, just, the aim of mediæval teaching, 223. need for just, 31, 227. regulation of, 32. Dominicans, the, 195, 196. _Dominium eminens_ of the State, 69. Donatus, 14. _Dublin Review, The_, 43. Duns Scotus, 149, 185, 188, 192. Dureau de la Malle, 225. _Ecclesiastes_, 151. Eck, 211. 'Economic,' interpretation of, 3, 6 _et seq._ 'Economic Man,' imaginary figure conceived by classical economists, 8. _Economic Review, The_, 44. Economics, causes of lack of interest in, 14. Elvira, the Council of, decree against usury, 169. Emperor, the, temporal vicar of God, 11. _Encyclopaedia Britannica, The_, definition of 'Middle Ages,' 4. Endemann, 19, 20, 23, 27, 34, 108, 120, 124, 134, 151, 155, 157, 158, 177, 186, 187, 190, 191, 195, 196, 203, 204, 216, 218. _Ephesians, Epistle to the_, 89. Equality, of men, 94. _Esdras_, 165. Espinas, A., 8, 17, 163, 197, 218. Essenes, the, and communism, 47. Ethics, error of disregarding in economics, 29. Eve, _see_ Adam and. Exchange, regulation of, 32. justice in, 36 _et seq._ theory of, see _Cambium_. _Exodus_, 163. _Ezekiel_, 165. Fathers, the, _see_ Church, the early. Favre, 173. Feudalism, increased organisation of, in thirteenth century, 15. Fornication, expressly forbidden by the Apostles, 168. Franciscans, the, 195, 196. Franciscus Patricius de Senlis, 225. Franck, A., 20, 90, 97. Fratricelli, the, belief in communism, 66. _Fundamentum_, distinction from _titulus_, 64 _et seq._ Funk, Dr., 113, 172, 203. Galileo, 159. Gand, Henri de, 110, 149. Garden of Eden, private property in, 55. Gasquet, 224. _Genesis_, 137, 226. Genoa, the Archbishop of, 207. letter from Alexander III. to, 187. Gentile, prohibition of usury between Jew and, 164. Gentiles, prohibition of usury not imposed on converts from, 168. taking of usury from, justified, 165. Genucian Law, the, interest prohibited by, 160. Gerbert, 14. Gerdilius, 100. Gerson, 39, 71, 104, 106, 108, 112, 118, 137, 182, 197. Gide and Rist, 9. Golden Age, the, private property in, 55. Gospel, the, preached to the poor, 137. Gospels, the, on usury, 166. Goyau, G., 67, 224. Haney, L.H., 2, 5, 41, 136. Heeren, A.H.L., 146. Hettinger, 226. Hilary of Poictiers, 60. Hincmar, 14. Hiring, Thomas Aquinas on, 38. Hogan, Dr., 43, 47, 49, 137. Hohoff, Abbé, 114, 199. Hostiensis, 188. Hoyta, Henricus de, 19. Huet, 47. Hunter, W.A., 105, 161. Hunting, _see_ Agriculture. Idleness, contrasted attitudes of ancient and Christian civilisations to, 137. Income, unearned, approved by scholastics, 113. justice of, 198 _et seq._ socialist theory of its injustice not supported by scholastics, 214. recognition of, 212. Individualism, of Christianity, 12. Industry, development of, in thirteenth century, 15. Ingolstadt, 211. Ingram, Dr. J.K., 2, 3, 4, 12, 17, 18, 23, 24. Innocent III., Pope, attitude to usury, 175. in favour of unearned income, 207. Insurance, a contract of, 210. Interamna, _montes pietatis_ at, 196. _Interesse proximum_, suggested alternative term to _damnum emergens_, 187. _Interesse remotum_, suggested alternative term to _lucrum cessans_, 187. Interest, justification of, 184. Interest, laws regarding, in Rome, 160. taking of, disapproved by Greek and Roman philosophers, 161. _see_ also Usury. _Irish Ecclesiastical Record, The_, 43, 47, 49, 109, 137. _Irish Theological Quarterly, The_, 9, 68, 128, 129, 130, 132, 135. Isidore, 95. Isidore of Seville, 15. his opinions on money regarded as final, 214. Italian States, forced loans in the, 195. Ivo, 169. Janet, P.A.R., 59, 61, 89, 91, 93, 97. Jannet, Claudio, 183. Janssen, J., 28, 68, 86, 125, 138, 139, 141, 143, 150, 154, 224. Jarrett, Fr., 83, 84. _Jeremiah_, 165. Jerusalem, the Church of, social system in, 44 _et seq._ St. Paul's appeal for funds, 48. the Council of, prohibition of usury not imposed on converts by, 168. Jesuits, the, invention of _trinus contractus_ attributed to, 211. _Jewish Encyclopaedia, The_, on usury, 165. Jews, attitude to usury, 160, 165. prohibition of usury between, 164. John of Salisbury, 14. Jourdain, 5, 14, 16, 149, 176, 183, 221. _Jus abutendi_, 87. _divinum_, 173. _humanum_, 174. _naturale_, 173. Just price, a Christian conception, 104. authorities empowered to fix, 108. comparison of mediæval theory with that of classical economists, 125. difference from modern competition price, 116. elasticity of, 117. factors determining, 109 _et seq._ Just price, fixed by common estimation, 115 _et seq._ fixing of, by law, 106. in money-lending, 179. mediæval teaching on, 103. necessity for adhering to, 108. of wages, _see_ Wages. rules for guidance in fixing by law, 107. nature of, 127 _et seq._ value of canonical doctrine, 123. Justinian, rates of interest fixed by, 161. Justinian Code, 28, 172. Kelleher, Father, 129, 130, 131, 132, 133, 134. Knabenbaur, 166. Knies, 80, 114, 135. Koran, the, the taking of interest forbidden in, 166. Labour, as title to property, 65. Christian teaching on its dignity, 137. division into honourable and degrading, 141. necessity and honourableness of all forms of, 140. only one constituent in the estimation of just price, 157. relative importance of, in determining value, 113. the motives which should actuate, 153. Lactantius, 45, 56 _et seq._, 91. Langenstein, 19, 107, 111, 112, 121, 122, 124, 137, 141, 203. Larceny Act, the, 27. Lateran Council, the, judgment in favour of _montes pietatis_, 197. Councils, the, of 1139 and 1179, declaration against usurers by, 174. Laurentius de Rodulphis, 157, 195, 209. Law, natural and positive, in relation to property, 64. Le Blant, 216. Lecky, 176, 211. Leo the Great, 146. Lessius, 117, 124. Letting, Thomas Aquinas on, 38. Levasseur, 138, 139, 224. Leviticus, 163. _Liberalitas_, its opposing vices, 74. meaning of, 73. Liberality, relation to justice, 73. Lisieux, Bishop of, _see_ Oresme, Nicholas. List, 146, 224. Loan, Thomas Aquinas on, 38. Loans, analogy between sales and, 182. forced, in the Italian States, 195. the real nature of, 178. _Locatio operarum_, 210, 213. Logic, mediæval study of, 14. Loria, 149. Lucca, _montes pietatis_ at, 196. _Lucrum cessans_, 185, 186, 195, 202. recognition of, 187 _et seq._ Lyons, Council of, ordinances against usurers, 175. Macleod, 218. _Magnificentia_, duty of, 77. Maimonides, 164. Malthusianism, 225. Mansi, 169. Mantua, _montes pietatis_ at, 196. Manufacture, position in the _artes possessivae_, 142 _et seq._ Marcian Capella, 15. Marriage, attitude of Thomas Aquinas towards, 225. Marshall, 30. Martin V., Pope, his bull on rent, 204. Marx, Karl, theory of value not supported by scholastics, 113, 114. Mastrofini, his interpretation of a verse of St. Luke, 166. Maximian, rescript regarding sales, 105. Mayronis, François de, 149, 156. Mediæval, interpretation of, 3 _et seq._ Menger, Anton, 199. Merchant, the, necessity for control of, _see_ Commerce. Metz-Noblat, de, 183. Meyer, Rudolph, 198. Middle Ages, definition of the term by various authorities, 3 _et seq._ early writers of, no reference to economic questions, 13. Milan, 211. Mohammed, prohibition of usury by his followers, 160. Mohammedans, taking of interest by, forbidden, 166. Monasteries, the, their example in manual labour, 138, 223. Money, as a form of capital, 201. a vendible commodity, 158. changing, see _Cambium_. different kinds of variation of, 219 _et seq._ ignorance of early Middle Ages regarding, 214 _et seq._ invention of, 103. most suitable metals for, 219. not discussed by early mediæval writers, 14. sterility of, 180. the sovereign's power in relation to, 219. treatment of, by Isidore of Seville, 15. utility of, as treated by Aristotle, 16. variations in value of, 216 _et seq._ value of, not to be changed unnecessarily, 219. Monopolies, mediæval views on, 124. _Montes pietatis_, 194. attitude of the Church to, 197. controversy over interest charged by, 196. _Montes profani_, 195 _et seq._ Moral theology, 130. Morality, economic, in the Middle Ages, 10. More, Sir Thomas, 48. Mosheim, 44. Munificence, duty of, 77. _Mutuum_, 202, 210, 213, 214. nature of, 178, 183. risk involved in, 192. Natural rights, distinction between absolute and commensurate in slavery, 95. Navarrus, 190. Necessaries, two kinds distinguished by Thomas Aquinas, 83. Neumann, 182. New Testament, the, 176. cited in support of prohibition of usury, 174. Nice, Council of, on usury, 169, 170. Nicholas v., Pope, bull on personal rent charges, 205. Nider, 39, 110, 118, 134, 150, 181, 193. Nitti, F.S., 43, 69. Noel, Conrad, 49. Numa, as origin of 'nummi,' 15. Occupancy, as title to property, 65. Old Testament, the, 176. attitude to usury, 163, 165. cited in support of prohibition of usury, 174. Oresme, Nicholas, 143, 215, 216, 219. his influence, 221. his work on money, 214, 217 _et seq._ Origen, 45. Orvieto, first _montes pietatis_ started at, 196. Ownership, _see_ Property. Padua, _montes pietatis_ at, 196. Palgrave, 30, 105, 112, 135, 212. Parma, _montes pietatis_ at, 196. Partnership, division of remuneration, 209. scholastic teaching on, 202, 205 _et seq._ the two kinds of, 209. _Parvificentia_, a sin, 77, 78. _Patria, potestas_, 226. Pelagius, views condemned by Council, A.D. 415, 61. Pennafort, Raymond de, 27, 149. _Periculum sortis_, 191, 192, 212. Périn, 183, 226. Perugia, _montes pietatis_ at, 196. Philip the Fair, his method of increasing the revenue, 216. Philosophers, the, their condemnation of usury, 161. Pigonneau, 146. Plato, his objection to usury, 161. Plutarch, attitude to usury, 163. _Poena conventionalis_, 185. difference from interest, 186. Political economy, errors of classical school, 8. difference between mediæval and modern methods, 6. Pope, the, his denunciation of Philip the Fair, 216. the spiritual vicar of God, 10. Popes, the, and almsgiving, 69. pronouncements by, on rent, 204. their protection of _montes pietatis_, 197. Population, mediæval attitude to, 224. Poverty, as the cause of sin, 78. Prescription, as title to property, 65. Price, just, _see_ Just price. Priscian, 14. Prodigality, an offence against liberality, 79. a sin towards the individual and the community, 78. distinction from liberality, 76. Production, an honourable vocation, 226. cost of, as a factor in determining value, 111 _et seq._ extended, the aim of mediæval teaching, 223. regulation of, 32. Professions, _see_ Labour. Profit, of the campsor to be determined by just price, 158. 'Profiteer,' the, doctrine of just price a weapon against, 125. Profiteering, prohibition of, 151. Property, duties attaching to, 69. duties in respect of exchange of, 102. immovable, rule for determining value, 120. in human beings, 88. private, duties attaching to, 40. right of, 39. teaching of mediæval Church, 41 _et seq._ the foundation of mediæval economics, 40. the keystone of economic system of later theologians, 66. _Proverbs_, 165. Prutz, 146. _Psalms_, 137, 165, 171. Rabanas Mauras, 14. Rambaud, 7, 8, 13, 80, 87, 100, 114, 146, 151, 182, 183, 188, 197, 203, 213, 215. Reformation, the, 211. attacks on monastic life during, 138. Renaissance, the, 218. Rent, pronouncements on, by the Popes, 204. refusal to pay, in Breslau, 204. scholastic teaching on, 202 _et seq._ _Revue Archéologique, La_, 61. Riches, the early Church on their abuse, 53. Rickaby, 75. Risk, remuneration for, 152, 157, 191. Rist, _see_ Gide. Roman Empire, the, fall of, regarded as beginning of Middle Ages, 3. jurists, their views on slavery accepted by Thomas Aquinas, 94. _Romans, Epistle to the_, 48. Rome, condemnation of usury by the philosophers of, 162. laws regarding interest in, 160. Numa, King of, 15. policy of, enforced by clergy, 11. the attitude to manual labour in, 137. Roscher, W.G.F., 5, 13, 19, 34, 46, 48, 87, 88, 107, 108, 112, 114, 121, 125, 142, 163, 166, 172, 186, 204, 215, 217. Ryan, Dr. J.A., 49, 74, 117, 123, 135. Sabatier, 223. St. Ambrose, 49, 52, 60, 82, 171. quoted by Aquinas, 71. St. Anselm, 14. St. Anthony, advice to his followers, 223. St. Augustine, 49, 57, 60, 63, 92, 93, 97, 98, 105, 146, 154, 172, 224. theory of slavery analysed by Janet, 93. views on slavery accepted by Aquinas, 94 _et seq._ St. Barnabas, 45. St. Basil, 49, 153, 171, 224. quoted by Aquinas, 71. St. Benedict, 152. Rule of, 224. St. Clement of Alexandria, 45, 49, 54, 168, 170. St. Clement of Rome, 49, 54. St. Cyprian, 45, 50, 168, 170. St. Gregory Nazianzen, 54. St. Gregory of Nyssa, 171. St. Gregory the Great, 49. St. Hilary, 171. St. Isidore, 62. St. Jerome, 49, 145, 171, 224. St. John Chrysostom, 49, 51, 52. St. Joseph, represented as a carpenter, 139. St. Justin, 45. St. Justin Martyn, 49. St. Lucian, 45. St. Luke, 82. St. Luke, doubtful meaning of a verse in, 168. interpretation of a doubtful verse in, 168, 171. St. Macharius, 223. St. Matthew, 38, 47. St. Pachomius, 223. St. Paul, 137. attitude to private property and communism, 48. on possession, cited by St. Augustine, 60. teaching on slavery, 89. followed by Christian teachers, 90. St. Peter, 46. teaching on slavery, 89. St. Peter Damian, 83. St. Thomas, _see_ Thomas Aquinas. Sale, Roman law as applied to, 104. Thomas Aquinas on, 38. treatment by fifteenth-century writers, 18. Sales, analogy between loans and, 182. Salvador, 48. Salvian, 55. Sapphira, 46, 52. Saturnus, result of banishment from heaven, 56. Saving, an act of liberality, 72 _et seq._ Scherer, 146. Scotus, Duns, _see_ Duns. Scotus Erigenus, 14. _Semaine Sociale de France, La_, 49, 62, 68, 104, 111. Seneca, 59, 89, 90. view of usury, 163. Serfdom, 99. Sertillanges, 80. _Servus_, St. Augustine's theory of origin, 93. Sevona, _montes pietatis_ at, 196. Sicily, personal rent charges permitted in, 205. Sidgwick, Professor Henry, 29, 31. Sinigaglia, 225. Sixtus V., Pope, condemnation of _trinus contractus_, 211. Slater, Father, 109, 128, 129, 130. Slavery, analogy with property, 97. attitude of Christianity to, 88. limits of master's rights, 100. three kinds of, 99. views of Christian Church and philosophers reconciled by Aquinas, 93 _et seq._ Smith, Adam, 29. _Societas_, 206, 207, 210, 213. Socialism, as providing an ethical basis of society, 31. danger of, 32. relation of its economic teaching to Christianity, 33. Socialists, claim to authority of the early Christians, 49 _et seq._ attempts to construct Utopia, 228. their communism not the 'community of user' advocated by scholastics, 86. their interpretations of St. Augustine, 58. their main principles, 230. their philosophy at variance with Christianity, 231. their principles not derived from mediæval teaching, 230. their view of the Church's teaching on usury, 198. _Socius stans_, 207. Solon, laws of, as affecting usury, 160. _Songe du Vergier_, 225. Stagyrite, the, _see_ Aristotle. Stoic tradition, the, 58. Stoicism, inferiority to Christian teaching on slavery, 89. Stoics, the, 93. Stintzing, 20. Sudre, 47, 48. _Summa Angelica_, 186. _Astesana_, 186. _Pisana_, 156. Superabundance, relativity of, 75. 'Teaching,' interpretation of, 3, 19 _et seq._ mediæval, its relation to practice, 21. ethical nature of, 27. Temperance, in the use of goods, 70. Tertullian, 45, 49, 145, 168, 170. _Thessalonians, Epistle to the_, 137. Thirteenth century, progress made in the, 15. Thomas Aquinas, 7, 16, 17, 18, 19, 20, 36, 41, 42, 46, 52, 62 _et seq._, 67, 69, 70, 71 _et seq._, 74 _et seq._, 77, 78, 80, 81, 82, 83, 84, 85, 91, 93, 94, 95, 96, 97, 99, 101, 105, 111, 112, 114, 117, 119, 121, 131, 132, 133, 135, 136, 141, 143, 144, 146, 147, 148, 149, 150, 151, 154, 156, 162, 167, 173, 174, 176, 182, 186, 188, 189, 193, 194, 195, 197, 206, 207, 208, 215, 230. Ticinum, Synod of, decree on usury, 173. Tillage, _see_ Agriculture. Time, the sale of, 182. _Timothy_, 151. _Titulus_, distinction from _fundamentum_, 64. _Tractatus Universi Juris_, 19. Tradesman, _see_ Commerce. Trade, _see_ Commerce. Troplong, 226. _Trinus contractus_, 210, 211. Trithemius, 85, 124, 137, 149. Twelve Tables, the, maximum rate of interest fixed by, 160. _Unciarum foenus_, doubtful meaning of, 160. Usufruct, Aquinas on, 38. Usurers, _see_ Usury. Usury and the clergy, 169. a sin against justice, 175. attitude of the Apostles, 168. attitude of various religious and legal systems, 160. borrowing at, circumstances justifying, 194. broader basis of discussion after twelfth century, 173. dealt with by ecclesiastical courts, 175. condemned by Councils, 13. by philosophers, 161, 162. as a sin against charity, 168, 171. controversies over prohibition, 159. definition of, by Lateran Council, 197. doubt as to Gospel teaching on, 167. Usury, ecclesiastical legislation on, 174. inconclusive teaching of the early Church, 172. increased payment for credit regarded as, 119. injustice of, according to Aristotle, 16. in the Old Testament, 163. not suppressed by civil law, 172. patristic and episcopal utterances in favour of, 172. not permitted by civil authorities, 197 _et seq._ popular attitude to, 163. prohibition of, 133, 173, 183, 184. proof of justice of unearned income, 213. position in canonist doctrine, 33. not imposed on converts from Gentiles, 168. secular legislation in favour of, declared void, 175. teaching of the early Church, 167 _et seq._ treatment by fifteenth-century writers, 18. Value, factors determining, 129. not systematically treated till fourteenth and fifteenth centuries, 111. _See_ also Price. Vaudois, the, belief in communism, 66. Verona, _montes pietatis_ at, 196. Vienne, Council of, 175. Vio, Thomas da, 196. Virgin, the Blessed, represented spinning, 139. Virginity, recommended for the few, 225. Viterbo, _montes pietatis_ at, 196. Wages, rules determining, 120. as factor in cost of production, 111. attitude of mediæval and modern working classes towards fixing, 126 _et seq._ fixed by a public authority, 121. Wages, paucity of authority on, before sixteenth century, 121. Wallon, 90, 137, 140. Wealth, theory of, according to Aristotle, 16. Wealth, not an end in itself, 80. Weber, 206. William of Paris, 176. Wolowski, 216, 217, 221. 
32252	----	Note: Project Gutenberg also has an HTML version of this file which includes the original page images. See 32252-h.htm or 32252-h.zip: (http://www.gutenberg.org/files/32252/32252-h/32252-h.htm) or (http://www.gutenberg.org/files/32252/32252-h.zip) THE STAGES IN THE SOCIAL HISTORY OF CAPITALISM[1] by HENRI PIRENNE In the pages that follow I wish only to develop a hypothesis. Perhaps after having read them, the reader will find the evidence insufficient. I do not hesitate to recognize that the scarcity of special studies bearing upon my subject, at least for the period since the end of the Middle Ages, is of a nature to discourage more than one cautious spirit. But, on the one hand, I am convinced that every effort at synthesis, however premature it may seem, cannot fail to react usefully on investigations, provided one offers it in all frankness for what it is. And, on the other hand, the kind reception which the ideas here presented received at the International Congress of Historical Studies held at London last April, and the desire which has been expressed to me by scholars of widely differing tendencies to see them in print, have induced me to publish them. Various objections which have been expressed to me, as well as my own subsequent reflections, have caused me to revise and complete on certain points my London address. In the essential features, however, nothing has been changed. A word first of all to indicate clearly the point of view which characterizes the study. I shall not enter into the question of the formation of capital itself, that is, of the sum total of the goods employed by their possessor to produce more goods at a profit. It is the capitalist alone, the holder of capital, who will hold our attention. My purpose is simply to characterize, for the various epochs of economic history, the nature of this capitalist and to search for his origin. I have observed, in surveying this history from the beginning of the Middle Ages to our own times, a very interesting phenomenon to which, so it seems to me, attention has not yet been sufficiently called. I believe that, for each period into which our economic history may be divided, there is a distinct and separate class of capitalists. In other words, the group of capitalists of a given epoch does not spring from the capitalist group of the preceding epoch. At every change in economic organization we find a breach of continuity. It is as if the capitalists who have up to that time been active, recognize that they are incapable of adapting, themselves to conditions which are evoked by needs hitherto unknown and which call for methods hitherto unemployed. They withdraw from the struggle and become an aristocracy, which if it again plays a part in the course of affairs, does so in a passive manner only, assuming the rôle of silent partners. In their place arise new men, courageous and enterprising, who boldly permit themselves to be driven by the wind actually blowing and who know how to trim their sails to take advantage of it, until the day comes when, its direction changing and disconcerting their manoeuvres, they in their turn pause and are distanced by new craft having fresh forces and new directions. In short, the permanence throughout the centuries of a capitalist class, the result of a continuous development and changing itself to suit changing circumstances, is not to be affirmed. On the contrary, there are as many classes of capitalists as there are epochs in economic history. That history does not present itself to the eye of the observer under the guise of an inclined plane; it resembles rather a staircase, every step of which rises abruptly above that which precedes it. We do not find ourselves in the presence of a gentle and regular ascent, but of a series of lifts. In order to establish the validity of these generalizations it is of course needful to control them by the observation of facts, and the longer the period of time covered the more convincing will the observations be. The economic history of antiquity is still too little known, and its relations to the ages which follow have escaped us too completely, for us to take our point of departure there; but the beginning of the Middle Ages gives us access to a body of material sufficient for our purpose. But first of all, it is needful to meet a serious objection. If it is in fact true, as seems to be usually conceded since the appearance of Bücher's brilliant _Entstehung der Volkswirtschaft_[2]--to say nothing here of the thesis since formulated with such extreme radicalism by W. Sombart[3]--that the economic organisation of the Middle Ages has no aspect to which one can rightly apply the term capitalistic, then our thesis is limited wholly to modern times and there can be no thought of introducing into the discussion the centuries preceding the Renaissance. But whatever may be the favor which it still enjoys, the theory which refuses to perceive in the medieval urban economy the least trace of capitalism has found in recent times ever increasing opposition. I will not even enumerate here the studies which seem to me to have in an incontrovertible manner established the fact that all the essential features of capitalism--individual enterprise, advances on credit, commercial profits, speculation, etc.--are to be found from the twelfth century on, in the city republics of Italy--Venice,[4] Genoa,[5] or Florence.[6] I shall not ask what one can call such a navigator as Romano Mairano (1152-1201), if, in spite of the hundreds of thousands of francs he employed in business, the fifty per cent. profits he realized on his operations in coasting trade, and his final failure, one persists in refusing to him the name of capitalist. I shall pass over the disproof of the alleged ignorance of the medieval merchants. I shall say nothing of the astonishing errors committed in the calculations, so confidently offered to us as furnishing mathematical proof of the naïveté of historians who can believe the commerce of the thirteenth and fourteenth centuries to have been anything more than that of simple peddlers, a sort of artisans incapable of rising even to the idea of profit, and having no views beyond the day's livelihood.[7] Important as all this may be, the weak point in the theory which I am here opposing seems to me to lie especially in a question of method. Bücher and his partizans, in my opinion, have, without sufficient care, used for their picture of the city economy of the Middle Ages the characteristics of the German towns and more particularly the German towns of the fourteenth and fifteenth centuries. Now the great majority of the German towns of that period were far from having attained the degree of development which had been reached by the great communes of northern Italy, of Tuscany, or of the Low Countries. Instead of presenting the classical type of urban economy, they are merely examples of it incompletely developed; they present only certain manifestations; they lack others, and particularly those which belong to the domain of capitalism. Therefore in presenting as true of all the cities of the Middle Ages a theory which rests only on the observation of certain of them, and those the least advanced, one is necessarily doing violence to reality. Bücher's description of _Stadtwirtschaft_ remains a masterpiece of penetration and economic understanding. But it is too restricted. It does not take account of certain elements of the problem, because these elements were not encountered in the narrow circle which the research covered. One may be confident that if, instead of proceeding from the analysis of such towns as Frankfort, this study had considered Florence, Genoa, and Venice, or even Ghent, Bruges, Ypres, Douai, or Tournai, the picture which it furnished us would have been very different. Instead of refusing to see capitalism of any kind in the economic life of the bourgeoisie, the author would have recognized, on the contrary, unmistakable evidences of capitalism. I shall later have occasion to return to this very essential question. But it was indispensable to indicate here the position which I shall take in regard to it. Of course I do not at all intend to reject _en bloc_ the ideas generally agreed upon concerning the urban economy of the Middle Ages. On the contrary, I believe them to be entirely accurate in their essential elements, and I am persuaded that, in a very large number of cases, I will even say, if you like, in the majority of cases, they provide us with a theory which is completely satisfactory. I am very far from maintaining that capitalism exercised a preponderant influence on the character of economic organization from the twelfth to the fifteenth centuries. I believe that, though it is not right to call this organization "acapitalistic", it is on the other hand correct to consider it "anticapitalistic". But to affirm this is to affirm the existence of capital. That organization recognized the existence of capital since it tried to defend itself against it, since, from the end of the thirteenth century onward, it took more and more measures to escape from its abuses. It is incontestable that, from this period on, it succeeded by legal force in diminishing the rôle which capitalism had played up to that time. In fact it is certain, and we shall have occasion to observe it, that the power of capital was much greater during the first part of the urban period of the Middle Ages than during the second. But even in the course of the latter period, if municipal legislation seems more or less completely to have shut it out from local markets, capital succeeded in preserving and in dominating a very considerable portion of economic activity. It is capital which rules in inter-local commerce, which determines the forms of credit, and which, fastening itself on all the industries which produce not for the city market but for exportation, hinders them from being controlled, as the others are, by the minute regulations which in innumerable ways cramp the activity of the craftsmen.[8] Let us recognize, then, that capitalism is much older than we have ordinarily thought it. No doubt its operation in modern times has been much more engrossing than in the Middle Ages. But that is only a difference of quantity, not a difference of quality, a simple difference of intensity not a difference of nature. Therefore, we are justified in setting the question we set at the beginning. We can, without fear of pursuing a vain shadow, endeavor to discern what throughout history have been the successive stages in the social evolution of capitalism. Of the period which preceded the formation of towns, that is, of the period preceding the middle of the eleventh century, we know too little to permit ourselves to tarry there. What may still have survived in Italy and in Gaul of the economic system of the Romans has disappeared before the beginning of the eighth century. Civilization has become strictly agricultural and the domain system has impressed its form upon it. The land, concentrated in large holdings in the hands of a powerful landed aristocracy, barely produces what is necessary for the proprietor and his _familia_. Its harvests do not form material for commerce. If during years of exceptional abundance the surplus is transported to districts where scarcity prevails, that is all. In addition certain commodities of ordinary quick consumption, and which nature has distributed unequally over the soil, such as wine or salt, sustain a sort of traffic. Finally, but more rarely, products manufactured by the rural industry of countries abounding in raw materials, such as, to cite only one, the friezes woven by the peasants of Flanders, maintain a feeble exportation. Of the condition of the _negociatores_ who served as the instruments of these exchanges, we know almost nothing. Many of them were unquestionably merchants of occasion, men without a country, ready to seize on any means of existence that came their way. Pursuers of adventure were frequent among these roving creatures, half traders, half pirates, not unlike the Arab merchants who even to our day have searched for and frequently have found fortunes amid the negro populations of Africa. At least, to read the history of that Samo who at the beginning of the eighth century, arriving at the head of a band of adventuring merchants among the Wends of the Elbe, ended by becoming their king, makes one think involuntarily of certain of those beys or sheiks encountered by voyagers to the Congo or the Katanga.[9] Clearly no one will try to find in this strong and fortunate bandit an ancestor of the capitalists of the future. Commerce, as he understood and practised it, blended with plunder, and if he loved gain it was not in the manner of a man of affairs but rather in that of a primitive conqueror with whom violence of appetite took the place of calculation. Samo was evidently an exception. But the spirit which inspired him may have inspired a goodly number of _negociatores_ who launched their barks on the streams of the ninth century. In the society of this period only the possession of land or attachment to the following of a great man could give one a normal position. Men not so provided were outside the regular classification, forming a confused mass, in which were promiscuously mingled professional beggars, mercenaries in search of employment, masters of barges or drivers of wagons, peddlers, traders, all jostling in the same sort of hazardous and precarious life, and all no doubt passing easily from one employment to another. This is not to say, however, that among the _negociatores_ of the Frankish epoch there were not also individuals whose situation was more stable and whose means of existence were less open to suspicion. Indeed, we know that the great proprietors, lay or ecclesiastical, employed certain of their serfs or of their _ministeriales_ in a sporadic commerce of which we have already mentioned above the principal features. They commissioned them to buy at neighboring markets the necessary commodities or to transport to places of sale the occasional surplus of their grain or their wine. Here too we discover no trace of capitalism. We merely find ourselves in the presence of hereditary servants performing gratuitous service, entirely analogous to military service. Nevertheless commercial intercourse produced even then, in certain places particularly favored by their geographic situation, groups of some importance. We find them along the sea-coast--Marseilles, Rouen, Quentovic--or on the banks of the rivers, especially in those places where a Roman road crosses the stream, as at Maastricht on the Meuse or at Valenciennes on the Scheldt. We are to think of these _portus_ as wharves for merchandise and as winter quarters for boats and boatmen. They differ very distinctly from the towns of the following period. No walls surround them; the buildings which are springing up seem to be scarcely more than wooden sheds, and the population which is found there is a floating population, destitute of all privileges and forming a striking contrast to the bourgeoisie of the future. No organization seems to have bound together the adventurers and the voyagers of these _portus_. Doubtless it is possible, it is even probable, that a certain number of individuals, profiting by circumstance, may have little by little devoted themselves to trade in a regular fashion and have begun by the ninth century to form the nucleus of a group of professional traders. But we have too little information to enable us to speak with any precision. The operations of credit follow much the same course. We cannot doubt that loans had been employed in the Carolingian period, and the Church as well as the State had occupied itself in combating their abuses.[10] But it would be a manifest exaggeration to deduce from this the existence of even a rudimentary capitalistic economy. Everything indicates that the loans which we are considering here were only occasional loans, of usurious nature, to which people who had met with some catastrophe, such as war, a fire, or a poor harvest, were forced to have recourse temporarily. Thus, the early centuries of the Middle Ages seem to have been completely ignorant of the power of capital. They abound in wealthy landed proprietors, in rich monasteries, and we come upon hundreds of sanctuaries the treasure of which, supplied by the generosity of the nobles or the offerings of the faithful, crowds the altar with ornaments of gold or of solid silver. A considerable fortune is accumulated in the Church, but it is an idle fortune. The revenues which the landowners collect from their serfs or from their tenants are directed toward no economic purpose. They are scattered in alms, in the building of monuments, in the purchase of works of art, or of precious objects which should serve to increase the splendor of religious ceremonies. Wealth, capital, if one may so term it, is fixed motionless in the hands of an aristocracy, priestly or military. This is the essential condition of the patronage that this aristocracy (_majores et divites_) exercises over the people (_pauperes_). Its action is as important from the social point of view as it is unimportant from that of economics. No part of it is directed toward the _negociatores_, who, left to themselves, live, so to speak, on the fringe of society. And so it will continue to be, for long centuries. Landed property, indeed, did not contribute at all to that awakening of commercial activity which, after the disasters of the Norman invasion in the North and the Saracen raids on the shores of the Mediterranean, began to manifest itself toward the end of the tenth century and the beginning of the eleventh. Its preliminary manifestations are found at the two extremities of the Continent, Italy and the Low Countries. The interior seas, between which Europe was restricted in her advance toward the Atlantic, were its first centres of activity. Venice, then Genoa and Pisa, venture on the coasting trade along their shores, and then maintain, with their rich neighbors of Byzantium or of the Mohammedan countries, a traffic which henceforward constantly increases. Meanwhile Bruges at the head of the estuary of the Zwyn, becomes the centre of a navigation radiating toward England, the shores of North Germany, and the Scandinavian regions. Thus, economic life, as in the beginning of Hellenic times, first becomes active along the coasts. But soon it penetrates into the interior of the country. Step by step it wins its way along the rivers and the natural routes. On this side and on that, it arouses the hinterland into which the harbors cut their indentations. In this process of growth the two movements finally meet, and bring into communication the people of the North and the people of the South. By the beginning of the twelfth century it is an accomplished fact. In 1127 Lombard merchants, journeying by the long route which descends from the passes of the Alps toward Champagne and the Low Countries, reach the fairs of Flanders. If the feeble and precarious commercial activity of the Carolingian period was sufficient to create gathering-places of merchants at the points most frequented in travel, it is not difficult to understand that the steady progress of economic activity from the end of the tenth century would result in the formation, at the strategic points of regional transit, of aggregations of like character but much more important and more stable. The surface of the land, the direction and the depth of the streams, determining the routes of commerce, also determined the location of the towns. Indeed, European cities are the daughters of commerce and of industry. Unquestionably in the countries of old civilization, in Italy or in Gaul, the Roman cities had not completely disappeared. Within the circle of their walls, which had now become too large and were filled with ruins, there gathered, around the bishop resident in each of them, a whole population of clerics and monks, and beside them a lay population employed in their service or support. In the North, one found the same spectacle at the centres of the new dioceses, at Thérouanne, at Utrecht, at Magdeburg, or at Vienna. But here was no trace, properly speaking, of municipal life. A certain number of artisans, some of them serfs, a little weekly market for the most indispensable commodities, sometimes a fair visited by the merchant-adventurers of whom we have spoken above--this is the sum total of economic life. But the situation changes from the moment when the increasing intensity of commerce begins to furnish men with new means of existence. Immediately one discovers an uninterrupted movement of migration of peasants from the country towards the places in which the handling of merchandise, the towing of boats, the service of merchants furnish regular occupations and arouse the hope of gain. If the old cities disadvantageously placed at one side from the highways of travel continue in their torpor, the others see their population increase continuously. Suburbs join the old enclosure; new markets are established; new churches are built for the new comers; and soon the primitive nucleus of the town, surrounded on all sides by the houses of the immigrants, becomes merely the quarter of the priests, bound to the shadow of the cathedral and submerged on all sides by the expansion of lay life. Much that at the beginning was the essential is now nothing more than the accessory. The episcopal burg disappears amid faubourgs.[11] The city has not been formed by growing with its own forces. It has been brought into existence by the attraction which it has exerted upon its surroundings whenever it has been aided by its situation. It is the creation of those who have migrated toward it. It has been made from without and not from within. The bourgeoisie of the oldest towns of Europe is a population of the transplanted. But it is at the same time essentially a trading population, and no other proof of this need be advanced than the fact that, down to the beginning of the twelfth century, _mercator_ and _burgensis_ were synonymous terms. Whence came these pioneers of commerce, these immigrants seeking means of subsistence, and what resources did they bring with them into the rising towns? Doubtless only the strength of their arms, the force of their wills, the clearness of their intelligence. Agricultural life continued to be the normal life and none of those who remained upon the soil could entertain the idea of abandoning his holding to go to the town and take his chances in a new existence. As for selling the holding to get ready money, like the men of a modern rural population, no one at that time could have imagined such a transaction. The ancestors of the bourgeoisie must then be sought, specifically, in the mass of those wandering beings who, having no land to cultivate, floated across the surface of society, living from day to day upon the alms of the monasteries, hiring themselves to the cultivators of the soil in harvest time, enlisting in the armies in time of war, and shrinking from neither pillage nor rapine if the occasion presented itself. It may without difficulty be admitted that there may have been among them some rural artisans or some professional peddlers. But it is beyond question that with very few exceptions it was poor men who floated to the towns and there built up the first fortunes in movable property that the Middle Ages knew. Fortunately we possess certain narratives which enable us to support this thesis with concrete examples. It will suffice to cite here the most characteristic of them, the biography of St. Godric of Finchale.[12] He was born of poor peasants in Lincolnshire, toward the end of the eleventh century, and from infancy was forced to tax his ingenuity to find the means of livelihood. Like many other unfortunates of all times, he at first walked the beaches on the outlook for wreckage cast up by the sea. Then we see him, perhaps by reason of some fortunate find, setting up as a peddler and travelling through the country with a little pack of goods (_cum mercibus minutis_). At length he gathers together a small sum, and one fine day joins a troop of town merchants whom he has met in the course of his wanderings. Thenceforward he goes with his companions from market to market, from fair to fair, from town to town. Having thus become a professional merchant, he rapidly gains a sufficient sum to enable him to associate himself with other merchants, charter a boat with them, and engage in the coasting trade along the shores of England, Scotland, Denmark, and Flanders. The company is highly successful. Its operations consist in carrying to a foreign country goods which it knows to be uncommon there, in selling them there at a high price, and acquiring in exchange various merchandise which it takes pains to dispose of in the places where the demand for them is greatest and where it can consequently make the greatest gains. At the end of some years this prudent practice of buying cheap and selling dear has made of Godric, and doubtless of his associates, a man of important wealth. Then, touched by divine grace, he suddenly renounces his fortune, gives his goods to the poor, and becomes a monk. The story of Godric, if one omits its pious conclusion, must have been that of many others. It shows us, with perfect clearness, how a man beginning with nothing might in a relatively short time amass a considerable capital. Our adventurer must have been favored by circumstances and chance. But the secret of his success, and the contemporary biographer to whom we owe the story insists strongly upon it, is intelligence.[13] Godric in fact shows himself a calculator, I might even say a speculator. He has in a high degree the feeling, and it is much more developed among minds without culture than is usually thought, for what is practicable in commerce. He is on fire with the love of gain. One sees clearly in him that famous _spiritus capitalisticus_ of which some would have us believe that it dates only from the time of the Renaissance. Here is an eleventh-century merchant, associated with companions like himself, combining his purchases, reckoning his profits, and, instead of hiding in a chest the money he has gained, using it only to support and extend his business. More than this, he does not hesitate to devote himself to operations which the Church condemns. He is not disquieted by the theory of the just price; the Decretum of Gratian disapproves in express terms of the speculations which he practises: "Qui comparat rem ut illam ipsam integram et immutatam dando lucretur, ille est mercator qui de templo Dei ejicitur". After this, how can we see, in Godric and any of those who led the same sort of life, anything else but capitalists? It is impossible to maintain that these men conducted business only to supply their daily wants, impossible not to see that their purpose is the constant accumulation of goods, impossible to deny that, barbarous as we may suppose them, they none the less possessed the comprehension, or, if one prefers, had the instinct for commerce on the large scale.[14] Of the organization of this commerce the life of Godric shows us already the principal features, and the description which it gives us of them is the more deserving of confidence because it is corroborated in the most convincing fashion by many documents. It shows us, first of all, the merchant coming from the country to establish himself in the town. But the town is to him, so to speak, merely a basis of operations. He lives there but little, save in the winter. As soon as the roads are practicable and the sea open to navigation, he sets out. His commerce is essentially a wandering commerce, and at the same time a collective one, for the insecurity of the roads and the powerlessness of the solitary individual compel him to have recourse to association. Grouped in gilds, in hanses, in _caritates_, the associates take their merchandise in convoy from town to town, presenting a spectacle entirely like that which the caravans of the East still furnish in our day. They buy and sell in common, dividing the profits in the ratio of their respective investments in the expedition, and the trade they carry on in the foreign markets is wholesale trade, and can only be that, for retail trade, as the life of Godric shows us, is left to the rural peddlers. It is in gross that they export and import wine, grain, wool, or cloth. To convince ourselves of this we need only examine the regulations which have been preserved to us. The statutes of the Flemish hanse of London, for example, formally exclude retail dealers and craftsmen from the company. Moreover, the merchant associations of the eleventh and twelfth centuries have nothing exclusively local in their character. In them we find bourgeoisie of different towns, side by side. They have rather the appearance of regional than of urban organisms. They are still far from the exclusivism and the protectionism which are to be shown with so much emphasis in the municipal life of the fourteenth century. Commercial freedom is not troubled by any restrictive regulations. Public authority assigns no limits to the activity of the merchants, does not restrict them to this or that kind of business, exercises no supervision over their operations. Provided they pay the fiscal dues (_teloneum, conductus_, etc.) levied by the territorial prince and the seigneurs having jurisdiction at the passage of the bridges, along the roads and rivers, or at the markets, they are entirely free from all legal obstacles. The only restrictions which hinder the full expansion of commerce do not come from the official authority, but result from the practices of commerce itself. To wit, the various merchant associations, gilds, hanses, etc., which encounter each other at the places of buying and selling, oppose each other in brutal competition. Each of them excludes from all participation in its affairs the members of all the others. But this is merely a state of facts, resting on no legal title. Force holds here the place of law, and whatever may be the differences of time and of environment, one cannot do otherwise than to compare the commerce of the eleventh and twelfth centuries to that bloody competition in which, in the sixteenth and seventeenth centuries, the sailors of Holland, England, France, and Spain engaged in the markets of the New World. We shall conclude then that medieval commerce, at its origin, is essentially characterized by its regional quality and by its freedom. And it is not difficult to understand that it was so, if one bears in mind two facts to which attention should be drawn. In the first place, down to the end of the twelfth century, the number of towns properly so-called was relatively small. Only those places that were favored by a privileged geographical situation attracted the merchants in sufficient number to enable them to maintain a commercial movement of real importance. After that the attraction which these centres of business exerted upon their environs was much greater than is ordinarily imagined. All the secondary localities were subject to their influence. The merchants dwelling in these last, too few to act by themselves, affiliated themselves to the hanse or gild of the principal town. The Flemish hanse, which we have already instanced, proves this fully, by showing us the merchants of Dixmude, Damme, Oudenbourg, Ardenbourg, etc., seeking admission into the hanse of Bruges. In the second place, at the period we have now reached the towns devoted themselves far more to commerce than to industry. Few could be cited that appear thus early as manufacturing centres. The concentration of artisans within their walls is still incomplete. If their merchants export, along with the products of the soil, such as wine and grain, a quantity of manufactured products, such, for example, as cloth, it is more than probable that these were for the most part made in the country. Admit these two statements, and the nature of early commerce is explained without difficulty. They account in fact both for the freedom of the merchants and for that character of wholesale exporters which they exhibit so clearly and which prevents our placing them in the category in which the theory of urban economy claims to confine them. Contrary to the general belief, it appears then that before the thirteenth century we find a period of free capitalistic expansion. No doubt the capitalism of that time is a collective capitalism: groups, not isolated individuals, are its instruments. No doubt too it contents itself with very simple operations. The commercial expeditions upon which its activity especially centres itself demand, for their successful conduct, an endurance, a physical strength, which the more advanced stages of economic evolution will not require. But they demand nothing more. Without the ability to plan and combine they would remain sterile. And so we can see that, from the beginning, what we find at the basis of capitalism is intelligence, that same intelligence which Georg Hansen has so well shown, long ago, to be the efficient cause of the emergence of the bourgeoisie.[15] The fortunes acquired inn the wandering commerce by the parvenus of the eleventh and twelfth centuries soon transformed them into landed proprietors. They invest a good part of their gains in lands, and the land they thus acquire is naturally that of the towns in which they reside. From the beginning of the thirteenth century one sees this land held in large parcels by an aristocracy of patricians, _viri hereditarii_, _divites_, _majores,_ in whom we cannot fail to recognize the descendants of the bold voyagers of the gilds and the hanses. The continuous increase of the burghal population enriches them more and more, for as new inhabitants establish themselves in the towns, and as the number of the houses increases, the rent of the ground increases in proportion. So, from the commencement of the thirteenth century, the grandsons of the primitive merchants abandon commerce and content themselves with living comfortably upon the revenue of their lands. They bid farewell to the agitations and the chances of the wandering life. They live henceforward in their stone houses, whose battlements and towers rise above the thatched roofs of the wooden houses of their tenants. They assume control of the municipal administration; they and their families monopolize the seats in the _échevinage_ or the town council. Some even, by fortunate marriages, ally themselves with the lesser nobility and begin to model their manner of living upon that of the knights. But while these first generations of capitalists are retiring from commerce and rooting themselves in the soil, important changes are going on in the economic organization. In the first place, in proportion as the wealth of the towns increases, and with it their attractive power, they take on more and more an industrial character, the rural artisans flocking into them _en masse_ and deserting the country. At the same time, many of them, favored by the abundance of raw material furnished by the surrounding region, begin to devote themselves to certain specialties of manufacture--cloth-making or metallurgy. Finally, around the principal aggregations many secondary localities develop, so that all Western Europe, in the course of the thirteenth century, blossoms forth in an abundance of large and small towns. Some, and much the greater number of them, content themselves perforce with local commerce. Their production is determined by the needs of their population and that of the environs which extend two or three leagues around their walls and, in exchange for the manufactured articles which the city furnishes to them, attend to the food supply of the urban inhabitants. Other towns, on the contrary, less closely set together but also more powerful, develop chiefly by means of an export industry, producing, as did the cloth industry of great Flemish or Italian cities, not for their local market,[16] but for the European market, constantly extensible. Others still, profiting by the advantages of nearness to the sea, give themselves up to navigation and to transportation, as did so many ports of Italy, of France, of England, and especially of North Germany. Of these two types of towns, the one sufficient to themselves, the other living upon the outside world, it is unquestionably the first to which the theory of the urban economy applies. Direct trade between purchaser and consumer, strict protectionism excluding the foreigner from the local market and reserving it to the bourgeoisie alone, minute regulations confining within narrow limits the industry of the merchant and the artisan; in a word, all the traits of an organization evidently designed to preserve and safeguard the various members of the community by assigning to each his place and his rôle, are all found and all explained without difficulty in those towns which are confined to a clientage limited by the extent of their suburban dependencies. In these one can rightly speak of an anti-capitalistic economy. In these we find neither great _entrepreneurs_ nor great merchants. It is true that the necessity of stocking the town with commodities which it does not produce or cannot find in its environs--groceries, fine cloths, wines in northern countries--brings into existence a group of exporters whose condition is superior to that of their fellow-citizens. But on inspection they cannot be regarded as a class of great professional merchants. If they buy at wholesale in foreign markets, it is to sell at retail to their fellow-citizens. They dispose of their goods piecemeal, and like the _Gewandschneider_ of the German towns, they do not rise above the level of large shopkeepers.[17] In the towns of the second category we find a quite different condition. Here capitalism not only exists but develops toward perfection. Instruments of credit, such as the _lettre de foire,_ make their appearance; a traffic in money takes its place alongside the traffic in merchandise and, despite the prohibition of loans at interest, makes constantly more rapid progress. The _coutumes_ of the fairs, especially those of the fairs of the Champagne, in which the merchants of the regions most advanced in an economic sense, Italy and the Low Countries, meet each other, give rise to a veritable commercial law. The circulation of money expands and becomes regulated; the coinage of gold, abandoned since the Merovingian period, is resumed in the middle of the thirteenth century. The security of travellers increases on the great highways. The old Roman bridges are rebuilt and here and there canals are built and dykes constructed. Finally, in the towns, the commercial buildings of the previous period, outgrown, are replaced by structures more vast and more luxurious, of which the _halles_ of Ypres, with their façade one hundred and thirty-three metres long, is doubtless the most imposing specimen. In the presence of these facts it is impossible to deny the existence of a considerable traffic. Moreover documents abound which attest the existence in the great cities of men of affairs who hold the most extended relations with the outside world, who export and import sacks of wool, bales of cloth, tuns of wine, by the hundred, who have under their orders a whole corps of factors or "sergents" (_servientes_, _valets_, etc.), whose letters of credit are negotiated in the fairs of Champagne, and who make loans amounting to several thousands of livres to princes, monasteries, and cities in need of money. To cite here merely a few figures, let us recall that in 1273 the company of the Scotti of Piacenza exports wool from England to the value of 21,400 pounds sterling, or 1,600,000 francs (metallic value);[18] in 1254 certain burgesses of Arras furnish 20,000 livres to the Count of Guines, prisoner of the Count of Flanders, to enable him to pay his ransom.[19] In 1339 three merchants of Mechlin advance 54,000 florins (700,000 francs) to King Edward III.[20] Extensive however as capitalistic commerce has been since the first half of the thirteenth century, it no longer enjoys the freedom of development which it had before. As we advance toward the end of the Middle Ages, indeed, we see it subjected to limitations constantly more numerous and more confining. Henceforth, in fact, it has to reckon with municipal legislation. Every town now shelters itself behind the ramparts of protectionism. If the most powerful cities can no longer exclude the stranger, upon whom they live, they impose upon him a minute regulation, the purpose of which is to defend against him the position of their own citizens. They force him to have recourse in his purchases to the mediation of his "hosts" and his "courtiers"; they forbid him to bring in manufactured articles which may compete with those which the city produces; they exploit him by levying taxes of all sorts: duties upon weighing, upon measuring, upon egress, etc. In those cities especially in which has occurred the popular revolution transferring power from the hands of the patriciate into those of the craft-gilds, distrust of capital is carried as far as it can go without entirely destroying urban industry. The craftsmen who produce for exportation--for example, the weavers and the fullers of the towns of Flanders--try to escape from their subjection, to the merchants who employ them. Not only do the municipal statutes fix wages and regulate the conditions of work, but they also limit the independence of the merchant, even in purely commercial matters. It will be sufficient to mention here, as one of their most characteristic provisions, the forbidding of the cloth merchant to be at the same time a wool merchant, a prohibition inspired by the desire to prevent operations that will unfavorably affect prices and the workman's wages.[21] But it is not solely the municipal authority which attacks the speculations born of the capitalistic spirit. The Church steps forward, and under the name of usury forbids indiscriminately the lending of money at interest, sales on credit, monopolies, and in general all profits exceeding the _justum pretium_. No doubt these prohibitions themselves attest the existence of the abuses which they endeavor to oppose, and their frequency proves that they did not always succeed. It is none the less true that they were very burdensome and that the pursuit of business on a large scale found itself much embarrassed by them. The increasing specialization of commerce embarrassed it much more. At the beginning the merchants had devoted themselves to the most various operations at once. Wandering from market to market, they bought and sold without feeling in need of centring their activity on this or that kind of products or commodities, but from about 1250 this is no longer the case. The progress of economic evolution has resulted in localizing certain industries and in restraining certain branches of commerce to the groups of merchants best suited to their promotion. Thus, for example, in the course of the thirteenth century the trade in fine cloth became a monopoly of the towns of Flanders, and banking a monopoly of certain merchant companies of Lombardy, Provence, or Tuscany. Thenceforward commercial life ceases to overflow at random, so to speak. It has a less arbitrary, a more deliberate, and consequently a more embarrassed quality. These limitations resting upon commerce have resulted in turning away from it the patricians, who moreover have become, as has been said above, a class of landed proprietors. The place which they left vacant is filled by new men, among whom, as among their predecessors, intelligence is the essential instrument of fortune. The intellectual faculties which the first developed in wandering commerce are used by these later men to overcome the obstacles raised in their pathway by municipal regulations of commerce and ecclesiastical regulations in respect to money affairs.[22] Many of them find a rich source of profit by devoting themselves to brokerage. Others in the industrial cities exploit shamelessly and in defiance of the statutes the artisans whom they employ. At Douai, for example, Jehan Boinebroke (1280-1310) succeeds in reducing to serfdom a number of workers (and characteristically, they are chiefly women) by advancing wool or money which they are unable to repay, and which therefore place them at his mercy.[23] The richest or the boldest profit by the constantly increasing need of money on the part of territorial princes and kings, to become their bankers. It will be remembered that it was Lombard capitalists who furnished Edward III. with money to prepare his campaigns against France,[24] and, quite recently, the history of Guillaume Servat of Cahors (1280-1320) has shown us a man who, setting out with nothing, like Godric in the eleventh century, accumulates in a few years a considerable fortune, supplies the King of England with a dowry for one of his daughters, lends money to the King of Norway, farms the wool duties at London, and, unscrupulous as he is shrewd, does not hesitate to engage in shady speculations upon the coinage.[25] And how many other financiers do we not know whose career is wholly similar: Thomas Fin at the court of the counts of Flanders,[26] the Berniers at that of the counts of Hainaut, the Tote Guis, the Vane Guis, at that of the kings of France, not to name the numberless Italians entrusted by the popes with the various operations of pontifical finance, those _mercatores Romanam curiam sequentes_ among whom are found the ancestors of the great Medici of the fifteenth century.[27] In the course of the fifteenth century this second class of capitalists, courtiers, merchants, and financiers, successors to the capitalists of the hanses and the gilds, is in its turn drawn along toward the downward grade. The progress of navigation, the discoveries made by the Portuguese, then by the Spaniards, the formation of great monarchical states struggling for supremacy, begin to destroy the economic situation in the midst of which that class had grown to greatness, and to which it had adapted itself. The direction of the currents of commerce is altered. In the north, the English and Dutch marine gradually take the place of the hanses. In the Mediterranean, commerce centres itself at Venice and at Genoa. On the shores of the Atlantic, Lisbon becomes the great market for spices, and Antwerp, supplanting Bruges, becomes the rendezvous of European commerce. The sixteenth century sees this movement grow more rapid. It is favored at once by moral, political, and economic causes; the intellectual progress of the Renaissance, the expansion of individualism, great wars exciting speculation, the disturbance of monetary circulation caused by the influx of precious metals from the New World. As the science of the Middle Ages disappears and the humanist takes the place of the scholastic, so a new economy rises in the place of the old urban economy. The state subjects the towns to its superior power. It restrains their political autonomy at the same time that is sets commerce and industry free from the guardianship which the towns have hitherto imposed upon them. The protectionism and the exclusiveness of the bourgeoisies are brought to an end. If the craft-guilds continue to exist, yet they no longer control the organization of labor. New industries appear, which, to escape the meddling surveillance of the municipal authorities, establish themselves in the country. Side by side with the old privileged towns, which merely vegetate, younger manufacturing centres, full of strength and exuberance, arise; in England, Sheffield, and Birmingham, in Flanders, Hondschoote and Armentières.[28] The spirit in which is now manifested in the world of business, is that same spirit of freedom which animates the intellectual world. In a society in process of formation, the individual, enfranchised, gives the rein to his boldness. He despises tradition, gives himself up with unrestrained delight to his virtuosity. There are to be no more limits on speculation, no more fetters on commerce, no more meddling of authority in relations between employers and employed. The most skillful wins. Competition, up to this time held in check, runs riot. In a few years enormous fortunes are built up, others are swallowed up in resounding bankruptcies. The Antwerp exchange is a pandemonium where bankers, deep-sea sailors, stock-jobbers, dealers in futures, millionaire merchants, jostle each other--and sharpers and adventurers to whom all means of money-getting, even assassination, are acceptable. This confused recasting of the economic world transfers the rôle played by the capitalists of the late Middle Ages in a class of new men. Few are the descendants of the business men of the fourteenth century among those of the fifteenth and sixteenth. Thrown out of their course by the current of events, they have not been willing to risk fortunes already acquired. Most of them are seen turning toward administrative careers, entering the service of the state as members of the councils of justice or finance and aspiring to the _noblesse de robe_, which, with the aid of fortunate marriages, will land their sons in the circle of the true nobility. As for the new rich of the period, they almost all appear to us like parvenus. Jacques Coeur is a parvenu in France. The Fugger and many other German financiers--the Herwarts, the Seilers, the Manlichs, the Haugs--are parvenus of whose families we know little before the fifteenth century, and so are the Frescobaldi and the Gualterotti of Florence, or that Gaspar Ducci of Pistoia who is perhaps the most representative of the fortune-hunters of the period.[29] Later, when Amsterdam has inherited the commercial hegemony of Antwerp, the importance of the parvenus characterizes it not less clearly. We may merely mention here, among the first makers of its greatness, Willem Usselinx,[30] Balthazar de Moucheron, Isaac Lemaire. And if from the world of commerce we turn toward that of industry the aspect is the same. Christophe Plantin, the famous printer, is the son of a simple peasant of Touraine. The exuberance of capitalism which reached its height in the second half of the sixteenth century was not maintained. Even as the regulative spirit characteristic of the urban economy followed upon the freedom of the twelfth century, so mercantilism imposed itself upon commerce and industry in the seventeenth and eighteenth centuries. By protective duties and bounties on exportation, by subsidies of all sorts to manufactures and national navigation, by the acquiring of transmarine colonies, by the creation of privileged commercial companies, by the inspection of manufacturing processes, by the perfecting of means of transportation and the suppression of interior custom-houses, every state strives to increase its means of production, to close its market to its competitors, and to make the balance of trade incline in its favor. Doubtless the idea that "liberty is the soul of commerce" does not wholly disappear, but the endeavor is to regulate that liberty henceforward in conformity to the interest of the public weal. It is put under the control of intendants, of consuls, of chambers of commerce. We are entering into the period of national economy. This was destined to last, as is familiar, until the moment when, in England at the end of the eighteenth century, on the Continent in the first years of the nineteenth, the invention of machinery and the application of steam to manufacturing completely disorganized the conditions of economic activity. The phenomena of the sixteenth century are reproduced, but with tenfold intensity. Merchants accustomed to the routine of mercantilism and to state protection are pushed aside. We do not see them pushing forward into the career which opens itself before them, unless as lenders of money. In their turn, and as we have seen it at each great crisis of economic history, they retire from business and transform themselves into an aristocracy. Of the powerful houses which are established on all hands and which give the impetus to the modern industries of metallurgy, of the spinning and weaving of wool, linen, and cotton, hardly one is connected with the establishments existing before the end of the eighteenth century. Once again, it is new men, enterprising spirits, and sturdy characters which profit by the circumstances.[31] At most, the old capitalists, transformed into landed proprietors, play still an active rôle in the exploitation of the mines, because of the necessary dependence of that industry upon the possessors of the soil, but it can be safely affirmed that those who have presided over the gigantic progress of international economy, of the exuberant activity which now affects the whole world, were, as at the time of the Renaissance, parvenus, self-made men. As at the time of the Renaissance, again, their belief is in individualism and liberalism alone. Breaking with the traditions of the old régime, they take for their motto "_laissez faire, laissez passer_". They carry the consequences of the principle to an extreme. Unrestrained competition sets them to struggling with each other and soon arouses resistance in the form of socialism, among the proletariate that they are exploiting. And at the same time that that resistance arises to confront capital, the latter, itself suffering from the abuses of that freedom which had enabled it to rise, compels itself to discipline its affairs. Cartels, trusts, syndicates of producers, are organized, while states, perceiving that it is impossible to leave employers and employees longer to contend in anarchy, elaborate a social legislation; and international regulations, transcending the frontiers of the various countries, begin to be applied to working men. I am aware how incomplete is this rapid sketch of the evolution of capitalism through a thousand years of history. As I said at the beginning, I present it merely as an hypothesis resting on the very imperfect knowledge which we yet possess of the different movements of economic development. Yet, in so far as it is exact, it justifies the observation I made at the beginning of this study. It shows that the growth of capitalism is not a movement proceeding along a straight line, but has been marked, rather, by a series of separate impulses not forming continuations one of another, but interrupted by crises. To this first remark may be added two others, which are in a way corollaries. The first relates to the truly surprising regularity with which the phases of economic freedom and of economic regulation have succeeded each other. The free expansion of wandering commerce comes to its end in the urban economy, the individualistic ardor of the Renaissance leads to mercantilism, and finally, to the age of liberalism succeeds our own epoch of social legislation. The second remark, with which I shall close, lies in the moral and political rather than the economic field. It may be stated in this form, that every class of capitalists is at the beginning animated by a clearly progressive and innovating spirit but becomes conservative as its activities become regulated. To convince one's self of this truth it is sufficient to recall that the merchants of the eleventh and twelfth centuries are the ancestors of the bourgeoisie and the creators of the first urban institutions; that the business men of the Renaissance struggled as energetically as the humanists against the social traditions of the Middle Ages; and finally, that those of the nineteenth century have been among the most ardent upholders of liberalism. This would suffice to prove to us, if we did not know it otherwise, that all these have at the beginning been nothing else than parvenus brought into action by the transformations of society, embarrassed neither by custom nor by routine, having nothing to lose and therefore the bolder in their race toward profit. But soon the primitive energy relaxes. The descendants of the new rich wish to preserve the situation which they have acquired, provided public authority will guarantee it to them, even at the price of a troublesome surveillance; they do not hesitate to place their influence at its service, and wait for the moment when, pushed aside by new men, they shall demand of the state that it recognize officially the rank to which they have raised their families, shall on their entrance into the nobility become a legal class and no longer a social group, and shall consider it beneath them to carry on that commerce which in the beginning made their fortunes. FOOTNOTES: [1] This article represents the substance of an address delivered at the International Congress of Historical Studies held in London, April, 1913. [2] First edition in 1893. [3] _Der Moderne Capitalismus_ (1902). [4] R. Heynen, _Zur Entstehung des Capitalismus in Venedig_ (1905). [5] H. Sieveking, "Die Capitalistische Entwickelung in den Italienischen Städten des Mittelalters", _Vierteljahrschrift für Social-und Wirtschaftsgeschichte_ (1909). [6] Davidsohn, _Forschungen zur Geschichte von Florenz_, III. 36; A. Doren, _Die Florentiner Wollentuchindustrie_, p. 481. [7] A. Schaube, "Die Wollausfuhr Englands von 1272", _Vierteljahrschrift für Social- und Wirtschaftsgeschichte_ (1908), pp. 39 ff. _Cf._ F. Keutgen, "Hansische Handelsgesellschaften", _ibid._ (1906), pp. 288 ff. [8] _Cf._ H. Pirenne, _Les Anciennes Democraties des Pays-Bas_, pp. 11 ff. [9] I. Goll, "Samo und die Karantinischen Slaven", _Mitteilungen des Instituts für Oesterreichische Geschichtsforschung_, vol. XI. [10] A. Dopsch, _Die Wirtschaftsentwickelung der Karolingerzeit_, II. 274. I cannot, however, accept the thesis of Mr. Dopsch on the importance of commerce in the Carolingian period. The extremely interesting texts which he has assembled seem to me to establish the existence of a sporadic commerce only. [11] Of course all the new towns did not grow up around an episcopal residence. Many of them, especially in the North and particularly in the Low Countries, had as their primitive nucleus a fortress (Ghent, Bruges, Ypres, Lille, Douai, etc.). But my purpose here is merely to recall the broad outlines of the subject. [12] See on this subject the interesting article by W. Vogel, "Ein Seefahrender Kaufmann um 1100", _Hansische Geschichtsblätter_ (1912), pp. 239 ff. [13] "Unde non agriculturae delegit exercitia colere, sed potius, quae sagacioris animi sunt, rudimenta studuit arripiendo exercere." [14] One finds already in the twelfth century lenders of money undertaking veritable financial operations. See H. Jenkinson and M. T. Stead, "William Cade: a Financier of the Twelfth Century", _English Historical Review_ (1913), p. 209 ff. [15] _Die drei Bevölkerungsstufen._ [16] The _Livre de la Vingtaine d'Arras_ (ed. A. Guesnon) says, in speaking of the merchants of that town, in 1222, "Emunt non ad usum civitatis, sed ut exportent et discurrant per nondinas longinquas et per Lombardiam". [17] G. von Below, "Grosshändler und Kleinhändler im Deutschen Mittelalter", _Jahrbücher für Nationalökonomie und Statistik_ (1900). [18] A. Schaube, "Die Wollausfuhr Englands vom Jahre 1273", _Vierteljahrschrift für Social- und Wirtschaftsgeschichte_ (1908), p. 183. [19] A. Duchesne, _Histoire des Maisons de Guines, d'Ardres et de Gand_, p. 289. [20] Rymer, _Foedera_, vol. II., part IV., p. 49. [21] For an example, see Espinas and Pirenne, _Recueil de Documents relatifs à l'Histoire de la Draperie Flamande_, II. 391. [22] J. Kulischer, "Warenhändler und Geldausleiher im Mittelalter", _Zeitschrift für Volkswirtschaft_, etc., XVII. (1908). [23] G. Espinas, "Jehan Boine-Broke, Bourgeois et Drapier Douaisien", _Vierteljahrschrift für Social- und Wirtschaftsgeschichte_ (1904), pp. 34 ff. [24] For the relations of the capitalists with the English crown see: Whitwell, "Italian Bankers and the English Crown", _Transactions of the Royal Historical Society_, XVII. (1903); and Bond, "Extract from the Liberate Rolls relative to the Loans supplied by Italian Merchants to the Kings of England", _Archaeologia_, XXVII. (1840). _Cf._ Hansen, "Der Englische Staatscredit unter König Edward III. und die Hansischen Kaufleute", _Hansische Geschichtsblätter_ (1910). [25] F. Arens, "Wilhelm Servat von Cahors als Kaufmann zu London", _Vierteljahrschrift für Social- und Wirtschaftsgeschichte_ (1913), pp. 477 ff. [26] V. Fris, "Thomas Fin, Receveur de Flandre", _Bulletin de la Commission Royale d'Histoire de Belgique_ (1900), pp. 8 ff. [27] Schneider, "Die Finanziellen Beziehungen der Florentinischen Banquiers zur Kirche", _Schmollers Forschungen_, vol. XVII. [28] Pirenne, "Une Crise Industrielle an XVI^e Siècle", _Bulletin de l'Académie Royale de Belgique_, classe des lettres (1905). [29] R. Ehrenberg, _Das Zeitalter der Fugger_, I. 311 ff. [30] J. F. Jameson, "Willem Usselinx", in Am. Hist. Assoc., _Papers_, II. [31] See, in Cunningham, _The Growth of English Industry and Commerce in Modern Times_, p. 618, this citation from P. Gaskell: "Few of the men who entered the trade rich were successful. They trusted too much to others, too little to themselves." Let us recall here that the founder of the largest industrial establishments of Belgium, John Cockerill, was a simple workman. See E. Mahaim, "Les Débuts de l'Établissement John Cockerill à Seraing", _Vierteljahrschrift für Social- und Wirtschaftsgeschichte_ (1905), p. 627. 
33946	----	A STIPTICK FOR A _Bleeding Nation_. OR, A Safe and Speedy WAY to Restore _Publick Credit_, and Pay the _National_ DEBTS. [Printer's Decoration] _LONDON_: Printed for J. ROBERTS, near the _Oxford-Arms_ in _Warwick-Lane_. 1721. [Printer's Decoration] A STIPTICK FOR A _Bleeding Nation_. OR, A Safe and Speedy WAY to Restore _Publick Credit_, and Pay the _National_ DEBTS. Do but a little consider, and you will soon find, _Pride_ and _Luxury_, _Corruption_ and _Bribery_, are the greatest Causes of our present Calamities; and if you do not discourage the Two first, and punish the Two last Evils, we shall speedily come to Destruction, and God will blast all our Endeavours. The lively Instance of late, proves to us the _Ruin_ those Evils carry with them: And is there not one good Man, that dares to stem the Tide that is come in upon us, and save us from being drown'd? Is there not one Man that has _Honesty_, _Interest_ or _Ability_, to put in Practice what is so necessary to _preserve_ their Country? Let us shake off then those plaguy Sores that corrupt our _Vitals_; and if we intend to be a Happy and Flourishing People, we must promote _Piety_, which admits of no Corruption; _Honesty_, that listens to no Temptation; _Sincerity_, which never deceives his Neighbour; _Sobriety_ is the Way to Honour, and _Industry_ brings Riches, which Frugality preserves: He therefore that desires to be _truly Great_, must possess these Virtues, and prefer _Publick_ to _Private Interest_. What is the Reason that all Inferior Places of Profit and Trust are _bought_ and _sold_, and true Merit wants its _Reward_? Is it not because the _Devil_, when bought, will be sold? Are not our Exports of _Bullion_ so great, that, as fast as it arrives, it goes away? Which the Publick Entries every Week demonstrate. And were it not for the daily Supplies from _Portugal_, we should have nothing but our own _Specie_ to answer all Demands. It is obvious, that One Single Corporation has put us into this Confusion: And will the _Government_ again trust to _that_, or any other? I should not desire a Friend of mind to be the _Adviser_. Can all the Corporations in _London_, put together, be so well depended upon, as the _Exchequer_; which is supported by the _Government_, who are able and willing to make good all their own Contracts, but are not answerable for the Losses of any Corporation; all being oblig'd to sit down and be content with their own? Can any Corporation desire more, than that the _Government_ compel their own Members, and their Estates, to make good to answer for their _Mismanagement_? Separate then the _Standers-by_ from the _Gamesters_, and let the Unconcern'd declare their Opinion, Whether, in all Corporations, the _Directors_ have not an unknown Advantage over all the other Members? Is it so in the _Exchequer_? Tell me then, why a Hundred Pound in a Corporation, is more valuable than a Hundred in the _Exchequer_? Is it not because you can part with your Property with much more Ease by way of _Transfer_ in _London_? Which is not practis'd at the _Exchequer_: Besides, the _Transferring_ is near at Hand. The _Directors_ of any Corporation, if not truly _honest_, may impose at all Times upon the rest of the _Proprietors_, by making a Dividend above the intrinsick Value of the Nett Produce of _Profit_; and the _Legislature_ would do well to provide against such Practices for the future. If due Encouragement was given for the Importation of _Iron_, _Hemp_, _Pitch_ and _Tar_, from our own _Plantations_, the Export of a great deal of our _Bullion_ would be sav'd, our _Colonies_ encourag'd, and we should be then able to supply the _Dutch_, _French_, _Spaniard_, _Italian_ and _Portugueze_ with Iron, and bring in Two Hundred Thousand Pounds _per Ann._ Balance of Trade. If the _South-Sea_ Company would trade to our own Islands, _viz._ the _Bahama_, and to _Carolina_; that Trade alone would bring them in Five Hundred Thousand Pounds _per Ann._ and with a small Expence, if well manag'd. A PROPOSAL To Restore _Publick Credit_, and Pay the _Nation's_ DEBTS. I. _That the =South-Sea= Company be put in =Statu quo=; and if the Estates of the late =Directors=, their Aiders and Abettors will not do it, the =Government= to make up what is wanting._ II. _That the =Subscriptions= at =Three Hundred=, =Four Hundred=, =Eight Hundred=, and a =Thousand=, be all paid into the =Exchequer= at =Two Hundred=, and there to have a Credit for =One Hundred=; for which the =Government= is to pay Ten =per Cent.= until the =One Hundred= shall be paid off: And that those who have not paid full =Two Hundred=, do make up that Sum within the Time limited by the late =Directors=._ III. _That a Proper Place in =London= be appointed to keep a =Book=, wherein each Person may be made =Debtor= and =Creditor=; and a Duplicate of such =Book= to remain in the =Exchequer=. And that there may be a =Book=, wherein every Person may =transfer= their Property._ IV. _The Debt of =Seven Millions, Five Hundred Thousand Pounds=, being forgiven the =South-Sea= Company, and they put in =Statu quo= by the =Government=; the =Nation= will stand =Debtor= and =Creditor= as followeth:_ Viz. NATION Debtor. _To =South-Sea= Company_, 11,746,384 _To Money-Subscribers_, 20,004,000 _To Redeemable Debts_, 13,886,486 _To Unredeemable Debts_, 12,070,343 _To Interest_, __________ NATION Creditor. _By a Moiety of the Money-Subscribers_, 10,002,000 _By =Ditto= Redeemable Debts_, 6,993,247 _By =Ditto= Unredeemable Debts_, 6,035,178 ---------- 23,030,425 The _Government_ is only to pay Ten _per Cent._ for the Sum of _Twenty Three Millions, Thirty Thousand, Four Hundred Twenty Five Pounds_. The _South-Sea_ Company being in _Statu quo_, are to receive an Interest as the _Act_ directed before the last _Settlement_. The other Moiety will enable the _Government_ to make good the _Deficiency_ (if any) to the _South-Sea_ Company, to forgive them the _Seven Millions, Five Hundred Thousand Pounds_, pay the _Interest_ due from the _Government_ and clear a great Part of the _Principal Debt_. The _Scheme_, as before-mention'd, will restore our _Credit_, and pay Part of our _Debt_; but if we intend to pay the Remainder, we must endeavour to be at a _Par_ with our Neighbours in Trade: And if they outdo us in Policy therein, and we do not strive to follow their _Methods_, we must expect in the End to be the Losers, and never to have a Balance. We ought to consult those Methods that will increase our _Exports_, and lessen the _Importation_ of such Goods as takes away our _Bullion_, and prevent our _Coin_ from being exported, in the best Manner we can. * * * * * Now, Sir, you having consider'd the _Proposal_, and what has been previously maintain'd give me Leave to ask you a few Questions: _Viz._ 1. Whether the Corporation of the _South-Sea_ Company, if they could be sure that the _Government_ would forgive them the Debt of _Seven Millions, Five Hundred Thousand Pounds_, and put them in _Statu quo_, (that is, in the Condition they were in when Stock was at _One Hundred Twenty Five_) would not they readily embrace the _Offer_? 2. Whether either the _South-Sea_ Company, the Bank of _England_, or the _East-India_ Company, desire the _Ingraftment_ propos'd by Parliament? 3. Whether a more equal Distribution of _Loss_ can be made, to please all Parties, especially the major Part; or who will be the greatest _Loser_ by the _Proposal_ herein mention'd? One great Calamity is the Loss of _Paper Credit_, on which our _Trade_ chiefly depended: We find already a great Decay, which will soon be more apparent. We have indeed at present too little _Cash_, and too little _Credit_, to support _Trade_; and if we do not take other _Methods_ than what has been yet practis'd, it will be entirely lost. It is the Prudence of a _Government_, to establish _Credit_ on the most solid Foundation; and what can be so solid as a _Parliamentary Security_? Will the _Government_ be trusted with any future Loans, if their Debts are settled upon a _precarious Bottom_? And are _Corporation-Pillars_ a good Foundation? The _Method_ already propos'd, is seemingly calculated for the Service of _Stock-Jobbing_, and a Parcel of _I know not who_, (_Sharpers_,) to reap the Benefit of it: And if so, the _Nation_ will be utterly ruin'd. For God's Sake, then, let us not run any more _Hazards_, but prudently take such _Measures_ as are most safe and advantageous. If the _Government_ will forgive the _South-Sea_ Company the Debt of _Seven Millions, Five Hundred Thousand Pounds_, and put them in _Statu quo_; they ought to sit down contented, and be easy and thankful. If the present _Scheme_ gives the Subscribers but _Twenty Five Pounds_ Capital Stock for a _Hundred_, and the _Government_ will give such Subscribers _Fifty Pounds_ for a _Hundred_, I hope they will have no Reason to complain. For should the _Subscriptions_ be ty'd down to _Four Hundred_, Thousands of Families will be ruin'd. If we consider the Debt we owe to _Foreigners_, and how they, on the _Advance of Stocks_, drain us of our Money; we shall find it very dangerous to suffer _Stocks_ to be sold above the intrinsick Value. If Common Interest be reduc'd to Four _per Cent._ as was intended; what _Proprietor_ can say he shall be a Loser? Setting aside the _Subscriptions_ and _Stock_, bought and sold at extravagant Prices; which is impossible to redress, without making a far greater Number of Sufferers. Will the _Proposal_ of Tying down the _Subscribers_ at _Four Hundred_, give a greater Interest than Ten _per Cent._ for the Capital? And what will the Capital be, when paid off? Will that be more than _Twenty Five Pounds_ for a _Hundred_? Does not this _Proposal_ give _Fifty Pounds_ for _One Hundred_, with a double Advantage to all; and at the same Time pays a great Part of our Debt, and settles our Credit on a solid Foundation? A Nation cannot flourish without _Virtue_; nor _Virtue_ without _good Conscience_. Sudden Ways of _growing rich_, must be ruinous to the _Publick_: There are of late those who have too suddenly got vast Estates, and others as soon stripp'd of great Fortunes. _Industry_ is therefore the true natural Way to Wealth, as _Idleness_ is to Poverty. Riches cannot be honestly got without _Industry_, therefore it ought to be encourag'd, and all _idle Persons_ made to work; and such as will not work, ought to be serv'd as they are in _Holland_, that is, exercis'd with the _Pump_. Has not the easy Way of getting Money prevented the _South-Sea_ Company from Carrying on _their Trade_, and the _Fishery_, that Noble and Profitable Branch; which if they would heartily set their Shoulders to, they might increase their Stock a Hundred _per Cent._ and not set it above its intrinsick Value? And our _Poor_ being very numerous, all of 'em may be provided for that way. Our _Trade_ has decay'd ever since we have promoted _Stock-Jobbing_, that easy Way of getting Money: Our _Manufactories_ have diminish'd; which have increas'd our _Poor_, and lessen'd our _Imports_ and _Exports_; and the King, in Time, will lose his _Customs_. I shall offer some few Heads, necessary to promote _Trade_, and to put us in a Way speedily to pay our _Debts_, and prevent _Stock-Jobbing_, or else _Trade_ can never flourish. * * * * * We must _Recoin_ our Money, and make the _Agio_ so large, as will prevent its being exported; and thereby hinder the _East-India_ Company from purchasing _Bullion_ in _Holland_: For if they are suffer'd to buy _Bullion_ there, we had better by the Half give them free Liberty to export our Coin, unless the _Exchange_ is Eight _per Cent._ in our Favour, (which is now so much to the contrary) we shall at all Times be Losers. By which it appears, how great Losers we are at present, by not making our Coin of a Value, as it may be exported without Damage to the Nation. Our _Government_ may have _Bullion_ in Plenty, if they will be the Merchant for that Commodity, and give but a small Matter more for it than our Neighbours; which we may very well afford to do, if we settle a like _Agio_. * * * * * One great Help to _Trade_ in the Nation, would be to have _Sixpences_ (nay, even _Shillings_) coined with a much greater Allay than our present Coin; as also _Groats_, _Three-pences_, and _Twopenny Pieces_: The Government would receive such a Benefit thereby, as cannot be well here express'd. And I dare answer to find a _Method_, with fine Copper so intermix'd with Silver, that it shall not be worth any Person's Time, Trouble and Hazard, to counterfeit it. Our Silver being coined with so great an _Allay_ as will prevent its being exported, will in a short Time cause a Currency of _Cash_: The _Gentry_ will not hoard it; whereby _Traders_ will be better paid, and our _Manufactures_ encourag'd, and carry'd on to a greater Degree. I remember when there was a great deal of _Clipt_ and _Counterfeit Money_, and very Plenty of both, that every one that had either a Counterfeit Piece, or Money that was cut very small, always studied what to _buy_ with it, that they might pass the one away, or part with the other. The Difference to the _East-India_ Company, in buying _Bullion_, or _Pieces of Eight_, in _Holland_, is Seven or Eight _per Cent._ more than what it stands them in when they can be supply'd with it at Home; and if they were prohibited the _Exportation_ of _Bullion_ from _Foreign Countries_, and suffer'd to export our own _Coin_, or such Ingots as shall have the _Tower-Mark_, our _Government_ would have the Advantage which the _Dutch_ now gain, and no Loss to the _East-India_ Company. For it will be then equally the same to them, whether they export it from hence, or from _Holland_, to _India_. There is no other Way of preventing our _Bullion_ and _Silver_ being carry'd out of the Land, but by the Prohibition of the one, by paying a Difference to the _Government_; _viz._ such a Difference as comes pretty near to what is lost by _Remittances_; and suffering the other (_viz._ our _Crowns_ and _Half-Crown Pieces_, coin'd with a proportionable Allay) to be exported. All which would help to pay off the _Nation's Debts_, and make us a Flourishing People. Our _Half-Crowns_ and _Crowns_ being recoined to such a Standard, I say, would be of equal Advantage to the _East-India_ Company, whether they exported _Bullion_ or _Pieces of Eight_, from hence or from _Holland_: For by the Bank of _Holland_, or rather _Amsterdam_, all _Exchanges_ are chiefly govern'd; and as the _Hollanders_ are the nearest concern'd with us in _Trade_, so by them we are to regulate and proportion the Difference between our _Bank-Money_ and our Current Cash. * * * * * The Bank of _England_ is establish'd upon the Standard of our present _Coin_: Let it so remain, till the _Government_ sees fit to alter, or pay them off; and let _Bills of Exchange_ be paid _in Banco_, or, if they so please, in Current Cash; the Difference or _Agio_ to be allow'd in like manner as they do in _Holland_. There has been a considerable Profit made, by _Melting down_ and _Exporting_ our own Coin; and there will always be those that will do it, tho' punish'd with Death, as in _Portugal_. And where there is a great Loss in Melting down, or Exporting the _Current Coin_, tho' there is no _Penalty_, the Money will be preserv'd; as in _Holland_. Let the Merchant have a _Profit_ in carrying Gold and Silver to the _Mint_ to be coined, or there will little or none go there: But if the Merchant finds a _Profit_ (tho' small) in the Coinage, there will be great Quantities coined. That they who act with the greatest _Prudence_ and _Honour_, and have most Money, will always have most Credit; this needs no Proof. While our _Money_, which is the Blood of the _Body Politick_, is suffer'd to run out, and there is no Supply, all _Projects_ for restoring _Credit_, and keeping up the Spirits of the _People_, will prove abortive. _Trade_, and the Noblest Undertakings for Employing the _Poor_, must be at a full Stop, if Money be wanting to carry them on. 'Tis certain, that until we have a greater Plenty of Money, _Trade_ and all other Business must be assisted with _Paper Credit_; and if it does not receive Voluntary Credit, it will never be made by Force. And if our Affairs are rightly managed, our Estates are doubled, and secur'd; if not, the best Estates will soon be worth nothing. That _Paper Credit_ may have an immediate Currency, it is necessary for the _Exchequer_ to issue out as many _Notes_ as they shall be able to circulate, with a _Tax_ of a _Guinea_ on every _Transfer_; the one Half to be paid by the _Buyer_, and the other by the _Seller_. That those _Bills_ be to discharge the Debts due and owing by the _Government_: And that the said _Bills_ be circulated in _London_. Some make a mighty Noise, that if our _Coin_ be raised, _Foreigners_ will not take it. I answer, For that Reason we ought to raise it. If we are to pay _Foreigners_ any Thing upon the Balance of an Accompt, we ought to pay them as near as we can in their own Coin. That no Person (under severe _Penalty_) presume to raise the _Price_ of any Thing, on Account of the Alteration of the _Coin_; otherwise the _Name_ is only alter'd, and not the _Value_ of our Coin: There being as much Reason for the _Parliament_ to put a _Value_ thereon, as for a _Goldsmith_ to do it on wrought Plate. But the first Care to be taken, is, How the _Nation_ may prevent any Advance in _South-Sea_ Stock above what it was before; so that _Foreigners_ concern'd may not receive a _greater Principal_ than a Hundred Pound, and Five _per Cent._ as they did before this unhappy _Ingraftment_: For the Stock, by the said _Ingraftment_, will be of such a Magnitude, that a Hundred _per Cent._ Advance will, in all Probability, give the Strangers such a Capital, as will amount to more than the whole _Cash_ of the Kingdom. The _Foreigners_ have taken an Alarm since our late _unhappy Mismanagement_; and are only waiting for some _New Project_, to sell out, and strip us entirely: So that if we will consider our own _Preservation_, we must rather _depretiate_ our Stocks, than seek Means to _augment_ them. It is a receiv'd Maxim, _Salus Populi Suprema Lex esto_: This I take to be meant of the _whole Body_, not of some Parts of the _People_. And tho' _Thousands_ may suffer, yet it is a receiv'd Rule, That the _Whole_ is first to be consider'd, when it comes in Competition with any _Parts_. Therefore, in our present Case, the _Whole_ is to be consider'd; and the _Preservation_ of that, is to weigh down against all the Hardships that may happen to _Particulars_. Now, if this Maxim stands good, it is the Obligation of every true Lover of his _Country_, to have that in View; and not, from a Regard to _Particulars_, run the Hazard of sacrificing the _Whole_. Their _Misfortunes_ ought to have no Weight, nor any _Contrivance_ to ease them, prevail, in Balance with our _Country_. Our late _Project_, if it could have been held up, would have created such a _Luxury_, that that very Thing alone would have undone the _Nation_, and would have sunk us; tho' not with such a _Rapidity_, as the Way which we have now in some measure escap'd. * * * * * The _Matter_ standing in this Light, the only View is the _Benefit_ of our _Country_. The _Body Politick_ is very weak, and requires an honest and able _Physician_; and where to find him, is the only Thing in Question. Let us consider, whether this design'd _Ingraftment_ of _Nine Millions_ into the _Bank_, and _Nine Millions_ into the _East-India_ Company, will prove any real Benefit to the _Nation_ as a _Nation_? No surely, that cannot be pretended; but only, that they making greater Dividends, may be of Service to _Individuals_; and yet that is much to be doubted. For as to the _Bank_, the Capital was too big before to render any great _Advance_: And had it not been for a new Practice, first begun by the _South-Sea_ Company, of Lending Money on their _Stock_; had it not been, I say, for their imitating (tho' with Caution) that _infamous Practice_, their Dividends would have been reduc'd to _Seven per Cent._ or under. And for the _East-India_ Company, their _Trade_ is so far extended, especially at this Juncture, when they are forc'd to _over-trade_ themselves, in order to ruin the _Ostenders_, that it's look'd on already as a _Grievance_: And yet by adding _Nine Millions_, they must divide _Four Hundred and Fifty Thousand Pounds_ Profit more than before. And notwithstanding their _Trade_ (as I said before) was then a _Grievance_; to what an Extension must it be driven now, to _divide_ such a Profit; when hitherto they never _divided_ above _One Hundred and Sixty Thousand Pounds_ a Year Profit? But will it not be a Second _Injustice_ to the _Annuitants_, after so great a _Diminution_ of their Estates, to have _Two Thirds_ of it _ingrafted_ on a _precarious Bottom_? All Stocks having been suffer'd to divide above the Value of the _Nett Produce_ of their Capital; a sure Way to distress _Trade_: Especially when Corporations are suffer'd to issue out _Bonds_, without Trading with the _Money_, but purely to advance their _Stock_. The _Two Ingraftments_ are brought in, in order to help the _Proprietors_, by Advantages of _Dividends_, to a greater Income than the Stock could make, if retain'd in the _South-Sea_; and so to raise the Nominal Price of Stock. Whether it will do the former, is a Doubt; but if so, the Stock had better been kept where it was; and if the latter, it will be only a _New Bubble_, to ruin us. Neither the _Bank_, nor the _East-India_ Company, seem fond of the Project of this _Ingraftment_; and nothing can be argued, but that Something must be done, at least to amuse People with _vain Hopes_: Whereas, the true Interest of our _Country_ would have been, to have laid the _Wound_ open to every one's View; to have shewn the World, what _Dividend_ could be made out of the _Interest_, and what they might expect. Then _Foreigners_ would have sat still; for they could no where else make Five _per Cent._ of _One Hundred Pounds_; and their Money have remain'd here. But if we come to make _Dividends_ of Twelve _per Cent._ and by that means advance the Stock to _Three Hundred_; then those Strangers that had _Four Millions_ Capital, and receiv'd _Two Hundred Thousand Pounds_ per Ann. will have _Four Hundred and Eighty Thousand Pounds_ per Annum, and have a _Demand_ of _Twelve Millions_ on you; which will entirely finish what the late _South-Sea_ Directors so gloriously began. Is this a Time to endeavour at new _Projects_, when the Nation is at so low an Ebb; and when the World is ready, on the least Opportunity given, to put to the _Finishing Stroke_? It is a certain Topick, That every _Relief_ in the Case of the _South-Sea_ Company, will be thought an _Injustice_ to some, who cannot be reliev'd but at the _Expence_ of others. That Way therefore must be taken, that is most Safe and Equal. * * * * * By what has been said, you will easily judge, how little the _poor Sufferers_ are like to expect from this _New Project_; and that if the _Success_ attend it that some People hope, it must be the Ruin of the _Nation_. You likewise see the _Danger_ there is in _Advancing_ of Stocks above their Original Capital; and how necessary it is to restrain Corporations from _Dividing_ more than what their _Original Stock_ will fairly produce; and that such _Practices_ are destructive to the Commonwealth of this _Nation_. Ought not then the _Legislature_ to enter upon speedy _Measures_, and such as may prevent any _Evil Consequence_ that may happen? * * * * * Our Main Business, therefore, is, how to find out _Methods_ to extend our _Trade_; for _Projects_, and _United Companies_, are only contriv'd to _enrich_ a few. We have within our selves, and in _America_, an inexhaustible Fund to _supply_ our selves, and perhaps _Europe_, with what we are now beholden to _Foreigners_ for, and that at the Expence of our _Silver_ and _Gold_; and yet either our _Negligence_, or _private Views_, make us sit still. But otherwise, What _prodigious Advantage_ would it be to the _Nation_, to have a _Supply_ from our own _Colonies_ with those _Naval Stores_, which we have now from _Denmark_, _Sueden_ and _Muscovy_; and to save the Expence of so much _Money_ as those Trades cost us, and no longer to be at the Mercy of any _Foreign Prince_? And could we gain a Balance of _Trade_, we may hope to retrieve our selves from all the _Difficulties_ we seem to labour under. But at present, we have not the Balance with any one Nation, except _Portugal_. Now if this be the Case, it cannot be thought that an _Over-Balance_ there, can answer the _Balance_ that all _Europe_ has against us. But Luxury in the Use of _Foreign Importations_ being discourag'd, we may reasonably expect to have a _Flourishing Trade_, which will bring Mines of _Gold_ and _Silver_ into our Coffers; all other Arts and Schemes having no _Foundation_, and nothing but _Destruction_. That _Foreigners_ take the Advantage of us, by the _Rising_ and _Falling_ of our _Stocks_; nor can the _Evil_ be remedied, but by fixing them down at a _certain Price_ that they shall be bought or sold; _viz._ _Bank_-Stock at _One Hundred and Twenty Five_ per Cent. And for that Sum, the said Corporation may divide _Common Interest_, but never more. That the Surplus of _Profit_ be, to make good the Value of _One Hundred and Twenty Five Pounds_, at the Time the said _Bank_ shall be paid off by the _Government_. _India_ Stock at _One Hundred and Twenty Five_ per Cent. And that Corporation never to _divide_ more than _Common Interest_ for that Sum: The Remainder of _Profits_ accruing by that Trade be, for the better _Maintenance_ of their _Factories_, and the Extending of their _Trade_ in _India_. _South-Sea_ Stock at _One Hundred and Twenty Five_ per Cent. (if the said Corporation be put in _Statu quo_) that the said Corporation may never _divide_ more than _Common Interest_: The Remainder to carry on a Trade to such Parts and Places, as shall be thought most advisable, and to establish _Colonies_ for the Good of the Kingdom in general. Or otherwise, _Trade_ and _Industry_ will be discourag'd, and _Luxury_ and _Idleness_ be our Ruin. * * * * * The _Hollanders_ are more Political in _Trade_ than we; and they being so near us, and we having with each other so great a _Trade_, and they so largely in our _Stocks_, that unless we have an _Agio_ settled, as they have, (that is, that there be a _Difference_ between the Current Cash and the _Bank_-Money) we shall never preserve our Coin. Nor will Trade ever _flourish_, or Credit _revive_, unless a Liberty be given to all _Bodies Corporate_ and _Collective_ to Transfer as usual. * * * * * As the Eyes of all are upon the Parliament of _Great Britain_, greedily expecting a speedy _Settlement_ of _South-Sea_ Stock; how easy is it, and how securely may the _House of Commons_ pass a Vote, That the _Losses_ of the _South-Sea_ Company shall be made good? For at present the _Stock_ is precarious. And the same may be said, in some Measure, both of the _East-India_ Company, and the _Bank_: Which strengthens the _Reasons_ against the _Government's_ trusting any more to _Corporation Credit_. That _Trade_ cannot easily extend it self in this Kingdom, unless all Corporations are ty'd down from _Dividing_ (I say) more than _Common Interest_. Persons will never go on to encourage _Trade_, so long as a Profit can be made by the frequent _Rise_ and _Fall_ of Stocks, the Bane of all _Industry_. That unless, I say, a Liberty be given to all _Bodies Corporate_ or _Collective_, to raise Money to carry on and extend the _Trade_ of this Kingdom, can it be thought that _Trade_ will ever increase? And without Liberty be given to all _Bodies Corporate_ and _Collective_, to have a _Book_, wherein every Person may _transfer_ their Properties, such _Bodies_ will be never able to raise Money to carry on a _Trade_, or extend it. * * * * * Before I conclude, I shall enlarge a little concerning the _Poor_ of our Country; who will never be brought to Labour, so long as they are maintain'd by the _Parish_, and suffer'd to beg about the Country, or in the Streets. If _proper Places_ were provided, on _Navigable Rivers_, where Land is reasonable; with good Management, and by the Improvement of those _Lands_, the Expence of our _Poor_ would not be so great by the one Tenth Part of what it is, and what we now pay towards their _Relief_. And by such a prudent Management, what an _inestimable Benefit_ would it be to this Nation; not only by easing the Subject from that _heavy Burthen_ or _Tax_ to the _Poor_, but by the many other _Advantages_ that thereby the _Publick_ will receive, besides the many Hands that may be employ'd to Profit, more than what is necessary to be appointed for their own and _their Maintenance_? Such an _Advantage_ would it be to the _Nation_, as would be better to us than the Mines of _Peru_ and _Mexico_ to the _Spanish_ Monarchy. It would introduce _Industry_, reduce _Idleness_ and _Luxury_; encourage and promote the _Trade_ of the Kingdom, increase our _Exports_, and lessen our _Imports_; by providing of Hands useful in making all Sorts of Utensils, for _Army_ and _Navy_, _Soldiers_ and _Sailors_, that, when their Country have no Service for them, they may return to their _Livelihood_ they were bred to, and by their _honest Industry_ find a _Maintenance_. _FINIS._ [Printer's Decoration] Transcriber's Notes: Passages in italics are indicated by _underscores_. Non-italicized words within an italicized block of text are indicated by =equal signs=. Small capitals have been replaced with Title cased text. Obsolete spellings of words (e.g., publick, intrinsick, nett, Portugueze, allay, accompt, depretiate etc.) have been retained; long s has been transcribed as modern round s. On page 7, "maintain d" was replaced with "maintain'd". On page 8, "Ingraffment" was replaced with "Ingraftment", to make it consistent with other usage in the document. On page 12, "Twopeny" was replaced with "Twopenny". On page 26, "Bodies Corporat" was replaced with "Bodies Corporate". 
21623	----	file made using scans of public domain works at the University of Georgia.) * * * * * +-----------------------------------------------------------+ | Transcriber's Note: | | | | Inconsistent hyphenation in the original document has | | been preserved. | | | | Obvious typographical errors have been corrected in this | | text. For a complete list, please see the end of this | | document. | | | +-----------------------------------------------------------+ * * * * * USURY A Scriptural, Ethical and Economic View BY CALVIN ELLIOTT PUBLISHED BY THE ANTI-USURY LEAGUE MILLERSBURG, OHIO COPYRIGHTED 1902 BY CALVIN ELLIOTT. CONTENTS. Page. Chapter I--Definition 7 Chapter II--The Law by Moses 11 Chapter III--Usury and "The Stranger" 18 Chapter IV--David and Solomon 26 Chapter V--Denunciation of Jeremiah and Ezekiel 30 Chapter VI--Financial Reform by Nehemiah 36 Chapter VII--Teachings of the Master 42 Chapter VIII--Parables of the Talents and the Pounds 52 Chapter IX--Practice of the disciples 58 Chapter X--Church history 69 Chapter XI--Calvin's letter on usury 73 Chapter XII--Permanency of the prohibition 79 Chapter XIII--Our changed conditions 81 Chapter XIV--The American Revision 87 Chapter XV--Duty learned from two sources 93 Chapter XVI--Rights of man over things 97 Chapter XVII--Equal rights of men 102 Chapter XVIII--A false basal principle 108 Chapter XIX--The true ethical principle 115 Chapter XX--Wealth is barren 121 Chapter XXI--Wealth decays 132 Chapter XXII--The debt habit 138 Chapter XXIII--The borrower is servant to the lender 144 Chapter XXIV--Usury enslaves the borrower 146 Chapter XXV--Usury oppresses the poor 154 Chapter XXVI--Usury oppresses the poor--continued 160 Chapter XXVII--Usury oppresses the poor--continued 168 Chapter XXVIII--Usury oppresses the poor--concluded 174 Chapter XXIX--Usury centralizes wealth 180 Chapter XXX--Mammon dominates the nations 189 Chapter XXXI--Effect on character 206 Chapter XXXII--Ax at the root of the tree 219 Chapter XXXIII--Per contra; Christian Apologists 233 Chapter XXXIV--Per contra; Land Rentals 243 Chapter XXXV--Per contra; Political Economists 253 Chapter XXXVI--Usury in History 258 Chapter XXXVII--Francis Bacon 266 Chapter XXXVIII--Why this truth was neglected 272 Chapter XXXIX--Crushed truth will rise again 281 Index 293 TO MY READERS. I beg the sincere and thoughtful consideration of this book by all its readers. Please follow the argument in the order in which it is presented. This is the way it developed in my own mind and led me, step by step, irresistibly to its conclusions. Do not read the closing chapters first, but begin with the "_Definition_." I believe every candid reader doing this, and having a logical mind, will fully and heartily concur in the condemnation of usury. I hope these arguments will be fairly treated and justly weighed even by those whose interests seem in conflict. I have simply sought the truth, believing that "the truth shall make you free." It cannot be that this or any truth is in real conflict with the highest welfare of any man. If any sincere friends of this truth are grieved that the argument is so crudely and roughly stated, I can only say in excuse, that, so far as I know or can learn from the great librarians I have consulted, this is the first attempt ever made to fully present the anti-usury argument, and I sincerely hope that others, profiting by my effort, may be able to make it more effective. THE AUTHOR. CHAPTER I. DEFINITION. In the evolution of the English language, since the making of our King James version of the Bible, many new words have been introduced, and many old ones have changed their meanings. In the nearly three hundred years the Saxon word "let," to hinder, has become obsolete. It was in common use and well understood when the version was made, but is now misleading. Thus we have in Isaiah 43:13: "I will work and who will let (hinder) it?" Paul declared that he purposed to go to Rome, "but was let (hindered) hitherto." Rom. 1:13. Again we have in II Thess. 2:7: "Only he who now letteth (hindereth) will let (hinder), until he be taken out of the way." "Wot," to know, has become obsolete. Gen. 21:26: "I wot (know) not who hath done this thing." Ex. 32:1: "As for this Moses, we wot (know) not what hath become of him." Acts 3:17: "I wot (know) that through ignorance ye did it." "Prevent," from its derivation and use, meant, "to go before;" now it means to hinder. Ps. 59:10: "The God of my mercies shall prevent (go before) me." Ps. 92:2: "Let us prevent (go before) his face with thanksgiving." I Thess. 4:15: "We who are alive shall not prevent (go before) them who are asleep." Charity, which now means liberality to the poor, and a disposition to judge others kindly and favorably, was at that time a synonym of love, and used interchangeably with love in the translations of the Greek. This is especially noted in the panegyric of love, in the thirteenth chapter of First Corinthians, and faithfully corrected in the Revised Version, though some have felt that the beauty and especially the euphony of the familiar passage has been marred. But the word charity is no longer equivalent to love, in our language, and could not be retained without perverting the sense. Usury, when the version was made, meant any premium for a loan of money, or increase taken for a loan of any kind of property. Theological Dictionary: "Usury, the gain taken for a loan of money or wares." "The gain of anything above the principal, or that which was lent, exacted only in consideration of the loan, whether it be in money, corn, wares or the like." Bible Encyclopedia: "Usury, a premium received for a sum of money over and above the principal." Schaff-Herzog: "Usury, originally, any increase on any loan." This was the usage of the word usury by the great masters of the English language, like Shakespeare and Bacon, in their day, and is still given as the first definition by the lexicographers of the present. Webster, 1890 edition: "Usury, 1. A premium or increase paid or stipulated to be paid for a loan, as for money; interest. 2. The practice of taking interest. 3. Law. Interest in excess of a legal rate charged to a borrower for the use of money." Interest is comparatively a new word in the language meaning also a premium for a loan of money. It first appeared in the fourteenth century, as a substitute for usury, in the first law ever enacted by a Christian nation that permitted the taking of a premium for any loan. The word usury was very odious to the Christian mind and conscience. Interest was at the first a legal term, used in law only, and it has always been applied to that premium or measure of increase that is permitted or made legal by civil law. In modern usage usury is limited in its meaning to that measure of increase prohibited by the civil law. Thus the two words interest and usury now express what was formerly expressed by the one word usury alone. Interest covers that measure of increase that is authorized in different countries, while usury, with all the odium that has been attached to it for ages, is limited to that measure of increase that for public welfare is forbidden by the laws of a state. The distinction is wholly civic and legal. That may be usury in one state which is only interest in another. The legal rates greatly vary and are changed from time to time in the states themselves. If a state should forbid the taking of any increase on loans, then all increase would be usury, and there could be no interest; or if a state should repeal all laws limiting the exactions of increase, then there would be no usury in that state. Usury is increase forbidden by civil law. Separated from the enacted statutes of a state the distinction disappears. There is no moral nor is there an economic difference. Blackstone says: "When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not." The moral nature of an act does not depend on the enacted statutes of human legislators, and the laws of economics are eternal. We must not permit our views of divine and economic truth to be perverted by this modern division of increase into legal and illegal. In order that the whole truth may be now expressed in our language we must combine with the old word usury the new word interest; then only will we have the full force of the revealed truth. "Wherefore then gavest not thou my money into the bank, that at my coming I might have required mine own with usury or interest?" It is rendered interest in the Revised Version. Throughout this discussion usury is used in its full old classical meaning for any increase of a loan, great or small, whether authorized or forbidden by the civil state. CHAPTER II. THE LAW BY MOSES. God determined to deliver his enslaved people from the bondage in Egypt, and to lead them out to the land he had promised to their fathers. They had been strangers in Egypt; now they should have a land of their own. To them liberty was but a tradition; they should now be freemen. They had been a tribe; they should now be a nation. God raised up Moses to be his special servant and the mouthpiece to declare his will. He ordered his marvelous deliverance from the river, and his training in court as a freeman. He then gave him direction to lead his people out of their slavery, and also divine authority to announce to his people the code of laws by which they were to be governed in their free state. Some of these laws were ceremonial, to conserve their religion, that they might not forget their God. Some were civil and politic, to promote the moral, intellectual and material welfare. All were in accord with the moral and religious nature of man, and with sound economic principles. All were suited to promote their highest good, and to secure them forever in their freedom and national independence. The great basal principles of law are found in concrete form. Human life is sacred as we find from the explicit laws for its protection. The owner of an ox was made responsible for the life taken by "an ox that was known to push with its horns." A battlement or balustrade was required on the houses, very like our laws requiring fire escapes. The principle is the same. The laws forbidding marriage within certain degrees of kinship have been copied into the laws of every civilized people. The laws for the preservation of social purity have never been surpassed. The rights of property were sacred. Each had a right to his own. Theft was severely punished. "If a thief be found breaking up, and be smitten that he die, there shall no blood be shed for him." Each must assist in the protection of the property of others; even the enemy's property must be protected. "If thou meet thine enemy's ox or his ass going astray, thou shalt surely bring it back to him again." The laws for the relief of the poor were kinder and more encouraging to self-help and self-reliance than our modern poorhouses. Deut. 15:7-11: "If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the Lord thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother; but thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth. Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him naught, and he cry unto the Lord against thee, and it be sin unto thee. Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the Lord thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto. For the poor shall never cease out of the land; therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land." These divinely given laws never wrought injustice. They protected life, purity and property, and required mutual helpfulness. They were given by the divine mind, in infinite love, to promote the highest good of this chosen people. These laws of God, given by Moses, positively forbade usury or interest, and this prohibition was so repeated that there was no mistaking the meaning. Ex. 22:25: "If thou lend money to any of my people that is poor by thee, thou shalt not be to him as a usurer, neither shalt thou lay upon him usury." This law is more fully presented in Lev. 25:35, 36, 37: "And if thy brother be waxen poor, and fallen into decay with thee, then thou shalt relieve him; yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase; but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, or lend him thy victuals for increase." Prof. George Bush makes the following note upon this passage: "The original term '_Neshek_' comes from the verb '_Nashak_' (to bite), mostly applied to the bite of a serpent; and probably signifies biting usury, so called perhaps because it resembled the bite of a serpent; for as this is often so small as to be scarcely perceptible at first, yet the venom soon spreads and diffuses itself till it reaches the vitals, so the increase of usury, which at first is not perceived, at length grows so much as to devour a man's substance." An effort is sometimes made to limit the application of these laws by placing special emphasis on the poverty of the borrowers and to confine the prohibition of usury to loans to the poor to meet the necessaries of life; and it is claimed that the laws are not intended to prohibit usury on a loan which the borrower secures as capital for a business. In reply it can be said: 1. There may be more benevolence in a loan to enable a brother to go into business than in a loan to supply his present needs. It may be less benevolent and less kind to lend a dollar to buy flour for present use than to lend a dollar to buy a hoe with which to go into business and earn the flour. The highest philanthropy supplies the means and opportunities for self-help. 2. A desire for capital to promote a business to gain more than is necessary to nourish the physical and mental manhood is not justified nor encouraged anywhere in the Word. There is just a sufficiency of food necessary to the highest physical condition. There is just a sufficiency of material wealth necessary to the development of the noblest manhood. More decreases physical and mental vigor and degrades the whole man. To seek more is of the nature of that "covetousness which is idolatry." Prov. 23:4: "Labor not to be rich." Prov. 28:20: "He that maketh haste to be rich shall not be innocent." Riches are a gift of God and a reward of righteousness. Prov. 22:4: "The reward of humility and the fear of the Lord are riches and honor and life." Psalm 112:1, 3: "Blessed is the man that feareth the Lord, that delighteth greatly in his commandments. * * * Wealth and riches shall be in his house." "In the fourth petition of the Lord's prayer (which is: Give us this day our daily bread) we pray, That of God's free gift, we may receive a competent portion of the good things of this life and enjoy his blessing with them." 3. If the prohibition is applicable only when the borrower is poor it would be difficult to properly apply it by drawing the line between the rich and the poor. Many who are rich feel that they are poor and there are many high spirited poor who will not admit their poverty. Many rich live in conditions that some poor would call poverty. The line must be vague and indefinite and always offensive. If any one should endeavor to clearly mark and emphasize such a division in any modern community he would receive the contempt of all right thinking people. 4. The laws of the Hebrews did not discriminate classes except in their ceremonial and forms of worship. There was but one law and that applicable to all alike. Even the stranger was included in the uniformity of the law. Num. 15:15, 16: "One ordinance shall be both for you of the congregation and also for the stranger that sojourneth with you, * * * one law and one manner shall be for you and for the stranger that sojourneth with you." 5. In the Hebrew community the man of independent resources did not compromise his freedom by becoming indebted to another. Debt was a sure indication of some embarrassment or strait. The mention of the poverty of the possible debtor is not to limit the application of the law but describes the borrower. Thou shalt not lend upon usury to the poor unfortunate fellow who is compelled to ask a loan. 6. The laws of the Hebrew state were for the promotion of equity between man and man and also for the protection of the weak and the helpless. With these objects all good governments must be in harmony. They can only be secured by general laws. It would be very imperfect protection to the helpless poor if it was permitted to charge usury to the covetous, greedy fellow who having much, yet desired to gain more and was bidding urgently for the very loan the unfortunate brother needed. Also even equity between the borrower and the lender would work a hardness in the conditions of the poor man. Full protection requires a law of general application. 7. Independence, self-reliance, self-support, was the condition aimed at and encouraged in the Hebrew state. Borrowing was only in time of sore need. The man who went a-borrowing was second only to the man who went a-begging. The brother who, through misfortune became dependent, was able the sooner to repay his loan and return to independence and to self support. 8. In the repetition of the law in Deut. 23:19, 20, there is no reference to the poverty of the borrower and it cannot by fair interpretation be limited to the poor. "Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury. Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to do in the land whither thou goest to possess it." CHAPTER III. USURY AND "THE STRANGER." Deut. 23:19, 20: "Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury. Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it." While there is no reference to poverty in this passage and the prohibition cannot fairly be limited to loans to the poor, a shadow of permission to exact usury is found in the clause: "unto a stranger thou mayest lend upon usury." Hebrews, who have been anxious to obey the letter of the Mosaic law, while indifferent to its true spirit, have construed this into a permission to exact usury of all Gentiles. Christian apologists for usury, who have not utterly discarded all laws given by Moses as effete and no longer binding, have tried hard to show that this clause authorizes the general taking of interest. To do this it is wrested from its natural connection, and the true historic reference is ignored. Three classes of persons, that were called strangers, may be noted for the purpose of presenting the true import of this passage. 1. Those were called strangers who were not of Hebrew blood, but were proselytes to the Hebrew faith and had cast their lot with them. They were mostly poor, for not belonging to any of the families of Jacob, they had no landed inheritance. The gleanings of the field and the stray sheaf were left for the fatherless, the poor, and these proselyted strangers. But they were to be received in love, and treated in all respects as those born of their own blood. Ex. 12:48, 49: "And when a stranger shall sojourn with thee, and will keep the passover to the Lord, let all his males be circumcized, and then let him come near and keep it; and he shall be as one that is born in the land: for no uncircumcized person shall eat thereof. One law shall be to him that is home born, and unto the stranger that sojourneth among you." Lev. 24:22: "Ye shall have one manner of law, as well for the stranger, as for one of your own country: for I am the Lord your God." Num. 9:14: "And if a stranger shall sojourn among you, and will keep the passover unto the Lord; according to the ordinance of the passover, and according to the manner thereof, so shall he do: ye shall have one ordinance both for the stranger, and for him that was born in the land." Num. 15:15, 16: "One ordinance shall be both for you of the congregation, and also for the stranger that sojourneth with you, an ordinance forever in your congregations: as ye are, so shall the stranger be before the Lord. One law and one manner shall be for you, and for the stranger that sojourneth with you." Of these strangers it is explicitly said they are to be treated precisely as brethren of their own blood. Lev. 25:35, 36: "And if thy brother be waxen poor, and fallen in decay with thee, then thou shalt relieve him: yea, though he be a _stranger_, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee." 2. There was also another class of strangers, including all the nations that were not of Hebrew blood, by which they were surrounded. These traded with them and often sojourned for a more or less extended period among them for merely secular purposes, but never accepted their faith. For this reason they were often called sojourners. With us, in law, the former strangers would be known as "naturalized citizens," these as "denizens," residents in a foreign land for secular purposes. These denizens were to be dealt with justly, to be treated kindly and even with affection, remembering their long sojourn as strangers in Egypt. Ex. 22:21: "Thou shalt neither vex a stranger, nor oppress him: for ye were strangers in the land of Egypt." Ex. 23:9: "Also thou shalt not oppress a stranger: for ye know the heart of a stranger, seeing ye were strangers in the land of Egypt." They were "denizens," but not citizens of Egypt four hundred years. Lev. 19:33, 34: "And if a stranger sojourn with thee in your land, ye shall not vex him. But the stranger that dwelleth with you shall be unto you as one born among you, and thou shalt love him as thyself; for ye were strangers in the land of Egypt: I am the Lord your God." This class of denizens or sojourners was also to be treated with the same kindness as their own blood. Lev. 25:35, 36: "And if thy brother be waxen poor, and fallen in decay with thee, then thou shalt relieve him: yea, though he be a stranger, or a _sojourner_; that he may live with thee. Take thou no usury of him, or increase: but fear thy God: that thy brother may live with thee." The sojourner or denizen is here distinguished from the stranger who had been naturalized, adopting their faith. 3. There was another class called strangers. This class was limited to the inhabitants of their promised land. Robinson's Bible Encyclopedia says, on this clause: "'Unto a stranger thou mayest lend upon usury.' In this place God seems to tolerate usury toward strangers: that is the Canaanites and other people devoted to subjection, but not toward such strangers against whom the Hebrews had no quarrel. To exact usury is here, according to Ambrose, an act of hostility. It was a kind of waging war with the Canaanites and ruining them by means of usury." God withheld his chosen people from taking possession of the promised land until "their iniquity was full" and the divine sentence of condemnation had been pronounced against them. They were to be rooted out of the land and utterly destroyed for their sins, and their land given to the chosen people. God declared that he would execute his sentence, driving them out before them, as his people should increase and be able to occupy the land. Ex. 23:23, 28-32: "For mine angel shall go before thee, and bring thee in unto the Amorites, and the Jebusite, and I will cut them off. And I will send hornets before thee, which shall drive out the Hivites, the Canaanite, and the Hittite, from before thee. I will not drive them out from before thee in one year; lest the land become desolate and the beasts of the field multiply against thee. By little and little I will drive them out from before thee, until thou be increased, and inherit the land. And I will set my bounds from the Red Sea even unto the sea of the Philistines, and from the desert unto the river: for I will deliver the inhabitants of the land into your hand; and thou shalt drive them out before thee. Thou shalt make no covenant with them, nor with their gods." Ex. 34:10-12: "And he said, Behold, I make a covenant: before all thy people I will do marvels, such as have not been done in all the earth, nor in any nation: and all the people among which thou art shall see the work of the Lord: for it is a terrible thing that I will do with thee. Observe thou that which I command thee this day: behold, I drive out before thee the Amorite, and the Canaanite, and the Hittite, and the Perizzite, and the Hivite, and the Jebusite. Take heed to thyself, lest thou make a covenant with the inhabitants of the land whither thou goest, lest it be for a snare in the midst of thee." They were in no way to covenant with this people and interfere with the execution of divine judgment. They were commanded, willing or unwilling, to be in a measure the executioners of those under sentence. These people of Canaan were deprived of all rights by the divine sentence and the Israelites were not to grant any. To do so was direct disobedience, and yet most of the tribes failed to obey the command, permitting many of the inhabitants to remain. When the Gibeonites deceived Joshua and secured a pledge, the pledge of their lives was kept, but they were made slaves, doomed to drudgery forever, "hewers of wood and drawers of water." Josh. 9:23. This compromise was contrary to the divine command for their utter destruction. To condone the guilt of these people, or to interfere with their execution, was as flagrant a violation of law as that of a modern community that seeks to protect criminals, or that interferes with the execution of those convicted of capital crimes. This class of strangers had no rights that Hebrews were permitted to respect. They were not to be given any privileges. They were to be treated as Hindoo widows are treated, "accursed of the gods and hated of men." Debts were not to be forgiven them. The year of Jubilee did not affect them. They remained enslaved forever. The Sabbath's rest was only incidental, that there might be a complete cessation of all activities. In the fourth commandment Deut. 5:14, "thy stranger" is mentioned after the ox, ass, and cattle, and was given rest for the same reason the beasts are permitted to rest: "That thy man-servant and maid-servant may rest as well as thou." They had not the rights of a common servant or slave. The carcass of the animal that died of itself could be given them to eat, and they could be charged usury. Yet this clause has been seized upon by avaricious Jews as permission to exact usury of all the nations not of Hebrew blood, ignoring the fact that when given it was limited to those peoples under the curse of God for their iniquities. It can not justly be made to mean that the Hebrews have a right to treat other nations with less righteousness than they treat their own people. It is an unwarranted broadening to make it a permission to exact usury from all the human race except from Hebrews. It was chiefly the acting upon this false interpretation, classing all Gentiles with these strangers, accursed of God, that had no rights they were permitted to respect, that set every Gentile Christian's hand against the Jews for fifteen hundred years. Nothing more clearly marked the line between Christian and Hebrew during fifteen centuries than this one thing, that the Hebrews exacted usury or interest of the Gentiles while the Christians were unanimous in its denunciation, and forbade its practice. Gentile Christian apologists for the taking of usury or interest, to overcome the force of this prohibition, are compelled to grant that Christians may be less brotherly than Hebrews: that the borrowers whether Christian or not are "strangers" to those who make them loans upon increase. CHAPTER IV. DAVID AND SOLOMON. Devout Hebrews during the period of the Judges obeyed the Mosaic prohibition of usury or interest. It was also recognized as binding and obeyed during the reigns of David and Solomon. This was a greatly prosperous period when commerce flourished and trade was extended to the ends of the earth. David was weak before certain temptations and his falls were grievous, but his repentance was deep and his returns to God were sincere. He never failed to regard God as supreme over him and the bestower of all his blessings. He is called the man after God's own heart, and it is also said that his heart was perfect before God. His spirit of devout worship has never been surpassed. His Psalms, in all the ages, have been accepted as expressing the true yearning after righteousness and a longing for closer communion with God. David, in the fifteenth Psalm, expresses the thought of the earnest and reverent worshippers of his time. This Psalm declares the necessity of moral purity in those who would be citizens of Zion and dwellers in the holy hill. "Lord, who shall abide in thy tabernacle? Who shall dwell in thy holy hill? He that walketh uprightly, and worketh righteousness, and speaketh the truth in his heart. He that backbiteth not with his tongue, nor doeth evil to his neighbor, nor taketh up a reproach against his neighbor. In whose eyes a vile person is condemned; but he honoreth them that fear the Lord. He that sweareth to his own hurt and changeth not. He that putteth not out his money to usury, nor taketh reward against the innocent. He that doeth these things shall never be moved." The description, "He that putteth not out his money to usury," is direct and unqualified. There could be no mistaking its meaning. Those who were guilty could not claim to be citizens of Zion. There is no qualifying clause behind which the usurer could take refuge and escape condemnation. This Psalm, prepared by the king, was chanted in the great congregation, and was a prick to the consciences of the sinners and a public reproof of all the sins mentioned. He that putteth out his money to increase received thus a public reproof in the great worshipping assembly. Solomon, endowed with unequaled wisdom and able so clearly to discern the right, places among his proverbs a direct denunciation of this sin. Prov. 28:8: "He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor." In this proverb the gain of usury is classed with unjust gain that shall not bless the gatherer. This is in entire harmony with other proverbs in which those who practice injustice and oppression are declared to be wanting in true wisdom and receive no benefit themselves. "The righteousness of the upright shall deliver them: but transgressors shall be taken in their own naughtiness." "As righteousness tendeth to life; so he that pursueth evil pursueth it to his own death." "Whoso causeth the righteous to go astray in an evil way, he shall fall himself into his own pit; but the upright shall have good things in possession." "Rob not the poor, because he is poor: neither oppress the afflicted in the gate: for the Lord will plead their cause, and spoil the soul of those that spoiled them." Usury and unjust gain are joined by Solomon as sins of the same nature. It is also implied that they are necessarily connected with want of sympathy and helpfulness toward the poor. They are presented as an oppression that shall not bless the oppressor. This proverb does not confine the evil to the borrower like the proverb, "The borrower is servant to the lender." The wrong is not confined to those of the poor to whom loans may be made. The oppression of usury is upon all the poor though they are not borrowers. They are the ultimate sufferers though the loan may be made by one rich man to another to enable him to engage in some business for profit. Usury is so bound up with injustice that its practice cannot fail to result in increasing the hard conditions of all the poor. Solomon's reign was brilliant, and the ships of his commerce entered every port in the known world, yet usury was not necessary and was not practiced in that prosperous age. CHAPTER V. DENUNCIATION OF JEREMIAH AND EZEKIEL. The Hebrew nation reached its summit of power and glory during the reign of King Solomon, but corruption crept in and disintegration followed, and a series of conflicts between portions of the kingdom. The laws given by Moses were neglected, and a long period of gross sinning followed. They were warned by the faithful yet hopeful prophet Isaiah that the overthrow of their nation was certain, and that their people would be carried captive to a strange land unless they forsook utterly their sins and turned to righteousness. They did not heed and the predicted calamities came upon them. In the midst of these calamities the contemporary prophets Jeremiah and Ezekiel ministered. They differed greatly in their dispositions. Jeremiah was a complainer. Always bemoaning his own and his people's hard lot. The Lamentations are recognized as the best extant expression of unmitigated grief. He lamented his birth because he was treated as a usurer and oppressor, when he had never exacted usury, nor had business with usurers. Jer. 15:10: "Woe, is me, my brother, that thou hast borne me a man of strife and a man of contention to the whole earth. I have neither lent on usury, nor have men lent to me on usury; yet every one of them doth curse me." Ezekiel was always patient, faithfully proclaiming his messages, and suffering in silence. The completeness of his self-control and patient suffering is shown in the short but pathetic description of the death of his beloved wife, yet at the divine command he repressed his grief and delivered his message the following morning. Ezekiel 24:15-18: "Also the word of the Lord came unto me, saying, Son of man, behold, I take away from thee the desire of thine eyes with a stroke; yet neither shalt thou mourn nor weep, neither shall thy tears run down. Forbear to cry, make no mourning for the dead, bind the tire of thy head upon thee, and put on thy shoes upon thy feet, and cover up thy lips, and eat not the bread of men. So I spake of people in the morning; and at even my wife died; and I did in the morning as I was commanded." These prophets were familiar with the same scenes. They met the same sins. Some have thought they exchanged messages, sending them respectively to Jerusalem and Chaldea for encouragement and confirmation. This was the opinion of Jerome. In a catalogue of the sins prevailing in Jerusalem, for which the judgment of God came upon them, this prophet places "Usury and increase." Ezekiel 22: 7-12: "In thee have they set light by father and mother: in the midst of thee have they dealt by oppression with the stranger: in thee have they vexed the fatherless and the widow. Thou hast despised mine holy things, and hast profaned my Sabbaths. In thee are men that carry tales to shed blood: and in thee they eat upon the mountains: in the midst of thee they commit lewdness. In thee have they discovered their father's nakedness: in thee have they humbled her that was set apart for pollution. And one hath committed abomination with his neighbor's wife; and another hath lewdly defiled his daughter-in-law; and another in thee hath humbled his sister, his father's daughter. In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and hast forgotten me, saith the Lord God." It would not be easy to give a list of more gross and flagrant sins than those associated with usury in this passage. They are all, always and everywhere, sinful. In no condition can they be lawful and right. One of the answers familiar to both Jeremiah and Ezekiel when the people were reproved for their sins and exhorted to forsake them, that the divine judgments might be removed, was this, that their sufferings were not on their own account, but for the sins of their fathers. They thus met the charge of personal sins and claimed their sufferings were inherited and unavoidable. Their fathers had indulged in sin and they must reap the consequences. They complained that this was hardness in God. They expressed this murmur by a proverb. Jer. 31:29: "The fathers have eaten a sour grape, and the children's teeth are set on edge." The answer of the prophet Jeremiah briefly is, that every one shall answer for his own sin. Jer. 31:30: "But every one shall die for his own iniquity: every man that eateth the sour grape, his teeth shall be set on edge." This same proverb was repeatedly given to Ezekiel, as an excuse for continuing in sins, even when the judgments of God were upon them. The word of the Lord came more fully and explicitly to him. Ezekiel declares that the sins of the fathers were visited on the children only when they continued in their father's iniquity. That those who forsook the sins of their fathers and were righteous, were free from the punishment of the unrighteous parents. Ezekiel 18:1-17: "The word of God came unto me again, saying, What mean ye, that ye use this proverb concerning the land of Israel, saying, The fathers have eaten sour grapes and the children's teeth are set on edge. As I live, saith the Lord God, ye shall not have occasion to use this proverb in Israel. Behold, all souls are mine; as the soul of the father, so also the soul of the son is mine: the soul that sinneth, it shall die. But if a man be just, and do that which is lawful and right, and hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, neither hath defiled his neighbor's wife, neither hath come near to a menstruous woman, (_i.e._ neither hath committed a rape,) and hath not oppressed any, but hath restored to the debtor his pledge, hath spoiled none by violence, hath given his bread to the hungry, and hath covered the naked with a garment. He that hath not given forth upon usury, neither hath taken any increase, that hath withdrawn his hand from iniquity, hath executed true judgment between man and man. Hath walked in my statutes, and hath kept my judgments, to deal truly; he is just, he shall surely live, saith the Lord God." "If he beget a son that is a robber, a shedder of blood, and that doeth the like to any one of these things; and that doeth not any of those duties but even hath eaten upon the mountains, and defiled his neighbor's wife, hath oppressed the poor and needy, hath spoiled by violence, hath not restored the pledge, and hath lifted his eyes to the idols, hath committed abomination, hath given forth upon usury, and hath taken increase: Shall he then live? He shall not live: he hath done all these abominations; he shall surely die; his blood shall be upon him. Now, lo, if he beget a son, that seeth all his father's sins which he hath done, and considereth, and doeth not such like: that hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, hath not defiled his neighbor's wife, neither hath oppressed any, hath not withholden the pledge, neither hath spoiled by violence, but hath given his bread to the hungry, and hath covered the naked with a garment, that hath taken off his hand from the poor, that hath not received usury or increase, hath executed my judgments, hath walked in my statutes; he shall not die for the iniquity of his father, he shall surely live." It will be noticed that usury or increase is here mentioned among the grossest and foulest sins of which that people were guilty. They are placed by the prophet in the worst possible company. He classifies them among those things that can never be right. There is no qualification of "increase" great or small, nor of "usury" whether the loan be domestic or commercial, whether for personal need, or to go into business, whether the borrower be poor or rich. Usury is mentioned as "_malum per se_." "Usury and increase" are treated as sinful in themselves, just as fraud, violence, impurity, and idolatry are sinful, and can never be innocent unless their very natures are reversed. When there is fraud without dishonesty, and violence without injury, and adultery without impurity, and idolatry without false worship, then may there be "usury and increase" without injustice and oppression. "Some sins in themselves and by reason of several aggravations are more heinous in the sight of God than others," the prophet Ezekiel places "usury or increase" in the list of "abominations." CHAPTER VI. FINANCIAL REFORM BY NEHEMIAH.[1] After seventy years of captivity of the Hebrews in Chaldea an edict was issued by Cyrus the king permitting their return to Judea. The most earnest and devout had been restless and homesick in the strange land. The restoration was led by Zerubbabel who accompanied by about five thousand of the most devout men from the various families, made their way over the long return to their former home. This was only about one-sixth of the captive population. Many preferred to remain in the land they had now adopted, and where some had been prospered, and some were perhaps less fervent in their religious zeal. This fraction of the people, however, determined to re-erect their temple and to cultivate the fields again that were given to their fathers and to rebuild the nation, the tradition of whose glory never failed to stir their hearts. Eighty years later another company under the priest and scholar, Ezra, authorized by Artaxerxes, joined the first colony that had returned to re-occupy their own land. A few years later another company was led by the patriot, Nehemiah. Nehemiah was in an honorable and lucrative position in the first court upon earth, yet he grieved over the misfortunes of his own people, and especially over the reported distress of the returned exiles. He sought leave of absence and a commission to return and co-work with his brethren for their complete re-establishment at Jerusalem. The leave of absence was cheerfully granted and a broad commission given to take with him any who wished to return. The revenues of the king were placed at his disposal and the governors of the provinces were ordered to assist and further his work. A large company of the earnest and devout returned with him, confident of his protection and in sympathy with his mission. He deliberately reviewed the work to be done, made careful plans and was greatly successful. The people were obedient. They cheerfully endured the privations and dangers in their devotion to their country, and in the hope of retrieving the fortunes of their depressed people. Enemies appeared, who threatened to estop their work, but some worked while others watched, with arms in hand, ready to defend. Some wrought with one hand and held a weapon for ready defence in the other. Nehemiah and his aides, and many of the people, did not take off their clothes, but were on duty constantly--so devoted were they to the cause in which they were engaged, regaining their homes and re-establishing the worship of their fathers and rebuilding the nation. But there was a strange interruption in this patriotic work. A sordid covetousness possessed their nobles and rulers. While the people were absorbed in their patriotic service, these persons were planning successfully to despoil them. A cry of distress came to the ears of Nehemiah. The people found, now that they had made the sacrifice and suffered deprivations and cheerfully given their labors for the common good, they were deprived of their blessings and enslaved. This enslavement was not to foreign rulers, but to those of their own blood. A division had grown up among their own kindred. Some had grown rich and become their masters. Others were in hopeless poverty. The distinctions came gradually or grew up among them, possibly unobserved: the rich becoming richer and the poor poorer, until the nobles held their lands and were selling their sons and daughters as chattels. This condition was hopeless, after all their struggles for nearly a hundred years to re-establish their institutions. Neither they nor their children could, under those conditions, enjoy the fruit of all their efforts. This was no fault of theirs. There had been times of dearth and harvest failure, when some with large families were in need. The king's tribute, too, was heavy upon them and some were not able to pay and they were compelled to borrow, but had to give mortgages upon their land as security. Now lands, homes and all, had passed to the creditors and they were despondent and helpless. This cry caused Nehemiah great distress, but Nehemiah was not like Ezra, a devout and learned priest, but without executive power, who in a like position gave way to unmitigated grief. Nehemiah was equally patriotic and conscientious, but he was also a strong leader and an independent commander. He did not call together the nobles and rulers charged with oppression and ask them what he should do. He had none of their counsel. He took counsel with himself, his own conscience, his own judgment, and worked out an independent, individual policy which he should pursue. His sympathy was with the suffering people, and he determined to espouse their cause and to correct their wrongs. He then called the nobles and rulers and charged them to their face with oppression. He laid "the ax at the root of the tree" and charged the fault to their covetousness, to the exacting of usury or interest. It was this, he declared, that had brought them to wealth, but driven others to poverty. He demanded reparation. When they were slow to yield, he called a convocation of the people and aroused them to a due sense of the wrong they had been enduring, and laid bare the sins of the rulers and nobles. He showed the oppression by comparing their sordid and greedy conduct with the unselfish, self-sacrifice of himself and others for the common good. While he and the patriotic people were busy with hand and brain in rebuilding the nation and fighting the enemies, these usurers were busy getting in their work of ruin, gathering the property into their own hands and enslaving the patriots. The usurers were not able to withstand this onslaught of the chief commander and the aroused people, and they made no reply. Their conduct had so evidently been contrary both to the letter and spirit of their own law, they were compelled to yield and to say meekly, "We will do as you have said." Then he stated the terms and conditions of the reform he would institute. 1. They must return the pledges they had taken for debts, without reserve. The people must not be deprived of their land, tools, or instruments of production. The foreclosure of mortgages must be set aside and the people again given possession of their lands. 2. Interest must be returned or credited upon the debts. If the interest equaled the debt, then the debt was fully discharged. If more than the principal had been paid, then it must be returned in money or in the product of lands taken in foreclosure, the wine or oil or fruits and grains must be returned. Thus only could the wrongs be corrected and righteous adjustment be made. There then followed a general restoration of pledges and a cancelling of debts that had been paid once in interest, and a repaying of any surplus. 3. They must take a solemn vow that this sin shall henceforth be unknown among them. The law against usury or interest must henceforth be carefully obeyed. These distinctions that had grown up among them must disappear forever, and the cause of the poverty of the many and the wealth of the few must be shunned. To these conditions the usurers assented, made ashamed by the conduct of the noble patriot in contrast with their own selfishness, though they had not yielded until awed and compelled by the indignation of the people, which Nehemiah had enkindled against them. This positive enforcement of the law against the taking of increase on any loan, makes unmistakably clear the interpretation of the law by the devout, earnest, sincere, God-fearing Hebrews, down to the close of the Old Testament Canon. [1] References: Ezra, Nehemiah, Bible Dictionaries. CHAPTER VII. TEACHINGS OF THE MASTER. Psalmist and prophets had sung of the exalted character of the coming Messiah. "Thou art fairer than the children of men: grace is poured into thy lips." "And his name shall be called Wonderful, Counselor, The Mighty God, The Everlasting Father, The Prince of Peace." At his coming he lifted to a higher plane, by his precepts and example, the ideal of a true, noble and worthy human life. By his teachings and by his life of utter unselfishness he revealed clearly the exalted character and conduct that conformed to the Divine will. 1. Our Lord's character forbids that we should think of him for a moment as devoted to the gathering of worldly wealth. He came to minister unto, not to serve himself. Self-seeking was foreign to his nature. A great truth was spoken by the scoffers. "He saved others, himself he cannot save." He who strives to follow in his footsteps cannot serve himself. The whole drift of a great unselfish Christ-like soul must be for others. The whole current of his thought and effort during his life must be, to be helpful to others. Studying and striving to help others, he cannot seek wealth. "Ye cannot serve God and mammon." It is out of harmony with the whole life and all the teachings of the Master that he should encourage or permit a means of increasing wealth forbidden by the laws given by Moses and classed among the vilest of sins by the prophets. 2. Again: He did not undo the teachings of the prophets, but enlarged their scope. He showed by word and example how the true spirit of the teachings of the old dispensation led to self-sacrifice for the welfare of others. Matt. 5:17: "Think not that I am come to destroy the law, or the prophets: I am not come to destroy but to fulfill." Fulfill, here, is more than to obey. It is in antithesis with destroy, and means to perfect and complete. The old ceremonial forms of religious worship, pointed to the advent of one who should be a perfect sacrifice for sin, typified by the daily sacrifice of bulls and rams. The sacrifice typified, was completed in Him. The moral enactments were not set aside, but they were given a completed meaning; that is they were made to reach beyond the external to the hidden desires and affections of the heart. He taught that mere external compliance was not sufficient in the All Seeing Eye. The affections and desires of the soul must be in agreement. Thus we have the explanation of the law of chastity, completed, requiring purity of the soul. So murder is not merely the external act, but the law for murder, completed, forbids enmity or hatred hidden in the heart. The requirements for mutual helpfulness were also perfected or completed. The old law required the helping of a brother in need. Deut. 15:7, 8: "If there be among you a poor man of one of thy brethren within any of thy gates in the land which the Lord thy God giveth thee, thou shalt not harden thy heart, nor shut thine hand from thy poor brother. But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth." This was completed so as to extend the help to all sufferers, though not kindred nor friendly, and though they may not be able nor willing to repay. Luke 6:35: "But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful, and to the evil." The old law permitted the lender to take a pledge to secure the return of "as much again," that is, the loan without interest. The Master enjoins being helpful though the principal should never be repaid. To take a pledge or mortgage and add the interest would greatly harden the conditions for the borrower. It would be a step backward and not forward in the way of helpfulness to others. Again, the year of Jubilee was a kind of legal time limit to debts. All obligations were then cancelled. No debt could be collected. The selfish Hebrew feared to make a loan shortly before Jubilee lest it should not be repaid promptly and his claim would become worthless. Deut. 15:9: "Beware that there be no thought in thy wicked heart, saying, The seventh year, the year of release is at hand; and thine eye be evil toward thy poor brother, and thou givest him naught; and he cry unto the Lord against thee and it be sin unto thee." In his heart the old Hebrew might have a desire to press his claim but the law protected the debtor. This law for the release of the debtor from the payment of principal without interest is completed so as to require sincere and hearty forgiveness. Our Lord taught his disciples to ask for forgiveness of God only as they forgave their debtors, Matt. 6:12: "And forgive us our debts, as we forgive our debtors." The commercial terms here used show this to be the completion of the law as touching the creditor and his released debtor. 3. Again, he broke down the artificial barriers, the distinction of Hebrew and Gentile, Greek and Barbarian, bond and free. The love and sympathy and helpfulness among men was no longer to be limited to such narrow bounds, but must be wide as the race. "Who is my neighbor?" is so answered that every man must be neighbor to every other man, and the object of his care and help. All are of one blood, and all God's children. He gave one law for all classes and conditions in all times. He so expounded the old commandments and so condensed them, that they became the one law of love. Whosoever is governed by supreme love to God, and loves his neighbor as himself, has fulfilled the law. He would thus bind all men together, and all to the throne of God, by the one bond of love. But he further intensified the obligations of love, by his own special command. John 15:12: "This is my commandment, that ye love one another, as I have loved you." And he adds it to the decalogue, John 13:34: "A new commandment I give unto you, that ye love one another as I have loved you that ye also love one another." This new command requires that men shall love their brethren above themselves and be ready to sacrifice for their welfare. As he gave his life, so also he commanded that men should sacrifice for their fellows. Those who hear his voice and have the spirit of obedience go to the ends of the earth, and make any sacrifice that may be required for the uplifting of fallen men. The law forbidding the Hebrews exacting usury of their brethren, of the stranger who had accepted their faith and kept the passover, of the stranger, sojourner who dwelt among them, of everybody except the Canaanite who was under the condemnation of God, could not have been annulled or suspended by the divine Master who thus draws together and embraces as one family the whole race. The ties of Christian brotherhood are not less strong than the ties of Hebrew blood. The converts from heathen to Christian faith are not less dear to the missionary than the proselytes to the Hebrew faith were to the Pharisees. The foreigner who comes into a Christian community must not be treated with less justice and kindness than the wandering Arab who strolled into Jerusalem for a trade. It cannot be that the relation between Christians is like that between the Hebrew and the criminal Canaanites who were convicted of capital crimes and under sentence of death. As usury was repugnant to that spirit of justice and brotherly love that obtained in the Hebrew State, much more is it repugnant to that closer brotherhood into which we are drawn by the divine Lord. 4. Again, He was a friend of the poor and lowly. This was foretold by the song of the virgin, when assured that she should be the mother of the Savior. Luke 51:52, 53: "He hath put down the mighty from their seats, and exalted them of low degree. He hath filled the hungry with good things; and the rich He hath sent empty away." The prophets foretold that He should be the friend of the poor. He pointed John to the fulfilment of these prophecies in proof of his Messiahship. In his first address in the explanation of the new dispensation he began by saying, "Blessed are the poor in spirit." The literal rendering would be, "Blessed are the poor, to the Spirit." This is the dative singular with the definite article. He is speaking of external conditions as contrasted with spiritual blessings, and those conditions thought wretched in the world were especially favorable for the development of grace. The poor, humble, mourning, suffering, and persecuted were especially blessed in his kingdom. The word rendered poor does not mean pauper. There is a great difference. The poor may be industrious, self-reliant and self-supporting. There is no hint of dependence. In Luke he says, "Blessed are ye poor." When at the rich man's table, he told his host that he would be more blessed if he should make the next feast to the poor and defective, that could make him no return. He was uncompromising in his denunciation of the rich. Luke 6:24: "But woe unto you that are rich, for ye have received your consolation." He showed the danger of riches in the parable of the sower. Matt. 13:22: "He also that received seed among thorns is he that heareth the word; and the care of this world, and the deceitfulness of riches choke the word, and it becometh unfruitful." Where grace is to be cultivated and flourish, the "greed of gain" must not enter. The young man who came to him, whom he loved for his sweet disposition and excellent character, he turned away by the answer that his wealth was incompatible with his salvation. He must part from his riches. When the disciples were surprised, he made it more emphatic, Matt. 19:24: "And again I say unto you, it is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God." And when they felt that this made salvation impossible, he declared it could only be possible by the exercise of omnipotent, divine grace. Zaccheus, the one rich man whose conversion is recorded, surrendered his ill-gotten gain fourfold and gave away half of the remainder before salvation came to his house. The temptation to trust and lean upon riches is irresistible. Our Lord did not make wealth more dangerous than under the Mosaic dispensation by removing the restraint that was there put upon it. As a friend to the poor he did not give wealth an advantage it did not have before. 5. The whole drift of his teachings limited and restrained accumulation of wealth. The parable of the rich fool is a forcible presentation of its human folly on the earthly side. "Whose shall these things be?" "Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through and steal: For where your treasure is, there will your heart be also." The result is irresistible; when engaged in storing earthly treasure, the heart will be earthly; or if laying up treasures in heaven, the heart will reach heavenward. He who labors for a heavenly reward, will be heavenly minded. Treasures are stored for eternity, when used for the bringing out of that which shall survive the grave; for the bringing out the highest divine type of manhood and womanhood, in ourselves, in our children, and in all the children of men. Treasures expended in the development of immortals shall be found when the earthly and temporal scenes have passed away. That which is expended in the uplifting of the race shall be our eternal reward. Giving, giving, not hoarding is commended. Productive industry he enforced by his example, the carpenter that wrought for his daily bread. He chose workmen to be his followers. He taught economy in the command to take up the fragments of the food miraculously created "that nothing be lost," yet unreserved giving was the lesson he inculcated and illustrated in his life. To follow his example, we must produce and produce much, yet what we gain is to be expended, so as to promote the highest welfare of all mankind. We must not store the fruits of our labor, but expend, not as a spendthrift who wastes, but judiciously and wisely for God and man. Our giving is only limited by the ability and facility to produce. Our Lord did not greatly add to the temptation to hoard by delivering the earthly treasures from the decay by "moth and rust" and instead permitting their increase. Our hoarding of earthly treasures must be limited, because of our disposition to trust in them. We must always be so dependent that we shall pray truly with the spirit of dependence, "Give us this day our daily bread." "Give me neither poverty nor riches; feed me with food convenient for me." Thrift does not require that we shall hoard an amount that will support us through life, much less that we shall lay up a fortune, that shall free our children from the necessity of productive labor. The spirit of the Master's teachings is, that each age shall produce and spend its product for its own advancement, then each succeeding age shall be better fitted to produce and care for itself and so advance the coming generations. "Go work today in my vineyard." Now is the time to give and do for the generation yet unborn. CHAPTER VIII. PARABLES OF THE TALENTS AND THE POUNDS. Our Lord mentions usury by name only in the parables of the talents and pounds. Matt. 25:14-30; Luke 19:12-27. Usury is mentioned in these passages incidentally to meet the excuses of worthless servants, but in both as the unjust and oppressive act of a hard and dishonest man. These references to usury are in entire harmony with the expressions of David and Solomon, and of Jeremiah and Ezekiel. These servants in the parables were slaves, who owed their service to their master and for whom he was responsible. The lesson in both parables is the necessity of faithfulness. The faithful servants are rewarded and the unfaithful punished in both. Yet there is a special lesson in each. The parable of the talents shows that an equal reward shall be given all who are equally faithful, though the means and opportunities afforded one may far exceed those granted another. One was given five talents and another but two; one gained five and the other two, yet both equally faithful, are directed to enter into the joy of their lord. The unfaithful servant brings his talent with an excuse, which is a charge against the character of his master, "I knew thee that thou art an hard man reaping where thou hast not sown, and gathering where thou hast not strewed," "so there thou hast which is thine." The master in reply showed the inconsistency of the excuse by assuming that he bore the hard character charged upon him by his slave, "Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strewed: Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury." It is "interest" in the Revised Version. This interview may be paraphrased as follows: The unfaithful servant said: "I know the kind of a man you are. You are dishonest. You take what does not belong to you. You reap what other people sow, and you take up what others earn. I was afraid of you: Here is all that you gave me and all that belongs to you." The master said: "You are merely excusing yourself. You are a lazy faithless slave. If I am the hard man you say I am, taking what does not belong to me and gathering the sowings and earnings of others, you could have met that condition without trouble to yourself, by giving my money to the usurers and then at my coming I could have received my unjust gain. Your excuse is inconsistent, you condemn yourself. You are an indolent and worthless slave. Begone to your punishment." It is clearly implied that unearned increase, reaping and gathering without sowing, could be gained through the exchangers. If this was what was demanded, the servant could have secured this with no effort on his part. His charge against the master was a mere pretence to excuse his own want of personal faithfulness, and the master's reply was fitted to this pretense. This is in entire harmony with the opinion our Lord expressed of the exchangers when he called them thieves and drove them out of the temple. It would be wholly inconsistent for him to advise an honest and faithful servant to place any portion of the property in their hands. His advice can only come from the standpoint of a dishonest master such as his servant called him. The parable of the pounds shows the degrees of faithfulness in those who have equal opportunities. With the same opportunities one may far surpass another, because more faithful to his trust, his reward is proportionately greater. In this parable each servant received the same, but the gains and rewards differ. By diligence one gained ten pounds and is commended and given authority over ten cities. Another gained five pounds. He is also commended and given authority over five cities. Another, who had given no service, came with his pound but without increase. This was a proof of his unfaithfulness. He endeavors to shield himself like the servant with the talent, by charging injustice and oppression on his master. "I feared thee because thou art an austere man: thou takest up that thou layest not down, and reapest that thou didst not sow." His master turned on him because his own reason was inconsistent with his conduct and a mere shield for his indolence and worthlessness. "Out of thine own mouth will I judge thee, thou wicked servant. Thou knowest that I was an austere man, taking up that I laid not down, and reaping that I did not sow. Wherefore gavest thou not my money into the bank, that at my coming I might have required mine own with usury." This interview may also be paraphrased. The unfaithful slave came and said: "Lord I have carefully kept all that thou gavest me. I knew that thou wast an exacting master, taking what did not belong to you and gathering what others sow." The master says: "Now stop right there and I will judge you by your own excuse out of your own mouth. You say you knew me to be exacting and dishonest, taking more than belonged to me. Now, knowing this, why did you not serve me by giving my money to the bank, and then at my coming you could have brought me my money with my unjust gain and that would have pleased a hard man like me, without effort on your part. You are only giving this as an excuse for your own unfaithfulness. You are a wicked slave." The master admits that he would be a hard man, if he reaped what another sowed, or took up what belonged to another, but assuming that this was his character, even this could have been met without trouble to the slave through the bank. This is a clear recognition of usury as unjust gain. Exchangers were little more than the pawn-brokers of today and a bank was a pawn-shop where pledges were stored. The money loaned upon any pawn was much less than its full value. The increase of the loan soon made it more than the value of the pledge which was then forfeited, and the pawn was sold by the broker. These parables are here dwelt upon, for they are so frequently misunderstood and misapplied. In a large volume on "Banking," the writer found the words of the master quoted, "Wherefore then gavest not thou my money into the bank, that at my coming I might have required my own with usury." And they were quoted as a solemn direction of the divine Master to deposit money in the bank. To quote from these parables in the defense of usury is as flagrant a perversion of the truth as the famous quotation to prove that Paul encouraged theft. "Let him that stole, steal." The lessons of these parables are in entire harmony with the law of Moses and the teachings of the prophets and Nehemiah. In these parables the usurer is presented as a hard man, exacting that which he has not earned and to which he has no right. The teachings of the Master did not permit what had been forbidden in all the ages. CHAPTER IX. PRACTICE OF THE DISCIPLES. The conditions in the very early church were not such as to make prominent the sin of usury. Many of the disciples were very poor and from the humblest walks of life. I Cor. 1:27-28: "But God hath chosen the foolish things of the world to confound the wise; and God hath chosen the weak things of the world to confound the things that are mighty; and the base things of the world, and things which are despised, hath God chosen, yea, and the things which are not, to bring to nought things that are." The practice of the disciples was, however, in entire harmony with the teachings of Moses and the Master, and in accord with the prohibition of usury. Later, in the time of the apostolic fathers when the church came face to face with this sin, there was but one voice and that in the denunciation, for the fathers were unanimous in its condemnation. (1) The first disciples did not loan, but gave to their needy brethren. The early converts held their property so subject to a general call that some have thought they had a community of goods. Acts 2:44, 45: "And all that believed were together, and had all things common; * * * and sold their possessions and goods, and parted them to all men, as every man had need." It is evident they did not assist their brethren with "loans," but with gifts; much less did they take the opportunity to secure increase on loans. The suffering poor were their especial care. They gave of their poverty for the relief of the suffering. Many called by the Spirit were in want, and many came to want through the severe persecutions to which they were subjected. This was especially true of the converts in Jerusalem. For these large collections were received from the churches in Macedonia and in Corinth. They were commanded to care for the needy of their own house. I Tim. 5:8: "But if any provide not for his own, and especially for those of his own house, he hath denied the faith, and is worse than an infidel." Paul, in giving directions to Timothy, as to the care of their poor, requires aid to be given to "widows indeed," those who have no children; but those who have children or nephews are to look to them and be supported by them, and if any person refuses to care for his widowed mother or grandmother or dependent aunt, "he hath denied the faith and is worse than an infidel." (2) They were diligent in business. They provided things honest in the sight of all men. Paul set the example during his itinerate ministry by working at his trade to secure his support and his dictum has been accepted as both divine and human wisdom ever since. "If any will not work neither shall he eat." Diligence was enjoined for self-support, and that others might be helped. Eph. 4:28: "Let him that stole, steal no more; but rather let him labor, working with his hands, the things which is good, that he may have to give to him that needeth." The effort was first by labor to be independent and then also to come to the relief of the feeble, the sick, the poor, and the needy. That a man could honestly secure a livelihood without productive labor was foreign to their way of thinking. If any did not work he did not deserve a living, nor was he an honest man. No one was at liberty to be idle. Productive effort must not be relaxed. There was no retiring for the enjoyment of a competency. There was no thought of such a provision to free them from the effort for the daily bread. The surplus product was given for the aid of others, to those who had claims of kinship first, then to all who had need. The instant a man failed to produce he began to consume. There is no hint anywhere that it entered any of their minds that they could stop production and live in ease from the increase of what they had produced and the supply grow no less; that the meal and oil should not fail, but be handed down unimpaired to their children. (3) Covetousness was hated and denounced and classed with the most flagrant violations of the moral law. Covetousness is an inordinate regard for wealth of any kind. This may be shown in the greed of seeking it, without proper regard for the rights of others; or in parsimony or stinginess in holding it, when there are rightful claims upon it. James 5:1-6: "Go to now, ye rich men, weep and howl for your miseries that shall come upon you. Your riches are corrupted, and your garments are moth eaten. Your gold and silver is cankered; and the rust of them shall be witness against you, and shall eat your flesh as it were fire. You have heaped treasure together for the last days. "Behold, the hire of the laborers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of Sabbath. "Ye have lived in pleasure on the earth, and been wanton; ye have nourished your hearts, as in a day of slaughter. Ye have condemned and killed the just, and he doth not resist you." Covetousness may also be shown in undue respect for wealth when in the hands of others. This is reproved in James 2:1-7. "My brethren, have not the faith of our Lord Jesus Christ, the Lord of glory, with respect of persons. For if there come unto your assembly a man with a gold ring, in goodly apparel, and there come also a poor man in vile raiment; and ye have respect to him that weareth the gay clothing, and say unto him, Sit thou here in a good place; and say to the poor man, Stand thou there, or sit here under my footstool: Are ye not then partial in yourselves, and become the judges of evil thoughts? Hearken, my beloved brethren, hath not God chosen the poor of this world rich in faith, and heirs of the kingdom which he hath promised them that love him? But ye have despised the poor. Do not rich men oppress you, and draw you before the judgment seats? Do not they blaspheme that worthy name by which ye are called?" Covetousness was a secret sin often indulged when the outward forms of righteousness were observed. Usurers were the open representatives of flagrant covetousness in all the ages. Usury was not named among them as becometh saints. (4) The early disciples kept out of debt. The early Christians were not borrowers. In both dispensations borrowing was only resorted to in hard necessity. The borrower was second to the beggar. The borrowing was but for a short time, and the loan was returned as soon as absolute wants were supplied. The doctrine and practice of the early church was to owe no man anything. Rom. 13:8: "Owe no man anything, but to love one another: for he that loveth another hath fulfilled the law." Indebtedness was to be avoided as compromising the faith in the eyes of others and detrimental to the development of grace in the disciples. This was the direct command of Paul. This commandment required the payment of all honest obligations. The Christian then as now who failed to acknowledge his obligations and meet them in full as he was able was wanting in the spirit of righteousness and unfaithful to his own convictions of right and duty. The payment of a debt was the return in full of the loan received. Any Christian conscience at that time would have been satisfied with the settlement approved and commanded by Nehemiah. The debt was fully discharged when payments equaled the loan by whatever name those payments were called. This text also required that they keep out of debt. By no distortion of the text can it be made to mean less. Chalmers on this passage comments as follows: "But though to press the duty of our text in the extreme and rigorous sense of it--yet I would fain aspire towards the full and practical establishment of it, so that the habit might become at length universal, not only paying all debts, but even by making conscience never to contract, and therefore never to owe any. For although this might never be reached, it is well it should be looked at, nay moved forward to, as a sort of optimism, every approximation to which were a distinct step in advance, both for the moral and economic good of society. For, first, in the world of trade, one can not be insensible to the dire mischief that ensues from the spirit often so rampant, of an excessive and unwarrantable speculation--so as to make it the most desirable of all consummations that the system of credit should at length give way, and what has been termed the ready-money system, the system of immediate payments in every commercial transaction, should be substituted in its place. The adventurer who, in the walks of merchandise, trades beyond his means is often actuated by a passion as intense, and we fear too, as criminal, as is the gamester, who in the haunts of fashionable dissipation, stakes beyond his fortune. But it is not the injury alone, which the ambition that precipitates him into such deep and desperate hazards, brings upon his own character, neither is it the ruin that the splendid bankruptcy in which it terminates brings upon his own family. These are not the only evils which we deprecate--for over and above these there is a far heavier disaster, a consequence in the train of such proceedings, of greatly wider and more malignant operation still, on the habit and condition of the working classes, gathered in hundreds around the mushroom establishment, and then thrown adrift among the other wrecks of its overthrow, in utter helplessness and destitution on society. This frenzy of men hasting to be rich, like fever in the body natural, is a truly sore distemper in the body politic. No doubt they are also sufferers themselves, piercing their own hearts through with many sorrows; but it is the contemplation of this suffering in masses, which the sons and daughters of industry in humble life so often earn at their hands, that has ever led me to rank them among the chief pests and disturbers of a commonwealth." To this may be added an extract from "Short Instructions for Early Masses by the Paulist Fathers." "The fact of the matter is, dear brethren, that there is too much laxity of conscience among our people on this question of contracting debts, of borrowing money, of running up bills with little or no hope of ever paying them. We have all of us no doubt come across people who consider themselves quite religious who owe money to their neighbors for years, and never make an effort to pay what they owe or even to offer an excuse for their negligence in such important matters. There are some professional debtors who think the world owes them a living, and who spend a good part of their time figuring out how much they can get out of the land and from those who dwell thereon. To have to pay rent is their greatest grievance, and after being trusted for a few months, they find it much cheaper to move to other quarters than to pay what they owe. Then there are others who must dress extravagantly, no matter what it costs, and in consequence have nothing left to pay for the things they eat or drink. Do they on this account deny themselves any of the good things of this life? Not at all; on the contrary, every business man will tell you the same story--these people want the best and are the most exacting in their demands. Now, I repeat, there is too much laxity about contracting debts and too little conscience about the necessity of paying for what we use. St. Paul's warning should ring in the ears of every debtor: "Owe no man anything." It will not do for such people to come to confession and say they contracted debts and are not able to pay what they owe. Confession will not relieve them of their obligation, and they must begin at once and make an effort to lessen the debts they owe in the past and learn a lesson in economy and strive against contracting new burdens. This will help us to clear off the old ones. It is not edifying, nor is it conducive to good fellowship, nor does it help to make our religion better known and better loved, to find people, dressed in the finest, coming Sunday after Sunday to mass while they are heavily in debt to their grocer or butcher or landlord, who may be in the very same pew with them. This is certain, it convinces such men in business that the debtor's religion is not very sincere. In a word, brethren, it is far better to live in less pretentious dwellings, dress more soberly and eat more sparingly than to owe any man anything. Pay what thou owest, and then you may walk honestly among all men." Freedom from debt is necessary to the independence of the man who does right and answers only to God. Struggle as he may the man is not free who is under obligations to others. He is hindered in his conduct; he is not always conscious of it, but nevertheless there is a real binding or fettering of his actions. It influences his gifts, for what he holds is not his own and the owner may criticize his benevolence. An easy conscience and sound sleep is the portion of the man who is under no obligations to another. He looks the whole world in the face, who owes no man a cent. He is free from distracting business relations with his brethren and brotherly love may abound. The exhortation of Paul is in connection with brotherly love, and of all external relations, debt hinders the free flow of sympathy among brethren. The early disciples endeavored to avoid all debt. Much less did they pay a premium for the privilege. They only borrowed in hard necessity; but borrowing on usury to make a profit by it was as repellant to the Christian conscience then as complicity with theft or fraud. It marked a man as anxious to share in unrighteous gain. His own conscience placed him among those who are discontented with their lawful estate and guilty of that covetousness which is idolatry. I Tim. 6:6-11: "But godliness with contentment is great gain. For we brought nothing into this world, and it is certain we can carry nothing out. And having food and raiment, let us be therewith content. But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. For the love of money is the root of all evil: which while some coveted after, they have erred in the faith, and pierced themselves through with many sorrows. But thou, O man of God, flee these things; and follow after righteousness, godliness, faith, love, patience, meekness." CHAPTER X. CHURCH HISTORY. The Church, from the time of the apostles, was emphatic in its denunciation of usury. Schaff-Herzog says: "All the apostolic fathers condemned the taking of usury." The Encyclopedia of Religious Knowledge declares the same. Chrysostom said: "Nothing is baser in this world than usury, nothing more cruel." Basil describes a scene so real that we can scarcely realize that he wrote over fifteen hundred years ago. After stating the usurer's protestations of having no money, to the victim, who seeks a loan without interest, he says: "Then the suppliant mentions interest and utters the word security. All is changed. The frown is relaxed; with a genial smile he recounts old family connections. Now it is 'My friend, I will see if I have any money by me. Yes, there is that very sum which a man, I know, has left in my hands in deposit for profit. He named a very heavy interest. However, I will certainly take something off and give it to you on better terms.' With pretenses like this he fawns on the wretched victim and induces him to swallow the barb." Of the man who has borrowed on interest, he says: "At first he is bright and joyous and shines with another's splendor * * * now night brings no rest, no sun is bright. He hates the days that are hurrying on, for time as it runs adds the interest to its tale." The fathers unanimously condemned the taking of interest, Tertullian, Cyprian, Ambrose, Augustine and Jerome can be quoted against it. The popes followed the teachings of the fathers and forbade it under severe penalties. The priests guilty of this sin were degraded from their orders. The laymen found guilty were excommunicated. Interest paid could be reclaimed, not only from the usurer but from his heirs. A bargain, though confirmed by an oath never to claim back the interest paid, was declared not binding. This action of the popes was confirmed by councils. Charlemagne, in France, forbid the taking of usury either by priests or laity. A council at Westminster (1126) approved the degradation of all clergy, who were guilty of this practice. Archbishop Sands said: "This canker (usury) hath corrupted all England." A council in Vienna (1311) reaffirmed the denunciations of previous popes and councils, and then adds: "If any shall obstinately persist in the error of presuming to affirm that the taking of usury is not a sin, we decree that he shall be punished as a heretic." There is no record of the repeal of any of these edicts. The leaders of the Protestant reformation also denounced usury. Luther was violent in his opposition, using the strongest language he could command. "Whoever eats up, robs and steals the nourishment of another, commits as great a murder, as he who carves a man or utterly undoes him. Such does a usurer, and he sits the while on his stool, when he ought rather to be hanging from the gallows." Melancthon, Beza and others are accounted against usury. The decisions of Ecclesiastical Councils were numerous and emphatic until the seventeenth century. Since that time interest taking has become common, all but universal, but there is no record found anywhere of its direct approval by any ecclesiastical body. The Church has come to tolerate it but has never given it official approval. Usury has not been included in any creed or confession of faith, nor has it been directly approved by any council or general assembly. The truth has not been left in any age without its witness. There have always been those more or less prominent in the Church who contended that it was unjust and oppressive. Some of them have been of world-wide distinction. The writer has a letter written him by John Clark Ridpath, the historian, expressing his agreement with the views presented in these pages. Another of these is brilliant John Ruskin, recently deceased. Quotations from him will close this review. "I have not so perverted my soul nor palsied my brain as to expect to be advantaged by that adhesion (usury). I do not expect that because I have gathered much to find Nature or man gathering more for me; to find eighteen pence in my box in the morning instead of the shilling as a reward of my continence, or to make an income of my Koran by lending it to poor scholars. If I think he can read it and will carefully turn the leaves by the outside, he is welcome to read it for nothing." "Thus in all other possible or conceivable cases, the moment our capital is increased by having lent it, be it but the estimation of a hair, that hair-breadth of increase is usury, just as much as stealing a farthing is theft no less than stealing a million." CHAPTER XI. CALVIN'S LETTER ON USURY. A mere hint of encouragement to the usurer came from Calvin. In a letter, to a friend, he hesitatingly expressed opinions that have ever since been quoted in defense of the practice. He alone of all the reformers took a doubtful stand. He has often been referred to and given great credit for his opinion, even by those who utterly reject all the doctrines he most earnestly advocated. The fear that he expressed near the opening, that some word might be seized to take more license than he would allow had reason, for this letter has been the basis for all the apologies for usury that have ever been attempted. In these last days all who have tried to present fully the moral law as comprehended in the ten commandments have felt called upon to make some apology for the prevailing practice of usury in connection with the eighth command. They all refer to this letter. Sometimes there is a brief quotation, given in Latin and left untranslated, to convince the ignorant, for Calvin wrote in Latin. Letter of Calvin: _De Usuris Responsum_. "I have not yet essayed what could fitly be answered to the question put to me; but I have learned by the example of others with how great danger this matter is attended. For if all usury is condemned tighter fetters are imposed on the conscience than the Lord himself would wish. Or if you yield in the least, with that pretext, very many will at once seize upon unlicensed freedom, which can then be restrained by no moderation or restriction. Were I writing to you alone I would fear this the less; for I know your good sense and moderation, but as you ask counsel in the name of another, I fear, lest he may allow himself far more than I wish by seizing upon some word, yet confident that you will look closely into his character and from the matter that is here treated judge what is expedient, and to what extent, I shall open my thoughts to you. "And first, I am certain that by no testimony of Scripture is usury wholly condemned. For the sense of that saying of Christ, 'Lend, hoping for nothing again' (Luke 6:35), has up to this time been perverted; the same as another passage when speaking of splendid feasts and the desire of the rich to be received in turn, he commands them rather to summon to these feasts, the blind, the lame, and other needy men, who lie at the cross-roads and have not the power to make a like return. Christ wished to restrain men's abuse of lending, commands them to lend to those from whom there is no hope of receiving or regaining anything; and his words ought to be interpreted, that while he would command loans to the poor without expectation of repayment or the receipt of interest, he did not mean at the same time to forbid loans to the rich with interest, any more than the injunction to invite the poor to our feasts did not imply that the mutual invitation of friends to feasts is in consequence prohibited. Again the law of Moses was political and should not influence us beyond what justice and philanthropy will bear. "It could be wished that all usury and the name itself were first banished from the earth. But as this cannot be accomplished it should be seen what can be done for the public good. Certain passages of Scripture remain in the Prophets and Psalms in which the Holy Spirit inveighs against usury. Thus a city is described as wicked because usury is practiced in the forum and streets, but as the Hebrew word means frauds in general, this cannot be interpreted so strictly. But if we concede that the prophet there mentions usury by name, it is not a matter of wonder that among the great evils which existed, he should attack usury. For wherever gains are farmed out, there are generally added, as inseparable, cruelty, and numberless other frauds and deceits. "On the other hand it is said in praise of a pious and holy man 'that he putteth not out his money to usury.' Indeed it is very rare for a man to be honest and yet a usurer. "Ezekiel goes even further (Ezek. 22:12). Enumerating the crimes which inflamed the wrath of the Lord against the Jews, he uses two words, one of which means usury, and is derived from a root meaning to consume; the other word means increase or addition, doubtless because one devoted to his private gain takes or rather extorts it from the loss of his neighbor. It is clear that the prophets spake even more harshly of usury because it was forbidden by name among the Jews, and when therefore it was practiced against the express command of God, it merited even heavier censure. "But when it is said, that as the cause of our state is the same, the same prohibition of usury should be retained, I answer that there is some difference in what pertains to the civil state. Because the surroundings of the place in which the Lord placed the Jews, as well as other circumstances, tended to this, that it might be easy for them to deal among themselves without usury, while our state today is very different in many respects. Therefore usury is not wholly forbidden among us unless it be repugnant both to Justice and to Charity. "It is said, 'Money does not beget money.' What does the sea beget? What does a house from the letting of which I receive a rent? Is money born from roofs and walls? But on the other hand both the earth produces and something is brought from the sea which afterward produces money, and the convenience of a house can be bought and sold for money. If therefore more profit can be derived from trading through the employment of money than from the produce of a farm, the purpose of which is subsistence, should one who lets some barren farm to a farmer, receiving in return a price or part of the produce, be approved, and one who loans money to be used for profit be condemned? And when one buys a farm for money does not that farm produce other money yearly? And whence is derived the profit of the merchant? You will say from his diligence and his industry. Who doubts that idle money is wholly useless? Who asks a loan of me does not intend to keep what he receives idle by him. Therefore the profit does not arise from the money, but from the product that results from its use or employment. I therefore conclude that usury must be judged, not by a particular passage of Scripture, but simply by the rules of equity. This will be made clearer by an example. Let us imagine a rich man with large possessions in farms and rents, but with little money. Another man not so rich, nor with such large possessions as the first, but has more ready money. The latter being about to buy a farm with his own money, is asked by the wealthier for a loan. He who makes the loan may stipulate for a rent or interest for his money and further that the farm may be mortgaged to him until the principal is paid, but until it is paid, he will be content with the interest or usury on the loan. Why then shall this contract with a mortgage, but only for the profit of the money, be condemned, when a much harsher, it may be, of leasing or renting a farm at large annual rent, is approved? "And what else is it than to treat God like a child, when we judge of objects by mere words and not from their nature, as if virtue can be distinguished from vice by a form of words. "It is not my intention to fully examine the matter here. I wished only to show what you should consider more carefully. You should remember this, that the importance of the question lies not in the words but in the thing itself." Those acquainted with Calvin's "Institutes" will not fail to notice the timid manner in which he treats the subject, as if uncertain of his ground and endeavoring to excuse usury to please his friend. This letter is wanting in that positive air of assured certainty that breathes inspired authority and lends a charm to his "Institutes." He is nearest himself when he bursts out, "It could be wished that all usury and the name itself were banished from the earth." The letter is here given in full because often more force is carried by the reference to a great name than by the study of his argument. A careful reading of this letter does not reveal a positive approval of usury. He merely excuses it by suggesting other evils that he thinks worse; for instance, that land rentals may be worse than the usury of money. He does not mention the necessary oppression of the poor tenants by the loan upon a mortgage. It is proof of the weakness of the case when this letter is the most favorable that can be presented from any ecclesiastic. CHAPTER XII. PERMANENCY OF THE PROHIBITION. It is sometimes urged that the law of Moses with regard to usury was not intended to be permanent but was only a wise and beneficent regulation for that people in their peculiar condition; that as the ceremonial was done away by the incoming of the New Testament dispensation, so this prohibition was annulled and should be reckoned among the effete laws of the ancient Hebrews. In answer to this contention it may be replied: (1) This prohibition is not ceremonial. It has no connection with the rites and forms of their religion. It touches their character and conduct but has no place in their forms of worship. (2) Nothing can be presented from the Mosaic laws to prove that this prohibition was only of a temporary character. It is in entire harmony with the spirit of helpfulness and especially the protection of the weak, that is so characteristic of the Mosaic order. No induction from any of the Old Testament writers can be fairly made to limit its application. The prophets place usury in the catalogue of sins that are always and everywhere offensive to God. Nehemiah condemns it as destructive to personal and civic freedom. (3) There is no hint of its discontinuance in the new dispensation. The Master gave a spiritual completeness to this law as he did to all enactments requiring external moral character. He classed the usurers, in his parables, among the dishonest, who took up what they had not laid down. The disciples, in their poverty and persecutions, were not specially tempted by this sin, and it is not therefore prominent in their history. But there is nothing in their teachings or practice that is not in entire harmony with the binding continuance of the Mosaic prohibition, and their practice and teaching are just such as we should expect from Christian people in their condition and circumstances who recognized the prohibition as permanent. (4) The apostolic fathers, as the church grew and came into contact with the world and was beginning to share in the business of the world, to a man, regarded the prohibition as in full force and its observance as one of the marked characteristics of the Christian, distinguishing him from the worldling and the Jew. Conditions in the apostolic age did not make this prominent but when the conditions were changed and the church came in conflict with this sin, it is clearly seen that the law was in a continuous binding force through the whole period. The later fathers were of the opinion, unanimously, that it was in full force, not temporary or provincial, but binding for all time and upon all people. That it is suspended is a modern idea, a suggestion of the world to the church within the last few hundred years. CHAPTER XIII. OUR CHANGED CONDITIONS. The changed conditions of the race in these last years are urged as a sufficient reason for annulling this law. It is admitted that it was righteous and beneficent in ages long past but with the new light and new conditions of the present it is effete, inapplicable and unjust. They call attention to the vast extension of commerce, to the marvelously increased facilities for travel, transportation and intercommunication; to the innumerable and wonderful inventions that in their application have brightened our civilization. They exalt present conditions and they belittle the long past conditions and thought. The prohibition of usury belonged to the past, the practice of usury is all but universal in the present, therefore they argue that usury is a part and a necessary part of our civilization and to revive the old prohibition would turn the world's civilization backward and be as absurd as to now dispense with steam or electricity. In reply it may be said that the changes are not universal, that there are some things that abide, that the changes are trifling when compared with those things that remain and are permanent. 1. Human nature remains the same. Man, in body and mind, in physiology and psychology, has not changed in these thousands of years. That which in ages past promoted the health and vigor of his body, will secure its best development now. That discipline, culture and mental exercise that secured the highest intellectual strength in ages past will do the most for its best development now. Many things that now give splendor to our civilization do not promote either the best physical or mental manhood. 2. Family ties remain. The relation of husband and wife, of parents and children, and the duties of their several positions in the home have not changed. The family remains the social unit as it has been in all ages. Sociology, the science of social and political organization, is a permanent science. It does not change with the shifting temporal conditions of the people. Those things which made for the general welfare of ages ago are for the public weal now, and those things that endangered the state then are to be avoided now. 3. The moral law remains unchanged and unchangeable, with all the brilliant present there is no amendment to the ten commandments. The ethical nature remains and the voice of conscience, approving the same right and condemning the same wrong, is identical with the voice of conscience in the time of Moses. 4. The laws of nature have not changed. The relation between a cause and its sequence remains. Like causes produce like effects. No living thing has changed its nature. A lion now is of the same nature that it was in the time of Samson. So with every savage beast that roams the jungle. Even the domesticated animals, with all the effort and skill of intelligent man, have only been smoothed or speeded a little. The horse, cow, sheep, or dog have held their old forms and dispositions. Seed time and harvest come and go and we are dependent for the same shower and sunshine that gave Adam his first harvest. We know some things they did not know and we have bettered our tools, but the natural world has shown no signs of change. 5. The relation of things to each other have not changed. Plants must have soil to grow in, animals must have vegetation to feed upon. Fish must have water. And so with the thousands of relations of climate, elements, soils, plants, animals, fishes, birds and insects, they are the identical relations sustained ages and ages ago. 6. The nature of money has not changed. Its material and form and denominations have been modified but the functions of money as a storage of values and as a measure of values and as a medium of exchange remain the same. Our gold and silver and paper money may be more convenient and more exact, but its functions are just the same as the Indians' wampum. The law of supply and demand and the equity in commercial transactions, great or small, are unchanged. Money could always be used to make or gather more money in business. It is no more true now than in the times of David or Nehemiah. If this had not then been possible; if there had not been tempting opportunities, there would have been no sin of usury for them to reprove. Man's changed conditions are but trifling and incidental, relating to himself. They do not affect a single natural or moral or economic law. The changed conditions, which are urged as a reason that the prohibition of usury is no longer binding, are only the conditions brought about by the violation of that law. The prohibition of usury is systematically violated. The neighbor in the smallest transaction with his neighbor exacts usury, though it be but a few cents. The credit system has become universal. It is the rare exception now to "own what you have" and to "pay as you go." Interest bearing bonds are issued by the smallest manufacturing plant, by the great corporation and by the empire. These conditions do not prove usury right. They only show how far true business, commercial, and political principles have been perverted by this practice. If violating a law annuls it, then any law can be pushed aside. Let the claims of the Sabbath day be ignored. Let the houses of worship remain closed upon that day. Let work be planned for seven days of the week. Let the hum of the mills and the roar of commerce go on. Take no note of the Sabbath day, either in business or recreation or worship, and conditions will soon be upon us, such that we may urge as plausibly, that the Sabbath is effete, possible to our slow going fathers but inconsistent with the necessary rush of our day. If the systematic violation of a law annuls it then we can quiet the conscience and be dishonest while dealing with a Turk in Constantinople and we may lie while dickering with a Chinese merchant in Canton. If violating a law annuls it, even the seventh commandment, the violation of which is so offensive to decency and its observance so necessary to the purity of the home, may in this way be ruled out as a binding obligation. Let polygamy be the order, supported by the example of Jacob and David and Solomon, and the families be constituted along that line, then enforced monogamy would seem to be a sundering of tender ties and hardness toward the cast off Hagars that is inconsistent with the Christian spirit. An earnest, Godly man, a missionary friend of the writer, under whose ministry a heathen chief was converted, was misled by the plausibility. The chief had a number of wives; he had children by them; he was much attached to his wives and was fond of his children, and they all seemed to love him and clung to him. The missionary in the kindness of his heart did not interfere with the family, permitting the chief to keep his wives and placed his name on the church roll of the Mission. For this act he was reproved by the ecclesiastical authorities above him. Let polygamy become as universal as usury and even the seventh commandment in its strictness will seem impracticable and unkind if not positively cruel. It will not do to claim freedom from the prohibition of usury because we have organized commerce and the state and all society in violation of it. CHAPTER XIV. AMERICAN REVISION. The Revision by the American Committee is the latest effort of scholarship to bring King James' Version up to date by eliminating effete terms and using words in their modern sense. The references to usury are here collated so as to give a general view of the question from the translations of the passages in this the latest Revision. The reader will notice that the modern word "interest" is substituted for "usury" in nearly every passage. Exodus 22:25: "If thou lend money to any of my people with thee that is poor, thou shalt not be to him as a creditor; neither shall ye lay upon him interest." Leviticus 25:35-37: "And if thy brother be waxen poor, and his hand fail with thee, then thou shalt uphold him: as a stranger and a sojourner shall he live with thee. Take thou no interest of him or increase, but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon interest, nor give him thy victuals for increase." Deuteronomy 23:19, 20: "Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of anything that is lent upon interest: unto a foreigner thou mayest lend upon interest, but unto thy brother thou shalt not lend upon interest, that Jehovah thy God may bless thee in all that thou puttest thy hand unto, in the land whither thou goest in to possess it." Nehemiah 5:7-10: "Then I consulted with myself, and contended with the nobles and rulers and said unto them, Ye exact usury, every one of his brother. And I held a great assembly against them. And I said unto them, We after our ability have redeemed our brethren the Jews that were sold unto the nations; and would ye even sell your brethren, and should they be sold unto us? Then held they their peace and found never a word. Also I said, The thing ye do is not good: ought ye not to walk in the fear of our God, because of the reproach of the nations, our enemies? And I likewise, my brethren and my servants, do lend them money and grain. I pray you, let us leave off this usury." The interest exacted by the princes and nobles was no doubt so extortionate that it could be called usury in the modern legal sense. Psalm 15: "Jehovah, Who shall sojourn in thy tabernacles? Who shall dwell in thy holy hill? He that walketh uprightly and worketh righteousness, And speaketh the truth in his heart; He that slandereth not with his tongue, Nor doeth evil to his friend, Nor taketh up a reproach against his neighbor; In whose eyes a reprobate is despised, But who honoreth them that fear Jehovah; He that sweareth to his own hurt and changeth not; He that putteth not out his money to interest, Nor taketh reward against the innocent. He that doeth these things shall never be moved." Proverbs 28:8: "He that augmenteth his substance by interest and increase, gathereth it for him that hath pity on the poor." Jeremiah 15:10: "I have not lent, neither have men lent to me; yet every one of them doth curse me." King James reads: "I have neither lent upon usury, nor have men lent to me upon usury." As Jeremiah was protesting his innocence of any wrongdoing the early translators inserted what was evidently implied while these latest revisors have omitted what was not in the original text. Ezekiel 18:1-18: "The word of Jehovah came again unto me saying, What mean ye that ye use this proverb, concerning the land of Israel, saying, The fathers have eaten sour grapes and the children's teeth are set on edge? As I live saith the Lord Jehovah, ye shall not have occasion any more to use this proverb in Israel. Behold, all souls are mine, as the soul of the father so also the soul of the son is mine: the soul that sinneth, it shall die. But if a man be just and do that which is lawful and right, and hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, neither hath defiled his neighbor's wife, neither hath come near to a woman in her impurity, and hath not wronged any, but hath restored to the debtor his pledge, hath taken naught by robbery, hath given his bread to the hungry, and hath covered the naked with a garment: he hath not given forth upon interest, neither hath taken any increase, that hath withdrawn his hand from iniquity, hath executed true justice between man and man, hath walked in my statutes and hath kept my ordinances, to deal truly: he is just, he shall surely live, saith the Lord Jehovah. "If he beget a son that is a robber, a shedder of blood, and that doeth any one of these things, and that doeth not any of those duties, but even hath eaten upon the mountains, and denied his neighbor's wife, hath wronged the poor and needy, hath taken by robbery, hath not restored the pledge, and hath lifted up his eyes to the idols, hath committed abomination, hath given forth upon interest, and hath taken increase; shall he then live? He shall not live: he hath done all these abominations: he shall surely die; his blood shall be upon him. "Now, lo, if he beget a son which seeth all his father's sins which he hath done, and feareth and doeth not such like; that hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, hath not defiled his neighbor's wife, neither hath wronged any, hath not taken aught to pledge, neither hath taken by robbery, but hath given his bread to the hungry, and hath covered the naked with a garment; that hath not withdrawn his hand from the poor, that hath not received interest nor increase, hath executed my ordinances, hath walked in my statutes; he shall not die for the iniquity of his father, he shall surely live. As for his father, because he cruelly oppressed, robbed his brother, and did that which is not good among his people, behold, he shall die in his iniquity." Ezekiel 22:6-12: "Behold, the princes of Israel, every one according to his power have been in thee to shed blood. In thee have they set light by father and mother; in the midst of thee have they dealt by oppression with the sojourner; in thee have they wronged the fatherless and the widow. Thou hast despised mine holy things and hast profaned my sabbaths. Slanderous men have been in thee to shed blood; and in thee have they eaten upon the mountains; in the midst of thee they have committed lewdness. In thee have they uncovered their fathers' nakedness; in thee have they humbled her that was unclean in her impurity. And one hath committed abomination with his neighbor's wife; and another hath lewdly defiled his daughter-in-law; and another in thee hath humbled his sister, his father's daughter. In thee have they taken bribes to shed blood; thou hast taken interest and increase, and thou hast greedily gained of thy neighbors by oppression and hast forgotten me saith the Lord Jehovah." Matthew 25:26-27: "But his lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not and gather where I did not scatter; thou oughtest therefore to have put my money to the bankers, and at my coming I should have received back mine own with interest." Luke 19:22, 23: "He saith unto him, Out of thine own mouth will I judge thee, thou wicked servant. Thou knewest that I am an austere man taking up that I laid not down and reaping that I did not sow; then wherefore gavest thou not my money into the bank, and I at my coming should have required it with usury." Luke 16:13-15: "No servant can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one and despise the other. Ye cannot serve God and mammon. And the Pharisees who were lovers of money heard all these things and they scoffed at him. And he said unto them, Ye are they that justify yourselves in the sight of men but God knoweth your hearts: for that which is exalted among men is an abomination in the sight of God." It is not easy to understand how an honest, godly man, who has even medium intelligence, unclouded by prejudice, and who has confidence in the highest scholarship of the age, can deny that the revealed Word of God, in both Testaments, condemns usury or interest. It is just as difficult to explain how any one, not glaringly inconsistent, can claim that interest taking is not a sin, who bows to the divine authority of the revealed Word and who defines sin as "Any want of conformity unto or transgression of the law of God." CHAPTER XV. DUTY LEARNED FROM TWO SOURCES. In this discussion we learn our duty from two sources. Two authorities are recognized. One is the revelation of God in his written Word. The other is the book of nature; this includes the ethical nature of man, his social relations, and the laws that govern material things. The author of the Bible is the God of nature. They are but two volumes from the same mind and hand. They must speak in harmony when both are understood. Truth found in the inspired Word cannot be contradicted in nature; and no facts in the works of God can be found in conflict with the Word He has spoken. A truth found in either is always consistent with the truths made plain in the other. Familiarity with one prepares us to better understand the other. The devout student of the Word has his mind aroused, and his susceptibility so quickened that he is able to read more clearly the lessons in the volumes of nature open before him. The student of nature, who has searched its mysteries and taken in its beauty and designs of infinite wisdom everywhere appearing, must be the more ready and competent to appreciate the revealed love and grace. The Bible is not a treatise on natural science, nor does natural science teach revealed religion, yet they do not conflict. The special student of either may have perfect confidence that whatever he has found true in his chosen field will be found consistent with truth in other fields of special study. Chemistry, biology and all studies of nature, are found only to give a higher conception of the God of all grace. The same wisdom and power shine out in His works that are revealed in His Word. Again, the laws of God, whether fixed in nature or revealed in His Word, are for the highest interest of the physical, mental and spiritual man. Every truth in the Word works for the welfare of man's body and soul. The laws of nature, physical and psychological, obeyed, promote man's bodily and mental vigor. Strict obedience to the laws of God, as revealed in both Word and nature, produces the completest physical and mental manhood. God had the highest welfare of every man at heart when He prepared the earth for his abode and gave him dominion over it. And He yearned for his deliverance from a fallen estate when He gave him a revelation of His infinite redeeming love. The eye of God is upon each individual of the race, as upon every sparrow. He has in thought, in word and in works, not the favoring of one of an hundred, while the ninety and nine are crushed or neglected, but the happiness and highest good of every one of the hundred. The ethics of the Bible and the ethics of nature, as wrought out by the earnest heathen philosophers, mainly agree. It is an astonishment to some that there is so much agreement in the systems of heathen morals and the revealed moral law. The moral law is written on men's hearts, and can be read there by the diligent and careful student; but the consciences of men, enlightened and quickened by the revealed Word, produce the highest ethical types the world knows. The Bible is not a work on political economy, yet there is nothing out of harmony with the most perfect political institutions. When we find political principles clearly revealed, we shall find the same truths when we study the most orderly relations of men in their social organization. The Bible is not a work on economics, yet it advances no economic principles that work a hardness or injustice to any. When we find economic principles clearly stated, we shall surely find the same truths confirmed in a careful study of the nature of things. As the written Word forbids usury or interest, it can be presumed that the nature of things and man's highest good also forbids it; that it is not an arbitrary prohibition, but is given in love because it is in its very nature a ruinous evil. As we find a positive prohibition of taking usury or interest in the old dispensation and the confirmation of it in the new, both by the words of the Master and the understanding and practice of the disciples and fathers, we may confidently expect that it will be confirmed by a correct and careful study of ethics and of the relation of man to things. We may learn duty from either or both sources. To some men the Bible comes with the greatest clearness and the utmost force of authority. Others find in nature their highest conception of the Infinite, and their best directions for a correct life. If usury or interest is found to be a sin from the Word, there is no need for those to enter into the economic proof who have no taste for this character of study or reasoning. If it is found to be "_malum per se_" from the nature of things, even those who reject the divine revelation must array themselves against it. If it is shown to be evil by both revelation and economic law, then all peoples, Christian and heathen, should combine against it. CHAPTER XVI. RIGHTS OF MAN OVER THINGS. Man was the last and the crowning work of the Creator. God made man in his own image and gave him dominion over all creatures. "For thou hast made him a little lower than the angels, and hast crowned him with glory and honor. "Thou madest him to have dominion over the works of thy hands; thou hast put all things under his feet: "All the sheep and oxen, yea, and the beasts of the field; "The fowl of the air, and the fish of the sea, and whatsoever passeth through the paths of the seas." This high position is in entire harmony with man's innate consciousness of his superior powers, and of his nobler spiritual nature, and of his rightful dominion over all the other material creations. Man is a person, a thinking intelligent being, and is conscious of his personality, and from his lofty height he calls all else the lower and the inferior creatures. Wherever man is found over the whole earth, of whatever faith or grade of civilization, he claims this universal dominion. Man was commanded to subdue the earth and bring it into subjection as his servant and he is conscious of his right to use all things to promote his comfort, convenience and welfare. Anything he can make of service to himself he has a right to appropriate. A tree is a thing which he may prepare for his own purposes, for fuel, for tools, or for a dwelling, as he pleases. Isaiah ridiculed the idolater in his time, who made an idol of wood and worshiped it, while with another part of the same tree he built a fire and warmed himself. A part he served and a part served him. The whole tree was subject to him; in itself it had no rights. Rights belong to persons, and not to things, and personality cannot be transferred to a thing. If there is no personal owner the question of rights is never raised. The tree, or any thing whatever, has no rights in the matter. Rights belong to the owner, the person, not to the thing he owns. The game in the mountain forests and the fish in the rivers are things with no owner and whosoever will may take and use them. Land is a thing, and any person may make it into a farm or garden and build upon it his home. The land has no rights and makes no protest. The whole earth is subject to man and is to be subdued by him. If no owner appears his rights are not disputed. Our fathers found an unowned continent, with all its rich resources of soil and forests and mines. It was to them free, and with the labor of a few generations they transformed it into farms and plantations and built it over with magnificent cities. Even that which formerly was the property of another has no rights. The deserted hunter's hut in the mountains can be appropriated. The abandoned farm does not resist a new tenant. A derelict vessel, still afloat but driven before the winds, whose officers, crew and owners are at the bottom of the sea, can be appropriated, for there is no one to dispute the claim. Even force or labor in the abstract is but a thing and has no rights. The wind is unowned and any one who will may harness it to do his work. The electric forces of nature are unowned, whoever will may gather and direct them to do his purpose. The waterfall may be made to do man's work and will not resist. The animals have no rights against man. The broncho, horse, ox, mule, or animal of any kind, may be turned to man's service. All the forces of nature were made for man. They have no rights to be regarded, when his interests can be served. It is man's high privilege to stand above all things, to call them to his feet and to compel their service. It is the reversion of the order for him to take the subordinate place and serve the inferior creation. Things subdued, such as wealth secured, is to minister to his highest good and to promote his noblest manhood. The order is reversed when this wealth commands his service and sacrifice. The miser both reverses the divine order and violates common sense by giving the love and service of his shriveling soul to a thing. The usurer and the borrower on usury, both, reverse the true order by assuming that a thing can claim man's service. Both grant that a thing has rights to be respected. The usurer takes the service as due to the thing he owns. It is his property that is exalted, and for which he claims the service must be rendered, and if the borrower will think closely, he will find that in paying usury he is serving a thing. A man reverses the divine order and degrades himself, and becomes a gross idolater, when he serves things unowned instead of commanding their service, "stocks and stones." He reverses the true order when he becomes a miser and serves that which is his own, "which his own fingers have made," instead of compelling it to serve him. He is not less degraded when he exalts over himself a thing owned by another and serves it. The ownership of another does not change the nature of the thing. One can serve his neighbor's idol as truly as he can his own. There is nothing above man but God. His fellow man is by his side, his equal, and all other material creations are beneath his feet, and he is not to permit his fellow man to lift up the inferior thing and place it above him. If he does he must step down from the pinnacle on which he was placed by his God and which his own consciousness demands he shall occupy. "Shall the ax boast itself against him that heweth therewith? or shall the saw magnify itself against him that shaketh it? as if the rod should shake itself against them that lift it up, or as if the staff should lift up itself, as if it were no wood." Isaiah 10:15. If he serves the borrowed ax and saw for the claim that the ax and saw have against him, he admits his debt to things and Isaiah's ridicule of an idolater can be turned against him and he steps down from the position of conscious inborn dignified lordship and becomes a servant of the inferior things. CHAPTER XVII. EQUAL RIGHTS OF MEN. All men have sacred rights that must be regarded. That these rights are equal is so familiar and stale an expression that it hardly need be spoken. "All men are created equal," each having rights, that are inalienable, and each having the right to resist the encroachment on his rights by another. To protect these rights governments are instituted. The vital energy of a man is his own and his right to it must be regarded. Since the abolition of chattel slavery this has been indefeasible except for crime. He has a right to his own vital energy and to all that his own vital force produces. He has a right to his property inherited, earned, or however secured, except by fraud. He has no claim against the vital energy of his fellow man, nor has he any claim whatever against the property of another. The working man needs capital. His vital energy must waste unless there is material upon which it may be expended. There must be the tree, land or material in some form, upon which he can work. But give him the world raw and unsubdued and he can transform it again as he has. He can build again everything on land and sea, the farms, towns, and cities, and the floating palaces. He can again dig out the mines and refine the silver and gold, mould the clay, smelt the ore and shape the iron. His needs and his power, however, give him no claim to the property of another. The man of property is dependent upon the laborer. He may be the owner of farms, forests and mines, of horses, flocks and herds, of railroads and oil wells, yet these will not minister to him nor serve him without the laborer. His coffers may be filled with gold, and his barns bursting with grain and his stalls filled with fatlings, yet all this wealth is useless and lost, unless touched with the vital energy of an intelligent laborer. But his dependence and losses give him no right to the labor of another. He has no right, no just claim, to the services of another man, his equal. All his wealth cannot confer the right. Wealth is but a thing, in itself without rights, and can therefore add nothing to the rights of its owner. He may however use his wealth to command service by might, but not by right. A club is but a thing having no will and no rights, yet in the hands of a savage it adds greatly to his power and may be used by him to oppress another of his tribe. A ruffian with his gun meeting a defenseless man may so command him, that he is ready for the most abject obedience. An armed highwayman may compel a brave man "to stand and deliver." So a man may use his property to secure the service of another but it gives him no right to that service. The usurer, who has himself no rights against his fellows, uses a thing, his property, as an instrument or weapon to command service. He may place his hand upon every material thing another must have, and withhold it, and the other is shut up and compelled, he has no alternative. He must yield to the demands or suffer. Many men are driven to the last extremity before they will borrow. But if the borrower is very willing and urgent for the loan, this does not change the nature of the act. The game may be shot upon the wing as it is endeavoring to escape, or it may be snared in a trap by a tempting bait. The wild broncho may be captured in chase, or beguiled into the corral. The voluntary sacrifice of others to the usurer does not make his gains just. The foolish ones are now willing to invest in lottery tickets, yet that does not make the lottery lawful. Slot machines are being put out of the cities, because so many are ready to part with their nickels. If there were none ensnared by them, they could stand harmless. The borrower may be greatly elated with the hope of gain, but the injustice is the same, whether the services be secured by compelling force, or by guile, or by the folly of the victim. If we admit the supremacy of man over the material creation, all subordinate to him, and no right to be, except to serve him, and also admit the equal rights of all men, there is no escape from the conclusion that the usurer can have no rightful claims to any portion of the labor of the borrower, without surrendering to him some portion of his property as compensation for the services received. He must have less property when the service is rendered and the borrower must have more property if the rights of both are regarded. A false impression prevails, that the lender in some way gives the loan to the borrower; that the borrower becomes somewhat the owner of the property. The borrower is encouraged in this illusion and it becomes a plausible basis for the claim upon his services. When a loan is made to a bank it is called a "deposit" and rightly, for it is only placed in the banker's hands and does not in any part become his. This is true of any amount, great or small, whether the deposit draws interest or not. The lender never loses his sense of ownership of the whole amount, nor does the banker encourage the fiction that he has become part owner. Every loan is but a "deposit." The ownership of no part passes to the borrower. It is seldom that the loan or "deposit" is not safer in the keeping of the borrower than in the hands of the owner himself, when secured by mortgages or personal sureties. The usurer gains the earnings of the borrower but parts with no property. He receives the service but gives nothing. Two usurers, A and B, are neighbors. A has a garden he wishes dug. He has an ax but no hoe. B has wood that he wishes cut. He has a hoe but no ax. The laborer appears and wishes to do their work. Usurer A agrees to lend him his ax to cut B's wood on the condition that he shall return it unimpaired and work his garden for its use. He cuts the wood, but has no hoe to dig A's garden for the use of the ax. Usurer B now lends the laborer his hoe to dig the garden, but takes the cutting of the wood for the use of the hoe. The confused borrower knows he is defrauded of his work, though each seems to have a plausible claim upon him. A does not give the hoe to the laborer. He retains the full ownership but deposits it in the workman's hands to be returned unimpaired. B does not give away his ax, he only places it in the laborer's hands also to be returned unimpaired. The full hoe and full ax is returned and they have taken the services without compensation. The result is just the same as if A and B had traded tools and A had given the laborer a hoe to dig the garden, "the tool and the material with which to work," and B had given him an ax to cut his wood, "the tool and the material with which to work," without a pretence of a payment for his labor. Taking only a part of the borrower's or laborer's services does not relieve it of injustice. The nature of the oppression is the same, only less heinous and flagrant. He who took a penny belonging to another is a thief as truly as the man who took a pound. Petit larceny and grand larceny differ only in the amount stolen. The man who takes three per cent. of the labor of another wrongfully defrauds as the man who takes fifty per cent. The nature of the wrong is the same; they only differ in degree. It is a well known fact, however, often repeated, that ninety-five out of every hundred who go into business with borrowed capital, that is, who pay interest on "their material and tools," do give the vigor of their lives to the service of usurers and at the end have nothing. The element of time is only a figment that clouds the question of right and deceives the borrower. In order that the labor of another may be appropriated it is necessary to give him time to work. The laborer may dig in A's garden a day or all summer and he may chop wood for B a day or all winter. The result is the same. It is necessary that the borrower be given time to earn something before it is or can be appropriated. The question is, how rapidly can he earn, and how soon can his earnings be collected? Long time loans with the frequent payments of the earnings of the victim are the ideal conditions of the usurer. CHAPTER XVIII. A FALSE BASAL PRINCIPLE. That usury or interest must be held under the restraints of law is recognized in nearly all countries. It is treated as a necessary evil that cannot be abolished, and therefore must be controlled. Bacon said, "It is permitted on account of the hardness of men's hearts." The laws differ in the various states. The rate of interest authorized by a particular state is not invariably fixed, but is changed as the condition of the people seems to demand. That which determines the rate, of any particular people, at any particular time, is the productive ability of the borrower. The rate now in England is about three per cent. The conditions being such that the productive power of the borrower is very limited. In the United States, where the natural resources are not all occupied, and the avenues for successful effort more numerous, the average is seven per cent. In the western states of the United States the rates are higher than in the eastern, for the material resources lie so open and undeveloped that the productive power of the borrower is far greater than in the older eastern states. The basal for the rate of interest is the benefit or the advantage of the loan to the borrower. What can the borrower do or make with this capital? How great a benefit can he gain by it? The rate is based on the earnings of the borrower. The transfer from R. R. station to R. R. station across this city is twenty-five cents. That I may make my train and meet my appointment, that prompt and rapid transfer is of greater value to me, but that does not give the hackman the right to an increased charge. The fare to the distant city is ten dollars, but to me, with important business waiting and suffering, it is worth an hundred. The conductor does not ask me what my profits are to be from this trip. He collects the same fare of all for the same service, whatever their interests may be in the passage. The letter which is freighted with a proposition that affects my future life is two cents. Because of great value to me the postal service is no more than a letter of idle gossip. Railroad freight rates are at times arbitrarily fixed on the basis of the benefit to the patron. The rates of freight from a coal mine are sometimes made by a railroad on the basis of the profits of operating the mine. The rates to a quartz mine in the mountains are often so regulated. A contractor, dependent on a transportation company, must often share his profits. Such rates are regarded as unjust and oppressive and efforts are made to correct the evil by law. A is crossing the city and can without inconvenience carry a note to a party for B. That accommodation without sacrifice or inconvenience on the part of A is no basis for a charge upon B, though the delivery of the message was of value to B, but if A discovers that in delivering that note he can make it a matter of business gain to himself, that would not justify B in claiming a part of the profits A secured for himself. While A served his own business he also favored B. It would be unreasonable and unjust for B to forget the favor and make a charge against A, because in the delivery of the note A managed to gain a profit. Two farmers are without barns. It will require the labor of a number of years to secure the requisite amount of lumber and other material to enable them to erect their barns. One of the farmers undertakes to shelter and protect from decay the lumber of both, until the requisite amount can be secured. This is a real favor to the other and is accepted readily. He even offers to pay him for the care and liability. But he discovers afterward that his neighbor, by wise, careful and skillful piling, has made from this lumber a shelter for his stock and grain. That he has so managed as to gain for himself a benefit. Then, with the false principle of usury he makes a charge for the keeping of the very thing for which he was willing to pay a price. A gentleman not wanting his coach for a time, but wishing it to be kept in perfect repair, and his team fed and exercised, to be kept sleek and strong, leaves it in his coachman's care. The coachman agrees to keep from decay, and to replace should one die, and at the end of the term, return the coach in perfect condition, no mar or wear, and the team sleek and strong from good care, feed and daily exercise. But the coachman discovers that in the daily exercise of the team he can carry a party of business men to and from their offices, and secure for himself a gain. He, at the end of the term, returns the carriage and equipage complete as he received it. The owner has had his property perfectly cared for during the term he could not use it. But the owner learning of the benefit to the keeper, which would not have been possible without his equipage, demands a portion of the benefit which cost him nothing, nor in the least diminished his property. A gentleman has a warm, rich and beautiful robe, but is about to travel a number of years among the countries of Cuba, Porto Rico, and the Philippines, where he will not need it, and afterward visit Siberia, where he will need and use it. Another undertakes to relieve him of all care of it during these years and deliver it to the Siberian home ready for his use. He protects it from the moths in summer, and guards it against all touch or taint, and delivers it in the perfect condition in which it was received. In justice he deserves a reward from the owner, and if he received no benefit, would receive it, but it is found that he needed it for his comfort by the way, and that without it he should have perished. Then the owner demands a reward for the benefit the carrier received. The owner did no service. He received a positive benefit, but the porter, who carried the burden all the way, must pay interest or rental because he was kept from perishing by it. The surprise or discovery feature is introduced into the above illustrations to emphasize the false basis upon which the rates of interest rest. In the actual practice of usury the lender may have full information as to the use of the loan and its advantages to the borrower. If we eliminate this feature the basis still remains untenable. By no tortion of ethics can I demand that he, who does me a favor, shall pay me for the privilege. A man has one thousand dollars of money he is not using. He gives it to another to keep or place in a drawer in his vault. To care for this and be responsible for it, a commission is allowed, for it is no benefit to the keeper. Even an amount is asked for the drawer in the vault, without responsibility. To care for this a term of years is deserving of a reward. But now keeping the property equally safe, and returning every dollar when the owner calls for it, is not satisfactory to the usurer. If this money has in any way proved a benefit to the keeper, through his wisdom and energy and skill, he demands an increase. What is this loan worth to you? is the question of the usurer to the borrower. The basis of legal interest rates is the amount of benefit the borrower gains by the loan. If his opportunities in a state are favorable, and he may by diligence make a large gain, the rates are high. If in another state his opportunities are so limited that, strive as he may, he can make little gain, the legal rates will be low. The basis is so absurd that many have urged the repeal of all laws regulating the rates of interest. "Why should the laws presume to level the rates for a whole state? The possibilities and opportunities of gain are infinitely varied. Every borrower knows his own conditions and the amount of advantage the loan is to him and he should be permitted to pay for money whatever he is willing to pay." One writer thus expresses it, "No man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargains in the way of obtaining money, as he thinks fit; nor anybody hindered from supplying him upon any terms he thinks proper to accede to." Jeremy Bentham is often quoted to prove the absurdity of all laws regulating the rates of interest, and yet all his elaborate arguments are based on this false principle. If usury is wrong only when the borrower can make no profit, and is right whenever the borrower can make a gain by it, and the rate of interest is to be measured by that gain, then all laws are illogical that limit the rate, and may be classed among those restraining trade. CHAPTER XIX. THE TRUE ETHICAL PRINCIPLE. The true ethical principle that should govern the relation between the owner of property and the person holding that property as a loan, does not differ from the principle that is recognized as prevailing in all the other relations of life. The party to whom the service is rendered is under obligation. The party served is the one who must pay for the service. The party served must pay in proportion to the amount of service rendered him. If that service is great, then the payment must be large. If the service is slight, then the payment is small, and when there is no service then no payment can be claimed. This principle is recognized in all worthy and upright transactions. It is the service rendered that is rewarded in a court of justice. An employe recovers his wages from his employer for his services rendered. The condition of the employer's business does not enter into the count. It may have been unprofitable or a great success but that cannot affect the claim either way. A physician charges for the services given a patient. The recovery or death of the patient can neither increase nor diminish them. In service we always surrender something of ourselves or of our own, and each knows the sacrifice or effort he has made; he cannot know the value of this to the other, and he need not know. Full compensation is due from the party served but no compensation is due when no service is given nor property surrendered. The usurer's whole claim is for the service of his property. But he does not surrender a particle of his wealth. He does not become poorer in making his loan. He holds all his wealth as fully as before, whether it be a loan of money or grains or tools. There has been no outgo of property for which, in any other relation, he could claim a reward or compensation from his fellow. He simply deposits his property with his fellow and takes security for its safe keeping. It must be preserved perfectly and restored fully. When we consider the true principle, that compensation is due always for services rendered, the obligation is upon the lender for the care and preservation of his property. The borrower in any and every case gives a real and valuable service in preservation and restoration at the end of the term, while the lender renders no personal service nor does he part with a particle of his wealth. There is always a service rendered in caring for and preserving the property of another. It may be very great or it may be very small. It may be so great that no one would undertake it though the property should be freely given him. In 1800 the "Faithful Steward" was wrecked in Delaware bay near the shore. It had on board a large number of passengers, emigrants, who nearly all perished. Few lives were saved and all the property was lost. One young man, of the kin of the writer, swam ashore through the breakers. Before he left the vessel an old man offered him a stocking full of gold if he cared to try and save it. Though young and vigorous he would not undertake to try to save it for it. This was an extreme case of risk and danger. In another extreme case the service may be very small, reduced to the minimum, for instance, caring for the gold of another by locking it up in a fire and burglar-proof safe. For this simple service a comparatively small charge is made. But caring for the property of another is always some service that earns a reward great or small. The nature of the service is not changed and the principle still holds when the deposit is made with a person who gives ample pledges for its full return; the principle still holds when the deposit is made in a farm and secured there by mortgage, making it safer than in the iron vault. The true ethical principle, equity between man and man, requires that the holder of the property of another shall be compensated by the owner of the property for his services in caring for and preserving it. The amount of compensation depends on the difficult or favorable conditions attending its care. These conditions greatly vary, perhaps in no two cases are exactly alike, and so there can be no fixed price or rate at which one will receive and care for the property of another. The extreme limit of liberality permitted is that he may care for the property of another for nothing. He is not permitted to pay a price for the privilege. The revealed divine law, true ethics and equity and duty of self preservation forbid him. Perfect preservation of any amount, large or small, for any time, long or short, whatever the incidental advantages to the borrower, is the highest compensation a borrower is permitted to give for any loan. The demand for more than this by the owner is to be resisted as unjust and oppressive. An express company receives a package of money for which it receipts and becomes responsible and agrees to deliver to the owner at some distant point. For this service it receives compensation in accordance with the amount of service. If the conditions are dangerous and the distance great the charge is large. If the conditions are very favorable and safe the charges are small. If the amount of service is reduced to the minimum, in rare cases, no charge may be made. But that a price should be paid for the privilege of caring for and conveying it, is inconsistent with the management of an honest business. The purpose would be either to rob the owner of his wealth or to rob the employes of their services. An insurance company undertakes to protect a property for a term of years, to a distant date. A rate is given for protection from a single element, as fire. If all destructive agents are included the rate is higher. The rate is higher for a long than a short period. All the business world recognize the value of this service and nearly every kind of property may now be insured. The premium is cheerfully paid by the owner of the property for the service rendered him. It is a real and valuable service to have his property protected, preserved, or restored, so that it cannot be lost before the distant date. It is conceivable that a property might be so indestructible that the risk would be practically nothing and a policy might be issued without a premium, but that a price should be paid for the privilege of protecting any property is utterly inconsistent with rational insurance. Now usury presumes to reverse this ethical order and requires that the insurance company shall pay the owner of the property for the privilege of protecting it. Under usury the property given into the care of another, and called a loan, must be perfectly protected and preserved by the borrower, restored if lost, and returned in full to the owner at the agreed distant date, and a price paid for the privilege of performing the service. The true ethical principle and equity in the relations between the owner of a property and the one who holds, protects and preserves it, require that the owner shall render to the holder a just compensation. This will vary in different conditions, it may be very small, it may in rare cases be entirely eliminated; but they also utterly forbid that the party rendering the service shall pay for the privilege of serving. One may submit to an injustice in order to gain an advantage. He can do better for himself by submitting than by resisting. His employer may be hard and oppressive but this is the best job he can get and he holds on, but that does not justify the oppressions of the employer up to the breaking point. It may be to the advantage of a borrower to submit to the exactions of usury, that is, he may gain more wealth by borrowing upon interest than not, but that does not relieve usury of its oppression up to the breaking point when it can no longer be endured. There is no better ethical basis for low interest than high interest. Low rates of interest are oppressions that may be suffered or endured for a possible gain, but high rates are intolerable. The principle is the same whatever the rate of interest, whether it be low or high. They only differ in the degrees of their severity. CHAPTER XX. WEALTH IS BARREN. That wealth can produce wealth is the assumption of Shylock. Shylock--"When Jacob grazed his Uncle Laban's sheep-- This Jacob from our holy Abraham was The third possessor; ay, he was the third." Antonio--"And what of him? Did he take interest?" Shylock--"No, not take interest; not as you would say, Directly interest. Mark what Jacob did." * * * Antonio--"This was a venture, sir, that Jacob served for; A thing not in his power to bring to pass-- But swayed and fashioned by the hand of Heaven. Was this inserted to make interest good? Or is your gold and silver, ewes and rams?" Shylock--"I can not tell; I make them breed as fast." --_Merchant of Venice._ It is only intelligent energy that can produce wealth. Even the natural resources must be subdued and shaped by intelligent energy to be of service to man. Trees do not betake themselves into the form of houses. Land does not transform itself into farms and gardens. Coal does not come to our fires without hands. Ore is not iron, nor is clay pottery. They must be carefully manipulated by the intelligent laborer. Nothing man can make has the power of self propagation. All wealth is as barren as silver and gold, though Shylock claimed he could make them breed like ewes and rams. Life alone is productive, and the secrets of life man has not touched. A tree or animal grows by the life that is in it, but the accretions of wealth are from the efforts of intelligent energy outside of itself. Wealth is an effect, a result. The vital energy of a person, of "a willing intelligent being" produces wealth, but it does not follow that it has the qualities of its cause. It has no intelligence, nor has it self-determining power, nor is it vital, nor has it energy, it has not in itself the force to overcome its inertia, the energy must be applied. It has no power to increase or grow. A fortune is built, as a building is built, brick after brick is added by intelligent hands. All wealth must have the living hands applied to cause it to increase even the smallest amount. There is no such thing as "productive" capital. It is so called when it is used to gather and appropriate the earnings of others, but wealth in none of its forms has the quality or power of producing. Money, the most familiar form, is barren. A bag of dollars stored for ages will not have increased a single coin. No one holds or handles money on the assumption that it will increase in his hands. Money is a care, and the broker who holds or handles it relies for his compensation, not on the increase of the dollars in his hands, but on the increase from some producer to whom he lends it. If there is no borrower he takes a direct commission from the amount itself, as trustee or administrator or custodian. Money is readily exchanged for any other property. Money has a number of functions but in exchange it is a medium by which the value of articles is conveyed. It takes the place of the bags which conveyed the wheat, of the crates which contained the potatoes, of the baskets which carried the peaches, and the wrapping which held the cotton or the wool. Col. Irish, who was chief of the Bureau of Engraving and Printing at Washington, when he died, and under whose administration the present building was erected, at one time sent to the wife of the writer a ten dollar bill, wrapped up so that it looked like a picture, cabinet size; this was accompanied by a note, to be opened first. In this note he said he took pleasure in sending her an excellent likeness of our late lamented president, which he would be pleased to have her accept. If she should prefer it in some other form, it was a peculiarity of this likeness that it would change instantly at the will of the holder into any form desired; that this was the peculiarity that troubled him, as he had been unable to decide what would please her best, and had finally decided to send it in this form, and let her change it into any other she might like better. Money is a peculiar medium which will hold and carry the value of anything. You pour in your wheat and take it to the merchant, who empties your wheat and fills it with clothes, he carries it to the dealer in any article needed and the vessel is instantly emptied and refilled. The values of the products of laborers in the various occupations of life or the products of the various climates are thus readily exchanged by money, but the gain is not in the money. The art in trade is to study and know the products and needs of the laborers of one class or country, and the varied products and needs of the producers of another class or local community. The skill in trade is in supplying the needs of one from the products of the other. The profit in trade is the gain from securing for an article a greater portion of the product of those whose needs are supplied, than was given to those who produced it. The harvester cost the manufacturer twenty days' work. The farmer, who needs and purchases it, pays forty days' work for it. The farmer may produce one hundred bushels of wheat with twenty-five days' work, but the mechanics in the city, who need it for bread, may give twice that amount of labor for that quantity of wheat. There is a wide field for skill and profit in trade, when the products and needs of all classes and all lands are considered. But money does not add to wealth in trade. There is nothing produced by it in trade. It is but the tool by which values are conveyed, and no more productive than baskets or crates or sacks. Intelligent energy produces all the profits that are secured by trading. Modern apologists for usury, knowing that money is unproductive itself, call it a tool for production, and as it can be readily transformed into any tool, they try to avoid the logical conclusion that the taking of interest on money is unjust and oppressive to the producer. But no tool is productive. All tools are but the reaching out of man for the better control and mastery of material things. The tool is but dead matter; the productive efficiency is in the vital energy of the intelligent laborer. The most complicated and ingenious tool ever made is useless without the operator. It is as helpless as the wire without the electric current; as helpless as the body without its life, for the body is but man's tool, preserved, and kept efficient, and made productive, by the living energy alone. Tools are but the reaching out of the vital energy beyond the body. Tools are but the means, invented and constructed, by which the man can overcome his physical limitations and accomplish wonders, the impossible to a creature wanting in his intelligence. These glasses enable dim eyes to see clearly. There is no ability in the glasses to see; they would be of no use on blind eyes. I see, these spectacles cannot see. Enlarge and so place these lenses that I can see bacteria, or the mountains of the moon, yet this microscope or this telescope has no more life nor sight than this single lens. I, with it, see the minute creation or examine the distant planet. It is but the extension of my eye. This pen and paper and this book are but the means by which I reach and reason with my fellow-men. They are but my tools to convey my thought. I am reasoning with you, not this paper and ink. My hand is the natural tool with which I labor. I may work in the garden and plant the seed and destroy the weeds with my hand alone, and there is no dispute but that I do the work. I take a small weeder in my hand and greatly increase my efficiency. I take a hoe and reach out further and greatly add to my efficiency. I am the efficient agent. There is no power in the weeder or the hoe. I take my plow, as my tool, and I tear up the soil and prepare it for my harvest. I take the complicated harvester and gather it into my barn. In every part of that process the tool is but the reaching out of my energy beyond my body. There is no place where that tool becomes vitalized and productive. I am a porter, I carry packages in my hands. To increase my efficiency I build me a cart, and smooth a roadway, by which I am able to carry more and heavier packages with ease. I construct a roadway across the continent, and with the power which I employ I carry the commerce of the nation. I build ships and direct them from continent to continent and handle the commerce of the world. Now there is no place from this simple carriage in the hand, to the complicated and stupendous system of transportation, where the tool is not wholly dependent on the vital intelligent energy. When the vital principle leaves this body, then hands, eyes and the whole body is helpless. Withdraw the vital energy from these means by which man extends his power beyond the body, and all the implements of agriculture will not produce a harvest, and the wheels of commerce on land and sea would instantly stop. There is no place in the most complicated machine where it begins to produce. The machine may show the greatest ingenuity in its invention and the perfection of skill in its construction, and the intelligence necessary to its operation may be reduced to the minimum, yet no where and at no time can it produce of itself. When a criminal is arraigned in court the responsibility is placed upon the person, the intelligent energy, always. It matters not by what tools the burglary or other criminal act was committed. The man who handled the tools is held accountable for the results. His tools may show the greatest ingenuity and the highest skill in their construction but they do not share his guilt. He is the efficient and responsible cause. If this were not so justice could be so perverted that the preservation of the order and the security of society would be impossible. Every tool is itself produced, and its maker must be rewarded or paid once, but there the claim for the tool ends. The laborer who constructs the machine cannot demand repayment over and over. The skilled mechanic who produced this pair of lenses must be paid, but he has no claim for second payment. To secure repayment he must make another pair. The maker of this pen and this paper must be paid, but that ends his claim. The maker of the hoe or cart or engine must have the reward he has earned, but can prefer no second claim. There is no question when the laborer makes and owns his own tool. The labor of constructing the tool must be rewarded as well as the laborer in its operation. When the tools are complicated and require the skill of many, the makers of the machine are usually different persons from the laborers who operate it. In this case the payment of all must come from the finished product. Those who constructed the machine and those who operate it must be paid by the consumers. If the shoe plant is built and operated, then from the shoes produced must come the payment for all. The workmen who built the plant and the engines and machinery for the manufacture of the different parts of the shoe, must be paid by the consumer of shoes. The workmen who built the plant must be as fully compensated as those who operate it, but being compensated, they have no claim for recompensation for the same work. To be paid again they must build a new plant. The operators must be compensated for every shoe they make, but they can not reclaim payment over and over again. To receive more pay they must make more shoes. Both classes of laborers have a right to full compensation for all the labor performed. Neither party has a right to demand a second payment for the same labor. It would be manifestly as unjust for the constructors of the plant to compel the operators to pay them over and over again, as it would be for the operators of the machine, having supplied the community with shoes, to demand payment over and over without making another shoe. The shoes will wear out, so will the machines. It is as unreasonable for the first class of laborers to compel the operators of their machinery to keep the same in repair, as for the operators to compel their customers to keep their shoes in perfect condition. For the first laborers to receive a new payment they must build a new plant, and for the operators to receive a new payment they must make new shoes. The confusion of ideas comes in when there intervenes a third party between these two classes of laborers. This third party meets the demands of the class of laborers who build the plant and machines, from hoarded wealth, and then exacts payment from those who operate it. This is then called productive capital, but it is no more productive than the money in the bank vault. The producing, so called, is but the exacting of a part of that which the operators produce. It is the exacting of payment that never pays. The operators are compelled to be forever buying, yet the plant is never bought. The capitalist is forever selling, yet the plant is never sold. Usually, the usurer is a fourth party that stands yet behind the third party, taking no risks, demanding complete security for his loan and also an increase out of the products of the operators. The third party assumes all care and guarantees against all losses and depends for his compensation on a portion of the product after the demands of the fourth party are satisfied. This third party may be an active producer. All that he receives may be fully earned in care, oversight and management of the business of the plant. But the fourth party can have no claim for his services, he has no part in the production. The absurdity, the figment that his capital is productive, is introduced to cover the evident fraud of appropriating, without compensation, a portion of the products of the operators. He has no more claim to an increase of his capital year by year and a doubling in a term of years, than the laborers who built it have to the same plant, perfect and unworn at the end of a term, and in addition, another plant equal in every respect. They built but one, they have no claim upon a second. For the usurer, who takes their place, to double his wealth, and yet the debt be undischarged, is a flagrant fraud. The underlying falsehood is that wealth changes its nature when put in the hands of a live man and becomes productive. It is acknowledged that wealth lying in the vault is barren and at the same time it is claimed that it produces in the hands of an intelligent agent. But it is the same dead, helpless, barren thing wherever it may be found and whatever form it may be made to take. The dollar taken from the vault and exchanged for a hoe does not receive this new quality. The hoe is as dead as the dollar. When this hoe is in the hands of the workman it is the same barren thing is was before he picked it up. These glasses are precisely the same when astride my nose as when lying on the table. It is not true that wealth in any form, though it be that of a useful tool, takes on this new quality or attribute when in the hands of a live man. A man's labor is more productive with suitable tools than without them. The same energy will secure far greater returns. If it were not so he would not trouble to make tools or use them. But to call tools productive agents and so reward them is to rob intelligent energy, skill and inventive genius of that which they alone can produce. This degrades the man to the level of the tool or exalts the tool to the height of its maker. CHAPTER XXI. WEALTH DECAYS. All man-made wealth is subject to inevitable decay. Aristotle said, "Labor produces all wealth," but the product has no sooner left the laborer's hands than it begins to perish. The vital energy that produced it must follow to preserve it from the ravages of time. Take the life, the vital part, from the body, and corruption begins. So with all that has been produced, withdraw the vital force and ruin immediately follows. The vital energy must ever be present and active to preserve it. Fruits and grains and provisions of all kinds for human food rapidly perish. The laborer must be continually active, producing and preserving, or the race would be starving in a fortnight. Even the miraculously bestowed manna became corrupt in a night. It had to be gathered day by day. Flocks and herds need the shepherd's care. They are subject to disease and natural enemies and are short lived, so that however large and strong, and healthy the herd of cattle, or the flock of sheep, it would be soon scattered and lost to the owner without watchful care. Tools and instruments of production, great or small, if used, soon need to be renewed, or if unused perish even sooner. Neglected they speedily decay. The locomotive left unattended on the track would soon be utterly useless from the destructive elements of rain and heat, frosts and sunshine. The palace, that floats on the ocean, would be a prey to barnacles, to winds and waves, to shoals and rocks, and would soon disappear, without the constant hand of intelligent vital energy to direct and preserve it. Houses untenanted and uncared for soon decay. Leaks unstopped, broken windows unrepaired, and vermin unrestrained, soon make them unfit for habitation. Farms and plantations go back speedily to weeds and wilderness when uncultivated. Great cities like Babylon and Nineveh are soon so covered with dust that we have to dig to find their ruins. Decay is written over every form of man-made wealth. There is needed constantly the touch of the laborer for its preservation. Gold, silver and precious stones are the least subject to decay. They are not, however, made, but found, and simply refined and polished. The indestructibility of silver and gold have made them the money metals of the world, quite as much as their rarity, their beauty and malleability. In them wealth could be stored and moth and rust would not corrupt. But even gold and silver will disappear. The thief will break through and steal. They must be, therefore, carefully guarded. The tax or levy of the government for its part in the protection must be met, so that even gold and silver must also gradually slip away. Decay is upon all wealth and the hand of the laborer must be ever present for its preservation. This law is universal. Even the Divine Creator must continue to uphold his creation. His sustaining hand cannot be withdrawn. He must preserve by his power and ever guide and direct, or disorder and chaos will ensue. Usury or interest presumes to ignore this order of nature and demands not only that the borrower shall resist this tendency of capital to decay, but shall also pay a price for the privilege. That any one should undertake to care for and preserve the property of another without compensation is unreasonable, but that any one should voluntarily pay a premium for the privilege can only be explained by misguided judgment or a perverted moral sense. No one would be responsible for, and care for and pay tax upon the money of another and himself get from it no return. Trustees and administrators receive, and feel they earn, a commission for this caring for the property of others. When this wealth is in the form of a tool, or manufacturing plant, the responsibility is greater. The owner asks that it be preserved perfectly. There must be no decline in value, from new improved machinery, and all accidents must be made good; if destroyed by fire, it must be rebuilt. To take this for a year or term of years, is a responsibility no one would feel justified in assuming in justice to himself. He would be using his own vital force to preserve the perishable property of another. A man has a farm, fertile and well improved, and well stocked. He is to be absent for a time. He asks as a favor that another watch it with care, preserve the stock in condition, if any die, replace them, and in short, so preserve that he shall have the farm at his return, just as fertile, the stock just as young and valuable, the implements unworn and no signs of decay on the buildings; if any burn, rebuild them. This would be a favor only the kindest and weakest of neighbors or friends would undertake, and what no man would be justified in asking of another. This is loaning without interest and this is the borrower, who pays only the principal and no increase. The usurer says, Care for my property and pay me for the opportunity. Keep it intact. Make good every loss and return to me an increase which you by your energy and effort may produce. The rates of interest greatly vary. The average in the United States is about seven per cent., by statistics of the government only recently issued. At seven per cent., interest paid annually or added to debt for ten years, the debt is doubled. The usurer or interest taker says, You take this hundred dollars and care for it for me for ten years and then bring me two hundred dollars. Take this wheat and this corn and in ten years bring me back just twice the amount. Take these horses and these sheep and cattle and care for them for ten years and return them just as good as they are now, and other horses, cattle and sheep in equal number, which you have produced in these ten years. Take this shop with all its tools and implements and care for it so that in ten years you can return it to me in as perfect order as now, and also build me with your labor and energy another shop, just like it, and equip it in every way just as complete as this, and on my return give both to me. Take this farm, fertile as it is, with its buildings and animals and implements, and preserve them perfectly, not a thing shall decay or decline in value; make good every loss, and at the end of ten years return it to me and also another farm which you have earned during these ten years, of equal acreage and fertility, equally improved with live stock and implements. The usurer gains the preservation of his own perishable property, and he gains also the product of the vital force of his victim. This law of decay is a natural limitation to the accumulation of any producer. As decay begins at once, a part of the vital energy must be expended in the preservation of that already produced. As the accumulations increase, more energy is required for its preservation, and less remains for active production. Time does not relax his work of ruin, and the resisting energy must be constant. The tendency to decay is such that soon the energy required to preserve that already gained leaves none to produce, and the accumulations must cease. To this point the rich fool in the parable had come. He had abundance accumulated and the problem was to preserve it, until he could consume it. "This will I do, I will pull down my barns, and build greater; and there will I bestow all my fruits and my goods. And I will say to my soul, Soul, thou hast much goods laid up for many years; take thine ease, eat, drink, and be merry." The usurer hands his goods to another to build the barns and keep for him, while he is free from its care; and, more, he requires of his victim not only that he shall preserve, resisting all decay, but that he shall actually pay him for the privilege. Had the rich fool not lived in his day, when usury was a crime, but in this age of folly, he would have apportioned his goods among his foolisher neighbors upon interest, to keep for him, and then not only he, for "many years," but his posterity forever, could be at ease, eating, drinking, and making merry. The silly borrowers would supply all the needs of his endowed family, for the privilege of caring for the goods. CHAPTER XXII. THE DEBT HABIT. The debt habit of mind is the disposition or tendency to look to things we have not as necessary to our success: To yearn for other opportunities and other means than those we have in our hands: To feel helpless without them and willing to incur debt to secure them. The independent, self-reliant disposition takes account of its own powers and opportunities and means, and plans with these to accomplish the very most. This old self-reliant, independent spirit, that scorned debt, has largely passed away. To incur debt is now the common habit and has become respectable. All evil-doers encourage and stimulate the particular fashion or habit or appetite or passion on which they thrive. Usury thrives on debt. If no one was in debt then usurers would be harmless. It is this debt habit that gives them the large field for their operations and secures to them their harvest. The agreement to pay interest preserves for a time the feeling of independence that would be wounded by receiving a loan as a favor. There is usually a feeling of joy and elation in the borrower that confidence in him is so great, and his credit is so high, that he can be entrusted with a loan. By incurring a debt there seems to promise the opening up of opportunities that have been denied, and a possible field for the successful exertion of his pent up energies. The present intended use of the loan, too, seems so attractive and profitable, and the buoyant, hopeful spirit does not doubt that the loan can be easily and promptly repaid. The temptations to debt do not come to the vicious and idle and worthless, but to the most worthy, industrious, talented, reliable and enterprising, those who will be the most productive in their fields of effort. Its very approach is flattering and therefore so hard to resist. A bright, intelligent, noble young man with high aims and worthy purposes yearns for an education, but the opportunities seem to be denied him; but there is a fund at low interest at his service. A lively, energetic young man, with industrious and economical habits, is anxious to engage in business; his youth, character and energy bring the loan to his feet. The young man with pure yearning for domestic life and a home, with a reputation that is above reproach and of commendable energy and thrift, has a home pressed upon him, to be paid for in long-time payments. He can fill it with furniture "on the installment plan." With intellectual taste, he can fill his library with just the books he desires "on the installment plan." Is he musical in his taste, he can fill his parlor with musical instruments "on the installment plan." His needs and tastes can all be gratified at once by incurring debt. To avoid debt there must be a determined and unremitted effort to resist. Few have been able to escape. The aggregate of private indebtedness can not be told. Few manufacturing plants are free from debt. They are usually carrying all the load their credit enables them to secure. Railroads and other corporations are under bonded debts that tax their trade to the utmost to sustain. Counties and municipalities have caught the contagious habit. Bonds are issued to build school houses, town halls, viaducts, water-works, and pave streets. There lies on this table a list of all the cities in this great land, the United States, with their number of inhabitants and their bonded debts. There are but six small cities in the long list without debt. In some the amount is enormous, the city debt in cases running up to one hundred and one hundred and fifty, and two hundred dollars per inhabitant. That is, there is a city debt on each man, woman and child of two hundred dollars. On this amount interest must be paid, twelve dollars per year, one dollar per month for every man, woman and child. There lies also on the table a report of the financial condition of the nearest great city. It is rendered in a cheerful mood and declares the city's credit "tip top." The indebtedness is eight millions, but the assessed valuation of the city is so high that two million more bonds can be issued before the limit of indebtedness is reached as established by the general law. This is regarded as a most favorable showing and the assurance is given that all the contemplated public improvements can be pushed without interruption. There is no thought of stopping until the extreme limit is reached. This habit extends to the churches and benevolent enterprises. There is scarcely a church that is not paying interest on some debt. Local societies are often greatly hindered in their work. A benevolent agency of one of the largest and richest denominations issued a piteous appeal to their constituents for help, declaring that the interest on their debts amounted to one thousand dollars per week. The debt habit has seized the nations and the most enlightened. This is so true that debts are, in pleasantry, spoken of as a sign of a nation's progress. These aggregate billions are rapidly increasing. The Chancellor of the Exchequer says the debt of England was reduced five hundred millions in twenty years. To the astonishment of all the world, the United States began to pay her debt, eighteen hundred million, in thirty years. But these stand alone among the nations. The national debts do not grow less, but are rapidly increasing. Both the United States and England are now increasing their indebtedness each year. The world has gone debt mad. It has become a great harvest field, ripe for the usurers. Debts may at times be unavoidable. They may at times be positively beneficial. There may be times when the system is in such a condition that it is necessary to take arsenic in small doses, but arsenic has no place in the menu of a healthy man. So debts may be necessary to those who have fallen into decay or have been unfortunate, but they should find no place in the normally healthy financial conditions of an individual or incorporation or nation. Debts make no man the richer. A man is no richer when he has secured a loan, than he was before. Paying debts makes no man poorer. He but relieves himself of the property of another. Paying a national debt destroys no wealth. If owed at home, it is but a transfer from one hand or pocket to another. Adjusting the world's debts, private, corporate, municipal, or national, the world would remain as rich and productive. Not a material thing would perish. No man would suffer the loss of any right or of any property, but it would be the destruction of the device by which the usurers appropriate to themselves the productions of others. Freed from this debt habit of mind, and the independent, self-reliant disposition replaced, this anomalous condition would disappear; the producer would receive again his full earnings and the great army of parasites, that has grown up, and that feed so richly on the labors of others, would be compelled to turn producers or perish. CHAPTER XXIII. THE BORROWER IS SERVANT TO THE LENDER. Solomon's declaration that, "The borrower is servant to the lender," was spoken without reference to usury. Loaning upon increase was not lawful in his day, and was condemned by him in his proverb, "He that by usury and unjust gain increaseth his substance, he shall gather it for him that will have pity on the poor." A loan binds the borrower to the lender though he pay no increase. There comes a sense of subserviency and subordination that can not be thrown off. He becomes steward of another's goods, and frees the owner of their care, but they remain subject to the owner's order. The preservation of goods hinder any great accumulation by any single producer, but if he can be freed from its care, then all his energies can be used to continue production. Many find it as hard to keep property as it is to earn it. The hunter or fisherman takes with him his lackey to carry his game. If game is plentiful and the hunter successful, he would, otherwise, soon be compelled to discontinue his hunt from the burden of fish and game. But, freed from that care and burden, he can continue his hunt indefinitely. So, the borrower, even when he pays no interest, as a lackey, without wages, cares for the earnings of the lender, leaving him free to continue his earning unhindered. A valet cares for the clothes of his master until he calls for them. The borrower, without interest, as a valet, without pay, cares for the goods of the lender until he needs them. The independent spirit of the borrower is not immediately lost. The servile spirit and conscious sense of bondage may not be felt at once. Likely the first sensation on receiving a loan is an elation bordering on ecstasy. The poor man who is offered a loan is usually greatly delighted. There is hope of relief from the limitations and restraints that have been as a wall round about him. The loan seems to throw down these walls and give him an opportunity to secure greater results and achieve success. But the delight is transient and the sense of greater liberty is brief. The prison walls are down, but the debt holds him like a ball and chain. He has only exchanged one restraint for another worse; he has leaped from the pan into the fire. The spirit loses its hopefulness and independence and becomes servile and cringing. Milton represents our first parents, after their first sin, as intoxicated in delight, but the consciousness of their degradation and shame soon followed. So the first sensation from a loan is of relief and hope; the future looks bright, but the sense of subjection to the lender is sure to follow. He forfeits the free, independent, self-reliant spirit that scorns dependence upon any man. He only looks the whole world in the face, who owes no man a cent. CHAPTER XXIV. USURY ENSLAVES THE BORROWER. Timon of Athens said, "No usurer, but has a fool for a slave." The borrower without usury loses his free and independent spirit and becomes cringing and servile, but when interest is paid it increases the severity of the servile service. The lackey must not only care for the game taken, but he must add to the bag from his own hunting. He not only cares for the fish his master caught but must add to the basket from his own catching. The valet must not only perfectly preserve the clothes of his master, but must add to his wardrobe. The borrower of the usurer must protect and preserve every farthing in value of the property or goods, and must also increase the amount. The estimate put upon the mental condition of the person who will submit to such an imposition, by "Timon of Athens," must be admitted as fairly just, for a heathen. From the almost universal practice of usury, and the vast numbers enslaved, we must also admit that Solomon, the wisest man that ever lived, knew what he was saying, when he slyly called us all fools in his proverb, "A wise man's heart is at his right hand but a fool's heart is at his left." The object of the usurer in making a loan is to secure the service of the borrower; it may be called a favor, an opportunity, an accommodation, but that is its purpose and its effect. It may be called capital or a tool for production, but the appropriation of the service of the borrower is the result sought and secured. To secure the service of a horse, there must be an outgo of wealth in its purchase price and in its harness and the vehicle. The service received is the return, the compensation for the payment made. That is money invested and repaid in service. The price was in accordance with the service the animal would be able to render. For more and better service a higher price must be paid. There must be an expenditure to secure the service of a chattel slave. The purchase price must be paid and the tools and material or plantation must be supplied before his services are available. The price paid is in accordance with a reasonable estimate of the service the slave will be able to render during life. The outlay is made in consideration of an equivalent in service. A loan is made for the same purpose and secures the same result. The price of the horse or slave must be paid before the service can be claimed. The loan must be made before there can be a pretext of a claim upon the services of the borrower. There is this difference, however, that the purchaser pays for the services he expects to receive; he makes a real outlay for what is to be given him. The usurer pays nothing, he does not give a farthing; he makes no outlay; he merely changes the deposit from the bank vault, or his strong box, to his victim, and requires from him such an ample security that it is as safe in his hands as remaining in the vault. That he has bought the service of the borrower as another bought the service of the horse or chattel slave is untrue. He has given no equivalent. He retains every farthing of his wealth safely deposited with his victim. The service he receives does not diminish the value of his property nor discharge any portion of his claim. The usurer, like all those who appropriate the labors of their slaves, claims that he is a real benefit to his borrower. He has given him an opportunity of advancement that he could not otherwise have had. He points to him possibly with some degree of pride, especially if he seems greatly prospered. The owner of colored slaves pointed to his well-fed and well-clothed and happy people, merry in their cabins, and made a claim that was equally plausible; that these people are far better off and far happier than they could be in freedom. Their well-kept, happy, care-free condition did not make them freemen. They were slaves, though they may have been happy. They were slaves, though they preferred bondage to being their own masters. The usurer's prosperous victim is not therefore a freeman. Though he should prefer debt to independence, that does not make him free. No one prefers to be in debt. Debts are chosen as the least of the evils. The natural resources are occupied and the opportunities of life are denied. Lands and all tools of production are withheld and the horns of the dilemma are debt or privation. The independent spirit shrinks from debt until the struggle of life becomes desperate, when he turns to the other evil and is enslaved. This is not a temptation that comes to the idle and vicious. They could not secure a loan though they tried. An indolent, dissipated and vicious chattel slave would not find a purchaser in the market. It is the industrious, virtuous and economical young man that is of value to the usurer, and the better his character, the greater his worth. For this reason their virtues are cried up to the usurers, as the favorable qualities of the chattel were presented in the slave marts. To secure a loan is an evidence of confidence in his business ability, and an evidence of the appreciation of his character. It is a flattering compliment, and promising relief to a condition that seems hopeless, he permits the yoke of bondage to be fastened upon him. The usurer's slave is cheaper than the chattel. It requires less wealth to secure an equal amount of service. A loan of five thousand dollars at the prevailing rate of seven per cent. will bring to the usurer more than one dollar, clear gain, for every working day. That is as much as any one man, not professional or specially skilled, can hope to produce with that amount of capital, after caring for himself and his home. The borrower secures the lender from all loss, he largely relieves him from oversight, he directs his own labors, supports himself wholly; if sick, he supplies a substitute that the service does not stop, and when from the infirmities of age he is no longer able to give the required amount of service, one dollar per day, he returns the loan in full, which may be bound upon another victim, and thus continued forever. In the days of chattel slavery labor was not so cheap. The price of a strong, faithful young colored slave, and the value of the tools for him to use, and the proportionate part of the plantation necessary for him to work, was about equal to the above loan. Then he must be clothed and fed; his work must be directed; if sick his labor was lost, and he must receive medical and other care; all risks of harvest from drouth or flood must be incurred by the owner, and the slave's term of service was limited by his death, when his purchase cost was lost, and there must be an outlay by a new purchase. One chattel slave could not bring his master such enormous returns. Not only does financial slavery exact more labor for the amount invested, but it is more heartless than chattel bondage. The master had a personal interest in the slave he bought. His health and strength was an object of his care and his death a great loss. There was also often a mutual affection developed, as is sometimes found between a man and his horse or affectionate dog. There was sometimes real unfeigned mutual love. The master had a tender care over his slaves in their sicknesses and in their decrepit age, and sorrowed at their graves. The slaves were inconsolable in their grief at the death of their master. The usurer has no personal interest in his slave. He has no care for his health or his life; they are of no interest to him. He may live in a distant state and has no anxiety about those who serve him. Their personal ills give him no concern. When they die, there is no loss nor any additional outlay required; the bonds are simply transferred to others, and the service is not interrupted. Many faithful, industrial and honest borrowers are unable to return the loan. It is as difficult to retain property as it is to earn it. New inventions, new processes, new methods, new legislation and the changing fashions and customs, often sweep property from the shrewd and careful. "Riches make themselves wings; they fly away." If for any cause the borrower fails there is scant sympathy from the usurer. He charges him with being deficient in business management and thriftless. If the yoke of bondage galls and becomes so painful that in his distress the debtor turns from the struggle in one direction to struggle in another in hope of relief, he calls him fickle; and if at last, after a long and hard service, he is unable to return the loan in full, he calls him dishonest. His ear is deaf to the voice, "Is not this the fast that I have chosen? to loose the bands of wickedness, to undo the heavy burdens, and to let the oppressed go free." There are those in debt yet struggling against hope to be free. They are slaving at work, but making no progress toward relief. The crisis must come. In the race with biting usury that knows no rest, night nor day, year in and year out, that knows no sickness nor delay, that keeps step with time, there is but one possible result. There can be but one final result, though the debtor may have a start far in advance, but if in the race it has become neck and neck, the end is near. Usury will sweep on with full wind, and unslacking pace, when the debtor falls exhausted. There is comfort, however, though the race be lost, for the distress of poverty is less than the agony of hopeless debt. The old and ruined, who have lived honorable and industrious lives, who have endeavored to do their part in all the relations of life, yet have been in the slavery of debt all their days, and when their powers began to fail were stripped of the earnings of years, and besides, are compelled to bear the name of dishonorable debtors, are the most worthy of sympathy of any the world knows. The decrepit old chattel slave had hope of a home until the end, and a decent burial, but the debtor has nothing, not even an honorable name. The young, who are yet free from personal debt, should be warned, and should not permit themselves to be beguiled by any of the allurements held out, nor by flatteries. As one prizes his independent spirit and freedom from the dictation of others, as he desires a successful life and a peaceful old age, he should avoid debt. As a Christian, who desires unrestrained Christian fellowship, whose benevolence will be from the kindness and love of his own heart, as one who wishes to bless all he meets, and to leave a name associated only with hallowed memories, he should avoid debt. "Owe no man anything, but love one another." CHAPTER XXV. USURY OPPRESSES THE POOR. Moses, Solomon and the prophets connect usury with the oppression of the poor. For this reason many have thought the divine prohibition of usury applied only to loans to the poor. By careful attention we will find that its evils are not confined to the immediate participants in the transaction. In the natural operation of economic laws the ultimate burden rests upon the poor. It is clear that when each member of a community contributes his portion to the common welfare the burdens are equally distributed. When any one fails to contribute his proportion the burdens are made heavier for the other members, and the burdens increase as the number increases of those who for any cause fail to contribute their part. This is true in the family home life. When every member of the household is able, and with cheerful willingness does his full part for the family support and comfort, the burden is equally distributed. Let one member of the family be in any way disabled and his duties must be performed by others. If several are disabled the burdens upon the others may be greatly increased. If any are indolent the burdens are made heavy upon those who are industrious. The same is true in the larger family, the community and the state, for political economy is but enlarged home economy. The burdens are lightest when every one contributes his full share to the general welfare. When any are idle the duties become heavier upon those who are faithful. Usury makes it possible for many to live upon incomes from their property. They are not classed, nor do they class themselves, among those who are personally productive. This makes it necessary for the poor, those who have no property, to produce more in order to house and clothe and feed the community. But those non-productive persons are consumers and are the most active consumers. They make heavy drafts upon the energies of others. They become extravagant in their habits and the spendthrifts of the world; while in proportion to their extravagant habits there must be severity and simplicity in the habits of the industrious and productive, on whom the support of the community rests. The world does not grow richer nor are the conditions of life for one class eased by the extravagance of another class. It is sometimes said that the idleness and the wasteful habits of some are for the benefit of others because they make a demand for more work. It would give the lumberman and nail-cutter and carpenter and glazier and plasterer and painter more work to call back the fire department and let the house burn, but that is not the way to house the houseless. Extravagance is wasteful destruction of property. "It is insisted upon both moral and economic grounds that no public benefit of any kind arises from the existence of a rich idle class. Their incomes must be paid, though inconsistent with the public good. To illustrate, the London and Southwestern railroad contemplated a reduction of fares in cars of the third-class. It was defeated because it might reduce the dividends. The poor could not be relieved lest it should reduce the incomes of the idle."--Ruskin. That family is happy and prosperous in which every member contributes personally his portion to its support and comfort. That condition affords the highest measure of relief for all. It is unfortunate if there should be an idler in the home who, as a parasite, feeds on the industry of the others; it is a double misfortune if that idler proves a spendthrift to waste the thrifty gatherings of the diligent. The same economic principles make it necessary for the highest good of every individual in the community that each shall contribute his personal part. "If any will not work neither shall he eat." If any insist upon eating and yet will not work, it imposes an oppressive burden on others to compel them to supply his table. Again: The limiting of production is a hardness to the poor. Their welfare requires the largest possible product along every line of human needs. Over-production is a term of the trade and means only that the supply has become so great that it cannot be sold at prices satisfactory to the trade. But as the prices fall the market broadens. Consumption increases with the increasing abundance, and that which it was not possible for certain classes to enjoy now comes within their reach and may become possible to even the poorest. There never can be an over-supply of fruits and vegetables and grains and meats and shoes and clothes and salt and oil and fuel and houses until the wants of the poorest are supplied. Their welfare requires that there shall be no restraining of the supply until they come out of their huts into houses; until they can shed their rags and dress in clothes both comfortable and attractive; until their tables are supplied with nutritious food; until they have the means of discovering and cultivating their æsthetic nature by shaking off the repellant conditions in which they are mostly compelled to live. The practice of usury restrains the supply by freeing so large a part of the people from the necessity of active productive effort by the incomes from their properties. Many born to wealth have never felt the necessity, and have never made an effort nor turned a thought along productive lines. The world has lost all that they might have added to the world's supply for human needs. Many, who have been successful in accumulation early in life, retire from active work while yet in full vigor, because they are relieved of the necessity by the income of usury or increase, and the most valuable portion of their lives is lost to the world. Production is further limited by the demand that it shall yield an increase on the property employed. The shop is shut down when the goods cannot be sold at such a price as to pay a satisfactory profit on the investment. The shop stands idle until the stock is depleted and the demand raises the price of the goods and then the shop is again opened. The workmen could go on with their work, supplying the world with their goods, bringing the price down until within the reach of the poorest, but it is the owner of the shop that holds the key and demands that the supply shall be so far restrained that the price shall yield a satisfactory increase on the property. Inventions and improved tools are a blessing to the poor when they make labor so productive that they can enjoy results of labor that could not be enjoyed by them before. They are not a blessing when used to gain an increase on wealth by employing less labor. Their proper use is to make labor more productive; their perverted use is to make property more profitable. There is a natural restraint by the law of supply and demand when all needs are so supplied that there is no longer a sufficient compensation to the producer; but it is a perverted and unrighteous restraint to place property between productive labor and human needs and demand a reward for it before these human needs shall be satisfied. There is an utter want of pity for the poor in permitting them to go unhoused, unfed and unclothed, unless there shall be a profit by increase in supplying their wants. True benevolence requires that labor shall be made so effective as to fill every human need, but pure selfishness uses property to supply the need for a gain. This restraint for an increase on property is oppression of the poor for a price. CHAPTER XXVI. USURY OPPRESSES THE POOR--Continued. The influence of any act is not limited to the person acting. The righteous act of a righteous man blesses himself and his generation and generations yet unborn. So the influence of a wrong act is not limited to the wrong-doer, but extends to others and is harmful to those who had no voluntary part in the act. Though the wrong be a personal habit and the sinner be himself the greatest sufferer, yet it is impossible to avoid causing distress to others who are themselves innocent. Equity between those who participate in a wrong does not make a wrong act righteous. Thieves may be just among themselves, in the division of the spoils secured from others, but that does not make them upright men, nor does it make their business honest. If it were possible to preserve equity between the borrower and the lender upon usury, yet that would not justify the act nor remove the evil. The collection of their profits, which they divide equitably among themselves, imposes a burden upon others who have no part in the transaction. Their satisfactory agreement does not make the transaction less detrimental to the general good. It may the rather partake of the nature of a conspiracy against the public welfare. The promoter of an enterprise on borrowed capital is practically but the agent of the lender. He may be the director and manager but he so conducts his undertaking as to gather the usury from others. When the opportunities for profitable investments become rare, and money accumulates and is lying idle, such promoters with their schemes are encouraged in order to gain a profit on the investment, though others suffer by it. There lies upon this table a booklet, written in 1841, which charges and proves complicity between the bankers and brokers of New York at that time. The bankers loaned the brokers the money which they reloaned at very high rates. The banks refused accommodations to those in pressing need, compelling them to go to the brokers and to submit to their extortionate demands. Though there may be an equitable arrangement between the owner of property and his broker and between the broker and his promoter, yet in the last analysis it will be found that this equitable arrangement, in its ultimate result, is of the nature of a conspiracy to compel the innocent poor to pay the profits of both; their consent is not first secured nor do they gain a single advantage and they are helpless to resist. Though the transaction may have been between the rich, a rich lender and a rich borrower, yet the final result is that the interest is paid by the poor. In Calvin's letter of apology he supposes a case of equity between a rich land owner who is in need of ready money and the man who has money to buy a farm, but instead lends to his rich landlord and takes a mortgage. In this case the tenants of the borrower must pay the interest and finally the principal also. This increases the hardness of their hard lot. Though Calvin seems to appreciate the severe conditions of the ordinary tenant in his day, yet he fails to recognize that the very illustration he gives would result in greater oppression. When one entrusts his money to a broker for investment he does not come in contact with those who earn the interest. It may pass through a number of agents and the source from which the interest is drawn is not regarded. When one entrusts his money to the "Security Co." in their great building, surrounded by all appearances of unlimited wealth, it is not realized that the interest returned is wrung from the poor. Money does not lie in the vaults. It is loaned to others who as agents do collect or gather from the poor. A loan is made to a milling company and the interest is gathered from all who buy their flour. A loan is made to a landlord and he collects the usury from his tenants. A loan is made to a street car company and increase is collected from the employes and from every rider. A loan is made to a merchant and he collects from his customers. It is easy to see who pay the interest when we make a common pawnbroker our agent and see in his dingy rooms the evident distress and needs of his callers. Many shrink from his oppressions who are deceived by the splendid surroundings of the "Security Co." But the interest is exacted from the same class as truly by one as by the other. Usury oppresses the poor by raising the price of all that he consumes. Without being consulted and without the power of resistance he must pay tribute to property for the very necessities of life. He lives in a rented house. The owner has placed a mortgage on this house and the tenant must pay the interest and more in his rental or be ejected. The bread he must have is from wheat raised on mortgaged land and the interest must be met in the price of wheat. The mill is mortgaged in which it is ground and the interest must be paid in the increased price of flour. The railroad is bonded and the interest on the bonds must be paid in the price of its transportation, and the merchant has a loan to enable him to do business and the interest on this loan must be met in the increase of the profits on flour and all other goods he handles. By usury a tribute is levied on his bread from the wheat in the field until it reaches his tables. In the same way he pays interest in the price of his meat, which is raised on a mortgaged farm, transported over a bonded railroad, dressed in a mortgaged abattoir and sold by a dealer doing business on borrowed capital. The same is true of his clothes; a first tribute must be paid to property by the raw cotton or wool, then the transportation and the factory and the merchant, in addition to the compensation for their services, must meet also the interest upon their loans, and the whole is summed up in the price the poor man must pay. He has no option in the matter; he has no alternative, no method by which he can escape. The same is true with regard to his fuel and his light. The same is true with regard to car fares. In every ride he pays an enormous tribute to invested wealth. The writer made a careful estimate of the accounts of a car line in a small city where the number of riders bore small comparison with the crowded cars of any metropolis. When the cost of maintenance of the plant, including the wear and tear and all repairs, and the cost of operation, covering all current expenses, including taxes, were compared with the receipts from the patrons of the road, it was found that less than two cents per passenger was necessary to pay these charges and that three cents had gone to pay the interest on the enormous bonded indebtedness and dividends on the inflated stock. The wage-earner, the pensioner and every person living upon an annuity or fixed income from any source, must thus pay usury or interest on obligations they never incurred. A large portion of their living is thus taken from them, and under a system of general usury they have no way of avoiding it. They must pay an enormous tribute to property in providing the common necessaries of life. Usury lowers the poor man's wages. The owners of property forbid its use until such a concession is made by the laborer as they may demand for the material and tools of production. Those who will use them and give the owner the highest return for their use secure the work, _i.e._, those who will bid the labor the lowest, who will use the tools and work up the material the cheapest. The demand of capital has come to absorb a large portion of the produce of labor. In 1890 the wage-earners created a value of $3,579,168,172 and received out of it wages amounting to $1,981,228,321, leaving in the hands of the employers $1,687,939,851. Labor thus received a little less than 53 per cent. of its product. In 1900 the wage-earners created a value of $4,640,784,931 and received out of it wages amounting to $2,323,407,257, leaving in the hands of employers $2,317,377,674. The employers and employes divided labor's product so evenly that the difference does not amount to one-eighth of one per cent. The decade 1890 to 1900 has been of unprecedented prosperity to capital, but the advantages to labor have not appeared. When the number of laborers at the beginning and the close of the decade are considered the annual income of the wage-earner at the close of the decade is actually $7 per year less than ten years ago. The tribute to property must first be gained, the wages are secondary. If the tribute is not paid the enterprise is regarded as not successful and the industry closes. There is no protection for the laborer except the selfishness of capitalists themselves in competition to secure the services of labor. But the selfish strife has rather resulted in the combination of their capital to dispense with labor or to cause the same labor to produce more by the employment of more capital. The effect is to give employment to capital rather than to labor. If labor can be dispensed with by borrowing more capital, then a loan is secured and the laborer is dismissed. Thus capital is made to crowd out the laborer and gains for itself his reward. This diminishes the call for labor and increases the number of the unemployed and they become competitors for the privilege of working. The opportunities for labor becoming fewer, the strife for work becomes fiercer. The laborer is helpless to resist, as his wants do not stop; his family must be fed and clothed and housed. The struggle is unequal between "flesh and blood" and a material thing that, by a false economy, is given not only the power of self-support but also continuous increase. For this reason combinations of laborers never have been and never can be successful in a conflict with capital. So long as the false principle is admitted, all efforts must fail. So long as it is granted that property has earning power, the effort will be made by the owners of property, and always successfully made, to have property receive the larger portion of the reward. The true order will be reversed; the laborer will be given a mere subsistence while the increase will be claimed for the capital; the very opposite of the true order, the mere preservation or subsistence of the capital, while all the increase belongs to the laborers. CHAPTER XXVII. USURY OPPRESSES THE POOR--Continued. Usury makes it possible to impose on the poor the principal burden of taxation. Though taxes are levied upon property it is a delusion to think that those who own no property pay no taxes. By usury the taxes are easily slipped upon the poor. If the tax levy is one per cent. on property then in a year the one hundred dollars has been decreased by one dollar and is but ninety-nine, unless that dollar has been supplied from other earnings of the owner. Thus vacant lots, jewels and hoarded stores are a burden to their owner. But when the property can add to itself an increase, then there need be no diminution of the amount, and no sacrifice is necessary on the part of the owner. If the wealth is placed in the form of a loan on mortgage on a house, the tenant in his rental pays the interest on that mortgage, which meets the tax and also yields a revenue to the owner, and leaves the wealth undiminished. The tenant earned the tax, and both property and owner are relieved. The mortgage may be upon a manufacturing plant, when the operatives pay the tax from their earnings. The bonded debt of a city or state, in the ultimate result, is collected from the productive labor. To pay the interest and principal of the bonded debt of a city the tax levy is increased, and a greater proportionate amount of labor is appropriated. Laboring people without property are often amazed at the indifference of property holders when a great bonded debt is incurred, as both interest and principal are to be paid by a tax upon property. Those who make the loan to the city, and all who hold mortgages and dividend paying properties, are complacent because the taxes of a hundred years would never diminish their property a dollar, though the tax levy should be doubled. It would raise the interest on money, diminish the price of labor and raise the price of goods, but those who profit by the gain of usury are untouched by it. Recently complaints were made by the tenants of one of the poor districts of London because their rentals had been greatly increased. The reply of the landlord was direct and clear: "You have voted for public improvements and now you must pay for them." The same is true of the interest and principal of the national debt. The revenue is raised from a levy upon importations, as, for example, tea, the tax on which is ten cents per pound. The tax is collected from the importer and by him attached to the price for which it is sold to the wholesale dealer and by him attached to the price he charges the retail dealer and by him the amount is collected from the consumer. Sufficient notice is usually given that the importer and the dealers may dispose of all their goods before the tariff is removed. A public announcement of such a purpose was recently made in reference to the tax upon tea. The tax collected from the consumer is far heavier than the mere levy of the government. The importer demands a profit on the amount of revenue tax he has paid as well as on the amount he pays for the goods. This results in greatly increasing the burdens of the poor. The revenue tax recently imposed by Great Britain of three pence per cwt. on wheat and five pence per cwt. on flour resulted immediately in the addition of one penny to the price of the four-pound loaf to the consumers. Again: This attributing to property the quality of self-perpetuation and increase has led to its incorporation and in a manner separation from those who own it. Property must always have an owner. Personality must always come in else there are no rights to be considered. Labor apart from a person laboring and property apart from a person owning are impersonal and no ethical or moral laws can be applied to them. They are only physical forces and material things. The wind may push against a tree and overcome its resistance and the tree falls. That is merely an abstract force against a material thing. But when my energy is exerted against your tree and destroys it, then personal responsibility and personal rights must be considered. A righteous adjustment between labor and capital can never be arrived at without the consideration of the personal elements on both sides. The moral and ethical laws must be applied as well as the physical and economic. Incorporated property, however, has eliminated from it the ethical and moral responsibility of personality and is regarded as possessed only of economic and physical qualities and restrained only by legal statutes. Incorporated properties are not generally managed by those who own them. The managers are employed by the owners, who are ready to pay large compensation to those who have the tact and brain and nerve power and peculiar quality of conscience to gain for them a satisfactory increase. It is their work to press this irresponsible material body up against "flesh and blood." The incorporation employs the laborer when his labor earns a satisfactory dividend on the capital, and lays him off or discharges him whenever it seems most to the advantage of the investment. A plant is built and operated for a time and then the plant is closed, or the location is changed without the slightest regard to the sacrifices of the poor laborers who have gathered around and are left stranded. Laborers everywhere throughout Christendom need and beg for a Sabbath of rest, but neither physical needs nor conscientious scruples are regarded when a greater dividend can be gained in seven days than in six. On the part of the workman, resistance is useless. He can do nothing but yield to the economic and physical force managed by those in whom human sympathy and pity for the suffering and helpless are not permitted. The dividend must be gained though it be necessary to grind the poor. The owner of this steel plant is in a distant city. All employes, from the manager down to the porter, must so serve that he shall receive the dividend. This mercantile house is owned by a woman on a pleasure trip round the world. All who are connected with this business must so serve and sacrifice that she shall receive her income regularly. This railroad is owned by those who have gone a-yachting in southern seas. It must be so managed that the revenues shall not fail whatever the sacrifice required of others. The writer once heard an American statesman, who afterward became President of the United States, deliver an elaborate and carefully prepared oration on a great occasion, in which he discussed the growing power and controlling influence in state and national affairs of incorporations. He did not formulate a remedy but said, "The problem to be solved by the next generation is, how shall the people be protected against the encroachments of incorporated wealth?" It need scarcely be said that there was no discussion of that question during the campaign which closed with his election to the presidency. Usury is both the basis of the incorporation and the instrument of its oppression. Incorporated wealth must not be permitted to claim personal rights and yet escape personal responsibility. It must be held to the same ethical and moral laws as the individual. Personal responsibility must not be eliminated from property. It must not be divested of personal responsibility and then pressed as a mere material thing up against "flesh and blood." No instrument of oppression ever surpassed in severity the usury of incorporated wealth and retained the pretense of respectability. It is sucking the blood of the poor every hour, yet they cherish and pet the vampire, not realizing that it is their blood upon which it feeds. CHAPTER XXVIII. USURY OPPRESSES THE POOR--Concluded. Usury increases its burdens in proportion to the poverty. It is the most oppressive upon the poorest. Property in any measure is a relief. However small the amount may be, to that degree it assists in bearing the burden. Those who have a home are relieved of the burden of usury by rent. Those who own their shops or farms on which they can employ their labor are relieved of the usury of tools and material. From the conditions now prevailing the burden of usury rests on all those, the half of whose income is the product of their own labor. The one who receives one-half his income from the interest on property and one-half from his own labor has no advantage from usury. The income of his labor would bring him as many of the comforts of life as his labor now does, plus the income from his property. There is no advantage until a greater part of the income is derived from property. A small savings account, adding a few dollars annually to the income, is a very small offset to the constant drain from usury in all that we buy and upon all our earnings. The full burden however is upon those who have nothing but their own productive energy; who receive only wages and must buy in the market. As the relief afforded by property decreases, the oppressive burden of usury in present conditions increases. It is a fair estimate that usury is oppressive until relieved by the income from property to the amount of one-half of the entire income received. When less, the oppression begins and leans its full weight and without pity upon the poorest and most helpless. He that has no property is dependent upon others for employment and in his wages must give a part of his product as tribute to the capital he uses. This, in the case of the average wage earner in this country, is not less than one-third, that is, he who earns one dollar and a half will receive as wages one dollar, the other half dollar is retained by the employer as due for the capital invested. Then having no home he must pay tribute to property in shelter for himself and family. The rent will be higher in proportion to the poverty of the apartments. The poorest tenement returns the highest rate of interest to the landlord. His decreased wages do not make the necessities of life proportionately cheap to him. He pays usury in the price of the fuel which he burns, of the oil, gas or electric light in his home. In the price of vegetables, bread and clothes and shoes. There is an increased outgo at every turn which he cannot avoid. He is helpless to resist. He can but struggle staggering along while work is given and his health and strength remain. When these fail he falls and must become entangled in debt, from which there is no hope of being able to extricate himself. The state recognizes the hopelessness of the poor man who is in debt and has provided a relief by bankruptcy, by which he may again arise and struggle on. This discharge in bankruptcy is an act of mercy but the relief from the oppressions of usury would be an act of justice. Grinding the helpless poor between low wages and high prices and then relieving them by the act of bankruptcy is only pulling them out of the mill to throw them into the hopper again, for the wage earner who has no protection from any property is between these upper and nether mill stones. Those who defend the fraud of usury always take to cover behind the widow and the fatherless. They plausibly pretend to be zealous for their protection while endeavoring to hide their own greed. Their pleas are often touchingly pathetic. "A thrifty loving father was taken away by death from a dear wife and sweet little ones. They had always leaned on his strong arms. He was their joy, their protector and their support. This widow and her fatherless children are left with nothing to support them except the saved hard earnings of this husband's life. As these earnings are their only support they are deposited with care with the 'Security Co.' for safety and that the regular interest dues may be received without fail. If there should be one failure they would suffer. The 'Security Co.' loan their deposits as opportunity offers. They take some local mortgages and also some mortgages on western lands. They buy some bonds of a milling trust and also of a railroad and street car line and some national bonds and loan on personal security to local merchants and traders. From all these sources the interest is regularly collected and regularly paid to this widowed mother, without which she and her little fatherless dear ones must suffer. 'Certainly,' they say 'usury is not oppressive to the widow and the fatherless. Usury comes to the help of the helpless.'" Another faithful industrious father was taken away from his wife and his little ones. He had been their stay and support. He was sober and thrifty but sickness and untoward conditions made accumulations impossible. When he, the head of the home, was taken away there was nothing for the support of these helpless little ones and their widowed mother but her own arms and head and heart. There was no time for sentiment and tears. These little ones must be sheltered and their hungry mouths must be fed. Restraining her grief, she bravely undertakes the heavy task. She rents a room but the rental is high, for the interest must be paid on a mortgage held by the Security Co. She finally finds a shop where she secures employment but the wages are low, for the shop is heavily mortgaged to the Security Co. and the interest must be paid or the shop will be closed and even this opportunity for scant wages will be lost. The distance requires that she shall ride to her work but the round trip costs two nickels and one of them goes to the Security Co. for interest on their bonds and stock. She buys a loaf of bread but the wheat was raised on a western farm mortgaged to the Security Co. and the interest was charged up against the wheat. The wheat was floured in a trust mill and the interest on the Security Co. bonds were charged up against the flour. It was transported by a railroad that charged up against it the interest on the bonds held by the Security Co. It was baked in a mortgaged oven and handled by a local dealer doing business on capital he had borrowed of the Security Co. How much of her bread money went for interests is an intricate problem. She only notices that her loaf is small. The same oppressive tribute must be paid on all that she buys to feed and clothe herself and her little ones. The first widow does not live upon the earnings of her husband. They are untouched at the end of a year nor diminished as the years pass. By the operation of usury she has lived upon the hard earnings of this poor widow. The laborers on the western farms contributed to her support in decreases of wages; the operatives of the railways, the workmen in the mill, the baker and merchant all contribute a portion, but it cannot be denied that the heaviest burden comes upon the poorest. The rich widow has fed her children with the bread which the poor widow earned. The flaunting sympathy for the poor of those who themselves feed upon them, is rank hypocracy. Nor can those who have grown fat by the practice of usury, condone the crime by tossing back to them a portion of the unjust gain. "Is it such a fast that I have chosen? A day for a man to afflict his soul?... Is not this the fast that I have chosen?... To undo the heavy burdens and to let the oppressed go free?... Is it not to deal thy bread to the hungry, and that thou bring the poor that are cast out to thy house?" CHAPTER XXIX. USURY CENTRALIZES WEALTH. The dictum of Bacon that "Usury gathers the wealth of the realm into few hands" is readily proven and fully verified in the experience of these times. The tendency to centralization under a system of usury or interest-taking is so strong, and the modern result so apparent that the statement only is necessary. Usury not only enslaves the borrower and oppresses the poor who are innocent of all debt, but it also affects the rich by gathering the wealth of the wealthy into fewer and fewer hands. There is a centralizing draft that threatens and then finally absorbs the smaller fortunes into one colossal financial power. It is as futile to resist this as to resist fate. Wealth cannot be so fortified and guarded as to successfully resist the attack of superior wealth when the practice of usury is permitted. The smaller and weaker fortune, using the same weapon as the larger and stronger, must inevitably be defeated and overcome, and ultimately absorbed. Rates of interest do not affect the ultimate result. Under a high rate the gathering is rapid, under a low rate the accretions are slower, but the gathering into few hands is none the less sure. Rates of interest only place the convergent center at a nearer or more remote period. If any interest is right, compound interest is right. When simple interest is due and paid, it may be loaned to another party, and thus the usurer secures interest upon his interest, though not from the same debtor. When the interest is to be paid annually, it is to be assumed, if not paid, that the debtor takes it as a loan in addition to the face of the note of his obligation. This saves the care of receiving and re-loaning to another. The custom of usurers, however, is to renew the note, adding the interest to the face, if unpaid. The mass of bank paper is renewed each ninety days: Compounded four times a year, whether to the same or to another debtor, the result in accretion is the same. Few realize the rapidity at which a loan increases, accelerating in geometrical progression as time passes. Any loan will double itself at three per cent. in twenty-three and a half years; at seven per cent. in ten and a fourth years, and at ten per cent. in seven and a third years. One dollar loaned for one hundred years, at three per cent., would amount to nineteen dollars; at seven per cent. one thousand dollars, and at ten per cent. thirteen thousand. The island upon which New York stands was bought from the Indians for the value of twenty-four dollars by Peter Minuits in 1626. Yet, if the purchaser had put his twenty-four dollars at interest, where he could have added it to the principal at the rate of seven per cent., the accumulation would now exceed the total value of the entire city and county of New York. M. Jennet quotes the elaborate calculation of an ingenious author to show that 100 francs ($20) accumulating at five per cent. compound interest for seven centuries, would be sufficient to buy the whole surface of the globe, both land and water, at the rate of 1,000,000 francs ($200,000) per hectare (nearly four square miles). From this we can gather that $20 at five per cent. compound interest for 700 years, would buy all the earth, mountains, and swamp lands, and water, at $80 per acre. Another mathematical genius says, had one cent been loaned on the first day of January A.D. 1, interest being allowed at the rate of six per cent. compounded yearly, then 1895 years later--that is on January 1, 1895--the amount due would be $8,497,840,000,000,000,000,000,000, 000,000,000,000,000,000,000 (8,497,840,000 decillions). If it were desired to pay this in gold, 23.2 grains to the dollar, then taking spheres of pure gold the size of the earth, it would take 610,070,000,000,000,000 to pay for that cent. Placing these spheres in a straight row, their combined length would be 4,826,870,000,000,000,000 miles, a distance which it would take light (going at the rate of 186,330 miles per second) 820,890,000 years to travel. The planets and stars of the entire solar and stellar universe, as seen by the great Lick telescope, if they were all in solid gold, would not nearly pay the amount. A single sphere to pay the whole amount, if placed with its centre at the sun, would have its surface extending 563,580,000 miles beyond the orbit of the planet Neptune, the farthest in our system. It may be added that if the earth had contained a population of ten billions, each one making a million dollars a second, then to pay for that cent it would have required their combined earnings for 26,938,500,000,000,000,000,000 years. Anyone can figure on this and see if it be correct. Had Peter only thought to put one cent at interest, there would be no call now for Peter's pence. With any accretion allowed, the concentration of wealth is irresistible. However small the amount of capital, if permitted to grow at any rate of increase it will ultimately absorb everything. Any finite quantity permitted any finite rate of increase, will, in finite time, gather all that is less than infinite. The only difficulty in this accretion is to secure debtors that will not die. We inherit the property of our fathers, but fortunately we do not inherit their personal debts. This difficulty is being overcome by bonds of corporations and nations that live on, though the individuals composing them may, age after age, pass away. This makes the increase perpetual. Generations may come and go, but the concentration of wealth goes uninterruptedly on. This is not visionary theory, but is shown in the practical results everywhere apparent. The usurers of England, a little over two hundred years ago, secured a charter for a bank on the condition that they loan the crown or government 1,200,000 pounds sterling, about six million dollars. This was a perpetual loan, never to be repaid, but annual interest at eight per cent. was to be paid by the government forever. This constant annual interest paid to this bank has made it such a financial power that it reaches and draws to itself of the resources of all lands. The aggregated wealth of the institution, if the accretions were continuous, would now be $25,165,824,000,000. The wealth of the United Kingdom is estimated at fifty billions, and all Europe two hundred billions, the United States seventy billions, and the whole world's wealth at five hundred billions. Were the accretions of the bank at eight per cent. undisturbed and unconsumed, it would now take fifty worlds as rich as ours to pay that debt. It is sometimes wondered how there can be such an accumulation of wealth in one institution as to control the finances of the world. It is often attributed to superior wisdom or some profound, occult manipulation. It is but the natural operation of the principle of interest--accretion from age to age. The managers may be stupid dolts, only so they do not interfere with the usurious principle in its eternal pull on the resources of mankind. The interest bearing debt of the United States, at this date, is about one thousand millions. This in one hundred years at six per cent. would amount to $340,000,000,000; five times the whole present wealth of the nation. The smallest national bank organized, by the deposit of $25,000 of bonds yielding two per cent. interest, and permitted to re-loan the same funds to its private customers at eight per cent., could gather to itself in one hundred years, $345,225,000. The wealth of an individual or of a family may also grow with the years as they pass. The property may be in public bonds or that of incorporations, requiring no care or effort on their part, yet it may be continually increasing. A usurer in any community in one life comes to absorb the wealth of that community, though the amount loaned at the beginning was small. The accretions are the irresistible result of the principle of usury. The wealth is more and more centralized as the years pass. Great trees in the forest shadow the smaller, and rob them of the sunshine and moisture until they perish. Great fish in the crowded pond feed upon the smaller. Individual manufacturers are absorbed by the great combinations called trusts. The stockholders of a railroad are absorbed by those who have large and controlling interest. But the railroad is itself absorbed by another yet greater corporation, and this again by a great combine that eliminates the influence of all but the chief control, and tends to a complete centralization of all the systems. There is no escaping from this centralizing draft upon all resources, when the system of interest-taking is as general as now. Freedom from personal debt does not deliver us. The farmer, the most independent of men, in his own home, free from personal debt, yet must contribute to this centralizing by paying interest on bonds in every shipment of produce, and every mile of railroad travel. He pays tribute also in all the tools that he buys, in the food that he eats and the clothes that he wears. This centralizing draft is constant, though not always equally apparent. Certain favorable conditions may hold in check, for a time, the adverse influence and cause a temporary distribution of wealth to the producers. Its force is not, however, destroyed, but only restrained for a time, and then draws with accumulated power. Times of industrial depression and commercial disasters are occurring over and over again. Some economists attribute them to the peculiar industrial and monetary conditions of the periods in which they occur; but they have seldom agreed as to the causes of any particular panic. They are so regular in their recurrence that some economists have thought they must be produced by some constant cause; like the moon causing the tides of the ocean. Both are true. There is a general and there is also a secondary or superficial cause. The times of greatest commercial disasters in this country were in the years 1809, 1818, 1837, 1873, 1893. The political economists can assign as reasons some peculiar conditions prevailing in each of these periods, but the wisest have never gone deep enough to discover the general cause; this constant centralizing draft of usury. In these periods of commercial disaster there is no destruction of property. There is only a general shake up and redistribution. All the wealth of the country remains, but after the disaster wealth is always found to be in fewer hands. Some have become rich, many who were thought to be wealthy are ruined, and the number of the poor has been multiplied. A patient may be afflicted with some deep-seated, chronic disease that makes him very easily affected by a change of the weather, by a change of his diet or of his bed, and these may be assigned as the causes of his frequent relapses, and they are the immediate or secondary causes, but the real cause is the deep-seated, chronic disease. Cure that disease and the changes in conditions, now so serious, would not be noticed by the healthy man. The real and constant cause of our recurring financial disasters is this centralizing usury that directly opposes the distribution of wealth that is natural, when the producers of wealth are permitted to receive and enjoy it. Root out this evil, and then the trifling differences in our harvests, changes in our tariff laws, currency legislation, and the score of other things that now affect us, would be unfelt by the healthy body politic. If this centralizing power is destroyed then the natural distribution would be undisturbed, and these, so-called, panics would be unknown. CHAPTER XXX. MAMMON DOMINATES THE NATIONS. The debt habit has been diligently cultivated and encouraged, until the nations are enslaved. Public bonds imply bondsmen, and the nations are no longer free. There is a mortgage upon the inventive genius, industry and productive energy of the world. Usurers greatly prefer an organized government as a debtor. The individual may die, but a nation's debts bind from age to age, are bequeathed by the fathers to the children, and thus descend from generation to generation. The bonds of no corporation, however great and rich, can be so secure. They embrace special industries, while national debts are a claim upon every industry and a mortgage upon every foot of soil, and every dollar of present personal property, and of all that may be produced in the whole realm. If we express the world's indebtedness, the national debts, in the terms of our currency, as nearly as we can reduce the currency of other nations to such an expression, we find the national debts as follows, in 1890: Denmark $ 33,004,722 Great Britain 3,848,460,000 United States 915,962,112 Germany 1,956,217,017 Austria-Hungary $2,666,339,539 France 4,446,793,398 Russia 3,491,016,074 Italy 2,324,826,329 Spain 1,251,433,096 Netherlands 430,539,653 Belgium 360,504,099 Sweden 64,220,807 Norway 13,973,752 Portugal 490,493,599 Greece 107,306,518 Turkey 821,000,000 Switzerland 10,912,925 --------------- These debts aggregate $22,955,386,008 Hundreds of millions have been added to these national debts in the last ten years. Nearly every nation has increased its indebtedness, possibly no nation has decreased it, and others, like China, with its recent great loan, and little Korea, with its twelve millions, must be added to the list. The debts of the nations of Europe have been increased until they now amount in the aggregate to twenty-three billions. The debts of the nations of all the world have increased one-half since 1890, and now aggregate thirty-three billions. These great national debts are practically perpetual, and though they may be at so low a rate of interest as three per cent., they absorb the energies of the people, and, like a glacier grinding over the earth, crush all beneath them. Public debts are incurred to relieve the present wealth of the burden of present duty. Debts place the whole burden on producers of the future. They relieve those who hold the wealth now, but are a draft upon those who make the wealth that is to be. An individual incurring debt places a mortgage upon his productions; by a pledge of future production he relieves himself of the strain of the present. A family incurs debt; a part of the members of the house are strong and capable of productive labor, and a part are not; the whole burden of the payment comes upon the productive members of the home. The weak and helpless and the indolent, though strong, bear no part of the burden. This family has a home, and a mortgage is placed upon it to secure the present needs. The burden of paying the interest on this mortgage, and the final payment of the principal, is wholly on the capable and industrious members of the family. National debts are incurred to relieve the present wealth of the burden of present government calls and obligations, and to roll it upon those who shall produce wealth in the future. So the debt of a city, state, or nation is a present relief to property holders, by placing the producers under future obligations. A street in a city is to be paved; no additional tax is levied; but bonds are issued running twenty years. This relieves the present wealth of the burden, placing it upon those who shall produce the wealth that shall be in twenty years. The expenses of a great war must be met. Present taxes may be slightly increased, but to meet the burden consols or public bonds are issued to be paid at a distant date. This relieves the present wealth, but binds it upon those who shall be the producers of wealth in the generations to come. Hume says, "The practice of contracting debts will almost invariably be abused by every government. It would scarcely be more imprudent to give a prodigal son a credit with every banker, than to empower statesmen to draw bills in this manner on posterity." These public bonds are the golden opportunity of the usurers. Not only is their wealth relieved of all burden, but it affords an opportunity of profitable investment with the best possible debtor. They can pose as enterprising citizens, and urge great public improvements, and at the same time gain a most sure and profitable investment. They can pose as patriots in time of war, and urge that it be pressed with energy at whatever cost of treasure and blood. It is not their blood that is shed, nor their wealth that is wasted. It gives them the opportunity of binding their burdens on the nation for the producers of the coming generations to carry. Usurers never wish public debts paid. They wish them issued for as long time as possible, and then reissued, or the time extended before they are due. This is done by the figment called refunding, as if it were a concession and favor to a poor debtor. It is but a device to keep the burden on the public back. It is not a financial feat and triumph for the chancellor of the exchequer to refund a public debt. He but yields himself as a tool to the usurers to continue their loans. They resist the payment when due, but when an officer is found willing to extend them before they are due all trouble is avoided and the accretions of interest are not interrupted for a day. Those who hold the bonds of a nation direct its destinies. The nation borrowing is servant to the lender, just as an individual. The nation compromises its freedom and becomes the slave of its bond-holders. The usurers use their power for the advancement of their own material interests, and hold all other purposes of government as inferior to their own ends. This subordination of a people, to the creditors, is fatal to republican and constitutional governments; the form may be preserved for a time, but the substance of free government has departed. The concentration of wealth carries with it the concentration of power, and is inimical to republican institutions. A proper distribution of wealth and power must be preserved or popular government is put in jeopardy. The first bank of deposit and discount was the Bank of Venice, in the republic of Venetia. It continued its existence for six hundred years, until the government that gave it life itself perished. From its long continuous business, and its success as a bank, it has been spoken of in every work on banking as a model. It began its association with the republic in 1171, and dominated it, sapping its life, and assuming its functions, until the bank practically ruled the state, and when one fell both perished in 1797. The usurers received their hold on the state in a time of the greatest need. The republic had been impoverished by the crusades, and was in dire financial straits. Advantage was taken of this by the usurers to so bind the bank and state together that when one lived the other must, or both must die together. Stock in the bank was a loan to the state at four per cent. annual interest. The union seemed to promise great prosperity for a time, but really absorbed all the republic's vitality during the last hundred years of their life. Venetia was at the first a pure democracy. The Doge was elected by the people and administered the government, himself being the responsible head. He, later, chose advisers, or a cabinet, to be associated in the responsible duties. After this, and about the time of the association with the bank, a representative council was elected by the people, and the government was administered by the Doge and this council. This was gradually transformed from a government of the people to an oligarchy; and as the years passed there were no steps taken toward a return, but the authority and power was more and more centralized. The ruling class was, in a hundred years, limited to those families enrolled in the "Golden Book." In another hundred years the government was in control of the "Council of Ten." Later the secret tribunal of three was the terror of the people and the instrument of their oppression. The republic was only such in name, the people were deprived of all voice in the government, and the Doge became a puppet to obey the ruling cabal. Shakespeare went to Venice to find his typical usurer in Shylock the Jew. He found there also his typical Christian, Antonio. Antonio was a benevolent great soul, who loved his friends, supported all benevolences, and hated the usurers. Shylock hated him because he would lend without interest, and was constantly reproving him for his usurious practice. The contest between the usurers and the people of the Venetian republic was a struggle for the life, but the usurers never relaxed their hold. They dominated until the end. Another great triumph of the usurers was in England at the time of great need. William and Mary had been placed upon the throne by the Protestants, but were in need of money to carry on the struggle for its complete establishment. This was the usurers' opportunity. Former kings, in like straits, had confiscated the wealth of the usurious Jews, Lombards and Goldsmiths, and appropriated their property as a penalty for their unchristian practice, but William and Mary entered into a contract with them to gain their assistance, giving them special privileges to secure a permanent loan. They were to loan the crown 1,200,000 pounds sterling. This was never to be repaid, but interest at the rate of eight per cent. per annum was to be paid forever. This loan was a marvel of success. There was a great rush of usurers to place their money with the crown as a perpetual loan at that rate of increase. Their usuries, which had hitherto been counted dishonest gain, were henceforth to be honorable, and they esteemed as patriots. Thus, the first Protestant power in the world was established in the hands of usurers, and bound to continue associated with them forever. The story, by Macauley, of the establishment of the Bank of England, is familiar to all students of English history. This bank is a great corporation; the Board of Directors is composed of twenty-six members, who elect their own successors, and thus it is entirely independent. It makes laws for its own direction in the name of the people or defies their control. In 1797 it secured an order from the privy council ordering itself to suspend specie payment. It obeyed its own order promptly, and at the same time announced their strength and that the order would be temporary; but for one excuse and another it was continued for twenty-five years. Sir Robert Peel, in 1844, having become convinced of the dangerous and disastrous influence, expanding and contracting its loans, secured the enactment of a law to regulate and limit its circulation. This law was distasteful to the bank, and was, upon its enactment, defied by open disobedience. It has not only dictated the laws for its own regulation, but directed both the domestic and the foreign policy of the government. It has subordinated the public weal to financial profit. This corporation of usurers manage all the finances of the kingdom, and has more influence than Crown and Parliament combined. As a great uncrowned king it dictates the diplomatic policies of the United Kingdom. Its influence has not been extended to promote Protestant Christian faith, Jews are not zealous for any Christian sect; nor for the purpose of lifting up the degraded and enlightening them; nor in the east has it exercised its power to relieve human suffering, but its diplomatic policy has been mercenary greed always. It should be noted that the enlightened Christian people of the United Kingdom are not the English government. There has been, for two hundred years, a power behind the Throne, behind Parliament, behind the people, essentially selfish and commercial. This has controlled India for profit, while the benevolent people were anxious to christianize and uplift. It has befriended the Turk while England wept over the Turkish barbarities. It forced opium upon China while the Christian people sent missionaries. The people of England love freedom, yet the government has endeavored to crush it in the American colonies and everywhere throughout the world, when in conflict with a selfish commercial policy. The English people cry out against human slavery, yet in the struggle in the United States, when slavery was in the balance, the English government earnestly espoused the cause of those who upheld slavery. The English people rejoiced that the slave trade in Africa was abolished, yet the government enacted the hut tax, and compels now the service of the young and vigorous blacks in the mines, sending them back to their people when their strength declines. In the establishment of the republic of the United States there was a strong resistance to any debt or subordination to usurers. The history of banks in the United States shows a struggle at the birth of the nation between the usurers, who demanded the management of the finances, and the people who resisted. This struggle continued for half a century, when the people triumphed, and for thirty years there was no hint of a purpose to overthrow what was regarded as the settled policy of the nation. The first bank was incorporated in 1791. Its establishment was strongly resisted, but being urged by the Secretary of the Treasury, a charter was granted for twenty years. When that charter expired by limitation in 1811, there was a struggle by the usurers to secure its renewal, but they were defeated. They did not, however, abandon their effort. In 1816 they secured the charter of the second bank of the United States. This charter was also limited to twenty years, expiring in 1836. There was a tremendous struggle for its renewal, but the chief executive, backed by a strong political party, so completely defeated it that the usurers for the time yielded, and for thirty years the settled policy of the government forbade the alliance with usurers and the making of any public debt. Many of the leading statesmen of that period were very pronounced in their opposition. "The banking system concentrates and places the power in the hands of those who control it. "Never was an engine invented better calculated to place the destines of the many in the hands of the few, or less favorable to that equality and independence which lies at the bottom of our free institutions."--J.C. Calhoun. "I object to the continuance of this bank because its tendencies are dangerous and pernicious to the government and the people. It tends to aggravate the inequality of fortunes; to make the rich richer, and the poor poorer; to multiply nabobs and paupers, and to deepen and widen the gulf that separates Dives from Lazarus."--Thomas H. Benton. "I sincerely believe that banking establishments are more dangerous than standing armies. I am not among those who fear the people. They and not the rich are our dependence for continued freedom. And to preserve their independence, we must not let our rulers load us with perpetual debts."--Thomas Jefferson. "Events have satisfied my mind, and I think the minds of the American people, that the mischief and dangers which flow from a national bank far overbalance all its advantages."--Andrew Jackson. The usurers were compelled to remain under public condemnation during thirty years, as sentiment was strongly against them and conditions were not in their favor, but they did not relax their watchful effort nor abandon hope of ultimate success. When the nation was struggling to prevent its dissolution in 1861-5, and unusual war measures seemed necessary to meet the great emergency, the usurers saw their opportunity and came forward, as they did in Venice and England; they would loan the government the funds necessary to carry on the war, if the government would comply with their conditions and grant them the privileges demanded. They asked that their loan be perpetual, like the English loan; that they should be freed from the burdens of the government; that their loan should be free from taxation; that they should receive their interest semi-annually, and not in the common legal tender, but in coin; that they be permitted to issue their own notes as currency to be loaned to their customers; that the government discredit its own issues and endorse theirs; and that they be given a monopoly by taxing out of existence all opposition. These were great demands, and were regarded as extortionate and oppressive. The struggle was severe, but the enemy in the field was threatening the life of the nation, while the usurers were urgent and posing as patriots, that they might accomplish their ends. True patriots, anxious to defeat the enemy in arms, regarded these usurers at home as equally the enemies of freedom. They were in a strait betwixt two foes. Secretary McCullough said, "Hostility to the government has been as decidedly manifested in the efforts that have been made in the commercial metropolis of the nation to depreciate the currency as has been by the enemy." The opposition to the usurers was very strong and bitter, but the conditions were in their favor and they gained a decided advantage. In the Senate the vote stood twenty-three yeas to twenty-one nays. It was carried only as a war measure. There was an effort to limit the usurers' privileges to the war and one year after its close. This was not successful, but their loan was confined to the war debt, and their time to its payment, limited to twenty years. This action caused great distress and dark forebodings of evil to many of the thoughtful. It was setting aside the policy of the nation, which had been generally acquiesced in as wise and judicious and safe for many years. The old patriot Thadeus Stevens, in the opening of a speech in a preliminary skirmish between patriotism and usurers, said: "I approach the subject with more depression of spirits than I ever before approached any question. No personal motive or feeling influences me. I hope not, at least. I have a melancholy foreboding that we are about to consummate a cunningly devised scheme, which will carry great injury and great loss to all classes of people throughout the Union, except one." Later he said, in excuse of the action, "We had to yield, we did not yield until we found that the country must be lost or the banks gratified, and we have sought to save the country in spite of the cupidity of its wealthier classes." The usurers have never relaxed the hold they secured by this victory, and have since been continually increasing their power. They obtained an extension or "refunding" of the war debt, and a renewal of their charters by the general laws, so their hold is indefinitely extended. Bonds are no longer limited to the covering of war expenses, but are issued freely in times of peace. The traditions of the fathers have been cast to the winds, and their fears derided and their policy changed. The usurers have been firmly in the saddle for many years, and have defeated every effort that has been made to unseat them. The great debts of the nations have brought all mankind into subjection to the usurers. Those who hold the bonds have the destinies of the race in their hands. They pervert the ends of government; the protection of life, liberty and the highest good of all the people; they make governments their tools to gather and appropriate the earnings of the many. They have exalted Mammon upon the throne of the world, and scoff at the God of heaven, who seeks the poor and needy, and who would in love lift up every son and daughter of the whole race. Milton presents Mammon as one of the devils cast out of heaven with Satan, and as saying in the council of the demons, "What place can be found for us within heaven's bound, unless heaven's Lord we overpower?... How wearisome eternity so spent in worship paid, to one we hate." The reign of Mammon subordinates character and virtue and liberty and human life to sordid gain, yet he holds the scepter of power. He elects legislators and senators. He elects governors or directs their arrest if they refuse to obey him. He elects presidents and dictates their policies. He places kings on their thrones and holds them there while they do his bidding. He strips a Khedive of power, and yet retains him as a collector of revenue. He steadies the Sultan's tottering throne, and compels six great Christian powers to stand by in silence while humanity is outraged. The Armenian's blood must be permitted to flow because the persecution is by a great servant, the Sultan, who pays interest on bonds, and his victims are only freemen. The murder of one hundred thousand Armenians meant nothing to Mammon. But when the Cretans were persecuted by the same Sultan, the suffering and bloodshed was soon ordered stopped by these same six powers, at Mammon's command. The Cretans were servants of the common master; the Cretan bonds were endangered. The cry of suffering humanity came up to deaf ears, but the cry of endangered bonds was heard from afar by this reigning god of wealth. The little republics of Africa were freemen, and therefore Mammon sees them strangled with indifference. Mammon gathers the civilized nations around China and demands that she shall be enslaved by all the bonds she can safely carry or submit to vivisection and distribution. This enslavement of the race is not by the destroying of intelligence, nor by denying the first principles of civil liberty, nor by crushing the aspirations for freedom, but by producing conditions that make the application of these principles and the exercise of freedom impossible. Though the race may increase in intelligence and theoretically have correct views of personal freedom and civil liberty, yet the conditions produced necessarily by usury utterly prevent their realization. The intelligence and aspirations of the race never were higher than at present, their subjection and subordination to material wealth was never more complete. The scepter wherein lies Mammon's power to sway the nations is usury. When bonds bear no increase his sovereignty is gone. All motive to involve the nation in debt at once disappears, and the power to control is lost. Moses' law was divinely wise that forbade interest, that his people could not be enslaved and might remain a free people forever. CHAPTER XXXI. EFFECT ON CHARACTER. The greatest factor in life in all ages is not material wealth, nor social position, nor genius, nor education, but character. Since man is above things, the highest purpose is not the gathering of that beneath him, but the developing of the best and noblest that is in him. The highest possible purpose and work is the developing of virtuous manhood. This was the thought of our fathers when they came to these shores and built their homes and established the free institutions which we now enjoy. They sacrificed material advantages that they might be free men and secure for themselves and for their children the opportunity to reach in faith and practice the ideal manhood. No material advantage can be regarded with favor that is detrimental to the characters of men. Position, wealth, education, are worse than worthless when associated with a corrupted manhood. "Ill fares the land, to hastening ills a prey, Where wealth accumulates, and men decay." The test of truth is its developing of the virtues and graces. Falsehood is detected by its quickening the vices that degrade and destroy. "By their fruits shall ye know them." Virtues are linked together so that the promoting of one gives strength to the others. All vices are also so linked that the stimulating of one quickens other vices. Virtues and vices are opposite, so that the encouraging of a vice or fault discourages the opposing virtue. When you discourage a virtue, you encourage a vice. The old-fashioned virtues which our fathers prized, and which they regarded essential elements of worthy manhood, were industry, and honesty, and self-reliance, and brotherly sympathy, and the devout recognition of God's divine sovereignty. 1. Usury discourages industry and encourages idleness. The laborer is stirred to diligence when he gets good wages. When his wages are meager he becomes discouraged, relaxes his efforts and may abandon his work altogether. When he knows that he is receiving less than he is earning, and that a part of his earnings are appropriated by another, he is embittered and becomes indifferent. When he receives all he earns, and the more diligent he is in his work the more he receives, he is stimulated to the utmost. This will be especially true if it is made impossible to secure a gain without earning it. The benefit of full wages may be largely lost by the knowledge of persons who, without productive effort, are appropriating the earnings of others. The influence of their easy, indolent lives may destroy or counteract the beneficent influence of good wages. The laborer may be led to despise his well-paid tasks and yearn for their ease, and thus become indolent. One is encouraged to idleness when he discovers that he can secure his bread by the sweat of another's face. He is likely to relax his efforts if he does not forsake all personal productive occupations. He may give great care and the closest attention to the management of his wealth, loaning to others and collecting the increase, but not to productive industry. There are activities that look like virtues, but they are perverted efforts. The slave-driver may work as hard as the slave in his efforts to appropriate the earnings of others. The thief may work in the night and endure more hardness to secure the property of another than would be necessary to honestly earn it. The usurer may give his thought, night and day, to the placing of his wealth the most securely and at the best rates of interest, and at the same time abandon all effort in the direct management of useful productive enterprises. The complete result of usury upon the habit of industry can be realized in those who have grown up under its influence; those who have an income secure from invested funds. When there is no need, present nor prospective, there is no motive to active industry, and the love of ease and pleasure grows and drives out all heart for productive effort. The industrious habit coupled with economy is called thrift. It is not parsimony or unwillingness to give, but a disposition to save. Our Lord, who was the prince of givers and inculcated unlimited giving among his followers, gave a lesson in thrift when he said after his miracle, "Gather up the fragments, that nothing be lost." Enforced industry and economy is not thrift. When by low wages or grinding conditions the necessities of life are with difficulty secured, the very opposite disposition may be cultivated. When the external restraints are removed, the wildest extravagance may be indulged in. This is sometimes given as an excuse for low, grinding wages; that "the workmen and their wives have no idea of saving;" that higher wages would be wasted in foolish extravagance. No one in normal conditions will be wasteful of that which has cost him hard labor. His care for it will naturally be in proportion to the effort that was necessary to secure it. Those who waste the wealth of the world are not those who by the sweat of their faces have produced it. The habit of thrift comes from the knowledge of the value of a thing, learned by earning it. Only that which comes without effort will be spent without thought. Those who have livings secured from the increase or interest of "productive" capital, having no need of industry, are wholly occupied with the spending; but in spending only, the value of the thing spent is not appreciated, the habit of extravagance grows and they become the idlers and the spendthrifts of the world. 2. It prevents open and frank honesty. When the thought is turned to an endeavor to secure a dollar that is not earned, there is secretiveness of purpose and inward guile. No person doing business on borrowed capital advertises the number and amount of his loans nor does he welcome inquiry by others. In a column of advertisements by money lenders in a newspaper lying on this table every one promises "privacy" or "no publicity." No one can be so open and frank as the one who earns every dollar that he receives or seeks. The possibility of speculation is ruinous. The first step in the wreck of integrity in a young man's character is when he becomes absorbed in some scheme by which he can secure gain without honestly earning it. Lotteries are outlaws not only because they defraud but they undermine integrity and honest industry. When property earns property, and the gain is secured with no struggle on his part, the temptation is presented and the disintegration of his character has begun. When there is no gain except by production, the whole thought and energy of the man is directed to that end, and his desire to secure that earned by another is restrained. The frank, open disposition is preserved. Honest productive toil drives out the spirit of speculation. Under usury, both lender and borrower are in the attitude of expectants of unearned gain. 3. It discourages the spirit of self-reliance. Usury causes a broad separation between a man of property and the man of mere muscle or brain. It makes such large combinations of capital possible in immense shops and department stores and other enterprises, that the individual workman is belittled. Under the principle of usury, property can produce as well as brain or muscle. One having property can control both. His property places him in a position as a superior. He comes to forget the relations he bears to men as equals, and requires that those who have only their natural gifts shall be cringing supplicants before him or be denied his favor. The borrower or the laborer who asserts his rights is endangered by the man controlling property, who has him in his power. That independent, self-reliant spirit, that looks every man in the face as an equal yet lingers in the country among the hills and mountains, but is fast disappearing from the city. There has come to the laborer in the town or city a feeling of dependence upon others and a desire to secure their favor. They almost feel that they must apologize for being laborers, and beg for an opportunity to earn a living in some one's employ. One of the saddest facts, and most threatening of disaster in these present commercial conditions, is the common desire to be employed, to get a job, dependent on the whim of another, instead of a determination to direct one's own labor and be the manager of one's own business. The sound educational development is wanting in the daily occupation of the hired laborer, and there is a loss of manhood that has no compensation. The independent spirit slips away so gradually that its going is scarcely noticed, but when once gone the degradation is complete. A family of free Hebrews went down into Egypt, and for a long time was in favor with the rulers, but they gradually lost their independence and became more and more servile and cringing until the Egyptian masters dared to go into their homes and pick up their boy babies and take them out and drown them as if they were worthless puppies. The hopelessness of the Ottoman Empire today is more in the cringing subordination and broken spirit of the people than in the oppression of the Sultan. His government might be overthrown in a day, but it would take ages to lift up that empire of prostrate slaves and to cultivate in them the self-assertion and self-reliance necessary to a free people. Every man who loves his country and his race must view with alarm this growing feeling of subordination and cringing disposition. It is the very reverse of that democratic spirit or consciousness of equality that must prevail to secure the permanency of our republican institutions. 4. It destroys fraternal sympathy. Two classes are found in every modern community. The one is the laborers with muscle or brain, the other class, those whose property produces for them. Between these classes there is a great wall fixed. It cannot be expected that they will mingle harmoniously and be in sympathy in civil and social relations. Producing and non-producing classes can never be congenially associated. The question is frequently discussed in church circles, "How can the laboring man be attracted to the churches?" The discussion often presumes that the non-laboring man does find the church congenial. If he does, all efforts to win the other class will be in vain. The church itself needs to correct its teachings and reform its spirit. The moral law commands "Six days shalt thou work," and there is no release because a man has property. So long as a man has brain or brawn he is bound by that law. If he is not, he is not a moral man, and has no rightful place in the church of God. Honest, upright, industrious Christian men, engaged in all lines of production for human needs, may be congenial and co-operate most harmoniously, but they never can be made comfortable in association with those who are unproductive and idle, yet living in luxury. 5. Usury promotes that "Covetousness which is idolatry." "As heathens place their confidence in idols, so doth the avaricious man place his confidence in silver and gold. The covetous person, though he doth not indeed believe his riches or his money to be God, yet by so loving and trusting in them, as God alone ought to be loved and trusted in, he is as truly guilty of idolatry as if he so believed." Idolatry is the act of ascribing to things or persons properties that are peculiar to God. The principal objects of worship are those things which bring to men the greatest good. The sun has been the most general object of idolatrous worship in all the ages. It is the most conspicuous object, and is the source of light and heat, and rules the seasons. Its worship was so general that the Hebrew people, when they lapsed from the worship of God, turned to the worship of the sun or Baal. No natural object is more worthy of worship. Job declaring his integrity and freedom from idolatry, said that he had not kissed his hand in salute of the sun in his rising. The river Nile was an object of idolatrous worship for ages. Its source was a mystery, and its annual rise in its rainless valley was so beneficent, that it was given the worship which belonged to the Divine alone. All the hope of the harvest depended on its annual overflow. It moistened and fertilized and prepared the ground, and then receded until the harvest was grown and gathered. Moses showed the Egyptians the impotence of their idols by making this chief idol, and the things that came out of it, a curse. The cow was worshiped because it was the most useful and necessary of their animals. A real or supposed power to give or withhold favors has been from the beginning the source and spring of idolatry. Riches, property, as the means of supplying our needs, is an object more coveted than any other. The principle of usury greatly aggravates this tendency. The principle of usury makes it imperishable; it can be perpetuated, unimpaired from year to year and from age to age; it is a constant source of benefit; it is productive of all that is necessary to supply human needs. It supplies, too, without effort on the part of the recipient. The sun, with his light and heat, makes the labor of the farmer successful. The rising Nile moistening and fertilizing the land, prepares the way for the sower. The cow draws the plow and the harrow, and threshes the grain, but usury makes property bring all needed material good without effort on the part of the owner. It brings him the matured fruits of the farm, though he neither plows or sows nor reaps. No labor on his part is needed. His property clothes and feeds him, and yet does not grow less, but is endowed with perpetual youth, ever giving yet never exhausted or diminished. He may die, but his idol knows no decay, and may continue to bless his children through the generations. This quality of riches makes them a greater source of blessing than the sun or any other object of idolatrous worship. This leads to unlimited self-denial and sacrifice to gain and retain property. The devotees subordinate their own ease and physical comfort, their own intellectual development, to secure it, they will themselves shrivel in body and soul; like other idolaters they will even yield the highest interests of their children, when this idol demands their sacrifice. 6. It destroys spirituality. Property is matter and not spirit. With the thought and heart and effort directed to a material thing, the spirit is neglected. The heathen Greek artist directed his whole attention to the material part of man. The symmetry of the human physical form was his study. The perfect man was the most symmetrically developed specimen of physical form. His thought of man was matter. The Christian directs his thought to the spirit, his mind and heart, his noble purposes, and all the qualities of true manhood. The material part is subordinated to the spiritual. The tendency now is to appreciate a man for what he has rather than for what he is, to ignore both symmetry of form and the graces of the noble character, and to worship what he holds in his hands. The truly spiritual loves true manhood and is indifferent to the possessions. If a noble soul is found in a Lazarus, the true child of Abraham will take him to his bosom. A perverted manhood will receive no favor though clothed and surrounded with all material splendor. It destroys spirituality, too, because it holds the mind to a material thing as the source of all good. The spiritual man rises to the true source of our blessings, the author of all temporal good, from whose hand every living thing is fed. This, as all idolatry, leads to a breaking away from the restraints of the moral law. The devotion to the material leads, logically and practically, to a neglect of the restraints of the spiritual, and a preponderance of subserviency to the material. Practices that will promote the material are indulged though the moral law may be broken. The material is not held subject to the needs of the higher nature, nor subject to the promotion of the kingdom of God, but man's noblest gifts and the worship of God are all made, if possible, to minister to the material interests. To break this idol's power, the true nature of property must be shown. It is not immortal, but perishable. It can not preserve itself, but must be carefully preserved by man's own effort. It can not protect him, but he must protect it. It is but a thing which man has himself made. It must be shown absurd, as Isaiah ridiculed it, "They worship the work of their own hands, that which their own fingers have made." Other forms of gross external idolatry are exposed by the advancing light of these progressive years, but this musty old form has taken new life and now receives the service of the race. The whole world is running pell-mell after this idol. It stands in the market places, it is not a stranger in the courts of justice, and is in high favor in legislative halls. Solon is relegated and Croesus is elected. It is given a high place in the temple of God. Pious Lazarus is neglected but Dives is promoted. "What agreement hath the temple of God with idols?" Until this idol is cast out the church will and must languish. Spiritual life will be low and fervor impossible. CHAPTER XXXII. AX AT ROOT OF THE TREE. It is easier to cut down an evil tree than to climb up and lop off it branches; besides the branches will grow again if the stock is left undisturbed. It is easier to destroy the mother of vipers than it is to chase after, catch and kill her poisonous progeny. The reptiles will not become extinct while the mother is left to breed without restraint. There are a large number of industrial and financial evils that derive their strength from usury, which have received the close attention of benevolent reformers, but they have not exposed the cause, nor have they suggested a sufficient remedy. That the evils exist is apparent to them all, but they seem too high to reach or too swift to be caught. It is only possible to hint at the prevailing evils in one chapter. It would require a volume to discuss them in detail and to apply the remedy. 1. There is a tendency to divergence in the material and financial conditions of men. Some are growing richer, while others are growing poorer. The prayer of Agur, "Give me neither poverty nor riches," is the prayer we should offer and the prayer we should try ourselves to answer. We are to seek freedom from poverty on the one hand and from ensnaring riches on the other. This is the condition we should try to secure in the community and in the commonwealth. We should discourage excess of riches and we should endeavor to relieve all of distressing poverty. We should hedge about accumulation with such conditions as to make it very difficult to gain great wealth, and at the same time we should so ease the conditions of accumulation that only gross indolence or great misfortune could cause dependent poverty. The so called middle class are those who neither have great riches nor yet are they in fear of want. The great mass of our people belonged to this class until very recent times. Now we find the excessively rich have multiplied and a vast number of our industrious, honest and virtuous population are struggling for life's necessities. The middle class is less numerous while both those in opulence and those in poverty have been increasing. We should level up and level down to the medium which is best for the development of the highest manhood and best also for the strength and perpetuity of our republican institutions. The rich should be limited in their accretions while the poor are lifted out of their poverty; but how can this be accomplished without interfering with individual liberty and our personal rights? The problem is not easily solved. While usury remains, which is an ever active centralizing force adding wealth to wealth, no remedy can be found. Do away with usury, and the evil is overcome. (_a_) When it is recognized that vital energy alone produces all wealth, no great fortune can be gathered in the life time of one man. The earnings of any life, however long, or the earnings of a succession of industrious, energetic ancestors, could not amass a fortune to interfere with the rights and activities of others. One may inherit a large fortune from wealthy kindred; he may discover a fortune; he may draw a grand prize in a lottery; he may as a Turk seize the properties of others and then bribe the courts to confirm his claims; or a people may be "held up" by law and one, selfish and conscienceless as a ghoul, may jump at the opportunity and appropriate their earnings and their property and yet the robber keep out of the penitentiary; but no one, however great his skill or brilliant his genius, can earn one million dollars, nor the tenth of it, in his natural life. To gain one million dollars one must earn twenty thousand dollars each year for fifty years and save it all. He must spend nothing for pleasure nor benevolence. He must spend nothing for food nor for clothes. (_b_) Wealth decays unless cared for and preserved. As wealth increases, the task of protecting and preserving it increases. There comes a time when production must cease, and all energy will be required to preserve that already gained. When others preserve and pay a price for the privilege, as in usury, the vital energy can continue production, indefinitely. (_c_) Abolish usury and the instant one ceases to produce he begins to consume that which he has earned. He can not live upon the increase of his earnings, but he must begin at once to diminish the supply. Exacting usury he may consume only the increase and preserve the principal untouched. He may not consume all the increase and add the remainder to his capital and thus grow richer in decrepit age. Many of those who have not inherited wealth, have not been wealthy until advanced age. It came to them by the accretions of interest after the productive period of life was past. (_d_) It is not possible to secure perfect equality of conditions. If all wealth was equally distributed today differences would begin to appear tomorrow. This has seemed to some disheartening and they abandon all hope of correcting the evil. They should look deeper and promote the natural and God-ordained remedy. The natural force for the preservation of the level of the ocean is gravity. But the surface is seldom smooth. The winds lash it into fury and pile high its waves, but gravity pulling upon every drop of water tends to draw it back to its place and smooth down the surface again. The wind cannot build permanently a mountain of water in the ocean. The consumption and decay of wealth tends unendingly to equalize the conditions of men. In the wild rush of the struggle for supremacy and gain, like a whirlwind in the affairs of men, with their diverse gifts and tastes and plans, there will be inequalities appearing, but consumption and inevitable decay are ever present leveling powers. Usury suspends this beneficent law and aggravates the evil, making the differences in condition permanent and increasing them. Do away with usury and there is a natural limitation to riches. The rich will find that he can not grow constantly richer; not because he is by statute deprived of any personal rights, but he is hindered by the natural law embedded in things by the Creator. Do away with usury and the problem of poverty is solved. If we credit vital energy with the increase of wealth and give the laborer all he earns, he has a fair and equal chance, and equity requires no more. It is justice and opportunity, a fair chance, that the poor need, not pity and gifts of charity. 2. Great combines of capital in business and especially in industrial trusts are receiving the closest attention of the thoughtful. Some regard them as the necessary result of successful and enlarging business. Many others regard them as hostile to the public good and are anxiously seeking a means of restraining their great and increasing power. These were at the first associations of manufacturers who co-operated to maintain prices. In the competitive system there is a constant pressure on the part of the consumer for lower prices. The manufacturer who is conscientious and a model employer, seeking to maintain prices sufficiently high to afford him a profit and living wages for his employes, must ever be resisting this pressure. They united for this purpose and were benevolent and just in their design. But the manufacturers were paying tribute on borrowed capital. They must meet the demands of interest on their debts and also the wages of their workmen. Between these two they struggled to secure for themselves comfortable wages. The capitalists, seeing the advantage of this co-operation and the resultant profits, undertook and accomplished the combination of their capital to secure for themselves the profits at first sought for the operators and their employes. These great combines are the natural result of successful business with the practice of usury. They threaten evil. The purpose and plan of the present trust is to increase the increase of the capital; to make the capital more productive; to bring larger returns for the wealth invested. (_a_) They are not organized for the benefit of the laborer. The object is to decrease the cost by producing with less labor. The less the labor, other things being equal, the greater the returns for the capital invested. (_b_) They are not organized for the benefit of the consumer. When they do favor the consumer it is only incidental and generally temporary to meet competition. They make no pretence of being benevolent in their purposes. They are organized for the purpose of business gain. (_c_) These capitalists combine their interests because they can thereby secure a greater return from their investments than they can by operating separately. They combine that they may mutually increase the rate of interest or dividends on their capital. This is the motive that draws them into coöperation. The learned and benevolent statesmen, teachers of economy and reformers, have not suggested an adequate remedy. The remedy is not far to find. Do away with usury and they will fall apart like balls of sand; the cohesive power will be gone; the centralization will cease and the wealth will speedily return to the various individuals from whom it was gathered. This remedy may seem heroic, but it is a specific and is the simplest of all possible methods. 3. How to secure a just distribution of the great advantages from improved machinery, new inventions and new discoveries, is a problem that is engaging the best thought of many of the wise and good. That the present distribution is inequitable and unfair; that it gives the capitalist an undue advantage over the laborer; that it aggravates the difference in conditions, seems generally admitted. An improved machine, owned by a capitalist, enables one man to do the work that formerly required ten. One man is employed and the nine are in competition for his place and there is no advance over the wages before the machine was introduced. The owner of the machine secures the gain. His wealth is greatly increased while the laborer plods on with his old wages. With the new machine the one man produces what ten men did before, but the product of the nine are credited to the machine and becomes the capitalist's gain. (_a_) The falsehood on which this claim rests must be seen and rejected before the evil can be overcome; that the machine is productive. It is but a tool in the hands of the one man, who now with it produces as much as ten men did without it. If one does the work of ten he earns the reward of ten. Because by this machine he multiplies his strength, and adds to his efficiency, he can not justly be deprived of his full reward. (_b_) "But the machine is owned by another." His not owning the machine does not change its nature and make it a productive force. Whether it belongs to him or to another, it is his intelligent vital energy that produces all that is produced. The machine is but his tool with which he works. (_c_) "But the machine must be paid for." Certainly, the inventors and skilled mechanics, who produced this wonderful tool, should be fully compensated, but once paid they have no claim upon it or on what another may produce with it. No honest workman objects to paying a good price for good tools. It is not the purchase of tools by one set of workmen of another that causes the unequal conditions. (_d_) It is the usurer or interest taker that perverts the conditions. He lays hold of those great inventions and discoveries, like railroads and telegraphs and telephones, and demands a perpetual compensation. He asks that the laborer shall be forever buying his tool, yet it shall be never bought, that the public shall be forever paying for privileges and the obligation remain forever unmet. This is but one of the forms of usury, by which wealth is heaped from the earnings of the many. 4. The difficulties between employers and their laborers do not cease. The continued strikes and lock-outs show how general and deep the trouble is. Laborers organize into unions to protect themselves from discharge and to promote their interests. They ask for better wages and shorter hours. They urge their petition with forceful arguments; they make demands with an implied threat; they stop work or "strike." Then follows a test of strength and endurance in which both parties greatly suffer and both are embittered and neither is satisfied. The correction of this common evil has received close study from those who have the welfare of all classes at heart and wish to be benefactors of the race. The remedies have not been thorough but superficial, and the benefits temporary. The branches have been cut off but they grow again. (_a_) The complaint of too small wages implies that more is earned than is received; but there is no standard recognized by which what a man does earn can be measured. The capitalist claims the output as the earnings of his capital and his claim is allowed by the workmen. The workmen may claim that wages are too small for a comfortable living. This is not a plea of free workmen, but of slaves begging to be better fed. (_b_) They may complain of too many hours of labor; but the number of hours of labor is arbitrarily fixed. There is no valid constant reason why one should wish to work less. In the management of one's own work, and the collection of his own earnings, there are times when long hours, of the strain of labor, are necessary, and there are other times when ease can be taken. With no standard of earnings or time, it is impossible to arrive at a just and satisfactory settlement. The reasons given sound to the employers like the pleadings of servants for richer food and more play. (_c_) The laborer should find a solid basal reason for his demands. That will be found only in the utter rejection of the theory and practice of usury. The selfishness of human nature will remain; conflicts between men in all conditions and all businesses will remain; feuds and rivalries will remain; but when employer and employe are enabled to see that capital is dead, and decaying, and that all the earnings above its preservation belong to the laborers, there will be a recognized and true basis upon which the rightful claims of each can be adjusted. (_d_) In a co-operative shop, where the workmen are the owners, each receives his share of the gains. With usury done away it is possible for workmen, who are poor, to ultimately become the owners, by the accumulation of earnings, but under the pull of the usurers, continually appropriating the earnings, they are doomed to hopeless poverty. 5. There is a widespread determination to overcome the evil of war. Non-combatants are numerous and peace societies are organized in all lands. Their literature is widely distributed and their petitions, for the preservation of peace, are poured upon every "power" that is thought to have an occasion, or a disposition, to engage in warfare. The waste of treasure and blood, the cruelties and suffering that are a military necessity, are pleaded in favor of peace. The shame of intelligent rational men settling differences with brute force is presented. The unchristian spirit, that in this age of light and saving grace should be so wanting in brotherly love as to wish to destroy those who harm us, is deprecated. When differences do arise between nations, they urge a just settlement or mutual concessions. Or if one is found to be unreasonable, unjust and oppressive, it is better and more christian-like, they claim, to endure hardness, submitting under protest, than by force, which the Master forbade, attempt to establish righteousness. Rulers of the greatest nations on the earth have become conscious of the cruel burdens upon their people, in the support of their great armaments. On the invitation of the Czar of Russia, peace commissioners from many nations recently met in The Hague, to devise means by which the burdens of armaments might be diminished and actual warfare avoided. This peace council advised that differences be submitted to arbitration, but while it was yet speaking two Christian powers, began open war, without having so "decent a regard to the opinions of mankind" as to make known to the world the cause of their conflict. Wars continue, and among the most highly civilized and enlightened and christianized, in the face of the arguments and advice and pleadings of non-combatants and peace societies and peace commissions. Mammon, a sordid greed of gain, is now on the world's throne and directs the movements of the nations in peace or war. His purposes may be often accomplished in peace by purchases of territory for which interest bearing bonds are issued. The irritation or hurts between peoples may be molified and healed by indemnities, which also serve his purpose because they necessitate the incurring of a bonded debt, interest bearing. But the history of the world for centuries proves that a condition of war is Mammon's opportunity to foist a debt upon a free people and to increase the burden of those whose bonds he already holds. His ears are deaf to advice and reason, when material and commercial advantages are to be secured. He cares not for human suffering and shed blood, if riches can be increased. When concessions can be secured, and mortgages placed, and a people exploited with profit, the cry of suffering, the pleading for pity and the call for justice are all in vain. To stop these modern wars they must be made unprofitable to Mammon. When they are made to deplete his treasury and to waste his wealth, instead of increasing it, he will call a halt in strife, and the gentle spirit of peace will be permitted to hover over the nations. Away with national debts and interest bearing bonds, which are the delight of the usurers. Make present wealth bear the burden of present duty. Try the patriotism of the usurers by making war a real sacrifice of their wealth, while the blood of others is being poured upon the field. Do not permit war to be an advantage to the rich to increase his riches. A patriot's life is given and it goes out forever, let wealth be no more sacred than life; let it not be borrowed but consumed. Let the rich grow poorer as the war goes on, let there be a facing of utter poverty, as the patriot faces death on the field. While Mammon is permitted this usury, his chief tool, he will use it for the oppression of the world. He will direct the movements among the nations to further his ends, although it may require a conflict between the most christianized and enlightened of the earth. The nations will be directed in peace or put in motion in war to make wealth increase. Give wealth its true place as a perishable thing, instead of a productive life, and wars will cease in all the earth. The holders of the wealth of the world will never urge nor encourage war, when the property destroyed is their own and not to be replaced. When wars are no longer the usurer's opportunity, but the consumption of his wealth, Mammon himself will beg that swords may be beaten into plow-shares and spears into pruning-hooks. CHAPTER XXXIII. PER CONTRA; CHRISTIAN APOLOGISTS. Every argument favoring the continuance of the practice of usury can be met from the propositions established in the preceding chapters. Indeed, there are no true arguments to be presented in its favor. Truth is consistent with truth. We are not placed in a dilemma and compelled to decide which are the strongest of the arguments arrayed against each other. We are not deciding which is the greater of two blessings nor which the less of two evils, but this is a question of evil or good, of sin or righteousness. If usury is wrong then every argument brought forward to support it is a falsehood, though it may be covered with a very beautiful and attractive and plausible form in its presentation. 1. The old Wilson Catechism published in Dundee in 1737 is perhaps the most familiar defense. "Q. Is the gaining of money by usury unlawful? "A. Yes, Prov. 28:8. Psalm 15:5. "Q. What is usury? "A. The taking unlawful profit for money that is lent out. "Q. Is it lawful to take any interest or gain for money lent? "A. Yes, when it is taken according to the laws of the land, and from these who make gain by it, by trading or purchasing of lands; seeing it is equally just for the owner of money to ask a share of the profit which others make by it, as for the owner of the land to demand farm from the tenant of it, money being improvable by art and labor as well as land. "Q. What is the unlawful profit for money, which may be called usury? "A. The taking profit for money from the poor who borrow for mere necessity, or taking needful things from them in pawn for it; or the taking more profit for any than law allows, as these who take ten, fifteen, or twenty in the hundred. Exod. 22:25, 26. Deut. 24:12, 17. Ezek. 18:7, 8. "Q. But were not the people of Israel discharged to take any usury or profit for lent money from their brethren? Deut. 23:19. "A. This law seems to have been peculiar to the Jewish state, and that in regard of their estates being so divided, settled, and secured to their families by the year jubilee, and their not being employed in trading or making purchases like other nations, so that they had no occasion to borrow money but for the present subsistence of their families. But for strangers, who had another way of living, the Israelites were allowed to lend upon usury, and to share with them in their profits, Deut. 23:20, which shows that the taking of interest is not oppressive in itself; for they are frequently prohibited to oppress a stranger, and yet allowed to take usury from him. Exod. 22:21, and 23:9." The reader will notice that the definition of usury is defective. The reader will also notice that there are no Scripture references given to prove that any interest can be taken. This is singular, since throughout the Catechism Scripture references are profuse in confirmation of the answers. If a single passage had been found that could be twisted into an approval the reference would have been given. He rests the permission to take usury wholly on human reason, though in direct opposition to the Scripture references he had first given to prove that the gaining of wealth by usury was unlawful. He does not claim to get this answer from the Bible. He rests this answer on the law of the land and the purposes of the borrower, and says it is not worse than taking a rental for land anyway. The questions with regard to the customs of the people of Israel are completely met in the Second and Third Chapters of this book. Fisher, also, we find from his catechism published in 1753, thought it necessary to make some excuse for the custom in his time. High interest he finds condemned, but moderate interest he tries to defend. "Q. 32. What is it to take usury, according to the proper signification of the word? "A. It is to take gain, profit, or interest, for the loan of money. "Q. 33. What kind of usury or interest is lawful? "A. That which is moderate, easy, and no way oppressive. Deut. 23:20, compared with Ex. 22:21. "Q. 34. How do you prove that moderate usury is lawful? "A. From the very light of nature, which teaches, that since the borrower proposes to gain by the loan, the lender should have a reasonable share of his profit, as a recompense for the use of his money, which he might otherwise have disposed of to his own advantage. 1 Cor. 8:13. "Q. 35. What is the usury condemned in scripture and by what reason? "A. It is the exacting of more interest or gain for the loan of money, than is settled by universal consent, and the laws of the land. Prov. 28:8. 'He that by usury, and unjust gain, increaseth his substance, shall gather it for him that will pity the poor.' "Q. 36. How do you prove from scripture, that moderate usury, or common interest, is not oppression in itself? "A. From the express command laid upon the Israelites not to oppress a stranger, Ex. 23:9; and yet their being allowed to take usury from him, Deut. 23:20; which they would not have been permitted to do, if there had been an intrinsic evil in the thing itself. "Q. 37. Is it warrantable to take interest from the poor? "A. By no means; for, if such as are honest, and in needy circumstances, borrow a small sum towards a livelihood, and repay it in due time, it is all that can be expected of them; and therefore the demanding of any profit or interest, or even taking any of their necessaries of life in pledge, for the sum, seems to be plainly contrary to the law of charity. Ex. 22:25-28. Ps. 15:5. "Q. 38. Were not the Israelites forbidden to take usury from their brethren, whether poor or rich? Deut. 23:19: 'Thou shalt not lend upon usury to thy brother.' "A. This text is to be restricted to their poor brethren, as it is explained, Ex. 22:25, and Lev. 25:35, 36; or, if it respects the Israelites indifferently, then it is one of the judicial laws peculiar to that people, and of no binding force now." In the answer to the 34th question he appeals to the light of nature. That light, as he interprets it, may be applied as follows. We follow his language closely and his argument perfectly. From the very light of nature which teaches, that since the borrower of the hoe purposes to dig his own garden with it, the lender should have a reasonable amount of his garden dug, as a recompense for the use of the hoe, which he might otherwise have used himself to dig his own garden. Fisher confirms his conclusion with a Scripture reference but it is so irrelevant that it would seem Wilson was wiser in omitting Scripture reference altogether. 1 Cor. 8:13, "Wherefore, if meat make my brother to offend, I will eat no meat while the world standeth, lest I make my brother to offend." The only explanation the writer ever saw or heard of, that was seriously made was this: "If using my brother's money without interest offends him, then I will never while the world standeth accept his money without interest lest I make my brother to offend." If this is the intended application then it may be further applied. If using a brother's money at six per cent. offends him then I will surely give him ten per cent. lest I cause my brother offence. Could there be a more absurd application of a Scripture passage? The later theologians have seldom mentioned usury and none have discussed it at any length, and no divine to our knowledge has undertaken a defence. The "Systematic Theology" of Dr. Charles Hodge is perhaps the most elaborate and exhaustive. He does not more than refer to usury; he does not even mention it by name. But in his discussion of the violation of the eighth commandment, he ridicules the idea that "a thing is worth what it is worth to the man who demands it." He says: "If this be so, then if a man perishing from thirst is willing to give his whole estate for a glass of water it is right to exact that price; or if a man in danger of drowning should offer a thousand dollars for a rope, we might refuse to throw it to him for a less reward. Such conduct every man feels is worthy of execration." He closes the discussion of the eighth commandment with this significant and emphatic sentence: "Many who have stood well in society and even in the church will be astonished at the last day to find the word 'Thieves' written after their names in the great book of judgment." 2. "To prohibit usury is revolutionary." Revolutions are not necessarily evil. They have been justified in all the ages to overthrow tyranny and oppression and to secure freedom and establish justice. Oppressors and evil-doers in power have ever been anxious to maintain the "statu quo": that is, to be let alone. The "Man of Galilee" is the prince of revolutionists. He has overthrown and turned down the civilizations of the world and has brought in his own, called by his name, Christian civilization. His followers were revolutionists. The idolatrous craftsmen of Ephesus, not wishing to be disturbed in their profitable business, in order to defeat the work of Paul and his associates, raised the cry of revolution. "These that have turned the world upside down have come hither also." The things that are wrong side up must be revolved. When material things are found superior to true manhood and womanhood, they must be reversed. When the works of men's hands are given a place above the hands that formed them, when the results of labor are given a place above the vital energy of the laborer, there is call for revolution. But this revolution should be the most peaceful the world ever saw. This need not require the destruction of any property nor the shedding of one drop of blood. It need interfere with no man's rights nor enforce upon any man a burden he should not be willing to bear. A man is not interfering with the rights of another when he is paying his debts, and a man should not feel that there is placed upon him a burden he is unwilling to carry, when his own property is returned to him. Yet that is the ultimate, the extreme goal, to be reached by the abolition of usury; every man free from debt and every man caring for his own property. 3. "If usury is not permitted, the great modern enterprises are impossible." A great modern enterprise that is not for the general good has no right to be. Splendid enterprises are often made possible by the sacrifice of the welfare of the many for the interests of the few. The splendid plantations of the southern states flourished in time of slavery, when the labor of many was subordinate to the welfare of one. They are not now possible; yet the present and future general good is better secured by the sacrifice of the splendid past. A splendid military campaign is only possible by the complete subordination of the many to the will and order of the commanding head. One hundred thousand in an army is now receiving the attention of the world. One hundred thousand in happy homes are commonplace. The pyramids are splendid monuments, but they were not a blessing to the slaves, who built them. Splendid enterprises in which the few command the many may be an unmitigated curse. "Ye friends to truth, ye statesmen who survey The rich man's joys increase, the poor's decay; 'Tis yours to judge, how wide the limits stand, Between a splendid and a happy land." No enterprise, however brilliant, can be in the model state, that blesses the few by the losses of the many. Great and benign enterprises are possible without usury. There is no greater enterprise than the postal system in this land and extending to all the nations in the postal union. You owe it nothing; like poor Richard, "you pay as you go." It owes nothing, pays no interest and renders a great service for the small amount you pay. It is a standing illustration of the success of a strictly cash business. The great benevolent missionary enterprises, that send their messengers to all lands, over the whole earth, receive and disburse the gifts of the benevolent. Their work is not interrupted, but continues from age to age. The commerce of the world can be carried on just as effectively without usury. A mortgage does not make a farm more productive nor does a bonded debt make a railroad or a navigation company more efficient. The railroads and express and telegraph and telephone and other enterprises are greatly hindered in the service of the public by the tribute they are returning to the usurers. Had this farmer not this mortgage he could improve his farm and bring from his land better results. Were it not for the unceasing drain upon the income of great enterprises to meet the interest on bonds, the properties could be improved and the public better served at greatly reduced rates. Indeed the most successful enterprises are now operated by the owners. 4. "It will be hard to borrow, if you will not pay interest." It would be a happy condition if no one should want to borrow except in urgent need from an accidental strait; if that old independent, self-reliant spirit that refused to be indebted to any man could be universal, that preferred frank and honest poverty in a cabin, to a sham affluence in a mortgaged palace. It should be hard to borrow, but easy to pay. Usury makes it easy to borrow, but hard to repay. Usurers even make it attractive and entice the victim into the trap of debt and then it is all but impossible to find a way out. An honest, industrious man of good habits must be ever on the alert or he will be entangled, sooner or later, with debts. It will not be harder for an honest man, who is in need, to borrow. He will not be able to borrow more than his need requires. The debt will not increase during the period of disability, and it will be easier to repay without increase. The usurer requires more than honesty for the security of his loan. The loan to him is precious seed, that must be planted where it will grow. To merely have the loan returned without increase does not meet his claim. To remit the increase, to make it easier for the poor debtor to pay, he would regard as a positive loss to himself and a gift to his victim. The usurer prefers rich debtors, who have abundant property to secure the loan and its increase. There is a despised class of pawn usurers who prey upon the poor. They are regarded as robbers of the poor in their distresses, but their business would be impossible, were it not that all avenues of relief are closed by usury; "interest must be paid anywhere; why not borrow of them though the rates are high?" The moral quality of the act is the same; the difference is wholly in the degree of turpitude. CHAPTER XXXIV. PER CONTRA; LAND RENTALS. "If no interest should be charged on money, then no rents should be collected." The early Christian apologists for usury, who felt it imperative to explain why it was permitted and practiced among Christians, found few arguments. They all agreed that the letter and spirit of the Scriptures forbade lending to the poor, upon interest. They also found it impossible to show from reason the right of money to an increase, but as money can readily be changed into other forms of property, as lands, they reversed the arguments; beginning with the assumed premise that it is right to charge rental for lands, and as money may represent lands, it is therefore right, they say, to charge interest on money. "It seems as lawful for a man to receive interest for money, which another takes pains with, improves, but runs the hazard in trade, as it is to receive rent for our land, which another takes pains with, improves, but runs the hazard of in husbandry." True logic would have led them to reason forward from the truth they had determined; that there is no valid reason justifying interest on money. Resting on this truth, and then discovering that money may represent lands, the necessary conclusion must be, that land rentals are without justice. Reversing the order of their argument, they assumed a false premise, and from it attempted to prove true the very proposition they had found to be false. There is the usury of lands as well as of "money or victuals." Forty years ago the Omaha Indians went across the river and cut some fine grass growing on open land, and carried it to their reservation. The owner of the land, living in a distant state, learning of this, claimed pay of the Indians and brought suit against them before the agent to recover it. The Indians admitted that they had cut and taken the grass; they also admitted its value. Their defense was that this man had no right superior to theirs. This was a natural growth that had cost him no labor, and they had not injured the land. Their speaker said, "If the man had dug the land and planted it in corn and hoed and tended the corn, the corn would have been his; but the Great Spirit made the grass grow and this man gave it no labor nor care; the buffalo or the cattle could eat it. Have we not the rights of the cattle? This man has no right to it." The agent decided against them and compelled them to pay the man. They were much dissatisfied and felt they were unjustly treated and oppressed, because they had to pay that which the man had never earned. The red men were not versed in legal statutes nor educated in the tutelage of usury, but it can not be denied that they interpreted very accurately the law written in the reason and conscience: that no man has any especial claim to that which he has not earned. The convictions of white men, and their method of compelling absentee owners to pay for the increase in value of their lands, came under the writer's observation in a new settlement near the Indians' reservation. He found three poor families in a district. They had little land and extremely plain homes, but there was a good school-house and a good school and an expensive bridge had been built across a stream to enable one of the families to reach it. Enquiring how they could afford to erect such improvements and support such a school, they replied that the lands all around them were owned by absentees, speculators in the east, who were holding the lands for the advance in value, which they, in their struggling poverty, should make by the improvement of the country, when they would gather in an "unearned increment." They said they had the power to levy taxes for bridges and for schools and they had determined to make the absentees in this way compensate them, in part, for the increment they were earning for them. The conviction of right and justice in the white settler did not differ from the innate and untutored argument of the Indian. The Indians felt oppressed because they were compelled to pay the man for what that man had never earned. The white settlers determined to thwart the purpose of the absentee owners to gain an increment from their sacrifice and labor. The landlord has a right to all that he has produced. When he has cleared away the forest or broken up the land; when he has planted the vineyard and builded the winepress, he has a right to let this out to husbandmen to gather the fruits of his preparation and planting and to share with them in the proportion each has contributed to the production, but to hold all that he himself has produced and yet claim a part of the product of another, is usury. A farmer retires from his farm because no longer able or willing to continue its cultivation. He has an undisputed right to a full reward for all his own labor, and for all he has purchased from others that he leaves in the farm. There must be a compensation for the transformation of the wilderness into a farm at the first, for the fertility that may have been added to the soil, for the orchards, vineyards, houses, barns and every improvement he may have made and left on the farm. He has an undisputed right to all the labor remaining in the farm. If he sells he expects compensation for all this. But if he sells, he must begin at once to consume its price, unless he becomes a usurer and is supported by the interest. If he does not sell, but retains his farm, he must also begin at once to consume the farm. For him to demand of his tenant that the farm shall remain as valuable as when he left it, the soil not permitted to become less fertile, the buildings to be kept from decay and restored when destroyed, the orchards to be kept vigorous and young by the planting of new trees and vines; in short, the farm to be preserved in full value and yet pay a rental, is usury in land. The preservation of a farm or land and its restoration to the owner unimpaired after a term of years involves far more than persons not informed suppose. It seems to them unreasonable to farm a field and only return the unimpaired field to the owner. While land is stable and possibly the most easily preserved of all forms of property, at least a thief cannot carry it away, yet the preservation of land involves great care and risk. The taking of any crop from any land reduces its fertility. On the virgin, western fertile lands the farmers laughed at the thought that they should ever need to return fertilizers, but it was only a few years until they yearned for the fertility they had extravagantly wasted. Buildings inevitably decay and they may be destroyed by fire or storm. Orchards may be overturned by a cyclone or be destroyed by blight or by the thousand enemies of the various varieties of fruit trees. The land may be injured by washing that may require years to repair. A single storm has destroyed fields in this way that never can be restored. Noxious weeds take possession of land that can only be eradicated by infinite pains. In this state certain weeds are declared outlaws and must be destroyed by the farmer for the protection of his neighbors. The farmer in this locality must have an alert eye for Canada thistles and oxeye daisy. It often causes more labor to eradicate them than the land is worth on which they are growing. If the annual renter was required to give bond for the return of the farm unimpaired, returning that which the crops and time must consume and destroy, taking all risks of every character upon himself, a thoughtful man, though poor and needing the opportunity, would hesitate. It might involve him in an obligation he could not discharge in his whole life through conditions and providences over which he has no control. Practically in this country the owner renting a farm from year to year does consume it. It begins at once to decline in fertility, the improvements begin to fall into decay, weeds take possession, washes occur and are not repaired, and in a few years the half of the value is gone. The owner is fortunate if he has received in rentals sufficient to restore its former value. Under a system of perpetual tenantry the case is different. If the fertility declines it is the tenant's loss. The improvements are his and may be sold as one could sell ordinary farm tools, but not to be removed. If they are impaired or destroyed it does not affect the annual rental. The landed proprietor in city or country, who has permanent tenants, who are required to make every improvement and keep up perfectly the fertility, and who pay an annual rental, is in the same class as those who are receiving annual interest. The landlord practically holds a perpetual mortgage, and the rental is the interest or increase exacted generation after generation. The debtor working under a mortgage is cheered by the hope that he may be able, some day, to lift it, but the perpetual tenant on entailed lands knows that he is doomed to hopeless tenantry. He can never own the land and he is in the power of the landlord, who is often oppressive. Calvin, in his letter of apology for usury of money, speaks of the injustice of the landlords in requiring a rental for "some barren farm" and of the "harsher" conditions imposed upon the tenants. Indeed his whole argument, when summed up, is, that the usury of lands is more cruel and oppressive than the usury of money. While it is not yet true in America, yet considering the landlordships of Ireland and Great Britain and the older countries, with their unremitted exactions, grinding the life out of their tenants for a mere subsistence, it is likely that the race is today suffering more from the injustice and oppression of usury of land than from the usury of money. The land question is too large for one short chapter or for one small book. It requires more and deeper study than the subject has ever yet received. The ownership of lands cannot be absolute; it must be limited by the rights of those who live upon them, but the limitations have never yet been clearly defined. If a man has a right to live he must have a right to a place to live. If a child has a right to be born it must have a right to a place to be born. It cannot be that the mass of our race only touch the earth by the sufferance of those who claim to own it. The unprecedented rapidity of the development of this country is owing more to its wise and beneficent land laws than to anything else. They are not perfect but the most favorable to the landless that the world has ever known. No landlordism, no binding up lands by entail to make it forever impossible to gain a title to a portion of the soil, but our land laws, wisely devised, gave hope of a home to the homeless everywhere. The result was that our people from the eastern part of our own country, and the landless from across the seas, swarmed over the mountains and filled the Ohio valley and pushed on to the great Mississippi and Missouri valleys, and in three generations have transformed this waste into happy homes. The possession of land, of a home, ennobles the character, produces a patriotic love of this country and stimulates devotion to her institutions. The landless foreigner who makes here a home of his own is unwavering in his loyalty to the country of his adoption. Those foreigners, who do not fall in love with our institutions and do not become assimilated with our people, are tenants here as they were before they came here. They are not attached to our soil; they do not secure homes of their own and are therefore restless and a menace. A dangerous tendency has been developing throughout our whole land in these later years. The usury of lands is on the increase. Tenantry is becoming more common on the farms in the country, while the mass of our city populations are living in rented houses or flats or crowded tenements. The yearning for a home of one's own is deeply imbedded in human nature. To be denied the privilege of living in one's own house is one of the greatest trials of a life. This tendency to tenantry is not because our people have come to care less for a home of their own, but the conditions are not such as to make a purchase of a home profitable; the interest on the purchase price is greater than the usury of the land or rental. The natural and desirable state is for every family to own and occupy their home, and those conditions should be encouraged which make it unprofitable for any one to own real property he does not himself occupy, and which make it easy and profitable for every family to own their own home. When all lands are owned by those who occupy them, the prophet Micah's picture of the millennial dawn will be realized. Every man shall sit under his own vine and under his own fig tree and no one shall molest him or make him afraid, by demanding a rental or by serving a writ of ejectment. CHAPTER XXXV. PER CONTRA; POLITICAL ECONOMIST. The students of political economy are not always reformers. It is not their purpose nor the object of their studies to transform society. They only endeavor to explain why things are as they are. They find the taking of usury all but universal, and they endeavor to give the reasons for the prevailing custom. The subject is usually but slightly touched upon and dismissed with a few sentences. Few economists claim that interest or rental is a part of the cost of production. They mostly affirm that it is no part of production; that it is merely the price paid for the opportunity to produce. The lender of money makes a loan to the borrower and thus gives him a better opportunity to produce than he had before. The landlord for the rental withdraws his hand from over his land and gives the renter the opportunity to produce a harvest. In justification, or at least in explanation of this exaction for an opportunity, three reasons are usually given. These may be briefly stated as risk, time and abstinence. 1. There is some risk in every investment. There is a possibility that the most honest, industrious and careful debtor may by some misfortune not be able to return the loan and it would therefore be lost. To guard against this the usurer requires the rate of interest to be graded by the measure of risk. This is claimed to be of the nature of insurance, the borrower paying the premium. The profits of insurance are secured by collecting a larger premium than necessary to pay all losses. On this theory, the gain of usury is in the excess that can be secured of increase over the amounts lost. This is the reverse of insurance. Insurance is the payment by an owner of property to a company who guarantees its preservation. Usury is the payment by the company to the owner for the privilege of guaranteeing that he shall not suffer loss. Business involves a risk usually covered by insurance, but no honest man expects to make a profit out of his insurance. 2. A loan is made for a more or less extended time. Time is therefore claimed to be a ground for usury charges. This claim rests on the assumption that time will increase wealth. But time is the great destroyer; time does not make gardens and farms, but covers them with weeds and sends them back to a wilderness; time does not erect a house, but pulls it down; time does not build a city, but causes it to crumble and a few ages buries it under the dust; time does not "incubate eggs, but turns them putrid; it does not transform into fowls. If eggs are developed into chickens the difference between eggs and chickens is the reward of the incubator." Aside from the spirit of benevolence and sympathy with the needy there are three selfish reasons why a time loan may be made. First, the owner has no present need of it and wishes to be rid of its care. Second, the owner shall need it at a distant date and he wishes it preserved intact against that time. But these afford no ground for a charge of increase. He who stands and resists the ravages of time until the day it is needed does a positive service and deserves a reward. Third, the lender wishes to appropriate the earnings of another during the period of time given. This is the usurer's reason, and were it not for this time would lose its importance as an element; it is certain that long time loans would not be so attractive. 3. "The reward of abstinence" is a reward for refraining from consuming one's own wealth. "You can not have your cake and eat it. If you do not eat it, you have your cake, but not a cake and a half. Not a cake and a quarter tomorrow, dunce, however abstinent you may be, only the cake you have, if the mice do not eat it in the night."--Ruskin. The usual illustration is that of Jacob. He practiced abstinence in refraining from eating the bowl of pottage and giving it to his hungry brother. The reward of his abstinence was his brother's birthright. If I do not take my soup now it is a great favor to have it preserved for me and served later, not cold and stale, but fresh and hot. If I deny myself now, for any cause, I can ask no more than that my meal shall be served, perfectly, later. This was all that Jacob could in justice demand of Esau. It should be remembered, that because Jacob took Esau's birthright, as a reward of his abstinence, he was accounted a robber, was compelled to flee from his home, and not for twenty years see his father's face; that the consciousness of this sin and of the merited vengeance of the brother, whom he thereby defrauded and whom he thought was on his track, caused that night of struggle when he could not let the angel go, until he had his promise of deliverance. Abstinence, to be benevolent, must be an act of personal loving self-sacrifice for another. Benevolent abstinence is its own reward and asks no more. Abstinence in hope of gain, denying himself while another is using his wealth, cannot be regarded as an act of benevolence, but of a selfish grovelling greed; more gratified to see his wealth increase than to himself enjoy its use. That is the spirit of the miser and receives the contempt of all right thinking people. That the political economists are right in their analysis of the common thought of usury; that risk, time and abstinence are the elements of its basis in the popular mind, may not be denied, but if these are in fact the elements, then usury has no standing in equity and must be condemned by every enlightened conscience. CHAPTER XXXVI. USURY IN HISTORY. It would require volumes to fully present the history of usury. A very brief summary must suffice in this place. Yet this synopsis may serve as a guide to those who may wish to pursue the investigation further and who have access to any considerable library of general and ecclesiastical history. The exacting of usury has always been more or less practiced, and there has always been a contention against it as impolitic and wrong. In heathendom the philosophers and economists and common people were usually arrayed against it, and the voice of christendom has been practically unanimous in its denunciation until the 17th century. (For History of Usury in the Church, see Chapter X.) Greece: Greece had no laws forbidding usury. The trade in money was left, like the trade in every thing else, without legal restraint. The law declared that the usurer should not demand a higher rate than that fixed by the original contract; it also advised "Let the usury on money be moderate." One per cent. per month was the usual rate. There were among the Greeks at various times thoughtful men, who violently opposed the taking of increase. Solon, of aristocratic blood, but with strong sympathies for the oppressed classes, led a Nehemiah-like reformation. Solon was wise and patriotic. His name is a synonym for unselfish devotion to the public good. He was given authority in Greece in times of great financial distress. Debts were increasing. Mortgage stones were erected at the borders of each tract of land, giving the name of the creditor and the amount of his claim. The interest could not be paid. Interest taking had concentrated the wealth and power of the state in a few hands. The farmer lost all hope and was only a laborer on the farm he once owned. The debtor who had no farm to work for his creditor was yet in a worse condition; he was the mere slave of his creditor and could be sold by him. The free farmers were fast disappearing. The most of them were struggling with miserable poverty. Solon at once came to the relief of this suffering class. He released those who were enslaved and brought back those who had been sold abroad. The great work of Solon for this oppressed class has caused his name to be revered by all who have studied the history of his times. Plato opposed usury, but he does not give extended reasons. Also the philosopher, Aristotle. His name is yet illustrious in the departments of natural and moral science and economics. With regard to usury he said: "Of all modes of accumulation, the worst and most unnatural is interest. This is the utmost corruption of artificial degeneracy; standing in the same relation to commerce that commerce does to economy. By commerce money is perverted from the purpose of exchange to that of gain; still this gain is occasioned by the mutual transfer of different objects; but interest, by transferring merely the same object from one hand to another generates money from money, and the product thus generated is called offspring (toxos) as being precisely the same nature as that from which it proceeds." Rome: In the early ages of Rome there were no laws regulating the loans of money. The practice was common and was one of the most frequent subjects of popular complaint. In the celebrated secession of the lower classes of the people to Mons Sacer, when civil strife and fraternal bloodshed was threatened, the loudest outcry was against the oppression of exhorbitant interest exacted by wealthy citizens of those who were obliged to borrow. The common rate was twelve per cent. per annum. This is inferred from the fact that six per cent. was called half interest and three per cent. one-fourth interest. The early records of Rome prove conclusively the odium attached to the business of money-lending for profit. In the codification of laws in the fifth century B.C. the rate of usury was fixed at one per cent. per month. This limitation of usury was enacted after a long and bitter contest between the rich lenders and the poorer classes. A compromise seems to have been made in the assigned punishments. The laws for the collection of debts and the punishment of exacting more than the law permitted were alike extremely cruel. The creditors of an insolvent debtor were given the power of cutting his body in pieces and the power of selling his children into slavery. The penalty of taking more than this legal interest was punished with more severity than theft. The thief must restore double, but the usurer must restore fourfold. This we learn from Cato's treatise on "Agriculture." Cato's own opinion of usury is shown in the answer which he made when he was asked what he thought of usury, his reply was, "What do you think of murder?" Nearly a hundred years later the Licinian law forbade all increase. A little later we find the one-half of one per cent. permitted by law. Then under Sylla the legal rate is made three per cent. In the time of Antony and Cleopatra it is four per cent. For a time there was utter confusion and intolerably oppressive rates prevailed. Horace, in his Satires, speaks of one lending at sixty per cent. In the reign of Tiberius Cæsar, Rome was again shaken with another usury sedition, an uprising of the people against the usurers. The law was finally adjusted in the Justinian Code, by a compromise permitting six per cent. and severely restraining the exorbitant rates. Three hundred and twenty-three years B.C., Livy speaks of a creditor who kept his debtor in irons, claiming, besides the debt, the interest which he exacted with greatest severity. It was soon after decreed that this cruelty should end and that no citizen should be placed in irons or sold into slavery for debt. At the close of the republic the rate was twenty-four per cent. England: In the earliest periods of which we have any records we find that the doctrine, that letting money to hire was sinful, prevailed universally over the island of Great Britain. It was the prevailing opinion that interest, or usury, as it was then called, was unjust gain, forbidden by divine law, and which a good Christian could neither receive nor pay. In common law the practice of taking increase was classed among the lowest crimes against public morals. So odious was it among Christians that the practice was confined almost wholly to the Jews, who did not exact usury of Jews but of the Christians. The laws of King Alfred, about 900 A.D., directed that the effects of money-lenders upon usury should be forfeited to the king, their lands to the lords under whom they were held, and they should not be buried in consecrated ground. By the laws of Edward the Confessor, about 1050 A.D., the usurer forfeited all his property and was declared an outlaw and banished from England. In the reign of Henry II, about the close of the twelfth century, the estates of usurers were forfeited at their death and their children were disinherited. His successor, Richard I, was yet more severe, forbidding the usurers attending his coronation, nor would he protect them from mob violence. During the thirteenth century the severities against the usurers were not relaxed. King John confiscated their gathered wealth without scruple. It is recorded that he exacted an enormous fine of a Jew in Bristol for his usuries, and when the Jew refused to pay he ordered one of his teeth to be drawn daily until he should pay. The Jew is said to have endured the pulling of seven, but then weakened and paid the fine. Henry III was equally harsh and severe in his measures. He exacted all he could and then turned them over to the Earl of Cornwall. "The one flayed and the other emboweled." It is written in the chronicles of England, 1251 A.D., "By such usurers and licentious liurs as belong to him, the realme had alreadie become sore corrupted." In the fourteenth century, under the three Edwards, the taking of interest was an indictable offence and Edward III made it a capital crime. In the fifteenth century, under Henry VII, the penalty was fixed at one hundred pounds and the penalty of the church added, which was excommunication. Attorney General Noy, in the reign of James I, thought the taking of money by usury was no better than taking a man's life. He said: "Usurers are well ranked with murderers." In the sixteenth century, under Henry VIII, it was enacted that all interest above ten per cent. was unlawful. Less was not collectable by law, but was not a punishable offence. Edward VI revived the old laws condemning all interest. Mary I, next following, executed these laws with extreme severity. Elizabeth restored the laws of Henry VIII, in which usury less than ten per cent. was not a punishable offence. This edict of Elizabeth adds: "In the interpretation of the law it shall be largely and strongly construed for the repression of usury." This law of Henry VIII and Elizabeth, with the rate of interest reduced, was the statute law of England until 1854, when all the usury laws were repealed. In 1694 William and Mary II entered into a contract to secure a permanent loan and pledged the kingdom to pay interest on it forever. The loan marked the turning point in the popular mind with regard to usury. As it was approved in their necessity by the king and queen at the head of the Protestant world, ecclesiastics began to shift their ground and to apologize for, and excuse, that which had been formerly unequivocably condemned. As the crown was the head of both the church and the state, the condemnation of usury seemed tinged both with disloyalty and heresy. The courts too began to modify their decisions to bring them into harmony with the action of the crown. The change in the usury laws were not made by enactments of Parliament, but by the decisions of courts. The precedents were gradually accumulated and the statutes were merely made to conform to them. CHAPTER XXXVII. FRANCIS BACON. From the short dissertation on usury found in the works of Bacon we learn that the taking of usury was a recognized evil and odious in his time. It will be noticed that he eliminates risk from usury and sees that "In the game of certainties against uncertainties" usury is sure to win. It will be noticed also that he mentions only economic arguments against usury. He does not give ethical and moral reasons. He does not mention the want of sympathy for the poor and their oppression. In his statement of the arguments in defence he implies that the usurer is less grasping than the man he knew who said "The devil take this usury." This is the very opposite of the picture of the usurer given by his contemporary, Shakespeare, in his character, Shylock. His specious argument for the regulation of the evil "For some small matter for the license" is familiar to modern reformers in connection with other sins. He speaks of the reduction of the usury rates as a general good and believes "It will no whit discourage the lender." Wrong-doers in all the ages have been ready to part with a portion of the profits of an unlawful business for the cover of the authority of the state. The following is his discussion in full OF USURY. "Many have made witty invectives against usury. They say that it is a pity the devil should have God's part, which is the tithe. That the usurer is the greatest Sabbath breaker, because his plough goeth every Sunday. That the usurer is the drone that Virgil speaketh of: "_Ignavum fucos pecus a praesepibus arcent._ "That the usurer breaketh the first law that was made for mankind after the fall, which was, _in sudore vultus tui comedes panem tuum; non in sudore vultus alieni_; (in the sweat of thy face shalt thou eat bread--not in the sweat of another's face.) That usurers should have orange-tawney bonnets, because they do Judaize. That it is against nature for money to beget money; and the like. I say only this, that usury is a _concessum propter duritiem cordis_; (a thing allowed by reason of the hardness of men's hearts): for since there must be borrowing and lending, and men are so hard of heart as they will not lend freely, usury must be permitted. Some others have made suspicious and cunning propositions of banks, discovery of men's estates and other inventions. But few have spoken of usury usefully. It is good to set before us the incommodities and the commodities of usury, that the good may be either weighed out or culled out; and warily to provide, that while we make forth to that which is better, we meet not with that which is worse. "The discommodities of usury are, first, it makes fewer merchants. For were it not for this lazy trade of usury, money would not lie still, but would in great part be employed upon merchandising; which is the _vena porta_ of wealth in a state. The second, that it makes poor merchants. For as a farmer can not husband his ground so well if he sit at a great rent, so the merchant can not drive his trade so well, if he sit at great usury. The third is incident to the other two; and that is the decay of customs of kings or states, which ebb or flow with merchandising. The fourth that it bringeth the wealth or treasure of a realm or state into a few hands. "For the usurer being at certainties, and others at uncertainties, at the end of the game most of the money will be in the box; and ever a state flourisheth when wealth is more equally spread. The fifth that it beats down the price of land; for the employment of money is chiefly either purchasing or merchandising; and usury waylays both. The sixth, that it doth dull and damp all industries, improvements and new inventions, wherein money would be stirring, if it were not for this slug. The last, that it is the canker and ruin of many men's estates; which in process of time breeds a public poverty. "On the other side, the commodities of usury are, first, that howsoever usury in some respect hindereth merchandising, yet in some other it advanceth it; for it is certain that the greatest part of trade is driven by young merchants upon borrowing at interest; so as if the usurer either call in or keep back his money, there will ensue presently a great stand of trade. The second is, that were it not for this easy borrowing upon interest, man's necessities would draw upon them a most sudden undoing; in that they would be forced to sell their means (be it lands or goods) far under foot; and so, whereas usury doth but gnaw upon them, bad markets would swallow them quite up. As for mortgaging or pawning, it will little mend the matter; for either men will not take pawns without use; or if they do, they will look precisely for the forfeiture. I remember a cruel monied man in the country that would say: 'The devil take this usury, it keeps us from forfeitures of mortagages and bonds.' The third and last is, that it is a vanity to conceive that there would be ordinary borrowing without profit; and it is impossible to conceive the number of inconveniences that would ensue if borrowing be cramped. Therefore, to speak of the abolishing of usury is idle. All states have ever had it, in one kind or rate, or other. So as that opinion must be sent to Utopia. "To speak now of the reformation and reiglement of usury; how the discommodities of it may be best avoided, and the commodities of it retained. It appears by the balance of commodities and discommodities of usury, two things are to be reconciled. The one, that the tooth of usury be grinded that it bite not too much; the other, that there be left open a means to invite monied men to lend to the merchants for the continuing and quickening of trade. This can not be done except you introduce two several sorts of usury, a less and a greater. For if you reduce usury to one low rate it will ease the common borrower, but the merchant will be to seek for money. And it is to be noted, that the trade of merchandise, being the most lucrative, may bear usury at a good rate: other contracts not so. "To serve both intentions, the way would be briefly thus: That there be two rates of interest; the one free and general for all, the other under license only, to certain persons and in certain places of merchandising. First, therefore, let usury in general be reduced to five in the hundred; and let that rate be proclaimed free and current; and, let the state shut itself out to take any penalty for the same. This will preserve borrowing from any general stop or dryness. This will ease infinite borrowers in the country. This will, in great part, raise the price of land, because land purchased at sixteen years' purchase will yield six in the hundred and somewhat more; whereas this rate of interest yields but five. This, by like reason, will encourage and edge industrious and profitable improvements; because many will rather venture in that kind than take five in the hundred, especially having been used to greater profit. Secondly, let there be certain persons licensed to lend to known merchants upon usury at a higher rate; and let it be with the cautions following: Let the rate be, even with the merchant himself, somewhat more easy than that he used formerly to pay; for by that means all borrowers shall have some ease by this reformation, be he merchant or whosoever. Let it be bank or common stock, but every man be master of his own money. Not that I altogether mislike banks, but they will hardly be brooked in regard of certain suspicions. Let the state be answered some small matter for the license, and the rest left to the lender; for if the abatement be but small, it will no whit discourage the lender. For he, for example, that took before ten or nine in the hundred, will sooner descend to eight in the hundred than give over his trade in usury, and go from certain gains to gains of hazard. Let these licensed lenders be in number indefinite, but restrained to certain principal cities and towns of merchandising; for then they will be hardly able to color other men's monies in the country. So as the license of nine will not suck away the current rate of five; for no man will lend his monies far off, nor put them into unknown hands. "If it be objected that this doth in a sort authorize usury, which before was in some places but permissive; the answer is, that it is better to mitigate usury by declaration, than to suffer it to rage by connivance." (Works of Francis Bacon, Vol. 12, Page 218.) CHAPTER XXXVIII. WHY THIS TRUTH WAS NEGLECTED. That we may find the way of return, we must consider the reasons of our wandering. We must reverse our direction and retrace our steps. These reasons are not occult or hard to find. 1. The departure had its root in man's depraved nature. The natural tendency is evil, while the graces must be cultivated with great diligence. Evils grow as weeds grow in the garden, as thorns and thistles and briers cover the untended fields. This evil has not been disturbed by any book exposing its harm for a hundred years, and it has been two hundred since it was treated as a violation of the Eighth Commandment. This evil, thus left undisturbed, has flourished and spread over all the world. 2. Two and three hundred years ago the great doctrines were occupying the thought of Christendom. The doctrines of free grace, by repentance and an exercise of faith, were receiving close attention. The creeds of the denominations were being unfolded, and their defense and proof absorbed the thought of the wise and good. What shall we believe was the question? 3. Other great evils stood before the faces of those who labored for the uplifting of the race. Practices attached to the ecclesiastics, and degrading the organized church, were flaunted before the eyes of those who stood for true faith and pure living. These were attacked with vigor, while this evil, which had been especially the sin of the Jew, crept in and entrenched itself. 4. Covetousness is one of those secret sins that may lurk in the heart while there is maintained a fair outward life. Few will admit this sin. Priests declare that this is the one sin that is never voluntarily confessed. Usury is the common outward activity of this inward state, and when usury was made lawful by the statutes of the realm, the voice of conscience was silenced. The conscience that would cry out in protest against a rate of interest forbidden by law, will permit the same rate when the statutes of the state are changed. 5. Early education and natural buoyancy have led the debtors to be less sensitive to the burdens of usury upon them. A large portion of our present arithmetic is taken up with percentage. The position of the student, in mind, is that of the creditor. This is presumed in the statements of the problems and lies in the thought of the student in all the calculations. If the statements of propositions and their conclusions were made to place the student on the debtor side, then the study of percentage would educate him to a horror of this sin. When a loan is made, the attention of the borrower is seldom called to the rapidity of increase and the dangers of accumulation. If this were done, and a prompt return of both principal and interest required, at the end of the term the borrower would soon be alarmed at the hopelessness of permanent gain through debt. Peter Cooper, it is said, taught this lesson to a friend who was talking of borrowing for six months at three per cent. We clip the following story: "Why do you borrow money for so short a time?" Mr. Cooper asked. "Because the brokers will not negotiate bills for longer." "Well, if you wish," said Mr. Cooper, "I will discount your note at that rate for three years." "Are you in earnest?" asked the would-be borrower. "Certainly I am. I will discount your note for ten thousand dollars for three years at that rate. Will you do it?" "Of course I will," said the merchant. "Very well," said Mr. Cooper. "Just sign this note for ten thousand dollars, payable in three years, and give me your check for eight hundred dollars, and the transaction will be complete." "But where is the money for me?" asked the astonished merchant. "You don't get any money," was the reply. "Your interest for thirty-six months at three per cent. per month amounts to one hundred and eight per cent., or ten thousand eight hundred dollars. Therefore, your check for eight hundred dollars just makes us even." There has come to this table, a letter recently sent by a wise uncle to his nephew, who sought from him his first loan. Usually the interest is minimized while the hopeful youth is permitted to indulge his dreams of fancied good, to be easily gained by a loan. "My Near Nephew: "I enclose a draft for forty dollars with a note for the amount to me, due in one year at six per cent., which please sign and return to me. This is probably the first note that you have ever given, and there are one or two things about a note that maybe you have never discovered. One striking peculiarity is, that they always come due, though they are drawn for a year. It may seem a long time, but when you have a note come due at the end of the year it seems altogether too short and has gone before you are aware of it. Another peculiar thing is, that while interest is a little thing apparently, yet it never works on the eight-hour system, but continues steadily through the whole twenty-four, and through the whole seven days in the week. Its about the most industrious animal of my acquaintance, working nights and Sundays as well, and apparently never becoming in the least fatigued, consequently, though it appears to be so slow, still if you do not watch it closely, the first thing you know you will be astonished at what an amount of work it has accomplished. There are other things equally striking about notes, but these two are the most important, and the ones I particularly wish to impress on your mind. "_________________ "P.S.--Don't think from the tone of this that I'm not willing to let you have the money. I merely want to impress on you what it means to go in debt." 6. The evil was not hitherto so much felt. This, especially, is true in the United States. Great natural resources, unclaimed wealth, made the burden of a small debt unfelt. By appropriating the vast unbroken forests and untilled lands and unopened mines of precious metals, of coal and iron and gas and oil, there seemed such evident advantages from the borrowed capital that the evils were unnoticed, until these natural resources had been appropriated and were held in private hands, and the opportunities are found to be denied those who have come so closely after. This system made it possible for one generation to grasp a continent; to grasp all its natural resources and hold them, and compel tribute from all that came after. Taking only a limited and short-time view, the advantages seemed great and the evils small. But looking at the welfare of the generations its evils might have been clearly discerned. 7. The evil was never before so great. The vast accumulations of wealth, so sure to follow the operation of usury, was hitherto unknown. Corporations, combinations for the handling of great interests, grasping the natural resources and monopolizing the natural wealth, gaining franchises covering a monopoly of privileges in transportation, light and communication by the telephone or telegraph, are comparatively recent. 8. The first appearance of indebtedness is a seeming, but false, prosperity. The young man who takes possession of a tract of land and then, with borrowed capital, improves it, building his house and his barns and his permanent buildings, and stocking it with animals that please his taste, has the appearance of abounding prosperity, but as the unending grind of usury continues, these, he comes to feel, are but weights to which he is chained, and in an agony of sweat he is compelled to wear out his life. A city incurring debt is seemingly prosperous. Bonds are issued for the erection of attractive public buildings, for the paving of muddy streets, for the beautifying of public parks. These bond issues are signs of the prosperity of only one class, the usurers. The ultimate burden is upon the laborers, who must pay every bond, interest and principal. 9. The opponents of usury have not always been wise. They have indulged in bitter invective rather than solid argument. The language of the fathers, especially, was unqualified in severity. When the absurdity and unmitigated evil of usury is seen, and one feels that adequacy requires superlatives, it is not easy to restrain language and use mild terms. The divine prohibition was so clear and the effects so oppressive, especially to the poor, that it did not appear to the fathers to require argument. The divine authority was not, therefore, followed up with the economic basis or reasons for the prohibitions. Usury crept in because it was not barred out by the sound reasoning of those who knew its evils. The vituperations were ignored as the rantings of ill-balanced minds. 10. Like every other wrong, it feeds upon itself. The very conditions it produces fosters and promotes its growth. At first directing effort and thought along material lines, ultimately the ideals become groveling. The purposes of a worthy life and the characteristics of a noble manhood are perverted. There comes a wrong idea of true greatness. There arises a false measure of manhood. That measure is wealth, and of all the grounds of distinction among men, wealth is the most sordid. Success is accumulation of wealth. Prosperity is getting rich. Whatever else a man may accomplish in life, if he remains poor he is accounted a failure. Yet to this pass, such a pass, have we come, that our national and age characteristic is that of material gain, commonly called commercialism. This was not the thought of our fathers who subordinated material gain to the development of noble manhood. This is a perversion of our American traditions, and is a menace to better development of the individual and of the state. 11. Wrong laws mislead the judgment and pervert the conscience. If there is a want of harmony between the moral and statute law when selfish interests are served, the moral law will be ignored. State laws ease the conscience that would be otherwise troubled. The rate of usury fixed by a state is used as a moral guide. When the legal rate is six per cent. it is wrong to take eight, but when the legal rate is ten per cent. then it is not wrong to take ten. The familiarity of our people with laws recognizing and enforcing interest rates has perverted their ideas of right and justice by substituting the statute for the divine moral law. But state laws can also trouble the conscience that is at ease and be a teacher of righteousness. Let the ancient laws forbidding usury be placed upon our statute books and enforced, and it would not be half a generation till the conscience and reason both approved. Nothing in history more shocked the conscience of Christendom than the compact of William and Mary with usurers in 1694. That was in direct conflict with the teachings and practice of all the ages among Christians. It has taken two hundred years for courts and states and financial institutions to first dull the Christian conscience and then secure its approval. The world now awaits the coming of some captain of righteousness, equal in authority and influence in church and state, who will organize a return to the faith and practice of the fathers. CHAPTER XXXIX. CRUSHED TRUTH WILL RISE AGAIN. The practice of usury is so general, and it is apparently so fully approved and sanctioned by many of the most intelligent and virtuous of our people, that those who believe in its prohibition and are disposed to pessimism may be utterly discouraged. Truth must eventually prevail. Any custom or system built upon falsehood must sooner or later yield. The house built upon the sand must in time fall. It may be undermined by years of instruction and so gradually give way that the date of its overthrow can hardly be determined, or it may in its strength be taken in a storm and fall. The whole commercial credit system built on this monstrous falsehood must either crumble or tumble. The prophet Isaiah was hopeful and happy in the midst of the most unfavorable conditions of corruption and alienation from the truth, for he was able with his prophetic eye to catch a glimpse of the good time coming, when righteousness should completely triumph. "He shall teach us of His ways and we shall walk in His steps." "With righteousness shall He judge the poor." "Righteousness shall be the girdle of His loins." No prophet has fixed a date for the suppression of usury, yet no intelligent man of faith, familiar with the reforms of the past, when as thoroughly entrenched and as giant evils were attacked and overthrown, need be in despair. We were enslaved by superstitions. Haunted houses were numerous and the bewitching of people was frequent. Two hundred arrests for witchcraft were made in a single year, 1692, and twenty of these persons were put to death. These persecutions were urged and defended by Cotton Mather, a representative of the highest intelligence and culture of the times. His mother was a daughter of John Cotton, and his father the President of Harvard College. Now black cats and epilepsy inspire no fear, and ghost stories do not now terrify and unnerve our children. Duelling prevailed among men of honor. Public opinion made it compulsory that personal differences between gentlemen should be settled in this way. Persons were branded as cowards who would not put their lives in jeopardy. Few had the courage to resist. Duels were common among the political leaders at Washington. Many a shot rang out at sunrise in the little valley at Bladensburg, the noted duelling ground. Jackson and Benton and Clay and De Witt Clinton were duellists. After the killing of Alexander Hamilton by Aaron Burr, in 1804, the whole country was aroused and an agitation began against the custom, but it yielded slowly. In 1838 and 1841 there were duels between distinguished congressmen. But now public opinion is so transformed that the "honorable and brave" duellist is a moral coward. Gambling was a common sin. There were lotteries organized for the raising of funds for state and municipal expenses. There were raffles at church fairs to support the ordinances in the sanctuary. The rules of the games were protected by the laws of the state. No one who had lost in a game could recover by law unless he proved that the rules of the game had not been followed. The rules for gambling were regarded as legitimate as the regulations of any business. The gambler was only a law-breaker when he "cheated." Now gambling is unlawful in every state and territory, and any newspaper advertising a lottery is shut out of our mails. Even an "honest" gambler is now classed among robbers. Intemperance was rampant through the eighteenth century and more than half the nineteenth. Whisky was king. Through a false physiology it became the almost universal opinion that in the great portion of the United States the climate required the use of "ardent spirit." Ministers and all classes of the people were thus deluded, and almost every person, adult or child, was a consumer. "Upon rising in the morning a glass of liquor must be taken to give an appetite for breakfast. At eleven o'clock the merchant in his counting-room, the blacksmith at his forge, the mower in the hay field, took a dram to give them strength till the ringing of the bell or the sounding of the horn for dinner. In mid-afternoon they drank again. When work for the day was done, before going to bed, they quaffed another glass. It was the regular routine of drinking in well-regulated and temperate families. Hospitalities began with drinking. 'What will you take?' was the question of host to visitor. Not to accept the proffered hospitality was disrespectful. Was there the raising of a meeting house, there must be hospitality for all the parish: no lack of liquor; and when the last timber was in its place a bottle of rum must be broken upon the ridge-place. In winter men drank to keep themselves warm; in summer to keep themselves cool; on rainy days to keep out the wet, and on dry days to keep the body in moisture. Friends, meeting or parting, drank to perpetuate their friendship. Huskers around the corn-stack, workmen in the field, master and apprentice in the shop, passed the brown jug from lip to lip. The lawyer drank before writing his brief or pleading at the bar; the minister, while preparing his sermon or before delivering it from the pulpit. At weddings bridegroom, bride, groomsman, and guest quaffed sparkling wines. At funerals minister, friend, neighbor, mourner, all except the corpse, drank of the bountiful supply of liquors always provided. Not to drink was disrespectful to living and dead, and depriving themselves of comfort and consolation. In every community there were blear-eyed men with bloated, haggard faces; weeping women, starving children." (Building of a Nation. Page 271.) While "temperate" men were grieved at the tide of wretchedness and protested, they did not think it possible to get on without whisky. Dr. Prime, for so many years editor of the New York Observer, told of the meeting of the family physician and the pastor at his father's home in a case of severe illness. When the physician took his leave the pastor followed him into the yard, where they had a long consultation. The pastor was anxiously seeking advice. Three drinks made his head swim, and the problem was how he could make more than three calls and not become unsteady. The doctor gave directions and Dr. Prime said that neither the minister nor the physician thought of the simple remedy, "not drinking." It has taken two generations, but the transformation is marvelous. The minister can now call in every home in his parish and never once have an opportunity to drink. If Rev. John Pierpont was yet living, who was put out of his pulpit in Boston by an ecclesiastical council because he publicly protested against the use of the basement of his church as a storeroom for whisky, he would see every minister losing his pulpit who would not publicly protest against such a desecration. Rev. George B. Cheever, the dreamer, in 1830, woke up the stupid consciences of the fuddled men and women; he wrote out his dream and published it, "Deacon Giles' Distillery," and went to jail for it, but even he never dreamed of the greatness of the temperance reform that has followed. The overthrow of chattel slavery is complete and the human rights of the inferior peoples are recognized. Human slavery was of old, as ancient as history; it was widespread over the world; there was an immense and profitable commerce in human flesh; luxurious wealth and ease was secured by appropriating labor without compensation; it was thought that the Scriptures in both Testaments approved the holding of bondmen; there was a consciousness of superior gifts; there was a firm belief that the negroes, especially, needed the care of the superior race; that they were better off and happier than they would be in freedom; there was a deep-seated race prejudice that remains unyielding till this day. Yet the slave trade has ceased, stopped by armed vessels patroling the seas. The slaves, eight hundred thousand, in the West Indies were set free; the shackles were stricken off by the sword in the United States; Brazil adopted gradual emancipation, and chattel slavery disappeared forever from the civilized world. The reform battles fought and won are assurances that victory shall also reward those who contend against this sin of usury. There are also other good grounds for confidence. 1. They are seeking only a return--a reform: "a restoration to a former state;" they are not seeking for the establishment of some new and untried theory, but they are seeking a return to the faith and conduct of the righteous from the beginning and up seventeen centuries of the Christian era. The race is but temporarily deflected to the worship of the golden calf. 2. There is coming forward a great army of intelligent, virtuous young people. They are made intelligent by our high schools, seminaries and colleges. They are made students of the Bible and stimulated in righteousness by Sunday Schools, Christian Associations, Endeavors, Leagues and Unions. From these there shall rise up defenders of the truth, free from the burden of debt and unbiassed by life-long association with conditions familiar to those older. The reformers in all ages have been young, and this reform will be no exception. There is a rashness in youth that needs direction, but there is also a dash and hope and confidence that is necessary to break away from old customs. One generation of intelligent, virtuous young people could give this evil its fatal blow. Usury cannot flourish among the vicious and the unreliable. Other evils may flourish among the idle, the indolent, the treacherous, the deceitful and the dishonest, but industry and economy and integrity and faithfulness and honor and even God-fearing piety are desirable qualities in the usurer's victims. The higher the civilization, yes Christian civilization, the more is produced and the richer the harvest. The usurer has no use for a savage. This worm thrives in the living body and sucks its vitality. It cannot flourish in putrid flesh. Let the highest types of our young manhood avoid this sin and its death knell is sounded. 3. Present conditions stimulate an interest in this question. The unequal distribution of the vast wealth now being produced: the earnings of the many turned into the coffers of a few; the struggles between the employers and their employees; organized labor and combinations of wealth; lead to a closer study of this and allied economic questions than they have ever received before. The solution of these questions will expose the fraud of usury. 4. The patriotic spirit has not decayed in our people and rulers. They are as strongly attached to our free, popular institutions as were the patriots of '76. There is alarm at the tendency to slip away from the early traditions, at the centralization of power, at class legislation. The influence of usury is so strong to promote a favored class and to concentrate power, that it must be resisted as an enemy to our republican institutions. It gradually undermined and then destroyed the republic of Venice, and it is now doing its first work with us. It must soon emerge from its cover. Then our people will arouse with their patriotic fervor and fell it with one blow, and then bury it with the other enemies of the government that have from time to time arisen. 5. In the studies in sociology there is now a strong current toward Socialism. There is a desire to preserve the individual's interests and yet a stronger disposition to merge him in the general welfare. There is a conviction that the privileges of individuals have been unduly guarded while the rights of the public were neglected, that the rights of individuals have received an excess of protection while the welfare of the great mass of the people has been sacrificed. The present problem of the student of sociology is, How can the rights of individuals be adjusted, yet so as to maintain the superior interests of all the people? This can be accomplished largely, if not completely, by the abolition of usury. Let the Government receive on deposit the surplus wealth of the individuals for safe keeping and subject to their orders. Let the Postal Savings Bank be established. The Government is the best possible security. The certificates of deposit would be as good as Government bonds. They could take the place of the National Bank currency. The Postal Department now transfers money and in a manner receives deposits and issues postal notes. These deposits as they accumulated would lift from the people the burden of the interest bearing debt. As they increased the Government could invest them in public utilities to be operated for the general welfare. The Government thus caring for the surplus wealth the people are entitled to any benefits that may accrue from its use. All would have an interest in preserving and all would share in the advantages of the property thus cared for by the State, while each would have his individual earnings subject to draft for his personal needs or pleasure. This would preserve the rights of the individual and secure to him perfectly his surplus earnings, and at the same time the whole people, through the Government, would have the use of this accumulated wealth for its safe-keeping. This will preserve the stimulating incentives of individualism and also gain, practically, the blessings of Socialism. This will be the natural conclusion in the balancing and adjustment of the present sociological discussion. 6. The prohibition of usury would be to the material advantage of the great mass of our people. It would be a blessing to all, though it might hinder the material gain of a few, but the hindered would not be a tithe of our people. It is not easy to forsake the wrong when appetite or passion or selfish interests plead for it. The martyrs who will stand by the right "though the heavens fall" are not a majority of our people. The paths of righteousness are easy, broad and smooth, and crowded with enthusiastic shouters when self-interest can walk hand in hand with a reform. Opposition to usury is self-defense to the poor, the pensioners, the producers, and they form a mighty, irresistible army. 7. Reason remains. The laws of logic have not changed nor has the human mind lost its power of tracing premises to their conclusion. The custom of usury was never reasoned into practice, but was permitted to creep in while reason was diverted to abstract, abstruse, scholastic subjects by those who claimed to be scholars. Had the fathers reasoned more about practical subjects, and scolded less, this sin would never have appeared in Christian society and claimed respectability. When the people begin to think and to turn their reasoning powers to this subject, as light dispels darkness, this gross error will flee away. 8. The conscience is yet alert to condemn the wrong and to approve the right. The public conscience was never more tender nor more delicately adjusted, but it is wanting in intelligence in this matter. The eye cannot see to determine the nature of an object without light, so the conscience must be enlightened, or made intelligent by the reason, to enable it to give a right decision. Conscience is the same in all ages among all peoples, and when informed by investigation and reasoning, the condemnation of usury will be as unanimous as in the centuries of the past. Prayer is also a means to this righteous end. God is still on His throne. His ear is not heavy. He hears the cry of the raven and sparrows and lions. He hears the cry of His suffering children and will not fail to come to their relief. In all the past, man's extremity has been God's opportunity. Relief has come at unexpected times and by ways that were not known. Sometimes by means that were insignificant and inadequate in order to show that it was not by human might or power; sometimes by the faith of one humble believer. This writer has been familiar with the story of David and Goliath from his infancy. To him, Mammon, whose head is usury, is the giant Philistine who now stalks forth to defy "the armies of the living God," and with a grain of David's faith, he flings this stone. INDEX Abstinence, 255 Agar--Prayer of, 219 American Revision, 87 American Statesman, 172 Aristotle, 132, 259 Average Interest, 135 Bank of England, 184, 195 Bank of Venice, 193 Bank, First in U.S., 198 Banks and Brokers, 161 Bacon, 108, 180, 266 Banking, Claim for, 56 Barriers Broken Down, 45 Borrower, 62 Borrowing, 241 Benton, Thomas H., 199 Bankruptcy, 176 Basil, 169 Beza, 71 Bible and Nature, 93 Bible Encyclopedia, 8, 21 Block Stone, 10 Brotherhood--Christian, 47 Bush, Prof. Geo., 14 Bureau of Engraving, 123 Capital Combines, 223 Catechism, 233 Cato, 261 Car Fares, 164 Calvin, Institutes of, 78 Calvin, Letter of, 73, 162, 248 Calhoun, J.C., 199 Capital Demands, 165 Cretan Bonds, 204 Chalmers, 62 Charlemagne, 70 Changed Conditions, 81 Chattel Slave, 147 Character in Fathers, 206 Cheever, Rev. Geo., 286 Creeds, 272 Croesus, 218 Covetousness, 61, 214, 273 Cooper Anecdote, 274 City Debts, 140, 168 Criminal in Court, 127 Coachman, 111 Chrysostom, 69 Christ-like Soul, 42 Council of Ten, 195 Cyrus, 36 David, 26 Debts, Discharged, 63 Debts, Stimulated, 138 Debts, Church, 141 Debts, National, 142, 189 Decay, Limits, 136 Deposit or Loan, 105 Diligence, 60 Disciples, Practice of, 58 Deacon Giles' Distillery, 286 Dives, 218 Doge, The, 194 Dueling, 282 Edward III, 263 Edward VI, 264 England, History, 262 English People, 192 Elizabeth, 264 Esau's Abstinence, 256 Equality Impossible, 222 Ethics in Bible, 94 Equity Between Thieves, 160 Exchanges, 56 Express Company, 118 Extravagance, 155 Ezekiel's Protests, 31 Ezra, 36 Family Economy, 154 Farm Preserved, 135, 247 Farm Consumed, 246 Faithful Steward, 117 Fathers, Apostolic, 69, 80 Fathers, Later, 70, 80 Financial Slavery, 150 Force in Abstract, 99 Fishers' Catechism, 235 Freight Rates, 109 "Golden Book", 194 Gambling, 283 Giving, 51 Gravity Levels, 222 Great Enterprises, 239 Greek Artist, 216 Greece, History, 258 Guile, Taken by, 104 Hebrews in Egypt, 212 Henry II, 262 Henry III, 263 Henry VII, 263 Henry VIII, 264 Hindoo Widow, 24 Honesty Hindered, 210 Hodge, Dr. Charles, 237 Home Wanted, 251 Horace, 261 Human Nature, 81 Hume, 192 Incorporated Properties, 171 Industry Discouraged, 207 Indians, Omahas, 244 Injustice, Submitted, 120 Interest Defined, 9 Insurance Company, 119, 254 Interest, Compound, 180 Installment Plan, 140 Intemperance, 283 Jackson, Andrew, 200 Jefferson, Thos., 200 Jennet, M., 182 Jeremy Bentham, 113 Jeremiah Protests, 30 Jubilee, Year of, 45 Justinian Code, 261 King Alfred, 262 Khedive, 203 Land Question, 249 Lombards, 195 London Tenants, 169 Luther, 71 Macauley, 196 Machinery, Improved, 226 Mammon, 203, 221 Melancthon, 71 Messiah's Character, 42 Moral Law, 82 Milton, 145, 203 Minuits, Peter, 181 Middle Classes, 220 Mons Sacer, 260 Money Barren, 83, 122 Moses, 57 Mosaic Laws, 11, 14 McCullough, Sec., 201 Nature and Bible, 93 Nehemiah, 36, 40, 57, 63 Nile Worship, 214 Obsolete Words, 7 One Cent Loaned, 182 Ottoman Empire, 212 Over-production, 156 Panics, 187 Paul to Timothy, 59 Paulist Fathers, 65 Pounds, Parable of, 54 Peel, Sir Robert, 196 Physicians' Charges, 115 Poor Richard, 240 Poor, Oppressed, 154 Poor, to the Spirit, 48 Popes, 70 Polygamy, 85 Production, Limited, 158 Promoter, 161 Prime, Dr., 285 Rates, Differ Why, 108 Rentals of Land, 243 Revolution, 238 Ridpath, 71 Rich Fool, 49, 137 Rights, Personal, 98 Rights, Equal, 102 Risk, 253 Robe, 111 Rome, History, 250 Ruskin, 72, 156, 255 Sands, Bishop, 70 Sabbath of Rest, 85, 171 Schaff-Herzog, 8, 69 Scripture Passages: Genesis 21:26, 7 Exodus 32:1, 7 Exodus 22:25, 13, 20 Leviticus 19:33, 34, 21 Leviticus 22:22, 19 Leviticus 23:23, 22 Leviticus 34:10, 22 Deut. 5:14, 24 Deut. 25:19, 17 Deut. 15:7-9, 44 Numbers 15:15, 16, 19 Joshua 9:23, 22 Psalm 15, 26 Psalm 92, 7 Psalm 112:1-3, 15 Proverbs 22:4, 15 Proverbs 28:20, 15, 27 Jeremiah 31:29, 32 Isaiah 10:15, 101 Ezekiel 24:15-18, 31 Ezekiel 22:7-12, 31 Ezekiel 18:117, 33 Matthew 5:17, 43 Matthew 6:12, 45 Matthew 13:22, 48 Matthew 19:24, 49 Matthew 25:14, 52 Luke 6:35, 44 Luke 51:52, 53, 47 Luke 19:12, 52 John 15:12, 46 John 13:34, 46 Romans 1:13, 7 Romans 13:8, 62 Acts 3:17, 7 Acts 2:44, 45, 58 1 Corinthians 1:27, 28, 58 1 Corinthians 13, 8 Ephesians 4:28, 60 1 Thess. 4:15, 7 1 Timothy 5:8, 59 James 5:1-6, 61 Slaves, Happy, 148 Slaves, Chattel, 286 Self Reliance, 211 Strangers, Three Classes, 18 Shoe Plant, 128 Shylock, 121, 195 Slot Machines, 104 Solomon and Usury, 27, 144 Solon, 218, 259 Socialism, 289 Spirituality Destroyed, 216 Stevens, Thadeus, 201 Strikes, 227 Sultan, 203 Sun Worship, 214 Superstitions, 282 Taxes Off the Poor, 168 Tenantry, 250 "The Hague", 230 Talents, Parable of, 52 Thrift, 51, 209 Time, 107, 254 Temptation to Upright, 149 Timon of Athens, 146 Tools, Not Productive, 135 Trade, Profits in, 124 Trusts, 186, 224 Usury, Definition, 8 Usury and the Stranger, 18 Valet, 145 Venice, 193 Vienna, Council of, 70 War, Evils of, 229 Webster, Definition, 9 Wealth Decays, 132 Wealth, Barren, 131 William and Mary, 195, 264, 279 Wilson's Catechism, 233 Wrong Laws, 279 Young Reformers, 187 Zaccheus, 49 Zerubbabel, 36 The Anti-Usury League The object, the purpose and work of the Anti-Usury League is to expose the evils, the oppressions, the fraud and the sin of usury or interest, by publications, by lectures, by conventions and by every other practical method. All persons in sympathy with this object, and who can in any way co-operate by distributing its literature or by other publications or by lecturing or by arranging for lectures or conventions, are requested to enter into correspondence. Also all persons who have become interested by reading the preceding pages and who seek further information and who desire to keep in touch with the work of this League should send their names and addresses for enrollment. THE ANTI-USURY LEAGUE, Millersburg, Ohio. * * * * * +-----------------------------------------------------------+ | Typographical errors corrected in text: | | | | Page 39: coveteousness replaced with covetousness | | Page 54: ponds replaced with pounds | | Page 61: Sabbaoth replaced with Sabbath | | Page 61: weap replaced with weep | | Page 64: bankrupty replaced with bankruptcy | | Page 70: degredation replaced with degradation | | Page 113: opportunites replaced with opportunities | | Page 119: employes replaced with employees | | Page 145: degredation replaced with degradation | | Page 211: forbodings replaced with forebodings | | Page 225: mutally replaced with mutually | | Page 228: neighors replaced with neighbors | | Page 294: Dicharged replaced with Discharged | | Page 297: Shoff, Herzog replaced with Schaff-Herzog | | Page 299: Zacheus replaced with Zaccheus | | | +-----------------------------------------------------------+ * * * * * 
33741	----	THE ACQUISITIVE SOCIETY BY R. H. TAWNEY FELLOW OF BALLIOL COLLEGE, OXFORD; LATE MEMBER OF THE COAL INDUSTRY COMMISSION NEW YORK HARCOURT, BRACE AND COMPANY COPYRIGHT, 1920, BY HARCOURT, BRACE AND HOWE, INC. PRINTED IN THE U. S. A. BY THE QUINN & BODEN COMPANY RAHWAY, N. J. CONTENTS CHAPTER I INTRODUCTORY II RIGHTS AND FUNCTIONS III THE ACQUISITIVE SOCIETY IV THE NEMESIS OF INDUSTRIALISM V PROPERTY AND CREATIVE WORK VI THE FUNCTIONAL SOCIETY VII INDUSTRY AS A PROFESSION VIII THE "VICIOUS CIRCLE" IX THE CONDITION OF EFFICIENCY X THE POSITION OF THE BRAIN WORKER XI PORRO UNUM NECESSARIUM _The author desires to express his acknowledgments to the Editor of the_ Hibbert Journal _for permission to reprint an article which appeared in it_. {1} THE ACQUISITIVE SOCIETY I INTRODUCTORY It is a commonplace that the characteristic virtue of Englishmen is their power of sustained practical activity, and their characteristic vice a reluctance to test the quality of that activity by reference to principles. They are incurious as to theory, take fundamentals for granted, and are more interested in the state of the roads than in their place on the map. And it might fairly be argued that in ordinary times that combination of intellectual tameness with practical energy is sufficiently serviceable to explain, if not to justify, the equanimity with which its possessors bear the criticism of more mentally adventurous nations. It is the mood of those who have made their bargain with fate and are content to take what it offers without re-opening the deal. It leaves the mind free to concentrate undisturbed upon profitable activities, because it is not distracted by a taste for unprofitable speculations. Most generations, it might be said, walk in a path which they neither make, nor discover, but accept; the main thing is that they should march. The blinkers worn by Englishmen enable them to trot all the more steadily along the beaten {2} road, without being disturbed by curiosity as to their destination. But if the medicine of the constitution ought not to be made its daily food, neither can its daily food be made its medicine. There are times which are not ordinary, and in such times it is not enough to follow the road. It is necessary to know where it leads, and, if it leads nowhere, to follow another. The search for another involves reflection, which is uncongenial to the bustling people who describe themselves as practical, because they take things as they are and leave them as they are. But the practical thing for a traveler who is uncertain of his path is not to proceed with the utmost rapidity in the wrong direction: it is to consider how to find the right one. And the practical thing for a nation which has stumbled upon one of the turning-points of history is not to behave as though nothing very important were involved, as if it did not matter whether it turned to the right or to the left, went up hill or down dale, provided that it continued doing with a little more energy what it has done hitherto; but to consider whether what it has done hitherto is wise, and, if it is not wise, to alter it. When the broken ends of its industry, its politics, its social organization, have to be pieced together after a catastrophe, it must make a decision; for it makes a decision even if it refuses to decide. If it is to make a decision which will wear, it must travel beyond the philosophy momentarily in favor with the proprietors of its newspapers. Unless it is to move with the energetic futility of a squirrel in a revolving cage, it must have a clear apprehension both of the {3} deficiency of what is, and of the character of what ought to be. And to obtain this apprehension it must appeal to some standard more stable than the momentary exigencies of its commerce or industry or social life, and judge them by it. It must, in short, have recourse to Principles. Such considerations are, perhaps, not altogether irrelevant at a time when facts have forced upon Englishmen the reconsideration of their social institutions which no appeal to theory could induce them to undertake. An appeal to principles is the condition of any considerable reconstruction of society, because social institutions are the visible expression of the scale of moral values which rules the minds of individuals, and it is impossible to alter institutions without altering that moral valuation. Parliament, industrial organizations, the whole complex machinery through which society expresses itself, is a mill which grinds only what is put into it, and when nothing is put into it grinds air. There are many, of course, who desire no alteration, and who, when it is attempted, will oppose it. They have found the existing economic order profitable in the past. They desire only such changes as will insure that it is equally profitable in the future. _Quand le Roi avait bu, la Pologne était ivre_. They are genuinely unable to understand why their countrymen cannot bask happily by the fire which warms themselves, and ask, like the French farmer-general:--"When everything goes so happily, why trouble to change it?" Such persons are to be pitied, for they lack the social quality which is {4} proper to man. But they do not need argument; for Heaven has denied them one of the faculties required to apprehend it. There are others, however, who are conscious of the desire for a new social order, but who yet do not grasp the implications of their own desire. Men may genuinely sympathize with the demand for a radical change. They may be conscious of social evils and sincerely anxious to remove them. They may set up a new department, and appoint new officials, and invent a new name to express their resolution to effect something more drastic than reform, and less disturbing than revolution. But unless they will take the pains, not only to act, but to reflect, they end by effecting nothing. For they deliver themselves bound to those who think they are practical, because they take their philosophy so much for granted as to be unconscious of its implications, and directly they try to act, that philosophy re-asserts itself, and serves as an overruling force which presses their action more deeply into the old channels. "Unhappy man that I am; who shall deliver me from the body of this death?" When they desire to place their economic life on a better foundation, they repeat, like parrots, the word "Productivity," because that is the word that rises first in their minds; regardless of the fact that productivity is the foundation on which it is based already, that increased productivity is the one characteristic achievement of the age before the war, as religion was of the Middle Ages or art of classical Athens, and that it is precisely in the century which has seen the greatest increase in {5} productivity since the fall of the Roman Empire that economic discontent has been most acute. When they are touched by social compunction, they can think of nothing more original than the diminution of poverty, because poverty, being the opposite of the riches which they value most, seems to them the most terrible of human afflictions. They do not understand that poverty is a symptom and a consequence of social disorder, while the disorder itself is something at once more fundamental and more incorrigible, and that the quality in their social life which causes it to demoralize a few by excessive riches, is also the quality which causes it to demoralize many by excessive poverty. "But increased production is important." Of course it is! That plenty is good and scarcity evil--it needs no ghost from the graves of the past five years to tell us that. But plenty depends upon co-operative effort, and co-operation upon moral principles. And moral principles are what the prophets of this dispensation despise. So the world "continues in scarcity," because it is too grasping and too short-sighted to seek that "which maketh men to be of one mind in a house." The well-intentioned schemes for social reorganization put forward by its commercial teachers are abortive, because they endeavor to combine incompatibles, and, if they disturb everything, settle nothing. They are like a man who, when he finds that his shoddy boots wear badly, orders a pair two sizes larger instead of a pair of good leather, or who makes up for putting a bad sixpence in the plate on Sunday by putting in a bad shilling the next. And when their fit of feverish energy {6} has spent itself, and there is nothing to show for it except disillusionment, they cry that reform is impracticable, and blame human nature, when what they ought to blame is themselves. Yet all the time the principles upon which industry should be based are simple, however difficult it may be to apply them; and if they are overlooked it is not because they are difficult, but because they are elementary. They are simple because industry is simple. An industry, when all is said, is, in its essence, nothing more mysterious than a body of men associated, in various degrees of competition and co-operation, to win their living by providing the community with some service which it requires. Organize it as you will, let it be a group of craftsmen laboring with hammer and chisel, or peasants plowing their own fields, or armies of mechanics of a hundred different trades constructing ships which are miracles of complexity with machines which are the climax of centuries of invention, its function is service, its method is association. Because its function is service, an industry as a whole has rights and duties towards the community, the abrogation of which involves privilege. Because its method is association, the different parties within it have rights and duties towards each other; and the neglect or perversion of these involves oppression. The conditions of a right organization of industry are, therefore, permanent, unchanging, and capable of being apprehended by the most elementary intelligence, provided it will read the nature of its countrymen in the large outlines of history, not in the bloodless {7} abstractions of experts. The first is that it should be subordinated to the community in such a way as to render the best service technically possible, that those who render no service should not be paid at all, because it is of the essence of a function that it should find its meaning in the satisfaction, not of itself, but of the end which it serves. The second is that its direction and government should be in the hands of persons who are responsible to those who are directed and governed, because it is the condition of economic freedom that men should not be ruled by an authority which they cannot control. The industrial problem, in fact, is a problem of right, not merely of material misery, and because it is a problem of right it is most acute among those sections of the working classes whose material misery is least. It is a question, first of Function, and secondly of Freedom. {8} II RIGHTS AND FUNCTIONS A function may be defined as an activity which embodies and expresses the idea of social purpose. The essence of it is that the agent does not perform it merely for personal gain or to gratify himself, but recognizes that he is responsible for its discharge to some higher authority. The purpose of industry is obvious. It is to supply man with things which are necessary, useful or beautiful, and thus to bring life to body or spirit. In so far as it is governed by this end, it is among the most important of human activities. In so far as it is diverted from it, it may be harmless, amusing, or even exhilarating to those who carry it on, but it possesses no more social significance than the orderly business of ants and bees, the strutting of peacocks, or the struggles of carnivorous animals over carrion. Men have normally appreciated this fact, however unwilling or unable they may have been to act upon it; and therefore from time to time, in so far as they have been able to control the forces of violence and greed, they have adopted various expedients for emphasizing the social quality of economic activity. It is not easy, however, to emphasize it effectively, because to do so requires a constant effort of will, against which egotistical instincts are in rebellion, and because, if that will is to prevail, it must be embodied in some social {9} and political organization, which may itself become so arbitrary, tyrannical and corrupt as to thwart the performance of function instead of promoting it. When this process of degeneration has gone far, as in most European countries it had by the middle of the eighteenth century, the indispensable thing is to break the dead organization up and to clear the ground. In the course of doing so, the individual is emancipated and his rights are enlarged; but the idea of social purpose is discredited by the discredit justly attaching to the obsolete order in which it is embodied. It is not surprising, therefore, that in the new industrial societies which arose on the ruins of the old régime the dominant note should have been the insistence upon individual rights, irrespective of any social purpose to which their exercise contributed. The economic expansion which concentrated population on the coal-measures was, in essence, an immense movement of colonization drifting from the south and east to the north and west; and it was natural that in those regions of England, as in the American settlements, the characteristic philosophy should be that of the pioneer and the mining camp. The change of social quality was profound. But in England, at least, it was gradual, and the "industrial revolution," though catastrophic in its effects, was only the visible climax of generations of subtle moral change. The rise of modern economic relations, which may be dated in England from the latter half of the seventeenth century, was coincident with the growth of a political theory which replaced the conception of purpose by that of mechanism. During a great part of history men had {10} found the significance of their social order in its relation to the universal purposes of religion. It stood as one rung in a ladder which stretched from hell to Paradise, and the classes who composed it were the hands, the feet, the head of a corporate body which was itself a microcosm imperfectly reflecting a larger universe. When the Reformation made the Church a department of the secular government, it undermined the already enfeebled spiritual forces which had erected that sublime, but too much elaborated, synthesis. But its influence remained for nearly a century after the roots which fed it had been severed. It was the atmosphere into which men were born, and from which, however practical, or even Machiavellian, they could not easily disengage their spirits. Nor was it inconvenient for the new statecraft to see the weight of a traditional religious sanction added to its own concern in the subordination of all classes and interests to the common end, of which it conceived itself, and during the greater part of the sixteenth century was commonly conceived, to be the guardian. The lines of the social structure were no longer supposed to reproduce in miniature the plan of a universal order. But common habits, common traditions and beliefs, common pressure from above gave them a unity of direction, which restrained the forces of individual variation and lateral expansion; and the center towards which they converged, formerly a Church possessing some of the characteristics of a State, was now a State that had clothed itself with many of the attributes of a Church. The difference between the England of Shakespeare, {11} still visited by the ghosts of the Middle Ages, and the England which merged in 1700 from the fierce polemics of the last two generations, was a difference of social and political theory even more than of constitutional and political arrangements. Not only the facts, but the minds which appraised them, were profoundly modified. The essence of the change was the disappearance of the idea that social institutions and economic activities were related to common ends, which gave them their significance and which served as their criterion. In the eighteenth century both the State and the Church had abdicated that part of the sphere which had consisted in the maintenance of a common body of social ethics; what was left of it was repression of a class, not the discipline of a nation. Opinion ceased to regard social institutions and economic activity as amenable, like personal conduct, to moral criteria, because it was no longer influenced by the spectacle of institutions which, arbitrary, capricious, and often corrupt in their practical operation, had been the outward symbol and expression of the subordination of life to purposes transcending private interests. That part of government which had been concerned with social administration, if it did not end, became at least obsolescent. For such democracy as had existed in the Middle Ages was dead, and the democracy of the Revolution was not yet born, so that government passed into the lethargic hand of classes who wielded the power of the State in the interests of an irresponsible aristocracy. And the Church was even more remote from the daily life of mankind than the State. Philanthropy abounded; but religion, {12} once the greatest social force, had become a thing as private and individual as the estate of the squire or the working clothes of the laborer. There were special dispensations and occasional interventions, like the acts of a monarch who reprieved a criminal or signed an order for his execution. But what was familiar, and human and lovable--what was Christian in Christianity had largely disappeared. God had been thrust into the frigid altitudes of infinite space. There was a limited monarchy in Heaven, as well as upon earth. Providence was the spectator of the curious machine which it had constructed and set in motion, but the operation of which it was neither able nor willing to control. Like the occasional intervention of the Crown in the proceedings of Parliament, its wisdom was revealed in the infrequency of its interference. The natural consequence of the abdication of authorities which had stood, however imperfectly, for a common purpose in social organization, was the gradual disappearance from social thought of the idea of purpose itself. Its place in the eighteenth century was taken by the idea of mechanism. The conception of men as united to each other, and of all mankind as united to God, by mutual obligations arising from their relation to a common end, which vaguely conceived and imperfectly realized, had been the keystone holding together the social fabric, ceased to be impressed upon men's minds, when Church and State withdrew from the center of social life to its circumference. What remained when the keystone of the arch was removed, was private rights and private interests, the materials of a society rather {13} than a society itself. These rights and interests were the natural order which had been distorted by the ambitions of kings and priests, and which emerged when the artificial super-structure disappeared, because they were the creation, not of man, but of Nature herself. They had been regarded in the past as relative to some public end, whether religion or national welfare. Henceforward they were thought to be absolute and indefeasible, and to stand by their own virtue. They were the ultimate political and social reality; and since they were the ultimate reality, they were not subordinate to other aspects of society, but other aspects of society were subordinate to them. The State could not encroach upon these rights, for the State existed for their maintenance. They determined the relation of classes, for the most obvious and fundamental of all rights was property--property absolute and unconditioned--and those who possessed it were regarded as the natural governors of those who did not. Society arose from their exercise, through the contracts of individual with individual. It fulfilled its object in so far as, by maintaining contractual freedom, it secured full scope for their unfettered exercise. It failed in so far as, like the French monarchy, it overrode them by the use of an arbitrary authority. Thus conceived, society assumed something of the appearance of a great joint-stock company, in which political power and the receipt of dividends were justly assigned to those who held the most numerous shares. The currents of social activity did not converge upon common ends, but were dispersed through a multitude of channels, {14} created by the private interests of the individuals who composed society. But in their very variety and spontaneity, in the very absence of any attempt to relate them to a larger purpose than that of the individual, lay the best security of its attainment. There is a mysticism of reason as well as of emotion, and the eighteenth century found, in the beneficence of natural instincts, a substitute for the God whom it had expelled from contact with society, and did not hesitate to identify them. "Thus God and nature planned the general frame And bade self-love and social be the same." The result of such ideas in the world of practice was a society which was ruled by law, not by the caprice of Governments, but which recognized no moral limitation on the pursuit by individuals of their economic self-interest. In the world of thought, it was a political philosophy which made rights the foundation of the social order, and which considered the discharge of obligations, when it considered it at all, as emerging by an inevitable process from their free exercise. The first famous exponent of this philosophy was Locke, in whom the dominant conception is the indefeasibility of private rights, not the pre-ordained harmony between private rights and public welfare. In the great French writers who prepared the way for the Revolution, while believing that they were the servants of an enlightened absolutism, there is an almost equal emphasis upon the sanctity of rights and upon the infallibility of the {15} alchemy by which the pursuit of private ends is transmuted into the attainment of public good. Though their writings reveal the influence of the conception of society as a self-adjusting mechanism, which afterwards became the most characteristic note of the English individualism, what the French Revolution burned into the mind of Europe was the former not the latter. In England the idea of right had been negative and defensive, a barrier to the encroachment of Governments. The French leapt to the attack from trenches which the English had been content to defend, and in France the idea became affirmative and militant, not a weapon of defense, but a principle of social organization. The attempt to refound society upon rights, and rights springing not from musty charters, but from the very nature of man himself, was at once the triumph and the limitation of the Revolution. It gave it the enthusiasm and infectious power of religion. What happened in England might seem at first sight to have been precisely the reverse. English practical men, whose thoughts were pitched in a lower key, were a little shocked by the pomp and brilliance of that tremendous creed. They had scanty sympathy with the absolute affirmations of France. What captured their imagination was not the right to liberty, which made no appeal to their commercial instincts, but the expediency of liberty, which did; and when the Revolution had revealed the explosive power of the idea of natural right, they sought some less menacing formula. It had been offered them first by Adam Smith and his precursors, who showed how the mechanism of economic life {16} converted "as with an invisible hand," the exercise of individual rights into the instrument of public good. Bentham, who despised metaphysical subtleties, and thought the Declaration of the Rights of Man as absurd as any other dogmatic religion, completed the new orientation by supplying the final criterion of political institutions in the principle of Utility. Henceforward emphasis was transferred from the right of the individual to exercise his freedom as he pleased to the expediency of an undisturbed exercise of freedom to society. The change is significant. It is the difference between the universal and equal citizenship of France, with its five million peasant proprietors, and the organized inequality of England established solidly upon class traditions and class institutions; the descent from hope to resignation, from the fire and passion of an age of illimitable vistas to the monotonous beat of the factory engine, from Turgot and Condorcet to the melancholy mathematical creed of Bentham and Ricardo and James Mill. Mankind has, at least, this superiority over its philosophers, that great movements spring from the heart and embody a faith; not the nice adjustments of the hedonistic calculus. So in the name of the rights of property France abolished in three years a great mass of property rights which, under the old régime had robbed the peasant of part of the produce of his labor, and the social transformation survived a whole world of political changes. In England the glad tidings of democracy were broken too discreetly to reach the ears of the hind in the furrow or the shepherd on the hill; {17} there were political changes without a social transformation. The doctrine of Utility, though trenchant in the sphere of politics, involved no considerable interference with the fundamentals of the social fabric. Its exponents were principally concerned with the removal of political abuses and legal anomalies. They attacked sinecures and pensions and the criminal code and the procedure of the law courts. But they touched only the surface of social institutions. They thought it a monstrous injustice that the citizen should pay one-tenth of his income in taxation to an idle Government, but quite reasonable that he should pay one-fifth of it in rent to an idle landlord. The difference, neverthelesss, was one of emphasis and expression, not of principle. It mattered very little in practice whether private property and unfettered economic freedom were stated, as in France, to be natural rights, or whether, as in England, they were merely assumed once for all to be expedient. In either case they were taken for granted as the fundamentals upon which social organization was to be based, and about which no further argument was admissible. Though Bentham argued that rights were derived from utility, not from nature, he did not push his analysis so far as to argue that any particular right was relative to any particular function, and thus endorsed indiscriminately rights which were not accompanied by service as well as rights which were. While eschewing, in short, the phraseology of natural rights, the English Utilitarians retained something not unlike the substance of them. For they assumed that private property in {18} land, and the private ownership of capital, were natural institutions, and gave them, indeed, a new lease of life, by proving to their own satisfaction that social well-being must result from their continued exercise. Their negative was as important as their positive teaching. It was a conductor which diverted the lightning. Behind their political theory, behind the practical conduct, which as always, continues to express theory long after it has been discredited in the world of thought, lay the acceptance of absolute rights to property and to economic freedom as the unquestioned center of social organization. The result of that attitude was momentous. The motive and inspiration of the Liberal Movement of the eighteenth century had been the attack on Privilege. But the creed which had exorcised the specter of agrarian feudalism haunting village and _château_ in France, was impotent to disarm the new ogre of industrialism which was stretching its limbs in the north of England. When, shorn of its splendors and illusions, liberalism triumphed in England in 1832, it carried without criticism into the new world of capitalist industry categories of private property and freedom of contract which had been forged in the simpler economic environment of the pre-industrial era. In England these categories are being bent and twisted till they are no longer recognizable, and will, in time, be made harmless. In America, where necessity compelled the crystallization of principles in a constitution, they have the rigidity of an iron jacket. The magnificent formulæ in which a society of farmers {19} and master craftsmen enshrined its philosophy of freedom are in danger of becoming fetters used by an Anglo-Saxon business aristocracy to bind insurgent movements on the part of an immigrant and semi-servile proletariat. {20} III THE ACQUISITIVE SOCIETY This doctrine has been qualified in practice by particular limitations to avert particular evils and to meet exceptional emergencies. But it is limited in special cases precisely because its general validity is regarded as beyond controversy, and, up to the eve of the present war, it was the working faith of modern economic civilization. What it implies is, that the foundation of society is found, not in functions, but in rights; that rights are not deducible from the discharge of functions, so that the acquisition of wealth and the enjoyment of property are contingent upon the performances of services, but that the individual enters the world equipped with rights to the free disposal of his property and the pursuit of his economic self-interest, and that these rights are anterior to, and independent of, any service which he may render. True, the service of society will, in fact, it is assumed, result from their exercise. But it is not the primary motive and criterion of industry, but a secondary consequence, which emerges incidentally through the exercise of rights, a consequence which is attained, indeed, in practice, but which is attained without being sought. It is not the end at which economic activity aims, or the standard by which it is judged, but a by-product, as coal-tar is a by-product of the {21} manufacture of gas; whether that by-product appears or not, it is not proposed that the rights themselves should be abdicated. For they are regarded, not as a conditional trust, but as a property, which may, indeed, give way to the special exigencies of extraordinary emergencies, but which resumes its sway when the emergency is over, and in normal times is above discussion. That conception is written large over the history of the nineteenth century, both in England and in America. The doctrine which it inherited was that property was held by an absolute right on an individual basis, and to this fundamental it added another, which can be traced in principle far back into history, but which grew to its full stature only after the rise of capitalist industry, that societies act both unfairly and unwisely when they limit opportunities of economic enterprise. Hence every attempt to impose obligations as a condition of the tenure of property or of the exercise of economic activity has been met by uncompromising resistance. The story of the struggle between humanitarian sentiment and the theory of property transmitted from the eighteenth century is familiar. No one has forgotten the opposition offered in the name of the rights of property to factory legislation, to housing reform, to interference with the adulteration of goods, even to the compulsory sanitation of private houses. "May I not do what I like with my own?" was the answer to the proposal to require a minimum standard of safety and sanitation from the owners of mills and houses. Even to {22} this day, while an English urban landlord can cramp or distort the development of a whole city by withholding land except at fancy prices, English municipalities are without adequate powers of compulsory purchase, and must either pay through the nose or see thousands of their members overcrowded. The whole body of procedure by which they may acquire land, or indeed new powers of any kind, has been carefully designed by lawyers to protect owners of property against the possibility that their private rights may be subordinated to the public interest, because their rights are thought to be primary and absolute and public interests secondary and contingent. No one needs to be reminded, again, of the influence of the same doctrine in the sphere of taxation. Thus the income tax was excused as a temporary measure, because the normal society was conceived to be one in which the individual spent his whole income for himself and owed no obligations to society on account of it. The death duties were denounced as robbery, because they implied that the right to benefit by inheritance was conditional upon a social sanction. The Budget of 1909 created a storm, not because the taxation of land was heavy--in amount the land-taxes were trifling--but because it was felt to involve the doctrine that property is not an absolute right, but that it may properly be accompanied by special obligations, a doctrine which, if carried to its logical conclusion, would destroy its sanctity by making ownership no longer absolute but conditional. {23} Such an implication seems intolerable to an influential body of public opinion, because it has been accustomed to regard the free disposal of property and the unlimited exploitation of economic opportunities, as rights which are absolute and unconditioned. On the whole, until recently, this opinion had few antagonists who could not be ignored. As a consequence the maintenance of property rights has not been seriously threatened even in those cases in which it is evident that no service is discharged, directly or indirectly, by their exercise. No one supposes, that the owner of urban land, performs _qua_ owner, any function. He has a right of private taxation; that is all. But the private ownership of urban land is as secure to-day as it was a century ago; and Lord Hugh Cecil, in his interesting little book on Conservatism, declares that whether private property is mischievous or not, society cannot interfere with it, because to interfere with it is theft, and theft is wicked. No one supposes that it is for the public good that large areas of land should be used for parks and game. But our country gentlemen are still settled heavily upon their villages and still slay their thousands. No one can argue that a monopolist is impelled by "an invisible hand" to serve the public interest. But over a considerable field of industry competition, as the recent Report on Trusts shows, has been replaced by combination, and combinations are allowed the same unfettered freedom as individuals in the exploitation of economic opportunities. No one really believes that the production of coal depends upon the payment of {24} mining royalties or that ships will not go to and fro unless ship-owners can earn fifty per cent. upon their capital. But coal mines, or rather the coal miner, still pay royalties, and ship-owners still make fortunes and are made Peers. At the very moment when everybody is talking about the importance of increasing the output of wealth, the last question, apparently, which it occurs to any statesman to ask is why wealth should be squandered on futile activities, and in expenditure which is either disproportionate to service or made for no service at all. So inveterate, indeed, has become the practice of payment in virtue of property rights, without even the pretense of any service being rendered, that when, in a national emergency, it is proposed to extract oil from the ground, the Government actually proposes that every gallon shall pay a tax to landowners who never even suspected its existence, and the ingenuous proprietors are full of pained astonishment at any one questioning whether the nation is under moral obligation to endow them further. Such rights are, strictly speaking, privileges. For the definition of a privilege is a right to which no corresponding function is attached. The enjoyment of property and the direction of industry are considered, in short, to require no social justification, because they are regarded as rights which stand by their own virtue, not functions to be judged by the success with which they contribute to a social purpose. To-day that doctrine, if intellectually discredited, is still the practical foundation of social {25} organization. How slowly it yields even to the most insistent demonstration of its inadequacy is shown by the attitude which the heads of the business world have adopted to the restrictions imposed on economic activity during the war. The control of railways, mines and shipping, the distribution of raw materials through a public department instead of through competing merchants, the regulation of prices, the attempts to check "profiteering"--the detailed application of these measures may have been effective or ineffective, wise or injudicious. It is evident, indeed, that some of them have been foolish, like the restriction of imports when the world has five years' destruction to repair, and that others, if sound in conception, have been questionable in their execution. If they were attacked on the ground that they obstruct the efficient performance of function--if the leaders of industry came forward and said generally, as some, to their honor, have:--"We accept your policy, but we will improve its execution; we desire payment for service and service only and will help the state to see that it pays for nothing else"--there might be controversy as to the facts, but there could be none as to the principle. In reality, however, the gravamen of the charges brought against these restrictions appears generally to be precisely the opposite. They are denounced by most of their critics not because they limit the opportunity of service, but because they diminish the opportunity for gain, not because they prevent the trader enriching the community, but because they make it {26} more difficult for him to enrich himself; not, in short, because they have failed to convert economic activity into a social function, but because they have come too near succeeding. If the financial adviser to the Coal Controller may be trusted, the shareholders in coal mines would appear to have done fairly well during the war. But the proposal to limit their profits to 1/2 per ton is described by Lord Gainford as "sheer robbery and confiscation." With some honorable exceptions, what is demanded is that in the future as in the past the directors of industry should be free to handle it as an enterprise conducted for their own convenience or advancement, instead of being compelled, as they have been partially compelled during the war, to subordinate it to a social purpose. For to admit that the criterion of commerce and industry is its success in discharging a social purpose is at once to turn property and economic activity from rights which are absolute into rights which are contingent and derivative, because it is to affirm that they are relative to functions and that they may justly be revoked when the functions are not performed. It is, in short, to imply that property and economic activity exist to promote the ends of society, whereas hitherto society has been regarded in the world of business as existing to promote them. To those who hold their position, not as functionaries, but by virtue of their success in making industry contribute to their own wealth and social influence, such a reversal of means and ends appears little less than a revolution. For it means that they must justify before a social tribunal {27} rights which they have hitherto taken for granted as part of an order which is above criticism. During the greater part of the nineteenth century the significance of the opposition between the two principles of individual rights and social functions was masked by the doctrine of the inevitable harmony between private interests and public good. Competition, it was argued, was an effective substitute for honesty. To-day that subsidiary doctrine has fallen to pieces under criticism; few now would profess adherence to the compound of economic optimism and moral bankruptcy which led a nineteenth century economist to say: "Greed is held in check by greed, and the desire for gain sets limits to itself." The disposition to regard individual rights as the center and pivot of society is still, however, the most powerful element in political thought and the practical foundation of industrial organization. The laborious refutation of the doctrine that private and public interests are co-incident, and that man's self-love is God's Providence, which was the excuse of the last century for its worship of economic egotism, has achieved, in fact, surprisingly small results. Economic egotism is still worshiped; and it is worshiped because that doctrine was not really the center of the position. It was an outwork, not the citadel, and now that the outwork has been captured, the citadel is still to win. What gives its special quality and character, its toughness and cohesion, to the industrial system built up in the last century and a half, is not its exploded theory of economic harmonies. It is the doctrine that {28} economic rights are anterior to, and independent of economic functions, that they stand by their own virtue, and need adduce no higher credentials. The practical result of it is that economic rights remain, whether economic functions are performed or not. They remain to-day in a more menacing form than in the age of early industrialism. For those who control industry no longer compete but combine, and the rivalry between property in capital and property in land has long since ended. The basis of the New Conservatism appears to be a determination so to organize society, both by political and economic action, as to make it secure against every attempt to extinguish payments which are made, not for service, but because the owners possess a right to extract income without it. Hence the fusion of the two traditional parties, the proposed "strengthening" of the second chamber, the return to protection, the swift conversion of rival industrialists to the advantages of monopoly, and the attempts to buy off with concessions the more influential section of the working classes. Revolutions, as a long and bitter experience reveals, are apt to take their color from the régime which they overthrow. Is it any wonder that the creed which affirms the absolute rights of property should sometimes be met with a counter-affirmation of the absolute rights of labor, less anti-social, indeed, and inhuman, but almost as dogmatic, almost as intolerant and thoughtless as itself? A society which aimed at making the acquisition of wealth contingent upon the discharge of social {29} obligations, which sought to proportion remuneration to service and denied it to those by whom no service was performed, which inquired first not what men possess but what they can make or create or achieve, might be called a Functional Society, because in such a society the main subject of social emphasis would be the performance of functions. But such a society does not exist, even as a remote ideal, in the modern world, though something like it has hung, an unrealized theory, before men's minds in the past. Modern societies aim at protecting economic rights, while leaving economic functions, except in moments of abnormal emergency, to fulfil themselves. The motive which gives color and quality to their public institutions, to their policy and political thought, is not the attempt to secure the fulfilment of tasks undertaken for the public service, but to increase the opportunities open to individuals of attaining the objects which they conceive to be advantageous to themselves. If asked the end or criterion of social organization, they would give an answer reminiscent of the formula the greatest happiness of the greatest number. But to say that the end of social institutions is happiness, is to say that they have no common end at all. For happiness is individual, and to make happiness the object of society is to resolve society itself into the ambitions of numberless individuals, each directed towards the attainment of some personal purpose. Such societies may be called Acquisitive Societies, because their whole tendency and interest and preoccupation is to promote the acquisition of wealth. The {30} appeal of this conception must be powerful, for it has laid the whole modern world under its spell. Since England first revealed the possibilities of industrialism, it has gone from strength to strength, and as industrial civilization invades countries hitherto remote from it, as Russia and Japan and India and China are drawn into its orbit, each decade sees a fresh extension of its influence. The secret of its triumph is obvious. It is an invitation to men to use the powers with which they have been endowed by nature or society, by skill or energy or relentless egotism or mere good fortune, without inquiring whether there is any principle by which their exercise should be limited. It assumes the social organization which determines the opportunities which different classes shall in fact possess, and concentrates attention upon the right of those who possess or can acquire power to make the fullest use of it for their own self-advancement. By fixing men's minds, not upon the discharge of social obligations, which restricts their energy, because it defines the goal to which it should be directed, but upon the exercise of the right to pursue their own self-interest, it offers unlimited scope for the acquisition of riches, and therefore gives free play to one of the most powerful of human instincts. To the strong it promises unfettered freedom for the exercise of their strength; to the weak the hope that they too one day may be strong. Before the eyes of both it suspends a golden prize, which not all can attain, but for which each may strive, the enchanting vision of infinite expansion. It assures men that there are no ends other {31} than their ends, no law other than their desires, no limit other than that which they think advisable. Thus it makes the individual the center of his own universe, and dissolves moral principles into a choice of expediences. And it immensely simplifies the problems of social life in complex communities. For it relieves them of the necessity of discriminating between different types of economic activity and different sources of wealth, between enterprise and avarice, energy and unscrupulous greed, property which is legitimate and property which is theft, the just enjoyment of the fruits of labor and the idle parasitism of birth or fortune, because it treats all economic activities as standing upon the same level, and suggests that excess or defect, waste or superfluity, require no conscious effort of the social will to avert them, but are corrected almost automatically by the mechanical play of economic forces. Under the impulse of such ideas men do not become religious or wise or artistic; for religion and wisdom and art imply the acceptance of limitations. But they become powerful and rich. They inherit the earth and change the face of nature, if they do not possess their own souls; and they have that appearance of freedom which consists in the absence of obstacles between opportunities for self-advancement and those whom birth or wealth or talent or good fortune has placed in a position to seize them. It is not difficult either for individuals or for societies to achieve their object, if that object be sufficiently limited and immediate, and if they are not distracted from its {32} pursuit by other considerations. The temper which dedicates itself to the cultivation of opportunities, and leaves obligations to take care of themselves, is set upon an object which is at once simple and practicable. The eighteenth century defined it. The twentieth century has very largely attained it. Or, if it has not attained it, it has at least grasped the possibilities of its attainment. The national output of wealth per head of population is estimated to have been approximately $200 in 1914. Unless mankind chooses to continue the sacrifice of prosperity to the ambitions and terrors of nationalism, it is possible that by the year 2000 it may be doubled. {33} IV THE NEMESIS OF INDUSTRIALISM Such happiness is not remote from achievement. In the course of achieving it, however, the world has been confronted by a group of unexpected consequences, which are the cause of its _malaise_, as the obstruction of economic opportunity was the cause of social _malaise_ in the eighteenth century. And these consequences are not, as is often suggested, accidental mal-adjustments, but flow naturally from its dominant principle: so that there is a sense in which the cause of its perplexity is not its failure, but the quality of its success, and its light itself a kind of darkness. The will to economic power, if it is sufficiently single-minded, brings riches. But if it is single-minded it destroys the moral restraints which ought to condition the pursuit of riches, and therefore also makes the pursuit of riches meaningless. For what gives meaning to economic activity, as to any other activity is, as we have said, the purpose to which it is directed. But the faith upon which our economic civilization reposes, the faith that riches are not a means but an end, implies that all economic activity is equally estimable, whether it is subordinated to a social purpose or not. Hence it divorces gain from service, and justifies rewards for which no function is performed, or which are out of all proportion to it. Wealth in modern societies is distributed according to {34} opportunity; and while opportunity depends partly upon talent and energy, it depends still more upon birth, social position, access to education and inherited wealth; in a word, upon property. For talent and energy can create opportunity. But property need only wait for it. It is the sleeping partner who draws the dividends which the firm produces, the residuary legatee who always claims his share in the estate. Because rewards are divorced from services, so that what is prized most is not riches obtained in return for labor but riches the economic origin of which, being regarded as sordid, is concealed, two results follow. The first is the creation of a class of pensioners upon industry, who levy toll upon its product, but contribute nothing to its increase, and who are not merely tolerated, but applauded and admired and protected with assiduous care, as though the secret of prosperity resided in them. They are admired because in the absence of any principle of discrimination between incomes which are payment for functions and incomes which are not, all incomes, merely because they represent wealth, stand on the same level of appreciation, and are estimated solely by their magnitude, so that in all societies which have accepted industrialism there is an upper layer which claims the enjoyment of social life, while it repudiates its responsibilities. The _rentier_ and his ways, how familiar they were in England before the war! A public school and then club life in Oxford and Cambridge, and then another club in town; London in June, when London is pleasant, the moors in August, and pheasants in October, Cannes in {35} December and hunting in February and March; and a whole world of rising bourgeoisie eager to imitate them, sedulous to make their expensive watches keep time with this preposterous calendar! The second consequence is the degradation of those who labor, but who do not by their labor command large rewards; that is of the great majority of mankind. And this degradation follows inevitably from the refusal of men to give the purpose of industry the first place in their thought about it. When they do that, when their minds are set upon the fact that the meaning of industry is the service of man, all who labor appear to them honorable, because all who labor serve, and the distinction which separates those who serve from those who merely spend is so crucial and fundamental as to obliterate all minor distinctions based on differences of income. But when the criterion of function is forgotten, the only criterion which remains is that of wealth, and an Acquisitive Society reverences the possession of wealth, as a Functional Society would honor, even in the person of the humblest and most laborious craftsman, the arts of creation. So wealth becomes the foundation of public esteem, and the mass of men who labor, but who do not acquire wealth, are thought to be vulgar and meaningless and insignificant compared with the few who acquire wealth by good fortune, or by the skilful use of economic opportunities. They come to be regarded, not as the ends for which alone it is worth while to produce wealth at all, but as the instruments of its {36} acquisition by a world that declines to be soiled by contact with what is thought to be the dull and sordid business of labor. They are not happy, for the reward of all but the very mean is not merely money, but the esteem of their fellow-men, and they know they are not esteemed, as soldiers, for example, are esteemed, though it is because they give their lives to making civilization that there is a civilization which it is worth while for soldiers to defend. They are not esteemed, because the admiration of society is directed towards those who get, not towards those who give; and though workmen give much they get little. And the _rentiers_ whom they support are not happy; for in discarding the idea of function, which sets a limit to the acquisition of riches, they have also discarded the principle which alone give riches their meaning. Hence unless they can persuade themselves that to be rich is in itself meritorious, they may bask in social admiration, but they are unable to esteem themselves. For they have abolished the principle which makes activity significant, and therefore estimable. They are, indeed, more truly pitiable than some of those who envy them. For like the spirits in the Inferno, they are punished by the attainment of their desires. A society ruled by these notions is necessarily the victim of an irrational inequality. To escape such inequality it is necessary to recognize that there is some principle which ought to limit the gains of particular classes and particular individuals, because gains drawn from certain sources or exceeding certain amounts are illegitimate. But such a limitation implies a {37} standard of discrimination, which is inconsistent with the assumption that each man has a right to what he can get, irrespective of any service rendered for it. Thus privilege, which was to have been exorcised by the gospel of 1789, returns in a new guise, the creature no longer of unequal legal rights thwarting the natural exercise of equal powers of hand and brain, but of unequal powers springing from the exercise of equal rights in a world where property and inherited wealth and the apparatus of class institutions have made opportunities unequal. Inequality, again, leads to the mis-direction of production. For, since the demand of one income of £50,000 is as powerful a magnet as the demand of 500 incomes of £100, it diverts energy from the creation of wealth to the multiplication of luxuries, so that, for example, while one-tenth of the people of England are overcrowded, a considerable part of them are engaged, not in supplying that deficiency, but in making rich men's hotels, luxurious yachts, and motorcars like that used by the Secretary of State for War, "with an interior inlaid with silver in quartered mahogany, and upholstered in fawn suede and morocco," which was recently bought by a suburban capitalist, by way of encouraging useful industries and rebuking public extravagance with an example of private economy, for the trifling sum of $14,000. Thus part of the goods which are annually produced, and which are called wealth, is, strictly speaking, waste, because it consists of articles which, though reckoned as part of the income of the nation, either should not have been produced until other articles had already {38} been produced in sufficient abundance, or should not have been produced at all. And some part of the population is employed in making goods which no man can make with happiness, or indeed without loss of self-respect, because he knows that they had much better not be made; and that his life is wasted in making them. Everybody recognizes that the army contractor who, in time of war, set several hundred navvies to dig an artificial lake in his grounds, was not adding to, but subtracting from, the wealth of the nation. But in time of peace many hundred thousand workmen, if they are not digging ponds, are doing work which is equally foolish and wasteful; though, in peace, as in war, there is important work, which is waiting to be done, and which is neglected. It is neglected because, while the effective demand of the mass of men is only too small, there is a small class which wears several men's clothes, eats several men's dinners, occupies several families' houses, and lives several men's lives. As long as a minority has so large an income that part of it, if spent at all, must be spent on trivialities, so long will part of the human energy and mechanical equipment of the nation be diverted from serious work, which enriches it, to making trivialities, which impoverishes it, since they can only be made at the cost of not making other things. And if the peers and millionaires who are now preaching the duty of production to miners and dock laborers desire that more wealth, not more waste, should be produced, the simplest way in which they can achieve their aim is to transfer to the public their whole incomes over (say) $5,000 a year, in order that it may {39} be spent in setting to work, not gardeners, chauffeurs, domestic servants and shopkeepers in the West End of London, but builders, mechanics and teachers. So to those who clamor, as many now do, "Produce! Produce!" one simple question may be addressed:--"Produce what?" Food, clothing, house-room, art, knowledge? By all means! But if the nation is scantily furnished with these things had it not better stop producing a good many others which fill shop windows in Regent Street? If it desires to re-equip its industries with machinery and its railways with wagons, had it not better refrain from holding exhibitions designed to encourage rich men to re-equip themselves with motor-cars? What can be more childish than to urge the necessity that productive power should be increased, if part of the productive power which exists already is misapplied? Is not _less_ production of futilities as important as, indeed a condition of, _more_ production of things of moment? Would not "Spend less on private luxuries" be as wise a cry as "produce more"? Yet this result of inequality, again, is a phenomenon which cannot be prevented, or checked, or even recognized by a society which excludes the idea of purpose from its social arrangements and industrial activity. For to recognize it is to admit that there is a principle superior to the mechanical play of economic forces, which ought to determine the relative importance of different occupations, and thus to abandon the view that all riches, however composed, are an end, and that all economic activity is equally justifiable. {40} The rejection of the idea of purpose involves another consequence which every one laments, but which no one can prevent, except by abandoning the belief that the free exercise of rights is the main interest of society and the discharge of obligations a secondary and incidental consequence which may be left to take care of itself. It is that social life is turned into a scene of fierce antagonisms and that a considerable part of industry is carried on in the intervals of a disguised social war. The idea that industrial peace can be secured merely by the exercise of tact and forbearance is based on the idea that there is a fundamental identity of interest between the different groups engaged in it, which is occasionally interrupted by regrettable misunderstandings. Both the one idea and the other are an illusion. The disputes which matter are not caused by a misunderstanding of identity of interests, but by a better understanding of diversity of interests. Though a formal declaration of war is an episode, the conditions which issue in a declaration of war are permanent; and what makes them permanent is the conception of industry which also makes inequality and functionless incomes permanent. It is the denial that industry has any end or purpose other than the satisfaction of those engaged in it. That motive produces industrial warfare, not as a regrettable incident, but as an inevitable result. It produces industrial war, because its teaching is that each individual or group has a right to what they can get, and denies that there is any principle, other than the mechanism of the market, which determines what {41} they ought to get. For, since the income available for distribution is limited, and since, therefore, when certain limits have been passed, what one group gains another group must lose, it is evident that if the relative incomes of different groups are not to be determined by their functions, there is no method other than mutual self-assertion which is left to determine them. Self-interest, indeed, may cause them to refrain from using their full strength to enforce their claims, and, in so far as this happens, peace is secured in industry, as men have attempted to secure it in international affairs, by a balance of power. But the maintenance of such a peace is contingent upon the estimate of the parties to it that they have more to lose than to gain by an overt struggle, and is not the result of their acceptance of any standard of remuneration as an equitable settlement of their claims. Hence it is precarious, insincere and short. It is without finality, because there can be no finality in the mere addition of increments of income, any more than in the gratification of any other desire for material goods. When demands are conceded the old struggle recommences upon a new level, and will always recommence as long as men seek to end it merely by increasing remuneration, not by finding a principle upon which all remuneration, whether large or small, should be based. Such a principle is offered by the idea of function, because its application would eliminate the surpluses which are the subject of contention, and would make it evident that remuneration is based upon service, {42} not upon chance or privilege or the power to use opportunities to drive a hard bargain. But the idea of function is incompatible with the doctrine that every person and organization have an unlimited right to exploit their economic opportunities as fully as they please, which is the working faith of modern industry; and, since it is not accepted, men resign themselves to the settlement of the issue by force, or propose that the State should supersede the force of private associations by the use of its force, as though the absence of a principle could be compensated by a new kind of machinery. Yet all the time the true cause of industrial warfare is as simple as the true cause of international warfare. It is that if men recognize no law superior to their desires, then they must fight when their desires collide. For though groups or nations which are at issue with each other may be willing to submit to a principle which is superior to them both, there is no reason why they should submit to each other. Hence the idea, which is popular with rich men, that industrial disputes would disappear if only the output of wealth were doubled, and every one were twice as well off, not only is refuted by all practical experience, but is in its very nature founded upon an illusion. For the question is one not of amounts but of proportions; and men will fight to be paid $120 a week, instead of $80, as readily as they will fight to be paid $20 instead of $16, as long as there is no reason why they should be paid $80 instead of $120, and as long as other men who do not work are paid anything {43} at all. If miners demanded higher wages when every superfluous charge upon coal-getting had been eliminated, there would be a principle with which to meet their claim, the principle that one group of workers ought not to encroach upon the livelihood of others. But as long as mineral owners extract royalties, and exceptionally productive mines pay thirty per cent. to absentee shareholders, there is no valid answer to a demand for higher wages. For if the community pays anything at all to those who do not work, it can afford to pay more to those who do. The naïve complaint, that workmen are never satisfied, is, therefore, strictly true. It is true, not only of workmen, but of all classes in a society which conducts its affairs on the principle that wealth, instead of being proportioned to function, belongs to those who can get it. They are never satisfied, nor can they be satisfied. For as long as they make that principle the guide of their individual lives and of their social order, nothing short of infinity could bring them satisfaction. So here, again, the prevalent insistence upon rights, and prevalent neglect of functions, brings men into a vicious circle which they cannot escape, without escaping from the false philosophy which dominates them. But it does something more. It makes that philosophy itself seem plausible and exhilarating, and a rule not only for industry, in which it had its birth, but for politics and culture and religion and the whole compass of social life. The possibility that one aspect of human life may be so exaggerated as to overshadow, {44} and in time to atrophy, every other, has been made familiar to Englishmen by the example of "Prussian militarism." Militarism is the characteristic, not of an army, but of a society. Its essence is not any particular quality or scale of military preparation, but a state of mind, which, in its concentration on one particular element in social life, ends finally by exalting it until it becomes the arbiter of all the rest. The purpose for which military forces exist is forgotten. They are thought to stand by their own right and to need no justification. Instead of being regarded as an instrument which is necessary in an imperfect world, they are elevated into an object of superstitious veneration, as though the world would be a poor insipid place without them, so that political institutions and social arrangements and intellect and morality and religion are crushed into a mold made to fit one activity, which in a sane society is a subordinate activity, like the police, or the maintenance of prisons, or the cleansing of sewers, but which in a militarist state is a kind of mystical epitome of society itself. Militarism, as Englishmen see plainly enough, is fetich worship. It is the prostration of men's souls before, and the laceration of their bodies to appease, an idol. What they do not see is that their reverence for economic activity and industry and what is called business is also fetich worship, and that in their devotion to that idol they torture themselves as needlessly and indulge in the same meaningless antics as the Prussians did in their worship of militarism. For what the military tradition and spirit have done for Prussia, {45} with the result of creating militarism, the commercial tradition and spirit have done for England, with the result of creating industrialism. Industrialism is no more a necessary characteristic of an economically developed society than militarism is a necessary characteristic of a nation which maintains military forces. It is no more the result of applying science to industry than militarism is the result of the application of science to war, and the idea that it is something inevitable in a community which uses coal and iron and machinery, so far from being the truth, is itself a product of the perversion of mind which industrialism produces. Men may use what mechanical instruments they please and be none the worse for their use. What kills their souls is when they allow their instruments to use _them_. The essence of industrialism, in short, is not any particular method of industry, but a particular estimate of the importance of industry, which results in it being thought the only thing that is important at all, so that it is elevated from the subordinate place which it should occupy among human interests and activities into being the standard by which all other interests and activities are judged. When a Cabinet Minister declares that the greatness of this country depends upon the volume of its exports, so that France, with exports comparatively little, and Elizabethan England, which exported next to nothing, are presumably to be pitied as altogether inferior civilizations, that is Industrialism. It is the confusion of one minor department of life with the {46} whole of life. When manufacturers cry and cut themselves with knives, because it is proposed that boys and girls of fourteen shall attend school for eight hours a week, and the President of the Board of Education is so gravely impressed by their apprehensions, that he at once allows the hours to be reduced to seven, that is Industrialism. It is fetich worship. When the Government obtains money for a war, which costs $28,000,000 a day, by closing the Museums, which cost $80,000 a year, that is Industrialism. It is a contempt for all interests which do not contribute obviously to economic activity. When the Press clamors that the one thing needed to make this island an Arcadia is productivity, and more productivity, and yet more productivity, that is Industrialism. It is the confusion of means with ends. Men will always confuse means with ends if they are without any clear conception that it is the ends, not the means, which matter--if they allow their minds to slip from the fact that it is the social purpose of industry which gives it meaning and makes it worth while to carry it on at all. And when they do that, they will turn their whole world upside down, because they do not see the poles upon which it ought to move. So when, like England, they are thoroughly industrialized, they behave like Germany, which was thoroughly militarized. They talk as though man existed for industry, instead of industry existing for man, as the Prussians talked of man existing for war. They resent any activity which is not colored by the predominant interest, because it seems a rival to it. So they {47} destroy religion and art and morality, which cannot exist unless they are disinterested; and having destroyed these, which are the end, for the sake of industry, which is a means, they make their industry itself what they make their cities, a desert of unnatural dreariness, which only forgetfulness can make endurable, and which only excitement can enable them to forget. Torn by suspicions and recriminations, avid of power, and oblivious of duties, desiring peace, but unable to "seek peace and ensue it," because unwilling to surrender the creed which is the cause of war, to what can one compare such a society but to the international world, which also has been called a society and which also is social in nothing but name? And the comparison is more than a play upon words. It is an analogy which has its roots in the facts of history. It is not a chance that the last two centuries, which saw the new growth of a new system of industry, saw also the growth of the system of international politics which came to a climax in the period from 1870 to 1914. Both the one and the other are the expression of the same spirit and move in obedience to similar laws. The essence of the former was the repudiation of any authority superior to the individual reason. It left men free to follow their own interests or ambitions or appetites, untrammeled by subordination to any common center of allegiance. The essence of the latter was the repudiation of any authority superior to the sovereign state, which again was conceived as a compact self-contained unit--a unit {48} which would lose its very essence if it lost its independence of other states. Just as the one emancipated economic activity from a mesh of antiquated traditions, so the other emancipated nations from arbitrary subordination to alien races or Governments, and turned them into nationalities with a right to work out their own destiny. Nationalism is, in fact, the counterpart among nations of what individualism is within them. It has similar origins and tendencies, similar triumphs and defects. For nationalism, like individualism, lays its emphasis on the rights of separate units, not on their subordination to common obligations, though its units are races or nations, not individual men. Like individualism it appeals to the self-assertive instincts, to which it promises opportunities of unlimited expansion. Like individualism it is a force of immense explosive power, the just claims of which must be conceded before it is possible to invoke any alternative principle to control its operations. For one cannot impose a supernational authority upon irritated or discontented or oppressed nationalities any more than one can subordinate economic motives to the control of society, until society has recognized that there is a sphere which they may legitimately occupy. And, like individualism, if pushed to its logical conclusion, it is self-destructive. For as nationalism, in its brilliant youth, begins as a claim that nations, because they are spiritual beings, shall determine themselves, and passes too often into a claim that they shall dominate others, so individualism begins by asserting the right of men to {49} make of their own lives what they can, and ends by condoning the subjection of the majority of men to the few whom good fortune or special opportunity or privilege have enabled most successfully to use their rights. They rose together. It is probable that, if ever they decline, they will decline together. For life cannot be cut in compartments. In the long run the world reaps in war what it sows in peace. And to expect that international rivalry can be exorcised as long as the industrial order within each nation is such as to give success to those whose existence is a struggle for self-aggrandizement is a dream which has not even the merit of being beautiful. So the perversion of nationalism is imperialism, as the perversion of individualism is industrialism. And the perversion comes, not through any flaw or vice in human nature, but by the force of the idea, because the principle is defective and reveals its defects as it reveals its power. For it asserts that the rights of nations and individuals are absolute, which is false, instead of asserting that they are absolute in their own sphere, but that their sphere itself is contingent upon the part which they play in the community of nations and individuals, which is true. Thus it constrains them to a career of indefinite expansion, in which they devour continents and oceans, law, morality and religion, and last of all their own souls, in an attempt to attain infinity by the addition to themselves of all that is finite. In the meantime their rivals, and their subjects, and they themselves are conscious of the danger of opposing forces, and seek to {50} purchase security and to avoid a collision by organizing a balance of power. But the balance, whether in international politics or in industry, is unstable, because it reposes not on the common recognition of a principle by which the claims of nations and individuals are limited, but on an attempt to find an equipoise which may avoid a conflict without adjuring the assertion of unlimited claims. No such equipoise can be found, because, in a world where the possibilities of increasing military or industrial power are illimitable, no such equipoise can exist. Thus, as long as men move on this plane, there is no solution. They can obtain peace only by surrendering the claim to the unfettered exercise of their rights, which is the cause of war. What we have been witnessing, in short, during the past five years, both in international affairs and in industry, is the breakdown of the organization of society on the basis of rights divorced from obligations. Sooner or later the collapse was inevitable, because the basis was too narrow. For a right is simply a power which is secured by legal sanctions, "a capacity," as the lawyers define it, "residing in one man, of controlling, with the assistance of the State, the action of others," and a right should not be absolute for the same reason that a power should not be absolute. No doubt it is better that individuals should have absolute rights than that the State or the Government should have them; and it was the reaction against the abuses of absolute power by the State which led in the eighteenth century to the declaration of the absolute rights of individuals. {51} The most obvious defense against the assertion of one extreme was the assertion of the other. Because Governments and the relics of feudalism had encroached upon the property of individuals it was affirmed that the right of property was absolute; because they had strangled enterprise, it was affirmed that every man had a natural right to conduct his business as he pleased. But, in reality, both the one assertion and the other are false, and, if applied to practice, must lead to disaster. The State has no absolute rights; they are limited by its commission. The individual has no absolute rights; they are relative to the function which he performs in the community of which he is a member, because, unless they are so limited, the consequences must be something in the nature of private war. All rights, in short, are conditional and derivative, because all power should be conditional and derivative. They are derived from the end or purpose of the society in which they exist. They are conditional on being used to contribute to the attainment of that end, not to thwart it. And this means in practice that, if society is to be healthy, men must regard themselves not as the owners of rights, but as trustees for the discharge of functions and the instruments of a social purpose. {52} V PROPERTY AND CREATIVE WORK The application of the principle that society should be organized upon the basis of functions, is not recondite, but simple and direct. It offers in the first place, a standard for discriminating between those types of private property which are legitimate and those which are not. During the last century and a half, political thought has oscillated between two conceptions of property, both of which, in their different ways, are extravagant. On the one hand, the practical foundation of social organization has been the doctrine that the particular forms of private property which exist at any moment are a thing sacred and inviolable, that anything may properly become the object of property rights, and that, when it does, the title to it is absolute and unconditioned. The modern industrial system took shape in an age when this theory of property was triumphant. The American Constitution and the French Declaration of the Rights of Man both treated property as one of the fundamental rights which Governments exist to protect. The English Revolution of 1688, undogmatic and reticent though it was, had in effect done the same. The great individualists from Locke to Turgot, Adam Smith and Bentham all repeated, in different language, a similar conception. Though what gave the Revolution its {53} diabolical character in the eyes of the English upper classes was its treatment of property, the dogma of the sanctity of private property was maintained as tenaciously by French Jacobins as by English Tories; and the theory that property is an absolute, which is held by many modern Conservatives, is identical, if only they knew it, with that not only of the men of 1789, but of the Convention itself. On the other hand, the attack has been almost as undiscriminating as the defense. "Private property" has been the central position against which the social movement of the last hundred years has directed its forces. The criticism of it has ranged from an imaginative communism in the most elementary and personal of necessaries, to prosaic and partially realized proposals to transfer certain kinds of property from private to public ownership, or to limit their exploitation by restrictions imposed by the State. But, however varying in emphasis and in method, the general note of what may conveniently be called the Socialist criticism of property is what the word Socialism itself implies. Its essence is the statement that the economic evils of society are primarily due to the unregulated operation, under modern conditions of industrial organization, of the institution of private property. The divergence of opinion is natural, since in most discussions of property the opposing theorists have usually been discussing different things. Property is the most ambiguous of categories. It covers a multitude of rights which have nothing in common except that they are exercised by persons and enforced by the State. {54} Apart from these formal characteristics, they vary indefinitely in economic character, in social effect, and in moral justification. They may be conditional like the grant of patent rights, or absolute like the ownership of ground rents, terminable like copyright, or permanent like a freehold, as comprehensive as sovereignty or as restricted as an easement, as intimate and personal as the ownership of clothes and books, or as remote and intangible as shares in a gold mine or rubber plantation. It is idle, therefore, to present a case for or against private property without specifying the particular forms of property to which reference is made, and the journalist who says that "private property is the foundation of civilization" agrees with Proudhon, who said it was theft, in this respect at least that, without further definition, the words of both are meaningless. Arguments which support or demolish certain kinds of property may have no application to others; considerations which are conclusive in one stage of economic organization may be almost irrelevant in the next. The course of wisdom is neither to attack private property in general nor to defend it in general; for things are not similar in quality, merely because they are identical in name. It is to discriminate between the various concrete embodiments of what, in itself, is, after all, little more than an abstraction. The origin and development of different kinds of proprietary rights is not material to this discussion. Whatever may have been the historical process by which they have been established and recognized, the {55} _rationale_ of private property traditional in England is that which sees in it the security that each man will reap where he has sown. "If I despair of enjoying the fruits of labor," said Bentham, repeating what were in all essentials the arguments of Locke, "I shall only live from day to day; I shall not undertake labors which will only benefit my enemies." Property, it is argued, is a moral right, and not merely a legal right, because it insures that the producer will not be deprived by violence of the result of his efforts. The period from which that doctrine was inherited differed from our own in three obvious, but significant, respects. Property in land and in the simple capital used in most industries was widely distributed. Before the rise of capitalist agriculture and capitalist industry, the ownership, or at any rate the secure and effective occupation, of land and tools by those who used them, was a condition precedent to effective work in the field or in the workshop. The forces which threatened property were the fiscal policy of Governments and in some countries, for example France, the decaying relics of feudalism. The interference both of the one and of the other involved the sacrifice of those who carried on useful labor to those who did not. To resist them was to protect not only property but industry, which was indissolubly connected with it. Too often, indeed, resistance was ineffective. Accustomed to the misery of the rural proprietor in France, Voltaire remarked with astonishment that in England the peasant may be rich, and "does not fear to increase the number of his beasts or to cover his roof with tiles." And {56} the English Parliamentarians and the French philosophers who made the inviolability of property rights the center of their political theory, when they defended those who owned, were incidentally, if sometimes unintentionally, defending those who labored. They were protecting the yeoman or the master craftsman or the merchant from seeing the fruits of his toil squandered by the hangers-on at St. James or the courtly parasites of Versailles. In such circumstances the doctrine which found the justification of private property in the fact that it enabled the industrious man to reap where he had sown, was not a paradox, but, as far as the mass of the population was concerned, almost a truism. Property was defended as the most sacred of rights. But it was defended as a right which was not only widely exercised, but which was indispensable to the performance of the active function of providing food and clothing. For it consisted predominantly of one of two types, land or tools which were used by the owner for the purpose of production, and personal possessions which were the necessities or amenities of civilized existence. The former had its _rationale_ in the fact that the land of the peasant or the tools of the craftsman were the condition of his rendering the economic services which society required; the latter because furniture and clothes are indispensable to a life of decency and comfort. The proprietary rights--and, of course, they were numerous--which had their source, not in work, but in predatory force, were protected from criticism by the wide distribution of some kind {57} of property among the mass of the population, and in England, at least, the cruder of them were gradually whittled down. When property in land and what simple capital existed were generally diffused among all classes of society, when, in most parts of England, the typical workman was not a laborer but a peasant or small master, who could point to the strips which he had plowed or the cloth which he had woven, when the greater part of the wealth passing at death consisted of land, household furniture and a stock in trade which was hardly distinguishable from it, the moral justification of the title to property was self-evident. It was obviously, what theorists said that it was, and plain men knew it to be, the labor spent in producing, acquiring and administering it. Such property was not a burden upon society, but a condition of its health and efficiency, and indeed, of its continued existence. To protect it was to maintain the organization through which public necessities were supplied. If, as in Tudor England, the peasant was evicted from his holding to make room for sheep, or crushed, as in eighteenth century France, by arbitrary taxation and seigneurial dues, land went out of cultivation and the whole community was short of food. If the tools of the carpenter or smith were seized, plows were not repaired or horses shod. Hence, before the rise of a commercial civilization, it was the mark of statesmanship, alike in the England of the Tudors and in the France of Henry IV, to cherish the small property-owner even to the point of offending the great. Popular sentiment idealized the {58} yeoman--"the Joseph of the country who keeps the poor from starving"--not merely because he owned property, but because he worked on it, denounced that "bringing of the livings of many into the hands of one," which capitalist societies regard with equanimity as an inevitable, and, apparently, a laudable result of economic development, cursed the usurer who took advantage of his neighbor's necessities to live without labor, was shocked by the callous indifference to public welfare shown by those who "not having before their eyes either God or the profit and advantage of the realm, have enclosed with hedges and dykes towns and hamlets," and was sufficiently powerful to compel Governments to intervene to prevent the laying of field to field, and the engrossing of looms--to set limits, in short, to the scale to which property might grow. When Bacon, who commended Henry VII for protecting the tenant right of the small farmer, and pleaded in the House of Commons for more drastic land legislation, wrote "Wealth is like muck. It is not good but if it be spread," he was expressing in an epigram what was the commonplace of every writer on politics from Fortescue at the end of the fifteenth century to Harrington in the middle of the seventeenth. The modern conservative, who is inclined to take _au pied de la lettre_ the vigorous argument in which Lord Hugh Cecil denounces the doctrine that the maintenance of proprietary rights ought to be contingent upon the use to which they are put, may be reminded that Lord Hugh's own theory is of a kind to make his ancestors turn in their graves. Of the two members of the {59} family who achieved distinction before the nineteenth century, the elder advised the Crown to prevent landlords evicting tenants, and actually proposed to fix a pecuniary maximum to the property which different classes might possess, while the younger attacked enclosing in Parliament, and carried legislation compelling landlords to build cottages, to let them with small holdings, and to plow up pasture. William and Robert Cecil were sagacious and responsible men, and their view that the protection of property should be accompanied by the enforcement of obligations upon its owners was shared by most of their contemporaries. The idea that the institution of private property involves the right of the owner to use it, or refrain from using it, in such a way as he may please, and that its principal significance is to supply him with an income, irrespective of any duties which he may discharge, would not have been understood by most public men of that age, and, if understood, would have been repudiated with indignation by the more reputable among them. They found the meaning of property in the public purposes to which it contributed, whether they were the production of food, as among the peasantry, or the management of public affairs, as among the gentry, and hesitated neither to maintain those kinds of property which met these obligations nor to repress those uses of it which appeared likely to conflict with them. Property was to be an aid to creative work, not an alternative to it. The patentee was secured protection for a new invention, in order to secure him the fruits of his own brain, but the monopolist who grew {60} fat on the industry of others was to be put down. The law of the village bound the peasant to use his land, not as he himself might find most profitable, but to grow the corn the village needed. Long after political changes had made direct interference impracticable, even the higher ranks of English landowners continued to discharge, however capriciously and tyrannically, duties which were vaguely felt to be the contribution which they made to the public service in virtue of their estates. When as in France, the obligations of ownership were repudiated almost as completely as they have been by the owner of to-day, nemesis came in an onslaught upon the position of a _noblesse_ which had retained its rights and abdicated its functions. Property reposed, in short, not merely upon convenience, or the appetite for gain, but on a moral principle. It was protected not only for the sake of those who owned, but for the sake of those who worked and of those for whom their work provided. It was protected, because, without security for property, wealth could not be produced or the business of society carried on. Whatever the future may contain, the past has shown no more excellent social order than that in which the mass of the people were the masters of the holdings which they plowed and of the tools with which they worked, and could boast, with the English freeholder, that "it is a quietness to a man's mind to live upon his own and to know his heir certain." With this conception of property and its practical expression in social institutions those who urge that society should be {61} organized on the basis of function have no quarrel. It is in agreement with their own doctrine, since it justifies property by reference to the services which it enables its owner to perform. All that they need ask is that it should be carried to its logical conclusion. For the argument has evidently more than one edge. If it justifies certain types of property, it condemns others; and in the conditions of modern industrial civilization, what it justifies is less than what it condemns. The truth is, indeed, that this theory of property and the institutions in which it is embodied have survived into an age in which the whole structure of society is radically different from that in which it was formulated, and which made it a valid argument, if not for all, at least for the most common and characteristic kinds of property. It is not merely that the ownership of any substantial share in the national wealth is concentrated to-day in the hands of a few hundred thousand families, and that at the end of an age which began with an affirmation of the rights of property, proprietary rights are, in fact, far from being widely distributed. Nor is it merely that what makes property insecure to-day is not the arbitrary taxation of unconstitutional monarchies or the privileges of an idle _noblesse_, but the insatiable expansion and aggregation of property itself, which menaces with absorption all property less than the greatest, the small master, the little shopkeeper, the country bank, and has turned the mass of mankind into a proletariat working under the agents and for the profit of those who own. The characteristic fact, which differentiates most {62} modern property from that of the pre-industrial age, and which turns against it the very reasoning by which formerly it was supported, is that in modern economic conditions ownership is not active, but passive, that to most of those who own property to-day it is not a means of work but an instrument for the acquisition of gain or the exercise of power, and that there is no guarantee that gain bears any relation to service, or power to responsibility. For property which can be regarded as a condition of the performance of function, like the tools of the craftsman, or the holding of the peasant, or the personal possessions which contribute to a life of health and efficiency, forms an insignificant proportion, as far as its value is concerned, of the property rights existing at present. In modern industrial societies the great mass of property consists, as the annual review of wealth passing at death reveals, neither of personal acquisitions such as household furniture, nor of the owner's stock-in-trade, but of rights of various kinds, such as royalties, ground-rents, and, above all, of course shares in industrial undertakings which yield an income irrespective of any personal service rendered by their owners. Ownership and use are normally divorced. The greater part of modern property has been attenuated to a pecuniary lien or bond on the product of industry which carries with it a right to payment, but which is normally valued precisely because it relieves the owner from any obligation to perform a positive or constructive function. Such property may be called passive property, or property for acquisition, for exploitation, or for power, {63} to distinguish it from the property which is actively used by its owner for the conduct of his profession or the upkeep of his household. To the lawyer the first is, of course, as fully property as the second. It is questionable, however, whether economists shall call it "Property" at all, and not rather, as Mr. Hobson has suggested, "Improperty," since it is not identical with the rights which secure the owner the produce of his toil, but is opposite of them. A classification of proprietary rights based upon this difference would be instructive. If they were arranged according to the closeness with which they approximate to one or other of these two extremes, it would be found that they were spread along a line stretching from property which is obviously the payment for, and condition of, personal services, to property which is merely a right to payment from the services rendered by others, in fact a private tax. The rough order which would emerge, if all details and qualification were omitted, might be something as follows:-- 1. Property in payments made for personal services. 2. Property in personal possessions necessary to health and comfort. 3. Property in land and tools used by their owners. 4. Property in copyright and patent rights owned by authors and inventors. 5. Property in pure interest, including much agricultural rent. 6. Property in profits of luck and good fortune: "quasi-rents." 7. Property in monopoly profits. {64} 8. Property in urban ground rents. 9. Property in royalties. The first four kinds of property obviously accompany, and in some sense condition, the performance of work. The last four obviously do not. Pure interest has some affinities with both. It represents a necessary economic cost, the equivalent of which must be born, whatever the legal arrangements under which property is held, and is thus unlike the property represented by profits (other than the equivalent of salaries and payment for necessary risk), urban ground-rents and royalties. It relieves the recipient from personal services, and thus resembles them. The crucial question for any society is, under which each of these two broad groups of categories the greater part (measured in value) of the proprietary rights which it maintains are at any given moment to be found. If they fall in the first group creative work will be encouraged and idleness will be depressed; if they fall in the second, the result will be the reverse. The facts vary widely from age to age and from country to country. Nor have they ever been fully revealed; for the lords of the jungle do not hunt by daylight. It is probable, at least, that in the England of 1550 to 1750, a larger proportion of the existing property consisted of land and tools used by their owners than either in contemporary France, where feudal dues absorbed a considerable proportion of the peasants' income, or than in the England of 1800 to 1850, where the new capitalist manufacturers made hundreds per cent. while manual workers were goaded by starvation into ineffectual {65} revolt. It is probable that in the nineteenth century, thanks to the Revolution, France and England changed places, and that in this respect not only Ireland but the British Dominions resemble the former rather than the latter. The transformation can be studied best of all in the United States, in parts of which the population of peasant proprietors and small masters of the early nineteenth century were replaced in three generations by a propertyless proletariat and a capitalist plutocracy. The abolition of the economic privileges of agrarian feudalism, which, under the name of equality, was the driving force of the French Revolution, and which has taken place, in one form or another, in all countries touched by its influence, has been largely counter-balanced since 1800 by the growth of the inequalities springing from Industrialism. In England the general effect of recent economic development has been to swell proprietary rights which entitle the owners to payment without work, and to diminish those which can properly be described as functional. The expansion of the former, and the process by which the simpler forms of property have been merged in them, are movements the significance of which it is hardly possible to over-estimate. There is, of course, a considerable body of property which is still of the older type. But though working landlords, and capitalists who manage their own businesses, are still in the aggregate a numerous body, the organization for which they stand is not that which is most representative of the modern economic world. The general tendency for the ownership and administration of {66} property to be separated, the general refinement of property into a claim on goods produced by an unknown worker, is as unmistakable as the growth of capitalist industry and urban civilization themselves. Villages are turned into towns and property in land changes from the holding worked by a farmer or the estate administered by a landlord into "rents," which are advertised and bought and sold like any other investment. Mines are opened and the rights of the landowner are converted into a tribute for every ton of coal which is brought to the surface. As joint-stock companies take the place of the individual enterprise which was typical of the earlier years of the factory system, organization passes from the employer who both owns and manages his business, into the hands of salaried officials, and again the mass of property-owners is swollen by the multiplication of _rentiers_ who put their wealth at the disposal of industry, but who have no other connection with it. The change is taking place in our day most conspicuously, perhaps, through the displacement in retail trade of the small shopkeeper by the multiple store, and the substitution in manufacturing industry of combines and amalgamations for separate businesses conducted by competing employers. And, of course, it is not only by economic development that such claims are created. "Out of the eater came forth meat, and out of the strong came forth sweetness." It is probable that war, which in barbarous ages used to be blamed as destructive of property, has recently created more titles to property than almost all other causes put together. Infinitely diverse as are these proprietary rights, they {67} have the common characteristic of being so entirely separated from the actual objects over which they are exercised, so rarified and generalized, as to be analogous almost to a form of currency rather than to the property which is so closely united to its owner as to seem a part of him. Their isolation from the rough environment of economic life, where the material objects of which they are the symbol are shaped and handled, is their charm. It is also their danger. The hold which a class has upon the future depends on the function which it performs. What nature demands is work: few working aristocracies, however tyrannical, have fallen; few functionless aristocracies have survived. In society, as in the world of organic life, atrophy is but one stage removed from death. In proportion as the landowner becomes a mere _rentier_ and industry is conducted, not by the rude energy of the competing employers who dominated its infancy, but by the salaried servants of shareholders, the argument for private property which reposes on the impossibility of finding any organization to supersede them loses its application, for they are already superseded. Whatever may be the justification of these types of property, it cannot be that which was given for the property of the peasant or the craftsman. It cannot be that they are necessary in order to secure to each man the fruits of his own labor. For if a legal right which gives $200,000 a year to a mineral owner in the North of England and to a ground landlord in London "secures the fruits of labor" at all, the fruits are the proprietor's and the labor that of some one else. Property {68} has no more insidious enemies than those well-meaning anarchists who, by defending all forms of it as equally valid, involve the institution in the discredit attaching to its extravagances. In reality, whatever conclusion may be drawn from the fact, the greater part of modern property, whether, like mineral rights and urban ground-rents, it is merely a form of private taxation which the law allows certain persons to levy on the industry of others, or whether, like property in capital, it consists of rights to payment for instruments which the capitalist cannot himself use but puts at the disposal of those who can, has as its essential feature that it confers upon its owners income unaccompanied by personal service. In this respect the ownership of land and the ownership of capital are normally similar, though from other points of view their differences are important. To the economist rent and interest are distinguished by the fact that the latter, though it is often accompanied by surplus elements which are merged with it in dividends, is the price of an instrument of production which would not be forthcoming for industry if the price were not paid, while the former is a differential surplus which does not affect the supply. To the business community and the solicitor land and capital are equally investments, between which, since they possess the common characteristic of yielding income without labor, it is inequitable to discriminate; and though their significance as economic categories may be different, their effect as social institutions is the same. It is to separate property from creative ability, and to divide society into two classes, of which one has its {69} primary interest in passive ownership, while the other is mainly dependent upon active work. Hence the real analogy to many kinds of modern property is not the simple property of the small land-owner or the craftsman, still less the household goods and dear domestic amenities, which is what the word suggests to the guileless minds of clerks and shopkeepers, and which stampede them into displaying the ferocity of terrified sheep when the cry is raised that "Property" is threatened. It is the feudal dues which robbed the French peasant of part of his produce till the Revolution abolished them. How do royalties differ from _quintaines_ and _lods et ventes_? They are similar in their origin and similar in being a tax levied on each increment of wealth which labor produces. How do urban ground-rents differ from the payments which were made to English sinecurists before the Reform Bill of 1832? They are equally tribute paid by those who work to those who do not. If the monopoly profits of the owner of _banalités_, whose tenant must grind corn at his mill and make wine at his press, were an intolerable oppression, what is the sanctity attaching to the monopoly profits of the capitalists, who, as the Report of the Government Committee on trusts tells us, "in soap, tobacco, wallpaper, salt, cement and in the textile trades ... are in a position to control output and prices" or, in other words, can compel the consumer to buy from them, at the figure they fix, on pain of not buying at all? All these rights--royalties, ground-rents, monopoly profits--are "Property." The criticism most fatal to them is not that of Socialists. It is contained in the {70} arguments by which property is usually defended. For if the meaning of the institution is to encourage industry by securing that the worker shall receive the produce of his toil, then precisely in proportion as it is important to preserve the property which a man has in the results of his own efforts, is it important to abolish that which he has in the results of the efforts of some one else. The considerations which justify ownership as a function are those which condemn it as a tax. Property is not theft, but a good deal of theft becomes property. The owner of royalties who, when asked why he should be paid £50,000 a year from minerals which he has neither discovered nor developed nor worked but only owned, replies "But it's Property!" may feel all the awe which his language suggests. But in reality he is behaving like the snake which sinks into its background by pretending that it is the dead branch of a tree, or the lunatic who tried to catch rabbits by sitting behind a hedge and making a noise like a turnip. He is practising protective--and sometimes aggressive--mimicry. His sentiments about property are those of the simple toiler who fears that what he has sown another may reap. His claim is to be allowed to continue to reap what another has sown. It is sometimes suggested that the less attractive characteristics of our industrial civilization, its combination of luxury and squalor, its class divisions and class warfare, are accidental maladjustments which are not rooted in the center of its being, but are excrescences which economic progress itself may in time be expected to correct. That agreeable optimism will not survive an {71} examination of the operation of the institution of private property in land and capital in industrialized communities. In countries where land is widely distributed, in France or in Ireland, its effect may be to produce a general diffusion of wealth among a rural middle class who at once work and own. In countries where the development of industrial organization has separated the ownership of property and the performance of work, the normal effect of private property is to transfer to functionless owners the surplus arising from the more fertile sites, the better machinery, the more elaborate organization. No clearer exemplifications of this "law of rent" has been given than the figures supplied to the Coal Industry Commission by Sir Arthur Lowes Dickenson, which showed that in a given quarter the costs per ton of producing coal varied from $3.12 to $12 per ton, and the profits from nil to $4.12. The distribution in dividends to shareholders of the surplus accruing from the working of richer and more accessible seams, from special opportunities and access to markets, from superior machinery, management and organization, involves the establishment of Privilege as a national institution, as much as the most arbitrary exactions of a feudal _seigneur_. It is the foundation of an inequality which is not accidental or temporary, but necessary and permanent. And on this inequality is erected the whole apparatus of class institutions, which make not only the income, but the housing, education, health and manners, indeed the very physical appearance of different classes of Englishmen almost as different from each other as though the minority were {72} alien settlers established amid the rude civilization of a race of impoverished aborigines. So the justification of private property traditional in England, which saw in it the security that each man would enjoy the fruits of his own labor, though largely applicable to the age in which it was formulated, has undergone the fate of most political theories. It has been refuted not by the doctrines of rival philosophers, but by the prosaic course of economic development. As far as the mass of mankind are concerned, the need which private property other than personal possessions does still often satisfy, though imperfectly and precariously, is the need for security. To the small investors, who are the majority of property-owners, though owning only an insignificant fraction of the property in existence, its meaning is simple. It is not wealth or power, or even leisure from work. It is safety. They work hard. They save a little money for old age, or for sickness, or for their children. They invest it, and the interest stands between them and all that they dread most. Their savings are of convenience to industry, the income from them is convenient to themselves. "Why," they ask, "should we not reap in old age the advantage of energy and thrift in youth?" And this hunger for security is so imperious that those who suffer most from the abuses of property, as well as those who, if they could profit by them, would be least inclined to do so, will tolerate and even defend them, for fear lest the knife which trims dead matter should cut into the quick. They have seen too many men drown to be {73} critical of dry land, though it be an inhospitable rock. They are haunted by the nightmare of the future, and, if a burglar broke it, would welcome a burglar. This need for security is fundamental, and almost the gravest indictment of our civilization is that the mass of mankind are without it. Property is one way of organizing it. It is quite comprehensible therefore, that the instrument should be confused with the end, and that any proposal to modify it should create dismay. In the past, human beings, roads, bridges and ferries, civil, judicial and clerical offices, and commissions in the army have all been private property. Whenever it was proposed to abolish the rights exercised over them, it was protested that their removal would involve the destruction of an institution in which thrifty men had invested their savings, and on which they depended for protection amid the chances of life and for comfort in old age. In fact, however, property is not the only method of assuring the future, nor, when it is the way selected, is security dependent upon the maintenance of all the rights which are at present normally involved in ownership. In so far as its psychological foundation is the necessity for securing an income which is stable and certain, which is forthcoming when its recipient cannot work, and which can be used to provide for those who cannot provide for themselves, what is really demanded is not the command over the fluctuating proceeds of some particular undertaking, which accompanies the ownership of capital, but the security which is offered by an annuity. Property is the instrument, security is the object, and when some alternative way is forthcoming {74} of providing the latter, it does not appear in practice that any loss of confidence, or freedom or independence is caused by the absence of the former. Hence not only the manual workers, who since the rise of capitalism, have rarely in England been able to accumulate property sufficient to act as a guarantee of income when their period of active earning is past, but also the middle and professional classes, increasingly seek security to-day, not in investment, but in insurance against sickness and death, in the purchase of annuities, or in what is in effect the same thing, the accumulation of part of their salary towards a pension which is paid when their salary ceases. The professional man may buy shares in the hope of making a profit on the transaction. But when what he desires to buy is security, the form which his investment takes is usually one kind or another of insurance. The teacher, or nurse, or government servant looks forward to a pension. Women, who fifty years ago would have been regarded as dependent almost as completely as if femininity were an incurable disease with which they had been born, and whose fathers, unless rich men, would have been tormented with anxiety for fear lest they should not save sufficient to provide for them, now receive an education, support themselves in professions, and save in the same way. It is still only in comparatively few cases that this type of provision is made; almost all wage-earners outside government employment, and many in it, as well as large numbers of professional men, have nothing to fall back upon in sickness or old age. But that does not alter the fact {75} that, when it is made, it meets the need for security, which, apart, of course, from personal possessions and household furniture, is the principal meaning of property to by far the largest element in the population, and that it meets it more completely and certainly than property itself. Nor, indeed, even when property is the instrument used to provide for the future, is such provision dependent upon the maintenance in its entirety of the whole body of rights which accompany ownership to-day. Property is not simple but complex. That of a man who has invested his savings as an ordinary shareholder comprises at least three rights, the right to interest, the right to profits, the right to control. In so far as what is desired is the guarantee for the maintenance of a stable income, not the acquisition of additional wealth without labor--in so far as his motive is not gain but security--the need is met by interest on capital. It has no necessary connection either with the right to residuary profits or the right to control the management of the undertaking from which the profits are derived, both of which are vested to-day in the shareholder. If all that were desired were to use property as an instrument for purchasing security, the obvious course--from the point of view of the investor desiring to insure his future the safest course--would be to assimilate his position as far as possible to that of a debenture holder or mortgagee, who obtains the stable income which is his motive for investment, but who neither incurs the risks nor receives the profits of the speculator. To insist that the elaborate apparatus of proprietary rights which {76} distributes dividends of thirty per cent to the shareholders in Coats, and several thousands a year to the owner of mineral royalties and ground-rents, and then allows them to transmit the bulk of gains which they have not earned to descendants who in their turn will thus be relieved from the necessity of earning, must be maintained for the sake of the widow and the orphan, the vast majority of whom have neither and would gladly part with them all for a safe annuity if they had, is, to say the least of it, extravagantly _mal-à-propos_. It is like pitching a man into the water because he expresses a wish for a bath, or presenting a tiger cub to a householder who is plagued with mice, on the ground that tigers and cats both belong to the genus _felis_. The tiger hunts for itself not for its masters, and when game is scarce will hunt them. The classes who own little or no property may reverence it because it is security. But the classes who own much prize it for quite different reasons, and laugh in their sleeve at the innocence which supposes that anything as vulgar as the savings of the _petite bourgeoisie_ have, except at elections, any interest for them. They prize it because it is the order which quarters them on the community and which provides for the maintenance of a leisure class at the public expense. "Possession," said the Egoist, "without obligation to the object possessed, approaches felicity." Functionless property appears natural to those who believe that society should be organized for the acquisition of private wealth, and attacks upon it perverse or malicious, because the question which they ask of any institution is, "What does it yield?" And such property yields much {77} to those who own it. Those, however, who hold that social unity and effective work are possible only if society is organized and wealth distributed on the basis of function, will ask of an institution, not, "What dividends does it pay?" but "What service does it perform?" To them the fact that much property yields income irrespective of any service which is performed or obligation which is recognized by its owners will appear not a quality but a vice. They will see in the social confusion which it produces, payments disproportionate to service here, and payments without any service at all there, and dissatisfaction everywhere, a convincing confirmation of their argument that to build on a foundation of rights and of rights alone is to build on a quicksand. From the portentous exaggeration into an absolute of what once was, and still might be, a sane and social institution most other social evils follow the power of those who do not work over those who do, the alternate subservience and rebelliousness of those who work towards those who do not, the starving of science and thought and creative effort for fear that expenditure upon them should impinge on the comfort of the sluggard and the _fainéant_, and the arrangement of society in most of its subsidiary activities to suit the convenience not of those who work usefully but of those who spend gaily, so that the most hideous, desolate and parsimonious places in the country are those in which the greatest wealth is produced, the Clyde valley, or the cotton towns of Lancashire, or the mining villages of Scotland and Wales, and the gayest and most luxurious {78} those in which it is consumed. From the point of view of social health and economic efficiency, society should obtain its material equipment at the cheapest price possible, and after providing for depreciation and expansion should distribute the whole product to its working members and their dependents. What happens at present, however, is that its workers are hired at the cheapest price which the market (as modified by organization) allows, and that the surplus, somewhat diminished by taxation, is distributed to the owners of property. Profits may vary in a given year from a loss to 100 per cent. But wages are fixed at a level which will enable the marginal firm to continue producing one year with another; and the surplus, even when due partly to efficient management, goes neither to managers nor manual workers, but to shareholders. The meaning of the process becomes startlingly apparent when, as in Lancashire to-day, large blocks of capital change hands at a period of abnormal activity. The existing shareholders receive the equivalent of the capitalized expectation of future profits. The workers, as workers, do not participate in the immense increment in value; and when, in the future, they demand an advance in wages, they will be met by the answer that profits, which before the transaction would have been reckoned large, yield shareholders after it only a low rate of interest on their investment. The truth is that whereas in earlier ages the protection of property was normally the protection of work, the relationship between them has come in the course of the economic development of the last two centuries to {79} be very nearly reversed. The two elements which compose civilization are active effort and passive property, the labor of human things and the tools which human beings use. Of these two elements those who supply the first maintain and improve it, those who own the second normally dictate its character, its development and its administration. Hence, though politically free, the mass of mankind live in effect under rules imposed to protect the interests of the small section among them whose primary concern is ownership. From this subordination of creative activity to passive property, the worker who depends upon his brains, the organizer, inventor, teacher or doctor suffers almost as much embarrassment as the craftsman. The real economic cleavage is not, as is often said, between employers and employed, but between all who do constructive work, from scientist to laborer, on the one hand, and all whose main interest is the preservation of existing proprietary rights upon the other, irrespective of whether they contribute to constructive work or not. If, therefore, under the modern conditions which have concentrated any substantial share of property in the hands of a small minority of the population, the world is to be governed for the advantages of those who own, it is only incidentally and by accident that the results will be agreeable to those who work. In practice there is a constant collision between them. Turned into another channel, half the wealth distributed in dividends to functionless shareholders, could secure every child a good education up to 18, could re-endow English Universities, and (since more efficient production is {80} important) could equip English industries for more efficient production. Half the ingenuity now applied to the protection of property could have made most industrial diseases as rare as smallpox, and most English cities into places of health and even of beauty. What stands in the way is the doctrine that the rights of property are absolute, irrespective of any social function which its owners may perform. So the laws which are most stringently enforced are still the laws which protect property, though the protection of property is no longer likely to be equivalent to the protection of work, and the interests which govern industry and predominate in public affairs are proprietary interests. A mill-owner may poison or mangle a generation of operatives; but his brother magistrates will let him off with a caution or a nominal fine to poison and mangle the next. For he is an owner of property. A landowner may draw rents from slums in which young children die at the rate of 200 per 1000; but he will be none the less welcome in polite society. For property has no obligations and therefore can do no wrong. Urban land may be held from the market on the outskirts of cities in which human beings are living three to a room, and rural land may be used for sport when villagers are leaving it to overcrowd them still more. No public authority intervenes, for both are property. To those who believe that institutions which repudiate all moral significance must sooner or later collapse, a society which confuses the protection of property with the preservation of its functionless perversions will appear as precarious as that which has left the memorials of its {81} tasteless frivolity and more tasteless ostentation in the gardens of Versailles. Do men love peace? They will see the greatest enemy of social unity in rights which involve no obligation to co-operate for the service of society. Do they value equality? Property rights which dispense their owners from the common human necessity of labor make inequality an institution permeating every corner of society, from the distribution of material wealth to the training of intellect itself. Do they desire greater industrial efficiency? There is no more fatal obstacle to efficiency than the revelation that idleness has the same privileges as industry, and that for every additional blow with the pick or hammer an additional profit will be distributed among shareholders who wield neither. Indeed, functionless property is the greatest enemy of legitimate property itself. It is the parasite which kills the organism that produced it. Bad money drives out good, and, as the history of the last two hundred years shows, when property for acquisition or power and property for service or for use jostle each other freely in the market, without restrictions such as some legal systems have imposed on alienation and inheritance, the latter tends normally to be absorbed by the former, because it has less resisting power. Thus functionless property grows, and as it grows it undermines the creative energy which produced property and which in earlier ages it protected. It cannot unite men, for what unites them is the bond of service to a common purpose, and that bond it repudiates, since its very {82} essence is the maintenance of rights irrespective of service. It cannot create; it can only spend, so that the number of scientists, inventors, artists or men of letters who have sprung in the course of the last century from hereditary riches can be numbered on one hand. It values neither culture nor beauty, but only the power which belongs to wealth and the ostentation which is the symbol of it. So those who dread these qualities, energy and thought and the creative spirit--and they are many--will not discriminate, as we have tried to discriminate, between different types and kinds of property, in order that they may preserve those which are legitimate and abolish those which are not. They will endeavor to preserve all private property, even in its most degenerate forms. And those who value those things will try to promote them by relieving property of its perversions, and thus enabling it to return to its true nature. They will not desire to establish any visionary communism, for they will realize that the free disposal of a sufficiency of personal possessions is the condition of a healthy and self-respecting life, and will seek to distribute more widely the property rights which make them to-day the privilege of a minority. But they will refuse to submit to the naïve philosophy which would treat all proprietary rights as equal in sanctity merely because they are identical in name. They will distinguish sharply between property which is used by its owner for the conduct of his profession or the upkeep of his household, and property which is merely a claim on wealth produced by another's labor. They will insist that {83} property is moral and healthy only when it is used as a condition not of idleness but of activity, and when it involves the discharge of definite personal obligations. They will endeavor, in short, to base it upon the principle of function. {84} VI THE FUNCTIONAL SOCIETY The application to property and industry of the principle of function is compatible with several different types of social organization, and is as unlikely as more important revelations to be the secret of those who cry "Lo here!" and "Lo there!" The essential thing is that men should fix their minds upon the idea of purpose, and give that idea pre-eminence over all subsidiary issues. If, as is patent, the purpose of industry is to provide the material foundation of a good social life, then any measure which makes that provision more effective, so long as it does not conflict with some still more important purpose, is wise, and any institution which thwarts or encumbers it is foolish. It is foolish, for example, to cripple education, as it is crippled in England for the sake of industry; for one of the uses of industry is to provide the wealth which may make possible better education. It is foolish to maintain property rights for which no service is performed, for payment without service is waste; and if it is true, as statisticians affirm, that, even were income equally divided, income per head would be small, then it is all the more foolish, for sailors in a boat have no room for first-class passengers, and it is all the more important that none of the small national income should be misapplied. It is foolish to leave the direction of industry {85} in the hands of servants of private property-owners who themselves know nothing about it but its balance sheets, because this is to divert it from the performance of service to the acquisition of gain, and to subordinate those who do creative work to those who do not. The course of wisdom in the affairs of industry is, after all, what it is in any other department of organized life. It is to consider the end for which economic activity is carried on and then to adapt economic organization to it. It is to pay for service and for service only, and when capital is hired to make sure that it is hired at the cheapest possible price. It is to place the responsibility for organizing industry on the shoulders of those who work and use, not of those who own, because production is the business of the producer and the proper person to see that he discharges his business is the consumer for whom, and not for the owner of property, it ought to be carried on. Above all it is to insist that all industries shall be conducted in complete publicity as to costs and profits, because publicity ought to be the antiseptic both of economic and political abuses, and no man can have confidence in his neighbor unless both work in the light. As far as property is concerned, such a policy would possess two edges. On the one hand, it would aim at abolishing those forms of property in which ownership is divorced from obligations. On the other hand, it would seek to encourage those forms of economic organization under which the worker, whether owner or not, is free to carry on his work without sharing its control or its profits with the mere _rentier_. Thus, if in certain {86} spheres it involved an extension of public ownership, it would in others foster an extension of private property. For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land or capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest all property with some kind of mysterious sanctity. It all depends what sort of property it is and for what purpose it is used. Provided that the State retains its eminent domain, and controls alienation, as it does under the Homestead laws of the Dominions, with sufficient stringency to prevent the creation of a class of functionless property-owners, there is no inconsistency between encouraging simultaneously a multiplication of peasant farmers and small masters who own their own farms or shops, and the abolition of private ownership in those industries, unfortunately to-day the most conspicuous, in which the private owner is an absentee shareholder. Indeed, the second reform would help the first. In so far as the community tolerates functionless property it makes difficult, if not impossible, the restoration of the small master in agriculture or in industry, who cannot easily hold his own in a world dominated by great estates or capitalist finance. In so far as it abolishes those kinds of property which are merely parasitic, it facilitates the restoration of the small property-owner in those kinds of industry for which small ownership is adapted. A socialistic policy towards the former is not {87} antagonistic to the "distributive state," but, in modern economic conditions, a necessary preliminary to it, and if by "Property" is meant the personal possessions which the word suggests to nine-tenths of the population, the object of socialists is not to undermine property but to protect and increase it. The boundary between large scale and small scale production will always be uncertain and fluctuating, depending, as it does, on technical conditions which cannot be foreseen: a cheapening of electrical power, for example, might result in the decentralization of manufactures, as steam resulted in their concentration. The fundamental issue, however, is not between different scales of ownership, but between ownership of different kinds, not between the large farmer or master and the small, but between property which is used for work and property which yields income without it. The Irish landlord was abolished, not because he owned a large scale, but because he was an owner and nothing more; if, and when English land-ownership has been equally attenuated, as in towns it already has been, it will deserve to meet the same fate. Once the issue of the character of ownership has been settled, the question of the size of the economic unit can be left to settle itself. The first step, then, towards the organization of economic life for the performance of function is to abolish those types of private property in return for which no function is performed. The man who lives by owning without working is necessarily supported by the industry of some one else, and is, therefore, too expensive a luxury to be encouraged. Though he deserves to be {88} treated with the leniency which ought to be, and usually is not, shown to those who have been brought up from infancy to any other disreputable trade, indulgence to individuals must not condone the institution of which both they and their neighbors are the victims. Judged by this standard, certain kinds of property are obviously anti-social. The rights in virtue of which the owner of the surface is entitled to levy a tax, called a royalty, on every ton of coal which the miner brings to the surface, to levy another tax, called a way-leave, on every ton of coal transported under the surface of his land though its amenity and value may be quite unaffected, to distort, if he pleases, the development of a whole district by refusing access to the minerals except upon his own terms, and to cause some 3,500 to 4,000 million tons to be wasted in barriers between different properties, while he in the meantime contributes to a chorus of lamentation over the wickedness of the miners in not producing more tons of coal for the public and incidentally more private taxes for himself--all this adds an agreeable touch of humor to the drab quality of our industrial civilization for which mineral owners deserve perhaps some recognition, though not the $400,000 odd a year which is paid to each of the four leading players, or the $24,000,000 a year which is distributed among the crowd. The alchemy by which a gentleman who has never seen a coal mine distills the contents of that place of gloom into elegant chambers in London and a place in the country is not the monopoly of royalty owners. A similar feat of prestidigitation is performed by the {89} owner of urban ground-rents. In rural districts some landlords, perhaps many landlords, are partners in the hazardous and difficult business of agriculture, and, though they may often exercise a power which is socially excessive, the position which they hold and the income which they receive are, in part at last, a return for the functions which they perform. The ownership of urban land has been refined till of that crude ore only the pure gold is left. It is the perfect sinecure, for the only function it involves is that of collecting its profits, and in an age when the struggle of Liberalism against sinecures was still sufficiently recent to stir some chords of memory, the last and greatest of liberal thinkers drew the obvious deduction. "The reasons which form the justification ... of property in land," wrote Mill in 1848, "are valid only in so far as the proprietor of land is its improver.... In no sound theory of private property was it ever contemplated that the proprietor of land should be merely a sinecurist quartered on it." Urban ground-rents and royalties are, in fact, as the Prime Minister in his unregenerate days suggested, a tax which some persons are permitted by the law to levy upon the industry of others. They differ from public taxation only in that their amount increases in proportion not to the nation's need of revenue but to its need of the coal and space on which they are levied, that their growth inures to private gain not to public benefit, and that if the proceeds are wasted on frivolous expenditure no one has any right to complain, because the arrangement by which Lord Smith spends wealth produced by Mr. Brown on objects which do no good to either is part {90} of the system which, under the name of private property, Mr. Brown as well as Lord Smith have learned to regard as essential to the higher welfare of mankind. But if we accept the principle of function we shall ask what is the _purpose_ of this arrangement, and for what end the inhabitants of, for example, London pay $64,000,000 a year to their ground landlords. And if we find that it is for no purpose and no end, but that these things are like the horseshoes and nails which the City of London presents to the Crown on account of land in the Parish of St. Clement Danes, then we shall not deal harshly with a quaint historical survival, but neither shall we allow it to distract us from the business of the present, as though there had been history but there were not history any longer. We shall close these channels through which wealth leaks away by resuming the ownership of minerals and of urban land, as some communities in the British Dominions and on the Continent of Europe have resumed it already. We shall secure that such large accumulations as remain change hands at least once in every generation, by increasing our taxes on inheritance till what passes to the heir is little more than personal possessions, not the right to a tribute from industry which, though qualified by death-duties, is what the son of a rich man inherits to-day. We shall treat mineral owners and land-owners, in short, as Plato would have treated the poets, whom in their ability to make something out of nothing and to bewitch mankind with words they a little resemble, and crown them with flowers and usher them politely out of the State. {91} VII INDUSTRY AS A PROFESSION Rights without functions are like the shades in Homer which drank blood but scattered trembling at the voice of a man. To extinguish royalties and urban ground-rents is merely to explode a superstition. It needs as little--and as much--resolution as to put one's hand through any other ghost. In all industries except the diminishing number in which the capitalist is himself the manager, property in capital is almost equally passive. Almost, but not quite. For, though the majority of its owners do not themselves exercise any positive function, they appoint those who do. It is true, of course, that the question of how capital is to be owned is distinct from the question of how it is to be administered, and that the former can be settled without prejudice to the latter. To infer, because shareholders own capital which is indispensable to industry, that therefore industry is dependent upon the maintenance of capital in the hands of shareholders, to write, with some economists, as though, if private property in capital were further attenuated or abolished altogether, the constructive energy of the managers who may own capital or may not, but rarely, in the more important industries, own more than a small fraction of it, must necessarily be impaired, is to be guilty of a robust _non-sequitur_ and to ignore the most obvious facts of {92} contemporary industry. The less the mere capitalist talks about the necessity for the consumer of an efficient organization of industry, the better; for, whatever the future of industry may be, an efficient organization is likely to have no room for _him_. But though shareholders do not govern, they reign, at least to the extent of saying once a year "_le roy le veult_." If their rights are pared down or extinguished, the necessity for some organ to exercise them will still remain. And the question of the ownership of capital has this much in common with the question of industrial organization, that the problem of the constitution under which industry is to be conducted is common to both. That constitution must be sought by considering how industry can be organized to express most perfectly the principle of purpose. The application to industry of the principle of purpose is simple, however difficult it may be to give effect to it. It is to turn it into a Profession. A Profession may be defined most simply as a trade which is organized, incompletely, no doubt, but genuinely, for the performance of function. It is not simply a collection of individuals who get a living for themselves by the same kind of work. Nor is it merely a group which is organized exclusively for the economic protection of its members, though that is normally among its purposes. It is a body of men who carry on their work in accordance with rules designed to enforce certain standards both for the better protection of its members and for the better service of the public. The standards which it maintains may be high or low: all professions have some rules which protect the interests {93} of the community and others which are an imposition on it. Its essence is that it assumes certain responsibilities for the competence of its members or the quality of its wares, and that it deliberately prohibits certain kinds of conduct on the ground that, though they may be profitable to the individual, they are calculated to bring into disrepute the organization to which he belongs. While some of its rules are trade union regulations designed primarily to prevent the economic standards of the profession being lowered by unscrupulous competition, others have as their main object to secure that no member of the profession shall have any but a purely professional interest in his work, by excluding the incentive of speculative profit. The conception implied in the words "unprofessional conduct" is, therefore, the exact opposite of the theory and practice which assume that the service of the public is best secured by the unrestricted pursuit on the part of rival traders of their pecuniary self-interest, within such limits as the law allows. It is significant that at the time when the professional classes had deified free competition as the arbiter of commerce and industry, they did not dream of applying it to the occupations in which they themselves were primarily interested, but maintained, and indeed, elaborated machinery through which a professional conscience might find expression. The rules themselves may sometimes appear to the layman arbitrary and ill-conceived. But their object is clear. It is to impose on the profession itself the obligation of maintaining the quality of the service, and to prevent its common purpose being frustrated through {94} the undue influence of the motive of pecuniary gain upon the necessities or cupidity of the individual. The difference between industry as it exists to-day and a profession is, then, simple and unmistakable. The essence of the former is that its only criterion is the financial return which it offers to its shareholders. The essence of the latter, is that, though men enter it for the sake of livelihood, the measure of their success is the service which they perform, not the gains which they amass. They may, as in the case of a successful doctor, grow rich; but the meaning of their profession, both for themselves and for the public, is not that they make money but that they make health, or safety, or knowledge, or good government or good law. They depend on it for their income, but they do not consider that any conduct which increases their income is on that account good. And while a boot-manufacturer who retires with half a million is counted to have achieved success, whether the boots which he made were of leather or brown paper, a civil servant who did the same would be impeached. So, if they are doctors, they recognize that there are certain kinds of conduct which cannot be practised, however large the fee offered for them, because they are unprofessional; if scholars and teachers, that it is wrong to make money by deliberately deceiving the public, as is done by makers of patent medicines, however much the public may clamor to be deceived; if judges or public servants, that they must not increase their incomes by selling justice for money; if soldiers, that the service comes first, and their private inclinations, {95} even the reasonable preference of life to death, second. Every country has its traitors, every army its deserters, and every profession its blacklegs. To idealize the professional spirit would be very absurd; it has its sordid side, and, if it is to be fostered in industry, safeguards will be needed to check its excesses. But there is all the difference between maintaining a standard which is occasionally abandoned, and affirming as the central truth of existence that there is no standard to maintain. The meaning of a profession is that it makes the traitors the exception, not as they are in industry, the rule. It makes them the exception by upholding as the criterion of success the end for which the profession, whatever it may be, is carried on, and subordinating the inclination, appetites and ambitions of individuals to the rules of an organization which has as its object to promote the performance of function. There is no sharp line between the professions and the industries. A hundred years ago the trade of teaching, which to-day is on the whole an honorable public service, was rather a vulgar speculation upon public credulity; if Mr. Squeers was a caricature, the Oxford of Gibbon and Adam Smith was a solid port-fed reality; no local authority could have performed one-tenth of the duties which are carried out by a modern municipal corporation every day, because there was no body of public servants to perform them, and such as there were took bribes. It is conceivable, at least, that some branches of medicine might have developed on the lines of industrial capitalism, with hospitals as factories, {96} doctors hired at competitive wages as their "hands," large dividends paid to shareholders by catering for the rich, and the poor, who do not offer a profitable market, supplied with an inferior service or with no service at all. The idea that there is some mysterious difference between making munitions of war and firing them, between building schools and teaching in them when built, between providing food and providing health, which makes it at once inevitable and laudable that the former should be carried on with a single eye to pecuniary gain, while the latter are conducted by professional men who expect to be paid for service but who neither watch for windfalls nor raise their fees merely because there are more sick to be cured, more children to be taught, or more enemies to be resisted, is an illusion only less astonishing than that the leaders of industry should welcome the insult as an honor and wear their humiliation as a kind of halo. The work of making boots or building a house is in itself no more degrading than that of curing the sick or teaching the ignorant. It is as necessary and therefore as honorable. It should be at least equally bound by rules which have as their object to maintain the standards of professional service. It should be at least equally free from the vulgar subordination of moral standards to financial interests. If industry is to be organized as a profession, two changes are requisite, one negative and one positive. The first, is that it should cease to be conducted by the agents of property-owners for the advantage of property-owners, {97} and should be carried on, instead, for the service of the public. The second, is that, subject to rigorous public supervision, the responsibility for the maintenance of the service should rest upon the shoulders of those, from organizer and scientist to laborer, by whom, in effect, the work is conducted. The first change is necessary because the conduct of industry for the public advantage is impossible as long as the ultimate authority over its management is vested in those whose only connection with it, and interest in it, is the pursuit of gain. As industry is at present organized, its profits and its control belong by law to that element in it which has least to do with its success. Under the joint-stock organization which has become normal in all the more important industries except agriculture, it is managed by the salaried agents of those by whom the property is owned. It is successful if it returns large sums to shareholders, and unsuccessful if it does not. If an opportunity presents itself to increase dividends by practices which deteriorate the service or degrade the workers, the officials who administer industry act strictly within their duty if they seize it, for they are the servants of their employers, and their obligation to their employers is to provide dividends not to provide service. But the owners of the property are, _qua_ property-owners functionless, not in the sense, of course, that the tools of which they are proprietors are not useful, but in the sense that since work and ownership are increasingly separated, the efficient use of the tools is not dependent on the maintenance of the proprietary rights exercised over them. {98} Of course there are many managing directors who both own capital and administer the business. But it is none the less the case that most shareholders in most large industries are normally shareholders and nothing more. Nor is their economic interest identical, as is sometimes assumed, with that of the general public. A society is rich when material goods, including capital, are cheap, and human beings dear: indeed the word "riches" has no other meaning. The interest of those who own the property used in industry, though not, of course, of the managers who administer industry and who themselves are servants, and often very ill-paid servants at that, is that their capital should be dear and human beings cheap. Hence, if the industry is such as to yield a considerable return, or if one unit in the industry, owing to some special advantage, produces more cheaply than its neighbors, while selling at the same price, or if a revival of trade raises prices, or if supplies are controlled by one of the combines which are now the rule in many of the more important industries, the resulting surplus normally passes neither to the managers, nor to the other employees, nor to the public, but to the shareholders. Such an arrangement is preposterous in the literal sense of being the reverse of that which would be established by considerations of equity and common sense, and gives rise (among other things) to what is called "the struggle between labor and capital." The phrase is apposite, since it is as absurd as the relations of which it is intended to be a description. To deplore "ill-feeling" or to advocate {99} "harmony" between "labor and capital" is as rational as to lament the bitterness between carpenters and hammers or to promote a mission for restoring amity between mankind and its boots. The only significance of these _clichés_ is that their repetition tends to muffle their inanity, even to the point of persuading sensible men that capital "employs" labor, much as our pagan ancestors imagined that the other pieces of wood and iron, which they deified in their day, sent their crops and won their battles. When men have gone so far as to talk as though their idols have come to life, it is time that some one broke them. Labor consists of persons, capital of things. The only use of things is to be applied to the service of persons. The business of persons is to see that they are there to use, and that no more than need be is paid for using them. Thus the application to industry of the principle of function involves an alteration of proprietary rights, because those rights do not contribute, as they now are, to the end which industry exists to serve. What gives unity to any activity, what alone can reconcile the conflicting claims of the different groups engaged in it, is the purpose for which it is carried on. If men have no common goal it is no wonder that they should fall out by the way, nor are they likely to be reconciled by a redistribution of their provisions. If they are not content both to be servants, one or other must be master, and it is idle to suppose that mastership can be held in a state of suspense between the two. There can be a division of functions between different grades of workers, or between worker and consumer, and each can {100} have in his own sphere the authority needed to enable him to fill it. But there cannot be a division of functions between the worker and the owner who is owner and nothing else, for what function does such an owner perform? The provision of capital? Then pay him the sum needed to secure the use of his capital, but neither pay him more nor admit him to a position of authority over production for which merely as an owner he is not qualified. For this reason, while an equilibrium between worker and manager is possible, because both are workers, that which it is sought to establish between worker and owner is not. It is like the proposal of the Germans to negotiate with Belgium from Brussels. Their proposals may be excellent: but it is not evident why they are where they are, or how, since they do not contribute to production, they come to be putting forward proposals at all. As long as they are in territory where they have no business to be, their excellence as individuals will be overlooked in annoyance at the system which puts them where they are. It is fortunate indeed, if nothing worse than this happens. For one way of solving the problem of the conflict of rights in industry is not to base rights on functions, as we propose, but to base them on force. It is to re-establish in some veiled and decorous form the institution of slavery, by making labor compulsory. In nearly all countries a concerted refusal to work has been made at one time or another a criminal offense. There are to-day parts of the world in which European capitalists, unchecked by any public opinion or authority {101} independent of themselves, are free to impose almost what terms they please upon workmen of ignorant and helpless races. In those districts of America where capitalism still retains its primitive lawlessness, the same result appears to be produced upon immigrant workmen by the threat of violence. In such circumstances the conflict of rights which finds expression in industrial warfare does not arise, because the rights of one party have been extinguished. The simplicity of the remedy is so attractive that it is not surprising that the Governments of industrial nations should coquet from time to time with the policy of compulsory arbitration. After all, it is pleaded, it is only analogous to the action of a supernational authority which should use its common force to prevent the outbreak of war. In reality, compulsory arbitration is the opposite of any policy which such an authority could pursue either with justice or with hope of success. For it takes for granted the stability of existing relationships and intervenes to adjust incidental disputes upon the assumption that their equity is recognized and their permanence desired. In industry, however, the equity of existing relationships is precisely the point at issue. A League of Nations which adjusted between a subject race and its oppressors, between Slavs and Magyars, or the inhabitants of what was once Prussian Poland and the Prussian Government, on the assumption that the subordination of Slavs to Magyars and Poles to Prussians was part of an unchangeable order, would rightly be resisted by all those who think liberty more precious than peace. A State which, in the {102} name of peace, should make the concerted cessation of work a legal offense would be guilty of a similar betrayal of freedom. It would be solving the conflict of rights between those who own and those who work by abolishing the rights of those who work. So here again, unless we are prepared to re-establish some form of forced labor, we reach an impasse. But it is an impasse only in so long as we regard the proprietary rights of those who own the capital used in industry as absolute and an end in themselves. If, instead of assuming that all property, merely because it is property, is equally sacred, we ask what is the _purpose_ for which capital is used, what is its _function_, we shall realize that it is not an end but a means to an end, and that its function is to serve and assist (as the economists tell us) the labor of human beings, not the function of human beings to serve those who happen to own it. And from this truth two consequences follow. The first is that since capital is a thing, which ought to be used to help industry as a man may use a bicycle to get more quickly to his work, it ought, when it is employed, to be employed on the cheapest terms possible. The second is that those who own it should no more control production than a man who lets a house controls the meals which shall be cooked in the kitchen, or the man who lets a boat the speed at which the rowers shall pull. In other words, capital should always be got at cost price, which means, unless the State finds it wise, as it very well may, to own the capital used in certain industries, it should be paid the lowest interest {103} for which it can be obtained, but should carry no right either to residuary dividends or to the control of industry. There are, in theory, five ways by which the control of industry by the agents of private property-owners can be terminated. They may be expropriated without compensation. They may voluntarily surrender it. They may be frozen out by action on the part of the working _personnel_, which itself undertakes such functions, if any, as they have performed, and makes them superfluous by conducting production without their assistance. Their proprietary interest may be limited or attenuated to such a degree that they become mere _rentiers_, who are guaranteed a fixed payment analogous to that of the debenture-holder, but who receive no profits and bear no responsibility for the organization of industry. They may be bought out. The first alternative is exemplified by the historical confiscations of the past, such as, for instance, by the seizure of ecclesiastical property by the ruling classes of England, Scotland and most other Protestant states. The second has rarely, if ever, been tried--the nearest approach to it, perhaps, was the famous abdication of August 4th, 1789. The third is the method apparently contemplated by the building guilds which are now in process of formation in Great Britain. The fourth method of treating the capitalist is followed by the co-operative movement. It is also that proposed by the committee of employers and trade-unionists in the building industry over which Mr. Foster presided, and which proposed that employers should be paid a fixed salary, and a fixed rate of {104} interest on their capital, but that all surplus profits should be pooled and administered by a central body representing employers and workers. The fifth has repeatedly been practised by municipalities, and somewhat less often by national governments. Which of these alternative methods of removing industry from the control of the property-owner is adopted is a matter of expediency to be decided in each particular case. "Nationalization," therefore, which is sometimes advanced as the only method of extinguishing proprietary rights, is merely one species of a considerable genus. It can be used, of course, to produce the desired result. But there are some industries, at any rate, in which nationalization is not necessary in order to bring it about, and since it is at best a cumbrous process, when other methods are possible, other methods should be used. Nationalization is a means to an end, not an end in itself. Properly conceived its object is not to establish state management of industry, but to remove the dead hand of private ownership, when the private owner has ceased to perform any positive function. It is unfortunate, therefore, that the abolition of obstructive property rights, which is indispensable, should have been identified with a single formula, which may be applied with advantage in the special circumstances of some industries, but need not necessarily be applied in all. Ownership is not a right, but a bundle of rights, and it is possible to strip them off piecemeal as well as to strike them off simultaneously. The ownership of capital involves, as we have said, three main claims; the right to interest as the price of capital, the right to {105} profits, and the right to control, in virtue of which managers and workmen are the servants of shareholders. These rights in their fullest degree are not the invariable accompaniment of ownership, nor need they necessarily co-exist. The ingenuity of financiers long ago devised methods of grading stock in such a way that the ownership of some carries full control, while that of others does not, that some bear all the risk and are entitled to all the profits, while others are limited in respect to both. All are property, but not all carry proprietary rights of the same degree. As long as the private ownership of industrial capital remains, the object of reformers should be to attenuate its influence by insisting that it shall be paid not more than a rate of interest fixed in advance, and that it should carry with it no right of control. In such circumstances the position of the ordinary shareholder would approximate to that of the owner of debentures; the property in the industry would be converted into a mortgage on its profits, while the control of its administration and all profits in excess of the minimum would remain to be vested elsewhere. So, of course, would the risks. But risks are of two kinds, those of the individual business and those of the industry. The former are much heavier than the latter, for though a coal mine is a speculative investment, coal mining is not, and as long as each business is managed as a separate unit, the payments made to shareholders must cover both. If the ownership of capital in each industry were unified, which does not mean centralized, those risks which are incidental to individual competition would be {106} eliminated, and the credit of each unit would be that of the whole. Such a change in the character of ownership would have three advantages. It would abolish the government of industry by property. It would end the payment of profits to functionless shareholders by turning them into creditors paid a fixed rate of interest. It would lay the only possible foundations for industrial peace by making it possible to convert industry into a profession carried on by all grades of workers for the service of the public, not for the gain of those who own capital. The organization which it would produce will be described, of course, as impracticable. It is interesting, therefore, to find it is that which experience has led practical men to suggest as a remedy for the disorders of one of the most important of national industries, that of building. The question before the Committee of employers and workmen, which issued last August a Report upon the Building Trade, was "Scientific Management and the Reduction of Costs."[1] These are not phrases which suggest an economic revolution; but it is something little short of a revolution that the signatories of the report propose. For, as soon as they came to grips with the problem, they found that it was impossible to handle it effectively without reconstituting the general fabric of industrial relationships which is its setting. Why is the service supplied by the industry ineffective? Partly because the workers do not give their full energies to the performance of their part in production. {107} Why do they not give their best energies? Because of "the fear of unemployment, the disinclination of the operatives to make unlimited profit for private employers, the lack of interest evinced by operatives owing to their non-participation in control, inefficiency both managerial and operative." How are these psychological obstacles to efficiency to be counteracted? By increased supervision and speeding up, by the allurements of a premium bonus system, or the other devices by which men who are too ingenious to have imagination or moral insight would bully or cajole poor human nature into doing what--if only the systems they invent would let it!--it desires to do, simple duties and honest work? Not at all. By turning the building of houses into what teaching now is, and Mr. Squeers thought it could never be, an honorable profession. "We believe," they write, "that the great task of our Industrial Council is to develop an entirely new system of industrial control by the members of the industry itself--the actual producers, whether by hand or brain, and to bring them into co-operation with the State as the central representative of the community whom they are organized to serve." Instead of unlimited profits, so "indispensable as an incentive to efficiency," the employer is to be paid a salary for his services as manager, and a rate of interest on his capital which is to be both fixed and (unless he fails to earn it through his own inefficiency) guaranteed; anything in excess of it, any "profits" in fact, which in other industries are distributed as dividends to shareholders, he is to {108} surrender to a central fund to be administered by employers and workmen for the benefit of the industry as a whole. Instead of the financial standing of each firm being treated as an inscrutable mystery to the public, with the result that it is sometimes a mystery to itself, there is to be a system of public costing and audit, on the basis of which the industry will assume a collective liability for those firms which are shown to be competently managed. Instead of the workers being dismissed in slack times to struggle along as best they can, they are to be maintained from a fund raised by a levy on employers and administered by the trade unions. There is to be publicity as to costs and profits, open dealing and honest work and mutual helpfulness, instead of the competition which the nineteenth century regarded as an efficient substitute for them. "Capital" is not to "employ labor." Labor, which includes managerial labor, is to employ capital; and to employ it at the cheapest rate at which, in the circumstances of the trade, it can be got. If it employs it so successfully that there is a surplus when it has been fairly paid for its own services, then that surplus is not to be divided among shareholders, for, when they have been paid interest, they have been paid their due; it is to be used to equip the industry to provide still more effective service in the future. So here we have the majority of a body of practical men, who care nothing for socialist theories, proposing to establish "organized Public Service in the Building Industry," recommending, in short, that their industry shall be turned into a profession. And they do it, it {109} will be observed, by just that functional organization, just that conversion of full proprietary rights into a mortgage secured (as far as efficient firms are concerned) on the industry as a whole, just that transference of the control of production from the owner of capital to those whose business is production, which we saw is necessary if industry is to be organized for the performance of service, not for the pecuniary advantage of those who hold proprietary rights. Their Report is of the first importance as offering a policy for attenuating private property in capital in the important group of industries in which private ownership, in one form or another, is likely for some considerable time to continue, and a valuable service would be rendered by any one who would work out in detail the application of its principle to other trades. Not, of course, that this is the only way, or in highly capitalized industries the most feasible way, in which the change can be brought about. Had the movement against the control of production by property taken place before the rise of limited companies, in which ownership is separated from management, the transition to the organization of industry as a profession might also have taken place, as the employers and workmen in the building trade propose that it should, by limiting the rights of private ownership without abolishing it. But that is not what has actually happened, and therefore the proposals of the building trade are not of universal application. It is possible to retain private ownership in building and in industries like building, {110} while changing its character, precisely because in building the employer is normally not merely an owner, but something else as well. He is a manager; that is, he is a workman. And because he is a workman, whose interests, and still more whose professional spirit as a workman may often outweigh his interests and merely financial spirit as an owner, he can form part of the productive organization of the industry, after his rights as an owner have been trimmed and limited. But that dual position is abnormal, and in the highly organized industries is becoming more abnormal every year. In coal, in cotton, in ship-building, in many branches of engineering the owner of capital is not, as he is in building, an organizer or manager. His connection with the industry and interest in it is purely financial. He is an owner and nothing more. And because his interest is merely financial, so that his concern is dividends and production only as a means to dividends, he cannot be worked into an organization of industry which vests administration in a body representing all grades of producers, or producers and consumers together, for he has no purpose in common with them; so that while joint councils between workers and managers may succeed, joint councils between workers and owners or agents of owners, like most of the so-called Whitley Councils, will not, because the necessity for the mere owner is itself one of the points in dispute. The master builder, who owns the capital used, can be included, not _qua_ capitalist, but _qua_ builder, if he surrenders some of the rights of ownership, as the Building Industry Committee proposed that he should. But {111} if the shareholder in a colliery or a shipyard abdicates the control and unlimited profits to which, _qua_ capitalist, he is at present entitled, he abdicates everything that makes him what he is, and has no other standing in the industry. He cannot share, like the master builder, in its management, because he has no qualifications which would enable him to do so. His object is profit; and if industry is to become, as employers and workers in the building trade propose, an "organized public service," then its subordination to the shareholder whose object is profit, is, as they clearly see, precisely what must be eliminated. The master builders propose to give it up. They can do so because they have their place in the industry in virtue of their function as workmen. But if the shareholder gave it up, he would have no place at all. Hence in coal mining, where ownership and management are sharply separated, the owners will not admit the bare possibility of any system in which the control of the administration of the mines is shared between the management and the miners. "I am authorized to state on behalf of the Mining Association," Lord Gainford, the chief witness on behalf of the mine-owners, informed the Coal Commission, "that if the owners are not to be left complete executive control they will decline to accept the responsibility for carrying on the industry."[2] So the mine-owners blow away in a sentence the whole body of plausible make-believe which rests on the idea that, while private ownership remains {112} unaltered, industrial harmony can be produced by the magic formula of joint control. And they are right. The representatives of workmen and shareholders, in mining and in other industries, can meet and negotiate and discuss. But joint administration of the shareholders' property by a body representing shareholders and workmen is impossible, because there is no purpose in common between them. For the only purpose which could unite all persons engaged in industry, and overrule their particular and divergent interests, is the provision of service. And the object of shareholders, the whole significance and _métier_ of industry to them, is not the provision of service but the provision of dividends. In industries where management is divorced from ownership, as in most of the highly organized trades it is to-day, there is no obvious halfway house, therefore, between the retention of the present system and the complete extrusion of the capitalist from the control of production. The change in the character of ownership, which is necessary in order that coal or textiles and ship-building may be organized as professions for the service of the public, cannot easily spring from within. The stroke needed to liberate them from the control of the property-owner must come from without. In theory it might be struck by action on the part of organized workers, who would abolish residuary profits and the right of control by the mere procedure of refusing to work as long as they were maintained, on the historical analogy offered by peasants who have destroyed {113} predatory property in the past by declining to pay its dues and admit its government, in which case Parliament would intervene only to register the community's assent to the _fait accompli_. In practice, however, the conditions of modern industry being what they are, that course, apart from its other disadvantages, is so unlikely to be attempted, or, if attempted, to succeed, that it can be neglected. The alternative to it is that the change in the character of property should be affected by legislation in virtue of which the rights of ownership in an industry are bought out simultaneously. In either case, though the procedure is different, the result of the change, once it is accomplished, is the same. Private property in capital, in the sense of the right to profits and control, is abolished. What remains of it is, at most, a mortgage in favor of the previous proprietors, a dead leaf which is preserved, though the sap of industry no longer feeds it, as long as it is not thought worth while to strike it off. And since the capital needed to maintain and equip a modern industry could not be provided by any one group of workers, even were it desirable on other grounds that they should step completely into the position of the present owners, the complex of rights which constitutes ownership remains to be shared between them and whatever organ may act on behalf of the general community. The former, for example, may be the heir of the present owners as far as the control of the routine and administration of industry is concerned: the latter may succeed to their right to dispose of residuary profits. The elements composing property, have, in fact, to be {114} disentangled: and the fact that to-day, under the common name of ownership, several different powers are vested in identical hands, must not be allowed to obscure the probability that, once private property in capital has been abolished, it may be expedient to re-allocate those powers in detail as well as to transfer them _en bloc_. The essence of a profession is, as we have suggested, that its members organize themselves for the performance of function. It is essential therefore, if industry is to be professionalized, that the abolition of functionless property should not be interpreted to imply a continuance under public ownership of the absence of responsibility on the part of the _personnel_ of industry, which is the normal accompaniment of private ownership working through the wage-system. It is the more important to emphasize that point, because such an implication has sometimes been conveyed in the past by some of those who have presented the case for some such change in the character of ownership as has been urged above. The name consecrated by custom to the transformation of property by public and external action is nationalization. But nationalization is a word which is neither very felicitous nor free from ambiguity. Properly used, it means merely ownership by a body representing the nation. But it has come in practice to be used as equivalent to a particular method of administration, under which officials employed by the State step into the position of the present directors of industry, and exercise all the power which they exercised. So those who desire to maintain the system under which industry is carried on, not as a profession {115} serving the public, but for the advantage of shareholders, attack nationalization on the ground that state management is necessarily inefficient, and tremble with apprehension whenever they post a letter in a letter-box; and those who desire to change it reply that state services are efficient and praise God whenever they use a telephone; as though either private or public administration had certain peculiar and unalterable characteristics, instead of depending for its quality, like an army or railway company or school, and all other undertakings, public and private alike, not on whether those who conduct it are private officials or state officials, but on whether they are properly trained for their work and can command the good will and confidence of their subordinates. The arguments on both sides are ingenious, but in reality nearly all of them are beside the point. The merits of nationalization do not stand or fall with the efficiency or inefficiency of existing state departments as administrators of industry. For nationalization, which means public ownership, is compatible with several different types of management. The constitution of the industry may be "unitary," as is (for example) that of the post-office. Or it may be "federal," as was that designed by Mr. Justice Sankey for the Coal Industry. Administration may be centralized or decentralized. The authorities to whom it is intrusted may be composed of representatives of the consumers, or of representatives of professional associations, or of state officials, or of all three in several different proportions. Executive work may be placed in the hands of civil {116} servants, trained, recruited and promoted as in the existing state departments, or a new service may be created with a procedure and standards of its own. It may be subject to Treasury control, or it may be financially autonomous. The problem is, in fact, of a familiar, though difficult, order. It is one of constitution-making. It is commonly assumed by controversialists that the organization and management of a nationalized industry must, for some undefined reason, be similar to that of the post-office. One might as reasonably suggest that the pattern exemplar of private enterprise must be the Steel Corporation or the Imperial Tobacco Company. The administrative systems obtaining in a society which has nationalized its foundation industries will, in fact, be as various as in one that resigns them to private ownership; and to discuss their relative advantages without defining what particular type of each is the subject of reference is to-day as unhelpful as to approach a modern political problem in terms of the Aristotelian classification of constitutions. The highly abstract dialectics as to "enterprise," "initiative," "bureaucracy," "red tape," "democratic control," "state management," which fill the press of countries occupied with industrial problems, really belong to the dark ages of economic thought. The first task of the student, whatever his personal conclusions, is, it may be suggested, to contribute what he can to the restoration of sanity by insisting that instead of the argument being conducted with the counters of a highly inflated and rapidly depreciating verbal currency, the exact situation, {117} in so far as is possible, shall be stated as it is; uncertainties (of which there are many) shall be treated as uncertain, and the precise meaning of alternative proposals shall be strictly defined. Not the least of the merits of Mr. Justice Sankey's report was that, by stating in great detail the type of organization which he recommended for the Coal Industry, he imparted a new precision and reality into the whole discussion. Whether his conclusions are accepted or not, it is from the basis of clearly defined proposals such as his that the future discussion of these problems must proceed. It may not find a solution. It will at least do something to create the temper in which alone a reasonable solution can be sought. Nationalization, then, is not an end, but a means to an end, and when the question of ownership has been settled the question of administration remains for solution. As a means it is likely to be indispensable in those industries in which the rights of private proprietors cannot easily be modified without the action of the State, just as the purchase of land by county councils is a necessary step to the establishment of small holders, when landowners will not voluntarily part with their property for the purpose. But the object in purchasing land is to establish small holders, not to set up farms administered by state officials; and the object of nationalizing mining or railways or the manufacture of steel should not be to establish any particular form of state management, but to release those who do constructive work from the control of those whose sole interest is pecuniary gain, in order that they may be free to {118} apply their energies to the true purpose of industry, which is the provision of service, not the provision of dividends. When the transference of property has taken place, it will probably be found that the necessary provision for the government of industry will involve not merely the freedom of the producers to produce, but the creation of machinery through which the consumer, for whom he produces, can express his wishes and criticize the way in which they are met, as at present he normally cannot. But that is the second stage in the process of reorganizing industry for the performance of function, not the first. The first is to free it from subordination to the pecuniary interests of the owner of property, because they are the magnetic pole which sets all the compasses wrong, and which causes industry, however swiftly it may progress, to progress in the wrong direction. Nor does this change in the character of property involve a breach with the existing order so sharp as to be impracticable. The phraseology of political controversy continues to reproduce the conventional antitheses of the early nineteenth century; "private enterprise" and "public ownership" are still contrasted with each other as light with darkness or darkness with light. But, in reality, behind the formal shell of the traditional legal system the elements of a new body of relationship have already been prepared, and find piece-meal application through policies devised, not by socialists, but by men who repeat the formulæ of individualism, at the very moment when they are undermining it. The Esch-Cummins Act in America, the {119} Act establishing a Ministry of Transport in England, Sir Arthur Duckham's scheme for the organization of the coal mines, the proposals with regard to the coal industry of the British Government itself, appear to have the common characteristic of retaining private ownership in name, while attenuating it in fact, by placing its operators under the supervision, accompanied sometimes by a financial guarantee, of a public authority. Schemes of this general character appear, indeed, to be the first instinctive reaction produced by the discovery that private enterprise is no longer functioning effectively; it is probable that they possess certain merits of a technical order analogous to those associated with the amalgamation of competing firms into a single combination. It is questionable, however, whether the compromise which they represent is permanently tenable. What, after all, it may be asked, are the advantages of private ownership when it has been pared down to the point which policies of this order propose? May not the "owner" whose rights they are designed to protect not unreasonably reply to their authors, "Thank you for nothing"? Individual enterprise has its merits: so also, perhaps, has public ownership. But, by the time these schemes have done with it, not much remains of "the simple and obvious system of natural liberty," while their inventors are precluded from appealing to the motives which are emphasized by advocates of nationalization. It is one thing to be an entrepreneur with a world of adventure and unlimited profits--if they can be achieved--before one. It is quite another to be a director of a railway company or coal {120} corporation with a minimum rate of profit guaranteed by the State, and a maximum rate of profit which cannot be exceeded. Hybrids are apt to be sterile. It may be questioned whether, in drawing the teeth of private capitalism, this type of compromise does not draw out most of its virtues as well. So, when a certain stage of economic development has been reached, private ownership, by the admission of its defenders, can no longer be tolerated in the only form in which it is free to display the characteristic, and quite genuine, advantages for the sake of which it used to be defended. And, as step by step it is whittled down by tacit concessions to the practical necessity of protecting the consumer, or eliminating waste, or meeting the claims of the workers, public ownership becomes, not only on social grounds, but for reasons of economic efficiency, the alternative to a type of private ownership which appears to carry with it few rights of ownership and to be singularly devoid of privacy. Inevitably and unfortunately the change must be gradual. But it should be continuous. When, as in the last few years, the State has acquired the ownership of great masses of industrial capital, it should retain it, instead of surrendering it to private capitalists, who protest at once that it will be managed so inefficiently that it will not pay and managed so efficiently that it will undersell them. When estates are being broken up and sold, as they are at present, public bodies should enter the market and acquire them. Most important of all, the ridiculous barrier, inherited from an age in which municipal corporations were corrupt oligarchies, which {121} at present prevents England's Local Authorities from acquiring property in land and industrial capital, except for purposes specified by Act of Parliament, should be abolished, and they should be free to undertake such services as the citizens may desire. The objection to public ownership, in so far as it is intelligent, is in reality largely an objection to over-centralization. But the remedy for over-centralization, is not the maintenance of functionless property in private hands, but the decentralized ownership of public property, and when Birmingham and Manchester and Leeds are the little republics which they should be, there is no reason to anticipate that they will tremble at a whisper from Whitehall. These things should be done steadily and continuously quite apart from the special cases like that of the mines and railways, where the private ownership of capital is stated by the experts to have been responsible for intolerable waste, or the manufacture of ornaments [Transcriber's note: armaments?] and alcoholic liquor, which are politically and socially too dangerous to be left in private hands. They should be done not in order to establish a single form of bureaucratic management, but in order to release the industry from the domination of proprietary interests, which, whatever the form of management, are not merely troublesome in detail but vicious in principle, because they divert it from the performance of function to the acquisition of gain. If at the same time private ownership is shaken, as recently it has been, by action on the part of particular groups of workers, so much the better. There are more ways of killing a cat than {122} drowning it in cream, and it is all the more likely to choose the cream if they are explained to it. But the two methods are complementary, not alternative, and the attempt to found rival schools on an imaginary incompatibility between them is a bad case of the _odium sociologicum_ which afflicts reformers. [1] Reprinted in _The Industrial Council for the Building Industry_. [2] _Coal Industry Commission, Minutes of Evidence_, Vol. I, p. 2506. {123} VIII THE "VICIOUS CIRCLE" What form of management should replace the administration of industry by the agents of shareholders? What is most likely to hold it to its main purpose, and to be least at the mercy of predatory interests and functionless supernumeraries, and of the alternations of sullen dissatisfaction and spasmodic revolt which at present distract it? Whatever the system upon which industry is administered, one thing is certain. Its economic processes and results must be public, because only if they are public can it be known whether the service of industry is vigilant, effective and honorable, whether its purpose is being realized and its function carried out. The defense of secrecy in business resembles the defense of adulteration on the ground that it is a legitimate weapon of competition; indeed it has even less justification than that famous doctrine, for the condition of effective competition is publicity, and one motive for secrecy is to prevent it. Those who conduct industry at the present time and who are most emphatic that, as the Duke of Wellington said of the unreformed House of Commons, they "have never read or heard of any measure up to the present moment which can in any degree satisfy the mind" that the method of conducting it can in any way be improved, are also those apparently who, with some {124} honorable exceptions, are most reluctant that the full facts about it should be known. And it is crucial that they should be known. It is crucial not only because, in the present ignorance of the real economic situation, all industrial disagreements tend inevitably to be battles in the dark, in which "ignorant armies clash by night," but because, unless there is complete publicity as to profits and costs, it is impossible to form any judgment either of the reasonableness of the prices which are charged or of the claims to remuneration of the different parties engaged in production. For balance sheets, with their opportunities for concealing profits, give no clear light upon the first, and no light at all upon the second. And so, when the facts come out, the public is aghast at revelations which show that industry is conducted with bewildering financial extravagance. If the full facts had been published, as they should have been, quarter by quarter, these revelations would probably not have been made at all, because publicity itself would have been an antiseptic and there would have been nothing sensational to reveal. The events of the last few years are a lesson which should need no repetition. The Government, surprised at the price charged for making shells at a time when its soldiers were ordered by Headquarters not to fire more than a few rounds per day, whatever the need for retaliation, because there were not more than a few to fire, establishes a costing department to analyze the estimates submitted by manufacturers and to compare them, item by item, with the costs in its own factories. It finds that, through the mere pooling of knowledge, {125} "some of the reductions made in the price of shells and similar munitions," as the Chartered Accountant employed by the Department tells us, "have been as high as 50% of the original price." The household consumer grumbles at the price of coal. For once in a way, amid a storm of indignation from influential persons engaged in the industry, the facts are published. And what do they show? That, after 2/6 has been added to the already high price of coal because the poorer mines are alleged not to be paying their way, 21% of the output examined by the Commission was produced at a profit of 1/- to 3/- per ton, 32% at a profit of 3/- to 5/-, 13% at a profit of 5/- to 7/-, and 14% at a profit of 7/- per ton and over, while the profits of distributors in London alone amount in the aggregate to over $3,200,000, and the co-operative movement, which aims not at profit, but at service, distributes household coal at a cost of from 2/- to 4/- less per ton than is charged by the coal trade![1] "But these are exceptions." They may be. It is possible that in the industries, in which, as the recent Committee on Trusts has told us, "powerful Combinations or Consolidations of one kind or another are in a position effectively to control output and prices," not only costs are cut to the bare minimum but profits are inconsiderable. But then why insist on this humiliating tradition of secrecy with regard to them, when every one who uses their products, and every one who renders honest service to production, stands to gain by publicity? If industry is to become a profession, whatever its {126} management, the first of its professional rules should be, as Sir John Mann told the Coal Commission, that "all cards should be placed on the table." If it were the duty of a Public Department to publish quarterly exact returns as to costs of production and profits in all the firms throughout an industry, the gain in mere productive efficiency, which should appeal to our enthusiasts for output, would be considerable; for the organization whose costs were least would become the standard with which all other types of organization would be compared. The gain in _morale_, which is also, absurd though it may seem, a condition of efficiency, would be incalculable. For industry would be conducted in the light of day. Its costs, necessary or unnecessary, the distribution of the return to it, reasonable or capricious, would be a matter of common knowledge. It would be held to its purpose by the mere impossibility of persuading those who make its products or those who consume them to acquiesce, as they acquiesce now, in expenditure which is meaningless because it has contributed nothing to the service which the industry exists to perform. The organization of industry as a profession does not involve only the abolition of functionless property, and the maintenance of publicity as the indispensable condition of a standard of professional honor. It implies also that those who perform its work should undertake that its work is performed effectively. It means that they should not merely be held to the service of the public by fear of personal inconvenience or penalties, but that they should treat the discharge of professional {127} responsibilities as an obligation attaching not only to a small _élite_ of intellectuals, managers or "bosses," who perform the technical work of "business management," but as implied by the mere entry into the industry and as resting on the corporate consent and initiative of the rank and file of workers. It is precisely, indeed, in the degree to which that obligation is interpreted as attaching to all workers, and not merely to a select class, that the difference between the existing industrial order, collectivism and the organization of industry as a profession resides. The first involves the utilization of human beings for the purpose of private gain; the second their utilization for the purpose of public service; the third the association in the service of the public of their professional pride, solidarity and organization. The difference in administrative machinery between the second and third might not be considerable. Both involve the drastic limitation or transference to the public of the proprietary rights of the existing owners of industrial capital. Both would necessitate machinery for bringing the opinion of the consumers to bear upon the service supplied them by the industry. The difference consists in the manner in which the obligations of the producer to the public are conceived. He may either be the executant of orders transmitted to him by its agents; or he may, through his organization, himself take a positive part in determining what those orders should be. In the former case he is responsible for his own work, but not for anything else. If he hews his stint of coal, it is no business of his whether the pit is a {128} failure; if he puts in the normal number of rivets, he disclaims all further interest in the price or the sea-worthiness of the ship. In the latter his function embraces something more than the performance of the specialized piece of work allotted to him. It includes also a responsibility for the success of the undertaking as a whole. And since responsibility is impossible without power, his position would involve at least so much power as is needed to secure that he can affect in practice the conduct of the industry. It is this collective liability for the maintenance of a certain quality of service which is, indeed, the distinguishing feature of a profession. It is compatible with several different kinds of government, or indeed, when the unit of production is not a group, but an individual, with hardly any government at all. What it does involve is that the individual, merely by entering the profession should have committed himself to certain obligations in respect of its conduct, and that the professional organization, whatever it may be, should have sufficient power to enable it to maintain them. The demand for the participation of the workers in the control of industry is usually advanced in the name of the producer, as a plea for economic freedom or industrial democracy. "Political freedom," writes the Final Report of the United States Commission of Industrial Relations, which was presented in 1916, "can exist only where there is industrial freedom.... There are now within the body of our Republic industrial communities which are virtually Principalities, oppressive to those dependent upon them for a livelihood {129} and a dreadful menace to the peace and welfare of the nation." The vanity of Englishmen may soften the shadows and heighten the lights. But the concentration of authority is too deeply rooted in the very essence of Capitalism for differences in the degree of the arbitrariness with which it is exercised to be other than trivial. The control of a large works does, in fact, confer a kind of private jurisdiction in matters concerning the life and livelihood of the workers, which, as the United States' Commission suggests, may properly be described as "industrial feudalism." It is not easy to understand how the traditional liberties of Englishmen are compatible with an organization of industry which, except in so far as it has been qualified by law or trade unionism, permits populations almost as large as those of some famous cities of the past to be controlled in their rising up and lying down, in their work, economic opportunities, and social life by the decisions of a Committee of half-a-dozen Directors. The most conservative thinkers recognize that the present organization of industry is intolerable in the sacrifice of liberty which it entails upon the producer. But each effort which he makes to emancipate himself is met by a protest that if the existing system is incompatible with freedom, it at least secures efficient service, and that efficient service is threatened by movements which aim at placing a greater measure of industrial control in the hands of the workers. The attempt to drive a wedge between the producer and the consumer is obviously the cue of all the interests which are conscious that by themselves they are unable to hold back {130} the flood. It is natural, therefore, that during the last few months they should have concentrated their efforts upon representing that every advance in the demands and in the power of any particular group of workers is a new imposition upon the general body of the public. Eminent persons, who are not obviously producing more than they consume, explain to the working classes that unless they produce more they must consume less. Highly syndicated combinations warn the public against the menace of predatory syndicalism. The owners of mines and minerals, in their new role as protectors of the poor, lament the "selfishness" of the miners, as though nothing but pure philanthropy had hitherto caused profits and royalties to be reluctantly accepted by themselves. The assumption upon which this body of argument rests is simple. It is that the existing organization of industry is the safeguard of productive efficiency, and that from every attempt to alter it the workers themselves lose more as consumers than they can gain as producers. The world has been drained of its wealth and demands abundance of goods. The workers demand a larger income, greater leisure, and a more secure and dignified status. These two demands, it is argued, are contradictory. For how can the consumer be supplied with cheap goods, if, as a worker, he insists on higher wages and shorter hours? And how can the worker secure these conditions, if as a consumer, he demands cheap goods? So industry, it is thought, moves in a vicious circle of shorter hours and higher wages and less production, which in time must mean {131} longer hours and lower wages; and every one receives less, because every one demands more. The picture is plausible, but it is fallacious. It is fallacious not merely in its crude assumption that a rise in wages necessarily involves an increase in costs, but for another and more fundamental reason. In reality the cause of economic confusion is not that the demands of producer and consumer meet in blunt opposition; for, if they did, their incompatibility, when they were incompatible, would be obvious, and neither could deny his responsibility to the other, however much he might seek to evade it. It is that they do not, but that, as industry is organized to-day, what the worker foregoes the general body of consumers does not necessarily gain, and what the consumer pays the general body of workers does not necessarily receive. If the circle is vicious, its vice is not that it is closed, but that it is always half open, so that part of production leaks away in consumption which adds nothing to productive energies, and that the producer, because he knows this, does not fully use even the productive energy which he commands. It is the consciousness of this leak which sets every one at cross purposes. No conceivable system of industrial organization can secure industrial peace, if by "peace" is meant a complete absence of disagreement. What could be secured would be that disagreements should not flare up into a beacon of class warfare. If every member of a group puts something into a common pool on condition of taking something out, they may still quarrel about the size of the shares, as children quarrel {132} over cake; but if the total is known and the claims admitted, that is all they can quarrel about, and, since they all stand on the same footing, any one who holds out for more than his fellows must show some good reason why he should get it. But in industry the claims are not all admitted, for those who put nothing in demand to take something out; both the total to be divided and the proportion in which the division takes place are sedulously concealed; and those who preside over the distribution of the pool and control what is paid out of it have a direct interest in securing as large a share as possible for themselves and in allotting as small a share as possible to others. If one contributor takes less, so far from it being evident that the gain will go to some one who has put something in and has as good a right as himself, it may go to some one who has put in nothing and has no right at all. If another claims more, he may secure it, without plundering a fellow-worker, at the expense of a sleeping partner who is believed to plunder both. In practice, since there is no clear principle determining what they ought to take, both take all that they can get. In such circumstances denunciations of the producer for exploiting the consumer miss the mark. They are inevitably regarded as an economic version of the military device used by armies which advance behind a screen of women and children, and then protest at the brutality of the enemy in shooting non-combatants. They are interpreted as evidence, not that a section of the producers are exploiting the remainder, but that a minority of property-owners, which is in opposition to {133} both, can use its economic power to make efforts directed against those who consume much and produce little rebound on those who consume little and produce much. And the grievance, of which the Press makes so much, that some workers may be taking too large a share compared with others, is masked by the much greater grievance, of which it says nothing whatever, that some idlers take any share at all. The abolition of payments which are made without any corresponding economic service is thus one of the indispensable conditions both of economic efficiency and industrial peace, because their existence prevents different classes of workers from restraining each other, by uniting them all against the common enemy. Either the principle of industry is that of function, in which case slack work is only less immoral than no work at all; or it is that of grab, in which case there is no morality in the matter. But it cannot be both. And it is useless either for property-owners or for Governments to lament the mote in the eye of the trade unions as long as, by insisting on the maintenance of functionless property, they decline to remove the beam in their own. The truth is that only workers can prevent the abuse of power by workers, because only workers are recognized as possessing any title to have their claims considered. And the first step to preventing the exploitation of the consumer by the producer is simple. It is to turn all men into producers, and thus to remove the temptation for particular groups of workers to force their claims at the expense of the public, by removing the valid excuse that such gains as they may get are {134} taken from those who at present have no right to them, because they are disproportionate to service or obtained for no service at all. Indeed, if work were the only title to payment, the danger of the community being exploited by highly organized groups of producers would largely disappear. For, when no payments were made to non-producers, there would be no debatable ground for which to struggle, and it would become evident that if any one group of producers took more, another must put up with less. Under such conditions a body of workers who used their strong strategic position to extort extravagant terms for themselves at the expense of their fellow-workers might properly be described as exploiting the community. But at present such a statement is meaningless. It is meaningless because before the community can be exploited the community must exist, and its existence in the sphere of economics is to-day not a fact but only an aspiration. The procedure by which, whenever any section of workers advance demands which are regarded as inconvenient by their masters, they are denounced as a band of anarchists who are preying on the public may be a convenient weapon in an emergency, but, once it is submitted to analysis, it is logically self-destructive. It has been applied within recent years, to the postmen, to the engineers, to the policemen, to the miners and to the railway men, a population with their dependents, of some eight million persons; and in the case of the last two the whole body of organized labor made common cause with those of whose exorbitant demands it was alleged to be the victim. But when these {135} workers and their sympathizers are deducted, what is "the community" which remains? It is a naïve arithmetic which produces a total by subtracting one by one all the items which compose it; and the art which discovers the public interest by eliminating the interests of successive sections of the public smacks of the rhetorician rather than of the statesman. The truth is that at present it is idle to seek to resist the demands of any group of workers by appeals to "the interests of society," because to-day, as long as the economic plane alone is considered, there is not one society but two, which dwell together in uneasy juxtaposition, like Sinbad and the Old Man of the Sea, but which in spirit, in ideals, and in economic interest, are worlds asunder. There is the society of those who live by labor, whatever their craft or profession, and the society of those who live on it. All the latter cannot command the sacrifices or the loyalty which are due to the former, for they have no title which will bear inspection. The instinct to ignore that tragic division instead of ending it is amiable, and sometimes generous. But it is a sentimentality which is like the morbid optimism of the consumptive who dares not admit even to himself the virulence of his disease. As long as the division exists, the general body of workers, while it may suffer from the struggles of any one group within it, nevertheless supports them by its sympathy, because all are interested in the results of the contest carried on by each. Different sections of workers will exercise mutual restraint only when the termination of the {136} struggle leaves them face to face with each other, and not as now, with the common enemy. The ideal of a united society in which no one group uses its power to encroach upon the standards of another is, in short, unattainable, except through the preliminary abolition of functionless property. Those to whom a leisure class is part of an immutable order without which civilization is inconceivable, dare not admit, even to themselves, that the world is poorer, not richer, because of its existence. So, when, as now it is important that productive energy should be fully used, they stamp and cry, and write to _The Times_ about the necessity for increased production, though all the time they themselves, their way of life and expenditure, and their very existence as a leisure class, are among the causes why production is not increased. In all their economic plans they make one reservation, that, however necessitous the world may be, it shall still support them. But men who work do not make that reservation, nor is there any reason why they should; and appeals to them to produce more wealth because the public needs it usually fall upon deaf ears, even when such appeals are not involved in the ignorance and misapprehensions which often characterize them. For the workman is not the servant of the consumer, for whose sake greater production is demanded, but of shareholders, whose primary aim is dividends, and to whom all production, however futile or frivolous, so long as it yields dividends, is the same. It is useless to urge that he should produce more wealth for the {137} community, unless at the same time he is assured that it is the community which will benefit in proportion as more wealth is produced. If every unnecessary charge upon coal-getting had been eliminated, it would be reasonable that the miners should set a much needed example by refusing to extort better terms for themselves at the expense of the public. But there is no reason why they should work for lower wages or longer hours as long as those who are to-day responsible for the management of the industry conduct it with "the extravagance and waste" stigmatized by the most eminent official witness before the Coal Commission, or why the consumer should grumble at the rapacity of the miner as long as he allows himself to be mulcted by swollen profits, the costs of an ineffective organization, and unnecessary payments to superfluous middlemen. If to-day the miner or any other workman produces more, he has no guarantee that the result will be lower prices rather than higher dividends and larger royalties, any more than, as a workman, he can determine the quality of the wares which his employer supplies to customers, or the price at which they are sold. Nor, as long as he is directly the servant of a profit-making company, and only indirectly the servant of the community, can any such guarantee be offered him. It can be offered only in so far as he stands in an immediate and direct relation to the public for whom industry is carried on, so that, when all costs have been met, any surplus will pass to it, and not to private individuals. It will be accepted only in so far as the workers in each industry are not merely servants executing orders, but {138} themselves have a collective responsibility for the character of the service, and can use their organizations not merely to protect themselves against exploitation, but to make positive contributions to the administration and development of their industry. [1] _Coal Industry Commission, Minutes of Evidence_, pp. 9261-9. {139} IX THE CONDITION OF EFFICIENCY Thus it is not only for the sake of the producers, on whom the old industrial order weighed most heavily, that a new industrial order is needed. It is needed for the sake of the consumers, because the ability on which the old industrial order prided itself most and which is flaunted most as an argument against change, the ability to serve them effectively, is itself visibly breaking down. It is breaking down at what was always its most vulnerable point, the control of the human beings whom, with characteristic indifference to all but their economic significance, it distilled for its own purposes into an abstraction called "Labor." The first symptom of its collapse is what the first symptom of economic collapses has usually been in the past--the failure of customary stimuli to evoke their customary response in human effort. Till that failure is recognized and industry reorganized so that new stimuli may have free play, the collapse will not correct itself, but, doubtless with spasmodic revivals and flickerings of energy, will continue and accelerate. The cause of it is simple. It is that those whose business it is to direct economic activity are increasingly incapable of directing the men upon whom economic activity depends. The fault is not that of individuals, but of a system, of Industrialism itself. {140} During the greater part of the nineteenth century industry was driven by two forces, hunger and fear, and the employer commanded them both. He could grant or withhold employment as he pleased. If men revolted against his terms he could dismiss them, and if they were dismissed what confronted them was starvation or the workhouse. Authority was centralized; its instruments were passive; the one thing which they dreaded was unemployment. And since they could neither prevent its occurrence nor do more than a little to mitigate its horrors when it occurred, they submitted to a discipline which they could not resist, and industry pursued its course through their passive acquiescence in a power which could crush them individually if they attempted to oppose it. That system might be lauded as efficient or denounced as inhuman. But, at least, as its admirers were never tired of pointing out, it worked. And, like the Prussian State, which alike in its virtues and deficiencies it not a little resembled, as long as it worked it survived denunciations of its methods, as a strong man will throw off a disease. But to-day it is ceasing to have even the qualities of its defects. It is ceasing to be efficient. It no longer secures the ever-increasing output of wealth which it offered in its golden prime, and which enabled it to silence criticism by an imposing spectacle of material success. Though it still works, it works unevenly, amid constant friction and jolts and stoppages, without the confidence of the public and without full confidence even in itself, a tyrant who must intrigue and cajole where formerly he commanded, a gaoler who, if not yet {141} deprived of whip, dare only administer moderate chastisement, and who, though he still protests that he alone can keep the treadmill moving and get the corn ground, is compelled to surrender so much of his authority as to make it questionable whether he is worth his keep. For the instruments through which Capitalism exercised discipline are one by one being taken from it. It cannot pay what wages it likes or work what hours it likes. In well-organized industries the power of arbitrary dismissal, the very center of its authority, is being shaken, because men will no longer tolerate a system which makes their livelihood dependent on the caprices of an individual. In all industries alike the time is not far distant when the dread of starvation can no longer be used to cow dissatisfied workers into submission, because the public will no longer allow involuntary unemployment to result in starvation. And if Capitalism is losing its control of men's bodies, still more has it lost its command of their minds. The product of a civilization which regarded "the poor" as instruments, at worst of the luxuries, at best of the virtues, of the rich, its psychological foundation fifty years ago was an ignorance in the mass of mankind which led them to reverence as wisdom the very follies of their masters, and an almost animal incapacity for responsibility. Education and experience have destroyed the passivity which was the condition of the perpetuation of industrial government in the hands of an oligarchy of private capitalists. The workman of to-day has as little belief in the intellectual superiority of many of those who direct industry as he has in the morality of {142} the system. It appears to him to be not only oppressive, but wasteful, unintelligent and inefficient. In the light of his own experience in the factory and the mine, he regards the claim of the capitalist to be the self-appointed guardian of public interests as a piece of sanctimonious hypocrisy. For he sees every day that efficiency is sacrificed to shortsighted financial interests; and while as a man he is outraged by the inhumanity of the industrial order, as a professional who knows the difference between good work and bad he has a growing contempt at once for its misplaced parsimony and its misplaced extravagance, for the whole apparatus of adulteration, advertisement and quackery which seems inseparable from the pursuit of profit as the main standard of industrial success. So Capitalism no longer secures strenuous work by fear, for it is ceasing to be formidable. And it cannot secure it by respect, for it has ceased to be respected. And the very victories by which it seeks to reassert its waning prestige are more disastrous than defeats. Employers may congratulate themselves that they have maintained intact their right to freedom of management, or opposed successfully a demand for public ownership, or broken a movement for higher wages and shorter hours. But what is success in a trade dispute or in a political struggle is often a defeat in the workshop: the workmen may have lost, but it does not follow that their employers, still less that the public, which is principally composed of workmen, have won. For the object of industry is to produce goods, and to produce them at the lowest cost in human effort. {143} But there is no alchemy which will secure efficient production from the resentment or distrust of men who feel contempt for the order under which they work. It is a commonplace that credit is the foundation of industry. But credit is a matter of psychology, and the workman has his psychology as well as the capitalist. If confidence is necessary to the investment of capital, confidence is not less necessary to the effective performance of labor by men whose sole livelihood depends upon it. If they are not yet strong enough to impose their will, they are strong enough to resist when their masters would impose theirs. They may work rather than strike. But they will work to escape dismissal, not for the greater glory of a system in which they do not believe; and, if they are dismissed, those who take their place will do the same. That this is one cause of a low output has been stated both by employers and workers in the building industry, and by the representatives of the miners before the Coal Commission. It was reiterated with impressive emphasis by Mr. Justice Sankey. Nor is it seriously contested by employers themselves. What else, indeed, do their repeated denunciations of "restriction of output" mean except that they have failed to organize industry so as to secure the efficient service which it is their special function to provide? Nor is it appropriate to the situation to indulge in full-blooded denunciations of the "selfishness" of the working classes. "To draw an indictment against a whole nation" is a procedure which is as impossible in industry as it is in politics. Institutions must be adapted to human nature, not {144} human nature to institutions. If the effect of the industrial system is such that a large and increasing number of ordinary men and women find that it offers them no adequate motive for economic effort, it is mere pedantry to denounce men and women instead of amending the system. Thus the time has come when absolutism in industry may still win its battles, but loses the campaign, and loses it on the very ground of economic efficiency which was of its own selection. In the period of transition, while economic activity is distracted by the struggle between those who have the name and habit of power, but no longer the full reality of it, and those who are daily winning more of the reality of power but are not yet its recognized repositories, it is the consumer who suffers. He has neither the service of docile obedience, nor the service of intelligent co-operation. For slavery will work--as long as the slaves will let it; and freedom will work when men have learned to be free; but what will not work is a combination of the two. So the public goes short of coal not only because of the technical deficiencies of the system under which it is raised and distributed, but because the system itself has lost its driving force--because the coal owners can no longer persuade the miners into producing more dividends for them and more royalties for the owners of minerals, while the public cannot appeal to them to put their whole power into serving itself, because it has chosen that they should be the servants, not of itself, but of shareholders. And, this dilemma is not, as some suppose, temporary, {145} the aftermath of war, or peculiar to the coal industry, as though the miners alone were the children of sin which in the last few months they have been described to be. It is permanent; it has spread far; and, as sleeping spirits are stirred into life by education and one industry after another develops a strong corporate consciousness, it will spread further. Nor will it be resolved by lamentations or menaces or denunciations of leaders whose only significance is that they say openly what plain men feel privately. For the matter at bottom is one of psychology. What has happened is that the motives on which the industrial system relied for several generations to secure efficiency, secure it no longer. And it is as impossible to restore them, to revive by mere exhortation the complex of hopes and fears and ignorance and patient credulity and passive acquiescence, which together made men, fifty years ago, plastic instruments in the hands of industrialism, as to restore innocence to any others of those who have eaten of the tree of knowledge. The ideal of some intelligent and respectable business men, the restoration of the golden sixties, when workmen were docile and confiding, and trade unions were still half illegal, and foreign competition meant English competition in foreign countries, and prices were rising a little and not rising too much, is the one Utopia which can never be realized. The King may walk naked as long as his courtiers protest that he is clad; but when a child or a fool has broken the spell a tailor is more important than all their admiration. If the public, which suffers from the slackening of economic activity, {146} desires to end its _malaise_, it will not laud as admirable and all-sufficient the operation of motives which are plainly ceasing to move. It will seek to liberate new motives and to enlist them in its service. It will endeavor to find an alternative to incentives which were always degrading, to those who used them as much as to those upon whom they were used, and which now are adequate incentives no longer. And the alternative to the discipline which Capitalism exercised through its instruments of unemployment and starvation is the self-discipline of responsibility and professional pride. So the demand which aims at stronger organization, fuller responsibility, larger powers for the sake of the producer as a condition of economic liberty, the demand for freedom, is not antithetic to the demand for more effective work and increased output which is being made in the interests of the consumer. It is complementary to it, as the insistence by a body of professional men, whether doctors or university teachers, on the maintenance of their professional independence and dignity against attempts to cheapen the service is not hostile to an efficient service, but, in the long run, a condition of it. The course of wisdom for the consumer would be to hasten, so far as he can, the transition. For, as at present conducted, industry is working against the grain. It is compassing sea and land in its efforts to overcome, by ingenious financial and technical expedients, obstacles which should never have existed. It is trying to produce its results by conquering professional feeling instead of using it. It is carrying not only its inevitable economic burdens, but an ever increasing {147} load of ill will and skepticism. It has in fact "shot the bird which caused the wind to blow" and goes about its business with the corpse round its neck. Compared with that psychological incubus, the technical deficiencies of industry, serious though they often are, are a bagatelle, and the business men who preach the gospel of production without offering any plan for dealing with what is now the central fact in the economic situation, resemble a Christian apologist who should avoid disturbing the equanimity of his audience by carefully omitting all reference either to the fall of man or the scheme of salvation. If it is desired to increase the output of wealth, it is not a paradox, but the statement of an elementary economic truism to say that active and constructive co-operation on the part of the rank and file of workers would do more to contribute to that result than the discovery of a new coal-field or a generation of scientific invention. The first condition of enlisting on the side of constructive work the professional feeling which is now apathetic, or even hostile to it, is to secure that when it is given its results accrue to the public, not to the owner of property in capital, in land, or in other resources. For this reason the attenuation of the rights at present involved in the private ownership of industrial capital, or their complete abolition, is not the demand of idealogues, but an indispensable element in a policy of economic efficiency, since it is the condition of the most effective functioning of the human beings upon whom, though, like other truisms, it is often forgotten, {148} economic efficiency ultimately depends. But it is only one element. Co-operation may range from mere acquiescence to a vigilant and zealous initiative. The criterion of an effective system of administration is that it should succeed in enlisting in the conduct of industry the latent forces of professional pride to which the present industrial order makes little appeal, and which, indeed, Capitalism, in its war upon trade union organization, endeavored for many years to stamp out altogether. Nor does the efficacy of such an appeal repose upon the assumption of that "change in human nature," which is the triumphant _reductio ad absurdum_ advanced by those who are least satisfied with the working of human nature as it is. What it does involve is that certain elementary facts should be taken into account, instead of, as at present, being ignored. That all work is distasteful and that "every man desires to secure the largest income with the least effort" may be as axiomatic as it is assumed to be. But in practice it makes all the difference to the attitude of the individual whether the collective sentiment of the group to which he belongs is on the side of effort or against it, and what standard of effort it sets. That, as employers complain, the public opinion of considerable groups of workers is against an intensification of effort as long as part of its result is increased dividends for shareholders, is no doubt, as far as mere efficiency is concerned, the gravest indictment of the existing industrial order. But, even when public ownership has taken the place of private capitalism, its ability to command {149} effective service will depend ultimately upon its success in securing not merely that professional feeling is no longer an opposing force, but that it is actively enlisted upon the side of maintaining the highest possible standard of efficiency which can reasonably be demanded. To put the matter concretely, while the existing ownership of mines is a positive inducement to inefficient work, public ownership administered by a bureaucracy, if it would remove the technical deficiencies emphasized by Sir Richard Redmayne as inseparable from the separate administration of 3,000 pits by 1,500 different companies, would be only too likely to miss a capital advantage which a different type of administration would secure. It would lose both the assistance to be derived from the technical knowledge of practical men who know by daily experience the points at which the details of administration can be improved, and the stimulus to efficiency springing from the corporate pride of a profession which is responsible for maintaining and improving the character of its service. Professional spirit is a force like gravitation, which in itself is neither good nor bad, but which the engineer uses, when he can, to do his work for him. If it is foolish to idealize it, it is equally shortsighted to neglect it. In what are described _par excellence_ as "the services" it has always been recognized that _esprit de corps_ is the foundation of efficiency, and all means, some wise and some mischievous, are used to encourage it: in practice, indeed, the power upon which the country relied as its main safeguard in an emergency was the professional zeal of the navy and nothing else. Nor is {150} that spirit peculiar to the professions which are concerned with war. It is a matter of common training, common responsibilities, and common dangers. In all cases where difficult and disagreeable work is to be done, the force which elicits it is normally not merely money, but the public opinion and tradition of the little society in which the individual moves, and in the esteem of which he finds that which men value in success. To ignore that most powerful of stimuli as it is ignored to-day, and then to lament that the efforts which it produces are not forthcoming, is the climax of perversity. To aim at eliminating from industry the growth and action of corporate feeling, for fear lest an organized body of producers should exploit the public, is a plausible policy. But it is short-sighted. It is "to pour away the baby with the bath," and to lower the quality of the service in an attempt to safeguard it. A wise system of administration would recognize that professional solidarity can do much of its work for it more effectively than it can do it itself, because the spirit of his profession is part of the individual and not a force outside him, and would make it its object to enlist that temper in the public service. It is only by that policy, indeed, that the elaboration of cumbrous regulations to prevent men doing what they should not, with the incidental result of sometimes preventing them from doing what they should--it is only by that policy that what is mechanical and obstructive in bureaucracy can be averted. For industry cannot run without laws. It must either control itself by professional standards, or it must be controlled by officials who are not of the {151} craft and who, however zealous and well-meaning, can hardly have the feel of it in their fingers. Public control and criticism are indispensable. But they should not be too detailed, or they defeat themselves. It would be better that, once fair standards have been established, the professional organization should check offenses against prices and quality than that it should be necessary for the State to do so. The alternative to minute external supervision is supervision from within by men who become imbued with the public obligations of their trade in the very process of learning it. It is, in short, professional in industry. For this reason collectivism by itself is too simple a solution. Its failure is likely to be that of other rationalist systems. "Dann hat er die Theile in seiner Hand, Fehlt leider! nur das geistige Band." If industrial reorganization is to be a living reality, and not merely a plan upon paper, its aim must be to secure not only that industry is carried on for the service of the public, but that it shall be carried on with the active co-operation of the organizations of producers. But co-operation involves responsibility, and responsibility involves power. It is idle to expect that men will give their best to any system which they do not trust, or that they will trust any system in the control of which they do not share. Their ability to carry professional obligations depends upon the power which they possess to remove the obstacles which prevent those obligations from being discharged, and upon their willingness, when they possess the power, to use it. {152} Two causes appear to have hampered the committees which were established in connection with coal mines during the war to increase the output of coal. One was the reluctance of some of them to discharge the invidious task of imposing penalties for absenteeism on their fellow-workmen. The other was the exclusion of faults of management from the control of many committees. In some cases all went well till they demanded that, if the miners were penalized for absenteeism which was due to them, the management should be penalized similarly when men who desired to work were sent home because, as a result of defective organization, there was no work for them to do. Their demand was resisted as "interference with the management," and the attempt to enforce regularity of attendance broke down. Nor, to take another example from the same industry, is it to be expected that the weight of the miners' organization will be thrown on to the side of greater production, if it has no power to insist on the removal of the defects of equipment and organization, the shortage of trams, rails, tubs and timber, the "creaming" of the pits by the working of easily got coal to their future detriment, their wasteful layout caused by the vagaries of separate ownership, by which at present the output is reduced. The public cannot have it both ways. If it allows workmen to be treated as "hands" it cannot claim the service of their wills and their brains. If it desires them to show the zeal of skilled professionals, it must secure that they have sufficient power to allow of their discharging professional responsibilities. In order that workmen may abolish any restrictions on output which {153} may be imposed by them, they must be able to insist on the abolition of the restrictions, more mischievous because more effective, which, as the Committee on Trusts has recently told us, are imposed by organizations of employers. In order that the miners' leaders, instead of merely bargaining as to wages, hours and working conditions, may be able to appeal to their members to increase the supply of coal, they must be in a position to secure the removal of the causes of low output which are due to the deficiencies of the management, and which are to-day a far more serious obstacle than any reluctance on the part of the miner. If the workmen in the building trade are to take combined action to accelerate production, they must as a body be consulted as to the purpose to which their energy is to be applied, and must not be expected to build fashionable houses, when what are required are six-roomed cottages to house families which are at present living with three persons to a room. It is deplorable, indeed, that any human beings should consent to degrade themselves by producing the articles which a considerable number of workmen turn out to-day, boots which are partly brown paper, and furniture which is not fit to use. The revenge of outraged humanity is certain, though it is not always obvious; and the penalty paid by the consumer for tolerating an organization of industry which, in the name of efficiency, destroyed the responsibility of the workman, is that the service with which he is provided is not even efficient. He has always paid it, though he has not seen it, in quality. To-day he is beginning to {154} realize that he is likely to pay it in quantity as well. If the public is to get efficient service, it can get it only from human beings, with the initiative and caprices of human beings. It will get it, in short, in so far as it treats industry as a responsible profession. The collective responsibility of the workers for the maintenance of the standards of their profession is, then, the alternative to the discipline which Capitalism exercised in the past, and which is now breaking down. It involves a fundamental change in the position both of employers and of trade unions. As long as the direction of industry is in the hands of property-owners or their agents, who are concerned to extract from it the maximum profit for themselves, a trade union is necessarily a defensive organization. Absorbed, on the one hand, in the struggle to resist the downward thrust of Capitalism upon the workers' standard of life, and denounced, on the other, if it presumes, to "interfere with management," even when management is most obviously inefficient, it is an opposition which never becomes a government and which has neither the will nor the power to assume responsibility for the quality of the service offered to the consumer. If the abolition of functionless property transferred the control of production to bodies representing those who perform constructive work and those who consume the goods produced, the relation of the worker to the public would no longer be indirect but immediate, and associations which are now purely defensive would be in a position not merely to criticize and oppose but to advise, to initiate and to enforce upon their own members the obligations of the craft. {155} It is obvious that in such circumstances the service offered the consumer, however carefully safeguarded by his representation on the authorities controlling each industry, would depend primarily upon the success of professional organizations in finding a substitute for the discipline exercised to-day by the agents of property-owners. It would be necessary for them to maintain by their own action the zeal, efficiency and professional pride which, when the barbarous weapons of the nineteenth century have been discarded, would be the only guarantee of a high level of production. Nor, once this new function has been made possible for professional organizations, is there any extravagance in expecting them to perform it with reasonable competence. How far economic motives are balked to-day and could be strengthened by a different type of industrial organization, to what extent, and under what conditions, it is possible to enlist in the services of industry motives which are not purely economic, can be ascertained only after a study of the psychology of work which has not yet been made. Such a study, to be of value, must start by abandoning the conventional assumptions, popularized by economic textbooks and accepted as self-evident by practical men, that the motives to effort are simple and constant in character, like the pressure of steam in a boiler, that they are identical throughout all ranges of economic activity, from the stock exchange to the shunting of wagons or laying of bricks, and that they can be elicited and strengthened only by directly economic incentives. In so far as motives in industry have been considered hitherto, it has usually been done {156} by writers who, like most exponents of scientific management, have started by assuming that the categories of business psychology could be offered with equal success to all classes of workers and to all types of productive work. Those categories appear to be derived from a simplified analysis of the mental processes of the company promoter, financier or investor, and their validity as an interpretation of the motives and habits which determine the attitude to his work of the bricklayer, the miner, the dock laborer or the engineer, is precisely the point in question. Clearly there are certain types of industry to which they are only partially relevant. It can hardly be assumed, for example, that the degree of skill and energy brought to his work by a surgeon, a scientific investigator, a teacher, a medical officer of health, an Indian civil servant and a peasant proprietor are capable of being expressed precisely and to the same degree in terms of the economic advantage which those different occupations offer. Obviously those who pursue them are influenced to some considerable, though uncertain, extent by economic incentives. Obviously, again, the precise character of each process or step in the exercise of their respective avocations, the performance of an operation, the carrying out of a piece of investigation, the selection of a particular type of educational method, the preparation of a report, the decision of a case or the care of live stock, is not immediately dependent upon an exact calculation of pecuniary gain or loss. What appears to be the case is that in certain walks of life, while the occupation is chosen after a consideration of {157} its economic advantages, and while economic reasons exact the minimum degree of activity needed to avert dismissal from it or "failure," the actual level of energy or proficiency displayed depend largely upon conditions of a different order. Among them are the character of the training received before and after entering the occupation, the customary standard of effort demanded by the public opinion of one's fellows, the desire for the esteem of the small circle in which the individual moves and to be recognized as having "made good" and not to have "failed," interest in one's work, ranging from devotion to a determination to "do justice" to it, the pride of the craftsman, the "tradition of the service." It would be foolish to suggest that any considerable body of men are uninfluenced by economic considerations. But to represent them as amenable to such incentives only is to give a quite unreal and bookish picture of the actual conditions under which the work of the world is carried on. How large a part such considerations play varies from one occupation to another, according to the character of the work which it does and the manner in which it is organized. In what is called _par excellence_ industry, calculations of pecuniary gain and loss are more powerful than in most of the so-called professions, though even in industry they are more constantly present to the minds of the business men who "direct" it, than to those of the managers and technicians, most of whom are paid fixed salaries, or to the rank and file of wage-workers. In the professions of teaching and medicine, in many branches of the {158} public service, the necessary qualities are secured, without the intervention of the capitalist employer, partly by pecuniary incentives, partly by training and education, partly by the acceptance on the part of those entering them of the traditional obligations of their profession as part of the normal framework of their working lives. But this difference is not constant and unalterable. It springs from the manner in which different types of occupation are organized, on the training which they offer, and the _morale_ which they cultivate among their members. The psychology of a vocation can in fact be changed; new motives can be elicited, provided steps are taken to allow them free expression. It is as feasible to turn building into an organized profession, with a relatively high code of public honor, as it was to do the same for medicine or teaching. The truth is that we ought radically to revise the presuppositions as to human motives on which current presentations of economic theory are ordinarily founded and in terms of which the discussion of economic question is usually carried on. The assumption that the stimulus of imminent personal want is either the only spur, or a sufficient spur, to productive effort is a relic of a crude psychology which has little warrant either in past history or in present experience. It derives what plausibility it possesses from a confusion between work in the sense of the lowest _quantum_ of activity needed to escape actual starvation, and the work which is given, irrespective of the fact that elementary wants may already have been satisfied, through the natural disposition of ordinary men to maintain, and of extraordinary {159} men to improve upon, the level of exertion accepted as reasonable by the public opinion of the group of which they are members. It is the old difference, forgotten by society as often as it is learned, between the labor of the free man and that of the slave. Economic fear may secure the minimum effort needed to escape economic penalties. What, however, has made progress possible in the past, and what, it may be suggested, matters to the world to-day, is not the bare minimum which is required to avoid actual want, but the capacity of men to bring to bear upon their tasks a degree of energy, which, while it can be stimulated by economic incentives, yields results far in excess of any which are necessary merely to avoid the extremes of hunger or destitution. That capacity is a matter of training, tradition and habit, at least as much as of pecuniary stimulus, and the ability of a professional association representing the public opinion of a group of workers to raise it is, therefore, considerable. Once industry has been liberated from its subservience to the interests of the functionless property-owner, it is in this sphere that trade unions may be expected increasingly to find their function. Its importance both for the general interests of the community and for the special interests of particular groups of workers can hardly be exaggerated. Technical knowledge and managerial skill are likely to be available as readily for a committee appointed by the workers in an industry as for a committee appointed, as now, by the shareholders. But it is more and more evident to-day that the crux of the economic situation is not {160} the technical deficiencies of industrial organization, but the growing inability of those who direct industry to command the active good will of the _personnel_. Their co-operation is promised by the conversion of industry into a profession serving the public, and promised, as far as can be judged, by that alone. Nor is the assumption of the new and often disagreeable obligations of internal discipline and public responsibility one which trade unionism can afford, once the change is accomplished, to shirk, however alien they may be to its present traditions. For ultimately, if by slow degrees, power follows the ability to wield it; authority goes with function. The workers cannot have it both ways. They must choose whether to assume the responsibility for industrial discipline and become free, or to repudiate it and continue to be serfs. If, organized as professional bodies, they can provide a more effective service than that which is now, with increasing difficulty, extorted by the agents of capital, they will have made good their hold upon the future. If they cannot, they will remain among the less calculable instruments of production which many of them are to-day. The instinct of mankind warns it against accepting at their face value spiritual demands which cannot justify themselves by practical achievements. And the road along which the organized workers, like any other class, must climb to power, starts from the provision of a more effective economic service than their masters, as their grip upon industry becomes increasingly vacillating and uncertain, are able to supply. {161} X THE POSITION OF THE BRAIN WORKER The conversion of industry into a profession will involve at least as great a change in the position of the management as in that of the manual workers. As each industry is organized for the performance of function, the employer will cease to be a profit maker and become what, in so far as he holds his position by a reputable title, he already is, one workman among others. In some industries, where the manager is a capitalist as well, the alteration may take place through such a limitation of his interest as a capitalist as it has been proposed by employers and workers to introduce into the building industry. In others, where the whole work of administration rests on the shoulders of salaried managers, it has already in part been carried out. The economic conditions of this change have, indeed, been prepared by the separation of ownership from management, and by the growth of an intellectual proletariat to whom the scientific and managerial work of industry is increasingly intrusted. The concentration of businesses, the elaboration of organization, and the developments springing from the application of science to industry have resulted in the multiplication of a body of industrial brain workers who make the old classifications into "employers and workmen," which is still current in common speech, an absurdly {162} misleading description of the industrial system as it exists to-day. To complete the transformation all that is needed is that this new class of officials, who fifty years ago were almost unknown, should recognize that they, like the manual workers, are the victims of the domination of property, and that both professional pride and economic interest require that they should throw in their lot with the rest of those who are engaged in constructive work. Their position to-day is often, indeed, very far from being a happy one. Many of them, like some mine managers, are miserably paid. Their tenure of their posts is sometimes highly insecure. Their opportunities for promotion may be few, and distributed with a singular capriciousness. They see the prizes of industry awarded by favoritism, or by the nepotism which results in the head of a business unloading upon it a family of sons whom it would be economical to pay to keep out of it, and which, indignantly denounced on the rare occasions on which it occurs in the public service, is so much the rule in private industry that no one even questions its propriety. During the war they have found that, while the organized workers have secured advances, their own salaries have often remained almost stationary, because they have been too genteel to take part in trade unionism, and that to-day they are sometimes paid less than the men for whose work they are supposed to be responsible. Regarded by the workmen as the hangers-on of the masters, and by their employers as one section among the rest of the "hands," they have the odium of capitalism without its power or its profits. {163} From the conversion of industry into a profession those who at present do its intellectual work have as much to gain as the manual workers. For the principle of function, for which we have pleaded as the basis of industrial organization, supplies the only intelligible standard by which the powers and duties of the different groups engaged in industry can be determined. At the present time no such standard exists. The social order of the pre-industrial era, of which faint traces have survived in the forms of academic organization, was marked by a careful grading of the successive stages in the progress from apprentice to master, each of which was distinguished by clearly defined rights and duties, varying from grade to grade and together forming a hierarchy of functions. The industrial system which developed in the course of the nineteenth century did not admit any principle of organization other than the convenience of the individual, who by enterprise, skill, good fortune, unscrupulous energy or mere nepotism, happened at any moment to be in a position to wield economic authority. His powers were what he could exercise; his rights were what at any time he could assert. The Lancashire mill-owner of the fifties was, like the Cyclops, a law unto himself. Hence, since subordination and discipline are indispensable in any complex undertaking, the subordination which emerged in industry was that of servant to master, and the discipline such as economic strength could impose upon economic weakness. The alternative to the allocation of power by the struggle of individuals for self-aggrandizement is its {164} allocation according to function, that each group in the complex process of production should wield so much authority as, and no more authority than, is needed to enable it to perform the special duties for which it is responsible. An organization of industry based on this principle does not imply the merging of specialized economic functions in an undifferentiated industrial democracy, or the obliteration of the brain workers beneath the sheer mass of artisans and laborers. But it is incompatible with the unlimited exercise of economic power by any class or individual. It would have as its fundamental rule that the only powers which a man can exercise are those conferred upon him in virtue of his office. There would be subordination. But it would be profoundly different from that which exists to-day. For it would not be the subordination of one man to another, but of all men to the purpose for which industry is carried on. There would be authority. But it would not be the authority of the individual who imposes rules in virtue of his economic power for the attainment of his economic advantage. It would be the authority springing from the necessity of combining different duties to attain a common end. There would be discipline. But it would be the discipline involved in pursuing that end, not the discipline enforced upon one man for the convenience or profit of another. Under such an organization of industry the brain worker might expect, as never before, to come to his own. He would be estimated and promoted by his capacity, not by his means. He would be less likely than at present to find doors closed to him because of poverty. His {165} judges would be his colleagues, not an owner of property intent on dividends. He would not suffer from the perversion of values which rates the talent and energy by which wealth is created lower than the possession of property, which is at best their pensioner and at worst the spend-thrift of what intelligence has produced. In a society organized for the encouragement of creative activity those who are esteemed most highly will be those who create, as in a world organized for enjoyment they are those who own. Such considerations are too general and abstract to carry conviction. Greater concreteness may be given them by comparing the present position of mine-managers with that which they would occupy were effect given to Mr. Justice Sankey's scheme for the nationalization of the Coal Industry. A body of technicians who are weighing the probable effects of such a reorganization will naturally consider them in relation both to their own professional prospects and to the efficiency of the service of which they are the working heads. They will properly take into account questions of salaries, pensions, security of status and promotion. At the same time they will wish to be satisfied as to points which, though not less important, are less easily defined. Under which system, private or public ownership, will they have most personal discretion or authority over the conduct of matters within their professional competence? Under which will they have the best guarantees that their special knowledge will carry due weight, and that, when handling matters of art, they will not be overridden or obstructed by amateurs? {166} As far as the specific case of the Coal Industry is concerned the question of security and salaries need hardly be discussed. The greatest admirer of the present system would not argue that security of status is among the advantages which it offers to its employees. It is notorious that in some districts, at least, managers are liable to be dismissed, however professionally competent they may be, if they express in public views which are not approved by the directors of their company. Indeed, the criticism which is normally made on the public services, and made not wholly without reason, is that the security which they offer is excessive. On the question of salaries rather more than one-half of the colliery companies of Great Britain themselves supplied figures to the Coal Industry Commission.[1] If their returns may be trusted, it would appear that mine-managers are paid, as a class, salaries the parsimony of which is the more surprising in view of the emphasis laid, and quite properly laid, by the mine-owners on the managers' responsibilities. The service of the State does not normally offer, and ought not to offer, financial prizes comparable with those of private industry. But it is improbable, had the mines been its property during {167} the last ten years, that more than one-half the managers would have been in receipt of salaries of under £301 per year, and of less than £500 in 1919, by which time prices had more than doubled, and the aggregate profits of the mine-owners (of which the greater part was, however, taken by the State in taxation) had amounted in five years to £160,000,000. It would be misleading to suggest that the salaries paid to mine-managers are typical of private industry, nor need it be denied that the probable effect of turning an industry into a public service would be to reduce the size of the largest prizes at present offered. What is to be expected is that the lower and medium salaries would be raised, and the largest somewhat diminished. It is hardly to be denied, at any rate, that the majority of brain workers in industry have nothing to fear on financial grounds from such a change as is proposed by Mr. Justice Sankey. Under the normal organization of industry, profits, it cannot be too often insisted, do not go to them but to shareholders. There does not appear to be any reason to suppose that the salaries of managers in the mines making more than 5/- profit a ton were any larger than those making under 3/-. The financial aspect of the change is not, however, the only point which a group of managers or technicians have to consider. They have also to weigh its effect on their professional status. Will they have as much freedom, initiative and authority in the service of the community as under private ownership? How that question is answered depends upon the form given to the administrative system through which a public service is {168} conducted. It is possible to conceive an arrangement under which the life of a mine-manager would be made a burden to him by perpetual recalcitrance on the part of the men at the pit for which he is responsible. It is possible to conceive one under which he would be hampered to the point of paralysis by irritating interference from a bureaucracy at headquarters. In the past some managers of "co-operative workshops" suffered, it would seem, from the former: many officers of Employment Exchanges are the victims, unless common rumor is misleading, of the latter. It is quite legitimate, indeed it is indispensable, that these dangers should be emphasized. The problem of reorganizing industry is, as has been said above, a problem of constitution making. It is likely to be handled successfully only if the defects to which different types of constitutional machinery are likely to be liable are pointed out in advance. Once, however, these dangers are realized, to devise precautions against them appears to be a comparatively simple matter. If Mr. Justice Sankey's proposals be taken as a concrete example of the position which would be occupied by the managers in a nationalized industry, it will be seen that they do not involve either of the two dangers which are pointed out above. The manager will, it is true, work with a Local Mining Council or pit committee, which is to "meet fortnightly, or oftener if need be, to advise the manager on all questions concerning the direction and safety of the mine," and "if the manager refuses to take the advice of the Local Mining Council on any question concerning the safety and health of the mine, such question shall be referred to {169} the District Mining Council." It is true also that, once such a Local Mining Council is formally established, the manager will find it necessary to win its confidence, to lead by persuasion, not by mere driving, to establish, in short, the same relationships of comradeship and good will as ought to exist between the colleagues in any common undertaking. But in all this there is nothing to undermine his authority, unless "authority" be understood to mean an arbitrary power which no man is fit to exercise, and which few men, in their sober moments, would claim. The manager will be appointed by, and responsible to, not the men whose work he supervises, but the District Mining Council, which controls all the pits in a district, and on that council he will be represented. Nor will he be at the mercy of a distant "clerkocracy," overwhelming him with circulars and overriding his expert knowledge with impracticable mandates devised in London. The very kernel of the schemes advanced both by Justice Sankey and by the Miners' Federation is decentralized administration within the framework of a national system. There is no question of "managing the industry from Whitehall." The characteristics of different coal-fields vary so widely that reliance on local knowledge and experience are essential, and it is to local knowledge and experience that it is proposed to intrust the administration of the industry. The constitution which is recommended is, in short, not "Unitary" but "Federal." There will be a division of functions and power between central authorities and district authorities. The former will lay down general rules as to those matters which must necessarily {170} be dealt with on a national basis. The latter will administer the industry within their own districts, and, as long as they comply with those rules and provide their quota of coal, will possess local autonomy and will follow the method of working the pits which they think best suited to local conditions. Thus interpreted, public ownership does not appear to confront the brain worker with the danger of unintelligent interference with his special technique, of which he is, quite naturally, apprehensive. It offers him, indeed, far larger opportunities of professional development than are open to all but a favored few to-day, when the considerations of productive efficiency, which it is his special _métier_ to promote, are liable to be overridden by short-sighted financial interests operating through the pressure of a Board of Directors who desire to show an immediate profit to their shareholders, and who, to obtain it, will "cream" the pit, or work it in a way other than considerations of technical efficiency would dictate. And the interest of the community in securing that the manager's professional skill is liberated for the service of the public, is as great as his own. For the economic developments of the last thirty years have made the managerial and technical _personnel_ of industry the repositories of public responsibilities of quite incalculable importance, which, with the best will in the world, they can hardly at present discharge. The most salient characteristic of modern industrial organization is that production is carried on under the general direction of business men, who do not themselves necessarily know anything of productive processes. "Business" {171} and "industry" tend to an increasing extent to form two compartments, which, though united within the same economic system, employ different types of _personnel_, evoke different qualities and recognize different standards of efficiency and workmanship. The technical and managerial staff of industry is, of course, as amenable as other men to economic incentives. But their special work is production, not finance; and, provided they are not smarting under a sense of economic injustice, they want, like most workmen, to "see the job done properly." The business men who ultimately control industry are concerned with the promotion and capitalization of companies, with competitive selling and the advertisement of wares, the control of markets, the securing of special advantages, and the arrangement of pools, combines and monopolies. They are preoccupied, in fact, with financial results, and are interested in the actual making of goods only in so far as financial results accrue from it. The change in organization which has, to a considerable degree, specialized the spheres of business and management is comparable in its importance to that which separated business and labor a century and a half ago. It is specially momentous for the consumer. As long as the functions of manager, technician and capitalist were combined, as in the classical era of the factory system, in the single person of "the employer," it was not unreasonable to assume that profits and productive efficiency ran similarly together. In such circumstances the ingenuity with which economists proved {172} that, in obedience to "the law of substitution," he would choose the most economical process, machine, or type of organization, wore a certain plausibility. True, the employer might, even so, adulterate his goods or exploit the labor of a helpless class of workers. But as long as the person directing industry was himself primarily a manager, he could hardly have the training, ability or time, even if he had the inclination, to concentrate special attention on financial gains unconnected with, or opposed to, progress in the arts of production, and there was some justification for the conventional picture which represented "the manufacturer" as the guardian of the interests of the consumer. With the drawing apart of the financial and technical departments of industry--with the separation of "business" from "production"--the link which bound profits to productive efficiency is tending to be snapped. There are more ways than formerly of securing the former without achieving the latter; and when it is pleaded that the interests of the captain of industry stimulate the adoption of the most "economical" methods and thus secure industrial progress, it is necessary to ask "economical for whom"? Though the organization of industry which is most efficient, in the sense of offering the consumer the best service at the lowest real cost, may be that which is most profitable to the firm, it is also true that profits are constantly made in ways which have nothing to do with efficient production, and which sometimes, indeed, impede it. The manner in which "business" may find that the methods which pay itself best are those which a truly {173} scientific "management" would condemn may be illustrated by three examples. In the first place, the whole mass of profits which are obtained by the adroit capitalization of a new business, or the reconstruction of one which already exists, have hardly any connection with production at all. When, for instance, a Lancashire cotton mill capitalized at £100,000 is bought by a London syndicate which re-floats it with a capital of £500,000--not at all an extravagant case--what exactly has happened? In many cases the equipment of the mill for production remains, after the process, what it was before it. It is, however, valued at a different figure, because it is anticipated that the product of the mill will sell at a price which will pay a reasonable profit not only upon the lower, but upon the higher, capitalization. If the apparent state of the market and prospects of the industry are such that the public can be induced to believe this, the promoters of the reconstruction find it worth while to recapitalize the mill on the new basis. They make their profit not as manufacturers, but as financiers. They do not in any way add to the productive efficiency of the firm, but they acquire shares which will entitle them to an increased return. Normally, if the market is favorable, they part with the greater number of them as soon as they are acquired. But, whether they do so or not, what has occurred is a process by which the business element in industry obtains the right to a larger share of the product, without in any way increasing the efficiency of the service which is offered to the consumer. Other examples of the manner in which the control of {174} production by "business" cuts across the line of economic progress are the wastes of competitive industry and the profits of monopoly. It is well known that the price paid by the consumer includes marketing costs, which to a varying, but to a large, extent are expenses not of supplying the goods, but of supplying them under conditions involving the expenses of advertisement and competitive distribution. For the individual firm such expenses, which enable it to absorb part of a rival's trade, may be an economy: to the consumer of milk or coal--to take two flagrant instances--they are pure loss. Nor, as is sometimes assumed, are such wastes confined to distribution. Technical reasons are stated by railway managers to make desirable a unification of railway administration and by mining experts of mines. But, up to the war, business considerations maintained the expensive system under which each railway company was operated as a separate system, and still prevent collieries, even collieries in the same district, from being administered as parts of a single organization. Pits are drowned out by water, because companies cannot agree to apportion between them the costs of a common drainage system; materials are bought, and products sold, separately, because collieries will not combine; small coal is left in to the amount of millions of tons because the most economical and technically efficient working of the seams is not necessarily that which yields the largest profit to the business men who control production. In this instance the wide differences in economic strength which exist between different mines discourage the unification which is economically desirable; naturally the {175} directors of a company which owns "a good thing" do not desire to merge interests with a company working coal that is poor in quality or expensive to mine. When, as increasingly happens in other industries, competitive wastes, or some of them, are eliminated by combination, there is a genuine advance in technical efficiency, which must be set to the credit of business motives. In that event, however, the divergence between business interests and those of the consumers is merely pushed one stage further forward; it arises, of course, over the question of prices. If any one is disposed to think that this picture of the economic waste which accompanies the domination of production by business interests is overdrawn, he may be invited to consider the criticisms upon the system passed by the "efficiency engineers," who are increasingly being called upon to advise as to industrial organization and equipment. "The higher officers of the corporation," writes Mr. H. L. Gantt of a Public Utility Company established in America during the war, "have all without exception been men of the 'business' type of mind, who have made their success through financiering, buying, selling, etc.... As a matter of fact it is well known that our industrial system has not measured up as we had expected.... _The reason for its falling short is undoubtedly that the men directing it had been trained in a business system operated for profits, and did not understand one operated solely for production_. This is no criticism of the men as individuals; they simply did not know the job, and, what is worse, they did not know that they did not know it." {176} In so far, then, as "Business" and "Management" are separated, the latter being employed under the direction of the former, it cannot be assumed that the direction of industry is in the hands of persons whose primary concern is productive efficiency. That a considerable degree of efficiency will result incidentally from the pursuit of business profits is not, of course, denied. What seems to be true, however, is that the main interest of those directing an industry which has reached this stage of development is given to financial strategy and the control of markets, because the gains which these activities offer are normally so much larger than those accruing from the mere improvement of the processes of production. It is evident, however, that it is precisely that improvement which is the main interest of the consumer. He may tolerate large profits as long as they are thought to be the symbol of efficient production. But what he is concerned with is the supply of goods, not the value of shares, and when profits appear to be made, not by efficient production, but by skilful financiering or shrewd commercial tactics, they no longer appear meritorious. If, in disgust at what he has learned to call "profiteering," the consumer seeks an alternative to a system under which product is controlled by "Business," he can hardly find it except by making an ally of the managerial and technical _personnel_ of industry. They organize the service which he requires; they are relatively little implicated, either by material interest or by psychological bias, in the financial methods which he distrusts; they often find the control of their professions by business men who are {177} primarily financiers irritating in the obstruction which it offers to technical efficiency, as well as sharp and close-fisted in the treatment of salaries. Both on public and professional grounds they belong to a group which ought to take the initiative in promoting a partnership between the producers and the public. They can offer the community the scientific knowledge and specialized ability which is the most important condition of progress in the arts of production. It can offer them a more secure and dignified status, larger opportunities for the exercise of their special talents, and the consciousness that they are giving the best of their work and their lives, not to enriching a handful of uninspiring, if innocuous, shareholders, but to the service of the great body of their fellow-countrymen. If the last advantage be dismissed as a phrase--if medical officers of health, directors of education, directors of the co-operative wholesale be assumed to be quite uninfluenced by any consciousness of social service--the first two, at any rate, remain. And they are considerable. It is this gradual disengagement of managerial technique from financial interests which would appear the probable line along which "the employer" of the future will develop. The substitution throughout industry of fixed salaries for fluctuating profits would, in itself, deprive his position of half the humiliating atmosphere of predatory enterprise which embarrasses to-day any man of honor who finds himself, when he has been paid for his services, in possession of a surplus for which there is no assignable reason. Nor, once large incomes from profits have been extinguished, need his salary be large, {178} as incomes are reckoned to-day. It is said that among the barbarians, where wealth is still measured by cattle, great chiefs are described as hundred-cow men. The manager of a great enterprise who is paid $400,000 a year, might similarly be described as a hundred-family man, since he receives the income of a hundred families. It is true that special talent is worth any price, and that a payment of $400,000 a year to the head of a business with a turnover of millions is economically a bagatelle. But economic considerations are not the only considerations. There is also "the point of honor." And the truth is that these hundred-family salaries are ungentlemanly. When really important issues are at stake every one realizes that no decent man can stand out for his price. A general does not haggle with his government for the precise pecuniary equivalent of his contribution to victory. A sentry who gives the alarm to a sleeping battalion does not spend next day collecting the capital value of the lives he has saved; he is paid 1/- a day and is lucky if he gets it. The commander of a ship does not cram himself and his belongings into the boats and leave the crew to scramble out of the wreck as best they can; by the tradition of the service he is the last man to leave. There is no reason why the public should insult manufacturers and men of business by treating them as though they were more thick-skinned than generals and more extravagant than privates. To say that they are worth a good deal more than even the exorbitant salaries which a few of them get is often true. But it is beside the point. No one has any business to {179} expect to be paid "what he is worth," for what he is worth is a matter between his own soul and God. What he has a right to demand, and what it concerns his fellow-men to see that he gets, is enough to enable him to perform his work. When industry is organized on a basis of function, that, and no more than that, is what he will be paid. To do the managers of industry justice, this whining for more money is a vice to which they (as distinct from their shareholders) are not particularly prone. There is no reason why they should be. If a man has important work, and enough leisure and income to enable him to do it properly, he is in possession of as much happiness as is good for any of the children of Adam. [1] The Coal Mines Department supplied the following figures to the Coal Industry Commission (Vol. III, App. 66). They relate to 57 per cent. of the collieries of the United Kingdom. Salary, including bonus and Number of Managers value of house and coal 1913 1919 £100 or less ............................... 4 2 £101 to £200 ............................... 134 3 £201 to £300 ............................... 280 29 £301 to £400 ............................... 161 251 £401 to £500 ............................... 321 213 £501 to £600 ............................... 57 146 £601 and over .............................. 50 152 {180} XI PORRO UNUM NECESSARIUM So the organization of society on the basis of function, instead of on that of rights, implies three things. It means, first, that proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not. It means, second, that the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lost, as at present, through their immediate subordination to shareholders whose interest is not service but gain. It means, in the third place, that the obligation for the maintenance of the service shall rest upon the professional organization of those who perform it, and that, subject to the supervision and criticism of the consumer, those organizations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged. It is obvious, indeed, that no change of system or machinery can avert those causes of social _malaise_ which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can {181} live up and not live down. It cannot control their actions. It can offer them an end on which to fix their minds. And, as their minds are, so, in the long run and with exceptions, their practical activity will be. The first condition of the right organization of industry is, then, the intellectual conversion which, in their distrust of principles, Englishmen are disposed to place last or to omit altogether. It is that emphasis should be transferred from the opportunities which it offers individuals to the social functions which it performs; that they should be clear as to its end and should judge it by reference to that end, not by incidental consequences which are foreign to it, however brilliant or alluring those consequences may be. What gives its meaning to any activity which is not purely automatic is its purpose. It is because the purpose of industry, which is the conquest of nature for the service of man, is neither adequately expressed in its organization nor present to the minds of those engaged in it, because it is not regarded as a function but as an opportunity for personal gain or advancement or display, that the economic life of modern societies is in a perpetual state of morbid irritation. If the conditions which produce that unnatural tension are to be removed, it can only be effected by the growth of a habit of mind which will approach questions of economic organization from the standpoint of the purpose which it exists to serve, and which will apply to it something of the spirit expressed by Bacon when he said that the work of man ought to be carried on "for the glory of God and the relief of men's estate." {182} Viewed from that angle issues which are insoluble when treated on the basis of rights may be found more susceptible of reasonable treatment. For a purpose, is, in the first place a principle of limitation. It determines the end for which, and therefore the limits within which, an activity is to be carried on. It divided what is worth doing from what is not, and settles the scale upon which what is worth doing ought to be done. It is in the second place, a principle of unity, because it supplies a common end to which efforts can be directed, and submits interests, which would otherwise conflict, to the judgment of an over-ruling object. It is, in the third place, a principle of apportionment or distribution. It assigns to the different parties of groups engaged in a common undertaking the place which they are to occupy in carrying it out. Thus it establishes order, not upon chance or power, but upon a principle, and bases remuneration not upon what men can with good fortune snatch for themselves nor upon what, if unlucky, they can be induced to accept, but upon what is appropriate to their function, no more and no less, so that those who perform no function receive no payment, and those who contribute to the common end receive honourable payment for honourable service. Frate, la nostra volontà quieta Virtù di carità, che fa volerne Sol quel ch'avemo, e d'altro non ci asseta. Si disiassimo esse più superne, Foran discordi li nostri disiri Dal voler di colui che qui ne cerne. * * * * * {183} Anzi è formale ad esto beato esse Tenersi dentro alla divina vogli, Per ch'una fansi nostre vogli e stesse. * * * * * Chiaro mi fu allor com' ogni dove In Cielo è paradiso, e sì la grazia Del sommo ben d'un modo non vi piove. The famous lines in which Piccarda explains to Dante the order of Paradise are a description of a complex and multiform society which is united by overmastering devotion to a common end. By that end all stations are assigned and all activities are valued. The parts derive their quality from their place in the system, and are so permeated by the unity which they express that they themselves are glad to be forgotten, as the ribs of an arch carry the eye from the floor from which they spring to the vault in which they meet and interlace. Such a combination of unity and diversity is possible only to a society which subordinates its activities to the principle of purpose. For what that principle offers is not merely a standard for determining the relations of different classes and groups of producers, but a scale of moral values. Above all, it assigns to economic activity itself its proper place as the servant, not the master, of society. The burden of our civilization is not merely, as many suppose, that the product of industry is ill-distributed, or its conduct tyrannical, or its operation interrupted by embittered disagreements. It is that industry itself has come to hold a position of exclusive predominance among human interests, which no single interest, and least of all the provision of the {184} material means of existence, is fit to occupy. Like a hypochondriac who is so absorbed in the processes of his own digestion that he goes to his grave before he has begun to live, industrialized communities neglect the very objects for which it is worth while to acquire riches in their feverish preoccupation with the means by which riches can be acquired. That obsession by economic issues is as local and transitory as it is repulsive and disturbing. To future generations it will appear as pitiable as the obsession of the seventeenth century by religious quarrels appears to-day; indeed, it is less rational, since the object with which it is concerned is less important. And it is a poison which inflames every wound and turns each trivial scratch into a malignant ulcer. Society will not solve the particular problems of industry which afflict it, until that poison is expelled, and it has learned to see industry itself in the right perspective. If it is to do that, it must rearrange its scale of values. It must regard economic interests as one element in life, not as the whole of life. It must persuade its members to renounce the opportunity of gains which accrue without any corresponding service, because the struggle for them keeps the whole community in a fever. It must so organize industry that the instrumental character of economic activity is emphasized by its subordination to the social purpose for which it is carried on. {185} INDEX Abolition of private ownership, 147 Absenteeism, 152 Absolute rights, 50-51 Absolutism in industry, 144 Acquisitive societies, 29-32 Administration, 115-116 Allocation of power, 163-164 American Constitution, 18-19, 52 Annuities, 74 Arbitration, compulsory, 101 Bacon, quoted, 58, 181 Bentham, 16, 52, 55 Brain workers, position of the, 161-171 British Coal Industry, reorganization of, 166-171 Building Guilds, 103 Building Trade Report, 106-110 Bureaucracy, 116, 149 Capitalism, and production, 173-176; downward thrust of, 154; in America, 101; losing control, 141-142, 148 Cecil, Lord Hugh, 23, 58 Cecil, Robert, 59 Cecil, William, 59 Church and State, 10-13 Coal Industry Commission, 71, 126, 137, 143; report of, 166-167 Coal Mines Committees, 152 Combinations, 125, 130 Committee on Trusts, 153 Competition, 27 Compulsory arbitration, 101 Confiscations, 103 Conservatism, the New, 28 Consumer, exploitation of the, 133-134 Co-operative Movement and cost of coal, 125 Dante, quoted, 182-183 Death Duties, 22 Democratic control, 116 Dickenson, Sir Arthur Lowes, 71 Directorate control, 129 Duckham, Sir Arthur, 119 Duke of Wellington, quoted, 123 Economic confusion, cause of, 131-132 Economic discontent, increase of, 5 Economic egotism, 27, Economic expansion, 9 Efficiency, the condition of, 139-160; through _Esprit de Corps_, 149-150 Employer, waning power of the, 140 England, and natural right, 15-16; and France contrasted, 16-17; Industrialism in, 44-47; Liberal Movement in, 18; over-crowding of population in, 37; proprietary rights in, 64 _et seq._ English landlordism, 22-23 Englishmen, characteristics of, 1-3; vanity of, 129 English Revolution of 1688, 52 Esch-Cummins Act, 118 Expediency, rule of, 16 Feudalism, 18 Fixed salaries, 177-178 Forced labor, 102 France, social and industrial conditions in, 16-17; Feudalism in, 18; Revolution in, 15, 65, 69 French Revolution, 15, 65, 69 Function, definition of, 8; as a basis for remuneration, 41-42; as a basis of social reorganization, 180; Function and Freedom, 7 Functional Society, 29, 84-90 Functionless property-owners, 79, 86; abolishment of, 87-88; an expensive luxury, 87 Gainford, Lord, quoted, 26, 111 Gantt, H. L., 175 Government control in war time, 25-26 Ground-rents, 89-90, 91 Hobson, Mr., 63 "Hundred-Family Man," 178 Imperial Tobacco Company, 116 Incomes, 41 Income Tax, 22 Income without service, 68 Individualism, 48-49 Individual rights, 9 Individual rights _vs._ social functions, 27 Industrial problems, 7 Industrial reorganization, 151, 155 Industrial revolution, 9 Industrial societies, 9 Industrial warfare, cause of, and remedy for, 40-42 Industrialism, 18; a poison, 184; compared to Militarism, 44-46; exaggerated estimate of its importance, 45-46; failure of present system, 139-141; nemesis of, 33-51; spread of, 30; tendency of, 31-32 Industry, and a profession, 94, 97; as a profession, 91 _et seq._, 125-126; deficiencies of, 147; definition of, 6; how private control of may be terminated, 103-104; and the advantages of such a change, 106; Building Trades' Plan for, 108, 111; motives in, 155-159; nationalization of, 104, 114-118; present organization of intolerable, 129; purpose of, 8, 46, 181; right organization of, 6-7; the means not the end, 46-47 Inheritance taxes, 90 Insurance, 74 Joint control, 111-112 Joint-stock companies, 66 Joint-stock organizations, 97 Labor, absolute rights of, 28; and capital, 98-100, 108; compulsory, 100; control of breaking down, 139 _et seq._; degradation of, 35; forced, 102 League of Nations, 101 Liberal Movement, 18 Locke, 14, 52, 55 Management divorced from ownership, 112-113 Mann, Sir John, 126 Militarism, 44-45 Mill, quoted, 89 Mine managers, position of, 162, 166-168 Mining royalties, 23-24, 88 Nationalism, 48-49 Nationalization, 114, 117; of the Coal Industry, 115, 165, 168-169 Natural right in France, 15; in England, 15-16; doctrine of, 21 Officials, position under the present economic system, 162 Old industrial order a failure, 139; its effect on the consumer, 144 Organization, for public service instead of private gains, 127 Over-centralization, 121 Ownership, a new system of, 112-114 Pensioners, 34 Poverty a symptom of social disorder, 5 Private enterprise and public ownership, 118-120 Private ownership, 120; abolition of, 147; of industrial capital, 105-106 Private rights and public welfare, 14-15 Privileges, 24 Producer, obligation of the, 127-128; responsibility of, 128 Production, increased, 5; large scale and small scale, 87; misdirection of, 37-39; why not increased, 136 Productivity, 4, 46 Professional Spirit, the, 149-150 Profits, and production, 173-176; division of, 133 Proletariat, 19, 65 Property, absolute rights of, 52, 80; and creative work, 52 _et seq._; classification of, 63, 64; complexity of, 75; functionless, 76-77, 81; in land, 56-60; in rights and royalties, 62; minority ownership of, 79; most ambiguous of categories, 53-54; passive ownership of, 62; private, 70-72; protection of, 78-70; rights, 50-51; security in, 72-73; socialist fallacy regarding, 86 Proudhon, 54 Publicity of costs and profits, 85, 123-124, 126, 132 Redmayne, Sir Richard, 149 Reformation the, 10-13; effect on society, 12-14 Reform Bill of 1832, 69 Religion, 10; changes in, 11-12 Report of the United States Industrial Commission, 1916, 128-129 Riches, meaning of, 98 Rights of Man, French Declaration of, the, 16, 52 Rights, and Functions, 8-19; doctrine of, 21 _et seq._, 43-44; without functions, 61 Rights of the shareholder, 75 Royalties, 23-24, 62 Royalties, and property, 70; from coal mining properties, 88; a tax upon the industry of others, 89 Sankey, Justice, 115, 117, 143, 165, 167, 168, 169 Security of income, 73-75 Service as a basis of remuneration, 25, 41-42, 85, 133 Shareholders, 91-92 Shells, cost of making, 124-125 Smith, Adam, 15, 52, 95 Social inequality, 36-37 Social reorganizations, schemes for, 5 Social war, 40 Socialism, 53 Society, duality of modern, 135 Society, functional organization of, 52 State management, 116, 117 Steel Corporation, 116 Supervision from within, 151 Syndicalism, 130 Taxation, 22 Trusts, Report on, 23 United States, transformation in, 65 Utilitarians, the English, 17 Utility, 16-17 "Vicious Circle," the, 43, 123-138 Voltaire, quoted, 55 Wages and costs, 131 Wages and profits, 78 Wealth, acquisition of, 20 _et seq._; as foundation for public esteem, 35-36; distribution of on basis of function, 77; fallacy of increased, 42-45; how to increase output of, 147; inequality of, 37-38; limitation of, 36-37; output of, 37-38; production and consumption of--a contrast, 77-78; waste of, 37-39 Whitley Councils, 110 Women self-supporting, 74 Worker and Spender, 77-78 Workers, collective responsibility of, 154 Workers' control, 128 Workmen, as "hands," 152; present independence of, 145-146; responsibility of destroyed, 153-154; servants of shareholders, 136-137; treatment of, 152-153 
37290	----	* * * * * +-----------------------------------------------------------+ | Transcriber's Note: | | | | Inconsistent hyphenation in the original document has | | been preserved. | | | | Obvious typographical errors have been corrected. For | | a complete list, please see the end of this document. | | | +-----------------------------------------------------------+ * * * * * _SOCIAL STUDIES SERIES_ (_VOLUME TWO_). THE LIFE AND TEACHING OF KARL MARX FIRST PUBLISHED IN 1921 [_All rights reserved._] THE LIFE AND TEACHING OF KARL MARX BY M. BEER _Author of "A History of British Socialism"_ TRANSLATED BY T.C. PARTINGTON AND H.J. STENNING, AND REVISED BY THE AUTHOR NATIONAL LABOUR PRESS, LIMITED, LONDON: 8/9, JOHNSON'S COURT, E.C. 4 MANCHESTER: 30, BLACKFRIARS STREET CONTENTS. CHAPTER PAGE INTRODUCTION: I. THE SIGNIFICANCE OF MARX ix. II. THE WORK OF HEGEL xiii. I. PARENTS AND FRIENDS: I. MARX'S APPRENTICESHIP 1 II. STUDENT 3 III. BEGINNINGS OF PUBLIC LIFE 11 II. THE FORMATIVE PERIOD OF MARXISM: I. THE FRANCO-GERMAN YEAR BOOKS 15 II. FRIENDSHIP WITH FRIEDRICH ENGELS 19 III. CONTROVERSY WITH BAUER AND RUGE 21 IV. CONTROVERSY WITH PROUDHON 26 III. YEARS OF AGITATION AND VARYING FORTUNES: I. THE REVOLUTIONARY SPIRIT OF THE FORTIES 39 II. THE COMMUNIST MANIFESTO 41 III. THE REVOLUTION OF 1848 48 IV. DAYS OF CLOUD AND SUNSHINE IN LONDON 51 V. THE INTERNATIONAL 54 VI. THE PARIS COMMUNE 59 VII. THE EVENING OF LIFE 60 IV. THE MARXIAN SYSTEM: I. THE MATERIALIST CONCEPTION OF HISTORY 65 II. CLASSES, CLASS STRUGGLES AND CLASS-CONSCIOUSNESS 78 III. THE ROLE OF THE LABOUR MOVEMENT AND THE PROLETARIAN DICTATORSHIP 84 IV. OUTLINES OF THE ECONOMIC DOCTRINES 93 V. CONCLUSION 125 INTRODUCTION. I. THE SIGNIFICANCE OF MARX. Karl Marx belongs to the ranks of those philosophical and sociological thinkers who throw potent thought-ferment into the world, and set in motion the masses of mankind. They awaken slumbering doubts and contradictions. They proclaim new modes of thought, new social forms. Their systems may sooner or later become obsolete, and the ruthless march of time may finally overthrow their intellectual edifice; meanwhile, however, they stimulate into activity the minds of countless men, inflame countless human hearts, imprinting on them characteristics which are transmitted to coming generations. This is the grandest and finest work to which any human being can be called. Because these thinkers have lived and worked, their contemporaries and successors think more clearly, feel more intensely, and are richer in knowledge and self-consciousness. The history of philosophy and of social science is comprised in such systems and generalisations. They are the index to the annals of mankind. None of these systems is complete, none comprehends all human motives and capacities, none exhausts all the forces and currents of human society. They all express only fragmentary truths, which, however, become effective and achieve success because they are shining lights amidst the intellectual confusion of the generation which gives them birth, bringing it to a consciousness of the questions of the time, rendering its further development less difficult, and enabling its strongest spirits to stand erect, with fixity of purpose, in critical periods. Hegel expresses himself in a similar sense where he remarks: "When the refutation of a philosophy is spoken of, this is usually meant in an abstract negative (completely destructive) sense, so that the confuted philosophy has no longer any validity whatever, and is set aside and done with. If this be so, the study of the history of philosophy must be regarded as a thoroughly depressing business, seeing that this study teaches that every system of philosophy which has arisen in the course of time has found its refutation. But if it is as good as granted that every philosophy has been refuted, yet at the same time it must be also asserted that no philosophy has been refuted, nor ever can be refuted ... for every philosophical system is to be considered as the presentation of a particular moment or a particular stage in the evolutionary process of the idea. The history of philosophy ... is not, in its totality, a gallery of the aberrations of the human intellect, but is rather to be compared to a pantheon of deities." --("Hegel, Encyclopædia," vol. 1, section 86, note 2.) What Hegel says here about philosophy is true also of systems of social science, and styles and forms in art. The displacement of one system by another reflects the historical sequence of the various stages of social evolution. The characteristic which is common to all these systems is their vitality. In spite of their defects and difficulties there surges through them a living spirit from the influence of which contemporaries cannot escape. Opponents may put themselves to endless trouble to contradict such systems, and show up their shortcomings and inconsistencies, and yet, with all their pains, they do not succeed in attaining their object; their logical sapping and mining, their passionate attacks break against the vital spirit which the creative genius has breathed into his work. The deep impression made on us by this vitality is one of the main factors in the formation of our judgments upon scientific and artistic achievements. Mere formal perfection and beauty through which the life of the times does not throb can never create this impression. Walter Scott, who was often reproached with defects and inconsistencies in the construction of his novels, once made answer with the following anecdote: A French sculptor, who had taken up his abode in Rome, was fond of taking to the Capitol his artistically inclined countrymen who were travelling in Italy, to show them the equestrian statue of Marcus Aurelius, on which occasions he was at pains to demonstrate that the horse was defectively modelled, and did not meet the requirements of anatomy. After one of these criticisms a visitor urged him to prove his case in a concrete form by constructing a horse on correct artistic principles. The critic set to work, and when, after the lapse of a year, his friends were again visiting Rome, exhibited to them his horse. It was anatomically perfect. Proudly he had it brought to the Capitol, in order to compare both productions and so celebrate his triumph. Quite absorbed in his critical comparison, the French sculptor after a while gave way to a burst of genuine artistic feeling, which caused him pathetically to exclaim, "_Et pourtant cette bête-là est vivante, et la mienne est morte!_" (And yet that animal is alive, while mine is dead.) Quite a number of Marxian critics find themselves in the same position as the hypercritical French sculptor. Their formal and logically complete economic doctrines and systems of historical philosophy, provided with pedantically correct details and definitions, remain dead and ineffective. They do not put us into contact with the relations of the time, whereas Marx has bequeathed both to the educated and the uneducated, to his readers and to non-readers, a multitude of ideas and expressions relating to social science, which have become current throughout the whole world. In Petrograd and in Tokio, in Berlin and in London, in Paris and in Pittsburg, people speak of capital and of the capitalist system, of means of production and of the class struggle; of Reform and Revolution; of the Proletariat and of Socialism. The extent of Marx's influence is shown by the economic explanation of the world-war, which is even accepted by the most decided opponents of the materialist conception of history. A generation after Marx's death, the sovereignty of Capital shrinks visibly, works' committees and shops' stewards interfere with the productive processes, Socialists and Labour men fill the Parliaments, working men and their representatives rise to or take by storm the highest position of political power in States and Empires. Many of their triumphs would scarcely have received Marx's approval. His theory, white-hot with indomitable passion, demanded that the new tables of the Law should be given to men amidst thunder and lightning. But still the essential thing is that the proletariat is loosening its bonds, even if it does not burst them noisily asunder. We find ourselves in the first stages of the evolution of Socialist society. Through whatever forms this evolutionary process may pass in its logical development, this much is certain, that only by active thought on the part of Socialists and by the loyal co-operation of the workers can it be brought to its perfection. We are already using Hegelian expressions, and must therefore pause here to note briefly Hegel's contribution to the subject. Without a knowledge of this, no one can be in a position to appreciate the important factors in the life and influence of Marx, or even to understand his first intellectual achievements during his student years. II. THE WORK OF HEGEL. Until towards the end of the eighteenth century, learned and unlearned, philosophers and philistines, had some such general notions as the following. The world has either been created, or it has existed from eternity. It is either governed by a personal, supernatural god or universal spirit, or it is kept going by nature, like some delicate machine. It exists in accordance with eternal laws, and is perfect, ordained to fulfil some design, and constant. The things and beings which are found in it are divided into kinds, species and classes. All is fixed, constant and eternal. Things and beings are contiguous in space, and succeed one another in time, as they have done ever since time was. It is the same with the incidents and events of the world and of mankind. Such common proverbs as "There is nothing new under the sun" and "History repeats itself" are but the popular expression of this view. Correlative to this philosophy was Logic, or the science of the laws of thinking (Greek logos--reason, word). It taught how men should use their reason, how they should express themselves reasonably, how concepts arise (in what manner, for example, the human understanding arrived at the concepts stone, tree, animal, man, virtue, vice, etc.); further, how such concepts are combined into judgments (propositions), and finally, how conclusions are drawn from these judgments. This logic exhibited the intellectual processes of the human mind. It was founded by the Greek philosopher, Aristotle (384 to 322 B.C.), and remained essentially unaltered until the beginning of the nineteenth century, in the same way as our whole conception of the universe remained unchanged. This science of human intellectual processes was based on three original laws of thought, which best characterise it. Just as an examining magistrate looks a prisoner in the face, and identifies him, so that uncertainty and contradiction may be avoided, so this logic began by establishing the identity of the conceptions with which it was to operate. Consequently, it established as the first law of thought the Principle of Identity, which runs as follows: A = A, i.e., each thing, each being, is like itself; it possesses an individuality of its own, peculiar to itself. To put it more clearly, this principle affirms that the earth is the earth, a state is a state, Capital is Capital, Socialism is Socialism. From this proceeds the second law of thought, the Principle of Contradiction. A cannot be A and not--A. Or following our example given above, the earth cannot be the earth and a ball of fire; a State cannot be a State and an Anarchy; Capital cannot be Capital and Poverty; Socialism cannot be Socialism and Individualism. Therefore there must be no contradictions, for a thing which contradicts itself is nonsense; where, however, this occurs either in actuality or in thought, it is only an accidental exception to the rule, as it were, or a passing and irregular phenomenon. From this law of thought follows directly the third, viz., the Principle of the Excluded Middle. A thing is either A or non-A; there is no middle term. Or, according to our example, the earth is either a solid body, or, if it is not solid, it is no earth; there is no middle term. The State is either monarchical, or, if it is not monarchical, it is no State. Capitalism is either oppressive, or altogether not Capitalism. Socialism is either revolutionary, or not Socialism at all; there is no middle term. (Socialism is either reformist, or not Socialism at all; there is no middle term.) With these three intellectual laws of identity, of contradiction, and of the excluded middle, formal logic begins. It is at once apparent that this logic operates with rigid, constant, unchanging, dogmatic conceptions, something like geometry, which deals with definitely bounded spatial forms. Such was the rationale of the old world-philosophy. By the beginning of the nineteenth century a new conception of the world had begun to make its way. The world, as we see it, or get to know it from books, was neither created, nor has it existed from time immemorial, but has developed in the course of uncounted thousands of years, and is still in process of development. It has traversed a whole series of changes, transformations, and catastrophes. The earth was a gaseous mass, then a ball of fire; the species and classes of things and beings which exist on the earth have partly arisen by gradual transition from one sort into another, and partly made their appearance as a result of sudden changes. And in human history it is the same as in nature; the form and significance of the family, of the State, of production, of religion, of law, etc., are subjected to a process of development. All things are in flux, in a state of becoming, of arising and disappearing. There is nothing rigid, constant, unchanging in the Cosmos. In view of the new conception, the old formal logic could no longer satisfy the intellect; it could not adequately deal with things in a state of evolution. In ever-increasing measure it became impossible for the thinker to work with hard and fast conceptions. From the beginning of the nineteenth century a new logic was sought, and it was G.W.F. Hegel (1770-1831) who made a comprehensive and thoroughly painstaking endeavour to formulate a new logic in accordance with the universal process of evolution. This task appeared to him to be the more urgent, as his whole philosophy aimed at bringing thought and being, reason and the universe, into the closest connection and agreement, dealing with them as inseparable from each other, regarding them as identical, and representing the universe as the gradual embodiment of Reason. "What is reasonable is real; what is real is reasonable." The task of philosophy is to comprehend what is. Every individual is the child of his time. Even philosophy is its time grasped in thought. No individual can overleap his time. (Pref. to Phil, of Law.) It is evident that, in his way, Hegel was no abstract thinker, divorced from actuality, and speculating at large. Rather he set himself to give material content to the abstract and purely ideal, to make it concrete, in fact. The idea without reality, or reality without the idea, seemed to him unthinkable. Accordingly his logic could not deal merely with the laws of thought, but must at the same time take account of the laws of cosmic evolution. Merely to play with the forms of thought, and to fence with ideas, as the old logicians, especially in the Middle Ages, were wont to do, seemed to him a useless, abstract, unreal operation. He, therefore, created a science of thinking, which formulated not only the laws of thought, but also the laws of evolution, albeit, unfortunately, in a language which offered immense difficulties to his readers. The essence of his logic is the dialectic. By dialectic the old Greeks understood the art of discourse and rejoinder, the refutation of an opponent by the destruction of his assertions and proofs, the bringing into relief of the contradictions and antitheses. When examined closely, this art of discussion, in spite of its contradictory and apparently negative (destructive) intellectual work, is seen to be very useful, because, out of the clash of opposing opinions, it brings forth the truth and stimulates to deeper thought. Hegel seized hold of this expression, and named his logical method after it. This is the dialectical method, or the manner of conceiving the things and beings of the universe as in the process of becoming, through the struggle of contradictory elements and their resolution. With its aid, he brings to judgment the three original laws of thought which have already been alluded to. The principle of identity is an abstract, incomplete truth, for it separates a thing from the variety of other things, and its relations to them. Everybody will see this to be true. Let us take the proposition: the earth is the earth. Whoever hears the first three words of this proposition naturally expects that what is predicated of the earth should tell him something which distinguishes the earth from other things. Instead of this, he is offered an empty, hard and fast identity, the dead husk of an idea. If the principle of identity is at best only an incomplete truth, the principles of contradiction and of the excluded middle are complete untruths. Far from making a thought nonsense, contradiction is the very thing which unfolds and develops the thought, and hence, too, the object which it expresses. It is precisely opposition, or antithesis, which sets things in motion, which is the mainspring of evolution, which calls forth and develops the latent forces and powers of being. Had the earth as a fiery, gaseous mass remained in that state, without the contradiction, that is, the cooling and condensation, taking place, then no life would have appeared on it. Had the State remained autocratic, and the contradictory principle, middle-class freedom, been absent, then the life of the State would have become rigid, and the bloom of culture rendered impossible. Had Capitalism remained without its proletarian contradiction, then it would have reverted to an industrial feudalism. It is the contradiction, or the antithesis, which brings into being the whole kingdom of the potentialities and gifts of nature and of humanity. Only when the contradictory begins to reveal itself does evolution to a higher plane of thought and existence begin. It is obvious that we are not concerned here with logical contradictions, which usually arise from unclear thinking or from confusion in the presentation of facts; Hegel, and after him Marx, dealt rather with real contradictions, with antitheses and conflicts, as they arise of themselves in the process of evolution of things and conditions. The thing or the being, against which the contradiction operates, was called by Hegel the Positive, and the contradiction, the antagonistic element, or the antithesis, he called the Negation. As may be seen from our example, this negation is not mere annihilation, not a resolution into nothing, but a clearing away and a building up at the same time; a disappearance and a coming into existence; a movement to a higher stage. Hegel says in this connection: "It has been hitherto one of the rooted prejudices of logic and a commonly accepted belief that the contradiction is not so essential or so inherent a characteristic (in thought and existence) as the identity. Yet in comparison with it the identity is, in truth, but the characteristic of what is simply and directly perceived, of lifeless existence. The contradiction, however, is the source of all movement and life; only in so far as it contains a contradiction can anything have movement, power, and effect." The part played by the contradiction, the antithesis, or the negation very easily escapes a superficial observer. He sees, indeed, that the world is filled with a variety of things, and that where anything is there is also its opposite; e.g., existence--non-existence, cold--heat, light--darkness, mildness--harshness, pleasure--pain, joy--sorrow, riches--poverty, Capital--Labour, life--death, virtue--vice, Idealism--Materialism, Romanticism--Classicism, etc., but superficial thought does not realise that it is faced with a world of contradictions and antitheses; it only knows that the world is full of varied and manifold things. "Only active reason," says Hegel, "reduced the mere multiplicity and diversity of phenomena to antithesis. And only when pushed to this point do the manifold phenomena become active and mutually stimulating, producing the state of negation, which is the very heart-beat of progress and life." Only through their differentiation and unfolding as opposing forces and factors is further progress beyond the antithesis to a higher positive stage made possible. "Where, however," continues Hegel, "the power to develop the contradiction and bring it to a head is lacking, the thing or the being is shattered on the contradiction."--(Hegel, "Science of Logic," Pt. 1, Sec. 2, pp. 66, 69, 70.) This thought of Hegel's is of extraordinary importance for the understanding of Marxism. It is the soul of the Marxian doctrine of the class-struggle, nay, of the whole Marxian system. One may say that Marx is always on the look-out for contradictions within the social development, for wherever the contradiction (antithesis--class struggle) shows itself, there begins, according to Marx-Hegel, the progress to a higher plane.[1] We have now become familiar with two expressions of the dialectical method, the positive and the negation. We have seen the first two stages of the process of growth in thought and in reality. The process is not yet complete. It still requires a third stage. This third step Hegel called the Negation of the Negation. With the continued operation of the negation, a new thing or being comes into existence. To revert to our examples: the complete cooling and condensation of the earth's crust: the rise of the middle-class State: the victory of the Proletariat: these things represent the suspension or the setting aside of the Negation; the contradiction is thus resolved, and a new stage in the process of evolution is reached. The expressions Positive (or affirmation), Negation, and Negation of the Negation, are also known as thesis, antithesis, and synthesis. In order to understand this more distinctly, and to visualise it, let us consider an egg. It is something positive, but it contains a germ, which, awakening to life, gradually consumes (i.e., negatives) the contents of the egg. This negation is, however, no mere destruction and annihilation; on the contrary, it results in the germ developing into a living thing. The negation being complete, the chick breaks through the egg shell. This represents the negation of the negation, whereby there has arisen something organically higher than an egg. This mode of procedure in human thinking and in the operations of nature and history Hegel called the dialectical method, or the dialectical process. It is evident that the dialectic is at the same time a method of investigation and a philosophy. Hegel outlines his dialectic in the following words: "The only thing which is required for scientific progress, an elementary principle for the understanding of which one should really strive, is the recognition of the logical principle that the negative is just as much a positive, or that the contradictory does not resolve into nothing, into an abstract nothingness, but actually only into the negation of a special content.... In so far as the resultant, the negation, is a definite negation, it has a content. It is a new conception, but a higher and richer conception than the preceding one; for it has been enriched by the negation or antithesis of this; it therefore contains it and more than contains it, being indeed the synthetic unity of itself and its contrary. In this way the system of concepts has to be formed--and is to be perfected by a continual and purely intellectual process which is independent of outside influences."--(Hegel, "Science of Logic" (German), Bk. I., Introduction.) The dialectical process completes itself not only by gradual transitions, but also by leaps. Hegel remarks: "It has been said that there are no sudden leaps in nature, and it is a common notion that things have their origin through gradual increase or decrease. But there is also such a thing as sudden transformation from quantity into quality. For example, water does not become gradually hard on cooling, becoming first pulpy and ultimately attaining the rigidity of ice, but turns hard at once. If the temperature be lowered to a certain degree, the water is suddenly changed into ice, i.e., the quantity--the number of degrees of temperature--is transformed into quality--a change in the nature of the thing."--("Logic" (German), Pt. 1, Sec. 1, p. 464, Ed. 1841.) Marx handled this method with unsurpassed mastery; with its aid he formulated the laws of the evolution of Socialism. In his earliest works, "The Holy Family" (1844) and the "Poverty of Philosophy" (1847), written when he was formulating his materialist conception of history, as also in his "Capital," it is with the dialectic of Hegel that he investigates these laws. "Proletariat and Riches (later Marx would have said Capital) are antitheses. As such they constitute a whole; both are manifestations of the world of private property. The question to be considered is the specific position which both occupy in the antithesis. To describe them as two sides of a whole is not a sufficient explanation. Private property as private property, as riches, is compelled to preserve its own existence, and along with it that of its antithesis, the Proletariat. Private property satisfied in itself is the positive side of the antithesis. The Proletariat, on the other hand, is obliged, as Proletariat, to abolish itself, and along with it private property, its conditioned antithesis, which makes it the Proletariat. It is a negative side of the antithesis, the internal source of unrest, the disintegrated and disintegrating Proletariat.... Within the antithesis, therefore, the owner of private property is the conservative, and the proletarian is the destructive party. From the former proceeds the action of maintaining the antithesis, from the latter the action of destroying it. From the point of view of its national, economic movement, private property is, of course, continually being driven towards its own dissolution, but only by an unconscious development which is independent of it, and which exists against its will, and is limited by the nature of things; only, that is, by creating the Proletariat as proletariat, poverty conscious of its own physical and spiritual poverty, and demoralised humanity conscious of its own demoralisation and consequently striving against it. "The Proletariat fulfils the judgment which private property by the creation of the Proletariat suspends over itself, just as it fulfils the judgment which wage-labour suspends over itself in creating alien riches and its own condemnation. If the Proletariat triumphs, it does not thereby become the absolute side of society, for it triumphs only by abolishing itself and its opposite. In this way both the Proletariat and its conditioned opposite, private property, are done away with."[2] The dialectical method is again described in a few sentences on pages 420-421 of the third volume of "Capital" (German), where we read: "In so far as the labour process operates merely between man and nature, its simple elements are common to every form of its social development. But any given historical form of this process further develops its material foundations and its social forms. When it has attained a certain degree of maturity the given historical form is cast off and makes room for a higher one. That the moment of such a crisis has arrived is shown as soon as there is a deepening and widening of the contradiction and antithesis between the conditions of distribution, and consequently also the existing historical form of the conditions of production corresponding to them, on the one hand, and the forces of production, productive capacity, and the state of evolution of its agents, on the other. There then arises a conflict between the material development of production and its corresponding social form." But the Hegelian dialectic appears most strikingly in the famous twenty-fourth chapter (sec. 7) of the first volume of "Capital" (German), where the evolution of capitalism from small middle-class ownership through all phases up to the Socialist revolution is comprehensively outlined in bold strokes: "The capitalist method of appropriation, which springs from the capitalist method of production, and therefore capitalist private property, is the first negation of individual private property based on one's own labour. But capitalist production begets with the inevitableness of a natural process its own negation. It is the negation of the negation." Here we have the three stages: the thesis--private property; the antithesis--capitalism; the synthesis--common ownership. Of critical social writers outside Germany it was Proudhon, in particular, who, in his works "What is Property?" and "Economic Contradictions, or the Philosophy of Poverty" (1840, 1846), attempted to use the Hegelian dialectic. The fact that he gave his chief book the title "Economic Contradictions" shows that Proudhon was largely preoccupied with Hegel. Nevertheless, he did not get below the surface; he used the Hegelian formulæ quite mechanically, and lacked the conception of an immanent process of development (the forward-impelling force within the social organism). If we look at the dialectical method as here presented, Hegel might be taken for a materialist thinker. Such a notion would be erroneous. For Hegel is an idealist: the origin and essence of the process of growth is to be sought, according to him, not in material forces, but in the logical idea, reason, the universal spirit, the absolute, or--in its religious expression--God. Before He created the world He is to be regarded as an Idea, containing within itself all forms of being, which it develops dialectically. The idea creates for itself a material embodiment; it first expresses itself in the objects of inorganic nature; then in plants, organisms wherein life awakens; then in animals, in which the Idea attains to the twilight of reason; finally, in men, where reason rises into mind and achieves self-consciousness and freedom. As self-conscious mind it expresses itself in the history of peoples, in religion, art and philosophy, in human institutions, in the family and in law, until it realises itself in the State as its latest and highest object. According to Hegel, then, the universal Idea develops into Godhead in proportion as the material world rises from the inorganic to the organic, and, finally, to man. In the mental part of man, the Idea arrives at self-consciousness and freedom and becomes God. In his cosmology, Hegel is a direct descendant of the German mystics, Sebastion Franck and Jacob Boehme. He was in a much higher degree German than any of the German philosophers since Leibnitz. The strangest thing, however, is that Germanism, Protestantism, and the Prussian State appeared to Hegel as the highest expression of the universal mind. Particularly the Prussian State as it existed before March, 1848, with its repudiation of all middle-class reforms and liberalism (of any kind), and its basis of strong governmental force. There is little purpose in trying to acquire a logical conception of Hegelian cosmology. It is not only idealist, but, as we said, mystical; it is as inconceivable to human reason as the biblical; it is irrational, and lies beyond the sphere of reason. Making the universe arise out of pure reason, out of the logical idea, developing through the dialectical process with a consciousness of freedom, it yet concludes in unreason and an obstinate determinism. In Liberalism Hegel saw only a simple negation, a purely destructive factor, which disintegrates the State and resolves it into individuals, thus depriving it of all cohesion and organising strength. He blamed Parliamentarism for demanding "that everything should take place through their (the individuals) expressed power and consent. The will of the many overturns the Ministry, and what was the Opposition now takes control, but, so far as it is the Government, the latter finds the many against it. Thus agitation and unrest continue. This collision, this knot, this problem, is what confronts history, a problem which it must resolve at some future time." One would have thought that it was precisely Parliamentarism, with its unrest and agitation, its antitheses and antagonisms, which would have had a special attraction for Hegel, but nevertheless he turned aside from it. How is this to be explained? Hegel's relation to the Prussian State is to be accounted for by his strong patriotic sentiments. His disposition inclined him strongly to nationalism in politics. In his early manhood he witnessed the complete dissolution of the German Empire, and deeply bewailed the wretchedness of German conditions. He wrote: "Germany is no longer a State; even the wars which Germany waged have not ended in a particularly honourable manner for her. Burgundy, Alsace, Lorraine have been torn away. The Peace of Westphalia has often been alluded to as Germany's Palladium, although by it the complete dismemberment of Germany has only been established more thoroughly than before. The Germans have been grateful to Richelieu, who destroyed their power." On the other hand, the achievements of Prussia in the Seven Years' War, and in the War of Liberation against the French, awoke in him the hope that it was this State which could save Germany. To this thought he gave eloquent and enthusiastic expression in his address at the opening of his Berlin lectures in October, 1818, and also in his lecture on Frederick the Great. Hegel therefore rejected everything which seemed to him to spell a weakening of the Prussia State power. The dialectician was overcome by national feelings. However, Hegel's place in the history of thought rests, not on his explanations of the creation of the world, nor on his German nationalist politics, but upon the dialectical method. In exploring, by means of this method, the wide expanse of human knowledge, he scattered an astonishing abundance of materialistic and strictly scientific observations and suggestions, and inspired his pupils and readers with a living conception of history, of the development of mankind to self-consciousness and freedom, thus rendering them capable of pushing their studies further, and emancipating themselves from all mysticism. As an example of the materialist tendency of his philosophy, the following references will serve. His "Philosophy of History" contains a whole chapter upon the geographical foundations of universal history. In this chapter he expresses himself--quite contrary to his deification of the State--as follows: "A real State and a real central government only arise when the distinction of classes is already given, when Riches and Poverty have become very great, and such conditions have arisen that a great multitude can no longer satisfy their needs in the way to which they have been accustomed." Or take his explanation of the founding of colonies by the Greeks. "This projecting of colonies, particularly in the period after the Trojan War until Cyrus, is here a peculiar phenomenon, which may thus be explained: in the individual towns the people had the governing power in their hands, in that they decided the affairs of State in the last resort. In consequence of the long peace, population and development greatly increased, and quickly brought about the accumulation of great riches, which is always accompanied by the phenomenon of great distress and poverty. Industry, in our sense, did not exist at that time, and the land was speedily monopolised. Nevertheless, a section of the poorer classes would not allow themselves to be depressed to the poverty line, for each man felt himself to be a free citizen. The sole resource, therefore, was colonisation." Or even the following passage, which conceives the philosophical system merely as the result and reflection of the accomplished facts of existence, and therefore rejects all painting of Utopias: "Besides, philosophy comes always too late to say a word as to how the world ought to be. As an idea of the universe, it only arises in the period after reality has completed its formative process and attained its final shape. What this conception teaches is necessarily demonstrated by history, namely, that the ideal appears over against the real only after the consummation of reality, that the ideal reconstructs the same world, comprehended in the substance of reality, in the form of an intellectual realm. A form of life has become old when philosophy paints its grey on grey, and with grey on grey it cannot be rejuvenated but only recognised. The owl of Minerva begins its flight only with the falling twilight."--Preface to the "Philosophy of Law." No materialist could have said this better: the owl--the symbol of wisdom--only begins her flight in the evening, after the busy activities of the world are over. Thus we have first the universe, and then thought; first existence, and then consciousness. Hegel himself was therefore an example of his own teaching that contradictory elements are to be found side by side. His mind contained both idealism and realism, but he did not bring them by a process of reasoning to the point of acute contradiction in order to reach a higher plane of thought. And as he regarded it as the task of philosophy to recognise the principle of things, and to follow it out systematically and logically throughout the whole vast domain of reality, and as further, owing to his mystical bent, he asserted the idea to be the ultimate reality, he remained a consistent Idealist. The Conservatism of Hegel, who was the philosophical representative of the Prussian State, was, however, sadly incompatible with the awakening consciousness of the German middle class, which, in spite of its economic weakness, aspired to a freer State constitution, and greater liberty of action. These aspirations were already somewhat more strongly developed in the larger towns and industrial centres of Prussia and the other German States. The Young Hegelians[3] championed this middle-class awakening in the philosophical sphere, just as "Young Germany" (Heine, Boerne, etc.) did in the province of literature. Just at the time when Marx was still at the university the Young Hegelians took up the fight against the conservative section of Hegel's disciples and the Christian Romanticism of Prussia. The antagonism between the old and the new school made itself felt both in religious philosophy and political literature, but both tendencies were seldom combined in the same persons. David Strauss subjected the Gospels to a candid criticism; Feuerbach investigated the nature of Christianity and of religion generally, and in this department inverted Hegel's Idealism to Materialism; Bruno Bauer trained his heavy historical and philosophical artillery on the traditional dogmas concerning the rise of Christianity. Politically, however, they remained at the stage of the freedom of the individual: that is, they were merely moderate Liberals. Nevertheless, there were also less prominent Young Hegelians who were at that time in the Liberal left wing as regards their political opinions, such as Arnold Ruge. None of the Young Hegelians had, however, used the dialectical method to develop still further the teaching of the Master. Karl Marx, the youngest of the Hegelians, first brought it to a higher stage in social science. He was no longer known to Hegel, who might otherwise have died with a more contented or perhaps even still more perturbed mind. Heinrich Heine, who belonged to the Hegelians in the thirties and forties, relates the following anecdote, which if not true yet excellently illustrates the extraordinary difficulties of the Master's doctrines:-- As Hegel lay dying, his disciples, who had gathered round him, seeing the furrows deepen on the Master's care-worn countenance, inquired the cause of his grief, and tried to comfort him by reminding him of the large number of admiring disciples and followers he would leave behind. Breathing with difficulty, he replied: "None of my disciples has understood me; only Michelet has understood me, and," he added with a sigh, "even he has misunderstood me." FOOTNOTES: [1] In one of the later chapters the reader will find the series of contradictions discovered by Marx in the evolution of capitalism. Sec. IV., "Outlines of the Economic Doctrine." Chapter 8, "Economic Contradictions." [2] Marx, in "The Holy Family" (1844), reprinted by Mehring in the "Collected Works or Literary Remains of Marx and Engels," vol. II., p. 132. [3] After the death of Hegel differences of opinion arose among his disciples, chiefly with respect to his doctrines of the Deity, immortality and the personality of Christ. One section, the so-called "Right Wing," inclined to orthodoxy on these questions. In opposition to them stood the "Young Hegelians," the progressive "Left Wing." To this section belonged Arnold Ruge, Bruno Bauer, Feuerbach, and Strauss, author of the "Life of Jesus." The Life and Teaching of Karl Marx I. PARENTS AND FRIENDS. I. MARX'S APPRENTICESHIP. Karl Heinrich Marx first saw the light of day in Treves on May 5, 1818. His father, an enlightened, fine feeling, and philanthropic Jew, was a Jurist who had slowly risen from the humble circumstances of a German Rabbi family and acquired a respectable practice, but who never learnt the art of making money. His mother was a Dutchwoman, and came of a Rabbi family called Pressburg, which, as the name indicates, had emigrated from Pressburg, in Hungary, to Holland, in the seventeenth century. She spoke German very imperfectly. Marx has handed on to us one of her sayings, "If Karl made a lot of Capital, instead of writing a lot about Capital, it would have been much better." The Marxes had several children, of whom Karl alone showed special mental gifts. In the year 1824 the family embraced Christianity. The baptism of Jews was at that time no longer a rarity. The enlightenment of the last half of the eighteenth century had undermined the dogmatic beliefs of many cultured Jews, and the succeeding period of German Christian Romanticism brought a strengthening and idealising of Christianity and of national feeling, from which, for practical just as much as for spiritual reasons, the Jews who had renounced their own religion could not escape. They were completely assimilated, felt and thought like the rest of their Christian and German fellow-citizens. Marx's father felt himself to be a good Prussian, and once recommended his son to compose an ode, in the grand style, on Napoleon's downfall and Prussia's victory. Karl did not, in truth, follow his father's advice, but from that time of Christian enthusiasm and German patriotic sentiment until his life's end, there remained with him an anti-Jewish prejudice; the Jew was generally to him either a usurer or a cadger. Karl was sent to the grammar school in his native town, leaving with a highly creditable record. The school was, however, not the only place where he developed his mind. During his school years he used to frequent the house of the Government Privy Councillor, L. von Westphalen, a highly cultured Prussian official, whose favourite poets were Homer and Shakespeare, and who followed attentively the intellectual tendencies of his time. Although he had already reached advanced age, he liked to converse with the precocious youth, and to influence his mental growth. Marx honoured him as a fatherly friend "who welcomes every progressive movement with the enthusiasm and sober judgment of a lover of truth, and who is a living proof that Idealism is no imagination, but the truth."--(Dedication of Marx's doctor thesis.) After quitting the public school, Marx went to the University of Bonn, in order to study jurisprudence, according to his father's wishes. After a year of the merry life of a student, he removed in the autumn of 1836 to Berlin University, the centre of culture and truth, as Hegel had called it in his Inaugural Lecture (1818). Before his departure for Berlin, he had become secretly engaged to Jenny Von Westphalen, the daughter of his fatherly friend, a woman distinguished alike for beauty, culture, and strength of character. II. STUDENT. In Berlin, Marx threw himself into the study of Philosophy, Jurisprudence, History, Geography, Literature, the History of Art, etc. He had a Faust-like thirst for truth, and his appetite for work was insatiable; in these matters only superlatives can be used to describe, Marx. In one of his poems dating, from this period, he says of himself: "Ne'er can I perform in calmness What has seized my soul with might, But must strive and struggle onward In a ceaseless, restless flight. All divine, enhancing graces Would I make of life a part; Penetrate the realms of science, Grasp the joys of Song and Art." Giving up all social intercourse, he worked night and day, making abstracts of what he read, translating from Greek and Latin, working at philosophical systems, setting down a considerable number of his own thoughts, and drafting outlines of philosophy or jurisprudence, as well as writing three volumes of poems. The year 1837 marks one of the critical periods of Marx's intellectual development; it was a time of vacillation and ferment and of internal struggle, at the end of which he found refuge in the Hegelian dialectics. In so doing he turned his back on the abstract idealism of Kant and Fichte, and made the first step towards reality; and indeed at that time Marx firmly believed that Hegel actually stood for reality. In a somewhat lengthy letter dated November 10, 1837, a truly human document, Marx gives his father an account of his intense activity during that remarkable period, comprising his first two terms at the University of Berlin, when he was still so very young: "DEAR FATHER, "There are times which are landmarks in our lives; and they not only mark off a phase that has passed, but, at the same time, point out clearly our new direction. At such turning points we feel impelled to make a critical survey of the past and the present, so as to attain to a clear knowledge of our actual position. Nay, mankind itself, as all history shows, loves to indulge in this retrospection and contemplation, and thereby often appears to be going backward or standing still, when after all it has only thrown itself back in its armchair, the better to apprehend itself, to grasp its own doings, and to penetrate into the workings of the spirit. "The individual, however, becomes lyrical at such times; for every metamorphosis is in part an elegy on the past and in part the prologue of a great new poem that is striving for permanent expression in a chaos of resplendent but fleeting colours. Be that as it may, we would fain set up a monument to our past experiences that they may regain in memory the significance which they have lost in the active affairs of life: and what more fitting way can we find of doing that than by bringing them and laying them before the hearts of our parents! "And so now, when I take stock of the year which I have just spent here, and in so doing answer your very welcome letter from Ems, let me consider my position, in the same way as I look on life altogether, as the embodiment of a spiritual force that seeks expression in every direction: in science, in art, and in one's own personality.... On my arrival in Berlin I broke off all my former connections, paid visits rarely and unwillingly, and sought to bury myself in science and art.... In accordance with my ideas at the time, poetry must of necessity be my first concern, or at least the most agreeable of my pursuits, and the one for which I most cared; but, as might be expected from my disposition and the whole trend of my development, it was purely idealistic. Next I had to study jurisprudence, and above all I felt a strong impulse to grapple with philosophy. Both studies, however, were so interwoven that on the one hand I worked through the Jurist's Heineccius and Thibaut and the Sources docilely and quite uncritically, translating, for instance, the first two books of the Pandects of Justinian, while on the other hand I attempted to evolve a philosophy of law in the sphere of jurisprudence. By way of introduction I laid down a few metaphysical principles, and carried this unfortunate work as far as Public Rights, in all about 300 sheets. "In this, however, more than in anything else, the conflict between what is and what ought to be, which is peculiar to Idealism, made itself disagreeably prominent. In the first place there was what I had so graciously christened the Metaphysics of Law, i.e., first principles, reflections, definitions, standing aloof from all established jurisprudence and from every actual form of legal practice. Then the unscientific form of mathematical dogmatism in which there is so much beating about the bush, so much diffuse argumentation without any fruitful development or vital creation, hindered me from the outset from arriving at the Truth. A triangle may be constructed and reasoned about by the mathematician; it is a mere spatial concept and does not of itself undergo any further evolution; it must be brought in conjunction with something else, when it requires other properties, and thus by placing the same thing in various relationships we are enabled to deduce new relationships and new truths. Whereas in the concrete expression of the mental life as we have it in Law, in the State, in Nature, and in the whole of philosophy, the object of our study must be considered in its development.... The individual's reason must proceed with its self-contradiction until it discovers its own unity." In this we perceive the first trace of the Hegelian dialectic in Marx. We see rigid geometrical forms contrasted with the continually evolving organism, with social forms and human institutions. Marx had put up a stout resistance against the influence of the Hegelian philosophy; nay, he had even hated it and had made mighty efforts to cling faithfully to his idealism, but in the end he, too, must fall under the spell of the idea of evolution, in the form which it then assumed in Hegelian speculation in Germany. Marx then goes on to speak of his legal studies as well as of his poems, and thus continues: "As a result of these various activities I passed many sleepless nights during my first term, engaged in many battles, and had to endure much mental and physical excitement; and at the end of it all I found myself not very much better off, having in the meanwhile neglected nature, art and society, and spurned pleasure: such, indeed, was the comment which my body seemed to make. My doctor advised me to try the country, and so, having for the first time passed through the whole length of the city, I found myself before the gate on the Stralau Road.... From the idealism which I had cherished so long I fell to seeking the ideal in reality itself. Whereas before the gods had dwelt above the earth, they had now become its very centre. "I had read fragments of Hegel's philosophy, the strange, rugged melody of which had not pleased me. Once again I wished to dive into the depths of the sea, this time with the resolute intention of finding a spiritual nature just as essential, concrete, and perfect as the physical, and instead of indulging in intellectual gymnastics, bringing up pure pearls into the sunlight. "I wrote about 24 sheets of a dialogue entitled 'Cleantes or on the Source and Inevitable Development of Philosophy.' In this, art and science, which had hitherto been kept asunder, were to some extent blended, and bold adventurer that I was, I even set about the task of evolving a philosophical, dialectical exposition of the nature of the Deity as it is manifested in a pure concept, in religion, in nature, and in history. My last thesis was the beginning of the Hegelian system; and this work, in course of which I had to make some acquaintance with science, Schelling and history, and which had occasioned me an infinite amount of hard thinking, delivers me like a faithless siren into the hands of the enemy.... "Upset by Jenny's illness and by the fruitlessness and utter failure of my intellectual labours, and torn with vexation at having to make into my idol a view which I had hated, I fell ill, as I have already told you in a previous letter. On my recovery I burnt all my poems and material for projected short stories in the vain belief that I could give all that up; and, to be sure, so far I have not given cause to gainsay it. "During my illness I had made acquaintance with Hegel from beginning to end, as also with most of his disciples. Through frequent meetings with friends in Stralau I got an introduction into a Graduates' Club, in which were a number of professors and Dr. Rutenberg, the closest of my Berlin friends. In the discussions that took place many conflicting views were put forward, and more and more securely did I get involved in the meshes of the new philosophy which I had sought to escape; but everything articulate in me was put to silence, a veritable ironical rage fell upon me, as well it might after so much negation."--("Neue Zeit," 16th year, Vol. I., No. 1.) His father was anything but pleased with this letter. He reproached Karl with the aimless and discursive way in which he worked. He had expected that these Berlin studies would lead to something more than breeding monstrosities and destroying them again. He believed that Karl would, before everything else, have considered his future career, that he would have devoted all his attention to the lectures in his course, that he would have cultivated the acquaintance of people in authority, that he would have been economical, and that he would have avoided all philosophical extravagances. He refers him to the example of his fellow students who attend their lectures regularly and have an eye to their future: "Indeed these young men sleep quite peacefully except when they now and then devote the whole or part of a night to pleasure, whereas my clever and gifted son Karl passes wretched sleepless nights, wearying body and mind with cheerless study, forbearing all pleasures with the sole object of applying himself to abstruse studies: but what he builds to-day he destroys again to-morrow, and in the end he finds that he has destroyed what he already had, without having gained anything from other people. At last the body begins to ail and the mind gets confused, whilst these ordinary folks steal along in easy marches, and attain their goal if not better at least more comfortably than those who contemn youthful pleasures and undermine their health in order to snatch at the ghost of erudition, which they could probably have exorcised more successfully in an hour spent in the society of competent men--with social enjoyment into the bargain!" In spite of his unbounded love for his father, Marx could not deviate from the path which he had chosen. Those deeper natures who, after having lost their religious beliefs, have the good fortune to attain to a philosophical or scientific conception of the universe, do not easily shrink from a conflict between filial affection and loyalty to new convictions. Nor was Marx allured by the prospects of a distinguished official career. Indeed his fighting temperament would never have admitted of that. He wrote the lines: Therefore let us, all things daring, Never from our task recede; Never sink in sullen silence, Paralysed in will and deed. Let us not in base subjection Brood away our fearful life, When with deed and aspiration We might enter in the strife. His stay in Stralau had the most beneficial effects on his health. He worked strenuously at his newly-acquired philosophical convictions, and for this his relations with the members of the Graduates' Club stood him in good stead, more especially his acquaintance with Bruno Bauer, a lecturer in theology, and Friedrich Köppen, a master in a grammar school, who in spite of difference of age and position treated him as an equal. Marx gave up all thought of an official career, and looked forward to obtaining a lectureship in some university or other. His father reconciled himself to the new studies and strivings of his son; he was, however, not destined to rejoice at Karl's subsequent achievements. After a short illness he died in May, 1838, at the age of fifty-six. Marx then gave up altogether the study of jurisprudence, and worked all the more assiduously at the perfecting of his philosophical knowledge, preparing himself for his degree examination in order--at the instigation of Bruno Bauer--to get himself admitted as quickly as possible as lecturer in philosophy at the University of Bonn. Bauer himself expected to be made Professor of Theology in Bonn after having served as lecturer in Berlin from 1834 to 1839 and in Bonn during the year 1840. Marx wrote a thesis on the Natural Philosophies of Democritus and Epicurus, and in 1841 the degree of Doctor of Philosophy was conferred on him at Jena. He then went over to his friend Bauer in Bonn, where he thought to begin his career as lecturer. Meanwhile his hopes had disappeared. Prussian universities were at that time no places for free inquirers. It was not even possible for Bauer to obtain a professorship; still less could Marx, who was much more violent in the expression of his opinions, reckon on an academic career. His only way out of this blind alley was free-lance journalism, and for this an opportunity soon presented itself. III. BEGINNINGS OF PUBLIC LIFE. Marx made his entry into public life with a thorough philosophical training and with an irrestrainable impulse to enter into the struggle for the spiritual freedom of Germany. By spiritual freedom he understood first and foremost freedom in religion and liberalism in politics. He was, too, perfectly clear as to the instrument to be used: it was criticism. The positive and rigid having become ineffectual and unreasonable, is to fall before the weapon of criticism and so make room for a living stream of thought and being, or as Marx himself expressed it in 1844, "to make the petrified conditions dance by singing to them their own tune." Their own tune is, of course, the dialectic. Criticism, generally speaking, was the weapon of the Young Hegelians. Criticism is negation, sweeping away existing conditions and prevailing dogmas to make a clear path for life. Not the setting up of new principles or new dogmas, but the clearing away of the old dogmas is the task of the Young Hegelians. For if dialectic be rightly understood, criticism or negation is the best positive work. Criticism finds expression, above all, in polemics, in the literal meaning of waging war--ruthless war--against the unreal for the purpose of shaking up one's contemporaries. After Marx had given up all hope of an academic career, the only field of labour that remained open to him was, as we have already said, that of journalism. His material circumstances compelled him, moreover, to consider the question of an independent livelihood. Just about this time the Liberals in the Rhine provinces took up a scheme for the foundation of a newspaper, the object of which was to prepare the way for conditions of greater freedom. The necessary money was soon procured. Significantly enough, Young Hegelians were kept in view for editors and contributors. On the first of January, 1842, the first number of the _Rheinische Zeitung_ was published at Cologne. The editor was Dr. Rutenberg, who had formed an intimate friendship with Marx at the time the latter was attending the University of Berlin; and so Marx, then in Bonn, was also invited to contribute. He accepted the invitation, and his essays brought him to the notice of Arnold Ruge, who likewise invited him to take part in his literary undertakings in conjunction with Feuerbach, Bauer, Moses Hess, and others. Marx's essays were greatly appreciated, too, by the readers of the _Rheinische Zeitung_, so that in October, 1842, on the retirement of Rutenberg, he was called to the editorial chair of that journal. In his new position he had to deal with a series of economic and political questions which, no doubt, with a less conscientious editor would have occasioned little hard thinking, but which for Marx showed the need of a thorough study of political economy and Socialism. In October, 1842, a congress of French and German intellectuals was held in Strasburg, and amongst other things French Socialist theories were discussed. Likewise in the Rhine provinces arose questions concerning landed property and taxes, which had to be dealt with from the editorial chair, questions which were not to be answered by a purely philosophical knowledge. Besides, the censorship made the way hard for a paper conducted with such critical acumen, and did not allow the editor to fulfil his real mission. In the preface to "The Critique of Political Economy" (1859) Marx gives a short sketch of his editorial life: "As editor of the _Rheinische Zeitung_, in 1842 and 1843 I came up, for the first time, against the difficulty of having to take part in the controversy over so-called material interests. The proceedings of the Diet of the Rhine provinces with regard to wood stealing and parcelling out of landed property, and their action towards the farmers of the Moselle districts, and lastly debates on Free Trade and Protection, gave the first stimulus to my investigation of economic questions. On the other hand, an echo of French Socialism and Communism, feebly philosophical in tone, had at that time made itself heard in the columns of the _Rheinische Zeitung_. I declared myself against superficiality, confessing, however, at the same time that the studies I had made so far did not allow me to venture any judgment of my own on the significance of the French tendencies. I readily took advantage of the illusion cherished by the directors of the _Rheinische Zeitung_, who believed they could reverse the death sentence passed on that journal as a result of weak management, in order to withdraw from the public platform into my study." And so the intellectual need which he felt of studying economics and Socialism, as well as his thirst for free, unfettered activity, resulted in Marx's retirement from his post as editor, although he was about to enter upon married life and had to make provision for his own household. But he was from the beginning determined to subordinate his material existence to his spiritual aspirations. II. THE FORMATIVE PERIOD OF MARXISM. I. THE FRANCO-GERMAN YEAR BOOKS. Between the years 1843 and 1844 we have the second and probably the most important critical period in the intellectual development of Marx. In 1837 he had become a disciple of Hegel, into whose philosophy he penetrated deeper and deeper during the two years which ensued. Between 1843 and 1844 he became a Socialist, and in the following two years he laid the foundations of those social and historical doctrines associated with his name. Of the way he came to be a Socialist and by what studies he was led to Socialism, we know nothing. All that can be said is that in the summer of 1848 he must have pursued the reading of French Socialist literature just as assiduously as he did the study of Hegel in 1837. In his letters to Arnold Ruge, written about 1843, and printed in the Franco-German Year Books, we find a few passages which bear witness to his sudden turnover. In a letter from Cologne (May, 1843) he remarks: "This system of acquisition and commercialism, of possession and of the exploitation of mankind, is leading even more swiftly than the increase of population to a breach within the present society, which the old system cannot heal, because indeed it has not the power either to heal or create, but only to exist and enjoy." That is still in the sentimental vein, and anything but dialectical criticism. In the following few months, however, he made surprisingly rapid progress towards the fundamental ideas of that conception of history and society, which later on came to be known as Marxism, and which he almost built up into a complete system during those restless years of exuberant creative activity, 1845-46. In a letter from Kreuznach, dated September, 1843, he shows already an acquaintance with Fourier, Proudhon, Cabet, Weitling, etc., and sees his task not in the setting up of Utopias but in the criticism of political and social conditions, "in interpreting the struggles and aspirations of the age." And by the winter of 1843 he has already advanced so much as to be able to write the introduction to the criticism of Hegel's "Philosophy of Law," which is one of the boldest and most brilliant of his essays. He deals with the question of a German revolution, and asks which is the class that could bring about the liberation of Germany. His answer is that the positive conditions for the German revolution and liberation are to be sought "in the formation of a class in chains, a class which finds itself in bourgeois society, but which is not of it, of an order which shall break up all orders. The product of this dissolution of society reduced to a special order is the proletariat. The proletariat arises in Germany only with the beginning of the industrial movement; for it is not poverty resulting from natural circumstances but poverty artificially created, not the masses who are held down by the weight of the social system but the multitude arising from the acute break-up of society--especially of the middle class--which gives rise to the proletariat. When the proletariat proclaims the dissolution of the existing order of things, it is merely announcing the secret of its own existence, for it is in itself the virtual dissolution of this order of things. When the proletariat desires the negation of private property, it is merely elevating to a general principle of society what it already involuntarily embodies in itself as the negative product of society." Marx wrote this in Paris, whither he had removed with his young wife in October, 1843, in order to take up the editorship of the Franco-German Year Books founded by Arnold Ruge. In a letter addressed to Ruge from Kreuznach in September, 1843, Marx summed up the program of this periodical as follows: "If the shaping of the future and its final reconstruction is not our business, yet it is all the more evident what we have to accomplish with our joint efforts, I mean the fearless criticism of all existing institutions--fearless in the sense that it does not flinch either from its logical consequences or from the conflict with the powers that be. I am therefore not with those who would have us set up the standard of dogmatism; far from it; we should rather try to give what help we can to those who are involved in dogma, so that they may realise the implications of their own principles. So, for example, Communism as taught by Cabet, Dezamy, Weitling, and others is a dogmatic abstraction.... Moreover, we want to work upon our contemporaries, and particularly on our German contemporaries. The question is: How is that to be done? Two factors cannot be ignored. In the first place religion, in the second place politics, are the two things which claim most attention in the Germany of to-day.... As far as everyday life is concerned, the political State, even where it has not been consciously perfected through Socialist demands, exactly fulfils, in all its modern forms, the demands of reason. Nor does it stop there. It presupposes reason everywhere as having been realised. But in so doing it lands itself everywhere in the contradiction between its ideal purpose and its real achievements. Out of this conflict, therefore, of the political State with itself social truth is evolved." Without a doubt, the Hegelian conception of the State as the embodiment of reason and morality did not accord well with the constitution and the working of the actual State. And Marx goes on to remark that in its history the political State is the expression of the struggles, the needs, and the realities of society. It is not true, then, as the French and English Utopians have thought, that the treatment of political questions is beneath the dignity of Socialists. Rather is it work of this kind which leads into party conflict and away from the abstract theory. "We do not then proclaim to the world in doctrinaire fashion any new principle: 'This is the truth, bow down before it!' We do not say: 'Refrain from strife, it is foolishness!' We only make clear to men for what they are really struggling, and to the consciousness of this they must come whether they will or not." That is conceived in a thoroughly dialectical vein. The thinker propounds no fresh problems, brings forward no abstract dogmas, but awakens an understanding for the growth of the future out of the past, inspiring the political and social warriors with the consciousness of their own action. II. FRIENDSHIP WITH FRIEDRICH ENGELS. Of the Franco-German Year Books only one number appeared (Spring, 1844). Alongside Marx's contributions (an Introduction to the criticism of Hegel's "Philosophy of Jurisprudence" and a review of Bauer's book on the Jewish Question) the volume contains a comprehensive treatise, "Outlines for a Criticism of Political Economy," from the pen of Friedrich Engels (born in Barmen, 1820; died in London, 1895), who was then living in Manchester. In September, 1844, Engels went to visit Marx in Paris. This visit was the beginning of the lifelong intimate friendship between the two men, who without a close collaboration would not have achieved what they did. Marx was a highly-gifted theorist, a master in the realm of thought, but he was quite unpractical in the affairs of everyday life. Had he enjoyed a regular income throughout life, he would probably have attained his end even without the help of Engels. On the other hand, Engels was an exceedingly able, energetic, and highly-cultured man, eminently practical and successful in everything he undertook, but not endowed with that speculative temperament which surmounts intellectual crises and opens out new horizons. But for his intellectual association with Marx he would, in all probability, have remained little more than a Moses Hess. Marx was never a Utopian; the complete saturation of his mind with Hegelian dialectics made him immune to all eternal truths and final social forms. On the contrary, up to 1844 Engels was a Utopian--until Marx explained to him the meaning of political and social conflicts, the basis and the motive force, the statics and dynamics of the history of civilised mankind. Engels' "Criticism of Political Economy" is a very noteworthy performance for a youth of twenty-three engaged in commerce, but it does not rise above the level of the writings of Owen, Fourier, and Proudhon. Engels' contributions to Owen's "New Moral World" (1843-44) are indeed more philosophical than the other articles by Owenites, but as far as matter goes, there is no perceptible difference between them. "The System of Economic Contradictions," on which Proudhon was working when Engels published his "Outlines," is couched, as far as the critical side is concerned, in the same strain of thought as we find in Engels. Both sought to expose the contradictions of the middle-class economic system, not in order to discover in them the source of the progress of society, but to condemn them in the name of justice. Whereas the Owenites considered their system as perfect, Proudhon and Engels had, independently of one another, striven to free themselves from the Socialist Utopias. Proudhon became a peaceful Anarchist and found salvation in the scheme of autonomous economic groups, which should carry on an exchange of labour equivalents with one another. Engels, on the other hand, found a solution of his difficulties in Marx, whom he rewarded with a lifelong friendship and devotion, which proved to be Marx's salvation. Without Engels' literary and financial help, Marx, with his unpractical, helpless, and, at the same time, proud and uncompromising disposition, would most probably have perished in exile. III. CONTROVERSIES WITH BAUER AND RUGE. After the Franco-German Year Books had been discontinued, Marx, recognising the importance of economics, studied English and French systems of political economy with still greater zeal than before, and continued his studies in Socialism and history with remarkable steadiness of purpose. No longer now did he show signs of hesitation or wavering; he knew exactly what he wanted. He had left behind him that period of ideological speculation when he was still a disciple of Hegel, and he was impelled, as in the autumn of 1837, to envisage, from his new standpoint, the past and the future. He takes such a survey in "The Holy Family," which had its genesis in the autumn of 1844, and to which Engels also furnished a slight contribution. It is a settling of accounts with his former friend and master, Bruno Bauer, and his brother Edgar, who had not been able to break away from Hegel. The aim of the book was to force the Young Hegelians into the path of social criticism, to urge them forward and prevent them from falling into stereotyped and abstract ways of thinking. It is not easy reading. In it Marx has compressed the knowledge he then had of philosophy, history, economics, and Socialism in concentrated and sharply-cut form. Besides the excellent sketch of English and French materialism, which among other things discloses in a few short but pregnant sentences the connection between this and English and French Socialism, "The Holy Family" contains the germs of the materialistic conception of history as well as the first attempt to give a social revolutionary interpretation to the class struggle between Capital and Labour. In the Introduction to the present book a quotation from "The Holy Family" has been given. Speaking against Bauer's conception of history, Marx says: "Or can he believe that he has arrived even at the beginning of a knowledge of historical reality so long as he excludes science and industry from the historical movements? Or does he really think that he can understand any period without having studied, for example, the industries of that period, the immediate means of production of life itself?... In the same way as he separated thought from the senses, the soul from the body, and himself from the world, so he separates history from science and industry, and he does not see the birthplace of history in coarse, material production upon earth but in the nebulous constructions in the heavens."--("Posthumous Works," Vol. II., pp. 259-60.) Bruno Bauer, who believed in the world-swaying might of the idea, but would not concede that the masses had any power whatever, wrote: "All the great movements of history up to this time were therefore doomed to failure and could not have lasting success, because the masses had taken an interest in them and inspired them--or they must come to a lamentable conclusion because the underlying idea was of such a nature that a superficial apprehension of it must suffice, that is to say, it must reckon on the approval of the masses." Marx's answer to this was that "the great historical movements had been always determined by mass interests, and only in so far as they represented these interests could the ideas prevail in these movements; otherwise the ideas might indeed stir up enthusiasm, but they could not achieve any results. The idea always fell into disrepute in so far as it differed from the interest. On the other hand, it is easy to understand that, when it makes its first appearance on the world-stage, every mass interest working itself out in history far exceeds, as an idea or in its presentation, its actual limits and identifies itself purely and simply with the interest of humanity. Thus the idea of the French Revolution not only took hold of the middle classes, in whose interest it manifested itself in great movements, but it also aroused enthusiasm in the labouring masses, for whose conditions of existence it could do nothing. As history has shown, then, ideas have only had effective results in so far as they corresponded to class interests. The enthusiasm, to which such ideas gave birth, arose from the illusion that these ideas signified the liberation of mankind in general."--("Posthumous Works," Vol. II., pp. 181-3.) In August, 1844, Marx published under the title "Marginal Notes" in the Paris _Vorwärts_ a lengthy polemic against Ruge, which is a defence of Socialism and revolution and takes the part of the German proletariat against Ruge. "As regards the stage of culture or the capacity for culture of the German workers, let me refer to Weitling's clever writings, which in their theoretical aspect often surpass those of Proudhon, however much they may fall behind them in execution. Where would the middle classes, their scholars and philosophers included, be able to show a work like Weitling's 'Guarantees of Peace and Concord' bearing on the question of emancipation? If one compares the insipid, spiritless mediocrity of German political literature with this unconstrained and brilliant literary début of the German workers, if one compares these gigantic baby shoes of the proletariat with the dwarfishness of the worn-out political shoes of the German middle classes, one can only prophesy an athletic stature for the German Cinderella. One must admit that the German proletariat is the philosopher of the European proletariat, just as the English proletariat is its political economist and the French proletariat its politician. One must admit that Germany is destined to play just as classic a rôle in the social revolution as it is incompetent to play one in the political. For, as the impotence of the German middle classes is the political impotence of Germany, so the capacity of the German proletariat--even leaving out of account German philosophy--is the social capacity of Germany." At that time (1844) Marx had already begun to mix among the German working classes resident in Paris, who clung to the various Socialist and Anarchist doctrines which then held sway, and he sought to influence them according to his own ideas. With Heine, too, who at that time was coquetting with Communism, he carried on a sprightly and not unfruitful intercourse. He likewise came into frequent contact with Proudhon, whom he endeavoured to make familiar with Hegelian philosophy. Already in his first work, "What is Property?" (1840) Proudhon had played with Hegelian formulæ, and Marx probably believed that he could win him over to Socialism. Proudhon, who, like the German Weitling, sprang from the proletariat, ushered in his activity as a social theorist with the above-mentioned work, which had a stimulating effect on Marx and on German Socialists in general, all the more so as Proudhon manifested some acquaintance with classical German philosophy. In this book ("What is Property?" German edition, 1844, p. 289) he sums up the whole matter as follows: "Expressing this according to the Hegelian formula, I should say that Communism, the first kind, the first determination of social life, is the first link in social evolution, the _thesis_; property is the antagonistic principle, the _antithesis_; if only we can get the third factor, the _synthesis_, the question is solved. This synthesis comes about only through the cancelling of the thesis by the antithesis; one must therefore in the last instance examine its characteristics, discard what is anti-social, and in the union of the remaining two is then seen the real kind of human social life." That was indeed a superficial conception of Hegelian dialectics, for what Proudhon wanted to find was not a synthesis but a combination; still for a French working man it was a smart performance to have manipulated German philosophical formulæ, and would justify the most sanguine hopes. Marx did not want to let this opportunity slip, and in "debates both late and long" he discussed Hegelian philosophy with Proudhon.--(Marx: "The Poverty of Philosophy," German edition, Stuttgart, 1885, p. 29.) In the midst of this activity, however, Marx and other German contributors to the Paris _Vorwärts_ were expelled from France in January, 1845, at the instigation of the Prussian Government. Marx packed up his traps and left for Brussels, where he lived, with short interruptions, until the outbreak of the European Revolution in February, 1848. During his sojourn in Brussels his time was occupied mainly with economic studies, for which Engels placed his library of works on political economy at his disposal. Marx embodied the result of these studies in the criticism directed against Proudhon in his "Misère de la Philosophie" (Poverty of Philosophy), published in 1847. IV. CONTROVERSY WITH PROUDHON. Marx's "Misère de la Philosophie" indicates the culmination of the fist phase of his creative work. In this critical review he makes his position clear with respect not only to Proudhon but to Utopian Socialism in general. It marks also the turning point in the studies of Marx: English political economy occupied henceforth the place which German philosophy had held. The anti-Proudhon controversy is therefore worthy of a fuller treatment. Pierre Joseph Proudhon (b. 1809 in Besançon, d. 1865 in Paris) was one of the most gifted and most distinguished of social philosophers which the modern proletariat has produced. He was originally a compositor, like his similarly minded English contemporary, John Francis Bray, the author of "Labour's Wrongs," published in 1839, but he had a much greater inclination for study and a more fruitful literary talent. He managed to acquire, self-taught, a knowledge of the classical languages, of mathematics and of science, read assiduously but indiscriminately works on economics, philosophy, and history, and applied himself to social criticism. It is rare for a working man in the West of Europe to feel impelled to make an acquaintance with Kant, Hegel, and Feuerbach as Proudhon did through French translations and through intercourse with German scholars in Paris. He possessed the noble ambition of blending French sprightliness with German thoroughness. But self-instruction failed to give him that intellectual training which is more valuable than knowledge, and which alone gives the power to order and to utilise the information acquired, as well as to submit one's own work to self-criticism. The value of a systematic education does not consist in the main in the acquisition of knowledge but in the training of our intellectual faculties as instruments of inquiry and apprehension, of methodical thinking and of sound judgment, to enable us to find our bearings more easily in the chaos of phenomena, experiences, and ideas. A self-taught man may no doubt attain to this degree of culture, but only if his first attempts at independent creative work are submitted to a strict but kindly criticism, which makes him discipline his thoughts. This was not the case with Proudhon; he lacked mental self-discipline. His first work, "What is Property?" (1840) brought him immediate recognition and strengthened him in his high opinion of his knowledge and his powers, even to the point of making him conceited. When, for example, the French historian, Michelet, disapproved of his dictum, "Property is robbery," Proudhon replied, "Not twice in a thousand years does one come across a pronouncement like that."--("Economic Contradictions," Leipzig, 1847. Vol. II., p. 301.) And yet the idea is as old as Communism itself. Besides all this, the vivacity and exuberance of language for which Proudhon was noted easily blinded him to the shortcomings of his intellectual culture. Thus it often happened that he rediscovered ideas of his predecessors and published them to the world with naïve pride. Through page after page of argument he holds the reader in expectation of the explanation, which he is about to give, of the nature of value, which he rightly characterises as the "corner-stone of political economy." At last he will disclose the secret: "It is time to make ourselves acquainted with this power. This power ... is _labour_." His main work, "The System of Economic Contradictions," swarms with philosophical formulæ and expressions like thesis, antithesis, antinomies, synthesis, dialectics, induction, syllogisms, etc., as also with Latin, Greek, and Hebrew etymologies; it often wanders into irrelevant theological and philosophical digressions and side issues, not so much with the intention of parading the author's knowledge as from his lack of intellectual discipline and insufficient command of his material. The work in question was to combine German philosophy with French and English political economy, and its author believed that it would secure for him before everything else the admiration of the German Socialists, especially of Marx. He drew the latter's attention to it by letter, and awaited his "rigorous criticism." The criticism came in "Misère de la Philosophie" (Brussels, 1847), but it could no longer fulfil its purpose, as the fundamental difference between the two men had already widened to a gulf that could not be bridged. Marx had almost completed his materialistic, logical, and revolutionary Socialism, Proudhon had laid the foundations of his peaceful Anarchism with its federative economic basis. With his searching analysis, his systematised knowledge, and his great indignation at the presumptuous attacks on every Socialist school and leader, Marx sat in judgment upon Proudhon, exposing him as a dilettante in philosophy and economics, and at the same time sketching in outline his own conception of history and economics. Marx's verdict is damning, yet one cannot but acknowledge that Proudhon, in spite of his obvious insufficiency, had endeavoured, honestly and zealously, to extricate himself from Capitalism as well as from Utopianism, and to outline a scheme for an economic order, in which men, such as he had found them, might lead a free, industrious, and righteous life. The task which Proudhon had set himself was the same as that which engaged the attention of Marx, the criticism of political economy and of the sentimental Utopian Socialism. That is the key-note of Proudhon's system, and it is sounded in almost every chapter. He lacked, however, the requisite knowledge and the historical sense which alone could have made him equal to his task. The whole of his criticism consists virtually in the complaint that riches and poverty accumulate side by side, and that the economic categories--use value, exchange value, division of labour, competition, monopoly, machinery, property, ground rent, credit, tax, etc.--manifest contradictions. Proudhon's special problem was the following: "The workers of any country produce yearly goods to the value, let us say, of 20 milliards. But if the workers, as consumers, wish to buy back these goods they have to pay 25 milliards. The workers are thus cheated out of a fifth. That is a terrible contradiction."--("What is Property?" Chap. IV.; "Economic Contradictions," Vol. I., pp. 292-93.) This statement of the problem shows that Proudhon had no inkling of the essential features of the question of value, in spite of the fact that he cites Adam Smith, David Ricardo, etc., whom he must therefore have read. Had he really understood these economists and taken up his critical attitude towards them from the standpoint of justice, he would have stated the problem somewhat as follows: "The workers of any country produce yearly goods to the value, say, of 20 milliards. For their work, however, they receive as wages a quantity of goods of the value of only 10 or 12 milliards. Is that just?" Only this way of stating the question could possibly have revealed to him the nature of wages, of value, of profit, of capital and its contradictions. Proudhon sees the perpetration of fraud or robbery in the sphere of exchange and not in that of production, and he does not ask himself how, if labour produces goods to the value of only 20 milliards, they can be exchanged at a value of 25 milliards, and what is responsible for the increase of five milliards. The other contradictions which he brings forward are not indeed new, but they are ingeniously treated. For example: the essence of exchange-value is labour, which creates wealth; but the more the wealth produced, the less becomes its exchange-value. Or this: the division of labour is, according to Smith, one of the most effective means of increasing wealth, but the further the division of labour proceeds the lower sinks the workman, being reduced to the level of an unintelligent automaton engaged in the performance of a fractional operation. The same thing holds good for machinery. So, too, competition stimulates effort, but brings much misery in its train by leading to adulteration, sharp practices, and strife between man and man. Further, taxation should be proportional to riches, in reality it is proportional to poverty. Or again, private ownership of land ought to increase productivity; in practice it deprives the farmer of the land. In this way he runs to earth the contradictions in political economy, and so we find everywhere the words thesis and anti-thesis or antinomies (contradictions between two well-established propositions). And out of this contradiction springs poverty. The solution or the synthesis is the creation of an economic order which shall preserve the good elements in this category and eliminate the bad ones, and so satisfy the demands of justice. And that is what Socialism cannot do. "For the economic order is based upon calculations of an inexorable justice and not upon those angelic sentiments of brotherhood, sacrifice, and love which so many well-meaning Socialists of the present time are endeavouring to awake in the people. It is useless for them to preach, after the example of Jesus Christ, the necessity for sacrifice, and to set an example of it in their own lives: selfishness is stronger than they and can only be restrained by rigid justice and immutable economic law. Humanitarian enthusiasm may cause upheavals which are conducive to the progress of civilisation, but such emotional crises, like the fluctuations in value, simply result in the establishing of law and order on a more rigid and more restricted basis. Nature or the Deity planted mistrust in our hearts, having no faith in the love of man for his fellow men; and though I say it to the shame of the human conscience (for our hypocrisy must be confronted with it sooner or later), every disclosure which science has made to us concerning the designs of providence with respect to the progress of society points to a deeply rooted hatred of mankind on God's part."--("System of Economic Contradictions or the Philosophy of Poverty," Vol. I., p. 107.) Just as severely does he denounce the institution of Trade Unionism and its methods of warfare, together with State politics, as indeed the working of class organisation and of the State generally. The only way to realise social justice is to create a society of producers who exchange their goods among one another according to their equivalents in labour and carry on work in adequate relationship to the production of wealth, or, to put it clearly, to establish an order where supply and demand balance one another. Marx's answer to the "Philosophy of Poverty" is indicated at once by the title "The Poverty of Philosophy." He deals first of all with the economic details of Proudhon's work, and proves with documentary evidence that the theses and antitheses it contains partly spring from a half-understood reading of English and French political economists, and in part have been taken direct from the English Communists. Marx already displays in this section an extensive knowledge of economic literature. Then he confronts Proudhon's philosophical and social theories with his own deductions and gives many positive results. Marx's main object was to induce the Socialists to give up their Utopianism and think in terms of realism, and to regard social and economic _categories_ in their historical setting: "Economic _categories_ are only the theoretical expressions, ideal conceptions of the conditions of production obtaining in society.... Proudhon has grasped well enough that men manufacture cloth, linen, etc., under certain conditions of production. But what he has not grasped is that these social conditions themselves are just as much human products as cloth, linen, etc. Social conditions are intimately bound up with productive power. With the acquisition of new productive power men change their methods of production, and with the change in the methods of production, in the manner of obtaining a livelihood, they change their social conditions. The hand-mill gives rise to a society with feudal lords, the steam-mill to a society with industrial capitalists. But the same men who shape the social conditions in conformity with the material means of production, shape also the principles, the ideas, the _categories_ in conformity with their social conditions. Consequently these ideas, these _categories_, are just as little eternal as are the conditions to which they give expression. They are the transitory and changing products of history. We are living in the midst of a continuous movement of growth in productive power, of destruction of existing social conditions, of formation of ideas."--("Poverty of Philosophy," Stuttgart, 1885, pp. 100-101.) Here it should, above all, be noticed that Marx ascribes to industrialism a powerful revolutionary effect, and that he characterises the different forms of society by their different methods of labour. Or, as he says later in "Capital," "not _what_ is produced, but _how_ it is produced distinguishes the various forms of society." What he means to say, then, is that ideas and systems are limited by their time, that they are conditioned by the prevailing means of production. To understand them one must study the times which have preceded them, as well as investigate the ideas and systems themselves, and find out whether new forms have not arisen which stand in contradiction or in contrast to the old one. Or, as Marx says: "Feudalism, too, had its proletariat--the villeinage--which contains all the germs of the middle class. Feudal production, too, had two contradictory elements which are likewise characterised as the 'good' and 'bad' sides of feudalism without regard to the fact that it is always the 'bad' side which triumphs ultimately over the 'good' side. It is the bad side which calls into being the movement which makes history, in that it brings the struggle to a head. If, at the time of the supremacy of feudalism, the economists, in their enthusiasm for knightly virtues, for the beautiful harmony between rights and duties, for the patriarchal life of the towns, for the flourishing home industries in the country, for the development of industry organised in corporations, companies and guilds, in a word, for everything which forms the finer side of feudalism, had set themselves the problem of eliminating everything which could throw a shadow on this picture--serfdom, privileges, anarchy--where would it all have ended? They would have destroyed every element which called forth strife, they would have nipped in the bud the development of the middle class. They would have set themselves the absurd problem of blotting out history. "When the middle class had come to the top, neither the good nor the bad side of feudalism come into question. The productive forces, which had been developed under feudalism through its agency, fell to its control. All old economic forms, the legal relations between private individuals, which corresponded to them, the political order, which was the official expression of the old society, were shattered." "Those Socialists and social revolutionaries who regard the hardships and struggles of society as an absolute evil and plan the construction of a society comprised solely of good elements, have not grasped the meaning of the history of mankind. They think abstractly. They misjudge both the past and the present. "Hence to form a correct judgment of production under feudalism one must consider it a method of production based upon contradiction. One must show how wealth was produced within this contradiction, how productive power developed contemporaneously with the antagonism of classes, how one of these classes, the bad side, the social evil, constantly increased until the material conditions for its liberation were fully ripe. "Does that not show clearly enough that the means of production, the conditions under which productive power is developed, are anything but eternal laws, that they rather correspond to a definite stage in the evolution of mankind and of its productive power, and that a variation in the productive power of mankind necessarily brings about a variation in its conditions of production? "The middle class begins with a proletariat, which in its turn is itself a remnant of the feudal proletariat. In the course of its historical development the middle class necessarily develops its contradictory character, which on its first appearance is more or less veiled, existing only in a latent form. In proportion as the middle class develops, there develops in its bosom a new proletariat, a modern proletariat; and a struggle arises between the proletarian class and the middle class, a struggle which, before being felt, observed, estimated, understood, acknowledged, and finally openly proclaimed on both sides, issues in the meanwhile only in partial and transitory conflicts and acts of destruction." In a special chapter Marx shows the necessity and the historical significance of the Trade Unions, which in spite of all the apprehensions and warnings of Utopians and Economists the workers have gone on establishing and perfecting, in order to be able to withstand the domination of capital. That means the gathering together of the divided interests and activities of the workers in a vast class movement, standing in opposition to the middle class; which, however, does not exclude the possibility of conflicting interests within the classes themselves, though these shall be put aside as soon as class is brought against class: "From day to day it becomes clearer then that the conditions of production, among which the middle class moves, have not a simple, uniform character but one which involves conflicting elements; that the same conditions which produce wealth produce also poverty; that the same conditions which tend to the development of productive power develop also the power of repression; that these conditions only create bourgeois wealth, i.e., the wealth of the middle class, at the cost of the continued destruction of the wealth of individual members of this class and the creation of an ever-increasing proletariat."--("Poverty of Philosophy," 1885, pp. 116-118, 177 sq.) This antithetical character of capitalist society has for its effect that the political economists, who are the philosophers of the existing order, lose their bearings, while the Socialists, who are the philosophers of the proletariat, look round for means to relieve the distress. They condemn class struggles,[4] build Utopias and plan schemes of salvation, whereas the only real solution, because it is the only one which arises from the actual conditions, must be to further the organisation of the oppressed class and make it conscious of the objects of its struggles. For out of these struggles the new society will arise, and that, of course, can only happen when productive power has reached a high stage of development. Or as Marx himself proceeds: "An oppressed class is a vital condition of any society founded upon class antagonism. The liberation of the oppressed class necessarily includes, therefore, the creation of a new society. In order that the oppressed class may be able to free itself, a stage must be reached in which the already acquired powers of production and the prevailing social institutions can no longer exist side by side. Of all the instruments of production, the greatest productive force is the revolutionary class itself. The organisation of the revolutionary elements as a class presupposes the existence in perfected form of all the productive forces that could in any way be developed in the bosom of the old society. Does this mean that after the collapse of the old order of society there will be a new class domination culminating in a new political power? The condition of the emancipation of the working class is the abolition of all classes, as the condition of the emancipation of the third estate, of the middle class, was the abolition of all the three estates. The working class will, in the course of its evolution, replace the old middle-class society by an association excluding classes and their antagonism, and there will no longer be any real political power,[5] because it is just this political power which is the official expression of class antagonism within the community. "Meanwhile the antagonism between proletariat and bourgeoisie is a struggle of class against class, a struggle which, when brought to its highest expression, means a complete revolution. And can one indeed be surprised that a society founded upon class antagonism should, at its final dissolution, issue in brutal conflict and collision of man against man? Let it not be said that the social movement excludes the political. There never was a political movement which was not at the same time a social movement. "Only in an order of things where there are no classes and no class antagonism will social evolution cease to be political revolution. Until then the last word of social science on the eve of every general reconstruction of society must ever be: 'Fight or die; bloody war or annihilation. Thus are we confronted with the inexorable question.'--(George Sand)." With this battle-cry "The Poverty of Philosophy" comes to a close. It is the prologue to the "Communist Manifesto," which in itself is but a popular version of the positive doctrines developed in the controversy against Proudhon. FOOTNOTES: [4] The Socialists of those times were the Owenites and the Fourierists, who condemned all class struggles, Trade Unionist strikes, and Labour politics. [5] Marx means the State. III. YEARS OF AGITATION AND VARYING FORTUNES. I. THE REVOLUTIONARY SPIRIT OF THE FORTIES. Marx was a revolutionary not only in the sense that he was the representative of a new conception of society and the founder of a theory of a new economic order, but also in the popular sense of advocating the use of force, in which connection he looked to the first years of the French Revolution as a model. He had a keen ear for the revolutionary rumblings in the depths of the populace. The years during which the elements of his new conception of society were accumulating in his mind and shaping themselves into a system were involved in a revolutionary atmosphere. In 1842 England witnessed the first strike on a large scale, which threatened to extend into a general strike and bore a political revolutionary character. In 1843 and 1844 the idea of the impending revolution was widely spread in England. Insurrections broke out among the Silesian weavers in 1844. In 1845 and 1846 Socialism spread rapidly on all sides in Germany, and Socialist periodicals appeared in the industrial centres. France swarmed with Socialist systems, Socialist novels and newspaper articles. The spectre of Communism was abroad in Europe. The convention of the United Assembly by Frederick William IV. at the beginning of February, 1847, was looked upon as the harbinger of the German Revolution. The connection between these phenomena could not escape acute intellects. Hand in hand with the extension of industry and the rapid construction of railways and telegraphs came alternations of economic prosperity and crisis, poverty grew, and the workers fought with ever-increasing bitterness against the iron law of wages and against the scanty pay, which hardly allowed the proletariat to eke out a bare subsistence. The cry in England was: "More factories, more poverty," but at the same time: "The greater the political rights of the masses, the surer becomes emancipation." Whoever lived in England and France during these years and had dealings with Socialism could not help feeling that political and social revolutions were on the march. Already in his first letter to Ruge, written from Holland in March, 1843, Marx deals with the coming revolution, and foresees, to the astonishment of Ruge, who refused to believe it, that the Government of Frederick William IV. was drifting towards a revolution. At that time Marx had hardly begun his studies in Socialism; and the further he advanced in these studies, elaborating his social dialectics and evolving the ideas of the class struggle, the more inevitably was he driven to the conclusion that the proletarian revolution, the seizure of political power by the proletariat, was the indispensable preliminary to the triumph of Communism. Utopian Socialism stood outside the State and attempted to set up a Socialist Commonwealth apart from the State and behind the back of the State. Utopianism, with its moral and religious motives and mediæval Communist traditions, was pervaded with that spirit of contempt for the State which was characteristic of the Catholic Church during the period of its splendour. Moreover Marx, who recognised all practical forms of power, even if he did not always estimate them at their true value, saw in the State an executive power which it was a question of overturning and using as an extremely powerful instrument in the social revolution. As a result of his excursions into politics and French and English Socialism, Marx gave up Hegel's overstrained idea of the State and accepted the view current in Western European thought of the time; but he interpreted the State in the sense of the doctrine of the class struggle as the executive council of the ruling and possessing classes. The impressions, the ideas, the experiences and the modes of thinking which took root in the mind of Marx during the evolution of the fundamental principles of his sociological and historical system dominated the whole of his life's work. Marxism is quite a natural growth of the revolutionary soil of the first half of the nineteenth century. Marx completes the social revolutionary doctrines of that time, of which he is, as it were, the executor. All his thoughts and sentiments are deeply rooted in it; they have nothing specifically Jewish about them. I know of no Jewish philosopher, sociologist, or poet who had so little of the Jewish character as had Marx. II. THE COMMUNIST MANIFESTO. As in Paris, so too in Brussels, Marx frequented the society of German working men in order to instruct them by lectures and by conversation. He was loyally seconded by Engels, who had more time and more money to devote to this task, and who worked for the new doctrine in Paris, Cologne, Elberfeld and other towns. Since 1836 the German working men living abroad had been organised in the League of the Just, which from 1840 had its head-quarters in London. The individual groups were kept in touch with one another by means of Communist correspondence committees. The Paris and Brussels groups drew the attention of the London Committee to Marx, and in January, 1847, Joseph Moll, one of its members, was commissioned to go to Brussels and obtain information about Marx.--("Mehring's Introduction to the Reprint of the Cologne Communist Proceedings," published by _Vorwärts_, Berlin, 1914, pp. 10-11.) The result was the transformation of the League of the Just into the League of Communists, which held its first Congress in London in the summer of 1847, Engels and Wilhelm Wolff (Lupus) being among those present as delegates. At the second Congress, held in London towards the end of November and beginning of December, 1847, Marx also appeared, and together with Engels was commissioned to prepare a new program. The new program is the Communist Manifesto. Engels had come from Paris, Marx from Brussels. Before leaving Paris, Engels wrote a letter to Marx, dated November 24, in which he speaks as follows on the subject of the Manifesto: "Just think over the confession of faith a little. I believe it will be best if we leave out the form of catechism and entitle the thing 'The Communist Manifesto.' And then, as more or less of it will consist in historical narrative, the present form is quite unsuitable. I am bringing along the manuscript which I have written; it is a plain narrative, but is badly put together, and has been done in a frightful hurry. I begin, 'What is Communism?' and then straight away with the proletariat--the history of its origin, difference from earlier workers, development of the antagonism of the proletariat and the middle class, crises, conclusions, with all kinds of secondary considerations thrown in, and lastly party politics of the Communists, as much as is good for the public to know."--("Correspondence of Marx and Engels," Vol. I., p. 84.) Engels' draft of the Communist Manifesto has been edited by Eduard Bernstein.--("Grundsätze des Kommunismus," published by _Vorwärts_, 1914.) A comparison of this draft with the actual "Communist Manifesto" makes evident the full extent of Marx's intellectual superiority to Engels. The Communist Manifesto contains four main groups of ideas: (1) The history of the evolution of the middle class, its character, its positive and negative achievement--modern capitalism and the rise of the proletariat. (2) Theoretical conceptions and conclusions--the doctrine of the class struggle and the rôle of the proletariat. (3) Practical application--revolutionary action by the Communists. (4) Criticism of other Socialist schools. The last section has long ago lost all practical interest, so that we need only deal with the first three sections. (1) The middle class developed in the bosom of feudal society, in the mediæval industrial towns. With the geographical discoveries of the sixteenth and seventeenth centuries its sphere of activity was extended; it revolutionised the methods of industry, agriculture and communication; it broke through the mediæval economic and political bonds; it overthrew feudalism, the guilds, the little self-governing regions, absolute monarchy, and established modern industry with its accelerated and concentrated production, middle-class franchise, the national State, and, at the same time, international trade. It was the middle class which first showed what human activity can accomplish. "It has achieved greater miracles than the construction of Egyptian pyramids, Roman aqueducts, or Gothic cathedrals, it has carried out greater movements than the migration of peoples or the crusades.... Although it is scarcely a century since it came to be the dominating class, the middle class has created more powerful and more gigantic forces of production than all past generations put together." The subjugation of natural forces, machinery, the application of chemistry to industry and to agriculture, steamships, railways, electric telegraphs, the clearing of whole continents, making the rivers navigable, the conjuring forth of whole peoples out of the ground: that is the positive achievement of the middle class. Now for the negative: it created the proletariat, immeasurable, uncontrollable, anarchical economic conditions, periodical crises--poverty and famine in consequence of over-production and a glut of wealth, over-driving and reckless exploitation of the workers, whose labour is bought in exchange for the minimum quantity of the necessaries of life. These facts show that the forces of production are more extensive and more powerful than is demanded by the conditions under which they are operative: the economic system can produce and deliver more goods than society can use under the existing laws concerning property, i.e., the distribution and the effective demand fall short of the manufacture and the supply. The material forces of production press upon the limits imposed upon them by the laws of private property. This happens, too, because the working class must reduce its consumption of goods to a minimum in consequence of the existing laws of property, which give to capital the right of distribution. All these conditions taken together, the positive as well as the negative ones, make possible and give rise to the struggles of the workers against the middle class--and so the productive agents rise in rebellion. These struggles lead to the organisation of the workers in trade unions, to the awakening of class consciousness, and, as a result, to the formation of the political labour party. (2) The movements within middle-class society, as well as in feudal and ancient society, where freeman and slave, patrician and plebeian, baron and serf, guild-master and journeyman, capitalist and working man stood and stand in constant antagonism to one another, prove that the whole history of mankind since the rise of private ownership is the history of class struggles, and that in these class struggles, carried on now openly, now under the surface, either new forms of society and of ownership, new economic systems arise or else end with the common destruction of the two classes. The antagonistic classes are supporters of conflicting economic interests, systems of ownership and ideals of culture. The craftsman and tradesman of the towns, the burgher, fought against the feudal lord and knight for individual property, for freedom of industry and trade, for freedom to dispose of personal property and for the national State. With the triumphal progress of the middle class private property fell into fewer and fewer hands. The proletarians are without property, they have no share in the wealth of their country; on the other hand, the production of capital becomes more and more a matter of common co-operation, and capital becomes a joint product. The proletariat can, accordingly, no longer fight for individual ownership but for the socially conducted utilisation of the means of production belonging to the community and of the goods produced. The middle class has therefore created in the proletariat a social class which must have as its object to do away with the middle class system of ownership and to set up the proletarian system of common ownership. (3) In this struggle of the working classes the Communists are therefore the pioneers of the movement. They are at once the philosophers and the self-sacrificing champions of the proletariat awakened into class consciousness. "The Communists are not a special party in contradistinction to the other Labour parties. They have no interests apart from the interests of the whole proletariat. They set up no special principles according to which they wish to mould the proletarian movement." The Communists lay stress on the common interests of the whole proletariat and of the collective movement. Their aim is the organisation of the proletariat into a class, the overthrow of middle-class domination, and the conquest of political power by the proletariat. They support everywhere "any revolutionary movement against the existing social and political conditions. In all these movements they emphasise the question of property, in whatever state of evolution it may appear, as the foundation of the movement. And finally the Communists work everywhere for the union and agreement of democratic parties[6] of all nationalities. The Communists disdain to conceal their views and intentions. They declare openly that their ends can only be attained by the forcible overthrow of every obtaining order of society. Let the ruling classes tremble before a Communist revolution; the workers have nothing to lose by it but their chains. They have the world to win. Workers of every land, unite!" From the standpoint of social philosophy, the Manifesto, a document reflecting its time, is almost perfect. Strong emotion and extraordinary intellectual power are united in it. Years of study of one of the boldest and most fertile minds are here welded together in the glowing heat of one of the most active of intellectual workshops. But the work is not free from logical flaws. In the passages we have quoted the part played in history by the middle class is extolled by Marx; yet in the last few lines of the very same section he declares that "the middle class is the unwitting and inert instrument of industrial progress," and still more scathing is his criticism in the second section, where the middle class is accused of indolence. "It has been objected that, if private property were done away with, all activity would cease and a general laziness set in. According to that, middle-class society would have been ruined by idleness long ago; for those of its members who work gain nothing, and those who gain do not work." That is as much as to say that the middle class is lazy and does not work, and yet the Manifesto says that the middle class has achieved more marvellous works than Egypt, Rome, and the Middle Ages, and that, in its reign of power of scarcely a hundred years, it has created more powerful and more gigantic forces of production than all past generations put together. How can a class which does not work produce more marvellous works than the whole ancient and mediæval world? Marx frees himself later from this inconsistency by ascribing surplus value solely to the operation of the variable part of capital (wage-labour)--a doctrine which he develops with iron logic in his principal work, "Capital." III. THE REVOLUTION OF 1848. The ink had hardly dried on the Communist Manifesto when the February Revolution broke out. The crowing of the Gallic cock soon awoke an echo in the various German States, whilst in Brussels the democrats were attacked and ill-treated by the mob. One of the victims of this attack was Karl Marx, who was, moreover, banished shortly afterwards by the Belgian Government. This action, however, did not cause him any embarrassment, as he was ready in any case to proceed to Paris, whither the Provisional Government of the French Republic had already invited him in the following terms: "Paris, March 1, 1848. "BRAVE AND FAITHFUL MARX, "The soil of the French Republic is a place of refuge for all friends of freedom. Tyranny has banished you; France, the free, opens to you her gates--to you and to all who fight for the holy cause, the fraternal cause of every people. In this sense shall every officer of the French Government understand his duty. _Salut et Fraternité._ FERDINAND FLOCON, Member of the Provisional Government." The stay in Paris was, however, of short duration. Marx and Engels gathered together the members of the League of Communists and procured them the means for returning to Germany to take part in the German revolution. They themselves travelled to the Rhineland and succeeded in getting the establishment of the newspaper planned in Cologne into their hands. On the first of June, 1848, the _Neue Rheinische Zeitung_ appeared for the first time. It goes without saying that the editor was Karl Marx, and among his collaborators were Engels, Freiligrath, Wilhelm Wolff, and Georg Weerth. Occasionally, too, Lassalle sent contributions. It is but rarely given to a daily paper to have such an editorial staff. In the third volume of his "Collected Papers of Marx and Engels," Franz Mehring gives a selection of the articles which appeared in this journal. They are still worth reading. Here are a few examples. After the fall of Vienna he wrote an article concluding with the following words: "With the victory of the 'Red Republic' in Paris the armies from the inmost recesses of every land will be vomited forth upon the boundaries and over them, and the real strength of the combatants will clearly appear. Then we shall remember June and October, and we too shall cry, 'Woe to the vanquished!' The fruitless butcheries which have occurred since those June and October days ... will convince the peoples that there is only one means of shortening, simplifying, and concentrating the torturing death agonies of society--only one means--revolutionary terrorism."--(_Neue Rheinische Zeitung_, November 6, 1848.) Or take, for example, this passage from the last article of the paper, when on May 18, 1849, it succumbed to the "craft and cunning of the dirty West Kalmucks" (i.e., the Prussians). "In taking leave of our readers we remind them of the words in our first January number: 'Revolutionary upheaval of the French working class, general war--that is the index for the year 1849. And already in the east a revolutionary army comprised of warriors of all nationalities stands confronting the old Europe represented by and in league with the Russian army, already from Paris looms the Red Republic.'" In reading these extracts one has only to substitute Russia for France and Moscow for Paris and we get at one of the sources of Lenin's and Trotsky's revolutionary policy. The articles written by Marx in 1848 and 1849 have supplied the Bolsheviks their tactics. The censorship, Press lawsuits, and the decline of the revolution severed the life threads of the paper after scarcely a year of its existence. Marx sacrificed everything he had in money and valuables--in all, 7,000 thalers--in order to satisfy creditors and to pay the contributors and printers. Then he travelled to Paris, where he witnessed not the triumph of the Red Republic but that of the counter-revolution. In July, 1849, he was banished by the French Government to the boggy country of Morbihan, in Brittany; he preferred, however, to go over to London, where he remained to the end of his life. IV. DAYS OF CLOUD AND SUNSHINE IN LONDON. Marx lived for more than a generation in London. Half of this time was spent in a wearying struggle for existence, which, however, did not prevent him from collecting and systematising a vast amount of material for his life-work, "Capital," nor from taking a decisive part in the Labour movement as soon as the opportunity presented itself, as it did on the founding of the International. The first decade was particularly trying. A letter written on May 20, 1851, by Marx's wife to Weydemeyer, in America, gives an affecting picture of their poverty during these first years of exile.--("Neue Zeit," 25th year, Vol. II., pp. 18-21.) The attempt to continue the _Neue Rheinische Zeitung_ under the title _Neue Rheinische Revue_ had only the negative result of swallowing up Marx's last resources. How poor Marx then was can be judged from the fact that he had to send his last coat to the pawnshop in order that he might buy paper for his pamphlet on the Cologne Communist trial (towards the end of 1852). On top of all this, lamentable differences sprang up among the German exiles, who, deceived in their revolutionary illusions, overwhelmed one another with recriminations; an echo of these conflicts is heard in the pamphlet "Herr Vogt" (1860). Marx's only regular source of income in the years 1851-60 was his earnings as correspondent of the _New York Tribune_, which paid him at the rate of a sovereign per article, and this hardly covered his rent and the cost of newspapers and postage. Yet his articles were veritable essays, the fruit of researches which cost him a good deal of time. And in the midst of this penury the idea of writing a Socialistic criticism of political economy burnt within him. One might almost say that since 1845 this idea had allowed him no peace. Freiligrath's lines are, as it were, stamped upon him: In the clouds his goal he planted; In the dust had he to live, Bare existence daily granted. Cramped, hemmed in on every side, Pinched by poverty and urged By want, he, of all denied, By necessity was scourged. Only in the sixties did his fortunes improve. Small family inheritances, Wilhelm Wolff's legacy of over £800, and Engels' more plentiful and regular help, which from 1869 onward amounted to about £350 annually, enabled Marx to write his "Capital," the first volume of which, as is well known, is dedicated to Wilhelm Wolff. To these relatively happy times belong Paul Lafargue's reminiscences--("Neue Zeit," 9th year, Vol. I., pp. 10-17, 37-42)--of his intercourse with the Marx family. In particular he depicts the personality of the author of "Capital." In the bosom of his family and among the circle of his friends on Sunday evenings Marx was a genial companion, full of wit and humour. "His dark black eyes sparkled with mirth and with a playful irony whenever he heard a witty remark or a prompt repartee." He was a tender, indulgent father, who never asserted the parental authority. His wife was his helper and companion in the truest sense of the word. She was four years older than he, and notwithstanding her aristocratic connections and in spite of the great hardships and persecutions which for years she had to suffer by the side of her husband, she never regretted having taken the step which linked her destiny with that of Marx. She possessed a cheerful, bright disposition and an unfailing tact, easily winning the esteem of every one of her husband's acquaintances, friends, and followers. "Heinrich Heine, the relentless satirist, feared Marx's scorn; but he cherished the greatest admiration for the keen, sensitive mind of Marx's wife. Marx esteemed so highly the intelligence and the critical sense of his wife that he told me in 1866 he had submitted all his manuscripts to her and that he set a high value upon her judgment." Six children were born to the Marxes, four girls and two boys, of whom only three of the girls grew up--Jenny, who married Charles Longuet; Laura, who became the wife of Paul Lafargue; and the unhappy but highly-gifted Eleanor, who spent 14 sad years of her life by the side of Dr. Edward Aveling. The sixties were undoubtedly the happiest years of Marx's life, and seemed to promise an abundant harvest in his later life. But his health soon began to fail, and did not allow him to complete his work. The most productive years of Marx's life were between 1837 and 1847 and between 1857 and 1871. All his valuable work falls within these years: the "Poverty of Philosophy," the Communist Manifesto, his activity in the International, "Capital," the Civil War in France (the Commune). V. THE INTERNATIONAL. The economic studies necessitated by his book "Capital" led Marx into the study of the social history of England during the eighteenth and nineteenth centuries, and gave him an insight into the working-class movements of those times such as but few scholars, English or foreign, have acquired. He became familiar with the modes of thought and expression of the working-class revolutionary movements, and especially of the Chartist movement, with the surviving leaders and adherents of which he was personally acquainted. Always eager to obtain knowledge of the actual working-class movement and to take part in it, he watched the activities of the English working class, which in the fifties was mainly occupied with purely trade unionist questions, being, politically, still in the Liberal camp. A change seemed imminent, however, about the beginning of the sixties. The London Labour leaders began to think about a Parliamentary reform movement, about starting a campaign for universal suffrage, which was an old Chartist demand. Likewise they manifested an interest in the fate of Poland and in other international questions concerning liberty. At the International Exhibition held in London in 1862, the Labour leaders made the acquaintance of a deputation of French working men, with whom they afterwards carried on a correspondence. In 1863 and 1864, in the course of this correspondence, the idea of founding an international union of workers was mooted; and in the fourth week of September, 1864, this idea was carried into effect. Labour delegates from Paris and London held a conference in London from the 25th to the 28th of September, and the event was celebrated by a public gathering in St. Martin's Hall on the evening of the 28th. Marx received an invitation to this meeting in order that the German workers might be represented there. This conference and meeting resulted in the formation of the International Working Men's Association. Committees and sub-committees were elected to draw up a declaration of principles and outline the constitution. One of Mazzini's followers and a Frenchman submitted schemes which were handed over to Marx to be elaborated by him. He consigned them to the waste-paper basket and wrote the "Inaugural Address," giving a history of the English workers since the year 1825, and deducing the necessary conclusions. The declaration of principles is entirely the work of Marx, and it is by no means a subtly and diplomatically conceived composition designed to please English and French working men; it consists essentially of Marxian ideas expressed in terms, however, which would appeal to English working men of that time. "It was difficult," writes Marx to Engels--("Correspondence," Vol. III., p. 191)--"so to arrange matters that our view should appear in a form which would prove acceptable to the working-class movement with its present outlook.... It needs time before the reanimated movement will allow of the old boldness of speech. One must go _fortiter in re, suaviter in modo_ (firmly maintaining essential principles with a pleasant manner)." The Inaugural Address sums up the history of the English working class from 1825 to 1864, and shows that from its struggles, as indeed from modern social history in general, the following lessons may be learnt by the proletariat: independent economic and political action by the working class; the turning to account of reforms forced out of the ruling classes by the proletariat; international co-operation of workers in the Socialist revolution and against secret, militarist diplomacy. Marx devoted a great deal of his time during the years 1865 to 1871 to the International. Its progress awoke in him the greatest hopes. In 1867 he writes to Engels: "Things are moving. And in the next revolution, which is perhaps nearer than it seems, we (i.e., you and I) have this powerful machinery _in our hands_."--("Correspondence of Marx and Engels," Vol. III., p. 406.) The International passed through three phases: from 1865 to 1867 the followers of Proudhon held sway; from 1868 to 1870 Marxism was in the ascendant; from 1871 to its collapse it was dominated and ultimately broken up by the Bakunists. The followers of Proudhon, like those of Bakunin, were against political action and in favour of the federative economic form of social organisation, only the Bakunists were also Communists, whereas the followers of Proudhon had an antipathy to Communism. Both groups were in agreement with Marx only on the one point--that he made economics the basis of the working-class movement. Both groups, however, accused him of being dictatorial, of attempting to concentrate the whole power of the International in his own hands. Besides insurmountable theoretical differences, racial and national prejudices crept into the International as disintegrating factors. The Romance and Russian Anarchists looked upon Marx as a pan-German, and conversely, some Marxians considered Bakunin a pan-Slav. Even as late as 1914, in the first months of the war, Professor James Guillaume, the last of the Bakunists, wrote a pamphlet entitled "Karl Marx, Pangermaniste" (Paris). Michael Bakunin (b. 1814, near Twer, in Russia; d. 1876, in Berne) lived and studied in Germany during the forties. In 1848 and 1849 he took part in the revolution, was arrested, then handed over to Russia and banished to Siberia, whence he escaped in 1856, afterwards living in various countries of Western Europe. He was an indifferent theorist, and contributed little to the enrichment of philosophical Anarchism, but he distinguished himself by his immense revolutionary activity and his capacity for sacrifice. The influence which he exercised sprang from his character. He had been acquainted with the Young Hegelians as well as with Marx, Engels, and Wilhelm Wolff since the beginning of the forties. Until the end of 1868 he acknowledged Marx as his intellectual leader, as is evident from the following letter which he addressed to Marx: "123, Montbrillant, Geneva, "December 22, 1868. "Serno has shown me the portion of your letter which concerns me. You ask him whether I am still your friend. Yes, more than ever, my dear Marx, for now I understand better than ever how truly right you are when you advance along the high road of economic revolution and invite us to follow, and when you set those below us who stray into the side-tracks either of national or exclusively political enterprises. I am now doing the same thing that you have been doing for more than twenty years. Since my solemn public leave-taking from the bourgeois of the Berne Congress, I no longer know any other society, any other milieu, than the world of the workers. Henceforth my country is the 'International,' of which you are one of the most illustrious founders. Yon see, my dear friend, that I am your disciple--and I am proud of it. That will be enough to make clear my attitude and my feelings toward you."--("Neue Zeit," 19th year, Vol. I., p. 6.) Nevertheless, this discipleship did not hinder Bakunin from secretly forming a separate organisation which contributed to the break-up of the International. Moreover, the International was only a kind of school for Socialist officers who had yet to create their armies, but it proved even more successful than Marx himself could have expected. The fundamental principles of Marxism ousted every other social revolutionary system which had made itself prominent within the working-class movement. VI. THE PARIS COMMUNE. On September 1, 1870, a part of the French Army was defeated near Sedan and compelled to capitulate on the following day. Among the prisoners was Louis Bonaparte, the French Emperor. The Empire fell on September 4, and France was proclaimed a Republic. On September 6 Marx wrote to Engels: "The French section of the International travelled from London to Paris in order to do foolish things in the name of the International. They want to overthrow the Provisional Government and set up a _Commune de Paris_."--("Correspondence," Vol. IV., p. 330). Although the Provisional Government of the newly-baked French Republic was in no wise made up of friends of the democracy, Marx and Engels expressed themselves _against_ any revolutionary action by the Paris working class. In the second Address (or declaration) of the General Council of the International, written on September 9, and composed by Marx, the question is discussed as follows: "Thus the French working class finds itself placed in extremely difficult circumstances. Any attempt to overthrow the new Government, when the enemy is already knocking at the gates of Paris, would be a hopeless piece of folly. The French workers must do their duty as citizens; but they must not let themselves be overcome by the national reminiscences of 1792.... They have not to repeat the past but to build the future. Let them quietly and with determination make the most of the republican freedom granted to them, in order to carry out thoroughly the organisation of their own class. That will give them new, Herculean strength for the rebirth of France and for our common task--the emancipation of the proletariat."--("Civil War in France," Second Address.) Marx then urged the French workers not to do anything foolish, not to set up a revolutionary Commune of Paris, but to make use of their republican liberties to create proletarian organisations and to save and discipline their forces for future tasks. Circumstances, however, proved much stronger than any words of wisdom. Goaded by the anti-democratic moves of the Government supporters, deeply humiliated by the defeats of the French army, burning with patriotism and whipped up into fury against the "capitulards," the Paris working men cast Marx's words to the winds and rose in revolution on March 18, 1871, proclaiming the Paris Commune. Paris was to be the capital of a Socialist Republic. In seven weeks the Paris Revolution was overthrown--and "Vae victis!" (Woe to the vanquished!) Marx afterwards wrote the pamphlet on "The Civil War in France, 1871," which is one of the most mature of his writings. He did not cut himself entirely adrift from the revolutionaries--the Bolsheviks of that time--but defended them with unsurpassable energy. It is the swan song of Marx and of the first International. VII. THE EVENING OF LIFE. During the last twelve years of his life Marx had to fight almost uninterruptedly against various bodily ailments, all of which had their origin in his chronic liver complaint and over-exertion. His work, for which he had sacrificed, as he wrote to an American friend, "health, happiness and family," remained unfinished. He devoted his enforced leisure to making a study of American agriculture and of rural conditions in Russia, for which purpose he learnt Russian; he likewise occupied himself with studies of the Stock Exchange, banking, geology, physiology, and higher mathematics. In 1875 he wrote his "Criticism of the Gotha Program"--("Neue Zeit," 9th year, Vol. I., No. 18)--which contains some very important data as to Marx's attitude to the State, to the revolutionary period of transition from Capitalism to Socialism, and lastly to Socialist society itself. He went to Karlsbad for the purpose of recovering his health. In 1877 and 1878 he was in some measure capable of carrying on his work, and set about arranging his manuscripts and getting the second volume of "Capital" ready for the press; it soon appeared, however, that his capacity for work had gone. The decline in body and mind could no longer be checked; even visits to French and Algerian watering-places proved ineffective. It was just at this time that Marx began to find recognition both in France and in England: Jules Guesde, Henry M. Hyndman, Belfort Bax set about spreading Marxian doctrines, and Marxian and anti-Marxian parties were formed. But the man to whom this recognition had come was already a ruin. Bronchial catarrh, inflammation of the lungs, spasmodic asthma, together with the loss of his wife on December 2, 1881, and of his eldest daughter (Mme. Longuet) in January, 1883, gave the finishing stroke to his enfeebled body. On March 14, 1883, Marx breathed his last. Engels gives an account of the last moments in a letter to his American friend Sorge, dated March 15, 1883: "Yesterday, at half-past two in the afternoon, the best time for visiting him, I went down to see him; everybody was in tears; it looked as if the end had come. I made inquiries, trying to get at the truth of the matter and to offer consolation. There had been a slight hæmorrhage, but a sudden collapse had supervened. Our good old Lena, who had tended him better than any mother does her child, went up, came down. He was half asleep, she said; I could go up. As we went in, he lay there, sleeping, never to wake again. Pulse and breathing had ceased. In those two minutes he had gone painlessly and peacefully to sleep.... Mankind is less by a head, and indeed by the most important head it had to-day. The working-class movement will pursue its course, but its central point, to which French, Russians, Americans, and Germans turned of their own accord in decisive moments, always to receive that clear, unambiguous counsel which genius and perfect mastery alone can give--is gone." On Saturday, March 17, he was buried in the Highgate Cemetery, London. Among those who spoke at the graveside were Friedrich Engels and Wilhelm Liebknecht. The former gave a brief account of his revolutionary struggles, in which he said: "Just as Darwin discovered the law of the evolution of organic nature, so Marx discovered the evolutionary law of human history--the simple fact, hitherto hidden under ideological overgrowths, that above all things men must eat, drink, dress, and find shelter before they can give themselves to politics, science, art, religion, or anything else, and that therefore the production of the material necessaries of life and the corresponding stage of economic evolution of a people or a period provides the foundation upon which the national institutions, legal systems, art, and even religious ideas of the people in question have been built, and upon which, therefore, their explanation must be based, a procedure the reverse of that which has hitherto been adopted. Marx discovered also the special law of motion for the modern capitalist mode of production and for the middle-class society which it begets. With the discovery of surplus value light was at once thrown upon a subject, all the earlier investigations of which, whether by middle-class economists or by Socialist critics, had been gropings in the dark...." After him spoke Liebknecht, who had hastened from Germany to pay a last tribute to his friend and master: "The dead one, whose loss we mourn, was great in his love and in his hate. His hate sprang from his love. He had a great heart, as he had a great intellect. He has raised social democracy from a sect, from a school, to a party, which now already fights unconquered, and in the end will win the victory." Engels, who outlived him by twelve years, edited the two last volumes of "Capital," while Karl Kautsky, the disciple and successor of Engels and the real disseminator of Marxian doctrines, edited the three volumes of Marx's historical studies on surplus value. The latter work is not far short of being a great history of political economy. FOOTNOTES: [6] By democratic parties were then understood working-class political movements, such as Chartism, etc. IV. THE MARXIAN SYSTEM. I. THE MATERIALIST CONCEPTION OF HISTORY. As a guide to his studies from 1843-4 onwards, Marx used the conception of history, or method of investigation, which--in contradistinction to the idealist conception of history of Hegel--was named materialistic. As its nature is dialectic--as it seeks to conceive in thought the evolving antagonisms of the social process--it is, like Hegel's dialectic, a conception of history and a method of investigation at the same time. Nowhere did Marx work out his method of investigation in a special and comprehensive form; the elements of it are scattered throughout his writings, particularly in the Communist Manifesto and in the "Poverty of Philosophy," and serve the purpose of polemics or demonstration. Only in the preface to his book, "On the Critique of Political Economy" (1859) did he devote two pages to a sketch of his conception of history, but in phraseology which is not always clear, sequential, or free from objection. It was the intention of Marx to write a work on Logic, where he would certainly have formulated clearly his materialistic dialectic. As, however, his fundamental ideas on this subject are available, we are able to extract the essentials of his position. A glance over human history suffices to teach us that from age to age man has held to be true or false various opinions on rights, customs, religion, the State, philosophy, land-holding, trade, industry, etc., that he has had various economic arrangements, and forms of the State and of society, and that he has gone through an endless series of struggles and wars and migrations. How has this complicated variety of human thought and action come about? Marx raises that question, which, so far as he is concerned, does not aim in the first place at the discovery of the origin of thought, of rights, of religion, of society, of trade, etc.; these he takes to be historically given. He is rather concerned to find out the causes, the impulses, or the springs which produce the changes and revolutions of the essentials and forms of the mental and social phenomena, or which create the tendencies thereto. In a sentence: What interested Marx here was not the _origin_, but the development and change of things--he is searching for the dynamic law of history. Marx answered: The prime motive power of human society, which is responsible for the changes of human consciousness and thought, or which causes the various social institutions and conflicts to arise, does not originate, in the first place, from thought, from the Idea, from the world-reason or the world-spirit, but from the material conditions of life. The basis of human history is therefore material. The material conditions of life--that is, the manner in which men as social beings, with the aid of environing nature, and of their own in-dwelling physical and intellectual qualities, shape their material life, provide for their sustenance, and produce, distribute and exchange the necessary goods for the satisfaction of their needs. Of all categories of material conditions of existence, the most important is production of the necessary means of life. And this is determined by the nature of the productive forces. These are of two kinds: inanimate and personal. The inanimate productive forces are: soil, water, climate, raw materials, tools and machines. The personal productive forces are: the labourers, the inventors, discoverers, engineers, and finally, the qualities of the race--the inherited capacities of specific groups of men, which facilitate work. The foremost place among the productive forces belongs to the manual and mental labourers; they are the real creators of exchange-value in capitalist society. The next place of importance is taken by modern technology, which is an eminently revolutionising force in society.--("Capital" (German), Vol. I., Chapters 1, 12, 13 and 14, "Poverty of Philosophy" (German edition, 1885, pp. 100-101.)) So much for the conception "Productive Forces," which plays an important part with Marx. We come now to the other equally important notion, "Conditions of production." By this phrase Marx understands the legal and State forms, ordinances and laws, as well as the grouping of social classes and sections: thus, the social conditions which regulate property and determine the reciprocal human relations in which production is carried on. The conditions of production are the work of men in society. Just as men produce various material goods out of the materials and forces made available to them by Nature, so they create out of the reactions of the productive forces upon the mind definite social, political, and legal institutions, as well as systems of religion, morals, and philosophy. "Men make their own history, but do not so spontaneously in conditions chosen by them, but on the contrary, in conditions which they have found ready to hand transmitted and given."--(Marx, "The Eighteenth Brumaire," I.) That is to say, under the influence of productive work and its needs, men build their form of society, their State, their religion, their philosophy and science. The material production is the substructure or the groundwork, while the corresponding political, religious, and philosophical systems are the superstructure. And in such a manner that the superstructure corresponds to the foundation, lends it strength, and promotes its development. The foundation is material, and the superstructure is the psychical reflex and effect. In broad outlines this conception may be illustrated somewhat as follows: Primitive human groups lived under Communism and were organised according to blood relationship. Their deities have the characteristics of their natural environment, and reflect the physical effects of this environment upon the primitive mental life of the "savage"; their religion, their morality, and their laws promote the communal life and the tribal discipline. Feudal society is based on the possession of land by the nobles and on the industrial labour of the corporations of the towns. The inherited religious ideas are soon transformed in accordance with the dominant interests of these historical periods (primitive Christianity became a State religion); all religious, ethical, and philosophical ideas antagonistic to these interests were fought and persecuted. The middle-class society, which is based on personal property, is endeavouring to sweep away all vestiges of communal and corporation rights, to set free the individual, to mobilise labour and property, to abolish Feudalism and the old Church and monasterial institutions, and to put in their place the individual relation between man and God, or the personal conscience (the Reformation), introducing individual rights as well; it struggles against the independent sovereignty of the feudal domains, and labours for a united national territory, which will afford greater scope to trade and commerce; it supports Absolutism, so long as the latter is in conflict with the feudal lords; and when, afterwards, Absolutism is a hindrance to the development of middle-class society, this also is fought and a constitutional monarchy or a republic demanded. And all this takes place not because certain human intelligences, by reason of more intense thought, or enlightenment, or the call of a supernatural power, are primarily at work, but as a consequence of the influence of the material basis, of the economic foundation of society, upon the mind, which translates and transforms these external realities into religious, juridical, and philosophic conceptions: "It is not the consciousness of men which determines their existence, but, on the contrary, their social existence determines their consciousness."--(Marx, Preface to "Critique of Political Economy.") Man, even the most heroic, is not the sovereign maker and law-giver of social life, but its executive; he only follows out the tendencies and currents set up by the material foundation of society. Nevertheless, a great deal depends upon the executive officials. If they possess comprehensive knowledge, energetic natures, and outstanding capacities, they are able, within the boundaries drawn for them, to accomplish great things, and to accelerate the development. "Up to the present the philosophers have but interpreted the world; it is, however, necessary to change it."--(Marx, "Theses to Feuerbach.") We have referred in various places to interests. We are not to understand by this personal, but general social or class interests. Marx is not of the opinion that everybody acts in accordance with his personal welfare. This is not Marxian doctrine, but that of the middle-class moral philosophers, like Helvetius (1715-1771) and Jeremy Bentham (1748-1832), who regarded pleasure and pain of the individual as the measure and motive of his actions and conduct. Marx is rather of the opinion that men often, in the most important events of their lives, act contrary to their personal interests, as in their feelings and thoughts they identify themselves with that which they hold to be the interests of the community or of their class. According to Marx, individual interest generally plays a slight part in history. He is preoccupied with the collective interest of social production. Only the latter does he hold to be determining in the formation of the intellectual superstructure. Up till now we have only spoken of various forms of production and society, and their corresponding mental systems. But we do not yet know why and how one form of production and society becomes obsolete and gives place to another, that is, how and why revolutionary changes are brought about. Or in other words: we have hitherto considered the statics of society; we will now look at its dynamics. The revolutionary changes in society depend on two groups of phenomena, which, although casually connected with each other, yet work differently. One of these groups of phenomena is technical, and consists in changes in the productive forces. The other group, which is the effect of the first, is of a personal nature, and consists in struggles between the social classes. Let us consider the first group of causes. As the productive forces expand, through greater skill on the part of the worker, through discoveries of new raw material and markets, through the invention of new labour processes, tools and machines, and through the better organisation of trade and exchange, so that the material basis or the economic foundation of society is altered, then the old conditions of production cease to promote the interests of production. For the conditions of production: the former social classes, the former laws, State institutions, and intellectual systems were adapted to a state of the productive forces which is either in process of disappearing, or no longer exists. The social and intellectual superstructure no longer corresponds to the economic foundation. The productive forces and the conditions of production come into conflict with each other. This conflict between the new realty and the old form, this conflict between new causes and the obsolete effects of bygone causes, begins gradually to influence the thoughts of men. Men commence to feel that they are confronted with a new external world, and that a new era has been opened. Social divisions acquire a new significance: classes and sections which were formerly despised gain in social and economic power; classes which were formerly honoured decline. While this transformation of the social foundation is proceeding, the old religious, legal, philosophical, and political systems cling to their inherited positions, and insist on remaining, although they are obsolete and can no longer satisfy mental needs. For human thought is conservative: it follows external events slowly, just as our eye perceives the sun at a point which the sun has in reality already passed, as the rays require several minutes of time in order to strike our optic nerves. We may recall Hegel's fine metaphor: "The Owl of Minerva begins its flight only when twilight gathers." However late, it does begin. Great thinkers gradually arise, who explain the new situation, and create new ideas and trains of thought which correspond to the new situation. The human consciousness gives birth to anxious doubts and questionings, and then new truths; leading to differences of opinion, disputes, strifes, schisms, class struggles, and revolutions. In the next chapter we will consider more closely the class struggle between Labour and Capital. Meanwhile, we will look at the class struggle generally. In primitive societies, where private property is yet unknown, or still undeveloped, there are no class distinctions, no class domination, and no class antagonisms. The chief, the medicine man, and the judge regulate or supervise the observance of the customary usages, religious ceremonies, and social arrangements. But as soon as the old order is dissolved, and private property develops, in consequence of trade with other peoples or through wars, there arise classes of those who possess and those who do not. The possessing class carries on the Government, makes laws, and creates institutions, which chiefly serve the end of protecting the interests of the possessing and ruling classes. The intellectual structure of the class society likewise corresponds to the interests of those who possess and rule. So long as these interests promote the common good in some measure, so long as the old forms of production and the old conditions of production are largely in harmony with each other, a certain truce prevails between the classes. But should there set in the above-mentioned opposition between the productive forces and the conditions of production, the latter will cease to satisfy the oppressed classes, and class conflicts will arise, which will either result in legal compromises (reforms) or will end in the overthrow of the society concerned, or will lead to a new set of conditions. Ancient history (Hebrew, Greek, Roman) is full of these social struggles; all the great reform laws of these peoples were attempts to establish social peace, but the rich and the poor, the Patricians and the Plebeians, the Slaves and Freemen, continued their struggles until the downfall of the old world, which has bequeathed to us great intellectual treasures as the fruit of these struggles. In the Middle Ages social struggles between the feudal lords and the traders, between nobles and peasants, were kindled. In more recent times the middle classes fought Autocracy and Squirearchy, and at length the proletariat was pitted against the bourgeoisie--class struggles which led to rebellions and revolutions, and powerfully influenced the intellectual life. From these historical antagonisms and struggles arose the intellectual and political antagonisms, personified by the leaders of the social groups and classes, of which world-history relates: opposing religious and philosophical systems: Brahma and Buddha, Baal and Jahveh, National God and Universal God, Heathendom and Christendom, Catholicism and Protestantism, Materialism and Idealism, Realism and Nominalism. However abstract or metaphysical, however remote from actual life and material production they may appear to be, nevertheless, in the last resort they are to be traced back through many intermediate stages to changes in the economic foundation of the society in question, to the contradiction between this foundation and the conditions of production, as well as to the great struggles between conflicting interests which spring therefrom. The ethical, political, and politico-economic systems which strive with each other for mastery, as well as national and world wars, are separated from the real basis of society by a progressively smaller number of intermediate stages: the questions of idealist or utilitarian ethics, monarchy or republic, oligarchy or democracy, protection or free trade, State regulation or free scope for the economic forces, Socialism or private enterprise, etc., however lofty and humanitarian may be the arguments and ideal motives which their champions may adduce, are connected with the material foundation and the conditions of production which have come into conflict with it. Marx and Engels have set forth this conception in the Communist Manifesto, in popular form, as follows: "Does it require deep intuition to comprehend that man's ideas, views, and conceptions, in one word, man's consciousness, changes with every change in the conditions of his material existence, in his social relations and in his social life? "What else does the history of ideas prove than that intellectual production changes in character in proportion as material production is changed. The ruling ideas of each age have ever been the ideas of its ruling class. "When people speak of ideas that revolutionise society they do but express the fact that within the old society the elements of a new one have been created, and that the dissolution of the old ideas keeps even pace with the dissolution of the old conditions of existence. "When the ancient world was in its last throes the ancient religions were overcome by Christianity. When Christian ideas succumbed in the eighteenth century to rationalist ideas, feudal society fought its death-battle with the then revolutionary bourgeoisie. The ideas of religious liberty and freedom of conscience merely gave expression to the sway of free competition within the domain of knowledge." Now one step farther. When the conditions of production, the social divisions into classes, and the laws of property become fetters to the productive forces, when the conflict of interests condense themselves into class struggles, then comes a period of social revolution. "With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations the distinction should always be made between the material transformation of the economic conditions of production which can be determined with the precision of natural science, and the legal, political, religious, æsthetic, or philosophic--in short, ideological forms in which men become conscious of this conflict and fight it out. Just as our opinion of an individual is not based on what he thinks of himself, so we are not able to judge of such a period of transformation by its own consciousness; on the contrary, this consciousness must rather be explained from the contradictions of material life, from the existing conflict between the social forces of production and the conditions of production."--(Preface to "Critique of Political Economy.") The revolutionary period only closes when the social order that had become full of contradictions liberates the productive forces and strikes off their fetters, and creates new conditions of production which correspond to them. The old society, which is doomed to disappear, evolves the new conditions of existence before it sinks into oblivion. The men who assist the progress of the new society accordingly occupy themselves with problems which they are able to solve, as the means thereto are given in the material development. Such problems are set before them because, regarded from the theoretical standpoint, they are the mental reflex of the contradictions and revolutionary tendencies within society. Accordingly, the essence of the historical development of human society has been so far the progressive dialectical unfolding and perfection of the productive forces. "In broad outlines," says Marx, "we can designate the Asiatic, the ancient, the feudal, and the modern bourgeois methods of production, as so many epochs in the progress of the economic formation of society. The bourgeois relations of production are the last antagonistic form of the social process of production--antagonistic not in the sense of individual antagonism, but of one arising from conditions surrounding the life of individuals in society; at the same time the productive forces developing in the womb of bourgeois society create the material conditions for the solution of that antagonism. This social formation constitutes, therefore, the closing chapter of the prehistoric stage of human society." Prehistoric stage of human society! What significant words! The capitalist economic order is the last phase of this stage, which is written in streams of blood and tears of the dispossessed and exploited, and to which is given the task of developing the productive forces and liberating men from the material fetters, so that they may enter into a life of mental culture. The materialist conception of history, unethical and unidealist like all natural science, opens up wide and elevating prospects. During thousands of years man struggled on the physical plane to obtain release from the animal kingdom, and was subjected to the discipline of unfeeling nature. After he had emerged from the animal kingdom, man laboured for thousands of years to lay the foundation of human society, a process which was performed under the hunger whip of stern taskmasters, and which powerfully stimulated the intellectual capacities of men, but only disclosed the ideal of justice and humanity as a remote and inaccessible star. The materialist conception of history has shown itself to be a fruitful method of historical investigation. Some aspects of this idea were uttered both before and during Marx's lifetime. The revolution in the positions of classes and the struggles which followed hard on the English industrial revolution (1760-1825), and everywhere attended the transition from an agrarian to an industrial State, were too palpable to be overlooked. It was Marx who fused these ideas, with the aid of the Hegelian dialectics made of them a method of investigation, and pressed them into the service of Socialism and historical research. II. CLASSES, CLASS STRUGGLES, AND CLASS-CONSCIOUSNESS. One of the most important contributions of Marx to the understanding of historical processes is his conception of social classes and of class struggles. Although, prior to Marx, there were historians and politicians who pointed out the part played by social classes in politics and in social convulsions, it was Marx who first grasped this conception in its entire scope and significance, giving it precise form, and making it an essential part of political and social thought. He refers to the subject in the Communist Manifesto in the following terms: "The Socialist and Communist systems properly so called, those of St. Simon, Fourier, Owen, and others, spring into existence in the early undeveloped period of the struggle between proletariat and bourgeoisie. The founders of these systems see, indeed, the class antagonisms, as well as the action of the decomposing elements in the prevailing form of society. But the proletariat, as yet in its infancy, offers to them the spectacle of a class without any historical initiative or any independent political movement." The classification of the various groups of society, or the division of human society into classes, is as logical a process, that is, a result attained by the operations of reason, as the division of animals, plants, and minerals into various classes. A specific group of social beings, which bear the stamp of common characteristics, is put in a certain class by social science. This classification cannot be made by purely empirical methods of immediate sensuous perceptions. It cannot be determined from the appearance of modern men, whether they are capitalists or workers. We must look for certain scientifically established features which determine the social classification of men. As we have just seen, Marx held economic facts to be fundamental, and he contended that the economic characteristics were valid for purposes of classification. In his view, the manner in which a specific human group obtained its sustenance was the chief characteristic. Men whose chief means of life are wages form the working class. Men whose most important source of livelihood is the ownership of capital (land, buildings, workshops, and raw material) form the capitalist class. It is of little moment that a worker owns a savings-bankbook, and draws interest or dividends from a co-operative society, or that a capitalist personally supervises his undertaking, or organises his business, so that his profits partly consist in wages of superintendence or salary. The outstanding feature is that the chief interest of the worker is concentrated on wages, whilst that of the capitalist is directed on property. It goes without saying that the social classes are not completely homogeneous. Like botanical and zoological classes, they may be divided into kinds and species; the working classes include well-paid hand and brain workers, as well as sweated sections; but all the subdivisions of the social classes possess the common outstanding quality of the same source of livelihood, which is either personal labour or the possession of capital. One class disposes only of labour-power, while the other class owns the means of production. Between these two classes, says Marx, there are deep-seated, unbridgeable antagonisms, which lead to a class struggle. The antagonisms are primarily of an economic nature. The wage-earners, as the owners of labour power, are constrained to sell this as dear as possible, i.e., to obtain the highest possible wages, whereas the owners of capital endeavour to buy such labour-power as cheap as possible, i.e., to pay the least possible wages. This antagonism is indeed fundamental, but, at first sight, does not touch the intellectual sphere very deeply. On the surface, this antagonism is only one as between buyer and seller, but in reality the distinction is very great, as the seller of labour-power will quickly starve if he does not market his commodity. The owner of the means of production is therefore in a position to cause the seller of labour-power to starve, if the latter does not accept the conditions which the capitalist imposes. Ownership of capital reveals itself as a power that can oppress the owner of labour-power. This antagonism leads to the formation of Trade Unions. It is also the prime cause of the class struggle, but mere trade unionism is but its incipient stage. It develops into a class struggle when the workers recognise that their condition of subjection is not a temporary state, but the result of the economic system of private capitalism, that the subjection will last so long as this economic system exists, and that the latter could be replaced by an economic order in which the means of production belong to all the members of society. The wage-workers only participate in the class struggle when they learn to think in a Socialist sense, when hostility to the existing social order develops out of the sporadic and unrelated wage struggle and actions of Trade Unions, and when the proletariat, as an organised class, turns from the preoccupations of the present to the tasks of the future, and strives to change the basis of society from private property to common property. The workers then become aware that there can be neither freedom nor equality for them in the existing society, and that their emancipation can only be attained through Socialism. The class struggle may, however, stop short at the recognition of these facts. The dialectical movement will be incomplete if the working class does not take its fate into its own hands, and is not convinced that it has the power to achieve its own emancipation, and therefore contents itself with small social reforms, or relies on noble-minded and benevolent men and heroic redeemers. This was actually the case in the beginnings of the Socialist movement, when the workers saw in Socialism the only way out, but were still too weak to take their fate into their own hands. This was the period which Marx called Utopian, when outstanding personalities spread Socialist ideas, and made Socialist plans and experiments to free the labouring masses. As these personalities knew the impotence of the masses, they turned to philanthropists and humane rulers, and sought to convince them that reason, justice, and the general welfare demanded that Socialism should be introduced, and poverty, misery, and their consequences abolished. This period of Utopian Socialism gave way before the further development of industry, the progress of machine technique, the centralisation and concentration of the means of production and exchange, which brought with it an increase in the number, strength, organisation, and class-consciousness of the working classes. It is the centralisation of the means of production and exchange, in particular, which renders it possible for the working class, by paralysing industry and power stations, to cause the whole of society to feel that living labour-power forms the soul of the economic life. At the same time Socialist investigators appear, who not only show the reasonableness and justice of Socialism, but exhibit the proof that the new economic order of Socialism is being prepared in the womb of Capitalism, and that therefore the aspirations of the worker are in harmony with the course of social development. In this wise, a science and an aspiring Socialist movement founded upon reality develops from Utopian Socialism, and, conscious of class, of power, and of aim, enters upon the decisive struggle with the capitalist economic order. The class struggle acts as a lever of social revolution. The original antagonism of the worker and capitalist over wages and hours of labour becomes am impassionate struggle of two classes over the question of the maintenance or transformation of the social and economic system--one of which classes fights for the existing order of private property and the other for the coming Socialistic system. Great social class struggles inevitably become political struggles. The immediate object of the struggle is the possession of the power of the State, with the aid of which the capitalist class endeavours to maintain its position, whilst the working class aims at the conquest of the power of the State in order to accomplish its larger objects. The following chapter will show the direction taken by the Labour movement. Here we will but briefly refer to the profound influence of Marx's doctrine of the class struggle as exercised in political thought. Prior to Marx, political thought and the struggles of political parties seemed to revolve around ideas and great personalities. Idealogy and hero-worship were prevalent. Now, political thought, consciously or unconsciously, proceeds along class and economic lines. This is equally true of historical investigations. These new political and historical orientations are largely the result of Marx's life-work. Rigidly conceived and applied, the Marxian doctrine of the class-struggle may lead to ultra-revolutionary tactics of the Socialist and Labour movement, to the system of Workers' Councils, and Proletarian Dictatorship. If the emerging class and its struggle constitutes the lever of social revolution and the impulse of the dialectical social process, the Dictatorship of the Proletariat is justified, and in any case, democracy, which includes both the capitalist and working class, cannot be the State form during the transition period from private property to Socialism. Considered from the economic standpoint, political democracy is generally impossible, or only sham democracy so long as economic inequality exists. The Communist Manifesto does not contain a single political democratic reform. The conclusion can be drawn from Marx's idea, as a whole, that in his estimation, the class stood higher than so-called democracy. This is one of the sources of Bolshevism. III. THE ROLE OF THE LABOUR MOVEMENT AND THE PROLETARIAN DICTATORSHIP. The Labour Party is the political expression of the whole Trade Union movement so far as the latter formulates national demands, directed towards the State and society generally. The Labour Party will function the more effectively, and be able to accomplish its allotted task, as its foundation--the Trade Union movement--becomes established and strengthened, and the more comprehensive will be its effects. The Trade Unions are not merely to be satisfied with the work of the present, but are to become the focus and centre of gravity of the proletarian aspirations which arise out of the social transformation process, and are to work for the abolition of Capitalism. The most effective lever for the achievement of this object is the conquest of political power. With its aid the proletariat can consciously carry out the transformation of a Capitalist into a Communist society. To this transformation, there also corresponds a political transition period, the state of which can be nothing else than a revolutionary Dictatorship of the Proletariat.--(Marx, Letter to the German Social Democracy, 1875, on their Gotha Programme.) Marx considered himself to be the real author of the idea of the Dictatorship of the Proletariat. In a letter written by him, in 1852, to his American friend, Weydemeyer, he declares: "As far as I am concerned, I can't claim to have discovered the existence of classes in modern society or their strife against one another. Middle-class historians long ago described the evolution of the class struggles, and political economists showed the economic physiology of the classes. I have added as a new contribution the following propositions: (1) that the existence of classes is bound up with certain phases of material production; (2) that the class struggle leads necessarily to the Dictatorship of the Proletariat; (3) that this dictatorship is but the transition to the abolition of all classes and to the creation of a society of free and equal."--("Neue Zeit," Vol. XXV., second part, p. 164.) With the exception of the year 1870, Marx remained true to his doctrine of Proletarian Dictatorship: he thought in 1875 as he did in 1847, when he sketched the groundwork of the Proletarian Dictatorship in the Communist Manifesto: "The first step in the revolution by the working class is to raise the proletariat to the position of ruling class, to win the battle of democracy. "The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total of productive forces as rapidly as possible. "Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production." But suppose that it is not the revolutionary working class which first attains to power in the revolution, but the democracy of the lower middle class and the social reformists. In this case, Marx gives the following advice: "Separate from it, and fight it." In the address to the League of Communists in 1850 he said: "It may be taken for granted that in the bloody conflicts that are coming, as in the case of previous ones, the courage, resolution, and sacrifice of the workers will be the chief factor in the attainment of victory. As hitherto, so in this struggle, the mass of the lower middle class will maintain an attitude of delay, irresolution, and inactivity as long as possible, in order that, as soon as victory is assured, to arrogate it to themselves and call on the workers to remain quiet, return to work, avoid so-called excesses, and to exclude the proletariat from the fruits of victory. It is not in the power of the workers to hinder the lower middle classes from doing this, but it is within their power to render their success over the armed proletariat very difficult, to dictate to them such conditions that from the beginning the rule of the middle-class democrats is doomed to failure, and its later substitution by the rule of the proletariat is considerably facilitated. "The workers must, during the conflict and immediately afterwards, as much as ever possible, oppose the compromises of the middle class, and compel the democrats to execute their present terrorist threats. They must aim at preventing the subsiding of the revolutionary excitement immediately after the victory. On the contrary, they must endeavour to maintain it as long as possible. "Far from opposing so-called excesses, and making examples of hated individuals or public buildings to which hateful remembrances are attached, by sacrificing them to the popular rage, such examples must not only be tolerated, but their direction must even be taken in hand. During the struggle and after the struggle, the workers must seize every opportunity to present their own demands side by side with those of the middle-class democrats. The workers must demand guarantees as soon as the middle-class democrats propose to take the government in hand. If necessary, these guarantees must be exacted, and the new rulers must be compelled to make every possible promise and concession, which is the surest way to compromise them. The workers must size up the conditions in a cool and dispassionate fashion, and manifest open distrust of the new Government, in order to quench, as much as possible, the ardour for the new order of things and the elation which follows every successful street fight. Against the new official Government, they must set up a revolutionary workers' government, either in the form of local committees, communal councils, or workers' clubs or workers' committees, so that the democratic middle-class government not only immediately loses its support amongst the working classes, but from the commencement finds itself supervised and threatened by a jurisdiction, behind which stands the entire mass of the working class. In a word: from the first moment of victory the workers must no longer level their distrust against the defeated reactionary party, but direct it against their former allies, who would seek to exploit the common victory for their own ends. The workers must be armed and organised to enable them to threaten energetic opposition to this party, whose treason to the workers will commence in the first hour of victory. The arming of the whole proletariat with rifles and ammunition must be carried out at once, and steps taken to prevent the reviving of the old militia, which would be directed against the workers. But should this not be successful, the workers must endeavour to organise themselves as an independent guard, choosing their own chief and general staff, with orders to support not the State power, but the councils formed by the workers. Where workers are employed in State service, they must arm and organise in a special corps, with a chief chosen by themselves, or form a part of the Proletarian Guard. Under no pretext must they give up their arms and equipment, and any attempt at disarmament must be forcibly resisted. Destruction of the influence of the middle-class democrats over the workers, immediate independent and armed organisation of the workers, and the imposition of the most irksome and compromising conditions possible upon the rule of the bourgeois democracy, which is for the time unavoidable.... We have noted that the Democrats come to power in the next phase of the movement, and how they will be obliged to impose measures of a more or less Socialistic nature. It will be asked what contrary measures should be proposed by the workers. Naturally, in the beginning of the movement the workers cannot propose actual Communist measures, but they can (1) compel the Democrats to attack the old social order from as many sides as possible, disturb its regular course, and compromise themselves, and concentrate in the hands of the State as much as possible of the productive forces, means of transport, factories, railways, etc. (2) When the Democrats propose measures which are not revolutionary, but merely reformist, the workers must press them to the point of turning such measures into direct attacks on private property; thus, for example, if the small middle class propose to purchase the railways and factories the workers must demand that such railways and factories, being the property of the reactionaries, shall be simply confiscated by the State, without compensation. If the Democrats propose a proportional tax, the workers must demand a progressive tax; if the Democrats themselves declare for a moderate progressive tax, the workers must insist on a tax so steeply graduated as to cause the collapse of large fortunes; if the Democrats demand the regulation of the State debt, the workers must demand State bankruptcy. Thus the demands of the workers must everywhere be directed against the concessions and measures of the Democrats.... Further, the Democrats will either work directly for a Federal Republic, or, at least, if they cannot avoid the Republic one and indivisible, will seek to paralyse it by granting the greatest possible independence to the municipalities and provinces. The workers must set themselves against this plan, not only to secure the one and indivisible German Republic, but to concentrate as much power as possible in the hands of the State. They need not be misled by democratic platitudes about the freedom of the Communes, self-determination, etc. Their battle-cry must be 'the revolution in permanence.'" This Address of Marx, written in 1850, appears to be the guide of the Bolsheviks and Spartacists. The working classes may, however, not expect their immediate emancipation from their political victory. "In order to work out their own emancipation, and with it that higher form of life which present-day society inevitably opposes, the protracted struggle must pass through a whole series of historical processes, in the course of which men and circumstances alike will be changed. They have no ideal to realise; they have only to set free the elements of the new society, which have already developed in the womb of the collapsing bourgeois society."--(Marx, "Civil War in France.") The means of production will gradually be socialised, production will be placed on a co-operative basis, education will be combined with productive work, in order to transform the members of society into producers. So long as the transition period lasts the Communist maxim, "From each according to his capacity, to each according to his needs," cannot become operative. For this period is in every respect--economic, social, and intellectual--still tainted with the marks of the old society, and "rights cannot transcend the economic structure of society, and the cultural development which it determines."--(Criticism of Gotha Program.) To each will be given according to his deeds. "Accordingly the individual producer will receive back what he gives to society, after deductions for government, education, and other social charges. He will give society his individual quota of labour. For example: the social working day consists in the sum total of individual working days; the individual labour time of the individual producer is the part of the social working day which he contributes; his share thereof. He will receive from society a certificate that he has performed so much work (after deducting his work for social funds), and with this certificate he will draw from the social provision of articles of consumption as much as a similar quantity of labour costs. The same quantity of labour as he will give to society in one form he will receive back in another.... The right of producers will be proportionate to the work they will perform: the equality will consist in the application of the same measure: labour." Because performances will vary in accordance with unequal gifts and degrees of diligence, an unequal distribution will actually take place during the transition period. Only in a fully developed Communistic society, after the distinction between intellectual and physical labour has disappeared, when productive activity has become a first need of life, when the all-round development of the individual and the productive forces has been achieved, and all the springs of co-operative riches flow abundantly; only then can the narrow middle-class idea of rights be improved on, and the Communist principle of equality be put into operation. Marx, who reasoned on strictly economic lines, and placed the emancipation of the working class as the highest goal, to which all other political and economic movements are subordinated, did not mistake the economic, political, and historical rôle of the nation: this is shown by the Communist Manifesto, where the creation of the national State by the bourgeoisie is indicated. He mocked at the young enthusiasts who thought they could brush aside the nation as an obsolete prejudice, but, in spite of this, he considerably under-estimated the unifying force of national feeling, considered from a biological and cultural point of view. He divided civilised mankind into antagonistic classes, and assumed that the economic dividing lines would prove to be more effective than national and political boundary lines. He was, therefore, through and through international. Marx demanded that the national Labour Parties should act internationally as soon as there was a possibility of the collapse of the capitalist domination. He reproached the original Gotha program with the fact that "it borrowed from middle-class Leagues of Peace and Freedom the phrase of the international brotherhood of peoples, whereas it was necessary to promote the international combination of the working classes in a common struggle against the ruling classes and their Governments." Marx had no confidence in the pacifism of the bourgeoisie. IV. OUTLINES OF THE ECONOMIC DOCTRINES. 1. _Capital._ As we already know, Marx became a Socialist in the year 1843. As a believer in dialectics, he knew that Socialism can only be understood by a knowledge of the movement operating in middle-class society and its developing forces. His investigations in 1843-4 led to the result that political economy forms the basis of bourgeois society. Henceforth political economy became the chief department of his studies. His comprehensive studies of French and English economists, especially Sismondi and Ricardo, and the anti-capitalist literature of England of the years 1820-40, which were connected with the Ricardian theory of value, furnished him with a wealth of suggestions and materials for the criticism of political economy, for the source and origin and development and decline of capitalism, written from the standpoint of the working class and the coming Socialistic society. Such a work is "Capital." It consists of three volumes. Only the first volume (1867) was carried through the press by Marx himself. The other two volumes he only sketched, and they were completed and published by Engels after Marx's death. The first volume deals with the origin and tendencies of large industrial capital, with the immediate and simple process of commodity production, so far as it concerns the relations between employer and worker, the exploitation of the proletariat, wages and labour time, and the influence of modern technique on the condition of the worker. We see in the first volume the effect of the factory system in creating capital. Its chief figure is the producing, suffering, rebellious working class. In the second volume, the employer appears on the market, sells his commodities, and sets the wheels of production again in motion, so that commodities will continue to be produced. In the third volume, the realisation process of the undertakings of the capitalist class, or the movement of capital as a whole is exhibited: cost of production, cost price, total gains and their division into profit, interest and ground rent. The first volume presents the greatest difficulties. The tremendous efforts of the author to produce a masterpiece unnecessarily refined and sublimated and overloaded with learning the doctrines of value and surplus value until they attained the level of a philosophy, an example of Hegelian logic. He played with his subject like an intellectual athlete. That Marx could handle complicated economic questions in a clear, vigorous manner is shown by the third volume, which is written just as it came out of the author's head, and without the apparatus of learning subsequently erected, without the crutches of notes and polemico-philosophical excursions. To understand "Capital" it is necessary to bear in mind that (1) Marx regarded the scientifically discovered principles as the real inner being of things, practice he regarded as the superficial appearance of things, capable of being apprehended empirically; for example, Value is the theoretical expression, Price the empirical; Surplus Value is the theoretical, and Profit the empirical expression; the appearances apprehended by experience (Price and Profit) deviate indeed from theory, but without the theory they cannot be understood; (2) he looked at the capitalist economic system as being essentially free from external hindrances and disturbances, free from invasions both by the State and the proletariat: the Labour struggles of factory protection laws of which Marx speaks in "Capital" serve rather to perfect the productive forces than to restrict the exploiting proclivities of sovereign capital. 2. _Value._ The life and motion of capitalistic society appears as an infinite net of exchange operations, formed out of numerous entwined meshes. Through the medium of money, men continually exchange the most varied commodities and services. A ceaseless buying and selling, an uninterrupted series of exchanges of things, and labour power--this constitutes the essential part of human relations in capitalistic society. An economic map of these relations, graphically displayed, would not be less confusing than an astronomical map which exhibited the manifold and intersected orbits of the heavenly bodies. And yet there must be some rule or law which operates in this seeming medley of movements; for men do not work or exchange their goods by hazard, like savages who give their entire lumps of gold or rough diamonds for a necklace of glass pearls. The English and French economists in the seventeenth, eighteenth, and nineteenth centuries, amongst whom Petty (1623-87), Quesnay (1694-1759), Adam Smith (1723-96), and Ricardo (1772-1823) were the most original, sought for the laws which regulated exchange operations, and their theories were designated by Marx as classical bourgeois economy. Following up their investigations, Marx declared: Every commodity, that is, every thing or good produced under Capitalism and brought to the market possesses a use value and an exchange value. The use value is the utility of the commodity to satisfy a physical or mental need of its user: a commodity without use value is not exchangeable or saleable. As use values, commodities are materially different from each other; nobody will exchange a ton of wheat for a ton of wheat of the same kind, but he will for clothes. In what measure will commodities exchange with one another? The measure is the exchange value, and this consists in the trouble and quantity of labour which the production of a commodity costs. Equal quantities of labour are exchanged with each other on the market. As exchange values, as the embodiment of human labour, commodities are essentially equal to each other, only quantitatively are they different, as different categories of commodities embody different quantities of labour. It is obvious that the quantities of labour will not be calculated according to the working methods of the individual producers, but according to the prevailing social working methods. If, for example, hand-weaver A requires twenty hours for the production of a piece of cloth, which in a modern factory will be produced in five hours, the cloth of the hand-weaver does not therefore possess four-fold exchange value. If hand-weaver A demands of consumer B an equivalent of twenty working hours, B answers that a similar piece of cloth can be produced in five hours, and therefore it only represents an exchange value of five working hours. Thus, according to Marx, the exchange value of a commodity consists in the quantity of socially necessary labour power which its reproduction would require. This quantity of labour is no constant factor. New inventions, improvements in labour processes, increase in the productivity of labour, etc., cause a diminution in the quantity of labour necessary for the reproduction of a commodity; its exchange value, or expressed in terms of money, its price, will therefore sink, provided that other things (demand, medium of exchange) remain equal. Consequently, labour is the source of exchange value, and the latter is the principle which regulates exchange operations. Exchange value even measures the extent of the commodity wealth of society. Wealth may increase in volume, but decrease in value, in so far as a less quantity of socially necessary labour becomes necessary for its reproduction. The more progressive a country is industrially and the higher the level of its civilisation, the greater is its wealth, and the smaller is the quantity of labour which must be expended on the creation of wealth. In the practical Labour politics of our times, this is expressed in higher wages and shorter working hours. It was said above that use value is a basic condition for the exchange of the individual commodity. This does not exhaust the rôle of use value. The quantity of use value of which society has need determines the quantity of the exchange values to be created. If more commodities are required than society requires, the superfluous commodities have no exchange value, in spite of the labour that is expended on them.--("Capital" (German), Vol. III., 1, pp. 175-176.) The complete realisation of exchange values or the social labour that is performed depends, as is seen, on the adaptation of supply to demand, and is a matter of organisation, of social direction. We have noticed that the Marxian theory of value is related to that of the classical economists, but they are by no means the same thing. Apart from some improvements and definitions which Marx made, they are distinguished by the following conceptions: In the classical theory of value, the capitalist who directs production and provides with his capital the tools and raw materials of labour, markets the finished commodity, and keeps going the processes of reproduction, appears as the only creator of value: the wage worker is only one of his means of production. In the Marxian theory of value, on the other hand, the wage worker who transforms the raw materials into commodities, or removes the raw materials to the place of production, appears as the sole creator of value. Value is only created by the worker in production, and in distribution connected therewith. 3. _Wages and Labour._ The worker appears to receive wages for his work. In reality he receives wages as the equivalent for the labour power expended by him, quite in accordance with the law of value, inasmuch as he receives by way of exchange as much means of sustenance as is usual and customary to replace the labour power he has expended, just as the working horse receives as much oats and hay as are necessary to maintain it capable of work. The capitalist and the worker exchange certain quantities of commodities in proportions determined by economic laws (means of subsistence against a quantity of the commodity, labour power, of equal value, commodity for commodity, exchange value for exchange value). As, therefore, the wages of labour signify a certain quantity of the means of subsistence, so they increase even if their money form remains unaltered with a fall in the price of the means of life, for the worker is then in the position, with his unaltered wage, to buy a greater quantity of the means of life. In the reverse case, if the prices of the means of life rise, the wages of labour fall, even if their money form remains the same as previously. This law of wages, formulated by Ricardo, was accepted by Marx, but he did not content himself with this acceptance. Ricardo regarded the capitalist world as the only possible and reasonable one, at least at the time when he wrote his "Principles," while Marx from the year 1843 adopted a critical attitude towards it, and sought to negate it. Consequently, he investigated further, and expressed himself somewhat as follows: The capitalist theoricians believed that the wages question was disposed of when it was settled by the law of value. We know, however, that every commodity possesses not only an exchange value, but also a use value, and is bought for the sake of the latter. The use value of the commodity labour power is distinguished in a very remarkable way from the use value of all other commodities. The use or the employment of labour power creates exchange value, and can create much more exchange value than itself possesses. The employer can make use of labour power so long that it not only creates its own exchange value (the value of the means of subsistence), but double this. To create the value of wages, the worker needs five or six hours daily, but he is obliged to produce for the capitalist during ten or twelve hours. If the worker were independent he would only produce during one half of the working day in order to receive his means of subsistence. This period of producing Marx called "necessary labour." As he is dependent on the capitalist, the worker must not only perform "necessary labour" but also surplus labour: the worker can generally only find employment under the conditions that, besides the time needed for himself, he also works a definite number of hours for the capitalist without payment. Or, as Marx says: "The fact that half a day's labour is necessary to keep the labourer alive during the 24 hours, does not in any way prevent him from working the whole day. Therefore, the value of labour power and the value which labour creates in the labour process are two entirely different magnitudes. And this difference in the two values was what the capitalist had in view when he was purchasing labour power. The circumstance that on the one hand the daily sustenance of labour power costs only half a day's labour, while on the other hand the very same labour power can work during a whole day; that consequently the value which its use during one day creates is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller." "No injury to the seller," which is quite correct from the standpoint of Ricardo, but not from that of Marx. He often calls surplus value "unpaid labour," and says, for example, "the capitalist appropriates one half of every day's labour without payment." In other words, he takes away something without return. This is a very distinct ethical judgment. On the other hand, it is very important that in our consideration of the wages question we have come up against the Marxian doctrine of surplus value. For this doctrine is the cornerstone of the whole economic system of Marx. 4. _Surplus Value._ We have already noted that Marx followed the classical economics in his treatment of the theory of value, but improved the definition of it, and brought it to bear on wages. In doing this he laid stress on the conflict between Capital and Labour. The beginning of this dialectical process, so far as England was concerned, was the work of the anti-capitalistic critics, who uttered their protest about 1820, or three years after the appearance of Ricardo's work. They declared, according to Ricardo, labour is the source and the measure of value. And yet according to his opinion labour is nothing and capital everything. This should be reversed: labour must be all, and capital nothing. This literature was contemporaneous with the emergence of the English revolutionary Labour movement, from which Chartism arose at a later date. Piercy Ravenstone (1821) called capital a metaphysical (airy, impalpable) entity. Hodgskin (1827) called it a fetish, whereas they described labour as the economic reality. The expressions surplus-product and surplus-value were already known to this anti-capitalist school, with which Marx also connected himself when he set to work to elaborate his criticism of political economy.[7] But this literature supplied him with much less material for the construction of the theory of surplus value than the formulation of the theory of value of the classical economy. Besides, while the English anti-capitalist critics, like Ravenstone, Gray, Hodgskin, and J.F. Bray merely condemned surplus value as immoral and as the source of all social wrongs, Marx used the theory of surplus value as the key to unlock the mechanism of the capitalist system and to reveal its workings, its tendencies, and its final destiny. This appears to be the real difference between the English anti-capitalist critics and Marx. In this matter he was obliged to perform most of the work himself. The question he put was no longer "What is the substance of wealth and how is it measured?" but "How is its growth and continual accretions to be explained?" Capital is that portion of wealth which is employed for the purpose of gain, of increase. Whence comes this gain, this increase? The answer is as follows: All capital that is embarked on a productive undertaking consists of two parts: one part is expended on the technical means of production--on buildings, machines, tools, and raw materials, the other on wages. The first part Marx calls Constant Capital (c), the other part Variable Capital (v). The first is called constant, because it only adds to the commodities just as much value as it loses in the course of the productive process; it creates no fresh value: Marx also calls it the passive portion. The outlay on wages is called variable capital because it undergoes an alteration in the process of production: it creates new additional value: Marx also called variable capital the active portion, for it creates surplus value (s). This composition of capital of constant and variable parts Marx calls its organic composition. He calls it average or normal composition when the capital of a business is 80 per cent. constant and 20 per cent. variable. If the constant part is higher, and the variable part lower, he calls it capital of a high composition. Capital of under 80 per cent. constant portion and over 20 per cent. variable portion he calls capital of a lower composition. And rightly, because the higher the ladder of capitalist production is, the more costly and extensive are the machinery and factory buildings and the greater is the outlay on raw materials, whereas primitive businesses employ less machinery, cheaper workshops, but a relatively greater number of workers. The relation between (c) and (v) reveals at the same time the stage to which production has developed. Thus, according to Marx, it is solely the variable capital which creates surplus value, or, as it is commonly expressed, profit. We have seen above, in the explanation of the nature of wages, why variable capital creates more value than it is paid for by the capitalist; the worker does indeed receive the exchange value of his labour power, but the use value of the labour power functions, we have assumed, twice as many hours as are necessary for its reproduction. This surplus labour is embodied in surplus value. While the worker receives, let us say, a daily wage of three shillings, for the reproduction of which five hours of work suffice, his labour power will be used for ten hours. These five hours of surplus labour appear in the exchange value of the commodity, so that the value of the commodity is composed of the transferred portion of the constant capital, the outlay on wages, and the added surplus value. Immediately before the production process only constant and variable capital existed, or, in brief (c) and (v); after the completion of the production process, the commodity embodies constant and variable capital and also surplus value, or (c) and (v) and (s). This is the actual value of the commodity, (c) or, shortly expressed, c + v + s. The relation between wages and surplus value, or between paid and unpaid labour, or, shortly, s/v, Marx calls the rate of surplus value: it expresses the degree of the exploitation of labour. If wages amount to three shillings, which can be produced in five working hours, and if the worker works in the factory ten hours for these wages, so that he creates exchange value to the amount of six shillings, then the rate of surplus value is 100 per cent. The whole of the surplus value which arises in this manner in the process of production is called the mass of the surplus value, or shortly, m.s., that is to say, the individual rate of surplus value multiplied by the total number of workers engaged in an undertaking, or the total amount of wages. 5. _Profit._ The mass of surplus value appears to the capitalist in the shape of profit. Surplus value is a Marxian scientific term which exactly expresses the principle of profit. Profit is a commercial expression which describes surplus value as it appears in practical life as a subject of experience, i.e., empirically. The distinction between the Marxian theoretical and the commercial empirical conception is, however, not so simple: it arises from the different conceptions of the influence of capital and labour in the economic process. Let us explain it more distinctly. As is known, Marx divided the capital embarked in industrial enterprise into two parts: into constant (technical means of production) and variable (living labour power, wages). He assumed that only the living labour power (wage labour) creates surplus value, whilst the constant capital only adds its own value to the new products. The capitalist divides his capital outlay otherwise: into fixed (buildings and machines) and circulating (raw materials and wages) capital. The fixed capital is only used up slowly and only passes entirely into production during a series of years--let us say 15 years: thus of a fixed capital of £75,000, £5,000 would each year be consumed in the production of commodities, and written off in the balance sheet. On the other hand, the circulating capital (raw materials and wages) are wholly consumed in every period of production, and must be renewed at the beginning of a new period of production. Suppose an industrial undertaking about to be started requires a capital expenditure of £105,000: £75,000 fixed capital (for buildings and machinery), £20,000 for raw materials, £10,000 for wages. For convenience sake, we will suppose that the period of production lasts a year, and that the rate of surplus value amounts to 100 per cent., that is, the labour power receives a payment of £10,000, and produces a value of £20,000. At the end of the year, the capitalist reckons an expenditure of £5,000 on account of fixed capital, and £30,000 of circulating capital: the commodities produced cost, therefore, a net outlay of £35,000. This is the cost price, without adding profit. According to Marx, cost price signifies (c) and (v), therefore without (s), (surplus value). But the capitalist knows that the manufactured commodities represent a greater value than the cost price. According to Marx, the surplus value amounts to £10,000 (as the variable capital of £10,000 creates surplus value at the rate of 100 per cent.); but the capitalist adds to the cost price a profit which includes the gains of the enterprise and interest on the capital outlay. If the capitalist were alone in the market, his profit might suck up the whole of the surplus value of £10,000; but he has to reckon with competition and the state of the market. The cost price, plus profit, is the production price as established by the capitalist. But according to Marx, that is, in pure theory, the production price is equal to the cost price, plus surplus value. There is thus a quantitative distinction--a difference in the amount of money--between the theoretical and practical production price, as well as a qualitative distinction between the notions of the capitalist and Marx respecting the source of profit. The capitalist believes that profit is the result of the portion of capital which he has put into the process of production, combined with his own commercial ability. On the other hand, Marx asserts that the capitalist can only extract a profit because the wage workers (the living labour power) create a surplus value in the process of production for which they receive no payment. We assumed that the surplus value amounted to 100 per cent. measured with variable capital, and that £10,000 expended on wages produced £20,000. The annual balance sheet, however, would show the percentage of profit to the total outlay. Consequently, we must spread the £10,000 surplus value over the £35,000 which have been expended. The surplus value of an undertaking spread over the total capital (c) Marx calls the rate of profit, or shortly, s/c = 10000/35000 = 28.58 per cent. As a rule, the capitalist cannot sell under cost price without becoming bankrupt, but he can quite easily sell under the production price, and mostly does so. In the example already given, his rate of profit amounts to over 28 per cent. According to the degree of competition, or by reason of other circumstances which we will examine in the next chapter, he can content himself with a rate of profit of 10, 15, or 20 per cent., which will serve him partly as an income and partly be expended in the development of his enterprise. The 28 per cent. profit generally forms a circle within which he fixes his manufactured price. Under favourable circumstances he can add the whole 28 per cent, to the price; under less favourable, only 20, 15, or 10 per cent. Accordingly, several portions of surplus value remain in the commodities which are not yet realised. What happens to them? The remaining portions of profit or of surplus value fall to the large or small traders who are interposed between producer and consumer, or go in the form of interest to the banking institutions, in the event of the capitalist operating with borrowed money. As the profit is only realised in the process of circulation (in commerce and exchange) and there divided amongst the various economic classes and sections, most people believe that profit arises in commercial transactions. They do not know that the price of a commodity can only be increased in trade because its manufactured price was fixed below its price of production or its value, that is, because the commodities contain surplus value which is only gradually realised in the process of circulation. The social significance of this doctrine is far-reaching. If it is correct, then all the social sections which are not engaged as manual and brain workers in the process of production, or in the transport of raw material, lead a parasitical life and consume the surplus value which is squeezed by the capitalist class out of the proletariat and appropriated without payment. Quite otherwise are capitalist ideas. According to them, profit is the result both of the spirit of the enterprise and the ability of the capitalist, added to that portion of the capital which is put into the process of production: the machines and buildings and raw materials which are used up, and the labour power, all of which are bought at their proper exchange value. It is only fit and proper that the trader and moneylender should receive a portion of the profit so created, for they assist in realising the exchange value by bringing the commodities to the consumer, and thus rendering possible the process of production. Surplus value or profit? Labour or Capital? Behind this question lurks the great class struggle of the modern social order. No wonder the Marxian doctrine of value and surplus value was the occasion for an extensive controversy, in which the famous problem of the average rate of profit played a great part. 6. _The Average Rate of Profit._ According to Marx's doctrine of value and surplus value only variable capital creates fresh value and surplus value. An industrial undertaking of a lower organic composition, which thus employs much variable capital and little constant capital, must consequently create a greater surplus value or more profit than an industrial undertaking of higher composition which may employ the same total capital, but composed of greater constant and smaller variable portions than the former. Let us take two industrial capitals of £35,000 each. One expends £15,000 on the constant elements (machinery, raw materials) and £20,000 on the variable element (wages of labour). The other shows £20,000 constant part and £15,000 variable part. With an equal rate of surplus value--100 per cent.--the first capital would produce £20,000 surplus value (profit) and the other only £15,000 profit. Experience shows, however, that equal amounts of capital--in spite of temporary differences in profits--tend to produce equal profits. From this, it would appear that it is actually the capital expended and not the labour employed which determines the magnitude of the surplus value (profit), that the concrete results of the capitalist process of production do not confirm the Marxian theory of value, that the facts directly contradict the theory. It was Marx himself who drew attention to this problem. After he had constructed his theory of surplus value in the form of a scientific law, he continued: "This law clearly contradicts all experience based on appearance. Everyone knows that a cotton spinner, who, reckoning the percentage on the whole of his applied capital, employs much constant capital and little variable capital, does not, on account of this, pocket less profit or surplus value than a baker, who relatively sets in motion much variable and little constant capital." How, then, can the equal rate of profit in the case of capitals of different organic composition be harmonised with the theory of surplus value? Marx concedes that equal capital sums whose organic parts are unequally employed give an equal rate of profit, although the volumes of surplus value created are different. Two capital sums of £50,000 each, one of which, for example, represents £40,000 constant and £10,000 variable capital, and with a rate of surplus value of 100 per cent. gives £10,000 surplus value, while the other is composed of £10,000 constant and £40,000 variable capital, and with an equal rate of surplus value gives an amount of £40,000 surplus value, will nevertheless yield an equal rate of profit, although theoretically they would be unequal if the rate of surplus value directly determined the rate of profit. In the first case, the rate of profit would amount to 20 per cent. and in the second to 80 per cent. In reality both undertakings yield an equal rate of profit. How is this explained, according to Marx? By means of competition, the different rates of profit are levelled to a general rate of profit, which is the average of all the various rates of profit. Thus the capitalists do not realise the surplus value as it is created in any particular factory, but in the form of average rate of profit as it is produced by the operations of the total capital of society. The average rate of profit may be lower or higher than the individual rate of profit, for the "various capitalists," as Marx explains, "so far as profits are concerned, are so many stockholders in a stock company in which the shares of profits are uniformly divided for every 100 shares of capital, so that profits differ in the case of the individual capitalists only according to the amount of capital invested by each of them in the social enterprise, according to his investment in social production as a whole, according to his shares." While thus the individual rates of profit do not proportionately coincide with the rates of surplus value, i.e., while the degree of exploitation of the worker in the individual factory, and the volume of surplus value thus individually created, do not directly determine the individual rate of profit, it is the total mass of social surplus value which is the source of the average rate of profit. If the mass of the surplus value be large, the average rate of profit will also be great. Marx says: "It is here just the same as with average rate of interest which a usurer makes who lends out various portions of his capital at different rates of interest. The level of his average rate depends entirely on how much of his capital he has lent at each of the different rates of interest." The higher the various individual rates of interest, the higher will be the average rate of interest at which his capital has been put out. The individual price of production signifies, therefore, cost price plus the average rate of profit, and not plus surplus value: it does not necessarily correspond with the total amount of the constant and variable portions of capital employed in an individual enterprise, plus the mass of the surplus value: the prices and magnitudes of value of commodities are not manifestly equal, as Marx has often pointed out. Of course, the total profits of the capitalist class coincide with the total surplus value extracted from the working class, provided, of course, that the supply of commodities corresponds with the social needs. Thus the law of surplus value, in spite of all deviations and refractions, holds good in the last resort. "In theory," observes Marx, "it is assumed that the laws of the capitalist mode of production develop freely. In reality, there is always only an approximation." And the more capitalist production develops, the greater will be the degree of approximation in particular cases, for the progress of Capitalism signifies a continuous increase of constant capital, a more mechanical character being given to industrial processes, and a reduction of variable capital to the necessary minimum, so that the differences in the organic composition of capitalist undertakings become less, thus bringing the average rate of profit and the rate of surplus value nearer to each other. This indirect and difficult method of realising profits involves the fact that the capitalist does not distinctly observe the exploitation of wage labour practised by him, but he believes that the profit is owing to his own commercial ability. This difficult section of the outlines of the economic doctrines of Marx can be most fitly concluded by quoting the comprehensive observations of Marx himself upon this subject, which he gives at the end of his book.--("Capital" (German), Vol. III., 2, pp. 355-6.) "In a capitalist society, this surplus value or this surplus product (leaving aside accidental fluctuations in its distribution and considering only the regulating law of these fluctuations) is divided among the capitalists as a dividend in proportion to the percentage of the total social capital held by each. In this shape the surplus value appears as the average profit, which in its turn is separated into profits of enterprise and interest, and which in this way may fall into the hands of different kinds of capitalists. Just as the active capitalist squeezes surplus labour, and with it surplus value in the form of profit out of the worker, so the landlord in his turn squeezes a portion of this surplus value from the capitalist in the shape of rent. Hence when speaking of profit as that portion of surplus value which falls to the share of capital, we mean average profit.... Profits of capital (profits of enterprise plus interest) and ground rent are merely particular constituents of surplus value.... If added together, these parts form the sum of the social surplus value. A large part of profits is immediately transformed into capital." In this way, capital grows, or, as Marx says, accumulates. 7. _Surplus Value as Social Driving Force._ It has been said already that capital is that portion of wealth which is devoted to the object of increasing wealth, of gain, the extraction of profit or surplus value. This object dominates the capitalist class; the desire for surplus value is the leading impulse and principle motive of their activity. Goaded by this desire and exclusively occupied with their special interests, this class unconsciously and unintentionally develops the entire capitalist system and leads it to ever higher and more comprehensive stages. Surplus value is thus the driving force of the history of modern capitalist society. This principle is rigidly followed out by Marx in his theoretical system, which aims at showing the rise and growth of Capitalism. The capitalist is no scientific investigator: he is not clear himself whether profit is created by a portion of the capital, or is the result of personal productive forces, but he knows one thing--without living labour power, without the wage worker, his whole capital remains dead and does not increase; all the fixed capital and raw materials are of no use to him so long as they are not set in motion by living labour power and transformed into commodities. His efforts are, therefore, primarily directed to making proper use of the living labour power. Historically considered, little constant and relatively much variable capital was employed in the primitive stage of the large scale industry: there was as yet little machinery, and the chief thing was the living labour power. The workers were not yet factory proletarians in the modern sense, but artisans who had lost their independent existence. The capitalist harnessed them and utilised their labour power and special ability. Consequently, he strives to lengthen the working day, in order that as many commodities and as much profit as possible may be produced. If previously the wage worker had laboured ten hours, of which five were devoted to the production of the value of his wages and five to surplus value, he is now obliged to work for twelve hours, which increases the period for surplus labour to seven hours. The surplus value which is extracted through the lengthening of the working day is called by Marx "absolute surplus value." Meanwhile, the capitalist learns by experience that if the workers are so organised as to co-operate with one another, the productivity of labour increases. From this arises the mode of labour which Marx calls Co-operation, or a reorganisation of the workplace, which raises the entire production of commodities to a higher level. The co-operation of the workers in the process of production soon leads to the discovery that, if the worker does not himself create the whole product, but only a part thereof, he loses less time and becomes quicker and more skilful in his work and produces more than previously. This discovery leads to the "division of labour," which indeed reduces the worker to the position of an automaton, or a living machine, but considerably augments commodity wealth. Division of labour again demands finer tools; mechanical problems arise to be solved by mechanicians and engineers. This favours the progress of mechanics. The growing commodity wealth, and the pressure to realise it profitably, renders necessary more extensive markets; the need for extension comes up against transport difficulties; transport problems arise, to be solved by road and canal engineers. The increasing variety of the labour process and the categories of commodities which are produced results in new metallurgical, physical, and chemical problems. Natural science flourishes. Meanwhile, things are not so peaceful in the places of manufacture. The lengthening of labour the closer strain on their nerves and muscles, as well as the arrangement of the work, cause the workers to combine and struggle for improved conditions of labour. This struggle, together with the progress of natural science, of technology, and the expansion of markets, result in the discovery of machine technology, of steam and electricity, the foundation of large-scale industry. The capitalist is impelled, on the one hand, to make himself as independent as possible of living labour-power; on the other hand, to increase the volume of his profits. The means thereto are offered him by the new technical discoveries. Those workers who still possessed some pride in handicraft, or as expropriated small peasants were not able to submit to factory discipline, and showed themselves rebellious, were partly replaced by the labour of women and children, and partly curbed and made pliable. The labour time is repeatedly lengthened, and the exploitation of the labour of women and children assumes terrible proportions. The wage worker, who entered into the manufacturing premises of the employer full of the pride of his calling and often with his own tools, became then a small cog in a gigantic, relentless piece of working machinery. In this extensive and hitherto unprecedented social transformation the old forms of handicraft disappear: whole sections of society, which are the representatives of the disappearing forms of handicraft, sink into poverty, and augment the class of proletarians. The progress of the industrial revolution extends also to agriculture: the greed for surplus value (ground rent) leads to enclosure of common lands by the great landlords, the independent yeomanry is decimated, the small proprietor and small tenant are made proletarians. A transmutation of social classes takes place; the urban population grows rapidly, the country districts are depopulated: out of the revolutionary process the outlines of two classes become more and more distinct: Capitalist and Proletarian. Both the factory proletariat and the other social sections which adopt a hostile attitude towards Capitalism react against the health-destroying exploitation, and struggle for a normal working day. The working time is curtailed and bounds are set to the efforts of the capitalist to lengthen the working day and obtain surplus value, but soon the progress of machine technique compels the worker to labour more intensely in the shorter working time: the accelerated movement of the machine determines the pace and necessitates a sharper straining of the nerves. Henceforth, the worker must compress into a working hour as much effort as was previously expended in an hour and a half. The surplus value which is extracted in this way Marx calls "relative surplus value." The struggle of the workers to secure a shorter working day is a powerful incentive to the manufacturers to perfect their machinery, in order to increase the amount of relative surplus value. The intensification of work or the creation of relative surplus value is one of the most immediate effects and one of the most striking features of advanced Capitalism. The understanding of this new phase is a preliminary condition to the comprehension of the Marxian system. In this matter, Marx goes considerably beyond the anti-capitalist theoreticians who followed upon Ricardo. What happens when the capitalist observes that the extraction of absolute surplus value comes up against an insurmountable obstacle? He sets himself to fit up his enterprise with the newest and most costly machinery, in order to supplant living labour-power and to work more intensively the living labour-power which he employs. As, however, less living labour-power brings forth less exchange value and less surplus value, he is obliged to multiply production, in order to cover the fall in surplus value by a larger mass of commodities: if the single commodity brings him less profit, he produces it in such large quantities that the profit thereon is the same, or even greater, than formerly. The more complicated machinery, the greater quantities of raw materials consumed, and the relatively smaller amount of labour-power signify obviously an alteration in the organic composition of capital: the constant portion (machinery, raw materials) preponderates more and more over the variable portion. If, previously, the composition was 50 per cent. constant and 50 per cent. variable, it becomes now something like 80 per cent.: 20 per cent. At the same time, the initial capital is also increased greatly, as machines and large quantities of raw and auxiliary materials demand such increase of capital. If, for example, the initial capital previously amounted to £100,000, divided into £50,000 constant and £50,000 variable capital, it would now amount to £500,000, comprising £400,000 constant and £100,000 variable. This organic composition signifies: that relatively smaller masses of labour set in motion large masses of technical means of production; labour is more productive because more intense; the sum total of commodities is increased; the profit on single articles is smaller, but the total profit is greater; the reconversion of profits into capital proceeds rapidly. The scale of production is more and more extended, and the amount of initial outlay becomes ever greater, because only large capitals are capable of creating relative surplus value in sufficient sums to assure a profit on the enterprise and payment of interest, and thus assist the accumulation of capital. The more extended scale of production is not possible to the less powerful capitalist undertakings. They partly disappear and partly combine in joint stock companies. The first alternative gives rise to the concentration of the means of production in fewer hands, and the second to the centralisation of the means of production. This is the effect of the new organic composition of capital on the capitalist class. The effect on the working class is not less profound. As long as the hand-worker still played an important part in the works premises, as long as the variable part was superior or equal to the constant part in the organic composition of capital, as was the case prior to and at the beginning of large-scale industry, the accumulation of capital meant an increased demand for wage-labour. The position was changed as Capitalism developed, in the manner just described. Although the mass of capital grows, there is a relative decrease in the demand for workers. For this growth of capital refers chiefly to the constant part (machinery and raw materials), while there is a relative shrinkage in the variable part; that means the worker is obliged to consume a much greater quantity of raw material than formerly. And whereas the prices of commodities fall during the phase of the high organic composition of capital, the period of necessary labour (the hours needed for the reproduction of wages) becomes shorter, while the period of surplus labour becomes longer. The great industrial development therefore signifies for the worker: intensive exploitation and relative over-population, a reserve army of labour-power, which is absorbed by industry in times of prosperous trade, and is speedily demobilised when the slump comes. In times of good business the reserve army serves to check the wage demands of the workers regularly employed, and in times of bad trade it serves to depress wages. The outcome for the workers is as follows: "Within the capitalist system all methods for raising the social productiveness of labour are brought about at the cost of the individual labourer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers; they mutilate the labourer into a fragment of a man, degrade him to the level of an appendage to a machine, destroy every remnant of charm in his work, and turn it into a hated toil; they estrange from him the intellectual potentialities of the labour-process in the same proportion as science is incorporated in it as an independent power; they distort the conditions under which he works, subject him during the labour-process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the Juggernaut of Capital. But all methods for the production of surplus value are at the same time methods of accumulation; and every extension of accumulation becomes again a means for the development of those methods. It follows, therefore, that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital."--("Capital" (German), Vol. I., pp. 660-1.) The result of the capitalist social order is the unfolding of the productive forces, the efflorescence of science, the expansion of material civilisation, the dividing of society into antagonistic classes, the conferring of economic power on the few, and the enslavement and degradation of the many. 8. _Economic Contradictions. Decay of Society and its Reconstruction._ As the ripening of the capitalist social order to its highest point proceeds, its innate contradictions develop, and announce distinctly the fact that Capitalism has outlived its usefulness, while new life, a higher form of society, is emerging from its womb. The most important contradictions are: The driving force of the capitalist is to obtain the largest measure of surplus value or profit. The latest stage of Capitalism is, however, marked by the fact of the high organic composition of capital, which means that living labour-power, the source of surplus value, has relatively decreased. The decrease of variable capital signifies manifestly a lower rate of profit. Capitalism in normal times exhibits a tendency towards a lowering of the rate of profit. Therefore it gives rise to a phenomenon which contradicts the aim of the endeavours of the capitalists. The capitalist strives to accumulate capital, but as variable capital and the rate of profit relatively decrease, a tendency towards the depreciation of capital is revealed. The capitalist endeavours to counteract this tendency, and to achieve his object by extending the scale of production, so that the mass of commodities will compensate him for what he loses on them singly. But while he furthers this object by resorting to a higher organic composition of capital, he squeezes out the middleman, reduces the numbers of workers in employment, and creates a relative over-population, a reserve of those who are only employed intermittently; there is a substantial shrinkage in the demand for commodities, as the impoverished masses of the people have obviously less purchasing power. The capitalist extends production, and at the same time contracts the market. The upshot is over-production, under-consumption--crisis: wasting of capital, restriction of production, paralysis of the productive forces. And if Marx lived to-day he would add: the developed economy of large-scale capitalism, that is, the high organic composition of industrial capital, requires enormous quantities of raw materials, which, in part, are only to be had from tropical and sub-tropical countries, and also from eastern Asia; the struggle for these sources of raw materials, and for access to them, leads to wars in which capital sums of unprecedented amount are destroyed. Since 1894 these wars over raw materials and trade routes have broken out every few years. Economic crises and imperialist wars; immeasurable destruction of capital and productive forces. This is a consequence which stands in sharp contradiction to the historical task of the economic order of Capitalism, and to the immediate aims of the individual capitalists. Further, the capitalist tries from the beginning to create docile and unresisting masses of workers, and yet unites and combines them by the creation of large centres of production; the factories become centres for the organisation of the workers, and for the welding of the individual wills of the proletarians into a class will; they abolish the scattered and antagonistic interests of single sections of the workers, and consolidate them into a unified class interest. Finally, the whole economic process, which began by resting on individualist principles, has assumed a common character; thousands upon thousands of hand and brain workers engage in production in economic undertakings upon a single and uniform plan, with the aid of productive implements which can only be used in common. The significance and tendency of these contradictions are sketched by Marx in the great finale, which properly belongs to the concluding chapter of the third volume: "As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the labourers are turned into proletarians, their means of labour into capital, as soon as the capitalist means of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited, and therefore common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist employing many labourers. This expropriation is accomplished by the action of the immanent laws of capitalist production itself, by the centralisation of capital. One capitalist always kills many. Hand in hand with this centralisation, or this expropriation of many capitalists by a few, develop on an ever-extending scale the co-operative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economising of all means of production by their use as the means of production of combined, socialised labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalist regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this, too, grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter on the mode of production, which has sprung up and flourished along with it, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated."--("Capital," Vol. I. English edition, chap. 84.) FOOTNOTES: [7] Compare M. Beer, "History of British Socialism," Vol, I., pp. 245-270. CONCLUSION. An appreciation of Marx can only be arrived at by adopting the Marxian method. We must judge him in the same way as any other towering figure in the realm of thought or of action. Marx was a child of his time, and his system is a logical conception of certain economic and social phenomena of his age, owing something to the pioneer work and thinking of some of his predecessors. Two important events dominated his thinking: the French Revolution and the English Industrial Revolution. Even apart from the statement of Arnold Ruge that in 1843-44 Marx had collected a vast amount of material for a history of the French National Convention, we know from the work he did between 1844 and 1852 how profound was the influence of the French Revolution on his intellectual life. Still deeper, however, were the traces left upon his mind by the studies he made on the economic transformation of England during the period 1700-1825. Both events are obvious, catastrophic expressions of class movements and class conflicts, in which the middle class, as the representative of a higher economic order, gains the victory over autocratic forms of feudal authority and oligarchic systems of organisation through State regulation, in which, however, at the same time, a new class--the working class--raises its head and begins to make a stand against the victor. Marx was led to interpret these events in this way and to make them the basis of his conception of history chiefly through the influence of Hegel, Ricardo, and the English anti-capitalist school following upon Ricardo. To the end of his life he clung to the opinion that dialectic, as Hegel had formulated it, was indeed mystical but, when materialistically conceived, contains the laws of the movement of society. "The mystification which dialectic suffers in Hegel's hands in no wise hinders him from presenting in a comprehensive and intelligible manner its general processes."--(Preface to second German edition of "Capital," 1873.) The splitting up of the concept into contradictories, and the attainment of a higher positive through the negation of these contradictories, that was what, to Marx's mind, constituted the essence and the deepest meaning of the French Revolution and of the English Industrial Revolution. Society, the positive, split up into feudal and bourgeois, into two sharply divided contradictories, the bourgeoisie appearing as the negation, to be supplanted by the proletariat and so to make room for a Communist society, the higher synthesis. What he got from Hegel in a mystical form found an economic expression in Ricardo and the anti-capitalist school. Ricardo's writings, which belong to the second decade of the nineteenth century and which formulate, in the guise of a system of economics, the antagonisms and the conflicts between industry and landed nobility, presented themselves as a practical demonstration of the validity of dialectic. The fundamental idea of Ricardo's system may be expressed as follows: Capital is the motive force of society and the creator of civilisation, but the fruits of its activity are enjoyed not by capital but by the landed nobility. That is the thesis; now for the proof. The value of all commodities which can be made in any quantity desired consists in the quantity of labour which is expended for the purpose of producing them. The value is expressed in the costs of production, the most important components of which are wages and profit. Wages and profit stand in opposition to one another: if wages rise, profit falls, and conversely. Wages consist in a definite quantity of the necessaries of life, sufficient to keep the worker effective. Wages must obviously rise whenever the cost of living rises. The facts show that this is actually the case. The following reasons make this clear. In consequence of the civilising effects of capital, there is an increase in the opportunities for work and in population, resulting in an increased demand for the necessaries of life. Agriculture must be extended, but agricultural land is limited and of varying quality. The extension of agriculture brings into use the inferior kinds of land, which demand a greater amount of labour for their cultivation. And as the amount of labour determines the value of the commodity, the cost of living increases, and there is a rapid rise in ground rents. The workers demand higher wages, whereby the profits of the employers are diminished. But there is still another circumstance to be taken into consideration. Whereas the prices of agricultural products rise, those of industrial products fall, since, in consequence of the invention of machinery and of the superior division of labour, smaller quantities of labour are required to produce manufactured goods. The result of the entire working of capital for the civilised community is accordingly the reduction of profits, the depreciation of capital, and the increase of wages. This latter, however, is of no advantage to the workers, for food prices rise higher and higher; on the contrary, the whole advantage falls to the landed nobility, who do nothing for the furtherance of civilisation, but who, through ground rents and protective tariffs, receive everything. We have, then, in Ricardo a system of economic contradictions between profit, wages, and rent, or between bourgeoisie, proletariat, and nobility, in which the antagonism between bourgeoisie and proletariat is still undeveloped. The year of the publication of Ricardo's "Principles" (1817) is the year which witnessed the rise of English Socialism. In that year, Robert Owen, in a public meeting in the City of London, declared himself a Socialist. Three years later appeared the first criticisms of Ricardo's political economy. In these it was argued that, according to Ricardo, labour is the source of value, yet he considers capital as the creative factor of society and the working class as a mere appendage of capital. It must be the reverse; for the workers create values together with the surplus products which are appropriated by capital. In 1817, Robert Owen openly declares himself a Socialist; four years later appears the anonymous letter to Lord John Russell; Percy Ravenstone publishes his "Criticism of Capitalism," John Gray his Lecture, and Hodgskin his pamphlet on the unproductive nature of capital, in which he establishes the existence of a raging class struggle. The deep impression which these writings made on Marx is clearly seen in the second and third volumes of his "Theories on Surplus Value." And he links on to them. He completed what Ricardo hinted at and what the anti-capitalist school deduced from Ricardo. How Marx continued and elaborated these deductions we haw already seen in Chapter 3, "Outlines of Marx's Economics," and Chapter 7, "Surplus Value as the Motive Force of Society," where capital is shown to be the mass of surplus value of which the workers have been deprived. The deductions made by the English anti-capitalist school from Ricardo signified, politically, the first awakenings of the English workers to class-consciousness, to the struggle against capital. Just as Ricardo's theory of value and rent was the battle-cry of capital against the aristocracy--a battle-cry which created the free trade movement and shattered the economic power of the landed nobility, so the theory of value and surplus value was to become the battle-cry of the proletariat against the bourgeoisie, the declaration of independence, so to speak, of the working class. The English proletariat lacked a philosopher who could work out the idea to its logical conclusion, until Marx applied himself to the problem and solved it, so far indeed as philosophical problems can be solved, by a science which places itself at the disposal of a class movement. For it is impossible to set aside the view that Marx's theory of value and surplus value has rather the significance of a political and social slogan than of an economic truth. It is for Marx the basis of the class struggle of the workers against the middle class, just as Ricardo's theory of rent was the basis of the class struggle of the bourgeoisie against the aristocracy, or as the doctrines of the social contract and of the natural rights of man formed the basis of the struggle of the middle classes against autocracy and divine right. Such militant philosophies need not in themselves be true, only they must accord with the sentiments of the struggling mass. It is with such philosophical fictions that human history works. Marx's theory of value explains neither the vast and unparalleled accumulation of wealth nor the movement of prices during the last sixty years. Wealth, measured in values, has, in the last few decades, increased by many times the increase in living labour-power. In this connection the old formula can be reversed: wealth increases in geometrical, living labour-power in arithmetical progression. The greatest difficulty in Marx is that the inventors and discoverers, the chemists and physicists, the pioneers and organisers of industry and agriculture, are not regarded by him as creators of surplus values. Thinkers, who by chemical researches and discoveries double the productive capacity of the soil and conjure forth values in millions from the waste products of industry: physicists who place new sources of power and new means of production at the disposal of mankind and multiply the productivity of labour; organisers who co-ordinate the forces of production and introduce new methods of working--all this creative and directive work, demanding, as it often does, an infinite amount of intensive intellectual effort, is not considered to increase the total sum of exchange values of the nation. However, as far as the distribution of products is concerned, Marx's theory is, generally speaking, correct; distribution is carried out under the capitalist economic system not according to the amount of productive work done, but in proportion to the outlay of capital and the skill in commercial manoeuvring which obtains in the sphere of circulation. Unique as an investigator of the laws of the proletarian movement, eminent and even a great pioneer as a sociologist, Marx is, in respect of economic theory, predominantly an agitator. His system, more than any other system of Socialism or of political economy, is the revolutionary expression of proletarian thought and feeling. His doctrines of value, surplus value, the economic determination of history, the evolution from Capitalism to Socialism, the political and economic class struggle, will for long have the force of truth for the masses and will continue to move them. Marx's heart must have been filled with joy and gladness when, out of the elements of Hegel, Ricardo, and the English anti-capitalist school, out of his studies of the French Revolution, of the English Industrial Revolution, and of French and English Socialism there arose a unified system whose destiny it was to lead mankind out of the earth-bound history of the past into the new world wherein a spiritual civilisation should fully blossom forth. Man is to quit the realm of necessity and to enter into that of freedom, where he shall cease to be a tool for the profit of others and shall rise to have a purpose of his own, freely associating himself with his fellow men to work in the service of all. "The realm of freedom, indeed, only begins there where work conditioned by necessity and external utility ceases. According to the nature of the thing, therefore, it lies beyond the sphere of actual material production. Just as the savage must struggle with nature for the satisfaction of his needs, for self-preservation and self-reproduction, so too must the civilised man, whatever be the form of society or the methods of production obtaining. Side by side with his own evolution develops this constitutional necessity, because his needs increase; but, at the same time, the forces of production which satisfy these needs likewise increase. Freedom in this sphere can only consist in this--that men in their social relationship, the associated producers, should regulate this material exchange with Nature in a rational manner and bring it under their united control, instead of being governed by it as by some blind power; it should be carried on with the minimum expenditure of energy and under conditions most adapted to and most worthy of human nature. Yet it remains all the same a realm of necessity. It is beyond this where that development of human power, which may be called independent purpose, begins, the true realm of freedom, which, however, can only flourish upon the basis of that realm of necessity."--("Capital," Vol. III., 2, p. 355.) The National Labour Press, Ltd., Manchester and London. 31258 * * * * * +-----------------------------------------------------------+ | Typographical errors corrected in text: | | | | Page 37: FN4: Fouvierists replaced with Fourierists | | Page 42: Wilhelm Wolf replaced with Wilhelm Wolff | | Page 60: "That will give give them new" replaced with | | "That will give them new" | | | +-----------------------------------------------------------+ * * * * * 
38185	----	FRUITS OF PHILOSOPHY A TREATISE ON THE POPULATION QUESTION By Charles Knowlton Edited by Charles Bradlaugh and Annie Besant PUBLISHERS' PREFACE. The pamphlet which we now present to the public is one which has been lately prosecuted under Lord Gampbell's Act, and which we republish, in order to test the right of publication. It was originally written by Charles Knowlton, M. D., whose degree entitles him to be heard with respect on a medical question. It was first published in England, about forty years ago, by James Watson, the gallant radical, who came to London and took up Richard Carlile's work, when Carlile was in jail. He sold it, unchallenged, for many years, approved it, and recommended it. It was printed and published by Messrs. Holyoake & Co., and found its place, with other works of a similar character, in their "Freethought Directory," of 1853, and was thus identified with freethought literature at the then leading freethought _depot_ Mr. Austin Holyoake, working in con-junction with Mr. Bradlaugh at the _National Reformer_ office, Johnson's Court, printed and published it in his turn, and this well-known freethought advocate, in his "Large or Small Families," selected this pamphlet, together with R. D. Owen's "Moral Physiology" and the "Elements of Social Science," for special recommendation. Mr. Charles Watts, succeeding to Mr. Austin Holyoake's business, continued the sale, and, when Mr. Watson died, in 1875, he bought the plates of the work (with others) from Mrs. Watson, and continued to advertise and to sell it until December 23, 1876. For the last forty years the book has thus been identified with freethought, advertised by leading freethinkers, published under the sanction of their names, and sold in the headquarters of freethought literature. If, during this long period, the party has thus--without one word of protest--circulated an indecent work, the less we talk about freethought morality the better; the work has been largely sold, and, if leading freethinkers have sold it--profiting by the sale--through mere carelessness, few words could be strong enough to brand the indifference which thus scattered obscenity broadcast over the land. The pamphlet has been withdrawn from circulation in consequence of the prosecution instituted against Mr. Charles Watts, but the question of its legality or illegality has not been tried; a plea of "Guilty" was put in by the publisher, and the book, therefore, was not examined, nor was any judgment passed upon it; no jury registered a verdict, and the judge stated that he had not read the work. We republish this pamphlet, honestly believing that on all questions affecting the happiness of the people, whether they be theological, political or social, fullest right of free discussion ought to be maintained at all hazards. We do not personally indorse all that Dr. Knowles says: his "Philosophical Proem" seems to us full of philosophical mistakes, and--as we are neither of us doctors--we are not prepared to indorse his medical views; but since progress can only be made through discussion, and no discussion is possible where differing opinions are suppressed, we claim the right to publish all opinions, so that the public, enabled to see all sides of a question, may have the materials for forming a sound judgment. The alterations made are very slight, the book was badly printed, and errors of spelling and a few clumsy grammatical expressions have been corrected; the subtitle has been changed, and in one case four lines have been omitted, because they are repeated word for word further on. We have, however, made some additions to the pamphlet, which are in all cases kept distinct from the original text. Physiology has made great strides during the past forty years, and not considering it right to circulate erroneous physiology, we submitted the pamphlet to a doctor in whose accurate knowledge we have the fullest confidence, and who is widely known in all parts of the world as the author of the "Elements of Social Science;" the notes signed "G. B." are written by this gentleman. References to other works are given in foot-notes for the assistance of the reader, if he desires to study up the subject further. Old Radicals will remember that Richard Carlile published a work entitled "Every Woman's Book," which deals with the same subject and advocates the same object as Dr. Knowlton's pamphlet R. D. Owen objected to the "style and tone" of Carlile's "Every Woman's Book," as not being in "good taste," and he wrote his "Moral Physiology" to do in America what Carlile's work was intended to do in England. This work of Carlile's was stigmatized as "indecent" and "immoral," because it advocated, as does Dr. Knowlton's, the use of preventive checks to population. In striving to carry on Carlile's work, we cannot expect to escape Carlile's reproach; but, whether applauded or condemned, we mean to carry it on, socially as well as politically and theologically. We believe, with the Rev. Mr. Malthus, that population has a tendency to increase faster than the means of existence, and that _some_ checks must therefore exercise control over population. The checks now exercised are semi-starvation and preventable disease; the enormous mortality among the infants of the poor is one of the checks which now keep down the population. The checks that ought to control population are scientific, and it is these which we advocate. We think it more moral to prevent the conception of children than, after they are born, to murder them by want of food, air and clothing. We advocate scientific checks to population, because, so long as poor men have large families, pauperism is a necessity, and from pauperism grow crime and disease. The wages which would support the parents and two or three children in comfort and decency, is utterly insufficient to maintain a family of twelve or fourteen, and we consider it a crime to bring into the world human beings doomed to misery or to premature death. It is not only the hard-working classes which are concerned in this question. The poor preacher, the struggling man of business, the young professional man, are often made wretched for life by their inordinately large families, and their years are passed in one long battle to live; meanwhile, the woman's health is sacrificed and her life embittered from the same cause. To all of these we point the way of relief and happiness; for the sake of these we publish what others fear to issue; and we do it confident that if we fail the first time, we shall succeed at last, and that the English public will not permit the authorities to stifle a discussion of the most important social question which can influence a nation's welfare. Charles Bradlaugh. Annie Besant. PHILOSOPHICAL PROEM Consciousness is not a "principle" or substance of any kind, nor is it, strictly speaking, a property of any substance or being. It is a peculiar action of the nervous system, and the system is said to be sensible, or to possess the property of sensibility, because those sentient actions which constitute our different consciousnesses may be excited in it. The nervous system includes not only the brain and spinal marrow, but numerous soft white cords, called nerves, which extend from the brain and spinal marrow to every part of the body in which a sensation can be excited. A sensation is a sentient action of a nerve and the brain; a thought or idea (both the same thing) is a sentient action of the brain alone. A sensation or a thought is consciousness, and there is no consciousness but that which consists either in a sensation or a thought. Agreeable consciousness constitutes what we call happiness, and disagreeable consciousness constitutes misery. As sensations are a higher degree of consciousness than mere thought, it follows that agreeable sensations constitute a more exquisite happiness than agreeable thoughts. That portion of happiness which consists in agreeable sensations is commonly called pleasure. No thoughts are agreeable except those which were originally excited by or have been associated with agreeable sensations. Hence, if a person never had experienced any agreeable sensations, he could have no agreeable thoughts, and would, of course, be an entire stranger to happiness. There are five species of sensations--seeing, hearing, smelling, tasting and feeling. There are many varieties of feeling--as the feelings of hunger, thirst, cold, hardness, etc. Many of these feelings are excited by agents that act upon the exterior of the body, such as solid substances of every kind, heat, and various chemical irritants. These latter feelings are called _passions_. Those passions which owe their existence chiefly to the state of the brain, or to causes acting directly upon the brain, are called the moral passion. They are grief, anger, love, etc. They consist of sentient actions, which commence in the brain and extend to the nerves in the region of the stomach, etc. But when the cause of the internal feeling of passion is seated in some organ remote from the brain, as in the stomach, genital organs, etc., the sentient action which constitutes the passion commences in the nerves of such organ and extends to the brain, and the passion is called an _appetite, instinct, or desire_. Some of these passions are natural, as hunger, thirst, the reproductive instinct, the desire to urinate, etc. Others are gradually acquired by habit A _hankering_ for stimulants, as spirits, opium and tobacco, is one of these. Such is the nature of things that our most vivid and agreeable sensations cannot be excited under all circumstances, nor beyond a certain extent under any circumstances, without giving rise in one way or another to an amount of disagreeable consciousness or misery, exceeding the amount of agreeable consciousness which attends such ill-timed or excessive gratification. To excite agreeable sensations to a degree not exceeding this certain extent is temperance; to excite them beyond this extent is intemperance; not to excite them at all is mortification or abstinence. This certain extent varies with different individuals, according to their several circumstances, so that what would be temperance in one person may be intemperance in another. To be free from disagreeable consciousness is to be in a state which, compared with a state of misery, is a happy state; yet absolute happiness does not exist in the absence of misery, if it does, rocks are happy. It consists, as aforesaid, in agreeable consciousness. That which enables a person to excite or maintain agreeable consciousness is not happiness; but the _idea_ of having such in one's possession is agreeable, and of course is a portion of happiness. Health and wealth go far in enabling a person to excite and maintain agreeable consciousness. That which gives rise to agreeable consciousness is _good_, and we desire it. If we use it intemperately, such use is bad, but the thing itself is still good. Those acts (and intentions are acts of that part of man which intends) of human beings which tend to the promotion of happiness are good, but they are also called _virtuous_, to distinguish them from other things of the same tendency. There is nothing for the word _virtue_ to signify, but virtuous actions. Sin signifies nothing but sinful actions, and sinful, wicked, vicious, or bad actions are those which are productive of more misery than happiness. When an individual gratifies any of his instincts in a _temperate_ degree, he adds an item to the sum total of human happiness, and causes the amount of human happiness to exceed the amount of misery farther than if he had not enjoyed himself, therefore it is virtuous, or, to say the least, it is not vicious or sinful for him to do so. But it must ever be remembered that this temperate degree depends on circumstances; that one person's health, pecuniary circumstances, or social relation may be such that it would cause more misery than happiness for him to do an act which being done by a person under different circumstances would cause more happiness than misery. Therefore, it would be right for the latter to perform such act, but not for the former. Again: owing to his _ignorance_, a man may not be able to gratify a desire without causing misery (wherefore it would be wrong for him to do it), but with knowledge of means to prevent this misery, he may so gratify it that more pleasure than pain will be the result of the act, in which case the act, to say the least, is justifiable. Now, therefore, it is virtuous, nay, it is the _duty_, for him who has a knowledge of such means, to convey it to those who have it not, for by so doing he furthers the cause of human happiness. Man by nature is endowed with the talent of devising means to remedy or prevent the evils that are liable to arise from gratifying our appetites; and it is as much the duty of the physician to inform mankind of the means to prevent the evils that are liable to arise from gratifying the productive instinct as it is to inform them how to keep clear of the gout or dyspepsia. Let not the old ascetic say we ought not to gratify our appetites any further than is necessary to maintain health and to perpetuate the species. Mankind will not so abstain, and if any means to prevent the evils that may arise from a farther gratification can be devised, they _need not_. Heaven has not only given us the capacity of greater enjoyment, but the talent of devising means to prevent the evils that are liable to arise therefrom, and it becomes us, "with thanksgiving," to make the most of them. FRUITS OF PHILOSOPHY. CHAPTER I. TO LIMIT AT WILL THE NUMBER OF THEIR OFFSPRING Showing how desirable it is, both in a political and a social point of view, for mankind to be able to limit at WILL THE NUMBER OF THEIR OFFSPRING, WITHOUT SACRIFICING THE PLEASURE THAT ATTENDS THE GRATIFICATION OF THE REPRODUCTIVE INSTINCT. First.---_In a political point of view_.--If population be not restrained by some great physical calamity, such as we have reason to hope will not hereafter be visited upon the children of men, or by some _moral restraint_, the time will come when the earth cannot support its inhabitants. Population unrestrained will double three times in a century. Hence, computing the present population of the earth at 1,000 millions, there would be at the end of 100 years from the present time, 8,000 millions. At the end of 200 years, 64,000 millions. " " 300 " 512,000 " And so on, multiplying by eight for every additional hundred years. So that in 500 years from the present time there would be thirty-two thousand seven hundred and sixty eight times as many inhabitants as at present. If the natural increase should go on without check for 1,500 years, one single pair would increase to more than _thirty-five thousand one hundred and eighty-four_ times as many as the present population of the whole earth! Some check then there must be, or the time will come when millions will be born but to suffer and to perish for the necessaries of life. To what an inconceivable amount of human misery would such a state of things give rise! And must we say that vice, war, pestilence and famine are desirable to prevent it? Must the friends of temperance and domestic happiness stay their efforts? Must peace societies excite to war and bloodshed? Must the physician cease to investigate the nature of contagion, and to search for the means of destroying its baneful influence? Must he that becomes diseased be marked as a victim to die for public good, without the privilege of making an effort to restore him to health? And in case of a failure of crops in one part of the world, must the other parts withhold the means of supporting life that the far greater evil of excessive population throughout the world may be prevented? Can there be no effectual moral restraint, attended with far less human misery than such physical calamities as these? Most surely there can. But what is it? Malthus, an English writer on the subject of population, gives us none but celibacy to a late age. But how foolish it is to suppose that men and women will become as monks and nuns during the very holiday of their existence, and abjure during the fairest years of life the nearest and dearest of social relations, to avert a catastrophe which they and perhaps their children will not live to witness. But, besides being ineffectual, or if effectual, requiring a great sacrifice of enjoyment, this restraint is highly objectionable on the score of its demoralizing tendency. It would give rise to a frightful increase of prostitution, of intemperance and onanism, and prove destructive to health and moral feelings. In spite of preaching, human nature will ever remain the same; and that restraint which forbids the gratification of the reproductive instinct will avail but little with the mass of mankind. The checks to be hereafter mentioned are the only moral restraints to population known to the writer that are unattended with serious objections. Besides starvation, with all its accompanying evils, overpopulation is attended with other public evils, of which may be mentioned, ignorance and slavery. Where the mass of the people must toil incessantly to obtain support, they must remain ignorant; and where ignorance prevails, tyranny reigns.* * The scientific part of Malthus' Doctrine of Population is not very clearly or correctly given in the above passages. His great theory, now or generally held by the most eminent political economists, is that the increase of population is always powerfully checked in old countries by the difficulty in increasing the supply of food; that the existing evils of poverty and low wages are really at bottom caused by this check, and are brought about by the pressure of population on the soil, and the continual overstocking of the labor markets with laborers; and hence that the only way in which society can escape from poverty, with all its miseries, is by putting a strong restraint on their natural powers of multiplication. "It is not in the nature of things," he says, "that any permanent and general improvement in the condition of the poor can be effected without an increase in the preventive checks to population."--G. R. Second--_In a social point of view_.--"Is it not notorious that the families of the married often increase beyond which a regard for the young beings coming into the world, and the happiness of those who give them birth, would dictate. In how many instances does the hard-working father, and more especially the mother, of a poor family remain slave throughout their lives, tugging at the oar of incessant labor, toiling to live, and living to toil; when, if their offspring had been limited to two or three only, they might have enjoyed comfort and comparative affluence? How often is the health of the mother, giving birth every year to an infant--happy if it be not twins--and compelled to toil on, even at those times when nature imperiously calls for some relief from daily drudgery,--how often is the mother's comfort, health, nay, even her life, thus sacrificed? Or if care and toil have weighed down the spirit, and at length broken the health of the father; how often is the widow left unable, with the most virtuous intentions, to save her fatherless offspring from becoming degraded objects of charity, or profligate votaries of vice! "Nor is this all. Many women are so constituted that they cannot give birth to healthy, sometimes not to living children. Is it desirable, is it moral, that such women should become pregnant? Yet this is continually the case. Others there are who ought never to become parents; because, if they do, it is only to transmit to their offspring grievous hereditary diseases, which render such offspring mere subjects of misery throughout their sickly existence. Yet such women will not lead a life of celibacy. They marry. They become parents, and the sum of human misery is increased by their doing so. But it is folly to expect that we can induce such persons to live the lives of Shakers. Nor is it necessary; all that duty requires of them is to refrain from becoming parents. Who can estimate the beneficial effect which a rational moral restraint may thus have on the health and beauty and physical improvement of our race throughout future generations?" Let us now turn our attention to the case of unmarried youth. "Almost all young persons, on reaching the age of maturity, desire to marry. That heart must be very cold, or very isolated, that does not find some object on which to bestow its affections. Thus, early marriage would be almost universal did not prudential consideration interfere. The young man thinks, 'I cannot marry yet; I cannot support a family. I must make money first, and think of a matrimonial settlement afterwards.' "And so he goes to making money, fully and sincerely resolved in a few years to share it with her whom he now loves. But passions are strong and temptations great. Curiosity, perhaps, introduces him into the company of those poor creatures whom society first reduces to a dependence on the most miserable of mercenary trades, and then curses for being what she has made them. There his health and moral feelings are alike made shipwreck. The affections he had thought to treasure up for their first object are chilled by dissipation and blunted by excess. He scarcely retains a passion but avarice. Years pass on--years of profligacy and speculation--and his wish is accomplished, his fortune is made. Where now are the feelings and resolve of his youth? 'Like the dew on the mountain, Like the foam on the river, Like the bubbles on the fountain, They are gone--and forever.' "He is a man of pleasure, a man of the world. He laughs at the romance of his youth, and marries a fortune. If gaudy equipage and gay parties confer happiness, he is happy. But if these be only the sunshine on the stormy sea below, he is a victim to that system of morality which forbids a reputable connection until the period when provision has been made for a large expected family. Had he married the first object of his choice, and simply delayed becoming a father until his prospects seemed to warrant it, how different might have been his lot. Until men and women are absolved from the fear of becoming parents, except when they themselves desire it, they will ever form mercenary and demoralizing connections, and seek in dissipation the happiness they might have found in domestic life. "I know that this, however common, is not a universal case. Sometimes the heavy responsibilities of a family are incurred at all risks; and who shall say how often a life of unremitting toil and poverty is the consequence. Sometimes, if even rarely, the young mind does hold its first resolves. The youth plods through years of cold celibacy and solitary anxiety, happy if, before the best hours of his life are gone and its warmest feelings withered, he may return to claim the reward of his forbearance and his industry. But even in this comparatively happy case, shall we count for nothing the years of ascetic sacrifice at which after happiness is purchased? The days of youth are not too many, nor its affections too lasting. We may, indeed, if a great object require it, sacrifice the one and mortify the other. But is this, in itself, desirable? Does not wisdom tell us that such a sacrifice is a dead loss--to the warm-hearted often a grievous one? Does not wisdom bid us temperately enjoy the springtimes of life, 'while the evil day come not, nor the years draw nigh, when we shall say we have no pleasure in them?' "Let us say, then, if we will, that the youth who thus sacrifices the present for the future, chooses wisely between the two evils, profligacy and asceticism. This is true. But let us not imagine the lesser evil to be good. It is _not_ good for man to be alone. It is for no man or woman's happiness or benefit that they should be condemned to Shakerism. It is a violence done to the feelings and an injury to the character. A life of rigid celibacy, though infinitely preferable to a life of dissipation, is yet fraught with many evils. Peevishness, restlessness, vague longings and instability of character, are amongst the least of these. The mind is unsettled, and the judgment warped. Even the very instinct which is thus mortified assumes an undue importance, and occupies a portion of the thoughts which does not of right or nature belong to it, and which, during a life of satisfied affection, it would not obtain." In many instances, the genital organs are rendered so irritable by the repletion to which unnatural continency gives rise, and by the much thinking caused by such repletion, as to induce a disease known to medical men by the name of _Gonorrhoea Dormientium_. It consists in an emission or discharge of the semen during sleep. This discharge is immediately excited in most instances by a lascivious dream, but such dream is caused by the repletion and irritability of the genital organs. It is truly astonishing to what a degree of mental anguish the disease gives rise in young men. They do not understand the nature, or rather, the cause of it. They think it depends on a weakness--indeed, the disease is often called a "seminal weakness"--and that the least gratification in a natural way would but serve to increase it. Their anxiety about it weakens the whole system. This weakness they erroneously attribute to the discharges; they think themselves totally disqualified for entering into or enjoying the married state. Finally, the genital and mental organs act and react upon each other so perniciously as to cause a degree of nervousness, debility, emaciation and melancholy--in a word, wretchedness that sets description at defiance. Nothing is so effectual in curing this diseased state of a body and mind in young men as marriage. All restraint, fear and solicitude should be removed. "Inasmuch, then, as the scruples of incurring heavy responsibilities deter from forming moral connections and encourage intemperance and prostitution, the knowledge which enables man to limit the number of his offspring would, in the present state of things, save much unhappi-ness and prevent many crimes. Young persons sincerely attached to each other, and who might wish to marry, should marry early, merely resolving not to become parents until prudence permitted it. The young man, instead of solitary toil and vulgar dissipation, would enjoy the society and the assistance of her he has chosen as his companion; and the best years of life, whose pleasures never return, would not be squandered in riot, nor lost through mortification."* * The passages quoted are from Robert Dale Owen's "Moral Physiology." CHAPTER II. ON GENERATION I hold the following to be important and undeniable troths: That every man has a natural right both to receive and convey a knowledge of all the facts and discoveries of every art and science, excepting such only as may be secured to some particular person or persons by copyright or patent; that a physical truth in its general effect cannot be a moral evil; that no fact in physics or in morals ought to be concealed from the inquiring mind. Some may make a misuse of knowledge, but that is their fault; and it is not right that one person should be deprived of knowledge, of spirits, of razors, or of anything else which is harmless in itself and may be useful to him, because another may misuse it. The subject on generation is not only interesting as a branch of science, but it is so connected with the happiness of mankind that it is highly important in a practical point of view. Such, to be sure, is the custom of the age, that it is not considered a proper subject to investigate before a popular assembly, nor is it proper to attend the calls of nature in a like place; yet they must and ought to be attended to, for the good, the happiness of mankind require it; so, too, for like reason, the subject of generation ought to be investigated until it be rightly understood by all people, but at such opportunities as the good sense of every individual will easily decide to be proper. This, I presume to say, not simply upon the abstract principle that all knowledge of Nature's workings is useful, and the want of it disadvantageous, but from the known moral fact that ignorance of this process has in many instances proved the cause of a lamentable "mishap," and more especially as it is essential to the attainment of the great advantage, which it is the chief object of this work to bestow upon mankind. People generally, as it was the case with physicians until late years, entertain a very erroneous idea of what takes place in the conception. Agreeably to this idea the "check" which I consider far preferable to any other, would not be effectual, as would be obvious to all. Consequently, entertaining this idea, people would not have due confidence in it. Hence, it is necessary to correct a long-held and widely extended error. But this I cannot expect to do by simply saying it is an error. Deeply rooted and hitherto undisputed opinions are not so easily eradicated. If I would convince any one that the steps in one of the most recondite processes of nature are not such as he has always believed, it will greatly serve my purpose to show what these steps are. I must first prepare him to be reasoned with, and then reason the matter all over with him. I must point out the facts which disprove his opinion, and show that my own is unattended with difficulties. But what can be more obvious than that it is absolutely impossible to explain any process or function of the animal economy, so as to be understood, before the names of the organs which perform this function have been defined, that is, before the organs themselves have been described. Now it is well known to every anatomist, and indeed it may be obvious to all, that in describing any organ or system of organs, we must always begin with some external and known parts, and proceed regularly, step by step, to the internal and unknown. As in arithmetic, "everything must be understood as you go along."* * This is an Americanism, which appears to us to convey a false idea. If it refers to the cases used as illustrations, Dr. Knowlton is more sparing in his use of them than either Dr. Bull or Dr. Chavasse.--Publishers' Note. Fully to effect the objects of this work, it is, therefore, a matter of necessity that I give an anatomical description of certain parts--even external parts--which some, but imagine what I have just said, might think it useless to mention. It is not to gratify the idle curiosity of the light-minded that this book is written; it is for _utility_ in the broad and truly philosophical sense of the term; nay, farther, it shall with the exception of here and there a little spicing*, have confined to _practical utility_. I shall, therefore, endeaver to treat of the subject in this chapter so as to be understood, without giving any description of the male organs of generation; though I hold it an accomplishment for one be able to speak of those organs, as diseases often put them under the necessity of doing, without being compelled use low and vulgar language. But I must briefly describe the female organs; in doing which I must, of course, speak as do other anatomists and physiologists; and whoever objects to this will discover more affectation and prudery than good sense and good will to mankind. The adipose, or fatty matter, immediately over the share bone, forms a considerable prominence in females, which, at the age of puberty, is covered with hair, as in males. This prominence is called Mons Veneris. The exterior orifice commences immediately below this. On each side of this orifice is a prominence continued from the mons veneris, which is largest above and gradually diminishes as it descends. These two prominences are called the Labia Externa, or external lips. Near the latter end of pregnancy they become somewhat enlarged and relaxed, so that they sustain little or no injury during parturition. Just within the upper or anterior commissure, formed by the junction of these lips, a little round oblong body is situated. The body is called the clitoris. Most of its length is bound down, as it were, pretty closely to the bone; and it is of very variable size in different females. Instances have occurred where it was so enlarged as to allow the female to have venereal commerce with others; and in Paris this fact was once made a public exhibition to the medical faculty. Women thus formed appear to partake in their general form of the male character, and are called hermaphrodites. The idea of human beings, called hermaphrodites, which could be either father or mother, is, doubtless, erroneous. The clitoris is analogous in its structure to the penis, and like it, is exquisitely sensitive, being, as it is supposed, the principal seat of pleasure. It is subject to erection or distension, like the penis, from like causes. The skin which lines the internal surface of the external lips is folded in such manner as to form two flat bodies, the exterior edges of which are convex. They are called the nymphse. They extend downward, one on each side, from the clitoris to near the middle of the external orifice, somewhat diverging from each other. Their use is not very evident The orifice of the urethra (the canal, short in females, which leads to the bladder) is situated an inch or more farther inward than the clitoris, and is a little protuberant. Passing by the external lips, the clitoris, the nymphse and the orifice of the urethra, we come to the membrane called the hymen. It is situated just at, or a trifle behind the orifice of the urethra. It is stretched across the passage, and were it a complete septum, it would close up the anterior extremity of that portion of the passage which is called the vagina. But the instances in which the septum or partition is complete are very rare, there being, in almost all cases, an aperture either in its center, or frequently in its anterior edge, giving the membrane the form of a crescent Through this aperture passes the menstrual fluid. Sometimes, however, this septum is complete, and the menstrual fluid is retained month after month, until appearances and symptoms much like those of pregnancy are produced, giving rise to perhaps unjust suspicions. Such cases require the simple operation of dividing the hymen. In many instances the hymen is very imperfect, insomuch that some have doubted whether it is to be found in the generality of virgins. Where it exists it is generally ruptured in the first intercourse of the sexes, and the female is said to lose her virginity. In some rare instances it is so very strong as not to be ruptured by such intercourse, and the nature of the difficulty not being understood, the husband has sued for a divorce. But everything may be put to rights by a slight surgical operation. The parts here described are among those called the external parts of generation. The internal organs of generation consist in the female of the Vagina, the Uterus, the Ovaries and their appendages. The Vagina is a membranous canal commencing at the hymen and extending to the uterus. It is a little curved, and extends backward and upward between the bladder, which lies before and above it, and that extreme portion of the bowels called the rectum, which lies behind it. The coat of membrane which lines the internal surface of the vagina forms a number of transverse ridges. These are to be found only in the lower or anterior half of the vagina, and they do not extend all round the vagina, but are situated on its anterior and posterior sides, while their lateral sides are smooth. I mention these ridges because a knowledge of them may lead to a more effectual use of one of the checks to be made known hereafter. The uterus or womb is also situated between the bladder and the rectum, but above the vagina. Such is its shape that it has been compared to a pear with a long neck. There is, of course, considerable difference between the body and the neck, the first being twice as broad as the last. Each of these parts is somewhat flattened. In subjects of mature age, who have been pregnant, the whole of the uterus is about two inches and a half in length, and more than an inch and a half in breadth at the broadest part of the body. It is near an inch in thickness. The neck of the uterus is situated downward, and may be said to be inserted into the upper extremity of the vagina. It extends down into the vagina the better part of an inch. In the uterus is a cavity which approaches the triangular form, and from which a canal passes down through the neck of the uterus into the vagina. This cavity is so small that its sides are almost in contact So that the uterus is a thick, firm organ for so small a one. Comparing the cavity of the uterus to a triangle, we say the upper side or line of this triangle is transverse with respect to the body, and the other two lines pass downward and inward, so that they would form an angle below, did they not before they meet take a turn more directly downward to form the canal just mentioned. In each of the upper angles there is an orifice of such size as to admit of a hog's bristle. These little orifices are the mouths of two tubes, called the Fallopian tubes, of which more will be said presently. The canal which passes through the neck of the uterus, connecting the cavity of this organ with that of the vagina, is about a quarter of an inch in diameter. It is different from other ducts, for it seems to be a part of the cavity from which it extends, inasmuch as when the cavity of the uterus is enlarged in the progress of pregnancy, this canal is gradually converted into a part of that cavity. The lower extremity of the neck of the uterus is irregularly convex and tumid. The orifice of the canal in it is oval, and so situated that it divides the convex surface of the lower extremity of the neck in two portions, which are called the lips of the uterus. The anterior is thicker than the posterior. The orifice itself is called _os tincæ_ or _os uteri_, or in English, the mouth of the womb. When the parts are in a weak, relaxed state, the mouth or neck of the uterus is quite low, and in almost all oases it may be reached by a finger introduced into the vagina, especially by a second person, who carries the hand behind. The Ovaries are two bodies of a flattened or oval form, one of which is situated on each side of the uterus at a little distance from it, and about as high up as where the uterus becomes narrow to form its neck. The longest diameter of the ovarium is about an inch. Each ovarium has a firm coat of membrane. In those who have not been pregnant, it contains from ten to twenty _vesicles_, which are little round bodies, formed of a delicate membrane, and filled with a transparent fluid. Some of these vesicles are situated so near the surface of the ovarium as to be prominent on its surface. They are of different sizes, the largest nearly a quarter of a inch in diameter.* * The vesicles here mentioned are the so-called Graafian vesicles, or ovisacs, each of which contains in its interior a little ovum or egg. In the human female the ovum is extremely minute, so as only to be visible with the aid of a lens. The Graafian vesicles are not limited to a certain small number, as was formerly thought, but continue to be formed in the ovaries, and to discharge at intervals mature ova during the whole of the fruitful period.--G. R. In those in whom conception has ever taken place, some of these vesicles are removed, and in their place a cicatrix or scar is formed which continues through life. However, the number of cicatrices does not always correspond with the number of conceptions. They often exceed it, and are sometimes found where conception has not been known to take place. The Fallopian Tubes are two canals four or five inches in length, proceeding from the upper angles of the cavity of the uterus, in a transverse direction in respect to the body. Having so proceeded for some distance they turn downward toward the ovaries. At their commencement in the uterus they are very small, but they enlarge as much as they progress. The large ends, which hang loose, terminate in open mouths, the margins of which consist of fimbriated processes, and nearly touch the ovaria. We are now prepared to treat of conception. Yet, as menstruation is closely connected with it, and as a knowledge of many things concerning menstruation may contribute much to the well-being of females, for whom this work is at least as much designed as for males, I shall first briefly treat of this subject. Menstruation.--When females arrive at the age of puberty they begin to have a discharge once every month, by way of the vagina, of the color of blood. This discharge is termed the menses. To have it is to menstruate. The age at which menstruation commences varies with different individuals, and also in different climates. The warmer the climate the earlier it commences and ceases. In temperate climates it generally commences at the age of fourteen or fifteen, and it ceases at forty-four, or a little later. * Whenever it commences the girl acquires a more womanly appearance. It is a secretion of the uterus, or, in other words, the minute vessels distributed to the inner coat of uterus, select as it were, from the blood, and pour out in a gradual manner the materials of this fluid. It has one of the properties, color, of blood, but it does not coagulate, or separate into different parts like blood, and cannot properly be called blood.** * Dr. Chavasse, on p. 94 of his "Advice to a Wife" published by W. H. Smith & Son gives instances of very early menstruation and consequent fecundity.--Publishers' note, ** "The menstrual discharge," says Dr. Kirkes, "consists of blood effused from the inner surface of the uterus, and mixed with mucus from the uterus, vagina, and the external parts of the generative apparatus. Being diluted by this admixture, the menstrual blood coagulates less perfectly than ordinary blood; and the frequent acidity of the vaginal mucus tends still further to diminish its coagulability."-- Handbook of Physiology, 8th ed., p. 727, 1874.--G. R. When this discharge is in all respects regular, it amounts in most females to six or eight ounces, and from two to four days' continuance. During its continuance the women is said to be unwell, or out of order. Various unpleasant feelings are liable to attend it; but when it is attended with severe pain, as it not infrequently is, it becomes a disease, and the woman is not likely to conceive until it is cured. During the existence of the "turns," or "monthlies," as they are often called, indigestible food, dancing in warm rooms, sudden exposure to cold or wet, and mental agitations, should be avoided as much as possible. The "turns" do not continue during pregnancy, nor nursing, unless nursing be continued after the "turns" recommence. Some women, it is true, are subject to a slight hemorrhage that sometimes occurs with considerable regularity during pregnancy, and which has led them to suppose they have their turns at such times; but it is not so; the discharge at such times is real blood.* * Consult on the whole of this Dr. Chavasse's book, pp. 91- 101, where full details are given.--Publishers' note. The use of the menstrual discharge seems to be to prepare the uterine system for conception. For females do not become pregnant before they commence, nor after they cease having turns; nor while they are suppressed by some disease, by cold or by nursing. Some credible women, however, have said that they become pregnant while nursing, without having had any turn since their last lying-in. It is believed that in these oases they had some discharge, colorless, perhaps, which they did not notice, but which answered the purposes of the common one. Women are not nearly so likely to conceive during the week before a monthly as during the week immediately after.* But although the use of this secretion seems to be to prepare for conception, it is not to be inferred that the reproductive instinct ceases at the "turn of life," or when the woman ceases to menstruate. On the contrary, it is said that this passion often increases at this period, and continues in a greater or less degree to an extreme age. * See, however, Dr. Bull's "Hints to Mothers," pp. 31-58, and 127-129 (published by Longmans, Green & Co.)-- Publishers' note. Conception.--The part performed by the male in the reproduction of the species consists in exciting the organism of the female, and depositing the semen in the vagina. Before I inquire what takes place in the females I propose to speak of the semen. This fluid, which is secreted by the testicles, may be said to possess three kinds of properties, physical, chemical, physiological. Its physical properties are known to every one--it is a thickish, nearly opaque fluid, of a peculiar odor, saltish taste, etc. As to its chemical properties, it is found by analysis to consist of 900 parts of water, 60 of animal muscilage, 10 of soda, 30 of phosphate of lime. Its physiological property is that of exciting the female genital organs in a peculiar manner. When the semen is examined by microscope, there can be distinguished a multitude of small animalculæ, which appear to have a rounded head and a long tail. These animalculæ move with a certain degree of rapidity. They appear to avoid the light and to delight in the shade. Leeuwenhoek, if not the discoverer of the seminal animalculse, was the first who brought the fact of their existence fully before the public. With respect to their size, he remarked that ten thousand of them might exist in a space not larger than a grain of sand. They have a definite figure, and are obviously different from the animalculse found in any other fluid.* * See Dr. Carpenter's "Animal Physiology," p. 558 (published by H. G. Bonn); Nichol's "Human Physiology," pp. 253-255 (published by Trubner & Co.)--Publishers' note. Leeuwenhoek believed them to be the beginnings of future animals--that they are of different sexes, upon which depends the future sex of the foetus. Be this as it may, it appears to be admitted on all hands that the animalculæ are present in the semen of the various species of male animals, and that they cannot be detected when either from age or disease the animals are rendered sterile. "Hence," says Bostock, "we can scarcely refuse our assent to the position that these animalculæ are in some way or other instrumental to the production of the foetus." The secretion of the semen commences at the age of puberty. Before this period the testicles secrete a viscid, transparent fluid, which has never been analyzed, but which is doubtless essentially different from semen. The revolution which the whole economy undergoes at this period, such as the tone of the voice, and development of hairs, the beard, the increase of the muscles and bones, etc., is intimately connected with the testicles and the secretion of this fluid.* "Eunuchs preserve the same form as in childhood; their voice is effeminate, they have no beard, their disposition is timid; and finally their physical and moral character very nearly resembles that of females. Nevertheless, many of them take delight in venereal intercourse, and give themselves up with ardor to a connection which must always prove unfruitful."** * Nichol's "Human Physiology," pp. 256-257. --Publishers' note ** Magendic's Physiology.--Author's note. The part performed by the female in the reproduction of the species is far more complicated than that performed by the male. It consists, in the first instance, in providing a substance which, in connection with the male secretion, is to constitute the foetus; in furnishing a suitable situation in which the foetus may be developed; in affording due nourishment for its growth; in bringing it forth, and afterward furnishing it with food especially adapted to the digestive organs of the young animal. Some parts of this process are not well understood, and such variety of hypotheses have been proposed to explain them that Drelincourt, who lived in the latter part of the seventeenth century, is said to have collected two hundred and sixty hypotheses of generation. It ought to be known that women have conceived when the semen was merely applied to the parts anterior to the hymen, as the internal surface of the external lips, the nymphæ, etc. This is proved by the fact that several cases of pregnancy have occurred when the hymen was entire. The fact need not surprise us, for, agreeable to the theory of absorption, we have to account for it only to suppose that some of the absorbent vessels are situated anterior to the hymen--a supposition by no means unreasonable. There are two peculiarities of the human species respecting conception which I will notice. First, unlike other animals they are liable, and for what has been proved to the contrary, equally liable--to conceive at all seasons of the year. Second, a woman rarely, if ever, conceives until after having several sexual connections; nor does one connection in fifty cause conception in the matrimonial state, where the husband and wife live together uninterruptedly. Public women rarely conceive, owing probably to a weakened state of the genital system, induced by too frequent and promiscuous intercourse. It is universally agreed, that some time after a fruitful connection, a vesicle (two in case of twins) of one or the other ovary becomes so enlarged that it bursts forth from the ovary and takes the name of ovum, which is taken up, or rather received, as it bursts forth, by the fimbriated extremity of the Fallopian tube, and is then conducted along the tube into the uterus, to the inner surface of which it attaches itself.* * Since Dr. Knowlton's work was written, the very important fact has been discovered that ova are periodically discharged from the ovaries in the human female and other animals, not in consequence of fruitful connection having taken place, as was formerly believed, but quite independently of intercourse with the male. Such a discharge of ova occurs in the lower animals at the time of heat or rut, and in women during menstruation. At each menstrual period, a Graafian vesicle becomes enlarged, bursts, and lets the ovum which it contains escape into the Fallopian tube, along which it passes to the uterus. "It has long been known," says Dr. Kirke, "that in the so-called oviparous animals, the separation of ova from the ovary may take place independently of impregnation by the male, or even of sexual union. And it is now established that a like maturation and discharge of ova, independently of coition, occurs in Mammalia, the periods at which the matured ova are separated from the ovaries and received into the Fallopian tubes being indicated in the lower Mammalia by the phenomena of _heat_ or _rut_; in the human female by the phenomena of _menstruation_. Sexual desire manifests itself in the human female to a greater degree at these periods, and in the female of mammiferous animals at no other time. If the union of the sexes takes place, the ovum may be fecundated, and if no union occur, it perishes. From what has been said it may therefore be concluded that the two states, heat and menstruation, are analogous, and that the essential accompaniment of both is the maturation and extrusion of ova."--"Handbook of Physiology," page 724.--G. R. Here it becomes developed into a full grown foetus, and is brought forth about forty-two weeks from the time of conception by a process termed parturition. But one grand question is, how the semen operates itself, or any part thereof reaches the ovary, and if so, in what way it is conveyed to them. It was long the opinion that the semen was ejected into the uterus in the act of coition, and that it afterward, by some unknown means, found its way into and along the Fallopian tubes to the ovary. But there are several facts which weigh heavily against this opinion, and some that entirely forbid it. In the first place, there are several well attested instances in which impregnation took place while the hymen remained entire, where the vagina terminated in the rectum, where it was so contracted by a cicatrix as not to admit the penis. In all these cases the semen could not have been lodged anywhere near the mouth of the uterus, much less ejected into it. Secondly, it has followed a connection where from some defect in the male organs, as the urethra terminating some inches behind the end of the penis, and it is clear that the semen could not have been injected into the uterus, nor even near its mouth. Third, the neck of the unimpregnated uterus is so narrow as merely to admit a probe, and is filled with a thick tenacious fluid, which seemingly could not be forced away by any force which the male organ possesses of ejecting the semen, even if the mouth of the male urethra were in opposition with that of the uterus. But fourth, the mouth of the uterus is by no means fixed. By various causes it is made to assume various situations, and probably the mouth of the urethra rarely comes in contact with it. Fifth. "The tenacity of the male semen is such as renders its passage through the small aperture in the neck of the uterus impossible, even by a power of force much superior to that which we may rationally suppose to reside in the male organs of generation." Sixth. "Harvey and DeGraaf dissected animals at almost every period after coition for the express purpose of discovering the semen, but were never able to detect the smallest vestige of it in the uterus in any one instance."* * Dewees' Essay on Superfoetation.--Author's note. Aware of the insurmountable objection to this view of the manner in which the semen reaches the ovary, it has been supposed by some physiologists that the semen is absorbed from the vagina into the great circulating system, where it is mixed, of course, with the blood, and goes the whole round of the circulation subject to the influence of those causes which produce great changes in the latter fluid. To this hypothesis it may be objected, that while there is no direct evidence in support of it, it is exceedingly unreasonable, inasmuch as we can scarcely believe that the semen can go the whole round of circulation, and then find its way to the ovary in such a pure unaltered state as the experiments of Spallanzani prove it must be in, that it may impregnate. A third set of theorists have maintained that an imperceptible something, which they have called _aura seminalis_, passes from the semen lodged in the vagina to the ovary, and excites those actions which are essential to the development of an ovum. Others, again, have told us that it is all done by sympathy. That neither the semen nor any volatile part of it finds its way to the ovary; but that the semen excites the parts with which it is in contact in a peculiar manner, and by the law of animal economy, termed sympathy, or consent of parts, a peculiar action commences in the ovary, by which an ovum is developed. To both these conjectures it may be objected that they have no other foundation but the supposed necessity of adopting them, to account for the effect of impregnation; and, further, they "make no provision for the formation of mules; for the peculiarities of, and likeness to, parents, and for the propagation of predisposition to disease, from parent to child; for the production of mulattoes," etc. A fifth, and to me far more satisfactory view of the subject than any other, is that advanced by our distinguished countryman, Dr. Dewees, of Philadelphia. It appears to harmonize with all known facts relating to the conception and something from analogy may also be drawn in its favor. It is this, that there is a set of absorbent vessels, leading directly from the inner surface of the _labia externa_ and the vagina, to the ovaries, the whole office of which vessels is to absorb the semen and convey it to the ovaries.* I do not know that these vessels have yet been fully discovered, but in a note on the sixteenth page of his "Essays on Various Subjects," the doctor says: "The existence of these vessels is now rendered almost certain, as Dr. Gartner, of Copenhagen, has discovered a duct leading from the ovary to the vagina." * This view is not held at the present day. The commonly received doctrine now is that the seminal fluid enters the uterus, whether during the intercourse or after it, and passes along the Fallopian tubes to the ovaries; and that fecundation takes place at some point of this course, most frequently in the tubes, but also at times in the ovary itself, or even, perhaps, in the uterus. It is essentially necessary for fecundation that the spermatozoa should come into actual contact with the ovum. "That the spermatozoa make their way toward the ovarium, and fecundate the ovum either before it entirely quits the ovisac or very shortly afterward," says Dr. Carpenter, "appears to be the general rule in regard to the Mammalia; and their power of movement must obviously be both vigorous and long continued to enable them to traverse so great an extent of mucous membrane, especially when it is remembered that they ascend in opposition to the direction of the ciliary movement of the epithelial cells and to the downward peristaltic action of the Fallopian tubes. * * * There can be no doubt that it is the contact of the spermatozoa with the ovum, and in the changes which occur as the immediate consequence of that contact, that the act of fecundation essentially consists." --"Principles of Human Physiology," 8th ed., p. 961,1876.--G.R. Another question of considerable moment relating to generation is from which parent are the first rudiments of the foetus derived. The earliest hypothesis with which we are acquainted, and which has received the support of some of the most eminent of the moderns, ascribes the original formation of the foetus to the combination of particles of matter derived from each of the parents. This hypothesis naturally presents itself to the mind as the obvious method of explaining the necessity for the cooperation of the two sexes, and the resemblance in external form, and even in mind and character, which the offspring often bears to the male parent. "The principal objections," says Bostock, "to his hypothesis, independent of the want of any direct proof of a female seminal fluid, are of two descriptions, those which depend upon the supposed impossibility of unorganized matter forming an organized being, and those which are derived from observations and experiments of Haller and Spallanzani, which they brought forward in support of their theory of pre-existent germs." In relation to these objections I remark, first those whose experience has been with hale females, I suspect, can have no doubt but that the female organism increases like that of the male, until an emission of fluid of some kind or other takes place. But whether this secretion may properly be called semen, whether any part of it unites with the male semen in forming the rudiments of the foetus, is another question. For my part I am inclined to the opinion that it does not.* I rather regard it as the result of exalted excitation, analogous to the increased secretion of other organs from increased stimulation; and if it may be for any object or use, as it probably is, it is that of affording nature a means of relieving herself; or, in other words, of quieting the venereal passion. If this passion, being once roused, could not by some means or other be calmed, it would command by far too great a portion of our thoughts, and with many constitutions the individuals, whether male or female, could not conduct themselves with due decorum. One fact which leads me to think that the female secretion in the act of coition is not essential to impregnation is, that many females have conceived, if their unbiased testimony may be relied on, when they experienced no pleasure. In these cases it is more than probable that there was no orgasm, nor any secretion or emission of fluid on the part of the female. * With regard to this secretion in the female, which has nothing of a seminal character, Dr. Carpenter observes: "Its admixture with the male semen has been supposed to have some connection with impregnation; but no proof whatever has been given that any such admixture is necessary."--"Human Physiology," p. 991.--G. R. As to the objection of the supposed impossibility of unorganized matter forming an organized being, I do not believe such a thing takes place, even if we admit that "the original formation of the foetus is a combination of particles of matter derived from each of the parents." What do, or rather what ought we to mean by organized matter? Not, surely, that it exhibits some obvious physical structure, unlike what is to be found in inorganic matter, but that it exhibits phenomena, and of course may be said to possess properties unlike any kind of inorganic matter. Matter unites with matter in three ways, mechanically, chemically and organically, and each mode of union gives rise to properties peculiar to itself. When matter unites organically, the substance or being so formed exhibits some phenomena essentially different from what inorganic bodies exhibit. It is on this account that we ascribe to organic bodies certain properties, which we call physiological properties, such as contractility, sensibility, life, etc. When, from any cause, these bodies have undergone such a change that they no longer exhibit the phenomena peculiar to them, they are said to have lost these properties, and to be dead. A substance need not possess all the physiological properties of an animal of the higher orders to entitle it to the name of an organized or living substance, nor need it possess the physical property of solidity. The blood, as well as many of the secretions, does several things, exhibits several phenomena, which no mechanical or mere chemical combinations of matter do exhibit. We must therefore ascribe to it certain physiological properties, and regard it as an organized, a living fluid, as was contended by the celebrated John Hunter. So with respect to the semen, it certainly possesses physiological properties, one in particular peculiar to itself, namely, the property of impregnating the female; and upon no sound principle can it be regarded in any other light than as an organized, and of course a living fluid. And if the female secretion or any part of it unite with the male secretion in the formation of the rudiments or the foetus in a different manner than any other substance would, then it certainly has the property of doing so, whether we give this property a name or not; and a regard to the soundest principles of physiology compels us to class this property with the physiological or vital, and of course to regard this secretion as an organized and living fluid So, then, unorganized matter does not form an organized being, admitting the hypothesis before us as correct. That organized being should give rise to other organized beings under favorable circumstances as to nourishment, warmth, etc., is no more wonderful than that fire should give rise to fire when air and fuel are present. To be sure, there are some minute steps in the processes which are not fully known to us; still, if they ever should be known, we should unquestionably see that there is a natural cause for every one of them; and that they are all consonant with certain laws of the animal economy. We should see no necessity of attempting to explain the process of generation by bringing to our aid, or rather to the darkening of the subject, any imaginary principle, as the _visus formaticus_ of Blumenbach. As to the "observations and experiments of Haller and Spallanzani," I think, with Dr. Bostock, that they weigh but little, if any, against the theory before us. I shall not be at the labor of bringing them forward and showing their futility as objections to this theory, for I am far from insisting on the correctness of it; that is, I do not insist that any part of the female secretion, during coition, unites with the male semen in the formation of the rudiments of the foetus. The second hypothesis or theory, I shall notice, as to the rudiments of the foetus, is that of Leeuwenhoek, who regarded the seminal animalculse of the male semen as the proper rudiments of the foetus, and thought that the office of the female is to afford them a suitable receptacle where they may be supported and nourished until they are able to exist by the exercise of their own functions. This is essentially the view of the subject which I intend to give more particularly presently. I know of no serious objections to this hypothesis, nothing but the "extreme improbability," as its opponents say, "that these animalculæ should be the rudiments of being so totally dissimilar to them." But I wish to know if there is more difference between a foetus and a seminal animalcule than there is between a foetus and a few material particles in some other form than that of such animalcule? The third hypothesis, or that of pre-existing germs, proceeded upon a precisely opposite view of the subject to that of Leeuwenhoek, namely, that the foetus is properly the production of the female; that it exists previous to the sexual congress, with all its organs, in some parts of the uterine system; and that it receives no proper addition from the male, but that the seminal fluid acts merely by exciting the powers of the foetus, or endowing it with vitality. It is not known who first proposed this hypothesis; but strange as it may appear, it has had the support of such names as Bonnet, Haller and Spallanzani, and met with a favorable reception in the middle of the last century. Agreeable to this hypothesis, our common mother, Eve, contained a number of homuncules (little men) one within another, like a nest of boxes, and all within her ovaries, equal to all the number of births that have ever been, or ever will be, not to reckon abortions. Were I to bring forward all the facts and arguments that have been advanced in support of this idea, it seems to me I should fail to convince sound minds of its correctness; as to arguments against it, they surely seem uncalled for. Having now presented several hypotheses of generation, some as to the manner in which the semen reaches or influences the ovary, and others as to the rudiments of the foetus, I shall now bring together those views which, upon the whole, appear to me the most satisfactory. I believe, with Dr. Dewees, that a set of absorbent vessels extend from the innermost surface of the _labia externa_, and from the vagina to the ovary, the whole office of which is to take up the semen or some part thereof, and convey it to the ovary. I believe, with Leeuwenhoek, that the seminal animalculæ are the proper rudiments of the foetus, and are perhaps of different sexes; that in cases of impregnation one of them is carried not only to, but into a vesicle of an ovary, which is in a condition to receive and be duly affected by it.* It is here surrounded by the albuminous fluid which the vesicle contains. This fluid being somewhat changed in its qualities by its new-comer, stimulates the minute vessels of the parts which surround it, and thus causes more of this fluid to be formed; and while it affords the animalcule material for its development, it puts the delicate membrane of the ovary which retains it in its place upon the stretch, and finally bursts forth surrounded probably by an exceedingly delicate membrane of its own. This membrane, with the albuminous fluid it contains and the animalcule in the center of it, constitutes the ovum or egg. It is received by the fimbriated extremity of the Fallopian tube, which by this time has grasped the ovary, and is by this tube slowly conveyed into the uterus, to the inner surface of which it attaches itself, through the medium of the membrane, which is formed by the uterus itself in the interim between impregnation and the arriving of the ovum in the way I have just mentioned. * The opinion that the spermatozoa of seminal filaments are real animalculæ is now abandoned, but it is held by Dr. Carpenter and other authorities that they actually, as here stated, penetrate into the interior of the ovum. "The nature of impregnation," says Dr. Hermann, "is as yet unknown. In all probability it is, above all, essential, in order that it should occur, that one or more spermatozoa should penetrate the ovum. At any rate, spermatozoa have been found within the fecundated eggs of the most diverse species of animals."--Elements of "Human Physiology," translated from the 5th ed., by Dr. Gamgee, p. 534, 1875.--G. R. The idea that a seminal animalcule enters an ovum while it remains in the ovary, was never before advanced to my knowledge; hence I consider it incumbent upon me to advance some reason for the opinion. First, it is admitted on all hands that the seminal animalculæ are essential to impregnation, since "they cannot be detected when either from age or disease the animal is rendered sterile." Second, the ovum is impregnated while it remains in the ovary. True, those who never met with Dr. Dewees' theory, and who, consequently, have adopted the idea that the semen is ejected into the uterus, as the least improbable of any with which they were acquainted, have found it very difficult to dispose of the fact that the ovum is impregnated in the ovary, and have consequently presumed this is not generally the case. They admit it is certainly so sometimes, and that it is difficult to reject the conclusion that it is always so. Dr. Bostock--who, doubtless, had not met with Dewees' theory at the time he wrote, and who admits it impossible to conceive how the semen can find its way along the Fallopian tubes, how it can find its way toward the ovary, farther, at most, than into the uterus, and, consequently, cannot see how the ovum can be impregnated into the ovary--says, "Perhaps the most rational supposition may be that the ovum is transmitted to the uterus in the unimpregnated state; but there are certain facts which seem almost incompatible with this idea, especially the cases which not infrequently occur of perfect foetuses having been found in the tubes, or where they escaped them into the cavity of the abdomen. Hence it is demonstrated the ovum is occasionally impregnated in the tubes (why did he not say ovaria?), and we can scarcely resist the conclusion that it must always be the case."..."Haller discusses this hypothesis (Bostock's 'most natural supposition, perhaps') and decides against it."..."The experiments of Cruikshank, which were very numerous, and appear to have been made with the requisite degree of skill and correctness, led to the conclusion that the rudiment of the young animal is perfected in the ovarium."... "A case is detailed by Dr. Granville, of a foetus which appears to have been lodged in the body of the ovarium itself, and is considered by its author as a proof that conception always takes place in this organ." The above quotations are from the third volume of Bostock's Physiology. Now, as the seminal animalculæ are essential to impregnation, and as the ovum is impregnated in the ovarium, what more probable conjecture can we form than that an animalcule, as the real proper rudiment of the foetus, enters the ovum, where, being surrounded with albuminous fluid with which it is nourished, it gradually becomes developed? It may be noticed that Leeuwenhoek estimates that ten thousand animalculæ of the human semen may exist in a space not larger than a grain of sand. There can, therefore, be no difficulty in admitting that they may find their way along exceedingly minute vessels from the vagina, not only to, but into the ovum while situated in the ovarium. I think no one can be disposed to maintain that the animalculæ merely reaches the surface of the ovum and thus impregnates it. But possibly some may contend that its sole office is to stimulate the ovum, and in this way set going that train of actions which are essential to impregnation. But there is no evidence in favor of this last idea, and certainly it does not so well harmonize with the fact that the offspring generally partakes more or less of the character of its male parent. As Dr. Dewees says of the doctrine of sympathy, "It makes no provision for the formation of mules; for the peculiarities of and likeness of parents; and for the propagation of predisposition to disease from parent to child; for the production of mulattoes," etc. Considering it important to do away with the popular and mischievous error that the semen must enter the uterus to effect impregnation, I shall, in addition to what has been already advanced, here notice the experiments of Dr. Haighton. He divided the Fallopian tubes in numerous instances, and that after the operation a foetus is never produced, but that _corpora lutea_ were formed. The obvious conclusions from these facts are that the semen does not traverse the Fallopian tubes to reach the ovaria; yet, that the ovum becomes impregnated while in the ovarium and, consequently, that the semen reaches the ovum in some way, except by the uterus and Fallopian tubes. I may remark, however, that a _corpus luteum_ is not positive proof that impregnation at some time or other has taken place; yet they are so rarely found in virgins that they were regarded as such proofs until the time of Blumenbach, a writer of the present century.* * A _corpus luteum_ is a little yellowish body, formed in the ovary by changes that take place in the Graafian vesicle after it has burst and discharged its contents. _Corpora lutea_ were formerly considered a sure sign of impregnation, as they were thought to be developed only or chiefly in cases of pregnancy, but it is now known that they occur in all cases where a vesicle has been ruptured and an ovum discharged; though they attain a larger, size and are longer visible in the ovary when pregnancy takes place than when it does not.--G. R. "Harvey and DeGraaf dissected animals at most every period after coition for the express purpose of discovering the semen, but were never able to detect the smallest vestige of it in the uterus in any one instance."--Dewells Essay on Superfoetation. The fact of superfoetation furnishes a very strong argument against the idea that the semen enters the uterus in impregnation. A woman being impregnated while she is already impregnated constitutes superfoetation. It is established beyond a doubt that such instances have occurred, yet those who have supposed that it is necessary for the semen to pass through the mouth of the uterus to produce conception have urged that superfoetation could not take place, because, say they--and they say correctly--"so soon as impregnation shall have taken place, the _os uteri_ closes and becomes impervious to the semen ejected in subsequent acts of coition." Dr. Dewees related two cases, evidently cases of superfoetation, that occurred to his own personal knowledge. The first shows that, agreeable to the old theory, the semen must have met with other difficulties than a closed month of the uterus,--it must have passed through several membranes, as well as the waters surrounding the foetus, to have reached even the uterine extremity of a Fallopian tube. The second case I will give in his own words: "A white woman, servant to Mr. H., of Abington township, Montgomery county, was delivered about five and twenty years since of twins, one of which was perfectly white, the other perfectly black. When I resided in that neighborhood I was in the habit of seeing them almost daily and also had frequent conversations with Mrs. H. respecting them. She was present at their birth, so that no possible deception could have been practiced respecting them. The white girl is delicate, fair-skinned, light-haired and blue eyed, and is said very much to resemble the mother. The other has all the characteristic marks of the African; short of stature, flat, broad-nosed, thick-lipped, woolly-headed, flat-footed, and projecting heels; she is said to resemble a negro they had on the farm, but with whom the woman would never acknowledge an intimacy; but of this there was no doubt, as both he and the white man, with whom her connection was detected, ran from the neighborhood as soon as it was known the girl was with child." I am aware that some have thought that they had actually discovered semen in the uterus, while Ruysch, an anatomist of considerable eminence, who flourished at the close of the seventeenth century, asserted in the most unequivocal manner that he found the semen in its gross white state in one of the Fallopian tubes of a woman, who died very soon after, or during the act of coition; but says Dewees, "the semen, after it has escaped from the penis, quickly loses its albuminous appearance and becomes as thin and transparent as water. And we are certain that Ruysch was mistaken. Some alteration in the natural secretion of the parts was mistaken for semen. This was nowise difficult for him to do, as he had a particular theory to support, and more especially as this supposed discovery made so much for it. It is not merely speculative when we say that some change in the natural secretion of the parts may be mistaken for semen, for we have the testimony of Morgani on our side. He tells us he has seen similar appearances in several instances in virgins and others, who have been subject during their lives to leucorrhæ, and that it has been mistaken by some for male semen." On the whole I would say, that in some instances, where the mouth of the uterus is uncommonly relaxed, the semen may, as it were, accidentally have found its way into it; but that is not generally the case, nor is it essential to impregnation; and further, that whatever semen may at any time be lodged in the uterus, has nothing to do with conception. It is not consistent with analogy to suppose that the uterus has vessels for absorbing the semen and conveying it to the ovaria, considering the other important functions which we know it performs. The circumstances under which a female is most likely to conceive are, first, when she is in health; second, between the ages of twenty-six and thirty; third, after she has for a season been deprived of those intercourses she had previously enjoyed; fourth, soon after menstruating. Respect-ing this latter circumstance, Dr. Dewees remarks, "Perhaps it is not erring greatly to say, that the woman is liable to conceive at any part of the menstrual interval. It is generally supposed, however, that the most favorable instant is immediately after the catamenia have ceased." Perhaps this is so as a general rule, but it is certainly liable to exceptions,* and he relates the following case which occurred to his own notice: * This view, which concerns a question of the utmost practical importance, is held at the present day by the great physiologists. It is believed that although conception may occur at other times, it is much more likely to happen from intercourse a few days before or after the menstrual periods; that is to say, during the time when ova are in process of being ripened and detached from the ovaries, and before they perish and are conveyed out of the body. "There is good reason to believe," says Dr. Carpenter, "that in the human female the sexual feeling becomes stronger at the period of menstruation; and it is quite certain that there is a greater aptitude for conception immediately before and after that epoch, than there is at any immediate period. This question has been made the subject of special inquiry by M. Raciborski, who affirms that the exceptions to the rule--that conception occurs immediately before or after or during menstruation--are not more than six or seven per cent. Indeed, in his latest work on the subject, he gives the details of fifteen cases, in which the date of conception could be accurately fixed, and the time of the last appearance of the catamenia was also known, and in all but one of them the correspondence between the periods was very close."--"Human Physiology," p. 959. So, too, Dr. Kirkes remarks, that "although conception is not confined to the periods of menstruation, yet it is more likely to occur within a few days after cessation of the menstrual flux than at other times."--"Handbook of Physiology," p. 725. "The husband of a lady who was obliged to absent himself many months in consequence of the embarrassment of his affairs, returned one night clandestinely, his visit being only known to his wife, his mother, and myself. The consequence of this visit was the impregnation of his wife. The lady was at that time within a week of her menstrual period; but as this did not fail to take place, she was led to hope that she had not suffered by the visit of her husband. But her catamenia not appearing at the next period, gave rise to a fear that she had not escaped! and the birth of a child nine months and thirteen days from the night of the clandestine visit proved her apprehensions too well grounded." I think this case is an exception to a general rule; and, furthermore, favors an idea which reason and a limited observation, rather than positive knowledge, has led me to advance, the above, namely, that a woman is more likely to conceive, other things being the same, after being deprived for a season of those intercourses she had previously enjoyed. Had this lady's husband remained constantly at home, she would probably either not have conceived at all, or have done so a fortnight sooner than she did. This case is also remarkable for two other facts: one, "that a woman in perfect health, and pregnant with a healthy child, may exceed the period of nine months by several days; the other, that a check is not always immediately given to the catamenial flow by an ovum being impregnated." Probably it is not so generally so as many suppose. The term of utero-gestation, or the length of time from conception to the commencement of labor, is not precisely determined by physiologists. "It seems, however," says Dr. Dewees, "from the best calculations that can be made, that nine calendar months, or forty weeks, approaches the truth so nearly that we can scarcely need or desire more accuracy, could it be obtained." Unquestionably, however, some cases exceed this period by many days, or even weeks, and it has been a question much agitated, how far this period is ever exceeded. It is a question of some moment in a legal point of view. Cases are reported where the usual period was exceeded by five or six months; cases, too, where the circumstances attending them and the respectability of their reporters are such as to command our belief. Dr. Dewees has paid much attention to this subject, and he declares himself entirely convinced "that the commonly fixed period may be extended from thirteen days to six weeks, under the influence of certain causes or peculiarities of constitution."* * See tables in Dr. Bull's "Hints to Mothers," pp. 130-141. --Publishers' note. These occasional departures from the general rule will, perhaps, be the more readily admitted when we consider that they are not confined to the human species. From the experiments of Tessier, it appears that the term of utero-gestation varies greatly with the cow, sheep, horse, swine and other animals to which his attention was directed. Properly connected with the subject of generation are the signs of pregnancy. Dr. Dewees remarks that "our experience furnishes no certain mark by which the moment conception takes place is to be distinguished. All appeals by the women to particular sensations experienced at the instant should be very guardedly received, for we are certain they cannot be relied upon; for enjoyment and indifference are alike fallacious. Nor are certain nervous tremblings, nausea, palpitation of the heart, the sensation of something flowing from them during coition, etc, more to be relied upon." Burns, however, says, "Some women feel, immediately after conception, a peculiar sensation, which apprises them of their situation, but such instances are not frequent, and generally the first circumstances which lead a woman to suppose herself pregnant are the suppression of the menses;" a fickle appetite, some sickness, perhaps vomiting, especially in the morning; returning qualms, or languor in the afternoon; she is liable to heartburn, and to disturbed sleep. The breasts at first often become smaller and sometimes tender; but about the third month they enlarge, and occasionally become painful. The nipple is surrounded with an aureole or circle of a brown color, or at least of a color sensibly deeper or darker than before. She loses her looks, becomes paler, and the under part of the lower eyelid is often somewhat of a leaden hue. The features become sharper, and sometimes the whole body begins to emaciate, while the pulse quickens. In many instances particular sympathies take place, causing salivation, toothache, jaundice, etc. In other cases very little disturbance is produced, and the woman is not certain of her condition until the time of quickening, which is generally about four months from conception. It is possible for a woman to mistake the effects of wind for the motion of the child, especially if they have never borne children, and be anxious for a family; but the sensation produced by wind in the bowels is not confined to one spot, but is often felt at a part of the abdomen where the motion of a child could not possibly be felt. Quite as frequently, perhaps, do fleshy women think themselves dropsical, and mistake motions of the child for movements of water within the abdominal cavity. The motion of the child is not to be confounded with the sensation sometimes produced by the uterus rising out of the pelvis, which produces the feeling of fluttering. At the end of the fourth month, the uterus becomes so large that it is obliged to rise out of the pelvis, and if this elevation takes place suddenly, the sensation accompanying it is pretty strong, and the woman at the time feels sick or faint, and in irritable habits; even a hysterical fit may accompany it After this the morning sickness and other sympathetic effects of pregnancy generally abate, and the health improves. Very soon after impregnation, if blood be drawn and suffered to stand a short time undisturbed, it will become sizy, of a yellowish or bluish color, and somewhat of an oily appearance. But we cannot from such appearances of the blood alone pronounce a woman pregnant, for a suppression of the menses, accompanied with a febrile state, may give the blood a like appearance as pregnancy, so also may some local disease. Of the above-mentioned symptoms, perhaps there is no _one_ on which we can place more reliance than the increased color of the circle around the nipple.* * See "Advice to a Wife," P. H. Chavasse, pp. 115-124, where many details are given.--Publishers' note. Six or eight weeks after conception, the most sure way of ascertaining pregnancy is to examine the mouth and neck of the uterus, by way of the vagina. The uterus will be found lower down than formerly, its mouth is not directed so much forward as before impregnation, and is more completely closed, and the neck is felt to be thicker, or increased in circumference. When raised on the finger it is found to be heavier or more resisting. Whoever makes this examination must have examined the same uterus in an unimpregnated state, and retained a tolerably correct idea of its feeling at that time, or he will be liable to uncertainty, because the uterus of one woman is naturally different in magnitude from another, and the uterus is frequently lower down than natural from other causes than pregnancy.* * No one but a doctor, or one trained in physiology could, of course, make any such examination with safety and utility.--Publishers' note. It has not been fully ascertained how long it is after a fruitful connection before an effect is produced upon the ovaria, that is before any alteration could be discovered, were the female to be dissected. But Brighton's experiments have established the fact, that with rabbits, whose term of utero-gestation is but thirty days, no effect is propagated to the ovaria until nearly fifty hours after coition; we should judge, therefore, that with the human species it must be several days, and it is generally estimated by physiologists that the ovum does not reach the uterus until the expiration of twenty days from the time of connection.* * "The time occupied in the passage of the ovum from the ovary to the uterus," says Dr. Kirkes, "occupies probably eight or ten days in the human female."--"Handbook of Physiology," p. 741.--G. R. It is probable that in all cases in which any matter is absorbed from any part of the animal system, some little time is required for such matter, after its application, to stimulate and arouse the absorbent vessels to action; hence it is probable that after the semen is lodged in the vagina, it is many minutes, possibly some hours, before any part of it is absorbed. CHAPTER III. OF PROMOTING AND CHECKING CONCEPTION Sterility depends either on imperfect organization, or imperfect action of the organs of generation. In the former cases, which are rare, the menses do not generally appear, the breasts are not developed, and the sexual desire is inconsiderable. There is no remedy in these cases. The action may be imperfect in several respects. The menses may be obstructed or sparing, or they may be too profuse or frequent. It is extremely rare for a woman to conceive who does not menstruate regularly. Hence where this is the case the first step is to regulate this periodical discharge. For this purpose the advice of a physician will generally be required, for these irregularities depend upon such various causes and require such a variety of treatment that it would be inconsistent with the plan of this work to give instructions for remedying them. A state of exhaustion or weakness of the uterine system, occasioned by too frequent intercourse, is a frequent cause of sterility. The sterility of prostitutes is attributed to this cause, but I doubt it being the only one. With females who are apparently healthy, the most frequent cause is a torpor, rather than weakness of the genital organs. For the removal of sterility from this cause, I shall give some instructions, and this I do the more readily because the requisite means are such as will regulate the menses in many cases, where they do not appear so early in life, so freely or so frequently as they ought. In the first place, it will generally be necessary to do something toward invigorating the system by exercise in the open air, by nourishing food of easy digestion, by sufficient dress, particularly flannel, and especially by strict temperance in all things. With this view, also, some scales which fall from the blacksmith's anvil, or some steel filings may be put into old cider or wine (cider the best), and after standing a week or so, as much may be taken two or three times a day as can be borne without disturbing the stomach. All the while the bowels are to be kept rather open by taking from one to three of _Pill rufi_ every night on going to bed. These pills consist of four parts of aloes, two parts of myrrh, and one of saffron, by weight. These measures having been regularly pursued until the system be brought into a vigorous state, medicines which are more particularly calculated to arouse the genital organs from a state of torpor may be commenced, and continued for months if necessary. The cheapest, most simple (and I am not prepared to say it is not the most effectual in many cases) is cayenne. All the virtues of this article are not generally known even to physicians. I know it does not have the effect upon the coats of the stomach that many have conjectured. It may be taken in the quantity of from one to two rising teaspoonsful, or even more, everyday up on food or on any liquid vehicle. Another medicine of much efficacy is Dewees' Volatile Tincture of Guaiac. It is generally kept by apothecaries, and is prepared as follows: Take of Gum Guaicum, in powder, eight ounces; carbonate of Potash, or of Soda, or (what will answer) Saleratus, three drachms; Allspice, in powder, two ounces; any common spirits of good strength, two pounds, or what is about the same two pints and a gill. Put all into a bottle, which may be shaken now and then, and use of it may be commenced in a few days. To every gill of this, at least a large teaspoon-ful of Spirits of Ammonia is to be added. A teaspoonful is to be taken for a dose, three times a day, in a glass of milk, cider or wine. It is usually given before eating; but if it should chance to offend the stomach when taken before breakfast, it may in this case be taken an hour after. Dr. Dewees found this tincture, taken perhaps for months, the most effectual remedy for painful menstruation, which is an obstinate complaint. If there be frequent strong pulse, heat, thirst, florid countenance, etc., it is not to be taken until these symptoms be removed by low diet, a few doses of salts, and bleeding, if required. A third medicine for arousing the genital organs, is tincture of Spanish Flies. But I doubt its being equal, in sterility, to the above mentioned medicines, though it may exceed them in some cases, and may be tried if these fail. A drachm of them may be put to two gills of spirits. Dose, 25 drops, in water, three times a day, increasing each one by two or three drops, until some degree of stranguary occurs, then omit until this pass off, as it will in a day or two. Should the stranguary be severe, drink freely of milk and water, slippery elm, or flaxseed tea. In many cases of sterility, where the general health is considerably in fault, and especially when the digestive organs are torpid, I should have much faith in a Thomsonian course. It is calculated to arouse the capillary vessels throughout the whole system, and thus to open the secretions, to remove obstructions, and free the blood of those effete and phlegmy materials which nature requires to be thrown off. The views of the Thomsonian as to heat and cold appear to me unphilosophical. But this has nothing to do with the efficiency of their measures. In relation to sterility, I would here bring to mind, what has before been stated, that a woman is most likely to conceive immediately after a menstrual turn. And now, also, let me suggest the idea that Nature's delicate beginnings may be frustrated by the same means that put her a going. This idea is certainly important when the woman is known to have miscarried a number of times. Sterility is sometimes to be attributed to the male, though he apparently be in perfect health. It would be an interesting fact to ascertain if there be no seminal animalculæ in these cases; and whether medicines of any kind are available. It has been ascertained that a male and female may be sterile in relation to each other, though neither of them be so with others. The foregoing measures for sterility are also suitable in cases of impotency. This term, I believe, is generally con-lined to, and defined as a want of desire or ability, or both on the part of the male; but I see no good reason why it should not comprehend the case in which there is neither desire nor pleasure with the female. Such females, it is true, may be fruitful; but so, on the other hand, the semen may not have lost its fecundating property. Impotency, at a young or middle age, and in some situations in life especially, is certainly a serious misfortune, to say the least of it. The whole evil by no means consists, in every case, in the loss of a source of pleasure. All young people ought to be apprised of the causes of it--causes which, in many instances, greatly lessen one's ability of giving and receiving that pleasure which is the root of domestic happiness. I shall allude to one cause, that of premature, and especially solitary gratification, in another place. Intemperance in the use of spirits is another powerful cause. Even a moderate use of spirits, and also of tobacco, in any form, have some effect It is a law of animal economy, that no one part of the system can be stimulated or excited, without an expense of vitality, as it is termed. The part which is stimulated draws the energy from other parts. And hence it is, that close and deep study, as well as all the mental passions when excessive, impair the venereal appetite. All excesses, all diseases and modes of life which impair the general health, impair this appetite, but some things more directly and powerfully than others. As to the remedies for impotency, they are much the same as for sterility. It is of the first importance that the mind be relieved from all care and anxiety. The general health is to be improved by temperance, proper exercise in the open air, cheerful company, change of scenery, or some occupation to divert the mind without requiring much exercise of it; nourishing food of easy digestion; flannel worn next to the skin. The cold bath may be tried, and if it be followed by agreeable feelings, it will do good. The bowels may be gently stimulated by the pills before mentioned; and the preparation of iron also, already mentioned, should be taken. To stimulate the genital organs more directly, cayenne, Dewees' tincture of guaiac, or tincture of flies, may be taken. I have given directions for making and taking the tincture of flies, chiefly because it is esteemed one of the best remedies for impotency caused by or connected with nocturnal emissions, to which I have before alluded. It is in cases where little or no pleasure, nor erection, attend these emissions--cases brought on by debauchery, or in elderly persons--that I would recommend tincture of flies, and the other measures above mentioned. In some bad cases, enormous doses of this tincture are required, say two or three hundred drops. Yet the best rule for taking it is that already given, namely, begin with small doses, and gradually increase until some stranguary be felt, or some benefit be received. In this affection, as well as in all cases of impaired virility, the means I have mentioned are to be pursued for a long time, unless relief be obtained. These have cured after having been taken for a year or more without the result. In all cases of impotency not evidently depending upon disease of some part besides the genital organs, I should have much confidence in blisters applied to the lower part of the spine. Occasional nocturnal emissions, accompanied with erection and pleasure, are by no means to be considered a disease, though they have given many a one such uneasiness. Even if they be frequent, and the system considerably debilitated, if not caused by debauch, and the person be young, marriage is the proper measure. There have been several means proposed and practiced for checking conception. I shall briefly notice them, though a knowledge of the best is what most concerns us. That of withdrawal immediately before emission is certainly effectual, if practiced with sufficient care. But if (as I believe) Dr. Dewees' theory of conception be correct, and as Spallanzani's experiments show that only a trifle of semen, even largely diluted with water, may impregnate by being injected into the vagina, it is clear that nothing short of entire withdrawal is to be depended upon. But the old notion that the semen must enter the uterus to cause conception, has led many to believe that a partial withdrawal is sufficient, and it is on this account that this error has proved mischievous, as all important errors generally do. It is said by those who speak from experience that the practice of withdrawal has an effect upon the health similar to intemperance in eating. As the subsequent exhaustion is probably mainly owing to the shock the nervous system sustains in the act of coition, this opinion may be correct. It is further said that this practice serves to keep alive those fine feelings with which married people first come together. Still, I leave it for every one to decide for himself whether this check be so far from satisfactory as not to render some other very desirable. As to the baudruche, which consists in a covering used by the male, made of very delicate skin, it is by no means calculated to come into general use. It has been used to secure immunity from syphilitic affections. Another check which the old idea of conception has led some to recommend with considerable confidence, consists in introducing into the vagina, previous to connection, a very delicate piece of sponge, moistened with water, to be immediately afterward withdrawn by means of a very narrow ribbon attached to it, But, as our views would lead us to expect, this check has not proved a sure preventive. As there are many little ridges or folds in the vagina, we cannot suppose the withdrawal of the sponge would dislodge all the semen in every instance. If, however, it were well moistened with some liquid which acted chemically upon the semen, it would be pretty likely to destroy the fecundating property of what might remain. But if this check were ever so sure, it would, in my opinion, fall short of being equal, all things considered, to the one I am about to mention--one which not only dislodges the semen pretty effectually, but at the same time destroys the fecundating property of the whole of it. It consists in syringing the vagina immediately after connection with a solution of sulphate of zinc, of alum, pearl-ash, or any salt that acts chemically on the semen, and at the same time produces no unfavorable effect on the female. In all probability a vegetable astringent would answer--as an infusion of white oak bark, of red rose leaves, of nut-galls, and the like. A lump of either of the above-mentioned salts, of the size of a chestnut, may be dissolved in a pint of water, making the solution weaker or stronger, as it may be borne without any irritation of the parts to which it is applied. These solutions will not lose their virtues by age. A female syringe, which will be required in the use of the check, may be had at the shop of an apothecary for a shilling or less. If preferred, the semen may be dislodged as far as it can be, by syringing with simple water, after which some of the solution is to be injected, to destroy the fecundating property of what may remain lodged between the ridges of the vagina, etc. I know the use of this check requires the woman to leave her bed for a few moments, but this is its only objection; and it would be unreasonable to suppose that any check can ever be devised entirely free of objections. In its favor it may be said, it costs nearly nothing; it is sure; it requires no sacrifice of pleasure; it is in the hand of the female; it is to be used after, instead of before the connection, a weighty consideration in its favor, as a moment's reflection will convince any one; and last, but not least, it is conducive to cleanliness, and preserves the parts from relaxation and disease. The vagina may be very much contracted by a persevering use of astringent injections, and they are constantly used for this purpose in cases of _procidentia uteri_, or a sinking down of the womb; subject as women are to _fluor albus_, and other diseases of the genital organs, it is rather a matter of wonder that they are not more so, considering the prevailing practices. Those who have used this check (and some have used it, to my certain knowledge with entire success for nine or ten years, and under such circumstances as leave no room to doubt its efficacy) affirm that they would be at the trouble of using injections merely for the purposes of health and cleanliness. By actual experiment it has been rendered highly probable that pregnancy may, in many instances, be prevented by injections of simple water, applied with a tolerable degree of care. But simple water has failed, and its occasional failure is what we should expect, considering the anatomy of the parts, and the results of Spallanzani's experiments heretofore alluded to. This much did I say respecting this check in the first edition of this work. That is what I call the chemical check. The idea of destroying the fecundating property of the semen was original, if it did not originate with me. My attention was drawn to the subject by the perusal of "Moral Physiology." Such was my confidence in the chemical idea that I sat down and wrote this work in July, 1831. But the reflection that I did not know that this check would never fail, and that if it should, I might do someone an injury in recommending it, caused the manuscript to lie on hand until the following December. Some time in November I fell in with an old acquaintance, who agreeably surprised me by stating that to his personal knowledge this last check had been used as above stated. I have since conversed with a gentleman with whom I was acquainted, who stated that, being in Baltimore some few years ago, he was there informed of this check by those who have no doubt of its efficacy. From what has as yet fell under my observation, I am not warranted in drawing any conclusion. I can only say that I have never known it to fail. Such are my views on the whole subject, that it would require many instances of its reputed failure to satisfy me that such failures were not owing to an insufficient use of it. I even believe that quite cold water alone, if thoroughly used, would be sufficient. In Spallanzani's experiments warm water was unquestionably used. As the seminal animalcule are essential to impregnation, all we have to do is to change the condition of, or, if you will, to kill them; and as they are so exceedingly small and delicate, this is doubtless easily done, and hence cold water may be sufficient. What has now been advanced in this work will enable the reader to judge for himself or herself of the efficacy of the chemical or syringe check, and time will probably determine whether I am correct in this matter. I do know that those married females who have much desire to escape will not stand for the little trouble of using this check, especially when they consider that on the score of cleanliness and health alone it is worth the trouble. A great part of the time no check is necessary, and women of experience and observation, with the information conveyed by this work, will be able to judge pretty correctly when it is and when it is not. They may rest assured that none of the salts mentioned will have any deleterious effect. The sulphate of zinc is commonly known by the name of white vitriol. This, as well as alum, have been extensively used for leucorrhæ. Acetate of lead would doubtless be effectual--indeed, it has proven to be so; but I do not recommend it, because I conceive it possible that a long continued use of it might impair the instinct. I hope that no failures will be charged of efficacy of this check which ought to be attributed to negligence or insufficient use of it. I will therefore recommend at least two applications of the syringe, the sooner the surer, yet it is my opinion that five minutes' delay would not prove mischievous--perhaps not ten. CHAPTER IV. REMARKS ON THE REPRODUCTIVE INSTINCT I scarcely need observe that by this instinct is meant the desire for sexual intercourse. Blumenbach speaks of this instinct as "superior to all others in universality and violence." Perhaps hunger is an exception. But surely no instinct commands a greater proportion of our thoughts or has a greater influence upon happiness for better or for worse. "Controlled by reason and chastened by good feelings, it gives to social intercourse much of its charm and zest, but directed by selfishness or governed by force, it is prolific of misery and degradation. In itself it appears to be the most social and least selfish of all instincts. It fits us to give even while we receive pleasure, and among cultivated beings the former power is even more highly valued than the latter. Not one of our instincts perhaps affords larger scope for the exercise of disinterestedness, or fitter play for the best moral feelings of our race. Not one gives birth to relations more gentle, more humanizing and endearing; not one lies more immediately at the root of the kindliest charities and most generous impulses that honor and bless human nature. It is a much more noble, because less purely selfish, instinct than hunger or thirst. It is an instinct that entwines itself around the warmest feelings and best affections of the heart"--_Moral Physiology_. But too frequently its strength, together with a want of moral culture, is such that it is not "controlled by reason;" and consequently, from time immemorial, it has been gratified, either in a mischievous manner, or to such an intemperate degree, or under such improper circumstances, as to give rise to an incalculable amount of human misery. For this reason it has, by some, been regarded as a low, degrading and "carnal" passion, with which family life must be ever at war. But in the instinct itself the philosopher sees nothing deserving of degrading epithets. He sees not that nature should war against herself. He believes that in savage life it _is_, and in wisely organized society of duly enlightened and civilized beings it should be the source of ten-fold more happiness than misery. A part of the evil consequences to which this instinct is daily giving rise under the present state of things, it belongs more particularly to the moralist to point out; whilst of others it falls within the province of the physician to treat. But let me first remark that physicians have hitherto fallen far short of giving those instructions concerning this instinct which its importance demands. In books, pamphlets, journals, etc., they have laid much before the public respecting eating, drinking, bathing, lacing, air, exercise, etc., but have passed by the still more important subject now before us, giving only here and there spine faint allusion to it This, it is true, the customs, not to say pruderies, of the age have compelled them to do, in publications designed for the public eye, yet, in some small work, indicated by its title to be for private perusal, they might, with the utmost propriety, have embodied much highly useful instruction in relation to this instinct. This instinct is liable to be gratified at improper times, to an intemperate degree, and in a mischievous manner. True philosophy dictates that this and all other appetites be so gratified as will most conduce to human happiness--not merely the happiness attending the gratification of one of the senses, but all the senses--not merely sensual happiness, but intellectual--not merely the happiness of the individual, but of the human family. First.--Of the times at which this instinct ought not to be gratified. With females it ought not to be gratified until they are seventeen or eighteen years of age, and with males not until they are a year or two older. The reason is, if they refrain until these ages, the passion will hold out the longer, and they will be able to derive much more pleasure from it in after life, than if earlier gratified, especially to any great extent A due regard to health also enjoins with most persons some restraint on this instinct--indeed, at all times, but especially for a few years after the above-mentioned ages. It ought not to be rashly gratified at first. Begin temperately, and as the system becomes more mature, and habituated to the effects naturally produced by the gratification of this instinct, it will bear more without injury. Many young married people, ignorant of the consequences, have debilitated the whole system--the genital system in particular; have impaired their mental energies; have induced consumptive and other diseases; have rendered themselves irritable, unsocial, melancholy and finally much impaired, perhaps destroyed their affection for each other by an undue gratification of the reproductive instinct. In almost all diseases, if gratified at all, it should be very temperately. It ought not to be gratified during menstruation, as it might prove productive to the man of symptoms similar to those of syphilis, but more probably to the woman of a weakening disease called _fluor albus_. In case of pregnancy a temperate gratification for the first two or three months may be of no injury to the woman or the coming offspring. But it ought to be known that the growth of the foetus in utero may be impaired, and the seeds of future bodily infirmity and mental imbecility of the offspring may be sown by much indulgence during utero-gestation or pregnancy, especially when the woman experiences much pleasure in such indulgences. Having already glanced at some of the bad effects of an undue gratification of this instinct, I have but little more to offer under the head of Intemperate Degree. It will be borne in mind that intemperance in this thing is not to be decided by numbers, but that it depends on circumstances; and what would be temperance in one, may be intemperance in another. And with respect to an individual, too, what he might enjoy with impunity, were he a laboring man, or a man whose business requires but little mental exercise, would, were he a student, unfit him for the successful prosecution of his studies. Intemperance in the gratification of this instinct has a tendency to lead to intemperance in the use of ardent spirits. The languor, depression of spirits, in some instances faintness and want of appetite, induced by intemperate gratification, call loudly for some stimulus, and give a relish to spirits. Thus the individual is led to drink. This inflames the blood, the passions, and leads to further indulgence. This again calls for more spirits; and thus two vicious habits are commenced, which mutually increase each other. Strange as it may appear to those unacquainted with the animal economy, an intemperate indulgence sometimes gives rise to the same disease--so far as the name makes it so--that is frequently cured by a temperate indulgence; viz, nocturnal emissions. Every young married woman ought to know that the male system is exhausted in a far greater degree than the female by gratification. It seems, indeed, to have but little effect, comparatively, upon some females. But with respect to the male, it has been estimated by Tissot that the loss of one ounce of semen is equal in its effects upon the system of forty ounces of blood. As it respects the immediate effects, this estimation, generally speaking, may not be too great. But a man living on a full meat diet might, doubtless, part with fifty ounces of semen in the course of a year, with far less detriment to the system than with 2,000 ounces of blood. It is a fact, that mode of living, independent of occupation, makes a great difference with respect to what the system will bear. A full meat diet, turtles, oysters, eggs, spirits, wine, etc., certainly promote the secretion of semen, and enable the system to bear its emission. But a cool vegetable and milk diet calms all the passions, the venereal especially. Most men adopting such a diet as this will suffer no inconvenience in extending the intervals of their gratification to three or four weeks; on the contrary, they will enjoy clear intellect, and a fine flow of spirits. This is the diet for men of literary pursuits, especially the unmarried. As to the mischievous manner, it consists in the unnatural habit of onanism, or solitary gratification; it is an antisocial and demoralizing habit, which, while it proves no quietus to the mind, impairs the bodily powers as well as mental, and not infrequently leads to insanity. While the gratification of the reproductive instinct in such manner as mentioned leads to bad consequences, a temperate and natural gratification, under proper circumstances, is attended with good, besides the mere attendant pleasure, which alone is enough to recommend such gratification. I admit that human beings might be so constituted that if they had no reproductive instinct to gratify, they might enjoy health; but being constituted as they are, this instinct cannot be mortified with impunity. It is a fact universally admitted, that unmarried females do not enjoy so much good health and attain to so great an age as the married; notwithstanding that the latter are subject to the diseases and pains incident to child-bearing. A temperate gratification promotes the secretions, and the appetite for food; calms the restless passions; induces pleasant sleep; awakens social feeling; and adds a zest to life which makes one conscious that life is worth preserving. APPENDIX [I here connect with this work, by way of Appendix, the following extract from an article which appeared in the Boston Investigator, a paper which, _mirabile dictu_, is so "crazy" as to be open to the investigation of all subjects which mightily concern mankind.] The only seeming objection of much weight that can be brought against diffusing a knowledge of checks is, that it will serve to increase illegal connections. Now, this is exactly the contrary effect of that which those who have diffused such knowledge most confidently believe will arise from it. To diminish such connections is indeed one of the grand objects of this publication,--an object which laws and prisons cannot, or, at least, do not, accomplish. Why is there so much prostitution in the land? The true answer to the question is not, and never will be, Because the people have become acquainted with certain facts in physiology; it is because there are so many unmarried men and women,--men of dissipation and profligacy, owing to their not having married in their younger days and settled down in life. But why are there so many unmarried people in the country? Not because young hearts when they arrive at the age of maturity do not desire to marry; but because prudential considerations interfere. The young man thinks: I cannot marry yet; I cannot support a family; I must make money first, and think of a matrimonial settlement afterward. And so it is, that through fear of having a family, before they have made a little headway in the world, and of being thereby compelled to "tug at the oar of incessant labor throughout their lives," thousands of young men do not marry, but go abroad into the world and form vicious acquaintances and practices. The truth, then, is this,--there is so much illegal connection in the land, because the people had not, twenty years ago, that very information which, it would seem, some, doubtless through want of due reflection, are apprehensive will increase this evil. I might quote pages to the point from "Every Woman's Book," but I fear my communication would be too lengthy. I content myself with a few lines. "But when it has become the custom here as elsewhere to limit the number of children, so that none need have more than they wish, no man will fear to take a wife; all will marry while young; debauchery will diminish; while good morals and religious duties will be promoted." It has been asked if a general knowledge of checks would not diminish the general increase of population? I think that such would not be the result in this country until such result would be desirable. In my opinion the effect would be a good many more families (and, on the whole, as many births), but not so many overgrown and poverty-stricken ones. It has been said, It is better to let Nature take her course. Now, in the broadest sense of the word "Nature," I say so too. In this sense there is nothing unnatural in the universe. But if we limit the sense of the word Nature so as not to include what we mean by art, then is civilized life one continued warfare against Nature. It is by art that we subdue the forest; by art we contend against the elements; by art we combat the natural tendency of disease, etc. As to the outrageous slander which here and there one has been heard to utter against the fair sex, in saying that fear of conception is the foundation of their chastity, it must be the sentiment of a "carnal heart," which has been peculiarly unfortunate in its acquaintances. "To the pure, all things are pure." Chastity, as well as its opposite, is in a great degree constitutional; and ought, in a like degree, to be regarded as a physical property, if I may so say, rather than a moral quality. Where the constitution is favorable a very indifferent degree of moral training is sufficient to secure the virgin without the influence of the above-mentioned fear; but where it is the reverse you may coop up the individual in the narrow dark cage of ignorance and fear, as you will, but still you must watch. An eminent moralist has said, "That chastity which will not bear the light [of physiology] is scarcely worth preserving." But verily, I believe there is very little such in the market. What there be is naturally short-lived, and, after its demise, the unhappily constituted individual stands in great need of this light to save her from ignominy. What might it not have prevented in the Fall River affair? And if one of two things must happen--either the destruction of fecundity or the destruction of life--which of the two is the greater evil? In these cases alone this light is calculated to do sufficient good to counterbalance all the evil that would arise from it; so that we should have its important advantages to the married in a political, a domestic and a medical point of view, as so much clear gain. This, of course, is my opinion; but since I have probably reflected more upon the subject than all the persons concerned in my imprisonment put together, until it can be shown that I have not as clear a head and as pure a heart as any of them, I think it entitled to some weight. 
33219	----	TRANSCRIBERS NOTE. In this book all words and phrases surrounded by '#' indicate they were #bold# in the original. Science Primers. POLITICAL ECONOMY. BY W. STANLEY JEVONS, LL.D., M.A., F.R.S., PROFESSOR OF POLITICAL ECONOMY IN UNIVERSITY COLLEGE, LONDON; EXAMINER IN LOGIC AND MORAL PHILOSOPHY IN THE UNIVERSITY OF LONDON. NEW YORK: D. APPLETON AND COMPANY, 549 AND 551 BROADWAY. 1880. CONTENTS. CHAP. PAGE I.--INTRODUCTION, 7 II.--UTILITY, 17 III.--PRODUCTION OF WEALTH, 24 IV.--DIVISION OF LABOUR, 32 V.--CAPITAL, 42 VI.--DISTRIBUTION OF WEALTH, 48 VII.--WAGES, 53 VIII.--TRADES-UNIONS, 61 IX.--CO-OPERATION, ETC., 77 X.--THE TENURE OF LAND, 87 XI.--EXCHANGE, 95 XII.--MONEY, 103 XIII.--CREDIT AND BANKING, 110 XIV.--CREDIT CYCLES, 115 XV.--THE FUNCTIONS OF GOVERNMENT, 123 XVI.--TAXATION, 126 PREFACE. In preparing this little treatise, I have tried to put the truths of Political Economy into a form suitable for elementary instruction. While connected with Owens College, it was my duty, as Cobden Lecturer on Political Economy, to instruct a class of pupil-teachers, in order that they might afterwards introduce the teaching of this important subject into elementary schools. There can be no doubt that it is most desirable to disseminate knowledge of the truths of political economy through all classes of the population by any means which may be available. From ignorance of these truths arise many of the worst social evils--disastrous strikes and lockouts, opposition to improvements, improvidence, destitution, misguided charity, and discouraging failure in many well-intended measures. More than forty years ago Miss Martineau successfully popularised the truths of political economy in her admirable tales. About the same time, Archbishop Whately was much struck with the need of inculcating knowledge of these matters at an early age. With this view he prepared his "Easy Lessons on Money Matters," of which many editions have been printed. In early boyhood I learned my first ideas of political economy from a copy of these lessons, from the preface to which I quote these remarks of Whately: "The rudiments of sound knowledge concerning these (subjects) may, it has been found by experience, be communicated at a very early age.... Those, therefore, who are engaged in conducting, or in patronising or promoting education, should consider it a matter of no small moment to instil, betimes, just notions on subjects with which all must in after-life be practically conversant, and in which no class of men, from the highest to the lowest, can, in such a country as this at least, be safely left in ignorance or in error." In later years like opinions have been held and efforts made by Mr. William Ellis, Professor W.B. Hodgson, Dr. John Watts, Mr. Templar, and others, and experience seems to confirm both the need and the practicability of the teaching advocated by Whately. But it is evident that one condition of success in such efforts is the possession of a small text-book exactly suited to the purposes in view. Relying upon my experience of ten years in the instruction of pupil-teachers at Manchester, I have now put my lessons into the simplest form which the nature of the subject seems to render advisable. It is hoped that this little treatise may also serve as a stepping-stone to a knowledge of the science among general readers of maturer age, who have hitherto neglected the study of political economy. Owing to the narrow limits of the space at my disposal, it was impossible to treat the whole of the science in a satisfactory way. I have, therefore, omitted some parts of political economy altogether, and have passed over other parts very briefly. Thus the larger portion of my space has been reserved for such subjects as Production, Division of Labour, Capital and Labour, Trades-Unions, and Commercial Crises, which are most likely to be interesting and useful to readers of this Primer. UNIVERSITY COLLEGE, GOWER STREET, LONDON, W.C. _31st January, 1878_. SCIENCE PRIMERS. _POLITICAL ECONOMY_. CHAPTER I.--INTRODUCTION. #1. What is Political Economy?# Political Economy treats of #the wealth of nations#; it inquires into the causes which make one nation more rich and prosperous than another. It aims at teaching what should be done in order that poor people may be as few as possible, and that everybody may, as a general rule, be well paid for his work. Other sciences, no doubt, assist us in reaching the same end. The science of mechanics shows how to obtain force, and how to use it in working machines. Chemistry teaches how useful substances may be produced--how beautiful dyes and odours and oils, for instance, may be extracted from the disagreeable refuse of the gasworks. Astronomy is necessary for the navigation of the oceans. Geology guides in the search for coal and metals. Various social sciences, also, are needed to promote the welfare of mankind. Jurisprudence treats of the legal rights of persons, and how they may be best defined and secured by just laws. Political Philosophy inquires into the different forms of government and their relative advantages. Sanitary Science ascertains the causes of disease. The science of Statistics collects all manner of facts relating to the state or community. All these sciences are useful in showing how we may be made more healthy, wealthy, and wise. But #Political Economy# is distinct from all these other sciences, and treats of #wealth# itself; it inquires what wealth is; how we can best consume it when we have got it; and how we may take advantage of the other sciences to get it. People are fond of finding fault with political economy, because #it treats only of wealth#; they say that there are many better things than wealth, such as virtue, affection, generosity. They would have us study these good qualities rather than mere wealth. A man may grow rich by making hard bargains, and saving up his money like a miser. Now as this is not nearly so good as if he were to spend his wealth for the benefit of his relatives, friends, and the public generally, they proceed to condemn the science of wealth. But these complainers misunderstand the purpose of a science like political economy. They do not see that in learning we must do one thing at a time. We cannot learn the social sciences all at the same time. No one objects to astronomy that it treats only of the stars, or to mathematics that it treats only of numbers and quantities. It would be a very curious Science Primer which should treat of astronomy, geology, chemistry, physics, physiology, &c., all at once. There must be many physical sciences, and there must be also many social sciences, and each of these sciences must treat of its own proper subject, and not of things in general. #2. Mistakes about Political Economy.# A great many mistakes are made about the science we are going to consider by people who ought to know better. These mistakes often arise from people thinking that they understand all about political economy without studying it. No ordinary person of sense ventures to contradict a chemist about chemistry, or an astronomer about eclipses, or even a geologist about rocks and fossils. But everybody has his opinion one way or another about bad trade, or the effect of high wages, or the harm of being underbid by cheap labour, or any one of hundreds of questions of social importance. It does not occur to such people that these matters are really more difficult to understand than chemistry, or astronomy, or geology, and that a lifetime of study is not sufficient to enable us to speak confidently about them. Yet, they who have never studied political economy at all, are usually the most confident. The fact is that, just as physical science was formerly hated, so now there is a kind of ignorant dislike and impatience of political economy. People wish to follow their own impulses and prejudices, and are vexed when told that they are doing just what will have the opposite effect to that which they intend. Take the case of #so-called charity#. There are many good-hearted people who think that it is virtuous to give alms to poor people who ask for them, without considering the effect produced upon the people. They see the pleasure of the beggar on getting the alms, but they do not see the after effects, namely, that beggars become more numerous than before. Much of the poverty and crime which now exist have been caused by mistaken charity in past times, which has caused a large part of the population to grow up careless, and improvident, and idle. Political economy proves that, instead of giving casual ill-considered alms, we should educate people, teach them to work and earn their own livings, and save up something to live upon in old age. If they continue idle and improvident, they must suffer the results of it. But as this seems hard-hearted treatment, political economists are condemned by soft-hearted and mistaken people. The science is said to be a dismal, cold-blooded one, and it is implied that the object of the science is to make the rich richer, and to leave the poor to perish. All this is quite mistaken. The political economist, when he inquires how people may most easily acquire riches, does not teach that the rich man should keep his wealth like a miser, nor spend it in luxurious living like a spendthrift. There is absolutely nothing in the science to dissuade the rich man from spending his wealth generously and yet wisely. He may prudently help his relatives and friends; he may establish useful public institutions, such as free public libraries, museums, public parks, dispensaries, &c.; he may assist in educating the poor, or promoting institutions for higher education; he may relieve any who are suffering from misfortunes which could not have been provided against; cripples, blind people, and all who are absolutely disabled from helping themselves, are proper objects of the rich man's charity. All that the political economist insists upon is that #charity shall be really charity, and shall not injure those whom it is intended to aid#. It is sad to think that hitherto much harm has been done by those who wished only to do good. It is sad, again, to see thousands of persons trying to improve their positions by means which have just the opposite effect, I mean by strikes, by refusing to use machinery, and by trying, in various ways, to resist the production of wealth. Working men have made a political economy of their own: they want to make themselves rich by taking care not to produce too much riches. They, again, see an immediate effect of what they do, but they do not see what happens as the after result. It is the same with the question of Free Trade. In England we have at length learned the wisdom of leaving commerce free. In other countries, and even in the Australian Colonies, laws are yet passed to make people richer by preventing them from using the abundant products of other lands. People actually refuse to see that wealth must be increased by producing it where it can be produced most easily and plentifully. Each trade, each town, each nation must furnish what it can yield most cheaply, and other goods must be bought from the places where they also can be raised most easily. Political economy teaches us to look beyond the immediate effect of what we do, and to seek the good of the whole community, and even of the whole of mankind. The present prosperity of England is greatly due to the science which Adam Smith gave to the world in his "Wealth of Nations." He taught us the value of #Free Labour and Free Trade#, and now, a hundred years after the publication of his great book, there ought not to be so many mistaken people vainly acting in opposition to his lessons. It is certain that #if people do not understand a true political economy, they will make a false one of their own#. Hence the imperative need that no one, neither man nor woman, should grow up without acquiring some comprehension of the science which we are going to study. #3. Divisions of the Science.# I will begin by stating the order in which the several branches or divisions of the science of economy are to be considered in this little treatise. Firstly, we must learn what wealth, the subject of the science, consists of. Secondly, we proceed to inquire how wealth is used or consumed; nothing, we shall see, can be wealth, unless it be put to some use, and before we make wealth we must know what we want to use. Thirdly, we can go on to consider how wealth is produced or brought into existence; and how, in the fourth place, having been produced, it is shared among the different classes of people who have had a hand in producing it. Briefly, we may say that political economy treats of (1) #The Nature#, (2) #The Consumption#, (3) #The Production#, and (4) #The Distribution of Wealth#. It will also be necessary to say a little about #Taxation#. A part of the wealth of every country must be taken by the government, in order to pay the expenses of defending and governing the nation. But taxation may come, perhaps, under the head of distribution. #4. Wealth and Natural Riches.# We do not learn anything by reading that #political economy is the science of wealth#, unless we know what science is, and what wealth is. When one term is defined by means of other terms, we must understand these other terms, in order to get any light upon the subject. In the Primer of Logic I have already attempted to explain what science is, and I will now attempt to make plain what wealth is. Doubtless many people think that there is no difficulty in knowing what #wealth# is; the real difficulty is to get it. But in this they are mistaken. There are a great many people in this country who have made themselves rich, and few or none of them would be able to explain clearly what wealth is. In fact it is not at all easy to decide the question. The popular idea is that wealth consists of money, and money consists of gold and silver; the wealthy man, then, would be one who has an iron safe full of bags of gold and silver money. But this is far from being the case; rich men, as a general rule, have very little money in their possession. Instead of bags of money they keep good balances at their bankers. But this again does not tell us what wealth is, because it is difficult to say what a bank balance consists of; the balance is shown by a few figures in the bankers' books. As a general rule the banker has not got in his possession the money which he owes to his customers. Perhaps some one will say that he is beyond question rich, who owns a great deal of land. But this depends entirely upon where and what the land is. A man who owns an English county is very wealthy; a man might own an equal extent of land in Australia, without being remarkably rich. The savages of Australia, who held the land before the English took it, had enormous quantities of land, but they were nevertheless miserably poor. Thus it is plain that land alone is not wealth. It may be urged that, in order to form wealth, the land should be fertile, the soil should be good, the rivers and lakes abounding in fish, and the forests full of good timber. Under the ground there should be plenty of coal, iron, copper, reefs of gold, &c. If, in addition to these, there is a good climate, plenty of sunlight, and enough, but not too much, water, then the country is certainly rich. It is true that these things have been called #natural riches#; but I mention them in order to point out that they are not in themselves wealth. People may live upon land full of natural riches, as the North American Indians lived upon the country which now forms the United States; nevertheless they may be very poor, because they cannot, or they will not labour, in such a way as #to turn the natural riches into wealth#. On the other hand, people like the Dutch live upon very poor bits of land, and yet become wealthy by skill, industry and providence. The fact is that wealth is more due to labour and ingenuity than to a good soil or climate; but all these things are needed in order that people shall become as rich as the inhabitants of England, France, the United States, or Australia. #5. What is Wealth?# Nassau Senior, one of the best writers on political economy, defined #wealth# in these words: #Under that term we comprehend all those things, and those things only, which are transferable, are limited in supply, and are directly or indirectly productive of pleasure, or preventive of pain.# It is necessary to understand, in the first place, exactly what Senior meant. According to him, whatever is comprehended under wealth must have three distinct qualities, and whatever has these three qualities must be a part of wealth. If these qualities are rightly chosen, we get a correct definition, which, as explained in the _Logic Primer_ (section 44), is a precise statement of the qualities which are just sufficient to make out a class, and to tell us what things belong to it and what do not. Instead, however, of the long phrase "directly or indirectly productive of pleasure or preventive of pain," we may substitute the single word #useful#, and we may then state the definition in this simple way:-- { (1) #transferable#. #Wealth = what is# { (2) #limited in supply#. { (3) #useful#. We still need to learn exactly what is meant by the three qualities of wealth; we must learn what it is to be transferable, limited in supply, and useful. #6. Wealth is transferable.# By being #transferable#, we mean that a thing can be passed over (Latin, _trans_, across, and _fero_, I carry) from one person to another. Sometimes things can be literally handed over, like a watch or a book; sometimes they can be transferred by a written deed, or by legal possession, as in the case of land and houses; services, also, can be transferred, as when a footman hires himself to a master. Even a musician or a preacher transfers his services, when his auditors have the benefit of hearing him. But there are many desirable things which cannot be transferred from one person to another; a rich man can hire a footman, but he cannot buy the footman's good health; he can hire the services of the best physician, but if these services fail to restore health, there is no help. So, too, it is impossible really to buy or sell the love of relatives, the esteem of friends, the happiness of a good conscience. Wealth may do a great deal, but it cannot really ensure those things which are more precious than pearls and rubies. Political economy does not pretend to examine all the causes of happiness, and those moral riches which cannot be bought and sold are no part of wealth in our present use of the word. The poor man who has a good conscience, affectionate friends, and good health, may really be much happier than the rich man, who is deprived of such blessings; but, on the other hand, a man need not lose his good conscience, and his other sources of happiness when he becomes rich and enjoys all the interesting occupations and amusements which wealth can give. #Wealth, then, is far from being the only good thing: nevertheless it is good#, because it saves us from too severe labour, from the fear of actual want, and enables us to buy such pleasant things and services as are transferable. #7. Wealth is limited in Supply.# In the second place, things cannot be called wealth unless they be _limited in supply_; if we have just as much of any substance as we want, then we shall not esteem a new supply of it. Thus the air around us is not wealth in ordinary circumstances, because we have only to open our mouths and we get as much as we can use. What air we do actually breathe is exceedingly useful, because it keeps us alive; but we usually pay nothing for it, because there is plenty for all. In a diving bell, or a deep mine, however, air becomes limited in supply, and then may be considered a part of wealth. When the tunnel under the English Channel is completed, it will be a great question how to get air to breathe in the middle of it. Even in the Metropolitan Railway tunnel a little more fresh air would be very valuable. On the other hand diamonds, though much valued, are used for few purposes; they make beautiful ornaments and they serve to cut glass or to bore rocks. Their high value chiefly arises from the fact that they are scarce. Of course scarcity alone will not create value. There are many scarce metals, or minerals, of which only a few little bits have ever yet been seen; but such substances are not valuable, unless some special use has been found for them. The metal iridium is sold at a very high price because it is wanted for making the tips of gold pens, and can be got only in small quantities. #8. Wealth is useful.# In the third place, we can easily see that everything which forms a part of wealth must be #useful#, or have #utility#, that is, it must serve some purpose, or be agreeable and desirable in some way or other. Senior said correctly that #useful things are those which directly or indirectly produce pleasure or prevent pain#. A well tuned and well played musical instrument produces pleasure; a dose of medicine prevents pain to one who is in need of it But it is often impossible to decide whether things give more pleasure or prevent more pain; dinner saves us from the pain of hunger and gives us the pleasure of eating good things. There is utility so far as pleasure is increased and pain decreased; nor does it matter, as far as political economy is concerned, what is the nature of the pleasure. Then, again, we need not be particular as to whether things #directly produce pleasure#, like the clothes we wear, or whether they #indirectly# do so, as in the cases of the machines employed to make the clothes. Things are indirectly useful when, like tools, machines, materials, &c., they are only wanted to make other things, which shall be actually consumed and enjoyed by some person. The carriage in which a person takes a pleasant drive is directly useful; the baker's cart which brings him food is indirectly useful. But sometimes we can hardly distinguish. Shall we say that the meat put into the mouth is directly, but the fork which puts it in is indirectly, useful? #9. Commodity.# We now know exactly what is wealth; but instead of speaking continually of wealth, it will often be convenient to speak of commodities, or goods. #A commodity is any portion of wealth#--anything, therefore, which is useful, and transferable, and limited in supply. Wool, cotton, iron, tea, books, boots, pianos, &c., are all commodities in certain circumstances, but not in all circumstances. Wool on a stray sheep lost in the mountains is not a commodity, nor iron in a mine which cannot be worked. #A commodity, in short, is anything which is really useful and wanted, so that people will buy or sell it.# But, instead of the long word commodity, I shall often use the shorter word goods, and the reader should remember that #goods = commodities = portion of wealth#. CHAPTER II. UTILITY. #10. Our Wants are various.# After a little reflection, we shall see that we generally want but little of any one kind of commodity, and prefer to have a portion of one kind and a portion of another kind. Nobody likes to make his dinner off potatoes only, or bread only, or even beef only; he prefers to have some beef, some bread, some potatoes, besides, perhaps, beer, pudding, &c. Similarly, a man would not care to have many suits of clothes all alike; he may wish to have several suits, no doubt, but then some should be warmer, others thinner; some for evening dress, others for travelling, and so on. A library all made of copies of the same book would be absurd; to keep several exact duplicates of any work would be generally useless. A collector of engravings would not care to have many identical copies of the same engraving. In all these, and many other cases, we learn that _human wants tend towards variety_; #each separate want is soon satisfied, or made full# (Latin, _satis_, enough, and _facere_, to make), and then some other want begins to be felt. This was called by Senior #the law of variety#, and it is the most important law in the whole of political economy. It is easy to see, too, that there is a natural order in which our wants follow each other as regards importance; we must have food to eat, and if we cannot get anything else we are glad to get bread; next we want meat, vegetables, fruit, and other delicacies. Clothing is not on the whole as necessary as food; but, when a man has plenty to eat, he begins to think of dressing himself well. Next comes the question of a house to live in; a mere cabin is better than nothing, but the richer a man is the larger the house he likes to have. When he has got a good house he wants to fill it with furniture, books, pictures, musical instruments, articles of vertu, and so forth. Thus we can lay down very roughly #a law of succession of wants#, somewhat in this order: air, food, clothing, lodging, literature, articles of adornment and amusement. It is very important to observe that there is no end nor limit to the number of various things which a rich man will like to have, if he can get them. He who has got one good house begins to wish for another: he likes to have one house in town, another in the country. Some dukes and other very rich people have four, five, or more houses. From these observations we learn that there can never be, among civilised nations, so much wealth, that people would cease to wish for any more. However much we manage to produce, there are still many other things which we want to acquire. When people are well fed, they begin to want good clothing; when they are well clothed, they want good houses, and furniture, and objects of art. If, then, too much wealth were ever produced, it would be #too much of one sort, not too much of all sorts#. Farmers might be ruined if they grew so much corn that nobody could eat it all; then, instead of producing so much corn, they ought to produce more beef and milk. Thus there is no fear that, by machinery or other improvements, things will be made so plentifully that workmen would be thrown out of employment, and not wanted any more. If men were not required at one trade, they would only need to learn a new trade. #11. When things are useful.# The chief question to consider, then, is when things are useful and when they are not. #This entirely depends upon whether we want them or not.# Most things about us, the air, rain water, stones, soil, &c., are not wealth, because we do not want them, or want so little that we can readily get what we need. Let us consider carefully whether we can say that #water is useful#, or in what sense we may say so. It is common to hear people say that water is the most useful substance in the world, and so it is--in the right place, and at the right time. But if water is too plentiful and flows into your cellars, it is not useful there; if it soaks through the walls and produces rheumatism, it is hurtful, not useful. If a man wanting pure good water, digs a well and the water comes, it is useful. But if, in digging a coal pit, water rushes in and prevents the miners reaching the coal seam, it is clear that the water is the opposite of useful. In some countries rain comes very irregularly and uncertainly. In Australia the droughts last for one or two or even three years, and in the interior of the continent the rivers sometimes dry up altogether. The dirtiest pools then become very valuable for keeping the flocks of sheep alive. In New South Wales water has been sold for three shillings a bucketful. When a drought breaks up, sudden floods come down the rivers, destroying the dams and bridges, sweeping away houses, and often drowning men and animals. It is quite plain that we cannot say water is always useful; it is often so hurtful as to ruin and drown people. All that we can really say is that #water is useful when and where we want it, and in such quantity as we want, and not otherwise#. We must not say that all water is useful, but only that such water is useful as we can actually use. It is now easy to see why things, in order to be wealth, must be #limited in supply#; for we never want an unlimited quantity of anything. A man cannot drink more than two or three quarts of water in the day, nor eat more than a few pounds of food. Thus we can understand why in South America, where there are great herds of cattle, the best beef is not wealth, namely, because there is so much that there are not people enough to eat it. The beef which is eaten there is just as useful in nourishing people as beef eaten in England, but it is not so valuable because there is plenty of beef to spare, that is, plenty of beef not wanted by the people. #12. What we must aim at.# Now we can see precisely what it is that we have to learn in political economy. It is #how to supply our various wants as fully as possible#. To do this we must, first of all, ascertain what things are wanted. There is no use making things unless, when made, they are useful, and the quantities of things must be proportioned to what are wanted. The cabinetmaker must not make a great many tables, and few chairs; he must make some tables and more chairs. Similarly, every kind of commodity must be supplied when it is most wanted; and nothing must be over-supplied, that is manufactured in such large quantities that it would have been better to spend the labour in manufacturing other things. Secondly, we must always try to produce things with the least possible labour; for labour is painful exertion, and we wish to undergo as little pain and trouble as we can. Thus, as Professor Hearn, of the University of Melbourne, well described it, #political economy is the science of efforts to satisfy wants#; it teaches us how to find the shortest way to what we wish for. The object which we aim at is #to obtain the most riches at the cost of the least labour#. #13. When to consume wealth.# To consume a commodity is to destroy its utility, as when coal is burnt, or bread eaten, or a jug broken, or a piano worn out. Things lose their utility in various ways, as when they go bad, like meat and fish; when the fashion changes, as with ladies' attire; or when they merely grow old, as in the case of an almanack, or a directory. Again, houses fall into bad repair; ricks of corn may be burnt down; ships may founder. In all these cases utility is destroyed, slowly or quickly, and the commodities may be said to be consumed. It is obvious that we must use things while they are fit to be used, if we are to use them at all. It is evident, too, that we ought to try to get the utmost possible use out of things which we are happy enough to possess. If an object is not injured nor destroyed by use, as in the case of reading a book, or looking at a picture, then the more often we use it the greater is the utility. Such things become more useful if they are passed on from one person to another, like books in a circulating library. In this case there arises what we may call #the multiplication of utility#. Public libraries, museums, picture galleries and like institutions all multiply utility, and the cost of such institutions is little or nothing compared with their usefulness. When a commodity is destroyed at once by use, as in the case of food, it is obvious that only one person can use the same portion of commodity. Our object must then be to consume it when it is most useful. If a man lost in the bush find himself with a short supply of food, it would be foolish of him to eat it all up at once, when he might starve for several days afterwards. He should spread out his supply, so as to eat each bit of food when it will support his strength the most. So we ought to do with the earnings of a life time. The working man should not spend all his wages when trade is brisk, because he will want some of it much more when trade becomes slack, and he is out of employment. Similarly, that which is spent in early life upon mere luxuries and frivolities, might be much more useful in old age, when even necessaries and ordinary comforts may be difficult to obtain. #All wealth is produced in order that it may be consumed, but then it must be consumed when it best fulfils its purpose; that is, when it is most useful.# #14. The Fallacy of Consumption.# It is not uncommon to hear people say that they ought to spend money freely in order to encourage trade. If every person were to save his money instead of spending it, trade, they think, would languish and workmen would be out of employment. Tradespeople favour these notions, because it is obvious that, the more a milliner or draper can persuade his customer to buy, the more profit he makes thereby. The customers, too, are quite inclined to think the argument a good one, because they enjoy buying new dresses, and other pleasant things. Nevertheless #the argument is a bad fallacy#. The fact is, that a person who has riches cannot help employing labour of some kind or other. If he saves up his money he probably puts it into a bank; but the banker does not keep it idle. The banker lends it out again to merchants, manufacturers and builders, who use it to increase their business and employ more hands. If he buy railway shares or government funds, those who receive the money put it to some other profitable use. If the rich man actually hoards up his money in the form of gold or silver, he gets no advantage from it, but he creates so much more demand for gold or silver. If many rich people were to take to hoarding up gold, the result would be to make gold mining more profitable, and there would be so many more gold miners, instead of railway navvies, or other workmen. We see then that, when a rich person decides how to spend his money he is deciding not how many more workpeople shall be set to work, but what kind of work they shall do. If he decide to give a grand fancy ball, then in the end there will be so many more milliners, costumiers, lacemakers, confectioners, &c. A single ball indeed will have no great effect; but, if many people were to do the same, there would soon be more tradespeople attracted to these trades. If, on the other hand, rich people invest their money in a new railway, there will be so many more surveyors, engineers, foremen, navvies, iron puddlers, iron rollers, engine mechanics, carriage builders, &c. The question really comes to this, whether people are made happier by more fancy balls, or by more railways. A fancy ball creates amusement at the time, but it costs a great deal of money, especially to the guests who buy expensive costumes. When it is over there is no permanent result, and no one is much the better for it. The railway, on the other hand, is no immediate cause of pleasure, but it cheapens goods by enabling them to be carried more easily: it allows people to live in the country, instead of the crowded town, or it carries them on pleasant and wholesome excursions. We see, then, that it is simple folly to approve of consumption for its own sake, or because it benefits trade. In spending our wealth we ought to think solely of the advantage which people get out of that spending. #15. The Fallacy of Non-consumption.# Some people fall into the opposite fallacy of thinking that all spending is an evil. The best thing to do with wealth is to keep it and let it grow by interest, or even to neglect the interest and keep the gold itself. Thus they become what we call misers, and there are always a certain number of people, who deprive themselves of the ordinary pleasures of life, in order that they may have the pleasure of feeling rich. Now these kind of people do no positive harm to their fellow-men; on the contrary they increase the wealth of the country, and some one or other will sooner or later benefit by it. Moreover, if they put their wealth into banks and other good investments, they do great service in increasing the capital of the nation, and thus enabling so many more factories, docks, railways, and other important works to be constructed. Most people are so fond of spending their money on passing amusements, entertainments, eating and drinking, and fine dressing, that it is a distinct advantage to have other people who will put their wealth into a more permanently useful form. Nevertheless, there could be no use in abstaining from all enjoyment in order that we might lay up a store of wealth. Things are not wealth unless they are useful and pleasant to us. If everybody invested his savings in railway shares, we should have so many railways that they could not be all used, and they would become rather a nuisance than a benefit. Similarly, there could be no good in building docks unless there were ships to load in them, nor ships unless there were goods or passengers to convey. It would be equally absurd to make cotton mills if there were already enough to manufacture as much cotton goods as people could consume. Thus we come to see that wealth must be fitted for use and consumption in some way or other. What we have to do is to endeavour to spend our means so as to get the greatest real happiness for ourselves, our relatives, friends, and all other people whom we ought to consider. CHAPTER III. PRODUCTION OF WEALTH. #16. The Requisites of Production.# The first thing in industry, as we now see, is to decide what we want; the next thing is to get it, or make it, or, as we shall say, #produce it#, and we ought obviously to produce it with the least possible labour. To learn how this may be done, we must inquire what is needful for the production of wealth. There are, as is commonly and correctly said, #three requisites of production#; before we can, in the present state of society, undertake to produce wealth, we must have the three following things:-- (1) #Land#, (2) #Labour#, (3) #Capital#. In production we bring these things together; we apply labour to the land, and we employ the capital in assisting the labourer with tools, and feeding him while he is engaged on the work. We must now proceed to consider each of the three requisites in succession. #17. Land or Source of Materials.# The word #production# is a very good one; it means #drawing forth# (Latin, _pro_, before, and _ducere_, to draw), and it thus exactly expresses the fact that, when we want to create wealth, we have to go to some piece of land, or to some lake, river, or sea, and draw forth the substance which is to be made into wealth. It does not matter whether the material comes from the surface of the earth, or from mines and quarries sunk into the earth, or from seas and oceans. Our food mostly grows upon the land, as in the case of corn, potatoes, cattle, game, &c.; our clothes are chiefly made of cotton, flax, wool, skins, raised in like manner. Minerals and metals are obtained by sinking pits and mines into the crust of the earth. Rivers, lakes, seas, and oceans are no slight source of wealth: they yield food, oil, whalebone, sealskin, &c. We cannot manufacture any goods unless we have some matter to work upon; to make a pin we must get copper, zinc, and tin out of mines; a ribbon requires the silk and the dye materials; everything that we touch, and use, and eat, and drink, contains substance, so that we must always begin by finding a supply of the right sort of materials. Commonly, too, we want something more than matter; we want force which shall help us to carry and work the raw material. People naturally wish to avoid tiring themselves by labouring with their own arms and legs, and so they make windmills to grind corn, ships to carry goods, steam-engines to pump water and to do all sorts of hard work. From the earth, or, as we say, from Nature, we obtain both the materials of wealth and the force which helps us to turn the materials into wealth. Whatever thus furnishes us with the first requisite of production is called a #natural agent#, that is, something which acts for us and assists us (Latin, _agens_, acting). Among natural agents #land# is by far the most important, because, when supplied with abundant sunlight and, moisture, it may be cultivated and made to yield all kinds of crops. Accordingly, economists often speak of land, when their remarks would really apply as well to rocks and rivers. Three-quarters of the whole surface of the globe is covered with seas; but this vast extent of salt water furnishes little wealth, except whales, seals, sea-weed, and a few other kinds of animals and plants. Hence, when we speak of land, we really mean any source of materials--any natural agent, and we may say that #land = source of materials = natural agent#. #18. Labour.# Nothing is more plain, however, than that natural agents alone do not make wealth. A man would perish in the most fertile spot if he did not take some trouble in appropriating the things around him. Fruit growing wild on the trees must be plucked before it becomes wealth, and wild game must be caught before it can be cooked and eaten. We must spend a great deal of labour if we wish to have comfortable clothes and houses and regular supplies of food; the proper sorts of materials must be gradually got together, and shaped and manufactured. Thus the amount of wealth which people can obtain depends far more upon their activity and skill in labouring than upon the abundance of materials around them. As already remarked, North America is a very rich land, containing plenty of fine soil, seams of coal, veins of metal, rivers full of fish, and forests of fine timber, everything, in short, needed in the way of materials; yet the American Indians lived in this land for thousands of years in great poverty, because they had not the knowledge and perseverance to enable them to labour properly and produce wealth out of natural agents. Thus we see clearly that skilful and intelligent and regular labour is requisite to the production of wealth. #19. Capital.# In order that we may produce much wealth, we require something further, namely, the #capital#, which supports labourers while they are engaged in their work. Men must have food once a day, not to say two or three times; if then they have no stock of food on hand, they must go at once and get it in the best way they can, for fear of starving. They must grub up roots, or gather grass seeds, or catch wild animals--if they can. When working in this way, they usually spend a great deal of labour for very little result; Australian natives sometimes have to cut down a large tree with stone axes, which is very hard work, in order to catch an opossum or two. Men who live in this way from hand to mouth have no time nor strength to make arrangements so as to get food and clothes in the easiest way. It requires much labour to plough the ground, to harrow it, and sow it with corn, besides fencing it in; when all this is done it is requisite to wait six months before the crop can be gathered. Certainly, the amount of food thus obtained is large compared with the labour: but wild Indians and other ignorant tribes of men cannot wait while the corn is growing; the poor Australian natives have to gather grass seeds or find worms and opossums every day. There is a good Japanese maxim which says, "Dig a well before you are thirsty," and it is evidently very desirable to do so. But you must have capital to live upon while you are digging the well. In the same way, almost every mode of getting wealth without extreme labour requires that we shall have a stock of food to subsist upon while we are working and waiting, and #this stock is called capital#. In the absence of capital people find themselves continually in difficulties, and in danger of starvation. In the first of her tales on political economy, called "Life in the Wilds," Miss Martineau has beautifully described the position of settlers at the Cape of Good Hope, who are imagined to have been attacked by Bushmen and robbed of their stock of capital. She shows us how difficult it is to get any food or to do any useful work, because something else is wanted beforehand--some tool, or material, or at any rate time to make it. But there is no time to make anything, because all attention has to be given to finding shelter for the night, and something for supper. Everybody who wishes to understand the necessity for capital, and the way capital serves us, should read this tale of Miss Martineau, and then go on to her other tales about Political Economy. We can hardly say that capital is as requisite to production as land and labour, for the reason that capital must have been the produce of land and labour. There must always, indeed, be a little capital in possession, even though it be only the last meal in the stomach, before we can produce more. But there is no good attempting to say exactly how capital began to be collected, because it began in the childhood of the world, when men and women lived more like wild animals than as we live now. Certain it is that we cannot have loaves of bread, and knives and forks, and keep ourselves warm with clothes and brick houses, unless we have a stock of capital to live upon while we are making all these things. #Capital is requisite, then, not so much that we shall labour, but that we shall labour economically and with great success.# We may call it a secondary requisite, and it would be best to state the requisites of production in this way-- { #natural agent.# #Primary requisites# { { #labour.# #Secondary requisite# #capital.# #20. How to make Labour most Productive.# The great object must be to make labour as productive as possible, that is, to get as much wealth as we can with a reasonable amount of labour. In order to do this we must take care to labour in the most favourable way, and there is no difficulty in seeing that we ought to labour (1) #At the best time#; (2) #At the best place#; (3) #In the best manner#. #21. Work at the best Time.# Of course we ought to do things when it is most easy to do them, and when we are likely to get most produce for our labour. The angler goes to the river in the early morning or the evening, when the fish will bite; the farmer makes hay while the sun shines; the miller grinds corn when the breeze is fresh, or the stream full; and the skipper starts when wind and tide are in his favour. By long experience farmers have found out the best time of year for doing every kind of work: seed is sown in autumn or spring; manure is carried in winter when the ground is frozen; hedges and ditches are mended when there is nothing else to do, and the harvest is gathered just when it is ripe, and the weather is fine. Norwegian peasants work hard all day in July and August to cut as much grass, and make as much hay as possible. They never think of timber then, because they know that there will be plenty of time during the long winter to cut down trees; and when the snow fills up all the hollows in the mountain side, they can easily drag the trees down to the rivers, which rise high with floods after the melting of the snow, and carry the logs away, without further labour, to the towns and ports. It is a good rule not to do to-day what we can probably do more easily to-morrow: but it is a still better rule not to put off till to-morrow what we can do more easily to-day. In order, however, that we may be able to wait and to do each kind of work at the best time, we must have enough #capital# to live upon in the meantime. #22. Work at the Best Place.# Again, we should carry on every kind of work at the place best suited for it, that we can get possession of. In many cases this is so obvious that the remark seems absurd. Does any one plant fruit trees on the sea sands, or sow corn among rocks? Of course not, because there would be no result. No one is so foolish as to spend his labour in a place where it would be wasted altogether. In other cases it is a question of degree; there may be some produce here, but there would be more produce there. In the south of England vines can be made to grow in the open air, and, in former days, wine used to be made from grapes grown in England. But vines grow much better on the sunny hills of France, Spain, and Germany, and the wine which can there be made with the same labour is far more plentiful and immensely better in quality. Those, then, who want to make wine had much better remove to the continent, or, still better, let the French, Spaniards, and Germans produce wine for us. In England we have good soil and a moist climate fitted for growing grass, and the best thing which our farmers can do is to raise cattle and produce plenty of milk, butter, and cheese. In order that the world may grow as rich as possible, each country should give its attention to producing what it can produce most easily in its present circumstances, getting other things in exchange by foreign trade. The United States can raise endless quantities of cotton, corn, bacon, meat, fruit, petroleum, besides plenty of gold, silver, copper, iron, &c. Australia, New Zealand, and South Africa will furnish much wool, hides, sugar, preserved meats, besides gold, copper, and diamonds. Tropical Africa has palm oil, ivory, teak wood, gum, &c. South America abounds in cattle from which we get tallow, hides, bones, horns, essence of beef, &c. China supplies us with vast quantities of tea, in addition to silk, ginger, and many minor commodities. India sends cotton, indigo, jute, rice, seeds, sugar, spices, and all kinds of other products. Every part of the world has some commodities which it can produce better than other countries, and if men and governments were wise, they would allow trade to be as free as possible, in order that each thing shall be produced where it costs the least labour to produce it. #23. Work in the Best Manner.# Whatever the kind of industry carried on in a place, we ought to take care, thirdly, that each labourer works in the best manner, so as not to waste his labour or to make mistakes. There are many different ways of setting about the same work, and, in order that he may choose the best, the labourer must be intelligent and skilful, or else he must be directed by some person who has knowledge and skill. Moreover, there must be, as we shall see, great division of labour, so that each man shall do the kind of work he can do best. We need, then-- (1) #Science#, (2) #Division of labour#. #24. The Need of Science.# In order that he may employ his labour to the best advantage, it is requisite that the labourer should be not merely skilful, that is, clever, and practised in handiwork, but that he should also be guided by a scientific knowledge of the things with which he is dealing. Knowledge of nature consists, to a great extent, in understanding the #causes of things#, that is, in knowing what things must be put together in order that certain other things shall be produced. Thus the steam-engine is due to the discovery that if heat be applied to water, the result is steam expanding with much force, so that a firebox, coal, boiler, and water are causes of force. Whenever we want to do any work, then, we must begin by learning, if possible, what are the causes which will produce it most easily and abundantly. By knowledge we shall often be saved from much needless labour. As Sir John Herschel has explained, science sometimes shows us that #things which we wish to do are really impossible#, as, for instance, to invent a perpetual motion, that is, a machine which moves itself. At other times science teaches us that the #way in which we are trying to make something is altogether the wrong way#. Thus, iron-masters used to think that the best way of smelting iron in the blast-furnace was to blow the furnace with cold air; science, however, showed that, instead of being cold, the air sent into the furnace should be made as hot as possible. Then, again, science often enables us #to do our work with a great saving of labour#. The boatman or bargeman takes care to learn the state of the tide, so that he may have the tide in his favour in making any journey. Meteorologists have now prepared maps of the oceans showing the sea-captain where he will find winds and currents most favourable to a rapid voyage. Lastly, #science sometimes leads us to discover wonderful things which we should not have otherwise thought it possible to do#; it is sufficient to mention the discovery of photography and the invention of the telegraph and the telephone. No doubt it may be said that all the greatest improvements in industry--most of what tends to raise man above the condition of the brute animals--proceed from science. The poet Virgil was right when he said, "#Happy is he who knows the causes of things.#" CHAPTER IV. DIVISION OF LABOUR. #25. How Division of Labour Arises.# When a number of workmen are engaged on any work, we find that each man usually takes one part of the work, and leaves other parts of the work to his mates. People by degrees arrange themselves into different trades, so that the whole work done in any place is divided into many employments or crafts. This division of labour is found in all civilised countries, and more or less in all states of society, which are not merely barbarous. In every village there is the butcher and the baker, and the blacksmith and the carpenter. Even in a single family there is division of labour: the husband ploughs, or cuts timber; the wife cooks, manages the house, and spins or weaves; the sons hunt or tend sheep; the daughters employ themselves as milkmaids. There is a popular couplet which says-- "When Adam delved and Eve span, Who was then the gentleman?" It seems to express the fact that this division of labour existed in very early times, before there were any gentlemen. In modern times the division of labour is immensely complicated: not only has every town and village its different tradespeople, and artisans and men in different posts and employments, but each district has its peculiar manufactures. In one place cotton goods are produced; in another, woollen goods; in other parts of the country flax, jute, silk are manufactured. Iron is made in Staffordshire, Cleveland, South Wales, and Scotland; copper is smelted in South Wales; crockery is baked in the potteries; hosiery is manufactured in Nottingham and Leicester; linens are sewed in the North of Ireland; and so on. In every separate factory, again, there is division of labour; there is the manager, the chief clerk, the assistant clerks; the foremen of different departments, the timekeeper, the engine-tenter, and stokers, the common labourers, the carters, errand boys, porters, &c., all in addition to the actual mechanics of different kinds and ranks who do the principal work. Thus the division of labour spreads itself throughout the whole of society, from the Queen and her Ministers, down to the errand boy, or the street scavenger. #26. Adam Smith on the Division of Labour.# There are many ways in which we gain by the division of labour, but Adam Smith has treated the subject so excellently that we had better, in the first place, consider his view of the matter. There are, as he thought, three ways in which advantage arises from the division of labour, namely-- (1.) Increase of dexterity in every particular workman. (2.) Saving of the time which is commonly lost in passing from one kind of work to another. (3.) The invention of a great number of machines, which facilitate and abridge labour, and enable one man to do the work of many. There can be no doubt as to the #increase of dexterity#, which arises from practice. Any one who has tried to imitate a juggler, or to play the piano, without having learned to do it, knows how absurdly he fails. Nobody could possibly do the work of a glass-blower without long practice. Even when a man can do a job in some sort of way, he will do it much more quickly if he does it often. Adam Smith states that if a blacksmith had to make nails without having been accustomed to the work, he would not make above 200 or 300 bad nails in a day. With practice he might learn to make 800 or 1000 nails in a day; but boys who are brought up to the nailer's trade can turn out 2300 nails of the same kind in the same time. But there is no need of many examples: everything that we see well or quickly made has been made by men who have spent a great deal of time and trouble in learning and practising the work. Secondly, there is #a great deal of time lost when a man changes from one kind of work to another# many times in the day. Before you can make a thing you must get all the right tools and materials around you; when you have finished one box, for instance, you are all ready to make another with less trouble than the first; but if you have to go off and do something quite different, such as to mend a pair of shoes or write a letter, a different set of implements have to be got ready. A man, as Adam Smith thought, saunters a little in turning his hand from one kind of employment to another, and if this happens frequently, he is likely to become lazy. In the third place, Smith asserted that #the division of labour leads to the invention of machines# which abridge labour, because men, he thought, were much more likely to discover easy methods of attaining an object when their whole attention is directed to that object. But it seems doubtful how far this is correct. Workmen do occasionally invent some mode of lessening their labour, and a few important inventions have been made in this way. But, as a general rule, the division of labour leads to invention, because it enables ingenious men to make invention their profession. The greatest inventors, such as James Watt, Bramah, Fulton, Roberts, Nasmyth, Howe, Fairbairn, Whitworth, the Stephensons, Wheatstone, Bessemer, Siemens, have not been led to invention in the way described by Adam Smith, but have cultivated an original genius by careful study and long practice in mechanical construction. But the division of labour greatly assists invention, because it enables each factory to adopt particular kinds of machinery. In England the division of labour is continually becoming more and more minute, and it is not uncommon to find that the whole supply of some commodity is furnished from a single manufactory, which can then afford to have a set of machines invented on purpose to produce this one commodity. Such is even more the case in the large manufactories of the United States. I will now describe four other ways in which great saving of labour arises from the division of labour, as follows:-- #27. The Multiplication of Services.# A great deal of labour is often saved by arranging work so that a labourer may serve many persons as easily as one. If a messenger is going to carry a letter to the post-office, he can as readily carry a score. Instead of twenty people each carrying their own letters, one messenger can do the whole work without more trouble. This explains why the post-office is able to forward a letter from any part of the kingdom to any other part for a penny or even a halfpenny. There are so many people sending and receiving letters, that a postman usually carries a great many, and often delivers half-a-dozen at once. But it would be quite impossible to send telegrams so cheaply, because every message has to be separately telegraphed along the wires, and then delivered at once by a special messenger, who can seldom carry more than one message at a time. Archbishop Whately pointed out that when a party of travellers exploring a new country camp out at night, they naturally divide the work: one attends to the horses, another unpacks the stores, a third makes a fire and cooks the supper, a fourth goes for water, and so on. It would be quite absurd if a dozen travellers in one party were to light a dozen separate fires, and cook a dozen separate meals. The labour of lighting a fire and cooking for twelve persons is not much greater than doing the same for one or two. There are many things which, if once done, will serve for thousands or millions of people. If a person gets important information, as, for instance, that a storm is coming across the Atlantic Ocean, he can warn a whole nation by means of the newspapers. It is a great benefit to have a meteorological office in London, where two or three men spend their labour in learning the weather all over the country by means of the telegraph, and thus enable us to judge, as far as possible, of the weather which is coming. This is a good case of the #multiplication of services#. #28. The Multiplication of Copies# is also a means of increasing immensely the produce of labour. When the proper tools and models for making a thing are once provided, it is sometimes possible to go on multiplying copies with little further trouble. To cut the dies for striking a medal or coin is a very slow and costly work; but, when once good dies are finished, it is easy to strike a great many coins with them, and the cost of the striking is very small. The printing press, however, is the best case of multiplication of copies. To have the whole of Shakespeare's Plays copied out by a law stationer would cost more than two hundred pounds, and every new copy would cost as much as the first. Before the invention of printing, books used to be thus copied out, and manuscript books were therefore very expensive, besides being full of mistakes. The whole of Shakespeare's Plays can now be bought for a shilling; and any one of the Waverley Novels can be had for sixpence. It may cost several hundred pounds to set up the type for a large book and stereotype it; but when this is once done, hundreds of thousands of copies can be struck off, and the cost of each copy is little more than that of the paper and the binding. Almost all the common things we use now, such as ordinary chairs and tables, cups and saucers, teapots, spoons and forks, &c., are made by machinery, and are copies of an original pattern. A good chair can be bought for five shillings or less, but if you wanted to have a chair made of a new pattern, it would cost perhaps five or ten times as much. #29. Personal Adaptation.# A further advantage of the division of labour is that, when there are many different trades, every person can choose that trade for which he is best suited--the strong healthy man becomes a blacksmith; the weaker one works a loom or makes shoes; the skilful man learns to be a watchmaker; the most ignorant and unskilful can find work in breaking stones or mending the hedges. Each man will generally work at the trade in which he can get the best wages, and it is an evident loss of skill if the artisan should break stones or sweep the streets. Now, the greater the division of labour and the more extensive factories become, the better chance there is for finding an employment just suited to each person's powers; clever workmen do the work which no one else can do; they have common labourers to help them in things which require no skill; foremen plan out the work, and allot it to the artisans; clerks, who are quick at accounts, keep the books, and pay and receive money; the manager of the factory is an ingenious experienced man, who can give his whole attention to directing the work, to making good bargains, or to inventing improvements in the business. Every one is thus occupied in the way in which his labour will be most productive and useful to other people, and at the same time most profitable to himself. #30. Local Adaptation.# Lastly, the division of labour allows of local adaptation--that is, it allows every kind of work to be done in the place most suitable for it. We have already learnt (sec. 22, p. 29) that each kind of labour should be carried on where it is most productive; but this cannot be done unless there be division of labour--so that while the French grow wine, weave silk, or make _articles de Paris_, they buy the cottons of Manchester, the beer of Burton-on-Trent, or the coals of Newcastle. When trade is free, and the division of labour is perfect, each town or district learns to make some commodity better than other places: watches are made in Clerkenwell; steel pens in Birmingham; needles at Redditch; cutlery at Sheffield; pottery at Stoke; ribbons at Coventry; glass at St. Helen's; straw bonnets at Luton; and so forth. It is not always possible to say exactly why certain goods are made better in one place--for instance, silks in Lyons--than anywhere else; but so it often is, and people should be left as free as possible to buy the goods they like best. Commodities are manufactured in order that they may produce pleasure and be useful, not, as we shall see, in order that labourers may be kept hard at work. Now, when trade is left free it gives rise to division of labour, not only between town and town, county and county, but between the most distant nations of the earth. Thus is created what may be called #the territorial division of labour#. Commerce between nation and nation is not only one of the best means of increasing wealth and saving labour, but it brings us nearer to the time when all nations will live in harmony, as if they were but one nation. #31. The Combination of Labour.# We now see what great advantages arise from each man learning a single trade thoroughly. This is called the division of labour, because it divides up the work into a great many different operations; nevertheless, it leads men to assist each other, and to work together in manufacturing the same goods. Thus, in producing a book, a great many trades must assist each other: type-founders cast the type; mechanics make the printing press; the paper is manufactured at the paper works; printers' ink is prepared at other works; the publishers arrange the business; the author supplies the copy; the compositors set up the type; the reader corrects the proofs; the pressmen work off the printed sheets; then there are still the bookbinders, and the booksellers, besides a great many other small trades which supply the tools wanted by the principal trades. Thus, society is like a very complicated machine, in which there is a great number of wheels, and wheels within wheels; each part goes on attending to its own business, and doing the same work over and over again. There is what we should call a #complex organization# (Greek, organon, instrument), that is to say, different people and different trades work as instruments of each other, all assisting in the ultimate result. But it is to be observed that nobody plans out these systems of divided labour; indeed few people ever know how many trades there are, and how they are connected together. There are said to be about thirty-six distinct kinds of employment in making and putting together the parts of a piano; there are about forty trades engaged in watchmaking; in the cotton business there are more than a hundred occupations. But new trades are frequently created, especially when any new discovery takes place; thus, there are at least sixteen different trades occupied in photography, or in making the things required by photographers; and railways have produced whole series of employments which did not exist fifty years ago. These trades arise without any Act of Parliament to make them or allow them. There is no law to say how many trades there shall be, nor how many people shall go into each trade, because nobody can tell what will be wanted in future years. These things are arranged by a kind of #social instinct#. Each person takes up the kind of work which seems to suit him and to pay him best at the time. Another and a totally different kind of combination of labour arises when men arrange to assist each other in doing the same work. Thus, sailors pulling at the same rope combine their labour together; other instances are, carrying the same ladder, rowing the same boat, and so forth. In this case there is said to be #simple combination of labour#, because the men do the same sort of work. When the men have different operations to perform, there is said to be #complex combination of labour#, as when one man points a pin and another makes the head. On board a ship there is both simple and complex combination. When several men work at the same capstan the combination is simple, because one man does exactly the same as the others. But the captain, mate, steersman, carpenter, boatswain, and cook work together in complex combination, since each attends to his own proper duties. Similarly, in a company of soldiers the privates act together in simple combination, but the officers of different ranks have distinct duties to perform, so that the combination becomes complex. Men who thus assist each other are usually able to do far more work than if they acted separately. #32. Disadvantages of the Division of Labour.# There are certainly some evils which arise out of the great division of labour now existing in civilised countries. These evils are of no account compared with the immense benefits which we receive; still it is well to notice them. In the first place, #division of labour tends to make a man's power narrow and restricted#; he does one kind of work so constantly, that he has no time to learn and practice other kinds of work. A man becomes, as it has been said, worth only the tenth part of a pin; that is, there are men who know only how to make, for instance, the head of a pin. In the time of the Romans it was said, _ne sutor ultra crepidam_, let not the shoemaker go beyond his last. When a man accustomed only to making pins or shoes goes into the far west states of America, he finds himself unfitted for doing all the kinds of hard work required from a settler. The poor peasant from Norway or Sweden, who seems at first sight a less intelligent man, is able to build his own house, till the ground, tend his horse, and in a rough way, make his own carts, implements, and household furniture. Even the Red Indian is much better able to take care of himself in a new country than the educated mechanic. The only thing to be said is that the skilled shoemaker, or mechanic of whatever sort, must endeavour to keep to the trade which he has learnt so well. It is a misfortune both for himself and for other people if he is obliged to undertake work which he cannot do so well. A second disadvantage of the division of labour is that #trade becomes very complicated, and when deranged the results are ruinous to some people#. Each person learns to supply only a particular kind of goods, and if change of fashion or any other cause leads to a falling off in the demand for that kind of goods, the producer is left in poverty, until he can learn another trade. At one time the making of crinoline skirts for ladies was a large and profitable trade; now it has ceased almost entirely, and those who learnt the business have had to seek other employments. But each trade is generally well supplied with hands perfectly trained to the work, and it is very difficult for fresh workmen, especially when old, to learn the new work, and compete with those who have long practised it. In some cases this has been successfully done; thus the Cornish miners, when the mines in Cornwall were no longer profitable, went into the collieries, where more hewers of coal were much wanted. But, generally speaking, it is very difficult to find a new employment in England, and this is a strong reason why trades-unions should make no objection to new men entering a trade to which they have not been brought up. The colliers tried to keep the Cornish miners out of the coal pits. In order to keep their own wages as high as possible they would let other men starve. But this is a very selfish and hurtful way of acting. If every trade were thus to try and keep all other people away, as if the trade were their own property, there would constantly be a number of unfortunate people brought to the workhouse through no fault of their own. It is most important, therefore, to maintain a man's right to do whatever kind of work he can get. It is one of the first and most necessary rights of a labourer to labour in any honest way he finds most profitable to himself. #Labour must be free.# CHAPTER V. CAPITAL. #33. What is capital?# We will now endeavour to understand the nature of #the third requisite of production, called capital, which consists of wealth used to help us in producing more wealth#. All capital is wealth, but it is not true that all wealth is capital. If a man has a stock of food, or a stock of money with which he buys food, and he merely lives upon this without doing any labour, his stock is not considered to be capital, because he is not producing wealth in the meantime. But if he is occupied in building a house, or sinking a well, or making a cart, or producing anything which will afterwards save labour and give utility, then his stock is capital. The great advantage of capital is that it enables us to do work in the least laborious way. If a man wants to convey water from a well to his house, and has very little capital, he can only get a bucket and carry every bucket-full separately; this is very laborious. If he has more capital, he can get a barrel and wheel it on a barrow, which takes off a large part of the weight; thus he saves much labour by the labour spent upon the barrel and barrow. If he has still more capital his best way will be to make a canal, or channel, or even to lay a metal pipe all the way from the well to his house; this costs a great deal of labour at the time, but, when once it is made, the water will perhaps run down by its own weight, and all the rest of his life he will be saved from the trouble of carrying water. #34. Fixed and Circulating Capitals.# Capital is usually said to be either fixed or circulating capital, and we ought to learn very thoroughly the difference between these two kinds. #Fixed capital# consists of factories, machines, tools, ships, railways, docks, carts, carriages, and other things, which last a long time, and assist work. It does not include, indeed, all kinds of fixed property. Churches, monuments, pictures, books, ornamental trees, &c., last a long time, but they are not fixed capital, because they are not used to help us in producing new wealth. They may do good, and give pleasure, and they form a part of the wealth of the kingdom; but they are not capital according to the usual employment of the name. #Circulating capital consists of the food, clothes, fuel, and other things which are required to support labourers while they are engaged in productive work.# It is called circulating because it does not last long; potatoes and cabbages are eaten up, and a new supply has to be grown; clothes wear out in a few months or a year, and new ones have to be bought. The circulating capital, which is in the country now, is not the same circulating capital which was in the country two years ago. But the fixed capital is nearly the same: some factories may have been burnt or pulled down; some machines may have become worn out, and have been replaced by new ones. But these changes in fixed capital are comparatively few; whereas the whole or nearly the whole of the circulating capital is changed every year or two. But the fact is that we cannot distinguish so easily as we may seem to do between fixed and circulating capitals; there may be kinds of capital which are neither quite fixed nor quite circulating, but something between the two. Flour is soon eaten up, and is circulating capital. A flour mill lasts fifty years, perhaps, and may certainly be called fixed capital; a flour sack lasts about ten years on an average. Is such a sack fixed or circulating capital? It seems to me difficult to say. In the case of a railway, the coal and oil wanted for the engine are used up at once, and are clearly circulating capital; the railway wagons last about ten years, the locomotive engines twenty years or more; the railway stations last at least thirty years; there is no reason why the bridges and tunnels and embankments should not last hundreds of years with proper care. Thus we see that #capital is altogether a question of time, and we must say that capital is more fixed as it endures or continues useful a longer time; it is more circulating in proportion as it is sooner worn out or destroyed, and thus requires to be more frequently replaced#. #35. How Capital is obtained. Capital is the result of saving or abstinence#, that is, it can only be obtained by working to produce wealth, and then not immediately consuming that wealth. The poor savage who has to labour hard every day for fear that he may have to go without food, has no capital; but when he has food in hand, and can employ himself in making bows and arrows to facilitate the capture of animals, he is investing capital in the bows and arrows. Whenever we work in this way for a future purpose, we are living on capital and investing it. The abstinence (Latin, _abs_, from, and _tenens_, holding) consists in holding off from the enjoyment of something which we have produced, or might produce with the same labour. #To save# is to keep something whole or untouched for future use; we save it as long as we do not consume it. If I have a stock of flour and eat it up, there is an end of the flour, and I cannot be said to save that. But if, while eating the flour, I am engaged in making a plough or a cart, or any other durable thing which will help me in production, I have turned one form of capital into another form. I might have eaten the flour in idleness, in which case it would not have been capital. But, while eating it, I worked for a future purpose. In so doing I am said to #invest capital#, which means #to turn circulating into fixed capital, or less durable into more durable capital#. Capital, accordingly, is invested for longer or shorter periods according to the durability of the form in which it is invested (Latin, _in_, on, and _vestire_, to clothe). A good plough will perhaps last twenty years; all through that time the owner should be getting back by its use the benefit of the labour and capital spent in making it. When it is worn out, he ought to have all the capital it cost paid back, with some increase or interest. Capital invested in railway wagons should pay itself back during the ten years that the wagons last on an average. The capital invested in any work may always be said to consist of wages or what is bought with wages. Thus the capital invested in railways really consisted of the food, clothes, and other commodities consumed by the labourers who made the railways. It is true that tools also were needed as well as the iron rails, sleepers, bricks, and other materials required for the work. But as these things had previously been made by labour, we may consider that the capital really invested in them was the wages of the labourers who had already made them. Thus, #when we go far enough back, we always find that the capital invested consisted of the maintenance of labourers#. #36. Investment of Capital.# We have two things to consider with regard to the investment of capital, #firstly, the quantity of the capital#, #and secondly, the length of time for which it is invested#. The same quantity of capital will keep more or less men at work, according as it is invested for shorter or longer periods. A man in growing potatoes only needs to wait for the result of his labour during one year on an average. If his food and clothing during one year cost thirty pounds, then capital worth thirty pounds is sufficient to keep him at work in this way. Three men cultivating potatoes will of course require three times as much capital, or ninety pounds worth; ten men will need three hundred pounds worth, and so on in proportion. But in growing vines it is necessary to wait several years after the vines are planted before they begin to bear. Suppose it to require five years waiting, then the labourer will want 5 x 30, or one hundred and fifty pounds worth of capital before he can grow vines. Three vine-growers will want 3 x 5 x 30, or four hundred and fifty pounds worth of capital; ten men, 10 x 5 x 30, or fifteen hundred pounds worth, and so on in proportion. Thus we see clearly that the capital required in any kind of industry is proportional to the number of men employed, and also to the length of time for which the capital remains locked up, or invested on the average. But there is no fixed proportion whatever between the number of labourers and the capital they require--it entirely depends upon the length of time in which the capital is turned over, that is, invested, and got back again. A poor savage manages to live on a few days' capital in hand; a potato grower on one year's capital. On a modern farm in which many durable improvements are made, the quantity of capital required is very much greater. To employ men upon a railway requires immense capital, because so much of it is sunk in a very fixed and durable form in the embankments, tunnels, stations, rails, and engines. #37. Labour cannot be Capital.# It is not uncommon to hear it said that #labour is the poor man's capital#; and then it is argued that the poor man has just as much right to live upon his capital as the rich man upon his. And so he has, if he can do it. If a labourer can go and produce any kind of wealth, and exchange it for food and necessaries, of course he may do so. But, as a general rule, he cannot do this without working for a length of time, waiting till the produce is finished and sold. In order to do this he wants something more than his labour, namely, his food in the meantime, besides materials and tools. These form the required capital, and there is no good in calling labour capital when it is really quite a different thing. At other times I have heard it said that #land is capital, intelligence is capital#, and so forth. These are all misleading expressions. The intended meaning seems to be that some people live upon what they get from land, or from intelligence, as other people live upon what they get as interest upon capital. Nevertheless, land is not capital, nor is intelligence capital. Production requires, as we have seen, three distinct things, namely, land, labour, and capital; and there is much harm in confusing things together by giving them the same name when they are not the same thing. CHAPTER VI. DISTRIBUTION OF WEALTH. #38. How Wealth is Shared.# We have learned what wealth is, how it is to be used, and how it may be produced in the greatest quantities, with the least possible labour, but we have yet to enter on the more difficult parts of our subject. We must now try to make out how wealth is shared among those who have a hand in producing it. The requisites of production, as we have seen, are land, labour, and capital; if these were all supplied by the same person, no doubt the produce ought all to belong to him, with the exception of what is taken by the government as taxes. But, in a state of society such as exists at present, the labourer seldom owns all the land and capital he uses; he goes to work on another man's farm, or in another man's factory; he lives in another man's house, and often eats another man's food; he derives benefits from other men's inventions, and discoveries; and he uses roads, railways, public buildings, &c., furnished at the cost of the community. The production of wealth, therefore, depends not on the will and exertions of a single man, but on the proper bringing together of land, labour, and capital, by different persons and classes of persons. These different persons must have their several shares of the wealth produced; if they furnish something requisite for producing, they can make a bargain and ask for more or less of the produce. But #it is not mere chance or caprice which governs the sharing of wealth, and we have to learn the natural laws according to which the distribution takes place#. We must ascertain how it is that many of the population get so little, and some so much. Men work very hard on a farm and raise crops; the landlord comes and takes away a large part as rent, so that the labourers have barely enough to live upon. When we are able to understand why the labourer gets so little at present, we shall see, perhaps, how he might manage to get more, but in any case we shall see that it is due in great part to the laws of nature. The part of our subject which we are now going to consider is called the #distribution of wealth#, because it teaches us how the wealth produced is distributed (Latin, _dis_, apart, and _tribuere_, to allot) between the labourers, the owners of land, the owners of capital, and the government. The part which the labourer gets is called #wages#; the share of the land owner is called #rent#; that of the capitalist is #interest#; and the government take #taxes#. We may say that, as a general rule, the produce of work is divided into four shares, which may be thus shown: #produce = wages + rent + interest + taxes.# #39. The Labourer's Share--Wages.# It ought to be carefully remembered that the names #wages#, #rent#, and #interest#, as here used, do not exactly agree in meaning with the names as we employ them in common life. The wages paid to workmen are sometimes more than wages, being partly interest; the rent almost always consists partly of interest; and what is called interest may in some degree be really wages or rent. By #wages# we mean, in political economy, nothing but what goes to pay for the trouble of labour. But many workmen own their own tools; masons have a boxful of chisels, mallets, rules, &c.; carpenters often require twenty or thirty pounds' worth of planes and other implements; a pianoforte maker sometimes owns seventy pounds' worth of tools; even gardeners require spades, rakes, a barrow, scythe, or perhaps a mowing machine and a roller. Now, all such tools represent so much invested capital, and a certain amount of interest must be paid for this capital. A pianoforte maker might expect five pounds a year as interest upon the cost of his tools. But true wages, are what remains after allowance has been made for such interest, and it would be proper to subtract also what is paid to the government as taxes. #40. The Land Owner's Share--Rent#, the second part of the produce, means, in political economy, what is paid for the use of a natural agent, whether land, or beds of minerals, or rivers, or lakes. The rent of a house or factory is, therefore, not all rent in our meaning of the word. Capital has been spent in building the house or factory, and interest must be paid on this capital; we must then deduct this interest from what is commonly called the rent, before we can find out what is really rent. The ground rent of a house is the rent paid for the ground on which it stands, and this will be more nearly the true rent, apart from interest. Similarly, the ordinary rent of a farm will usually include interest upon the capital spent on the farm buildings, roads, gates, fences, drains, and other improvements. We shall afterwards learn exactly how true rent arises. #41. The Capitalist's Share.# The proper share of the capitalist is #interest#; but this is usually a good deal less than what actually remains in the hands of the capitalist. Business is generally carried on by some capitalist who rents a piece of land, builds a factory, purchases machinery, and then employs men to work the machinery, paying them wages. The capitalist himself often acts as manager, and works every day almost as long as the workmen. When the goods are finished and sold, he keeps the whole of the money he gets for them; but then he has already paid out a large sum as wages, while the goods were being made; another part goes to pay the rent of the land which he has hired. Having struck off these portions, there ought to remain a certain #profit#, part of which he uses to live upon. But even this profit consists of more than interest upon his capital. It should include also a payment for his labour in superintending the business. The manager of a factory may seldom touch the cotton, flax, iron, or other material, which is manufactured; nevertheless, he works with his head and his pen, calculating the prices at which he can produce goods, inquiring where he can buy the materials most cheaply, choosing good workmen, keeping the accounts straight, and so on. Severe mental labour is really far more difficult and exhausting than manual labour; and in raising up a good business, and carrying it through times of danger, a manager has to undergo great anxiety and mental fatigue. Thus, it is necessary that a successful manager should receive a considerable share of the produce, so as to make it worth his while to give this labour. His share is called #the wages of superintendence#, and, although usually much larger than the share of a common labourer, it is really wages of the same nature. Another part of the capitalist's so-called profit ought to be laid aside as #recompense for risk#. There is always more or less uncertainty in trade, and even the most skilful and careful manager may lose money by circumstances over which he has no control. Sometimes, after building a factory, the demand for the goods which he is going to produce falls off; sometimes the materials cannot be bought; perhaps it is discovered, when too late, that the factory has been built in an unsuitable place; occasionally, too, the workmen are discontented, and refuse to work for such wages as the capitalist can afford to pay. Now, whenever any of these mistakes or misfortunes happen, it is the capitalist who mainly suffers, because he loses a great deal of money, on which he might otherwise have lived comfortably. Sometimes men who have worked hard all their lives, and grown rich by degrees, lose all their wealth again in the end, by some error of judgment or by some unfortunate event due to no fault of their own. A capitalist, then, must have some inducement for running into these disagreeable risks; by lending his capital to the government he might get interest for it, and be nearly sure not to lose. If, then, he puts it into trade, and runs the risk of loss, he must have a recompense for the risk. This ought to be at least enough to make the profits of the successful business balance the losses of the unfortunate ones, so that on the average capitalists will get the interest of capital and the wages of superintendence free from loss. We may say, then, that-- profit = wages of superintendence + interest + recompense for risk. #42. About Interest.# That which is paid for the use of capital altogether apart from what is due for the trouble and risk of the person conducting the business, is called #interest#. This interest, of course, will be greater or less according as the amount of capital is greater or less; it will also be greater or less according as the capital is employed for a longer or shorter time. Thus the rate of interest is always stated in proportion to the capital sum and to the time; _five per cent. per annum_ means that, for every hundred pounds of capital, five pounds are paid during every year in which the capital is used, and in the same proportion for longer or shorter times. The rates of interest actually paid in business vary very much, from one or two per cent. up to fifty per cent. or more. When the rate is above five or six per cent., it will be to some extent not true interest, but compensation for the risk of losing the capital altogether. To learn the true average rate of interest, we must inquire what is paid for money lent to those who are sure to pay it back, and who give property in pledge, so that there may be no doubt about the matter. It seems probable that the true average rate of interest in England is at present about four per cent., but it varies in different countries, being lower in England and Holland than anywhere else. In the United States it is probably six or seven per cent. The most important fact about #interest# is that #it is the same in one business as in another#. The rates of profit differ very much, it is true, but this is because the labour of superintendence is different, or because there is greater risk in one trade than another. But the true interest is the same, because capital, being lent in the form of money, can be lent to one trade just as easily as to another. There is nothing in circulating capital which fits it for one trade more than another: accordingly it will be lent to that trade which offers ever so little more interest than other trades. Thus #there is a constant tendency to the equality of interest in all branches of industry#. CHAPTER VII. WAGES. #43. Money Wages and Real Wages.# Wages, as we have already learnt, are the payments received by a labourer in return for his labour. It does not matter whether these payments are received daily, weekly, monthly, quarterly, or yearly. A day gardener is, perhaps, paid every evening; an artisan is usually paid on Saturday or Friday night, or sometimes fortnightly; clerks receive their salaries monthly; managers, officers, secretaries, and others, are paid quarterly, or sometimes half-yearly. When the wages are paid monthly, or at longer intervals, they are generally called #salary# (Latin, _salarium_, money given to Roman soldiers for salt); but if the salary is paid for labour and nothing else, it is exactly the same in nature as wages. I said, in the last chapter, that wages consist of a share of the produce of labour, land, and capital; in the preceding paragraph, I have been saying that it consists of payments. Here arises one of the great difficulties of our subject. As a matter of fact, the wages received by labourers, in the present day, consist almost always of money. A person working in a cotton mill produces cotton yarn; but he does not receive at the end of the week so much cotton yarn; he receives so many shillings. This is much more convenient; for if the labourer received cotton yarn, or any other commodity which he produces, he would have to go and sell it in order to buy food and clothes, and to pay the rent of his house. Instead, then, of receiving an actual share of the produce, he receives from the capitalist as much money as is supposed to be equal in value to his share. Now, we shall see that it is requisite to distinguish between #money wages# and #real wages#. What a labourer really works for is the bread, clothes, beer, tobacco, or other things which he consumes; these form the real wages. If he gets more of these, it does not matter whether he gets more or less money wages; he cannot eat money, or use it in any way except to spend it at shops. If corn or cotton becomes dearer, the wages of every workman are really lessened; because he can buy less corn or cotton with his money wages. On the other hand, everything which makes goods cheaper, increases the real wages of workmen; because they can get more of the goods in exchange for the same money wages. People are accustomed to think far too much about the number of shillings they get for a day's work; they fancy that, if they get 25 per cent. more money wages, they must be 25 per cent. more wealthy. But this is not necessarily the case; for if the prices of goods on the average have also risen 25 per cent, they will be really no richer nor poorer than before. We now begin to see that to increase the productiveness of labour is really the important thing for everybody. For if anything, such as cotton cloth, can be made with less labour, it can be sold more cheaply, and everybody can buy more of it for the same money, and thus be better clothed. If the same were the case with other goods, so that linen, stockings, boots, bricks, houses, chairs, tables, clocks, books, &c., were all made in larger quantities than before, with the same labour, everybody in the country would be better supplied with the things which he really wishes to have. It is certain that #a real increase of wages to the people at large is to be obtained only by making things cheaply#. No doubt a tradesman gains sometimes when the goods he deals in become dearer, but to the extent that they are dearer, all consumers of the goods lose, because they can enjoy less comforts and necessaries. But, if goods are made cheaply, all consumers gain thereby, and, all people being consumers, all gain so far as they use the cheapened articles. Nor does it follow that artisans and tradespeople suffer by the cheapening of goods. If, owing to some invention, much greater quantities are made with the same labour, the artisan will probably be able to sell his share of the produce for more than before, that is, his wages will rise instead of falling by the cheapening of the produce. The tradesman, again, may gain less on each separate article that he sells, but he may sell so much more than before, that his total profits may be increased. The result to which we come is, then, that #all increase of produce, and cheapening of goods tends to the benefit of the public, and this is the true way in which people are made richer#. #44. How Differences of Wages arise.# It is very important to understand rightly the reasons of the great differences which exist between the rates of wages paid in different occupations. Some kinds of labourers are paid a hundred or even a thousand times as much for a day's work as others, and it may seem very unfair that there should be such great differences. We must learn to see that this is the necessary result of the various characters and abilities of persons, partly arising from the actual strength of mind and body with which they were born, partly from the opportunities of education and experience which they have happened to enjoy. We are often told that all men are born free and equal; however this may be in a legal point of view, it is not true in other ways. One child is often strong and stout from its earliest years; another weakly and unfit for the same exertion. In mind there are still more remarkable differences. The rates of wages in different employments are governed by #the laws of supply and demand# which we shall afterwards consider. Just as goods rise in price when there is little in the market and much is wanted, so the price of men's labour rises when much of any particular kind is wanted and little is to be had. It does not matter much whether we speak of demand for goods or demand for the labour, which is necessary to make the goods. If more things of a certain sort are wanted, then more men able to make them must be found. If I buy an aneroid barometer, I use up the labour of a man able to make such a barometer; if many people take a fancy to have aneroid barometers, and only a few workmen have the necessary skill to make them, they can ask a high price for their labour. It is true that people buying barometers do not usually pay the workmen for making them; a man with capital gets the barometers made beforehand and puts them in shops ready for sale. The capitalist advances the wages of the workmen, but this is only for a few weeks or months, and according as the demand for barometers is brisk or slow, he employs more or fewer workmen. Thus, #demand for commodities comes to nearly, though not quite, the same thing as demand for labour#. There is the profit of the capitalist to be considered as well; but, with this exception, #rates of wages are governed by the same laws of supply and demand as the prices of goods#. Anything, then, which affects the numbers of men able and willing to do a particular kind of work, affects the wages of such men. Thus the principal circumstance governing wages is the comparative numbers of persons brought up with various degrees of strength, both of body and mind. The greater number of ordinary men, while in good health, have sufficient strength of arms and legs to do common work; the supply of such men is consequently very large, and, unless they can acquire some peculiar knowledge or skill, they cannot expect high wages. Dwarfs and giants are always much less common than men of average size; if there happened to be any work of importance which could only be done by dwarfs or giants, they could demand high wages. Dwarfs, however, are of no special use except to exhibit as curiosities; very large strong men, too, are not generally speaking of any particular use, because most heavy work is now done by machinery. They can, however, still get very high wages in hewing coal, or puddling iron, because this is work, requiring great strength and endurance, which is not yet commonly done by machinery. Iron puddlers sometimes earn as much as £250 a year. It is great skill and knowledge which generally enable a man to earn large wages. Rich people like to get the best of everything, and thus the few people who can do things in the best possible way can ask very high prices. Almost any one can sing badly; but hardly any one can sing as well as Mr. Sims Reeves: thus he can get perhaps £20 or £30 for every song which he sings. It is the same with the best artists, actors, barristers, engineers. An artist is usually his own capitalist, for he maintains himself during many months, or even years, while he is painting a great picture; if he succeeds in doing it excellently well, he can sell the picture for thousands of pounds, because there are many rich people who wish to possess good pictures. #45. Adam Smith on Wages.# There are, however, various circumstances which cause wages in any particular employment to be higher or lower than in other employments, and we had better attend to what Adam Smith has said on this subject. He mentioned five principal circumstances which make up for small wages in some occupations, and balance great wages in other ones, as follows: (1.) #The Agreeableness or Disagreeableness of the Employments themselves.# If an employment is in itself comparatively pleasant, it attracts many who would not otherwise go into it at the current wages. Thus, officers of the army and navy are not on the average highly paid; but there is never any difficulty in finding men willing to be officers, because the work is thought to be easy, and there is honour and power attaching to it. On the other hand, a good butcher makes high wages, because his business is a greasy one, besides being thought to be cruel, and a clever man must be attracted to it by good earnings. (2.) #The Easiness and Cheapness, or the Difficulty and Expense of learning the Occupation.# This circumstance always has much importance, because the greater number of the people are poor, and are consequently unable to give their children a long good education. Thus, the larger part of the young men who grow up are only fit for common manual employments, and therefore get low wages. To learn a profession, like that of an architect or engineer, it is requisite to pay a high premium, and become a pupil in a good office, and then there are many years to be spent in practising and waiting before profit begins to be made. Hence the comparatively few who succeed in the difficult professions gain very high wages. (3.) #The Constancy or Inconstancy of Employment.# When a man is sure of being employed and paid regularly all the year round, he is usually willing on that account to accept a less rate of wages. Thus, there is little difficulty in finding men to be policemen at about 25 shillings a week; for though they have to go on duty at night, and their work is often tedious and disagreeable, yet policemen are nearly sure to have employment as long as they behave well. A carpenter or bricklayer, on the contrary, is sometimes thrown out of work, and becomes anxious as to the means of keeping his family. Masons and bricklayers, who cannot work during frosty weather, ought of course to have higher wages during the rest of the year, so as to make up a good average. Dock-labourers, who are simply strong men without any particular skill, earn large wages when trade is brisk and many ships come into the docks; at other times, when trade is slack, or when contrary winds keep ships out of port, they often fall into destitution through want of employment. (4.) #The Small or Great Trust which must be reposed in those who exercise the Employments.# This circumstance considerably affects the supply of people suitable for certain occupations. A man cannot expect to get employment in a bank, or in a jeweller's shop, unless he has a good character. Nothing is more difficult than for a person convicted of dishonesty to find desirable employment. Thus, a good character is often worth a great deal of money. Honesty, indeed, is so far common that it does not alone command high wages; but it is one requisite. The cleverest man would never be made the manager of a large business, if there was reason to think that he had committed fraud. (5.) Lastly, #The Probability or Improbability of Success in Employments greatly affects the Wages of those who succeed#. In some cases, a man can hardly avoid succeeding; if he once enlists, he is made into a soldier whether he likes it or not. Almost all, too, who become clerks in banks, counting-houses, or public offices, can succeed in doing some of the work required in such offices. Accordingly clerks are seldom highly paid. But of those who become barristers, only a few have the peculiar knowledge, tact, and skill required to make them successful; these few make very large gains, and the unsuccessful men have to seek for other employments. Some occupations are very badly paid, because they can be taken up by men who fail in other work. Frequently a person who has learnt a trade or profession finds that he is unfit for it; in other cases, there is a failure in the demand for a commodity, which obliges its manufacturers to seek other work. Such people are usually too old and too poor to begin again from the beginning, and learn a new difficult trade. Thus they have to take to the first work they can do. Educated men who have not been successful become secretaries, house-agents, insurance-agents, small wine merchants, and the like. Uneducated men have to drive cabs, or go into the army, or break stones; poor women become seamstresses, or go out charing. Here again we see the need of leaving everybody at perfect liberty to enter any trade which he can manage to carry on; it is not only injurious to the public, but it is most unfair to people in misfortune, if they are shut out of employments by the artificial restrictions of those who already carry on those employments. #46. What is a Fair Day's Wages?# It is a favourite saying that #a man should have a fair day's wages for a fair day's work; but this is a fallacious saying#. Nothing, at first sight, can seem more reasonable and just; but when you examine its meaning, you soon find that there is no real meaning at all. It amounts merely to saying, that #a man ought to have what he ought to have#. There is no way of deciding what is a fair day's wages. Some workmen receive only a shilling a day; others two, three, four, or five shillings; a few receive as much as ten, or even twenty shillings a day; which of these rates is fair? If the saying means that all should receive the _same_ fair wages, then all the different characters and powers of men would first have to be made the same, and exactly equalised. We have seen that wages vary according to the laws of supply and demand, and as long as workmen differ in skill, and strength, and the kind of goods they can produce, there must be differences of demand for their products. Accordingly, there is no more a fair rate of wages than there is a fair price of cotton or iron. It is all a matter of bargain; he who has corn or cotton or iron or any other goods in his possession, does quite right in selling it for the best price he can get, provided he does not prevent other people from selling their goods as they think best. So, any workman does quite right in selling his labour for the highest rate of wages he can get, provided that he does not interfere with the similar right of other workmen to sell their labour as they like. CHAPTER VIII. TRADES-UNIONS. #47. The Purposes of Trades-Unions.# Working-men commonly think that the best way to raise their earnings is to form trades-unions, and oblige their employers to pay better wages. #A trades-union is a society of men belonging to any one kind of trade, who agree to act together as they are directed by their elected council, and who subscribe money to pay the expenses.# Some trades-unions are very different from others, and they are not all well conducted nor all badly conducted, any more than people are all well behaved or all badly behaved. Moreover, the same trades-union often does different kinds of business. Usually they act as benefit or friendly societies, that is to say, if a member of a trades-union pays his subscription of say one shilling weekly, together with an entrance-fee and other small payments, he has a right, after a little time, to receive say twelve shillings a week in case of illness; he gets back the value of his tools if they should happen to be burnt or lost; when thrown out of work he will enjoy say ten shillings a week for a certain length of time; if he is so unfortunate as to be disabled by accident, he receives a good sum of money as an accident benefit; and when he dies he is buried at the expense of the union. All these arrangements are very good, for they insure a man against events which are not usually under his own control, and they prevent workmen from becoming paupers. So far as trades-unions occupy themselves in this way, it is impossible not to approve of them very warmly. Then, again, trades-unions are able to take care of their members by insisting that employers shall make their factories wholesome and safe. If a single workman were to complain that the workshops were too hot, or that a machine was dangerous, or a mine not properly ventilated, he would probably not be listened to, or would be told to go about his business. But if all the workmen complain at once, and let it be known that they do not intend to go on working unless things are made better, the employer will think about the matter seriously, and will do anything that is reasonable to avoid disputes and trouble. Everybody is justified in taking good care of his own life and health, and in making things as convenient to himself as possible. Therefore we cannot find fault with workmen for discussing such matters among themselves, and agreeing upon the improvements they think right to demand. It is quite proper that they should do so. But nobody is perfectly wise, and those who have not much time to get knowledge, and learn science and political economy, will often not see the effects of what they demand. They may ask for something which is impossible, or would cost so much as to stop the trade altogether. In all such matters, therefore, working-men should proceed cautiously, hearing what their employers have to say, and taking note especially of what the public opinion is, because it is the opinion of many who have nothing to lose or gain in the matter. #48. The Regulation of Hours.# One of the principal subjects of dispute is usually the number of hours in the day that a workman should work. In some trades a man is paid by the hour or by the work done, so that each man can labour a longer or shorter time as he prefers. When this is the case, each man is the best judge of what suits him, and no trades-union ought to interfere. But in factories, generally speaking, it would not do to let the men come and go when they liked; they must work while the engines and machines are moving, and while other men need their assistance. Accordingly, somebody must settle whether the factory is to work for twelve, or ten, or nine, or eight hours a day. The employer would generally prefer long hours, because he would get more work and profit out of his buildings and machines, and he need not usually be on the spot all the time himself. It seems reasonable, then, that the workmen should have their opinion, and have a voice in deciding how long they will work. But workmen are likely to be mistaken, and imagine that they may get as much wages for nine hours' work as for ten. They think that the employer can raise the price of his goods, or that he can well afford to pay the difference out of his own great profits. But if political economy is to be believed, the wages of workmen are really the value of the goods produced, after the necessary rent of land and interest of capital have been paid. If factories, then, produce less goods in nine hours than in ten, as is usually the case, there cannot, in the long run, be so much wages to receive. On the other hand, as machinery is improved, labour becomes more productive, and it is quite right that those who are sufficiently well paid should prefer, within reasonable limits, to lessen their hours of work rather than increase their earnings. This is a matter which depends upon many considerations, and it cannot be settled in this Primer. What I should conclude is, that when workmen want to lessen their hours of work, they ought not to ask the same wages for the day's work as before. It is one thing to lessen the hours of work; it is another thing to increase the rate of wages per hour, and though both of these things may be rightly claimed in some circumstances, they should not be confused together. #49. The Raising of Wages.# The principal object of trades-unions, however, is to increase the rate of wages. Working men seem to believe that, if they do not take care, their employers will carry off the main part of the produce, and pay very low wages. They think that capitalists have it all their own way unless they are constantly watched, and obliged to pay by fear of strikes. Employers are regarded as tyrants who can do just as they like. But this is altogether a mistake. No capitalists can for more than a year or two make unusual profits, because, if they do, other capitalists are sure to hear of it, and try to do likewise. The result will be that the demand for labourers in that kind of trade will increase; the capitalists will bid against each other for workmen, and they will not, generally speaking, be able to get enough without raising the rate of wages. There is no reason whatever to think that trades-unions have had any permanent effect in raising wages in the majority of trades. No doubt wages are now much higher than they were thirty or forty years ago; but to a certain extent this is only a rise of money wages, due to the abundance of gold discovered in California and Australia. The rest of the increase can be easily accounted for by the great improvements in machinery, and the general prosperity of the country. It is certain, too, that the increase of wages is not confined to those trades which have unions; even common labourers who have no unions receive considerably more money wages than they did, and domestic servants, who never strike in a body, but simply leave one place when they can get a better, have raised their own wages quite as much as any union could have done it for them. #50. Strikes and Lockouts.# #Workmen are said to strike, that is, to strike work, when a number of them agree together to cease working on a certain day for certain employers#, in order to oblige these employers to pay better wages, or in some way to yield to their demands. When one or more employers suddenly dismiss their workpeople altogether, in order to oblige them to take lower wages, or agree to some alteration of work, it is called #a lockout#, and a #lockout is nearly the same as a strike of the employers#. Strikes sometimes last for many months, the workmen living on what savings they have, and on contributions sent to them by workmen or unions in the same or other trades. The employers at the same time lose much money by their factories standing still, and they sometimes receive aid from other employers. There is nothing legally or morally wrong in a strike or lockout when properly conducted. A man, when free from promises or contracts, has a right to work or not to work, as he thinks best, that is to say, the law regards it as beneficial to the country, on the whole, that people should be free to do so. Similarly, employers are free to work their mills or not as they like. Neither employers nor employed, indeed, must break engagements; men who have promised to work to the end of the week must of course do so; they are not free till their promise is performed. Again, nobody should be allowed suddenly to stop work in a way endangering other people. Enginedrivers and guards in America sometimes strike when a train is halfway on its journey, and leave the passengers to get to the next town as they best can. This is little better than manslaughter. Neither the owners nor the workmen in gasworks, waterworks, or any other establishment on which the public depends for necessaries of life, should be allowed suddenly to stop work without notice. The safety of the public is the first consideration. The law ought therefore to punish those who make such strikes. #51. The General Effect of Strikes.# There is not space in this little work to argue the matter out in detail, but I have not the least doubt that #strikes, on the whole, produce a dead loss of wages to those who strike, and to many others#. I believe that if there had not been a strike during the last thirty years, wages would now be higher in general than they are, and an immense amount of loss and privation would also have been saved. It has, in fact, been shown by Dr. John Watts of Manchester, in his "Catechism of Wages and Capital," that even a successful strike usually occasions loss. He has said, "Allowing for accidental stoppages, there will not be in the most regular trades above fifty working weeks in the year, and one week will therefore represent two per cent. of the year. If a strike for four per cent. rise on wages succeeds in a fortnight, it will take twelve months' work at the improved rate to make up for the lost fortnight; and if a strike for eight per cent. lasts four weeks, the workmen will be none the richer at the end of twelve months; so that it frequently happens that, even when a strike succeeds, another revision of wages takes place before the last loss is made up; a successful strike is, therefore, like a successful lawsuit--only less ruinous than an unsuccessful one." If we remember that a large proportion of strikes are unsuccessful, in which case of course there is simple loss to every one concerned; that when successful, the rise of wages might probably have been gradually obtained without a strike; that the loss by strikes is not restricted to the simple loss of wages, but that there is also injury to the employers' business and capital, which is sure to injure the men also in the end; it is impossible to doubt that the nett result of strikes is a dead loss. The conclusion to which I come is that, #as a general rule, to strike is an act of folly#. #52. Intimidation in Strikes.# Those who strike work have no right to prevent other workmen from coming and taking their places. If there are unemployed people, able and willing to work at the lower wages, it is for the benefit of everybody, excepting the strikers, that they should be employed. It is a question of supply and demand. The employer, generally speaking, is right in getting work done at the lowest possible cost; and, if there is a supply of labour forthcoming at lower rates of wages, it would not be wise of him to pay higher rates. But it is unfortunately common for those who strike to endeavour to persuade or even frighten workmen from coming to take their places. This is as much as to claim a right to the trade of a particular place, which no law and no principle gives to them. A strike is only proper and legal as long as it is entirely voluntary on the part of all concerned in refusing to work. When a striker begins to threaten or in any way prevent other people from working as they like, he commits a crime, by interfering with their proper liberty, and at the same time injuring the public. Men are free to refuse to labour, but it is absolutely necessary to maintain at the same time the freedom of other men to labour if they like. The same considerations, of course, apply to lockouts; no employer who locks out his workmen has any right to intimidate, or in any way to oblige other employers to do the same. No doubt voluntary agreements are made between employers, and lockouts are jointly arranged, just as extensive strikes are arranged beforehand. If any employers were to go beyond this and threaten to injure other employers if they did not join in the lockout, they should be severely punished. But such a case seldom or never occurs. Thus, strikes and lockouts are proper only as mere trials, to ascertain whether labour will be forthcoming at a certain rate of wages, or under certain conditions. If the workmen in a trade are persuaded that their wages are too low, then a strike will show whether it is the case or not; if their employers find themselves unable to get equally good workmen at the same wages, they will have to offer more; but if equally good can be got at the old rate, then it is a proof that the strikers made a mistake. Their wages were as good as the state of trade warranted. It is all a matter of bargain, and of supply and demand. Those who strike work are in the position of those who, having a stock of goods, refuse to sell it, hoping to get a better price. If they make a mistake, they must suffer for it, and those who choose to sell their goods in the meantime will have the benefit. But it is plain that it would never do to allow one holder of goods to intimidate and prevent other holders from selling to the public. It is worthy of consideration whether even voluntary combinations of dealers should not be prohibited, because they are often little better than conspiracies to rob the public. The good of consumers, that is, of the whole people, is what we must always look to, and this is best secured when men act freely and compete with each other to sell things at the cheapest rates. #53. Trades-Union Monopolies.# It cannot be denied that, in certain trades, the men may succeed to some extent in keeping their wages above the natural level by union. Wages, like the prices of goods, are governed by the laws of supply and demand. Accordingly, if the number of hat-makers can be kept down it reduces the number of hats that can be made, raises their prices, and enables the hat-makers to demand higher wages than they otherwise could do. Many unions try thus to limit production by refusing to admit more than a fixed number of apprentices, and by declining to work with any man who has not been brought up to the trade. It is probable that, where a trade is a small one, and the union powerful, there may be some success. The trade becomes a monopoly, and gets higher wages by making other people pay dearer for the goods they produce. They raise a tax from the rest of the nation, including all the workmen of other trades. This is a thoroughly selfish and injurious thing, and the laws ought by all reasonable means to discourage such monopolies. Moreover, monopoly is extremely hurtful in the long run to the working classes, because all the trades try to imitate those which are successful. Finding that the hatters have a strong union, the shoemakers, the tailors, and the seamstresses try to make similar unions, and to restrict the numbers employed. If they could succeed in doing so, the result would be absurd; #they would all be trying to grow richer by beggaring each other#. As I have pointed out in the _Logic Primer_ (section 177, p. 117), this is a logical fallacy, arising from the confusion between a general and a collective term. #Because any trade separately considered may grow richer by taxing other trades, it does not follow that all trades taken together, and doing the same thing, can grow richer.# No doubt, working men think that, when their wages are raised, the increase comes out of the pockets of their employers. But this is usually a complete mistake; their employers would not carry on business unless they could raise the prices of their goods, and thus get back from purchasers the increased sum which they pay in wages. They will even want a little more to recompense them for the risk of dealing with workmen who strike at intervals, and thus interrupt business. It is the consumers of goods who ultimately pay the increased wages, and though wealthy people no doubt pay a part of the cost, it is mainly the working people who contribute to the higher wages of some of their own class. The general result of trades-union monopolies to the working people themselves is altogether disastrous. If one in a hundred, or one in a thousand is benefited, the remainder are grievously injured. The restrictions upon work which they set up tend to keep men from doing that which they are ready and willing to do. The lucky fatten at the cost of those whom they shut out in want of work, and the strikes and interruptions of trade, occasioned by efforts to keep up monopolies, diminish the produce distributed as wages. #54. Professional Trades-Unions.# We often hear the proceedings of trades-unions upheld on the ground that lawyers, doctors, and other professional men have their societies, Inns of Court, or other unions, which are no better than trades-unions. This is what may be called a _tu quoque_ (thou also) argument. "We may form unions because you form unions." It is a poor kind of argument at best; one man acting unwisely is no excuse for another doing so likewise. I am quite willing to allow that many of the rules of barristers and solicitors are no better than those of trades-unions. That a barrister must begin to be a barrister by eating certain dinners; that he must never take a fee under a certain amount; that he must never communicate with a client except through a solicitor; that a senior counsel must always have a junior; and most of the rules of the so-called #etiquette# are clearly intended to raise the profits of the legal profession. Many things of this kind want reform. But, on the other hand, these unions avoid many of the faults of trades-unions. There is no limit to the number of persons who may enter them; all men of good character and sufficient knowledge can become barristers and solicitors. Moreover, the entrance to the legal, medical, and several other professions is being more and more regulated by examinations, which are intended purely to secure able men for the service of the public. Nor is any attempt made in these professional trades-unions to prevent men from exerting themselves as much as they can, so as to serve the public to the utmost of their ability. These professional trades-unions are thus free from _some_ of the evils which other unions produce. #55. The Fallacy of Making Work.# One of the commonest and worst fallacies into which people fall in political economy is to imagine that wages may be increased by doing work slowly, so that more hands shall be wanted. Workmen think they see plainly that the more men a job requires, the more wages must be paid by their employers, and the more money comes from the capitalists to the labourers. It seems, therefore, that any machine, invention, or new arrangement which gets through the work more quickly than before, tends to decrease their earnings. With this idea, bricklayers' labourers refuse (or did lately refuse) to raise bricks to the upper parts of a building by a rope and winch; they preferred the old, laborious, and dangerous mode of carrying the bricks up ladders in hods, because the work then required more hands. Similarly, brickmakers refused to use any machinery; masons totally declined to set stones shaped and dressed by machinery; some compositors still object to work in offices where type-composing machines are introduced. They are all afraid that if the work is done too easily and rapidly, they will not be wanted to do it; they think that there will be more men than there are berths for, and so wages will fall. In almost every case this is an absurd and most unfortunate mistake. No doubt, if men insist on sticking to a worse way of doing work after a better one has been invented, they may get bad wages, and perhaps go to the workhouse in old age. Thus, the hand-weavers in Spitalfields would continue weaving by hand, instead of learning to weave by steam power, and the case is somewhat the same with the hand-nailers of South Staffordshire. But when the younger workmen of a trade are wise and foreseeing enough to adopt a new invention as soon as it is successful, they are never injured, and usually much benefited by it. Seamstresses in England received wretchedly poor wages before the introduction of the American sewing machine, and they thought they would be starved altogether when the same work could be done twenty times as fast by machine as by hand. The effect, however, has been just of the opposite kind. Those who were not young, skilful or wise enough to learn machine-sewing, receive better wages for hand-sewing than they would formerly have done. The machine sewers earn still more, as much in many cases as 20s. a week. The explanation of this is that, when work is cheapened, people want much more of it. When sewing can be done so easily, more sewing is put into garments, and the garments being cheapened, more are bought. At the same time a good deal of the sewing, and finishing, and fitting, cannot be done by machinery, and this furnishes plenty of employment for those who cannot work machines. If masons were to employ machines for cutting stone, they would be benefited like the seamstresses, instead of being injured. The cost of cutting stone by hand is now so great that people cannot build many stone buildings, nor use stone to decorate brick buildings, unless they are wealthy people. Were the dressing of stone much cheapened by the aid of machinery, a great deal more stone would be used, and the masons, instead of labouring at the dull work of cutting flat surfaces, would find plenty of employment in finishing, and carving, and setting the machine-shaped stones. I have not the least doubt that, in addition to those engaged in working the machines, there would in the end be more masons wanted after the general introduction of machines than before. With type-setters the same thing will happen, if they take betimes to the new type-composing machines. It is true that a man with the aid of a good machine can set types several times as fast as without. But though the wages paid for setting a certain number of types might thus be reduced, so many more books, pamphlets, newspapers, and documents of various kinds would be printed, that no want of employment could be felt. Much of the work, too, such as the justifying, correcting, making into pages, &c., cannot be done by machinery, or not profitably, so that there would be plenty of work even for those who would not consent to work machines. The fact is that #wages are increased by increasing the produce of labour, not by decreasing the produce#. The wages of the whole working population consist of the total produce remaining after the subtraction of rent, interest, and taxes. People get high wages in Lancashire because they use spinning machinery, which can do an immense quantity of work compared with the number of hands employed. If they refused to use machinery, they would have to spin cotton by hand like the poor inhabitants of Cashmere. Were there no machinery of any kind in England we should, nearly all of us, be as poor as the agricultural labourers of Wiltshire lately were. People lose sight of the fact that #we do not work for the sake of working, but for the sake of what we produce by working#. The work itself is the disagreeable price paid for the wages earned, and these wages consist of the greater part of the value of the goods produced. It is absurd to suppose that people can become richer by having less riches. To become richer we must make more riches, and the object of every workman should be not to make work, but to make goods as rapidly and abundantly as possible. #56. Piece-Work.# Some trades unions endeavour to prevent their members from earning wages by piece work, that is, by payment for the quantity of work done, instead of payment for the time spent in doing it. If a man is paid tenpence an hour, whether he work quickly or slowly, it is evidently for his interest to work slowly rather than quickly, provided that he be not so lazy as to run a risk of being discharged. It is a well known fact that men employed on piece-work do much more work in the same time than those employed on time jobs, and it is altogether better that they should be paid by the piece when the work done can be exactly measured and paid for. The men earn better wages because they are incited to do so much more, and they earn it more fairly, as a general rule. Trades-unions, however, sometimes object to piece-work, the reason given being that it makes the men work too hard, and thus injures their health. But this is an absurd reason; for men must generally be supposed capable of taking care of their own health. There are many trades and professions in which people are practically paid by the piece, but it is not found necessary to have trades-unions to keep them from killing themselves. There is more fear that people will work too little rather than too much. The real objection which trades-unionists feel to piece-work is that it gets the work done quickly, and thus tends, as they think, to take employment away from other men. But, as I have already explained, men do not work for the sake of working, but for the sake of what they produce, and the more men in general produce, the higher wages in general will be. Trades-unionists put forward their views on the ground of unselfishness. They would say that it is selfish of Tom to work so as to take away employment from Dick and Harry; but they overlook the thousands of Toms, Dicks, and Harrys in other employments who get small wages indeed, and who are perhaps prevented by their rules from earning more. If the nation as a whole is to be wealthy and happy, we must each of us work to the best of our powers, producing the wealth which we can best produce, and not grudging others a greater success, if Providence has given them superior powers. People can seldom produce wealth for themselves without spreading a greater benefit over society in general, by cheapening commodities and lightening toil. #57. The Fallacy of Equality.# Workmen often show a dislike to allowing one man to earn more than another in the same shop, and at the same kind of work. This feeling is partly due to the mistaken notion that in doing more work than others he takes employment from them. It partly, however, arises from a dislike to see one man better off than his mates. This feeling is not confined to workmen. Any one who reflects upon the state of society must regret that the few are so rich, and the many so poor. It might seem that the laws must be wrong which allow such differences to exist. It is needful to reflect, therefore, that such differences of wealth are not for the most part produced by the laws. All men, it has been said, are born free and equal; it is difficult to see how they can be born free, when, for many years after birth, they are helpless and dependent on their parents, and are properly under their governance. No doubt they ought to become free when grown up, but then they are seldom equal. One youth is stout, healthy and energetic; another puny and weak; one bright and intelligent; another dull and slow. Over these differences of body and mind the laws have no power. An Act of Parliament cannot make a weak frame strong. It follows that in after life some men must be capable of earning more than others. Out of every thousand men and women, too, there will be a few who are distinguished by remarkable talents or inventive genius. One man by patient labour and great sagacity invents a sewing machine, a telegraph, or a telephone, and he thus confers the greatest possible advantage upon other men for centuries after. It is obviously to the advantage of everybody that those who are capable of benefiting society should be encouraged to do so by giving them all the reward possible, by patents, copyright, and the laws of property generally. To prevent or discourage a clever man in doing the best work he can, is certainly no benefit to other men. It tends to level all down to a low standard, and to retard progress altogether. Every man, on the contrary, who is incited to work, and study, and invent to the utmost of his powers, not only earns welfare for himself, but confers welfare upon other people. He shows how wealth may be created abundantly, and how toil may be lessened. What is true of great ability and great inventions is true, also, of the smallest differences of power or the slightest improvements. If one bricklayer's labourer can carry up more bricks than another, why should he be prevented from doing it? The ability is his property, and it is for the benefit of all that he should be allowed to use it. If he finds a better way of carrying bricks, of course it should be adopted in preference to worse ways. The purpose of carrying bricks is to get them carried and benefit those who want houses. Everything which makes it difficult and expensive to build houses, causes people to be lodged worse than they otherwise would be. We can only get things made well and cheaply if every man does his best, and is incited to do so by gaining the reward of his excellence. Every man then should not only be allowed, but should be encouraged to do and to earn all that he can; we must then allow the greatest inequalities of wealth; for a man who has once begun to grow rich, acquires capital, and experience, and means which enable him to earn more and more. Moreover, it is altogether false to suppose that, as a general rule, he does this by taking wealth from other people. On the contrary, by accumulating capital, by building, mills, warehouses, railways, docks, and by skilfully organising trades, he often enables thousands of men to produce wealth, and to earn wages to an extent before impossible. The profits of a capitalist are usually but a small fraction of what he pays in wages, and he cannot become rich without assisting many workmen to increase the value of their labour and to earn a comfortable subsistence. CHAPTER IX. CO-OPERATION, &c. #58. Arbitration.# We have now considered at some length the evils arising from the present separation of interests between the employed and their employers. The next thing is to discuss the various attempts which have been made to remedy these evils, and to bring labour and capital into harmony with each other. In the first place, many people think that when any dispute takes place, arbitrators or judges should be appointed to hear all that can be said on both sides of the question, and then decide what the rate of wages is to be for some time to come. No doubt a good deal may be said in favour of such a course, but it is nevertheless inconsistent with the principles of free labour and free trade. If the judges are to be real arbitrators, they must have power to compel obedience to their decision, so that they will destroy the liberty of the workman to work or not as he likes, and of the capitalist to deal freely with his own capital, and sell goods at whatever price suits the state of the market. If wages are to be arbitrarily settled in this way, there is no reason why the same thing should not be done with the prices of corn, iron, cotton, and other goods. But legislators have long since discovered the absurdity of attempting to fix prices by law. These prices depend entirely upon supply and demand, and no one is really able to decide with certainty what will be the conditions of supply and demand a month or two hence. Government might almost as wisely legislate about the weather we are to have next summer as about the state of trade, which much depends upon the weather, or upon wars and accidents of various kinds, which no one can foresee. It is impossible, then, to fix prices and wages beforehand by any kind of law or compulsory decision. The matter is one of bargain, of buying and selling, and the employer must be at liberty to buy the labour required at the lowest price at which he can get it, and the labourers to sell their labour at the highest price they can get, both subject of course to the legal notice of a week or fortnight. #59. Conciliation.# Though the compulsory fixing of wages is evidently objectionable, much good may be done by #conciliators#, who are men chosen to conduct a friendly discussion of the matters in dispute. The business is arranged in various ways; sometimes three or more delegates of the workmen meet an equal number of delegates from the masters, who place before the meeting such information as they think proper to give, and then endeavour to come to terms. In other cases the delegates lay their respective views before a man of sound and impartial judgment, who then endeavours to suggest terms to which both sides can accede. If the two parties previously engage that they will accept the decision of this conciliator or umpire, the arrangement differs little from arbitration, except that there is no legal power to compel compliance with the decision. Discredit has been thrown upon this form of conciliation by the fact that the workmen have in several instances refused to abide by the award of the umpire when given against them, and of course it cannot be expected that masters will accept adverse decisions as binding under such circumstances. Thus I am led to think that the conciliator should not attempt to be a judge; he should be merely an impartial friend of both sides, trying to remove misapprehension and hostile feelings, enlightening each party as to the views and reasons and demands of the other--acting, in short, as a go-between, and smoothing down the business as oil eases the movement of a machine. The final settlement must take the form of a voluntary bargain directly between the employers and employed, which will only have compulsory effect during the week or fortnight for which workmen usually enter into a legal agreement. Conciliation may in this way do much good, but it cannot remove the causes of difference--it cannot make the men feel that their interest is one with the interest of their employers. #60. Co-operation.# Among the measures proposed for improving the position of workmen, the best is co-operation, if we understand by this name #the uniting together of capital and labour#. The name co-operation is used indeed with various meanings, and some of the arrangements called by it have really nothing to do with what we are now considering. #To co-operate means to work together# (Latin, _con_, together, and _operor_, to work). About thirty-five years ago some workmen of Rochdale, noticing the great profits made by shopkeepers in retail trade, resolved to work together by buying their own supplies wholesale, and distributing them amongst the members of the society which they established. They called this #a co-operative society#, and a great number of so-called co-operative stores have since been established. Most of these are nothing but shops belonging to a society of purchasers, who agree to buy at the store and divide the profits. They have on the whole done a great deal of good by leading many men to save money and to take an interest in the management of affairs. The stores are also useful, because they compete with shopkeepers, and induce them to lower their prices and to treat their customers better. We frequently hear now of shops selling goods at #co-operative prices#. But such co-operative societies have little or nothing to do with the subject of capital and labour. Commonly these stores are conducted less upon the true co-operative principle than ordinary shops. A shop is usually managed by the owner or by a man who has a large interest in its success, and has the best reasons for taking trouble. Co-operative stores, on the contrary, are often managed by men who are paid by salary or wages only, and have nothing to do with the profits and the capital of the concern. #Real co-operation consists in making all those who work share in the profits.# At present a workman sells his labour for the best price he can get, and has nothing further to do with the results. If he does his work well, his master gets the benefit, and if he works badly his master is injured. It is true that he must not be very lazy or negligent for fear of being discharged; but if he takes care to be moderately careful and active, it is all that he need do for his own interests. No doubt it would be a good thing to reward the more active workmen with higher wages, and a wise employer endeavours to do this when he can, and to put the best workmen into the best places. But the trades-unions usually prevent it as far as they can, by insisting that men doing the same kind of work in the same place shall be paid alike. Moreover, as we have seen, many men are under the mistaken belief that if they work hard they decrease the demand for employment, and tend to take away the bread from their fellow-men. Thus it is not uncommon for workmen to study #how not to do the work too quickly#, instead of striving to make the most goods in the least time with the least trouble. Workmen do not see that what they produce forms in the long run their wages, so that if all workmen could be incited to activity and carefulness, wages would rise in all trades. #61. Industrial Partnerships.# The best way of reconciling labour and capital would be to give every workman a share in the profits of his factory when trade is so prosperous as to allow of it. Charles Babbage proposed, in the year 1832, that a part of the wages of every person employed should depend on the profits of the employers. In recent years this has been tried in several large works, especially in Messrs. Briggs' collieries, and in Messrs. Fox, Head & Co.'s iron-works. The arrangement generally made with the men was that the capitalists should first take enough of the profits to pay 10 per cent. interest on the capital, together with fair salaries for the managers as wages of superintendence, a sum to meet bad debts, the repairs and depreciation of the machinery, and all other ordinary causes of loss. Such profit as remained was then divided into two equal parts, one of which went to the employers, while the other was divided among the workpeople in proportion to the amounts of wages which they had received during the year. Many workmen under such a scheme found themselves at Christmas in possession of five or ten pounds, in addition to the ordinary wages of the trade received weekly during the year. This kind of co-operation has been called #industrial partnership#, and, if it could be widely carried into effect, there would arise many advantages. The workmen, feeling that their Christmas bonuses depended upon the success of the works, would not favour idleness, and would have some inducement for preventing needless waste whether of time or materials. By degrees they would learn that #the best trades-union is a union with their employers#. Strikes and lockouts would be for the most part a thing of the past, because, if wages were too low, the balance-sheet would prove the fact at the end of the year, and half the surplus would go to the workmen. To be free from the danger of strikes would be a very great advantage to the employers, and any portion of profits which they might seem to give up would be more than repaid by the increased care and activity of the workmen. The employers would continue to manage the business entirely according to their own judgment, and they need not make their affairs or accounts known to the men. All that is requisite is that skilful accountants should examine the books at the end of the year, and certify the amount of profits due to the men. If this plan were thoroughly carried out, the men would feel that they were really working for themselves as much as for their masters, and the troubles which at present exist would be nearly unknown. There are great difficulties in the way of this kind of co-operation: most capitalists do not like it, because they needlessly fear to make known their profits to their men, and they do not understand the advantages which would arise from a better state of things. The workmen also do not like the arrangement, because the trades-unions oppose co-operation, fearing that it will overthrow their own power. Where the scheme has been tried, it has usually succeeded well, until the men, urged by their trades-unions, refused to go on with it. Thus are people, through prejudice and want of knowledge, made blind to the best interests of themselves and the country. It is to be feared, then, that industrial partnerships will not make much progress just at present, so great is the dislike to them felt both by trades-unions and by prejudiced employers. Nevertheless, the arrangement is in accordance with the principles of political economy, and it will probably be widely adopted by some future generation. Already, indeed, many banks, mercantile firms, and public companies practically recognise the value of the principle, by giving bonuses or presents to their clerks at the end of a profitable year. A French railway company adopted this practice forty years ago, and as business falls more and more into the hands of companies whose profits are matters of general knowledge, there seems to be no reason whatever why the principle of industrial partnership should not be adopted. Somewhat the same principle is said to be carried into effect in the very extensive and successful newspaper business of Messrs. W. H. Smith & Son. #62. Joint-Stock Co-operation.# Another mode of co-operation consists in working men saving up their wages until they have got small capitals, so that they can unite together and own the factories, machines, and materials with which they work. They then become their own capitalists and employers, and secure all the profit to themselves. Co-operative societies of this kind are simply Joint-Stock Companies, the shares of which are held by the men employed. Of course the shareholders must choose directors from among themselves, and they must also have managers to arrange the business. The managers and directors ought to be well paid for what they do, and have a considerable share of the profits, in order to make them interested in the success of the works, and therefore active and careful. Incompetent or negligent management will soon ruin the best business. A great number of co-operative companies of this kind have been formed in the last twenty years in England, France, America, and elsewhere; but most of them have failed from want of good direction. The working-men shareholders do not generally understand what a great deal of skill and judgment is required in the conduct of a business; they are accustomed to see work going on as if it went of its own accord, but they do not see the constant anxiety and the careful calculation which is requisite to make the work profitable. Hence they usually fail to secure good managers, and they do not sufficiently trust those whom they appoint. Moreover, many of the so-called co-operative companies are not really co-operative; they frequently employ men who are neither shareholders nor receivers of a share of profits, and they pay their managers by a small fixed salary. #Such co-operative societies are badly-managed joint-stock companies, and cannot be expected to succeed well.# Another difficulty with such companies is, that they rarely have enough capital, and, when bad trade comes, they are unable to bear the losses which will sometimes occur for several years in succession. They can borrow money by the mortgage of the buildings and machinery belonging to the company, and this is usually done; but no banker will give credit to such companies without the security of fixed property. Thus they frequently fail when bad trade comes, and those who buy up their property cheaply reap advantage. It is to be hoped that at a future time all working-men will become capitalists on a small scale, and when education and experience have been acquired, co-operative factories of working-men may succeed. At present it would be better to leave the management of business in the hands of capitalists, who are not only experienced and clever men, but have the best reason to be careful and active, because their fortunes depend upon success. #63. Providence.# It is most deeply to be regretted that the working-people of England will not, for the most part, see the necessity of saving a portion of their wages in order to have something to live upon when trade is bad, or when ill-health and misfortune come upon them. Too many working-men's families spend all that is earned while trade is brisk, and when employment fails they are as badly off as ever. #There are several distinct reasons why every man or woman should save up some property when possible#:-- (1) It forms a provision in case of ill-health, accident, want of employment, or other misfortune; it is also wanted for support in old age, or for the helpless widow and orphans of a workman who dies early. (2) It yields interest, and adds to a workman's income. (3) It enables a man to go into trade, to buy good tools, and to enjoy good credit in case he sees an opportunity of setting up business on his own account. No man and no woman, who is in the prime of life and earning fair wages, should spend the whole. Even an unmarried person will generally reach a time of life when, through ill health, old age, or other unavoidable causes, it is no longer possible to get a living. By that time enough ought to have been saved to avoid the need of charity or the degradation of the poor-house. When there is a wife and young family, the need of saving is evidently greater still. Every great storm, colliery explosion, or other great accident leaves a number of helpless children to be brought up by a struggling widow, or to go on the parish. No doubt people may meet with disasters so unexpected and so great that they cannot be blamed for not providing against them. A man who is blinded, or crippled, or otherwise disabled in early life, is a proper object of charity, but there would be plenty of benevolent institutions to provide for such exceptional cases, if those who are more fortunate would provide properly for themselves. It is often said that working men really cannot save out of the small wages they receive; the expenses of living are too great. We cannot deny that there are labourers, especially agricultural labourers in the South of England, whose wages will not do more than barely provide necessary food and clothing for their families. The weekly earnings of a family in some parts are not more than 12 or 15 shillings on the average of the year, and sometimes even less. Such people can hardly be expected to save. But this is not the case with the artisans and labourers in the manufacturing districts. They seldom earn less than a pound a week, and often two pounds. The boys and girls, and sometimes the mother of the family, also earn wages, so that when trade is brisk a family in Manchester or Leicester, or other manufacturing town, will get altogether £150 a year, or more. Some kinds of workmen, especially coal-hewers, and iron-puddlers, earn twice that amount in good years, and are in fact better paid than schoolmasters, ministers of religion, and upper clerks. It is idle to say that the better-paid working men cannot save, and though we cannot make any strict rule, it is probable that #all who earn more than a pound (five dollars, or 25 francs) a week, might save something#. It is easy to prove this assertion by the fact that when a strike occurs, men voluntarily live on a half, or a third of their ordinary wages. Sometimes they will live for three or four months on 12 or 15 shillings a week, which is paid for their support by their trades-union, or by other unions, which subscribe money to assist them. It is quite common for workmen to pay #levies#, that is, almost compulsory subscriptions of a shilling or more a week, to be spent by other workmen who are #playing#, as it is called, during a long strike. Nobody wishes working people to live on the half of their wages, but #if, for the purpose of carrying on struggles against their employers, they can spare these levies, it is evident that they could spare them for the purpose of saving#. Then, again, we know that the money spent on drink is enormous in amount; in this country it is about £140,000,000 a year, or about four pounds a year for every man, woman, and child. To say the least, half of this might be saved, with the greatest advantage to the health and morals of the savers, and thus the working classes would be able to lay by an annual sum not much less than the revenue of the nation. CHAPTER X. TENURE OF LAND. 64. We have sufficiently considered the difficulties which exist regarding #Labour# and #Capital#, two of the requisites of production, and we will now turn to another part of political economy, and inquire into the way in which #Land#, the third requisite, is supplied. In different countries land is held in very different ways. It is a matter of custom, and in the course of time customs slowly change. The way in which farms are owned and managed in England at the present time is no indication of the way land is held in France, or Norway, or Russia, or even the United States; nor is it the same as the way in which farms were owned in England some centuries ago. What is fitting to one place and state of society will not necessarily be fitting in other circumstances. We have to consider the various ways in which the requisites of production, land, labour, and capital, are brought together; sometimes they are all furnished by the same person; sometimes by separate persons. In the condition of #slavery#, for instance, as it existed in the Southern States of North America, the owner of an estate owned the land, labour, and capital, all at once. Strictly speaking a slave is not a labourer, because he cannot sell his labour at his own price, and work or not as he likes. He is more in the position of the horse which drags the plough, a mere beast of burden. Just as a farmer owns his horses, and cows, and pigs, as part of his capital, so a slave-owner treats his slaves as part of his capital. Slave-labour being given unwillingly, and without hope of reward, is usually badly given, and is wasteful; but there is hardly any need to consider whether slavery is good or bad in an economical point of view, because it is altogether condemned from a moral point of view. We may show the way the requisites of production are furnished in slavery by the following diagram-- #Slave-Owner.# | /---------------------------------------------\ #Land.# #Labour.# #Capital.# In a very large part of the world, again, the government takes the place of land-owners, and collects the rent by means of tax-gatherers. The farming is done by poor peasants, who find the capital, so far as there is any, and also do the work. Thus, we have the arrangement-- #Government.# #Peasant.# | | /------\ /---------------------------\ #Land.# #Capital.# #Labour.# This system is called #Ryot Tenure#, and it exists at the present day in Turkey, Egypt, Persia, and many eastern countries; also in a somewhat altered form in British India. After slavery, it is the worst of all systems, because the Government can fix the rent at what it likes, and it is difficult to distinguish between rent and taxes. When their crops fail the ryot peasants are unable to pay the tax-gatherers, and they get into debt and become quite helpless. 65. #Peasant Proprietorship.# One of the best modes of holding land, when it can exist, is that known as peasant proprietorship, because the owner of the land is the peasant himself, who labours with his own arms, and finds the capital also. In this system, as in slavery, all the requisites of production are in the same hands; thus-- #Peasant.# | /------------------------------------------------\ #Land.# #Labour.# #Capital.# But in every other respect this system is the opposite of slavery. Its advantages are evident; the labourer being the owner of the farm and of all upon it, is an independent man, who has every inducement to work hard, and to increase his savings. Every little improvement which he can make in his farm is so much added to his wealth, and that of his family after him. There is what is called the #magic of property#. The feeling that he is working entirely for his own and his family's benefit #almost magically increases his inclination to work#. In newly-settled countries, such as the Western Territories of the United States, and Canada, or the colonies of Australia, and the Cape, this mode of holding land seems to be suitable, because the land is there very cheap, and crops can be raised with little capital. In such countries there is no need of expensive manures, elaborate machinery, and the cost of draining and improving land. The objection to peasant proprietorship is, that he who does the labour of a farm with his own hands, must usually be a poor and unskilful person. If he were rich he would probably prefer to buy up the labour of other men, and become a capitalist farmer; if he were a really skilful farmer, it would be a pity to waste his skill upon a small farm, when, with more division of labour, he might profitably direct and manage a large one. Being poor, his capital will be mostly absorbed in building his cottage and barns, and in paying the small price of his land; he will have little left to make improvements, or to buy good labour-saving implements, and good stock, such as well-bred horses, cows, and pigs. Thus, unless his land be new and very fertile, he will not get a large return for his labour. Owing to the magic of property, he may work very hard, and during long hours, but he will not work in an economical way, and therefore will remain poor in spite of his severe exertions. The peasant proprietors who still exist in Switzerland, Belgium, Norway, Sweden, and some other parts of Europe, work almost day and night during the summer, and they are very careful and saving; yet they seldom grow rich, or get more than a bare living out of the soil. Too frequently the peasant proprietor, if he is not very provident, runs short of money after one or two bad seasons. He will then be tempted to borrow money, to sell his timber, and other produce before it is ready for the market, and thus run in debt. When his farm has increased in value and would bring some rent, he will very likely mortgage it, that is, give it by a legal deed as security for his debts. The mortgagee or lender of the money then becomes part-owner of the land and capital, so that the arrangement tends to take this form-- #Money-Lender.# #Peasant.# | | /----------------\ /-----------------\ #Land.# #Capital.# #Capital.# #Labour.# 66. #Tenure of Land in England.#. As agriculture becomes more a science, farming will require greater skill, and larger capital, and the English mode of land tenure will probably spread. In this system there is the greatest division of labour, and different ranks of people have shares in the business, somewhat as follows:-- #Proprietor.# #Farmer.# #Labourer.# | | | /-----------\ /-------------\ /----\ #Land. Capital.# #Capital. Labour.# #Labour.# The land is usually owned by some rich man, who likes to have large estates, but does not wish to have the trouble of farming. In respect of the land only he is a #proprietor of a natural agent#, and the rent he receives is true rent; but there will usually be buildings, roads, fences, drains, and other improvements, of which he is also owner; in respect of these he is a capitalist, and the return he receives is interest. The farmer is a man of knowledge and skill, with considerable capital; he hires the land and its improvements from the proprietor, and stocks it with cattle, carts, improved implements of all kinds, and then employs day-labourers to do the manual work, labouring himself in superintendence, in keeping accounts, buying and selling, &c. The labourer, generally speaking, is nothing but a labourer; he lives in a cottage hired probably from the farmer or proprietor, and he has little motive for working harder than he is made to do, because the advantage goes to his employer. In this arrangement there are great advantages, and also great disadvantages. The farmer, being an intelligent man, acquainted with agricultural science, and furnished with plenty of capital, can adopt all the latest inventions, and raise the largest possible produce from the land and labour. It is also advantageous that the farmer does not own the land and fixed capital, because this leaves all his own capital free to provide more expensive implements and manures, and finer kinds of cattle. It is also a good thing that farms will, on this system, be large, so that there will be considerable division of labour, almost as in a factory; thus there will arise some of the advantages which were described as belonging to the Division of Labour (Sections 25-29). The disadvantages of the English mode of farming are also great, especially as regards the labourers, the most numerous class. They have none of the independence of peasant proprietors, and, when dismissed, or too old to work, have probably to go to the workhouse. Their wages have hitherto been very low, and saving was not possible. But this state of things is partly due to the bad Poor Laws which used to exist in England, and to the excessive numbers of poor, ignorant labourers. After a time, when the poor laws are improved, when labourers become more educated, and are employed, like factory hands, to work machines, there is no reason why they should not get good wages, and become independent, like artisans. In the English system, a great deal depends upon the nature of the agreement between the land-owner and the capitalist farmer. Many large land-owners in England refuse to let their land for long periods They like to have farmers who are #tenants at will#, and can be turned off their farms at a year's notice, and deprived of the value of all the improvements they have made, if they offend the great land-owner. It is easy to understand this; the land-owners wish to be lords, and to rule affairs in their own neighbourhood, as if they were little kings. This sort of thing is called #territorial influence#, and men who have become rich by making iron or cotton goods, often buy estates at a high price, in order to enjoy the pleasure of feeling like lords. The rural parts of England, Scotland, and Ireland are still, in fact, under #the feudal system#. In a Primer like this we have to look at the matter as regards political economy only, and in this respect the arrangement described is bad. Tenants at will have no inducement to improve their farms, because this would tempt the land-owner to turn them out, or to raise the rent. It is generally understood, indeed, that a land-owner will not use his power, so that many farmers act as if they were sure of holding their farms; if turned out after all, they are practically robbed of their capital; and, in any case, they cannot possibly feel the independence which every man ought to enjoy. We must always remember that the laws should be made not for the benefit of any one class, but for the benefit of the whole country. The laws concerning landlord and tenant have, however, been made by landlords, and are more fitted to promote their enjoyment than to improve agriculture. There are two modes of remedying the unfortunate state of land tenure in this country, namely:-- (1) By a system of long leases. (2) By tenant right. #67. Leasehold Tenure.# A lease is a formal agreement to let land or houses to a tenant for a certain number of years at a fixed rent, and with various conditions, which are carefully stated, to prevent misunderstanding. When land is taken by a farmer under a lease for thirty years or more, it becomes almost like his own property, because, in the earlier part of his term, he can make great improvements with the aid of his capital, and yet be sure of getting the value back before the lease comes to an end. In the eastern parts of England and Scotland, where the farms are largest and best managed, these long leases are the usual mode of letting land. It is certainly one of the best arrangements for promoting good farming, and it has few disadvantages, except that the farmer will not make improvements towards the end of his lease. #68. Tenant Right.# Another good arrangement is tenant right, which consists in #giving the tenant a right to claim the value of any unexhausted improvements#, which he may have made in his farm, if he be turned out of it. A farmer can prove without difficulty how much he has spent in building barns, stables, piggeries, &c., in draining the lands, making roads and fences, or in putting lime and costly manures into the soil. Those who are experienced in farming can form a good judgment how long each improvement will continue profitable, so as to calculate how much the tenant loses if he be turned away. Thus a good estimate may be formed as to the sum which the tenant should receive as compensation, and the landlord, if he chooses to dismiss the tenant, should be obliged to pay this compensation. He will get it back by charging a higher rent to the next tenant. Tenant right, though unknown in most parts of England, is not at all a new system; it has existed for a long time in the north of Ireland, where it is called the #Ulster tenant right#. A new tenant there pays the old tenant a considerable sum of money for the privilege of getting a good farm with various improvements, and the land-owner is practically prevented from turning out a good tenant at his mere will. In Yorkshire also it has been the custom to compensate an outgoing tenant, and there is no good reason why the custom should not be made into a legal right, and extended over the whole country. Mr. Gladstone's Irish Land Act has already established a somewhat similar system throughout Ireland. If the land is to be used for its proper purposes, and not merely for the amusement and pride of a few landlords, #every owner of land who lets it should be obliged either to give a long lease, say of thirty or fifty years, or else to pay the compensation fixed by a jury# after taking evidence from those skilled in valuing farms. It should be made illegal to let land on any other terms. #69. The Cause of Rent.# It is very important to understand exactly how rent arises, for without knowing this it is impossible to see why a landlord should be allowed to come and take away a considerable part of what is produced, without taking any other trouble in the matter. But the fact is that we cannot do away with rents: they must go to some one or other, and the only real question which can arise is whether there shall be many landlords receiving small rents or few landlords with great rent-rolls. Rent arises from the fact that different pieces of land are not equally fertile, that is, they do not yield the same quantities of produce for the same quantities of labour. This may arise from the soil being different, or from one piece of land getting more sun and moisture than another. If the earth had a perfectly smooth surface the same everywhere, and if it were all tilled and cultivated in exactly the same way, there would be no such thing as rent. But the earth's surface, as we know, has hills and valleys: there are flats of rich soil in one place, and wastes of dry sand and stones in other places. Now, where the soil is good and favourably situated for growing corn, or other produce, the owner of such land must get more, in return for his labour, than if he possessed a bad piece of land. Even then, if everybody owned the farm which he cultivates, those who owned the better pieces would get rent, because they would get more produce. Thus, after allowing the same wages to all, there would remain something in addition to the lucky owners of the better land. If, instead of working on this good land themselves, they let it to other workmen, they will be able to get a rent depending on the richness and the other advantages of the land. Now there can be little difficulty in seeing how the amount of rent of land is governed. That land will pay no rent at all which only gives produce enough to pay the wages of the labourers who work upon it, together with the interest of any capital which they require. The rent of better land will then consist of the surplus of its produce over that of the poorest cultivated land, after allowance has been made for the greater or less amount of labour and capital expended on it. Or we may look at the matter in this way: The price of corn is decided by the cost of producing it on land which just pays the expenses of cultivation, because when more corn is needed, it is from such land we must procure it, the better land having been long since occupied. But corn of the same quality sells at the same price whatever be its cost of production; hence the rent of more fertile land will be the excess of the price of its produce over that of land which only just pays the cultivator and leaves no rent. CHAPTER XI. EXCHANGE. #70. How Exchange Arises#. One of the most important ways in which we can increase wealth consists in exchange--#in giving what we do not want in return for what we do want#. Wealth, as we have seen, is anything which is actually useful to us, because we have not enough already, and which can be transferred to another person. But when our want of any kind of commodity is satisfied, we want no more of that, but we do want other kinds of commodity. The result is that exchange constantly produces a #gain of utility#. Some people have objected that there can be no good in exchange, because that which is given equals in value that which is received. Others have said that, if one party gains, it must evidently be by robbing the other party. According to this view, trade would consist in trying to beggar your neighbour. That which is given does really equal in value that which is received, but it does not equal it in utility, and to increase utility is the purpose of all production and all commerce. We do not pay for things in proportion to their usefulness, or else air and water would be the most costly of all things. A good-sized loaf may be bought for fourpence or sixpence, although bread is the staff of life. Before attempting to understand this apparent paradox, we must settle exactly what we mean by value. #71. What is Value?# In exchanging some goods for other goods, there arises the question, How much of one kind shall be given for so much of the other? Some things are said to be #valuable#, as in the case of a gold watch or a diamond ring, because in exchange for them we can get a great quantity of other articles. Ashes are of little or no value, because we cannot get anything in exchange for them. Now this word #value# is a very difficult one, and is employed to mean different things. We may say that quinine is valuable for curing fevers, that iron is valuable for improving the blood, or that water is valuable for putting out fires. Here we do not mean valuable in exchange, for quinine would cure fevers just as well if it cost a penny an ounce instead of some ten shillings. Water, if we can get it at the right time, puts out a fire whether it costs much or little or nothing. It is clear, then, that by valuable we often mean #valuable in use#. The words value and valuable are in fact #ambiguous#. (See Logic Primer, pp. 22-26, on The Correct Use of Words.) #There is value in use and value in exchange, and many things which would be commonly said to have little value in exchange have much value in use.# But of these meanings, "value in use" is nothing but the #utility# of a thing to us, that is, the utility of all such portions of it as we can actually employ. Thus, the value in use of water means the utility of the water that we drink, or wash in, or cook with, or water the roads with, and this utility is very great. But of course it cannot mean the utility of water which is not useful to us, but on the contrary hurtful, as in the case of floods, damp houses, wet mines, and so forth. We may now see how true was the remark of Genovesi, the Italian economist, that "#Exchange consists in giving the superfluous for the necessary#," or, as I should prefer to say, #the comparatively superfluous for the comparatively necessary#. He who has more than enough of one article has already enjoyed all the good which that article can do to him, but he probably needs supplies of other articles. The exchange, like an act of mercy, blesses both him who gives and him who receives, because what each receives in exchange is much wanted and has high utility. In England, for instance, we possess a great deal of coal, and France produces plenty of good wine. We could have little or no wine in England unless we got it from France or some foreign country, and France also is much in want of coal. It is obvious that there is a great gain of utility if we give some of our comparatively superfluous coal in exchange for some of the abundant wine of France. It has been objected to commerce that it is #sterile# and produces no new goods. There exist neither more nor less coal and wine after they are exchanged than before. But in political economy we treat of utility and wealth; the question is whether things are usefully consumed or not. Now that which is not wealth if it were consumed by one person, becomes wealth when handed over to another person for consumption. #Though exchange cannot create the material of wealth, it creates wealth because it gives utility to the material.# #72. Value means Proportion in Exchange.# When we speak of the value of a thing in exchange, we mean how much of some other thing we can get for it. This of course will depend upon the nature of that other thing. Obviously, I can get for a shilling much more potatoes than bread, and bread than beef, and beef than essence of beef. Therefore, when we speak of the value of a thing, we ought always to say what it is to be valued by. #The word value only means that so much of one thing is given for so much of the other#, and it is the #proportion# of these quantities (Latin _proportio_ from _pro_, in comparison with, and _portio_, share), which measures the values of the thing. A ton of pig-iron can usually be got for a quarter of corn; here the proportion is one to one. To get a ton of copper, we should probably have to give thirty quarters of corn; here the proportion is that of one to thirty. There cannot be such a thing as value in exchange, unless there be proportion--so much of one commodity for so much of another. Usually, indeed, we measure the values of things by their #prices#. The #price is the quantity of money which we give for a thing#; in this case the proportion is between the quantity of money and the quantity of goods we get for it, as when we give sixty shillings for ten yards of carpet. We shall learn later on that money is a kind of commodity, which has utility and value like other commodities. But there is great convenience in always thinking and speaking of values in money, because we can then readily compare the value of one thing with that of any other. If a pound of potatoes costs one penny, a pound of bread threepence, and a pound of beef ninepence, we can see at once that a pound of beef is of the same value as three pounds of bread and nine pounds of potatoes, and we can judge how much of each to use. 73. #Laws of Supply and Demand.# In the next place, we must try to understand how the values of things are governed, and made to change from time to time. The principal laws which govern values are called #the laws of supply and demand#, and they are very important indeed. #Supply# means the quantity of any goods which people are willing to give in exchange at a certain value, and #demand# means similarly the quantity of goods which people are willing to take in exchange; but, before a person can judge how much he wishes to buy of a particular kind of goods, he must know its price, that is, its proportion in exchange for money. If bread, instead of being threepence per pound, becomes fourpence, a poor person would perhaps decide to take less bread, and to buy more potatoes. If beef, instead of being ninepence, should rise to a shilling, or fourteenpence a pound, some people would refuse to buy it altogether, and others would buy less than before. The supply of things varies similarly; if the price of meat rises high, farmers who own cattle bring them to market, in order to get a good profit by selling them; if the price falls low, they keep their cattle to sell at another time. #The Laws of Supply and Demand# may be thus stated: a rise of price tends to produce a greater supply and a less demand; a fall of price tends to produce a less supply and a greater demand. Conversely, an increase of supply or a decrease of demand tends to lower price, and a decrease of supply or an increase of demand to raise price. These laws are so important that I will state them over again, in the form of a table:-- |-----------|------------|-------------| | #Price.# | #Supply.# | #Demand.# | |-----------|------------|-------------| | Higher. | Greater. | Less. | |-----------|------------|-------------| | Lower. | Less. | Greater. | |-----------|------------|-------------| We can now understand how the price of any kind of goods is decided. The price must be such that the quantity demanded at any time is equal to the quantity supplied. If those who want goods at a certain price, cannot get them, they will have to offer a higher price, so that they may induce other people to sell. The higher the price the greater the supply, as we have seen; moreover, if some people in a market are offering a higher price, it soon becomes known to other dealers. When a farmer's wife carries a basket of butter to sell at the Butter Cross in the neighbouring market town, she soon learns whether the supply is greater or less than usual. If the purchasers are few and slow in buying, she begins to fear that she may have to carry her butter back unsold, and go without the crockery and calico and other things which she intended to buy with the money. Then she begins to ask a penny or twopence a pound less, and the other sellers of butter are obliged to lower their prices also, since no one would buy butter from one woman at 1s. 6d., if he could get it as good from the next person at 1s. 4d. But, if few people bring butter to market, or if there are many purchasers with money in their pockets, the scene is quite changed. Those who have brought butter, find that they will have no difficulty in selling all they have; it is the purchasers who now become anxious to buy before all is gone, and their eagerness soon shows the sellers that they may ask higher prices. It is by this #higgling of the market#, by sellers asking the highest price they think they can get, and buyers trying to buy at the lowest price which they think will be taken--that the market price of any commodity is settled. #The market price will be such that the demand at that price will equal the supply at that price.# The quantity of butter or any other commodity that is sold must equal what is bought, because it is not sold until it is bought; but the price will settle itself accordingly. #74. How Value depends upon Labour.# We now come to the great question whether value is produced by labour, or how it is connected with labour. Some economists, observing that, when a thing like gold is very valuable, men spend a great deal of labour in getting it, have said that #the labour spent upon it is the cause of the high value#. #This is quite wrong#; for if it were true, anything, upon which great labour has been spent, ought to be very valuable; everybody knows that such is not the case. Great labour may be expended in writing, printing, and binding a book; but, if nobody wants the book, it is valueless, except as waste paper. A vast amount of labour was spent on building the Thames Tunnel, but, as few people wished to go through it, the tunnel was of small value, until it was required for a railway. Thus it is quite certain that we cannot make a thing valuable by simply labouring at it; we must labour in such a way as to make the thing useful. On the other hand, substances may be very valuable which have cost little or no labour. When a shepherd in Australia happens to pick up a nugget of gold on the mountain side, it takes no labour worth mentioning to pick it up, yet the gold is just as valuable in proportion to its weight as any other gold. Some gold mines produce a great quantity of gold: others which have cost quite as much to sink, produce little; nevertheless the gold out of the one mine is sold at the same price in proportion to its weight and fineness as that out of the other mine. #Thus it is quite certain that labour is not the cause of value.# Gold is valuable because a great many people want more gold than they have already got, and whenever a thing is valuable it is because somebody wants it. But we may look at this matter in another way. If it were possible to get a valuable thing like gold with little labour, many people would become gold miners. Much gold would then be produced; if this were wanted as much as what was already in use, it would be as valuable. But no one wants an unlimited quantity of any substance. Wealth, as we saw, must be limited in supply; if gold became as plentiful as lead or iron, it could not possibly remain as valuable as it is now. People would have far more than they could employ for ornaments, watches, gilding and so forth; there would be a large surplus to be used in making pots and pans, for which it is less needed. Now we can see through the whole subject of value. When much of a substance can usually be produced with little labour, the substance becomes so plentiful that people are satisfied with the supplies of it which they have; they do not want more, or at least do not want it so urgently. It follows that they are unwilling to give much wealth for it. Thus the labour spent upon producing a commodity does not affect the value of that commodity, unless it alters the quantity of it which people can get, and thus makes a further supply of the commodity more or less useful than before. #75. Why Pearls are valuable#. To make this still more plain, let us endeavour to answer this difficult question, "Do men dive for pearls because pearls fetch a high price, or do pearls fetch a high price because men must dive in order to get them?" Pearl-diving is a very dangerous and laborious kind of work. The divers have to jump into the deep sea with heavy weights to carry them down, and they must hold their breath a long time while they are engaged in collecting the oyster shells at the bottom. The number of good pearls which they generally get is small compared with the great toil of getting them. It follows that, on the average, they must receive a high price for what they do find, otherwise they would not have adequate wages for such work. But this alone is not a sufficient reason for the pearls being so valuable, otherwise the mother of pearl shells, in which the pearls are found, and brought up, would be as valuable as the pearls. But mother of pearl is a very cheap substance. Again, if it were merely a question of labour, a diver might go down anywhere, and, bringing up the first stone or shell he found, insist on selling it for a high price, because he had dived for it. The truth is, that pearls are valuable because there are many ladies who have not got pearl necklaces, and who would like to have them; and those who have some pearls would like to get more and finer ones. In short, then, pearls are valuable because they are useful to ladies who want more pearl ornaments: they are thus useful because the ladies have not hitherto been able to get as many as they would like; and they have not been able to get many, because it is so difficult to fish them up from the bottom of the sea. Here we have the whole theory of value and labour. #The labour which is required to get more of a commodity governs the supply of it; the supply determines whether people do or do not want more of it eagerly; and this eagerness of want or demand governs value.# CHAPTER XII. MONEY. #76. Barter.# When exchanges are made by giving one ordinary commodity for another, as a sack of corn for a side of bacon, or a book for a telescope, we are said to #barter# them. The operation is also called #truck# (French, _troc_, barter). Among uncivilised races trade is still carried on in this way; a traveller going into the interior of South Africa takes a stock of beads, knives, pieces of iron, looking-glasses, &c., in order that he may always have something which the natives will like to receive in exchange for food or services. People still occasionally barter things in England, or the United States, but this is seldom done, owing to the trouble which it gives. If, for instance, I want a telescope, in exchange for a book, I shall probably have to make many inquiries, and to wait a long time before I meet with a person who has a telescope to spare, and who is also willing to take my book in exchange. It is very unlikely that he who has a telescope will just happen to want that particular book. A second difficulty is, that the book will probably not be worth just as much as the telescope, and neither more nor less. He who owns a valuable telescope cannot cut it up, and sell a part to one and a part to another; this would destroy its value. #77. Convenience of Money.# With the aid of money all the difficulties of barter disappear; for #money consists of some commodity which all people in the country are willing to receive in exchange, and which can be divided into quantities of any amount#. Almost any commodity might be used as money in the absence of a better material. In agricultural countries corn was so used in former times. Every farmer had a stock of corn in his own granary, and if he wanted to buy a horse or cart, he took so many sacks of corn to his neighbour's granary in exchange. Now suppose that, with corn as money, a farmer wanted to part with a cart and get a plough instead; he need not inquire until he finds a person willing to receive a cart, and give a plough in exchange. It is sufficient if he find one farmer who will receive a cart and give corn, and any other farmer who will give a plough and receive corn. No difficulty arises, too, if the cart or plough are not of equal value; for if the cart be the more valuable, then the farmer finally gets for it the plough together with enough corn to make up the difference. Money thus acts as a #medium of exchange#; it is a go-between, or third term, and it facilitates exchange by dividing the act of barter into two acts, in this way-- #Sale.# #Purchase.# _____/\______ ____/\____ / \ / \ #Cart.# #Money.# #Plough.# No doubt it turns one act of exchange into two; but the two are far more easy to manage than one, because they need not be made with the same person. #78. Money as a Measure of Value.# When money is used in exchange, he who receives money is said #to sell goods#, and he who pays money is said #to buy or to purchase#. In each case there is an act of exchange, and sales and purchases are not really different in nature from acts of barter, except that one of the commodities given or received is employed for the purpose of arranging the exchange. Thus money may be called #current commodity#, because it is merchandise chosen #to run# about as a medium of exchange. Now, in every purchase or sale there must be some proportion between the quantity of the money, and the quantity of the other commodity. This proportion expresses the value of the one commodity as compared with the other. Value in exchange means nothing but this proportion, as was before explained (section 72). Now when money is used, the quantity of money given or received for a certain quantity of goods is called #the price of that goods#, so that the price is the value of goods stated in money. But as money when once introduced is used in almost every act of exchange, a further great advantage arises. We are able to compare the value of any commodity with that of any other commodity. If we know how much copper may be had for so much lead; how much iron for so much steel; and so on with zinc and brass, bricks and timber, and so forth, it would not be possible to compare the value of copper with zinc, or iron with timber. But if we know that for one ounce of gold we can get 950 ounces of tin, 1,700 ounces of copper, 6,400 ounces of lead, and 16,000 ounces of wrought iron, then we learn without any trouble that for 1,700 ounces of copper we can get 16,000 ounces of iron, and so on. Thus gold or any other substance used as money serves as a #common measure of value#; it measures the value of every other commodity, and thus enables us to compare the value of each commodity with that of every other. This is an immense convenience. It leads every one to think and speak of the values of things in terms of a money known to everybody. All lists of values of goods are given as lists of prices and everybody understands these prices and can compare the prices in one list with those in another. Money may then be said to have two chief functions. It serves as (1) #A medium of exchange.# (2) #A common measure of value.# But it is important to remember that, though money thus acts in a very useful and peculiar way, it never ceases to be a commodity. Its value is subject to the laws of supply and demand already stated (section 73); if the quantity of money increases, its value is likely to decrease, so that more money is given for the same commodity, and #vice versa#. #79. What Money is made of.# As already remarked almost any commodity may be used as money, and in different ages all kinds of things such as wine, eggs, olive oil, rice, skins, tobacco, shells, nails, have actually been employed in buying and selling. But metals are found to serve much the best for several reasons, and gold and silver are better for the purpose than any of the other metals. The advantages of having gold and silver money are evident. Such metals are #portable#, because they are so valuable that a small weight of metal equals in value a great weight of corn or timber or other goods. Then they are #indestructible#, that is, they do not rot like timber, nor go bad like eggs, nor sour like wine; thus they can be kept for any length of time without losing their value. Another convenience is, that there is no difference in quality in the metal itself; pure gold is always the same as pure gold, and though it may be mixed with more or less base metal, yet we can assay or analyse the mixture, and ascertain how much pure metal it contains. The metals are also #divisible#; they may be cut or coined into pieces, and yet the pieces taken together will be as valuable as before they were cut up. It is a further advantage of gold and silver that they are such beautiful, brilliant substances, and gold is also so heavy that it is difficult to make any counterfeit gold or silver; with a little experience and care, every one can tell whether he is getting real money or not--when the money is made of gold or silver. Finally, it is a great convenience that #these metals do not change in value rapidly#. A bad harvest makes corn twice as dear as before, and destructible things, like eggs, skins, &c., are always rising or falling in value. But gold and silver change slowly in value, because they last so long, and thus the new supply got in any one year is very little compared with the whole supply or stock of the metal. Nevertheless, #gold and silver, like all other commodities, are always changing in value more or less quickly#. #80. Metallic Money.# Almost all the common metals--copper, iron, tin, lead, &c.--have been used to make money at one time or other, besides various mixtures, such as brass, pewter, and bronze. But copper, silver, and gold have been found far more suitable than any of the other metals. Copper, indeed, being comparatively low in value, is wanting in portability. It was formerly the only money of Sweden, and I have seen a piece of old Swedish money consisting of a plate of copper about two feet long and one foot broad. A merchant making payments in such money had to carry his money about in a wheel-barrow. Now we use copper only for coins of small value, and to make the copper harder, it is melted up with tin and converted into bronze. In the Saxon times English money was made of silver only, but this was inconvenient both for very large and for very small payments. The best way is to use gold, silver, and bronze money according as each is convenient. #In the English system of money, gold is the standard money and the legal tender#, because no one can be obliged to receive a large sum of money in any other metal. If a person owes a hundred pounds, he cannot get rid of the debt without tendering or offering a hundred pieces of coined gold to his creditor. Silver coin is a legal tender only to the amount of forty shillings--that is, no creditor can be obliged to receive more than forty shillings in a single payment. Similarly, bronze coin is a legal tender only up to the amount of one shilling in all. #81. What is a Pound Sterling?# In England people are continually paying and receiving money in pounds, but few could say exactly what a pound sterling means. No doubt it is represented by a coin called a sovereign, but what is a sovereign? Strictly speaking, #a sovereign is a piece of gold coined, in accordance with an Act of Parliament, at a British mint, still bearing the proper stamp of that mint, and weighing not less than 122-1/2 grains#. On the average the sovereigns issued from the mint ought to weigh 123.274 grains, but it is impossible to make each coin of that exact weight, and if this were done, the coins would soon be lessened in weight by wear. A sovereign is legal tender for a pound as long as it weighs 122-1/2 grains or more, and is not defaced; but, in reality, people are in the habit of paying and receiving sovereigns which are several grains less in weight than the law requires. Twenty silver shillings are by law to be received as equal in value to a pound. This is necessary, in order that we may be able to pay a fraction of a pound, for a coin made of gold equal to the twentieth part of a pound would easily be lost, worn, or even blown away. But the silver in twenty shillings is not equal in value to the gold in a pound; its value varies with the gold price of silver, and, at present, twenty shillings are only worth about sixteen gold shillings and eightpence, that is, 5/6 of a pound. It is necessary to make the silver coin thus of less value than it is taken for, in order to render it unprofitable to melt the coin. In the same way, the metal in a bronze penny is worth only about the sixth part of a penny, so that people would lose a great deal by melting up or destroying pence. #82. Paper Currency.# Instead of using actual coins of gold, silver, or bronze, it is common to make use of paper notes containing promises to pay money. When the sum of money to be paid is large, a bank note is much more convenient, being of far less weight than the coins, and less likely to be stolen. A five-pound bank note is a promise to pay five pounds to any person who has the note in his possession, and who asks for five pounds in exchange for the note at the office of the bank issuing the note. A #convertible bank note# is one which actually can be thus changed into the coins whenever it is desired, and so long as this is really the case, it is evident that the note is just as valuable as the coins, and is more convenient. The only fear is that, if a banker be allowed to issue these bank notes, he will not always have coins enough to pay them when presented. Very frequently banks have been obliged to stop payment; that is, to refuse to perform their promises. Nevertheless, when there is no other currency to be had, the bank notes often go on circulating like money. They are then called #inconvertible notes#, and there is said to be a #paper money#. A person is willing to receive paper currency in exchange for goods, if he believes that other people will take it from him again. But such paper currency is very bad, because its value will rise or fall according to the quantity issued, and people who owe money will often be able to pay their debts with less value than they received. The subject of bank notes and paper money, however, is too difficult for us to pursue in this Primer. CHAPTER XIII. CREDIT AND BANKING. #83. What Credit means.# It is very important for those who would learn political economy to understand exactly what is meant by #credit#. John is said to give credit to Thomas when John leaves some of his property in the use of Thomas, expecting to have it returned at a future time. In short, any one who lends a thing #gives credit#, and he who borrows it #receives credit#. The word #credit# means #belief#, and John believes that he will get back his property from Thomas, though this, unfortunately, does not always prove to be the case. John is called the #creditor#, and Thomas the #debtor#. It is not common, indeed, to speak of credit in the case of most articles: when a man borrows a horse, a book, a house, an engine, or other common article, and pays for its use, he is said to #hire# it, and what he pays for the use is called the hire, fare, or rent. In some countries, where coins are not yet used, people lend and borrow corn, oil, wine, rice, or any common commodity which all like to possess. In the parts of Africa where palm oil is produced in great quantities, people give and take credit in oil. But in all civilised countries it has become the practice to borrow and lend money. If a man needs an engine, and has nothing to buy it with, he goes and borrows money enough from the person who will lend it on the lowest terms, and then he buys the engine where he can get it most cheaply. Frequently, indeed, the man who sells the engine will give credit for its price, that is, will lend the sum of money to the buyer, just sufficient to enable him to buy it. Credit is a very important thing, because, when properly employed, #it enables property to be put into the hands of those who will make# the #best use of it#. Many people have property but are unable to go into business, as is the case with women, children, old men, invalids, &c. Rich people perhaps have so much property that they do not care to trouble themselves with business, if they can get others to take the trouble for them. Even those who are engaged in business often have sums of money which they do not immediately want to use, and which they are willing to lend for a short time. On the other hand, there are many clever active men, who could do a great deal of work in establishing manufactories, sinking mines, or trading in goods, if they only had enough money to enable them to buy the requisite materials, tools, buildings, land, &c. A man must have some property of his own before he can expect to get credit; but with some property to fall back upon in case of need, and with a good character for honesty and ability, a trader can by credit obtain other people's capital to deal with. #84. Loans on Mortgage.# Credit is given in many different ways; sometimes a man is assisted by a permanent loan from a relative or friend who has confidence in him. Enormous sums of money are lent, as it is called, upon #mortgage#. A man, for instance, who has built a cotton mill with his own money, pledges the mill as security for a loan, that is, he gives his creditor a right to sell the mill unless the debt is paid when required. #The mill is called a mortgage or dead pledge#, because it becomes dead to the former owner, if he breaks the conditions of the loan. There are many institutions, such as insurance companies, building societies, &c., which have a great deal of capital to lend on mortgage, and many rich people invest their money in the same way. Thus a very large part of the houses, land, factories, shops, &c., are not really owned by the people who seem to own them, but by #mortgagees#, who have lent money on them. Generally speaking, the interest paid for such loans is 4-1/2 or 5 per cent. per annum, when the security is quite good, that is, when the property mortgaged is sure to sell for more than is lent upon it. A considerable margin is always left to cover mistakes or alterations as regards the value of the property; thus, if a house be said to be worth £1000, it will usually be security only for a debt of £700 or £800. When the security is not so good, because the ownership or the value of the property mortgaged is doubtful, the rate of interest charged will be higher, and may be six, seven, or more per cent. The surplus covers the risk, that is, compensates the lender, for the chance of losing what he lends. Mortgage loans are generally made upon fixed capital like houses, mills, ships, &c., which last a long time; but sometimes stocks of goods, such as cotton, wine, corn, &c., are mortgaged as security for temporary loans. #85. Banking.# A large part of the credit given, in a civilised country, is given by bankers, who may be said #to deal in credit#, or which comes to the same thing, #in debt#. A banker usually carries on three or four different kinds of work, but his proper work is that of borrowing from persons who have ready money to lend, and lending it to those who want to buy goods. As a shopkeeper sells his stock of goods, he receives money for it. And, until he buys a new stock, he has no immediate need of this money. Those, again, who receive salaries, dividends, rents, or other payments once a quarter, do not usually want to spend the whole at once. Instead of keeping such money in a house, where it pays no interest and is liable to be stolen, lost, or burnt, it is much better to deposit it with a banker, that is, to lend it to a banker who will undertake to pay it back when it is wanted. Generally speaking a merchant, manufacturer, or tradesman sends to his banker every day the money which he has received, and only keeps a few pounds to give change or make petty payments. The advantages of thus depositing money with the banker are chiefly as follows:-- (1.) The money is safe, as the banker provides strong rooms, locked and guarded at night. (2.) It is easy to pay the money away by means of cheques or written orders entitling the persons named therein to demand a specified sum of money from the banker. (3.) The banker usually allows some interest for the money in his care. Bankers receive deposits on various terms; sometimes the depositor engages to give seven days' notice before withdrawing his deposit; in other cases the money is lent to the banker for one, three, or six months certain, and the longer the time for which it is lent the better the rate of interest the banker can usually give. But a great deal of money is deposited #on current account#, that is, the customer puts his money into the bank, and draws it out just when he likes, without notice. In this case the banker gives very little interest, or none at all, because he has to keep much of the money ready for his customers, not knowing when it will be wanted. Nevertheless, while some depositors are drawing their money out, others will be putting more in, and it is exceedingly unlikely that all the thousands of customers of a large bank will want their deposits at the same time. Thus it happens that the banker, in addition to his own capital, has a large stock of money always on hand, and he makes profit by lending out this money to other customers, who need credit. There are various ways in which a banker arranges his loans; sometimes he lends upon the mortgage of goods, houses, and other property, or of shares in railways and government funds, in the way described; but this is not a proper way for a banker to employ much of his funds, because he may not be able to get back such loans rapidly enough when he needs them. One of the simplest ways of lending money is to allow customers to overdraw their accounts, that is, to draw more money out of the bank than they have put in. But a banker naturally takes care not to allow overdrafts unless he has great confidence in his customer, or has received a guarantee of repayment from him or his friends. #86. Discount of Bills.# The most common and proper way in which a banker gives credit and employs his funds is in the discount of bills, that is, in advancing money in exchange for a definite promise to pay it back at a stated time. Suppose that John Smith has sold a thousand pounds worth of cotton goods to Thomas Jones, a shopkeeper; several months will pass perhaps before Jones can sell the goods over the counter, and if he has not much capital, he agrees that John Smith shall give credit for the thousand pounds but in the mean time draw a bill upon Jones. This bill would very likely be somewhat in this form-- LONDON, 1st February, 1878. £1000, 0s. 0d. Three months after date pay to me or my order the sum of one thousand pounds, value received. JOHN SMITH. To Mr. Thomas Jones. John Smith is said to be the #drawer# of the bill; Thomas Jones is the #drawee#, and the bill amounts to a claim on the part of John Smith that Thomas Jones owes him the sum named. If the drawee acknowledges that this is the case, he signifies it when the bill is presented to him, by writing on the back the word "accepted," together with his name. Now if the drawer and drawee of a bill are persons of good credit, a banker will readily discount such a bill, that is, buy it up for the sum due, after subtracting interest at the rate of say five per cent. per annum for the length of time the bill has to run. The bill forms good security, because, when accepted, John Smith is bound to pay the thousand pounds when due, and if he fails, the drawee is liable. Such bills are often bought by one person after another, being #endorsed# by each to the next, that is, impressed with an order that the money shall be paid to the next person named. When due the last owner must claim the money from John Smith, and if he refuses to pay, each owner has a claim upon the previous owners. CHAPTER XIV. CREDIT CYCLES. #87. Industry is Periodic#. Everybody ought to understand that trade varies in activity, from time to time, in a periodic manner. #A thing is said to vary periodically, when it comes and goes at nearly equal intervals# like the sun, or rises and falls like the tides. Now, in industry, as Mr. William Langton pointed out twenty years ago, there are tides almost as regular as those of the sea. Shakespeare says truly-- "There is a tide in the affairs of men, Which, taken at the flood, leads on to fortune." Some of these tides depend upon the seasons of the year; business is more active in the spring and summer, and falls off in winter. It is comparatively easy to borrow money in January, February, March, June, July, August, and September; October and November are particularly bad months; the rate of interest then often runs up rapidly, and the bankruptcies in these months are more numerous than at any other time of year. April and May are also dangerous months, but in a less degree. Men of business should always bear these facts in mind, and, by being prepared beforehand, they may escape disaster. There is also a much longer kind of tide in business, which usually takes somewhere about ten years to rise and fall. The cause of this tide is not well understood, but there can be no doubt that in some years men become confident and hopeful. They think that the country is going to be very prosperous, and that if they invest their capital in new factories, banks, railways, ships, or other enterprises, they will make much profit. When some people are thus hopeful, others readily become so too, just as a few cheerful people in a party make everybody cheerful. Thus the hopefulness gradually spreads itself through all the trades of the country. Clever men then propose schemes for new inventions and novel undertakings, and they find that they can readily get capitalists to subscribe for shares. This encourages other speculators to put forth proposals, and when the shares of some companies have risen in value, it is supposed that other shares will do so likewise. The most absurd schemes find supporters in a time of great hopefulness, and there thus arises what is called a bubble or mania. #88. Commercial Bubbles or Manias.# When the schemes started during a bubble begin to be carried out, great quantities of materials are required for building, and the prices of these materials rise rapidly. The workpeople who produce these materials then earn high wages, and they spend these wages in better living, in pleasure, or in buying an unusual quantity of new clothes, furniture, &c. Thus the demand for commodities increases, and tradespeople make large profits. Even when there is no sufficient reason, the prices of the remaining commodities usually rise, as it is called, #by sympathy#, because those who deal in them think their goods will probably rise like other goods, and they buy up stocks in the hope of making profits. Every trader now wants to buy, because he believes that prices will rise higher and higher, and that, by selling at the right time, the loss of any subsequent fall of prices will be thrown upon other people. This state of things, however, cannot go on very long. Those who have subscribed for shares in new companies have to pay up the calls, that is, find the capital which they promised. They are obliged to draw out the money which they had formerly deposited in banks, and then the bankers have less to lend. Manufacturers, merchants, and speculators, who are making or buying large stocks of goods, wish to borrow more and more money, in order that they may have a larger business, the profit seeming likely to be so great. Then according to the laws of supply and demand, the price of money rises, which means that the rate of interest for short loans, from a week to three or six months in duration, is increased. The bubble goes on growing, until the more venturesome and unscrupulous speculators have borrowed many times as much money as they themselves really possess. #Credit is said to be greatly extended#, and a firm, which perhaps owns a capital worth ten thousand pounds, will have undertaken to pay two or three hundred thousand pounds, for the goods which they have bought on speculation. But the sudden rise which, sooner or later, occurs in the rate of interest, is very disastrous to such speculators; when they began to speculate interest was, perhaps, only two or three per cent.; but when it becomes seven or eight per cent., there is fear that much of the profit will go in interest paid to the lenders of capital. Moreover, those who lent the money, by discounting the speculators' bills, or making advances on the security of goods, become anxious to have it paid back. Thus the speculators are forced at last to begin selling their stocks, at the best prices they can get. As soon as some people begin to sell in this way, others who hold goods think they had better sell before the prices fall seriously; then there arises a sudden rush to sell, and buyers being alarmed, refuse to buy except at much reduced rates. The bad speculators now find themselves unable to maintain their credit, because, if they sell their large stocks at a considerable loss, their own real capital will be quite insufficient to cover this loss. They are thus unable to pay what they have engaged to pay, and #stop payment#, or, in other words, become bankrupt. This is very awkward for other people, manufacturers, for instance, who had sold goods to the bankrupts on credit; they do not receive the money they expected, and as they also perhaps have borrowed money while making the goods, they become bankrupt likewise. Thus the #discredit# spreads, and firms even which had borrowed only moderate sums of money, in proportion to their capital, are in danger of failing. #89. Commercial Crisis or Collapse.# The state of things described in the last section is called a commercial collapse, because there is #a sudden falling in of prices, credit, and enterprise#. It is also called #a Crisis, that is, a dangerous and decisive moment# (Greek, krinô, _to decide_), when it will soon be seen who is to become bankrupt, and who not. No sooner has such a crisis arrived, than everything changes. No one ventures to propose a new scheme, or a new company, because he knows that people in general have great difficulty in paying up what they promised to the schemes started during the bubble. #This bubble is now burst#, and it is found that many of the new works and undertakings from which people expected so much profit, are absurd and hopeless mistakes. It was proposed to make railways where there was nothing to carry; to sink mines where there was no coal nor metal; to build ships which would not sail; all kinds of impracticable schemes have to be given up, and the capital spent upon them is lost. Not only does this collapse ruin many of the subscribers to these schemes, but it presently causes workpeople to be thrown out of employment. The more successful schemes indeed are carried out, and, for a year or two, give employment to builders, iron-manufacturers, and others, who furnish the materials. But as these schemes are completed by degrees, no one ventures to propose new ones; people have been frightened by the losses and bankruptcies and frauds brought to light in the collapse, and when some people are afraid, others readily become frightened likewise by sympathy. In matters of this kind men of business are much like a flock of sheep which follow each other without any clear idea why they do so. In a year or two the prices of iron, coal, timber, &c., are reduced to the lowest point; great losses are suffered by those who make or deal in such materials, and many workmen are out of employment. The working classes then have less to spend on luxuries, and the demand for other goods decreases; trade in general becomes depressed; many people find themselves paupers, or spend their savings accumulated during previous years. Such a #state of depression# may continue for two or three years, until speculators have begun to forget their failures, or a new set of younger men, unacquainted with disaster, think they see a way to make profits. During such a period of depression, too, the richer people who have more income than they spend, save it up in the banks. Business men as they sell off their stocks of goods leave the money received in the banks; thus by degrees capital becomes abundant, and the rate of interest falls. After a time bankers, who were so very cautious at the time of the collapse, find it necessary to lend their increasing funds, and credit is improved. Then begins a new credit cycle, which probably goes through much the same course as the previous one. #90. Commercial Crises are Periodic.# It would be a very useful thing if we were able to foretell when a bubble or a crisis was coming, but it is evidently impossible to predict such matters with certainty. All kinds of events--wars, revolutions, new discoveries, treaties of commerce, bad or good harvests, &c.--may occur to decrease or increase the activity of trade. Nevertheless, #it is wonderful how often a great commercial crisis has happened about ten years after the previous one#. During the last century, when trade was so different from what it now is, there were crises in or near the years 1753, 1763, 1772 or '3, 1783, and 1793. In this century there have been crises in the years 1815, 1825, 1836-9, 1847, 1857, 1866, and there would probably have been a crisis in 1876 or 1877 had it not been for an exceptional collapse in America in 1873. There is at present (February, 1878) the great depression of trade which marks the completion of one cycle and the commencement of a new one. Good vintage years on the continent of Europe, and droughts in India, recur every ten or eleven years, and it seems probable that commercial crises are connected with a periodic variation of weather, affecting all parts of the earth, and probably arising from increased waves of heat received from the sun at average intervals of ten years and a fraction. A greater supply of heat increases the harvests, makes capital more abundant and trade more successful, and thus helps to create the hopefulness out of which a bubble arises. A falling off in the sun's heat makes bad harvests and deranges many enterprises in different parts of the world. This is likely to break the bubble and bring on a commercial collapse. Generally, #a credit cycle#, as Mr. John Mills of Manchester has called it, will last #about ten years#. The first three years will witness depressed trade, with want of employment, falling prices, low rate of interest, and much poverty; then there will be perhaps three years of active, healthy trade, with moderately-rising prices, a reasonable rate of interest, fair employment, and improving credit; then come some years of unduly-excited trade, turning into a bubble or mania, and ending in a collapse, as already described. This collapse will occupy the last of the ten years, so that the whole credit cycle will, on the average, be as follows:-- |---------------------------------------------------------------| | YEARS. | |---------------------------------------------------------------| | 1 2 3 | 4 5 6 | 7 8 | 9 | 10 | |----------- |----------- |--------- |-----------|--------------| | DEPRESSED | HEALTHY | EXCITED | _Bubble._ | _Collapse._ | | | | | | | | TRADE. | TRADE. | TRADE. | | | |----------- |----------- |--------- |-----------|--------------| #It is not to be supposed that things go as regularly as is here stated;# sometimes the cycle lasts only nine, or even eight years, instead of ten; minor bubbles and crises sometimes happen in the course of the cycle, and disturb its regularity. Nevertheless, it is wonderful how often the great collapse comes at the end of the cycle, in spite of war or peace or other interfering causes. 91. #How to avoid Loss by Crises.# Now, these bubbles and crises are very disastrous things; they lead to the ruin of many people, and there are few old families who have not lost money at one collapse or another. The working-classes are often much injured; many are thrown out of employment, and others, not seeing why their wages should be reduced, make things worse by strikes, which, after a collapse, cannot possibly succeed. It is most important, therefore, that all people--working-people, capitalists, speculators, and all connected with any kind of business--should remember that #very prosperous trade is sure to be followed by a collapse and by bad trade#. When, therefore, things look particularly promising, investors should be unusually careful into what undertakings they put their money. #As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing.# If, for instance, the price of coal rises high, and coal-owners make large profits, there are certain to be many people sinking new mines. Such a time is just the worst one for buying shares in a coal-mine, because, in the course of a few years, there will be a multitude of new mines opened, the next collapse of trade will decrease the demand for coal, and then there will be great losses in the coal business. This is what has happened in the last few years in England, and the same thing has happened over and over again in other trades. As a general rule, #the best time to begin a new factory, mine, or business of any kind, is when the trade is depressed, and when wages and interest are low#. Mining, building, or other work can then be done more cheaply than at other times, and the new works will be ready to start just when business is becoming active and there are few other new works opening. This rule, indeed, does not apply to the schemers, speculators, or #promoters#, as they are called, who start so many companies. These people make it their business to have new schemes and shares to offer just when people are in a mind to buy, that is, during a bubble or time of excited trade. They take care to sell their own shares before the collapse comes, and it is their dupes who bear all the loss. A prudent man, therefore, would never invest in any new thing during a mania or bubble; on the contrary, he would sell all property of a doubtful or speculative value, when its price is high, and invest it in the very best shares or government funds, of which the value cannot fall much during the coming collapse. The wisest men have been deluded during manias; and in the Library of the Royal Society is shown a letter from Sir Isaac Newton requesting a friend to buy shares for him in the South Sea Company, just at the moment when the South Sea Bubble was at its worst. Let people take warning by Sir Isaac Newton, and never speculate in a thing because other people are doing the same; then these bubbles and collapses will be prevented, or will become much less disastrous. Credit cycles will go on until the public learn to look out for them, and act accordingly. Business men must become bold during depressed trade, careful during excited trade, instead of acting exactly in the opposite way. It is only a knowledge of these credit cycles which can prevent them, and this is the reason why I have said so much about them in this Primer. CHAPTER XV. THE FUNCTIONS OF GOVERNMENT. 92. Functions mean performances (Latin, _fungi_, _functus_, to perform), and the functions of government mean those things which a government ought to do,--the duties which it undertakes to perform, or the services which it may be expected to render to the people governed. These functions are commonly divided into two classes-- (1) The necessary functions. (2) The optional functions. The #necessary functions# of a government are such as it is obliged to undertake; thus it must defend the nation against foreign enemies, it must keep the peace within the country, and prevent insurrections which might threaten the existence of the government itself; it must also punish evildoers who break the laws, and try to become rich by robbery; it must also maintain law courts in which the disputes of its subjects can be fairly decided, and set at rest. These are far from being all the necessary functions. The #optional functions# of government consist of those kinds of work which a government can execute with advantage, such as providing a good currency, establishing a uniform system of weights and measures, constructing and maintaining the roads, carrying letters through a national post office, keeping up a national observatory and a meteorological office, &c. The optional functions are in fact very numerous, and there is hardly any end to the things which one government or another has provided for the people. It would be a most important work, if it were possible, to decide exactly what undertakings a government should take upon itself, and what it should leave to the free action of other people; but it is impossible to lay down any precise rules upon this subject. The characters and habits and circumstances of nations differ so much, that what is good in one case might be bad in another. Thus in Russia the government makes all the railways, and the same is the case in the Australian States; but it does not at all follow that, because this is necessary or desirable in those countries, therefore it is desirable in England, or Ireland, or the United States. Experience shows that though the English Post Office is very profitable, the Postal Telegraphs cannot at present be made to pay. There can be no doubt that #it would be altogether ruinous to put the enormous system of English railways under the management of government officers#. Each case has thus to be judged upon its own merits, and all that the political economist can do is to point out the general advantages and disadvantages of government management. #93. The Advantage of Government Management.# There is often immense economy in having a single establishment to do a certain kind of work for the whole country. For instance, a weather office in London can get daily telegraphic reports of the weather in all parts of the kingdom and many parts of Europe; combining and comparing these reports it can form a much better opinion about the coming weather than would be possible to private persons, and this opinion can be rapidly made known by the telegraph and newspapers. The few thousand pounds spent by the government yearly on the meteorological office are inconsiderable compared with the services which it may render to the public by preventing shipwrecks, colliery explosions, and other great disasters and inconveniences which often arise from our ignorance of the coming weather. It is certainly proper then to make meteorological observation one of the functions of government. Great economy would arise, again, if an establishment like the post-office were created in Great Britain in order to convey small goods and parcels. At present there are a great number of parcel companies, but they often send a cart a long way to deliver a single parcel. In London some half a dozen independent companies send carts all over the immense town; each of the chief railway companies has its own system of delivering parcels, and the larger shops have their own delivery vans as well. Thus there is an enormous loss of horse power and men's time. If a government postal system undertook the work, only one cart would deliver goods in each street, and as there might be a parcel for almost every house, or sometimes several, there would be an almost incredible saving in the distance travelled and the time taken up. This illustrates the economy which may arise from government management. #94. The Disadvantage of Government Management.# On the other hand there is great evil in the government undertaking any work which can be fairly done by private persons or companies. Officers of the government are seldom dismissed when once employed, or, if turned away, they receive pensions. Thus when the government establishes any new work, it cannot stop it without great expense, and the work is usually carried on whether it is done economically or not. Then again, government officers, knowing that they will not be dismissed without a pension, are commonly less active and careful than men in private employment. For the work which they do they are paid at a higher rate than in private establishments. It is therefore very undesirable that the Government should take any kind of work into its own hands, unless it is perfectly clear that the work will be done much better, and more cheaply than private persons could do it. There is a balance of advantages and disadvantages to be considered: the advantage of a single great establishment with plenty of funds; and the disadvantage that work is always done more expensively by Government. In the case of the post-office, the advantages greatly outweigh the disadvantages; the same would probably be the case with a well-arranged parcel post; in the postal telegraphs, there are many advantages, but they are obtained at a considerable loss of revenue. If the state were to buy up and manage the railways of Great Britain, the advantages would be comparatively small, but the losses would be enormous. In America the express or parcel companies are so admirably managed that they do the work more safely and better than the Government post office. There can be little doubt, too, that the American railways and telegraphs are far better managed now than they would be if acquired by the Federal Government. CHAPTER XVI. TAXATION. #95. There must be Taxes.# Whether governments undertake more or less functions, it is certain that we must have some kind of government, and that this government will spend a great deal of money. This money, too, can very seldom be obtained in the form of real profit on the work done, so that it must be raised by taxation. We generally apply the name tax to any payment required from individuals towards the expenses of the local or general government. We may easily indeed be taxed without being aware of it; thus, nearly the half of every penny paid for posting a letter is a tax, and a town may be taxed through the price of gas or water. At one time or another, and in one country or another, taxes have been raised in every imaginable way. The #Poll Tax# was a payment required from every poll or head of the population, man, woman, or child. This was considered a very grievous tax and has never been levied in England since the reign of William III. The #Hearth Tax# consisted of a payment for each hearth in a house; then a rich family with a large house and many hearths paid far more than a poor family with only one or two hearths. But as people did not like the tax-gatherer coming into the house to count the hearths, the window tax was substituted, because the tax-gatherer could walk round the outside of the house, and count the windows. Now, in England, we do not tax the light of heaven at all, but we fix a man's payments by the rent of his house, the amount of his income, or the quantity of wine and beer he drinks. #96. Direct and Indirect Taxes.# Taxes are called #direct taxes# when the payment is made by the person who is intended to bear the sacrifice. This is the case generally with the assessed taxes, or the charges made upon people who have menservants, private carriages, &c. As most people keep carriages only for their own comfort, they cannot make other people repay the cost of the tax. But if a carrier or tradesman were taxed for his carts, he would be sure to make his customers repay it; thus the tax would not be direct, and carriages employed in trade are therefore exempt from taxation. Other taxes in England, which are generally direct ones, are the income-tax, the dog-tax, the poor-rates, the house-duty; but a tax which is usually direct, may sometimes become indirect, and it is often impossible to say what is really #the incidence of a tax#, that is, the manner in which it falls upon different classes of the population. #Indirect taxes# are paid in the first place by merchants and tradesmen, but it is understood that they recover the amount paid from their customers. The principal part of such taxes in England consist of the #customs duties# levied upon wine, spirits, tobacco, and a few other articles, when they are imported for use in this country. #Excise duties# are similar duties levied upon like goods produced within the kingdom. These were called #excise#, because it was originally the practice actually to cut off a portion of the goods themselves, and take it as the duty. In England, excise duties are now levied on a few things only, such as spirits and beer; and care is taken to make the excise duty as nearly as possible equal to the customs duty on the same kind of imported goods. English brandy pays a duty equivalent to that on French brandy, and the matter is arranged so that the duty shall neither encourage nor discourage the making of English brandy. Thus the trade is left as free as it can be, consistently with raising a large revenue. Another important class of indirect taxes consist of #the stamp duties#, which are payments required from people when they make legal agreements of various kinds. According to law, deeds, leases, cheques, receipts, contracts, and many other documents are not legally valid unless they be stamped, and the cost of the stamp varies from a penny up to hundreds or even thousands of pounds, according to the value of the property dealt with. Stamp duties are probably in most cases indirect taxes, but it would be very difficult to say who really bears the cost; this must depend much upon circumstances. #97. Maxims of Taxation.# Adam Smith first stated certain rules, or maxims, which should guide the statesman in laying on taxes; they are such good rules that everybody who studies political economy ought to learn them. They are as follows-- (1) The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. This we may call the #maxim of equality#, and equality consists in everybody paying, in one way or another, about an equal percentage of the wages, salary, or other income which he receives. In England the taxes amount to something like ten per cent., or one pound in every ten pounds, and this is pretty equally borne by different classes of society. It is probable, however, that the very rich do not pay as much as they ought to do. At the same time those who are too poor to pay income tax, and who do not drink nor smoke, are almost entirely free from taxation in this country; they pay very little, except poor rates. It would be impossible to invent any one tax which could be equally levied upon all persons. The income tax is a tax of so many pence in every pound of a person's income, but it is impossible to make people state their income exactly, and poor people could never be got to pay such a tax. Hence it is necessary to put on a certain number of different taxes so that those who manage to escape one tax shall be made to pay in some other way. (2) The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain. This is the #maxim of certainty#, and it is very important, because, if a tax is not certainly known, the tax-gatherers can oppress people, requiring more or less as they choose. In this case it is very probable that they will become corrupt, and will receive bribes to induce them to lower the tax. On this account duties ought never to be levied according to the value of goods, or _ad valorem_, as it is said. Wine, for instance, varies in value immensely according to its quality and reputation, but it is impossible for the custom-house officer to say exactly what this value is. If he takes the statement of the people who import the wine, they will be tempted to tell lies, and say that the value is less than it really is. And as it would not be easy to prove the guilt either of the customs officer or of the importers, it is to be feared that some officers will receive bribes. But if the wine is taxed simply according to its quantity, the amount of duty is known with great certainty, and fraud can easily be detected. The same remarks apply more or less to every kind of goods which varies much in quality. (3) Every tax ought to be levied at the time, and in the manner, in which it is most likely to be convenient for the contributor to pay it. This is #the maxim of convenience#, and the reason for it is sufficiently obvious. As government only exists for the good of the people at large, of course it ought to give the people as little trouble as possible. And as the Government has immensely more money at its command than any private person, it ought to arrange so as to demand a tax when the taxpayer is likely to be able to pay it. Thus there seems to be no sufficient reason why the government should make people pay the income-tax in January, when they are likely to have plenty of other bills to pay. In respect of this maxim, the customs and excise duties are very good taxes, because a person pays duty whenever he buys a bottle of spirits or an ounce of tobacco. If he does not want to pay taxes, let him leave off drinking and smoking, which will probably be better for him in every way. At any rate, if he can afford to drink spirits and smoke tobacco, he can afford something for the expenses of government. The penny receipt duty, again, is in this respect a good tax, because when a person is receiving money he is sure to be able to spare one penny for the State, and he is generally so glad to get his money that he thinks nothing of the penny. (4) Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury. This is the #maxim of economy#. Thus, a tax ought not to be imposed if it would require a great many officers to collect it, and thus waste much of what is collected, or if it disturbs trade and makes things dearer than they would otherwise be. Again, the government ought not to cause people to lose time and money in paying the taxes, because this is just as bad for them as if they paid so much more taxes. In this respect the stamp-duties are very bad taxes, because in many cases it is requisite for a person to take his deeds and other documents to the stamp-office and lose his time, or else employ lawyers and agents to do it for him, who charge considerable fees. So troublesome are some of the stamp-duties that in many cases people neglect to have their agreements stamped, and prefer to trust to the honesty of those they deal with. Such agreements are thus often rendered of no legal value, and the government, for the sake of sixpence or a shilling, practically denies law to the people. #98. Protection and Free Trade.# Almost every government has employed taxation at one time or another, for the purpose of encouraging industry within the country. It is often supposed that if purchasers are prevented from buying foreign goods, they will have to buy home-made goods, and thus manufacturers at home will be kept busy, and there will be plenty of employment. This is altogether a fallacy, which we may call the #fallacy of Protection#, but it is one which readily takes hold of people's minds. No tradesman or manufacturer likes to see himself underbid by those who offer better goods at lower prices. When foreign goods, then, are preferred by purchasers, the home manufacturers of such goods complain bitterly, and join together to persuade people that they are being injured by foreign trade. There is still so much national pride and animosity, that a nation does not like to be told that it is being beaten by foreigners. The manufacturers, misled by their own self-interest, use all kinds of bad arguments to show that if foreign products were kept out of the country, they could make as good ones in a little time, and then they could employ many people, and add to the wealth of the country. They fall, in fact, into #the fallacy of making work# before described (section 55), and argue as if the purpose of work was to work, and not to enjoy abundant supplies of the necessaries and comforts of life. Now it is impossible to deny that certain owners of lands and mines and works may be benefited by putting duties upon foreign goods of the kind which they want to produce. Those who are already enjoying the advantage of such improper duties may, of course, be injured when they are removed. But what we have in political economy to look to, is not the selfish interests of any particular class of people, but the good of the whole population. Protectionists overlook two facts--(1) that the object of industry is to make goods abundant and cheap; (2) that it is impossible to import cheap foreign goods without exporting home-made goods of some sort to pay for them. We have already learnt the obvious truth that wealth is to be increased by producing it in the place most suitable for its production. Now the only sure proof that a place is suitable is the fact that the commodities there produced are cheap and good. If foreign manufacturers can underbid home-producers, this is the best, and in fact the only conclusive proof that the things can be made more cheaply and successfully abroad. But then it may be objected, what is to become of workmen at home, if all our supplies be got from another country. The reply is, that such a state of things could not exist. Foreigners would never think of sending us goods unless we paid for them, either in other goods, or in money. Now, if we pay in goods, workmen will of course be needed to make those goods; and the more we buy from abroad, the more we shall need of home produce to send in exchange. Thus, the purchase of foreign goods encourages home manufactures in the best possible way, because it encourages just those branches of industry for which the country is most suited, and by which wealth is most abundantly created. #99. The Mercantile Theory.# Perhaps, however, it will be objected that our foreign imports will be paid for not in goods but in money; thus the country will be gradually drained of its wealth. This is #the old fallacy of the Mercantile Theory#, which was to the effect that a country becomes rich by bringing gold and silver into it. It is an absurd fallacy, because we can get no benefit by accumulating stocks of gold and silver. In fact, to keep precious metals causes a loss of interest upon their value; people who are rich may afford to have costly plate, and the pleasures they derive from it may be worth the interest. But to have more gold, or silver money than is just sufficient to make the ordinary payments of trade causes dead loss of interest. Nor is there any fear that the country will be drained of money entirely. For, if money became scarce, its value would rise according to the laws of supply and demand, and prices of goods would fall; then imports would decrease, and exports increase. It is only a country like Australia or North America, possessing gold or silver mines, which could go on paying money for its imports, and then it is quite right it should do so, the metal being a commodity which can be cheaply produced in the country. Gold and silver must be got out of mines, and therefore a country which buys goods with money must either have such mines, or else get the metal from other countries which possess mines. In no case, then, can we import foreign commodities without producing at home goods of equivalent value to pay for them, and thus we see beyond all doubt that foreign trade is a means of increasing, not decreasing, the activity of industry at home. #100. Is Political Economy a Dismal Science?# This is only a Primer, a very brief and elementary account of some parts of political economy, and it is evidently impossible to argue out the subjects of such a science in so small a compass. But the purpose of this little treatise will be fulfilled if those who begin with the primer can be persuaded to go on and study larger works on the science. But even he who has read only thus far must know that political economy is no cold-blooded or dismal science, as people say. Is it a dismal thing to relieve the labourer of his load, or to spread his table with the most nutritious food? No doubt the science is dismal enough so far as it leads us to reflect upon the needless misery existing on every side. It is dismal to think of the hundreds of thousands who lengthen out a weary life in workhouses and prisons and infirmaries. Strikes are dismal; lockouts are dismal; want of employment, bankruptcy, dear bread, famine, are all dismal things. But is it political economy which causes them? #Is not our science more truly described as that beneficent one, which, if sufficiently studied, would banish such dismal things, by teaching us to use our powers wisely in relieving the labours and misery of mankind.# END. 
41856	----	TRANSCRIBER'S NOTE: Italic text is denoted by _underscores_ and bold text by =equal signs=. MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS FOR USE WITH VOLUME II. MODERN ECONOMIC PROBLEMS BY FRANK A. FETTER, PH.D., LL.D. PROFESSOR OF ECONOMICS, PRINCETON UNIVERSITY [Illustration] NEW YORK THE CENTURY CO. 1917 FOREWORD This Manual follows the lines of the "Manual of References and Exercises," published in the autumn of 1916, to accompany the volume on Economic Principles. The literature of the field treated in "Modern Economic Problems" is now so vast that no more than a few of the titles could be included in the following lists. The references given are usually the more recent of those that would be helpful to students desiring to go more deeply into the subjects. The collection of questions and exercises is based upon the list printed, first in 1904 and much enlarged in 1910, in the author's "Principles of Economics." Much material has been added that had been shaped and used in class work at Princeton University, and a few other problems have been drawn from, or suggested by, other published lists. The plan of indicating the original sources of a number of these questions has been found to be too difficult to be completed for the present edition. Indeed, it appears that numerous test problems have become a common heritage for economic teachers, and one can hardly be sure when one has traced the ideas to their original sources. Some of them have appeared in somewhat differing forms in various lists for a half century past. Particular acknowledgment is made to my colleagues, Professors Adriance and McCabe, who devised a number of the questions for class use; and to Dr. Stanley E. Howard, who has given most valuable aid in the preparation of this Manual in its present form. F. A. F. Princeton, N. J., February, 1917. MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS CHAPTER I MATERIAL RESOURCES OF THE NATION REFERENCES. (Those marked with an asterisk (*) are the shorter assignments that are most applicable.) _Adams, C. C._, Commercial geography. 1906. _Marsh, G. P._, Man and nature: or physical geography as modified by human action. 1864. (Later editions under the title, "The earth as modified by human action.") *_Materials_, 58-61 (Extract from _Mason, O. T._, Technogeography, or the relation of the earth to the industries of mankind. American Anthropologist, 7: 135-158. 1905); 61-66 (extract from _Semple, E. C._, Influence of geographic environment. 1911.) _Smith, J. R._, Industrial and commercial geography, 1913. *_Source Book_, 292-302 (extract from); _Daniels, W. M._, Economic causes as affecting the political history of the United States. Accountants' Magazine, May, 1907. _Teele, R. P._, Irrigation in the United States. 1915. _Trotter, S._, The geography of commerce. 1903. _United States Census_, 1910. Volume on wealth, debt, and taxation. _Van Hise, C. R._, Conservation of natural resources. 1910. QUESTIONS. 1. What relation can be observed between general industrial conditions and the per capita wealth? Between the character of the people and the per capita wealth? Can countries be grouped geographically according to per capita wealth? 2. How does the United States compare with other countries with respect to the estimated amounts and values of cereal products? Textile fibres? Coal? Iron and copper ore? Present the results of your study in tabular form. 3. From the reports of the Thirteenth Census prepare a statement in tabular form showing the geographical distribution of our chief domestic sources of supply of the leading cereals, of neat cattle, of textile fibres, of coal, iron ore and copper ore, and of water power. 4. What physical conditions account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Has the isothermal line any relation to the number of millionaires? CHAPTER 2 THE PRESENT ECONOMIC SYSTEM REFERENCES. _Cooley, C. H._, Human nature and the social order. 1902. _Cooley, C. H._, Personal competition. Amer. Econ. Assn., Econ. Studies, 4: 78-173. 1899. *_Ely, R. T._, Competition: its nature, its permanency, and its beneficence. A. E. Assn. Pubs., 3d ser., 2: 55-70. 1901. _Ely, R. T._, Evolution of industrial society. 1903. _Ely, R. T._, Property and contract in their relation to the distribution of wealth. 1914. (2 vols.) _Giddings, F. H._, The economic ages. P. S. Q., 16: 193-221. 1901. *_Gray, John H._, Economics and the law. A. E. Rev., 5 (no. 1, supp.): 3-23. 1914. _Kinley, David_, The renewed extension of government control of economic life. A. E. Rev., 4 (no. 1, supp.): 3-17. 1914. _Schmoller, Gustav_, The mercantile system. Trans. by Ashley, 1896. QUESTIONS. 1. State briefly and criticize the theories of the origin of private property. 2. What have been the theories put forward to justify the system of private property in the past? 3. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 4. What are the recognized limitations upon the right of private property? Are these limitations in opposition to the principle by which private property is now generally defended? 5. Is the right of bequest a necessary condition of private property? 6. Do you know of any father who created more wealth because he could bequeath it to his son? 7. Does the son work as hard when he inherits his father's wealth? 8. What is the effect of private property on saving? 9. What is meant by the "Factory System"? 10. Through what historic stages has production passed? CHAPTER 3 NATURE, USE AND COINAGE OF MONEY REFERENCES. _Jevons, W. S._, Money and the mechanism of exchange. 1875. Chs. III-VII, XIII. *_Johnson, J. F._, Money and currency. 1905. Chs. I, II, IX. *_Phillips, C. A. (Ed.)_, Readings in money and banking. 1916. Chs. I-III, XIV. _Walker, F. A._, Money in its relations to trade and industry. 1st ed. 1879. Chs. I, II. _White, Horace_, Money and banking illustrated by American history. Ed. 1914. Bk. I. QUESTIONS. 1. What are the qualities of metallic money? 2. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 3. Who makes coins? Would jewelers make better ones? 4. What are the advantages and disadvantages of a seigniorage tax? CHAPTER 4 THE VALUE OF MONEY REFERENCES. _Fisher, Irving_, The purchasing power of money. 1911. _Gibson, Thomas_, Special market letters on the increasing gold supply and its effect on security values; interest rates; commodity prices, etc. 1908. *_Johnson_, chs. III-VIII, X. _Kemmerer, E. W._, Money and credit instruments in their relation to general prices. 2d ed. 1909. _Magee, J. D._, Money and prices. J. P. E., 21: 681-711, 798-818. 1913. *_Phillips_, chs. VIII, XI. _Round table discussion_, Money and prices. A. E. Assn. Bul., 4th ser., 1 (no. 2): 46-70. 1911. *_Source Book_, 303-313. (Extract from report of the Secretary of the Treasury, 1911.) _United States Secretary of the Treasury_, Finance report, 1911. _Walker, F. A._, chs. IV, V. QUESTIONS. 1. What are the functions of money? 2. What are the principal things besides money uses that cause a demand for gold and silver? 3. Why do you value money? Do you value it more than the things it buys? 4. When goods are exchanged for money or money for goods, what is the gain? 5. If money is a tool, what does it make? 6. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 7. Are men wealthy in proportion to the money they have? Are countries? 8. Would a nation be poorer, if, like Sparta, it prohibited all money? 9. Is a community poor because it has little money in circulation or does it have little money in circulation because it is poor? 10. Could a country better do without money, horses, or roads? 11. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 12. The mint price of an ounce of gold, .900 fine, is alike at San Francisco and Philadelphia, $18.604. Why is gold ever shipped from California to New York? 13. Does gold cost the day-laborer as much in California as in New York? 14. Note any habits of friends that result in their carrying more or less money than others of the same income. 15. What determines the amount of money needed by different persons, towns, states, and nations? 16. Give examples of things that increase the demand for money. 17. On an isolated island would it make any difference as to the value of money if there were but one gold-mine or several competing ones, supposing that the output were the same? 18. What per cent. of the total money in the world is the yearly output of gold; of silver; of gold and silver? Stat. Abst. 19. Is the value of gold and silver due to the action of government? 20. In what ways may the government determine the value of the monetary standard? 21. If all the different denominations of media of exchange were doubled in number, exchanges remaining unchanged, what would be the effect upon prices? 22. Is it true of all commodities that changes in supply affect their value proportionally? Is it true of money? If in your opinion there is any difference, explain it. 23. If the amount of coal in a country should be increased twenty-five per cent., in what percentage would you expect the value of coal to change? Give reasons. If the amount of money in a country should be increased twenty-five per cent., in what direction and in what percentage would the value of money change? Give reasons. (In each case the condition is "other things being equal.") 24. If in a given community all watch cases were made of gold, and each case contained one ounce of gold, would you expect the value of watch cases to fall by exactly one-half if the number of watch cases in the community were doubled, all other things remaining the same? If in another community (at another time) all exchanges were made exclusively by the use of gold coins, each containing an ounce of pure gold, would you expect that prices in general would be exactly doubled in case no change occurred in the community except a doubling of the number of coins in circulation? 25. Why might an increased resort to barter produce upon the general level of money prices effects similar to those produced by an increased use of credit media of exchange? 26. What gives rise to the belief sometimes held that money is an invariable standard of value? 27. Define depreciation and appreciation of the currency. What causes may produce either? What are the effects of either? More generally, what determines the value of the currency? 28. If gold were to become as plentiful as iron, would it be worth more or less than iron? 29. A nation having no foreign trade had originally in circulation 1,000,000 coins, each called a florin, and each containing an ounce of pure metal. To this original coin circulation the government adds 500,000 florins each containing one-half ounce of pure metal, and at the same time the government adds to the circulation 600,000 florins in the shape of inconvertible paper. Both the half ounce florin and the paper florin are by law made legal tender for a full weight florin. In the absence of any tendency to discriminate between accepting different kinds of florins in domestic trade, and with no other changes in the money situation except such as are necessitated by the aforesaid additions to the circulating medium, tell, first, what ultimately will be the number of florins in circulation, and give your reasons; and tell, second, of what kinds of florins and in what proportions the ultimate circulating medium will be composed. 30. Assume a country using gold alone as money and having in circulation 2,000,000 coins, under a system of free coinage. What would be the effect of closing the mints and issuing 1,500,000 new coins containing nine-tenths as much gold as the coins above mentioned, assuming that the number of goods exchanged remains the same? Explain clearly. What is the total quantity of such new coins the government can issue and keep in circulation? Explain clearly. 31. A country using gold money as its sole medium of exchange, under free and gratuitous coinage, makes the following change: it imposes a seigniorage charge of ten per cent., but without giving up free coinage or reducing the amount of fine gold in the coin. To what extent and in what direction will the value of money change, if at all (a) if the number of goods exchanged gradually increases five percent.; (b) if the number of goods exchanged gradually increases twenty-five percent.? Give your reasons clearly. CHAPTER 5 FIDUCIARY MONEY, METAL AND PAPER REFERENCES. *_Jevons_, chs. VIII, XVII, XVIII. *_Johnson_, chs. XIII-XVI. _Kemmerer, E. W._, Modern currency reforms. 1916. *_Phillips_, chs. IV, V, XII. _United States Director of the Mint_, Annual reports. _Walker_, chs. VIII-XII. _White_, Bk. II, chs. III-VI. QUESTIONS. 1. When 5160 grains of standard gold (i.e., by weight nine-tenths fine, with the other tenth composed of the alloy used in gold coin of the United States) sell in New York for $201.25 has the money "saturation point" been reached or exceeded, and will bullion be taken to the mint or coin melted down or exported? 2. Define legal-tender as applied to money. What is meant by fiat money? 3. Is a United States standard silver dollar commodity or fiduciary money? What determines its value? Of what importance is its legal tender quality? 4. Is the provision of law whereby the fractional silver coins of the United States are of less proportionate silver content than the standard silver dollar necessary to-day? Is it useful? Give your reasons. 5. Under what conditions will "bad money" fail to displace "good money" from circulation? 6. Under what circumstances will money that is not in fact convertible into other money have greater value than the material of which it (the first mentioned money) is made? Give an example from the monetary experience of the United States. 7. In a country which has hitherto had free and gratuitous coinage of gold, the government institutes a seigniorage charge of five per cent. by reducing to that extent the amount of gold put into each coin; the gold withheld by the government is not coined. What will be the effect of this seigniorage charge upon (a) prices in that country, (b) the comparative value of the gold in a new coin and the same weight of uncoined gold? Make your reasoning clear. 8. If a nation's entire money circulation consisting of 1,000,000 coins, all of them debased by a seigniorage charge of 50 per cent., were at once increased by the government's putting into circulation 300,000 pieces of inconvertible paper money, each piece of the same denomination as each coin, what effects might be anticipated on the basis of Gresham's law or otherwise, it being presupposed that the full amount of full weight coin required to conduct the nation's exchanges is only 900,000? Give your reasons. 9. A certain island has no silver mines and no foreign trade. It effects all its exchanges by the actual use of silver coin whose coinage is free and gratuitous. It has no banks, and does not resort either to barter or to credit. Silver is also used in the shape of plate in the island. Originally it had 100,000 silver coins in circulation, each containing one ounce of pure silver. After a certain date, as these coins were paid into the government treasury for taxes, at the rate of 5,000 one-ounce coins per week, the one-ounce coins were melted and the resulting bullion was recast, each new coin weighing 2 ounces and bearing the same name as the original one-ounce coins. Thereafter all coins struck at the island Mint contained two ounces of silver, and at that standard coinage continued free and gratuitous. When the government first pays out the new 2-ounce pieces, will they remain in circulation with the old one-ounce coins and have the same purchasing power? Give reasons. 10. If the above-described process of reminting 5,000 one-ounce coins per week continues for twelve weeks and then stops, how many old and how many new coins will at the end of the twelfth week be in circulation? Reasons. 11. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (From Sumner's Problems in political economy.) 12. Suppose a nation has 1,000,000,000 gold coins, each weighing one ounce (Troy) as its only circulating medium. Suppose that the government enacts that henceforth coins will be uttered containing only 99 per cent. as much pure gold as heretofore, the government taking one per cent. for its own use. Suppose "other things remain the same." What effect will this action have on the number of coins circulating? Will prices be affected? Now suppose the demand for money increases. Will bullion owners bring their bullion to the mint for coinage? Suppose this government had continued to utter coins of the same weight and fineness as before, but had kept back one per cent. of the bullion brought to the mint for its own use. Answer these three questions in the light of this supposition. 13. Tabulate the index numbers, the greenback price of the gold dollar, and the gold price of the greenback dollar, from 1861 to 1879. 14. Show the difference between convertible and inconvertible money. 15. Contrast the position of the commodity money theorists with that of the fiat money theorists. 16. In a gold-standard country, one-half of whose monetary circulation consists of silver dollars (which are unlimited legal tender) and of silver certificates payable on demand in silver dollars (and supported dollar for dollar by silver dollars in reserve), and whose mints are closed to the free coinage of silver, how would the money value of the silver dollars and silver certificates be affected if the gold price of silver should fall (1) 10 per cent.? (2) 50 per cent? (3) 5 per cent.? How would it be affected if the value of gold should fall 10 per cent? (Free coinage of gold is assumed). Explain the principles involved in your answer. CHAPTER 6 THE STANDARD OF DEFERRED PAYMENTS REFERENCES. _Fisher, Irving_, Appreciation and interest. A. E. Assn. Pubs., 11: 331-442. 1896. _Fisher, Irving_, A remedy for the rising cost of living--standardizing the dollar. A. E. Rev., 3 (no. 1, supp.): 20-28. 1913. Round table discussion of above, 29-51. _Fisher, Irving_, Objections to a compensated dollar answered. A. E. Rev., 4: 818-839. 1914. *_Jevons_, ch. XXV. *_Johnson_, chs. XI, XII, XVII. _Kinley, David_, Objections to a monetary standard based on index numbers. A. E. Rev., 3: 1-19. 1913. *_Materials_, 787, 788 (extract from _Brown, H. G._,), 788, 789 (extract from _Clark, W. E._, in "How to invest when prices are rising." 1912). _Noyes, A. D._, Forty years of American finance. 1909. Chs. I-III. _Patterson, E. M._, Objections to a compensated dollar. A. E. Rev., 3: 863-874. 1913. *_Phillips_, chs. VI, VII, XIII. _Taussig, F. W._, The plan for a compensated dollar. Q. J. E., 27: 401-416. 1912-1913. _United States Bureau of Labor Statistics_, Bul. 173. 1915. _Walker_, chs. III, VI, VII. QUESTIONS. 1. In which year between 1890 and the present year would a fixed salary of $1,000 have gone farthest? In which year would its purchasing power have been least? If a sum of $1,000 loaned in 1897 was returned in 1902, what was the difference in its purchasing power on its return and when it was loaned? 2. Will a day's work of a common laborer buy more to-day than it would a half century ago? Why? 3. The Bureau of Labor's index number for 1912 was 133. What was the percentage change in the value of money from the base period to 1912? Give your reasons and your work. 4. _Average prices for years 1860-65._ _Prices for 1900._ Coffee, lb. $ .12 $ .18 Coal, ton 3.00 3.60 Sugar, lb. .08 .06 Wool, lb. .30 .20 Wheat, bu. .80 .90 Upon the basis of the prices of the above commodities estimate the general price level for 1900, showing the percentage of its decline or advance from the basal price level. Indicate some of the causes which may have brought about this decline or advance. 5. At a given time the following commodity prices prevailed: cotton (raw), $.10 per lb.; wheat, $1.00 per bu.; sugar, $.07 per lb.; potatoes, $1.00 per bu.; beef (for roasting), $.25 per lb.; shoes, $5.00 per pair; cotton cloth of a standard grade, $.12 per yd.; woolen cloth of a standard grade, $1.25 per yd.; men's hats, $4.00, and coal, $7.00 per ton. At a later date the prices of the same commodities were respectively as follows: $.13, $1.05, $.06, $1.10, $.30, $5.75, $.15, $1.20, $4.50 and $6.50. Tabulate these facts and compute index numbers, which will show: (1) changes in the price level of all ten commodities. (2) changes in the price level of the articles of food. (3) changes in the price level of the articles of clothing. 6. In the preceding exercise, do the data afford sufficient grounds for saying that the cost of living has moved either upward or downward? If an affirmative answer be assumed, what has been the change in the value of money? 7. Assign to each of the commodities listed above a "weight" which represents, in your opinion, its importance as an article of popular consumption. Using this system of weights compute index numbers to show changes in the price levels of the same groups of commodities. How does the weighting affect your first conclusions regarding the changes in the cost of living? What is the importance of a system of weighting? 8. If the world's annual production of gold should suddenly increase five-fold, what would be the probable effect: upon the welfare of a stock exchange speculator as compared with the welfare of a teacher; upon the welfare of the creditor class as compared with that of the debtor class; upon prices? 9. What is the function of the standard of deferred payments? What is that standard now in America? What change in it has lately been going on? How is this affecting the incomes of various classes? 10. What ought to be the characteristics of a standard unit of value? 11. Can you get a kind of money that will make the things that are sold, dearer, and the things that are bought, cheaper? 12. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 13. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 14. Compare the effect of an increasing gold output upon the price of outstanding bonds with its effect upon the price of common stock already issued. 15. X is an isolated industrial country with a certain volume of money. Its government on a given day doubles the amount of currency. What will be the effect upon the rate of interest. (a) of long-time loans, (b) of short-time loans, and (c) of demand loans? 16. The rate of interest on long-time investments in a certain isolated community has been six per cent. The amount of money in this community is increased so as to raise the general level of prices by 100 per cent. Assuming that the increase in money has come wholly from the more copious output of money-metal from the mines, to what extent will this rise in the general level of prices affect the rate of interest when thereafter capital is loaned for long-time periods? 17. Could a railway in the United States advantageously float a large issue of 20-year bonds in the year 1916? Give reasons for your answer. Show clearly what you mean by "advantageously." Would a railroad wish to float such an issue if it could? Why? 18. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 19. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 20. What are the main reasons given for the ratio of 16 to 1? 21. Does the principle of the substitution of goods have any bearing on the value of metals under bimetallism? 22. What is the theory of money held by bimetallists? 23. "Inasmuch as gold (before 1848) was more valuable on the world's market than at the French mint, relatively to silver, it was impossible that gold should circulate in France." Is this a necessary conclusion? 24. What arguments advanced in favor of bimetallism in 1896 are inapplicable to-day? 25. What is the extent of the influence one nation can have on the ratio of the two precious metals? 26. How would the adoption of international bimetallism to-day at the ratio of 32 to 1 affect (a) the circulating medium, (b) the standard of value in different countries? Consider both the immediate and the eventual results. 27. What would have happened if a free silver law had been enacted in the United States in 1900? 28. Would an ideal monetary standard always measure the same quantity of goods? 29. A owes B a long term debt, which falls due just before the commencement of a commercial crisis; would it be to the advantage or disadvantage of A if the contract called for payment in terms of a tabular standard? 30. Why has not the tabular standard of deferred payments come into common use? Is the tabular standard sound or unsound in principle? Would your answer apply to the labor standard? CHAPTER 7 THE FUNCTIONS OF BANKS REFERENCES. _Cleveland, F. A._, Funds and their uses. 1902. _Conant, C. A._, History of modern banks of issue. 5th ed., 1915. _Dunbar, C. F._, Theory and history of banking. 2d ed., 1901. _Fisk, A. K._, The modern bank. 1903. _Holdsworth, J. T._, Money and banking. 1914. _Kinley, David_, The specie reserve in a banking system. J. P. E., 20: 12-24. 1912. *_Phillips_, chs. IX, X. _Scott, W. A._, Money and banking. 1903. _Veblen, T._, Theory of business enterprise. 1904. *_White_, bk. III, chs. I-III. QUESTIONS. 1. What does a bank do for a community? 2. What are the functions performed by a bank? 3. What are the sources of income to a bank? 4. Explain the most important ways in which the deposits of commercial banks originate; and state which of these ways creates the greatest amount of demand liabilities of the banks. 5. Do all banks issue notes? Why? 6. What is the advantage to a bank of the right to issue bank notes? 7. How does the issue of bank notes differ from the lending of funds to depositors? 8. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 9. Two men A and B have notes each for $1000 discounted at the same bank. A is credited on the bank's books with the right to draw $950. B receives $950 in the circulating notes issued by this bank. Are the bank's liabilities increased to precisely the same extent by the two transactions? Does either transaction immediately lessen the bank's cash reserve? 10. The following are the items of a report of a National Bank: Capital stock, $50,000; Cash on hand and in banks, $77,066.21; Circulation, $49,400; Bills payable, $10,000; United States and other bonds, $239,050; Deposits, $465,417.41; Surplus and net undivided profits, $30,952.58; Loans and investments, $289,653.78. (a) Separate and arrange these items in accordance with a regular bank statement and prove your answer. (b) Show how these items illustrate the essential functions of a bank, explaining in detail the nature of these functions. 11. Sort out from the following items the resources and liabilities and show the equality of total resources and total liabilities: Unpaid dividends $ 782.00 Reserved for payment of taxes due 10,000.00 Undivided profits 85,228.57 Capital stock 500,000.00 Surplus fund 250,000.00 Cash items (checks to be presented for settlement in next day's exchanges) 280,347.43 Loans and discounts 2,782,713.15 U. S. legal tender notes and notes of national banks 435,296.00 Specie 278,304.48 Deposits 4,057,934.61 Overdrafts (checks paid in excess of deposits) 2,842.10 Due from banks and bankers 370,142.02 Real estate 43,900.00 Mortgage owned 1,000.00 Bonds 709,400.00 12. Classify the following items as resources or liabilities of a national bank and give reasons for your classification of the 1st, 4th, 6th, and 7th: (1) Capital stock, $50,000; (2) Real estate, furniture, fixtures, etc., $15,046.14; (3) Cash, $69,343.34; (4) Surplus and net undivided profits, $19,257.43; (5) United States bonds, $108,951.50; (6) Loans and discounts, $242,546.36; (7) Deposits, $301,679.91; (8) Circulation (i.e., notes outstanding), $64,950. Prove that your classification is correct by balancing the account. Then show the changes made in the account by the following transaction: The bank loans $25,000.00 for 90 days at 6 per cent. interest, and the borrower draws out one-half the amount, with which he is credited after the bank has made the proper deduction for interest. 13. The week's averages of the New York banks for the third week in May compare as follows in 1905 and 1904: 1905. 1904. Loans $1,120,426,800 $1,056,553,500 Deposits 1,165,151,700 1,100,586,100 Circulation 45,308,300 36,480,400 Specie 215,174,200 210,002,800 Legal tenders 84,333,700 78,143,000 Explain why loans and deposits in the above table show practically the same increase from 1904 to 1905. 14. How would the balance sheet of a commercial bank issuing an ordinary asset bank-note currency stand after the following operations? The bank opens business with a paid-up capital of $2,000,000 and a surplus of $400,000. It spends $50,000 in its own bank notes for furniture and fixtures. It discounts at six per cent. for various customers $4,000,000 of 60-day notes and bills receivable, the borrowers taking one-fourth of the proceeds in cash, one-fourth in the bank's own bank notes, and leaving the balance on deposit. Customers cash checks on their accounts for $600,000 receiving two-thirds of the amount in the bank's own bank notes and the other third in coin and other kinds of "lawful money." Other customers make deposits of $900,000, of which one-third is in "lawful money," one-third in the bank's own bank notes, and one-third in the checks of other depositors in the same bank. The bank buys at par $1,200,000 of railroad bonds, paying for them in its own bank notes. It pays with its own bank notes expenses for wages, stationery and taxes to the amount of $10,000. (b) What percentage of reserve is it carrying at the end of these operations? 15. Statement of a national bank. LIABILITIES | RESOURCES $ Thousand | $ Thousand Capital, 464. | Loans and discounts, 708. Surplus, 203. | Over-drafts, .1 Undivided profits, 53. | Bonds to secure circulation Circulation, 404. | (par value) 450. Deposits, 419. | Other stocks and bonds, 163. Due banks, 29. | Due from reserve agents, 105. | Due from banks, 21. | Banking house, 32. | Current expenses and taxes, 3. | Checks and cash items, 4. | Exchange for Clear. House, 11. | Notes of other banks, 15. | Gold, 30. | Silver, .9 | Legal tenders, 9. | Redemption fund in U. S. T. 20. ------- | ------- 1,572. | 1,572. What can you learn from this statement about the kind of business which the bank is carrying on, and its power to withstand a financial storm? 16. How would the balance sheet of a commercial bank stand after the following operations? The bank begins business with a paid-up capital of $300,000 and a surplus of $60,000. It discounts for customers $600,000 of four-months notes and bills receivable, at 6 per cent., the borrowers taking one third of the proceeds in cash (i.e., lawful money), and leaving two-thirds on deposit. Customers deposit $200,000, of which one-half is in cash, one-quarter is in checks drawn on this bank, and one-quarter is in checks drawn on other banks. 17. Suppose that this bank now reorganizes as a national bank and, to secure the privilege of note issue, buys United States 2 per cent. bonds of a par value of $90,000 at $102. These bonds it deposits with the Treasurer of the United States and receives the full amount of national bank notes to which it is entitled. Depositors withdraw by check $180,000, the bank giving them $45,000 in its notes and the balance in lawful money. A dividend of 2 per cent. is declared, and is paid, one-half in lawful money and one-half in the form of deposits. Present the balance sheet. CHAPTER 8 BANKING IN THE UNITED STATES BEFORE 1914 REFERENCES. _Hollander, J. H._, Security holdings of national banks. A. E. Rev., 3: 793-814. 1913. _Kemmerer, E. W._, Banking reform in the United States. A. E. Rev., 3 (no. 1, supp.): 52-63. 1913. Round table discussion of above, 64-88. _Kemmerer, E. W._, Seasonal variations in the New York money market. A. E. Rev., 1: 33-49. 1911. _National Monetary Commission_, Report. 1912. In Sen. Doc. 243, 62d Cong., 2d Sess. _Phillips_, ch. XXX. *_Source Book_, 324-336 (extract from National Monetary Commission Report), 314-323 (extract from 1910 report of the Comptroller of the Currency). _Sprague, O. M. W._, Proposals for strengthening the national banking system. Q. J. E., 24: 201-242, 634-659; 25: 67-95. 1909-1911. _United States Comptroller of the Currency_, Annual reports. *_White_, bk. III, chs. IV, XV, XVII, XX, XXI, and appendices A and B. _Willis, H. P._, The banking question in Congress. J. P. E., 20: 869-885. 1912. QUESTIONS. 1. Explain the method followed by national banks in issuing bank notes. Why did the banks often find it more profitable to use their money in other ways than by issuing bank notes? Ref.: Discussion in various reports of Comptroller of the Currency. 2. Section 28 of the National Bank Act of June 3, 1864, after providing that a national banking association may hold real estate "necessary for its immediate accommodation in the transaction of its business" and such other real estate and mortgages thereupon as it may have taken to secure debts previously contracted, provides that "Such associations (national banks) shall not purchase or hold real estate in any other case or for any other purpose...." (a) What is the reason for the above provision? (b) Would it be wise to make a similar prohibition on savings banks? 3. Describe the clearing house and define its economic advantages. 4. If there are twenty banks in a town and no clearing house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 5. Does a clearing house enable the banks that belong to it to get along with a smaller cash reserve? CHAPTER 9 THE FEDERAL RESERVE ACT REFERENCES. _Conway, Thomas, Jr._, The financial policy of the Federal reserve banks. J. P. E., 22: 319-331. 1914. _Federal Reserve Board_, The Federal Reserve Bulletin. Monthly. *_Phillips_, ch. XXXI. _Scott, W. A._, Banking reserves under the Federal Reserve Act. J. P. E., 22: 332-344. 1914. _White_, bk. III, ch. XXII and appendices D and E. _Willis, H. P._, The Federal Reserve Act. A. E. Rev., 4: 1-24. 1914. QUESTIONS. 1. Name and contrast the different kinds of banks in the United States. 2. How are notes issued under the Federal Reserve Act? 3. If on a given date the surplus reserve (i.e., the reserve in excess of the legal minimum reserve required by law to be held against deposits) of the New York Associated Banks amounts to $11,000,000, and the deposits on the same date amount to $1,164,000,000, what is the total cash reserve held by the banks on said date? What would it have been in 1912? 4. The "New York Times" of December 8, 1916, said: "The rediscounting of commercial paper at the Federal Reserve Bank of New York by some of the city's largest banks on Wednesday had the effect yesterday of improving general money market conditions. Call loans which were made at 15 per cent. on Monday, and as high as 10 per cent. on Tuesday, and touched seven per cent. Wednesday, were placed yesterday at from three to five per cent. Most of the loans were made at four and one-half per cent., the renewal rate, and the closing quotation was three per cent. Time money rates were easier." Explain the process of rediscounting here referred to. In just what way did the rediscounting operations relieve the call money market? Do you consider that this use of the rediscounting facilities provided by the Federal Reserve System was in accord with sound banking principles? Was it the best possible use of the rediscounting mechanism? For suggestions see the "New York Times" of December 5, 1916, under the heading "Financial Markets." CHAPTER 10 CRISES AND INDUSTRIAL DEPRESSIONS REFERENCES. _Dewey, D. R._, Financial history of the United States, 4th ed., 1912. Ch. X. _England, Minnie T._, Promotion as the cause of crises. Q. J. E., 29: 748-767. 1914-1915. *_Hamilton_, Readings, 91-93, 93-95, 95-98. _Hobson, J. A._, Evolution of modern capitalism. Ed., 1912. Ch. 7. _Jones, E. D._, Economic crises. 1900. _Juglar, C._, and _Thom, C. W._, A brief history of panics and their periodical recurrence in the United States. Ed., 1916. *_Materials_, 391-396. _Mitchell, W. C._, Business cycles. 1913. _Moore, H. L._, Economic cycles: their law and cause. 1914. _Nelson, S. A._, The A B C of Wall Street. 1900. _Patterson, E. M._, The theories advanced in explanation of economic crises. A. A. A., 59: 133-147. 1915. *_Phillips_, chs. XXVIII, XXIX. *_Source Book_, 138-156. _Sprague, O. M. W._, The crisis of 1914 in the United States. A. E. Rev., 5: 499-533. 1915. _United States Bureau of Labor_, Annual report for 1886. QUESTIONS. 1. What is a financial crisis? An industrial depression? 2. Describe the trade, banking and price conditions which obtain just preceding, during and immediately following a crisis. 3. State clearly and explain the movement of prices of stocks, bonds, mortgages, land, commodities generally, wages and interest rates on long time and short time loans, before, during, and after a crisis. 4. Tabulate for a series of years covering periods of prosperity and depression, the prices of stocks, bonds, real estate, and of some commodities. 5. What economic changes occurred in your own community in the panic of 1893-94, or in the years 1903-04, or in 1907-08? 6. Is it possible that the amount of all goods produced shall be in excess of the community's power of consumption? 7. "As the average American can produce far more than he can consume, it has been proved repeatedly that as long as the sale of his products is confined to the home markets, over-production is certain to be a natural consequence of every prolonged period of activity. For half a century, therefore, with regularly recurring seasons of surplus production, there came those inevitable commercial crises which emphasized with increasing force the necessity for foreign markets." (This passage is taken from a reprint of a speech of a congressman.) Criticize the view as to the cause of commercial crises expressed in the above statement. 8. Is a crisis caused by too much or too little money, or by some other influence? 9. If there were twice as much money in the world, would panics take place? 10. In a period of depression is there less money than usual in the country? In the banks? 11. In what ways and to what extent are trade conditions apt to be affected by: The increasing gold supply? The trust movement? Increasing armies and navies? The agricultural situation? 12. Explain the difference in the motive of the borrower at ordinary times and in times of panic. 13. How are loans affected when the reserve limit as established either by law or custom is reached in England, Germany and the United States? 14. What in your opinion is the correct explanation of crises? 15. In what ways is business affected by the condition of the crops? Within what limitations? In the case of which crops is the connection closest? 16. What element of security is furnished by clearing houses during panics? 17. Describe the method used by the banks in meeting demands of depositors during the panics of 1893 and of 1907. (Dunbar is especially valuable. Also O. M. W. Sprague, History of crises under the National Banking System, pub. by Nat. Monetary Com.) CHAPTER 11 INSTITUTIONS FOR SAVING AND INVESTMENT REFERENCES. _Chamberlain, Laurence_, Principles of bond investment. 4th ed., 1913. The work of the bond house. 1913. _Devine, H. C._, People's coöperative banks for workers in towns, and small holders, allotment cultivators, and others in country districts. 1908. _Dexter, Seymour_, A treatise on coöperative savings and loan associations. Ed., 1894. _Fisher, Irving_, _Kemmerer, E. W._, _Brown, H. G._, and others, How to invest when prices are rising. 1912. _Guenther, Louis_, Investment and speculation. 1916. (La Salle Uni.) _Hamilton, J. H._, Savings and savings institutions. 1902. _Johnson, A. S._, Influences affecting the development of thrift. P. S. Q., 22: 224-244. 1907. _Kemmerer, E. W._, The United States Postal Savings bank. P. S. Q., 26: 462-499. 1911. _Kniffin, W. H._, The savings bank and its practical work. 1912. *_Phillips_, ch. XVI. _Wolff, H. W._, A coöperative bank handbook. 1909. Coöperative banking. 1907. People's banks. 3d ed., 1910. QUESTIONS. 1. What are the nature and purpose of legislation restricting the investments of savings banks? 2. What are these restrictions in this state? In your own state? In those states which are regarded as having the most highly developed laws in this field? 3. Is legislation in this field to be considered as subsidizing certain types of private enterprise? If so, is it socially justifiable? CHAPTER 12 PRINCIPLES OF INSURANCE REFERENCES. _Gephart, W. F._, Principles of insurance. 1913. _Gephart, W. F._, Insurance and the state. 1913. _Huebner, S. S._, Life insurance. 1915. _Huebner, S. S._, Property insurance. 1913. _Statistical Abstract of the United States._ _Valgren, V. N._, Farmers' mutual fire insurance in Minnesota. Q. J. E., 25: 387-396. 1910-1911. _Willet, A. H._, Economic theory of risk and insurance. 1901. _Zartman, L. W._ (Ed.), Fire insurance. Ed., 1915. _Zartman, L. W._ (Ed.), Life insurance. Ed., 1915. QUESTIONS. 1. What are the conditions of economically sound insurance? Give at least two examples. 2. What is the essential economic difference between gambling and insurance? 3. Give examples showing the difference between a gambling house and an insurance company? 4. Investors in Russian bonds are said to take out policies of insurance payable to themselves in the event of the Czar's death, their object being to guard themselves against loss by the depreciation of their Russian securities in case of political disturbances that might emerge upon a change of rulers. (a) Do you regard such insurance as gambling or legitimate speculation from the standpoint of either insurer or insured? (b) Do you regard the issue of such policies on the part of the insurance companies as "sound"? 5. Ought lotteries to be permitted by law? 6. Suppose 1,000 owners of 1,000 buildings worth $7,000 each wish to insure themselves against fire. If the risk for the class of buildings involved in such that seven out of 1,000 burn each year, what annual payment from each owner would be necessary to insure all against total loss--expenses of management, interest, etc., being ignored? (F. M. Taylor.) 7. Suppose that a corporation owns 500 buildings worth $100,000 each; that to insure against fire in an ordinary company would cost $250 for each building; and that the corporation is convinced that by the expenditure of $10,000 the fire loss can be reduced to an average of one building every three years. Would it pay the corporation to insure with some company? (F. M. Taylor.) CHAPTER 13 INTERNATIONAL TRADE REFERENCES. _Bastable, C. E._, The theory of international trade. 1897. _Brown, H. G._, International trade and exchange. 1914. _Clare, G._, The A B C of the foreign exchanges. 1895. _Escher, Franklin_, The elements of foreign exchange. 2d ed., 1911. _Goschen, Viscount_, The theory of the foreign exchanges. 1898. _Johnson, E. R._, Probable changes in the foreign trade of the United States resulting from the European war. A. E. Rev., 6 (no. 1, supp.): 17-25. 1916. Round table discussion of above, 26-49. _Johnson, E. R._, _Van Metre, T. W._, _Huebner, G. G._, and _Hanchett, D. S._, History of domestic and foreign commerce of the United States. 1915. *_Source Book_, 337-346. _Willis, H. P._, Transportation and competition in South American markets. A. E. Rev., 2: 814-833. 1912. QUESTIONS. 1. Is it bad policy to let the people of a suburban village spend money in the city for things that could be produced at home? 2. Is it bad policy for California to buy New England manufactures? 3. Give examples of the industrial advantages of America as compared with Europe. 4. Is the alleged superior efficiency of the American workman over the competing workman of Europe connected in any way with the principle of proportionality? 5. Community A has lands that can produce wheat at a cost of 60 cents per bushel, corn at 40 cents per bushel and potatoes at 40 cents per bushel. Community B can produce wheat at 70 cents per bushel, corn at 45 cents per bushel and potatoes at 42 cents per bushel. Supposing that each community can raise just enough of these foodstuffs for its own use, will there be any incentive for them to exchange these products? 6. "A man is of all sorts of luggage the most difficult to be transported." What is the bearing of this fact upon the theory of international trade? 7. Can a country have a persisting excess of merchandise exports over merchandise imports? If so, under what conditions? 8. If foreign exchange suddenly rose several cents, while imports and exports remained the same, to what causes might it be due? 9. If as the result of a year's foreign trade nation A obtains from other nations $10,000,000 in gold coin in settlement of the balance of international indebtedness, to what extent does that sum measure the gain of nation A from international trade? Reasons. 10. The statistics of exports and imports of the United States for the year 1908-1909 show an excess of exports over imports of $351,000,000 in merchandise; $12,000,000 in silver and $48,000,000 in gold. Explain clearly how the United States could have had an excess of exports of merchandise, silver and gold in the same year. 11. If demand exchange on London were selling at $4.835 in New York, would that indicate anything as to the relative values of our imports and exports? Would gold be shipped under these conditions and if so in which direction? Explain. 12. Explain clearly the condition of commerce under which demand sterling bills of exchange will sell at $4.875 in the New York exchange market. 13. If the merchandise imports from England to the United States equalled the exports from the United States to England, what would be the state of exchange on London? Would there be any greater advantage to either of the countries engaged in trade? 14. What effect on exchange has the holding of American bonds abroad? 15. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York? 16. When in New York a sight draft on London for £5000 sells for $24,150, in which direction are gold remittances likely to be moving? Give reasons. 17. If England sells $10,000,000 worth of our securities to Americans, what is the effect on exchange rates? 18. Show what, in a gold-producing country, would be the relations and interaction of new gold supply, prices, relative amounts of imports and exports, and rate of exchange. (Sumner.) 19. A nation with _n_ dollars in circulation has to pay a war indemnity of _n_ dollars to another country having the same circulation. How much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (Davenport.) 20. Suppose an increase in the volume of our currency, due to a new issue of silver, what would be the effect upon international trade? Would this effect be lasting? Would your answer depend at all upon the condition of our currency at the time the increase occurred? 21. If through the improvement of our banking and currency system a much larger percentage of the business of the country comes to be done through the use of credits (rather than money) as the medium of exchange, what will be the effect on (a) the quantity of money in circulation, (b) the general level of prices, (c) the composition of the country's media of exchange, (d) the international movement of gold, (e) the interests of debtors and creditors, respectively? 22. Each one of two countries, A and B, can, by the application of a given amount of labor to its material resources, produce any one or all of the commodities M, N, O, P, Q, R and S, as exhibited in the following table: _Commodity._ _Country A._ _Country B._ =M= 50 tons 60 tons =N= 1000 yards 1100 yards =O= .25 bales 20 bales =P= 900 bushels 800 bushels =Q= 600 ounces 650 ounces =R= 5000 gallons 5000 gallons =S= 2500 pounds 2000 pounds (a) In the absence of restrictive legislation is each country likely to produce all of these commodities for itself? Why or why not? (b) If conditions are such as to lead to the territorial division of labor, which commodities are most likely to be produced in each country? (c) About which of these commodities is there the least certainty on this point? Why? CHAPTER 14 THE POLICY OF A PROTECTIVE TARIFF REFERENCES. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. Pt. II. _Daniels, W. M._, The elements of public finance. Ed., 1911. Pt. II, ch. VII. _Johnson, E. H._, The effect of a tariff on production. Q. J. E., 18: 135-137. 1903-1904. _Patten, S. N._, The economic basis of protection. 1890. *_Source Book_, 347-357, 358-360. _Wallace, H. B._, A balanced tariff. A. E. Rev., 2: 568-575. 1912. QUESTIONS. 1. Can it be of advantage to trade freely with one nation if general free trade is bad? 2. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 3. Discuss the contention that a protective tariff by helping to keep out imports of foreign goods tends to maintain a favorable balance of trade. 4. "The territorial distribution of money is both a determined and a determining factor in international trade." Explain the meaning of this statement and show its relation to the "favorable balance of trade" argument for protection. 5. An Englishman gave this argument for protection: "If an Englishman buys a frying pan from a German for a shilling (24 cents), then England gets the frying pan and Germany gets the shilling, whereas if an Englishman buys the frying pan from an English manufacturer for 13 pence (26 cents), England gets both the frying pan and the 13 pence. The increase in price benefits England because the money remains within the country, instead of going abroad to increase the wealth of foreign nations." Give your opinion of this argument. 6. Discuss this statement: "The American people send abroad over $100,000,000 a year to pay for imported sugar. To meet this bill requires the wheat crop of over 7,100,000 acres. But all the sugar now imported could be grown on 1,700,000 acres in beets or cane. In other words we are throwing away the product of approximately 5,400,000 acres of land by not growing our own sugar." 7. A New York daily has contended that "Of course, we should be the gainers if every pound of it (raw cotton) were exported in manufactured form. Every process through which the raw material passes in its conversion into fabrics would mean employment for American wage-earners." Discuss the proposition that the aggregate for the labor of American wage-earners is less if we export raw cotton than if we should manufacture the raw cotton in this country for export. 8. Assuming that an import duty on tea, if sufficiently high, would create a tea growing industry in the United States capable of supplying the whole domestic demand, trace the various economic effects of such a duty. 9. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 10. If the owners of marble quarries can show that their net income is 30 per cent. greater by reason of the protective tariff upon foreign marbles, does this show that the tariff increases the wealth of the protecting country? 11. State any proposition which you think that you can maintain about the relation between high or low wages and international competition. Maintain your proposition. 12. What do you say to the plan of so adjusting duties on imports as to equalize the "labor cost" of imported and domestic commodities, through the levy of duties which will just offset the higher wages paid by the American employer? 13. Is a high rate of money wages an obstacle to the successful conduct of industry in competition with countries where money wages are low? 14. What was the argument originally used as to the comparative wage levels here and abroad so far as the starting of certain industries in this country was concerned? Compare this argument with the current protectionist argument as to the relation between the tariff and the present general wage level in the United States. 15. What help should the law of wages give in explaining the present inequality as among the wage scales in Germany, France, England and the U. S.? 16. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country? 17. What conditions as to consumption and production at home and abroad would be most favorable to the shifting of an import duty on a manufactured article entirely to the consumer? 18. (a) A and B are two tropical islands inhabited by friendly peoples and producing the same commodities. The climate, soil and topography of A are such that all kinds of products can be produced there with less effort than they can be produced in B. Could there be any incentive for the people of A to trade with the people of B? (b) Debarring all feelings of hostility and of sentimental attachment to home, is there any reason why the people of B should not all emigrate to A? (c) Could B equalize conditions of production by enacting a protective tariff on the products of the two islands? (d) Suppose A were discovered after a strong civilization had grown up on B. Might conditions be such that A could with advantage to itself exact a protective tariff? CHAPTER 15 AMERICAN TARIFF HISTORY REFERENCES. *_Blakey, R. G._, The new revenue act. A. E. Rev., 6: 837-850. 1916. _Curtis, J. F._, The administrative provisions of the revenue act of 1913. Q. J. E., 28: 31-45. 1913-1914. _Hoffmann, I. N._, Customs administration under the 1913 tariff act. J. P. E., 22: 845-871. 1914. _McKinley, Wm._, History of tariff legislation, 1812-1896. 1896. _Sumner, W. G._, History of protection in the United States. 1877. _Taussig, F. W._, How tariffs should not be made. A. E. Rev., 1: 20-32. 1911. _Taussig, F. W._, Tariff History of the United States. 6th ed., 1914. _Taussig, F. W._, The tariff debate of 1909 and the new tariff act. Q. J. E., 24: 1-38. 1909-1910. *_Willis, H. P._, The tariff of 1913. J. P. E., 22: 1-42, 105-131, 218-238. 1914. QUESTIONS. 1. In the light of American tariff history what would you say were (1) the principal advantages and (2) the principal disadvantages of a highly protective tariff as a primary source of public revenue? Illustrate your points by historical references. 2. If other countries can carry our commerce cheaper than we can do it ourselves and if the citizens of this country can invest their money with greater profit in other industries, what are the advantages and disadvantages of allowing those countries to carry our commerce? 3. Tabulate and diagram the values of the imports and of the exports of the U. S. to and from Europe, N. A., S. A., Asia, Oceanica and Africa for the latest five years reported. Discuss the question of American exports and imports in a paragraph not exceeding 200 words in length. Stat. Abst. (under Progress of U. S.). 4. Make a list of the ten leading articles exported from and the ten leading articles imported into the U. S. for the latest year available. What do these show as to the position of the U. S. in international commerce? Stat. Abst. CHAPTER 16 OBJECTS AND PRINCIPLES OF TAXATION REFERENCES. *_Bullock, C. J._, Selected readings in public finance. 1906. Chs. VIII, IX. The growth of federal expenditures. P. S. Q., 18: 97-111. 1903. *_Daniels_, Pt. II, chs. I-IV. _Edgeworth, F. Y._, The subjective element in the first principles of taxation. Q. J. E., 24: 459-470. 1909-1910. *_Plehn, C. C._, Public finance. 3d ed., rev and enl. 1913. Pts. I, II. _Round table discussion of taxation._ A. E. Assn. Bul., 4th ser., 1 (no. 2): 333-346. 1911. _Seligman, E. R. A._, Essays in taxation. 8th ed., 1913. QUESTIONS. 1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. In what ways may we understand the proposition that taxation should be proportioned to ability? 5. It is claimed by some that the use by the government of indirect taxes increases existing inequalities in the personal distribution of wealth. What reasons may be given for or against this opinion? CHAPTER 17 PROPERTY AND CORPORATION TAXES REFERENCES. _Brooks, R. C._, The German imperial tax on the unearned increment. Q. J. E., 25: 682-709. 1910-1911. _Bullock_, Chs. XI, XV. _Compton, W. M._, Recent tendencies in the reform of forest taxation. J. P. E., 23: 971-979. 1915. *_Hamilton_, Readings, 560, 561. _Robinson, M. H._, The Federal corporation tax. A. E. Rev., 1: 691-723. 1911. *_Source Book_, 130-137. _Tucker, R. S._, The British taxes on land values in practice. Q. J. E., 29: 794-819. 1914-1915. _United States Bureau of Corporations_, Report on the taxation of corporations. Pts. I-IV. 1909-1912. Special report on taxation. 1913. _Young, A. N._, The single tax movement in the United States. 1916. QUESTIONS. 1. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 2. The parts of an estate divided into fifteen equal shares by expert real estate agents were soon after assessed variously from $900 to $2850 for purposes of taxation. What does this indicate? (From Sumner's Problems.) 3. Explain how and why the general property tax has been breaking down in the United States with reference to the taxation of public service corporations. 4. What is meant by the separation of state and local revenues? What advantages do the advocates of separation claim for their plan? What is your judgment with reference to its advisability? 5. What is meant by the proposition that a single tax on land values is paid for all time by the one who owns the land at the time the tax is first imposed? 6. How does Massachusetts tax interstate railroads running through the state? What defects, if any, do you see in the Massachusetts plan? 7. Can taxation be used to secure some of the profits of large corporations? CHAPTER 18 PERSONAL TAXES REFERENCES. _Adams, T. S._, The effect of income and inheritance taxes on the distribution of wealth. A. E. Rev., 5 (no. 1, supp.): 234-244. 1915. The place of the income tax in the reform of state taxation. A. E. Assn. Bul., 4th ser., 1 (no. 2): 302-321. 1911. *_Blakey, R. G._, The new income tax. A. E. Rev., 4: 25-46. 1914. _Bowley, A. L._, The British super-tax and the distribution of income. Q. J. E., 28: 255-268. 1913-1914. *_Bullock_, chs. XII, XVI. The taxation of property and income in Massachusetts. Q. J. E., 31: 1-61. 1916-1917. _Daniels_, Pt. II, ch. VIII. _Grice, J. W._, Recent developments in taxation in England. A. E. Rev., 1: 488-504. 1911. _Hill, J. A._, The income tax of 1913. Q. J. E., 28: 46-68. 1913-1914. _Seligman, E. R. A._, The income tax. Ed., 1914. _Smith, R. H._, Distribution of income in Great Britain and incidence of the income tax. Q. J. E., 25: 216-238. 1910-1911. _West, Max_, The inheritance tax. 2d ed., 1908. QUESTIONS. 1. What is the present status of the inheritance tax in the American commonwealths? 2. Discuss the proposition that income is the normal source of taxation. 3. Outline the history of income tax legislation by the federal government. What were the conditions which led to the income tax legislation of 1913? 4. What conception of income does the recent income tax embody? Illustrate some peculiar distinctions resulting from this use of "income." 5. What is your opinion concerning the justice of progressive taxation? 6. Name the two principal arguments in favor of progressive taxation. Which two arguments in favor of progressive taxation do you consider the strongest and why? Which two arguments against progressive taxation do you consider the weakest and why? To what kinds of taxes, if to any, is the principle of progression inapplicable and why? CHAPTER 19 METHODS OF INDUSTRIAL REMUNERATION REFERENCES. *_Adams, T. S._, and _Sumner, H. L._, Labor problems. 8th ed., 1914. Chs. IV, IX, X. _Commons, J. R._ (Ed.), Trade unionism and labor problems. 1905. Ch. XI. *_Commons, J. R._, and _Andrews, J. B._, Principles of labor legislation. 1916. Ch. II, secs. 1-3. _Cross, Ira B._, Coöperation in California. A. E. Rev., 1: 535-544. 1911. _Fay, C. R._, Coöperation at home and abroad. 1898. _Gilman, N. P._, Profit-sharing between employer and employee. 1889. _Hoxie, R. F._, Why organized labor opposes scientific management. Q. J. E., 31: 62-85. 1916-1917. _Round table discussion._ Industrial efficiency and the interests of labor. A. E. Rev., 2 (no. 1, supp.): 117-130. 1912. _Schloss, D. F._, Methods of industrial remuneration. 3d ed., 1898. _Virtue, G. O._, Coöperative coopers of Minneapolis. Q. J. E., 19: 527-544. 1904-1905. _Wolff, H. W._, Neglected opportunities of coöperation. Econ. Rev., 16: 190-206. 1906. QUESTIONS. 1. With increasing division of labor is there greater or less opportunity for the payment of laborers according to the piece-wage plan? 2. Discuss the following statement: Under the piece-work system the foreman looks out for the quality and the operative for the quantity of the work; under the time-wage system the foreman looks out for the quantity and the laborer for the quality of the work. 3. What remedy has the foreman for an inefficient laborer working under the time-wage system? 4. Is time- or piece-work best adapted to the following kinds of laborers: coal-miners, coopers, farm-hands, printers, engravers, shoe-factory hands, railroad brakemen, telegraph operators? 5. Since under the piece-work system a man is paid only for what he does is there any reason for discharging a workman employed under this plan whose efficiency falls below the average? 6. Describe any case of profit-sharing you may have seen in operation. 7. In the case of a coöperative general store do economic profits emerge? If so, where do they go? 8. If you have seen a coöperative store in operation tell what was its success. 9. Compare and explain producers' and consumers' coöperation, showing the difficulties and advantages. CHAPTER 20 ORGANIZED LABOR REFERENCES. *_Adams_ and _Sumner_, chs. VI, VII. _Barnett, G. E._, National and district systems of collective bargaining in the United States. Q. J. E., 26: 425-443. 1911-1912. _Barnett, G. E._, The dominance of the national union in American labor organization. Ibid., 27: 455-481. 1912-1913. _Carlton, F. T._, The history and problems of organized labor. 1911. _Commons_, chs. II, VI. *_Commons_ and _Andrews_, Ch. III, sec. 1. _Groat, G. G._, An introduction to the study of organized labor in America. 1916. _Hoxie, R. F._, Scientific management and labor. 1915. _Hoxie, R. F._, The truth about the I. W. W. J. P. E., 21: 785-797. 1913. _Hoxie, R. F._, Trade unionism in the United States: general character and types; the interpretation of union types. J. P. E., 22: 201-217, 464-481. 1914. _Lewis, H. T._, The economic basis of the fight for the closed shop. J. P. E., 20: 928-952. 1912. _McCabe, D. A._, The standard rate in American trade unions. 1912. _Mitchell, John_, Organized labor. 1902. *_Source Book_, 214-227 (extract from McCabe). _Webb, Sidney and Beatrice_, Industrial democracy. 1897. _Wolman, L._, The boycott in American trade unions. 1916. QUESTIONS. 1. Are the opportunities for workmen to rise to the rank of masters as great as formerly? 2. What are the chief causes of the origin and rise of trade unions? Distinguish between a trade union and a labor union. 3. What are the conditions favorable to national agreements between trade unions and employers' associations? Explain clearly the bearing of each of these conditions. 4. Describe the practices included under the term "direct action," and contrast with the methods of collective bargaining and legislation. 5. Are strikes becoming more or less frequent and important in your state? In answer to this question give figures from 1881 on if obtainable, showing number of strikes; establishments affected and to what extent; loss in wages and to employers. Diagram the figures. Ref., U. S. Bu. of Labor, Annual report, 1906. 6. Do trade unions increase or decrease the number of strikes? 7. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 8. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 9. Give examples of the different kinds of boycott. What seems to be the attitude of the federal courts as to the lawfulness of boycotts? 10. Is there any similarity between the methods of trade unions and the etiquette of the medical and the legal professions? 11. Some trade unions limit the number of apprentices in their trades. Is this a justifiable policy on their part? 12. Of the methods employed by trade unions to raise the wages of their members, which are prejudicial and which are not prejudicial to the interests of the rest of the community, including non-union labor? Give reasons. 13. Can wages be affected by the "collective bargaining" of trade unions and if so indicate in that connection a justification (if one exists) for trade union organization. 14. If a trade union sets a minimum rate of wages lower than the competitive market rate would be in the absence of organization, which rate would the members receive? State the facts from the Source Book which lead you to your answer. 15. Have trade unions raised or lowered the wages of non-union labor? 16. What is the attitude of American trade unions toward efficiency systems as attempts to introduce improved methods of production (not systems of payment)? CHAPTER 21 PUBLIC REGULATION OF HOURS AND WAGES REFERENCES. _Abbott, Edith_, Progress of the minimum wage in England. J. P. E., 23: 268-277. 1915. Women in industry. 1915. *_Adams_ and _Sumner_, chs. II, VIII, XII, secs. 1-4, 9, XIII, sec. 2. _Barnett, G. E._, and _McCabe, D. A._, Mediation, investigation and arbitration of industrial disputes. 1916. _Clark, V. S._, The labor movement in Australasia. 1906. _Commons_, chs. VII, VIII, XVIII, XXI. *_Commons_ and _Andrews_, chs. III, secs. 2, 3, IV, V. _Compton, W. M._, Wage theories in industrial arbitration. A. E. Rev., 6: 324-342. 1916. _Hammond, M. B._, Judicial interpretation of the minimum wage in Australia. A. E. Rev., 3: 259-286. 1913. _Hammond, M. B._, Wages boards in Australia. Q. J. E., 29: 98-148, 326-361, 563-630. 1914-1915. _Holcombe, A. N._, The legal minimum wage in the United States. A. E. Rev., 2: 21-37. 1912. _Kelley, Florence_, Minimum-wage laws. J. P. E., 20: 999-1010. 1912. _Millis, H. A._, Some aspects of the minimum wage. J. P. E., 22: 132-155. 1914. _Mote, C. H._, Industrial arbitration. 1916. _Persons, C. E._, Women's work and wages in the United States. Q. J. E., 29: 201-234. 1914-1915. _Suffern, A. E._, Conciliation and arbitration in the coal industry of America. 1915. _United States Bureau of Labor Statistics_, Bul. 175. 1915. Summary of report on woman and child wage-earners. _Webb, Sidney_, The economic theory of a legal minimum wage. J. P. E., 20: 973-998. 1912. _Wise, E. F._, Wage boards in England. A. E. Rev., 2: 1-20. 1912. QUESTIONS. 1. If you can do more work in two hours than in one, can you do more continuously in sixteen consecutive hours than in eight? 2. What determines the maximum study time for the earnest student? 3. When does an industrious man stop working on his own farm, and why? 4. If production is reduced one-fourth by shorter hours, is "work made" to that degree for the unemployed? 5. Defend the minimum wage policy from the workman's point of view, and state the employers' objections thereto. 6. Suppose it were proposed to establish by law a universal nine-hour day for men. (a) Under what conditions would you consider such a law socially beneficial? (b) What other agencies might accomplish the ends which such a law is designed to effect? (c) What are the chief social and economic effects which you would expect from such a law? CHAPTER 22 OTHER PROTECTIVE LABOR AND SOCIAL LEGISLATION REFERENCES. *_Adams_ and _Sumner_, chs. V, sec. 3, XII, sec. 5, XIII, sec. 3. _Addams, Jane_, Child labor legislation, a requisite for industrial efficiency. A. A. A., 25: 542-550. 1905. _Commons_, chs. XIV, XIX, XX, XXII, XXIII, XXVI, XXXVIII. *_Commons_ and _Andrews_, Chs. VI, VII, IX. _Fisher, W. C._, The field of workmen's compensation in the United States. A. E. Rev., 5: 221-278. 1915. _Leiserson, W. M._, The movement for public labor exchanges. J. P. E., 23: 707-716. 1915. _Pigou, A. C._, Unemployment. 1914. _Rubinow, I. M._, The problem of unemployment. J. P. E., 21: 313-331. 1913. _Rubinow, I. M._, Subsidized unemployment insurance. Ibid., 412-431. 1913. _Sumner, H. L._, and _Merritt, E. A._, Child labor legislation in the United States. 1915. _United States Bureau of Labor Statistics_, Bul. 159. 1915. QUESTIONS. 1. What classes of economic goods or services are regulated by law and why? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? 3. What reasons are given in justification of laws closing barber shops on Sundays? 4. May a person owning a lot on a residence street of a city erect a glue factory on it? 5. What have you noted as to the benefits or hardships of restricting child labor in factories? 6. In what kinds of social legislation is the federal character of our government a serious bar to experimentation? Show clearly the reasons why. 7. If population became stationary, neither increasing nor decreasing in numbers, and if methods were discovered which would render possible the production of the same amount of wealth per year as at present with only half the force of laborers employed, and if the average labor day were not shortened, would there not be a great and apparently permanent lack of employment? Discuss thoroughly and give reasons for your answer. 8. In what sense is the "unemployment," so manifest in a period of industrial depression, evidence that the number of workers is "in excess of the work to be done"? CHAPTER 23 SOCIAL INSURANCE REFERENCES. _Adams_ and _Sumner_, ch. XII, secs. 6-8. _Baldwin, F. S._, Old age pension schemes: a criticism and a program. Q. J. E., 24: 713-742. 1909-1910. _Commons_, ch. XXV. *_Commons_ and _Andrews_, ch. VIII. _Foerster, R. F._, The British national insurance act. Q. J. E., 26: 275-312. 1911-1912. _Frankel, L. K._, and _Dawson, M. M._, Workingmen's insurance in Europe. 1910. _Henderson, C. R._, Industrial insurance in the United States. 1909. _Lewis, F. W._, State insurance. 1909. _National Civic Federation, Social Insurance Department_, Report of the committee on preliminary foreign inquiry. 1915. _Rubinow, I. M._, Standards of sickness insurance. J. P. E., 23: 221-251, 327-364, 437-464. 1915. _United States Bureau of Labor_, Annual reports, 1908, 1909. _Warren, B. S._, and _Sydenstricker, Edgar_, Health insurance. 1916. QUESTIONS. 1. Are industrial accidents more frequent in low paid or in high paid occupations? 2. Suggest advantages and disadvantages of a general system of compulsory industrial insurance for old age, sickness and accidents. What are the essential differences between these three forms of insurance? 3. Show to what extent a system of workingmen's insurance has been developed in one of the following countries: Germany, France, Italy, England. In the development of a general system of workingmen's insurance in the U. S., which one of the above forms will probably first come in? For what reasons has a system of this kind not been developed in the U. S.? Henderson, C. R., Industrial insurance. CHAPTER 24 POPULATION AND IMMIGRATION REFERENCES. *_Adams_ and _Sumner_, ch. III. *_Commons_ and _Andrews_, ch. II, sec. 4. _Fairchild, H. P._, Immigration. 1913. The standard of living--up or down? A. E. Rev., 6: 9-25. 1916. _Fetter, F. A._, Population or prosperity. A. E. Rev., 3 (no. 1, supp.): 5-19. 1913. (Presidential address before the American Economic Association, 1912, much of which is incorporated with chap. 24 in the text.) _Goldenweiser, E. A._, Walker's theory of immigration. Am. J. Soc, 18: 342-351. 1912-1913. _Hall, P. F._, The recent history of immigration and immigration restriction. J. P. E., 21: 735-751. 1913. *_Hamilton_, Readings, 384-386, 392-395. _Husband, W. W._, The significance of emigration. A. E. Rev., 2 (no. 1, supp.): 79-85. 1912. Round table discussion of above, 86-88. _Jenks, J. W._, and _Lauck, W. J._, The immigration problem. 1912. _Lauck, W. J._, The vanishing American wage-earner. Atlan. Mo., 110: 691-696. 1912. *_Materials_, 146-156. _Mayo-Smith, Richmond_, Statistics and economics. 1899. Bk. I, ch. V. _Mayo-Smith, Richmond_, Statistics and sociology. 1895. Bk. I, chs. V-VII. _Millis, H. A._, Some economic aspects of Japanese immigration. A. E. Rev., 5: 787-804. 1915. _Page, T. W._, The distribution of immigrants in the United States before 1870. J. P. E., 20: 676-694. 1912. _Page, T. W._, Some economic aspects of immigration before 1870. Ibid., 20: 1011-1028; 21: 34-55. 1912, 1913. _Roberts, Peter_, The new immigration. 1912. _Ross, E. A._, The old world in the new. 1914. *_Source Book_, 187-198. (Extract from Jenks and Lauck.) _Warne, F. J._, The tide of immigration. 1916. QUESTIONS. 1. Tabulate and chart the changes that have taken place in our immigration in regard to (1) amount, (2) character. What problems are presented by these facts? Stat. Abst. 2. Explain the terms "the new immigration" and "the old immigration," and give the important statistical facts regarding them. 3. Show the application of the doctrine of population to the present problem of immigration and wages in America. 4. Do the figures on immigration show anything as to the need of legislation restricting immigration? 5. What has been the effect of the recent immigration into the United States upon the use of machinery? 6. Apply the theory of wages to explain the effect of present immigration on the wages of unskilled or slightly skilled workers. 7. If the supply of labor of any class were to be decreased ten per cent., would wages rise in like proportion? 8. Is immigration now adding to the general welfare in the United States? State the facts and general economic principles on which you base your answer. 9. If there is an immigration of half a million workers annually into a country for a period of ten years--during which no new natural resources are made available, would wages in that country be affected? If so, of what classes of workers? What would be the effect on the amount of income received by land owners? 10. Explain how the general principles of price-determination hold in the determination of wages. Show how these principles apply when there is extensive employment of southern and eastern Europeans. (See Source Book.) 11. If in a given labor market the number of laborers increases while the number and technical efficiency of indirect agents remains unchanged, what change, if any, will result in the average rate of wages? What change, if any, will there be in the return to the indirect agents? 12. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? CHAPTER 25 AGRICULTURAL AND RURAL POPULATION REFERENCES. _Carver, T. N._, Selected readings in rural economics. 1916. _Carver, T. N._, The work of rural organization. J. P. E., 22: 821-844. 1914. _Coulter, J. L._, Agricultural development in the United States, 1900-1910. Q. J. E., 27: 1-26. 1912-1913. _Hibbard, B. H._, Tenancy in the north central states. Q. J. E., 25: 710-729. 1910-1911. _Hibbard, B. H._, Tenancy in the north Atlantic states. Q. J. E., 26: 105-117. 1911-1912. _Hibbard, B. H._, Tenancy in the western states. Q. J. E., 26: 363-376. 1911-1912. _Hibbard, B. H._, Tenancy in the southern states. Q. J. E., 27: 482-496. 1912-1913. _Hoagland, H. E._, The movement of rural population in Illinois. J. P. E., 20: 913-927. 1912. _Nourse, E. G._, Agricultural economics. 1916. (A large volume of readings, well selected and edited.) _Round table discussion._ The decline of the rural population. A. E. Rev., 2 (no. 1, supp): 51, 52. 1912. _Round table discussion._ Rural conditions in the south. Ibid., 48-50. 1912. _Taylor, H. C._, Agricultural economics. 1905. _Vogt, P. L._, The farmer's labor income. A. E. Rev., 6: 808-822. 1916. QUESTIONS. 1. Cite any instances you have noted of local changes of population distribution as between country and city. What are the chief facts of interest in these cases? What forces can you assign as causes of the changes? Has agricultural activity been accelerated or retarded? Has it received a set-back? 2. A wealthy metropolitan banker purchases a large country estate in a section in which farming is practically on a subsistence basis and in which in recent years many farms have been abandoned. He applies labor and materials lavishly to the soil, sparing no expenditures for purposes which will assist in the production of crops of the best quality. Under what conditions can this be profitably done? What will be the probable effect on local agriculture, (a) if the entire product of the estate is consumed upon it? (b) if a substantial part of the product is marketed in competition with that of the local farmers? What changes are likely to occur with reference to the occupation of the local population? With reference to its migration? 3. Why is it that immigrants are now taking up the farms of New England which have, in some cases for years, been abandoned by native farmers? Is the fact that they are doing so an argument for or against the restriction of immigration? 4. What is the general tendency of immigrants in the matter of settlement in urban and rural communities? 5. If it is true that the relative decline of the agricultural population of the United States can be explained by the operation of purely economic forces, on what grounds is there justification for complaint as to the evils of concentration of population in cities? CHAPTER 26 PROBLEMS OF AGRICULTURAL ECONOMICS REFERENCES. _Carver, T. N._, Selected readings in rural economics. 1916. _Coulter, J. L._, Marketing of agricultural lands in Minnesota and North Dakota. A. E. Rev., 2: 282-301. 1912. _Goldenweiser, E. A._, The farmer's income. A. E. Rev., 6: 42-48. 1916. _Huebner, G. G._, Agricultural commerce: the organization of American commerce in agricultural commodities. 1915. _International Institute of Agricultural Statistics Year Book._ Monographs on agricultural coöperation in various countries. 1916. _Kemmerer, E. W._, Agricultural credit in the United States. A. E. Rev., 2: 852-872. *_Materials_, 407, 408, 409. _Metcalf, R._, and _Black, C. G._, Rural credit coöperation, and agricultural organization in Europe. 1915. _Olmsted, V. H._, The purchasing power of farm products. United States Dept. of Agric., Report, 1912. *_Phillips_, ch. XXVII. On agricultural credit. _Powell, F. W._, Coöperative marketing of California fresh fruit. Q. J. E., 24: 392-418. 1909-1910. _Putnam, G. E._, Agricultural credit legislation and the tenancy problem. A. E. Rev., 5: 805-815. 1915. _Putnam, G. E._, Farm credit in Kansas. Ibid., 27-37. 1915. _Putnam, G. E._, The federal rural credit bill. Ibid., 6: 770-789. 1916. _Shaw, A. W._, Some problems in market distribution. Q. J. E., 26: 703-765. 1911-1912. *_Source Book_, 34-47, 48-57, 75-80, 81-90. _Warren, G. F._, Farm management. 1913. (Treats primarily the problem of the individual farm, but also many of the broader economic questions.) _Weld, L. D. H._, The marketing of farm products. 1916. QUESTIONS. 1. Why has the corporate form of business organizations not been as extensively introduced into the farming industry as into other industries? 2. Discuss the following statements quoted from an article on the Federal Farm Loan Act of 1916. "There was no necessity for any kind of federal legislation affecting the land credit problem of land-owners.... There is, however, the more pressing problem ... of making the conditions of country life more attractive to the _younger_ generation of farmers. In accomplishing this end some form of land purchase legislation is needed." Amer. Econ. Rev., 6: 789. 1916. 3. How do urban and rural districts differ in their preference for and use of different kinds of bank credit? CHAPTER 27 THE RAILROAD PROBLEM REFERENCES. _Brown, H. G._, The competition of transportation companies. A. E. Rev., 4: 771-792. 1914. _Brown, H. G._, Transportation rates and their regulation. 1916. _Clark, J. M._, Some neglected phases of rate regulation. A. E. Rev., 4: 565-574. 1914. _Dixon, F. H._, The Mann-Elkins Act, amending the act to regulate commerce. Q. J. E., 24: 593-633. 1909-1910. _Dunn, S. O._, Railway discrimination. J. P. E., 20: 437-461. 1912. _Gephart, W. F._, The place of the canal in a national system of transportation. A. E. Assn. Bul., 4th ser., 1 (no 2): 188-196. 1911. Round table discussion, 197-203. _Hadley, A. T._, Railroad transportation. 1884. _Hammond, M. B._, Railway rate theories of the interstate commerce commission. Q. J. E., 25: 1-66, 279-336, 471-538. 1909-1910. _Johnson, E. R._, American railway transportation. 3d ed., 1908. _Johnson, E. R._, Inland waterway policy. A. E. Assn. Bul., 4th ser., 1: 166-174. 1911. _Johnson, E. R._, The principles of governmental regulation of railways. P. S. Q., 15: 37-49. 1900. _McFall, R. J._, Railway monopoly and rate regulation. 1916. _Materials_, 627, 628. _Meyer, B. H._, Certain considerations in railway rate making. A. E. Rev., 4 (no. 1, supp.): 69-80. 1914. Round table discussion of above, 81-100. _Prouty, C. A._, Railway discriminations and industrial combinations. A. A. A., 15: 41-50. 1900. _Ripley, W. Z._, (Ed.), Railway problems. 1907. _Ripley, W. Z._, Railroads: rates and regulation. 1912. _Ripley, W. Z._, Railroad overcapitalization. Q. J. E., 28: 601-629. 1913-1914. _Ripley, W. Z._, Railroads: finance and organization. 1915. *_Source Book_, 361-367, 368-378, 379-382. QUESTIONS. 1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. Upon what considerations are commodities classified for shipment by railroads? Is classification unfair discrimination? Illustrate by an example. 5. What classes of interests are affected by increasing the minimum weight for carloads? Explain in each case whether the effect is favorable or unfavorable and the reasons therefor. 6. Does cost of service have anything to do with the rates charged by railroads? 7. Give an example of a blanket rate territory and the reasons therefor. 8. What is the "long and short haul" clause of the Interstate Commerce Act? Explain why railroads make rates which contravene the terms of this clause, and why the government should forbid the railroads to make such rates. 9. A railroad connecting two competitive points charges one-fourth of a cent per ton mile on grain shipments from its inland terminus, while it charges one cent per ton mile on grain shipments from non-competitive territory. What considerations have probably led to the establishment of the above rates? Might not the railroad increase its net revenue by raising the rate on through traffic to one-half cent per ton mile and lowering the local rate to three-fourths of a cent per ton mile? 10. The rate on corn in carload lots from Omaha, Neb. to Newport News, Va. is 10 cents per hundred pounds. From the Omaha region there are competing carriers to the Gulf and other Atlantic ports. The rate on corn in carload lots from points in Virginia to Newport News over the same route is 12 cents per hundred pounds. Could not the local rates be lowered if the carriers advanced the rates on the long-distance haul? 11. What cases have you seen where the railroads impose unjustly on the public? 12. Give instances you have seen or heard of where two shippers paid different rates for the same service. 13. Do you know any large cities that are more favorable shipping points than neighboring towns? 14. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 15. Can you see any clear distinction between the public nature of a railroad and that of a horse and carriage? 16. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 17. Ought the law prohibit the sale of tickets by "scalpers"? 18. If your neighbor rides on a pass and you pay your fare, are you helping to pay for his ride? 19. Why should preachers get half-fare rates? 20. What are the chief reasons for the governmental regulation of railways? 21. Why does the question of the control of the railways in the interest of the public present especial difficulties in America? CHAPTER 28 THE PROBLEM OF INDUSTRIAL MONOPOLY REFERENCES. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. _Collier, W. M._, The trusts. 1900. _Cotter, A._, The authentic history of the United States Steel Corporation. 1916. _Hobson, J. A._, The evolution of modern capitalism. Ed., 1912. Ch. V. _Jones, Eliot_, The anthracite coal combination in the United States. 1914. _King, W. I._, The wealth and income of the people of the United States. 1915. _Meade, E. S._, The economics of combination. J. P. E., 20: 358-372. 1912. Trust finance. 1903. _Montague, G. H._, Trusts of to-day. 1904. _Ripley, W. Z._, Industrial concentration as shown by the census. Q. J. E., 21: 651-658. 1906-1907. (Ed.), Trusts, pools and corporations. Ed., 1916. *_Source Book_, 255-264. (Extract from United States Commissioner of Corporations, Report on the transportation of petroleum.) _Stevens, W. S._, Classification of pools and associations. A. E. Rev., 3: 545-575. 1913. _Stevens, W. S._, (Ed.), Industrial combinations and trusts. 1913. _Stevens, W. S._, A group of trusts and combinations. Q. J. E., 26: 593-643. 1911-1912. _Stevens, W. S._, The powder trust, 1872-1912. Ibid., 444-481. 1911-1912. _United States Commissioner of Corporations_, Report on the transportation of petroleum. 1906. _Willoughby, W. F._, The integration of industry in the United States. Q. J. E., 16: 94-115. 1901-1902. QUESTIONS. 1. What large trusts have recently been formed? 2. State the motives for forming trusts, separating those which are socially beneficial and those which are anti-social. 3. Enumerate the advantages possessed by a "trust" over a small competitor, and indicate which of these are the results of large scale production and which are due to the possession of monopoly power. 4. Are there any conditions under which a combination would be a more economical unit of production and distribution than a single plant large enough to secure all advantages to be obtained from mere quantity of output? If so, state them clearly. 5. Explain carefully the causes and limits of the advantages of large production. Give three examples of industries in which the advantages are seen. 6. Have you observed the growth of any local industry from a small beginning to large proportions? If so, how do you account for it? 7. What is the largest manufacturing establishment in your home town? Would a number of smaller establishments of the same sort and with the same aggregate capacity succeed as well? Why? 8. What relation has improved transportation and other means of communication to trusts? 9. What are the chief methods by which trusts or combinations have sought to make economies in management? 10. Describe the characteristic features of the pool, the trust and the holding company. 11. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 12. What is a simple price agreement? How does it differ from a pool? Is there any difference in the matter of legality? Reasons. 13. What are the limits to the price-fixing and profit-earning powers of monopolies? Are there any other conditions which will tend to check the indefinite growth of combinations? 14. Explain and illustrate by a concrete example the circumstances relating to cost of production which tend to make a monopoly price lower than the previous competitive price for the same article. No reference is here intended to local or temporary cuts in price by monopolies which are intent by such means on capturing a local market. 15. If all trade is exchange, do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 16. Five plants engaged in the production of a given article in different parts of the United States are combined under the ownership of a single corporation formed for this purpose. Before the combination these five plants produced 75 per cent. of the total output of the article in question, each producing approximately 15 per cent.; the remaining 75 per cent. was produced by seven plants, no one of these turning out more than 5 per cent. of the total output. Each of the first five plants was large enough to secure all known economies in the costs of transforming the raw material into the physically finished product, and each was running to its full capacity. The aggregate net earnings of the five plants were $1,000,000 a year. The cost of reproducing these five is $14,000,000. The new corporation issues and pays to the owners of the properties taken over $10,000,000 in 5 per cent. first mortgage bonds, $6,000,000 in cumulative preferred stock, and $8,000,000 in common stock. What will determine whether this combination possesses monopoly power? Is the corporation overcapitalized? If so, to what extent? State clearly what you mean by overcapitalization? Is it probable that the earnings of the new corporation will be greater than the aggregate earnings of the five plants, if the price of the product is not increased? If so, how will this increase be gained? If there is an increase in earnings, how will the price of each of the three kinds of securities of the corporation be affected? 17. Suppose that the effective demand for a certain kind of goods in the country as a whole will vary in the following manner with the price changes indicated: $1.00 1,000,000 units 1.10 900,000 units 1.20 800,000 units 1.30 700,000 units 1.40 600,000 units 1.50 500,000 units 1.60 400,000 units 1.70 300,000 units 1.80 200,000 units There are ten companies each producing 100,000 units at a cost of 90 cents (including all costs but an allowance for dividends on investment) this giving just enough of a margin to each company to cause it to continue in the industry. What immediate effect on prices could a combination consisting of six firms have, assuming that the cost per unit of product and that the output of the independents remain unchanged? Show for each of the prices indicated what the amount of the margin made by the four independent competitors (altogether) and by the combination would be. What less immediate effects would be likely to follow, and why? 18. Is granting patents an interference with trade similar to tariffs? 19. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 20. Is it right that an inventor should by patent laws be able to keep the profits of his business high? CHAPTER 29 PUBLIC POLICY IN RESPECT TO MONOPOLY REFERENCES. _Anderson, B. M., Jr._, Competition versus monopoly the issue of the campaign. Independent, 73: 997-1002. 1912. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. _Brown, W. J._, The prevention and control of monopolies. 1915. _Clark, J. B._, The problem of monopoly. 1904. _Clark, J. B._, and _J. M._, The control of trusts. Ed., 1914. _Clark, J. M._, Rates for public utilities. A. E. Rev., 1: 473-487. 1911. _Collier, W. M._, The trusts. 1900. _Davies, J. E._, Trust laws and unfair competition. 1916. _Durand, E. D._, The trust problem. 1915. See also Q. J. E., 28: 381-416, 664-700. 1913-1914. _Durand, E. D._, The trust legislation of 1914. Q. J. E., 29: 72-97. 1914-1915. _Ely, R. T._, Monopolies and trusts. 1900. _Gray, J. H._, The control of public service corporations. A. E. Rev., 4 (no. 1, supp.): 18-44. 1914. Round table discussion of above, 45-68. _Hotchkiss, W. E._, Recent trust decisions and business. A. E. Rev., 4 (no. 1, supp.): 158-172. 1914. Round table discussion of above, 173-195. _Jenks, J. W._, The trust problem. 1900. _Knauth, O. W._, Capital and monopoly. P. S. Q., 31: 244-259. 1916. _Knauth, O. W._, Competition and capital. Ibid., 30: 578-590. 1915. _Knauth, O. W._, The policy of the United States toward industrial monopoly. 1914. _LeRossignol, J. E._, Monopolies past and present. 1900. _Orth, S. P._ (Ed.), Readings on the relation of government to property and industry. 1915. _Ripley, W. Z._, (Ed.), Trusts, pools and corporations. Ed., 1916. *_Source Book_, 383-385. The Sherman anti-trust act. _Stevens, W. S._, The Clayton act. A. E. Rev., 5: 38-54. 1915. The trade commission act. Ibid., 4: 840-855. 1914. _United States Industrial Commission_, Report. 1898-1901. 19 vols. _Wright C. W._, The economics of governmental price regulation. A. E. Rev., 3 (no. 1, supp.): 126-131. 1913. Round table discussion of this paper and that of J. M. Clark, 132-142. _Wyman, Bruce_, Control of the market. 1911. QUESTIONS. 1. What is the trust problem? 2. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it? 3. Which one of the following views do you think to be nearest the truth and why? (a) The trust is a natural and inevitable outcome of modern conditions and is a distinct economic gain. (b) The trust is a result of special privileges and corporate abuses. (c) The trust is the greatest invention of this or any other age. 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. How would the effects on society be different if prices were reduced by better organization and the prevention of waste? 6. If it could be shown that trusts have lowered prices, should that fact exempt them from all interference from legislation? 7. Describe briefly the "unfair practices" of monopolistic corporations. What specific features of the recent railroad and trust legislation are aimed at the prevention of these practices? 8. Is it good public policy to allow a trust to undersell its smaller competitor in one district while it keeps up its prices elsewhere? 9. Are most positive laws intended to hinder competition or make it freer? 10. Copy from the statutes of two states far apart, those sections that pertain to anti-trust or anti-monopoly legislation. Note the general nature of this legislation, special features, penalties for violations, etc., and discuss. 11. What are the main provisions in one of the following: (a) Sherman Anti-Trust Law, (b) Massachusetts Business Corporation Law, (c) The New Companies' Acts, England, (d) German Company Law. 12. Abstract and discuss the Northern Securities decision. Do you see any arguments to be advanced for pooling? Do you think the decision effective in stopping pooling? Ripley (Ed.), Trusts, pools and combinations. CHAPTER 30 PUBLIC OWNERSHIP REFERENCES. _Bemis, E. W._, (Ed.), Municipal monopolies. 1899. _Brooks, R. C._, Municipal Affairs, 5: 1-346. 1901. (An exhaustive and well-arranged bibliography on all aspects of municipal problems.) _Dewsnup, E. R._, The attitude of the state toward railways, a discussion of the question of nationalization. A. E. Assn. Bul., 4th _Fairlie, J. A._, Recent extensions of municipal functions in the ser., 1, no. 2: 175-187. 1911. (Vol. of Papers and discussions.) United States. A. A. A., 25: 299-310. 1905. _Guyot, Yves_, Where and why public ownership has failed. Trans. by H. F. Baker. 1914. _Knapp, M. A._, Government ownership of railroads. A. A. A., 19: 61-73. 1902. _National Civic Federation_, Report on municipal and private operation of public utilities. 1907. 3 vols. (A monumental study by an American delegation, which visited many cities of Europe and America; favorable, in the main, to extension of municipal ownership.) _Winchell, B. L._, Drift toward government ownership of railways. Atlan. Mo., 110: 747-758. 1912. QUESTIONS. 1. Does every government enterprise necessarily narrow the field for private enterprise and diminish the amount of competition? 2. What forms of state activity favor survival of unfit men and bad traits of character? What forms help the fittest to survive? 3. What are municipal franchises? Where are they? 4. Why does the public consent to grant patents or public franchises? 5. What kinds of municipal industries have you seen in operation? How successful were they? 6. What are the main arguments for and against the city ownership and control of gas and waterworks? What troubles arise from city politics? 7. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. Which of them are most satisfactory in your judgment? Which the least so? 8. What is the public sentiment in your home community as to the ownership of industries by the town or city? CHAPTER 31 SOME ASPECTS OF SOCIALISM REFERENCES. _Brooks, J. G._, The problem of syndicalism. A. E. Rev., 4 (no. 1, supp.): 115-130. 1914. Round table discussion of above, 131-157. _Clark, J. B._, Social justice without socialism. 1914. _Ensor, R. C. K._, (Ed.), Modern socialism. 2d ed., 1907. (Selections from socialistic sources.) _Gladden, Washington_, Tools and the man. 1893. (One example of a large number of American books appealing for the application of Christian ethics to social questions.) _Hillquit, M._, History of socialism in the United States. 1903. _Hillquit, M._, Socialism in theory and practice. 1909. _Hinds, W. A._, American communities. 2d ed., 1908. (Describes many experiments, all failures; by a sympathizer with socialism.) _Kirkup, T._, Inquiry into socialism. 3d ed., 1907. (A sympathetic, but not a partizan statement.) _Lockwood, G. B._, The New Harmony movement. 2d ed., 1907. _Martin, John_, An attempt to define socialism. A. E. Assn. Bul., 4th ser., 1 (no. 2): 347-354. 1911. Round table discussion of above, 355-367. _Menger, A._, The right to the whole produce of labor. Trans. 1899. (Masterly criticism.) _Rae, John_, Contemporary socialism. 3d ed., 1901. (Standard work by a non-socialist.) _Schaeffle, A._, The quintessence of socialism. Ed., 1898. (Exposition by a non-socialist, so favorable that it is used by the socialists as a tract.) _Spahr, C. B._, Present distribution of wealth in the United States. 1896. _Spargo, John_, Socialism. 1906. (Pro.) _Walling, W. E._, Socialism as it is. 1912. (Pro.) _Walling, W. E._, and others, The socialism of to-day. 1916. (A source book.) _Watkins, G. P._, Growth of large fortunes. 1907. _Wells, H. G._, New worlds for old. 1908. (An appeal for juster distribution; Fabian school.) QUESTIONS. 1. In the last analysis is there anyone--retired capitalist or unskilled day-worker--whose title to the real income he receives is derived solely from the property he owns, or solely from the labor he performs? 2. What is it to earn a living? How many people do it? 3. If capital is needed in production why is the question of justice raised when its use is paid for? 4. What is the doctrine of economic harmonies? Give three examples (distinct in kind) in modern legislation which run counter to this doctrine, with the justification for each of these. 5. Define charity. Apply the general principles of charity to free schools, free libraries, and free clothing to school children. 6. What is economic freedom? How different from political freedom? 7. Is custom a better regulator of economic action than competition? 8. What are vested rights? Do they ever stand in the way of progress? Examples. 9. Distinguish between the socialistic and the competitive principles of distribution. 10. What classes of thinkers are most inclined to take up socialism? (Classes considered socially, industrially, as to race, as to economic and historical training.) 11. If socialism reduced the total product, would it still be desirable because of the better distribution? 12. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? Or should reduce rents for the less capable merchants and manufacturers? 13. Is there any rule for determining the limits of state interference? 14. If you had the power, what single public measure that you believe would be practicable and effective would you put on the statute books, in order to make a juster division of the social income? Give reasons. 15. The wealth of the United States increased from $7,000,000,000 in 1850 to $188,000,000,000 in 1912. How was this wealth distributed according to (a) the socialistic theory of value? (b) the single tax theory? (c) the theory of value under competitive conditions? 16. What are the chief ways in which the rule of competitive value has been nullified in this period. 17. Would socialism guarantee steadiness or regularity in economic activity, thus eliminating the phenomena of economic crises and depressions? 18. In what way does taxation now shift the distribution of real incomes as among persons? By what other methods and in what degree could such taxation be extended? * * * * * TRANSCRIBER'S NOTES 1. All errors and inconsistencies in spelling, punctuation, italicization have been retained, except as noted below. 2. On p. 9, the title 'The geography of commerce' had a lower case 't' in 'The' in the original. 3. On p. 10, the question 'What is meant by the "Factory System"?' appeared in the original as 'What is meant by the "Factory System."' 4. On p. 12, the question 'What are the principal things besides money uses that cause a demand for gold and silver?' had a full stop (period) instead of a question mark in the original. 5. On p. 15, in the phrase 'piece of the same denomination' the original had 'demonination'. 6. On p. 17, in the reference to 'chs. VI, VII, XIII.', the name 'Phillips' was not italicized in the original. 7. In the table at the top of p. 18 labelled 'Average prices for', there was no comma after 'Wool' in the original. 8. On p. 18 the penultimate sentence in question 7, with the phrase 'weighting affect your first', lacked a question mark in the original. 9. On p. 21 question 9, about 'Two men A and B', had 'transacton' instead of 'transaction' in the original. 10. On p. 23, question 17, 'Suppose that this bank...', had two full stops (periods) instead of one after '$102'. 11. On p. 38, the hanging indent after the reference beginning 'Virtue,' was a regular indent in the original. 12. On p. 42, in the reference beginning 'United States', the abbreviation 'Bul.' was italicized in the original, although it was not italicized in its other occurrences. 13. On p. 44, the word 'and' in the reference beginning 'Warren, B.' was italicized in the original. 14. On p. 46, the hanging indent after the reference to 'The work of rural organization' was a normal indent in the original. 15. On p. 47, the author of 'Tenancy in the southern states', B. H. Hibbard, was shown as H. E. Hibbard in the original. 16. On p. 49, the question 'How do urban and rural...' had a full stop (period) instead of a question mark in the original. 17. On p. 53, presumably either the phrase 'these five plants produced 75 per cent.' was meant to be 'these five plants produced 25 per cent.' or the phrase 'the remaining 75 per cent.' was meant to be 'the remaining 25 per cent.' 18. On p. 55, the initials of LeRossignol were not italicized in the original. 19. On p. 56, the phrase 'its prices elsewhere' was 'its prices elsewere' in the original. 20. On p. 58, in the question about the 'doctrine of economic harmonies', the word 'justification' was 'justificaton' in the original. 21. On p. 59, the question about 'unsuccessful employers' had 'unsuccesful' in the original. 22. The phrase 'land owners' occurs once in the text; the word 'land-owners', broken across lines, occurs once. This discrepancy has been retained, with the word 'land-owners' rather than 'landowners' being arbitrarily chosen for the latter. 
444	----	None 
38047	----	SOCIAL VALUE A STUDY IN ECONOMIC THEORY CRITICAL AND CONSTRUCTIVE BY B. M. ANDERSON, JR., PH.D. _Instructor in Political Economy Columbia University_ BOSTON AND NEW YORK HOUGHTON MIFFLIN COMPANY The Riverside Press Cambridge 1911 COPYRIGHT, 1911, BY HART, SCHAFFNER & MARX ALL RIGHTS RESERVED _Published November 1911_ TO MY FATHER BENJAMIN M. ANDERSON OF COLUMBIA, MISSOURI MY FIRST TEACHER OF POLITICAL ECONOMY PREFACE This series of books owes its existence to the generosity of Messrs. Hart, Schaffner, and Marx of Chicago, who have shown a special interest in directing the attention of American youth to the study of economic and commercial subjects, and in encouraging the systematic investigation of the problems which vitally affect the business world of to-day. For this purpose they have delegated to the undersigned Committee the task of selecting topics, making all announcements, and awarding prizes annually for those who wish to compete. In the year ending June 1, 1910, the following topics were assigned:-- 1. The effect of labor unions on international trade. 2. The best means of raising the wages of the unskilled. 3. A comparison between the theory and the actual practice of protectionism in the United States. 4. A scheme for an ideal monetary system for the United States. 5. The true relation of the central government to trusts. 6. How much of J. S. Mill's economic system survives? 7. A central bank as a factor in a financial crisis. 8. Any other topic which has received the approval of the Committee. A first prize of six hundred dollars, and a second prize of four hundred dollars, were offered for the best studies presented by class A, composed chiefly of graduates of American colleges. The present volume was awarded the second prize. PROFESSOR J. LAURENCE LAUGHLIN, _University of Chicago, Chairman_. PROFESSOR J. B. CLARK, _Columbia University_. PROFESSOR HENRY C. ADAMS, _University of Michigan_. HORACE WHITE, ESQ., New York City. PROFESSOR EDWIN F. GAY, _Harvard University_. A NOTE The following study is the outgrowth of investigations in the "Quantity Theory" of money, carried on in the seminar of Professor Jesse E. Pope, at the University of Missouri, during the term 1904-5. That a satisfactory general theory of value must underlie any adequate treatment of the problem of the value of money, and that there is little agreement among monetary theorists concerning the general theory of value, became very evident in the course of this investigation; and that the present writer's conception of value, as expressed in a paper written at that time on the "Quantity Theory," was not satisfactory, became painfully clear after Professor Pope's kindly but fundamental criticisms. The problem of value, laid aside for a time, forced itself upon me in the course of my teaching: my students seemed to understand the treatment of value in the text-books used quite clearly, but I could never convince myself that I understood it, and the conviction grew upon me that the value problem really remained unsolved. Hence the present book. It was begun in Dean Kinley's seminar, at the University of Illinois, in the term 1909-10. The first three parts, in substantially their present form, and an outline sketch of the germ idea of the fourth part, were submitted, in May of 1910, in the Hart, Schaffner & Marx Economic Prize Contest of that year. Part IV was elaborated in detail, and minor changes made in the first three parts, during the year 1910-11, at Columbia University. The book is submitted as a doctor's dissertation to the Faculty of Political Science of that institution. My obligations to others in connection with this book are numerous. I cannot refrain from thanking my old teacher Professor Pope, in this connection. I owe my interest in economic theory, and the greater part of my training in economic method, to the three years I spent in his seminar at Missouri. I am also indebted to him for substantial aid in the critical revision of the proofsheets. At the University of Illinois, Dean Kinley and Professors E. L. Bogart and E. C. Hayes were of special service to me, as was also Mr. F. C. Becker, now of the department of philosophy at the University of California. Dean Kinley, in particular, criticized several successive drafts, and made numerous valuable suggestions. My chief obligations at Columbia University are to Professors Seligman, Seager, John Dewey, and Giddings. My debt to Professors Seligman and Dewey is, in part, indicated in the course of the book, so far as points of doctrine are concerned. Both have been kind enough to read and criticize the provisional draft, and Professor Seligman has supervised the revision at every stage. My wife's services, in criticism, in bibliographical work, and in the mechanical labors which writing a book involves, have been indispensable. It is due Professor J. B. Clark, since I discuss his theories here at length, to mention the fact that, owing to his absence from Columbia University during the year 1910-11, I have been unable to talk over my criticisms with him, and so may have misinterpreted him at points. Of course, there is a similar danger with reference to every other writer mentioned in the book, but the reader will not be likely to think, in the case of others, that the interpretations have been passed on by the writers discussed, in advance of publication. I must also mention here Professor H. J. Davenport, whose name occurs frequently in the following pages. Chiefly he has evoked criticism in this discussion, but it goes without saying that his _Value and Distribution_ is a most significant work in the history of economic theory, and my indebtedness to it will be manifest. THE AUTHOR. COLUMBIA UNIVERSITY, May, 1911. ANALYTICAL TABLE OF CONTENTS PART I. INTRODUCTION CHAPTER I PROBLEM AND PLAN OF PROCEDURE Social Value concept recently become important, chiefly in America, and primarily through the influence of Professor J. B. Clark--Value and "social marginal utility"--Relation of social-value theory to Austrian theory: Professor Clark's view; views of Böhm-Bawerk, Wieser, and Sax--Statement of the author's position: conceptions of social utility and social cost unsatisfactory, but social value concept a necessity for the validation of economic theory--Plan of procedure: study of logical requirements of valid value concept; failure of current theory to justify such a concept; cause of this failure in faulty psychology, epistemology, and sociology presupposed by current economic theory; reconstruction of these presuppositions; on the basis of the reconstruction, a positive theory of social value 3 PART II. CRITIQUE OF CURRENT VALUE THEORY CHAPTER II FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT Value as ideal, and value as market fact--Value as absolute, and value as relative--Value as quantity--Relation between quantity and quality--Relative conception of value involves a vicious circle, if treated as ultimate--Every "relative value" implies two absolute values--Ratios must have quantitative terms--But physical quantities cannot serve as these terms--Value and evaluation: confusion of the two responsible, in part, for doctrine of relativity--Value in current economic usage: value and wealth; money as a "measure of values" 13 CHAPTER III VALUE AND MARGINAL UTILITY Individualistic method of Jevons and the Austrians--Such a method, applied to value problem in concrete social life, yields, not quantities of value, but rather, particular ratios between such quantities--Value cannot be identified with marginal utility of a good to a marginal individual, even though we assume the commensurability and homogeneity of human emotions--Clark's Law 28 CHAPTER IV JEVONS, PARETO AND BÖHM-BAWERK When individualistic methods and assumptions are pushed to the extreme, the problem of a quantitative value becomes still more hopeless--Jevons' psychological and epistemological assumptions--No objective value quantity for Jevons--The same true of Pareto--Böhm-Bawerk, trying to find law of value in law of price, reaches results no more satisfactory--Austrian analysis, even with Professor Clark's correction, is simply an explanation of the modus operandi of determining particular ratios between values in the market--It tells us nothing of value itself, and assumes a whole system of values predetermined 34 CHAPTER V DEMAND CURVES AND UTILITY CURVES Constant confusion of demand curves and utility curves in current economic literature has made necessary much of the foregoing criticism--Confusions in the writings of Jevons, Böhm-Bawerk, Wieser, Pierson, Patten, Hadley, Ely, Schaeffle, Flux, Marshall, and Davenport 40 CHAPTER VI THE VICIOUS CIRCLE OF THE AUSTRIANS Extreme abstractness of the Austrian theory--Abstraction legitimate and necessary, but must not be carried so far that the explanation phenomena are obliged to include the problem phenomenon--Austrians explain value in terms of value,--a vicious circle--Circle explicit in Wieser--Also explicit in Hobson's attempt to combine Austrian theory with cost theory of English School 45 CHAPTER VII PROFESSOR CLARK'S THEORY OF SOCIAL VALUE All attempts to explain value in terms of the highly abstract factors of individual utility and individual cost, or any combination of them, must become similarly entangled--Austrians have shown this of English theory--Professor Clark's value theory, set forth in the Distribution of Wealth, intended to justify social value concept, really uses only these abstract individual factors, combined in arithmetical sums, and similarly falls into a circle--Differences between Professor Clark's point of view in his _Philosophy of Wealth_ and that of his later writings--The point of view of the earlier book, supplemented by later studies in social psychology, will afford the basis for an organic conception of society, and a valid doctrine of social value 49 PART III. THE PRESUPPOSITIONS OF ECONOMIC THEORY CHAPTER VIII THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS Connection between social philosophy and metaphysics and epistemology always close--Three stages in history of philosophy: dogmatic, skeptical, critical--Ancient and modern philosophy have each gone through these three stages--Each philosophic stage characterized by distinctive social philosophy: individualism and sociological monadism go with skeptical philosophy, while organic conception of society goes with critical stage--Economics to-day based on skeptical philosophy of Hume--Doctrine of sociological monadism: Marshall, Pareto, Jevons, Veblen, Davenport--Critique of sociological monadism, from standpoint of epistemology and psychology 59 CHAPTER IX THE SOCIOLOGICAL PRESUPPOSITIONS Conceptions of the social unity: mechanical, biological, psychological--DeGreef's criticism of mechanical and biological analogies--Hierarchy of sciences: Comte and Baldwin--Baldwin's psychical abstractionism--Cooley's psychological conception of the nature of society seems most useful for purposes of this study--Cooley's view--Relation between Cooley and Giddings: the Social Mind--Summary of sociological doctrine--Critique of Davenport 72 PART IV. A POSITIVE THEORY OF SOCIAL VALUE CHAPTER X VALUE AS GENERIC--THE PSYCHOLOGY OF VALUE Economic value a species, coördinate with ethical, legal, æsthetic, and other values--Psychology of value, as manifested in individual experience--Values as "tertiary qualities"--When we reflectively break up the experience, values thrown from object to subject's emotional life, but this an abstraction from concrete experience--Feeling and desire in relation to value: hedonism; Ehrenfels and Davenport; Urban and Meinong--"Presuppositions" of value--Feeling and desire both _phases_ in value, but neither is _the_ worth-fundamental, and each may vary in intensity without affecting amount of value--Value and reality judgment: Meinong and Tarde; Urban--On _structural_ side, feeling, desire, and "reality feeling" are all significant phases in value--But real significance of value lies in its _functional_ aspect: the function of value is the function of _motivation_--Essence of value is _power_ in motivation--For concrete experience, this power a quality of the object--Positive and negative values--Complementary values--Rival values: two cases: qualitatively compatible, and qualitatively incompatible values--In first case, quantitative marginal compromise often possible: generalization of Austrian analysis--So-called "absolute values" ("absolute" here used as in history of ethics)--No sharp lines between different sorts of values, as ethical, economic, æsthetic--Different sorts of values do not constitute self-complete, separate systems--Generalization of notion of price--Suggestions as to analogues in the field of the social values 93 CHAPTER XI RECAPITULATION--THE SOCIAL VALUES--FUNCTIONS OF THE VALUE CONCEPT IN ECONOMICS Conclusions reached both in economic analysis and in sociological analysis point to values which correspond to no individual values, great social forces of motivation--To individual, economic, legal, and moral values appear as external forces, over which his control is limited, and to which he must adapt his individual behavior--Economic theory, often unconsciously, has assumed objectively valid, quantitative value, and economic theory valid only on the basis of such a concept: value the homogeneous element among the diversities of physical forms of goods, by virtue of which ratios, sums, and percentages may be obtained among them, and comparisons made--Process of "imputation" assumes such a value concept--Value used by economists to explain motivation of economic activity--Such a value concept essential for the theory of money--Implied in the term, "purchasing power"--Such a concept has never been justified, but economists, more concerned about practical results than logical consistency, have found it essential, and used it--Impossible to develop a social quantity by synthesis of abstract individual elements--Correct procedure the reverse of this 115 CHAPTER XII SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE Neither Urban nor Tarde primarily concerned with economic value--Urban's important contributions--Insists on conscious feeling as essential for social value--But feeling may vary in intensity without affecting the power in motivation of the value--Feeling significant when values are to be compared--Social weight of those who feel a value a highly significant phase which Urban ignores--Tarde recognizes this phase, but errs in treating it as an abstract element, which obeys the laws of simple arithmetic 124 CHAPTER XIII ECONOMIC SOCIAL VALUE How get out of Austrian circle?--Temporal _regressus_ _vs._ logical analysis of the concrete whole of the Social Mind--Even in Wieser's "natural" community, psychic elements other than "marginal utility" significant for the determination of economic values, especially legal and moral values concerned with distribution--Quotation from Mill--Critique of "pure economic" theories of distribution--They presuppose as a "framework" a set of legal and moral values which, in modern times, especially, are little more stable than "pure economic" forces, and which, in any case, are of same nature as economic forces,--fluid, psychic forces--"Pure economic" forces, working in _vacuo_, would lead to anarchy; any concrete economic tendency depends on legal and moral forces quite as much as on "pure economic" forces--Illustrations 132 CHAPTER XIV ECONOMIC SOCIAL VALUE (_continued_) Abstract elements of the Austrian and English schools, individual "utilities" and "costs," have their place in the concrete whole of social intermental life--Social causes largely determine them--But this not enough for a theory of social value--Intensity of a man's feelings or desires has no relation whatever to value in market till we know social rankings of _men_--Conflicts of values concerned with these social rankings--Prices express results of court decisions as well as results of changing individual desires for economic goods--We break the circle by turning to the concrete whole of social-mental life--Economics has failed to profit by example of other social sciences here--No social science can explain its phenomena by reference to one or two abstract factors 148 CHAPTER XV SOME MECHANICAL ANALOGIES Mechanical analogies of limited use in revealing full complexity of social control, but of use for certain purposes--Our argument can be put, in part, in terms of mechanical analogies--Transformations of social forces--Illustrations--Marginal equilibria among social forces--Illustrations--Social forces of control take different forms under different conditions--Mechanical analogies useful enough for economic price-analysis--Our thesis involves no radical revision of economic methodology--It is rather concerned with interpretation and validation of economic methodology 156 CHAPTER XVI PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES Professor Seligman's contributions to value theory--Points of difference between his views and those here maintained--His psychological doctrine of relativity--Different from doctrine of English School, which is a matter of logical definition--Values relative because there is fixed sum of values, and increase in one value can come only through decrease in other values--Criticism: psychological difficulties; diminution of all values in times of panics and epidemics; decrease of economic values through increase of religious and other values--Element of truth in Professor Seligman's doctrine--Relation between Professor Seligman's view and that of Professor Clark 162 CHAPTER XVII THE THEORY OF VALUE AND THE THEORY OF PRICES Price and _Preis_--Price broadened to include all relations between values, whether money be involved or not--History of price-concept in English economics--Distinction between prices and values--Generalization of notion of price--Measurement of beliefs, etc., in terms of money--"Qualitative analysis" and "quantitative analysis"--Great bulk of economic theory, and virtually all that is valid and valuable in economic theory, has so far been in theory of prices, and not in theory of value--Methods of price analysis--Abstract units of value--Price theory and practical problems 175 CHAPTER XVIII THE THEORY OF VALUE AND THE THEORY OF PRICES (_concluded_) Great work of Austrians really done in field of price theory--They have, without logical right, but with excellent results, assumed and used a quantitative, objective value concept--Distribution in relation to theory of value and theory of prices--Mill's treatment primarily from standpoint of fundamental value theory; later theories, as a rule, chiefly concerned with more superficial, but also more exact, price analysis of distributive problems--Theory of value not a substitute for detailed price analysis, but, rather, a presupposition of it--Prices have _meanings_, which only theory of value can explain 188 CHAPTER XIX THE THEORY OF VALUE AND THE SOCIAL OUTLOOK--SUMMARY Belief that social optimism and social pessimism are connected with theory of value--Views of Fetter, Schumpeter, Wieser, and Davenport--No such implications, either optimistic or pessimistic, in theory here maintained--Theory of value does not contain justification of existing social order--Summary of main argument of book 194 INDEX OF NAMES 201 PART I INTRODUCTION SOCIAL VALUE CHAPTER I PROBLEM AND PLAN OF PROCEDURE Recent economic literature has had much to say about "social value." The conception, while not entirely new,[1] has become important only of late years, chiefly through the influence of Professor J. B. Clark, who first set it forth in his article in _The New Englander_ in 1881 (since reproduced as the chapter on the theory of value in his _Philosophy of Wealth_). The conception has been found attractive by many other American writers, however, and has become familiar in many text-books, and in periodical literature. Among those who have used the conception may be named: Professors Seligman, Bullock, Kinley, Merriam, Ross, and C. A. Tuttle.[2] Gabriel Tarde, the brilliant French sociologist, has independently developed a social value doctrine, different in many respects from that of the Americans named, which we shall later have occasion to consider.[3] In its most definite form, the theory asserts that the value of an economic good is determined by, and precisely accords with, the marginal utility of the good to society, considered as a unitary organism. Professor Clark, as is well known, makes use of the analysis of diminishing utility in an individual's consumption of goods in much the same fashion that Jevons does, but while Jevons makes this simply a step in the analysis of market ratios of exchanges, Professor Clark treats it as analogical, representing _in parvo_ what society does, as an organic whole, on a bigger scale.[4] The precise relation of social value to social marginal utility is variously stated by the writers named: for Professor Clark, value is the _measure_ of effective, or marginal, utility;[5] for Professor Seligman, social value is the _expression_ of social marginal utility;[6] for Professors Ross, Merriam, and Kinley, value _is_ that social marginal utility itself.[7] These statements are more different in words than in ideas, though some significance is to be attached to Professor Seligman's formulation, as will later appear. This conception is a bold one. It has, moreover, never been adequately developed or criticized. Its friends have found it a convenient and useful working hypothesis, and Professor Clark, especially, has built a great system upon it, but, with the exception of an article in the _Yale Review_ of 1892,[8] has made no serious efforts, either to make clear its full meaning, or to vindicate it--except that, of course, his whole system may be considered such a vindication. Professor Seligman, in an article in the _Quarterly Journal of Economics_, vol. XV, and also in his _Principles of Economics_, has espoused the conception, and has shown how, assuming its truth, a great many antagonistic theories may be harmonized; but he, also, has failed to treat it with that detail which full demonstration requires. In particular, he has omitted a treatment of the problem of the relation between the value of a good for the individual and for society, and the relation between individual and social marginal utility.[9] The most searching investigation of the theory has come from unfriendly critics, among whom may be especially named Professor H. J. Davenport, and Professor J. Schumpeter of Vienna.[10] For the purposes of this discussion, Professor Clark will be considered as the representative of the Social Value School, for the most part, though attention will be given to some of the other writers named as well. It is worth while, consequently, to make clear at this point the relation between Professor Clark and the Austrian School, with which he is sometimes associated by economic writers. His extensive use of the marginal principle, his use of the term, "utility," and his deduction of value from utility, seem to place him at one with them. Professor Clark has pointed out, however, in the preface to the second edition of his _Philosophy of Wealth_, that his theory is to be distinguished from that of Jevons by "the analysis of the part played by society as an organic whole in the valuing processes of the market." And the Austrians, for their part, have rejected the conception that value and social marginal utility coincide, or that society, as an organic whole, puts a value on goods. Thus, Böhm-Bawerk:-- Man pflegt den objektiven Tauschwert im Gegensatz zu dem auf individuellen Schätzungen beruhenden subjektiven Wert häufig auch als den _volkswirtschaftlichen Wert_ der Güter zu bezeichnen. Ich halte diesen Gebrauch für nicht empfehlenswert. Zwar wenn man durch ihn nichts anders hervorheben wollte, als dass diese Gestalt des Wertes nur in der Gesellschaft und durch die Gesellschaft hervortreten könne, dass er also das volks- und sozialwirtschaftliche Wertphänomen _per eminentiam_ sei, so wäre dagegen nichts zu erinnern. Gewöhnlich mischt sich aber mit jener Benennung auch die Vorstellung, dass der Tauschwert der Wert sei, den ein Gut _für_ die Volkswirtschaft habe. Man deutet ihn als ein über den subjektiven Urteilen der einzelnen stehendes Urteil der Gesellschaft, welche Bedeutung ein Gut für sie im ganzen habe; gewissermassen als Werturteil einer objektiven höheren Instanz. Dies ist irreführend.[11] Equally emphatic is Wieser:-- The ordinary conception, which makes price the social estimate put upon goods, has to the superficial judgment the attraction of simplicity. A good A whose market price is £100 is not only ten times as dear as B whose market price is £10, but it is also absolutely and for every one ten times as valuable. In our conception the matter is much more complicated.... Price alone forms no basis whatever for an estimate of the economic importance of the goods. We must go further and find out their relation to wants. But this relation to wants can only be realised and measured individually.... And the question how it is possible to unite those divergent individual valuations into one social valuation, is one that cannot be answered quite so easily as those imagine who are rash enough to conclude that price represents the social estimate of value.[12] Sax, likewise, expresses his dissent:-- Da für die exacte Forschung die Psyche einer fabelhaften Collectiv-Personlichkeit nicht existirt, so kann der Ausgangspunkt unserer Untersuchung auch wieder nur der Individualwerth sein.[13] Whatever the worth of the conception of social value, it is not the same as the Austrian theory. It is proper to remark here that these strictures of the Austrian writers are probably directed, not against Professor Clark, but rather against the social use-value concept as it had appeared in Germany, in the writings, say, of Rodbertus, and of Adolph Wagner, who accepts Rodbertus' notion.[14] It may be well, at the outset, for the writer to define his own position briefly. We shall find the notion of social marginal utility, and the companion notion of social marginal cost (considering the latter as a "real cost," or pain-abstinence cost, concept), unsatisfactory and unilluminating. Social marginal utility, as a determinant of value, cannot be the marginal utility of a good to some particular individual who stands out as _the_ marginal individual in society, nor can it be an average of individual marginal utilities, nor a sum of individual marginal utilities, nor any other possible arithmetical combination of individual marginal utilities, if our conclusions are true. For the term, social marginal utility, we can find only a vague, analogical meaning, if any at all, unless we identify it outright with social value, in which case it is a superfluous term, which itself not only explains nothing, but rather presents complications which call for explanation. We shall find no use for the social utility concept in our analysis. On the other hand, we shall find the conception of social value a necessity for the validation of economic analysis, and a conception which present-day psychological and sociological theory abundantly warrant us in accepting. I do not desire, at the outset of a comparatively short book, to anticipate my arguments in detail, but a statement of the plan of procedure may aid the exposition somewhat. I shall first, through an examination of the logical necessities of economic theory, and of the function of the value concept in economics, set up certain logical and formal qualifications for an adequate value concept. Then I shall examine the efforts made by current theories of value to attain such a value concept, by means of the elements of individual utilities, individual costs, or combinations of the two, and show that such procedure gets into invincible logical difficulties. We shall find the source of these difficulties in the faulty epistemology, psychology, and sociology which constitute the avowed or implicit presuppositions of the economic theory of to-day. Criticizing these faulty presuppositions, we shall endeavor to reconstruct them in the light of later epistemological, psychological, and sociological doctrine, and then, on the basis of the new presuppositions, we shall endeavor to develop a truly organic doctrine of social value, and to link it with what seems valuable--that is to say, the greater part--in the economic theory of to-day. FOOTNOTES: [1] The value concept of Marx is not, strictly speaking, a social value concept. _Cf._ Pareto, V., _Cours d'Économie Politique_, vol. I, p. 32. Rodbertus, however, has a doctrine of social use value, based on the organic conception of society. "Nemlich so: es gibt nur Eine Art Werth und das ist der Gebrauchswerth.... Aber dieser Eine Gebrauchswerth ist entweder individueller Gebrauchswerth oder _socialer_ Gebrauchswerth.... Der zweite ist der Gebrauchswerth, den ein aus vielen individuellen Organismen bestehender _socialer Organismus_ hat.... Damit glaube ich also bewiesen zu haben, dass der Tauschwerth nur der historische Um- und Anhang des socialen Gebrauchswerths aus einer bestimmten Geschichtsperiode ist. Indem man also dem Gebrauchswerth einen Tauschwerth als logischen Gegensatz gegenüber stellt, stellt man zu einem logischen Begriff einen historischen Begriff in logischem Gegensatz, was logisch nicht angeht." From a letter to Adolph Wagner, published by Wagner in the _Zeitschrift für die Gesammte Staatswissenschaft_, 1878, pp. 223-24. Wagner indicates his approval of this concept, though he makes little use of it, in his _Grundlegung der politischen Oekonomie_, Leipzig, 1892, pp. 329-30. Ingram, in his _History of Political Economy_ (New York, 1888), although he takes no account of social value theories of other writers, suggests one of his own--which is, however, a vague one, mixing technological, ethical, and economic categories. See p. 241. [2] Seligman, E. R. A., _Principles of Economics_, New York, 1905, especially pp. 179-82 and 192-93. Bullock, C. J., _Introduction to the Study of Economics_, especially pp. 162-64. There is no attempt at a psychological treatment in this work, and no clear statement of the meaning of the concept, social. Kinley, David, _Money_, New York, 1904, pp. 125-26. The social value conception runs through the book. Merriam, L. S., "The Theory of Final Utility in its Relation to Money and the Standard of Deferred Payments," _Annals of the American Academy_, vol. III; "Money as a Measure of Value," _ibid._, vol. IV; an unfinished study in the same volume, pp. 969-72, described by Professor J. B. Clark. Ross, E. A., "The Standard of Deferred Payments," _ibid._, vol. III; "The Total Utility Standard of Deferred Payments," _ibid._, vol. IV. These articles by Professors Ross and Merriam were written in the course of an interesting controversy between the gentlemen named, Tuttle, C. A., "The Wealth Concept," ibid., vol. I; "The Fundamental Economic Principle," _Quarterly Journal of Economics_, 1901. [3] See chapter XII. [4] See especially Professor Clark's _Essentials of Economic Theory_, New York, 1907, pp. 41-42. [5] See especially _The Philosophy of Wealth_, 1892 ed., pp. 73-74. [6] _Principles_, pp. 179-82. [7] The general references for Ross and Merriam have been given _supra._ _Cf._ p. 62 of Dean Kinley's _Money_. [8] "Ultimate Standard of Value." This article is substantially the same as chap, XXIV of _The Distribution of Wealth_, New York, 1899. [9] In his discussion of social value in the _Principles_, Professor Seligman modifies a statement made in his article, "Social Elements in the Theory of Value" (_Quarterly Journal of Economics_, vol. XV). The two discussions are parallel in part, the former being based upon the latter. The passage quoted is from the _Q. J. E._ article, pp. 323-24. The same passage is essentially reproduced in the _Principles_ (first edition, p. 180), with the exception of the passages in italics: "I not only measure the relative satisfaction that I can get from apples or nuts, but the quantity of apples I can get for the nuts depends upon the relative estimate put upon them by the rest of society. _Some individuals may prize a commodity a little more, some a little less; but its real value is the average estimate, the estimate of what society thinks it is worth._ If an apple is worth twice as much as a nut, it is only because the community, after comparing _and averaging_ individual preferences," etc. The conception of social value as an _average_ of individual values is withdrawn in the second treatment, and no substitute is offered for it. [10] Davenport, "Seligman, 'Social Value,'" _Journal of Pol. Econ._, 1906; _Value and Distribution_, Chicago, 1908. This last work reproduces, in abridged form, the article on Professor Seligman, in a footnote, pp. 444 _et seq._ Schumpeter, "On the Concept of Social Value," _Q. J. E._, Feb., 1909; "Die neuere Wirtschaftslehre in den Vereinigten Staaten," _Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtechaft im Deutschen Reich_, 1910, pp. 913 _et seq._ In the last-named article (p. 925, n.) Professor Schumpeter indicates that his objection to the social value concept relates not so much to the question of fact as to the question of method. The English article in the _Quarterly Journal_ contains Schumpeter's fullest treatment of the topic. [11] Böhm-Bawerk, "Grundzüge der Theorie des wirtschaftlichen Güterwerts," Conrad's _Jahrbücher_, N. F., Bd. XIII, 1886, p. 478. [12] _Natural Value_, p. 52, n. [13] Sax, Emil, _Grundlegung Der Theoretischen Staatswirtschaft_, Vienna, 1887, p. 249. [14] See _supra_, p. 3, note 1. PART II CRITIQUE OF CURRENT VALUE THEORY CHAPTER II FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT The study of wealth is meaningless, unless there be a unit for measuring it. The questions to be answered are quantitative.... Reciprocal comparisons give no sums.... Ratios of exchange alone afford us no answer to the economist's chief inquiries.[15] This quotation from Professor Clark raises an issue which we must examine in detail. Professor Clark proceeds, pointing out the need for a homogeneous element, among the diversities of the physical forms of goods, capable of absolute measurement, if goods are ever to be added together, or a sum of wealth obtained. Money, on the surface of things, affords this common standard, but "the thought of men runs forward to the power that resides in the coins." This power is effective social utility, the quantitative measure of which is value. Elsewhere in his writings,[16] Professor Clark insists on the conception of value as a quantity, an absolute magnitude, and he consistently makes use of this conception. All of the exponents of the social value concept named, except Professor Seligman, follow him in this, and it may be considered an essential feature of the theory. Marginal utility is a definite quantity, social marginal utility is a definite quantity, and value, if conceived as identical with social marginal utility, or as the quantitative measure of it (the difference is verbal, for present purposes, at least), must be so considered. A _ratio of exchange_, then, is a ratio between two quantities of social marginal utility, or social value, rather than between two physical objects, and _price_, in this view, is a particular sort of ratio of exchange, namely, one where one of the terms of the ratio is the social marginal utility, or the social value, of the money unit. It is important to contrast value as thus conceived, in its formal and logical aspects, with other historical conceptions of value. In the classification which follows, the writer has by no means attempted an exhaustive list. Definitions of value are very numerous, but it is not necessary to list them all, since many differ, not so much in their logical or formal aspects, as in the theory of the origin of value which the definition is made to include. There are two principles of classification which will be used, however, which, used in a cross-classification, will enable us to exhibit the contrasts of most importance for present purposes. The first line of cleavage is between the conceptions which treat value as an ethical ideal, often different from the market fact, and those which accept the value which is expressed in prices in the market as the "real or true" value for economic science. The medieval conception of the _justum pretium_ belongs to the first class, as does also the conception of President Hadley: "The price of an article or service, in the ordinary commercial sense, is the amount of money which is paid, asked, or offered for it. The value of an article or service, is the amount of money which may properly be paid, asked, or offered for it."[17] And the value theory of Karl Marx, though differing from either of these in points, is yet like them in this one respect: value and price do not necessarily agree for Marx. The value of a thing for him depends on the "socially necessary" labor embodied in it, while some things, as land, command a price in the market, even though embodying no labor.[18] Opposed to this group of theories are, doubtless, the greater part of present-day writers, who, while differing among themselves at many points, would insist that value is a fact, and not an ideal. The second line of division is between the conceptions of value as a quantity and value as a ratio, or, to put the thing more generally and more accurately, between the value of a thing as a definite magnitude, independent of exchange relations, and that value as a relative thing, not only _measured_ by the process of exchanging, but also caused by it, and varying with the value of the things with which the article is compared. Professor Clark and his followers belong in the second group of the first classification, and in the first group of the second classification. The social value of which they speak is a fact, and not an ideal (though Professor Clark has often been interpreted as teaching that the fact corresponds closely with an ideal), and social value as treated by them (noting the exception of Professor Seligman, who does not follow Professor Clark closely), is an absolute magnitude.[19] Karl Marx and Henry George agree with them upon this latter point. Value is a quantity, and not a mere relation, for both.[20] Wieser would concur here.[21] Professor Carver, in a recent article in the _Quarterly Journal of Economics_,[22] insists on the conception of value as a quantity. Gabriel Tarde states the matter illuminatingly in a passage in his _Psychologie Économique_:[23]-- Value is a quality which we attribute to things, like color, but which, like color, exists only in ourselves.... This quality is of that peculiar species of qualities which present numerical degrees, and mount or descend a scale without essentially changing their nature, and hence merit the name of quantities. On the other hand, the doctrine of relativity has characterized the teachings of the English School, of the Austrians (except Wieser), and of many of the more eclectic followers of each in this country. It will appear later that this relative conception follows naturally from their individualistic method of approaching the subject. The essence of the relative conception of value, whether defined as "power in exchange," or "ratio of exchange," or, with Professor Fisher,[24] and others, as a quantity of goods to be got in exchange, comes out in the statement, so common in the text-books, that, while there can be a general rise or fall of _prices_, there cannot be a general rise or fall of _values_, since a rise in the value of one good implies a corresponding fall in the value of all other goods. The incompatibility of the two opposing conceptions comes out strikingly here: if value be an absolute magnitude, then there _can_ be a general rise or fall of values without disturbing exchange ratios at all--12:6::6:3. All values might be cut in half, or multiplied by any factor, and, provided all decreased or increased in the same degree, exchange relations would not change. Now this difference is fundamental. Vastly more than terminology and definition is involved. Is value a quantity or a relation? Is value a thing which determines causally exchange relations, or is value determined causally by them? To the writer, the former conception seems a logical necessity. Value as merely relative is a thing hanging in the air. There is a vicious circle in reasoning if, when I ask you what the value of wheat is, you refer me to corn, and then when I ask you the value of corn, you refer me again to wheat. And if you put in intermediate links, even as many links as there are different commodities in the market, the circle still remains: the value of A is its power over, or its ratio with, B; the value of B its relation to C; the value of C ... its relation to Z; and the value of Z, the last in the series, must come back to its relation to one of those named before. This circle is noted and sharply criticized by Wieser:[25]-- Theorists who have confined themselves to the examination of exchange value, or, what comes to the same thing, of price, may have succeeded in discovering certain empirical laws of changes in amounts of value, but they could never unfold the real nature of value, and discover its true measure. As regards these questions, so long as examination was confined to exchange value, it was impossible to get beyond the formula that value lies in the relation of exchange;--that everything is so much more valuable the more of other things it can be exchanged for.... Absolutely and by itself, value was not to be understood. It is significant of this conception to state that one thing cannot be an object of value in itself; that a second must be present before the first can be valued. Theory has only very gradually shaken itself free from this misconception, this circle. Where an absolute theory was attempted--such as the labour theory, or that which explained value as usefulness--some logical leap generally reconnected it with the relative conception. Now the validity of this reasoning might be admitted, in so far as it applies to "Crusoe economics"--though Professor Seligman, with strict consistency, insists that even there value arises from a comparison in Crusoe's mind of apples with nuts[26]--by those who would object to its application to value in society. Value there, it would be insisted, is determined through exchange, and does not have any meaning except as a ratio between physical commodities.[27] But even here, it seems to me, the same reasoning must hold. We really do not find a ratio between physical commodities at all. Four gallons of milk exchange for one dollar, or 23.22 grains of gold. The exchange ratio is four to one. But milk is in units of liquid measure; gold in incommensurable units of Troy weight. The ratio, 4:1, is not on the basis of any physical commensurability. If any physical basis of comparison be taken, whether weight, or bulk, or length, or more subtle and less easily measurable physical qualities, the ratio would be found very different. But 4:1 _is_ the market ratio. Now a quantitative ratio is between commensurable quantities. Gold and milk must be, then, commensurable quantities, _i.e._ must have a common _quality_, present in each in definite quantitative degree, before comparison is possible, or a ratio can emerge. This quality is _value_. The difficulty, from the standpoint of logic, is only covered up, and not avoided, if we say with Professor Davenport,[28] "Value is a ratio of exchange between two goods, _quantitatively specified_." [Italics mine.] For the quantitative specification depends on the extent to which the homogeneous quality is present in each of the goods, or, if we assume that the quantitative specification is made before the question of exchange ratio is raised, then the exchange ratio will vary with the extent to which the common quality is present in each of the goods. We can have no quantitative ratios between unlike things. And yet, we must have terms for our ratios. The situation here is not unlike the situation that arises when we compare two weights. We have no unit of weight in the abstract. Weight never appears as an isolated quality, but always along with other qualities, as extension, color, and the like. And when we compare weights, we really compare two heavy objects, and make our weight ratio between the object to be weighed and the physical standard of weight. Nor does value ever appear as an isolated quality. And we have no unit of abstract value which we can apply abstractly in a measurement. Instead, we choose some valuable object, as 23.22 grains of gold, and make our ratio between the given quantity of gold and the object whose value we wish to measure. But we must not forget that this is merely a symbol, a convenient mode of expression, and that the fact expressed is something different--that the real terms of our ratios are so many units of abstract weight, or of abstract value, as the case may be. Otherwise conceived, the ratio itself is meaningless: it has no terms. We have four to one up in the air, not four units of something to one unit of something. The abstract ratio is a thing for pure mathematics, and not a thing for economics. An economic ratio must have "economic quantities" as terms.[29] The difficulty with the doctrine we are maintaining arises from the difficulty of isolating and defining this quality of value. It is not a quality "inherent" in the good (whatever "inherent" may mean). It does not arise from the simple relation between our senses and the object, or even from an intellectual elaboration thereof. It rather grows out of the relation between our emotional-volitional life and the object, and the definition of this relation, and the determination of the quality, have been so difficult, that some writers, as Professor Davenport,[30] have explicitly given it up as a hopeless task, and have determined to content themselves with the surface facts of relativity. But there is no logical resting place in those surface facts. Relativity implies _things_ related, ratios must have quantitative _terms_, additions require _homogeneous_ quantities to make up a sum. Some further distinctions are necessary. When we say "absolute magnitude," we do not mean a magnitude which stands out of all relations to other facts in the universe. There is no intention of setting up a metaphysical absolute here. The terms "positive" and "relative" (suggested by Professor Taylor)[31] might serve our purpose better, except for the fact that we wish to reserve the term "positive value" to contrast with "negative value" at a later stage of our discussion. Our objection to the relative conception of value really gives our value more, rather than less relations. Instead of allowing its relation to one particular thing, namely, some other good with which it happens to be compared, to determine its amount, we insist that that relation is so much a minor matter that it can generally be ignored, and that the significant relations--a very numerous set of relations indeed, as we shall later see!--are of another sort. The contention is that value is absolute only in this sense: its amount is not determined by the particular exchange ratio in which it happens to be put, and is not changed _eo ipso_ every time a new comparison is made. Further, it is in the process of exchange, and by the method of comparison, that the value of goods becomes quantitatively _known_, as a rule. That is to say, we find out precisely _how much_ value a good has by comparing it in exchange with some other good. In this respect, value is again like other qualities. We measure lengths, weights, cubic contents of objects, all by comparison, direct or indirect, with other objects. But the amount of water in a vessel is not changed when we put it into a measure, and determine how many gallons of it there are. Nor is the amount of value in a good _causally_ determined by the process of exchange.[32] We must distinguish between two confused meanings of the word "determine." It may mean "to cause," and it may mean "to find out" or "to measure." We must distinguish, in Kantian phrase, between the "_ratio essendi_" and the "_ratio cognoscendi_." _Value_ and _evaluation_ are two distinct things. Value, to anticipate a later part of the study, is primary, and grows out of the action of the volitional-emotional side of human-social life; evaluation is secondary, and is the intellectual process devoted, not to _giving_ value, but to _finding out_ how much value there is in a good. This distinction between the existence of a quantity, and our precise knowledge of its amount, is brought out by several writers, among them, General F. A. Walker,[33] and the keen mathematical economists, Pareto[34] and Edgeworth.[35] There are two further arguments for the propriety of this conception, considered primarily as a question of terminology, to be drawn from usage in the treatment of other terms. The first is drawn from a consideration of the function of the value concept in economic science,[36] and of its relation to the concept of wealth. "The notion of value is to our science what that of energy is to mechanics," says Jevons.[37] It is clear that a mere abstract ratio, which Jevons two pages later declares value to be, cannot serve such a purpose. Abstract ratios are subject-matter for mathematics, not for economics. "Wealth and value differ as substance and attribute," (Senior, quoted with approval by F. A. Walker.[38]) With this view, Marx[39] would concur. "Wealth is that which has value," Professor Laughlin states.[40] Clearly a qualitative attribute, and not a ratio, must be indicated here, even though Professor Laughlin elsewhere in the book defines value as a "ratio between two objective articles."[41] And if we take a definition like that of Professor Seligman, who defines wealth in terms which entirely ignore the ideas of comparison and exchange as consisting of those things which are (1) capable of satisfying desire, (2) external to man, and (3) limited in supply,[42] we find no basis for insisting on relativity, exchange and comparison, as essential to the idea of value, which is the essential and distinguishing characteristic of wealth. The science loses in coherency from this diversity of definition. The second argument is similar. Current economic usage speaks of money as a "measure" of values. Professor Seligman uses the expression in the chapter on money in the book referred to. But the point made by General Walker against this expression, when value is defined as a ratio, is absolutely valid. He says:-- I apprehend that this notion of money serving as a common measure of value is wholly fanciful; indeed, the very phrase seems to represent a misconception. Value is a relation. Relations may be expressed, but not measured. You cannot measure the relation of a mile to a furlong; you express it as 8:1.[43] Only on the basis of a definition of value as a quantity is it proper to speak of a "measure of values."[44] I conclude that the value of a thing is a quantity, and not a ratio. It is a definite magnitude, and not a mere relation. What sort of a quantity remains to be seen. FOOTNOTES: [15] Clark, J. B., "Ultimate Standard of Value," _Yale Review_, 1892. p. 258. [16] _E.g._, _The Philosophy of Wealth_, chap. v. [17] _Economics_, p. 92. See also the article by President Hadley on "Value" in Baldwin's _Dictionary of Philosophy_, etc., and "Misunderstandings about Economic Terms," _Yale Review_, vol. IV, pp. 156-70. The same ideas are expressed in all. [18] Some of my socialist friends object to the interpretation of Marx given above. I feel strengthened in my position here by finding the same view expressed by Conrad in his _Grundriss_, etc., 4te Aufl, Bd. I, pp. 17-18. Professor O. D. Skelton's admirable _Socialism_ (Hart, Schaffner & Marx Series, 1911) comes to hand while the proof sheets of the present volume are being revised. _Cf._ his interesting chapter on the Marxian theory of value. [19] Seligman, _Principles_, pp. 184-85. See also Taylor, W. G. L., "Values, Positive and Relative," _Annals A. A._, vol. IX, pp. 70-106. Taylor, who follows Professor Clark largely, accepts the conception of social value as a quantity. [20] Marx, _Capital and Capitalistic Production_, London, 1896, pp. 2-4. George, _Science of Political Economy_, New York, 1898, chap. XI. [21] _Natural Value_, p. 53, n. [22] "The Concept of an Economic Quantity," _Q. J. E._, May, 1907. Professor Carver insists on the quantitative nature of value, taking as his point of departure the point made _infra_, p. 27, with reference to money as a measure of values. But it is not clear that he has entirely freed himself from the conception of relativity, for he continues to speak of value as "purchasing power" (pp. 438-39), and this term has usually the relative, rather than the absolute, significance. _Cf._ his use of the term "purchasing power" in his _Distribution of Wealth_, 1904, pp. 51-52, where the _relativity_ of value is insisted on as a basis for a criticism of Professor Clark's amendment of the Austrian theory. [23] Paris, 1902, vol. I, p. 63. [24] Fisher, Irving, _The Nature of Capital and Income_, New York, 1906, pp. 13 _et seq._ Ely, R. T. (and others). _Outlines of Economics_, New York, 1908, pp. 156-57. Professor Ely uses the term in a different sense on pp. 99-100; and on the pages first cited indicates that value, defined as a quantity of other goods, is to be distinguished from subjective value. But "subjective" (individual) value would hardly serve as an equivalent for the value described on pp. 99-100. There are, in fact, four pretty distinct uses of the term value to be found in Professor Ely's discussion, inadequately distinguished, and often confused in the treatment: (1) homogeneous quality among the diversities of the physical forms of wealth, by virtue of which a sum of wealth may be obtained (99-100); (2) ratio of exchange (156); (3) quantity of goods obtained in exchange (157); (4) subjective utility (157 and _ante_); and a fifth meaning is indicated for market value on pp. 358-59, where, in explaining the law of rent for pleasure grounds and residence sites, the "general law of value" is declared to be that value measures _marginal utility_. _Cf._ the confusions of utility and demand pointed out _infra_, chapter v. This loose treatment of the value concept, while doubtless accentuated by the fact that four men have coöperated in the production of the book, is too much characteristic of most of the text-books. There is even to-day little uniformity or agreement as to what value means. [25] _Natural Value_, p. 53, n. [26] _Principles of Economics_, p. 183. Professor Seligman in the _Q. J. E._ article (_supra_, p. 6, note I) indicates that Pantaleoni expresses a similar thought (_Pure Economics_, London, 1898, p. 127). This idea is elaborated by Professor Georg Simmel, _Philosophie des Geldes, Erster Teil, Kap. 2_. (A translation of this chapter, under the title, "A Chapter in the Philosophy of Value," appears in the _American Journal of Sociology_, vol. v, pp. 577-603. The translation was made from the author's manuscript, before the publication of the book, and does not exactly correspond with the chapter as published by Simmel.) Simmel's contention is that, even for an isolated economy, value arises from exchange, and that exchange is essential to it. Every value is relative to some other value. But to develop this conception, "exchange" is distorted into a variety of meanings. In one place, exchange takes place between an isolated man and his environment. It makes no difference to him whether he is exchanging with other men or with the order of nature (_Phil. des Geldes_, p. 34). But later, exchange is declared to be "a sociological structure _sui generis_" (_ibid._, p. 56). Again, only in the vaguest sort of sense is exchange used in this expression, "_wo wir Liebe um Liebe tauschen_" (_ibid._, p. 33). Yet all these meanings are forced in to fit the exigencies of the argument. The doctrine of cost is brought in, and the exchange is between individual cost and individual utility, and an equality between them is insisted upon, despite the well-known phenomenon of "consumer's surplus." This emphasis on _equality_ in exchanges is stressed especially on p. 31, and economic activity is said to derive its peculiar character from a consideration of these equalities in abstraction. The gist of Simmel's argument comes out in the following: "The object is not for us a thing of value so long as it is dissolved in the subjective process as an immediate stimulator of feelings." Desire must encounter obstacles before a value can appear. "It is only the postponement of an object through obstacles, _the anxiety lest the object escape_ [italics mine], the tension of struggle for it, which brings into existence that aggregate of desire elements which may be designated as intensity or passion of volition." Value is conditioned upon a "distance between subject and object" (_A. J. S._, 589-90).--I waive for the moment Simmel's apparent insistence upon the element of conscious desire as essential to value, though I shall attack that doctrine in a later chapter on the psychology of value. It is enough to point out here that this "distance between subject and object" is adequately present, that there is surely "anxiety lest the object escape," if only the object be sufficiently limited in supply, independently of the existence of other objects so limited.--Simmel undertakes to meet this objection by holding that "scarcity, purely as such, is only a negative quantity, an existence characterized by a non-existence. The non-existent, however, cannot be operative" (_Phil. des G._, p. 57).--But the scarcity, I would reply, is not, as he holds, "the quantitative relation in which the object stands to the aggregate of its kind" (_A. J. S._, p. 592), but is rather a relation between the object and our wants. A bushel of wheat would be a scarcity, a bushel of diamonds a superabundance, for a man. There is a positive thing here, not a mere "non-existence," and that positive thing is the _unsatisfied want_. _Cf._ Pareto, _Cours d'Économie Politique_, vol. I, p. 34. See further, on the psychology of value, chapter X, and on Professor Seligman's theory of the relativity of value, chapter XVI, of the present volume. [27] Laughlin, J. L., _Elements of Political Economy_, rev. ed., copyright 1902, p. 18: "Value ... is a ratio between two objective articles." See also Professor Laughlin's rejoinder to Clow's "The Quantity Theory and its Critics," _Journal of P. E._, 1902, where Professor Laughlin insists that exchange value is "something physical." Professor Davenport, _Value and Distribution_, Chicago, 1908, p. 569, defines value similarly. [28] _Value and Distribution_, p. 569. [29] Professor Davenport, caught between two apparently invincible logical difficulties, accepts this situation frankly, as, seemingly, the only thing possible. See _Value and Distribution_, p. 184, n. The ratio has no terms for him. [30] _Value and Distribution_, pp. 330-31. [31] "Values, Positive and Relative." _Annals_, vol. IX. [32] It is, of course, recognized that exchange modifies value in so far as exchange is a _productive_ process. But the essential thing here is the _transfer_ aspect of exchange, which would hold even in a communistic society where value relations might be found out by some process other than exchange. [33] _Political Economy_, New York, 1888, p. 84. [34] _Cours d'Économie Politique_, vol. I, pp. 8-9. [35] Edgeworth, F. Y., _Mathematical Psychics_, London, 1881, chapter on "Unnumerical Mathematics," pp. 83 _et seq._ [36] A fuller discussion of the functions of the value concept is given in chapter XI where this argument is materially strengthened. The points here made, however, seem adequate. [37] Jevons, _Principles of Economics_, 1905 (posthumous), p. 50. [38] Walker, _op. cit._, p. 5. [39] Marx, _op. cit._, vol. I, chap. I. [40] Laughlin, _Elements_, p. 77. _Cf._ also, Ely, _op. cit._, 99-100. [41] _Ibid._, p. 18. It is interesting to note that Professor Irving Fisher so defines wealth and value as to divorce the two concepts. Wealth includes free human beings, who cannot be exchanged, while the idea of value is derived from that of price, which, in turn, comes from the ideas of exchange and transfer. (_Nature of Capital and Income_, chap. I.) [42] _Principles_, pp. 8-11. [43] _Money_, p. 288. [44] _Cf._ Kinley, _op. cit._, Merriam, _loc. cit._, and Carver, "The Concept of an Economic Quantity," _loc. cit._ _Cf._ also, Laughlin, _Money_, 1903, pp. 14-16; and Davenport, _Value and Distribution_, p. 181, n. CHAPTER III VALUE AND MARGINAL UTILITY The method of Jevons and the Austrians, and, for that matter, of the great majority of value theorists, including even the social value school, in seeking the determinants of value, is to start with individual "utilities" or psychic "costs" directly connected with the consumption or production of goods. Such a study, if confined to an isolated individual economy, or if confined to an ideal communistic economy, like that for which Wieser works out his laws of "natural value," seems to yield us quantities of "utility," which may properly be called values, or quantities of sacrifice which may be properly treated as exactly measuring values.[45] But when applied to a competitive society, or to any society where there are inequalities among men in their power to attain the gratification of their wants, it yields us, not quantities of value, but only particular ratios between such quantities, or prices. An examination of the Austrian procedure will make this clear. If the Austrian analysis be taken as meaning anything more than a method of determining surface ratios of exchange, difficulties at once arise. What quantitative relation is there between the satisfaction which an individual man gets from a good and the value of that good? What quantitative relation does the sacrifice, in terms of dissatisfactions endured and satisfactions foregone, of the individual producer bear to the value of his product? Now in thus positing the problem, I wish to distinguish it clearly from another problem, namely: what is the quantitative relation between psychic satisfaction, subjective individual value, and psychic cost, connected with the commodity, in the mind of some hypothetical "normal" man, and market value in a hypothetical market, where only "normal" men are found, and where there is an equality of wealth among these men? The problem is a concrete one: how are the actual desires and aversions of living men and women, no one of them "normal" perhaps, living in a world where inequalities of wealth are everywhere manifest, _quantitatively_ related to value in the market? Let us consider the inadequacy of the old Austrian analysis for this quantitative determination. I assume, without trying to prove here, the homogeneity and commensurability of human desires and aversions. (The Austrians, be it noted, do not explicitly postulate this, and Jevons, as will later be noted, rejects it, but it is necessary for Wieser's argument, and Böhm-Bawerk implies it clearly enough in places.[46]) This does not mean that any two men have, necessarily, the same desire for any particular good, or the same aversion from any particular piece of work, but simply that the desires and aversions of one man are comparable with those of another, and may be fractions or multiples of them, even though not exactly equal. My object in this assumption is to justify the use of the concept of _units_ of desires and aversions, which are not the desires and aversions of a hypothetical "normal" man, but are some particular concrete desire and some particular concrete aversion of any man you choose to take. Now let us assume the market as treated in the usual Austrian analysis (somewhat simplified): five men have horses to sell, and five buyers appear in the market also. A B C D E Sellers will take: $20 $30 $40 $50 $60 Buyers will give: $60 $50 $40 $30 $20 _Price_ is then fixed at forty dollars. Now if all these men were "normal" men, and if all had equal wealth, we could say here, _marginal utility_ = _value_. But such is not the case in real life. Our marginal buyer and marginal seller may be as different as you please. Let us assume that the marginal buyer is a very rich man: forty dollars is to him a bagatelle: surrendering it means one unit of cost to him: he has, further, many horses: he has no special use in mind for the horse he is on the margin of buying: it has one unit of utility to him. The marginal seller, we will assume, is a poor country boy: the horse is one he has raised himself: he has a personal affection for it, and it is immensely useful to him: it has two hundred units of utility to him, and to give it up means two hundred units of sacrifice: but he needs the forty dollars pressingly: it has two hundred units of utility to him. Is marginal utility equal to value here? If so, marginal utility to whom? But this does not exhaust the difficulties of the analysis--if the analysis be designed to show anything except what a particular _price_ is, and the utility theorists, when very careful, do not always claim to do more than that.[47] But _price_ is not _value_. We take up now, as an additional point designed to show that marginal utility to an individual is not the same as value, Professor Clark's clean-cut analysis amending the Austrian theory which we shall call "Clark's Law."[48] A detailed statement of this law is not necessary here, but its main meaning may be outlined, and its demonstration left to Professor Clark himself. Any good, except the poorest and simplest, is a complex, giving several distinct services. Thus, an automobile gives the service of transportation (a cart would do that); of comfort (a spring-buggy, with top, would do that); of elegance and social distinction (a carriage would do that); of speed and exhilaration (only an automobile can do this last, and the others as well). Now each of these services Professor Clark considers as a distinct economic good, and he constructs a demand curve for each of them. The service of transportation would be worth $5000 to the marginal buyer of automobiles, if he could not get it for less, but then, he is not the marginal user of carts, and he gets the cart service for what the marginal buyer of it pays, say $10. The comfort element would be worth $3000 to him, but he is not the marginal buyer there, and he gets it for what the marginal buyer of buggies pays for a buggy, less the $10 for the mere transportation-service of the buggy, say $100 less $10, or $90. For the service of elegance and social distinction, he would pay $4000, but then he does not have to do so, for he is not the marginal buyer of carriages, and he gets this additional service for $800, less the price of the preceding two services, or less $100. For the additional service of speed and exhilaration he _is_ the marginal demander, and his margin fixes the price, say $2000, for that service. Now his automobile--and he is the marginal buyer, and he buys only one--gives him satisfaction far in excess of that measured by the price he pays for it. The automobile, economically considered, is several distinct services bundled together, worth to him $5000 plus $3000 plus $4000 plus $2000. But he pays for the automobile only $2800, or less than he would have paid even for the first service. Now by the Austrian definition the price of anything is determined by its utility to the marginal user. And marginal utility is the _total_ utility of the marginal unit consumed. The total utility of this marginal automobile, to this marginal user, would balance $14,000 in his mind, and this, by the Austrian analysis, ought to be the price. But the price is $2800. Marginal utility determines price? Marginal utility to whom? Not to the marginal buyer! To whom, then? Professor Clark says, to _society_, without further defining what he means by that, except in general terms of social organism, etc. But it seems to me clear that, except on the basis of some such conception, we shall have to give up the idea that marginal utility determines price, and say rather that price is something with which marginal utility has something to do! And the quantitative relation between the feeling of any individual and _value_ has become very uncertain indeed. FOOTNOTES: [45] This statement must be qualified, as subsequently appears. Even in Wieser's "natural" community, there are psychic factors in value other than mere utility. See chap. XIII, _infra_. [46] For further discussion of this doctrine, see chapters IV and VIII of this book. Böhm-Bawerk, _Positive Theory_, p. 149, n., says: "One gives donations, charities, and the like, when the importance of such, measured by their marginal utility, is very much higher as regards the well-being Footnote: of the receiver than as regards that of the giver, and almost never when the converse is the case." The assumption that emotional states in different minds can be compared is very clear in this passage. _Cf._ Veblen, Thorstein, "Professor Clark's Economics," _Q. J. E._, Feb., 1908, p. 170, n.: "Among modern economic hedonists, including Mr. Clark, there stands over from the better days of the order of nature a presumption, disavowed, but often decisive, that the sensational response to the like mechanical impact of the stimulating body is the same in different individuals. But, while this presumption stands ever in the background, and helps to many important conclusions,... few modern hedonists would question the statement in the text" [_i.e._, that comparison of emotional intensity in one man's mind with emotional intensity in another man's mind is impossible]. In the light of the psychological doctrine which I shall maintain in the chapter on the psychology of value, this whole question will seem beside the point, considered as a psychological question. But my interest here is in making clear the psychological implications of the Austrian theory, as I wish for the present to consider their theory on their own ground. [47] Böhm-Bawerk and Wieser are certainly seeking an objective value, but Jevons and Pareto are concerned simply with the ratio. See Wieser, _Natural Val._, p. 53, n. Jevons, Pareto, and Böhm-Bawerk are discussed, with reference to this point, in chap. IV. [48] This law is first set forth by Professor Clark in an article in the _Q. J. E._, vol. VIII, "A Universal Law of Economic Variation." See also, _The Distribution of Wealth_, pp. 210-45. A brief exposition of the doctrine is found in Seligman, _Principles_, 1905, pp. 185-88. CHAPTER IV JEVONS, PARETO AND BÖHM-BAWERK In the foregoing analysis, the assumption of the homogeneity and communicability of human wants was made. Only on this assumption could value as a quantity of utility appear even in Wieser's "natural" community. How hopeless the case becomes when individualistic methods and assumptions are pushed to the extreme, will appear from a consideration of Jevons and Pareto, both of whom insist on the entirely subjective and incommunicable nature of human wants. Thus, Jevons:[49]-- I see no means by which such a comparison [between the motives of one man and those of another] can be accomplished. The susceptibility of one mind may, for what we know, be a thousand times greater than that of another. But, provided that the susceptibility was different in a like ratio in all directions, we should never be able to discover the difference. Every mind is thus inscrutable to every other mind, and no common denominator of feelings seems to be possible.... But the motive in one mind is weighed only against other motives in the same mind, never against the motives in other minds. Each person is to other persons a portion of the outside world--the _non-ego_ as the metaphysicians call it. Thus the motives in the mind of A may give rise to phenomena which may be represented by motives in the mind of B; but between A and B there is a gulf. Hence the weighing of motives must always be confined to the bosom of the individual. This question as to the homogeneity and communicability of emotional states in different men is one fundamental to any value theory which starts with individual feelings or desires as elements--and, indeed, from a somewhat different viewpoint, is fundamental to all value theory. Value, as a concrete quantity of desire or feeling, embodied in a given good at a given time, regardless of who is purchaser and who is seller, can exist only if feelings and desires are homogeneous and can interact--even in Wieser's ideal society, where the complication of differences in wealth does not obtain. And value must have some very different meaning unless this assumption be held. In illustration of this, I wish to quote further from Jevons. Jevons finds for value[50] three distinct meanings, for each of which he employs both a "popular" and a "scientific" name: (1) value in use ("popular" name) = total utility ("scientific" name); (2) esteem, or urgency of desire ("popular" name) = final degree of utility ("scientific" name); (3) purchasing power ("popular" name) = ratio of exchange ("scientific" name). Now the first two of these are purely subjective, individual facts, varying as to their quantities for each individual. The only one that can have social meaning is the third, and that, as Jevons explicitly states, is a numerical ratio, an abstract number.[51] This is brought out very clearly when he discusses the question of the concrete dimensions of these three quantities. Total utility has dimensions, and so has final utility, but ratio of exchange, which he considers the precise scientific equivalent for the popular term, purchasing power, has no dimension at all. Its dimension is zero. Finding these ambiguities in the word value, Jevons proposes to abandon it altogether, and to use instead either of the three expressions discussed, depending on which sense of the word value is intended.[52] He can find no definite meaning for value as an unqualified term. Now in this I believe he is correct. Economic value is not total utility to an individual, nor marginal utility to an individual, nor is it a mere ratio of exchange. If no other meaning of the term can be found--and no other meaning _can_ be found on Jevons's psychological assumptions--then the term should be abandoned altogether. Pareto's position[53] is essentially similar. "Ophelimity" (which he uses in place of the more ambiguous "utility" to mean what Jevons means by the latter term) "is an entirely subjective quality." (4.) "On ne doit pas oublier que le vigneron établit l'égalité des deux ophélimités pour lui, et que le laboureur fait de même, mais qu'il n'y a aucun rapport entre l'ophélimité du vin pour le vigneron et pour le laboureur, ni entre l'ophélimité du blé pour le vigneron et pour le laboureur. Il faut toujours se rapeller ce caractère subjectif de l'ophélimité." (21.) Now no quantity of value, irrespective of the particular holder of the good, emerges for Pareto. Value is either a "_rapport de convenance_" between a man and a good, i.e., ophelimity, or is a "_taux d'échange_," a ratio between two goods. (30.) The older term, "_puissance d'achat_," power in exchange, which John Stuart Mill makes synonymous with value in exchange, is, at bottom, nothing but a vague conception of ophelimity. (30.) The two conceptions, ratio of exchange and ophelimity, are to be sharply distinguished, power in exchange is ruled out as a vague and confused conception, and value as an objective quantity does not appear at all. Davenport, who recognizes clearly "the rich-man-poor-man complication,"[54] and avoids, for the most part, the confusion into which others have fallen, of mixing a demand-price curve and a utility curve (a confusion dealt with in detail in the next chapter), and who accepts the psychological assumption of subjective isolation unreservedly,[55] reaches, as already indicated, the same conclusion regarding the nature of value. For him there is no social validity in value except as a ratio of exchange.[56] The same may be said for Böhm-Bawerk, so far as his formal analysis goes. It is true that he recognizes the existence of an "objective value in exchange"[57] in addition to "subjective value" and "subjective value in exchange," and in addition to price,[58] but he makes no effort to exhibit its nature, or to show its origin. His study has to do with individual subjective ratios, between the marginal utilities of two goods, and the market ratio, or price, that results from the meeting of these individual ratios--_not utilities_--in the market. The nature of his objective exchange value is expected to become clear, somehow, from this surface determination of price:-- Exchange Value is the capacity of a good to obtain in exchange a quantity of other goods. Price is that other quantity of goods. But the laws of these two coincide. So far as the law of price explains that a good actually obtains such and such a price, and why it obtains it, it affords at the same time the explanation that the good is _capable_, and why it is capable, of obtaining a definite price. The law of Price, in fact, contains the law of Exchange Value.[59] But (as will be elaborated more fully in chapter VI), Böhm-Bawerk's law of price does not explain the _why_ any more than do those of Jevons and Pareto, and the assumption that an "objective value in exchange" exists, in addition to the ratio of exchange and the subjective values, might just as logically be added to their systems as to his, with the assumption that the problem of its nature and causes had been cleared up. The Austrian analysis, even with Professor Clark's correction, is simply an explanation of the _modus operandi_ of the determination of _particular_ ratios in the market. It tells us nothing of quantitative values, and, in fact, assumes a whole system of values already predetermined, before the question of any particular price can be approached.[60] FOOTNOTES: [49] _Theory of Political Economy_, 3d edition, p. 14. [50] _Op. cit._, pp. 76-84. [51] _Ibid._, p. 83. [52] _Op. cit._, p. 81. [53] _Cours d'Économie Politique_, vol. I, pp. 1-40. The numerals in the text refer to pages in this volume. [54] _Value and Distribution_, p. 444. [55] Professor Davenport's attitude on this point we shall discuss more fully in chapter VIII. [56] _Ibid._, pp. 184, n., and 330-31. [57] It is not wholly clear whether or not Böhm-Bawerk means his "objective value in exchange" to be considered as an absolute or as a relative concept. His formal definition ("Grundzüge der Theorie des wirtschaft lichen Güterwerts," Conrad's _Jahrbücher, N. F._, XIII, 1886, p. 5) is as follows: "Hierunter ist zu verstehen die objective Geltung der Güter im Tausch, oder mit anderen Worten, die Möglichkeit für sie im Austausch eine Quantität anderer wirtschaftlicher Güter zu erlangen, diese Möglichkeit als eine Kraft oder Eigenschaft der ersteren Güter gedacht." The concluding phrase would seem to point to an absolute conception, as would also his criticism of the expressions, "ratio of exchange," "_Austauschverhältnis_," and "_Tauschfuss_" (_Ibid._, p. 478, n.): "Diese Ausdrücke haben nämlich eine Nüance an sich, die es unmöglich macht, sie sprachlich den Gütern als Eigenschaft beizulegen, oder von einer grösseren oder geringeren Höhe derselben zu sprechen." But, on the other hand, his identification of the concept, "objective value in exchange," with the term "power in exchange" of the English economists (in both the passages referred to) would seem to make the relative implication in the concept unavoidable, and perhaps there is no point to raising the question. His criticism of Hermann in the _Capital and Interest_ (p. 203) is based on the relative conception of value. _Cf._ our discussion of the practical usage of the Austrians in chapters XI and XVIII. [58] Whether price be defined as a quantity of goods given for a good, or as the ratio between the two quantities of goods exchanged, is for present purposes immaterial. [59] _Positive Theory_, p. 132. [60] See chapter VI, _infra_. CHAPTER V DEMAND CURVES AND UTILITY CURVES Much of the foregoing would be needless were it not for the fact that there has been, and is, in the writings of the Austrians and those who have followed them, a confusion of two very different things: on the one hand, the curve of utility for a single individual of a given good, measured in terms of money, on the assumption that the marginal utility of money remains constant to him; and, on the other hand, the demand-price curve of that commodity for a whole community or a "trading body,"[61] made up of many individuals, differing in wealth and in tastes.[62] The former curve does express a diminishing scale of absolute feeling-magnitudes,[63] concerned with the consumption of the good. The latter does not. The latter is not necessarily a diminishing utility curve at all, for the poor man whose price offer is lowest may easily desire the good more intensely than does the rich man whose demand price is highest. These confusions, in the writings of Böhm-Bawerk and Wieser, especially, have been adequately commented on by Professor Davenport,[64] who adheres pretty carefully throughout to the distinction drawn above, and to the strictly individualistic, subjectivistic conception of price determination, with its correlate of relativity. Jevons's confusion on this point has been noted by Marshall.[65] It is amazing, really, when one sets about to find them, how numerous are the occasions on which leading economists have been guilty of this confusion--a confusion that utterly vitiates very many of the conclusions based upon it. In truth, Professor Davenport is not far wrong when he asserts that "the general understanding of Austrian theory has come to be that it explains market value by marginal utility, and resolves market value into marginal utility."[66] To go through the roll of the economists in pointing out this confusion is a needless task here, but a few representative names must be called, in addition to those mentioned above. Thus, Pierson:[67]-- There is nothing to prevent our treating a group of persons as a unit, and examining the position which commodities occupy in relation to that unit. If we do this, we shall see that the above diagram [the regular diminishing utility diagram of Jevons], depicting the position which they occupy in many cases in relation to the individual, must depict the position which they occupy in a still larger number of cases in relation to the group. And the truth of this statement is greater in proportion to the size of the group. Similar confusions appear in Professor Patten's _Theory of Prosperity_, in a number of places.[68] President Hadley's discussion of "Speculation" falls into this confusion, also.[69] Professor Ely's confusion on this point is instanced in his _Outlines of Economics_, 1908 edition, pp. 358-59.[70] Schaeffle, in his _Quintessence of Socialism_,[71] treats utility as if it were demand. With Professor Flux it seems more a deliberate identification than an unconscious confusion, as he recognizes very clearly the complication which differences in wealth bring in, and yet none the less declares, "The measure of the exchange value is, then, the utility which is on the margin of not being realized, or the marginal utility," and "The series of marginal-demand-prices, corresponding to all the varied possible scales of supply, register, in fact, the utility of the marginal supply for each such scale."[72] It is somewhat disheartening, however, to find Professor Marshall, who has pointed out the confusion on the part of Jevons, allowing his marginal notes to speak of "utility and cost" when the body of the text, to which they refer, is discussing demand and supply.[73] And still more disheartening to find Professor Davenport, at the end of his cautiously written volume, marked throughout by the greatest clearness of thought, and by especially painstaking care in the criticism of this confusion in the writings of others, saying:-- Limitation upon the supply of goods relatively to the need gives value. Thus value in producible goods is ultimately explained by human desires over against a limitation of supply due either to the shortage of instrumental goods or to the irksomeness of effort, or to both. With great esteem for good singing, and with the rarity of good singers, the high gains of prima donnas find sufficient explanation. This, as a separate, unqualified proposition in the "Summary of Doctrine,"[74] is hardly to be counted anything but a _lapsus_, even though recognition is later accorded to the necessity of backing up "utility" with "purchasing power." But it cannot be too strongly insisted, in the first place, that only particular ratios, market relations, can come out of the individualistic analysis of satisfactions of consumption and dissatisfactions of production, and that, in the second place, these ratios, and this relativity, are but surface explanations, that point to, and are based upon, something underlying and definite--without which they would be hanging in the air.[75] FOOTNOTES: [61] See Jevons, _Theory of Pol. Econ._, 3d ed., pp. 88-90; 95-96. [62] See, especially, Pareto, _op. cit._, vol. I, pp. 36-37. [63] Our question here is primarily a _logical_, and not a _psychological_, one, else I should choose a different term from "feeling-magnitude." For the present, I am accepting the Austrian psychology, and attacking the Austrian logic. _Cf._ the chapter in this work on the psychology of value. [64] _Op. cit._, pp. 300, 312, 313 _et seq._, 320, 325, n., 327, 328 n., 329, and chap. XVII. [65] _Principles_, 1898 ed., p. 176. [66] _Op. cit._, p. 300. [67] _Principles of Economics_, London, 1902, p. 57. [68] Page 18, "The consumption of all the individuals in a community or nation can also be represented by this diagram if their feelings, sentiments, and habits are nearly enough alike to create a normal type."--A statement which is defensible only if "habits" be stretched to include incomes! See, also, pp. 28 (diagram) and 82. [69] _Economics_, 1904 ed., pp. 101-104. [70] See _supra_, p. 17, n. [71] English edition, London, 1889, pp. 90-91 [72] Flux, A. W., _Economic Principles_, London, 1904. Compare pp. 4, 29, and 27. [73] _Principles_, 1907 ed., pp. 348-50. [74] _Op. cit._, p. 569. [75] As shown in chapter II. An interesting illustration of this general conclusion as to the significance of the results based on the individualistic analysis is found in the reformulation of the law of marginal utility by Professor Irving Fisher in his "Mathematical Investigations in the Theory of Value and Prices," _Trans. of the Connecticut Academy of Arts and Sciences_, vol. IX, p. 37. The theory of marginal utility in relation to prices "is not, as sometimes stated: 'the marginal utilities to the same individual of all articles are equal,' much less is it: 'the marginal utilities of the same article to all consumers are equal;' but _the marginal utilities of all articles_ CONSUMED [capitals mine] _by a given individual are proportional to the marginal utilities of the same series of articles for each other consumer, and this uniform continuous ratio is the scale of prices for those articles_." This conception of Professor Fisher's is clear as far as it goes, but it by no means explains the action of individual desires upon prices. It rather explains how an already established set of prices controls individual _expenditure_ and _consumption_. Compare, however, Böhm-Bawerk's view, "Grundzüge," Conrad's _Jahrbücher, N. F._, XIII, 1886, pp. 516 _et seq._ CHAPTER VI THE VICIOUS CIRCLE OF THE AUSTRIANS The great and permanent service of the Austrian analysis is in the fact that it looks for the explanation of value--a psychical fact--in human minds. Its essential defect is that it takes only a small part of the human mind for that explanation. It makes two abstractions, neither of which is allowable: first, it abstracts the "individual mind" from its vital and organic union with the social _milieu_; and second, it abstracts from the "individual mind" thus abstracted, only those desires and thoughts which are immediately concerned with the consumption and production of economic goods--really, in the narrower analysis of "market price," only those concerned with the consumption of economic goods. Now it is at once conceded that a science, in explaining its phenomena, must ignore some of the relations which those phenomena bear to other phenomena. No science is called upon to link its facts with all the other facts in the universe. Some abstraction,[76] much abstraction, is legitimate and necessary. Where to draw the line is often a perplexing question, and I do not intend to lay down a general rule here. But there is one familiar canon which the Austrians have violated in drawing the line so narrowly as they have done: we must include enough in our _explanation_ phenomena to enable us to explain our _problem_ phenomenon in terms other than itself. Concretely, in explaining value, we have not solved the problem if the explanation assumes value. Rather, we are reasoning in a circle. Now have the Austrians done this? Wieser explicitly rejects the older circle in the _definition_ of value,[77] which made the value of A equal to what it would exchange for, B, the value of B being in turn equal to what it would exchange for, namely, A, and does point out that the value of a good must be treated as an absolute thing, independent of the particular exchange that happens to be made. He even works out an explanation of value in purely psychical terms,[78] as it would exist in a hypothetical individual economy, or in a hypothetical "natural" communistic society, where all men's wants are equally regarded. But when the Austrians come to the explanation of value as it exists in society as actually organized, the attempt to explain value in terms of individual desires for economic goods (or individual aversions in connection with their production) fails, and a circle again emerges: Why has the good, A, value? Because men desire it? No, that is not enough: the men who desire it must have other economic goods, i.e., wealth, with which to buy it. And why will these other goods buy it? Because they have _value_! For the power is proportioned, not to the quantity of their wealth in pounds or yards or other physical units, but simply to its amount in _value_.--The explanation of the value of these goods then becomes another problem, for which the Austrian analysis can offer only the same solution, with the same circle in reasoning, and the same problem of value at the end. This circle is made explicit in Wieser's treatment:-- The relation of natural value to exchange value is clear. Natural value is one element in the formation of exchange value. It does not, however, enter simply and thoroughly into exchange value. On the one side, it is disturbed by human imperfection, by error, fraud, force, chance; and on the other, by the present order of society, by the existence of private property, and by the differences between rich and poor,--as a consequence of which latter a second element mingles itself in the formation of exchange value, namely, _purchasing power_.[79] [Italics mine.] This _purchasing power_ can only be either the inaccurate name of the English School for value itself, or else a consequence of the possession of goods which have value in the sense in which Wieser uses the term value, in the note on page 53 of his _Natural Value_ already quoted.[80] The circle becomes still more explicit in Hobson.[81] Hobson attempts to coördinate the Austrian theory with the older cost theory, and in this connection gives a table analyzing the forces that lie back of value, or "importance," from the supply side, and from the demand side. And there, apparently oblivious of the obvious circle, he places "purchasing power" as one of the ultimate factors on the demand side! If the Austrian analysis attempt nothing more than the determination of particular prices, one at a time, on the assumption that the transactions are, in each particular case, so small as not to disturb the marginal utility of money for each buyer and seller, and on the assumption that the values and prices of all the goods owned by buyers and sellers are already determined and known, except that of the good immediately in question, it is clear that it but plays over the surface of things. If it attempt more it is involved in a circle. FOOTNOTES: [76] The extreme abstraction of the utility school is made very clear by Pareto, _op. cit._, introductory chapter. He is concerned only with "the science of ophelimity" (p. 6), and ophelimity is a "wholly subjective quality" (p. 4). [77] See _supra_, chap. II. [78] But as later indicated (_infra_, chap. XIII), the apparent simplicity of his analysis simply covers up, and does not eliminate, the complexity of the situation. [79] _Op. cit._, pp. 61-62. [80] See _supra_, chap. II. [81] _Economics of Distribution_, p. 81. CHAPTER VII PROFESSOR CLARK'S THEORY OF SOCIAL VALUE And all attempts to explain value in terms of these abstract factors must become similarly entangled. The Austrians themselves have pointed out that the explanation of value from the standpoint of individual costs involves a circle, that costs resolve themselves into value-complexes, and that the cost theorists are really explaining value by value.[82] I have shown that the same is true of the Austrian attempt to reduce values to terms of individual utilities. It is also true of Hobson's attempt to combine the two explanations, as shown, and the same could be shown of at least the earlier writings of Professor Marshall.[83] There is another attempt to work out the explanation of value, still in terms of sacrifices in production and satisfactions in consumption, but no longer from the same standpoint, which deserves special attention here. Professor Clark, in the _Yale Review_ for 1892, in the article above referred to, "The Ultimate Standard of Value" (since reproduced as chapter XXIV of the _Distribution of Wealth_), has attempted so to add up individual units of cost and individual units of utility, as to get absolute social units of utility and cost either of which might serve as the ultimate standard of value. It will be remembered that I have already quoted from this article with reference to the quantitative nature of value, and that Professor Clark stands as the leading exponent of the conception that value is a social fact, "is social and subjective," the value put on goods by the social organism. In this article, he is seeking the unit of social value, the measure of the importance of a good to society. Either the unit of social utility or the unit of social detriment would serve, but it happens, he holds, that the unit of detriment is the more available for purposes of measurement, and so the final unit[84] of value is the sacrifice entailed by a quantity of distinctively social labor (p. 261). Professor Clark avoids the complication that labor and capital work together, by isolating labor at the margin, in the manner made familiar in his _Distribution of Wealth_. Assume capital constant, introduce or subtract a small quantity of labor, and whatever of product is added or subtracted is due to that labor only (p. 263). This virtually unaided labor is the only kind that can measure values. Attempts to use the labor standard have come short of success, because of their failure to isolate from capital the labor to which products are due. Work, however, is miscellaneous and heterogeneous. There is needed "a pervasive element in the actions, and one that can be measured." This is "personal sacrifice," which is "common to all varieties of labor." An isolated worker, making and using his own products, readily finds an equilibrium point, where utility and sacrifice are equal, and where he stops his day's work (pp. 364-65). If the product of any hour's labor be destroyed (p. 366) he will not suffer the loss of anything more important than the product of the last hour's labor, for he will forego that, and re-create the good with the higher utility. The utility of the last hour's product and the pain of the last hour's labor are equal. Either is his _unit of value_. Of society regarded as a unit the same is true. Take away the articles that the society gains by the labor of a morning hour,--the necessary food, clothing and shelter that it absolutely must have,--and it will divert to making good the loss the work performed at the approach of evening, which would otherwise have produced the final luxuries on its list of goods. (It might be questioned parenthetically here whether _all_ are fed before _any_ begin to enjoy luxuries, or, if not, just what is considered the "socially necessary" amount of food, and whom does social necessity require that we feed before we devote an hour to making luxuries?) Professor Clark finds the final hour of social labor-pain to be a compound, the sum of the final hour's dissatisfactions of all the laborers. This sum is the _ultimate standard of value_. It is in equilibrium with the sum of the utilities of the final hour's products to all the laborers considered as consumers. This is illustrated by a diagram on page 271. But the problem still remains as to the value of particular goods. Granted that the sum of the satisfactions got from the total amount--a vast amount--of the final hour's product is equal to the sum of the pains incurred in producing this giant composite, and granted that the pain incurred by each man in making his part of the composite is equal to the satisfaction gained by him in consuming his part of the composite--_not the same part_!--the problem still remains as to the connection of the marginal utility and the value of the _particular_ goods that make up the composite, with social labor. Professor Clark concedes at once that there is no necessary connection between the utility of the good to him who enjoys it, and the pain of making it to him who makes it. What connection is there than, between the value of the good and social labour? It is at this point, I venture to suggest, that Professor Clark's argument fails. I shall not follow his argument in detail, but shall quote a couple of paragraphs which seem to exhibit the failure (pp. 272-73):-- The burden of labor entailed on the man who makes an article stands in no relation to its market value. The product of one hour's labor of an eminent lawyer, an artist, a business manager, etc., may sell for as much as that of a month's work of an engine stoker, a seamstress or a stonebreaker. Here and there are "prisoners of poverty," putting life itself into products of which a wagon load can literally be bought for a prima donna's song. Wherever there is varying personal power, or different position, giving to some the advantage of a monopoly, there is a divergence of cost and value, if by these terms we mean the cost to the producer, and the value in the market. Compare the labor involved in maintaining telephones with the rates demanded for the use of them. Yet of monopolized products as of others our rule holds good; they sell according to the disutility of the terminal social labor expended in order to acquire them. But suppose they are _bought_ with monopolized products, and suppose that a monopoly element enters, at some stage or other, into _every_ product of the market, and in varying degrees in each, either in the form of control of raw material, or special native mental or physical aptitude, or patent right, or any other of the innumerable forms that monopoly takes? Can these monopoly products then call forth a definite amount of social labor? Or can they merely call out a definite amount of value?[85] "_Differences in wealth between different producers cause the cost of products to vary from their value._" (Italics mine.) But surely this is our old circle again. If differences in wealth, which is the embodiment of value, are to modify the working of the "pervasive element" of "personal sacrifice" (p. 263), it is difficult to see how that pervasive element can in any way be an ultimate explanation or measure of value. The rich worker stops producing early, while the sacrifice entailed is still small; but his product sells as well as if it were costly. If we say that the prices of things correspond with the amount and _efficiency_ of the labor that creates them, we say what is equivalent to the above proposition. The efficiency that figures in the case is power and willingness to produce a certain effect. The willingness is as essential as the power.... Moreover, the effect that gauges the efficiency of a worker is the value of what he creates; and this value is measured by the formula that we have attained. But surely the circle is very clear here: the price (the expression of the value) of the good depends on the efficiency of the labor that produces it; and the efficiency of the labor depends on the value (of which price is the expression) of the good produced. Our "pervasive element" is complicated, as a determinant of social value, with several factors, among them _the value of the wealth of the different producers_, and the efficiency, which can be defined only in terms of _value product_, of the workers. Value is an ultimate in the explanation of value, and the effort to make individual costs and utilities an ultimate explanation of value has failed--as it must needs fail--even in the hands of Professor Clark. The validity of this criticism, assuming it valid, in no way invalidates Professor Clark's contention that value is, after all, the work of the social organism, and that the value of a good, at a given time, measures its importance to the social organism at that time. The difficulty with the analysis just criticized is that it has not been an analysis of an organic process, but rather, a mathematical study of sums. The individuals have been treated, not as interacting in their mental processes, but as isolated atoms, each of whom has a definite individual _quantum_ of pain or pleasure, and the social unit of pain or pleasure has been treated as simply a sum of these. But it is characteristic of an organism that the simple rules of arithmetic do not hold precisely in its activity. The whole is more than the sum of its parts, and something different from that sum. Professor Clark elsewhere says:-- But the owner is a part of the social body, and is the organic whole indifferent to his suffering? If so, society is an imperfect and nerveless organism. It ought to feel, as a whole, the sufferings of every member, and what makes or mars the happiness of every slightest molecule, should make or mar the happiness of all. A sympathetic connection between members of society exists, etc.[86] True: and indicative of the true line of study for the conception of value as a product of an organic society. But in the foregoing analysis we have no hint of "nerves" or social sympathy or other manifestation of a collective mental activity. The "social psychology" promised on page 261 of the article just reviewed, turns out not a social psychology at all, but simply a summation of the results of many individual psychologies. But the line along which the true nature of value is to be found is clearly indicated in the general conception of the psychical organic unity of society, and it remains for the present writer to make use of the studies in social psychology of Tarde, Cooley, Baldwin, and others,[87] not available, for the most part, when Professor Clark's article was written, in an effort to get nearer the heart of the problem. The doubly abstract conceptions of individual costs and individual satisfactions, connected with economic goods,--abstracted first from the social _milieu_, and second, from the rest of the individual's interests and desires,--lead us around in a circle, from value to value, but never to anything else. It is the belief of the writer that we get out of the circle only by broadening our explanation phenomena, by giving up these abstractions, and getting back to the concrete reality of the total intermental life of men in society. FOOTNOTES: [82] See _inter alia_ Böhm-Bawerk, "Ultimate Standard of Value," _Annals of the American Academy_, vol. V; also his "Grundzüge," p. 516, n.; Wieser, _op. cit._, bk. V. [83] See Laughlin, J. L., "Marshall's Theory of Value and Distribution," _Q. J. E._ vol. I, pp. 227-32. See also Marshall's reply in the same volume. [84] There is a needless complication here. For Professor Clark's purposes it is not necessary to seek a _unit_ of value; what is needed is simply a vindication of the quantitative social value concept. The unit may then be arbitrarily chosen--_e.g._, the amount of value in 23.22 grains of gold. _Cf._ the discussion of abstract units of value, _infra_, chap. XVII, pp. 183-84. [85] The issue appears to be shifted here. If an ultimate _cause_ of value is being sought, it is certain that labor does not supply it for the monopolized goods; and if it be simply a _measure_ of the amount of value embodied in the monopolized goods that is looked for, then it is clear that goods produced entirely by competitive labor (assuming that such goods exist, which I deny) can fulfill this function only by virtue of being themselves _valuable_--and that they serve this purpose no better than other goods into which a monopoly element enters. The doctrine here criticized goes back to Ricardo: "If the state charges a seignorage for coinage, the coined piece of money will generally exceed the value of the uncoined piece of metal by the whole seignorage charged, _because it will require a greater quantity of labour, or, which is the same thing, the value of the produce of a greater quantity of labour, to procure it_." (Italics mine.) Ricardo, _Works_, McCulloch edition, 1852, p. 213. [86] _Philosophy of Wealth_, 1892 ed., p. 83. [87] Tarde, _The Laws of Imitation_, _Psychologie Économique_, 2 vols., Paris, 1902. Cooley, C. H., _Human Nature and the Social Order_, _Social Organisation_. Baldwin, Mark, _Social and Ethical Interpretations_. Elwood, C. A., _Some Prolegomena to Social Psychology_, Chicago, 1901; "The Psychological View of Society," _American Journal of Sociology_, March, 1910. Hayden, Edwin Andrew, _The Social Will_, 1909. No attempt is made at an exhaustive list here, nor are the writers mentioned to be held accountable for the views maintained in the text, though their point of view is in general that which I shall maintain. PART III THE PRESUPPOSITIONS OF ECONOMIC THEORY CHAPTER VIII THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS The connection between social philosophy, on the one hand, and metaphysics and epistemology on the other hand, has always been a close one,--a fact not always adequately recognized by writers in the field of social science, in economics, especially. Scientists often "ignore" philosophy, holding that their concern is simply with the world of phenomenal "facts," and that the injection of philosophic considerations is illicit and unscientific. And this is often well enough in the field of the physical, chemical, and biological sciences, where the procedure is primarily inductive, and the data are got from sense observation. But in the social sciences, where the procedure is so largely deductive, and where the data are often principles of mind, whose truth is assumed as a starting point for investigation, and especially in economic theory, such an attitude cannot be justified. For philosophical assumptions _will_ creep in, and the scientist has no option about it. The only thing he can do is to be critical, and know definitely _what_ philosophical assumptions he is making,--and most of our treatises on economic theory do not bear evidence that this critical work has been done. There may be traced in the history of philosophy, in the ancient world, and also in the modern era, three main stages in philosophic thought, each accompanied by a distinctive set of ideas concerning the nature of society. In distinguishing these three stages, in showing the relation of each to social philosophy, and especially in tracing a parallel between the philosophy of the ancients and that of modern times, I recognize the grave dangers of giving a superficial treatment, and of distorting facts to make them fit a schematism. I recognize, further, that a host of details and a multitude of differences must be ignored in tracing the parallel I propose. Considerations of space, moreover, prevent such a detailed justification of the views here presented as would be required were this more than a minor phase of my subject. The need for this is lessened, however, by the fact that much of what follows is part of the commonplaces of the history of philosophy,--albeit a repetition of it seems needed in a criticism of economic theory. The three stages are: the dogmatic stage; the skeptical stage; and the critical stage. In Greek philosophy, the first stage is represented by the cosmological philosophers, as Thales, Anaximenes, and Anaximander, who, with perfect confidence in the power of their minds to solve the riddles of the universe, or rather, without questioning that point at all, proceeded to spin out poetical accounts of the origin and nature of things. The second stage is represented by the Sophists, who, struck by the manifold divergences in the philosophies of the earlier schools, and by the lack of harmony between the god-given laws and rules of morality which earlier tradition had handed down, and the needs of the social conditions among which they lived, found themselves unable to find truth readily, and reached the conclusion that each man is the measure of truth, that there are no universal criteria, or valid standards. The third stage begins with Socrates, who sought for a common principle of truth and justice in the midst of divergences, and this critical movement, continued by Plato and Aristotle, led to conceptions of unity once more. Now the social philosophy which goes with the first stage is relatively undefined. It is for the most part content with the existing order, recognizes a supernatural basis for it, and raises few questions. The social philosophy of the second period is intensely individualistic. In the third stage, the emphasis upon social solidarity and upon a unified, organic conception of society, a society which is paramount to individual interests and rights, comes to the fore again. The extreme poles of thought are, on the one hand, an individualism which leaves scant room for any very significant social relations whatsoever, and, on the other hand, a socialism--like that of the _Republic_--which swallows up the individual. The compromise view, expressed in the Aristotelian doctrine of the relation between "form" and "matter," applied to the social problem, finds the individual very real, to be sure, but still real only in his social relationships. Individual activities are facts, but social activity is more than a mere sum of individual activities. Society and the individual are alike abstractions, if viewed separately. The mediæval conflict over realism and nominalism really derives its interest from the practical social issues involved, for the reality of the Church, as more than a mere aggregate of its members, and the validity of Christian doctrine, as more than the sum of individual beliefs, are at stake. The cycle began again in modern times. As representatives of the dogmatic period in modern philosophy, DesCartes and Spinoza may be chosen. They were not, of course, naïvely dogmatic, for philosophy had learned much from its many disappointments, and DesCartes, especially, starts out with reflections which would seem to make him very much a skeptic. And yet each believed in the power of the mind to draw absolute truth from itself, and each proceeded in a highly rationalistic way to build up his system. The very title of Spinoza's great work indicates this attitude of mind: "_Ethica more geometrico demonstrata_." The conception of society which characterizes this period is, again, not naïve, but still has a supernatural, or at least a superhuman, basis, for it is in a Law of Nature (capitalized and personified) that social institutions find their origin and justification. Critical reflections, starting with Locke, and passing through Berkeley to the absolute skepticism of Hume, bring in the second, or skeptical, period, in which the rationalistic-dogmatic certitude of Spinoza and DesCartes is banished. And going with this movement in philosophic thought comes the extreme individualism of Rousseau in politics, and Adam Smith in economics. The movement away from skepticism, beginning with Kant, puts the world, and especially society, back into organic connections again, and we have, in Hegel, especially, society to the fore, and the individual real only as a part of society. The organic conception, revived by Hegel, and vitalized by the positivistic studies which applied the Darwinian doctrine to social phenomena, has characterized the greater part of the social philosophy of the last half hundred years--of course, not without protest and highly necessary criticism. Now all of this is, of course, commonplace. And yet a failure to recognize it has vitiated very much thinking in the field of economic theory. Economic thought is to-day very largely based on the philosophic conceptions which characterize the period in which economics began to be a differentiated science,--the skeptical doctrines of David Hume, the close friend of Adam Smith.[88] The individual is all-important; his world of thought and feeling is shut off from that of every other man; social relationships are largely mechanical, and grow out of calculating self-interest on the part of the individual; social laws are conceived after the analogy of physical laws. Ethics and politics, however, have been far more influenced by later thinking, and the organic conception of society has largely dominated these sciences of late, while the new science, sociology, free to base itself more largely upon present-day epistemological, philosophical, and psychological notions, has gone further than any other in accepting the doctrine of the unity and pervasiveness of social relations, organically conceived. I think there are few things more strikingly in contrast than the conception of society which the student meets in most works on economic theory, and that which he meets in studying the other social sciences. That this is so is due precisely to the fact that the economists have too largely neglected philosophy and psychology, and have accepted uncritically the assumptions of the founders of the science. Doctrines accepted then have become _crystallized_, and still form part of the current stock in trade of economic science, even though rejected by philosophy itself. To one of these faulty doctrines from the earlier time, attention has already been called. It is that the intensities of wants and aversions in the mind of one man stand in no relation to the same phenomena in the mind of another man, and that there can be no comparison instituted between them. The individual is an isolated monad,[89] mechanically connected with his fellows, who are to him "a part of the _non-ego_,"[90] but spiritually self-sufficient and inaccessible. The doctrine appears in Marshall's statement:[91] "No one can compare and measure accurately against one another even his own mental states at different times, and no one can measure the mental states of another at all, except indirectly and conjecturally, by their effects." Pareto I have quoted, as also Jevons, in chapter IV. The doctrine appears in Professor Veblen's recent article in criticism of Professor Clark:[92]-- It is evident, and admitted, that there can be no balance, and no commensurability, between the laborer's disutility (pain) in producing the goods and the consumer's utility (pleasure) in consuming them, inasmuch as these two hedonistic phenomena lie each within the consciousness of a distinct person. There is, in fact, _no continuity of nervous tissue_ [italics mine] over the interval between consumer and producer, and a direct comparison, equilibrium, equality, or discrepancy in respect of pleasure and pain can, of course, not be sought except within each self-balanced individual complex of nervous tissue. In the recent elaborate study, _Value and Distribution_, by Professor H. J. Davenport, the theories based on the conception of the individual as an isolated monad, a self-complete whole, with purely mechanical relationships with other men, find their fullest and most self-conscious expression, and the philosophical presuppositions are explicitly premised. The following quotation from Thackeray's _Pendennis_ is given as a footnote,[93] in which Professor Davenport's own conception is expressed:-- Ah, sir, a distinct universe walks about under your hat and under mine--all things in nature are different to each--the woman we look at has not the same features, the dish we eat has not the same taste, to the one and to the other; you and I are but a pair of infinite isolations, with some fellow islands a little more or less near us. This is, of course, manifestly the theme of the old subjectivistic analysis, by which all things are reduced to thoughts, sensations, and desires within the individual soul, and in accordance with which we have none save conjectural knowledge of anything outside of our own souls. Now a general answer might be given that this is an epistemological principle which holds true only for what Kant calls the "_Ding an sich_,"--if such a thing there be--and that there is no more reason why it should apply to human emotions, considered purely as phenomena, than to any other of the phenomena with which science busies itself. If this principle be adhered to, its effect will be simply to cast doubt on the conclusions of all sciences, physical as well as psychical. Certainly psychology would be impossible on this assumption, except in so far as the psychologist claims only to be working out a science of his individual soul, which, so far as he knows, is not true of any other individual. But it is precisely _not_ this that psychology attempts. It is concerned with the laws and behavior of minds in general, with the "_typisch und allgemeingültig_" and not with the mental idiosyncrasies of the particular individual. But the doctrine can be met from the standpoint of epistemology itself. The writers who are responsible for this subjective analysis, have held that _mind_ is more nearly capable of being known by mind than is anything else, since we can interpret things only in terms of our own experiences. The real nature of a purely physical thing is far more deeply hidden from our view than is the real nature of a mental fact, even though it be in the mind of another. And especially would they grant a degree, at least, of objective currency to clearly phrased conceptual thought. Now I base myself upon the present day pragmatic philosophy,[94] which is, essentially, concerned with the problem of knowledge. Its principle is that we believe things to be true, not because of any knowledge we have of some mystical, absolute truth, but because of our experiences of utilitarian sort. That is true which works. That is true which we find will satisfy our desires and needs. In a word, desire, volition, _values_, lie at the basis of intellect.[95] Whence it follows, that if our minds are so constituted that we understand each other on the intellectual side, then there must be a still deeper and more underlying similarity on the desire, feeling, volitional side.[96] Consequently, if there be anything at all, outside of our own mind, which we _can_ understand, it must be the feelings and emotions of other men. Considerations of a practical nature give us the strongest possible grounds for a belief that human desires, feelings, etc., are homogeneous and communicable. The fact is that we all have back of us many millions of years of evolutionary history in the same general environment. In the past, with relatively minor variations, the same influences have played upon our ancestors from the beginnings of life on our planet. And then, we are born into the same society, and it has given us, not, to be sure, the power of reaction, but certainly all of our most important stimuli.[97] Further, we do get along in society. We laugh together, we play together, we share each other's sorrows, we love and hate each other, in a way that would be wholly impossible if we did not in practice assume the correctness of our "inferences" about one another's motives and desires. And the fact that these "inferences" are in the main correct is the one thing that makes social life possible. We can, and do, understand one another's motives, desires, wants, emotions. We can, and do, constantly communicate our feelings to one another. It is only on the basis, further, of an intellectualistic psychology that such a subjectivistic conception is possible. If the voluntaristic psychology and the doctrine of "the unconscious" be accepted--and certainly the psychological facts on which the latter is based must be accepted, whether the metaphysical conclusions are or not[98]--we have no basis whatever for this doctrine that clearness holds within the mind, but that without all is uncertain. Really, only a little part of our mental life is in consciousness at any given moment. The "stream of consciousness" is but a narrow thing, and the unity of the individual mind is a unity, not of consciousness, but of _function_. As Goethe somewhere says, we know ourselves never by reflection, but by action. And often does it happen that a sympathetic friend, or even an observant enemy, may interpret more accurately our actions than we ourselves can do, and may measure more accurately the strength of a given motive for us than we can ourselves. In a certain sense, our knowledge of other minds is inference. We see other men's actions, or hear their voices, or watch the muscles of their faces, and so, indirectly, get at their thoughts and feelings. But, in much the same sense, our knowledge of their actions, or of their voices, is inference too. For we must interpret the image on the retina, or the sense excitation in the ear. But practically, neither is inference, if by inference be meant a consciously made judgment from premises of which we are conscious. In a casual walk with a friend, where conversation flows smoothly on easy topics, one is as _immediately_ conscious of his friend's thoughts and feelings, expressed in the conversation, as he is of the scenes that present themselves by the way, or even of the thoughts that arise within himself.[99] The significance of this conclusion is not quite the same as that which might be expected from the context from which I have taken the doctrine under criticism. The feelings of men with reference to economic goods are facts of definite, tangible nature, and subject-matter of social knowledge. But we have not yet reached a standard or source of social value. No homogeneous "labor jelly," or "pain jelly," or "utility jelly,"[100] made up by averaging arithmetically, or adding arithmetically, individual efforts or pains or pleasures, will solve our problem for us--as indeed I have been at pains to show in what has gone before. The purpose of the foregoing criticism is primarily to clear the ground for a conception of social organization which is more than mechanical, and in which the individual is both less and more than a self-sufficient monad. FOOTNOTES: [88] This criticism applies to the teachings of James Mill, J. S. Mill, and other sensationalist followers of Hume, even more than to Adam Smith. But see Professor Albion W. Small's _Adam Smith and Modern Sociology_, Chicago, 1907, esp. p. 51. [89] It is easy for "analysis" to separate society into "individual" monads, and impossible for "synthesis"--once the validity of the analytic process is accepted--to put society together again. In fact, once the analytic process is begun, and once its results are accepted as anything more than matters of logical convenience, all unity and all organic connections, whether in the social or in other fields, seem to vanish like a dissolving show. There is a psychological doctrine of monadism, quite as logical as the sociological monadology here criticized, which finds it impossible to link together even the elements in a single individual's mind. (See William James, _Principles of Psychology_, 1905 ed., vol. I, pp. 179-80.) Into what inextricable difficulties one falls, in pursuing the monadistic logic, is more dramatically illustrated than by anything else I know by Bradley's _Appearance and Reality_, esp. chaps. II and III. The most useful viewpoint seems to be as follows: unity is as much an object of immediate knowledge as is plurality,--both being, in fact, the products of reflective thought. And unity is no more called upon to justify itself, before we recognize its existence, than is plurality. _Cf._ William James, _The Meaning of Truth_, New York, 1909, p. xiii; and also his _Psychology_, vol. I, pp. 224-25. _Cf._ also the writings of Professor John Dewey. [90] Jevons, _Theory of Pol. Econ._, 3d ed., p. 14. [91] _Principles_, 1907, p. 15 (1898 ed., p. 76). See also Marshall's criticism of Cairnes' conception of supply and demand, in the 1898 edition of the _Principles_, p. 172. [92] "Professor Clark's Economics," _Q. J. E._, 1908, p. 170. [93] Davenport, _op. cit._, p. 300, n. It may seem somewhat unfair to hold a man responsible for the view of another writer which he throws into a footnote of his own book. One who has read Professor Davenport's book, however, will recognize, I think, that this quotation does express Professor Davenport's view. His discussion in the text on pages 300-301 affirms virtually this same doctrine, as a proposition of psychology. See also his discussions in small type on pages 336-37. His whole system is based upon this doctrine. [94] See, especially, William James, _Pragmatism_, and _The Meaning of Truth_; John Dewey, _Essays in Logical Theory_; and F. C. S. Schiller, _Humanism_. [95] The utter impossibility of adequately summing up a philosophic doctrine in two or three sentences will excuse this statement to those pragmatists who would prefer a somewhat different formulation. [96] I am indebted for suggestions here to Professor H. W. Stuart's article on "Valuation as a Logical Process," in Dewey's _Studies in Logical Theory_, pp. 322-23. [97] _Cf._ Baldwin, _Social and Ethical Interpretations_, _passim_, and Cooley, _Human Nature and the Social Order_, _passim_. [98] The most interesting discussion of these topics I know is that of Friedrich Paulsen, in his _Introduction to Philosophy_ (translated by Professor Frank Thilly). [99] _Cf._ Perry, R. B., "The Hiddenness of the Mind," _Jour. of Phil., Psy., and Sci. Meth._, Jan. 21, 1909; "The Mind Within and the Mind Without," _Ibid._, April 1, 1909; "The Mind's Familiarity with Itself," _Ibid._, March 4, 1909. Urban, W. M., _Valuation_, p. 243. [100] Davenport, _op. cit._, p. 331. CHAPTER IX THE SOCIOLOGICAL PRESUPPOSITIONS Conceptions of the social unity fall, in the main, into three classes: the mechanical, the biological, and the psychological. Each of these conceptions recognizes, of course, that the individual has a mind, but the first thinks of that mind as so shut in that the only connections between men must be of an external sort; the second sees modes of collective action _analogous_ to the modes of individual action, and reaches the conception of a social mind by analogy; while the third treats the social mind as an empirical fact, the phenomena of which can be studied as concrete things in detail. And there are gradations here, and combinations. The following extract, freely translated and substantially abridged, is taken from chapter I of DeGreef's _Introduction à la Sociologie_:-- It is in vain that Spencer protests against the accusation that he has assimilated the laws of biology with those of sociology. The confusion is everywhere complete. He has not indicated a single law, nor a single phenomenon, which has not its correspondent, if not its equivalent, in the antecedent sciences. Draper, in his _History of the Intellectual Development of Europe_, adopts precisely the doctrine that the laws of biology apply equally to sociology. Man is the archetype of society. Nations pass through their periods of infancy, adolescence, maturity, age, death. This sort of thing makes sociology wholly unnecessary. The attempt of Stanley Jevons to explain economic crises by sun-spots, so far from being an effort of genius, is simply a _jeu d'esprit_. It is simply a recognition of the common fact that climate is one of the factors that influence man in society. According to Hesiod, physical forces first engender each other, then in turn the gods and man. Since then, social science has in turn been founded on the laws of astronomy, chemistry and biology. To-day it is the last, vitiated, further, by false psychological notions about the power and unlimited liberty of the reason, and the consciousness of human individuals, and applied by analogy to the collective reason. The error consists in looking for the explanation of social phenomena in the most general laws. This is natural within certain limits, but has been pushed to extreme, but logical consequences, by the American, Carey (_Social Science_). He looks, in effect, to one of the oldest sciences, and one, consequently, relating to the most highly general phenomena, those of astronomy, for the universal laws of society. Geometry, he holds, gives us principles equally valid for the chemist, the sociologist, and for him who measures the earth. A system assuming to explain complex phenomena solely by the laws of phenomena more simple, may be compared to the effort to give an account of a book, not by reading it line by line, but by examining the cover and the title-page. As DeGreef elsewhere puts it, there is a hierarchy in science, proceeding from the more general to the less general, depending on the nature of the phenomena studied. This hierarchy has been variously stated. Comte puts it thus: mathematics, astronomy, physics, chemistry, physiology, social physics (sociology). Baldwin,[101] writing much later, of course, puts it thus:-- So here, as elsewhere, there is a gradation, a hierarchy, in science: chemistry necessary to life, but not itself of life; forces in the environment necessary to evolution, but not themselves vital; life-processes necessary to consciousness, but not themselves mental; consciousness necessary to society, but not all consciousness social; social consciousness necessary to social organization, but not all social consciousness actually in a social organization. Now the point with DeGreef is that the special laws of each successively narrower group of phenomena are to be explained only by concrete study, and that it is wholly vain to think that the application of principles drawn from other, more general groups of phenomena give us these laws. Thus the economists talk of "equilibria" between various economic forces, just as if they were physical forces;[102] and a whole school of mathematical economists has arisen, who find economic life a thing that will fit into equations. This work is valuable, but it is not final. Analogies are helpful, but are not ultimate. Similarly, the biological conception, which likens society to a man, has its contributions. The biological analogy has been pushed very far: thus Novikow calls the social intellectual _élite_ the social _sensorium_; Lilienfeld likens the action of a mob to female hysterics; Simiand calls the idle rich the adipose tissue of society, the priests also represent fat, while the police are the social phagocytes which eat up wandering criminal cells.[103] But this, though suggestive, is not an ultimate social philosophy or even an approach to it. Even DeGreef, as I shall indicate a little later, errs by trying to trace a too rigid parallel between individual structure and social structure. We must introduce a careful study of the peculiarly social phenomena, those phenomena which are to be found only in society, before we are privileged to talk of a social organism or a social mind.[104] On the other hand, it seems to me that Baldwin has erred in the opposite direction. The laws of chemistry do not cease to be operative in the human body, even though more complex biological laws operate there. And the laws of biology are not suspended just because an animal organism develops a mind. The greatest defect of the older psychology, against which the experimental psychology is a reaction, was its failure to take proper account of physical processes connected with consciousness. Now society, according to Baldwin, is best described as analogous to a psychological organization, and such an organization as is found in the individual in _ideal thinking_.[105] But surely this is an abstraction, and not a fact. Society does not cease to be physical, chemical, biological, subconscious, merely because it has also attained in part a higher form of psychical activity (to which Professor Baldwin would object on the basis of his distinction between the "social" and the "socionomic"). DeGreef's conception seems to me better, on this logical point,--though of course Baldwin's analysis of facts represents a great advance--but it is not satisfactory:[106]-- Since unconsciousness, instinct, and reflex action characterize the psychic life of inferior beings, and even the greater part of the intellectual activity of those most highly developed, man included, we ought not to be astonished, _a priori_, that the collective force which constitutes the social superorganism presents the same characteristics. Consciousness is aroused in the individual, and new activities result, which soon, however, lose their conscious character, and become reflex and automatic. So with society. Then follows an elaborate analogy between the individual brain and nervous system and their functions, and the social structure and its functions, which we need not reproduce here. This analogy seems forced to me. There is little point to trying to find such exact correspondences. It is enough if we have our general organic principle as a method of study, and then proceed to the study of social facts. I shall myself, however, make use of some analogies in what follows, but shall not insist too strongly upon them. I may here express the opinion that society is an organism less highly developed than a man's body or a man's mind, and that its unity is primarily a unity of _function_ rather than of _structure_,[107] though there is some structural unity. The conception of the social unity which seems most useful for the purpose of our study--and the writer would insist that no social theory is valid for all purposes, and that many social theories have value for some particular purposes--is that of Professor C. H. Cooley, as set forth, particularly, in the opening chapters of his _Social Organization_. As this book, however, presupposes certain doctrines set forth in Professor Cooley's earlier book, _Human Nature and the Social Order_, a brief account of certain points in that study must also be given. It may be noted, at the outset, that Professor Cooley neglects the study of the material aspects of society, and centres his attention upon the mental side. His purpose in this is not to deny the significance of the material factors, as he explains in the preface to _Social Organization_, but simply to narrow the scope of his labors. The writer wishes here to make a similar statement regarding his own viewpoint. In the following pages, attention will be centred almost exclusively upon the psychical forces involved, upon what we shall call the "social mind." In this, however, it is explicitly recognized that the physical environment and the biological individuals are essential factors, and that the forces which are manifested in them must be recognized as coefficients with the psychical forces which we shall study, in the determination of any concrete social situation. I have no intention whatever of giving an independent, ontological character to this psychical abstraction. For the purposes of this study we shall regard the physical factors as constant,--an assumption justified for purposes of study, provided we subsequently, in handling concrete problems, make allowance for the extent to which it is untrue. In his earlier book,[108] Professor Cooley objects to the customary antithesis between "individual" and "social." They are simply two aspects of the same thing. He discriminates three meanings of the word, social, none of which, he says, is properly to be contrasted with "individual": (1) that pertaining to the collective aspect of humanity, in its widest and vaguest meaning; (2) that pertaining to immediate intercourse; (3) conducive to collective welfare, and so nearly equivalent to moral. But none of these meanings has "individual" as its natural or logical antithesis. There are several forms of individualistic views: (1) _Mere_ Individualism. The distributive phase of human life is almost exclusively regarded. Each person is thought of as a separate agent; all social phenomena originate in the action of such agents. This view is much discredited by evolutionary science and philosophy, but is by no means abandoned even in theory, and practically it enters as a premise into most common thought of the day. (2) Double Causation,--a partition of power between society and the individual, both thought of as separate causes. This is ordinarily the view met with in social and ethical discussions. There is here the same premise of the individual as a separate, unrelated agent; but over against him is set a vaguely conceived collective interest or force. People are so accustomed to think of themselves as uncaused causes, special creators on a small scale, that when general phenomena are forced on their notice, they think of them as something additional, and more or less antithetical. The correction of this error will leave the contest between individualism and socialism, considered as philosophical notions, rather than as names for social programs, among the forgotten _débris_ of speculation. (3) The third view he calls Primitive Individualism. The individual is prior in time to society. This view is a variety of the preceding, perhaps formed by mingling individualistic preconceptions with a rather crude evolutionary philosophy. Individuality is lower in rank as well as prior in time. The social is the good, moral, and the individual is the anti-social and bad. Professor Cooley's view is that individuality is neither prior in time, nor inferior in rank, to sociality. If social be applied only to the higher forms of mental life, it should be opposed, not to individual, but to animal or sensual, or the like. Our remote ancestors were just as inferior when viewed separately as when viewed collectively. (4) The fourth form of individualism he calls the Social Faculty view. The social includes only a part, and often a rather definite part, of the individual. Individual and social are two different parts of human nature. Love is social; fear and anger are unsocial and individualistic. Some writers have treated intelligence as an individualistic faculty, and have founded sociality on some form of sentiment. This is well enough if we use social in the second sense of pertaining to immediate conversation, or fellow feeling. But that these sociable emotions are essentially higher, or pertain peculiarly to collective life, is very doubtful. Cooley holds that no such division of human nature is possible. Social or moral progress consists less in the aggrandizement of certain faculties and suppression of others, than in the discipline of all with reference to a progressive organization of life. The rest of the book is devoted to a study of society in its distributive aspect, or as we should say ordinarily, using the terms which Professor Cooley objects to, the study of the social nature of individuals. It is based in large measure upon a study of the development of children. Personality is an essentially social thing. The "I" feeling is a thing which only social influences can develop.[109] The thought process within the "individual mind" is a social process,--we think in words, and, indeed, in conversations.[110] I shall not develop these notions at length. They are of similar nature to those in Professor Baldwin's _Social and Ethical Interpretations_, when he discusses the "dialectic of personal growth." They are interesting and pertinent as showing in a concrete way the tremendous and comprehensive sweep of social factors in the creation of the individual mind. _Social Organization_, which appeared in 1909, takes up the collective aspect of human-mental life. Mind is an organic whole, made up of coöperating individualities, in somewhat the same way that the music of an orchestra is made up of divergent but related sounds.[111] No one would think it necessary or reasonable to divide the music into two kinds, that made by the whole, and that of the particular instruments, and no more are there two kinds of mind, the social mind and the individual mind. The view that all mind acts together in a vital whole from which that of the individual is never really separate, flows naturally from our growing knowledge of heredity and suggestion, which makes it increasingly clear that every thought we have is linked with the thought of our ancestors and associates, and through them with that of society at large. It is also the only view consistent with the general standpoint of modern science, which admits nothing isolate in nature. The unity of the social mind consists not in agreement but in organization, in the fact of reciprocal influence or causation among its parts, by virtue of which everything that takes place in it is connected with everything else, and so is an outcome of the whole. Whether, like the orchestra, it gives forth harmony may be a matter of dispute, but that its sound, pleasing or otherwise, is the expression of a vital coöperation, cannot well be denied.[112] Professor Cooley stresses the unconscious character of many of these social relations. "Although the growth of social consciousness is perhaps the greatest fact of history, it has still but a narrow and fallible grasp of human life." Cooley objects to the Cartesian postulate, which makes "_cogito_," "I think," the fundamental and most absolutely certain fact in the world. He holds that it grows out of the idiosyncrasy of a highly specialized, introspective philosopher's mind, and that, for the normal mind, "_cogitamus_," "we think," is just as obvious.[113] The "I" feeling, and the "we" feeling are differentiated together out of the inchoate experience of the child. And "I" and "we" are alike social in their nature. The self, for Professor Cooley, is not a scholastic "soul-substance" or transcendental ego, but simply a relatively differentiated portion of the social mind. "'Social organism' using the term in no abstruse sense, but merely to mean a vital unity in human life, is a fact as obvious to enlightened common sense as individuality."[114] I pause here to contrast this view of the "social mind" with that of some other writers, of whom I may take Professor Giddings as representative. I quote from page 134 of the 1905 edition of Professor Giddings' _Principles of Sociology_:-- The social mind is the phenomenon of many individual minds in interaction, so playing upon one another that they simultaneously feel the same sensation or emotion, arrive at one judgment and perhaps act in concert. It is, in short, the mental unity of many individuals, or of a crowd. The social mind for Professor Giddings is thus made to depend upon an _identity of content_ in many individual minds. For Professor Cooley, it is an organization and integration of many differentiated and divergent minds, in a complementary activity. Professor Cooley's conception, thus, takes in all minds, while that of Professor Giddings would exclude the dissenters. Further, Professor Giddings emphasizes the element of consciousness; unconscious processes are included by Professor Cooley, whose conception really finds a place for the total psychosis of every individual in society. It may be noted, however, that Professor Giddings, in the more detailed exposition of the classroom, does not stress either the agreement or the consciousness in the absolute fashion that the brief passage quoted would indicate, and readily concedes that for theoretical purposes the more inclusive conception of Professor Cooley's is a very useful one. The difference between his viewpoint, as set forth in the classroom, and that of Professor Cooley, is primarily a matter of emphasis.[115] * * * * * The following propositions are submitted, partly by way of summary, and partly by way of addition, as embodying the points essential for present purposes as to the nature of society:-- (1) Society is an organism. Organism as here used is a generic term, with the following connotation: (_a_) an organism has different parts, with different functions; (_b_) these parts are interdependent; (_c_) an organism is alive, in the sense in which Spencer defined life, that is, an organism has the power of making appropriate inner adjustments to the external environment; (_d_) an organism has a central theme, not externally imposed, to the working-out of which the different parts contribute; but the organism--or the parts--is not necessarily conscious of this central theme; (_e_) an organism is constantly changing its "matter" without essential change in "form." (In a biological organism the process of metabolism goes on constantly. In a society, men are constantly passing out of society through death, or through lapsing into idiocy, etc., and new elements are constantly entering, not through the biological process of birth, but through the process of becoming "socialized," in the manner described by Baldwin as the "dialectic of personal growth," or by Cooley, in his _Human Nature and the Social Order_.) (_f_) An organism grows, by progressive differentiations and integrations. (2) There is a mind of society, a psychical organism. The minds of different individuals--themselves differentiated into systems of thoughts and feelings that are often lacking in harmonious adjustment to each other--are in such intimate interrelation that they may be said to constitute one greater mind. The physiological basis of this greater mind--if it be thought necessary to locate it--is the brains and nervous systems of individual men, _plus_ that set of physical symbols (e.g., language, literature, gestures, art, music, etc.) which are set in motion by the nerve activity of one man, and then stimulate nerve activity on the part of another. This unity is primarily a unity of _function_, however.[116] (3) The fact of individual differences among the minds of men, does not vitiate the conception of a mind of society. It rather proves the _organic_ character of the social mind, by introducing the fact of _differentiation_. The integrating element is found in the points which individual minds have in common. (4) The mind of society, like the mind of a man, is primarily volitional, and not intellectual. (Volition is here used in the wider sense, as including all motor and affective activities in mind.) Like the individual mind, the greater part of it is vaguely conscious or subconscious. (5) Less highly organized than the individual mind, the mind of society is less rational, and less highly conscious, than most, if not all, individual minds. "Social self-consciousness" is a rare, if not non-existent phenomenon. (6) The mind of society, in its entirety, is of necessity not a matter of perception for any individual. Each individual sees only that part which is in his own mind--not all of that!--and in the minds of other individuals with whom he is in communication. (7) But the minds of other men may be, and normally are, in part objects of perception for any social individual. There may be an "inferential" element in our perception of mental processes in the minds of other men, but it is not inference. (8) The individual monad is a myth. His machinery of thought--language and logic--is socially given him, his ideals and interests, his tastes even in matters of food and drink, are socially given,--apart from social intercourse his human-mental life would be mere potentiality. (9) The worth of this conception of social reality, like the worth of other scientific hypotheses, is to be determined by a pragmatic test: does it relate phenomena the connection between which was previously obscure, without introducing greater difficulties of its own? I believe that, for the problem of value theory at least, it will find such a pragmatic justification. * * * * * This lengthy excursion into a field not commonly counted as part of the economist's territory is to be justified on the ground that the economist has not only failed to take account of the conclusions reached there, but has also, too often, been making and using assumptions which contradict them. It is further necessary, because the conception of "social value," which forms the subject of this book, assumes a "social organism" which can give value to goods, without making it clear what sort of an organism society is conceived to be. The excursion has at least revealed some of the many meanings that lie behind that term. And it is especially necessary in view of the fact that the conception of "social value" has been attacked on the ground that the organic conception has been abandoned by the sociologists themselves.[117] That this is true of the biological analogy, which made society an animal, and drew social laws from biological laws, rather than from the study of social phenomena, is readily granted. But that sociologists have abandoned the generalized conception which gives us primarily a highly convenient schematism on which to group the social facts that we actually find, is by no means conceded. And the question is really one as to those facts themselves rather than as to the mode of grouping and conceiving them. If social activity be nothing more than a _sum_ of _similar_ individual activities, as Professor Davenport seems to think in the article criticizing Professor Seligman,[118] and if the individual be an isolated monad, then Professor Davenport's criticisms will hold. But if the individual is in vital psychic relation with other individuals, so much so that he is impossible apart from those relations, and if social activity is, not a _sum_ of _similar_ individual activities, but an _integration_ and _organization_ of _differentiated_ and _complementary_ individual activities, spiritual as well as physical, then Professor Davenport's criticisms are not valid. And it is on this point that I would strongly insist. The argument of the following chapters may be put--though not so conveniently--in terms of the mechanical analogy, and the psychical processes treated, not as the action of a unitary, though differentiated, mind, but as a balancing and transformation of forces, and practically the same results for value theory will follow. FOOTNOTES: [101] Baldwin, Mark, _Social and Ethical Interpretations_, 1906 ed., pp. 8-9. [102] _Cf._ John Stuart Mill's _Logic_, book VI, on the nature of social laws. [103] Cited by Baldwin, _op. cit._, p. 495, n. [104] See Giddings, _Principles of Sociology_, 1905 ed., p. 194. [105] _Op. cit._, p. 571. [106] _Op. cit._, chap. XIII. [107] _Cf._ Elwood, C. A., _Some Prolegomena to Social Psychology_, Chicago, 1901. _Cf. infra_ in this chapter the note on Professor Elwood's view. [108] _Human Nature, etc._, chap. I. [109] _Op. cit._, chaps. V and VI. [110] _Ibid._, pp. 52 _et seq._ [111] This analogy is unhappy, if pushed very far--like most analogies between physics and psychics. It serves as a useful figure of speech, however,--which is all Professor Cooley designs it for. [112] _Social Organization_, pp. 3-4. [113] _Social Organization_, pp. 6-9. [114] _Ibid._, p. 9. [115] Compare Professor Giddings' more detailed and concrete treatment of the subject in his _Readings in Descriptive and Historical Sociology_, New York, 1906, pp. 124-428. [116] Professor C. A. Elwood, in the essay mentioned _supra_, _Some Prolegomena to Social Psychology_, is the first, so far as I know, to apply Professor Dewey's psychological viewpoint to the study of the social mind. Chap. II of his book contains a very excellent brief discussion of this point. Without going into the matter at length, it must suffice to say here that the new viewpoint stresses the significance of mental processes for _activity_, for the adjustment of the organism to its environment, rather than the _structure_ or _content_ of the mental process. It stresses impulse, instinct, habit, etc., and refuses to undertake a synthetic process, which strives to get some sort of mechanical unity by combining abstract, structural elements. The unifying principle in mind is _activity_, _function_. Professor Elwood holds that, while the individual mind has unity both of structure and of function, the social mind has a unity of function only. I think the contrast is not so sharp as that. There is _some_ structural unity in the social mind, there are points of identity among individual minds, common ideals, and a common--even though small--body of knowledge, especially in very elementary matters. And the unity of the individual mind is primarily a unity of _function_. Certainly--and there is no issue with Professor Elwood here!--there is no unifying "soul-substance" lying back of the psychic activities organized in the single individual mind. And the analogy between the mind of an individual and the mind of society is not intended to read into the social mind any of the hypothetical character which an absolutistic, preëvolutionary metaphysics ascribed to the individual mind, but rather--in so far as the issue is raised at all--to divest the individual mind of just that hypothetical character. _Cf._ Friedrich Paulsen's _Introduction to Philosophy_, on "soul-substance," and Wundt's _Völker-Psychologie_, vol. I, chap. I. [117] Davenport, _op. cit._, pp. 467-68. [118] _Op. cit._, pp. 445-46. (The reference is given to Professor Davenport's book for the convenience of the reader. The original article appears in the _Journal of Political Economy_ for March, 1906.) "Some linguistic uses connected with collective nouns will offer a point of departure. When thought of merely as indicating an aggregate, a unit, the collective noun takes a singular verb; if regarded as a collection of units, it takes the plural verb.... "Now, in many cases, though the act or the situation asserted is really one of each individual by himself, there is no occasion for insisting upon this; no ambiguity or inaccuracy or misapprehension is involved in saying that 'the battalion is eating its dinner'; it is a shorthand fashion of speech, but it is perfectly intelligible; it is common enough to think of a battalion as a unit, and the act of dining is a simple one in which all join, and in which all comport themselves in pretty much the same way; from the point of view adopted, the interest proceeded upon, the purpose in hand, no importance attaches to the fundamental separateness of the activities, and to their entire lack either of psychical unity or of purposive coöperation; they are simply similar--roughly simultaneous--and are thought of in block. True, one man eats rapidly and another slowly, some little and others much, and a few sick ones not at all; but the expression serves, and implies its own limitations of accuracy.... But when it comes to asserting that the army is brushing its teeth, or has stubbed its toe, or has a stomach ache, there is obvious difficulty. These things are not done jointly, coöperatively, by aggregates, and will not bear thinking over into this form. "And so we may speak of public opinion, the preference, or habit, or custom, or convention, of society; and no harm need come of it, despite the fact that some men neither think nor choose in the manner implied, but have their own peculiar judgments or choices or wishes, and yet are members of society, entitled to be included in any exact formulation; every one knows that the thought really runs upon majorities of ''most everybodies'; that is, no harm need come of it, if only there were not people to take the notion of a 'social mind' seriously, and to import into cases calling for accurate analysis, and to accept as sober fact, a mere figure of speech, or at best a loose analogy drawn from biological science. For to the biologist and the sociologist it is to be charged--or credited--that the society-as-an-organism formula has found its way into economic thought. And thus hereby a doctrine long since abandoned in economic reasonings is in the way of reappearing; for have we not need of normals and averages? Else our doctrine in getting accurate and actual will get difficult also. And so, by the aid of the sociologist, through the magic of the society-as-an-organism incantation, a resurrection miracle has lately been worked; we salute the average man." Whether any serious advocate of the organic conception of society will recognize in this caricature the doctrine which he maintains may well be doubted. Certainly it would never occur to us to construct an organism by averaging its organs! Nor do we try to get a social mind by adding a sum of similar physical activities, or even similar mental activities. An organism is a functional unity of _different_ and _complementary parts_. PART IV A POSITIVE THEORY OF SOCIAL VALUE CHAPTER X VALUE AS GENERIC. THE PSYCHOLOGY OF VALUE We return, then, to the problem of the nature of value. Value is more than the total utility of a good, or the marginal utility of a good, to an individual, and it is more than a ratio of exchange. Economic value is a species of the _genus_ value, which runs through other social sciences, as ethics, æsthetics, jurisprudence, etc. Sometimes these various values are so intermingled that it is impossible to tell them apart: thus, what kind of value did a human life have in early Germanic jurisprudence, when a _wergeld_ was accepted as compensation for killing a man? Ethical and legal values we recognize as something very different from the feelings of single individuals, and also as something very different from abstract ratios. In fact, the idea of quantitative ratios in connection with moral values is somewhat startling--though we do apply the "times judgment" pretty far, and say, "he's twice the man the other fellow is," or "this isn't half as bad as that." But we do not go into refinements, ordinarily, and try to make the ratios more exact, as by saying that the value of this noble deed is three and three eighths times as great as that. The quantitative measure of legal value is a more familiar idea. Thus, a man gets five dollars fine for a plain drunk, and twenty-five dollars for getting drunk and "cussin' around" (a scale of "prices" recently established in the court of a Missouri Justice of the Peace), or three years in the penitentiary for one crime, and ten years for another. Here we have quantitative measurements of values, but still it is rather strange to our thought to speak of a ratio of exchange between them. We have no occasion to exchange them ordinarily, even though it may happen that a criminal, in contemplating the chances of success in two alternative depredations, will weigh the penalties to which he would be liable in the two cases against each other; and, indeed, the law of supply and demand holds here also (though inversely applied, for we are dealing with negative values). If a particular crime (as "Black-Handing") increases rapidly, we increase the penalty on it to bring it to a stop. But this generalization of the idea of value ought to make clear one thing: exchange, at least in its ordinary meaning,[119] is not the essence of value. Exchange is a factor in estimating value only in economic life. And even there, values are often estimated without actual exchange, and the art of accountancy has arisen for that purpose. An exhaustive study of this generic aspect of value lies, of course, outside the scope of this book. Ehrenfels, Meinong, and others,[120] have made fruitful investigations in the psychology of value, with primary reference to the problems of ethical value, while Gabriel Tarde, approaching the subject with a sociological, rather than psychological or ethical interest, has also made some illuminating suggestions. The most comprehensive work in English, from the psychological point of view, is by Professor W. M. Urban, whose _Valuation_ appeared in 1909. His interest is also chiefly in ethical, rather than economic, value. Reference has been made in an earlier footnote[121] to Simmel's views. There is, in fact, a rich literature on the subject. The theory of economic value to be developed in this volume, however, is relatively independent of many of the theories treated in this literature, since, as will appear later, the question I wish to raise is, not so much as to the fundamental nature of value, in its psychological aspects, but rather, as to _what_ individual values (and in what _relations_) are significant for the explanation of the particular sort of value with which the economist is concerned. The exposition which follows will be clearer, however, if a psychological theory of value be premised, and the discussion of social economic value will gain from a consideration of ethical and other forms of value, in their sociological aspects, as treated by some of the writers named. The rest of this chapter will be concerned with the problem of value as it presents itself in individual psychology, and later chapters will treat the problem of social value. _For_ the experience, and at the time of the experience, a value is a _quality_ of the object valued.[122] Values are "tertiary qualities" (to borrow an expression from Professor Santayana's _Life of Reason_[123]), just as real and objective as the "primary" and "secondary" qualities. We speak of a gloomy day, or a fearful sight, and the gloom is a quality of the day, and the fearfulness is really in the object--for the experience. When we have sufficiently reflected upon the situation to be able to separate subject and object, and to divest the object of the quality, and put the fear in ourselves, or the gloom in our own emotional life, then the experience is already past, and the value, as the value of that object, has ceased to be. We are already over our fear when we can separate it from the object. These qualities are intensive qualities, may be greater or less in degree, i.e., are quantities.[124] And they must first _exist_, as such quantities, before any reflective process of evaluation and comparison can put them in a scale, and make clear their _relative_ values.[125] So much for the experience as an immediate fact. If we break up the experience analytically, however, we of course first distinguish subject and object, and we throw the "tertiary quality," of value, over to the side of the subject. It is a phase of the subject's emotional life. In this analytical process we necessarily make abstractions,--the elements with which we finally come out, put together in a synthesis, will not give us our concrete experienced value again. But, recognizing this, we may still distinguish what seem to be the more important aspects of the value experience, on its psychological side, and set forth the criteria by which a value is to be recognized. First of all, then, value has its roots in the emotional-volitional side of mind. A pure intellect, if we may imagine it, would understand logical necessity, would contemplate the "world of description," but could know nothing of the "world of appreciation," or of values.[126] (It is precisely because intellect is never "pure," because it always has its emotional accompaniment and presuppositions, that we can objectively communicate our values, as urged in chapter VIII.) But what phases of the emotional-volitional side of mind are most significant? For hedonism, an abstract element, a _feeling_, a pleasure or a pain, is the essence of the value,--in fact, _is_ the value. Critics of hedonism, as Ehrenfels[127] and Professor Davenport,[128] have made _desire_, rather than feeling, the worth-fundamental. The psychology lying back of this conception represents a great advance over the passive, associationalistic, element psychology of the hedonists, and is especially significant as emphasizing the impulsive, dynamic nature of value, but it is still too abstract,--indeed, it abstracts from a very fundamental aspect of the value as _experienced_, namely, the feeling itself. Moreover, in many cases, value may be great with desire at a minimum, else we must say that value ceases when an object is _possessed_, and desire is satisfied. I may value my friend greatly, may be vividly conscious of that value, and yet, because he _is_ my friend, because I already possess him, may find the element of desire a minor phase in his value, even if it be present at all.[129] Hedonism abstracts a prominent and important phase of the value experience, and while it errs in making that phase the whole of the experience, and while it has sadly misinterpreted that phase (for feelings of value cannot be reduced to pleasure and pain feelings), still we cannot afford to disregard it. Just because the hedonistic analysis is crude, it has to seize on something obvious. If we must choose between feeling and desire as _the_ value-fundamental, we must, I think, with Meinong and Urban,[130] settle on feeling rather than desire. Our point will be, however, to protest against the identification of value with either of these, and to distinguish both of them as _moments_, or phases, in value, and value itself as a moment or phase in the total psychosis. Value is not to be understood apart from what Urban calls its "presuppositions."[131] Every value presupposes a going on of activity, and is intimately linked with the total psychosis,--a moving focal point of clear consciousness, with a surrounding area of vaguer processes, gradually shading off into the subconscious and unconscious at the borders. Every value is linked with the whole body of ideas, emotions, habits, instincts, impulses, which, in their organic totality, we call the personality. Back of the value stands a long history, which persists into the present in the form of dispositions and activities, of which we are unconscious so long as they are unimpeded, but which spring into consciousness at once if arrested. If the object be one that appeals to simple biological impulses, we may, as a rule, safely abstract from most of these "presuppositions," and centre attention upon the biological impulse and its accompanying feelings and ideas. But as we rise to objects that appeal to wider and higher interests, the essential presuppositions include more and more till, in vital ethical values, virtually the whole personality is essentially involved. Of these presuppositions, or "funded meaning," we need not be conscious in any detail. The value, which is the emotional-volitional aspect of this funded meaning, is, of course, sufficient, so long as it is unchallenged by an opposing value, for the motivation of our activity--which is the essential function of values. The presuppositions tend to become explicit when the value is challenged by another value, though they never come entirely into light, in the case of the higher values, and to make them even approximately clear is the work of long conflict in an introspective mind. A frequent result of conflicts among values is a sort of mechanical "haul and strain," producing "more heat than light." The question of the relations among values is a separate topic, which will be discussed for its own sake later. We are here interested in it as making clearer the nature of the "presuppositions" of value. Now in the value, as has been said, we may distinguish both desire and feeling. The feelings, in Professor Dewey's phrase, are "absolutely pluralistic" and cannot be reduced to any one type, or two types, as pleasure and pain. The desires may be either intense or slight, without reference to the amount of the value, depending on circumstances. As stated, if we _have_ the object we value, the element of desire must be reduced to an _attitude_, to a disposition to desire, in the event the object should be lost. It remains a vague background of concern, of "anxiety lest the object escape," capable, of course, of springing into full intensity if need be. In æsthetic values, and in the values of mystical repose, we have cases where desire is,[132] thus, at a minimum. Strictly speaking, desire, as a conscious fact, has in it always a negative aspect, a privative aspect,--we desire when we are incomplete, when we lack. It is this negative aspect of desire which the Greek philosophers, as Aristotle, stressed, and which has led absolute idealism to eliminate desire from its conception of the Absolute Spirit. But desire has also a positive or active aspect, and in this aspect it remains in all values. Where the activity is perfectly unified,--a situation which we sometimes approximate,--we may not be conscious of desire, even though intense activity is going on. Since, however, the human mind is rarely in this state, and never completely in it, we may hold that desire, in its privative aspect, is always to some degree present, if only as a vague uneasiness. And as a disposition to activity, if the value should be threatened, desire is always present. Conversely, desire may be at a maximum, and feeling at a minimum. If we do _not_ possess the object, if we are striving for it, while there may be and doubtless is feeling in connection with the desire, it cannot, obviously, be the _same_ feeling that we would experience if the object were present and quenching the desire. Indeed, it may be held that much of the feeling-accompaniment of intense desire is extraneous to the value-moment: that it is, in fact, kinæsthetic feeling, due to the stress of opposing muscular reactions, etc. The disposition to feel is there, and, if the object of desire be one that is familiar, the mere anticipation of it may call up traces of the feeling that its presence has in the past produced and will produce again. But the feeling element in such a situation is a minor phase. Finally, unless we mean to insist that all the objects which one values, and whose values motivate one's conduct, are present in consciousness all the time, we must recognize that neither desire nor feeling need be actual, present, conscious facts, for the value to be effective. It may happen that the object of value is one reserved for later use, and that it is not threatened. In such a case we may accord its value intellectual recognition, with desire and feeling both at a minimum, and that recognition may serve as a term in a logical process which may lead to a practical conclusion of significance for action. Or, a value may form part of the unconscious "presupposition" of another value, which is consciously felt at the moment. Mind is economical. Consciousness is not wasted, when there is no function to be served by it. The essential thing about value is that it motivate our conduct. If a satisfactory set of habits be built up about a value, it may serve this purpose perfectly, without coming into consciousness very often. But both desire and feeling must be potentially there. A further element is necessary. Meinong insists upon an existential judgment, a judgment that the object valued is real, as essential to value.[133] Gabriel Tarde[134] makes a similar contention, holding that belief, as well as desire, is involved in value, and that a diminution of either means a lessening of the value. Urban's opinion, which seems to me the correct one, is that we need not and cannot go so far as this.[135] In many cases such judgments are explicit and the value could not exist if the object were explicitly judged unreal. But the mere unconscious assumption or presumption of the reality of the object, the mere "reality-feeling," is sufficient,--as is obvious enough from the fact that we value the objects of our imagination. We shall often find, especially in the field of the social values to which we shall shortly turn, that Tarde's contention is highly significant, particularly with reference to economic values, and there, particularly in the matter of credit phenomena.[136] But explicit affirmation, even there, is not necessary, provided the question of reality is not raised at all. A "reality-feeling," however, is essential. It should be noticed, too, that this "reality-feeling" is an essentially emotional, rather than intellectual, fact. It is the emotional "tang" which distinguishes _belief_ from mere ideation, and, if it be present, the ideation and explicit judgment may be dispensed with. In the value experience, as a conscious experience, and from the structural side, we may distinguish these phases: feeling, desire, and the reality-feeling, each present at least to a minimal degree. And yet it seems to me that we have in none of these, considered as phases _in consciousness_, the most essential aspect of value. For our purposes the structural aspect is not the most significant. The _functional_ aspect is of more importance. And the function of values is the function of _motivation_. That value is greatest which counts for most in motivating activity. A well-established and unquestioned value, which in a concrete situation has the _pas_ over all the others concerned, has little need to awaken the emotional intensity that other, less certain, values, whose position in the scale is as yet undetermined, may require. A girl is arranging a dinner-party. Whom shall she invite? Well, her chum of course must be there. No question arises. There is no need for conscious emotion. One or two others are settled upon almost as readily, and with as little emotional intensity. But now comes the problem _at the margin_! For eight or ten others are almost equally desirable, and there are only six places. The lower values, compared with each other, must show themselves for what they are, must come vividly into consciousness, must be felt and desired _in order that_ they may be _compared_,--not in order that they may be! From the functional side, then, the test of a value is its influence upon activity. The "common denominator," or, better, the abstract essence, of values, is, not feeling, nor desire, but power in motivation, and the expression of this is of course the activity itself. The _functional_ significance of the consciously realized desire and feeling aspects of values comes in when values are to be compared and weighed against one another, and--a phase that was stressed in a preceding section, and will again be adverted to shortly--when values are to be _shared_ consciously by different individuals, when they are to be communicated and discussed,--that is to say, are to become objects of a group consciousness. The significant thing about value, then, from this functional point of view is its dynamic quality. Value is a _force_, a motivating force. But now we must revert to our original point of view,--the total situation. We have, by an analytical process, sundered subject and object, and then, within the subject, have discriminated phases which psychological analysis reveals. But in the course of activity, these elements are not discriminated. The value is, not in the subject, but in the _object_. The object is an embodiment of the force. It has power over us, over our actions. If the object be a person, we are under his control--to the extent of the value. If the object be a thing controlled by another person, we are subject to his control--to the extent of the value. I do not wish to be understood as picking out this abstract phase of value as the whole of the story, or thinking that it is possible for value to exist in this abstract form. Qualities are never separate. But I do contend that this is the essential and universal element in values, and that for an individual engaged in the active conduct of life, this aspect is so significant that it may often be the sole feature to engage his attention--because it is the sole feature that _need_ engage his attention for the activity to go on in harmony with his values. Here, then, is value "stripped for racing": _a quantity of motivating force, power over the actions of a man, embodied in an object_. All the other phases, in the course of the active experience itself, may be relegated to the sphere of the implicit. A necessary limitation has been definitely indicated in what has gone before, but, to avoid misunderstanding, it may be well to indicate it more explicitly. Not every form of impulse is to be counted a value. Every state of consciousness is motor, and tends to pass into action, even vague, undefined feelings, and half-conscious fancies. A value must have its organic presuppositions, as indicated before, and must be embodied in an _object_. The objects of value may be infinitely various: they may be economic goods, they may be persons, they may be activities, they may be other values, they may be ideal objects, the creatures of our imaginations, they may be social utopias or the Kingdom of Heaven. But there must be an object, and the value is a quality of the object. But, functionally, the essential thing about this value is its dynamic character. Values are positive and negative.[137] A "fearful sight" repels us, has a negative value, tends, to the extent of its strength, to make us withdraw. A bad act, an ugly woman, a cruel man,--here we have negative values. Little need be said further with reference to this point. They alike are motivating forces, the positive values attracting us, the negative values repelling us. The question of the relations among values we shall discuss rather briefly, not that it is unimportant, but that much of it is familiar. Values may be complementary--as when several objects are all essential to one another if any of them are to be of use. Values may depend on other values, as the value of the means depends on the value of the end, which is its essential "presupposition." Values may antagonize each other, and here two cases are to be distinguished, which differ so much in degree that the difference may be regarded as qualitative. Values may be in their nature quite compatible, so that nothing in their character prevents the realization of both, but there may not be _room_ enough for both, owing to the limitation of our resources,--as when the young lady of our illustration had only six seats at her dinner, and so was obliged to exclude some of her friends. But the values may be qualitatively incompatible. We may be unable to realize them both because the one involves a different sort of _self_ from the self that could realize the other. This is the typical case in ethical values, where the presuppositions, especially in ethical crises, involve the whole personality. In case of such conflicts, say between the value of Sabbath observance and the allurement of Sunday baseball in the case of an orthodox "fan," we may have, as before indicated, a mere mechanical haul and stress, in which one or the other wins by sheer force, to the very considerable discomfort of the uneasy victim. But the conflict may lead to a reëxamination of the presuppositions of each value, to a process of bringing each into more organic relation to the whole system of values. In this process, other values may be called into play, may reënforce one or the other of the two alternative values. And, after such a process, both values may be different from what they were. There may emerge some higher value which comprehends them both, or one may be reduced to a minor place, and the other may prevail. Values are no more permanent than any other phase of the mental life. Constant transformations, even though not always fundamental transformations, take place. There is another case which is so familiar to economists that it need merely be adverted to. Where objects of value are indivisible, we must take one _or_ the other, if there be a conflict. But, in the case of qualitatively compatible objects, a different situation is the rule. We may have _part_ of one, _and_ part of the other, and the question arises as to _how much_ of each. Here the Austrian analysis gives us an answer, which, when we generalize it, despite its antiquated psychology, may be accepted with little modification.[138] The law of "diminishing utility" as we increase the increments of each object, holds, and the problem is that of a marginal equilibrium. The young lady of our illustration would certainly have her chum if she have only one dinner, but if she have a number of dinners, the "marginal utility" of her chum's presence may sink so low that she may find the presence of some one hitherto excluded more valuable at the sixth or seventh dinner. And, indeed, our conception of qualitatively incompatible values must not be made too absolute. Human nature is accommodating and practical, and a little wickedness may be tolerated by a good man for the sake of a value which would not induce him to tolerate more. He may find the "final increment" of his Sabbath observance lower than the "initial increment" of his Sunday baseball. Two antagonistic values may cohere in the same object. Our _fearful_ sight may also be an _interesting_ sight. And the initial increment of the interest may outweigh the initial increment of the fear. But, as the interest is partially satisfied, the fear may grow, until it finally overcomes the interest, and we flee. Indeed, it may be laid down as the law of negative values that as the "supply" increases (_cæteris paribus_) the negative value rises--the obverse of the law of "diminishing (positive) utility"--a doctrine recognized, in one of its aspects, in the economic doctrine of "increasing (psychic) costs." A further point is to be noted in the case (especially though not exclusively) of these qualitatively incompatible values, where a quantitative compromise of the sort described is worked out between them. The personality itself may change, through a growing familiarity with the negative value. It may cease to be a negative value, and may become positive. And if, as may happen, this change takes place quickly, in the course of a moral crisis, our process would be, first, a gradually increasing negative value, as the "supply" of the objects of negative value is increased; next, a sudden shift from a high negative to a high positive value, as the personality changes, and we come to love what we have hated; then a gradual sinking of the new positive value as the supply is still further increased.[139] The case of the conflict between qualitatively incompatible values is the typical case of the conflict between "duty and pleasure," between "obligation and inclination," etc. Certain values present themselves as "categorical imperatives," as "absolute universals," and refuse, or tend to refuse, any compromise. Our analysis would tend to cast doubt on the "absolute absoluteness" of these values (taking absolute in the sense in which it has been used in the history of ethics, as distinguished from the sense in which I have earlier used it in this book[140]). The most significant thing about these "absolute" values from the standpoint of our present inquiry, seems to be the resistance which they offer to the "marginal process." They seem to insist that their objects be taken _in toto_ or not at all. They tend to universalize themselves, attaching to the remotest possible increment of the "supply" quite as strongly as to the initial increments. They refuse to place their objects in a scale of "diminishing utility." Such values are those which have been so fortified by habit and education that they are vital parts of the personality, and that any compromise where they are involved seems treason to the inmost self. If we wish to make precise analogies between our social and our individual values, we shall find here the nearest approach in the individual field to those fundamental legal values which determine the inmost character of the state, and which present themselves as "practical absolutes" in the legal value system, e.g., democracy, or personal liberty--or fundamental sociological values, like the "color line." It will be noted, further, that our analysis draws no hard and fast lines between the different sorts of value, ethical, economic, esthetic, religious, personal, etc., in the sphere of the individual's psychology. Such lines do not exist. There are shadings, gradations, quantitative differences which become distinct enough to justify a classification of values. But values never become, on the functional side, so fundamentally different in character that there can be no reduction of them to the "common denominator" of power in motivation. And especially is that a false abstraction which would separate the different sorts of value, ethical, economic, etc., into separate, water-tight systems, and let each system have its own equilibrium and its own interactions, uninfluenced by the other systems. The fact is, simply, that ethical and esthetic values may constantly reinforce economic values, economic values reinforce ethical values, or economic and ethical or other values may oppose each other, and marginal equilibria are constantly worked out between them. Or, better, _among_ them, for, while in the consciousness of the moment we may have only _two_ opposing values in mind, and may have our equilibrium apparently between just two, yet in fact the whole system of values is constantly tending toward equilibrium, ethical, religious, economic, esthetic, all asserting themselves, and finding their place in the scale, and getting their "margins" fixed,--extensive margins and intensive margins. But this is so obviously merely a generalization of well-known economic laws, that further detail is needless. One point may be mentioned, however. _Price_ is to be generalized in the same way as value. Since this equilibrium among values holds, then any object of value may be used to _measure_ the value of any other. If the presence of her chum at the fifth dinner is in equilibrium with the presence of some hitherto excluded friend, for our young lady, then the one is the _price_ of the other, and measures her value. A material good which one takes in return for an immoral act is the price of that act. And if, in a moment of fundamental ethical crisis, a man surrenders a cherished purpose about which his whole life has been built, to the allurement of some dazzling temptation, it is much more than a metaphor to speak of "the price of a soul."[141] The Austrian analysis was essentially faulty, then, not so much in its hedonistic psychology--for it can be freed from that[142]--as in its abstraction of the economic from other aspects of the individual's value system. Equilibria among economic values will not explain even the individual's economic behavior--do not by any means constitute a self-complete system. This abstraction has been noted before.[143] The other abstraction of the Austrians, the abstraction of the individual from his vital, organic connection with the social whole, we shall treat more fully later. So far, we have kept pretty strictly within the field of "individual psychology" and "individual values." But we shall find, when we come to the field of the social values, that essentially the same laws hold. On the _functional_ side, the analogy between the individual mind and the social mind is a very close one, and the correspondences on the _structural_ side are numerous also. While we shall not try to find analogies in the social field for all these laws of individual value, it is not because of any difficulty that the problem presents, but rather, because it is unnecessary for the vindication of our thesis to do so. FOOTNOTES: [119] See the discussion of Simmel's contention, _supra_, p. 19, n. [120] Ehrenfels, C., _System der Werttheorie_, Leipzig, 1897; Kreibig, J. C., _Psychologische Grundlegung eines Systems der Werttheorie_, Vienna, 1902; Kallen, H. M., "Dr. Montague and the Pragmatic Notion of Value," _Jour. of Philosophy_, etc., Sept., 1909; Montague, W. P., "The True, the Good and the Beautiful, from a Pragmatic Standpoint," _Ibid._, April 29, 1909; Meinong, A., _Psychologisch-ethische Untersuchungen zur Werttheorie_, Graz, 1894; Paulsen, Friedrich, _Introduction to Philosophy_, and _System of Ethics_; Stuart, H. W., "The Hedonistic Interpretation of Subjective Value," _Jour. of Pol. Econ._, vol. IV, "Valuation as a Logical Process," in Dewey's _Studies in Logical Theory_, Chicago, 1903; Shaw, C. C., "The Theory of Value, and its Place in the History of Ethics," _International Jour. of Ethics_, vol. XI; Slater, T., "Value in Moral Theology and Political Economy," _Irish Eccles. Rec._, ser. 4, vol. X, Dublin, 1901; Tufts, J. H., "Ethical Value," _Jour. of Philosophy_, etc., vol. XIX; Baldwin's _Dictionary of Philosophy_, etc., _s. v._ "Worth" (article by W. M. Urban); Simmel, G., _Philosophie des Geldes_, Leipzig, 1900, "A Chapter in the Philosophy of Value," _Amer. Jour. of Sociology_, vol. V; Urban, W. M., _Valuation_, London, 1909. These titles are representative of an extensive literature on the subject. [121] _Supra_, p. 19, n. [122] I am indebted to Professor John Dewey for many valuable suggestions and criticisms in connection with this part of my study. My more general obligations to him will be manifest to any one who is familiar with his epoch-marking point of view. Economic, sociological and political philosophy have, in my judgment, more to learn from him than from any other contemporary philosopher. [123] Pp. 141-42. [124] _Cf._ Gabriel Tarde, _Psychologie Économique_, vol. I, p. 63, and Urban, _Valuation_, p. 78. [125] Urban, _op. cit._, p. 32. [126] Paulsen, Friedrich, _Ethics_, _passim_. [127] _System der Werttheorie_, vol. I, chap. I. [128] _Op. cit._, p. 311. [129] _Cf._ Urban, _op. cit._, p. 36; Meinong, _op. cit._, pp. 15-16. [130] Meinong, _op. cit._, pt. I, chap. I; Urban, _op. cit._, pp. 38-39. [131] _Op. cit._, pp. 14-16, and following chapter. [132] Urban, _op. cit._, p. 39. [133] _Psychologisch-ethische Untersuchungen zur Werttheorie_, Graz, 1894, pt. I, chap. I, esp. p. 21. [134] "La psychologie en économie politique," _Revue Philosophique_, vol. XII, pp. 337-38. [135] _Op. cit._, pp. 41 _et seq._ [136] See chapter XVI, _infra_. [137] The German, with its facility in compounding, offers a convenient nomenclature here: _Wert_ and _Unwert_. _Cf._ Ehrenfels, _op. cit._, for a brief discussion of negative values (pp. 53-54). [138] For this generalization, see Urban, _op. cit._, chap. VI; Ehrenfels, _op. cit._, vol. II, chap. III, esp. p. 86. [139] An analogue in the field of social values is readily suggested. A new heresy starts, opposed by the dominant element in the social will, _i.e._, having a negative value for the majority. As the heresy increases, the negative value rises till, in a crucial point, the tide turns, and the heretics become the dominant element in the society. Then--since their position is far from certain--new recruits to the heresy have a high positive value, but, as the heresy still further spreads, additional recruits count for less and less. [140] _Cf._ Urban, _op. cit._, _passim_; Ehrenfels, _op. cit._, vol. I, pp. 43 _et seq._; Mackenzie, criticism of Ehrenfels and Meinong in _Mind_, Oct., 1899. _Cf._ also, Wicksteed, _The Common Sense of Political Economy_, London, 1910, pp. 402 _et seq._ [141] The generalization of the idea of price, while not original with Wicksteed, is interestingly developed by him in chaps. I and II of his _Common Sense of Political Economy_, London, 1910. [142] Davenport, _op. cit._, pp. 303-11, gives a good summary of economic discussions of hedonism. His own view is that the Austrians are not essentially bound up with hedonism. [143] _Supra_, chaps. VI and VII. CHAPTER XI RECAPITULATION. THE SOCIAL VALUES. FUNCTIONS OF THE VALUE CONCEPT IN ECONOMICS Our conclusions reached in previous chapters, from the standpoint of economic theory, and from the standpoint of sociological theory, alike forbid us to stop with the results so far obtained as to the nature of value. From the standpoint of social theory, we are unable to consider the individual values discussed in the last chapter as completely accounted for on the psychical side by what goes on in the individual mind: every individual mind is a part of a larger whole; every thing in the individual mind has been influenced by processes in the minds of others; every process in the individual mind influences, directly or indirectly, processes in the minds of others. There is a social mind. And the values in the mind of an individual constitute no self-complete and independent system, either in their origin, in their interactions, or in their consequences for action. In our psychological phrase, their "presuppositions" include elements in the minds of other men, and they themselves constitute part of the "presuppositions" of the values in the minds of other men. Finally, there are values which correspond to the values of no individual mind, great social values, whose presuppositions are tremendously complex, including individual values in the minds of many men, as well as other factors which we shall have to analyze in considerable detail, great social values whose motivating power directs the activities of nations, of great industries, of literary and artistic "schools," of churches and other social organizations, as well as the daily lives of every man and woman--impelling them in paths which no individual man foresaw or purposed. In Urban's phrase,-- between the subjectively desired and the objectively desirable in ethics, between subjective utility and sacrifice and objective value and price in economic reckoning, between the subjectively effective and the objectively beautiful in art, there is a difference for feeling so potent that in naïve and unreflective experience the feelings with such objectivity of reference are spoken of as predicates of the objects themselves.[144] And our theory carries us even further than Professor Urban cares to go here. Naïve and unreflecting experience is perfectly justified in treating these objective values as qualities of the objects themselves. To the individual man, an objective value, say the value of an economic good, _is_ as a rule, a quality almost wholly independent of his personal subjective feelings or point of view. The average man, "by taking thought," can no more affect the value of wheat or corn or other big staple than he can "add a cubit to his stature." For the great mass of men, and the great mass of commodities, this holds true. The individual finds the world of economic values a part of the brute universe, like the force of gravity, or the weather, or the law against murder--less invariable than the force of gravity, and less variable, as a rule, than the weather--to which he must adapt his individual economy. He is not wholly impotent to change this world of economic values, nor is he wholly without influence on the balance of cosmic forces. And, if possessed of enough social _power_ (which we shall find to constitute the essence of these social values) he may substantially modify the action of the law against murder, or the values of those commodities about which the rich may be capricious; or even, if intelligent in the use of his power, he may undertake a successful "bull" campaign, and force up the value of wheat or cotton. But even in such cases, he deals with objective facts,--which often, in the midst of a bull campaign, behave in a most surprising and disconcerting manner![145] The existence of external constraining and directive forces are matters of every day experience. Laws, moral values, social constraints of a thousand subtle and obvious kinds, are facts so well known that education has made it its central task to teach the individual how to adjust himself to them. They have been described and elaborated in innumerable books.[146] _That_ they exist is certain. Their origin, nature and function we shall study in what is to follow. We were led to a similar conclusion by the analysis of the necessities of economic theory. Economic value as a quality, present in a good in definite, quantitative degree, regardless of the idiosyncrasy of the particular holder of the good, we found a necessity of economic thought. The argument may be briefly recapitulated, and a few points added. If goods are to be added together and a sum of wealth obtained, there must be a homogeneous element in them by virtue of which the addition can be made. We do not add a crop of wheat and a lead-pencil,[147] and a gold watch, and twenty dollars and a theatre ticket, on the basis of length or weight or other physical quality. Only by picking out the homogeneous quality, value, can we add them. We cannot compare two economic goods, and put them into a ratio, except on the basis of such a homogeneous quality. We have no terms for our ratios apart from quantities of value, and yet our ratios must have terms. We find economists speaking of value as the essential characteristic or quality of wealth. We find theorists speaking of money as a "measure of values"--a conception only possible if value be a quality of the sort of which we speak, present both in the money measure and in the thing measured in definite quantitative degrees. A point or two may be added. We find economists, notably the Austrians, undertaking the problem of "Imputation," breaking up the value of a consumption good into different parts, one part being assigned to the labor immediately concerned in its production, and other parts of that value to goods of the next "rank"--owned by people different from those who consume the good--and this value further subdivided among goods of remoter ranks,--the whole process possible only if the original value be an objective quantity of the sort described. We find a differential portion of a crop of wheat compared with the land which produced it, and spoken of as a percentage of the land, which is true only if the _value_ of each be considered--and indeed is meaningless, else. Or, we find merchants reckoning their gains in the form of money at the end of the year, as a certain percentage of their capital--which has consisted throughout the year of goods of various sorts. Everywhere in the economic analysis this conception of value has been essential for the validity of the analysis, and this is especially true when we come to the ultimate problems of monetary theory. We may ignore, sometimes, the element of value when dealing with non-monetary problems, in terms of quantities of money, simply because it is not necessary to refer to fundamental principles explicitly all the time. But when we come to the problem of money itself, we must make use of the value concept, and the value concept is implicit in the whole procedure. Further, the value concept has been called upon to explain the motivation of the economic activity of society, and value has been conceived of as a motivating force.[148] Schaeffle, especially, has stressed this phase of the matter in his criticism of the socialistic theories of value. "Utility value," he holds, does direct industry into proper channels, but a value based on labor-time would get supply and needs into a hopeless discrepancy.[149] No ratio "between objective articles" will serve these functions which the economists have put upon the value concept. Value as a purely individual phenomenon, varying from man to man, will in no way[150] serve these purposes of the economists. Value as a mere brute quantity of physical objects given in exchange for other physical objects, could in no way serve these purposes. Value must be an objective quality, a _power_, embodied in the object, independent of the individual judgment or desire. A strong feeling that this is so is manifested in the term which the English School so often uses as the equivalent of value, namely, "purchasing power"[151]--a term which Böhm-Bawerk approves.[152] The notion of relativity which has, historically, been bound up with this term, we have criticized in chapter II, and it is not necessary to repeat the argument here. But the other aspect of it, its recognition of the dynamic character of value, and of the quantitative character of value, even though often confusedly and vaguely, seems very much to strengthen the case for the thesis I am maintaining.[153] The effort of the Austrians, and of other schools of economic theory, to explain and justify this notion of value as an objective quantity, has already been considered, and our conclusion has been that, through a too narrow delimitation of their determinants, they have been led into circular reasoning. A further criticism is now possible, in the light of our sociological and psychological conclusions: the picking out of _any_ abstract elements, however numerous, with the effort, by a synthesis, to combine them into a concrete social quantity, must fail. In the process of abstraction we leave out vital elements of the concrete social situation; how shall we expect these vital elements left out to reappear when we put the abstract elements into a synthesis? They cannot, if the synthesis be logically made. And it is precisely because Professor Davenport is so accurate in his logic that he fails to get a social quantity out of the abstract elements of subjective utility, etc. But the majority of economists, less careful in their formal logic, but more impressed by the facts of social life and by the exigencies of getting a working set of concepts, have assumed and used the quantitative concept, with satisfactory results so far as practical problems are concerned, but without fundamental theoretical consistency. The elements which the abstract theories suppress persist, under the guise of economic value itself, in the facts of life, and take their vengeance on the theory by forcing it into a circle. Our problem, then, is not to find out certain elements out of which to construct social value by a synthesis. The proper procedure will be the reverse of that: to take social value as we find it--i.e., as it _functions_ in economic life,--and then to analyze it, picking out certain prominent and significant phases, or moments, in it, which, taken abstractly, are not the whole story, but which furnish the criteria of social value, and control over which is significant for the purpose of controlling social values. In subsequent chapters, we shall, carrying out this plan, try to put concrete meaning into our abstract formulation of the problem. FOOTNOTES: [144] _Op. cit._, p. 17. [145] _Cf._ Royce, J., _The World and the Individual_, New York, 1901, vol. I, pp. 209-10, and 225. [146] I may refer here particularly to Durkheim, _De la division du travail social_, Paris, 1893. In giving this reference, of course, I do not commit myself to the "mediæval realism" of which Durkheim has been, perhaps justly, accused. _Cf._, also, Professor Ross's admirable _Social Control_. [147] _Cf._ Ely, _Outlines of Economics_, 1908 ed., pp. 99-100, and Tarde, _Psychologie Économique_, vol. I, p. 85, n. See _supra_, chap. II. [148] _Cf._ Wieser, _Natural Value_, pp. 65, 162-63, 210-12, and 36; Flux, _Economic Principles_, chap. II. [149] _Quintessence of Socialism_, London, 1898, pp. 55-59, 91 _et seq._, 123-24. [150] I take pleasure in availing myself of the privilege which Professor W. A. Scott, of the University of Wisconsin, accords me, of quoting him to the effect that "such a conception of value [a value concept which makes the value of a commodity a quantity, socially valid, regardless of the individual holder of the coin or the commodity, and regardless of the particular exchange ratio into which the value quantity enters as a term] is absolutely essential to the working-out of economic problems." Professor Scott has been driven to this conclusion in the course of his studies in the theory of money. Dean Kinley expresses a somewhat similar view in his _Money_, p. 62. It is, of course, in the theory of money that the need for such a concept makes itself most acutely felt. But the same view is expressed by Professor T. S. Adams, from the standpoint of the statistician. See his article, "Index Numbers and the Standard of Value," _Jour. of Pol. Econ._, vol. X, 1901-02, pp. 11 and 18-19. [151] Even Professor H. J. Davenport finds a quantitative value concept necessary in places. For example, on page 573 of his _Value and Distribution_, he speaks of capital, considered as a cost concept, as standing "for the total invested fund of value, inclusive of all instrumental values, and of all the general purchasing power devoted to the gain-seeking enterprise." It might be unkind to remind him of his definition of value on page 569, and ask him what a "fund" of "ratio of exchange" might mean! And the notion of value as a quantity, instead of a ratio, is involved, as indicated in the text, in the term, "purchasing power," which he also uses in the passage quoted. This term, "purchasing power," as apparently a substitute for value, Professor Davenport uses in several instances, where the ratio notion clearly will not work: on page 561, "distribution of purchasing power," page 562, "redistribution of purchasing power," and page 571. I say "apparently," for I do not think Professor Davenport anywhere in the volume gives a formal definition of "purchasing power." [152] "Grundzüge," etc., Conrad's _Jahrbücher_, 1886, pp. 5 and 478, n. [153] This line of argument, drawn from the usage of the economists in the treatment of other terms, and in the handling of problems, might be almost indefinitely expanded. Almost everybody has a quantitative value concept in mind when he is reasoning about practical problems. The trouble comes only when a value theory has to be constructed! _Cf._ the discussion of production as the "creation of utilities," _infra_ chap. XVIII. CHAPTER XII SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE Our point of view will be more adequately defined if we consider briefly the theories of social value, set forth from the angle of a general (as opposed to a specifically economic) conception of value, by Professor W. M. Urban and Gabriel Tarde. These theories contain some elements which we shall need, and our criticism of them will bring into clearer light the need for the distinctive point of view of this book. Professor Urban's conception as to the nature of value, in its individual manifestation, has been already indicated, in part, in chapter X. Stressing the organic nature of the relations of a value to other phases of the mental life, insisting on a recognition of the "presuppositions" of value, and recognizing that both feeling and desire (or desire-disposition) are involved in value--our cursory account cannot begin to do justice to the subtlety and exhaustiveness of his masterly analysis--he still insists on finding the fundamental nature of value in a phase of its _structure_ (rather than in its function), namely, in the _feeling_. From this part of his doctrine we have found it necessary to differ. When he comes to the problem of social value, he carries over the same conception of value, and he finds that social values appear when many individuals, through "sympathetic participation," _feel_ the same value. With our conclusion (chapter VIII) that we can share each other's emotional life he is in thorough accord. His argument in this connection is admirable.[154] His interest is primarily in moral social values, and he attempts no detailed treatment of economic social values, seeming to hold that the Austrian treatment of objective value is adequate.[155] Both moral and economic values are "objective and social."[156] Collective desire and feeling, when it has acquired this "common meaning," when the object of desire and feeling is consciously held in common, we may describe as Social Synergy; and the objective, over-individual values may be described as the resultants of social synergies. The introduction of this term has for its purpose the clearest possible distinction between social forces as conscious and as subconscious. It is with the former that we are here concerned.[157] Conscious collective feeling is thus insisted upon as an essential in social values, and Professor Urban insists[158] that the value ceases to be a value as this conscious feeling wanes--even though conceding[159] that it retains the power of influencing the _felt_ values, after it has passed into the realm of "things taken for granted." But this stressing of the conscious element of feeling--which as I have previously shown is a variable element even within the individual psychology, and has no necessary quantitative relation to the functional significance, the amount of _motivating power_, of the value--makes it really impossible for him to resolve the question of how the _strength_ of a social value is to be determined. He does, indeed, undertake something of the sort[160] (he is speaking of ethical values), making the quantity of value depend on "supply and demand," the supply depending on the number of people willing to supply a given moral act, and the intensity of their willingness to do it--extension and intention both being recognized. And demand is similarly determined. The thing seems to be nothing more than an arithmetical sum of intensities of individual feelings, or, most justly, individual values. But this leaves us no wiser than before as to the social _weight_, the social _validity_, of these social values. An infinite deal would depend, both in the case of supply and demand, on _who_ the individuals are. A demand for a given act from a poor group of fanatics, however intense, might count for little, while such a demand coming from a group with great prestige, with great social _power_, might have a very great significance. If we are trying to get an objective quantity of social value, which shall have a definite weight in determining social action--the function of social values--we are as poorly off as we were with the Austrian analysis which, in order to get an objective quantity of economic value out of individual "marginal utilities," has to assume value in the background as the validating force behind these individual elements. The error here, as there, comes from an abstraction, from centring attention upon the conspicuous conscious elements. And it comes in stressing the structure, the content, of social values, to the exclusion of their functional _power_. Here is our real problem, if we would determine the social validity of values. This lurking element of social power remains an unexplained residuum. This residuum of _power_, backing up the conscious psychological factors, gets explicit recognition, even though no real explanation, at the hands of Gabriel Tarde,[161] to whose theory of social value we now turn. I quote chiefly from his _Psychologie Économique_, and the numerals which follow refer to pages in volume I. (63-64) Value understood in its largest sense, takes in the whole of social science. It is a quality which we attribute to things, like color,[162] but which, like color, exists only in ourselves.... It consists in the accord of the collective judgments ... as to the capacity of objects to be more or less, and by a greater or less number of persons, believed, desired, or admired. This quality is thus of that peculiar species of qualities which present numerical degrees, and mount or descend a scale without essentially changing their nature, and hence merit the name of quantities. There are three great categories of value: "_valeur-vérité_," "_valeur-utilité_," and "_valeur-beauté_." To ideas, to goods (in a generic sense of the term), and to things considered as sources "_de voluptés collectives_," we attribute a truth, a utility, a beauty, greater or less. Quite as much as utility, beauty and truth are children of the opinion of the mass, in accord, or at war, with the reason of an _élite_ which influences it. (It may be noted in passing that Tarde's "trinitarian" conception of value is not as artificial as it seems. It is simply a method of classification, and there are many subdivisions under each head. Economic value, e.g., is a subspecies within the group of utility values--"goods" include "_pouvoirs_," "_droits_," "_mérites_," and "_richesses_" (66). Our own conception is, of course, that values are thoroughly "pluralistic" as to their structure, and are "monistic" in their function.) (64) The greater or less truth of a thing signifies three things diversely combined: the greater or smaller number, the greater or less social importance ("_poids_," "_considération_," "_compétence_," "_reconnue_") of the people who believe it, and the greater or less intensity of their belief in it. The greater or less utility of an object expresses the greater or less number of people who desire it in a given society at a given time, the greater or less social "_poids_" ("_ici poids veut dire pouvoir et droit_") of the persons who desire it, and the greater or less intensity of their desire for it. And so with beauty. Here is, then, an explicit recognition of the element of the social _weight_ of those who create a social value, as a factor coördinate with their number and the intensity of their desires, etc. Toward resolving it, however, Tarde makes no real contribution. If enough be read into the parenthetical expressions given above, following the word "_poids_" in each case, they would be found to harmonize with the theory of the writer, shortly to be set forth. As it happens, however, Tarde attempts to resolve this factor of the social weight of a participant in a social value, in an analogous case, and gives us a different sort of explanation. He is seeking a "_glorio mètre_," or measure of glory--for glory is a social value too. He finds that to determine a man's glory we must take account of two things: one his notoriety, and the other, the admiration in which he is held (71-72). The first is simple: we will count the number who watch him and talk about what he does. The second is harder, for we must not merely count the number who admire him, but also determine the importance of each as an admirer. But how get at this? Tarde suggests that the study of the cephalic index will throw light upon the problem--no satisfactory solution, I think!--but says that anyhow the problem is practically solved every day in university and administrative examinations. Apart from the fact that conscious desire (or conscious belief, etc.), rather than functional power, is made the basis of Tarde's social value, and apart from the failure to give any real account of the origin of this "social weight," of the individuals in the group which creates the social value, there is a further defect in Tarde's analysis which cannot be strongly objected to. It is his effort to treat organic processes as if they were an arithmetical sum of elements. A sum of abstractions will not give you a concrete reality. A man's social weight is not a thing independent of relations, a thing which can be thrown now here and now there with the same results in each case. And two men, each with a definite social weight, do not have precisely twice that social weight when they combine with each other. Two great leaders of opposing, evenly balanced political parties, combining their influence, may secure wonderful results, leading both parties to agree on a programme, and carrying it through. Two equally great leaders, but both within the same party, may be unable to accomplish anything by combining their efforts. And it may happen that two men, each with great weight in his own sphere, would be so incongruous if they tried to coöperate, that their joint weight would be less than the weight of either alone. It is not a matter of arithmetical addition. Social power can be used in certain ways, and in certain organic connections. If we care to use a mechanical phrase, the effort to use it out of organic connections is apt to result in so much "friction" that much of the power is lost. The objection to the insistence on the amount of conscious desire or feeling as a criterion of the amount of value holds for social values quite as much as for individual values. The social value of the gold standard, judging by the amount of desire and feeling involved, by the degree to which it was a factor in consciousness, was vastly greater during the campaign of 1896, while its validity was still in question, than it was after it had been validated, and made a really effective fact. Social value depends, not on conscious intensity, but on motivating power. The social consciousness, as the individual consciousness, is economical. And the need for conscious feeling, for conscious desire, in connection with social, as with individual, values, arises when values must be compared, when they are in question, when they must show themselves for what they are, that they may be brought into equilibrium with antagonistic values. And the amount of consciousness will not be greater than the need for it--and, alas, is rarely as great as the need! When a value becomes accepted, when its place is secure, when the equilibrium is established, conscious feeling and desire with reference to it tend to pass away, and peace comes. Tarde seems to recognize this, indeed, when he says (72, n.):-- Of nobility, as of glory, it is proper to remark that it is a force, a means of action, for him who possesses it, but that it is a faith, a peace, for the people who accept it, and who, in believing in it, create it. FOOTNOTES: [154] _Op. cit._, chap. VIII, esp. p. 243. [155] _Ibid._, p. 319. [156] _Ibid._, p. 312. [157] _Ibid._, p. 318. [158] _Ibid._, pp. 333-36. [159] _Ibid._, p. 335. [160] _Op. cit._, pp. 329-30. [161] "La croyance et le désir: possibilité de leur mésure," _Rev. philosophique_, vol. X (1880), pp. 150, 264. "La psychologie en économie politique," _Ibid._, vol. XII (1881), pp. 232, 401. "Les deux sens de la valeur," _Rev. d'économie politique_, 1888, pp. 526, 561. "L'idée de valeur," _Rev. politique et littéraire (Rev. Bleue)_, vol. XVI, 1901. _Psychologie Économique_, Paris, 1902. [162] _Cf._ Conrad, _Grundriss zum Studium der politischen Oekonomie_, Jena, 1902, Erster Teil, p. 10. CHAPTER XIII ECONOMIC SOCIAL VALUE How are we to get out of our circle:[163] The value of a good, A, depends, in part, upon the value embodied in the goods, B, C, and D, possessed by the persons for whom good A has "utility," and whose "effective demand" is a _sine qua non_ of A's value? The most convenient point of departure seems to be the simple situation which Wieser has assumed in his _Natural Value_.[164] Here the "artificial" complications due to private property and to the difference between rich and poor are gone, and only "marginal utility" is left as a regulator of values. But what about value in a situation where there are differences in "purchasing power"? How assimilate the one situation to the other? A temporal _regressus_, back to the first piece of wealth, which, we might assume, depended for its value solely upon the facts of utility and scarcity, and the existence of which furnished the first "purchasing power" that upset the order of "natural value," might be interesting, but certainly would not be convincing. In the first place, there is no unbroken sequence of uninterrupted economic causation from that far away hypothetical day to the present, in the course of which that original quantity of value has exerted its influence. The present situation does not differ from Wieser's situation simply in the fact that some, more provident than others, have saved where others have consumed, have been industrious where others have been idle, and so have accumulated a surplus of value, which, used to back their desires, makes the wants of the industrious and provident count for more than the wants of others. And even if these were the only differences, it is to be noted that private property has somehow crept in in the interval, for Wieser's was a communistic society. And further, an emotion felt ten thousand years ago could scarcely have any very direct or certain quantitative connection with value in the market to-day. Even if there had been no "disturbing factors" of a non-economic sort, the process of "economic causation" could not have carried a value so far. It is the living emotion that counts! Values depend every moment upon the force of live minds, and need to be constantly renewed. And there would have been, of course, many "non-economic" disturbances, wars and robberies, frauds and benevolences, political and religious changes--a host of historical occurrences affecting the weight of different elements in society in a way that, by historical methods, it is impossible to treat quantitatively.[165] What is called for is, not a _temporal regressus_, which, starting with an hypothesis, picks up abstractions by the way, and tries to synthesize them into a concrete reality of to-day, but rather a _logical analysis_ of existing psychic forces, which shall abstract from the concrete social situation the phases that are most significant. This method will not give us the whole story either. Value will not be completely explained by the phases we pick out. But then, we shall be aware of the fact and we shall know that the other phases are there, ready to be picked out as they are needed, for further refinement of the theory, as new problems call for further refinement. And, indeed, we shall include them in our theory, under a lump name, namely, the rest of the "presuppositions" of value. Our reason for choosing a logical analysis of existing psychic forces instead of a temporal _regressus_--instead, even, of an accurate historical study of the past--is a twofold one: first, we wish to coördinate the new factors we are to emphasize with factors already recognized, and to emerge with a value concept which shall serve the economists in the accustomed way--it is illogical to mix a logical analysis with a temporal _regressus_. But, more fundamental than this logical point, is this: the forces which have historically _begot_ a social situation are not, necessarily, the forces which _sustain_ it. The rule doubtless is that new institutions have to win their way against an opposition which grows simply out of the fact that we are, through mental inertia, wedded to what is old and familiar. We resist the new _as_ the new. Even those who are most disposed to innovate are still conservative, with reference to propaganda that they themselves are not concerned with. The great mass of activities of all men, even the most progressive, are rooted in habit, and resist change. When, however, a new value has won its way, has become familiar and established, the very forces which once opposed it become its surest support. Or, waiving this unreflecting inertia of society, as things become actualized they are seen in new relations. What, prior to experiment, we thought might harm us, we find beneficial after it has been tried, and so support it--or the reverse may be true. The psychic forces maintaining and controlling a social situation, therefore, are not necessarily the ones which historically brought it into being.[166] We turn, therefore, to a logical analysis of existing social psychic forces for our explanation of social economic value, and for the explanation of the motivation of the economic activity of society. It will still pay us, however, to halt for a moment in Wieser's hypothetical "natural" community, for we shall find there that many of the concrete complexities which he sought to eliminate have really persisted in slight disguise. Really there is no such simplicity as Wieser supposes. The "natural" society has, indeed, no private property, or differences between rich and poor, but it has, none the less, _legal_ and _ethical_ standards of _distribution_, which are just as efficient in the determination of economic values as are the results of our present system of distribution. The term, "natural," has misled Wieser, when it leads him to say that marginal utility alone will rule. For "natural" here means, not "simple," but "ethically ideal." The word has--as Wieser and others who have used it often fail to see--a positive connotation of its own: a definite set of legal and ethical values are bound up in it in this case. That such a society should exist, and that in it "marginal utility" should be the only _variable_ affecting value (apart from the limitations of physical nature), implies the legal rule of equality in distribution, and such a set of moral values actually ruling the behavior of the people as to make this legal rule effective,--or else the most extraordinary activity on the part of the government to maintain the rule. Wieser himself fails to see this, for he concedes that the "moral" principle of distribution in such a society would recognize the superior merits of the leaders who furnish ideas and direction, as entitling them to a higher reward than the merely mechanical laborers.[167] But this, it is evident, would give them an excess of that same vexatious "purchasing power"[168]--whether embodied in gold or commodities or labor-checks matters little--and so would destroy the efficiency of the principle of "marginal utility" as the ruler of values. As phases in the "presuppositions" of economic value, then, coördinate with "marginal utility," our theory puts the legal and ethical values concerned with distribution, which rule in a community at a given time. Reinforcing and validating the values of _goods_ are the social values of _men_. President F. A. Walker[169] defines value as "the power an article confers upon its possessor _irrespective of legal authority or personal sentiments_, of commanding, in exchange for itself, the labor, or the products of the labor, of others." [Italics are mine.] In our view, this definition is precisely wrong. A change in laws or in morals respecting the social ranking of men, respecting property rights, will at once affect economic values. Earlier economists often wrote as if distribution were primarily a physically determined matter, and so we got from them an "Iron Law of Wages," etc. But it is pertinent to quote from one who, though in many ways allied to the older school, and in value theory avowedly their follower, still stands as a bridge between the theories I am criticizing and my own. John Stuart Mill[170] says:-- The laws and conditions of the production of wealth, partake of the character of physical truths. There is nothing optional or arbitrary in them.... It is not so with the Distribution of Wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms. Further, in the social state, in every state except total solitude, any disposal whatever of them can only take place by the consent of society, or rather of those who dispose of its active force. Even what a person has produced by his individual toil, unaided by any one, he cannot keep, unless by the permission of society. Not only can society take it from him, but individuals could and would take it from him, if society only remained passive; if it did not either interfere _en masse_, or employ and pay people for the purpose of preventing him from being disturbed in the possession. The distribution of wealth, therefore, depends on the laws and customs of society. The rules by which it is determined, are what the opinions and feelings of the ruling portion of the community make them, and are very different in different ages and countries; and might be still more different, if mankind so chose. The distribution of wealth, then, depends on social psychic forces. And among these are the social, ethical and legal values of men and of social classes. Economists of an earlier school took these factors for granted, when they thought of them at all, and assumed that they are constant, relatively unchangeable things, a sort of fixed framework within which the forces of a Malthusian biology, or the forces of "self-interest" might work. Commonly, indeed, they thought of them not at all, and wrote as if the factors which they allowed to vary told the whole story. Such is, indeed, still the procedure, in our present day "pure economic" theories of distribution, which either exclude the non-economic factors,[171] or else relegate them to the "pound of '_cæteris paribus_.'"[172] If ours were a stagnant civilization, this procedure might be safe, but in a highly "dynamic" society, where laws, morals, class relations, the very fundamentals of organization, are being made the subjects of scrutiny, agitation, class struggle, etc., are being subjected to "transvaluations," and are continually changing them with the principles, machinery and results of distribution, and so one of the biggest factors lying back of economic values, no study of value can afford to ignore them. It is of course recognized that a purely ethical and legal theory of distribution would be as much an abstraction as the "_reinwirtschaftlich_" theory of distribution--and probably a much less useful abstraction. Either abstraction is legitimate, if it do not seek to abolish the other factors. We may safely enough define a set of legal and moral values, concerned with the organization of society and industry, and, assuming them constant, a sort of frozen framework, let man's values with reference to the immediate consumption and production of economic goods ("utilities and costs" in current phrase) vary, and see what the consequences, both on the ranking of men, and the ranking of goods, will be. Or, assuming "utilities and costs" constant, we may let the legal and moral values vary, and see what consequences would follow. Or, assuming all other factors constant, we may vary the size of the population, or vary the proportions between labor and productive instruments, or between land and population, or pick out any other factor of the concrete situation we happen to be interested in, as the "standard of living," and let it change, and see what consequences flow therefrom. But, in doing this, we must not forget that the other factors remain essential, equally potent in the general situation with the one on which we have centred our attention. And we must not forget that changes in one factor, while we may in thought allow it to occur alone, cannot occur without bringing in changes in the others as well. An increase in the number of laborers, e.g., may also mean an increase of _voters_ of a given political tendency, and may mean a change in the political power of classes, and a change in the laws. And it may be tremendously significant whether the increased number of laborers consists of Irish Catholics, or of Russian Jews, or of native Americans, or of negroes,--significant from the standpoint of distribution, of the values of economic goods, and the direction of economic activity.[173] Reduce your labor force to "efficiency units," so that from the standpoint of productive power of the additions no difference is made whether they be of the one class or the other, and still it is a matter of consequence, from the standpoint of distribution, and ultimately of the values of goods, whether they belong to one class or the other. One sort of laborer may be capable of efficient labor-union organization, with the result that a large share of the product goes to labor. Another sort of laborer may be incapable of much organization, may work at cross-purposes with the rest of the labor force, and may be an easy victim of exploitation. "Other things equal," we may concede that productive efficiency, or "standard of living," or other abstract principle, determines the share that goes to labor--but many indeed are "the other things." The distribution of wealth is not an "arbitrary" matter--if by that it be meant that no scientific laws can be worked out to describe it. Mill himself would be first to protest against any metaphysical "freedom of the will" here. But it is a matter into which law and morals and personal friendship and monopoly privilege and charity and benevolence and statesmanlike purpose and selfish struggle--in a word, the whole intermental life of men in society--are involved. And any principle of distribution that we may select is only true, not only if other things are "equal," but also if other things are in a particular set of relations. We have seen the assumptions of a non-economic sort that are implicit in Wieser's conception of a "natural society." It may be interesting to note what is involved in the situation which Professor Clark treats in his _Distribution of Wealth_. That his system should hold, we must have, of course, private property, and personal freedom. We must have perfectly free competition. We must have absolutely no monopoly privilege of any sort. We must have such rapid and free communication of ideas that no monopoly of knowledge should exist. But imagine the moral values that must rule in a society where such a situation holds! How are men to be prevented from getting monopolies? How prevent laws in the interests of the alert and influential? How prevent the monopoly of ideas? A very different moral situation must obtain in such a society from that we know. And a very different system of laws. In saying this, of course, I say nothing that was not obvious enough to Professor Clark when he constructed his system on the basis of "heroic abstraction," but still it cannot be neglected. Not every one who has undertaken to interpret Professor Clark, and to make practical application of his theories, has seen these limitations. Or, again, what does the system of competition mean? Why do we have such varied estimates from different writers? Why do some see in it a benevolent influence, while for others it is a ghastly nightmare? The answer is, I think, that competition is an abstraction, which each makes in his own way. If we look on competition as a system where each is free to follow his "pure economic" tendencies in the shortest and simplest manner, I think there can be no question but that we must condemn it. The "pure economic impulse," namely, the impulse to get the maximum of wealth with the minimum of effort, left unchecked and unguided by any other social forces, would lead, by the shortest and simplest path, to theft, robbery, and murder. They are easier than work! And more sensible than work, if one be "_reinwirtschaftlich_," and live in a society where there is little chance that he who creates wealth will enjoy it. Or, partly checked by social constraints (thinking of these as "external" matters solely), the "economic tendency" may lead--as it has led--to the dynamiting of rival plants, to the securing of preferential rates from common carriers, to the corrupting of legislatures and judges, to the spreading of false rumors, etc. On the other hand, if the "rules of the game" are high, if competition be limited to doing things which result in a better commodity with a decreased outlay of human effort and physical resources, and with kindly feeling among competitors (or even without this last), we may see in it a great source of justice and progress. It all depends on what Professor Seligman calls the "level of competition."[174] That is to say, it depends on the extent to which the system includes factors of moral, legal and social nature, other than the "pure economic"--a thing "that never was on land or sea." And what shall we say of "inevitable economic tendencies"? A good many of them--leading in diverse directions--have appeared in the literature of economics. On the one hand, inevitable tendencies towards a divine "economic harmony." On the other hand, inevitable tendencies toward monopoly; toward ever more numerous panics; toward greater concentration of wealth; toward proletarian misery of an ever more hopeless sort--all bringing us finally to a socialistic state. I see no inevitable economic tendencies anywhere. The "economic motive," as already indicated, if left free to work in vacuo, would lead us to anarchy. But it doesn't work _in vacuo_. And the question as to where the infinite complex of social forces may lead us is not one that can be settled "_reinwirtschaftlich_." We can only say that economic values, at a given moment, are the focal points at which the laws and moral values and loves and hates, and "utilities" and "costs" directly connected with economic goods, and the multitudinous other values of concrete social life exert their motivating influence on the economic activities of society. Then, given these economic values, and assuming that they alone are of significance for the activity of society, we may see where they would lead us. But we should still be in a world of abstractions if we did so. For the economic social values do not exhaust the social forces of motivation. Very much of social activity is non-economic in character. And the force of a given moral value--say that of elevating the condition of a degraded class--may be divided, tending indirectly by raising the value of a certain sort of economic good, to encourage its production, and tending directly to prevent its production. Let us assume, for example, that this moral value leads to an increase in the income of the degraded class, and so tends to increase the demand for liquor; but assume, further, that this same moral value is the force leading to a prohibition law, that forbids the production and sale of liquor. Ethical, religious, legal, esthetic, and other values may indirectly motivate the economic activity of men through entering into economic values, or they may directly, in their own form, antagonize these economic values, by constraining those who do not "participate" in them, and by impelling those who do feel them to activities in lines other than those where the greatest surplus of economic value is to be gained. Even, then, though we have a theory of economic value which includes these other social forces, we have no right to speak of "inevitable economic tendencies." Social life is one organic whole. There is no phase of social activity which is wholly directed by one set of values, and there is no one set of values that exclusively depends on one sort of motive. And when we give exclusive attention, in our study, to one set of values, as it is often necessary to do, we must recognize that we are handling an abstraction, that the other forces remain, and must be dealt with before our conclusions have any validity for practice. FOOTNOTES: [163] See chaps. VI and VII, _supra_. [164] Bk. II, chap. VI. [165] _Cf._ Davenport, _op. cit._, p. 560. "For, in truth, not merely the distribution of the landed and other instrumental, income-commanding wealth in society, but also the distribution of general purchasing power ... are, at any moment in society, to be explained only by appeal to a _long and complex history_ [italics mine], a distribution resting, no doubt, in part upon technological value productivity, past or present, but in part also tracing back to bad institutions of property rights and inheritance, to bad taxation, to class privileges, to stock-exchange manipulation ... and, as well, to every sort of vested right in iniquity.... _But there being no apparent method of bringing this class of facts within the orderly sequences of economic law, we shall--perhaps--do well to dismiss them from our discussion...._" [Italics are mine.] It may be questioned if the "orderly sequence" is worth very much if it ignore facts so decisive as these. It is precisely this sort of abstractionism which has vitiated so much of value theory. Most economists slur over the omissions; Professor Davenport, seeing clearly and speaking frankly, makes the extent of the abstraction clear. I venture to suggest that the reason he can find no place for facts like these within the orderly sequence of his economic theory is that he lacks an adequate sociological theory at the basis of his economic theory. A historical _regressus_ will not, of course, fit in in any logical manner with a synthetic theory which tries to construct an existing situation out of existing elements. Our plan of a _logical_ analysis of existing psychic forces makes it possible to treat these facts which have come to us from the past, not as facts of different nature from the "utilities" with which the value theorists have dealt, but rather as fluid psychic forces, of the same nature, and in the same system, as those "utilities." [166] I do not, of course, mean to question the immense light which history throws upon the nature of existing social forces. [167] Wieser, _op. cit._, pp. 79-80. [168] _Ibid._, p. 62. [169] _Pol. Econ._, 1888 edition, p. 5. [170] _Principles_, bk. II, chap. I. [171] Professor Clark seems to desire to exclude all phases of social life except the "pure economic," from his static conception, as indicated by the footnote which follows, taken from page 76 of his _Distribution of Wealth_: "The statement made in the foregoing chapters that a static state excludes true entrepreneurs' profits does not deny that a legal monopoly might secure to an entrepreneur a profit that would be as permanent as the law that should create it--and that, too, in a social condition which, at first glance, might appear to be static. The agents, labor and capital, would be prevented from moving into the favored industry, though economic forces, if they had been left unhindered, would have caused them to move to it. This condition, however, is not a true static state, as it has here been defined. Such a genuine static state has been likened to that of a body of tranquil water, which is held motionless solely by an equilibrium of forces. It is not frozen into fixity; but as each particle is impelled in all directions by the same amounts of force, it retains a fixed position. There is a _perfect fluidity, but no flow_; and in like manner the industrial groups are in a truly static state when the industrial agents, labor and capital, show _a perfect mobility, but no motion_. A legal monopoly destroys at a certain point this mobility [so would a law forbidding the manufacture of, say, opium or liquor, or any law or moral force that prevents the individual's using his labor and capital in the manner most advantageous to himself regardless of public consequences], and is to be treated as an element of obstruction or of friction that is so powerful as not merely to retard a movement that an economic force, if unhindered, would cause, but to prevent the movement altogether." This would seem to leave economic forces working _in vacuo_ in Professor Clark's static state--if "unhindered" is to be taken literally. It is probably a juster interpretation, however, to hold that Professor Clark has in mind a constant legal situation, in which absolutely free competition is assured by law. But even in his scheme for an economic dynamics, there is no place for legal or ethical changes. There are five general sets of dynamic changes which Professor Clark mentions, whose operation is to constitute the subject matter of economic dynamics. They are (_Essentials_, p. 131, and _Distribution_, pp. 56 _et seq._): (1) population increases; (2) capital increases; (3) methods of production change; (4) new modes of organizing industry come into vogue; (5) the wants of men change and multiply. These five categories are all, primarily, at least, economic in character. While legal and ethical changes would doubtless influence them, they certainly cannot comprehend the full influence of these legal and ethical changes, especially those affecting the ranking of men, and the distribution of wealth. There seems to be a marked difference between Professor Clark's point of view in his _Distribution of Wealth_ and that of his earlier _Philosophy of Wealth_, and I must confess my preference for the earlier point of view. In saying this, of course, I am far from impeaching the masterly economic analysis which the later book contains--rather, I join heartily in the general estimate which counts that book as of altogether epoch-marking significance. My point is, rather, as will be indicated more fully in the chapters on the relation between value-theory and price-theory, that the presuppositions and significance of such a study as Professor Clark's need clarification and interpretation in the light of a theory of value which takes account of the rich complexity of social life. Professor Joseph Schumpeter, of Vienna, carries out economic abstractionism to its logical limits, both in "statics" and in "dynamics." For an estimate of his statics, _vide_ Professor Alvin S. Johnson's review of Schumpeter's _Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie_ (Leipzig, 1908), in the _Journal of Political Economy_, 1909, pp. 363 et seq. His dynamics is also to be "_reinwirtschaftlich_." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the Austrian _Zeitschrift für Volkswirtschaft_, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schumpeter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pinpoint--and then fails to carry out his program of giving us a "_reinwirtschaftlich_" theory. For, in order to get any _periodicity_ into his economic movement, he is obliged to bring in, from the field of sociological theory, the factor of _imitation_--he does not use the term, imitation, though he does use the verb, "_kopieren_." (_Vide_ esp. pp. 298-99.) Professor Schumpeter very explicitly recognizes the existence of factors other than the "_reinwirtschaftlich_," but counts them as "external" factors. [172] Cf. Professor Marshall's discussions in his sections on economic law and method, and Professor Davenport's classification of the factors in the economic environment (_Value and Distribution_, pp. 514-15). [173] The danger of the abstract individualistic study, from the entrepreneur's viewpoint--a useful enough method within limits--is well illustrated by Professor Davenport's contention that "men as employees are passive facts, mere agents under the direction of managing producers, and are therefore only potentially directing forces. The problem of production and of marginalship is, accordingly, an entrepreneur problem." (_Op. cit._, p. 279, n.) This is set forth as a limitation on the doctrine, stated in the paragraph which precedes it, that "man is to be conceived as the subject and centre of economic science, etc." Surely Professor Davenport's contention is an impossible abstraction from the rich facts of social control. The managing entrepreneur knows better, when he deals with union rules and walking delegates. And the economist, tracing the subtler forces that underlie values, and so motivate the direction of industry, should know more, rather than less, than the entrepreneur. [174] _Principles_, 1905 ed., pp. 147 _et seq._ CHAPTER XIV ECONOMIC SOCIAL VALUE (_continued_) Back to the concrete whole, then, of social-mental life. The abstract elements with which the Austrians and the pain-abstinence cost school undertook to solve the value problem, have their place in this whole. The "utility" of goods to individuals, growing out of the nature of their wants, depends very largely on social causes. Mode,[175] fashion, custom--how powerfully they mould our wants. And individual "cost," likewise: a university athlete could dig a ditch far more easily, so far as bodily pain is concerned, than could an aged negro, and yet would suffer much more in doing it than would the negro. A social standard would bring a feeling of shame to him which the negro would not share. If we abstract from the concrete forms which individual wants and "costs" take, and define them in their lowest physical terms, we might leave out a social reference. But men do not desire raw meat, and the skins of beasts, and caves in which to live. Their food they wish to eat in accordance with the conventions of their class, and of a sort that their fellows eat, their water, of late, they wish free from germs, their houses and clothing must be "in style,"--facts well enough recognized, though not in themselves enough for a theory of "social value." These individual "utilities" and "costs" have little meaning till we know the social ranking of the men who feel them, till we know how much the men who have them count for in the scale of fundamental _human_ values. And their effect on "supply price" and "demand price"--the money measures of infinitely complex social forces, to which the entrepreneur immediately looks for his "cue"--has absolutely no constant relation to their intensity. The wants of slaves may count for little. The utterly unattractive and inefficient man may starve. The gilded parasite of a prerevolutionary French monarch may command untold resources, while the useful and productive millions may barely exist. On the other hand, with a changed set of legal and moral values, we may have men of social influence and power striving constantly to increase the incomes and relieve the sufferings of the poor and helpless. Our legislatures may be busy with laws shortening the hours of all labor, laws prohibiting child labor, laws restricting the labor of women, laws for the protection of miners, laws relating to the conditions of pay for labor and to compensation for accidents--which promptly reflect themselves in the values of the goods produced in the industries affected, and in the increased values--through increased "demand"--of the goods consumed by these classes. The ideal of "no pay without function" may attain--as I think it is to-day attaining--a value of increasing power. And it may lead men to strive for the abolition of monopoly incomes, and the correction of the gross inequalities in the distribution of wealth. If it do not succeed--and it does not by any means succeed--it is because opposing values check it. At any given moment, there is an equilibrium, usually unstable, between the forces tending to correct, and to perpetuate, these inequalities. And it need not be an evil force that is the real obstacle to the realization of greater justice in distribution. The legal value of private property--one of those social "absolute values" which do not readily lend themselves to the "marginal process"--checks at an early stage many of our well-meant, but badly planned, efforts at justice. Glad as most of us would be to deprive plutocratic pirates of what they have not earned, we still do not care to upset the fundamentals of our social system in the process. But the conflict between these values brings them both into clearer light. We see, and feel, the significance, the "presuppositions," the "funded meanings," of each. And while, for the present, there is a "mechanical haul and strain" between them, which, if no more light comes, may ultimately lead to the triumph of one and the complete defeat of the other, still, we may hope to get a result like that which often comes in the case of conflicts between values in the individual psychology--a fuller appreciation of the significance of both values, which will get us away from the "absoluteness" of each, and effect a marginal equilibrium between them, or, perhaps, get a new value which will comprehend them both. Of course, the thing is not so simple as this. It is not a conflict simply between two values, both of which the same man may "participate" in. Our plutocrats are also parts of the social will. They count! The economic value they control may bribe lawmakers, may corrupt judges, may seduce writers and preachers and teachers and others who have to do with the making of public sentiment and the shaping of social values. And, in subtler ways, through the social prestige which their mere wealth too often gives, through the ideals which they themselves honestly feel, and communicate to those about them, do they create values opposing the values making for a juster distribution of wealth. Infinitely complex is the situation, many and varied are the values, which reinforce each other, oppose each other, and come into equilibrium with each other, in a given moment in the social will. Older egoistic theories of political economy, which assumed perfect freedom of competition, and gloried in the "harmonies" which result therefrom, whereby the interests of the individuals and of society converge, and the maximum of social welfare is attained by the individual's attaining his own interests--these theories have been much attacked of late by those who accept the premise of egoism, but reject the premise of freedom. To them economic "friction" means simply an opportunity for the strong to prey upon the weak, and the social outlook is gloomy indeed. The harmonies are shattered and gone. If we reject the other premise also, however, as necessarily a dominant principle, the outlook is changed or may be changed. It is true that there are ignorance, helplessness, and passions among men, and that wolves prey. But it is also true that there are forces of righteousness alert and militant in the world, not merely in the pulpit and cloister and missionary field. And the struggle between these contending forces is pregnant with implications for value theory. An astute corporation lawyer argues before a court; an honest attorney-general defends the rights of the people; and the ticker on 'Change records whether right or wrong has prevailed. Prices are big with the moral tidings they would speak--shall we read in them only mathematical ratios between quantities of physical objects? It is by turning, then, to the concrete whole of social-mental life, and especially to the moral and legal values of distribution, that we break the circle[176] of our economic values. Economics has failed to profit by the example of the other social sciences here. Ethics has frankly recognized the tremendous import of economic values for ethical values. Jurisprudence has frankly accepted the fact that law grows, in large part, out of economic needs--even though it remains behind the needs of the present economic situation. But economic theory has sought to make itself too much a thing apart, to isolate its phenomena from other phases of social life, and has busied itself exclusively with "utility" and "cost" and "prices," and the like. And where the economist has consented to consider the relations between his own field and adjacent fields, he has done so with a preconception of the priority of his own phenomena, and his results have been an "economic" interpretation of history, ethics, jurisprudence, etc. That the economic interpretation of the other fields has much to commend it is certain, but it is equally certain that law and morality react on economic values, especially in the higher stages of civilization. This has been so fully and convincingly stated by Professor Seligman, in his _Economic Interpretation of History_, that I forego further elaboration here. One comment is necessary however: even though we might grant Marx and Buckle that the physical environment and the progress of economic technique are of ultimate ruling significance for the direction of social progress, it is still a far cry from that doctrine to the doctrine that the "utilities" and "costs" directly connected with the production and consumption of economic goods, in the minds of individual men, are an adequate explanation of anything. Were we interested in ethical and political values for their own sake, it would be easy to show that our conception of the nature of society and of social values has a similar significance for politics and ethics. There is no one distinctive emotion, as fear, or the love of domination, that lies at the basis of the state; there is no one emotion, as sympathy, or the love of pleasure, which constitutes the essence of the moral values, nor is there any single type of mental activity, as imitation, or consciousness of kind, which furnishes the peculiar theme of sociology. Social life is not in water-tight compartments. It is one whole, of which the different sciences study different aspects. And the principle of division of labor among the social sciences is not that one science shall offer one theory of society and another science another theory, but rather, that each science shall take as its problem a phase of society, and explain it by reference to a general set of facts which all have in common. The differentiation comes not in the _explanation_ phenomena[177]--no science has any monopoly on any set of forces which may be used for the purpose of explanation--but in the phenomena to be explained, in the _problem_ phenomena.[178] FOOTNOTES: [175] _Vide_ Ross, _Foundations of Sociology_, chapter on the "Sociological Frontier of Economics," and Tarde, _Psychologie Économique_, _passim_. [176] It may be objected that instead of "breaking the circle," we have simply widened it--that economic values, working through other forms of value, affect other economic values still. In a sense, of course, this is true. In any truly _organic_ situation, we have the phenomenon of _reciprocal causation_. An organic situation _must_ be circular in this sense. The parts are _inter_dependent. And our objection to the theories criticized is based on the fact that they are essentially efforts to describe a process in _rectilinear causation_--in the case of the Austrians, _e.g._, the process is _from_ subjective utility, _to_ objective value of consumption goods, then _to_ the values of the production goods of the nearest rank, and then on and on to goods of remoter ranks, etc. Böhm-Bawerk recognizes very well that the charge of circular reasoning, if it could be brought home to the Austrians, would vitiate their system. _Vide_ "Grundzüge," Conrad's _Jahrbücher_, 1886, p. 516. And Professor Clark likewise recognizes that value theory of the sort he is treating is spoiled by circular reasoning, as indicated by his criticism of a certain form of the labor theory in his _Distribution of Wealth_, p. 397. Whenever a small set of abstractions is picked out, as _the source_ and _cause_ of the rest of a movement, such a process of rectilinear causation is implied. And a rectilinear process has no right to get into a circle! [177] Pareto, in the introductory chapter of his _Cours d'Économie Politique_, defines economics in terms of the narrow abstraction which he has chosen for the explanation phenomenon, as the "science of ophelimity" (p. 6), and ophelimity is "an entirely subjective quality" (p. 4). There are two objections to this procedure: you neither completely explain your problem phenomena, nor do you exhaust the possibilities of your explanation phenomena--for the same sort of mental facts have bearing on ethical and other social problems as well as on economic problems. [178] I am indebted to Professor E. C. Hayes, of the Department of Sociology of the University of Illinois, for this distinction. CHAPTER XV SOME MECHANICAL ANALOGIES It may help the exposition if we throw the argument, briefly, into terms of the more familiar mechanical analogies, and speak of the equilibria and transformations of social forces. Of course, mechanical analogies have been used from time to time already in our discussion--psychologists themselves often find it useful to conceive of their phenomena in mechanical terms. And while, in the exposition, we shall find frequent reason to prefer our plan of conceiving society as a psychical organism, and the social forces as phases in an organic process, still certain relations may be clearer for being put into the other form. Social values may be transformed into other forms of social value--as heat may be transformed into electricity, or into motion, or motion into heat, etc. Professor Clark, with his distinction between "capital" and "capital goods," has shown how economic value may undergo constant transformation, as to its physical embodiment, and yet remain generically the same. But the possibilities of transformation are not confined to the economic sphere. We may generalize the notion. A man may use economic value to attain political power; having the political power, he may use it to get economic value back again, by direct barter and sale, if he wishes to take bribes, or by subtler, but still all too familiar means. Or, the political power may be transformed into personal prestige, if used in ways that please those whose good will means prestige. And personal influence--"live human power" (in Professor Cooley's phrase),[179] may be transformed into values of numerous sorts, into political power, into moral values--if he who has it wishes to make a propaganda--into prestige for other men, into economic value--for cannot an inspiring man command the purses of others in behalf of his plans and purposes? And may not popular confidence in a great statesman or financier in times of panic cause fears to be allayed, and values to return to goods that had lost their value? A man who has goods for which no demand exists, and which have, hence, little value, may, employing those who possess the art of creating demand to make public opinion for him by advertising, find his investment, transformed into public belief and interest, return to him a golden harvest. A religious value may flow into the economic value of religious books. A moral or religious value may be transformed into a law. A legal value--as a franchise right[180]--has often a definitely recognized economic value as well. Economic value, spent in an educational campaign, may result in the establishment of a new moral or legal value. And so on indefinitely. Enough has been said to show that there is some sort of analogy between social and physical forces, in that both can be transformed into other forms of force. The analogy might be pushed further. It is often difficult to make the transformation in both cases--there's lots of "friction" if a man starts out publicly and brazenly to buy a political office, and a great deal of waste in the process. But enough has also been said to show the weakness of such an analogy: in creating personal prestige through the wise use of his political power, an officer may actually increase, instead of exhausting, his political power. Or, in the moment of attempting certain transformations, the original power may be suddenly wiped out--as if a great political leader should undertake to popularize some form of immorality. There is no law of equivalence, of conservation of energy, in social forces. Their nature and their relations are organic, and not mechanical. Or, we may speak of equilibria among social forces. Economists have for a long time been used to this, speaking of equilibria between supply and demand, between labor and capital, between enterprise and the other factors of production, between intensive and extensive margins, etc. But we may also have equilibria between, say, demand and moral values, as when moral forces oppose the consumption of liquor, or between supply and law, as in the case where regulation, rather than total suppression, of certain vicious businesses is the practice, or where the effort at total suppression falls short. And equilibria between enterprise and law and morals are being constantly worked out--entrepreneurs seeking to produce at the minimum expense, even at the cost of the lives and health of their employees, and law and morals[181] drawing limits beyond which they must not go, with a struggle between them at the margin--and the money prices of the products reflect the marginal equilibrium attained. Supply may be in equilibrium with a protective tariff, or an internal revenue excise--legal values which the economists have long been accustomed to treat quantitatively by the laws of incidence, and whose strength they measure in terms of money prices.[182] Not "utility and cost," but an infinite complex of social forces are in equilibrium in the economic situation. And the social forces in equilibrium at focal points are themselves composites of many forces, coöperating and reinforcing each other, each of these forces having its own equilibria with other minor forces--a net resultant sending the unneutralized energy of both in a common direction, to form part of a bigger stream of energy. "Demand" is a stream of energy fed by many springs, among which, no doubt, individual wants for the good in question are to be found, but which include the legal and moral values of _men_, also, and an infinite host of other forces. And, just as one form of physical energy may be substituted for another, under different systems of technique, electricity taking the place of steam power, steam doing the work formerly done by horse or human power, so, in particular forms of social organization, one form of social force may do the work that is better done by some other form of social force under a different form of social organization. Thus the regulation of the details of conduct, a matter of iron law (or of custom with the force of law) in certain stages, we now leave to the control of subtler social forces. At one stage we depend on religious values, the curse and the benediction of the church, as a tremendously vital power in social control; now we find other modes of social energy frequently more efficacious. Now we depend primarily on economic social values, under a competitive system, to motivate the economic activities of society, to determine whether this piece of land shall be planted in wheat, or in some other crop, or fertilized in this or that manner; in the mediæval English manor, many questions like these were settled by vote of the manor court. But whatever the form in which the social energy of control and motivation manifests itself, its functional character is the same. It has its origin in, and receives its vitality from, the social will--or better is a phase of the social will--as steam power, electric power, and the energy in human muscles, are species of the same generic force. The effort has not been made to put the whole of our argument into these obviously uncongenial terms. The mechanical analogies, often useful for particular purposes, fail to bring out the rich complexity, the organic nature, of the social processes, and, by their very simplicity, often lead to the ignoring of essential factors. For the purposes of the practical economist, however, concerned with price analysis in a situation which is so complex that he can give attention to only one set of forces, or tendencies, at a time, and where quantitative measurement is essential, it is often highly necessary to abstract from the organic complexity, to assume that other forces than those he is measuring are constant, and to put his argument into mechanical terms. My conception involves no radical revision of economic methodology in this matter. It is primarily concerned with the interpretation and validation of this methodology. To this topic I shall return in the chapters on the relation between the theory of value and the theory of prices. FOOTNOTES: [179] _Social Organization_, p. 264. [180] Professor J. R. Commons has made some interesting comments in a note ("Political Economy and Business Economy," _Quar. Jour. Econ._, Nov., 1907), as to the extent to which intangible objects have come to have economic value. The legal and psychical nature of such values is, of course, very manifest. [181] Moral values, like economic values, in the sense in which I use the term here, are actual facts, and not mere ideals. A moral value _is_ a value, to the extent that it is an effective _power in motivation_, to the extent that the social will backs it up, and punishes with its disapproval and with the subtle penalties which social disapproval involves, infractions of the moral standard in question. I am not here passing judgment on moral values themselves in the light of any ideal standard, but simply describing the manner in which moral values function. [182] Intrinsically, there is no more reason why the economist should concern himself with measuring quantitatively the effect of tariff laws than with a similar treatment of other legal values. Tariffs do not affect industry any more intimately than hosts of other laws. The obvious reason why the economic laws of taxation have been worked out and the others ignored, in our economic analyses, is that the tax laws, being themselves expressed in money terms, are more easily handled by the economist. CHAPTER XVI PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES Professor Seligman's discussion of value theory has been extremely fertile in suggestions for me, and I find the spirit of the positive theory outlined in this book much closer to the general point of view of his doctrines than to those of any other economic writer. His recognition of the generic character of value, of the fact that economic value is but a species within a genus,[183] his contention that, while ethical principles depend on economic considerations in primitive life, they still, in later and higher stages, attain a relative independence, and react on economic life,[184] his recognition of the essentially social nature of even the individual's wants,[185] his discussion of the legal and moral "level of competition,"[186] and, in general, his insistence upon a sociological point of view, especially in the treatment of all practical problems, have been of marked assistance to me in freeing my mind from the individualistic bias of the narrow price analyses, and in making clear the gap between existing theories of value and the function of the value concept in economic science. At certain stages, as already indicated in part, his theories differ pretty radically from that set forth in the preceding pages. For one thing, I find no place in my scheme for the notions of social utility and social cost[187] which are prominent in his discussions, as, indeed, in the discussion of most of the adherents of the social value school. There is one further point of difference, however, to which I wish especially to call attention, as criticism of Professor Seligman's view brings to light certain significant points in the theory I am defending. The following quotation is from his article, "Social Elements in the Theory of Value," from the _Quarterly Journal_ of May, 1901:[188]-- Progress consists in reducing costs, so that we gradually approach gratuity. But, in reducing the value of certain things, we necessarily increase the value of other things. By diminishing the efforts required to satisfy one want, we liberate the efforts needed to satisfy a new want; it is only when we can satisfy this new want that the means of satisfaction acquires value. For the pioneer who with difficulty is able to clothe and feed himself a piano has no value. It is only as clothing and food take up less of his energy--that is, become of less value to him--that he will appreciate the new want, until finally in civilized society a piano is worth far more than a suit of clothes. Since value, as we know, is simply an expression for marginal utility, we cannot affirm that value in general ever increases or decreases. As pianos are worth more, clothing is worth less. The relativity of value is here made to depend on a ground different from that which lies at the basis of the English School's doctrine of relativity. The ground of the latter is _logical_; the ground for Professor Seligman's view is _psychological_. Values considered as mutual relations between two goods cannot both fall--a fall in one means that it goes lower _than the other_, whence inevitably the other must rise, as a matter of logical definition. For Professor Seligman, on the other hand, value is a quantity of marginal utility. So far as the logic of the situation is concerned, an increase in the supply of good diminishes _their_ marginal utility, and so their value.[189] But, as soon as that is done, a new want springs into existence, a new object receives value therefrom, and the total quantity of value remains as before. In the article from which the quotation is taken, the doctrine is merged to some extent with the English doctrine of logical relativity, as indicated by the discussion on page 343, and by the footnote on page 344. The English doctrine is also suggested by the treatment in the _Principles of Economics_ (pp. 184-85), where it is stated that "prices may rise or fall with reference to this standard, but we cannot speak of a general rise or fall of values, because there is no fixed point." It is clear, however, that the argument for relativity in the passage first quoted, is wholly distinct from, and independent of, the logical relativity of definition. Professor Seligman, in conversation with the writer, has so distinguished it, and has indicated that, rejecting the logical doctrine of relativity, he now holds this psychological doctrine of relativity, as distinct, both from the absolute conception of Professor Clark, and the relative conception of the English School. As preliminary to a criticism of Professor Seligman's doctrine, certain distinctions must be made. Values may be relative in Professor Seligman's sense without being relative in the sense in which the English School uses the term: the English School thought only of the relations among, say, a _unit_ of wheat and a unit of corn, a unit of woolen goods, a unit of wine, etc.: Professor Seligman is thinking of the _total stocks_ of these various commodities. Assume, for simplicity, that the stocks of all commodities were doubled, and that the demand curves for all the commodities have the same shape, and that form is the rectangular hyperbola,[190] so that the absolute value of each unit of each commodity would be exactly cut in half. The English School would say that there had been no change in the values of the units; Professor Seligman would say that there had been no change in the value of the _stocks_, but would concede at once that every unit has had its value cut in half.[191] Another distinction must be made. There is, to be sure, at any given time, a pretty definitely limited[192] amount of social _productive energy_. This energy can be distributed among only a limited number of products. Hence, there can be only a limited number of objects to receive value from the mental energies of society. But does it follow from this that what we may call the social energy of value-giving is a limited thing? Or, granted that it is limited, does it necessarily follow that the limits are fixed and rigid? Cannot circumstances arise which will make it vary in amount? If a new want arises, does it necessarily follow that all the old wants become less intense in the exact degree that the new want is intense? Must a quantum of value be withdrawn from the old objects precisely equal to that which is attached to the new object? This doctrine is deliberately affirmed, so far, at least, as the individual is concerned, in the article on "Worth"[193] in Baldwin's _Dictionary of Philosophy_, etc.:-- The struggle for existence among dispositions, which are at once the objects of ethical valuation and the source of value reactions, springs out of the nervous conditions of these dispositions. While there dwells in each the tendency to utmost activity under the given conditions, yet, since the valuing subject is master of only a limited energy of valuation, i.e., nervous energy, the increase of value of any given disposition must necessarily cause others to decrease. In any case increase of values is always relative. Now two lines of criticism suggest themselves. In the first place, the concluding sentence of the quotation is a _non-sequitur_. If there be a definite, absolute quantity of energy, then its distribution among objects can give absolute quantities of value. Reservoirs connected by pipes may among them contain a definite quantity of water, and increase in the volume of water in one may be at the expense of all the others. But still the amount of water in each is an absolute amount. This criticism, I may note, Professor Seligman concurs in. Conceding that a definite amount of value may exist in each object, he holds that there is, none the less, a relativity about value in the sense that increase in the value of one item can only come from a decrease in the value of another, and _vice versa_. The other line of criticism calls attention to the identification of "energy of valuation" with "nervous energy." That the two are identical would be maintained only by the crudest materialism. The one is a physical force; the other is a psychical force. While nervous energy and energy of valuation may be connected, the nature of the connection is surely not so well known as to justify the assumption that definite limitation in the one implies a precisely corresponding limitation in the other.[194] There is no justification--at least in the present state of psychological knowledge--for holding that the law of the "conservation of energy" applies to psychical energy.[195] Some concrete illustrations will make clearer the difficulties of the doctrine, as applied to economic life. Assume a group of men on board a whaling vessel, who suddenly discover that they will be obliged to spend the winter in the ice-zone, instead of reaching home in the fall as they had planned. Will not the value of everything in their store of provisions be increased? Will not their whole stock of wealth have a greater value? But this, Professor Seligman objects, is because they are in a situation such that opportunity for reproduction is lacking, and he raises the question as to whether the same situation is possible in economic life on a large scale, where wealth is being constantly produced. Well, assume that a crop failure on a large scale occurs. Will not the value of the total existing supply of the articles in which there is a failure be raised? And will not other competing articles of food have their values increased also? But, Professor Seligman would retort, these increases would be at the expense of the values of the half-grown fields of grain, and at the expense of articles other than food. Granted: but what evidence is there of exact equivalence? And further, assume that half of every existing stock of commodities, of every sort, were suddenly wiped out. Would the sum total of values remain the same? Only on the assumption that the social value curve for this totality of commodities is a rectangular hyperbola.[196] That this particular shape of the curve holds for any particular commodity would be difficult to prove. That it does not hold at all for the necessities of life is one of the commonplaces of economic analysis. Initial items in a stock of necessities have a very great value, when there are no other items of the stock, and the curve often descends very abruptly. Gregory King has undertaken to show, in terms of money, the shape of this curve for wheat in the England of his day. Other commodities have curves which behave very differently. While the argument from the part to the whole is not a valid argument in the presence of specific reasons making the whole obey different laws from the parts, it still, in the absence of such special considerations, does raise a strong presumption. And I must confess that I see no reasons why the curve for the totality of commodities should take the particular form of a rectangular hyperbola, instead of some other form. _A priori_, the presumption would seem to be that its form would be irregular. There is another point of view which seems to support Professor Seligman's contention, and that is the money-price viewpoint. At a given moment, each man has a definite quantity of money--or of bank-credit--which he can use in purchasing commodities. If he spends it for some commodities, he cannot spend it for others. As he joins one group, demanding one commodity, he must--at least to the extent of that amount of money--withdraw from other groups demanding other commodities. At a given instant, therefore, there is a definite demand-situation with reference to every item of every stock, and one can increase its money-price only by drawing upon the demand for others. But let a panic now come. Let these bank credits become unstable: let _social confidence_ be wiped out, and what happens to general prices and values? Does the value that leaves the general range of commodities all betake itself to the gold supply? That cannot be, for the supply of gold, as compared with the supply of other commodities, is well-nigh infinitesimal, and if the whole of the values that left the commodities went into gold, then every unit of gold would be tremendously increased in value, and prices in terms of gold would fall, not two-thirds, but a thousandfold. What has become of the values? They have simply been wiped out. A psychical change has taken place, a malady has afflicted the social mind, its integrity is shattered, doubt has taken the place of confidence, panic fear has replaced buoyant expectation, demoralization and disorganization have lessened the social psychic energy--or dissipated it in inchoate, unorganized individual activities. The sum total of values is lessened. Of course, the reverse may happen. Let confidence be restored, let the social psychic organization function normally once more and values rise again. As we have indicated in our discussion of the psychology of value, _belief_, as well as desire and feeling, may often be a very significant phase in the value situation, and have a motivating power quite as great as the other phases. _Credit_, while it exists, is a real addition to the sum of values--has, that is to say, a real power in motivating economic activity, calling forth new productive efforts, and directing labor, capital, and enterprise to new channels. This is not, of course, asserting the doctrine of John Law. Credit cannot be manufactured out of whole cloth. Beliefs, at least to some extent, follow rational laws, and, except in moments of hysteria, there must be something for people to believe in before strong belief can emerge. Sometimes, of course, an unstable but momentarily powerful belief, based on nothing rational, may dominate a situation, and radically upset the existing scale of values--with a sad reaction following shortly after. And, in the absence of belief, the most rational justification for belief is impotent. Witness the bankruptcies, in times of panic, of men whose assets turn out later perfectly adequate, but who are unable to liquidate them at the time of the panic. Note, too, in this connection, the tendency in times of panic to turn to government for aid in sustaining values--to substitute for the waning social force of belief the power of a new legal force. A case parallel to the panic, as inducing a diminution of the total psychic energy of control, is presented by widespread epidemics. Gabriel Tarde, criticizing Mill's contention that all values cannot rise or fall, instances the general fall in all values which an epidemic occasions, and the recovery of values after the epidemic.[197] This criticism of Tarde's will not, of course, hold as against Mill's doctrine (indefensible on other grounds) which bases the relativity of values upon a logical definition, but it will hold as against the psychological doctrine of relativity under discussion. A further point is to be noted. Even granting that the sum total of social power of motivation is definitely limited, it still does not follow that the sum total of economic value is so limited. For not all of this social psychic energy goes into economic values. Religious, æsthetic, patriotic, moral values, all call for their share of this energy, and the amount given to each varies from time to time. This phase of the matter is discussed in detail by Professor Ross, in the chapter on "The Social Forces" in his _Foundations of Sociology_, and I shall not expand the discussion here. The doctrine that there is a definite, unchanging sum of economic values, therefore, cannot, in my judgment, be maintained. And yet, it must be conceded, there is a substantial element of truth in Professor Seligman's contention. At a given time, or through a considerable period, assuming social conditions to change slowly, there are fairly definite amounts of social energy, both of production and of control over production (value-giving energy). The surface fact here is that men have definite incomes. If this energy is disposed of in one way, it cannot be disposed of in another. If men elect to have one good, they must dispense with something else. And in using their control over social forces to increase the value of one good, they must refrain from using it to increase the value of another. In the long run, these quantities are subject to change. At a given moment, a sudden disturbance may radically change them. But, as a statement of tendency, Professor Seligman's doctrine must be admitted. Professor Seligman's view differs from that of Professor Clark simply in that it adds an element. On its logical side, it conceives value in the same way. Value is a quality, with degrees, i.e., a quantity. This quantity in a particular good is an absolute fraction of an absolute quantity. It is not changed merely in consequence of being compared with some other good--it remains the same, regardless of what price-ratio it is put into. On its formal and logical side, therefore, Professor Seligman's concept is to be classed with that of Professor Clark--with which, as indicated in chapter II, I am in hearty accord, in so far as the issues raised in that chapter are concerned. FOOTNOTES: [183] _Principles_, 1905, p. 174. [184] _Economic Interpretation of History_, _passim_. [185] _Principles_, p. 175. [186] _Ibid._, pp. 147-48. [187] It might be possible to put the argument into terms which would give an analogical meaning to "social utility" and "social cost." The diagram representing the intersection of the demand curve and the supply curve, fixing price, may be taken equally well to represent the balance of social forces which lies back of the market phenomena in the case of a given commodity. The demand curve might then be called a "social utility" curve, and the supply curve a "social cost" curve, if only it be remembered that cost and utility here have only a vague, analogical meaning, and cover up a host of factors which, while they fall conveniently into two opposing groups, like the individual's "cost" and "utility," are yet much more than the latter. But they are really so very much more than the latter, that it seems to me misleading to continue the use of the terms, utility and cost, when the associations of these terms in economic theory are remembered. The tendency would be to make the student feel that value depends on two abstract phases of social-mental life, instead of being an outcome of the organic whole. [188] Pp. 342-43. [189] The reader will understand that I am using accustomed phraseology and making customary assumptions, not because I approve of them, but because the point at issue here is not affected by the question as to the relations between value and utility, etc. The distinction between a utility curve and a price curve does not affect the argument here. [190] Analytically expressed _xy_ = _c_. This curve, by definition, leaves the "value area" (_xy_) constant. [191] A complication must be noticed here, due to my use of the term, "demand curve." I am tacitly assuming that the absolute value of the money unit remains the same in this process, and so must say that the English School would concede that the value of the money unit has doubled even though holding that all the other values remain unchanged, except with reference to the money unit. For Professor Seligman, the value of money (_i.e._, the total stock) has not changed. [192] But the limitation is not absolute. New incentives may call out substantial increases in productive activity. [193] Written by Professor W. M. Urban, author of _Valuation_, to which frequent reference has been made. _Vide Valuation_, p. 4, n. The article was, of course, written several years before the book. [194] In this view I am sustained by Professor John Dewey. [195] _Cf._ Stuart, "Valuation as a Logical Process," in Dewey's _Studies in Logical Theory_, pp. 328, n., and 330. [196] See _supra_, p. 165, n. [197] "La psychologie en économie politique," _Rev. Philosophique_, vol. XII, p. 238. CHAPTER XVII THE THEORY OF VALUE AND THE THEORY OF PRICES In most English treatises on economics, a price means a sum of money given in exchange for a commodity, or the ratio between the money and the commodity, or the ratio between the value of the money and the value of the commodity. In any case, price as a rule involves the idea of money. With the Germans, on the other hand, _Preis_ means any exchange ratio (or a quantity of commodities of any sort given in exchange for a good), whether or not one of the terms of the ratio involves money, and the distinction between price and value (_Preis_ and _Wert_) is, commonly, the distinction between the measure and the thing measured, or between "relative value" and "absolute value" in Ricardian phrase.[198] The conception of price has been broadened by some later writers in English, however, to correspond with the German usage, notably by Professor Patten,[199] and by Professor Schumpeter,[200] in an English article contributed recently to the _Quarterly Journal_. I do not care to argue a merely terminological question, and I readily concede that there are disadvantages in departing from familiar usage. But, on the other hand, since I am convinced that ratios of exchange in general, and money prices in particular, are generically the same, while ratios of exchange and values are generically as unlike as it is easily possible for two things to be, I shall use the term price in this wider meaning, and confine the word value, in the exposition of my own theory, to the non-relative meaning. The distinction between prices in this sense and absolute values appears in Adam Smith and in Ricardo. These writers do not adhere very strictly to either meaning of the term, value, however.[201] The conception of absolute values is lost by J. S. Mill, and the distinction which he draws in connection with the problem of the standard of deferred payments (not so called by Mill) is between values (relative) and _cost of production_.[202] In Cairnes, the two conceptions are hopelessly confused on a single page,[203] while Marshall's whole treatment runs in terms of price. In what follows, I wish to generalize the conception of price, to show the function of the price concept in economics, to distinguish carefully between the theory of value and the theory of prices, and to see what light the theory of value outlined in this book throws upon the problems of the price analysis. In chapter II, the distinction between "absolute and relative values," or, in our present phrase, between values and prices, was sufficiently indicated not to need further elaboration here. The relation between them was made clear--the absolute value must first exist before the price, which is the expression of the value of a good in terms of some other valuable object which is chosen as a measure, can be determined. In fact, _two_ values, the value of the good measured, and the value of the good which is to serve as the measure, must first exist, as absolute quantities, before a price-ratio can be made between them, and their "relative values" shown. In the chapter on the psychology of value, the notion of price was generalized, and we spoke of the price measure of values of non-economic sort. This notion is one of very general application and one of significance for the whole realm of social and psychical phenomena: not merely where the question of exchanging economic goods is involved, but wherever choice among alternative goods, or courses of action, or men, or institutions, or works of art, or other objects of value, is necessary, we _compare_ them with each other, we _measure_ them by each other, we _price_ them in terms of each other. We arrange them in _scales_ of value, or in series, seeing which is higher and which lower. Where only two goods are involved, we may call either the measure, depending on the point of view. But where many goods are to be compared, it is highly convenient to pick out some one as the common measure of all, so that they may be reduced to common terms. For measuring economic goods, money is, of course, the standard, or common measure _par excellence_, for most purposes. If we are measuring the value of the political institutions of various countries, we usually take the institutions of our own country, with which we are most familiar, as the common measure or standard. Or, in measuring the moral systems, or the literary masterpieces, of other countries, we again find those of our own people the most convenient standard. But it is significant of the correctness of our general point of view that values of different species may be measured in terms of each other. _Money_, in particular, is a very general measure, which may serve for many values outside the economic sphere. Thus, I have pointed out how legal values may be measured in terms of money, as when the fine for one offense is five dollars, and that for another twenty-five. Gabriel Tarde[204] points out that by comparing the theatre receipts of theatres representing different dramatic schools we may compare the vogues of each, or that by comparing the income of the clergy in different periods we may get some index of the variations of religious sentiments. He suggests that while money as a measure of economic values usually functions in exchange, it may, as a measure of beliefs or other social forces, function through gifts, through popular subscriptions to build this or that statue, for the support of scientific work or philanthropies, or even through thefts: "Quelquefois même c'est par des vols où se montre la perversion d'un esprit sectaire, l'aberration et la profondeur de ses convictions passionées." Commonly, indeed, money performs even this function, that of measuring currents of belief, passion, enthusiasms, etc., through the process of exchange, and, ordinarily, it is difficult to get any single current separately. We simply get the resultant of an equilibrium of a complex of forces in economic values. But sometimes a single factor stands out so prominently that we can abstract from the rest, and let money changes measure changes in it alone. For example, during the three days of the battle of Gettysburg, the premium on gold, as measured in terms of Federal paper, fell from forty-five per cent to twenty-three and a fourth per cent.[205] For the market, this means simply a change in the economic value of Federal paper. But for one who cares to look even superficially behind the scenes, it means an increased volume of belief in the triumph of the Federal arms--a belief that at once affected economic values, and was measured in terms of money. Or, the economist may abstract a single legal factor, as a tax law, and measure its influence on the assumption that the rest of the situation is constant, in the well-known laws of shifting and incidence. Such clean-cut instances are not the rule, however. The organic complexity of the social forces lying back of economic values makes it difficult to disentangle single elements, and measure their force. For one thing, variations in one factor usually mean movements in the others. If we may borrow terms from chemistry, while the economist may give us a _qualitative_ analysis of these forces, it is hard for him to give us a _quantitative_ analysis. And the characteristic of pure economic theory has been its effort to get quantitative, quasi-mathematical laws. The "pure theorist," therefore, does well to start with a quantitative value concept (a convenient shorthand or symbol for the infinite complexity that lies behind it), a value quantity in which the net outcome of social interactions does precisely manifest itself, and study the laws which it manifests. His chief interest is, not in the origin of economic value itself, but in the changes in quantities in value in different goods and services as these manifest themselves in the market, and submit themselves to economic measurement. In a word, his chief interest is, not in value, but in _prices_.[206] And the great bulk of pure economic theory, and practically all that is of greatest importance in pure theory, is in the theory of prices, and not in the theory of value. Lest I be misunderstood, the qualification must be repeated: prices here mean, not money-prices, but prices in the generic sense. In this sense of the word price, it is just as accurate to speak of the price of money in terms of commodities, or of a composite of commodities, as to speak of prices of commodities in terms of money. That is to say, the economist gives himself little concern, in his quasi-mathematical study, as to the ultimate nature of the social forces that manifest themselves in the market. A host of forces lie back of demand, but the economist puts the phenomena of demand into a curve which is the function of two variables, one a quantity of money, and the other a quantity of goods. Lying back of these quantities of goods and money, and giving meaning to the curve, are the more fundamental quantities, the value of the goods and the value of the money. Further than this, for the purposes of his quasi-mathematical, pure theory, the pure economist has no real occasion to go--in proof of which it need be remarked simply that the most divergent theories as to the nature of value, none of them adequate if the theory set forth in this book be true, have not prevented the development of a vast, highly organized, and immensely useful body of price doctrine, shared by economists of many schools. If only the economist have a quantitative value concept, he can do wonders. And, if the question be regarding relations between factors where the question of the value of money may be ignored, he may often safely abstract from the idea of value, and speak simply of money quantities, and relative changes in these money quantities. Such is, indeed, Professor Marshall's procedure in a large part of his great work. Professor Davenport's contention that, from the standpoint of the entrepreneur, the whole thing may be looked at in pecuniary terms, is true of many problems. Cost for the entrepreneur is simply a money matter. And while, for the more fundamental analysis, we of course must insist that a host of psychic forces determine what those money costs shall be, our analysis will justify the contention that it is impossible to treat them in any but price terms, in a precise and quantitative manner. They are too complex. Certainly labor-pain and abstinence, looked on as abstract individual feeling-magnitudes, will not explain the supply-prices of labor and capital, any more than individual "utilities" will explain demand-schedules. And we may add that the terms "social cost" and "social utility" can, in our scheme, get no meaning that will make them useful. The social value concept seems to us absolutely essential for the validation of the whole procedure of the price analysis, and to be implied in every step in it, but the only meaning we can find for the concept of social marginal utility would be one which would make it identical with social value; and against that there are two objections: first, it would be superfluous, and second, it would be misleading. "Social utility" can get only a vague, analogical meaning in our scheme. Instead of explaining social value, it would itself present a problem.[207] A measure of social economic value in terms of a feeling-magnitude which an individual can appreciate is not to be had. Value can be measured and quantitatively handled only in terms of _price_. In saying this, I do not mean to impeach that more abstract procedure which speaks of abstract units of value, and uses arithmetical numbers which designate no particular commodities, or algebraic symbols, or even ordinary speech, to indicate quantitative relations among different sums of these abstract units. Such procedure is thoroughly correct, and often highly convenient, if one be dealing with highly general laws, or if one wish to avoid any complications from changes in the value of any concrete commodity which might be chosen as the standard of value. Only, I would insist, such procedure is simply an abstraction from the price concept, and so presupposes it. A unit of value, in the concrete, must be the value of some particular concrete good, which is chosen as the standard. _What_ good is chosen is a purely arbitrary matter, determined by convenience. Abstract value, apart from valuable things, is an utter impossibility--only a Platonic idealism or mediæval realism could hold the contrary view. And, in order to show how many units of value there are in a good, we must compare it with another good, whose value is the unit, unless, indeed, we arbitrarily choose as our unit the good in question, and say that its value is one unit, or several units, in case we arbitrarily define the unit as a fraction of its value. But clearly this latter procedure would tell us nothing after all as to the amount of the value in the good. It would be a purely formal process--like renaming a "hocus-pocus" and calling it two "Abracadabras." Any real measuring--and real measuring is essential for any quantitative manipulation--implies _two_ things, one of which shall serve as the measure of the other. The conception of abstract _units_ of value, therefore, is an abstraction from the price conception, and presupposes it.[208] A valid price procedure, in my view, is essentially this: we take our quantitative value concept, summing up the multitudinous social forces which determine values: then we assume a given set of ethical, legal, and social values of a non-economic sort,[209] as a sort of frozen framework within which our economic values are to operate, and which shall remain constant during the investigation: then, measuring the economic values in terms of a common unit, we let them exert their influence on the situation, and see what results follow. We vary first one and then the other, and see what readjustments any change involves. Since the situation is so infinitely complex, we bring about this artificial simplicity in thought, that we may study the tendencies one by one. But a given economic change will work out its consequences fully only on the assumption that other economic changes are not occurring. We can in thought let them vary one by one, but they do in fact all vary at once. And further--and for this fact price theory has made no allowance--the "frozen framework" of legal, moral, and other non-economic social values, is not "frozen." Changes in economic values lead to readjustments, not only in the other economic values, but also in the legal, ethical, and other values of the framework. These last are fluid, psychic forces, just as truly as are the economic values. They change because of changes in the economic values; they initiate changes in the economic values; and they initiate changes which deflect the tendencies of changes in the economic values. So that, even though we premise a thoroughly organic theory of social value, in which the influence of the non-economic social values, working _through_ the economic values, is carefully provided for, we still have to correct the results of our price analysis, before applying it to practice, to account for changes in the non-economic values working to deflect the tendencies which the economic values would lead to if the other values had remained constant. This last, of course, most economists in practice constantly try to do. Present day discussions of practical economic problems are rich in data of a non-economic sort. In practice the economist recognizes that his mission is, not to see how far a few abstract factors will go in the explanation of economic life, but rather, to _explain_ that economic life by any means in his power, though he ransack heaven and earth in the process. Of course, it is but a commonplace to add that the economist, in practice, does try to take account of the extent to which his assumptions as to the legal and social "framework" hold: how far there is real freedom of competition, how far real "intelligent self-interest," how far mobility of labor and of capital, how far monopoly privilege, etc. Or, at least, he usually tries to make himself think that he has done so. It still remains lamentably true that a great deal of reasoning even on practical problems is an effort to apply theories without any adequate understanding of the extent to which the theories grow out of abstractions made for purposes of study, or any effort to put back the concrete facts from which the abstraction was made. The practical business man knows how these various forces operate on values. He studies them, tries to estimate their force in quantitative price terms, and adjusts his plans to them. If a religious wave sweeps over a large section of the country, the wholesaler sends in larger orders for Bibles, and smaller orders for playing cards. If a rate-reduction agitation is going on, the manufacturer of steel rails and railroad supplies plans to cut down his output. If trades-unionism grows strong, employers of labor recognize that they must readjust their budgets. FOOTNOTES: [198] _Cf._ Davenport, _op. cit._, pp. 296-97. [199] _Theory of Prosperity_, New York, 1902, pp. 16-17, 89. [200] "On the Concept of Social Value," _Quar. Jour. Econ._, Feb., 1909, pp. 226-27. [201] See _Wealth of Nations_, introductory part of chap. VIII of bk. I (pp. 66-67 of the Cannan ed.) For Ricardo, see _Works_, McCulloch ed., London, 1852, p. 15. Adam Smith seems occasionally to use value in the relative sense, as on p. 183 of vol. II of the Cannan ed. Ricardo, though indicating that he is concerned only with relative values on the page cited _supra_, still speaks of values as simultaneously falling, in ch. XX, on "Value and Riches," which, of course, is impossible on the basis of the relative concept. There is no point to torturing these passages unduly, however, in the effort to find our distinctions in them. Professor Seligman calls my attention to a most interesting forty-page discussion of the theory of value by W. F. Lloyd, _A Lecture on the Notion of Value, as Distinguishable not only from Utility, but also from Value in Exchange_. The lecture was delivered before the University of Oxford, in Michælmas Term, 1833, and published, in accordance with the rules of the foundation which provided funds for the lecture, in London, 1834. The writer insists on the conception of value as absolute, and devotes pp. 30-40 to a defense of the absolute conception. He cites the passage in Adam Smith referred to _supra_, in which Smith distinguishes real dearness from apparent dearness (introductory part of chap. VIII of bk. I). The most striking thing about this lecture, however, is its anticipation of Jevons's doctrine of marginal utility, and its emphasis upon the subjective character of value. The word, margin, is used in virtually the sense in which Jevons uses it, on p. 16. The book is very rare,--only three copies, one in Professor Seligman's library, one in the British Museum, and one in the Goldsmiths' (formerly Foxwell) Library in London, are known to exist. It seems to have made no impression upon the economists of the time of its publication. A reprint to-day would enable the economic world to do belated justice to a very acute and original thinker. _Cf._ Professor Seligman's article "On Some Neglected British Economists" in the _Economic Journal_, vol. XIII, esp. pp. 357-63. [202] _Principles_, bk. III, chap. XV, par. 2. [203] _Leading Principles_, editions of 1878 and 1900, pp. 12-13. [204] _Psychologie Économique_, vol. I, pp. 77-78. [205] Scott, _Money and Banking_, 1903 ed., p. 60. [206] _Cf._ Schumpeter, _Quar. Jour. Econ._, Feb., 1909, pp. 226-27. [207] See _supra_, p. 163, n. [208] _Cf._ p. 50, n. It is sufficiently clear, I trust, that this argument is concerned with the relativity of _knowledge_, and not with the relativity of _value_. We can _know_ things only in terms of our "apperceptive mass," but that does not mean that things _exist_ only by virtue of our apperceptive mass. And even knowledge is relative only when it is "_Knowledge-about_." _Cf._ James, _Principles of Psychology_, vol. I, p. 221, and _The Meaning of Truth_, p. 4, n. [209] Marshall accords a limited recognition to our doctrine. See _Principles_, 1907 ed., p. 35, where he indicates that certain parts of the theory of value assume the prevailing ethical standards of our Western civilization, and that prices of various stock exchange securities are "normally" affected by the patriotic feelings of purchasers, and even brokers, etc. CHAPTER XVIII THE THEORY OF VALUE AND THE THEORY OF PRICES (_concluded_) My strictures upon the Austrian, or "utility" theory of value in what has gone before seem to call for further qualification here. As a theory of _value_, as a theory to explain the nature and origin of value, I am convinced that the Austrian theory is utterly and hopelessly inadequate. And yet, for the work of the Austrian economists, taken by and large, I have the highest admiration. Their treatment of margins, their conception of the motivating function of value, and their new stress on the demand side of the price-problem, constitute a marked advance over the point of view of the earlier English School, even though perhaps too extreme a reaction. And their detailed work in the price analysis, despite the utterly inadequate basis which the utility theory of value affords for it, has been marvelously accurate, sound, and useful. Having no logical warrant for an objectively valid quantitative value concept, they have none the less assumed and used one--and used it marvelously well. Sometimes that objective value is called by the name, "objective value." Sometimes they call it "marginal utility," and yet it is clearly anything but the feeling of an individual, for it is broken up into different parts, and reflected back and back through different productive goods of remoter and remoter rank till it has got very far from the individual who may be supposed to feel it. Production is the production, not of material things, but of "utilities"--and yet these utilities, as treated in the analysis, are anything but individual feeling-magnitudes, and the actual reasoning on the basis of them would not be different if they were called quantities of value outright. By logical leaps, by confusing "utility" with demand, or by confusing "marginal utility" with objective value,[210] the Austrians have got what the practical exigencies of price theory demand. A detailed estimate of the work of the Austrian School is, of course, out of place here, but I do not wish to be understood as failing to recognize the immense value of the work of men who have given so great an impetus to economic thought as has been the case with the Austrian masters. There is a further topic in connection with the relation between value theory and price theory that calls for more explicit attention here, though frequent reference has been made to it already. What is the relation of the distributive problem to value theory and to price theory? Is distribution a price problem or a value problem? It may be looked at from either angle, and treated in either way. A complete theory of distribution involves many of the most fundamental social values. Indeed, it is through the machinery of distribution that the non-economic values most vitally affect economic values. Wages, interest, competitive profits, are surely legal categories, and are possible only in a society where there is free labor and private control of industry. We may agree with Wieser[211] that, as categories of economic causation, interest, rent, and wages will remain even in a communistic society (and, doubtless, also profit and loss), but that is far from saying (as Wieser of course recognizes) that they would remain as distributive shares. Each social system has its own distributive scheme. But, in a system like that of Western civilization to-day, where human services and the uses of land and instrumental goods are offered in the market like other commodities, we may treat them in terms of the price analysis with as much propriety as the other commodities. The prices paid for them measure a complex of social forces, but we cannot always disentangle these social forces and measure them separately. It is hard to tell precisely how much influence on the price of labor has been exerted by a speech from Mr. Gompers, or a Federal injunction, or a law for the exclusion of certain classes of immigrants. If we wish to handle distribution quantitatively, we must do it superficially, studying in the market the effects which the underlying social forces manifest there with reference to the rewards of the different factors of production. This has been increasingly the case with later theories of distribution. If, on the other hand, we take the discussion which J. S. Mill gives in book II of his _Principles_, we shall find that the price analysis plays relatively little part, and that he considers chiefly the influence of the more fundamental social values.[212] A failure to recognize the distinction between value theory and price theory seems to lie behind the complaint which Professor Davenport makes against the "Social Value School" in his criticism of Professor Seligman: "As soon as we turn from the value problem to the separate treatment of the distributive shares, we find ourselves to have descended from the cloud-land mysteries of transcendental economics to the old and beaten paths of the traditional analysis."[213] To this complaint the obvious answer is that we have turned from fundamental value theory to abstract, quantitative price analysis. And the social value theorist has as much right to do this as has any other economist--in fact, if our theory be true, only on the basis of a social value doctrine has any economist a right (logically) to take up price analysis. The theory of value, as I conceive it, is, then, not a substitute for detailed price analysis, but rather a presupposition of it. The theory of value is to interpret, validate, and guide the theory of prices. If the theory here outlined be true, it will have significant consequences for the theory of prices, in that it will open up new problems for the price analysis to attack. There are many social forces which can be measured with substantial accuracy, and many more which can be, for purposes of theory, disentangled from the complex in which they appear, and treated by the methods of price analysis already discussed, which economic theory has not yet thought it worth while to attack. The economist must emulate the practical business man, in trying to treat in price terms the various social changes which affect economic values. There is much left for the theory of prices to do. The theory defended here, with its sharp sundering of values and prices, will, of course, criticize the mixing of the two. One chief criticism of the Austrian theory, and also of the theory of the English School in so far as it attempts to give a "real cost" doctrine, is that they are attempts to give both a theory of value and a theory of prices at the same time. Certainly we must object to Böhm-Bawerk's contention that the solving of the price problem _ipso facto_ solves the value problem.[214] The purpose of this book is, not _destructive_, but _reconstructive_. A detailed criticism of the various economic theories that have appeared, as theories of prices, is manifestly too big a task to be undertaken here. All of them cannot, of course, be accepted _in toto_, for there are, doubtless, irreconcilable differences among them at points. But it is the belief of the writer that the great bulk of what has been done in the study of the quasi-mathematical laws of prices is of substantial worth, that a recognition of the distinction between value theory and price theory, and of the confusions that result from mixing the two, will remove many seemingly irreconcilable differences between opposing schools, and that existing price theories are less to be criticized for what they affirm than for what they ignore and deny. Much of the significance of the theory of value for the interpretation of price theory has been indicated from time to time, in what has gone before. Prices have _meanings_. They express _values_. To understand the meanings of prices, we must know what the values mean. There is one further point in this connection which is so important that we shall give a separate chapter to it. FOOTNOTES: [210] _Vide supra_, chaps. V and XI. [211] _Natural Value_, _passim_. [212] Mill's self-congratulation on having written two books of his treatise without taking up the theory of value has been commented on by many economists. He was able to do this, because value theory meant price theory for him. Value theory in the sense of the theory of the forces of social control and motivation does appear in plenty in Mill's first two books, and also the wealth concept, which he connects with the idea of value, and a quantitative value concept, not formally defined, but probably all the more useful on that account. It was a sound instinct that led Mill to take up the problem of distribution before taking up the problem of "value." Really, in discussing distribution as he did, he was making a very real contribution to the ultimate value problem. [213] _Value and Distribution_, p. 451. [214] _Vide supra_, chap. IV. CHAPTER XIX THE THEORY OF VALUE AND THE SOCIAL OUTLOOK. SUMMARY The belief that social optimism and social pessimism are in an essential way linked with the theory of value is one that finds expression in a good many writers. The socialist theory of value is supposed to serve as a condemnation of the existing social _régime_; Professor Clark's system of value and distribution is often interpreted as justifying an optimistic outlook. This view is expressed by Professor Frank Fetter, for one, who especially stresses this aspect of value theory.[215] Professor Joseph Schumpeter, in his article on social value several times mentioned,[216] indicates that an optimistic social outlook is a necessary corollary of the theory of social value. Wieser's objection to the doctrine that economic value signifies social importance[217] seems to be based on the belief that the doctrine means, not merely that society is responsible for the existing value situation, but also that that situation is consequently a just and righteous one. And the same notion seems to be, in part at least, the inspiration of Professor Davenport's attack in his recent article in the _Quarterly Journal_.[218] It is not necessary to discuss here the question as to whether Professor Clark means that his theory should be so interpreted.[219] What I wish to insist upon is that no implication, either optimistic or pessimistic, as to the existing social order, can be drawn from the theory defended in this book. Whether or not economic values in particular cases correspond with ethical values, whether or not goods are ranked on the basis of their import for the ultimate welfare of society, and the extent to which this is the case, will depend on the extent to which the ethical forces in society prevail over the anti-ethical forces. The theory as such is neutral. Assume our existing society, modified in the one particular that competition shall henceforth be perfectly free, and still the conclusion does not follow. Idle sons of our multimillionaires may inherit ill-gotten wealth, may invest it and draw an endless income from it. With this income to back their desires, they may make the services of panders worth more than the services of statesmen and inventors. The values of goods depend on the more fundamental values of men, even though the values of men, under abstract economic laws, depend upon the value productivity of their labor or their possessions. The theory is a theory of economic value, even though the tremendous influence of ethical and other values be recognized as entering into economic values. They may be overpowered by opposing forces. The theory is a general theory, and holds for a decadent as well as for an improving society; for a society where justice reigns, if such a society there be, and for a society where corruption is rampant, and wolves prey. The justification of the existing social order is to be sought elsewhere--the theory of economic value, as such, does not contain it. * * * * * The main steps of our argument may be briefly recapitulated here: Value is a quantity, socially valid; value is not logically dependent upon exchange, but is logically antecedent to exchange; a circle in reasoning is involved if the relative conception of value be treated as ultimate; the Austrian theory, and the cost theory, and combinations of the two, all fail alike to lead us to an ultimate quantity of value; they fall into another circle, that of explaining value in terms of value, if they attempt to do so; the defect is in the highly abstract nature of the determinants of value which these theories start from; they abstract the individual mind from its connection with the social whole, and then abstract from the individual mind only those emotions which are directly concerned with the consumption and production of economic goods; this abstraction is necessitated by the individualistic, subjectivistic conception of society, which, growing out of the skeptical philosophy of Hume, has dominated economic theory ever since; present day sociology has rejected this conception of society, and has reëstablished the organic conception of society in psychological (rather than biological) terms, which make it possible to treat society as a whole as the source of the values of goods; this does not obviate the necessity for close analysis, nor does it, in itself, solve the problem, but it does give us an adequate point of view; the determinants of value include not only the highly abstract factors which the value theories here criticized have undertaken to handle arithmetically, but also all the other volitional factors in the intermental life of men in society--not an arithmetical synthesis of elements, but an organic whole; legal and ethical values are especially to be taken into account in a theory of economic value, particularly those most immediately concerned with distribution; the theory of value and the theory of prices are to be sharply distinguished. The function of economic values is the motivation of the economic activities of society. Value as treated by the cost theories, or value as a sum of money costs, is a blind thing, a product rather than an end, and fails utterly as a guiding, motivating principle for economic activity. It is the merit of the Austrian School to have pointed this out. But the abstract individual factors which the Austrians have substituted are just as helpless in explaining the motivation of social activity. Every man's course is made for him far more by outside forces than by his own individual motives. Economic activity in society is an intricate, complex thing, for the motivation of which no individual's motives can suffice. If motivated at all its guidance comes from something superindividual, and that something is social value. Ends, aims, purposes, desires, of many men, mutually interacting and mutually determining each other, modifying, stimulating, creating each other, take tangible, determinate shape, as economic values, and the technique of the social economic organization responds and carries them out. THE END FOOTNOTES: [215] _Principles of Economics_, New York, 1905, pp. 415 _et seq._ [216] "On the Concept of Social Value," _Quar. Jour. Econ._, 1909, pp. 222-23. [217] _Nat. Val._, p. 52, n. Quoted _supra_, chap. I. [218] "Social Productivity _vs._ Private Acquisition," _Quar. Jour. Econ._, Nov., 1910, pp. 112-13. "Economic productivity is not a matter of piety or merit or deserving, but only of commanding a price. Actors, teachers, preachers, lawyers, prostitutes, all do things that men are content to pay for. So wages may be earned by inditing libels against a rival candidate, or by setting fire to a competitor's refinery, or by sinking spices. The test of economic activity in a competitive society is the fact of private gain, irrespective of any ethical criteria, and unconcerned with any social accountancy.... If whiskey is wealth, distilleries are capital items. If Peruna is wealth, the kettle in which it is brewed must be accepted as capital. Then so is the house rented as a dive; and if the house is productive, and is therefore capital, so, also, must the inmates be producers according to their kind. The test of social welfare is invalid to stamp as unproductive any form of wealth, or any kind of labor. If jimmies are capital, being productive for their purpose, so also is burglary productive; if sandbags, so highway robbery.... Always and everywhere, in the competitive _régime_, the test of productivity is competitive gain." If only my conception of social value is granted, I may safely enough concede Professor Davenport all the depravity he can find in society, and recognize that that depravity has its part in the determination of the concrete values. Only, I would insist, virtue as well as depravity is a factor in the social will, and plays its rôle in determining economic values, and motivating economic activities. Legal values are not "absolute" values, in the sense that everybody obeys the law, but laws as well as lawlessness affect economic values. It may be well at this point for me to make clear my relation to Professor Davenport. Throughout this book, his theories have been subject to frequent criticism. The obvious reason is, of course, that he has made himself the leading critic of the social value concept, and hence, if that concept is to be defended, his point of view must be met. But, if that were all, he would have occupied far less of our space than has been the case. The fact is, in my judgment, that Professor Davenport is one of the commanding figures in economic theory. I think no economist has even approximated the clearness and explicitness with which he has set forth the presuppositions of the view which this book opposes, and that no economist has ever reasoned more clearly upon the basis of these presuppositions. Professor Davenport thus presents the very best object of attack, if one is to justify the social viewpoint in economic theory. My indebtedness to him is marked, and I have tried to indicate the fact from time to time in notes. His book has aided me greatly in clarifying my own ideas, and has also substantially abridged my bibliographical labors. With many of his criticisms of existing value theory, those criticisms, especially, which are concerned with the internal logical contradictions of existing value theory, I am in hearty accord. The chief difference between us at this point will be, I think, that I try to go further than he has gone. And the fundamental differences between his view and mine grow out of the different psychological, philosophical, and sociological presuppositions with which we start. I feel that the individualistic method of approaching the value problem is foredoomed, provided it be logically carried out, and I think Professor Davenport has logically carried it out! [219] I regret exceedingly that Professor Clark's absence from Columbia University during the academic year, 1910-11, has prevented my discussing this, and a host of other questions raised in this book, with him. INDEX OF NAMES Adams, T. S., 120, n. Anaximander, 60. Anaximenes, 60. Aristotle, 61, 101. Austrian School, 7, 8, 16, n., 17, 28, 29, 30, 31, 38, n., 39, 40, 41, chap. VI, 49, 108, 113, 119, 121, 125, 126, 152, n., 188-89, 192, 197, 198. Baldwin, M., 15, n., 56, 69, n., 73, 74, n., 75, 80, 84, 95, n., 167. Berkeley, G., 62. Böhm-Bawerk, E. von, 7, 29, 31, n., 37-39, 40, 44, n., 49, n., 121, 152, n., 192. Bradley, F. H., 65, n. Buckle, H. T., 153. Bullock, C. J., 4. Cairnes, J. E., 65, n., 177. Carey, H. C., 73. Carver, T. N., 16, 27, n. Clark, J. B., 3, 4, 5, 6, 7, 8, 13, 16, 30, n., 31-33, 39, chap. VII, 65, 139, n., 143-44, 152, n. 156, 165, 173, 174, 194, 196. Clow, F. R., 20, n. Commons, J. R., 157, n. Comte, A., 73. Conrad, J., 15, n., 127, n. Cooley, C. H., 56, 69, n., 77 _et seq._, 84, 157. Darwin, Charles, 63. Davenport, H. J., 6, 21, 22, n., 23, 27, n., 37, 41, 42, 66, 71, n., 87-89, 98, 113, n., 121, n., 122, 133, n., 140, n., 142, n., 175, n., 182, 191, 194, 195, n. DeGreef, G., 72-76. DesCartes, René, 62, 63, 81. Dewey, J., 65, n., 68, n., 84, n., 95, n., 96, n., 100, 168, n. Draper, J. W., 72. Durkheim, E., 117, n. Edgeworth, F. Y., 25. Ehrenfels, C., 94, 98, 106, n., 108, n., 110, n., 111, n. Elwood, C. A., 56, n., 76, n., 84, n. Ely, R. T., 17, n., 42, 118, n. English School, 17, 38, n., 47, 121, 164, 165, 166, 188, 192. Fetter, F., 194. Fisher, I., 17, 26, n., 43, n. Flux, A. W., 42, 120, n. George, Henry, 16. Giddings, F. H., 75, n., 82, 83. Goethe, J. W. von, 70. Gompers, S., 190. Hadley, A. T., 15, 42. Hayden, E. A., 56, n. Hayes, E. C., 155, n. Hegel, G. W. F., 63. Hermann, F. B. W. von., 38, n. Hesiod, 73. Hobson, J. A., 47, 49. Hume, David, 62, 63, 198. Ingram, J. K., 3, n. James, Wm., 65, n., 68, n., 184, n. Jevons, W. S., 4, 7, 25, 28, 29, 31, n., 34-36, 39, 40, 41, 42, 65, 73, 176, n. Johnson, A. S., 140, n. Kallen, H. M., 94, n. Kant, Immanuel, 25, 63, 67. King, Gregory, 169. Kinley, D., 4, 5, 27, n., 120, n. Kreibig, J. C., 94, n. Laughlin, J. L., 20, n., 26, 27, n., 49, n. Law, John, 171. Lilienfeld, P. von, 74. Lloyd, W. F., 176, n. Locke, John, 62. Mackenzie, J. S., 111, n. Malthus, T. R., 139. Marshall, A., 41, 42, 49, 65, 140, n., 177, 182, 185, n. Marx, Karl, 3, n., 15, 16, 26, 153. Meinong, A., 94, 95, n., 98, n., 99, 102, 111, n. Merriam, L. S., 4, 5, 27, n. Mill, James, 63, n. Mill, J. S., 37, 63, n., 74, n., 138, 143, 172, 177, 191. Montague, W. P., 94, n. Novikow, J., 74. Pantaleoni, M., 19, n. Pareto, V., 3, n., 20, n., 25, 31, n., 34, 36-37, 39, 40, n., 45, n., 65, 154, n. Patten, S. N., 42, 175. Paulsen, Friedrich, 69, n., 85, n., 95, n., 97, n. Perry, R. B., 70, n. Pierson, N. G., 41. Plato, 61, 184. Ricardo, David, 53, n., 175, 176. Rodbertus, J. K., 3, n., 8, 9. Ross, E. A., 4, 5, 117, n., 148, n., 173. Rousseau, J. J., 63. Royce, J., 117, n. Santayana, G., 96. Sax, E., 8. Schaeffle, A., 42, 120. Schiller, F. C. S., 68, n. Schumpeter, J., 6, 140, n., 175, 181, 194. Scott, W. A., 120, n., 180, n. Seligman, E. R. A., 4, 5, 6, n., 13, 16, 19, 20, n., 26, 32, n., 87, 145, 153, chap. XVI, 176, n., 177, n., 191. Senior, N. W., 26. Shaw, C. C., 95, n. Simiand, F., 74. Simmel, G., 19, n., 20, n., 94, n., 95. Skelton, O. D., 15, n. Slater, T., 95, n. Small, A. W., 63, n. Smith, Adam, 63, 176. Socrates, 61. Sophists, 60. Spencer, Herbert, 72, 83. Spinoza, Benedict de, 62, 63. Stuart, H. W., 68, n., 95, n., 168, n. Tarde, G., 4, 16, 56, 95, 97, n., 103, 118, n., chap. XII, 148, n., 172, 179. Taylor, W. G. L., 16, n., 23. Thackeray, W. M., 66. Thales, 60. Tufts, J. H., 95, n. Tuttle, C. A., 4. Urban, W. M., 70, n., 95, 97, n., 98, n., 99, 101, n., 103, 108, n., 110, n., 116, chap. XII, 167, n. Veblen, T., 30, n., 65. Wagner, Adolph, 3, n., 9. Walker, F. A., 25, 26, 137. Wicksteed, P. H., 111, n., 113, n. Wieser, F. von, 8, 16, 17, 18, 28, 29, 31, n., 34, 35, 40, 46, 47, 49, n., 120, n., 132, 133, 136, 137, 143, 190, 194. Wundt, W., 85, n. The Riverside Press CAMBRIDGE. MASSACHUSETTS U. S. A 
4336	----	AN INQUIRY INTO THE NATURE AND PROGRESS OF RENT AND THE PRINCIPLES BY WHICH IT IS REGULATED. By The Rev. T. R. Malthus _Professor of History and Political Economy In the East India College, Hertfordshire_ LONDON: PRINTED FOR JOHN MURRAY, ALBEMARLE STREET. 1815. Contents: Advertisement Rent Advertisement The following tract contains the substance of some notes on rent, which, with others on different subjects relating to political economy, I have collected in the course of my professional duties at the East India College. It has been my intention, at some time or other, to put them in a form for publication; and the very near connection of the subject of the present inquiry, with the topics immediately under discussion, has induced me to hasten its appearance at the present moment. It is the duty of those who have any means of contributing to the public stock of knowledge, not only to do so, but to do it at the time when it is most likely to be useful. If the nature of the disquisition should appear to the reader hardly to suit the form of a pamphlet, my apology must be, that it was not originally intended for so ephemeral a shape. RENT &c. The rent of land is a portion of the national revenue, which has always been considered as of very high importance. According to Adam Smith, it is one of the three original sources of wealth, on which the three great divisions of society are supported. By the Economists it is so pre-eminently distinguished, that it is considered as exclusively entitled to the name of riches, and the sole fund which is capable of supporting the taxes of the state, and on which they ultimately fall. And it has, perhaps, a particular claim to our attention at the present moment, on account of the discussions which are going on respecting the corn laws, and the effects of rent on the price of raw produce, and the progress of agricultural improvement. The rent of land may be defined to be that portion of the value of the whole produce which remains to the owner of the land, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate of the profits of agricultural stock at the time being. It sometimes happens, that from accidental and temporary circumstances, the farmer pays more, or less, than this; but this is the point towards which the actual rents paid are constantly gravitating, and which is therefore always referred to when the term is used in a general sense. The immediate cause of rent is obviously the excess of price above the cost of production at which raw produce sells in the market. The first object therefore which presents itself for inquiry, is the cause or causes of the high price of raw produce. After very careful and repeated revisions of the subject, I do not find myself able to agree entirely in the view taken of it, either by Adam Smith, or the Economists; and still less, by some more modern writers. Almost all these writers appear to me to consider rent as too nearly resembling in its nature, and the laws by which it is governed, the excess of price above the cost of production, which is the characteristic of a monopoly. Adam Smith, though in some parts of the eleventh chapter of his first book he contemplates rent quite in its true light, [1] and has interspersed through his work more just observations on the subject than any other writer, has not explained the most essential cause of the high price of raw produce with sufficient distinctness, though he often touches on it; and by applying occasionally the term monopoly to the rent of land, without stopping to mark its more radical peculiarities, he leaves the reader without a definite impression of the real difference between the cause of the high price of the necessaries of life, and of monopolized commodities. Some of the views which the Economists have taken of the nature of rent appear to me, in like manner, to be quite just; but they have mixed them with so much error, and have drawn such preposterous and contradictory conclusions from them, that what is true in their doctrines, has been obscured and lost in the mass of superincumbent error, and has in consequence produced little effect. Their great practical conclusion, namely, the propriety of taxing exclusively the net rents of the landlords, evidently depends upon their considering these rents as completely disposable, like that excess of price above the cost of production which distinguishes a common monopoly. M. Say, in his valuable treatise on political economy, in which he has explained with great clearness many points which have not been sufficiently developed by Adam Smith, has not treated the subject of rent in a manner entirely satisfactory. In speaking of the different natural agents which, as well as the land, co-operate with the labours of man, he observes, 'Heureusement personne n'a pu dire le vent et le soleil m'appartiennent, et le service qu'ils rendent doit m'etre paye.' [2] And, though he acknowledges that, for obvious reasons, property in land is necessary, yet he evidently considers rent as almost exclusively owing to such appropriation, and to external demand. In the excellent work of M. de Sismondi, De la richesse commerciale, he says in a note on the subject of rent, 'Cette partie de la rente fonciere est celle que les Economistes ont decoree du nom du produit net comme etant le seul fruit du travail qui aj outat quelquechose a la richesse nationale. On pourrait au contraire soutenir contre eux, que c'est la seule partie du produit du travail, dont la valeur soit purement nominale, et n'ait rien de reelle: c'est en effet le resultat de l'augmentation de prix qu'obtient un vendeur en vertu de son privilege, sans que la chose vendue en vaille reellement d'avantage.' [3] The prevailing opinions among the more modern writers in our own country, have appeared to me to incline towards a similar view of the subject; and, not to multiply citations, I shall only add, that in a very respectable edition of the Wealth of nations, lately published by Mr Buchanan, of Edinburgh, the idea of monopoly is pushed still further. And while former writers, though they considered rent as governed by the laws of monopoly, were still of opinion that this monopoly in the case of land was necessary and useful, Mr Buchanan sometimes speaks of it even as prejudicial, and as depriving the consumer of what it gives to the landlord. In treating of productive and unproductive labour in the last volume, he observes, [4] that, 'The net surplus by which the Economists estimate the utility of agriculture, plainly arises from the high price of its produce, which, however advantageous to the landlord who receives it, is surely no advantage to the consumer who pays it. Were the produce of agriculture to be sold for a lower price, the same net surplus would not remain, after defraying the expenses of cultivation; but agriculture would be still equally productive to the general stock; and the only difference would be, that as the landlord was formerly enriched by the high price, at the expense of the community, the community would now profit by the low price at the expense of the landlord. The high price in which the rent or net surplus originates, while it enriches the landlord who has the produce of agriculture to sell, diminishes in the same proportion the wealth of those who are its purchasers; and on this account it is quite inaccurate to consider the landlord's rent as a clear addition to the national wealth.' In other parts of his work he uses the same, or even stronger language, and in a note on the subject of taxes, he speaks of the high price of the produce of land as advantageous to those who receive it, it but proportionably injurious to those who pay it. 'In this view,' he adds, 'it can form no general addition to the stock of the community, as the net surplus in question is nothing more than a revenue transferred from one class to another, and from the mere circumstance of its thus changing hands, it is clear that no fund can arise out of which to pay taxes. The revenue which pays for the produce of land exists already in the hands of those who purchase that produce; and, if the price of subsistence were lower, it would still remain in their hands, where it would be just as available for taxation, as when by a higher price it is transferred to the landed proprietor.' [5] That there are some circumstances connected with rent, which have an affinity to a natural monopoly, will be readily allowed. The extent of the earth itself is limited, and cannot be enlarged by human demand. And the inequality of soils occasions, even at an early period of society a comparative scarcity of the best lands; and so far is undoubtedly one of the causes of rent properly so called. On this account, perhaps, the term partial monopoly might be fairly applicable. But the scarcity of land, thus implied, is by no means alone sufficient to produce the effects observed. And a more accurate investigation of the subject will show us how essentially different the high price of raw produce is, both in its nature and origin, and the laws by which it is governed, from the high price of a common monopoly. The causes of the high price of raw produce may be stated to be three. First, and mainly, that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land. Secondly, that quality peculiar to the necessaries of life of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced. And, thirdly, the comparative scarcity of the most fertile land. The qualities of the soil and of its products, here noticed as the primary causes of the high price of raw produce, are the gifts of nature to man. They are quite unconnected with monopoly, and yet are so absolutely essential to the existence of rent, that without them, no degree of scarcity or monopoly could have occasioned that excess of the price of raw produce, above the cost of production, which shows itself in this form. If, for instance, the soil of the earth had been such, that, however well directed might have been the industry of man, he could not have produced from it more than was barely sufficient to maintain those, whose labour and attention were necessary to its products; though, in this case, food and raw materials would have been evidently scarcer than at present, and the land might have been, in the same manner, monopolized by particular owners; vet it is quite clear, that neither rent, nor any essential surplus produce of the land in the form of high profits, could have existed. It is equally clear, that if the necessaries of life the most important products of land--had not the property of creating an increase of demand proportioned to their increased quantity, such increased quantity would occasion a fall in their exchangeable value. However abundant might be the produce of a country, its population might remain stationary And this abundance, without a proportionate demand, and with a very high corn price of labour, which would naturally take place under these circumstances, might reduce the price of raw produce, like the price of manufactures, to the cost of production. It has been sometimes argued, that it is mistaking the principle of population, to imagine, that the increase of food, or of raw produce alone, can occasion a proportionate increase of population. This is no doubt true; but it must be allowed, as has been justly observed by Adam Smith, that 'when food is provided, it is comparatively easy to find the necessary clothing and lodging. And it should always be recollected, that land does not produce one commodity alone, but in addition to that most indispensable of all commodities--food--it produces also the materials for the other necessaries of life; and the labour required to work up these materials is of course never excluded from the consideration. [6] It is, therefore, strictly true, that land produces the necessaries of life, produces food, materials, and labour, produces the means by which, and by which alone, an increase of people may be brought into being, and supported. In this respect it is fundamentally different from every other kind of machine known to man; and it is natural to suppose, that it should be attended with some peculiar effects. If the cotton machinery, in this country, were to go on increasing at its present rate, or even much faster; but instead of producing one particular sort of substance which may be used for some parts of dress and furniture, etc. had the qualities of land, and could yield what, with the assistance of a little labour, economy, and skill, could furnish food, clothing, and lodging, in such proportions as to create an increase of population equal to the increased supply of these necessaries; the demand for the products of such improved machinery would continue in excess above the cost of production, and this excess would no longer exclusively belong to the machinery of the land. [7] There is a radical difference in the cause of a demand for those objects which are strictly necessary to the support of human life, and a demand for all other commodities. In all other commodities the demand is exterior to, and independent of, the production itself; and in the case of a monopoly, whether natural or artificial, the excess of price is in proportion to the smallness of the supply compared with the demand, while this demand is comparatively unlimited. In the case of strict necessaries, the existence and increase of the demand, or of the number of demanders, must depend upon the existence and increase of these necessaries themselves; and the excess of their price above the cost of their production must depend upon, and is permanently limited by, the excess of their quantity above the quantity necessary to maintain the labour required to produce them; without which excess of quantity no demand could have existed, according to the laws of nature, for more than was necessary to support the producers. It has been stated, in the new edition of the Wealth of nations, that the cause of the high price of raw produce is, that such price is required to proportion the consumption to the supply. [8] This is also true, but it affords no solution of the point in question. We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the fertility of the earth in producing the necessaries of life. Diminish this plenty, diminish the fertility of the soil, and the excess will diminish; diminish it still further, and it will disappear. The cause of the high price of the necessaries of life above the cost of production, is to be found in their abundance, rather than their scarcity; and is not only essentially different from the high price occasioned by artificial monopolies, but from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies. The produce of certain vineyards in France, which, from the peculiarity of their soil and situation, exclusively yield wine of a certain flavour, is sold of course at a price very far exceeding the cost of production. And this is owing to the greatness of the competition for such wine, compared with the scantiness of its supply; which confines the use of it to so small a number of persons, that they are able, and rather than go without it, willing, to give an excessively high price. But if the fertility of these lands were increased, so as very considerably to increase the produce, this produce might so fall in value as to diminish most essentially the excess of its price above the cost of production. While, on the other hand, if the vineyards were to become less productive, this excess might increase to almost any extent. The obvious cause of these effects is, that in all monopolies, properly so called, whether natural or artificial, the demand is exterior to, and independent of, the production itself. The number of persons who might have a taste for scarce wines, and would be desirous of entering into a competition for the purchase of them, might increase almost indefinitely, while the produce itself was decreasing; and its price, therefore, would have no other limit than the numbers, powers, and caprices, of the competitors for it. In the production of the necessaries of life, on the contrary, the demand is dependent upon the produce itself; and the effects are, in consequence, widely different. In this case, it is physically impossible that the number of demanders should increase, while the quantity of produce diminishes, as the demanders only exist by means of this produce. The fertility of soil, and consequent abundance of produce from a certain quantity of land, which, in the former case, diminished the excess of price above the cost of production, is, in the present case, the specific cause of such excess; and the diminished fertility, which in the former case might increase the price to almost any excess above the cost of production, may be safely asserted to be the sole cause which could permanently maintain the necessaries of life at a price not exceeding the cost of production. Is it, then, possible to consider the price of the necessaries of life as regulated upon the principle of a common monopoly? Is it possible, with M. de Sismondi, to regard rent as the sole produce of labour, which has a value purely nominal, and the mere result of that augmentation of price which a seller obtains in consequence of a peculiar privilege; or, with Mr Buchanan, to consider it as no addition to the national wealth, but merely as a transfer of value, advantageous only to the landlords, and proportionately injurious to the consumers? Is it not, on the contrary, a clear indication of a most inestimable quality in the soil, which God has bestowed on man--the quality of being able to maintain more persons than are necessary to work it? Is it not a part, and we shall see further on that it is an absolutely necessary part, of that surplus produce from the land, [9] which has been justly stated to be the source of all power and enjoyment; and without which, in fact, there would be no cities, no military or naval force, no arts, no learning, none of the finer manufactures, none of the conveniences and luxuries of foreign countries, and none of that cultivated and polished society, which not only elevates and dignifies individuals, but which extends its beneficial influence through the whole mass of the people? In the early periods of society, or more remarkably perhaps, when the knowledge and capital of an old society are employed upon fresh and fertile land, this surplus produce, this bountiful gift of providence, shows itself chiefly in extraordinary high profits, and extraordinary high wages, and appears but little in the shape of rent. While fertile land is in abundance, and may be had by whoever asks for it, nobody of course will pay a rent to a landlord. But it is not consistent with the laws of nature, and the limits and quality of the earth, that this state of things should continue. Diversities of soil and situation must necessarily exist in all countries. All land cannot be the most fertile: all situations cannot be the nearest to navigable rivers and markets. But the accumulation of capital beyond the means of employing it on land of the greatest natural fertility, and the greatest advantage of situation, must necessarily lower profits; while the tendency of population to increase beyond the means of subsistence must, after a certain time, lower the wages of labour. The expense of production will thus be diminished, but the value of the produce, that is, the quantity of labour, and of the other products of labour besides corn, which it can command, instead of diminishing, will be increased. There will be an increasing number of people demanding subsistence, and ready to offer their services in any way in which they can be useful. The exchangeable value of food will, therefore, be in excess above the cost of production, including in this cost the full profits of the stock employed upon the land, according to the actual rate of profits, at the time being. And this excess is rent. Nor is it possible that these rents should permanently remain as parts of the profits of stock, or of the wages of labour. If such an accumulation were to take place, as decidedly to lower the general profits of stock, and, consequently, the expenses of cultivation, so as to make it answer to cultivate poorer land; the cultivators of the richer land, if they paid no rent, would cease to be mere farmers, or persons living upon the profits of agricultural stock. They would unite the characters of farmers and landlords--a union by no means uncommon; but which does not alter, in any degree, the nature of rent, or its essential separation from profits. If the general profits of stock were 20 per cent and particular portions of land would yield 30 per cent on the capital employed, 10 per cent of the 30 would obviously be rent, by whomsoever received. It happens, indeed, sometimes, that from bad government, extravagant habits, and a faulty constitution of society, the accumulation of capital is stopped, while fertile land is in considerable plenty, in which case profits may continue permanently very high; but even in this case wages must necessarily fall, which by reducing the expenses of cultivation must occasion rents. There is nothing so absolutely unavoidable in the progress of society as the fall of wages, that is such a fall as, combined with the habits of the labouring classes, will regulate the progress of population according to the means of subsistence. And when, from the want of an increase of capital, the increase of produce is checked, and the means of subsistence come to a stand, the wages of labour must necessarily fall so low, as only just to maintain the existing population, and to prevent any increase. We observe in consequence, that in all those countries, such as Poland, where, from the want of accumulation, the profits of stock remain very high, and the progress of cultivation either proceeds very slowly, or is entirely stopped, the wages of labour are extremely low. And this cheapness of labour, by diminishing the expenses of cultivation, as far as labour is concerned, counteracts the effects of the high profits of stock, and generally leaves a larger rent to the landlord than in those countries, such as America, where, by a rapid accumulation of stock, which can still find advantageous employment, and a great demand for labour, which is accompanied by an adequate increase of produce and population, profits cannot be low, and labour for some considerable time remains very high. It may be laid down, therefore, as an incontrovertible truth, that as a nation reaches any considerable degree of wealth, and any considerable fullness of population, which of course cannot take place without a great fall both in the profits of stock and the wages of labour, the separation of rents, as a kind of fixture upon lands of a certain quality, is a law as invariable as the action of the principle of gravity. And that rents are neither a mere nominal value, nor a value unnecessarily and injuriously transferred from one set of people to another; but a most real and essential part of the whole value of the national property, and placed by the laws of nature where they are, on the land, by whomsoever possessed, whether the landlord, the crown, or the actual cultivator. Rent then has been traced to the same common nature with that general surplus from the land, which is the result of certain qualities of the soil and its products; and it has been found to commence its separation from profits, as soon as profits and wages fall, owing to the comparative scarcity of fertile land in the natural progress of a country towards wealth and population. Having examined the nature and origin of rent, it remains for us to consider the laws by which it is governed, and by which its increase or decrease is regulated. When capital has accumulated, and labour fallen on the most eligible lands of a country, other lands less favourably circumstanced with respect to fertility or situation, may be occupied with advantage. The expenses of cultivation, including profits, having fallen, poorer land, or land more distant from markets, though yielding at first no rent, may fully repay these expenses, and fully answer to the cultivator. And again, when either the profits of stock or the wages of labour, or both, have still further fallen, land still poorer, or still less favourably situated, may be taken into cultivation. And, at every step, it is clear, that if the price of produce does not fall, the rents of land will rise. And the price of produce will not fall, as long as the industry and ingenuity of the labouring classes, assisted by the capitals of those not employed upon the land, can find something to give in exchange to the cultivators and landlords, which will stimulate them to continue undiminished their agricultural exertions, and maintain their increasing excess of produce. In tracing more particularly the laws which govern the rise and fall of rents, the main causes which diminish the expenses of cultivation, or reduce the cost of the instruments of production, compared with the price of produce, require to be more specifically enumerated. The principal of these seem to be four: first, such an accumulation of capital as will lower the profits of stock; secondly, such an increase of population as will lower the wages of labour; thirdly, such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect; and fourthly, such an increase in the price of agricultural produce, from increased demand, as without nominally lowering the expense of production, will increase the difference between this expense and the price of produce. The operation of the three first causes in lowering the expenses of cultivation, compared with the price of produce, are quite obvious; the fourth requires a few further observations. If a great and continued demand should arise among surrounding nations for the raw produce of a particular country, the price of this produce would of course rise considerably; and the expenses of cultivation, rising only slowly and gradually to the same proportion, the price of produce might for a long time keep so much ahead, as to give a prodigious stimulus to improvement, and encourage the employment of much capital in bringing fresh land under cultivation, and rendering the old much more productive. Nor would the effect be essentially different in a country which continued to feed its own people, if instead of a demand for its raw produce, there was the same increasing demand for its manufactures. These manufactures, if from such a demand the value of their amount in foreign countries was greatly to increase, would bring back a great increase of value in return, which increase of value could not fail to increase the value of the raw produce. The demand for agricultural as well as manufactured produce would be augmented; and a considerable stimulus, though not perhaps to the same extent as in the last case, would be given to every kind of improvement on the land. A similar effect would be produced by the introduction of new machinery, and a more judicious division of labour in manufactures. It almost always happens in this case, not only that the quantity of manufactures is very greatly increased, but that the value of the whole mass is augmented, from the great extension of the demand for them, occasioned by their cheapness. We see, in consequence, that in all rich manufacturing and commercial countries, the value of manufactured and commercial products bears a very high proportion to the raw products; [10] whereas, in comparatively poor countries, without much internal trade and foreign commerce, the value of their raw produce constitutes almost the whole of their wealth. If we suppose the wages of labour so to rise with the rise of produce, as to give the labourer the same command of the means of subsistence as before, yet if he is able to purchase a greater quantity of other necessaries and conveniencies, both foreign and domestic, with the price of a given quantity of corn, he may be equally well fed, clothed, and lodged, and population may be equally encouraged, although the wages of labour may not rise so high in proportion as the price of produce. And even when the price of labour does really rise in proportion to the price of produce, which is a very rare case, and can only happen when the demand for labour precedes, or is at least quite contemporary with the demand for produce; it is so impossible that all the other outgoings in which capital is expended, should rise precisely in the same proportion, and at the same time, such as compositions for tithes, parish rates, taxes, manure, and the fixed capital accumulated under the former low prices, that a period of some continuance can scarcely fail to occur, when the difference between the price of produce and the cost of production is increased. In some of these cases, the increase in the price of agricultural produce, compared with the cost of the instruments of production, appears from what has been said to be only temporary; and in these instances it will often give a considerable stimulus to cultivation, by an increase of agricultural profits, without showing itself much in the shape of rent. It hardly ever fails, however, to increase rent ultimately. The increased capital, which is employed in consequence of the opportunity of making great temporary profits, can seldom if ever be entirely removed from the land, at the expiration of the current leases; and, on the renewal of these leases, the landlord feels the benefit of it in the increase of his rents. Whenever then, by the operation of the four causes above mentioned, the difference between the price of produce and the cost of the instruments of production increases, the rents of land will rise. It is, however, not necessary that all these four causes should operate at the same time; it is only necessary that the difference here mentioned should increase. If, for instance, the price of produce were to rise, while the wages of labour, and the price of the other branches of capital did not rise in proportion, and at the same time improved modes of agriculture were coming into general use, it is evident that this difference might be increased, although the profits of agricultural stock were not only undiminished, but were to rise decidedly higher. Of the great additional quantity of capital employed upon the land in this country, during the last twenty years, by far the greater part is supposed to have been generated on the soil, and not to have been brought from commerce or manufactures. And it was unquestionably the high profits of agricultural stock, occasioned by improvements in the modes of agriculture, and by the constant rise of prices, followed only slowly by a proportionate rise in the different branches of capital, that afforded the means of so rapid and so advantageous an accumulation. In this case cultivation has been extended, and rents have risen, although one of the instruments of production, capital, has been dearer. In the same manner a fall of profits and improvements in agriculture, or even one of them separately, might raise rents, notwithstanding a rise of wages. It may be laid down then as a general truth, that rents naturally rise as the difference between the price of produce and the cost of the instruments of production increases. It is further evident, that no fresh land can be taken into cultivation till rents have risen, or would allow of a rise upon what is already cultivated. Land of an inferior quality requires a great quantity of capital to make it yield a given produce; and, if the actual price of this produce be not such as fully to compensate the cost of production, including the existing rate of profits, the land must remain uncultivated. It matters not whether this compensation is effected by an increase in the money price of raw produce, without a proportionate increase in the money price of the instruments of production, or by a decrease in the price of the instruments of production, without a proportionate decrease in the price of produce. What is absolutely necessary, is a greater relative cheapness of the instruments of production, to make up for the quantity of them required to obtain a given produce from poor land. But whenever, by the operation of one or more of the causes before mentioned, the instruments of production become cheaper, and the difference between the price of produce and the expenses of cultivation increases, rents naturally rise. It follows therefore as a direct and necessary consequence, that it can never answer to take fresh land of a poorer quality into cultivation, till rents have risen or would allow of a rise, on what is already cultivated. It is equally true, that without the same tendency to a rise of rents, occasioned by the operation of the same causes, it cannot answer to lay out fresh capital in the improvement of old land--at least upon the supposition, that each farm is already furnished with as much capital as can be laid out to advantage, according to the actual rate of profits. It is only necessary to state this proposition to make its truth appear. It certainly may happen, and I fear it happens frequently, that farmers are not provided with all the capital which could be employed upon their farms, at the actual rate of agricultural profits. But supposing they are so provided, it implies distinctly, that more could not be applied without loss, till, by the operation of one or more of the causes above enumerated, rents had tended to rise. It appears then, that the power of extending cultivation and increasing produce, both by the cultivation of fresh land and the improvement of the old, depends entirely upon the existence of such prices, compared with the expense of production, as would raise rents in the actual state of cultivation. But though cultivation cannot be extended, and the produce of the country increased, but in such a state of things as would allow of a rise of rents, yet it is of importance to remark, that this rise of rents will be by no means in proportion to the extension of cultivation, or the increase of produce. Every relative fall in the price of the instruments of production, may allow of the employment of a considerable quantity of additional capital; and when either new land is taken into cultivation, or the old improved, the increase of produce may be considerable, though the increase of rents be trifling. We see, in consequence, that in the progress of a country towards a high state of cultivation, the quantity of capital employed upon the land, and the quantity of produce yielded by it, bears a constantly increasing proportion to the amount of rents, unless counterbalanced by extraordinary improvements in the modes of cultivation. [11] According to the returns lately made to the Board of Agriculture, the average proportion which rent bears to the value of the whole produce, seems not to exceed one fifth; [12] whereas formerly, when there was less capital employed, and less value produced, the proportion amounted to one fourth, one third, or even two fifths. Still, however, the numerical difference between the price of produce and the expenses of cultivation, increases with the progress of improvement; and though the landlord has a less share of the whole produce, yet this less share, from the very great increase of the produce, yields a larger quantity, and gives him a greater command of corn and labour. If the produce of land be represented by the number six, and the landlord has one fourth of it, his share will be represented by one and a half. If the produce of land be as ten, and the landlord has one fifth of it, his share will be represented by two. In the latter case, therefore, though the proportion of the landlord's share to the whole produce is greatly diminished, his real rent, independently of nominal price, will be increased in the proportion of from three to four. And in general, in all cases of increasing produce, if the landlord's share of this produce do not diminish in the same proportion, which though it often happens during the currency of leases, rarely or never happens on the renewal of them, the real rents of land must rise. We see then, that a progressive rise of rents seems to be necessarily connected with the progressive cultivation of new land, and the progressive improvement of the old: and that this rise is the natural and necessary consequence of the operation of four causes, which are the most certain indications of increasing prosperity and wealth--namely, the accumulation of capital, the increase of population, improvements in agriculture, and the high price of raw produce, occasioned by the extension of our manufactures and commerce. On the other hand, it will appear, that a fall of rents is as necessarily connected with the throwing of inferior land out of cultivation, and the continued deterioration of the land of a superior quality; and that it is the natural and necessary consequence of causes, which are the certain indications of poverty and decline, namely, diminished capital, diminished population, a bad system of cultivation, and the low price of raw produce. If it be true, that cultivation cannot be extended but under such a state of prices, compared with the expenses of production, as will allow of an increase of rents, it follows naturally that under such a state of relative prices as will occasion a fall of rents, cultivation must decline. If the instruments of production become dearer, compared with the price of produce, it is a certain sign that they are relatively scarce; and in all those cases where a large quantity of them is required, as in the cultivation of poor land, the means of procuring them will be deficient, and the land will be thrown out of employment. It appeared, that in the progress of cultivation and of increasing rents, it was not necessary that all the instruments of production should fall in price at the same time; and that the difference between the price of produce and the expense of cultivation might increase, although either the profits of stock or the wages of labour might be higher, instead of lower. In the same manner, when the produce of a country is declining, and rents are falling, it is not necessary that all the instruments of production should be dearer. In a declining or stationary country, one most important instrument of production is always cheap, namely, labour; but this cheapness of labour does not counterbalance the disadvantages arising from the dearness of capital; a bad system of culture; and, above all, a fall in the price of raw produce, greater than in the price of the other branches of expenditure, which, in addition to labour, are necessary to cultivation. It has appeared also, that in the progress of cultivation and of increasing rents, rent, though greater in positive amount, bears a less, and lesser proportion to the quantity of capital employed upon the land, and the quantity of produce derived from it. According to the same principle, when produce diminishes and rents fall, though the amount of rent will always be less, the proportion which it bears to capital and produce will always be greater. And, as in the former case, the diminished proportion of rent was owing to the necessity of yearly taking fresh land of an inferior quality into cultivation, and proceeding in the improvement of old land, when it would return only the common profits of stock, with little or no rent; so, in the latter case, the high proportion of rent is owing to the impossibility of obtaining produce, whenever a great expenditure is required, and the necessity of employing the reduced capital of the country, in the exclusive cultivation of its richest lands. In proportion, therefore, as the relative state of prices is such as to occasion a progressive fall of rents, more and more lands will be gradually thrown out of cultivation, the remainder will be worse cultivated, and the diminution of produce will proceed still faster than the diminution of rents. If the doctrine here laid down, respecting the laws which govern the rise and fall of rents, be near the truth, the doctrine which maintains that, if the produce of agriculture were sold at such a price as to yield less net surplus, agriculture would be equally productive to the general stock, must be very far from the truth. With regard to my own conviction, indeed, I feel no sort of doubt that if, under the impression that the high price of raw produce, which occasions rent, is as injurious to the consumer as it is advantageous to the landlord, a rich and improved nation were determined by law, to lower the price of produce, till no surplus in the shape of rent anywhere remained; it would inevitably throw not only all the poor land, but all, except the very best land, out of cultivation, and probably reduce its produce and population to less than one tenth of their former amount. From the preceding account of the progress of rent, it follows, that the actual state of the natural rent of land is necessary to the actual produce; and that the price of produce, in every progressive country, must be just about equal to the cost of production on land of the poorest quality actually in use; or to the cost of raising additional produce on old land, which yields only the usual returns of agricultural stock with little or no rent. It is quite obvious that the price cannot be less; or such land would not be cultivated, nor such capital employed. Nor can it ever much exceed this price, because the poor land progressively taken into cultivation, yields at first little or no rent; and because it will always answer to any farmer who can command capital, to lay it out on his land, if the additional produce resulting from it will fully repay the profits of his stock, although it yields nothing to his landlord. It follows then, that the price of raw produce, in reference to the whole quantity raised, is sold at the natural or necessary price, that is, at the price necessary to obtain the actual amount of produce, although by far the largest part is sold at a price very much above that which is necessary to its production, owing to this part being produced at less expense, while its exchangeable value remains undiminished. The difference between the price of corn and the price of manufactures, with regard to natural or necessary price, is this; that if the price of any manufacture were essentially depressed, the whole manufacture would be entirely destroyed; whereas, if the price of corn were essentially depressed, the quantity of it only would be diminished. There would be some machinery in the country still capable of sending the commodity to market at the reduced price. The earth has been sometimes compared to a vast machine, presented by nature to man for the production of food and raw materials; but, to make the resemblance more just, as far as they admit of comparison, we should consider the soil as a present to man of a great number of machines, all susceptible of continued improvement by the application of capital to them, but yet of very different original qualities and powers. This great inequality in the powers of the machinery employed in procuring raw produce, forms one of the most remarkable features which distinguishes the machinery of the land from the machinery employed in manufactures. When a machine in manufactures is invented, which will produce more finished work with less labour and capital than before, if there be no patent, or as soon as the patent is over, a sufficient number of such machines may be made to supply the whole demand, and to supersede entirely the use of all the old machinery. The natural consequence is, that the price is reduced to the price of production from the best machinery, and if the price were to be depressed lower, the whole of the commodity would be withdrawn from the market. The machines which produce corn and raw materials on the contrary, are the gifts of nature, not the works of man; and we find, by experience, that these gifts have very different qualities and powers. The most fertile lands of a country, those which, like the best machinery in manufactures, yield the greatest products with the least labour and capital, are never found sufficient to supply the effective demand of an increasing population. The price of raw produce, therefore, naturally rises till it becomes sufficiently high to pay the cost of raising it with inferior machines, and by a more expensive process; and, as there cannot be two prices for corn of the same quality, all the other machines, the working of which requires less capital compared with the produce, must yield rents in proportion to their goodness. Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every large territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and, as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to show at once the necessity of the actual price of corn to the actual produce, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce. I hope to be excused for dwelling a little, and presenting to the reader in various forms the doctrine, that corn in reference to the quantity actually produced is sold at its necessary price like manufactures, because I consider it as a truth of the highest importance, which has been entirely overlooked by the Economists, by Adam Smith, and all those writers who have represented raw produce as selling always at a monopoly price. Adam Smith has very clearly explained in what manner the progress of wealth and improvement tends to raise the price of cattle, poultry, the materials of clothing and lodging, the most useful minerals, etc., etc. compared with corn; but he has not entered into the explanation of the natural causes which tend to determine the price of corn. He has left the reader, indeed, to conclude, that he considers the price of corn as determined only by the state of the mines which at the time supply the circulating medium of the commercial world. But this is a cause obviously inadequate to account for the actual differences in the price of grain, observable in countries at no great distance from each other, and at nearly the same distance from the mines. I entirely agree with him, that it is of great use to inquire into the causes of high price; as, from the result of such inquiry, it may turn out, that the very circumstance of which we complain, may be the necessary consequence and the most certain sign of increasing wealth and prosperity. But, of all inquiries of this kind, none surely can be so important, or so generally interesting, as an inquiry into the causes which affect the price of corn, and which occasion the differences in this price, so observable in different countries. I have no hesitation in stating that, independently of irregularities in the currency of a country, [13] and other temporary and accidental circumstances, the cause of the high comparative money price of corn is its high comparative real price, or the greater quantity of capital and labour which must be employed to produce it: and that the reason why the real price of corn is higher and continually rising in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land--to machines which require a greater expenditure to work them--and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost--in short, it is to be found in the important truth that corn, in a progressive country, is sold at the price necessary to yield the actual supply; and that, as this supply becomes more and more difficult, the price rises in proportion. [14] The price of corn, as determined by these causes, will of course be greatly modified by other circumstances; by direct and indirect taxation; by improvements in the modes of cultivation; by the saving of labour on the land; and particularly by the importations of foreign corn. The latter cause, indeed, may do away, in a considerable degree, the usual effects of great wealth on the price of corn; and this wealth will then show itself in a different form. Let us suppose seven or eight large countries not very distant from each other, and not very differently situated with regard to the mines. Let us suppose further, that neither their soils nor their skill in agriculture are essentially unlike; that their currencies are in a natural state; their taxes nothing; and that every trade is free, except the trade in corn. Let us now suppose one of them very greatly to increase in capital and manufacturing skill above the rest, and to become in consequence much more rich and populous. I should say, that this great comparative increase of riches could not possibly take place, without a great comparative advance in the price of raw produce; and that such advance of price would, under the circumstances supposed, be the natural sign and absolutely necessary consequence, of the increased wealth and population of the country in question. Let us now suppose the same countries to have the most perfect freedom of intercourse in corn, and the expenses of freight, etc. to be quite inconsiderable. And let us still suppose one of them to increase very greatly above the rest, in manufacturing capital and skill, in wealth and population. I should then say, that as the importation of corn would prevent any great difference in the price of raw produce, it would prevent any great difference in the quantity of capital laid out upon the land, and the quantity of corn obtained from it; that, consequently, the great increase of wealth could not take place without a great dependence on the other nations for corn; and that this dependence, under the circumstances supposed, would be the natural sign, and absolutely necessary consequence of the increased wealth and population of the country in question. These I consider as the two alternatives necessarily belonging to a great comparative increase of wealth; and the supposition here made will, with proper restrictions, apply to the state of Europe. In Europe, the expenses attending the carriage of corn are often considerable. They form a natural barrier to importation; and even the country which habitually depends upon foreign corn, must have the price of its raw produce considerably higher than the general level. Practically, also, the prices of raw produce, in the different countries of Europe, will be variously modified by very different soils, very different degrees of taxation, and very different degrees of improvement in the science of agriculture. Heavy taxation, and a poor soil, may occasion a high comparative price of raw produce, or a considerable dependence on other countries, without great wealth and population; while great improvements in agriculture and a good soil may keep the price of produce low, and the country independent of foreign corn, in spite of considerable wealth. But the principles laid down are the general principles on the subject; and in applying them to any particular case, the particular circumstances of such case must always be taken into consideration. With regard to improvements in agriculture, which in similar soils is the great cause which retards the advance of price compared with the advance of produce; although they are sometimes very powerful, they are rarely found sufficient to balance the necessity of applying to poorer land, or inferior machines. In this respect, raw produce is essentially different from manufactures. The real price of manufactures, the quantity of labour and capital necessary to produce a given quantity of them, is almost constantly diminishing; while the quantity of labour and capital, necessary to procure the last addition that has been made to the raw produce of a rich and advancing country, is almost constantly increasing. We see in consequence, that in spite of continued improvements in agriculture, the money price of corn is ceteris paribus the highest in the richest countries, while in spite of this high price of corn, and consequent high price of labour, the money price of manufactures still continues lower than in poorer countries. I cannot then agree with Adam Smith, in thinking that the low value of gold and silver is no proof of the wealth and flourishing state of the country, where it takes place. Nothing of course can be inferred from it, taken absolutely, except the abundance of the mines; but taken relatively, or in comparison with the state of other countries, much may be inferred from it. If we are to measure the value of the precious metals in different countries, and at different periods in the same country, by the price of corn and labour, which appears to me to be the nearest practical approximation that can be adopted [and in fact corn is the measure used by Adam Smith himself], it appears to me to follow, that in countries which have a frequent commercial intercourse with each other, which are nearly at the same distance from the mines, and are not essentially different in soil; there is no more certain sign, or more necessary consequence of superiority of wealth, than the low value of the precious metals, or the high price of raw produce. [15] It is of importance to ascertain this point; that we may not complain of one of the most certain proofs of the prosperous condition of a country. It is not of course meant to be asserted, that the high price of raw produce is, separately taken, advantageous to the consumer; but that it is the necessary concomitant of superior and increasing wealth, and that one of them cannot be had without the other. [16] With regard to the labouring classes of society, whose interests as consumers may be supposed to be most nearly concerned, it is a very short-sighted view of the subject, which contemplates, with alarm, the high price of corn as certainly injurious to them. The essentials to their well being are their own prudential habits, and the increasing demand for labour. And I do not scruple distinctly to affirm, that under similar habits, and a similar demand for labour, the high price of corn, when it has had time to produce its natural effects, so far from being a disadvantage to them, is a positive and unquestionable advantage. To supply the same demand for labour, the necessary price of production must be paid, and they must be able to command the same quantities of the necessaries of life, whether they are high or low in price. [17] But if they are able to command the same quantity of necessaries, and receive a money price for their labour, proportioned to their advanced price, there is no doubt that, with regard to all the objects of convenience and comfort, which do not rise in proportion to corn [and there are many such consumed by the poor], their condition will be most decidedly improved. The reader will observe in what manner I have guarded the proposition. I am well aware, and indeed have myself stated in another place, that the price of provisions often rises, without a proportionate rise of labour: but this cannot possibly happen for any length of time, if the demand for labour continues increasing at the same rate, and the habits of the labourer are not altered, either with regard to prudence, or the quantity of work which he is disposed to perform. The peculiar evil to be apprehended is, that the high money price of labour may diminish the demand for it; and that it has this tendency will be readily allowed, particularly as it tends to increase the prices of exportable commodities. But repeated experience has shown us that such tendencies are continually counterbalanced, and more than counterbalanced by other circumstances. And we have witnessed, in our own country, a greater and more rapid extension of foreign commerce, than perhaps was ever known, under the apparent disadvantage of a very great increase in the price of corn and labour, compared with the prices of surrounding countries. On the other hand, instances everywhere abound of a very low money price of labour, totally failing to produce an increasing demand for it. And among the labouring classes of different countries, none certainly are so wretched as those, where the demand for labour, and the population are stationary, and yet the prices of provisions extremely low, compared with manufactures and foreign commodities. However low they may be, it is certain, that under such circumstances, no more will fall to the share of the labourer than is necessary just to maintain the actual population; and his condition will be depressed, not only by the stationary demand for labour, but by the additional evil of being able to command but a small portion of manufactures or foreign commodities, with the little surplus which he may possess. If, for instance, under a stationary population, we suppose, that in average families two thirds of the wages estimated in corn are spent in necessary provisions, it will make a great difference in the condition of the poor, whether the remaining one third will command few or many conveniencies and comforts; and almost invariably, the higher is the price of corn, the more indulgences will a given surplus purchase. The high or low price of provisions, therefore, in any country is evidently a most uncertain criterion of the state of the poor in that country. Their condition obviously depends upon other more powerful causes; and it is probably true, that it is as frequently good, or perhaps more frequently so, in countries where corn is high, than where it is low. At the same time it should be observed, that the high price of corn, occasioned by the difficulty of procuring it, may be considered as the ultimate check to the indefinite progress of a country in wealth and population. And, although the actual progress of countries be subject to great variations in their rate of movement, both from external and internal causes, and it would be rash to say that a state which is well peopled and proceeding rather slowly at present, may not proceed rapidly forty years hence; yet it must be owned, that the chances of a future rapid progress are diminished by the high prices of corn and labour, compared with other countries. It is, therefore, of great importance, that these prices should be increased as little as possible artificially, that is, by taxation. But every tax which falls upon agricultural capital tends to check the application of such capital, to the bringing of fresh land under cultivation, and the improvement of the old. It was shown, in a former part of this inquiry, that before such application of capital could take place, the price of produce, compared with the instruments of production, must rise sufficiently to pay the farmer. But, if the increasing difficulties to be overcome are aggravated by taxation, it is necessary, that before the proposed improvements are undertaken, the price should rise sufficiently, not only to pay the farmer, but also the government. And every tax, which falls on agricultural capital, either prevents a proposed improvement, or causes it to be purchased at a higher price. When new leases are let, these taxes are generally thrown off upon the landlord. The farmer so makes his bargain, or ought so to make it, as to leave himself, after every expense has been paid, the average profits of agricultural stock in the actual circumstances of the country, whatever they may be, and in whatever manner they may have been affected by taxes, particularly by so general a one as the property tax. The farmer, therefore, by paying a less rent to his landlord on the renewal of his lease, is relieved from any peculiar pressure, and may go on in the common routine of cultivation with the common profits. But his encouragement to lay out fresh capital in improvements is by no means restored by his new bargain. This encouragement must depend, both with regard to the farmer and the landlord himself, exclusively on the price of produce, compared with the price of the instruments of production; and, if the price of these instruments have been raised by taxation, no diminution of rent can give relief. It is, in fact, a question, in which rent is not concerned. And, with a view to progressive improvements, it may be safely asserted, that the total abolition of rents would be less effectual than the removal of taxes which fall upon agricultural capital. I believe it to be the prevailing opinion, that the greatest expense of growing corn in this country is almost exclusively owing to the weight of taxation. Of the tendency of many of our taxes to increase the expenses of cultivation and the price of corn, I feel no doubt; but the reader will see from the course of argument pursued in this inquiry, that I think a part of this price, and perhaps no inconsiderable part, arises from a cause which lies deeper, and is in fact the necessary result of the great superiority of our wealth and population, compared with the quality of our natural soil and the extent of our territory. This is a cause which can only be essentially mitigated by the habitual importation of foreign corn, and a diminished cultivation of it at home. The policy of such a system has been discussed in another place; but, of course, every relief from taxation must tend, under any system, to make the price of corn less high, and importation less necessary. In the progress of a country towards a high state of improvement, the positive wealth of the landlord ought, upon the principles which have been laid down, gradually to increase; although his relative condition and influence in society will probably rather diminish, owing to the increasing number and wealth of those who live upon a still more important surplus [18] --the profits of stock. The progressive fall, with few exceptions, in the value of the precious metals throughout Europe; the still greater fall, which has occurred in the richest countries, together with the increase of produce which has been obtained from the soil, must all conduce to make the landlord expect an increase of rents on the renewal of his leases. But, in reletting his farms, he is liable to fall into two errors, which are almost equally prejudicial to his own interests, and to those of his country. In the first place, he may be induced, by the immediate prospect of an exorbitant rent, offered by farmers bidding against each other, to let his land to a tenant without sufficient capital to cultivate it in the best way, and make the necessary improvements upon it. This is undoubtedly a most short-sighted policy, the bad effects of which have been strongly noticed by the most intelligent land surveyors in the evidence lately brought before Parliament; and have been particularly remarkable in Ireland, where the imprudence of the landlords in this respect, combined, perhaps, with some real difficulty of finding substantial tenants, has aggravated the discontents of the country, and thrown the most serious obstacles in the way of an improved system of cultivation. The consequence of this error is the certain loss of all that future source of rent to the landlord, and wealth to the country, which arises from increase of produce. The second error to which the landlord is liable, is that of mistaking a mere temporary rise of prices, for a rise of sufficient duration to warrant an increase of rents. It frequently happens, that a scarcity of one or two years, or an unusual demand arising from any other cause, may raise the price of raw produce to a height, at which it cannot be maintained. And the farmers, who take land under the influence of such prices, will, in the return of a more natural state of things, probably break, and leave their farms in a ruined and exhausted state. These short periods of high price are of great importance in generating capital upon the land, if the farmers are allowed to have the advantage of them; but, if they are grasped at prematurely by the landlord, capital is destroyed, instead of being accumulated; and both the landlord and the country incur a loss, instead of gaining a benefit. A similar caution is necessary in raising rents, even when the rise of prices seems as if it would be permanent. In the progress of prices and rents, rent ought always to be a little behind; not only to afford the means of ascertaining whether the rise be temporary or permanent, but even in the latter case, to give a little time for the accumulation of capital on the land, of which the landholder is sure to feel the full benefit in the end. There is no just reason to believe, that if the lands were to give the whole of their rents to their tenants, corn would be more plentiful and cheaper. If the view of the subject, taken in the preceding inquiry, be correct, the last additions made to our home produce are sold at the cost of production, and the same quantity could not be produced from our own soil at a less price, even without rent. The effect of transferring all rents to tenants, would be merely the turning them into gentlemen, and tempting them to cultivate their farms under the superintendence of careless and uninterested bailiffs, instead of the vigilant eye of a master, who is deterred from carelessness by the fear of ruin, and stimulated to exertion by the hope of a competence. The most numerous instances of successful industry, and well-directed knowledge, have been found among those who have paid a fair rent for their lands; who have embarked the whole of their capital in their undertaking; and who feel it their duty to watch over it with unceasing care, and add to it whenever it is possible. But when this laudable spirit prevails among a tenantry, it is of the very utmost importance to the progress of riches, and the permanent increase of rents, that it should have the power as well as the will to accumulate; and an interval of advancing prices, not immediately followed by a proportionate rise of rents, furnishes the most effective powers of this kind. These intervals of advancing prices, when not succeeded by retrograde movements, most powerfully contribute to the progress of national wealth. And practically I should say, that when once a character of industry and economy has been established, temporary high profits are a more frequent and powerful source of accumulation, than either an increased spirit of saving, or any other cause that can be named. [19] It is the only cause which seems capable of accounting for the prodigious accumulation among individuals, which must have taken place in this country during the last twenty years, and which has left us with a greatly increased capital, notwithstanding our vast annual destruction of stock, for so long a period. Among the temporary causes of high price, which may sometimes mislead the landlord, it is necessary to notice irregularities in the currency. When they are likely to be of short duration, they must be treated by the landlord in the same manner as years of unusual demand. But when they continue so long as they have done in this country, it is impossible for the landlord to do otherwise than proportion his rent accordingly, and take the chance of being obliged to lessen it again, on the return of the currency to its natural state. The present fall in the price of bullion, and the improved state of our exchanges, proves, in my opinion, that a much greater part of the difference between gold and paper was owing to commercial causes, and a peculiar demand for bullion than was supposed by many persons; but they by no means prove that the issue of paper did not allow of a higher rise of prices than could be permanently maintained. Already a retrograde movement, not exclusively occasioned by the importations of corn, has been sensibly felt; and it must go somewhat further before we can return to payments in specie. Those who let their lands during the period of the greatest difference between notes and bullion, must probably lower them, whichever system may be adopted with regard to the trade in corn. These retrograde movements are always unfortunate; and high rents, partly occasioned by causes of this kind, greatly embarrass the regular march of prices, and confound the calculations both of the farmer and landlord. With the cautions here noticed in letting farms, the landlord may fairly look forward to a gradual and permanent increase of rents; and, in general, not only to an increase proportioned to the rise in the price of produce, but to a still further increase, arising from an increase in the quantity of produce. If in taking rents, which are equally fair for the landlord and tenant, it is found that in successive lettings they do not rise rather more than in proportion to the price of produce, it will generally be owing to heavy taxation. Though it is by no means true, as stated by the Economists, that all taxes fall on the net rents of the landlords, yet it is certainly true that they are more frequently taxed both indirectly as well as directly, and have less power of relieving themselves, than any other order of the state. And as they pay, as they certainly do, many of the taxes which fall on the capital of the farmer and the wages of the labourer, as well as those directly imposed on themselves; they must necessarily feel it in the diminution of that portion of the whole produce, which under other circumstances would have fallen to their share. But the degree in which the different classes of society are affected by taxes, is in itself a copious subject, belonging to the general principles of taxation, and deserves a separate inquiry. FOOTNOTES: [Footnote 1: I cannot, however, agree with him in thinking that all land which yields food must necessarily yield rent. The land which is successively taken into cultivation in improving countries, may only pay profits and labour. A fair profit on the stock employed, including, of course, the payment of labour, will always be a sufficient inducement to cultivate.] [Footnote 2: Vol II. p. 124. Of this work a new and much improved edition has lately been published, which is highly worthy the attention of all those who take an interest in these subjects.] [Footnote 3: Vol. I. p. 49.] [Footnote 4: Vol IV. p. 134.] [Footnote 5: Vol. III. p. 272.] [Footnote 6: It is, however, certain, that if either these materials be wanting, or the skill and capital necessary to work them up be prevented from forming, owing to the insecurity of property, to any other cause, the cultivators will soon slacken in their exertions, and the motives to accumulate and to increase their produce, will greatly diminish. But in this case there will be a very slack demand for labour; and, whatever may be the nominal cheapness of provisions, the labourer will not really be able to command such a portion of the necessaries of life, including, of course, clothing, lodging, etc. as will occasion an increase of population.] [Footnote 7: I have supposed some check to the supply of the cotton machinery in this case. If there was no check whatever, the effects wold show themselves in excessive profits and excessive wages, without an excess above the cost of production.] [Footnote 8: Vol. iv. p. 35.] [Footnote 9: The more general surplus here alluded to is meant to include the profits of the farmer, as well as the rents of the landlord; and, therefore, includes the whole fund for the support of those who are not directly employed upon the land. Profits are, in reality, a surplus, as they are in no respect proportioned (as intimated by the Economists) to the wants and necessities of the owners of capital. But they take a different course in the progress of society from rents, and it is necessary, in general, to keep them quite separate.] [Footnote 10: According to the calculations of Mr Colquhoun, the value of our trade, foreign and domestic, and of our manufactures, exclusive of raw materials, is nearly equal to the gross value derived from the land. In no other large country probably is this the case. P. Colquhoun, Treatise on the wealth, power, and resources of the British Empire, 2nd ed. 1815, p. 96. The whole annual produce is estimated at about 430 millions, and the products of agriculture at about 216 millions.] [Footnote 11: To the honour of Scotch cultivators, it should be observed, that they have applied their capitals so very skilfully and economically, that at the same time that they have prodigiously increased the produce, they have increase the landlord's proportion ot it. The difference between the landlord's share of the produce in Scotland and in England is quite extraordinary--much greater than can be accounted for, either by the natural soil or the absence of tithes and poor's rates. See Sir John Sinclair's valuable An account of husbandry in Scotland, (Edinburgh) not long since published--works replete with the most useful and interesting information on agricultural subjects.] [Footnote 12: See Evidence before the House of Lords, given in by Arthur Young. p. 66.] [Footnote 13: In all our discussions we should endeavour, as well as we can, to separate that part of high price, which arises from excess of currency, from that part, which is natural, and arises from permanent causes. In the whole course of this argument, it is particularly necessary to do this.] [Footnote 14: It will be observed, that I have said in a progressive country; that is, in a country which requires yearly the employment of a greater capital on the land, to support an increasing population. If there were no question about fresh capital, or an increase of people, and all the land were good, it would not then be true that corn must be sold at its necessary price. The actual price might be diminished; and if the rents of land were diminished in proportion, the cultivation might go on as before, and the same quantity be produced. It very rarely happens, however, that all the lands of a country actually occupied are good, and yield a good net rent. And in all cases, a fall of prices must destroy agricultural capital during the currency of leases; and on their renewal there would not be the same power of production.] [Footnote 15: This conclusion may appear to contradict the doctrine of the level of the precious metals. And so it does, if by level be meant level of value estimated in the usual way. I consider the doctrine, indeed, as quite unsupported by facts, and the comparison of the precious metals to water perfectly inaccurate. The precious metals are always tending to a state of rest, or such a state of things as to make their movement unnecessary. But when this state of rest has been nearly attained, and the exchanges of all countries are nearly at par, the value of the precious metals in different countries, estimated in corn and labour, or the mass of commodities, is very far indeed from being the same. To be convinced of this, it is only necessary to look at England, France, Poland, Russia, and India, when the exchanges are at par. That Adam Smith, who proposes labour as the true measure of value at all times and in all places, could look around him, and yet say that the precious metals were always the highest in value in the richest countries, has always appeared to me most unlike his usual attention to found his theories on facts.] [Footnote 16: Even upon the system of importation, in the actual state and situation of the countries of Europe, higher prices must accompany superior and increasing wealth.] [Footnote 17: We must not be so far deceived by the evidence before Parliament, relating to the want of connection between the prices of corn and of labour, as to suppose that they are really independent of each other. The price of the necessaries of life is, in fact, the cost of producing labour. The supply cannot proceed, if it be not paid; and though there will always be a little latitude, owing to some variations of industry and habits, and the distance of time between the encouragement to population and the period of the results appearing in the markets: yet it is a still greater error, to suppose the price of labour unconnected with the price of corn, than to suppose that the price of corn immediately and completely regulates it. Corn and labour rarely march quite abreast; but there is an obvious limit, beyond which they cannot be separated. With regard to the unusual exertions made by the labouring classes in periods of dearness, which produce the fall of wages noticed in the evidence, they are most meritorious in the individuals, and certainly favour the growth of capital. But no man of humanity could wish to see them constant and unremitted. They are most admirable as a temporary relief; but if they were constantly in action, effects of a similar kind would result from them, as from the population of a country being pushed to the very extreme limits of its food. There would be no resources in a scarcity. I own I do not see, with pleasure, the great extension of the practice of task work. To work really hard during twelve or fourteen hours in the day, for any length of time, is too much for a human being. Some intervals of ease are necessary to health and happiness: and the occasional abuse of such intervals is no valid argument against their use.] [Footnote 18: I have hinted before, in a note, that profits may, without impropriety, be called a surplus. But, whether surplus or not, they are the most important source of wealth, as they are, beyond all question, the main source of accumulation.] [Footnote 19: Adam Smith notices the bad effects of high profits on the habits of the capitalist. They may perhaps sometimes occasion extravagance; but generally, I should say, that extravagant habits were a more frequent cause of a scarcity of capital and high profits, than high profits of extravagant habits.] 
12217	----	Economics--Volume II MODERN ECONOMIC PROBLEMS BY FRANK A. FETTER, PH.D., LL.D. PROFESSOR OF ECONOMICS, PRINCETON UNIVERSITY 1916 TO THE MOTHER WITH A YOUTHFUL HEART AND SYMPATHETIC INTEREST IN ALL THINGS HUMAN TABLE OF CONTENTS PART I. RESOURCES AND ECONOMIC ORGANIZATION. 1. Material resources of the nation 2. The present economic system PART II. MONEY AND PRICES. 3. Nature, use, and coinage of money 4. The value of money 5. Fiduciary money, metal and paper 6. The standard of deferred payments PART III. BANKING AND INSURANCE. 7. The functions of banks 8. Banking in the United States before 1914 9. The Federal Reserve Act 10. Crises and industrial depressions 11. Institutions for saving and investment 12. Principles of insurance PART IV. TARIFF AND TAXATION. 13. International trade 14. The policy of a protective tariff 15. American tariff history 16. Objects and principles of taxation 17. Property and corporation taxes 18. Personal taxes PART V. PROBLEMS OF THE WAGE SYSTEM. 19. Methods of industrial remuneration 20. Organized labor 21. Public regulation of hours and wages 22. Other protective labor and social legislation 23. Social insurance 24. Population and immigration PART VI. PROBLEMS OF INDUSTRIAL ORGANIZATION. 25. Agricultural and rural population 26. Problems of agricultural economics 27. The railroad problem 28. The problem of industrial monopoly 29. Public policy in respect to monopoly 30. Public ownership 31. Some aspects of socialism Index FOREWORD The present volume deals with various practical problems in economics, as a volume published a year earlier dealt with the broader economic principles of value and distribution. To the student beginning economics and to the general reader the study of principles is likely to appear more difficult than does that of concrete questions. In fact, the difficulty of the latter, tho less obvious, is equally great. The study of principles makes demands upon thought that are open and unmistakable; its conclusions, drawn in the cold light of reason, are uncolored by feeling, and are acceptable of all men so long as the precise application that may justly be made of them is not foreseen. But conclusions regarding practical questions of public policy, tho they may appear to be simple, usually are biased and complicated by assumptions, prejudices, selfish interests, and feelings, deep-rooted and often unsuspected. No practical problem in the field of economics can be solved as if it were solely and purely an economic problem. It is always in some measure also a political, moral, and social problem. The task of the economist "as such" is the analysis of the economic valuation-aspects of these problems. We may recall Francis A. Walker's comparison of the economist's task with that of the chemist, which task, in a certain case, was to analyze the contents of a vial of prussic acid, not to give advice as to the use to make of it. Accordingly, in the following pages, the author has endeavored primarily to develop the economic aspects of each problem, and has repeatedly given warning when the discussion or the conclusions began to transcend strict economic limits. In many questions feeling is nine-tenths of reason. If the reader has different social sympathies he may prefer to draw different conclusions from the economic analysis. The outlook and sympathies that are expressed or tacitly assumed throughout this work are not so much those personal to the author as they are those of our present day American democratic society, taken at about its center of gravity. When the people generally feel differently as to the ends to be attained, a different public policy must be formulated, tho the economic analysis may not need to be changed. Therefore, in some cases, the author has discussed merely the economic aspect, or has referred to the general principles treated in volume one, and has purposely refrained from expressing his personal judgment as to "the best" policy for the moment. The present volume was planned some years ago as a revision of a part of the author's earlier text, "The Principles of Economics" (1904). The intervening years have, however, been so replete with notable economic and social legislation and have witnessed the growth of a wider public interest in so many economic subjects, that both in range and in treatment this work necessarily grew to be more than a revision. Except in a few chapters, occasional sentences and paragraphs are all of the specific features of the older text that remain. Suggestive of the rapid changes occurring in the economic field is the fact that a number of statements made in the manuscript a few months or a few weeks ago had to be amended in the proof sheets to accord with recent events. The author's debt for information, inspiration, and assistance in various phases of the work is a large one. The debt is owing to many,--authors, colleagues, and students. A few of the sources that have been drawn upon will be indicated in a pamphlet following the plan of the "Manual of References and Exercises in Economics," already published for use in connection with Volume I; but the limits of space will prevent a complete enumeration. I wish, however, in particular, to acknowledge gratefully the aid and friendly criticisms given in connection with the chapters on money and banking, on labor problems, and on the principles of insurance, respectively, by my colleagues, E.W. Kemmerer, D.A. McCabe, and N. Carothers. In completing, at least provisionally, the present work, the author cherishes the hope that it will be of assistance not only to teachers and to students in American colleges, but also to citizen-readers seeking to gain a better and a non-partisan insight into the great economic problems now claiming the nation's conscience and thought. F.A.F. Princeton, N.J., October, 1916. MODERN ECONOMIC PROBLEMS PART I RESOURCES AND ECONOMIC ORGANIZATION CHAPTER I MATERIAL RESOURCES OF THE NATION § 1. Politico-economic problems. § 2. American economic problems in the past. § 3. Present-day problems: main subjects. § 4. Attempts to summarize the nation's wealth. § 5. Average wealth and the problem of distribution. § 6. Changes in the price-standard. § 7. A sum of capital, not of wealth. § 8. Sources of food supply. § 9. The sources of heat, light, and power. § 10. Transportation agencies. § 11. Raw materials for clothing, shelter, machinery, etc. § 1. #Politico-economic problems.# The word "problem" is often on our tongues. Life itself is and always has been a problem. In every time and place in the world there have been questions of industrial policy that challenged men for an answer, and new and puzzling social problems that called for a solution. And yet, when institutions, beliefs, and industrial processes were changing slowly from one generation to another and men's lives were ruled by tradition, authority, and custom, few problems of social organization forced themselves upon attention, and the immediate struggle for existence absorbed the energies and the interests of men. But our time of rapid change seems to be peculiarly the age of problems. The movement of the world has been more rapid in the last century than ever before--in population, in natural science, in invention, in the changes of political and economic institutions; in intellectual, religious, moral, and social opinions and beliefs. Some human problems are for the individual to solve, as, whether it is better to go to school or to go to work, to choose this occupation or that, to emigrate or to stay at home. Other problems of wider bearing concern the whole family group; others, still wider, concern the local community, the state, or the nation. In each of these there are more or less mingled economic, political and ethical aspects. Economics in the broad sense includes the problems of individual economy, of domestic economy, of corporate economy, and of national economy. In this volume, however, we are to approach the subject from the public point of view, to consider primarily the problems of "political economy," considering the private, domestic, and corporate problems only insomuch as they are connected with those of the nation or of the community as a whole. Our field comprises the problems of national wealth and of communal welfare. What then are our politico-economic problems in America? They are problems that are economic in nature because they concern the way that wealth shall be used and that citizens are enabled to make a living; but that are likewise political, because they can be solved only collectively by political action. § 2. #American economic problems in the past.# With the first settlements of colonists on this continent politico-economic problems appeared. Take, for example, the land policy. Each group of colonists and each proprietary landholder had to adopt some method of land tenure whether by free grant or by sale of separate holdings or by leasing to settlers. In one way and another these questions were answered, but rapidly changing conditions soon forced upon men the reconsideration of the problem as the old solution ceased to be satisfactory. In large part our political history is but the reflection of the economic motives and economic changes in the national life. Thus the American Revolution arose out of resistance to England's trade regulations, commercial restrictions, and attempted taxation of the colonies. The War of 1812 was brought on by interference with American commerce on the high seas. The Mexican War was the result of the colonization of Texan territory by American settlers and the desire of powerful interests to extend the area of land open to slavery. The Civil War arose more immediately out of a difference of opinion as to the rights of states to be supreme in certain fields of legislation, but back of this political issue was the economic problem of slave labor. Illustrations of this kind, which may be indefinitely multiplied, do not prove that the material, economic changes are the cause of all other changes, political, scientific, and ethical; for in many cases the economic changes themselves appear to be the results of changes of the other kinds. There is a constant action and reaction between economic forces and other forces and interests in human society, and the needs of economic adjustment are constantly changing in nature. § 3. #Present-day problems: main subjects#. The particular economic problems in America at this time are determined by the whole complex economic and social situation. Two main factors in this may be distinguished: the objective and the subjective, or the material environment and the population composing the nation. The one is what we have, the other is what we are, as a people. These factors are closely related; for what we are as a people (our tastes, interests, capacities, achievements) depends largely on what we have, and what we have (our wealth and incomes) depends largely on what we are. We may consider the following phases; the first two of the objective factor, and the last two of the subjective factor. (a) The basic material resources, consisting of the materials of the earth's surface and the natural climatic conditions which together provide the physical conditions necessary for human existence, and which furnish the stuff out of which men can create new forms of wealth. (b) The industrial equipment, consisting of all those artificial adaptations and improvements of the original resources by which men fit nature better to do their will. These two (a and b) become more and more difficult to distinguish in settled and civilized communities, and become blended into one mass of valuable objects, the wealth of the nation. (c) The social system under which men live together, make use of wealth and of their own services, and exchange economic goods. (d) The people, considered with reference to their number, race, intelligence, education, and moral, political, and economic capacity. The particular economic problems which are presented to each generation of our people are the resultant of all these factors taken together. A change in any one of them alters to some extent the nature of the problem. The problems change, for example, (a) with the discovery or the exhaustion (or the increase or decrease) of any kind of basic material resources; (b) with the multiplication or the improvement of tools and machinery or the invention of better industrial equipment; (c) with changes in the ideals, education, and capacities of any portion of the people whether or not due to changes in the race composition of the population; (d) with the increase or decrease of the total number of people, and the consequent shift in the relation of population to resources. Many examples of such changes may be found in American history, and some knowledge of them is necessary for an appreciation of the genesis and true relation of our present-day problems. § 4. #Attempts to summarize the nation's wealth.# If we seek to compare the material resources of the nation at one period in our history with those at another period, we find that it is impossible to find a single satisfactory expression for them. Let us examine the figures for the (so-called) "wealth of the people of the United States",[1] as it has been calculated by the census officials. Average total per capita Population. "wealth." wealth. 1850 23,200,000 $7,136,000,000[a] $308 1860 31,400,000 16,160,000,000[a] 514 1870 38,600,000 24,055,000,000[a b] 624 1880 50,200,000 43,642,000,000 870 1890 62,900,000 65,037,000,000 1,036 1900 76,000,000 88,517,000,000 1,165 1904 82,500,000 107,104,000,000 1,318 1912 95,400,000 187,739,000,000 1,965 [Footnote a: Taxable only; all other figures include exempt.] [Footnote b: Estimated on a gold basis.] A detailed comparison of the classes of concrete things making up the totals is possible only in the last three sets of figures (1900 to 1912), and they are here given (omitting 000,000). 1900. 1904. 1912. 1. Real property (excepting some items below) 52,538 62,331 110,700 2. Irrigation enterprises [a] [a] 360 3. Agricultural equipment (livestock, tools, etc.) 3,822 4,919 7,706 4. Manufacturing equipment 2,541 3,298 6,069 5. Transportation agencies 11,249 14,434 22,360 6. Telegraph and telephones 612 813 1,304 7. Waterworks (privately owned) 263 275 290 8. Electric lighting plants 403 563 2,099 9. Products (still in trade)[b] 8,294 10,212 21,577 10. Direct goods in use[c] 6,880 8,250 12,758 11. Gold and silver 1,677 1,999 2,617 [Footnote a: No figures for these years.] [Footnote b: The main items are agricultural and mining products and imported merchandise.] [Footnote c: The main items are clothing, personal adornment, furniture, and carriages.] § 5. #Average wealth and the problem of distribution#. The foregoing figures make a most satisfactory showing, and appear to indicate that mere economic problems are rapidly being solved by the growth of national wealth. But unfortunately these figures have little significance in connection with such an inquiry, if indeed they are not badly misleading. In the first place, the final figures of "per capita wealth" are merely averages; a per capita increase, therefore, may appear when total wealth increases, altho the total may be due to the growth of comparatively few very large fortunes. The fact is evident that vast numbers of individuals and families are nearly propertyless and in so far as this is true there is involved one of the greatest of our socio-economic problems, that of the distribution of wealth and income among the people. The more unequal the distribution, the greater, in all likelihood, is the discontent; and the greater the effort of many men to find some methods by which greater equality may be attained. § 6. #Changes in the price-standard#. These figures, moreover, are expressed in terms of the monetary price-unit, in dollars of the gold standard, and therefore the increasing total figure (and correspondingly, the increasing per capita) may be but the reflection of a change in the value of the monetary unit. It is well known that the gold dollar has now less purchasing power than in 1880, and less also than at any intervening time.[2] To the extent that this is true the increase in the figures of wealth (total and per capita) is only nominal and does not indicate increase in the quantity and betterment in the quality of real wealth. This fact is so evident that it would seem unnecessary to call attention to it, if it were not constantly overlooked in citing these figures. § 7. #A sum of capital, not of wealth#. Consider further, that the figures here given for wealth really express but the sum of capitals of the individuals (or private corporations) of the nation. These do not constitute a sum of social wealth in any proper sense of the term.[3] Arithmetically it is a fallacious kind of a total, for the sum of the individual capitals contains some items that should be canceled to find the sum of wealth. Moreover, capital is an acquisitive concept. It is an expression of the value of a man's possessions, and not of the utility[4] of them. It measures intensity of desire for goods and not necessarily the degree of welfare. Such a total, therefore, embodies the difficulties of the paradox of value; in some cases increased value reflects a growing scarcity and not greater abundance.[5] For example, between 1900 and 1915, with the growth of population, the total number of improved acres in farms in the United States increased but little, and the per capita number diminished. At least in part as a result of this fact, the prices of nearly all kinds of food rose rapidly, as did also the price of farm land. The prices (and estimated values) of farm lands are the expression of the individual capitals, which formed each year an increasing statistical total of so-called wealth. The people had less land per capita, and were poorer per capita as respects this item of landed-wealth, had less meat per capita, and had to give more labor in exchange for food, at the same time that the statistical per capita of land values increased. So it may be as respects forests, coal, cotton, and eventually iron, copper, and many other things. When forests were plentiful, lumber and fire wood were free goods in many neighborhoods. Forests entered into the total of national "wealth" in 1850 and 1860 at a comparatively small sum. But in 1910 when the forests had been half used up they appeared as a greater total and probably as a greater per capita item of "wealth" than in 1850. The figures reflect changes in the paradoxical section of the scale of values, and express scarcity rather than wealth. Altho the wealth of a nation may not be expressed as a single sum of values that accurately reflects the weal-bringing things composing its environment, some conception of the situation is to be gained by an enumeration of goods in their kinds and quantities and by studying their relations to the life of the people. Objects of wealth may be grouped in various ways. The following may serve our purpose of a general survey of our present resources. § 8. #Sources of food supply#. The land area of the country in 1910 was about 1,900,000,000 acres, of which 879,000,000 acres were in farms, this being 46 per cent of the total area. A very small part of the remainder is used for residential and commercial purposes, the rest being barren mountains, deserts, swamps, and forests. Of the total in farms a little more than one-half was improved, 478,000,000 acres altogether, a per capita average of 5.2 acres; and a little less than one-half was unimproved, 400,000,000 acres altogether, a per capita average of 4.3 acres. The improved land produced not merely food but many kinds of materials, such as cotton, wool, hides, and lumber, while much of the unimproved land was either in farm wood-lots, or in rough range pasture. Of course the kinds and amounts of produce per acre vary with the climate, particularly with sunshine and rainfall; possibly the proportion of the area of the United States that is true desert and infertile mountain land is greater than that of any other equal area in the temperate zones. The actual productive capacity per acre of the lands of America cannot be expressed in a very helpful way as a general average per acre, but each area must be carefully studied in respect to its climate, rainfall, and possibility of irrigation and drainage. It is evident that a very large number of economic problems must arise in connection with the land supply for food: such as problems of land-ownership, taxation, irrigation, drainage, forestry, and encouragement or limitation of population. We are just beginning to awaken to the needs in this direction. The rivers, lakes, and ocean waters near our coasts are other great sources of food, but no statistics are available to show adequately their yield. Few of them are in private possession and they do not appear at all in a total of "capitals," yet they are more important to the nation than a large part of the land area. They are only beginning to be developed artificially by the propagation of oysters, clams, and fish. The development of a proper policy in this matter is one of our economic problems. There were in 1910 (mostly on farms) about 64,000,000 beef and dairy cattle, 60,000,000 swine, 56,000,000 sheep and goats, and there were raised in the one year nearly 500,000,000 fowls of all kinds. § 9. #The sources of heat, light, and power#. The law of the conservation of energy expresses the fundamental likeness of heat, light, and power. The principal sources from which man derives these agencies are coal and falling waters, tho wood is of importance as fuel in some localities. About 500,000 square miles of land (about 13 per cent of the area of the country) are underlaid with coal. These deposits are widely distributed, so that nearly every part of the country is within 500 miles of a mine. The enormous deposits if used at the present amounts per year would last probably 2,000 to 4,000 years, but if used at the present increasing rate (doubling the product every ten years) they would, it has been estimated, last but 150 years. What shall be the actual rate as between these extremes is a question whose answer depends on our economic legislation as to ownership, exploitation, prices, use, and substitution. This is another of our important socio-economic problems. The one great available substitute for coal as a source of heat and light and power is water power. It is estimated that in 1908 but 5,400,000 horse power was being developed from water falls, whereas about 37,000,000 primary horse power[6] was available; but, by the storage of flood waters so as to equalize the flow, at least 100,000,000 horse power, and possibly double that amount, could be developed. As it requires ten tons of coal to develop one horse power a year in a steam engine by present methods, there is here a potential substitute for coal equal to two to four times our present annual use of coal (about 500,000,000 tons in 1912). But this does not mean that it would be economical, at present costs of mining coal and of building reservoirs, to make this substitution now. To determine when, how far, and by what methods to develop this water power from lakes and rivers for the use of the people and to make this substitution, is another of our great economic problems. Petroleum and natural gas, of which our original reservoirs were perhaps the richest in the world, are being rapidly exhausted. These may be merely mentioned as being related to coal in the source of their supply, in the nature of their uses, and in the economic problems to which they give rise. § 10. #Transportation agencies#. First to mention among the means of transportation are the navigable waters--oceans, lakes, rivers, and canals, with the necessary equipment of dredged inlets, harbors, docks, locks, and lighthouses. Few of these appear in the total of "capitals," for they are not in private possession. Yet a good system of natural waterways may be greater wealth to one nation than costly additional railroads are to another. Good natural harbors on the waterways leading out to the oceans are a most important kind of national wealth, as are the navigable great lakes within the boundaries or on the borders of a country. Just in proportion as these natural means of transportation are lacking, is the need to build costly artificial means of transportation. Both in natural and in artificial means of transportation, America is well provided. The straight coast line is 5700 miles long, and the line following indentations of the coast is about 64,000 miles. The Great Lakes with a straight shore line of 2760 miles are the most important inland waterways in the world. The 295 navigable rivers in the country have a length of 26,400 miles of navigable water. About 2000 miles of canals are still in operation. On the waterways some 27,000 American vessels are in use, with a capacity of 8,000,000 gross tons.[7] There are about 250,000 route miles of steam railroads, or with additional tracks, yard tracks, and sidings, a total of about 370,000 miles. On these are over 63,000 locomotives, 52,000 passenger cars, and 2,400,000 freight and company cars. Besides these are 45,000 track miles of electric railways and nearly 100,000 cars. These railroads include an enormous aggregate of works and structures in the form of tunnels, cuts, banks, bridges, stations, and shops. There are in the country (1914) about 2,228,000 miles of public roads, of which 10 per cent are "surfaced" roads. No figures are now available of the number of wagons, horses, automobiles, and other vehicles in use on the roads and streets for purposes of transportation. Many of our economic problems are presented by these transportation agencies, from the question of opening a new dirt road in a rural township to that of building an inter-oceanic canal, from the question whether to have free public roads or toll roads to that of regulating the railroad rates on the whole railroad system of the country. § 11. #Raw materials for clothing, shelter, machinery, etc.# The farm lands supply, besides food, a large part of the raw materials for many other goods, such materials as cotton, flax, wool, hides, feathers, lumber, and firewood. The farm woodlots compose about 200,000,000 acres, and the large forests, public and private, about 350,000,000 acres, a total of about one-fourth the area of the country in forests, containing about one-half of the lumber that the country once possessed. The economic problem of a sound forestry policy is one of the largest we have to solve. The most important other sources of raw materials for industry are the mineral deposits in the earth's surface.[8] This country is stored more bountifully, probably, than is any other country, with the metal ores of iron, copper, lead, zinc, gold, and silver. Aluminum is the most abundant metal, composing about 8 per cent of the crust of the earth, but by present methods it can be extracted only at considerable cost from certain compounds that are limited in amount. The details as to our metal stores are too complex for fuller treatment here, and may be found in treatises on economic geology or on industrial geography. The determination of wise policies as to the use of these stores involves many economic problems, private and public. Another great class of material wealth is in the form of tools, machinery, and other agencies for carrying on the industrial processes of farming and of manufacturing. These are sometimes called instrumental goods, or the industrial equipment. Still another class consists of the great mass of completed direct goods, such as houses to live in, libraries, museums, school buildings, theaters, all kinds of buildings and equipment for pleasure and entertainment, parks, and pleasure resorts in mountains, at lakes or sea shore. The possession and use of these forms of wealth give rise to some economic problems of public ownership and to others connected with the institution of private property in general, as sketched in the following chapter. [Footnote 1: It is to be observed that these figures appear under the general title of Part I, "Estimated valuation of national wealth: 1850-1912," and the tables are spoken of (volume on Wealth, Debt, and Taxation, p. 20) as "estimates of the aggregate wealth of the nation as prepared by the United States censuses," but the tables themselves are described (pp. 23-25) as the "estimated true valuation of all property," this phrase being used as equivalent to "wealth." For the definitions of wealth and property see Vol. I, pp. 264-265.] [Footnote 2: This change will be described below in ch. 6, in treating of the standard of deferred payments.] [Footnote 3: See Vol. I, pp. 265, 278, 508 for the distinction between wealth and capital.] [Footnote 4: See Vol. I, p. 25, for the definition of utility.] [Footnote 5: See Vol. I, p. 510 on the paradox of value.] [Footnote 6: That is, "the amount which can be developed upon the basis of the flowage of the streams for a period of two weeks in which the flow is the least," all the rest being allowed to escape unused. Van Hise, "Conservation of Natural Resources," p. 119.] [Footnote 7: These and other figures in this section relate to the year 1913.] [Footnote 8: Coal has been mentioned above, sec. 9.] CHAPTER 2 THE PRESENT ECONOMIC SYSTEM § 1. The place of private property. § 2. Nature of property. § 3. Relation of wealth, property, and capital. § 4. Some theories of private property. § 5. Origin vs. justification. § 6. Limitations of private property. § 7. Limitations of bequest and inheritance. § 8. Social expediency of private property. § 9. The monetary economy. § 10. The competitive system. § 11. Limitation of competition by custom. § 12. Effect of modern forces upon custom. § 13. Adam Smith's influence. § 14. The wage-system. § 1. #The place of private property#. Of fully equal importance with material wealth in determining the economic power of a people is the _social system_ under which the nation lives. This is the term applied to the whole complex of institutions and arrangements in which and by which people live together in society. It is the embodiment of the opinions, ideas, and habits of life inherited by each generation from its forbears. It is, indeed, a people's whole state of civilization with its political, economic, intellectual, scientific, religious, and esthetic aspects. The most important economic aspect of the existing system is, broadly speaking, the institution of private property. So closely connected with this that they are hardly more than different phases of the same thing, are the use of money (the monetary economy), the wage system, and competition as a mode of distribution. "The institution of private property" is the general expression for the way in which men in the modern state make use of their own energies and of material wealth within the nation. Nearly all the total of the things mentioned in the table in Chapter 2, section 4, are owned by private citizens.[1] We live in a régime of private property, and all our economic problems are affected by that fact. The determination of the exact boundaries of private property makes up a large part of the politico-economic problems which the people in each generation have to solve. A large share, possibly, in a certain sense, every one of the economic problems that are discussed involve change, limitation, definition, or, more radically, abolition of present laws of property. Broadly understood, as above, therefore, determination of the nature of private property is _the essential_ economic problem. § 2. #Nature of property#. Property means ownership, and "ownership" is the abstract noun expressing the quality of possessing a thing. Correspondingly, "owner" is the Anglo-Saxon equivalent of "proprietor." Property thus, fundamentally, means not an object held, or possessed, but the right in or belonging to a person to control something that he owns. Ownership is a legal right to control under certain conditions.[2] Physical, possession of an object is not necessarily ownership. There are different kinds of ownership. It may be private, as that of individuals, families, partnerships, or corporations; or it may be public, as that of nations, states, counties, cities and towns, owning such things as public buildings, parks, highways, the Adirondack forest-reserve, or the Erie Canal. These two kinds are equally effective as against the claims of outsiders, but the rights of those inside the circle of ownership differ. For example, the rights of one shareholder against another, or the rights of one member of a family as against another, are not the same as the rights against outsiders. Private property is the characteristic feature of our present industrial society, but it exists side by side with public property and with many intermediate grades between private and common property. Tho property meant originally and essentially the intangible right to a thing, the word came to be applied also to the object of the right. This is done both in common speech and in judicial decisions, with inevitable ambiguity. This may be readily seen by trying to substitute the word ownership for property, a thing quite simple in some cases but impossible in others. One would not point to a house and say, "This is my ownership," but either, "This is my property," or "I exercise ownership over it." It is well recognized that a man may have a property right in this abstract sense in or over his own services, as to practise a trade or in the "good will" of a business or in an intangible patent or a copyright, quite as well as in a material object. § 3. #Relation of wealth, property, and capital#. A failure to see this distinction and to keep it clearly in mind has led to confusion, even on the part of legislatures, learned judges, and able economists. If property is said to be (for example) a house and lot and at the same time the right to that house and lot, then there are two properties at once for each economic good, viz.: the object itself and the right to it.[3] This difficulty could be avoided by the consistent definition and use of terms. A material economic object is a good, is a form of wealth. The usance of wealth and the service of laborers at the moment rendered constitute forms of income. The right of ownership, i.e., the right to control, use, or direct the use of wealth and services, is property, which is therefore the right to receive incomes. The value of the incomes of an individual constitute his capital. Goods, rights to goods, value of rights to goods: these three things are clearly distinguishable. § 4. #Some theories of private property#. Various theories have been framed to explain the origin and to justify the existence of private property. The occupation theory is that property is based upon the priority of claim of one who finds wealth without an owner and appropriates it. This is not an explanation of the property rights that are arising every moment, nor does it give a logical reason for the continuance of ancient property rights. It is a statement applying to a case that has rarely happened, the settlement of an unoccupied territory. More adequate to explain many cases is the conquest theory, that property is based on force; for nearly all lands to-day are occupied by the descendants of conquering invaders who took the lands and natural resources from the former inhabitants, who in turn had taken them from other occupants, many centuries before. The conquest theory applies, for example, to the invasion of the Roman provinces by barbarian tribes who divided the country and developed the feudal system based on land tenure. But it hardly applies to present-day happenings, and at its best it cannot, to modern minds, "justify" present property rights. The labor theory, meeting some queries where others fail, is that ownership is based on the act of production. It is declared that every man has a right to that to which his brain and his muscle have imparted value. It is evident that this test leaves without explanation or justification a great number of things that do exist and have existed as property. Usually the basis of the labor theory of property is declared to be each individual's natural right to the results of his own labor, which claim is assumed to be an ultimate, undebatable, axiomatic fact. However, that type of natural-right doctrine, which makes no appeal to experience and results, is now quite discredited in political science. Another form of natural-rights theory is that property is necessary for the realization of the dignity of human nature and every individual has the natural right to self-realization. This theory is, in a way, based on an appeal to experience, as to the effect of property on human character, and it has the virtue of expressing one of the ideals of modern democracy. Altho, in common with various other "natural-rights" theories, it must be deemed too absolute and too individualistic, it contains a far-reaching truth, of which due account must be taken in our social philosophy. The legal theory is that property exists because the law says it shall. This expresses a truth, but is no more than a truism. The law determines the limits of property, but what determines the limits of the law? What practical or social justification is there for passing and continuing such law? The legal theory does not contain a final explanation. Each of these theories has its defects, but each points to some fact important and significant, at certain times and places, in the explanation of this widespread institution. § 5. #Origin vs. justification#. The question of the origin is not the same as that of the present justification of the existing system of private property. The institution of private property has evolved under diverse conditions. In early societies individual property rights were not very clearly marked. Every tribe asserted against other tribes, and tried to uphold by war, its claims upon its customary hunting grounds; but the claims of the individual hunters on land within the tribe did not often come into conflict. Private property at the outset was in personal possessions, ornaments, weapons, utensils, which were very meager in that primitive society in which it was the custom "to go calling with a club instead of a card-case." Only later came individual property in land. A few years ago it was generally believed that the organization of the old German tribes was politically an almost perfect democracy, and economically a communism in which all had equal claims upon the land. To-day this opinion is very seriously questioned. It seems probable that there was a goodly measure of communism in the control and use of lands (tho not in other things), but this was largely confined to an oligarchy of the favored; whereas the masses lived in subjection, cut off from all but a meager share in the common lands. However that may have been, strong forces within historic times have put an end to the common ownership and tillage of land as it existed among the peasants of Europe. That system was shown by experience to be wasteful. Competition tended to bring the economic agents into more efficient hands, and the movement was furthered by many acts of injustice and violence on the part of those in power. Inquiries into the origin and development of any social institution are interesting and helpful in forming an estimate of its present significance, but the problems of the past are not those of to-day. Whether or not the ancient beginning of property in Europe was in violence and evil has but a remote bearing on the question as to the present working of it. Social conditions and needs have not changed more than have the forms and limits of property itself. Each generation has its own problems to solve, and ignoring for the most part the evils of the distant past, each generation must test existing institutions by their present results. § 6. #Limitations of private property#. It is well, in discussing private property, to rid the mind at once of the idea that it is an absolute and unchanging thing. Few realize the manifold ways in which property rights are limited. Unmodified private control of property is unknown; the public makes many reservations in its own interest. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger may be excluded. Under the right of "eminent domain," the state or the railroad takes the old homestead from the owner who would live and die there. Altho pecuniary damages are paid to him, this is a limitation of his property rights. Rights of way on property exist either by contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may not approve. The law enforces a multitude of private claims by some persons against others. A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a limitation of the owner's control. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable interest in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to execute the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth.[4] § 7. #Limitations of bequest and inheritance#. The term bequest implies a will, usually a written will in which the person, in anticipation of death, expresses his wishes as to the disposition of his property. It is said sometimes that bequest is a "logical" result of private property, but the law does not treat it as such. The right of bequest, or of gift at death, is limited in various ways in different countries. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills given outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasted this with the practice in America, frequent even in his day and still more frequent now, of rich men giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. Settlements and _fidei commissa_ are limited in many countries, because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations, as the result of bequests by the pious. In England, of late (and to a less extent in this country), the policy of permitting unlimited endowments to charitable institutions has been seriously questioned, and by legislation some of the old endowments have been diverted from their original purposes when these have ceased to be of social utility. Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The law of inheritance likewise varies greatly with time and place. § 8. #Social expediency of private property#. In the light of present political philosophy the explanation and justification of private property must be on grounds of social expediency. This is a broad explanation and it has the fault of a broad explanation, that it needs to be further explained. Under it can be brought the many varying conditions. Even if private property works hardship to individuals in many cases, yet it may be justified if, on the whole, it is best for the progress of society. Laws must be judged by their average working, not by exceptional cases. In general, the system of private property must be judged by this test: Does it further the welfare of the nation better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that the rule of property needs to be uniform in respect to all kinds of wealth. There are many kinds of property, and the test may be applied separately to the different forms and to the varying degrees of property rights. The varied and often strict limitations of property mentioned above are all determined by some thought, wise or foolish, of social expediency. Different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and public property in railway carriages. But any rule of property, like any other workable human law, must be applicable to all individuals that meet the conditions. The very acceptance of the theory of social expediency implies the need of frequent readjustment of the institution of private property. The essential thought in the various attacks on the institution of property is that, because it either causes or makes possible the inequality of incomes, it is not socially expedient. Private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined not according to the logic of expediency, but by the social inertia which often governs successive generations. The question is raised in many minds: If private property is not an absolute right, what shall be its limits? What changes should be made in it? These questions put the greatest economico-political problem of our day, one that contains within it, indeed, many minor problems. A number of these will receive attention in the following pages. § 9. #The monetary economy#. So greatly does the use of money facilitate the transfer, buying, and selling of private property and so closely are property and pecuniary trade connected in practice and in the thoughts of men, that every radical proposal to abolish private property has included a plan to do away with money also. But money and private property are not essentially and logically bound up together, for a certain measure of private property always has been found where money was little or not at all used. True, if there were absolutely no private property, there would be little use for money, altho it might still be used as a form of counter by the communistic state. We have already seen[5] how a monetary unit comes into use, and we shall treat more fully of the nature of money in later chapters. We may note here merely that the use of money is an outstanding feature of the present economic system and gives rise to many of the problems of political economy. § 10. #The competitive system#. The existing system is likewise characterized by competition[6] in the buying and selling of wealth and of the usances and services of economic agents. By competition we mean here the condition of political freedom on the part of each man to trade his property (goods, uses, or services) as he chooses, and this combined with the disposition on his part to get what he values most highly for himself and his family. Whenever any one else (official or citizen) forbids and prevents a man from getting all he can, in so far competition is limited. Whenever any one is deterred by fear of, or by affection for, some other trader, from getting all he can, in so far competition is limited. Whenever any one conspires with another trader to act together with him to withdraw or to alter his bid, in so far competition is limited. Private property and economic competition do not merely happen to exist side by side, forming more or less favored conditions each for the other; they are essentially connected.[7] It is not our task at this point to present the advantages and disadvantages of competition, but merely to indicate its important place in the actual economic world. Like private property, competition is not the universal feature of our present system, but it is the most general and characteristic method of valuation, of price fixing, and of trade. § 11. #Limitation of competition by custom.#[8] The relatively large influence of competition in present society appears more plainly in comparing the present system with that of an earlier state of society or with that of a present savage tribe. A member of the lowest human societies is subject to law; tho he is a savage he is not "untutored." On the contrary he is bound in many ways to follow customary lines of conduct, and a large part of his time is given to learning the traditions and then to observing the ceremonials of the tribe. Primitive customs always take on a religious sanction, and every member of the tribe is piously bound to do as his fathers have done and as his neighbors are doing. This limitation applies to the choice of food to eat, clothes to wear, time to hunt, plant, and harvest, weapons and tools to use, where and how to trade, how much to give or take, and to countless other details of economic choice. So, in early society, economic relations were complex and but slowly changing from generation to generation. Custom, rather than competition, ruled in manifold ways the economic actions of men. Custom continued to rule a large share of the individual life of the peoples of northern Europe through barbarian and feudal times. Its force has gradually decreased, but even yet is not entirely set aside. Political and economic interests were not clearly distinct in the Middle Ages. Land was the all-important kind of wealth. Military and other public services were performed by the higher landlords (as vassals of their overlords) who in this way paid at the same time what we to-day would call rent and taxes. The landlord in turn received from his underlings services and goods in kind (food and supplies) and so (in modern eyes) was both a collector of taxes and a receiver of rent. The rent, however, was not a competitive price, but consisted of the dues and services which the forefathers had been accustomed to pay. In many ways also in the towns, close organizations of craftsmen and of merchants regulated prices and kept others out of their industries. Industrial privilege pervaded the life of that time. Yet through all the Middle Ages ran the forces of competition. The inefficiency of customary services and the high prices charged by selfish privilege were constant invitations to men to become competitors. Men strove to break over the barriers of custom and of prejudice. Their efforts to attain freedom to compete was the vital force of the time. The industrial history of the Middle Ages was largely the story of the struggle of the forces of competition against the bonds of custom and privilege. § 12. #Effect of modern forces upon custom#. The industrial events following the discovery of America strengthened the forces making for economic freedom. Discoveries in the Western hemisphere opened up a wide field for the adventure and enterprise of Europe. Commerce is the strongest enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the village. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation, and the spirit of the times which expressed the principle of personal liberty and allowed the individual to follow his own opinions and take the consequences, were favorable to competition. Despite these facts, the restraints of the national governments on trade continued great, in some respects increasing during the seventeenth and eighteenth centuries, in France, Holland, and England. The regulation before attempted by towns and villages was employed on a larger scale by national governments with their industrial systems. The colonies in America were used for the economic ends of the "mother country" and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the English policy of trade restriction. § 13. #Adam Smith's influence#. "The Wealth of Nations," the first great work on political economy, was published in the year 1776. That was the "psychological moment" for its appearance, as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was merely negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, following a few years later, emphasized this thought in the political field. The philosophers of the time believed in a "natural law" in industry and politics. The reformers of the time wished to throw off the trammels of the past and to give men opportunity to exert themselves "naturally." In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Altho the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet custom still is stronger to-day in Europe than in America. Serfdom was not abolished until the first half of the nineteenth century in Austria and southeastern Europe, and not until the last half in Russia. Many economic and cultured forces furthered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an impression did Smith's book make, that in the minds of men "free trade" became almost identical in thought with political economy, whereas that was but the temporary economic problem of the eighteenth century. Many men then thought that in "free and unlimited competition" had been found a solution of all economic problems for all time. But soon, it was apparent that it was no such simple and absolute solution. Indeed many of the present economic problems--in one sense all of them--center around this one: to determine the proper forms and limits of competition. The varied aspects that this problem takes will appear in every portion of the following pages. § 14. #The wage-system.# Viewed in another aspect the present economic and social order is called the wage-system.[9] The wage-contract, like the use of money, is not essential to the existence of a system of private property. Communities such as the American colonies and as many of the newly settled states, may consist almost entirely of self-employed owners of land. Bulgaria, before the Balkan wars called the peasant state, presented this organization (tho of course with some wage-payment), as did also its neighbor Serbia. But given the institution of private property with competition (freedom to buy and sell), let manufactures and commerce develop to any extent, and inequalities of fortunes increase while an increasing number of persons work for wages. It is noteworthy that as this goes on (as it has done in America at an increasing rate since the middle of the nineteenth century) it is the agricultural and rural hand industries that continue to be mainly worked by owner-managers and workers, while it is the manufacturing, transporting, and large commercial enterprises in which the labor is done for wages. The acceptance of the wage-system thus far has been the inevitable price to be paid for manufacturing and industrial development; and one of our economic problems is to determine whether this must continue, and if so, whether in the same measure as in the past. [Footnote 1: The exceptions are probably unstated amounts of exempt real estate (owned by municipalities, state, and nation), some of the irrigation plants, part of the canals, and that part of the gold and silver which is in the public treasury.] [Footnote 2: See Vol. I, pp. 264-267. The law makes between property rights and equitable rights some subtle distinctions, which have their reason in the history, if not in the logic, of the law but which are not essential to economic discussion. In some states this distinction has been in large measure abolished. What interests us are the rights (claims) that men have to the control of wealth and services, whether by technical law these are called legal or equitable, and this right is what is meant by "property" in our discussion of it.] [Footnote: 3 This confusion has had important practical consequences in the field of taxation. See Vol. I, pp. 265-267, and below, ch. 17.] [Footnote 4: These claims mutually delimit each other (whether they be called equitable claims, or liens, or property rights), and wealth is not multiplied by multiplying the claims, as is unfortunately sometimes assumed to be the case. See above, sec. 3.] [Footnote 5: See Vol. I, p. 51.] [Footnote 6: See Vol. I, p. 73.] [Footnote 7: This will appear in comparing the competitive method of distribution with other methods in ch. 31.] [Footnote 8: See Vol. I, p. 143, on medieval land tenures; p. 158, on customary rents; p. 190, on the effect of caste.] [Footnote 9: See Vol. I, p. 227.] PART II MONEY AND PRICES CHAPTER 3 NATURE, USE, AND COINAGE OF MONEY § 1. Origin of money. § 2. Qualities of the original money-goods. § 3. Industrial changes and the forms of money. § 4. The precious metals as money. § 5. Gold-using countries. § 6. Varying extent of the use of money. § 7. Money defined and reviewed. § 8. Metal money without or with coinage. § 9. Technical features of coinage. § 10. Seigniorage defined. § 1. #Origin of money#. Everywhere in the world where the beginnings of regular trade have appeared, some one of the articles of trade soon has come to be taken by many traders who did not expect to keep or use it themselves, but to pass it along in another trade.[1] This made it money, for money is whatever comes to be used as a general price-good. The character of a _general_ price good clearly distinguishes money from goods bought and sold by a particular class of merchants, such as grain, cattle, etc., to be sold again. It is only in so far as a particular good comes to be taken by persons not specially dealing in it, taken for the purpose of using it as a price-good to get something else which they desire, that a thing has the character of money. The thing called money thus is a durative good passing from hand to hand in a community, and completing its use in turn to each possessor of it only as he parts with it. The use of money is of such social importance, that it would be impossible for modern industrial society to exist without it. The discussion of money touches many interests, it raises many questions of a political and of an ethical nature. There are perhaps more popular errors on this than on any other one subject in economics, but the general principles of money are as fully understood and as firmly established as are any parts of economics. § 2. #Qualities of the original money-good#. The selection of any money-commodity has not been mere chance, but has been the result of that object being better fitted than others to serve as a medium of exchange. The main qualities that affected the selection of primitive form of money were as follows: 1. Marketability (or saleability); that is, it must be easy to sell. The first forms of money had to be things which every one desired at some time and many people desired at any time. That was the essential quality that made any one ready to take it even when he did not wish to use it himself. Many kinds of food and of clothing are very generally desired goods. But few of these classes of goods have in a high measure certain other important qualities, now to be named. 2. Transportability; that is, the money material must be easy to carry, it must have a large value in small bulk and weight. To carry a bag of wheat on one's back a few miles requires as great an effort ordinarily as does the raising of the wheat, and the cost of carriage for fifty miles even by wagon will often equal the whole value of the wheat. Cattle, while not comparatively very valuable in proportion to weight, and not possessing the other qualities of money in the highest degree, have the advantage that they can be made to carry themselves long distances, and therefore they have been much used as money in simpler economic conditions. 3. Cognizability; that is, the money-good must be easy to know, and to judge as to quality. If expert knowledge or special apparatus are needed to test it in order to avoid counterfeits, few could be ready to take it and trading would be a costly process. 4. Durability; that is, the money-good must be easy to keep without much loss in amount or in quality, perhaps for long periods, until it can be passed on in trade. Few kinds of food answer very well to this last requirement, being organic and perishable. But all four qualities above named were pretty well embodied in primitive times in rock salt, in rare flints and bits of copper suitable for tools and weapons, in furs in northern countries, and in many articles of personal adornment, such as beads, feathers, jewels, and metal ornaments. 5. Divisibility; that is, the quality in the monetary material that permits it to be divided easily into smaller amounts and then to be united again into larger masses at little cost and without loss in amount or in quality. This quality is present only when the material is quite homogeneous throughout the whole mass, a condition fulfilled more completely by the metals than by any other goods. This quality makes it possible to put the governmental stamp upon the money material, and to produce pieces, some of which are exact duplicates and some exact multiples, of others. In this manner pieces of money are provided suitable for transactions of different magnitudes, down to small fractional amounts. A monetary system of this kind aids greatly the development of the sense and habit of exact estimation of price. § 3. #Industrial changes and the forms of money#. The money use, as has just been shown, is a resultant of a number of different motives in men. The changing material and industrial conditions of society change the kind of money that is used. Things that have the highest claim to fitness for money with a people at one stage of development have a low claim at another. The final choice of the money-good depends on the resultant of all the advantages. Shells are used for ornament in poor communities but cease to be so used in a higher state of advancement, and thus their saleability ceases. Furs cease to be generally marketable in northern climes, when the fur-bearing animals are nearly killed off and the fur trade declines. When tobacco was the great staple of export from Virginia, everybody was willing to take it, and its market price was known by all. It served well then as the chief money, but, as it ceased to be the almost exclusive product of the province, it lost the knowableness and marketability it had before. In agricultural and pastoral communities where every one had a share in the pasture, cattle were a fairly convenient form of money, but in the city trade of to-day their use as money is impossible. Thus, in a sense, different commodities compete, each trying to prove its fitness to be a medium of trade; but only one, or two, or three at the most, can at one time hold such a place. While industrial changes and conditions affect the choice of money, in turn money reacts upon the other industrial conditions. If a new and more convenient material is found or the value of the money metal changes to a degree that affects the generalness of its use, industry is greatly affected. The discovery of mines in America brought into Europe in the sixteenth century a great supply of the precious metals, and this change in the use of money reacted powerfully upon industry. Money, being itself one of the most important of the industrial conditions, is affected by and in turn affects all others. § 4. #The precious metals as money#. Certain of the metals early began to show their superior fitness to perform the monetary function. The metals first used as money were copper, bronze (an alloy of copper with nickel), and iron. These were truly precious metals in early times for they were found only in small quantities in a few localities. They, therefore, were widely sought and highly valued as ornaments and for use as tools and weapons. But as the great ancient nations emerged into history, these materials were already being displaced in large measure. Their value fell greatly as a result of greater production due to somewhat regular mining. As wealth grew, as trade increased, as the use of money developed, as commerce extended to more distant lands, the heavier, less precious metals failed to serve the growing monetary need, especially in the larger transactions. Silver and gold, step by step, often making little progress in a century, became the staple and dominant forms of money in the world, while copper and nickel still continued to be used for the smaller monetary pieces. Every community has witnessed some stages of this evolution. In this contest silver had proved itself a few centuries ago to be on the whole the fittest medium of exchange for most purposes, though gold was at the same time in use in larger transactions and in international trade. § 5. #Gold-using countries#. At the beginning of the nineteenth century nations were divided, in accordance with the metals they used as standards, into two great groups, silver- and gold-using. Since that time, and more rapidly after 1850, gold has displaced silver as the standard money. In a higher degree than any other one material, gold has the qualities of a good standard for rich and industrially developed communities. England for a long period practically has had gold as its standard money; the United States since 1834 (except for the period of paper money from 1862 to 1879); France since about 1879, having shifted gradually from silver, after 1855, under the working of the bimetallic law; Germany since 1873; and Japan since the later nineties. Other countries have been striving to attain it. Since about 1890 some states (including Mexico) and some of the colonial possessions of the great nations (including India and the Philippines) have adopted the plan of "the gold-exchange standard." By this plan gold is the standard price unit, while silver continues to be used all but exclusively as the material in circulation, its amount being controlled and its value regulated on principles to be explained below under coinage, seigniorage, and foreign exchange. There are now left but a few silver-standard countries, the most important being China. There are, however, numerous countries, notably in South America and Central America, which have fiduciary paper-money standards.[2] § 6.# Varying extent of the use of money#. Trade by the use of money at no time has become the exclusive method. Barter still lingers to-day.[3] The extent to which, on an average, money is used in different parts of the world differs widely. The use of money in Siberia is less than in European Russia, and its use is less there than in western Europe. The use of money as compared with barter is generally much greater in the cities than in the rural districts. In the cities of Mexico not only money, but banks and credit agencies are in general use; whereas the rural districts are more backward and make far more use of barter than is the case in the United States. At the ports in the cities of China, India, and South America the use of money may be very like that in European cities; but go a little way into the interior of these countries and conditions as to the use of money change greatly. However, the comparative per capita amounts of money (in terms of American dollars) in circulation in different countries is far from being a true index of their industrial development or of their commercial activity. Indeed, beyond a certain point the larger average amount of money in circulation in a country may indicate backwardness in the development of banks and other credit agencies rather than greater amount of wealth or of business. Notice, for example, the medium position of the great commercial countries, Germany and the United Kingdom, as compared with other countries above and below them in the following list. PER CAPITA CIRCULATION OF MONEY IN LEADING COUNTRIES DECEMBER 31, 1912. France..................$48.91 America (U.S.)..........$32.98 Australia............... 38.45 Portugal................ 29.46 Canada.................. 33.57 Netherlands............. 26.86 Switzerland............. 24.32 Mexico.................. 9.17 Germany................. 21.36 Finland................. 8.38 United Kingdom.......... 21.21 Chile................... 8.24 Spain................... 19.96 Turkey.................. 7.09 Brazil.................. 18.79 Russia.................. 6.45 Denmark................. 17.73 Japan................... 5.68 Belgium................. 15.83 Bulgaria................ 5.57 Austria-Hungary......... 14.68 Serbia.................. 5.49 Rumania................. 13.24 Venezuela............... 5.51 Italy................... 13.09 India (British)......... 5.19 South Africa............ 12.93 Ecuador................. 4.62 Norway.................. 12.50 Peru.................... 3.17 Sweden.................. 11.59 Colombia................ 2.32 Greece.................. 11.02 Paraguay................ .57 7. #Money defined and reviewed#. Money may be defined as a material means of payment and medium of trade, generally accepted as the price-good and passing from hand to hand. The definition contains several ideas. The words "generally accepted" imply that money has a peculiar social character, is not an ordinary good. As a price-good, money itself must be a thing having value, otherwise it could not be accepted. Trade means the taking and giving of things of value. Money is, therefore, not merely an order for goods, as a card or paper requesting payment; it is itself a thing of value (tho this value may be due partly or solely to its possessing the money function). Such things as a telegram when transferring an order for the payment of money, as the spoken word, and as a mere promise to pay, are not money. Even checks and drafts are merely substitutes for money. Money passes from hand to hand, is a thing that can be handled, and is or can be bodily transported. The application of the definition is not always easy, for money shades off into other things that serve the same purpose and are related in nature. In many problems money appears to be at the same time like and unlike other things of value, and just wherein lies the difference often is difficult to determine. Even special students differ as to the border-line of the concept, but as to the general nature of money there is essential agreement. 8.# Metal money without or with coinage#. In antiquity the metals were used as money in bulk; that is, the amount was weighed at each transaction and the quality was tested whenever there was doubt.[4] In countries industrially backward, payments are still made in this manner. For some time after the discovery of gold in California, gold dust was roughly measured out on the thumb-nail. In shipments of gold to-day by bankers to settle international balances, metal may be in the form of bars that bear the mark of some well-known banking house. In all of the cases of this kind the gold is money in fact, but not by virtue of any act of government. The metal is simply a valuable good, the receiver of which values it according to its weight and fineness. This is true even when the government mint, for a small charge, tests and stamps the bars at the request of citizens. Very early it became the practice of governments to shape and stamp pieces of metal to be used as money, so as to indicate their weight and fineness. The act of shaping and marking metal for this purpose is called coinage.[5] The coinage by government had notable advantages in giving to the monetary units uniformity of size, fineness, and value, with the stamp that was readily recognized. But in its simplest form coinage in no way changed the value of the money, and any other mark equally plain put upon it would have served equally well, if only it had carried with it equal assurance of the quality and weight of the metal. 9. #Technical features of coinage#. For each kind of metal money there is an established _ratio of fineness_ for the more precious material, which is mixed with baser metals used as alloys. In the United States all gold and silver coins are made nine-tenths fine; in Great Britain, eleven-twelfths. The established weight of the gold dollar in the United States is 25.8 grains of standard gold which contain 23.22 grains of fine gold. The _limit of tolerance_ is the variation either above or below the standard weight or fineness that a coin is allowed to have when it leaves the mint. This is different for each of the principal coins, being about one-fifth of one per cent on a gold eagle. The _par of exchange_ between standard coins of different countries is the expression of the ratio of fine metal in them. Thus the par of exchange between the American dollar and the English sovereign (the "pound") is 4.866; that is, that number of dollars contains the same amount of fine gold as an English gold sovereign. The embossed design is merely to make the coins easily recognizable and difficult to counterfeit; and milled or lettered edges are to prevent clipping and otherwise abstracting metal from the coins. 10. #Seigniorage defined#. Coinage, as practised by early governments and rulers, came to be a function of great importance politically as well as economically. The right to issue money came to be one of the most essential prerogatives of sovereignty. The prince, king, or emperor stamped his own device or portrait upon the coin; hence the term seigniorage from _seignior_ (meaning lord or ruler). Seigniorage meant primarily the right the ruler, or the estate, has to charge for coinage, and hence it has come to mean also the charge made for coinage, and often, in a still broader sense, the profit made by the government in issuing any kind of money with a value higher than that of the materials (whether metal or paper) composing it. Coinage is rarely without charge, and often has been a source of revenue to the ruler. In antiquity and in the Middle Ages this right was frequently exercised by princes for their selfish advantage to the injury and unsettling of trade. This introduced a very great problem of value into the use of money. The coinage is said to be _gratuitous_ when no charge is made for coinage. Coinage is said to be _free_ if the subject or citizen may take bullion to the mint whenever he pleases, paying the usual seigniorage. Coinage is _limited_ if the government or ruler determines when coinage is to take place. Thus, coinage may be both free and gratuitous, when citizens are allowed to bring bullion whenever they please and have it converted into coins without charge or deduction. But coinage is free without being gratuitous when any citizen may bring metal to the mint, whenever he chooses, to be coined subject to the seigniorage charge. [Footnote 1: See Vol. I, pp. 15-16 and 50-53 for an introductory statement of the origin of money in connection with markets.] [Footnote 2: See ch. 5.] [Footnote 3: See Vol. I, p. 43, on the decline of barter.] [Footnote 4: "I will ... refine them as silver is refined, and will try them as gold is tried." Zech. xiii, 9. "I bought the field ... and weighed him the money, even seventeen shekels of silver. And I ... weighed him the money in the balances." Jer. xxxii, 9, 10. A shekel was 224 grains, troy weight, which is about equal to six-tenths of the pure metal in a silver dollar to-day and worth now about twenty-four cents in gold. At that time, however, the purchasing power of silver was many times greater than it now is.] [Footnote 5: From the French _coin_, in turn from Latin _cuneus_, wedge, suggestive either of an earlier wedge-shaped piece, or of a wedge-shaped mark on the piece. The German word _Münze_ is from the Latin _moneta_ (as is the English _mint_, the place where coins are made), which meant money, that name being taken from the temple of Juno, called _Moneta_, where coins were made.] CHAPTER 4 THE VALUE OF MONEY § 1. Standard-commodity money. § 2. Alternative uses of the money-good. § 3. Money as a valuable tool. § 4. Relative importance of money. § 5. Concept of the individual monetary demand. § 6. Concept of the community's monetary demand. § 7. The money-material in its commodity uses. § 8. The general level of prices. § 9. Effect of increasing gold production. § 10. The quantity theory of money. § 11. Interpretation of the quantity theory. § 12. Practical application of the quantity theory. § 1. #Standard-commodity money#. The actual money in use in almost every country to-day consists of a wide and confusing variety: gold, silver, nickel, copper, paper in various forms, issued by various authorities under various conditions as to amount and as to seigniorage. But among all the kinds, in each country some one kind is found standing preëminent and in a peculiar position, as the _standard_ money to which the value of all the other kinds of money is in some manner adjusted. Usually this standard money is composed of a material (gold or silver) which is a commodity; but there are many examples of paper money being for the time the standard. The difficulties of the money problem must be attacked at the point of standard-commodity money, where it is nearest to ordinary value problems and is less complicated than when the various other kinds of money and the various money substitutes are included. We mean by standard money that kind, no matter what its form, which serves in any country as the unit in which the value of other kinds of money is expressed. The standard usually is a quantity of metal of a certain weight and fineness, which, as a commodity, has a value also in industrial uses. Coins of this standard are called full, or real, money by some writers that deny the title of money to everything else. § 2. #Alternative uses of the money-good.# Let us consider the problem of money-value as it would present itself if only one kind of commodity money were in use. This doubtless was in large measure, if not entirely, the case for a time in early societies after one material had proved itself to be the best suited for the purpose. The history of many kinds of money may, we have seen, be traced back to a point where they were not money, but commodities with a direct value-in-use. Such were ornaments, shells, furs, feathers, salt, cattle, fish, game, and tobacco. Each of these materials has, in each situation, a value which is the reflection of its power to appeal to choice. Now, if to the commodity-use is added the money-use, this increases the demand for that good. No new theory is required to explain the value of a commodity as it gradually acquires the added use of a medium of trade. The money use is one that works no physical or visible change in goods except a slight unavoidable abrasion, and at any time a person receiving a piece of commodity money may retain it for its use-value, as food, ornament, tool, or weapon, or may retain it for a time and then spend it as money. This case of value is no more difficult than that of anything else having two or more uses. For example, cattle are used for milk, for meat, and as beasts of burden. Each of these uses is logically independent as a cause of value, yet all are mutually related, the value of cattle to a particular person being determined by the consideration of all the uses united into one scale of varying gratification. § 3. #Money as a valuable tool.# Money is often, by a figure of speech, called a tool. A tool is a piece of material taken into the hand to apply force to other things, to shape them or move them. Figuratively, this is what money does. A man takes it not to get enjoyment out of it directly, but to apply force, to move something, and that which he moves is the other commodity. Money thus (as money) is always an indirect agent. Adam Smith aptly likened money to the roads and wagons that transport goods, thus gratifying desires by putting goods into more convenient places. The fundamental use that money serves is to apportion one's income conveniently as it accrues and as it is spent. The use of money increases the value of goods by increasing the ease with which trade takes place. Like any tool or agent, money is valued for what it does or helps to do. It enhances the value of the goods that it buys and sells by dividing them into quantities convenient for use and by making them available at the right times. In the light of the principles of diminishing gratification and of time-preference it is clear that the amounts in which, and the times at which, goods are available have an essential bearing on their values. Money is the most successful device ever discovered for distributing the supplies of a journey along its course, and the goods of daily need over a period of time. The use of money as a storehouse of value by hoarding it is merely a more extreme case of keeping income until a time when it will have a greater value to the owner than it has in the present.[1] § 4. #Relative importance of money.# Because money is the general expression of purchasing power, and comes to symbolize all other wealth, it often assumes undue and exaggerated importance in men's eyes. Money is but one of many forms of wealth. It constitutes but a small percentage of the total wealth of a country, and it is far from being the most indispensable to human welfare. Yet its importance, as a whole, in determining the form of industrial organization is enormous. In a society without money, industrial processes would be very different, and trade would be hampered in manifold ways. A poor community has little money because it cannot afford more; it gets along with less money than is convenient just as it gets along with fewer agents of every other kind that it could use. Pioneers in a poor community where the average wealth is low cannot afford to keep a large number of wagons, plows, good roads, or schoolhouses. If the members of the community were wealthy enough each would have more of these and of other things, and the sum total of money would be greater. Great as is the convenience of money, poorer communities have to do with little of it. It is, therefore, a confusion of cause and effect when poor communities imagine that their poverty is due to lack of money. § 5. #Concept of the individual monetary demand.# Let us now seek to get in mind the idea of an _individual monetary demand,_ as that amount of money which at any time is required by an individual to make his purchases in expending his income. Every man may be thought of as having an average monetary demand, or his average individual cash reserve, throughout a period. A man with a salary of $50 a month paid monthly has ordinarily a maximum monetary demand of $50. If his expenditures are made in two equal parts, the one on pay-day, the other thirty days later, his average monetary demand during the month is a little over $25. If most of his purchasing is done in the first week of the month, his average monetary demand may be perhaps $10. Many a workman purchases on credit, running accounts at the stores for a month. Then on pay day he spends his entire month's wages the day he receives it, and goes without money for the rest of the month. His average monetary demand throughout the month would then be about equal to one day's wages. Evidently any person's cash reserve may be expressed as that proportion of his income that is to him of more value retained in money form for any period than if at once expended. In this conception of the individual monetary demand, must, however, be included not merely the demands of retail purchasers, made by themselves, but also those of all agencies such as merchants, bankers, and transportation companies, serving the needs of ultimate consumers of goods. The use of money may be necessary several times before a commodity completes its journey from producer to consumer. Of two persons whose expenditures of money are of the same kind and made at the same rate, the one having the larger amount of purchases to make has the larger monetary demand. But the amount of purchases does not always vary directly with the amount of real income[2]; for example, a farmer and a village mechanic may have at their disposal incomes equal in the quantities of goods, such as food, fuel, clothing, and house-uses (worth, let us say, $1000 for each), but the farmer would be getting a larger part of his goods directly from his farm and by his own labor, while the mechanic would be getting first a money income to be expended afterward for food, clothing, and rent. The mechanic would in this case have an average monetary demand much larger than the farmer. We see thus that a person's monetary demand at any time is that amount of money which rests in his possession as the necessary condition to making his purchases as he desires. Individual monetary demand varies in proportion directly to the delay, and inversely to the rapidity with which the individual passes the money on; and directly to the amount of the person's income that is received and expended in monetary form. § 6. #Concept of the community's monetary demand.# The monetary demand of a community at a given time is the sum of the monetary demands of the various individuals and enterprises. It is that stock of money which is necessarily present to effect the exchanges of the community in the prevailing manner at the existing price level. A single dollar as it circulates helps to supply the monetary demand of many individuals in turn: the more quickly each person spends the piece of money he receives, the greater its rapidity of circulation. Let us suppose that every piece of money passed from one person to another once each day. Then a dollar would, in the course of a business year (about 300 days), serve to buy (and at the same time to sell) $300 worth of goods. If the average purchases of each individual amounted to $1000 a year, the average monetary demand of each would be about 3-1/3 dollars. But every moment beyond the average time that any one kept money would increase his monetary demand. If he delayed a day, a week, or a month in spending the money, waiting until he could buy in some other market, or until a better time to buy, he would thus increase insomuch the amount of money needed to make the trade (on that scale of prices). It requires more slow dollars than swift dollars to make a given volume of purchases. Evidently the times of maximum monetary demand of the different individuals do not coincide; rather they alternate with each other, and the community's total monetary demand at a given time is a composite of the many individual variations. The amount of money that will remain in circulation in a community depends on several factors, the chief among them being the amount of goods to exchange, the methods of exchange, and the prevailing scale of prices. The amount of goods to be exchanged may change even when the amount produced is unaltered (e.g., a change from agricultural to industrial conditions). The methods of exchange may alter so as to require either more money (e.g., cash instead of credit business), or less money (e.g., use of bank checks displacing use of money by individuals). Or, apart from the other factors, the scale of prices may change as the conditions of gold and silver production are altered. The interrelations of gold and silver production, paper money issues, banking growth, and money-inflow and outflow in foreign exchanges give rise to the most interesting and important problems in the field of monetary theory. § 7. #The money-material in its commodity uses#. We are now prepared to take up the question: What determines the ratio at which money exchanges for other goods? And, as money comes to be the unit in which prices are generally expressed, the question becomes: What determines the general level of monetary prices? We have this problem in its simplest form in the case of a commodity-money such as gold. It may be looked upon merely as so much precious metal. The problem of its value as bullion is the same as that of the value of pig iron or of zinc, of meat or of potatoes. There is here no special monetary problem. The value of gold as bullion and its value as money are kept in equilibrium by choice and by substitution. The several uses of gold are constantly competing for it: its uses for rings, pens, ornaments, championship cups, photography, dentistry, delicate instruments, and as a circulating medium. If the metal becomes worth more in any one use, its amount is increased there and is correspondingly diminished in other uses.[3] When coinage is free and gratuitous[4] the standard money is a commodity. Such coinage is essentially but the stamp and certificate that the coin contains a certain weight and fineness of metal. Where coinage is free and gratuitous each coin will be worth the same as the bullion that is in it so far as the citizens exercise their choice. They will not long keep uncoined metal in their possession when it is worth more in the form of money, nor will they long keep money from the melting-pot when it is worth more as bullion. Yet there may be a slight disparity between the bullion value and the monetary value before the metal is converted into coin or the coin melted down into metal. This adjustment of the value of commodity-money to other things is made also on the side of supply, in the use of labor and material agents to produce the precious metals and to produce other things. Gold-mining, for example, is one among various industries to which men may apply their labor and their available material agents. Some mines are superior, others medium, others marginal which it barely pays to work. There is, therefore, a rise and fall of the margin of gold production with changes in prices and changes in the cost of production. Large new deposits of gold are discovered from time to time and new methods of extracting gold are invented. If, when it barely pays to work a mine, such changes occur, gold becomes worth less, and the poorer mines eventually must go out of use. As gold rises in value some abandoned mines again come into use. A similar variation may be noted in the utilization of marginal land, marginal factories, marginal forges, and marginal agents of every kind.[5] § 8. #The general level of prices#. We come now to a more peculiar aspect of the monetary value problem. In performing its function as general medium of trade, money determines the general level of monetary prices. We have the idea of a general level of prices whenever we contrast the price ratio of money to other commodities at one time with its ratio at another time. Now the monetary prices of the various commodities are constantly changing, and in somewhat different degrees, but on the average there may be a general trend upward or downward, and this is called a change in the general scale (or level) of prices, as contrasted with changes in the values of any two commodities in terms of each other. The general price level will be more fully discussed below (Chapter 6, section 3) in connection with the method of measuring by index numbers its changes. This brief explanation may, perhaps, be enough for our present purpose. Our question now is: What is the effect of changes in the quantity of money (considered apart from chance accompanying changes) upon the general level of prices? § 9. #Effect of increasing gold production#. Let us take a case where gold is in general use as money, and where for some time there has been no noticeable change in the amount of business, the methods of trade, and the general scale of prices. What would happen when new gold mines were found that were much easier to operate, and gold began to be produced at a much more rapid rate than formerly? The amount of gold as compared with other forms of wealth evidently would be increased. What if all the increase went into the industrial arts? The value of gold in its industrial uses would fall. Then a part of the increase must be diverted to monetary uses. When any man, by reason of the increasing gold supplies, gets a larger stock of money than he had before, the proportion formerly existing between his use for money and his monetary stock is altered. He has more money than meets his monetary demand at the existing prices. As he seeks to reduce his stock of money to due proportions by buying more goods, he thereby distributes a part of the excess of money to others. This bids up the prices of goods further until the total value of goods exchanged again bears the same ratio as before to the average monetary demand of each individual. Take an extreme case: if twice as many dollars get into circulation in a community, either some few men may have far more dollars than before, while others have nearly the same number; or every man may have his due proportion of the new supplies, just twice as many as before in proportion to his income. The latter result, "other things being equal," is the logical one after equilibrium has been restored. If prices of goods remained the same as before, there would be twice as many pieces of money available to effect the same number of trades at the same prices. There is no reason why each person should tie up twice as large a proportion of his income in the form of money. If, however, there is a concerted movement to spend the surplus money, there results a general bidding down of the value of money, a general bidding up of the prices of goods. At what point will this movement stop? The rational conclusion must be that, other things being equal, the new equilibrium will be established when the ratio between the value of money and the price of the goods which each individual is purchasing becomes the same as before. The money being doubled, prices must be doubled, and likewise for any other change in quantity. § 10. #The quantity theory of money.# This explanation of the effect of changes in the quantity of money in a country upon prices (the general scale of prices) is known as the quantity theory of money. This theory has, for a century, been very generally accepted by competent students of the money problem. It may be summed up thus: other things being equal, the value of the monetary unit, expressed in terms of all other commodities, falls as the quantity of money increases, and _vice versa_. That is, prices rise and fall in direct proportion to changes in the total quantity. This is a simple explanation of a complex and difficult set of conditions. The phrase, "other things being equal," betokens the statement of a tendency where there are several factors. The quantity theory explains what happens when there is a change in one of the factors--the number of pieces of money. There are three large sets of facts to be brought into relationship with each other in the quantity theory: (1) the amount of business, or the number of trades effected; (2) the rapidity of circulation, depending on the methods by which business is done; (3) the amount of money available. According to the quantity theory we must expect that, when conditions (1) and (2) remain fixed, the value of money will vary inversely as its quantity. This quantity theory may be expressed in the formula P = MR/N when P is the symbol for price, or the general price level, N is (1) above, R is (2), and M is (3). P, therefore, changes directly with either M or R, or inversely with N.[6] § 11. #Interpretation of the quantity theory.# The quantity theory must be carefully interpreted to avoid various misunderstandings of it that have appeared again and again in economic discussion. (1) It does not mean that the price level changes with the absolute quantity of money, independently of growth of population and of the corresponding growth in the volume of exchanges. (2) It is not a mere per capita rule to be applied at a certain moment to different countries. For example, Mexico may have $9 per capita and the United States $35, while average prices may not differ in anything like that proportion. But in these two countries not only the amounts of exchanges per capita but the methods of exchange and the rapidity of the circulation of money differ greatly.[7] (3) It cannot be applied as a per capita rule to the same country through a series of years, without taking account of the many changing factors. It is estimated that in 1800 the money stock was about $5 per capita in the United States, and in 1914 about $35[8], but average prices have not necessarily changed in the same ratio. In a period of years a country may change in a multitude of ways, in complexity of industry, modes of exchange, transportation, wealth, and income. These changes require, some larger, others smaller, per capita amounts of money to maintain the same level of prices. For example, the substitution of cash payments for book-credit in retail trade calls for a larger per capita stock of money; whereas an increased use of banks and checking accounts, by economizing the use of money, enables a smaller amount of money to maintain the same level.[9] (4) Tho applied originally to standard money, the quantity theory applies to all other kinds of money circulating side by side and at a parity of value, so far as these fulfil the definition of money and are not merely supplementary aids of money. These substitutes for, or supplements to, money enable each dollar to do more work, to circulate more rapidly. If the standard money alone were doubled in quantity, while the various forms of fiduciary money (smaller coins, bank notes, government notes) remained unchanged, the quantity of money as a whole would not be doubled. Indeed, in such a case, the method of exchange would be greatly altered. According to the quantity theory, therefore, prices would not be expected to double. § 12. #Practical application of the quantity theory#. Despite the number of changing factors affecting the methods of exchange and the amount of business, the quantity theory is a rule unable at any moment. These various factors change slowly, and the quantity theory answers the question: What general change occurs in prices as a result of the increase or decrease of the money in a given community at a given moment? Like the law of gravitation and the law of projectiles, the theory must be interpreted with relation to actual conditions. The quantity theory makes intelligible the great and rapid changes in prices which have followed sudden changes in the quantity of money. Inductive demonstration of broadly stated economic principles is usually difficult, but there have been many "monetary experiments" to teach their lessons. Many inflations and contractions of the circulating medium have occurred, now in a single country, again in the whole world; and the local or general results have helped to exemplify richly the working of the quantity principle. With the scanty yield of silver and gold mines during the Middle Ages, prices were low. After the discovery of America, especially in the sixteenth century, quantities of silver flowed into Europe. The great rise of prices that occurred was explained by the keenest thinkers of that day along the essential lines of the quantity theory, tho there were many monetary fallacies current at that time. The experience in England during the Napoleonic wars, when the money of England was inflated (by the forced issue of large amounts of bank notes) and prices rose above those of the Continent, led to the modern formulation of the theory by Ricardo and others about 1810. The discovery of gold in California and Australia in 1848-50 greatly increased the gold supply, and gold prices rose throughout the world. Between 1870 and 1890 the production of gold fell off while its use as money increased greatly, and prices fell. A great increase of gold production has occurred in the period since 1890. In part the rising prices since 1897 are explicable as the periodic upswing of confidence and credit, but in the main doubtless they are due to the stimulus of increasing gold supplies.[10] These are but a few of many instances in monetary history, which, taken together, make an argument of probability in favor of the quantity theory so strong as to constitute practically an inductive proof. [Footnote 1: The old-fashioned miser, however, withdraws his hoarded gold for the time from its usual monetary function as an indirect agent and treats it as a direct good yielding to him psychic income by its mere possession.] [Footnote 2: See on kinds of income, Vol. I, p. 26 ff.] [Footnote 3: See secs. 1 and 2 of this chapter; also Vol. 1, especially pp. 31-38 and 353-355.] [Footnote 4: This means actually gratuitous, for any real difficulty in getting metal to or from the mint operates as a cost in the conversion of bullion into money, or _vice versa_; e.g., the gold may be in Australia and the mint in London.] [Footnote 5: See Vol. I, pp. 138 ff. and 361 ff. FIG. 1. GOLD PRODUCTION OF THE WORLD, 1493-1914. The changes in gold production here shown have bearings not only upon problems of money, but in some respects upon nearly every modern economic problem. Compare in the present connection this figure with Figure 3, in Chapter 6, Section 4, showing changes in index numbers of prices. [Illustration: FIG. 1. GOLD PRODUCTION OF THE WORLD. 1493-1710. AVERAGES FOR PERIODS BEFORE 1870]] [Footnote 6: This formula is presented by E.W. Kemmerer in "Money and Prices" (2d ed., 1909), p. 15 ff.] [Footnote 7: See above, ch. 3, sec. 6, table.] [Footnote 8: PER CAPITA CIRCULATION OF MONEY (ESTIMATED) IN THE UNITED STATES IN VARIOUS YEARS. 1800......$4.99 1850......$12.02 1890......$22.82 1810...... 7.60 1860...... 13.85 1900...... 26.93 1820...... 6.96 1870...... 17.51 1910...... 34.33 1830...... 6.78 1880...... 19.41 1915...... 35.44 1840......10.91 ] [Footnote 9: On the function of deposits, see below, ch. 7, sec. 11.] [Footnote 10: Consult Figure 1 in ch. 4 and Figure 2 in ch. 6 for the graphic presentation of these and related facts.] CHAPTER 5 FIDUCIARY MONEY, METAL AND PAPER § 1. Commodity and fiduciary defined. § 2. Present monetary system of the United States. § 3. Saturation point of fractional money. § 4. Light-weight fractional coins. § 5. Worn coins and Gresham's law. § 6. A general seigniorage charge on standard money. § 7. Coinage on governmental account. § 8. The gold-exchange standard. § 9. Nature of governmental paper money. § 10. Irredeemable paper money. § 11. Theories of political money. § 1. #Commodity and fiduciary defined#. The actual moneys in circulation in every modern country consist of a wide variety of pieces, differing in denomination, physical size, shape and materials, mode of issue, source or authority of issue, and legal character. Among these kinds, one is the standard and is a commodity-money.[1] In such cases the coinage is free and nearly gratuitous, and the value of the money is kept close to parity with its value as bullion by changing bullion into coin, or coin back into bullion, whenever there is an appreciable difference between the values in the two uses. This adjustment is brought about by the free action of the people. The government, having declared what is the standard money unit, and having provided a mint to make coins, leaves it to citizens, acting from the ordinary competitive motives, to decide when they will reduce or increase the number of coins in circulation. The other kinds of money are not commodity-money and the materials of which they are made, whatever they be, are not worth as much in any other uses as they are in their present monetary form. Their value is always referred to, and adjusted to, that of the commodity-money, so long as any of it is in circulation. In contrast with commodity-money, these other kinds may be called fiduciary money. By fiduciary money we mean money that has not a commodity value equal to its money value, but which is generally accepted because each receiver has faith that others in turn will take it in the same way.[2] § 2. #Present monetary system of the United States.# Here is given a summary of the main features marking the present monetary system of the United States (in 1915). Not all this variety is essential to an efficient monetary system and several of the kinds survive as the result of historical accidents (political and legislative). But all are now kept in accord with the value of the gold coin which, it will be observed, is the only kind the amount of which is not artificially limited. Silver dollars are no longer coined, subsidiary silver and minor coins are issued only in exchange for other money, as are gold and silver certificates in exchange for gold or for silver, which they merely represent while in circulation. § 3. #Saturation point of fractional money.# Fiduciary money is that on which regularly the issuer makes a seigniorage charge.[3] Let us consider now the effect of seigniorage on the value of money. Fractional coins are those of smaller denominations than the standard unit of money, as shillings and pence in England, and half dollars, quarter dollars, dimes, nickels, and cents in America. Money to serve well a variety of uses must be of different denominations, and "small change" is necessary to make small purchases and for exact settlement in larger payments that are not multiples of the standard unit. The amount required (or most convenient to use) in each denomination of fractional coins is thus a more or less certain portion of each person's monetary demand, shaped by experience and fixed by habit. For example, within certain elastic limits of convenience quarters may be used for halves, and dimes for nickels (and _vice versa_); but each person has a point of preference. The total demand for each kind of change is the sum of the individual demands. This point where the amount of coins of any denomination (in relation to the whole monetary system) is most convenient may be called the saturation point of that kind of small change, up to which point the people prefer a share of their money in that form, and beyond which they will, if free to choose, exchange that kind for other denominations (smaller or larger). Each kind of money, as the cent, nickel, dime, has its own peculiar demand and its saturation point. MONETARY SYSTEM OF THE UNITED STATES, 1915 Metals | Weight, grains | Fineness |Ratio to gold 1. Gold coins | 25.8 | .90 | 100 2. Silver dollar | 412.5 | .90 | 15.988 to 1 3. Silver, subsidiary | 385.8 | .90 | 14.953 to 1 4. Nickel (5 cents) | 77.0 | .25 | ........... 5. Copper (1 cent) | 48.0 | .95 | ........... ---------------------------------------------------------------- Metal |Limit of issue | Legal tender for|Receivable for | | private debts |public dues 1. Gold coins | Unlimited. | Unlimited. |For all 2. Silver dollar |Ceased in 1905 | Unlimited. |For all 3. Silver, | Needs of the | $10 |$10 subsidiary | people | | 4. Nickel (5 cts.) | Do. | 25 cts. |25 cts. 5. Copper (1 ct.) | Do. | 25 cts. |25 cts. | \ | _Paper_ | | | 6. Gold certificates|Unlimited in ex-| No |For all |change for gold | | 7. Silver |In exchange for | No |For all certificates | silver $ | | 8. US notes | No new issues. |Unlimited. |Except customs 9. Treasury notes | No new issues. |Unlimited |For all of 1890 | | | 10. National bank |Capital of banks|No |Except customs notes. | | | 11. Federal reserve |Per cent. of |At banks of |For all notes. | gold reserves |reserve system | ---------------------------------------------------------------------- Metal |Exchangeable at |Redeemable at |In circulation |treasury for | treasury in |Oct 1, 1915 1. Gold coins |Gold certificates| |616,000,000 |U.S., Treas., or | | |Fed, res. notes | | 2. Silver dollar |Silver | |65,000,000 |certificates | | 3. Silver, |Minor coins |Lawful money[a]| subsidiary | |in sums or mul-|162,000,000 | |tiples of $20 | 4. Nickel | | Do. \ > 62,000,000[d] 5. Copper | | Do. / Paper | | | 6. Gold certificates| Subsidiary and |Gold coin |1,172,000,000 | minor coins | |[e] 7. Silver | Silver and |Silver dollars | 482,000,000[f] certificates | minor coins | | 8. US notes | Subsidiary and |Gold | 337,000,000 | minor coins | | 9. Treasury notes of| Silver and |Gold | 2,200,000 1890 | minor coins | | 10. National bank |Subsidiary silver|Lawful money[b]|761,000,000 notes |and minor coins | | 11. Federal reserve | Gold[c] |Gold[c] |133,000,000 notes | | | ------------------------------------------------------------------- Total[g]...........................................3,792,200,000 [Footnote a: "Lawful money" includes gold coin, silver dollars, U.S. notes, and Treasury notes.] [Footnote b: Redeemable also in lawful money at bank of issue.] [Footnote c: Redeemable also at Federal reserve banks in gold.] [Footnote d: Not usually included in the estimates of total money in circulation.] [Footnote e: Represented dollar for dollar by gold kept in the U.S. treasury.] [Footnote f: Represented dollar for dollar by silver kept in the U.S. treasury.] [Footnote g: Besides, there were about $312,000,000 in the U.S. Treasury not offset by outstanding paper. The total money stock (in circulation and in the Treasury, eliminating certificates representing gold and silver), was about $4,233,000,000, of which 70 per cent was metal (largely represented in circulation by paper certificates) and 30 per cent was paper. Of the 70 per cent 50 was gold, 18 was silver, and 2 was copper and nickel.] § 4. #Light-weight fractional coins.# The standard metal is usually too valuable to be suitable for coins of the smaller denominations. Therefore, when gold is the standard, copper, nickel, and silver remain in restricted use. But when coins of these metals are issued at weights corresponding with their bullion value, difficulties arise. Not only are they too heavy for convenience, but with every slight rise in their bullion value as compared with that of the standard metal, they become worth more as bullion than as coin and begin to disappear from circulation. This happened often throughout the Middle Ages and until the nineteenth century. The attempt was generally made to coin gold and silver at a ratio of weight corresponding exactly to their market values at a given moment and, every time the market conditions varied, the best full-weight coins of one of the two metals were taken out of circulation. [4]The country thus suffered for lack either of the larger gold coins or of fractional coins. At length, to remedy this difficulty, fractional silver coins, often called "token coins," were issued, in limited numbers, of less than full proportionate weight and bullion value. This plan, having been partially tried, was generally adopted by the United States in 1853 at a time when the silver dollar of 371.25 fine grains was legally rated at the same value as the gold dollars of 23.22 grains, and was freely coined. The fractional coins were made a little over 6 per cent lighter per dollar than the dollar coin; two half-dollars or four quarters or ten dimes contained 93.52 cents worth of silver. Since then silver bullion has become worth much less in terms of gold, and for years past the bullion value of the silver in a dollar of silver small change has been between 40 and 60 cents. Why then has the fractional coinage a monetary value equal to the standard money, dollar for dollar? The answer is, because it is artificially limited in quantity, so that it does not pass the point of saturation in the field of its use. Its value rests on its monetary use; it is fiduciary money, not commodity money. It is limited simply by letting "the needs of the people" determine its amount. This is done by issuing it only in exchange for other money of the larger denominations, and by redeeming it in other money on demand. Fractional coins are issued on the request of banks in exchange for standard money. One needing "change" gets it at the bank; when the bank finds its supply falling short it gets more from the government mints. As business increased in 1898, the demand for nickels, dimes, and quarters became unprecedented, and the mints worked night and day to supply them. If these coins were made in great quantities and forced into circulation by the government through paying them out to creditors and officials, their quantity would become excessive and they would fall in value (be at a discount) compared with standard money. But as this is not done, and as, moreover, they are redeemed on demand at the treasury (and practically at every bank and post office) in other money, any slight tendency to depreciation in any locality is at once corrected. As it is, the government makes a seigniorage profit on the fiduciary coinage, as shown in the following table. [5] The fractional coinage is maintained at a parity with the standard money in accordance with the monopoly principle, expressed in the limitation of the amount. _Receipts:_ Earnings (charges for refining, assaying, manufacture for other countries, etc.)......................... $392,000 Bullion recovered, by-products, old materials, etc... 143,000 Profits on seigniorage, subsidiary silver............ 3,013,000 Profits on seigniorage minor coinage and recoinage... 2,387,000 ---------- Total receipts.......................................$5,935,000 _Expenditures_: All kinds............................................$1,138,000 ---------- Net revenues from mint service.....................$4,797,000 § 5. #Worn coins and Gresham's law.# Coins may be light-weight as the result of another cause--namely, the abrasion (wearing off) of the coins in circulation. Nearly always when this has occurred the worn coins have still been accepted as money,[6] and ordinarily without any depreciation. That is to say, they have a value as money greater than the value of the bullion that is in them. Everybody takes them without hesitation as readily as if they were full weight. If, however, at this point, new full-weight coins are put into circulation, these at once disappear while the old ones remain in circulation--a fact that has always been somewhat mystifying. In explanation of the phenomenon was formulated "Gresham's law" of the circulation side by side of coins of different bullion value: bad money drives out good money. Sir Thomas Gresham (whose name has but recently been given to this so-called law), explained the principle to Queen Elizabeth when counseling her regarding the recoinage of the debased money of the realm as was done in 1560. He showed that when old, worn coins were in circulation and the mint began putting out full-weight coins, the old lighter ones remained as money, while the new ones, being heavier, were picked out by jewelers and by those needing to send money abroad. Gresham's law has a paradoxical wording and is frequently misunderstood. "Bad" money means not counterfeit money, but merely money that has not as great a bullion value compared with its money value as some other kind of money then in circulation. But not every piece of such money will drive out every piece of good money. The law applies only under certain conditions, and within certain limitations. The "good" will be driven out only if the total amount of money in circulation is in excess of what would be needed if all were of full weight and of best quality. Paradoxically speaking, if there is not too much of the bad money, it is just as good as the good money. But even if good money is driven out, it may not leave the country. It may be hoarded, or be picked out by banks and savings-institutions to retain as their reserves, or be melted for use in the arts. Gresham's "law" becomes thus a practical precept. As applied to the plan of recoinage it is: Withdraw the worn coins as rapidly (in equal numbers) as you put new coins into circulation. The continued circulation of "bad" money along side of "good" money (light-weight along side of full-weight coins), so long as the total number of coins is not in excess of the money demand for full-weight coins, is explained thus on just the same principle as is the circulation at parity of a light-weight fractional coinage, in the preceding section. § 6. #A general seigniorage charge on standard money.# The fiduciary coinage problem presents itself under a some-what different guise in case a seigniorage charge is made on all coinage, even of that metal used as the standard unit. In this case coinage is free but not gratuitous. In this case no bullion is brought to the mint unless the coined pieces the owners receive have a value equal to the bullion value plus the seigniorage charge. The power to impose a seigniorage charge is a monopoly power. Artificial limitation is present. Evidently, the number of coins that can be issued without depreciation is limited to that number which would circulate if they were made full weight without a seigniorage charge.[7] This number of pieces of full-weight metal is the saturation point of the money demand of the country. If more than that could in any way be put into circulation it would become worth less as money than as bullion, and would be melted or exported. Assume that this full supply of money at a given moment is 100,000 pieces or dollars; then consider the effect of imposing a seigniorage charge of ten per cent on further coinage. The government alone having the right of coinage, the need of money would give the circulating medium a monopoly value. The value of the money would rise. When it had risen until the coin would buy any more than one-ninth more bullion than was in it, the citizens would begin to take metal to the mint. After the ten per cent charge was taken out they would receive a coin which, the containing one-tenth less bullion, would be worth very nearly the same as the metal taken to the mint. No considerable depreciation could take place unless the volume of business fell off so that less money was needed than before. In that case there would be no outlet for the excess of coins until they fell to their bullion value, i.e., till they lost the entire value of the seigniorage, the monopoly element in them. Melting or exporting them before that point was reached would cause to the owner the loss of whatever element of seigniorage value they contained. We thus have arrived at the general principle of seigniorage: when the number of coins issued is limited to the saturation point, a seigniorage charge does not reduce their money value; they are worth more as money than as bullion. And this holds good of a large seigniorage charge as well as of a small one, even up to the extreme limit of a charge of 100 per cent. In this last case the government would retain the whole of the bullion brought to it and would give in return a piece of money made of material (metal or paper) with a negligible value. § 7. #Coinage on governmental account.# The fiduciary coinage problem may be presented also when coinage is not free, and the times and amount of coinage are determined by law or by legally authorized officials. In this case the bullion must be obtained by purchase in the open market (and paid for by some form of legal money, or by bonds). Coinage is then said to be "on governmental account." Now, assuming that the normal money-demand (the volume of business, or sum of exchanges) remains unchanged, let us consider what will result if the government begins to issue money in this way, when, as in the preceding case, 100,000 units of full-weight money are in circulation. This action might be taken most simply by recoining all the full-weight pieces that came into the treasury, making them contain 1/10 less precious metal, and paying out 1111 pieces for every 1000 received. Every time this was done there would be an excess of 111 pieces above the normal money-demand, and 111 full-weight pieces would be exported or melted (Gresham's law). The process (in strict theory) may be repeated 90 times, at which point 90,000 full-weight coins have been received, 100,000 light-weight coins have been issued to take their place and 10,000 full-weight coins have gone out of circulation. The total seigniorage charge would be 1-10 of 90,000, or 9000 units. No depreciation has taken place, and the pieces, by reason of their limitation, bear a money value in excess of the bullion that is in them. Now the government, with the next 1000 pieces collected by taxation, could buy enough bullion (in the open market) to make another 1111. The excess of 111 pieces could not now be promptly removed by the melting down or exporting of 111 coins, for all those remaining in circulation have a bullion value 1/10 below their money value. As this process is repeated the excess must continue to grow from 100,000 to 111,111, and the value of the money piece in terms of bullion continue to fall from 10 to 9. At this point the 111,111 pieces would contain just the same amount of bullion and have just the same value as the 100,000 pieces did before. Thereafter no further profit would accrue to the government from issuing coins of that weight. To make a further profit it must again reduce the amount of pure metal in the coin. This process was often repeated in the Middle Ages. A ruler, either by making a higher seigniorage charge or by coining on his own account, debased the quality or reduced the weight of the money of his realm. For a time the new coins, having the same monetary use, circulated at par with the old coins. The ruler, pleased with this almost magical power of getting a revenue with little trouble, continued to issue coins until suddenly the heavier coins began to be exported or melted, and the value of the other money fell, to the mystification alike of the prince and of his people. The reason is now perfectly plain: the number of coins was not kept within the proper limits and they went down to their bullion value. The only way a further profit could be made in this way was to debase the coin again. By successive steps the coinage came to consist almost entirely of cheaper alloy. § 8. #The gold-exchange standard.# In a number of silver-using countries and colonial dependencies near the end of the nineteenth century, the fluctuations of the value of silver in terms of gold was a constant source of difficulty in the payment of foreign obligations to gold standard countries. Yet there were strong reasons in the habits of the people and in the industrial conditions of the country to forbid the adoption of gold and the disuse of silver as the actual money in circulation. The method adopted, that of the gold-exchange standard, involved these features. (1) Closing the mints of the country to the free coinage of silver, as was done most notably in India in 1893 and in Mexico in 1904. (2) Adoption of a fixed ratio of exchange between the silver coins in circulation and some gold coin which is made the standard of value in all transactions (as the dollar or the pound sterling), the money in circulation thus being all or nearly all of a fiduciary nature. (3) Regulation and limitation of the amount of money in circulation so that a fixed parity between it and gold may be maintained (a) by the limited issue of coins only on governmental account, (b) by the sale, at a fixed rate, of foreign exchange bills payable abroad in the standard unit, the money paid for the bills being withheld from circulation in a special reserve, (c) by the purchase of foreign bills of exchange at a fixed rate, thus paying out and putting again into circulation some of the fiduciary money in the special reserve. These monetary changes furnish numerous illustrations and demonstrations of the quantity theory of money as applied to the entire circulating medium of a country.[8] §9. #Nature of governmental paper money.# The problem of seigniorage presents itself in its most extreme form when money is made of paper. Paper money is issued either by a government or by a bank. We will consider governmental notes here, reserving until Chapter 7 the case of bank notes. The issue of paper money in some cases grew out of the practice of debasing metal. However this may have been, governmental paper money may be looked upon as money for which a seigniorage of one hundred per cent is charged. The gain of seigniorage from paper money is greater and is just as easily secured as that from coinage of metals. Governmental paper money is called "political money," in contrast with commodity money. However, all coins that contain an element of seigniorage, or monopoly value, are to that degree "political money." The typical paper money is irredeemable; that is, it cannot be turned into bullion money on demand. It is simply put into circulation, usually with the "legal-tender" quality. Money has the _legal-tender_ quality (as the term is used in the United States) when, according to law, it must be accepted by citizens as a legal discharge for debts due them, unless otherwise provided in the contract. The prime purpose of making money legal tender is to reduce the danger of dispute as to payments; but another purpose often has been to force people to use a depreciated money whether they would or not. The purpose of the issue of political money is usually to gain the profit of seigniorage for the public treasury, and often it has been the desperate expedient of nearly bankrupt governments. Governmental paper money differs from bank notes in that its value does not necessarily depend on the promise of redemption by the issuer. It differs from promissory notes and bonds in that its value is not based on the interest it yields, but mainly on its monetary uses. The issue of paper money may save the government the payment of interest on an equal amount of bonds. The promise to receive paper in payment for taxes or for public lands may help to maintain its value by reducing its quantity, but nothing short of its prompt redemption in standard coins makes it truly redeemable. § 10. #Irredeemable paper money.# The most notable examples of paper money in the eighteenth century were the American colonial currencies, the continental notes, and the French assignats. In all the American colonies before the Revolution, notes or bills of credit were issued which were in most cases legal tender. Parliament forbade the issues, but to no effect. Without exception they were issued in large amounts and without exception they depreciated. The continental notes were issued by the Continental Congress in the first year of the war (1775), and for the next five years. The object at first was to anticipate taxes, and it was expected that the states would redeem and destroy the notes, but this was not done. The notes passed at par for a time, but depreciated rapidly as their number increased. It has been estimated that the country had less than $10,000,000 of coin before the war, and when, in 1780, over $200,000,000 of notes were in circulation they were completely discredited: hence the phrase "not worth a continental." Specie then quickly came back into use. A few years later the leaders of the French Revolution, failing to learn the lesson of the American experience, issued, on the security of land, notes called assignats in such enormous quantities that they became worth no more than the paper on which they were printed. The paper money issued under the English bank restriction act of 1797-1820 is especially notable because it gave rise to the controversy which did much to develop the modern theory of the subject. Parliament forbade the Bank of England to redeem its notes in coin because the government wished to borrow the coin the bank held. The result was the issue of a large amount of bank money not subject to the ordinary rule of redemption on demand. It was virtually governmental paper money. The notes depreciated and drove gold out of circulation, and it was not until 1821 that specie payments were definitely resumed. The United States, under the Constitution, did not try legal-tender paper money till 1862 when paper notes (called greenbacks, because of the color of ink with which the reverse side was printed) were first issued, later increased to a total of about $450,000,000. Other interest-bearing notes were issued with the legal-tender quality and circulated as money to some extent. Greenbacks depreciated in terms of gold, and gold rose in price in terms of greenbacks until, in June, 1864, it sold at 280 a hundred. Fourteen years elapsed after the war before these notes rose to par, in terms of gold (in December, 1878), and they became legally redeemable in gold January 1, 1879. This was called "the resumption of specie payments." Almost every nation has at some time issued political money. During the Franco-Prussian War in 1870, France, through the medium of its great state bank, made forced issues of notes of a political nature, which only slightly depreciated. Many countries--Russia, Austria, Portugal, Italy, and most of the South and Central American republics--have had or still have depreciated paper currencies. At once, at the outbreak of the great war in 1914, the governments of the warring nations began to exercise a strict control over the issue of paper money, sought to gather into the public treasury all the specie, and to give paper (either governmental notes or bank notes) practically a forced circulation, making it almost the sole circulating medium. The values of the paper moneys have fallen in all the countries, especially in Germany and Russia. In such cases the money partakes somewhat of the characters both of bank notes and of political money. Resorted to in desperate extremities, political money has usually proved to be a costly experiment. A result usually unintended is the derangement of business and of the existing distribution of incomes. The rapid and unpredictable changes in prices gives opportunity for speculative profits, but injure legitimate business. This incidental effect on debts and industry offers the main motive to some citizens for advocating the issue of paper money. It is peculiarly liable to be the subject of political intrigue and of popular misunderstanding. It is this danger, more than anything else, which makes political money in general a poor kind of money. § 11. #Theories of political money.# There are two extreme views regarding the nature of paper money, and a third which endeavors to find the truth between these two. First is that of the cost-of-production theorists, who declare that government is powerless to influence value, or to impart value to paper by law. They deny that there is any other basis for the value of money than the cost of the material that is in it. Money made of paper, on a printing press, has a cost almost negligibly small, and, therefore, they say it can have no value. The facts that it does circulate and that it is treated as if it had value are explained by the cost-of-production theorists as follows: while the paper note is a mere promise to pay, with no value in itself, it is accepted because of the hope of its redemption, just as any private note. Depreciation, according to this view, is due to loss of confidence; the rise toward par measures the hope of repayment. Taking a very different view, the extreme fiat-theorists assert that the government has unlimited power to maintain the value of paper money by conferring upon it the legal-tender quality. The meaning of _fiat_ is "let there be," and the fiat-money advocates believe that the government has but to say, "Let there be money," to impart value to a piece of paper. The typical fiat-money advocates in the United States were the "Greenbackers," who wished to retain the greenbacks issued in the Civil War and to increase the amount greatly. They saw in paper money an unlimited source of income to the government. They proposed the payment of the national debt, the support of the government without taxes, and the loan of money without interest to citizens. All might live in luxury if the extreme fiat-money theorists could realize their dreams. The depreciation that has taken place in nearly every case where government notes have been issued, the fiat-theorists declare to be due to a mild enforcement of the law of legal tender. To them the fact that paper money may circulate for a time at par appears a reason why it always should. They do not recognize that there is a saturation point in the use of money, and that its use is still further limited by the fear of larger issues. The almost universally accepted opinion among economists rejects both of these views, tho recognizing in each a certain limited aspect of the truth. The cost-of-production view quite overlooks the features in which paper money differs from ordinary credit paper. The value of one's promises to pay depends on his reputation and his resources; the resources constitute the basis of value. Bonds have value because they yield interest and are payable at a definite time in standard money. But paper money, lacking this basis for its value, has another basis in its money use, in its power to buy goods. The theory of paper money here outlined makes the value of paper money a special case of monopoly value. As the power of any private monopoly over price is relative, not absolute, so is that of the government over the value of political money. The money use is the source of value of the paper notes. It is this which gives the economic condition for value in paper money and strictly limits the power of the government--a fact overlooked by the fiat-theorists. Business conditions remaining unchanged, the limit of possible issue without depreciation is the number of units in circulation before the paper money was issued, the saturation point of full-weight and full-value coins. Whenever governments have failed to stop at that point, paper money has depreciated. But under wise and honest control and regulation political paper money might serve the monetary function very effectively. [Footnote 1: The problem of a legally authorized double standard, bimetallism, is treated in the next chapter. An irredeemable paper money may be, for a time, the standard money.] [Footnote 2: The faith _(fides)_ is not always that the issuer of the money (whether it be a bank or the government) will redeem the money on demand at any future time; for fiduciary money may circulate while irredeemable, that is, either carrying no promise of redemption in the standard money or in fact not being redeemed. Yet undoubtedly actual redemption on demand or a good prospect of future redemption is one of the circumstances stimulating the faith and the readiness of each person in turn to receive fiduciary money.] [Footnote 3: In the broad sense as above defined, ch. 3, sec. 10.] [Footnote 4: See next section on worn coins.] [Footnote 5: Receipts and Expenditures of Mint Service in 1914:] [Footnote 6: It makes no difference what may be deemed the cause of their acceptance; whether it be habit, public opinion in business circles, or the act of law making them a legal tender; the essential thing is that they continue to be accepted as money.] [Footnote 7: In this and following numerical examples no account is taken of the possibility that the standard metal may depreciate in the world market in terms of all other goods as a result of its diminished use as money in one or more countries. This properly belongs in a complete theoretical treatment of the subject.] [Footnote 8: See "Modern Currency Reforms" (1916), by E.W. Kemmerer, professor of Economics and Finance in Princeton University, for a detailed treatment of this remarkable series of monetary changes, probably unequaled in instructiveness to the student of monetary theory.] CHAPTER 6 THE STANDARD OF DEFERRED PAYMENTS § 1. Relative positions of gold and silver; historical. § 2. Gold production, first half of nineteenth century. § 3. Concept of the general price level. § 4. Index numbers. § 5. Gold production and monetary legislation, 1850 to 1879. § 6. Definition of the standard of deferred payments. § 7. Increasing importance of the standard. § 8. Fluctuating standard and the interest-rate. § 9. Notable changes in prices. § 10. Nature and object of bimetallism. § 11. The movement for national bimetallism in America. § 12. Rising prices after 1896. § 13. Defectiveness of the gold standard. § 14. Various ideal standards suggested. § 15. The tabular standard. § 1. #Relative positions of gold and silver: historical.# It is not possible within the limits of our space to enter here into the details of the world's monetary history. It must suffice for our purpose to sketch briefly the period preceding the nineteenth century. Both gold and silver were used as moneys in Europe in the Middle Ages, tho silver was much the more common. The two metals continued to be used side by side in Europe and in the new settlements in America, silver for the smaller and gold for many of the larger transactions. Both were made legalized forms of money (and standards of deferred payments) in units of specified weights and fineness, the weights bearing a certain ratio to each other. Thus it was possible for a debtor to discharge his obligations with that one of the two metals that at the moment was the cheaper at the legal ratio. Fluctuations in the prices of gold in terms of silver were at times such as to cause a large part of the full-weight coins of one or the other metal to leave circulation (in accordance with Gresham's law). So from time to time the ratio was slightly changed by law in the various countries to permit the circulation or to bring back the kind of money that had been undervalued in terms of the other. But it is a very remarkable fact that from the time of Xenophon until the discovery of America (a period of nearly 2000 years), the market ratio of silver to gold bullion in Europe remained pretty close to 10 to 1, being only temporarily altered by sudden and unusual occurrences. From 1492 to 1660 the ratio changed to 15 to 1, where it remained with remarkable stability until about the year 1800. At the establishment of the mint of the United States in 1792 that ratio was found to exist. Men had come to look upon the ratio of 15 to 1 as the natural order, determined (it was sometimes said) providentially by the deposit of the two metals in due proportion in the earth's surface. But as we now see it, this in part was mere chance and in part was due to the equalizing effect of the wide use of both metals so that the one could be easily substituted for the other in case of a divergence of the market ratio from the legal ratio as money. From the year 1500 until 1800 the Western hemisphere was the main source of the precious metals, the alluvial deposits were widely scattered, were gradually discovered, were usually found in small quantities, and were extracted in primitive ways. The existing stock of precious metals, gold and silver, more than other products of mine and field, is at any time the accumulation of many years' production, and is changed very little, proportionally, by a large change of output in any year or short period. It changes in volume as does a glacier fed by the snows of many years, not as does a river, filled by a single rainfall. For a short time after the discovery of America (from 1493 to about 1544) the average coining value[1] of the world's production of gold, nearly all found in America, was about 1-1/2 times as great as that of silver; but thereafter for three centuries from about 1545, the annual value of silver produced was between 1-1/2 to 4 times as great as that of gold, averaging about twice as great. Silver was the money chiefly in use in the ordinary transactions in all of the principal countries of the world. § 2. #Gold production, first half of nineteenth century.# We have now to note some great changes in the production of gold in the nineteenth century, changes both absolute and relative to that of silver. The market ratio of the two metals had been gradually changing before 1792 and continued to change. Gold was slowly becoming more valuable in terms of silver and the legal ratio of 15 to 1 in the United States (at which both metals were admitted free to the mint) proved to have undervalued gold. Gold largely left circulation and silver and bank notes formed the greater part of our circulating medium. Then, in 1834, soon after the production of gold had begun to increase somewhat more rapidly than that of silver, the legal ratio of the United States was changed to 16 to 1. This brought a good deal of gold back into circulation and gradually drove out most of the silver (the heavier coins disappearing first). In the decade 1841-50 the average annual value of the gold production had, for the first time since the early sixteenth century, exceeded that of silver. Then, from 1848 to 1850, came the great gold discoveries in California and in Australia. In 1851 the value of gold produced was one and one-half times that of silver; in 1852 was three times, and in 1853 four times as great; and then slowly declined, but continued every year as late as 1870 to be over twice as great. This caused the displacement of silver by gold and drove out a large proportion of the silver coins of smaller denominations. This led to the law of 1853, authorizing subsidiary coinage (on government account only) of lighter weight.[2] Let us observe the effect on prices that was brought about by the discoveries of 1848-49, and, first, we must consider briefly the method of measuring and expressing general changes in prices. § 3. #Concept of the general price level.# The price of any good is some other good or group of goods given for it in trade.[3] The standard unit of money coming to be the most convenient expression for price (whether or not money be actually passed from hand to hand in that particular trade), prices usually are monetary prices, and more specifically are prices in gold, or in silver, or in whatever constitutes the standard money unit. But the price of each good is a definite, separate fact, which expresses the ratio at which that commodity is sold. The price of any particular kind of goods may fluctuate in either direction as compared with the prices of other goods at the same time. For example, iron and many other goods may rise while wheat and many other goods fall in price. There is, therefore, no such thing as an actual _general_ change in the prices of goods in terms of money, but it may be seen that the prices of large classes of goods, often of nearly all goods, change upward or downward at the same time and in the same general direction. We thus have need to distinguish between changes in the valuations of particular kinds of goods in terms of each other and general changes in the valuation of a number of different goods in terms of the monetary unit. To get some idea of whether such a general trend occurs, the algebraic sum of all the changes in the particular prices of a selected group of goods may be taken, and for convenience this may be reduced to an average price (by dividing the sum by the number of articles). Such an average is called a general price and, when comparing it with the general price of another time, we speak of changes up or down in _general prices,_ or in the _general scale of prices,_ or in the _price level._ When gold is the standard unit, its value is the converse of general prices; as prices go up the value of gold goes down, and gold is said to _depreciate_. As prices go down, the value of gold goes up and gold is said to _appreciate_. Rising prices mean falling value of gold (and at the same time falling purchasing power), and _vice versa._ [Illustration: FIG. 2. INDEX NUMBERS OF PRICES. The four series of prices here shown begin at different periods; the American in 1840 (Aldrich report 1840-1889 and Bureau of Labor from 1890 on); the English in 1846; the German in 1851; the French in 1857. We have adjusted each of these series to a base of the average prices for 1890-1899, in accord with the basic period used by the American Bureau of Labor. The reader must be on his guard against misunderstanding the diagram. It does not represent the heights of the prices of the different countries compared with each other either at any one date or for the entire period. For example, the heights of the lines at the year 1860, do not indicate that American prices were lowest and French the highest at that date, or, indeed, tell anything whatever directly on that point. The various series of prices are compared within themselves, every year with the average of the prices for 1890-1899 in each country, respectively. The only comparison allowable, therefore, between the several lines, is that between the fluctuations, both as to their times and as to their directions, both as to the larger tidal movements and as to the lesser wave-like movements within the business cycles. The Figure does indicate that both American and German prices have risen somewhat as compared with the English and French prices, since the period before 1860. This figure should be studied in connection with Figure 1, in ch. 4, sec. 9, on gold production. The Figures indicate that the rapidly growing monetary use of gold offset a large part of the effects of increasing gold production between 1840-1860 and 1884-1914. Between 1884 and 1896 prices actually continued to fall after gold production had begun to climb. Likewise the growing monetary use of gold accentuated strongly the effects, between 1873 and 1883 of a comparatively small decrease in gold production.] § 4. #Index numbers.# The process of calculating general prices and changes in them has in it, inevitably, something of arbitrariness and incompleteness. For not all prices can be included, but only those of articles of somewhat standardized grades and those that are pretty regularly sold in markets where prices are publicly quoted. Any list of articles that can be selected is of unequal importance to different persons and classes of persons, at different places, at different times, and for different purposes. And yet the study of general prices as shown by any broadly selected list reveals changes which in some measure affect the interests of every member of the community. General prices are conveniently compared from one time to another through the use of index numbers. An _index number_ of any article is the per cent which its price at any certain date is of its price at another date (or of the average for a series of prices) taken as a base or standard. Thus if the average price of cotton in the base year were 10 cents (taken as 100) and the price rose to 12 cents, the index number would be 120. _A tabular index number_ is the per cent which the price of a selected group of articles at any certain date is of the price of the same group of articles at a date which has been taken as the base.[4] The principal index numbers of the leading countries are here shown. The fact that from 1862 to 1879 inclusive prices in the United States were expressed in an irredeemable paper standard makes comparisons for that period misleading. A better idea is obtained by using as the base for each of the several series, the average of prices in each country for the years 1890 to 1899. § 5. #Gold production and monetary legislation, 1850 to 1879#. The unprecedented increase in gold production between 1849 and 1853, and the continuance of production in volume about four-fold as great as that of the decade 1840-49 was reflected at once in a rise of prices. This was a period of prosperity in business culminating in the crisis of 1857 (felt more or less in all the leading countries). This prosperity accelerated the effect of increasing quantities of the standard money. Credit was stimulated and the rate of circulation and the efficiency of money were increased. Prices rose to a temporary maximum in 1857 and then fell as a great international financial crisis occurred. The great new supplies of gold had been readily taken ("absorbed") into the monetary circulation of the world, to meet the needs of rapidly growing commerce and industry. In the European countries,[5] prices in terms of gold, tho fluctuating somewhat, kept at about the same level from 1860 to 1870. The years 1871 and 1872 were very prosperous and showed rapidly rising prices which reached a maximum in 1873, when a financial panic occurred. In that very year, just as the gold production for the first time since 1851 had fallen below $100,000,000, several notable changes in monetary legislation were made which made gold more important in the circulation of a number of countries. In 1873 Germany made gold the standard throughout the new German Empire (having prepared the way by legislation in 1871 which made gold a legal tender alongside of silver), and provided that silver was thenceforth to be used only in the subsidiary coinage. The same year Belgium, and the next year the other countries of the Latin Union (France, Switzerland, and Italy) took steps which resulted in demonetizing silver; that is, in limiting its coinage to governmental account, and in making gold their one standard money. The United States at that time had neither gold nor silver regularly in circulation (except in California), and there was a long-continued discussion of "a return to specie payments," which meant the return to a metallic standard, and the redemption of greenbacks on demand. Meantime in 1873 a law was passed making the gold dollar "the unit of value," and dropping out the standard silver dollar from the list of coins authorized to be issued at the mint.[6] From 1873 until 1879, prices (in greenbacks) were falling in this country very rapidly because the country with the increase in population, wealth, and business, was "growing up to" its unchanging currency supply. For a like reason at the same time gold prices throughout the world were falling. While this country was lowering its level of prices from an inflated paper money to a gold commodity basis, the gold basis itself was sinking to a lower level. The very demand of our treasury and banks for gold caused the retention of our own gold product (which between 1864 and 1876 had been nearly all exported) and required an enormous net importation of gold between 1878 and 1888. This reduced suddenly by one-half the amount available each year from our production for the rest of the world. § 6. #Definition of the standard of deferred payments.# These various changes in the purchasing power of the standard money had great effects upon industrial conditions. Particularly had they shifted the positions and claims of debtors and creditors, because of the enormous importance of money as "the standard of deferred payments," Let us now get a more definite understanding of that term. As a medium of exchange, money comes to be the unit in which most prices are expressed and compared; in other words, it becomes the common denominator of prices.[7] This makes it also the most convenient unit in which to express the amount of credit transactions and of existing debts.[8] A credit transaction is a trade lengthened in time; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date. The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the promise of its return at the end of the year with a part of the increase of the flock. A simple standard in which to express the debt is the thing borrowed, as horse, sheep, wheat, house. Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed and, with the growth of the monetary economy and the use of the interest contract, money comes more and more to be used as the standard. At length the law declares that, in the absence of any other agreement, the amount of a debt is to be payable in terms of the unit of standard money, which thus is made legal tender as well as the customary standard of deferred payments. A _standard of deferred payments_ is the thing of value in which, by law or by contract, the amount of a debt is expressed and payable. § 7. # Increasing importance of the standard.# Until the use of money develops, the use of credit is difficult and limited; it becomes easy when the value of all things is expressed in terms of a common circulating medium. It therefore generally is true that the importance of money as the standard of deferred payments increases with the use of money as a medium of trade. The volume of outstanding debts expressed in terms of money now very greatly exceeds the total value of the circulating medium. Changes in the general level of prices have, therefore, great effects upon all existing debts. The value of all debts changes in the same proportion as does that of the standard unit of money; when this rises or falls in value, it means increase or reduction, in the same ratio, of the purchasing power of every creditor. It is as if he had in his possession metal dollars equal in amount to the face of the debt, and they had changed by so much in purchasing power. The debtor's interests in such changes are, of course, just the reverse of the creditor's interests. Outstanding contract debts may be roughly divided into two classes: short-time loans, running less than a year; and long-time loans, running for a year or more.[9] Fluctuations are rarely rapid and great enough to affect appreciably the debtors and creditors in the case of short-time loans. The results are appreciable in the case of loans running from one to five years, and may be very great in the case of loans made for still longer periods, such as the bonded indebtedness of nations, states, municipalities, and business corporations, and as mortgages given by farmers on their land or by owners of city real estate. A multitude of interests are thus affected by a change in the value of money. When money rises in purchasing power, receivers of fixed incomes are gainers. When it falls in purchasing power, they lose. Receivers of fixed incomes from loans include not merely private investors, but also many educational and charitable institutions which dispense their incomes for public purposes. Wages and salaries of many kinds go up and down less rapidly than do other prices, and thus to some extent wage-earners are in the position of passive capitalists[10] as regards changes in the monetary standard. In a capitalistic age, therefore, almost every individual is affected in some way by a change in the value of money. § 8. #Fluctuating standard and the interest-rate.# In connection with the standard of deferred payments there is presented a problem of the effect that fluctuations of the standard may have upon the interest-rate.[11] As the general price-level falls or rises, the monetary standard conversely appreciates or depreciates.[12] If these changes are slight in amount and imperceptible in their direction they may not affect considerably the motives of borrowers and lenders. Therefore, the rate of interest this year in long-time loans would be just that resulting in the expectation, on all hands, of a stationary level of general prices. Suppose that rate to be 5 per cent on the standard investment (such as real-estate loans and good bonds). Then the lender of $1000 will receive each year a $50 income and at the end of the investment period $1000 principal, each dollar of which will purchase the same composite quantum of goods that a dollar would have purchased at the time the loan was made. Likewise, the borrower would pay interest and principal in a standard that reflected an unchanging general level of prices. But, now, if the general level of prices unexpectedly falls 1 per cent within the year, the creditor of a loan maturing at the end of the year would receive (principal and interest) $1050 which will purchase 1 per cent more goods per dollar than the sum he loaned, or (approximately) $1060 worth of goods. Hence, he has received, in quantum of goods, a yield of 6 per cent on his investment. If this change continues for five years, the lender of a five-year loan would receive each year $50 having a purchasing power successively 1, 2, 3, 4, and 5 per cent greater than the same sum had at the making of the loan; and at the end of the five years would collect the principal, having a purchasing power 5 per cent greater. The lender, on his part, would have to pay interest and repay the principal in a money that is to be obtained only in exchange for a larger sum of goods than that which could be bought with each dollar that he borrowed. This means that, with individual exceptions, creditors generally gain and debtors lose by falling prices. But this is fully true only in respect to loans already made. For just to the extent that such a movement of prices comes to be more or less regularly in the same direction, both borrowers and lenders are able to take it into account, and as experience shows, do take it into account.[13] When prices fall men become more eager to sell wealth, to lend the proceeds, and more reluctant to borrow for investment at the prevailing rate of interest and at the prevailing prices. There is an incentive to divest one's self of ownership (e.g., by selling stocks) and to become a lender (e.g., by buying bonds). This whole situation is reversed in a period of rising prices. The result is that the rate of interest in any long continued period of falling prices (such as from 1873 to 1896) has a trend downward and in a period of rising prices (such as from 1897 to 1915) has a trend upward. This movement of readjustment would not go on indefinitely, even if the same trend of prices continued; for in the strict theory of the case the adjustment would be complete when the interest rate had changed by just the amount of the annual change in the level of prices. For example, if 5 per cent is the static normal rate of interest, then when prices are falling 1 per cent each year, the adjusted rate of interest would be 4 per cent; and when prices were rising 1 per cent each year, the adjusted rate of interest would be 6 per cent. Such adjustments serve to some extent to neutralize the effects of changes in the standard of deferred payments so far as concerns new loans made in view of just such a change and in expectation of its continuance. But no one can foresee exactly, and most persons take little account of, such a change until it has continued for several years in the same direction. The adjustment is therefore never very prompt or very exact. In some years the general level of prices has risen more than 5 per cent, or more than enough to offset the entire interest received by most lenders. A man with dollars to invest would have been as well off if he had kept them buried during that period.[14] § 9. #Notable changes in prices#. In most cases the true effects of monetary changes escape recognition. In a few cases, however, the change has been so great as to cause an economic revolution. Such was the change in prices following the discovery of America, which occurred soon after the old feudal dues had come to be generally expressed in terms of money instead of labor services. In modern times, since the mass of debts has become greater than ever before, such changes bring even graver economic consequence. The increase in the output of gold in 1849-57,[15] caused what was the most rapid, if not the greatest money inflation that had occurred since the sixteenth century. The substitution of gold for silver by some countries at that time, by making a great additional market for gold, helped to check the fall in its value. Indeed, a considerable decline in the output of gold after 1870 combined with its widening use to cause in 1873 the beginning of a great fall of gold prices. The resulting increase in the burden of outstanding debts was felt by all debtors, but particularly by great numbers of the agricultural classes both in Europe and in America. Their tribulations were aggravated by the fact that at that time (especially from about 1873 to 1896) the prices of their products were falling much more rapidly than were general prices, as a result of the very rapid extension of the agricultural land supply.[16] There was complaint, agitation, and demand for relief on the part of many interests in France, Germany, England, and the United States. As a result, the money question became in this country a leading political issue and continued to be such between 1873 and 1900. § 10. #Nature and object of bimetallism.# First came "the greenback movement," which, lasted until after 1880.[17] This then gave way to an agitation for bimetallism. _Bimetallism_ is the plan of using two metals as standard moneys. Bimetallism is legally authorized when both metals are admitted to the mints for free coinage at an established ratio of weight. Bimetallism may be legally authorized, but not actually working, for, if the market-value long continues to vary appreciably from the legal ratio, only one of the metals may in fact be left in circulation. This situation is called _limping_ bimetallism (or the halting double standard), tho this is a contradiction of terms. National bimetallism is confined to a single country, as was the case in the United States before the Civil War, or in France before 1867. International bimetallism is that resulting from an agreement among several nations to use two metals on the same terms. The theory of bimetallism is that the government can act on the value of the two metals through the principle of substitution. The metal tending to become dearer will not be coined, the other will be coined in greater quantities. The degree of influence that can thus be exerted on the value of the two metals depends on the size of the reservoir of the metal that is rising in value. When it all leaves circulation, the law on the statute book permitting it to be coined becomes a mere phrase. In such a case there is bimetallism _de jure,_ but monometallism _de facto._ The greater the league of states the greater is the likelihood that the plan will continue to work. The only notable historical instance of international bimetallism is that of the Latin Union, which united France, Belgium, Italy, and Switzerland in an agreement remaining actually in force from 1866 to 1874. A strong movement developed between 1878 and 1892 in favor of forming a great international bimetallic union of states. One object of the movement was to put an end to the great fluctuations in the rates of exchange of money between the silver-using and gold-using countries, fluctuations which occasioned much uncertainty and loss to individuals engaged in foreign trade. The rise in the price of gold-exchange in the silver-using countries (notably India) meant also an increase in their burden of taxation. These countries collected their revenues in silver, but they had to pay their debts, principal and interest, in gold. Another object of this movement was to prevent the burden of individual debts from increasing by reason of the rise in the value of the single standard, gold. It was, indeed, hoped that by bringing silver much more into use, the value of gold would be reduced, thus bringing relief to the debtor classes. Still another object of the bimetallic movement was to aid the silver miners and silver-producing districts by creating a larger market for silver. Several international conferences were held which were taken part in by some of the leading financiers of the world representing their respective governments. The United States was foremost in advocating the policy, France at first favored it, as did in large measure the British Indian administration, tho England was in the main opposed. The movement came to nothing. § 11. #The movement for national bimetallism in America#. When all hope of international bimetallism failed, the efforts of many of its advocates were turned to the plan of legalizing national bimetallism in the United States at a ratio of 16 to 1. This was very different from the market ratio. Gold had become before 1860, in fact, the standard of our money system, and after 1873 it was the only metal admitted to free coinage. Silver, little by little, had been losing purchasing power in terms of gold, until from being worth, in 1873, one-sixteenth as much, ounce for ounce, it became, in 1896, worth but one-thirtieth as much as gold. The power of silver to purchase general commodities fell much less than the change in its ratio to gold would indicate, gold having risen in terms of most other goods as well as of silver. Nevertheless, the proposal to open the mints to the free coinage of silver at the ratio of 16 to 1 in the year 1896 threatened a sudden and marked cheapening of money.[18] Probably gold would have been entirely driven out as money and silver would have taken its place as the standard. In any event "free silver" would have accomplished the purpose of making the standard of deferred payments cheaper. It was at first a debtors' movement, but to succeed it had to enlist the support of other large classes of voters. And thus it developed into the more sweeping theory that wages, welfare, and prosperity were favored by a larger supply of money quite apart from the effect it would have upon debts. In its extreme form the free-silver plan was a fiat scheme, for some of its supporters believed that by the mere passage of the law the two metals could be made to bear to each other any ratio desired. But its most intelligent advocates recognized that the force of the law was limited by economic conditions. The victory of the gold standard in the campaign of 1896 was, it would seem, due more to the well-founded fear that a sudden change of the money standard would cause a panic than to a popular understanding of the question. The free-silver advocates got what they desired, a reversal of the movement of general prices, through an occurrence for which no political party could claim the credit. In 1883 the gold production of the world was less than $100,000,000. From that date, with the opening of newer gold-yielding territory in South Africa and in the Klondike, the annual output of gold had been increasing rapidly and almost steadily. The methods of extracting gold theretofore had still been in large part of a primitive sort. But intricate machinery was taking the place of crude tools, chemical processes had been introduced (notably, the cyanide process), and the principal product began to come from the regular and certain working of deep mines rather than from chance surface discoveries. In many parts of the world were enormous deposits of low-grade ores, before useless, that could be worked economically by the new methods. The general price level fluctuated, but on the whole tended downward between 1884 and 1893 (the year of panic), and reached a minimum in the year 1895 in Germany, 1896 in England, and 1897 in America. It is noteworthy that the very year 1896, which marked the height of the political agitation to abandon the gold standard for silver, saw the gold production for the first time in all history surpass the two hundred million dollar mark. The gold output had caught up with, and began to surpass, the normal monetary demands of the world, meaning by that phrase, the amount of gold needed to maintain a stationary level of prices. § 12. #Rising prices after 1896#. The whole character of the monetary problem then changed. A period of rising prices set in, which has continued to the present time. By 1913 prices had risen just about 50 per cent above the low level of 1896. The rise has been, and still is, at the average rate of nearly 3 per cent each year. This caused a reversal of the former positions of advantage and disadvantage on the part of debtor and creditor respectively. The purchasing power of a 3 per cent annual interest on notes and bonds has been offset by the decrease in the purchasing power of the principal of the debt. The burden of the average debt began relatively to decrease. A wide field for enterpriser's profits was opened up by the rapid displacement of prevailing prices in all quarters of the industrial world. The price of manufacturer's products rose in advance of the rise of costs of many raw materials and especially of the labor costs of manufacture. The average enterpriser's gain was the average wage-worker's loss. Wages (and salaries), as nearly always in the case of a change of price levels, moved more slowly than did the prices of most of the commodities which are bought with wages, thus causing great hardship to large classes living on comparatively slowly moving incomes.[19] Extremes meet, and these classes include both those living on passive investments, and those dependent on their daily labor for a livelihood. Thus we escape the evils of a rising standard of deferred payments, only to meet those of a falling standard. And as long as we have so fluctuating a standard these difficulties must arise again and again, continually repeated, causing unmerited gains and losses to individuals. Let us conclude with a brief consideration of the fundamental principles involved in this problem. § 13. #Defectiveness of the gold standard#. Money is, in general, for both borrowers and lenders the most convenient standard of deferred payments. But from the usage of speaking of all things in terms of gold, arises the popular notion that the value of gold is always the same, while the value of other things changes. In truth, a fixed objective standard of value is not possible of attainment. Altho the value of gold is stable as compared with most things, it rests on the estimates made by men and is constantly changing with conditions. The current new supplies of gold are comparatively regular. For centuries at a time there was little change in the methods of mining gold and there were no radical changes in its output. The nature of the use of gold, likewise, is such as to made changes in the amount of it needed, under ordinary conditions, more stable than is that of most other goods. Moreover, the stock of gold in monetary uses is but slowly worn out; it is, therefore, a large reservoir into which flows a comparatively small stream of annual production; the existing stock is twenty or thirty times the annual output. Yet the value of gold expressed in other things is never quite stable, and sometimes several influences combine to affect it greatly and suddenly. Recent inventions, chemical and mechanical, moreover, have considerably altered the conditions of production. While, therefore, it is the best standard yet devised and put into actual practice, it is very imperfect. A standard better than a single metal, more stable than a single commodity, is desirable if it can be found. § 14. #Various ideal standards suggested.# It may, perhaps, be agreed that the ideal standard of deferred payments is one that would insure justice between borrower and lender. Yet different views may be and have been taken as to what constitutes justice in this matter. The suggestion is attractive that repayment should involve the return of enjoyment equal to that which could be purchased with the sum at the time of the loan. Such a standard is impossible of perfect realization in any general way, for men's circumstances are constantly changing. To insure even to the average man the same amount of enjoyment is only roughly possible. The same goods do not afford the same enjoyment when conditions, either subjective or objective, have changed. Another suggestion is that the goods returned should represent the same sacrifice as those loaned. Here again the difficulty is in the lack of a standard applicable to all men. Whose sacrifice? That of the lender, who may be rich, or that of the borrower, who may be poor? Some have supposed that the condition of equal sacrifices was met by the labor standard, according to which the sum returned should purchase the same number of days of labor as when borrowed. But what kind of labor is to be taken, that of the lender or that of the borrower or that of some one else? Labor is of many different qualities, which can be exactly compared only through their objective value in terms of some one good.[20] It must be recognized that any possible concrete standard of deferred payments will sometimes work hardship in individual cases. The best average results for justice and social welfare will be secured by measuring debts in some standard that will change least often, and least rapidly, in relation to the great majority of people of all classes in the community. § 15. #The tabular standard.# Apart from the difficulties of its practical operation, a standard better than a single metal and more stable than a single commodity would be a _tabular standard_, consisting of a number of leading commodities in fixed proportions, such as is used in calculating index numbers expressing the general scale of prices. Such a standard averages the fluctuations of particular goods and would give a fair approximation in practice to the ideals of equal sacrifice and equal enjoyment (on the average tho not in individual cases). While some natural materials are growing more scarce and call for more sacrifice, other products are by industrial progress becoming more plentiful. This kind of standard has been viewed with favor by many monetary authorities, and despite the administrative difficulties ways may yet be found for putting it into practice. After determining the tabular standard, the actual regulation of the quantity of money to make prices conform to the standard might be accomplished in one of several ways. It might be done by letting the value of the gold dollar fluctuate as it does now, while requiring a greater or less number of dollars to be given in fulfilment of all outstanding contracts. For example, if prices by the tabular standard fell from 100 to 95 in the time between the origin of a debt of $100 and its payment, the debt would be discharged by paying $95; if prices rose to $110, the debt would be discharged only by the payment of $110. By the plan of a "compensated gold dollar" the legal weight of the gold coins would be increased or decreased from time to time to conform with the tabular standard. Still a third method would be to regulate the issue of standard paper money, contracting and expanding its amount by issue and redemption, by deposit in and withdrawal from depository banks, at regular intervals to bring prices into conformity with the tabular standard. These are as yet but distant possibilities, and for some time to come gold will continue to serve as the standard money in the same manner as in the past. [Footnote 1: The amount of silver is here expressed at its coining value; this is not the commercial value, but rather the number of silver dollars 371.25 fine grains weight that could be made out of the silver produced. Silver and gold of equal coining value are, therefore, as to weight always in the ratio of 16 to 1.] [Footnote 2: See above, ch. 5, sec. 4.] [Footnote 3: See Vol. I, p. 45 ff. See also above, ch. 4, sec. 8.] [Footnote 4: Numerous tabular index numbers have been worked out for different countries and periods. The main results of the more recent ones have been brought together with critical comments, by Professor Wesley C. Mitchell, in Bulletin 173 of the U.S. Bureau of Labor Statistics, July, 1915, from which the figures here used are quoted.] [Footnote 5: The price movements in the United States between 1860 and 1879 must be left out of consideration here, for the excessive issues of greenbacks drove gold out of circulation and made greenbacks the standard money, except in California and elsewhere on the Pacific Coast where, by public opinion, gold was retained as the circulating medium.] [Footnote 6: This change was what later was referred to in political discussions as "the crime of '73." The dollar referred to was the _standard_ silver dollar; at the same time the coinage of a _trade_ dollar was authorized (intended to be used only in foreign trade), which, after 1876, was not legal tender in the United States.] [Footnote 7: See Vol. I, p. 262.] [Footnote 8: See Vol. I, p. 263, on credit transactions, and p. 302, on the interest contract.] [Footnote 9: See Vol. I, p. 304.] [Footnote 10: See Vol. I, p. 319.] [Footnote 11: This could not be treated in connection with the interest-rate in Vol. I, Part IV, for the reason that even its elementary treatment must presuppose the fuller study of the nature of money and the study of changes in the level of prices, that has just been given in this and the three preceding chapters. The theory of interest in Vol. I, therefore, is a static theory in respect to the standard of deferred payments, and requires adjustment to apply to a condition of a changing price-level.] [Footnote 12: See above, sec. 3.] [Footnote 13: Mention was made in Vol. I of the prospect of profit as affecting the motives of commercial borrowers; e.g., pp. 298, 335, 348, 495.] [Footnote 14: The modern explanation of this phenomenon was worked out in the period of falling prices before 1896 and hence was referred to as the theory of "appreciation and interest" (meaning the relation of the appreciating dollar to a falling rate of interest). More generally the theory is that of the relation of a changing standard of deferred payments and the rate of interest.] [Footnote 15: See ch. 4, sec. 12, and above secs. 1, 2, 4, 5.] [Footnote 16: See Vol. I, on agricultural leases, p. 159, wheat prices, p. 436, and changes in the land supply, p. 442.] [Footnote 17: See ch. 5, sec. 11.] [Footnote 18: The advocacy of this proposal was called "the free-silver movement" because it involved resuming the free coinage of silver at the legal ratio of 16 to 1.] [Footnote 19: This happened to coincide with a relative increase of the price of food-products and of other necessities of daily life at a greater rate than general prices. This aspect of the much discussed rising cost of living must be carefully distinguished from that of the change of the _general_ price level, and also from that of the relatively slower change of wages. See Vol. I, pp. 437, 445-446 on population and food supply.] [Footnote 20: See on the labor theory of value, Vol. I, pp. 210, 228-229, 502.] PART III BANKING AND INSURANCE CHAPTER 7 THE FUNCTIONS OF BANKS § 1. Nature and classes of banks. § 2. Functions of banks. § 3. The essential banking function. § 4. Time deposits. § 5. Demand deposits. § 6. Discount and deposit. § 7. Nature of banking reserves. § 8. Bills of exchange, domestic. § 9. Issue of notes. § 10. Divergent views of typical bank notes. § 11. Banking credit as a medium of trade. § 12. Productive services of banks. § 13. Income of banks. § 1. #Nature and classes of banks.# Banks perform a variety of useful functions in every modern community. All these functions touch in some way upon the use of money, and banking problems always are related to money problems. It is our purpose now to understand the general nature and work of banks in relation to the general business activity of the community. A bank, as one first comes to know it, is a building (or a room in some building) in which there is a fire- and burglar-proof safe. In this room are men receiving and paying out money and acting as bookkeepers. Gradually one comes to understand that the bank is perhaps not the building but the business organization that is there performing these transactions. In the United States there were in 1913 about 26,000 banks reported.[1] These may be classified first according to the source from which they derive their charters or authority to do a banking business as: national, state, and private. The last are unchartered and act under the general state laws governing private contracts; in general they are unsupervised.[2] Banks may be classified also according to the two main types of business they perform, as banks for savings and commercial banks. Most banks do mainly a general commercial business; some are distinctly banks for savings; but in truth this dividing line can be less and less sharply drawn between banks as wholes; rather the distinction must be made between the savings function and the commercial discount function, which are more and more being performed by one and the same bank. The trust company usually well exemplifies this union of functions. This will best be explained in connection with the subject to which we now turn, the analysis of the functions which banks perform. § 2. #Functions of banks.# Almost every bank performs various functions useful to its customers, but some of which are not essentially bound up with banking, and may be performed by institutions that are not truly banks. Among these are: (a) Maintaining a safe deposit vault, where space may be rented by an individual to keep his valuable papers, jewels, etc. The customer does not usually deliver to the bank possession of the valuables, but himself retains the key to the box which the bank has no right to open. In larger cities this work is often done by separate institutions. (b) Acting as money-changer to buy and sell moneys of different nations. This function is of less importance in America than elsewhere because of the great size of our country and of the small portion of our boundaries touching those of other nations using different monetary units. Moreover, the function is in large part performed for Americans by ticket agencies at the ports of embarkation and by the steamship companies en route. (c) Selling bonds and other investments to customers. In smaller communities the customers of a bank turn to it as the best source of information for safe investments of personal or trust funds. This opens to it a new possibility of service. Large investments, however, are usually made through the agency of more specialized investment brokers. (d) Acting as trustee and business manager for passive investors, and especially as executor and administrator of estates or as guardian of a minor heir. This function has been taken up rapidly since about 1890 by the trust company[3] organized under state laws. § 3. #The essential banking function.# The one essential function of a bank, however, is selling (lending) its credit to its customers in some form which will conveniently serve the same function as money. A bank is sometimes defined as a business whose income is derived from lending its promises. The bank's credit is sold in the form of its promises, the evidences of which are its receipts, depositors' account books, drafts and checks on other banks, and bank notes. The indispensable condition to the exercise of this function by a bank is public confidence in its ability to fulfil its promise to pay whenever it is due. This confidence is built upon the bank's paid-up capital; its surplus and undivided profits: the further liability of the stockholders to make good any losses up to an amount equal to the capital stock each holds ("stockholder's double liability"); the financial prestige of the bank's officers, directors, and stockholders; the bank's established reputation and "good will" in the community after a period of successful operation; the character of its loans and of the securities which it owns; and, finally, by the reliance placed in the control and inspection by official examiners. The bank may then sell its credit in any one or in all of the following five ways: (1) by receiving time deposits; (2) by receiving demand deposits; (3) by the method of discount and deposit; (4) by selling exchange of funds to distant points; (5) by issuing bank notes. § 4. #Time deposits.# Time deposits are funds to the credit of customers which, by agreement, are to be left for some specified minimum time or on condition that the bank may require notice in advance of the depositor's intention to withdraw them. The notice that may be required is usually thirty to ninety days; but only in times of general financial crises or of runs on particular banks is this requirement enforced. A sufficient deterrent to irregular withdrawal of funds is usually found in the loss of interest if deposits are withdrawn at other than stated times. The bank's right to require notice makes prudent the investment of a much larger proportion of its deposits and for a longer time; it reduces the proportion of deposits needed for reserves, and yet reduces the danger of a "run" upon the bank in time of financial distress. These are reasons why banks can and usually do pay interest on time deposits (at from 2 to 4 per cent), as until more recently they rarely did on demand deposits[4]. From the standpoint of the depositor a time deposit is, by its very nature, an investment and not a demand credit available for current monetary uses. Only that portion of a person's capital that for some more or less considerable period is not likely to be needed for other purposes ought to be put into time deposits. A bank, however, is generally a much safer place in which to keep a fund of purchasing power for the future than is the strongest private treasure box. Receiving time deposits is the one essential function of savings banks, but this function is increasingly performed by other banks[5]. Sometimes time deposits are cared for by a separate department and kept separate from the general business of a commercial bank. § 5. #Demand deposits#. Demand deposits are those payable on demand, the demand in practice being by means of personal checks requesting the bank to pay to (or on the order of) a specified person, or to pay to bearer. A customer's bank account consisting of demand deposits is called a checking account. Since the turn of the century it has become increasingly the practice to pay a low rate of interest (about 2 per cent) on current balances, oftener to large depositors. Banks attract demand deposits mainly by the convenience and economy which they offer to their customers in the guarding of funds from theft and fire and in saving the time, trouble, and expense of carrying money for making payments. A deposit in a bank is to the depositor for most purposes "just as good" as money in the pocket and for many purposes is even better. Thus the banks have become the custodians of a large proportion of the money (or funds) needed for current use by individuals and business corporations. § 6. #Discount and deposit#. The process of discount and deposit is the purchase of the promissory note of a customer,[6] the price being a credit in the form of a demand deposit on the books of the bank. This--the central and most characteristic banking operation--has something of mystery in it at first view. The simplest idea of making a deposit is that of bringing to a bank window bags and rolls of money or other funds (credit papers such as checks and drafts, calling for the payment of money). The bank in that case becomes the debtor and the depositor becomes the creditor of the bank. But in discount and deposit the depositor brings no money, and the credit paper that he gives is his own promise to pay whereby he becomes the bank's debtor. For example, when a bank discounts a thousand dollar note for three months and credits its customer with the proceeds, its deposits are at that moment increased (let us say) $985. Notice that hereby the bank does not add a cent to the cash in its vaults while it has added to its liabilities payable on demand. As an off-setting asset it holds the note of its customer receivable at some future time. §7. #Nature of banking reserves#. Banks would have nothing to gain by receiving deposits or by issuing notes if they were obliged to keep in the vaults actual money to the amount of their deposits and outstanding notes (unless they were paid by depositors for taking care of deposits). Banks have found it necessary in practice to keep on hand money amounting to only a fraction of all their outstanding obligations in order to be able to pay promptly all due demands, excepting in periods of general financial distress. The sum thus kept on hand is called the _reserve_ or the _reserves_ of the bank, and this is frequently expressed as a percentage of reserves against deposits or against note issues, respectively. Frequently, as in the United States, a minimum percentage of reserves is fixed by law.[7] A bank's reserves consist, first, of the lawful money which it actually holds in its vaults at any moment and secondly, of certain other credit items in other banks or with the government, of such a nature that a bank is permitted to count them as tho immediately available. The explanation of the adequacy of a mere fractional reserve is found in the nature of the individual monetary demand[8] and in the effective way in which a checking account serves as a substitute for actual money.[9] Every customer, if he would avoid overdrawing his account, must at most times keep a goodly balance to his credit that he does not immediately need. Many individuals and corporations must at times keep very large balances. The times of maximum monetary need of the customers of a bank never exactly coincide and many payments are made among the customers of a single bank, requiring only bookkeeping transfers. A fractional reserve is therefore ordinarily fully adequate, altho with any less than a 100 per cent reserve any bank would be insolvent if all of its demand obligations were presented at the same instant. Such a contingency is made impossible by business custom and public opinion especially among the larger customers of banks, but the panic of small depositors often brings about dangerous conditions. § 8. #Bills of exchange, domestic.# Foreign and domestic exchange is the sale of orders for the payment of specified sums of money at distant points. But for this, payments at distant points would ordinarily have to be made by sending the money in some way. It must often occur, for example, that hundreds of payments, aggregating millions of dollars, must be made by persons in and near Chicago to those in and near New York, while, at the same time, equally large sums are due from New York to Chicago. The wasteful process of shipping these sums back and forth is avoided by the cancellation of indebtedness between the two localities. It has been the practice for each small bank to keep a part of its legal reserves in correspondent banks in one or more of the larger cities on which it draws bills of exchange for its customers and to which in turn it remits for collection drafts and checks which it has received. From time to time, as balances of accounts increase on the one side or the other, shipments of actual money become necessary, but these are only a small fraction of the total amount of the bills of exchange. Similarly, the settlement of accounts between any two localities can be made by the shipment of comparatively small sums of money. Under the Federal Reserve Act the reserve banks are in various ways assuming the functions of the correspondent banks. The wider use and acceptance of individual checks at long distances from the banks upon which they are drawn limit by so much the proportion of special bills of exchange drawn by the banks themselves. Domestic exchange involves just the same principles as foreign exchange of funds, except that in the latter, usually, two different units of standard money are used. In connection with the discussion of foreign trade below, foreign exchanges will be explained and further light will be thrown upon the adjustment of the money supplies and levels of prices of the various sections of a single country as well as between different countries. § 9. #Issue of notes#. The issue of bank notes as a mode of lending a bank's credit calls for consideration here. Yet it must be observed at once that comparatively few banks in the world have now the legal right to issue their own notes. In some cases the right has been granted as a monopoly to certain banks in return for specified payments and services. But in general the function of bank note issue has come to be treated as so closely connected with that of the coinage and regulation of the standard money that it has been increasingly limited in each country to a central national bank, or group of banks, which is in many respects practically if not technically an organ of the government. This public nature of bank note issues has been strikingly evident in Russia, England, France, Germany, and other countries since the outbreak of the war in 1914. No two countries have quite the same system and kind of bank notes. It is well to consider first, therefore, the qualities of typical bank money. This consists of notes issued by banks on the credit of their general assets, without special regulation by law. With such a form of note we have had until 1914 no experience in the United States since 1866, at which time a federal tax of 10 per cent on state bank notes made their issue unprofitable. Since the passage of the Federal Reserve Act we have temporarily two kinds of national-bank notes, the old bond-secured notes, in use since 1863 (very different from the typical form),[10] and the new kind of Federal reserve notes very nearly typical in character but issued only by the Federal reserve banks, not by individual banks. A bank, by the issue of notes, puts into circulation as money its own promises to pay. The customer, in borrowing money or in withdrawing deposits or cashing checks and drafts from other banks, is paid with the bank's notes instead of with standard money. These notes may be returned to the issuing bank either to be redeemed in specie or to be paid in some other form of credit, such as deposits or exchange. The limit of the issue of such notes is the need of the community for that form of money, and if they are promptly redeemed in standard money on demand, they never can exceed that amount. A holder of a note (in the absence of special regulations) has the same claim on the bank that a depositor has. As it is to the interest of the bank to keep in circulation as many notes as possible, there is a temptation to abuse the power of note issue, to which many banks in America yielded in the period of so-called "wild-cat" banking before the Civil War. § 10. #Divergent views of typical bank notes#. Some persons seeing in bank notes but a form of ordinary commercial credit (like a promissory note or an individual's check) have contended that their issue should be entirely unlimited and unregulated except by the ordinary law of contract which makes the bank liable to redeem the notes on demand. Such bank notes would not be legal tender, and every one would be free to take or refuse them as he pleased. Each bank would thus put into circulation as many notes as it could, and as they would constantly be returned for redemption when not needed as money their volume would expand and contract with the needs of business. It may be conceded that there is much truth in this view, but not the whole truth. For, in reality, when bank notes are in common use, every one is compelled to take the money that is current. This offers a constant temptation to the reckless and unscrupulous promotion of banking enterprises, as has been repeatedly shown (notably in America in the days of "wild-cat" banking before 1860). The average citizen cannot know the credit of distant banks, and thus has not the same power of judging wisely in taking bank notes that he has even in making deposits in the bank of his own neighborhood. Between bank notes and ordinary promissory notes there are other differences. Bank notes pass without endorsement and thus depend on the credit of the bank alone, not, like checks, on the credit of the person, from whom received. Unlike ordinary promissory notes, they yield no interest to the holder. They go into circulation and remain in circulation for considerable time by virtue of their monetary character in the hands of the holders. Thus they approach political money in their nature, and the banks are near to exercising the sovereign right of the issue of money. At the other extreme of view have been those who consider bank notes to be essentially of the nature of political money. If they are so, it is argued, the power of issue should not be exercised by any but the sovereign state. In this view it is overlooked that bank notes, unlike inconvertible paper money, depend for their value on the credit of the bank, not on their legal-tender quality and on political power.[11] They must be redeemed on penalty of insolvency; government notes need not be, and yet will circulate at par if properly limited. Adequate provision for the prompt return and redemption of bank notes makes them "elastic" in their adaptation to monetary needs, which fluctuate with changes in commerce and industry from season to season and even from day to day. The predominant opinion to-day is that in their economic nature bank notes share to some extent the character both of private promissory notes and of political paper money. They stand midway between the two. Everywhere it has come to be held that the issue of paper money of any kind is in its nature a public monopoly, and yet everywhere the bank note policy has come to be that of permitting the issue only to certain institutions, under strict public legislation and regulation, and of requiring in return for this privilege some substantial services or payments to the government. § 11. #Banking credit as a medium of trade.# The credit which, in five ways, banks sell (see above, section 3) serves, in most cases, the purposes of money to their customers. This is least true of time deposits, for the motive of the depositor in such cases is usually to _invest_ his funds for a time rather than to keep them available as money. However, there are many cases in which persons save for some moderately distant use--such as the purchase of furniture, of a piano, of a house. The safety and convenience of time deposits, combined with the reward of a small rate of interest, cause great sums, in the aggregate, to be deposited as _temporary_ savings, which otherwise would be hoarded in the form of money and thus withdrawn from circulation. In all such cases the time deposit is serving both as an investment and as a monetary fund for future use. This is a great economy in the use of money, for experience shows that in the savings banks of America the average reserves of actual money kept against deposits are only about 1-1/2 per cent. In countries where banks are little known, the amount of actual money hoarded is therefore vastly greater than it is in the United States where there are $5,000,000,000 of individual deposits in _regular_ savings banks, besides large sums in time deposits in commercial banks. Demand deposits, while not money, clearly perform the function of a reserve of purchasing power for depositors and reduce by so much the amount of money each must keep at hand to meet his current needs of purchasing power. If the depositor's credit balance bears no interest, he has no motive to keep a balance greater than he would require of actual money, and he has the motive to spend it or invest it in income-bearing capital whenever his balance (plus his cash in hand) exceeds his monetary needs.[12] Thus demand deposits are often spoken of (somewhat inaccurately) as "deposit currency," being funds at the command of depositors which are as disposable and as active and current for the monetary function as so much actual money would be. It is estimated that the rate of turnover of deposits in the United States is about 50 times a year. We may view the demand deposits subject to check as either a substitute for money or as a means by which the rapidity of circulation and the monetary efficiency of actual money held in bank reserves is multiplied many fold.[13] The method of payment by bank drafts in domestic exchange reduces the need for, or increases the efficiency of, money in just the same way as does the use of checks. By the mutual credit of banks in different parts of the country, very large payments may be made in both directions with the movement of only the comparatively small amount of physical money needed to pay the balance after the cancellation of drafts, bills of exchange, and checks. The use of bank notes reduces the amount needed of other kinds of money more directly, tho not more effectively, than do deposit accounts. Bank notes _are_ money, and so long as their amount is limited by prompt redemption they circulate _instead of_ so much of other kinds of money. Redemption is possible by the use of a reserve of standard (or of legal tender) money very much smaller than the amount of notes outstanding. § 12. #Productive services of banks.# There have always been some erroneous ideas regarding the magic power of banks to multiply the power of money. But there should be no more of mystery about banking credit than about the nature of money itself. Banks are the labor-saving machinery of finance. They gather loanable funds, reduce hoarding, make money move more rapidly, and create a central market between borrowers and lenders for the sale of credit. While not creating more physical wealth directly, they add to the efficiency of wealth; they simplify and quicken the movement of nearly all commercial transactions. Banks perform incidentally a further service in developing better business methods in the community. They enforce promptness and exactitude in business dealings. In supplying credit to enterprises, banks are constantly passing judgment on the collateral security presented to them and on the soundness of the enterprises that are seeking support. This gives to bankers great economic power, capable at times of misuse in political and social affairs, especially where a group of selfish men come to exercise a practical monopoly of business credit in any community. § 13. #Income of banks.# The income of banks is drawn from different sources, according to the size of the community and the nature of the banks. While in the villages and smaller cities the commercial banks perform a number of functions, in the larger cities they usually specialize in a far greater degree. The trust companies, however, with their greater versatility, are increasing in number. The income of banks is derived from discounts, interest on their own capital, charges for exchange and collection, dividends, interest and rents on investments, and profit from their bank notes. The capital with which a bank starts in business[14] could be loaned with less trouble and more cheaply without starting a bank, but used as a banking capital it can be loaned in part while still serving to attract deposits, which are the main source of the income of banks to-day. Charging smaller customers for exchange is a source of income to some banks, but in many cases this service is freely performed for regular customers and becomes a considerable expense. Banks make few investments in real estate or other physical property; it is, in fact, their duty to keep out of ordinary enterprises, but they are forced sometimes to take for unpaid debts things that have been held as security. Profits on bank notes have at times been the main, almost the sole, motive for starting banks; but that is not the case to-day when the right of issue is so strictly limited. [Footnote 1: These are classified as follows: _Number_ --_Per Cent_-- _National charter_: 28.56 National banks 7,404 28.56 _State charter_: 67.52 State banks 14,011 54.05 Loan and trust companies 1,515 5.84 Savings banks 1,978 7.63 _Private_: 3.92 Private banks 1,016 3.92 ------ ------ ------ 25,924 100.00 100.00 ] [Footnote 2: Opinion favors prohibiting the use of the word bank to any except regularly incorporated organizations, or at least subjecting private banks to the same supervision as the chartered banks.] [Footnote 3: Not to be confused with a trust in the sense of a monopolistic enterprise, with which it has no connection except by mere verbal accident, through the word trust.] [Footnote 4: See next sec.] [Footnote 5: The Federal Reserve Act of 1913 has given encouragement to this practice by reducing to 5 per cent the reserve required to be kept against time deposits. See ch. 9, sec. 7.] [Footnote 6: Usually with deduction of interest in advance; a process called discount. See Vol. 1, pp. 275, 302.] [Footnote 7: The legal requirements as to minimum reserves vary greatly from no specific per cent to 40 or more in different countries, for different classes of banks, and for different purposes. Some examples of legal reserve requirements in the United States occur in the two following chapters.] [Footnote 8: See above, ch. 4, sec. 5.] [Footnote 9: See below, sec. 10.] [Footnote 10: Including, now, some Federal Reserve bank notes secured by United States bonds.] [Footnote 11: In some cases, as during the bank restriction in England, 1797-1821, bank notes become inconvertible--practically political money.] [Footnote 12: Payment of interest on credit balances reduces the motive to withdraw for investment elsewhere any such excess, and mingles in the depositor's thought monetary and investment motives.] [Footnote 13: In the United States in 1914 there were individual deposits reported in banks other than savings banks to the amount of about $13,400,000,000 In national banks .................................. $6,000,000,000 In state banks ..................................... 3,250,000,000 In loan and trust companies .......................... 4,000,000,000 In private banks ..................................... 150,000,000 Nearly all these were doubtless demand deposits (what proportion were time deposits we have no data for determining), and were available as immediate purchasing power for the depositors. The total money (other than bank notes) in the commercial banks of the country was hardly 11 per cent of this amount. In that year the total amount of money of all kinds in circulation (and in banks) in the United States (outside the Treasury), including gold and silver and certificates represented by bullion in the treasury, United States notes of all kinds, and national bank notes, was about one fourth of the amount of these individual deposits in commercial banks. This may suggest the enormous influence that banking has in determining the average efficiency of the circulating medium of the country.] [Footnote 14: See above, sec. 3.] CHAPTER 8 BANKING IN THE UNITED STATES BEFORE 1914 § 1. The First and Second Banks of the United States. § 2. Banking from 1836 to 1863. § 3. National Banking Associations, 1863-1913. § 4. Defects of our banking organization before 1913. § 5. Lack of system. § 6. Inelasticity of credit. § 7. Periodical local congestion of funds. § 8. Unequal territorial distribution of banking facilities. § 9. Lack of provision for foreign financial operations. § 10. The "Aldrich plan." § 1. #The First and Second banks of the United States.# A knowledge of the history of banking is helpful to an understanding of the present banking system in our country. The form of our present banking system has been affected by various economic and political events which will be sketched here in broad outline to give a background for our present study. Alexander Hamilton, the great first Secretary of the Treasury in Washington's cabinet, advocated the charter of a central national bank as one portion of his larger plan of national financiering. His purpose was realized in the chartering, in 1791, of the First Bank of the United States, for a period of twenty years. The capital for this institution was in small part subscribed by the government, but mostly by private capitalists. The management of the bank was left almost entirely in private hands. The central bank established branches in many parts of the country, issued bank notes which circulated everywhere without depreciation, acted as the governmental depository of funds and as governmental agency in various ways. It seems to have been successful and useful as a banking institution until the expiration of its charter in 1811, but it was touched by the contemporary controversies over state rights and was from the first opposed by those who feared the growth of a strong central government. This opposition prevented the extension of its charter. In 1816, however, after only a moderate discussion, the Second Bank of the United States was chartered for a period of twenty years. This also, in its purely banking aspects, seems to have been distinctly successful, conducting numerous branches in various parts of the country, maintaining at all times the parity of its notes, facilitating domestic exchange throughout the country, and enjoying unquestioned credit and solvency. However, this bank became, even in a greater degree than did the First Bank, the creature of political rivalries. In the period of rising democratic sentiment typified and led by Andrew Jackson, the bank came to be looked upon as the embodiment, or the stronghold, of plutocratic interests, and Congress permitted its charter to expire by limitation in 1836, near the close of Jackson's administration. § 2. #Banking from 1836 to 1863#. The Federal Government, which up to that time had deposited its funds in the central bank and its branches and in local state banks, established the "independent treasury," in 1840 (abolished in 1841 and re-established in 1846). By this plan the government kept its money of all kinds in various depositories (or sub-treasuries) in charge of public officials. While from 1792 to 1836 almost continuously a central banking system was in operation, other banks, organized under state charters, were steadily increasing in number. They received deposits, issued bank notes under state laws, and cared for local commercial needs. The abolition of the central national bank in 1836 left to the various state banks for twenty seven years all the banking functions of the country. The banks of some states (notably those of New England and New York), under careful regulation and held to strict standards by public sentiment, for the most part maintained a high credit; but many banks, under lax laws and regulations, were guilty of great abuses of credit and of downright dishonest practices. The evils were more especially evident in connection with excessive issues of bank notes. § 3. #National Banking Associations, 1863-1913#. The next step in federal legislation was taken in 1863 in the midst of the Civil War by chartering local "national banking associations." The purpose was in part to provide banks under national charters for banking purposes (both of deposit and of issue), and in part it was to make a wider market for United States bonds at a time when government credit was at low ebb. The plan adopted followed the experience of New York state (1829 on) with a system of bond-secured bank notes. Congress provided that every bank taking out a national charter must purchase bonds of the United States and deposit them with the treasurer of the United States, in return for which it would receive bank notes to the amount of 90 per cent of the denomination or of the market value of the bonds.[1] Bank notes issued on this plan, being secured by the bonds, rest ultimately on the credit of the government, not on the credit of the bank. They are not promptly sent back for redemption to the banks issuing them, as should be done if they were typical bank notes. They may circulate thousands of miles away from the bank that issued them, and for years after the bank has gone out of business. They are not an "elastic currency," increasing or diminishing with the needs of business. The changes in their amount depend upon the chance of the banks to make more or less in this way than by any other use of their capital, and this in turn depends largely on the price of bonds and on the rate of interest they bear. From 1864 to 1870, fortunes were made from this source, but thereafter banks could make little more from note issues than they could by investing the same amount in other ways. Many banks for a long period did not avail themselves in the least of their privilege of issue. The notes were subject to a tax.[2] A national bank (as the law now stands) may be organized, with $25,000 capital in towns not exceeding three thousand population, with $50,000 in towns not exceeding six thousand, with $100,000 in cities not exceeding fifty thousand, and with $200,000 in large cities. Three cities, New York, Chicago, and St. Louis, have long been designated as central reserve cities, and some 47 other cities as reserve cities, in which the reserves of banks were required to bear a considerably larger proportion to their deposits than in other cities.[3] Other banks might count as part of their legal reserves their deposits in reserve city banks, up to a certain proportion. The national banks in the larger cities thus became the great capital reservoirs of cash for the whole country. National banks have been subject to stricter inspection than have been the banks in most of the states, a fact which has strengthened public confidence in their stability. Except in this and the other respects above mentioned, a national charter offered few, if any, attractions to small banks, a majority of which have found it more advantageous to operate under state charters because of less stringent regulations as to amount of capital, reserves, and supervision. § 4. #Defects of our banking organization before 1913#. Taken altogether, the banks in the United States since 1868 have represented great banking power and very efficient service for the community in times of normal business. But in several respects it long ago became evident that our banks were operating less satisfactorily than those of several other countries. American banking organization had failed to keep pace with the increasing magnitude and difficulty of its task. Especially at the recurring periods of financial stress, such as occurred in 1893, 1903, and 1907, our banking machinery showed itself to be wofully unequal to the strain put upon it. Financial panics were more acute here than in any other land, and the evil clearly was traceable in large part to defects in the banking situation. In academic teaching and in public conferences of bankers, business men, publicists, and students, the subject was continually discussed after 1890. At length Congress in 1908 created a "National Monetary Commission" to inquire into and report what changes were necessary and desirable in the monetary system of the United States or in the laws relative to banking and currency. After the most extended inquiry and discussion that the subject had ever received, the commission submitted its report in January, 1912. The defects to be remedied, as enumerated in the report,[4] may be reduced to the following five headings: (a) Lack of system, (b) Inelasticity of credit, (c) Periodic local congestion of funds. (d) Unequal territorial distribution of banking facilities. (e) Lack of provision for foreign banking. § 5. #Lack of system#. Only in a loose sense could the banks of the United States be said (before 1914) to constitute a system at all. Both national and state laws dealt with individual banks only. It was not legal for a bank to establish branches in another city as is done in most countries. The several national banks in one city were legally quite separate. It was only by voluntary agreement that in some of the larger cities they came together into clearing-house associations. They made possible some measure of coöperation which, small as it was, proved at times of stress to be of much service within a limited sphere for the local communities. But even with the aid of these organizations the banks were unable in times of emergency to avoid the suspension of cash payments. There was no provision whatever for the concentration of bank revenues so that each bank would be supported by the strength of the other banks, if a movement began to withdraw deposits in unusual amounts. Each bank then was compelled for self-protection to call for any sums it had deposited with other banks,[5] and to keep for its own use all the reserves it might have in excess of its own immediate needs. This threw a great strain upon the banks in the reserve cities, which in normal times had become the depositories of a good part of the reserves of the banks in other places. Thus developed a spirit of panic, like the fright of theater-goers crowding toward the door at the cry of fire. The maintenance of the government's independent treasury contributed to the difficulties by causing the irregular withdrawal of money from circulation and thus depleting bank reserves in periods of excessive government revenues and by returning these funds into circulation only in periods of deficient revenues. Efforts to modify this system by a partial distribution of the public moneys among national banks had resulted, it was charged, in discrimination and favoritism in the treatment of different banks and of different sections of the country. § 6. #Inelasticity of credit#. Our banks, considered both separately and collectively, were unable to increase their loaning powers quickly and easily to respond to business needs. The need of greater elasticity of credit was felt in the more or less regular seasonal variations within the year, and in the more irregular variations in cycles of years from periods of prosperity to those of panic and depression in business. The inelasticity was necessitated by illogical federal and state laws restricting absolutely the further extension of credit when the reserves fell below the percentage of deposits (15 or 25 per cent) fixed by law. Reserves thus could not legally be used to meet demands for cash payments at the very time when most needed. This feature has been likened to the rule of the liveryman who always refused to allow the last horse to leave his stable so that he would never be without a horse when a customer called for one. The refusal of credit by the banks at such times when they still had large amounts of cash in their vaults increased the need and eagerness of the public to draw from the bank all the cash they could, and often precipitated the insolvency of the banks. Clearly some means were needed to enable the loaning power of the individual banks to be increased at such times, so that no customer with good commercial paper need fear to be refused a loan, even tho the rate of interest might have to be somewhat higher for a few days or weeks than the normal rate. Our bond-secured bank notes lacked almost entirely the quality of elasticity needed to meet these changing business needs.[6] Their value being dependent primarily upon the amount and price of United States bonds, they might be most numerous just when least needed as a part of our circulating medium. § 7. #Periodical local congestion of funds#. In times of general confidence each bank finds it profitable, and is tempted, to extend its credit to the extreme limit permitted by the law governing the proportion of reserves to deposits. Of the 15 per cent reserves required in most banks, three-fifths (9 per cent) might be kept in banks in reserve cities, and of the 25 per cent in reserve city banks, 12-1/2 per cent might be kept in central reserve cities, where it counted as part of the depositing banks' legal reserves, was a fund upon which domestic exchanges could be drawn, and usually earned a small rate of interest (usually 2 per cent). Very large reserves were kept in New York city where they could be loaned "on call," and the largest use for call loans was in stock-exchange speculation. Thus every period of prosperity encouraged an unhealthy distribution of reserves, gave an unhealthy stimulus to rising prices, and "promoted dangerous speculation." § 8. #Unequal territorial distribution of banking facilities.# Another aspect of this concentration of surplus money and available funds in the larger cities was the comparatively ample provision of banking facilities in the cities and in the manufacturing sections, and imperfect provision in the agricultural districts. The whole financial system seemed designed to induce the poorer country districts to lend funds at low rates of interest to be used speculatively in cities, instead of enabling the richer districts, the cities, to lend to the rural districts for productive enterprise. The rates of bank discount in different sections of our country have long been most unequal--lowest in the largest cities, and highest in the rural South and West--whereas in all parts of Canada, with a different system of banking, the rates have long been much more approximately uniform. Indeed, our national banking development has been predominantly urban and commercial to the neglect of rural and agricultural interests. National banks were (until 1913) forbidden to make loans on real estate, and this greatly "restricted their power to serve farmers and other borrowers in rural communities." There was "no effective agency to meet the ordinary or unusual demands for credit or currency necessary for moving crops or for other legitimate purposes." The lack of uniform standards of regulation, examination, and publication of reports in the different sections prevented the free extension of credit where most needed. Finally, the methods and agencies for making domestic exchange of funds were, compared with other countries, imperfect and uneconomical even in normal times and could not "prevent disastrous disruption of all such exchanges in times of serious trouble." § 9. #Lack of provision for foreign financial operations.# Not without its influence on public opinion was the consideration that we had "no American banking institutions in foreign countries." Many bankers and business men felt, as did the commission, that the time had come when the organization of such banks was "necessary for the development of our foreign trade." Foreign banks in South America and the Orient, handling American trade, were believed to favor their own countrymen rather than the interests of American merchants. In contrast with the European nations with their centralized control of banking, we had "no instrumentality that" could "deal effectively with the broad questions which, from an international standpoint, affect the credit and status of the United States as one of the great financial powers of the world. In times of threatened trouble or of actual panic these questions, which involve the course of foreign exchange and the international movements of gold, are even more important to us from a national than from an international standpoint." § 10. #The "Aldrich plan."# The National Monetary Commission submitted with its report a plan which was known by the name of the commission's chairman, Senator Aldrich. This plan was embodied in a bill for a National Reserve Association, a bank for banks which bore some likeness to the great central banks of Europe. In the many details of the plan an effort has been made to remedy every one of the difficulties above described and to supply all the needs indicated. The plan was favored pretty generally by bankers, but called forth many adverse opinions. In the year of a presidential election, however, Congress took no action in the matter. All parties were pledged to some kind of banking reform, but particular proposals were not discussed in the campaign. [Footnote 1: Whichever was the smaller. In 1900 this was changed so that notes could be issued to the full amount of the denomination of the bonds.] [Footnote 2: In recent years this has been one half of 1 per cent when 2 per cent bonds, and 1 per cent when bonds bearing a higher interest, were deposited.] [Footnote 3: In reserve cities 25 per cent and in other cities 15 per cent. The details of the regulations in the old law (given in part below, sec. 7) were ll altered by the legislation of 1913.] [Footnote 4: The expressions within quotation marks in the following sections are taken from this report.] [Footnote 5: See further on this in sec. 7 on periodical congestion of funds.] [Footnote 6: See above, sec. 3.] Chapter 9 THE FEDERAL RESERVE ACT § 1. General banking organization. § 2. The Federal Reserve Board. § 3. Federal reserve banks. § 4. Federal reserve notes. § 5. Reserves against Federal reserve notes. § 6. Reserves against Federal reserve bank deposits. § 7. Reserves in member banks. § 8. Rediscount by Federal reserve banks. § 9. Changes in national banks. § 10. Operation of the Act. § 1. #General banking organization#. President Wilson and the newly elected Congress with its Democratic majority made banking reform one of the main objects on the program for the special session beginning March 5, 1913. The result was the Glass-Owen bill, which became law as the Federal Reserve Act December 23 of that year. The bill was actively discussed within and without the halls of Congress, and many of its features were attacked by bankers individually and acting through the bankers' associations, at various stages of its progress. As a result it underwent numerous amendments in details, and tho it remained in most essentials as it was first proposed, it was at last accepted even by its critics as on the whole a beneficent act of legislation. Indeed, its strongest critics had been the friends of the Aldrich plan, and the Federal Reserve Act embodies, in a greater degree than its authors were ready to admit, the main features of the Aldrich plan. In one important respect, however, it is different; it provides for more decentralization of control and of reserves than did the Aldrich plan. It created not one central banking reserve, but, in the end, twelve regional, or district, banks each to keep the reserves of its district. The Jacksonian tradition of opposition to a central bank[1] in part helps to explain this; in part the contemporary congressional investigation and discussion of the so-called "money-trust" and the consequent desire to decrease the importance of "Wall Street" and of New York city banking power. On the accompanying map are given the outlines of the districts as constituted and altered down to 1916.[2] [Illustration: FEDERAL RESERVE BANK DISTRICTS] § 2. #The Federal Reserve Board#. At the head of the banking system stands the Federal Reserve Board of seven members, five of them appointed by the President and Senate of the United States for this purpose, and two serving _ex-officio_--the Secretary of the Treasury and the Comptroller of the Currency. One of the five shall be designated by the President as Governor and one as Vice-Governor of the Board, but the Secretary of the Treasury is _ex-officio_ chairman. The term of the appointive members is ten years and the salary is $12,000 a year. The powers of the board are numerous and important. The board is made the head of a real _system_ of banking, the twelve parts of which can, in times of emergency, and at the board's discretion, be compelled to combine their reserves by means of lending to each other (rediscounting), to the very limit of their resources, at rates fixed by the board. By this means the reserves of the several district banks may be "piped together" and thus be practically made into one central bank under governmental control, altho centralization was in outward form avoided by the bill. Alongside of the Reserve Board, is placed a Federal Advisory Council, consisting of one member from the board of directors of each of the twelve district banks. This council has only the power to confer with, make representations and recommendations to, and call for information from, the Federal Reserve Board. § 3. #Federal reserve banks#. The twelve Federal reserve banks which opened for business November 16, 1914, are of a type of institution new in our financial history. They are "banks for banks" belonging to the system in their respective districts. Every national bank must, and any state bank or trust company may,[3] subscribe for stock to the amount of 6 per cent of its capital and surplus, and thus become a "member bank." The capital of each Federal reserve bank was to be at least $4,000,000; in fact only two of those organized (Atlanta and Minneapolis) had at their opening less than $5,000,000 capital; the largest (New York) had $21,000,000, and the average was $9,000,000. The member banks are to receive dividends of 6 per cent, cumulative, on this stock, and net earnings above that amount are to be paid to the Government as a franchise tax.[4] Each reserve bank has nine directors, consisting of three classes of three men each. Classes A and B are elected by the member banks by a system of group and preferential voting designed to prevent the large banks from outvoting the smaller ones. Directors of class A are chosen by the banks to represent them, and are expected to be bankers; those of class B, tho chosen by the banks and tho they may be stockholders, shall not be officers of any bank, and shall at the time of their election be actively engaged within the district in commerce, agriculture, or some other industrial pursuit. Directors in class C are appointed by the Federal Reserve Board, one of them being designated as chairman of the board of directors and as Federal reserve agent. They represent the public particularly, and may not be stockholders of any bank. Any Federal reserve bank may: a. Receive deposits from member banks and from the United States. b. Discount upon the indorsement of any of its member banks negotiable papers, with maturity not more than ninety days, that have arisen out of actual business transactions, but not drawn for the purpose of trading in stock and other investment securities. c. Purchase in the open market anywhere various kinds of negotiable paper. d. Deal anywhere in gold coin and bullion. e. Buy and sell anywhere bills, notes, revenue bonds, and warrants of the states and subdivisions in the continental United States. f. Fix the rate of discount it shall charge on each class of paper (subject to review by the Federal Reserve Board). g. Establish accounts with other Federal reserve banks and with banks in foreign countries or establish foreign branches. h. Apply to the Federal Reserve Board for Federal reserve notes to be issued in the manner below indicated. § 4. #Federal reserve notes#. In 1914 there were outstanding about $750,000,000 of what we may now call the old-style bank notes (bond-secured). These were by the new act not forcibly retired at once; but, as the law is shaped, they probably will be retired at the rate of about $25,000,000 a year, and will all disappear from circulation in thirty years.[5] Whenever the banks having old-style bank notes outstanding desire to retire any of their circulating notes, the Federal reserve banks are required[6] to purchase the bonds in due quota (not to exceed $25,000,000 in any one year). On the deposit of these bonds with the Treasurer of the United States, the Federal reserve banks may receive other circulating notes (essentially of the old style) called Federal reserve bank notes, or may receive 3 per cent bonds not bearing the circulating privilege. The new kind of notes provided by the act are called Federal reserve notes. They are not secured by the deposit of government bonds, but they are secured beyond all question in other ways. First, they are obligations of the United States receivable for all taxes, customs, and other public dues, and are redeemable in gold on demand at the Treasury of the United States. Secondly they are receivable by all member banks in the twelve districts and by all Federal reserve banks, and redeemable by the latter in gold or lawful money (which includes greenbacks and gold and silver certificates). Thirdly, their credit and prompt redemption is insured by certain elastic rules as to reserves in gold which must be kept for the redemption of outstanding notes. Fourthly, they are secured by collateral, consisting of notes and bills accepted for rediscount from member banks, which must be deposited by a Federal reserve bank with the Federal reserve agent of its district, dollar for dollar for every note it receives. Fifthly, the notes become "a first and paramount lien on all the assets of the bank." This is what gives the notes their character of asset currency. It is evident that the notes unite in a manner without example the characteristic of asset bank notes with the characteristics of political paper money.[7] No notes, it will be observed, are issued by or on request of the member banks, but only on request of a Federal reserve bank. After the notes have been issued, the bank may reduce its liability any day by depositing lawful money with the Federal reserve agent who is right there in the bank. The Federal reserve banks and the United States Treasury must promptly return to the banks through which they were issued all notes as fast as they are received, and "no Federal reserve bank shall pay out notes issued through another on penalty of a tax of ten per centum." The regulations do not apply to the member banks, but their effect must be to keep notes from circulating long in any district except that for which they were issued. § 5. #Reserves against Federal reserve notes.# The rule applying in normal times to reserves against note issues is that each bank must provide a reserve in gold equal to 40 per cent "against the Federal reserve notes in actual circulation, and not offset by gold or lawful money deposited with the Federal reserve agent." At least 5 per cent is to be on deposit in the Treasury of the United States. The proportion of reserves to the liability for note issues by any bank, however, may be allowed to fall below 40 per cent, on condition that the Federal Reserve Board shall establish a graduated tax of not more than 1 per cent per annum (it evidently might be made less if the board chose) upon such deficiency, until the reserves fall to 32-1/2 per cent and thereafter a graduated tax of not less than 1-1/2 per cent on each additional 2-1/2 per cent deficiency or fraction thereof.[8] This tax must be paid by the reserve bank, but it must add an amount equal to the tax to the rates of interest and discount charged to member banks. The effect of these rules is to give a power of note issue in time of emergency without compelling the reserve banks to lock up their reserves held against notes. Suppose for example that the circulating notes were in normal times $1,000,000,000 and the reserves, therefore, were $400,000,000 and the rate of discount 5 per cent. Then the circulation might be doubled with the same reserves, the proportion thus falling to 20 per cent of outstanding notes, and the rate of discount to customers rising to 13.5 per cent (5 plus 8.5). Or, to take a most extreme supposition, suppose that the withdrawal of gold had been so great as to reduce the reserves against notes to $50,000,000; yet outstanding notes might be doubled (becoming $2,000,000,000,) the proportion falling to 2.5 per cent, the rate of discount rising to 24 (5 plus 19). § 6. #Reserves against Federal reserve bank deposits.# Every Federal reserve bank shall, under normal conditions, maintain reserves in lawful money of not less than 35 per cent against its deposits. But the Federal Reserve Board may suspend any reserve requirement in the Act for a period not exceeding 30 days and from time to time renew the suspension for periods not exceeding 15 days; but in that case it must establish a graduated tax upon the amounts by which the reserve requirements may be permitted to fall below the levels specified as to note issues. Altho the amount of the tax on the deficiency of reserves against deposits is not indicated in the act (as it is in respect to excess note issues) it is plainly the thought that the Board, to which discretion is left, will follow somewhat the same rule in both cases. The great discretionary power as to reserve requirements thus lodged in the hands of the Board makes possible at times of emergency the use of the reserves both of the reserve banks and of the member banks, down to the last dollar, if need be, without violation of law. This gives practically unlimited opportunity to expand credit both by the issue of bank notes and by discount and deposit in periods of financial crises. § 7. #Reserves in member banks.# A fundamental change is made in the rules as to the reserves against deposits that must be maintained by the member banks. A new distinction is made between time and demand deposits. Time deposits are defined as those payable after thirty days or subject to not less than thirty days' notice; and demand deposits as those payable within thirty days. In every case the reserve requirement against time deposits is only 5 per cent. This gives encouragement to banks to maintain savings departments. The requirements as to reserves against demand deposits are not uniform, being the lowest for banks in smaller cities (the great majority), larger for banks in the reserve cities, and largest for banks in the three central reserve cities (New York, Chicago, St. Louis). The act substitutes the new Federal reserve banks for the banks in reserve and central reserve cities as the depositories of funds that may[9] be counted as a part of the reserves of member banks. The new rule requires that one-third must be in the bank's own possession, a fraction slightly over a third must be in the Federal reserve bank, and the remainder may be kept in either place. This may be tabulated as follows: _Not in In reserve In central reserve cities cities reserve cities_ Total reserves, per cent 12 15 18 Must be in its own vaults 4/12 5/15 6/18 May be either place 3/12 4/15 5/18 Must be in a Federal reserve bank 5/12 6/15 7/18 These requirements as to total reserves are, as compared with requirements of national banks under the old law, a reduction respectively of 20 per cent, 40 per cent, and 28 per cent. The total decrease in the amount of reserves required for all three classes of national banks was about $400,000,000 on the amount of deposits held in September, 1914. § 8. #Rediscounts by Federal reserve banks.# More important than any other single feature of the act is, however, that by which each Federal reserve bank is to rediscount notes, drafts, and bills of exchange arising out of actual commercial transactions, when indorsed and presented by any of its member banks. This, quite apart from the note issues, gives a power to the banks collectively, under the general supervision and control of the board, to expand credits indefinitely at any time for real business purposes. Any business man able to offer any commercial paper of sound quality should now be able to borrow on it at some rate of discount, even in the most stringent times. And, in turn, every member bank will now be able at such times to rediscount such paper and thus secure credit toward its reserve requirement on the books of its Federal reserve bank. Suppose, for example, that a member bank (in a central reserve city) saw its reserve in the Federal bank fall below 7 per cent of its deposits. It could by rediscounting $7000 worth of notes increase by $38,888 the amount to which it might legally extend credit to its customers (i.e., $7000 is 18 per cent of that sum). The deposits of the Federal reserve bank would then be increased $7000, against which it must have a reserve of 35 per cent, or $2450. If the reserves of any Federal reserve bank fall too low, it can in turn rediscount its paper with the other Federal reserve banks.[10] If the time comes when no one of the twelve banks can longer maintain a 35 per cent reserve, the board may reduce or suspend the requirement, levying a tax graduated according to the deficiency. The provision here for elasticity of credit combined with union and solidarity of all the central banking reserves of the country to meet unusual demands in emergencies, exceeds any needs which can be expected to arise. § 9. #Changes in national banks.# There is here created a national system of reserves, but it will be observed that membership in the new system of the Federal reserve banks is not limited to national banks, but is open on equal terms to banks organized under state laws. While in most respects the general banking law remains as it was, certain changes are of importance. The percentage of reserves henceforth required of all member banks (as above indicated) is a substantial reduction of the former requirement for national banks. In some other respects the powers of national banks are enlarged. One with a capital and surplus of $1,000,000 may with the approval of the Board establish foreign branches, and one not situated in a central reserve city may loan on farm lands for a term not longer than five years, but not to exceed one third of its time deposits or 25 per cent of its capital and surplus. National banks may now be granted permission by the board to act as trustee, executor, administrator, or registrar of stocks and bonds, thus having the rights that have proved in many cases to be of advantage to trust companies organized under state laws. § 10. #Operation of the Act#. It was fortunate that this act was nearly ready to be put into operation when, August 1, 1914, the great European war broke out. The able appointees to the Federal Reserve Board commanded the confidence of the bankers and of the public. The knowledge that the reserve banks would early begin operations was reassuring during the grave financial stress of the next three months, and the opening of the district banks in November, 1914, at once made possible the release for commercial uses of cash reserves and credits to meet the needs of reviving business.[11] Only an extended experience can show how this enormous new banking organization will operate as a whole and in its details. Because of the very wide discretionary powers given to the board in the administration of the act much depends on the character and ability of the members of the board as well as on a sound public opinion that will keep this great power from use in partisan and selfish ways. No doubt amendments of the act will appear necessary, but there can be no question that the Federal Reserve Act has inaugurated a new epoch in the banking and financial history of our country.[12] [Footnote 1: See ch. 8, sec. 1.] [Footnote 2: The law provided that an organization committee should designate not less than eight nor more than twelve cities as Federal reserve cities and should divide the continental United States, excluding Alaska, into districts each containing one such city. Twelve districts were designated. Wherever, therefore, the act speaks of "not less than eight nor more than twelve," or of "as many as there are Federal reserve districts," we may, for convenience, speak of twelve.] [Footnote 3: On agreeing to comply with reserve and capital requirements of national banks and to submit to Federal examination.] [Footnote 4: Except that until the surplus of any reserve bank amounts to 40 per cent of its paid-in capital stock, one half of its net earnings shall be paid into a surplus fund.] [Footnote 5: These notes are all secured by the deposit of bonds of the United States, a large share of them bearing interest at the very low rate of 2 per cent. Two per cent is less than the market rate for government loans, for 3 per cent bonds without this privilege sell above par. Therefore these 2 per cent bonds were held almost exclusively by banks, and would have lost a good share of their value had the note-deposit privilege been withdrawn.] [Footnote 6: Through the Federal Reserve Board or they may do it voluntarily, sec. 4.] [Footnote 7: The Act does not explicitly say by whom the notes are issued: it says that they are "to be issued at the discretion of the Federal Reserve Board"; that "the said notes shall be obligations of the United States." Further on the notes are spoken of as "issued to" a Federal reserve bank, and again as "issued through" a Federal reserve bank, but not _by_ it. But the phrase occurs (sec. 16) "its [i.e., the Federal reserve bank's] Federal reserve notes." The notes thus are technically issued by the United States, but not as ordinary political (fiat) money, for they are not given a forced circulation by the Government in paying its indebtedness. But the banks "shall pay such rate of interest on" the amounts of notes outstanding as may be established by the Federal Reserve Board (i.e., to the Government of the United States). Practically the notes (as respects choice of time of issue, amounts, profits from them, commercial assets to secure them and to redeem them) are asset currency issued by the several Federal reserve banks.] [Footnote 8: This may be shown in the following table: When reserves against notes are the tax rate upon the total are-- deficiency shall be-- Below 40.0 to 32.5 per cent 1.0 per cent " 35.5 to 30.0 " " 2.5 " " " 30.0 to 27.5 " " 4.0 " " " 27.5 to 25.0 " " 5.5 " " " 25.0 to 22.5 " " 7.0 " " " 22.5 to 20.0 " " 8.5 " " " 20.0 to 17.5 " " 10.0 " " " 17.5 to 15.0 " " 11.5 " " " 15.0 to 12.5 " " 13.0 " " " 12.5 to 10.0 " " 14.5 " " " 10.0 to 7.5 " " 16.0 " " " 7.5 to 5.0 " " 17.5 " " " 5.0 to 2.5 " " 19.0 " " " 2.5 to 0.0 " " 20.5 " " ] [Footnote 9: The complete application of the new rule is deferred for a period of three years from the passage of the act.] [Footnote 10: See on "piping" provision, sec. 2, above.] [Footnote 11: See sec. 7 above.] [Footnote 12: Several other features of the law well merit description. Among these features are measures for developing bankers' acceptances, open market operations, the gold clearing system of the Federal Reserve Board, and the clearing of checks and parring of exchange.] CHAPTER 10 CRISES AND INDUSTRIAL DEPRESSIONS § 1. Mischance, special and general, in business. § 2. Definitions. § 3. A feature of a money economy. § 4. European crises. § 5. American crises. § 6. A business cycle. § 7. General features of a crisis. § 8. "Glut" theories of crises. § 9. Monetary theories of crises. § 10. Capitalization theory of crises. § 11. The use of credit. § 12. Interest rates in a crisis. § 13. Dynamic conditions and price readjustments. § 14. Tariff changes and business uncertainty. § 15. Rhythmic changes in weather and in crops. § 16. Remedies for crises. § 1. #Mischance, special and general, in business.# Every separate business enterprise is subject to chances which suddenly decrease its profits and the prosperity of its owners; such are fire, flood, illness of its owners, unfavorable changes in prices of materials or of the products.[1] The interests of many other persons in the neighborhood may be so bound up with an enterprise that its losses may mean unemployment, lower wages to workingmen, and bankruptcy to local merchants and to banks. Sometimes misfortune and disaster affect whole communities. The lack of cotton while the Civil War was in progress compelled the factories of Manchester to close in 1864, and the earthquake and fire in San Francisco in 1906 left a quarter of a million people homeless. But a change of business conditions is constantly occurring that is of wider extent, that is of less accidental and of more rhythmic nature, and that appears to be the effect of slowly working and more general causes. The enterprise of a modern community, as a whole, "general business," moves along, in a wavelike manner, going through a somewhat regular series of changes that is called a business cycle. We are now to study the nature of these cycles. § 2. #Definitions.# Crisis means, generally, a decisive moment or turning point. The word crisis suggests a brief period, a moment, something that is sudden, severe, and soon over. In medical usage it is the period when the disease must take a turn for better or for worse. As used in economics, the term, however, implies a sudden change of business conditions for the worse, a collapse of prosperity. What precedes has not the appearance of disease, but rather that of exuberant health. Crises in economics may be distinguished as industrial, speculative, and financial, according as one or another influence seems to be more potent, but all are essentially financial. The change that occurs always is connected in some way with the use of money and credit. A financial _crisis_ is the culmination of a period of rising prices, and a sudden fall which shatters the credit of some banks, brokers, merchants, and manufacturers. Every crisis is marked by much confusion and loss and by hasty efforts of individuals and institutions to meet their pressing obligations. Sometimes this process of liquidation goes on quietly and in other cases it becomes a wild scramble, each one trying to save himself, in which case it is a financial _panic_. An _industrial depression_ is the period of hard times that usually follows a financial crisis. § 3. #A feature of a money economy.# Financial crises, by their very nature, are confined to communities in which the money economy prevails and where there is a developed state of industry. The periods of industrial hardship in the Middle Ages were connected usually not with the collapse of prices, but with political oppression, famine, wars, pestilence, and scourges of nature. Throughout the lands money was little used and there was no development of credit and of credit prices. The money economy began, as has been noted, in the cities. As the use of money spread, as larger commercial enterprises were undertaken, as borrowing and the payment of interest became common, there began to appear in city trading circles, on a small scale, the phenomena of the modern crisis.[2] § 4. #European crises.# In Europe financial crises date from 1763 and have occurred at more or less regular intervals since. The common statement that the cycle of a crisis is run in a period of ten years, finds only partial support in history. The chief crises of the eighteenth century occurred in 1763, 1783, 1793, these dates marking the close of wars of some magnitude. The crises were not widespread or general, but were more marked in England, which was at that time farther developed industrially and in its money economy than other countries. Likewise, in the nineteenth century, the crises were of unequal force in various countries, usually being severer in England. They may be dated 1803, 1825, 1838, 1847, 1857, 1864-66, 1875, 1890, 1900, 1907, and 1914. These were attributed to various causes; that of 1825 to over-trading abroad; that of 1847 to railroad-building; while that of 1866 followed the severe disturbance of trade in 1864 caused by the interruption of the cotton trade and commerce by the Civil War in America. While in many parts of England the crisis of 1864 was unusually severe, in other countries it was of little moment. Germany, after several years of great speculative prosperity, had a most severe crisis in 1875; while France, although prostrated by the war of 1870-71, losing a large amount of wealth, and paying a thousand millions of dollars to Germany as a war indemnity, escaped a commercial crisis almost entirely at that time. § 5. #American crises.# Since the beginning of the nineteenth century, the financial connections of the United States with London, the leading loan market of Europe, have been such that every crisis in either England or America has extended its effects to the other country. But the disturbances are so modified by the particular conditions (of crops, politics, and speculation) that the phenomena never correspond exactly in time of occurrence, in duration, or in intensity. The first notable crisis in America occurred about 1817 in the very violent readjustment of trade after the resumption of commerce with Europe in 1816.[3] In 1837-39 came in quick succession two crises, not quite distinct from each other, the second similar to the relapse of a fever patient. The conditions were rapid westward expansion, over-speculation in lands, reckless state internal improvements, great issues of state bank notes, and the financial measures of Andrew Jackson, which included the dissolution of the Second Bank of the United States in 1836.[4] The crisis of 1857 followed a period of great prosperity marked by rising gold production and prices and a great increase in foreign trade. The crisis of 1873, possibly the severest in our history, followed great speculation, especially in the direction of railroad building on an unexampled scale after the war. The blow, when it fell, was intensified by the relative contraction of currency then in progress, leading to the return to a specie basis and lower prices.[5] The crisis of 1884, a comparatively slight one, occasioned (rather than caused) by the discussion of the money question, was followed by some years of noticeable depression. The years 1889 to 1892 witnessed prosperity, only slightly interrupted in 1890, that culminated in a crisis in May, 1893 (likewise generally explained as due to the unsettled state of our monetary system), followed by a period of great depression lasting until 1897. A rapid growth of business was checked but little in 1900 when a crisis occurred in Europe, especially severe in Germany. In November, 1902, began in America what has been called "the rich man's panic" of 1903 in which for a year many securities were sold by holders because European creditors were recalling their loans. American business, however, slackened but little, altho building operations were somewhat checked. General prices, which had been moving upward since 1897, remained almost unchanged in 1903 and 1904, and then continued going upward until 1907. In the period from September to November of that year occurred a severe crisis both in Europe and in America. The industrial depression following this was marked in 1908, slowly growing less. The crisis at the outbreak of the war in August, 1914, was quite exceptional, being due to the sudden demand of Europe upon New York for funds. Within a couple of months it was over and soon prices were again rising as the result of large exports of merchandise followed by gold imports. § 6. #A business cycle#. Let us now sketch in broad outline a business cycle, bearing in mind that this series of changes does not repeat itself with unvarying regularity, but that it is fairly typical in the modern business world. The period leading up to a crisis is one of relative prosperity; then occurs a crisis in which prices fall, at first rapidly, and afterward for a while going slowly lower. When prices are at the lowest point many factories are closed, and much labor is unemployed. Let us start at that point. Conditions are worse in some industries than in others. General economy and great caution prevail; few new enterprises are undertaken. For those persons having available funds this is a good time to buy, and property begins to change hands. Then hoarded money begins to come out of its hiding places. Money and credit flow in from other countries, particularly if business conditions are better abroad than here, for when prices are lower than they have been, relative to those of other countries, a country is a good place in which to buy. At the same time that the money in circulation thus increases, there is a general return of confidence that increases credit. Not only are there more dollars, but each does more work. Then old enterprises are resumed and new ones are undertaken. The purchase of materials in larger quantities causes a rapid rise in the prices of many raw materials and of all kinds of industrial equipment. The less efficient laborers and others that have been out of work, begin to find employment, and then, more tardily, wages begin to rise. As a result, the costs of many products begin to rise rapidly. The only classes not sharing in this improvement are the receivers of fixed incomes. As prices rise, the purchasing power of their incomes correspondingly falls. At length prices begin to go up less rapidly, and the question arises in many minds whether the movement can continue, and if not, when it will cease. Men wish to hold on for the last profits, and are willing to risk something to gain them. When prices rise not only as compared with former domestic prices, but as compared with current foreign prices, foreign imports are stimulated and exports fall. This calls for a new equilibrium of money and requires at length large and continued exportation of specie. This checks prices, and, reducing the specie reserves of the banks, compels them to be more cautious. At the same time the increase of costs in many industries begins to reduce profits. The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures.[6] The falling prices, the shattered credit, and the financial losses force many factories to close, and many workmen are thrown out of employment. This moment of widespread loss is the crisis, It is followed by another period of low prices and of small output, and therefore of profits small or negative in many industries. Business must again enter upon a period of retrenchment, for it has completed another cycle. § 7. #General features of a crisis.# Altho irregular in time of occurrence and unlike in their immediate occasions, financial crises show certain general features. They are a part of the larger movement here outlined as the business cycle. Some have thought this cycle to be normally a period of ten years, divided into one year of crisis, three years of depression, three years of recovery, and three years of unusual prosperity. This succession of events occurs pretty regularly, though not in the regular intervals of time. Crises are more severe in countries with more extensive use of money and credit, but still more severe where the credit system is more loosely administered and less efficiently coördinated. They are harder in the United States and England than in Germany, harder in Germany than in France, harder in western Europe than in eastern Europe, harder in Christendom than in heathendom. They are less severe in rural districts, where prosperity depends more on crop conditions, and business has in it less of financial speculation. Their effects are least felt in the staple industries, for when hard times come people economize on the less essential things. The glove-factory, the silk-factory, the golf-club-factory are more likely to close than the flour-mill. In a crisis wages and salaries are less affected than are profits, but wageworkers suffer in the loss of employment. Those money lenders who have eliminated chance as far as possible and have taken a low rate of interest lose little; the risk-takers who draw their incomes from dividends on stock or from bonds of a less stable kind, often lose much. § 8. #"Glut" theories of crises#. Many explanations of the causes of financial crises have been offered.[7] Nearly all of these belong to the general group of "glut" theories, of which genus there are two species, under-consumption and over-production theories. These are, in truth, but two aspects of the same idea.[8] The one view is that too many goods are produced, the other that too few are consumed. The over-production theorist seeing that in a crisis warehouses are filled with goods that cannot be disposed of for what they cost (or at best, not so as to give a profit), and that factories are shut down and men are out of employment for lack of demand, declares that productive power has grown too great. The under-consumption theorist, seeing the same facts, says that the trouble is lack of purchasing power. He observes that there are some people who would like to buy more of some of these things, but that such people lack income with which to buy. Usually he asserts that this is because production grows faster than wages, wages being fixed, as he believes, by the minimum of subsistence--a theory akin to the iron law of wages. In both over-production and under-consumption theories, the inequality of demand and supply is looked upon as a general one. There is supposed to be not merely an unequal and mistaken distribution of production, but a general excess of productive power. The wide vogue held by these views would justify a fuller discussion and disproof of them here, did space permit. It must suffice to indicate merely that they have the same taint of illogicalness as the "fallacy of waste," and the "fallacy of luxury."[9] They overlook the fact that an income, either of money or of other goods, coming even to the wealthiest, will be used in some way. It may be used either for immediate consumption or for further indirect use in durable form. Through miscalculation there may be, at a given moment, too many consumption goods of a particular kind, but the durable applications can find no limit until the inconceivable day when the material world is no longer capable of improvement. At the time of a crisis, there is unquestionably a bad apportionment of productive agents, and a still worse adjustment of their valuations, but these facts should not be taken as proving that there is an excess of all kinds of economic goods. § 9. #Monetary theories of crises.# Another group of theories explains the crises as being due to money, either too much or too little. The unregulated issue of bank notes has been assigned as the cause of crises, especially under the circumstances accompanying such crises as those of 1837 and 1857 in America, when bank note issues greatly contributed to the unsound expansion of credit. The issue of government paper money years before, leading to inflation and speculation, was by many believed to be the cause of the crisis of 1873. The reverse view is taken by the advocates of a cheap and plentiful money. They say that these crises were caused, not by the expansion, but by the contraction of the money stock; for example, not by the inflation of prices through the issue of greenbacks in 1862 to 1865, but by the contraction of the currency from 1866 to 1873. There is only a fragment of truth in these various views. It is always lack of "money" at the moment of the crisis that causes any particular failure, and in that sense it is always lack of "money" that causes a crisis. The question is, whether in any reasonable sense it can be said that it was lack of a circulating medium before the crisis that brought it on. There is no support for this view, except in the rare case when the money standard is undergoing a rapid change, as in the United States from 1866 to 1873, and the statement then needs much modification and explanation. The monetary theories of crises are a bit nearer to the truth than are those of the over-production type, for the crisis is always connected with prices and credit. But it is clear that these rhythmic price changes occurring in the business cycle are not due to the same causes as are the general movements of the price level, due to an increasing or decreasing output of gold or again to a paper money inflation. Statistics show that while a general price level is slowly changing like a tidal movement, the effect of the rhythmic business cycle appears now in hastening, now in retarding, the changes in the price level. § 10. #Capitalization theory of crises#. Here we verge upon a different type of explanation of the financial crisis--one of a psychological nature. The quantity of money, we have seen, affects prices more or less according as credit is more or less used in connection with it. Money plus confidence has a larger power of sustaining prices, than money without, or with less, confidence. And throughout the business cycle the amount of confidence, expressed in such ways as the readiness to grant credits and in the easy extension of the time of collection, is constantly changing. Over-confidence at one time is suddenly followed by widespread lack of confidence. This has led some to say that lack of confidence is the cause of crises. This is a truism, but it does not explain what is the real cause of this lack of confidence, which, when the crisis comes, is not mere unreasoning fear that needs only to ignore the danger to banish it. Might it not just as truly, if not more truly, be said that the cause is _over-confidence_ in the period preceding the crisis? The essential characteristic of a crisis is the forcible and sudden movement of readjustment in the mistaken capitalization of productive agents. Capitalization runs through all industry. The value of everything that lasts for more than a moment is built in part upon incomes that are not actual, but expectative, whose amount, therefore, is a matter of guesswork, or "speculation."[10] Many unknown factors enter into the estimate of future incomes. The universal tendency to rhythm in motion (material or psychic) manifests itself in an overestimate or underestimate of incomes and of every other factor in value. This is emphasized by a psychological factor called sometimes the "hypnotism of the crowd," and sometimes, the "mob mind." Most men follow a leader in investment as in other things. The spirit of speculation grows till often it becomes almost a frenzy, and people rush toward this or that investment, throwing capitalization in some industries far out of equilibrium with that in others. The cause of crises immediately back of the maladjusted capitalization thus is seen to be a psychological factor; it is the rhythmic miscalculation of incomes and of capital value, occurring to some degree throughout industry, but particularly in certain lines. This subjective cause in men is given an opportunity for action only when certain favoring objective conditions are present. § 11. #The use of credit.# Most noteworthy of these objective conditions is the general use of credit. The credit system greatly enhances the rhythm of price. If the value of a thing that is fully paid for falls, the owner alone loses; but if the value of a thing only partly paid for falls so much that the owner is forced to default in his payment, the loss may be transmitted along the line of credit to every one in a long series of transactions. A credit system, highly developed, is a house of cards at a time of financial stress. Demand liabilities are at such a time the greatest danger, so that the banks, ordinarily the pillars of financial strength, become at such a time the points of greatest weakness in the financial situation. If many of the customers were not restrained by their sense of personal obligation to the banks, by the strong pressure which the banks can bring to bear upon them, or by the force of public opinion among business men, from withdrawing the balances to their credit in a time of crisis, all commercial banks would become insolvent at once in a crisis by the very nature of their business; for all their ordinary deposits are nominally payable on demand. § 12. #Interest rates in a crisis.# In normal times there is always outstanding a great mass of short-time, commercial loans.[11] The motive of the borrower, in most cases has been to hire more labor and to buy more materials for use in his business. Ordinarily these loans can and are renewed without difficulty or are replaced by others, based on the security of new business transactions in unbroken succession. Now at the time of a crisis a general contraction of credit occurs, and all borrowers with maturing obligations are faced with bankruptcy. The effort of the business man at such a time is not to make a positive profit, but to save what he can from the threatened wreck. The demand for short-time loans, therefore, in such times of stress, fluctuates rapidly, and exceedingly high interest rates prevail in these loan markets for a few days or a few weeks, rates which have only a remote relationship with the usual capitalization of most agents. The distress of the business man is magnified by the fact that it is just at such times that both the equipment he has bought and the products he has made become temporarily almost unsaleable at prices as high as he paid for them when he bought them with the borrowed money. He may know that prices will soon be higher, but he cannot wait. Various courses are open to him in this emergency; he may borrow the money at a very high rate of interest, holding the goods for better prices; or he may sell the goods under the unfavorable conditions; or he may sell other capital such as stocks and bonds. The end sought is the same--to get ready money; and the methods are not essentially unlike--the exchange of greater future values for smaller present values. The sacrifice sale thus reveals the merchant's high estimate of present goods in the form of money. The purchaser of some kinds of property in times of depression is securing them at a lower capitalization than they will later have. The rise in value may be foreseen as well by seller as by buyer, but the low capitalization reflects the high interest rate temporarily obtaining. A.T. Stewart, once the most famous New York merchant, is said to have laid the foundation of his fortune when, being out of debt himself, he bought up the bankrupt stocks of his competitors in a great financial panic. The high interest at such times is but the reflection of the high premium on present purchasing power. The worst of the evils of crises are confined to the markets where the greatest numbers of short-time loans are made. Most of the long-time loans do not fall due in such seasons of stress, and the great mass of slowly exchanging wealth alters little and slowly in price. Such loans as fall due can generally be renewed for long periods at rates little higher than usual, the market for long-time and short-time loans being in large measure independent of each other. But they are not quite independent, and some lenders take whatever sums they can collect on maturing long-time obligations and loan them on short terms at high rates of interest, or buy goods, whole enterprises, bonds, and stocks, at the unusually low prices temporarily prevailing. The effect of this is to raise somewhat the interest rate on long-time paper to accord with the new conditions. § 13. #Dynamic conditions and price readjustments.# Another condition favorable to the rhythmic movement of capitalization is a dynamic economic society. The past century has opened up new fields for investment on an unexampled scale. Investment has advanced both intensively and extensively in a series of great waves. New machinery and processes have given undreamt of opportunities for enterprise in the older countries, and the physical frontier of investment has moved outward with the march of millions of immigrants to people the fertile wilderness. Such factors disturb the equilibrium of prices both in time and space, give a powerful impulse toward higher values in the older lands, and stimulate the hopes of all investors. When the balance between the capitalizations of various industries and between the incomes of the various periods proves to be false, the inevitable readjustment causes suffering and loss to many, but particularly in the inflated industries. But, because of the mutual relations of men in business, few even of those who have kept freest from speculation can quite escape the evils. Among the dynamic conditions in industry are changes in the general price level whether due to changes in the production of the standard money commodity (relative to population) or to changing methods of doing business. If the price level is falling (i.e., the standard unit is appreciating), the burden of the great mass of outstanding debts is growing heavier upon the debtors.[12] Sooner or later some of them break down under its weight. At such times many attempt to shift their capital from active investments such as stocks, to passive investments such as bonds. When the price level is rising, the opposite conditions prevail. But such adjustments proceed uncertainly and unevenly in different industries, with much speculation in shifting from one type of business to another, and with much accompanying miscalculation. § 14. #Tariff changes and business uncertainty.# Another variable influence in American business has been the tariff. Every tariff revision, whether the rates go upward or downward, shifts somewhat the relative opportunities and profitableness of different industries. Some of these call for far-reaching readjustments of investments and of productive forces. Some persons gain and some lose by every such change. It is observed that a reduction of tariff rates seems to have a more disturbing effect upon business than does an increase. This probably is because the industries favored by protective tariffs in America are those most fully within the circle affected by crises; whereas most of the consumers adversely affected by a rise of tariff rates are outside the commercial circles where short-time credit is common and where the rapid readjustment of investment leads to a financial crisis. It never has been convincingly shown, however, that there is any large measure of correspondence in time (not to say causal relation) between tariff revisions and crises.[13] § 15. #Rhythmic changes in weather and in crops#. A psychological movement, once started, accumulates force and momentum up to a certain point where a reaction begins. This rhythmic movement as it appears in the capitalization of enterprises is favored and magnified, we have seen, by the wide use of credit and by the constantly changing technical and physical conditions of industry. These call for constant revaluations of the sources of incomes, thus destroying customary and habitual valuations. But why should the cycle begin or end at one point of time rather than at another; and what determines the length of the cycle? Some of the new dynamic forces such as inventions and growth of population are distributed pretty regularly along the line, so that their influences are nearly equalized. But occasionally some large impulse may serve to start a swing and if this impulse is somewhat regularly repeated, it may serve to keep up the rhythmic motion. True, the lack of coincidence in the impact of various influences which occur accidentally, such as political changes, wars, and the rapid opening of new routes of transportation, would serve to hasten or to retard, perhaps for a time quite to alter, what would otherwise be the rhythm of the cycle. That there is nevertheless, a noticeable degree of regularity in the recurrence of crises may be due to the presence of one dominating factor. Alternation of good and poor harvests has always seemed to be favorable to business prosperity. In America since about 1865, farm products have constituted the larger part of our exports, so that a succession of large harvests has usually acted to stimulate exports (one of the features of a period of prosperity), to give us a larger credit balance in international trade, and to reduce the rate of exchange. Large harvests of the staple agricultural crops in America have been known to be closely related to the amount of rainfall in the three most important growing months. Recently, it has been shown that the rainfall of the Ohio Valley occurs in cycles of about eight years, and in a larger cycle of thirty-three years. The cycle of yield per acre of the nine principal crops is shown to correspond closely with the cycle of pig iron production (one of the best single indices of growing business) dated one to two years later.[14] As the cycles of rainfall and of harvests are not coincident in different countries, it will require further study to adjust to these observations the fact of the world-wide extent of the great financial crises. But a better understanding of objective conditions of this kind will give fuller meaning to the psychological interpretation of crises. § 16. #Remedies for crises#. The financial crisis must be looked upon as an economic disease which brings many evils in its train. The need is not merely to mitigate the severity of the brief period of crisis, but also to smooth out the curve of the business cycle so as to reduce periodic unemployment, the lottery element in profits, and the number of unmerited failures in business. Several measures may aid toward this end. In the past the crisis has been more severe in America than in Europe because of certain well-recognized defects which now have been largely remedied in the Federal Reserve Act.[15] The provisions whereby any one may get credit on good commercial assets should make it impossible for a crisis to degenerate into a panic. This legislation has provided springs to reduce the jolt of the change from a higher to a lower level of prices. Probably other improvements may be made in our banking laws. Competent students of the subject have urged that the payment of interest on deposits not subject to notice before withdrawal should be made unlawful, because demand deposits constitute the greatest danger at critical times. In principle this objection is sound, tho experience may show that this evil has been practically remedied by other features of the Federal Reserve Act. Moreover, bankers could, by pursuing a more conservative policy, discourage speculative methods of enterprise. The strong public disapproval of stock-market speculation on margins may some day be able to express itself effectively in ways that will not injure healthy business. Greater stability in our tariff policy would remove a constantly disturbing factor in prices, as would likewise the stabilizing of the standard of deferred payments. In the attempt to remedy the great evil of unemployment, public works of every kind might be planned and distributed in time so as to better equalize the demand for labor and materials. Finally, much better commercial statistics are needed, and for collecting them and reporting the outlook, government organization is required comparable in range and methods to the weather bureau. It cannot be expected, however, that financial crises, in the sense of general readjustments of prices downward from time to time, ever can be completely abolished. There will always be changes in general industrial conditions calling for reevaluation of the existing sources of income; and in this process there will always be a tendency to rhythmic swing like that of a river, which carries the stream of prices now on this side of the valley, now on that. But this fluctuation of general prices surely can be so greatly moderated in magnitude and in evil results as to make the word "crisis" almost a misnomer. It is toward the attainment of this irreducible minimum of uncertainty and disaster in business that efforts should be directed. [Footnote 1: On the way these affect private profits see Vol. I, pp. 340, 341 (and references there given in note), 348 ff. and 361 ff. There are thus good reasons for discussing crises in connection with profits, as well as with money and banking.] [Footnote 2: See Vol. I, pp. 51, 154, 300-302.] [Footnote 3: See below, ch. 15, sec. 5, on the tariff legislation at this time.] [Footnote 4: See ch. 8, sec. 1.] [Footnote 5: See ch. 6, sec 5.] [Footnote 6: See diagram of business failures 1890-1914, in Vol. I p. 364.] [Footnote 7: In the first annual report of the United States Commissioner of Labor is given a long catalog of theories that have been suggested, many of them quite fantastic.] [Footnote 8: See Vol. I, ch. 38, on Abstinence and Production. Believers in the glut theory usually condemn efforts to encourage frugality among the masses, calling it the "fallacy of saving."] [Footnote 9: See Vol. I, ch. 37, secs, 6 and 9.] [Footnote 10: See e.g., Vol. I, pp. 271. 335, 365 367.] [Footnote 11: See Vol. I, p. 304.] [Footnote 12: See above, ch. 6, on the standard of deferred payments.] [Footnote 13: See note on tariff legislation and business crises, end of ch. 15.] [Footnote 14: In both cases there is what is called in statistics a high degree of correlation (viz., .719 and .800), indicating that there is that percentage of probability that there is some causal relation between the two sets of figures.] [Footnote 15: See above, ch. 9, secs. 5, 6, 8.] CHAPTER 11 INSTITUTIONS FOR SAVING AND INVESTMENT § 1. The nature of saving. § 2. Economic limit of saving. § 3. Commercial bank deposits of an investment nature. § 4. Investment banking. § 5. Savings banks in the United States. § 6. Typical mutual savings banks. § 7. Postal savings plan. § 8. Advantages of the postal savings plan. § 9. Collection of savings and education in thrift. § 10. Building and loan associations. § 11. The main features. § 12. The continuous plan. § 13. The distribution of earnings. § 14. Possible developments of savings institutions. § 1. #The nature of saving.# The motives actuating the different classes of lenders may, for our present purpose, be reduced to two: to postpone the consumption of income, and to obtain a net income from wealth (or investment). Saving always is relative to a particular period and is for more or less distant ends. The child saves its pennies to go to the circus next week, the working girl saves her dimes for a new hat next spring, the earnest high school pupil saves to go to college next year, and the provident man saves for his family's future needs and for his own old age. But always, to constitute saving, there must be for the time a net result: the excess of income over consumptive outgo in that period. This is easily distinguishable from various forms of pseudo-saving of which many persons that are really spending all their incomes are very proud. Such forms are: planning to buy a particular thing and then deciding not to do so, but buying something else; finding the price less than was expected, and thereupon using this so-called saving for another purpose; spending less than some one else for a particular purpose, such as food, but off-setting this by larger outlay for another purpose, such as clothing; spending all one's own income but less than some one else with a larger income. We may define saving as the conversion, into expenditure for consumptive use, of less than one's net income within a given income period. Saving goes on in a natural economy both by accumulation of indirect agents and by elaboration so as to improve their quality.[1] It goes on to-day by the replacement of perishable by durative agents, as in replacing a wooden house by one of stone or concrete, and by producing wealth without consuming it, as in increasing the number of cattle on one's farm. But saving has come to be increasingly made in the form of money (or of monetary funds), and in this chapter we shall consider some of the ways in which this can now be done. § 2. #Economic limit of saving#. There is an economic limit to saving, as judged from the standpoint of each individual.[2] The ultimate purpose of every act of saving is the provision of future incomes, either as total sums to be used later or as new (net) incomes to be received at successive periods. The economic limit of saving in each case is dependent upon the person's present needs in relation to present income and conditions, as compared with the prospect of his future needs in relation to his future income and conditions. Each free economic subject must form a judgment and make his choice as best he can and in the light of experience. There is no absolute and infallible standard of judgment that can be applied by outsiders to each case. Yet there is occasion to deplore the improvidence that is fostered and that prevails, especially among those receiving their incomes in the form of wage or salary. Considered with reference to the possible maximum of welfare of the individuals themselves, the apportionment of their incomes in time is frequently woful. It is uneconomic for families of small income to save through buying less food than is needed to keep them in health; but it is likewise uneconomic to spend the income, when work is plentiful and wages good, for expensive foods having little nutriment and then, for lack of savings, to go badly underfed when work is slack and wages are small. There is for each class of circumstances a golden mean of saving. The saving habit may develop to irrational excess and become miserliness, but this happens rarely compared with the many cases where men in the period of their largest earnings spend up to the limit on a gay life and make no provision for any of the mischances of life--business reverses, loss of employment, accidents, temporary sickness, permanent invalidity, or unprovided old age. Despite the development of late of new agencies and opportunities for saving there is need of doing more toward popular education in thrift.[3] § 3. #Commercial bank deposits of an investment nature.# If a commercial bank pays no interest on demand deposits there is no motive for the depositor to keep a balance larger than he needs as current purchasing power. When his bank account increases beyond that point, it becomes available for a more or less lasting investment to yield financial income. If the sum is small or if the owner is at all uncertain as to his plans or if he is not in a position to find another attractive form of investment, the offer by the bank of a small rate of interest on special time deposits (2 to 3 per cent is not an unusual rate in such cases) will suffice to cause him to leave such funds in the bank. Since about 1900 the practice has been greatly extended of paying interest even on "current balances" of regular checking accounts (demand deposits). If the new 5 per cent rule[4] as to reserves against time deposits operates to cause commercial banks generally to pay a rate ranging from 2-1/2 to 3-1/2 per cent on time deposits, their amount will doubtless increase greatly. But still, in the future as in the past, those depositors having funds that can be invested for considerable periods will seek a higher rate of interest than can be obtained from commercial banks. In their loaning function the "commercial" banks (as the adjective indicates) serve mainly the special needs of the _commercial_ elements of the community--business men borrowing for short terms to carry out particular transactions. Loans made on short-time commercial paper (quick assets) are very suitable to the needs of a bank that has its liabilities largely in the form of demand deposits. Time deposits can be more safely loaned on the security of real estate and for longer periods. Despite their limitations in this respect, the commercial banks must be recognized as of growing importance in the work of encouraging and collecting small savings, which in many cases are better invested in other ways. In 1916, the centenary of the beginning of savings banks in this country, a nation-wide propaganda was undertaken by the American Bankers' Association for the encouragement of savings. § 4. #Investment banking#. Enormous amounts of securities issued by governments or by corporations (railroad or industrial) are now on the market and to be bought conveniently by private investors. Through special bond houses some bonds are to be had in denominations as small as $100 and $500. The regular brokers on the stock exchanges buy and sell, for a small commission, the regular bonds and investment stocks. Several large statistical and financial expert agencies[5] in return for an annual subscription, offer advice to investors regarding general market conditions and special securities. For a large number of investors the personal examination and selection of sound securities is too difficult a task. To serve their needs many bonds and trust companies have of late developed special departments for investment banking. Through these agencies the banks are constantly placing as relatively permanent investments securities which they have bought or have aided "to float" or which they handle only as commission agents. In any case the real investment banker is bringing to his task special training and a high sense of his professional obligations, and is employing the services of statisticians, financial experts, and of practical engineers to determine exactly the fundamental conditions of each investment. Investment banking promises to increase steadily in amount and importance. § 5. #Savings banks in the United States.# For the increasing number of wage-earners, salaried employees, and persons following professions, investment as active capitalists is impossible.[6] Their savings must take the form of passive investments. But there are few good opportunities for lending money in small amounts, without great risk, and the requirement of skill, time, and labor to look after the loans and to collect the interest is prohibitive to a small lender. To provide a place where small sums could be kept with safety and so as to yield a moderate rate of income, the first modern savings bank in the United States was instituted in New York in 1816 after a plan already developed in England. In form these banks are mutual, having no capital stock on which dividends are to be paid. The boards of trustees are self-perpetuating and receive only fees for attending meetings. In their legal aspect these banks have a philanthropic character. Their investments are limited by law to specified, conservative classes of securities and loans on real estate. The total increase from investments is, after paying the expenses of operation and setting aside a surplus, distributable to the depositors at regular periods. In the United States the number of such institutions reported in 1914 was 2100.[7] They have over 11,000,000 depositors, deposits to the amount of $5,000,000,000, an average deposit of $444 per depositor, or of $50 per capita of the whole population. These figures are very unequally distributed geographically, the divisions ranking as to total deposits in the following order: the Eastern Middle, New England, Middle Western, Pacific, Southern, and Western divisions. The first two of these groups of states have about 75 per cent of all the deposits, the Southern states hardly 2 per cent, and the Western (North Dakota to Oklahoma) only 1/4 of 1 per cent. § 6. #Typical mutual savings banks#. About one third of these banks are on the mutual plan, having no capital stock (most of them in the East) and these contain about four fifths of all the deposits. The stock savings banks have individual deposits of over a billion dollars, and have outstanding capital stock to the amount of about $90,000,000 (about 9 per cent of their deposits). These stock savings banks to a much greater extent than do the mutual banks transact also a commercial business. The banks on the mutual plan are therefore the most important, the typical savings banks. The average rate of interest they paid to depositors in 1914 was 3.86 per cent. About one half of their resources are invested in loans, mostly to small borrowers on the security of real estate, and most of the remainder consists of bonds and other securities of the safer kinds. Savings banks are subject to the supervision and inspection of the banking departments in the several states, a fact that exerts a salutary effect though not insuring absolutely against either mistaken judgment or dishonesty on the part of the bank officials.[8] Savings banks seek to keep invested as large a part as possible of their assets, keeping only in ready cash enough to meet a possible temporary excess of withdrawals over deposits. In contrast with the policy of commercial banks with their demand deposits, the sound policy for savings banks is to reserve the right to require notice of intention to withdraw. The period of such notice varies from a minimum of ten days to a maximum of about sixty days. In ordinary circumstances it is not needful or usual for a bank to exercise this right, but it is a needful safeguard in times of commercial crises. This requirement of notice is greatly to the advantage of depositors collectively and thus of the community as a whole. It is not an undue limitation of the rights of the individual depositor. It is unfair for the individual, in a period of financial stress, to seek his own safety in a manner which is impossible for all, and thus to endanger the interests of all.[9] The mutual savings banks in 1914 had (on the average) but six tenths of a cent of actual cash (and "checks and cash items") in their tills for every dollar of deposits, but in addition they had for every dollar of deposits four cents due on demand from state and national (commercial) banks. In the aggregate these demand deposits amounted to the large sum of $172,000,000, a large part of which bore a low rate of interest. The depositors in savings banks have a direct legal claim on the bank as a corporation. The bank's only means of payment are its assets, consisting of claims upon the owners of such wealth as houses, factories, railroads, electric light plants, good roads, and school buildings. Thus virtually the depositors have by their savings made possible the building and equipping of these actual forms of wealth, and have an equitable claim upon the usance of them, which claim is met by the payment of interest and dividends to the savings banks. Viewed in this way the great social importance of the savings function appears, and the importance of developing the savings institutions. § 7. #Postal savings plan.# In many countries of the world the governments have not only authorized private, corporate, and trustee savings banks, but have provided public agencies where it is possible for the citizens to deposit small amounts. Thus municipal, and what are called communal, savings banks are operated by many European cities; but the most effective and widely used agencies for the purpose are the national post-offices. Postal savings banks, or postal savings systems as divisions of the postal service, are now found in all the larger countries of the world, and in many smaller ones. The United States of America was almost the last civilized country to establish such a system, which was authorized by act of Congress in 1910, and went into operation in a few designated cities in January, 1911. The number of offices at which it was in operation was rapidly increased, and the number in 1914 was about 10,000. Any one ten years of age may become a depositor. Deposit must be made always in multiples of one dollar. Not more than $100 will be accepted for deposit in any one calendar month, and nothing after the total balance to the depositor's credit is as much as $1000, exclusive of accumulated interest. However, amounts less than one dollar may be saved for deposit by purchasing a ten-cent postal savings card and affixing ten-cent postal savings stamps until the nine blank spaces are filled. Such a filled card will be accepted as a deposit of one dollar either in opening an account or in adding to an existing account. Deposits are not entered in a depositor's book, as is the usual practice of savings banks, but are evidenced by certificates issued in fixed denominations of $1, $2, $5, $10, $20, $50, and $100. These bear interest, from the first day of the month next following that in which the deposit is made, at the rate of 2 per cent per annum for a whole year (interest is not paid for any fraction of a year). Interest is not compounded, unless the depositor withdraws the interest and redeposits it, but simple interest continues to accrue annually on a certificate so long as it is outstanding, without limitation as to time. By the end of the first year (1911) of operation the savings system held a balance to the credit of depositors of nearly $11,000,000; in the next year (1912) there was added to this about $17,000,000; in the next year (1913) about $12,000,000; and this average rate of one million dollars a month net addition to deposits has continued to the present (1916). These funds are deposited in banks belonging to the federal reserve system, which must deposit with the Treasurer of the United States designated kinds of bonds (national, state, and municipal) as security and pay interest at the rate of 2-1/2 per cent on the amount of the deposits. The one-half per cent difference between this rate and that paid to individuals goes far toward paying the expense of operating the system. Provision is made for the issue of postal savings bonds in exchange for certificates issued in sums of $20 or multiples thereof up to $500. These bonds bear interest at the rate of 2-1/2 per cent payable in semi-annual instalments, January 1 and July 1. These bonds are not counted as a part of the $500 maximum of deposits allowed to one person, and there is no limit to the amount of bonds which may be acquired by one depositor. Postal savings bonds are exempt from all kinds of taxes, federal and local. These bonds are issued only on the surrender of postal savings deposits, but may be sold by the owner at any time. Three years after the law went into effect, there were $4,635,820 of postal savings bonds outstanding. § 8. #Advantages of the postal savings plan.# As compared with corporate savings banks the postal savings system has certain advantages. (a) It protects the small depositors from the danger of dishonest private bankers who have preyed upon the immigrants in the larger cities. To foreigners, accustomed to the postal savings plan in their home countries, it is especially useful. (b) It gives to every depositor the greatest safety possible, as "the faith of the United States is solemnly pledged" for the repayment of depositors. (c) It brings a savings institution to many a small town and rural place formerly entirely lacking in facilities for small depositors. The benefit of this has not immediately appeared to be great, but may in time prove to be. (d) It pays interest from the first of the month following the date of deposit whereas the usual practice of savings and commercial banks is to pay only from the beginning of the quarter year or half year. (e) It provides for the exchange of deposits for bonds bearing a higher rate of interest--a unique feature greatly simplifying for the small saver the process of buying bonds for more lasting investment. In some respects, however, the postal savings system falls short of the advantages of the regular savings banks. These usually accept for deposit as small an amount as ten cents; they pay interest either quarterly or semi-annually; they pay on the average (at present) almost double the rate of interest, and the interest is credited to the depositor's account at stated intervals and automatically compounded. The postal savings system, as the law now stands, may be looked upon, therefore, as supplementing the regular savings banks rather than competing with them. § 9. #Collection of savings and education in thrift.# Small savings have been encouraged in many places by penny provident funds, dime savings banks, and school savings funds, which have been conducted at public schools, social settlements, and factories, by school officers and by charitable and educational societies acting through canvassers. These plans all call for much personal effort and cost, which must be provided by volunteer services and private gifts. These plans being undertaken mainly as a means of education in thrift and in the related moralities, their results are not to be measured merely by the magnitude of the sums collected. They are not rivals of the ordinary savings banks, but rather auxiliary methods of encouraging their use. The funds collected by these agencies are usually deposited in local savings banks, and depositors are encouraged to open individual accounts there, whenever they have considerable sums saved. In Germany the public schools have been furnished with automatic stamp vending machines, from which savings stamps in as small denominations as ten pfennigs (2-1/2 cents) may be had by dropping a coin into a slot.[10] This method could be used very effectively in connection either with the postal savings system or with a local savings bank. It ought to be made easy to deposit funds at every school house, at every post-office, at every factory counter on pay day, and wherever people pass in numbers. Allurements to foolish expenditures meet old and young at every turn; to spend the dime is made all too easy, whereas to save it and deposit it in a safe place too often calls for wasteful and discouraging efforts from the person of small means. § 10. #Building and loan associations.# Building and loan association is the name applied to a coöperative organization of persons with the purpose of collecting regularly from members small sums which are loaned to some members for the purpose of building or paying for homes.[11] The first association of this type was organized in Frankford, Pennsylvania, in 1831. It and others of its kind have made Philadelphia notable among all the larger cities as "the city of homes." The number of such associations has almost steadily increased in the United States. Pennsylvania continues to rank first in respect to amount of total assets, with Ohio a close second, and New Jersey third (the ranking first in proportion to population). Associations of this type have been hardly second in importance in America to the savings banks as institutions for savings for persons of moderate means. The number of their members (nearly 3,000,000) is about one-fourth of that of savings bank depositors, and the amount of their assets (1-1/4 billion dollars) is about one-fourth that of the reported savings banks. But their relative influence in educating and encouraging to thrift is doubtless much greater than these figures indicate. There are more than three times as many of them as of reported savings banks, their management is much more democratic than is that of the banks, and many of their members attend and participate in the meetings and understand how they are conducted. Moreover, the savings made through these associations are constantly passing on into the houses that are fully paid for, and which continue to yield their incomes to their owners. Each year these associations collect from their members as dues and in repayment of loans (made to build houses) the sum of over half a billion dollars, which is twice as much as the annual increase in the deposits of the reported savings banks.[12] § 11. #The main features.# A building and loan association is organized by a group of persons in a neighborhood, uniting to form a corporation under the laws of the state, every member to subscribe for one or more shares. The officers elected all serve without pay excepting the secretary-treasurer, who receives a small fee for his services. All official meetings are open to all members. The shares vary in denomination from $25 to $200; the larger figure being common under the serial plan and $100 being usual under the continuous (or permanent) plan, described below. Whenever there is a sufficient sum it is loaned to one of the members for the purpose of building a house. The borrower must subscribe for shares to the par value of his loan. The receipts of the association are of several kinds. (a) Interest is received from members, usually at the rate of 6 per cent, and from banks at a lower rate on the small working cash balances kept on deposit. Usually the loans made are large enough to cover a large proportion of the cost of the house, but the land on which the house stands must be free from all incumbrance, and its value gives a margin of safety to the association. Then by the method of payment of dues the debt is, from the first month, steadily reduced and the security for the loan therefore grows constantly better. (b) Premiums are collected in addition, sometimes in the form of a higher rate of interest, but the practice of charging premiums has been mostly abandoned and the total amount of premiums now constitutes less than 1 per cent of all payments from members. (c) Fines for delinquency also are less commonly imposed now and constitute a small fraction of 1 per cent of total payments. (d) Deductions are made on account of withdrawal before the maturity of the shares; under these circumstances it is usual to pay a portion but not all of the accumulated profits, sometimes a proportion increasing as the shares approach maturity. Different plans have been and still are followed in respect to the method of issuing the shares. Under the _terminating plan_ all the shares begin and mature at the same time (for all members that continue to the end). Whereupon the association dissolves or starts anew. The chief difficulty in this plan is that the association has too few funds to loan at the beginning of its career, and a surplus of unloanable funds as it nears the maturity of the series. It is therefore necessary to encourage or to compel the withdrawal of non-borrowing members on the payment of estimated profits to date. The better to remedy this difficulty the _serial plan_ was devised, by which new series of stock are issued at intervals--yearly, half-yearly, quarterly, and even oftener. § 12. #The continuous plan.# A further development is the continuous plan (usually called the _permanent_ or the Dayton plan), by which much greater flexibility is attained in the organization. Shares of stock may be subscribed for at any time, each man's separate subscription of shares being treated as a separate series, and maturing each at its own time. There is thus, after an association has been for some time in operation, a continuous stream of new members (or new subscriptions) flowing into the association, and a continuous outflow of shareholders whose shares have matured. The maturing shares of borrowing members discharge their indebtedness to the association; the maturing shares of non-borrowing members are paid in money, or may (if the association has use for the funds) be left as an interest-bearing loan. Additional funds are obtained when needed by issuing paid-up stock to non-borrowers. This is convenient at the beginning of an association and when the movement in building is more active than usual. But if an association has funds that cannot be loaned, outstanding paid-up stock may be called in. In practice a large part of the paid-up stock as well as of the running stock is subscribed for and held not by large capitalists but by persons of small means, especially "the more frugal element in the working classes." Non-borrowing members desiring to withdraw may do so at any time under certain conditions; but to safeguard the association, the laws usually require that thirty days' notice of intention to withdraw shall be given, that not more than one half of the funds received in any one month shall be paid on withdrawals, and that withdrawing shareholders shall be paid in the order of the notices of intention to withdraw. The most intelligent and prudent workers were formerly deterred from subscribing by the fear that sickness, unemployment, or other mishap might make it impossible to keep up regular payments. Now, however, fines for late payment have been almost entirely done away with. On the other hand, extra payments may be made at any time by borrowing members, to hasten the date when their shares mature and their debt be discharged. These privileges are possible because of the method of distributing earnings which will now be described. § 13. #The distribution of earnings.# Every six months is ascertained the amount of the gross earnings which, under this plan, consist almost entirely of interest paid on loans. From this amount are deducted expenses (and in some states 5 per cent of the total is placed in a "loss fund" to meet possible losses) and the rest is divided in proportion to the amount standing to the credit of each member, being credited to the account of running stock and paid in cash to holders of paid-up stock. The payment of dues is correspondingly simple. The dues at twenty-five cents a week amount to $13 a year per share of $100. This is the whole bill; there are no extras. The interest at 6 per cent (the usual rate) is $6, and the rest, $7, is credited upon the stock. Thus at the end of the first six months the member has $3.50 to his credit, and is entitled to his share of the net earnings on that amount. Thus his share of the earnings is steadily increased by compound interest, and if he keeps up his regular payments the shares mature in about sixteen years. This means in most cases that a prudent tenant can become the owner of a house in sixteen years while paying no more than the rent would be. As the active investor he becomes his own rent collector and uses the house with less need of repairs, thus dispensing with services and costs which are included in contractual rents.[13] These associations are properly made subject to supervision and examination by state officials, in the manner of that exercised over banks. They have been favored by exempting the shares of members and the mortgages held by the associations from all state and municipal taxation. As the houses built or paid for are taxed, this is of course but just, but it is an exception to the rule of the illogical general property tax.[14] § 14. #Possible developments of savings institutions.# The social importance of increasing and improving the agencies of savings for the masses is being more fully recognized, but much more might be done in these directions. Some possible changes have been suggested above, and a few words more may be added. Probably the greatest developments in the near future will be through the savings departments of commercial banks (favored by the reserve rules of the Federal Reserve Act) rather than by the increase in the number of special banks for savings. The initial expense and risk of starting a savings bank is considerable, and outside of cities of some size this is prohibitive. Whereas a savings department, with its funds and reserves separated, can be easily and cheaply operated in connection with a general bank. It is much to be desired, however, that a larger measure of popular coöperation might be made possible to the depositors, both for its educational value and to reduce the real evil of the autocratic or the plutocratic centralization of the money power in the small communities. Savings banks usually limit the amount of an account to $3000. It is desirable that depositors should be able easily to convert their savings-bank deposits over certain amounts into good bonds, bearing a higher rate of interest (after the method of the issue of postal savings bonds). There is need of a central market in each community where such bonds can be bought and sold at any time; and the savings banks might easily serve to buy and sell for their customers in this way in the larger bond market. This would be of benefit also to the states and municipalities which issue bonds for such purposes as schools, roads, and public utilities, by creating a more open and regular market to small investors than now is provided for such securities. This might somewhat reduce the rate of interest and there would be a gain divided between taxpayers and lenders. The general plan and principles of local building and loan associations might well be extended to groups of rural coöperators, enabling them to make loans to their members; and to groups of small investors, permitting them to hold real estate mortgages and bonds and stocks of corporations, free from taxation other than that paid on the wealth itself. Members of such organizations could get a higher income on their investments than a savings bank could pay, and with greater security than if each attempted to save and invest by himself.[15] Savings institutions are necessarily also lending institutions. In this chapter they have been looked at mainly from the saver's (the lender's) standpoint, though their service to the borrower is of coördinate importance. In the case of building and loan associations this feature is most apparent. Later, the problem of the agricultural borrower will receive further consideration. [Footnote 1: See Vol. I, chs. 9 and 10.] [Footnote 2: See Vol. I, pp. 285-290 for the analysis of saving from the individual standpoint; and pp. 482-499 for its relation to general economic conditions.] [Footnote 3: See Vol. I, p. 484.] [Footnote 4: See above, ch. 9, sec. 7.] [Footnote 5: E.g., Babson Statistical Organization, Brookmire Economic Service, Moody Manual Co., Moody Corporation Service.] [Footnote 6: See Vol. I, p. 318.] [Footnote 7: Report of the Comptroller of the Currency. Not all of these are mutual. Statistics, moreover, include in some cases (e.g., California) the savings deposits of commercial banks but not the number of such banks, and in other cases (Michigan) some banks that do chiefly a commercial business. The line of demarcation between savings banks and savings departments of commercial banks cannot be sharply drawn. The Comptroller of the Currency reported in 1914 in a different form the amount of savings deposits and of time certificates of deposits in _all_ kinds of banks as the enormous sum of $8,675,000,000.] [Footnote 8: In the last twenty-three years, on the average, seven savings banks a year have failed, the annual excess of liabilities over assets being about $200,000, or about $30,000 for each failing bank. The total loss has been about 1/5 of 1 per cent of total deposits.] [Footnote 9: The Federal Reserve Act, by making it possible for loans to be had at any time (through member banks) on good security, should reduce the danger of runs on savings banks.] [Footnote 10: The author saw in operation a new machine of this kind which had been installed in a German public school as early as 1910.] [Footnote 11: See Vol. I, pp. 290, 297-298, 484, and 486.] [Footnote 12: The figures here given and the description of methods apply to the "local" building and loan associations. The success of this kind led to the organization of other associations which took the name "National" building and loan associations, to carry on a business in a larger field. The number of these has always been comparatively small, and their operation is less simple, democratic, and economical than the local associations. They have borne more of the nature of ordinary profit-making enterprises. They should not be confused with the local associations.] [Footnote 13: On these economies, see Vol. I, p. 298.] [Footnote 14: See ch. 17, sec. 4.] [Footnote 15: Since this was written the Federal Rural Credits Act has been passed, embodying the main idea here described.] CHAPTER 12 PRINCIPLES OF INSURANCE § 1. Chance, unavoidable and average. § 2. Uneconomic character of gambling. § 3. Borderland of gambling. § 4. Insurance: definition and kinds. § 5. Insurance viewed as a wager. § 6. Insurance as mutual protection. § 7. Conditions of sound insurance. § 8. Purpose of life insurance. § 9. Assessment plan. § 10. The reserve plan. § 11. The mortality table. § 12. The single premium for any term. § 13. Level annual premiums and reserves. § 14. Different features of policies. § 15. Insurance assets and investments as savings. § 16. Excessive costs of insurance operation. § 1. #Chance, unavoidable and average.# Every action and every movement in life has in it some element of chance. There are what may be called natural chances, arising from the uncertainties of the seasons, or from rainfall, heat, hail, storm, flood, lightning, or land-slides. Such chances must be taken both by the small enterpriser and by the large. In earlier conditions of society natural chance dominated industry, and it still remains and must always remain important. There is the chance of unexpected political events, such as war, riot, and legislation on money, tariffs, credit, and business relations. These things are caused, it is true, by the action of men, but it is a collective action out of the control of the individual. There is the chance of human carelessness causing fire, explosions, and wrecks on misplaced switches. There is the chance of physical or mental collapse, as the sudden insanity or the sudden death of one performing responsible duties. There is the chance of sickness that often wrecks the plans and the fortunes of a whole family. There is the chance of economic alterations in methods of production and of transportation, in fashions and demand in this direction or for those materials. Some of these chances are more connected with money-lending, others with manufacturing, some with agriculture, others with commerce; but all are present in some degree in every industry. Some events are unique in nature and seem unlikely ever to occur again; others are of a kind occurring so irregularly that no reasonable prediction can be made as to the time and frequency of their occurrences. Still others occur frequently and to many different persons; but no individual can tell when and how they will occur to him. A general average of chances in different lines of business causes some to be called safe, others extra-hazardous. Chance has its favorable as well as its unfavorable aspects. Chances are averaged and added algebraically to the profit or loss in an industry, for an extra-hazardous enterprise must in general afford a higher average of profit in order to induce men to engage in it. It is folly to take a risk without ascertaining its degree so far as general experience enables one to choose. But inasmuch and in so far as the gains and losses fall unequally upon different individuals, income depends upon chance. § 2. #Uneconomic character of gambling.# This prevalence of chance sometimes tempts men to say that business is "a gamble." But a distinction in principle must be made between gambling and legitimate risk-taking. The chances enumerated above are not sought, but avoided as far as possible; yet they must be borne by some one if productive enterprise is to continue, and the burden must somehow be distributed throughout the community. Gambling is, however, a kind of risk-taking which has a very different economic and moral quality. Gambling creates the hazard, making the gain or loss of income depend on an event that is not a necessary part of productive enterprise. Typical gambling is the transfer of wealth on the outcome of events absolutely unpredictable, so far as the two gamblers are concerned. Examples are the shaking of unloaded dice or the honest dealing of a pack of cards, and the betting on prices in so-called "bucket-shops" by persons having no connection with the market of real things, and seeking to get something for nothing as a result of mere chance. Cheating is not a necessary mark of gambling, altho the cruder forms of dishonesty, such as the loading of dice or the collusion of horse-owners or of horse-jockeys to deceive the betting public, are so common that they seem often to be an essential feature. Gamblers recognize fair as opposed to unfair methods. Fair gambling is a kind of minor morality within the immoral field of gambling, like the honor found among thieves. The chance-taking in gambling has no useful purpose or result outside itself. Betting and gambling do not produce wealth, but merely shift the ownership of existing wealth. The gamblers constitute themselves a little fictitious economic circle, and they transfer gains and losses on the turn of events that have no practical objective result within their circle except to determine the direction of the transfer. Even when fairest, gambling must, in its average results, be uneconomic. In any economic trade each trader gains by getting goods that are, on the marginal principle, to him more valuable than the other kinds of goods he gives up.[1] But in gambling the winner gets all, the loser gets nothing. If two men of like incomes gamble the additional desires that the winner is able to gratify are (by the principle of decreasing gratification) less in amount than the desires which the loser must forego. As a result the loser is often depressed and seriously injured by the loss of his income, the winner makes reckless and extravagant use of his winnings. Easy come, easy go, is the rule of gamblers. Moreover, gambling reduces the amount of wealth by relaxing the motives of economic activity, diverting energy from productive enterprise, tempting men into dishonesty to offset their losses, and leading them into speculation and embezzlement. § 3. #Borderland of gambling.# Ranging between the extremes of unavoidable risk-taking and of gambling are a number of cases of a mixed nature. In nearly all wagers, judgment in some degree influences the choice of sides. One man bets on a horse whose pedigree and performances he knows thoroly; another judges by the horse's appearance as it comes upon the track. The professional bookmakers have the latest possible and most exact information on which to base their bids. In the bets made on one's own prowess, as on speed in running, the chance-taking is still on the uneconomic side of the borderland, certainly if the running is for the sake of the wager, not for pleasure or for a useful purpose. A premium won by a runner for speed in delivering a message of economic importance presents an essential contrast to the winnings in a wager. Finally, the very borderland of difficulty is reached in the purchase and sale of goods in the market with a view of profiting by chance changes in price. The purchasing and holding of land, lumber, grain, cattle, and other tangible and useful things, that need to be stored, held for buyers, or taken to market, must be judged liberally. The quality of gambling depends somewhat on the motive as well as on the ability of the trader. The enterpriser dealing with real wealth, and fitted to take the risks both because of his resources and of his exceptional knowledge, needs the motive of gain in such cases, and in a sense can be said to earn socially what he gets. The motive of the uninformed must be a blind trust in luck, and a hope to gain from a rise in prices which they are quite unable to foresee or to explain. § 4. #Insurance: definition and kinds.# The large element of luck in industry due to unavoidable chances has something of the same evil character as gambling. It brings unearned prizes to some and to others unmerited losses. It must therefore be a benefit to the community, if this element of unavoidable chance cannot be reduced as a whole, at least to regularize it and make it exactly calculable for any individual. In this way each may be encouraged by the more certain prospect of receiving a reward proportionate to his efforts and abilities. This desirable condition has in many respects been accomplished by means of insurance. _Insurance_ is the act of providing a guarantee of indemnity against a financial loss that will result if an event of a specified kind occurs. The person seeking some surety against the possible loss is the _insured_; the person contracting to indemnify against the loss is the _insurer_; the written contract of insurance is the _policy_; and the price paid by the insured in fulfillment of his part of the contract is the _premium_; the amount paid when a loss has been incurred is the _indemnity_; and the person to whom the indemnity is paid is the _beneficiary_ (who may or may not be the insured). The insurance with which we are here concerned is that which gives financial indemnity. This is given for loss of expected net income, when by chance either receipts are less or costs are more than average. The two main classes as regards kinds of loss are property insurance and personal insurance. _Property insurance_ is that which indemnifies for loss of one's possession in specified ways, such as by fire, by the elements at sea (marine), by hail, lightning, or cyclone, by death (of valuable animals), by robbery, and by breakage (of window glass). _Personal insurance_ is that which indemnifies the beneficiary for loss of income as the result of various happenings to persons, the chief being death, accident, sickness, invalidity, old age, and unemployment. The principle of insurance is being constantly extended to new subjects[2] and it is capable of further development in a variety of directions. § 5. #Insurance viewed as a wager.# Insurance, without question a highly useful thing, appears, paradoxically, to be in its outer form a bet. The large merchant with many vessels used in many kinds of business had in the days before marine insurance an advantage in distributing his losses over a number of voyages. Antonio, the wealthy merchant, is made thus to express his security: "My ventures are not in one bottom trusted Nor to one place; nor is my whole estate Upon the fortune of the present year. Therefore my merchandise makes me not sad." In its early form marine insurance was the attempt of smaller ship-owners to distribute their losses (as could the wealthy merchant) over a number of undertakings, lucky and unlucky. It became customary for a ship-owner to bet with a wealthy man that the ship would not return. If it did come back, the owner could afford to pay the bet; if it did not, he won his bet and thus recovered a part of his loss. Gradually there came about a specialization of risk-taking by the men most able to bear it. They could tell by experience about what was the degree of uncertainty, and could lay their wagers accordingly. When several insurers were in the same business, competition forced them to insure the vessel and cargo of the ordinary trader for something near the percentage of risk involved. The insurance thus tended to become a mutual protection to the ship-owners; what had to be paid in premiums to cover risk came to be counted as part of the cost of carrying on that business. Every legitimate form of insurance exhibits substantially the same characteristics; it reduces loss at the margin where it is felt most keenly. The difference between insurance and gambling, thus, lies primarily in the purpose of insurance, which is not to increase artificially the risk that any individual runs, but to neutralize or offset an already existing chance. The insurance bet is what is called a "hedge." The difference lies further in the collective method of insurance, which combines the chances scattered among a number of persons. Insurance does not increase the total of risks and of losses, but merely combines, averages, and distributes them equally among all the insured. This eliminates the chance element to the individual by converting it into a regular cost. § 6. #Insurance as mutual protection.# Modern insurance is conducted either by enterprisers for profit, or by mutual companies; but in any case in large measure the losses in insurance are mutually shared, as the premiums (plus interest earned) equal the total losses plus operating expenses and profit, if any is made. Each insured gets a contract of indemnity for the payment of a sum that will help cover the losses of others. Such an exchange is mutually beneficial. The premium comes from marginal income; the loss if it occurs would fall upon the parts of income having higher value to the insured. The less urgent needs of the present are sacrificed in order to protect the income that gratifies the more urgent needs of the future. In insurance each party gives a smaller value for a greater; each makes a gain. The greater security in business stimulates effort. This effect is quite the opposite of that of gambling. § 7. #Conditions of sound insurance.# To be economically sound, insurance must have to do with real productive agents, and with a group of occurrences which, as a whole, are approximately ascertainable in advance--however irregularly they may fall upon individuals. The beneficiary must have an _incurable interest_ in the property or person insured; that is, the beneficiary must actually suffer a loss by the occurrence insured against. Finally, the amount of the indemnity must not be greater than the loss incurred. Some of the greatest difficulties in insurance arise from the absence of these essential conditions. When there is no insurable interest or when the indemnity is greater than the loss that may be incurred, the beneficiary may and sometimes does find it to his interest to bring about the socially injurious event insured against. He artificially increases the loss against which insurance was taken. When the insured sets fire to his own buildings, he makes an illegitimate use of insurance. Constant efforts are made by insurance companies to guard against these "moral risks," the least calculable of any. Merchants whose stocks have been mysteriously burned two or three times find difficulty in getting further insurance. Formerly insurance was not paid in case of death by suicide; but now usually no such limitation is contained in a policy after a period of one or more years. As men rarely plan suicide years in advance, death by one's own hand some years after taking life insurance is regarded as coming under the ordinary rules of chance. Yet it is to be feared that this liberal policy serves as a temptation at times to crime and to self-destruction. § 8. #Purpose of life insurance.# Property insurance is mainly an aspect of enterpriser's cost, whereas personal insurance is more closely connected with the object of saving.[3] We shall in the rest of this chapter limit the discussion to the one most important form of personal insurance, that called life insurance (sometimes called survivors' insurance). Life insurance is that form of insurance in which partial indemnity is provided for survivors against the financial loss incurred by the death of the insured. Usually the insured is the breadwinner of the family and the beneficiary is a member of his family, but in an increasing number of cases the beneficiary is the surviving business partner, a creditor, or a business corporation with an insurable interest in the life of one of its employees. Life insurance has been much used by persons mainly dependent on labor incomes[4] rather than on incomes from capital, by those receiving salaries, professional fees, and by active business men. It has of late been extended rapidly, as "industrial insurance" to wage earners, in policies never exceeding $1000, but averaging very much less, and often being for no more than enough to pay funeral expenses. The premiums on such policies are usually collected weekly and by agents making personal visits. The cost to the insured is, therefore, necessarily very high in proportion to the amount of insurance. § 9. #Assessment plan.# Life insurance plans may be distinguished, with reference to the time and method of collecting the premiums, as assessment and reserve insurance. In the simple form of assessment insurance originally the losses were paid by contributions taken after the losses occurred, each member paying an equal share without regard to age. In a slightly improved plan the assessments are made at the beginning of the year, based upon the expected mortality for the year. The sum just sufficient for this purpose (omitting expenses) is called the _natural premium_. The cost of such insurance is closely related to the average age of the members. The rates are very low in a new organization with a membership of young men; but each year the average age, and therefore the mortality of the membership, rises and the annual assessments must be increased. By constant additions of young members, this rise of cost may be retarded. But when these members grow older, a still larger addition of young members is required to keep down the average, and the mathematically inevitable result is an increasing rate of assessment. This keeps young men from entering, and finally results in failure or in some form of "reorganization" that drives out the older members. The assessment plan carries with it the seeds of its own decay. To meet these difficulties in part, various modifications of the flat-rate assessment plan are employed, such as classification by age at entry, so that each member pays a flat-rate according to age at entry; or large initiation fees at entry which form a temporary "reserve" to offset increasing mortality in late years. Finally, the policies may be issued on the natural premium plan, by which the members of each age class pay exactly what the insurance costs for the year. Under this plan the company will remain solvent, but with this and all the other expedients the surviving members are forced to drop the insurance in later years. Assessment insurance is sold by business companies organized for profit, by fraternal orders, and by various types of mutual organizations. The business companies have had a dismal history of hardship to surviving members and of eventual failure. They are disappearing under the influence of hostile legislation resulting from a better popular knowledge of insurance principles. The fraternal orders combine insurance with other objects of a benevolent and social character. With good management, a favorable death rate, and very low expenses, some of them have provided protection at very low rates for many years. Others have failed with disappointment and disaster to the older members. Still others are struggling with difficulties that presage dissolution. Many now have some form of reserve accumulations, and some have so improved their methods that they closely resemble reserve companies. The assets of all the assessment companies are now $1.37 per $100 of insurance in force, while the legal reserve companies have $22.66. The assessment companies now get 10 per cent of their total incomes from their funded investments, as against 24 per cent for the old-line companies. Even with the favorable conditions under which the fraternal orders conduct their insurance business they are doomed to failure unless they adopt rates and policies based upon adequate reserve accumulations. Many thousands of present members are paying for insurance at rates which will not suffice to meet the future losses. The assessment plan fails to eliminate the one great risk, that of leaving the survivors without insurance in advancing years. § 10. # The reserve plan.# The reserve plan, if honestly administered, gives complete protection against the difficulties just indicated. The essential purpose of the reserve plan is to collect during the earlier years of the insurance policy when the mortality is less, a sum larger than is needed to meet the current losses. This sum, the reserve, is kept invested and accumulating an income, sufficient to offset the increase in losses as years advance. In reserve insurance, therefore, the premium never increases from year to year, altho it may be so arranged as to diminish or to cease entirely sometime within the term for which the insurance continues. The premium must always be fixed in advance. The calculations for determining the premiums on different kinds of insurance policies are many and complex, but all conform to a few general principles. The three factors assumed are an average mortality table, a rate of interest (or yield on investments), and an expense rate in proportion to the premiums or outstanding insurance. Insurance on the reserve plan is often called "scientific insurance" because, upon the basis of these assumptions resulting from experience, it makes exact mathematical calculations of the premiums and reserves needed for insurance of any particular kind in respect to age of insured, number of payments, method of paying the beneficiary, and any other conditions. The premium thus fixed is, however, only a maximum, and usually is reduced as the result of conditions more favorable than those assumed. § 11. #The mortality table.# When large numbers of men are taken as a group, a certain proportion of those at each age may be expected to die. A mortality table starts with a group of persons, as 100,000, at a given age, as 10 years, and shows the number who die and the number who survive at each year of age until all are dead. The table most widely used in the United States is the American Experience Table of Mortality, constructed by Sheppard Homans in 1868. The figures of this table, at different years, are given below: Age Number Living Deaths each year Death rate per 1,000 10 100,000 749 7.49 20 92,637 723 7.80 30 84,441 720 8.43 35 81,822 732 8.95 40 78,106 765 9.79 50 69,804 962 13.78 60 57,917 1,546 26.69 70 38,569 2,391 61.99 80 14,474 2,091 144.47 90 847 385 454.54 95 3 3 1,000.00 The actual number of deaths of any group of insured will not correspond exactly with the figures of any mortality table. But this is not an essential defect of a table so long as the figures of the table are approximately correct and are at least as great in the earlier years as the actual mortality. For any excess of premium thus collected but increases the safety of the insurance and reduces later payments. In fact the mortality in nearly all companies in the United States is much below the figures of the American Experience Table, partly because of the influence of medical selection on the recently insured and partly because of the decided improvement in longevity since the table was constructed. § 12. #The single premium for any term.# It is evident that the natural assessment premium payable at the beginning of the year for $1000 of insurance for that year is expressed by the death rate, e.g., at age 35, the payment of $8.95 by each of the 81,822 living at the beginning of the year will provide the $732,000 needed to pay the losses.[5] In the same manner would be determined the natural assessment premium for each year of insurance. Now, when it is possible to invest the premiums so as to yield a minimum rate of income it is a simple matter to determine the amount of a single premium, at any age, that is adequate to pay for insurance covering any selected number of years (term insurance) up to the entire period of each insured person's life (full life). It is necessary only to apply the formula of present worth and that of compound interest on investments.[6] Thus the expected losses of any year according to the table of mortality, divided by 1 + rate of yield on investments raised to the power of years distant, equals the present worth of insuring the entire group for that year. The sum of the discounted cost of insurance for all the years of the term divided by the number living at the beginning of the period, gives the single premium for each of the insured. Let P be the present worth of all the policies for a group of the same age, p the present worth of one policy, X the total insured at the beginning of the period, f the natural assessment premium this year, or the natural premium required for any year. Then f f1 f2 fn P = __________ + _________ + ________ + _________ (l + r) (l + r)^2 (l + r)^3 (l + r)^n P p = _________ X The payment in advance of the single premium for any selected period provides a reserve fund sufficient, on the assumptions made, to carry all the insurance without further payments. Each year there is added to the fund the income earned on investments, and there is subtracted the amount of the losses for the year, until the death of the last member of the insured group. If the deaths in the earlier years are fewer than were expected in the mortality table, this will be offset eventually by more deaths at the advanced years; but in the meantime a reserve larger than was expected is yielding income, thus providing a larger sum than is needed to pay all the policies at maturity. This surplus might be distributed as so-called "dividends" from time to time to those surviving, or be added pro-rata, at intervals, to the amount of the policies as accumulated dividends. § 13. #Level annual premiums and reserves.# It is a matter of no very abstruse mathematics (in principle) to find the equivalent of this single premium in any one of many other forms of premium payment. The processes are mainly but variations of present worth and compound interest calculations. Such calculations, however, lead into many complexities of practical detail difficult to explain in brief compass, and are the special task of the actuary (the mathematical expert dealing with such problems in the insurance business). The most useful actuarial equivalent of the single premium is the level annual premium for any period (term or life). Almost all policies now written have the level annual premium as a feature. The amount of the level annual premiums at first is greater than the losses; this causes for a time the steady accumulation of a reserve which yields income. Then, as the losses grow, they overtake and finally surpass the amount of the annual premiums. Therefore, the total reserve for any group of insured increases year by year to a maximum and then declines until it reaches zero with the payment of the last claim. The individual reserve for each policy not yet matured increases steadily the longer it is in force. The total reserve is essential to the solvency of the company and the payment of all the policies as they fall due. The companies which issue policies on the level premium plan or reserve plan are known as "old line" companies, or as "legal reserve" companies, because the state laws require every company of this type to maintain the reserves calculated on the basis of a certain rate of yield. The growth of the legal reserve companies in recent times constitutes one of the financial marvels of the age. § 14. #Different features of policies.# The premiums thus far discussed are "net premiums" estimated as just sufficient to meet the actual payments required by the contracts in the policies. To provide for the expenses of management an addition is made to the net premium called the "loading." The entire premium is called the "gross premium." Reserve insurance is still carried on by a few stock companies, but of late some stock companies have been transformed into mutual companies, which are the prevailing type. The mutual company legally belongs to the policyholders. The gross premiums in reserve insurance are, for the purpose of safety, fixed at a figure larger than the expected cost of the insurance, and normally the earnings from interest are higher, the mortality is lower, and expenses are less than those on which the calculation of rates is based. From the excess of income resulting, the company sets aside a surplus and then divides the rest among the policyholders. These returns, virtually but the refund of excess premiums, are called "dividends" (a somewhat misleading term, not to be confused with dividends on corporate stock). The policies that receive dividends are called "participating" and are said to participate in the earnings. Formerly the majority of policies paid "deferred" dividends after 5, 10, or 20 years, according to various tontine and semi-tontine plans, the survivors to these periods receiving their dividends plus those of the other policyholders who had died or had withdrawn from the company. This form of payment having been found objectionable, it was made illegal in New York and other states, and in most cases dividends are now paid annually. The stock company, organized for profit, frequently charges lower premiums for "non-participating" policies, and then retains such profits as may result from keeping expenses below receipts. The most popular policies are term policies (usually for 5, 10, 15, or 20 years); ordinary life policies with annual premiums; limited payment life policies (the policy payable at death, with premiums fully paid up after 10, 15, or 20 years); and endowment policies (the face of the policy payable after 10, 15, or 20 years if the insured is still living). An endowment policy must be understood to be a regular term policy of insurance for the specified number of years, plus a plan of regular annual savings, which at compound interest, accumulate to the face of the policy. Many persons are attracted to endowment insurance by the oft expressed thought that "you don't have to die to beat it." But this is a mistaken thought. For the premium in endowment insurance is much higher than that for life insurance alone during the same period, so that the endowment is merely a pretty convenient but somewhat costly plan of saving, hitched on to an insurance policy, with which "actuarially," it has no essential connection. In "scientific" insurance the insured pays its full actuarial cost for each additional feature of the policy that he buys. The various policies issued by a company are approximately equivalent actuarially, on the basis of the assumptions made, but they are of very different degrees of desirability, in view of the circumstances of the insuring individual. The choice of policies deserves a more careful investigation than it usually received. Moreover, carelessness and ignorance in the choice of a company is responsible for widespread loss and suffering. Policies differ in respect to the mode of payment. The payment usually takes the form of a lump sum payment at death or at the maturity of the endowment. In recent times there has been a growing use of optional forms of payment which give to the beneficiary annual or monthly installments for a definite number of years or for life. § 14. #Insurance assets and investments as savings.# The discussion of savings institutions in the last chapter left unmentioned insurance, which probably is destined to be the most important of all. The assets of life insurance companies in the United States have already attained the enormous sum of $5,000,000,000, a sum equal to the reported savings bank deposits. In the last twenty years life insurance assets have more than doubled in each decade, and are now increasing by about a quarter of a billion dollars every year.[7] These great funds, which in equity nearly all belong to the policyholders, form already approximately one thirtieth of all the private capital of the country. They are invested in many ways, in real estate, in loans secured by mortgages on real estate, in bonds--municipal, railroad, and industrial. The problem of wise legislation for these organizations, of their competent and honest management, and of their relation to the social, business, and political life of the nation, is certain to be of ever-increasing importance. We are hardly more than emerging from the experimental stage of life insurance, hardly more than at the beginning of its development. The premium in personal insurance (life, accident, sickness, invalidity, old age pensions) is in almost all cases paid out of some current income. The premium paid is just so much subtracted from the amount available for present direct use and applied to the purchase of future incomes for one's self or family. The insurance method differs from the method of depositing savings by its contingent nature, the resulting income of any individual being possibly much greater than the amounts actually saved (e.g., when the insured dies or is injured soon after taking insurance), and possibly less or nothing at all. A very desirable kind of insurance which is yet little developed is that for a term ending with the usual retirement age (say 65 years) combined with an old-age pension for life thereafter. It is probable that abstinence will more and more express itself not in accumulating large capital sums to provide for one's old age or for survivors, but in providing insurance for survivors, and invalidity and old-age pensions for the insured and others, payable as terminable annuities. In any case the results to be expected in the changing forms and magnitude of private fortunes are certain to be great. § 15. #Excessive costs of insurance operation.# So beneficent is insurance that the enormous cost of transacting the business under present methods is much to be regretted. A very large part of the premiums paid by the insured is retained by the companies.[8] In the case of reserve life insurance a considerable part of what is not returned is, however, set aside as reserve virtually held in trust for the policyholders. In the case of the other kinds of insurance, nearly all of the amount not returned is either cost of operation or profits, tho it must be recognized that a part of the cost of some kinds of insurance is for real services, such as inspection and fire prevention. It is remarkable that the percentage returned by the life insurance companies, accumulating, as they do, large reserves in trust for the policyholders, is greater than it is for the other kinds of companies (fire, marine, casualty, surety, liability, accident, and health insurance). It is a striking evidence of the importance of the marginal principle[9] that insurance at such a cost should still be desired by men. The use of insurance would be much wider and its benefits greater if this "tare and tret" of doing the business could be reduced. It seems a reasonable hope, now that the experimental stages are passed, that this may be done. In the case of all kinds of insurance as yet a large expense for agents has been necessary to educate men to see the value of insurance and to purchase it, as well as for many other competitive expenses. It has been found that much of this expense can be saved by insurance in groups (for all employees in an establishment), by compulsory insurance (as of all working men), and by central state administration serving to regularize and unify the organizations. This important question will be further considered in connection with "social insurance" as a measure to benefit the working classes. [Footnote 1: See Vol. 1, ch. 5, sec. 7.] [Footnote 2: The Jeffries-Johnson prize-fight was insured, against rain, for $30,000. Frequently, race-horses, the fingers of pianists, the lives of ball-players, and the throats of singers, are now insured. Summer hotels in England regularly insure for large sums against more than so many days of rain per season.] [Footnote 3: On the former, see Vol. I, pp. 365 and 374; and on the latter, below, sec. 14.] [Footnote 4: See Vol. I, labor-incomes, in Index.] [Footnote 5: There is an appearance of a slight discrepancy due to the omission of fractions of cents. If premiums are collected at the beginning of the year and losses are paid at the end of the year, and if interest can be earned meantime at the rate of 3-1/2 per cent, the natural premium for a one year term policy is about $8.64, that being the present worth of $8.95 due a year hence, interest being 3-1/2 per cent. In these calculations there is no allowance for expenses, the necessary "loading," on which see below, sec. 14.] [Footnote 6: See Vol. I, p. 279.] [Footnote 7: The following are the chief statistical facts regarding the life insurance business in the United States, Jan. 1, 1914, showing separately legal reserve and assessment companies, and the total. ------------------------------------------------------------------ | Number of | Policies | Insurance | Companies | in force | in force | | | Legal reserve ..| 260 | 38,206,000 | $20,256,000,000 Assessment .....| 605 | 8,789,000 | 10,023,000,000 Total ..........| 865 | 46,995,000 | 30,587,000,000 ----------------------------------------------------------------- | Premium | Total | Per cent income | income | income | from premiums | | | Legal reserve ..| $715,000,000 | $946,000,000 | 75.6 Assessment .....| 138,000,000 | 153,000,000 | 90.2 Total ..........| 853,000,000 |1,099,000,000 | 77.6 ---------------------------------------------------------------- | Payments to| Assets | Assets for each | policyholders| | 100 insurance | | | in force | | | Legal reserve | $470,000,000 |$4,659,000,000 | $22.66 Assessment .... | 106,000,000 | 195,000,000 | 1.37 Total ....... | 576,000,000 | 4,854,000,000 | 15.87 ] [Footnote 8: In 1913 the total premiums collected by all kinds of insurance companies reported (Statistical Abstract of the U.S., 1914, pp. 549-557) were about $1,512,000,000, and the amount returned to policy holders the same year was $918,000,000, or about 61 per cent of all premiums, the amount not returned ($584,000,000) being 39 per cent. Premiums received Returned to policyholders Amount Percent Life insurance reserve companies ..$715,000,000 $470,000,000 67 assessment companies 138,000,000 106,000,000 76 Other kinds ......... 659,000,000 342,000,000 52 ------------- ----------- -- Total ........... $1,512,000,000 $918,000,000 61 ] [Footnote 9: See above, secs. 2 and 5.] PART IV TARIFF AND TAXATION CHAPTER 13 INTERNATIONAL TRADE § 1. Political and trade boundaries. § 2. Benefits of international trade. § 3. Choice of the more advantageous occupations. § 4. Persistence of differences between nations. § 5. Doctrine of comparative advantages. § 6. Equation of international exchange. §7. Balance of merchandise movements. § 8. Cancellation of foreign indebtedness. § 9. Par of exchange. § 10. International monetary balance and price-levels. § 1. #Political and trade boundaries.# By international trade is meant, in general, trade between persons resident in different countries; comparatively rare is the case in which one of the two parties to a trade is a whole nation acting through its government as a unit (e.g., in the purchase of munitions of war in neutral countries). Outside of a communistic group such as the family, trade is a necessary accompaniment of division of labor. As territorial division of labor began between neighboring tribes,[1] international trade was the earliest kind of regular interchange of goods. Indeed the very word "market" meant originally the boundary between tribes. Thus, from primitive times when wandering savages gave bits of flint or copper in return for salt or fish, individuals have sought to adjust their goods to their desires through trade with men of other political groups. With the progress of the world in the means of communication and transportation, international trade has widened in extent and grown in volume. Economic relations never have been coextensive with political relations. The economic groupings of men connected by a network of trades never have and never will correspond very nearly with political groupings of men bound together by common citizenship in particular states. Indeed it is not uncommon for many of the residents in two adjoining states to trade far more with each other than they do with their own fellow citizens. Lawmakers and rulers from the beginnings of formal governments have constantly tried to hinder this kind of trade. They have done this chiefly because of their belief that they could strengthen their states in political and economic ways, and could favor some of their citizens, by confining economic relations within political boundaries--if not exclusively, more closely than when trade was left to take its natural course, guided by individual motives. The regulation of international trade, therefore, has always constituted an economic problem of great importance in the field of political action. § 2. #Benefits of international trade#. Now, bearing in mind that international trade is carried on by individual traders in any two countries, we may ask what motive impels men to trade across the political boundaries of a state. The simple answer is that each trader has something to give and desires to get something in return. Each is seeking to get something that has to him a greater value than the thing he gives, and believes he can do this in trade with a foreigner better than by trading at home. In any trade, both parties gain, or think they are gaining.[2] In international trade there is the same chance for mistake as in domestic trade, but no more. In a single transaction in either domestic or foreign trade one party may be cheated, but the continuance of trade relations is dependent upon continued benefits. The once generally accepted maxim that the gain of one in trade is the loss of another is now generally rejected, but often still it is assumed to be true of international trade. The starting point for the consideration of this subject is in this proposition: Foreign trade is carried on by individuals, for individual gain, with the same motives and for the same benefits as are found in other trade. The advantages of international trade are indeed but those of division of labor in general, in the particular case where it happens to cross political boundaries. The great territorial divisions of industry are determined first and mainly by natural differences of climate, soil, and material resources. Thus trade arises easily between North and South, between warm and frigid climates, between new countries and old, between regions sparsely and regions densely populated.[3] Territorial divisions of industry are determined secondly by social and economic differences such as those with respect to accumulation of wealth, amount of loanable capital, invention, organization and intelligence of the workers, and the grade of civilization. Foreign trade normally imparts increased efficiency to the productive forces of each country. In most cases it is apparent that labor is more effective and gets a larger product when it is applied in those ways for which the country is best fitted and for which it offers the best and most bountiful materials; and that, further, when special branches of industry have developed at one place, they make possible the advantages of large production and of high specialization. Certain erroneous explanations of the advantages of foreign trade may be dismissed with brief mention. It is said to give vent for surplus production and to give a wider market to what would otherwise go to waste. This involves the same fallacy as the "lump of labor notion," the destruction of machinery, and the praise of waste and luxury.[4] If it were true that sale to backward nations were now necessary to give an outlet for products which would otherwise rot in the warehouses, a time would come at length when the world would have an enormous surplus unless neighboring planets could be successively annexed. Again it is said that the great purpose of foreign trade is to keep exports in excess of imports so that the money of the country may constantly increase in amount. The ideal of such theorists is an impossible condition where the country would constantly sell and never buy.[5] In the narrow commercial view of the subject the sole object of foreign trade is to afford a profit to the merchants, regardless of the welfare of the mass of the citizens. § 3. #Choice of the more advantageous occupations#. Let us consider the cases of two countries somewhat differently situated, such as an old country like England and a newer country such as was the United States in the nineteenth century. Now the relative advantages of various industries in two such countries are very unlike. The newer country excels in its broad area, its abundant rich lands, its bountiful natural resources of forests and mines. These are the superior opportunities which give the economic motives for settlement and for continued immigration from the other lands. Most of the newcomers find it to their advantage to develop the peculiar opportunities of the new land, rather than to go on producing the same things in the same way as they did in the old country.[6] Thus they get a larger quantity of products per day's labor, and are able to gain by trading a part of these for the products of the older country. Thus the characteristic industries of the two countries must differ. Without any government supervision, therefore, but simply through the choice of enterprises, each seeking the best investment of capital for himself, industries are developed in which each country is either most markedly superior, or least inferior, to its neighbors. If either laborers or capitalists in the new country were to turn to the less-favored industries they would be forced to accept a smaller reward than they can earn in the more favored. § 4. #Persistence of difference between nations#. If both men and wealth interchanged between industries and between countries with perfect readiness and without any outlay whatever for transportation, these differences would soon disappear, and perfect equilibrium of advantage would everywhere result. In every country, in every occupation, labor and wealth of given quality and amount would receive the same reward. But the interchange of labor and of products between countries is never without friction. The laborers, enterprisers, and investors in a naturally rich country are thus in a position of more or less enduring advantage relative to those of older and poorer countries. Differences of the same nature appear as between different parts of the same country, as between the Northern and the Southern states of the American union, between the Eastern and the Western states, and even between neighboring countries of the same state. The differences between two countries, however, are likely to be more marked, the circulation of factors being so active within a country that it is allowable to speak broadly of prevailing national rates of wages and of interest. Altho, as Adam Smith said, "a man is of all sorts of luggage the most difficult to be transported," the higher wages in a new country attract constantly from the older lands a portion of their laborers. The higher rate of interest in new countries constantly attracts investments from abroad; yet, despite these forces working toward equalization, the inequality may remain and, through the working of other influences, may even increase in the course of years. § 5. #Doctrine of comparative advantages.# It may be that two countries both possess the necessary technical conditions for making both articles that are to be traded for each other. It may even be that the people in one country would be able to make not only one of the two objects of trade, but both of them, more easily and with less sacrifice and effort than the people in the other. If, for example, American labor can produce two bushels of wheat in a day and English labor but one bushel a day; and American labor can produce just as much iron in a day as English labor--or more--the question always arises: Is it not foolish and wasteful not to produce both the wheat and the iron? Now, exactly the same case is presented in almost every simple neighborhood trade. The proprietor may be able to keep his books better than does the bookkeeper whom he employs. The merchant may be able to sweep out the store better than the cheap boy does it. The carpenter may be able to raise better vegetables than can the gardener from whom he purchases. Yet the merchant does not turn to sweeping and the carpenter to raising vegetables, because if they did they would have to quit or limit by so much their present better-paying work, and would lose far more than they would gain. So whenever the people in one country have a greater advantage in one article than in another, relative to another country, the foreigners, like the low-paid man, will be willing to exchange at a ratio that will make it profitable to specialize in the product wherein the greater superiority lies.[7] But this is always hard doctrine for the popular mind, and particularly for the commercial mind endeavoring to carry on a business that can not be made "to pay" in the face of foreign competition. It is easy to believe that a country ought not to import goods unless it is at an _absolute_ disadvantage in their production. It is often declared that as our country can produce any kind of goods "as well" as foreign countries (meaning with as few days' labor), there is a loss on every unit imported. The fundamental principle of trade as applied to such cases shows that not the advantage which one country enjoys over the other as to a single product determines whether it will gain by producing at home, but the comparative advantages enjoyed in the production of the two articles in question. As a simple example, suppose that a day's labor in country A will secure two bushels of wheat (2x) and two hundred pounds of iron (2y), whereas in B a day's labor will secure 1x or 2y. Then A's comparative advantage in producing x becomes a reason for A's not trying to produce y. Trade can take place (aside from transportation outlay) at any ratio between 2x = 2x (A's minimum) and 2x = 4y (B's maximum). Evidently at any rate between these two ratios each party would gain something by the trade, e.g., at 2x = 3y A would get 3 instead of 2y by a day's labor, and B would get 1-1/3x instead of 1x for a day's labor (2x for 1-1/2 day's labor instead of for two days'). If, however, A could produce exactly twice as much of everything as B could, then there could be no motive on either side for trade. But this never happens. § 6. #Equation of international exchange.# Foreign trade of course can take place as barter, and in earlier times, particularly, very commonly did so. But in the existing monetary economy nearly all trades are expressed in terms of monetary prices. Both the prices of all the particular objects of international trade and the general levels of prices in any two trading countries come to be pretty definitely interrelated. Changes in the one country at once compel readjustments in the other. To understand in the most general way how this occurs, a knowledge at least of the elementary principles of foreign exchange is required, and to this we may now turn. Let us begin with the proposition known as the equation of international exchange, which is sometimes given thus: the value of the imports of a country must in the long run equal the value of the exports. But this proposition (especially the words imports and exports) must be understood in a much broader sense than that of the movements of merchandise merely. The proposition might better be expressed: the total credits of a nation (including money actually sent abroad) must just equal its total debits (including money imported). Into the balance of accounts between any two nations enter many items: the cash values of the imports and exports of merchandise; freights, insurance premiums, and commissions; the expenses of citizens while traveling abroad; money brought in or taken out by immigrants; the cost of the governmental foreign services (such as the salaries of consuls and of diplomatic representatives); subsidies and war indemnities received from or paid to foreign nations; the investments of foreign capital; and credit items of many kinds, on both sides of the account. The effect of loans upon the equation differs at different periods according as they are just being made, are continuing, or are being repaid. When foreign capital is first invested in a country, whether it is loaned to the government or to individuals or to corporations, either gold must be remitted to the borrowing country or goods be sent. But later the interest payments and the eventual repayment of the principal of the loan act in the opposite direction. Accruing interest must be offset annually by exports from the debtor country and the repayment of the principal requires that either money or goods be exported equal in value to the original obligations. In popular opinion an excess of exports of merchandise is an index, if not the real cause, of national prosperity; but evidently it is no true index whatever on this point. An excess of exports may at any given moment indicate that the country is rich and is lending abroad, or that it is in debt and is paying interest, or that it is repaying the principal. On the other hand, an excess of imports may indicate either that a country is poor, and is borrowing from abroad, or that it is rich, with many foreign investments, and is receiving the income from them in the form of a regular shipment of goods from the debtors. The following statistics of the foreign commerce (merchandise imports and exports) of the principal countries of the world are given in significant groupings which call for various explanations. Figures are in million dollars ($1,000,000) and are mostly for the year 1908, (Stat. Abst. 1908, p. 769). At the present writing the war has altered all the lines of commerce. COUNTRIES HAVING EXCESS OF IMPORTS OF MERCHANDISE |Excess %|Imports.|Exports.| United Kingdom ..| 57 | 2886 | 1835 | Germany ..........| 20 | 1824 | 1523 | Netherlands ......| 30 | 1130 | 873 | France ...... | 12 | 1089 | 975 | Belgium ..........| 33 | 642 | 484 | Italy ............| 68 | 562 | 334 | Aust.-Hung .......| 7 | 487 | 457 | Switzerland ......| 44 | 287 | 200 | Spain ............| 10 | 168 | 153 | Sweden ...........| 26 | 163 | 129 | Denmark ..........| 16 | 191 | 165 | Norway ...........| 58 | 101 | 64 | Canada ...........| 34 | 298 | 222 | China ............| 43 | 254 | 178 | Turkey ...........| 59 | 135 | 85 | COUNTRIES HAVING EXCESS OF EXPORTS OF MERCHANDISE |Imports.|Exports.|Excess %| United States ....| 1312 | 1638 | 25 | Russia ...........| 436 | 542 | 24 | British Colonies .| 558 | 615 | 5 | British India ....| 418 | 486 | 16 | Australasia ......| 242 | 302 | 25 | Japan ............| 196 | 206 | 5 | Cuba .............| 84 | 116 | 40 | Mexico ...........| 78 | 115 | 42 | San Domingo ......| 5 | 10 | 100 | Argentina ........| 263 | 353 | 34 | Brazil ...........| 172 | 214 | 24 | Chile ............| 98 | 116 | 18 | Uruguay ..........| 35 | 37 | 6 | Bolivia ..........| 21 | 24 | 14 | Venezuela .... | 10 | 15 | 50 | #§ 7. Balance of merchandise movements.# The first group evidently consists of the older, creditor countries which are drawing some of the income of their investments from abroad each year in the form of food and of raw materials of many kinds. The second group includes countries of very diverse conditions, possibly all having some investments abroad; Italy receives large imports in return for the services of many Italians working in foreign countries, and the three Scandinavian countries (especially Norway) carry on a large commerce for other nations which is paid for in these ways. The excess of imports in the third group probably is the result of new investments that were being made in Canada by English and American capitalists, in Turkey especially by Germans, and in China by Americans and Europeans. The countries in the second column are doubtless on the whole debtors, but in varying degrees. The excess exports of some are insufficient even to pay all the current interest, and they are borrowing still more (possibly the British colonies, Japan and several South American countries); others have ceased to borrow and are simply paying interest; whereas the United States at least with its excess of exports was at this time both paying interest and getting out of debt. With the outbreak of the war in 1914 the United States began rapidly buying up its foreign-held securities, and events are fast making it a creditor nation. Its imports must therefore in future more nearly equal if not exceed its exports, the actual outcome being dependent as well on various other items in the balance as on those here considered. § 8. #Cancelation of foreign indebtedness.# In the international business of any two important countries to-day, such as England and America, the number of credit and debit transactions is enormous. If each trader had to attend to the forwarding of the means of payment for his purchases he would, of course, deduct from the amount of his indebtedness the amount due him from his foreign correspondent, and might from time to time "remit" the balance in the form of a shipment of gold. This simple offsetting and cancelation of debits and credits would greatly limit the amount of gold that would have to be shipped. But still, under such conditions, there must be a very large number of shipments of gold by different individuals, and a large proportion of these shipments would be going in opposite directions at the same time. Now a merchant in New York called M may have a balance to pay in London to X and at the same time a merchant in London called Y have a balance to pay in New York to a man called N. If M can buy from N his claim in the form of an order, draft, or bill of exchange, and send it to X, the latter may through his bank collect the sum from Y. In this way a further cancelation of indebtedness would occur. When all persons having either debits or credits to be paid in New York and in London, respectively, are dealing with the banks in these cities, and the banks and special exchange brokers are constantly buying and selling these bills, a market is created for London exchange in New York (and conversely in London), and a much easier and more nearly complete cancelation of indebtedness results. In effect, all the debits and credits between the two countries are merged into one big ledger balance, and the international shipment of gold bullion finally made is just the amount needed to balance the accounts payable at the time. Industrial indebtedness is represented in various forms: bills of lading for goods shipped, drafts made by the creditor on his debtor for goods shipped or property sold, checks or letters of credit for travelers, bonds and notes public and private. These are the objects dealt in by the bankers who are the agents to carry on the work of exchange. The balance of foreign exchanges is of essentially the same nature as the domestic cancelation of indebtedness. It is going on constantly between the two merchants in the same town, between two banks in the same town who represent groups of merchants, between men in neighboring towns, and between distant states like New York and California.[8] The price of exchange to the individual is reduced by the specializing of the business in the hands of a few dealers, permitting the cancelation of indebtedness or offsetting of exchange, and greatly reducing the amount of bullion to be transported in making the payments. The cost to the bank of providing this exchange for its customers varies as conditions change, but in any case is not great, so that in domestic business when any charge is made it is usually at a fixed rate, and is mainly for the service. § 9. #Par of exchange.# Foreign exchange from America to Europe is, however, in two features different from domestic exchange: (a) the cost of shipment of gold is greater; (b) the monetary units of the two countries usually differ in name, weight, and fineness, and sometimes in materials. We may define foreign exchange as the purchase and sale of the right to receive a given kind and weight of metal or its monetary equivalent in current funds at a specified time and place. _Par of exchange_ between two countries using the same metal as a standard is the number of units of the standard coin of the one country that contains the same amount of fine metal as the standard coin of the other country. There is no fixed par of exchange between gold-using and silver-using countries: par of exchange between them fluctuates with changes in the comparative values of the two metals. The _gold shipping points_ for importing or exporting gold are respectively par of exchange plus or minus the cost of moving the actual metal. These points vary with means of transportation and communication. The par of exchange between New York and London being nearly $4.866 and the cost of expressing and insuring a gold pound between New York and London being approximately $.02,[9] the shipping point for the export of gold from New York is $4.886 and for the import of gold to New York is $4.846. At these upper and lower limits, there is a motive for shipping gold as a commodity. When large sales have been made to Europe and credits are accumulating in New York and the importation of gold is imminent or already begun, the claims are bought by bankers in New York at less than par. At such a time one needing to remit a sum to London can buy exchange for less than par, for every such draft remitted reduces London's indebtedness and, by so much, the need of shipping gold to this country. As a rule then, accumulating credits here mean a low rate of exchange, accumulating debits a high rate of exchange from this to the foreign country. These are the merest rudiments of the subject. The many problems arising, such as the adjustment of foreign credits to changing needs, and such as arbitrage (the readjustment of the rates of exchange prevailing among different financial centers) make foreign exchange both a complex science and a difficult art. § 10. #International monetary balance and price-levels.# The balance of all accounts for or against a country (including new loans, current interest, and repayments) must thus eventually be settled in money. This cannot fail to affect the general level of prices in both countries, tho this is brought about often only in indirect and gradual ways. The flow of money out of a country causes the loan market of a country to tighten (interest and discount rates to rise) in proportion as the reserves of the banks are reduced. Then "general prices" begin to fall.[10] When prices fall, imports decline, as the country is not so good a place in which to sell: when prices rise, imports increase, as it is a better place in which to sell. The opposite effect is produced on exports, and thus in a short time the national credits and debits are again brought into equilibrium. A slight movement of money in either direction is enough to influence prices and set in motion forces to counteract a further flow of money. Decade after decade the circulating medium of leading countries changes very slightly in amount, and the fluctuations in its amounts during periods of so-called "favorable balance of trade" and of "unfavorable balance of trade" are only the smallest fraction of the value of goods passing through the ports of the country. It is therefore absurd to imagine, as is sometimes done, that a country could, by continually importing goods, be drained of all its money, or that by any possible set of devices it could forever have an excess of exports to be paid for by a continual inflow of gold. Long before either of such movements could go far, the automatic readjustment of prices would inevitably check it, and secure and retain for each country its due portion of the money. [Footnote 1: See Vol. I, ch. 17, sec. 10.] [Footnote 2: See Vol. I, ch. 5, secs. 1 and 7.] [Footnote 3: See Vol. I, ch. 6, sec. 11, on the origin of markets.] [Footnote 4: See Vol. I, chs. 36 and 37.] [Footnote 5: Recall ch. 4, in general, on the nature of monetary demand.] [Footnote 6: See Vol. 1 for numerous statements of the effects of varying quantities of agents upon the economy of utilization; e.g., pp. 138, 163, 164, 213, 228, and chs. 34 and 35 entire.] [Footnote 7: This theory has usually been presented under the name of "the doctrine of comparative costs." The word "costs" is very misleading in this connection because it is now always applied to enterpriser's outlay. It seems best, therefore, to replace it in this phrase by the word "advantages." Of course, it _never_ can be true that an article can be "profitably" imported when its monetary costs (all things considered) are higher in the exporting than in the importing country. Indeed, the importation of any article is proof conclusive that the importer thinks that the monetary costs of an article would be higher in the importing than in the exporting country. See further, ch. 15, secs. 11 and 13 (note).] [Footnote 8: See ch. 7, sec. 7.] [Footnote 9: This varies also with conditions; after the outbreak of the war in 1914 it was for a time as high as $.05 because of high war rates of insurance.] [Footnote 10: The connection between a high rate of interest and falling price is a dynamic phenomenon of a very temporary nature. In long-time static conditions the general level of prices and the prevailing rate of interest are dependent on entirely different sets of forces. See on the theory of interest, Vol. I, p. 308. In long-time movements of prices, in contrast with brief changes due to foreign trade such as are referred to above, high rates of interest are connected with rising prices, and _vice versa._ See above, ch. 6, sec. 8, on fluctuating price-levels and the interest rate.] CHAPTER 14 THE POLICY OF A PROTECTIVE TARIFF § 1. Military and political motives for interference with trade. § 2. Revenue and protective tariffs. § 3. Growth of a protective system. § 4. The infant-industry argument. § 5. The home-market argument. § 6. The "two-profits" argument. § 7. The balance-of-trade argument. § 8. The claim that protection raises wages. § 9. Tariffs and unemployment. § 10. Exports and exhaustion of the soil. § 11. Protection as a monopoly measure. § 12. Harm of sudden tariff reductions. § 1. #Military and political motives for interference with trade.# The considerations set forth in the last chapter raise a strong presumption in favor of the sovereign state permitting its citizens to trade freely across its boundaries, as the best way to further their own prosperity and, on the whole and in the long run, that of the nation. Indeed, this presumption and belief has been held by nearly all serious students of the question, with more or less of modifications and qualifications, ever since Adam Smith published his work on the "Wealth of Nations" in 1776.[1] But in conflict with this belief has been the all but unanimous policy of nations from early times, throughout the Middle Ages, and down to this day, of interposing some special hindrances (of varying degrees and kinds) to this kind of trade. Sometimes this has been done by prohibitions, but more often by taxes imposed upon either imports or exports. Sometimes the attempt is made to justify the policy of governmental interference with foreign trade by arguments which crumble before the slightest examination, and again it is admitted that free trade is true in theory, but it is declared to be false in practice. The latter view is not to be entertained for a moment. If free trade in theory (as an explanation) is complete and true, it will in practice (as a plan of action) be sound and workable. In truth, however, the practical policy of governmental interference with foreign trade has always in part rested on other than the simple economic grounds. Interference with free trade with the foreigner has always been in large measure due to political motives. In every petty medieval state or self-governing city, the aim was to make the economic boundaries coincide as nearly as possible with the political boundaries. Except for the trade in a few articles of comparative luxury this aim was at that time nearly attainable. The peasantry surrounding a fortified town and enjoying its protection were compelled to trade there. Down to our own time it has seemed to statesmen expedient to forbid or discourage trade that might nourish the economic power of future enemies. Sometimes governments have used embargoes, bounties, or tariffs as weapons to injure the trade of other nations and to secure diplomatic or commercial concessions. Often they have sought by tariffs to encourage the building of ships and the manufacture of armaments and of all kinds of munitions by private enterprise within their own borders, even when the immediate cost of these products was greater than if they were purchased abroad. In such cases it is always a question whether an outright expenditure would not be better, whether the government could not build its own arsenals and shipyards more economically than it can foster private enterprise by means of a protective tariff. However, the political (or military) argument for protection recognizes that it is in itself a costly (not a profitable) policy, and that the cost is only justified on the grounds that military necessity warrants the outlay. The military argument as applied to the preparation of ships and munitions has no application to a tariff on those articles which have no bearing upon military power. But the most recent application of science and the mechanical arts to the uses of war has given new significance to a larger policy of industrial preparedness for military purposes. The year 1914 doubtless ushered in for the world a new epoch of protective and discriminatory tariff legislation determined by political rather than by direct economic considerations. § 2. #Revenue and protective tariffs.# An important distinction in principle is to be made between a tariff for revenue and a tariff for protection. A _revenue tariff_ is a schedule of duties on goods entering or leaving a country, so arranged that the collection of taxes causes the least possible disturbance to domestic industry. Speaking generally, the duties may be on either imports or exports; but, as export duties are unconstitutional in the United States, our tariff discussions are concerned only with import duties. The most completely revenue-yielding tariff is one touching only articles which, even at the higher prices are not in the least to be produced profitably in the home country. A _protective tariff_ is a schedule of import duties so arranged as to give appreciably higher prices to some domestic enterprises than they could obtain with free trade. It shuts out some foreign goods which would otherwise enter, an in so far it "protects" the domestic producer from the foreign competitors who would sell at lower prices than those at which he can or will sell. In other words, "protection" means governmental interference with the freedom of trade. The distinction between revenue and protective tariffs, thus clear in principle, is not always easy to make in practice. It does not lie in the intention of the taxing power, but in the actual effects produced. Most tariffs combine the characteristics both of revenue and of protective measures. A tariff that reduces imports but does not cut them off entirely may be called either a revenue tariff with incidental protection or a protective tariff with incidental revenue. The difference is one of degree. But notice particularly that the two features of protection and of revenue are mutually exclusive. To the extent that one is present the other is impossible. A tariff rate that in whole or in part excludes the foreign article to that extent affords "protection" but does not yield revenue. Whenever the government collects a cent of tariff taxes, the domestic producer in so far and as respects that unit of goods is unprotected. Likewise, whenever any domestic producer enjoys "protection" in respect to any unit of goods, importation is in so far prohibited and the government is deprived of any revenue whatever derived from the production and sale of that unit of goods. § 3. #Growth of a protective system.# The protective policy developed at first accidentally, as it were, out of the practice of levying taxes for revenue only. Tolls, dues (or duties), customs (that is, in former times the customary dues paid by merchants, now the dues fixed by law), tariffs (that is, schedules or lists of rates of duties) were at first intended to raise revenues for the sovereign, the city, or the state. The unintended, and to some degree inevitable, result of the taxation of goods in commerce, whether imports or exports, is to prevent and discourage trade and to raise the prices of the goods imported. Any change in tariff duties, therefore, at once alters the previously existing adjustment of profits and of industries in a country. The first effect of the tariff is the same as that of any new factor in enterpriser's cost; the same, for example, as that of a new domestic tax on an article or as that of a rise of freight rates--the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot, even at the higher price, be produced within the country (as in the cases of oranges, spices, and coffee in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may, however, depress somewhat the price in the producing country. But as such a tariff does not increase home production of the taxed article, it is therefore for revenue, not for protection. But if the article can be profitably produced in the importing country at the new price, "home industries" will start. Where the transportation charges are low, as on the coasts and on the main lines of railways, some imported goods may be bought, while farther inland where transportation charges are higher home production of some or all grades of such goods may take place. If the whole demand at home is supplied and all imports stop, therewith cease all revenues to the government from that source. A completely protective tariff is completely prohibitive. Experience abundantly shows that, with a few exceptions, due to climate and natural resources, it is impossible to put into effect the most moderate schedule of duties without the increase in price at once causing some men to shift their occupations, and to begin producing articles of the kinds that have risen in price. At once appears a group of "protected industries," the owners of which are dependent for the safety and profits of their investments, and the workmen in which are dependent for the security of their present jobs (possibly for the chance to continue the pursuit of highly skilled trades) on the continuance, if not the increase, of the existing tariff rates. A tariff may be adopted mainly from stress of financial need (as in our own history in 1789 or in 1861), but its modification or repeal cannot be decided by fiscal considerations. The "incidental protection" it affords has created a wealthy and influential group of employers and a large body of employees who are irresistibly tempted to exercise their influence in politics almost solely in favor of continuing and of increasing the rates to the sacrifice of the higher civic life of their communities. Of course the beneficiaries of the tariff usually believe sincerely that it is indispensable for the prosperity of the country as a whole, and they can do much to persuade others to the same opinion. This commercial motive for maintaining existing protective tariffs explains in large part their wide prevalence, whatever other reasons may be adduced in their justification. § 4. #The infant-industry argument.# Most free-trade writers concede a limited validity to the claim that protection may be used to encourage infant industries and thus diversify the industries of the country. If the natural resources of a land are adapted to an industry, it may be called into being earlier by a fostering protective tariff. This is merely anticipating and hastening the natural order of progress. In the American colonies the manufactures of such goods as iron, cloth, hats, ships, and furniture sprang up and continued not only without "protection," but despite numerous harassing trade restrictions made in the interest of English merchants. Can it be doubted that many of these industries would have developed and flourished after the adoption of the Constitution with no other favoring influences than those of rich resources and of economy in freights? In the Mississippi Valley since 1880 natural gas, abundant coal, ore, and timber have made possible a great growth of industries without protection against the Eastern states. Industries capable of eventual self-support must in most cases naturally appear in due time. Economic forces will bring them out. The protective system has often been likened to a hothouse, anticipating the season by a few weeks and at great cost. The question is whether the mere possession of the hothouse is a luxury worth the price, if meantime the products can be got more cheaply by trade. English manufactures flourished in the nineteenth century because they were well established, had excellent coal supplies, great stores of iron ore, and low-paid labor which did not have the opportunity of better alternatives, as did the American workman. If America had imported more (it would not have been all) of her iron and coal, the English mines would have begun to shown signs of exhaustion earlier, and America's advantage surely would have asserted itself in time. Her iron manufactures undoubtedly were hastened--they cannot truly be said to have been created--by the protective tariff. The peculiar advantages of a new country attract labor and enterprise into a few lines. Industries are forced into an earlier diversification by tariffs. Which is the better economic situation? Contrast Iowa, Dakota, and Minnesota, or Kansas, if you please, with New York and Pennsylvania. Is it so certain that a dense population congested in cities and crowded in factories and mines is a more ideal social aggregation than is a community of prosperous farmers? The smoky industrialism fostered by protection often puts a premium on a low grade of immigrants, crowds then into city slums and into forlorn mill towns, and keeps them aliens to the American spirit. It would be surprising if Americanism on the Western plains were not as sound as in the crowded cities. But the infant-industry argument appeals strongly to the enterprise and the speculative spirit of Americans, who like to do all things rapidly and on a large scale. Every village aspires to be a great industrial center. Americans are impatient of the suggestion that things "will come in time"; they like things to come at once. It must, however, be recognized that in a new country there is often a certain monotony and poverty of life because of the lack of diversified industries. There are not sufficiently varied avenues for the expression and use of the manifold talents of the nation. There are unused materials and opportunities, but the initial expense of experimentation, the initial difficulties of gathering and training a working force, are discouraging to individual enterprise, prices being as they are. A protective tariff is not necessarily and always the best way, but it is one way of helping private enterprise to establish and conduct such industries through their initial period. But as has been pointed out by many writers, the infant-industry argument is self-limiting, and involves always the assumption that the industries selected as fit for protection are such as ultimately, and within a moderately short period, can grow into self-dependence. The infant must sometime grow to be a man and stand on his own legs, or he is either a chronic invalid or a degenerate. #§ 5. The home-market argument.# The home-market argument seeks to show a more permanent need for a tariff. At the same time it appeals to the farmers, whom it has been hard to reconcile to a policy which in America[2] has been peculiarly favorable to manufacturers. The home-market argument extols the advantages of having near to the farms customers for agricultural products, and dwells on the greater steadiness of domestic trade. War or political changes, it is said, may change the demand for products. This is true, but no other changes have affected American agriculture so radically as the peaceful development of domestic transportation and the opening of the West. The main economic claim made in the home-market argument is that the shipping of food to Europe and the importing of manufactures involve a great cost for double freights which could be saved by manufacturing at home. The farmer is supposed to pay this cost. The obvious defects in this view are: first, there is nothing to show that the freight is not partly or entirely paid by the European, either the manufacturer or the food consumer; secondly, home trade "saves the freights" for the farmer only in case he can buy goods under a tariff with less of his own labor and products than under free trade. The payment of freight charges is true economy when the goods can be bought at a distance on more favorable terms than near home. The freight argument attempts to prove too much for it condemns every trade within the country, of goods produced a stone's throw away from the consumer. The home-market appeal is strongest when addressed not to all farmers, but to one class of farmers, those whose lands are situated nearer the manufacturing cities. As city population grows, some land is converted from the extensive cultivation of corn and wheat to dairying, fruit- and market-gardening in the neighborhood of cities, and perhaps at length is used for factory sites or as city lots. There is, thus, a partial validity in the argument as applied to a comparatively small number of farmers, who gain as landlords, not as tillers of the soil. Even greater gains have sometimes been reaped by the owners of timber lands, ore mines, coal lands, and other natural resources, the values of which have been raised by tariff legislation. But unless these gains come from truly productive additions due to the tariff, there is no benefit to the community as a whole. #§ 6. The "two-profits" argument.# Somewhat related to this idea of the saving of two freights is the "two-profits" argument. It is said that the tariff keeps "two profits" at home, foreign trade gives but one. The word "profits" is here used in the popular sense of gain from a single transaction. Both parties are said to profit and both profits are thought to be secured at home when two citizens are forced to trade with each other. The view that there are "two profits" in a trade is an advance upon the notion that "one man's gain is another's loss,"[3] but there is an error in elementary arithmetic here, both as to the number and as to the aggregate amount of profits. The purpose of a protective tariff is to compel two of the citizens of a country to trade with each other instead of trading with two citizens of a foreign state; the number of profits made by each country is therefore not increased by substituting domestic for foreign trade. What, then, as to individual size and aggregate amount of the profits? The gain is not the same in all trades; the trade is made if there is a gain to each party, no matter how small it is; but the generous "profit" on one transaction where the conditions of the two parties are very different may be greater than the total of petty gains on a dozen trades between two traders of evenly matched powers. Indeed, the greater the difference in the conditions and the capacities of two groups of traders, the greater is the sum of the profits which they may secure through the members of each group trading with those of the other, rather than by the members of each group trading only among themselves. Can it safely be assumed that every trade with a foreigner is less advantageous than one with a fellow-citizen? Diamond cuts diamond, but two Yankees left to themselves surely should not be worsted in bargains with the universe. If they could exchange to better advantage with each other they probably would discover it as soon as the interested manufacturers and political orators who can prove so eloquently that they know the other man's business better than he knows it himself. Forcing the home trade by making our citizens trade with each other whether both wish to or not may be to the advantage of one citizen, but it is not likely to be to the advantage of both citizens. § 7. #The balance-of-trade argument.# At the foundation of nearly all belief in the virtues of a protective tariff will be found the "favorable balance-of-trade" notion. The ideal of the more thorogoing upholders of a protective policy is to keep merchandise consistently flowing out of the country, and to have nothing come in--in any case, nothing that by any fair amount of effort (whatever that be) could be produced at home. This is called maintaining a "favorable balance of trade." Sometimes the emphasis is more on the advantages of an excess of exports of goods, sometimes more on the importance of the need "to keep money at home." The simple error in these opinions is clearly apparent in the explanation of foreign exchanges and of the principles regulating the international flow of money.[4] An interesting commentary on the opinion before us is the fact already noted[5] that an excess of exports is the usual situation in poor debtor countries having constant interest payments to meet; while, on the contrary, rich creditor countries have an excess of merchandise imports. The "favorable balance-of-trade" argument, with the emphasis on money rather than on goods, is that the protective tariff keeps money at home which, if trade is free, will be sent abroad to buy foreign goods, thus impoverishing the country. This doctrine as presented in the seventeenth and eighteenth centuries in Europe, was known as _mercantilism_. It had great influence upon the commercial policies of all the great European nations. A superficial glance at the trade relations of an old, rich country with a new province seems to give evidence for such a belief. A richer country that is lending capital (sent to the debtor country in the form of goods) has at the same time a larger supply of money. The lack of money and the poverty of the newer country are looked upon by the protectionist as due to the importation of goods. The common cause of the imports to newly settled districts and of their scanty stocks of money, it need hardly be repeated here, is the comparative poverty of settlers and pioneers.[6] Often these are paying for imports by means of loans, and in any case their monetary stocks are not decreased either by their foreign trade or by their domestic trade with the older and richer parts of the same country. Europe and the United States, in their trade with China and South America, usually do not get gold in exchange, but merchandise of various sorts. It is true that in the trade of England and New York with great gold-producing districts, such as California, South Africa, and Alaska, gold is received in return for merchandise, for much of the gold in gold-producing districts is merely merchandise, and its export does not drain them of their due portion of money. There was a time when the states of Kansas, Nebraska, Iowa, and their neighbors were filled with resentment against the money-lenders of the Eastern states. There was a widespread belief that hard times were due to an insufficient currency.[7] Attempted action took the form of the greenback and free silver movements, which were defeated by the opposition of the East, but there can be little doubt that if the Federal Constitution had not forbidden it, the discontented states would have established a protective tariff "to keep their money at home." Few advocates of protective tariffs are ready to admit that the money stock of the country is dependent on the general wealth of the country and on the methods of doing business, rather than on a protective tariff. § 8. #The claim that protection raises wages.# The most effective popular claim made for protection is that it raises, or maintains, the general scale of wages in the country. This argument takes two forms: first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them. In Germany the fear is of the higher paid and more efficient labor of England. In America, where general wages at all times have been higher than in England, it was first argued (in the time of Henry Clay) that because of the greater cost of production, due to high wages, the tariff was needed to start certain industries; but after the tariff had long been established and the old argument had been forgotten (ever since 1865), it has been urged that the tariff, being the cause of high wages, must be maintained to protect against the "pauper" labor of the older countries. The higher wages in new countries where a tariff exists are always claimed to be the fruits of a protective policy. The true cause of the high general scale of wages in America is the greater efficiency of industry under existing conditions.[8] Labor is surrounded here with advantages in the forms of rich natural resources and of mechanical appliances such as never before were combined. Because of the scarcity of workers in particular protected industries, wages may be temporarily higher in them than in some other industries; but such workers form a small fraction of the population, and it is impossible to show that the general scale of wages in all occupations is raised by the tariff protecting this fraction. There is, of course, no question that every tariff change affects certain enterprises and classes of workmen. Enterprisers already acquainted with and engaged in a business always may hope to gain by the higher prices immediately following a rise in the tariff rates on their particular products. Though they are granted no enduring monopoly by the protection, they for a time enjoy the advantage of being on the ground, and may reap the first fruits of the favoring conditions. The enterpriser usually profits when the price of his product suddenly rises. Usually skilled workmen are affected slowly by competition when there is any considerable increase of prices in their special industries. The important question is, Who bears the burden of the higher prices that result from a tariff? The burden is very soon distributed. A part of it may be for a short time borne by the retail merchants, but ultimately nearly the whole of it must be borne by their customers, the unfortunate, less favored citizens. The weight falling on each is usually small, often unsuspected, always hard to measure. The increased benefit is concentrated in a few industries and accrues to a comparatively few producers. Here is a recipe for riches: get everybody to give you a penny; it's so little that no one will miss it, and it will mean a great deal to you. Something like this happens in the case of many protected industries; every consumer of the article pays a few cents more, a small group of wage-earners temporarily gains, and a few enterprises wax wealthy. § 9. #Tariffs and unemployment#. The claim that a low tariff is bad for the workers is made with peculiar success in any period when unemployment is greater than usual. It is vain in reply to show that again and again equally bad periods of unemployment have occurred when a high tariff was in force, and that often the most highly protected industries are most affected. It is vain to suggest that fluctuations of unemployment are related rather to the rhythm of industrial cycles and panics, than to any particular level of the tariff, whatever it be.[9] The fact that at the moment is seen is that here are some men for the time out of work, and here are some foreign goods coming in. Of course, what is not seen is that if we stop importing goods we thereby eventually will stop the exportation of goods of equal value now being sent in payment and this must throw as many men out of jobs as we helped into jobs by raising the tariff. But the view easy to take is the short view, and the ulterior consequences seem to the popular mind to be vain imaginings. § 10. #Exports and exhaustion of the soil#. It has been ingeniously argued that a tariff may keep some of the natural agricultural resources of a new country from becoming quickly exhausted. The export of food takes out of the soil and out of the country fertile qualities never to be returned. The shipment of several hundred million dollars of food products year after year represented a tremendous drain from the soil of the United States, but this has now largely ceased. The assumption, however, that the use of the food in this country preserves the fertility of our own fields is in the main mistaken. The fertile material in the food for human consumption hauled to a town five miles away from the field is almost as entirely lost as if it were shipped to Europe. Engineering skill has as yet succeeded in returning economically to the fields from which it comes hardly a fraction as much fertile organic matter as that which flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our own cities. Artificial fertilizers are increasingly used, to be sure, but they are obtained in other ways. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufacturers, has very effectually hastened the exhaustion of the natural resources of the country. § 11. #Protection as a monopoly measure#. It has rightly been observed that a new country has a limited potential monopoly in certain kinds of products and that a tariff may make it effective. The rapid opening up of America with its rich natural resources greatly benefited the average consumer in Western Europe, altho it caused a loss to a special class of landowners.[10] Whether the citizens of the older or of the newer country shall reap the greater benefit in the trade depends on the reciprocal demand for the two classes of goods, as was seen in discussing the equation of international demand. A wide margin of advantage may go to one party and a narrow margin to the citizen of the more favored land. To put it concretely: America, having great natural resources for agriculture, might continue to trade food for manufactured goods even tho England reaped most of the benefits of the trade. An American tariff on manufactures from England would, under such conditions, check the demand for English products and compel some Americans to leave farming. This reduction of the American supply of wheat or corn and of the American demand for English manufactures compels a new ratio of trade (expressed in prices). It is conceivable that trading fewer goods with a larger gain on each trade would give a larger total of gain to the favored nation. Thus, foreigners may conceivably be compelled to pay a part of the tariff duties to enjoy the favored market. This is but a special case of the monopoly principle; the government by law artificially limits the supply of goods offered by its citizens. This argument is somewhat subtle, but probably is the soundest one in the theory of protection. The supposed conditions seldom occur in a marked measure, but they may exist, and probably have existed in America. When the great system of internal transportation was developed in the United States before that of the other new countries (say from 1840 to 1894), this country had such peculiar advantages for the production of food that the quantity was enormously increased and agricultural prices fell.[11] At such a time the tariff may have worked toward checking the fall and earlier reestablishing a more favorable ratio. It did this by making prices of manufactured goods in this country artificially higher and thus tempting men from rural to urban callings. But the limited application of the principle must be recognized. The potential competition of undeveloped countries on all sides, seeking to develop their resources, and profiting by the higher prices of food in the world-market caused by our tariff, threatens the peculiar advantages of the favored land. Russia, Argentina, and Australia have rapidly taken the place of America in supplying food to Western Europe, in part, no doubt, because we refused to take Europe's goods in trade. A great nation with its manifold interests is not eminently fitted to practise the gentle art of monopoly. The period in America from about 1840 to 1890 shows certain absurd contradictions in economic policy. By governmental action, national, state, and municipal, enormous grants of money and lands were made in aid of transportation. Canals, roads, and railways were built into new agricultural territory far faster than was healthy and normal. A prodigal land policy put a premium upon a wastefully rapid extension of the farming area. These things were done to favor the agricultural states, but agricultural prices fell so greatly that our farmers for a long period were nowhere prosperous, and great numbers of them, both in the East and in the West, were ruined. At the same time a high tariff on nearly everything the farmers needed to buy was the political spoil obtained by the Eastern and Middle states. This further depressed the condition of the farmers and forced them or their sons into urban industries. A slower development would have occurred without the waste of national resources in such conflicting policies of artificial stimulation. § 12. #Harm of sudden tariff reductions.# It is rarely appreciated how great is the tactical advantage which the advocates of a high tariff enjoy in popular political discussion. They can so easily impress the popular judgment with the evident fruits of their own policy and with the immediate dangers of the policy of their opponents. When a protective rate is first applied or is increased, it calls into existence something visible and tangible, which can be measured in terms of factories built, men employed, and products turned out. The increased cost of these results is diffused among many consumers and reaches them in such indirect ways and in such small increments of price that they are quite unaware of the way they are affected.[12] On the other hand, reduction of the tariff works in a direction the reverse of the enactment. It may cause local crises and may even bring on general crises. The benefits of the lower prices are diffused and lost to view; the immediate injury is concentrated and strikingly evident. Factories are closed, investments depreciate, laborers are thrown out of employment. The organic nature of local industry causes these evils to be felt by many classes. Merchants, professional men, servants, and skilled laborers, that are tributary to the depressed industry, suffer. The effects are transmitted to commercial and financial centres and often credit is much shaken. Then follows a slow and painful process of readjustment. The low-tariff advocates in America undoubtedly have underestimated these immediate effects. They have been too abstractly doctrinaire, have argued too absolutely for the merits of free trade to be applied instantly regardless of the existing distribution of investments and of occupations. They have opposed one extreme system by another, with no thought of the inexpediency and injustice of sweeping changes. There is a strong feeling among business men that any tariff, be it high or low, is better than a shifting policy. Despite the great preponderance of domestic production over foreign trade, it is perhaps too much to say that the tariff is unimportant in our present conditions. It can, however, be truly said that business can adjust itself in large measure to any settled conditions and that radical changes, especially sudden and large reductions, are fraught with evils. Long before a new tariff law goes into effect, even months in advance of its passage, while it is merely in prospect, the course of trade is abnormally affected. If the rate is likely to be raised, large importations take place under the lower rate, and for a considerable time after the law goes into effect imports are small, while prices rise and domestic production gradually increases. But if the rate is likely to fall, importations are for months meager, stocks of goods are reduced to the lowest point, and when the lower rate goes into effect, large importations follow to the injury of domestic producers. In many cases a year or two of notice, time given to enterprisers to adjust their business, would probably do away with a large part both of the serious losses and of the lottery-like gains that otherwise occur. The obvious measure of precaution and of justice would be to put any new rate into effect gradually.[13] The difficulties are of a political nature and in the desire of the party in power to "make a showing" at once of the results of its campaign pledges, in the one case by starting and stimulating industries through a higher tariff and in the other by reducing prices to consumers through a lower tariff. Under the new permanent tariff board, constituted to suggest tariff changes and to administer the tariff laws, it would be possible to apply some such feature. [Footnote 1: See above, ch. 2, secs. 12, 13.] [Footnote 2: In European countries, on the contrary, the rates that have been mainly effective have been those levied upon food products, and the agricultural landholders have been the "protected interests," such as the England "landed aristocracy," the German agrarian "Junkertum," and the French peasant landowners.] [Footnote 3: See above, ch. 13, sec. 2.] [Footnote 4: See ch. 4, sec. 6 and ch. 13, secs. 6-10.] [Footnote 5: In ch. 13, sec. 7.] [Footnote 6: See ch. 4, secs. 4 and 9.] [Footnote 7: That there is a certain measure of truth in this opinion is recognized in our discussion of the standard of deferred payments, ch. 6, sec. 9. But the relation of a world-wide appreciation of the standard money commodity with the burden that this change puts upon debtors has nothing to do with the question now before us, viz.: Does a protective tariff enable a country to keep and increase its proportion of the world's stock of gold; and if it could, would it be a general benefit?] [Footnote 8: See Vol. I, especially p. 228, and chs. 34 and 36.] [Footnote 9: See on wages in times of crises, ch. 10, secs. 6 and 7; and on tariff changes, ch. 10, sec. 14, and ch. 15, sec. 13.] [Footnote 10: See Vol. 1, pp. 361 and 443.] [Footnote 11: See Vol. 1, p. 436, for average wheat prices in England, practically in the world-market.] [Footnote 12: See above, sec, 8. On the next paragraph, see ch. 10, sec. 14.] [Footnote 13: For example, the maximum alteration in any year might be limited to 3.65 per cent of the value of the goods and in any case not to exceed one tenth of the old duty, this change to be applied day by day. Thus, if, on a valuation of $1000, the duty collected under the old rate has been $400, and under the new law is to be $290.50, three years would be required for the full change to become effective, the reduction each day being $.10 per $1000 valuation. The administration of such a rule would be simple, and it has been favored by men of practical commercial experience.] CHAPTER 15 AMERICAN TARIFF HISTORY § 1. Prevalence of protective tariffs. § 2. Specific and _ad valorem_ rates. § 3. Some technical features of the tariff. § 4. The tariff, 1789-1815. §5. The tariff, 1816-1845. §6. The tariff, 1846-1860. §7. The tariff, 1861-1871. § 8. The tariff, 1872-1889. § 9. The tariff, 1890-1896. § 10. The Dingley tariff, 1897-1909. § 11. Sentiment favoring lower rates. § 12. The Payne-Aldrich tariff, 1909-1913. § 13. The Underwood tariff, 1913. § 14. Some lessons from our tariff history. Note on Tariff legislation and business depressions. § 1. #Prevalence of protective tariffs.# For a century and a half most serious students of economics have favored a larger measure of freedom, if not absolute freedom, in foreign trade. But the actual practice of most nations has never been in accord with the principles laid down by the philosophers. Great Britain alone among the larger countries has, since 1846, steadily pursued a low tariff policy for revenue only, and her example has been most nearly followed by Holland and Denmark. Germany, which had always had restrictive duties, adopted still more protective measures under Bismarck in 1879. France, Italy, and most of the other nations of Europe have strong protective tariffs. The United States has followed a restrictive policy since near the beginning of the last century. The explanation of this contradiction between precept and practice is not entirely simple. Great interests are affected by foreign trade and certain of these interests are able to influence opinion and to dominate legislation. Free trade is not the most desirable thing for every one. The general policy of free trade between nations, as advocated by most English economists since Adam Smith, has usually been rejected by the people and the legislators of other countries. In its details American policy in tariff legislation under the Constitution has been varied and vacillating. The changes have been determined in most cases by motives of temporary partisan advantage or by the political activity of the immediate beneficiaries rather than by clear knowledge and consistent purpose of the electorate as a whole. Thus its lessons for the student are largely of a negative nature, but they well repay serious study. § 2. #Specific and _ad valorem_ rates.# Before entering upon the history of the American policy let us make clear the meaning of certain technical terms and explain certain methods which are frequently referred to. Rates (and duties) may be by either specific or _ad valorem. Specific duties_ are those that are calculated and levied according to some physical test, as so much per pound, per yard, per hundred-weight, or per ton. _Ad valorem_ duties are those that are calculated and levied according to the value of the goods (usually as it was at the place of shipment) determined by an assessor, by invoice of sale, by statement of the importer under oath, etc. The actual duty collected on any article may result from various combinations of the two rates (as, to take an actual example, $4.50 a pound and 25 per cent _ad valorem_ on cigars and cigarettes) or _ad valorem_ with a minimum valuation so that on the cheaper goods the rate is specific. Specific rates are more easily applied in administration, not offering the temptation to undervaluation and misrepresentation that _ad valorem_ rates do; on the other hand, specific rates do not adjust themselves to price changes as _ad valorem_ rates do. If the prices of goods go up the specific rate is relatively less and affords less of "protection" to the domestic producer; whereas if prices go down (as, in general trend, the prices of manufactured goods have done most of the time) the specific duties are relatively greater. To take a historical example, the specific rate of 6-1/4 cents a yard on cotton goods in 1816 which was at first in fact only about 25 per cent, within a few years became about 75 per cent and absolutely prohibitive. For this reason specific rates have most often been used in acts intended to increase the "protective" duties and often as a device for immediately raising rates; while _ad valorem_ rates have been more often used in acts prompted by the desire for less drastic exclusion and for a more adequate revenue; but there is no essential connection between the protective policy and specific rates. Indeed, in the period from 1897 to 1909, when most prices were rising, many of the specific rates under the Dingley Act, intended to be strongly protective, afforded less and less "protection."[1] § 3. Some technical features of the tariff. All goods not subject to duties are said to be on the _free list_. It is customary to group articles in _schedules_, of which there are fourteen in the law of 1913, designated from A to N (for chemicals, pottery, metals, wood, etc.), but the rates are not uniform for all the articles in each schedule. _Drawbacks_ are a certain amount, the whole or a part, of the duties that have been paid on imported commodities, which is paid back by the government on the reëxportation of the goods. _Compensatory duties_ (or compensatory rates) are those levied on certain manufactured articles with the purpose of raising their price as much as domestic producers' costs are raised by a tariff on their raw materials. Examples are a duty on woolen goods to offset a duty on wool, or a duty on shoes to offset one on hides. They may be intended to be partial or complete or more than sufficient, and are likely in any case to work either more or less to the advantage of the domestic producer than was intended. It may be that the conditions of supply are such that the home price of the raw materials is raised little or none by the tariff while the price of the finished product is considerably raised, or _vice versa._ § 4. #The tariff, 1789-1815.# The main difficulty of government in 1781-1789 under the Articles of Confederation was lack of the power to obtain revenues by taxation. The separate states alone could levy duties, and a good many tariff restrictions on freedom of trade among them developed in this period. The Constitution established the principle of entire freedom of trade among the states. The first act of Congress under the Constitution levied a tariff, primarily for revenue purposes, but clearly having a protective purpose, in the view of some of the representatives. However, most of the separate rates, as well as the general average rate, were the lowest ever levied by Congress, except that there was no free list and that 5 per cent was imposed upon all goods not otherwise enumerated. _Ad valorem_ duties up to a maximum of 15 per cent (that on carriages) were laid upon certain articles of luxury, and low specific duties on a few articles such as glass, nails, iron manufactures, hemp, and cordage. From 1789 until 1812, thirteen tariff laws, all told, were passed. One after another many rates were raised to get larger revenues, but some goods were put upon the free list. The foreign trade, in both imports and exports, grew largely and with considerable regularity, rising then rapidly to a maximum in 1807. Then followed troublous times, with British Orders in Council and our embargo and nonintercourse acts until 1812, and war until 1815, trade falling off at first to one-half, and at last (in 1814) to less than one-twelfth of the former maximum. Just as trade was, in the war period, sinking to the vanishing point, the tariff rates were doubled in hopes of getting increased revenues needed for the war, but in vain. [Illustration: FIG. 3. IMPORTS INTO THE UNITED STATES. 1821-18565 Many statistics bearing upon tariff history are graphically brought together here. This figure should be carefully studied in connection with the following sections. Observe how invariably in the years following a crisis, the amounts of dutiable imports and of duties collected have diminished, whether the tariff meantime was changed or not.] § 5. #The tariff, 1816-1845.# Tho rates had been rising, manufacturers had been making efforts to secure higher rates for protection, even as early as 1803. Effectual exclusion of foreign goods and consequent stimulus to the establishment of manufactures in the eastern states resulted, in the period 1808 and 1815, from the embargoes and the war. On the return of peace imports were resumed on a large scale and the call for a higher tariff was loud. In the revision of 1816, rates in a number of cases were fixed higher than those before the war. Average rates are said to have been about 20 per cent. The rate on both cotton and woolen goods was 25 per cent (and the minimum on cotton goods was a specific rate of 6-1/4 cents a yard). High rates were imposed on pig iron (50 cents a hundred), hammered bar (75 cents a hundred), and rolled bar ($1.50 a hundred, equivalent to about 100 per cent _ad valorem_). Rates were raised on many other articles. The average _ad valorem_ rates collected in 1821 attained the remarkably high figures of 36 per cent on dutiable goods, and almost 35 per cent on free and dutiable together. In 1824 in response to the growing sentiment in favor of the so-called "American policy of protection," many rates were still further increased, as those on cotton goods and woolen goods (to 33-1/3 per cent) and some kinds of iron. Cheap wool was now taxed 15 per cent and that valued over 10 cents a pound at 20 per cent (to be 30 per cent after 1826). In 1828, in the "tariff of abominations" which evoked much bitter criticism, the rates on all these goods were again raised, those on woolen goods being in some cases 100 per cent on the value, and those on iron being from 40 to 100 per cent on the value, and duties were levied on molasses, hemp, and flax. The results appear in the statistics of 1830, showing the average _ad valorem_ rates on dutiable imports to be nearly 49 per cent, and on free and dutiable together to be over 45 per cent. This marks a temporary high point in tariff rates. Revenues were then becoming excessive and that year the rates on tea and coffee and some other goods were reduced. Violent protests, especially from the South, were made against the protective system, and the tariff became a more important political issue. Then in 1832 a number of changes were made, mostly downward; the iron tariff, for example, being reduced to about the level of 1824. Average rates were thus brought down to about 33 per cent on dutiable goods. The compromise tariff act of 1833 provided for a process of reduction during a period terminating in 1842, the cut to be small at first, then to be made more rapidly to bring the maximum rate on any article down to about 20 per cent.[2] These changes, while as yet incompleted had, in 1840, brought the average rates on dutiable goods down to but 30 per cent and on free and dutiable together to 15 per cent. The 20 per cent rate, however, remained in effect only two months in 1842, when it was replaced by a tariff with higher rates distinctly protective, passed by the Whig party and which remained in force four years. § 6. #The tariff, 1846-1860.# The Democratic party coming into power, passed the Act of 1846, called the Walker tariff, after the Secretary of the Treasury. As he was a believer in free trade, this act is often mistakenly described as a free-trade measure. It was, in truth, far from that. Most of the rates were indeed lower than those that had been in force between 1816 and 1846 (with the exception of those between 1840 and 1842), but still some of the rates were high (a few as high as 100 per cent) and many of them were strongly protective in nature. The fact that tea and coffee were on the free list is marked evidence that considerations of revenue did not dominate. The rate on cotton goods was 25 per cent and the rates on many of the most important other protected articles (iron, woolen goods, manufactures of iron, leather, paper, glass, and wood) were 30 per cent. The average rates under the act for its last eight years (to 1857) were on dutiable 26 per cent, on free and dutiable 23 per cent. The country prospered for eleven years under this tariff. In 1857, rates were again reduced, the more important protective rates from 30 per cent to a level of 24 per cent. This time partizan considerations played no part in the discussion. The revenues of the government had been excessive and the need of a reduction was admitted by nearly every one. The average _ad valorem_ rates under the nearly four years of the act of 1857 were about 20 per cent on dutiable and 16 per cent on free and dutiable (the lowest in the century between 1812 and 1913). § 7. #The tariff, 1861-1871.# The reduction of rates in 1857 was made just at the time when the country was at the height of a wave of prosperity and of speculation which culminated in the financial crisis of that year.[3] As always at such times, the government's revenues fell greatly. The first purpose in the revision of the tariff in 1861 was simply to restore the rates in the act of 1846. But the Morrill act which became a law just before Fort Sumter was fired upon, contained many higher rates and its purpose was avowedly protective. This necessarily involved a sacrifice of possible revenues for the government.[4] Then from the beginning of the Civil War till its close some rates were raised almost every month with little scrutiny or debate. The average _ad valorem_ rate jumped from 19 per cent on dutiable in 1861 (under the law of 1857) to an average of 35 per cent in the three years, 1862-1865. The most important tariff acts of the war were those of 1862 and 1864 by which large increases were made on many articles. These tariff acts were passed in connection with far-reaching and burdensome applications of internal revenue taxes on many kinds of manufactures. The tariff rates were primarily intended to offset these taxes, "to impose an additional duty on imports equal to the tax which had been put on the domestic articles," as was said by the sponsors of the bill. These rates were similar in purpose to compensatory rates, and in many cases they were more than sufficient to offset the internal taxes. Under the last of these acts the duties collected in the six years from 1865 to 1870 averaged nearly 48 per cent on dutiable and nearly 44 per cent on free and dutiable. The remarkable fact was that soon after the war the internal revenue taxes began to be repealed one after another, and by 1872 nearly all those bearing upon general manufactures (apart from cigars and alcoholic beverages) were gone. The tariff, however, remained almost unaltered. This repeal of internal revenue taxation had the same "protective" effect as raising the tariff rates by so much. As if this were not enough for the protected interests, in 1867 the duty on woolens was further raised and in 1870 numerous other increases were made in the duties having a protective character. Some reductions were made, but these were almost all on articles of a distinctly "revenue" character such as tea, coffee, sugar, molasses, spices, wines. Revenues were superabundant for current expenses of government, and altho there was a large national debt, hardly any of it was redeemable at the time. There was therefore need to reduce taxation, but the attention of the consuming and tax-paying public was distracted by the somewhat passionate political issues of the day. Besides, the public had not the technical knowledge or the unified opinion on this subject to protect itself against the greedy lobby in this process of tax revision. And so, selfish commercial interests could get nearly what they asked for in Congress, and the politicians at Washington, who had come to have a well-nigh superstitious faith in the efficacy of very high protective duties, could quietly use the opportunity to raise the people's taxes for the people's good. These virtual increases in the protective power of the rates in force are not evident in the statistics of average _ad valorem_ rates, because the higher rates in many cases were sufficient to exclude relatively more of the foreign products to which they applied.[5] The imports came, by a process of selection, to consist more largely of goods subject to lower rates. So the year 1868 showed the highest average rate on dutiable goods (48.6 per cent) of any year after the act of 1828 until that of 1890, and the rate fell somewhat each year until in the fiscal year 1872 it was 41.3 per cent. § 8. #The tariff, 1872-1889#. In 1872 the country was again, as in 1857, nearing the crest of a wave of prosperity and of speculation. Imports and customs receipts attained new high points in our history, and, despite the enormous reductions of internal revenue taxation, the government's receipts continued to be excessive.[6] The important revenue articles, tea and coffee, were then transferred to the free list, as were also raw hides and paper stock and some other articles; the rate on salt was reduced one-half and that on coal almost as much. Many other specific rates were reduced and the _ad valorem_ rates on a long list of articles were cut to "90 per cent of existing rates." The effects of these reductions were mingled with those of the severe financial panic occurring in 1873 and of the depression following, which reduced especially the importation of luxuries bearing the higher rates. The average rate of the three (fiscal) years 1873 to 1875 was 39 per cent on dutiable (a fall of 9) and 28 on free and dutiable (a fall of 16). The ratio of imports entering free, which in 1872 was still only about 1 in 14, became the next year 1 in 4. But government revenues falling short in 1874, advantage was soon taken of the circumstance to repeal in 1875 with little discussion the horizontal cut of tariff rates made in 1872. The specific rates that had been reduced in 1872 were little changed, however. From 1876 to 1883 (8 fiscal years) nearly a third of the imports consisted of goods on the free list. The average rate on dutiable was over 43 per cent, and on free and dutiable was 30 per cent. The tariff was a leading issue in the campaigns of 1876 and 1880. In 1876, the Democratic party's platform contained a plank for "a tariff for revenue only." It was a time of great industrial depression, and as is usual in such cases a large number of the electors held the party in power responsible for business adversity (as in turn they credit it with any more or less fortuitous prosperity). The Republican candidate Hayes, after a long contest in Congress, was declared elected by a margin of one electoral vote. His opponent, Tilden had received a quarter of a million more votes in the country as a whole. In 1880, when business prosperity was rapidly returning, the party in power was successful by a goodly margin of votes in the electoral college, tho having a bare plurality of the popular vote. Garfield, the Republican candidate, was known as one of the more moderate protectionists and his opponent, General Hancock, who was without any political record, declared the tariff to be a "local issue," to be determined in the Congressional districts. The tariff issue was thus not very sharply drawn. The tragic death of President Garfield left no clear leadership. The tariff question from 1876 to 1884 was politically in the doldrums. Yet there was undoubtedly a somewhat growing popular demand for some moderation of the very high duties. To this demand the friends of protection who were in power felt compelled to concede something--or to appear to do so. Congress appointed a Tariff Commission of which the Chairman was secretary of the wool manufacturers' association, and after a report the tariff act of 1883 was passed. The net results were almost nil. Some rates were lowered, while others were raised with a definite protectionist purpose. The average rates for the next seven years, 1884-1890, were 45 on dutiable (an increase of nearly 2 per cent) and 30 on free and dutiable (unchanged as compared with the period ending 1883). In 1884, the Democratic party elected its presidential candidate (Cleveland) and a majority of the House, but as it did not control the Senate it could not pass any of the various proposed measures for a "reform" of the tariff. In 1888 the protective principle was a leading issue in the campaign. Altho Cleveland received a few ten thousands larger popular plurality than he had obtained four years before, and held the electoral votes of 18 of the states, he lost New York and Indiana by very narrow margins, a result in which other issues played a large part. Harrison was elected and the party favoring a high protective tariff came into power. § 9. #The tariff, 1890-1896#. The tariff act (known as the McKinley act) of October, 1890, followed. This was a general extension of the principle of protection. The rates on woolen goods were on the whole increased and made in more cases prohibitive. The rates on wool were increased. The rates on iron, which was already highly protected, were little changed except by the increase of the duty on tin-plates. The duty on sugar (in the main a revenue duty, yielding $55,000,000 a year) was removed and a bounty was granted to domestic sugar producers. In the next three (fiscal) years, 1892-1894, the average rate proved to be over 49 per cent on dutiable (4 per cent increase) and 22 per cent on free and dutiable (the remission of sugar duties accounting for the most of this fall of 8 per cent from the average under the preceding law--4 per cent fall from the last year of its operation). Particularly noticeable, however, was the increase in the proportion of goods entering free, which was nearly 55 per cent of all merchandise as contrasted with about 33 per cent between 1884 and 1890. Again the political weather vane shifted. The month after the McKinley bill became law, the Congressional elections (November, 1890) returned an overwhelming Democratic majority in the House, altho this was a period of business prosperity, a fact usually favoring the party in power. In 1892, Cleveland, being again a candidate, was successful over Harrison by a largely increased plurality of the popular vote, and received almost double the electoral vote of his opponent. The House was Democratic, and the Senate soon became so. Business prosperity was rising again to a high level, but there were many features of financial and speculative weakness in the situation, intensified by growing fear of a cheap money (silver dollar) inflation under the act of 1878 providing for the annual purchase of silver. A financial panic occurred in September, 1893, six months after Cleveland's inauguration. Nevertheless Congress enacted the next year, Aug. 28, 1894, the Wilson tariff act. The changes made by this legislation were not on the whole very great, but were nearly all in the direction of the lowering of the tariff. Most notable was the putting of raw wool upon the free list. Some rates on woolen goods were reduced, but hardly more than enough to offset the effects, upon manufacturers' costs, of the reduction of the tariff on raw wool. Likewise small reductions were made on cotton and silk goods, on pig iron, steel and tin plate and many other articles; and larger reductions on coal, iron ore, chinaware, and glassware. To make up for the expected reduction of receipts from other sources, a duty was laid again upon raw sugar, and an income tax law was passed (this soon, however, to be declared unconstitutional). Under this law, for three fiscal years (1894-1897) the average rates were 41 per cent on dutiable and 21 per cent on free and dutiable,--pretty high rates. The proportion entering free under this act was actually less than under the McKinley act, partly because of the sugar item, and partly, probably, because of general business conditions. § 10. #The Dingley tariff, 1897-1909.# The campaign of 1896 was waged almost solely on the issue of free silver. Undoubtedly great numbers of voters supported William McKinley rather despite of, than because of, his high protectionist beliefs. But his inauguration was promptly followed by the passage of the Dingley act of July 24, 1897, which embodied a marked increase of protective rates. A duty was again levied on wool, and also on hides which had been untaxed since 1872. High rates were made for woolens, linens, silks, chinaware, and the rate on sugar was doubled. Provision was made for some reduction of rates by reciprocity agreements, but the conditions were so complex that the effect could not be great. This high protective tariff, thus enacted without popular discussion, remained almost unchanged for twelve years, the longest life, by one year, of any tariff act in our history,[7] The rate under the first full fiscal year of the law's operation, 1899, was the highest on dutiable in our history, 52 per cent, and was nearly 30 per cent on free and dutiable. In practical operation, however, the average rate steadily became more moderate because of the rapid rise of the general price level that was in progress throughout this period, amounting to 35 per cent from 1898 to 1909.[8] The average rate of duties collected for the period of 12 years was 47 per cent on dutiable and 26 per cent on free and dutiable. It was steadily falling and the last year, 1909, was 43 per cent on dutiable and 23 per cent on free and dutiable. § 11. #Sentiment favoring lower rates.# While the Dingley act was thus in operation showing declining average rates, sentiment was developing in every part of the country in favor of a further moderation of the tariff. This was due partly to the discontent resulting from steadily rising general prices, in which change the rise in the prices of food and of many other necessities was not fully compensated by the rise of the wages and incomes of the masses. Partly the growth of this sentiment accompanied the agitation against trusts and the belief that protective duties in some cases were an aid to the formation of domestic monopolies. But more fundamentally, this changing sentiment was the result of the changing industrial conditions in America. The character of our foreign trade had altered greatly since the early nineties. We were importing relatively less and less of manufactured and finished products, and more of raw materials; and we were exporting less and less of raw materials and more of finished products. A growing number of manufacturers were feeling the need of cheaper raw materials and were looking hopefully toward an enlargement of their foreign trade. The Republican platform in 1908, in view of the changing public sentiment, formulated a new rule for maintaining "the true principle of protection," namely, that it "is best maintained by the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit to American industries." This rule is very attractive in its suggestion at the same time of the idea of a moderation of the tariff and of an exact practical (not to say scientific) standard for the determination of the proper rate in every case. The rule is, however, fallacious. "Costs of production" mean here the monetary costs of the enterpriser. Now a first difficulty is that costs are not uniform for all establishments in any one industry, and a tariff high enough to protect some is entirely too low to protect others. As long as a tariff rate is too low to exclude every unit of the foreign product its importation is conclusive proof that for some home producers the tariff rates fall short of the "true principle" (better proof, indeed, than the most elaborate investigation by any tariff board could be). The indubitable truth is that no trade ever can take place (in a monetary régime) unless the monetary price is lower in the exporting than it is in the importing country. This virtually means that the product cannot be profitably exported unless the monetary costs of production ("together with a fair profit") of the article exported are for each party less than those of the other party in the other country.[9] The so-called "true principle" would lead thus to absolute prohibition of every article to which it was applied. § 12. #The Payne-Aldrich tariff, 1909-1913#. In the campaign of 1908 the Republicans admitted that the protective tariff needed to be revised, but they declared that it should be revised by its friends. It was doubtless the general understanding that "revision" in this promise meant revision downward, tho this was left somewhat unclear in a campaign wherein the tariff played a somewhat minor part. The tariff act of 1909 (the Payne-Aldrich act) was the attempt of the successful party to redeem its promise in this regard. Many changes of rates were made, both downwards and upwards. It was estimated that rates were reduced in 584 instances, affecting 20 per cent of imports. These changes included placing hides upon the free list (before taxed 15 per cent), and cutting down the rate on leather, shoes, coal, lumber, iron ore, pig iron, and steel-rails. But on the other hand rates were increased in 300 instances (including many items in the cotton schedule). The general belief that little reduction was effected, on the whole, was confirmed by the experience under the act. As compared with the last two years (1908-1909) of the Dingley tariff the first two years of the Payne-Aldrich tariff showed a decline of 1.5 per cent, and on free and dutiable a decline of less than 3 per cent. These reductions in the statistical results are no greater than occurred within like periods while the Dingley act continued in operation without change.[10] No other tariff since "the act of abominations" in 1828 has called forth such widespread criticism as this one, and the tariff became a leading issue in the campaign of 1912. After 1910, the House being Democratic, many bills to reduce duties were presented, and some were passed by both houses, but all were vetoed by President Taft mainly on the ground that it would be best to await the report of the tariff board which had been authorized and appointed for the purpose of ascertaining the cost of production referred to in the "true principle of protection." § 13. #The Underwood tariff, 1913#. After President Wilson was inaugurated, March 4, 1913, the tariff was at once taken up by Congress. The general features of the act that was passed were as follows: (a) Considerable additions to the free list of raw materials. (b) Abolition of compensatory duties corresponding with the old rates on raw materials. (c) Replacement of specific by _ad valorem_ rates in many cases. (d) Taxation of plain kinds of goods less than fancy kinds--luxuries higher than necessities. (e) Reduction of rates generally (most of the few increases being to correct some evident error in the old law). (f) Application of the so-called competitive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products.[11] Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent), metals, agricultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gunpowder, wood pulp, and print paper. Moderate reductions were made in the schedules for chemicals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged or raised. Left almost unchanged were the schedules for tobacco, for spirits and wines, and for silks (already very high). This act was signed October 3, 1913, and had been in operation about nine months when the great war broke out in August, 1914. What its effects would have been under normal conditions we can judge little from the actual experience. The first eight months that the act was in operation, the _ad valorem_ rate on dutiable goods proved to be 36 per cent (about 4 per cent less than in the preceding year) and the rate on free and dutiable together about 14 per cent (over 3 per cent less than the preceding year). The first complete fiscal year (that of 1915) under the act, the average rate on dutiable goods was 33.5 per cent and that on all imports was 12.5 per cent. Evidently this is far from a "free trade tariff." The reduction in the average _ad valorem_ rate is less than was expected. Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods. In other cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e.g., farm products, cotton goods, and some other manufactures). But some of the reductions doubtless will force the less efficient plants in some industries touched to increase their efficiency or go out of business. Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind is in progress during the war. Imports from Europe have fallen greatly, while exports are enormously increased. Old industrial establishments have been converted to different and temporary uses. The conclusion of the war must bring a new readjustment that must cause a severe shock to some enterprises--and this must have been so under any possible variety of tariff.[12] § 14. #Some lessons from our tariff history.# Can we draw from the checkered course of tariff history in America clear lessons of wisdom for the future? At least certain negative conclusions may be safely drawn. It is a history of a vacillating public opinion toward the policy of protective duties. Always the policy has kept some hold on public sentiment, but it has varied in strength, now waxing, now waning. The time of revisions has been determined nearly always by varying needs of revenue. When more income has had to be raised, this has nearly always been made the occasion and pretext for increasing the degree of protection for many industries. This is not at all a necessary connection, for it would be possible to couple internal revenue taxes and customs duties in such a way that the rates would go up and down together and give the varying amounts of revenue required for the government without appreciably altering the relative profitableness of various private enterprises. Our tariff history is too largely a record of special favors granted to classes of citizens, to the citizens of certain localities, and to particular enterprises. This is apparent even in a general survey, but almost every more detailed examination of particular protective rates reveals evidence of suspicious and sometimes scandalous personal influences at work. The protective policy has always professedly been advocated for the general welfare to raise wages or to make the country prosperous, but the initiative has always been taken, and the valiant work in contributing funds for campaign purposes and in lobbying bills through Congress has been done, by the interested manufacturers. Even if it were beyond question sound in principle to exclude goods that can be bought more cheaply by trade, it is very doubtful whether any net good could have resulted from this policy as it has been in fact applied and followed. The frequent and unpredictable changes have been a great evil, and have again and again brought unmerited losses to the many in business and still greater and unearned gains to a favored few. It is incredible that such a hit-or-miss, in large part selfishly determined, policy could have been an important cause of our national prosperity. The fundamental causes of the general high wages and popular welfare that we have enjoyed is to be found rather in our rich natural resources, our capacity for self-government with free institutions, and the industrial energies of our people.[13] The revision of the tariff of 1913, viewed with non-partizan eyes, appears to have been carried out, to say the least, as consistently with regard to its professed doctrine, and as little influenced by the malevolent arts of the old-time Congressional lobby, as any debated tariff act in our history. It still contains on the whole a large measure of protection. Under various pretexts such as the danger of a flood of cheap goods after the close of the great war, attempts will be made to make it still more prohibitive. But one lesson of our tariff history is that such an act should be given a period of fair trial before extensive changes are made in it. Even further reductions should be cautiously undertaken and put into effect gradually. If the attempt is made through temporary rates to reduce the shock of the trade adjustments, of the "dumping" after the war, then the devising and administration of such measures should be delegated to an expert, disinterested, permanent tariff board. The task is to prevent temporary "unfair competition" and sudden changes, rather than to raise permanent barriers to fair trade.[14] [Footnote 1: It is evident that it is only through _ad valorem_ rates that it is possible to compare the average rate of duty for one tariff act, with that for another. As, however, every tariff act is made up of both specific and _ad valorem_ duties, it is only at the end of the year that an average _ad valorem_ rate can be estimated by comparing the total of duties collected with the total estimated value of the goods imported. Average _ad valorem_ rates are estimated in this way both on the dutiable goods alone, and on all goods, free and dutiable combined. There may be an element of error, even of misrepresentation, in such estimates. They do not give the simple test of the relative height of duties, or of the degree of "protection" that we might at first suppose. Just to the extent that a new and higher rate really operates to exclude imports (and thus is protective in its effect) the goods subject to that rate cease to form part of the total imports. For example, if the average rate of duty were 25 per cent, and a 50 per cent rate on an article were increased to 75 per cent, it is possible that this rate would prove to be absolutely prohibitive. This raise of rate, therefore, would tend to reduce the average rates collected on all dutiable articles. Changes in general conditions of industry from causes quite apart from the tariff may result in shifting the proportions of imports that are dutiable so that the average rates go either up or down while the tariff law has remained unchanged on the statute book. A failure to consider these and related facts leads to much confusion in popular and political discussion of the tariff.] [Footnote 2: Usually given as 20 per cent. However a good many rates under the full operation of the act worked out as 21-1/2 or 23 per cent, and a few at 26 and at 29 per cent. Besides there were numerous specific rates, the _ad valorem_ force of which cannot be determined.] [Footnote 3: The political argument that the small tariff reduction of 1857 caused the crisis of 1857 will not bear serious examination. See below, sec. 13.] [Footnote 4: See ch. 14, sec. 2.] [Footnote 5: See above, sec. 2, note 1.] [Footnote 6: Internal revenue receipts in 1866 had been $309,000,000; in 1872 they had fallen to $131,000,000, yet the government's surplus for the three years 1870-1872 was little less than $100,000,000 a year. This was almost half of the total receipts from customs, which were $216,000,000.] [Footnote 7: Other issues absorbed public attention in this period--the Spanish war, colonial policy, "imperialism," railway rate regulation, corporation control, etc.] [Footnote 8: See above, sec. 2.] [Footnote 9: Compare with ch. 13, sec. 5.] [Footnote 10: Probably resulting from the rising prices, as explained above, sec. 2. For example, in one year, from 1899 to 1900, the average _ad valorem_ rate collected on dutiable goods fell 3 per cent, and that on all goods fell 2 per cent; in the two years from 1904 to 1906 the average rates on dutiable fell 4 per cent, and on all goods fell 2 per cent.] [Footnote 11: This "competitive principle" is essentially the same as the so-called "true principle" of equalizing the cost of production (see above, sec. 11). It is essentially a prohibitive, not a free trade, principle. Strictly applied it would cause complete exclusion of imports. But as applied to selected articles which it is desired to exclude in order to "protect" the domestic producer, this principle would simply prevent the rate being placed appreciably higher than was needed to exclude them. Anything beyond that point but offers temptation and opportunity for the formation of a monopoly by domestic producers. Then, too, the rate may intentionally be fixed so as to make just possible the survival of the most favorably located or most efficiently operated establishments, while compelling the abandonment of other establishments. See ch. 14, sec. 3.] [Footnote 12: Such changes are logically related to the subject of financial crises rather than to that of the tariff. See note at end of the next section.] [Footnote 13: See Vol. I, e.g., pp. 228, 431, 445ff, 466, 490, 506ff.] [Footnote 14: #Tariff legislation and business depressions.# The relation between new tariff legislation and the business conditions following it has been the subject of much debate in political campaigns. In the few cases where a relationship has been most often asserted to exist, it is more probable that the tariff change was the _result_ of business conditions preceding it, than that it was the cause of the conditions following it. For usually a tariff has been revised downward because a few years of prosperity with large imports had so increased customs duties that the government has had surplus revenues. Just when the tariff was reduced, the conditions were ripe for a crisis. This happened in 1857 (already in 1856 there had been a preliminary halt of business), again in 1872, and on a small scale in 1883. But the main reduction resulting from the compromise act of 1833 did not occur until after the crisis of 1837-39; the Walker act of 1846 was passed just as business was starting upward on a long wave of prosperity; and the act of 1894 was passed a full year after the severe crisis of 1893, when business had already entered upon a period of depression. In none of these cases does it seem reasonable to attribute business depression to the reduction of the tariff, as is commonly done in protectionist arguments even to the point of attributing the panic of 1893 to the reduction of the tariff a year later! At several times the tariff has been raised soon after a crisis when a good occasion was presented by the need of larger revenues as in 1842, 1860, 1875, and 1897. Business at such times is just at the point of the cycle when prosperity is due. The higher tariff of 1842 was succeeded by the low tariff of 1846 without any check to business. The war obscured the ordinary industrial effects of the tariff acts of the sixties. The increase in the year 1875 was followed by four years of hard times and slow recovery. The increase of the tariff in 1890 occurred as business was nearing the top of the cycle and was followed by two years of prosperity culminating in the very severe crisis of 1893. The authors of the tariff of 1897 were peculiarly fortunate in the time of their action, for the country was just fairly recovering from the very severe crisis of 1893 and prosperity was to continue (with brief hesitation in 1900 and 1903) until the severe crisis and panic of 1907. The advocates of higher rates are, of course, correct in declaring that the great business prosperity of the years 1915 and 1916 resulted from the unexpected demands in foreign trade growing out of the war, and is not to be credited in large measure to the act of 1913. But reason requires that the same restraint be exercised in crediting to higher protective acts the prosperity which has in some--not all--cases, followed their enactment; and requires further that the present act be not held accountable for the next reaction in trade, whenever it may occur, inasmuch as a reaction would be sure to occur no matter what kind of tariff act we might chance to have at the time.] CHAPTER 16 OBJECTS AND PRINCIPLES OF TAXATION § 1. Public finance as a division of economics. § 2. The police function. § 3. Social and industrial functions. § 4. The enlarging sphere of the state. § 5. Industrial revenues of governments. § 6. Governmental receipts from loans. § 7. Nonrevenue character of receipts from loans. § 8. Revenues from taxation. § 9. Forms of taxation. §10. Defective tax "systems." §11. Various standards of justice suggested. § 12. Social welfare as the aim. § 13. Principles of administration. § 14. Shifting and incidence. § 15. Taxes as costs. § 1. #Public finance as a division of economics.# Men live together in politically organized societies which employ public officials as agents to carry on the functions of government. Every governmental unit, large or small, may be viewed not only as a political body, but as an economic enterprise. Each has its economic aspects, such as receipts and expenditures, employer and employee, borrowing and lending, etc. Each political unit is in this sense "an economy." The study of the public economy, of the economic aspects of government as distinguished from its political aspects, constitutes the science of public finance, an important division, tho not the whole, of political economy. The primary fact determining the public finances is the extent of the sphere of "the state," meaning by the state the totality of political powers and functions in a community. There are two typical ideals of a state, each with corresponding functions: the ideal of the police state, and that of the social-industrial state. In fact every system of government provides for the exercise of both functions in some measure. The police function is primary. All governments alike exercise it, but they differ most in respect to the degree in which they exercise the social-industrial functions. § 2. #The police function.# The police function is that of public defense and the maintenance of domestic order. In family or patriarchal communities all share a common income and combine in the common defense, but self-preservation often has compelled such small communities to form a larger, stronger state for the common defense. Public defense requires sacrifice of some independence on the part of the family and of the individual. Personal service in the field gives place later in some measure to the payment of taxes, so that a regular income may permit the government to attain a more regular, continuing, and perfect organization of military forces. As political unity and power grow, the citizens need less often protection against foreign foes, and they need more often, relatively, defense against the aggressions of some of their own countrymen. The preservation of domestic order requires police, courts of justice, and other agencies. The ideal of the anarchist to do without government is nowhere realized. Everywhere there must be government to preserve peace and to protect property. Unfortunately, this need grows with the growing density of population. Crime increases when men swarm in great cities. The courts which settle disputes between men, and which interpret their contracts, are agencies of peace, displacing physical contests. To maintain and operate the various parts of the social machinery requires ever increasing governmental revenues. From many causes government has, in modern times, grown increasingly costly. § 3. #Social and industrial functions.# The social and industrial functions of government seem naturally to grow out of the primary ones just mentioned. In a democratic society, popular education is a necessity, as it appears that domestic order is not possible in a democratic state without intelligent citizens. The system of public education has, in many states, expanded to include a publicly supported university as the dominant educational and scientific organ of the community. Some industrial functions are performed by the government in connection with the primary needs. Lighthouses are necessary to guide the navy, but they also serve to guide the merchant marine and to aid industry. The post was established as an agent of political and military government to connect the ruler with the outposts (a fact the name post indicates), but the postal service has grown in every country to be a great industrial and social agency. The consular service, originating in the political need of keeping official representatives in foreign lands, has become a valuable economic agency; consuls are commercial agents, advancing the business interests of their countries in all quarters of the globe. § 4. #The enlarging sphere of the state.# A mere police state would leave to private initiative the provision of every kind of economic agencies not needed for political government. The state might, for example, even leave the provision of roads and bridges to private individuals or to companies, permitting them to charge tolls to obtain a return on their investment. Whenever a toll-road is made public and a toll-bridge becomes free, and the state maintains the roads, it is becoming less strictly a mere police state. Reacting from the ideal of the police state which was most highly praised in the first half of the nineteenth century, the functions of government have been extending in many directions in the last half century. More and more economic functions are performed through the agency of government. If we think of an act as done by the government _for_ private citizens, we call it paternalism; but if we think of an act as done _by_ citizens collectively _for_ themselves as the best way to get these things done, we may call it, in a broad sense, socialism.[1] Government is in one aspect a direct good to its citizens. In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities. But government becomes also a mode of social investment, an indirect agent, a productive enterprise. Wealth applied through it secures in some cases a greater product than is possible by individual action. But when the government undertakes these various tasks the expense falls unequally on individuals and affects differently their incomes. When free schools take the place of private schools, the law compels every one to contribute to education. To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer's family. The average result of a certain social policy may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action. Happily the subject is not always viewed with selfish eyes. The ethical and patriotic thought is not, "How will this affect my interests?" but. "How will it affect the general interests?" But as the question of value is always involved men are usually found favoring or opposing the industrial and social activity of the state according as it affects their own incomes. Thus the determination of the sphere of the state is in large part an economic question. § 5. #Industrial revenues of governments#. The costs of government at any stage are met in varying degrees in one of three ways: (1) from industrial sources, (2) by borrowing and thus creating a public debt, (3) from taxation. (1) Receipts from industrial sources in the broad sense include all rents from wealth owned, interest on loans made, and proceeds of sales from enterprises conducted, by the government. In feudal times, these were mostly obtained in the form of rents from the private domains of kings and nobles. In many early and medieval states these sources of receipts were adequate to the need of government; then they decreased in many countries, both relatively and absolutely, because of the sale of publicly owned wealth (lands and mines) and with the recent extension of the functions of government have again increased very rapidly. Now industrial revenues come not only from the rents of forests, mines, docks, lands, and buildings, but from profits in the operation of industrial enterprises such as waterworks, railways, mines, and factories, and from interest on funds deposited in banks or otherwise invested. At present the industrial revenues of the aggregate governments of the United States (national, state, and municipal) amount to about a fifth of all revenue receipts. Since the middle of the nineteenth century the number and variety of the industrial enterprises undertaken by governments has been steadily increasing, and this increase has been most marked in the cities. The change in this respect in the United States, great as it has been, has been proceeding more slowly than in the European countries. In 1913 the receipts of this nature (earnings of departments and of public service enterprises) were nearly $500,000,000. The larger part of this sum comes to the national government ($288,000,000), mostly from the post-office department. Most of the remainder comes to the minor divisions ($176,000,000), and but little to the states. The total "earnings" (this means here receipts, not profits) of public service enterprises in incorporated places were $120,000,000. § 6. #Governmental receipts from loans.# The funds to invest in these commercial undertakings are originally obtained in nearly all cases from public loans. Almost every unit or division of government may become a borrower to provide for its citizens at once certain needed advantages and improvements when the funds are not at hand and immediate taxation is deemed too heavy a burden.[2] The indebtedness (less funds available for payment of debt) of the aggregate governments of the United States in 1913 was: Nation ................................. $1,028,000,000 States ................................. 346,000,000 Minor divisions ......................... 3,476,000,000 ------------- Total .................................. $4,850,000,000 The larger part of nearly every national debt has been incurred for purposes of war and preparation for war, while nearly all public debt other than national has been created for the purpose of peaceful social and industrial development. The debts of the American states have partly been made necessary to meet deficits in current expenses, but largely of late to erect public buildings, purchase forest lands, improve roads, and construct canals. The minor divisions are counties, cities, villages, boroughs, towns, townships, school districts, drainage, irrigation, and levee districts, fire districts, poor-relief districts, road districts, and various other subdivisions of states and of counties. Every one of them has more or less legal power to incur debts and to levy taxes for the purpose of paying the interest and of repaying the principal. The purposes for which the debts are incurred by specially organized districts are sometimes indicated in the names (e.g., drainage, irrigation), while the regular political divisions of counties, cities, villages, towns, townships, incur debts for a large variety of objects, such as streets, sewage disposal, water supply, electric light or gas plants, school houses, libraries, and other public buildings. Large expenditures for these purposes are necessary because the local governments are undertaking new functions, and either existing equipment (such as waterworks systems, and street railways) must be bought from private companies or new ones must be built. They are necessary further because the rapid growth of population calls for an immediate "capital investment," the payment of which may be, through borrowing, more easily spread over a series of years (e.g., in the extension of streets and paving, and in the provision of school houses for the children). § 7. #Nonrevenue character of receipts from loans.# The proceeds from loans (and certain other items of sales) are called nonrevenue receipts, because they are but in anticipation of receipts from other sources. The economic theory of such loans is essentially the same as that of private loans, but it is the people of the political district collectively that are the borrowers. To get the present uses of goods they sell their promise to make future payments totaling a larger amount. The loan is the present worth of those promises. In the case of loans made for local purposes, provision is now usually made for their complete repayment within a definite number of years, usually 10, or 20, or 30. Meantime interest is payable annually or semi-annually, and from some source an additional sum is collected to repay a part of the loan, sometimes by redeeming a certain part annually, sometimes by accumulating a sinking fund until that amounts to the whole debt. The minor divisions in the United States are thus constantly creating debts at the rate of about $2,000,000,000 each year and at the same time paying former debts in instalments, in a total amount somewhat less than this. In the case of some municipal investments which are commercial enterprises (such as those supplying gas, electricity, and water), these annual payments can be made out of the profits; in the case of others, the payments come from special assessments upon the owners; and in most other cases they are collected by the usual methods of taxation. In America, a large part of these costs are, by the law of special assessments, placed upon the owners of adjacent lands, whose outlays are usually more than offset by the increased value of their lands as a result of the improvements. In this case also, the present investment is in anticipation of the future incomes which the owners of the improved lands will get.[3] § 8. #Revenues from taxation.# Much the largest part of the receipts of most governments, apart from loans, and in many cases nearly all such revenue receipts, come from taxation. Tax (as a verb) meant originally to touch or handle, then to estimate or appraise, and then to charge a burden upon some one, especially to impose a payment of services, goods, or money upon persons or property for the support of government.[4] _Taxation_ is the legal process of taking income, services, or wealth from private persons for public uses. Taxes are of various kinds, but they always are incomes, or wealth representing future incomes, transferred from private ownership of the taxpayers to the government. In rare cases, more than the net current income of a certain kind may be taken for public uses. As economic income has many sources, it may be intercepted at many different points, and taxation may take various forms. The differences are so manifold that it is difficult to classify particular taxes satisfactorily. § 9. #Forms of taxation.# The following are the forms of taxation most frequently referred to. (a) The simplest form of tax is a _poll tax_, a uniform amount payable by every person of the taxable class. This form of tax is being less and less used in America and now amounts to little more than $17,000,000,[5] this being only .6 of 1 per cent of the aggregate taxes in the United States. The national government gets about one-fourth of this amount from a tax on immigrants and the rest is collected by (some of) the states, counties, and minor divisions. Usually, if not always, the poll tax is imposed only upon voters, as a condition to the right to vote. (b) Taxes may be laid upon _incomes_, as they come into the possession of the owner. Usually, only monetary incomes that arise in commercial transactions are taxable, and no attempt is made to estimate the value of psychic incomes. Commercial incomes are more easily measured, but the omission of the other elements must cause many inequalities in the burden of the tax as between two individuals controlling equal incomes of real things. (c) Taxes may be on _property_, either general upon all property in the taxing district, or special, upon certain forms of property. A property tax may be specific or _ad valorem_, in proportion to value, as to the method of its determination. Since the value of material wealth is the capitalization of the rentals at the prevailing rate of interest, a general, _ad valorem_, property tax, so far as it applies to material wealth, and if it were accurately assessed, would take an approximately equal proportion of wealth-incomes. It does not, of course, touch directly incomes derived from wages and salaries, but it reduces their purchasing power in many cases. It is in some respects more searching than a tax on actual rents, for it reaches the prospective, or speculative, rental. (d) Taxes may be on _expenditure_ (sometimes called taxes on consumption). This is but another mode of attacking income, for in the long run most income is spent, not always by the individual who earned it, but by some one, and thus it is reached by a tax on expenditure. Usually in the United States the tariff duties are accounted to be taxes on expenditure, as also the internal revenues (also called excises) of the national government. In time of war, internal revenues are extended in the United States to a multitude of articles, but usually they have been limited (with minor exceptions) to liquor and tobacco. Most of these taxes are in fact levied not at the time of purchase by the ultimate consumer, but upon the specific goods in the hands of some merchant or business agency, and some of them are essentially special property taxes and others are business taxes of the kind next to be mentioned. (e) Taxes may be levied on selected agencies of industry or on the process of _business_; such are business taxes, licenses, taxes on investment in business, and corporation taxes. These burdens are diffused and rest eventually on some income, rarely to be ascertained exactly. § 10. #Defective tax "systems."# The actual tax laws of each division of government in a country combine the various forms in different proportions. Most of the federal taxes are from tariff duties and from internal revenues; the latter include a variety of special business and property taxes and, since 1913, the federal income tax. The largest receipts of states, of counties, and of minor divisions are from property taxes, some special but most of them general in form. Among the various states a wide diversity is found. Some use the general property tax for all the divisions (state and local), while others (several of the Northern states and California) have separated the sources of state and local taxation, taxing corporations for state purposes, and most other forms of wealth for local purposes. Some states, particularly those of the South, make large use of licenses and taxes on business both for state and local purposes. The tax laws of many states have been much modified of late and are still in process of change. It is only in a loose sense that one can speak of the tax "system" of any state, made up as it is of so many diverse elements, each used to tap in some independent way some source of private income for public purposes. Every tax "system" has grown up more or less accidentally, guided by no more of a general principle than the advice of the cynical old statesman--so to pluck the feathers of the goose that it will squawk as little as possible. Thus, everywhere, the existing situation must be largely accounted for by custom and ignorance, by the weakness of some classes and the undue influence of other classes, rather than by clearly thought out principles soundly administered. § 11. #Various standards of justice suggested.# There have not been lacking earnest attempts to arrive at some general principles. Many standards have been suggested to measure the distribution of the burden of taxation, such as benefit, equality, and ability. Each of these terms is capable of various interpretations which have changed from time to time. The benefit derived by any citizen from most of the public services evidently cannot be measured with exactness. The standard of equality cannot be applied in any literal sense to strong and weak, to rich and poor. It is possible, however, to interpret equality with reference not to objective goods, but to the psychic sacrifice occasioned by taxation. Ability is of many kinds and may be differently understood. Some think ability to bear taxation is "in exact proportion to the money income"; others believe that it increases at a greater rate than money income, and favor, therefore, progressive taxation, that is, higher rates on the larger incomes. § 12. #Social welfare as the aim.# The conflicting interests of the various classes of taxpayers in each period are to some degree softened by the prevailing public opinion, sometimes called the social conscience, and taxes are adjusted according to a vaguely held ideal of the social welfare. Social expediency, more or less broadly interpreted, determines who shall be taxed and what social results are to be sought. The exemptions from taxation in feudal times were great and, viewed from our standpoint, were inequitable, for the upper classes escaped while the peasants bore most of the burdens. The landlords and nobility, who were assumed to be performing important social functions, generally had outgrown their usefulness in the period preceding the French Revolution, which swept away many of these abuses. Exemptions from taxation are granted liberally in most states to-day on some kinds of wealth and to some classes of citizens, because of their supposed relations to the public interest. Real estate and equipment devoted to educational, religious, and charitable purposes, the homes of priests and ministers, homesteads purchased with pension money, as well as all public lands, buildings, and equipment are exempt. The social interest requires that taxes be both elastic and productive, so that the needs of the government shall be amply provided for. The harmonizing of these needs in the laws of taxation requires a high degree of wisdom, of foresight, and of integrity in the legislator and in the citizen. No hard-and-fast rule for the apportioning of taxes can be laid down. The decision must be made in each generation by the public opinion as to what is most expedient for the general welfare. § 13. #Principles of administration.# Whatever forms of taxes are adopted, whether on property or income, whether at proportional or at progressive rates, their justice and expediency depend largely on their administration. Principle and practice in this, as in most affairs, may go far apart. The administration of taxation should be economical, certain, and uniform. Some laws are more easily and economically executed than others. The time of collection should be as convenient as possible for the citizen, and the mode of payment should be the most simple. The utmost certainty is desirable as to the time, method of payment, and amount. Taxation that, in its principle, is variable, shifting, or dependent on personal whim and favoritism, is despotism. But the greatest evils, in practice, result from the failures in assessment. The assessment of taxes has to be intrusted to men with fallible judgment, imperfect knowledge, and selfish interests. The assessor is as near a despot as any agent of popular government to-day. Not infrequently men of proved incapacity in every private business they have attempted are, for partizan or corrupt reasons, selected as assessors, and are given the power of passing judgment on the value of millions of dollars' worth of property. Under the circumstances, evils are to be expected, and they occur. The small owner often is crushed under the unequal assessment while the large owner comes lightly off. Political friends are favored, political foes are made to suffer. Even the most honest and capable of assessors find in the imperfections of the tax laws[6] an insuperable obstacle to even-handed justice. § 14. #Shifting and incidence.# The person paying a tax into the public treasury is not always the one whose income is reduced in the long run. This is most clearly seen in the case of taxes paid by middlemen. In most cases the final and regular burden of the tax is distributed over a number of incomes. The passing on of the burden is called the _shifting_ of the tax; the final location of the burden is called the _incidence_ of the tax. The lawmaker cannot tell exactly where the weight will fall. The principles of value give some guidance in the inquiry, but the workings of the principle are difficult to follow. Consider a situation where certain taxes have been for some time levied. They have become a part of the general adjustment of prices. If paid by any one in business they may be looked upon as a deduction from the gross proceeds or product of the business, prior to cost, or as a part of cost.[7] In either case every one choosing that business does so in the light of this fact. Unless the business promises to yield as good incomes (wages, profits) as other lines, the number engaging in it, and the output, must diminish and thus the price of the product rise, or the cost of the factors fall, or both in some proportion. The tax on any durative agent or on any established business thus becomes incorporated after a time in its price and in the prices of the products, and any purchaser pays a price based on the net income remaining to the owner of the wealth after the tax is paid. Viewed in this way, taxes are seen to be borne to some extent by every one, by those who do not as well as by those who do actually meet the tax-collector face to face. The citizen with no taxable property is affected, far more than he realizes, by extravagance of government and by inequities in taxation, for the effects of most taxes are diffused so that every self-sustaining member of the community has some share in them. § 15. #Taxes as costs.# Now if a new tax is levied, or an old tax changed in amount or in its incidence, it becomes a new influence in industry. Some occupations are made more attractive, others less so. Some places are made more, others less, desirable to live in. Property thus fluctuates in value, and investments become more or less remunerative. If the new tax reduces the net income of any productive agent, it reduces likewise its value, which is but the capitalization of its net rental. If taxes are taken off of factories and put upon farm rents, factories rise and farms fall in value in the hands of their owners. The immediate change in value is much greater than the annual tax, for if five dollars is to be taken permanently from the annual rental of the farm, nearly one hundred dollars is taken at once from its selling value when the prevailing yield on investment is 5 per cent. The rate of adjustment varies greatly under different conditions, and the inflow and the outflow of labor and capital are more or less rapid in the various industries. Taxes that enterprisers are unable to shift to others are reckoned by them as a part of their costs of production whenever the conditions of competition and of substitution make it possible to do so. Every new tax that curtails the supply of any necessary agent must raise the price of the products and cause more or less of the tax to fall upon the consumers. In the Civil War an increase in the tax on whisky increased its selling price, and distillers who owned stocks on which a smaller tax had already been paid reaped profits of millions of dollars. When the tax on tea was increased in England, all dealers that had accumulated a stock before the law went into effect were gainers. Every change in taxation inevitably affects, either favorably or unfavorably, many interests. The chance to anticipate a change in tax laws or to get, from those in power, information of a proposed change, makes speculation possible and political corruption profitable. The fact that a change in taxation is a disturbing element in price is not to be deemed insignificant merely because "all comes out right in the end." Every change in taxation is an element of uncertainty in business and increases the fortunes of some men at the expense of others. Hence no considerable change should be made without good reasons in its favor. The older taxes have the virtue of stability, but in many cases they have grown out of harmony with the industrial conditions. While, therefore, from time to time there is a real need of a reform in the tax system, it should not be undertaken without recognizing the many and complex interests involved. [Footnote 1: Meaning here not a certain political party, but a principle of social action.] [Footnote 2: The total debts of the _national_ governments of the world just before the outbreak of the great war in 1914 were estimated at about $44,000,000,000. (These figures include the debts of the separate states in the federal unions of Australia and the German Empire, and the separate debts of European colonial governments, but not those of the states of the United States, and in no case including the debts of minor divisions, the total figures for which are not to be had.) The new debts created by the war give already more than double the foregoing total.] [Footnote 3: The special assessment is thus in its nature, in part a private investment. The plan, of special assessments could easily be applied in many more cases than is done at present.] [Footnote 4: There are border-line cases where it is difficult to decide whether a particular payment to the government in the form of a fee, price for service (as water rates, etc.), and special assessment (as for street paving) is in the legal sense a tax or not. Some courts have, for example, decided that for certain purposes a special assessment is to be called a tax, and in certain other cases it is not to be if this would defeat the evident and just intention of the legislature.] [Footnote 5: The figures do not include returns from incorporated places having a population of less than 2500 where the poll taxes may be a considerable sum.] [Footnote 6: Particularly the difficulties noted in the next chapter, sees. 2-5.] [Footnote 7: See Vol. I, p. 374.] CHAPTER 17 PROPERTY AND CORPORATION TAXES § 1. Importance of taxation as a public question. § 2. The general property tax; nature and difficulty. § 3. Ambiguity of the term "property." § 4. Various temporizing policies. § 5. A consistent policy of wealth-taxation. § 6. Needed reform of assessment. § 7. Separation of state and local taxation. § 8. Federal taxation of merchandise in commerce. § 9. The proposal of the single tax on land values. § 10. Various reforms in land taxation. § 11. Difficulties in taxing corporations. § 12. Special taxes on banks. § 13. Special taxes on insurance. § 14. Special taxes on transportation. § 15. Alternative policies of corporate taxation. § 16. General plan for corporate taxation. § 1. #Importance of taxation as a public question.# The discussion of taxation has accompanied the growth of free government in England and America from the time of Magna Charta. The control of the public purse has been found to give the key to political power, and therefore it has frequently become the occasion of conflict between the monarch and the people. But in our own national history since the adoption of the Constitution, taxation has not had a leading place in politics except in the one aspect of the tariff. The constitutional question of states' rights long absorbed most of the interest of citizens and of legislators. But with the quickened attention of the public to economic questions, the problem of taxation became of increasing importance. It has come to be recognized that taxation can be made to play, and is bound to play, a leading part as an agency in the distribution of wealth, and thus it is the center of much of the ardent controversy regarding social reform. Ultimately, almost every proposal of social change and betterment involves some cost. The question then must be answered. Who is to receive the benefits and upon whom and how shall new taxes be levied to pay the cost? Further, it is often urged that this result of taxation in redistributing incomes is in itself (or can be made) a virtue; and some even see in tax reform the answer to the largest social questions of our time. We are now to take up a few of the more important problems of taxation, to see the difficulties, and to suggest the direction in which their solution is to be sought. The tariff having been already separately considered, the chief kinds of taxes we have here to treat are property taxes, general and special, and inheritance and income taxes. § 2. #The general property tax; nature and difficulty.# The rates both of assessment and of levy of the general property tax are uniform and equal in proportion to the value of all (or nearly all) property in the taxing district.[1] There are always some exceptions of certain kinds of property, or of the property of certain persons, or of property and things put to certain uses--public, educational, religious, and charitable in their nature. The federal government levies no general property tax, but the other branches of government[2] receive about three-fifths of all their revenues from it. At first view nothing would seem to be simpler and juster in principle than such a plan of taxation, but those who have most carefully studied its practical operation, almost with one accord, pronounce it to be "a dismal failure." The chief reason assigned for this failure has been that the assessment of the tax is imperfect and incomplete. The usual thought is that if all property could be assessed the plan would be excellent. Undoubtedly the difficulty of just assessment has its part in the weakness of the tax, but back of, and more important than this, is an inherent fallacy in the apparently simple principle of the tax. § 3. #Ambiguity of the term "property."# Unfortunately, the word property is applied, even by the most competent courts, both to the intangible right of ownership (the fundamental meaning) and to the concrete thing that is owned, the source of the income.[3] But evidently the value of the right to the income yielded by a house, for example, is merely the value of the house. The value of the _property in the one sense_ (the abstract ownership, the intangible right) is merely a reflection of the value of the _property in the other sense_ (the concrete wealth). There are not here two independent bodies of economic wealth. Whatever value belongs to the one is subtracted from the other. Nor is it rational to take the paper document called a deed (which is but the evidence of ownership) and call it tangible property having a value in addition to the house itself. Yet, in fact, all these confusions are constantly made in taxation. The term "intangible personal property" is applied to such things as mercantile credits, promissory notes, bonds--in general to the right to collect sums from another person, whether these rights arise out of sales or of loans--and all are treated as parts of taxable property. Sometimes the evidences of indebtedness, the promissory notes or the mortgage papers, are even called tangible property, the same term that is applied to land, houses, and machinery. By universal practice supported by a long line of court decisions, these rights (whether evidenced by paper or not) are made subject to taxation, except as by piecemeal legislation certain grudging exceptions have been made. These views and this practice are supported by the popular desire to tax money-lenders. The result is "double taxation" of many sources of income. This involves a burden that is ruinous in some cases, both to borrowers and to lenders, and that tempts in all cases to the evasion of the tax. Take, for example, a house assessed at $10,000 which is owned free of debt and which has a rental value of $600. At the rate of 1.5 per cent the tax paid would be $150. Now if the owner borrows $8000 he is still taxable $150 on the full value of the house, and the lender nearly everywhere is taxable $120 on the amount of his mortgage. The total tax payable out of the one source of income, the house, is then $270. The same analysis will show that any credit is but a contractual claim upon some other source of income which is, or should have been, already taxed. If one person owns all the capital-value invested in a specific piece of wealth, no attempt is made to tax both the capital and the wealth; but if it happens that two or more persons share the capital-value invested in the same wealth, the attempt is made to tax as a unit the full value of the wealth and, in addition, some part of the capital also. It is, however, easy in most cases to conceal this "intangible property" from the assessor's eyes, and a comparatively small amount of it is ever taxed. This means inequality and hardship in the operation of the tax and, as a result, unceasing temptation to perjury by the taxpayer and to favoritism and graft by public officials. § 4. #Various temporizing policies.# The general property tax in practice is unjust and demoralizing. What, then, shall be done about it? Various policies have been followed. One has been to declare that the law would be good if it could be enforced, but that as in practice it cannot be, the best thing is to go on as before, catching a few "tax dodgers," and letting the rest go. Another policy is to hire "tax ferrets," paying them large commissions to discover cases where intangible property of this sort has been concealed from the assessors. This method, no matter how stringently applied, has never reached more than a small proportion of the cases, and becomes a potent agency of political favoritism and corruption. Another policy is to maintain the general principle, but to make exceptions here and there. Usually the exceptions are made just at those points where the law would with earnest effort be most easily enforceable, and therefore where it has become most inconvenient. As a result of these changes the state laws display a bewildering and illogical variety. By constitutional interpretation, United States notes and federal bonds are exempt from state and local taxation; generally, by state law, building and loan association and savings-bank loans are exempt as, in a majority of states, are state and municipal bonds if held within the state. In at least eight states, bonds of the state are exempt, but those of the municipalities are taxable, while in a few states the reverse is the case. In several states both kinds of bonds when issued after specified dates, are exempt, but in Ohio state bonds are exempt only if issued prior to 1913. All but seven of the forty-eight states, however, attempt to tax the resident holders of state and municipal bonds of other states; but the exceptional states are those in which most of the investors in this class of securities reside. In many cases private debts receivable are allowed to be offset against debts payable. In some states mortgages on real estate are exempted or (in Massachusetts) treated as an interest in the real estate. Rarely mortgages are exempted up to a certain amount (in Indiana, to $700, the purpose being to tempt the borrower to reveal the name of the lender). Sometimes a special mortgage registration tax, payable but once (in New York 1/2 of 1 per cent) is levied, and otherwise mortgages are free from taxation. Small as this rate is, the fiscal yield of mortgage taxation under this plan exceeds that under the general property tax. By the overlapping of these laws, so contradictory in principle, it may happen that securities held by taxpayers residing in other states than those of the issue are taxable two or three or more times; but few if any loans of this kind are made except by those evading all taxation. § 5. #A consistent policy of wealth taxation.# These exceptions still leave the law in its general principles as to the taxation of intangible property illogical and unjust. A solution can be found only by abandoning the ambiguous legal concept of property, and making use of economic concepts. A consistent tax law might take either wealth or capital as the basis of assessment, but not sometimes the one and sometimes the other. Wealth is an impersonal basis of taxation; each piece of wealth might be taxed once as a unit no matter how the ownership were divided. Or the other alternative might be chosen. Capital would be a personal basis of taxation; each person's capital might be taxed no matter from what sources the incomes were derived (the concrete wealth, of course, then being left untaxed). The wealth basis is much nearer to the present general property tax as actually administered. The assessment of general tangible wealth would undoubtedly be more easily done than would that of individual capitals, and likewise be both easier and juster than the present inconsistent policy. Tangible things are comparatively easy to find, measure, and evaluate where they are, and if they are all taxed it is evidently the same as if all the capital values based upon them were taxed in the owners' hands. The various equitable claims of different owners in one source of income could be left to adjust themselves through shifting, mainly in the choice of investments, once the plan had become generally applied. § 6. #Needed reform of assessment.# The assessment of the present general property tax is notoriously inefficient and unjust. The root of most of the present evils (other than those above discussed) is the method of local election of assessors, which usually is by townships, but in some cases by counties. The local assessor's estimate of value is used as a basis for taxation not only for his district but for the larger units (county and state). Thus every local assessor is tempted by the conflict of interests not only among the taxpayers in the district which elects him, but by the conflict of interests between his district as a whole and other districts. The lower the ratio of assessment to true valuation in any township compared with that of the other tax districts, the smaller the proportion of county and state taxes that the people of the district have to pay. Willingness to under-assess property often becomes thus the chief virtue of an assessor in the eyes of his political constituents. This has led in many cases to absurd underassessment, which boards of equalization have proved powerless to remedy in any great measure. A sounder plan would be general state assessment, with a permanent expert board of commissioners employing a corps of state assessors under the merit system of appointment. This plan has as yet been applied only to assessment of railroads and some other public-service corporations. § 7. #Separation of state and local taxation.# For the reason just indicated the failure of the general property tax has been most conspicuous where it is used as a basis for state taxation. This has led some financial students to advocate the plan of separation of state and local taxation. This means the assignment of certain sources of revenue (such as corporations and the liquor business) primarily or exclusively to the state, leaving all real estate and the general property of non-corporate persons to be taxed by the counties and minor divisions under the general property tax. The plan has been increasingly applied in New York, until, in 1906, it became almost complete. In 1910 the plan was adopted in California; and it is largely used in New Jersey, Connecticut, Delaware, and Pennsylvania, and to a small extent in some other states. An efficient state assessment of general wealth would accomplish most of the advantages claimed for this plan, while avoiding some of its dangers. § 8. #Federal taxation of merchandise and acts in commerce.# Tariff and internal revenue duties constitute the two chief revenues of the federal government. Both of these are mainly taxes on wealth. Unlike the general property taxes they are not levied upon the main body of wealth held in possession, but almost entirely upon articles of merchandise and upon acts in course of trade. Stamps on receipts, checks, deeds, bills of sale, and licenses on the sale of liquor and tobacco are taxes on business acts which are necessary to the acquisition, use, or expenditure of wealth. Goods imported are taxed at the time of entering the country; domestic products such as cigars, spirituous or malt liquors, playing cards, and (at times) matches, pig iron, and other products, are taxed usually at the time of exit from the factory. It has already been shown that when the tariff duty prevents the importation of foreign goods and by raising the price encourages domestic manufacture of the article, there is virtually taxation of the consumer to subsidize the private manufacturer. A system of properly adjusted compensatory duties (tariffs and internal duties combined) which would prevent tariff duties from having any prohibitive effect whatever could, in a great country like ours, be made to produce any revenues desired. Such a system, combined with the federal income tax, seems destined to be the chief dependence for the national government. § 9. #Proposal of the single tax on land values.# Besides the general property tax there are found in the country as a whole a large number of special property taxes. Some of these have been introduced as substitutes for the general property tax; such is the special taxation (above referred to) of mortgages, and bonds. Other special property taxes have been introduced because they were believed to be good in themselves; such are special franchise taxes on corporations and some kinds of taxes on land. The special taxation of land, or of land values, has been strongly urged by Henry George and his followers since the publication of the remarkable book "Progress and Poverty" in 1879. The doctrine there set forth is that the state should "appropriate land rent by taxation," should "tax land values, irrespective of improvements." It is maintained that "a single tax" of this kind would be quite sufficient for all the purposes of government. The main arguments adduced for this plan may be reduced to three propositions: first, private property in land is essentially unjust, because land is made by nature, not by men; second, the plan would make assessment simple and certain by limiting it to the unimproved land, and making unnecessary the more difficult assessment both of tangible improvements and of intangible personal property; and third, it would work a marvelous reform in social conditions, abolishing poverty and greatly increasing production. It is impossible within our limits of space to discuss this proposal further than to indicate that: (1) It assumes an untenable theory of property.[4] (2) It overlooks the difficulty of distinguishing the value of the land "irrespective of improvements," from that of the land as it actually is, a difficulty especially great in the case of agricultural land.[5] The difficulty is present even in the case of urban land when the improvements of filling, draining, and leveling have become incorporated with the site.[6] (3) The plan ignores the stimulus (motivating force) which private ownership has given and still gives to the maintenance and fuller productive use of land. Nowhere has production thriven where the state was the universal landlord. § 10. #Various reforms in land taxation.# While the single tax plan is defective in principle, its wide discussion has served to direct attention toward the need of reform in the taxation of land. Some proposals looking toward this end are widely favored by opponents as well as by advocates of the single tax. Such are the following: (a) The abandonment of the taxation of mortgages.[7] (b) A more correct assessment, in accordance with the present laws, of lots and lands held for speculative purposes, which in practice are now greatly under-assessed. (c) More adequate special franchise taxation upon corporations for special privileges in the public highways. (d) Exemption, in value equal to the costs, of improvements on land, such as buildings, drains, fences, and fertilizers, for a limited time after they are made, perhaps five years. (e) The separate assessment of urban lands used as mere building sites and of the buildings on them. (f) Taxation of the increase ("increment") of urban land values, periodically or on the occasion of transfer of ownership. § 11. #Difficulties in taxing corporations.#[8] Until near the second quarter of the nineteenth century, business corporations (of which there were few) were taxed just as was the general property of individuals. This still continues to be the case in the main in most of the states. The methods and machinery of assessment were (and still are) essentially local and simple, and have proved to be inadequate to reach or justly assess the larger and more complex corporate enterprises when their equipment and business extend beyond town, then county and, finally, state lines. Moreover, the corporate forms of organization presented in complex and puzzling forms the dual conception of property.[9] Here was the tangible wealth of the corporation and there were the diffused rights of ownership, the capital of individual stockholders and bondholders. Confused by this ambiguity, the men of that time believed (as many still believe) that there were here two separate and justly taxable funds of value. The popular will declared (and still declares) that "all kinds of property ought to bear their fair share of the burdens of taxation." Yet to apply this principle would obviously be double taxation and result in confiscation in many cases. Between this doubt and the practical difficulty of assessment, it turned out that corporate wealth, far from being doubly taxed, was largely escaping even its due single burden. § 12. #Special taxes on banks.# Attempts to deal with the difficulty without clear perception of its cause took the form of legislative tinkering and patching. Taxes were gathered from corporations by any device that seemed workable. The banks, being the earlier important corporations, were first experimented upon. Taxes on capital stock and on circulation were tried first (in 1805, by Georgia), then a tax on dividends (in 1814, in Pennsylvania, and in 1815 in Ohio), examples which were followed or modified by a number of states. After the national banking system was started in 1864, attempts to tax both the capital of the banks and the stock in the hands of individuals led to federal court decisions and then to state legislation by which now in many of the states the banks are separately taxed on their real estate and the shares are assessed to the individual holders (by various rules), but the taxes deducted from dividends and paid by the bank. There are, besides, special franchise taxes and fees paid by banks in various states. § 13. #Special taxes on insurance companies#. Insurance companies present in a striking manner the complexities of the ambiguous property concept. The assets of the insurance companies (we refer here particularly to the reserve companies), which belong in equity to the policy holders (less the claim of the stockholders in the case of the stock companies), are nearly all invested in stocks and bonds of corporations and in mortgages on real estate. Now under the general property tax, strictly interpreted, the policies are assessable at their surrender or reserve valuation in the hands of the policy holders; secondly, the securities and credits which compose the assets are assessable to the company; and, thirdly, the railroads, factories, and houses, built with the outstanding loans made by the insurance companies, are assessable as tangible wealth, to the owners. If such an interpretation were practically enforced it would result in triple taxation to be drawn from the same economic source, and would be utterly prohibitive of the insurance business. The enforcement has, however, been impossible in practice. Insurance companies have comparatively little tangible wealth excepting real estate for offices. This is taxed locally. Several methods have been tried (beginning as early as 1824) to make insurance companies pay taxes (usually for state purposes) on something besides tangible wealth. A tax on receipts from premiums proved most workable, first as applied to "foreign corporations" (that is, to those of other states) and later, generally, to domestic companies also. Now, amid bewildering variety and interstate rivalries in tax laws, the most usual rate is two per cent on gross (in a few cases on net) premiums collected. The taxes on premiums, with various licenses and fees, now amount to 2.15 per cent of the total receipts from life insurance premiums in the United States. This is taxation not on an existing body of accumulated wealth, but upon the process of accumulation, a tax directly on the act of saving. A consistent policy of wealth taxation combined with income taxation would require the abandonment of the present forms of special insurance taxes. § 14. #Special taxes on transportation.# Another great group of businesses whose taxation has been especially complex, because they are distributed throughout different taxing districts, are agencies of transportation and communication, especially railroad, sleeping car, express, telegraph, and telephone companies. A state tax on railroad tonnage (Pennsylvania, 1860) was declared unconstitutional by the United States Supreme Court. But many other plans have been tried to compel the railroads to contribute, the chief being by taxes on dividends, gross earnings, equipment, and valuation of capital stock, taxed either to the company or to the stock-holders, (Connecticut since 1849). About a third of the states no longer make the physical plant the basis of taxation, except that in most of them some part or kinds of real estate are taxed locally.[10] Telegraph companies are still locally assessed in most states, but in over a third of the states are taxed either on gross receipts, or on mileage of wire. Telephone companies are similarly taxed, but sometimes on the number of transmitters, or of subscribers, or on each plant, or otherwise. In a similar manner, express and sleeping car companies are taxed, in the same group of states, on mileage, or on capital stock proportional to mileage, or by license and privilege taxes. In the case of these corporations, and also of various other miscellaneous kinds of companies, no clear-cut principles serve to guide. The result is "a chaos in practice--a complete absence of principle."[11] § 15. #Alternative policies as to corporate taxation.# If the taxation of corporations is not to continue to be treated in a mere hit-or-miss manner, with every possible kind of inconsistency among the various states, some general principles must be recognized and some clear policy be formulated. But there is no general agreement to-day among jurists and economists upon a definite and consistent plan in this matter. Two alternative policies appear. The first is to make the scheme for taxing corporations quite different in principle and plan from that for taxing natural persons. The assumption in this is that the "general property tax" is an irremediable failure, and is particularly inapplicable to corporations. This plan goes along with the separation of state and local taxation.[12] An unfortunate result of this is to relieve the great mass of taxpayers of the state from, any apparent and measurable part of the tax burden for state purposes and thus to separate responsibility and power in state government. This policy nevertheless is favored by some of the leading authorities on finance. The other policy is to tax the wealth and business of corporations (excepting those enjoying special privileges) in essentially the same way as other wealth and business. The improvement of corporate taxation would thus be but a part of the transformation of the "general property tax" into a general tax on tangible wealth.[13] If first there is recognized the error of assessing the equitable ownership interests in addition to the body of wealth, and secondly there is created an efficient agency of assessment, the taxation of corporations can be logically and easily brought into accord with a harmonious system of state and local taxation.[14] § 16. #General plan for corporate taxation.# The main features in such a plan of reform would be as follows: (a) Assessment of all wealth by a state agency, with expert nonlocal assessors, appointed and serving only under the merit system. (b) The assessment of the value of each enterprise and body of wealth as a unit for the whole state, and apportioned to the minor divisions as the basis for levying local taxes. (c) Apportionment of the total value in the state among the localities by general rule, in the case of transportation and transmission companies, by mileage with due regard to the presence of local real estate and of special industrial equipment such as repair shops and power plants. (d) Taxation of interstate enterprises only in due proportion to the whole business, by mileage or other rules; inter-state comity to be further developed in this matter. (e) Account to be taken, in assessment, of various factors determining the earning power, such as good will, patents, and other monopolistic elements, pertaining to and helping to determine the value of the tangible plant of the enterprise. (f) Account to be taken of the market value of securities and notes owned by a corporation, in determining the taxable value of the whole business, but these not to be treated as a separately assessable "property" (in addition to the tangible plant). (g) Exemption of the holders of securities and evidences of indebtedness of corporations.{15} (h) Treatment of special privileges granted to public-service corporations for the use of streets and public highways on the principle of rent-payment to the community rather than by levying a percentage on an assessment. [Footnote 1: For example, the constitution of Alabama declares: "All taxes levied on property in this state shall be assessed in exact proportion to the value of such property," etc. And the constitution of Indiana declares: "The general assembly shall provide, by law, for a uniform and equal rate of assessment and taxation of all property, both real and personal, excepting," etc. Similar statements occur in most state constitutions.] [Footnote 2: The general property tax in the United States constitutes: Of the revenue receipts of the states 38 per cent. Of the revenue receipts of the counties 76 per cent. Of the revenue receipts of the incorporated places. 60 per cent. The total amount collected in this way in 1913 was over $1,083,000,000.] [Footnote 3: See above, ch. 2, secs. 2, 3, and reference there to Vol. I.] [Footnote 4: See above, ch. 2.] [Footnote 5: See Vol. I, pp. 116, 117, 145, 445-455.] [Footnote 6: See Vol. I, pp. 117, 146, 453.] [Footnote 7: See above, sec. 4.] [Footnote 8: No reference is made in what follows to fees payable but once for the incorporation of new companies or at times of increasing the capital stock of an old one, variously called taxes on corporate charters, license taxes, incorporation fees, organization fees, and charter fees.] [Footnote 9: See above, sec. 3.] [Footnote 10: E.R.A. Seligman, "Essays on Taxation" (1895), p. 156.] [Footnote 11: Seligman, op. cit. p. 136.] [Footnote 12: See above, sec. 7.] [Footnote 13: See above, sec. 5.] [Footnote 14: The assessment feature of this proposal is exemplified more nearly than anywhere else, tho still imperfectly, in the "Indiana plan," in which, however, the true concept of property is recognized only in so far as the shares of corporations of which all the wealth is taxed are not assessed to the shareholders.] [Footnote 15. This need not prevent a supplementary system of graduated taxation on incomes. See below, ch. 18, sec. 10.] CHAPTER 18 PERSONAL TAXES § 1. Inheritance tax laws. § 2. Fiscal importance of inheritance taxes. § 3. Income taxes; general nature. §4. Income taxation by the states. § 5. History of federal income taxation. § 6. Events leading up to the law of 1913. § 7. Main features of the law. § 8. Exemptions and stoppage at source. § 9. The graduation principle. § 10. A system of taxation. § 1. #Inheritance tax laws.# There remain to be considered at least two important forms of taxation that are essentially _personal_ in their unit of assessment, in contrast with the foregoing which are (or should be, if consistent) essentially _impersonal_[1] These are the inheritance and the income taxes. Until 1916 little use had been made of inheritance taxation for federal purposes. In that year, however. Congress passed a law which was expected to obtain about $20,000,000 a year from inheritances. Forty-one states in America have inheritance tax laws (in 1915) which apply generally to property passing either by will or under the intestate laws of the state. The tax is for state purposes. These laws differ in many ways, but are nearly all alike in certain respects: (1) In applying to the separate legacies rather than to the estate as a whole.[2] (2) In taxing legacies to relatives in the direct line at a lower rate (or even exempting them entirely) than those to collateral relatives.[3] (3) In exempting legacies below a certain amount.[4] (4) In having rates progressing with the size of the legacy; (this feature is less general, but is prominent in most of the later laws). § 2. #Fiscal importance of inheritance taxes.# The fiscal importance of inheritance taxes has been comparatively not very great (except in New York State), but it has rapidly grown. In 1903 the receipts from this source (in 27 states) were over $7,000,000; in 1913 they were (in 35 states) $26,000,000. The spread of inheritance taxes and the higher and progressive rates applied are an expression in part of the need of additional revenues and in part of the growing popular concern regarding the concentration of wealth. Yet the actual legislation is something of a compromise between fiscal policy (to get revenues) and social policy (to reduce or to distribute the larger fortunes).[5] In New York legacies of over $1,000,000 are now taxable at 4 per cent to relatives in the direct line and to all others at 8 per cent. In Washington the tax to relatives in the direct line is but 1 per cent, but to others it may go as high as 12 per cent on legacies over $100,000. In Wisconsin, somewhat similarly, the tax may rise to 15 per cent on the excess above $500,000. § 3. #Income taxes; general nature.# All taxes, whether assessed upon the capital value of goods or not, come out of (reduce) the incomes now or later available for individuals. But there are various ways of attacking incomes, i.e., of apportioning the tax burden. Income taxation is that form in which the basis of the assessment and levy is the income of the taxpayer as it arises (not accumulated wealth, or capital, or business processes, or expenditures). Of the various conceptions of income[6] the one mainly employed in income taxation is monetary income arising in the course of business, supplemented occasionally (but not consistently) by some items of material income that are expected to come to the person. There is not in the long run such a contrast between wealth taxation and income taxation in their ultimate burden and effect as is usually supposed. Indeed wealth (or capital) taxation as applied to accumulated wealth is more far-reaching than income taxation, for it falls upon the present worth alike of monetary and of psychic incomes (e.g., the value of a house whether it is let to a tenant or occupied by the owner). But, on the other hand, income taxation attacks directly the monetary incomes from labor, coming as wages, salaries, fees, and profits in business. This feature goes naturally with the fact that the income tax is essentially a personal tax, grouping the items of assessment about a person, whereas the "property" taxes are mainly (tho not consistently) impersonal, making the piece of wealth the primary object of assessment. This summation of each person's income makes income taxation peculiarly suitable for progressive taxation with the social-welfare motive of equalizing the distribution of wealth. It is doubtless this technical assessment feature, rather than any essential advantage as a mode of taxation, that has led to its recent growth in popular favor. § 4. #Income taxation by the states#. Income taxes have been used widely in European countries, but not so much in the United States. Numerous attempts have been made by the states to tax incomes, but with small results. Personal incomes, when sought by local assessors, proved to be most elusive. There are (in 1913) but seven states with anything resembling a personal income tax.[7] These are Virginia, North Carolina, South Carolina, Mississippi, Oklahoma, Massachusetts, and Wisconsin. Of these states Wisconsin has the most recent law, and one the widest in its application and the most important fiscally. The law applies a progressive rate to all incomes (with exemption of $700 from wages and salaries) and contains elaborate provisions for corporate taxation. The proceeds are distributed 10 per cent to the state, 20 per cent to the county, and 70 per cent to the municipality in which the tax is collected. In the six other states the tax is on incomes only exceeding a certain amount (North Carolina, $1000, the other states from $2000 to $3500 exemption); some apply to incomes from any source but others do not apply to incomes from property otherwise taxed. The total receipts from these state income taxes in 1913 were but $314,000. § 5. #History of federal income taxation.# The income tax seems destined to play a more important part in the fiscal system of the federal government. Until 1913, however, its part had been small. It began to be used under the law of 1867 (when the law passed in 1861 was replaced before it went into effect). This was repeatedly amended and finally repealed in 1870, to continue in force until the year 1872. The rate was 3 per cent on the excess of incomes over $600, and 5 per cent on the excess over $10,000. This law was repeatedly upheld by the United States Supreme Court as not in conflict with the Constitution. Its fiscal results were not large, as it was never effectively administered. The next income tax law was that of 1894, enacted in connection with the tariff revision of that year. It was declared unconstitutional before it had gone into effect. The main ground for the decision was that a tax on incomes from rent of land as well as on incomes from personal property is direct, and must therefore be apportioned among the states according to population. In the active discussion of social legislation in the years following this decision public sentiment developed favoring a renewed attempt to get such legislation by amending the Constitution. This was shown by the remarkable fact that a bill for the sixteenth amendment to the Constitution was passed unanimously by the Senate, and almost unanimously by the House. It was ratified by three-fourths of the states and became a law in 1913.[8] § 6. #Events leading up to the law of 1913.# Meantime, in 1909 and excise tax law had been passed, applying to corporations in a manner not open to the objections found by the Supreme Court to the law of 1894. The Democratic party, which had passed the law of 1894, was pledged to the passage of an income tax law when it came into power again in 1913. The reduction of the tariff, as well as growing expenditures, moreover, made necessary the development of new sources of revenue for the national government. In other countries the income tax had been found to be a part of a system of taxation especially valuable as "a balance wheel" to equalize the revenues and expenditures. It was deemed by some to be an additional advantage of an income tax that it would make the richer citizens better realize the nature and burden of public expenditure. Most other federal revenues, being derived from the tariff and from taxes on merchandise, are borne mainly by the purchasers and consumers. An income tax was opposed as sectional taxation by many in the Eastern states where the owners of most of the larger fortunes reside. But to this Senator Elihu Root replied that the states where there was the greatest ownership of wealth pay the largest taxation under any scheme, and ought to. § 7. #Main features of the law.# The law as enacted[9] imposes (a) a "normal" tax of 1 per cent on the entire net income of every corporation (engaged in business for profit); (b) a "normal" tax of 1 per cent on the excess above $3000 of every unmarried individual's income (or $4000 for husband and wife, as indicated in the next section); (c) an "additional tax" (often called a super-tax) ranging from 1 to 6 per cent on individual incomes of larger amounts than $20,000. There are thus eight classes of persons, those entirely exempt, those paying only at the normal tax rate, and six different classes paying a super-tax.[10] A person with an income of $1,000,000 thus pays $60,020, this being the amount indicated, $25,020 for the first half million plus 7 per cent on the second half million. § 8. #Exemptions and stoppage at source#. There are various exemptions, the first being that of $3000 on every individual income and of $4000 on the aggregate income of husband and wife living together.[11] Among other exceptions are sums paid for taxes (except assessments for local benefits), necessary business expenses, losses sustained, and (for the normal tax only) those parts of individual incomes derived from corporations which have paid the tax on them. The difficulty of getting an honest and complete assessment of incomes is great. All taxation is deemed by the taxpayer to be "inquisitorial" in some degree, and this is particularly true of an income tax. In England had been developed the plan called "stoppage at source." In our law the taxation of corporations at the rate of the normal tax, while requiring them to report the names of those receiving dividends and interest payments, affords an ingenious way of checking up the returns of individuals in respect to a class of investments which is steadily increasing in importance. § 9. #The graduation principle#. The most disputed feature of the income tax is the principle of graduation, or of progression. It is upheld in part because in this case it but offsets _regression_, that is relatively heavier taxation on the smaller incomes, in the case of the other kinds of taxes (tariff, property taxes, etc.). It is urged further that those of larger incomes, especially the largest, have marked advantages over others in making investments. Further it is urged that the higher the income the less does a certain rate cut into "the amount necessary for good living" (as was said in Congressional debate). This is in accord with the psychological principles of choice, of value, and of diminishing gratification. Finally, there is a widespread approval of the progressive rate just because it in so far acts as a leveling influence upon fortunes. The "additional" tax is already important fiscally, yielding over one-half of the total paid by individuals and one-fourth of the total from corporations and individuals. The income tax returns for the first ten months of the law (March to December, 1913) showed 356,598 taxable individual incomes, equal to about 1 per cent of the taxable population (considering minors to be usually not taxable). Even this proportion, small as it is, is much larger than that of the European countries having a general income tax. The first ten months' yield (March 1, 1913, to December 31, 1913) was over $60,000,000. A remarkable fact is that 21 per cent of all taxable incomes (not persons) were in the single Borough of Manhattan (the main part of New York City). The receipts from the income tax in 1913 were nearly 10 per cent of the ordinary receipts of the federal government, and about 2 per cent of total revenue receipts of all branches of government, the income taxes paid by individuals being about 1 per cent of the same total, and the super-tax about 1/2 per cent of the same. The receipts from the income tax during the fiscal year ending June 30, 1915, were $80,000,000, of which $39,000,000 was paid by corporations and $41,000,000 by individuals. Of the latter sum, over $24,000,000 was from the super-tax. § 10. #A system of taxation.# The task of reforming and developing the various kinds of taxes and of uniting them into a just and consistent plan for each of the divisions of government in the United States is a vast and difficult one. There are many conflicting interests among states, between states and nation, among the various minor political divisions, and among individuals and classes. There are also conflicting opinions regarding many features of the possible practical plans. Because of these it is safe to predict that progress will not be made quickly, steadily, nor always directed toward a clear ideal. If progress is to be rapid, the public must, however, have consistent principles by which its steps may be guided. In the foregoing kinds of taxation are the various elements which may be united into a system of taxation. It is useful to consider how this might be done. At the basis of the whole tax structure is taxation, by value, of concrete wealth at the place where it is situated (_in situ_). This should be regardless of the distribution of ownership or of the residence of the owner. The present misnamed "general property tax" already presents the main outlines of this form of taxation and the general changes necessary in law and method of assessment have been indicated above.[12] Corporation taxation may be adjusted to this either by separate treatment and assignment to state purposes only, or more simply for most states, by assimilating it with the general taxation of wealth and allotting due shares of the proceeds to the various taxing divisions.[13] The national government can, because of its exclusive power of levying tariff duties and also because of its exclusive control over interstate commerce, reach the tax-paying ability of the nation effectively by a combination of tariff and internal revenue taxes. These become a part of business costs, and are diffused over the whole population in general prices.[14] This system of impersonal wealth taxation may then be supplemented by personal taxation, applied through inheritance and income taxes. These forms of taxation extend over and reach many of the same persons and incomes as do ultimately the impersonal taxes. But the summation of personal incomes gives the necessary condition for applying the principle of progression so far as this is, by public opinion, deemed desirable either for fiscal or for social reasons. [Footnote 1: See above, ch.17, sec. 3, note, and sec. 5, on this distinction. The poll tax also is personal: see ch. 16, sec. 9.] [Footnote 2: In Utah the tax is 5 per cent on all estates over $10,000.] [Footnote 3. Exception, Utah.] [Footnote 4: Exceptions are Missouri, New Hampshire, Vermont, Virginia.] [Footnote 5: It would be more consistent with the purpose of equalizing fortunes to vary the rate not according to the size of the legacy but according to the size of the fortune which the legatee has, or would have, after receiving the legacy.] [Footnote 6: See Vol. I, p. 26.] [Footnote 7: In addition, certain items of receipts of companies or incomes of individuals are arbitrarily defined as property for purposes of taxation in a few cases in about fifteen other states. See Wealth, Debt, and Taxation, Report of the Bureau of the Census, 1907, p. 622.] [Footnote 8: Article XVI. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census enumeration.] [Footnote 9: It constitutes sec. 2 of the tariff act of 1913 entitled "An act to reduce tariff duties and to provide revenue for the government and for other purposes."] [Footnote 10: This may be seen in the following table: Normal Rate on excess Total tax on in next class tax on lower Nor- Addi- upper Total rate limit mal tional limit per cent Under $3,000 0 0 0 0 0.00 to 0.00 $3,000-$20,000 0 1 0 170 0.00 to 0.85 $20,000-$50,000 170 1 1 770 0.85 to 1.54 $50,000-$75,000 770 1 2 1,520 1.54 to 2.02 $75,000-$100,000 1,520 1 3 2,520 2.02 to 2.52 $100,000-$250,000 2,520 1 4 10,020 2.52 to 4.00 $250,000-$500,000 10,020 1 5 25,020 4.00 to 5.00 In excess of $500,00 25,020 1 6 upwards 5.00 to 7.00 By legislation in the summer of 1916, after the foregoing was in type, the "normal" rate was doubled and the additional rates were raised.] [Footnote 11: The exemption is $3000 for each if they are not living together. Thus the law offers a reward of $20 to make marriage a failure.] [Footnote 12: See above, ch. 17, sec. 5.] [Footnote 13: See above, ch. 17, secs. 15, 16.] [Footnote 14: See above, ch. 15, sec. 14, first paragraph.] PART V PROBLEMS OF THE WAGE SYSTEM CHAPTER 19 METHODS OF INDUSTRIAL REMUNERATION § 1. Workers subordinate in early societies. § 2. Workers in the Middle Ages. § 3. Growth of the wage system. § 4. Practicability of the wage system. § 5. Time work. § 6. Task work. § 7. Piece work. § 8. Premium plans. § 9. Aim of profit-sharing. § 10. Examples of profit-sharing. § 11. Difficulties in profit-sharing. § 12. Defective theory of profit-sharing. § 13. Purpose of producers' coöperation. § 14. Limited success of the plan. § 15. Its main difficulty. § 1. #Workers subordinate in early societies#. As far back as the history of settled and populous communities can be traced, the masses of workers have been subordinate. Civilization began with direction, with obedience to superiors on the part of the mass of men. Even in the rudest tribes, the women and children were subject to the will of the stronger, the head of the family. Among the Aryan races the family system was widened, and the patriarch of the tribe secured personal obedience and economic services from all members of the community. Chattel slavery, the typical form of industrial organization in early tropical civilization, seems to have been one of the necessary steps to progress from rude conditions; students to-day incline to view it as an essential stage in the history of the race. But as conditions changed with industrial development, chattel slavery became an inefficient form of industrial organization and a hindrance to progress. § 2. #Workers in the Middle Ages#. Serfdom for rural labor and many limitations on the workman's freedom in the towns were the prevailing conditions in medieval Europe. Serfdom was both a political and an economic relation. The self was bound to the soil; the lord could command and control him; but the serf's obligations were pretty well defined. He had to give services, but in return for them he got something definite in the form of protection and the use of land. Between the lord and the serf there continued an implied contract, which passed by inheritance from father to son, in the case both of the master and of the serf. In the towns conditions were better for the free master class of the artisans who owned their tools and often a little shop where they both made and sold their products. But the mass of the workers, shut out from special privileges, bore a heavy burden. There were strict rules of apprenticeship; gild regulations forbidding the free choice of a trade or a residence; laws against migration into the town; settlement laws making it impossible for poor men to remove from one place to another; arbitrary regulation of wages, either by the gilds in the towns or by national councils and parliaments, forbidding the workmen to take the competitive wages that economic conditions would have forced the employers to pay; combination laws forbidding laborers to combine in their own interest. These conditions prevailed even in the periods and in the countries often referred to as particularly favorable for the working classes (such as England in the fifteenth century). § 3. #Growth of the wage system#. Throughout the Middle Ages these conditions were gradually changing, and the changes were hastened by the discovery of America, by the social unrest accompanying the Reformation, and by other forces. Servile dues in the rural districts were, by the sixteenth century, commuted for cash payments in England and had begun to disappear in the other Western countries of Europe. The agricultural work was done partly by the peasant landowners, partly by yeomen farmers on their own land, and partly by laborers hired by landowners or by tenant farmers (enterprisers with some capital for equipment). The growth of commerce and of the mechanical trades in the towns required larger ships, factories, and shops, and increasing investments. This required in the towns an increasing proportion of hired laborers having little or no capital invested in industry, and living on wages. This change went on more and more rapidly with the introduction of machinery in the eighteenth and nineteenth centuries, and "the wage system" grew steadily to be a more and more important part of the whole economic structure.[1] § 4. #Practicability of the wage system#. This change has brought with it grave problems of social organization and social welfare, which it is not the place here to discuss. But whatever be the difficulties of the wage system it has certain practical merits of workableness which account for its progress and dominance.[2] The larger the market and the longer the waiting period in industry, the greater the element of uncertainty and financial risk. Under the wage contract the employer, as the one best prepared to do it, takes the risk as to the future selling price of the product; the worker gets in a definite sum at once the market value of his services. Wage payment, therefore, is a form of insurance to the workingman; he gets something definite instead of taking chances he is ill prepared to take. Wage payment is a form of credit to the laborer whose labor is applied to producing the goods for customers distant in time and in place. The employer advances to the workman the present value of the future sale, discounting it at the prevailing rate of interest. Wage payment implies a contract by which the employee on his part agrees to render service and the employer on his part agrees to pay for it. The methods of determining and measuring the amount of service of the employee are called "methods of industrial remuneration." The many varieties may be grouped in two classes: time payment and piece payment, corresponding with the two modes of measuring labor, time work and piece work. § 5. #Time work.# Time work came first and was long almost the only method. In time work the employee is paid by the hour, day, week, month, or year, as the case may be. This is very satisfactory for small enterprises, where the master works with his own hands alongside of the employee, overseeing him, teaching him, and stimulating him by his own presence and example of industry. This method prevails still in nearly all farming work, in many kinds of manufacturing, in most transportation, in clerical positions in trade, and in general where the employee must perform a variety of tasks. Considering a brief period, it might seem that in time work the worker is paid by time regardless of his effort or performance. However, in every industry there is a recognized, fairly definite standard of accomplishment for those getting the regular market rates of wages, so that the time-standard implies some performance- or piece-standard also. But this is judged by the employer only in a general way, and very commonly men of different degrees of efficiency continue for some time to receive the same money wage. Still, where any differences become noticeable to the employer in quantity of work, quality of work, or personal qualities of honesty, reliability, and good temper, the better workman is likely to obtain a better position, higher pay, more regular employment, or some other form of reward. The employer is more likely at the end of any period of employment, to discharge the man who falls short either in quantity or quality of work, and to retain and advance the better worker. The method of time-payment does not directly tempt the workman to slight the quality of his work by haste. It does not keep constantly before the worker the thought of his own interest in rapid work, often with an accompanying nervous and mental strain. In most occupations, therefore, the workers prefer time work. It does not take exclusive account of the quantity of material product, but leaves place for estimating various personal qualities of the employee which are of value in a business. § 6. #Task work#. There are thus both advantages and disadvantages in time work, and their relative importance varies in different industries and industrial conditions. Especially is the difficulty of supervising workers and of ensuring the performance of a certain standard, or minimum, amount and quality of work great in larger enterprises. Various methods of measuring the performance of the worker directly by some other than the time-standards have been developed. All of these, in a general way, involve the piece work principle. Task work is nominally time work, with a penalty if a certain amount of product is not turned out within a given period. The agreement may be that if the specified task is not done within the regular time, it must be completed in overtime without additional pay. This is also called "doing a stint." This method has been extensively used in the ready-made clothing business in America, and is to some extent involved in many cases of wage payment in manufacturing. § 7. #Piece work.# Piece work of the simpler, or ordinary kind, is that where the payment varies just according to the amount of the product, by some physical measurement, as yards of cloth woven, number of pieces turned on a lathe, or amount of type set by a printer. Usually careful inspection by some agent of the employer serves to keep the quality up to a certain standard. The rejected pieces are not paid for, and sometimes also the workmen are required to pay for the materials wasted by their poor work. Piece payment is convenient for home work, such as that of rural peasants weaving cloth for commission merchants or as that of tenement workers in cities. It is also employed very widely in the larger factories in textile and mechanical industries. Selling on commission is a form of piece work. In piece work the motive to activity is ever present to the worker, and almost always the worker turns out a larger product when paid by the piece than when paid by time. The employer benefits by the more efficient use of his machinery and equipment even when the price per piece is not reduced with the larger output per worker. The worker's earnings may increase rapidly under this plan, but as the manual dexterity acquired is usually of a very special kind which can be used only on one particular machine, the worker has little opportunity to resist a cut in his wages. For this reason and because of the undue strain upon the worker that often occurs, piece work is in many trades not favored by the workers.[3] § 8. #Premium plans.# Various modifications of piece work have been developed of late, all involving the features of a minimum task and of a premium for performance beyond that point. These plans are called "premium plans," "progressive wage systems," and "gain sharing." One of the first of these, Halsey's premium plan, fixes a standard time for a job and if the worker falls short of, or merely attains to, that standard he gets the regular pay; but if he takes less than the standard time he receives a fixed premium per hour for the time saved. For example, if the standard time is 10 hours for a $3.00 job and the premium for speed is ten cents per hour, the worker would receive 20 cents premium if he did the work in 8 hours ($2.40 +.20, total $2.60), and 50 cents premium if he did it in 5 hours ($1.50 + 50, total $2.00). His average wage per hour thus rises as his speed increases; it becomes 32.5 cents per hour when the job is done in 8 hours, and 40 cents per hour when the job is done in 5 hours. The reduction of cost per job to the employer evidently would be 40 cents in the first case, and $1.00 in the second. This is Halsey's plan, by which the worker gets one-third and the employer two-thirds of the time saved. The same plan has been applied (Weir's method) with a premium that equally divides between the workman and the employer the time saved. By Rowan's method the premium is not a fixed sum but a percentage of the standard rate per hour equal to the percentage of reduction in time consumed. For example, if in the foregoing example the time were reduced 20 per cent (to 8 hours) the premium would be 20 per cent of 30 cents, and the workman would receive 36 cents per hour. By this plan the premium becomes less for the later reductions than in either of the other plans. The utmost possible wages would be double the standard rate. A number of other variations have been worked out by the promoters of recent scientific management, and are known as Taylor's, Gantt's, and Emerson's plans. The authors of all these plans agree as to the importance of fixing the standard rate so that it will leave a possibility of considerable improvement with unusual effort, and of leaving the standard rate and premium unchanged as long as no new process or new machinery is introduced into the business. If this is not done the employees lose faith in the plan and refuse to make the necessary effort to earn the premium. Most of these plans of payment recently have been connected with experiments and studies in scientific management to reduce the time and increase the ease of the operations. In a variety of ways a bonus or a premium may be paid for quality, or for economy in the use of materials (as to a fireman for using less coal), or for various other results. Every business has its peculiar conditions, which make certain results especially desirable, and certain methods of reward practicable. In some industries, for example, the various plans of piece work and of premium payment are applied to groups of workers (as in collective piece work), the total payment being then divided among the members of the group in some agreed proportion. § 9. #Aim of profit-sharing.# Profit-sharing is rewarding the laborer with a share of the profits in addition to his usual contract wages. Payments by the piece and premiums for output are solely dependent on the efforts of the particular workman (or collective group), but in the plan of profit-sharing a premium is given in addition to the regular wage if, at the end of the year, the business as a whole has yielded a profit above a certain amount. Profit-sharing is not merely a gift; it is done usually in accordance with a definite promise in advance. The employer adopting the plan does not intend to lose by it. His purpose is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision, and thereby increasing profits. He offers to divide with the workman the additional profits which are expected to result from their efforts. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workman's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of personal interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes may be averted, good feeling promoted, and contentment furthered if the interest of the worker can be made to approach, and in large measure to become in harmony with, that of the employer. The economic result of the plan, if it can be made to work, should be to reduce the costs of these establishments below what they are. The crucial question is whether profit-sharing alone in any particular case will insure that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. For the amount of profits is affected not only by the amount of output, but also by a number of other things that are quite outside the control of the workmen. § 10. #Examples of profit-sharing.# The profit-sharing plan seems first to have been successfully tried in Paris, in 1842, by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. It has been tried in many hundreds, possibly thousands, of cases, and is operating in some form or another in more than a hundred firms in Europe and America. The most notable examples of profit-sharing in the United States are the Pillsbury Mills in Minneapolis, Procter and Gamble's soap-factories, in Ivorydale, Ohio, the Nelson Mfg. Co., in Leclaire, Ill., and the Ford Automobile Works, in Detroit. In some cases both manufacturer and workmen value the system highly. It probably has its greatest success when applied in prosperous establishments where profits are regular and large, and where a steady working force is especially desired. The proportion of business done in this way is not large. One hundred firms is a very small fraction of 1 per cent of the total number of firms in Germany, France, England, and America. A still more important fact is that true profit-sharing has spread little since 1890, tho various practices have developed under that name. The most noteworthy of these is the selling of stock, usually at a somewhat lower price, to the employees of a corporation so that, as stockholders, they may have a motive to work for the success of the company (e.g., the United States Steel Corporation). This method as applied to a select few of the employees, who are advanced to official positions in a corporation, is very widely adopted. § 11. #Difficulties in profit-sharing.# It seems at first difficult to explain this comparative failure of a plan that looks so attractive in spirit and of which so much was hoped. Yet objections come from the side both of the workman and of the employer. The workman lacks knowledge of the business and is suspicious of the bookkeeping. If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it. The working of the plan remains in the employer's hands, and the workman really is not a partner in the business. Moreover, the plan puts a limitation upon the workman's freedom to compete for better wages by changing his place of work. It is indispensable to make length of service in some degree a condition to the sharing of profits. Workmen, coming and going, cannot be allowed to share; the percentage given to the others increases with length of employment. Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages. The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the main reason that organized labor opposes it. The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant complaints of the workmen. He dislikes to have the profits known; if they are large, the advertisement of success invites competition; if they are small, publicity may injure credit and depress the value of the enterprise. In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually fails after a short trial. Business methods are severely subject to the principle of the survival of the fittest. Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones. If a method fails to spread when it has been tried for seventy-five years and all are free to adopt it, the strong probability is that it has serious defects inherent in it. § 12. #Defective theory of profit-sharing.# It is usually better to make wages depend on the worker's efficiency rather than on the profits of the whole business. The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker's control. Any change in the amount of profits is only partially and indirectly related to increased effort of the worker. The "profits" may be nothing, tho all the manual workers may be exerting themselves to the utmost. The wage bill is but one of the groups of costs. Profits are the net result of many influences. Chief among these is the skill in planning and conducting the business. This function of management is either performed by the same person that is carrying the financial risk, or by some salaried employee selected by him. It is this management function the reward of which should, in theory, be made to vary with the amount of profits; and in fact such an arrangement (managerial profit-sharing, so to speak) is undoubtedly in operation in thousands of cases, but is not included in the usual conception of profit-sharing. Many salaried managers are in receipt of a share of profits and are gradually acquiring an interest in partnerships or a larger share of ownership in the enterprise for which they work. But ordinary profit-sharing is not in accord with the general trend toward the centralization of responsibility in the hands of competent managers, ensuring to the worker a definite amount in advance, as high as conditions make possible. The system of premiums, or bonus payments, for output, where it can be safeguarded against abuses, gives in most cases better results and is rapidly spreading. It is sounder in conception and works better in practice as a method of remuneration for most of the workers. § 13. #Purpose of producers' coöperation.# Since the early part of the nineteenth century many well-wishers of humanity have cherished high hopes that the whole wage system might gradually be replaced by the plan of producers' coöperation among workingmen. Producers' coöperation is the union of workers in a self-employing group, performing for themselves the enterpriser's function. The workers hope to get what seems to them to be a needless drain of profits into the pockets of the employer and unnecessarily high salaries to managers. To do this they must perform the enterpriser's function as to investment and risk. Collectively or through their representatives they must undertake to furnish capital and management as well as hand-work. The capital may be supplied either by the members, individually or collectively, or may be borrowed from outsiders, who are thus merely passive investors. Usually the return to capital invested by members is limited to 5 or 6 per cent, so that this part of the capital likewise is treated as a passive investment, and all the real variable profits are distributed to the members as wages. The hope has been as in profit-sharing to increase the amount of profits through the stimulus the plan might give to the workers and by saving in friction, disputes, and strikes. § 14. #Limited success of the plan.# Practically the plan has been made to work in a comparatively few simple industries. The most notable example of successful coöperation in America was in the cooper-shops in Minneapolis. There were few and uniform materials, patterns, and qualities of product, few machines and much hand-labor, simple well-known processes, a simple problem of costs, a sure local market. After more than thirty years the main shop was still in operation, but with a membership of the older men and with no growth, A number of the less skilled workers receive ordinary wages. In America a few of the productive coöperative companies are found operating small factories. In England, there have been numerous successful societies, but all in small enterprises, mostly connected with agriculture. Within the whole field of industry, this method of organization makes little if any progress. Most experiments have failed and the successful ones have become or are tending to become ordinary stock companies with most of the stock in the hands of a few men. Therefore, whether losing or making money, they nearly all cease to exist as coöperative enterprises. This result has disappointed the hopes and prophecies of many well-wishers of the working classes. § 15. #Its main difficulty.# The main difficulty in producers' coöperation is to get and retain managerial ability of a high order. Failure to do this results in inability to maintain and keep in repair the equipment and to pay the ordinary returns to the passive investment, and financial failure follows. There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in coöperative shops by jealousies and rivalries, and by politics among the workmen. A man selected by his fellows finds it difficult to enforce discipline. In coöperation there is occasionally developed good business ability that might have remained dormant under the wage system; some work-men showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing establishments where their function is not in such bad repute, and where they are given higher salaries, or they go into business independently, being able easily to get the needed backing from passive capitalists. Coöperative schemes thus suffer from the workers' inability to appreciate the functions of enterprise and management. Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. Further, they fail to see that the investment function is an essential one. The theory of exploitation, as explaining profits, is very commonly held in a more or less vague way by work-men. With a body of intelligent and thoroughly honest work-men, keenly alive to the truth, the dangers, and the risks of the enterprise, coöperation would be possible in many industries where now it is not. Producers' coöperative schemes usually stumble into unsuspected pitfalls. When a heedless and over-confident army ventures into an enemy's country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen. The coöperative principle has been embodied much more successfully and on a larger scale in America in the form of producers' selling organizations or of consumers' coöperative stores. As, however, both of these forms of organization have been developed in America more largely by farmers than by wageworkers, the discussion of them may better be undertaken in connection with problems of rural organization rather than with those of labor. [Footnote 1: See Vol. 1, pp. 227, 318, 322; also above, ch. 2, sec. 14.] [Footnote 2: See e.g., Vol. 1, p. 329, on selection of managed and of managers.] [Footnote 3: See below, ch. 20, sec. 6.] CHAPTER 20 ORGANIZED LABOR § 1. Changing relations between employers and wage-workers. § 2. Need of common action among wage-workers. § 3. Functions of labor organizations. § 4. Types of labor organizations. § 5. Statistics of labor organizations. § 6. Collective bargaining. § 7. Limitation of competition among workers. § 8. Strikes in labor disputes. § 9. Frequency and causes of strikes. § 10. Picketing and the boycott. § 11. Effects of organization upon general wages. § 12. Competitive aspect of organization and particular wages. § 13. Monopolistic aspect of organization and particular wages. § 14. Open vs. closed shop. §15. Political and economic considerations. §16. The public's view of unions. § 17. Future role of organization. § 1. #Changing relations between employers and wage-workers.# The "organization of labor," or the "labor movement," so striking a feature of the world to-day, is of comparatively recent origin. It did not begin and advance _pari passu_ with the beginning and early growth of the wage-system as above briefly described.[1] In anything like its modern form the labor movement dates from the early years of the eighteenth century. Much of the largest part of its history in all countries, excepting England, is after 1860. Why was organization among the workers so long delayed after wage-payment became common, and why when it once appeared did it spread so rapidly in some directions, and why is it still limited in the main to certain fields of industry? These three questions are but one question in three forms and to answer one fully would be to answer all. The modern trade union appeared in England shortly before the industrial revolution,[2] and has extended as fast and as far as the same stage of industrial development has been attained in other countries. The effort of wage workers to organize themselves appears everywhere to result from the separation of the economic and personal interests of employers and workmen. As the control of industry became more concentrated in larger units with the advent of power machinery, the feeling of economic unity among the different ranks of industry was further weakened. The average workman had less opportunity of becoming a master, an employer. In the days of the old hand industry, master, journeyman, and apprentice worked side by side at the same bench. Almost every apprentice might hope to become some time a master, and many a one did so. To-day most wage-workers in large establishments have no hope of rising out of their positions. The mere largeness of an establishment forbids also the personal acquaintance of employer and workman. As a result of these changes, the workmen become more "class-conscious" of their position as wage-workers and the employers in many establishments take the attitude of buyers of labor as a mere ware. When the employer then feels the pressure of competition he is more likely to force the lowest wage that is possible and to compel the workers to accept less favorable conditions than if he were in more personal relations with them. Where the immediate direction of an establishment is intrusted to paid managers who are responsible to stockholders, the managers' success is judged almost exclusively by the dividends they succeed in earning. Hence they are under stronger and more persistent temptation than are active owners to drive hard bargains with their employees. Many examples might be found where managers and resident directors have wished to pursue a more liberal policy than absentee shareholders would permit. § 2. #Need of common action among wage-workers.# These same industrial changes caused employers, even earlier than it did employees, to have something of a "class-conscious" feeling, which tempered the spirit of their mutual competition, especially in bidding for the services of workers. The smaller the number of employers the easier it is by an understanding to suppress competition on their side. If there is only one factory of a kind in a town the employer is able at times to drive a harder bargain with his employees. Especially in times of industrial depression is a change of employment difficult for the laborer, involving for him much trouble and loss of time and money in moving. But it is possible to exaggerate the degree to which competition among employers of labor is weakened to-day. In the long run and at many points competition must be felt in all such cases. The notoriously unfair employer will find his workmen drifting away, his working-force reduced in number and quality at times of greatest need, and his evil reputation going abroad among workmen. A better realization of this fact has led many employers to pursue a farther-sighted policy that fosters a better understanding and a kindlier feeling on both sides of the labor-contract. Another effect of the growing size of business units is to give the workers less personal acquaintance with each other. When they are unorganized they have less unity, common opinion, and power than the workers in the old-fashioned shop with its close personal acquaintance and ready interchange of views. In the wilderness of a great modern factory a worker may be unknown in name and interests to the man touching elbows with him. Moreover, in America, differences in nationality and in speech among immigrant workers often effectively prevent a common feeling of their interests and assertion of them. There is an analogy between these conditions and the political conditions that early led simple democracies to give way to representative governments. So long as a community is small and men know each other personally, popular government may exist without complex machinery, but when numbers become larger, public opinion can be concentrated and made effective only by delegating the functions to elected representatives. § 3. #Functions of labor organizations.# Out of these conditions have grown the various kinds of labor organizations. Their first object is to maintain and increase wages. Closely connected with this is the remedying of various abuses in respect to methods of payment, measurement of the output, and conditions of work. Almost coördinate with the aim of higher wages of recent years has been that of the shorter work day. Labor leaders have frequently asserted when the two demands have been made together, that a reduction of hours is the more desirable. Better conditions of safety and sanitation in their work were not the first thought of laborers when they organized. As a result of habit and ignorance (widely prevalent at that time) they were remarkably unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers, the "philanthropists," often described as sentimentalists. But the modern, more enlightened, labor movement has better ideals and policies in respect to the safety, sanitation, and decency of the working places. Labor organizations have also secondary objects of very great importance. They are nearly always in some measure mutual-benefit associations, and provide in varying degrees insurance against accident, sickness, death, or lack of employment. All unions in a measure serve their members as employment bureaus, and some make this am important feature. Through trade-papers, correspondence, traveling members, and in meetings, information is exchanged regarding conditions of employment in various parts of the country. Labor organizations by means of their discussions and through their special periodicals are a strong educational force in matters political and economic. The local labor organizations often come to be the center of the social activities and interests of many of their members, and even of all the members of their families. The organizations thus serve the functions of social clubs, of literary societies, and of civic centers for their members. § 4. #Types of labor organizations.# Among the many organizations of wage-earners three main types may be distinguished: the labor union, the trade union, and the industrial union, tho often they are all spoken of as trade unions without distinction. A labor union admits all classes of wage-earners and even business and professional men into the same local chapter. The "Knights of Labor" is the most notable example that America has seen of this type. The national organization was composed of local chapters, to membership in which every one was eligible excepting bankers, lawyers, gamblers, and saloon keepers. Organized as a single local chapter in 1869 it grew very rapidly until it attained its maximum membership of 600,000 in 1886. From this point it rapidly declined in membership, and since 1900, altho its organization is still maintained, has been of very little influence. A trade union is an organization of wage-earners in the same handicraft or occupation. Unions exist among workers in all the old distinctive handicrafts, such as the printers, stone cutters, cigar makers, carpenters and in many other groups such as musicians and retail clerks. The local chapters in many cases have been long united in national unions (often international, including the United States and Canada). An industrial union is one that seeks to unite all workers employed in the same class of establishments regardless of their craft or the kind of work they do. The most notable examples are the United Mine Workers, the Brewery Workers, and the Industrial Workers of the World. In 1881 a number of national trade unions united for certain purposes, to form the American Federation of Labor with a membership of about a quarter million workers, which has steadily increased since that date. The American Federation of Labor now includes also some important unions of the industrial type. Several strong national trade unions (the most important being the brotherhoods of railroad employees) are not affiliated with the American Federation of Labor. § 5. #Statistics of labor organization.# The ratio of organized workers to the population is estimated (figures for 1910) to be highest in the United Kingdom, being nearly 7 per cent; it is next highest in the German Empire, being nearly 6 per cent; whereas, in the United States, it is but 2.3 per cent. This difference is largely due to the much greater relative importance of agriculture in the United States. The total membership of trade unions in the United States and Canada is estimated to have been in 1910 about 2,200,000, of which only about 100,000 were in Canada. This was 5.5 per cent of all persons (38,130,000) gainfully employed, or 6.8 per cent of male employees, and 9 per cent of female employees. Organization was very weak (less than 1 per cent) among the workers in a group of industries occupying nearly one-half of all workers, including agriculture, the hand trades, oil and natural gas, salt, and rubber factories. Organization was not of large extent (1 to 10 per cent) in other groups of industries occupying more than one fourth of all workers, including those engaged in producing quarried stone, food stuffs, iron and steel, metal, paper and pulp, stationary engineers, in public, professional, and domestic service, and in clerical work. Organization was of much greater strength, including 10 per cent or more of the workers, in the remaining industries and occupations. If deduction be made of the employing and salaried classes, about 7.7 per cent of all persons occupied were organized. If, further, deduction be made of agricultural, clerical, publicly employed, commercial and domestic workers, about 16 per cent of the remaining 13,760,000 persons are organized (of women 3.7 per cent). Among the occupations most highly organized are those of railway conductors (87 per cent) and engineers (74 per cent). In the building trades about 16 per cent are organized, of granite cutters 69 per cent, masons 39 per cent, plasterers 32 per cent, carpenters 21 per cent, and painters 17 per cent. Similar striking differences appear among the occupations in the printing industry; of stereotypers 90 per cent are organized and of compositors only 35 per cent. These figures point to inherent differences in the conditions favoring organization. Even in the same craft a high degree of organization may be found in the cities and little or none in the smaller towns (e.g., in the case of the printing and building trades in general).[3] § 6. #Collective bargaining.# The fundamental policy of trade unions is the substitution, for the individual wage bargain, of collective bargaining between the delegated representatives of the working men and the employer, or group of employers, or their representatives. The wage-earners bargaining collectively may be those of a single establishment, or of a group of establishments in the same locality, or of a wider territory even national in extent. Accordingly, they are represented in the negotiations by trade-union officials with narrower or wider jurisdiction. Employers in some cases had tacit understandings with each other before laborers were organized. But in many cases the individual employer was at a marked disadvantage after the organization of his employees. The result has been the rapid spread of employers' organizations, so that in industries where laborers are highly organized, two-sided collective bargaining has become more and more usual. A large part of the effort of trade unions is directed toward ensuring the use of collective bargaining. This is the purpose of many of their demands, even of some that hardly appear to have any such consideration. Collective bargaining practically necessitates the use of "the standard rate," since only with reference to some standard rate, a market price for labor, is it possible for a wage contract to be made by labor officials for a group of men. The standard rate may be a piece price or a time price, and in many cases the unions strive to secure the latter as more convenient for their purposes. The standard time rate usually is but a minimum and many of the more skilful workers receive wages above the minimum. But the standard minimum tends to become also the maximum in many cases, the more so when the union has succeeded in enforcing a pretty high standard rate. § 7. #Limitation of competition among workers#. In order that the representatives of organized laborers may act effectively in collective bargaining the first condition necessary is that a large proportion, if not all, of the workers of the trade in the establishments concerned shall be organized. A common sense of wrong is one of the strongest motives to bring workers together, and has prompted the origin of many a local chapter. Then constant and strenuous efforts are made to bring workers into the organized ranks. Experienced organizers knowing all the arts of persuasion devote their whole time to this task, being paid regular salaries. When friendly argument fails, threats may be used and sometimes personal violence. The public opinion and class feeling fostered among members of an organization in times of difficulties are analogous to the sense of patriotism in the nation at large and at times may displace it in the hearts of organized laborers as is seen in opposition to the militia and to the maintenance of order in times of strikes. The most effective of all peaceful methods if petty persecution rising at times to social ostracism. The individual who declines to enter the union is denounced as a traitor to his fellow workers and is made to feel their scorn. The use of the union card to be carried by every member to show whether he is in good standing is an effective way of enforcing these measures. Finally, where all these measures fail, pressure may be brought upon the employer to get him to force unwilling workers into the union.[4] Further to give control over those working in a trade and to reduce competition among workers, unions often limit the number of apprentices and determine who shall have the privilege of learning the trade. By a variety of regulations they limit the output and in many cases (tho less frequently now) have opposed the use of labor-saving machinery. Further to enforce these policies they seek to have each special kind of work controlled by a special union. This gives rise to disputes between rival unions and causes annoyance and loss to the workers themselves, to the employers, and to the general public. § 8. #Strikes in labor disputes.# A strike is a concerted stopping of work by a group of employees to enforce a demand upon the employer. A lockout is an employer's closing of his shop because of a disagreement with his employees. The strike is, in its direct and indirect, immediate and ultimate, effects the most important weapon of the organized wage-earners in their relations with their employers. To newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer, or for making him suffer to compel him to accede to their demands. The effectiveness of a strike lies in the loss it threatens or occasions in the stopping of machinery, the ruin of materials, the loss of custom, and the failure to complete contracts that have been undertaken. The employers will often, to break a strike, pay to others for a time more than the current rate of wages. The success of the strikers being dependent on their ability to keep the employer from filling their places, their energies are bent upon that end. The losses that strikes cause to workers in stoppage of wages, to employers and investors in destruction of plant and in suspension of profits, and to the public in the interruption of business, aggregate an enormous sum. The direct losses to employers and strikers in the 20 years between 1881 and 1900 have been estimated to have been nearly $500,000,000, a large sum, but amounting to less than 1 per cent of the wage-earners' incomes. It is, however, impossible to estimate at all exactly losses that in many cases are indirect and intangible. The strikers are concerned in each case not with the balance of total losses and total gains to society as a whole, but with the net gain that they expect to accrue in the long run to themselves. Viewed in this way it is true that there are various indirect benefits in strikes that are not easily calculable, particularly the advances of wages made by employers to avoid strikes which they know will otherwise occur. In regard to the wisdom of any contemplated strike, opinion is always somewhat divided, as it is in regard to the value of strikes in general. § 9. #Frequency and causes of strikes#. Strikes were relatively decreasing in number from 1880 to 1900, but from 1901 to 1905 the annual average was more than twice as large as in the preceding decade. On the whole, strikes have been more numerous in periods of business prosperity when there was a better chance to get concessions from the employers. But they occur also in the periods following crises, when the workers seek to minimize cuts in wages and to prevent the depression of working conditions. More broadly viewed, strikes appear to accompany readjustments to dynamic conditions. As wages as a rule rise more slowly than general prices,[5] it was to be expected that the period since 1900, in which the general price level was rising at the rate of about 3 per cent a year, should have been marked by increasing resort to strikes. The immediate causes of strikes have been changing in relative importance. In 1881, at the time of the very rapid organization of unions, over 71 per cent of all strikes were directly connected with wage demands (61 per cent for increase and 10 per cent against reduction). But in 1905 the total for these causes was only 37 per cent, whereas the proportion of strikes for reduction of hours nearly doubled (from 3 to 5 per cent) and the proportion of those concerning recognition of unions and union rules increased fivefold (from 6 to 31 per cent). Ultimately nearly every demand of the laborers is related to the question of wages; but these figures show that when organization is new this relationship is more immediate, whereas later more effort is directed toward securing the stronger strategic position that comes with recognition of the union. § 10. #Picketing and the boycott#. Picketing by strikers or their friends is intercepting and accosting all persons approaching or leaving the place of work, to inform them of conditions and to dissuade them from working there. When peaceable means fail, often there is recourse to violence both against the employer and his property and against nonstriking workers. Indeed, many persons declare that peaceable picketing is impossible, and it surely is difficult to attain in view of the temptations of human nature under the circumstances. Almost always connected with a strike is the practice of the boycott, which is a combination of wage-earners to cut off an employer (or group of employers) from business dealings. The boycott is found in varying forms and degrees, broadly distinguished as simple and compound-boycott. In simple boycott only persons directly interested in the trade dispute refuse to deal with the boycotted person. The question arises as to who are to be deemed directly interested, whether it includes only the actual strikers in a particular establishment, or whether it includes organized workers in sympathy with them. The latter case is presented when an "unfair" list is published in labor journals. It seems that only the former case is a really simple boycott. The use of the simple boycott, the refusal of a person, or even of a conspiring group of persons, to deal with a person with whom they have an industrial dispute, appears to be a part of the elementary rights of personal liberty. Beyond that point the boycott is compound in varying degrees.[6] It is the compound form which is usually referred to in discussion and in court decisions on the subject. It is the compound boycott that has been described as "a combination to harm one person by coercing others to harm him." The compound boycott, as experience shows, has moral limits as well as legal limits. It is doubtful whether the boycott can be extended at all beyond the first degree of personal relations without becoming antisocial, whether it is the weapon of organized workers or of organized wealth. The endless-chain boycott, a measure of excommunication without limit, pronounced against an offending employer, non-union workers, and every one in any way befriending them, is an effort to drag every one else into a dispute that is primarily a private matter. § 11. #Effects of organization upon general wages.# The crucial economic problem in connection with trade unions is not as to their methods (that being rather a political problem) but as to their effect upon wages. There must be distinguished two questions: first, as to their effect upon the general level of wages; and next, as to their effect in raising the wages of the organized laborers alone. As to the first, the thought has sometimes been expressed by sympathetic social students outside of trade-union circles that but for the organization of labor wages in America would be no higher than they were in 1850. This seems to be assumed in much of the argument of labor leaders, for they speak as if all wages, but for trade unions, would be at the starvation level; and they credit everything above that level to the work of the union.[7] This claim is peculiarly effective in America, where wages are and always have been relatively high. But proof of the claim is lacking. As we have seen, even now fewer than 1 in 16 of all gainfully employed, and fewer than 1 in 12 of those working for contractual wages are organized. On no principle of value could the mere organization of one-twelfth of the wage-earners, without permanently withdrawing them from the labor market, explain the relatively high wages of the other eleven-twelfths. In many lines where labor is not organized, as in teaching, clerical, professional, domestic, and agricultural services, wages have risen as much or even more than in most of the organized trades. The underlying economic forces determining the general level of labor-incomes in a country are much more fundamental in nature than labor unions or protective tariffs.[8] The trade-union authority already cited seems in another passage to admit a view not essentially unlike that just expressed when he says: "Capital is increasing faster than population.... It seems therefore merely in obedience to natural laws that wages should rise." The only reasons ever suggested for thinking that the organization of one-twelfth (or any larger proportion of the wage-earners) could in any general way raise the labor-incomes of those remaining unorganized are: first, that organized labor sometimes leads the way in securing favorable legislation; and, secondly, that if organized workers get higher wages this sets a standard which it is easier for the unorganized then to attain. Both of these suggestions may have some little validity in special cases, affecting slightly a small proportion of the unorganized workers, but neither touches fundamental causes of general high wages. Whereas, it is clear that when the unorganized laborers constitute the main body of consumers for the products of organized labor (and this unquestionably is in large measure the case) any increase in wages that can be secured through organization by a portion of the workers must, in part, be subtracted from the "real" incomes of the unorganized workers. The employer is middleman, not to a great degree the ultimate consumer of labor.[9] Some part, it is true, of the higher wage might be taken from profits or from wealth-incomes, but this would still leave the unorganized workers the losers. § 12. #Competitive aspect of organization and particular wages.# A different question is presented as regards the influence of organization upon particular wages, and primarily upon the wages of organized labor. The trade-union authority before cited says, "Where there are no unions wages should be lower. This is exactly the case." And he quotes: "Wherever we find union principles ignored, a low rate of wages prevails and the reverse where organization is perfect." But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." If this be true, as doubtless it is to some degree in many trades and places, it is in accordance with competitive principles that, as the elite of the trade, the organized laborers should get higher wages than those outside the unions. Moreover, the unions exist mainly in the more populous places where costs of living as well as wages range higher than in the small towns and in the rural districts. A comparison merely of wages in money in such cases is misleading as to the conditions of real income. Further, a higher standard of output prevails in the cities where organization is greatest, and older men and the less efficient that are unable to "keep up the pace" drift away into unorganized shops or to villages where no standard union rate is in force. So far as unions help to develop the intelligence and promote the sobriety and efficiency of their members, they are a positive economic force making for higher wages. The book before quoted expresses, somewhat vaguely, an opinion in accord with these facts when it says: "It is an error to think that the trade union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." And so, with organization as well as without, the wages of individuals and of classes of laborers are determined by the general principles of price as applied to their services. Where neither the employer has a monopoly in his business nor the organized laborers have a monopoly of the labor supply, there is two-sided competition in the labor bargain, and organization may help to raise particular wages inasmuch as it acts in the competitive ways above mentioned and as it helps to restore to the laborers a truer equality of competition. § 13. #Monopolistic aspect of organization and particular wages.# The action of organized labor is not, however, limited to the competitive field, above discussed. Wages in particular industries may, by the action of trade unions be raised and maintained above a true competitive rate. This of course can be done only in accordance with the principles of the service-value to the consumer and of service-price in the employment-market. The supply of labor is in a variety of ways artificially limited by the efforts of the unions. It may be done temporarily by striking when a failure to fill orders will cause the employer exceptional loss. Violence in strikes and boycotts is often the desperate attempt to create and assert a measure of monopoly power where of itself it does not exist, i.e., where other workers stand ready to take the jobs at the prevailing rates of wages. Monopoly is created if apprentices are limited to fewer than in the long run would be attracted into the trade by the prevailing wages. It is created if the unions artificially limit output to less than is consistent with the health of the worker. Monopoly is created if unions strong enough to keep "scabs" from getting work, fix their dues high or put other obstacles in the way of increasing the membership. Probably the most striking cases of high wages for organized labor are of this kind. The element of labor-monopoly evidently is mingled in all degrees from the slightest to a very great amount, in particular economic situations. § 14. #Open vs. closed shop.# The question of labor monopoly is involved in the very crucial question of the closed vs. the open shop. A closed shop (or union shop) is a shop in which no non-union men may be employed, even at union wages. Its existence is evidence that the union is strong enough to compel the employer to act on this principle and thus virtually to force all his employees into the union. The refusal of a demand for the closed shop is often the ground for a strike. Where this is so unions usually assert that the closed shop is essential to the existence of the union. If union and non-union men work side by side there are many ways in which the employer is able to discriminate so as gradually to break down the union. If business slackens, the union man may be the first to be discharged; if any preference is given it is to the non-union man. While this may be true, it would seem, on the other hand, that an unmodified closed shop, with the conditions of membership in the control of the union, creates a distinct monopoly of labor leaving the employer helpless in any wage dispute and enabling the union to enforce its every demand regardless of the competitive conditions of the labor-market for that class of services. § 15. #Political and economic considerations.# The question here takes on a broad aspect, Is the closed shop, and are the other policies of trade unions, morally right; and ought they to be legally sanctioned? The answer to such questions is not for the economist alone to give. The questions involve other than economic considerations. They involve moral and political considerations--not merely existing formal law, but the fundamental issue of personal liberty and of interference with the liberty of some citizens by another group acting without political authority. For example, if a workman is unable to earn the standard rate[10] and is not permitted to take less, he is forced to move to a place where there is no union, or is forced out of the trade entirely. In the latter case he probably is compelled to take a lower wage than he could get in his regular occupation. Likewise, this change artificially increases the pressure of competition and reduces the wages of others in the occupation to which he turns. So in the case of persons prevented from becoming apprentices in a trade, or kept from taking work by threats, or by the dread of boycott, or by the fear of violence, in any degree however slight, there is present an element of personal coercion by the organized laborers. This is the price others are made to pay for a favorable effect on the wages of the organized laborers. Now the strictly economic question concerns merely the part as to the effects upon wages, and the economist (as such) is going outside of his special field when he pronounces on the moral rectitude (and the desirability in law) of such acts and policies. One who fully shares the feelings of the organized workers will believe that the winning of a strike or the general improvement of the strikers' condition is so important that it outweighs the evils to other individuals and to society as a whole. Indeed, to one in that state of mind the evils appear very small or nonexistent. The economist can only issue the warning that the commonest illusion he encounters is the belief of each class--commercial, banking, manufacturing, wage-earning--that what is for its particular interest is, in a peculiar manner, for the general interest, so much as to justify favoring legislation or special exemption from the general law, or even sheer lawlessness. § 16. #The public's view of unions.# We may, however, observe the view of the onlooker striving to be impartial. The attitude of the public in labor disputes, and particularly in regard to the closed shop, is a vacillating one. The general public sympathizes in large measure with the unions in their efforts up to a more or less uncertain point; but the public does not like to see organized labor with the power to dictate terms absolutely to the employers any more than it likes to see employers crush the union. The unions are effective in varying degrees in strengthening the bargaining power of the workers, and accordingly the results vary not merely in degree but in kind. The public wishes to see "fair play," and up to a certain point the union is a device to get fair play. In truth, what is in the public's thought, somewhat vaguely, is approval of unions so far as they go to establish a real equality in competitive bargaining with the employers, but disapproval where the power of the union gets greater and becomes monopolistic. It is at this point that organized labor loses the sympathy of most of "the general public" outside of unions. When the union tries to force a higher wage than the market will warrant, when it strives not to establish but to defeat competition, the public condemns. It sees, tho not quite clearly, that such action makes an unstable equilibrium of wages which tempts to constant friction and discord with employers and with unorganized laborers. It sees also that if the unions force a wage higher than a fair and open market affords, this is rarely done at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen.[11] In accordance with these facts and opinions there has developed, at least in one respect, a pretty definite conviction on the part of the public regarding the closed shop, namely: the closed shop should go only with the open union. A union under the closed shop policy is exercising a quasi-public function, that of controlling the industrial action of private citizens against their will. The union therefore, in this view, must cease to be a purely private, voluntary organization, and become in some respects subject to public regulations as to its internal rules and administration. This view, however, is very unacceptable to the leaders of organized labor in America, and there the question now stands. § 17. #Future role of organization#. In the light of the principles of wages it appears that organization most easily gains results, and the most stable results, when wages are below or near the competitive rate. An earnest effort on the part of the workers is necessary for them to get the share that true competition would accord them, but the attempt to force wages beyond that point must be the occasion of increasing friction. With so modest an ideal however, as the true competitive wage, organized laborers and their leaders cannot be expected always to be content. Aside from its effects upon the wage-bargain, unionism finds its greatest justification is in its unspectacular fraternal, mutual-benefit, and educational functions. The chief forces favorable in the long run to wages that can be affected by organization are domestic peace, order, and security to wealth; honesty and good faith between man and master, in law-maker and in judge; efficiency and intelligence of the workers; and far-sighted social legislation. Some of these contribute to greater productiveness, others to a fairer distribution. In all these ways organized laborers have made valuable contributions, unfortunately neutralized in many cases by a narrow class outlook. Organized labor is here to stay for a long time to come, and as the elite of the wage-earning class it should, and probably will, be an increasing force for political betterment and for social welfare in the republic. [Footnote 1: See ch. 19, secs. 1-3.] [Footnote 2: See Vol. I, p. 459.] [Footnote 3: See _Quarterly Journal of Economics_, May, 1916, article by L. Wolman.] [Footnote 4: See below, sec. 14, on the closed shop.] [Footnote 5: See Vol I, pp. 223-224, and above, ch. 6, sec. 12 and ch. 10, sec. 7.] [Footnote 6: The "unfair list" is usually given as a form distinct from either the simple or compound forms. The "fair list" published either by labor journals or by a consumer's league is not declared to be a boycott.] [Footnote 7: In a book by an English trade-unionist, Trant, reprinted and circulated by the American Federation of Labor as representing its theory and claims, all the advances that have been made in wages are said to be due to the trade-unions.] [Footnote 8: See Vol. I, pp. 227, 439, 466, 467, 504-507; and above, ch. 14, sec. 8.] [Footnote 9: See Vol. I, pp. 217, 222-223, 352, 356.] [Footnote 10: See above, sec 12.] [Footnote 11: We are expressing here the general opinion, not pronouncing a final justification of competition as a rule of conduct. On this something will be said later, in ch. 31.] CHAPTER 21 PUBLIC REGULATION OF HOURS AND WAGES § 1. Spread of the shorter working day. § 2. The shorter day and the lump of labor notion. § 3. Fewer hours and greater efficiency. § 4. Child-labor. § 5. Child-labor legislation. § 6. Limitation of the working day for women. § 7. Limitation of the working day for men. § 8. Broader aspects of tins legislation. § 9. Plan of the minimum wage. § 10. Some problems of the minimum wage. § 11. Mediation and voluntary arbitration. § 12. Compulsory arbitration. § 13. Organized labor's attitude, toward labor legislation. § 14. Organized labor's opposition to compulsory arbitration. § 15. The public and labor legislation. §16. The public and compulsory arbitration. § 1. #Spread of the shorter working day.# Since about 1880 a shorter working day has been one of the prime objects of organized labor in America. Notable progress was early made in some trades, reducing hours from 11 to 10, or from 10 to 9, and in a few cases from 9 to 8. In the building trades in the cities, especially, the eight-hour day has come to be well nigh the rule. In 1912 it was estimated[1] that 1,847,000 wage earners were working in the United States on the eight-hour basis; of these 475,000 were public employees. A large proportion of the remainder were women and children whose hours were limited by law, or were men working in the same establishments with them. Since that date the eight-hour day has been more widely adopted both through private action in many establishments and by legislation. The year 1915 witnessed an especially rapid spread of the eight-hour day. § 2. #The shorter day and the lump of labor notion.# The shorter working day is advocated by most workers in the belief that it will result not in less pay per day, but in even greater pay than the longer day, even if the output should be decreased. This view is connected with the lump of labor notion.[2] It assumes that men will work no faster in a shorter day, and that there is so much work to be done regardless of the rate of wages; and concludes that the shorter day will reduce the amount of labor for sale and cause wages to rise. To the extent, however, that laborers, as consumers, mutually buy each other's labor, evidently this loss due to curtailing production must fall upon the laborers as a class. The workers nearly always call for the same daily pay for a shorter day, which means a higher wage per hour. If wages per hour increase less than enough to make up for the fewer hours,[3] the purchasing power of the workers must be reduced. If the output per hour is increased proportionally to the pay per hour, the existing wages equilibrium would not be disturbed. But if the output increases not at all or in less than the proportion of the increase in pay, there is an inevitable disturbance of the wage equilibrium. In a competitive industry this would compel a speedy readjustment of wages downward. If a certain group, or large number, of workers were to begin turning out only 80 per cent as large a product as they did before while getting the same money wage, the costs per unit would be thereby increased. Prices must rise or many of the establishments must close, and then prices would rise as a result. This must throw some of the workmen out of employment and create a new bargaining situation for wages. If the general eight-hour day were applied to every industry and to all wage workers at once, then all workers and all employers in the industry would be in a like situation. But at once there must occur changes of consumers' choices in a great number of ways. If there are one fifth fewer goods evidently at least one fifth of the consumers must go without. This would largely be the wage workers. The things of which wage labor makes up a large part of the costs will rise in price relative to the things of which self-employed labor and of which materials and machinery make up a relatively larger part. This must compel a reduction of the demand for the products of wage labor relative to other things, and be reflected to labor in a lower wage. This reduction would not necessarily be just in proportion to the reduced output (that is, say, 20 per cent if from 10 to 8 hours, or 11 per cent, if from 9 to 8 hours). It might even be more, but probably would be somewhat less. In any case, both the money wages and the real wages of laborers, either in the particular trade or generally, must be reduced by a general reduction of hours that results in a decreased output. In such cases, even when the workmen by a strike or general movement secured the same wage scale for a day of fewer hours (a higher wage per hour), they would be unable to hold it excepting where they had monopolistic control of the trade. In a period of rising prices due to an increasing supply of gold, the readjustment of wages (per hour) away from an artificially high level down to a competitive rate goes steadily on. Even when money wages remain the same their purchasing power declines at such times, and this serves soon to bring the high money wages into accord with the lower value of the services.[4] § 3. #Fewer hours and greater efficiency.# Quite contrary to the foregoing view is the claim that in the shorter day the rate of work is so increased that the output is at least as large as in the longer day, or even larger. A faster working pace is possible with a shorter day, particularly in those operations calling for physical or mental dexterity. This view is less attractive to the workers than the preceding one, but is more acceptable to the employers and to the public. The change undoubtedly has resulted in many cases in the manner indicated, and could be made to result so in many other cases by applying the methods of scientific management. But it is a change which cannot be repeated indefinitely and under all conditions with like favorable results. Whether in any particular case it can be, depends in part on the length of the working day at the start. Such an increase in output might occur in a change from exhausting hours, as from 12 to 10, and again from 10 to 9, and yet not be possible in a change from 9 to 8. Moreover, the speeding up of the workers beyond a certain point may have had physiological effects outweighing the benefit from shorter hours. It is now said that with the increase of automatic machinery there are more and more workmen who much of the time have merely to watch the machine-tool run, and occasionally adjust the material. There has, however, been collected a notable body of evidence to show that, in many industries and in different establishments using much machinery, a reduction of hours to a number as few as eight has been followed by the increase of the output per worker, or by improvement in the quality of work, or by improvement in the management, resulting in a reduction of the cost of production. This is often sufficient, or more than sufficient, to compensate for the shorter time. Wages have remained as high as, or higher than, before, and employment has been more regular. So far as this result is due to the individual worker, it is explained by the same evidence referred to below[5] as bearing upon the health of the worker. This evidence tends to prove that with longer periods of rest and recreation the worker lives in a physical and mental condition fitting him far better for his work, and for continuing his working life. § 5. #Child-labor.# All the foregoing arguments are weighed in terms of private incomes and of the value of the products, whereas the main considerations that have of late been influencing legislation and judicial decision in favor of shorter hours have been those of public welfare. The legal limitation of working hours is being treated primarily as a health measure, into the judgment of which is more and more entering a broader conception of the happiness, morality, and opportunities for good citizenship for the worker and his family. In agricultural conditions, such as have prevailed generally in America, there is little need of limiting the hours of work and the age at which children may begin to work. The barefoot boy trudging over clover fields to carry water to the harvesters may be the happier, healthier, and better for his work. Child-labor in agriculture has never become a social "problem" so long as the children work with their own parents at their own homes; but the labor of children for wages, especially in gangs on large farms (as in beet cultivation and cranberry picking) or in canning factories, has exhibited evils as pronounced as any in urban manufacturing conditions. The evil of forcing children into factories was early recognized. The most obvious evils of child-labor are neglect of the child's schooling; destruction of home life; overwork, overstrain, and loss of sleep, with resulting injury to health; unusual danger of industrial accidents; and exposure to demoralizing conditions. The usual assumption that the worker is able to contract regarding the conditions of labor on terms of equality with the employer is most palpably false in the case of children. The child, subject to the commands of his parents and guardians, is not a free agent. Lazy fathers are tempted to support themselves in idleness on the wages of their young children. Often poverty leads the parents to rob their children of health, of schooling, and of the joys of childhood. The competition of child-labor also depresses the wages of adults, and thus the evil grows. § 5. #Child-labor legislation.# The limitation of hours was first applied to children working in English factories early in the nineteenth century and thence has extended throughout the world, tardily following the spread of the factory system. The first American law of the kind was in Massachusetts, in 1842, limiting to 10 hours the labor of children under twelve years of age in manufacturing establishments. All the earlier state laws established low minimums of age and high maximums of hours, and were poorly enforced for lack of adequate administrative machinery, this in turn being the result of lack of active public interest. In all these respects many states gradually improved their child-labor laws in the latter part of the last century, and much more rapidly since 1903. Now the maximum working day for children in about one half of the states is 8 hours, in one quarter is 9 hours, and in one quarter is 10 hours (and in a few southern states, 11 hours). Night work by children is very generally forbidden (in about forty states). During the same time the minimum age has been pretty generally raised to fourteen years for factory work, with higher ages (sixteen, eighteen, or even twenty-one) in some states for certain occupations dangerous to health or morals. In addition to these general limitations, special provision is made for individual examinations to determine whether the child is mentally and physically fit to work and has met the requirements of the compulsory education laws of the state. The most important child-labor legislation in recent years was the enactment of the long debated national child-labor law (passed in August, 1916). This prohibits the interstate shipment of goods produced in factories wherein any child has, within thirty days, been employed under unfavorable conditions as to hours and time of work as specified in the act. The passage of this act was the culmination of years of efforts in and out of Congress. Child-labor legislation viewed as a merely negative policy is not of great moment. Its real significance is to be judged only in connection with the broader social policy of protecting and developing all of the children of the nation to be healthy, intelligent, moral, and efficient citizens. Children growing into blighted and ignorant manhood and womanhood are threats to society. § 6. #Limitations of the working day for women#. But little later than the limitation of child-labor usually comes some legislation to limit the hours and conditions of employment of women. The grounds of this policy are that women likewise are less able than men to protect themselves in the labor contract, that they are physically weak and are peculiarly exposed to certain dangers to health, that as future mothers they need protection for their own and the public welfare, and that in the period of maternity the dangers are especially great. The work of women in factories operates in some ways to depress the wages of men, and it is harmful in its effects upon the home and family life. At present five states limit the hours of women to 8 a day, twelve to 9 a day, fifteen to 19 a day, four to 11 or less a day. A number of states forbid the work of women in designated places of work such as saloons, mines, or where constant standing is required. Only as late as 1911, in America, has legislation, now in four states, given maternity protection, as is now more fully provided in European countries in connection with systems of health insurance. In all of the great industrial countries of Europe night work by women is restricted (prohibited between 10 P.M. and 5 A.M. or yet more narrowly limited); but legislation along this line is found in only eight American states. § 7. #Limitations of the working day for men#. The general assumption made in law has been that the adult male worker is competent to judge of the working conditions, hours of labor, and wages, and is capable of protecting his own interests sufficiently by his power of refusal to accept employment. The legislatures have, much more tardily than in their legislation for children and for women, acted contrary to this assumption, but, when this has been done, the courts in America have vigorously asserted the general doctrine and denied the constitutionality of the laws. However, some exceptions were made in legislation, and, after much apparent hesitation and vacillation, were allowed by, the courts to stand, and these have now grown in number until they form an impressive total. These exceptions have come in various ways. There is first, the eight-hour limitation in public employment, required in federal employment in 1868, really effective since 1892, and now in force likewise in about two thirds of the states. In almost the same jurisdictions--national, state and municipal--eight hours is the legal day on work done in private business for the governments. Work on railroads and street railways, particularly in the direct operation of trains, such as the work of dispatchers, signal men, and trainmen, is subjected to a large variety of regulative measures, hours being limited in some cases to 8, in others to 9, 10, 12, or 16, and in a number of cases a specified minimum number of hours of rest is required after the maximum hours of labor. These laws are primarily for the protection of the public, but they afford a protection to the employee much needed, as many well-authenticated cases of excessive and exhausting hours demonstrate. The limitation of hours has very recently been extended to many private businesses in which exceptional conditions exist affecting the health of the workers or the safety of the public. This development has occurred almost entirely since the United States Supreme Court in 1898 (Holden vs. Hardy) sustained a Utah statute limiting to eight the hours of labor in underground mines. Now 8 hour laws in certain specified cases are found applying to mines, smelters, tunnels, and a variety of other kinds of work, and in a few cases the limit is 9, 10, or 11 hours. § 8. #Broader aspects of this legislation#. The subject took on a new aspect when the legislature of Oregon, in 1913, declared broadly that "no person shall be hired, nor permitted to work for wages, under any conditions or terms, for longer hours or days of service than is consistent with his health and physical well-being and ability to promote the general welfare by his increasing usefulness as a healthy and intelligent citizen," and fixed ten hours as the limit of work consistent with such a measure of health and welfare, in work in any mill, factory, or manufacturing establishment. This law was sustained by the Supreme Court of that state and was carried on appeal to the United States Supreme Court.[6] In support of the law there was presented a voluminous brief giving a most impressive body of evidence from scientific and from practical business sources, to show the many evils, popularly unsuspected or underestimated, that result from long hours even in industries of no exceptional hazards.[7] Physiological and psychological tests demonstrate that the fatigue following more than a moderate working period not only reduces immediate efficiency, but so poisons the system that greater liability to accident, disease, intemperance, immorality, and premature decay, results. Two main purposes appear somewhat intermingled in this legislation in limitation of hours. The first purpose is to protect the public directly where the safety of others is dependent on the health and efficiency of the worker. The second purpose is to protect directly the worker's health and welfare, that policy being recognized to be in the long run the best likewise for the public welfare. In legal reasoning it is being recognized that the individual wage-worker, even the adult male, is not in a position to judge the number of hours he ought, for his own good, to work, and is unable to fix the length of his own working day. As a matter of economic theory, the usance of a child, a woman, or a man, is merely that kind and amount of service that can be given out by each without repressing the normal possibilities of growth, reducing the normal health and vigor, or shortening the normal period of healthy productive human existence.[8] It is becoming a general social policy to prevent the abnormal strains of industry that cause the unnatural deterioration of the human factor in industry. A wage-worker may be permitted to sell his daily _net_ fund of working power--his usance--but not his life. § 9. #Plan of the minimum wage.# Even more recent than the legislative regulation of hours downward is the attempt to regulate wages upward in the case of certain low-paid wage-workers. The modern[9] movement for the minimum wage began in Victoria in 1896, and it soon extended to nearly all the other Australasian states. Great Britain applied the plan in 1910 to industries in which wages were exceptionally low. The plan was first adopted in the United States by Massachusetts in the year 1912, tho in an emasculated form, and spread so rapidly that at the end of 1915 it was found in at least 11 states. Minimum wage laws usually lay down "a living wage" as the standard to be used, and either prescribe a flat rate of wages, or, more often, leave the decision in each case to the wage commission established to administer the law. Generous sympathies have guided this movement of which much has been hoped and which, on the other hand, has always had its adverse critics. The most that can be claimed for it by its friends after more than twenty years of experience, is that the "dire predictions" have not been verified. In truth it would seem that the plan as yet has not been tried on a scale that could yield very large fruits either for good or for evil. The persons whom it is sought to aid are only selected groups of the lowest paid workers, generally limited to minors and young women, who in many cases are those of immigrant families in urban districts. A large volume of discussion on this subject has developed, mostly of an _a priori_ nature, of which we may here touch only a few of the salient points. At first glance the principles involved in the legislation limiting hours and those in minimum wage legislation may seem to be the same. But an important difference soon appears. In the former case the evil is that of a too long working period, injurious to health, and this can be reached directly and stopped by an efficiently administered law. But in the latter case the real evil is industrial weakness and incapacity such that the workers are unable to command "a living wage" in a competitive market. A minimum wage law, by itself, neither cures the industrial incapacity nor ensures employment to the industrially weak at any wage. The law does not attempt to compel employers to employ at the legal minimum wage every one who wishes to work; it merely declares that the employer shall _not_ employ any one whom, in his employ, he finds to be not worth that high a wage. § 10. #Some problems of the minimum wage#. Unless the demand for a particular kind of service is absolutely inelastic (a rare if not impossible situation in a large market), there must be fewer jobs for the less capable workers at high than at low wages, other prices remaining the same. Further, some of the less capable workers must be crowded out of such jobs as remain; for an artificially higher wage attracts into an occupation some from other occupations before paid more highly. It seems to be admitted by the friends of minimum wage legislation that this result is logically to be expected and that to some degree it appears. Of course it is never possible to tell to just what extent workers have been and are being excluded in this way from any particular establishment or occupation. Forbidden to earn what they can, the poorer workers must become dependent on charity. It may be said, and perhaps truly: better this than underpaid labor destructive to the health of the workers and evil in its competitive effects upon other wage workers. In most discussions of the wages of women there is a ready confusion of sympathetic ideals of what one would like to see with the cold facts as they are. Women's services (especially those of young women) have increasingly of late been coming upon the labor market in such a way as to cause abnormal congestion in a few occupations. Employers have not caused low wages in these cases. Partly these occupations are the clean, light, and agreeable ones, partly they have a relative social glamour, largely they can be followed for a few years near the home of the worker, nearly always they may be undertaken with brief training and little skill. Investigation has shown that at least eighty per cent of this group of girl workers live at home. A wage that is amply a "living wage" when used as a pro-rata contribution to an American family income is frequently insufficient for the girl living "independently." Such a girl is, under the conditions, unable to earn a living in her chosen occupation, and it may be better to recognize that fact and to deal with such individual cases as appear among the one fifth of all girls employed. The one unquestioned service of the minimum wage law is that of diagnosing the evil of low wages rather than in remedying it. The minimum wage law brings to light the industrial incapacity of particular individuals to earn a living wage. The direct remedy is to abolish the incapable workers or their incapacity by such methods as regulating foreign or cityward immigration, custodial care of the physically, mentally, and morally weak, vocational guidance, and more effective measures of industrial education. Alongside of the abnormally low paid occupations or elsewhere in the industrial organization are other occupations in which with, or often even without, special training, the sweated workers could get, competitively, more than the minimum wage, if they could, or would, qualify for the work. § 11. #Mediation and voluntary arbitration#. The labor controversies in which the public has the largest interest as a third party[10] are those which result or may result in strikes. The public interest becomes acute when a strike results in interference with the individual freedom of other workers and of nonparticipants, when it causes a blocking of the highways and disturbance of the peace, and when it prevents the regular production and transportation of the commodities which the public consumes. The public, therefore, has steadily become more interested in all methods and agencies designed to conserve better relations between employers and wageworkers, and to diminish or, if possible, to do away with strikes when individual and collective bargaining between the two parties fail. _Mediation_, or conciliation, is the effort of a third party to get the two parties to a trade dispute to come together to agree peaceably upon a settlement. Mediation may be voluntarily undertaken in a particular case by any citizen or by a public official, usually the executive (mayor, governor, or President); or it may be by a regular public state or national commission charged with this duty (as in some 17 states). _Arbitration_ is the decision, by a disinterested person (or commission) to whom it is submitted, of the exact terms, after a provisional settlement of a dispute. It is voluntary when the parties agree in advance to accept the verdict, and compulsory when they are compelled by law to submit to arbitration and abide by the verdict. Some provision either of voluntary private or of public agencies to mediate between the parties in labor disputes and to facilitate voluntary arbitration has been made of late in most communities of the civilized world, including 32 of our states, and the nation as a whole particularly in respect to disputes between railroads and train operatives engaged in interstate commerce.[11] No one objects to them, and they accomplish much good, but fail oftenest in the greater emergencies because of the unwillingness of one or the other party to submit the case, or because of lack of any power to enforce the decisions. § 12. #Compulsory arbitration#. The serious question in the subject of arbitration concerns the introduction of the principle of coercion by government, in compulsory arbitration. This, in principle, is pretty radically different from voluntary arbitration, for as it denies to the parties the right to settle their dispute by private agreement, it becomes in effect the legal regulation of rates of wages and conditions of work. In principle this was involved in the legal regulation of wages in England from the fourteenth to the nineteenth centuries. The plan is closely approached in the industrial courts that are now provided in a number of European countries for a cheap and expeditious settlement of small disputes regarding trade matters, arising in the relations between employer and employees. The new modern development began when New Zealand passed a compulsory arbitration act in 1894, followed to some extent since by all the other Australian states, largely through the action of the Labor party. Through the operation of its act New Zealand came to be called the "land without strikes," tho the description was inaccurate, especially after 1907. The Canadian Industrial Disputes Act of 1907 is an example that has had influence upon public opinion everywhere, and has been followed to some extent in recent legislation in New Zealand, America, and elsewhere. It involves the compulsory principle in a limited degree, making it unlawful in public utilities and mines to change the terms of employment without thirty days' notice, or to strike or lock-out until after investigation and hearing before a board to be nominated for the purpose. The Colorado Act of 1915 goes even beyond the Canadian act in its scope. The plan seems destined to have wider applications and a larger development in the not distant future. Let us note the general attitude of the various interests concerned. § 13. #Organized labor's attitude toward labor legislation#. Labor organizations hitherto have been in their legal nature almost entirely private and voluntary. They are seldom incorporated and are rarely even recognized in any way by legislatures and by courts, which deal merely with the members as individuals.[12] Their private character, combined with their limited membership as compared with the total population, leaves them without the power to accomplish legally by themselves the results which they desire in their own interest. Hence they are tempted at times to usurp public authority over the field of private rights in industry.[13] In other cases, when they have come to the end of their unaided powers, they invoke the aid of the law to accomplish their objects. But the appeal of organized labor to the law is special and qualified, being confined to cases where the actions of others are controlled to the advantage of the union, such as regulating the work of women and children, controlling the acts of employers in respect to construction of factories, and limiting the length of trains. This does not imply a peculiarly selfish attitude on the part of organized labor. Action together in any social group always develops in men their loyalty and spirit of coöperation without always making them more considerate to those outside of their group. Indeed, often men acting through their chosen officials, private or public, are more selfish collectively than they are individually. The leaders of any group of men, whether of wage workers, merchants, manufacturers, or political constituents, find it necessary to show that the interest of their supporters rather than a broader "sentimentality" is uppermost in their thought. And further, the jealousy of any limitation of their power is as powerful a motive in one group of men as in another. All are made of the same human clay. But the stronger and more successful a labor organization is, the more vigorously do its leaders resist any legislation that limits the functions and field of action of the labor leaders, or that settles labor troubles in a way that makes the voluntary labor organization less necessary to the individual worker. Of course self-help, as a spirit and as a policy, is a virtue, if it does not sacrifice the rights of others. But if the facts above suggested are borne in mind they will help to explain the otherwise often puzzling attitudes of organized labor toward different measures of social legislation. § 14. #Organized labor's opposition to compulsory arbitration.# Organized labor in America has attained to a highly influential position. On the whole it constitutes an "aristocracy of labor," consisting largely of skilled workers that obtain a wage exceeding that of unskilled workers to a degree not seen anywhere else in the world. In this they have been favored by a combination of conditions which it is not possible to describe briefly; suffice it here to say that organization is itself not the whole explanation, but only a small part of it. That organized labor, officially, is strongly opposed to compulsory arbitration in America, is thus perhaps sufficiently to be understood on the principle of "Let well enough alone." When in August, 1916, a strike on the entire railroad system was threatened by the four railroad brotherhoods, and some action was proposed in the form of the Canadian act, the trade-union officials issued a statement containing these words: "Since the abolition of slavery no more effectual means has been devised for insuring the bondage of the workingman than the passage of compulsory investigation acts of the character of the Canadian Industrial Disputes Act." Within less than a week the brotherhoods called off the strike after Congress had passed an act giving the men immediately the eight-hour day--a substantial part of what they had asked--and providing for investigation, by a commission, of the effects of the rule. This is compulsory upon the railroads but it is not compulsory upon the men to accept these terms. § 15. #The public and labor legislation.# It has come to be recognized that in every serious labor dispute, especially in such as develop into strikes, those concerned are not merely the two parties, employers and employees, but a third party, the public, consisting of every one else whose interests are not directly or indirectly bound up with one of the other two parties. The line of demarcation is not easy to draw exactly. An individual may be divided in sympathy, inclining to the one party perhaps because of some personal friendships or class loyalty or to the other party because of material investments, while in the main having interests distinct from either. But wherever the public is drawn in as a party, it includes far more persons and embraces far larger interests than does either of the other two parties or than do both of them together. The public becomes a party primarily because it consists of the purchasers and consumers of the products, who are deprived of the usual supply of goods, more or less essential to their welfare or even to their existence. With the increasing division of labor and complexity of industrial organization more and more kinds of business have, in a greater and greater degree, become "affected with a public interest." The public becomes an unwilling party, therefore, in every serious labor controversy. In order that any kind of labor legislation shall be enacted, it is necessary (so far as we have a government by public opinion) for a majority of the public to be convinced that the conditions are such as call for governmental interference. It becomes so convinced in two broadly distinguishable classes of cases: one, when the masses of unorganized workers are too weak to secure for themselves conditions of work and wages consistent with health and morality; and the other, when strong bodies of organized workers, in their attempts to win their ends in an industrial dispute, exceed their private rights and invade the public welfare. § 16. #The public and compulsory arbitration#. Where the railways are owned and operated by the state (as is now the case pretty generally except in America and Great Britain) the question of the "right to strike" arises from time to time, in critical forms. The logic of the situation compels even those officials that are of the labor party or are most favorable to labor, to maintain an uninterrupted service on the public railways. The experiences of that nature in France and in Australasia have been notable. Nowhere in the United States has the principle of compulsory arbitration been adopted, but at the time of the great anthracite strike, in 1902, public sentiment grew strong in favor of it. As a result of the intolerable conditions in the mines of Colorado was passed the compulsory investigation act of 1915 in that state. In 1916 the threat of a general railroad strike brought from many quarters strong expressions of condemnation in principle, of the strike as a method of settlement of wage disputes on the railroads. And in the end the organized laborers themselves accepted, apparently with much satisfaction, a law involving the legal fixation of wages and the principle of compulsion as applied to the employers. [Footnote 1: By the Secretary of the American Federation of Labor.] [Footnote 2: See Vol. I, pp. 458-467.] [Footnote 3: For example, increase less than 25 per cent per hour in changing from a 10 hour to an 8 hour day.] [Footnote 4: See above, ch. 6, sec. 12.] [Footnote 5: See especially, sec. 8.] [Footnote 6: At this writing the case, Bunting vs. the State of Oregon, is still undecided.] [Footnote 7: Published as "The case for the shorter working day," by the National Consumers' League, see especially pp. 621-892.] [Footnote 8: See Vol. I, pp. 135 and 197.] [Footnote 9: Much public regulation of wages occurred in Europe until near the end of the eighteenth century. In England this was done mainly by the justices of the peace and, in the main was directed toward limiting the demands of the wage-workers.] [Footnote 10: See below, sec. 15.] [Footnote 11: By the act of 1888, the Erdman act of 1898, superseded by the Newlands act of 1913, and supplemented by measures for mediation by the Department of Labor.] [Footnote 12: The few exceptions to this statement are mostly recent; such as the recognition of the unions in New Zealand in 1894 as parties in the plan of compulsory arbitration, and in Great Britain in 1909 as agencies through which unemployment insurance may be administered.] [Footnote 13: As appeared in ch. 20.] CHAPTER 22 OTHER PROTECTIVE LABOR AND SOCIAL LEGISLATION § 1. Evils of early factory conditions. § 2. Improvement of factory conditions. § 3. Limitation of the wage contract. § 4. Usury laws. § 5. Public inspection of standards and of foods. § 6. Charity, and control of vice. § 7. City growth and the housing problem. § 8. Good housing legislation. § 9. General grounds of this social legislation. § 10. Training in the trades. § 11. Prevalence of unemployment. § 12. Evils of unemployment. § 13. Definition of unemployment. § 14. Individual maladjustments causing unemployment. § 15. Maladjustment of wages causing unemployment. § 16. Individual maladjustment in finding jobs, § 17. Public employment offices. § 18. Fluctuations of industry causing unemployment. § 19. Remedies for seasonal fluctuations. § 20. Reducing cyclical unemployment and its effects. § 1. #Evils of early factory conditions#. The time is but brief in the life of nations since the main manufacturing processes, now mostly conducted in great factories, were carried on in or near the homes of the workers. This change has been reflected in the meaning of "manufactures," which first meant literally goods made by hand but now conveys the thought of goods made by machinery. The craftsmen worked alone in their own homes or with the help of their wives and children. If the master craftsmen had other helpers these were usually lodged and fed in the homes, and were taught by the side of the masters' own families. The old English law of master and servant was the labor law of that time as, to some extent, it still is to-day in Great Britain and America. The living and working conditions of the wage-workers were in general the same as those of the master himself and of his own family; and this was the best possible guarantee that the conditions would be kept up to the best standards of that time. The same change in industrial relations that led to the rise of the organized labor movement[1] revealed new and often horrible neglect and evil in and about the factories. They had been erected with no thought of sanitation, safety, and decency for the workers. § 2. #Improvement of factory conditions#. Legislation to remedy these evils began in England a century ago, and the English code of factory laws, regulating the construction and operation of factories and providing for their inspection, has become voluminous. It has been copied, and in some respects improved, by all of the great industrial nations. This is true in America of the manufacturing states, tho the agricultural states have still very few such regulations. As a result of these measures, accompanying and stimulating an enlightenment of the employers' self-interest, there has been a very remarkable improvement in such matters in recent years. In many American factories erected in the last quarter-century the conditions as to lighting, heating, ventilation, stairways, fire-escapes, protection of the workers against accidents, and lavatory and sanitary arrangements, are better than the best conditions ever existing in domestic manufactures. A somewhat corresponding improvement has taken place on railroads, in mercantile establishments and, perhaps less, in mining. Factory legislation often has been opposed by employers because of the expense it causes; but if the regulations apply to all factories, the expense becomes a part of the cost of production and is shifted, like the other expenses of production, to the general body of consumers, of which the employers form only a small part. Much of the recent progress in some establishments has, however, gone much beyond the requirements of any existing laws. Many employers recognize that it is costly and unprofitable to themselves to allow their workmen to be in surroundings that reduce their vitality and efficiency, such as do the conditions mentioned at the close of the preceding section. § 3. #Limitation of the wage contract#. In general the law does not attempt to interfere with the making, by individuals, of such contracts as they choose to make. Its main function is to interpret and enforce the contracts that are made. But there has been an increasing group of exceptions to this general statement. It was forbidden even by the English common law for wage-workers under some conditions to sign away their right to claim damages in case of accident, and many recent statutes have added more specific limitations in this respect.[2] Legislatures and courts have been particularly watchful of the interests of children, who are usually deemed incapable of entering into contracts binding them to their injury. Sailors, likewise, have been somewhat exceptionally treated, because, journeying far from home, they are under the often despotic control of their employers. The English courts may even change the contract if the sailors have been coerced by their masters. Laws regulate the form, time, and methods of payment in manufactures and mining. Companies sometimes keep stores and pay the workers in mines and factories in goods instead of money. Such a store in the hands of a philanthropic employer might easily be made, without expense to himself, a great boon to his workmen, giving them the benefits of consumers' coöperation. But the usual result is told by the fact that such stores are often known as "truck stores" and "pluck-me stores," and heartily disliked by the wage-workers. They are most often found where some one large corporation dominates in the community, as in a mining district, and the workers are in a very dependent condition. If the higher prices demanded practically lower real wages, it would seem that the worker had an immediate remedy in his power to demand higher money-wages. Recognizing that this is for the most part an illusion--for it is just in such places that the conditions for free competition are least present--the law in many states prohibits these stores. It regulates also the measuring of work, fixing the size of screens and of cars used in coal-mining. The law is especially favorable to the hand-laborer in regard to the collection of his wages, requiring monthly or fortnightly or sometimes weekly payments. Mechanics' liens give to workmen in the building trades the first claim upon the products of their labor. § 4. #Usury laws#. The limitation by law of the rate of interest that may be charged affects many persons outside the ranks of wage-workers. Usury laws are found almost universally in civilized lands. By usury was formerly meant any payment for the loan of goods or money; now it means only excessive payments. In former times moralists and lawmakers were opposed to all usury or interest. The reason for this attitude is not hard to find.[3] Most loans were made in times of distress. The sources of loanable capital and the chances of profitable investment were few. But for the last four centuries there has been on the question of usury a gradual change of opinion, beginning in the commercial centers and progressing most rapidly in the countries with the most developed industry. A moderate rate of interest is now everywhere permitted; but in all but a few communities the rate that can be collected is limited by law, and penalties more or less severe are imposed upon the usurious lender. Usury laws are practically evaded in a number of ways within the letter of the law.[4] Many persons maintain that they do more harm than good even to the borrower, whom they are designed to protect. In a developed credit economy, where a regular money-market exists, they are superfluous, to say the least, as most loans are made below the legal rate. Such laws, however, have a partial justification. In a small loan market they to some extent protect the weak borrower at the moment of distress from the rapacity of the would-be usurer. There has been great need to check the rapacity of the "loan-shark" in the cities. Usury laws are fruits of the social conscience, a recognition of the duty to protect the weaker citizen in the period of his direst need. Their utility is diminishing; and at best they are only negative in their action, preventing the needy borrower from borrowing when his need is acute. In many European countries a more positive remedy has been found in the provision of public pawn-shops. In America a very little has yet been done in this way, and that mostly by private philanthropy.[5] § 5. #Public inspection of standards and of foods#. The determination and testing of standards of weights and measures has long been a function of government. English laws of the Middle Ages forbade false measures and the sale of defective goods, and provided for the inspection of markets in the cities. Usually, the self-interest of the purchaser is the best means of ensuring the quality of goods; but personal inspection by each buyer frequently is difficult and time-consuming, requiring special and unusual knowledge of the products and special costly testing apparatus. The states and the nation undertake, in some cases, therefore, to set minimum standards of quality, and to enforce them by governmental inspection. Government coinage had its origin in this need. This policy is applied, however, mainly to commodities affecting health; its application to art products, except to protect the morality of the community, would be difficult or unwise. Recent legislation in many lands and in all of the American states has developed greatly the policy of insuring the purity or the safety of many articles consumed in the home; notable is the Federal Pure Food and Drug Act of 1906. The federal law levying a tax on oleomargarine, however, was designed as protective legislation in the interest of the farmer. Public regulation and inspection sometimes raises the price, but the cost is small compared with the convenience and the benefits resulting to the citizen. § 6. #Charity, and control of vice#. The public relief of the defective classes, insane, feeble-minded, and paupers, is a part of the social protective policy. The public interest undoubtedly is served by having these suffering classes systematically relieved, but the extent and nature of the provision are questions ever in debate. Still more debated is temperance legislation, both as to licensing and as to prohibiting the liquor traffic. Nowhere is the manufacture and sale of intoxicating liquor treated quite like the traffic in most other goods, because it is recognized that the public interest is affected in a different way. While it is beyond question that society should protect itself and its innocent members against the drunkard, it is more doubtful whether it owes to the man, for his sake, protection against his own blunders. Not even the gods can save the stupid. Temperance legislation is strongest in its social aspect. The opponent of it usually champions the individualist view; its partizans uphold, in varying degrees, the social view. Similar questions arise regarding lotteries, gambling, betting, and horse-racing. When a man backs a worthless horse against the field, money probably is transferred from the stupider to the shrewder party. The philosopher may say that the sooner a prodigal and his money are parted the better; but the broken gambler remains a burden and a threat to honest society. Gambling, lotteries, and speculation cause embezzlement, crime, unhappy homes, and wrecked lives.[6] Here are to be found with difficulty the true boundaries between ethics and expediency. A busybody despotism may protect the fool, but it thereby helps to perpetuate and multiply his folly; yet if the fool is left alone, he too often is a plague to the wise and the virtuous. § 7. #City growth and the housing problem#. In 1790, of our population only 3 per cent lived in cities of over eight thousand inhabitants; in 1900 the percentage was 33. Then the largest city (Philadelphia) numbered 50,000; in 1910 the largest city (New York) numbered 5,500,000; that is, 110 times as large 120 years later. The total number of persons living in cities of 8000 had increased in more than double that ratio. The rapid growth of cities brought with it many evils. Considered in their more material aspects, nearly all of these are summed up in the expression "the housing problem." As population grows denser in cities, land rises in value, yards and gardens narrow and then disappear, light, sun, and air are shut out, and cleanliness, decency, and home life become more difficult and, for many, impossible. The residents gradually group themselves in districts corresponding to their economic incomes, and the poorer parts of the population become tenement dwellers in the neighborhood of factories or become segregated in "slum" districts of unsanitary and dilapidated houses. § 8. #Good housing legislation.# Two policies are open under these conditions. The one, always followed for a time, is to leave individual self-interest unguided to solve the problem. If the tenant agrees to rent a disease-breeding house, he is the first to suffer. The interests of investors, it is said, will supply as good a house as each tenant can pay for. The other policy now adopted is to set a minimum standard of sanitation and comfort, in respect to plans, lighting, materials, and proportion of lots to be covered, to which standard all builders and owners must attain. Complying with the legal requirements, they are left free to collect whatever rent they can get. As one bad building may bring down the rent of all on the street, such legislation may sometimes be in the interest of the body of landowners as against the selfish desires of some individuals. Mainly, however, the regulation is in the interest of the tenants and of society as a whole, and against that of the landlords. The rents from slum property are threatened, hence the strong opposition always manifested against tenement-house legislation by some landlords, architects, and contractors, who fight it as an interference with their interests and as a confiscation of their property. It is not unlikely that this policy has the effect of making rents too high for some poorer tenants and driving them into the country. But this result is not so undesirable. Moreover, the control and inspection of housing conditions has in a few states been made statewide to reach even "the country slums" which lately have been recognized to exist. Enlightened sentiment to-day favors efforts to destroy the breeding-places of disease, misery, and crime, no matter where they may be. Property owners are in many communities no longer left free to determine height of buildings, appearance, or even the uses for which houses may be erected in any district. American cities have still much to learn in this regard from the example of many European cities which have developed the art of city planning with wonderful results in beauty of landscape and of architecture, in practical economy for business, and in the health and welfare of the mass of the people. § 9. #General grounds of this social legislation#. Why are not such matters as we have been discussing safely left to individuals? It is for the interest of every one that his back yard should not be a place of noisome smells and disagreeable sights. But men are at times strangely obstinate, selfish, and neglectful, and through one man's fault a whole community may suffer. The refusal of one man to put a sewer in front of his house may block the improvement of a whole street. The heedlessness of one family may bring an epidemic upon an entire city. There must be a plan, and by law the will of the majority must be imposed upon the unsocial few. Where voluntary coöperation fails, compulsory coöperation often is necessary. Thus health laws, tax laws, and improvement laws regulate many of the acts of citizens, limit the use of property, and compel men to better social courses against their own wishes and judgments. All such laws as these are protective legislation, in that they depart from the rule of free trade taken in its broadest sense. It does not follow, however, that all these laws stand or fall together. The justification of such measures is limited and relative, and therefore of varying strength. All protective measures are alike in that the free choice of one citizen is forbidden by law in the supposed interest of some other citizen who is to be "protected." While the purpose of the tariff is economic and political, in a large majority of social laws the moral purpose is fundamental. It is the demand of humanity that competition be placed upon a higher plane. Most social legislation is to protect the weak from being forced into contracts, or from living in conditions injurious to their welfare and happiness. The justification for these limitations upon the right of private property, upon the free choice of the individual, upon "free competition," must be found in the social result secured. The best test of social protective laws is their contribution to a higher independence and to a freer competition on a higher, more worthy, and more humane plane. § 10. #Training in the trades#. Free elementary and secondary education has become the all but unquestioned public policy in the American commonwealths. The main motive for it has been the belief that education in books is a necessity for good citizenship in a republic. At the same time it has been thought that the training of the school would help the child to earn a living. This appears to have been true so long and so far as it was combined with, or supplemented by, industrial training on the farm, in the home, and through apprenticeship in the manual trades, as once was so prevalent. But industrial conditions have changed. Most of the old-time education of the schools has now little relation to the industrial life of the great majority of the children, for few enter clerical or professional callings. Germany was the first nation to recognize the new educational need (in fact, never as urgent there as here) and to provide for systematic and efficient training in all the industrial arts. Since the beginning of the century the American public has been awaking to the needs of the situation. We appear to be on the eve of a great development in industrial training that will equip youth for more efficient life in business and in the home, either in rural or in urban conditions. § 11. #Prevalence of unemployment.# Many other forms of social legislation on behalf of the common man might well deserve, did time and space permit, a larger measure of the economic student's attention. However, excepting the subjects treated in the next two chapters, the one remaining that is most important at this time is the problem of unemployment. In every country and at all times where the wage system prevails, some wage-workers, now more and now less, are "out of work" and unable to get it. The proportion that they constitute of all workers cannot, with the aid of any existing statistics, be exactly told, nor can exact comparisons be made between different countries. Of the magnitude, importance, and difficulty of this "problem of the unemployed" there is, however, no question. It is greatest, speaking generally, in manufacturing industries, tho, among the various kinds, great differences in this respect appear. In 1900 the United States census reported that of all persons in gainful occupations 2.5 per cent had been unemployed more than half the year, 8.8 per cent from three to six months, and 11 per cent one to three months, a total of 22.3 per cent more than one month.[7] In 1911 in a large group (nearly all) of the manufacturing industries, the minimum number of wage-earners employed (in January) was 13 per cent below the maximum (in November). In some the difference was much greater (e.g., 24 per cent in the iron industry, 63 per cent in the brick and tile industry). Statistics of unemployment among trade-unions in New York and Massachusetts indicate that the annual average of unemployment is between 12 and 15 per cent. In some years upwards of 10 per cent of all the working time of the wage-earning population is lost by unemployment. § 12. #Evils of unemployment.# A considerable part of the total in an ordinary year may be set aside as "normal" in the sense that it is allowed for in the wage-workers' plans;[8] and a part of it may even be desirable. Yet there remains an inconceivable sum of suffering in the lives of the workers, and an enormous economic waste of productive energy not only for them but for the whole community. The irregularity, and occasionally the excessive duration, of these periods of unemployment too often makes unemployment not a beneficent vacation (comparable to shorter hours), but a period of tragic anxiety, demoralizing and unfitting for return to work. Irregular work is generally recognized to be a greater cause of poverty and of actual pauperism than is a low wage regularly received. § 13. #Definition of unemployment.# Unemployment is the state of a wage-worker for the time out of a job. But this definition needs to be further explained and limited if it is to be useful in the discussion of unemployment as an evil calling for social remedy. There must be set aside the cases where the lack of a job is due to one rest day in seven and to legal holidays, a total of nearly 65 days in most American states; to the worker's being on strike; to temporary sickness; finally, and more difficult to distinguish, that due to continued disability, physical, mental, or moral, to do the work up to an acceptable standard and to retain a job in the occupation chosen by the applicant. The first cannot be called a problem, and the others constitute the problems of strikes, of industrial sickness, and of the unemployables, respectively. There still remain some unanswered questions such, for example, as: whether in seasonal trades (e.g., teaching, or the building trades) allowance should be made for normal vacations and for slack times, not to be counted as unemployment; and whether lack of work at one's principal occupation is ever or always unemployment when the person is actually employed or can get work at some lower paid employment. The more frequent answer to these questions is in the negative but this in some cases is almost palpably absurd. Further study is necessary to work out a generally acceptable concept of unemployment. § 14. #Individual maladjustments causing unemployment.# The cause or causes of the evil must be ascertained before a remedy can be intelligently applied. It is pretty generally agreed that unemployment is essentially a problem of maladjustment of the labor supply, and not that of an absolutely and permanently redundant supply. That is, there is, under static conditions, work for all to do at various rates of wages that would bring about a value equilibrium of services.[9] The maladjustments are either of an individual or of a general character. Individual maladjustment may be due to a mistake in choosing an occupation (e.g., through the vain ambition of one unfitted to be an artist, actor, lawyer, or teacher); or to failure to acquire by adequate training the necessary skill; or to loss of capacity by accident, old age, or failure of mental or moral powers; in all of which cases the problem verges upon or becomes that of the unemployable. The "can't-works" and the "won't-works" must be divided from the "want-works." If there is any remedy in such cases it must be through re-education, personal reform, or change of occupation. Many persons look upon this type of cases as almost wholly accounting for the problem of the unemployed. They are confirmed in this opinion by the fact that the out-of-work group in any trade at any time is, on the average, the least efficient group of workers in the trade. This results from selection by the employers. This selection is due to the _relative_ not to the _absolute_ efficiency or inefficiency of workers, and must result whenever there are any discoverable economic differences in the workers (all things considered) that are employed at the same wage. This would continue even tho the poorest workers were to raise their efficiency above that of the best men now retained. "Personal inefficiency" may explain a chronic low wage or absolute unemployability in a particular case, but it does not explain intermittent lack of work for those willing and able to work. Unemployment is a social problem and not merely an individual problem. § 15. #Maladjustment of wages causing unemployment.# It seems highly probable that the artificial maintenance of a wage above the competitive, or value-equilibrium, rate of the individual, whether this be done by sympathy, by custom, or by the action of trade unions, must cause some maladjustment of workers in relation to available jobs and thus increase unemployment. To doubt this is again to maintain the absolute inelasticity of the demand for labor with changes in its price.[10] If the true equilibrium wage in a certain industry were $3.00 a day, then a wage of $4.00 a day would attract to the trade more than enough workers to meet the demand for labor in normal periods (unless entry to the trade is controlled by monopoly power), and at length the losses from unemployment would balance the day-wages received in excess of the rate obtaining elsewhere for that quality of labor. Any artificial obstacles to change of occupation or to concessions in the kind of work done and in the rate of wages must operate to increase the maladjustment. So far as this maladjustment occurs, it may cause unemployment neutralizing the apparent gain of higher day-wages obtained by monopoly power. The very inertia of wages, however, in new price situations[11] makes the wage-workers resist more vigorously such a policy of wage concessions. Moreover, the difficulty here indicated is more particularly one occurring in static conditions and is to be distinguished from the dynamic maladjustments next to be considered. § 16. #Individual maladjustment in finding jobs.# Another kind of individual maladjustment is the failure of the jobless man to connect with the manless job. A certain amount of this maladjustment must exist in the most stable industries and in the most settled industrial conditions. Fluctuations occur in the market demand for the products of various establishments, requiring the taking on or laying off of some men. Fluctuations occur in the plans both of employers and of wage-workers as a result of age, of removal, for reasons more or less non-economic, of desire to change occupations, of variations in health, and of countless other causes. The needs of the employer for a worker, and of the worker for a job, are mutual. To a large degree these various fluctuations are mutually compensatory, workers going and coming, orders increasing here and decreasing there. Total jobs and total workers capable of filling the jobs, are at any moment in normal times equal quantities, if they can be brought together. But almost everywhere is lacking a real labor-market. The substitutes for it are largely ineffective: trade-union action, employers' associations, "want ads," cards in shop windows, weary walks from door to door, lines of waiting men outside of factories, private employment agencies. At their best the private employment agencies perform valuable services within limited fields, but they are uncoordinated, and utterly inadequate to meet the chief need, and at their worst they are the instruments of great abuses against the unemployed. § 17. #Public employment offices.# Vigorous efforts to create local "free employment offices," or "labor exchanges," began in a number of countries about 1895. The movement gained headway in the next ten years and has since steadily grown. In Germany the chief exchanges have been founded and conducted by the municipalities (while others are controlled by the unions and by groups of employers) and have remained largely decentralized, tho coöperating to some extent through voluntary state conferences of officials of the exchanges, and since 1915 required to report to the imperial statistical office. The total number of exchanges in Germany (in 1915) was nearly 3000. The general results have been remarkably good, altho not completely satisfactory. Every industrial country of Europe has done something of this kind. Great Britain, however, after some experiments with a similar local system, established in 1909 the first national system of "labor-exchanges." In America the movement is developing in three directions, through municipal, state, and federal offices. These are united (since 1913) in an "American Association of Public Employment Offices." In 1915 there were known to be 99 state and city employment offices distributed through 30 states, besides federal offices operated in 18 cities in connection with the Bureau of Immigration. The clearly recognized task is now to coördinate these various agencies into an efficient national system, eliminating partizan politics and elevating the management of all branches to the plane of professional service. Through these agencies can be operated an industrial service, analogous in function to the weather bureau, and reporting from day to day the pressure of demand and the prospects for labor in the various parts of the country. The economic results of a complete, exclusive, and efficient service of this kind would far exceed its legitimate cost to the community. § 18. #Fluctuations of industry causing unemployment.# Any one of the maladjustments in employment thus far considered may occur at a given moment, in static conditions of industry. But there are also maladjustments resulting from more general industrial changes throughout a period of time. The two main types of these are seasonal and cyclical changes, the one occurring within a year, and the other occurring within the longer period of the business cycle. At the downward swing of these seasonal and cyclical changes the number of would-be workers exceeds the number of jobs [12] and the resulting unemployment is greatest when the minor and the major swings are both downward, about midwinter in a period of industrial depression. Thus in 1893-94, and to a lessening degree in 1894-95, 1895-96; in 1907-08, and 1914-15. Of course employment offices alone are no remedy for the exceptional difficulties of such times, and the individual, whether he be an unfortunate "out-of-work" or a more fortunate well-wisher, feels helpless in the face of the overwhelming burden of distress. Such a situation is declared by the radical communists to spell the bankruptcy of the wage-system; while the most conservative students of the subject confess that this periodic chaos in the labor market is the strongest indictment of, and involves the gravest dangers to, the existing economic and social order. § 19. #Remedies for seasonal fluctuations.# But of late there has been a growing hope that an answer may be found to this economic riddle of the Sphinx. A number of different measures are being experimentally tested and applied. Many years of effort will be required for the perfecting of these plans separately and collectively. Some of these plans may be here indicated, however briefly. To remedy seasonal fluctuations within the establishments output may be regularized by taking orders in advance; by producing various products successively in the same factory; by overcoming weather conditions as has been done successfully in brick and tile making, ditch digging, and building operations; by transferring workers from one department of an establishment to another; by improving the employment departments so as to build up a more stable force, thus reducing the great expense of "hiring and firing" and the loss through training "green hands"; by varying the length of the working day while keeping the same working force throughout the year; by coöperating with other industries to build up a regular working force and transferring it from one establishment to another with seasonal changes. Of great aid in a number of these measures is a broader industrial training for the workers, making them more able to change from one occupation to another. For this purpose every period of unemployment and of temporary shortening of the working day ought to be used as a time for trade education, by the recently devised and successfully applied "short-unit courses for wage-earners."[13] § 20. #Reducing cyclical unemployment and its effects.# The maladjustments due to the movement of the business cycle are even more difficult to remedy completely, but are diminished by every measure that helps to reduce the great financial fluctuations.[14] Further, many communities have already begun to plan large public works more systematically so that they may be carried on mainly when private business is more slack. A comparatively small amount of such work would serve as a gyroscope to preserve the balance of employment for a large part of the less skilled workers. It has been estimated by Bowley, an English statistician, that in the United Kingdom, it would be necessary to set aside only 3 per cent of the annual expenditure for public works to be used additionally in years of industrial depression, in order to balance the wage loss at such times. This is a well-nigh incredibly small proportion, hardly as great as that of the weight of the gyroscope compared with the car or ship to which it is applied. It is hardly to be doubted that hitherto, in America, public undertakings have been executed much more largely in periods of business prosperity, and have been diminished during "hard times," thus greatly accentuating the harmful swing of the labor-demand. Finally, unemployment insurance, which has already been applied by parliamentary legislation in Great Britain to a group of nearly 3,000,000 wage-workers, is an indispensable and highly hopeful measure of relief. The place of this in a general system of industrial insurance will be indicated in the next chapter. [Footnote 1: See above, ch. 20, sec. 1.] [Footnote 2: See ch. 23, secs. 5-7, on the old law of employer's liability.] [Footnote 3: See Vol. I, pp. 292-293.] [Footnote 4: See Vol. I, p. 304.] [Footnote 5: See Vol. I, pp. 293 and 303.] [Footnote 6: See above, ch. 12, sec. 2.] [Footnote 7: Great importance should not be attached to these figures for they contain errors resulting from the inexact notions of inexperienced enumerators as to what constitutes unemployment, and from the inclusion of all persons gainfully employed, whether self-employed or in professional, salaried, or wage-earning positions.] [Footnote 8: See Vol. I, p. 207, on irregularity of employment as influencing wages, psychic income, and choice of employment.] [Footnote 9: On static, see Vol. I, ch. 32; on the scarcity of labor, see Vol. I, ch. 18, sec. 2 and references there; on value of services and wages see Vol. I, ch. 18, especially sec. 3, and ch. 19, especially sec. 7.] [Footnote 10: See above, ch. 21, sec. 9 on the minimum wage.] [Footnote 11: See Vol. I, p. 223, on friction in the adjustment of wages.] [Footnote 12: See above, ch. 10, secs. 6 and 7, on the industrial crisis.] [Footnote 13: See Bulletin of the United States Bureau of Labor Statistics, No. 159 (April, 1915). ] [Footnote 14: See above, ch. 8, secs. 6, 7; ch. 9, secs. 6, 8; ch. 10, secs. 14, 16; ch. 14, sec. 12. ] CHAPTER 23 SOCIAL INSURANCE § 1. Purpose and meaning of social insurance. § 2. Increasing need of social insurance. § 3. The new era of social insurance. § 4. Features of social insurance. § 5. Historical roots of accident insurance. § 6. Development of compensation for accidents. § 7. The compensation plan in America. § 8. Standards for a compensation law. § 9. Historical roots of sick-insurance. § 10. Need of sick-insurance in America. § 11. Old-age and invalidity pensions. § 12. Unemployment insurance. § 13. Need of ideals in social insurance. § 14. Insurance rather than penalty. § 15. The compulsory principle. § 16. State insurance and a unified system. § 17. The contributory principle. § 1. #Purpose and meaning of social insurance.# In importance surpassing at present any one of the various measures on behalf of the wage-earning class that have thus far been considered is the remarkable development now under way of plans and agencies to provide insurance for "the common man." Insurance means making some kind of provision out of present means, so as to reduce the injury and suffering that would result from a future mishap. Usually, likewise, it implies uniting with others to distribute the expense fairly over all in the group. Social insurance is the term most frequently applied to the various institutions and plans provided, more or less under the regulation of law, for the protection of the lower-paid workers in most modern countries. The terms industrial insurance and workingmen's insurance are likewise used. The principal types of events for which social insurance in its various branches provides, are (1) accident, (2) sickness, (3) incapacitation (either by old age or by invalidity, that is, permanent failure of health within the normal working years), (4) death (generally called "life" or "survivor" insurance), and (5) unemployment. The direct aim of social insurance is not to prevent these mishaps (tho that may be an indirect result), but it is to provide some financial indemnity for the economic loss and expense involved in the mishap. The principal kinds of losses are two. First, that occasioned directly in caring for the sick or injured person, the expense of medical attention, nursing, hospital care, drugs and special apparatus such as crutches and glasses, and burial expenses. The second is the loss of income because of inability to work as a result of injury, of illness, or of permanent disability, or (in the case of life insurance) of the death of the bread-winner, or of want of employment. § 2. #Increasing need of social insurance.# In various connections we have observed how the changes that have been occurring in modern times have increased the uncertainties of the industrial life and of the earning power of the mass of the workers.[1] It should be further observed that in city conditions, a working family does not have, as in agricultural conditions, the supplementary sources of income from garden, field, forest, and stream, and it is not so possible to use the earning power of children, of old people, and of the partially disabled. The faster working pace of factories, the rapid fluctuations of employment with changing fashions, inventions, shifts of population, and waves of industrial prosperity and depression, all have introduced new risks and problems into the worker's life. The increasing payment of wages in money, and the more temporary nature of employment of men in many kinds of factory work, have added to the problem. With these changes have come a growing interest in the welfare of the mass of the workers and a growing sense of responsibility on the part of the public. There is an appalling mass of misfortune in the United States requiring social insurance for its relief, altho satisfactory statistics of the various types of misfortune are still lacking. On the basis of the experience of private industrial insurance companies it appears that there are not less than 25.000 fatal industrial accidents yearly, and 700,000 injuries causing disability for more than four weeks, to say nothing of the enormous number of slight injuries--if injuries, many of them very painful, disabling for a period from one day to four weeks, should be called slight. As to loss of time due to illness, the experience of Germany shows an average of eight or nine days a year per worker, which figure, applied to those gainfully employed in America, would mean nearly 300,000,000 days of illness, or 1,000,000 one-man working years, causing a loss estimated to be $750,000,000 annually. It is estimated that one on eighteen of American wage-workers attains the age of sixty-five with no financial provision for old age, and that about 1,250,000 persons above the age of sixty-five are dependent on their families or on charity, public or private, receiving $250,000,000 yearly. The losses and suffering to dependents due to the death of the bread-winner are very partially accounted for by accidents, but no estimate of much value can now be made of the other cases. Some notion of the losses from unemployment has been given in discussing that subject in the preceding chapter. § 3. #The new era of social insurance.# Some not insignificant attempts to deal with these problems were made throughout the nineteenth century, but the new era of social insurance may be said to date from the message of the Emperor William to the German Reichstag in 1881, in which he said: We consider it our imperial duty to impress upon the Reichstag the necessity of furthering the welfare of the working people.... In order to realize these views, a bill for the insurance of workmen against industrial accidents will first of all be laid before you; after which a supplementary measure will be submitted, providing for a general organization of industrial sick-relief insurance. Likewise, those who are disabled in consequence _of_ old age, or invalidity, possess a well-founded claim to more relief on the part of the state than they have hitherto enjoyed. The program here outlined was carried out by the enactment between 1883 and 1889 of a series of laws, which taken together constituted a pretty effective system of social insurance for the mass of wage-workers in the German Empire. Later amendments have extended and improved the various features of the plan, which has served as a stimulative example to other countries. America has been the tardiest among all the industrial nations to undertake this kind of social reform. § 4. #Features of social insurance.# The plans of social insurance, in force in various countries, present a great variety of features combined in many ways. The main characteristics in which they may differ relate to (1) the element of compulsion, (2) contributions by the insured, (3) the nature of the insurance organization. Insurance may be _voluntary_ or _compulsory_. It is voluntary when the state simply encourages the formation of insurance agencies, and perhaps contributes something to them, leaving it to the individuals to insure themselves as they choose, in mutual societies, or in privately managed companies. In the case of accident insurance, however, there is often a semi-compulsion by which the employer is requires to pay indemnity to his workers, according to fixed scales of compensation, but is left free to insure himself against this risk or not as he pleases, in which case it is still called voluntary insurance. Compulsory insurance is that which the state requires to be provided be means of some mutual organization of the insured, or of the employers, or by the state. Insurance may be _contributory_ or _noncontributory_. It is on the contributory plan when the insured workers contribute something toward the premiums that provide the funds for eventual payment. It is noncontributory when the funds are provided either by the employers or by the state without any payments from the insured. Insurance may be (a) in _private_ companies, carrying on the business for profit; or (b) in _mutual_ companies of workingmen, or of employers insuring themselves against the cost of compensation in case of accident to their employees; or (c) in a _state_ bureau, or fund, organized and conducted by government. § 5. #Historical roots of accident insurance#. The different kinds of social insurance had different origins, some knowledge of which is necessary to an understanding of the present situation. These origins still affect the nature of social insurance to-day, and have prevented the development of a truly unified and logical system in accord with present conceptions of needs and of justice. Accident insurance had its beginnings in the liability of employers for accidents that happened as a result of the employer's negligence, a principle found to some degree in all countries. Thus the earlier payments to workers in cases of accidents were not insurance indemnity but merely damages collected in court for the fault of the employer. In Great Britain and the United States, indeed, by judicial interpretation the law grew more strict as against the claims of the workers, until about 1880 in Great Britain and 1910 in the United States. To collect damages it was not enough for the workman to prove the employer's negligence, for collection was made more difficult by (1) the doctrine of contributory negligence, (2) the doctrine of the assumption of risk, and (3) the fellow-servant doctrine. By the doctrine of contributory negligence, the workman's claim could be defeated by showing that he had by his carelessness contributed to the accident even when the employer had been negligent. By the doctrine of assumption of risk the workman was presumed, in entering upon employment, to have taken upon himself the risks usually incident to the employment, including the chance of imperfections in the machinery, of which he might by some care have known. By the fellow-servant doctrine the employer was freed from responsibility for accidents due to the negligence of other employees, "fellow servants," even when it was impossible for him to know their character and reputation as in the case of a large factory or of a great railroad. § 6. #Development of compensation for accidents#. In some countries of continental Europe, notably Germany and France, the law of employers' liability was altered in favor of the worker early in the nineteenth century, so as to make compensation more usual and adequate. Since 1885, especially, this liability has been much further extended in many countries and in various directions, and yet the laws of accident compensation still retain many features of the old liability laws and remain in their legal character somewhat apart from the other branches of social insurance. Even in the newer type of "compensation" laws the indemnity paid by employers on account of accident is looked upon as commuted damages, but the old employers' defenses, just named, are abolished or made more difficult to plead. The new plan has the advantages of granting compensation by a schedule fixed in the law, insuring greater certainty, more adequate payments, greater ease of securing redress, and abolishing the cost of law suits. Still, in most countries and in most states in America, the worker has the option of suing under the old law. In some forty countries the principle of compensation by a prearranged schedule of rates has to some degree replaced that of litigation, and determination by a jury of the damages, in each separate case. The insurance spoken of in relation to accidents is technically that which the employers may or must take to protect themselves against loss, not that which the workman has. The situation as to compensation in a few leading countries is as follows, the dates given being those of important legislation. ACCIDENT INSURANCE _Voluntary_ (as to employers insuring, but compulsory compensation). Great Britain, 1897, 1906, 1907. France, 1898, 1907, (compulsory for seamen, 1898, 1905). Denmark, 1898, 1908. Belgium, 1903, (voluntary except for miners). _Compulsory insurance of their risks, by employers_. Belgium, for miners, 1868. Germany, 1884, (in employers' associations), 1887, 1900, 1911 (voluntary for some classes). Austria, 1887 (as in Germany), 1894 (voluntary for some classes). Norway, 1894 (in a state central insurance office), 1896. Italy, 1898, 1904. Holland, 1901 (in the Royal Bank or in private companies). Sweden, 1901 (as in Norway). § 7. #The compensation plan in America#. Under the practical operation of the law of employers' liability in force in any American state until 1911, a very small proportion of the workers injured while at work were legally entitled to any indemnity, and a still smaller proportion could succeed in recovering any substantial amount. Employers, and the accident companies with which employers insured, either compromised the claims for small amounts or fought bitterly in the courts the claims of those who refused to compromise. When the courts awarded damages, large or small, a large part of the proceeds went for legal expenses. But a small proportion of the total costs to employers came as benefits to the victims of accidents. It appeared in an extensive investigation of the business of the large industrial insurance companies that but 28 per cent of the premiums paid by employers were paid to workmen as indemnity. Between 1911 and 1916 the laws have been changed to some extent in their application to selected occupations in at least 34 states and territories of the United States, and covering nearly all but some of the distinctly agricultural states. This remarkable development has been largely actuated and guided by a comparatively small group of socially minded nonworking class citizens rather than by either employees or organized workers. It is an encouraging example of what can be done by skilful methods, when conditions are ripe, in furthering righteous social legislation without the use of money or of corrupting influences. § 8. #Standards for a compensation law#. The standards which, in detail, in one jurisdiction or another, have already been attained, and which are the provisional ideals now sought by reformers, may be briefly stated as follows.[2] All employments should be included, altho, as yet, there are various exceptions, such as farm labor and domestic service, employers with but few employees (the number excepted being one to five), and nonhazardous employments. Compensation should be granted for all injuries, suffered in the course of employment, that cause disability beyond a definite waiting period of three to seven days. Compensation should include medical attendance for a limited period, and two-thirds of the estimated loss of wages for disability, either total or partial, during its continuance; and, in case of death, funeral expenses, and from one to two-thirds of the estimated wages, to the widow (or dependent widower) and children, or to other dependent relatives. To secure the full benefit of the plan it must be made the exclusive remedy, replacing entirely the old remedy of suits for negligence. The employer should be required to insure his risk, and general sentiment is moving rapidly toward the plan of a state insurance bureau as the exclusive agency.[3] For the administration of the system an accident and insurance board should be created in each jurisdiction. Experience shows the importance of careful attention to numerous other details, and many amendments will be made as the needs become manifest in practice. § 9. #Historical roots of sick-insurance.# Sick-insurance had its origin partly in trade unions and in fraternal societies voluntarily organized by workers, and partly in the system of public poor relief. The voluntary societies were first recognized, regulated, and encouraged by law (in some cases being given state subsidies), and later, in some cases, being made compulsory for some classes of members (i.e., such as miners and seamen). On these institutions have been built the later state systems of social sick-insurance. This movement had made large headway by the end of the third quarter of the nineteenth century in various European countries. The two systems that are the most typical and influential examples are those of the German Empire and of Great Britain, the former local and the latter national in organization. The British plan of national health insurance promises to be on the whole of the greatest influence upon American opinion and policy. However, the best informed American students favor in some features the more decentralized German rather than the centralized British system. While it is impossible to describe the various systems in detail, the situation in the leading industrial countries of Europe may be indicated as follows. SICK-INSURANCE _Voluntary_. France, 1850, 1898 (voluntary except for miners). Belgium, 1851, 1894. Italy, 1886. Sweden, 1891. Denmark, 1892. Holland (authorized private societies and poor relief). _Compulsory_. Germany, 1883, 1911 (voluntary for others with earnings of $500). Austria, 1888 (voluntary for some classes). France, for miners, 1894. Norway, 1909. Great Britain, national system 1911 (was voluntary 1875-1911). § 10. #Need of sick-insurance in America#. Contrary to the usual opinion in America, the sick-insurance in Germany is, both in amount of contributions collected and in importance to the welfare of the workers and their families, of more importance than is either accident compensation or the system of invalidity pensions. Yet, thus far, our interest and efforts in America have been directed almost entirely toward the reform of accident compensation and almost everything remains to be done in the matter of social insurance against sickness. It is true that in recent years there has been a rapid development, in some of the larger cities, of medical insurance clubs conducted by private companies, with dues of ten cents weekly. They give medical care in ordinary cases, but require extra payments for surgical treatment and for medical supplies. They as yet touch only the outer fringe of the problem, but they testify to the need and to the increasing desire of the wage-workers for insurance of this kind. It is believed that at least 4 per cent of the income of wage-workers now is expended for the care of sickness and for burial insurance. The losses of wages meantime remain unequalized by insurance indemnities. A large proportion of the cases of temporary destitution in ordinarily self-supporting families is due to sickness. The German experience shows that 4 per cent of wages, collected in part from employers and in part from wage-workers, is sufficient to give a far better medical service than can be had through private effort, to give some indemnity for loss of wages, and to carry on a very useful hygienic work for the families and for the public health. § 11. #Old-age and invalidity pensions#. Insurance to provide pensions for old-age and permanent (partial or total) disability is in nature but an extension of the insurance against accident and sickness. In a relatively small number of cases accidents result in permanent disability and it is both illogical and inhumane to limit, arbitrarily, the compensation in such cases to a certain period, as two or three years, as is done in many compensation laws. The disability due to advancing years is in nature a chronic illness, inevitable, sooner or later, to all who survive. The movement to provide some indemnity in such cases has been rapid in European countries, doubtless because the problem was a very pressing one where the average earnings are low. In Germany and Austria this development has been more in connection with other forms of insurance; in Denmark, Great Britain, and France it has had more the aspect of an extension of poor relief. In the United States little has been done to provide for these great needs. Massachusetts in 1907 authorized savings banks to sell insurance and old-age pensions to those who applied. An increasing number of corporations, especially railroads, are adopting a pension system for men growing old in their service, but nothing has been done of a general public nature toward compulsory and universal protection against these misfortunes. The following table shows the situation in some of the leading countries: OLD AGE AND INVALIDITY PENSIONS _Voluntary_. Belgium, 1850, 1903 (voluntary except for miners). Italy, 1898, 1907 (all wage earners). _Compulsory_. Belgium, for miners, 1868. Germany, 1889, 1899, 1911. Austria, 1889 (miners only); 1906 (office employees). Denmark, 1891, 1908 (noncontributory). France, for seamen 1850, 1881; for miners, 1894, 1905, 1907 (noncontributory, all indigent citizens); 1910 (contributory, all workmen and employees; was voluntary by laws 1850, 1886). Great Britain, 1908 (noncontributory, old age pensions, granted by the government). Sweden, 1913 (universal, contributory). § 12. #Unemployment insurance#. The most difficult of all the problems of insurance is that of unemployment. There the amount of the risk in any case is so largely dependent on the personal qualities of the worker. There are obvious objections to making the competent, steady, sober members of any trade bear the burden of the infirmities of their fellows. But, on the other hand, as we have seen,[4] a large part of the problem of unemployment is chargeable to social maladjustments rather than to individual faults. At present development in this field is along two lines, that of subsidized trade-union relief (the Ghent system), and that of compulsory state insurance in certain industries. The former has been adopted by many cities and by some countries in western Europe, the public paying a certain proportion (from one sixth to one third) of the amounts of the benefits paid by the unions. Great Britain is the only country as yet to adopt a compulsory state system. It began operation in 1912, and applied to 2,500,000 persons, or one sixth of all the wage-earners. The contributions are made 3/8 by employers, 3/8 by wage-earners, and 2/8 by the state. There are several original and interesting features of the act, such as rewarding, by the refunding of dues, those employers that provide regular employment and older workmen that have received benefits amounting to less than their contributions. Its administration in close connection with the labor exchanges will give valuable experience in this field. The working out of the many minor problems of classification, assessment, and administration, of unemployment insurance, will require many more years of experimentation. § 13. #Need of ideals in social insurance#. The world has had nearly forty years of experimentation of a remarkably varied kind, in the field of social insurance, since the German system was inaugurated in the eighties of the nineteenth century. America stands almost at the beginning of a development along those lines that is certain to be of enormous extent and importance. It would be folly for us to repeat the costly errors of other countries by failing to recognize certain principles which have been clearly established by experience. If these could be grasped and firmly kept in mind our progress in this field in America would be faster, more certain, less costly, and farther reaching than it promises otherwise to be. We can here attempt no more than merely to outline these principles that must be embodied in an ideal system of social insurance in America. § 14. #Insurance rather than penalty#. The principle of social insurance rather than that of legal penalty should be universally recognized. At present, in all countries where the several kinds of insurance are found side by side, accidents are indemnified on plans that are still rooted in the notion of employers' liability for negligence; whereas, necessarily, the indemnity in case of sickness and of old age has no such explanation. The unfortunate result of this difference of view is that whereas all cases of sickness and invalidity entitle to benefits, only those accidents suffered "in the course of employment" are indemnified, and the worker is left unprotected in a large share of the accidents to which he is liable. The worker's need and the social need are thus not adequately met. We have started along the same line of development in America, and it is to be feared that only through a long series of legal fictions and contradictory judicial decisions shall we be able to work out toward consistency in this matter. Another unfortunate result of this difference is that accident compensation, being made peculiarly the task of the employers, does not develop the spirit of responsibility on the part of the workers and of coöperation between them and employers that other forms of insurance call forth, where representatives of both parties sit together in the administration of the system. § 15. #The compulsory principle#. Insurance must be general in its application to all the persons within broad wage-earning classes, and in order to be general it must necessarily be compulsory, not voluntary, in its application. To leave any form of insurance optional, or elective, with either employers or wage-workers, is to fail of the main purpose in a large proportion of the individual cases where it is most needed, and to increase the expense to those that are included. Within a compulsory system, however, there should be given wide opportunity for the voluntary principle by admitting to the system others that are not compelled to insure, and to enable any insured person to increase his paid-up, nonforfeitable insurance at any time by extra payments made at times of unusually high wages, from legacies, or from any other exceptional income. § 16. #State insurance and a unified system#. The state, through the public insurance office, must ultimately be the sole agency for insurance. Only in this way can the maximum of simplicity and economy be attained. Of course, this calls for a better appreciation of expert training, and a broader sentiment in favor of the merit system in the public service than we yet have in America. There should be a unification of various kinds of insurance in one general plan and under one general administration for the whole state. This should be done with full regard to the actuarial differences in costs as among various kinds of insurance, various trades, various establishments, and, to some extent, even the various individuals, so as to ascertain the costs and to distribute them equitably. Only in this way can provision be made for entire mobility of labor, so that men may not be bound, as a condition for obtaining benefits, to continue in the service of any one employer. To this end there should be interstate comity and coöperation, so that the insured could at any time transfer his actuarial equity from one state to another. § 17. #The contributory principle#. The contributory principle should be adopted, and both employers and wage-earners contribute to the cost in equal amounts. But further, the general public interests may be recognized through the payments in aid of the funds (subsidies, subventions). Both employers and employees usually seek to escape the burden, by getting the state to bear the whole expense[5] or by getting the other party to pay all or the larger part. But it is much to be desired that in large part the finances of a system of social insurance should be disassociated from the ordinary budgetary system of taxation and public expenditures. The fundamental reason why the premiums should be divided between employers and employees is that this is most favorable to the equal participation and coöperative efforts toward reducing the risk, and developing right industrial and political relations. Everywhere it is the practice to provide for representation nearly in proportion to contributions. It is usually assumed by employers, by wage-workers, and by others in the discussion of the subject, that the burden remains and is borne by those who directly pay the premiums, and just in proportion to their payments. This is an almost utterly mistaken view. There is, on the contrary, every reason to believe that the general principles of shifting and incidence of taxation apply fully here.[6] It cannot be doubted that, if wages are not arbitrarily fixed, if they result, as we must believe, from an adjustment and equilibrium of the various classes of labor in a general economic situation, then after a time the premiums become a part of that general situation. Payments compulsorily made by employers (by all, without exception) will ultimately be offset by a lower wage, and if transferred to the workmen will ultimately be offset by a higher wage. Of course, there is some delay and friction in making the adjustment, but, under any settled policy, the adjustment once made will be maintained. The benefit of social insurance to the workingmen is not mainly that their wages are increased by the direct contributions of employers to the premiums, tho there are doubtless some cases of "parasitic" industries and parasitic employers that escape their due share of payments for risk, now that there is no insurance system. The great benefits are that total wages and losses are apportioned economically to the points of maximum utility; that accumulation of capital by and for the wage workers is made regular, automatic, safe, and in great amounts; and that financial aid, physical care, and mental relief from, some of the most tragic anxieties of life, are given effectively and economically to the masses of the people. But, as has been indicated in another connection above, it is far from being a matter of indifference, psychologically, where the first, immediate burden of premium payment falls. The persons paying the premiums, in whole or in part, are far more keenly aware of the cost, and alive to reducing and removing the evil conditions. Moreover, their interest is stimulated by the fact that they are the first to gain by any temporary economies, and the more so because of the illusory belief sure to persist, that they are the ultimate as well as the immediate bearers of the costs. The development of a complete system of social insurance along these lines promises to do more than any other single measure of practical social reform now under consideration to change the conditions and the outlook of the wage-earning class. [Footnote 1: See above ch. 2, sec. 14; ch. 10, sec. 7; ch. 20, sec. 1; ch. 22, secs. 11-18.] [Footnote 2: The American Association for Labor Legislation has issued a pamphlet describing these features more in detail.] [Footnote 3: Thirteen states had, in 1916, state insurance funds, and, in five states (Oregon, Nevada, Washington, West Virginia, and Wyoming), they are the only insurance agencies allowed.] [Footnote 4: Ch. 22, secs. 14-18.] [Footnote 5: See examples in the lists of laws above cited, sec. 11.] [Footnote 6: See above, ch. 16, sec. 14.] CHAPTER 24 POPULATION AND IMMIGRATION § 1. Nature of the population problem. § 2. Complexity of race problems. § 3. Economic aspects of the negro problem. § 4. Favorable economic aspects of early immigration. § 5. Employers' gains from immigration. § 6. Pressure of immigration upon native wage-workers. § 7. Abnormal labor conditions resulting from immigration. § 8. Popular theory of immigrant competition. § 9. Divergent views of effects on population. § 10. The displacement theory; its fundamental assumption. § 11. Magnitude of the inflow of immigrants. § 12. Earlier and recent effects of immigration upon wages. § 13. _Laissez-faire_ policy of immigration. § 14. Social-protective policy of immigration. § 15. Population and militarism. § 16. Problem of maximum military power. § 1. #Nature of the population problem.# No one of the problems of labor thus far discussed is of so great importance in relation to popular welfare as is "the problem of population." By this is meant the problem of determining and maintaining the best relation between the population and the area and resources of the land. What is to be deemed "best" in this case depends, of course, on the various human sympathies and points of view of those pronouncing judgment. Very generally, until the nineteenth century, the only view that found expression was that of a small ruling class which favored all increase in population as magnifying the political power of the rulers and as increasing the wealth of the landed aristocracy. This view still is unconsciously taken by the members of a small but influential class, and is echoed without independent thought by many other persons. But more and more, in this and other labor problems, another more democratic standard of judgment has come to be taken, that of the abiding welfare of the masses of the people. This is the point of view that must be taken by the political economist in a free republic. The problem of population presents two main aspects: one as to composition, and the other as to numbers of the people. Changes in either of these respects concern the welfare of the masses. Changes in the kinds of people, or in their relative numbers, may greatly affect the welfare of the people, in some cases touching special large classes, and in others affecting the whole mass of the people. § 2. #Complexity of race problems.# The questions of race composition that we shall here consider are those of the negro and of the immigrant.[1] Both of these questions are complex and go beyond the limits of mere economic considerations, touching the most vital political and social interests of the nation. Indeed they involve the very soul and existence of peoples, for who can doubt that ultimately racial survival and success are mainly to be determined by physical and spiritual capacity? The negro in America is the gravest of our population problems. In large portions of our land it overshadows every other public question. Yet the negro is here because men of the seventeenth century ignored the complexity of the labor problem and thought only of its economic aspect. The landowners wished cheaper labor and, reckless of other consequences, they imported slaves from Africa to get it. They gained for themselves and a few generations of their descendants a measure of comparative ease, but at a frightful cost to our national life--a cost of which the Civil War now seems to have been merely a first installment on account rather than a final payment. § 3. #Economic aspects of the negro problem.# The negro as a wage earner is found very little outside of the least skilled branches of a limited range of occupations. Of these the principal ones, as is a matter of common knowledge, are farm work, domestic service (including janitor service in stores and factories and work in hotels), and crude manual outdoor labor. Repeated attempts to operate factories with a labor force of negroes have proved unsuccessful. In some of the better-paying occupations in which large numbers of negroes were found in the North soon after the Civil War, such as barbering, waiting on table in the best hotels, and skilled manual work, they have been largely displaced by European immigrants. Negroes are a disturbing and unwelcome influence in labor organizations, and even when nominally eligible to membership are in fact rarely accepted. They very frequently are employed as strike-breakers and this fosters race antagonism both immediately and permanently. The negro problem is, from our present outlook, insoluble. The most laudable of present efforts, that for industrial training, represented by Hampton and Tuskegee Institutes, and the work of Booker T. Washington, leaves the dire fact of two races side by side and yet unassimilated socially, politically, and, in large measure, economically. Two other possibilities, race admixture and caste, are both so repellent to white American thought, that they cannot be looked upon as solutions. Segregation in a separate state, or separate states, is a thorogoing proposal, but is practically impossible. Finally there is the conceivable, but improbable, event of the decrease and extinction of the negroes in America, Their relative number has declined since 1800,[2] but their absolute number still continues to increase. It seems probable that if European immigration were to be stopped that a very large migration of negroes from the South to the North and the West would occur to take places hitherto filled by unskilled immigrant workers. In the year 1915, following the check to immigration as a result of the European war, a very marked movement of this kind set in. If this occurred on a much larger scale it might result in greatly reducing the negro population in some portions of the South, and as the "natural rate of increase" of the negroes in the North is a negative quantity, it might cause the total negro population of the country to begin absolutely decreasing. § 4. #Favorable economic aspects of earlier immigration.# Regarding the immigration problem we are not confined to futile expressions of regret as in the last case. For by the "immigration problem" is meant primarily and mainly the coming of immigrants, and we can by legislation limit or stop their coming, if we will. The question at issue is whether their coming really is an evil or, on the whole, a blessing to the country. The historic American attitude toward immigration has been highly favorable to it. The early settlers on these coasts were led by various motives, some political, some religious, but far the largest part economic, the motive of bettering their worldly condition. Land was plentiful and all men of any capacity could easily become landowners. An inflow of laborers was favorable to the interests of all the influential elements of the population, especially to landowners and active business men. Increase of numbers, favoring division of labor and the economies of production in manufacturing, and reducing the dangers from Indians and from foreign enemies, seemed an unmixed blessing. Many of the newcomers soon became landowners and employers, and in turn favored a continuance of the movement. Thus was hastened the peopling of the wilderness. The interest of these classes harmonized to a certain point with the public interest; but likewise it was in some respects in conflict with the abiding welfare of the whole nation. It led to the fateful introduction of slavery from Africa, and it encouraged much defective immigration from Europe, the heritage of which survives in many defective and vicious strains of humanity, some of them notorious, such as the Jukes, the Kallikak family, and the Tribe of Ishmael. § 5. #Employers' gains from immigration.#. The immigration from Europe has furnished an ever-changing group of workers, moderating the rate of wages which employers otherwise would have had to pay. The continual influx of cheap labor aided in imparting values to all industrial opportunities. A large part of these gains have been in trade, in manufacturers, and in real estate as the cities have taken and retained an ever-growing share of the immigrants. Successive waves of immigration, composed of different races, have ever been ready to fill the ranks of the unskilled workers at wages somewhat lower than the current American rate. The lower enterprisers' costs that resulted from immigration surely did not accrue to the advantage of the employers alone. Bearing in mind the fact that the employing-enterpriser is a middleman,[3] we may see that the lower costs must, in most cases, be passed on to the consumers in the form of lower prices of products. And often the consumer, as the employer of domestic service at lower rates than otherwise would be possible, gets this advantage directly. This increases the number of those whose self-interest, at least when narrowly judged, leads them to favor the policy of unrestricted immigration, Tho perhaps less general than it once was, this sentiment in favor of immigration is still potent. The continuous inflow of immigrants has in many industries come to be looked upon as an indispensable part of the labor supply. Conditions of trade, methods of manufacturing, prices, profits, and the capital value of the enterprises have become adjusted to the fact. Hence results one of those illusions cherished by men whenever they identify their own profits with the public welfare. Without immigration, it is said, "the supply of labor would not be equal to the demand." It would not at the wages prevailing. But supply and demand have reference to a certain price. At a higher wage the amount of labor offered and the amount demanded would come to an equality. This would temporarily curtail profits, and other prices would, after readjustment, be in a different ratio to wages. § 6. #Pressure of immigration upon native wage-workers.# There must always have been cases where the labor incomes of workers were somewhat depressed by the incoming of immigrants. Indeed, that must to some extent always be so when the natives continue to work alongside of the immigrant at just the same job. But before the Civil War living conditions were simple, wages comparatively high and (more important) pretty steadily rising, and the wage-earning class not yet a large share of the population. Moreover, this conflict of interest was minimized and often quite avoided by the native changing to another occupation. In the old days there was always the outlet of free land on the frontier, now closed. Always there has been a better opportunity for natives to move into higher positions of foremanship or as employers of immigrant labor. As the wage-earners have become relatively more numerous, many of them have felt more keenly the pressure of competition from immigrant labor. Moreover, the immigration since 1890 has been increasingly from southern and southeastern Europe, from countries with much lower standards of living, and has been of enormous proportions. Here are some significant figures as to immigration since 1820. -------------------------------------------------------------- | | | Immigration, | Immigration | Increase of | per cent of Decade | in the period | population | population- | | | increase -----------------|---------------|-------------|-------------- 1820-30 | 124,000 | 3,300,000 | 3.8 1830-40 | 528,000 | 4,200,000 | 12.3 1840-50 | 1,604,000 | 6,100,000 | 26.3 1850-60 | 2,648,000 | 8,200,000 | 32.3 1860-70 | 2,369,000 | 8,400,000 | 28.2 1870-80 | 2,812,000 | 10,400,000 | 27.0 1880-90 | 5,246,000 | 12,700,000 | 41.3 1890-1900 | 3,687,000 | 13,100,000 | 28.1 1900-1910 | 8,795,000 | 16,000,000 | 55.0 Total, 90 yrs. | 27,800,000 | 82,400,000 | 33.7 § 7. #Abnormal labor conditions resulting from immigration.# The labor supply coming from countries of denser population and with low standards of living creates, in some occupations, an abnormally low level of wages and prices. Children cannot be born in American homes and raised on the American standard of living cheaply enough to maintain at such low wages a continuous supply of laborers. Many industries and branches of industry in America are thus parasitical A condition essentially pathological has come to be looked upon as normal. The commercial ideal imposes itself upon the minds of men in other circles. Statistics show that the prevailing wages for unskilled manual workers in America have risen much less since the Civil War than have other wages.[4] Wages in the great lower stratum of the unskilled and slightly skilled workers are much lower in America relative to those of more skilled and professional workers than they are in Europe. It can hardly be doubted that the most important, tho not the sole, cause of this situation has been the unceasing inflow of immigrants going into these low-paid occupations. The "general economic situation" in America, but for immigration, would compel higher wages to be paid to the masses of the workers. If immigration were suddenly stopped in a period of normal or of increasing business, wages in these occupations would at once rise, and that, without the aid of organization, of strikes, or of arbitration. This would affect most those occupations which now present the most serious social problems, in mines, factories, and city sweatshops. In some small measure the war in the Balkan States, by recalling many men for service, had this influence in 1912; and the great war beginning in 1914, by stopping a large part of the usual immigration, gave a striking demonstration of this principle. In employing circles the rise of wages was sometimes referred to with an air of grievance as due to the "monopoly of labor," as if the economic situation here, enabling the wage-earners (millions of them immigrants), to get a higher competitive wage when immigration temporarily was diminished, constituted a monopoly. § 8. #Popular theory of immigrant competition.# The depressing effect of the ever-present and ever-renewing supply of immigrant labor upon wages appears most clearly at the time of wage contests, and often seems to be the most important aspect of the question. Laws against contract labor, passed to prevent this particular evil, have put no check to the great stream of those guided by friends to a "job." Organized labor thinks most of these immediate effects. Commonly labor's protest is expressed in terms of the untenable "lump of labor" theory of wages. "Every foreign workman who comes to America" is believed to take "the place of some American workman." The error in this too rigid conception of the influence exerted upon wages by new supplies of labor is evident in the light of the principles of wages. Yet it may be true that, both immediately and ultimately, the foreign workman depresses the incomes of those already here with whom he directly competes. On the other hand, those in occupations into which few immigrants enter may, as consumers of cheaper products, be immediately the gainers in real wages, by the very change that depresses the wages in the lower strata.[5] The manufacturing-employers advocate "protection" which enhances the price of their products, while usually favoring "free trade" in immigration to cheapen their costs. What more natural than that laborers should favor a policy of protection to labor, to keep foreigners from coming here to be their competitors. § 9. #Divergent views of effects on population.# The foregoing views of the effects of immigration upon wages, both of those favoring and those opposing it, are short-time views, relating to immediate rather than ultimate effects. If the immediate causes are continuously repeated throughout the lives of successive generations the results are for those mortal men as ultimate as anything that concerns them. In this case it would make no difference to the millions of workers, whose wages are depressed, if it could be shown that wages fifty or a hundred years from now would be no lower as a result of continued immigration than they otherwise would be; or to the employer that wages would then be no higher. But to the social philosopher and to the statesman, interested in the abiding general welfare, the ultimate economic effects are of the greatest importance. The question is: What will be the far-reaching, long-time effects of immigration upon the general economic situation, as that determines the welfare of the mass of the people? We confine ourselves here to the economic effects, leaving aside as far as possible the racial, moral, religious, political, and general social aspects of the subject. We are met at the outset by two divergent opinions as to the permanent results of immigration upon the growth of population. The one is that all immigrants coming to our shores are net additions, hastening by so much the growth in density of population; the other opinion, the displacement theory, is that immigration has the effect of checking the natural increase of the native stock so much that it does not materially change the total population, or actually causes it to be less than it would have been had no immigration occurred. § 10. #The displacement theory; its fundamental assumption.# The latter opinion which still has many upholders[6] was first advanced by a distinguished economist, Francis A. Walker, but his first statement of it referred only to the period between 1830 and 1860. The main argument in support of this opinion was that in the three decades from 1830 to 1860 during which a large immigration occurred, the decennial rates of increase of the population were almost the same as in the three decades from 1800 to 1830.[7] The conclusion drawn from these figures is that the immigrants were the cause of the decline of the average birthrate that occurred in the families of native stock. The validity of this conclusion is absolutely dependent on the assumption that no other forces were at work to produce this result. Must we believe that, but for immigration, the native birthrate would not have declined at all? This is incredible. The birthrate of the native stock had already begun to decline before 1820 as is shown by many family records, and by the fall of the decennial rate of increase from 35 and 36 in the decades ending 1800 and 1810, to 33.1 and 33.5 in the next two decades. This occurred despite the enormous western settlement then under way on the Louisiana Purchase. The decline of the birthrate began at that time to appear as a world-wide phenomenon, accompanying improved transportation (roads, steamboats, steam railways), the rapid growth of cities, and the general industrial revolution. The general birthrate has declined of recent years in Australia and New Zealand, where there has been little immigration, more rapidly than it has in the United States.[8] § 11. #Magnitude of the inflow of immigrants.#In view of these facts it seems necessary to modify the displacement theory greatly. To the extent that the coming of immigrants caused a net addition to the population, it doubtless hastened the growth of cities and the development of industrialism, and thus helped to reduce the birthrate in some classes. But this view admits the effect upon population which the displacement theory denies. Probably, in a good many cases the more rapid business advancement of the natives, because of the coming of the immigrants, led to the decline of birthrate that is a consequence of economic success.[9] But a large part of this change would have inevitably occurred even if there had been no immigration after 1820. Between 1820 and 1910 the population increased 82,400,000, and the total number of immigrants was 27,800,000, or 33.7 per cent of the total increase. In an urban environment the birthrate among immigrants always has been very much higher than that of native Americans. This fact alone might well be taken as sufficient to offset whatever depressing effects the coming of the immigrants may have had upon the native birthrate, leaving the immigration nearly a net addition to population. It does not seem possible to believe that if there had been no immigration, our native population, rapidly advancing in average wealth, wages, and general education, would have continued with an unchecked birthrate, and would have filled all the places taken by immigrants. And no believer in the displacement theory has ever ventured to claim, as the argument requires, that if immigration were now stopped, the birthrate would again return to the old standard of 1820, or would cease to decrease somewhat. Especially of late, since the rate of increase of the native population has become much less, is the effect of continuing immigration apparent. In the decade of 1900-1910 the total population increased 16,000,000, while nearly 9,000,000 immigrants arrived. Of the remaining increase, 3,000,000 consisted of children born of foreign parents. That leaves three or at the most four million (4,000,000) increase attributable to the native stock, white and negro combined. § 12. #Earlier and recent effects of immigration upon wages.# Let us now correlate the principle of decreasing returns and the facts as to the exploitation of our natural resources[10] with the growth of our population, on the assumption that immigration has been a net contribution to our numbers. While the vast frontier was open to settlement, the growth of population could not fail to be looked upon as a blessing, even tho somewhat mixed with political evils, immorality, and pauperism. Beginning in colonial times, the policy of "the open door" to immigrants came thus to be deemed the traditional, patriotic American policy. Yet there is grave reason to believe that the rate of growth in the nineteenth century was wastefully rapid and that a slower and sounder growth might have been better.[11] However, this rapid growth was largely extensive, spreading over wider areas, and was consistent with a pretty steady rise of real wages in America until about 1895,[12] the level continuing higher than that of Europe despite the contemporaneous rise of wages there. Much of this general rise is undoubtedly attributable to the adoption of better tools, machinery, and industrial processes, the more so as inventions and new methods have rapidly become free goods.[13] The beneficial improvements long cooperated with the rapid exploitation of rich resources to raise real wages, and then undoubtedly continued to offset for a time the unfavorable effects as the richer resources began to show signs of exhaustion. Since the end of the last century, however, the net trend upward seems to be checked, and "the rising cost of living" (real cost) has come to be a serious actuality for larger sections of the population.[14] Yet so long as wages are enough higher in America to pay the passage of the low-paid workers of the industrially backward nations, they will continue to come. The ease and cheapness of migration in these days of steamships, the encouragement of immigration by the agencies and advertisements of the steamship lines, and the increasing readiness of the peasantry to migrate, have become well known through recent discussions. Unless immigration is limited, it must continue to depress the wages of American workingmen, through both its immediate and its ultimate effects. § 13. #Laissez-faire policy of immigration.# There are those who take a fatalistic, or a _laissez-faire_, view of the subject, and declare that the problem will solve itself as the level of American wages comes to be nearly the same as that of the countries of Europe from which our immigration is coming. True enough, if this can be called a "solution." There are many who cherish the commercial ideal according to which cheap labor is absolutely desirable and needful to produce cheaper products. This ideal has spread to wider circles. Here, for example, are the words of a man who combines wide knowledge of the facts of immigration with keen sympathy for the working classes:[15] "The past industrial development of America points unerringly to Europe as the source whence our unskilled labor supply is to be drawn . . . America is in the race for the markets of the world; its call for workers will not cease." Yet a little further on he must say: "All wage-earners in America agree that it is not as easy to make a living to-day as it was twenty years ago, and the dollar does not go so far now as it did then. The conflict for subsistence on the part of the wage-earner is growing more stern as we increase in numbers and industrial life becomes more complicated, and the fact must be faced that the vast army of workers must live more economically if peace and well-being are to prevail." § 14. #Social-protective policy of immigration.# A different kind of solution is offered by those who favor the strict limitation, if not the complete prohibition, of immigration. The foregoing study indicates that the time has come, if it is not far past, when the traditional policy of fostering immigration is opposed to the welfare of the masses of the people. This belief can be based solely on grounds of numbers, the relation of population to resources, quite apart from a preference for particular races or the familiar arguments regarding social and political evils and lack of assimilation, however valid they may be. The limitation of immigration would immediately improve working-class conditions where they are worst in America,[16] and would check and probably reverse the tendency to diminishing returns already manifest in many directions. This opinion does not necessitate an absolute prohibition of immigration; it is consistent with the continuance of immigration of a strictly selected character, and in numbers so small that all European immigrants now here could be rapidly and completely assimilated, economically and racially. With a slow national increase of population and with the continued progress of science and the arts, it should be possible for real wages to continue indefinitely rising in America. The selection of immigrants to be admitted should be a part of a national policy of eugenics,[17] which aims to improve the racial quality of the nation by checking the multiplication of the strains defective in respect to mentality, nervous organization, and physical health, and by encouraging the more capable elements of the population to contribute in due proportion to the maintenance of a healthy, moral, and efficient population. In such a view, a eugenic opportunity is presented in the selection and admission of immigrants that are distinctly above (not merely equal to) the average of our general population. § 15. #Population and militarism#. In view of the recrudescence of the spirit of armed national aggression evident of late, and especially in the outbreak of the Great War in 1914, the military aspect of the population question deserves serious consideration. The growth of savage and barbarian tribes in numbers, so that their customary standards of living were threatened, frequently has led to the invasion and conquest of their richer neighbors.[18] To-day nations on a higher plane of living are probably repeating history. The nation with an expanding population is tempted to seek an outlet for its numbers and for its products by entering upon a policy of commercial expansion, which in turn has to be supported by stronger military and naval establishments. It is led by primitive impulses that to it carry their own moral justification, to possess the territory of its neighbors. The immediate occasion is probably some matter of internal politics, such as growing discontent and democratic sentiment among the people. Nations with slowly growing populations, and still possessed of ample territories to maintain their accustomed standards of life, naturally favor the _status quo_, and are pacifist or nonmilitarist. If they arm it is for their own safety. In this view, militarism is seen to consist not in having drilled soldiers and stores of munitions, but in the national state of mind that would use these for aggression, not merely for defense. When, therefore, a powerful nation has reached a certain stage in the relation of its population to resources, limitation of population not limitation of armaments is the real pacifism; and increase of population, not increased military training or a larger navy, is the real militarism. § 16. #Problem of maximum military power.# It is a grave question, however, whether a nation with a comparatively sparse population, high wages, and great wealth can safely limit that population in the presence of a capable, ambitious, and efficient rival that covets such opportunities. On the one hand, a population may be so sparse that it has not soldiers enough to defend its territory against a numerous enemy; on the other hand, it may be so dense, and consequently average incomes be so low, that it cannot properly train, arm, and support its population of military age. The recent developments in the art of warfare call for great use of the mechanical industries, for great power to endure taxation, and for great financial resources, conditions found only where the average of national income is high. The point of maximum military power must be far short of the maximum possible population. It would seem that a nation of 100,000,000 inhabitants favorably situated to resist aggression, well supplied with the natural materials for munitions, and well equipped to produce them, might safely limit its numbers so as to ensure a high level of popular income. This safety would be greatly increased by permanent alliance with other peoples likewise limiting their numbers and, therefore, interested in maintaining the peace of the world. In this way it would be possible for them all to maintain a standard of popular well-being even higher than is fully consistent with the maximum military power, even in the presence of prolific and aggressive rival nations. [Footnote 1: Even more important than these is the relative decrease of the successful strains of the population, briefly treated in Vol. I, ch. 33. This is the problem of eugenics, the choice and biologic breeding of capable men to be the citizens of the nation, and broadly understood, it includes both the negro and the immigrant problems.] [Footnote 2: See Vol. I, p. 430, figure 58, showing the fall in the decennial rate of increase of negroes compared with whites; and see comment in accompanying note.] [Footnote 3: See above, ch. 20, sec. 11, and references in note.] [Footnote 4: See below, sec. 12.] [Footnote 5: See Vol. I, p. 221, on non-competing classes.] [Footnote 6: The latest and best statement is that of H.P. Fairchild, "Immigration," pp. 215-225, citing various opinions, and accepting the view of Walker. But he says (p. 216): "It must be admitted that this is not a proposition which can be demonstrated in an absolutely mathematical way, which will leave no further ground for argument."] [Footnote 7: See Vol. I, p. 429, for figures of population and of decennial rates of increase.] [Footnote 8: The effect of the growth of cities is discussed in the "American Journal of Sociology," Vol. 18, p. 342, in an article on "Walker's Theory of Immigration," by E.A. Goldenweiser.] [Footnote 9: See Vol. I, p. 420.] [Footnote 10: See Vol. I, chs. 34 and 35.] [Footnote 11: E.g., see above ch. 14, sec. 11 on the prodigal land policy.] [Footnote 12: See Vol. I, p. 436 ff.] [Footnote 13: See Vol. I, ch. 36, on machinery and wages.] [Footnote 14: For analysis of the available statistics bearing on the subject, with conclusions that real wages are no longer rising, see H.P. Fairchild, in "American Economic Review" (March, 1916), "The standard of living-up or down?"] [Footnote 15: Peter Roberts, in "The New Immigration," 1912, preface, p. viii, and p. 47.] [Footnote 16: See above, sec. 7; also ch. 21, sec. 9.] [Footnote 17: See above, sec. 2, note; also Vol. I, p. 422.] [Footnote 18: See Vol. I, p, 412, on war and the pressure of population.] PART VI PROBLEMS OF INDUSTRIAL ORGANIZATION CHAPTER 25 AGRICULTURAL AND RURAL POPULATION § 1. Agriculture and farms in the United States. § 2. Rural and agricultural. § 3. Lack of a social agricultural policy in America. § 4. Period of decaying agricultural prosperity. § 5. Sociological effects of agricultural decay. § 6. Fewer, relatively, occupied in agriculture; use of machinery. § 7. Transfer of work from farm to factory. § 8. The rural exodus. § 9. The farmer's income in monetary terms. § 10. Compensations of the farmer's life. § 11. Ownership and tenancy. § 1. #Agriculture and farms in the United States#. There were nearly 12,400,000 persons in the United States gainfully occupied in agriculture in 1910, this being 32.5 per cent of all in occupations. These, together with other family members not reported as engaged in gainful occupations, constitute the agricultural population, and comprize more than one third of the total population of the country. "Agriculture" is here used in a broad sense, including floriculture, animal husbandry (poultry, bee culture, stock raising), regular fishing and oystering, forestry and lumbering. Agriculture thus produces not only the food but (excepting minerals, including coal, stone, natural gas, and oil) the raw or partly finished materials for all the manufacturing and mechanical industries. With the exception of areas devoted to forestry on a large scale and to fishing, the industry of agriculture is pursued on the 6,400,000 farms, covering 46 per cent of the total land area of the country. Of the land in farms, a little over half is classified as improved. The estimated value of farm property, including buildings, implements, machinery, and live stock, was, in 1910, about $41,000,000,000, somewhere near one fourth of the estimated wealth of the country at that date.[1] § 2. #Rural and agricultural.# The adjectives rural and agricultural are often used loosely as synonyms. Agricultural refers primarily to the occupation of cultivating the soil, and is properly contrasted with other occupations, as mechanical and professional; whereas rural refers to place of residence outside of incorporated places of a specified minimum population (of late, 2500), and is properly contrasted with urban, applied to those living in larger population groupings. In 1910 the rural population comprised 53.7 per cent of the total population. It is true that the two groups of the agricultural and the rural populations are largely composed of the same persons, but to a considerable extent they are not. Many farm houses, together with part or all of the farm lands, lie inside urban boundaries, and, besides, some persons engaged in agriculture reside in urban places. On the other hand, any one acquainted in the least with a rural district (in the statistical sense) can at once think of many persons living there that are not engaged in agriculture; they may be merchants, warehousemen, railway employees, physicians, handicraftsmen, teachers, artists, retired business men, and others. The percentages given in this and in the preceding section indicate that about two fifths of the rural families are not engaged in agriculture. It is often important to make this distinction, tho it is difficult to do; for some of the much-discussed rural questions are of a broad social nature, are matters of rural sociology, relating pretty generally to the rural population; while other questions of "rural economics" are more strictly matters of agricultural economics and relate to the farm as a unit of industry, or to agriculture as an occupation. § 3. #Lack of a social agricultural policy in America.# It is a common remark that the farmer lives an independent life. This develops in him a self-reliant spirit. He readily gives and takes simple neighborly help in informal ways, but he does not readily turn to government for aid. While every influential urban group, organized or unorganized--manufacturers, merchants, wage-earners--has sought and obtained special protective social legislation, the farmer has, from choice or necessity, usually had to work out his economic problems unaided. The exceptions are few and of small importance. For example, the prodigal land-policy of the state and national governments encouraging the settlement of the frontiers was not a farmers' policy. It was originally inspired by the larger political purpose of extending the bounds of the nation; later it was advocated and fostered by a land-speculating element, linked with bad politics, in the frontier states, and not by farmers as such. It in time greatly injured the farmers of the eastern states. The "Granger legislation," to regulate railroad rates, was so called by the East in a spirit of derision because it began in the distinctively agricultural states of the Northwest; but it had neither the aim, nor the result, of obtaining especially for farmers any rates that were not open to every one on the same terms. The tariff rates on American agricultural products, placed in the acts as a matter of form, have, with minute exceptions, been ineffective to favor farmers, as the shipments were all outward and none inward, while heavy and effective rates were placed on most things that the farmers had to buy.[2] In part the explanation of the lack of legislation favoring farmers is to be found in their small part and influence, as a class, in political affairs, outside of minor executive offices in township and county governments. In the state legislatures farmers are few relative to their numbers in the community, and still fewer in either House in Washington. Among the real exceptions to the otherwise fair record of the farming class in this respect is the tax on oleomargarine and the special favor accorded to farmers' associations in the Clayton Act. It might be cynically said that the farmer has not been "sharp" enough to get his share of the "good" things" that the business classes were passing around in protective legislation. But farmers have, as has every economic group, interests which may legitimately be the subject of social legislation; whereas they have limited their attention to their private affairs at home and have been prone to vote patiently and proudly the "straight ticket" to elect business men and lawyers to office. § 4. #Period of decaying agricultural prosperity#. Despite the facts just stated, every campaign orator admits that there is no other occupational class of the nation of greater importance to the nation than the farmers, or more deserving of prosperity. Every other part of the industrial organization of a nation is interrelated with its agriculture. Great changes, in respect to growth of population, immigration, exhaustion of natural resources, mechanical inventions, scientific discovery, and many things more, have been occurring, which have altered and, in some communities, have destroyed the very foundations of agricultural enterprise in America since the close of the Civil War in 1865. But the farmers have been left to struggle individually with their individual difficulties, tho the outcome was of the gravest portent to the whole social economy. Such was the case in the period of agricultural depression from 1873 to about 1896.[3] Multitudes of ancestral homesteads were then left behind by the last farmer-descendant of the old line. No longer able to make a living on the soil, he took up an urban occupation. § 5. #Sociological effects of agricultural decay#. Such changes caused a relative decline in the birthrate of the old American stock. The places of many of these long-settled families remained unfilled as thousands of abandoned farm houses testified. The places of others were taken by a tenantry, white or black, lacking the thrift of ownership; the lands of others passed to new owners of alien races. The populations of many rural neighborhoods thus became heterogeneous, with results calamitous to the social life. Once prosperous schools declined, once thronging country churches were deserted, and much of the old neighborhood democracy disappeared. When, about the year 1900, prosperity began slowly to return to the American countrysides in the form of rising prices of farm produce, it was in large part too late to remedy the evil, except as it may be done by generations of effort under more favoring conditions. There are merely suggested here some of the complex sociological effects of past economic changes in American agriculture. It is certain that in the future also the economic changes in this field will be related closely to social and political changes of a fundamental character. § 6. #Fewer, relatively, occupied in agriculture; use of machinery.# Probably ever since the first census in 1790, the relative number of agriculturists in this country has been decreasing. Beginning in 1880, the numbers of those occupied in agriculture for gain have been reported at the census dates in a form that makes them fairly comparable.[4] The explanation of this decrease in the proportion of the population that is engaged in agriculture is twofold; the first is the real increase in the productive output per person in agricultural industry. In larger part this is due to the increasing use of machinery in place of simple hand tools, and the substitution of horse-, hydraulic-, windmill-, steam-, and gasoline-power for human labor. This change has been made readily in the regions of level fields, but of late has been made possible to a greater extent in hilly country, by rearranging and combining the old irregular fields into regular fairly level rectangular fields easily tillable, while turning the rougher lands and hillsides into wood lots and pastures.[5] One man, thus, driving three or four or more horses, can do the work formerly done by two or more men and do it just as well. The farmers' incomes in different parts of the country vary pretty nearly with the amount of horse-power used per man. Economies equally great are made in the work done in the barnyards and barns. In most parts of the country only a beginning has been made in these ways, and in future the census will continue to reflect the progress in these directions. § 7. #Transfer of work from farm to factory#. The other part of the explanation of the decrease in the proportion of the population that is engaged in agriculture is that many operations are, step by step, being transferred from the farm to the factory. "Agriculture," we have observed, is a great complex of industries, in which many different products are taken from the first simplest extractive stage, and then put through successive processes to make them more nearly fitted for their final uses. Not so long ago grain cut in the field was threshed, winnowed, shelled, made into flour, and baked on the farm, as it still is in many places. Logs were cut into boards, planed, and made into houses or furniture by the farmer. The old-time farmer made by hand a large number of his farm implements--rakes, ax handles, pumps, carts, and even wagons. Until a generation ago all butter, cheese, and other dairy products were made on the farm. Now these things are being done in steadily increasing proportion by workers classified as in the manufacturing industries, and agriculture contains fewer separate industries and processes. Of course there is economy of labor in nearly all of these changes, but the number occupied in agriculture is greatly reduced. Many farmers and more farmers' sons are moving from agriculture into occupations of manufacturing, trade, transportation, and the professions, and are becoming more narrow specialists. § 8. #The rural exodus#. The percentage of persons in the rural population changes at about the same rate as does that of the persons occupied in agriculture. In 1890 it was 64, in 1900 it was 60, and in 1910 it was 54 per cent. The percentage of the population in cities of 8000 or more has steadily increased. This phenomenon has been marked in all of the countries that have been developing along industrial lines. It has been variously described as "the rural exodus," "the abandonment-of-the-farm-movement," and "the city-ward drift."[6] It is only in part explained by the change from agriculture to other occupations; perhaps even in greater part it is due to the decline and disappearance in many rural places of small manufacturing and mercantile businesses before the competition of large business in the cities. In much of the long-settled area of the country every hillside stream once turned a little mill to saw timber, grind corn, forge iron, or weave cloth. Most of these mills are now deserted. In countless villages the old blacksmith shop, once a center of business, is abandoned. Here and there a patriarchal smith still serves a dwindling group of customers and speaks with mingled pride and pathos of his sons, now in the automobile business in the city. The movement away from the countryside has been but little counteracted as yet, but may be more in future, by the growing enjoyment of rural life, by the back-to-the-land movement, by interurban railways, by improved roads, and by automobiles. § 9. #The farmer's income in monetary terms#. Census figures and some additional investigations have led to the estimate of the average real income of the farmers of the United States in 1909, expressed in monetary terms, as $724. The estimated value of all products, whether sold or used by the farmer, plus the value of his house rent and fuel consumed by family, was $1236, from which expenditures of $512 are deducted for outside labor, and for materials used for operating and maintaining the farm. Of the $724 the sum of $402 is estimated to be the labor-income of the family and $322 is estimated to be the wealth-income (at 5 per cent of the capitalization of the farm). This was in a period of rising values in farm lands, averaging about $323 per farm annually, and this to most farmers was equivalent to so much monetary savings. The main items of net income, therefore, are as follows: Rent $125 Food from the farm 261 Fuel 35 Cash 303 Total $724 Increase in value of farm 323 Total estimated monetary income $1047 Of the total, $422 is a labor-income, and $645 is a wealth income.[7] It would be difficult, even if the available statistics were much more exact than they are, to compare exactly the farmer's income with those of urban classes. Averages of such large numbers and over such a wide area have a limited significance in the specific case; and living conditions and the purchasing power of money are so different in country and city and in different parts of the country.[8] § 10. #Compensations of the farmer's life#. In bare monetary terms the average farmer's family gets a labor-income less than that of the ordinary wage-earner in a factory, and it is only by the aid of the wealth-income that it appears to fare as well or better. Even the few largest incomes made in farming are small in comparison with many of those made in commerce, transportation, and manufacturing. The great mass of farmers of the nation are hard-laboring men, poor in the eyes of the city dwellers.[9] But this much is certain: the farmer's income in monetary terms has on the average much larger power to purchase the main goods of life (material and psychic goods) than it would have in town. Equally good house usance would cost more in nearly all towns, and much more in larger cities. Retail prices of the same food and fuel even in small towns would be much greater. The necessary outlay for clothes to maintain the class standard is much less for farmers than for city dwellers. Moreover, in the use of horses and carriages, and now of automobiles, and in the free control of his own time--in many elements of psychic income--the farmer is on a parity with men in other occupations of double or quadruple his income expressed in monetary terms. Tho the farmer's working day in the busiest season of summer is very long compared with that of factory or office workers, his working day at other seasons is usually much shorter than the average urban worker's day. The farmer's life is nearly always free from the excessive pressure, haste, and competition of city life, and the value, to many a man, of the more natural and wholesome conditions of outdoor life and outdoor work are hardly to be measured in terms of even the most untainted dollars. § 11. #Ownership and tenancy.# Since 1880, when the first figures on farm tenures were collected, the proportion of farms operated by owners has steadily decreased. Percentage of farms operated by Owners Cash tenants Share tenants 1880 ............ 74.5 8.0 17.5 1890 ............ 71.6 10.0 18.4 1900 ............ 64.7 13.1 22.2 1910 ............ 63.0 13.0 24.0 These statistics arouse fears that the class of independent farmers operating their own farms is gradually giving way to a tenantry in America. But in some respects the figures are misleading unless carefully interpreted. The increasing proportion of tenants is due not so much to owners falling into the class of tenants as to the hired laborers rising into the class of tenants. The number of male operating owners compared with all male workers (not merely with all farms) has remained almost constant at about 42 per cent; while the per cent of hired workers has decreased from 43.3 (in 1880) to 41.4 (in 1890) and to 34.6 (in 1900). Most hired men on farms are farmers' sons; the city boy does not adapt himself readily to farm work. Most hired men of native stock become tenants, and finally owners. Only 11 per cent of the hired workers in agriculture (in 1900) were over 35 years of age. The landlord of a farm let to a tenant, especially to a share tenant, is still to a large extent the general manager, controlling in a large measure through the renting contract and by his oversight, the operations of the farm. Older men find that letting the farm to a share tenant is easier for them and gives better results than continuing to operate the farm with hired labor. And it evidently gives a man a somewhat higher status to become a tenant than to continue to be a hired laborer. In the South this movement has taken on large proportions in the breaking up of large plantations once operated by the owner with hired labor, and now let in smaller lots to operating tenants. Yet such a change appears, statistically, as a decrease in the proportion of farms operated by owners. Despite these somewhat reassuring facts, the problem of maintaining and increasing operating ownership of farms in America is one deserving of the most earnest thought and efforts. The best form of farm tenure is not necessarily that giving the best immediate economic results. Politically in a democratic nation, and sociologically in its effects upon the size of families and the raising of healthy children, the preservation of an independent American yeomanry is of fundamental importance to the nation. The problem is as difficult as it is important, and becomes more difficult with the rise in the acreage value of lands and with the economical size of farms, both calling for a larger investment to become an owner. Changes in the system of taxation should be made with reference to this object; the system of agricultural credit should be developed and administered to assist; special efforts in agricultural education should be made and active administrative efforts should be directed, toward this important end. [Footnote 1: See above, ch. 1, secs. 7 and 8.] [Footnote 2: See ch. 14, sec. 5.] [Footnote 3: See Vol. I, p. 437.] [Footnote 4: It must be observed in studying these figures, that farmers' wives and children, working at home, are not reported as gainfully occupied. But a widow or a spinster owner, if herself acting as the enterpriser, is reported as "occupied" in agriculture. The increasing number of such cases in the past generation in part explains the growing number and percentage of females in agriculture. Number occupied in agriculture Per cent of all persons occupied Males Females Both sexes Males Females Both sexes 1880... 7,068,658 594,385 7,663,043 47.9 22.5 44.1 1890... 7,787,539 678,824 8,466,363 41.4 17.3 37.2 1900... 9,272,315 977,336 10,249,651 39.0 18.4 35.3 1910...10,582,039 1,806,584 12,388,623 35.2 22.4 32.5 ] [Footnote 5: See further, ch. 26, secs. 1 and 2 on the size of farms as an economic factor.] [Footnote 6: See above, sec. 2, on the distinction between rural and agricultural. In part the change here noted results from increases in the population of towns and incorporated places from a little below 2500 to something about 2500. For example, if there were 2499 persons in a town in 1900 they would all be classified as rural; if in 1910 there were 2500 or more they would all be classified as urban.] [Footnote 7: Sec Vol. I, p. 225, and note 11.] [Footnote 8: See Vol. I, p. 206.] [Footnote 9: See Vol. I, p. 227, note, for figures on owners and farm laborers.] CHAPTER 26 PROBLEMS OF AGRICULTURAL ECONOMICS § 1. Size of farms, and total farming area. § 2. Influences acting upon the size of farms. § 3. Self-sufficing versus commercial farming. § 4. Farming viewed as a capitalistic enterprise. § 5. Diversified versus specialized farming. § 6. Conditions favoring diversified farming. § 7. Intensive farming in Europe and America. § 8. Prospect of more intensive cultivation of land in America. § 9. The new agriculture. § 10. Difficulty of coöperation among farmers. § 11. Rapid growth of farmers' selling coöperation. § 12. Some economic features of farmers' selling coöperation. § 13. Coöperation in buying. § 14. Need of agricultural credit. § 15. Recent provisions for farm loans. § 1. #Size of farms, and total farming area#. The average area of farms has varied from a maximum of 203 acres, in 1850 (the first figures), to a minimum of 134 acres in 1880, being 138 acres in 1910. A better index, perhaps, is the average improved area per farm, which has been more nearly stationary, varying from a maximum of 80 acres in 1860 to a minimum of 71 acres in 1870 and 1880, being 75 acres in 1910. Here again the statistics require interpretation, for in the spread of the frontier the addition of large farms in the arid and semi-arid regions may raise the average, or the breaking up of large plantations in the South may decrease the average, without this indicating any essential change in the technical conditions of farming in the country generally. Since about 1900 the total area in farms has increased very slowly. Between 1900 and 1910 the increase was only 4.8 per cent; whereas a larger increase occurred in the area of improved land, 15.4 per cent, and the unimproved area in farms decreased 5.6. Future changes of farm areas may be expected to be of this same nature, mainly in the improvement of rough pastures, swamps, partly cleared woodlands, and desert lands awaiting irrigation. An increasing population will have to be provided with food and other products of agriculture on a farming area that henceforth will be increasing less rapidly than it has in the past and than the population increases. § 2. #Influences acting upon the size of farms#. In these averages for the whole country many conflicting influences unite and neutralize each other. Making for smaller farms is the breaking up of large grazing areas in the West into smaller general purpose farms or irrigated fruit districts, and of larger general farms in the North and East into small poultry, flower, and fruit farms. Opposed to this is a movement toward the merging of farms of 50 to 100 acres into larger farms of 300 acres, more or less. The economic cause of this movement is interesting and important. The typical and economic size of farms when the Atlantic states were settled, was determined by the use of hand tools, which permitted a man and his family to operate a farm of about 75 acres of which about half was tilled and the rest was in permanent pasture and woodland. The fields were small and were laid out irregularly, which was no disadvantage for hand cultivation. But for the most economic use of land in field crops and under more modern conditions it is necessary to have pretty level fields, of regular rectangular shape. The farm unit should be of such extent as to permit of the proper use of the soil by rotation of crops, and to employ fully the best modern labor-saving machinery for each purpose. Numerous recent agricultural surveys point to the conclusion that for general farming this unit is a comparatively large area of about 300 acres. These conditions offer a reward to those agricultural enterprisers who can purchase lands at a price based upon the high costs and lower yields of the older methods and cultivate them at the lower costs and with the larger yields of the newer methods. This movement, therefore, toward the consolidation of smaller into larger farms is likely to continue in many communities for several decades. This is likewise an advantage to the community in increasing the production with less labor. But the net effect upon the social life of the countryside is more doubtful, and calls for careful consideration. § 3. #Self-sufficing versus commercial farming. The typical American farming family once produced nearly everything it used, and used nearly everything it produced. It was very nearly a self-sufficing economic unit, "a closed economy," as it sometimes called. Food, clothing, fuel, lumber, houses, furniture, tools, were on the farm carried through the various processes from the first gathering of the raw materials to the finished product. They were then consumed by the farm household. It is true that even in the first settlements there were some craftsmen, cobblers, millers, weavers, blacksmiths--whose services and wares were got by trading some of the surplus products from the farms--butter, cheese, eggs, wool, hides, furs, live stock, grain lumber. A few rare commodities of foreign make found their way to the farm through peddlers and merchants; but altogether the goods produced outside the farm were a small fraction of the family's consumption, and were exchanged for but little of the farm's production. Most farmers tried to produce for themselves, as far as possible, everything their families needed, when the soil and situation were poorly suited to the purposes. True, there were early some exceptions to the general rule, where only one kind of crop was taken from the land. Such was the forest product of masts, shingles, lumber, and turpentine, and the great southern staple, tobacco, and later, cotton. The exceptions have been tending to become the rule in more and more communities. Farmers have been specializing more and more in the kinds of products to which their farms are adapted in respect to soil, relation to market, and otherwise. These products are taken to market and sold for money with which are bought the things needed for use on the farm. § 4. #Farming viewed as a capitalistic enterprise#. Thus the farm comes to be looked upon more and more, not just as a home, but much as if it were a commercial enterprise or a factory, by which products are made for sale. This change, to be sure, is far from complete, as the figures for the average farmer's income show that a large share of the family living still comes from the farm. It has gone on much further in some districts than in others, as is indicated in the types of farming discussed below. But just to the extent that the farmer grows crops to sell, his outlook on his work undergoes a change. He is less exclusively a farmer, concerned with the technical processes of farming; he must be more largely a business man. Like a manufacturing enterpriser, he buys the factors of production, combines them into new products, and sells them again. He becomes interested in market conditions and prices. He grows more commercially-minded. He views the farm no longer as a fixed area, but one that may be enlarged by purchase or by rental, and that may be reduced by selling or letting the less needed parts. One-fifth of farm owners now rent additional land. In commercial farming the land is not contrasted with capital as something apart, consisting of the value of the equipment and stock; but the whole complex of land and other goods is thought of as a capital-investment. The greater ease of transferring landed-property in America and the greater mobility of our population have always made it more natural here than in Europe to look upon land as a capital investment. This view is now becoming more general as a result of the commercializing of farming enterprise. This change has been favored by other influences. Particularly has the use of machinery and of other equipment, calling for a larger investment per man and per acre, been making agriculture, in its form of enterprise, more and more like manufacturing and commercial undertakings. § 5. #Diversified versus specialized farming#. To be self-sufficing a farming family must carry on general farming, that is, must produce a diversity of products. As farming becomes more commercialized it necessarily becomes somewhat more specialized, and produces a smaller variety of products. In some parts of the country and on particular farms this specialization is extreme: in California, citrus fruits, or prunes, or beans, may be the only crop raised; wheat in Kansas and the Dakotas, and dairy products in thousands of farms surrounding the great cities, are the main, tho not the exclusive products. Many farmers in these districts have no gardens or orchards, keep no cow, and buy much or all of the grain for their horses, as well as milk, butter, vegetables and fruits for their own use. Poultry and eggs are shipped in trainloads two thousand miles from the Middle West to California to be consumed by orange growers. Many farmers in the East no longer keep sheep, pigs, or beef cattle, and they buy out of the butcher's wagon all the meat except fowls used by their families. This partly explains the decrease of live stock in the whole country in recent years and the increase in the price of meat. § 6. #Conditions favoring diversified farming#. There are, however, limits to the net advantage of specialization in crops, and competent authorities on agriculture question whether in many cases that limit has not been readied and passed. Most farms have a variety of soils and of conditions--hilltops, slopes, bottom lands--which are suitable for different purposes. A rotation of crops is necessary to get good yields. Live stock must be kept to maintain the fertility of the land, which deteriorates fast if hay and grain are continually sold. Some live stock can be kept on every farm very cheaply with the food that would go to waste otherwise. The specialization in stock raising in the prairie states ceased to be profitable when lands became more valuable. Specialization in wheat production in the states just west of the Mississippi is possible only so long as wheat will grow on the virgin soil without costly fertilizers. The cotton farmers of the South, especially the negro farmers, have been forced by debt and thriftlessness into a one-crop policy that is now seen to be wasteful in the long run. A variety of production is necessary to employ labor somewhat regularly on a farm throughout the year. These and other conditions will make most farming always an industry of comparatively diversified products. Only 1 per cent of the farms get as much as 40 per cent of their receipts from fruit; 2 per cent get that much from tobacco; 3 per cent from vegetables; 6 per cent from dairy products; and 19 per cent from cotton. The remaining 60 per cent of receipts were in most cases from various sources, and these figures did not include the value of produce consumed by the farmer's family. § 7. #Intensive farming in Europe and America#. No other farm problem interests the city man so much as that of increasing the production of the land. To most city men farming hardly seems to be an occupation giving livelihood and life to the farmer; it seems rather to exist for the sole purpose of feeding men living in cities. The city man, therefore, measures the success of farming not by the farmer's income, by the level of countryside prosperity, but by the number of bushels per acre raised to ship to town. Every city newspaper and magazine contains articles pointing to the fact that larger crops per acre are raised in Europe than in America, and broadly suggesting that the American farmer could do as well, if only he would. Foreign travelers comment in like vein on the wasteful use of land in America as compared with farming methods in Europe. Land is used most extensively, with respect to labor, when it is in forests; somewhat less so when in pasture as care must be given to the live stock; and still less when used for hay, grain, and other crops. But the use of machinery in large fields is far more extensive than the patient work of peasants with their hand tools. The more labor or the more equipment (or both together) that is put upon an acre, the larger the product, but the larger the cost per unit. It is a familiar economic principle.[1] It would bankrupt any farmer, excepting the millionaire amateur, to farm in America by European methods. American farmers, at least many of them, could raise as many bushels per acre and keep their farms as thoroly cultivated as do the European peasants, if wages were as low here as are the peasants' incomes. § 8. #Prospect of more intensive cultivation of land in America#. As the aggregate need for food increases in America there must come a steady pressure upon our stock of land uses, resulting in decreasing returns to labor in agriculture, unless this movement can be counteracted by the spread of better methods in agriculture--not European peasant methods, but new American methods consistent with high labor-incomes. A good deal of our farm land is undoubtedly too intensively used now in view of present and prospective commodity prices and wages. Maladjustment of land uses has resulted from mistaken judgment, from changing conditions as to prices, transportation, and markets, and from loss of soil fertility. There are thus, on nearly every old farm, some fields that would better be in pasture and much hillside pasture that would better be woodland. It is often declared extravagantly that our country could support easily the total population of China, or as great a population per square mile as that of Italy. If it did so it would be only on the penalty of lowering wages toward, if not quite to, the level of the Chinese coolie or of the Italian peasant. Great metropolitan dailies gravely present as an argument in favor of unrestricted immigration, the proposition that "if" the cheaper immigrants would but go upon our "waste" land (which they refuse to do), and raise food by European methods the problem of the rising cost of food in the cities would be solved. This urban ideal of a frugal, low-paid agricultural peasantry can hardly be adopted in America as the national ideal. Rather, it would seem, any movement toward more intensive agriculture that necessitates a lowering of the standard of living of the masses of the American people will, when it is recognized, be condemned and opposed. § 9. #The new agriculture#. Agricultural method, the technic of farming, has been constantly progressing for two hundred years in Europe and in America, Were it not for this, the great growth of population on this combined area would have been quite impossible. But the betterments since about 1890 in America have been especially great. They are mostly the first large fruits of the scientific study made possible by the land-grant colleges and agricultural experiment stations fostered by state and national, legislation. These many diverse improvements are grouped under the general title of "the new agriculture." Its chief features are: new machinery and other labor-saving methods; better methods of cultivation of the soil; better selection of seed; introduction of new plants and trees from abroad to utilize low-grade lands; plant-breeding to develop new varieties of better quality, heavier bearing, or immune to disease; more efficient and economical ways of maintaining soil fertility; better methods of marketing; and better technical education of the individual farmer. Each of these topics, and a number of other minor ones, would require a chapter in a complete treatise on agricultural economics. Here this mere enumeration must be allowed to convey its own suggestion of far-reaching results for the whole political economy of the nation and of the world. Indeed, so much has been written in a Barnumesque way of the wonders of the new agriculture, that its actual results and further possibilities are in many minds absurdly exaggerated. It has not as yet been potent enough to prevent diminishing returns in respect to the great staple foods and raw materials obtained by agriculture. It apparently has barely kept pace with the needs of the growing population of Christendom. It has enabled a larger population to exist in about the same, if not in a worse condition, on the same area, while progress in cheapness of goods has come almost entirely from the side of the chemical and the mechanical industries. It does not give the promise of an indefinite amelioration of the lot of an indefinitely multiplying population. But to a population slowly increasing, a new and ever newer agriculture, utilizing constantly the achievements of the natural sciences and the mechanic arts, ensures the possibility of a steady betterment of the popular welfare in city and in open country alike. § 10. #Difficulty of coöperation among farmers#. Rural communities are proverbially conservative; the American farmer is proverbially an individualist. No wonder, then, that the new ideas and plans of coöperation in business matters have made headway in agriculture slowly and with difficulty. The need of mutual aid among American farmers is especially great, for, as has often been, said, isolation is the problem of the farm as congestion is that of the city. On the frontier a coöperative spirit manifested itself frequently in mutual helpfulness, in house raising bees, husking bees, threshing bees, and other similar gatherings. But this spirit seems to have almost disappeared in the older communities, the more rapidly doubtless in the period of decaying agricultural prosperity.[2] To-day, for example, it is impossible on a certain Pennsylvania road for one more progressive farmer to get his neighbors to coöperate in so simple a matter as hauling their milk cans to the creamery, and so every day in the year ten horses are hitched to ten delivery wagons carrying two or three milk cans apiece, and driven by ten drivers along the same road to and from the railroad station. One driver and two horses could easily carry as much or more, as is done now in many other dairy districts. Even of successful coöperation among farmers sympathetic critics are forced to say: "Many students of rural economics assert that coöperation as applied to the distribution and marketing of farm products is not very successful unless it is founded upon dire necessity. When the records of the organizations of the country are analyzed it becomes almost necessary to accept that statement. So long as farmers do fairly well in their own way they are not inclined to coöperate." § 11. #Rapid growth of farmers' selling coöperation#. Despite what has just been said, coöperation among farmers now is more developed and is growing faster than all other kinds of coöperation in America. This is most marked in farming communities in the West, especially in California and in the Middle Western or Northwestern states (e.g., Minnesota and Wisconsin). There the farmers are younger, and many have been educated in the state agricultural colleges. They all produce nearly the same kinds of crops of staple produce which must be shipped to distant markets. The need of uniting to get what they thought would be fair treatment from the railroads, and to protect themselves against the abuses of the competitive commission salesagents, seems to have given the first impetus to farmers' coöperation. The most notable developments were those of the California Fruit Exchange and of coöperative societies of the Northwest for marketing grain. The membership of the former is made up entirely of the local citrus growers' associations in California. It has a complete organization of selling agents in the Eastern cities and a remarkably efficient, tho simple, system of equalizing and expediting shipments. Now the agricultural coöperative associations of various kinds are multiplying all over the country, for shipping live stock, fruits, butter, cheese, and other farm products. Coöperation for these purposes called forth new activities; packing houses were built, and grain elevators and creameries and dairies, and now a goodly number of the simple manufacturing processes are undertaken by these societies, now numbering thousands. § 12. #Some economic features of farmers' selling coöperation#. This type of producers' selling coöperation is proving in America to be far more successful than producers' coöperation among workingmen;[3] and certain important economic features in it should be noted. The local producers' selling coöperative society is composed of farmers who as enterprisers own and carry on their own separate businesses; they are not, as in the other case, wage workers. Any productive processes undertaken by this kind of society are subordinate to the main business, being such as picking, packing, drying, preserving, and making boxes for packing. This form of coöperation with the related form of consumers' coöperation that is fostered by it, promises to have a wide extension. Some of these societies, as those dealing in citrus fruits, regulate with some success the picking and the marketing so as to distribute them more evenly throughout the year. They watch the markets and direct their agents by telegraph to divert cars _en route_ away from markets that are glutted with products and into markets where prices are higher. They take some of the products, as eggs in the spring at the period of low prices, and pack or refrigerate them, to be sold when prices are higher. For thus withholding the supply they are said by some to exercise a monopolistic power. But this is a more than doubtful view. So long as only the seasonal variations are equalized and the total supply of the year is not reduced it is, on the marginal principle, an economic service to the consumers, comparable to insurance in its utility. Any reduction of the area planted or of the entrance of others into the industry would be a monopolistic act but this as yet has not occurred. § 13. #Coöperation in buying.# Coöperative buying (called also consumers' coöperation or distributive coöperation) has had a large growth in the British Isles, since 1844, when the society called the Rochdale Pioneers was founded by a group of factory workingmen. The coöperative stores, both in Great Britain and on the Continent, have continued to develop mainly among the industrial classes in urban centers. However, this has not been exclusively the case, and particularly in Denmark and Ireland coöperative buying has increased in agriculture in connection with selling associations. Since 1890 the growth of consumers' coöperation among European industrial wage-earners has been phenomenal, especially in Belgium, Germany, and Switzerland. American wage-workers, however, have made few and feeble efforts in this direction. In the period beginning 1867 many coöperative stores were founded in America by farmers in the Grange movement, who operated also grain elevators, warehouses, and steamboat lines. But the movement failed about 1877. This result is easily explained by lack of commercial knowledge and lack of harmony among the members, selling on credit, and inefficient management. A new era in consumers' coöperation for farmers began about 1900 and now in several widely separated parts of the country--Minnesota, Kansas, California, Washington, and elsewhere--the movement is spreading rapidly, supported in large part by the same persons who are members of the selling associations. § 14. #Need of agricultural credit.# Banking originated in cities and for the use of the merchant-class. It still retains pretty faithfully its commercial character. The change of farming toward a more commercial form[4] has been little aided by banking credit. National banks and many others were forbidden in their charters to lend on the security of real-estate, the farmer's one business asset.[5] A great number of farms are always in course of being purchased, the balance of purchase money being borrowed by the purchaser. A group of private agencies such as life insurance and mortgage loan companies and local money lenders has supplied in somewhat costly ways the need of farm credits. Tho rates of interest have become more equalized throughout the whole country, they still range between 7 and 10 per cent in the Southern and Western states, averaging 7 per cent in the whole country for interest and commission. The need of better opportunities for credit in the agricultural districts has long been recognized. The high rate of interest for borrowed money necessarily placed a limit on improvements in equipment and methods of farming.[6] § 15. #Recent provisions for farm loans#. The Federal Reserve Act made two important changes to improve agricultural credit.[7] Soon afterward some of the states took more vigorous action to provide a special system of agricultural credit, especially New York and Missouri. In the latter state, on the initiative of a public-spirited citizen of St. Louis, was passed in 1915 a notable act of legislation known as the Gardner State Land Bank Act (effective December 1, 1916, provided a constitutional amendment is adopted in November, 1916). This authorizes the establishment of a land bank, with power to lend on the security of farming lands, for buying farms and for productive improvements, and to issue bonds to be sold to investors. Following this general plan the Federal Farm Loan Act became law July 17, 1916. It authorized the establishment of twelve Federal Land Banks, each with a capital of not less than $750,000 to make loans through national farm loan associations organized somewhat after the model of the building and loan associations. The bonds issued by these banks are to bear not to exceed 5 per cent interest. It is hoped that they will have the high credit of municipal bonds so that they may be sold at parity, bearing interest at 4 or 4.5 per cent. The loan is repaid by the farmers under a regular plan of amortization. The practical results of these measures are yet to appear. They are expected to give to loans that are made on the security of farms as wide a market and as high credit as state and municipal bonds now have. They bid fair to bring the rate of interest on long-time loans to farmers down to 5 per cent or less in the remotest parts of the land. This will stimulate agricultural improvement, and facilitate the purchase of land by tenants. Where the interest rate has been the highest it should raise the value of farm lands as it brings them within the circle of a lower-interest-rate economy. This may hasten the transfer of the lands from less provident to more provident owners, who are willing to take the land at a higher capitalization. But the system of loans will probably help to develop greater thrift in the younger farming population. [Footnote 1: See Vol. I, chs. 12 and 13 on proportionality and usance.] [Footnote 2: See ch. 25, secs. 4 and 5.] [Footnote 3: See above, ch. 19, secs. 13, 14, 15.] [Footnote 4: See above, sec. 3.] [Footnote 5: See ch. 8, sec. 8.] [Footnote 6: See Vol. I, pp. 495-497, on the relation between lower interest rates and productive processes.] [Footnote 7: See ch. 9, sec. 7 on time deposits, and sec. 9 on farm loans.] CHAPTER 27 THE RAILROAD PROBLEM § 1. Rise of the corporation concept. § 2. The modern era of corporations. § 3. Beginning of corporation problems. § 4. The era of canals. § 5. Rapid building of American railroads. § 6. Reasons for governmental aid. § 7. Kinds of governmental aid. § 8. Emergence of the railroad problem. § 9. Discrimination as to goods. § 10. Local discrimination. § 11. Personal discrimination. § 12. Economic power of railroad managers. § 13. Political power of railroad managers, § 14. Consolidation of railroads. § 15. State railroad commissions. § 16. Passage of the Interstate Commerce Act. § 17. Working of the Act. § 18. Public nature of the railroad franchise. § 19. Other peculiar privileges of railroads. § 20. Private and public interests to be harmonized. § 1. #Rise of the corporation concept#. In the legal systems of primitive people and long afterward, only natural persons had legal rights, could make contracts, have property, and carry on a business. But in a number of cases, very early, groups of men came to have certain interests in common and certain possessions. Gradually some such groups gained more or less of legal recognition, with certain political and economic rights as a body and not as individuals. Thus evolved the conception of a "corporation" (body) having men as "members," an artificial person, yet not the same as any one or as all the individuals together, and legally distinct from the individuals. A group of burghers obtaining a charter from the lord of the realm became a municipal corporation; a group of teachers, a _collegium_, became the corporation of the college or a university (a number of persons united into one association); a group of craftsman became a gild-corporation. Each corporation had certain rights, privileges, and immunities, and used a corporate seal as a signature. All of the early corporations had some economic features that were incidental to the main purposes, which were political, ecclesiastical, educational, and fraternal. Toward the end of the Middle Ages groups of traders obtained charters to act as corporations permanently for business purposes, such as foreign trade, colonization, and banking. These increased in the sixteenth and seventeenth centuries, and in the eighteenth century this form of organization was adopted also and parliamentary charters obtained, by groups of men for building turnpikes and canals and for carrying on other kinds of business. § 2. #The modern era of corporations#. The great era of the corporations did not begin, however, until well on in the second quarter of the nineteenth century. Then, both in Europe and in America, the corporate form of organization was extended to a greater number, and to other kinds, of enterprises. It proved itself to be well adapted to enterprises for the construction and operation of canals and railroads, requiring a larger amount of capital than usually could or would be risked by one person. The investor in a corporation bought shares, and his liability for debts and losses was limited by charter to his share capital. It is an advantage that permanent enterprises of that kind are owned by corporations with charters perpetual or for long periods. It is possible for corporations to make investments running for longer periods than would be safe for individuals. The corporation with an unlimited charter has legally an immortal life. Sale and change of management are not necessary on the death or failure in health of any one owner. As the factory system and large production developed, the corporate form of organization was found to have these same advantages in manufacturing. It appeared in textile, iron, mercantile, and other industries. After 1865 the corporate form of organization increased at a cumulative rate, until now it is applied to many enterprises of small extent and local in operation. There are 300,000 corporations making returns to the United States Commissioner of Internal Revenue.[1] There were 70,000 manufacturing corporations, which were 26 per cent of the whole number of manufacturing establishments, but which employed 76 per cent of all wage earners and turned out 79 per cent of the whole product. § 3. #Beginning of corporation problems.# With the corporations came "the corporation problem," a single name for a complex of problems--legal, political, moral, and economic--which arise out of the relations of corporations to their individual stockholders, to their employees, to the state, to the general public, and to their competitors in business. The problems differ also in corporations of different sizes and in different businesses. We shall discuss in this and succeeding chapters but a few of the larger aspects of the corporation problem, the railroad, the industrial trust, and certain other kinds of monopolistic industry. Of the various forms of corporations, banks first presented problems calling for economic legislation and regulation. This is explained by the fact that it was the first kind of business corporation to become important, and further by the fact that its work was in various ways closely connected with the coinage and regulation of money, which had already become a governmental function. The railroad was the form of corporation next in point of time to become a great problem; this because of the peculiarly vital and far-reaching effects that such railroad transportation has upon all other kinds of business in the community, as appears in what follows. § 4. #The era of canals.# Canals were used in the ancient empires for irrigating, for the supplying of cities with water, and for navigation. In the late eighteenth and the early nineteenth centuries they were rapidly built in England and America. Six canals had been built in the United States before 1807, but the "canal-era" in America dated from the beginning of work on the Erie canal in 1817, and continued until about 1840, when nearly all new work ceased; over 4000 miles of canals had been built at a cost of $200,000,000. The great advantage of canals is cheapness of operation due to the simplicity of the machinery needed and to the great loads that can be moved with small power. A cent a ton-mile proved to be a paying rate on a small canal. For heavy, slow-moving freight, a railroad can even now barely rival a parallel canal at its best. As canals, however, can be built only along pretty level routes and where the water supply is at high level, their construction is limited to a small portion of the country. The principle of diminishing returns applies strongly to the construction of canals; the first canals in favored locations are easily constructed and economically operated, but it is only with greater cost and difficulty that the system can be successively extended. In temperate climates the use of canals is limited by ice to a part of the year, and by the summer's drought sometimes still further. At its best, therefore, the small land-locked canal is fitted only to be a supplementary agent in the system of transportation wherever another transportation agency of higher speed and greater regularity is possible. Far different is the case of the oceanic canal in a tropical climate. Canals do not appear to have developed any serious problems calling for public regulation of rates. A first simple legislative act fixing the rate of tolls for boats was sufficient. Charges were made by distance as on a toll road and the boats were owned by different private shippers or by common carriers among whom competition prevailed. § 5. #Rapid building of American railroads#. The canal was just reaching the peak of popular favor when the railroad in 1830, after a half-century of slowly accumulating technical improvements, burst into view as a demonstrated success as a means of transportation.[2] The railroad excels in adaptability any other agent of transportation; it can go over mountains or tunnel through them. It is markedly superior in certainty; it may be blocked for a day or two by floods and snows, but it suffers no seasonal stoppage of traffic. In speed, even the early railroad so far excelled that the canal could survive only by dividing the traffic, taking the lower grades of freight, and leaving to the railroad the passenger traffic and fast freight. Even in respect to cheapness, the unique virtue of waterways in favored localities, the railroad made rapid gains. Improvements in roadbed, rails, cars, engines, and other equipment soon reduced greatly the cost of conducting traffic on the main lines of roads. Because of these qualities railroads soon surpassed in importance every other agency of internal transportation. The miles constructed and miles in operation in the United States, by decades since 1830 were as follows (route mileage, not counting double tracks and sidings): Miles constructed Total route miles in decade. in operation. 1830 ........................ 23 23 1840 ........................ 2,795 2,818 1850 ........................ 6,203 9,021 1800 ........................ 21,605 30,626 1870 ........................ 22,296 52,922 1880 ........................ 40,345 93,267 1890 ........................ 73,924 167,191 1900 ........................ 31,773 198,964 1910 ........................ 51,028 249,992 1915 (5 yrs.) ............... 13,555 263,547 The extension of railroads was so rapid that there was not time for a gradual adjustment of industrial conditions. In many places the resulting changes were revolutionary. The building of railroads in the Mississippi valley in the seventies lowered the value of eastern farms, ruined many English farmers, and depressed the condition of the peasantry in all western Europe.[3] With the lower prices that resulted when the fertile lands of the western prairies were opened to the world's markets, the less fertile lands of the older districts could not compete. Many other changes, of no less moment in limited districts, resulted from the building of railroads. Local trading-centers decreased in importance. Villages and towns, hoping to be enriched by the railroads, saw their trade going to the cities. Commerce became centralized. Enormous increases of value at a few points were offset by losses in other localities. § 6. #Reasons for governmental aid#. The growth of railroads in America was more rapid than in any other part of the world, but it did not occur without much help to private capital from governmental agencies. The railroad enterprise was uncertain, the possibilities of its growth could not be foreseen, and private capital would not invest without great inducements. In European countries the railways were built through comparatively densely populated districts to connect cities already of large size. Yet railroad extension was very slow there, even tho the states in many ways aided the enterprises. America was comparatively sparsely populated, and most of the railroads were built in advance of and to attract population, business, and traffic. In many cases railroad building in America was part of a gigantic real-estate speculation undertaken collectively by the taxpayers of the communities. § 7. #Kinds of governmental aid#. American states recklessly abandoned the policy of non-interference, and vied with each other in giving railroad enterprises lands, money, and privileges, in loaning bonds, in subscribing for stock, and in releasing from taxation. These fostering measures were expected to increase wealth and to diffuse a greater welfare through the community. Many states were forced to the point of bankruptcy by their reckless generosity, and some states repudiated the debts thus incurred. The national government then took up the same policy and granted lands to the states to be used for this purpose. The first case of this kind was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south. Grants were made in fourteen states, covering tens of millions of acres of land. Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars,--a debt which was settled by compromise only after thirty years. Counties, townships, cities, and villages then entered into keen competition to secure the building of railroads, projected by private enterprise. Bonds, bonuses, tax-exemptions, and many special privileges were granted. To obtain this new Aladdin's lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come. The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate. Not the civil engineer, but the railroad promoter determined the devious lines of many a railroad on the level prairies of America. The effects of these grants were in many cases disastrous, and after 1870 they were forbidden in a number of states by legislation and by constitutional amendments. But before this era of generosity ended, probably the railroads in America had received more public aid than has ever been given to any other form of industry in private hands. § 8. #Emergence of the railroad problem#. In most charters and laws authorizing the building of railroads, either nothing was specified regarding rates, or maximum rates were fixed which proved to be so high that they were of little, if any, practical effect. But very soon began to appear some serious evils in the policy of railroads toward the shipping and traveling public in matters of rates and of service. As the ownership of the wagons, ships, and canal-boats of a country is usually divided, ocean ports and points along the lines of turnpikes and canals enjoy competition between carriers. In the early days of the railroads it was believed that a company or the government would own the rails and charge toll to the different carriers, who would own cars and conduct the traffic as was done on the canals. Experience soon showed the impracticability of this scheme and the need of unified management. An operating railroad company, therefore, has a monopoly at all points on its line not touched by other carriers. This, like any other monopoly, is limited, for the railroad, to secure traffic, is led to meet competition of whatever kind--that of wagons, canals, rivers, or of other railroads--wherever it occurs. The railroads in private hands early began to "charge what the traffic would bear," high where they could, and low where they must, to get the business. Thus developed the various forms of discrimination which are now to be described. § 9. #Discrimination as to goods#. Discrimination as to goods is charging more for transporting one kind of goods than for another without a corresponding difference in the cost. When reasonably understood, this proposition does not apply to a higher charge for goods of greater bulk, as more per pound for feathers than for iron, the "dead weight" of car being much greater in one case than in the other. It does not apply where there is a difference in risk, as between bricks and powder, or coal and crockery; nor where there is a difference in trouble, as between live stock and wheat. Any difference that can reasonably be explained as due to a difference in cost is not discrimination; on the other hand a difference in cost without a difference in rate is discrimination. Discrimination as to goods may be by value, as low rates for heavy, cheap goods, and high rates for lighter, valuable ones. Coal always goes at a low rate as compared with dry goods, and sometimes more is charged for coal to be used for gas than for coal to be used for heating purposes. Railroad discrimination so frequently has resulted in injustice to the shipping public that the term has taken on an evil significance. But it is well to observe that the word discrimination is not derived from _crimen_ (crime), but from _discernere_ (to discern). There are both reasonable and unreasonable forms of discrimination. In general discrimination as to goods more often appears, under certain conditions and made with due regard to the public interest, to be reasonable; less often to be justified is the form of local discrimination, next to be described; and least often of all to be justified is the last named form of personal discrimination. § 10. #Local discrimination#. Discrimination between places (called also local discrimination) is charging different rates to two localities for substantially the same service. This occurs when local rates are high and through rates are low; when rates at local points are high and at competing points are low; when less is charged for shipments consigned to foreign ports than for domestic shipments; when, more is charged for goods going east than for goods going west. The causes of local discrimination are: first, water-competition, found at great trade centers such as New York and San Francisco; second, differences in terminal facilities, making some places better shipping-points than others; third, competition by other railroads, which is concentrated at certain points, only one tenth of the stations of the United States being junctions; fourth, the influence of powerful individuals or large corporations and the personal favoritism shown by railroad officials. The effects of local discrimination are to develop some districts and depress others; to stimulate cities and blight villages; to destroy established industries; to foster monopolies at favored points; and to sacrifice the future revenues of the road by forcing industry to move in the competing points to get the low rates. The power of railroad officials arbitrarily to cause rates to rise or fall is happily limited in practice by the need of earning as large and as regular an income as possible, but even as exercised it has been at times as great as that possessed by many political rulers. § 11. #Personal discrimination#. Discrimination between shippers (personal discrimination) is charging one person more than another for substantially the same service. This most odious of railroad vices, rarely practised openly, is done by false billing of weight, by wrong descriptions or false classification to reduce the charge below published rate-sheets, by carrying some goods free, by issuing passes to some and not to all patrons under the same conditions, or by donations or rebates after the regular rate has been paid. In some cases a subordinate agent shares his commission with the shipper, and the transaction does not appear on the books of the company. In other cases favored shippers are given secret information that the rate is to be changed, so that they are enabled to regulate their shipments to secure the lower rate. One group of reasons for personal discrimination is connected with the interests of the road. It is to build up new business; it is to make competition with rival roads more effective by favoring certain agents, as was very commonly done in the Western grain business; it is to exclude competition, as by refusing to make a rate from a connecting line or to receive materials for a new railroad which is to be a competitor; and it is to satisfy large shippers whose power, skill, and persistence make the concession necessary. Another group of reasons has to do with the interests of the corporate officials. It is to enable them to grant special favors to friends; or it is to build up a business in which they are interested; or it is to earn a bribe that has been given them. The evils of personal discrimination are great. It introduces uncertainty, fear, and danger into all business; it causes business men to waste, socially viewed, an enormous fund of energy to get good rates and to guard against surprises; it grants unearned fortunes and destroys those honestly made; it gives enormous power and presents strong temptations to railroad officials to injure the interests of the stockholders on the one hand and of the public on the other. § 12. #Economic power of railroad managers.# Other evils of unregulated private management of railroads appeared. When the railroad was a young industry, it was thought to be simply an iron-track turnpike to which the old English law of common carriers would apply. This and similar notions soon, however, proved illusory. It was seen that the higher railroad officials had, in the granting of transportation service and the fixing of rates, a great economic power. They had complex and sometimes conflicting duties to the stockholders and to the shipping public. They wore their conscience-burdens lightly, before the days of effective regulation, and frequently made little attempt to meet the one and no attempt whatever to meet the other obligation. The opportunities for private speculation brought to many railroad managers great private fortunes. There were no precedents, no ripened public opinion, no established code of ethics, to govern. It was a betrayal of the interests of the stockholders when directors formed "construction companies" and granted contracts to themselves at outrageously high prices. It was an injury not only to shippers, but also to the stockholders, when special rates were granted to friends and to industries in which the directors were interested. In general, however, the interests and rights of the stockholders were more readily recognized than were those of the public. A railroad manager is engaged by the stockholders, is responsible to them, and looks to them for his promotion. Hence their interests are uppermost whenever the welfare of the public is not in harmony with the earning of liberal dividends. The managers long felt bound to defend the principle of "charging what the traffic will bear" in the case of each individual, locality, and kind of goods, even if this ruined some men and enriched others, and if it destroyed the prosperity of cities to increase the earnings of the road. § 13. #Political power of railroad managers.# Likewise in various ways railroad managers may exercise great political influence and power. Some writers maintain that the power to make rates on railroads is a power of taxation. They point out that if rates are not subject to fixed rules imposed by the state, the private managers of railroads wield the power of the lawmaker. By changing the rates on foreign exports or imports, the railroads frequently have made or nullified tariff rates and have defeated the intention of the legislature. High rates on state-owned roads in Europe have been used in lieu of protective duties. These facts go to show that a change of railroad rates between two places within the country is similar in effect to the imposing or repeal of tariff duties between them. The wealth and industrial importance of the railroads soon began to give them widespread political power in other ways. It was commonly charged in some states that the legislature and the courts were "owned" by the railroads. The railroads, in part because they were the victims at times of attempts at blackmail by dishonest public officials, declared that they were compelled, in self-defense to maintain a lobby. The railroad lobby, defensive and offensive, was, in many states, the all-powerful "third house." Railroads even had their agents in the primaries, entered political conventions, dictated nominations from the lowest office up to that of governor, and elected judges and legislators. The extent to which this was done differed according as the railroads had large or small interests within the state. These statements can with approximate truth now be made in the past tense, as was not possible a few years ago. A better code of business morality has developed, and the railroad management's relationship of private trusteeship toward the shareholders and of public trusteeship toward the patrons of the road is now much more fully recognized. The change was not brought about without long and strenuous agitation and effort, educational and legislative, as is in part described below. § 14. #Consolidation of railroads#. Gradually the consolidation of the railroad mileage into larger units put into fewer hands greater and greater economic power. The early railroads, many of which were built in sections of a few miles in length, have been slowly welded into continuous trunk lines with many branches. The New York Central between Albany and Buffalo was a consolidation, by Commodore Vanderbilt, of sixteen short lines. The Pennsylvania system was formed link by link from scores of small roads. In the decade of the nineties the growth of consolidation went on more rapidly than ever before. In 1903 it could be said that 60 per cent of the mileage of the United States was under the control of five interests; 75 per cent was controlled by a group of men who could sit about one table. The country was being divided territorially into great railroad domains, within each of which one financial interest was dominant. Since that time the policy of the leading roads has been still further unified by great financial alliances and by the method known as "community of interests." Toward this result strong economic forces have been working. Consolidation has many technical advantages: it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the terminal facilities of the railroads, and insures continuous train service. It has the advantage of other large production and the possible economies of the trusts. Most important, however, from the point of view of the railroads, is the prevention of competition and the making possible of higher rates and larger dividends. The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates. It is true that competition between roads does not prevent discrimination and excessive charges between stations on one line only; but competition usually has acted powerfully at well-recognized "competing points." The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies. It is a grim jest to say that consolidation does not change the railroad situation as regards the question of rates. § 15. #State railroad commissions.# When it became evident that public and private interests in the railroads were so divergent, it still was not easy to determine how the public was to be safeguarded. At first, some general conditions such as maximum rates were inserted in the laws and charters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced. Some early efforts at state ownership were disastrous. The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for, while delay was death to the shipper's business, cases hung for months or years in the courts; it was ineffectual, for, even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers. In the older Eastern states, attempts to remedy these and other evils by creating some kind of a state railroad commission date back to the fifties of the last century. Massachusetts developed in the seventies a commission of "the advisory type" which investigated and made public the conditions, leaving to public opinion the correction of the evils. A number of the Western states, notably Illinois and Iowa, developed in the seventies commissions of "the strong type," with power to fix rates and to enforce their rulings. The commission principle, strongly opposed at first by the railroads, was upheld by the courts and became established public policy. By 1915 every state and the District of Columbia had a state commission. In Wisconsin and in New York, in 1907, in New Jersey, in 1911, and in many other states since, the "railroad" commissions were replaced by "public utilities" or "public service" commissions, having control not only over the railroads but over street railway, gas, electric light, telephone, and some other corporations. The state commissions have found their chief field in the regulation of local utilities, and they fall far short of a solution of the railroad problem. Altho they from the first did much to make the accounts of the railroads intelligible, something to make the local rates reasonable and subject to rule, and much to educate public sentiment, on the whole their results have been disappointing. It was difficult to get commissioners at once strong, able, and honest; the public did not know its own mind well enough to support the commissions properly; and the courts decided that state commissions could regulate only the traffic originating and ending within the state. § 16. #Passage of the Interstate Commerce Act.# Public hostility to private railroad management was greatest in the regions where the most rapid building of roads occurred from 1866 to 1873. One center of grievances was in "the granger states' of Illinois, Wisconsin, Kansas, Nebraska, Iowa, and Minnesota; another center was in the oil regions of Ohio and Pennsylvania. The Eastern states were not without their troubles, for the report of the Hepburn Committee of the New York legislature in 1879 showed that discrimination between shippers prevailed to an almost incredible degree in every portion of New York state. When the courts, in 1886, decided that the greater portion of the railroad rates could not be treated by state commissions, national control was loudly demanded. Scores of bills were presented to Congress between 1870 and 1886, and, despite much opposition, the Interstate Commerce Act was passed in 1887. The act laid down some general rules: that rates should be just and reasonable; that railroads should not pool, or agree to divide, their earnings to avoid competition; that they should, under similar conditions, and, unless expressly excused, fix rates in accordance with the long- and short-haul principle (to charge no more for a shorter distance than for a longer one on the same line and in the same direction, the shorter being included within the longer). The act provided for a commission of five men, to be appointed by the President, which might require uniform accounts from the railroads, and which should enforce the provisions of the act. § 17. #Working of the Act.# The commission in its earlier years gave promise of effectiveness, but its powers, as interpreted by the courts, proved inadequate to its assigned task. The railroads in many cases refused to obey its orders, and court decisions paralyzed its activity. Competent authorities declared in 1901, after fourteen years of the commission's operation, that discrimination never had been worse, and a series of exposures of abuses strengthened the popular demand for stricter legislation. The result was first the Elkins' Act of 1903, aimed at discrimination and rebates, and then the Hepburn Act Of 1906, which marked a new era in railroad regulation in this country. The commission was increased to seven members, its authority was extended to include express, sleeping car, and other agencies of transportation, and it was given the power to fix maximum rates, not to be suspended by the courts without a hearing. It became thus unquestionably a commission of "the strong type." It began to exercise its new powers with vigor, and the carriers reluctantly accepted its authority. Responsive to a calmer but insistent popular demand further amendments were made by the Mann-Elkins Act of 1910, which strengthened the long-and-short-haul clause, and gave to the commission, among other new powers, that of suspending new rates proposed by carriers. A special Commerce Court of five judges was created with exclusive jurisdiction in certain classes of railroad cases, but this was abolished after a short trial. It cannot be said that a final satisfactory solution of the railroad problem has been attained; indeed, in most human affairs such a thing is unattainable. But it can be said that there is no considerable sentiment anywhere in favor of reversing the railroad policy that has been developed, as here briefly outlined. Certainly the public has no such sentiment, and the railroads, which for many years opposed the progress of strong federal control, are now foremost in advocacy of a policy of exclusive national regulation, to remedy the evil of "forty-nine masters." § 18. #Public nature of the railroad franchise.# A pretty definite public opinion regarding the nature of the problem has emerged from the nearly half-century of experience and discussion, since the first vigorous agitation of the subject in the seventies of the last century. Railroads in our country are owned by private corporations and are managed by private citizens, not, as in some countries, by public officials. They have been built by private enterprise, in the interest of the investors, not as a charity or as a public benefaction. Railroad-building appears thus at first glance to be a case of free competition where public interests are served in the following of private interests. But, looked at more closely, it may be seen to be in many ways different from the ordinary competitive business. Competition would make the building of railroads a matter of bargain with proprietors along the line, and an obdurate farmer could compel a long detour or could block the whole undertaking. But the public says: a public enterprise is of more importance than the interests of a single farmer. By charter or by franchise the railroad is granted the power of eminent domain, whereby the property of private citizens may be taken from them at an appraised valuation. The manufacturer, enjoying no such privilege, can only by ordinary purchase obtain a site urgently needed for his business. Why may the railway exercise the sovereign power of government as against the private property rights of others? Because the railway is peculiarly "affected with a public interest." The primary object is not to favor the railroads, but to benefit the community. These charters and franchises are granted sparingly in most European countries. In this country they have been granted recklessly, often in general laws, by states keen in their rivalry for railroad extension. When thus great public privileges had been granted without reserve to private corporations, it was realized, too late in many cases, that a mistake had been made and that an impossible situation had been created. § 19. #Other peculiar privileges of railroads.# Further, do the various grants of lands and money to the railroads make them other than mere private enterprises? One answer, that of those financially interested in the railroads, was No. They said that the bargain was a fair one, and was then closed. The public gave because it expected benefit; the corporation fulfilled its agreement by building the road. The terms of the charter, as granted, determined the rights of the public; but no new terms could later be read into it, even tho the public came to see the question in a new light. Similar grants, tho not so large, have been made to other industries. Sugar-factories were given bounties; iron-forges and woolen-mills were favored by tariffs; factories have been given, by competing cities, land and exemption from taxation; yet these enterprises have not on that account, been treated, thereafter, in any exceptional way. So, it was said, the railroad was still merely a private business. But the social answer is stronger than this. The privileges of railroads are greater in amount and more important in character than those granted to any ordinary private enterprise. The legislatures recognize constantly the peculiar public functions of the railroads. In other private enterprises, investors take all the risk; legislatures and courts recognize the duty of guarding, where possible, the investment of capital in railroads. Laws have been passed in several states to protect the railroads against ticket-scalping. Whenever the question comes before them, the courts maintain the right of the railroads to earn a fair dividend. Private enterprise has been invited to undertake a public work, yet public interests are paramount. § 20. #Private and public interests to be harmonized.# If an extremely abstract view is taken there is danger of losing sight of the real problem, which is that of harmonizing these two interests in thought and in public policy. Yet the extreme advocates of the private control of railroads for a long time resented indignantly any public interference with railroad rates and with railroad management as an infringement of individual liberty. Before the passage of the Interstate Commerce Act, in 1887, this position was inconsistently taken by those in whose interests free competition had been violently set aside at the very outset of railroad construction, and for whom governmental interference had made possible great fortunes. It has become generally recognized that the railroads ought not to be allowed to change from a public to a private character just as it suits their convenience. True, they are private enterprises as regards the character of the investment, but they are public enterprises as to their privileges, functions, and obligations. Finally, it might be said that if there were none of these special reasons for the public control of railways, there is an all-sufficient general reason in the fact that a railroad is always, in some respects and to some degree, a monopoly. Therefore, the railroad problem may be viewed as but one aspect of the general problem of monopoly. To other aspects of this problem we are now to turn our attention. [Footnote 1: Returns for 1915. The following figures are from the census taken in 1909.] [Footnote 2: See A.T. Hadley, "Railroad Transportation," pp. 10, 32.] [Footnote 3: See Vol. I, pp. 437, 438, 443.] CHAPTER 28 THE PROBLEM OF INDUSTRIAL MONOPOLY § 1. Kinds of monopoly. § 2. Political sources of monopoly. § 3. Natural agents as sources of monopoly. § 4. Capitalistic monopoly; aspects of the problem. § 5. Industrial monopoly and fostering conditions. § 6. Growth of large industry in the nineteenth century. § 7. Methods of forming combinations. § 8. Growth of combinations after 1880. § 9. The great period of trust formation. § 10. Height of the movement toward combinations. § 11. Motive to avoid competition. § 12. Motive to effect economies. § 13. Profits from monopoly and gains of promoters. § 14. Monopoly's power to raise prices. § 1. #Kinds of monopoly.# Monopolies may, for special purposes, be classified as selling or buying, producing or trading, lasting or temporary, general or local, monopolies. The terms selling or buying monopoly explain themselves, tho the latter conflicts with the etymology.[1] Under conditions of barter the selling and the buying monopoly would be the same thing in two aspects. A selling monopoly is by far the more common, but a buying monopoly may be connected with it. A large oil-refining corporation that sells most of the product may by various methods succeed in driving out the competitors who would buy the crude oil. It thus becomes practically the only outlet for the oil product, and the owners of the land thus must share their ownership with the buying monopoly by accepting, within certain limits, the price it fixes. The Hudson Bay Company, dealing in furs, had practically this sort of power in North America. Many instances can be found, yet, relatively to the selling monopolies, those of the buying kind are rare. A producing monopoly is one controlling the manufacture or the source of supply of an article; a trading monopoly is one controlling the avenues of commerce between the source and the consumers. Monopolies are lasting or temporary, according to the duration of control. By far the larger number are of the temporary sort, because high prices strongly stimulate efforts to develop other sources of supply. Yet the average profits of a monopoly may be large throughout a succession of periods of high and low prices. Monopolies are general or local, according to the extent of territory where their power is felt. At its maximum where transportation and other costs most effectually shut out competition, monopoly power shades off to zero on the border-line of competitive territory. The frequent use of the adjectives partial, limited, and virtual are implied but usually superfluous recognitions of the relative character of monopoly. § 2. #Political sources of monopoly.# Monopoly gets its power from various sources. A political monopoly derives its power of control from a special grant from the government, forbidding others to engage in that business. The typical political monopoly is that conferred by a crown patent bestowing the exclusive right to carry on a certain business. A second kind is that conferred by a patent for invention, or the copyright on books, the object of which is to stimulate invention, research, and writing by giving the full control and protection of the government to the inventor and the writer or their assignees. In this case the privilege is socially earned by the monopolist; it is not gotten for nothing. Moreover, the patent, being limited in time, expires and becomes a social possession. A third kind is a governmental monopoly for purposes of revenue. In France and Japan the governments control the tobacco trade, and the high price charged for tobacco makes this monopoly yield large revenues. A fourth kind is that derived from franchises for public service corporations, such as those supplying electricity, gas and water. These franchises are granted to private capitalists to induce them to invest capital in enterprises that are helpful to the community. § 3. #Natural agents as sources of monopoly.# "Economic" monopoly, so-called, arises when the ownership of scarce natural agents, as mines, land, water-power, comes under the control of one man or one group of men who agree on a price. Economic monopoly is a result of private property that is undesigned by the government or by society. It is exceptional, considering the whole range of private property, but it is important. The oil-wells embracing the main sources of the world's supply have largely come under one control. One corporation may control so many of the richest iron mines of the country as to be able to fix a price different from that which would result under competition. Coal mines, especially those of some peculiar and limited kind, such as anthracite, appear to become easily an object of monopolization. Economic monopoly merges into political monopolies, such as patents and franchises. Private property is a political institution designed to further social welfare, and only rarely is property in any particular business a monopoly. Private control of great natural resources might have been prevented in many cases had it been foreseen. § 4. #Capitalistic monopoly; aspects of the problem.# Capitalistic monopoly, variously called contractual, organized, commercial or industrial monopoly, arises when men unite their wealth to control a market, to overpower or intimidate opposition, and to keep out or limit competition by the mere magnitude of their wealth. These various kinds so merge into each other that they cannot always be distinguished in practice. A patent may help a capitalistic monopoly in getting control of a market; great wealth may enable a company to get control of rare natural resources. In the discussion of industrial monopoly, the problem now before us, there is a good deal of vagueness and misunderstanding because of lack of definiteness in the use of words which have rapidly shifted in meaning. The word "trust" originally applied, and still in legal usage applies, to a particular form of organization, that of a board of trustees holding the stock, and thus unifying the control, of two or more formerly separate enterprises. The Standard Oil Company at one time had this form of organization, which was declared by the courts to be illegal _(ultra vires)_ for corporations. Now "trust" often is used in the sense of a corporation having monopoly power in some degree; either broadly, of any monopolistic corporation (including railways and local public utilities), or, oftener, limited to manufacturing and commercial monopolies, otherwise called "industrial trusts" in contrast with franchise trusts and railroads.[2] The word "combination" referred originally to a more or less thoro "merger," with a view to attaining monopolistic power, of a number of formerly separate organizations, as in the case of the United States Steel Corporation. But the word is often used as if it were a synonym for trust (in a narrower or wider sense) even as applied to a single enterprise that has grown to be monopolistic. A "trust" in the legal sense of a form of organization, and "combinations" as above defined, might have no monopoly power whatever; whereas a monopoly may be possessed by an individual owner (e.g., of a patent right, railroad, waterworks plant), or by a single corporation that has simply grown monopolistic without the trust form of organization or without combination. Now it is evident that the real problem is that of monopoly, however attained. Monopoly may be defined as such a degree of control over the supply of goods in a given market that a net gain will result if a portion is withheld.[3] In accord with growing and now dominant usage it is well to observe the following meanings in our discussion. "_Combination"_ is a term referring particularly to one method by which monopolies are formed. "_Trust,"_ in the now popular sense, is best limited to an industrial, primarily manufacturing, enterprise or group of enterprises, with some degree of monopoly power due not to a "special franchise" giving the use of streets and highways and the right of eminent domain, nor to a single patent, but to a group of favoring technical, financial, and economic conditions. The trust may consist of a single establishment; or of a group of establishments separately operated but united in a "pool" to divide output, territory, or earnings; or of such a group held together by a holding company, or combined into one corporation. Public utility is the name of special franchise enterprises of the kind just mentioned, including, in the broad sense, railroads and local utilities such as street railways, gas, water, and electric light-plants. § 5. #Industrial monopoly and fostering conditions.# The problem of monopoly is probably as old as markets. From the first coming together of groups of men to trade there were doubtless efforts made by some individuals and groups of traders to manipulate conditions so as to get higher prices than they could get in a free and open market.[4] There are traces of these practices in ancient times, and the history of the Middle Ages is full of evidences both of monopolistic practices and of the efforts to prevent or control them. If this fact is borne in mind it may help us to distinguish in thought four features of enterprise that are readily and constantly confused, viz: large individual capital, large production, corporate organization, and monopoly.[5] Evidently any one of these features may appear without the other; e.g., a person of large aggregate capital may have his investments distributed among a large number of small enterprises, such as farms, without a trace of corporate organization or monopoly, and numerous examples could be given of large production, or of corporate organization, or of monopoly without one or more of the other features. But the presence of any one of these features is a favoring condition for the development of the others. Hence they are frequently found together, and of late this occurs increasingly. It is difficult to say in every, indeed in any, case which feature has been cause and which effect in this development, but, on the whole, large production seems to have been primary. Itself made possible by inventions, by better transportation, and by the widening of markets, it in turn helped to build up large individual fortunes, and then to create a need for the corporate form of organization. And monopoly power no doubt is more easily gained by large aggregations of capital in a corporation having the advantages of large production. § 6. #Growth of large industry in the nineteenth century.# The great recent growth of the monopoly problem is in part to be explained as the result of the growth of large industry, not as the sole cause, but as a favoring condition. Before the middle of the last century a tool-using household industry, on farms and in homes where the greater part of the things used were produced in the family, was still the typical organization in the United States.[6] A family produced somewhat more than it needed of food and cloth and exchanged with its neighbors; so with shoes, candles, soap, and cured meats. The early factories growing out of the household industry were small. Since that time two counter forces have been at work to affect the ratio of manufacturing establishments to population. The number of small establishments has been increased by the many industries producing the things once made on farms, and by increasing demands for comforts and luxuries. Many establishments producing the staple products that can be transported have been consolidated or have been enlarged, so that the unit of production now averages much larger. The number of cotton-weaving factories was about the same in 1900 as it had been seventy years earlier, while population has grown six fold. Iron- and steel-mills were fewer in 1900 than in 1880. In industries having local markets or local sources of materials, such as grist mills and saw mills, the change in numbers was less, for many small establishments were started in outlying districts at the same time that the mills became larger in the great population centers. But the average number of employees and the average capital per establishment increased in every period between census enumerations. § 7. #Methods of forming combinations.# Combinations of previously independent enterprises may be more or less complete and are made by different methods. Four major methods are: (1) The pool, by which the enterprises continue to be separately operated, but divide the traffic (or output), or the earnings, or the territory, in prearranged proportions. (2) The trust, in a legal sense (as defined above in section 5). (3) The holding company, a corporation with the sole purpose of holding the shares of stock, or a controlling number of them, in various corporations otherwise nominally independent. (4) Consolidation into one company. At least five minor methods may be distinguished; these are here numbered continuously with the preceding four. (5) Lease by one company of the plants of one or more other companies. (6) Ownership of stock by one corporation in another corporation, sufficient to give substantial influence over its policy, if not absolute control. (7) Ownership of stock in two or more competing companies, by the same individual or group of individuals, to such an extent as appreciably to unify the policies of the competing companies. (8) Interlocking directorates, that is, boards of competing companies containing one or more of the same persons as directors. (9) Gentlemen's agreements, mere friendly informal conferences and understandings as to common policies. § 8. #Growth of combinations after 1880.# Undoubtedly industry before 1860 had some elements of monopoly. Monopoly constituted part of the banking problem; it began to be evident in the railroads almost at once, and it rapidly increased as street railways and other public utilities were constructed. But after 1880 occurred the formation in larger numbers of industrial enterprises which appeared to exercise some monopoly power. In the years between 1890 and 1900 this movement was still more rapid. Consolidation took place on a great scale in railroads and in manufactures. Much of this has been of such a kind that it does not appear at all in the figures showing the number of establishments and of employees. In the data regarding this movement given by different authorities, many discrepancies appear, as there is no generally accepted rule by which to determine the selection of the companies to be included in the lists. One financial authority gave the following figures[7] regarding the industrial companies reorganized into larger units in the United States between 1860 and 1899, not including combinations in such businesses as banking, shipping, and railroad transportation. Some of the enterprises here included have much and others probably have little or no monopolistic power. _Decade Number Organized Total Nominal Capital_ 1860-60 ............... 2 $ 13,000,000 1870-79 ............... 4 135,000,000 1880-89 ............... 18 288,000,000 1890-99 ............... 157 3,150,000,000 --------------- ------ --------------- Total, 40 years ........ 181 $3,586,000,000 § 9. #The great period of trust formation.# The number of trusts organized and the capital represented by this movement in the last of these decades were seven times as great as in the thirty years preceding. The figures by years for the decade 1890-1899 are as follows: Decade Number Organized Total Nominal Capital 1890 ................... 6 $82,000,000 1891 ................... 13 168,000,000 1892 ................... 13 140,000,000 1893 ................... 5 226,000,000 1894 ................... 2 35,000,000 1895 ................... 7 104,000,000 1896 ................... 3 40,000,000 1897 ................... 6 93,000,000 1898 ................... 22 574,000,000 1899 ................... 80 1,688,000,000 ---------------- ---- -------------- Total, 10 years ......... 157 $3,150,000,000 The influence of great prosperity shows in the large number of combinations; but in 1893, the number was less, altho the total nominal capital (stocks and bonds) was still the greatest it had ever been in any year. Then came the period of depression, 1894-97, when both the numbers and the capital were comparatively small. Then from 1898 to 1901 followed the period of the greatest formation of trusts the world has ever seen. The list of these four years contains the names of the most widely known American combinations, a few of which are here given with the years of their formation: 1898, American Thread, National Biscuit; 1899, Amalgamated Copper, American Woolen, Royal Baking Powder, Standard Oil of N.J., American Hide and Leather, United Shoe Machinery, American Window Glass; 1900, Crucible Steel, American Bridge; 1901, United States Steel Corporation, Consolidated Tobacco, Eastman Kodak, American Locomotive. § 10. #Height of the movement toward combinations.# In a list by another authority[8] it appears that the data for all industrial trusts are in round numbers as follows: Number of Plants Acquired Total Date Number or Controlled Nominal Capital Jan. 1, 1904 318 5288 $7,246,000,000 These figures compared with those given above would indicate that the industrial trusts had about doubled in the years 1900-1903 inclusive. Probably most of this growth was in the years 1900 and 1901; then the movement became very slow, because, as is generally believed, of the aroused public opinion, of more vigorous prosecution by the government, and of additional legislation against trusts. The authority last cited gives in a more comprehensive list, in six groups, all the monopolistic combinations in the United States, at the date of January 1, 1904, as follows (the figures just given above being the totals of the first three groups): No. of Plants Total Nominal Groups Number Acquired or Controlled Capital 1. Greater industrial trusts 7 1528 $2,260,000,000 2. Lesser industrial trusts 298 3426 4,055,000,000 3. Other industrial trusts in process of reorganization or readjustment 13 334 528,000,000 4. Franchise trusts 111 1336 3,735,000,000 5. Great steam railroad groups 6 790 9,017,000,000 6. Allied independent 10 250 380,000,000 --- ----- -------------- Total, 445 8664 $20,000,000,000 § 11. #Motive to avoid competition.# This remarkable movement toward the formation of united corporations from formerly independent enterprises called forth a variety of explanations. The organizers of trusts gave as the first explanation of their action that it was the necessary result of excessive competition. It is not to be denied that a hard fight and lower prices often preceded the formation of the trusts. But as this excessive competition usually is begun for the very purpose of forcing others into a combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never the same in all factories, and to those manufacturers that are on the margin competition may appear excessive. It generally has been the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, have forced the smaller, weaker, industries to come into the trust. In other cases the smaller enterprises have been eager to be taken in at a good price, altho they might have continued to operate independently with moderate profits. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination. § 12. #Motive to effect economies.# Another advantage of the combination of competing plants that was strongly emphasized was the economy of large production.[9] The economies that are possible within a single factory may be still greater in a number of combined or federated industries. The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. Each independent factory must send its drummers into every part of the country to seek business. In combination they can divide the territory, visit every merchant and get larger orders at smaller cost. A large aggregation can control credit better and escape losses from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation, it can reduce the friction. A combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities often, in the period of trust formation, served to strengthen its influence with the railroads, and to increase its political as well as its economic power. Another phase of corporate growth is the "integration of industry," that is, the grouping under one control of a whole series of industries. One company may carry the iron ore through all the processes from the mine to the finished product. A railroad line across the continent owns its own steamers for shipping goods to Asia or Europe. Large wholesale houses own or control the output of entire factories. § 13. #Profits from monopoly and gains of promoters.# There are, however, well-recognized limitations to the economy of large production in the single establishment,[10] and of late there has been ever-increasing skepticism as to the net economy actually attributable to combinations. Undoubtedly the merging of a number of old plants has sometimes effected an immediate improvement in the weaker ones. A new broom sweeps clean. This movement chanced to be contemporaneous with the development of "efficiency engineering," and of "scientific cost-accounting," and these better methods, already developed and applied in comparatively small plants, could be more quickly extended to the other plants brought into the combination. Moreover, the personal organizations in the separate enterprises had been brought to a high state of efficiency by the stimulus of competition, and there is reason to fear that, after some years of centralized bureaucratic organization, much of this efficiency may be lost. There seems no doubt that the strong motive for forming combinations is the profit to the organizers.[11] Whatever was the more generous motive or more fundamental economic reason assigned by the promoters, the investing public confidently expected that higher prices would be the chief result. There are indirect as well as direct gains to the promoters of a combination. There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock. The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product. A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the gold discoveries in California and in the Klondike. Then is the time for the promoter to offer shares without limit to investors. § 14. #Monopoly's power to raise prices#. There is no doubt that the formation of a combination from competing plants can and does give a control over prices, a monopoly power, not possessed by the separate competing establishments. The same kind of power might be attained by the growth of one establishment outstripping all its competitors, or by a new enterprise coming into the field backed by powerful capitalists. But this would work slower and less extensive results than does the formation of a combination. Of course, the fundamental principles of price cannot be changed by a trust; a selling monopoly can affect price only as it affects supply or demand.[12] The strongest trust yet seen has not been omnipotent. Many careless expressions on the subject are heard even from ordinarily careful writers and speakers: "The trust can fix its own prices," "has unlimited control," "can determine what it will pay and for what it will sell." This implies that trusts are benevolent, seeing that the prices they charge are usually not far in excess of competitive prices in the past. Such a view overlooks the forces that limit the price a monopoly can charge. If the supply remains the same, no trust can make the price go higher. The monopoly usually directs its efforts to affecting the supply, leaving the price to adjust itself. It can affect the supply either by lessening its own output or by intimidating and forcing out its competitors. It is true that this logical order is not always the order of events. The trust may not first limit the supply, and then wait for prices to adjust themselves; it may first raise its prices, but unless it is prepared to limit the supply in accordance with the new resulting conditions of demand, such action would be vain. The control of the sources of supply is the logical explanation of the higher price, even tho the limitation of supply is effected later by successive acts found necessary to maintain the higher price. The report of the Federal Industrial Commission, which, from 1898 to 1901, investigated the trusts, showed that immediately upon their formation, the industrial combinations had raised their prices.[13] Prices might be lowered again but only when and where competition became troublesome, thus causing either "price-wars" or discrimination. [Footnote 1: See Vol. I, p. 76.] [Footnote 2: As in the list in sec. 8, below.] [Footnote 3: See Vol. I, chs. 8 and 31.] [Footnote 4: See Vol. I, ch. 8, on competition and monopoly, and ch. 31, on monopoly prices and large production. An understanding of the definitions and of the general principles distinguishing competition and monopoly is a necessary prerequisite to a profitable discussion of the practical problem of monopoly.] [Footnote 5: See Vol. I, p. 267, on capital; pp. 388-393, on large production. See also references in preceding note on monopoly; and ch. 27, secs. 1 and 2, on corporate organization.] [Footnote 6: See above, ch. 26, sec. 3; and ch. 25, secs. 6 and 7.] [Footnote 7: Compiled from data given by "The Journal of Commerce and Commercial Bulletin," reprinted in "The Commercial Year Book," Vol. V, 1900, pp. 564-569.] [Footnote 8: John Moody, "The Truth About the Trusts," 1904] [Footnote 9: See Vol. I, pp. 388-393.] [Footnote 10: See Vol. I, pp. 391-392.] [Footnote 11: See Vol. I, p. 334, on the function of the promoter.] [Footnote 12: See Vol. I, pp. 80-85, 382-387, 394-396.] [Footnote 13: A summary of this evidence is given in the author's "Principles of Economics" (1904), pp. 327-330. A fuller outline of the results of the Commission's conclusions may be found in "The Trust Problem," by J.W. Jenks, who acted as expert in the investigation.] CHAPTER 29 PUBLIC POLICY IN RESPECT TO MONOPOLY § 1. Moral judgments of competition and monopoly. § 2. Public character of private trade. § 3. Evil economic effects of monopolistic price. § 4. Common law on restraint of trade. § 5. Growing disapproval of combination. § 6. Competition sometimes favored regardless of results. § 7. Increasing regard for results of competition. § 8. Common law remedy for monopoly ineffective. § 9. First federal legislation against monopoly. § 10. Policy of the Sherman anti-trust law. § 11. Policy of monopoly-accepted-and-regulated. § 12. Field of its application. § 13. Industrial trusts,--a natural evolution? § 14. Artificial versus natural growth. § 15. Kinds of unfair practices. § 16. Growing conception of fair competition. § 17. The trust issues in 1912. § 18. Anti-trust legislation in 1914. § 1. #Moral judgments of competition and monopoly.# What should be the attitude of society toward monopoly? Is it good or bad as compared with competition? Some very strong ethical judgments bearing on practical problems are found in the popular mind connected with the ideas of competition and monopoly. Competition usually is pronounced bad when viewed from the standpoint of the competitors who are losing by it, and as good when viewed from the standpoint of the traders on the other side of the market who gain by that competition. Competition among buyers thus appears to sellers to be a good thing; that among sellers appears to themselves to be a bad thing (and _vice versa_). Many persons are moved by sympathy to pronounce competition among low-paid and underfed workers to be bad, and each worker is convinced that it is so in his own trade. Yet nearly all men are of one mind that competition is a good thing in most industries, those that are thought of as supplying "the general public." Monopoly is believed by the public to be wrong in such cases, and competition to be the normal and right condition of trade. Yet there are some men interested in "large business" who look upon competition as bad, and upon monopoly as having essentially the nature of friendly coöperation. The roots of these opinions, or prejudices, are easily discoverable in the theoretical study of the nature of monopoly.[1] Yet often different men or groups of men feel so strongly on this matter, viewing it from their own standpoints, that they are quite unable to understand how any one else can feel otherwise. There is thus a great deal of controversy to no purpose. § 2. #Public character of private trade.# Any such general judgment as that of the public, tho it may be mistaken in some details, is likely to be a resultant of broad experience. There is in competitive trade a public, a social character, which monopoly destroys. Even in a simple auction, when the bidding is really competitive, price depends far less on shrewd bargaining, on bluff, or on stubbornness, than is the case in isolated trade. Each bidder is compelled by self-interest to outbid his less eager competitors, and thus the limits within which the price must fall are narrowly fixed. The auction-sale is less a purely personal matter, takes on a more public aspect, has a more socialized character than isolated trade, depends more on forces outside the control of any one man, and results in a price fixed with greater definiteness. The price in a more developed market results from the play of impersonal forces, or at least from the play of personal forces which have come under the rules of the market.[2] This price men are ready to accept as fair. It has a democratic character, whereas the gains of monopoly price arouse resentment as being the work of personal, and felt to be despotic, power. Monopoly price is a bad price to the one who pays it, not only because it is a high price but because it bears the character of personal extortion. The medieval notion of _justum pretium_, the just price, may have been often misapplied, and it was often criticized and ridiculed by economists in the period of idealized competition (from Adam Smith to John Stuart Mill). But at the heart of the notion was the judgment that general uniform prices fixed in the open market are the proper norms for prices when one of the traders is caught at an exceptional disadvantage. The modern world has been compelled to reëxamine the conception of the just price. § 3. #Evil economic effects of monopolistic price.# Theoretical analysis confirms this view. Any exercise of monopolistic power over price keeps some, the weaker bidders, from getting any of the desired goods, or limits them to their most urgently desired units. What may be called "the theoretically correct price"[3] with two-sided competition is the one that permits the maximum number of trades with a margin of gain to each trader. In narrowing the possibility of substitution of goods by trade, the sum of values of goods for most men is diminished. All citizens thus that are the victims of an artificially created scarcity look upon monopoly as "bad," just as they do upon the evils of nature--drought, locusts, fires, and pestilence. A monopoly has an indirect and more distant effect upon the spirit of all those trading with it. If they are producers selling at prices depressed by monopoly, their money incomes are reduced; if they are consumers buying at monopoly prices, their real-incomes are reduced; in either case their psychic incomes, the motives of all industry, are diminished, and their industrial energies are relaxed. § 4. #Common law on restraint of trade.# The first recorded case in English law, wherein the courts sought to prevent the limiting of competition by agreement, runs back to the year 1415, in the reign of Henry V. This was a very simple case of a contract in restraint of trade, whereby a dyer agreed not to practise his craft within the town for half a year. The court declared the contract illegal (and hence unenforceable in a court) and administered a severe reproof to the craftsman who made it. Thus was set forth the doctrine of the moral and legal obligation of each economic agent to compete fully, freely, and without restraint upon his action, even restraint imposed upon himself by a contract voluntarily entered into for his own advantage. Not until the eighteenth century was this rigid doctrine somewhat relaxed so as to permit the sale of the "good will" of a business under limited conditions, and some "reasonable" contracts in restraint of trade. Later the emphasis was somewhat further shifted, by judicial interpretations, from the notion of free competition to that of "fair" competition, so as to permit contracts involving moderate restraint of trade, if the essential element of competition was retained. Thus it was said that a piano manufacturer might by contract grant an exclusive agency to a dealer in a certain territory, there being many other competing makes of pianos, and such a contract "does not operate to suppress competition nor to regulate the production or sale of any commodity."[4] But with such moderate limitations the courts in cases under the common law have steadily disapproved contracts in restraint of trade that would appear to be to the disadvantage of third parties, whether producers or consumers. § 5. #Growing disapproval of combination.# The attitude of the courts became in one respect stricter. Some earlier cases involved the doctrine that what is lawful for an individual to do alone is lawful if done in combination with others. Indeed, a comparatively recent case[5] declared regarding a group of dealers, agreeing not to deal with another, that "desire to free themselves from competition was a sufficient excuse" for such action. But the general trend has been to the doctrine that a combination of men "has hurtful powers and influences not possessed by the individual." Hence threats of associations of traders (retailers or wholesalers) not to deal with another if he continued to deal with some third party have been declared acts in restraint of trade.[6] Yet in the case cited the court seemed to have been more concerned with protecting "the individual against encroachment upon his rights by a greater power," "one of the most sacred duties of the courts," than with rights and interests of the general public, endangered by such restraint of trade. § 6. #Competition sometimes favored regardless of results.# In another respect the courts have wavered in their attitude toward competition, the general doctrine being that competition, particularly the cutting of prices, is absolutely justifiable, regardless of circumstances. In the leading English case[7] the facts were that the larger steamship companies sent to Hankow additional ships, now called, figuratively, "fighting ships," to "smash" freights in order to ruin tramp steamship owners and drive them out of the field. The court held that this constituted no legal wrong to the tramp steamship owners, and scouted the idea of the court's looking at the motives in price cutting, or taking into consideration in any way what the court called "some imaginary normal standard of freights and prices." And of this case the lawyer is forced to say: "Undoubtedly the excellent opinion just quoted represents the law everywhere," even tho there are other cases difficult to harmonize with it.[8] To the economist, not bound in like manner by legal precedent, such a verdict was from the first impossible. The court appears to have considered that only the rights of the private litigants, the tramp steamship owners, were involved, not the rights and interests of the shipping public; it considered the immediate and not the ultimate effects of the "smashing" of rates; it allowed itself to be deceived by the appearance of acts that in outer form were competition, but that had as their purpose the strengthening and maintenance of monopoly. These acts are forms of the "unfair" practices that will be mentioned later.[9] § 7. #Increasing regard for results of competition.# Despite the binding precedents, the courts in some later decisions have refused to look upon competition as good regardless of its motives and of its consequences. In a federal case[10] the judge, in a brief and acute dictum, recognized the evil of a rate war that would result from threats of definite cuts. They impair "the usefulness of the railroads themselves, and cause great public and private loss." The court's opinion was no doubt largely influenced by the fact that railroad rates were already subject to regulation: "Every precaution has been taken by state legislatures and by the congress to keep them just and reasonable,--just and reasonable for the public and for the carriers." In a state case[11] the facts were that a man of wealth started a barber shop and employed a barber to injure the plaintiff and drive him out of business. The court recognized that while, as a general proposition, "competition in trade and business is desirable," it may in certain cases result in "grievous and manifold wrongs to individuals"; and in this case the "malevolent" man of wealth was declared to be "guilty of a wanton wrong and an actionable tort." The economists can but pronounce this judgment admirable so far as it goes, but it is remarkably confined to a consideration of the private legal rights of the injured competitor, and gives hardly a hint of a higher criterion for judging competitive acts, that of the general welfare. § 8. #Common law remedy for monopoly ineffective.# The common law contained prohibitions enough, both broad and specific, against contracts and acts in restraint of trade. The common law contained likewise a closely related body of doctrine by which the railroads, as common carriers, ought to have given equitable and undiscriminating rates to all shippers. There was a strong body of influential opinion that long maintained that the case was sufficiently covered, that the only thing needed was to enforce the common law. Even now, after all that has elapsed, there are some in railroad and business circles who still appear to hold that opinion. But the evils of railroad discrimination and of other monopolistic practices continued, and for some cause the common law was not enforced, excepting occasionally, disconnectedly, and without important results. Why? The answer may be ventured that in the common law the whole question of restraint of trade was treated primarily as one of private rights and only incidentally as one involving general public policy. Cases came before the courts only on complaint of some individual that felt injured. Now the injury of higher prices due to contracts in restraint of trade is usually diffused among many customers, and the loss of any one is less than the expense of bringing suit. Consequently, it rarely happened that cases were brought before the courts except by one of the two equally guilty parties to a contract in restraint of trade, when the other party had failed in some way to do his part. When such an illegal contract in restraint of trade was proved before a court by a defendant in a civil suit the contract was declared unenforceable, and the only penalty in practice was that the plaintiff could not collect his debt or secure performance from the defendant.[12] A very similar situation existed in the case of the individual's grievances against railroad charges and services. § 9. #Federal legislation against monopoly.# The passage of the Interstate Commerce Act in 1887[13] prohibiting discrimination and railway pooling, and that of the Act of 1890 "to protect trade and commerce against unlawful restraints and monopolies," popularly known as the "Sherman Anti-trust Law," were part of one public movement to remedy monopoly. From one point of view it seems true, as has often been said, that in essence these statutes were simply enactments of long established principles of the common law. Section 1 of the Sherman law declared illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations." Section 2 made it a misdemeanor "to monopolize, or attempt to monopolize." But from another point of view, these new laws showed a marked change both in the conception of the interests involved and in the means of preventing the evils. The evil was at last conceived of as a general public evil; the laws are not merely to protect individuals,[14] but "to regulate commerce," "to protect trade and commerce." More important still, it was made the duty of public officers (district-attorneys of the United States) to institute proceedings in equity "to prevent and restrain" violation of the Sherman Act, and a special Commission was instituted to deal with railroad cases. It was this undertaking of the initiative by the government, the treatment of the problem as one of the general welfare, that marked a new epoch in this field. The methods and agencies provided might be at first inadequate and ineffective, but time and experience could remedy those defects. § 10. #Policy of the Sherman anti-trust law.# But in important respects opinion and policies were not yet clear and consistent. They wavered from one to another conception of the method for dealing with the problem. It was clear only that _laissez-faire_ had been laid aside. There are three other possible policies reflecting as many different conceptions of the problem of monopoly: (1) monopoly-prosecuted, (2) monopoly-accepted-and-regulated, (3) competition-maintained-and-regulated. The policy of monopoly-prosecuted is merely negative. This is the policy of the Sherman law. It opposed no positive action to the making of monopolistic contracts and to the formation of combinations, but declared them to be illegal and provided for their prosecution and punishment after the mischief had been done. The great epoch of the formation of combinations[15] followed the enactment of this law. True, lack of experience by the department of justice, and lack of vigorous effort to enforce the law, and the slow action of the courts were largely to blame for this result. The law has proved to be more effective to prevent new combinations since it has been successfully enforced in a few notable cases. But once large combinations have been formed and complex individual financial interests have become involved, the courts have proved to be incapable of undoing the deeds. In practice the most sweeping remedy attempted under the law has been the dissolution of enormous combinations formed years after the law went into effect. This has been called the job of unscrambling the eggs. The most notable cases were those of the Standard Oil Company and of the Tobacco Company, decided in 1911, the results being absurdly futile. § 11. #Policy of monopoly-accepted-and-regulated.# A second policy may be called that of monopoly-accepted-and-regulated. This is represented by the Interstate Commerce Act (at first weakly, and more vigorously after its amendment), and by the great mass of state legislation putting the local and interurban public utilities under the control of regulative commissions. For some decades after these industries developed, the public faith was in competition as the effective regulator. If monopolistic prices were too high, another company was chartered to build a parallel railroad or another horse-car line on the next street, or to lay down another set of gas pipes in the same block. Almost from the first some students of the subject saw the wastefulness and futility of this kind of competition, and nearly a half century later the public reluctantly came to this view. Still, sad to relate, the same history had to be repeated in regard to the telegraph and telephone industry, and in some quarters the ultimate outcome is not yet recognized. The Interstate Commerce Act itself, with odd inconsistency, contains an anti-pooling provision (section 5) the purpose of which seems to have been to compel competition as to rates which is now practically impossible under the other provisions of the law. The policy of "monopoly-accepted" was seen to involve as a necessary feature, public regulation of rates, to the point, if necessary, of absolutely fixing them. The principle has come to be accepted that wherever competition ends there public regulation of prices and service begins. Monopolistic enterprises are _ipso facto_ quasi-public institutions. § 12. #Field of its application#. This policy, gradually extending in practice, came to be applied to the class of industries which, for lack of a better name, are called local utilities. The one characteristic that they all have in common is that the service, or product, which is sold requires for its delivery an expensive, permanent, physical plant, and some special use of public highways. Thus gas pipes, water pipes, poles and wires for telegraph, telephones and electric light, street railways, regular steam railroads and some other minor industries all answer to this test.[16] Beginning about the year 1900 one state after another enlarged the powers of its state railroad commission or created a new corporation commission to regulate these "local" or "public utilities."[17] They have accomplished much, but the development of this kind of regulation has not proceeded in many cases beyond the adjustment of relative rates and the abolition of discrimination among the different individuals and classes of customers. Experience has shown the great difficulty of determining what is a fair absolute level of charges. A new science of accounting has been developing to assist in the solution of a problem, the complexity of which transcends the agencies at hand to deal with it. With this policy applied to the local utility (and railroad) phase of monopoly, there remains still the problem of the industrial trusts in the manufacturing enterprises. § 13. #The industrial trust,--a natural evolution?# The policy that one is inclined to favor regarding industrial trusts depends very much on one's answer to the question: Are or are not industrial trusts natural growths? In this bare form the question is somewhat vague, but the thought of those who answer it in the affirmative is positive if not always entirely clear. They (at least the extreme representatives of this view) declare that trusts have been, are, and will continue to be, the results of a "natural evolution" of business conditions, as inevitable as the great changes in the physical world. If this is so man and society must recognize the facts, must waste no efforts vainly in fighting against fate, but should accept the trusts and realize their possibilities for good. And these are declared to be great, for it is assumed that without the trusts all of the economies of large production must be sacrificed. Irresistible economic forces, it is said, are creating larger and larger units of business; friendly coöperation and unified action must take the place of competition in business. The outcome must be monopoly in every important line of manufacturing industry and perhaps of commerce. In view of public opinion toward monopoly, its acceptance necessitates its regulation. This argument is supported by appeal to the experience in the field of railroads and other local utilities, where public opinion has, after long hesitation, recognized competition to be impracticable and the acceptance of monopoly as inevitable. As extremes often meet, the view of the industrial trust as a natural evolution is most favored on the one hand by men of "big business," already interested financially in trusts, and on the other hand by the most radical communists (or socialists) whose ideal is the complete monopolization of industry under the government. § 14. #Artificial versus natural growth.# Opposed to this view is a deep and widespread popular opinion or prejudice, against the trust and in favor of competition. General opinion in this case (as not always) finds much support in special economic studies of the methods by which the existing industrial trusts came into being. First the question properly is raised; just what is meant by "natural"? In a sense everything has been the natural outcome of evolution,--the steam engine, the submarine, the boycott, militarism. In an equally good, if not better sense, every mechanical invention and every method of industrial organization is artificial, has been the result of man's choice and effort. In any case men may choose as good or reject as unsuitable or bad, any particular mechanical device, and society may decide to adopt any particular policy toward a certain form of business organization and certain business practices (unless, indeed, our philosophy be that of automatism, crude determination or fatalism, regarding all human affairs). Now when one examines the methods which the notable trusts actually did employ, and apparently had to employ, even when they were already powerful single enterprises, in order to destroy their competitors and to attain their monopolistic power, the word "natural" seems hardly to describe the process. The evidence is not a matter of hearsay but is embodied in a long line of judicial decisions, and in numerous special inquiries by governmental commissions and officials.[18] § 15. #Kinds of unfair practices#. This evidence is a startling array of "unfair practices" and "unfair" forms of competition, which, however novel in appearance, are essentially of the kind that has been illegal under the common law for the past five hundred years. Many of these practices were baldly dishonest, many of them were contemptibly mean. The manifold varieties of unfair competition may be roughly grouped under three headings according as they are connected with (1) Illegal favors received from public or quasi-public officials; (2) Discrimination against, or control of, customers; (3) Foul tactics against competitors. (1) Among the practices in the first group are discriminatory rates and rebates from railroads, favoritism in matters of taxation, undue influence in legislatures, special manipulation of tariff rates through powerful lobbies, or paid agents, undue influence in the courts through the employment of lawyers of the highest talent, who often later became judges. (2) Among the unfair practices toward customers are discriminations among them by the various forms of price cutting, grants of credit, and kinds of service. The liberty of retail dealers is limited in a variety of ways, such as fixing resale prices, requirement of exclusive dealing, and full-line forcing. (3) All the methods just mentioned as employed in dealings with customers are likewise unfair toward competitors. Many other methods are used to the same end, such as: enticing away their employees, or corrupting and bribing them to act as spies, paying secret commissions, false advertising, misrepresenting competitors, imitating their patterns in goods of defective workmanship, shutting off their credit or their supplies of materials, acquiring stock in competing companies, malicious suits, infringement of patents, intimidation by threats of business injury or of scandalous exposures, operation of bogus independent companies. § 16. #Growing conception of fair competition.# Any industrial trust that was able to gain domination and monopoly power only by the use of such practices, or any part of them, can hardly be deemed the result of a "natural evolution." If "artificial" means the use of artifices surely this development deserves the adjective. Yet even if not natural, this development may be thought to be "inevitable," human nature being as it is. But the bald fact is that while the great trust movement was in progress no effort worthy of the name was being made to enforce even the then existing laws and to oppose this artificial development. The same allegation of inevitableness was once commonly made of discriminatory railroad rates and rebates, evils which have been in large part remedied only since the period 1903-1906, when at last intelligent action was taken. To those that came to see the problem in this light, acceptance of industrial monopoly with its complex task of fixing by public commission the prices on innumerable kinds and qualities of goods seemed at least premature. Rather, the first step toward a solution seemed to be the vigorous prevention of unfair practices, and the next step a positive regularizing of "fair competition."[19] The fundamental idea in this is the enforcement of a common market price (plus freights) at any one time to all the customers of an enterprise. By this plan potential competition would become actual, and small enterprises that were efficient might compete successfully within their own fields with large enterprises that maintained prices above a true competitive level. Even general lowering of prices by a large enterprise with evident purpose of killing off smaller competitors is unfair competition under this conception. It was for years recognized that the realization of this policy required legislation regarding uniform prices and the creation of a commission for the administration of the law. § 17. #The trust issues in 1912#. The campaign of 1912 presented in an interesting manner the three policies above outlined. The Republican party led by President Taft stood for the policy of monopoly-prosecuted; its program was the vigorous enforcement of the Sherman law. The Progressive party, led by Mr. Roosevelt, stood in the main for the policy of "monopoly-accepted-and-regulated"; its program called for minimizing prosecution and for developing a system of regulation of trust-prices. The Democratic party, led by Mr. Wilson, stood for the policy of competition-maintained-and-regulated, and the problem was to find means to strengthen and regularize the forces of competition. In practice these programs doubtless would be less divergent than they appear. All alike proposed the retention of the Sherman law. The two proposals to go further were presented as mutually exclusive alternatives, whereas they necessarily must supplement each other in some degree. The Progressives did not expect all industries to become monopolies, and the Democrats tacitly conceded to monopoly-accepted the large field of transportation and local utilities it already had occupied. But there was a real difference in the angle of approach and a real difference in emphasis. The Democratic program (the somewhat unclearly) showed greater distrust of monopoly and greater faith in the possibilities of creating fair conditions of competition (which never had fully prevailed) in which efficiency would be able to prove its merits and monopoly would work its own undoing. It was the more logical for the country to give this policy at least a trial before adopting irrevocably the policy of general industrial monopoly. In either case competition actual or potential is the fundamental principle by which prices have to be regulated. Where competition is enforced it is by applying some general rules that create a general market price instead of discriminatory prices, but the fixing of the price is left to the competitors. Where monopoly is accepted prices must be fixed with reference to an estimated competitive standard, that which under hypothetically free conditions would just suffice to attract and retain private enterprise and capital. § 18. #Anti-trust legislation of 1914#. The anti-trust legislation of 1914, passed by the Democratic party to carry out its program, is embodied in two acts: the Clayton Act, laying down new rules; and the Federal Trade Commission Act, mainly to provide an agency with administrative and quasi-judicial functions to deal with unfair practices. This displaced the Bureau of Corporations, established in 1903. The Clayton Act forbids discrimination where the effect may be to lessen competition, or tend to create a monopoly. Due allowance may be made for difference in the cost of selling or transportation, but a difference is not required in such cases. It forbids contracts to prevent dealers from handling other brands. It forbids corporate ownership of stock in a competing corporation, forbids interlocking directorates in large banks and in other competing corporations, with capital, surplus and undivided profits aggregating more than $1,000,000. The Trade Commission Act in addition to its administrative provisions for investigation, reports, and readjustment of the business of companies upon request of the courts, declares that "unfair methods of competition in commerce" are unlawful, and both empowers and directs the Commission to prevent their use (banks and common carriers subject to other acts being excepted). These acts are too new to have been given a fair test. They have, however, given evidence of exercising at once an influence upon the situation. They are imperfect in some details that will require amendment; but they mark the beginning of a new policy toward industrial monopoly, the results of which will be watched with the deepest interest. [Footnote 1: See Vol. I, especially pp. 74 and 75.] [Footnote 2: See Vol. I, pp 59, 68, 70-71] [Footnote 3: See Vol. I, pp. 66, 67.] [Footnote 4: 77 Miss., 476. Cited by Bruce Wyman, "Control of the Market," p. 137.] [Footnote 5: 19 R.I., 255.] [Footnote 6: 115 Ga., 429.] [Footnote 7: Mogul Steamship Company v. McGregor (L.R. 23 Q.B.D. 598).] [Footnote 8: Bruce Wyman, "Control of the Market," p. 22. In 1914 (216 Fed. 971), a federal court granted an injunction restraining the use of fighting ships by a combination, and in 1915 (220 Fed 235), the court indicated a willingness to grant a similar injunction if necessary. Similarly "fighting brands" of goods have been recently prohibited.] [Footnote 9: See below, sec. 15.] [Footnote 10: Averrill v. Southern Railway (75 Fed. Rep. 736).] [Footnote 11: 107 Minn. 145.] [Footnote 12: Arnott v. Pittston and Elmira Coal Co., 68 N.Y. 558 (1877).] [Footnote 13: See ch. 27, sec. 16.] [Footnote 14: At the same time the rights of injured individuals are better safeguarded by sec. 7 of the Sherman law, permitting the recovery of threefold damages and attorney's fees.] [Footnote 15: See ch. 28, sec. 9.] [Footnote 16: See further, ch. 30, secs. 5-9.] [Footnote 17: See ch. 27, sec. 15, on state commissions.] [Footnote 18: A few among the most important sources are the Report of the Industrial Commission, 1898-1901, 19 volumes; reports of the Bureau of Corporations on the petroleum and tobacco industries; U.S. Supreme Court decisions, e.g., the Addystone Pipe case (175 U.S. 211), given in Ripley, Trusts, Pools, and Corporations, p. 86; the Standard Oil case (221 U.S. 1), and the Tobacco Trust case (221 U.S. 106); and the very comprehensive volume on "Trust Laws and Unfair Competition," by Joseph E. Davies, Commissioner of Corporations, Washington, 1916.] [Footnote 19: John B. Clark, the distinguished professor of economics in Columbia University, has been the foremost and clearest exponent of this idea, in his "The Control of Trusts," 1901, 2d ed., 1912, and in other works.] CHAPTER 30 PUBLIC OWNERSHIP § 1. Waves of opinion as to public ownership. § 2. Primary functions of government favoring public ownership. § 3. Economic influences favoring public ownership. § 4. Forms of municipal ownership. § 5. Localized production favoring monopoly. § 6. Economies of large production favoring monopoly, § 7. Uniformity of products favoring monopoly. § 8. Franchises favoring monopoly. § 9. Various policies toward local public service industries. § 10. State ownership of various kinds. § 11. National ownership. § 12. Economic basis of public ownership. § 1. #Waves of opinion as to public ownership.# Opinion and practice in the matter of the public ownership of wealth and the direct management of enterprises has moved in waves. In feudal times, when government was practically identical with the personal ruler, and the private "domains" of the lord or king were the sole source of his public revenues,[1] holdings of this kind were very large. Their public nature came to be more fully recognized, but they did not yield large revenues, and gradually were in large part sold or given away to private owners. This was particularly true in England, and in a less degree on the continent of Europe. The conviction grew that the state, or government, was an inefficient enterpriser, and that the sound public policy was to foster private industry and obtain public revenues by taxation. The ideal was embodied in the _laissez-faire_ philosophy that government should confine itself exclusively to the most essential political functions, leaving the economic functions absolutely alone. It should keep the peace, prevent men from beating and robbing each other, and preserve the personal liberty of the citizen.[2] Thus, it was believed, all of the economic needs would be provided for by competition, in the best way humanly possible, in the quantities and at the rate needed. This policy attained its maximum influence in the first half of the nineteenth century in England, and in America probably just before the Civil War, in the decade of the fifties. § 2. #Primary functions of government favoring public ownership#. Some public ownership, however, is necessary for the exercise even of the primary political functions of the state. Civilized government requires the use of numerous material agents. Buildings for legislative and executive offices, custom-houses, post-offices, lighthouses, can be rented of private citizens, as post-offices usually are in small places; but it is obviously economical and convenient in large cities for the government to own the public buildings. Government can reduce to a minimum its direct employment of officials by "farming out" the taxes, as all countries once did to some extent, and as France continued to do up to the French Revolution. It is now the general policy for government to own or control its essential agencies, but this does not involve in every case the employment of day-labor direct as in cleaning the streets or collecting garbage. The more simple political functions shade off into the economic. To coinage usually are added the issue of legal-tender notes and certain banking functions: the post carries packages, transmits money, and in most countries now performs the function of a savings-bank for small amounts. The social and industrial functions undertaken by public agencies have steadily increased since the middle of the nineteenth century, and the sphere of the state has been enlarging.[3] The question ever open is as to the proper limits to this development. § 3. #Economic influences favoring public ownership#. In some cases private ownership is difficult because of the excessive cost of collecting for the service. The cost of maintaining toll houses on a turnpike sometimes exceeds the amount collected. Collection in other cases, as for the service of lighthouses to passing ships, is impossible. Public industry may secure, through the economy of large production, a cheaper and more efficient service, the benefits and costs being diffused throughout the community. The benefits of the work of experiment-stations for agriculture are felt immediately by the farmers, but are diffused to all citizens. A manufacturer able to keep his method secret, or to retain his advantages for a time, can afford to undertake experiments in his factory, but the farmer seldom can. The public ownership of parks for the use of all gives a maximum of economy in the production of the most essential goods,--fresh air, sunshine, natural beauty, and playgrounds in the midst of crowded populations. Municipal ownership of waterworks is an extension of the same idea. Not only because large amounts of water are used by the public, but because cheap, pure, abundant water is an essential condition to good citizenship, speculation should in every possible way be eliminated from this industry. The assumption is made in the _laissez-faire_ doctrine that the interest of the public harmonizes with that of the individual. But this proves often not to be the case. For example, the forest has an immediate value to its owners and to the consumers of lumber, and it has also a diffused utility in its influence on industry, on climate, on navigation, on water-power and on floods. Yet, as the private owner, unless a great land monopolist, does not control enough of the forest to appreciably affect any of these things, and could rarely sell them even if he could affect them, he will cut down the tree whenever he can gain by doing so. In this situation either governmental control or governmental ownership of forests is essential. Each kind of political unit, or subdivision of government, develops characteristic kinds of public ownership and industry. Federal states consist of three main groups of political units: national, provincial, and local. Provincial units are the largest subdivisions, as the American "states," or commonwealths, the German states, and the provinces in other countries. The term local political unit is more complex and may mean county, township, village, city, or school or sanitary district; but most of what is to be said of local ownership refers to cities or to incorporated villages. § 4. #Forms of municipal ownership#. Local political units acquire ownership only in local industries and in wealth used locally by the citizens. Nearly all parks and recreation grounds are owned by cities. As population has become more dense, private yards of any extent have become impossible, in cities, for all but the wealthy. Public ownership of parks insures a "breathing place" and recreation grounds to the common man in the most economical way. Of late the movement for large and small public parks and playgrounds has gone on rapidly in American cities. Related to parks are public baths, public libraries, art collections, museums, zoological gardens, etc. Some have seen danger in this policy, but the public sees no such danger so long as the things supplied gratify the higher tastes--as art, music, literature, and social recreation. These give no encouragement to the increase of improvident families and to the breaking down of independent character. The means of local communication--streets, roads, bridges--were once owned largely by private citizens. Here and there still are found toll roads and toll bridges built under charters granted a century ago, but tolls on public thoroughfares are for the most part abolished. A public market, where the producer from the farm and the city consumer can meet, is an old institution. About two thirds of the cities of 30,000 population or more have public markets or scales, and fully one third have public markets of importance. New York City has six large retail and wholesale markets, for selling meat and farm produce, in which rents or fees are charged, and several open markets. There has recently been a large movement in this direction. The providing of apparatus for extinguishing fires is always a public duty; the conveyance of waste water is increasingly a public function. The supply of pure water for domestic and business uses, for fire protection and for street cleaning, while often a private enterprise in villages, and sometimes in large cities, is increasingly undertaken by public agencies. Most of the largest cities now own their own water supply systems. Public ownership of gas and electric lighting is less common, as the utility supplied is not so essential and the industry is somewhat less subject to monopoly; but the difference is one of degree only. Street railroads are often under public ownership in Europe; but there have thus far been few cases of the kind in the United States and Canada.[4] § 5. #Localized production favoring monopoly#. A number of these enterprises have characteristics in common which appear to make inevitable their drift into monopolistic control. Waterworks, gas, electric lighting, street railways, telephone systems, are among these. However fierce may be the competition for a time, sooner or later either one company drives out the other or buys it up, or both come to an agreement by which the public is made to pay higher prices. A feature favoring the growth of monopoly when such industries are left to private enterprise is the need to produce and supply the commodity or service at a given locality. While two street railways can compete on neighboring streets, it is physically impossible for two or more to compete on the same street. Two systems of water-mains or gas-mains can be put down, as sometimes is done, but this is not only a great economic waste, but the tearing up of the streets is an intolerable public nuisance. This difficulty is less marked in the case of telephones and electric lighting, and some persons still cling to faith in competition to regulate the rates in those industries; but faith in competition between water companies and between gas companies has been given up by nearly all persons now, as it was long since by students of the subject. § 6. #Economies of large production favoring monopoly#. A second feature favoring monopoly in such industries is the marked advantage of large production in them. These industries are usually spoken of as "industries of increasing returns." This advantage is enjoyed in some degree by every enterprise, but it is gradually neutralized and limited. The need to extend an expensive physical plant to every point where customers are to be served, and the very much smaller cost per unit of delivering large amounts of water, gas, electricity, and transportation, on the same street, offers a greater inducement for one competitor to crowd out or buy out the other at a more than liberal price. Even then, larger net dividends and correspondingly larger capitalization are secured than were before possible to both companies combined. § 7. #Uniformity of products favoring monopoly#. A third feature favoring monopoly is uniformity in the quality of the furnished. It is a general truth that competition is most persistent where there is the greatest range of choice open to the customer, and consequently the most individual treatment required of the enterpriser. An artist, even a storekeeper, attracts about him a body of patrons who like his product (for the merchant's manner and method of dealing are a part of the quality of his goods), and who cannot be tempted away by slight differences in price. Rival companies in the stage of competition are seen to claim superiority for their particular goods and to improve their service in every way possible. A new telephone company, entering where a monopoly has held the field, works at once a wonderful betterment in rates, courtesy, and service. But as the product of all competitors attains the highest technical standard possible at the time, the rivalry is reduced to one of price, and it is usually a "fight to the finish." § 8. #Franchises favoring monopoly#. A fourth feature favoring monopoly in these enterprises is the necessity of making permanent and exceptional use of the public streets and alleys. If this right were granted by a general law to every citizen, this feature would be sufficiently implied in the foregoing discussion. As it would be intolerable to allow private interests to use public property in whatever way they wished, the legislative body makes special grants in such cases in view of the circumstances. Not only is the legislature (or council, or county board of commissioners, etc.) led by the economic difficulties to withhold a charter from a second company, but it may be corruptly influenced by the company already established. The knowledge of the opposition to be encountered in getting a franchise must keep competitors out, even tho monopoly prices are maintained. In view of these several features, which are so closely related that they form a common character, more or less fully shared by various industries, and especially in view of the necessity for the formal granting to them of peculiar privileges in the form of a public franchise, the public, in order to protect the general interest, is forced to undertake an exceptional control of these industries. § 9. #Various policies toward local public service industries#. Several courses are open to the public, acting in its political capacity, to retain those monopolistic advantages for the general welfare. (a) It may do nothing, trusting vainly to competition to regulate the rate, or consciously leaving the result to be worked out by the monopoly principle; this is what in most cases has been done in the past in America. (b) It may attempt, in granting the franchise, to fix near cost the charge for the service or product, so that the franchise will be worth little as private property. (c) It may leave the rate to be fixed by the monopoly principle, but charge for the franchise so much that the value of the monopoly is appropriated into the public treasury. (d) It may have public officials carry on the business, either selling the product at cost or making monopoly profits that go into the public treasury. Various combinations of these plans are followed in practice, the most common plan being the fixing of maximum rates which, with improved methods, generally become ineffective. It is difficult to fix a uniform rate that is equitable, because conditions change, and, further, because a uniform rate must be applied to all parts of the town, altho the cost of service varies greatly. It is difficult because of the limited number of competent bidders, to sell the franchise for what it is worth. There remains the policy of public ownership to secure the profits of monopoly to the public, either directly or in a diffused manner. There is no doubt that the general trend of municipal policy everywhere is toward public ownership of this type of local public service industries. § 10. #State ownership of various kinds#. The movement toward public ownership by the American states has been much less marked than that by the municipalities. The commonwealths have retired from some fields where once they were engaged in industry. Students of American history know that between the years 1830 and 1840 some states engaged largely, even wildly, in canal building, railroad construction, banking and in other enterprises. The undertaking of these industries was determined often by political and by selfish local interests, and their operation often was wasteful. A few enterprises succeeded, the most notable of these being the Erie Canal in New York. The unsuccessful ones remained worthless property in the hands of the state or were sold to private companies, as in the case of the Pennsylvania Railroad. This reckless state enterprise was a bitter lesson in public ownership, and continued for three quarters of a century to have such an effect on public opinion, that few proposals for public ownership could have a fair hearing in America, But railroads and canals are publicly owned, and more or less successfully operated, by many foreign states, as in Prussia and other German states, in Switzerland, and in the new states of Australia, and this policy is rapidly extending to other countries and to varied industries. There has been recently a greatly increased interest in forestry shown by the American states. This is especially likely to be a state enterprise wherever the forest tracts are entirely within the limits of the state, as is the case in New York and Pennsylvania which have been foremost in this work. At present at least 32 states have forestry departments. Most of the forests in Germany are either communal or state-owned. The schools, a great industry for turning out a product of public utility, are largely conducted by the American states and by local units rather than by the nation or by private enterprise. The state encourages researches in the arts and sciences, and gives technical training. A variety of minor enterprises have been undertaken by states to supply salt, phosphate, banking facilities, even some manufactures. One after another the states are adopting the "state use" system of labor in the prisons and public institutions, engaging in agriculture and manufacturing on a large scale, and using the products, amounting to millions of dollars annually, almost entirely for public purposes. § 11. #National ownership#. The national governments everywhere appear to be enlarging the field of their ownership. This policy has its roots far in the past. Some industries grow out of the political needs of government. Established as a means of communication with military outposts, the post became a convenient means of communication for merchants and other citizens and grew into a great economic institution. In most countries the telegraph is publicly owned and has been annexed to the post, to which it is very closely related in purpose. National ownership of railroads is the rule, and our policy of private ownership the great exception in the world to-day. Many persons, even some in railroad circles, believe that national ownership of railroads is sure to develop out of our present policy of regulation. The national improvements connected with rivers and harbors were first political--that is, they were for the use of the government's navy; they became, secondly, commercial--for the free use of all citizens engaged in trade; and they continue to unite these two characters. Forestry is most largely undertaken in this country by the national government, partly because some forest areas in the West extend over state boundaries, and largely because large tracts of public forest lands were still unsold at the time public attention was attracted to the subject. Since 1890, the policy of reserving great areas for forests, and picturesque districts for national parks, has developed greatly in the United States. The national forest area contained in the various forests in 20 states (not including Alaska and Porto Rico), now covers about 225,000 square miles, equal in area to five states of the size of Pennsylvania. There are, besides, fourteen large national parks, ranging in size from a few hundred acres up to over 2,140,000 acres (the area of the Yellowstone National Park), and aggregating 4,600,000 acres, nearly the size of Massachusetts or of New Jersey, besides numerous other national reservations for monuments and antiquities. In some countries mines are thought to be peculiarly fitted for national ownership and control. In the German Empire the several states own coal, salt, and other mines. Coinage and banking are everywhere looked upon as functions of sovereignty, and yet it is no more necessary for a nation to own its own mint in order to control the monetary system than for it to print the banknotes in order to regulate their issue. The American government has its own printing office. The fish commission, and the various branches of the department, coöperate with private industry in many ways. This brief survey suggests that the industries undertaken by government are both varied in nature and large in extent, altho small in proportion to the mass of private industry. § 12. #Economic basis of public ownership#. The question as to the proper limits of public ownership is one most actively debated. The movement is progressing in accordance with the principle that public ownership is economically justified wherever it secures a product or service of widespread use that would otherwise be impossible, or insures the public a better quality or a lower price. The question of public ownership is not exclusively an economic question. There are incidental problems, such as its effects on enterprise and on political integrity, with which it is not possible here to deal. In the main, however, public ownership is simply a business policy which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership (as popular education or the climatic effect of forests), the only question to answer is whether the utility is worth the cost. In the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have upon cost and service. If public officials can furnish some goods cheaper than they are furnished by private enterprise, it is because of the wide margin of monopoly profit, not because there is any magic in public ownership. The same general items of cost must be met. The first cost of the plant and the annual interest payments are much the same. Experience shows that, because of political influence and of public opinion, wages are likely to be higher under public ownership, but salaries for management lower. Public collection of dues along with taxes is an advantage not enjoyed by private companies. Several public officials sometimes share the same office and thus reduce expenses. In small towns the public electric lighting and waterworks have been operated more economically under one roof. Some items of cost may be less under public management, but on the whole, public industry probably has no advantage in these respects. Public industry does not have to meet the costs of lobbying and blackmail which are often forced upon private companies. But the greatest source of saving in public ownership is the value of monopoly privileges that, under private management, go into private pockets. The temptation of political corruption may be more insistent when a large force of men is constantly employed, and when large supplies are constantly purchased, by public officials, but the temptation is not so strong or so centralized as it is in the granting of franchises to wealthy corporations. Public industry is weakened by the absence of certain motives to excellence that are present in private business. The income of public officials not being dependent on the economy of management, the spur and motives of competitive industry are lacking. No social discovery has made individual honesty and civic virtue useless to good government. The decision in any specific case is one dependent on local conditions, and the exact limits of public ownership are not fixed. Industry is changing so rapidly that new adjustments are made every year. The main outlines of public ownership, however, are now in large part determined. Some industries do well, others ill, under public management, and between these lie many debatable cases. Waterworks and probably electric lighting, because of the comparative simplicity of their operation, are more suitable for public ownership than are gas works. No absolute line divides the one group from the other. But whatever the changes, the fact can not be ignored that the increase of public ownership is altering in manifold ways the organization of industry, and is reacting upon the production of wealth, and the distribution of incomes. [Footnote 1: See above, ch. 16, sec. 5.] [Footnote 2: See above, ch. 16, sec. 2, on the police function.] [Footnote 3: See ch. 16, secs. 3 and 4.] [Footnote 4: See above, ch. 16, sec. 5, statistics of receipts from public service enterprises.] CHAPTER 31 SOME ASPECTS OF SOCIALISM § 1. The distribution of incomes. § 2. Distribution by force and by status. § 3. Social effects of the right to transmit property. § 4. Effects of the right to inherit property. § 5. Broader social effects of inheritance. § 6. Limitations upon intestate inheritance. § 7. Some merits of competition. § 8. Wide acceptance of competition. § 9. "Economic harmonies" and discords. § 10. Competition modified by charitable distribution. § 11. Competition modified by authoritative distribution. § 12. Meanings of socialism. § 13. Philosophic socialism. § 14. Socialism in action. § 15. Origin of the radical socialist party. § 16. The two pillars of "scientific" socialism. § 17. Aspects of the materialistic philosophy of history. § 18. Utopian nature of "scientific" socialism. § 19. Its unreal and negative character. § 20. Revisionism and opportunism in the socialist party. § 21. Alluring claims of party-socialism. § 22. Growth and nature of the socialist vote. § 23. Economic legislation and the political parties. § 1. #The distribution of incomes#. The great economic progress of the past two centuries has been mainly in lines of technical production. The developing natural sciences and mechanic arts have given men a marvelously increased control over forces and materials. This has multiplied the quantities of goods of most kinds at the disposal of men, collectively considered. All men, with rare exceptions, have been gainers; but the increased production has been very unequally distributed among the members of the community. More and more insistently the plea and the demand have been made for better methods of distribution that will give to the masses of the people a larger share of the goods produced. Production is largely a problem of the technical arts; distribution is a problem of social economy. Two aspects of distribution may be distinguished: functional distribution is the attribution of value (yields) to wealth and labor considered impersonally, as groups of productive agents; and personal distribution is the actual movement of incomes into the control of persons.[1] Personal incomes, whether monetary, real, or psychic, are the sum of a number of elements. Some parts are due to services performed by the person himself. When one combs his own hair he is performing for himself a service that is a part of his income. Benjamin Franklin said it was better to teach a boy to shave himself than to give him a thousand dollars with which to pay barbers for a life-time. Other parts of income are the uses and fruits of legally controlled wealth; chance finds, as gifts of value or lost and abandoned goods; goods assigned to one by authority; wealth inherited; illegal gains by robbery; goods secured on credit; gifts either of things or of services. The many methods by which incomes are distributed to the persons making up a society may be grouped in the following five general classes: force, status, charity, competition, and authority. These will be discussed in due order. § 2. #Distribution by force and by status.# Distribution by force is the most primitive mode of distribution. The stronger takes from the weaker. Forceful distribution still persists in the form of crime, and if we include fraud within the term it still affects an enormous amount of income. The lawless take whatever they can, and the supporters and officers of the law do what they can to check the acts. Slavery is distribution by force, as is the levying of war indemnities from a conquered people. Distribution may be by status, or set rules and customs. In this case men receive incomes that are independent of their efforts and outside of their control. Distribution by status is guided neither by the personal merit of the recipients nor by the value of their direct services, but the merits and acts of men not living. Feudal society was built on status. Men were born to certain privileges and positions; they inherited property which could neither be bought nor sold; they followed trades which could rarely be entered by any outside of favored families. Caste in India and in other Oriental countries regulates a large part of the life of the people. This method still prevails to a greater extent in our society than is usually recognized.[2] By public opinion and by prejudice, status is still maintained in respect to the choice of occupations even where the law has formally abolished it, as is seen in modern race problems, in western countries to-day inheritance of property is the main legal form of status and it shades off into other forms of distribution. Private property must find its justification in social expediency.[3] There is no feature of it that is more questioned than is the right of inheritance. § 3. #Social effects of the right to transmit property.# The right to transmit property by inheritance or by bequest may be judged with reference to its effects upon the giver, upon the receiver, and upon society at large. It is well to take these three points of view. The right to dispose of property either during life or at death has undoubtedly in many ways a good effect upon the character of men. It stimulates the husband and father to provide for his wife and children, and spurs others to continued economic activity. There is a joy in giving, a joy in the power to bestow one's wealth upon those one loves, or as one pleases. Much of the existing wealth probably never would have been created if men had not had this right. But there is a limit to the working of this motive, and other motives often are more effective. Many a man after gaining a competence continues to work for love of wealth and power in his own lifetime, as the miser continues to toil for love of gold. When men without families die wealthy, when men not having the slightest interest in their nearest relatives labor till their dying days to amass wealth, it is evident that the right to bequeath property has little to do with their efforts. Love of accumulation and love of power in these cases supply the motives. A more limited liberty to dispose of property at death might still suffice, therefore, to call out the greater part of the efforts now made to accumulate property. § 4. #Effects of the right to inherit property#. That the effects upon the receiver of the property are good is somewhat more doubtful. It is true that children reared in families of large incomes would be great sufferers if plunged into poverty at the death of their parents. There is much social justification for permitting families to maintain an accustomed standard of comfort. Few would deny that provision by parents to provide education and opportunity for their children is commendable and desirable. But the evil effects of waiting for dead men's shoes are proverbial. Many a boy's greatest curse has been his father's fortune. Many a man of native ability waits idly for fortune to come and lets opportunities for self-help slip by unheeded. The world often exclaims over the failure of the sons of noted men to achieve great things, for, despite confusing evidence, men still have faith in biologic heredity. A too easy fortune saps ambition and relaxes energy; and thus rich men's sons, if not most carefully and wisely trained, are often made paupers in spirit, while the self-made fathers think their boys have better opportunities than they themselves enjoyed. The greater social loss is not the dissipated fortunes, but the ruined characters. Andrew Carnegie said that it would be a good thing if every boy had to start in poverty and make his own way. Cecil Rhodes recorded in his will his contempt for the idle, expectant heir. § 5. #Broader social effects of inheritance#. Inheritance has good effects for the community insofar as it helps to secure efficient management of wealth. If the son or relative has been in business with the deceased, there is a reason that he should inherit the property, and his succession to it makes the least disturbance to existing business conditions. This consideration, however, has less weight as the corporate form of organization becomes well nigh universal in "big business." Every profligate son, every incompetent heir, is an argument against the inheritance of property. It is to society's interest that no able-bodied member should stand idle. Every child should have presented to him the motive to use his powers in useful ways. Moreover, many feel that the great fortunes now accumulating through successive generations in the hands of a few families are a danger to our free society, even if these fortunes should continue to be well administered. There is a widespread feeling that the heredity of great wealth is, like the heredity of political power, out of harmony with the democratic spirit. Democracy wishes to see men and individuals put to the test, not profiting forever by the deeds of their forebears. This feeling is shared by those who cannot be charged with radical prejudices. It was startling when a conservative body of lawyers meeting in their state association in Illinois, passed a resolution favoring moderate limits to inherited fortunes. Almost every year sees bills of this purport introduced in the legislatures and in Congress. Probably no one of many current radical proposals is more widely favored than this, among men of otherwise conservative social views. Tho sum most often mentioned as the proper limit is $1,000,000, but in every case it is a sum larger than the fortune of the person speaking.[4] § 6. #Limitations upon intestate inheritance#. A proposal less crude and with strong reasons of social expediency in its favor is to limit the right of intestate inheritance to persons that have been in essential economic and social relations with the deceased. The foregoing considerations show that the case for the right of gift in the lifetime of the giver is strongest; that for the right of bequest comes next. The man who has acquired wealth may usually be trusted to decide who bear to him close social or personal relations, and to say whose lives have in a measure furnished the motives of his activity. But the right of intestate inheritance by distant relatives is one that stands on weak social foundations. It is a survival from more patriarchal conditions when, in the large family, or clan, the bond of unity was very strong. A truer test to-day of the proper limits for intestate inheritance is whether the wish to provide for these heirs has furnished the motive for the producing and preserving of the wealth. The claims of those nearest in blood and closest in personal relations are strongest. Family affection and friendship form the strongest of social ties, and it is socially expedient to cultivate them. Motives for abstinence and industry must be strengthened. But the same test shows that the zealous regard of the American law for the rights of distant kinsmen in foreign lands, or in distant quarters of this country, is irrational, and is unjust to the community where the fortune was made. Public opinion tends strongly toward this idea. Property rights as they exist are clearly seen not to be a product of pure reason. They are the result of social evolution, of historical accidents, of class legislation, and in many cases, of selfish interests. Changing social conditions and ideas are bringing many changes in law, and further changes must be expected to come, which will reduce the influence of inheritance of property in fostering status in distribution. Especially important are the increasing application of the progressive principle to incomes and inheritance,[5] and the development of insurance to put family savings into the form of terminable annuities instead of capital sums.[6] § 7. #Some merits of competition#. The dominant method of distribution to-day is that of competition.[7] This is not a mere accident, but is a resultant of unending experimentation with different methods of distribution carried on since the beginning of human society. A method of distribution had to be found and retained that would work under the conditions of human nature at each stage of social progress; and competition, however imperfectly, has worked. It is evident from the voices of praise and of blame that competition has its good and its bad aspects. Let us observe first the good ones. Competition acts to distribute the working force over the field of industry wherever it is most needed. The remarkable (tho far from perfect) adjustment of industry to the needs of each neighborhood is brought about by individual motives, not by centralized authority. Wherever consumers settle, stores are started and factories are built. Wherever work is to be done, men come in about the right number to do it. It is not mere chance that produces this result. The available skill is adjusted to varying needs by the delicate measurement of the market rate of wages. Two-sided competition gives a definite rule of price--the only definite impersonal rule. The theoretical competitive price is the standard to which things tend constantly to adjust themselves in an open market.[8] Competition is an essentially economic method as contrasted with the legal and personal methods above and later described, because it is impersonal and reducible to a rule of value. Distribution under competition is made, not with reference to abstract ethical principles or to personal affection, but to the value of the product. Each worker strives to do what will bring him the largest return, and the price others pay expresses their estimates of the service in that market. Each seeking his own interest is led to make himself more valuable to others. In most cases and in large measure, competition stimulates men to sacrifice, to invention, to preparation; thus is zeal animated and are efforts sustained. In the economic realm, as is now seen to be the case in the biologic realm, competition of some effective kind is an indispensable condition not only of progress but of life without degeneration. Monopoly, as we have noted, never has ceased to rest under the ban of Anglo-Saxon law, and therefore to exemplify compulsory, as opposed to competitive distribution. A striking feature of the competitive method is its decentralization. Each helps to value the economic services of each. If one pays more for the services of the singer than for those of the cook, it is not because one would rather listen to the singing than to eat when starving, but because by apportioning one's income one can get the singing and the eating too. In the existing circumstances, the singer's services seem to the music lover to be worth paying for, and he backs his opinion with his money. So each is measuring the services of all others, and all are valuing the services of each. It is distribution by valuation, and it is valuation by democracy. § 8. #Wide acceptance of competition.# On purely abstract and _a priori_ grounds competition cannot be accorded an ethical sanction, as is sometimes assumed. But because of the qualities above outlined, and because it meets in large measure the pragmatic tests, the competitive rule of distribution appeals to all men (even to those who denounce it) as having in many of its applications a moral character, as compared with the other possible methods of distribution. Indeed, the competitive rule is the only rule that does not involve either personal and arbitrary judgment (force, charity, and authority) or status. Even such measure of justification as is found in status (as in property and inheritance laws) is traceable, in the long run, to competition. The case for a limited application of status is based upon its results in stimulating motives of effort and accumulation.[9] When the rule of authority is applied to-day in the large field of public regulation where _actual_ competition has become impossible, almost the only guiding rule is _hypothetical_ competition. The just rate is felt to be that which in the long run _would be_ just sufficient to afford "normal" incomes to labor and to capital, to call forth the necessary effort, skill, judgment, and forethought, if competition _were_ at work, as it is not.[10] Only this rule of hypothetical competition redeems these public rates from arbitrariness, favoritism, and force. § 9. #"Economic harmonies" and discords.# Every truth in political philosophy finds some exaggerated expression. Competition, as compared with status and custom, has some notable merits; and when the eighteenth century was throwing off some of the burdens inherited from the more static Middle Ages, competition appeared to be a panacea for all the ills of society.[11] The belief in the benefits of competition and the virtues of economic freedom found its extremist expression in the first half of the nineteenth century in the doctrine of "the economic harmonies." According to this, if men are left entirely free to do as their interests dictate, the highest efficiency and best results for all will follow; the economic interests of all men are in harmony. Corresponding with this doctrine is the economic policy of extreme _laissez faire._ But experience has shown that the economic interests of the individuals in a community are only partly very rarely are they wholly, in harmony. There are three species of competition in every market: that between sellers, that between buyers, and that between sellers on the one hand and buyers on the other.[12] If at any point free competition is hindered, even the disciple of economic harmony must, from the very nature of his doctrine, expect a discordant result. In reality competition is rarely quite complete on both sides, and when it is not the weak usually suffer. Men do not start with fair opportunities. All that they may be entitled to have under competition may be so little that social sympathy seeks to better the results; hence poor relief, public and private. Society as a whole has an interest in the outcome of the individual's economic struggle. It cannot see men starving or driven into crime. Moreover, when competition is the rule of valuation, it, like all valuations, partakes of the quality of those choosing--wise or foolish, good or evil.[13] And tho competition is the rule of democracy in economics, yet democracy cannot permit the economic vote of a vicious or of a foolish group to stand, where the goods, services, and prices resulting offend the prevailing public judgment and social conscience. § 10. #Competition modified by charitable distribution.# In practice the competitive method of distribution always has been modified or supplemented in varying degrees by the other methods. Important among these is charitable distribution. Charitable is here used in its original sense, as synonymous with benevolence and affection. First is parental love, the root and type of all the forms of charity. There is a complete lack of economic equivalence in the relation of parent and child in early years. The helpless infant does nothing for the parent, the parent gives all and does all for the child. Gradually, however, the balance is regained; as the years go on, not only do children repay in affection but in many cases they repay in material ways. Especially in the factory districts and on the farm the child sooner or later begins to reestablish the balance, becomes a worker, and contributes to the family income as much as the cost of his support, and finally more. A student of modern English town life has traced the curve of poverty traversed by the average poor family as the children are first an economic burden, and later an aid to their parents. In the middle, or propertied, classes the children do not for many years cease to be a financial burden to their parents, and in most eases the economic balance is never reestablished. It is not to the parents, but to the succeeding generation, that the debt is tardily paid. Friendship widens the range of generosity and multiplies the mass of gifts. Broad sentiments of humanity lead to gifts outside the range of personal affection and personal interest, to the beggar on the street, to institutions devoted to charity. In New York state alone a sum of more than $20,000,000 a year is expended by institutional charities. About $512,000,000 in public benefactions were given in the United States by private donors in the year 1915, and in this respect that year was not exceptional. An enormous and increasing body of property is thus being year by year socialized, largely through bequests from persons without direct heirs. Great public subscriptions to the sufferers from great disasters, such as the Irish and the Indian famines, the Chicago fire, the Galveston flood, the San Francisco earthquake, the great European war, bespeak a widening generosity. Religion impels to the building of churches, to the support of priests, missions, and manifold religious undertakings. Charity in this connection is the expression of a sentiment that varies from the most intense personal, affection to the broadest and most general humanitarian sentiment. § 11. #Competition modified by authoritative distribution.# Authority is, after force, the oldest and was the earliest widely operative method of distribution. It shades into force, status, and charity in manifold ways, but it is essentially the assignment of a common, or social, income to individuals by some person or persons chosen, or accepted, by the society to perform this function. Thus it may be distinguished from force, which takes for itself what belongs to another; and from charity, which gives to another what belongs to one's self; and from status, which transmits claims to income from one generation to another by a fixed impersonal rule, not by a personal judgment in the particular case. Authoritative distribution is the dominant method in patriarchal tribes, in communal societies, and in monastic and other religious orders. Each person works at what he is commanded to do, and some one in authority (patriarch, head of the community, father of the monastic order) portions out the tasks and the rewards. In the family this rule largely prevails, and even after the children have come to years of discretion they not infrequently accept, from habit or affection, the will of the parents, and give up their entire wages to receive back a portion. The method of charitable distribution while the child is young gradually changes to authoritative distribution after the child becomes a worker. The untrained and indocile youth, however, is made the subject of compulsory distribution. The collection and distribution of taxes is by public authority. No attempt is made to give back an exact equivalent to each taxpayer. The money is taken and spent by authority. The new forms, or at least the new extensions, of taxation, especially of incomes and inheritances at progressive rates, are very important examples of authoritative distribution.[14] The courts sometimes find themselves obliged to apply the method of authoritative distribution, altho they do it unwillingly. They try to confine their efforts to interpreting the contracts men have voluntarily entered into, and they avoid, so far as possible, the making of contracts or the fixing of rates. Authoritative distribution is exemplified in the work of many commissions appointed by law to fix rates or settle disputes, such as boards of conciliation and arbitration and railway commissions. § 12. #Meanings of socialism.# Our reason for leaving to the last the discussion of _authority_ as a method of distribution is not that it appeared last in historical development, but that it now is the most strongly advocated as an alternative of competition. One of the most striking developments of opinion in the nineteenth century was that favoring an increasing use of authority in distribution. This was meant not merely to supplement and modify competition, but to displace it completely, or (in the more moderate program) in large part. This opinion, or plan, has appeared under a variety of names, the main ones being communism, collectivism, social-democracy, and socialism, of which the last name has just now the greatest vogue. Socialism is a word of manifold meanings no one of which is generally accepted. Discussion is therefore often a Babel of tongues. Socialism designates (1) a social[15] philosophy (2) a mode of social action, (3) a particular political party. There is thus philosophic, active, and partisan socialism. Each of these may be taken either in an absolute or in a more or less relative sense. The first meaning is the most fundamental, the second less so, and the last the least fundamental, but just now the most frequently used. § 13. #Philosophic socialism.# As a philosophy socialism is related to social just as individualism is related to individual. Socialism is faith in the group motive and group action rather than in self-interest and competitive action. Instead of social philosophy we may say social faith, or social ideals. This faith may be absolute, or radical, to the rejection of all economic competition; or it may be moderate, and leave more or less place for self-interest and competition. Every man of conscience and of ideals has moods that are socialistic (in this sense) and dreams of a world without toil, competition, or poverty. This social philosophy has taken form as "Christian Socialism" among men of strong religious natures, in various religious denominations. Great secular dreamers--Plato in his "Republic," Sir Thomas More, in his "Utopia," Edward Bellamy, in "Looking Backward," William Morris, in "News from Nowhere," and others--have painted beautiful pictures of ideal economic states from which all of the great evils and problems of our society have been banished. § 14. #Socialism in action.# Active socialism is group action in economic affairs. This may be by private voluntary groups, as a club, church, or trade union, or by a public group, or political unit of government, which has therefore a compulsory character. The radical kind of active socialism would be the ownership by government of all the means of production and the conduct of all business, assigning men, by authority, to particular work and granting them such incomes as the established authority thought they deserved. This kind exists nowhere. A moderate kind of active socialism is represented by each separate case of public ownership or industry. Even public regulation by authority, of the many kinds described in this volume, is touched with a quality of active socialism. In this sense there can be more or less of active socialism in a community; a state may be more or less socialized in its economic aspects. An English Chancellor of the Exchequer declared in the last decade of the nineteenth century, "We are all socialists now." The ever-increasing sphere of the state[16] gives to that statement to-day a larger, fuller meaning than when it was uttered. Socialism in action is of course always the expression of a more or less socialistic philosophy shared by a majority of the people. This great recent movement of socialization in industry is the expression not of a radical but of a moderate social philosophy. It does not look to the abolition, but only to the modification and limitation in some directions, of private property and of competitive industry. The spirit of this movement is opportunist, or experimental. It is ready to try public action, but recognizes that it has difficulties and limitations. The ultra-radical and the ultra-conservative alike declare that these measures "logically" lead on to the complete destruction of private property. But men find that they can warm their hands without being "logically" compelled to thrust them into the fire, and that they can quench their thirst without a growing resolution to drink the well dry. When this governmental activity has proceeded somewhat extensively and systematically in cities, as in Great Britain, it is called municipal socialism; and in states, as in Germany, it is called state socialism. § 15. #Origin of the radical socialist party.# Socialism in the partizan sense is an actual political organization. Both in Europe and in America such organizations have been designated as "social-democratic," "socialist labor," or "labor" parties. Socialism in this sense of a party organization, or movement, is very different from a social philosophy. In its partizan phase socialism exhibits all of the baffling variability and elusiveness that it does in its other aspects. However, in its printed program the socialist party sets forth both a socialist philosophy and an ideal of active socialism in their most radical forms. Modern political socialism traces its origin directly to the most radical of German social philosophers, Marx, Engels, and Lassalle. Karl Marx (1818-1883), preeminently the philosophic leader of the movement, sought to give a solider foundation of reason to the somewhat romantic socialist philosophy current in his day. His own doctrine, first set forth connectedly[17] in the Communist Manifesto in 1848, he called Communism. This has come to be called by his followers, "scientific socialism." "Scientific" was meant to emphasize the contrast with "Utopian" socialism, as Marx and Engels somewhat scornfully characterized the older communist philosophy, romances of the ideal state, and attempts to found and conduct small communistic states. § 16. #The two pillars of "scientific" socialism.# Scientific communism was to be based upon two immovable pillars. The one was "the labor theory of value," by which all profits and incomes from investment were shown to be robbery of the wage-workers.[18] "Capital," that is, the ownership of the means of production, was declared to be the instrument of this "exploitation." The other foundation stone was "the materialistic philosophy of history," that is, the explanation of all the intellectual, cultural, and political changes of mankind from the side of the material economic conditions as causes. As Engels expressed it, "The pervading thought ... that the economic production with the social organization of each historical epoch necessarily resulting therefrom forms the basis of the political and intellectual history of this epoch." This doctrine denies that, in an equally valid sense, biological changes in brain, and cultural changes in science, arts, and education, cause the mechanical inventions and improved processes and thus alter the form bf economic production. § 17. #Aspects of the materialistic philosophy of history#. Marx's general formula of economic materialism had three minor propositions or corollaries: (a) The doctrine of the _class conflict_; all history is a record of the class struggle between those who have property, the ruling classes within the nations, and those who have not, the oppressed working class, (a conception of history blind to most of the great international conflicts). The class conflict was declared to be more sharply marked and bitter than ever before; "the entire human society more and more divides itself into two great hostile camps, into two great conflicting classes, _bourgeoisie_ and proletariate." (b) The doctrine of _increasing misery_; the conditions before described must cause the steadily increasing degradation of the masses. (c) The _catastrophic theory_; the final and inevitable result of this movement must be a revolution, when the downtrodden workers will throw off their chains and expropriate the expropriators. There is no doubt that Marx, when he first formulated this philosophy, believed that such a revolution, most violent in nature, would occur within a few years. § 18. #Utopian nature of "scientific" socialism#. The term "scientific" set in contrast with "utopian" was meant to imply that the doctrine of Marx was not "utopian" (a word which had come to mean fanciful and impracticable). Marx had a contempt for the romances of the ideal state and for what he deemed to be the unfounded speculations of earlier prophets of communism. But utopian (from _utopia_, Greek for no place) means nonexistent, and Marxian socialism surely was that. "Experimental" or "actually at work" would have been a more logical contrast with "utopian." Marx and his followers likewise had a contempt for the communistic experiments, or settlements and colonies, which by the scores had been started and had failed, bringing discredit upon all communistic proposals. The beauty of "scientific" socialism was that it never could be tried on a small scale--or tried at all until a whole nation adopted it. The old time "scientific" socialist had a lofty scorn for any less dogmatic philosophy than his own or for any less sweeping social change than that he expected. Moderate social reform to him was but temporizing; indeed, it was evil, inasmuch as it helped to postpone the inevitable, but in the end, beneficent catastrophe of the social revolution. A step-by-step movement toward socialism, state socialism,[19] even of a pretty sweeping character, was, to the old-time Marxians, not really socialism at all. A valid reason for this attitude was found in the extremely limited manhood suffrage and in the aristocratic class government of most European countries, especially of Germany; so that, as the party socialists saw it, multiplying state enterprises but increased the power of the ruling, and eventually of the militarist, class. The social-democratic leaders felt that until they themselves were in power, the growth of "state socialism" would be a calamity for the nation. The events of 1914 may make our judgment tolerant toward their feeling. § 19. #Its unreal and negative character.# The so-called "scientific" socialism had, therefore, a peculiarly unscientific spirit; for, in a modern sense, science implies a patient search for truth, not a sudden revelation; a constant testing of opinions by observation and experiment, not a dogmatic conviction that refuses the test of reality. "Scientific" socialists talked much (and still talk much) of the "evolution" of social institutions; but they refused to admit the essential condition for institutional evolution, the competitive trial on a small scale, of a new form of economic organization to prove its fitness to survive. Indeed, it had been tried on a small scale many times, and had always failed in a brief time. Lincoln said that a man's legs ought to be long enough to reach to the ground; but "scientific" socialism was not built on that plan. To be sure it contained many elements of truth, but these were so distorted that the result was a caricature of history, of philosophy, of economics, and of prophecy. The most important influence of radical socialism has been exerted through negative criticism. It has performed the function of a party in opposition, relentlessly hunting out and pointing out the defects of existing institutions, arousing the smugly contented, and, by its very recklessness and bitterness, inspiring at times a wholesome fear of more revolutionary evils. This has been a real service to the cause of moderate and constructive reform. § 20. #Revisionism and opportunism in the socialist party#. Most men have always agreed in an adverse judgment of the claims of "scientific" socialism. The criticisms have been admitted in part even by the intellectual leaders among the Social-democrats. They lost some of their fantastic illusions, they tempered some of their exaggerated claims of oracular inspiration. "Revisionism," the socialist higher criticism, became influential in the party. Whenever the party gained any success at the polls, the socialists in public office and the party leaders found it necessary to "do something" immediately. The rank and file might be willing to talk of the millennium, but preferred to take it in instalments instead of waiting for it to come some centuries after they were dead. And so the socialist party, as fast as it gained any practical power, became "opportunist" and worked for moderate practical reforms. The leaders did this with many misgivings lest the masses might become so reconciled to the present order that they would refuse to rise in revolt. In that case the revolution never could happen (altho it was inevitable). As the party socialists did more to improve the present, they talked less of the distant future state. They ceased their criticisms of "mere temporizing" "_bourgeois_" reforms, and began to claim these as the achievements of the socialist party. They began to write of the remarkable growth of social legislation in Europe and America in the past half century under such titles of "socialism in practice" and "socialists at work." This was despite the fact that these reforms were all brought about by governments in which the socialist party had no part whatever or was a well-nigh insignificant minority. This bald sophistry, or self-deception, was easily possible by confusing the word "socialist" as relating to the abstract principle of social action, with socialist as applied to their own party organization. It is as if the Republican party in the United States were to claim as its own all the works of the republican spirit and principles of government in the world from the party's organization to the present time. § 21. #Alluring claims of party socialism.# In thus changing the emphasis of its claims, the socialist party has been somewhat put to it to retain any clear distinction between itself and other parties of social reform. It has done this however by continuing to proclaim the _ultimate_ desirability of reorganizing all society without leaving any productive wealth in private hands. It has had no misgivings prompted by the experience of the world. Its case continues to be far the strongest in its negative aspect, the exposure of the evils in present society. To many natures the claims of the socialist party have all the allurements of patent medicine advertisements. These describe the symptoms so exactly and promise so positively to cure the disease, that they are irresistible--especially when the regular physicians keep insisting that the only way to get well is to take baths and exercise, and stop the use of whisky and tobacco. Those attracted to the socialist party by its sweeping claims are of two main types. The one is the low-paid industrial wage-worker; the other is the sympathetic person of education or of wealth (or of both), who has become suddenly aroused to the misery in our industrial order. To both of these types, feeling intensely on the subject, the socialist party appeals as the only party with promises sweeping enough to be attractive. The one becomes the proletarian, the other the intellectual, the one becomes the workshop, the other the parlor-socialist. Many of the latter type are persons overburdened either with unearned inherited wealth or with an undigested education. Many of them, having enjoyed for a time the interesting experience of radical thought and of bohemianism, come later to more moderate social opinions. § 22. #Growth and nature of the socialist vote.# In 1912 the socialist party in the United States polled 900,000 votes in the presidential election. The socialist parties in the various lands have almost steadily grown, and now cast votes numbering in the aggregate six to ten million (as variously estimated, the name socialist being elastic). The socialist parties may be expected to continue growing. They will ultimately gather within their folds most of the ultra-discontented, and others that are not able to find an alternative economic philosophy and a plan that inspire their hopes. But the socialist party vote is made up of men of many shades of opinion, a large number of whom hold only the mildest sort of socialistic philosophy. Not many of the more than 3,000,000 social-democratic voters in Germany before the war were members of the regular party organization; but they supported the party as the one unequivocal way to declare themselves against militarism and undemocratic class-government. In the United States only about one tenth of the socialistic party voters have been enrolled as members of the party. § 23. #Economic legislation and the political parties.# This floating socialist vote is now so large that it is eagerly sought by candidates of the older parties. These independent voters care little for the radical and distant tenets of the socialist party leaders, and these, to attract wider support, are forced to place increasing stress upon immediate and moderate reforms. On the other hand, men of larger qualities of leadership in the older parties are constantly adopting and advancing pending measures of social reform. Where this is not done the socialist party tends more quickly to develop into the one powerful party of protest and of popular aspiration, receiving support from many elements of the middle and small propertied classes and from non-radical wageworkers. This movement from both sides is leaving less noticeable the contrast between the socialist party and other parties claiming to be "progressive" or "forward looking." The strongest allies of the more radical communistic faction of the socialist party are those members of the conservative parties who fail to recognize the need of humane legislation, who irritate by their unsympathetic utterances, and who unduly postpone by their powerful opposition the gradual and healthful unfolding of the social spirit, energy, and capacity of the nation. The greatest problem of social and economic legislation for the next generation is to determine how far, and how, the principle of authority may wisely be substituted for the principle of competition in distribution. [Footnote 1: Distribution as a problem of incomes is not to be confused with distribution of physical goods by transportation (as on the railroads) or by commercial agencies transferring goods from producer to consumer (as in coöperative distribution). Functional distribution is the prime subject of the theory of value in Vol. I (e.g., usance, value of labor, time-preference, profits), a study of which is prerequisite to an intelligent study of the problems of personal distribution.] [Footnote 2: See Vol. I, pp. 190, 223; and above, ch. 2, secs. 11-13.] [Footnote 3: See Vol. I, pp. 248-255, 297-298, 406, 408, 415-418, 480-481, 483-484: also Vol. II, pp. 22-23, 146-148, 161-162, 178-180, 283, and various passages in the chapters of this Part.] [Footnote 4: See above, ch. 2, sec. 7, on limitations upon bequest and inheritance.] [Footnote 5: See ch. 18.] [Footnote 6: See ch. 12, sec. 14.] [Footnote 7: See ch. 2, sec. 10.] [Footnote 8: See Vol. I, pp. 54 and 66; also pp. 504 507 in an organic theory of value.] [Footnote 9: See above, sec. 2, note 3.] [Footnote 10: Compare, e.g., portions of chs. 9, 15, 20, 21, 27; and 29, see. 17.] [Footnote 11: See ch. 2, sees. 11-13.] [Footnote 12: See Vol. I, p. 75.] [Footnote 13: See, e.g., Vol. I, pp. 25, 71, 205, 479, 509, 511, 513.] [Footnote 14: See above, ch. 18.] [Footnote 15: See Vol. I, p. 6, on "social" and the social sciences.] [Footnote 16: See e.g., ch. 9, secs. 2, 10; ch. 11, secs. 7, 8; ch. 16, secs. 3, 4, 12; chs. 18, 21, 22, 23, 27, 29, and 30.] [Footnote 17: See Vol. I, p. 502, on communism and value theory.] [Footnote 18: See Vol. I, pp. 210, 228, 502 on the labor-theory of value.] [Footnote 19: See above, sec. 14.] INDEX Accident insurance, Agricultural credit, Agricultural, decay, economics, problems of, prices, fall of, Agricultural, and rural population, Agriculture and crises, Agriculture, exhaustion of the soil, medieval, number in, the new, Aldrich report, Senator, plan, American Federation of Labor, Appreciation and interest, Arbitration, voluntary, compulsory, Assessment insurance, Assessment of taxes, Authoritative distribution, B Balance of merchandise, Balance of trade argument, Bank, deposits as investments, notes, restriction act, Banking, in the U.S., before 1914, Banks, functions of, in U.S., taxes on, Bellamy, Edward, Bills of exchange, Bimetallism, Bonds, taxation of, Bowley, statistician, Boycott, Building and loan associations, Business cycle, C California Fruit Exchange, Canadian Industrial Disputes Act, Canals, Capital, Capitalistic monopoly, Charitable distribution, Capitalization theory of rises, Charity, and control of vice, Child-labor, Christian socialism, City growth, Clark, John B., Clay, Henry, Clayton Act, and farmers, Cleveland, Grover, Closed shop, see Open shop Coal, Coinage on governmental account, Collective bargaining, Combination, Combinations, industrial, Common law, on monopoly, Comparative advantages, doctrine of, Compensated gold dollar, Compensation, for accidents, Competition among employers, among workers, of railroads, and monopoly, as regulative principle, merits of, see also Monopoly Competitive system, Compulsory insurance, economy of, Consolidation, of railroads, Consumers' League, Contributory principle in insurance, Coöperation, producers', consumers', among farmers, Corporation taxation, difficulty of, Corporations, Costs of production, and the tariff, Crises, and industrial depressions, and unemployment, Custom, D Davies, Joseph E., Deferred payments, standard of, Deposits, bank, Debts, public, Dingley Act, Discrimination, railroad, Displacement theory of immigration, Distribution of incomes, Doctrine of comparative advantages, Dollar, Dynamic conditions, E Economic, harmonies, problems, system, the present, Emerson's premium plan, Employers, and immigration, Employment offices, Engels, Friederich, Erdman act, Eugenics, F Factory conditions, Fair competition, see also Unfair practices Fairchild, H.P., Farm, stock, raw materials, and factory, loans, Farmer's income, life, Farming, commercial, capitalistic, diversified, intensive, Farms, area, woodlots, equipment, in U.S., size of, and railroads, Federal Industrial Commission, Federal legislation against monopoly, Federal Reserve Act, Federal Rural Credits Act, Federal taxation, Federal Trade Commission Act, Fiat money, Finance, public, Food prices, supply, Foreign, banking, exchange, trade, Forestry, Forests, Fractional coins, Franchises, railroad, for public utilities, Free trade, see also Protective tariff G Gambling, uneconomic character of, Gantt's premium plan, Gardner Land Bank Act, Garfield, James A., Ghent, unemployment insurance, General property tax, see Property George, Henry, Glass-Owen bill, Glut theories of crises, Gold-exchange standard, Gold, production, standard, defectiveness of, Gold-using countries, Goldenweiser, E.A., Governmental aid to railroads, Graduated taxation, Graduation principle, Greenbacks, Gresham's law, H Hadley, A.T., Halsey's premium plan, Hamilton, Alexander, Hancock, Gen. Winfield Scott, Harrison, Benjamin, Hayes, Rutherford B., Home market argument, Housing problem, Hours and wages, public regulation of, I Immigrants, and organized labor, Immigration, and low wages, and population, economic aspects of, and wages, and farming, Imports into the U.S. chart, Income, taxation, federal, taxes, Independent treasury, Index numbers, chart, Industrial revenues of government, remuneration, methods of, monopoly, problem of, trust, nature of growth, depressions, see Crises Infant industry argument, Inheritance, taxes, limitations of, Interest rate, and deferred payments, and prices, in crises, Insurance, principles of, companies, taxes on, against unemployment, Internal revenue, International exchange, equation of, International trade, Interstate Commerce Act, Invalidity pensions, Investment banking, J Jackson, Andrew, Jenks, J.W., Justice in taxation, K Kemmerer, E.W., Knights of Labor, L Labor, legislation, and social legislation, exchanges, see Employment offices Laissez-faire, Land, taxation, reform of, banks, Large production, in public utilities, Large industry, Lassalle, Ferdinand, Leclaire, profit sharing, Legal tender, Loans, governmental, Lump of labor notion, M McKinley Act, McKinley, William, Market, public, Materialistic philosophy, Marx, Karl, Mediation, Mercantilism, Merchandise, imports and exports, Militarism, and population, Military power, maximum, Mill, J.S., Minimum wage, Mitchell, Wesley C., Monetary economy, system, theory of crises, Money, nature, use, and coinage, value of, quantity theory, per capita circulation, fiduciary, commodity, Monopolistic nature of protection, Monopoly, and labor organization, in railroads, industrial, prices, public policy in respect to, in public utilities, Moody, John, Moral judgments of monopoly, More, Sir Thomas, Morris, William, Mortality table for insurance, Mortgage taxation, Municipal ownership, N National banks, ownership, National Monetary Commission, Negro problem, Natural agents, and monopoly, Newlands act, O Old-age pensions, Open shop, Opportunism, Organized labor, and legislation, Ownership of farms, P Paper money, Par of exchange, Paradox of value, Payne-Aldrich tariff, Personal taxes, Picketing, Piece work, Plato, Police state, Political, money, aspects of labor, aspect of railroads, Population, agricultural and rural, and immigration, Postal savings, Power, Precious metals as money, Premium plans, Price, standard, common market, Prices, general level, changes in, rising, and international trade, and monopoly, Profit sharing, Profits from monopoly, Progressive taxes, see graduation, Promoters of monopoly, Property, private, taxes on, tax on, concept, Property tax, general, Protection, "true principle" of, Protective, tariff, policy of, tariffs, prevalence of, railroad rates, Public finance, view of trade unions, and labor legislation, inspection, ownership, Public utility commissions, Public utilities, monopolistic nature of, Q Quantity theory of money, R Race problems, Railroad mileage, building, problem, commissions, Resources, material, of the nation, Reserve, cities, plan of insurance, Reserves, bank, against notes, against deposits, Restraint of trade, Revenue tariff, Revisionism, Ricardo, David, Rich man's panic, Ripley, W.Z., Roads, Roberts, Peter, Roosevelt, Theodore, Root, Elihu, Rowan's premium plan, Rural, definition, exodus, S Saturation point of money, Saving, and investment, Savings, banks, deposits, insurance assets as, "Scientific" socialism, Seasonal fluctuations, and unemployment, Seigniorage, charge, Seligman, E.R.A., Sherman Anti-trust law, Shifting and incidence, of insurance premiums, Shorter working day, Sickness, insurance against, Single tax, Smith Adam, Social, legislation, protective policy of immigration, agricultural policy, effects of inheritance, Social insurance, by trade unions, Social utility, Social welfare, in taxation, and shorter working day, Socialism, some aspects of, meanings of, philosophic, active, Marxian, political, "scientific", Socialist, party, vote, Standard money, defined, see also Deferred payments, State, sphere of, insurance, ownership, Status, Strike, right to, Strikes, T Tabular standard, Taft, William Howard, Tariff, changes and crises, and wages, and unemployment, reductions, harm of, board, a permanent, history, American, rates, for revenue, "true principle" of, "competitive principle" of, and business depressions, Task work, Taxation, objects and principles of, revenues from, forms of, as a public question, separation of, system of, Taxes, effect upon property valuations, property and corporation, Taylor's premium plan, Tenancy on farms, Tilden, Samuel J., Time work, Trade education, Trade unions, see also Organized labor, Transportation, taxes on, Trant, on trade unions, Trust company, Trust, definition, see Monopoly, Two-profits argument, U Underwood tariff, Unemployment, in crises, insurance, Unfair practices, Usance of wealth, of labor, Usury laws, Utility, V Van Hise, C.R., W Wage contract, limitation of, Wage-system, growth of, practicability of, Wages, and tariff, and general prices, general, and organization, particular, and organization, maladjustment of, and unemployment, and immigration, see Immigration, see also Hours and wages, Walker, Francis A., Walker tariff, Washington, Booker T., Wealth, the nation's, taxation of, "Wealth of Nations", Weir's premium plan, Wild-cat banking, Wilson tariff act, Wilson, Woodrow, Wolman, L., Women, working day for, Wyman, Bruce, 
4543	----	The Querist by George Berkley 1735 The Querist Containing Several Queries Proposed to the Consideration of the Public Part I Query 1. Whether there ever was, is, or will be, an industrious nation poor, or an idle rich? 2. Qu. Whether a people can be called poor, where the common sort are well fed, clothed, and lodged? 3. Qu. Whether the drift and aim of every wise State should not be, to encourage industry in its members? And whether those who employ neither heads nor hands for the common benefit deserve not to be expelled like drones out of a well-governed State? 4. Qu. Whether the four elements, and man's labour therein, be not the true source of wealth? 5. Qu. Whether money be not only so far useful, as it stirreth up industry, enabling men mutually to participate the fruits of each other's labour? 6. Qu. Whether any other means, equally conducing to excite and circulate the industry of mankind, may not be as useful as money. 7. Qu. Whether the real end and aim of men be not power? And whether he who could have everything else at his wish or will would value money? 8. Qu. Whether the public aim in every well-govern'd State be not that each member, according to his just pretensions and industry, should have power? 9. Qu. Whether power be not referred to action; and whether action doth not follow appetite or will? 10. Qu. Whether fashion doth not create appetites; and whether the prevailing will of a nation is not the fashion? 11. Qu. Whether the current of industry and commerce be not determined by this prevailing will? 12. Qu. Whether it be not owing to custom that the fashions are agreeable? 13. Qu. Whether it may not concern the wisdom of the legislature to interpose in the making of fashions; and not leave an affair of so great influence to the management of women and fops, tailors and vintners? 14. Qu. Whether reasonable fashions are a greater restraint on freedom than those which are unreasonable? 15. Qu. Whether a general good taste in a people would not greatly conduce to their thriving? And whether an uneducated gentry be not the greatest of national evils? 16. Qu. Whether customs and fashions do not supply the place of reason in the vulgar of all ranks? Whether, therefore, it doth not very much import that they should be wisely framed? 17. Qu. Whether the imitating those neighbours in our fashions, to whom we bear no likeness in our circumstances, be not one cause of distress to this nation? 18. Qu. Whether frugal fashions in the upper rank, and comfortable living in the lower, be not the means to multiply inhabitants? 19. Qu. Whether the bulk of our Irish natives are not kept from thriving, by that cynical content in dirt and beggary which they possess to a degree beyond any other people in Christendom? 20. Qu. Whether the creating of wants be not the likeliest way to produce industry in a people? And whether, if our peasants were accustomed to eat beef and wear shoes, they would not be more industrious? 21. Qu. Whether other things being given, as climate, soil, etc., the wealth be not proportioned to the industry, and this to the circulation of credit, be the credit circulated or transferred by what marks or tokens soever? 22. Qu. Whether, therefore, less money swiftly circulating, be not, in effect, equivalent to more money slowly circulating? Or, whether, if the circulation be reciprocally as the quantity of coin, the nation can be a loser? 23. Qu. Whether money is to be considered as having an intrinsic value, or as being a commodity, a standard, a measure, or a pledge, as is variously suggested by writers? And whether the true idea of money, as such, be not altogether that of a ticket or counter? 24. Qu. Whether the value or price of things be not a compounded proportion, directly as the demand, and reciprocally as the plenty? 25. Qu. Whether the terms crown, livre, pound sterling, etc., are not to be considered as exponents or denominations of such proportion? And whether gold, silver, and paper are not tickets or counters for reckoning, recording, and transferring thereof? 26. Qu. Whether the denominations being retained, although the bullion were gone, things might not nevertheless be rated, bought, and sold, industry promoted, and a circulation of commerce maintained? 27. Qu. Whether an equal raising of all sorts of gold, silver, and copper coin can have any effect in bringing money into the kingdom? And whether altering the proportions between the kingdom several sorts can have any other effect but multiplying one kind and lessening another, without any increase of the sum total? 28. Qu. Whether arbitrary changing the denomination of coin be not a public cheat? 29. Qu. Whether, nevertheless, the damage would be very considerable, if by degrees our money were brought back to the English value there to rest for ever? 30. Qu. Whether the English crown did not formerly pass with us for six shillings? And what inconvenience ensued to the public upon its reduction to the present value, and whether what hath been may not be? 31. Qu. What makes a wealthy people? Whether mines of gold and silver are capable of doing this? And whether the negroes, amidst the gold sands of Afric, are not poor and destitute? 32. Qu. Whether there be any vertue in gold or silver, other than as they set people at work, or create industry? 33. Qu. Whether it be not the opinion or will of the people, exciting them to industry, that truly enricheth a nation? And whether this doth not principally depend on the means for counting, transferring, and preserving power, that is, property of all kinds? 34. Qu. Whether if there was no silver or gold in the kingdom, our trade might not, nevertheless, supply bills of exchange, sufficient to answer the demands of absentees in England or elsewhere? 35. Qu. Whether current bank notes may not be deemed money? And whether they are not actually the greater part of the money of this kingdom? 36. Qu. Provided the wheels move, whether it is not the same thing, as to the effect of the machine, be this done by the force of wind, or water, or animals? 37. Qu. Whether power to command the industry of others be not real wealth? And whether money be not in truth tickets or tokens for conveying and recording such power, and whether it be of great consequence what materials the tickets are made of? 38. Qu. Whether trade, either foreign or domestic, be in truth any more than this commerce of industry? 39. Qu. Whether to promote, transfer, and secure this commerce, and this property in human labour, or, in other words, this power, be not the sole means of enriching a people, and how far this may be done independently of gold and silver? 40. Qu. Whether it were not wrong to suppose land itself to be wealth? And whether the industry of the people is not first to be consider'd, as that which constitutes wealth, which makes even land and silver to be wealth, neither of which would have, any value but as means and motives to industry? 41. Qu. Whether in the wastes of America a man might not possess twenty miles square of land, and yet want his dinner, or a coat to his back? 42. Qu. Whether a fertile land, and the industry of its inhabitants, would not prove inexhaustible funds of real wealth, be the counters for conveying and recording thereof what you will, paper, gold, or silver? 43. Qu. Whether a single hint be sufficient to overcome a prejudice? And whether even obvious truths will not sometimes bear repeating? 44. Qu. Whether, if human labour be the true source of wealth, it doth not follow that idleness should of all things be discouraged in a wise State? 45. Qu. Whether even gold or silver, if they should lessen the industry of its inhabitants, would not be ruinous to a country? And whether Spain be not an instance of this? 46. Qu. Whether the opinion of men, and their industry consequent thereupon, be not the true wealth of Holland and not the silver supposed to be deposited in the bank at Amsterdam? 47. Qu. Whether there is in truth any such treasure lying dead? And whether it be of great consequence to the public that it should be real rather than notional? 48. Qu. Whether in order to understand the true nature of wealth and commerce, it would not be right to consider a ship's crew cast upon a desert island, and by degrees forming themselves to business and civil life, while industry begot credit, and credit moved to industry? 49. Qu. Whether such men would not all set themselves to work? Whether they would not subsist by the mutual participation of each other's industry? Whether, when one man had in his way procured more than he could consume, he would not exchange his superfluities to supply his wants? Whether this must not produce credit? Whether, to facilitate these conveyances, to record and circulate this credit, they would not soon agree on certain tallies, tokens, tickets, or counters? 50. Qu. Whether reflection in the better sort might not soon remedy our evils? And whether our real defect be not a wrong way of thinking? 51. Qu. Whether it would not be an unhappy turn in our gentlemen, if they should take more thought to create an interest to themselves in this or that county, or borough, than to promote the real interest of their country? 52. Qu. Whether it be not a bull to call that making an interest, whereby a man spendeth much and gaineth nothing? 53. Qu. Whether if a man builds a house he doth not in the first place provide a plan which governs his work? And shall the pubic act without an end, a view, a plan? 54. Qu. Whether by how much the less particular folk think for themselves, the public be not so much the more obliged to think for them? 55. Qu. Whether cunning be not one thing and good sense another? and whether a cunning tradesman doth not stand in his own light? 56. Qu. Whether small gains be not the way to great profit? And if our tradesmen are beggars, whether they may not thank themselves for it? 57. Qu. Whether some way might not be found for making criminals useful in public works, instead of sending them either to America, or to the other world? 58. Qu. Whether we may not, as well as other nations, contrive employment for them? And whether servitude, chains, and hard labour, for a term of years, would not be a more discouraging as well as a more adequate punishment for felons than even death itself? 59. Qu. Whether there are not such things in Holland as bettering houses for bringing young gentlemen to order? And whether such an institution would be useless among us? 60. Qu. Whether it be true that the poor in Holland have no resource but their own labour, and yet there are no beggars in their streets? 61. Qu. Whether he whose luxury consumeth foreign products, and whose industry produceth nothing domestic to exchange for them, is not so far forth injurious to his country? 62. Qu. Whether, consequently, the fine gentlemen, whose employment is only to dress, drink, and play, be not a pubic nuisance? 63. Qu. Whether necessity is not to be hearkened to before convenience, and convenience before luxury? 64. Qu. Whether to provide plentifully for the poor be not feeding the root, the substance whereof will shoot upwards into the branches, and cause the top to flourish? 65. Qu. Whether there be any instance of a State wherein the people, living neatly and plentifully, did not aspire to wealth? 66. Qu. Whether nastiness and beggary do not, on the contrary, extinguish all such ambition, making men listless, hopeless, and slothful? 67. Qu. Whether a country inhabited by people well fed, clothed and lodged would not become every day more populous? And whether a numerous stock of people in such circumstances would? and how far the product of not constitute a flourishing nation; our own country may suffice for the compassing of this end? 68. Qu. Whether a people who had provided themselves with the necessaries of life in good plenty would not soon extend their industry to new arts and new branches of commerce? 69. Qu. Whether those same manufactures which England imports from other countries may not be admitted from Ireland? And, if so, whether lace, carpets, and tapestry, three considerable articles of English importation, might not find encouragement in Ireland? And whether an academy for design might not greatly conduce to the perfecting those manufactures among us? 70. Qu. Whether France and Flanders could have drawn so much money from England for figured silks, lace, and tapestry, if they had not had academies for designing? 71. Qu. Whether, when a room was once prepared, and models in plaster of Paris, the annual expense of such an academy need stand the pubic in above two hundred pounds a year? 72. Qu. Whether our linen-manufacture would not find the benefit of this institution? And whether there be anything that makes us fall short of the Dutch in damasks, diapers, and printed linen, but our ignorance in design? 73. Qu. Whether those specimens of our own manufacture, hung up in a certain public place, do not sufficiently declare such our ignorance? and whether for the honour of the nation they ought not to be removed? 74. Qu. Whether those who may slight this affair as notional have sufficiently considered the extensive use of the art of design, and its influence in most trades and manufactures, wherein the forms of things are often more regarded than the materials? 75. Qu. Whether there be any art sooner learned than that of making carpets? And whether our women, with little time and pains, may not make more beautiful carpets than those imported from Turkey? And whether this branch of the woollen manufacture be not open to us? 76. Qu. Whether human industry can produce, from such cheap materials, a manufacture of so great value by any other art as by those of sculpture and painting? 77. Qu. Whether pictures and statues are not in fact so much treasure? And whether Rome and Florence would not be poor towns without them? 78. Qu. Whether they do not bring ready money as well as jewels? Whether in Italy debts are not paid, and children portioned with them, as with gold and silver? 79. Qu. Whether it would not be more prudent, to strike out and exert ourselves in permitted branches of trade, than to fold our hands, and repine that we are not allowed the woollen? 80. Qu. Whether it be true that two millions are yearly expended by England in foreign lace and linen? 81. Qu. Whether immense sums are not drawn yearly into the Northern countries, for supplying the British navy with hempen manufactures? 82. Qu. Whether there be anything more profitable than hemp? And whether there should not be great premiums for encouraging our hempen trade? What advantages may not Great Britain make of a country where land and labour are so cheap? 83. Qu. Whether Ireland alone might not raise hemp sufficient for the British navy? And whether it would not be vain to expect this from the British Colonies in America, where hands are so scarce, and labour so excessively dear? 84. Qu. Whether, if our own people want will or capacity for such an attempt, it might not be worth while for some undertaking spirits in England to make settlements, and raise hemp in the counties of Clare and Limerick, than which, perhaps, there is not fitter land in the world for that purpose? And whether both nations would not find their advantage therein? 85. Qu. Whether if all the idle hands in this kingdom were employed on hemp and flax, we might not find sufficient vent for these manufactures? 86. Qu. How far it may be in our own power to better our affairs, without interfering with our neighbours? 87. Qu. Whether the prohibition of our woollen trade ought not naturally to put us on other methods which give no jealousy? 88. Qu. Whether paper be not a valuable article of commerce? And whether it be not true that one single bookseller in London yearly expended above four thousand pounds in that foreign commodity? 89. Qu. How it comes to pass that the Venetians and Genoese, who wear so much less linen, and so much worse than we do, should yet make very good paper, and in great quantity, while we make very little? 90. Qu. How long it will be before my countrymen find out that it is worth while to spend a penny in order to get a groat? 91. Qu. If all the land were tilled that is fit for tillage, and all that sowed with hemp and flax that is fit for raising them, whether we should have much sheep-walk beyond what was sufficient to supply the necessities of the kingdom? 92. Qu. Whether other countries have not flourished without the woollen trade? 93. Qu. Whether it be not a sure sign or effect of a country's inhabitants? And, thriving, to see it well cultivated and full of; if so, whether a great quantity of sheep-walk be not ruinous to a country, rendering it waste and thinly inhabited? 94. Qu. Whether the employing so much of our land under sheep be not in fact an Irish blunder? 95. Qu. Whether our hankering after our woollen trade be not the true and only reason which hath created a jealousy in England towards Ireland? And whether anything can hurt us more than such jealousy? 96. Qu. Whether it be not the true interest of both nations to become one people? And whether either be sufficiently apprised of this? 97. Qu. Whether the upper part of this people are not truly English, by blood, language, religion, manners, inclination, and interest? 98. Qu. Whether we are not as much Englishmen as the children of old Romans, born in Britain, were still Romans? 99. Qu. Whether it be not our true interest not to interfere with them; and, in every other case, whether it be not their true interest to befriend us? 100. Qu. Whether a mint in Ireland might not be of great convenience to the kingdom; and whether it could be attended with any possible inconvenience to Great Britain? And whether there were not mints in Naples and Sicily, when those kingdoms were provinces to Spain or the house of Austria? 101. Qu. Whether anything can be more ridiculous than for the north of Ireland to be jealous of a linen manufacturer in the south? 102. Qu. Whether the county of Tipperary be not much better land than the county of Armagh; and yet whether the latter is not much better improved and inhabited than the former? 103. Qu. Whether every landlord in the kingdom doth not know the cause of this? And yet how few are the better for such their knowledge? 104. Qu. Whether large farms under few hands, or small ones under many, are likely to be made most of? And whether flax and tillage do not naturally multiply hands, and divide land into small holdings, and well-improved? 105. Qu. Whether, as our exports are lessened, we ought not to lessen our imports? And whether these will not be lessened as our demands, and these as our wants, and these as our customs or fashions? Of how great consequence therefore are fashions to the public? 106. Qu. Whether it would not be more reasonable to mend our state than to complain of it; and how far this may be in our own power? 107. Qu. What the nation gains by those who live in Ireland upon the produce of foreign Countries? 108. Qu. How far the vanity of our ladies in dressing, and of our gentlemen in drinking, contributes to the general misery of the people? 109. Qu. Whether nations, as wise and opulent as ours, have not made sumptuary laws; and what hinders us from doing the same? 110. Qu. Whether those who drink foreign liquors, and deck themselves and their families with foreign ornaments, are not so far forth to be reckoned absentees? 111. Qu. Whether, as our trade is limited, we ought not to limit our expenses; and whether this be not the natural and obvious remedy? 112. Qu. Whether the dirt, and famine, and nakedness of the bulk of our people might not be remedied, even although we had no foreign trade? And whether this should not be our first care; and whether, if this were once provided for, the conveniences of the rich would not soon follow? 113. Qu. Whether comfortable living doth not produce wants, and wants industry, and industry wealth? 114. Qu. Whether there is not a great difference between Holland and Ireland? And whether foreign commerce, without which the one could not subsist, be so necessary for the other? 115. Qu. Might we not put a hand to the plough, or the spade, although we had no foreign commerce? 116. Qu. Whether the exigencies of nature are not to be answered by industry on our own soil? And how far the conveniences and comforts of life may be procured by a domestic commerce between the several parts of this kingdom? 117. Qu. Whether the women may not sew, spin, weave, embroider sufficiently for the embellishment of their persons, and even enough to raise envy in each other, without being beholden to foreign countries? 118. Qu. Suppose the bulk of our inhabitants had shoes to their feet, clothes to their backs, and beef in their bellies, might not such a state be eligible for the public, even though the squires were condemned to drink ale and cider? 119. Qu. Whether, if drunkenness be a necessary evil, men may not as well drink the growth of their own country? 120. Qu. Whether a nation within itself might not have real wealth, sufficient to give its inhabitants power and distinction, without the help of gold and silver? 121. Qu. Whether, if the arts of sculpture and painting were encouraged among us, we might not furnish our houses in a much nobler manner with our own manufactures? 122. Qu. Whether we have not, or may not have, all the necessary materials for building at home? 123. Qu. Whether tiles and plaster may not supply the place of Norway fir for flooring and wainscot? 124. Qu. Whether plaster be not warmer, as well as more secure, than deal? And whether a modern fashionable house, lined with fir, daubed over with oil and paint, be not like a fire-ship, ready to be lighted up by all accidents? 125. Qu. Whether larger houses, better built and furnished, a greater train of servants, the difference with regard to equipage and table between finer and coarser, more and less elegant, may not be sufficient to feed a reasonable share of vanity, or support all proper distinctions? And whether all these may not be procured by domestic industry out of the four elements, without ransacking the four quarters of the globe? 126. Qu. Whether anything is a nobler ornament, in the eye of the world, than an Italian palace, that is, stone and mortar skilfully put together, and adorned with sculpture and painting; and whether this may not be compassed without foreign trade? 127. Qu. Whether an expense in gardens and plantations would not be an elegant distinction for the rich, a domestic magnificence employing many hands within, and drawing nothing from abroad? 128. Qu. Whether the apology which is made for foreign luxury in England, to wit, that they could not carry on their trade without imports as well as exports, will hold in Ireland? 129. Qu. Whether one may not be allowed to conceive and suppose a society or nation of human creatures, clad in woollen cloths and stuffs, eating good bread, beef and mutton, poultry and fish, in great plenty, drinking ale, mead, and cider, inhabiting decent houses built of brick and marble, taking their pleasure in fair parks and gardens, depending on no foreign imports either for food or raiment? And whether such people ought much to be pitied? 130. Qu. Whether Ireland be not as well qualified for such a state as any nation under the sun? 131. Qu. Whether in such a state the inhabitants may not contrive to pass the twenty-four hours with tolerable ease and cheerfulness? And whether any people upon earth can do more? 132. Qu. Whether they may not eat, drink, play, dress, visit, sleep in good beds, sit by good fires, build, plant, raise a name, make estates, and spend them? 133. Qu. Whether, upon the whole, a domestic trade may not suffice in such a country as Ireland, to nourish and clothe its inhabitants, and provide them with the reasonable conveniences and even comforts of life? 134. Qu. Whether a general habit of living well would not produce numbers and industry' and whether, considering the tendency of human kind, the consequence thereof would not be foreign trade and riches, how unnecessary soever? 135. Qu. Whether, nevertheless, it be a crime to inquire how far we may do without foreign trade, and what would follow on such a supposition? 136. Qu. Whether the number and welfare of the subjects be not the true strength of the crown? 137. Qu. Whether in all public institutions there should not be an end proposed, which is to be the rule and limit of the means? Whether this end should not be the well-being of the whole? And whether, in order to this, the first step should not be to clothe and feed our people? 138. Qu. Whether there be upon earth any Christian or civilized people so beggarly, wretched, and destitute as the common Irish? 139. Qu. Whether, nevertheless, there is any other people whose wants may be more easily supplied from home? 140. Qu. Whether, if there was a wall of brass a thousand cubits high round this kingdom, our natives might not nevertheless live cleanly and comfortably, till the land, and reap the fruits of it? 141. Qu. What should hinder us from exerting ourselves, using our hands and brains, doing something or other, man, woman, and child, like the other inhabitants of God's earth? 142. Qu. Be the restraining our trade well or ill advised in our neighbours, with respect to their own interest, yet whether it be not plainly ours to accommodate ourselves to it? 143. Qu. Whether it be not vain to think of persuading other people to see their interest, while we continue blind to our own? 144. Qu. Whether there be any other nation possess'd of so much good land, and so many able hands to work it, which yet is beholden for bread to foreign countries? 145. Qu. Whether it be true that we import corn to the value of two hundred thousand pounds in some years? 146. Qu. Whether we are not undone by fashions made for other people? And whether it be not madness in a poor nation to imitate a rich one? 147. Qu. Whether a woman of fashion ought not to be declared a public enemy? 148. Qu. Whether it be not certain that from the single town of Cork were exported, in one year, no less than one hundred and seven thousand one hundred and sixty-one barrels of beef; seven thousand three hundred and seventy-nine barrels of pork; thirteen thousand four hundred and sixty-one casks, and eighty-five thousand seven hundred and twenty-seven firkins of butter? And what hands were employed in this manufacture? 149. Qu. Whether a foreigner could imagine that one half of the people were starving, in a country which sent out such plenty of provisions? 150. Qu. Whether an Irish lady, set out with French silks and Flanders lace, may not be said to consume more beef and butter than a hundred of our labouring peasants? 151. Qu. Whether nine-tenths of our foreign trade be not carried on singly to support the article of vanity? 152. Qu. Whether it can be hoped that private persons will not indulge this folly, unless restrained by the public? 153. Qu. How vanity is maintained in other countries? Whether in Hungary, for instance, a proud nobility are not subsisted with small imports from abroad? 154. Qu. Whether there be a prouder people upon earth than the noble Venetians, although they all wear plain black clothes? 155. Qu. Whether a people are to be pitied that will not sacrifice their little particular vanities to the public good? And yet, whether each part would not except their own foible from this public sacrifice, the squire his bottle, the lady her lace? 156. Qu. Whether claret be not often drank rather for vanity than for health, or pleasure? 157. Qu. Whether it be true that men of nice palates have been imposed on, by elder wine for French claret, and by mead for palm sack? 158. Qu. Do not Englishmen abroad purchase beer and cider at ten times the price of wine? 159. Qu. How many gentlemen are there in England of a thousand pounds per annum who never drink wine in their own houses? Whether the same may be said of any in Ireland who have even? one hundred pounds per annum. 160. Qu. What reasons have our neighbours in England for discouraging French wines which may not hold with respect to us also? 161. Qu. How much of the necessary sustenance of our people is yearly exported for brandy? 162. Qu. Whether, if people must poison themselves, they had not better do it with their own growth? 163. Qu. If we imported neither claret from France, nor fir from Norway, what the nation would save by it? 164. Qu. When the root yieldeth insufficient nourishment, whether men do not top the tree to make the lower branches thrive? 165. Qu. Whether, if our ladies drank sage or balm tea out of Irish ware, it would be an insupportable national calamity? 166. Qu. Whether it be really true that such wine is best as most encourages drinking, i.e., that must be given in the largest dose to produce its effect? And whether this holds with regard to any other medicine? 167. Qu. Whether that trade should not be accounted most pernicious wherein the balance is most against us? And whether this be not the trade with France? 168. Qu. Whether it be not even madness to encourage trade with a nation that takes nothing of our manufacture? 169. Qu. Whether Ireland can hope to thrive if the major part of her patriots shall be found in the French interest? 170. Qu. Why, if a bribe by the palate or the purse be in effect the same thing, they should not be alike infamous? 171. Qu. Whether the vanity and luxury of a few ought to stand in competition with the interest of a nation? 172. Qu. Whether national wants ought not to be the rule of trade? And whether the most pressing wants of the majority ought not to be first consider'd? 173. Qu. Whether it is possible the country should be well improved, while our beef is exported, and our labourers live upon potatoes? 174. Qu. If it be resolved that we cannot do without foreign trade, whether, at least, it may not be worth while to consider what branches thereof deserve to be entertained, and how far we may be able to carry it on under our present limitations? 175. Qu. What foreign imports may be necessary for clothing and feeding the families of persons not worth above one hundred pounds a year? And how many wealthier there are in the kingdom, and what proportion they bear to the other inhabitants? 176. Qu. Whether trade be not then on a right foot, when foreign commodities are imported in exchange only for domestic superfluities? 177. Qu. Whether the quantities of beef, butter, wool, and leather, exported from this island, can be reckoned the superfluities of a country, where there are so many natives naked and famished? 178. Qu. Whether it would not be wise so to order our trade as to export manufactures rather than provisions, and of those such as employ most hands? 179. Qu. Whether she would not be a very vile matron, and justly thought either mad or foolish, that should give away the necessaries of life from her naked and famished children, in exchange for pearls to stick in her hair, and sweetmeats to please her own palate? 180. Qu. Whether a nation might not be consider'd as a family? 181. Qu. Whether other methods may not be found for supplying the funds, besides the custom on things imported? 182. Qu. Whether any art or manufacture be so difficult as the making of good laws? 183. Qu. Whether our peers and gentlemen are born legislators? Or, whether that faculty be acquired by study and reflection? 184. Qu. Whether to comprehend the real interest of a people, and the means to procure it, doth not imply some fund of knowledge, historical, moral, and political, with a faculty of reason improved by learning? 185. Qu. Whether every enemy to learning be not a Goth? And whether every such Goth among us be not an enemy to the country? 186. Qu. Whether, therefore, it would not be an omen of ill presage, a dreadful phenomenon in the land, if our great men should take it in their heads to deride learning and education? 187. Qu. Whether, on the contrary, it should not seem worth while to erect a mart of literature in this kingdom, under wiser regulations and better discipline than in any other part of Europe? And whether this would not be an infallible means of drawing men and money into the kingdom? 188. Qu. Whether the governed be not too numerous for the governing part of our college? And whether it might not be expedient to convert thirty natives-places into twenty fellowships? 189. Qu. Whether, if we had two colleges, there might not spring a useful emulation between them? And whether it might not be contrived so to divide the fellows, scholars, and revenues between both, as that no member should be a loser thereby? 190. Qu. Whether ten thousand pounds well laid out might not build a decent college, fit to contain two hundred persons; and whether the purchase money of the chambers would not go a good way towards defraying the expense? 191. Qu. Where this college should be situated? 192. Qu. Whether it is possible a State should not thrive, whereof the lower part were industrious, and the upper wise? 193. Qu. Whether the collected wisdom of ages and nations be not found in books, improved and applied by study? 194. Qu. Whether it was not an Irish professor who first opened the public schools at Oxford? Whether this island hath not been anciently famous for learning? And whether at this day it hath any better chance for being considerable? 195. Qu. Whether we may not with better grace sit down and complain, when we have done all that lies in our power to help ourselves? 196. Qu. Whether the gentleman of estate hath a right to be idle; and whether he ought not to be the great promoter and director of industry among his tenants and neighbours? 197. Qu. Whether the real foundation for wealth must not be laid in the numbers, the frugality, and the industry of the people? And whether all attempts to enrich a nation by other means, as raising the coin, stock-jobbing, and such arts are not vain? 198. Qu. Whether a door ought not to be shut against all other methods of growing rich, save only by industry and merit? And whether wealth got otherwise would not be ruinous to the public? 199. Qu. Whether the abuse of banks and paper-money is a just objection against the use thereof? And whether such abuse might not easily be prevented? 200. Qu. Whether national banks are not found useful in Venice, Holland, and Hamburg? And whether it is not possible to contrive one that may be useful also in Ireland? 201. Qu. Whether any nation ever was in greater want of such an expedient than Ireland? 202. Qu. Whether the banks of Venice and Amsterdam are not in the hands of the public? 203. Qu. Whether it may not be worth while to inform ourselves in the nature of those banks? And what reason can be assigned why Ireland should not reap the benefit of such public banks as well as other countries? 204. Qu. Whether a bank of national credit, supported by public funds and secured by Parliament, be a chimera or impossible thing? And if not, what would follow from the supposal of such a bank? 205. Qu. Whether the currency of a credit so well secured would not be of great advantage to our trade and manufactures? 206. Qu. Whether the notes of such public bank would not have a more general circulation than those of private banks, as being less subject to frauds and hazards? 207. Qu. Whether it be not agreed that paper hath in many respects the advantage above coin, as being of more dispatch in payments, more easily transferred, preserved, and recovered when lost? 208. Qu. Whether, besides these advantages, there be not an evident necessity for circulating credit by paper, from the defect of coin in this kingdom? 209. Qu. Whether the public may not as well save the interest which it now pays? 210. Qu. What would happen if two of our banks should break at once? And whether it be wise to neglect providing against an event which experience hath shewn us not to be impossible? 211. Qu. Whether such an accident would not particularly affect the bankers? And therefore whether a national bank would not be a security even to private bankers? 212. Qu. Whether we may not easily avoid the inconveniencies attending the paper-money of New England, which were incurred by their issuing too great a quantity of notes, by their having no silver in bank to exchange for notes, by their not insisting upon repayment of the loans at the time prefixed, and especially by their want of manufactures to answer their imports from Europe? 213. Qu. Whether a combination of bankers might not do wonders, and whether bankers know their own strength? 214. Qu. Whether a bank in private hands might not even overturn a government? and whether this was not the case of the Bank of St. George in Genoa? [Footnote: See the Vindication and Advancement of our national Constitution and Credit. Printed in London 1710.] 215. Qu. Whether we may not easily prevent the ill effects of such a bank as Mr Law proposed for Scotland, which was faulty in not limiting the quantum of bills, and permitting all persons to take out what bills they pleased, upon the mortgage of lands, whence by a glut of paper, the prices of things must rise? Whence also the fortunes of men must increase in denomination, though not in value; whence pride, idleness, and beggary? 216. Qu. Whether such banks as those of England and Scotland might not be attended with great inconveniences, as lodging too much power in the hands of private men, and giving handle for monopolies, stock-jobbing, and destructive schemes? 217. Qu. Whether the national bank, projected by an anonymous writer in the latter end of Queen Anne's reign, might not on the other hand be attended with as great inconveniencies by lodging too much power in the Government? 218. Qu. Whether the bank projected by Murray, though it partake, in many useful particulars, with that of Amsterdam, yet, as it placeth too great power in the hands of a private society, might not be dangerous to the public? 219. Qu. Whether it be rightly remarked by some that, as banking brings no treasure into the kingdom like trade, private wealth must sink as the bank riseth? And whether whatever causeth industry to flourish and circulate may not be said to increase our treasure? 220. Qu. Whether the ruinous effects of Mississippi, South Sea, and such schemes were not owing to an abuse of paper money or credit, in making it a means for idleness and gaming, instead of a motive and help to industry? 221. Qu. Whether those effects could have happened had there been no stock-jobbing? And whether stock-jobbing could at first have been set on foot, without an imaginary foundation of some improvement to the stock by trade? Whether, therefore, when there are no such prospects, or cheats, or private schemes proposed, the same effects can be justly feared? 222. Qu. Whether by a national bank, be not properly understood a bank, not only established by public authority as the Bank of England, but a bank in the hands of the public, wherein there are no shares: whereof the public alone is proprietor, and reaps all the benefit? 223. Qu. Whether, having considered the conveniencies of banking and paper-credit in some countries, and the inconveniencies thereof in others, we may not contrive to adopt the former, and avoid the latter? 224. Qu. Whether great evils, to which other schemes are liable, may not be prevented, by excluding the managers of the bank from a share in the legislature? 225. Qu. Whether the rise of the bank of Amsterdam was not purely casual, for the security and dispatch of payments? And whether the good effects thereof, in supplying the place of coin, and promoting a ready circulation of industry and commerce may not be a lesson to us, to do that by design which others fell upon by chance? 226. Qu. Whether the bank proposed to be established in Ireland, under the notion of a national bank, by the voluntary subscription of three hundred thousand pounds, to pay off the national debt, the interest of which sum to be paid the subscribers, subject to certain terms of redemption, be not in reality a private bank, as those of England and Scotland, which are national only in name, being in the hands of particular persons, and making dividends on the money paid in by subscribers? [Footnote: See a Proposal for the Relief of Ireland, &c. Printed in Dublin A. D. 1734] 227. Qu. Whether plenty of small cash be not absolutely necessary for keeping up a circulation among the people; that is, whether copper be not more necessary than gold? 228. Qu. Whether it is not worth while to reflect on the expedients made use of by other nations, paper-money, bank-notes, public funds, and credit in all its shapes, to examine what hath been done and devised to add to our own animadversions, and upon the whole offer such hints as seem not unworthy the attention of the public? 229. Qu. Whether that, which increaseth the stock of a nation be not a means of increasing its trade? And whether that which increaseth the current credit of a nation may not be said to increase its stock? 230. Qu. Whether it may not be expedient to appoint certain funds or stock for a national bank, under direction of certain persons, one-third whereof to be named by the Government, and one-third by each House of Parliament? 231. Qu. Whether the directors should not be excluded from sitting in either House, and whether they should not be subject to the audit and visitation of a standing committee of both Houses? 232. Qu. Whether such committee of inspectors should not be changed every two years, one-half going out, and another coming in by ballot? 233. Qu. Whether the notes ought not to be issued in lots, to be let at interest on mortgaged lands, the whole number of lots to be divided among the four provinces, rateably to the number of hearths in each? 234. Qu. Whether it may not be expedient to appoint four counting-houses, one in each province, for converting notes into specie? 235. Qu. Whether a limit should not be fixed, which no person might exceed, in taking out notes? 236. Qu. Whether, the better to answer domestic circulation, it may not be right to issue notes as low as twenty shillings? 237. Qu. Whether all the bills should be issued at once, or rather by degrees, that so men may be gradually accustomed and reconciled to the bank? 238. Qu. Whether the keeping of the cash, and the direction of the bank, ought not to be in different hands, and both under public control? 239. Qu. Whether the same rule should not alway be observed, of lending out money or notes, only to half the value of the mortgaged land? and whether this value should not alway be rated at the same number of years' purchase as at first? 240. Qu. Whether care should not be taken to prevent an undue rise of the value of land? 241. Qu. Whether the increase of industry and people will not of course raise the value of land? And whether this rise may not be sufficient? 242. Qu. Whether land may not be apt to rise on the issuing too great plenty of notes? 243. Qu. Whether this may not be prevented by the gradual and slow issuing of notes, and by frequent sales of lands? 244. Qu. Whether interest doth not measure the true value of land; for instance, where money is at five per cent, whether land is not worth twenty years' purchase? 245. Qu. Whether too small a proportion of money would not hurt the landed man, and too great a proportion the monied man? And whether the quantum of notes ought not to bear proportion to the pubic demand? And whether trial must not shew what this demand will be? 246. Qu. Whether the exceeding this measure might not produce divers bad effects, one whereof would be the loss of our silver? 247. Qu. Whether interest paid into the bank ought not to go on augmenting its stock? 248. Qu. Whether it would or would not be right to appoint that the said interest be paid in notes only? 249. Qu. Whether the notes of this national bank should not be received in all payments into the exchequer? 250. Qu. Whether on supposition that the specie should fail, the credit would not, nevertheless, still pass, being admitted in all payments of the public revenue? 251. Qu. Whether the pubic can become bankrupt so long as the notes are issued on good security? 252. Qu. Whether mismanagement, prodigal living, hazards by trade, which often affect private banks, are equally to be apprehended in a pubic one? 253. Qu. Whether as credit became current, and this raised the value of land, the security must not of course rise? 254. Qu. Whether, as our current domestic credit grew, industry would not grow likewise; and if industry, our manufactures; and if these, our foreign credit? 255. Qu. Whether by degrees, as business and people multiplied, more bills may not be issued, without augmenting the capital stock, provided still, that they are issued on good security; which further issuing of new bills, not to be without consent of Parliament? 256. Qu. Whether such bank would not be secure? Whether the profits accruing to the pubic would not be very considerable? And whether industry in private persons would not be supplied, and a general circulation encouraged? 257. Qu. Whether such bank should, or should not, be allowed to issue notes for money deposited therein? And, if not, whether the bankers would have cause to complain? 258. Qu. Whether, if the public thrives, all particular persons must not feel the benefit thereof, even the bankers themselves? 259. Qu. Whether, beside the Bank-Company, there are not in England many private wealthy bankers, and whether they were more before the erecting of that company? 260. Qu. Whether as industry increased, our manufactures would not flourish; and as these flourished, whether better returns would not be made from estates to their landlords, both within and without the kingdom? 261. Qu. Whether we have not paper-money circulating among, whether, therefore, we might not as well have that us already which is secured by the public, and whereof the pubic reaps the benefit? 262. Qu. Whether there are not two general ways of circulating money, to wit, play and traffic? and whether stock-jobbing is not to be ranked under the former? 263. Qu. Whether there are more than two things that might draw silver out of the bank, when its credit was once well established, to wit, foreign demands and small payments at home? 264. Qu. Whether, if our trade with France were checked, the former of these causes could be supposed to operate at all? and whether the latter could operate to any great degree? 265. Qu. Whether the sure way to supply people with tools and materials, and to set them at work, be not a free circulation of money, whether silver or paper? 266. Qu. Whether in New England all trade and business is not as much at a stand, upon a scarcity of paper-money, as with us from the want of specie? 267. Qu. Whether paper-money or notes may not be issued from the national bank, on the security of hemp, of linen, or other manufactures whereby the poor might be supported in their industry? 268. Qu. Whether it be certain that the quantity of silver in the bank of Amsterdam be greater now than at first; but whether it be not certain that there is a greater circulation of industry and extent of trade, more people, ships, houses, and commodities of all sorts, more power by sea and land? 269. Qu. Whether money, lying dead in the bank of Amsterdam, would not be as useless as in the mine? 270. Qu. Whether our visible security in land could be doubted? And whether there be anything like this in the bank of Amsterdam? 271. Qu. Whether it be just to apprehend danger from trusting a national bank with power to extend its credit, to circulate notes which it shall be felony to counterfeit, to receive goods on loans, to purchase lands, to sell also or alienate them, and to deal in bills of exchange; when these powers are no other than have been trusted for many years with the bank of England, although in truth but a private bank? 272. Qu. Whether the objection from monopolies and an overgrowth of power, which are made against private banks, can possibly hold against a national one? 273. Qu. Whether banks raised by private subscription would be as advantageous to the public as to the subscribers? and whether risks and frauds might not be more justly apprehended from them? 274. Qu. Whether the evil effects which of late years have attended paper-money and credit in Europe did not spring from subscriptions, shares, dividends, and stock-jobbing? 275. Qu. Whether the great evils attending paper-money in the British Plantations of America have not sprung from the overrating their lands, and issuing paper without discretion, and from the legislators breaking their own rules in favour of themselves, thus sacrificing the public to their private benefit? And whether a little sense and honesty might not easily prevent all such inconveniences? 276. Qu. Whether an argument from the abuse of things, against the use of them, be conclusive? 277. Qu. Whether he who is bred to a part be fitted to judge of the whole? 278. Qu. Whether interest be not apt to bias judgment? and whether traders only are to be consulted about trade, or bankers about money? 279. Qu. Whether the subject of Freethinking in religion be not exhausted? And whether it be not high time for our freethinkers to turn their thoughts to the improvement of their country? 280. Qu. Whether any man hath a right to judge, that will not be at the pains to distinguish? 281. Qu. Whether there be not a wide difference between the profits going to augment the national stock, and being divided among private sharers? And whether, in the former case, there can possibly be any gaming or stock-jobbing? 282. Qu. Whether it must not be ruinous for a nation to sit down to game, be it with silver or with paper? 283. Qu. Whether, therefore, the circulating paper, in the late ruinous schemes of France and England, was the true evil, and not rather the circulating thereof without industry? And whether the bank of Amsterdam, where industry had been for so many years subsisted and circulated by transfers on paper, doth not clearly decide this point? 284. Qu. Whether there are not to be seen in America fair towns, wherein the people are well lodged, fed, and clothed, without a beggar in their streets, although there be not one grain of gold or silver current among them? 285. Qu. Whether these people do not exercise all arts and trades, build ships and navigate them to all parts of the world, purchase lands, till and reap the fruits of them, buy and sell, educate and provide for their children? Whether they do not even indulge themselves in foreign vanities? 286. Qu. Whether, whatever inconveniences those people may have incurred from not observing either rules or bounds in their paper money, yet it be not certain that they are in a more flourishing condition, have larger and better built towns, more plenty, more industry, more arts and civility, and a more extensive commerce, than when they had gold and silver current among them? 287. Qu. Whether a view of the ruinous effects of absurd schemes and credit mismanaged, so as to produce gaming and madness instead of industry, can be any just objection against a national bank calculated purely to promote industry? 288. Qu. Whether a scheme for the welfare of this nation should not take in the whole inhabitants? And whether it be not a vain attempt, to project the flourishing of our Protestant gentry, exclusive of the bulk of the natives? 289. Qu. Whether, therefore, it doth not greatly concern the State, that our Irish natives should be converted, and the whole nation united in the same religion, the same allegiance, and the same interest? and how this may most probably be effected? 290. Qu. Whether an oath, testifying allegiance to the king, and disclaiming the pope's authority in temporals, may not be justly required of the Roman Catholics? And whether, in common prudence or policy, any priest should be tolerated who refuseth to take it? 291. Qu. Whether there have not been Popish recusants? and, if so, whether it would be right to object against the foregoing oath, that all would take it, and none think themselves bound by it? 292. Qu. Whether those of the Church of Rome, in converting the Moors of Spain or the Protestants of France, have not set us an example which might justify a similar treatment of themselves, if the laws of Christianity allowed thereof? 293. Qu. Whether compelling men to a profession of faith is not the worst thing in Popery, and, consequently, whether to copy after the Church of Rome therein, were not to become Papists ourselves in the worst sense? 294. Qu. Whether, nevertheless, we may not imitate the Church of Rome, in certain places, where Jews are tolerated, by obliging our Irish Papists, at stated times, to hear Protestant sermons? and whether this would not make missionaries in the Irish tongue useful? 295. Qu. Whether the mere act of hearing, without making any profession of faith, or joining in any part of worship, be a religious act; and, consequently, whether their being obliged to hear, may not consist with the toleration of Roman Catholics? 296. Qu. Whether, if penal laws should be thought oppressive, we may not at least be allowed to give premiums? And whether it would be wrong, if the public encouraged Popish families to become hearers, by paying their hearth-money for them? 297. Qu. Whether in granting toleration, we ought not to distinguish between doctrines purely religious, and such as affect the State? 298. Qu. Whether the case be not very different in regard to a man who only eats fish on Fridays, says his prayers in Latin, or believes transubstantiation, and one who professeth in temporals a subjection to foreign powers, who holdeth himself absolved from all obedience to his natural prince and the laws of his country? who is even persuaded, it may be meritorious to destroy the powers that are? 299. Qu. Whether, therefore, a distinction should not be made between mere Papists and recusants? And whether the latter can expect the same protection from the Government as the former? 300. Qu. Whether our Papists in this kingdom can complain, if they are allowed to be as much Papists as the subjects of France or of the Empire? 301. Qu. Whether there is any such thing as a body of inhabitants, in any Roman Catholic country under the sun, that profess an absolute submission to the pope's orders in matters of an indifferent nature, or that in such points do not think it their duty to obey the civil government? 302. Qu. Whether since the peace of Utrecht, mass was not celebrated and the sacraments administered in divers dioceses of Sicily, notwithstanding the Pope's interdict? 303. Qu. Whether every plea of conscience is to be regarded? Whether, for instance, the German Anabaptists, Levellers, or Fifth Monarchy men would be tolerated on that pretence? 304. Qu. Whether Popish children bred in charity schools, when bound out in apprenticeship to Protestant masters, do generally continue Protestants? 305. Qu. Whether a Sum, which would go but a little way towards erecting hospitals for maintaining and educating the children of the native Irish, might not go far in binding them out apprentices to Protestant masters, for husbandry, useful trades, and the service of families? 306. Qu. Whether if the parents are overlooked, there can be any great hopes of success in converting the children? 307. Qu. Whether there be any instance, of a people's being converted in a Christian sense, otherwise than by preaching to them and instructing them in their own language? 308. Qu. Whether catechists in the Irish tongue may not easily be procured and subsisted? And whether this would not be the most practicable means for converting the natives? 309. Qu. Whether it be not of great advantage to the Church of Rome, that she hath clergy suited to all ranks of men, in gradual subordination from cardinals down to mendicants? 310. Qu. Whether her numerous poor clergy are not very useful in missions, and of much influence with the people? 311. Qu. Whether, in defect of able missionaries, persons conversant in low life, and speaking the Irish tongue, if well instructed in the first principles of religion, and in the popish controversy, though for the rest on a level with the parish clerks, or the school-masters of charity-schools, may not be fit to mix with and bring over our poor illiterate natives to the Established Church? Whether it is not to be wished that some parts of our liturgy and homilies were publicly read in the Irish language? And whether, in these views, it may not be right to breed up some of the better sort of children in the charity-schools, and qualify them for missionaries, catechists, and readers? 312. Qu. Whether there be any nation of men governed by reason? And yet, if there was not, whether this would be a good argument against the use of reason in pubic affairs? 313. Qu. Whether, as others have supposed an Atlantis or Utopia, we also may not suppose an Hyperborean island inhabited by reasonable creatures? 314. Qu. Whether an indifferent person, who looks into all hands, may not be a better judge of the game than a party who sees only his own? 315. Qu. Whether one, whose end is to make his countrymen think, may not gain his end, even though they should not think as he doth? 316. Qu. Whether he, who only asks, asserts? and whether any man can fairly confute the querist? 317. Qu. Whether the interest of a part will not always be preferred to that of the whole? FINIS ERRATA. Page 10. Line 17. for inexhaustable r. inexhaustible P. 14 L. 22. for Helpless r. Hopeless. P. 16 L. ult for than r. as. Part II Query 1. Whether there be any country in Christendom more capable of improvement than Ireland? 2. Qu. Whether we are not as far before other nations with respect to natural advantages, as we are behind them with respect to arts and industry? 3. Qu. Whether we do not live in a most fertile soil and temperate climate, and yet whether our people in general do not feel great want and misery? 4. Qu. Whether my countrymen are not readier at finding excuses than remedies? 5. Qu. Whether it can be reasonably hoped, that our state will mend, so long as property is insecure among us? 6. Qu. Whether in that case the wisest government, or the best laws can avail us? 7. Qu. Whether a few mishaps to particular persons may not throw this nation into the utmost confusion? 8. Qu. Whether the public is not even on the brink of being undone by private accidents? 9. Qu. Whether the wealth and prosperity of our country do not hang by a hair, the probity of one banker, the caution of another, and the lives of all? 10. Qu. Whether we have not been sufficiently admonished of this by some late events? 11. Qu. Whether therefore it be not high time to open our eyes? 12. Qu. Whether a national bank would not at once secure our properties, put an end to usury, facilitate commerce, supply the want of coin, and produce ready payments in all parts of the kingdom? 13. Qu. Whether the use or nature of money, which all men so eagerly pursue, be yet sufficiently understood or considered by all? 14. Qu. Whether mankind are not governed by Citation rather than by reason? 15. Qu. Whether there be not a measure or limit, within which gold and silver are useful, and beyond which they may be hurtful? 16. Qu. Whether that measure be not the circulating of industry? 17. Qu. Whether a discovery of the richest gold mine that ever was, in the heart of this kingdom, would be a real advantage to us? 18. Qu. Whether it would not tempt foreigners to prey upon us? 19. Qu. Whether it would not render us a lazy, proud, and dastardly people? 20. Qu. Whether every man who had money enough would not be a gentleman? And whether a nation of gentlemen would not be a wretched nation? 21. Qu. Whether all things would not bear a high price? And whether men would not increase their fortunes without being the better for it? 22. Qu. Whether the same evils would be apprehended from paper-money under an honest and thrifty regulation? 23. Qu. Whether, therefore, a national bank would not be more beneficial than even a mine of gold? 24. Qu. Whether private ends are not prosecuted with more attention and vigour than the public? And yet, whether all private ends are not included in the pubic? 25. Qu. Whether banking be not absolutely necessary to the pubic weal? 26. Qu. Whether even our private banks, though attended with such hazards as we all know them to be, are not of singular use in defect of a national bank? 27. Qu. Whether without them what little business and industry there is would not stagnate? But whether it be not a mighty privilege for a private person to be able to create a hundred pounds with a dash of his pen? 28. Qu. Whether the mystery of banking did not derive its original from the Italians? Whether this acute people were not, upon a time, bankers over all Europe? Whether that business was not practised by some of their noblest families who made immense profits by it, and whether to that the house of Medici did not originally owe its greatness? 29. Qu. Whether the wise state of Venice was not the first that conceived the advantage of a national bank? 30. Qu. Whether at Venice all payments of bills of exchange and merchants' contracts are not made in the national or pubic bank, the greatest affairs being transacted only by writing the names of the parties, one as debtor the other as creditor in the bank-book? 31. Qu. Whether nevertheless it was not found expedient to provide a chest of ready cash for answering all demands that should happen to be made on account of payments in detail? 32. Qu. Whether this offer of ready cash, instead of transfers in the bank, hath not been found to augment rather than diminish the stock thereof? 33. Qu. Whether at Venice, the difference in the value of bank money above other money be not fixed at twenty per cent? 34. Qu. Whether the bank of Venice be not shut up four times in the year twenty days each time? 35. Qu. Whether by means of this bank the public be not mistress of a million and a half sterling? 36. Qu. Whether the great exactness and integrity with which this bank is managed be not the chief support of that republic? 37. Qu. Whether we may not hope for as much skill and honesty in a Protestant Irish Parliament as in a Popish Senate of Venice? 38. Qu. Whether the bank of Amsterdam was not begun about one hundred and thirty years ago, and whether at this day its stock be not conceived to amount to three thousand tons of gold, or thirty millions sterling? 39. Qu. Whether besides coined money, there be not also great quantities of ingots or bars of gold and silver lodged in this bank? 40. Qu. Whether all payments of contracts for goods in gross, and letters of exchange, must not be made by transfers in the bank-books, provided the sum exceed three hundred florins? 41. Qu. Whether it be not true, that the bank of Amsterdam never makes payments in cash? 42. Qu. Whether, nevertheless, it be not also true, that no man who hath credit in the bank can want money from particular persons, who are willing to become creditors in his stead? 43. Qu. Whether any man thinks himself the poorer, because his money is in the bank? 44. Qu. Whether the creditors of the bank of Amsterdam are not at liberty to withdraw their money when they please, and whether this liberty doth not make them less desirous to use it? 45. Qu. Whether this bank be not shut up twice in the year for ten or fifteen days, during which time the accounts are balanced? 46. Qu. Whether it be not owing to this bank that the city of Amsterdam, without the least confusion, hazard, or trouble, maintains and every day promotes so general and quick a circulation of industry? 47. Qu. Whether it be not the greatest help and spur to commerce that property can be so readily conveyed and so well secured by a compte en banc, that is, by only writing one man's name for another's in the bank-book? 48. Qu. Whether, at the beginning of the last century, those who had lent money to the public during the war with Spain were not satisfied by the sole expedient of placing their names in a compte en banc, with liberty to transfer their claims? 49. Qu. Whether the example of those easy transfers in the compte en banc, thus casually erected, did not tempt other men to become creditors to the public, in order to profit by the same secure and expeditious method of keeping and transferring their wealth? 50. Qu. Whether this compte en banc hath not proved better than a mine of gold to Amsterdam? 51. Qu. Whether that city may not be said to owe her greatness to the unpromising accident of her having been in debt more than she was able to Pay? 52. Qu. Whether it be known that any State from such small beginnings, in so short a time, ever grew to so great wealth and power as the province of Holland hath done; and whether the bank of Amsterdam hath not been the real cause of such extraordinary growth? 53. Qu. Whether we are by nature a more stupid people than the Dutch? And yet whether these things are sufficiently considered by our patriots? 54. Qu. Whether anything less than the utter subversion of those Republics can break the banks of Venice and Amsterdam? 55. Qu. Whether at Hamburgh the citizens have not the management of the bank, without the meddling or inspection of the Senate? 56. Qu. Whether the directors be not four principal burghers chosen by plurality of voices, whose business is to see the rules observed, and furnish the cashiers with money? 57. Qu. Whether the book-keepers are not obliged to balance their accounts every week, and exhibit them to the controllers or directors? 58. Qu. Whether any besides the citizens are admitted to have compte en banc at Hamburgh? 59. Qu. Whether there be not a certain limit, under which no sum can be entered into the bank? 60. Qu. Whether each particular person doth not pay a fee in order to be admitted to a compte en banc at Hamburgh and Amsterdam? 61. Qu. Whether the effects lodged in the bank of Hamburgh are liable to be seized for debt or forfeiture? 62. Qu. Whether this bank doth not lend money upon pawns at low interest and only for half a year, after which term, in default of payment, the pawns are punctually sold by auction? 63. Qu. Whether the book-keepers of the bank of Hamburgh are not obliged upon oath never to reveal what sums of money are paid in or out of the bank, or what effects any particular person has therein? 64. Qu. Whether, therefore, it be possible to know the state or stock of this bank; and yet whether it be not of the greatest reputation and most established credit throughout the North? 65. Qu. Whether the success of those public banks in Venice, Amsterdam and Hamburg would not naturally produce in other States an inclination to the same methods? 66. Qu. Whether an absolute monarchy be so apt to gain credit, and whether the vivacity of some humours could so well suit with the slow steps and discreet management which a bank requires? 67. Qu. Whether the bank called the general bank of France, contrived by Mr Law, and established by letters patent in May, 1716, was not in truth a particular and not a national bank, being in the hands of a particular company privileged and protected by the Government? 68. Qu. Whether the Government did not order that the notes of this bank should pass on a par with ready money in all payments of the revenue? 69. Qu. Whether this bank was not obliged to issue only such notes as were payable at sight? 70. Qu. Whether it was not made a capital crime to forge the notes of this bank? 71. Qu. Whether this bank was not restrained from trading either by sea or land, and from taking up money upon interest? 72. Qu. Whether the original stock thereof was not six millions of livres, divided into actions of a thousand crowns each? 73. Qu. Whether the proprietors were not to hold general assemblies twice in the year, for the regulating of their affairs? 74. Qu. Whether the accompts of this bank were not balanced twice every year? 75. Qu. Whether there were not two chests belonging to this bank, the one called the general chest containing their specie, their bills and their copper plates for the printing of those bills, under the custody of three locks, whereof the keys were kept by the director, the inspector and treasurer, also another called the ordinary chest, containing part of the stock not exceeding two hundred thousand crowns, under the key of the treasurer? 76. Qu. Whether out of this last mentioned sum, each particular cashier was not to be intrusted with a share not exceeding the value of twenty thousand crowns at a time, and that under good security? 77. Qu. Whether the Regent did not reserve to himself the power of calling this bank to account, so often as he should think good, and of appointing the inspector? 78. Qu. Whether in the beginning of the year 1719 the French King did not convert the general bank of France into a Banque Royale, having himself purchased the stock of the company and taken it into his own hands, and appointed the Duke of Orleans chief manager thereof? 79. Qu. Whether from that time, all matters relating to the bank were not transacted in the name, and by the sole authority, of the king? 80. Qu. Whether his Majesty did not undertake to receive and keep the cash of all particular persons, subjects, or foreigners, in his said Royale Banque, without being paid for that trouble? And whether it was not declared, that such cash should not be liable to seizure on any pretext, not even on the king's own account? 81. Qu. Whether the treasurer alone did not sign all the bills, receive all the stock paid into the bank, and keep account of all the in-goings and out-goings? 82. Qu. Whether there were not three registers for the enregistering of the bills kept in the Banque Royale, one by the inspector, another by the controller, and a third by the treasurer? 83. Qu. Whether there was not also a fourth register, containing the profits of the bank, which was visited, at least once a week, by the inspector and controller? 84. Qu. Whether, beside the general bureau or compter in the city of Paris, there were not also appointed five more in the towns of Lyons, Tours, Rochelle, Orleans, and Amiens, each whereof was provided with two chests, one of specie for discharging bills at sight, and another of bank bills to be issued as there should be demand? 85. Qu. Whether, in the above mentioned towns, it was not prohibited to make payments in silver, exceeding the sum of six hundred livres? 86. Qu. Whether all creditors were not empowered to demand payment in bank bills instead of specie? 87. Qu. Whether, in a short compass of time, this bank did not undergo many new changes and regulations by several successive acts of council? 88. Qu. Whether the untimely, repeated, and boundless fabrication of bills did not precipitate the ruin of this bank? 89. Qu. Whether it be not true, that before the end of July, 1719, they had fabricated four hundred millions of livres in bank-notes, to which they added the sum of one hundred and twenty millions more on the twelfth of September following, also the same sum of one hundred and twenty millions on the twenty-fourth of 3 October, and again on the twenty-ninth of December, in the same year, the farther sum of three hundred and sixty millions, making the whole, from an original stock of six millions, mount, within the compass of one year, to a thousand millions of livres? 90. Qu. Whether on the twenty-eighth of February, 1720, the king did not make an union of the bank with the united company of the East and West Indies, which from that time had the administration and profits of the Banque Royale? 91. Qu. Whether the king did not still profess himself responsible for the value of the bank bills, and whether the company were not responsible to his Majesty for their management? 92. Qu. Whether sixteen hundred millions of livres, lent to his majesty by the company, was not a sufficient pledge to indemnify the king? 93. Qu. Whether the new directors were not prohibited to make any more bills without an act of council? 94. Qu. Whether the chests and books of the Banque were not subjected to the joint inspection of a Counsellor of State, and the Prevot des Marchands, assisted by two Echevins, a judge, and a consul, who had power to visit when they would and without warning? 95. Qu. Whether in less than two years the actions or shares of the Indian Company (first established for Mississippi, and afterwards increased by the addition of other compares and further? and whether this privileges) did not rise to near 2000 per cent must be ascribed to real advantages of trade, or to mere frenzy? 96. Qu. Whether, from first to last, there were not fabricated bank bills, of one kind or other, to the value of more than two thousand and six hundred millions of livres, or one hundred and thirty millions sterling? 97. Qu. Whether the credit of the bank did not decline from its union with the Indian Company? 98. Qu. Whether, notwithstanding all the above-mentioned extraordinary measures, the bank bills did not still pass at par with gold and silver to May, 1720, when the French king thought fit, by a new act of council, to make a reduction of their value, which proved a fatal blow, the effects whereof, though soon retracted, no subsequent skill or management could ever repair? 99. Qu. Whether, what no reason, reflexion, or foresight could do, this simple matter of fact (the most powerful argument with the multitude) did not do at once, to wit, open the eyes of the people? 100. Qu. Whether the dealers in that sort of ware had ever troubled their heads with the nature of credit, or the true use and end of banks, but only considered their bills and actions as things, to which the general demand gave a price? 101. Qu. Whether the Government was not in great perplexity to contrive expedients for the getting rid of those bank bills, which had been lately multiplied with such an unlimited passion? 102. Qu. Whether notes to the value of about ninety millions were not sunk by being paid off in specie, with the cash of the Compagnie des Indes, with that of the bank, and that of the Hotels des Monnoyes? Whether five hundred and thirty millions were not converted into annuities at the royal treasury? Whether several hundred millions more in bank bills were not extinguished and replaced by annuities on the City of Paris, on taxes throughout the provinces, &c., &c? 103. Qu. Whether, after all other shifts, the last and grand resource for exhausting that ocean, was not the erecting of a compte en banc in several towns of France? 104. Qu. Whether, when the imagination of a people is thoroughly wrought upon and heated by their own example, and the arts of designing men, this doth not produce a sort of enthusiasm which takes place of reason, and is the most dangerous distemper in a State? 105. Qu. Whether this epidemical madness should not be always before the eyes of a legislature, in the framing of a national bank? 106. Qu. Whether, therefore, it may not be fatal to engraft trade on a national bank, or to propose dividends on the stock thereof? 107. Qu. Whether it be possible for a national bank to subsist and maintain its credit under a French government? 108. Qu. Whether it may not be as useful a lesson to consider the bad management of some as the good management of others? 109. Qu. Whether the rapid and surprising success of the schemes of those who directed the French bank did not turn their brains? 110. Qu. Whether the best institutions may not be made subservient to bad ends? 111. Qu. Whether, as the aim of industry is power, and the aim of a bank is to circulate and secure this power to each individual, it doth not follow that absolute power in one hand is inconsistent with a lasting and a flourishing bank? 112. Qu. Whether our natural appetites, as well as powers, are not limited to their respective ends and uses? But whether artificial appetites may not be infinite? 113. Qu. Whether the simple getting of money, or passing it from hand to hand without industry, be an object worthy of a wise government? 114. Qu. Whether, if money be considered as an end, the appetite thereof be not infinite? But whether the ends of money itself be not bounded? 115. Qu. Whether the mistaking of the means for the end was not a fundamental error in the French councils? 116. Qu. Whether the total sum of all other powers, be it of enjoyment or action, which belong to man, or to all mankind together, is not in truth a very narrow and limited quantity? But whether fancy is not boundless? 117. Qu. Whether this capricious tyrant, which usurps the place of reason, doth not most cruelly torment and delude those poor men, the usurers, stockjobbers, and projectors, of content to themselves from heaping up riches, that is, from gathering counters, from multiplying figures, from enlarging denominations, without knowing what they would be at, and without having a proper regard to the use or end or nature of things? 118. Qu. Whether the ignis fatuus of fancy doth not kindle immoderate desires, and lead men into endless pursuits and wild labyrinths? 119. Qu. Whether counters be not referred to other things, which, so long as they keep pace and proportion with the counters, it must be owned the counters are useful; but whether beyond that to value or covet counters be not direct folly? 120. Qu. Whether the public aim ought not to be, that men's industry should supply their present wants, and the overplus be converted into a stock of power? 121. Qu. Whether the better this power is secured, and the more easily it is transferred, industry be not so much the more encouraged? 122. Qu. Whether money, more than is expedient for those purposes, be not upon the whole hurtful rather than beneficial to a State? 123. Qu. Whether there should not be a constant care to keep the bills at par? 124. Qu. Whether, therefore, bank bills should at any time be multiplied but as trade and business were also multiplied? 125. Qu. Whether it was not madness in France to mint bills and actions, merely to humour the people and rob them of their cash? 126. Qu. Whether we may not profit by their mistakes, and as some things are to be avoided, whether there may not be others worthy of imitation in the conduct of our neighbours? 127. Qu. Whether the way be not clear and open and easy, and whether anything but the will is wanting to our legislature? 128. Qu. Whether jobs and tricks are not detested on all hands, but whether it be not the joint interest of prince and people to promote industry? 129. Qu. Whether, all things considered, a national bank be not the most practicable, sure, and speedy method to mend our affairs, and cause industry to flourish among us? 130. Qu. Whether a compte en banc or current bank bills would best answer our occasions? 131. Qu. Whether a public compte en banc, where effects are received, and accounts kept with particular persons, be not an excellent expedient for a great city? 132. Qu. What effect a general compte en banc would have in the metropolis of this kingdom with one in each province subordinate thereunto? 133. Qu. Whether it may not be proper for a great kingdom to unite both expedients, to wit, bank notes and a compte en banc? 134. Qu. Whether, nevertheless, it would be advisable to begin with both at once, or rather to proceed first with the bills, and afterwards, as business multiplied, and money or effects flowed in, to open the compte en banc? 135. Qu. Whether, for greater security, double books of compte en banc should not be kept in different places and hands? 136. Qu. Whether it would not be right to build the compters and public treasuries, where books and bank notes are kept, without wood, all arched and floored with brick or stone, having chests also and cabinets of iron? 137. Qu. Whether divers registers of the bank notes should not be kept in different hands? 138. Qu. Whether there should not be great discretion in the uttering of bank notes, and whether the attempting to do things per saltum be not often the way to undo them? 139. Qu. Whether the main art be not by slow degrees and cautious measures to reconcile the bank to the public, to wind it insensibly into the affections of men, and interweave it with the constitution? 140. Qu. Whether the promoting of industry should not be always in view, as the true and sole end, the rule and measure, of a national bank? And whether all deviations from that object should not be carefully avoided? 141. Qu. Whether a national bank may not prevent the drawing of specie out of the country (where it circulates in small payments), to be shut up in the chests of particular persons? 142. Qu. Whether it may not be useful, for supplying manufactures and trade with stock, for regulating exchange, for quickening commerce, for putting spirit into the people? 143. Qu. Whether tenants or debtors could have cause to complain of our monies being reduced to the English value if it were withal multiplied in the same, or in a greater proportion? and whether this would not be the consequence of a nation al bank? 144. Qu. If there be an open sure way to thrive, without hazard to ourselves or prejudice to our neighbours, what should hinder us from putting it in practice? 145. Qu. Whether in so numerous a Senate, as that of this kingdom, it may not be easie to find men of pure hands and clear heads fit to contrive and model a public bank? 146. Qu. Whether a view of the precipice be not sufficient, or whether we must tumble headlong before we are roused? 147. Qu. Whether in this drooping and dispirited country, men are quite awake? 148. Qu. Whether we are sufficiently sensible of the peculiar security there is in having a bank that consists of land and paper, one of which cannot be exported, and the other is in no danger of being exported? 149. Qu. Whether it be not delightful to complain? And whether there be not many who had rather utter their complaints than redress their evils? 150. Qu. Whether, if 'the crown of the wise be their riches' (Prov., xiv.24), we are not the foolishest people in Christendom? 151. Qu. Whether we have not all the while great civil as well as natural advantages? 152. Qu. Whether there be any people who have more leisure to cultivate the arts of peace, and study the public weal? 153. Qu. Whether other nations who enjoy any share of freedom, and have great objects in view, be not unavoidably embarrassed and distracted by factions? But whether we do not divide upon trifles, and whether our parties are not a burlesque upon politics? 154. Qu. Whether it be not an advantage that we are not embroiled in foreign affairs, that we hold not the balance of Europe, that we are protected by other fleets and armies, that it is the true interest of a powerful people, from whom we are descended, to guard us on all sides? 155. Qu. Whether England doth not really love us and wish well to us, as bone of her bone, and flesh of her flesh? And whether it be not our part to cultivate this love and affection all manner of ways? 156. Qu. Whether, if we do not reap the benefits that may be made of our country and government, want of will in the lower people, or want of wit in the upper, be most in fault? 157. Qu. What sea-ports or foreign trade have the Swisses; and yet how warm are those people, and how well provided? 158. Qu. Whether there may not be found a people who so contrive as to be impoverished by their trade? And whether we are not that people? 159. Qu. Whether it would not be better for this island, if all our fine folk of both sexes were shipped off, to remain in foreign countries, rather than that they should spend their estates at home in foreign luxury, and spread the contagion thereof through their native land? 160. Qu. Whether our gentry understand or have a notion of magnificence, and whether for want thereof they do not affect very wretched distinctions? 161. Qu. Whether there be not an art or skill in governing human pride, so as to render it subservient to the pubic aim? 162. Qu. Whether the great and general aim of the public should not be to employ the people? 163. Qu. What right an eldest son hath to the worst education? 164. Qu. Whether men's counsels are not the result of their knowledge and their principles? 165. Qu. Whether an assembly of freethinkers, petit maitres, and smart Fellows would not make an admirable Senate? 166. Qu. Whether there be not labour of the brains as well as of the hands, and whether the former is beneath a gentleman? 167. Qu. Whether the public be more interested to protect the property acquired by mere birth than that which is the Mediate fruit of learning and vertue? 168. Qu. Whether it would not be a poor and ill-judged project to attempt to promote the good of the community, by invading the rights of one part thereof, or of one particular order of men? 169. Qu. Whether the public happiness be not proposed by the legislature, and whether such happiness doth not contain that of the individuals? 170. Qu. Whether, therefore, a legislator should be content with a vulgar share of knowledge? Whether he should not be a person of reflexion and thought, who hath made it his study to understand the true nature and interest of mankind, how to guide men's humours and passions, how to incite their active powers, how to make their several talents co-operate to the mutual benefit of each other, and the general good of the whole? 171. Qu. Whether it doth not follow that above all things a gentleman's care should be to keep his own faculties sound and entire? 172. Qu. Whether the natural phlegm of this island needs any additional stupefier? 173. Qu. Whether all spirituous liquors are not in truth opiates? 174. Qu. Whether our men of business are not generally very grave by fifty? 175. Qu. Whether there be really among us any parents so silly, as to encourage drinking in their children? 176. Qu. Whence it is, that our ladies are more alive, and bear age so much better than our gentlemen? 177. Qu. Whether all men have not faculties of mind or body which may be employed for the public benefit? 178. Qu. Whether the main point be not to multiply and employ our people? 179. Qu. Whether hearty food and warm clothing would not enable and encourage the lower sort to labour? 180. Qu. Whether, in such a soil as ours, if there was industry, there could be want? 181. Qu. Whether the way to make men industrious be not to let them taste the fruits of their industry? And whether the labouring ox should be muzzled? 182. Qu. Whether our landlords are to be told that industry and numbers would raise the value of their lands, or that one acre about the Tholsel is worth ten thousand acres in Connaught? 183. Qu. Whether our old native Irish are not the most indolent and supine people in Christendom? 184. Qu. Whether they are yet civilized, and whether their habitations and furniture are not more sordid than those of the savage Americans? 185. Qu. Whether this be altogether their own fault? 186. Qu. Whether it be not a sad circumstance to live among lazy beggars? And whether, on the other hand, it would not be delightful to live in a country swarming, like China, with busy people? 187. Qu. Whether we should not cast about, by all manner of means, to excite industry, and to remove whatever hinders it? And whether every one should not lend a helping hand? 188. Qu. Whether vanity itself should not be engaged in this good work? And whether it is not to be wished that the finding of employment for themselves and others were a fashionable distinction among the ladies? 189. Qu. Whether idleness be the mother or the daughter of spleen? 190. Qu. Whether it may not be worth while to publish the conversation of Ischomachus and his wife in Xenophon, for the use of our ladies? 191. Qu. Whether it is true that there have been, upon a time, one hundred millions of people employed in China, without the woollen trade, or any foreign commerce? 192. Qu. Whether the natural inducements to sloth are not greater in the Mogul's country than in Ireland, and yet whether, in that suffocating and dispiriting climate, the Banyans are not all, men, women, and children, constantly employed? 193. Qu. Whether it be not true that the great Mogul's subjects might undersell us even in our own markets, and clothe our people with their stuffs and calicoes, if they were imported duty free? 194. Qu. Whether there can be a greater reproach on the leading men and the patriots of a country, than that the people should want employment? And whether methods may not be found to employ even the lame and the blind, the dumb, the deaf, and the maimed, in some or other branch of our manufactures? 195. Qu. Whether much may not be expected from a biennial consultation of so many wise men about the public good? 196. Qu. Whether a tax upon dirt would not be one way of encouraging industry? 197. Qu. Whether it may not be right to appoint censors in every parish to observe and make returns of the idle hands? 198. Qu. Whether a register or history of the idleness and industry of a people would be an useless thing? 199. Qu. Whether we are apprized, of all the uses that may be made of political arithmetic? 200. Qu. Whether it would be a great hardship if every parish were obliged to find work for their poor? 201. Qu. Whether children especially should not be inured to labour betimes? 202. Qu. Whether there should not be erected, in each province, an hospital for orphans and foundlings, at the expense of old bachelors? 203. Qu. Whether it be true that in the Dutch workhouses things are so managed that a child four years old may earn its own livelihood? 204. Qu. What a folly is it to build fine houses, or establish lucrative posts and large incomes, under the notion of providing for the poor? 205. Qu. Whether the poor, grown up and in health, need any other provision but their own industry, under public inspection? 206. Qu. Whether the poor-tax in England hath lessened or increased the number of the poor? 207. Qu. Why the workhouse in Dublin, with so good an endowment, should yet be of so little use? and whether this may not be owing to that very endowment? 208. Qu. Whether that income might not, by this time, have gone through the whole kingdom, and erected a dozen workhouses in every county? 209. Qu. Whether workhouses should not be made at the least expense, with clay floors, and walls of rough stone, without plastering, ceiling, or glazing? 210. Qu. Whether the tax on chairs or hackney coaches be not paid, rather by the country gentlemen, than the citizens of Dublin? 211. Qu. Whether it be an impossible attempt to set our people at work, or whether industry be a habit which, like other habits, may by time and skill be introduced among any people? 212. Qu. Whether all manner of means should not be employed to possess the nation in general with an aversion and contempt for idleness and all idle folk? 213. Qu. Whether it would be a hardship on people destitute of all things, if the public furnished them with necessaries which they should be obliged to earn by their labour? 214. Qu. Whether other nations have not found great benefit from the use of slaves in repairing high roads, making rivers navigable, draining bogs, erecting public buildings, bridges, and manufactures? 215. Qu. Whether temporary servitude would not be the best cure for idleness and beggary? 216. Qu. Whether the public hath not a right to employ those who cannot or who will not find employment for themselves? 217. Qu. Whether all sturdy beggars should not be seized and made slaves to the public for a certain term of years? 218. Qu. Whether he who is chained in a jail or dungeon hath not, for the time, lost his liberty? And if so, whether temporary slavery be not already admitted among us? 219. Qu. Whether a state of servitude, wherein he should be well worked, fed, and clothed, would not be a preferment to such a fellow? 220. Qu. Whether criminals in the freest country may not forfeit their liberty, and repair the damage they have done the public by hard labour? 221. Qu. What the word 'servant' signifies in the New Testament? 222. Qu. Whether the view of criminals chained in pairs and kept at hard labour would not be very edifying to the multitude? 223. Qu. Whether the want of such an institution be not plainly seen in England, where the disbelief of a future state hardeneth rogues against the fear of death, and where, through the great growth of robbers and housebreakers, it becomes every day more necessary? 224. Qu. Whether it be not easier to prevent than to remedy, and whether we should not profit by the example of others? 225. Qu. Whether felons are not often spared, and therefore encouraged, by the compassion of those who should prosecute them? 226. Qu. Whether many that would not take away the life of a thief may not nevertheless be willing to bring him to a more adequate punishment? 227. Qu. Whether there should not be a difference between the treatment of criminals and that of other slaves? 228. Qu. Whether the most indolent would be fond of idleness, if they regarded it as the sure road to hard labour? 229. Qu. Whether the industry of the lower part of our people doth not much depend on the expense of the upper? 230. Qu. What would be the consequence if our gentry affected to distinguish themselves by fine houses rather than fine clothes? 231. Qu. Whether any people in Europe are so meanly provided with houses and furniture, in proportion to their incomes, as the men of estates in Ireland? 232. Qu. Whether building would not peculiarly encourage all other arts in this kingdom? 233. Qu. Whether smiths, masons, bricklayers, plasterers, carpenters, joiners, tilers, plumbers, and glaziers would not all find employment if the humour of building prevailed? 234. Qu. Whether the ornaments and furniture of a good house do not employ a number of all sorts of artificers, in iron, wood, marble, brass, pewter, copper, wool, flax, and divers other materials? 235. Qu. Whether in buildings and gardens a great number of day-labourers do not find employment? 236. Qu. Whether by these means much of that sustenance and wealth of this nation which now goes to foreigners would not be kept at home, and nourish and circulate among our own people? 237. Qu. Whether, as industry produced good living, the number of hands and mouths would not be increased; and in proportion thereunto, whether there would not be every day more occasion for agriculture? And whether this article alone would not employ a world of people? 238. Qu. Whether such management would not equally provide for the magnificence of the rich, and the necessities of the poor? 239. Qu. Whether an expense in building and improvements doth not remain at home, pass to the heir, and adorn the public? And whether any of those things can be said of claret? 240. Qu. Whether fools do not make fashions, and wise men follow them? 241. Qu. Whether, for one who hurts his fortune by improvements, twenty do not ruin themselves by foreign luxury? 242. Qu. Whether in proportion as Ireland was improved and beautified by fine seats, the number of absentees would not decrease? 243. Qu. Whether he who employs men in buildings and manufactures doth not put life in the country, and whether the neighbourhood round him be not observed to thrive? 244. Qu. Whether money circulated on the landlord's own lands, and among his own tenants, doth not return into his own pocket? 245. Qu. Whether every squire that made his domain swarm with busy hands, like a bee-hive or ant-hill, would not serve his own interest, as well as that of his country? 246. Qu. Whether a gentleman who hath seen a little of the world, and observed how men live elsewhere, can contentedly sit down in a cold, damp, sordid habitation, in the midst of a bleak country, inhabited by thieves and beggars? 247. Qu. Whether, on the other hand, a handsome seat amidst well-improved lands, fair villages, and a thriving neighbourhood may not invite a man to dwell on his own estate, and quit the life of an insignificant saunterer about town for that of a useful country-gentleman? 248. Qu. Whether it would not be of use and ornament if the towns throughout this kingdom were provided with decent churches, townhouses, workhouses, market-places, and paved streets, with some order taken for cleanliness? 249. Qu. Whether, if each of these towns were addicted to some peculiar manufacture, we should not find that the employing many hands together on the same work was the way to perfect our workmen? And whether all these things might not soon be provided by a domestic industry, if money were not wanting? 250. Qu. Whether money could ever be wanting to the demands of industry, if we had a national bank? 251. Qu. Whether when a motion was made once upon a time to establish a private bank in this kingdom by public authority, divers gentlemen did not shew themselves forward to embark in that design? 252. Qu. Whether it may not now be hoped, that our patriots will be as forward to examine and consider the proposal of a public bank calculated only for the public good? 253. Qu. Whether any people upon earth shew a more early zeal for the service of their country, greater eagerness to bear a part in the legislature, or a more general parturiency with respect to politics and public counsels? 254. Qu. Whether, nevertheless, a light and ludicrous vein be not the reigning humour; but whether there was ever greater cause to be serious? FINIS. ERRATUM Qu. 168, for Indulg'd, read ill judg'd. Part III Query 1. Whether the fable of Hercules and the carter ever suited any nation like this nation of Ireland? 2. Qu. Whether it be not a new spectacle under the sun, to behold, in such a climate and such a soil, and under such a gentle government, so many roads untrodden, fields untilled, houses desolate, and hands unemployed? 3. Qu. Whether there is any country in Christendom, either kingdom or republic, depending or independent, free or enslaved, which may not afford us a useful lesson? 4. Qu. Whether the frugal Swisses have any other commodities but their butter and cheese and a few cattle, for exportation; whether, nevertheless, the single canton of Berne hath not in her public treasury two millions sterling? 5. Qu. Whether that small town of Berne, with its scanty barren territory, in a mountainous corner, without sea-ports, without manufactures, without mines, be not rich by mere dint of frugality? 6. Qu. Whether the Swisses in general have not sumptuary laws, prohibiting the use of gold, jewels, silver, silk, and lace in their apparel, and indulging the women only to wear silk on festivals, weddings, and public solemnities? 7. Qu. Whether there be not two ways of growing rich, sparing and getting? But whether the lazy spendthrift must not be doubly poor? 8. Qu. Whether money circulating be not the life of industry; and whether the want thereof doth not render a State gouty and inactive? 9. Qu. But whether, if we had a national bank, and our present cash (small as it is) were put into the most convenient shape, men should hear any public complaints for want of money? 10. Qu. Whether all circulation be not alike a circulation of credit, whatsoever medium (metal or paper) is employed, and whether gold be any more than credit for so much power? 11. Qu. Whether the wealth of the richest nations in Christendom doth not consist in paper vastly more than in gold and silver? 12. Qu. Whether Lord Clarendon doth not aver of his own knowledge, that the Prince of Orange, with the best credit, and the assistance of the richest men in Amsterdam, was above ten days endeavouring to raise L20,000 in specie, without being able to raise half the sum in all that time? (See Clarendon's History, BK. XII) 13. Qu. Whether the whole city of Amsterdam would not have been troubled to have brought together twenty thousand pounds in one room? 14. Qu. Whether it be not absolutely necessary that there must be a bank and must be a trust? And, if so, whether it be not the most safe and prudent course to have a national bank and trust the legislature? 15. Qu. Whether objections against trust in general avail, when it is allowed there must be a trust, and the only question is where to place this trust, whether in the legislature or in private hands? 16. Qu. Whether it can be expected that private persons should have more regard to the public than the public itself? 17. Qu. Whether, if there be hazards from mismanagement, those may not be provided against in the framing of a pubic bank; but whether any provision can be made against the mismanagement of private banks that are under no check, control, or inspection? 18. Qu. Whatever may be said for the sake of objecting, yet, whether it be not false in fact, that men would prefer a private security to a public security? 19. Qu. Whether a national bank ought to be considered as a new experiment; and whether it be not a motive to try this scheme that it hath been already tried with success in other countries? 20. Qu. If power followeth money, whether this can be anywhere more properly and securely placed, than in the same hands wherein the supreme power is already placed? 21. Qu. Whether there be more danger of abuse in a private than in a public management? 22. Qu. Whether the proper usual remedy for abuses of private banks be not to bring them before Parliament, and subject them to the inspection of a committee; and whether it be not more prudent to prevent than to redress an evil? 23. Qu. Supposing there had been hitherto no such thing as a bank, and the question were now first proposed, whether it would be safer to circulate unlimited bills in a private credit, or bills to a limited value on the public credit of the community, what would men think? 24. Qu. Whether experience and example be not the plainest proof; and whether any instance can be assigned where a national bank hath not been attended with great advantage to the public? 25. Qu. Whether the evils apprehended from a national bank are not much more to be apprehended from private banks; but whether men by custom are not familiarized and reconciled to common dangers, which are therefore thought less than they really are? 26. Qu. Whether it would not be very hard to suppose all sense, honesty, and public spirit were in the keeping of only a few private men, and the public was not fit to be trusted? 27. Qu. Whether it be not ridiculous to suppose a legislature should be afraid to trust itself? 28. Qu. But, whether a private interest be not generally supported and pursued with more zeal than a public? 29. Qu. Whether the maxim, 'What is everybody's business is nobody's,' prevails in any country under the sun more than in Ireland? 30. Qu. Whether, nevertheless, the community of danger, which lulls private men asleep, ought not to awaken the public? 31. Qu. Whether there be not less security where there are more temptations and fewer checks? 32. Qu. If a man is to risk his fortune, whether it be more prudent to risk it on the credit of private men, or in that of the great assembly of the nation? 33. Qu. Where is it most reasonable to expect wise and punctual dealing, whether in a secret impenetrable recess, where credit depends on secrecy, or in a public management regulated and inspected by Parliament? 34. Qu. Whether a supine security be not catching, and whether numbers running the same risk, as they lessen the caution, may not increase the danger? 35. Qu. What real objection lies against a national bank erected by the legislature, and in the management of public deputies, appointed and inspected by the legislature? 36. Qu. What have we to fear from such a bank, which may not be as well feared without it? 37. Qu. How, why, by what means, or for what end, should it become an instrument of oppression? 38. Qu. Whether we can possibly be on a more precarious foot than we are already? Whether it be not in the power of any particular person at once to disappear and convey himself into foreign parts? or whether there can be any security in an estate of land when the demands upon it are unknown? 39. Qu. Whether the establishing of a national bank, if we suppose a concurrence of the government, be not very practicable? 40. Qu. But, whether though a scheme be never so evidently practicable and useful to the pubic, yet, if conceived to interfere with a private interest, it be not forthwith in danger of appearing doubtful, difficult, and impracticable? 41. Qu. Whether the legislative body hath not already sufficient power to hurt, if they may be supposed capable of it, and whether a bank would give them any new power? 42. Qu. What should tempt the pubic to defraud itself? 43. Qu. Whether, if the legislature destroyed the public, it would not be felo de se; and whether it be reasonable to suppose it bent on its own destruction? 44. Qu. Whether the objection to a pubic national bank, from want of secrecy, be not in truth an argument for it? 45. Qu. Whether the secrecy of private banks be not the very thing that renders them so hazardous? and whether, without that, there could have been of late so many sufferers? 46. Qu. Whether when all objections are answered it be still incumbent to answer surmises? 47. Qu. Whether it were just to insinuate that gentlemen would be against any proposal they could not turn into a job? 48. Qu. Suppose the legislature passed their word for any private banker, and regularly visited his books, would not money lodged in his bank be therefore reckoned more secure? 49. Qu. In a country where the legislative body is not fit to be trusted, what security can there be for trusting any one else? 50. Qu. If it be not ridiculous to question whether the pubic can find cash to circulate bills of a limited value when private bankers are supposed to find enough to circulate them to an unlimited value? 51. Qu. Whether the united stock of a nation be not the best security? And whether anything but the ruin of the State can produce a national bankruptcy? 52. Qu. Whether the total sum of the public treasure, power, and wisdom, all co-operating, be not most likely to establish a bank of credit, sufficient to answer the ends, relieve the wants, and satisfy the scruples of all people? 53. Qu. Whether those hazards that in a greater degree attend private banks can be admitted as objections against a public one? 54. Qu. Whether that which is an objection to everything be an objection to anything; and whether the possibility of an abuse be not of that kind? 55. Qu. Whether, in fact, all things are not more or less abused, and yet notwithstanding such abuse, whether many things are not upon the whole expedient and useful? 56. Qu. Whether those things that are subject to the most general inspection are not the least subject to abuse? 57. Qu. Whether, for private ends, it may not be sometimes expedient to object novelty to things that have been often tried, difficulty to the plainest things, and hazard to the safest? 58. Qu. Whether some men will not be apt to argue as if the question was between money and credit, and not (as in fact it is) which ought to be preferred, private credit or public credit? 59. Qu. Whether they will not prudently overlook the evils felt, or to be feared, on one side? 60. Qu. Whether, therefore, those that would make an impartial judgment ought not to be on their guard, keeping both prospects always in view, balancing the inconveniencies on each side and considering neither absolutely? 61. Qu. Whether wilful mistakes, examples without a likeness, and general addresses to the passions are not often more successful than arguments? 62. Qu. Whether there be not an art to puzzle plain cases as well as to explain obscure ones? 63. Qu. Whether private men are not often an over-match for the public; want of weight being made up for by activity? 64. Qu. If we suppose neither sense nor honesty in our leaders or representatives, whether we are not already undone, and so have nothing further to fear? 65. Qu. Suppose a power in the government to hurt the pubic by means of a national bank, yet what should give them the will to do this? Or supposing a will to do mischief, yet how could a national bank, modelled and administered by Parliament, put it in their power? 66. Qu. Whether even a wicked will entrusted with power can be supposed to abuse it for no end? 67. Qu. Whether it be not much more probable that those who maketh such objections do not believe them? 68. Qu. Whether it be not vain to object that our fellow-subjects of Great Britain would malign or obstruct our industry when it is exerted in a way which cannot interfere with their own? 66. Qu. Whether it is to be supposed they should take delight in the dirt and nakedness and famine of our people, or envy them shoes for their feet and beef for their belies? 70. Qu. What possible handle or inclination could our having a national bank give other people to distress us? 71. Qu. Whether it be not ridiculous to conceive that a project for cloathing and feeding our natives should give any umbrage to England? 72. Qu. Whether such unworthy surmises are not the pure effect of spleen? 73. Qu. Whether London is not to be considered as the metropolis of Ireland? And whether our wealth (such as it is) doth not circulate through London and throughout all England, as freely as that of any part of his Majesty's dominions? 74. Qu. Whether therefore it be not evidently the interest of the people of England to encourage rather than to oppose a national bank in this kingdom, as well as every other means for advancing our wealth which shall not impair their own? 75. Qu. Whether it is not our interest to be useful to them rather than rival them; and whether in that case we may not be sure of their good offices? 76. Qu. Whether we can propose to thrive so long as we entertain a wrongheaded distrust of England? 77. Qu. Whether, as a national bank would increase our industry, and that our wealth, England may not be a proportionable gainer; and whether we should not consider the gains of our mother-country as some accession to our own? 78. Qu. Whether the Protestant colony in this kingdom can ever forget what they owe to England? 79. Qu. Whether there ever was in any part of the world a country in such wretched circumstances, and which, at the same time, could be so easily remedied, and nevertheless the remedy not applied? 80. Qu. What must become of a people that can neither see the plainest things nor do the easiest? 81. Qu. Be the money lodged in the bank what it will, yet whether an Act to make good deficiencies would not remove all scruples? 82. Qu. If it be objected that a national bank must lower interest, and therefore hurt the monied man, whether the same objection would not hold as strong against multiplying our gold and silver? 83. Qu. But whether a bank that utters bills, with the sole view of promoting the public weal, may not so proportion their quantity as to avoid several inconveniencies which might attend private banks? 84. Qu. Whether there be any difficulty in comprehending that the whole wealth of the nation is in truth the stock of a national bank? And whether any more than the right comprehension of this be necessary to make all men easy with regard to its credit? 85. Qu. Whether any Thing be more reasonable than that the pubic, which makes the whole profit of the bank, should engage to make good its credit? 86. Qu. Whether the prejudices about gold and silver are not strong, but whether they are not still prejudices? 87. Qu. Whether paper doth not by its stamp and signature acquire a local value, and become as precious and as scarce as gold? And whether it be not much fitter to circulate large sums, and therefore preferable to gold? 88. Qu. Whether, in order to make men see and feel, it be not often necessary to inculcate the same thing, and place it in different lights? 89. Qu. Whether it doth not much import to have a right conception of money? And whether its true and just idea be not that of a ticket, entitling to power, and fitted to record and transfer such power? 90. Qu. Whether the managers and officers of a national bank ought to be considered otherwise than as the cashiers and clerks of private banks? Whether they are not in effect as little trusted, have as little power, are as much limited by rules, and as liable to inspection? 91. Qu. Whether the mistaking this point may not create some prejudice against a national bank, as if it depended on the credit, or wisdom, or honesty, of private men, rather than on the pubic, which is really the sole proprietor and director thereof, and as such obliged to support it? 92. Qu. Though the bank of Amsterdam doth very rarely, if at all, pay out money, yet whether every man possess'd of specie be not ready to convert it into paper, and act as cashier to the bank? And whether, from the same motive, every monied man throughout this kingdom would not be cashier to our national bank? 93. Qu. Whether a national bank would not be the great means and motive for employing our poor in manufactures? 94. Qu. Whether money, though lent out only to the rich, would not soon circulate among the poor? And whether any man borrows but with an intent to circulate? 95. Qu. Whether both government and people would not in the event be gainers by a national bank? And whether anything but wrong conceptions of its nature can make those that wish well to either averse from it? 96. Qu. Whether it may not be right to think, and to have it thought, that England and Ireland, prince and people, have one and the same interest? 97. Qu. Whether, if we had more means to set on foot such manufactures and such commerce as consists with the interest of England, there would not of course be less sheep-walk, and less wool exported to foreign countries? And whether a national bank would not supply such means? 98. Qu. Whether we may not obtain that as friends which it is in vain to hope for as rivals? 99. Qu. Whether in every instance by which we prejudice England, we do not in a greater degree prejudice ourselves? See Part II. qu. 153 and 154. 100. Qu. Whether in the rude original of society the first step was not the exchanging of commodities; the next a substituting of metals by weight as the common medium of circulation; after this the making use of coin; lastly, a further refinement by the use of paper with proper marks and signatures? And whether this, as it is the last, so it be not the greatest improvement? 101. Qu. Whether we are not in fact the only people who may be said to starve in the midst of plenty? 102. Qu. Whether business in general doth not languish among us? Whether our land is not untilled? Whether its inhabitants are not upon the wing? 103. Qu. Whether there can be a worse sign than that people should quit their country for a livelihood? Though men often leave their country for health, or pleasure, or riches, yet to leave it merely for a livelihood, whether this be not exceeding bad, and sheweth some peculiar mismanagement? 104. Qu. Whether our circumstances do not call aloud for some present remedy? And whether that remedy be not in our power? 105. Qu. Whether, in order to redress our evils, artificial helps are not most wanted in a land where industry is most against the natural grain of the people? 106. Qu. Whether, of all the helps to industry that ever were invented, there be any more secure, more easy, and more effectual than a national bank? 107. Qu. Whether medicines do not recommend themselves by experience, even though their reasons be obscure? But whether reason and fact are not equally clear in favour of this political medicine? 108. Qu. Whether, although the prepossessions about gold and silver have taken deep root, yet the example of our Colonies in America doth not make it as plain as day-light that they are not so necessary to the wealth of a nation as the vulgar of all ranks imagine? 109. Qu. Whether it be not evident that we may maintain a much greater inward and outward commerce, and be five times richer than we are, nay, and our bills abroad be of far greater credit, though we had not one ounce of gold or silver in the whole island? 110. Qu. Whether wrongheaded maxims, customs, and fashions are not sufficient to destroy any people which hath so few resources as the inhabitants of Ireland. 111. Qu. Whether it would not be a horrible thing to see our matrons make dress and play their chief concern? 112. Qu. Whether our ladies might not as well endow monasteries as wear Flanders lace? And whether it be not true that Popish nuns are maintained by Protestant contributions? 113. Qu. Whether England, which hath a free trade, whatever she remits for foreign luxury with one hand, doth not with the other receive much more from abroad? Whether, nevertheless, this nation would not be a gainer, if our women would content themselves with the same moderation in point of expense as the English ladies? 114. Qu. But whether it be not a notorious truth that our Irish ladies are on a foot, as to dress, with those of five times their fortune in England? 115. Qu. Whether it be not even certain that the matrons of this forlorn country send out a greater proportion of its wealth, for fine apparel, than any other females on the whole surface of this terraqueous globe? 116. Qu. Whether the expense, great as it is, be the greatest evil; but whether this folly may not produce many other follies, an entire derangement of domestic life, absurd manners, neglect of duties, bad mothers, a general corruption in both sexes? 117. Qu. Whether therefore a tax on all gold and silver in apparel, on all foreign laces and silks, may not raise a fund for the bank, and at the same time have other salutary effects on the public? 118. Qu. But, if gentlemen had rather tax themselves in another way, whether an additional tax of ten shillings the hogshead on wines may not supply a sufficient fund for the national bank, all defects to be made good by Parliament? 119. Qu. Whether upon the whole it may not be right to appoint a national bank? 120. Qu. Whether the stock and security of such bank would not be, in truth, the national stock, or the total sum of the wealth of this kingdom? 121. Qu. Whether, nevertheless, there should not be a particular fund for present use in answering bills and circulating credit? 122. Qu. Whether for this end any fund may not suffice, provided an Act be passed for making good deficiencies? 123. Qu. Whether the sole proprietor of such bank should not be the public, and the sole director the legislature? 124. Qu. Whether the managers, officers, and cashiers should not be servants of the pubic, acting by orders and limited by rules of the legislature? 125. Qu. Whether there should not be a standing number of inspectors, one-third men in great office, the rest members of both houses, half whereof to go out, and half to come in every session? 126. Qu. Whether those inspectors should not, all in a body, visit twice a year, and three as often as they pleased? 127. Qu. Whether the general bank should not be in Dublin, and subordinate banks or compters one in each province of Munster, Ulster, and Connaught? 128. Qu. Whether there should not be such provisions of stamps, signatures, checks, strong boxes, and all other measures for securing the bank notes and cash, as are usual in other banks? 129. Qu. Whether these ten or a dozen last queries may not easily be converted into heads of a bill? 130. Qu. Whether any one concerns himself about the security or funds of the banks of Venice or Amsterdam? And whether in a little time the case would not be the same as to our bank? 131. Qu. Whether the first beginning of expedients do not always meet with prejudices? And whether even the prejudices of a people ought not to be respected? 132. Qu. Whether a national bank be not the true philosopher's stone in a State? 133. Qu. Whether it be not the most obvious remedy for all the inconveniencies we labour under with regard to our coin? 134. Qu. Whether it be not agreed on all hands that our coin is on very bad foot, and calls for some present remedy? 135. Qu. Whether the want of silver hath not introduced a sort of traffic for change, which is purchased at no inconsiderable discount to the great obstruction of our domestic commerce? 136. Qu. Whether, though it be evident silver is wanted, it be yet so evident which is the best way of providing for this want? Whether by lowering the gold, or raising the silver, or partly one, partly the other? 137. Qu. Whether a partial raising of one species be not, in truth, wanting a premium to our bankers for importing such species? And what that species is which deserves most to be encouraged? 138. Qu. Whether it be not just, that all gold should be alike rated according to its weight and fineness? 139. Qu. Whether this may be best done, by lowering some certain species of gold, or by raising others, or by joining both methods together? 140. Qu. Whether all regulations of coin should not be made with a view to encourage industry, and a circulation of commerce, throughout the kingdom? 141. Qu. Whether the North and the South have not, in truth, one and the same interest in this matter? 142. Qu. Whether to oil the wheels of commerce be not a common benefit? And whether this be not done by avoiding fractions and multiplying small silver? 143. Qu. But, whether a pubic benefit ought to be obtained by unjust methods, and therefore, whether any reduction of coin should be thought of which may hurt the properties of private men? 144. Qu. Whether those parts of the kingdom where commerce doth most abound would not be the greatest gainers by having our coin placed on a right foot? 145. Qu. Whether, in case a reduction of coin be thought expedient, the uttering of bank bills at the same time may not prevent the inconveniencies of such a reduction? 146. Qu. But, whether any pubic expediency could countervail a real pressure on those who are least able to bear it, tenants and debtors? 147. Qu. Whether, nevertheless, the political body, as well as the natural, must not sometimes be worse in order to be better? 148. Qu. Whether, all things considered, a general raising the value of gold and silver be not so far from bringing greater quantities thereof into the kingdom that it would produce a direct contrary effect, inasmuch as less, in that case, would serve, and therefore less be wanted? And whether men do not import a commodity in proportion to the demand or want of it? 149. Qu. Whether the lowering of our gold would not create a fever in the State? And whether a fever be not sometimes a cure, but whether it be not the last cure a man would choose? 150. Qu. What if our other gold were raised to a par with Portugal gold, and the value of silver in general raised with regard to that of gold? 151. Qu. Whether the pubic ends may or may not be better answered by such augmentation, than by a reduction of our coin? 152. Qu. Provided silver is multiplied, be it by raising or diminishing the value of our coin, whether the great end is not answered? 153. Qu. Whether raising the value of a particular species will not tend to multiply such species, and to lessen others in proportion thereunto? And whether a much less quantity of cash in silver would not, in reality, enrich the nation more than a much greater in gold? 154. Qu. Whether, if a reduction be thought necessary, the obvious means to prevent all hardships and injustice be not a national bank? 155. Qu. Upon supposition that the cash of this kingdom was five hundred thousand pounds, and by lowering the various species each one-fifth of its value the whole sum was reduced to four hundred thousand pounds, whether the difficulty of getting money, and consequently of paying rents, would not be increased in the proportion of five to four? 156. Qu. Whether such difficulty would not be a great and unmerited distress on all the tenants in the nation? But if at the same time with the aforesaid reduction there were uttered one hundred thousand pounds additional to the former current stock, whether such difficulty or inconvenience would then be felt? 157. Qu. Whether, ceteris paribus, it be not true that the prices of things increase as the quantity of money increaseth, and are diminished as that is diminished? And whether, by the quantity of money is not to be understood the amount of the denominations, all contracts being nominal for pounds, shillings, and pence, and not for weights of gold or silver? 158. Qu. Whether in any foreign market, twopence advance in a kilderkin of corn could greatly affect our trade? 159. Qu. Whether in regard of the far greater changes and fluctuations of prices from the difference of seasons and other accidents, that small rise should seem considerable? 160. Qu. Whether our exports do not consist of such necessaries as other countries cannot well be without? 161. Qu. Whether upon the circulation of a national bank more land would not be tilled, more hands employed, and consequently more commodities exported? 162. Qu. Whether, setting aside the assistance of a national bank, it will be easy to reduce or lower our coin without some hardship (at least for the present) on a great number of particular persons? 163. Qu. Whether, nevertheless, the scheme of a national bank doth not entirely stand clear of this question; and whether such bank may not completely subsist and answer its ends, although there should be no alteration at all made in the value of our coin? 164. Qu. Whether, if the ill state of our coin be not redressed, that scheme would not be still more necessary, inasmuch as a national bank, by putting new life and vigour into our commerce, may prevent our feeling the ill effects of the want of such redress? 165. Qu. Whether men united by interest are not often divided by opinion; and whether such difference in opinion be not an effect of misapprehension? 166. Qu. Whether two things are not manifest, first, that some alteration in the value of our coin is highly expedient, secondly, that whatever alteration is made, the tenderest care should be had of the properties of the people, and even a regard paid to their prejudices? 167. Qu. Whether our taking the coin of another nation for more than it is worth be not, in reality and in event, a cheat upon ourselves? 168. Qu. Whether a particular coin over-rated will not be sure to flow in upon us from other countries beside that where it is coined? 169. Qu. Whether, in case the wisdom of the nation shall think fit to alter our coin, without erecting a national bank, the rule for lessening or avoiding present inconvenience should not be so to order matters, by raising the silver and depressing the gold, as that the total sum of coined cash within the kingdom shall, in denomination, remain the same, or amount to the same nominal value, after the change that it did before? 170. Qu. Whether all inconvenience ought not to be lessened as much as may be; but after, whether it would be prudent, for the sake of a small inconvenience, to obstruct a much greater good? And whether it may not sometimes happen that an inconvenience which in fancy and general discourse seems great shall, when accurately inspected and cast up, appear inconsiderable? 171. Qu. Whether in public councils the sum of things, here and there, present and future, ought not to be regarded? 172. Qu. Whether silver and small money be not that which circulates the quickest, and passeth through all hands, on the road, in the market, at the shop? 173. Qu. Whether, all things considered, it would not be better for a kingdom that its cash consisted of half a million in small silver, than of five times that sum in gold? 174. Qu. Whether there be not every day five hundred lesser payments made for one that requires gold? 175. Qu. Whether Spain, where gold bears the highest value, be not the laziest, and China, where it bears the lowest, be not the most industrious country in the known world? 176. Qu. Money being a ticket which entitles to power and records the title, whether such power avails otherwise than as it is exerted into act? 177. Qu. Whether it be not evidently the interest of every State, that its money should rather circulate than stagnate? 178. Qu. Whether the principal use of cash be not its ready passing from hand to hand, to answer common occasions of the common people, and whether common occasions of all sorts of people are not small ones? 179. Qu. Whether business at fairs and markets is not often at a stand and often hindered, even though the seller hath his commodities at hand and the purchaser his gold, yet for want of change? 180. Qu. Whether beside that value of money which is rated by weight, there be not also another value consisting in its aptness to circulate? 181. Qu. As wealth is really power, and coin a ticket conveying power, whether those tickets which are the fittest for that use ought not to be preferred? 182. Qu. Whether those tickets which singly transfer small shares of power, and, being multiplied, large shares, are not fitter for common use than those which singly transfer large shares? 183. Qu. Whether the public is not more benefited by a shilling that circulates than a pound that lies dead? 184. Qu. Whether sixpence twice paid be not as good as a shilling once paid? 185. Qu. Whether the same shilling circulating in a village may not supply one man with bread, another with stockings, a third with a knife, a fourth with paper, a fifth with nails, and so answer many wants which must otherwise have remained unsatisfied? 186. Qu. Whether facilitating and quickening the circulation of power to supply wants be not the promoting of wealth and industry among the lower people? And whether upon this the wealth of the great doth not depend? 187. Qu. Whether, without the proper means of circulation, it be not vain to hope for thriving manufacturers and a busy people? 188. Qu. Whether four pounds in small cash may not circulate and enliven an Irish market, which many four-pound pieces would permit to stagnate? 189. Qu. Whether a man that could move nothing less than a hundred-pound weight would not be much at a loss to supply his wants; and whether it would not be better for him to be less strong and more active? 190. Qu. Whether the natural body can be in a state of health and vigour without a due circulation of the extremities, even? And whether the political body, any in the fingers and toes more than the natural, can thrive without a proportionable circulation through the minutest and most inconsiderable parts thereof? 191. Qu. If we had a mint for coining only shillings, sixpences, and copper-money, whether the nation would not soon feel the good effects thereof? 192. Qu. Whether the greater waste by wearing of small coins would not be abundantly overbalanced by their usefulness? 193. Qu. Whether it be not the industry of common people that feeds the State, and whether it be possible to keep this industry alive without small money? 194. Qu. Whether the want of this be not a great bar to our employing the people in these manufactures which are open to us, and do not interfere with Great Britain? 195. Qu. Whether therefore such want doth not drive men into the lazy way of employing land under sheep-walk? 196. Qu. Whether the running of wool from Ireland can so effectually be prevented as by encouraging other business and manufactures among our people? 197. Qu. Whatever commodities Great Britain importeth which we might supply, whether it be not her real interest to import them from us rather than from any other people? 198. Qu. Whether the apprehension of many among us (who for that very reason stick to their wool), that England may hereafter prohibit, limit, or discourage our linen trade, when it hath been once, with great pains and expense, thoroughly introduced and settled in this land, be not altogether groundless and unjust? 199. Qu. Whether it is possible for this country, which hath neither mines of gold nor a free trade, to support for any time the sending out of specie? 200. Qu. Whether in fact our payments are not made by bills? And whether our foreign credit doth not depend on our domestic industry, and our bills on that credit? 201. Qu. Whether, in order to mend it, we ought not first to know the peculiar wretchedness of our state? And whether there be any knowing of this but by comparison? 202. Qu. Whether there are not single market towns in England that turn more money in buying and selling than whole counties (perhaps provinces) with us? 203. Qu. Whether the small town of Birmingham alone doth not, upon an average, circulate every week, one way or other, to the value of fifty thousand pounds? But whether the same crown may not be often paid? 204. Qu. Whether there be any woollen manufacture in Birmingham? 205. Qu. Whether bad management may not be worse than slavery? And whether any part of Christendom be in a more languishing condition than this kingdom? 206. Qu. Whether any kingdom in Europe be so good a customer at Bordeaux as Ireland? 207. Qu. Whether the police and economy of France be not governed by wise councils? And whether any one from this country, who sees their towns, and manufactures, and commerce, will not wonder what our senators have been doing? 208. Qu. What variety and number of excellent manufactures are to be met with throughout the whole kingdom of France? 209. Qu. Whether there are not everywhere some or other mills for many uses, forges and furnaces for iron-work, looms for tapestry, glass-houses, and so forth? 210. Qu. What quantities of paper, stockings, hats; what manufactures of wool, silk, linen, hemp, leather, wax, earthenware, brass, lead, tin, &c? 211. Qu. Whether the manufactures and commerce of the single town of Lyons do not amount to a greater value than all the manufactures and all the trade of this kingdom taken together? 212. Qu. Whether it be not true, that within the compass of one year there flowed from the South Sea, when that commerce was open, into the single town of St. Malo's, a sum in gold and silver equal to four times the whole specie of this kingdom? And whether that same part of France doth not at present draw from Cadiz, upwards of two hundred thousand pounds per annum? 213. Qu. Whether, in the anniversary fair at the small town of Beaucaire upon the Rhone, there be not as much money laid out as the current cash of this kingdom amounts to? 214. Qu. Whether it be true that the Dutch make ten millions of livres, every return of the flota and galleons, by their sales at the Indies and at Cadiz? 215. Qu. Whether it be true that England makes at least one hundred thousand pounds per annum by the single article of hats sold in Spain? 216. Qu. Whether the very shreds shorn from woollen cloth, which are thrown away in Ireland, do not make a beautiful tapestry in France? 217. Qu. Whether the toys of Thiers do not employ five thousand families? 218. Qu. Whether there be not a small town Or two in France which supply all Spain with cards? 219. Qu. Whether there be not French towns subsisted merely by making pins? 220. Qu. Whether the coarse fingers of those very women, those same peasants who one part of the year till the ground and dress the vineyards, are not another employed in making the finest French point? 221. Qu. Whether there is not a great number of idle fingers among the wives and daughters of our peasants? 222. Qu. Whether, about twenty-five years ago, they did not first attempt to make porcelain in France; and whether, in a few years, they did not make it so well, as to rival that which comes from China? 223. Qu. Whether the French do not raise a trade from saffron, dyeing drugs, and the like products, which may do with us as well as with them? 224. Qu. Whether we may not have materials of our own growth to supply all manufactures, as well as France, except silk, and whether the bulk of what silk even France manufactures be not imported? 225. Qu. Whether it be possible for this country to grow rich, so long as what is made by domestic industry is spent in foreign luxury? 226. Qu. Whether part of the profits of the bank should not be employed in erecting manufactures of several kinds, which are not likely to be set on foot and carried on to perfection without great stock, public encouragement, general regulations, and the concurrence of many hands? 227. Qu. Whether our natural Irish are not partly Spaniards and partly Tartars, and whether they do not bear signatures of their descent from both these nations, which is also confirmed by all their histories? 228. Qu. Whether the Tartar progeny is not numerous in this land? And whether there is an idler occupation under the sun than to attend flocks and herds of cattle? 229. Qu. Whether the wisdom of the State should not wrestle with this hereditary disposition of our Tartars, and with a high hand introduce agriculture? 230. Qu. Whether it were not to be wished that our people shewed their descent from Spain, rather by their honour and honesty than their pride, and if so, whether they might not easily insinuate themselves into a larger share of the Spanish trade? 231. Qu. Whether once upon a time France did not, by her linen alone, draw yearly from Spain about eight millions of livres? 232. Qu. Whether the French have not suffered in their linen trade with Spain, by not making their cloth of due breadth; and whether any other people have suffered, and are still likely to suffer, through the same prevarication? 233. Qu. Whether the Spaniards are not rich and lazy, and whether they have not a particular inclination and favour for the inhabitants of this island? But whether a punctual people do not love punctual dealers? 234. Qu. Whether about fourteen years ago we had not come into a considerable share of the linen trade with Spain, and what put a stop to this? 235. Qu. Whether we may not, with common industry and common honesty, undersell any nation in Europe? 236. Qu. Whether, if the linen manufacture were carried on in the other provinces as well as in the North, the merchants of Cork, Limerick, and Galway would not soon find the way to Spain? 237. Qu. Whether the woollen manufacture of England is not divided into several parts or branches, appropriated to particular places, where they are only or principally manufactured; fine cloths in Somersetshire, coarse in Yorkshire, long ells at Exeter, saies at Sudbury, crapes at Norwich, linseys at Kendal, blankets at Witney, and so forth? 238. Qu. Whether the united skill, industry, and emulation of many together on the same work be not the way to advance it? And whether it had been otherwise possible for England to have carried on her woollen manufacture to so great perfection? 239. Qu. Whether it would not on many accounts be right if we observed the same course with respect to our linen manufacture; and that diapers were made in one town or district, damasks in another, sheeting in a third, fine wearing linen in a fourth, coarse in a fifth, in another cambrics, in another thread and stockings, in others stamped linen, or striped linen, or tickings, or dyed linen, of which last kinds there is so great a consumption among the seafaring men of all nations? 240. Qu. Whether it may not be worth while to inform ourselves of the different sorts of linen which are in request among different people? 241. Qu. Whether we do not yearly consume of French wines about a thousand tuns more than either Sweden or Denmark, and yet whether those nations pay ready money as we do? 242. Qu. Whether they are not the Swiss that make hay and gather in the harvest throughout Alsatia? 243. Qu. Whether it be not a custom for some thousands of Frenchmen to go about the beginning of March into Spain, and having tilled the lands and gathered the harvest of Spain, to return home with money in their pockets about the end of November? 244. Qu. Whether of late years our Irish labourers do not carry on the same business in England to the great discontent of many there? But whether we have not much more reason than the people of England to be displeased at this commerce? 245. Qu. Whether, notwithstanding the cash supposed to be brought into it, any nation is, in truth, a gainer by such traffic? 246. Qu. Whether the industry of our people employed in foreign lands, while our own are left uncultivated, be not a great loss to the country? 247. Qu. Whether it would not be much better for us, if, instead of sending our men abroad, we could draw men from the neighbouring countries to cultivate our own? 248. Qu. Whether, nevertheless, we are not apt to think the money imported by our labourers to be so much clear gains to this country, but whether a little reflexion and a little political arithmetic may not shew us our mistake? 249. Qu. Whether our prejudices about gold and silver are not very apt to infect or misguide our judgments and reasonings about the public weal? 250. Qu. Whether it be not a good rule whereby to judge of the trade of any city, and its usefulness, to observe whether there is a circulation through the extremities, and whether the people round about are busy and warm? 251. Qu. Whether we had not, some years since, a manufacture of hats at Athlone, and of earthenware at Arklow, and what became of those manufactures? 252. Qu. Why we do not make tiles of our own, for flooring and roofing, rather than bring them from Holland? 253. Qu. What manufactures are there in France and Venice of gilt-leather, how cheap and how splendid a furniture? 254. Qu. Whether we may not, for the same use, manufacture divers things at home of more beauty and variety than wainscot, which is imported at such expense from Norway? 255. Qu. Whether the use and the fashion will not soon make a manufacture? 256. Qu. Whether, if our gentry used to drink mead and cider, we should not soon have those liquors in the utmost perfection and plenty? 257. Qu. Whether it be not wonderful that with such pastures, and so many black cattle, we do not find ourselves in cheese? 258. Qu. Whether great profits may not be made by fisheries; but whether those of our Irish who live by that business do not contrive to be drunk and unemployed one half of the year? 259. Qu. Whether it be not folly to think an inward commerce cannot enrich a State, because it doth not increase its quantity of gold and silver? And whether it is possible a country should? not thrive, while wants are supplied, and business goes on? 260. Qu. Whether plenty of all the necessaries and comforts of life be not real wealth? 261. Qu. Whether Lyons, by the advantage of her midland situation and the rivers Rhone and Saone, be not a great magazine or mart for inward commerce? And whether she doth not maintain a constant trade with most parts of France; with Provence for oils and dried fruits, for wines and cloth with Languedoc, for stuffs with Champagne, for linen with Picardy, Normandy, and Brittany, for corn with Burgundy? 262. Qu. Whether she doth not receive and utter all those commodities, and raise a profit from the distribution thereof, as well as of her own manufactures, throughout the kingdom of France? 263. Qu. Whether the charge of making good roads and navigable rivers across the country would not be really repaid by an inward commerce? 264. Qu. Whether, as our trade and manufactures increased, magazines should not be established in proper places, fitted by their situation, near great roads and navigable rivers, lakes, or canals, for the ready reception and distribution of all sorts of commodities from and to the several parts of the kingdom; and whether the town of Athlone, for instance, may not be fitly situated for such a magazine, or centre of domestic commerce? 265. Qu. Whether an inward trade would not cause industry to flourish, and multiply the circulation of our coin, and whether this may not do as well as multiplying the coin itself? 266. Qu. Whether the benefits of a domestic commerce are sufficiently understood and attended to; and whether the cause thereof be not the prejudiced and narrow way of thinking about gold and silver? 267. Qu. Whether there be any other more easy and unenvied method of increasing the wealth of a people? 268. Qu. Whether we of this island are not from our peculiar circumstances determined to this very commerce above any other, from the number of necessaries and good things that we possess within ourselves, from the extent and variety of our soil, from the navigable rivers and good roads which we have or may have, at a less expense than any people in Europe, from our great plenty of materials for manufactures, and particularly from the restraints we lie under with regard to our foreign trade? 269. Qu. Whether commissioners of trade or other proper persons should not be appointed to draw up plans of our commerce both foreign and domestic, and lay them at the beginning of every session before the Parliament? 270. Qu. Whether registers of industry should not be kept, and the pubic from time to time acquainted what new manufactures are introduced, what increase or decrease of old ones? 271. Qu. Whether annual inventories should not be published of the fairs throughout the kingdom, in order to judge of the growth of its commerce? 272. Qu. Whether there be not every year more cash circulated at the card tables of Dublin than at all the fairs of Ireland? 273. Qu. Whether the wealth of a country will not bear proportion to the skill and industry of its inhabitants? 274. Qu. Whether foreign imports that tend to promote industry should not be encouraged, and such as have a tendency to promote luxury should not be discouraged? 275. Qu. Whether the annual balance of trade between Italy and Lyons be not about four millions in favour of the former, and yet, whether Lyons be not a gainer by this trade? 276. Qu. Whether the general rule, of determining the profit of a commerce by its balance, doth not, like other general rules, admit of exceptions? 277. Qu. Whether it would not be a monstrous folly to import nothing but gold and silver, supposing we might do it, from every foreign part to which we trade? And yet, whether some men may not think this foolish circumstance a very happy one? 278. Qu. But whether we do not all see the ridicule of the Mogul's subjects, who take from us nothing but our silver, and bury it under ground, in order to make sure thereof against the resurrection? 279. Qu. Whether he must not be a wrongheaded patriot or politician, whose ultimate view was drawing money into a country, and keeping it there? 280. Qu. Whether it be not evident that not gold but industry causeth a country to flourish? 281. Qu. Whether it would not be a silly project in any nation to hope to grow rich by prohibiting the exportation of gold and silver? 282. Qu. Whether there can be a greater mistake in politics than to measure the wealth of the nation by its gold and silver? 283. Qu. Whether gold and silver be not a drug, where they do not promote industry? Whether they be not even the bane and undoing of an idle people? 284. Qu. Whether gold will not cause either industry or vice to flourish? And whether a country, where it flowed in without labour, must not be wretched and dissolute like an island inhabited by buccaneers? 285. Qu. Whether arts and vertue are not likely to thrive, where money is made a means to industry? But whether money without this would be a blessing to any people? 286. Qu. Whether therefore Mississippi, South Sea, and such like schemes were not calculated for pubic ruin? 287. Qu. Whether keeping cash at home, or sending it abroad, just as it most serves to promote industry, be not the real interest of every nation? 288. Qu. Whether commodities of all kinds do not naturally flow where there is the greatest demand? Whether the greatest demand for a thing be not where it is of most use? Whether money, like other things, hath not its proper use? Whether this use be not to circulate? Whether therefore there must not of course be money where there is a circulation of industry? 289. Qu. Whether all such princes and statesmen are not greatly deceived who imagine that gold and silver, any way got, will enrich a country? 290. Qu. Whether it is not a great point to know what we would be at? And whether whole States, as well as private persons, do not often fluctuate for want of this knowledge? 291. Qu. Whether gold may not be compared to Sejanus's horse, if we consider its passage through the world, and the fate of those nations which have been successively possess'd thereof? 292. Qu. Whether the effect is not to be considered more than the kind or quantity of money? 293. Qu. Whether means are not so far useful as they answer the end? And whether, in different circumstances, the same ends are not obtained by different means? 294. Qu. If we are a poor nation, abounding with very poor people, will it not follow that a far greater proportion of our stock should be in the smallest and lowest species than would suit with England? 295. Qu. Whether, therefore, it would not be highly expedient if our money were coined of peculiar values, best fitted to the circumstances and uses of our own country; and whether any other people could take umbrage at our consulting our own convenience, in an affair entirely domestic, and that lies within ourselves? 296. Qu. Whether every man doth not know, and hath not long known, that the want of a mint causeth many other wants in this kingdom? 297. Qu. What harm did England sustain about three centuries ago, when silver was coined in this kingdom? 298. Qu. What harm was it to Spain that her provinces of Naples and Sicily had all along mints of their own? 299. Qu. Whether those who have the interests of this kingdom at heart, and are concerned in the councils thereof, ought not to make the most humble and earnest representations to his Majesty, that he may vouchsafe to grant us that favour, the want of which is ruinous to our domestic industry, and the having of which would interfere with no interest of our fellow-subjects? 300. Qu. Whether it may not be presumed that our not having a privilege which every other kingdom in the world enjoys, be not owing to our want of diligence and unanimity in soliciting for it? 301. Qu. Whether his most gracious Majesty hath ever been addressed on this head in a proper manner, and had the case fairly stated for his royal consideration, and if not, whether we may not blame ourselves? 302. Qu. If his Majesty would be pleased to grant us a mint, whether the consequences thereof may not prove a valuable consideration to the crown? 303. Qu. Whether it be not the interest of England that we should cultivate a domestic commerce among ourselves? And whether it could give them any possible jealousy, if our small sum of cash was contrived to go a little further, if there was a little more life in our markets, a little more buying and selling in our shops, a little better provision for the backs and bellies of so many forlorn wretches throughout the towns and villages of this island? 304. Qu. Whether Great Britain ought not to promote the prosperity of her Colonies, by all methods consistent with her own? And whether the Colonies themselves ought to wish or aim at it by others? 305. Qu. Whether the remotest parts from the metropolis, and the lowest of the people, are not to be regarded as the extremities and capillaries of the political body? 306. Qu. Whether, although the capillary vessels are small, yet obstructions in them do not produce great chronical diseases? 307. Qu. Whether faculties are not enlarged and improved by exercise? 308. Qu. Whether the sum of the faculties put into act, or, in other words, the united action of a whole people, doth not constitute the momentum of a State? 309. Qu. Whether such momentum be not the real stock or wealth of a State; and whether its credit be not proportional thereunto? 310. Qu. Whether in every wise State the faculties of the mind are not most considered? 311. Qu. Whether every kind of employment or business, as it implies more skill and exercise of the higher powers, be not more valued? 312. Qu. Whether the momentum of a State doth not imply the whole exertion of its faculties, intellectual and corporeal; and whether the latter without the former could act in concert? 313. Qu. Whether the divided force of men, acting singly, would not be a rope of sand? 314. Qu. Whether the particular motions of the members of a State, in opposite directions, will not destroy each other, and lessen the momentum of the whole; but whether they must not conspire to produce a great effect? 315. Qu. Whether the ready means to put spirit into this State, to fortify and increase its momentum, would not be a national bank, and plenty of small cash? 316. Qu. Whether private endeavours without assistance from the public are likely to advance our manufactures and commerce to any great degree? But whether, as bills uttered from a national bank upon private mortgages would facilitate the purchases and projects of private men, even so the same bills uttered on the public security alone may not answer pubic ends in promoting new works and manufactures throughout the kingdom? 317. Qu. Whether that which employs and exerts the force of a community deserves not to be well considered and well understood? 318. Qu. Whether the immediate mover, the blood and spirits, be not money, paper, or metal; and whether the soul or will of the community, which is the prime mover that governs and directs the whole, be not the legislature? 319. Qu. Supposing the inhabitants of a country quite sunk in sloth, or even fast asleep, whether, upon the gradual awakening and exertion, first of the sensitive and locomotive faculties, next of reason and reflexion, then of justice and piety, the momentum of such country or State would not, in proportion thereunto, become still more and more considerable? 320. Qu. Whether that which in the growth is last attained, and is the finishing perfection of a people, be not the first thing lost in their declension? 321. Qu. Whether force be not of consequence, as it is exerted; and whether great force without great wisdom may not be a nuisance? 322. Qu. Whether the force of a child, applied with art, may not produce greater effects than that of a giant? And whether a small stock in the hands of a wise State may not go further, and produce more considerable effects, than immense sums in the hands of a foolish one? 323. Qu. Whether as many as wish well to their country ought not to aim at increasing its momentum? 324. Qu. Whose fault is it if poor Ireland still continues poor? FINIS ERRATA. Page 4. Line 13 for Silklace, read Silk, Lace, p. 30 l. 7 r. 61 Prices. p. 32 l. 21 r. to be. p. 39, l. 8 r. as Mills. 
36345	----	LETTERS OF RICARDO TO MALTHUS London HENRY FROWDE OXFORD UNIVERSITY PRESS WAREHOUSE AMEN CORNER, E.C. LETTERS OF DAVID RICARDO TO THOMAS ROBERT MALTHUS 1810-1823 EDITED BY JAMES BONAR M.A. OXFORD, LL.D. GLASGOW Oxford AT THE CLARENDON PRESS 1887 [_All rights reserved_] CONTENTS. PAGE 1. PREFACE vii 2. OUTLINE OF SUBJECTS xix 3. LETTERS I TO LXXXVIII 1-240 4. CHRONICLE 241 5. INDEX 245 PREFACE. The following Letters are printed for the first time from the original manuscripts, kindly lent for the purpose by Colonel Malthus, C.B. The representatives of Ricardo have been good enough to make search for the corresponding letters of Malthus, but without success. The Collection covers the whole period of the friendship of the two men. What is of purely private interest (a very small portion) has, as a rule, been omitted. There is seldom any obscurity in the text; the handwriting of Ricardo is clear and good. The earlier letters have no envelopes. The breaking of the seal has frequently torn a page, and destroyed a word or two. In two cases we have nothing but the fragment of a letter. But fortunately the bulk of the series has reached us in a complete state. These Letters were evidently known to Empson and MacCulloch, whose references to them are quoted in their proper place. Other letters of Ricardo, as well as his speeches in Parliament, are quoted here and there when they illustrate the text or fill up a gap. The Correspondence with J. B. Say is given at some length, as it is probably little known to English readers. The Outline of Subjects will be found to contain only a bare sketch of the main positions taken up by Ricardo against Malthus in these Letters. It could not fairly be expanded into an account of both sides of the argument, for, when we are within hearing of only one of the disputants, we cannot with fairness believe ourselves to have the whole case before us. We cannot accept his statement of the terms of the discussion, for, though he had every desire to be just to his opponent, his cast of mind was so different that he can hardly be thought to have entered into his opponent's views with perfect sympathy[1]. These Letters indeed show on almost every page how completely the two economists differed in their point of view. Beginning in a deep mutual respect, their acquaintance with each other grew into a very close intimacy; but it was the friendship of two men entirely unlike in mental character. Ricardo admits that he had been deeply impressed by the Essay on Population (p. 107), but thinks that Malthus is apt to miss the true subject of political economy, the inquiry into the distribution of wealth, and to confine himself to production, of which nothing can be made (pp. 111, 175); Malthus seems to his friend to have too strong a practical bias (p. 96); instead of reflecting on the general principles that determine (for example) the Foreign Exchanges, he tries to get light from Jamaica merchants and City bullion dealers (p. 3, cf. 12); he buries himself in temporary causes and effects instead of looking to permanent ones (p. 127); he gains his point by a definition instead of an argument (p. 237) and, perhaps through the same practical bias, he is too much absorbed in questions of his own College (p. 125), and not eager enough for political reform (pp. 151, 152). Malthus, Cambridge Wrangler and Haileybury Professor, was free from any academical bias in favour of abstract thinking; he had in fact little of the typical University man except his love of boating (p. 158). Ricardo, a self-made and largely a self-educated man[2] (though he had neither the pride of the first nor the vanity of the second), had no traditions that were not mercantile, and made a large fortune on the Stock Exchange[3]. But, in his thinking, he was under no slavery to details; he was even conscious of a strong theoretical bias (p. 96). He was fonder of 'imagining strong cases' to elucidate a principle, than of adducing actual incidents to establish it (pp. 164, 167). The very narrowness of his programme enabled him (as later it enabled Cobden and his school) to seem to exhaust all the difficulties of the subject, and dispose of them by plain straightforward proofs. Malthus, who had a less acute logical understanding, but saw more clearly the real breadth and complexity of the subject, seemed often more faltering, and less consistent with himself. Ricardo agreed with his friend in looking, on the whole, at the bright side of things, and forecasting prosperity for England even in the dark days of Luddites and Six Acts (pp. 139, 141). They were, both of them, unready writers, partly from deference to each other's criticism (pp. 20, 23, 117, 125, 155, 159, 207),--partly, in Ricardo's case, from awkwardness in composition, where he was always, in his own opinion, the worse man of the two (pp. 104, 108, 145, 208),--partly because the obscurity of the subject was felt by them to be inconsistent with dogmatic certainty (pp. 111, 176, 181). But they are free in their criticism; they never dream of allowing it to affect their good temper (pp. 175, 240), and they are never afraid to confess mistakes (pp. 20, 184, 207, 231, etc.). Personally, they agreed in enjoying society and travel, in loving 'law and order' and hating 'a row' (pp. 64, 208), and in being nowhere so happy as in their family circle, in Ricardo's case a patriarchally large one (p. 146). The robust health of Malthus was not shared by his friend (p. 140), but the latter had more of the qualities of a public man, and in the House of Commons he was by no means a silent member. Their range of interests was perhaps equally wide, though Ricardo's bent was to natural science as Malthus' to mathematics. In politics they were both in favour of Parliamentary Reform. Francis Place[4], writing in 1832 to a correspondent who had reproached Political Economists with hostility to reform, says that the study tends almost necessarily to political enlightenment, and points to Malthus, Mill, Ricardo, and others in confirmation. 'Mr. Malthus' (he says) 'was an aristocratic parson when he first published his Essay on Population ... but in going on with his work and being obliged to study political economy, his prejudices gave way before principles, and he became the advocate so far as he dared of good government. His work contains irrefragable arguments for universal suffrage, which cannot be overlooked, but must be applied by every reader who understands the subject; and there are also in his work other indications of what you and I should call liberal principles[5].' For myself, Place adds, I have been 'a plain Republican for forty years;' James Mill is 'as bad as myself.' As to Ricardo: 'He was one of the most enlightened of reformers I ever knew; he was a man who never concealed his opinions.' There is no doubt, from all the evidence, what these opinions were. Ricardo advocated a widely extended suffrage, frequent parliaments, and especially secret voting. In his speeches in the House of Commons, which are more than a hundred in number, from the first on the 25th March, 1819, to the last on the 4th July, 1823, he speaks his mind plainly not only on the Bank, the Sinking Fund, the currency, agriculture, the Poor Law, and the tariff, but on the reform of Parliament, retrenchment, freedom of the press and right of public meeting. His oratory seems in many respects to have resembled that of Cobden. The arguments were given with plain directness without elegance of diction; and they were brought home by matter-of-fact similes from every-day life or commercial experience. We know from Brougham that his manner of speaking was earnest, modest, genial, frank, and unaffected; and, as he only spoke on what he knew, he was always heard with attention[6], though his sentiments were unpalatable and he was usually in a hopeless minority. Bentham claimed to be the spiritual grandfather of Ricardo[7], and Ricardo may have got his first thoughts on Politics from him and Mill, as on Economics from Adam Smith; he may also have caught from Bentham his habit of reasoning abstractly. But the arguments he uses on behalf of his political opinions are such as to leave the impression that he reached his politics through his political economy, the former being only the latter from a different point of view. He seems to construct his notion of a free government on the lines of his notion of a free trade. When he takes the unpopular side in the case of the Carliles[8], imprisoned for blasphemous libel, he is not unfairly described by Wilberforce as simply 'carrying into more weighty matters those principles of free trade which he has so successfully expounded' in other cases. His interest in popular education seems to spring from the desire that our people may be rightly equipped for industrial competition. He attends a City dinner to the Spanish Minister at a time when the European Powers are threatening Spain, and appeals to the principle of Non-Intervention[9], thus anticipating the Manchester School and applying _laissez faire_ on the large scale. He applies the same principles perhaps too abstractly in the case of the Spitalfield Acts[10], which made the wages of the silkweavers to be fixed by the Justices instead of by the 'higgling of the market,' and in the case of the Truck System[11], or payment of wages in kind; but there was much to justify his hostility to the first, and there was Robert Owen's successful use of something very like the Truck system in New Lanark to excuse his defence of the second. He had a statesman's willingness to accept part where he could not get the whole, and to welcome a compromise rather than no progress at all. He would not abolish the Corn Laws at a stroke, but would prepare our agriculturists for the change by lessening the duty on imports year by year till nothing was left but 10_s._ a quarter, to remain as a 'countervailing duty' roughly equal in amount to the peculiar burdens of the British agriculturist[12]. Some of his opponents called him a 'mere theorist'; but this is a common taunt of men who cannot render a reason against men who can. Even his disciple MacCulloch thinks that his investigations were 'too abstract to be of much practical utility[13].' But in his own hands they were not so abstract that they were divorced from practice, or unmodified by the needs of each case. Such measures as he recommended in the House were of great practical utility, and have nearly all been embodied in subsequent legislation; yet he founded them all on certain general principles which in the order of his thinking were economical first and political afterwards. As far as politics are concerned, we find the principles abstract simply because they are not in our own day the principles most needed in legislation. In short, Ricardo's thinking was abstract only in the sense in which Bentham's was so. They had arrived, by a different road, at the same political philosophy. Ricardo had a fixed idea of the individual as being logically prior to society; and the interest of the community only meant to him the interest of a large number of individuals, the collection as a whole having no qualities not possessed by each of the parts, and there being no spiritual bond. Nature (which means in this case theory instead of history) begins and ends with individuals; Nature made the individuals, and Man made the groups. Ricardo agreed with Bentham that 'the community is a fictitious Body, composed of individual persons who are considered as constituting, as it were, its Members. The interest of the community then is what? The sum of the interests of the several members who compose it[14].' We find Ricardo arguing: 'Let me know what the state of men's interests is, and I will tell you what measures they will recommend;' and 'that State is most perfect in which all sanctions concur to make it the interest of all men to be virtuous,' in other words, to promote the general happiness[15]. Now, to consider human beings as first and chiefly separate from one another and having a separate self-interest which rules their action, is certainly to reason abstractly. But this abstract reasoning of the Philosophical Radicals is due, in the case of the Economists among them, more to Adam Smith than to Bentham. Most of them, like Ricardo, had got not only their first economics but their first lessons in thinking, from the 'Wealth of Nations.' The 'Wealth of Nations' bore the stamp of that Individualism which we usually associate with Rousseau. Its author had written, seventeen years before, a book in which he gave almost exclusive consideration to the common bond that unites man to man, the power one man has of putting himself by thought in the place of another, or (in a wide sense of the word) to sympathy. There is no need to suppose that Adam Smith had forgotten or recanted the 'Moral Sentiments;' but it is certainly the case that in the later and greater work, which became the text-book of Political Economy, he deliberately takes up another point of view, and presents men as dominated by private interest. With every allowance for his frequent qualifications ('upon the whole,' 'in many respects,' etc.), there is no doubt that he there considers 'the natural effort which every man is continually making to better his own condition' as a principle of growth and health which owes little or nothing to State or Society, but is continually transforming them and bringing good out of their evil. He is fully aware how industry in all its forms has been affected by the government and civilization of a people; but he regards industry itself, or the commercial ambition of the industrious classes, as more potent still. As far as industrial progress is concerned, he would have said with Bentham that Nature begins and ends with individuals; in matters of trade he has no confidence in associations of men, even when they are voluntary. To him, the really beneficent association is that unintended and unpreventible organization resulting from the division of labour, the separation of trades, and the uncontrolled movements of commercial ambition on the part of individual men. He is careful to say that Political Economy is not Politics[16]; but he insists that all political restraints and preferences must be taken away from industry, and 'the obvious and simple system of natural liberty' will 'establish itself of its own accord.' It is not surprising that this lesson in individualism was learned by his successors without the cautions with which the teacher would have surrounded it. The pupils unconsciously argued as if political individualism was part and parcel of economical principles, for it certainly seemed so in the one book of their teacher that they had been led to study; and, when Bentham made self-interest a leading principle of politics, Ricardo, to follow him, needed only to make clear to himself the underlying political basis of his economical ideas. In Malthus, economical individualism is held in check by a strong devotion to the principle of nationality, as well as by a wide range of philosophical and general interests. But to Ricardo political economy is all in all; the ruling principles of all his thinking are determined for him by the economical; and the result is individualism in politics as well as in political economy. The animosity of his critics is perhaps as often due to their strong dislike of this political philosophy underlying his doctrines, and derived through Adam Smith from Rousseau, as to any real or supposed abstractness of the doctrines themselves. Ricardo's political work has therefore the merits and the defects of the theory of individualism and policy of _laissez faire_, which crowned its achievements with the Repeal of the Corn Laws and Navigation Acts. John Stuart Mill, who was bred an individualist, has left us in his writings a faithful reflection of the change which has passed over English politics and English economics in the course of his lifetime, and which he himself welcomed with some misgivings. We have ceased to believe that the removal of obstacles is enough to secure the highest good either in government or in industry. But we must not deny that the Manchester School and its predecessors were indispensable in their own day. It is sometimes said that in addition to the faults of his school, Ricardo had flaws of his own which were due to a certain strong bias of self-interest[17]. We might answer that his arguments must none the less stand or fall by their own logic. But there is no reason to suppose any bias in Ricardo except his peculiar character of mind and cast of thought. He had the intellectual interest of a reasonable man in getting the right instead of the wrong answer to a difficult question; and his selfish interest as a member of the 'propertied' classes was not clear enough to be a snare to him. 'It would puzzle a good accountant' (he says in the House[18]) 'to make out on which side my interest predominated; I should find it difficult myself from the different kinds of property which I possess (no part funded property) to determine the question.' He could be chivalrous and even Quixotic on occasion. His best political friends[19] thought he was Quixotic when he proposed to levy a high property tax to pay off the National Debt: 'I should contribute any portion of my own property for the attainment of this great end if others would do the same[20].' There was chivalry in his praise of Cobbett's Letter to the Luddites[21]; Cobbett had given him abuse unmixed with any drop of generosity. We may therefore look in vain in Ricardo for any feeling of antipathy to landlords or any other body of men, though he spoke, as in duty bound, against landlords, bank directors, and all classes of monopolists, whenever they stood in the way of urgent reforms. Like other men, he not improbably had a lurking partiality for what had been the main business of his working life. But in his writings and speeches he gives us not feelings but arguments, and arguments that cannot be dismissed as feelings in disguise. In the purely economical works there is more of abstract theory than the author is ever fully aware. Not only did he as an individualist habitually regard men as separate competing atoms, and the desire of wealth as the permanent and dominant motive of men[22]; but he made his general statements too absolute. He sometimes guarded himself by saying (as he does in these Letters): What I am laying down is true over any considerable period of time; the causes to which I point are permanent; I allow that other causes may prevail for short intervals; temporary causes may seem to overrule the permanent ones; but I look to the final settlement. Nevertheless, he admitted more than once in the course of his career that he had stated the permanent causes too absolutely. The doctrine of Value is first presented by him as extremely simple,--the value of a thing depends on the labour employed in producing it. Then, as we go on, we find this is only true of 'the early stages of society before much machinery or durable capital is used,' while it is not meant to be true, even there, of objects that have a 'fancy' value, due purely to their scarcity. Next, we are told that in modern times the relative value of two things is affected by the proportions in which fixed capital and circulating enter into their production; if fixed capital enters more into one than into another, then a rise of wages will lower the value of the first, for it will lower the rate of profits, and, as there are more profits concerned in the first, the value of this first will fall in relation to the other. This is not all;--if two things are produced with a like amount of fixed capital, yet, if the durability of the capital is different, there will be more labour where there is less durability, and more profits where there is more durability; the things produced by the more durable fixed capital will be lowered in value by a rise in wages, which lowers the rate of profit; and so on, _mutatis mutandis_. In short, value is affected not only by labour, but by the wages of labour. To these concessions we may add the important change of view, which (as we know from these Letters) made MacCulloch tremble for the Ark of his Covenant[23]; we had heard nothing at first but the praise of machinery as lowering prices and increasing the general wealth; now we are reminded that the invention of it may for the time cause serious injury to the working classes[24]. It is not difficult for men living two generations after Ricardo, and having (as he himself expressed it[25]) 'all the wisdom of their ancestors and a little more into the bargain,' to point out many unjustified assumptions, many ambiguous terms, and even many wavering utterances, in Ricardo's 'Principles,' in spite of their appearance of severe logic. The author's detached practical pamphlets were in those respects far more powerful than this volume of imperfectly connected essays on general theory. The flattering importunities of friends had induced an unsystematic writer to attempt a systematic treatise[26]. The cardinal doctrine, that of Value, is applied to only one class of cases, and, even to that, with serious modifications. It was left for later economists, like Jevons in this country, and Menger and Böhm Bawerk in Germany, to take up the task of giving a theory of value that will embrace all cases of it, not excluding those objects that possess a value 'wholly independent of the quantity of labour originally necessary to produce them, and varying with the varying wealth and inclinations of those who are desirous to possess them[27].' Malthus has left a clear statement of the points at issue between Ricardo and himself in the Quarterly Review for January, 1824. He contended against Ricardo that (1) Quantity of Labour is not the chief cause of Value, but (2) 'Supply and Demand' are more truly so described, while (3) Competition of Capital, and not fertility of the soil, determines the rate of profits. But, in regard to the first, he hardly gives Ricardo sufficient credit for his large concessions. In regard to the second, he does not realize that supply and demand are vague terms which can only be made definite by a theory of value itself. In regard to the third position, if fertility of soil be translated productiveness of the staple industry, Ricardo's view seems nearer the truth than his own. The inadequacy of the whole discussion on this third head is largely due to the fact that economists had not then been pushed by Socialism into a thorough investigation of Profits and Interest. They were content to borrow these ideas from every-day commercial life, and treat them as given ultimate facts needing no explanation. They therefore never fully accomplished the very first task of Political Economy, to state the facts as they are, and analyse into its fundamental laws the existing industrial system of modern nations. Still less did they fulfil its second task, to estimate the relation of the industrial system to the larger social and political body in which it lives and moves and has its being. The peculiar wants and motives of an individual people, changing, as they do, with the growth of civilization, must be viewed in their effects upon the production and distribution of the national wealth, if the truth about the latter is to be fully known. It is because the older economists did not attempt this that their discussions, carried on even by their most eminent representative men, seem to later readers superficial and unreal. But in their Economics, as in their Politics, they had their own work and not ours to do; and we must not blame them for not answering questions that have only very recently occurred to ourselves. OUTLINE OF SUBJECTS. In only two cases do the letters of this collection form groups that have a subject of their own not discussed at any length in the other letters. Letters I to XIV are the only ones that discuss at any length the influence of the Depreciation of the Currency on the Foreign Exchanges. Letters LXXVIII to LXXXVIII are the only ones that so discuss the Measure of Value. After these the nearest approach to continuity is perhaps in Letters LXXI to LXXVII, when Over-production is the chief subject. But the discussion of Rent, Wages and Profits is not conducted by chapters as in a book; it follows the course of conversations which were not recorded, and obeys suggestions that are given in replies lost to us. We cannot hope to make the propositions on these three heads fall into a consecutive logical series. The following analysis of the letters is not meant to be exhaustive. Ricardo's opinions on the Bank of England (XXXV, etc.) and on the East India College (XL, etc.), for example, will not be found in it. It is simply a statement of the chief economical arguments. In the early letters the correspondence turns chiefly on matters made prominent at the time (1810 seq.) by the Bullion Committee and Ricardo's own pamphlet, 'The High Price of Gold Bullion.' Though this pamphlet did not appear in its separate form till early in 1810, the matter of it had been published by Ricardo in a series of letters to the 'Morning Chronicle' beginning in September, 1809. These letters brought their author into public notice, and they seem to have led Malthus to seek his acquaintance. The earliest letters (of which Letter I in this collection was clearly not the first of the whole correspondence) were naturally on the subjects that first brought the two men together. Ricardo's main positions as against Malthus are as follows:-- 1. The amount of the currency of a nation is determined for it not simply by its size and population but by the nature and extent of its trading transactions; and yet, when these elements are given, the currency of one nation will stand to the currency of another in some ascertainable normal proportion, to alter which is to alter the relative value of the currencies affected (VI, VII, X). 2. Such events as a bad harvest, a change in articles of consumption or the transmission of a subsidy abroad, will, by altering the relative value of our currency, produce effects on the exchanges which, apart from their own specific remedy, are permanent, not transitory (I, VII, X). 3. An increase in the amount of gold and silver in a country will lead to an increased use of these metals for general purposes rather than to a proportionate fall in their value, there (II, III). 4. An increase in the value of a nation's exports and imports may involve no increase of its wealth or its capital, but may be due to a mere change from one set of articles of consumption to another, or to a carrying trade with foreign capital (IV). 5. In any case, such an increase is not the cause, but the effect of a change in the currency; it is a sign that money is going from where it is cheap to where it is dear (IV, VI, IX, cf. XII and XVII), and the Exchanges are an accurate measure of the difference (VII). 6. There has certainly been an increase of wealth in our own country in recent years, but it has not necessarily been accompanied with an increased rate of profits (V, cf. XX). In Letters XV to XXI the following are the chief propositions:-- 1. Restrictions on the importation of corn by keeping up the price of necessaries have a tendency to lower profits (XV), unless, indeed, they are followed by a great reduction of capital (XVI, XVII). 2. The only cause of permanently high or low profits is the facility of procuring necessaries, for on that mainly depends the rate of wages (XVI, XVIII, XIX, XX, XXI, cf. V, and for qualification LXXIX, LXXX). 3. Other causes, such as bad harvests, new taxation, changes in demand, or excessive accumulation, are merely temporary (XX, XXI, cf. Ricardo's Pol. Econ. and Tax., ch. vi. 'On Profits'). 4. Improvements in agriculture or machinery by increasing productiveness permanently increase profits (XX, cf. V and XXIII). To these may be added-- 5. Consumption and accumulation equally promote demand, and are both of them ineradicable tendencies of our nature, the one adding to our enjoyments, the other to our power (XIX). 6. Accumulation increases not only production, but consumption (XXI). 7. It is worth while to establish the truth of a principle, even if we cannot establish its utility (XXI). In Letters XXIII to LXVIII, and in LXXVIII to LXXX, the positions are as follows:-- 1. By importing cheap foreign corn the public saves the whole difference in price (XXIII, XXIV). 2. It must be allowed that the prices of articles, besides varying with the amount of necessary labour bestowed on them, vary with the value of their raw material (XXV). 3. Apart from changes in the currency, a rise in the price of corn and a fall in the corn wages of labour, would be a contradiction (XXVI). 4. It follows from the principle of Population that the rate, as distinguished from the amount, of agricultural production, grows not greater, but less, when the increase of population drives agriculture to the cultivation of poorer soils (XXVII, XXVIII, cf. XLIX). 5. This means that the whole cost in corn will be greater in proportion to the whole produce of corn, and, though the whole cost in money may be less in proportion to the whole produce in money, the rate of profits from farming will fall (XXIX). 6. A tax on home corn raises prices twice over, and should be accompanied by a countervailing duty, not necessary in other cases (XXIX). 7. In order of time, the increased price of corn comes first, and the costly cultivation second, but this increase of farmers' profits may be due to a fall in general profits that is itself caused by the increased price of corn (XXIX). 8. The progress of wealth has a tendency to lower profits and increase rent (XXIX). 9. Mere increase in quantity of corn will not prevent increase in price if the numbers of consumers have increased in equal or greater proportion. So it will be one day in America (XXX). 10. A rise in the price of corn will not be followed by a rise in the price of other commodities, but by a fall in profits (XXXI, XXXIV, XXXV). 11. An addition of rich land to our island would reduce the price of corn by reducing the cost of raising the total supply of corn; and it would not raise the value of manufactured goods (XXXII). 12. High prices, whether caused by depreciation of money or by difficulty of production, are not a public benefit; in the first case, they are a cause of distress, especially to the working classes; in the second, they are a sign but not a cause of prosperity (XXXIII, XXXIV). 13. Facility of production includes skill and appliances as well as fertility of soil, and in that sense, when suddenly introduced in a fertile country, it would for some time extinguish rent (XXXVI). 14. There is no real distinction between productiveness of industry and productiveness of capital; and in the progress of society both of them will diminish, and rents will increase (XXXVI). 15. Wages do not rise when labour is productive unless the productiveness of the labour gives rise to a new capital that demands new labour (XXXVII). 16. There can be no such demand for new labour unless there is a reduction in the value of food (XXXVII). 17. The only permanent cause of diminished demand for capital is the increased price of food (XXXVIII). 18. Low prices are not necessarily a discouragement to production (XXXIX). 19. The need of cultivating less productive soils is the cause of higher nominal and lower real wages (XLII), and it is the only cause in constant and permanent operation (XLVIII, cf. LXIX). 20. Profits depend on wages; wages on the supply and demand of labour, and on the cost of the labourers' necessaries (XLIX). 21. Profits will therefore rise if the last are easily produced, unless through stationariness of population demand for labour has increased (L). 22. In two lands with equal capital and equal population, but with different fertility of soil, profits would differ in favour of the more fertile (L). 23. The rate of interest is no sure indication of the rate of profits; and a low rate of interest may co-exist with a low rate of wages and a high rate of profits (LXIII). 24. Profits cannot be said to depend on 'the proportion which capital bears to labour,' for, where profits were lowest, most capital would be needed to produce a given return, and, where highest, least, in proportion (LI). 25. By a rise in the value of money it is possible (though not probable) that a reduced cost of labour, materials, and machinery might be followed by an increase instead of a reduction, in their money value (LXIII). 26. A dearth may increase profits and wealth by making labour cheap (LXIII). 27. Free trade in corn may increase the amount of profits more than a policy of Restriction may increase the amount of Rents (LXVII, cf. LXX). 28. Rent is always a transfer, and never a creation of wealth (LIII, LXVIII). 29. There cannot be two rates of profit at the same time in the same country (LXXVIII), nor under free trade could there be a very different rate in different countries, the cost of necessaries and therefore the rate of wages being brought nearly to a level, allowance being made for differences between one country and another in regard to the standard of living (LXXIX). It seems impossible that under free trade a fertile country, unless agriculture were its sole and only industry, and its capital were small, would long continue to sell its corn at the high prices of its less favoured rivals; the prices would fall to cost price (LXXX). In Letter LXV, and in Letters LXIX to LXXVII, the positions are as follows:-- 1. Natural Price should not be described as depending, like Market Price, on Supply and Demand, for it can never permanently fall below or rise above the expenses of production (LXV). 2. A universal over-production is impossible (LXXII, LXXVII), and a glut of particular articles may be cured by a cessation in the production of those articles (LXXII); a 'superior genius' might so lay out our capital even now, that all might be prosperous (LXXIII). 3. It is not demand, but supply, which regulates value, and supply is itself determined by comparative cost of production (LXXIII, LXXIV). 4. If all labour and capital were devoted to production of necessaries, there might then be an over-supply or general glut, of them; but in no other case is such a glut possible (LXXIV, LXXVII). 5. Over-production tends to cure itself by destroying profits, and thereby removing the producer's motive for production. But production could not go on when this point had been reached, and therefore the over-production could not last (LXXVI). 6. The remedy would be not the greater consumption of non-producers, but the payment of lower wages, which means the securing of higher profits by the producers. When wages are excessive, the labourers are the unproductive consumers, and the employers who pay them are thereby causing instead of curing the over-production (LXXVI, LXXVII). 7. A diminished demand for labour may mean, not the employment of fewer men, but the payment of lower wages (LXXVII). In Letters LXXVIII to LXXXVIII the positions are:-- 1. It is better to take, as a Measure of Value, some foreign commodity [like gold], the cost of producing which is nearly invariable, than to estimate either by the amount of labour or by the amount of corn or of other goods generally that will be purchased by the article measured (LXXVII, LXXVIII). 2. There is nothing in the said labour which fits it to be a better measure of value than anything else; but, on the contrary, to use it as a measure is to involve ourselves in paradoxes (LXXXIII, LXXXV to LXXXVIII). 3. There cannot be an absolute or universal measure of value, for there is no uniformity in the conditions under which commodities are produced, the time taken and the proportion and durability of the capital employed being, for example, very different (LXXXIV). LETTERS OF DAVID RICARDO TO THOMAS ROBERT MALTHUS. I. STOCK EXCHANGE, _25th Feb., 1810_. MY DEAR SIR, I have just time, after a very busy day, to tell you that I will endeavour to get Mr. Mushet[28] to meet you at my house at breakfast on Sunday morning. At any rate I shall expect you, and, if Mushet is engaged, I shall be able to tell you whether he will meet us on Monday or Tuesday in the City. He is exceedingly obliging, and would I am sure not mind trouble if he could contribute to throw light on the subject of exchanges, yet I think he will not be inclined to publish anything under his own name as he gave great offence to the higher powers on a former occasion. You have clearly stated the point of difference now between us; I think we never so well understood each other before. There are some causes which operate on the exchange which are in their nature of transitory duration; there are others which have a more permanent character. If we agree that a change of taste in one country for the commodities of the other,--and the transmission of a subsidy will produce certain effects on the exchange,--the only question between us is as to their duration. I am of opinion that they will operate for a very considerable time and that in fact recourse is not had to bullion but as a last resort. I cannot believe that you give a correct account of your habits of application any more than you did of your memory when I last saw you. From all my observations I should have been led to the very opposite conclusions from those which you have formed; and I believe most of your friends would be of my opinion. When you have once fairly begun, I expect that you will advance at a giant's pace. I beg you to remember me kindly to Mrs. Malthus. I am, my dear Sir, Yours very truly, DAVID RICARDO. II. STOCK EXCHANGE, _22 March, 1810_. MY DEAR SIR, Mrs. Ricardo is expecting Mrs. Malthus to accompany her on Friday next to Knyvett's concert, and will, I am sure, be very much disappointed at the information which I am to give her that she will not be able to accompany you to town. I will not however quite give up all hopes of seeing her. You must positively not think of leaving us before Tuesday. I have engaged several of your friends to meet you at dinner on Monday, and I not only advance my own claims but those of Mr. Wishaw[29], Mr. Sharp[30], Mr. Tennant[31], and Mr. Dumont[32]. I have been making enquiries concerning a bullion merchant. I find that the trade is mostly carried on by a class of people not particularly scrupulous in their modes of getting money, and I am told that they would not be very communicative, particularly on the subject of their _exports_. There are however some well-informed merchants who know a great deal of the trade without themselves being actively engaged in it, to whom I hope I shall be able to introduce you. I do not admit that if you were to double the medium of exchange it would fall to half its former value, not even if you were also to double the quantity of metal which was the standard of such medium. The consumption would increase in consequence of its diminished value, and the fall of its value would be regulated precisely by the same law as the fall in the value of indigo, sugar, or coffee. Mr. Mushet will dine with us on Sunday. What do you think of Mr. Vansittart's financial talents? Yours very truly, DAVID RICARDO. NOTE.--Speaking in the House of Commons on Agricultural Distress, on May 7, 1822, Ricardo gives an illustration which bears on some points in the foregoing and following letters: 'Suppose my own case. I am possessed of a considerable quantity of land, the whole unburthened with a single debt. Now according to the honourable member (Mr. Attwood) I and the tenants on that land would have only been injured to the amount of the increase which the change in the value of money has made in the burthen of taxation; but we are in point of fact injured much more.' 'The superabundant supply' has caused a sinking in the value of corn greater than in proportion to the additional quantity itself. To understand why, take the case of a commodity introduced for the first time, say a particular kind of superfine cloth: 'If 10,000 yards of this cloth were imported, under such circumstances, many persons would be desirous of purchasing it, and the price consequently would be enormously high. Suppose this quantity of cloth to be doubled; the aggregate value of the 20,000 yards would be much more considerable than the aggregate value of the 10,000 yards, for the article would still be scarce and therefore in great demand. If the quantity of cloth were to be again doubled, the effect would still be the same, for, although each particular yard of the 40,000 would fall in price, the value of the whole would be greater than that of the 20,000. But, if they went on in this way increasing the quantity of the cloth until it came within the reach of the purchase [_sic_] of every class in the country, from that time any addition to its quantity would diminish the aggregate value. This argument would apply to corn. Corn is an article which is necessarily limited in its consumption, and, if you went on increasing it in quantity, its aggregate value would be diminished beyond that of a smaller quantity. I make an exception in favour of money. If there were only £100,000 in this country, it would answer all the purposes of a more extended circulation; but, if the quantity were increased, the value of commodities would alter only in proportion to the increase, because there is no necessary limitation of the quantity of money [wanted].' (Cf. Letter III, p. 3.) So on June 12th he says: 'Quantity regulates the value of everything,' though it is also true (he says in a speech of May 9, 1822) 'that the price of every commodity is constituted by the wages of labour and the produce [_sic_] of stock.' III. STOCK EXCHANGE, _24 March, 1810_. MY DEAR SIR, I have left you quite free for Friday, but I regret that your engagements will not conveniently allow you to come to us on that day. We shall expect you on Saturday morning. I hope Mrs. Malthus' visit will not be deferred longer than the next meeting of the King of Clubs[33]. It appears to me that you ascribe the difference in the variations of price which would probably be the effect of doubling the quantity of coffee, sugar, or indigo, on [the] one hand, or of doubling the quantity of the precious metals on the other, to a wrong cause. Coffee, sugar, and indigo are commodities for which, although there would be an increased use if they were to sink much in value, still, as they are not applicable to a great variety of new purposes, the demand would necessarily be limited; not so with gold and silver. These metals exist in a degree of scarcity, and are applicable to a great variety of _new_ uses; the fall of their price, in consequence of augmented quantity, would always be checked, not only by an increased demand for those purposes to which they had before been applied, but to the want of them for entirely new employments. If they were in sufficient abundance, we might even make our tea-kettles and saucepans of them. It is to this essential difference between these commodities, and not to the circumstance of one of them being employed as a circulating medium, that I should attribute the different effects which would follow from the augmentation of their quantity. In any point of view however I do not see how it bears materially on the question between us, namely whether the precious metals are frequently resorted to for the payment of debts between countries when no disturbance has taken place in the amount or proportion of the currency. I wonder as you do that the stocks have not felt the effects of Mr. Vansittart's vigorous system. The delay which has taken place in creating new stock, the good news from abroad, and, above all, the want of reflection in the mass of stockholders may be considered as the cause. Ever truly yours, DAVID RICARDO. NOTE.--'The King of Clubs' is described in the Life of Sir James Mackintosh, (by his son,--2nd ed. 1836), vol. i. p. 137 (under date 1800): 'As an agreeable rallying point in addition to the ordinary meetings of a social circle, a dinner-club (christened "The King of Clubs" by Mr. Robert Smith [Bobus, brother of Sydney Smith]), was founded by a party at his [Mackintosh's] house, consisting of himself [Mackintosh] and the five following gentlemen, all of whom still survive:--Mr. Rogers, Mr. Sharp, Mr. Robert Smith, Mr. Scarlett, and Mr. John Allen. To these original members were afterwards added the names of many of the most distinguished men of the time; and it was with parental pride and satisfaction that he received intelligence some time after of their "being compelled to exclude strangers and to limit their numbers, so that in what way 'The King of Clubs' eats, by what secret rites and institutions it is conducted, must be matter of conjecture to the ingenious antiquary, but can never be regularly transmitted to posterity by the faithful historian."'--The biographer adds in a note that the Club was suddenly dissolved in the year 1824. Some of the most distinguished members are enumerated, among them Ricardo (l. c. p. 138 _n._). To judge by a letter of Mackintosh to Sharp on 29th June, 1804, the Club at that date included (besides the writer and his correspondent) only Sydney Smith, Scarlett, Boddington, the poet Rogers, Whishaw, and Horner (Mack. Life, vol. i. 209). The time of meeting seems to have been the first Saturday of every month. See below Letter XLIV, but cf. XLIII. Add Memoirs of Horner, i. 193, under date April 1802, and Holland's Memoir of Sydney Smith i. 91, &c. IV. LONDON, _10 Aug., 1810_. MY DEAR SIR, On my return to London, after a short excursion to Tunbridge Wells, I found your obliging letter.... On further reflection I am confirmed in the opinion which I gave with regard to the effect of opening new markets or extending the old. I most readily allow that since the war not only the nominal but the real value of our exports and imports has increased; but I do not see how this admission will favour the view which you take of the subject. England may have extended its carrying trade with the capital of other countries. Instead of exporting sugar and coffee direct from Guadaloupe and Martinique to the continent of Europe, the planters in those colonies may first export them to England, and from England to the continent. In this case the list of our exports and imports will be swelled without any increase of British capital. The taste for some foreign commodity may have increased in England at the expense of the consumption of some home commodity. This would again swell the value of our exports and imports, but does not prove a general increase of profits nor any material growth of prosperity. I am of opinion that the increased value of commodities is always the effect of an increase either in the quantity of the circulating medium or in its power, by the improvements in economy [in] its use [_sic_][34],--and is never the cause[35]. It is the diminished value, I mean nominal value, of commodities, which is the great cause of the increased production of the mines; but the increased nominal value of commodities can never call money into circulation. It is certainly an effect and not a cause. I am writing in a noisy place; you must therefore excuse all blunders. I must offer the same apology for my two half sheets[36]. I did not like to copy the first half over again. With best compliments to Mrs. Malthus, I remain, Yours very sincerely, DAVID RICARDO. V. STOCK EXCHANGE, _17 Aug., 1810_. MY DEAR SIR, ... I cannot deny myself the pleasure of accepting your kind invitation for Saturday next. I will be with you at the usual hour. That we have experienced a great increase of wealth and prosperity since the commencement of the war, I am amongst the foremost to believe; but it is not certain that such increase must have been attended by increased profits, or rather an increased rate of profits, for that is the question between us. I have little doubt however that for a long period, during the interval you mention[37], there has been an increased rate of profits, but it has been accompanied with such decided improvements of agriculture both here and abroad, for the French Revolution was exceedingly favourable to the increased production of food, that it is perfectly reconcileable to my theory. My conclusion is that there has been a rapid increase of capital, which has been prevented from showing itself in a low rate of interest by new facilities in the production of food. I quite agree that an increased value of particular commodities occasioned by demand has a tendency to occasion an increased circulation, but always in consequence of the cheapness of some other commodities. It is therefore their cheapness which is the immediate cause of the introduction of additional money. I have not been home since I received your letter. I will look at the passage you refer me to in Adam Smith[38], and will consider of the other matters in your letter, so as to be prepared to give you my theory when we meet. The facts you have extracted from Wetenhall's tables are curious[39], and are hardly reconcileable to any theory. I attribute many of them to the state of confusion into which Europe has been plunged by the extent and nature of the war; and it would be quite impossible to reason correctly from them without calculating what the state was of the real as well as the computed exchange during the periods referred to. Pray make my best respects to Mrs. Malthus, and believe me, Truly yours, DAVID RICARDO. VI. DEAR SIR, I lose no time in answering your obliging letter and endeavouring as far as lies in my power to remove the very few objections which prevent us from being precisely of the same opinion on the subject of money and the laws which regulate its value in the countries which have constant commercial intercourse with each other. I have no view in this discussion but that which you have avowed, the circulation of truth; if therefore I should fail to convince you, and you should express your opinions in print, it is immaterial to me whether you mention my name or not. I trust you will do that which shall most fully tend to establish the just principles of the science. There does not appear to me to be any substantial difference between bullion and any other commodity as far as regards the regulation of its value and the laws which determine its exportation or importation. It is true that bullion, besides being a commodity useful in the arts, has been adopted universally as a measure of value and a medium of exchange; but it has not on that account been taken out of the list of commodities. A new use has been found for a particular article; consequently there has been an increased demand for it and an augmented supply. This new use has made every man a dealer in bullion; he buys it to sell it again, and the general competition of all these dealers will as surely, and as strictly, regulate its value in every country, as the competition of the same or other dealers will regulate the value of all other commodities. I have your sanction for calling every purchaser of commodities a dealer in bullion; and, though in the language of commercial men the sellers of money are in all cases called purchasers, it is not on that account less true that they are sellers of one commodity and purchasers of another. The nature of corn was not changed by the discovery that a new use might be made of it by fermentation and distillation; and, if we should hereafter discover that it might be used for a hundred other purposes, contributing to the comforts and enjoyments of mankind, the demand for it would increase, and its price would in the first instance be considerably augmented; but this would be the only change it would undergo; it would continue to be imported and exported by the same rules as every other commodity. I have no doubt that on this point we should not differ; it remains therefore for you to show why the new uses, to which gold has been applied in consequence of its being adopted as the money of the world, should exempt it from the general law of competition, and why it should not certainly and invariably (invariably only as that term is applied to other commodities) seek the most advantageous market. It is probable that the word 'redundancy' has not been happily chosen by me to express the impression made on my mind of the cause of an unfavourable balance of trade; but on looking over the article in the Review[40] I find that you use it precisely in the sense in which I wish to convey my meaning, for you admit that a relatively redundant currency may be, and frequently is, a cause of an unfavourable balance of trade; but you contend that it is not the only cause. Now I, so understanding the word, contend that it is the invariable cause. This relative redundancy may be produced as well by diminution of goods as by an actual increase of money (or which is the same thing by an increased economy in the use of it) in one country; or by an increased quantity of goods or by a diminished amount of money in another. In either of these cases a redundancy of money is produced as effectually as if the mines had become more productive. I do not deny that temporary fluctuations do occur in the value of the precious metals; on the contrary I maintain that those fluctuations never cease; but I attribute them all to one cause, namely a redundancy of the currency produced in one of the ways above mentioned, and not to the demand for particular commodities. These demands are in my opinion regulated by the relative state of the currency; they are not causes but effects. You appear to me not sufficiently to consider the circumstances [which] induce one country to contract a debt to another. [In] all the cases you bring forward you always suppose the [deb]t already contracted, forgetting that I uniformly contend that it is the relative state of the currency which is the motive to the contract itself. The corn, I say, will not be bought unless money be relatively redundant; you answer me by supposing it already bought and the question to be only concerning the payment. A merchant will not contract a debt for corn to a foreign country unless he is fully convinced that he shall obtain for that corn more money than he contracts to pay for it, and, if the commerce of the two countries were limited to these transactions, it would as satisfactorily prove to me that money was redundant in one country as that corn was redundant in the other. It would prove too that nothing but money was redundant. If indeed sugar were exported by some other merchant, the debt for corn would be paid without the exportation of money, and I should say that sugar was the redundant commodity; and the exportation of sugar, the more redundant commodity, by diminishing the aggregate amount of commodities, would raise the value of money, so that in a short time money would, if corn continued to be imported and sugar exported, no longer be redundant even as compared with corn. Your observation is just, concerning the extra expenses attending the exportation of bulky commodities; but in all these discussions we must suppose these expenses to make part of the price of the commodity; our comparison is made on the prices at which the importer could afford to sell them, and those prices necessarily include expenses of every sort. I do not think that the knowledge of the computed exchange of Jamaica would throw any light on the subject in dispute[41]. I will, however, endeavour to learn every particular concerning it, and hope to be able on Saturday next to pay you a visit in Hertfordshire, when we will further discuss these seeming difficulties. I am, dear Sir, with great respect, Your obedient Servant, DAVID RICARDO. THROGMORTON STREET, _18th June, 1811_. VII.[42] DEAR SIR, I have been so much engaged since I had the pleasure of receiving your letter that I have not had an opportunity of answering it till this evening. The information which you are desirous of obtaining respecting the premium on bills in Jamaica from the year 1808 to the present period, I will endeavour to procure, but, as these transactions all take place in Jamaica, and as the merchants here are frequently not acquainted with the prices at which the bills remitted to them are negociated, I am not sure that I shall be successful. I very much regret that there is so little probability of our finally agreeing on the subject which has lately engaged our attention. The definition which you give of the word 'redundant,' as applied to the currency, is not satisfactory to me. Though it should be allowed that the rise in the price of one commodity, in the case of a scarcity of corn, should be accompanied with a fall in the prices of all others, why should a redundancy of currency be impossible under such circumstances? The currency must, I apprehend, be considered as a whole, and as such must be compared with the whole of the commodities which it circulates. If then it be in a greater proportion to commodities after than before the scarce harvest, whilst no such alteration has taken place in the proportions between money and commodities abroad, it appears to me that no expression can more correctly describe such a state of things than a 'relative redundancy of currency.' Under these circumstances not only money but every other commodity would become comparatively cheap as compared with corn, and would therefore be exported in return for the corn which would be in demand in this country. By relative redundance then I mean, relative cheapness, and the exportation of the commodity I deem, in all ordinary cases, the proof of such cheapness. Indeed, from one who allows that the amount of money employed in any country is regulated by its value, and might therefore be comparatively redundant though it consisted only of a million, or deficient though it amounted to a hundred millions, I should not have expected any difference of opinion on the comparative cheapness of money being the only satisfactory proof of its redundance. If however I thought that the difference between us was as to the correct use of a word, I should immediately yield the point in dispute, but I am persuaded that we do not agree in the principle. You are of opinion that a bad harvest will raise the price of corn, but will lower in some degree the prices of other commodities. Whether it would or would not do so is not material; but, if your opinion is correct, then I say there would be no exportation of money, because money would not be the cheapest exportable commodity. If, before the deficient harvest, money was at the same value in any two countries, that is to say all their exportable commodities without exception were at the same prices in both, then, according to your view of the question, after the scarcity the prices of all commodities would fall in the country where such scarcity occurred. Whilst then the prices were unequal in the two countries, commodities only would be exported in exchange for corn, and there would be no question between us, because we differ as to the cause of the exportation of money. You have indeed said that there may be a glut of commodities in the foreign market. What! a glut of commodities with a dearer price! impossible,--these two circumstances are incompatible. If the price of any commodity had been £20 in both countries and in consequence of the bad harvest it had been lowered to £15 in one of them, there could not be a glut of that commodity in the other country till it had there also fallen to £15. Not only must the price of one commodity fall in the foreign market, but the prices of all (because you suppose them all to have fallen in England) before money could be exported in exchange for corn, and then I would allow that money would be exported, but even then it would be so only because it was more cheap on the whole, as compared with commodities in the exporting country, and this I contend is the proof of its relative redundance. You maintain that money is rendered cheap by a bad harvest as compared with corn only, but with all other commodities it is dearer than before,--and then, what appears to me very inconsistent, you insist that this commodity thus rendered scarce and dear will be exported, though, before it had increased in value, it had no tendency to leave us, whilst too there are commodities which have undergone an opposite change, which from being dearer have become cheaper, and which will nevertheless be obstinately retained by us. This is a mode of reasoning which I cannot reconcile. With respect to the other point, namely, that the exchange accurately measures the depreciation of the currency[43], I cannot but humbly retain that opinion notwithstanding the high authorities against me. I do not mean to contend that a convulsed state of the exchange, such as would be caused by a subsidy granted to a foreign power, would accurately measure the value of the currency, because a demand for bills arising from such a cause would not be in consequence of the natural commerce of the country. Such a demand would therefore have the effect of forcing the exports of commodities by means of the bounty which the exchange would afford. After the subsidy was paid the exchange would again accurately express the value of the currency. The same effects would follow, as in the case of a subsidy, from the foreign expenditure of Government. These have a natural tendency to create an unfavourable exchange, yet if the demand for bills is regular it is surprising how this bounty on exportation will be reduced by the competition amongst the exporters of commodities. I am of opinion that in the ordinary course of affairs, if, from any of the circumstances so often mentioned, there should be a slight alteration in the value of the currencies of any two countries, it will speedily be communicated to the exchange; and, if such a state of things should permanently continue, the exchange has no tendency to correct itself. The fact however appears to be that there is no degree of permanence in the proportions between the currencies and the commodities of nations,--they are subject to constant fluctuations always approaching an absolute level but never really finding it. I hope I have not wearied you with the defence which I have endeavoured to make for the opinions which I have imbibed. I assure you that I am not obstinately attached to any system, but am ready to relinquish any views I may have taken as soon as I am satisfied that they are incorrect. I shall not fail attentively to consider the chapters in Sir J. Steuart's work which you have mentioned[44]. I hope before the summer is over to pay you a visit at Hertford. I am, dear Sir, Yours very sincerely, DAVID RICARDO. NEW GROVE, MILE END, _17 July, 1811_. VIII. DEAR SIR, I hoped long ere this to have had the pleasure of seeing you in London. I am anxious for an opportunity of introducing Mrs. Malthus and Mrs. Ricardo to each other, and I shall certainly claim the half promise which Mrs. Malthus made me on that subject when I experienced your hospitality at Hertford. We have few engagements, and have a bed always at your disposal, so that I shall hope on your very first visit to London you will favour me by occupying it. A friend of mine has been writing on the subject of bullion. I take the liberty of sending you the MS[45]. If you could look over it and give me your opinion of it you will much oblige me. He would be induced to prepare it for the press if he thought that the mode in which the argument is put is more likely to silence our adversaries and convince those who are not our adversaries than the mode in which it has been put by any other person. Should you be so engaged that you cannot devote your attention to it at the present time, use no ceremony with me, but return the MS. by the coach, directed to me at No. 16 Throgmorton Street. With best respects to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. STOCK EXCHANGE, _17th Oct., 1811_. IX. THROGMORTON STREET, _22nd Oct., 1811_. DEAR SIR, I am exceedingly obliged to you for the trouble which you have taken in looking over the papers which I sent you, and for the remarks which you have made upon them. Notwithstanding your flattering encouragement I think I shall not have sufficient confidence again to address the public;--the object which I had in view is completely attained,--the public attention has been awakened, and the discussion is now in the most able hands. I regret, however, that you cannot bring yourself to subscribe to my doctrine respecting the exchange being influenced by no other causes but by the relation which the amount of currency bears to the uses for which it is required in the different nations of the earth. This may proceed from your interpreting my proposition somewhat too rigidly. I wish to prove that if nations truly understood their own interest they would never export money from one country to another but on account of comparative redundancy. I assume indeed that nations in their commercial transactions are so alive to their advantage and profit, particularly in the present improved state of the division of employments and abundance of capital, that in point of fact money never does move but when it is advantageous both to the country which sends and the country that receives that it should do so. The first point to be considered is, what is the interest of countries in the case supposed? The second what is their practice? Now it is obvious that I need not be greatly solicitous about this latter point; it is sufficient for my purpose if I can clearly demonstrate that the interest of the public is as I have stated it[46]. It would be no answer to me to say that men were ignorant of the best and cheapest mode of conducting their business and paying their debts, because that is a question of fact not of science, and might be urged against almost every proposition in Political Economy. It rests with you therefore to prove that a case can exist where it may become the _interest_ of a nation to pay a debt by the transmission of money rather than in any other mode, when money is not the cheapest exportable commodity,--when money (taking into account all expenses which may attend the exportation of different commodities as well as money) will not purchase more goods abroad than it will at home. You appear to me to have repeatedly admitted that it is the relative prices of commodities which regulates their exportation. Is it not then as certain that money will go to that country where the major part of goods are cheap, as that goods will go to any other country where the major part are dear? I say the major part, because if the cheapness of one half of the exportable commodities be balanced by the dearness of the other half, in both countries, it is obvious that the commerce of such countries will be confined to the exchange of goods only. When you say that money will go abroad to pay a debt or a subsidy, or to buy corn, although it be not superabundant, but at the same time admit that [it] will speedily return and be exchanged for goods, you ap[pear to me] to concede all for which I contend, namely, that [it will] be the _interest_ of both countries, when money is not superabundant in the one owing the debt, that the expense of exporting the money should be spared, because it will be followed by another useless expense,--sending it back again. If in any country there exists a dearness of importable commodities and no corresponding cheapness of exportable commodities, money in such country is above its natural level and must infallibly be exported in payment of the dear commodities,--but what does this state of things indicate but an excess of currency, and it may surely be correctly said that money is exported to restore the level not to destroy it. I ought to apologise for again troubling you with my opinions, but you have drawn me into it. I shall be happy to renew our conversation on these disputed points as soon as you can make it convenient to visit us in London, and I trust it will not be long before Mrs. Malthus and you will favour us with your company. On some future day I shall have great pleasure in again visiting you at Hertford. I am, dear Sir, Yours very truly, DAVID RICARDO. X. NEW GROVE, MILE END, _22nd Dec., 1811_. MY DEAR SIR, I write to you, in the first place, to remind you that Mrs. Ricardo and I fully depend on having the pleasure of Mrs. Malthus' and your company at Mile-end in the next month, when we hope that our endeavours to make your visit comfortable will induce you to make a long stay with us. In the second place, I am desirous of correcting some of the errors in the papers which I left with you and which I have been enabled to discover, as I have many others, by the ingenious arguments with which you have opposed my conclusions. In my endeavours to trace the effects of a subsidy[47] in forcing the exportation of commodities, I stated, if I recollect rightly, that it would occasion, first, a demand for bills; secondly, an exportation of all those commodities the prices of which already differed so much, in the two countries, as to require only the trifling stimulus which the first fall in the exchange would afford; thirdly, a real alteration in the relative state of prices, viz. a rise in the exporting and a fall in the importing country,--in a degree too to counterbalance the advantage from the unfavourable exchange; and lastly, a further fall of the exchange and a consequent exportation of an additional quantity of goods and then of money till the subsidy were paid. It appears, then, that if the subsidy were small it would be wholly paid by the exportation of commodities, as the fall in the exchange would be sufficient to encourage _their_ exportation, but not sufficient to encourage the exportation of money. If the exportation of money were in the same proportion as the exportation of commodities, that is to say, supposing the commodities of a country to be equal to 100, and its money equal to two, then if not less than one fiftieth of the exports in payment of the subsidy consisted of money, prices would after such payment be the same as before in both countries, and, although the exchange must have fallen to that limit at which the exportation of money became profitable, it would immediately have a tendency to recover, and would shortly rise to par; but it is precisely because less than this proportion of money will be exported that the exchange will continue permanently unfavourable and will have no tendency to rise, more than it will have to fall. I believe you admit, that in the case of an augmentation of 2 per cent. to our currency, although it were wholly metallic, the prices of commodities would rise in this country 2 per cent. above their former level, and that such rise being confined to this country alone it would check exportation and encourage importation; the consequence of which would be a demand for bills and a fall in the exchange. This rise of prices and fall of the exchange, proceeding from what you do not object to call a redundant currency, would not be temporary but permanent, unless it were corrected by a reduction of the amount of the currency here, or by some change in the relative amount of the currencies of other countries. That these would be the effects of a direct augmentation of currency, I believe, you, with very few qualifications, admit. Now, as a bad harvest or the vote of a subsidy tend [_sic_] to produce the very same effects, namely, a relative state of high prices at home, accompanied by an unfavourable exchange, they admit only of the same cure,--and, as in the case of an augmentation of currency the exchange would have no tendency to rise, neither would it in the case of a subsidy, the unfavourable exchange being in both instances produced by a redundant currency, or in more popular language by a relative state of prices which renders the exportation of money most profitable[48]. I have uniformly maintained that the money of the world is distributed amongst the different countries according to their commerce and payments, and that, if in any country it should from any cause happen to exceed that proportion, the excess would infallibly be exported to be divided amongst the other countries. I have, however, always supposed that my readers would understand me to mean that this would be strictly the fact only if money could be exported free from all expense. If the expenses of exporting money to France be 3 per cent., to Vienna 5 per cent., to Russia 6 per cent., and to the East Indies 8 per cent., the currency of England may exceed its natural level as compared with those countries by 3, 5, 6, and 8 per cent. respectively, and consequently the exchange may permanently continue depressed in th[ose pr]oportions. If an excess of currency once occurs, [the unfa]vourable exchange must continue till some alterati[on in] the relative amount of currency. The circumstances which [may] occasion such an alteration are numerous, and are fully detailed in the papers which I left with you. To the precise agreement between the effects of an augmented currency and the effects of a subsidy I most particularly request your attention, as on such agreement depends the whole success of the argument which I am advancing in favour of my opinion that an unfavourable exchange has no tendency to correct itself. It may be urged that the relative state of high prices at home occasioned by an augmentation of currency is the natural effect of such a cause, but that this is not the case in a subsidy; that the exportation of commodities in payment of a subsidy is forced, and that it will produce a glut in the foreign market, but that after the subsidy is paid and the necessity for exportation shall cease prices will rise in the foreign market to their former rate. This however will not be true. Commodities may rise in a trifling degree abroad, but cannot regain their former rate unless the exchange should also rise to par, but this it can never do whilst the demand for bills do[es] not exceed the supply. Now, as the prices of foreign commodities in the home market, which could not have been supplied in the usual abundance during the operation of the subsidy when we had a large balance to pay, would fall, and would be in greater demand from the moment that our commodities would be received in exchange, the exportation of our goods would be balanced by the importation of foreign goods, and the sellers of bills would neither exceed nor fall short of the purchasers. These are the substance of the amendments which I wish to make to my paper, which is now so faulty that I shall be glad to have it returned to me. Have the goodness to bring it with you when you come to town. I am, dear Sir, Yours with great esteem, DAVID RICARDO. XI[49]. LONDON, _29th, August, 1812_. MY DEAR SIR, I intend leaving town this evening for Ramsgate, where I think I shall stay about a fortnight, so that I cannot accept your kind invitation for Saturday next; but I hope it will not be long before I bend my steps towards your hospitable roof. If on Saturday the 19th of September you should be quite disengaged and it should be every way convenient to you and Mrs. Malthus, I shall be glad to take tea with you on the evening of that day. I shall be obliged to quit you on the Monday morning. I hope I need not say that I shall be exceedingly sorry if I put you to the least inconvenience and that it will be equally agreeable to me to visit you on any Saturday after the 19th if I am not engaged to go to Ramsgate. Perhaps you will be so good as to write a few lines directed to the Stock Exchange a few days previously to the 19th as I shall certainly be in town at that time. I am obliged to you for the interest you take in the price of Omnium. It appears to be in a very thriving condition. Mr. Goldsmid[50] informs me that at the period of the improvement in the exchange about Christmas last there were no importations, as far as he knows, of gold from France. A small quantity was imported from Lisbon. I have consulted Wetenhall's list[51], and the following appear to be the variations in the exchange and the price of gold about Christmas last. +----------+----------+-------------+-------------+ | | | | | | | Exchange | Doubloons, | Portuguese | | | with | per oz. | gold, | | | Hamburg. | | [per. oz.] | | | | | | +----------+----------+-------------+-------------+ | | | | | | 1811. | | £ _s._ _d._ | £ _s._ _d._ | | Nov. 29 | 24 | 4 15 0 | | | Dec. 3 | 24·6 | | 4 18 6 | | " 6 | 24·6 | 4 14 6 | 4 18 6 | | " 13 | 25 | 4 15 6 | | | " 20 | 25 | | 4 19 0 | | " 31 | 27·6 | | | | 1812. | | | | | Jan. 3 | 27·6 | 4 14 0 | 4 18 6 | | " 31 | 27·6 | | 4 18 6 | | Feb. 21 | 28 | | 4 17 0 | | Mar. 20 | 29 | | 4 15 6 | | " 31 | 29·4 | 4 14 6 | 4 13 6 | | April 21 | 29·4 | 4 17 6 | 4 17 6 | | June 5 | 28·6 | | 4 18 6 | | July 31 | 28·9 | 4 19 0 | 5 0 0 | | Aug. 28 | 28·9 | 5 0 0 | | | | | | | +----------+----------+-------------+-------------+ The price of dollars yesterday was 6/3½ per oz., higher by one penny than any price ever yet quoted. I should think that a very trifling rise more will send the tokens out of circulation. We will speak on our old subject when we meet. I am now in great haste and must therefore conclude. Pray make my kind compliments to Mrs. Malthus, And believe me, my dear Sir, Yours very truly, DAVID RICARDO. [At the end is written in pencil in Malthus's handwriting, 'Was any bullion imported from Hamburg in March?'] XII. LONDON, _17 Dec., 1812_. MY DEAR SIR, I have written to Mr. Thornton[52] to request him to meet you at dinner, at my house, on any day most convenient to him, after Saturday and before Thursday, but I have not had his answer in time for this day's post. I will send you a line at the King of Clubs. I shall only ask Mr. Sharp to meet us. Will you not stay with us whilst you are in town? I assure you it would be quite convenient, and it would afford me great pleasure. If Mrs. Malthus accompany you it will be still more agreeable, and I am desired by Mrs. Ricardo to add her solicitations to my own. On many points connected with our old question we are I believe agreed,--though there is yet some difference between us. I have not lately given it so much consideration as you have,--and I always regret that I do not put down in writing, for I have a very treacherous memory, the chief points of difference that occur in our discussions. I cannot help thinking that there is no unfavourable exchange which may not be corrected by a diminution in the amount of the currency, and I consider this to afford a proof that the currency must be redundant for a time at least. Whilst the exchange is unfavourable it is always accompanied, though not always caused, by an excess of currency. With best respects to Mrs. Malthus, I am, my dear Sir, Yours most truly, DAVID RICARDO. ... As I was about leaving the city I received Mr. Thornton's answer. He is engaged on Wednesday and Thursday, and has fixed on Monday for our meeting, but he wishes us to meet at his house as there is to be a debate in the House of Lords on the Bullion question, and he is not sure that his presence may not be necessary in the Commons. I will settle this point with him, and if you do not hear from me I shall expect you at my house on Monday, if you do not agree to come on Saturday evening. NOTE.--Thomas Tooke, in his 'History of Prices and of the State of the Circulation from 1839 to 1847' (publ. 1848)[53], refers to this dispute between Ricardo and Malthus, on the relation of the currency to the balance of trade, and quotes long extracts from the article of Malthus in the Edinburgh Review, where (as in this correspondence[54]) Malthus maintains that the precious metals are continually used in payments made by one country to another even if, till that moment, the currencies of both have been at their usual level. The view of Ricardo is that nothing but the state of the currency can influence the foreign exchanges. As late as 1840 statesmen clung to the idea that the Directors of the Bank of England could only operate on the exchanges by increasing or diminishing the circulation[55]. Tooke (followed later by Newmarch, hardly a less authority) sides with Malthus, and thinks that Ricardo's reply to him, in the Appendix to the Tract on Bullion, is 'little more than a repetition in varied forms of expression, according to the phraseology peculiar to the theory in question, of the axiom that gold will not be exported unless it is cheaper than another commodity, assuming consequently the fact to have been that all commodities were at that time dearer in this country than they were abroad, and relatively to gold;'--whereas it appears[56] that between 1809 and 1811 the bulk of commodities were at a far higher price (measured in gold) on the Continent than in England; the 'continental system' had forced vast stores of goods to lie unsaleable in England for want of physical ability, on the part of the merchants of them, to land them on the Continent, though they did their best to smuggle them by way of Heligoland or Turkey into Germany and the door of Portugal was ajar. Coffee was unsaleable in England at 6_d._ the pound, and at the same time it was fetching 4_s._ or 5_s._ on the Continent. Napoleon used to look at the English price current, and, if he found gold dear and coffee cheap in England, he was satisfied that his Berlin and Milan decrees were well carried out, while the English saw only another proof that the Bank was extending its issues overmuch. Tooke and Malthus agreed that the difference between the market price and the mint price of gold bullion was the full measure of the depreciation of the currency; but the 'ultra-bullionists' would not stop there. Tooke, like Ricardo on another occasion (see Letter XLII), had to 'write a book to convince' them, namely his 'Thoughts and Details on the High and Low Prices of the last Thirty years,' (1823). XIII. LONDON, _30th Dec., 1813_. MY DEAR SIR, I have been amusing myself for one or two evenings in calculating the exchanges, price of gold, etc., at Amsterdam, and I enclose the result of my labour. I have every reason to believe that my calculations are correct,--though I am somewhat puzzled at the profit which there appears to be on the importation of gold from Amsterdam, if the prices there be quoted correct [_sic_]. If the difference were the other way, we might ascribe it to the money of Holland not being so good as it ought to be by the mint regulations; but in the present instance for guilders, as good as they are coined, gold can be bought 9-1/2 per cent. cheaper than in London. I am told that gold which cannot be exported has sunk considerably in price although gold that may be exported keeps its price. I fully expect that foreign gold will be lower. We have had a continuance of foggy weather ever since Monday. We are obliged to burn candles during the day, and at night it is with the greatest difficulty we can find our way to our homes. I hope you are more fortunate and breathe a clearer atmosphere. We shall expect you in Brook Street on your next visit to London. Have the goodness to write the day before you come. With best wishes to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. [TABLES ENCLOSED IN LETTER XII.] Columns 11 and 12 will show on inspection whether silver be passing from London to Amsterdam or from Amsterdam to London. Suppose the price of silver in London to be 6_s._ 7_d._ and the exchange with Amsterdam 28_s._ Against 6_s._ 7_d._ in column 11 the par of exchange is 29·41 in column 12; consequently being at 28 it is unfavourable to Amsterdam, and silver can be exported from Amsterdam to London with a profit of 5 per cent. If under the same circumstances the exchange had been 31, silver could have been exported to Amsterdam with a profit of 5 per cent. Columns 8, 9 and 10 will show from which country gold may be profitably exported. Suppose the price of gold in Amsterdam to be 16 per cent. premium, the agio 3 per cent., the exchange with London 31, and the price of gold in London £5 10_s._, from which country would gold be exported and with what profit? Against 16 per cent. in column 1 the par of exchange in column 8 is 39·64, and against £5 10_s._ the price of gold in London in column 9 the multiplier ·708 stands in column 10. 39·64 multiplied by ·708 gives 28·06 as the par for bank notes; therefore, when the exchange is at 31, it is unfavourable to Holland, and gold may be exported from thence with a profit of 10-1/2 per cent. nearly. Or thus: an oz. of standard gold, when the marc could be bought at 16 per cent. premium at Amsterdam, would cost 154·3 Flemish shillings banco, when the agio was 3 per cent., which reduced into English money at 31 [Flemish] shillings per £ sterling will give £4 19_s._ 6-3/4_d._ But it will sell in London for £5 10_s._ which is a profit of 10-1/2 per cent. nearly. Table Key 1: Price of gold at Amsterdam. Premium on _f._ 355 per marc. 2: Value of a marc in current guilders. 3: Corresponding price of an oz. of standard gold in London. 4: Corresponding price of an oz. of standard silver in London. 5: Value of an oz. of standard gold in Flemish current shillings. 6: Value of an oz. of standard gold in Flemish Banco shillings. Agio 3 p.c. +--------------+----------+-------------+---------+----------+-------+ | 1 | 2 | 3[57] | 4 | 5 | 6[58] | +--------------+----------+-------------+---------+----------+-------+ | | |£ _s._ _d._ | | | | | Par _f._ 355 |_f_ 355 | | 68·00 | 137 | 133 | | | | | pence | | | | 1 p.c. prem. | 358·55| | 67·32 | 138·4 | 134·3 | | 2 " | 362·10| | 66·67 | 139·8 | 135·7 | | 3 " | 365·65| | 66·02 | 141·3 | 137·2 | | 4 " | 369·20| | 65·38 | 142·5 | 138·6 | | 5 " | 372·75| | 64·76 | 143·9 | 139·8 | | 6 " | 376·30| | 64·15 | 145·3 | 141·1 | | 7 " | 379·85| | 63·55 | 146·6 | 142·5 | | 8 " | 383·40| | 62·96 | 148 | 143·9 | | 9 " | 386·95| | 62·39 | 149·3 | 145·3 | | | 389·37|3 17 10-1/2 | 62 | 150·3 | 146·0 | |10 " | 390·50|3 18 1 | | 150·7 | 146·3 | |11 " | 394·05|3 18 10 | | 152·1 | 147·6 | |12 " | 397·60|3 19 6-1/2 | | 153·5 | 149·0 | |13 " | 401·15|4 0 3 | | 154·8 | 150·3 | |14 " | 404·70|4 0 11-1/2 | | 156·2 | 151·7 | |15 " | 408·25|4 1 8 | | 157·5 | 152·9 | |16 " | 411·80|4 2 4-1/2 | | 158·9 | 154·3 | |17 " | 415·35|4 3 0-1/2 | | 160·3 | 155·6 | |18 " | 418·90|4 3 9 | | 161·7 | 157·0 | |19 " | 422·45|4 4 5-1/2 | | 163·1 | 158·3 | |20 " | 426 |4 5 2 | | 164·5 | 159·6 | |21 " | 429·55|4 5 10-1/2 | | 165·8 | 161·0 | +--------------+----------+-------------+---------+----------+-------+ Table Key 7: Real par of exchange in Flemish current shillings per £ sterling in gold. 8: Real par of exchange in Flemish Banco shillings per £ sterling in gold. Agio 3 p.c. 9: When the price of gold in London in bank notes is 10: The bullion par must be multiplied by 11: Price of standard silver in London in bank notes per oz. 12: Par of exchange with Amsterdam in Banco. Agio 3 p.c. +-----------+-------------+-------------+------+----------+----------+ | 7 | 8 | 9 | 10 | 11 | 12 | +-----------+-------------+-------------+------+----------+----------+ | | | £ _s._ _d._ | |_s._ _d._ | | | 35·20| 34·17 | | | | | | (1.) 35·55| 34·51 | 4 0 0 | ·973 | 5 2 | 37·48 | | (2.) 35·90| 34·85 | 4 1 0 | ·961 | 5 3 | 36·88 | | (3.) 36·25| 35·19 | 4 2 0 | ·949 | 5 4 | 36·60 | | (4.) 36·61| 35·54 | 4 3 0 | ·938 | 5 5 | 35·75 | | (5.) 36·95| 35·87 | 4 4 0 | ·927 | 5 6 | 35·21 | | (6.) 37·31| 36·22 | 4 5 0 | ·916 | 5 7 | 34·68 | | (7.) 37·66| 36·56 | 4 6 0 | ·905 | 5 8 | 34·17 | | (8.) 38·01| 36·90 | 4 7 0 | ·895 | 5 9 | 33·67 | | (9.) 38·36| 37·24 | 4 8 0 | ·885 | 5 10 | 33·19 | | 38·61| 37·48 | | | | | |(10.) 38·71| 37·58 | 4 9 0 | ·875 | 5 11 | 32·72 | |(11.) 39·06| 37·92 | 4 10 0 | ·865 | 6 0 | 32·27 | |(12.) 39·62| 33·27 | 4 11 0 | ·856 | 6 1 | 31·84 | |(13.) 39·77| 38·62 | 4 13 0 | ·838 | 6 2 | 31·42 | |(14.) 40·12| 38·96 | 4 15 0 | ·820 | 6 3 | 30·98 | |(15.) 40·48| 39·30 | 4 17 0 | ·803 | 6 4 | 30·58 | |(16.) 40·83| 39·64 | 4 19 0 | ·786 | 6 5 | 30·17 | |(17.) 41·18| 39·98 | 5 0 0 | ·779 | 6 6 | 29·79 | |(18.) 41·54| 40·32 | 5 2 0 | ·764 | 6 7 | 29·41 | |(19.) 41·89| 40·67 | 5 4 0 | ·749 | 6 8 | 29·04 | |(20.) 42·24| 41·02 | 5 6 0 | ·735 | 6 9 | 28·69 | |(21.) 42·59| 41·36 | 5 8 0 | ·721 | 6 10 | 28·33 | | | | 5 10 0 | ·708 | 6 11 | 27·99 | | | | | | 7 0 | 27·66 | | | | | | 7 1 | 27·32 | | | | | | 7 2 | 27·02 | | | | | | 7 3 | 26·71 | | | | | | 7 4 | 26·40 | | | | | | 7 5 | 26·11 | | | | | | 7 6 | 25·82 | +-----------+-------------+-------------+------+----------+----------+ XIV. LONDON, _1 Jan., 1814_. MY DEAR SIR, Having finished a table for the Hamburgh exchanges, similar to that which I have already sent you for Holland, I thought you might like to have a copy of it[59]. In this as well as in the other the result is not quite satisfactory; for example, at the present time I believe the exchange with Hamburgh is quoted 28_s._ and the price of dollars 6_s._ 11-1/2_d._ By the table it appears that with [such] a price of dollars the exchange at par would be 25_s._; consequently it is now unfavourable to Hamburgh 12 per cent., which appears to me to be excessively high. In fact, under the present circumstances, there can be no intercourse with Hamburgh, and the quotation must be only nominal. Mrs. Ricardo and I leave London to-morrow early for Bradford; from thence we intend going to Gatcomb[60], and expect to be in town again on Thursday. I hope we shall soon see you. With best wishes to Mrs. Malthus, I am, dear Sir, Yours very truly, DAVID RICARDO. Table Key A: Price of a ducat or 53 grains of fine gold in marks banco. B: Price of an oz. of standard gold in Flemish shillings banco. C: Par of exchange with London in Flemish shillings banco per £ sterling of gold. D: Corresponding price of an oz. of standard silver in London in pence. E: Corresponding price of an oz. of standard gold in London in £, etc. F: When the price of gold in London in bank-notes is per oz. G: The bullion par of exchange must be multiplied by H: When the price of dollars in London is per oz. I: The par of exchange in silver is +----+-------+------+------+------+------------+----+---------+------+ | A | B | C | D | E | F | G | H | I | +----+-------+------+------+------+------------+----+---------+------+ | | | | | | £ _s._ _d._| |_s._ _d._| | |5·39|119·33 | 30·60| 70·97| | 4 0 0 |·973| 4 11-1/2| 35·08| |5·45|120·66 | 30·94| 70·19| | 4 1 0 |·961| 5 1 | 34·22| |5·51|121·99 | 31·28| 69·43| | 4 2 0 |·949| 5 2-1/2| 33·39| |5·57|123·32 | 31·63| 68·68| | 4 3 0 |·938| 5 4 | 32·61| |5·63|124·65 | 31·97| 67·95| | 4 4 0 |·927| 5 5-1/2| 31·87| |5·69|125·98 | 32·33| 67·23| | 4 5 0 |·916| 5 7 | 31·15| |5·75|127·31 | 32·68| 66·53| | 4 6 0 |·905| 5 8-1/2| 30·47| |5·81|128·64 | 33·03| 65·84| | 4 7 0 |·895| 5 10 | 29·82| |5·87|129·96 | 33·37| 65·17| | 4 8 0 |·885| 5 11-1/2| 29·19| |5·93|131·29 | 33·72| 64·51| | 4 9 0 |·875| 6 1 | 28·59| |5·99|132·62 | 34·07| 63·86| | 4 10 0 |·865| 6 2-1/2| 28·02| |6·05|133·95 | 34·42| 63·23| | 4 11 0 |·856| 6 4 | 27·46| |6·11|135·28 | 34·76| 62·61| | 4 13 0 |·838| 6 5-1/2| 26·93| |6·17|136·61 | 35·08| 62 | 3·893| 4 15 0 |·820| 6 7 | 26·42| |6·23|137·92 | 35·42| | 3·931| 4 17 0 |·803| 6 8-1/2| 25·93| |6·29|139·25 | 35·76| | 3·968| 4 19 0 |·796| 6 10 | 25·46| |6·35|140·57 | 36·11| | 4·005| 5 0 0 |·779| 6 11-1/2| 25 | |6·41|141·89 | 36·45| | 4·043| 5 2 0 |·764| 7 1 | 24·55| |6·47|143·21 | 36·79| | 4·081| 5 4 0 |·749| 7 2 | 24·13| |6·53|144·54 | 37·14| | 4·119| 5 6 0 |·735| | | |6·59|145·86 | 37·48| | 4·157| 5 8 0 |·721| | | |6·65|147·19 | 37·83| | 4·195| 5 10 0 |·708| | | |6·71|148·51 | 38·18| | 4·233| | | | | |6·77|149·84 | 38·52| | 4·270| | | | | |6·83|151·17 | 38·87| | 4·308| | | | | |6·89|152·50 | 39·22| | 4·346| | | | | +----+-------+------+------+------+------------+----+---------+------+ N.B.--3 marks are equal to 8 Flemish shillings banco. When dollars are 4_s._ 11-1/2_d._, standard is 2-1/2_d._ more. When 6_s._ 1_d._, 3_d._ more. When 7_s._, 3-1/2_d._ more. XV. [Addressed to Penr[h]yn Arms, Bangor, North Wales.] LONDON, _26 June, 1814_. MY DEAR SIR, ... I cannot partake of your doubts respecting the effects of restrictions on the importation of corn in tending to lower the rate of interest. The rise of the price or rather the value of corn without any augmentation of capital must necessarily diminish the demand for other things even if the prices of those commodities did not rise with the price of corn, which they would (tho' slowly) certainly do. With the same capital there would be less production and less demand. Demand has no other limits but the want of power of paying for the commodities demanded. Everything which tends to diminish production tends to diminish this power. The rate of profits and of interest must depend on the proportion of production to the consumption necessary to such production,--this again essentially depends upon the cheapness of provisions, which is after all, whatever intervals we may be willing to allow, the great regulator of the wages of labour. Nothing can tend more effectually to diminish the demand abroad for our manufactures than to refuse to import corn and other commodities which we [had] usually taken in exchange for such manufactures. If we rigorously refused to import any [foreign] commodity whatever, I firmly believe that we should soon cease to export any commodity, even if we made gold an exception to the general rule. Our money would stand at a higher level than in other countries, but there are limits beyond which it could not go. All trade is at last a trade of barter, and no nation will long buy unless it can also sell,--nor will it long sell if it will not also buy. If by adopting such policy [_sic_] a country were to enhance the value of the raw materials which it consumed, of which corn is the principal, it would thereby lower the rate of interest. If otherwise, it might be deprived of many luxuries and many comforts, or might enjoy them in less abundance, but the rate of interest would not fall. This is a repetition, you will say, of the old story, and I might have spared you the trouble of reading at 200 miles distance what I had so often stated to you as my opinion before; but you have set me off, and must now abide the consequences. I never was more convinced of any proposition in Political Economy than that restrictions on importation of corn in an importing country have a tendency to lower profits. Remember me kindly to Mrs. Malthus. Yours very truly, DAVID RICARDO. XVI. GATCOMB PARK, NEAR MINCHIN HAMPTON, GLOUCESTERSHIRE, _25th July, 1814_. MY DEAR SIR, I am writing to you from Gatcomb, where I arrived with S---- as my companion yesterday afternoon. To enable me to quit London at the time I did I was obliged to bestow an unusual degree of attention to business of all sorts, and, though I had written a letter to you in answer to your last before I left Brook Street, I was so dissatisfied with it that I could not resolve to send it. I shall, I fear, succeed no better now, but you shall have it whatever it may be, as, if I defer writing any longer, you may have quitted Bangor before my letter arrives there[61]. It appears to me that you have changed the proposition on which we first appeared to differ. The proposition advanced by you, if I recollect right, was that restrictions on the importation of corn would not lower the rate of profits and interest, but now you add--or rather your argument leads to that conclusion,--'if the consequence of such restriction be a great reduction of capital.' So amended I should not object to the proposition,--but I think it material that causes should be kept distinct, and their due effects ascribed to each. Restrictions on the trade of corn, if capital suffers no diminution, will occasion a fall in the rate of profits and interest. A reduction of capital independently of restrictions on importation of corn will have a tendency to raise profits and interest,--but there is no necessary connection between these two operating causes, as they may at the same time be acting together or entirely in opposite directions. Effective demand, it appears to me, cannot augment or long continue stationary with a diminishing capital; and your question why if this were true profits rise at the commencement of a war? does not, I think, bear any connection with the argument, because profits will augment under a diminution of capital and produce, if demand though diminished does not diminish so rapidly as capital and produce. For the opposite reason profits will diminish when capital and produce increase. This is totally independent of the rate of production, and often, I think, may counteract the effects which usually follow, and in the long run will almost always follow, from increasing or diminishing capital. You say that 'the proportion of production to the consumption necessary to such production seems to be determined by the quantity of accumulated capital compared with the demand for the products of capital, and not by the mere difficulty and expense of procuring corn.' It appears to me that the difficulty and expense[62] of procuring corn will necessarily regulate the demand for the products of capital, for the demand must essentially depend on the price at which they can be afforded, and the prices of all commodities must increase if the price of corn be increased. The capitalist 'who may find it necessary to employ a hundred days' labour instead of fifty in order to produce a certain quantity of corn' cannot retain the same share for himself unless the labourers who are employed for a hundred days will be satisfied with the same quantity of corn for their subsistence that the labourers employed for fifty had before. If you suppose the price of corn doubled, the capital to be employed, estimated in money, will probably be also nearly doubled,--or at any rate will be greatly augmented; and, if his monied income is to arise from the sale of the corn which remains to him after defraying the charges of production, how is it possible to conceive that the rate of his profits will not be diminished? I hope you continue to enjoy yourself amidst the wild scenery with which you are encompassed.--The weather here is delightful, and I am as happy as I can be, separated from the whole family (except S----) and surrounded by upholsterers, carpenters, etc.... Yours very truly, DAVID RICARDO. I believe that in this sweet place I shall not sigh after the Stock Exchange and its enjoyments. XVII. GATCOMB PARK, _11 Aug., 1814_. MY DEAR SIR, I received your letter last Sunday, and in the evening of that day Mrs. Ricardo and the rest of my family arrived here. I have been showing them all the beauties of this place, and my time has been pretty well engrossed by them these three last days.... The fall in Omnium is I believe to be attributed to our continued expenses, and the expectation of another loan before the payments on the present are completed. The present state of the Exchanges seem[s] to indicate a real fall in the value of foreign currencies; it cannot be attributed to any change of taste for particular commodities, or any other caprice. I expected that Peace would lower the value of foreign currency, but I confess not in the degree which has taken place. It leaves the question between us undecided--namely, whether the exchange is not operated upon solely by the relative preponderance of currency. Peace has rendered the currency of the continent much more efficacious to the business to be done. With regard to our present question, we differ as to effects which must _necessarily_ follow from restrictions on the importation of foreign corn. I do not think that a diminution of capital is a _necessary_, but a probable effect. We agree as to the consequences which will attend a diminution of capital, but I should say that a real diminution of capital will diminish the work to be done, and consequently will affect the wages of labour, and the demand for food. In the case supposed, restrictions on importation of corn, encouragement is given to the further cultivation of our own land,--but _if_ accompanied by a diminution of capital a discouragement is also given to the cultivation of the land, and whether profits rise or fall must in my opinion depend upon the degree of these contra-operating causes. It is true that the woollen or cotton manufacturer will not be able to work up the same quantity of goods with the same capital if he is obliged to pay more for the labour which he employs, but his profits will depend on the price at which his goods when manufactured will sell. If every person is determined to live on his revenue or income, without infringing on his capital, the rise of his goods will not be in the same proportion as the rise of labour, and consequently his percentage of profit will be diminished if he values his capital, which he must do, in money at the increased value to which all goods would rise in consequence of the rise of the wages of labour. In such case I should say that the effective demand had diminished, because the same quantity of commodities could not be annually consumed. If the same quantity of commodities continued to be consumed, then it must be evident that it would be at the expense of capital. In such case capital would diminish faster than demand, which would tend to keep up profits. But how long will [people] continue to indulge in luxuries at the expense of a continual diminution of capital? It is the road to ruin, and, though frequently persisted in by a few individuals, it is not often found to be the folly of nations. On the contrary, if any causes interrupt the progress of nations, if restrictions on their trade, or expensive wars, tend to diminish their capital, at such times more economy is practised, and, as Adam Smith has observed, the profusion of governments is counteracted by the frugality of individuals. If so, I cannot be incorrect in saying that, though for a short period capital and produce may diminish faster than demand,--yet in the long run effective demand cannot augment or continue stationary with a diminishing capital. You say, what I did not before understand you to admit, 'that the whole amount of demand will from advanced prices diminish of course, but the proportion of demand to supply, which is always the main point in question, as determining prices and profits, may continue to increase, _as it does in all countries the capital of which is retrograde_;' but I do not agree even to this explanation, and it appears to me to be at variance with an opinion which I have often heard you express, viz. The temptation to save from revenue to augment capital is always in proportion to the rate of profits, and, if from accumulation of capital profits and interest should fall very low indeed, at that point accumulation would nearly stop, because it would be almost without an object. In this opinion I most cordially agree, and I cannot help thinking that it is at variance with the above sentence which I have quoted from your letter. I maintain, as I think you have done, that consumption as compared with production is always greatest where capital is most accumulated. Diminish the capital of England one half, and you undoubtedly augment profits, but it will not be in consequence of a greater proportion of demand but of a greater proportion of production; demand as compared with production could hardly fail to diminish. Individuals do not estimate their profits by the material production, but nations invariably do. If we had precisely the same amount of commodities of all descriptions in the year 1815 that we now have in 1814, as a nation we should be no richer; but, if money had sunk in value, they would be represented by a greater quantity of money, and individuals would be apt to _think_ themselves richer. I shall be in town either next week or the week after. I wish you would return here with me. We would discuss these important points in our shady groves. With kind regards to Mrs. Malthus, I am, yours truly, DAVID RICARDO. XVIII. GATCOMB PARK, MINCHIN HAMPTON, _30th Aug., 1814_. MY DEAR SIR, I left London on the 19th, the day before your letter arrived there, having dispatched all my business in four days. The appearance of the Omnium was not sufficiently inviting to induce me to protract my stay longer than was absolutely necessary. David[63], who is come to pass his holidays with us, brought me your letter. I regret that I shall not see you for some time, as you cannot come here, and I shall not have it in my power at present to visit Hail[e]ybury. I expected to have a great deal of leisure time in the country, but as yet I have not had any. Walking and riding with my family, and friends who have visited us, have entirely occupied me; besides which, the only room in my house which is not finished is the library, owing to the tedious time which they have taken to fix my bookcases. I think if we could talk together we should not _very_ much differ on the question which has lately engaged us; our principal difference is about the permanence of the effects. It will often happen that the scarcity of a commodity or the increasing demand for it will for a time increase profits; but it is not therefore correct to say that, where profits are high, they are so because the demand for produce is great compared with supply. There are many other causes which will occasion profits to be permanently high. There may be two countries, in one of which, from bad government and the consequent insecurity of property, or from the little disposition to saving in the people, profits may be permanently high and interest at 12 per cent., whilst in the other, where these causes do not operate, profits may be permanently low and interest at 5 per cent. It would surely be incorrect to say that the cause of the high profits was the greater proportion of demand for produce, when in both countries the supply would be or might be precisely equal to the demand and no more. In America profits are higher than in England, and yet I can have no doubt that the proportion of supply to demand is greater in the former country. I think it must necessarily be so in all countries which are most rapidly increasing in riches, for from whence do riches come but from production preponderating over consumption? Profits are sometimes high when corn is scarce and dear; but this arises from the stimulus which the high prices give to industry. If the population could immediately accommodate itself to the scanty supply, no such effects would follow; and in fact they only continue till time has gradually equalised them. I sometimes suspect that we do not attach the same meaning to the word 'demand.' If corn rises in price, [you] perhaps attribute it to a greater demand. I should [attribute it to] a greater competition. The demand cannot, I think, be said to increase if the quantity consumed be diminished, although much more money may be required to purchase the smaller than the larger quantity. If it were to be asked what the demand was for port-wine in England in the years 1813 and 1814, and it were to be answered that in the first year she had imported 5000 pipes, and in the next 4500, should we not all agree that the demand was greater in 1813? Yet it might be true that double the quantity of money was paid for the 4500 pipes. Have you read the report of the Lord[s'] Committee on the Corn question? It discloses some important facts; but how ignorant the persons giving evidence appear to be of the subject as a matter of science! The Editor's remarks too are very unworthy of his paper. ... With best compliments to Mrs. Malthus, I am, yours truly, DAVID RICARDO. NOTE.--The 'Editor' was Lord Hardwicke, who moved for the Committee 10th June, 1814, and presented its report to the House on 23rd Nov. 1814. See Hansard, under date Feb. 17, 1815, p. 796; Ann. Register 1815, Gen. Hist. p. 130. The reports were 'ordered to be printed' 25th July, 1814. The first was on a single sheet, and was simply a complaint that the Committee could not take evidence; the second reported that they had heard evidence, but thought that before any certain conclusions could be reached the inquiry must go on further. There is a copiously annotated copy of them in the 'Place' Collection in the British Museum. XIX. GATCOMB PARK, _16 Sept., 1814_. MY DEAR SIR, ... I agree with you that, when capital is scanty compared with the means of employing it, from whatever cause arising, profits will be high. Whether temporarily or permanently must of course depend upon whether the cause be temporary or permanent. It is, however, very important to ascertain what the causes are which make capital scanty compared with the means of employing it, and how far, when ascertained, they may be considered temporary or permanent. It is in this inquiry that I am led to believe that the state of the cultivation of the land is almost the only great permanent cause. There are other circumstances which are attended with temporary effects of more or less duration and frequently operate partially on particular trades. The state of production from the land, compared with the means necessary to make it produce, operates on all, and is alone lasting in its effects. We agree too that effectual demand consists of two elements, the _power_ and the _will_ to purchase; but I think the will is very seldom wanting where the power exists, for the desire of accumulation will occasion demand just as effectually as a desire to consume; it will only change the objects on which the demand will exercise itself. If you think that, with an increase of capital, men will become indifferent both to consumption and accumulation, then you are correct in opposing Mr. Mill's idea[64], that in reference to a nation supply can never exceed demand; but does not an increase of capital beget an increased inclination for luxuries of all descriptions? and, though it appears natural that the desire of accumulation should decrease with an increase of capital and diminished profits, it appears equally probable that consumption will increase in the same ratio. Exchanges will be as active as ever; the objects only will be altered. If demand _appears_ more active where capital is scarce, it is only because the _power_ to purchase is comparatively greater. Wherever capital is scanty, the necessaries of life are cheap, if the country is commonly fertile; and, as capital and population increase, the necessaries of life rise in price, and thus is the power of purchasing, though really greater, comparatively less. In a country with little comparative capital, the value of the yearly produce may very rapidly increase; and, if it be said to be in consequence of the greatness of demand, I should contend that in such country the demand would not be limited in the same degree by a want of power as in a country abounding in capital, and merely because provisions would not rise in the same proportion in the two countries. If half as much corn [again] as usual were produced next year, a great part of it would undoubtedly be wasted; and the same might be said of any commodities which we might be ingenious enough to name: but the real question is this--If money should retain the same value next year, would any man (if he had it) want the will to spend half as much again as he now does? and, if he did want the will, would he feel no inclination to add the increase of his revenue to his capital and employ it as such? In short, I consider the wants and tastes of mankind as unlimited. We all wish to add to our enjoyments or to our power. Consumption adds to our enjoyments, accumulation to our power, and they equally promote demand. Mrs. Ricardo and I are going this morning to Cheltenham, which is eighteen miles distant from us; we shall return to-morrow. Mr. Smith[65], whom I met at your house, lives about nine miles from here. ... I hope you recollect that we are not quite twenty-eight miles from Bath. You and Mrs. Malthus might, I think, give us the pleasure of your company for a few days during your Christmas vacation[66], and might at the same time visit your friends; but as you have seen them so lately you would give us great pleasure if you would give us the whole of your time. Mrs. Ricardo, who is standing by me, has made me express myself in a more than usually bungling manner. She unites with me in kind regards to Mrs. Malthus. Yours very sincerely, DAVID RICARDO. XX. GATCOMB PARK, _23rd Oct., 1814_. MY DEAR SIR, On the day that you were writing your last letter to me, I was travelling to London with Mrs. Ricardo, where my business detained me a little more than a week. On my return your letter was delivered to me. I am sorry that you cannot make it convenient to pay us a visit at Christmas. I shall however depend on your not allowing any common occurrence to prevent you and Mrs. Malthus from favouring[67] us with your company during your next summer vacation. I hope you will not repent having set me the example of using a larger sized paper. If you are tired with my long letter, you only will be to blame for it. It does not appear to me that we very materially differ in our ideas of the effects of the facility or difficulty of procuring food on the profits of stock. You say that I 'seem to think that the state of production from the land compared with the means necessary to make it produce is almost the sole cause which regulates the profit of stock and the means of advantageously employing capital.' This is a correct statement of my opinion, and not, as you have said in another part of your letter and which essentially differs from it, 'that it is the _quantity_ of produce compared with the expense of production that determines profits.' You, instead of allowing the facility of obtaining food to be almost the sole cause of high profits, think it may be safely said to be the main cause, and also a difficulty of acquiring food the main cause of low profits. There appears to me to be very little difference in these statements. You infer that my doctrine is not correct because improvements may take place in agriculture or manufactures, because new leases may not be granted precisely at the time of the rise in the price of raw produce, and because the price of labour may not rise without delay in the same proportion. But improvements in agriculture or in machinery which shall facilitate or augment production will according to my proposition increase profits because 'it will augment production compared with the means necessary to that production.' The same may be said of the wages of labour not rising in the same proportion as the price of produce. As for old leases affecting the question, you will observe that in calculating the profits made by agriculture we must estimate leases at the value which they bear at the time of the calculation and not at the value agreed upon at an antecedent period. If the question were concerning the profits of a manufactory or distillery for example, we should calculate such profits according to the then value of barley, although a few individual distillers might have been so fortunate as to purchase their barley when it was 25 per cent cheaper. These points then are expressly allowed for in my proposition, and are by no means at variance with it. You add to your statement [']that in the interval between the two extremes (of high profits and low profits caused by facility or difficulty of procuring food) considerable variations may take place, and that practically no country was ever in such a state as not to admit of increase of profits on the land for a period of some duration, from the advanced price of raw produce.' I agree that variations will take place because the means of obtaining produce are not always equally expensive; and, if they should be, the produce itself may become more valuable, and in either case profits will vary. But even during these temporary variations the great cause, namely the accumulation of capital, may be paving the way for permanently diminished profits. It appears to me important to ascertain what the causes are which may occasion a rise in the price of raw produce, because the effects of a rise, on profits, may be diametrically opposite. A rise in the price of raw produce may be occasioned by a gradual accumulation of capital, which by creating new demands for labour may give a stimulus to population and consequently promote the cultivation or improvement of inferior lands; but this will not cause profits to rise but to fall, because not only will the rate of wages rise, but more labourers will be employed without affording a proportional return of raw produce. The whole value of the wages paid will be greater compared with the whole value of the raw produce obtained. A rise of raw produce may proceed from one or more bad seasons, which will undoubtedly increase profits because the price of produce would rise considerably more than in the proportion of the deficient quantity, and would therefore be much ahead of the price [_sic_] of production. An advanced price of raw produce may also proceed from a fall in the value of currency, which would raise the price of produce, for a time, more than it would wages, and would therefore raise profits. Both these you will allow are temporary causes, no way affecting the principle itself but merely disturbing it in its progress. Restrictions on importation of raw produce may cause a rise in its price which will be permanent or temporary according as the bad policy which dictated the restrictive law may be permanent or temporary. In the first instance profits will be raised; but they will ultimately fall below their former level. From what I have said it will appear that I am of opinion that a permanent rise in the rate of profits on land is never preceded by a rise but by a fall in the price of raw produce; and, though profits may be raised by a rise of the price of produce, they will generally ultimately settle at a rate lower than that from which they started. The converse of this, as it regards low prices of produce, I hold to be equally true. I should be glad to have your sentiments on this point. There may be other causes of high price, which do not at present occur to me. I allow that no country ever was or can be in such a situation as not to admit of increase of profits on the land, because there is no country which is not liable to lose or waste part of its capital; there is no country which is not liable to bad seasons, to depreciated currency, to a real fall in the value of the precious metals, and to other accidents which will, some permanently and some temporarily, raise profits. You observe that in rich countries profits are often much higher, and in poor countries much lower than according to my theory, to which I reply that profits are very much reduced in the poor country by enormous wages; the wages themselves may be considered as part of the profits of stock, and are frequently the foundation of new capital. In rich countries wages are low, too low for the comforts of the labourers; too large a portion of the gross produce is retained by the owner of stock and is reckoned as profit. I am not aware that I have underrated the effect of the wants and tastes of mankind on profits; they frequently occasion large profits on particular commodities for short periods, but they do not, I think, often operate on general profits, because they do not often influence the growth of raw produce. Adam Smith, in Book V, ch. i, p. 134[68], concisely expresses what appears to me correct, of the effects of demand on the price of commodities. I go much further than you in ascribing effects to the wants and tastes of mankind; I believe them to be unlimited. Give men but the means of purchasing, and their wants are insatiable. Mr. Mill's theory is built on this assumption. It does not attempt to say what the proportions will be to one another of the commodities which will be produced in consequence of the accumulation of capital, but presumes that those commodities only will be produced which will be suited to the wants and tastes of mankind, because none other will be demanded. The very term 'accumulation of capital' supposes a power somewhere to employ more labour; it supposes the total income of the society to be increased, and therefore to create a demand for more food and more commodities. You ask 'whether we can furnish to persons of the same incomes a great additional quantity of commodities without lowering the price so much compared with the price of production as to destroy the effective demand for such a supply, and consequently to check its continuance to the same extent.' We answer this is not our case; we are speaking of larger incomes, not of the same incomes; and instead of anticipating a fall in the price of commodities we should expect a rise, because the fall of profits which generally follows accumulation is in consequence of the increase in the price of production, compared with the price of produce, although they would both undoubtedly rise. You appear to think, indeed you say, 'that you know no other cause for the fall of profits which generally takes place from accumulation than that the price of produce falls compared with the expense of production, or in other words, that the _effective_ demand is diminished;' and by what follows you seem to infer that commodities will not only be relatively lower but really lower; and this is in fact the foundation of our difference with regard to the theory of Mr. Mill. You will by this time feel that you have enough if not too much. Yours truly, DAVID RICARDO. NOTE.--The passage of the Wealth of Nations is as follows:--'The East India Company represented in very strong terms what had been at this time [1730] the miserable effects, as they thought them, of this competition [between themselves and the Old East India Company and private traders]. In India, they said, it raised the price of goods so high that they were not worth buying; and in England, by overstocking the market, it sunk their price so low that no profit could be made by them. That by a more plentiful supply, to the great advantage and conveniency of the public, it must have reduced very much the price of India goods in the English market cannot well be doubted; but that it should have raised very much their price in the Indian market seems not very probable, as all the extraordinary demand which that competition could occasion must have been but as a drop of water in the immense ocean of Indian commerce. The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the long run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art, which might never otherwise have been thought of. The miserable effects of which the company complained were the cheapness of consumption and the encouragement given to production: precisely the two effects which it is the great business of political economy to promote.' XXI. GATCOMB PARK, _18 Dec., 1814_. MY DEAR SIR, Since I received your last letter I have been unexpectedly called from home, besides having had friends staying with me, which have prevented me from writing sooner. I have been twice to Bath and once to Cheltenham, and have also been as far as Devonshire, to the old Abbey which Mr. Bentham[69] at present inhabits. I accompanied M. Say, the author of �conomie Politique, on a visit to him and Mr. Mill[70];--and, had it not been for the incessant rain, we should have had a very pleasant excursion. M. Say came to me here from London at the request of Mr. Mill, who wished us to be acquainted with each other. He intends seeing you before he quits this country. He does not appear to me to be ready in conversation on the subject on which he has very ably written,--and indeed in his book there are many points which I think are very far from being satisfactorily established,--yet he is an unaffected agreeable man, and I found him an instructive companion. We intend to be in London in the middle of January, and have little doubt that we shall return here quite time enough to receive a visit from Mrs. Malthus and you next summer vacation, so I trust you will not project an excursion to any other quarter. I perceive that we are not nearly agreed on the subject which we have been lately discussing. I have been endeavouring to get you to admit that the profits on stock employed in manufactures and commerce are seldom permanently lowered or raised by any other cause than by the cheapness or dearness of necessaries, or of those objects on which the wages of labour are expended. Accumulation of capital has a tendency to lower profits. Why? because every accumulation is attended with increased difficulty in obtaining food, unless it is accompanied with improvements in agriculture; in which case it has no tendency to diminish profits. If there were no increased difficulty, profits would never fall, because there are no other limits to the profitable production of manufactures but the rise of wages. If with every accumulation of capital we could tack a piece of fresh fertile land to our Island, profits would never fall. I admit at the same time that commerce, or machinery, may produce an abundance and cheapness of commodities, and if they affect the prices of those commodities on which the wages of labour are expended they will so far raise profits:--but then it will be true that less capital will be employed on the land, for the wages paid for labour form a part of that capital. A diminution of the proportion of produce, in consequence of the accumulation of capital, does not fall wholly on the owner of stock, but is shared with him by the labourers. The whole amount of wages paid will be greater, but the portion paid to each man will in all probability be somewhat diminished. I do not recollect ever having allowed that an extension of foreign commerce will take capital from the land, unless we were an exporting country as far as regards corn, in which case my proposition would be true, namely that the rate of profits can never permanently rise unless capital be withdrawn from the land. I am not sanguine about the principle, if true, being of any use; but that is another consideration;--its utility has nothing to do with its truth, and it is the latter only which I am at present anxious to establish. I cannot agree with you when you say that 'without supposing capital to be taken from the land the throwing of new objects of desire into the market will increase the value of the whole mass of commodities in the country, estimated either in money, or in corn and labour,'--and it is because I think that there will not be a greater value of commodities to be exchanged for the raw produce, or for money, that I conclude no increased profits will anywhere be made. If the mass of commodities be increased we diminish their exchangeable value as compared with those things whose quantity is not augmented. If we double the quantity, or rather double the facility of making stockings, we diminish their value one half, as compared with _all_ other commodities. If we do the same with regard to hats and shoes, we restore the accustomed relations between stockings, hats, and shoes, but not with respect to other things. It is here, I think, that our difference rests, and I hope soon to hear all that you have to advance in favour of your view of the question. M. Say, in the new edition of his book, p. 99, vol. i, supports, I think, the very [same] doctrine that demand is regulated by production. Demand [is] always an exchange of one commodity for another. The shoemaker when he exchanges his shoes for bread has an effective demand for bread, as well as the baker has an effective demand for shoes,--and, although it is clear that the shoemaker's demand for bread must be limited by his wants, yet whilst he has shoes to offer in exchange he will have an effective demand for other things,--and if his shoes are not in demand it shows that he has not been governed by the just principles of trade, and that he has not used his capital and his labour in the manufacture of the commodity required by the society,--more caution will enable him to correct his error in his future production. Accumulation necessarily increases production and as necessarily increases consumption. Accumulation of _produce_, if properly selected, _may_ always be accumulation of _capital_, and it cannot fail to be worth more than it cost, estimated in corn or labour,--and this I think would be true although all our soldiers, sailors, and menial servants were employed in productive labour. It appears to me that the consideration of money value may be the foundation of our difference on this point. I must leave room for a request which I hope you will not refuse. I dined a little while ago at Mr. Smith's, whom I first met at your house. Mrs. Smith told me that she had a collection of the handwriting of a great number of men who had distinguished themselves by their writings, and she wished that I would give her a letter of yours to add to her collection. Knowing that I had many which would not discredit you, I assented; but after I came home I thought I had no right to do it without your consent--which I hope you will not refuse. I should be sorry to disappoint her, and should really cut a poor figure in making my apologies if I did; yet, as my opinion, that I should not do it without your consent, is confirmed by Mrs. Ricardo, I must falter out my excuses if you are inexorable. With kind regards to Mrs. Malthus, I am, ever yours truly, DAVID RICARDO. NOTE.--Of Ricardo, Bentham used to say: 'I was the spiritual father of Mill, and Mill was the spiritual father of Ricardo; so that Ricardo was my spiritual grandson. I was often _tête à tête_ with Ricardo. He would borrow a sixpenny book instead of buying it. There was an _épanchement_ between us. We used to walk together in Hyde Park, and he reported to me what passed in the House of Commons. He had several times intended to quote the 'Fragment'; but his courage failed him as he told me. In Ricardo's book on rent there is a want of logic. I wanted him to correct it on these principles; but he was not conscious of it, and Mill was not desirous. He confounded _cost_ with _value_. Considering our intercourse it was natural he should give me a copy of his book;--the devil a bit!' (Life by Bowring in Works, vol. x. p. 498.) Then follows a letter to Ricardo, in which Bentham compliments him on his political progress: 'I told Burdett you had got down to _trienniality_, and were wavering between that and annuality, where I could not help flattering myself you would fix,--also, in respect of extent, down to _householders_, for which, though I should prefer universality on account of its simplicity and unexclusiveness, I myself should be glad to compound.' The suggestion of stinginess made by Bentham in the passage quoted is sufficiently rebutted by Bentham's own biographer, who tells us Ricardo was one of those who guaranteed the funds for Bentham's Chrestomathic School (Bentham, Works, x. p. 484), and by James Mill (Biography, p. 191), when he speaks of Ricardo's unwillingness to accept payment for his article (Sinking Fund) in the Encyclopædia Britannica on the grounds that, first, it was not worth payment, second, payment was no part of his inducement to write it. The influence of Bentham on Ricardo's general ways of thinking is discussed elsewhere. In economical theory (if we judge Bentham by his 'Manual of Political Economy,' which was written some years before this time, though not published in England till long afterwards) there was no more than a general agreement between the two men. XXII.[71] GATCOMB PARK, _13 Jan., 1815_. MY DEAR SIR, I am pleased to learn that you are busy writing with a view to immediate publication[72]. The public pay a most flattering attention to anything from your pen, and you are not fulfilling your duty to society if you do not avail yourself of this disposition to endeavour[73] to remove the cloud of ignorance and prejudice, which everywhere exists on the subjects which have particularly engaged your time and reflection. I hope your notes on Adam Smith are in great forwardness, and that they will soon follow the smaller publications which you are now preparing. I expect that they will not only be very useful in giving correct notions to the public, but also in calling the attention of those who are well informed in the science of political economy to many points which have hitherto escaped their consideration. I cannot help thinking that Lord Lauderdale was mistaken (and I believe you hold the same opinion as him), in supposing the farmer to lie under any particular disadvantage from not having the monopoly of the home market, whilst so many other trades were enjoying that benefit. You will agree that the monopoly of the home market is eventually of no great advantage to the trade on which it is conferred. It is true that it raises the price of the commodity by shutting out foreign competition, but this is equally injurious to all consumers, and presses no more on the farmer than on other trades. If monopolies tend to raise the price of labour, the inconvenience must be suffered by all who employ labour, and will therefore not be particularly injurious to the farmer or landlord. If all the monopolies of the home market were immediately abolished, there would be at least as much disposition to import corn:--if so they do not interfere with the natural course of the corn trade. Lord Lauderdale, with his opinion of the effect of monopolies, is, I think, quite consistent in recommending a duty on the importation of corn. I thought you maintained that the high or low profits on commerce were totally independent of the amount of capital which might be employed on the land, consequently that high profits might continue as long as commerce was prosperous, whether that was for twenty or for a hundred years. I now understand you to say, that the profits of commerce may take the lead, and may regulate the profits of agriculture for a period of some duration, possibly for twenty years. I have always allowed that under certain circumstances profits on agriculture might be diverted from their regular course for short periods, so that we only appear to differ with respect to the duration of such profits; instead of twenty years I should limit it to about four or five. If with the same labour we could obtain double the quantity of tin from the mines in Cornwall, after prices had found the[ir l]evel, would the value of the whole mass of commodities be increased in England? Should we obtain the same quantity of deals from Norway in exchange for a given quantity of tin as we now do? Although the mass of commodities both in the markets of Norway and in those of England would increase by the greater abundance of tin, or of some other commodity, if the labour employed in procuring tin were diverted to other objects, yet the estimated value of all their commodities in corn, money, or any article but tin, would, it appears to me, continue unaltered. It is sufficient that deals can be purchased cheaper in Norway than elsewhere to determine a portion of foreign trade to that quarter, although it should yield no more profits than those of other trades. On the supposition which you have made of a great foreign demand for our raw produce, there can be no question that more capital would be employed on the land, and I think profits would fall. Such a demand cannot exist in the present situation of the world. Raw produce is always imported into the relatively rich country, and never exported from it, but on occasions of dearth or famine. I have no doubt that, if the free importation of corn is allowed into this country, inasmuch as it will direct foreign capital to foreign land, it will tend to lower foreign profits, and if all the earth were cultivated _with equal skill_ up to the same standard, the rate of profits would be everywhere the same, though the superior industry and ingenuity of particular countries might secure to them a greater abundance of other commodities.... Your club meets, I think, on the 28th.... Pray take a bed at our house.... Truly yours, DAVID RICARDO. XXIII. [Headed by Malthus in pencil, _Feb. 1815_. Post Office mark, _Feb. 6_.] MY DEAR SIR, I have now read with great attention your essay on the rise and progress of Rent[74], with a view of selecting every passage which might afford us subject for future discussion. It is no praise to say that all the leading principles in it meet with my perfect assent, and that I consider it as containing many original views which are not only important as connected with rent, but with many other difficult points, such as taxation, etc., etc. I cannot, however, help regretting that you did not consider separately the relations of rent with the profits of stock and the wages of labour. By treating of the joint effect of the two latter on rent you have, I think, not made the subject so clear as it might have been made. There are some parts in the essay with which I cannot agree. One of these is the effects of improvements, whether in the practice of agriculture or in the implements of husbandry, on rent. They appear to me in their immediate effects to be beneficial to the farmer only and not to the landlord. All the augmented produce obtained, or the saving in obtaining the same quantity of produce is, I think, wholly to the advantage of the farmer, and that the landlord only benefits remotely from it, as it may encourage accumulation and the cultivation of poorer lands. I think too that rents are in no case a creation of wealth; they are always a part of the wealth already created, and are enjoyed necessarily, but not on that account less beneficially to the public interest, at the expense of the profits of stock[75]. Viewing rents in this light, it follows that I must withdraw the concession which I was inclined to make when you first started the question 'whether, in importing corn at a cheaper price than we could grow it, the whole difference of price was saved, or whether some abatement should not be made from the advantage for the loss of rent?' as I now decide[d]ly think that the whole difference of price would be gained without any deduction whatever. The arguments then of those who contend for a free trade in corn remain in their original full force, as rents are always withdrawn from the profits of stock. I will try, if I have a little leisure, to put my thoughts on this subject on paper, and shall attempt to show that the effects of a tax and of rent are very different as far as regards importation. It may be economical to grow corn if its price is raised merely by taxation, as by importing it a part of the tax would be wholly lost to the country [import]ing it. No such consideration should influence us [with regar]d to rent being lost. I differ, as you know, as to the effects of taxation on the growth of produce. You appear to me not quite consistent in admitting, as you unequivocally do, that the last portion of land cultivated yields nothing more than the profits of stock, no rent, and yet to maintain that taxes on necessaries or on raw produce fall on the landlord and not on the consumer. ... I have paid Wettenhall £2 8_s._ for two years' lists, but it has since occurred to me that I paid him and you paid me for one year, and therefore that only one year can be due to him. If so, let me know, that I may get back £1 4_s._ Ever yours, DAVID RICARDO. XXIV. _10th Feb., 1815._ MY DEAR SIR, I shall accept your kind invitation, and intend being with you on Saturday evening at the usual time. We can then talk over the points on which we differ. I will bring with me the papers on which I have been busy since you left London, and in which my objections are more fully stated than can be done in the compass of a letter[76]. In the case of the Scotch farmers who made such large profits on their capital during the latter part of their leases[77], they appear to me to have been enjoying rent, arising not from improvements in agriculture, but from poorer land being taken into cultivation. If their leases had expired sooner, rent would have been increased long before on those farmers. It would be desirable to know what the rent on those farms was when the lease was originally granted, or rather what proportion it bore to the capital then employed and what the proportion of rent is to the capital now employed. The effects of monopoly cannot, I think, be felt till no more land can be advantageously cultivated. You have yourself said, and I very much admire the passage[78], that the last portion of capital employed on the land yields only the common profits of stock, and does not afford any rent. If so, corn, like everything else, is regulated in its price by the cost of production, and every other portion of capital employed on the land is reduced to the same level of profits only because no more capital can be employed with more advantage, and all which it anywhere yields more is rent and not profit. I have read the Appendix[79] also with great attention, and cannot help thinking that you have quite thrown off the character of impartiality to which, in the Observations, I thought you fairly entitled. You are avowedly for restrictions on importation; of that I do not complain. It is not easy to estimate justly the dangers to which we may be exposed. Those who are for an open trade in corn may underrate them, and it is possible that you may overrate them. It is a most difficult point to calculate these dangers at their fair value; but in an economical view, although you have here and there allowed that we might be benefited by importing cheap rather than by growing dear, you point out many inconveniences which we should suffer from the loss of agricultural capital and from other causes, which would make it appear as if even economically you thought we ought to import corn,--such is the approbation with which you quote from Adam Smith of [_sic_] the benefits of agriculture over commerce in increasing production[80], and which I cannot help thinking is at variance with all your general doctrines. Your observations on the advantages (and therefore on the injustice to other classes) which the stockholder would reap from a low price of corn are, I think, very correct; but I do not think these objections should stand in the way of the general good. They, the stockholders, have at different periods suffered much, and, if the sinking fund be now appropriated to other services[81], another striking injustice will be added to the long list. I meant to write only a few lines and have filled a long letter.... Yours very truly, DAVID RICARDO. XXV. LONDON, _9th March, 1815_. MY DEAR SIR, My acquaintance lies so little amongst political economists that I have very few opportunities of knowing whether what you consider as my peculiar opinions have any supporters, or indeed are read or attended to. As for my own judgment on the subject, it is perhaps too partial to merit attention; but after my best efforts not to be biassed in favour of my own opinions, I continue to think them correct. I would indeed rather modify what I said concerning the stationary state of the prices of commodities under all the variations of the price of corn, either from wealth on the one hand or the importation from foreign countries or improvements in agriculture on the other. I made no allowance for the altered value of the raw material in all manufactured goods[82]. They would, I think, be subject to a variation in price not on account of increased or diminished wages, but on account of the rise or fall in the price of the raw produce which enters into their composition, and which in some commodities cannot be inconsiderable. It is a matter of mortification to me that my execution has been so faulty; I was too much in a hurry, and have not made my meaning intelligible even to those who are familiar with such subjects, much less to those who skim over these matters. Since I have seen you I received a note from Mr. Edward West, who is the author writing under the title of a Fellow of University College; he speaks in favour of my opinions of course, because they are very similar to his own. I have read his book with attention, and I find that his views agree very much with my own. He is a barrister, a young man, and appears very fond of the study of political economy. Mr. Brougham has, I think he said, promised to introduce him to you. Mr. Jacob[83] has handled both him and me rather roughly; but he will not condescend to argue with us. I shall be very easy if he is the most formidable opponent that is to attack me, for he seems totally ignorant of the scientific part of the subject. The opposition to the bill[84] is more formidable than I expected, but they appear so determined in the House of Commons, that I suppose it will finally pass. I regret that the people should have proceeded to acts of riots and outrage. I am too much a friend to good order to wish to succeed through such means, besides that I am persuaded that they hurt rather than promote the object which they and I have in view. I wish you could have dined with me on Saturday. I expect Mr. Phillips[85] and Mr. Dumont; it would be a very agreeable surprise to me if you should join our party. Perhaps you may be inclined to come to London and wil[l] take a bed in Brook Street. Do if you can [and] do not think it necessary to write on purpose to say you cannot. I shall fully depend on your staying with us when you come to the next club. Sir F. Burdett and some others think that the high price of our corn is owing to enormous taxation, and that it ought not nor cannot fall without oppression to the landholders till our debt is diminished. If I could convince myself that any part of the price of corn was owing to taxation, I should be in favour of a protecting duty to that amount. But, if he were right, the high price would not be accompanied by high rents or by the cultivation of inferior lands. These I consider as unequivocal marks of the high price being caused by wealth and a scarcity of fertile land. Indeed my theory leads me to think that no taxes but those directly on the land or on its produce would raise the price of corn, and even such taxes would have no effect if all exportable commodities were taxed in the same degree, for a tax on exportable commodities in a country which imports corn does not act very differently from a duty on the importation of corn. Kind regards to Mrs. Malthus. Ever yours, DAVID RICARDO. XXVI.[86] UPPER BROOK STREET, _14 March, 1815_. MY DEAR SIR, I have read Mr. Torrens' pamphlet[87] and think it on the whole a very able performance. I differ with him in most of his views in chap. 2, part 2, with many of the 3rd chap., and with a few in the remainder of the work. I am glad to hear that you are going to make some observations on it[88]. I think he is an adversary worthy of your pen, and the friends of truth cannot fail to profit by the discussion. With regard to any remarks on my opinions, you must be governed by your own discretion. If those opinions are wrong, I should like to see them refuted, but, thinking as I do that they are in all essential points founded on correct principles, I ask for no mercy. I do not care how severely they are attacked; there is nothing you could say of them which would hurt me, if what you said did not express contempt, and that I know you do not feel for me. Act therefore towards me as if I were a perfect stranger, and notice me or not as you think best. I cannot hesitate in agreeing with you that, if from a rise in the relative value of corn less is paid for fixed capital and wages, more of the produce must remain for the landlord and farmer together; this is indeed self-evident, but is really not the matter in dispute between us, and I cannot help thinking that you overlook some of the circumstances most important connected with the question. My opinion is that corn can only permanently rise in its exchangeable value when the real expenses[89] of its production increase. If 5000 quarters of gross produce cost 2500 quarters for the expenses of wages, etc., and 10,000 quarters cost double, or 5000 quarters, the exchangeable value of corn would be the same; but, if the 10,000 quarters cost 5500 quarters for the expenses of wages, etc., then the price would rise 10 p.c., because such would be the amount of the increased expenses. A rise of the price of corn and a fall in the corn price of labour is [_sic_] in my opinion incompatible, unless it be owing to something in the currency; and it is not necessary to enquire here what effects that would produce. Observe that I do not question that each individual labourer may receive a less corn price of labour, because I believe that would be the case, but I question whether the whole corn amount of wages, etc., paid for the cultivation of the land can be diminished with an increase of the exchangeable value of corn. If no more labourers were employed and the price of corn rose, your proposition could not be disputed; but the cause of the rise of the price of corn is solely on account of the increased expense of production. I have lost Lord Lauderdale's pamphlet[90], or rather it has been taken from my office. If I can get another, it sha[ll] accompany this. The improvement[s] in agriculture I believe have had more effect in kee[ping] down r[ents] than we have ever imagined. On my theory they fully account for rents being no higher; on yours they would tell the other way. I meant to reproach you when I saw you [for[91]] speaking of Mr. Jacob's pamphlet with so much [praise[91]] as you did when Mr. Basevi[92] asked your opinion of it. I am glad you allow he is very deficient in scientific knowledge. You will see by what I have said that a rise in the price of corn is always in my opinion accompanied by a less material surplus produce; but it may be of equal value as compared with other things. Of this produce the landlord gets so large a share that in spite of the rise of produce the situation of the farmer is constantly getting worse. Yours very truly, DAVID RICARDO. XXVII. LONDON, _17 March, 1815_. MY DEAR SIR, If your statement[93] was correct, this extravagant consequence would follow from it: That in proportion as population increased and worse land was brought under cultivation, the proportion of produce to the corn expenses of procuring it would increase. If we now had twenty millions of quarters with an expense of five millions of quarters, we should when we expended ten millions of quarters obtain more than forty[94], notwithstanding that in the latter period many more than double the quantity of hands were employed in cultivation in consequence of the poorer quality of the land. If this be true, the principle of population is false, because the more you increase the people, the greater surplus of abundance will appear. Your statement is however very ingenious, and carries a great deal of plausibility with it; but I think you err in supposing it possible that the proportion of the whole corn expenditure to the produce obtained can fall, with an increase of the price of corn. The two are incompatible; either the whole corn expenses of production will be increased or not. If they be, the price of corn will rise; but, if they be not, I can see no reason for a rise in the price of corn. I admit that it is only the last portion of capital employed on the land which will be attended with an increased corn expense; but, unless it renders the whole produce together at an increased expense, the price of produce will not rise. Suppose the produce of the country ten millions of quarters with the price at £4 per quarter, the number of labourers employed two-and-a-half millions, each receiving two quarters of corn annually as wages. Suppose too that the population increases and five millions of quarters more are required, but that it cannot be obtained with less labour than that of two millions of men. If we suppose the price to increase in proportion to the number of men employed, it will rise to £4 16_s._, because to raise ten millions of quarters an average of three millions of men would be now required instead of two-and-a-half millions. Suppose now each man to consume one quarter annually for food and to exchange the remainder for other necessaries. Fourteen bushels will be sufficient wages for him[95]; the expenditure of corn for wages will then be for fifteen millions of produce 7.875.000, and for ten millions 5.250.000. Before, it was only five millions; consequently the proportion of surplus produce has diminished. In making this calculation I have very much favoured your view of the question, because the price of corn would not, I think, rise in proportion to the greater number of men employed but to the greater amount of wages paid; it would not therefore rise to £4 16_s_., but to £4 4_s_., because as 5 : 5-1/4 :: £4 : £4 4_s_. But, if the price was only £4 4_s_., more corn would be required by the labourer than fourteen bushels, that calculation being founded on a greater exchangeable value of corn. It appears too that your statement if true does not account for the less proportion of the population now emp[loyed upon] the land, because you always suppose more men to [be employed] but at less corn wages. It can never happen, I think, that profits can fall and encourage the cultivation of poor [land in] the manner assumed in my table without a rise in the price of corn. It is by the rise of the price of corn that all other profits are regulated to agricultural profits. If the price of corn remained low, money wages would not rise, and general profits could not fall. If it be true that capital has become more and more productive on the land, it can, I think, only be accounted for on the supposition that great improvements have taken place in agriculture, and that wages have been kept moderate by the improvements in those manufactures which supply the poor with the necessaries on which a part of their wages are expended. What a dreadful change in our political horizon has occurred within a few days[96]! Will it be possible to remain at peace if Bonaparte establishes himself as sovereign of France? The prospect is very gloomy. ... Ever yours, DAVID RICARDO. XXVIII. LONDON, _21 March, 1815_. MY DEAR SIR, On no subject that we have been lately discussing have we so materially differed as on the one now occupying our attention. Your position, if established, would, I think, overturn both your theory of rent and population, for I understand you to maintain that the higher the price of corn rises, in consequence of more men being employed on the poorer land, the greater will be, not only the surplus produce after paying the labourers, but the ratio of that surplus produce to the whole capital employed on the land. If this be true there is no check to the increase of population, and food can be increased in a ratio exceeding that at which mankind increase. Your statement requires that with every additional labourer not only an equal increase but a greater increase of surplus produce should be obtained. More labourers may then be employed without limit, and rent and profit together must not only increase, but increase in a geometrical progression. I am sure I am correct in thus stating your proposition, because if as you say the whole corn expense of production per quarter will be diminished with every rise of price, the surplus must increase in a geometrical ratio with the capital employed. If you meant only that the surplus produce would increase with every accumulation of capital on the land, though in a diminishing ratio to the capital employed on the land, that is not only advanced, but strenuously maintained as the groundwork of my theory, and is the basis also on which my table is formed. You have misapprehended a passage in my last letter. I certainly never said, nor ever thought, that any good reason could be given for an increased number of men being required to produce precisely the same quantity of corn from precisely the same land. What I said was that, if at one period the number of labourers required to produce ten millions of quarters of corn was two-and-a-half millions of men, and at another, in consequence of increased demand, fifteen millions of quarters could not be produced with a portion of worse land at a less cost of labour than that of four-and-a-half millions, at this latter period a production of ten millions would require three millions of men, because fifteen is to four-and-a-half as ten to three, and if we supposed the price of corn under such circumstances to increase in the proportion of 2-1/2 to 3, a supposition much more favourable to your view of the question than we should be obliged to concede, yet that it would not support the conclusions to which you arrive, but, on the contrary, would prove my theory to be the correct one. If the calculation had been made, as you think would have been more correct, on an increase from ten millions to ten-and-a-half millions, the result would have been the same, but we should be puzzled with the decimals or fractions which must be employed on such a supposition. I agree with you 'that the natural price of corn depends entirely upon the price of the last addition, and it does not matter whether with regard to the old land a capital yields 50 per cent. rent and profit or 20 per cent. In either case the price of corn on such land has nothing to do with the cost of production.' I do not see how the admission of this fact can assist your argument, which relates only to the ratio of the surplus produce to the whole capital employed. I cannot conceive by what argument you could shew that it might be possible that the addition of another labourer on the land would not pay his expenses, although not more than a quarter of the population were employed upon the land. Allowing, as I most fully do, that no pressure can destroy rents, yet as the last portions of capital employed on the land pay no rent, it is to me inconceivable that there would be no inducement to employ more labourers whilst their average production should be three times more food than they could themselves consume. If the whole of this surplus, after maintaining in the most frugal manner the owners of stock, were absorbed by the landlords as rent, they would increase their revenue, and employ more labourers on the land, if any among them saved any part of his income and lent it at the common rate of interest. I am sorry you do not come to town for the next club. Yours truly, DAVID RICARDO. XXIX. LONDON, _27th March, 1815_. MY DEAR SIR, No particular event which I recollect ever occasioned so great a gloom as the late lamentable reverse. At present we have the most dismal forebodings of war and its consequences on our finances; the truth is our courage is not screwed up to the proper pitch; like everything else, we shall be easy under our new situation in another fortnight. I am glad, however, to turn my attention to other subjects. I have observed in the bullion pamphlet[97] that many who say they consider money only as a commodity, and subject to the same laws of variation in value from demand and supply as other commodities, seldom proceed far in their reasoning about money without showing that they really consider money as something peculiar, varying from causes totally different from those which affect other commodities. Do you not fall into this error when you say, 'In the first place all depends upon the relation between corn and other commodities, and, as labour and corn enter into the prices of all commodities, the difference between corn and other commodities cannot possibly increase in any proportion to the increase in the money price of corn'? If money be a commodity does [_sic_] not corn and labour enter into its price or value? And, if they do, why should not money vary as compared with corn and labour by the same law as all other commodities do? As far as this question regards the importation of corn, you are much more interested than I am in maintaining the uniform value of commodities, because if the rise of the price of corn and labour will as you contend raise the price of our commodities, this is an additional reason why we should not impose restrictions on the importation of corn, as it will subject us to a decided disadvantage in our competition with foreigners for the sale of our commodities. Not however to dwell on this very essential point, I agree with you that a rise in the price of corn occasions a different distribution of the produce from the old land. It does this by lowering profits. Instead of a manufacturer having it in his power to maintain a servant or mechanic who may contribute to his enjoyment, that power will be transferred to the landlord, and this will arise from the lower corn value of manufactured goods. Indeed I see no limit to the fall of the corn value of goods but the impossibility of manufacturing them with any the least return of profit, and this will not happen till the landlord has appropriated to himself in the form of rent nearly the whole surplus produce of the land. It appears to me that the progress of wealth, whilst it increases accumulation, has a natural tendency to produce this effect and is as certain as the principle of gravitation. You have, I think, totally changed your proposition. You before contended that, in consequence of increasing wealth and the cultivation of poorer land, the whole _corn_ cost of production on the land would bear a _less_ proportion to the whole _corn_ produce; but now you say that the _money_ cost of production on the land will bear a less proportion to the _money_ value of the whole produce. Between these propositions there is a very material difference, as the latter might be true at the very time that the former was false. To admit what you now contend for would not affect my theory, as, though it would prove that the landlord and tenant (together) got more money revenue, or, if you will, a greater proportion of money revenue as compared to the money capital employed, yet the tenant might and I think would get a less proportion, and therefore the rate of profits would fall. Such a state of price [_sic_] is quite compatible with a greater proportion of men, as compared with the produce obtained, being employed on the land; but it is wholly irreconcileable with the net corn produce bearing a larger proportion to the gross corn produce, which was the principle before contended for. I agree with you that the increased price of corn in the order of things is rather a cause than a consequence of a greater than the usual number of men being employed to obtain the same quantity of produce from new land, because profits from such an employment of capital may be higher than other profits; but this difference of profit may be owing to a general fall in the rate of profits on other concerns rather than to the actual elevation of the profits on land; and I am of opinion that a rise in the price of corn always lowers general profits by increasing wages. I can in no way satisfy myself that general profits can rise with a rising price of corn and fall with falling prices, unless they are raised or lowered by diminishing or increasing wages, and then they can be but of short duration. In the ordinary course of things, as a high price of corn attends a state of progression, wages of labour will be really high, and profits cannot rise because of wages being low. I am decidedly of opinion that Torrens[98] has treated you unjustly in his remarks in the preface of his book. If I recollect, you acknowledged an alteration in your opinion respecting the corn laws, since you wrote your essay on population, in your 'Observations on the Corn Laws.' I think too that you have always held the opinion you now do that the difference between the value of gold and paper was partly owing to the rise of the value of gold. Is not his criticism very much strained as to the use of the word depreciation? But, if he be right in all, the instances are much too few to justify his severe observation. At the Geological Club[99] his book was spoken of the other day with great approbation. Mr. Blake[100] and Mr. Greenough[101] think that he has exhausted the subject, and that his arguments cannot be controverted. I should think that he is very generally read. 'If I would lay a tax on foreign corn,' you ask, 'on account of a tax on our own, does not the same principle apply to the indirect taxes that raise the price of labour?' I think not, because a tax on corn will raise the price of corn twice, once on account of the tax, and a second time on account of the rise of wages; but, as this second rise is common to all things in which labour enters, and will be corrected by a new value of money, it will not be of long duration. The indirect taxes which only raise the wages of labour produce, I think, the same effects as the second rise in the price of corn, of which I have just been speaking. Whenever a tax bore with unequal effect on the land, when it did not affect labour bestowed in other employments, a countervailing duty on importation should, I think, be also imposed. I fear I cannot be with you on Saturday. If you do not hear from me by Wednesday's post, conclude that I cannot leave home.... Ever yours, DAVID RICARDO. NOTE.--Robert Torrens, the soldier economist, began his literary career with 'The Economist Refuted' (1808), in answer to William Spence, who in 1807 tried to persuade his countrymen that Napoleon's blockade mattered little to them, Britain being 'independent of commerce.' In the winter of 1810-11, Torrens was Major Commandant of the Royal Marines, doing garrison duty on the island of Anholt in the Kattegat. The frost gave him time to re-read his Adam Smith and write his 'Essay on Money and Paper Currency' (publ. 1812). In his 'Essay on the External Corn Trade' (see above, page 65), Torrens characterizes the writings of Malthus as suggestive and candid and full of 'facts,' but ill-reasoned and inconsistent. Mr. Malthus, he says, scarcely ever embraced a principle which he did not subsequently abandon; his Essay on Population was a plagiarism from Wallace; and he refuted it himself by introducing the influence of Moral Restraint; in regard to Corn Bounties and in regard to the Currency, his later writings have contradicted his earlier. (Pref. pp. viii. to xii.) Torrens compared the Political Economy of Malthus with that of Ricardo, greatly to the advantage of the latter, in his 'Production of Wealth' (1821). See 'Malthus and his Work,' pp. 265-6. Compare also Note to Letter XLIV. XXX. LONDON, _4 April, 1815_. MY DEAR SIR, You think that my theory of a diminishing rate of profit in consequence of being obliged to cultivate poorer lands is affected by my admission that there will be a greater quantity of surplus produce and a greater money value from the old land. This would be true if any part of either the additional quantity or additional value belonged to the owner of stock. You, however, expressly say that this additional value or quantity 'will remain to the farmer and landlord.['] Before my theory is affected it must be shown that the whole will not remain with the landlord, as, if the farmer gets no share of it, his rate of profits cannot be raised. I agree with you that, when the exchangeable value of corn rises, 'the whole quantity of corn in the country will exchange for a greater number of coats than before, and consequently that there will be both the power and will to purchase, with the raw produce of the country, a greater quantity of manufactured and foreign commodities.' In a progressive country I can easily conceive this power and will to be doubled or trebled, as well as the commodities on which they are exercised; but this admission does not affect the question of profits. There may be a great demand for home and foreign commodities without their price being permanently raised, as no new difficulties may attend their production. When America becomes populous and wealthy in the same proportion as the most wealthy country of Europe, will not her corn exchange at a higher value both for money and commodities, although it will have much increased in quantity? Will not all foreign and home commodities in America be double or treble their present amount, yet will not the profits of stock be less there than they now are? On this question I could not have thought that the slightest doubt could exist; all theory, all experience is in favour of this opinion. Whilst the labour of ten persons employed on land paying no rent can produce one hundred quarters of wheat, it appears to me possible and probable that one-third more labour might profitably be employed on that land, not indeed in producing only one hundred quarters of wheat, but an additional quantity more than the additional labourers would consume. Whilst the labour of ten men can produce one hundred quarters of wheat, it is difficult to suppose profits only ten per cent., and more difficult to conceive that many more men might not be profitably employed in increasing the produce off such land. In theory, land which yields no rent, according to your supposition, would have more and more capital profitably expended on it, whilst the additional quantity of produce obtained exceeded [the] quantity paid to the additional labourers. Capital [might] be so expended, whilst the profits of stock gave any return, not ten per cent. but one per cent. or a half per cent. No doubt money varies more slowly than other commodities for the reason you mention; nevertheless its value, like every other foreign commodity, depends on the labour and expense of bringing it to market. I expect some friends to dine with me on Saturday, and on Monday I am engaged out to dinner; yet, if the weather is tolerably fine, I will be with you by the time you leave chapel on Sunday, but I must get home next day. If this is not quite convenient, pray let me know. Ever yours, DAVID RICARDO. XXXI. LONDON, _17 April, 1815_. MY DEAR SIR, You, I think, agree with Mr. Torrens that a rise in the price of corn will be followed by a rise in the price of home commodities; but your theory requires that there should be no rise in the price of those commodities on which the wages of labour are expended, for, if they rose in the same proportion as corn, there could be no fall in the corn wages of labour. Is it not, however, very improbable that all manufactures should rise at home, and yet that those on which [the wages of] labour are expended should not rise? Is not the price of soap, candles, etc., though foreign commodities[102], necessarily affected by the rise in the price of those home goods which are given in exchange for them. Mr. Torrens' theory, however, on this part of the subject appears to me defective, as I think that the price of commodities will be very slightly affected either by a rise or fall in the price of corn. If so, every rise in the price of corn must affect profits on manufactures; and it is impossible that agricultural profits can materially deviate from them. I will, however, suppose that you and Mr. Torrens are correct, and that commodities do rise in price with every increased price of corn. The value of fixed capital as well as of circulating capital employed on the land will then rise also; and, although the money value of the produce should be increased on the old land, it will still bear the same proportion to the money value of the capital employed; and, as this produce will be divided in different proportions between the landlord and the farmer, the rate of profits of the latter will fall. For the purpose of examining the effects, let us suppose that all commodities rise, with the rise of the price of corn, excepting those only on which the wages of labour are expended, and that in consequence the corn wages of labour fall. Suppose the price of corn £4, and that on the old land the labour of eight men was necessary to raise eighty quarters of corn, that no rent was paid, and that each labourer had eight quarters annually for his wages, of which one half was expended on commodities. The gain of the farmer, when the price was £4, would be £64 or sixteen quarters, and, besides his fixed capital, horses, seed, etc., he would require the value of sixty-four quarters, or £256, to pay the annual wages of his labourers; consequently his profits would be in the proportion of £25 to £100 of wages, for 256:64::100:25. Now, suppose corn to rise to £4 10_s._, wages would vary only 10_s._ on four quarters, and consequently would rise to £34 annually per man, or £272 on the old land; but the eighty quarters of corn would sell for £360, leaving a produce of £88 to be divided between farmer and landlord; and 88 would be to 272 as 32 to 100. But on the new land the labour of eight men and a half might be required to obtain eighty quarters or £360; the labour of eight-and-a-half men would cost, at £34 each, £289; consequently the profit would be £71, which is to the whole expense of £360 as £19·7 to £100. £100 capital or expenses on the old land will yield £32 £100 capital or expenses on the new land " " £19·7. -------- Rent £[1]2·3. It appears then that the profit on new land, which regulates the profit on all other land, would be 19·7 per cent. when the price of corn was £4 10_s._ It was 25 per cent. when the price was £4. If indeed under the same circumstances we had supposed the price of corn to rise to £6, then profits would be increased, and would be much more than 25 per cent.; but some adequate cause must be shown for [such] rise, and it cannot be arbitrarily assumed. Your theory supposes too what is impossible, that the demand for manufactures [could] increase in the same proportion as the demand for [corn] at the very time that more men are employed on the land to obtain a less proportion of produce. The whole appears to me a labyrinth of difficulties; one is no sooner got over than another presents itself, and so on in endless succession. Let me entreat you to give my simple doctrine fair consideration, and you must allow that it accounts for all the phenomena in an easy natural manner. I yesterday met Mr. Smyth[103], your friend, and Mr. Torrens at Mr. Phillips'. I passed a very pleasant day. Mr. Smyth was exceedingly agreeable. I like him very much. The corn question was occasionally introduced, and I had an opportunity of stating some of my objections to Mr. Torrens' theory. I have no reason to think that I convinced him. I defended the use of the word depreciation in the sense [in] which you had used it; and I believe I had every one with me. I fancy that his arguments in his book on currency are founded on the sense in which he uses the word. We spoke on the other points of difference between him and you. Mr. Smyth, Mr. Phillips, and Mr. Torrens have agreed to dine with me on Wednesday, which has induced me to write to you a day or two sooner than I otherwise should have done that I might express my wish that you would join us. If you will, we will dine as late as you please. There will be a bed at your service, and I need not say that you will add considerably to my pleasure. Yours very truly, DAVID RICARDO. NOTE.--In many of his speeches, e.g. June 12, 1822, Ricardo refers to the ambiguity of the word 'depreciation'. He himself always uses it to indicate that the currency had fallen below its own standard, as e.g. when coins are clipped. Others used it of a change in the _value_ of the currency as purchasing a larger or a smaller quantity of goods. A currency might be depreciated in the first sense when it was actually, through counteracting causes, the opposite (or appreciated) in the second. Malthus, in Edinburgh Review, Feb. 1811, had used it in the first sense. (See pp. 341, 356, 365.) Torrens, in his 'Essay on Money,' 1812, had used it in the second. (See pp. 98, 99.) The word 'appreciation' occurs in Tooke's 'High and Low Prices' (1823), Part I. p. 76. Tooke himself distinguishes depreciation of the Currency (the first of the above senses) from depreciation of Money (the second of them); (l. c. p. 8.) XXXII. LONDON, _21 April, 1815_. MY DEAR SIR, I was sorry you could not join our party on Wednesday. Mr. Smyth has left a pleasing impression on the minds of all those who met him, and I had every reason to confirm me in the favourable opinion which I had formed of him at our first meeting. Mr. Torrens is a very gentlemanly man. He had sent me his book on bullion before he came, and I fear that too much of the conversation was bestowed on the differences between his opinion and mine on the subject of paper currency and the exchanges. The latter he does not appear to me correctly to understand. I insisted on the consistency of your former and present opinions on the bullion question, and asked him from whence he had derived his knowledge of your views on that subject. He said that Dr. Crombie[104] and you had met purposely to discuss the question, and from him he had understood that you ascribed the whole effects on the price of bullion to the abundance of paper. He, as well as Monsieur Say, finds it difficult to support his opinions and answer objections in conversation--he says all such discussions should be carried on in writing.... On Saturday I shall meet you at the King of Clubs, to which I am invited by Mr. Whishaw, and on Sunday I wish you and Mrs. Malthus will oblige Mrs. Ricardo and me with your company to dinner. If you can I will ask Mr. Whishaw and Mr. Smyth to meet you. Perhaps too you will breakfast with me on Saturday or Sunday morning. It appears to me that my table is applicable to all cases in which the relative price of corn rises from more labour being required to produce it, and under no other circumstances can there be a rise, however great the demand may be, unless commodities fall in value from less labour being required for their production. It is not probable that the relative price of corn will fall so low with an abundant capital in the country as when capital was very limited, but, if it could, the same effects on profits and on rent would follow, as it would demonstrate that land only of the best quality was in cultivation. You agree with me that if a large tract of rich land were added to the Island it would restore the state contemplated in my table. Though we agree in the conclusion we differ materially in our opinion of the means by which it would be brought about. You think that 'before any fall of price had taken place capital would be removing fast from the old land, _and from manufactures_,'--I think that capital would go from the old land to manufactures, because a given quantity of food only being required, that quantity could be raised on the rich land added to the Island with much less capital than was employed on the old, and consequently all the surplus would go to [manu]factures to procure other enjoyments for the so[ciety[105]], and profits on the land would rise at the expense of the rent of the landlord, whilst the cheaper price of corn would raise the profits on all manufacturing capital. I confess it appears to me impossible that under the circumstances you have supposed the relative value of corn would fall, not from the facility of procuring it, but from a rise in the value of manufactures. You suppose that corn would remain at the same price whilst manufactures rose in price,--I on the contrary think that the price of manufactures would continue nearly stationary, whilst the price of corn would fall. Is not this the natural consequence of more capital being employed on manufactures and less on agriculture? Have you not too uniformly supported the opinion that a fall in the price of corn will occasion a fall in the price of commodities? If they act on each other as you think, but to which I do not agree, how can manufactures rise in price with a stationary price of corn? I should have thought that on your principles such an effect would be deemed impossible. Ever truly yours, DAVID RICARDO. XXXIII. (Addressed to Claverton House, near Bath.) UPPER BROOK STREET, _27th June, 1815_. MY DEAR SIR, I have been for two or three days at Tunbridge Wells, and have been agreeably surprised to-day on my arrival in London, to hear of the great events which are taking place in France in consequence of the great victory obtained by the Duke of Wellington and his brave army over Bonaparte. With the deposition of Bonaparte I hope there may be no other obstacles to peace, and that we may at length be rewarded for the blood and treasure which we have expended with a long period of tranquil[l]ity, which I have no doubt will also prove a long period of prosperity. I think with Mr. Whitbread[106] that great credit is due to ministers for the energy which they have displayed in the prosecution of this contest. Having determined on war, their preparations have been on such a scale as to give from the commencement the best hopes of success, and we appear at last to have adopted the wise policy of making one grand effort in preference to a series of puny efforts, each just sufficient to keep the contest alive without making the least advance to its ultimate object. The effect on the price of Omnium has been no more than what might have been expected. I am sorry that you have not profited by the rise. As for myself, I have all my stock, by which I mean I have all my money[,] invested in Stock; and this is as great an advantage as ever I expect or wish to make by a rise. I have been a considerable gainer by the loan[107]; in the first place by replacing the stock which I had sold before the contract with the minister [_sic_] at a much lower price, secondly by a moderate gain on such part of the loan as I ventured to take over and above my stock. This portion I sold at a premium of from 3 to 5 per cent., and I have every reason to be well contented. Perhaps no loan was ever more generally profitable to the Stock Exchange. Now for a little of our old subject. It appears to me that there are two causes which may cause a rise of prices, one the depreciation of money, the other the difficulty of producing. The latter can in no case be advantageous to a society. It is always a sign of prosperity but never the cause of it. Depreciation of money may be beneficial, because it generally favours that class who are disposed to accumulate, but I should say that it augmented riches by diminishing happiness, that it was advantageous only by occasioning a great pressure on the labouring classes and on those who lived on fixed incomes. You and I concur in this opinion, for you say you are convinced that there are unobserved advantages attending the high price of corn and labour 'when not arising solely from difficulty of production,' [by] which I think you imply that no such advantages attend high prices if attended with difficulty of production. This opinion is, however, a little at variance with that which you have long been supporting, for you have said that the high price of corn and labour in this country at this time was an advantage, although it is universally allowed that that high price is mainly owing to difficulty of production. The farmers and shopkeepers may suffer very general distress from a sudden and general fall of prices; but I hold that this would be no criterion by which to judge of the general or permanent prosperity of a country. The accounts in which I am at present engaged will I fear keep me in London till the very latter end of July. I shall very much regret if you quit Bath without my seeing you. I quite depended on having a visit from you at Gatcomb this year, and I yet hope that it may be accomplished. I shall certainly leave London the very earliest day possible. The price of labour in America appears to me enormously high as compared with the price of wheat; but we should not fail to remember how very low the exchangeable value of wheat is there, and how much of it must be given for the manufactured necessaries and comforts of life.... Ever truly yours, DAVID RICARDO. XXXIV. GATCOMB PARK, _30 July, 1815_. MY DEAR SIR, I bore with great patience the fatigues of the last fortnight in London, in the hope that on my arrival at Gatcomb I should have the pleasure of your company for a few days previously to your return to London. It was a great disappointment to me to learn that you would be travelling to London the very day after I quitted it, and I see little prospect of having a visit from you here for some time to come, as your convenience or inclination will probably lead you to a different part of the country next year. I most cordially join with you in the wish that the victory of the Duke of Wellington will be the means of giving Europe some permanent repose. There appears every probability that it will be attended with that happy effect, and I should hope that the late stormy times will afford instruction both to sovereigns and people, and will secure the world from the evils of anarchy as well as from those of tyranny and despotism. David's ill health has induced us to take him from the Charterhouse.... Mr. Clerk, a neighbour of mine here in Gloucestershire and who is brother to the East India Director of that name, has just sent his son George to the East India College, and knowing my intimacy with you has called upon me to request me to write to you on behalf of his son, that in case he may st[and] in need of any friendly advice or assistance you [would have] the goodness to give it to him. I hope [I] am not taking too great a liberty in asking you to comply with his father's wishes. The immense concerns in business which I have lately had on my mind had nearly banished all consideration of subjects connected with political economy from it. Those concerns are now settled, but they have given me incessant work in arranging and balancing my accounts ever since I have been here. I recur now, however, with pleasure to corn, labour, and bullion. A really high price of corn is always an evil; in this opinion I think you would concur, because it is always occasioned by difficulty of production. I know of no other cause, and you allow difficulty of production not to be desirable in itself. In our own case the high bullion price of corn is not wholly owing to the barrenness of the land to be taken into cultivation, but from whatever cause it has arisen it cannot, I think, have enabled us to grant greater subsidies than we should otherwise have done, for subsidies as well as all services performed for us are paid for by the produce of the land and labour of the people of England. It surely is a palpable contradiction to say that our power of commanding services is increased, whilst our productions with which those services are paid are diminished. The principle may be true when confined to a few commodities of which we either have a monop[o]ly or peculiar facilities in the production of them, but as a general preposition it appears to me to be at variance with the best established doctrines. If a free trade in corn were allowed with America I should not expect that the prices would differ more, here and there, than the expenses and profits of sending it;--as it is I am surprised the price should be so high. A high money price of wages is I think quite natural. Ever yours, DAVID RICARDO. XXXV. GATCOMB PARK, _10th Sept., 1815_. MY DEAR SIR, Nothing could be more unlucky than our missing each other as we did this year. I should think there would be no obstacle to our leaving town a little earlier next year, when I hope we shall at length have the pleasure of seeing Mrs. Malthus and you at Gatcomb. It is the general remark in our part of the country that a finer season was never remembered. The rain, of which we have certainly had a deficiency, has generally come at night, and the days which have followed have been beautiful. The temptation to enjoy it has been so great that I have been incessantly out with some one or other of my friends who have been staying with me, either riding or walking, which makes such inroads on my time that I find I have much less leisure here for reading and study than I have in London. Before I came here I often saw Mr. Grenfell[108], who is very warm on the subject of the Bank and the advantageous bargains which it has always made with government, as well for the management of the national debt, the composition which it has hitherto paid for stamps, as for the compensation which government has received in the way of loan for enormous average deposits left with the Bank. I am quite of his opinion, and indeed I go much further; I think the Bank an unnecessary establishment, getting rich by those profits which fairly belong to the public. I cannot help considering the issuing of paper money as a privilege which belongs exclusively to the State; I regard it as a sort of seignorage, and I am convinced, if the principles of currency were rightly understood, that commissioners might be appointed, independent of all ministerial control, who should be the sole issuers of paper money,--by which I think a profit of from two to three millions might be secured to the public, at the same time that we should be protected from the abuses of the country banks, who are the cause of much mischief all over the kingdom. These commissioners should also have the management of the public debt, and should act as bankers to all the different public departments. They might invest the eleven millions which is the average of public deposits in Exchequer Bills, a part of which might be sold whenever occasion required. This of course (at least all of it) could not be effected till the expiration of the Bank Charter in 1833; but it is never too soon to give due consideration to important principles, which might be recognized, though not yet acted on. In looking over the papers which have from time to time been laid before Parliament, I think it might clearly be proved that the profits of the bank have been enormous. I should think they must have a hoard nearly equal to their capital. By their charter they are bound to make an annual division of their profits and to lay a statement of their accounts before the proprietors; but they appear to set all law at defiance. I always enjoy any attack upon the Bank, and [if I] had sufficient courage I would be a party to it. Though I have been thinking on this subject lately, I am not less interested about our old subject, of the advantages or disadvantages of high prices for raw produce. If I agreed with Mr. Torrens that such high prices were accompanied with a rise in the prices of commodities, and, if I thought that such rise would not preclude the usual exchanges with foreign countries, I should of course agree with you that with such general high prices we should command a greater quantity of foreign commodities in exchange for a given quantity of ours; but I cannot admit in the first place that commodities would rise because corn rose[109]; and, secondly, if they did so rise there are but very few which we could sell in equal quantity at the advanced price to foreigners; and, if we sold less to them, we could buy less of them, and thus would our general commerce suffer. I can see great advantages attending low general prices but none in high prices. On this subject we are not likely to agree. I hope you are diligently employed and that early in the year we shall see something new from your pen. I have some curiosity to see a pamphlet just advertised[110], in the title page of which your name is mentioned. Ever yours, DAVID RICARDO. ... Have you seen Monsieur Say's [Catec]hisme d'Economie Politique? He has softened but not [expung]ed the objectionable definitions. NOTE.--Correspondence between Ricardo and J. B. Say is given in the 'Oeuvres Diverses' of the latter, published after his death (Guillaumin, 1848), with notes by Ch. Comte, Daire, and Horace Say. J. B. Say (born 1767) was the son of a Lyons merchant, of Huguenot origin. When a boy, he was sent with his brother Horace to learn business in London, where he was struck, amongst other things, by the fact that his Croydon landlord built up one of the two windows of his lodgings to escape window tax. Having gained familiarity with the English language and English ways he returned to France in 1789 and entered the employment of a Life Insurance Company, the manager of which (Clavière) lent him a copy of the 'Wealth of Nations,' not yet translated into French. The reading of it made him an economist for life, as it did for Ricardo ten years later. After serving in the revolutionary army in 1792, he left commerce for journalism. His chief book, Le Traité de l'Economie Politique, appeared in 1803. Too independent to please Napoleon, he was forced to quit his new profession for his old; and his commercial travelling landed him eventually at Geneva, where he made the acquaintance of Necker, Madame de Stael, and Benjamin Constant. He came back to France (to Auchy, Pas de Calais) to spin cotton, retiring with a moderate fortune in 1813. After the Peace he was sent by Government to report on the economical condition of England. He was cordially received by Ricardo, Bentham, and other economists; and on his return to Paris narrated with pride to his audiences at the Conservatoire des Arts et Metiers that the Glasgow professors had made him sit in the chair of Adam Smith. After an active life of teaching and writing, he died in Paris, 15th November, 1832. Ricardo writes to him from Gatcomb Park on 18th Aug., 1815, thanking him for the copy of the (first edition of the) 'Catechisme de l'Economie Politique,' which he had just sent. Though complimenting him highly on the work, he thinks that Say has not, even yet, with sufficient clearness distinguished Value from Utility. No doubt to have value a commodity must be _useful_, but it is the _difficulty_ of its production that is the sole measure of its value. 'The wealthiest man is he who has most values, and who is able, by giving them in exchange, to procure himself not the things which he himself and everybody else regard as the most desirable, and which can be had at a low price, but the things that are difficult to produce and consequently dear. A man is rich not by the moderation of his desires, but by the quantity of commodities that he possesses.' Say has also, in Ricardo's opinion, forgotten sometimes that the growth of the capital of a manufacturer cannot be safely estimated in money if we do not allow for the change in the value of money. Ricardo concludes: 'The pleasure which I take in reading and studying good works on political economy has not diminished since I saw you. I should devote all my time to the discussion of points which seem to me to need further elucidation, if I had any talent for composition. However, I have ventured to publish the pamphlet[111] which I sent you, and I should be glad to know your opinion on the doctrine which I maintain in it in relation to the rent of land and the rate of profits, in opposition to Mr. Malthus. I learn from Mr. Mill that several persons in this country do not understand me because I have not explained my views at sufficient length; and he is trying to induce me to undertake an explanation of them from the beginning and at greater length; but I fear that the undertaking is beyond my powers.' (Oeuvres Diverses de Say, pp. 409-11. Ricardo wrote in English, but in this and the other cases the editors give only the French.) Say's answer follows (pp. 411-13), 2nd Dec., 1815: 'Nous nous occupons heureusement vous et moi de choses de tous les temps plûtot que de celles du moment actuel, qui ne sont pas gaies, malgré les fêtes que l'on donne pour faire croire aux peuples qu'ils sont heureux.' Going to the subject of value, he says he did _not_ say Utility was the measure of Value, but 'the value that men attach to a thing is the measure of the utility they find in it;' moreover he had not maintained the Stoical doctrine, 'the fewer wants, the greater wealth,' but had simply said that a man is the richer if all the things he wants (whatever they be) are cheap instead of dear, and would be richest of all if he had abundance of everything without any cost at all. He allows that Ricardo is right in regard to the growth of the manufacturer's capital, and promises to introduce the qualification suggested by Ricardo in his next edition. In the controversy between Malthus and Ricardo he finds it difficult to take a side, for he cannot for his part exclude from the question of profits 'the talent and industrial capacity of the man who brings out the resources of a land or a capital;' the profit inherent merely in land or in capital seems to him unimportant in comparison with the profit due to the source described. But he says he is too timid to insist on his opinion, and will wait for Ricardo's full explanations in the larger work. 'How I envy your lot, to study political economy in your beautiful retreat of Gatcomb Park! I shall never forget the too short moments I passed there, nor the charms of your conversation.' XXXVI. MY DEAR SIR, By facility of production I do not mean to consider the productiveness of the soil only, but the skill, machinery, and labour joined to the natural fertility of the earth. It does not therefore follow that because Otaheite[112] has an abundance of fertile land profits should be there at the highest rate, because the skill and the means of abridging labour may in Europe more than compensate this natural advantage of Otaheite. The question is this: If part of the skill and capital of England were employed in Otaheite to produce 100,000 quarters of corn, would not the persons employing that capital obtain greater profits in Otaheite than they would if they employed the same capital for the same purpose here, and would not rent be lower there than here? You must at any rate allow that the quantity of corn produced with a given quantity of capital, supposing the same skill to be employed, must be greater there than here, or there is no meaning in fertility of soil. You must allow too that in proportion to the fertility of Otaheite and to its extent compared with the population will be the lowness of rent, notwithstanding its abundant rate of produce. I can easily _conceive_ that, with the imperfect tillage the people of Otaheite now give their land, the population may be just sufficiently numerous to require that the whole of their lands should be in cultivation, and consequently that they should bear a rent; but let a hundred Europeans only join them with our improved machinery and perfectly skilled in husbandry, and the immediate consequence would be that three quarters of their lands would for a time become perfectly useless to them, as the quarter might produce them more food than all the inhabitants could possibly consume. Now I ask whether it be possible that three quarters of the land of a country can be suffered to pass from a state of tillage to a state of nature without occasioning a fall in rents? If land is less in demand, must not the rent of it fall? If you say no, there is no truth in the proposition that value depends upon the proportion between supply and demand. Now suppose England in the state in which I have been fancying Otaheite; and she is actually in that state, all or most of her land being in cultivation; and suppose further that there is another country totally unknown to us whose skill and machinery in husbandry as far surpasses ours as ours does that of the Otaheiteans. If a hundred of these persons were to come amongst us with their capital, skill, etc., would not the same consequences follow as I have just stated? Now every improvement in machinery is precisely on a small scale what I have been here supposing on a large scale; and I am quite astonished that you should yet maintain that 'universally where land is limited in quantity, the facility of production upon it will go mainly to rent, and the soil of a country might be of such fertility as to yield sixtyfold instead of eight or ten, and yet the profits of stock be only six per cent. and the wages of labour both nominally and really low.' Land, like everything else, rises or falls in proportion to the demand for it; every improvement which shall enable you to raise the same quantity of produce on a less quantity of land or, which is the same thing, a larger quantity of produce on the same quantity of land cannot increase the demand for land and therefore cannot raise rents. I do not clearly see the distinction which you think important between productiveness of industry and productiveness of capital. Every machine which abridges labour adds to the productiveness of industry, but it adds also to the productiveness of capital. England with machinery and with a given capital will obtain a greater real net produce than Otaheite with the same capital without machinery, whether it be in manufactures or in the produce of the soil. It will do so because it employs much fewer hands to obtain the same produce. Industry is more productive; so is capital. It appears to me that one is a necessary consequence of the other, and that the opinion which I have advanced and which you are combat[t]ing is that in the progress of society independently of all improvements in skill and machinery the produce of industry constantly diminishes as far as the land is concerned, and consequently capital becomes less productive. That this diminution of produce is beneficial to all owners of land, but that it is so at the expense of manufacturers, amongst which [_sic_] I include farmers, first by rendering the commodities which they manufacture of less exchangeable value than they before were for corn, and secondly by raising the cost of production by raising the price of labour. I shall put this letter in the Post Office in London, where I am going to-morrow for a few days. I have been writing, in my unconnected and confused style, my opinions on the profits of the Bank and on the advantages of a paper and nothing but a paper currency. I am too little pleased with it to think of publishing. The whole is too little for a pamphlet. Mr. Grenfell is, I think, anxious that something should be said about the Bank before the meeting of Parliament, and I too wish some able hand would undertake it. I am always glad to hear that you are preparing for the press; for, though I do not always agree in opinion with you, I am sure that your writings will contribute towards the progress of a science in which I take great interest. I should be more pleased that we did not so materially differ. If I am too theoretical (which I really believe is is the case), you I think are too practical. There are so many combinations and so many operating causes in Political Economy that there is great danger in appealing to experience in favour of a particular doctrine, unless we are sure that all the causes of variation are seen and their effects duly estimated. Mr. Whishaw and Mr. Warburton[113] have been at Mr. Smith's for some time. I have been absent from home unfortunately, and have seen but little of them. I yesterday dined with Mr. Whishaw; he talked of leaving Mr. Smith immediately.... Yours, DAVID RICARDO. _7th Oct., 1815._ XXXVII. [Not dated or headed, but fastened to preceding.] [_Oct. 1815?_] MY DEAR SIR, I have an account before me of the capital actually employed on a farm of 200 acres in Essex. It amounts to £3433 or about £17 per acre[114], of which not more than £1100 or £1200 is of that description which is not subject to the same variation of value as the produce of the land itself, for £2200 consists of the value of the seeds in the ground, the advances for labour, the horses and live stock, etc. etc. If then the money value of the produce from the land should fall _from facility of production_ it must ever continue to bear a greater ratio to the whole money value of the capital employed on the land, for there will be a great increase of average produce per acre, whilst the fall in money value will be common to both capital and produce, and it cannot therefore be true that rent, profits, and wages can all _really_ fall at the same time. The effect of high or low wages on profits has always been distinctly recognized by me:--till the population increases to the proportion which the increased capital can employ, wages will rise, and may absorb a larger portion of the whole produce. But this effect will only take place with an increase of capital, and has nothing to do with new facilities of production. Wages do not depend upon the quantity of a commodity which a day's labour will produce, and I cannot help thinking you quite incorrect when you say that the natural consequence of the facility of production being so increased that a day's labour will produce 4 measures of corn, cloth and cotton instead of 2 measures, will be that 4 measures of corn, cloth and cotton will be worth only the price of a day's labour instead of 2. It appears to me that, if, instead of 4, 10 measures could be produced by a day's labour, no rise would take place in wages, no greater portion of corn, cloth or cotton would be given to the labourer, unless a portion of the increased produce were employed as capital, and then the rise in wages would be in proportion to the new demand for labour, and not at all in proportion to the increase in the quantity of commodities produced. This increase would be exclusively enjoyed by the owner of stock, and, if he consumed in his family the whole increased produce, without augmenting his capital, wages would remain stationary, and not be in any way affected by the increased facility of production. I cannot agree with your proposition, namely, [']That the means of employing capital profitably can never co-exist with an abundant capital and produce and a stationary population, on account of the necessary effect of such a state of things in increasing the real price of labour,' because I consider the rise of wages as by no means a necessary effect of an abundant capital and produce, for it may be accompanied with new facilities in procuring corn, and then wages even if they should rise would not lessen profits, they will only keep them lower than they otherwise would be. In the case which we were considering the other night, if every lady made her own shoes, a part of the capital now employed in making shoes by the shoemakers would be otherwise employed. The same labour would be bestowed in the production of other objects desirable to these lady shoemakers, who would have both the power and the will to purchase them from the savings which would accrue to them by employing their labour productively. There is a great difference between [the] common effects of an accumulation of capital, and the employing the same capital more productively. The first is generally attended with a rise of wages and a fall of profits for a time at least,--but the second may exist for an indefinite length of time without producing any such effects. In the case of great improvements in machinery,--capital is liberated for other employments and at the same time the labour necessary for those employments is also liberated,--so that no demand for additional labour will take place unless the increased production in consequence of the improvement should lead to further accumulation of capital, and then the effect on wages is to be ascribed to the accumulation of capital and not to the better employment of the same capital. If the population were to be stopped whilst accumulation continued the effects which you enumerate would undoubtedly follow, but this would arise from the demand for labour not being adequately supplied,--it would be the effect of accumulation which would operate so powerfully that it would be but slightly checked by the facility of production, but it would not by any means be the consequence of such facility. It is true that the rate of profits depends upon the scanty or abundant supply of capital compared with the means of employing it profitably,--and these means will as you say upon the common principles of supply and demand be increased either by a diminution of capital or by an extension of the market for it. Our inquiry is in fact what the causes are of an extension of the market, and I hold that the most powerful, and the only one which operates permanently, is a reduction in the relative value of food. You appear to me to concede a little respecting demand being regulated by the power of production,--but you are yet very far from yielding all that I demand. I hope we shall meet this month, but I cannot yet say whether I can leave London. Yours very truly, D. RICARDO. XXXVIII. LONDON, _17 Oct., 1815_. MY DEAR SIR, Mrs. Ricardo and I are sorry that Mrs. Malthus will be prevented from accompanying you when you pay us a visit at Gatcomb. We should have been very happy to have shown her some of the beauties of our county. When you come, perhaps you will bring your gun with you. Though I am no sportsman myself, I will endeavour to procure you the best sport that my influence can command. I am very much obliged to you for the attention which you have given to my MS.[115] I am fully aware of the deficiency in the style and arrangement; those are faults which I shall never conquer. I will however use my best endeavours to elevate it to the very low standard to which you compare it[116]. It would be unpardonable to write worse with more practice. I expected that you would not quite agree with my plan of abolishing the metals from circulation; but the grounds on which you object to it may I think be answered, and then your objections would I hope be removed. You fear that without a metallic circulation we could not on an emergency supply a large sum of bullion for the exigencies of the State. The fact is however against you, for we have supplied large sums when the metals have been absolutely banished from circulation. This has been the case during the whole Peninsular War. If indeed on my system the Bank could keep a less quantity of bullion in their coffers to answer the demands of the public, the objection would be well founded; but the only difference would be that in one case their hoards would consist wholly of coined gold and silver, and in the other they would consist of the uncoined metals; but, on both systems, if the Bank paid their notes on demand the currency must be equally reduced in quantity, if gold and silver should become more valuable. That argument then may be used against a currency convertible at all, into specie or bullion, but does not apply to one more than the other. I think with you that on the whole silver would be a better standard than gold, particularly if paper only were used. All objections against its greater bulk would be removed. I find I did misapprehend your illustration respecting profits from Otaheite; but our difference is still very serious. I most distinctly allow that any causes which tend to make capital less in demand will lower profits; but I contend that there are no causes which will for any length of time make capital less in demand, however abundant it may become, but a comparatively high price of food and labour,--that profits do not _necessarily_ fall with the increase of the quantity of capital, because the demand for capital is infinite and [is] governed by the same law as population itself. They are both checked by the rise in the price of food and the consequent increase in the value of labour. If there were no such rise, what could prevent population and capital from increasing without limit? I acknowledge the effects of the great principle of supply and demand in every instance; but in this it appears to me that the demand will enlarge at the same rate as the supply if there be no difficulty on the score of food and raw produce. Fertility is, as you justly observe, the essence of high rents; and low rents are the necessary result of barrenness however scarce corn may be. I agree with you too that, in a country limited to 100,000 acres, all of the richest conceivable quantity, yet peopled and capital'd up to the utmost limits of its produce, the profits of stock and the wages of labour would both be very low, although the quantity of produce yielded by a given capital _including rent_ might be 100 per cent.; but I ask, if by any miracle the produce of that land could at once be doubled, would rents then continue as high as before, or could they possibly rise? We are speaking of the immediate not the ultimate effects. The improvements in skill and machinery may in 1000 years go to the landlord, but for 900 they will remain with the tenant. Yours very truly, DAVID RICARDO. I have been so busy and am yet so busy that I cannot return to Gatcomb till Friday. XXXIX. LONDON, _17 Oct. 1815_. MY DEAR SIR, My letter was sent to the post before I received yours of yesterday's date. The parcel you sent me has reached me safe. I am sorry you had so much trouble about it. My views respecting the Bank are entirely prospective. The last return of bank notes in circulation was, I think, larger than any that preceded it. I have not the paper in London, but I think the circulation of bank notes then amounted (1815) to 28,000,000 or more[117]. It is dangerous to listen to reports respecting briskness or slackness of trade. It is I believe certain that the revenue has been uncommonly productive the last quarter, which is no indication of diminished trade. As you allow that the loss of the sellers is the gain of the buyers, you appear to me to attribute effects much too great to the fall of raw produce which has lately taken place. It does not follow that, because prices are low, production will be discouraged. If money were to fall very much in value whilst a country was making great advances in prosperity, would not production be encouraged, notwithstanding a fall of prices? That profits may rise on the land, if population increases faster than capital, I am not disposed to deny; but this will be a partial rise of profits on a particular trade, for a limited time, and is very different from a general rise of profits on trade in general. This admission does not affect my principle. Ever truly yours, DAVID RICARDO. I ought to apologise for writing to you twice in one day. XL. GATCOMB PARK, _24th Dec., 1815_. MY DEAR SIR, I write to remind you that the time is come at which you once gave me hope almost to certainty that I should have the pleasure of seeing you here; and even when I last saw you you promised, if you could make it convenient, to come and pass a part of your vacation with me. The weather is beautiful, and my desire to see you as ardent as ever. Come then and inhale the pure atmosphere of our hills, and be under no fear that your visit will retard any object to which your attention may now be devoted, for you shall be free to write, study, or read, as many hours in the day as you please, unmolested by any one's intrusion. My lost MS.[118] is recovered. Mr. Mill recommends its publication, but advises me to write an introduction, and to divide it into sections. I had almost resolved to throw it aside, but I have been again at work upon it, and, though I cannot put it in any shape to please me, it is I think rather better than when you saw it; and the probability at present is that I shall venture to publish it. I attended the Bank Court the other day. I had no intention whatever of speaking; but some very bad reasoning on the other side and a total deviation from the question called me up, and I spoke for five or ten minutes with considerable inward agitation, but without committing any glaring blunder. My speaking is like my writing too much compressed. I am too apt to crowd a great deal of difficult matter into so short a space as to be incomprehensible to the generality of readers. The Chronicle, I see, has reported what he thought or heard I said, but he has imputed to me what I neither felt nor uttered. Allusions were made to the Bullion question, and it was said that it had been prophesied that, if the Bank directors were corrupt, they might with the power they had of issuing paper occasion the greatest public distress; no such distress, however, had been experienced. I observed in reply that the goodness of the system was not proved by the distress not having occurred,--that the speaker had been only paying a compliment to the integrity of the directors, in which no one in the court was more ready to join than myself,--but, if the directors had been corrupt, I still thought that they had been armed with the power of doing mischief. Though I was ready to declare my confidence in the integrity of the directors, there were many parts of their system of which I could not approve, etc. etc. This is very different from the report in the Chronicle; but I understand that the reporters were most carefully excluded from the court. I hope the business at the college has been settled to your satisfaction, and that the result of the late unpleasant disturbance[119] will give you some security against its recurrence in future. I conclude that you have quite finished writing the alterations and amendments which you projected for the new edition of your book[120]. When I last saw you I think you had made considerable progress, and therefore it is probable that you may be already in the press. What point will next engage your attention? For I hope, as M. Say says, that you will 'travaillez toujours' [_sic_].... Ever yours, DAVID RICARDO. [Fragment. Within this year, or earlier. See Letter XL] [I began] by assuring you that I was not going to weary you with a repetition of my hundred times told tale, and I am ashamed to see that I have filled four sides with nothing else. There are some other points on which I shall make some remarks when I have the pleasure of seeing you. If you should come to town, will you do me the favour to call at the Stock Exchange, unless my house should not be much out of your way. I recommend your calling there because I am just about deserting Brook Street for some time. Mrs. Ricardo and all the family are going to Ramsgate to-morrow morning, and she will not consent to let me remain at home by myself, so that when I am in London I shall be chiefly with my brother at Bow; now and then I shall pass a night at home. My business is so uncertain that I cannot at all foresee what portion of the next two or three months I shall be able to spend at the sea side. It is probable that I shall be so much in town that I shall be found by you at the Stock Exchange.... Yours most truly, DAVID RICARDO. XLI. GATCOMB PARK, _2 Jan., 1816_. MY DEAR SIR, Your two letters have both reached me, and I am very sorry to find that I shall not have the pleasure of seeing you at Gatcomb this vacation. I left London, as you supposed, the day after the Bank Court. I should have considered it fortunate if whilst I was there I had met you. My house in Brook Street is not yet in a state to receive us; nor will it be this season, unless we consent to go in it with the walls unpapered and unpainted, conditions to which we shall agree. It will be we are told in a habitable state by the latter end of the month, at which time we shall probably quit Gatcomb. As you have not given me the pleasure of your company here, and as I wish to speak to Murray concerning my book and to consult some Parliamentary papers which I have not got here, I intend taking a trip to town the beginning of next week. Do you think I shall have any chance of meeting you there? Remember that a letter will always find me at or follow me from the Stock Exchange[121]. It is exceedingly provoking that you should have been so much interrupted by college affairs as not to have made more progress with your new chapters. I shall regret your thinking it necessary to abridge or leave out anything which you may have to say connected with the subject, and particularly if you should so determine, because more time will otherwise be required before you can publish. The question of bounties and restrictions is exceedingly important, and, unless you have already given your present opinions on that subject elsewhere, or mean to do so, it ought to form part of the present work[122]; and a little delay in the publication is not very important. The edition which I have of your work is the first, and it is many years since I read it. When you wrote to me that you were looking over the chapters on the Agricultural and Manufacturing systems with a view to make some alterations in them, I looked into those chapters and saw a great deal in them which differed from the opinions I have formed on that part of the subject. At your house I observed that in a subsequent edition you had altered some of the passages to which I particularly objected, and in the chapters as you are now writing them it appeared to me that there was only a slight trace of the difference we have often discussed. The general impression which I retain of the book is excellent. The doctrines appeared so clear and so satisfactorily laid down that they excited an interest in me inferior only to that produced by Adam Smith's celebrated work[123]. I remember mentioning to you, and I believe you told me that you had altered it in the following editions, that I thought you argued in some places as if the poor rates had no effect in increasing the quantity of food to be distributed,--that I thought you were bound to admit that the poor laws would increase the demand and consequently the supply. This admission does not weaken the grand point to be proved. As for the difference between us on Profits, of which you speak in your letter, you have not, I think, stated it correctly. You say that my opinion is 'that general profits never fall from a general fall of prices compared with labour, but from a general rise of labour compared with prices.' I will not acknowledge this to be my proposition. I think that corn and labour are the variable commodities, and that other things neither rise nor fall but from difficulty or facility of production or from some cause particularly affecting the value of money, and that no alteration of price proceeding from these causes affect[s] general profits,--allowing always some effect for cheapness of the raw material.... Yours very truly, DAVID RICARDO. XLII. LONDON, _10th Jan., 1816_. MY DEAR SIR, I arrived in town yesterday and found your letter at the Stock Exchange. It is very uncertain whether I shall leave London to-morrow evening or Monday evening. I am desirous of getting home on many accounts, but I may not be able to accomplish the business for which I came so soon as I expected, and, if I do not get it done by to-morrow it will in all probability detain me till Monday. Thus then it is still uncertain whether we are to meet, and I do not exactly know how to make you acquainted with my movements. I will, however, let Mr. Murray know if I leave town to-morrow, and, if you are in the neighbourhood of Russell Square, by sending to No. 8, Montague Street (Mr. Basevi's), you will be sure to know. In the City, at the Stock Exchange, any of my brothers will inform you about me. If I should not be gone, will you do me the favour of dining with me on Friday at Mr. Basevi's? His dinner hour is six o'clock, and he begs me to say that he shall be much flattered by your favouring him with your company. I was in hopes of finding you in London and of having the benefit of your opinion of my book[124] in its present state, before I sent it to be printed. That advantage I must now forego, because I am desirous of getting it out before the meeting of Parliament, and have before experienced the inconvenience of too much hurry. I cannot think it inconsistent to suppose that the money price of labour may rise when it is necessary to cultivate poorer land, whilst the real price may at the same time fall. Two opposite causes are influencing the price of labour, one the enhanced price of some of the things on which wages are expended, the other the fewer enjoyments which the labourer will have the power to command. You think these may balance each other, or rather that the latter will prevail; I on the contrary think the former the most powerful in its effects. I must write a book to convince you. I am glad you are not going to cut your next edition short. Very truly yours, DAVID RICARDO. NOTE.--The MS. referred to in this letter was probably the pamphlet on 'Economical and Secure Currency,' which internal evidence would show to have been printed not earlier than Feb., 1816. Ricardo, as appears from Letter XL, had already submitted the MS. to James Mill. In the fragment of a letter to Mill (quoted in Bain's 'Life of Mill,' p. 153, and dated Jan., 1816) he writes: 'Fill eight pages in the Appendix, will that be too much?' Professor Bain thinks this must refer to the 'Principles of Political Economy and Taxation' (1817). But that work has no Appendix; and there seems no reason why it should not refer to the 'Economical and Secure Currency' (1816), which has one. The 'Resolutions proposed concerning the Bank of England by Mr. Grenfell,' and those proposed by Mr. Mellish, together, cover seven pages of that Appendix in the original edition; and Ricardo in the fragment quoted had probably been saying, that these Resolutions, if he printed them, would fill nearly eight pages, etc. XLIII. LONDON, _7 Feb., 1816_. MY DEAR SIR, I arrived in town yesterday, with the whole of my numerous family. We are already as comfortably settled in Brook Street as under all circumstances we can expect, and I hasten to inform you that we have a bed ready for you, which I hope you will very soon occupy. I have forgotten on which Saturday in the month you meet at the King of Clubs, but conclude from your last meeting that it is the second. If so, you will probably be in town to-morrow or Friday, when I shall hope that you will lodge at our house and give us as much of your company as your numerous friends will allow you to do. You have probably ere this seen my book[125]. I have been reading it in its present dress, and very much lament that I make no progress in the very difficult art of composition. I believe that ought to be my study before I intrude any more of my crude notions on the public. It is said that the Bank have made some agreement with Government, but what it is is not exactly known. They talk of the Bank advancing to Government six millions at four per cent., besides continuing the loan of three millions without interest. We shall not, however, be long in suspense on this subject, as a general court of proprietors is to be held to-morrow, when the directors will make some communication to the proprietors to ask for their vote to sanction their agreement. They will ask for this without giving them any information either respecting their savings, their profits, or the amount of public deposits. Is not this a ridiculous piece of mockery, and an insult to our common sense? I hope there may be a few independent proprietors present who may call for information, or who may at least demand a ballot, for which purpose nine only are necessary[126]. You would be surprised at the abjectness of the city men, and the great influence which the directors have in consequence of their power of discounting bills. I am persuaded many of the proprietors would vote very differently at a ballot, to what they would by a show of hands. I have not thought much on our old subject; my difficulty is in so presenting it to the minds of others as to make them fall into the same chain of thinking as myself. If I could overcome the obstacles in the way of giving a clear insight into the original law of relative or exchangeable value, I should have gained half the battle.... Very truly yours, DAVID RICARDO. XLIV. [On the back of this are jotted figures and lists of books in Malthus' handwriting.] LONDON, _23rd Feb., 1816_. MY DEAR SIR, I beg to remind you that the first Saturday in the next month is to-morrow se'n-night, on which day or a few days before it, I hope to have the pleasure of seeing you in Brook Street. We have a bed always at your service, and I wish you would make the rule invariable to take up your lodging with us whenever you visit London. I hope you have quite determined to extend your new edition to another volume, and that you are now making great progress in it. I wish much to see a regular and connected statement of your opinions on what I deem the most difficult and perhaps the most important topic of political economy, namely, the progress of a country in wealth, and the laws by which the increasing produce is distributed. Have you seen Torrens' Letter to Lord Liverpool[127]? He appears to me to have adopted all my views respecting profits and rent; and, in some conversation which I had with him a few days ago, he unequivocally avowed that he was now of my opinion, that the price of labour, arising from a difficulty in procuring food, did not affect the prices of commodities. He confessed that his former view on that subject was erroneous. I should be glad to see all the arguments in favour of my view of the question clearly and ably stated. I should not wonder if Torrens undertook it. The sale of my last pamphlet has far exceeded its merits. Murray is printing a second edition[128]. I had no idea that the subject was of much interest to the public, but it seems that they are curious about the amount of the Bank treasure. In the House of Commons the defence of the contracts with the Bank was very little satisfactory; they endeavoured to fix the attention of the House on what the public had got and saved by the operations of the Bank; they seemed to think that all the rest belonged of right to the Bank. Will Ministers be able to carry the Income Tax[129]? Very truly yours, DAVID RICARDO. NOTE.--Torrens came nearest to fulfilment of the above forecast in his 'Essay on the Production of Wealth' (1821), which was announced as 'a general treatise upon Political Economy, combining with the principles of Adam Smith so much of the more recent doctrines as may be conformable to truth and embodying the whole into one consentaneous system.' (Pref. p. v.) But he thinks out the subject vigorously for himself; and, though in all his later books he extols Ricardo above all his contemporaries, he finds frequent occasion to differ from him. Indeed he occasionally claims that Ricardo is the borrower, and he the lender. Ricardo, for example, is indebted to him (he says) for the doctrine that, when a nation has great advantage in one production but a much greater advantage in another, it will confine itself to producing the latter, and will even import the former (Ricardo, Works, pp. 76, 77; cf. Torrens, Preface to Essay on External Corn Trade, p. vii). Yet the doctrine has always passed as Ricardian _par excellence_ (see e.g. Cairnes, Leading Principles of Political Economy, Part III. ch. i. p. 371, and Logical Method, p. 81), and we should not guess, from Letter XLVII for example, that Ricardo was the convert. The Preface to the 'Production of Wealth' ends with the prediction that in twenty years' time there would be unanimity amongst Economists on all fundamental principles. XLV. LONDON, _5 March, 1816_. MY DEAR SIR, The public papers have ere this informed you of the result of yesterday's ballot at the India House; Mr. Jackson's motion was lost by a majority of twenty-one or twenty-two. Mr. Jackson, in his reply, said everything of you that your most partial friends could wish; and indeed the general tone of his speech, yesterday, was much more moderate than that by which he introduced his motion. Mr. Bosanquet's[130] comments on some passages in your pamphlet[131] lead me to think that he must have misunderstood you, as I conceive that it was not your intention by recommending the directors to appoint more young men than there were vacant writerships, that the unsuccessful candidates should be finally and irrecoverably dismissed from all chance of going out to India[132]. I imagine that it was your intention to let them be again competitors for one of the prizes of the following year, and therefore that the punishment of their neglect would rather be a delay in their appointment than an absolute dismission. Mr. Bosanquet appeared to me to argue on the latter supposition. Mr. Elphinstone[133] spoke very kindly and very handsomely of the professors; yet I thought that he was by far the most formidable opponent of the College as at present constituted, and the one that I should have been least able to answer. His speech was short, but from the moderation of his language it produced, I think, a considerable effect, and gave great courage to Mr. Jackson's party. I hope this subject will not be again revived, or, rather, I hope that the proficiency of the young men, and the absence of all turbulence, will satisfy every one of the impolicy of interfering with the establishment. I am sorry to be under the necessity of putting off my visit to you, but I shall not be able to be with you on Saturday[134].... We are going ... into Gloucestershire, so that I must defer my visit to you to some more favourable opportunity. Perhaps you may be in London to the King of Clubs. If so, pray come to us. I wanted to show you my observations[135] on your pamphlets before they go to the printers. If I do not see you on Friday, I shall send them by the coach in a few days. As they are the last article in my very poor performance, the printer will probably not want them till my return[136]. When you have read them, pray send them with your observations to Brook Street by the coach.... Very truly yours, DAVID RICARDO. XLVI. LONDON, _24th April, 1816_. MY DEAR SIR, It is not too soon to remind you that Mrs. Ricardo and I expect to have the pleasure of Mrs. Malthus' and your company at our house on your visit to London in the next week. I hope it will be early in the week, and that you will not be in so great a hurry to get home as you usually are. On the Monday, after your club meeting, I shall ask a few of your and my friends to meet you at dinner, and on Sunday or any other day perhaps Warburton and Mill will take a family meal with us. I have just received an invitation from Mr. Blake to dine with him on Friday the 3rd May, and I have taken upon myself to let you know from him that he hopes you will favour him with your company on that day. You will I trust be also agreeable to this arrangement. I hope you have made better use of your time than I have done of mine, and that you are making rapid advances with the different works which you have in hand. I have done nothing since I saw you as I have been obliged to go very often into the city, and after leaving off for a day or two I have the greatest disinclination to commence work again. I may continue to amuse myself with my speculations, but I do not think I shall ever proceed further. Obstacles almost invincible oppose themselves to my progress, and I find the greatest difficulty to avoid confusion in the most simple of my statements. Have you seen Torrens' letters to the Earl of Lauderdale in the 'Sun?' I think he has published five. They are chiefly on the subject of currency, and are ingenious, though I think they support some very incorrect doctrines. They are signed with his name. Horner, I understand, will oppose the continuance of the restriction bill; he does not deny now the fall in the value of gold and silver since the termination of the war. There cannot be a better opportunity than the present for the Bank to recommence payments in specie. Silver is actually under the mint price. The change is surprising [and has been] brought about in a very unexpected [manner].... Very truly yours, DAVID RICARDO. XLVII. LONDON, _28 May, 1816_. MY DEAR SIR, From what you said when you left London it is probable that you will not be at the Club on Saturday next. If your visit to town should be deferred till the following Tuesday we have a bed at your service--it is now occupied by Mr. and Mrs. Smith, our Gloucestershire friends. In case you should come sooner I hope you will be able to pass much of your time with us. Our breakfast hour is now at so reasonable a time that I hope you will take that meal with us the first morning you are in London, and then settle how often we shall see you at dinner. I suppose you have been too busy in official occupations, since we last met, to have made much progress in the writings which you have in hand. I hope, however, that you will be prepared to give the public the result of your well considered opinions in due season. We have a right to look to you for the correction of some difficulties and contradictions with which Political Economy is encumbered[137]. Major Torrens tells me that he shall work hard for the next few months, so that we may expect a book on the same subject from him next year. He continues to hold some heretical opinions on money and exchange, notwithstanding Mr. Mill and I have exerted all our eloquence to bring him to the right faith. We, however, have succeeded in removing some of the obscurity which clouds his vision on the principles of exchange. He is, I think, quite a convert to _all_ what you have called my peculiar opinions on profits, rent, etc. etc., so that I may fairly say that I hold no principles on Political Economy which have not the sanction either of your or his authority, which renders it much less important that I should persevere in the task which I commenced of giving my opinions to the public. Those principles will be much more ably supported either by you or by him than I could attempt to support them. My labours have wholly ceased for two months; whether in the quiet and calm of the country I shall again resume them is very doubtful. My vanity has not received sufficient stimulus to remove the temptation which is constantly offering itself to the indulgence of my idle habits. The fine weather is come opportunely for your vacation. I suppose you will commence your travels without much delay. I hope we shall meet at Gatcomb before you return home. Believe me, Ever truly yours, DAVID RICARDO. XLVIII. GATCOMB PARK, _9th Aug., 1816_. MY DEAR SIR, I am obliged to you for the interest you have taken about my boat.... I am glad that Mrs. Malthus and Miss Eckersall were pleased with their excursion to Easton Grey and Gatcomb. They and you would have better satisfied me that your visit was agreeable if you had not been in so great a hurry to put an end to it. Our friends at Easton Grey have been staying a few days with us, accompanied by Mr. Binda. We expected Mr. Warburton to join them here, but he wrote to delay his journey for a couple of days.... He appears pleased with the idea of his journey to Italy, though Mrs. Austin, who is returned, did not fail to represent in the strongest colours the disagreeables which she encountered. He I daresay is a very good traveller, and my daughter I have always thought the very worst I ever met with. The Smiths leave Easton Grey on Monday for London. I suppose you have heard that they are going with Mr. Whishaw to the Netherlands and Holland. They will I am sure be very much delighted with their excursion. They always go a journey, as indeed I think they travel through life, with a disposition to be pleased. They view everything through a favourable medium, and are not eager to spy out the defects of every object they encounter. I have no difficulty in agreeing with you 'that the rate of profits of stock depends mainly on the demand and supply of stock compared with the demand and supply of labour,' if by those words you mean the rise or fall of wages. That is my identical proposition. Now, if labour rises, no matter from what cause, profits will fall; but there are two causes which raise the wages of labour,--one the demand for labourers being great in proportion to the supply,--the other that the food and necessaries of the labourer are difficult of production or require a great deal of labour to produce them. The more I reflect on the subject the more I am convinced that the latter cause has an incessant operation. It is very seldom that the whole additional produce obtained with the same quantity of labour falls to the lot of the labourers who produce it; but, if it should, I should yet contend that the rate of profits would fall because the price of corn would fall with such an increased facility of production; capital would be withdrawn from the land, rents would fall, and profits rise. The causes you mention may operate in Poland and America; I have never denied it. The proportion between labour and capital will undoubtedly affect profits, because it will affect wages; but it is not the only element in the consideration of the subject of profits; there are other causes which also affect wages. Whether that demand can be general which increases price must, I apprehend, depend on whether the precious metals can be furnished as rapidly as other commodities. If the savings or acquisitions of labour are exchanged for all commodities in the same proportion, and the demand should increase in that proportion also, I can see no reason why any commodity should rise; but, if the demand for cloth or gold be either greater or less than the supply, they may rise or fall in their exchangeable value. That is to say, their market value might rise or fall; but their natural value would probably undergo little variation, and therefore after a time they would exchange at their usual rates. A new value thrown in the market always supposes a certain quantity of sales as well as purchases; if no part of that value consists of the precious metals, I do not see how all commodities could rise. I should expect some to rise and some to fall, but the general tendency would rather be to the latter. Ever truly yours, DAVID RICARDO. .... XLIX. GATCOMB PARK, _5 Oct., 1816_. MY DEAR SIR, Notwithstanding the bad weather I have not failed to enjoy myself, for I have been to Cheltenham, Malvern, and Worcester, and latterly to Bath. To be sure the continued rains make it less pleasant than it otherwise would be, but, as I am not at a loss for amusement within doors, I contrive to take my walks while it is fine, and return to my library with the recommencement of rain.... I hope your additional volume will soon follow your new edition of the old work[138]. I shall be glad to see in a connected form your matured opinions on the progress of rent, profits, and wages, and in what manner they are affected by the increasing difficulty of procuring food, by the increase of capital, and the improvement of machinery. I fear we shall not agree on these subjects, and I should be very glad if we could fairly submit our different views to the public, that we might have some able heads engaged in considering it [_sic_][139]. Of this, however, I have little hope, for though I feel strongly the truth of my theory I cannot succeed in stating it clearly. I have been very much impeded by the question of price and value, my former ideas on those points not being correct. My present view may be equally faulty, for it leads to conclusions at variance with all my preconceived opinions. I shall continue to work, if only for my own satisfaction, till I have given my theory a consistent form. You say that you think I have sometimes conceded that if population were miraculously stopped, while the most fertile land remained uncultivated, profits would fall upon the supposition of an increase of capital still going on. I concede it now. Profits I think depend on wages,--wages depend on demand and supply of labour, and on the cost of the necessaries on which wages are expended. These two causes may be operating on profits at the same time, either in the same, or in an opposite direction. In the case you put wages would have a tendency to keep stationary as far as the supply of food was concerned, but they would have a tendency to rise in consequence of the demand for labour increasing, whilst the supply continued the same. Under such circumstances profits would of course fall. You must, however, allow that this is an extraordinary case, and out of the common course of events, for the tendency of the population to increase is, in our state of society, more than equal to that of the capital to increase. I shall be in London on Thursday or Friday next.... I should be glad if some fortunate accident were to take you to town at the same time. If so let me know where you are to be found; a line directed to the Stock Exchange will be certain to find me. We shall not finally leave the country till January or February. I wish you would come and see a little more of Gatcomb during your Xmas vacation.... Ever truly yours, DAVID RICARDO. L. BOW, MIDDLESEX, _11 Oct., 1816_. MY DEAR SIR, I arrived in London this morning and found your kind letter, which I ought to have answered immediately, as you could not otherwise know whether I accepted your kind invitation, before the time that you might expect me. The truth is I forgot the day of the week, and was not aware till I got home that we were so near Saturday. I very much regret that I shall not be able to avail myself of Mrs. Malthus' and your kindness, as I have engagements here which will prevent me from leaving town till I return to Gatcomb. You mistake me if you suppose me to say that under no circumstances of facility of production profits could fall. What I say is that profits will rise when wages fall, and, as one of the main causes of the fall of wages is cheap food and necessaries, it is _probable_ that with facility of production, or cheap food and necessaries, profits would rise. At the very time that the labour of a certain number of men may produce on such land as pays no rent 1100 instead of 1000 quarters of corn, and when corn falls in consequence from £5 to £4 10_s._ per quarter, the money as well as the corn wages of labour _may_ rise, for capital _may_ have increased at a very rapid rate, and labourers at a slow rate, in which case profits would fall and not rise. Under these very peculiar circumstances of higher money wages with a lower price of necessaries, the wages of labour would be in an unusual state, and would shortly revert to the old standard, when profits would feel the benefit. All I mean to contend for is that profits depend on wages, wages under common circumstances on the price of food and necessaries, and the price of food and necessaries on the fertility of the last cultivated land. In all cases it is perhaps true that rent will depend upon the demand compared with the supply of good land, and wages on the demand compared with the supply of labour, if it be allowed that the price of necessaries influence[s] the demand and supply of labour. I do not quite understand the expression that profits depend on the demand compared with the supply of capital. What would you say of two countries in [which] there are precisely equal capitals, where wages [are] also equal, and where the population is precisely in the same number. Would the demand compared with the supply of capital be the same in both? If you say they would, I ask whether their rate of profits would be the same under any other supposition but that of their land being exactly of the same degree of fertility? To me it appears quite probable that the ordinary and usual rate of profits might in one be 20 and in the other only 15 per cent., or in any other proportions.... Believe me, Ever yours, DAVID RICARDO. LI. LONDON, _14th Oct., 1816_. MY DEAR SIR, My stay in London will not be prolonged beyond Friday next. I hope it will be convenient to you to come up before. On Thursday I shall be disengaged and will meet you at any place in London that may best suit you, unless you will dine with me at my brother's at Bow. His house is small, and I fear he has not, now we are with him, a spare bed to offer, and you may not like to travel so far at night. If so, let us meet in the city and get our dinner there. The money wages of labour are, I apprehend, generally regulated by facility of production. With an abundant production too I think that a less proportion of the whole will be given to the landlords, and more will remain for the other two classes, of capitalists and labourers; but of this increased quantity a greater proportion will be given to capitalists and a less proportion to labourers. Now, though what you call the real wages of labour[140] (but which I think a wrong term) will increase, the money wages will fall. But this will not be the case with profits; what you would call real profits would increase, but so would also money profits. Under the circumstances then that I have supposed, the rate of profits would rise though money wages would fall. The difference between us is this. I say that with every facility or difficulty of production, of the quantity of necessaries, that is to be divided between profits and wages, different proportions will be given to each, and that money will accurately show those proportions. You appear to me to think that profits do not depend on the division of the produce, and that money wages may as often rise with facility of production as fall. You state the real question fairly; it is, 'What is the main cause which determines the rate of profits under all the varying degrees of productiveness?' You do not appear to me [to] solve the question when you answer 'that it is the proportion which capital bears to labour.' In a rich country where profits are low, and where a great portion of produce is paid to the landlords for rent, the proportion of labour to capital will be the greatest, and yet according to your theory it should be the least. You will not, I think, deny that in a country where labour is high a manufacturer would employ more capital to produce the same commodities than what he would do in a country where wages were low, and there also would profits be low; that is to say, profits are high where capital bears a large proportion to labour, and low where labour bears a large proportion to capital. I am writing amidst the noise of the Stock Exchange, and very much fear that I shall be more than usually incomprehensible. Ever yours, DAVID RICARDO. LII. GATCOMB PARK, _3rd Jan., 1817_. MY DEAR SIR, A long time has elapsed since I had the pleasure of seeing you, during which time I have often intended writing, as I did not hear from you; but my natural indolence prevailed, and I have procrastinated it till now. I had some faint hopes that you might be in the neighbouring county this vacation, in which case I should have hoped to prevail on you to pass a short time here; but I learnt from Mr. Binda, who is on a visit to Mr. Smith, that he had met with you at Holland House, and that it was not probable you would go far from home. I had previously enquired about you of our young neighbour George Clerk; he, however, could only tell me you were well; he knew nothing about your intended movements. By an advertisement in the public papers I perceive that you have been occupied in writing about your College[141], which I regret, as I believe the task was not very agreeable to you, and as it may have prevented you from proceeding with other works in which I imagine you are more interested. I should be glad to hear that everything you think defective in the College was remedied, and that it was placed on such a footing as to require only the ordinary routine of your attention. I have been occasionally employed, since we met, in putting my thoughts on paper, on the subjects which have often passed under our discussion. I have encountered the usual obstacles from difficulties of composition; but I have resolutely persevered till I have committed everything to paper that was floating in my mind. There are a few points on which there is a shadow of difference between my present and my past opinions; but they are not those on which we could not agree. I hope I shall succeed in putting my MS. in some tolerable order, as on that will depend whether I shall again appear before the public. What I have hitherto done is rather a statement of my own opinions than an attempt at the refutation of the opinions of others. Lately, however, I have been looking over Adam Smith, Say, and Buchanan, and where I have seen passages in their works contrary to the principles I hold to be correct I have noticed them, and shall perhaps make them the subject of some comment. I fear I shall not have the satisfaction of receiving your acquiescence to my doctrines, particularly as I have reverted to my former views respecting taxes on raw produce. Whatever may be correct on that subject, surely Adam Smith is wrong, as there are various passages in his book inconsistent with each other. We shall, I hope, soon meet and renew our discussions on some of these difficult matters. I shall be in London on Friday next, and hope to see you in Brook Street as our inmate, as soon after that day as business or inclination may draw you to London. I want to hear your opinion of the measures lately adopted for the relief of the poor[142]. I am not one of those who think that the raising of funds for the purpose of employing the poor is a very efficacious mode of relief, as it diverts those funds from other employments which would be equally if not more productive to the community. That part of the capital which employs the poor on the roads, for example, cannot fail to employ men somewhere, and I believe every interference is prejudicial.... Believe me, Ever yours, DAVID RICARDO. LIII. UPPER BROOK STREET, LONDON, _24 Jan., 1817_. MY DEAR SIR, I have read your pamphlet[143] with great pleasure, and am very much satisfied with your arguments in favour of a college in preference to a school for the education of the young men destined to manage the complicated affairs of our Indian Empire. The testimonies from India in favour of the young men sent from the College, as compared with those who went out to India before the establishment of the College make powerfully for you, and do not appear to have been answered by your opponents. I observe by the papers that the discussion on this subject will be renewed at the India House on the 6th February, at which time I conclude that you will be in London. If so, I hope you will make my house your headquarters. Mr. Murray promised to send copies of your book to the gentlemen you directed me to mention to him. It appears to me that one great cause of our difference in opinion on the subjects which we have so often discussed is that you have always in your mind the immediate and temporary effects of particular changes, whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them. Perhaps you estimate these temporary effects too highly, whilst I am too much disposed to undervalue them. To manage the subject quite right, they should be carefully distinguished and mentioned, and the due effects ascribed to each. I have been reading again your three last pamphlets on rent and corn, and cannot help thinking there is some ambiguity in the language. The word [_sic_], 'high price of raw produce,' is calculated to produce a different impression on your reader from what you mean. Your first and third causes of high price appear to me to be directly at variance with each other. The first is the fertility of land, the third the scarcity of fertile land. The second cause too, I think, never operates[144]. There is one passage in particular which expresses fully my opinions. I have not the book by me, and cannot refer you to the page, but it begins, 'I have no hesitation in stating that independently of irregularities in the currency,' etc. It is in the essay on Rent[145]. Surely Buchanan is right and your comment[146] wrong; rent is not a creation but a transfer of wealth. It is the necessary consequence of rent being the effect and not the cause of high price[147]. Say and I would say that by turning revenue into capital we shall obtain both an increased supply and an increased demand; but, if the same capital be so created, I do not approve of its present application, and taking it out of the hands of those who know best how to employ it, to encourage industry of a different kind and under the superintendence of those who know nothing of the wants and demands of mankind, and blindly produce cloth or stockings of which we have already too much, or improve roads which nobody wishes to travel.... Very truly yours, DAVID RICARDO. LIV. MY DEAR SIR, I am not in the least acquainted with the subject on which your papers[148] treat, but that is no reason why I should not mention what appears to me defective. In page 8[149] you add 1/6 to the births for probable omissions, and 1/12 for deaths; but you do not tell your reader why these proportions are taken rather than 1/4 or 1/3, nor can I discover on what grounds those numbers are chosen. You sometimes take averages from the known facts of certain years; but your averages are formed on an arithmetical ratio while your application is to a geometrical series. I submit whether this is correct. If, as you say in page 14[150], births are to burials as 47 to 30, and the mortality as 1 to 47, the addition to the population would be little more than 1/82 instead of 1/83, for out of every 1410 persons 30 would die and 47 would be born, and consequently there would be an increase of 17; but 1410 divided by 17 is 82.94, or 83 nearly; and therefore, if 1410 gives an increase of 17, 9,287,000 will give an increase of 111,970, or 1,119,700 in ten years, which will raise the population 9,287,000 + 1,119,700 = 10,406,700 instead of 10,483,000[151]. In page 16[152] the mortality is supposed to be as before, 1 in 47, and the births to the population as 1 to 29-1/2, and the population to be 9,287,000. This latter sum divided by 29-1/2 gives 314,813 the annual number of births, and divided by 47 gives 197,595 the annual number of deaths; deduct one from the other (197,595 from 314,813) gives 117,218 for the annual increase, which in ten years would be 1,172,180, which added to the former population of 9,287,000 gives 10,459,180 instead of 10,531,000. I have marked in pages 35 and 36 some very trifling errors. These are all I can discover with the facts which are before me. Ever truly yours, DAVID RICARDO. _8 Feb., 1817._ LV. LONDON, _21 Feb., 1817_. MY DEAR SIR, I am very sorry that you were prevented from being in London yesterday. I fully expected to see you, as I thought the subject of debate at the India House was of too much interest not to make you desirous of hearing it. Mr. Grant[153] was, I assure you, a warm advocate in the cause of the College. He spake admirably and with great effect, improving in energy and eloquence as he proceeded. He did justice to the various qualifications of the professors for the responsible situations which they filled, and I believe left nothing unsaid which might assist the cause which he so ably defended. I thought him very severe on Randle Jackson, who will find it difficult to answer some parts of his speech. In the Times the report of what he said is very correct, as far as it goes; but it is necessarily a very abbreviated statement. Mr. Kinnaird[154] began by speaking in the most respectful manner of you, and indeed in terms of great eulogy, but afterwards I think absurdly dwelt on your being an interested party and an advocate for the college, and imitated Mr. Jackson in his irony on those whom he first declared were highly deserving of respect. In what manner could we have any correct account of the college and its concerns but from an interested party? Who could speak of its management, attainments, and discipline, but those who were acquainted with it? He, however, gave up the only strong grounds they had (if they had been true) for inquiring into the affairs of the college, for he said that he had no idea that there was more immorality and profligacy in the East India College than in any other seminary; neither did he say anything of a want of proficiency in the students; but his main argument was built on the general principle that a supply of intellectual attainments will as surely follow an effectual demand for it, as the supply of any material commodity will follow effectual demand. Mr. Grant, I should mention, supported a directly contrary principle. Mr. Kinnaird dwelt very much on the compulsion under which parents were of sending their children to this particular institution. He seemed to me to adopt Mr. Mill's view of the subject, and his argument would have been quite as applicable to all colleges if parents were compelled to send their children to them. He passed over the compulsion under which parents were to send their children to college, who wished to bring them up to the church, etc. In a few minutes' conversation which I had with him after the debate I urged this objection, and he answered that they had a choice among a large number of colleges, whereas in your case they were confined to this one. He finished by assuring me that my friend had a bad cause, that it could not be defended and must fall. Mr. Impey's speech was badly timed; he should not have immediately followed Mr. Grant, for he could not then say anything new, nor could he repeat anything that had been said half as well as Mr. Grant had said it before. The debate will be renewed on Tuesday. If you should come up, I shall expect you in Brook Street. If I do not see you, and you are disengaged on the Saturday evening following, I shall be glad to pass a day with you, commencing my visit at that time.... Very truly yours, DAVID RICARDO. LVI. LONDON, _9th March, 1817_. MY DEAR SIR, I leave London to-morrow morning very early for Gloucestershire, from whence I shall return some time before your next meeting at the King of Clubs, so that I hope you will do me the favour to come to Brook Street when you visit town on that occasion. ... This letter will accompany that part of my MS.[155] which refers to you. I hope I have not in any respect misapprehended you; and, however we may differ in opinion on the subjects that we have so often discussed, I trust you will not think that I have exceeded the bounds of fair criticism in my remarks on the passages of your pamphlets which I have selected for animadversion. The printing goes on briskly. We have had a sheet a day since the commencement, and eleven sheets are now corrected. In their printed form they appear worse, in my eyes, than before; and I need all the encouragement of my partial correctors[156] to keep alive a spark of hope respecting their reception. I wish it were fairly out of my hands; and, that it may not be delayed, I have taken every precaution that it shall proceed uninterruptedly in my absence. As yet I have no misgivings about the doctrines themselves; all my fears are for the language and arrangement, and above all that I may not have succeeded in clearly showing what the opinions are which I am desirous of submitting to fair investigation. I hope that college affairs will no longer occupy an undue proportion of your attention, but that you will be able to give a finishing hand to the works which you are about to publish. Mrs. Marcet[157] will immediately publish a second edition[158]. I have given her my opinion on some passages of her book, and have pointed out those which I know you would dispute with me. If she begins to listen to our controversy, the printing of her book will be long delayed; she had better avoid it, and keep her course on neutral ground. I believe we should sadly puzzle Miss Caroline, and I doubt whether Mrs. B. herself could clear up the difficulty. From some conversation which I had yesterday morning with Mr. Murray, it appears that Torrens has been offering his book to him; but Murray is very lukewarm in the negotiation, and really very much underrates Torrens' talents. He thinks that the sale of Torrens' best work, that on corn[159], was very limited; he talked of it's not having exceeded 150 copies. Since writing the above I have seen Mr. Hume[160]; he tells me that he has heard that the directors are about to institute an inquiry into the state of the college themselves.... Very truly yours, DAVID RICARDO. LVII. LONDON, _22 March, 1817_. MY DEAR SIR, I have been expecting you, both yesterday and to-day, and it is only after a most laborious calculation that I am led to suspect that the meeting of your Club is not till next Saturday. Next Friday then, or any earlier day, I hope we shall see you in Brook Street; and I am desired by Mrs. Ricardo to say that, if Mrs. Malthus will also favour us with her company, she will be very happy to see her. If you should come on or before Friday, the printer will not before that day want that part of my MS. which I sent to you; but, if he uses due diligence, he will certainly be ready for it about that time. If you have any remarks to make on it which will require much consideration on my part, be so good as to send it me before, for, as the time approaches that I am to appear in print, I seem to become more dissatisfied with my work, and less capable to give any proposition contained in it a patient investigation. It is now 5 o'clock; and, notwithstanding my doubts have been gathering strength since the morning, I am but just convinced, after tracing back with Mr. Hitchings the day you were last here, that I shall not see you this day. In great haste, yours very truly, DAVID RICARDO. We returned from Gloucestershire on Tuesday last. LVIII. LONDON, _26 March, 1817_. MY DEAR SIR, This morning I intended that my letter to you to-day should inform you that I would have the pleasure of passing next Saturday and Sunday with you at Haileybury; but a circumstance has taken place which will make it necessary for me to go to Bath on Friday next, from which place I shall again return to London early in the next week. As you say you will not be in town till after Easter, perhaps it will be convenient to you to see me at Haileybury on Saturday se'nnight. If so, I shall be with you on that day, at your dinner hour; and, if I do not hear from you before, I shall conclude that you have no engagement which will render my visit inconvenient. I mean this day to put the last of my papers in the printer's hands, and hope he will be able to finish the printing before my visit to you; but of this I have some doubt, as he does not proceed regularly at the same even pace. I agree with you that, after having so often heard your opinions, in contradiction to mine, it would not be of much use just now, when my book is actually in the press, to enter again on your reasons for differing with me. I did not send you the manuscripts with any such intention. I merely wished you to see that part which related to you before I published, that I might not inadvertently misrepresent your statement. I cannot have the least objection to insert the note you mention[161], although I cannot but regret that we should differ so much as to the just and fair import of the words _real price_. When you see my book altogether, you will not perhaps differ from me so much as you now think you do. You may, and I believe will, object to the correctness of many of my terms, as they will appear to you fanciful and not always properly applied; but, making allowance for such deviations, you will I am sure agree with much of the matter. On some points, indeed, there is no difference between us, and on others our chief disagreement would be in the mode of representing them. I have written this letter at intervals between other engagements, as I have been repeatedly interrupted. I now hear the postman's bell, and must hasten to conclude. Very truly yours, DAVID RICARDO. LIX. MY DEAR SIR, I came up to London last night by the mail from Salisbury, and have just seen your letter. Mr. Whishaw told me when we last met that he was going to your house on Saturday, and I feared that my projected visit might, on account of numbers, be inconvenient to you.... You have, however, suggested the getting me a bed out of your house, with which I shall be well satisfied, let it be hard or soft, narrow or roomy.... Pray make no ceremony with me, and do not receive me if there be the least difficulty about the bed. Yours very truly, DAVID RICARDO. LONDON, _3 June, 1817_. LX. LONDON, _25 July, 1817_. MY DEAR SIR, I am just returned from my six weeks' excursion highly pleased with everything I have seen. I very much regretted that you were not with me, as I am sure you would have been gratified with the towns of Flanders and the scenery of Namur, the Rhine and the castle of Heidelberg. I met Mr. Hamilton[162] at Luneville; he was going through the country that I had just quitted, and I hope he was as much pleased with it as I was. I fear that his engagements at the college made him devote less time to it than was required to enjoy all its beauties. We found that we were obliged to hurry over it with more expedition than we wished. Mrs. Ricardo has been at Gatcomb rather more than a week, and to-morrow I shall quit town and join her there. Since Tuesday morning when I left Paris I have been incessantly travelling in the day and have not devoted many hours to sleep. I shall not be sorry to have a few days' rest. Your college was liberal to France, for I not only met Mr. Hamilton there but Mr. Le Bas[163] and the gentleman, whose name I forget, who teaches the French language at that institution[164]. I hope you have been enjoying your excursion and that you found less distress in Ireland than has been represented as existing there. The prospect of a good harvest is some consolation for the sufferings which the poor have been forced to endure; in every country of Europe they have endured much, and in every one they are anticipating a return of plenty. M. Say was very much gratified with your present, and requested me to forward a letter and a small duodecimo volume which he has just published[165]. The letter I send you, but the book as well as his work on Political Economy, the 3rd edition of which he gave to me, has been detained at the Custom house at Dover, that they may have sufficient time to calculate the duty on them. As I did not wish to stay at Dover till the next day, I requested the master of the Inn to pay the duty and to forward them by Osman, who will be on his return from France in a few days. The book is an interesting little work in the manner of Rochefoucauld, and appears to me to be ably done. M. Say was very agreeable and friendly; he dined with me one day and I with him another. He is engaged in a commercial concern to which I believe he gives great attention. I fear that it will be a long time before you and I meet, though I shall probably be in London once or twice in the next three months. I hope you will be disposed to bend your stops westerly in your winter vacation, and that you will not fail to pay us a visit at Gatcomb; but not such a visit as the last,--I shall not be satisfied with a flying excursion. Perhaps Mr. Whishaw will favour me with his company at the same time; if so, with the assistance of my friend Smith, we should, I hope, contrive to make the time pass agreeably to both of you. Being very tired and very sleepy I hasten to conclude. Very truly yours, DAVID RICARDO. LXI. GATCOMB PARK, _4 Sept., 1817_. MY DEAR SIR, I thank you very much for your kind letter of the 17th August. I am pleased to hear that your journey to Ireland turned out so well. The account you give of the improvements before the check which they received during the last two years, as well as of the situation of the people, agrees exactly with what I should expect to find. Humbold[t] in his account of New Spain[166] points out the very same evils as you do in Ireland, proceeding too from the same cause. The land there yields a great abundance of Bananas, Manioc, Potatoes, and Wheat, with very little labour, and the people, having no taste for luxuries and having abundance of food, have the privilege of being idle. No other advantage would I think result from the disposable labour being employed in manufactures than in preventing its being turned to profligate and mischievous pursuits, dangerous to the public peace. Happiness is the object to be desired, and we cannot be quite sure that, provided he is equally well fed, a man may not be happier in the enjoyment of the luxury of idleness than in the enjoyment of the luxuries of a neat cottage and good clothes. And after all we do not know if these would fall to his share. His labour might only increase the enjoyments of his employer. Mr. Smith has heard from Mr. Whishaw; he was at Paris when he wrote, on the eve of recommencing his journey. I hope he may enjoy his tour. It is a pity that he is without an agreeable companion; he is of so sociable a disposition that he would have had pleasure in communicating his feelings and comparing them with these of another intelligent person. Mr. Smith has also heard from Mr. Warburton, who has set out on the very same tour that I have been taking, with the addition of Holland, through which country he means to pass. He has a very intelligent companion in Dr. Woolaston[167]. At the very moment that we were beginning to despair of the weather it has changed and is now beautiful. Our hopes will I trust not be disappointed, and we shall be enabled safely to house the abundant crops with which our lands in every country (_sic_) are loaded. I doubt whether we have, even during the late distresses, ceased to advance as a nation in wealth; but at present I think no one can doubt that we are again making forward strides in prosperity. A bad harvest does not perhaps very much check the progress of wealth; but it materially interferes with the general happiness. You flatter me very much by your second perusal of my book; and I am happy to find that there are but a very few important points on which we materially differ. I certainly allow that my theory of value does not hold good in different countries when profits are different. If you look to page 156 and the following pages you will see my ideas on that subject[168]. It is only yesterday that I received the book from Dover which M. Say entrusted me with for you; I send that and this letter together by Mrs. Ricardo, who is going to London for a few days; she has undertaken to send my parcel to the Hertford coach. ... If you go to Bath and do not come over to us I shall not know how to forgive you. I have heard lately from Mill; he is still hard at work in correcting the press (_sic_) and finishing his book[169]. He tells me that Sir Samuel and Lady Romilly are expected at Ford Abbey. I fully expect that I shall see him here before he returns to London. I do not know when I shall be obliged to go to town, but whenever it may happen I will let you know, as I would not willingly forego any chance of meeting you. Mr. Smith's house is the centre of attraction for all his able London friends, and he is kind enough always to allow me to participate in the pleasure which their company affords him. We have already had Mr. Warburton and Mr. Belsham, and in a few days he expects to see Mr. Mallet. Mr. Smith continues to reign pre-eminent in the good-will of all his neighbours, and indeed I do not know any one who is entitled to dispute the palm with him.... Ever yours truly, DAVID RICARDO. This is a sad blundering letter, bad even from me, but you must excuse it, and will I am sure when I tell you that I am just recovering from the languor and weakness caused by the powerful medicines which I have been obliged to take.... The night before last I was very ill; yesterday I was better, and to-day I have no complaint left but weakness. LXII. GATCOMB PARK, _10 Oct., 1817_. MY DEAR SIR, I said I would write to you when I was going to London and therefore I now do it, but without much hope of seeing you there.... It is not my intention, if I can get my business done, to stay in town beyond Tuesday morning, unless I had any chance of meeting you there, which would induce me to defer my return home one day longer.... Dr. Roget[170] has been on a visit for a few days at Mr. Smith's; he stayed one evening with us at Gatcomb. We all very much admire his unassuming manners, and are well disposed to admit his claims on our esteem and affection. Sir Samuel Romilly and Lady Romilly have been on a visit at Mr. Phelps' a near neighbour of mine. They went from here to Bowood[171] and from thence they were going to Ford Abbey, Mr. Bentham's residence. I have since heard of their arrival there, and they are now probably returned to London. ... Our harvest in this part of the country is almost entirely got in. The crops are I believe generally good, and we are very grateful for the fortunate change in the weather which enabled us to reap and house them in a state of perfection. We shall now, I hope, for some years sail before the wind. You and I have always agreed in our opinions of the power and wealth of the country; we were not in a state of despair at the discouraging circumstances with which we were lately surrounded. We looked forward to the revival which has taken place.... Ever truly yours, DAVID RICARDO. If you should write me a line, it will reach me sooner by being directed to the Stock Exchange. LXIII. GATCOMB PARK, _21 Oct., 1817_. MY DEAR SIR, I hope we shall be more fortunate in meeting, when I again visit London. You think that the low price of labour which has lately prevailed contradicts my theory of profits depending on wages, because the rate of interest is at the same time very low. If interest and profits invariably moved in the same degree and in the same direction, my theory might be plausibly opposed; but I consider this as by no means the case. Although interest is undoubtedly ultimately regulated by profits, rising when they are high and falling when they are low, yet there are considerable intervals during which a low rate of interest is compatible with a high rate of profit; and this generally occurs when capital is moving from the employments of war to those of peace. If goods do not vary in price and the cost of manufacturing them falls, it is self-evident that profits must rise; and, if goods do fall in price generally, then it is not the value of goods or of labour which falls, but the value of the medium in which they are paid which rises, and then my theory does not require any rise of profits; they may even fall. You ask me if I can show you the fallacy of the following statement: 'Capital is wholly employed in the purchase of materials and machinery and the maintenance of labour. If, from any cause whatever, materials, machinery and the maintenance of the labourer and his wages fall considerably in money value, is it _possible_ that the same amount of monied capital can be employed in the country?' I answer that it is _possible_ but by no means probable. Suppose the mines were to produce a diminished quantity of the precious metals, at the same time that materials and machinery were greatly increased in quantity, might not the increased aggregate quantity of materials and machinery be of a greater money value than before, although each particular portion should be at a less? Might we not by importation appropriate to ourselves a larger proportion of the mass of money distributed amongst all the countries of the world? I cannot doubt the _possibility_ of the case. In your argument about the stimulus of increased value and the effects of demand and supply on future wealth, you do not really differ from my views on this subject so much as you suppose, for I make profits and wealth to depend on the real cheapness of labour, and so do you, for you say that the evils of a dearth will often be more than counteracted as regards wealth, by the great stimulus which it may give to industry. I say the same, for I contend that the evils of a dearth fall exclusively on the labouring classes, that they perform frequently more labour not only without receiving the same allowance of food and necessaries, but often without receiving the same value for wages or the same recompense in money, whilst everything is dearer. When this happens, profits, which always depend on the value of labour, must necessarily rise. I thought I had written to you about the additional matter in your excellent work[172], although I had not given it all the examination I intended. I read it as I was travelling and noticed the pages wherever I saw the shadow of a difference between us, that I might look at the passages again when I got home and give them my best consideration[A][173]. On my passing through London when I returned from France, I looked for your book, as I expected you had sent me a copy, which I think you kindly told me you would do; but Mrs. Ricardo had jumbled that and many other books in a wardrobe, and it could not be got at till I went to town. I have it now here and have been reading all the new matter again, and am surprised at the little that I can discover, with the utmost ingenuity, to differ from. [A] [_Foot-note, eventually ousting the text._] In every part you are exceedingly clear, and time only is wanted to carry conviction to every mind. The chief difference between us is whether food or population precedes. I could almost agree with the statement of the question in p. 47 of third vol., which I think is in strict conformity with Sir J. Steuart's opinion. In speaking of the fall of wages you only once mention _corn_ wages, but must always mean corn wages and not money wages. In the note to p. 438 of the third vol. you agree to my doctrine, but I think in pp. 446, 456 and 457 you forget the admission you had before made, 497 [_sic_]. You agree with Smith that the monopoly of the Colony trade raises profits. 502 is in my opinion wrong and inconsistent with 438. I differ a little from your views in 506. You do not always appear to me to admit that the tendency of the Poor Laws is to increase the quantity of food to be divided, but assume in some places that the same quantity is to be divided among a larger number. I can neither agree with Adam Smith nor with you in 326, 328: a maximum tends to discourage future production; an undue increase of wages, or poor laws, tend to promote it. 360, a fall in the price of commodities and a rise in the value of money are spoken of as the same thing. 361, a diminution of production is another way of expressing an abatement of demand. 371, a combination among the workmen would increase the amount of money to be divided amongst the labouring class. These you will observe are slight objections, and I make them that I may preserve my consistency. They would not be understood by the mass of readers, but to you who are acquainted with my _peculiar_ views, if you please, they need no explanation.... Ever yours, DAVID RICARDO. LXIV. GATCOMB PARK, _16 Dec., 1817_. MY DEAR SIR, I believe I am within the time stated in your letter for your visit to Surr[e]y, and consequently that this will reach you there. I am sorry that you were not sufficiently loyal to give her majesty some mark of your attention at Bath[174], during your present vacation, as in that case I might have hoped to have seen you here. As it is we may probably be in London nearly at the same time. We have not yet absolutely fixed on the day for our journey, but it will not be deferred beyond the middle of next month. I hope I may see you before your return home. I am glad to find that we may soon expect another volume[175] from your pen, although, if you attack me, I am prepared for nine tenths of our readers deciding in favour of your view of the question. I want an able pen on my side to put my opinions in a clear light, and to divest them of that appearance of paradox which they now wear. I wish I could assist you to a good title but no one is more able to give a work the best air and arrangement than yourself. Have you seen the Review of M. Say and myself in the British? In some of the remarks you would I believe agree; yet it is some consolation to me that, after designating every part of my performance absurd and nonsensical, they attack you on the subject of Rent, and say that both you and I have endeavoured to make the nature of rent, which was before so clear, obscure. Rent is nothing more than the hire paid for land. I feel delighted that they have given me so desirable a companion. In the Scotsman, a Scotch newspaper, I have been ably defended--the writer[176] has evidently understood what I meant to say, which the reviewer has not done. I have been reading Mill's book[177] for this last week, and have got through about half of the first volume. I am not qualified to give an opinion of its merits, but I am very much pleased with it. It is very interesting, and is, I think, calculated to excite a great deal of attention, for it not only descants on the religion, manners, laws, arts, and literature, of the Hindus, but compares them with the religion, manners, etc. of other nations which the world has generally considered as much inferior to the Hindus; and, if these in the Hindus are to be deemed marks of a high state of civilization, Africa, Mexico, Peru, Persia, and China, might also lay claim to the same character. He also gives his own sentiments as to what constitutes good laws, a good religion, a high state of civilization, and shews at what a very low degree Hindostan deserves to be estimated for these acquirements[178]. The Political Economy is, I think, excellent, and the part that I have read may be considered as the author's view of the progress of the human mind. I hope it will bring him fame and reputation,--his perseverance as well as his other qualities well deserve it.... Like the Patriarchs of old I am surrounded by all my descendants, sons, daughters and grandchildren--they have assembled from all quarters to visit us, and if I were not afraid that they would soon become too numerous for the limits of our house I should insist on its being an annual custom. You have probably seen in the papers that I am gazetted as one of the three from whom the choice of Sheriff is to be made, and as Col. Berkeley, the first named, will in all probability be excused on account of his intended application to the House of Lords for the Peerage which must otherwise be given to his brother, who is nearly of age, I shall no doubt be selected. This honour I could well have dispensed with.... Ever yours, DAVID RICARDO. NOTE.--In Say's 'Oeuvres Diverses' (vol. i. p. 413) is printed a letter of Ricardo to Say, dated from Gatcomb, 18th Dec. 1817. He says amongst other things: 'Since your visit to England, I have been by degrees retiring from business; and, as our debt is enormous and the price of stock very high, I have from time to time withdrawn my capital, and have laid out much of it in land.... My life is made up of successes and cares; hence I am providing for the future as much as I can, that I may get rid of anxiety altogether. Our friend Mill is about to publish his book on India, on which he has been at work for several years. With powers like his, nothing can fail to become interesting and instructive under his pen; and I am convinced that this book will exceed the expectations of his closest friends. It is in type; and he has kindly given me an early copy. I have read more than half of the first volume, and I hope it will produce on competent judges the same impression that it has made on me. What he says on the government, laws, religion, and manners of the country is of great weight; and the comparison he draws between the former condition of Hindostan and its present condition seems to me to decide the question of the high state of civilization attributed to the former.... Your _Traité d'Economie Politique_ increases in reputation among us, in proportion as it becomes better known. Extracts from it (and from my own book) have recently appeared in the British Review, and its merit has been recognised. I have not fared so well; the reviewer has found in my book ample material for criticisms, and hardly a single passage worthy of praise.' LXV. LONDON, _30th Jan., 1818_[179]. MY DEAR SIR, During your visit in London next week I hope you will stay with us in Brook Street, and I am commissioned by Mrs. Ricardo to add her solicitations to mine to induce Mrs. Malthus to accompany you. Lord King[180], Mr. Whishaw and you have done me a great deal of honour in making my work[181] the subject of your discussions, but I confess it fills me with astonishment to find that you think, and from what you say they appear to agree with you, that the measure of value is not what I have represented it to be; but that _natural price_, as well as _market price_, is determined by the demand and supply,--the only difference being that the former is governed by the average and permanent demand and supply, the latter by the accidental and temporary. In saying this do you mean to deny that facility of production will lower natural price, and difficulty of production raise it? Will not these effects be produced after a very short interval, although the absolute demand and supply, or the proportion of one to the other, should remain permanently the same? At any rate then demand and supply are not the sole regulators of price. I should be glad to understand what Lord King and you mean by supply and demand. However abundant the demand it can never permanently raise the price of a commodity above the expense of its production, including in that expense the profits of the producers. It seems natural therefore to seek for the cause of the variation of permanent price in the expenses of production. Diminish these and the commodity must finally fall, increase them and it must as certainly rise. What has this to do with demand? I may be so foolishly partial to my own doctrine that I may be blind to its absurdity. I know the strong disposition of every man to deceive himself in his eagerness to prove a favourite theory, yet I cannot help viewing this question as a truth which admits of demonstration and I am full of wonder that it should admit of a doubt. If indeed this fundamental doctrine of mine were proved false I admit that my whole theory falls with it, but I should not on that account be satisfied with the measure of value which you would substitute in its place. I am sorry that you have determined not to publish this spring. I have not seen Torrens, and do not know what his intentions are respecting the work which he promised to give to the public. Sir James Mackintosh is indeed a great acquisition in more respects than one to your College[182]. It must be particularly agre[e]able to you. I thank you for your congratulations on the hono[u]r [which] has been conferred on me by the appointment [to] the office of Sheriff[183], an honour which I could well have dispensed with. Under all circumstances I think it best not to offer an objection to it. I wish you were of our party to-day. Mr. Whishaw, Mr. Smyth, Mr. Mallet, Mr. Sharp and Mr. Warburton dine with me. I am glad that you have heard Mill's book[184] favourably spoken of. I hope it may be as well thought of by others as it is by me. Very truly yours, DAVID RICARDO. LXVI. LONDON, _25 May, 1818_. MY DEAR SIR, I have again to regret that I shall not have you as an inmate of my house on your next visit to London.... I hope, however, that you will be our daily visitors, or as often as engagements will permit. I trust that those on our part will be exhausted before you come, for at no period have I led so dissipated a life as during this season. The King of Clubs will meet on the 6th. Let me know whether Mrs. Malthus and you will favour us with your company on the 8th, as we should be glad to ask a few friends to meet you on that day. The general opinion here is that Parliament will be dissolved immediately after the prorogation[185], but as the election in that case will interfere with the Circuit I cannot believe that ministers will choose so inconvenient a time. To-morrow evening there is to be a long debate in the House of Lords on the Bank Restriction Bill[186], on which occasion Lord Grenville means to speak. Lord King mentioned to me his idea of proposing that the Bank should be forbid making any dividend on their stock while the price of gold was above the mint price. I have no doubt that practically such a measure would operate a reduction of the currency and its rise to par; but, if the bank directors were obstinate, it might be attended with the most serious consequences to widows, orphans, and others, who might depend on the bank dividends only for their support. My walks with Mill continue almost daily. I hope you will sometimes honour us with your company when in London. We could make a very tolerable reformer of you in six walks, if your prejudices be not too strongly fixed. Indeed I should expect to find that our differences were not very great, as, if you are favourable to reform at all and that I believe you are, we should agree on all the important principles. Sir James Mackintosh has been reading Bentham, and was just beginning to give me his opinion of the book[187] when we were interrupted. I hope I shall find another opportunity of hearing his sentiments, which I am very eager to do. In a conversation which I yesterday had with Sharp he told me what he conceived Sir James' sentiments on reform to be[188]. If he is correct, I do not think that Sir James and I should be so much opposed to each other as he now thinks.... Very truly yours, DAVID RICARDO. LXVII. [Addressed to Albury, Guildford.] LONDON, _24th June, 1818_. MY DEAR SIR, Your letter arrived here whilst I was in Gloucestershire. I came to town last night, having on Monday presided at the County meeting, and made a return of our two members. I thank you for your inquiries after the infant[189] that you left so ill.... It died ... on the day you left London. Dr. Holland was surprised at the rapidity with which the disease advanced.... I believe it is now finally settled that I am not to be in Parliament, and truly glad I am that the question is at any rate settled, for the certainty of a seat could hardly compensate me for the disagreeables attending the negociation for it. Mr. Clutterbuck's[190] answer announced to me that the seat he had in view for me was disposed of; and thus end my dreams of ambition. Having once consented to yield to the opinion of my friends, I let no opportunity slip of getting into the Honourable House; but I am fully persuaded that, if I consult my own happiness only, I shall do wisely in stopping where I am. It is easier to animadvert on the actions of others than to act with wisdom ourselves; and I strongly fear that I want both the judgment and discretion which are requisite to make a tolerable senator. I am surprised at the kindness and consideration with which my friends now treat me, and it would be a great want of prudence to afford them more easy means of sifting my claims. I am equally pleased with you that Sir Samuel Romilly's election is going on so well in Westminster, and more pleased than you will be at Sir Francis Burdett's recent success on the poll[191]. Sir Francis is, I think, a consistent man. I believe Bentham's book has satisfied him that there would be no danger in universal suffrage; but his main object, I am sure, is to get a real representative government; and he would think that object might be [secur]ed by stopping very far short of universal suffrage. [With] such opinions it is a mere question of prin[ciple][192] (as to the obtaining of his object) whether he shall ask for the more or the less extended suffrage. I agree with you that it would be more prudent to ask for the less, and I agree also with you in thinking that with our present experience we should not venture on universal suffrage if it could be had. I am glad, however, to find, that you think the election in Westminster will afford us a fair sample of the sense of the nation. I will take care that all demands against you shall be faithfully discharged. I have not left myself room to enter at any length into the question of the comparative advantage of employing capital in agriculture or on manufactures[193]. If by wealth you mean as I do all those things which are desirable to man, wealth I think would be most effectually increased by allowing corn to be grown or imported as best suits those concerned in the trade. You say that in the one case the corn obtained would only be sufficient to support the workmen employed _and pay fully the profits of stock_; and in the other case it would pay in addition the increased amount of rent, and support an additional population proportioned to it. Now, _if the profits of stock to be paid fully_ in one case would be much greater both in value as defined by you, and in value as defined by me, than in the other, it is evident that the difference might not only equal the additional amount of rent but exceed it. I contend that the profits of stock would be higher than this whole amount if we consented to import corn, and therefore, although I will admit that in the case supposed our wealth has increased by the increase of rent from 1790 to 1818, yet I would contend that, if the trade had been free, and corn had been imported in preference to growing it, under the new and improved circumstances of agriculture, our wealth would have increased in a still greater ratio than it now has done.... Truly yours, DAVID RICARDO. NOTE.--In the new Parliament of 1818 Portarlington was represented, as in the last Parliament, by Richard Sharp, who seems to have retired in the course of six or seven months, for we find Ricardo's name in a division list as early as March 2, 1819. (Hansard, _sub dato_, p. 846.) It was a pocket borough, and there is nothing to show that Ricardo ever visited his constituents; but this did not prevent him from strongly denouncing the system of election. The biographer of J. B. Say asserts (apparently on pure conjecture) that Ricardo had bought an estate at Portarlington, and with it the seat in Parliament as one of its appurtenances (Say, Oeuvres Diverses, p. 406): 'Possesseur de vastes domaines, il s'en trouvait qui, par un abus déploré par lui-même, lui donnaient entrée au parlement.' In his Biography of James Mill, p. 172, Professor Bain speaks as if Ricardo had entered Parliament at the General Election in 1818. LXVIII.[194] [On outside of letter with the frank MINCHING HAMPTON (_sic_), _Aug. 20, 1818_.] MY DEAR SIR, I am very much obliged to you for the kind manner in which you express yourself respecting the praise that has been so lavishly bestowed on me by the reviewer of my book, in the Edinburgh Review[195]. Immediately on reading it, I guessed that the writer of the article was Mr. M'Culloch[196], for from the publication of my book he appears sincerely to have embraced the views which I wished to impress on all my readers. I cannot but feel highly gratified at his praise, which I should not have been in anything like an equal degree if it had come from Mr. Mill, because, though I should not have doubted his sincerity, I should have imputed much to his friendship and good opinion. The praise indeed is far beyond my merits, and would perhaps have really told more if the writer had mixed with it an objection here and there. I do not remember what the question was which I answered consistently with my general principles in my last letter, and not having your letter here I cannot refer to it. I admit that by improvements in agriculture an enormous quantity of wealth may be created, and that in the natural progress of society much of that wealth may ultimately go to landlords in the shape of rent, but that does not alter the fact of rent being always a transfer, and never a creation of wealth--for before it is paid to the landlords as rent it must have constituted the profits of stock, and a portion is made over to the landlord only because lands of a poorer quality are taken into cultivation.... ... You must have found your excursion to the Isle of Wight very pleasant.... You will have seen by the newspapers that I have been through all the parade and expense, which my office of sheriff imposes on me, when the judges attend the Assizes, without any advantage. The judge came into the town after midnight, by which his commission became void, and, after sending to London, Jury, Witnesses, Counsel, and Sheriff were all dismissed to their respective homes. It is expected that we shall have a new commission in two or three weeks.... I am sorry that you have not made any great progress in the work that you are about. After the reflection you have given to the subject I am not surprised that my reviewer has not shaken your confidence in your opinions. It would have been little flattering to me if he had, for I have had many opportunities, and have taken a great deal of pains to bring you round to my way of thinking without success. Why should he be so fortunate on the first trial? The truth I begin to suspect is that we do not differ so much as we have hitherto thought. I differed very little from the opinions expressed in that part of your MS. which you read to me, but I wish to h[ave an] opportunity of judging of your system as a whole, and therefore shall be glad when it comes forth in its printed form. I am glad to hear that Sir J. Mackintosh and Mr. Whishaw are well, pray remember me kindly to them. If either, or both of them, should go to Bowood[197] this season, I shall take it very kind of them if they will come for a few days to me. The Marquis of Lansdown has promised me a visit, and it would be particularly agreeable if they would all come at the same time. Should Mr. Whishaw be as near to me as Bowood he is already under an engagement to come. I met the Marquis and Marchioness of Lansdown at Gloucester; they entered the town on their way home from a tour, just as I was about leaving it; and owing to the breaking up of the courts were detained some time for want of horses. I suppose that you will be confined at Hertford till the Xmas vacation. I very much wish that Mrs. Malthus and you would pass a part of that vacation with us.... Mr. Mill arrived here yesterday evening to pay me his long promised visit. He brings me no news, excepting that he dined at Mr. Bentham's with Mr. Brougham, Mr. Rush[198] the American Ambassador, and Sir Samuel Romilly. The old gentleman is becoming gay. A party of four must to him be a formidably large one[199].... Ever truly yours, D. RICARDO. NOTE.--Between this letter and the next come probably the two quoted by McCulloch (Ricardo, Works, p. XXVI), to whom (if not to Mill) they were no doubt addressed: 7th April, 1819, 'You will have seen that I have taken my seat in the House of Commons. I fear that I shall be of little use there. I have twice attempted to speak; but I proceeded in the most embarrassed manner; and I have no hope of conquering the alarm with which I am assailed the moment I hear the sound of my own voice.' 22nd June, 1819, 'I thank you for your endeavours to inspire me with confidence on the occasion of my addressing the House. Their indulgent reception of me has, in some degree, made the task of speaking more easy to me; but there are yet so many formidable obstacles to my success, and some, I fear, of a nature nearly insurmountable, that I apprehend it will be wisdom and sound discretion in me to content myself with giving silent votes.' Happily he did not keep this resolution. It was at this time that George Grote was introduced to Ricardo, breakfasting with him at Brook Street (March 23 and 28, 1819), and walking with him and Mill in St. James's Park and Kensington Gardens afterwards. Grote used to submit his papers to Ricardo's judgment, and vied with Mill in admiration of him (Personal Life of George Grote, p. 36). A letter from Ricardo to Grote, dated March 1823, is given in Grote's Life (p. 42); Ricardo thanks Grote for having expressed approbation of his political conduct. One of Ricardo's last public appearances, outside Parliament, was at a Reform dinner, where he proposed the chief resolution of the evening in a speech which Grote helped him to prepare (Bain's Life of J. Mill, p. 208). LXIX[200]. GATCOMB PARK, _21 Sept., 1819_. MY DEAR MALTHUS, I must not longer delay answering your kind letter. I have had you often in my mind, and was on the point of writing to you a short time ago, when I received a letter from Mill enclosing one from Mr. Napier, the editor or manager of the Encyclopedia Britannica, requesting him to apply to me to write an article on the Sinking Fund[201] for his publication. The task appeared too formidable to me to think of undertaking; and I immediately wrote to Mill to that effect; but that only brought me another letter from him which hardly left me a choice, and at last I have consented to try what I can do, but with no hope of succeeding. I am very hard at work, because I wish to give Mr. Napier[202] the opportunity of applying to some other person, without delaying his publication, as soon as I have convinced Mill and him that I am not sufficiently conversant with matters of this kind. This business has lately engrossed all my time, and will probably continue to do so for at least a week to come. So you moved from Henley to Maidenhead! You were determined not to lose sight of the Thames. I shall expect to see your name entered as a candidate for the annual wherry. I am glad that you are proceeding merrily with your work. I now have hopes it will be finished. You have been very indolent, and are not half so industrious nor so anxious as I am when I have anything on hand. I have not been able to give a proper degree of attention to the subject of your letter. The supposition you make of half an ounce of silver being picked up on the sea shore by a day's labour is, you will confess, an extravagant one. Under such circumstances silver could not, as you say, rise or fall, neither could labour, but corn could or rather might. Profits I think would still depend on the proportions of produce allotted to the capitalist and the labourer. The whole produce would be less, which would cause its price to rise, but of the quantity produced the labourer would get a larger proportion than before. This larger proportion would nevertheless be a less quantity than before, and would be of the same money value. In the case you suppose the rise of money wages does not appear to be necessary in the progress of cultivation to its extreme limits; but the reason is that you have excluded the use of capital entirely in the production of your medium of value. You know I agree with you that money is a more variable commodity than is generally imagined, and therefore I think that many of the variations in the price of commodities may be fairly attributed to an alteration in the value of money. It is difficult to conceive that in a great and civilized country any commodity of importance could be produced with equal advantage without the employment of capital. By what you tell me in your letter[203] you have respected my authority much too highly, and I do not consent that you should attribute to that respect the little activity you have displayed in getting your work finished. I wish that Mrs. Malthus and you would come to us here at Christmas. I shall then be quite in the humo[u]r to discuss all the difficult questions on which we appear to differ. My family is now in a settled state, and I think I can promise you more comfortable entertainment than I have yet been able to give you here. You must no longer plume yourself on being the principal object of Cobbett's[204] abuse. I have come in for my share of it, and just in the way that I anticipated. Even when he agrees with you he can find shades of difference which calls [_sic_] forth his virulence. I had the pleasure of passing a few days lately in Mr. Whishaw's company at Mr. Smith's at Easton Grey. He was in very good spirits and very agreeable. We had some political discussion, particularly on Reform, and he was more liberal in his concessions than I have usually found him. I had Miss Hobhouse heartily on my side; and Mrs. Chandler, an enthusiast for the Whigs, declared that mine were the true Whig principles. Mr. Belsham was of the party, but he did not take a decided part. Mr. Macdonnel, who came with Mr. Whishaw was, I thought, all but an ally. Are you not weary?... Believe me, Ever yours truly, DAVID RICARDO. NOTE 1.--The Sinking Fund was a frequent topic of Ricardo's speeches in the House of Commons. It was a delusion to the people, who fancied it was paying off their National Debt, and a snare to the Government, who were constantly tempted to divert it from its proper purpose. So he declared in his first session (e.g. May 13, June 9, and June 18, 1819), and so he persisted, in his last. The following apologue on the subject from his speech of 28th Feb. 1823, is in the manner of Cobden, and shows how economists will rather read a difficult truth 'writ small' than 'writ large:'--'I have (he says) an income of £1000 a year, and I find it necessary to borrow £10,000, for which I agree to give up to my creditor £500 per annum. My steward says to me: "If you will live on £400 a year and give up another £100 out of your income of £500, that will enable you in a certain number of years to get completely rid of your debt." I listen to this good advice, live on £400 a year, and give up annually £600 to my steward in order to pay my creditor. The fist year my steward pays the creditor £100; then the debt would be £9,900, and therefore the income [or interest] due to the creditor would be only £495. But I continue to pay to my steward £600 per annum; and in the next year the steward pays over £105, and so from year to year the debt is diminished, £600 being still received by the steward. At the end of a certain number of years the result is this--that out of a yearly reserve of £600, half the debt is paid off; only £250 is due to the creditor, and £350 remains in the hands of the steward, his master continuing to live on £400 per annum. At this period some object occurring to the steward which he thinks might be of benefit to me or to himself, he borrows £7000, and devotes the whole £350 in his hands to pay the interest on that sum. What then becomes of my sinking fund? Originally I was in debt only £10,000; now I find myself indebted altogether £12,000; so that instead of possessing a sinking fund, as I had hoped, I am positively so much more in debt.' Ricardo's moral was that we should honestly give up pretending to have a sinking fund. One of his own friends remarking that this was to believe, with the French lady, that the best way to overcome temptation was to yield to it, Ricardo retorts (speech of 6th March, 1823): 'If I knew I was going to be robbed of my purse, I should spend its contents myself first.' NOTE 2.--It is worth while to quote some parts of the passages of Cobbett, to which this letter refers. They were too violent to be taken seriously. If Dr. Johnson really loved a good hater, he lost much enjoyment by ending his days before Cobbett wrote. In the letter which appears in the Political Register for 4th Sept. 1819, Cobbett delivers himself as follows: 'I see that they [the borough-mongers] have adopted a scheme of one Ricardo (I wonder what countryman he is), who is I believe a converted Jew. At any rate he has been a 'Change Alley-man for the last fifteen or twenty years. If the Old Lord Chatham were now alive, he would speak with respect of the muckworm, as he called the 'Change Alley people. Faith, they are now become _everything_. Baring assists at the Congress of Sovereigns, and Ricardo regulates things at home. The muckworm is no longer a creeping thing; it rears its head aloft, and makes the haughty borough-lords sneak about in holes and corners.'... He goes on to say that the doctrines preached in the 'Courier' and elsewhere about the inutility of ready money and the convenience of paper show that cash payments are not really thought practicable by these people. 'This Ricardo says that the country is happy in the discovery of a paper money, that it is an improvement in political science. Now if this were true it would be better to have a paper money in _all_ countries. And what standard of _value_ would there then be? It is manifest that there could be none, and that commerce could not be carried on. Besides, what would be the peril in case of war?' Even as it is, the French expect us to be in their power in a very few years from this very cause, &c. In another letter to Hunt in the following number of the Register he goes on (p. 112): 'I wonder that Ricardo, hot from the 'Change, who talks of the _lower orders_ in such goodly terms, and was shocked at the idea of their increasing, ... had not thought of the fine and copious _drain_ that is continually going on from England to America. This was a little thing of sunshine amidst the gloom.' There are other references to Ricardo in the Register not much more complimentary. Ricardo and Malthus, however, wear their rue with a difference. Cobbett reaches his spring-tide level of vituperation in the letter written from Long Island on 6th Feb., and printed in the Political Register for May 8, 1819 (vol. 34, no. 33): 'To Parson Malthus, on the Rights of the Poor and on the cruelty recommended by him to be exercised towards the Poor.' 'Parson, I have during my life detested many men, but never any one so much as you. Your book ... could have sprung from no mind not capable of dictating acts of greater cruelty than any recorded in the history of the massacre of St. Bartholomew. Priests have in all ages been remarkable for cool and deliberate and unrelenting cruelty; but it seems to have been reserved for the Church of England to produce one who has a just claim to the atrocious preeminence. No assemblage of words can give an appropriate designation of you; and therefore, as being the single word which best suits the character of such a man, I call you Parson, which amongst other meanings includes that of Borough-monger Tool' (pp. 1019, 1020). He goes on to say he has drawn up a list of 743 obnoxious parsons, who have dared to exclude his Register and 'Paper against Gold' from their parish reading-rooms. 'I must hate these execrable Parsons; but the whole mass put together is not to me an object of such perfect execration as you, a man (if we give you the name) not to be expostulated with but to be punished' (1021). The best commentary on this scurrility may be found in a speech of Ricardo himself (July 1, 1823, on the 'Petition of Christian Ministers for free discussion'), where he says that ribald language should always be allowed full publicity, for it 'offends the common-sense of mankind' and can hope to make no serious converts. LXX. GATCOMB PARK, _9 Nov., 1819_. MY DEAR MALTHUS, ... I shall go to London alone, on the 22nd, and of course I shall continue there until Parliament adjourns for the holidays:--perhaps you may have occasion to visit town during that time, if so, I shall have a bed at your service, and such fare as can be furnished by my factotum in Brook Street. I am glad that Mr. Whishaw has expressed satisfaction with his very short visit here. I was very much pleased with his company--no one could be more agreeable, nor more disposed to be satisfied with everything about him. We had many conversations on the subject of Parliamentary Reform, and I was glad to find that our sentiments accorded much more than I had previously imagined. I should be quite contented with such a reform as Mr. Whishaw was willing to grant us. I am certainly not more inclined than I was before to Radicalism[205], after witnessing the proceedings of Hunt, Watson, and Co., if by Radicalism is meant Universal Suffrage. I fear, however, that I should not think the moderate reform, which you are willing to accede to, a sufficient security for good government. Your scheme of reform, if I recollect right, is as much too moderate as the universal suffrage plan is too violent: something between these would give me satisfaction. Do you think that any great number of the people can really be deluded with the idea that any change in the representation would completely relieve them from their distresses? There may be a few wicked persons who would be glad of a revolution, with no other view but to appropriate to themselves the property of others, but this object must be confined to a very limited number, and I cannot think so meanly of the understandings of those who are well disposed, as to suppose that they sincerely believe a reform in Parliament would give them work, or relieve the country from the payment of the load of taxes with which we are now burthened; neither do I observe in the speeches which are addressed to the mob any such extravagant expectations held out to them. If there were I am sure they know better than to believe the speakers who make such delusive promises. I expect that we shall have a very stormy session of Parliament. With respect to my calculations, I have only this to say in defence of them, that I never brought them forward for any practical use, but merely to elucidate a principle. It is no answer to my theory to say that 'it is scarcely possible that all my calculations should not be necessarily and fundamentally erroneous,' for that I do not deny; but still it is true that the proportion of produce in agriculture or manufactures, retained by the capitalist who sets the labourers to work, will depend on the quantity of labour necessary to provide for the maintenance and support of the labourers. You ask me 'whether, when land is thrown out of cultivation from the importation of foreign corn, I consider the new rate of profits as determined by the state of the land, or the stationary prices of manufactured and mercantile products compared with the fall of wages.' You have correctly anticipated my answer. 'Capital will,' I think, 'be withdrawn from the land till the last capital yields the profit obtained (by the fall of wages) in manufactures, on the supposition of the price of such manufactures remaining stationary.['] I am glad to hear that your book will be so soon in the press, but I regret that the most important part of the conclusions from the principles which you endeavour to elucidate, will not be included in it, I mean taxation. In a letter which I have lately received from Turner[206], he is full of regret that the important subject of taxation receives so little attention from Political Economists;--at this time he thinks it peculiarly important, and I cannot but agree with him. As soon as you have launched your present work, I hope you will immediately prepare to give us your thoughts on a subject in which [we] are all practically interested. I have received a letter also very lately from M'Culloch, he has been writing an article on Exchanges for the Ency. Brit., which is very well done, I think; although I cannot agree with one or two of his definitions. I finished in my hasty way the article I had undertaken to do on the Sinking Fund, and then became so disgusted with it, that I was glad to get rid of it. I have given so many injunctions not to regard my supposed feelings in deciding whether it shall or shall not be published, that I much doubt whether it will ever see the light.... Ever yours, D. RICARDO. NOTE.--The gap between the above letter (of 9th Nov. 1819) and the following (of 4th May, 1820) may be filled up by a letter of Ricardo to J. B. Say, dated from London, 11th January, 1820 (Oeuvres Diverses, p. 414). After thanking him for a present (which appears from Say's reply to have been a French translation of his 'Pol. Econ. and Taxation') and a letter, he goes on to say: 'I remember hearing you tell me when I saw you in Paris that in each successive edition of our respective works our opinions would approximate to each other more and more, and I am convinced that the truth of the remark will be demonstrated.' Our differences (he goes on) are becoming rather verbal than substantial. Your chapter on Value has in my opinion gained considerably. You misrepresent me, however, on that subject when you say I consider the _value_ of labour to determine the value of commodities; I hold, on the contrary, that it is not the value, but 'the _comparative quantity of labour_ necessary to production which regulates the relative value of the commodities produced.' Also in regard to Rent, Profits, and Taxation, you do not observe that my reasoning proceeds on the assumption that there is in every country 'a land which yields no rent, _or_ there is a capital employed on the land with a view to profit merely, and paying no rent for it.' [See 'Pol. Ec. and Tax.' (McC.'s ed.), ch. xii. p. 107.] The latter you pass over without answer. I forward you the 2nd edition of my book, which 'has nothing new in it, as I have not had the courage to recast it.' He concludes by saying: 'Political Economy is gaining ground. Sounder principles are now brought forward. Your treatise is rightly in the first rank of authorities. The debates in parliament last session were satisfactory to the friends of the science. The true principles of currency are at last recognised. I think that on that point we shall not again go astray. Jeremy Bentham and Mill are well; I saw them a short time ago.' Say answers (2nd March, 1820) that their controversy would certainly end in agreement, if it were not cut short by death, as a recent fit of apoplexy had made him think probable. He then briefly defends himself against Ricardo's criticisms. How can you (he says) determine the quantity and quality of the labour except by the price paid to obtain it? As to the two parts of your proposition on Rent, I see no reason for disagreeing with the second when I differ from the first, and I think (with you) that taxation in the second case will be shifted to the consumers. LXXI[207]. LONDON, _4 May, 1820_. MY DEAR MALTHUS, ... I have read your book[208] with great attention. I need not say that there are many parts of it in which I quite agree with you. I am particularly pleased with your observations on the state of the poor; it cannot be too often stated to them that the most effectual remedy for the inadequacy of their wages is in their own hands. I wish you could succeed in ridding us of all the obstacles to the better system, which might be established. After the frequent debates between us you will not be surprised at my saying that I am not convinced by your arguments on those subjects on which we have long differed. Our differences may in some respects, I think, be ascribed to your considering my book as more practical than I intended it to be. My object was to elucidate principles, and to do this I imagined strong cases that I might show the operation of those principles[209]. I never thought, for example, that practically any improvements took place on the land which would at once double its produce; but, to show what the effect of improvements would be, undisturbed by any other operating cause, I supposed an improvement to that extent to be adopted; and I think I have reasoned correctly from such premises. I am sure I do not undervalue the importance of improvements in agriculture to landlords, though it is possible that I may not have stated it so strongly as I ought to have done. You appear to me to overvalue them; the landlords would get no more rent while the same capital was employed as before on the land, and no new land was taken into cultivation; but, as with a lower price of corn new land could be cultivated and additional capital employed on the old land, the advantage to landlords would be manifest. Because the landlord's corn rent would increase without these conditions, you appear to think he would be benefited; but his additional quantity of corn would exchange for no more money nor for any additional quantity of other goods. If labour were cheaper, he would be benefited in as far as he would save on the employment of his gardeners and perhaps some other menial servants, but this advantage would be common to all who had the same money revenue, from whatever source it might be derived. The compliment you pay me in one of your notes[210] is most flattering. I am pleased at knowing that you entertain a favourable opinion of me; but I fear that the world will think, as I think, that your kind partiality has blinded you in this instance. I differ as much as I ever have done with you in your chapter on the effects of the accumulation of capital[211]. Till a country has arrived to [_sic_] the end of its resources from the diminished powers of the land to afford a further increase, [I hold] it to be impossible that there should [be at the] same time a redundancy of capital and of [commodities (?)]. [I] agree that profits may be for a time very l[ow] because capital is abundant compared with [labour][212], they cannot both, I think, be abundant at one [and the same time]. Admitting that you are correct on this [point, I doubt] whether the inference you draw is the correct one, and it [does not seem to me] wise to encourage unproductive consumption. If individuals would not do their duty in this respect, government might be justified in raising taxes for the mere purpose of expenditure. McCulloch[213] has a short review of your book in the last Scotsman; it is chiefly on the subject of value; he differs from you but does so with the greatest civility and good humour. Torrens has an interest in (I believe he is editor of) the Traveller[214], and as his arguments are on my side, I of course think his criticism just.... Believe me, ever truly yours, DAVID RICARDO. LXXII[215]. GATCOMB PARK, _Sept. 4, 1820_. MY DEAR MALTHUS, I was very desirous of hearing from you, and was on the point of telling you so when your letter reached me from Brighton. Mr. Hump[hre]y Austin, a neighbour of mine, told me he saw you at Paris and I had heard of your safe arrival in England. I am quite pleased to hear that your journey has been agreeable to you; it could not fail to be so when it gave you the opportunity of seeing and conversing with the principal literary men of France and of hearing their opinions on the present state of that important country. I hope in that quarter there will be no interruption of the present order of things for some time to come; but, if they do make a movement, I trust it will be for the purpose of securing more effectually the liberty of the people by perfecting as far as human means can perfect the representative system. There is nothing on which the happiness of the great body of the people so much depends. I did not expect that I had so many readers in France as the number of copies of the French translation which you tell me have been sold would seem to imply. I am not surprised that you found few who understood my theory correctly and still fewer who were disposed to agree with me. I have not yet succeeded in making many converts in my own country; but I do not despair of seeing the number increase; the few I have are of the proper description, and do not want zeal for the propagation of the true faith. I have seen Say's letters to you[216]; it appears to me that he has said a great deal for the right cause but not all that could be said. In one point I think he falls into the same error as Torrens in his article in the Edinburgh Review[217]. They both appear to think that stagnation in commerce arises from a counter set of commodities not being produced without which the commodities on sale are to be purchased, and they seem to infer that the evil will not be removed till such other commodities are in the market. But surely the true remedy is in regulating future production; if there is a glut of one commodity, produce less of that and more of another, but do not let the glut continue till the purchaser chooses[218] to produce the commodity which is more wanted. I am not convinced by anything Say says of me; he does not understand me and is frequently at variance with himself, when value is the subject he treats of. In his 4th edition[219], vol. ii, page 36, he says everything falls in value, as the quantity is increased, by the facility of production. Now suppose that you have to pay for what he calls 'services productifs' in these commodities which have so fallen in value, will you give the same value if you give for them the same quantity of commodities as before? Certainly not, according to his own admission; and yet he maintains, page 33, that productive services have not varied if they receive the same quantity of a commodity, notwithstanding the cost of production of that commodity may have fallen from 40 to 30 francs per ell. He has two opposite notions about value, and I am sure to be wrong if I differ with either of them[220]. I am sorry that the government of France is prejudiced against Political Economy. Whatever differences of opinion may exist amongst writers on that science, they are nevertheless agreed upon many important principles, which are proved to demonstration. By an adherence to these, governments cannot fail to promote the welfare of the people who are submitted to their sway. What more clear than the advantages which follow from freedom of trade, or than the evils resulting from holding out any peculiar encouragement to population? I have been reading your book a second time with great attention, but my difference with you remains as firmly rooted as ever. Some of the objections you make to me are merely verbal; no principle is involved in them; the great and leading point in which I think you fundamentally wrong is that which Say has attacked in his letters. On this I feel no sort of doubt. With respect to the word value, you have defined it one way, I another. We do not appear to mean the same thing, and we should first agree what a standard ought to be and then examine which approaches nearest to an invariable standard, the one you propose, or that which I propose. I have not heard of anything further having been written against you either by McCulloch or Torrens, nor do I know that they have anything in contemplation. McCulloch has written me two letters since I saw you last; he does not say anything about value, and it will probably be a year or two before he can publish anything on that subject in the Supplement to the Encyclopedia. In the next Review there will be an article of his on Tithes, which I have seen; his principles are right, but I do not like his remedy for the existing evil[221]. Mill has been with me here for a fortnight and will stay some time longer. He has it in contemplation to write a popular work on Political Economy[222], in which he will explain the principles which he thinks correct in the most familiar way for the use of learners. It is not his intention to notice any person's opinions or to enter into a controversy on the disputed points. I have been looking over my first chapter with a view to make a few alterations in it before the work goes to another edition. I find my task very difficult, but I hope I shall make my opinions more clear and intelligible. I did intend to defend myself against some of your attacks, but on reflection I think that, to do myself justice, I must say so much that I should very inconveniently enlarge the size of my book, besides which I should be constantly drawing my readers' attention from the [proper?] subject. If I defend myself at all, I must do it in [a] separate publication[223]. Respecting the trial of the Queen I am more than ever convinced of the impolicy and inexpediency of the proceedings which have led to it, and am quite sure that the plea set up that it is a State question is a false one: it is entered into merely to gratify the resentment and hostility of one individual who has himself behaved so ill that whatever he may have to complain of he so fully merits that no one is bound to enter into his quarrels or wish for punishment to follow offences to which his own conduct has been so instrumental.... Gatcomb is very delightful. I wish you and Mrs. Malthus could give us your company here before we go to London. Mr. Mill desires to be kindly remembered. Ever yours, DAVID RICARDO. LXXIII[224]. GATCOMB PARK, _10 Oct., 1820_. MY DEAR MALTHUS, The Queen's defence appears to be going on well; a few more such evidence [_sic_] as Sir Wm. Gell and I think the Lords cannot pass the bill; in that case I shall not be called to town, and if you are in this part of the world at Christmas perhaps we shall see you at Gatcomb. Warburton is staying at Easton Grey and has paid us a visit of two or three days with the Smiths; he was very agreeable. He does not speak quite positively, but I think he is one of my disciples and agrees with me on some of those points which you most strongly dispute. I quite agree with you in thinking that M. Say's letters to you are not very well done. He does not even defend his own doctrine with peculiar ability, and on some other of the intricate questions, on which he touches, he appears to me to be very unsatisfactory. He certainly has not a correct notion of what is meant by value when he contends that a commodity is valuable in proportion to its utility. This would be true if buyers only regulated the value of commodities; then indeed we might expect that all men would be willing to give a price for things in proportion to the estimation in which they held them; but the fact appears to me to be that the buyers have the least in the world to do in regulating price; it is all done by the competition of the sellers, and, however the buyers might be really willing to give more for iron than for gold, they could not, because the supply would be regulated by the cost of production, and therefore gold would inevitably be in the proportion which it now is to iron, although it probably is by all mankind considered as the less useful metal. I think more may be said in defence of his doctrine of services; they are, I think, the regulators of value, and, if he would give up rent, he and I should not differ very materially on that subject. In what he says of services he is quite inconsistent with his other doctrine about utility. He appears to me to talk very ignorantly of the taxation of England. In the note, page 101, he concedes too much. The difficulty of finding employment for capital in the countries you mention proceeds from the prejudices and obstinacy with which men persevere in their old employments; they expect daily a change for the better, and therefore continue to produce commodities for which there is no adequate demand. With abundance of capital and a low price of labour there cannot fail to be some employments which would yield good profits; and, if a superior genius had the arrangement of the capital of the country under his control[225], he might, in a very little time, make trade as active as ever. Men err in their production; there is no deficiency of demand. If I wanted cloth and you cotton goods, it would be great folly in us both, with a view to an exchange between us, for one of us to produce velvets and the other wine; we are guilty of some such folly now, and I can scarcely account for the length of time that this delusion continues. After all, the mischief may not be so great as it appears. You have fairly represented the point at issue between us;--I cannot conceive it possible, without the grossest miscalculation, that there should be a redundancy of capital and of labour at the same time. When I say mine is the true faith, I mean to express only my strong conviction that I am right; I hope you do not attach anything like arrogance to the expression. I am in the habit of asserting my opinion strongly to you, and I am sure you would not wish me to do otherwise. I am satisfied that you should do the same by yours, and I dare say you will agree with me that you are not more inclined to yield to mere authority without being convinced than I am[226]. I affirm with you that 'if the farmer has no adequate market for his produce, he will soon cease to distribute more necessaries to his labourers,' with a view to the production of more necessaries; but will he therefore leave that part of his capital inactive, will not he or somebody else employ it in producing something which will meet an adequate market? You speak of the relative _utility_ of our two definitions of value. I confess that your definition[227] does not convey to my mind anything approximating to the idea I have ever formed of value. To say that real value as applied to wages implies the quantity of necessaries given to the labourer, at the same time that you agree that those necessaries are as variable as anything else, appears to me a contradiction. Political Economy you think is an enquiry into the nature and causes of wealth; I think it should rather be called an enquiry into the laws which determine the division of the produce of industry amongst the classes who concur in its formation. No law can be laid down respecting quantity, but a tolerably correct one can be laid down respecting proportions. Every day I am more satisfied that the former enquiry is vain and delusive, and the latter only the true object of the science. You say that my proposition, 'that with few exceptions the quantity of labour employed on commodities determines the rate at which they will exchange for each other, is not well founded.' I acknowledge that it is not rigidly true, but I say that it is the nearest approximation to truth, as a rule for measuring relative value, of any I have ever heard. You say demand and supply regulates value [_sic_]; this I think is saying nothing, and for the reason I have given in the beginning of this letter: it is supply which regulates value[228], and supply is itself controlled by comparative cost of production. Cost of production, in money, means the value of labour as well as profits. Now, if my commodity be of equal value with yours, its cost of production must be the same. But cost of production is, with some deviations, in proportion to labour employed. My commodity and your commodity are both worth £1000; they will therefore probably have the same quantity of labour realized in each. But the doctrine is less liable to objections when employed not to measure the whole absolute value of the commodities compared, but the variations which from time to time take place in relative value. To what causes, I mean permanent causes, can these variations be attributed? To two and to two only, one insignificant in its effects, a rise or fall of wages, or what I think the same thing a fall or rise of profits, the other of immense importance, the greater or less quantity of labour that may be required to produce the commodities. From the first cause no great effects may follow because profits themselves constitute but a small portion of price, and no great addition or deduction can be made on their account. To the other cause no very confined limit can be assigned, for the quantity of labour required to produce commodities may vary to double or treble. The subject is difficult, and I am but a poor master of language, and therefore I shall fail to express what I mean. My first chapter[229] will not be materially altered; in principle I think it will not be altered at all.... Ever truly yours, DAVID RICARDO. LXXIV[230]. GATCOMB PARK, _24 Nov., 1820_. MY DEAR MALTHUS, I have been living in a state of great uncertainty whether I should be obliged to go to London or not. It seems to be settled that Parliament will be prorogued, and therefore I do not think it necessary to take a journey to town for the sole purpose of hearing the usher of the black rods give his three taps at the door of the House of Commons with his rod of office, and which [_sic_] we are assured by Hobhouse would be laid about his back, if he presumed so to disturb a reformed House of Commons. The political horizon does not appear to be clearing up. It is always unwise for a Government to set itself against the declared opinion of a very large class of the people, and it is more particularly so when the point in dispute is one trifling in itself, and of no real importance to the state. Should the public be kept in this agitated state on a question whether the Queen should be allowed a palace, or whether her name should be inserted in the Liturgy? Nothing can be more unjustifiable than to risk the public safety on such questions as these, for after raising the discussion there is no safety either in yielding or resisting. You say in your last letter 'that you are fortified with new arguments to prove demonstratively that a neat revenue is absolutely impossible under the determination to employ the whole produce in the production of necessaries, and consequently that if there is not an adequate taste for luxuries and conveniences or unproductive labour, there must necessarily be a general glut.' I shall not trouble you to bring forward these arguments, for with a very slight alteration I should entirely concur in your proposition. If I recollect right, it is the very exception which I made[231] and which you mention in your book. You must collect your stock of arguments to defend more difficult points than this. I am quite sure that you are the last man who would misstate an adversary, knowingly, yet I find in your book some allusions to opinions which you represent as mine and which I do not really hold. In one or two cases you, I think, furnish the proof that you have misapprehended me, for you represent my doctrines one way in one place, and another way in another. After all the difference between us does not depend on these points; they are very secondary considerations. I have made notes on every passage in your book which I dispute, and have supposed myself about publishing a new edition of your work, and at liberty to mark the passage with a reference to a note at the bottom of the page. I have in fact quoted three or four words of a sentence, noting the page, and then added my comment. The part of your book to which I most object is the last. I can see no soundness in the reasons you give for the usefulness of demand on the part of unproductive consumers. How their consuming, without reproducing, can be beneficial to a country, in any possible state of it, I confess I cannot discover. I have also written some notes on M. Say's letters to you, with which I am by no means pleased. He is very unjust to me, and evidently does not understand my doctrine; and for the opinions which we hold in common he does not give such satisfactory reasons as might, I think, be advanced. In fact he yields points to you, which may almost be considered as giving up the question, and affording you a triumph. In Say's works generally, there is a great mixture of profound thinking, and of egregious blundering. What can induce him to persevere in representing utility and value as the same thing? Can he really believe that our taxation operates as he describes[232], and can he think that we should be relieved, in the way he represents, by the payment of our national debt[233]? I shall not dispute another proposition in your letter. 'No wealth,' you say, 'can exist unless the demand or the estimation in which the commodity is held exceeds the cost of production.' I have never disputed this. I do not dispute either the influence of demand on the price of corn or on the price of all other things; but supply follows close at its heels and soon takes the power of regulating price in his [_sic_] own hands, and in regulating it he is determined by cost of production. I acknowledge the intervals on which you so exclusively dwell, but still they are only intervals. 'Fifty oak trees valued at £20 each do not contain as much labour as a stone wall in Gloucestershire which costs £1000['][234]. I have answered your question; let me ask you one. Did you ever believe that I thought fifty oak trees would cost as much labour as the stone wall? I really do not want such propositions to be granted in order to support my system.... I am, Ever truly yours, DAVID RICARDO. LXXV[235]. [MINCHINHAMPTON, _29 Nov., 1820_.] MY DEAR MALTHUS, ... I am very glad to hear of your intention of paying me a visit here. I hope it will be for a longer time than you mention. I am desired by Mrs. Ricardo to say that it would give her great pleasure to see Mrs. Malthus and your three children.... There is a coach which leaves London three times a week at five o'clock in the evening, on Monday, Wednesday, and Friday. This coach goes to Minchinhampton, one mile from our house; it carries four inside, travels at a very good pace, and sets off from the Angel Inn, St. Martin's-le-Grand. There is also a morning coach which goes from Gerard's Hall, Basing Lane, Cheapside, three times a week in the morning at a quarter before six. I believe this coach goes on Tuesday, Thursday, and Saturday; it is a Stroud coach and does not come nearer to our house than within four miles on the Cirencester Road. If you prefer this coach, we will send for you to the place where the roads diverge. This is of course in case Mrs. Malthus does not accompany you.... It is true the case[236] in my book is stated to be temporary, and in my opinion it can only be temporary because it cannot exist when the population has increased with the demand for people. When we meet we must agree upon the meaning to be attached to 'a neat surplus from the land'; it may mean the whole material produce after deducting from it what is absolutely necessary to feed the men who obtained it, or it may mean the value of the produce which falls to the share of the capitalist, or to the share of the capitalist and landlord together. If the first be neat surplus it is equally so whether given to labourers, capitalists, or landlords. If the second it may fall short of giving as great a value to the capitalist as he expended in obtaining it, and therefore for him there would be no neat produce. This term neat produce is used ambiguously in your book, and is made the ground of an observation on something [which I s]aid about neat and gross produce. The observation is [just] or not just, according to the meaning attached to the term neat produce; but more of this when we meet. Knowing as I do how much we are influenced by taking a particular view of a subject, and how difficult it is to destroy a train of ideas which have long followed each other in the mind, I will not say I am right about the effects of unproductive demand, and therefore it is possible that five years hence I may think as you do on the subject, but at present I do not see the least probability of such a change, for every renewed consideration of the question confirms me in the opinion which I have long held. Ever truly yours, DAVID RICARDO. NOTE.--On the 8th May, 1821, Ricardo writes to J. B. Say from London (Say, Oeuvres Diverses, p. 416), acknowledging receipt of Say's 'Letters to Malthus,' and sending him an early copy of the 3rd edition of his 'Pol. Econ. and Tax.' He finds fault again with Say's use of the word Value. He adopts Say's doctrine of 'productive services'; but 'rent being the effect and not the cause of the rise of prices, I submit afresh to you the question whether it is not well to leave rent out of account when we are estimating the comparative value of the productions of the soil. Suppose that I have before me two loaves, the one from the best land in the country, a land yielding three or four pounds sterling per acre, the other from a land rented at about three or four shillings. The two are precisely of the same quality and the same price. You would say that the price of the one is largely a payment for the service of the soil, while it gives little profit for the capital and the labour that have made that land produce. This is incontestable; but what consequence can you draw from it for our practical guidance? What we want to know is the general law which regulates the value of bread relatively to the value of all other things; and I believe that we shall find that one of those loaves, the one that comes from the land that pays little or no rent, determines the value of the whole of the bread; consequently its value, compared with that of all other things, depends on the quantity of labour employed in its production, comparatively with the quantity of labour employed in every other production. Your book (the Traité) would have gained much if you had considered the laws of rent and profits more deeply: 'Adam Smith was certainly wrong in supposing that the rate of profits depends on the amount of accumulated capitals without regard to the population, and the means of providing for it.' In other points I agree with your book and with the greater part of your 'Letters to Malthus.' 'Mr. Malthus and I see each other frequently, without convincing one another. I am glad to be able to inform you that economical science is more and more studied by the youth of this country. We have recently formed a club of political economists, in which we are proud to include Messrs. Torrens, Malthus, and Mill. Many others besides are actively maintaining the principles of free trade, though their names are not so well known to the public.' In his reply (Paris, 19th July, 1821) Say points out that Ricardo neglects the distinction between 'natural wealth' and 'social wealth,' or he would agree more than he does with Say in his view of value. 'Value in use,' if it means anything, means utility pure and simple, and we may leave out the 'value.' But utility may be gratuitously presented to us by nature, or added by our labour and outlay. We measure the new utility thus added, not as you say by the _quantity of labour_ it costs us, but by the different _quantities of another product_ which are given for it (for the new utility not for the nature-given utility) by others. For instance, a pound of iron is perhaps 2000 times less valuable than a pound of gold, though the utility of the iron may be equal, if not superior, to that of the gold; and the reason is that nearly all the utility of the iron is a gratuitous gift of nature to us. I neglect, therefore, the distinction of value in use and value in exchange deliberately, for I think Political Economy has to do only with the latter. As to the two loaves, the phenomenon you speak of is due, first, to the appropriation of land, apart from which such produce of the soil as was got without labour would cost nothing to anybody,--second, taking things as they are, to the fact that progress in production essentially consists in the substitution of nature's gratuitous services for our own costly ones--our ideal being the complete displacement of the latter by the former, which would make us all 'richer than David Ricardo.' Again, I consider that the determining causes of value include the causes that influence demand as well as supply, the cost to the demander of the productive services he offers in exchange, and not only the cost in labour of the article supplied. I am glad to hear of your Club. 'What I desire above all is that such economical principles as are not abstract, but are only the frank exposition of facts and their consequences, should be diffused among all classes of citizens. We have need not of controversialists expert in syllogistic weapons, but of practical economists; and all that is wanted, for that, is notions accessible to plain common sense, which I fear we repel by our too abstract reasonings.' If you admit strangers, I should be glad to be a member. He adds in a postscript that his eulogies (in the letters to Malthus) of the Essay on Population have been taken by some English writers as ironical; and he would like Ricardo to tell Malthus this is not so; he considers the position of the Essay impregnable, and has a genuine esteem for the author (Oeuvres Diverses, pp. 418-22). Say was of opinion that the time had not yet come for setting up a dogmatic orthodoxy in economical doctrines; and he begins the above letter by saying to Ricardo:--'I see in your book a new proof that the subjects of political economy are prodigiously complicated, for, though you and I are both seeking the truth in good faith, yet after devoting whole years to sounding the depths of its fundamental questions we find several points on which we do not agree. It is well we are agreed on the essential point, the possibility of the progress of man in wealth and happiness, as well as on the means needful to that end. We reach the same conclusions, though sometimes in different ways' (p. 418). LXXVI[237]. [Addressed to St. Catherine's, Bath.] GATCOMB PARK, MINCHINHAMPTON, _9 July, 1821_. MY DEAR SIR, I am sorry that you will not spare me a few days before you return to London. Pray reconsider your determination, and, if you can alter it, do. On Saturday I expect Mr. Tooke; it is a long time since he fixed on that day to come to me, and I am sure the pleasure of his visit will be much increased, both to him and to me, if you also formed one of our party. McCulloch has specifically and strongly objected to my chapter on Machinery[238]; he thinks I have ruined my book by admitting it, and have done a serious injury to the science, both by the opinions which I avow, and by the manner I have avowed them[239]. Two or three letters have passed between us on this subject; in his last, he appears to me to acknowledge that the effect of the use of machinery may be to diminish the annual quantity and value of gross produce. In yielding this, he gives up the question, for it is impossible to contend that with a diminished quantity of gross produce there would be the same means of employing labour. The truth of my propositions on this subject appear to me absolutely demonstrable. McCulloch is lamenting over the departure from my plan of currency, and means to make it the subject of an article in the Edinburgh Review, as he has already done in the Scotsman. I very much regret that in the great change we have made from an unregulated currency to one regulated by a fixed standard we had not more able men to manage it than the present Bank directors. If their object had been to make the revulsion as oppressive as possible, they could not have pursued measures more calculated to make it so than those which they have actually pursued. Almost the whole of the pressure has arisen from the increased value which their operations have given to the standard itself. They are indeed a very ignorant set. You are right in supposing that I have understood you in your book not to profess to enquire into the motives for producing, but into the effects which would result from abundant production. You say in your letter--'We see in almost every part of the world vast powers of production which are not put into action, and I explain this phenomenon by saying that from the want of the proper distribution of the actual produce adequate motives are not furnished to continued production.' If this had been what I conceived you to have said, I should not have a word to say against you; but I have rather understood you to say that vast powers of production are put into action and the result is unfavourable to the interests of mankind; and you have suggested as a remedy either that less should be produced or more should be unproductively consumed. If you had said 'After arriving at a certain limit, there will in the actual circumstances be no use to try to produce more; the end cannot be accomplished, and, if it could, instead of more, less would belong to the class which provided the capital,' I should have agreed with you; yet in that case I should say the real cause of this faulty distribution would be to be found in the inadequate quantity of labour in the market, and would be effectually cured by an additional supply of it. But I say with you there could be no adequate motive to push production to this length, and therefore it would never go so far. I do not know whether I am correct in my observation that 'I say so with you,' for you often appear to me to contend not only that production can go on so far without an adequate motive, but that it actually has done so lately, and that we are now suffering the consequences of it in stagnation of trade, in a want of employment for our labourers, etc., etc.; and the remedy you propose is an increase of consumption. It is against this latter doctrine that I protest, and give my decided opposition. I acknowledge there may not be adequate motives for production, and therefore things will not be produced; but I cannot allow first that with these inadequate motives commodities will be produced, and secondly that, if their production is attended with loss to the producer, it is for any other reason than because too great a proportion is given to the labourers employed. Increase their number and the evil is remedied. Let the employer consume more himself and there will be no diminution of demand for labour; but the pay of the labourer, which was before extravagantly high, will be reduced. You say in your letter, 'If an increased power of production be not accompanied by an increase of unproductive expenditure, it will inevitably lower profits and throw labourers out of employment.' In this proposition I do not wholly agree. First I say it must be accompanied with an increase either of productive or of unproductive expenditure. If the labourer receives a large proportion of the produce as wages, all that he receives more than is sufficient to prompt him to the necessary exertions of his powers, is as much unproductive consumption as if it were consumed by his master, or by the State; there is no difference whatever. A master manufacturer might be so extravagant in his expenditure, or might pay so much in taxes, that his capital might be deteriorated for many years together; his situation would be the same if, from his own will or from the inadequacy of the population, he paid so much to his labourers as to leave himself without adequate profits or without any profits whatever. From taxation he might not be able to escape, but from this last most unnecessary _unproductive_ expenditure he could and would escape, for he could have the same quantity of labour with less pay, if he only saved less; his saving would be without an end, and would therefore be absurd. You perceive then I fully admit more than you ask for; I say that, under these circumstances, without an increase of unproductive expenditure on the part of the masters profits will fall; but I say this further that even with an increased unproductive consumption and expenditure by the labouring classes profits will fall. Diminish this latter unproductive expenditure and profits will again rise; this may be done two ways, either by an increase of hands which will lower wages, and therefore the unproductive expenditure of the labouring class, or by an increase of the unproductive expenditure of the employing class, which will also lower wages by reducing the demand for labour. I fear I have been guilty of needless repetition, but I have really a great wish to show you what the points are on which our difference really exists. I am glad to hear that you are in a pleasant country.... Ever yours, DAVID RICARDO. LXXVII[240]. [To St. Catherine's, Bath.] GATCOMB PARK, _21 July, 1821_. MY DEAR MALTHUS, I think that the concession which I have made will not bear the construction you have put upon it. 'An increased power of production must be accompanied with an increase of productive or unproductive expenditure.' This is the sentence on which you have remarked, and you say could not be true if the gross produce were diminished. Certainly not, but I have never said that with an increased power of production the gross produce would be diminished; I have never said that machinery enables you to get a greater quantity of gross produce; my sole complaint against it is that it sometimes actually diminishes the gross produce. With respect to the particular subject of discussion between us, you seem to be surprised that I should understand you to say in your book 'that vast powers of production are put into action, and the result is unfavourable to the interests of mankind.' Have you not said so? Is it not your objection to machinery that it often produces a quantity of commodities for which there is no demand, and that it is the glut which is the consequence of quantity which is unfavourable to the interests of mankind? Even as you state your proposition in your present letter, I have a right to conclude that you see great evils in great powers of production from the quantity of commodities which will be the result, and the low price to which they will fall. Saving, you would say, would first lead to great production, then to low prices, which would necessarily be followed by low profits. With very low profits the motives for saving would cease, and therefore the motives for increased production would also cease. Do you not then say that increased production is often attended with evil consequences to mankind because it destroys the motives to industry, and to the keeping up of the increased production? Now in much of this I cannot agree with you. I indeed allow that the case is possible, to conceive of saving being so universal that no profit will arise from the employment of capital; but then I contend that the specific reason is because all that fund, which should, and in ordinary cases does, constitute profit, goes to wages and immoderately swells that fund which is destined to the support of labour. The labourers are immoderately paid for their labour, and they necessarily become the unproductive consumers of the country. I agree too that the capitalists being in such a case without a sufficient motive for saving from revenue to add to capital, will cease doing so, will, if you please, even expend a part of their capital; but I ask what evil will result from this? None to the capitalist, you will allow, for his enjoyments and his profits will be thereby increased, or he would continue to save; none to the labourers, for which we should repine, because their situation was so exceedingly favourable that they could bear a deduction from their wages and yet be in a most prosperous condition. Here it is where we most differ. You think that the capitalist could not cease saving on account of the lowness of his profits, without a cessation in some degree of employment to the people. I, on the contrary, think that with all the abatements from the fund destined to the payment of labour, which I acknowledge would be the consequence of the new course of the capitalists, enough would remain to employ all the labour that could be obtained and to pay it liberally, so that in fact there would be little diminution in the quantity of commodities produced; the distribution only would be different; more would go to the capitalists and less to the labourers. I do not think that stagnation is a proper term to apply to a state of things, in which for a time there is no motive to a further increase of production. When in the course of things profits shall be so low from a great accumulation of capital and a want of means of providing food for an increasing population, all motive for further savings will cease; but there will be no stagnation; all that is produced will be at its fair relative price, and will be freely exchanged. Surely the word stagnation is improperly applied to such a state of things, for there will not be a general glut, nor will any particular commodity be necessarily produced in greater abundance than the demand shall warrant. You say, 'We know from repeated experience that the money price of labour never falls till many workmen have been for some time out of work.' I know no such thing; and, if wages were previously high, I can see no reason whatever why they should not fall before many labourers are thrown out of work. All general reasoning, I apprehend, is in favour of my view of this question, for why should some agree to go without any wages while others were most liberally rewarded? Once more I must say that a sudden and diminished demand for labour in this case must mean a diminished reward to the labourer, and not a diminished employment of him; he will work at least as much as before, but will have a less proportion of the produce of his work, and this will be so in order that his employer may have an adequate motive for employing him at all, which he certainly would not have if his share of the produce were reduced so low as to make increased production an evil rather than a benefit to him. 'It is' (never) 'said that an increase of unproductive consumption among landlords and capitalists may not sometimes be the proper remedy for a state of things in which the motives for production fail.' I know of no one who has recommended a perseverance in parsimony even after the profits of capital have vanished. I have never done so, and I should be amongst the first to reprobate the folly of the capitalist in not indulging himself in unproductive consumption. I have indeed said that nothing can be produced for which there will not be a demand, unless from miscalculation, while the employment of stock affords even moderate profits; but I have not said that production may not in theory be pushed so far as to destroy the motive on the part of the capitalist to continue producing to the same extent. I believe it might possibly be pushed so far, but we have never witnessed it in our days, and I feel quite confident that, however injurious such a state of things may be to the capitalist, it is so only because it is attended with disproportionate and unusual benefits to the labourers. The remedy, therefore, and the sole remedy, is a more just distribution of the produce; and this can be brought about only, as I said in my last letter, by an increase of workmen or by a more liberal unproductive expenditure on the part of the capitalists. I should not make a protest against an increase of consumption as a remedy to the stagnation of trade, if I thought as you do, that we were now suffering from too great savings; as I have already said, I do not see how stagnation of trade can arise from such a cause. We appear then not to differ _very_ widely in our general principles, but more so respecting the applications of them. Such and such evils may exist; but the question is do they exist now? I think not; none of the symptoms indicate that they do, and in my opinion increased savings would alleviate rather than aggravate the sufferings of which we have lately had to complain. Stagnation is a derangement of the system, and not too much general production, arising from too great an accumulation of capital. Mr. Tooke has been here since Saturday last. I am going with him to-morrow to Bromesberrow[241], from whence he will go to Ross and down the Wye to Chepstow. We have had plenty of talk on subjects of political economy, and have found out points on which there is partial difference of opinion between us. He brought with him two pamphlets, in which you are often mentioned as well as myself; perhaps you have seen them: their titles are An Inquiry into those principles advocated by Mr. Malthus relative to the Nature of Demand and the necessity of Consumption[242], the other Observations on certain Verbal Disputes in political economy[243]. Mrs. Ricardo unites with me in kind regards to Mrs. Malthus and yourself. Mr. Tooke also desires to be kindly remembered. Ever truly yours, DAVID RICARDO. LXXVIII[244]. GATCOMB PARK, _18 Sept., 1821_. MY DEAR MALTHUS, Without imputing the least blame to you, I fear that I do not quite understand your 'knotty point.' You appear to me to compare things together, which cannot, under any supposable circumstances, be made the subject of comparison. You compare a commodity, in the production of which the advances in labour remain the same while the profits of stock diminish, to another commodity 'obtained by a given quantity of labour, a given quantity of capital, and a given rate of profits.' Is not this supposing two rates of profit at the same time? Perhaps this was not meant, and your question was asked on the supposition of profits varying equally in all trades. If so, I have no hesitation in answering that, if, from an increased quantity of labour on the land, corn should appear to have doubled in money price, and not from any increased facility in the production of money, we ought to say, as we always do say, that corn had risen a hundred per cent., and not that money had fallen fifty. In differing on this point we in reality come to our old dispute, whether the quantity of labour in a commodity should be the regulator of its value, or whether the value of all things should, under all circumstances, be estimated by the quantity of corn for which they would exchange. You say 'we cannot surely assume that the cost of producing the necessaries of the labourer is low absolutely when the land is productive, if what is gained by the small quantity of labour employed is counterbalanced by the very high rate of profits.' I, of course, should say the cost of these necessaries was low if they were produced with little labour, but would not you, who adopt another measure and _sometimes_ think value is to be estimated by the quantity of things generally which the commodity could command, would you not say, that the cost of these necessaries was small in value, agreeing, as you would, that they would not command an abundance of other things? I do not know what you mean by the low cost of necessaries being counterbalanced by the very high rate of profits. If a hundred quarters of corn be to be divided between my labourers and me, its cost being made up of wages and profits, its cost will be the same, whether profits be high or low, and this division will in no degree affect the price of the corn; but, if at a subsequent time eighty quarters only can be obtained with the same labour and capital, and in consequence a greater proportion of the eighty be given to the labourers than was before given of the hundred, corn will rise absolutely both in my measure and in yours. It is I who am willing to take some one or more of the external commodities[245] in the production of which, while the advances in labour increase in money value, the profits of stock diminish, as a steady measure, but which you so often reject, and insist that, whether the produce of a given quantity of labour be a hundred or eighty quarters, in either case, corn has remained a steady measure of value. In the case you have supposed, you say that the commodity, in which the same advances for labour were made, while profits diminished, 'would not only fall one half relatively to corn, but it would appear to do so estimated in any common external commodity which had all along been produced by the same quantity of labour, _and at the same rate of profits_.' I wish you had named this commodity. In the first place I deny that it would be produced at the same rate of profits, for there cannot be two rates of profit at the same time in the same country, and secondly I contend that this commodity would also fall to one half relatively to corn, and therefore would appear invariable when compared with the other commodities. Perhaps by external commodity, you mean a foreign commodity to be imported from abroad. If so, why should not that commodity vary in reference to corn in the same degree as any home made commodity? If a hogshead of claret were worth a certain quantity of cloth, of hats, of hardware, etc., etc., would its relative value to these things alter because it was more difficult to raise corn in England, and its price rose because we refused to import it from other countries? To me it appears most clear that claret would not vary as compared with the things which I before enumerated, and that it would vary as compared with corn. Pray think of this and tell me whether I am not right. In the postscript to your letter you ask 'In the two extreme cases of the highest profits, and the lowest profits on the land, may not corn and labour remain of the same value estimated in some external commodity, although in the interval considerable variations may have taken place from supply and demand?' I answer, no, it could not remain of the same value estimated in home commodities, and as it is by means of these home commodities that we should purchase the external commodities, I cannot see the slightest reason for supposing that these commodities so exchanged could alter in relative value. I hope I have made myself understood. I am glad you approach a little towards my views, I wish you had told me to what extent. Torrens told me he should send me his book[246]; he has not done so, and I have not seen it. Ever yours, DAVID RICARDO. LXXIX[247]. [_28 Sept., 1821._] MY DEAR MALTHUS, The case you put to me appears to me to be an impossible one. How can all countries produce their commodities with the same quantity of labour, all, except one, produce their _corn_ with the same quantity of labour also, and yet all, the one not excepted, have their profits on capital at the same rate? The one which you suppose to raise its corn with only half the quantity of labour required in the others would in all probability obtain its labour at a much cheaper price, and consequently profits would be higher in that country. If indeed a free trade should be established between all these countries, then their profits might be all nearly at the same rate, because the price of corn and necessaries estimated in quantity of labour would be nearly the same in all. In carrying on this supposed case we must be informed whether the country in which corn is obtained with comparatively little labour can continue to obtain it on the same terms, after she is called upon to supply the markets of other countries; if she can, then the comparative prices of corn and commodities will be altered in all countries; in the country producing the cheap corn, money will be rather at a higher level than before, and therefore corn rather dearer; but commodities generally will be at no higher price;--they will be indeed rather cheaper, because they will be imported from abroad and from countries where the level of currency will be somewhat reduced; and therefore the cost price of commodities in those countries will be lower, and consequently they can be sold cheaper to the country importing them. Bulky commodities and the price of labour will only be raised in this particular country, because the level of currency will be somewhat raised; labour will in the real measure of value be rather lowered, that is to say, the portion of produce paid to the labourer, manufactured and raw produce, together, will probably be rather increased, but in consequence of free trade and a better distribution of capital, the proportion of the whole produce of a given capital which the labourer will receive, will be diminished; his proportion will really be obtained with less labour. The benefit to other countries cannot be doubted; corn and labour will fall very greatly in those countries, and consequently profits will rise, and, as part of their exports in return for corn must in the first instance be money, the general level of currency will be reduced and commodities generally will fall, not because they can be produced cheaper but because they are measured by a more valuable money. This is on the supposition that corn can continue to be produced with little labour in the excepted country; but suppose the increased demand for corn should oblige this country to cultivate poorer land, then the price of corn would rise from another cause besides the higher level of currency; and, if this difficulty should be nearly as great as in other countries, corn would be nearly as high; but, while it could afford on any terms to export corn for commodities, there would be previously to the importation of commodities an influx of the precious metals and a higher level of currency. Without such higher level of currency commodities could never be imported from countries where they were before at the same price, and where they required the same quantity of labour to produce them. Your case is an impossible one, first because you suppose the profits in two countries to be the same although the cost of producing necessaries in one of them be only one half of what it is in the other, secondly you assume as a matter of course that with a free trade the price of corn in the exporting country would rise to the price of corn in the importing country whereas it would fall in the importing country to the price in the exporting country if its cost of production was not increased in that country, and if it rose it would rise only in proportion to the increased cost of production. When there is a free trade between countries it is impossible that profits can differ very much, the only cause of difference in such case will be the different modes of living of the labourers; in one country they may be contented with potatoes and a mud hovel; in another they may require a decent house and wheaten bread. You say: 'Proceeding from this point it is obvious that in the course of a hundred years (if accumulation were supposed) labour and corn might continue at nearly the same price, while domestic commodities from the fall of profits to the level of other countries would fall to half their price estimated in the money of the commercial world.' Domestic commodities are to fall, because profits fall. If profits fall, _I_ do not see why domestic commodities should fall; but why should profits fall if corn and labour continued at nearly the same price? I know of no cause of the fall of profits but the fall[248] of labour. You say: 'A striking approximation to this case actually exists in America.' 'The only difference,' you continue, 'is that circumstances in America have made labour high'; but this is the only important feature in the case. I am however decidedly of opinion that, if in America labour was very low and profits consequently much higher than they are, there would be very little fall in the domestic commodities of America. I agree indeed with you that in the progress of the cultivation of America her corn must rise with the increased difficulty of producing it; this circumstance must have a tendency to reduce the relative quantity, or rather lower the level of American currency, which will not fail by increasing the value of money to lower the value of those commodities in America which are too bulky to be exported[249]. The commodities which America exports will not be similarly affected. Nothing is to me so little important as the fall and rise of commodities in money; the great enquiries on which to fix our attention are the rise or fall of corn, labour, and commodities, in real value, that is to say the increase or diminution of the quantity of labour necessary to raise corn and to manufacture commodities. It may be curious to develop the effect of an alteration of real value on money price; but mankind are only really interested in making labour productive, in the enjoyment of abundance, and in a good distribution of the produce obtained by capital and industry. I cannot help thinking that in your speculations you suppose these much too closely connected with money price. I have read a very good critique on Godwin in the Edinburgh Review[250]; and I am quite sure that I know the writer. It is very well done and most satisfactorily exposes Godwin's ignorance as well as his disingenuousness. Ever yours, DAVID RICARDO. [Postscript.] I cannot agree with you that in the progress of the cultivation of America a mean between her corn and labour will remain nearly at the same price as it now is, estimated in money or in hogsheads of claret; it will in my opinion rise. Let me take your own supposition. A country produces her corn with half the labour of another country; consequently she employs only half the capital in producing a given quantity[251]. In this country corn will be at only half the price at which it is in another; 100 quarters will sell for £200, while in another it sells for £400. Suppose profits in both countries to be 20 per cent.; in one a capital of £166 will be employed in the raising of 100 quarters of corn, in the other £333 will be so employed, and 20 per cent. on each of these capitals will be on one £33, and on the other £66. To get £33 the one must have 16-1/2 quarters for his share of the 100 quarters, the other must have precisely the same quantity, and consequently 83-1/2 quarters are paid in both cases for wages and other charges. But the farmer in the fertile country employs only half the labour that the other employs, and consequently with the same money wages each labourer will have the command of double the quantity of corn, he will have what you call double real wages. Now suppose that in the progress of the fertile country it [will] at last arrive at the state in which it is necessary to [emplo]y £333 instead of £166 to raise 100 quarters of corn; it is indeed possible, under the extravagant supposition with which we have commenced, that labour might continue at the same money price; but it is quite impossible that corn should not be doubled in money price, for twice the quantity of labourers at these uniform money wages would be required to produce it. If corn doubles in price and wages remain stationary, the mean between the two must necessarily rise, and consequently, estimated in claret or in money, a mean between her corn and labour cannot as you say remain nearly the same. If (as I had a right to suppose) labour in such a country was at a low money price, when corn could be produced with so much facility, the conclusion, when corn rose, would be much more in my favour. I cannot allow that hats would fall in a progressive country because of a fall of profits. How can it be said that the cost of producing hats is reduced by a fall of profits, if a fall of profits must be accompanied by a rise of wages? Show me that a fall of profits may take place without a rise of wages in any fixed measure of value, and then I will yield this point. But _you_ have no right to talk of a fall of profits; your case is that of a progressive country with low profits and enormous wages. If of every 100 quarters of corn, where it can be produced with little labour, eighty-three be given to the labourers, while no more is given in countries where double the quantity of labourers are employed to produce 100 quarters of corn, _you_ are bound to say that wages are enormously high. In my measure of value they would not be enormously high: but the commodity on which wages were expended would be extravagantly low; at any rate we should both agree that profits in such a state of things would be very moderate. It is hardly fair to tax you with so long a letter and so soon too! LXXX[252]. GATCOMB PARK, _11 Oct., 1821_. MY DEAR MALTHUS, It is certainly probable that the fault is with me in not understanding the proposition you submit to me; and it may arise as you say from my being too much prepossessed in favour of my own views; but I do not plead guilty to the charge of not giving the requisite degree of attention to the propositions themselves. You now say 'where have I made the supposition you impute to me? Surely not in my last letter. My first supposition was that profits would be 100 per cent. in the country where corn was obtained with double the facility, while it was 10 per cent. in all others.' If you had done so, then indeed I should be justly chargeable with inattention; but these were your words in the letter which I was answering, 'I will try an illustration. Suppose that corn, money and commodities were obtained in the great mass of nations, connected with each other by commerce, at a rate of 10 per cent., but that in one country half the quantity of labour only was necessary to produce corn, while other commodities were produced with as much labour as in the rest of the world;' not one word is said of profits being at a different rate in this country; and, as you had said that in the great mass of nations profits were at 10 per cent., I concluded that in this country also profits were supposed to be at 10 per cent. In this instance then you must acknowledge the fault was yours and not mine. You do indeed afterwards suppose that this single country exports its corn and obtains the high price of other countries for it, and by such means raises its profits to 100 per cent.; but this evidently would depend on the fact whether she would get the price of other countries or whether domestic competition would lower the price of corn, in the countries to which it was exported, to the growing price of the exporting country. This I now understand to be your case. If the country which raised its corn, with such great facility, were completely insulated from all other countries, you would probably allow that corn, in that country, would be cheap in proportion to the facility of producing it. You would allow this also if all other countries were determined to protect their own agriculture and absolutely refused to import foreign corn. But in the case of a free trade, then you think the price would rise in the exporting country to the level of the price of other countries, and consequently profits would be enormously high. If I could admit the fact of a high price, which I cannot do, I should adopt your conclusion. I should say that general profits would be higher than they had been before the rise in the price of corn. Rents would undoubtedly be higher, for the landlord would have at least the same portion of corn as before, and that portion would be greatly enhanced in value. Labour would be higher, because the labourer would require higher money wages when corn was doubled in price. And profits would be higher because the capitalist would have more corn than before at the same time that it bore a higher price. All these classes would be benefited by the high relative value of corn to manufactured commodities, and the capitalist more particularly so, because amongst those manufactured commodities are to be found some of the necessaries of the labourer, and therefore by the payment of a less portion of corn to the labourer he would still have the command of a increased quantity of food and necessaries for himself and his family. The question then between us is--would the price of corn rise permanently or would it not, in the country which continued to possess the great facility of producing it? There is only one case in which I think such a rise possible, and that is on the supposition that the whole capital of the country was employed in producing corn, and yet could not produce it in sufficient quantity to satisfy the demand of other countries. In that case corn would be at a monopoly price, in the same manner as those rare wines which can only be produced in particular districts are at a monopoly price, because competition could not have its full effect. In the article of corn it would be limited by the scarcity of capital, which gave to the growers of corn large profits, in the same way as the East India Company or any other Company might make large profits. In the article of wine the price would be augmented by the scarcity of the land on which the grapes were grown, and would chiefly go to the landlord in [the] form of rent. But, supposing no monopoly, supposing capital to be so abundant that all the corn demanded could be supplied, then I hold it to be demonstrable that the price would sink to the growing price of it in the exporting country. There is however another point on which we differ; you say a striking approximation to this actually exists in the case of America; the only difference is that the demand for labour has awarded a larger quantity of corn to the labourer, the effect of which has been to keep the rate of profit comparatively low. But you surely do not mean that the exchangeable value of the commodities exported by America are (_sic_) in the least degree affected by the quantity of corn awarded to the labourer. I do not think you are justified in your expectation that in consequence of the accumulation of capital in America any commodity should fall there until it ceased to possess the character of a monopolized commodity. Corn and the bulky commodities of America (which latter are always regulated by the price of corn) could not fall until corn was sold at a price depending on the quantity of labour actually expended on its production, and not on the demand of our countries. When that time came, it would cease to be a monopolized commodity, and would fall as well as profits to the fair competition rates. I deny that America comes at all within your supposed case; and the proof is that, if you were to isolate America from all other countries, you would not lower her rate of profits, otherwise than by preventing her from receiving a supply of labour from other countries; but do the same thing to a country circumstanced as you have supposed, and profits would immediately fall from 100 to perhaps 20 per cent. Your case in fact is that of a country possessed of a particular commodity in very general demand, and on which competition operates most feebly. We have often discussed this peculiar case, and have always agreed in our opinions on it. I confess, however, I am astonished to hear you say that this is the case of America; you might with as much reason contend that it was also the case of Russia, of Poland, of the Cape of Good Hope, of Botany Bay. If indeed America could send her produce from the interior to Europe without expense, and if the ports of all countries were open freely to receive the corn with which America could, under the circumstances I have supposed, supply [them], then I should say the cases were similar; but, with the enormous expenses of sending corn from the interior of the country, America can really produce a very inconsiderable supply to Europe at an expense much less than Europe can grow it. You ask what can entitle me to suppose that corn will be at half the price in America that it is in other countries, and then argue on that supposition so contrary to the fact. I answer I did not apply my argument to America but to your case, which supposed a country to produce corn with half the labour which was required to produce it in other countries. If America can do this, then I apply it to America. You complain that I do not reason fairly with you, that my theory requires labour to be low in America; but you dispute my theory and refer to the actual state of things in America, where labour is high, and yet I contend that I have a right to suppose labour low. I was dealing with your case and not with America. With respect to America I am not in possession of the facts of her case, and I cannot admit that my theory requires the price of labour to be low in that country. It requires rent to be low, for without that there cannot be a great surplus produce to divide between the two other classes, after satisfying the landlord. You will always make me say that profits depend on the low price of corn. I never do say so; I contend that they depend on wages, and, although in my opinion wages will be mainly regulated by the facility of obtaining necessaries, they do not entirely depend on such facility. You wish to confine me to that theory, but I reject it; it is none of mine, and I have often told you so. I think I _do_ show that your fact does not invalidate my theory, which you say I am bound to do, and I do not assume a different fact than the one you refer to in order to refute you. Surely it is fair to say 'for such and such reasons your conclusion is not correct, but my argument would have been still stronger against you, if, as I have a right to suppose, labour in such a country were cheap, because the necessaries of the labourer are there obtained with facility.' In a country situated as you suppose America to be I do not see what is to make her corn rise; it is already according to your arguments at a monopoly price and cannot rise above that price unless there should be a greater demand and a higher price in Europe, which you say regulates the price in America, or unless America should become so populous that the price of her corn should be regulated by the expense of growing it, as in other countries, and that expense should exceed the present expense in Europe. If your theory be correct, this may not happen in 150 years, notwithstanding the greatest accumulation of capital; but will not labour fall during all that time? If it does fall, then the mean between corn and labour will fall. But suppose the other case. Suppose the _cost_ price of corn in America should rise above the present cost price in Europe; is it conceivable that labour should fall under such circumstances? To me it appears impossible unless we suppose money to alter in value. In this case then also the mean between corn and labour would vary in value. If hats were produced under the same circumstances as money they would not fall in price in consequence of a fall of profits. If hats were produced by the employment of capital, and money were produced, as you suppose, without any capital, then I allow and have said so in my book[253], hats would fall in price with a fall of profits. But I say again that too much importance is attached to money; facility of production is the great and interesting point. How does that operate on the interests of mankind? You ask what is to become of the money before produced in a country which should grow its own corn with 10 per cent. profit, if it had its facility of producing corn doubled, and profit, were to rise to 100 per cent.; you ask further whether she would not continue to produce money as well as other commodities as the profits of producing it would be also 100 per cent. If the facility of producing corn were doubled, a great deal of labour would be employed on other things, and therefore the corn and commodities of the country would altogether be of as great a money value as before, and would require the same quantity of money to circulate them. With respect to the production of more money that would depend on the demand for it and the prices of other things. I think the production of money would continue as before, but it is quite possible that there might be less encouragement to produce money than other things, and therefore capital might afford 100 per cent. profit in all employments except that one. I wonder you should refuse to assent to this obvious conclusion. You say it is your opinion that, if labour were to fall in consequence of improvements in agriculture before an increase of population had taken place, it could only be from glut and want of demand. Is this opinion consistent with another, which I think you hold, and in which I agree, that one of the regulators of the price of labour is the price of the necessaries of the labourer? I have mentioned my suspicions respecting the writer of the article on population in the _Edinburgh Review_ to several persons. I will not utter them from this time. I hear nothing about Murray and Place. I hope your visit at Holland House was an agreeable one. Mrs. Ricardo unites with me in kind regards to Mrs. Malthus; we are all well and are leading gay lives, one week at Worcester Music meeting and Bromesberrow, another at Bath, etc. Ever truly yours, DAVID RICARDO. NOTE.--Francis Place, the radical tailor, is well known to every reader of Prof. Bain's Life of Mill (see e.g. p. 77). His book on Population, perhaps the best of the long series that followed the 'Essay' of Malthus, was published by Longman early in 1822. He differed from Malthus mainly on the nature of the preventive checks. The collection of Scrap Books known by his name in the British Museum library contains the following autograph letter of Malthus (whom he seems to have first known through Ricardo):--'Mr. Malthus sends to Mr. Place, at the request of Mr. Ricardo, the edition of the Essay on Population which was first published in reply to the speculations of Mr. Godwin and other writers. The copy sent is the only one which Mr. Malthus has left. He will be much obliged to Mr. Place, therefore, as soon as he has done with it, to send it to Mr. Ricardo's house in Upper Brook St., to be kept till Mr. M. is in town, which will be in a fortnight. Mr. Godwin, in his last work, has proceeded to the discussion of the principles of population with a degree of ignorance of his subject which is really quite inconceivable.' E. I. Coll. Feb. 19, 1821. LXXXI[254]. GATCOMB PARK, _27 Nov., 1821_. MY DEAR MALTHUS, Your excuse for not going on with the discussion which you commenced is ingenious, and I ought to be satisfied with it, as it is accompanied with a pretty compliment to me--indeed as pretty an one as could well be paid to a person who is so uniformly your adversary. I however agree with you;--we know each other's sentiments so well that we are not likely to do each other much good by private discussion. If I could manage my pen as well as you do yours, I think we might do some good to the public by a public discussion. I am sorry that I shall be obliged to miss two of the Political Economy meetings[255], as I shall not be in London till towards the latter end of the month of January. On the 7th of December I am to dine at Hereford, by invitation, with Hume, at a public dinner, which is to be given to him for the purpose of presenting him a silver tankard and a hogshead of cider, in token of the respect and gratitude of the inhabitants of Hereford for his public services. Hume comes from town on the occasion, and is to be met at Ross at 11 o'clock in the forenoon, and escorted with due honour into Hereford. I hope everything will be conducted in an orderly and peaceable manner. I have a great aversion to a row. I have not yet seen Torrens' book[256], nor shall I see it in all probability till I get to London. Torrens has some concern in the Champion, in which there is a paper weekly on Political Economy[257]. I think these essays are well done, but you probably would not agree with me in that opinion. Ever yours, D. RICARDO. NOTE.--This wide gap of more than a year between the eighty-first and the eighty-second letter of this collection may be filled up by a letter to Say (Oeuvres Diverses, p. 423), dated from London, 5th March, 1822, and being a somewhat tardy answer to Say's letter of July, 1821, quoted above, p. 182. He says in effect: We are nearer agreement than I thought, and your distinction of natural and costly utility illustrated by the iron and the gold is objectionable only in point of expression. But it follows that commodities have a value equal to the quantity of labour spent on them, and that therefore if a pound of gold for example could be produced with less labour it would fall in value. You for your part therefore are bound to maintain it would be a less portion of our [social] wealth. Whereas for my part I do not estimate wealth by value, but by utility from whatever source derived. Your 'Catéchisme' (of which Francis Place has just given me the 2nd edition) says that a man's wealth is in proportion to the value and not to the quantity of the things he possesses, but, as you add that that same value is estimated by the quantity of other things these same things will buy, wealth turns out to be in proportion to quantity of goods after all. If wealth is value, then to lessen all costs, so as to produce all things with less labour, would be to make the wealth of the world no greater. After some remarks on the 'two loaves,' he concludes by saying that the Political Economy Club had made Say an honorary member. 'We hope in time to raise ourselves from a Club to the dignity of an Academy, and become a learned body with ever-increasing numbers.' Say replies (1st May, 1822) that he gratefully accepts the honorary membership. As to the points discussed, some of their differences are merely verbal. His most important contention is that in production we exchange productive services for products, and the more products we obtain for them the more _value_ they have, and the richer we are. 'Moreover, I do not think that we should aim at giving abstract definitions especially of wealth,--definitions, that is to say, in which we should abstract from the possessor and the thing possessed. This was the method of medieval disputants, and this was the very reason they could never come to an understanding. Too general a definition, which enters into none of the peculiarities of each several object, teaches us nothing.' He concludes his letter by lamenting that his countrymen paid so little attention to economical questions. A full half of his audience in the Conservatoire des Arts et Métiers consisted of foreigners--English, Russians, Poles, Germans, Spaniards, Portuguese, and Greeks. The Crown Prince of Denmark got private lessons from him. LXXXII. BROMESBERROW PLACE, LEDBURY, _Dec. 16, 1822_. MY DEAR MALTHUS, A long time has elapsed since there has been any connection between us, and I take an early opportunity after my arrival in England to address a few lines to you principally with a view of having some account of yourself and family, from your own pen. I have been actively employed since we last met, for not only have I wandered about Switzerland but I have been as far as Florence. In my way to Florence I deviated from the direct road to see Venice, and on my return from it I did the same thing in order to visit Genoa. Our journey has been an uncommonly prosperous one, for we have all enjoyed perfect health and have met with few or no difficulties. My companions as well as myself have very much enjoyed this tour. When I was at Geneva I saw a good deal of our friend Dumont, who accompanied us to Chamouny and returned with us to Geneva. At Coppet[258] I met M. Sismondi. He, the Duke of Broglie, and I had a long conversation on the points of difference between us: the Duke took my side, but after a long battle we each of us I believe remained in the same opinion that we commenced the discussion in. M. Sismondi has left a pleasing impression on my mind. Madame de Broglie had a great deal of patience and forbearance. She is, I think, a very agreeable lady. I stayed in Paris three weeks just previous to my return to England. M. de Broglie and the Baron de Stael arrived there after me. I had the pleasure of seeing them two or three times. I was very much pleased with M. Gallois[259], who made me acquainted with M. Destutt [de] Tracy[260], a very agreeable old gentleman, whose works I had read with pleasure. I do not entirely agree with him in his political economy; he is one of Say's school; there are, nevertheless, some points of difference between them. I saw Say several times, but our conversation did not turn much on subjects connected with political economy; he never led to those subjects, and I always fancied he did not much like to talk upon them. His brother, Louis Say[261], has published a thick volume of remarks upon Adam Smith's, his brother's, your, and my opinions. He is not satisfied with any of us. His principal object is to show that wealth consists in the abundance of enjoyable commodities; he accuses us all of wishing to keep up what we call valuable commodities, without any regard to quantity, about which only the political economist should be anxious. I do not believe that any of us will plead guilty to this charge. I feel fully assured that I do not merit it should be made against me. M. Gamier[262] is dead; but previous to his death he had prepared an additional volume of notes for a new edition of his translation of the 'Wealth of Nations,' and which [_sic_] has lately been published. I had an opportunity of looking it over, and naturally turned to those places where he criticises me. He has bestowed a good deal of space on his remarks upon my work, but they do appear to me quite irrelevant. Neither he nor M. Say have (_sic_) succeeded in at all understanding what my opinions are. Your name often occurs in this last volume. I believe he differed from you also, but I had not time to read the whole of his book. I hope you have been very industrious in my absence, and that we shall soon see the new edition of your last work[263]. I am anxious to know how you deal with the difficult question of value. I shall read you with great interest and attention. I am sorry to find the agricultural distress continue. I was in hopes that it would have subsided before this time. I suppose we shall hear much on this subject next session of Parliament, and that I shall be a mark for all the country gentlemen. There is not an opinion I have given on the subject which I desire to recall. I only regret that my adversaries do not do me justice, and that they put sentiments in my mouth which I never uttered. Dr. Copplestone in his article in the Quarterly Review[264] charges me with maintaining the absurd doctrine that the price of gold bullion is a sure test of the value of bullion and currency. A Mr. Paget has addressed a (printed) letter[265] to me, in which I am accused of holding the same opinion, and everybody knows how pertinaciously Cobbet[t] persists in saying that I have always done so. I must fight my cause as well as I can; I know it is an honest one (in spite of Mr. Western's[266] insinuations), and, if it be also founded in truth and on correct views, justice will be finally done to me. I arrived in London the beginning of last week; I saw Tooke for a few minutes, and was glad to hear from him that he had been writing and was nearly ready for the press. I have a very good opinion of his judgment and of the soundness of his views; he will, I think, from his practical knowledge, throw much light on the question of the influence of an over-supply or of an increased demand, without a corresponding supply, on price[267]. I am now on a visit to my son. On the 27th I shall go to Gatcomb for a week. From the 3rd to the 17th January I shall be with Mrs. Austin at Bradley, Wottonunderedge, and from the 17th to the 2nd February with Mrs. Clutterbuck, Widcomb, Bath. Where shall you pass your holidays? Is there any probability of my seeing you at Bath? I should be glad to meet you there. I read in the papers with much concern of the renewal of disturbances amongst the young men at the college. I know how distressing to you such insubordination is, and greatly regretted that you should have been again exposed to it. I hope that order was quickly restored. I saw Mr. Whishaw in London for a few minutes. I am not without hopes of seeing him at Mrs. Smith's at Easton Grey, where I mean to pass two nights on my way to Bradley.... Believe me, Ever truly yours, DAVID RICARDO. LXXXIII. LONDON, _29 April, 1823_. MY DEAR MALTHUS, After the most attentive consideration which I can give to your book[268], I cannot agree with you in considering labour, in the sense in which you use it, as a good measure of value. Neither can I discover exactly what connexion the constant labour necessary to produce the wages and profits on a commodity has with its value. If it be a good measure for one commodity, it must be for all commodities; and, as well as valuing wheat by the constant quantity of labour necessary to produce the particular quantity given to the workman, together with the profit of the farmer on that particular quantity, I might value cloth or any other thing by the same rule. I know, indeed, that I might make out a table[269] precisely such as yours, in which the only alteration would be the word cloth instead of the word wheat, and you would probably then ask me whether your principle were not of universal application. I should answer that it contains in it that radical objection which you make against the proposed measure of your opponents. You may, if you please, arbitrarily select labour as a measure of value, and explain all the science of political economy by it, in the same way as any other man might select gold or any other commodity; but you can no more connect it with a principle or show its invariability than he could. Let me suppose that cloth could not be made in less than two years; the first line of my table must be altered, and the figures would stand in the following order:-- 150, 100, 25 per cent. 7-1/2, 2-1/2, 10, 10, 15. They would do so because ten pieces of cloth would, with the accumulation of profit for two years, be of the same value as a commodity, the result of the same quantity of labour, which could be produced in two years. I do not know how you will treat this objection, but in my opinion it is fatal to your whole theory. I have the same objection to your measure, which I have always professed; you choose[270] a variable measure for an invariable standard. Who can say that a plague which should take off half our people would not alter the value of labour? We might, indeed, agree to transfer the variation to the commodities, and to say that they had fallen and not that labour had risen, but I can see no advantage in the change. We might again discover modes by which the necessaries of the labourer might be produced with uncommon facility; and, in consequence of the stimulus which the good situation of the labourers might give to population, the reward of the labour in necessaries might be no higher than before; would it be right in this case, in which nothing had really altered but necessaries and labour, to say that they only had remained steadily at the same value, and, because a given quantity of corn or of labour will exchange only for (perhaps) 3/4 of the former quantity of linen, cloth, or money, to declare that it was the linen, cloth, or money which had risen in value, not labour and corn which had fallen? Two countries are equally skilful and industrious; but in one the people live on the cheap food of potatoes, in the other on the dear food, wheat. You will allow that profits will be higher in the one country than the other. You will allow, too, that money may be nearly of the same value in both, if we choose anything else as a measure of value but labour. You will further agree that there might be an extensive trade between such countries. If a man sent a pipe of wine from the potato[271] country, which cost £100 and which might be sold at £110 in the wheat country, you would say that the wine was at a higher value in the country from which it was exported, merely because, in that country, it could command more labour. You would say this although the wine would not only exchange for more money but for more of every other commodity in the wheat country. I contend that this is a novelty which cannot be considered an improvement; it would confound all our usual notions, and would impose upon us the necessity of learning a new language. All mankind would say that wine was dearer in the wheat than in the potato country, and that labour was of less value in the latter. In page 31 there is a long passage on the reason for choosing labour as a standard, with which I am not satisfied. A piece of cloth is 120 yards in length and is to be divided between _A_ and _B_; it is obvious that in proportion as much is given to _A_ less will be given to _B_ and vice versa. This will be true, although the value of the whole 120 yards be £100, £50, or £5. Is it not then a begging of the question to assume the constant value because the quantity is constant, and because it is always to be divided between two persons? Allowing you your premises, I see very few instances in which I can quarrel with your conclusions. I agree with all you say concerning the glut of commodities; allow to you your measure, and it is impossible to differ in the result. I hope soon to see you. I have hardly been able to find time to write this letter, I am so busily engaged. I am serving on a committee. Ever yours, DAVID RICARDO. NOTE.--The table referred to in this letter is the following:-- _Table illustrating the invariable Value of Labour and its Results._ Table Key 1: Quarters of corn produced by 10 men or varying fertility of the soil. 2: Yearly corn wages to each labourer, determined by the demand and supply. 3: Advances in corn wages, or variable produce commanding the labour of 10 men. 4: Rate of profits under the foregoing circumstances. 5: Quantity of labour required to produce the wages of 10 men under the foregoing circumstances. 6: Quantity of profits on the advances of labour. 7: Invariable value of the wages of a given number of men. 8: Value of 100 qrs. of corn under the circumstances supposed. 9: Value of the product of the labour of 10 men under the circumstances supposed. +-------------------------------------------------------------------+ | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | |--------+-------+--------+-------+------+-----+----+-------+-------| | | | | | | | | | | |150 qrs.|12 qrs.|120 qrs.|25 p.c.|8 |2 | 10 | 8·33 | 12·5 | |150 |13 |130 |15·38 |8·66 |1·34 | 10 | 7·7 | 11·53 | |150 |10 |100 |50 |6·6 |3·4 | 10 | 10 | 15 | |140 |12 |120 |16·66 |8·6 |1·4 | 10 | 7·14 | 11·6 | |140 |11 |110 |27·2 |7·85 |2·15 | 10 | 9·09 | 12·7 | |130 |12 |120 | 8·3 |9·23 |0·77 | 10 | 8·33 | 10·8 | |130 |10 |100 |30 |7·7 |2·3 | 10 | 10 | 13 | |120 |11 |110 | 9 |9·17 |0·83 | 10 | 9·09 | 10·9 | |120 |10 |100 |20 |8·33 |1·67 | 10 | 10 | 12 | |110 |10 |100 |10 |9·09 | ·91 | 10 | 10 | 11 | |110 | 9 | 90 |22·2 |8·18 |1·82 | 10 | 11·1 | 12·2 | |100 | 9 | 90 |11·1 |9 |1 | 10 | 11·1 | 11·1 | |100 | 8 | 80 |25 |8 |2 | 10 | 12·5 | 12·5 | | 90 | 8 | 80 |12·5 |8·88 |1·12 | 10 | 12·5 | 11·25 | +--------+-------+--------+-------+------+-----+----+-------+-------+ ('Measure of Value,' p. 38.) Columns 5 to 9 contain the debateable matter. LXXXIV. LONDON, _28 May, 1823_. MY DEAR MALTHUS, I will, to the best of my power, state my objections to your arguments respecting the measure of value. You have yourself stated, as an objection to my view on this subject, that a commodity produced with labour and capital united, cannot be a measure of value for any other commodities than such as are produced precisely under the same circumstances, and in this I have agreed that you are substantially correct. If all commodities were produced in one day and by labour only without the assistance of capital, they would vary in proportion as the quantity of labour employed on their production increased or diminished. If the same quantity of labour was constantly employed on the production of money, money would be an accurate measure of absolute value, and, if shrimps or nuts or any other thing rose or fell in such money, it would only be because more or less labour was employed in procuring them. Under such circumstances every commodity which was the produce of a day's labour would naturally command a day's labour, and therefore the value of a commodity would be in proportion to the quantity of labour which it would command. But, though such a money would measure accurately the value of every commodity produced under circumstances exactly similar, it would not be an accurate measure of the value of other commodities produced with a large quantity of capital, employed for a length of time. In the case just supposed a quantity of shrimps would be as accurate a measure of value as a quantity of money produced by the same quantity of labour; but, when capital is employed and cloth is the product of labour and capital, you justly say that cloth is not a correct measure of the value of shrimps and of silver, picked up by labour alone, on the sea shore; and yet with singular inconsistency, as I cannot help thinking, you contend that the shrimps and the silver, picked up by labour alone on the sea shore, are accurate measures of the value of cloth. If you are right, then must cloth be also an accurate measure of value, because the thing measured must be as good a measure as the thing with which you measure. When I say that £4 and a quarter of wheat are of the same value, I can measure other values by the quarter of wheat as well as by the £4. You say: 'It is conceded that, when labour alone is concerned in the production of commodities, and there is no question of time, both the absolute and exchangeable values of such commodities may be accurately measured by the quantity of labour employed upon them.' Nothing can, I think, be more correct, and it is perfectly accordant with what I have been saying. Your mistake appears to me to be this: you show us that under certain conditions a certain commodity would be a measure of absolute value, and then you apply it to cases where the conditions are not complied with, and suppose it to be a measure of absolute value in those cases also. You appear to me, too, to deceive yourself when you think you prove your proposition, because your proof only amounts to this, that your measure is a good measure of exchangeable value but not of absolute value. You say: 'If the accumulated and immediate labour worked up in a commodity be of any assumed value, £100 for instance, and the profits of the value of £20, including the compound profits upon the labour worked up in the materials, the whole will be of the value of £120. Of this value 1/6 only belongs to profits, the rest or 5/6 may be considered as the product of pure labour.' This is quite true, whether we value the commodity by the quantity of labour actually employed upon it, by the quantity which it will command when brought to market, or by the quantity of money, or any other commodity, for which it is exchanged; 5/6, in all cases, will belong to the workmen and 1/6 to the master. 'Consequently the value of 5/6 of the produce is determined by the quantity of labour employed on the whole; and the value of the whole produce by the quantity of labour employed upon it with the addition of 1/6 of that quantity.' This is really saying no more than that, when profits are one sixth of the value of the whole commodity (in which no rent enters), the other 5/6 go to reward the labourers, and that the portion so going to the labourers may itself be resolved into labour and profits in the same proportion of 5 and 1. Five men produce six pieces of cloth, of which 5 are paid to them, the men; if profits fall one half, the men will receive 5-1/2 pieces, and then you say the cloth is of less value; but in what medium? In labour, you answer. You appear to me to advance a proposition that cloth is of less value when it will exchange for less labour, and to prove it by showing the fact, merely, that it actually does exchange for less labour. You say: 'But, when labour is concerned, it follows from what has been conceded that the value of the produce is determined by the quantity of labour employed upon it.' By value here you mean absolute value; and then you immediately apply this measure of absolute value, which is only conceded in a particular case, to a general proposition, and say 'consequently;' consequently on what? On this particular case; 'consequently the value of 5/6 of the produce is determined by the quantity of labour employed on the whole,' that is to say 'consequently the quantity of labour which 5/6 of the produce will command is determined by the quantity of labour employed on the whole;' the same is true, in the same sense, of 5/6, 5/7, 5/8, 5/9 or of any other proportions in which the whole may be divided. My only object has been to show, and, if I am not mistaken, I have succeeded in showing, that a measure of value, which is only allowed to be accurate in a particular case where no capital is employed, is arbitrarily applied by you to cases where capital and time necessarily enter into the consideration. I fear I have been guilty of many repetitions. I shall not regret it, however, if I have made myself understood. [The last sheet is wanting. The fragment on page 105 does not match this fragment.] NOTE.--On 12th June, 1822, in one of Ricardo's most important speeches on Resumption (afterwards published as a pamphlet), he speaks of those who propose to make Corn, on a ten years' average, the standard of value instead of money. To prove gold more variable than corn, they and their authorities, Locke and Adam Smith are (he says) obliged to begin by supposing gold invariable. 'Unless the medium in which the price of corn is estimated could be asserted to be invariable in its value, how could corn be said not to have varied in relative value? If they must admit the medium to be variable--and who could deny it?--then what became of the argument?' Nothing is more difficult than to ascertain the variations in the value of money: 'To do so with any accuracy we should have an invariable measure of value; but such a measure we never had nor ever can have.' (Cf. Pol. Econ. and Tax. ch. i. § 7, Works, p. 28.) But we can speak with accuracy of depreciation; we can see to it that the standard is always the same standard, and that our currency conforms to it, even if the standard itself may vary in value. (See Note to Letter XXXI.) LXXXV. LONDON, _13 July, 1823_. MY DEAR MALTHUS, McCulloch and I did not settle the question of value before we parted,--it is too difficult a one to settle in a conversation; I heard everything he had to urge in favour of his view, and promised, during my holiday, to bestow a good deal of consideration on it. He means exactly what you say;--he does not contend that commodities exchange for each other according to the quantity of labour actually worked up in them, but he constitutes a commodity the general measure, by which he estimates the value of all others. A pipe of wine kept for three years has no more labour worked up in it than a pipe of wine kept for a day, but he says the additional value on account of time must be estimated by the accumulations which a like amount of capital actively employed in the support of labour would make in the same time. An oak-tree which has been growing for 200 years has very little labour actually worked up in it, but its value is to be estimated by the accumulated capital which the original labour employed would give in the same time. He and you in fact differ as to your original measure. I think he could not give any other good reason for choosing a medium which requires labour and capital to produce it, rather than one which requires labour only, excepting that commodities in general require the combination of the two, and that a measure, to have any claim to be even an approximation to an accurate one, should itself be produced under circumstances somewhat similar to the commodities which it is to measure. If all things required precisely the same quantities of capital and labour, and for the same length of time, to produce them, any one of them would be an accurate measure of the rest; but this is not the case; the conditions admit of infinite variety, and therefore whichever we choose it can only be an approximation to truth, and we are bound to give good reasons for preferring it. I should, indeed, be wanting in candour if I refused to admit that my money measure would not measure the quantity of labour worked up in commodities. I have admitted it over and over again. I am also ready to admit that your money measure will measure exactly the quantity of labour and profits together of which commodities are composed, but so will my money measure. Neither of them will measure the quantity of labour alone worked up in commodities, but they will both measure the quantity of labour and profits together of which commodities are composed. Suppose gold always to require the same quantity of labour, for one year, before it can be brought to market, will you say that all variations in wages and profits may not be estimated in this medium? You would indeed say that many of those variations would be ascribable to the variations in the value of the medium, and not to any alteration in the value of the thing measured, because you do not think that it is any proof of invariability in a commodity that it requires always the same quantity of labour, and the same duration of time to produce it. If I allow the justice of your objection, I am at liberty to apply the same to your medium. The same quantity of labour applied for a day will always produce the same given quantity of gold; gold is therefore an invariable measure, you say. I find this gold vary in relation to another commodity which always requires the same quantity of labour and capital to produce it; you say it is never the gold but it is always the commodity which varies, and, when you are asked why, you answer because labour never varies. Double the quantity of labour in a country or diminish it one half, always leaving the funds which are to employ it at precisely the same amount, and you tell us, notwithstanding the condition of the labourer is in the one case a very distressed one, in the other a very prosperous one, that the value of his labour has not varied. I cannot subscribe to the justness of this language. The question is whether you are right, not whether I am wrong. Suppose that a man in India could pick up in a day precisely the same quantity of gold as in England, and that all trade in provisions were forbid between the two countries. The small quantity of rice and clothing in India which are necessary for the support of a labourer would be of precisely the same value as the quantity of wheat and clothing necessary for a labourer in England. But this would not long continue. All manufactured commodities would be of a high comparative money value in India, and consequently we should export manufactured commodities and import gold; the reward of a labourer in England would come to be a much larger quantity of gold than he could actually pick up here. No gold would be then obtained in England but by means of importation. Under these circumstances you would say that money was of a low value in England, and you would be correct if all men agreed to constitute labour the measure of value; but in this they do not agree, and, as we should find that at the very moment that gold was low, relatively to labour, in England, it was high relatively to manufactured commodities of every description, with which in fact gold would be purchased from India, if we took these commodities for the measure, we should be bound to say that gold was cheap in England and dear in India. You must remember that the point in dispute is whether labour be the correct measure of value; you must not then take the fact for granted, and then offer it as a proof of your correct conclusion. We leave London for Gatcomb early to-morrow morning.... We shall have one bed disengaged if you and Mrs. Malthus will come over to us. I am sorry I cannot ask all your party. Ever truly yours, DAVID RICARDO. LXXXVI[272] [MINCHINHAMPTON, _Aug. 3, 1823_.] MY DEAR MALTHUS, The value of almost all commodities is made up of labour and profits, but in choosing a measure of value it is not necessary that it should possess the property of determining what proportion of the value of the commodity measured belongs to wages, and what proportion belongs to profits. You make it a reproach on my proposed measure that it will not do this, and prefer your own because it will. Now, as I do not think this quality essential to a measure of value, I shall not defend mine for not possessing this quality. This consideration appears to me wholly foreign to the question under discussion. We agree, I believe, that nothing can be a measure of value which does not itself possess value. We agree too, I believe, that a measure of value to be a good one should itself be invariable, and further that in selecting one thing as a measure of value rather than another we are bound to show some good reason for such selection, for, if a good reason be not given, the choice is altogether arbitrary. Now the measure proposed by you has value, and therefore [is] not to be objected against on account of any deficiency of that quality; but I do not think it is invariable, and by the concession which you make in your last letter you appear to give up your measure, for you say that 'you expressed yourself without sufficient care, when you intimated that, if any number of labourers were imported or exported, the value of labour would remain the same.' This is a large concession indeed, and I think entirely subverts your measure, because, if it be true of labourers exported or imported, it must be true also of labourers born or dying in the country. If by poor laws imprudent marriages are encouraged and population becomes excessive, the effect on the value of labour will be precisely the same as if labourers had been imported; and, if an epidemic disorder break out and many labourers die, it will be the same as if they were exported. Nay more, if the people be well educated and be taught caution and foresight with regard to the increase of their numbers, who shall say that the effect on the value of labour will not be the same as an exportation of labourers? You have, I think, been imprudent, which is much at variance with your usual practice, in conceding this point, and you allow us to enter into your fortress and spike all your guns. You add indeed: 'This will only be true after the supply comes to be affected by the increased or diminished number of labourers.' When will the supply not be affected by the increased or diminished number? What follows will not assist you, for you say: 'If the corn obtained by twenty men be divided among ten, then the value of the wages of ten men will be less than the quantity of labour employed to produce them with the addition of profits, and vice versa.' What profits? They might have been 50 per cent., and may from the circumstance mentioned be reduced to 5 per cent. You speak of profits in this place as if they were a fixed amount, and forget that they fall when wages rise. Besides, I will not admit the extravagant supposition that the corn obtained by the labour of twenty men is bestowed as wages on ten men; but I will suppose that the corn obtained by twenty men had been sufficient to command the labour of thirty men, but that owing to a diminished supply of labour this same quantity of corn obtained by the same number of men is bestowed as wages on twenty-two men. In this case I ask you whether corn has fallen in value in the proportion of thirty to twenty-two? If you say Yes, then you do not admit that labour may rise in value in consequence of exporting labourers; and, if you say No, there is an end of your measure, because you then acknowledge that commodities do not vary according to the quantity of labour they can command. I do not see how you are to extricate yourself from this dilemma. I cannot discover what the value of the precious metals in different countries can have to do with this question. A piece of cloth or a piece of muslin can command more labour in India than in England; on this we are agreed, but we are not agreed in our explanation of this fact. You say the piece of cloth or muslin is more valuable in India than in England, and your proof is that it can command more labour in India. You would say so, although both cloth and muslin were exported from India to England, from the country where they are dear to the country where they are cheap. I, on the contrary, say that it is not the cloth and muslin which are dear in India and cheap in England, but it is labour which is cheap in India and dear in England, and that cloth and muslin would come to England from India although there were no such commodities as gold and silver on the face of the earth. I say further that you are bound to admit this by the concession which you have made, for you must admit that labour might be rendered cheap as effectually in England by prevailing on English labourers to be satisfied with the modest remuneration of food paid in India, as by the importation of labourers; and, if you do not admit it, I beg to ask why you refuse to do so. I beg you to point out the distinction between a supply of labourers from abroad, with a consequently reduced remuneration of food, and a supply of labourers from the principle of population, and a consequent reduction in the remuneration paid in food. Can you be said to have given a good reason for the selection which you have made of a measure of value when it will not bear close examination? You have repeatedly said that a commodity, on which a quantity of labour has been bestowed, will always exchange for a like quantity, together with an additional quantity which will constitute the profits on the advances. Now this I consider to be your main proposition, and on its truth must depend according to your own view the correctness of your measure. Is it true then that every commodity exchanges for two quantities of labour, one equal to the quantity actually worked up in it, another equal to the quantity which the profits will command? I say it is not. This year corn is cheap, and I must give a certain quantity of it to procure the labour of ten men to be worked up in the commodity which I manufacture; but next year, when I take my commodity to market, corn is dear and wages high, and therefore to procure a certain quantity of labour I must give more of my finished commodity than I should have given if corn had been plenty [_sic_] and wages low. If corn had been cheap and wages low, my profits would have been high; as it is, they are low. I want to know in these two cases whether the commodity does really exchange for the two specific quantities of labour mentioned above. You answer my question by saying that you always make a reserve of the first quantity, and all above it you call profits. But I contend that labour of one value has been expended on the commodity, and, when it comes to market, it is exchanged for labour of another value, and that is the sole reason why the balance, over and above the labour expended on it, is small. Why is it small but because the value of labour is high? No such thing, you say; labour never varies; and yet you cannot but confess that, if corn had been abundant and if wages had remained the same, the manufactured commodity would have exchanged for a great deal more labour. You say: 'How comes it about that labour should remain of the same value in the progress of society, when it is known that it must require more labour to produce it?' You must mean 'to produce the remuneration paid for it;' and you add: 'The answer to this question is that, as profits depend upon the _proportion_ of the whole produce which goes to labour, it must necessarily happen that the increase of value occasioned by the additional quantity of labour will be exactly counterbalanced by the diminution in the amount of profits, leaving the value of labour the same.' I confess I cannot understand this answer. We are inquiring about the meaning which should be attached to the words 'increase of value,' 'diminution of value.' You tell me that increase of value means an increased power of commanding labour. I deny that this definition is a correct one, because I deny the invariability of the standard measure you have chosen; and to prove its invariability you speak of the proportion in which the whole produce is divided, and that, if wages have more, profits have less;--all which is true, but what connection do you prove between this proposition and the invariability in your measure of value? In your answer you use the words 'increase of value;' that is to explain the meaning of the words required to be understood by the use of the words themselves. You mistake McCulloch's and my objection to your doctrine if you suppose it to be on account of its making the same quantity of labour of the same value, while the condition of the labourer is very different; we do not object to it on that account, because, as you justly observe, our own doctrines require the same admission; but we object to your saying that, from whatever cause it may arise that the labourer's condition is deteriorated, he is always receiving the same value as wages. When _our_ labourers are badly off, although (we say) they have wages of the same value, profits must necessarily be very low; according to you wages would be of the same value whether profits were 2 per cent. or 50 per cent. I think I have shown you that your long letter was acceptable by doing that which is really a difficult task to me, writing a longer one myself. I am, however, only labouring in my vocation and trying to understand the most difficult question in political economy. All I have hitherto done is to convince myself more and more of the extreme difficulty of finding an unobjectionable measure of value. As far as I have yet been [able] to reflect upon McCulloch's and Mill's suggestion, I am not satisfied with it. They make the best defence for my measure[273], but they do not really get rid of all the objections. I believe however that, though not without fault, it is the best. I am sorry you could not spare a few days for a visit to us; if you will come to Gatcomb before we go to town, I shall be very glad to see you. I have been writing a few pages in favour of my project of a National Bank[274], with a view to prove that the nation would lose nothing in profits by abolishing the Bank of England, and that the sole effect of the change would be to transfer a part of the profits of the bank to the national treasury.... Yours ever, DAVID RICARDO. NOTE.--Arguments very similar to those of this letter have been used against Malthus by Julius Pierstorff, in his book on 'Die Lehre vom Unternehmergewinn' (Berlin, 1875), where the views of Malthus and Ricardo are compared with one another. There is, however, shrewder criticism of Ricardo's whole doctrine in Böhm Bawerk's 'Geschichte und Kritik der Kapital-Zins-Theorien,' Innsbrück, 1884. A neat _reductio ad absurdum_ of the view, held more or less explicitly by MacCulloch and others, that cost is enough to explain value, is given by Böhm Bawerk in his 'Grundzüge der Theorie des wirthschaftlichen Güterwerths' (Jena, 1886, p. 72), in a passage of which this is the conclusion: 'To explain the value of a commodity by its cost is to explain it by the value of the means of its production. But how have the latter their value? Logically we must answer from _their_ cost, in other words from the means of production a degree farther back, and so on backwards. Now, clearly, if we pursue this regress, we either arrive at commodities which are not themselves 'produced,' e.g. land and labour, and our explanation of all value by cost has failed us; or else we explain even these sophistically as being in a sense 'products,' and owing their value to their cost, e.g. the labour as owing its value to the cost of the labourer's subsistence, and in this case we are bound to go farther back and explain the value of the means of subsistence by _their_ cost, i.e. the labour that produced them; and we reason endlessly in a circle.' LXXXVII[275]. GATCOMB PARK, MINCHINHAMPTON, _15th Aug., 1823_. MY DEAR MALTHUS, It is a prudent step in you to withdraw your concession, for I am sure that your theory could not stand with it. You find fault with my measure of value, you say, because it varies with the varying profits of other commodities. This is, I acknowledge, an imperfection in it when used to measure other commodities in which there enters more or less of profits than enters into my measure; but you do not appear to see that against your measure the same objection holds good, for your measure contains no profits at all, and therefore never can be an accurate measure of value for commodities which do contain profits. If I had no other arguments to offer against your measure, this which I am going to mention _when used to you_ would be fatal to it. You say that my measure cannot measure commodities produced by labour alone. Granted; but, if it be true, how can your measure measure commodities produced with labour and profits united? You might just as well say that three times two are six and that twice three are not six, or that a foot measure was a good measure for a yard but a yard was not a good measure for a foot. If your measure will measure my commodity accurately, mine must do the same by yours. These are identical propositions, and I confess I see no answer that can be made to me. The fact really is that no accurate measure of absolute value can be found. No one doubts the desirableness of having one; but all we can ever hope to get is one tolerably well calculated to measure the greatest number of commodities, and therefore I should have no hesitation in admitting your measure to be the best, under all circumstances, if you could show that the greatest number of commodities were produced by labour alone without the intervention of capital. On the other hand, if a greater number of commodities are produced under the circumstances which I suppose to attend the production of the commodity which I choose for my measure, then mine would be the best measure. You will understand that in either case I suppose a degree of arbitrariness in the selection, and I only contend that it would be best employed in selecting mine. When you say that my great mistake is in considering commodities made up of labour alone and not of labour and profits, I think the error is yours, not mine, for that is precisely what you do; you measure commodities by labour alone, which have both labour and profits in them. You surely will not say that my money, produced by labour and capital, and by which I propose to measure other things, omits profits. Yours does; what profits are there in shrimps or in gold picked up by daily labour, on account of the labourer, on the sea-shore? How much more justly then might this accusation be brought against you! You object to me that I am inconsistent in wishing to leave the consideration of the value of money here and in India out of the question, when speaking of the value of labour and of commodities in this country and in India. I, you say, to leave out the consideration of the value of the precious metals, who have proposed a measure formed of them! There is nothing inconsistent in this. In examining your proposition which rejects my measure and adopts another, I must try it by your doctrines and not by mine which you reject. A conclusion founded on my premises might be a just one, but, if you dispute my premises and substitute others, the conclusion may no longer be the same; and in examining your doctrines I must attend only to the conclusions to which your premises would lead me. You ask: 'Would you really say that cloth and muslin were not dear in India where they cost four or five times as much labour as in England?' You know I would not, because I estimate value by the quantity of labour worked up in a commodity; but by the cost in labour of cloth and muslin in India you do not mean the quantity of labour actually employed on their production, but the quantity which the finished commodity can command in exchange. The difference between us is this; you say a commodity is dear because it will command a great quantity of labour, I say it is only dear when a great quantity has been bestowed on its production. In India a commodity may be produced with twenty days' labour, and may command thirty days' labour. In England it may be produced by twenty-five days' labour and command only twenty-nine. According to you this commodity is dearer in India, according to me it is dearer in England. Now here is my objection against your measure as a general measure of value, that, notwithstanding more labour may be bestowed on a commodity, it may fall in value estimated in your measure; it may exchange for a less quantity of labour. This is impossible when you apply your measure legitimately to those objects only which it is calculated to measure. Would it be possible, for example, to apply more labour to the production of shrimps or to pick up grains of gold on the sea-shore, and yet to sell those commodities for less labour than before? Certainly not; but it would be quite possible to bestow more labour on the making of a piece of cloth, and yet for cloth to exchange for a less quantity of labour than before. This is another argument in my mind conclusive against the expediency of adopting your measure. I repeat once more that the same trade precisely would go on between India and Europe, as far as regards commodities, if no such thing as money made of gold and silver existed in the world. All commodities would in that case as well as now command a much larger quantity of labour in India than in England; and, if we wanted to know how much more, either of those commodities, as well as money, would enable us to ascertain. The same thing which makes money of a low value in England makes many other commodities of a low value there; and the political economist in accounting for the low value of one accounts at the same time for the low value of the others. I do not object to accounting for the low value of gold in particular countries; but I say it is not material to an enquiry into a general measure of value, particularly if it be itself objected to as forming any element in that measure. Suppose a farmer to have a certain quantity of cattle and implements and a hundred quarters of wheat,--that he expends this wheat in supporting a certain quantity of labour, and that the result is 110 quarters of wheat and an increase of one-tenth also in his cattle and implements; would not his profits be 10 per cent. whatever might be the price of labour the following year? If the 110 quarters could command no more labour than the 100 quarters could command before, he would, according to you, have made no profits; and you are right if we admit that yours is a correct measure of value; he would have a profit in kind but no profit in value. If wheat was the measure of value, he would have a profit in kind, and the same profit in value. If money was the correct measure of value and he commenced with £100, he would have 10 per cent. profit if the value of his produce was £110. All these results leave the question of a measure of value undecided, and prove nothing but the convenience, in your estimation, of adopting one in preference to another. The labourer, however, who lived by his labour would find it difficult to be persuaded that his labour was of the same value at two periods, in one of which he had abundance of food and clothing, and in another he was absolutely starving for want. What he might think would certainly not affect the philosophy of the question; but it would be at least as good a reason against the measure you propose as that of the farmer in favour of it, when he found that he had no profits because he had no greater command of labour, although he might have more corn or more money. You call every increase of value nominal which is not an increase in the measure you propose. I do not object to your doing so; but those who do not agree with you in the propriety of adopting this measure may argue very consistently in saying they are possessed of more value when they have £110 than when they had £100, although the larger sum may not when it is realized command so much labour as the smaller sum did before, because they not only admit but contend that labour may rise and fall in value, and therefore in respect to labour he may be poorer, although he possesses a greater value. I have said that the value of most commodities is made up of labour and profits. If this be so, you observe, 'it is as clear as the sun that the variable wages which command the same quantity of labour must be of the same value, _because_ they will always cost in their production the same quantity of labour with the addition of the profits upon that labour.' I confess that I cannot see the connection of this conclusion with the premises. Whether you divide a commodity in eight, seven, or six divisions, it will always be divided into two portions, variable portions, but always two. If the division be in eight, the portions may be six and two, five and three, four and four, seven and one. If seven, they may be six and one, five and two, four and three, and so on. Now this is my admission. What we want to know is what the number of those divisions are, or what the value of the commodity is, whether eight, seven, or six? And have I come a bit nearer to this knowledge by admitting that whatever the value may be it will be divided between two persons? Whatever you give to the labourer is made up of labour and profits, and therefore the value of labour is constant! This is your proposition. To me it wants every quality of clearness. I find that at one time I give a man ten bushels of wheat for the same quantity of his labour for which at another time I give him eight bushels. Wheat, according to you, falls in the proportion of ten to eight. I ask why? And your answer is, because 'as the positive value of the labour worked up in the wages increases, the positive value of the profits (the other component part of their whole value) diminishes exactly in the same degree.' Now does this positive value refer to the same quantity of wheat? Certainly not, but to two different quantities, to ten bushels at one time, to eight at another. You add: 'If these two propositions['] (namely the one I have just mentioned and the invariability of labour as a measure of value) 'can properly be considered as having no connection with each other, I must have quite lost myself on these subjects, and can hardly hope to show the connection by anything which I can say further[']. I hope you do not suspect me of shutting my eyes against conviction; but, if this proposition is so very clear as it is to you, I cannot account for my want of power to understand it. I still think that the invariability of your measure is the _definition_ with which you set out, and not the _conclusion_ to which you arrive by any legitimate argument. My complaint against you is that you claim to have given us an accurate measure of value, and I object to your claim, not that I have succeeded and you have failed, but that we have both failed, that there is not and cannot be an accurate measure of value, and that the [most th]at any man can do is to find out a measure of value applicable in a great many cases, and not very far deviating from accuracy in many others. This is all I have pretended to do, or now pretend to have done; and, if you advanced no higher claims, I would be more humble; but I cannot allow that you have succeeded in the great object you aimed at. In answering you I am really using those weapons by which alone you say you can be defeated, and which are I confess equally applicable to your measure and to mine, I mean the argument of the non-existence of any measure of absolute value. There is no such thing; your measure as well as mine will measure variations arising from more or less labour being required to produce commodities, but the difficulty is respecting the varying proportions which go to labour and profits. The alteration in these proportions alters the relative value of things in the degree that more or less of labour or profit enters into them; and for these variations there has never been, and I think never will be, any perfect measure of value. I have lost no time in answering your letter, for I am just now warm in the subject, and cannot do better than disburthen myself on paper. Ever, my dear Malthus, Truly yours, DAVID RICARDO. LXXXVIII[276]. GATCOMB PARK, _31 Aug., 1823_. MY DEAR MALTHUS, I have only a few words more to say on the subject of value, and I have done. You cannot avail yourself of the argument that a foot may measure the variable height of a man, although the variable height of a man cannot truly measure the foot, because you have agreed that under certain circumstances the man's height is not variable, and it is to those circumstances that I always refer. You say of my measure, and say truly, that if all commodities were produced under the same circumstances of time, etc., as itself, it would be a perfect measure, and you say further that it is now a perfect measure for all commodities produced under such circumstances. If then under certain circumstances mine is a perfect measure, and yours is always a perfect one, under those circumstances certain commodities ought to vary in these two measures just in the same degree. Do they so? Certainly not, then one of the measures must be imperfect. If they are both perfect mine ought to measure yours as well as yours mine. There is no impropriety in your saying with Adam Smith[277] that 'labour will measure not only that part of the whole value of the commodity which resolves itself into labour, but also that which resolves itself into profit,' because it is the fact. But is not this true also of any variable measure you could fix on? Is it not true of iron, copper, lead, cloth, corn, etc., etc.? The question is about an invariable measure of value, and your proof of invariability is that it will measure profits as well as labour, which every variable measure will also do. I have acknowledged that my measure is inaccurate, you say, I have so; but not because it would not do everything which you assert your's will do, but because I am not secure of its invariability. Shrimps are worth £10 in my money;--it becomes necessary, we will suppose, in order to improve the shrimps to keep them one year when profits are 10 per cent.; shrimps at the end of that time will be worth £11. They have gained a value of £1. Now where is the difference whether you value them in labour and say that at the first period they are worth ten days' labour and subsequently eleven, or say that at the first period they are worth £10, subsequently £11? I am not sure that your language is accurate when you say that 'labour is the real advance in kind, and profits may be correctly estimated upon the advances whatever they may be.' A farmer's capital consists of raw produce, and his real advances in kind are raw produce. His advances are worth and can command a certain quantity of labour undoubtedly, and his profits are nothing unless the produce he obtains will command more if he estimates both advances and profits in labour, but so it is in any other commodity in which he may value his advances and returns. Does it signify whether it be labour or any other thing, provided there be no reason to suspect that it has altered in value? I know that you will say that provided his produce is sure to command a certain quantity of labour he is sure of being able to reproduce, not so if he estimates in any other thing, because that thing and labour may have undergone a great relative alteration. But may not the real alteration be in the value of labour, and, if he act on the presumption of its remaining at its then rate, may he not be wofully mistaken, and be a loser instead of a gainer? Your argument always supposes labour to be of an uniform value, and if we yielded that point to you there would be no question between us. A manufacturer who uniformly used no other measure of value than that which you recommend would be as infallibly liable to great disappointments as he is now exposed to in the vulgar variable medium in which he is accustomed to estimate value. And now, my dear Malthus, I have done. Like other disputants, after much discussion we each retain our own opinions. These discussions, however, never influence our friendship; I should not like you more than I do if you agreed in opinion with me. Pray give Mrs. Ricardo's and my kind regards to Mrs. Malthus. Yours truly, DAVID RICARDO. NOTE.--Ricardo died at Gatcomb on 11th Sept., 1823, of an abscess in the head, which caused great suffering. He was buried in the vault of a church at Huish, near Chippenham, Wilts; and his friend Joseph Hume was among the mourners. As he was only fifty-one years of age, his death was a great shock to his friends and caused something like dismay among his disciples. 'I never loved anybody out of my own family so much. Our interchange of opinions was so unreserved, and the object after which we were both enquiring was so entirely the truth and nothing else, that I cannot but think we sooner or later must have agreed.' So said Malthus, in Empson's hearing[278]. James Mill[279], albeit unused to the melting mood, was overwhelmed with grief, and in a letter to MacCulloch, 19th Sept., 1823, writes of the closing scenes with much tenderness of feeling. CHRONICLE. 1809. Ricardo's letters in 'Morning Chronicle' ('High Price of Bullion'). Quarterly Review founded. Corunna (Jan.), Talavera, Wagram, Walcheren. Continuance of Orders in Council and Berlin Decrees. Perceval, Premier. King's Jubilee. O. P. riots. Bad harvest. Rise in wheat. Fall in other articles. 1810. Letters I (25th Feb.) to V (Aug.).--Lines of Torres Vedras, Busaco. Bullion Committee (report, 8th June). Burdett and Parliamentary privilege. Fair harvest. Commercial and Agricultural Depression. Many failures. South American market overstocked. Trade with United States re-opened. 1811. Letters VI to X (Dec.).--Ricardo's 'Reply to Bosanquet,' Malthus' article on 'Depreciation.' 'Curse of Kehama.' Fuentes Onoro, Albuera. Napoleon's estrangement from Russia. Virtual close of George III's reign. Questions of Regency. Castlereagh and Sidmouth in the Government. Poor harvest and high prices of wheat. Lord King's letter to his tenants. Currency debates in Parliament. Government loan to Merchants. Slight revival of trade. Stoppage of trade with United States. 1812. Letters XI and XII (Dec.).--'Childe Harold,' I and II. Ciudad Rodrigo, Badajoz, Salamanca. Moscow Campaign. Repeal of Orders in Council (June). War with United States. Catholic Association. Murder of Perceval (May). Liverpool, Premier. Williams' murders in Ratcliff Highway. Depression of trade. Luddite outbreaks. Cold and wet summer. High price of corn. 1813. Letter XIII (Dec.).--Malthus' 'Letter to Lord Grenville.' Southey, Laureate. Vittoria, S. Sebastian. Lützen, Katzbach, Dresden, Leipzig. Affairs of Princess Charlotte. Joanna Southcote. Prosecutions for seditious libel. Removal of Company's monopoly of East India trade. Good harvest. Rise in Colonial produce. 1814. Letters XIV to XXI (Dec.).--Malthus' 'Observations on the Corn Laws.' 'Waverley.' 'The Excursion.' Treaty of Chaumont. Abdication of Napoleon (April). First Treaty of Paris. Congress at Vienna. Capture of Washington. Peace of Ghent (Dec.). Trial of Cochrane. Burning of Custom House (Feb.). Introduction of Corn Bill. Repeal of Corn Bounty. Relapse in prices of Colonial produce. Indifferent harvest. Medium prices of corn. 1815. Letters XXII to XL (Dec.).--Ricardo's 'Influence of Low Price of Corn.' Malthus' 'Grounds for an Opinion,' and 'Rent.' Napoleon in France (March). Treaty of Vienna. Waterloo. Second Treaty of Paris (Nov.). Bad Season. New Corn Law. Luddite outbreaks. Low Corn prices. Low general prices. 1816. Letters XLI to LI (Oct.).--Ricardo's 'Economical and Secure Currency.' Bombardment of Algiers. War taxation kept up. Adoption of Gold standard by Act of Parliament. Income-tax rejected. Agitation about Civil List. Cobbett's cheap 'Political Register.' Spa Fields. Luddite outbreaks. Petition of London Corporation. Continued fall of general prices. Bad harvest. Rise in Corn. 1817. Letters LII to LXIV (Dec.).--Ricardo's 'Political Economy and Taxation.' Malthus' 'Statements respecting the East-India College.' Malthus' visit to Ireland. Ricardo's to Flanders, Germany, and France. Death of Horner (8th Feb.). 'Biographia Literaria,' 'Revolt of Islam,' 'Lalla Rookh.' Committee on Sinecures. Suspension of Habeas Corpus. Derby Insurrection. Blanketeers. Attack on Regent. Death of Princess Charlotte. Hone's Trials. Fair Harvest. Rise in general prices. 1818. Letters LXV to LXVIII (Aug.).--Mackintosh at Haileybury. Ricardo Sheriff of Gloucestershire. Death of Romilly. 'Childe Harold,' III, IV. Congress of Aix-la-Chapelle. Secret Committees on disaffection. Act of Indemnity. Poor Law Bill. Scotch Borough Reform. Debates on Resumption of Cash payments. Royal Marriages. Renewal of Alien Act. General Election (June, July). Manchester strike. Fair harvest. Increased general imports and fall of general prices. 1819. Letters LXIX and LXX (Nov.).--Malthus F.R.S. Ricardo M.P. for Portarlington. Act for Resumption of Cash payments. The 'Radicals.' Factory Act. Poor Law Amendment. Penal Law Amendment. Peterloo massacre. The Six Acts. Fall in Cotton. Trade healthier. Fair harvest. 1820. Letters LXXI to LXXV (Nov.).--Malthus' 'Political Economy.' Malthus' visit to France. Ricardo's 'Funding System.' 'The Cenci.' Death of George III. Insurrection in Spain. Congress of Troppau. General Election. Queen Caroline. Cato Street Conspiracy. Political trials. Reform movement. Popular Education. Penal law amendment. Good harvest. Low prices of corn. Agricultural distress. 1821. Letters LXXVI to LXXXI (Nov.).--Foundation of Political Economy Club. Death of Keats. King's Coronation, and Visit to Ireland. _De facto_ Resumption of cash payments. Interference with the Press. 'Bridge Street Gang.' Coalition of Liverpool ministry with the Grenvilles. Retirement of Sidmouth. Insurrection in Greece. Death of Napoleon. Large harvest, poor in quality. Fall in wheat. Low general prices. 1822. Letter LXXXII (Dec.).--Ricardo's 'Protection to Agriculture.' Ricardo's visit to Italy and Switzerland. Death of Shelley. New Marriage Act. New Corn Law. Wellesley in Ireland. Suicide of Castlereagh. Canning at the Foreign Office. Wellington at Verona. Ashantee War. Dispute with United States about Oregon territory. Habeas Corpus suspended in Ireland. Good harvest. Low corn prices. Large importations of wheat from Ireland. General prosperity. Agricultural distress. 1823. Letters LXXXIII to LXXXVIII (31st Aug.).--Malthus' 'Measure of Value,' and article on Tooke. Malthus Associate of Royal Society of Literature. Ricardo's 'National Bank' (written). Death of Ricardo, 11th Sept. Essays of Elia. Byron in Greece. Burmese War. French invasion of Spain. Recognition of South American Independence. Huskisson at Board of Trade. Amendment of Navigation Laws. Canning's Jamaica circular. Catholic Association. Poor harvest, but medium prices of corn. Low general prices. Increased general imports. INDEX. A. Accumulation, what it implies, 39, 47-50; of produce and of capital, 54; its effects, 45, 52, 71, 99, 168; Ricardo's difference from Malthus upon, 168, cf. 185-191, 203. 'Additions to Essay on Population,' 105, 128. Agriculture, improvements, 8, 46, 59, 180; monopoly of home market, 56; distress, 3, 212; prosperity, 141; burdens, 3; restrictions in favour of home agriculture, see Corn Laws; Anon. tract on, 91. Allen, John, 6. America, its future prospects, 77; high wages in, 118, 197, 198, 203, 204, 205; profits, 41; Ambassador, 156; emigration to, 161. 'Appendix' to tract on Bullion, 17; to 'Observations,' 61. Appreciation as distinguished from Depreciation, 82. Attwood, Mr., 3. Austin, H., of Gloucestershire, 117, 169. Austin, Mrs., daughter of Ricardo, 117, 213. B. Bain, Prof. A., 'Life of Jas. Mill,' Pref. viii, x, 44, &c. See Mill, Jas. Bank, Ricardo's speech at B.-court, 104; its bargains with Government, &c., 89, 110; its profits and Charter, 90; its bullion, 100; its notes, 102; cash payments, 115; incapacity of directors, 104, 185; 'an unnecessary establishment,' 89; views on, 102. Balance of Trade, 11. Banks, Country, 89. Baring, Mr., 161. Basevi, 67, 108. Belsham, neighbour in Gloucestershire, 140, 159. Bentham, Jeremy, Pref. xi. seq., 3, 51, 55, 91, 140, 141, 151, 152, 166. Berkeley, Col., 147. Berlin Decrees, &c., 27. Binda, Mr., 117, 125. Blake, Wm., F.R.S., 75, 115. Boddington, Mr., 6. Böhm Bawerk, Dr. Eugen von, Pref. xvii, 230. Bosanquet, Chas., 113. ---- Jacob, 113. Bowood, 141, 156. Bowring, J., Life of Bentham, 55, &c. 'British Review,' 145, 147. Broglie, Duc de, 210, 211. Brougham, Henry, Pref. x, 63, 156. Buchanan, David (editor of 'Wealth of Nations'), 125, 128. Bullion Committee, 2, 12, 24, 25, 26, 32, 89; Outl. xix. Bullion, merchants, 3; every man a dealer in it, 10; debate in Lords, 26; Bank supplies of, 100; Ricardo's tract on, see Ricardo; as a commodity, 9. Burdett, Sir F., 55, 64, 152. C. Cairnes, J. E., 113. Capital, home and foreign, 7; when 'scanty,' 43; rapid increase without low rate of interest, 8; abundant, 18. See Accumulation and Profits. Carey, Henry C., 68. Carlile, Richard and Ann, case of, Pref. xi. 'Champion' newspaper, 208. Chandler, Mrs., neighbour in Gloucestershire, 159. 'Chronicle' newspaper, 104; Outl. xix. Clerk, George, 87, 125. Clubs, King of, 3, 5; note to III, 25, 110, &c.; Geological Club, 64; Political Economy Club, see Pol. Econ. Clutterbuck, Mr., 41, 152, 213. Cobbett, Wm., Pref. xv, 148, 159, 161, 162, 168, 208, 213. Cobden, Richard, Pref. x, 160. Commons, debates in, 64, 84, &c. Competition, 'general law of,' 10, 42, 51; its effect in equalizing profits, 195, 203; competition of sellers more effective than that of buyers, 173; acts feebly in some cases, 202, 203. Constant, Benjamin, 91. Consumption and Production, 36, 39, 185, &c.; and Accumulation, 45, &c. Continental System, 27. Coppleston, Dr., 212. Corn, demand for not unlimited, 4; corn laws, 34, 48, 58, 153, 201; Corn Committee, 42; new corn law, 64; corn as measure of value, 193, 221. Corn-prices, as regulating others, 34, 84, 90; relation to profits, 37. Cost of production, 175, &c.; as explaining value, 230, cf. 55. Coulson, Walter, 168. Countervailing duty on corn, 64, Pref. xi. Crombie, Alex., 82. Currency, 'redundant,' 11, 19; how affected by the Peace, 38; relation to foreign trade, 7 seq., 38; 'Economical and Secure,' 96, 100, 103, 108, 112. See Bullion, &c. Custom house, delays, 137, 140. D. Debate, House of Lords on Bullion, 26; ditto on Bank Restriction, 150. Definitions deprecated by Say, 209; unfairly used by Malthus, 229, 237. Demand, unlimited, 34, 43, 44; effective, 36, 39, 43; its meaning, 42, 43, 54; relation to supply, 41, 42, 44, 148, 173; relation to market and natural price, 53, 148, 174, 176. Depreciation, Torrens' criticism of Malthus' use of, 75, 81; Tooke on depreciation, 27, 82; a public evil, 85; depreciation and exchanges, 15; depreciation and corn measure of value, 221. Destutt, De Tracy, 211. Distribution, to Ricardo the chief subject of Pol. Econ., 175; in case of wages and profits, 185, 189; of money in the world, 22. 'Domestic competition,' bringing down unusual profits, 192 seq. Dumont, P. E. L., 3, 64, 210. E. Eckersall, Miss, 117. 'Economical and Secure Currency.' See Currency. Edinburgh Review, 8, 10, 56, 65, 116, 120, 154, 170, 171, 184, 198, 240. Elphinstone, W. F., 113. Empson (Wm.), 238; quotes letters of Ricardo's, 56, 65, 116, 120, 167, 175, 240. Encyclopædia Brit., 55, 157, 158, 165, 171. Essex, expenses of farming in, 97. Exchanges, with Hamburgh, 24, 32, with Holland, 27 seq. Exchequer bills, 90. Experience, danger of appeals to in Pol. Econ., 96. Exports, 7, 20, &c.; of bullion, 3, 14, 19, 25. See Imports. Extension of Market, chief cause of, 99. 'External commodities,' 193, cf. 79. F. Facility of production, including skill, 93; affecting value, 170; affecting profits, 8; 'the essence of high rents,' 101, cf. 127. Fact versus Principle, 18. Fall or rise of money and of goods compared, 194-197. Foligny, M. de, 137. Ford Abbey, 51, 140, 141. 'Foreign commodities,' 79; cf. 193. Fragment of letter, 105, 216-219. 'Fragment on Government' (Bentham's), 55. France, 24, 169, 170, 211; cf. 92, 93. French Revolution, 8, 151, 210. G. Gallois, the publicist, 211. Garnier (Germain), 212. Gell, Sir Wm., 173. General glut, 188 seq.; impossible, 14. See Over-production. General prosperity, 86. 'General reasoning' versus 'repeated experience,' 190. Geological Society, 64, 75. George IV, his character, 172. Gilbart, J. W., 85. Godwin, Wm., 198, 206, 207. Gold, exportation prohibited, 28; unlike other commodities, 5; imports of, 24; conditions of exportation, 27. Goldsmid, Aaron Asher, 24. Grant, Chas., 130. Greenough, G. B., 75. Grenfell, Pascoe, 89, 96, 109. Grenville, Lord, 113, 150. Grote, Geo., 96, 157. H. Haileybury College, a student of, 87; pamphlets on, 113, 125, 126; Mackintosh Professor there, 149; others of the staff, 137; disturbances of students at, 104, 213; the subject before India House, 127, 130. Hamburgh, table of exchanges with, 24, 32, 33. Hamilton, Prof., 136, 137. Hardwicke, Lord, 42. Harvest, effects of bad, 21, 139. Held, Adolf, Pref. xv. High price of raw produce, its causes and effects, 47, 90; Ricardo's views on it change, 126; Malthus' view discussed, 127. Hitchings, Mr., 134. Hobhouse, 177; Miss, 159. Holland, table of exchanges with, 28-31; visits to, 118. Holland House, 125, 207. Holland, Dr., 151. Horner, Francis, 6, 81, 115. Hughan, Thos., West India Merchant, 12. Humboldt, Alex., 138. Hume, J. Deacon, 27. ---- Joseph, 96, 133, 208, 240. Hunt, 'Orator,' 152, 161, 163. Hone, William, 45. I. Idleness of the inhabitants of fertile lands, 138; cf. Otaheite. Impey, Mr., 131. Imports, 4, 7, 12, 21, 196; of bullion, 25, &c. Income tax, 112, cf. Pref. xv. India, E. I. College, see Haileybury. E. India Co., its profits, 50; illustrations from, 202, &c.; Mill's book on, 146, 147, 149. 'Inquiry into principles of Malthus relative to Demand,' 191. Interest, rate of, 8, 35, 41, &c. See Profits and Capital. Interest, of nations and of individuals, 18, 19; of mankind, 188, 198. Ireland, Malthus' visit to, 137, 138. J. Jackson, Randle, 113, 114, 130. Jacob, William, 63, 67. Jamaica, premium on bills in, 12, 13. K. King, 'of Clubs.' See Clubs. King, Lord Peter, 148, 150. Kinnaird, Douglas, 130. Knyvett's concert, 2. L. Labour, as measure of value, 214 seq.; as cause of value, 192. Other references _passim_. Labourers, as over-reached by employers, 139; as injured by depreciation of money, 85. Lansdown, Marquis of, 141, 156. Lauderdale, Lord, 56, 57, 65, 115. Leases in relation to prices, 47, 61. Le Bas of Haileybury College, 137. Level of currency, 16, 19, 34, 196. Lisbon, gold imported from, 24. Liverpool, Lord, letter of Torrens to him, 111; motion in House of Lords, 150. Locke, John, 221. Lords Committee on Corn, 42; debates on Currency, 26, 150. Luxury, of idleness, 138; love of luxuries displaced by other motives, 39; luxuries curtailed by dear corn, 34, 35. M. MacCulloch, J. R., articles on Ricardo in Edinburgh Review, 154, 184; and in Scotsman, 146, 184; on Malthus in Scotsman, 168; on Value, 221, 230. Other references, Pref. xii, xvii, 44, 49, 171, 240. Macdonnel, Mr., 160. Machinery, Ricardo's views of, changing, 184, cf. Pref. xvii; effect of improved, 99, 102, 188. Mackintosh, Sir James, 6, 81, 149, 151. Mallet, Mr. 140, 149. Malthus, T. R., character, see Pref. viii; letter to Place, 207; travels in France, 169; article on Depreciation, 10, 27; tract on Rent, 58, 127, 128; 'Political Economy,' 123, 138, 145, 166; Say's Letters to him, see Say; 'Observations' and 'Grounds of an Opinion,' 56, 61; Essay on Population and Additions, 105, 107, 119, 128, 138, 143, 183; Notes on Adam Smith, 56; tract on Measure of Value, 214 seq.; tracts on East India College, 125, and see Haileybury; Utilitarian view of his subject, 175; article (by him?) on Godwin, 198, 206; Death, 45. Marcet, Dr., 141; Mrs., 132, 133. Market and Mint price, of bullion generally, 27; of gold, 150; of silver, 24, 115. Measure of Value, cost, 175; corn, 193 seq., 214 seq.; gold, 230, 231. Mill, James, Pref. viii, ix, xi, 44, 50, 51, 55, 92, 103, 109, 117, 131, &c.; his 'Political Economy,' 172. ---- John S., 25, 132, 172. Mocatta and Goldsmid, 24. Money, like other commodities, 73; on what its value depends, 78; paper money ought to be Government monopoly, 89; fall or rise unimportant in comparison with that of goods, 198; as measure of value, 225, 230. Monopoly and rent, 56, 61; prices, 56, 202. 'Moral Sentiments,' Pref. xiii. Motives for production, adequate and inadequate, 38-40, 185. Murray, John, the publisher, 106, 108, 112, 127, 133, 207. Mushet, Robert, First Clerk to Master of the Mint, 1, 3. N. Napier, Macvey, 157, 158. Napoleon, 27, 70, 84, 91. National estimate of profits, 40; national interest, 18; growth of national wealth, 40. 'Natural level' of money, 19, cf. 34, &c.; price of corn, 71; wealth, 182. 'Neat produce,' 181; revenue, 178; surplus from land, 180. Necessaries, 138, 197, 215, 224. Necker, M., 91, 210. Newmarch, William, 26. Nominal and real value, 7, 198; wages, 123. Notes, to Letter II (Supply and Demand); III (King of Clubs); XII (Tooke on Depreciation and Exchanges); XVIII (Corn Committee, 1814); XX (Adam Smith on Indian trade); XXI (Bentham); XXIX (Torrens); XXXI (Depreciation); XXXV (Say's Correspondence with Ricardo); XLII (MS. mentioned in letter); XLIV (Torrens and Ricardo); LXIV (Say's Correspondence); LXVII, LXVIII (Ricardo in Parliament); LXIX (I) (Sinking Fund), (II) (Cobbett); LXX, LXXV, LXXXI (Say's Correspondence); LXXX (Francis Place); LXXXIII (Labour as Measure of Value); LXXXIV (Corn as Measure of Value); LXXXVI (Cost and Value); LXXXVIII (Death of Ricardo). O. Omnium, 24, 37, 85. Otaheite, its fertility, 93 seq., 101. Overproduction, 14, 38, 39, 170, 178, 185; cf. note to II. Owen, Robert, Pref. xi, 170. P. Paget, Thos., 213. Parsimony, 39, 190. Peace, economical effects of, 38, 84. Peninsular war, metal currency out of circulation in, 100. Phelps, of Gloucestershire, 141. Phillips, William, 64, 81. Pierstorff, Dr. Julius, 230. Place, Francis, Pref. ix, 43, 96, 207, 209. Political Economy, of what advantage to governments, 171; inquiry not into production but into distribution, 175; into effects not into motives, 185; into principles not facts, 18; corn, labour, and commodities the all-important subjects, 198; two tasks of Pol. E., Pref. xviii. Political Economy Club, 182, 183, 208, 209. Poor Rates, effect on quantity of available food, 107, 144; Laws, 126, 144, 225. Population, principle of, 42, 69, 180, 186, 189; turned by Ricardo against arguments of Malthus, 68, 70, 98, 99, 101, 205, 215; whether food precedes, 144. Prices. See Wages, Profits, &c. Private work, its effect on general demand for labour, 98. Productive and unproductive consumption, 185 seq. Profits, rate of, 8, 35, 36, 38, 39, 40, &c.; on what hypothesis everywhere the same, 58; rate depends on what, 34, 46, 52, 53; how related to wages, 49, 52, 97; to facility of production of food, 45, &c.; cannot be at two rates in same country, 192; rate lowered by commercial restrictions, 36, 38; when permanently high, 41. Q. Quantity and Value, 3, 4, 5, 188, &c.; and Profits, 46, 188; not quantity but proportions determinable, 175, cf. 211. Quarterly Review, 179, 212. Queen Caroline, 173, 177. ---- Sophia, 145. Quin, Mr., 168. R. Radicalism, 163. Real price, 135; value, 7, 198; wages, 123. Redundancy of Money, 10 seq.; permanent, 21; how cured, 22, 23; of labour and capital impossible, 174. Reform, views of Ricardo and Malthus, Pref. ix, 55, 151, 152, 163, 169. Relief Works, 126, 128. Rent, Malthus' tract on, 58; always a transfer not a creation of wealth, 59, 155; neglected by Say, 181; other references, _passim_. Restrictions on Corn trade. See Corn. Resumption of cash payments by the Bank, 115, 150, 167. 'Retrograde Capital,' 39. Ricardo, David, character and habits. See Pref. viii seq.; Corn pamphlet, 64; Bullion pamphlet, 21, 72; Appendix to ditto, 7, 17, 18, 23, 27, 72, 109; cf. Outl. xix; Sinking Fund, 55, 62, 157, 160; 'Political Economy and Taxation,' 114, 132, 135, (2nd ed.) 166, 170, 175, 176, 180, 184, 206; 'Economical and Secure Currency,' 100, 103, 110; other MSS., 178, 228; Sale and popularity of works, 112, 166; converts, 169, 173; walks with Mill, 150; patriarch, 146; optimism, 72, 183; diffidence, 157, 158, 181, 200; 'a poor master of language,' 176, cf. Pref. ix; travels in France, &c., 136, 210; profits on Stock Exchange, 85, 147; fear of dogmatism, 149, 174; appearance of paradox, 145; misunderstood, 178, 179, 212; Sheriff of Gloucestershire, 147, 149, 151, 155; M.P. for Portarlington, 152, 154; Death, 240; Letters not in this collection, 157, 184; public services, 167; speeches referred to, _passim_. quoted, Pref. xv, 3, 4, 160, 162, 221. Ricardo, David, son of above, 41, 87. ---- Mortimer, 41. ---- Osman, 41, 137, 191. Rogers, George, Pref. ix. Roget, Dr., 141. Romilly, Sir Samuel, 3, 140, 141, 152. Rush, American Minister, 156. S. Saving, 'excessive,' 38, 39, 188. Say, J. B., Letters to Ricardo; Notes to XXXV, LXIV, LXX, LXXV, LXXXI; Letters to Malthus, 169, 173, 178, 181; other references, Pref. vii, 51, 53, 82, 91; ('travaillez toujours'), 105, 125, 145, 154, 173, 192; severely characterised, 178, 179. ---- Horace, 91. ---- Louis, 211. Scarlett, Mr., 6. Scotch Farmers, 61. 'Scotsman' newspaper, 146, 168, 184. 'Services,' Say's doctrine of, 170, 174, 181, 209. Sharp, Richard, 2, 25, 149, 151. Silver, as a standard, 101; under mint price, 115; over ditto, 24. Sinking Fund, Ricardo's article in Encyclopædia Britannica, see Ricardo. Sismondi, 210, 211. Smith, Adam, on Indian trade quoted, 50. Other references, _passim_. ---- Robert and Sydney, 6. ---- Thos., of Gloucestershire, 45, 54, 116, 118, 125, 138, 140, 173, 214. Smyth, Wm., 81, 82, 83, 139, 149. Social wealth, 182. Spain, New, 138. Spence, William, 44, 76. Stael, Baron de, 210, 211; Madame de, 91, 210. Stagnation, not overproduction but derangement, 189, 191. Standard of living, 138, 197. Steuart, Sir Jas., 16, 144. Stocks, up and down in war times, 85; Stockholders sufferers, 62. Subsidies, 1, 15, 88; effect on Exchanges, 15, 20 seq.; relation to price of corn, 88. 'Sun' newspaper, 115. 'Superabundant supply,' 3, and whole of note to II. 'Superior genius,' 174. Supply, in relation to demand, 173-175, &c. See Demand. T. Tables, exchange with Hamburgh, 24, 33; with Holland, 28-31. Taxation, relation to Rent, 59, 65; not a cause of dear corn, 64; too little considered by Economists, 164; taxation and altered value of money, 3; Say's views on English, 174, 179. Tennant, Smithson, 2. Theoretical and practical bias, 96; theory and experience, 78. Thornton, Henry, 25, 26. 'Times' newspaper, 130. Tithes, 65, 171. Tooke, Thomas, 26, 27, 81, 82, 184, 191, 212. Torrens, Robert, 63, 64, 65, 75; life, 76, 79, 81, 82, 90, 111, 112, 115, 116, 133, 149, 168, 170, 182, 195, 208. Tracy, Destutt de, 211. 'Traveller' newspaper, 168. 'Trienniality,' 55. U. Ultra-Bullionists, 27. Utility and Truth of propositions, 53, but cf. 182; Utility and Value, 92, 93, 173, 174, 179, 182, 183. V. Value, real and nominal, 7; of currency, 82; doctrine of Value a cardinal point in Ricardo's system, 149; how viewed by Malthus, 171, 175; and by Say, 92, 93, 173, 181, 209; Measure of Value, 148; Ricardo's doctrine modified, 139; Quantity and Value, 3 seq., 53. See also Measure. Vansittart, Nicholas, 3, 5. 'Verbal disputes in Political Economy,' 192, cf. 165. W. Wages, foundation of capital, 49; do not depend on day's produce, 97; in proportion not to the produce but to the demand for labour, 98; 'Real,' 123; too high and too low, 186, 188; depends on facility of obtaining necessaries, 34; effect of high wages on prices, 39; wages low in 1817, 142; remedy for low wages, 166. Wants of men unlimited, 34, 45, 49; effects of changing wants and tastes, 1, 38, 49, 53. War, effects on trade, 8, 9, 39, 72, 84; Peninsular, 100. Warburton, Henry, 96, 115, 117, 139, 140, 149, 172. Wealth, as abundance, 211; proper sense, 153; natural and social, 182. Wellington, Duke of, 84, 87. West, Edward, 63. Western, Mr., 213. Westminster Election, 152. Wetenhall, tables, 9, 24, 60. Whishaw (or Wishaw), John, 2, 83, 118, 138, 139, 148, 149, 163. Whitbread, Samuel, 63, 84. Wilberforce, William, Pref. xi, 89. Woolaston, Dr., 139. Workmen, combinations, 144. Y. Young, Arthur, 97. THE END. FOOTNOTES [1] Cf. Letter LXXX, p. 200, cf. 236, etc. [2] See the obituary notice in Annual Register 1823, which appears (on comparison with MacCulloch's Preface to Ricardo's Works, p. xxxii) to have been written by James Mill. See also Prof. Bain's Life of James Mill, p. 210. [3] He left £700,000. Gent. Mag. 1823. [4] Letter to George Rogers, 11th Jan. 1832, in the 'Place' Collection, British Museum. [5] The political philosophy of Malthus is described by the present editor at some length in 'Malthus and his Work,' Book III. [6] Brougham's testimony is the more valuable because he is by no means a disciple or admirer of Ricardo as an Economist. 'Statesmen of the Time of George III,' vol. ii. pp. 166 seq. For other authorities on the subject see Joseph Garnier's life of Ricardo in Dict. de l'�con. Polit., and Bain's Life of Jas. Mill. [7] See note to Letter XXI. [8] March 26, 1823. [9] Speech of March 18, 1823. [10] May 21, 1823, etc. [11] June 17, 1822. [12] April 29, cf. May 7, 1822. [13] MacCulloch's 'Funding and Taxation,' Preface to 1st Ed. (1845). [14] Bentham, 'Princ. of Morals and Legislation,' I, IV. [15] Ricardo's Wks. p. 554 (from 'Observations on Parliamentary Reform'). [16] B. IV, ch. IX, middle, p. 307. 1 (McCulloch's ed.). [17] E.g. by Held, 'Sociale Geschichte Englands,' article Ricardo, and by Western in the House June 11, 1823, more coarsely by Cobbett in passages quoted in Note to Letter LXIX, and many others. [18] June 11, 1823, in reply to Western. [19] E.g. Grenfell, March 11, 1823. [20] Feb. 21, 1823, etc. [21] May 30, 1823. He adds a crumb of criticism: Cobbett underestimated the effect of machinery in throwing men out of work. [22] E.g. 'The greatest advantage will be sought and obtained at all times by the employer of capital.' Evidence before Lords' Resumption Committee, 1819, Ques. and Answ. 75. [23] Letter LXXVI. [24] Ch. xxxi. of Pol. Ec. and Tax.; a chapter added in the 3rd ed., 1821. [25] Speech of 9th May, 1822. [26] This had been acutely observed (without aid from these Letters) by a writer in the Harvard 'Journal of Economics,' July, 1887. [27] Ricardo, Pol. Ec. and Tax. Sect. I. [28] Robert Mushet of the Mint. He published 'An Enquiry into the Effects produced on the National Currency and Rates of Exchange by the Bank Restriction Bill' in this very year 1810. [29] John Whishaw, of Lincoln's Inn, the editor of Mungo Park's 'Life and Travels' (1815, etc.): see Edin. Rev., Feb. 1815; Brougham's 'Statesmen in Time of George III,' ed. 1855, i. 369. [30] Richard Sharp, called 'Conversation Sharp,' author of 'Letters and Essays in Prose and Verse' (1834), member of the Bullion Committee. [31] Probably Smithson Tennant, the chemist. [32] P. E. L. Dumont of Geneva, the friend of Mirabeau and Romilly, best known as the admirer of Bentham, whose works he brought out in French as a labour of love. See Bentham's Works, ed. Bowring, vol. x. pp. 184-5. Like Whishaw, Sharp, and Tennant, he was a member of the 'King of Clubs.' See following letter. [33] See note at the end of this letter. [34] The same phrase occurs in Appendix to 'High Price of Bullion' (Ricardo's Works, p. 297) etc. [35] Malthus regarded the change in the currency as in some cases the effect (and not the cause) of a change in trade. See references under Letters VI, XII. [36] Fastened with wax at one corner. [37] Probably 1793 to 1810. See Malthus' Pol. Econ. (1820), p. 324, etc. [38] Probably Wealth of Nations (McCulloch's ed., 1863) I. xi. 95. 1, where the precious metals are said to be especially useful in the case of a roundabout trade of consumption. Cf. Edinb. Rev. Feb. 1811, p. 362. [39] Wetenhall's 'Course of Exchange.' See note to Letter XI. [40] Edinb. Review, Feb. 1811. See 'Malthus and his Work,' p. 285. [41] Some information on that point had been given by Mr. Thomas Hughan, a West Indian merchant, before the Bullion Committee (Evidence, pp. 55-61). [42] Franked by Richard Sharp. [43] See note to Letter XII. [44] The passages were probably the first three or four chapters of the third book of Sir Jas. Steuart's 'Inquiry into the Principles of Political Economy' (1st ed. 1767), more especially ch. iii, 'Is the loss which the course of exchange marks upon the trade of Great Britain with France real or apparent?' [45] Ricardo's 'Appendix' to the fourth edition of his tract on the 'High Price of Gold Bullion.' This Appendix embodies most of the opinions set forth in these early letters. See his Works (ed. McCulloch) pp. 291 seq. Cf. 'Malthus and his Work,' p. 287. [46] 'It is self-interest which regulates all the speculations of trade; and, where that can be clearly and satisfactorily ascertained, we should not know where to stop if we admitted any other rule of action.' Appendix to 'High Price of Bullion' (Works, p. 292). [47] See above, p. 15. [48] See 'High Price of Gold Bullion,' Ricardo's Works (McCulloch's edition), pp. 264, 282. [49] The Fragment on p. 105 should perhaps come here. [50] Aaron A. Goldsmid, of Mocatta and Goldsmid, bullion brokers. See Report of Bullion Committee, Evidence of Witnesses, pp. 1-18, 61. He was nephew of Abraham and Benjamin Goldsmid, who died by their own hand in 1810. [51] Wetenhall got his information from Mocatta and Goldsmid. See Bullion Report, Evid. p. 2. [52] Henry Thornton, M.P., member of the Bullion Committee, author of 'An Enquiry into the Nature and Effects of the Paper Credit of Great Britain,' 1802. See J. S. Mill, Political Economy III. xi. § 4. [53] Part III. ch. i. § 5: 'On the Opinions of the Bullion Committee on the Phenomena of the Circulation in 1809-1811,' pp. 100-110. [54] See especially Letters IV and VI. [55] Tooke, Hist. of Prices, p. 359. [56] As was shown also in 'Letters on the Corn Laws,' by H. B. T. (J. Deacon Hume.) London, 1834. [57] When the price of gold in Holland is above 10 p.c. premium, and the mint in England is open to the public, silver will be the standard in London. Consequently its market and mint prices will agree, and gold will be above the mint price. When under 10 p.c., silver will be above the mint price, and gold will be the standard. When the price of gold in Holland was above 9 p.c. premium, the English £ sterling would be estimated in silver and therefore the par of exchange would invariably continue 38.61 currency; and 37.48 Banco if the agio were 3 p.c. [58] The agio is variable, but is supposed to be constant in this table for the purpose of calculation. A marc weight = 3798 grains troy. A marc is divided into 5120 onsen[a], 200 onsen[a] of pure silver in a guilder. Gold and silver are sold by the marc in Holland perfectly pure[b]. British standard--gold 11 fine, 1 alloy; silver 11·2 fine, 18 dwts. alloy. [a] The word is indistinct. [b] The gold mark is meant. See Adam Smith's account of the Bank of Amsterdam in 'Wealth of Nations,' IV. iii. p. 212 n. (McCulloch's ed.). [59] A good commentary on these Tables and on the whole of these early letters will be found in the Evidences of the Witnesses examined before the Bullion Committee (1810). [60] His favourite country-seat, in Gloucestershire. [61] This actually happened; and the letter is re-addressed first to 'Aylesbury' and then to 'Hayleybury'. [62] Here and elsewhere written 'expence'. [63] Ricardo's second son. The eldest was Osman, the third Mortimer. Ricardo had five daughters, three of whom were married, one to Mr. Clutterbuck, mentioned later in the correspondence. (See Gentl. Mag. 1823, pt. ii, 376.) [64] Announced as early as 1807 in the reply to Spence ('Commerce Defended'). Ricardo's friendship with James Mill seems to have begun about the year 1811: 'With an estimate of his [Ricardo's] value in the cause of mankind, which to most men would appear to be mere extravagance, I have the recollection of a dozen years of the most delightful intercourse, during the greater part of which time he had hardly a thought or purpose, respecting either public or his private affairs, in which I was not his confidant and adviser.' Letter of Jas. Mill to MacCulloch, 19th Sept. 1823 (Bain's Life of Jas. Mill, p. 209). [65] Thomas Smith of Easton Grey. His name is on the list of subscribers to Hone's Testimonial, 1818. [66] Malthus was in the habit of spending his Christmas with his wife's relations at St. Catherine's near Bath, and it was in one of these visits that he died there, 1834. See Malthus and his Work, p. 415. [67] Here and elsewhere spelt 'favoring'. [68] Ed. 5th (1789). In McCulloch's ed. (1863), pp. 336, 337. See quotation at end of letter. [69] See note at end of this letter. [70] Mill had permanently taken up his abode with Bentham there in the summer of this year (1814). His biographer gives a long description of the house (_Life of Jas. Mill_, pp. 129 seq). It is in the valley of the Axe, four miles from Chard, on the borders of Devonshire and Somerset. [71] The first sentences of this letter are quoted by Empson, Edinb. Review, Jan. 1837, p. 498. [72] He was writing the tract entitled: 'Grounds of an Opinion on the Policy of Restricting the Importation of Foreign Corn, intended as an Appendix to "Observations on the Corn Laws."' It might however have been the tract on Rent to which Ricardo is here alluding. See Letter XXIII. [73] Here as elsewhere spelt 'endeavor.' [74] 'An Inquiry into the Nature and Progress of Rent and the principles by which it is regulated.' 1815. [75] In the original, 'trade' has been written first and then struck out in favour of 'stock.' [76] 'An Essay on the Influence of a Low Price of Corn on the Profits of Stock, shewing the inexpediency of Restrictions on Importation, with Remarks on Mr. Malthus's two last Publications,' 1815. Ricardo's Works (McCulloch), pp. 367-390. [77] Cf. 'Nature and Progress of Rent,' p. 30, note. [78] 'Rent,' pp. 21, 34. In the latter, Malthus says 'it would return only the common profits of stock with little or no rent.' Cf. ib. p. 36. [79] 'Grounds of an Opinion.' See note on Letter XXII, p. 56. [80] Probably the passage in Book II, ch. v, quoted by Ricardo in Pol. Econ. ch. ii (on Rent), p. 39 foot (McCulloch's ed. of Works). It contains the Physiocratic paradox that in manufactures nature does nothing, man does all; in agriculture nature does nearly all and man very little. [81] Ricardo's opinion, expressed frequently and emphatically afterwards in the House of Commons, and most fully on paper in his article on the Sinking Fund written for the Encycl. Brit., was that no safeguards could prevent the Sinking Fund from being appropriated by a needy government, and that it was therefore from the point of view of the public interest a mere snare and delusion. [82] Cf. Ricardo's Pol. Econ., ch. vi. 65 (ed. McCulloch). [83] In his 'Letter to Samuel Whitbread, Esq., M.P.; being a Sequel to Considerations on Protection of Brit. Agriculture, with Remarks on the Publications of a Fellow of University College, and Mr. Ricardo, and Mr. Torrens.' Dated 25th Feb. 1815. He discusses West in a long 'Note,' and the two others in a longer 'Appendix.' Ricardo (whose tract on 'The Influence of a Low Price of Corn on the profits of Stock' he has just read) has, he says, 'little practical knowledge,' but brings forward 'truisms mixed with vagaries, clothed in the technical cant of political economy.' Torrens does not escape much more easily. [84] The New Corn Law, prohibiting importation when the home price of wheat should be under 80_s._ a quarter. [85] Possibly William Phillips, F.R.S., F.G.S., the Quaker and eminent mineralogist and geologist, member of the Geological Society. Born 1773, died 1828. Ricardo in early life was himself devoted to geological study. [86] Part of this letter (5th sentence to 8th) is quoted by Empson, Edinb. Review, Jan. 1837, p. 499. [87] 'Essay on the External Corn Trade,' 1815, Part II, ch. ii: 'Is the general principle' of free trade 'liable to limitations in the case of a country more heavily taxed than other growing countries?' (To which Torrens answers: No), ch. iii. Should there be limitations where an artificial range of prices has been created by continued protection? (To which he answers: No, but the re-introduction of free trade should be gradual.) It was probably on such subjects as Tithes and Taxation that he differed most from Ricardo. On the whole, Torrens stands rigidly by Adam Smith as against his successors, especially Malthus. See Note to Letter XXIX. [88] Malthus did not carry out his intention. Though there are occasional references in his later books to Torrens' 'Production of Wealth,' there seems to be nothing like a reply to the strictures in this 'Essay.' [89] Here as elsewhere spelt in the old fashion 'expences.' [90] Probably one of the two he published on the Currency in 1812 and 1813 respectively. [91] MS. hopelessly torn. [92] The name appears as Baswi in Ricardo's letters to Say. Even in Ricardo's clear handwriting Basevi and Baswi would be hardly distinguishable. [93] Probably the statement given at the beginning of next letter. [94] This really happens in the cases made prominent by Mr. Carey, 'Social Science,' I. iv (1858), where historical circumstances have made cultivation begin with indifferent instead of fertile soils. [95] Because the remaining six would purchase what eight purchased before. [96] Napoleon landed near Frejus on 26th Feb., 1815. [97] Or rather in the Appendix to it, p. 292 (McCulloch's ed.). [98] See the Note at the end of this letter. [99] Ricardo was one of the original members of the Geological Society. See McCulloch's ed. of his Works, p. xvii. [100] Blake, probably William Blake, author of 'Observations on the principles which regulate the course of Exchange and on the present depreciated state of the Currency,' 1810. [101] Probably G. B. Greenough, F.R.S., F.S.L., and President of the Geological Society, who wrote on Geology, 1819. [102] They were only foreign in the sense of being articles, not only manufactured in this country but also imported from abroad, e.g. soap (under a heavy duty) from France, Italy, and Spain. [103] Probably William Smyth, Professor of Modern History at Cambridge, friend of Mackintosh and Horner. [104] Dr. Alexander Crombie, schoolmaster, theologian, and economist, had published in the Pamphleteer, vol. x, in 1813, a 'Letter to David Ricardo, containing an analysis of his pamphlet on the Depreciation of Bank Notes'. About a year after the date of this letter he wrote 'Letters on the Agricultural Interest'. When Torrens did not get his inspiration from Adam Smith he seems to have got it from Dr. Crombie, for whom he had profound respect. See Torrens' Essay on Money and Paper Currency, 1812, and Essay on External Corn Trade (Preface), 1815. [105] Hopelessly torn by the seal. [106] Probably they had had a private conversation on the subject. On the 28th June Whitbread made a lengthened speech in the House to this effect. [107] A loan of 36,000,000 was contracted in 1815. See Gilbart's 'History and Principles of Banking' (2nd ed. 1835), p. 54. [108] Pascoe Grenfell, member of the Bullion Committee, a strong supporter of Wilberforce in the matter of Emancipation. His motions in Parliament on the subject of the Bank of England are given in the appendix to Ricardo's 'Economical and Secure Currency' (Wks. p. 451), a pamphlet which by its author's admission (p. 395) owes much to him. [109] Cf. Ricardo's Pol. Econ. and Tax. ch. vi, Profits. [110] Probably 'An Address to the Nation on the relative importance of Agriculture and Manufactures, with remarks on the doctrines of Mr. Malthus,' 1815. [111] High Price of Corn, 1815. [112] Spelt throughout 'Othaeite.' [113] Probably Henry Warburton, mentioned e.g. in Personal Life of Geo. Grote, p. 75. In a MS. letter from Joseph Hume to Francis Place, 19th Oct., 1839 (in the Place Collection), he refers to Mr. Warburton as a friend of Place who had been too much neglected by the Whigs in office. [114] In Arthur Young's Farmer's Calendar, 1815, p. 501, £10 are said to be the average capital needed for stocking a farm in 1814, and £15 are counted high. [115] Probably the 'Proposals for an Economical and Secure Currency, with observations on the profits of the Bank of England as they regard the public and the proprietors of Bank Stock.' See Works (McCulloch's ed.), pp. 391 sq. One 'proposal' was that the Bank should be obliged to deliver uncoined bullion, at the Mint price (instead of coined money) in exchange for its notes. [116] Presumably Ricardo's first pamphlet, of 1810. Cf. Works (McCulloch's ed.) p. xxiii. [117] They amounted to 27,300,000 ('Econ. and Sec. Currency,' Wks., p. 450, but cf. p. 413). [118] Probably 'Econ. and Secure Currency.' See note to Letter XLII. [119] See Malthus and his Work, p. 422. [120] 'Additions to the 4th and former editions of an Essay on the Principle of Population,' published in June 1817, both in the separate form and as part of the 5th edition of the Essay. [121] The Post Office London Directory of the time gives Ricardo's full City address as 4 Shorter's Court, Throgmorton Street. [122] The advice was taken. [123] Which gave him his first stimulus to economical study when he read it at Bath in 1799. See McCulloch's ed. of Wks., pp. xvii, xviii. [124] See note at end of this letter. [125] 'Economical and Secure Currency.' See note to previous letter. [126] Cf. 'Econ. and Secure Currency,' Wks., pp. 433, 434. [127] Letter to the Earl of Liverpool on Agriculture, 1816. [128] The edition reprinted in Wks., ed. McCulloch, pp. 391 seq. [129] The question was whether the Income Tax, being a war tax, was to cease with the war. The Ministry were forced to yield. [130] Not Chas. Bosanquet who wrote on the Bullion Report, but Jacob Bosanquet, a Director of the East India Company. [131] Letter to Lord Grenville occasioned by his observations on E. India Co.'s education of Civil Servants, 1813. [132] See Malthus and his Work, p. 424. [133] Hon. Wm. F. Elphinstone, a Director of the East India Company. [134] Written without a capital, as the days of the week usually are in these letters. [135] From the description which follows, this must be the last section ('Mr. Malthus's opinions on Rent') in 'Political Economy and Taxation,' 1817. [136] From Letters LII, LIII, it is clear that the printer had to wait for the whole MS. much longer than was at first intended. [137] This sentence is quoted by Empson, Edin. Review, Jan., 1837, p. 498. [138] Essay on Population. [139] Part of this sentence is quoted by Empson in Edin. Review, Jan., 1837, p. 498. [140] See Malthus, Pol. Econ. (1820), p. 241: 'The real wages of labour consist of their value, estimated in the necessaries, conveniences, and luxuries of life.' The 2nd ed. (1836) adds, 'which the money wages of the labourer enable him to purchase' (p. 217). In 'Definitions' (1827) he says 'command' instead of 'purchase,' (p. 239). [141] 'Statements respecting the East India College,' etc., 1817. [142] See the long and interesting Report of Select Committee of House of Commons on the Poor Laws. Ann. Reg. 1817, Chron. pp. 263-302. Cf. Ann. Reg. 1816, Chron. pp. 151 and 345. [143] 'Statements respecting the East India College,' 1817. [144] Rent, p. 8. The second is the fact that the necessaries of life create their own demand by leading to an increase of population. [145] P. 40. [146] Ibid., p. 15. [147] The comments in this letter occur at greater length in the last chapter of Ricardo's 'Pol. Econ. and Tax.': 'Mr. Malthus's opinions on Rent' (1st ed., 1817), McC. ed., pp. 243 seq. [148] 'Additions to the Fourth and Former Editions of an Essay on the Principle of Population,' etc., 1817. [149] Should be p. 17. [150] P. 21. [151] 10,488,000 is the figure given by Malthus, l. c. p. 18. [152] Should be p. 21. Ricardo may have had a proof before him. [153] Charles Grant, M. P., later Lord Glenelg. He was a Director in the preceding year (1816). [154] Hon. Douglas J. W. Kinnaird. [155] Pol. Econ. and Tax. ch. xxxii. [156] One of whom was probably James Mill. See 'Autobiography of John S. Mill,' p. 27. [157] 'Conversations on Political Economy' (anon. 1816), in which the interlocutors are 'Mrs. B.' and 'Caroline.' [158] In original, 'addition.' [159] On the External Corn Trade. [160] Joseph Hume, M. P. for Melcombe Regis, and later for Montrose. He had much knowledge of India, and was at that time (vainly) endeavouring to get a seat on the Board of Directors. [161] I.e. the note which now appears Ric. Wks., p. 253, ('Upon showing this passage to Mr. Malthus at the time when these papers were going to the press,' etc.). In that note Malthus is made to say he used the words real price twice by mistake in Ricardo's sense, cost of production, instead of his own, power of purchasing other commodities. [162] Professor of Hindu literature and of the History of Asia, at Haileybury College. [163] Professor of Mathematics. [164] M. de Foligny, according to the E. India Register for this year, (1817). [165] Probably the 'Petit Volume contenant quelques aperçus des Hommes et de la Société.' See Oeuvres Diverses, pp. 661 seq. [166] See the passages quoted by Malthus, Pol. Econ. (1820), pp. 382 seq. Cf. 'Additions' to Essay, pp. 243 n., 235. [167] Probably Dr. W. H. Wollaston or Woolaston, F.R.S., the chemist. [168] Pp. 81 seq. of McCulloch's edition of Works. [169] 'British India.' [170] The physician who, along with Dr. Marcet, attended Sir Sam. Romilly on the day before his death (Nov. 1818). [171] Lord Lansdowne's house in Wiltshire. [172] Essay on Pop., 4th ed. See above, p. 128. [173] See next page. [174] Queen Sophia went there with Princess Elizabeth at the end of November. (Ann. Register, 1817, Chron., p. 123.) [175] Probably the 'Political Economy,' 1820. [176] J. R. McCulloch, in all probability. [177] 'British India.' [178] Mill's estimate, however, has seldom been accepted by later authorities. [179] Written by oversight 1817. The postmark and all the internal evidence show that 1818 must be the year. [180] Less famous perhaps by his numerous writings and speeches on the currency than by his Letter to his leaseholders in the spring of 1811, calling on them to pay their rents in gold or else in such an amount in notes as would cover the depreciation since the date of their leases. The text of the letter is given by Cobbett, Paper against Gold, letter XXV. [181] 'Political Economy and Taxation.' [182] Mackintosh entered on his duties as Professor of Law there 1818. [183] 1818. See Ann. Register, 1818, Chron., p. 207. [184] British India, publ. 1818. [185] It was dissolved on 10th June. [186] The Bill for renewing Restriction for another year had passed the Commons, and was to be moved by Lord Liverpool on 26th May, 1818. Lord Grenville spoke against it at great length. [187] 'Plan of Parliamentary Reform in the Form of a Catechism, with reasons for each article. With an Introduction, showing the necessity of Radical and the inadequacy of Moderate Reform' (1817). [188] A glimpse of his mental history is given in the remarkable letter to Sharp, written from Bombay, on 9th Dec. 1804. He had even then outlived his reaction against the ideas of the French Revolution. See Life, vol. i. 128-136. [189] A grandchild. [190] Ricardo's son-in-law. See above, p. 41. Ricardo eventually sat for Portarlington in Queen's County. [191] The poll was open for fifteen days, and on Saturday, July 4th, the result was declared: Romilly (Whig) 5339, Burdett (Whig) 5238, Maxwell (Tory) 4808, Orator Hunt 84. [192] We should expect 'detail.' [193] He had added (and then cancelled): 'but it appears to me that our difference is occasioned by what I think the improper sense in which you use the word Wealth.' [194] Franked by H. J. Shepherd (M.P. for Shaftesbury, Dorsetshire). [195] June, 1818. 'Mr. Ricardo,' says the reviewer, 'has done more for the improvement [of Political Economy] than any other writer with perhaps the single exception of Dr. Smith' (p. 60). He follows up this laudation with a full analysis of the doctrines of the book ('Political Economy and Taxation'), finding nothing with which he disagrees. [196] Here, as frequently elsewhere, written M'Cullock. [197] The estate of Lord Lansdowne, about three miles from Chippenham, Wilts. As Lord Henry Petty, this statesman had been Chancellor of the Exchequer in the short-lived government of 'All the Talents' in 1806. He held office in Grey's Reform Ministry 1831. He joined with Malthus and others in founding the Statistical Society 1834. He outlived his most famous contemporaries, and died in 1863 in his 83rd year. [198] Famous by association with the Oregon dispute. He recorded his impressions of England in a book called 'Narrative of a Residence at the Court of London from 1817 to 1825,' (publ. 1833), and 'Memoranda of a Residence at the Court of London, comprising Incidents Official and Personal, from 1819 to 1825,' (touching on Oregon and other questions) (1845). [199] Bentham was then over 70. [200] Franked by himself. [201] See Note 1 at end of this letter. [202] See Macvey Napier's Correspondence (Macmillan, 1879), p. 23, where Jas. Mill (writing on 10th Sept. 1819), says of Ricardo to Napier, 'it is unaffected diffidence that is the cause of his unwillingness, for he is as modest as he is able.' Cf. also Bain's Life of Jas. Mill, p. 187. [203] Probably, that deference for Ricardo's authority was delaying his new book on 'Political Economy.' [204] See note 2 at end of this letter. [205] 'The principal domestic events of the year [1819] are intimately connected with the movements of a set of men who have received the name of Radical Reformers,' Annual Register, 1819, Hist. p. 103. [206] Name not clear in MS. [207] Franked by himself. [208] 'Principles of Political Economy considered with a view to their practical application' (Murray), 1820. [209] The three foregoing sentences are quoted by Empson, Edin. Review, Jan. 1837, p. 478, though the letter is wrongly dated. [210] Probably the note on p. 485: 'Mr. Ricardo deserves the thanks of the country' for having suggested to it a comparatively easy means of returning to Cash Payments. [211] Ch. vii. sect. iii. pp. 351 seq. [212] Several words wanting. Page much torn. But cf. Letter LXXIII, p. 173. [213] Hitherto 'McCullock.' Ricardo at last falls into the Scotch way of spelling. [214] 'An important Liberal organ,' of which in 1822 the editor was Walter Coulson a friend of Jas. Mill. (See Bain's Life of the latter, p. 183.) In 1811 the editor was Mr. Quin, and its views were at least not liberal enough for Cobbett. See Paper against Gold, p. 310. [215] Franked by himself. [216] Lettres à M. Malthus sur différents sujets d'économie politique, notamment sur les causes de la stagnation générale du commerce (Paris, 1820). In addition to these 5 open letters, a letter of Say to Malthus (Feb. 1827) together with the reply of Malthus is given in Oeuvres Diverses de J. B. Say, pp. 502-515. [217] Perhaps Oct. 1819 (see e.g. p. 471), 'on Mr. Owen's Plans for relieving the National Distress.' [218] Spelt here, as elsewhere, 'chuses.' [219] Of the 'Traité d'�conomie Politique' (1819). See Oeuvres Diverses, p. xiii. Say had made considerable alterations. [220] See Ricardo, Pol. Econ. and Tax., ch. XX. 'Value and Riches,' Wks. pp. 165 seq., 3rd ed. [221] Edin. Review, Aug. 1820. McCulloch proposed to make the tithes a poundage on Rents, varying therefore with the net income and not with the gross produce. [222] Elements of Political Economy, 1821. See J. S. Mill, Autobiography, pp. 27, 28, for whose use (in the first place) it was prepared. For clear logical precision it stands alone among economical text-books. [223] See Wks. (ed. McCull.), Preface, p. XXXI. [224] Franked by himself 9th Oct., which is therefore the real date of the letter. [225] Written 'controul.' [226] The foregoing three sentences are quoted by Empson, Edin. Review, Jan. 1837, p. 499. [227] 'Real value in exchange may be defined to be the power of an object to command in exchange the necessaries and conveniences of life, including labour,' Malthus, Pol. Econ. (1820), p. 62. 'Wages are to be estimated by their real value, namely, by the quantity of labour and capital employed in producing them,' Ricardo, Pol. Ec. 2nd ed. 1819, p. 44, Wks., p. 32. [228] See Pol. Econ. and Tax. ch. xxi. 'Effects of Accumulation on Profits and Interest.' [229] The arrangement is altered, and we have such significant changes as 'almost exclusively' instead of 'solely.' [230] Franked by himself. [231] See Wks. p. 176. 'Malthus and his Work,' p. 294. [232] See Ricardo, Wks. pp. 110-112. [233] A Sinking Fund. [234] This simile is used by Malthus in Quart. Rev. Jun. 1824, with 'old wine' in place of 'oak trees.' [235] Franked by himself. Date only on cover. [236] Perhaps the passage beginning at foot of p. 41 of Wks. and pp. 65-6 of 2nd ed. of Pol. Ec. and Tax. (where he is describing the effect of agricultural improvements), 'With the same population and no more, there can be no demand for any additional quantity of corn,' etc. etc., as far as the sentence, 'A considerable period would have elapsed attended with a positive diminution of rent.' [237] Franked by himself. [238] Ch. xxxi, in which he explains his change of mind with great frankness. Cf. Author's Advertisement to 3rd ed. of Pol. Econ. and Tax., Wks. p. 3. McCulloch's views were too early stereotyped. For his character and habits generally, see Bain, Life of Jas. Mill, p. 183, etc. [239] It is due to McCulloch to say that in his published notices of Ricardo he conceals his consternation. [240] Franked by himself. [241] Or Bromeberrow, one of Ricardo's estates, afterwards left to his son Osman. [242] Anon. London, 1821. The writer criticises Malthus closely though in a friendly spirit. He is less polite to Say. [243] Also anonymous. [244] Franked by himself. [245] Imported foreign goods. See below. [246] 'An Essay on the Production of Wealth, with an Appendix, in which the principles of Political Economy are applied to the actual circumstances of this country,' London, 1821. The Preface is dated June 30, 1821. [247] Franked by himself. Date only on cover. [248] _Sic_, a slip of the pen for 'rise.' [249] [Note by Ricardo.] On reading over my letter I am doubtful whether this opinion respecting exportable commodities is correct. [250] July 1821, no. LXX. See Malthus and his Work, p. 368. Ricardo evidently suspected Malthus to be the author. See conclusion of next letter. [251] The writer added but struck out: 'and wages must be necessarily high, in which case she may employ nearly the same amount of capital.' [252] Franked by himself. [253] See 'Political Economy and Taxation,' chapter on Value. [254] Franked by himself. [255] The Political Economy Club was founded by Tooke in 1821, though there had been informal meetings of the members for some time before in Ricardo's house. See Bain's Life of Jas. Mill, p. 198, where the programme of the club is given. It included discussion and propaganda, replies to unsound newspapers, and the circulation of sound literature. [256] 'Essay on the Production of Wealth,' 1821. See above, p. 195. [257] This had been its feature for some time. 'There is a canting Scotchman in London who publishes a paper called the "Champion," who is everlastingly harping upon the virtues of the "fireside," and who inculcates the duty of quiet submission.' Cobbett, Pol. Reg., Nov. 2, 1816, p. 460. Cobbett, like many others, took the received Political Economy for a doctrine of political quietism. [258] Necker's asylum in 1790 and the scene of his death in 1804, the refuge also of his daughter Madame de Stael, when driven from Paris by Napoleon. Madame de Stael died here in 1817, and her last book, 'Considérations sur les principaux événements de la Revolution Française,' was brought out in 1818 by her son the Baron de Stael and the Duc de Broglie jointly. Sismondi had long been a familiar friend of the house, and it was probably he who had introduced Ricardo. The 'Nouveaux Principes d'écon. polit.' (Sismondi's chief economical work) had appeared in 1819. [259] The publicist. See 'Malthus and his Work,' p. 416. [260] See Ricardo, Works, p. 171; De Tracy agreed with Say's definitions of 'value,' 'riches,' and 'utility.' He was at this time 68, and his chequered life (of war, politics, and authorship) did not end till 1836. His economics are properly a branch of his philosophy. [261] Louis had been, like his brother, in the Cotton manufacture, but left it for Sugar Refining. His 'Considérations sur l'industrie et la législation,' etc., published in 1822, is the book to which Ricardo refers. [262] Germain Garnier, author of 'L'Histoire de la Monnaie' and translator not only of 'The Wealth of Nations' but of 'Caleb Williams,' etc., had died 4th Oct., 1821. [263] The 'Political Economy.' The 2nd ed. did not appear till 1836, after its author's death. [264] April 1822, pp. 239 seq. on the State of the Currency. This is the article closely criticised by Tooke in 'High and Low Prices,' Part i. pp. 19 seq. [265] 'A Letter to David Ricardo, Esq., M.P., on the true principle of estimating the extent of the late Depreciation in the Currency and on the effects of Mr. Peel's Bill for the Resumption of Cash Payments by the Bank,' by Thomas Paget, Esq., 1822 (July). It contains more rhetoric than logic. [266] One of his chief Parliamentary opponents, in the agricultural interest. [267] 'Thoughts and Details on High and Low Prices' was published early in 1823. Tooke was for thirty years a Russia merchant. [268] 'The Measure of Value Stated and Illustrated, with an Application of it to the Alterations in the Value of the English Currency since 1790,' London, 1823. [269] See note to this letter. [270] Here as elsewhere written 'chuse.' [271] Written here as elsewhere 'potatoe.' [272] Franked by himself. Date and address only on cover. [273] Gold, with many reservations. See Wks., pp. 29 to 33. But compare p. 231 below. [274] Published in 1824 by his family, and reprinted in Wks., ed. MacC., pp. 499 seq. [275] Franked by himself. [276] Franked by himself. [277] W. of N., I. vi. 23, 1. [278] Edin. Rev., Jan. 1837, p. 499. [279] Life, pp. 209-213. 
17196	----	Life of Adam Smith By JOHN RAE London MACMILLAN & CO. AND NEW YORK 1895 PREFACE The fullest account we possess of the life of Adam Smith is still the memoir which Dugald Stewart read to the Royal Society of Edinburgh on two evenings of the winter of 1793, and which he subsequently published as a separate work, with many additional illustrative notes, in 1810. Later biographers have made few, if any, fresh contributions to the subject. But in the century that has elapsed since Stewart wrote, many particulars about Smith and a number of his letters have incidentally and by very scattered channels found their way into print. It will be allowed to be generally desirable, in view of the continued if not even increasing importance of Smith, to obtain as complete a view of his career and work as it is still in our power to recover; and it appeared not unlikely that some useful contribution to this end might result if all those particulars and letters to which I have alluded were collected together, and if they were supplemented by such unpublished letters and information as it still remained possible to procure. In this last part of my task I have been greatly assisted by the Senatus of the University of Glasgow, who have most kindly supplied me with an extract of every passage in the College records bearing on Smith; by the Council of the Royal Society of Edinburgh, who have granted me every facility for using the _Hume Correspondence_, which is in their custody; and by the Senatus of the University of Edinburgh for a similar courtesy with regard to the _Carlyle Correspondence_ and the David Laing MSS. in their library. I am also deeply indebted, for the use of unpublished letters or for the supply of special information, to the Duke of Buccleuch, the Marquis of Lansdowne, Professor R.O. Cunningham of Queen's College, Belfast, Mr. Alfred Morrison of Fonthill, Mr. F. Barker of Brook Green, and Mr. W. Skinner, W.S., late Town Clerk of Edinburgh. CONTENTS CHAPTER I EARLY DAYS AT KIRKCALDY Birth and parentage, 1. Adam Smith senior, 1; his death and funeral, 3. Smith's mother, 4. Burgh School of Kirkcaldy, 5. Schoolmaster's drama, 6. School-fellows, 6. Industries of Kirkcaldy, 7. CHAPTER II STUDENT AT GLASGOW COLLEGE Professors and state of learning there, 9. Smith's taste for mathematics, 10. Professor R. Simson, 10. Hutcheson, 11; his influence over Smith, 13; his economic teaching, 14. Smith's early connection with Hume, 15. Snell exhibitioner, 16. College friends, 17. CHAPTER III AT OXFORD Scotch and English agriculture, 18. Expenses at Oxford, 19. Did Smith graduate? 20. State of learning, 20; Smith's censure of, 20. His gratitude to Oxford, 22. Life in Balliol College, 22. Smith's devotion to classics and belles-lettres, 23. Confiscation of his copy of Hume's _Treatise_, 24. Ill-health, 25. Snell exhibitioners ill-treated and discontented at Balliol, 26. Desire transference to other college, 27. Smith's college friends, or his want of them, 28. Return to Scotland, 28. CHAPTER IV LECTURER AT EDINBURGH Lord Kames, 31. Smith's class on English literature, 32. Blair's alleged obligations to Smith's lectures, 33. Smith's views as a critic, 34. His addiction to poetry, 35. His economic lectures, 36. James Oswald, M.P., 37. Oswald's economic correspondence with Hume, 37. Hamilton of Bangour's poems edited by Smith, 38. Dedication to second edition, 40. CHAPTER V PROFESSOR AT GLASGOW Admission to Logic chair, 42. Letter to Cullen about undertaking Moral Philosophy class, 44. Letter to Cullen on Hume's candidature for Logic chair and other business, 45. Burke's alleged candidature, 46. Hume's defeat, 47. Moral Philosophy class income, 48. Work, 50. Professor John Millar, 53. His account of Smith's lectures, 54; of his qualities as lecturer, 56. Smith's students, 57. H. Erskine, Boswell, T. Fitzmaurice, Tronchin, 58, 59. Smith's religious views suspected, 60. His influence in Glasgow, 60. Conversion of merchants to free trade, 61. Manifesto of doctrines in 1755, 61. Its exposition of economic liberty, 62. Smith's alleged habitual fear of the plagiarist, 64. This manifesto not directed against Adam Ferguson, 65. CHAPTER VI THE COLLEGE ADMINISTRATOR Smith's alleged helplessness in business transactions, 66; his large participation in business at Glasgow, 67. Appointed Quæstor, 68; Dean of Faculty, 68; Vice-Rector, 68. Dissensions in the University, 69; their origin in the academic constitution, 70. Enlightened educational policy of the University authorities, 71. James Watt, University instrument-maker; Robert Foulis, University printer, 71. Wilson, type-founder and astronomer. The Academy of Design. Professor Anderson's classes for working men, 72. Smith and Watt, 73. Smith's connection with Foulis's Academy of Design, 74. Smith and Wilson's type-foundry, 77. Proposed academy of dancing, fencing, and riding in the University, 79. Smith's opposition to the new Glasgow theatre, 80; his generally favourable views on theatrical representations, 81. His protests against Professor Anderson voting for his own translation to Natural Philosophy chair, 83. Joins in refusing Professor Rouet leave to travel abroad with a pupil, and in depriving him of office for his absenteeism, 84. CHAPTER VII AMONG GLASGOW FOLK Glasgow at period of Smith's residence, 87; its beauty, 88; its expanding commerce and industry, 89; its merchants, 90. Andrew Cochrane, 91. The economic club, 92. Duty on American iron and foreign linen yarns, 93. Paper money, 94. The Literary Society, 95. Smith's paper on Hume's Essays on Commerce, 95. "Mr. Robin Simson's Club," 96. Saturday dinners at Anderston, 97. Smith at whist, 97. Simson's ode to the Divine Geometer, 98. James Watt's account of this club, 99. Professor Moor, 99. CHAPTER VIII EDINBURGH ACTIVITIES Edinburgh friends, 101. Wilkie, the poet, 102. William Johnstone (afterwards Sir William Pulteney), 103. Letter of Smith introducing Johnstone to Oswald, 103. David Hume, 105. The Select Society, 107; Smith's speech at its first meeting, 108; its debates, 109; its great attention to economic subjects, 110; its practical work for improvement of arts, manufactures, and agriculture, 112; its dissolution, 118. Thomas Sheridan's classes on elocution, 119. The _Edinburgh Review_, 120; Smith's contributions, 121; on Wit and Humour, 122; on French and English classics, 123; on Rousseau's discourse on inequality, 124. Smith's republicanism, 124. Premature end of the _Review_, 124; Hume's exclusion from it, 126. Attempt to subject him to ecclesiastical censure, 127. Smith's views and Douglas's _Criterion of Miracles Examined_, 129. Home's _Douglas_, 130. Chair of Jurisprudence in Edinburgh, 131. Miss Hepburn, 133. The Poker Club, 134; founded to agitate for a Scots militia, 135. Smith's change of opinion on that subject, 137. The tax on French wines, 139. CHAPTER IX THE "THEORY OF MORAL SENTIMENTS" Letter from Hume, 141. Burke's criticism, 145. Charles Townshend, 146. Letter from Smith to Townshend, 148. Second edition of Theory, 148. Letter from Smith to Strahan, 149. The union of Scotland with England, 150. Benjamin Franklin, 150. CHAPTER X FIRST VISIT TO LONDON Conversion of Lord Shelburne to free trade, 153. Altercation with Dr. Johnson, 154. Boswell's account, 155; Sir Walter Scott's, 156; Bishop Wilberforce's, 157. CHAPTER XI LAST YEAR IN GLASGOW Letter on Rev. W. Ward's Rational Grammar, 159. Letter to Hume introducing Mr. Henry Herbert, 161. Smith's indignation at Shelburne's intrigues with Lord Bute, 162. On Wilkes, 163. Letter from Hume at Paris, 163. Letter from Charles Townshend about Buccleugh tutorship, 164. Smith's acceptance, 165. Salary of such posts, 165. Smith's poor opinion of the educational value of the system, 166. Smith's arrangements for return of class fees and conduct of class, 167. Letter to Hume announcing his speedy departure for Paris, 168. Parting with his students, 169. Letter resigning chair, 172. CHAPTER XII TOULOUSE Sir James Macdonald, 174. Toulouse, 175. Abbé Colbert, 175. The Cuthberts of Castlehill, 176. Archbishop Loménie de Brienne, 177. Letter to Hume, 178. Trip to Bordeaux, 179. Colonel Barré, 179. Toulouse and Bordeaux, 180. Sobriety of Southern France, 180. Duke of Richelieu, 181. Letter to Hume, 181; letter to Hume, 183. Visit to Montpellier, 183. Horne Tooke, 183. The States of Languedoc, 183. The provincial assembly question, 184. Parliament of Toulouse, 185. The Calas case, 186. CHAPTER XIII GENEVA Its constitution, 188. Voltaire, 189; Smith's veneration for, 190; remarks to Rogers and Saint Fond on, 190. Charles Bonnet, G.L. Le Sage, 191. Duchesse d'Enville and Duc de la Rochefoucauld, 192. Lord Stanhope, Lady Conyers, 193. CHAPTER XIV PARIS Arrival, 194. Departure of Hume, 196. Smith's reception in society, 197. Comtesse de Boufflers, 198. Baron d'Holbach, 199. Helvetius, 200. Morellet, 200. Mademoiselle de l'Espinasse, 201. Turgot and D'Alembert, 202. Question of literary obligations, 203. Alleged correspondence, 204. Smith's opinion of Turgot, 205. Necker, 206. Dispute between Rousseau and Hume, 206. Letter to Hume, 208. Madame Riccoboni, 210; letter from her to Garrick introducing Smith, 211. Visit to Abbeville, 212. A marquise, 213. The French theatre, 214. Smith's love of music, 214. The French economists, 215. Dupont de Nemours's allusion, 215. Quesnay, 216. Views of the political situation, 217. Mercier de la Rivière and Mirabeau, 218. Activity of the sect in 1766, 219. Smith's views of effect of moderate taxation on wages, 220. Illness of Duke of Buccleugh at Compiègne, 222. Letter of Smith to Townshend, 222. Hume's perplexity where to stay, 225. Death of Hon. Hew Campbell Scott, 226. Duke of Buccleugh on the tutorship, 226. Smith's merits as tutor, 227. His improvement from his travels, 227; their value to him as thinker, 228. Did he foresee the Revolution? 229. His views on condition of French people, 230. His suggestion for reform of French taxation, 231. CHAPTER XV LONDON Arrival in November 1766, 232. On Hume's continuing his _History_, 233. Third edition of _Theory_, 233. Letter to Strahan, 234. Letter to Lord Shelburne, 233. Alexander Dalrymple, hydrographer, 235. Colonies of ancient Rome, 236. Anecdote of Smith's absence of mind, 237. F.R.S., 238. CHAPTER XVI KIRKCALDY Count de Sarsfield, 240. Letter from Smith to Hume, 241. His daily life in Kirkcaldy, 242. Letter to Hume from Dalkeith, 243. Bishop Oswald, 243. Captain Skene, 243. The Duchess of Buccleugh, 243. Home-coming at Dalkeith, 244. The Duke, 245. Stories of Smith's absence of mind, 246. Letter to Lord Hailes on old Scots Acts about hostellaries, 247. On the Douglas case, 248. Reported completion of _Wealth of Nations_ in 1770, 251. Smith receives freedom of Edinburgh, 251. Letter to Sir W. Pulteney on his book and an Indian appointment, 253. Crisis of 1772, 254. The Indian appointment, 255; Thorold Rogers on, 256. Work on _Wealth of Nation_ after this date, 257. Tutorship to Duke of Hamilton, 258. Anecdote of absence of mind, 259. Habits in composing _Wealth of Nations_, 260. CHAPTER XVII LONDON Letter to Hume appointing him literary executor, 262. Long residence in London, 263. Assistance from Franklin, 264. Recommendation of Adam Ferguson for Chesterfield tutorship, 266. Hume's proposal as to Smith taking Ferguson's place in the Moral Philosophy chair, 266. The British Coffee-House, 267. Election to the Literary Club, 267. Smith's conversation, 268. His alleged aversion to speak of what he knew, 269. Attends William Hunter's lectures, 271. Letter to Cullen on freedom of medical instruction, 273. Hume's health, 280. Smith's zeal on the American question, 281. Advocacy of colonial incorporation, 282. CHAPTER XVIII "THE WEALTH OF NATIONS" Terms of publication and sales, 285. Letter from Hume, 286. Gibbon's opinion, 287; Sir John Pringle's, 288; Buckle's, 288. General reception, 288. Fox's quotation, 289. Fox and Lauderdale's conversation on Smith, 289. Quotations in Parliament, 290. Popular association of economics with "French principles," 291. Prejudice against free trade as a revolutionary doctrine, 291. Editions of the book, 293. Immediate influence of the book on English taxation, 294. CHAPTER XIX THE DEATH OF HUME Smith and John Home meet Hume at Morpeth, 295. The _Dialogues on Natural Religion_, 296. Letter from Hume, 297. Hume's farewell dinner, 299. Correspondence between Hume and Smith about the _Dialogues_, 300. Hume's death and monument in Calton cemetery, 302. Correspondence of Smith with Home or Ninewells, 302. Correspondence with Strahan on the _Dialogues_, 305. Copy money for _Wealth of Nations_. Strahan's proposal to publish selection of Hume's letters, 309. Smith's reply, 310. Clamour raised by the letter to Strahan on Hume's death, 311. Bishop Horne's pamphlet, 312. Was Hume a Theist? 313. Mackenzie's "La Roche," 314. CHAPTER XX LONDON AGAIN--APPOINTED COMMISSIONER OF CUSTOMS Mickle's translation of the _Lusiad_, 316. His causeless resentment against Smith, 317. Governor Pownall, 318. Letter of Smith to Pownall, 319. Appointed Commissioner of Customs, 320. Lord North's indebtedness to the _Wealth of Nations_, 320. Salary of post, 321. Correspondence with Strahan, 321. CHAPTER XXI IN EDINBURGH Panmure House, Canongate, 325; Windham on, 326. Sunday suppers, 327. Smith's library, 327. His personal appearance, 329. Work in the Custom House, 330. Anecdotes of absence of mind, 330. Devotion to Greek and Latin classics, 333. The Oyster Club, 334. Dr. Black and Dr. Hutton, 336. CHAPTER XXII VARIOUS CORRESPONDENCE IN 1778 Letter from Duc de la Rochefoucauld, 339. Letter to Lord Kames, 341. Sir John Sinclair's manuscript work on the Sabbath, 342. The surrender at Saratoga, 343. Letter to Sir John Sinclair on the _Mémoires concernant les Impositions_, 343. Smith's view of taxes on the necessaries and on the luxuries of the poor, 345. CHAPTER XXIII FREE TRADE FOR IRELAND Commercial restrictions on Ireland, 346. Popular discontent, 347. Demand for free trade, 347. Grattan's motion, 348. Smith consulted by Government, 349. Letter to Lord Carlisle, 350. Letter from Dundas to Smith, 352. Smith's reply, 353. Smith's advocacy of union, 356. CHAPTER XXIV THE "WEALTH OF NATIONS" ABROAD AND AT HOME Danish translation, 357. Letter of Smith to Strahan, 357. French translations, 358; German, 359; Italian and Spanish, 360. Suppressed by the Inquisition, 360. Letter to Cadell, 361. Letter to Cadell on new edition, 362. Dr. Swediaur, 362. The additional matter, 363. CHAPTER XXV SMITH INTERVIEWED Reminiscences in the _Bee_, 365. Opinion of Dr. Johnson, 366; Dr. Campbell of the _Political Survey_, 366; Swift, 367; Livy, 367; Shakespeare, 368; Dryden, 368; Beattie, 368; Pope's _Iliad_, Milton's shorter poems, Gray, Allan Ramsay, Percy's _Reliques_, 369; Burke, 369; the Reviews, 370. Gibbon's _History_, 371. Professor Faujas Saint Fond's reminiscences, 372. Voltaire and Rousseau, 372. The bagpipe competition, 372. Smith made Captain of the Trained Bands, 374. Foundation of Royal Society of Edinburgh, 375. Count de Windischgraetz's proposed reform of legal terminology, 376. CHAPTER XXVI THE AMERICAN QUESTION AND OTHER POLITICS Smith's Whiggism, 378. Mackinnon of Mackinnon's manuscript treatise on fortification, 379. Letter from Smith, 380. Letter to Sir John Sinclair on the Armed Neutrality, 382. Letter to W. Eden (Lord Auckland) on the American Intercourse Bill, 385. Fox's East India Bill, 386. CHAPTER XXVII BURKE IN SCOTLAND Friendship of Burke and Smith, 387. Burke in Edinburgh, 388. Smith's prophecy of restoration of the Whigs to power, 389. With Burke in Glasgow, 390. Andrew Stuart, 391. Letter of Smith to J. Davidson, 392. Death of Smith's mother, 393. Burke and Windham in Edinburgh, 394. Dinner at Smith's, 394. Windham love-struck, 395. John Logan, the poet, 396. Letter of Smith to Andrew Strahan, 396. CHAPTER XXVIII THE POPULATION QUESTION Dr. R. Price on the decline of population, 398. Dr. A. Webster's lists of examinable persons in Scotland, 399. Letter of Smith to Eden, 400. Smith's opinion of Price, 400. Further letter to Eden, 400. Henry Hope of Amsterdam, 401. Letter to Bishop Douglas, introducing Beatson of the _Political Index_, 403. CHAPTER XXIX VISIT TO LONDON Meeting with Pitt at Dundas's, 405. Smith's remark about Pitt, 405. Consulted by Pitt, 406. Opinion on Sunday schools, 407. Wilberforce and Smith, 407. The British Fisheries Society, 408. Smith's prognostication confirmed, 409. Chosen Lord Rector of Glasgow University, 410. Letter to Principal Davidson, 411. Installation, 412. Sir John Leslie, 412. Letter of Smith to Sir Joseph Banks, 413. Death of Miss Douglas, 414. Letter to Gibbon, 414. CHAPTER XXX VISIT OF SAMUEL ROGERS Smith at breakfast, 416. Strawberries, 417. Old town of Edinburgh, 417. Loch Lomond, 417. The refusal of corn to France, 417. "_That_ Bogle," 418. Junius, 429. Dinner at Smith's, 420. At the Royal Society meeting, 421. Smith on Bentham's _Defence of Usury_, 422. CHAPTER XXXI REVISION OF THE "THEORY" Letter from Dugald Stewart, 426. Additional matter in new edition of _Theory_, 427. Deletion of the allusion to Rochefoucauld, 427. Suppressed passage on the Atonement, 428. Archbishop Magee, 428. Passage on the Calas case, 429. CHAPTER XXXII LAST DAYS Declining health, 431. Adam Ferguson's reconciliation and attentions, 433. Destruction of Smith's MSS., 434. Last Sunday supper, 434. His words of farewell, 435. Death and burial, 435. Little notice in the papers, 436. His will and executors, 436. His large private charities, 437. His portraits, 438. His books, 439. Extant relics, 440. CHAPTER I EARLY DAYS AT KIRKCALDY 1723-1737 Adam Smith was born at Kirkcaldy, in the county of Fife, Scotland, on the 5th of June 1723. He was the son of Adam Smith, Writer to the Signet, Judge Advocate for Scotland and Comptroller of the Customs in the Kirkcaldy district, by Margaret, daughter of John Douglas of Strathendry, a considerable landed proprietor in the same county. Of his father little is known. He was a native of Aberdeen, and his people must have been in a position to make interest in influential quarters, for we find him immediately after his admission to the Society of Writers to the Signet in 1707, appointed to the newly-established office of Judge Advocate for Scotland, and in the following year to the post of Private Secretary to the Scotch Minister, the Earl of Loudon. When he lost this post in consequence of Lord Loudon's retirement from office in 1713, he was provided for with the Comptrollership of Customs at Kirkcaldy, which he continued to hold, along with the Judge Advocateship, till his premature death in 1723. The Earl of Loudon having been a zealous Whig and Presbyterian, it is perhaps legitimate to infer that his secretary must have been the same, and from the public appointments he held we may further gather that he was a man of parts. The office of Judge Advocate for Scotland, which was founded at the Union, and which he was the first to fill, was a position of considerable responsibility, and was occupied after him by men, some of them of great distinction. Alexander Fraser Tytler, the historian, for example, was Judge Advocate till he went to the bench as Lord Woodhouselee. The Judge Advocate was clerk and legal adviser to the Courts Martial, but as military trials were not frequent in Scotland, the duties of this office took up but a minor share of the elder Smith's time. His chief business, at least for the last ten years of his life, was his work in the Custom-house, for though he was bred a Writer to the Signet--that is, a solicitor privileged to practise before the Supreme Court--he never seems to have actually practised that profession. A local collectorship or controllership of the Customs was in itself a more important administrative office at that period, when duties were levied on twelve hundred articles, than it is now, when duties are levied on twelve only, and it was much sought after for the younger, or even the elder, sons of the gentry. The very place held by Smith's father at Kirkcaldy was held for many years after his day by a Scotch baronet, Sir Michael Balfour. The salary was not high. Adam Smith began in 1713 with £30 a year, and had only £40 when he died in 1723, but then the perquisites of those offices in the Customs were usually twice or thrice the salary, as we know from the _Wealth of Nations_ itself (Book V. chap. ii.). Smith had a cousin, a third Adam Smith, who was in 1754 Collector of Customs at Alloa with a salary of £60 a year, and who writes his cousin, in connection with a negotiation the latter was conducting on behalf of a friend for the purchase of the office, that the place was worth £200 a year, and that he would not sell it for less than ten years' purchase.[1] Smith's father died in the spring of 1723, a few months before his famous son was born. Some doubt has been cast upon this fact by an announcement quoted by President M'Cosh, in his _Scottish Philosophy_, from the Scots Magazine of 1740, of the promotion of Adam Smith, Comptroller of the Customs, Kirkcaldy, to be Inspector-General of the Outports. But conclusive evidence exists of the date of the death of Smith's father in a receipt for his funeral expenses, which is in the possession of Professor Cunningham, and which, as a curious illustration of the habits of the time, I subjoin in a note below.[2] The promotion of 1740 is the promotion not of Smith's father but of his cousin, whom I have just had occasion to mention, and who appears from Chamberlayne's _Notitia Angliæ_ to have been Comptroller of the Customs at Kirkcaldy from about 1734 till somewhere before 1741. In the _Notitia Angliæ_ for 1741 the name of Adam Smith ceases to appear as Comptroller in Kirkcaldy, and appears for the first time as Inspector-General of the Outports, exactly in accordance with the intimation quoted by Dr. M'Cosh. It is curious that Smith, who was to do so much to sweep away the whole system of the Customs, should have been so closely connected with that branch of administration. His father, his only known relation on his father's side, and himself, were all officials in the Scotch Customs. On the mother's side his kindred were much connected with the army. His uncle, Robert Douglas of Strathendry, and three of his uncle's sons were military officers, and so was his cousin, Captain Skene, the laird of the neighbouring estate of Pitlour. Colonel Patrick Ross, a distinguished officer of the times, was also a relation, but on which side I do not know. His mother herself was from first to last the heart of Smith's life. He being an only child, and she an only parent, they had been all in all to one another during his infancy and boyhood, and after he was full of years and honours her presence was the same shelter to him as it was when a boy. His friends often spoke of the beautiful affection and worship with which he cherished her. One who knew him well for the last thirty years of his life, and was very probably at one time a boarder in his house, the clever and bustling Earl of Buchan, elder brother of Lord Chancellor Erskine, says the principal avenue to Smith's heart always was by his mother. He was a delicate child, and afflicted even in childhood with those fits of absence and that habit of speaking to himself which he carried all through life. Of his infancy only one incident has come down to us. In his fourth year, while on a visit to his grandfather's house at Strathendry on the banks of the Leven, the child was stolen by a passing band of gipsies, and for a time could not be found. But presently a gentleman arrived who had met a gipsy woman a few miles down the road carrying a child that was crying piteously. Scouts were immediately despatched in the direction indicated, and they came upon the woman in Leslie wood. As soon as she saw them she threw her burden down and escaped, and the child was brought back to his mother. He would have made, I fear, a poor gipsy. As he grew up in boyhood his health became stronger, and he was in due time sent to the Burgh School of Kirkcaldy. The Burgh School of Kirkcaldy was one of the best secondary schools of Scotland at that period, and its principal master, Mr. David Millar, had the name of being one of the best schoolmasters of his day. When Smith first went to school we cannot say, but it seems probable that he began Latin in 1733, for _Eutropius_ is the class-book of a beginner in Latin, and the _Eutropius_ which Smith used as a class-book still exists, and contains his signature with the date of that year.[3] As he left school in 1737, he thus had at least four years' training in the classics before he proceeded to the University. Millar, his classical master, had adventured in literature. He wrote a play, and his pupils used to act it. Acting plays was in those days a common exercise in the higher schools of Scotland. The presbyteries often frowned, and tried their best to stop the practice, but the town councils, which had the management of these schools, resented the dictation of the presbyteries, and gave the drama not only the support of their personal presence at the performances, but sometimes built a special stage and auditorium for the purpose. Sir James Steuart, the economist, played the king in _Henry the Fourth_ when he was a boy at the school of North Berwick in 1735. The pupils of Dalkeith School, where the historian Robertson was educated, played _Julius Cæsar_ in 1734. In the same year the boys of Perth Grammar School played _Cato_ in the teeth of an explicit presbyterial anathema, and again in the same year--in the month of August--the boys of the Burgh School of Kirkcaldy, which Smith was at the time attending, enacted the piece their master had written. It bore the rather unromantic and uninviting title of "A Royal Council for Advice, or the Regular Education of Boys the Foundation of all other Improvements." The _dramatis personæ_ were first the master and twelve ordinary members of the council, who sat gravely round a table like senators, and next a crowd of suitors, standing at a little distance off, who sent representatives to the table one by one to state their grievances--first a tradesman, then a farmer, then a country gentleman, then a schoolmaster, a nobleman, and so on. Each of them received advice from the council in turn, and then, last of all, a gentleman came forward, who complimented the council on the successful completion of their day's labours.[4] Smith would no doubt have been present at this performance, but whether he played an active part either as councillor or as spokesman for any class of petitioners, or merely stood in the crowd of suitors, a silent super, cannot now be guessed. Among those young actors at this little provincial school were several besides Smith himself who were to play important and even distinguished parts afterwards on the great stage of the world. James Oswald--the Right Hon. James Oswald, Treasurer of the Navy--who is sometimes said to have been one of Smith's schoolfellows, could not have been so, as he was eight years Smith's senior, but his younger brother John, subsequently Bishop of Raphoe, doubtless was; and so was Robert Adam, the celebrated architect, who built the London Adelphi, Portland Place, and--probably his finest work--Edinburgh University. Though James Oswald was not at school with Smith, he was one of his intimate home friends from the first. The Dunnikier family lived in the town, and stood on such a footing of intimacy with the Smiths that, as we have seen, it was "Mr. James of Dunnikier"--the father of the James Oswald now in question--who undertook on behalf of Mrs. Smith the arrangements for her husband's funeral; and the friendship of James Oswald, as will presently appear, was, after the affection of his mother, the best thing Smith carried into life with him from Kirkcaldy. The Adam family also lived in the town, though the father was a leading Scotch architect--King's Mason for Scotland, in fact--and was proprietor of a fair estate not far away; and the four brothers Adam were the familiars of Smith's early years. They continued to be among his familiars to the last. Another of his school companions who played a creditable part in his time was John Drysdale, the minister's son, who became one of the ministers of Edinburgh, doctor of divinity, chaplain to the king, leader of an ecclesiastical party--of the Moderates in succession to Robertson--twice Moderator of the General Assembly, though in his case, as in so many others, the path of professional success has led but to oblivion. Still he deserves mention here, because, as his son-in-law, Professor Dalzel tells us, he and Smith were much together again in their later Edinburgh days, and there was none of all Smith's numerous friends whom he liked better or spoke of with greater tenderness than Drysdale.[5] Drysdale's wife was a sister of the brothers Adam, and Robert Adam stayed with Drysdale on his visits to Edinburgh. A small town like Kirkcaldy--it had then only 1500 inhabitants--is a not unfavourable observatory for beginning one's knowledge of the world. It has more sorts and conditions of men to exhibit than a rural district can furnish, and it exhibits each more completely in all their ways, pursuits, troubles, characters, than can possibly be done in a city. Smith, who, spite of his absence of mind, was always an excellent observer, would grow up in the knowledge of all about everybody in that little place, from the "Lady Dunnikier," the great lady of the town, to its poor colliers and salters who were still bondsmen. Kirkcaldy, too, had its shippers trading with the Baltic, its customs officers, with many a good smuggling story, and it had a nailery or two, which Smith is said to have been fond of visiting as a boy, and to have acquired in them his first rough idea of the value of division of labour.[6] However that may be, Smith does draw some of his illustrations of the division of labour from that particular business, which would necessarily be very familiar to his mind, and it may have been in Kirkcaldy that he found the nailers paid their wages in nails, and using these nails afterwards as a currency in making their purchases from the shopkeepers.[7] At school Smith was marked for his studious disposition, his love of reading, and his power of memory; and by the age of fourteen he had advanced sufficiently in classics and mathematics to be sent to Glasgow College, with a view to obtaining a Snell exhibition to Oxford. FOOTNOTES: [1] Original letter in possession of Professor Cunningham, Belfast. [2] A COUNT OF MONEY DEBURSED ABOUT MR. SMITH'S FUNERALL To eight bottles of ale £0 12 0 To butter and eggs to the seed cake 1 4 0 To four bottles of ale 0 6 0 To three pounds fresh butter for bread 0 14 0 To one pound small candles 0 4 6 To two pounds bisquet 1 4 0 To sixteen bottles of ale 1 4 0 To money sent to Edinr. for bisquet, stockings, and necessars 25 4 0 To three expresses to Edinburgh 2 14 0 To a pair of murning shous to Hugh 1 10 0 To horse hyre with the wine from Kinghorn 0 15 0 To the poor 3 6 0 To six bottles and eight pints of ale to the beadels, etc. 1 10 4 To pipes and tobacco 0 4 0 To four pints of ale to the workmen 0 12 8 To the postage of three letters 0 6 0 To making the grave 3 0 0 To caring the mourning letters thro' the town and country 1 10 0 To the mort cloth 3 12 0 To Robert Martin for his services 1 4 0 To Deacon Lessels for the coffin and ironwork 28 4 0 To Deacon Sloan for lifting the stone 1 11 0 -------- Summa is £80 16 6 On the back is the docquet, "Account of funeral charges, Mr. Adam Smith, 1723," and the formal receipt as follows: "Kirkaldie, Apl. 24, 1723. Received from Mr. James of Dunekier eighty pund sexteen shilling six penes Scots in full of the within account depussd by me. MARGRATE DOUGLASS." "Mr. James of Dunekier" is Mr. James Oswald of Dunnikier, the father of Smith's friend, the statesman of the same name, and he had apparently as a friend of the family undertaken the duty of looking after the funeral arrangements. [3] In possession of Professor Cunningham. [4] Grant's _Burgh Schools of Scotland_, p. 414. [5] Drysdale's _Sermons_, Preface by Dalzel. [6] Campbell, _Journey from Edinburgh through North Britain_, 1802, ii. p. 49. [7] _Wealth of Nations_, Book I. chap. iv. CHAPTER II STUDENT AT GLASGOW COLLEGE A.D. 1737-1740. _Aet._ 14-17 Smith entered Glasgow College in 1737, no doubt in October, when the session began, and he remained there till the spring of 1740. The arts curriculum at that time extended over five sessions, so that Smith did not complete the course required for a degree. In the three sessions he attended he would go through the classes of Latin, Greek, Mathematics, and Moral Philosophy, and have thus listened to the lectures of the three eminent teachers who were then drawing students to this little western College from the most distant quarters, and keeping its courts alive with a remarkable intellectual activity. Dr. A. Carlyle, who came to Glasgow College for his divinity classes after he had finished his arts course at Edinburgh, says he found a spirit of inquiry and a zeal for learning abroad among the students of Glasgow which he remembered nothing like among the students of Edinburgh. This intellectual awakening was the result mainly of the teaching of three professors--Alexander Dunlop, Professor of Greek, a man of fine scholarship and taste, and an unusually engaging method of instruction; Robert Simson, the professor of Mathematics, an original if eccentric genius, who enjoyed a European reputation as the restorer of the geometry of the ancients; and above all, Francis Hutcheson, a thinker of great original power, and an unrivalled academic lecturer. Smith would doubtless improve his Greek to some extent under Dunlop, though from all we know of the work of that class, he could not be carried very far there. Dunlop spent most of his first year teaching the elements of Greek grammar with Verney's Grammar as his textbook, and reading a little of one or two easy authors as the session advanced. Most of the students entered his class so absolutely ignorant of Greek that he was obliged to read a Latin classic with them for the first three months till they learnt enough of the Greek grammar to read a Greek one. In the second session they were able to accompany him through some of the principal Greek classics, but the time was obviously too short for great things. Smith, however, appears at this time to have shown a marked predilection for mathematics. Dugald Stewart's father, Professor Matthew Stewart of Edinburgh, was a class-fellow of Smith's at Glasgow; and Dugald Stewart has heard his father reminding Smith of a "geometrical problem of considerable difficulty by which he was occupied at the time when their acquaintance commenced, and which had been proposed to him as an exercise by the celebrated Dr. Simson." The only other fellow-student of his at Glasgow of whom we have any knowledge is Dr. Maclaine, the translator of Mosheim, and author of several theological works; and Dr. Maclaine informed Dugald Stewart, in private conversation, of Smith's fondness for mathematics in those early days. For his mathematical professor, Robert Simson himself, Smith always retained the profoundest veneration, and one of the last things he ever wrote--a passage he inserted in the new edition of his _Theory of Moral Sentiments_, published immediately before his death in 1790--contains a high tribute to the gifts and character of that famous man. In this passage Smith seeks to illustrate a favourite proposition of his, that men of science are much less sensitive to public criticism and much more indifferent to unpopularity or neglect than either poets or painters, because the excellence of their work admits of easy and satisfactory demonstration, whereas the excellence of the poet's work or the painter's depends on a judgment of taste which is more uncertain; and he points to Robert Simson as a signal example of the truth of that proposition. "Mathematicians," he says, "who may have the most perfect assurance of the truth and of the importance of their discoveries, are frequently very indifferent about the reception which they may meet with from the public. The two greatest mathematicians that I ever have had the honour to be known to, and I believe the two greatest that have lived in my time, Dr. Robert Simson of Glasgow and Dr. Matthew Stewart of Edinburgh, never seemed to feel even the slightest uneasiness from the neglect with which the ignorance of the public received some of their most valuable works."[8] And it ought to be remembered that when Smith wrote thus of Simson he had been long intimate with D'Alembert. But while Smith improved his Greek under Dunlop, and acquired a distinct ardour for mathematics under the inspiring instructions of Simson, the most powerful and enduring influence he came under at Glasgow was undoubtedly that of Hutcheson--"the never-to-be-forgotten Hutcheson," as he styled him half a century later in recalling his obligations to his old College on the occasion of his election to the Rectorship. No other man, indeed, whether teacher or writer, did so much to awaken Smith's mind or give a bent to his ideas. He is sometimes considered a disciple of Hume and sometimes considered a disciple of Quesnay; if he was any man's disciple, he was Hutcheson's. Hutcheson was exactly the stamp of man fitted to stir and mould the thought of the young. He was, in the first place, one of the most impressive lecturers that ever spoke from an academic chair. Dugald Stewart, who knew many of his pupils, states that every one of them told of the extraordinary impression his lectures used to make on their hearers. He was the first professor in Glasgow to give up lecturing in Latin and speak to his audience in their own tongue, and he spoke without notes and with the greatest freedom and animation. Nor was it only his eloquence, but his ideas themselves were rousing. Whatever he touched upon, he treated, as we may still perceive from his writings, with a certain freshness and decided originality which must have provoked the dullest to some reflection, and in a bracing spirit of intellectual liberty which it was strength and life for the young mind to breathe. He was not long in Glasgow, accordingly, till he was bitterly attacked by the older generation outside the walls of the College as a "new light" fraught with dangers to all accepted beliefs, and at the same time worshipped like an idol by the younger generation inside the walls, who were thankful for the light he brought them, and had no quarrel with it for being new. His immediate predecessor in that chair, Professor Gershom Carmichael, the reputed father of the Scottish Philosophy, was still a Puritan of the Puritans, wrapt in a gloomy Calvinism, and desponding after signs that would never come. But Hutcheson belonged to a new era, which had turned to the light of nature for guidance, and had discovered by it the good and benevolent Deity of the eighteenth century, who lived only for human welfare, and whose will was not to be known from mysterious signs and providences, but from a broad consideration of the greater good of mankind--"the greatest happiness of the greatest number." Hutcheson was the original author of that famous phrase. All this was anathema to the exponents of the prevailing theology with which, indeed, it seemed only too surely to dispense; and in Smith's first year at Glasgow the local Presbytery set the whole University in a ferment by prosecuting Hutcheson for teaching to his students, in contravention of his subscription to the Westminster Confession, the following two false and dangerous doctrines: 1st, that the standard of moral goodness was the promotion of the happiness of others; and 2nd, that we could have a knowledge of good and evil without and prior to a knowledge of God. This trial of course excited the profoundest feeling among the students, and they actually made a formal appearance before the Presbytery, and defended their hero zealously both by word and writing. Smith, being only a bajan--a first year's student--would play no leading part in these proceedings, but he could not have lived in the thick of them unmoved, and he certainly--either then or afterwards, when he entered Hutcheson's class and listened to his lectures on natural theology, or perhaps attended his private class on the Sundays for special theological study--adopted the religious optimism of Hutcheson for his own creed, and continued under its influence to the last of his days. In politics also Hutcheson's lectures exercised important practical influence on the general opinion of his students. The principles of religious and political liberty were then so imperfectly comprehended and so little accepted that their advocacy was still something of a new light, and we are informed by one of Hutcheson's leading colleagues, Principal Leechman, that none of his lectures made a deeper or wider impression than his exposition of those principles, and that very few of his pupils left his hands without being imbued with some of the same love of liberty which animated their master. Smith was no exception, and that deep strong love of all reasonable liberty which characterised him must have been, if not first kindled, at any rate quickened by his contact with Hutcheson. Interesting traces of more specific influence remain. Dugald Stewart seems to have heard Smith himself admit that it was Hutcheson in his lectures that suggested to him the particular theory of the right of property which he used to teach in his own unpublished lectures on jurisprudence, and which founded the right of property on the general sympathy of mankind with the reasonable expectation of the occupant to enjoy unmolested the object which he had acquired or discovered.[9] But it is most probable that his whole theory of moral sentiments was suggested by the lectures of Hutcheson, perhaps the germs of it even when he was passing through the class. For Hutcheson in the course of his lectures expressly raises and discusses the question, Can we reduce our moral sentiments to sympathy? He answered the question himself in the negative, on the ground that we often approve of the actions of people with whom we have no sympathy, our enemies for example, and his pupil's contribution to the discussion was an ingenious attempt to surmount that objection by the theory of sympathy with an impartial spectator. Hutcheson's name occurs in no history of political economy, but he lectured systematically on that subject--as Smith himself subsequently did--as a branch of his course on natural jurisprudence, a discussion of contracts requiring him to examine the principles of value, interest, currency, etc., and these lectures, though fragmentary, are remarkable for showing a grasp of economic questions before his time, and presenting, with a clear view of their importance, some of Smith's most characteristic positions. He is free from the then prevailing mercantilist fallacies about money. His remarks on value contain what reads like a first draft of Smith's famous passage on value in use and value in exchange. Like Smith, he holds labour to be the great source of wealth and the true measure of value, and declares every man to have the natural right to use his faculties according to his own pleasure for his own ends in any work or recreation that inflicts no injury on the persons or property of others, except when the public interests may otherwise require. This is just Smith's system of natural liberty in matters industrial, with a general limitation in the public interest such as Smith also approves. In the practical enforcement of this limitation he would impose some particular restraints which Smith might not, but, on the other hand, he would abolish other particular restraints which Smith, and even Quesnay, would still retain, _e.g._ the fixing of interest by law. His doctrine was essentially the doctrine of industrial liberty with which Smith's name is identified, and in view of the claims set up on behalf of the French Physiocrats that Smith learnt that doctrine in their school, it is right to remember that he was brought into contact with it in Hutcheson's class-room at Glasgow some twenty years before any of the Physiocrats had written a line on the subject, and that the very first ideas on economic subjects which were presented to his mind contained in germ--and in very active and sufficient germ--the very doctrines about liberty, labour, and value on which his whole system was afterwards built. Though Smith was a mere lad of sixteen at that time, his mind had already, under Hutcheson's stimulating instructions, begun to work effectively on the ideas lodged in it and to follow out their suggestions in his own thought. Hutcheson seems to have recognised his quality, and brought him, young though he was, under the personal notice of David Hume. There is a letter written by Hume to Hutcheson on the 4th of March 1740 which is not indeed without its difficulties, but if, as Mr. Burton thinks, the Mr. Smith mentioned in it be the economist, it would appear as if Smith had, while attending Hutcheson's class,--whether as a class exercise or otherwise,--written an abstract of Hume's _Treatise of Human Nature_, then recently published, that Smith's abstract was to be sent to some periodical for publication, and that Hume was so pleased with it that he presented its young author with a copy of his own work. "My bookseller," Hume writes, "has sent to Mr. Smith a copy of my book, which I hope he has received as well as your letter. I have not yet heard what he has done with the abstract. Perhaps you have. I have got it printed in London, but not in the _Works of the Learned_, there having been an article with regard to my book somewhat abusive before I sent up the abstract." If the Mr. Smith of this letter is Adam Smith, then he must have been away from Glasgow at that time, for Hutcheson was communicating with him by letter, but that may possibly be explained by the circumstance that he had been appointed to one of the Snell exhibitions at Balliol College, Oxford, and might have gone home to Kirkcaldy to make preparations for residence at the English University, though he did not actually set out for it till June. These Snell exhibitions, which were practically in the gift of the Glasgow professors, were naturally the prize of the best student of Glasgow College at the time they fell vacant, and they have been held in the course of the two centuries of their existence by many distinguished men, including Sir William Hamilton and Lockhart, Archbishop Tait and Lord President Inglis. They were originally founded by an old Glasgow student, a strong Episcopalian, for the purpose of educating Scotchmen for the service of the Episcopal Church in Scotland. By the terms of his will the holders were even to be bound under penalty of £500 "to enter holy orders and return to serve the Church in Scotland," and it has sometimes been concluded from that circumstance that Smith must have accepted the Snell exhibition with a view to the Episcopal ministry. But the original purpose of the founder was frustrated by the Revolution settlement, which made "the Church in Scotland" Presbyterian, and left scarce any Episcopal remnant to serve, and the original condition has never been practically enforced. The last attempt to impose it was made during Smith's own tenure of the exhibition, and failed. In the year 1744 the Vice-Chancellor and the heads of Colleges at Oxford raised a process in the Court of Chancery for compelling the Snell exhibitioners "to submit and conform to the doctrines and discipline of the Church of England, and to enter into holy orders when capable thereof by the canons of the Church of England"; but the Court of Chancery refused to interfere, and the exhibitioners were left entirely free to choose their sect, their profession, and their country, as seemed best to themselves. It may be added that in Smith's time the Snell foundation yielded five exhibitions of £40 a year each, tenable for eleven years. Of Smith's friends among his fellow-students at Glasgow, no names have been preserved for us except those already mentioned, Professor Matthew Stewart, and Dr. Maclaine, the embassy chaplain at the Hague. He continued on a footing of great intimacy with Stewart, whom, as we have seen, he considered to be, after Robert Simson, the greatest mathematician of his time, and he seems to have enjoyed occasional opportunities of renewing his acquaintance with Dr. Maclaine, though the opportunities could not have been frequent, as Maclaine spent his whole active life abroad as English chaplain at the Hague. But the remark made by Smith to Dr. William Thompson, a historical writer of the last century, seems to imply his having had some intercourse with his early friend. Thompson, Dr. Watson the historian of Philip II., and Dr. Maclaine, seem all to have been writing the history of the Peace of Utrecht, and Smith, who knew all three, said Watson was much afraid of Maclaine, and Maclaine was just as much afraid of Watson, but he could have told them of one they had much more cause to fear, and that was Thompson himself. FOOTNOTES: [8] _Theory of Moral Sentiments_, i. 313. [9] Stewart's _Works,_ vii. 263. CHAPTER III AT OXFORD 1740-1746. _Aet._ 17-23 Smith left Scotland for Oxford in June 1740, riding the whole way on horseback, and, as he told Samuel Rogers many years afterwards, being much struck from the moment he crossed the Border with the richness of the country he was entering, and the great superiority of its agriculture over that of his own country. Scotch agriculture was not born in 1740, even in the Lothians; the face of the country everywhere was very bare and waste, and, as he was rather pointedly reminded on the day of his arrival at Oxford, even its cattle were still lean and poor, compared with the fat oxen of England. Among the stories told of his absence of mind is one he is said by a writer in the _Monthly Review_ to have been fond of relating himself whenever a particular joint appeared on his own table. The first day he dined in the hall at Balliol he fell into a reverie at table and for a time forgot his meal, whereupon the servitor roused him to attention, telling him he had better fall to, because he had never seen such a piece of beef in Scotland as the joint then before him. His nationality, as will presently appear, occasioned him worse trouble at Oxford than this good-natured gibe. He matriculated at the University on the 7th of July. Professor Thorold Rogers, who has collected the few particulars that can now be learned of Smith's residence at Oxford from official records, gives us the matriculation entry: "Adamus Smith e Coll. Ball., Gen. Fil. Jul. 7mo 1740,"[10] and mentions that it is written in a round school-boy hand--a style of hand, we may add, which Smith retained to the last. He has himself said that literary composition never grew easier to him with experience; neither apparently did handwriting. His letters are all written in the same big round characters, connected together manifestly by a slow, difficult, deliberate process. He remained at Oxford till the 15th of August 1746; after that day his name appears no longer in the Buttery Books of the College; but up till that day he resided at Oxford continuously from the time of his matriculation. He did not leave between terms, and was thus six years on end away from home. A journey to Scotland was in those days a serious and expensive undertaking; it would have taken more than half Smith's exhibition of £40 to pay for the posting alone of a trip to Kirkcaldy and back. When Professor Rouet of Glasgow was sent up to London a few years later to push on the tedious twenty years' lawsuit between Glasgow College and Balliol about the Snell exhibitions, the single journey cost him £11:15s., exclusive of personal expenses, for which he was allowed 6s. 8d. a day.[11] Now Smith out of his £40 a year had to pay about £30 for his food; Mr. Rogers mentions that his first quarter's maintenance came to £7:5s., about the usual cost of living, he adds, at Oxford at that period. Then the tutors, though they seem to have ceased to do any tutoring, still took their fees of 20s. a quarter all the same, and Smith's remaining £5 would be little enough to meet other items of necessary expenditure. It appears from Salmon's _Present State of the Universities_, published in 1744, during Smith's residence at Oxford, that an Oxford education then cost £32 a year as a minimum, but that there was scarce a commoner in the University who spent less than £60. Smith's name does not appear in Bliss's list of Oxford graduates, and although in Mr. Foster's recent _Alumni Oxonienses_ other particulars are given about him, no mention is made of his graduation; but Professor Rogers has discovered evidence in the Buttery Books of Balliol which seems conclusively to prove that Smith actually took the degree of B.A., whatever may be the explanation of the apparent omission of his name from the official graduation records. In those Buttery Books he is always styled Dominus from and after the week ending 13th April 1744. Now Dominus was the usual designation of a B.A., and in April 1744 Smith would have kept the sixteen terms that were then, we may say, the only qualification practically necessary for that degree. He had possibly omitted some step requisite for the formal completion of the graduation. Smith's residence at Oxford fell in a time when learning lay there under a long and almost total eclipse. This dark time seems to have lasted most of that century. Crousaz visited Oxford about the beginning of the century and found the dons as ignorant of the new philosophy as the savages of the South Sea. Bishop Butler came there as a student twenty years afterwards, and could get nothing to satisfy his young thirst for knowledge except "frivolous lectures" and "unintelligible disputations." A generation later he could not even have got that; for Smith tells us in the _Wealth of Nations_ that the lecturers had then given up all pretence of lecturing, and a foreign traveller, who describes a public disputation he attended at Oxford in 1788, says the Præses Respondent and three Opponents all sat consuming the statutory time in profound silence, absorbed in the novel of the hour. Gibbon, who resided there not long after Smith, tells that his tutor neither gave nor sought to give him more than one lesson, and that the conversation of the common-room, to which as a gentleman commoner he was privileged to listen, never touched any point of literature or scholarship, but "stagnated in a round of College business, Tory politics, personal anecdotes, and private scandal." Bentham, a few years after Gibbon, has the same tale to tell; it was absolutely impossible to learn anything at Oxford, and the years he spent there were the most barren and unprofitable of his life. Smith's own account of the English universities in the _Wealth of Nations_, though only published in 1776, was substantially true of Oxford during his residence there thirty years before. Every word of it is endorsed by Gibbon as the word of "a moral and political sage who had himself resided at Oxford." Now, according to that account, nobody was then taught, or could so much as find "the proper means of being taught, the sciences which it is the business of those incorporated bodies to teach." The lecturers had ceased lecturing; "the tutors contented themselves with teaching a few unconnected shreds and parcels" of the old unimproved traditionary course, "and even these they commonly taught very negligently and superficially"; being paid independently of their personal industry, and being responsible only to one another, "every man consented that his neighbour might neglect his duty provided he himself were allowed to neglect his own"; and the general consequence was a culpable dislike to improvement and indifference to all new ideas, which made a rich and well-endowed university the "sanctuary in which exploded systems and obsolete prejudices find shelter and protection after they have been hunted out of every corner of the world." Coming up from a small university in the North, which was cultivating letters with such remarkable spirit on its little oatmeal wisely dispensed, Smith concluded that the stagnation of learning which prevailed in the wealthy universities of England was due at bottom to nothing but their wealth, because it was distributed on a bad system. Severely, however, as Smith has censured the order of things he found prevailing at Oxford, it is worthy of notice that he never, like Gibbon and Bentham, thought of the six years he spent there as being wasted. Boswell and others have pronounced him ungrateful for the censures he deemed meet to pass upon that order of things, but that charge is of course unreasonable, because the censures were undeniably true and undeniably useful, and I refer to it here merely to point out that as a matter of fact Smith not only felt, but has publicly expressed, gratitude for his residence at the University of Oxford. He does so in his letter to the Principal of Glasgow College in 1787 accepting the Rectorship, when in enumerating the claims which Glasgow College had upon his grateful regard, he expressly mentions the fact that it had sent him as a student to Oxford. In truth, his time was not wasted at Oxford. He did not allow it to be wasted. He read deeply and widely in many subjects and in many languages; he read and thought for six years, and for that best kind of education the negligence of tutors and lecturers, such as they then were, was probably better than their assiduity. For this business of quiet reading Smith seems to have been happily situated in Balliol. Balliol was not then a reading college as it is now. A claim is set up in behalf of some of the other Oxford colleges that they kept the lamp of learning lit even in the darkest days of last century, but Balliol is not one of them. It was chiefly known in that age for the violence of its Jacobite opinions. Only a few months after Smith left it a party of Balliol students celebrated the birthday of Cardinal York in the College, and rushing out into the streets, mauled every Hanoverian they met, and created such a serious riot that they were sentenced to two years' imprisonment for it by the Court of King's Bench; but for this grave offence the master of the College, Dr. Theophilus Leigh, and the other authorities, had thought the culprits entitled to indulgence on account of the anniversary they were celebrating, and had decided that the case would be sufficiently met by a Latin imposition. If Balliol, however, was not more enlightened than any of the other colleges of the day, it had one great advantage, it possessed one of the best college libraries at Oxford. The Bodleian was not then open to any member of the University under the rank of a bachelor of arts of two years' standing, and Smith was only a bachelor of arts of two years' standing for a few months before he finally quitted Oxford. He could therefore have made little use of the Bodleian and its then unrivalled treasures, but in his own college library at Balliol he was allowed free range, and availed himself of his privilege with only too great assiduity, to the injury of his health. His studies took a new turn at Oxford; he laid aside the mathematics for which he showed a liking at Glasgow, and gave his strength to the ancient Latin and Greek classics, possibly for no better reason than that he could get nobody at Oxford to take the trouble of teaching him the former, and that the Balliol library furnished him with the means of cultivating the latter by himself. He did so, moreover, to some purpose, for all through life he showed a knowledge of Greek and Latin literature not only uncommonly extensive but uncommonly exact. Dalzel, the professor of Greek at Edinburgh, was one of Smith's most intimate friends during those latter years of his life when he was generally found with one of the classical authors before him, in conformity with his theory that the best amusement of age was to renew acquaintance with the writers who were the delight of one's youth; and Dalzel used always to speak to Dugald Stewart with the greatest admiration of the readiness and accuracy with which Smith remembered the works of the Greek authors, and even of the mastery he exhibited over the niceties of Greek grammar.[12] This knowledge must of course have been acquired at Oxford. Smith had read the Italian poets greatly too, and could quote them easily; and he paid special care to the French classics on account of their style, spending much time indeed, we are told, in trying to improve his own style by translating their writings into English. There was only one fruit in the garden of which he might not freely eat, and that was the productions of modern rationalism. A story has come down which, though not mentioned by Dugald Stewart, is stated by M'Culloch to rest on the best authority, and by Dr. Strang of Glasgow to have been often told by Smith himself, to the effect that he was one day detected reading Hume's _Treatise of Human Nature_--probably the very copy presented him by the author at the apparent suggestion of Hutcheson--and was punished by a severe reprimand and the confiscation of the evil book. It is at least entirely consistent with all we know of the spirit of darkness then ruling in Oxford that it should be considered an offence of peculiar aggravation for a student to read a great work of modern thought which had been actually placed in his hands by his professor at Glasgow, and the only wonder is that Smith escaped so lightly, for but a few years before three students were expelled from Oxford for coquetting with Deism, and a fourth, of whom better hopes seem to have been formed, had his degree deferred for two years, and was required in the interval to translate into Latin as a reformatory exercise the whole of Leslie's _Short and Easy Method with the Deists_.[13] Except for the great resource of study, Smith's life at Oxford seems not to have been a very happy one. For one thing, he was in poor health and spirits a considerable part of the time, as appears from the brief extracts from his letters published by Lord Brougham. When Brougham was writing his account of Smith he got the use of a number of letters written by the latter to his mother from Oxford between 1740 and 1746, which probably exist somewhere still, but which, he found, contained nothing of any general interest. "They are almost all," he says, "upon mere family and personal matters, most of them indeed upon his linen and other such necessaries, but all show his strong affection for his mother." The very brief extracts Brougham makes from them, however, inform us that Smith was then suffering from what he calls "an inveterate scurvy and shaking in the head," for which he was using the new remedy of tar-water which Bishop Berkeley had made the fashionable panacea for all manner of diseases. At the end of July 1744 Smith says to his mother: "I am quite inexcusable for not writing to you oftener. I think of you every day, but always defer writing till the post is just going, and then sometimes business or company, but oftener laziness, hinders me. Tar-water is a remedy very much in vogue here at present for almost all diseases. It has perfectly cured me of an inveterate scurvy and shaking in the head. I wish you'd try it. I fancy it might be of service to you." In another and apparently subsequent letter, however, he states that he had had the scurvy and shaking as long as he remembered anything, and that the tar-water had not removed them. On the 29th of November 1743 he makes the curious confession: "I am just recovered from a violent fit of laziness, which has confined me to my elbow-chair these three months."[14] Brougham thinks these statements show symptoms of hypochondria; but they probably indicate no more than the ordinary lassitude and exhaustion ensuing from overwork. Hume, when about the same age, had by four or five years' hard reading thrown himself into a like condition, and makes the same complaints of "laziness of temper" and scurvy. The shaking in the head continued to attend Smith all his days. But low health was only one of the miseries of his estate at Oxford. There is reason to believe that Balliol College was in his day a stepmother to her Scotch sons, and that their existence there was made very uncomfortable not merely at the hands of the mob of young gentlemen among whom they were obliged to live, but even more by the unfair and discriminating harshness of the College authorities themselves. Out of the hundred students then residing at Balliol, eight at least were Scotch, four on the Snell foundation and four on the Warner, and the Scotch eight seem to have been always treated as an alien and intrusive faction. The Snell exhibitioners were continually complaining to the Glasgow Senatus on the subject, and the Glasgow Senatus thought them perfectly justified in complaining. In a letter of 22nd May 1776, in which they go over the whole long story of grievances, the Glasgow Senatus tell the Master and Fellows of Balliol plainly that the Scotch students had never been "welcomely received" at Balliol, and had never been happy there. If an English undergraduate committed a fault, the authorities never thought of blaming any one but himself, but when one of the eight Scotch undergraduates did so, his sin was remembered against all the other seven, and reflections were cast on the whole body; "a circumstance," add the Senatus, "which has been much felt during their residence at Balliol." Their common resentment against the injustice of this kind of tribal accountability that was imposed on them naturally provoked a common resistance; it developed "a spirit of association," say the Senatus, which "has at all periods been a cause of much trouble both to Balliol and to Glasgow Colleges."[15] In 1744, when Smith himself was one of them, the Snell exhibitioners wrote an account of their grievances to the Glasgow Senatus, and stated "what they wanted to be done towards making their residence more easy and advantageous";[16] and in 1753, when some of Smith's contemporaries would still be on the foundation, Dr. Leigh, the master of Balliol, tells the Glasgow Senatus that he had ascertained in an interview with one of the Snell exhibitioners that what they wanted was to be transferred to some other college, because they had "a total dislike to Balliol."[17] This idea of a transference, I may be allowed to add, continued to be mooted, and in 1776 it was actually proposed by the heads of Balliol to the Senatus of Glasgow to transfer the Snell foundationers altogether to Hertford College; but the Glasgow authorities thought this would be merely a transference of the troubles, and not a remedy for them, that the exhibitioners would get no better welcome at Hertford than at Balliol if they came as "fixed property" instead of coming as volunteers, and that they could never lose their national peculiarities of dialect and their habits of combination if they came in a body. Accordingly, in the letter of 22nd May 1776, which I have already quoted,[18] they recommended the arrangement of leaving each exhibitioner to choose his own college,--an arrangement, it may be remembered, which had just then been strongly advocated as a general principle by Smith in his newly-published _Wealth of the Nations_, on the broader ground that it would encourage a wholesome competition between the colleges, and so improve the character of the instruction given in them all. Now if the daily relations between the Scotch exhibitioners at Balliol and the authorities and general members of the College were of the unhappy description partially revealed in this correspondence, that may possibly afford some explanation of what must otherwise seem the entirely unaccountable circumstance that Smith, so far as we are able to judge, made almost no permanent friends at Oxford. Few men were ever by nature more entirely formed for friendship than Smith. At every other stage of his history we invariably find him surrounded by troops of friends, and deriving from their company his chief solace and delight. But here he is six or seven years at Oxford, at the season of manhood when the deepest and most lasting friendships of a man's life are usually made, and yet we never see him in all his subsequent career holding an hour's intercourse by word or letter with any single Oxford contemporary except Bishop Douglas of Salisbury, and Bishop Douglas had been a Snell exhibitioner himself. With Douglas, moreover, he had many other ties. Douglas was a Fifeshire man, and may possibly have been a kinsman more or less remote; he was a friend of Hume and Robertson, and all Smith's Edinburgh friends; and he was, like Smith again, a member of the famous Literary Club of London, and is celebrated in that character by Goldsmith in the poem "Retaliation," as "the scourge of impostors, the terror of quacks." I have gone over the names of those who might be Smith's contemporaries at Balliol as they appear in Mr. Foster's list of _Alumni Oxonienses_, and they were a singularly undistinguished body of people. Smith and Douglas themselves are indeed the only two of them who seem to have made any mark in the world at all. An allusion has been made to the Scottish dialect of the Snell exhibitioners; it may be mentioned that Smith seems to have lost the broad Scotch at Oxford without, like Jeffrey, contracting the narrow English; at any rate Englishmen, who visited Smith after visiting Robertson or Blair, were struck with the pure and correct English he spoke in private conversation, and he appears to have done so without giving any impression of constraint. Smith returned to Scotland in August 1746, but his name remained on the Oxford books for some months after his departure, showing apparently that he had not on leaving come to a final determination against going back. His friends at home are said to have been most anxious that he should continue at Oxford; that would naturally seem to open to him the best opportunities either in the ecclesiastical career for which they are believed to have destined him, or in the university career for which nature herself designed him. But both careers were practically barred against him by his objection to taking holy orders, the great majority of the Oxford Fellowships being at that time only granted upon condition of ordination, and Smith concluded that the best prospect for him was after all the road back to Scotland. And he never appears to have set foot in Oxford again. When he became Professor at Glasgow he was the medium of intercourse between the Glasgow Senate and the Balliol authorities, but beyond the occasional interchange of letters which this business required, his relations with the Southern University appear to have continued completely suspended. Nor did Oxford, on her part, ever show any interest in him. Even after he had become perhaps her greatest living alumnus, she did not offer him the ordinary honour of a doctor's degree. FOOTNOTES: [10] Rogers's edition of the _Wealth of Nations_, I. vii. [11] Laing MSS., Edinburgh University. [12] Stewart's _Life of Adam Smith_, p. 8. [13] Tyerman's _Wesley_, i. 66. [14] Brougham, _Men of Letters_, ii. 216. [15] Letter from Senatus of Glasgow College to Balliol College, in Laing MSS., Edinburgh University. [16] Letter of A.G. Ross of Gray's Inn to Professor R. Simson, Glasgow, in Edinburgh University Library. [17] Laing MSS., Edinburgh University. [18] Edinburgh University Library. CHAPTER IV LECTURER AT EDINBURGH 1748-1750. _Aet._ 25-27 In returning to Scotland Smith's ideas were probably fixed from the first on a Scotch university chair as an eventual acquisition, but he thought in the meantime to obtain employment of the sort he afterwards gave up his chair to take with the Duke of Buccleugh, a travelling tutorship with a young man of rank and wealth, then a much-desired and, according to the standard of the times, a highly-remunerated occupation. While casting about for a place of that kind he stayed at home with his mother in Kirkcaldy, and he had to remain there without any regular employment for two full years, from the autumn of 1746 till the autumn of 1748. The appointment never came; because from his absent manner and bad address, we are told, he seemed to the ordinary parental mind a most unsuitable person to be entrusted with the care of spirited and perhaps thoughtless young gentlemen. But the visits he paid to Edinburgh in pursuit of this work bore fruit by giving him quite as good a start in life, and a much shorter cut to the professorial position for which he was best fitted. During the winter of 1748-49 he made a most successful beginning as a public lecturer by delivering a course on the then comparatively untried subject of English literature, and gave at the same time a first contribution to English literature himself by collecting and editing the poems of William Hamilton of Bangour. For both these undertakings he was indebted to the advice and good offices of Lord Kames, or, as he then was, Mr. Henry Home, one of the leaders of the Edinburgh bar, with whom he was made acquainted, we may safely assume, by his friend and neighbour, James Oswald of Dunnikier, whom we know to have been among Kames's most intimate friends and correspondents. Kames, though now fifty-two, had not yet written any of the works which raised him afterwards to eminence, but he had long enjoyed in the literary society of the North something of that position which Voltaire laughs at him for trying to take towards the world in general; he was a law on all questions of taste, from an epic poem to a garden plot. He had little Latin and no Greek, for he never was at college, and the classical quotations in his _Sketches_ were translated for him by A.F. Tytler. But he had thrown himself with all the greater zeal on that account into English literature when English literature became the rage in Scotland after the Union, and he was soon crossing steel with Bishop Butler in metaphysics, and the accepted guide of the new Scotch poets in literary criticism. Hamilton of Bangour confesses that he himself From Hume learned verse to criticise, the Hume meant being his early friend, Henry Home of Kames, and not his later friend, David Hume the historian.[19] Home's place in the literature of Scotland corresponds with his place in its agriculture; he was the first of the improvers; and Smith, who always held him in the deepest veneration, was not wrong when, on being complimented on the group of great writers who were then reflecting glory on Scotland, he said, "Yes, but we must every one of us acknowledge Kames for our master."[20] When Home found Smith already as well versed in the English classics as himself, he suggested the delivery of this course of lectures on English literature and criticism. The subject was fresh, it was fashionable, and though Stevenson, the Professor of Logic, had already lectured on it, and lectured on it in English too to his class, nobody had yet given lectures on it open to the general public, whose interest it had at the moment so much engaged. The success of such a course seemed assured, and the event fully justified that prognostication. The class was attended among others by Kames himself; by students for the bar, like Alexander Wedderburn, afterwards Lord Chancellor of England, and William Johnstone, who long played an influential part in Parliament as Sir William Pulteney; by young ministers of the city like Dr. Blair, who subsequently gave a similar course himself; and by many others, both young and old. It brought Smith in, we are informed, a clear £100 sterling, and if we assume that the fee was a guinea, which was a customary fee at the period, the audience would be something better than a hundred. It was probably held in the College, for Blair's subsequent course was delivered there even before the establishment of any formal connection with the University by the creation of the professorship. The lectures Smith then delivered on English literature were burnt at his own request shortly before his death. Blair, who not only heard them at the time, but got the use of them--or, at least, of part of them--afterwards for the preparation of his own lectures on rhetoric, speaks as if there was some hope at one time that Smith would publish them, but if he ever entertained such an intention, he was too entirely preoccupied with work of greater importance and interest to himself to obtain leisure to put them into shape for publication. It has been suggested that they are practically reproduced in the lectures of Blair. Blair acknowledges having taken a few hints for his treatment of simplicity in style from the manuscript of Smith's lectures. His words are: "On this head, of the general characters of style, particularly the plain and the simple, and the characters of those English authors who are classed under them, in this and the following lecture, several ideas have been taken from a manuscript treatise on rhetoric, part of which was shown to me many years ago by the learned and ingenious author, Dr. Adam Smith; and which it is hoped will be given by him to the public."[21] Now many of Smith's friends considered this acknowledgment far from adequate, and Hill, the biographer of Blair, says Smith himself joined in their complaint. It is very unlikely that Smith ever joined in any such complaint, for Henry Mackenzie told Samuel Rogers an anecdote which conveys an entirely contrary impression. Mackenzie was speaking of Smith's wealth of conversation, and telling how he often used to say to him, "Sir, you have said enough to make a book," and he then mentioned that Blair frequently introduced into his sermons some of Smith's thoughts on jurisprudence, which he had gathered from his conversation, and that he himself had told the circumstance to Smith. "He is very welcome," was the economist's answer; "there is enough left."[22] And if Smith made Blair welcome to his thoughts on jurisprudence, a subject on which he intended to publish a work of his own, we may be certain he made him not less heartily welcome to his thoughts on literature and style, on which he probably entertained no similar intention. Besides, if we judge from the two chapters regarding which he owns his obligation to Smith, Blair does not seem to have borrowed anything but what was the commonest of property already. He took only what his superficial mind had the power of taking, and the pith of Smith's thinking must have been left behind. To borrow even a hat to any purpose, the two heads must be something of a size. We cannot suppose, therefore, that we have any proper representation or reflection of Smith's literary lectures in the lectures of Blair, but it would be quite possible still, if it were desired, to collect a not inadequate view of his literary opinions from incidental remarks contained in his writings or preserved by friends from recollections of his conversation. Wordsworth, in the preface to the _Lyrical Ballads_, calls him "the worst critic, David Hume excepted, that Scotland, a soil to which this sort of weed seems natural, has produced," and his judgments will certainly not be confirmed by the taste of the present time. He preferred the classical to the romantic school. He thought with Voltaire that Shakespeare had written good scenes but not a good play, and that though he had more dramatic genius than Dryden, Dryden was the greater poet. He thought little of Milton's minor poems, and less of the old ballads collected by Percy, but he had great admiration for Pope, believed Gray, if he had only written a little more, would have been the greatest poet in the English language, and thought Racine's _Phædrus_ the finest tragedy extant in any language in the world. His own great test of literary beauty was the principle he lays down in his Essay on the Imitative Arts, that the beauty is always in the proportion of the difficulty perceived to be overcome. Smith seems at this early period of his life to have had dreams of some day figuring as a poet himself, and his extensive familiarity with the poets always struck Dugald Stewart as very remarkable in a man so conspicuous for the weight of his more solid attainments. "In the English language," says Stewart, "the variety of poetical passages which he was not only accustomed to refer to occasionally, but which he was able to repeat with correctness, appeared surprising even to those whose attention had never been attracted to more important acquisitions." The tradition of Smith's early ambition to be a poet is only preserved in an allusion in Caleb Colton's "Hypocrisy," but it receives a certain support from a remark of Smith's own in conversation with a young friend in his later years. Colton's allusion runs as follows:-- Unused am I the Muse's path to tread, And curs'd with Adam's unpoetic head, Who, though that pen he wielded in his hand Ordain'd the _Wealth of Nations_ to command; Yet when on Helicon he dar'd to draw, His draft return'd and unaccepted saw. If thus like him we lay a rune in vain, Like him we'll strive some humbler prize to gain. Smith's own confession is contained in a report of some conversations given in the _Bee_ for 1791. He was speaking about blank verse, to which he always had a dislike, as we know from an interesting incident mentioned by Boswell. Boswell, who attended Smith's lectures on English literature at Glasgow College in 1759, told Johnson four years after that Smith had pronounced a strong opinion in these lectures against blank verse and in favour of rhyme--always, no doubt, on the same principle that the greater the difficulty the greater the beauty. This delighted the heart of Johnson, and he said, "Sir, I was once in company with Smith, and we did not take to each other, but had I known that he loved rhyme as much as you tell me he does, I should have hugged him." Twenty years later Smith was again expressing to the anonymous interviewer of the _Bee_ his unabated contempt for all blank verse except Milton's, and he said that though he could never find a single rhyme in his life, he could make blank verse as fast as he could speak. "Blank verse," he said; "they do well to call it blank, for blank it is. I myself even, who never could find a single rhyme in my life, could make blank verse as fast as I could speak." The critic would thus appear here again to have been the poet who has failed, though in this case he had the sense to discover the failure without tempting the judgment of the public. Indeed he had already begun to discover his true vocation, for besides his lectures on English literature, which he delivered for three successive winters, he delivered at least one winter a course on economics; and in this course, written in the year 1749, and delivered in the year 1750-51, Smith advocated the doctrines of commercial liberty on which he was nurtured by Hutcheson, and which he was afterwards to do so much to advance. He states this fact himself in a paper read before a learned society in Glasgow in 1755, which afterwards fell into the hands of Dugald Stewart, and from which Stewart extracts a passage or two, which I shall quote in a subsequent chapter. They certainly contain a plain enough statement of the doctrine of natural liberty; and Smith says that a great part of the opinions contained in the paper were "treated of at length in some lectures which I have still by me, and which were written in the hand of a clerk who left my service six years ago"--that is, in 1749--and adds that "they had all of them been the subjects of lectures which I read at Edinburgh the winter before I left it, and I can adduce innumerable witnesses both from that place and from this who will ascertain them sufficiently to be mine."[23] These ideas of natural liberty in industrial affairs were actively at work, not only in Smith's own mind, but in the minds of others in his immediate circle in Scotland in those years 1749 and 1750. David Hume and James Oswald were then corresponding on the subject, and though it is doubtful whether Smith had seen much or anything of Hume personally at that time (for Hume had been abroad with General St. Clair part of it, and did not live in Edinburgh after his return), it was in those and the two previous years that Smith was first brought into real intellectual contact with his friend and townsman, James Oswald. Oswald, it may be mentioned, though still a young man--only eight years older than Smith--had already made his mark in Parliament where he sat for their native burgh, and had been made a Commissioner of the Navy in 1745. He had made his mark largely by his mastery of economic subjects, for which Hume said, after paying him a visit at Dunnikier for a week in 1744, that he had a "great genius," and "would go far in that way if he persevered." He became afterwards commissioner of trade and plantations, Lord of the Treasury, and Vice-Treasurer of Ireland, and would have certainly gone further but for his premature death in 1768 at the age of fifty-two. Lord Shelburne once strongly advised Lord Bute to make him Chancellor of the Exchequer. Smith thought as highly of Oswald as Hume. He used to "dilate," says Oswald's grandson, who heard him, "with a generous and enthusiastic pleasure on the qualifications and merits of Mr. Oswald, candidly avowing at the same time how much information he had received on many points from the enlarged views and profound knowledge of that accomplished statesman."[24] Dugald Stewart saw a paper written by Smith which described Oswald not only as a man of extensive knowledge of economic subjects, but a man with a special taste and capacity for the discussion of their more general and philosophical aspects. That paper, we cannot help surmising, is the same document of 1755 I have just mentioned in which Smith was proving his early attachment to the doctrines of economic liberty, and would naturally treat of circumstances connected with the growth of his opinions. However that may be, it is certain that Smith and Oswald must have been in communication upon economic questions about that period, and Oswald's views at that period are contained in the correspondence to which reference has been made. Early in 1750 David Hume sent Oswald the manuscript of his well-known essay on the Balance of Trade, afterwards published in his _Political Essays_ in 1752, asking for his views and criticisms; and Oswald replied on the 10th of October in a long letter, published in the _Caldwell Papers_,[25] which shows him to have been already entirely above the prevailing mercantilist prejudices, and to have very clear conceptions of economic operations. He declares jealousies between nations of being drained of their produce and money to be quite irrational; that could never happen as long as the people and industry remained. The prohibition against exporting commodities and money, he held, had always produced effects directly contrary to what was intended by it. It had diminished cultivation at home instead of increasing it, and really forced the more money out of the country the more produce it prevented from going. Oswald's letter seems to have been sent on by Hume, together with his own essay, to Baron Mure, who was also interested in such discussions. The new light was thus breaking in on groups of inquirers in Scotland as well as elsewhere, and Smith was from his earliest days within its play. Amid the more serious labours of these literary and economic lectures, it would be an agreeable relaxation to collect and edit the scattered poems, published and unpublished, of Hamilton of Bangour, the author of what Wordsworth calls the "exquisite ballad" of "The Braes o' Yarrow," beginning-- Busk ye, busk ye, my bonny, bonny bride, Busk ye, busk ye, my winsome marrow, Busk ye, busk ye, my bonny, bonny bride, And think no more on the Braes o' Yarrow. This ballad had appeared in Allan Ramsay's _Tea-Table Miscellany_ so long ago as 1724, and it was followed by Hamilton's most ambitious effort, the poem "Contemplation," in 1739, but the general public of Scotland only seem to have awakened to their merits after the poet espoused the Jacobite cause in 1745, and celebrated the victory of Prestonpans by his "Ode to the Battle of Gladsmuir"--the name the Jacobites preferred to give the battle. This ode, which had been set to music by M'Gibbon, became a great favourite in Jacobite households, and created so much popular interest in the author's other works that imperfect versions of some of his unpublished poems, and even of those which were already in print, began to appear. The author was himself an outlaw, and could not intervene. The ode which had lifted him into popularity had at the same time driven him into exile, and he was then living with a little group of young Scotch refugees at Rouen, and completely shattered in bodily health by his three months' hiding among the Grampians. Under those circumstances his friends thought it advisable to forestall the pirated and imperfect collections of his poems which were in contemplation by publishing as complete and correct an edition of them as could possibly be done in the absence of the author. And this edition was issued from the famous Foulis press in Glasgow in 1748. In doing so they acted, as they avow in the preface, "not only without the author's consent, but without his knowledge," but it is absurd to call an edition published under those circumstances, as the new _Dictionary of National Biography_ calls it, a "surreptitious edition." It was published by the poet's closest personal friends as a protection for the poet's reputation, and perhaps as a plea for his pardon. The task of collecting and editing the poems was entrusted to Adam Smith. We are informed of this fact by the accurate and learned David Laing, and though Laing has not imparted his authority for the information, it receives a certain circumstantial corroboration from other quarters. We find Smith in the enjoyment of a very rapid intimacy with Hamilton during the two brief years the poet resided in Scotland between receiving the royal pardon in 1750 and flying again in 1752 from a more relentless enemy than kings--the fatal malady of consumption, from which he died two years later at Lyons. Sir John Dalrymple, the historian, speaks in a letter to Robert Foulis, the printer, of "the many happy and flattering hours which he (Smith) had spent with Mr. Hamilton." We find again that when Hamilton's friends propose to print a second edition of the poems, they come to Smith for assistance. This edition was published in 1758, and is dedicated to the memory of William Craufurd, merchant, Glasgow, a friend of the poet mentioned in the preface to the first edition as having supplied many of the previously unpublished pieces which it contained. Craufurd appears to have been an uncle of Sir John Dalrymple, and Sir John asks Foulis to get Smith to write this dedication. "Sir," says he, in December 1757, "I have changed my mind about the dedication of Mr. Hamilton's poems. I would have it stand 'the friend of William Hamilton,' but I assent to your opinion to have something more to express Mr. Craufurd's character. I know none so able to do this as my friend Mr. Smith. I beg it, therefore, earnestly that he will write the inscription, and with all the elegance and all the feelingness which he above the rest of mankind is able to express. This is a thing that touches me very nearly, and therefore I beg a particular answer as to what he says to it. The many happy and the many flattering hours which he has spent with Mr. Hamilton and Mr. Craufurd makes me think that he will account his usual indolence a crime upon this occasion. I beg you will make my excuse for not wryting him this night, but then I consider wryting to you upon this head to be wryting to him."[26] It is unlikely that Smith would resist an appeal like this, and the dedication bears some internal marks of his authorship. It describes Mr. Craufurd as "the friend of Mr. Hamilton, who to that exact frugality, that downright probity and pliancy of manners so suitable to his profession, joined a love of learning and of all the ingenious arts, an openness of hand and a generosity of heart that was far both from vanity and from weakness, and a magnanimity that would support, under the prospect of approaching and inevitable death, a most torturing pain of body with an unalterable cheerfulness of temper, and without once interrupting even to his last hour the most manly and the most vigorous activity of business." This William Craufurd is confounded by Lord Woodhouselee, and through him by others, with Robert Crauford, the author of "The Bush aboon Traquair," "Tweedside," and other poems, who was also an intimate friend of Hamilton of Bangour, but died in 1732. Another link in the circumstantial evidence corroborating David Laing's statement is the fact that Smith was certainly at the moment in communication with Hamilton's personal friends, at whose instance the volume of poems was published. Kames, who was then interesting himself so actively in Smith's advancement, was the closest surviving friend Hamilton possessed. They had been constant companions in youth, leading spirits of that new school of dandies called "the beaux"--young men at once of fashion and of letters--who adorned Scotch society between the Rebellions, and continued to adorn many an after-dinner table in Edinburgh down till the present century. Hamilton owns that it was Kames who first taught him "verse to criticise," and wrote to him the poem "To H.H. at the Assembly"; while Kames for his part used in his old age, as his neighbour Ramsay of Ochtertyre informs us, to have no greater enjoyment than recounting the scenes and doings he and Hamilton had transacted together in those early days, of which the poet himself writes, when they "kept friendship's holy vigil" in the subterranean taverns of old Edinburgh "full many a fathom deep." FOOTNOTES: [19] Home and Hume, it may be mentioned, are only different ways of spelling the same name, which, though differently spelt, was not differently pronounced. [20] Tytler's _Life of Kames_, i. 218. [21] Blair's _Lectures on Rhetoric and Belles-Lettres_, i. 381. [22] Clayden's _Early Life of Samuel Rogers_, p. 168. [23] Stewart's _Works_, ed. Hamilton, vol. x. p. 68. [24] _Correspondence of James Oswald_, Preface. [25] _Caldwell Papers_, i. 93. [26] Duncan's _Notes and Documents illustrative of the Literary History of Glasgow_, p. 25. CHAPTER V PROFESSOR AT GLASGOW 1751-1764. _Aet._ 27-40 The Edinburgh lectures soon bore fruit. On the death of Mr. Loudon, Professor of Logic in Glasgow College, in 1750, Smith was appointed to the vacant chair, and so began that period of thirteen years of active academic work which he always looked back upon, he tells us, "as by far the most useful and therefore by far the happiest and most honourable period" of his life. The appointment lay with the Senatus--or, more strictly, with a section of the Senatus known as the Faculty Professors--some of whom, of course, had been his own teachers ten years before, and knew him well; and the minutes state that the choice was unanimous. He was elected on the 9th of January 1751, and was admitted to the office on the 16th, after reading a dissertation _De origine idearum_, signing the Westminster Confession of Faith before the Presbytery of Glasgow, and taking the usual oath _De fideli_ to the University authorities; but he did not begin work till the opening of the next session in October. His engagements in Edinburgh did not permit of his undertaking his duties in Glasgow earlier, and his classes were accordingly conducted, with the sanction of the Senatus, by Dr. Hercules Lindsay, the Professor of Jurisprudence, as his substitute, from the beginning of January till the end of June. During this interval Smith went through to Glasgow repeatedly to attend meetings of the Senatus, but he does not appear to have given any lectures to the students. If he was relieved of his duties in the summer, however, he worked double tides during the winter, for besides the work of his own class, he undertook to carry on at the same time the work of Professor Craigie of the Moral Philosophy chair, who was laid aside by ill health, and indeed died a few weeks after the commencement of the session. This double burden was no doubt alleviated by the circumstance that he was able in both the class-rooms to make very considerable use of the courses of lectures he had already delivered in Edinburgh. By the traditional distribution of academic subjects in the Scotch universities, the province of the chair of Logic included rhetoric and belles-lettres, and the province of the chair of Moral Philosophy included jurisprudence and politics, and as Smith had lectured in Edinburgh both on rhetoric and belles-lettres and on jurisprudence and politics, he naturally took those branches for the subjects of his lectures this first session at Glasgow. Professor John Millar, the author of the _Historical View of the English Government_ and other works of great merit, was a member of Smith's logic class that year, having been induced, by the high reputation the new professor brought with him from Edinburgh, to take out the class a second time, although he had already completed his university curriculum; and Millar states that most of the session was occupied with "the delivery of a system of rhetoric and belles-lettres." In respect to the other class, jurisprudence and politics were specially suggested to him as the subjects for the year when he was asked to take Professor Craigie's place. The proposal came through Professor Cullen, who was probably Craigie's medical attendant, and Cullen suggested those particular subjects as being the most likely to suit Smith's convenience and save him labour, inasmuch as he had lectured on them already. Smith replied that these were the subjects which it would be most agreeable to him to take up. EDINBURGH, _3rd Sept. 1751_. DEAR SIR--I received yours this moment. I am very glad that Mr. Craigie has at last resolved to go to Lisbon. I make no doubt but he will soon receive all the benefit he expects or can wish from the warmer climate. I shall, with great pleasure, do what I can to relieve him of the burden of his class. You mention natural jurisprudence and politics as the parts of his lectures which it would be most agreeable for me to take upon me to teach. I shall very willingly undertake both. I shall be glad to know when he sets out for Lisbon, because if it is not before the first of October I would endeavour to see him before he goes, that I might receive his advice about the plan I ought to follow. I would pay great deference to it in everything, and would follow it implicitly in this, as I shall consider myself as standing in his place and representing him. If he goes before that time I wish he would leave some directions for me, either with you or with Mr. Leechman, were it only by word of mouth.--I am, dear doctor, most faithfully yours, ADAM SMITH.[27] Smith would begin work at Glasgow on the 10th of October, and before the middle of November he and Cullen were already deeply immersed in quite a number of little schemes for the equipment of the College. There was first of all the affair of the vacancy in the Moral Philosophy chair, which was anticipated to occur immediately through the death of Mr. Craigie--referred to in the following letter as "the event we are afraid of." This vacancy Cullen and Smith were desirous of seeing filled up by the translation of Smith from the Logic to the Moral Philosophy chair, and the Principal (Dr. Neil Campbell) seems to have concurred in that proposal, and to have mentioned Smith's name with approbation to the Duke of Argyle, who, though without any power over the appointment to any except the Crown chairs, took much interest in, and was believed to exercise much influence over, the appointment to all. This was the Duke Archibald--better known by his earlier title of the Earl of Islay--who was often called the King of Scotland, because he practically ruled the affairs of Scotland in the first half of last century, very much as Dundas did in the second. Smith seems to have gone through to Edinburgh to push his views with the Duke, and to have waited on him and been introduced to him at his levee. Then there was the affair of Hume's candidature for the Logic chair, contingent on Smith's appointment to the other. There was the affair of the Principal's possible retirement, with, no doubt, some plan in reserve for the reversion, probably in favour of Professor Leechman, mentioned in the previous letter, who did in the event succeed to it. Then there was Cullen's "own affair," which Smith was promoting in Edinburgh through Lord Kames (then Mr. Home), and which probably concerned a method of purifying salt Cullen had then invented, and wanted to secure a premium for. At any rate, Lord Kames did speak to the Duke of Argyle on this subject in Cullen's behalf a few months later. While immersed in this multiplicity of affairs Smith wrote Cullen the following letter:--[28] EDIN., _Tuesday, November 1751_. DEAR SIR--I did not write to you on Saturday as I promised, because I was every moment expecting Mr. Home to town. He is not, however, yet come. I should prefer David Hume to any man for the College, but I am afraid the public would not be of my opinion, and the interest of the society will oblige us to have some regard to the opinion of the public. If the event, however, we are afraid of should happen we can see how the public receives it. From the particular knowledge I have of Mr. Elliot's sentiments, I am pretty certain Mr. Lindsay must have proposed it to him, not he to Mr. Lindsay. I am ever obliged to you for your concern for my interest in that affair. When I saw you at Edinburgh you talked to me of the Principal's proposing to retire. I gave little attention to it at that time, but upon further consideration should be glad to listen to any proposal of that kind. The reasons of my changing my opinion I shall tell you at meeting. I need not recommend secrecy to you upon this head. Be so good as to thank the Principal in my name for his kindness in mentioning me to the Duke. I waited on him at his levee at Edinburgh, when I was introduced to him by Mr. Lind, but it seems he had forgot. I can tell you nothing particular about your own affair more than what I wrote you last till I see Mr. Home, whom I expect every moment.--I am, most dear sir, ever yours, A. SMITH. The event they were afraid of happened on the 27th of November, and Smith was, without any opposition, appointed Craigie's successor on the 29th of April 1752. It would appear from this letter as if Cullen had heard from his colleague, Professor Lindsay, of a possible rival to Smith for that chair in the person of Mr. Elliot--no doubt Mr. Gilbert Elliot, a man of brilliant parts and accomplishments, who afterwards attained high political eminence as Sir Gilbert Elliot, but who was at this time a young advocate at the Edinburgh bar, with no liking for law and a great liking for letters and philosophy. Smith, however, who was a personal friend of Elliot's, knew that the latter had no such designs, and eventually his own candidature was unopposed. But in anticipation of this result, the keenest contest was carried on all winter over the election to the Logic chair, which he was to leave. David Hume came forward as a candidate, and there is an erroneous, though curiously well-supported tradition that Edmund Burke was a candidate also. One of Burke's biographers, Bisset, states that Burke actually applied for the post, but applied too late.[29] Another of his biographers, Prior, says that Burke being in Scotland at the time, took some steps for the place, but finding his chances hopeless, withdrew;[30] while Professor Jardine, a subsequent occupier of the chair himself, asserts that Burke was thought of by some of the electors, but never really came forward.[31] But Smith, who was not only the previous occupant of the office, but, as Professor of Moral Philosophy, was one of the electors of his successor, stated explicitly to Dugald Stewart (as Stewart wrote to Prior[32]) "that the story was extremely current, but he knew of no evidence on which it rested, and he suspected it took its rise entirely from an opinion which he had himself expressed at Glasgow upon the publication of Burke's book on the _Sublime and Beautiful_, that the author of that book would be a great acquisition to the College if he would accept of a chair." Had anything been known in Glasgow of Burke's candidature for a chair there five years before, it would unquestionably be recollected on the occasion of the publication of so notable a work, but Burke's very name was so unfamiliar to the circle interested in the election that when Hume first met him in London in 1759, he mentions him in a letter to Smith as "a Mr. Burke, an Irish gentleman who has written a very pretty book on the _Sublime and Beautiful_."[33] The interest of the contest is sufficiently great from the candidature of one philosopher of the first rank, and to Smith himself--already that philosopher's very close friend--it must have been engrossing. It will be observed that in his letter to Cullen he expresses himself with great caution on the subject. He is quite alive to the fact that the appointment of a notorious sceptic like Hume might be so unpopular with the Scottish public as to injure the interests of the University. But when Hume came forward Cullen threw himself heart and soul into his cause, as we know from Hume's own acknowledgments; and if Cullen and Smith are found acting in concert at the initiation of the candidature, it is not likely that Smith lagged behind Cullen in the prosecution of the canvass, though nothing remains to give us any decisive information on the point. Their exertions failed, however, in consequence, Hume himself always believed, of the interference of the Duke of Argyle, and the chair was given to a young licentiate of the Church named Clow, who was at the time entirely unknown, and indeed never afterwards established any manner of public reputation. Smith's preference for the Moral Philosophy chair came mainly no doubt from preference for the subjects he would be called upon to teach in it, but the emoluments also seem to have been somewhat better, for Smith was expressly required, as a condition of acceptance of the office, to content himself until the 10th of October of that year (the opening day of the new session) "with the salary and emoluments of his present profession of Logic," even though he might be actually admitted to the other professorship before that date. It must not be supposed, however, that the emoluments of his new office were by any means very lordly. They accrued partly from a moderate endowment and partly from the fees paid by the students who attended the lectures--a principle of academic payment which Smith always considered the best, because it made the lecturer's income largely dependent on his diligence and success in his work. The endowment was probably no more than that of the Mathematical chair, and the endowment of the Mathematical chair was £72 a year.[34] The fees probably never exceeded £100, or even came up to that figure, for Dr. Thomas Reid, Smith's successor in the Moral Philosophy chair, writes an Aberdeen friend, after two years' experience of Glasgow, that he had more students than Smith ever had, and had already touched £70 of fees, but expected, when all the students arrived, to make £100 that session.[35] The income from fees in the Scotch chairs in last century seems to have been subject to considerable variations from session to session. A bad harvest would sometimes tell seriously on the attendance, and a great crisis like that of 1772, when the effects of a succession of bad harvests were aggravated by ruinous mercantile speculations, deprived Adam Ferguson in the Edinburgh Moral Philosophy chair of half his usual income from fees. It may also be mentioned as a curious circumstance that in those days a professor used to lose regularly many pounds a year by light money. When Lord Brougham, as a young student of chemistry in Edinburgh, paid his fee to Black, the great chemist weighed the guineas carefully on a weighing machine he had on the table before him, and observed in explanation, "I am obliged to weigh when strange students come, there being a very large number who bring light guineas, so that I should be defrauded of many pounds every year if I did not act in self-defence against this class of students."[36] Smith kept an occasional boarder in his house, and would of course make a trifle by that, but his regular income from his class work would not exceed £170 a year. £170 a year, however, was a very respectable income at a period when, as was the case in 1750, only twenty-nine ministers in all broad Scotland had as much as £100 a year, and the highest stipend in the Church was only £138.[37] Besides his salary Smith had a house in the College--one of those new manses in the Professors' Court which Glasgow people at the time considered very grand; and though the circumstance is trifling, it is a little curious that he changed his house three times in the course of his thirteen years' professorship. It was the custom when a house fell vacant for the professors to get their choice of it in the order of their academical seniority. There seems to have been no compulsion about the step, so that it is not beneath noticing that Smith should in so short a term have elected to make the three removes which proverbial wisdom deprecates. When his friend Cullen was translated to Edinburgh in 1756, Smith, who was next in seniority, having been made professor in Glasgow a few months after the eminent physician, removed to Cullen's house; then he quitted this house in 1757 for the house of Dr. Dick, Professor of Natural Philosophy, who died in that year; and he left Dick's house in turn for Dr. Leechman's, on the promotion of that divine to the Principalship in 1762. These houses are now demolished with the rest of the old College of Glasgow, so that we cannot mark the gradation of comfort that may have determined these successive changes; and besides they may have been determined by no positive preference of the economist himself, but by the desires of his mother and his aunt, Miss Jane Douglas, who both lived with him in Glasgow, and whose smallest wishes it was the highest ambition of his affectionate nature to gratify. In Smith's day there were only some 300 students at Glasgow College in all, and the Moral Philosophy chair alone had never more than 80 or 90 in the public class and 20 in the private. The public class did not mean a free class, as it does on the Continent; it really was the dearer of the two, the fee in the private class being only a guinea, while the fee of the public class was a guinea and a half. The public class was the ordinary class taken for graduation and other purposes, and obligatory by academic authority; the private was a special class, undertaken, with the permission of the Senatus, for those who wished to push the subject further; and to harmonise this account of them with what has been previously said of the income Smith drew from fees, it is necessary to explain that many of the students who attended these classes paid no fees, according to a custom which still prevails in Scotch universities, and by which one was considered a _civis_ of a class he had attended for two years, and might thereafter attend it whenever he chose without charge. Many in this way attended the Moral Philosophy class four or five years, and among them, as Dr. Reid informs us, quite a number of preachers and advanced students of divinity and law, before whom, the worthy doctor confesses, he used to stand in awe to speak without the most careful preparation. The College session was then longer than it is now, extending from the 10th of October to the 10th of June, and the classes began at once earlier in the morning and continued later at night. Smith commenced his labours before daybreak by his public class from 7.30 to 8.30 A.M.; he then held at 11 A.M. an hour's examination on the lecture he delivered in the morning, though to this examination only a third of the students of the morning class were in the habit of coming; and he met with his private class twice a week on a different subject at 12. Besides these engagements Smith seems to have occasionally read for an hour like a tutor with special pupils; at least one is led to infer so much from the remarks of a former pupil, who, under the _nom de plume_ of Ascanius, writes his reminiscences of his old master to the editor of the _Bee_ in June 1791. This writer says that he went to Glasgow College after he had gone through the classes at St. Andrews, Edinburgh, and even Oxford, in order that he might, "after the manner of the ancients, walk in the porticoes of Glasgow with Smith and with Millar, and be imbued with the principles of jurisprudence and law and philosophy"; and then he adds: "I passed most of my time at Glasgow with those two first-rate men, and Smith read private lectures to me on jurisprudence, and accompanied them with his commentaries in conversation, exercises which I hope will give a colour and a substance to my sentiments and to my reason that will be eternal." There is no difficulty in identifying this enthusiastic disciple with the eccentric and bustling Earl of Buchan, the elder brother of Lord Chancellor Erskine, and of the witty and greatly beloved Harry Erskine of the Scotch bar, and the subject of the Duchess of Gordon's well-known _mot_: "The wit of your lordship's family has come by the mother, and been all settled on the younger branches." We know that this Earl of Buchan was a contributor to the _Bee_ under various fictitious signatures, because he has himself republished some of his contributions, and we know that he attended Smith's class at Glasgow, because he says so in a letter to Pinkerton, the historian, mentioning having seen in Smith's library at that time a book of which Pinkerton could not find a single copy remaining anywhere--the memoirs of Lockhart of Lee, Cromwell's ambassador to France, which had been suppressed (as the Earl had been told by his maternal uncle, Sir James Steuart, the economist) at the instance of Lockhart, the famous advocate, afterwards Lord Covington, because the family had turned Jacobite, and disliked the association with the Commonwealth.[38] The Earl gives the year of his attendance at Glasgow as 1760, but he must have continued there more than one session, for he attended Millar's lectures as well as Smith's, and Millar was not there till the session 1761-62; and it is on the whole most likely that this is the very young nobleman whom Dr. Alexander Carlyle met in company with Smith at a large supper party in April 1763, and concerning whom he mentions that he himself whispered after a little to Smith that he wondered how he could set this young man so high who appeared to be so foolish, and Smith answered, "We know that perfectly, but he is the only lord in our College." It will be observed that Lord Buchan says Smith _read_ private lectures to him. Smith's public lectures he was not accustomed to read in any of his classes, but he seems to have found it more convenient in teaching a single pupil to read them, and interpose oral comments and illustrations as he went along. Others of Smith's old students besides Lord Buchan express their obligations to the conversations they were privileged to have with him. Dugald Stewart, Brougham informs us, used to decline to see his students, because he found them too disputatious, and he disliked disputing with them about the correctness of the doctrines he taught. But Smith, by all accounts, was extremely accessible, and was even in the habit of seeking out the abler men among them, inviting them to his house, discussing with them the subjects of his lectures or any other subject, and entering sympathetically into their views and plans of life. John Millar, having occasion to mention Smith's name in his _Historical View of the English Government_, takes the opportunity to say: "I am happy to acknowledge the obligations I feel myself under to this illustrious philosopher by having at an early period of life had the benefit of his lectures on the history of civil society, and enjoying his unreserved conversation on the same subject."[39] Millar, it may be added, was one of Smith's favourite pupils, and after obtaining the chair of Jurisprudence in his old College, one of his chief associates, and Smith held so high an opinion of Millar's unique powers as a stimulating teacher that he sent his cousin, David Douglas, to Glasgow College for no other purpose but to have the advantage of the lectures and conversation of Millar. Jeffrey used to say that the most bracing exercises a student in Glasgow underwent in those days were the supper disputations at Professor Millar's house, and that, able and learned as his works are, "they revealed nothing of that magical vivacity which made his conversation and his lectures still more full of delight than of instruction." Though he always refused to accept Smith's doctrine of free trade, Millar was the most effective and influential apostle of Liberalism in Scotland in that age, and Jeffrey's father could never forgive himself for having put his son to Glasgow, where, though he was strictly forbidden to enter Millar's class-room, "the mere vicinity of Millar's influence" had sent him back a Liberal.[40] Now it is this interesting and famous lecturer from whom we obtain the fullest account of Smith's qualities as a lecturer and of the substance of his lectures. "In the professorship of logic," he says, "to which Mr. Smith was appointed on his first introduction into this University, he soon saw the necessity of departing widely from the plan that had been followed by his predecessors, and of directing the attention of his pupils to studies of a more interesting and useful nature than the logic and metaphysics of the schools. Accordingly, after exhibiting a general view of the powers of the mind, and explaining as much of the ancient logic as was requisite to gratify curiosity with respect to an artificial method of reasoning which had once occupied the universal attention of the learned, he dedicated all the rest of his time to the delivering of a system of rhetoric and belles-lettres." In moral philosophy "his course of lectures," says Millar, "was divided into four parts. The first contained natural theology, in which he considered the proofs of the being and attributes of God, and those principles of the human mind upon which religion is founded. The second comprehended ethics, strictly so called, and consisted chiefly of the doctrines which he afterwards published in his _Theory of Moral Sentiments_. In the third part he treated at more length of that branch of morality which relates to _justice_, and which, being susceptible of precise and accurate rules, is for that reason capable of a full and particular explanation. "Upon this subject he followed the plan that seems to be suggested by Montesquieu, endeavouring to trace the gradual progress of jurisprudence, both public and private, from the rudest to the most refined ages, and to point out the effects of those arts which contribute to subsistence and to the accumulation of property, in producing correspondent improvements or alterations in law and government. This important branch of his labours he also intended to give to the public; but this intention, which is mentioned in the conclusion of the _Theory of Moral Sentiments_, he did not live to fulfil. "In the last of his lectures he examined those political regulations which are founded, not upon the principle of _justice_ but that of _expediency_, and which are calculated to increase the riches, the power, and the prosperity of a state. Under this view he considered the political institutions relating to commerce, to finances, to ecclesiastical and military establishments. What he delivered on those subjects contained the substance of the work he afterwards published under the title of _An Inquiry into the Nature and Causes of the Wealth of Nations_."[41] Under the third part were no doubt included those lectures on the history of civil society to which Millar expresses such deep obligation, and of which another pupil of Smith's, Professor Richardson of the Humanity chair in Glasgow--a minor poet of considerable acceptance in his day--also speaks with lively gratitude, particularly of those "on the nature of those political institutions that succeeded the downfall of the Roman Empire, and which included an historical account of the rise and progress of the most conspicuous among the modern European governments."[42] Richardson tells us, too, that Smith gave courses of lectures on taste, on the history of philosophy, and on belles-lettres, apparently continuing to utilise his old lectures on this last subject occasionally even after his translation from the chair to which they properly appertained, and that he was very fond of digressing into literary criticism from his lectures on any subject. "Those who received instruction from Dr. Smith," says Richardson, "will recollect with much satisfaction many of those incidental and digressive illustrations and discussions, not only in morality but in criticism, which were delivered by him with animated and extemporaneous eloquence as they were suggested in the course of question and answer. They occurred likewise, with much display of learning and knowledge, in his occasional explanations of those philosophical works, which were also a very useful and important subject of examination in the class of moral philosophy."[43] His characteristics as a lecturer are thus described by Millar:-- "There was no situation in which the abilities of Mr. Smith appeared to greater advantage than as a professor. In delivering his lectures he trusted almost entirely to extemporary elocution. His manner, though not graceful, was plain and unaffected, and as he seemed to be always interested in the subject, he never failed to interest his hearers. Each discourse consisted commonly of several distinct propositions, which he successively endeavoured to prove and illustrate. These propositions when announced in general terms had, from their extent, not unfrequently something of the air of a paradox. In his attempts to explain them, he often appeared at first not to be sufficiently possessed of the subject, and spoke with some hesitation. As he advanced, however, his manner became warm and animated, and his expression easy and fluent. On points susceptible of controversy you could easily discern that he secretly conceived an opposition to his opinions, and that he was led upon this account to support them with greater energy and vehemence. By the fulness and variety of his illustrations the subject gradually swelled in his hands and acquired a dimension which, without a tedious repetition of the same views, was calculated to seize the attention of his audience, and to afford them pleasure as well as instruction in following the same subject through all the diversity of shades and aspects in which it was presented, and afterwards in tracing it backwards to that original proposition or general truth from which this beautiful train of speculation had proceeded."[44] One little peculiarity in his manner of lecturing was mentioned to the late Archdeacon Sinclair by Archibald Alison the elder, apparently as Alison heard it from Smith's own lips. He used to acknowledge that in lecturing he was more dependent than most professors on the sympathy of his hearers, and he would sometimes select one of his students, who had more mobile and expressive features than the rest, as an unsuspecting gauge of the extent to which he carried with him the intelligence and interest of the class. "During one whole session," he said, "a certain student with a plain but expressive countenance was of great use to me in judging of my success. He sat conspicuously in front of a pillar: I had him constantly under my eye. If he leant forward to listen all was right, and I knew that I had the ear of my class; but if he leant back in an attitude of listlessness I felt at once that all was wrong, and that I must change either the subject or the style of my address."[45] The great majority of his students were young men preparing for the Presbyterian ministry, a large contingent of them--quite a third of the whole--being Irish dissenters who were unfairly excluded from the university of their own country, but appear to have been no very worthy accession to the University of Glasgow. We know of no word of complaint against them from Smith, but they were a sore trial both to Hutcheson and to Reid. Reid says he always felt in lecturing to those "stupid Irish teagues" as St. Anthony must have felt when he preached to the fishes,[46] and Hutcheson writes a friend in the north of Ireland that his Irish students were far above taking any interest in their work, and that although he had "five or six young gentlemen from Edinburgh, men of fortune and fine genius, studying law, these Irishmen thought them poor bookworms."[47] Smith had probably even more of this stamp of law students than Hutcheson. Henry Erskine attended his class on jurisprudence as well as his elder brother. Boswell was there in 1759, and was made very proud by the certificate he received from his professor at the close of the session, stating that he, Mr. James Boswell, was "happily possessed of a facility of manners."[48] After the publication of the _Theory of Moral Sentiments_, students came even from a greater distance. Lord Shelburne, who was an enthusiastic admirer of that work, sent his younger brother, the Honourable Thomas Fitzmaurice, for a year or two to study under Smith, before sending him to Oxford in 1761 to read law with Sir William Blackstone. Mr. Fitzmaurice, who married the Countess of Orkney, and is the progenitor of the present Orkney family, rose to a considerable political position, and would have risen higher but for falling into ill health in the prime of life and remaining a complete invalid till his death in 1793, but he never forgot the years he spent as a student in Smith's class and a boarder in Smith's house. Dr. Currie, the well-known author of the _Life of Burns_, was his medical attendant in his latter years, and Dr. Currie says his conversation always turned back to his early life, and particularly to the pleasant period he had spent under Smith's roof in Glasgow. Currie has not, however, recorded any reminiscences of those conversations.[49] Two Russian students came in 1762, and Smith had twice to give them an advance of £20 apiece from the College funds, because their remittances had got stopped by the war. Tronchin, the eminent physician of Geneva, the friend of Voltaire, the enemy of Rousseau, sent his son to Glasgow in 1761 purposely "to study under Mr. Smith," as we learn from a letter of introduction to Baron Mure which the young man received before starting from Colonel Edmonston of Newton, who was at the time resident in Geneva. It was of Tronchin Voltaire said, "He is a great physician, he knows the mind," and he must have formed a high idea of the _Theory of Moral Sentiments_ to send his son so far to attend the lectures of its author. It was this young man who, on his way back from Glasgow, played a certain undesigned part in originating the famous quarrel between Rousseau and Hume, of which we shall have more to hear anon. He was living with Professor Rouet of Glasgow, at Miss Elliot's lodging-house in London, when Hume brought Rousseau there in January 1866, and the moment Rousseau saw the son of his old enemy established in the house to which he was conducted, he flew to the conclusion that young Tronchin was there as a spy, and that the good and benevolent Hume was weaving some infernal web about him. Smith's popularity as a lecturer grew year by year. It was felt that another and perhaps greater Hutcheson had risen in the College. Reid, when he came to Glasgow to succeed him in 1764, wrote his friend Dr. Skene in Aberdeen that there was a great spirit of inquiry abroad among the young people in Glasgow--the best testimony that could be rendered of the effect of Smith's teaching. It had taught the young people to think. His opinions became the subjects of general discussion, the branches he lectured on became fashionable in the town, the sons of the wealthier citizens used to go to College to take his class though they had no intention of completing a university course, stucco busts of him appeared in the booksellers' windows, and the very peculiarities of his voice and pronunciation received the homage of imitation. One point alone caused a little--in certain quarters not a little--shaking of heads, we are told by John Ramsay of Ochtertyre. The distinguished professor was a friend of "Hume the atheist"; he was himself ominously reticent on religious subjects; he did not conduct a Sunday class on Christian evidences like Hutcheson; he would often too be seen openly smiling during divine service in his place in the College chapel (as in his absent way he might no doubt be prone to do); and it is even stated by Ramsay that he petitioned the Senatus on his first appointment in Glasgow to be relieved of the duty of opening his class with prayer, and the petition was rejected; that his opening prayers were always thought to "savour strongly of natural religion"; that his lectures on natural theology were too flattering to human pride, and induced "presumptuous striplings to draw an unwarranted conclusion, viz. that the great truths of theology, together with the duties which man owes to God and his neighbours, may be discovered by the light of nature without any special revelation,"[50] as if it were a fault to show religious truth to be natural, for fear young men should believe it too easily. No record of the alleged petition about the opening prayers and its refusal remains in the College minutes, and the story is probably nothing but a morsel of idle gossip unworthy of attention, except as an indication of the atmosphere of jealous and censorious theological vigilance in which Smith and his brother professors were then obliged to do their work. In his lectures on jurisprudence and politics he had taught the doctrine of free trade from the first, and not the least remarkable result of his thirteen years' work in Glasgow was that before he left he had practically converted that city to his views. Dugald Stewart was explicitly informed by Mr. James Ritchie, one of the most eminent Clyde merchants of that time, that Smith had, during his professorship in Glasgow, made many of the leading men of the place convinced proselytes of free trade principles.[51] Sir James Steuart of Coltness, the well-known economist, used, after his return from his long political exile in 1763, to take a great practical interest in trying to enlighten his Glasgow neighbours on the economical problems that were rising about them, and having embraced the dying cause in economics as well as in politics, he sought hard to enlist them in favour of protection, but he frankly confesses that he grew sick of repeating arguments for protection to these "Glasgow theorists," as he calls them, because he found that Smith had already succeeded in persuading them completely in favour of a free importation of corn.[52] Sir James Steuart was a most persuasive talker; Smith himself said he understood Sir James's system better from his talk than from his books,[3] and those Glasgow merchants must have obtained from Smith's expositions a very clear and complete hold indeed of the doctrines of commercial freedom, when Steuart failed to shake it, and was fain to leave such theorists to their theories. Long before the publication of the _Wealth of Nations_, therefore, the new light was shining clearly from Smith's chair in Glasgow College, and winning its first converts in the practical world. One can accordingly well understand the emotion with which J.B. Say sat in this chair when he visited Glasgow in 1815, and after a short prayer said with great fervour, "Lord, let now thy servant depart in peace."[53] Dugald Stewart further states, on the authority of gentlemen who were students in the moral philosophy class at Glasgow in 1752 or 1753, that Smith delivered so early as that lectures containing the fundamental principles of the _Wealth of Nations_; and in 1755--the year Cantillon's _Essai_ first saw the light, and the year before Quesnay published his first economic writing--Smith was not only expounding his system of natural liberty to his students, but publicly asserting his claim to the authorship of that system in a Glasgow Economic Society--perhaps the first economic club established anywhere. The paper in which Smith vindicates this claim came somehow into the possession of Dugald Stewart, and so escaped the fire to which Smith committed all his other papers before his death, but it is believed to have been destroyed by Stewart's son, very possibly after his father's directions. For Stewart thought it would be improper to publish the complete manuscript, because it would revive personal differences which had better remain in oblivion, and consequently our knowledge of its contents is confined to the few sentences which he has thought right to quote as a valuable evidence of the progress of Smith's political ideas at that very early period. It will be observed that, as far as we can collect from so small a fragment of his discourse, he presents the doctrine of natural liberty in a more extreme form than it came to wear after twenty years more of thought in the _Wealth of Nations_. Stewart says that many of the most important opinions in the _Wealth of Nations_ are detailed in this document, but he cites only the following:-- "Man is generally considered by statesmen and projectors as the materials of a sort of political mechanics. Projectors disturb nature in the course of her operations on human affairs, and it requires no more than to leave her alone and give her fair play in the pursuit of her ends that she may establish her own designs.... Little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and, to support themselves, are obliged to be oppressive and tyrannical.... A great part of the opinions enumerated in this paper is treated of at length in some lectures which I have still by me, and which were written in the hand of a clerk who left my service six years ago. They have all of them been the constant subjects of my lectures since I first taught Mr. Craigie's class the first winter I spent in Glasgow down to this day without any considerable variations. They had all of them been the subjects of lectures which I read at Edinburgh the winter before I left it, and I can adduce innumerable witnesses both from that place and from this who will ascertain them sufficiently to be mine."[54] The distinction drawn in the last sentence between _that_ place, Edinburgh, and _this_ place, shows that the paper was read to a society in Glasgow. Smith was a member of two societies there, of which I shall presently have something more to say, the Literary Society and a society which we may call the Economic, because it met for the discussion of economic subjects, though we do not know its precise name, if it had any. Now this paper of Smith's was not read to the Literary Society--at least, it is not included in the published list of papers read by it--and we may therefore conclude that it was read to the Economic Society. Nothing is now known of the precise circumstances in which the paper originated, except what Stewart tells us, that Smith "was anxious to establish his exclusive right" to "certain leading principles both political and literary," "in order to prevent the possibility of some rival claims which he thought he had reason to apprehend, and to which his situation as a professor, added to his unreserved communications in private companies, rendered him peculiarly liable"; and that he expressed himself "with a good deal of that honest and indignant warmth which is perhaps unavoidable by a man who is conscious of the purity of his intentions when he suspects that advantages have been taken of the frankness of his temper." It would appear that some one, who had got hold of Smith's ideas through attending his class or frequenting his company, either had published them, or was believed to be going to publish them as his own. The writer of the obituary notice of Smith in the _Monthly Review_ for 1790 alleges that in this Glasgow period Smith lived in such constant apprehension of being robbed of his ideas that, if he saw any of his students take notes of his lectures, he would instantly stop him and say, "I hate scribblers." But this is directly contradicted by the account of Professor John Millar, who, as we have seen, was a student in Smith's classes himself, and who expressly states both that the permission to take notes was freely given by Smith to his students, and that the privilege was the occasion of frequent abuse. "From the permission given to students of taking notes," says Millar, "many observations and opinions contained in these lectures (the lectures on rhetoric and belles-lettres) have either been detailed in separate dissertations or engrossed in general collections which have since been given to the public." In those days manuscript copies of a popular professor's lectures, transcribed from his students' notebooks, were often kept for sale in the booksellers' shops. Blair's lectures on rhetoric, for example, were for years in general circulation in this intermediate state, and it was the publication of his criticism on Addison, taken from one of the unauthorised transcripts, in Kippis's _Biographia Britannica_, that at length instigated Blair to give his lectures to the press himself. A professor was thus always liable to have his unpublished thought appropriated by another author without any acknowledgment at all, or published in such an imperfect form that he would hardly care to acknowledge it himself. If Smith, therefore, exhibited a jealousy over his rights to his own thought, as has been suggested, Millar's observation shows him to have had at any rate frequent cause; but neither at that time of his life nor any other was he animated by an undue or unreasonable jealousy of this sort such as he has sometimes been accused of; and if in 1755 he took occasion to resent with "honest and indignant warmth" a violation of his rights, there must have been some special provocation. Mr. James Bonar suggests that this manifesto of 1755 was directed against Adam Ferguson, but that is not probable. Ferguson's name, it is true, will readily occur in such a connection, because Dr. Carlyle tells us that when he published his _History of Civil Society_ in 1767 Smith accused him of having borrowed some of his ideas without owning them, and that Ferguson replied that he had borrowed nothing from Smith, but much from some French source unnamed where Smith had been before him. But, however this may have been in 1767, it is unlikely that Ferguson was the occasion of offence in 1755. Up till that year he was generally living abroad with the regiment of which he was chaplain, and it is not probable that he had begun his _History_ before his return to Scotland, or that he had time between his return and the composition of Smith's manifesto to do or project anything to occasion such a remonstrance. Then he is found on the friendliest footing with Smith in the years immediately following the manifesto, and Stewart's allusion to the circumstances implies a graver breach than could be healed so summarily. Besides, had Ferguson been the cause of offence, Stewart would have probably avoided the subject altogether in a paper to the Royal Society, of which Ferguson was still an active member. FOOTNOTES: [27] Thomson's _Life of Cullen_, i. 605. [28] Thomson's _Life of Cullen_, i. 606. [29] Bisset's _Burke_, i. 32. [30] Prior's _Burke_, p. 38. [31] _Outlines of the Philosophy of Education_, p. 23. [32] Prior's _Life of Burke_, Bohn's ed. p. 38. [33] Burton's _Life of Hume_, ii. 55. [34] _Caldwell Papers_, i. 170. [35] Hamilton's _Reid_, p. 40. [36] _Brougham's Life and Times_, i. 78. [37] Chamberlayne's _Angliæ Notitia_ for 1750. [38] Smith's copy of this book seems to have gone out of existence like the others, for his cousin and heir, David Douglas, wrote Lord Buchan in January 1792 that he had searched for it in Smith's library without any success, and that though a catalogue of the library had since then been made out, Lockhart's Memoirs was not contained in it. Douglas's letter is in the Edinburgh University Library. [39] Book II. chap. x. [40] Cockburn's _Life of Jeffrey_, p. 12. [41] Stewart's _Works_, x. 12. [42] Richardson's _Life of Arthur_. See _Arthur's Discourses_, p. 510. [43] Richardson's _Life of Arthur_. See _Arthur's Discourses_, p. 508. [44] Stewart's _Works_, x. 12. [45] Sinclair's _Old Times and Distant Places_, p. 9. [46] Hamilton's _Reid_, p. 43. [47] M'Cosh, _Scottish Philosophy_, p. 66. [48] Boswell's _Correspondence with Erskine_, p. 26. [49] Currie's _Memoirs of James Currie, M.D._, ii. 317. [50] Ramsay, _Scotland and Scotsmen_, i. 462, 463. [51] _Steuart's Works_, vi. 379. [52] _Ibid._ vi. 378. [53] Dr. Cleland's account of Glasgow in _New Statistical Account of Scotland_, vi. 139. [54] Stewart's _Works_, ed. Hamilton; x. 68. CHAPTER VI THE COLLEGE ADMINISTRATOR A common misconception regarding Smith is that he was as helpless as a child in matters of business. One of his Edinburgh neighbours remarked of him to Robert Chambers that it was strange a man who wrote so well on exchange and barter was obliged to get a friend to buy his horse corn for him. This idea of his helplessness in the petty transactions of life arose from observing his occasional fits of absence and his habitual simplicity of character, but his simplicity, nobody denies, was accompanied by exceptional acuteness and practical sagacity, and his fits of absence seem to have been neither so frequent nor so prolonged as they are commonly represented. Samuel Rogers spent most of a week with him in Edinburgh the year before his death, and did not remark his absence of mind all the time. Anyhow, during his thirteen years' residence at Glasgow College, Smith seems to have had more to do with the business of the College, petty or important, than any other professor, and his brethren in the Senate of that University cannot have seen in him any marked failing or incapacity for ordinary business. They threw on his shoulders an ample share of the committee and general routine work of the place, and set him to audit accounts, or inspect the drains in the College court, or see the holly hedge in the College garden uprooted, or to examine the encroachments on the College lands on the Molendinar Burn, without any fear of his forgetting his business on the way. They entrusted him for years with the post of College Quæstor or Treasurer, in which inattention or the want of sound business habits might inflict injury even on their pecuniary interests. They made him one of the two curators of the College chambers, the forty lodgings provided for students inside the College gates. And when there was any matter of business that was a little troublesome or delicate to negotiate, they seem generally to have chosen Smith for their chief spokesman or representative. It was then very common for Scotch students to bring with them from home at the beginning of the session as much oatmeal as would keep them till the end of it, and by an ancient privilege of the University they were entitled to bring this meal with them into the city without requiring to pay custom on it; but in 1757 those students were obliged by the tacksman of the meal-market to pay custom on their meal, though it was meant for their own use alone. Smith was appointed along with Professor Muirhead to go and represent to the Provost that the exaction was a violation of the privileges of the University, and to demand repayment within eight days, under pain of legal proceedings. And at the next meeting of Senate "Mr. Smith reported that he had spoken to the Provost of Glasgow about the ladles exacted by the town from students for meal brought into the town for their own use, and that the Provost promised to cause what had been exacted to be returned, and that accordingly the money was offered by the town's ladler[55] to the students." Smith was often entrusted with College business to transact in Edinburgh--to arrange with Andrew Stuart, W.S., about promoting a bill in Parliament, or to wait on the Barons of Exchequer and get the College accounts passed; and he was generally the medium of communication between the Senatus and the authorities of Balliol College during their long and troublesome contentions about the Snell property and the Snell exhibitioners. He was Quæstor from 1758 till he left in 1764, and in that capacity had the management of the library funds and some other funds, his duties being subsequently divided between the factor and the librarian. The professors, we are told by Professor Dickson, used to take this office in turn for a term of two or three years, but Smith held the office longer than the customary term, and on the 19th of May 1763 the Senate agreed that "as Dr. Smith has long executed the office of Quæstor, he is allowed to take the assistance of an amanuensis." He was Dean of Faculty from 1760 to 1762, and as such not only exercised a general supervision over the studies of the College and the granting of degrees, but was one of the three visitors charged with seeing that the whole business of the College was administered according to the statutes of 1727. While still filling these two offices, he was in 1762 appointed to the additional and important business office of Vice-Rector, by his personal friend Sir Thomas Miller, the Lord-Advocate of Scotland (afterwards Lord President of the Court of Session), who was Rector of the University that year. As Sir Thomas Miller was generally absent in consequence of his public engagements in London or his professional engagements in Edinburgh, Smith as Vice-Rector had to preside over all University meetings--meetings of the Senatus, of the Comitia, of the Rector's Court--at a time when this duty was rendered delicate by the contentions which prevailed among the professors. The Rector's Court, it may be added--which consisted of the Rector and professors--was a judiciary as well as administrative body, which at one time possessed the power of life and death, and according to the Parliamentary Report of 1829, actually inflicted imprisonment in the College steeple on several delinquents within the preceding fifty years. It may be mentioned that some time elapsed after Sir Thomas Miller's election to the Rectorship before he was able to appoint a Vice-Rector, because he could not appoint a Vice-Rector till he was himself admitted, and he could not attend personally to be admitted on account of engagements elsewhere. During this interval Smith was elected præses of the University meetings by the choice of his colleagues, and as the position was at the time one of considerable difficulty, they would not be likely to select for it a man of decided business incapacity. Some idea of the difficulty of the place, on account of the dissensions prevailing in the College during Smith's residence there, may be got from a remark of his successor, Dr. Reid. In the course of the first year after his arrival in Glasgow, Reid writes one of his Aberdeen friends complaining bitterly of being obliged to attend five or six College meetings every week, and meetings, moreover, of a very disagreeable character, in consequence of "an evil spirit of party that seems to put us in a ferment, and, I am afraid, will produce bad consequences."[56] A writer in the _Gentleman's Magazine_, in noticing Smith's death in 1790, says that these divisions turned on questions of academic policy, and that Smith always took the side which was popular with people of condition in the city. The writer offers no further particulars, but as far as we can now ascertain anything about the questions which then kept the Glasgow Senate in such perpetual perturbation, they were not questions of general policy or public interest such as his words might suggest, and on the petty issues they raised it makes no odds to know whether Smith sided with the kites or with the crows. The troubles were generated, without any public differences, out of the constitution of the University itself, which seemed to be framed, as if on purpose, to create the greatest possible amount of friction in its working. By its constitution; as that is described in the Parliamentary Report of 1830, Glasgow University was at that time under one name really two distinct corporations, with two distinct governing bodies: (1) the University governed by the Senate, which was composed of the Rector, the Dean of Faculty, the Principal, the thirteen College or Faculty professors, and the five regius professors; and (2) the College governed by the Faculty, as it was called, which consisted of the thirteen College professors alone, who claimed to be the sole owners and administrators of the older endowments of the College, and to have the right of electing the occupants of their own thirteen chairs by co-optation. Within the Faculty again there was still another division of the professors into gown professors and other professors. The gown professors, who seem to have been the representatives of the five regents of earlier times, were the professors of those classes the students of which wore academical gowns, while the students of the other classes did not; the gown classes being Humanity, Greek, Logic, Natural Philosophy, and Moral Philosophy. These several bodies held separate meetings and kept separate minutes, which remain to this day. The meetings of the Senate were called University meetings or Rector's meetings, because they were presided over by the Rector; and the meetings of the Faculty were called Faculty meetings or Principal's meetings, because they were presided over by the Principal. Even the five gown professors with the Principal held separate meetings which the other professors had no right to attend--meetings with the students every Saturday in the Common Hall for the administration of ordinary academic discipline for petty offences committed by the students of the five gown classes. Smith belonged to all three bodies; he was University professor, Faculty or College professor, and gown professor too. It is obvious how easily this complicated and unnatural system of government might breed incessant and irritating discussions without any grave division of opinion on matters of serious educational policy. Practical difficulties could scarce help arising as to the respective functions of the University and the College, or the respective claims of the regius professors and the Faculty professors, or the respective powers of the Rector and the Principal; and Smith himself was one of a small committee which presented a very lengthy report on this last subject to the Senate of the University on the 13th of August 1762. The report was adopted, but two of the professors dissented on the ground that it was too favourable to the powers of the Principal. But, wrangle as they might over petty points of constitutional right or property administration, the heads of Glasgow College were guided in their general policy at this period by the wisest and most enlightened spirit of academic enlargement. Only a few years before Smith's arrival they had recognised the new claims of science by establishing a chemical laboratory, in which during Smith's residence the celebrated Dr. Black was working out his discovery of latent heat. They gave a workshop in the College to James Watt in 1756, and made him mathematical instrument maker to the University, when the trade corporations of Glasgow refused to allow him to open a workshop in the city; and it was in that very workshop and at this very period that a Newcomen's engine he repaired set his thoughts revolving till the memorable morning in 1764 when the idea of the separate condenser leapt to his mind as he was strolling past the washhouse on Glasgow Green. They had at the same time in another corner of the College opened a printing office for the better advancement of that art, and were encouraging the University printer, the famous Robert Foulis, to print those Homers and Horaces by which he more than rivalled the Elzevirs and Etiennes of the past. To help Foulis the better, they had with their own money assisted the establishment of the type-foundry of Wilson at Camlachie, where Foulis procured the types for his _Iliad_; they appointed Wilson type-founder to the University, and in 1762 they erected for him a founding-house, as they called it, in their own grounds. They had just before endowed a new chair of astronomy, of which they had made their versatile type-founder the first professor, and built for him an astronomical observatory, from which he brought reputation to the College and himself by his observation of the solar spots. They further gave Foulis in 1753 several more rooms in the College, including the large room afterwards used as the Faculty Hall, to carry out his ill-fated scheme of an Academy of Design; so that the arts of painting, sculpture, and engraving were taught in the College as well as the classics and mathematics, and Tassie and David Allan were then receiving their training under the same roof with the students for the so-called learned professions. The Earl of Buchan, while walking, as he said, "after the manner of the ancients in the porticoes of Glasgow with Smith and with Millar," unbent from the high tasks of philosophy by learning to etch in the studio of Foulis. This was the first school of design in Great Britain. There was as yet no Royal Academy, no National Gallery, no South Kensington Museum, no technical colleges, and the dream of the ardent printer, which was so actively seconded by the heads of the University, was to found an institution which should combine the functions of all those several institutions, and pay its own way by honest work into the bargain. In all these different ways the College of Glasgow was doing its best, as far as its slender means allowed, to widen the scope of university education in accordance with the requirements of modern times, and there was still another direction in which they anticipated a movement of our own day. They had already done something for that popularisation of academic instruction which we call university extension. Professor John Anderson, an active and reforming spirit who deserves to be held in honour in spite of his troublesome pugnacity, used then to deliver within the College walls, with the complete concurrence and encouragement of his colleagues, a series of evening lectures on natural philosophy to classes of working-men in their working clothes, and the lectures are generally acknowledged to have done great service to the arts and manufactures of the West of Scotland, by improving the technical education of the higher grades of artisans. Now in all these new developments Smith took a warm interest; some of them he actively promoted. There is nothing in the University minutes to connect Smith in any more special way than the other professors with the University's timely hospitality to James Watt; but as that act was a direct protest on behalf of industrial liberty against the tyrannical spirit of the trade guilds so strongly condemned in the _Wealth of Nations_, it is at least interesting to remember that Smith had a part in it. Watt, it may be recollected, was then a lad of twenty, who had come back from London to Glasgow to set up as mathematical instrument maker, but though there was no other mathematical instrument maker in the city, the corporation of hammermen refused to permit his settlement because he was not the son or son-in-law of a burgess, and had not served his apprenticeship to the craft within the burgh. But in those days of privilege the universities also had their privileges. The professors of Glasgow enjoyed an absolute and independent authority over the area within college bounds, and they defeated the oppression of Watt by making him mathematical instrument maker to the University, and giving him a room in the College buildings for his workshop and another at the College gates for the sale of his instruments. In these proceedings Smith joined, and joined, we may be sure, with the warmest approval. For we know the strong light in which he regarded the oppressions of the corporation laws. "The property which every man has in his labour," he says, "as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his hands, and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman and of those who might be disposed to employ him."[57] Watt's workshop was a favourite resort of Smith's during his residence at Glasgow College, for Watt's conversation, young though he was, was fresh and original, and had great attractions for the stronger spirits about him. Watt on his side retained always the deepest respect for Smith, and when he was amusing the leisure of his old age in 1809 with his new invention of the sculpture machine, and presenting his works to his friends as "the productions of a young artist just entering his eighty-third year," one of the first works he executed with the machine was a small head of Adam Smith in ivory.[58] In the Foulis press and the Academy of Design Smith took a particular interest. He was himself a book-fancier, fond of fine editions and bindings, and he once said to Smellie the printer, whom he observed admiring some of the books in his library, "I am a beau in nothing but my books." And he was a man, as Dugald Stewart informs us, with a carefully-cultivated taste for the fine arts, who was considered by his contemporaries an excellent judge of a picture or a sculpture, though in Stewart's opinion he appeared interested in works of art less as instruments of direct enjoyment than as materials for speculative discussions about the principles of human nature involved in their production. Smith seems to have been one of Foulis's chief practical advisers in the work of the Academy of Design, in settling such details, for example, as the pictures which ought to be selected to be copied by the pupils, or the subjects which ought to be chosen for original work from Plutarch or other classical sources, and which would be most likely to suit modern taste. Sir John Dalrymple, who appears to have been one of Foulis's associates in the enterprise, and to have taken an active concern in the sale of the productions of the Academy in its Edinburgh agency shop, writes Foulis on the 1st of December 1757 regarding the kind of work that ought to be sent for sale there. "In the History pictures that you send in, I beg you will take the advice of Mr. Smith and Dr. Black. Your present scheme should be to execute not what you think the best, but what will sell the best. In the first you may be the better judge, since you are the master of a great Academa, but in the last I think their advice will be of use to you."[59] The letter concludes: "Whether it is an idea or not, I am going to give you a piece of trouble. Be so good as make out a catalogue of your pictures, and as far as you can of your busts, books of drawings, and prints. Secondly, your boys, and how employed. Thirdly, the people who have studied under you with a view to the mechanical art. And lastly, give some account of the prospects which you think you have of being of use either to the mechanical or to the fine arts of your country. Frame this into a memorial and send it to me. I shall have it tryed here by some who wish well to you, and as I go to London in the spring, I shall, together with Mr. Wedderburn and Mr. Elliot, consider what are the most prudent measures to take for your sake, or whether to take any. Mr. Smith is too busy or too indolent, but I flatter myself Dr. Black will be happy to make out this memorial for you. Let me know if I have any chance of seeing you this winter. I have none of being at Glasgow, and therefore wish you and Mr. Smith would come here, or you by yourself would come here in the Christmas vacance." The memorial alluded to in this letter was no doubt a memorial to Government in behalf of a project then promoted by the Earl of Selkirk and other friends of Foulis, of settling a salary on him for directing an institution so useful to the nation as the Academy of Design. Whether Smith overcame his alleged indolence and drew up the memorial I cannot say, but this whole letter shows that Smith and Black were the two friends in Glasgow whom Foulis was in the habit of principally consulting, and the last sentence seems to indicate that Smith's hand in the business was hardly less intimate than Dalrymple's own. It may be noticed too how completely Sir John Dalrymple's ideas of Smith, as implied in this letter, differ from those which are current now, and how he sends a tradesman to the philosopher for advice on practical points in his trade. As to pure questions of art, whether this work or that is finest, he thinks Foulis himself may possibly be the best judge, but when it comes to a question as to which will sell the best--and that was the question for the success of the project--then he is urged to take the practical mind of Smith to his counsels. Though Smith's leanings were not to practical life, his judgment, as any page of the _Wealth of Nations_ shows, was of the most eminently practical kind. He had little of the impulse to meddle in affairs or the itch to manage them that belongs to more bustling people, but had unquestionably a practical mind and capacity. If Smith was consulted by Foulis in this way about the management of the Academy of Design, we may safely infer that he had also more to do with the Foulis press than merely visiting the office to see the famous _Iliad_ while it was on the case. Smith's connection with Foulis began before he went to Glasgow, by the publication of Hamilton of Bangour's poems by the University press, and I think it not unreasonable to see traces of Smith's suggestion in the number of early economic books which Foulis reissued after the year 1750, works of writers like Child, Gee, Mun, Law, and Petty. In the University type-foundry Smith took an active interest, because he was a warm friend and associate of the accomplished type-founder. Wilson had been bred a physician, but gave up his practice to become type-founder, and devoted himself besides, as I have just mentioned, to astronomy, to which Smith also at this period of his life gave some attention. Smith indeed was possibly then writing his fragment on the history of astronomy, which, though not published till after his death, was, we are informed by Dugald Stewart, the earliest of all his compositions, being the first part of an extensive work on the history of all the sciences which he had at this time projected. Wilson, having gone to large expense both of time and money to cast the Greek type for the University Homer, and having never found another customer for the fount except the University printer, went up to London in 1759 to push around, if possible, for orders, and was furnished by Smith with a letter of recommendation to Hume, who was then residing there. Hume writes to Smith on the 29th of July: "Your friend Mr. Wilson called on me two or three days ago when I was abroad, and he left your letter. I did not see him till to-day. He seems a very modest, sensible, ingenious man. Before I saw him I spoke to Mr. A. Millar about him, and found him much disposed to serve him. I proposed particularly to Mr. Millar that it was worthy of so eminent a bookseller as he to make a complete elegant set of the classics, which might set up his name equal to the Alduses, Stevenses, or Elzevirs, and that Mr. Wilson was the properest person in the world to assist him in such a project. He confessed to me that he had sometimes thought of it, but that his great difficulty was to find a man of letters that could correct the press. I mentioned the matter to Wilson, who said he had a man of letters in his eye one Lyon, a nonjuring clergyman of Glasgow. I would desire your opinion of him."[60] When Wilson came to reside in the College in 1762, after his appointment to the chair of Astronomy, he found it inconvenient to go to and fro between the College and Camlachie to attend to the type-foundry, and petitioned the Senate to build him a founding-house in the College grounds, basing his claim on their custom of giving accommodation to the arts subservient to learning, on his own services to the University in the matter of the Greek types before mentioned, and on his having undertaken, in spite of the discouraging results of that speculation, to cast a large and elegant Hebrew type for the University press. He estimated that the building would cost no more than the very modest sum of £40 sterling, and he offered to pay a fair rent. This memorial came up for consideration on the 5th of April, and it was Smith who proposed the motion which was ultimately carried, to the effect that the University should build a new foundry for Mr. Wilson on the site most convenient within the College grounds, at an expense not exceeding the sum of £40 sterling, on condition (1) that Mr. Wilson pay a reasonable rent, and (2) that if the house should become useless to the College before the Senate were sufficiently recouped for their expenditure, Mr. Wilson or his heirs should be obliged to make adequate compensation. The foundry was erected in the little College garden next the Physic Garden; it cost £19 more than the estimate, and was let for £3:15s. a year, from which it would appear that 6-1/2 per cent on the actual expenditure (irrespective of any allowance for the site) was considered a fair rent by the University authorities in those days. The Senate of this little college, which was thus actively encouraging every liberal art, which had in a few years added to the lecture-room of Hutcheson and Smith the laboratory of Black, the workshop of Watt, the press of Foulis, the academy of painting, sculpture, and engraving, and the foundry and observatory of Wilson, entertained in 1761 the idea of doing something for the promotion of athletics among the students, and had under consideration a proposal for the establishment of a new academy of dancing, fencing, and riding in the University. One of the active promoters of this scheme appears again to have been Adam Smith, for it is he who is chosen by the Senate on the 22nd December 1761 to go in their name and explain their design to the Rector, Lord Erroll, and request his assistance. This idea seems, however, to have borne no fruit. Dancing was an exercise they required to be observed with considerable moderation, for they passed a rule in 1752 that no student should be present at balls or assemblies or the like more than thrice in one session, but they treated it with no austere proscription. One art alone did they seek to proscribe, the art dramatic, and in 1762 the Senate was profoundly disturbed by a project then on foot for the erection of the first permanent theatre in Glasgow. The affair originated with five respectable and wealthy merchants, who were prepared to build the house at their own expense, the leading spirit of the five being Robert Bogle of Shettleston, who had himself, we are told by Dr. Carlyle, played "Sempronius" in a students' performance of _Cato_ within the walls of Glasgow College in 1745. Carlyle played the title _rôle_, and another divinity student, already mentioned as a college friend of Smith's, Dr. Maclaine of the Hague, played a minor part. But an amateur representation of an unexceptionable play under the eye of the professors was one thing, the erection of a public playhouse, catering like other public playhouses for the too licentious taste of the period, was another, and the project of Mr. Bogle and his friends in 1762 excited equal alarm in the populace of the city, in the Town Council, and in the University. The Council refused to sanction a site for the theatre within the city bounds, so that the promoters were obliged to build it a mile outside; but the anger of the multitude pursued them thither, and on the very eve of its opening in 1764 by a performance in which Mrs. Bellamy was to play the leading part, it was set on fire by a mob, at the instigation of a wild preacher, who said he had on the previous night been present in a vision at an entertainment in hell, and the toast of the evening, proposed in most flattering terms from the chair, was the health of Mr. Millar, the maltster who had sold the site for this new temple of the devil. During the two years between the projection of this building and its destruction it caused the Senate of the College no common anxiety, and Smith went along with them in all they did. On the 25th of November 1762 he was appointed, with the Principal and two other professors, as a committee, to confer with the magistrates concerning the most proper methods of preventing the establishment of a playhouse in Glasgow, and at the same time to procure all the information in their power concerning the privileges of the University of Oxford with respect to their ability to prevent anything of that kind being established within their bounds, and concerning the manner in which those privileges, if they existed, were made effectual. On the recommendation of this committee the University agreed to memorialise the Lord Advocate on the subject, and to ask the magistrates of the city to join them in sending the memorial. The Lord Advocate having apparently suggested doubts as to the extent of their ancient powers or privileges in the direction contemplated, Smith was appointed, along with the Principal and one or two other professors, as a special committee of inquiry into the ancient privileges and constitution of the University, and the Principal was instructed meanwhile to express to his lordship the earnest desire of the University to prevent the establishment of a playhouse. While this inquiry was proceeding, the magistrates of the city, on their part, had determined, with the concurrence of a large body of the inhabitants, to raise an action at law against the players if they should attempt to act plays in the new theatre, and at a meeting over which Smith presided, and in whose action he concurred, the University agreed to join the magistrates in this prosecution. The agitation against the playhouse was still proceeding when Smith resigned his chair in 1764, but shortly afterwards, finding itself without any legal support, it gradually died away. The part Smith took in this agitation may seem to require a word of explanation, for he not only entertained no objection to theatrical representations, but was so deeply impressed with their beneficial character that in the _Wealth of Nations_ he specially recommends them for positive encouragement by the State, and expressly dissociates himself from those "fanatical promoters of popular frenzies" who make dramatic representations "more than all other diversions the objects of their peculiar abhorrence." The State encouragement he wants is nothing in the nature of the endowment of a national theatre, which is sometimes demanded nowadays. All the encouragement he asks for is liberty--"entire liberty to all those who from their own interest would attempt, without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing, by all sorts of dramatic representations and exhibitions." But in pressing for this liberty, he expresses the strongest conviction that "the frequency and gaiety of public diversions" is absolutely essential for the good of the commonwealth, in order to "correct whatever is unsocial or disagreeably rigorous in the morals of all the little sects into which the country is divided," and to "dissipate that melancholy and gloomy humour which is almost always the source of popular superstition and enthusiasm."[61] Yet here we seem to find him in alliance with the little sects himself, and trying to crush that liberty of dramatic representations which he declares to be so vital to the health of the community. The reason is not, moreover, that he had changed his opinions in the interval between the attempts to suppress the Glasgow playhouse in 1762 and the publication of his general plea for playhouses in the Wealth of Nations in 1776. He had not changed his opinions. He travelled with a pupil to France, still warm from this agitation in Glasgow, and, as we learn from Stewart, was a great frequenter and admirer of the theatre in that country,[62] and a few years before the agitation began he was as deeply interested as any other of John Home's friends in the representations of the tragedy of Douglas, and as much a partisan of Home's cause. He does not appear indeed, as is sometimes stated, to have been present either at the public performance of Home's tragedy in Edinburgh in 1756, or at the previous private performance, which is alleged to have taken place at Mrs. Ward the actress's rooms, and in which the author himself, and Hume, Carlyle, Ferguson, and Blair are all said to have acted parts. But that he was in complete sympathy with them on the subject is manifest from an undated letter of Hume to Smith, which must have been written in that year. In this letter, knowing Smith's sentiments, he writes: "I can now give you the satisfaction of hearing that the play, though not near so well acted in Covent Garden as in this place, is likely to be very successful. Its great intrinsic merit breaks through all obstacles. When it shall be printed (which shall be soon) I am persuaded it will be esteemed the best, and by French critics the only tragedy of our language." After finishing his letter he adds: "I have just now received a copy of _Douglas_ from London. It will instantly be put on the press. I hope to be able to send you a copy in the same parcel with the dedication."[63] These sentences certainly imply that Smith's ideas of theatrical representations were in harmony with those of Hume and his other Edinburgh friends, but shortly afterwards he is seeking to revive obsolete academic privileges to prevent the erection of a theatre. The explanation must be looked for in the line of the conditional clause with which he limits his claim for entire liberty to dramatic entertainments--they must be "without scandal or indecency." There is never any question that if free trade and public morals clash, it is free trade that must give way, and his opposition to the project of the Glasgow playhouse must have originated in his persuasion that it was not attended, as things then went, with sufficient practical safeguards against scandal and indecency. In considering that point due weight must be given not only to the general improprieties permissible on the English stage at that time, but to the fact that locally great offence had quite recently been given in Scotland by the profane or immoral character of some of the pieces presented on the Scottish boards,[64] and that Glasgow itself had had experience of a disorderly theatre already--the old wooden shed where hardy playgoers braved opinion and listened to indifferent performances under the protection of troops, and where, it will be remembered, Boswell, then a student at the College, made the acquaintance of Francis Gentleman, the actor. That house was not a licensed house, but the new house was not to be a licensed house either, and it is quite possible for one who thought a theatre generally, with due safeguards, a public benefit, to think that a particular theatre without those safeguards might constitute a public danger, especially in a university town. On two delicate questions of professorial duty Smith made a decided stand in behalf of the stricter interpretation. In 1757 Professor John Anderson, the founder of the Andersonian University, who was then Professor of Oriental Languages in Glasgow, became a candidate for the chair which he afterwards filled for so many years with great credit and success--the chair of Natural Philosophy; and, as the appointment lay with the professors, Professor Anderson was one of the electors, and was quite within his legal right in voting for himself. But Smith, impressed with the importance of keeping such appointments free from any leaven of personal interest, tabled a formal protest on three successive occasions against the intervention of that distinguished but headstrong professor in the business of that particular election. He protested first against Anderson voting on a preliminary resolution respecting the election; he protested the second time against him taking part in the election itself; and he protested a third time after the election, desiring it to be recorded expressly "that he did not vote in the election of Mr. Anderson as Professor of Natural Philosophy, not from objection to Mr. Anderson, in whose election he would willingly have concurred, but because he regarded the method of proceeding as irregular and possibly establishing a bad precedent." As patrons of University chairs, the professors were trustees for the community, and ought each to be bound by a tacit self-denying ordinance, at least to the extent of refraining from actively using this public position to serve his private interest. Smith himself, it will be remembered, was one of his own electors to the Moral Philosophy chair, but then that election was uncontested, and Smith was not present at the meeting which appointed him. The other personal question arose also out of circumstances which have their counterpart in Smith's own history. Professor William Rouet, Professor of Ecclesiastical and Civil History, made an engagement in 1759 to travel abroad as tutor with Lord Hope, the eldest son of Lord Hopetoun; but when Lord Hopetoun wrote requesting leave of absence for Professor Rouet, the Senate by a majority refused to grant the request. Smith was one of that majority, and took an active part in the subsequent transactions arising out of their decision. Rouet persists in going abroad in the teeth of the refusal, and the University by a majority deprive him of office for his negligence of duty. The Crown, however, at first refuse to appoint a successor, on the ground of informality in the act of deprivation, and Lord Bute tells the Rector, Lord Erroll, that "the king's orders" are that the business must be done over again _de novo_, or "else it may be of the worst consequences to the University." The University take the opinion of eminent counsel, Ferguson of Pitfour and Burnet of Mountbodie (Monboddo), and are prepared to face the consequences threatened, but are eventually saved the trouble by the resignation of Rouet in 1761. Now in these transactions Smith seems to bear a leading part. He was one of the small committee appointed to draw up answers to the protest tabled by the minority of the Senatus; it was to him Lord Erroll communicated the intimation of Lord Bute, though he was not then either Vice-Rector or Dean of Faculty; and it was he and Professor Millar who were sent through to Edinburgh to consult the two advocates. Smith was probably on the best terms with Rouet himself, who was an intimate friend of David Hume and a cousin of their common friend Baron Mure, and it was not an uncommon practice for the Scotch universities at that period to sanction the absence of a professor on a tutorial engagement. Adam Ferguson left England as tutor to Lord Chesterfield while he was Professor of Moral Philosophy at Edinburgh, and Dalzel resided at Oxford as tutor to Lord Maitland after he was Professor of Greek in the same University. The Senate of Glasgow had itself already permitted Professor John Anderson to remain another winter in France with a son of the Primate of Ireland, when he was chosen Professor of Oriental Languages in 1756, and Smith had concurred in giving the permission. But Anderson's absence was absence to fulfil an already-existing engagement, like the absence granted to Smith himself in the first year of his own appointment, while Rouet's was absence to fulfil a new one; and Smith, as his own subsequent conduct shows, held pluralities and absenteeism of that sort to be a wrong and mischievous subordination of the interest of the University to the purely private interest or convenience of the professors. They had too many temptations to accommodate one another by such arrangements at the expense of the efficiency of the College; and his action both in Rouet's case and his own is entirely in the spirit of his criticism of the English universities in the _Wealth of Nations_. FOOTNOTES: [55] The words ladles and ladler seem to have descended from a time when the exactions were made in kind by ladling the quantity out of the sack. [56] Hamilton's _Reid_, p. 43. [57] _Wealth of Nations_, Book I. chap. ix. [58] Muirhead's _Life of Watt_, p. 470. [59] Duncan's _Notes and Documents_, p. 25. [60] Burton, _Life of Hume_, ii. 59. [61] _Wealth of Nations_, Book V. chap. i. art. iii. [62] Stewart's _Works_, x. 49. [63] Burton's _Life of Hume_, ii. 16. [64] See Doran's _Annals of the Stage_, ii. 377. CHAPTER VII AMONG GLASGOW FOLK Smith was not only teacher in Glasgow, he was also learner, and the conditions of time and place were most favourable, in many important ways, for his instruction. Had he remained at Oxford, he would probably never have been an economist; had he not spent so many of his best years in Glasgow, he would never have been such an eminent one. It was amid the thickening problems of the rising trade of the Clyde, and the daily discussions they occasioned among the enterprising and intelligent merchants of the town, that he grew into a great economist. It need scarce be said that the Glasgow of the middle of last century was a very different city from the Glasgow of to-day. It was in size and appearance a mere provincial town of 23,000 inhabitants. Broom still grew on the Broomielaw; a few cobles were the only craft on the river; and the rude wharf was the resort of idlers, watching the fishermen on the opposite side cast for salmon, and draw up netfuls on the green bank. The Clyde was not deepened till 1768. Before that the whole tonnage dues at Glasgow were only eight pounds a year, and for weeks together not a single vessel with a mast would be seen on the water. St. Enoch Square was a private garden; Argyle Street an ill-kept country road; and the town herd still went his rounds every morning with his horn, calling the cattle from the Trongate and the Saltmarket to their pasture on the common meadows in the now densely-populated district of the Cowcaddens. Glasgow in these its younger days struck every traveller chiefly for its beauty. Mrs. Montagu thought it the most beautiful city in Great Britain, and Defoe, a few years before, said it was "the cleanest and beautifullest and best built city in Britain, London excepted." As Mrs. Bellamy approached it on the occasion I have mentioned in order to open the new theatre in 1764, she says "the magnificence of the buildings and the beauty of the river ...elated her heart"; and Smith himself, we know, once suffered for praising its charms. It was at a London table, and Johnson was present, who, liking neither Smith nor his Scotch city, cut him short by asking, "Pray, sir, have you seen Brentford?" Boswell, who took a pride in Glasgow himself, calling it "a beautiful city," afterwards expostulated with the doctor for this rough interruption: "Now, sir," said he, "was not that rude?" The full rudeness is only apparent when we remember that Brentford was in that day a byword for dreariness and dirt--Thomson in the _Castle of Indolence_ calls it "a town of mud." When Johnson visited Glasgow, however, he joined the troop of its admirers himself, and Boswell took the opportunity to put him then in mind of his question to Smith, and whisper to him, "Don't you feel some remorse?" But Glasgow had already begun its transition from the small provincial to the great commercial capital, and was therefore at a stage of development of special value to the philosophical observer. Though still only a quiet but picturesque old place, nestling about the Cathedral and the College and two fine but sleepy streets, in which carriers built their haystacks out before their door, it was carrying on a trade which was even then cosmopolitan. The ships of Glasgow were in all the waters of the world, and its merchants had won the lead in at least one important branch of commerce, the West India tobacco trade, and were founding fresh industries every year with the greatest possible enterprise. The prosperity of Glasgow is a fruit of the Union which first opened the colonial markets to Scotch merchandise, and enabled the merchants of the Clyde to profit by the advantages of their natural situation for trading with the American plantations. Before the middle of the century the Clyde had become the chief European emporium for American tobacco, which foreign countries were not then allowed to import directly, and three-fourths of the tobacco was immediately on arrival transhipped by the Glasgow merchants for the seaports of the Mediterranean, the Baltic, and the North Sea. As they widened their connections abroad, they naturally developed their industries at home. They founded the Smithfield ironworks, and imported iron from Russia and Sweden to make hoes and spades for the negroes of Maryland. They founded the Glasgow tannery in 1742, which Pennant thought an amazing sight, and where they employed 300 men making saddles and shoes for the plantations. They opened the Pollokshaws linen print-field in 1742, copper and tin works in 1747, the Delffield pottery in 1748. They began to manufacture carpets and crape in 1759, silk in 1759, and leather gloves in 1763. They opened the first Glasgow bank--the Ship--in 1750, and the second--the Arms--in 1752. They first began to improve the navigation of the Clyde by the Act of 1759; they built a dry dock at their harbour of Port Glasgow in 1762; while in 1768 they deepened the Clyde up to the city, and began (for this also was mainly their work) the canal to the Forth for their trade with the Baltic. It was obvious, therefore, that this was a period of unique commercial enterprise and expansion. We can easily believe Gibson, the historian of Glasgow, when he states that after 1750 "not a beggar was to be seen in the streets," and "the very children were busy"; and we can as easily understand Smith when, contrasting Glasgow and Edinburgh among other places, he says the residence of a few spirited merchants is a much better thing for the common people of a place than the residence of a court. Now it was those spirited merchants who had then so much to do with the making of Glasgow that had also something to do with the making of Adam Smith. Plain business men of to-day sometimes smile at the "Virginian Dons" and "tobacco lords" of last century as they picture them gathering to the Glasgow Plainstanes at the hour of Change in the glory of scarlet cloaks, cocked hats, and gold-headed canes, and the plain citizens of that time all making way for their honours as they passed. But there was much enlightenment and sagacity concealed under that finery. Mrs. Montagu, who visited Glasgow in 1767, wrote Sir A. Mitchell, the Ambassador, that she was more delighted with it than with any other commercial town she had seen, because gain did not usurp people's whole attention, but "the sciences, the arts, and the love of agriculture had their share."[65] Their fortunes were small compared with the present standard. Sir John Dalrymple, speaking of three of the foremost merchants of Glasgow (one of them, John Glassford, the richest man in the city), computes that they had a quarter of a million between the three, and Dr. Reid, explaining the anxiety caused in Glasgow by the American troubles in 1765, says Glasgow owners possessed property in the American plantations amounting to £400,000. But these figures meant large handling and large dealings in those times, and perhaps more energy, mind, and character than the bigger figures of the present day; and we are told that commercial men in Glasgow still look back to John Glassford and Andrew Cochrane as perhaps the greatest merchants the Clyde has seen. Andrew Cochrane was Smith's particular friend among them, and Dr. Carlyle tells that "Dr. Smith acknowledged his obligations to this gentleman's information when he was collecting materials for his _Wealth of Nations_; and the junior merchants who have flourished since his time and extended their commerce far beyond what was then dreamt of, confess with respectful remembrance that it was Andrew Cochrane who first opened and enlarged their views."[66] Dr. Carlyle informs us, moreover, that Cochrane founded a weekly club in the "forties"--political economy club--of which "the express design was to inquire into the nature and principles of trade in all its branches, and to communicate knowledge and ideas on that subject to each other," and that Smith became a member of this club after coming to reside in Glasgow. This was probably the first political economy club in the world, for Carlyle was in Glasgow in 1743, and it is of that period he speaks when he says, "I was not acquainted with Provost Cochrane at this time, but I observed that the members of this society had the highest admiration of his knowledge and talents." Cochrane was indeed one of the remarkable men of that time. Smollett describes him in _Humphrey Clinker_ as "one of the first sages of the Scottish kingdom," and "a patriot of a truly Roman spirit." He was Provost of Glasgow during the Rebellion, and while the Government and the Horse Guards slumbered and dawdled, and let Prince Charlie march from the Highlands to Edinburgh, and from Edinburgh up into the heart of England, Cochrane had already raised two regiments in Glasgow to resist the invader, which, however, this same dawdling Government, from mistaken suspicions of Scottish loyalty, refused to permit him to arm. The Prince, on his return from England, actually occupied Glasgow, and taxed it severely, but Cochrane's sagacious management piloted the city through the crisis, so that it neither yielded to the popular Prince's arts nor provoked him to hostilities; and, looking back at these difficulties when he laid down the Provostship a few years later, he said, "I thank my God that my magistracy has ended without reproach." His correspondence, published by the Maitland Club, contains some terse descriptions of the "prodigious slavery" he underwent, "going through the great folks" in London day after day for two months trying to recover from the Government some compensation for the Prince's exactions. And it may be added that it was his banking firm--Cochrane, Murdoch and Co., generally known, however, as the Glasgow Arms Bank, because they printed the Glasgow arms on their notes--that fell on the happy expedient of paying in sixpences when the Bank of Scotland made the infamous attempt to "break" it in 1759 by first collecting its notes for some time, and then suddenly presenting the whole number collected for immediate payment. The agent of the Bank of Scotland presented £2893 of notes on the 14th of December, and after thirty-four successive days' attendance he wrote his employers that he had only received £1232, because "the partners vied with each other in gaining time by miscounting and other low arts, and when the partners became wearied or ashamed of the task, their porter, a menial servant, would act the part of teller."[67] Of the Political Economy Club, founded by this able man, we know nothing except what Dr. Carlyle tells us, and the only other member of it besides Smith and Cochrane whose name Carlyle mentions is Dr. Wight, Professor of Ecclesiastical and Civil History. But it met once a week all the thirteen years Smith resided in Glasgow, and must have discussed many commercial problems during that time. We know, indeed, some of the principal practical questions which were then agitating the minds of Glasgow merchants, and may be sure those, at least, would be among the questions discussed at the club. Some of them concerned the removal of trade restrictions, but the restrictions which those Glasgow merchants were anxious to remove were restrictions on the import of raw materials for their manufactures, such as iron and linen yarn, and manufacturers, of course, are not necessarily free-traders because they want free import of raw materials. That was advocated as strongly from the old mercantilist standpoint as it is now from the free-trade one; it was merely sanctioning a little addition to our imports in order to produce a much greater addition to our exports. In 1750 we find Provost Cochrane in correspondence with Smith's friend, James Oswald, M.P., concerting parliamentary action for the entire removal of the import duty on American iron. The Glasgow ironworks--the nailery, as it was called--with which Mr. Cochrane was connected used at that time 400 tons of iron in the year, and the iron had to be all imported at a high price from Russia and Sweden, because the native ores of Scotland were not then discovered, and American iron, by an iniquitous piece of preferential legislation in favour of the English manufacturer, was allowed to come duty free into English but not into Scotch seaports. Cochrane wants Oswald to get the law amended so as to "allow bar iron from our colonies to be imported to Scotland duty free." "It would," he says, "save our country very great sums, and no way hurt the landed interest. It would lower the price of iron, and consequently of all our manufactures, which would increase the consumpt and sale; it would serve for ballast to our ships from North America, and when tobacco is scarce, fill up part of the tonnage; would increase our exports, and no way interfere with our neighbours in the South."[68] That language might be held indifferently by the mercantilist and the free-trader. In advocating the abolition of the duty on foreign linen yarns, which they succeeded in obtaining in 1756, the Glasgow merchants seem certainly to have had no thought of free trade, or probably anything else but their own obvious interest as manufacturers, for they never dreamt of abolishing either the export bounty on home-made linen cloth or of repealing the law of 1748, which gave their own Glasgow linen factory a considerable lift, and which forbade the import of foreign linen, and fined husbands for letting their wives wear it. Still the discussion of these subjects would open up various points of view, and it may be remembered that this duty on foreign linen yarns is one which Smith himself, free-trader though he was, was against abolishing, not out of any favour for the flax-growers, but for the protection of the poor women scattered in the cottages of the kingdom who made their livelihood by spinning yarn. On the question of paper money we find Mr. Cochrane and Mr. Glassford--both of whom were bankers as well as merchants--in communication with Baron Mure and Sir James Steuart, the economist, soon after Smith left Glasgow. Sir James would almost certainly be a member of the club, because he resided in the neighbourhood, but as he was only pardoned a few months before Smith resigned his chair, it is improbable that the two economists ever met together at the club meetings. But the questions the two leading merchants were then discussing with Sir James would, no doubt, have been occasionally subjects of conversation at the club during the time of Smith's attendance. What, we find them asking, are the effects of paper money on prices? on the currency? on the exchanges with other countries? What was the effect of small notes? what of notes not payable on demand? They differed on various points. For example, Glassford would let the banks issue notes for any sums they liked, and had no objection to the small ten-shilling and five-shilling notes which were then common. Cochrane would abolish all notes for less than a pound,[69] and Smith--at least in 1776--would abolish all notes less than five pounds.[70] But all alike had a firm grasp of the true nature and operation of money. Another society of which Smith was a member, and indeed a founder, was the Literary Society of Glasgow. It was a general debating society composed mainly of professors in the University--Cullen, Black, Wilson the astronomer; Robert Simson, Leechman the divinity professor and principal; Millar, and indeed nearly the whole Senatus; with a few merchants or country gentlemen of literary tastes such as William Craufurd, the friend of Hamilton of Bangour; William Mure of Caldwell, M.P. for Renfrewshire; Sir John Dalrymple, the historian, who was a proprietor in the West country; John Callander of Craigforth, the antiquary; Thomas Miller, Town Clerk of Glasgow, and afterwards Lord Justice-Clerk of Scotland; Robert Foulis, the printer; James Watt, who said he derived much benefit from it; Robert Bogle of Shettleston, the promoter of the theatre already mentioned; David Hume, and the Earl of Buchan, elected while residing as a student in 1762. The Literary Society was founded in 1752, and met every Thursday evening from November to May at half-past six. Its minutes are probably still in existence somewhere, but a few extracts from them have been published by the Maitland Club,[71] and from them we learn that Smith was one of the first contributors to its proceedings. Early in its first session--on the 23rd of January 1753--Professor Adam Smith is stated to have read an account of some of Mr. David Hume's Essays on Commerce. These essays had then just appeared; and they had probably been seen by Smith before their publication, for in September 1752 Hume writes Smith asking him for any corrections he had to suggest on the old edition of the Political Essays with which the Commercial Essays were incorporated. We have seen Hume submitting one of these Commercial Essays in 1750 to Oswald and Mure, and when we find him in 1752 asking for suggestions from Smith on the essays already printed, we may safely infer that he had also asked and received suggestions on the new essays which had never been published. The Maitland Club volume gives us no information about the papers read in this society after the first six months, except those read by Foulis, but no doubt Smith read other papers in the remaining ten years of his connection with the society. Its debates were often very keen; the metaphysical and theological combats between Professor Millar--a most brilliant debater--and Dr. Reid, the father of the common-sense philosophy, were famous in their day; and on one occasion tradition informs us that Smith engaged in a strenuous discussion on some subject for a whole evening against the entire assembly, and, having lost his point by an overwhelming majority, was overheard muttering to himself, "Convicted but not convinced."[72] After their high controversies in the Literary Society and their keener but less noble contentions in the Senate Hall, the Glasgow professors used to unbend their bows again in the simple convivialities of "Mr. Robin Simson's Club." Mr. Robin Simson was the venerable Professor of Mathematics, equally celebrated and beloved, known through all the world for his rediscovery of the porisms of Euclid, but in Glasgow College--whose bounds he rarely quitted--the delight of all hearts for the warmth, breadth, and uprightness of his character, for the charming simplicity of his manner, and the richness of his weighty and sparkling conversation. It was his impressions of Simson that first gave Smith the idea that mathematicians possessed a specific amiability and happiness of disposition which placed them above the jealousies and vanities and intrigues of the lower world. For fifty years Simson's life was spent almost entirely within the two quadrangles of Glasgow College; between the rooms he worked and slept in, the tavern at the gate, where he ate his meals, and the College gardens, where he took his daily walk of a fixed number of hundred paces, of which, according to some well-known anecdotes, he always kept count as he went, even under the difficulties of interruption. Mr. Robin, who was unmarried, never went into general society, but after his geometrical labours were over finished the day with a rubber of whist in the tavern at the College gate. Here one or another of the professors used to join him, and the little circle eventually ripened into a regular club, which met for supper at this tavern every Friday evening, and went out to Anderston for dinner on Saturday. It was then known as the Anderston Club, as well as by its former designation from the name of its founder. Anderston was at that time quite a country village. It was very soon afterwards made busy enough with the cotton factory of James Monteith, but at this time Tames Monteith's father was using the spot as a market garden. It contained, however, a cosy little "change-house," capable of providing the simple dinner then in vogue. The dinner consisted of only one course. Mr. M'George says the first dinner of two courses ever given in Glasgow was given in 1786; and Principal M'Cormick of St. Andrews, writing Dr. Carlyle about that date, praises the dinner-parties of St. Andrews to the skies, but says nobody gave two courses except Mrs. Prebendary Berkeley, and Mrs. Prebendary Berkeley was the daughter-in-law of a bishop. The course at the Anderston dinner, moreover, consisted every week of the same dish; it was invariably chicken-broth, which Smollett classes with haggis, singed sheepshead, fish and sauce, and minced collops, as one of the five national dishes of Scotland. He describes it as "a very simple preparation enriched with eggs in such a manner as to give the air of a spoiled fricassee"; but adds that "notwithstanding its appearance, it is very delicate and nourishing." The chicken-broth was accompanied with a tankard of sound claret, and then the cloth was removed for whist and a bowl of punch. At whist Smith was not considered an eligible partner, for, says Ramsay of Ochtertyre, if an idea struck him in the middle of the game he "either renounced or neglected to call,"[73] and he must have in this way given much provocation to the amiability of Simson, who, though as absent-minded as Smith ever was at common seasons, was always keenly on the alert at cards, and could never quite forgive a slip of his partner in the game. After cards the rest of the evening was spent in cheerful talk or song, in which again Simson was ever the leading spirit. He used to sing Greek odes set to modern airs, which the members never tired of hearing again, for he had a fine voice and threw his soul into the rendering. Professor Robison of Edinburgh, who was one of his students, twice heard him--no doubt at this club, for Simson never went anywhere else--sing a Latin hymn to the Divine Geometer, apparently of his own making, and the tears stood in the worthy old gentleman's eyes with the emotion he put into the singing of it. His conversation is said to have been remarkably animated and various, for he knew most other subjects nearly as well as he did mathematics. He was always full of hard problems suggested by his studies of them, and he threw into the discussion much whimsical humour and many well-told anecdotes. The only subject debarred was religion. Professor Traill says any attempt to introduce that peace-breaking subject in the club was checked with gravity and decision. Simson was invariably chairman, and so much of the life of the club came from his presence that when he died in 1768 the club died too. Three at least of the younger men who shared the simple pleasures of this homely Anderston board--Adam Smith, Joseph Black, and James Watt--were to exert as important effects on the progress of mankind as any men of their generation. Watt specially mentions Smith as one of the principal figures of the club, and says their conversation, "besides the usual subjects with young men, turned principally on literary topics, religion, morality, belles-lettres, etc., and to this conversation my mind owed its first bias towards such subjects in which they were all my superiors, I never having attended a college, and being then but a mechanic."[74] According to this account religion was not proscribed, but Professor Traill's assertion is so explicit that probably Watt's recollection errs. It is, however, another sign of the liberal spirit that then animated these Glasgow professors to find them welcoming on a footing of perfect equality one who, as he says, was then only a mechanic, but whose mental worth they had the sense to recognise. Dr. Carlyle, who was invited by Simson to join the club in 1743, says the two chief spirits in it then were Hercules Lindsay, the Professor of Law, and James Moor, the Professor of Greek, both of whom were still members in Smith's time. Lindsay, who, it will be remembered, acted as Smith's substitute in the logic class, was a man of force and independence, who had suffered much abuse from the Faculty of Advocates in Edinburgh for giving up the old practice of delivering his lectures in Latin, and refusing to return to it. Moor was the general editor of the famous editions of the classics printed by his brother-in-law, Robert Foulis, a man, says Dugald Stewart, of "a gaiety and levity foreign to this climate," much addicted to punning, and noted for his gift of ready repartee. He was always smartly dressed and powdered, and one day as he was passing on the Plainstanes he overheard two young military officers observe one to the other, "He smells strongly of powder." "Don't be alarmed, my young soldier," said Moor, turning round on the speaker, "it is not gunpowder." A great promoter of the merriment of the club was Dr. Thomas Hamilton, Professor of Anatomy, the grandfather of Sir William, the metaphysician, who is thus described in some verses by Dr. John Moore, the author of _Zelucco_-- He who leads up the van is stout Thomas the tall, Who can make us all laugh, though he laughs at us all; But _entre nous_, Tom, you and I, if you please, Must take care not to laugh ourselves out of our fees. Then we remember what Jeffrey says of "the magical vivacity" of the conversation of Professor John Millar. FOOTNOTES: [65] Add. MSS., 6856. [66] Carlyle's _Autobiography_, p. 73. [67] Fleming's _Scottish Banking_, p. 53. [68] Oswald's _Correspondence_, p. 229. [69] _Caldwell Papers_, ii. 3. [70] _Wealth of Nations_, Book II. chap. ii. [71] _Notices and Documents illustrative of the Literary History of Glasgow_, p. 132. [72] Strang's _Clubs of Glasgow_, 2nd ed. p. 314. [73] Ramsay's _Scotland and Scotsmen in Eighteenth Century_, i. 468. [74] Smiles's _Lives of Boulton and Watt_, p. 112. CHAPTER VIII EDINBURGH ACTIVITIES During his residence in Glasgow Smith continued to maintain intimate relations with his old friends in Edinburgh. He often ran through by coach to visit them, though before the road was improved it took thirteen hours to make the journey; he spent among them most part of many of his successive vacations; and he took an active share, along with them, in promoting some of those projects of literary, scientific, and social improvement with which Scotland was then rife. His patron, Henry Home, had in 1752 been raised to the bench as Lord Kames, and was devoting his new-found leisure to those works of criticism and speculation which soon gave him European fame. David Hume, after his defeat at Glasgow, had settled for a time into the modest post of librarian to the Faculty of Advocates, and was writing his _History of England_ in his dim apartments in the Canongate. Adam Ferguson, who threw up his clerical calling in 1754, and wrote Smith from Groningen to give him "clerical titles" no more, for he was "a downright layman," came to Edinburgh, and was made Hume's successor in the Advocates' Library in 1757 and professor in the University in 1759. Robertson did not live in Edinburgh till 1758, but he used to come to town every week with his neighbour John Home before the latter left Scotland in 1757, and they held late sittings with Hume and the other men of letters in the evening. Gilbert Elliot entered Parliament in 1754, but was always back during the recess with news of men and things in the capital. The two Dalrymples--Sir David of Hailes, and Sir John of Cousland--were toiling at their respective histories, and both were personal friends of Smith's; while another, of whom Smith was particularly fond--Wilkie, the eccentric author of the _Epigoniad_--was living a few miles out as minister of the parish of Ratho. Wilkie always said that Smith had far more originality and invention than Hume, and that while Hume had only industry and judgment, Smith had industry and genius. His mind was at least the more constructive of the two. A remark of Smith's about Wilkie has also been preserved, and though it is of no importance, it may be repeated. Quoting Lord Elibank, he said that whether it was in learned company or unlearned, wherever Wilkie's name was mentioned it was never dropped soon, for everybody had much to say about him.[75] But that was probably due to his oddities as much as anything else. Wilkie used to plough his own glebe with his own hands in the ordinary ploughman's dress, and it was he who was the occasion of the joke played on Dr. Roebuck, the chemist, by a Scotch friend, who said to him as they were passing Ratho glebe that the parish schools of Scotland had given almost every peasant a knowledge of the classics, and added, "Here, for example, is a man working in the field who is a good illustration of that training; let us speak with him." Roebuck made some observation about agriculture. "Yes, sir," said the ploughman, "but in Sicily they had a different method," and he quoted Theocritus, to Roebuck's great astonishment. Among Smith's chief Edinburgh friends at this period was one of his former pupils, William Johnstone--son of Sir James Johnstone of Westerhall, and nephew of Lord Elibank--who was then practising as an advocate at the Scotch bar, but ultimately went into Parliament, married the greatest heiress of the time, Miss Pulteney, niece of the Earl of Bath, and long filled an honoured and influential place in public life as Sir William Pulteney. He was, as even Wraxall admits, a man of "masculine sense" and "independent as well as upright" character, and he devoted special attention to all economic and financial questions. It was Pulteney who in his speech on the suspension of cash payments by the Bank of England in 1797--in which he proposed the establishment of another bank--quoted from some unknown source the memorable saying which is generally repeated as if it were his own, that Smith "would persuade the present generation and govern the next." He quoted the words as something that had been "well said." Between him and Smith there prevailed a warm and affectionate friendship for more than forty years, and we shall have occasion again to mention his name. But I allude to him at present because a letter still exists which was given him by Smith at this period to introduce him, during a short stay he made in London, to James Oswald, then newly appointed to office at the Board of Trade. This is the only letter that happens to be preserved of all the correspondence carried on by Smith with Oswald, and while both the occasion of it and its substance reveal the footing of personal intimacy on which they stood, its ceremonious opening and ending indicate something of the reverence and gratitude of the client to the patron:-- SIR--This will be delivered to you by Mr. William Johnstone, son of Sir James Johnstone of Westerhall, a young gentleman whom I have known intimately these four years, and of whose discretion, good temper, sincerity, and honour I have had during all that time frequent proofs. You will find in him too, if you come to know him better, some qualities which from real and unaffected modesty he does not at first discover; a refinement and depth of observation and an accuracy of judgment, joined to a natural delicacy of sentiment, as much improved as study and the narrow sphere of acquaintance this country affords can improve it. He had, first when I knew him, a good deal of vivacity and humour, but he has studied them away. He is an advocate; and though I am sensible of the folly of prophesying with regard to the future fortune of so young a man, yet I could almost venture to foretell that if he lives he will be eminent in that profession. He has, I think, every quality that ought to forward, and not one that should obstruct his progress, modesty and sincerity excepted, and these, it is to be hoped, experience and a better sense of things may in part cure him of. I do not, I assure you, exaggerate knowingly, but could pawn my honour upon the truth of every article. You will find him, I imagine, a young gentleman of solid, substantial (not flashy) abilities and worth. Private business obliges him to spend some time in London. He would beg to be allowed the privilege of waiting on you sometimes, to receive your advice how he may employ his time there in the manner that will tend most to his real and lasting improvement. I am sensible how much I presume upon your indulgence in giving you this trouble; but as it is to serve and comply with a person for whom I have the most entire friendship, I know you will excuse me though guilty of an indiscretion; at least if you do not, you will not judge others as you would desire to be judged yourself; for I am very sure a like motive would carry you to be guilty of a greater. I would have waited on you when you was last in Scotland had the College allowed me three days' vacation; and it gave me real uneasiness that I should be in the same country with you, and not have the pleasure of seeing you. Believe it, no man can more rejoice at your late success,[76] or at whatever else tends to your honour and prosperity, than does, Sir, your ever obliged and very humble servant, ADAM SMITH. Glasgow, _19th January 1752_, N.S.[77] Pulteney abandoned the law in which Smith prophesied eminence for him, but he was happily not cured entirely of his sincerity by his subsequent experience, for it was greatly from that quality that he derived the weight he enjoyed in the House of Commons. His contemporary in Parliament, Sir John Sinclair, says Pulteney's influence arose from the fact that he was known to be a man who never gave a vote he did not in his heart believe to be right. Having no taste for display, he lived when he had £20,000 a year about as simply as he did when he had only £200, and on that account he is sometimes accused of avarice, though he was constantly doing acts of signal liberality. Smith's chief friend in Edinburgh was David Hume. Though their first relations were begun apparently in 1739, they could not have met much personally before Smith's settlement in Glasgow. For when Smith came to Edinburgh in 1748 Hume was abroad as secretary to General St. Clair in the Embassy at Vienna and Turin, and though he left this post in 1749, he remained for the next two years at Ninewells, his father's place in Berwickshire, and only settled in Edinburgh again just as Smith was removing to Glasgow. He would no doubt visit town occasionally, however, and before Smith was a year in Glasgow he had already entered on that correspondence with the elder philosopher which, beginning with the respectful "dear sir," grew shortly into the warmer style of "my dearest friend" as their memorable and Roman friendship ripened. Hume never paid Smith a visit in Glasgow, though he had often promised to do so, but Smith in his runs to Edinburgh spent always more and more of his time with Hume, and latterly at any rate made Hume's house his regular Edinburgh home. In 1752 Hume had already taken Smith as one of his literary counsellors, and consulted him about the new edition of his _Essays, Moral and Political_, and his historical projects, and I may be permitted here and afterwards to quote parts of Hume's letters which throw any light on Smith's opinions or movements. On the 24th of September 1752 he writes-- DEAR SIR--I confess I was once of the same opinion with you, and thought that the best period to begin an English History was about Henry the Seventh, but you will please to observe that the change which then happened in public affairs was very insensible, and did not display its influence for many years afterwards.... I am just now diverted for the moment by correcting my _Essays, Moral and Political_ for a new edition. If anything occur to you to be inserted or retrenched, I shall be obliged if you offer the hint. In case you should not have the last edition by you I shall send you a copy of it.... I had almost lost your letter by its being wrong directed. I received it late, which was the reason you got not sooner a copy of _Joannes Magnus_.[78] On the 17th of December 1754 Hume gives Smith an account of his quarrel with the Faculty of Advocates, and his resolution to stay as librarian after all, for the sake of the use of the books, which he cannot do without, but to give Blacklock, the blind poet, a bond of annuity for the salary. Three weeks later he writes again, and as the letter mentions Smith's views on some historical subjects, it may be quoted:-- EDINBURGH, _9th January 1755_. DEAR SIR--I beg you to make my compliments to the Society, and to take the fault on yourself if I have not executed my duty, and sent them this time my anniversary paper. Had I got a week's warning I should have been able to have supplied them. I should willingly have sent some sheets of the History of the Commonwealth or Protectorship, but they are all of them out of my hand at present, and I have not been able to recall them.[79] I think you are extremely in the right that the Parliament's bigotry has nothing in common with Hiero's generosity. They were themselves violent persecutors at home to the utmost of their power. Besides, the Huguenots in France were not persecuted; they were really seditious, turbulent people, whom their king was not able to reduce to obedience. The French persecutions did not begin till sixty years after. Your objection to the Irish massacre is just, but falls not on the execution but the subject. Had I been to describe the massacre of Paris I should not have fallen into that fault, but in the Irish massacre no single eminent man fell, or by a remarkable death. If the elocution of the whole chapter be blamable, it is because my conceptions laboured most to start an idea of my subject, which is there the most important, but that misfortune is not unusual.--I am, etc.[80] In 1752 Smith was chosen a member of the Philosophical Society of Edinburgh, which, after an interregnum caused by the rebellion, was revived in that year, with David Hume for Secretary, and which was eventually merged in the Royal Society in 1784. But we know of no part he took, if he took any, in its proceedings. Of the Rankenian Society, again--the famous old club in Ranken's Coffee-house, to which Colin Maclaurin and other eminent men belonged, and some of whose members carried on a philosophical controversy with Berkeley, and, if we can believe Ramsay of Ochtertyre, were pressed by the good bishop to accompany him in his Utopian mission to Bermuda--Smith was never even a member, though it survived till 1774. But he took a principal part in founding a third society in 1754, which far eclipsed either of these--at least for a time--in _éclat_, and has left a more celebrated name, the Select Society. The Select Society was established in imitation of the academies which were then common in the larger towns of France, and was partly a debating society for the discussion of topics of the day, and partly a patriotic society for the promotion of the arts, sciences, and manufactures of Scotland. The idea was first mooted by Allan Ramsay, the painter, who had travelled in France as long ago as 1739, with James Oswald, M.P., and was struck with some of the French institutions. Smith was one of the first of Ramsay's friends to be consulted about the suggestion, and threw himself so heartily into it that when the painter announced his first formal meeting for the purpose on the 23rd of May 1754, Smith was not only one of the fifteen persons present, but was entrusted with the duty of explaining the object of the meeting and the nature of the proposed institution. Dr. A. Carlyle, who was present, says this was the only occasion he ever heard Smith make anything in the nature of a speech, and he was but little impressed with Smith's powers as a public speaker. His voice was harsh, and his enunciation thick, approaching even to stammering.[81] Of course many excellent speakers often stutter much in making a simple business explanation which they are composing as they go along, and Smith always stuttered and hesitated a deal for the first quarter of an hour, even in his class lectures, though his elocution grew free and animated, and often powerful, as he warmed to his task. The Society was established and met with the most rapid and remarkable success. The fifteen original members soon grew to a hundred and thirty, and men of the highest rank as well as literary name flocked to join it. Kames and Monboddo, Robertson and Ferguson and Hume, Carlyle and John Home, Blair and Wilkie and Wallace, the statistician; Islay Campbell and Thomas Miller, the future heads of the Court of Session; the Earls of Sutherland, Hopetoun, Marchmont, Morton, Rosebery, Erroll, Aboyne, Cassilis, Selkirk, Glasgow, and Lauderdale; Lords Elibank, Garlies, Gray, Auchinleck, and Hailes; John Adam, the architect; Dr. Cullen, John Coutts, the banker and member for the city; Charles Townshend, the witty statesman; and a throng of all that was distinguished in the country, were enrolled as members, and, what is more, frequented its meetings. It met every Friday evening from six to nine, at first in a room in the Advocates' Library, but when that became too small for the numbers that began to attend its meetings, in a room hired from the Mason Lodge above the Laigh Council House; and its debates, in which the younger advocates and ministers--men like Wedderburn and Robertson--took the chief part, became speedily famous over all Scotland as intellectual displays to which neither the General Assembly of the Kirk nor the Imperial Parliament could show anything to rival. Hume wrote in 1755 to Allan Ramsay, who had by that time gone to settle in Rome, that the Select Society "has grown to be a national concern. Young and old, noble and ignoble, witty and dull, laity and clergy, all the world are ambitious of a place amongst us, and on each occasion we are as much solicited by candidates as if we were to choose a member of Parliament." He goes on to say that "our young friend Wedderburn has acquired a great character by the appearance he has made," and that Wilkie, the minister, "has turned up from obscurity and become a very fashionable man, as he is indeed a very singular one. Monboddo's oddities divert, Sir David's (Lord Hailes) zeal entertains, Jack Dalrymple's (Sir John of the _Memoirs_) rhetoric interests. The long drawling speakers have found out their want of talents and rise seldomer. In short, the House of Commons is less the object of general curiosity to London than the Select Society is to Edinburgh. The 'Robin Hood,' the 'Devil,' and all other speaking societies are ignoble in comparison."[82] At the second regular meeting, which was held on the 19th of June 1754, Mr. Adam Smith was Præses, and gave out the subjects for debate on the following meeting night: (1) Whether a general naturalisation of foreign Protestantism would be advantageous to Britain; and (2) whether bounties on the exportation of corn be advantageous to trade and manufactures as well as to agriculture.[83] Lord Campbell in mentioning this circumstance makes it appear as if Smith chose the latter subject of his own motion, in accordance with a rule of the society whereby the chairman of one meeting selected the subject for debate at the next meeting; and it would have been a not uninteresting circumstance if it were true, for it would show the line his ideas were taking at that early period of his career; but as a matter of fact the rule in question was not adopted for some time after the second meeting, and it is distinctly mentioned in the minutes that on this particular occasion the Præses "declared before he left the chair the questions that were agreed upon by the majority of the meeting to be the subject of next night's debate."[84] It is quite possible, of course, that the subjects may have been of Smith's suggestion, but that can now only be matter of conjecture. Indeed, whether it be due to his influence or whether it arose merely from a general current of interest moving in that direction at the time, the subjects, discussed by this society were very largely economic; so much so that in a selection of them published by the _Scots Magazine_ in 1757 every one partakes of that character. "What are the advantages to the public and the State from grazing? what from corn lands? and what ought to be most encouraged in this country? Whether great or small farms are most advantageous to the country? What are the most proper measures for a gentleman to promote industry on his own estate? What are the advantages and disadvantages of gentlemen of estate being farmers? What is the best and most proper duration of leases of land in Scotland? What prestations beside the proper tack-duty tenants ought to be obliged to pay with respect to carriages and other services, planting and preserving trees, maintaining enclosures and houses, working freestone, limestone, coal, or minerals, making enclosures, straightening marches, carrying off superfluous water to other grounds, and forming drains? and what restrictions they should be put under with respect to cottars, live stock on the farm, winter herding, ploughing the ground, selling manure, straw, hay, or corn, thirlage to mills, smiths or tradesmen employed on business extrinsic to the farm, subsetting land, granting assignations of leases, and removals at the expiration of leases? What proportion of the produce of lands should be paid as rent to the master? In what circumstances the rents of lands should be paid in money? in what in kind? and in what time they should be paid? Whether corn should be sold by measure or by weight? What is the best method of getting public highways made and repaired, whether by a turnpike law, as in many places in Great Britain, by county or parish work, by a tax, or by what other method? What is the best and most equal way of hiring and contracting servants? and what is the most proper method to abolish the practice of giving of vails?"[85] The society had what may be termed a special agricultural branch, to which I shall presently refer, and which met once a month and discussed chiefly questions of husbandry and land management; and the above list of subjects looks, from its almost exclusively agrarian character, as if it had been rather the business of this branch of the society merely than of the society as a whole. Still the same causes that made rural economy predominate in the monthly work of the branch would give it a large place in the weekly discussions of the parent association. The members were largely connected with the landed interest, and agricultural improvement was then on the order of the day. In this society accordingly, which Smith attended very frequently, though he does not appear to have spoken in the debates, he had with respect to agrarian problems precisely what he had in the economic club of Glasgow with respect to commercial problems, the best opportunities of hearing them discussed at first hand by those who were practically most conversant with the subjects in all their details. Of course the society sometimes discussed questions of literature or art, or familiar old historical controversies, such as whether Brutus did well in killing Cæsar? Indeed, no subject was expressly tabooed except such as might stir up the Deistic or Jacobite strife--in the words of the rules, "such as regard revealed religion, or which may give occasion to vent any principles of Jacobitism." But the great majority of the questions debated were of an economic or political character,--questions about outdoor relief, entail, banking, linen export bounties, whisky duties, foundling hospitals, whether the institution of slavery be advantageous to the free? and whether a union with Ireland would be advantageous to Great Britain? Sometimes more than one subject would be got through in a night, sometimes the debate on a single subject would be adjourned from week to week till it was thought to be thrashed out; and every member might speak three times in the course of a debate if he chose, once for fifteen minutes, and the other twice for ten. The Select Society was, however, as I have said, more than a debating club; it aimed besides at doing something practical for the promotion of the arts, sciences, manufactures, and agriculture, in the land of its birth, and accordingly, when it was about ten months in existence, it established a well-devised and extensive scheme of prizes for meritorious work in every department of human labour, to be supported by voluntary subscriptions. In the prospectus the society issued it says that, after the example of foreign academies, it had resolved to propose two subjects for competition every year, chosen one from polite letters and the other from the sciences, and to confer on the winner some public mark of distinction in respect to his taste and learning. The reward, however, was not in this case to be of a pecuniary nature, for the principle of the society was that rewards of merit were in the finer arts to be honorary, but in the more useful arts, where the merit was of a less elevated character, they were to be lucrative. On the same principle, in the arts the highest place was allowed to be due to genius, and therefore a reward for a discovery or invention was set at the very top of the tree, but still it was of a purely honorary character, a pecuniary recognition being thought apparently unsuitable to the dignity of that kind of service. "The art of printing," the prospectus goes on to say--with a glance of satisfaction cast doubtless at the Foulis Press--"the art of printing in this country needs no encouragement, yet as to pass it by unnoticed were slighting the merit of those by whose means alone it has attained that eminence, it was resolved that the best printed and most correct book which shall be produced within a limited time be distinguished by an honorary reward." On the other hand, the manufacture of paper was a thing that required encouragement in Scotland, because the Scotch at that time imported their paper from abroad, "from countries," says the prospectus, "which use not half the linen that is here consumed"; and "to remove this defect, to render people more attentive to their own interest as well as to the interest of their country, to show them the consequence of attention to matters which may seem trivial, it was resolved that for the first, second, third, fourth, and fifth parcels of linen rags gathered within a limited time a reward be assigned in proportion to the quantity and goodness of each parcel." In other cases manufactures were already well established in the country, and the thing that still needed to be encouraged by prizes was improvement in the workmanship. For example, "manufactures of cotton and linen prints are already established in different places of this country; in order to promote an attention to the elegance of the pattern and to the goodness of the colouring, as well as to the strength of the cloth, it was resolved that for the best piece of printed linen or cotton cloth made within a certain period a premium should be allotted." The art of drawing, again, "being closely connected with this art and serviceable to most others, it was resolved that for the best drawings by boys or girls under sixteen years of age certain premiums be assigned." Then there was a considerable annual importation into Scotland of worked ruffles and of bone lace and edging which the Select Society thought might, under proper encouragement, be quite as well produced at home; and it was therefore resolved to give both honorary and lucrative rewards for superior merit in such work, the honorary for "women of fashion" who might compete, and the lucrative for those "whose laudable industry contributes to their own support." Scotch stockings had then a great reputation for the excellence of their workmanship, but Scotch worsted, to make them with, was not so good, and consequently a premium was to be offered for the best woollen yarn. There was a great demand at the time for English blankets, and no reason why the Scotch should not make quite as good blankets themselves out of their own wool, so a premium was proposed for the best imitation of English blankets. Carpet-making was begun in several places in the country, and a prize for the best-wrought and best-patterned carpet would encourage the manufacturers to vie with each other. Whisky-distilling, too, was established at different places, and Scotch strong ale had even acquired a great and just reputation both at home and abroad; but the whisky was "still capable of great improvement in the quality and taste," and the ale trade "might be carried to a much greater height," and these ends might be severally promoted by prizes for the best tun of whisky and the best hogshead of strong ale. The practical execution of this scheme was committed to nine members of the society, who were to be chosen annually, and were to meet with the society once a month to report progress or receive instructions; but to keep this new task quite distinct from the old, the society resolved, like certain mercantile firms when they adopt a new branch of business, to carry it on under a new firm name, and for this purpose the Select Society of Edinburgh became "The Edinburgh Society for encouraging arts, sciences, manufactures, and agriculture in Scotland"; and the executive committee of nine were termed the "ordinary managers of the Edinburgh Society," who were assisted by other nine "extraordinary managers." The Edinburgh Society was not, however, a separate institution; it was really only a special committee of the Select Society. It met once a month at a separate time from the usual weekly meeting of the parent society, and the business of this monthly meeting came, from the predominant interest of the members, who were so largely composed of the nobility and gentry, to be engrossed almost wholly with agricultural discussions. To render these discussions more effective and profitable, a resolution was passed in 1756 to admit a certain number of practical farmers to the membership. This extension of the scope of the society's work was not approved by its founder, Allan Ramsay, who thought it beneath the dignity of such an institution to take an interest in the making of ruffles or the brewing of strong ale, and feared besides that it would introduce a new set of very unintellectual members, to the serious prejudice of the society's debates. An essay on taste was very well, and when it came out he would ask Millar, the bookseller, to send it out to him in Rome, but a prize for the biggest bundle of linen rags! "I could have wished," he writes Hume, "that some other way had been fallen upon by which porter might have been made thick and the nation rich without our understanding being at all the poorer for it. Is not truth more than meat, and wisdom than raiment?"[86] But however Ramsay might look down on the project, his coadjutor in the founding of the society, Adam Smith, entertained a very different idea of its importance. A stimulus to the development of her industries was the very thing Scotland most needed at the moment, and he entered heartily into the new scheme, and took a prominent part in carrying it out. He was not one of the nine managers to whom the practical execution of the idea was at first entrusted, but when a few months afterwards the work was divided among four separate committees or sections of five members each, all chosen by another committee of five, nominated expressly for that purpose, Smith is one of this nominating committee, and is by it appointed likewise a member of one of the four executive committees. The other four members of the nominating committee were Alexander Monro _Primus_, the anatomist; Gilbert Elliot, M.P. for Selkirkshire; the Rev. William Wilkie, author of the _Epigoniad_; and the Rev. Robert Wallace, the predecessor and at least in part the stimulator of Malthus in his speculations on the population question. The five members of this committee were directed by the society to put their own names on one or other of the four executive committees, and they placed the name of Smith, together with that of Hume, on the committee for Belles-Lettres and Criticism. As yet he was evidently best known as literary critic, though the questions propounded by him in this society, and the subjects treated by him in the Literary Society of Glasgow, show that his tastes were already leading him into other directions. Sufficient contributions soon flowed in; Hume in his letter to Ramsay speaks of £100 being already in hand, and of several large subscriptions besides being promised from various noblemen, whom he names; and accordingly an advertisement was published in the newspapers on the 10th of April 1755, offering the following prizes:-- I. Honorary premiums, being gold medals with suitable devices and inscriptions:-- 1. For the best discovery in science. 2. For the best essay on taste. 3. For the best dissertation on vegetation and the principles of agriculture. II. Honorary premiums, being silver medals with proper devices and inscriptions:-- 4. For the best printed and most correct book of at least 10 sheets. 5. For the best printed cotton or linen cloth, not under 28 yards. 6. For the best imitation of English blankets, not under six. 7. For the next best ditto, not under six. 8. For the best hogshead of strong ale. 9. For the best hogshead of porter. III. Lucrative premiums:-- 10. For the most useful invention in arts, £21. 11. For the best carpet as to work, pattern, and colours, of at least 48 yards,.£5:5s. 12. For the next best ditto, also 48 yards, £4:4s. 13. For the best drawings of fruits, flowers, and foliages by boys or girls under sixteen years of age, £5:5s. 14. For the second best, £3:3s. 15. For the third best, £2:2s. 16. For the best imitation of Dresden work in a pair of man's ruffles, £5:5s. 17. For the best bone lace, not under 20 yards, £5:5s. 18. For the greatest quantity of white linen rags, £1:10s. 19. For the second ditto, £1:5s. 20. For the third ditto, £1. 21. For the fourth ditto, 15s. 22. For the fifth ditto, 10s. The articles were asked to be delivered to Mr. Walter Goodall (David Hume's assistant in the work of librarian), at the Advocates' Library, before the first Monday of December.[87] On the 19th of August the following additional prizes were offered:-- 23. To the farmer who plants the greatest number (not under 1000) of timber trees, oak, beech, ash, or elm, in hedgerows before December 1756, £10. 24. Second ditto (not under 500), £5. 25. To the farmer who shall raise the greatest number (not under 2000) of young thorn plants before December 1758, £6. 26. Second ditto (not under 1000), £4. In the following year the society increased the number of its prizes to 92; in 1757 to 120, in 1758 to 138, and in 1759 to 142; and they were devoted to the encouragement of every variety of likely industry--kid gloves, straw hats, felt hats, soap, cheese, cradles to be made of willow grown in Scotland. One premium was offered to the person who would "cure the greatest number of smoky chimneys to the satisfaction of the society." The prize for the best essay on taste was won by Professor Gerard of Aberdeen, and the essay was published, and is still well known to students of metaphysics; and the prize for the best dissertation on vegetation and agriculture fell to Dr. Francis Home. The best invention was a piece of linen made like Marseille work but on a loom, and for this £20 were awarded to Peter Brotherton, weaver in Dirleton, East Lothian. Foulis won in 1757 the prize for the best printed book in Roman characters by his _Horace_, and for the best printed book in Greek characters by his _Iliad_; and in 1759 Professor Gerard again won a prize by his dissertation on style. This society, while it lasted, undoubtedly exercised a most beneficial influence in developing and improving the industrial resources of Scotland. The carpet manufacture alone rose £1000 in the year after the establishment of the prizes, and the rise was believed to be due to the stimulus they imparted. But, useful and active and celebrated as it was, the Select Society died within ten years of its origin. The usual explanation is that it owed its death to the effects of a sarcasm of Charles Townshend's. Townshend was brought to hear one of the wonderful debates, which were thought to reflect a new glory on Edinburgh, and was even elected a member of the society, but he observed when he came out that, while he admitted the eloquence of the orators, he was unable to understand a word they said, inasmuch as they spoke in what was to him a foreign tongue. "Why," he asked, "can you not learn to speak the English language, as you have already learnt to write it?"[88] This was to touch Scotchmen of that period who made any pretensions to education at one of their most sensitive parts. Scotch--the broad dialect of Burns and Fergusson--was still the common medium of intercourse in polite society, and might be heard even from the pulpit or the bench, though English was flowing rapidly into fashion, and the younger and more ambitious sort of people were trying their best to lose the native dialect. We know the pains taken by great writers like Hume and Robertson to clear their English composition of Scotch idioms, and the greater but less successful pains taken by Wedderburn to cure himself of his Scotch pronunciation, to which he reverted after all in his old age. Under these circumstances Townshend's sarcasm occasioned almost a little movement of lingual reform. Thomas Sheridan, who was about this time full of a method he had invented of imparting to foreigners a proper pronunciation of the English language by means of sounds borrowed from their own, and who had just been giving lessons to Wedderburn, and probably practising the new method on him, was brought north in 1761 and delivered a course of sixteen lectures in St. Paul's Chapel, Carrubber's Close, to about 300 gentlemen--"the most eminent," it is reported, "in the country for rank and abilities." Immediately thereafter the Select Society organised a special association for promoting the writing and speaking of the English language in Scotland, and engaged a teacher of correct English pronunciation from London. Smith was not one of the directors of this new association, but Robertson, Ferguson, and Blair were, together with a number of peers, baronets, lords of Session, and leaders of the bar. But spite of the imposing auspices under which this simple project of an English elocution master was launched, it proved a signal failure, for it touched the national vanity. It seemed to involve a humiliating confession of inferiority to a rival nation at the very moment when that nation was raging with abuse of the Scotch, when Wilkes was publishing the _North Briton_, and Churchill was writing his lampoons; and when it was advertised in the Edinburgh newspapers, it provoked such a storm of antipathy and ridicule that even the honourable society which furthered the scheme began to lose favour, its subscriptions and membership declined, and presently the whole organisation fell to pieces. That is the account commonly given of the fall of the Select Society, and the society certainly reached its culminating point in 1762. After that subscribers withdrew their names, or refused to pay their subscriptions, and in 1765 the society had no funds to offer more than six prizes and ceased to exist, its own explanation being that it died of the loss of novelty. "The arrears of subscriptions seem," it says, "to confirm an observation that has sometimes been made, that in Scotland every disinterested plan of public utility is slighted as soon as it loses the charm of novelty."[89] Another interesting but even more abortive project which Smith took a leading part in promoting at this same period was the publication of a new literary magazine, entitled the _Edinburgh Review_, of which the first number appeared in July 1755, and the second and last in January 1756. This project also originated, like the Select Society, in a sentiment of Scotch patriotism. It was felt that though Scotland was at the time stirring with an important literary and scientific movement, the productions of the Scotch press were too much ignored by the English literary periodicals, and received inadequate appreciation even in Scotland itself for want of a good critical journal on the spot. "If countries may be said to have their ages with respect to improvement," says the preface to the first number of the new _Review_, "then North Britain may be considered as in a state of early youth, guided and supported by the more mature strength of her kindred country. If in anything her advances have been such as to make a more forward state, it is in science." After remarking that the two obstacles to the literary advancement of Scotland had hitherto been her deficiency in the art of printing and her imperfect command of good English, and that the first of these obstacles had been removed entirely, and the second shown by recent writers to be capable of being surmounted, it proceeds: "The idea therefore was that to show men at this particular stage of the country's progress the gradual advance of science would be a means of inciting them to a more eager pursuit of learning, to distinguish themselves and to do honour to their country." The editor was Alexander Wedderburn, who afterwards became Lord High Chancellor of England and Earl of Rosslyn, but had in 1755 only just passed as an advocate at the Scotch bar; and the contributors were Robertson, who wrote eight review articles on new historical publications; Blair, who gave one or two indifferent notices of works in philosophy; Jardine, one of the ministers of Edinburgh, who discussed Ebenezer Erskine's sermons, a few theological pamphlets, and Mrs. Cleland's Cookery Book; and Adam Smith, who contributed to the first number a review of Dr. Johnson's _Dictionary_, and to the second a remarkable letter to the editor proposing to widen the scope of the _Review_, and giving a striking survey of the state of contemporary literature in all the countries of Europe. Smith's two contributions are out of sight the ablest and most important articles the _Review_ published. He gives a warm and most appreciative welcome to Johnson's _Dictionary_, but thinks it would have been improved if the author had in the first place more often censured words not of approved use, and if in the second he had, instead of simply enumerating the several meanings of a word, arranged them into classes and distinguished principal from subsidiary meanings. Then to illustrate what he wants, Smith himself writes two model articles, one on _Wit_ and the other on _Humour_, both acute and interesting. He counts humour to be always something accidental and fitful, the disease of a disposition, and he considers it much inferior to wit, though it may often be more amusing. "Wit expresses something that is more designed, concerted, regular, and artificial; humour something that is more wild, loose, extravagant, and fantastical; something which comes upon a man by fits which he can neither command nor restrain, and which is not perfectly consistent with true politeness. Humour, it has been said, is often more diverting than wit; yet a man of wit is as much above a man of humour as a gentleman is above a buffoon; a buffoon, however, will often divert more than a gentleman." In his second contribution--a long letter to the editor published in the appendix to the second number--Smith advocates the enlargement of the scope of the _Review_ so as to give some account of works of importance published abroad, even though space had to be provided for the purpose by neglecting unimportant publications issued from the Scotch press, and, in fact, he considers this substitution as a necessity for the continued life of the _Review_. For, says he, "you will oblige the public much more by giving them an account of such books as are worthy of their regard than by filling your paper with all the insignificant literary news of the time, of which not an article in a hundred is likely to be thought of a fortnight after the publication of the work that gave occasion to it." He then proceeds to a review of contemporary continental literature, which he says meant at that time the literature of France. Italy had ceased to produce literature, and Germany produced only science. A sentence or two may be quoted from his comparison between French and English literature, because they show that he was not, as he is sometimes accused of being, an unfair depreciator of the great writers of England and a blind admirer of those of France. He will be owned to have had a very just opinion of the specific merits of each. "Imagination, genius, and invention," he says, "seem to be the talents of the English; taste, judgment, propriety, and order, of the French. In the old English poets, in Shakespeare, Spenser, and Milton, there often appears, amidst some irregularities and extravagancies, a strength of imagination so vast, so gigantic and supernatural, as astonishes and confounds the reader into that admiration of their genius which makes him despise as mean and insignificant all criticism upon the inequalities of their writings. In the eminent French writers such sallies of genius are more rarely to be met with, but instead of them a just arrangement, an exact propriety and decorum, joined to an equal and studied elegance of sentiment and diction, which, as it never strikes the heart like those violent and momentary flashes of imagination, so it never revolts the judgment by anything that is absurd or unnatural, nor ever wearies the attention by any gross inequality in the style or want of connection in the method, but entertains the mind with a regular succession of agreeable, interesting, and connected objects." From poetry he passes to philosophy, and finds that the French encyclopedists had left their native Cartesian system for the English system of Bacon and Newton, and were proving more effective expositors of that system than the English themselves. After reviewing the _Encyclopédie_ at considerable length, he gives an account of the recent scientific works of Buffon and Reaumur, and, among books in metaphysics, of Rousseau's famous _Discourse on the Origin and Foundation of the Inequality of Mankind_, which was then only a few months out, and in which, Smith says, Rousseau, "by the help of his style, together with a little philosophical chemistry," has made "the principles and ideas of the profligate Mandeville seem to have all the purity and simplicity of the morals of Plato, and to be only the true spirit of a republican carried a little too far." He gives a summary of the book, translates a few specimen passages, and concludes by saying, "I shall only add that the dedication to the Republic of Geneva, of which M. Rousseau has the honour of being a citizen, is an agreeable, animated, and I believe, too, a just panegyric." Sir James Mackintosh, who republished these two numbers of the first _Edinburgh Review_ in 1818 after the second _Edinburgh Review_ had made the name famous, considers it noteworthy, as showing the contributors to have taken up a very decided political position for so early a period, that the preface to the first number speaks boldly in praise of George Buchanan's "undaunted spirit of liberty." But Smith's warm expression of admiration for the Republic of Geneva, to which he reckons it an honour to belong, is equally notable. He seems to have been always theoretically a republican, and he certainly had the true spirit of a republican in his love of all rational liberty. His pupil and lifelong friend, the Earl of Buchan, says: "He approached to republicanism in his political principles, and considered a commonwealth as the platform for the monarchy, hereditary succession in the chief magistrate being necessary only to prevent the commonwealth from being shaken by ambition, or absolute dominion introduced by the consequences of contending factions."[90] Smith's scheme for the improvement of the _Review_ was never carried out, for with that number the _Review_ itself came to a sudden and premature end. The reason for giving it up is explained by Lord Woodhouselee to have been that the strictures passed by it on some fanatical publications of the day had excited such a clamour "that a regard to the public tranquillity and their own determined the reviewers to discontinue their labours."[91] Doubt has been expressed of the probability of this explanation, but Lord Woodhouselee, who was personally acquainted with several of the contributors, is likely to have known of the circumstances, and his statement is borne out besides by certain corroborative facts. It is true the theological articles of the two numbers appear to us to be singularly inoffensive. They were entrusted to the only contributor who was not a young man, Dr. Jardine, the wily leader of the Moderate party in the Church, the Dean of the Thistle mentioned in Lord Dreghorn's verses as governing the affairs of the city as well as the Church through his power over his father-in-law-- The old Provost, who danced to the whistle Of that arch politician, the Dean of the Thistle. The arch politician contrived to make his theological criticism colourless even to the point of vapidity, but that did not save him or his _Review_; it perhaps only exposed them the more to the attacks of zealots. His notice of the sermons of Ebenezer Erskine, the Secession leader, provoked a sharp pamphlet from Erskine's son, in which the reviewers were accused of teaching unsound theological views, of putting the creature before the Creator by allowing the lawfulness of a lie in certain situations, of throwing ridicule on the Bible and the Westminster _Confession of Faith_, and of having David Hume, an atheist, among their number. This last thrust was a mere controversial guess, and, strangely enough, it guessed wrong. A new literary review is started in Edinburgh by a few of Hume's younger friends, and Hume himself--the only one of them who had yet made any name in literature, and the most distinguished man of letters then in Scotland--is neither asked to contribute to the periodical, nor even admitted to the secret of its origination. When the first number appeared he went about among his acquaintances expressing the greatest surprise that so promising a literary adventure should be started by Edinburgh men of letters without a whisper of it ever reaching his ears. More than that, his very name and writings were strangely and studiously ignored in its pages. His _History of the Stewarts_ was one of the last new books, having been published in the end of 1754, and was unquestionably much the most important work that had recently come from any Scotch pen, yet in a periodical instituted for the very purpose of devoting attention to the productions of Scotch authors, this work of his remained absolutely unnoticed. Why this complete boycott of Hume by his own household? Henry Mackenzie "thinks he has heard" two reasons given for it: first, that Hume was considered too good-natured for a critic, and certain to have insisted on softening remarks his colleagues believed to be called for; and second, that they determined to keep him out of the secret entirely, because he could not keep a secret.[92] But this explanation does not hold together. If Hume was so good-natured, he would be less difficult rather than more difficult to manage; and as for not being able to keep a secret, that, as Mr. Burton observes, is a very singular judgment to pass on one who had been Secretary of Legation already and was soon to be Secretary of Legation again, and Under Secretary of State, without having been once under the shadow of such an accusation. Besides, neither of these reasons will explain the ignoring of his writings. A more credible explanation must be looked for, and it can only be discovered in the intense _odium theologicum_ which the name of Hume excited at the moment, and which made it imperative, if the new _Review_ was to get justice, that it should be severed from all association with his detested name. Scotland happened to be at that very hour in an exceptional ferment about his theological heresies, and one of the strangest of proposals had come before the previous General Assembly of the Kirk, backed by a number of the most respected country clergy. It was no other than to summon the great sceptic to their bar, to visit his _Inquiry concerning the Principles of Morals_ with censure, and to pronounce against the author the major ban of excommunication. The wise heads who rule the Scotch Church courts of course threw out this inconvenient proposal by the favourite ecclesiastical device of passing an abstract resolution expressive of concern at the growing evils of the day, without committing the Church to any embarrassing practical action; and Hume himself was, as Wedderburn told them he likely would be, hardened enough to laugh at the very idea of their anathema. But the originators of the agitation only returned to the battle, and prepared for a victory in the next Assembly in May 1756. Between the two Assemblies Hume wrote his friend Allan Ramsay, the painter, who was in Rome: "You may tell that reverend gentleman the Pope that there are men here who rail at him, and yet would be much greater persecutors had they equal power. The last Assembly sat on me. They did not propose to burn me, because they cannot, but they intended to give me over to Satan, which they think they have the power of doing. My friends, however, prevailed, and my damnation is postponed for a twelvemonth, but next Assembly will surely be upon me."[93] And so in truth it was. An overture came up calling for action regarding "one person calling himself David Hume, Esq., who hath arrived at such a degree of boldness as publicly to avow himself the author of books containing the most rude and open attacks upon the glorious Gospel of Christ," and a motion was made for the appointment of a committee "to inquire into the writings of this author, to call him before them, and prepare the matter for the next General Assembly." This motion was again defeated, and the heresy-hunters passed on to turn their attention to Lord Kames, and to summon the printers and publishers of his _Essays_ before the Edinburgh Presbytery to give up the author's name (the book having been published anonymously), "that he and they may be censured according to the law of the Gospel and the practice of this and all other well-governed churches." It is open to us to believe that Hume's friends contemplated no more than a temporary exclusion of him from their counsels until this storm should pass by; but at any rate, as they launched their frail bark in the very thick of the storm, it would have meant instant swamping at that juncture to have taken the Jonah who caused all the commotion and made him one of their crew. For the same reason, when they found that, for all their precautions, the clamour overtook them notwithstanding, they simply put back into port and never risked so unreasoning and raging an element again. It may indeed be thought that they declined Hume's co-operation, because they expressly hoisted the flag of religion in their preface, and professed one of their objects to be to resist the current attacks of infidelity. But there would have been no inconsistency in engaging the co-operation of an unbeliever on secular subjects, so long as they retained the rudder in their own hands, and men who were already Hume's intimate personal friends were not likely to be troubled with such unnecessary scruples about their consistency. The true reason both of Hume's exclusion from their secret and of their own abandonment of their undertaking is undoubtedly the reason given by Lord Woodhouselee, that they wanted to live and work in peace. They did not like, to use a phrase of Hamilton of Bangour, to have "zeal clanking her iron bands" about their ears. Hume, on the other hand, rather took pleasure in the din he provoked, and had he been a contributor the rest would have had difficulty--and may have felt so--in restraining him from gratifying that taste when any favourable opportunities offered. While these things were going on in Edinburgh a book had made its appearance from the London press, which is often stated to have been written for the express purpose of converting Adam Smith to a belief in the miraculous evidences of Christianity. That book is the _Criterion of Miracles Examined_, by Smith's Oxford friend Bishop Douglas, then a country rector in Shropshire. It is written in the form of a letter to an anonymous correspondent, who had, in spite of his "good sense, candour, and learning," and on grounds "many of them peculiar to himself and not borrowed from books," "reasoned himself into an unfavourable opinion of the evidences of Christianity"; and this anonymous correspondent is said in Chalmers's _Biographical Dictionary_ to have been "since known to be Adam Smith." From Chalmers's _Dictionary_ the same statement has been repeated in the same words in subsequent biographical dictionaries and elsewhere, but neither Chalmers nor his successors reveal who it was to whom this was known, or how he came to know it; and on the other hand, Macdonald, the son-in-law and biographer of Douglas, makes no mention of Smith's name in connection with this work at all, and explicitly states that the book was written for the satisfaction of more than one of the author's friends, who had been influenced by the objections of Hume and others to the reality of the Gospel miracles.[94] This leaves the point somewhat undetermined. Smith was certainly a Theist, his writings leave no doubt of that, but he most probably discarded the Christian miracles; and if Douglas's book is addressed to his particular position, discarded them on the ground that there is no possible criterion for distinguishing true miracles from false, and enabling you to accept those of Christianity if you reject those of profane history. The Earl of Buchan, apostrophising Smith, asks, "Oh, venerable and worthy man, why was you not a Christian?" and tries to let his old professor down as gently as possible by suggesting that the reason lay in the warmth of his heart, which always made him express strongly the opinions of his friends, and carried him in this instance into sympathy with those of David Hume. That is obviously a lame conclusion, because Smith's friendship for Hume never made him a Tory, nor even on the point of religion were his opinions identical with those of Hume; but Lord Buchan's words may be quoted as an observation by an acute man of a feature in Smith's character not without biographical interest. "Had he (Smith) been a friend of the worthy ingenious Horrox," says his lordship, "he would have believed that the moon sometimes disappeared in a clear sky without the interposition of a cloud, or of another truly honest and respectable man, that a professor of mathematics at Upsala had a tail of six inches long to his rump."[95] In 1756 the literary circle in Edinburgh was much excited by the performance of John Home's tragedy of _Douglas_. Smith was not present at that performance; but he is stated by Henry Mackenzie, in his _Life of John Home_, to have been present at some of the previous rehearsals of the play, and at any rate he was deeply interested in it; and Hume, as soon as he hears of the continued success of the play in London, hastens to communicate the welcome news to his friend in Glasgow, with whom he was in correspondence about his own historical plans. Smith seems to have been advising him, instead of following up his _History of the Stewarts_ by the history of succeeding periods, to go back and write the history of the period before the Stewarts. After mentioning John Home, Hume proceeds: "I can now give you the satisfaction of hearing that the play, though not near so well acted in Covent Garden as in this place, is likely to be very successful. Its great intrinsic merit breaks through all obstacles. When it shall be printed (which shall be soon) I am persuaded it will be esteemed the best, and by French critics the only tragedy of our language!... "Did you ever hear of such madness and folly as our clergy have lately fallen into? For my part, I expect that the next Assembly will very solemnly pronounce the sentence of excommunication against me, but I do not apprehend it to be a matter of any consequence; what do you think? "I am somewhat idle at present and somewhat indifferent as to my next undertaking. Shall I go backwards or forwards in my History? I think you used to tell me that you approved more of my going backwards. The other would be the more popular subject, but I am afraid I shall not find materials sufficient to ascertain the truth, at least without settling in London, which I own I have some reluctance to. I am settled here very much to my mind, and would not wish at my years to change the place of my abode. "I have just now received a copy of _Douglas_ from London. It will instantly be put in the press. I hope to be able to send you a copy in the same parcel with the dedication."[96] Hume was now very anxious to have his friend nearer him, and thought in 1758 an opportunity could be contrived of translating Smith to a chair in the University of Edinburgh. There was at that time some probability of Professor Abercromby resigning the chair of Public Law (then styled the chair of the Law of Nature and Nations), and as Smith, though not a lawyer, was yet a distinguished professor of jurisprudence, his friends in Edinburgh immediately suggested his candidature, especially as they believed such a change would not be unacceptable to himself. The chair of the Law of Nature and Nations was one of the best endowed in the College, having a revenue of £150 a year independently of fees, but it had been founded as a job, and continued ever since to be treated as a sinecure. Not a single lecture had ever been delivered by any of its incumbents, in spite of repeated remonstrances on the part of the Faculty of Advocates, and Hume believed that if the Town Council, as administrators of the College, could be got to press for the delivery of the statutory lectures, the present professor would prefer the alternative of resignation. In that event the vacant office might easily, in Hume's opinion, be obtained by Smith, inasmuch as the patronage was in the hands of the Crown, and Crown patronage in Scotland at the time was virtually exercised through Lord Justice-Clerk Milton (a nephew of Andrew Fletcher of Saltoun, the patriot), who had been, ever since the death of Lord President Forbes, the chief confidential adviser of the Duke of Argyle, the Minister for Scotland, and was personally acquainted with Smith through his daughter Mrs. Wedderburn of Gosford, the friend of Robertson and John Home. Others of Smith's Edinburgh friends zealously joined Hume in his representations, especially the faithful Johnstone (afterwards Sir W. Pulteney), who actually wrote Smith a letter on the subject along with Hume's. Hume's letter is as follows:-- DEAR SMITH--I sit down to write to you along with Johnstone, and as we have been talking over the matter, it is probable we shall employ the same arguments. As he is the younger lawyer, I leave him to open the case, and suppose that you have read his letter first. We are certain that the settlement of you here and of Ferguson at Glasgow would be perfectly easy by Lord Milton's Interest. The Prospect of prevailing with Abercrombie is also very good. For the same statesman by his influence over the Town Council could oblige him either to attend, which he never would do, or dispose of the office for the money which he gave for it. The only real difficulty is then with you. Pray then consider that this is perhaps the only opportunity we shall ever have of getting you to town. I dare swear that you think the difference of Place is worth paying something for, and yet it will really cost you nothing. You made above a hundred pound a year by your class when in this Place, though you had not the character of Professor. We cannot suppose that it will be less than a hundred and thirty after you are settled. John Stevenson[97]--and it is John Stevenson--makes near a hundred and fifty, as we were informed upon Enquiry. Here is a hundred pounds a year for eight years' Purchase, which is a cheap purchase, even considered in the way of a Bargain. We flatter ourselves that you rate our company at something, and the Prospect of settling Ferguson will be an additional inducement. For though we think of making him take up the Project if you refuse it, yet it is uncertain whether he will consent; and it is attended in his case with many very obvious objections. I beseech you therefore to weigh all these motives over again. The alteration of these circumstances merit that you should put the matter again in deliberation. I had a letter from Miss Hepburn, where she regrets very much that you are settled at Glasgow, and that we had the chance of seeing you so seldom.--I am, dear Smith, yours sincerely, DAVID HUME. _8th June 1758._ _P.S._--Lord Milton can with his finger stop the foul mouths of all the Roarers against heresy.[98] The postscript shows what we have already indicated, that Smith had not escaped the general hue and cry against heresy which was now for some years abroad in the country. The Miss Hepburn who regrets so much the remoteness of Smith's residence is doubtless Miss Hepburn of Monkrig, near Haddington, one of those gifted literary ladies who were then not infrequently to be found in the country houses of Scotland. It was to Miss Hepburn and her sisters that John Home is said to have been indebted for the first idea of Douglas, and Robertson submitted to her the manuscript of his _History of Scotland_ piece by piece as he wrote it. When it was finished the historian sent her a presentation copy with a letter, in which he said: "Queen Mary has grown up to her present form under your eye; you have seen her in many different shapes, and you have now a right to her. Were I a _galante_ writer now, what a fine contrast might I make between you and Queen Mary? What a pretty string of antitheses between your virtues and her vices. I am glad, however, she did not resemble you. If she had, Rizzio would have only played first fiddle at her consort (_sic_), with a pension of a thousand merks and two benefits in a winter; Darnley would have been a colonel in the Guards; Bothwell would, on account of his valour, have been Warden of the Middle Marches, but would have been forbid to appear at court because of his profligacy. But if all that had been done, what would have become of my History?"[99] Smith seems to have declined, for whatever reason, to take up the suggestion of Hume about this chair of Law, for we find Hume presently trying hard to secure the place for Ferguson. The difficulty may have been about the price, for though Hume speaks of £800, it seems Abercromby wanted more than £1000, and Ferguson too had no mind to begin life with such a debt on his shoulders. But the world is probably no loser by the difficulty, whatever it was, which kept Smith five years longer among the merchants and commercial problems of Glasgow. Smith was one of the founders, or at least the original members, of the Edinburgh Poker Club in 1762. Every one has heard of that famous club, but most persons probably think of it as if it were merely a social or convivial society; and Mr. Burton lends some countenance to that mistake by declaring that he has never been able to discover any other object it existed for except the drinking of claret. But the Poker Club was really a committee for political agitation, like the Anti-Corn-Law League or the Home Rule Union; only, after the more genial manners of those times, the first thing the committee thought requisite for the proper performance of their work was to lay in a stock of sound Burgundy that could be drawn from the wood at eighteenpence or two shillings a quart, to engage a room in a tavern for the exclusive use of the members, and establish a weekly or bi-weekly dinner at a moderate figure, to keep the _poker_ of agitation in active exercise. The club got its name from the practical purpose it was instituted to serve; it was to be an instrument for _stirring_ opinion, especially in high quarters, on a public question which was exciting the people of Scotland greatly at the moment, the question of the establishment of a national Scotch militia. Some of the members thought that when that question was settled, the club should go on and take up others. George Dempster of Dunnichen, for example, an old and respected parliamentary hand of that time, wrote Dr. Carlyle in 1762 that when they got their militia, they ought to agitate for parliamentary reform, "so as to let the industrious farmer and manufacturer share at last in a privilege now engrossed by the great lord, the drunken laird, and the drunkener baillie."[100] But they never got the length of considering other reforms, for the militia question was not settled in that generation. It outlived the Poker Club, and it outlived the Younger Poker Club which was enrolled to take up the cause in 1786, and it was not finally settled till 1793. The Scotch had been roused to the defenceless condition of their country by the alarming appearance of Thurot in Scotch waters in 1759, and had instantly with one voice raised a cry for the establishment of a national militia. The whole country seemed to have set its mind on this measure with a singular unanimity, and a bill for its enactment was accordingly introduced into the House of Commons in 1760 by two of the principal Scotch members, both former ministers of the Crown--James Oswald and Gilbert Elliot; but it was rejected by a large majority, because within only fifteen years of the Rebellion the English members were unwilling to entrust the Scotch people with arms. The rejection of the bill provoked a deep feeling of national indignation, the slur it cast on the loyalty of Scotland being resented even more than the indifference it showed to her perils. It was under the influence of this wave of national sentiment that the Poker Club was founded in 1762, to procure for the Scotch at once equality of rights with the English and adequate defences for their country. The membership of the club included many of the foremost men in the land--great noblemen, advocates, men of letters, together with a number of spirited county gentlemen on both sides of politics, who cried that they had a militia of their own before the Union, and must have a militia of their own again. Dr. Carlyle says most of the members of the Select Society belonged to it, the exceptions consisting of a few who disapproved of the militia scheme, and of others, like the judges, who scrupled, on account of their official position, to take any part in a political movement. Carlyle gives a list of the members in 1774, containing among other names those of the Duke of Buccleugh, Lords Haddington, Glasgow, Glencairn, Elibank, and Mountstuart; Henry Dundas, Lord Advocate; Baron Mure, Hume, Adam Smith, Robertson, Black, Adam Ferguson, John Home, Dr. Blair, Sir James Steuart the economist, Dempster, Islay Campbell, afterwards Lord President; and John Clerk of Eldin. The first secretary of the club was William Johnstone (Sir William Pulteney), and, as has been frequently told, David Hume was jocularly appointed to a sinecure office created for him, the office of assassin, and lest Hume's good-nature should unfit him for the duties, Andrew Crosbie, advocate (the original of Scott's "Pleydell"), was made his assistant. The club met at first in Tom Nicholson's tavern, the Diversorium, at the Cross, and subsequently removed to more fashionable quarters at the famous Fortune's in the Stamp Office Close, where the Lord High Commissioner to the General Assembly held his levees, and the members dined every Friday at two and sat till six. However the club may have pulled wires in private, their public activity seems to have been very little; so far at least as literary advocacy of their cause went, nothing proceeded from it except a pamphlet by Dr. Carlyle, and a much-overlauded squib by Adam Ferguson, entitled "A History of the Proceedings in the Case of Margaret, commonly called Sister Peg." Smith was, as I have said, one of the original members of the club, and from Carlyle's list would appear to have continued a member till 1774; but he was not a member of the Younger Poker Club, established in 1786. In the interval he had expressed in the _Wealth of Nations_ a strong preference for a standing army over a national militia,[101] after instituting a very careful examination of the whole subject. Whether his views had changed since 1762, or whether he had joined in the agitation for a militia merely as a measure of justice to Scotland or as an expedient of temporary necessity, without committing himself to any abstract admiration for the institution in general, I have no means of deciding; but we can hardly think he ever shared that kind of belief in the principle of a militia which animated men like Ferguson and Carlyle, and which, according to them, animated the other members of the club also at its birth. Ferguson says the club was founded "upon the principle of zeal for a militia and a conviction that there could be no lasting security for the freedom and independence of these islands but in the valour and patriotism of an armed people";[102] and when, during his travels in Switzerland in 1775, he saw for the first time in his life a real militia--the object of his dreams--actually moving before him in the flesh, and going through their drill, his heart came to his mouth, and he wrote his friend Carlyle: "As they were the only body of men I ever saw under arms on the true principle for which arms should be carried, I felt much secret emotion, and could have shed tears."[103] He was deeply disappointed a year later with Smith's apostasy on this question, or at least opposition, for Ferguson makes no accusation of apostasy. After reading the _Wealth of Nations_, he wrote Smith on the 18th of April 1776: "You have provoked, too, so far the Church, the universities, and the merchants, against all of whom I am willing to take your part; but you have likewise provoked the militia, and there I must be against you. The gentlemen and peasants of this country do not need the authority of philosophers to make them supine and negligent of every resource they might have in themselves in the case of certain extremities, of which the pressure, God knows, may be at no great distance. But of this more at Philippi."[104] But many others besides Smith had in this interval either found their zeal for a militia grown cool or their opinion of its value modified, and when Lord Mountstuart introduced his new Scotch Militia Bill in 1776, it received little support from Scotch members, and its rejection excited nothing like the feeling roused by the rejection of its predecessor in 1760, although it was attended this time with the galling aggravation that what was refused to the Scotch was in the same hour granted to the Irish, then the less disliked and distrusted nation of the two. Opinions had grown divided. Old Fletcher of Saltoun's idea of a citizen army with universal compulsory service was still much discussed, but many now objected to the compulsion, and others, among whom was Lord Kames, to the universality of the compulsion, rallying to the idea of Fencibles--_i.e._ regiments to be raised compulsorily by the landed proprietors, each furnishing a number of men proportioned to their valued rent.[105] Smith said a militia formed in this way, like the old Highland militia, was the best of all militias, but he held that the day was past for militias of men with one hand on the sword and the other on the plough, and that nothing could now answer for what he calls "the noblest of all arts," the art of war, but the division of labour, which answered best for the arts of peace, and a standing army of soldiers by exclusive occupation. Divided counsels and diminished zeal supply, no doubt, the main reason for the decay of the Poker Club, but other causes combined. Dr. Carlyle, who was an active member of the club, says it began to decline when it transferred itself to more elegant quarters at Fortune's, because its dinners became too expensive for the members; and Lord Campbell attributes its dissolution definitely to the new taxes imposed on French wines to pay the cost of the American War. His statement is very explicit: "To punish the Government they agreed to dissolve the 'Poker,' and to form another society which should exist without consumption of any excisable commodity."[106] But he gives no authority for the statement, and they are at least not likely to have been such fools as to think of punishing the Government by what was after all only an excellent way of punishing themselves. The wine duty was no doubt a real enough grievance; it was raised five or six times during the club's existence, and many a man who enjoyed his quart of Burgundy when the duty was less than half-a-crown a gallon, was obliged to do without it when the duty rose to seven shillings. It may be worth adding, however, that the Poker Club was revived as the Younger Poker Club in the very year, 1786, when the duty on Burgundy was reduced again by the new Commercial Treaty with France. FOOTNOTES: [75] Southey's Life of A. Bell, i. 23. [76] Oswald had just been appointed commissioner for trade and plantations. [77] _Correspondence of James Oswald_, p. 124. [78] Burton's _Life of Hume_, i. 375. [79] Mr. Burton thinks the Society mentioned in this paragraph to be "evidently the Philosophical Society" of Edinburgh, but it seems much more likely to have been the Literary Society of Glasgow, of which Hume was also a member. Of the Philosophical Society he was himself Secretary, and would therefore have been in the position of giving warning rather than receiving it; nor would he have spoken of sending that Society a paper which he would be on the spot to read himself. Whether Smith was Secretary of the Glasgow Literary Society I do not know, but even if he were not it would be nothing strange though the communications of the Society with Hume were carried on through Smith, his chief friend among the members, and his regular correspondent. [80] Burton's _Life of Hume_, i. 417. [81] Carlyle's _Autobiography_, p. 275. [82] Burton's Scot Abroad, ii. 340. [83] Minutes of Select Society, Advocates' Library, Edinburgh. [84] Ibid. [85] _Scots Magazine_, xix. 163. [86] Burton's _Scot Abroad_, ii. 343. [87] _Scots Magazine_ for year 1755, p. 126. [88] Lord Campbell's _Lives of the Chancellors_, vi. 32. [89] _Scots Magazine_, xxvi. 229. [90] The _Bee_ for June 1791. [91] Tytler's _Life of Lord Kames_, i. 233. [92] _Life of John Home_, p. 24. [93] Burton's _Scot Abroad_, ii. 343. [94] Douglas's _Select Works_, p. 23. [95] The _Bee_ for 1791. [96] Burton's _Life of Hume_, ii. 16. [97] Professor of Logic. [98] Burton's _Life of Hume_, ii. 45. [99] Fraser's _The Lennox_, p. xliv. [100] _Carlyle Correspondence_, Edinburgh University Library. [101] _Wealth of Nations_, Book V. chap. i. [102] "Memoirs of Black," _Transactions,_ R.S.E., v. 113. [103] _Carlyle Correspondence,_ Edinburgh University. [104] Small, _Sketch of A. Ferguson,_ p. 23. [105] Kames, _Sketches of Man_, Book II. chap. ix. [106] Campbell's _Lives of the Lord Chancellors_, vi. 28. CHAPTER IX THE "THEORY OF MORAL SENTIMENTS" 1759. _Aet._ 36 Smith enjoyed a very high Scotch reputation long before his name was known to the great public by any contribution to literature. But in 1759 he gave his _Theory of Moral Sentiments_ to the press, and took his place, by almost immediate and universal recognition, in the first rank of contemporary writers. The book is an essay supporting and illustrating the doctrine that moral approbation and disapprobation are in the last analysis expressions of sympathy with the feelings of an imaginary and impartial spectator, and its substance had already been given from year to year in his ordinary lectures to his students, though after the publication he thought it no longer necessary to dwell at the same length on this branch of his course, giving more time, no doubt, to jurisprudence and political economy. The book was published in London by Andrew Millar in two vols. 8vo. It was from the first well received, its ingenuity, eloquence, and great copiousness of effective illustration being universally acknowledged and admired. Smith sent a copy to Hume in London, and received the following reply, which contains some interesting particulars of the reception of the book there:-- LONDON, _12th April 1759_. DEAR SIR--I give you thanks for the agreeable present of your _Theory_. Wedderburn and I made presents of our copies to such of our acquaintances as we thought good judges and proper to spread the reputation of the book. I sent one to the Duke of Argyle, to Lord Lyttelton, Horace Walpole, Soame Jenyns, and Burke, an Irish gentleman who wrote lately a very pretty treatise on the Sublime. Millar desired my permission to send one in your name to Dr. Warburton. I have delayed writing you till I could tell you something of the success of the book, and could prognosticate with some probability whether it should be finally damned to oblivion or should be registered in the temple of immortality. Though it has been published only a few weeks, I think there appear already such strong symptoms that I can almost venture to foretell its fate. It is, in short, this-- But I have been interrupted in my letter by a foolish impertinent visit of one who has lately come from Scotland. He tells me that the University of Glasgow intend to declare Rouet's office vacant upon his going abroad with Lord Hope. I question not but you will have our friend Ferguson in your eye, in case another project for procuring him a place in the University of Edinburgh should fail. Ferguson has very much polished and improved his _Treatise on Refinement_, and with some amendments it will make an admirable book, and discovers an elegant and singular genius. The _Epigoniad_, I hope, will do, but it is somewhat uphill work. As I doubt not but you consult the Reviews sometimes at present, you will see in _The Critical Review_ a letter upon that poem; and I desire you to employ your conjectures in finding out the author. Let me see a sample of your skill in knowing hints by guessing at the person. I am afraid of Kames's _Law Tracts_. The man might as well think of making a fine sauce by a mixture of wormwood and aloes as an agreeable combination by joining metaphysics and Scottish law. However, the book, I believe, has merit, though few people ever take the pains of inquiring into it. But to return to your book and its success in this town. I must tell you-- A plague to interruptions! I ordered myself to be denied, and yet here is one that has broke in upon me again. He is a man of letters, and we have had a good deal of literary conversation. You told me that you was curious of literary anecdotes, and therefore I shall inform you of a few that have come to my knowledge. I believe I have mentioned to you already Helvetius's book _De l'Esprit_. It is worth your reading, not for its philosophy, which I do not highly value, but for its agreeable composition. I had a letter from him a few days ago, wherein he tells me that my name was much oftener in the manuscript, but that the censor of books at Paris obliged him to strike it out. Voltaire has lately published a small work called _Candide, ou l'Optimisme_. I shall give you a detail of it. But what is all this to my book, say you? My dear Mr. Smith, have patience; compose yourself to tranquillity. Show yourself a philosopher in practice as well as profession. Think on the impotence and rashness and futility of the common judgments of men, how little they are regulated by reason on any subject, much more on philosophical subjects, which so far exceed the comprehension of the vulgar-- Non, si quid turbida Roma Elevet, accedas: examenve improbum in iliâ Castiges trutinâ: nec te quaesiveris extra. A wise man's kingdom is his own heart; or, if he ever looks farther, it will only be to the judgment of a select few, who are free from prejudices and capable of examining; his work. Nothing, indeed, can be a stronger presumption of falsehood than the approbation of the multitude; and Phocion, you know, always suspected himself of some blunder when he was attended with the applause of the populace. Supposing, therefore, that you have duly prepared yourself for the worst by all these reflections, I proceed to tell you the melancholy news that your book has been very unfortunate, for the public seem disposed to applaud it extremely. It was looked for by the foolish people with some impatience; and the mob of literati are beginning already to be very loud in its praises. Three bishops called yesterday at Millar's shop in order to buy copies, and to ask questions about the author. The Bishop of Peterborough said he had passed the evening in a company where he heard it extolled above all books in the world. The Duke of Argyle is more decisive than he used to be in its favour. I suppose he either considers it as an exotic, or thinks the author will be very serviceable to him in the Glasgow elections. Lord Lyttelton says that Robertson and Smith and Bower[107] are the glories of English literature. Oswald protests he does not know whether he has reaped more instruction or entertainment from it, but you may easily judge what reliance can be placed on his judgment. He has been engaged all his life in public business, and he never sees any faults in his friends. Millar exults and brags that two-thirds of the edition are already sold, and that he is now sure of success. You see what a son of the earth that is, to value books only by the profit they bring him. In that view, I believe, it may prove a very good book. Charles Townshend, who passes for the cleverest fellow in England, is so much taken with the performance that he said to Oswald he would put the Duke of Buccleugh under the author's care, and would make it worth his while to accept of that charge. As soon as I heard this I called on him twice with a view of talking with him about the matter, and of convincing him of the propriety of sending that young gentleman to Glasgow, for I could not hope that he could offer you any terms which would tempt you to renounce your professorship; but I missed him. Mr. Townshend passes for being a little uncertain in his resolutions, so perhaps you need not build much on his sally. In recompense for so many mortifying things, which nothing but truth could have extorted from me, and which I could easily have multiplied to a greater number, I doubt not but you are so good a Christian as to return good for evil, and to flatter my vanity by telling me that all the godly in Scotland abuse me for my account of John Knox and the Reformation. I suppose you are glad to see my paper end, and that I am obliged to conclude with--Your humble servant.[108] On the 28th of July Hume again writes from London on the same subject:-- I am very well acquainted with Bourke,[109] who was much taken with your book. He got your direction from me with a view of writing to you and thanking you for your present, for I made it pass in your name. I wonder he has not done it. He is now in Ireland. I am not acquainted with Jenyns,[110] but he spoke very highly of the book to Oswald, who is his brother in the Board of Trade. Millar showed me a few days ago a letter from Lord Fitzmaurice,[111] where he tells him that he has carried over a few copies to the Hague for presents. Mr. York[112] was very much taken with it, as well as several others who had read it. I am told that you are preparing a new edition, and propose to make some additions and alterations in order to obviate objections. I shall use the freedom to propose one; which, if it appears to be of any weight, you may have in your eye. I wish you had more particularly and fully proved that all kinds of sympathy are agreeable. This is the hinge of your system, and yet you only mention the matter cursorily on p. 20. Now it would appear that there is a disagreeable sympathy as well as an agreeable. And, indeed, as the sympathetic passion is a reflex image of the principal, it must partake of its qualities, and be painful when that is so. Indeed, _when we converse with a man with whom we can entirely sympathise_, that is when there is a warm and intimate friendship, the cordial openness of such a commerce overbears the pain of a disagreeable sympathy, and renders the whole movement agreeable, but in ordinary cases this cannot have place. A man tired and disgusted with everything, always _ennuié_, sickly, complaining, embarrassed, such a one throws an evident damp on company, which I suppose would be accounted for by sympathy, and yet is disagreeable. It is always thought a difficult problem to account for the pleasure from the tears and grief and sympathy of tragedy, which would not be the case if all sympathy was agreeable. An hospital would be a more entertaining place than a ball. I am afraid that on p. 99 and 111 this proposition has escaped you, or rather is interwoven with your reasoning. In that place you say expressly, "It is painful to go along with grief, and we always enter into it with reluctance." It will probably be requisite for you to modify or explain this sentiment, and reconcile it to your system.[113] Burke, who was thus reported by Hume to have been so much taken with the book, reviewed it most favourably in the _Annual Register_, and not only recognised Smith's theory as a new and ingenious one, but accepted it as being "in all its essential parts just and founded on truth and nature." "The author," he says, "seeks for the foundation of the just, the fit, the proper, the decent, in our most common and most allowed passions, and making approbation and disapprobation the tests of virtue and vice, and showing that these are founded on sympathy, he raises from this simple truth one of the most beautiful fabrics of moral theory that has perhaps ever appeared. The illustrations are numerous and happy, and show the author to be a man of uncommon observation. His language is easy and spirited, and puts things before you in the fullest light; it is rather painting than writing."[114] One of the most interesting characteristics of the book, from a biographical point of view, is that mentioned by this reviewer; it certainly shows the author to have been a man of uncommon observation, not only of his own mental states, but of the life and ways of men about him; as Mackintosh remarks, the book has a high value for "the variety of explanations of life and manners which embellish" it, apart altogether from the thesis it is written to prove.[115] Charles Townshend adhered to his purpose about Smith with much more steadiness than Hume felt able to give him credit for. Townshend, it need perhaps hardly be said, was the brilliant but flighty young statesman to whom we owe the beginnings of our difficulties with America. He was the colonial minister who first awoke the question of "colonial rights," by depriving the colonists of the appointment of their own judges, and he was the Chancellor of the Exchequer who imposed the tea duty in 1767 which actually provoked the rebellion. "A man," says Horace Walpole, "endowed with every great talent, who must have been the greatest man of his age if he had only common sincerity, common steadiness, and common sense." "In truth," said Burke, "he was the delight and ornament of this house, and the charm of every private society which he honoured with his presence. Perhaps there never arose in this country nor in any other a man of a more pointed and finished wit, and (when his passions were not concerned) of a more refined and exquisite and penetrating judgment." He had in 1754 married the Countess of Dalkeith, daughter and co-heiress of the famous Duke of Argyle and Greenwich, and widow of the eldest son of the Duke of Buccleugh. She had been left with two sons by her first husband, of whom the eldest had succeeded his grandfather as Duke of Buccleugh in 1751, and was now at Eton under the tutorship of Mr. Hallam, father of the historian. On leaving Eton he was to travel abroad with a tutor for some time, and it was for this post of tutor to the Duke abroad that Townshend, after reading the _Theory of Moral Sentiments_, had set his heart on engaging its author. Townshend bore, as Hume hints, a bad character for changeability. He was popularly nicknamed the Weathercock, and a squib of the day once reported that Mr. Townshend was ill of a pain in his side, but regretted that it was not said on which side. But he stood firmly to his project about Smith; paid him a visit in Glasgow that very summer, saw much of him, invited him to Dalkeith House, arranged with him about the selection and despatch of a number of books for the young Duke's study, and seems to have arrived at a general understanding with Smith that the latter should accept the tutorship when the time came. Townshend of course delighted the Glasgow professors during this visit, as he delighted everybody, but he seems in turn to have been delighted with them, for William Hunter wrote Cullen a little later in the same year that Townshend had come back from Scotland passing the highest encomiums on everybody. Smith seems to have acted as his chief cicerone in Glasgow, as appears from one of the trivial incidents which were all that the contemporary writers of Smith's obituary notices seemed able to learn of his life. He was showing Townshend the tannery, one of the spectacles of Glasgow at the time--"an amazing sight," Pennant calls it--and walked in his absent way right into the tanpit, from which, however, he was immediately rescued without any harm. In September 1759, on the death of Mr. Townshend's brother, Smith wrote him the following letter:--[116] SIR--It gives me great concern that the first letter I ever have done myself the honour to write to you should be upon so melancholy an occasion. As your Brother was generally known here, he is universally regretted, and your friends are sorry that, amidst the public rejoicings and prosperity, your family should have occasion to be in mourning. Everybody here remembers you with the greatest admiration and affection, and nothing that concerns you is indifferent to them, and there are more people who sympathise with you than you are aware of. It would be the greatest pedantry to offer any topics of consolation to you who are naturally so firm and so manly. As your Brother dyed in the service of his country, you have the best and the noblest consolation: That since it has pleased God to deprive you of the satisfaction you might have expected from the continuance of his life, it has at least been so ordered that y^e manner of his death does you honour. You left Scotland so much sooner than you proposed, when I had the pleasure of seeing you at Glasgow, that I had not an opportunity of making you a visit at Dalkieth (_sic_), as I intended, before you should return to London. I sent about a fortnight ago the books which you ordered for the Duke of Buccleugh to Mr. Campbell at Edinburgh.[117] I paid for them, according to your orders, as soon as they were ready. I send you enclosed a list of them, with the prices discharged on the back. You will compare with the books when they arrive. Mr. Campbell will further them to London. I should have wrote to you of this a fortnight ago, but my natural dilatoriness prevented me.--I ever am, with the greatest esteem and regard, your most obliged and most obedient humble servant, ADAM SMITH. COLLEGE OF GLASGOW, _17th September 1759._ The second edition of the _Theory_, which Hume was anticipating immediately in 1759, did not appear till 1761, and it contained none of the alterations or additions he expected; but the _Dissertation on the Origin of Languages_ was for the first time published along with it. The reason for the omission of the other additions is difficult to discover, for the author had not only prepared them, but gone the length of placing them in the printer's hands in 1760, as appears from the following letter. They did not appear either in the third edition in 1767, or the fourth in 1774, or the fifth in 1781; nor till the sixth, which was published, with considerable additions and corrections, immediately before the author's death in 1790. The earlier editions were published at 6s., and the 1790 edition at 12s. This was the last edition published in the author's lifetime, and it has been many times republished in the century that has elapsed since. This is the letter just referred to:-- DEAR STRAHAN--I sent up to Mr. Millar four or five Posts ago the same additions which I had formerly sent to you, with a good many corrections and improvements which occurred to me since. If there are any typographical errors remaining in the last edition which had escaped me, I hope you will correct them. In other respects I could wish it was printed pretty exactly according to the copy which I delivered to you. A man, says the Spanish proverb, had better be a cuckold and know nothing of the matter, than not be a cuckold and believe himself to be one. And in the same manner, say I, an author had sometimes better be in the wrong and believe himself in the right, than be in the right and believe or even suspect himself to be in the wrong. To desire you to read my book over and mark all the corrections you would wish me to make upon a sheet of paper and send it to me, would, I fear, be giving you too much trouble. If, however, you could induce yourself to take this trouble, you would oblige me greatly; I know how much I shall be benefitted, and I shall at the same time preserve the pretious right of private judgment, for the sake of which our forefathers kicked out the Pope and the Pretender. I believe you to be much more infallible than the Pope, but as I am a Protestant, my conscience makes me scruple to submit to any unscriptural authority. _Apropos_ to the Pope and the Pretender, have you read Hook's Memoirs?[118] I have been ill these ten days, otherwise I should have written to you sooner, but I sat up the day before yesterday in my bed and read them thro' with infinite satisfaction, tho' they are by no means well written. The substance of what is in them I knew before, tho' not in such detail. I am afraid they are published at an unlucky time, and may throw a damp upon our militia. Nothing, however, appears to me more excusable than the disaffection of Scotland at that time. The Union was a measure from which infinite good has been derived to this country. The Prospect of that good, however, must then have appeared very remote and very uncertain. The immediate effect of it was to hurt the interest of every single order of men in the country. The dignity of the nobility was undone by it. The greater part of the gentry who had been accustomed to represent their own country in its own Parliament were cut out for ever from all hopes of representing it in a British Parliament. Even the merchants seemed to suffer at first. The trade to the Plantations was, indeed, opened to them. But that was a trade which they knew nothing about; the trade they were acquainted with, that to France, Holland, and the Baltic, was laid under new embar(r)assments, which almost totally annihilated the two first and most important branches of it. The Clergy, too, who were then far from insignificant, were alarmed about the Church. No wonder if at that time all orders of men conspired in cursing a measure so hurtful to their immediate interest. The views of their Posterity are now very different; but those views could be seen by but few of our forefathers, by those few in but a confused and imperfect manner. It will give me the greatest satisfaction to hear from you. I pray you write to me soon. Remember me to the Franklins. I hope I shall have the grace to write to the youngest by next post to thank him, in the name both of the College and of myself, for his very agreeable present. Remember me likewise to Mr. Griffiths. I am greatly obliged to him for the very handsom character he gave of my book in his review.--I ever am, dear Strahan, most faithfully and sincerely yours, ADAM SMITH. GLASGOW, _4th April 1760_.[119] The Franklins mentioned in this letter are Benjamin Franklin and his son, who had spent six weeks in Scotland in the spring of the previous year--"six weeks," said Franklin, "of the densest happiness I have met with in any part of my life." We know from Dr. Carlyle that during this visit Franklin met Smith one evening at supper at Robertson's in Edinburgh, but it seems from this letter highly probable that he had gone through to Glasgow, and possibly stayed with Smith at the College. Why otherwise should the younger, or, as Smith says, youngest, Franklin have thought of making a presentation to Glasgow College, or Smith of thanking him not merely in the name of the College, but in his own? Strahan was one of Franklin's most intimate private friends. They took a pride in one another as old compositors who had risen in the world; and Smith had no doubt heard of, and perhaps from, the Franklins in some of Strahan's previous letters. The Mr. Griffiths to whom Smith desires to be remembered was the editor of the _Monthly Review_, in which a favourable notice of his book had appeared in the preceding July. FOOTNOTES: [107] Burton thinks with great probability that this junction of names was meant as a sarcasm on Lord Lyttelton's taste. [108] Burton's _Life of Hume_, ii. 55. [109] Edmund Burke. [110] Soame Jenyns. [111] Afterwards the Earl of Shelburne, the statesman. [112] Probably Charles Yorke, afterwards Lord Chancellor Morden. [113] Burton's _Hume_, ii. 59. [114] _Annual Register_, 1776, p. 485. [115] Mackintosh, _Miscellaneous Works_, i. 151. [116] _Buccleuch MSS._, Dalkeith Palace. [117] Mr. Campbell was the Duke's law-agent. [118] _The Secret History of Colonel Hooke's Negotiations in Scotland in Favour of the Pretender in 1707_, written by himself. London, 1760. [119] Bonar's _Catalogue of Adam Smith's Library_, p. x. CHAPTER X FIRST VISIT TO LONDON 1761. _Aet._ 38 Smith visited London for the first time in September 1761, when Hume and probably others of his Scotch friends happened to be already there. He had not visited London in the course of his seven years' residence at Oxford, for, as Mr. Rogers reports, the Balliol Buttery Books show him never to have left Oxford at all during that time, and he had not visited London in the course of the first ten years he spent in Glasgow, otherwise the University would be certain to have preserved some record of it. For Glasgow University had much business to transact in London at that period, and would be certain to have commissioned Smith, if he was known to be going there, to transact some of that business for it. It never did so, however, till 1761. But in that year, on the 16th of June, the Senate having learned Smith's purpose of going to London, authorise him to get the accounts of the ordinary revenue of the College and the subdeanery for crops 1755, 1756, 1757, and 1758 cleared with the Treasury (that public office being then always in deep arrears with its work); to meet with Mr. Joshua Sharpe and settle his accounts with respect to the lands given to the College by Dr. Williams (the Dr. Williams of Williams's Library); to inquire into the state of the division of Snell's estate as to Coleburn farm, and the affair of the Prebends of Lincoln; and to get all particulars about the £500 costs in the Snell lawsuit with Balliol, which had to be paid to the University. Those documents were delivered, on the 27th of August, to Smith _in præsentia_, and then on the 15th of October, after his return, he reported what he had done, and produced a certificate, signed by the Secretary to the Treasury, finding that the University had in the four years specified and the years preceding expended above their revenue the sum of £2631:6:5-11/12. I mention all these details with the view of showing that during Smith's residence in Glasgow the University had a variety of important and difficult business to transact in London, which they would be always glad to get one of their own number to attend to personally on the spot, and that as Smith was never asked to transact any of this business for them except in 1761, it may almost with certainty be inferred that he never was in London on any other occasion during his connection with that University. Now this journey to London in 1761 is memorable because it constituted the economic "road to Damascus" for a future Prime Minister of England. It was during this journey, I believe, that Smith had Lord Shelburne for his travelling companion, and converted the young statesman to free trade. In 1795 Shelburne (then become Marquis of Lansdowne) writes Dugald Stewart: "I owe to a journey I made with Mr. Smith from Edinburgh to London the difference between light and darkness through the best part of my life. The novelty of his principles, added to my youth and prejudices, made me unable to comprehend them at the time, but he urged them with so much benevolence, as well as eloquence, that they took a certain hold which, though it did not develop itself so as to arrive at full conviction for some few years after, I can truly say has constituted ever since the happiness of my life, as well as the source of any little consideration I may have enjoyed in it."[120] Shelburne was the first English statesman, except perhaps Burke, who grasped and advocated free trade as a broad political principle; and though his biographer, Lord Edmond Fitzmaurice, attributes his conversion to Morellet, it is plain from the letter to Stewart that Morellet had only watered, it was Smith that sowed. It is important, therefore, to fix if possible the date of this interesting journey. It occurred, Lord Shelburne says, in his own youth, and the only journeys to London Smith made during the period which with any reasonable stretching may be called Shelburne's youth, were made in 1761, 1763, and 1773. Now we have no positive knowledge of Shelburne being in Scotland any of these years, but in 1761 his brother, the Hon. Thomas Fitzmaurice, who had been studying under Smith in Glasgow, and living in Smith's house, left Glasgow for Oxford; and Shelburne, who, since his father's death that very year, was taking, as we know from his correspondence with Sir William Blackstone on the subject, a very responsible concern in his younger brother's education and welfare, may very probably have gone to Scotland to attend him back. This circumstance seems to turn the balance in favour of 1761 and against the other two dates. It is almost certain that the journey was not in 1773, for Shelburne would hardly have thought of himself as so young at that date, six years after he had been Secretary of State, and besides he had probably cast off his prejudices by that time, and was already (as we shall presently find) receiving instruction from Smith on colonial policy in 1767; and whether it was 1761 or 1763, it in either case shows at what a long period before the appearance of the _Wealth of Nations_ Smith was advocating those broad principles which struck Shelburne at the time for their "novelty," and were only fully comprehended and accepted by him a few years afterwards. Of Smith's visit to London on this occasion we know almost no particulars, but I think the notorious incident of his altercation with Johnson at the house of Strahan the printer must be referred to this visit. The story was told by Robertson to Boswell and Allan Ramsay, the painter, one evening in 1778, when they were dining together at the painter's house, and Johnson was expected as one of the guests. Before the doctor arrived the conversation happened to turn on him, and Robertson said, "He and I have always been very gracious. The first time I met him was one evening at Strahan's, when he had just had an unlucky altercation with Adam Smith, to whom he had been so rough that Strahan, after Smith was gone, had remonstrated, and told him that I was coming soon, and that he was uneasy to think that he might behave in the same way to me. 'No, no, sir,' said Johnson, 'I warrant you Robertson and I shall do very well.' Accordingly he was gentle and good-humoured and gracious with me the whole evening, and he has been so on every occasion that we have met since. I have often said laughing that I have been in a great measure indebted to Smith for my good reception."[121] Now this incident must have occurred years before 1778, the date of Ramsay's dinner-party at which it was related, for Robertson speaks of having met Johnson many times between; and it probably occurred before 1763, because in 1763 Boswell mentions in his journal having told Johnson one evening that Smith had in his lectures in Glasgow expressed the strongest preference for rhyme over blank verse, and Johnson alludes in his reply to an unfriendly meeting he had once had with Smith. "Sir," said he, "I was once in company with Smith, and we did not take to each other, but had I known that he loved rhyme so much as you tell me he does I should have hugged him."[122] This answer seems to imply that the meeting was not quite recent--not in 1763--and if it occurred before 1763, it must have been in 1761. It was, no doubt, this unhappy altercation that gave rise to the legendary anecdote which has obtained an immortality it ill deserved, but which cannot be passed over here, because it has been given to the world by three independent authorities of such importance as Sir Walter Scott, Lord Jeffrey, and Bishop Wilberforce. Scott communicates the anecdote to Croker for his edition of Boswell's _Johnson_, as it was told him by Professor John Millar of Glasgow, who had it from Smith himself the night the affair happened. Wilberforce gives it ostensibly as it was heard by his father from Smith's lips; and Jeffrey, in reviewing Wilberforce's book in the _Edinburgh Review_, says he heard the story, in substantially the same form as Wilberforce tells it, nearly fifty years before, "from the mouth of one of a party into which Mr. Smith came immediately after the collision." The story, as told by Scott, is in this wise:[123] "Mr. Boswell has chosen to omit (in his account of Johnson's visit to Glasgow), for reasons which will be presently obvious, that Johnson and Adam Smith met at Glasgow; but I have been assured by Professor John Millar that they did so, and that Smith, leaving the party in which he had met Johnson, happened to come to another company where Millar was. Knowing that Smith had been in Johnson's society, they were anxious to know what had passed, and the more so as Dr. Smith's temper seemed much ruffled. At first Smith would only answer, 'He's a brute; he's a brute;' but on closer examination it appeared that Johnson no sooner saw Smith than he attacked him for some point of his famous letter on the death of Hume. Smith vindicated the truth of his statement. 'What did Johnson say?' was the universal inquiry. 'Why, he said,' replied Smith, with the deepest impression of resentment, 'he said, You lie.' 'And what did you reply?' 'I said, You are a son of a ----!' On such terms did these two great moralists meet and part, and such was the classical dialogue between two great teachers of philosophy." Wilberforce's version is identical with Scott's, except that it commits the absurdity of making Smith tell not the story itself, but the story of his first telling it. "'Some of our friends,' said Adam Smith, 'were anxious that we should meet, and a party was arranged for the purpose in the course of the evening. I was soon after entering another society, and perhaps with a manner a little confused. "Have you met Dr. Johnson?" my friends exclaimed. "Yes, I have." "And what passed between you?"'" and so on. All this at any rate is legendary outgrowth on the very face of it, and nonsensical even for that. But even the story itself, as told so circumstantially by Scott, is demonstrably mythical in most of its circumstances. Johnson was never in Glasgow except one day, the 29th of October 1773, and in October 1773 Smith was in London, and as we know from an incidental parenthesis in the _Wealth of Nations_,[124] engaged in the composition of that great work. Hume, again, did not die till 1776, so that there were better and more "obvious reasons" than Scott imagined for Boswell's omitting mention of a meeting between Johnson and Smith at Glasgow which never took place, and a collision between them about a famous letter which was not then written. Time, place, and subject are all alike wrong, but these Scott might think but the mortal parts of the story, and he sometimes varied them in the telling himself. Moore heard him tell it at his own table at Abbotsford somewhat differently from the version he gave to Croker.[125] But when so much is plainly the insensible creation of the imagination, what reliance can be placed on the remainder? All we know is that apparently at their very first meeting those two philosophers did, in Strahan's house in London in September 1761, have a personal altercation of an outrageous character, at which, if not the very words reported by Scott, then words quite as strong must manifestly have passed between them; that their host declared Johnson to be entirely in the wrong, and that Smith withdrew from the company, and would very possibly go, as the story relates, to another company, his Scotch friends at the British Coffee-House in Cockspur Street, then the great Scotch resort,--a house which was kept by the sister of his friend Bishop Douglas, which was frequented much by Wedderburn, John Home, and others, and to which Smith's own letters used to be addressed. One thing remains to be said: if the world has never been able to suffer this little morsel of scandal to be forgotten, the two principals in the feud themselves were able to forget it entirely. Smith was at a later period in the habit of meeting Johnson constantly at the table of common friends in London, and was elected in 1775 a member of Johnson's famous club, which would of course have been impossible--and indeed in so small a society never have been thought of--had the slightest remnant of animosity continued on either side. Johnson, it is true, was still occasionally rude to Smith, as he was occasionally rude to every other member of the club; and certainly Smith never established with him anything of the cordial personal friendship he enjoyed with Burke, Gibbon, or Reynolds; but their common membership in the Literary Club is proof of the complete burial of their earlier quarrel. FOOTNOTES: [120] Stewart's _Life of Smith; Works_, ed. Hamilton, vol. x. p. 95. [121] Boswell's _Johnson_, ed. Hill, iii. 331. [122] _Ibid._ i. 427. [123] Boswell's _Johnson_, ed. Hill, v. 369. [124] Book IV. chap. vii. [125] Russell's _Life of Moore_, p. 338. CHAPTER XI LAST YEAR IN GLASGOW 1763. _Aet._ 40 In 1763 the Rev. William Ward of Broughton, chaplain to the Marquis of Rockingham, was bringing out his _Essay on Grammar_, which Sir William Hamilton thought "perhaps the most philosophical essay on the English language extant," and sent an abstract of it to Smith through a common friend, Mr. George Baird, to whom Smith wrote the following letter on the subject:--[126] GLASGOW, _7th February 1763_. DEAR SIR--I have read over the contents of your Friend's work with very great pleasure; and heartily wish it was in my power to give, or to procure him all the encouragement which his ingenuity and industry deserve. I think myself greatly obliged to him for the very obliging notice he has been pleased to take of me, and should be glad to contribute anything in my power to compleating his design. I approve greatly of his plan for a Rational Grammar, and am convinced that a work of this kind, executed with his abilities and industry, may prove not only the best system of grammar, but the best system of logic in any language, as well as the best history of the natural progress of the human mind in forming the most important abstractions upon which all reasoning depends. From the short abstract which Mr. Ward has been so good as to send me, it is impossible for me to form any very decisive judgment concerning the propriety of every part of his method, particularly of some of his divisions. If I was to treat the same subject, I should endeavour to begin with the consideration of verbs; these being in my apprehension the original parts of speech, first invented to express in one word a compleat event; I should then have endeavoured to show how the subject was divided to form the attribute, and afterwards how the object was distinguished from both; and in this manner I should have tried to investigate the origin and use of all the different parts of speech and of all their different modifications, considered as necessary to express the different qualifications and relations of any single event. Mr. Ward, however, may have excellent reasons for following his own method; and perhaps if I was engaged in the same task I should find it necessary to follow the same; things frequently appearing in a very different light when taken in a general view, which is the only view I can pretend to have taken of them, and when considered in detail. Mr. Ward, when he mentions the definitions which different authors have given of nouns substantive, takes no notice of that of the Abbé Girard, the author of the book called _Les Vrais Principes de la Langue Françoise_, which made me think it might be possible that he had not seen it. It is the book which first set me a thinking upon these subjects, and I have received more instruction from it than from any other I have yet seen upon them. If Mr. Ward has not seen it, I have it at his service. The grammatical articles, too, in the French _Encyclopédie_ have given me a good deal of entertainment. Very probably Mr. Ward has seen both these works, and as he may have considered the subject more than I have done, may think less of them. Remember me to Mrs. Baird and Mr. Oswald, and believe me to be, with great truth, dear sir, sincerely yours, ADAM SMITH. Shortly after the date of this letter, Smith, who was now probably beginning to see the approach of the day when he would lay down his Glasgow professorship in order to superintend the studies of the young Duke of Buccleugh, writes David Hume, pressing for his long-promised visit to the West. The occasion of the letter is to introduce a young gentleman of whom I know nothing, but who was doubtless one of the English students who were attracted to Glasgow by Smith's rising fame. He was possibly the first Earl of Carnarvon, of whose uncle, Nicholas Herbert, Smith told Rogers the story that he had read over once a list of the Eton boys and repeated it four years afterwards to his nephew, then Lord Porchester. Smith said he knew him well. The letter is as follows:-- MY DEAR HUME--This letter will be presented to you by Mr. Henry Herbert, a young gentleman who is very well acquainted with your works, and upon that account extremely desirous of being introduced to the authour. As I am convinced that you will find him extremely agreeable, I shall make no apology for introducing him. He proposes to stay a few days in Edinburgh while the company are there, and would be glad to have the liberty of calling upon you sometimes when it suits your conveniency to receive him. If you indulge him in this, both he and I will think ourselves infinitely obliged to you. You have been long promising us a visit at Glasgow, and I have made Mr. Herbert promise to endeavour to bring you along with him. Though you have resisted all my sollicitations, I hope you will not resist his. I hope I need not tell you that it will give me the greatest pleasure to see you.--I ever am, my dear friend, most affectionately and sincerely yours, ADAM SMITH. GLASGOW, _22nd February 1763_.[127] To that letter Hume returned the following answer:-- DEAR SMITH--I was obliged to you both for your kind letter and for the opportunity which you afforded me of making acquaintance with Mr. Herbert, who appears to me a very promising young man. I set up a chaise in May next, which will give me the liberty of travelling about, and you may be sure a journey to Glasgow will be one of the first I shall undertake. I intend to require with great strictness an account how you have been employing your Leisure, and I desire you to be ready for that purpose. Wo be to you if the Ballance be against you. Your friends here will also expect that I should bring you with me. It seems to me very long since I saw you.--Most sincerely, DAVID HUME. EDINBURGH, _28th March 1763_.[128] This long-meditated visit was apparently never accomplished, the chaise, notwithstanding. Only a few months more pass and the scene completely changes; the two friends are one after the other transported suddenly to France on new vocations, and their first meeting now was in Paris. Hume writes Smith from Edinburgh on the 9th of August 1763 intimating his appointment as Secretary to the English Embassy at Paris, and bidding him adieu. "I am a little hurried," he says, "in my preparations, but I could not depart without bidding you adieu, my good friend, and without acquainting you with the reasons of so sudden a movement. I have not great expectations of revisiting this country soon, but I hope it will not be impossible; but we may meet abroad, which will be a great satisfaction to me."[129] Smith's reply has not been preserved, but it seems to have contained among other things a condemnation, in Smith's most decisive style, of the recent proceedings of his friend Lord Shelburne in connection with various intrigues and negotiations set agoing by the Court and Lord Bute with the view of increasing the power of the Crown in English politics. That appears from a letter Hume writes Smith from London on 13th September, wanting information about his new chief's eldest son, Lord Beauchamp, regarding whom he had once heard Smith mention something told by "that severe critic Mr. Herbert," and to whom Hume was now to act in the capacity of tutor in conjunction with his official duties as Secretary of Legation. Then after relating the story of Bute's negotiations with Pitt through Shelburne, and stating that Lord Shelburne resigned because he found himself obnoxious on account of his share in that negotiation, he says: "I see you are much incensed with that nobleman, but he always speaks of you with regard. I hear that your pupil, Mr. Fitzmaurice, makes a very good figure at Paris."[130] Smith was always a stout Whig, strongly opposed to any attempt to increase the power of the Crown, and cordially denounced Bute and all his works. He was delighted with the famous No. 45 of the _North Briton_, published in the April of this very year 1763, and after reading it exclaimed to Dr. Carlyle, "Bravo! this fellow (Wilkes) will either be hanged in six months, or he will get Lord Bute impeached."[131] Shelburne after his resignation in September voted against the Court in the Wilkes affair, but up till then, at any rate, his public conduct could not be viewed by a man of Smith's political principles with anything but the most absolute condemnation, and the condemnation would be all the stronger because, from personal intercourse with his lordship, Smith knew that he was really a man of liberal mind and reforming spirit, from whom he had a right to look for better things. When Hume arrived in France the first letter he wrote to any of his friends at home was to Smith. He had been only a week in the country, and describes his first experiences of the curious transformation he then suddenly underwent: from being the object of attack and reproach and persecution for half a lifetime among the honest citizens of Edinburgh, he had become the idol of extravagant worship among the great and powerful at the Court of France. "During the last days in particular," he says, "that I have been at Fontainebleau I have _suffered_ (the expression is not improper) as much flattery as almost any man has ever done in the same time, but there are few days in my life when I have been in good health that I would not rather pass over again. "I had almost forgot in this effusion, shall I say, of my misanthropy or my vanity to mention the subject which first put my pen in my hand. The Baron d'Holbach, whom I saw at Paris, told me that there was one under his eye that was translating your _Theory of Moral Sentiments_, and desired me to inform you of it. Mr. Fitzmaurice, your old friend,[132] interests himself strongly in this undertaking. Both of them wish to know if you propose to make any alteration on the work, and desire you to inform me of your intentions in that particular."[133] Hume's hope of their "not impossible" meeting in Paris was destined to be gratified sooner than he could have conjectured. A few days before Smith received this letter from Hume he had received likewise the following letter from Charles Townshend, intimating that the time had now come for the Duke of Buccleugh to go abroad, and renewing to Smith the offer of the post of travelling tutor to his Grace:-- Dear Sir--The time now drawing near when the Duke of Buccleugh intends to go abroad, I take the liberty of renewing the subject to you: that if you should still have the same disposition to travel with Him I may have the satisfaction of informing Lady Dalkeith and His Grace of it, and of congratulating them upon an event which I know that they, as well as myself, have so much at heart. The Duke is now at Eton: He will remain there until Christmass. He will then spend some short time in London, that he may be presented at Court, and not pass instantaneously from school to a foreign country; but it were to be wished He should not be long in Town, exposed to the habits and companions of London, before his mind has been more formed and better guarded by education and experience. I do not enter at this moment upon the subject of establishment, because if you have no objection to the situation, I know we cannot differ about the terms. On the contrary, you will find me more sollicitous than yourself to make the connection with Buccleugh as satisfactory and advantageous to you as I am persuaded it will be essentially beneficial to him. The Duke of Buccleugh has lately made great progress both in his knowledge of ancient languages and in his general taste for composition. With these improvements his amusement from reading and his love of instruction have naturally increased. He has sufficient talents: a very manly temper, and an integrity of heart and reverence for truth, which in a person of his rank and fortune are the firmest foundation of weight in life and uniform greatness. If it should be agreeable to you to finish his education, and mould these excellent materials into a settled character, I make no doubt but he will return to his family and country the very man our fondest hopes have fancied him. I go to Town next Friday, and should be obliged to you for your answer to this letter.--I am, with sincere affection and esteem, dear sir, your most faithful and most obedient humble servant, C. TOWNSHEND. Lady Dalkeith presents her compliments to you. ADDERBURY, _25th October 1763_.[134] Smith accepted the offer. The terms were a salary of £300 a year, with travelling expenses while abroad, and a pension of £300 a year for life afterwards. He was thus to have twice his Glasgow income, and to have it assured till death. The pension was no doubt a principal inducement to a Scotch professor in those days to take such a post, for a Scotch professor had then no resource in his old age except the price he happened to receive for his chair from his successor in the event of his resignation; and we find several of them--Professors Moor and Robert Simson of Glasgow among others--much harassed with pecuniary cares in their last years. Smith's remuneration was liberal, but nothing beyond what was usual in such situations at the time. Dr. John Moore, who gave up his medical practice in Glasgow a few years later to be tutor to the young Duke of Hamilton, got also £300 a year while actively employed in the tutorship and a pension of £100 a year afterwards.[135] Professor Rouet, who, as already mentioned, sacrificed his chair in Glasgow for his tutorial appointment, is said to have received a pension of £500 a year from Lord Hopetoun, in addition to a pension of £50 he received, in consideration of previous services of the same kind, from Sir John Maxwell; and Professor Adam Ferguson, who was appointed tutor to the Earl of Chesterfield on Smith's recommendation, had £400 a year while on duty, and a pension of £200 a year, which he lived to enjoy for forty years after, receiving from first to last nearly £9000 for his two years' work. Smith did almost as well, for with the pension, which he drew for twenty-four years, he got altogether more than £8000 for his three years' service. This residence abroad for a few years with a competent tutor was then a common substitute for a university education. The Duke of Buccleugh, for example, was never sent to a university after he came back from his travels with Smith, but married almost immediately on his return, and entered directly into the active duties of life. It was generally thought that travel really supplied a more liberal education and a better preparation for life for a young man of the world than residence at a university; and it is not uninteresting to recall here how strongly Smith disagrees with that opinion in the _Wealth of Nations_, while admitting that some excuse could be found for it in the low state of learning into which the English universities had suffered themselves to fall:-- "In England it becomes every day more and more the custom to send young people to travel in foreign countries immediately upon their leaving school, and without sending them to any university. Our young people, it is said, generally return home much improved by their travels. A young man who goes abroad at seventeen or eighteen, and returns home at one-and-twenty, returns three or four years older than he was when he went abroad; and at that age it is very difficult not to improve a good deal in three or four years. In the course of his travels he generally acquires some knowledge of one or two foreign languages; a knowledge, however, which is seldom sufficient to enable him either to speak or write them with propriety. In other respects he commonly returns home more conceited, more unprincipled, more dissipated, and more incapable of any serious application, either to study or to business, than he could well have become in so short a time had he lived at home. By travelling so very young, by spending in the most frivolous dissipation the most precious years of his life, at a distance from the inspection and controul of his parents and relations, every useful habit which the earlier parts of his education might have had some tendency to form in him, instead of being riveted and confirmed, is almost necessarily either weakened or effaced. Nothing but the discredit into which the universities are allowing themselves to fall could ever have brought into repute so very absurd a practice as that of travelling at this early period of life. By sending his son abroad, a father delivers himself, at least for some time, from so disagreeable an object as a son unemployed, neglected and going to ruin before his eyes."[136] Smith must have written Townshend accepting the situation almost immediately on receiving the offer of it, and he at the same time applied to the University authorities for leave of absence for part of the session. He does not as yet resign his chair, nor does he make in his application any formal mention of the nature of the business that required his absence; he merely asks for their sanction to some highly characteristic arrangements which he desired to make in connection with the conduct of his class by a substitute. On the 8th of November 1763, according to the Faculty Records, "Dr. Smith represented that some interesting business would probably require his leaving the College some time this winter, and made the following proposals and request to the meeting:-? "1st, That if he should be obliged to leave the College without finishing his usual course of lectures, he should pay back to all his students the fees which he shall have received from them; and that if any of them should refuse to accept of such fees, he should in that case pay them to the University. "2nd, That whatever part of the usual course of lectures he should leave unfinished should be given gratis to the students, by a person to be appointed by the University, with such salary as they shall think proper, which salary is to be paid by Dr. Smith. "The Faculty accept of the above proposals, and hereby unanimously grant Dr. Smith leave of absence for three months of this session if his business shall require, and at such time as he shall find it necessary." The reason he asks in the first instance only for this temporary and provisional arrangement is no doubt to be found in the fact that the precise date for the beginning of the tutorship was not yet determined. As it might very possibly be fixed upon suddenly and involve a somewhat rapid call for his services, the precaution of obtaining beforehand a three months' leave of absence would enable him to remain in constant readiness to answer that call whenever it might come, without in the meanwhile requiring him to give up his duties to his Glasgow class prematurely; and it would at the same time allow ample time to the University to make more permanent arrangements before the temporary provision expired. The call when it came did come rather suddenly. Up till the middle of December Smith never received any manner of answer from Townshend, and the matter was not settled till after the Christmas holidays. For on the 12th of December 1763 Smith writes Hume, who was now in Paris:-- MY DEAR HUME--The day before I received your last letter I had the honour of a letter from Charles Townshend, renewing in the most obliging manner his former proposal that I should travel with the Duke of Buccleugh, and informing me that his Grace was to leave Eton at Christmas, and would go abroad very soon after that. I accepted the proposal, but at the same time expressed to Mr. Townshend the difficulties I should have in leaving the University before the beginning of April, and begged to know if my attendance upon his Grace would be necessary before that time. I have yet received no answer to that letter, which, I suppose, is owing to this, that his Grace is not yet come from Eton, and that nothing is yet settled with regard to the time of his going abroad. I delayed answering your letter till I should be able to inform you at what time I should have the pleasure of seeing you....--I ever am, my dearest friend, most faithfully yours, ADAM SMITH.[137] After the Duke reached London, however, at the Christmas recess, it seems to have been quickly settled to send him out on his travels without more delay, and on the 8th of January 1764 Smith intimated to the Faculty of Glasgow College that he was soon to leave that city under the permission granted him by the Dean of Faculty's meeting of the 8th of November, and that he had returned to the students all the fees he had received that session. He likewise acquainted the meeting that he proposed to pay his salary as paid by the College for one half-year, commencing the 10th of October previous, to the person who should teach his class for the remainder of the session. Mr. Thomas Young, student of divinity, was, on Smith's recommendation, chosen for this purpose. A committee was appointed to receive from Smith the private library of the Moral Philosophy class; next day at a meeting of Senatus he was paid the balance due to him on his accounts as Quæstor, and was entrusted with a copy of Foulis's large _Homer_, which they asked him to carry to London and deliver, in their name, to Sir James Gray, as a present to his Sicilian majesty, who had shown them some favour; and the Senate-room of Glasgow knew him no more. His parting with his students was not quite so simple. They made some difficulty, as he seems to have anticipated, about taking back the fees they had paid him for his class, and he was obliged to resort almost to force before he succeeded in getting them to do so. The curious scene is described by Alexander Fraser Tytler (Lord Woodhouselee) in his _Life of Lord Kames:_ "After concluding his last lecture, and publicly announcing from the chair that he was now taking a final leave of his auditors, acquainting them at the same time with the arrangements he had made, to the best of his power, for their benefit, he drew from his pocket the several fees of the students, wrapped up in separate paper parcels, and beginning to call up each man by his name, he delivered to the first who was called the money into his hand. The young man peremptorily refused to accept it, declaring that the instruction and pleasure he had already received was much more than he either had repaid or ever could compensate, and a general cry was heard from every one in the room to the same effect. But Mr. Smith was not to be bent from his purpose. After warmly expressing his feelings of gratitude and the strong sense he had of the regard shown to him by his young friends, he told them this was a matter betwixt him and his own mind, and that he could not rest satisfied unless he performed what he deemed right and proper. 'You must not refuse me this satisfaction; nay, by heavens, gentlemen, you shall not;' and seizing by the coat the young man who stood next him, he thrust the money into his pocket and then pushed him from him. The rest saw it was in vain to contest the matter, and were obliged to let him have his own way."[138] This is a signal proof of the scrupulous delicacy of Smith's honour; he had firmly determined not to touch a shilling of this money, and if the students had persisted in refusing it he intended, as we have seen, to give it to the funds of the University. Many may think his delicacy even excessive, for it is common enough for a professor's class to be conducted by a substitute in the absence, through ill-health or other causes, of the professor himself, and nobody thinks the students suffer any such injury by the arrangement as to call for even a reduction of the fees. What Smith would have done had his absence been due to ill-health one cannot say, but as his engagement with the students for a session's lectures was broken off by his own spontaneous acceptance of an office of profit, he felt he could not honourably retain the wages when he had failed to implement the engagement,--a thing which a barrister in large practice does without scruple every day. The same sense of right led Smith to resign his chair. He did not do so till he reached France, but he manifestly contemplated doing it from the first, for he only made arrangements for paying his substitute till the end of the first half of the session, by which time he would expect his successor to have entered on office, as indeed actually happened, for Reid came there in the beginning of June. Moreover, his resignation was evidently an understood thing at the University long before it was really sent in, for a good deal of intriguing had already been going on for the place. The Lord Privy Seal (the Hon. James Stuart Mackenzie, Lord Bute's brother), who was Scotch Minister, writes Baron Mure on the 2nd February 1764, a fortnight before Smith resigned, asking whether it was true the University were to appoint Dr. Wight to succeed Smith, and mentions incidentally having had some conversation with Smith himself (apparently in London) on the subject, particularly with regard to the possible claims of Mr. Young, his substitute, to the appointment. It was not always necessary--nor, indeed, does it seem to have been the more usual practice--for a Scotch professor to resign his chair on accepting a temporary place like a travelling tutorship. Adam Ferguson fought the point successfully with the Edinburgh Town Council when he left England as tutor to Lord Chesterfield; and Dalzel, when Professor of Greek in Edinburgh, went to live at Oxford as tutor to Lord Maitland; but we have already seen, in connection with the case of Professor Rouet, that Smith held strong views against the encouragement of absenteeism and the growth of any feeling that the University was there for the convenience of the professors, instead of the professors being there for the service of the University. Under these circumstances it was natural for Smith to resign his chair on his acceptance of the tutorship; and although he only sent the letter of resignation after his arrival in France, it is perhaps more convenient to print it here in its natural connection with Glasgow University affairs than to defer it to its more strictly chronological place in the chapter describing his French travels. The letter is addressed "To the Right Hon. Thomas Miller, Esq., His Majesty's Advocate for Scotland," Lord Rector of Glasgow University at the time; and it runs as follows: MY LORD--I take this first opportunity after my arrival in this place, which was not till yesterday, to resign my office into the hands of your lordship, of the Dean of Faculty, of the Principal of the College, and of all my other most respectable and worthy colleagues. Into your and their hands, therefor, I do hereby resign my office of Professor of Moral Philosophy in the University of Glasgow and in the College thereof, with all the emoluments, privileges, and advantages which belong to it. I reserve, however, my right to the salary for the current half year, which commenced at the 10th of October for one part of my salary and at Martinmas last for another; and I desire that this salary may be paid to the gentleman who does that part of my duty which I was obliged to leave undone, in the manner agreed on between my very worthy colleagues and me before we parted. I never was more anxious for the good of the College than at this moment; and I sincerely wish that whoever is my successor may not only do credit to the office by his abilities, but be a comfort to the very excellent men with whom he is likely to spend his life, by the probity of his heart and the goodness of his temper.--I have the honour to be, my lord, your lordship's most obedient and most faithful servant, ADAM SMITH. PARIS, _14th February 1764_.[139] The Senate accepted his resignation on the 1st of March, and expressed their regret at his loss in the following terms: "The University cannot help at the same time expressing their sincere regret at the removal of Dr. Smith, whose distinguished probity and amiable qualities procured him the esteem and affection of his colleagues; whose uncommon genius, great abilities, and extensive learning did so much honour to this society; his elegant and ingenious _Theory of Moral Sentiments_ having recommended him to the esteem of men of taste and literature throughout Europe. His happy talents in illustrating abstracted subjects, and faithful assiduity in communicating useful knowledge, distinguished him as a professor, and at once afforded the greatest pleasure and the most important instruction to the youth under his care." FOOTNOTES: [126] Nichol's _Literary Illustrations_, iii. 515. [127] _Hume Correspondence_, R.S.E. Library. [128] _Ibid._ Printed by Burton. [129] Burton's _Life of Hume_, ii. 157. [130] _Ibid._, ii. 163. [131] Carlyle's _Autobiography_, p. 431. [132] See above, p. 58. [133] Burton's _Life of Hume_, ii. 168. [134] Original in possession of Professor Cunningham, Belfast. [135] _Caldwell Papers_, i. 192. [136] Wealth of Nations, Book V. chap. i. art. ii. [137] Fraser's _Scotts of Buccleuch_, ii. 403. [138] Tytler's _Kames_, i. 278. [139] Glasgow University Records. CHAPTER XII TOULOUSE Smith joined his pupil in London in the end of January 1764, and they set out together for France in the beginning of February. They remained abroad two years and a half--ten days in Paris, eighteen months in Toulouse, two months travelling in the South of France, two months in Geneva, and ten months in Paris again. Smith kept no journal and wrote as few letters as possible, but we are able from various sources to fill in some of the outlines of their course of travel. At Dover they were joined by Sir James Macdonald of Sleat, a young baronet who had been at Eton College with the Duke of Buccleugh, and who had been living in France almost right on since the re-establishment of peace. Sir James was heir of the old Lords of the Isles, and son of the lady who, with her factor Kingsburgh, harboured Prince Charlie and Flora Macdonald in Skye; and he was himself then filling the world of letters in Paris and London alike with astonishment at the extent of his knowledge and the variety of his intellectual gifts. Walpole, indeed, said that when he grew older he would choose to know less, but to Grimm he seemed the same marvel of parts as he seemed to Hume. He accompanied Smith and the Duke to Paris, where they arrived (as we know from Smith's letter to the Rector of Glasgow University) on the 13th of February. In Paris they did not remain long--not more than ten days at most, for it took at that period six days to go from Paris to Toulouse, and they were in Toulouse on the 4th of March. Smith does not appear during this short stay in Paris to have made the personal acquaintance of any of the eminent men of letters whom he afterwards knew so well, for he never mentions any of them in his subsequent letters to Hume from Toulouse, though he occasionally mentions Englishmen whose acquaintance he first made at that time. He probably could not as yet speak French, for even to the last he could only speak it very imperfectly. Most of their time in Paris seems, therefore, to have been spent with Hume and Sir James Macdonald and Lord Beauchamp, who was Hume's pupil and Sir James's chief friend. Paris, moreover, was merely a halting-place for the present; their immediate destination was Toulouse, at that time a favourite resort of the English. It was the second city of the kingdom, and wore still much of the style of an ancient capital. It was the seat of an archbishopric, of a university, of a parliament, of modern academies of science and art which made some ado with their annual _Jeux Floraux_, and the nobility of the province still had their town houses there, and lived in them all winter. The society was more varied and refined than anywhere else in France out of Paris. Among the English residents was a cousin of David Hume, who had entered the Gallican Church, and was then Vicar-General of the diocese of Toulouse, the Abbé Seignelay Colbert. Smith brought a letter from Hume to the Abbé, and the Abbé writes Hume in reply on the 4th of March, thanking him for having introduced Smith, who, he says, appeared to be all that was said of him in the letter. "He has only just arrived," the Abbé proceeds, "and I have only seen him for an instant. I am very sorry that they have not found the Archbishop here. He went some six weeks ago to Montpellier, whence he will soon go to Paris. He told me he had a great desire to make your acquaintance. I fear that my long black cassock will frighten the Duke of Buccleugh, but apart from that I should omit nothing to make his stay in this town as agreeable and useful as possible."[140] He writes again on the 22nd of April, after having a month's experience of his new friends: "Mr. Smith is a sublime man. His heart and his mind are equally admirable. Messrs. Malcolm and Mr. Urquhart of Cromartie are now here. The Duke, his pupil, is a very amiable spirit, and does his exercises well, and is making progress in French. If any English or Scotch people ask your advice where to go for their studies, you could recommend Toulouse. There is a very good academy and much society, and some very distinguished people to be seen here." In a subsequent letter he says, "There are many English people here, and the district suits them well."[141] This Abbé Colbert, who was Smith's chief guide and friend in the South of France, was the eldest son of Mr. Cuthbert of Castlehill in Inverness-shire, and was therefore head of the old Highland family to which Colbert, the famous minister of Louis XIV., was so anxious to trace his descent. That minister had himself gone the length of petitioning the Scotch Privy Council for a birth-brieve, or certificate, to attest his descent from the Castlehill family, and the petition was refused through the influence of the Duke of Lauderdale. But his successor, the Marquis de Seignelay, found the Scotch Parliament more accommodating in 1686 than the Scotch Privy Council had been, and obtained the birth-brieve in an Act of that year, which was passed, as it states, in order that "this illustrious and noble family of Colbert may be restored to us their friends and to their native country," and which declared that the family came from the south of Scotland, took their name from St. Cuthbert (pronounced, says the Act, by the Scotch Culbert, though "soaftened" by the French into Colbert), and received their arms for their valour in the battle of Harlaw. The link between the Scotch Cuthberts and the French Colberts, thus attested by Act of Parliament, may or may not be fabulous, but it was a link of gold to many members of the family of Castlehill, who emigrated to France, and were advanced into high positions through the interest of their French connections. One of these was the present Abbé, who had come over in 1750 a boy of fourteen, was now at twenty-eight Vicar-General of Toulouse, and was in 1781 made Bishop of Rodez. As Bishop he distinguished himself by the work he did for the improvement of agriculture and industry in his diocese, and, as member of the States General in 1789, he became the hero of the hour in Paris and was carried shoulder-high through the streets for proposing the union of the clergy with the Third Estate. When the Civil Constitution of the clergy was declared he refused to submit, and returning to this country, spent the remainder of his days here as Secretary to Louis XVIII. It would appear from the Abbé's first letter that Smith had either brought with him from Paris an introduction to the Archbishop of Toulouse, or that Hume had asked his cousin to give him one. This Archbishop--who was so desirous to make Hume's acquaintance--was the celebrated Loménie de Brienne, afterwards Cardinal and Minister of France, who was thought at this time, Walpole says, to be the ablest man in the Gallican Church, and was pronounced by Hume to be the only man in France capable of restoring the greatness of the kingdom. When he obtained the opportunity he signally falsified Hume's prognostication, and did much to precipitate the Revolution by his incapacity. Smith must no doubt have met him occasionally during his protracted sojourn at Toulouse, though we have no evidence that he did, and the Archbishop was rather notorious for his absence from his see. If he did meet his Grace he would have found him as advanced an economist as himself, for having been a college friend of Turgot and Morellet at the Sorbonne, he became a strong advocate of their new economic principles, and succeeded in getting the principle of free trade in corn adopted by the States of Languedoc. Whether they were personally acquainted or not, the Archbishop does not appear to have cherished any profound regard for Smith, for when he was Minister of France he refused his friend Morellet the trifling sum of a hundred francs, which the Abbé asked to pay for the printing of his translation of the _Wealth of Nations_. During Smith's first six months at Toulouse he does not seem to have seen the Archbishop, or to have seen much of anybody, as the following letter shows. Indeed he found the place extremely dull, the life he led in Glasgow having been, he says, dissipation itself in comparison. They had not received the letters of recommendation they had expected from the Duc de Choiseul, and for society they were as yet practically confined to the Abbé Colbert and the English residents. For a diversion Smith contemplates an excursion to Bordeaux, and suggests a visit for a month from Sir James Macdonald, for the sake not only of his agreeable society, but of the service "his influence and example" would render the Duke. Personally he had, to mitigate his solitude, taken a measure no less important than effectual--he had begun to write a book--the _Wealth of Nations_--"to pass away the time. You may believe I have very little to do." They had arrived in Toulouse on the 3rd or 4th of March, but it is the 5th of July before Smith thinks of writing Hume; at least the following letter reads as if it were the first since they parted:-- MY DEAREST FRIEND--The Duke of Buccleugh proposes soon to set out for Bordeaux, where he intends to stay a fortnight or more. I should be much obliged to you if you could send us recommendations to the Duke of Richelieu, the Marquis de Lorges, and the Intendant of the Province. Mr. Townshend assured me that the Duc de Choiseul was to recommend us to all the people of fashion here and everywhere else in France. We have heard nothing, however, of these recommendations, and have had our way to make as well as we could by the help of the Abbé, who is a stranger here almost as much as we. The Progress indeed we have made is not very great. The Duke is acquainted with no Frenchman whatever. I cannot cultivate the acquaintance of the few with whom I am acquainted, as I cannot bring them to our house, and am not always at liberty to go to theirs. The life which I led at Glasgow was a pleasurable dissipated life in comparison of that which I lead here at Present. I have begun to write a book in order to pass away the time. You may believe I have very little to do. If Sir James would come and spend a month with us in his travels, it would not only be a great satisfaction to me, but he might by his influence and example be of great service to the Duke. Mention these matters, however, to nobody but to him. Remember me in the most respectful manner to Lord Beauchamp and to Dr. Trail,[142] and believe me, my dear friend, ever yours, ADAM SMITH. TOULOUSE, _5th July 1764_.[143] The trip to Bordeaux was taken probably in August, and in the company of Abbé Colbert. At Bordeaux they fell in with Colonel Barré, the furious orator, whose invective made even Charles Townshend quail, but who was now over on a visit to his French kinsfolk, and making the hearts of these simple people glad with his natural kindnesses. He seems to have been much with Smith and his party during their stay in Bordeaux, and to have accompanied them back to Toulouse. For he writes Hume on the 4th of September from the latter town, and says: "I thank you for your last letter from Paris, which I received just as Smith and his _élève_ and L'Abbé Colbert were sitting down to dine with me at Bordeaux. The latter is a very honest fellow and deserves to be a bishop; make him one if you can.... Why will you triumph and talk of _platte couture_? You have friends on both sides. Smith agrees with me in thinking that you are turned soft by the _délices_ of the French Court, and that you don't write in that nervous manner you was remarkable for in the more northern climates. Besides, what is still worse, you take your politics from your Elliots, Rigbys, and Selwyns."[144] Smith was already acquainted with Barré before he left Scotland, where the colonel, for services rendered to Lord Shelburne, held the lucrative post of Governor of Stirling Castle; and now he could not go sight-seeing in a French town under two better guides than Barré and Colbert--a Frenchman who had become an English politician, and an Englishman who had become a French ecclesiastic. He seems to have been struck with the contrast between the condition of the working class in Bordeaux and their condition in Toulouse, as he had already been struck with the same contrast between Glasgow and Edinburgh. In Bordeaux they were in general industrious, sober, and thriving; in Toulouse and the rest of the parliament towns they were idle and poor; and the reason was that Bordeaux was a commercial town, the _entrepôt_ of the wine trade of a rich wine district, while Toulouse and the rest were merely residential towns, employing little capital more than was necessary to supply their own consumption. The common people were always better off in a town like Bordeaux, where they lived on capital, than in a town like Toulouse, where they lived on revenue.[145] But while he speaks as if he thought the people of Bordeaux more sober as well as more industrious than the people of Toulouse, he looked upon the inhabitants of the southern provinces of France generally as among the soberest people in Europe, and ascribes their sobriety to the cheapness of their liquor. "People are seldom guilty of excess," he says, "in what is their daily fare." He tells that when a French regiment came from some of the northern provinces of France, where wine was somewhat dear, to be quartered in the southern, where wine was very cheap, the soldiers were at first debauched by the cheapness and novelty of good wine; but after a few months' residence the greater part of them became as sober as the rest of the inhabitants. And he thinks the same effect might occur in this country from a reduction of the wine, malt, and ale duties.[146] Besides seeing the places, they visited some of the notabilities, to whom the Earl of Hertford had sent them the letters of introduction for which Smith had asked through Hume. The governor of the province was away from home at the time, however; but Smith hoped to see him on a second visit to Bordeaux he was presently to pay to meet his pupil's younger brother on his way round from Paris to Toulouse. But they found the Duke of Richelieu at home, and the gallant old field-marshal, the hero of a hundred fights and a thousand scandals, seems to have received them with great civility and even distinction. Smith used to have much to say ever afterwards of this famous and ill-famed man. The excursion to Bordeaux in August was so agreeable that they made another--probably in September--up to the fashionable watering-place Bagnères de Bigorre, and in October, when Smith wrote the following letter to Hume, they were on the eve of the second visit to Bordeaux of which I have spoken, and even contemplating after that a visit to Montpellier, when the States of Languedoc--the local assembly of the province--met there in the end of November. TOULOUSE, _21st October 1764_. MY DEAR HUME--I take this opportunity of Mr. Cook's going to Paris to return to you, and thro' you to the Ambassador, my very sincere and hearty thanks for the very honourable manner in which he was so good as to mention me to the Duke of Richelieu in the letter of recommendation which you sent us. There was, indeed, one small mistake in it. He called me Robinson instead of Smith. I took upon me to correct this mistake myself before the Duke delivered the letter. We were all treated by the Maréchal with the utmost Politeness and attention, particularly the Duke, whom he distinguished in a very proper manner. The Intendant was not at Bordeaux, but we shall soon have an opportunity of delivering his letter, as we propose to return to that place in order to meet my Lord's Brother. Mr. Cook[147] goes to Caen to wait upon Mr. Scot, and to attend him from that place to Toulouse. He will pass by Paris, and I must beg the favour of you that as soon as you understand he is in town you will be so good as to call upon him and carry him to the Ambassador's, as well as to any other place where he would chuse to go. I must beg the same favour of Sir James. Mr. Cook will let you know when he comes to town. I have great reason to entertain the most favourable opinion of Mr. Scot, and I flatter myself his company will be both useful and agreeable to his Brother. Our expedition to Bordeaux and another we have made since to Bagnères has made a great change upon the Duke. He begins now to familiarise himself to French company, and I flatter myself I shall spend the rest of the time we are to live together not only in Peace and contentment, but in gayetty and amusement. When Mr. Scot joins us we propose to go to see the meeting of the States of Languedoc at Montpelier. Could you promise us recommendations to the Comte d'Eu, to the Archbishop of Narbonne, and to the Intendant? These expeditions, I find, are of the greatest service to my Lord.--I ever am, my dear friend, most, faithfully yours, ADAM SMITH.[148] A few days after the date of that letter Smith writes Hume again, introducing one of the English residents in Toulouse, Mr. Urquhart of Cromartie, as Abbé Colbert describes him in one of his letters, a descendant therefore probably of Sir Thomas. The letter is of no importance, but it shows at least Smith's hearty liking for a good fellow. MY DEAR FRIEND--This letter will be delivered to you by Mr. Urquhart, the only man I ever knew who had a better temper than yourself. You will find him most perfectly amiable. I recommend him in the most earnest manner to your advice and protection. He is not a man of letters, and is just a plain, sensible, agreeable man of no pretensions of any kind, but whom you will love every day better and better.--My dear friend, most faithfully yours, ADAM SMITH. TOULOUSE, _4th November 1764_.[149] Smith and his two pupils made their proposed expedition to Montpellier during the sittings of the States, for we find them visited there by Horne Tooke,[150] then still parson of Brentford, who had been on a tour in Italy, and stayed some time in Montpellier on his way back. Tooke, it may be said here, was no admirer of Smith; he thought the _Theory of Moral Sentiments_ nonsense, and the _Wealth of Nations_ written for a wicked purpose,[151] and this is the only occasion on which they are known to have met. The little provincial assembly which Smith had come to Montpellier to see was at that period, it ought to be mentioned, attracting much attention from all the thinkers and reformers of France, and was thought by many of the first of them to furnish the solution of the political question of that age. The States of Languedoc were almost the only remains of free institutions then left in France. In all the thirty-two provinces of the country except six the States had been suppressed altogether, and in five of these six they were too small to be important or vigorous; but Languedoc was a great province, containing twenty-three bishoprics and more territory than the kingdom of Belgium, and the States governed its affairs so well that its prosperity was the envy of the rest of France. They dug canals, opened harbours, drained marshes, made roads, which Arthur Young singles out for praise, and made them without the _corvée_ under which the rest of rural France was groaning. They farmed the imperial taxes of the province themselves, to avoid the exactions of the farmers-general. They allowed the _noblesse_ none of the exemptions so unfairly enjoyed by them elsewhere. The _taille_, which was a personal tax in other parts of the kingdom, was in Languedoc an equitable land tax, assessed according to a valuation periodically revised. There was not a poorhouse in the whole province, and such was its prosperity and excellent administration that it enjoyed better credit in the market than the Central Government, and the king used sometimes, in order to get more favourable terms, to borrow on the security of the States of Languedoc instead of his own.[152] Under those circumstances it is not surprising that one of the favourite remedies for the political situation in France was the revival of the provincial assemblies and the suppression of the intendants--"Grattan's Parliament and the abolition of the Castle." Turgot, among others, favoured this solution, though he was an intendant himself. Necker had just put it into execution when the Revolution came and swept everything away. Smith himself has expressed the strongest opinion in favour of the administration of provincial affairs by a local body instead of by an intendant, and he must have witnessed with no ordinary interest the proceedings of this remarkable little assembly at Montpellier, with its 23 prelates on the right, its 23 barons on the left, and the third estate--representatives of 23 chief towns and 23 dioceses--in the centre, and on a dais in front of all, the President, the Archbishop of Narbonne. The Archbishop, to whom, it will be remembered, Smith asked, and no doubt received, a letter of introduction from Lord Hertford, was a countryman of his own, Cardinal Dillon, a prince of prelates, afterwards Minister of France; a strong champion of the rights of the States against the pretensions of the Crown, and, if we may judge from the speech with which Miss Knight heard him open the States of Languedoc in 1776, a very thorough free-trader. With all these excursions, Smith was now evidently realising in some reasonable measure the "gayetty and amusement" he told Hume he anticipated to enjoy during the rest of his stay in the South of France. His command of the language, too, grew easier, though it never became perfect, and he not only went more into society, but was able to enjoy it better. Among those he saw most of in Toulouse were, he used to tell Stewart, the presidents and counsellors of the Parliament, who were noted, like their class in other parliament towns, for their hospitality, and noted above those of other parliament towns for keeping up the old tradition of blending their law with a love of letters. They were men, moreover, of proved patriotism and independence; in no other society would Smith be likely to hear more of the oppressed condition of the peasantry, and the necessity for thoroughgoing reforms. In those days the king's edict did not run in a province till it was registered by the local parliament, and the Parliament of Toulouse often used this privilege of theirs to check bad measures. They had in 1756 remonstrated with the king against the _corvée_, declaring that the condition of the peasantry of France was "a thousand times less tolerable than the condition of the slaves in America." At the very moment of Smith's first arrival in Toulouse they were all thrown in prison--or at least put under arrest in their own houses--for refusing to register the _centième denier_, and Smith no doubt had that circumstance in his mind when he animadverted in the _Wealth of Nations_ on the violence practised by the French Government to coerce its parliaments. He thought very highly of those parliaments as institutions, stating that though not very convenient courts of law, they had never been accused or even suspected of corruption, and he gives a curious reason for their incorruptibility; it was because they were not paid by salary, but by fees dependent on their diligence. During Smith's residence in Toulouse the town was raging (as Abbé Colbert mentions in his letters to Hume) about one of the judgments of this Parliament, and for the most part, strangely enough, taking the Parliament's side. This was its judgment in the famous Calas case, to which Smith alludes in the last edition of his _Theory_. Jean Calas, it may be remembered, had a son who had renounced his Protestantism in order to become eligible for admission to the Toulouse bar, and then worried himself so much about his apostasy that he committed suicide in his father's house; and the father was unjustly accused before the Parliament of the town of having murdered the youth on account of his apostasy, was found guilty without a particle of proof, and then broken on the wheel and burnt on the 9th of March 1762. But the great voice of Voltaire rose against this judicial atrocity, and after three years' agitation procured a new trial before a special court of fifty masters of requests, of whom Turgot was one, on the 9th of March 1765, with the result that Calas was pronounced absolutely innocent of the crime he suffered for, and his family was awarded a compensation of 36,000 livres. The king received them at court, and all France rejoiced in their rehabilitation except their own townsfolk in Toulouse. On the 10th of April 1765--a month after the verdict--Abbé Colbert writes Hume: "The people here would surprise you with their fanaticism. In spite of all that has happened, they every man believe Calas to be guilty, and it is no use speaking to them on the subject."[153] Smith makes use of the incident to illustrate the proposition that while unmerited praise gives no satisfaction except to the frivolous, unmerited reproach inflicts the keenest suffering even on men of exceptional endurance, because the injustice destroys the sweetness of the praise, but enormously embitters the sting of the condemnation. "The unfortunate Calas," he writes--"a man of much more than ordinary constancy (broken upon the wheel and burnt at Tholouse for the supposed murder of his own son, of which he was perfectly innocent)--seemed with his last breath to deprecate not so much the cruelty of the punishment, as the disgrace which the imputation must bring upon his memory. After he had been broke, and when just going to be thrown into the fire, the monk who attended the execution exhorted him to confess the crime for which he had been condemned. 'My father,' said Calas, 'can you bring yourself to believe that I was guilty?'" FOOTNOTES: [140] _Hume Correspondence_, R.S.E. Library. [141] Ibid. [142] Lord Beauchamp was the eldest son of the English Ambassador, the Earl of Hertford, and Dr. Trail, or properly Traill, was the Ambassador's chaplain, who was made Bishop of Down and Connor soon afterwards, when Lord Hertford became Lord-Lieutenant of Ireland. [143] _Hume Correspondence_, R.S.E. Library. [144] Burton's _Letters of Eminent Persons to David Hume_, p. 37. [145] _Wealth of Nations_, Book II. chap. iii. [146] _Wealth of Nations_, Book I. chap. xi. [147] The Duke's servant. [148] _Hume Correspondence_, R.S.E. Library. [149] _Hume Correspondence_, R.S.E. Library. [150] Stephen's _Life of Horne Tooke_, i. 75. [151] Samuel Rogers told this to his friend the Rev. John Mitford. See Add. MSS. 32,566. [152] Tocqueville, _State of Society in France_, pp. _265, 271._ [153] _Hume Correspondence_, R.S.E. Library. CHAPTER XIII GENEVA In the end of August Smith and his pupils left Toulouse and made what Stewart calls an extensive tour in the South of France. Of this tour no other record remains, but the Duke's aunt, Lady Mary Coke, incidentally mentions that when they were at Marseilles they visited the porcelain factory, and that the Duke bought two of the largest services ever sold there, for which he paid more than £150 sterling. They seem to have arrived in Geneva some time in October, and stayed about two months in the little republic of which, as we have seen, Smith had long been a fervent admirer. In making so considerable a sojourn at Geneva, he was no doubt influenced as a political philosopher by the desire to see something of the practical working of those republican institutions which he regarded speculatively with so much favour, to observe how the common problems of government worked themselves out on the narrow field of a commonwealth with only 24,000 inhabitants all told, which yet contrived to keep its place among the nations, to sit sometimes as arbiter between them, and to surpass them all in the art of making its people prosperous. He had the luck to observe it at an interesting moment, for it was in the thick of a constitutional crisis. The government of the republic had hitherto been vested in the hands of 200 privileged families, and the rest of the citizens were now pressing their right to a share in it, with the active assistance of Voltaire. This important struggle for the conversion of the aristocratic into the democratic republic continued all through the period of Smith's visit, and the city of Geneva, which in its usual state was described by Voltaire as "a tedious convent with some sensible people in it," was day after day at this time the animated scene of the successive acts of that political drama. During his stay there Smith made many personal friends, both among the leading citizens of the commonwealth and among the more distinguished of the foreign visitors who generally abounded there. People went to Geneva in those days not to see the lake or the mountains, but to consult Dr. Tronchin and converse with Voltaire. Smith needed no introduction to Tronchin, who, as we have seen, held so high an opinion of his abilities that he had sent his own son all the way to Glasgow to attend his philosophical classes; and it was no doubt through Tronchin, Voltaire's chief friend in that quarter, that Smith was introduced to Voltaire. Smith told Rogers he had been in Voltaire's company on five or six different occasions, and he no doubt enjoyed, as most English visitors enjoyed, hospitable entertainment at Ferney, the beautiful little temporality of the great literary pontiff, overlooking the lake. There was no living name before which Smith bowed with profounder veneration than the name of Voltaire, and his recollections of their intercourse on these occasions were always among those he cherished most warmly. Few memorials, however, of their conversation remain, and these are preserved by Samuel Rogers in his diary of his visit to Edinburgh the year before Smith's death. They seem to have spoken, as was very natural, of the Duke of Richelieu, the only famous Frenchman Smith had yet met, and of the political question as to the revival of the provincial assemblies or the continuance of government by royal intendants. On this question Smith said that Voltaire expressed great aversion to the States and favoured the side of the royal prerogative. Of the Duke of Richelieu Voltaire said that he was an old friend of his, but a singular character. A few years before his death his foot slipped one day at Versailles, and the old marshal said that was the first _faux pas_ he had ever made at court. Voltaire then seems to have told anecdotes of the Duke's being bastilled and of his borrowing the Embassy plate at Vienna and never returning it, and to have passed the remark he made elsewhere that the English had only one sauce, melted butter. Smith always spoke of Voltaire with a genuine emotion of reverence. When Samuel Rogers happened to describe some clever but superficial author as "a Voltaire," Smith brought his hand down on the table with great energy and said, "Sir, there is only one Voltaire."[154] Professor Faujas Saint Fond, Professor of Geology in the Museum of Natural History in Paris, visited Smith in Edinburgh a few years before Rogers was there, and says that the animation of Smith's countenance was striking when he spoke of Voltaire, whom he had known personally, and whose memory he revered. "Reason," said Smith one day, as he showed M. Saint Fond a fine bust of Voltaire he had in his room, "reason owes him incalculable obligations. The ridicule and the sarcasm which he so plentifully bestowed upon fanatics and heretics of all sects have enabled the understanding of men to bear the light of truth, and prepared them for those inquiries to which every intelligent mind ought to aspire. He has done much more for the benefit of mankind than those grave philosophers whose books are read by a few only. The writings of Voltaire are made for all and read by all." On another occasion he observed to the same visitor, "I cannot pardon the Emperor Joseph II., who pretended to travel as a philosopher, for passing Ferney without doing homage to the historian of the Czar Peter I. From this circumstance I concluded that Joseph was but a man of inferior mind."[155] One of the warmest of Smith's Swiss friends was Charles Bonnet, the celebrated naturalist and metaphysician, who, in writing Hume ten years after the date of this visit, desires to be remembered "to the sage of Glascow," adding, "You perceive I speak of Mr. Smith, whom we shall always recollect with great pleasure."[156] On the day this letter was written by Bonnet to Hume, another was written to Smith himself by a young Scotch tutor then in Geneva, Patrick Clason, who seems to have carried an introduction from Smith to Bonnet, and who mentions having received many civilities from Bonnet on account of his being one of Smith's friends. Clason then goes on to tell Smith that the Syndic Turretin and M. Le Sage also begged to be remembered to him. The Syndic Turretin was the President of the Republic, and M. Le Sage was the eminent Professor of Physics, George Louis Le Sage, who was then greatly interested in Professor Black's recent discoveries about latent heat and Professor Matthew Stewart's in astronomy, and was one of a group who gathered round Bonnet for discussions in speculative philosophy and morals, at which, it may be reasonably inferred, Smith would have also occasionally assisted. Le Sage seems to have met Smith first, however, and to have been in the habit of meeting him often afterwards, at the house of a high and distinguished French lady, the Duchesse d'Enville, who was living in Geneva under Tronchin's treatment, and whose son, the young and virtuous Duc de la Rochefoucauld, who was afterwards stoned to death in the Revolution, was receiving instruction from Le Sage himself. Le Sage writes the Duchesse d'Enville on 5th February 1766, "Of all the people I have met at your house, that is, of all the _élite_ of our good company, I have only continued to see the excellent Lord Stanhope and occasionally Mr. Smith. The latter wished me to make the acquaintance of Lady Conyers and the Duke of Buckleugh, but I begged him to reserve that kindness for me till his return."[157] This letter shows that Smith was so much taken with Geneva that he meant to pay it a second visit before he ended his tutorial engagement, but the intention was never fulfilled, in consequence of unfortunate circumstances to be presently mentioned. The Duchesse d'Enville, at whose house Smith seems to have been so steady a guest, was herself a Rochefoucauld by blood, a grand-daughter of the famous author of the _Maxims_, and was a woman of great ability, who was popularly supposed to be the inspirer of all Turgot's political and social ideas, the chief of the "three Maries" who were alleged to guide his doings. Stewart tells us that Smith used to speak with very particular pleasure and gratitude of the many civilities he received from this interesting woman and her son, and they seem on their part to have cherished the same lively recollection of him. When Adam Ferguson was in Paris in 1774 she asked him much about Smith, and often complained, says Ferguson in a letter to Smith himself, "of your French as she did of mine, but said that before you left Paris she had the happiness to learn your language."[158] After two and a half years' residence in France, Smith seems then to have been just succeeding in making himself intelligible to the more intelligent inhabitants in their own language, and this agrees with what Morellet says, that Smith's French was very bad. The young Duc de la Rochefoucauld, who, like his mother, was a devoted friend of Turgot, became presently a declared disciple of Quesnay, and sat regularly with the rest of the economist sect at the economic dinners of Mirabeau, the "Friend of Man." When Samuel Rogers met him in Paris shortly after the outbreak of the Revolution, he expressed to Rogers the highest admiration for Smith, then recently dead, of whom he had seen much in Paris as well as Geneva, and he had at one time begun to translate the _Theory of Moral Sentiments_ into French, abandoning the task only when he found his work anticipated by the Abbé Blavet's translation in 1774. The only surviving memorial of their intercourse is a letter from the Duke, which will be given in its place, and in which he begs Smith to modify the opinion pronounced in the _Theory_ on the writer's ancestor, the author of the _Maxims_. The Earl Stanhope, whom Smith used to meet at the Duchess's, and with whom he established a lasting friendship, was the second Earl, the editor of Professor Robert Simson's mathematical works, and himself a distinguished mathematician. He took no part in public life, but his opinions were of the most advanced Liberal order. He had come to Geneva to place his son, afterwards also so distinguished in science, under the training of Le Sage. The Lady Conyers, to whom the Scotch was so anxious to introduce the Swiss philosopher, was the young lady who a few years afterwards ran away from her husband, the fifth Duke of Leeds, with the poet Byron's father, whom she subsequently married, and by whom she became the mother of the poet's sister Augusta. FOOTNOTES: [154] Clayden's _Early Life of Samuel Rogers_, p. 110. [155] Faujas Saint Fond, _Travels in England, Scotland, and the Hebrides,_ ii. 241. [156] _Hume Correspondence_, R.S.E. Library. [157] Prevost, _Notice de la Vie et des écrits de George Louis Le Sage de Geneva_, p. 226. [158] Small's _Biographical Sketch of Adam Ferguson_, p. 20. CHAPTER XIV PARIS Smith left Geneva in December for Paris, where he arrived, according to Dugald Stewart, about Christmas 1765. The Rev. William Cole, who was in Paris in October of the same year, notes in his journal on the 26th of that month, that the Duke of Buccleugh arrived in Paris that day from Spa along with the Earl and Countess of Fife; but this must be a mistake, for Horace Walpole, who was also in Paris that autumn, writes on the 5th of December that the Duke was then expected to arrive in the following week, and as Walpole was staying in the hotel where the Duke and Smith stayed during their residence in that city--the Hotel du Parc Royal in the Faubourg de St. Germain--he probably wrote from authentic information about the engagement of their rooms. It may be taken, therefore, that they arrived in Paris about the middle of December, just in time to have a week or two with Hume before he finally left Paris for London with Rousseau on the 3rd of January 1766. Hume had been looking for Smith ever since midsummer. As far back as the 5th of September he wrote, "I have been looking for you every day these three months," but that expectation was probably founded on reports from Abbé Colbert, for Smith himself does not seem to have written Hume since the previous October, except the short note introducing Mr. Urquhart. At any rate in this letter of September 1765 Hume, as if in reply to Smith's account of his pupil's improvement in his letter of October 1764, says, "Your satisfaction in your pupil gives me equal satisfaction." It is no doubt possible that Smith may have written letters in the interval which have been lost, but he had clearly written none for the previous three months, and it is most probable, with his general aversion to writing, that he wrote none for the four or five months before that. Hume's own object in breaking the long silence is, in the first place, to inform him that, having lost his place at the Embassy through the translation of his chief to the Lord-Lieutenancy of Ireland, he should be obliged to return to England in October before Smith's arrival in Paris; and in the next, to consult him on a new perplexity that was distressing him, whether he should not come back to Paris and spend the remainder of his days there. In compensation for the loss of his place, he had obtained a pension of £900 a year, without office or duty of any kind--"opulence and liberty," as he calls it. But opulence and liberty brought their own cares, and he was rent with temptations to belong to different nations. "As a new vexation to temper my good fortune," he writes to Smith, "I am in much perplexity about fixing the place of my future abode for life. Paris is the most agreeable town in Europe, and suits me best, but it is a foreign country. London is the capital of my own country, but it never pleased me much. Letters are there held in no honour; Scotsmen are hated; superstition and ignorance gain ground daily. Edinburgh has many objections and many allurements. My present mind this forenoon, the 5th of September, is to return to France. I am much press'd also to accept of offers which would contribute to my agreeable living, but might encroach on my independence by making me enter into engagements with Princes and great lords and ladies. Pray give me your judgment."[159] Events soon settled the question for him. He was appointed Under Secretary of State in London by Lord Hertford's brother, General Conway, and left Paris, as I have just said, early in January 1766. Rousseau had been in Paris since the 17th of December waiting to accompany Hume to England, and Smith must no doubt have met Rousseau occasionally with Hume during that last fortnight of 1765, though there is no actual evidence that he did. Before leaving, moreover, Hume would have time to introduce his friend to the famous men of Paris itself, and to initiate him into those literary and fashionable circles in which he had moved like a demigod for the preceding two years. The philosophe was then king in Paris, and Hume was king of the philosophes, and everything that was great in court or salon fell down and did him obeisance. "Here," he tells Robertson, "I feed on ambrosia, drink nothing but nectar, breathe incense only, and walk on flowers. Every one I meet, and especially every woman, would consider themselves as failing in the most indispensable duty if they did not favour me with a lengthy and ingenious discourse on my celebrity." Hume could, therefore, open to his friend every door in Paris that was worth entering, but Smith's own name was also sufficiently known and esteemed, at least among men of letters, in France to secure to him a cordial welcome for his own sake. _The Theory of Moral Sentiments_ had been translated, at the suggestion of Baron d'Holbach, by E. Dous, and the translation had appeared in 1764 under the title of _Métaphysique de l'Ame_. It was unfortunately a very bad translation, for which Grimm makes the curious apology that it was impossible to render the ideas of metaphysics in a foreign language as you could render the images of poetry, because every nation had its own abstract ideas.[160] But though the book got probably little impetus from this translation, it had been considerably read in the original by men of letters when it first came out, and many of them had then formed, as Abbé Morellet says he did, the highest idea of Smith's sagacity and depth, and were prepared to meet the author with much interest. Smith went more into society in the few months he resided in Paris than at any other period of his life. He was a regular guest in almost all the famous literary salons of that time--Baron d'Holbach's, Helvetius', Madame de Geoffrin's, Comtesse de Boufflers', Mademoiselle l'Espinasse's, and probably Madame Necker's. Our information about his doings is of course meagre, but there is one week in July 1766 in which we happen to have his name mentioned frequently in the course of the correspondence between Hume and his Paris friends regarding the quarrel with Rousseau, and during that week Smith was on the 21st at Mademoiselle l'Espinasse's, on the 25th at Comtesse de Boufflers', and on the 27th at Baron d'Holbach's, where he had some conversation with Turgot. He was a constant visitor at Madame Riccoboni the novelist's. He attended the meetings of the new economist sect in the apartments of Dr. Quesnay, and though the economic dinners of the elder Mirabeau, the "Friend of Men," were not begun for a year after, he no doubt visited the Marquis, as we know he visited other members of the fraternity. He went to Compiègne when the Court removed to Compiègne, made frequent excursions to interesting places within reach, and is always seen with troops of friends about him. Many of these were Englishmen, for after their long exclusion from Paris during the Seven Years war, Englishmen had begun to pour into the city, and the Hotel du Parc Royal, where Smith lived, was generally full of English guests. Among others who were there, as I have just mentioned, was Horace Walpole, who remained on till Easter, and with whom Smith seems to have become well acquainted, for in writing Hume in July he asks to be specially remembered to Mr. Walpole. So much has been written about the literary salons of Paris in last century that it is unnecessary to do more here than describe Smith's connection with them. The salon we happen to hear most of his frequenting is the salon of the Comtesse de Boufflers-Rouvel, but that is due to the simple circumstance that the hostess was an assiduous correspondent of David Hume. She was mistress to the Prince de Conti, but ties of that character, if permanent, derogated nothing from a lady's position in Paris at that period. Abbé Morellet, who was a constant guest at her house, even states that this connection of hers with a prince of the blood, though illicit, really enhanced rather than diminished her consideration in society, and her receptions were attended by all the rank, fashion, and learning of the city. The Comtesse was very fond of entertaining English guests, for she spoke our language well, and had been greatly pleased with the civilities she had received during her then recent visit to England in 1763. Smith was not long in Paris till he made her acquaintance, and received a very hearty welcome for the love of Hume. She began to read his book, moreover, and it became eventually such a favourite with her that she had thoughts of translating it. Hume writes to her from Wootton on the 22nd of March 1766: "I am glad you have taken my friend Smith under your protection. You will find him a man of true merit, though perhaps his sedentary recluse life may have hurt his air and appearance as a man of the world." The Comtesse writes Hume on the 6th of May: "I think I told you that I have made the acquaintance of Mr. Smith, and that for the love of you I had given him a very hearty welcome. I am now reading his _Theory of Moral Sentiments_. I am not very far advanced with it yet, but I believe it will please me." And again on the 25th of July, in the same year, when Hume's quarrel with Rousseau was raging, she appends to a letter to Hume on that subject a few words about Smith, who had apparently called upon her just as she had finished it: "I entreated your friend Mr. Smith to call upon me. He has just this moment left me. I have read my letter to him. He, like myself, is apprehensive that you have been deceived in the warmth of so just a resentment. He begs of you to read over again the letter to Mr. Conway. It does not appear that he (Rousseau) refuses the pension, nor that he desires it to be made public."[161] The _Theory of Moral Sentiments_, which she had then begun to read, grew more and more in favour with her, and a few years after this--in 1770--when the two sons of Smith's friend, Sir Gilbert Elliot, visited her, they found her at her studies in her bedroom, and talking of translating the book, if she had time, because it contained such just ideas about sympathy. She added that the book had come into great vogue in France, and that Smith's doctrine of sympathy bade fair to supplant David Hume's immaterialism as the fashionable opinion, especially with the ladies.[162] The vogue would probably be aided by Smith's personal introduction into French literary circles, but evidence of its extent is found in the fact that although one French translation of the work had already appeared, three different persons were then preparing or contemplating another--the Abbé Blavet, who actually published his; the Due de la Rochefoucauld, who discontinued his labour when he found himself forestalled by the Abbé; and the Comtesse de Boufflers who perhaps did little more than entertain the design. The best translation was published some years after by another lady, the widow of Condorcet. The Baron d'Holbach's weekly or bi-weekly dinners, at one of which it has been mentioned Smith had a conversation with Turgot, were, as L. Blanc has said, the regular states-general of philosophy. The usual guests were the philosophes and encyclopedists and men of letters--Diderot, Marmontel, Raynal, Galiani. The conversation ran largely towards metaphysics and theology, and, as Morellet, who was often there, states, the boldest theories were propounded, and things spoken which might well call down fire from heaven. It was there that Hume observed he had neither seen an atheist, nor did he believe one existed, and was informed by his host in reply, "You have been a little unfortunate; you are here at table with seventeen for the first time." Morellet mentions that it was at the table of Helvetius, the philosopher, he himself first met Smith. Helvetius was a retired farmer-general of the taxes, who had grown rich without practising extortion, and instead of remaining a bachelor, as Smith says other farmers-general in France did, because no gentlewoman would marry them, and they were too proud to marry anybody else, he had married a pretty and clever wife, an early friend of Turgot's, who helped to make his Tuesday dinners among the most agreeable entertainments in Paris. He had recently returned from a long sojourn in England, so enchanted with both country and people that d'Holbach, who could find nothing to praise in either, declared he could really have seen nothing in England all the time except the persecution for heresy which he had shortly before suffered in France, and would have escaped in our freer air; and he was always very hospitable to English celebrities, so that it may be inferred that Smith enjoyed many opportunities of conversation with this versatile and philosophical financier during his stay in Paris. Morellet, whose acquaintance Smith made at Helvetius' house, became one of his fastest friends in France, and on leaving Paris Smith gave him for a keepsake his own pocket-book,--a very pretty English-made pocket-book, says the Abbé, which "has served me these twenty years." Morellet, besides being an advanced economist, whose views ran in sympathy with Smith's own, was the most delightful of companions, uniting with strong sense and a deep love of the right an unfailing play of irony and fun, and ever ready, as Fanny Burney found him still at eighty-five, to sing his own songs for the entertainment of his friends. The Abbé was a metaphysician as well as an economist, but, according to his account of his conversations with Smith, they seem to have discussed mainly economic subjects--"the theory of commerce," he says, "banking, public credit, and various points in the great work which Smith was then meditating,"[163] _i.e._ the _Wealth of Nations_. This book had therefore by that time taken shape so far that the author made his Paris friends aware of his occupation upon it, and discussed with them definite points in the scheme of doctrine he was unfolding. Morellet formed a very just estimate of him. "I regard him still," he says, "as one of the men who have made the most complete observations and analyses on all questions he treated of," and he gave the best proof of his high opinion by writing a translation of the _Wealth of Nations_ himself. Smith would no doubt derive some assistance towards making his observations and analyses more complete from the different lights in which the matters under consideration would be naturally placed in the course of discussions with men like Morellet and his friends; but whatever others have thought, Morellet at least sets up no claim, either on his own behalf or on behalf of his very old and intimate college friend Turgot, or of any other of the French economists, of having influenced or supplied any of Smith's ideas. The Scotch inquirer had been long working on the same lines as his French colleagues, and Morellet seems to have thought him, when they first met, as he thought him still, when he wrote those memoirs, as being more complete in his observations and analyses than the others. A frequent resort of Smith in Paris was the salon of Mademoiselle de l'Espinasse, which differed from the others by the greater variety of the guests and by the presence of ladies. The hostess--according to Hume, one of the most sensible women in Paris--had long been Madame du Deffand's principal assistant in the management of her famous salon, but having been dismissed in 1764 for entertaining Turgot and D'Alembert on her own account without permission, she set up a rival salon of her own on improved principles, with the zealous help of her two eminent friends; and to her unpretending apartments ambassadors, princesses, marshals of France, and financiers came, and met with men of letters like Grimm, Condillac, and Gibbon. D'Alembert indeed lived in the house, having come there to be nursed through an illness and remaining on afterwards, and as D'Alembert was one of Smith's chief friends in Paris, his house was naturally one of the latter's chief resorts. Here, moreover, he often met Turgot, as indeed he did everywhere he went, and of all the friends he met in France there was none in whose society he took more pleasure, or for whose mind and character he formed a profounder admiration, than that great thinker and statesman. If his conversation with Morellet ran mainly on political and economic subjects, it would most probably run even more largely on such subjects with Turgot, for they were both at the moment busy writing their most important works on those subjects. Turgot's _Formation and Distribution of Wealth_ was written in 1766, though it was only published three years later in the _Éphémérides du Citoyen_; and it cannot, I think, be doubted that the ideas and theories with which his mind was then boiling must have been the subject of discussion again and again in the course of his numerous conversations with Smith. So also if Smith brought out various points in the work he was undertaking for discussion with Morellet, he may reasonably be inferred to have done the same with Morellet's greater friend Turgot, and all this would have been greatly to their mutual advantage. No vestiges of their intercourse, however, remain, though some critics profess to see its results writ very large on the face of their writings. Professor Thorold Rogers thinks the influences of Turgot's reasoning on Smith's mind to be easily perceptible to any reader of the _Formation and Distribution of Wealth_ and of the _Wealth of Nations_. Dupont de Nemours once went so far as to say that whatever was true in Smith was borrowed from Turgot, and whatever was not borrowed from Turgot was not true; but he afterwards retracted that absurdly-sweeping allegation, and confessed that he had made it before he was able to read English; while Leon Say thinks Turgot owed much of his philosophy to Smith, and Smith owed much of his economics to Turgot.[164] Questions of literary obligation are often difficult to settle. Two contemporary thinkers, dealing with the same subject under the same general influences and tendencies of the time, may think nearly alike even without any manner of personal intercommunication, and the idea of natural liberty of trade, in which the main resemblance between the writers in the present case is supposed to occur, was already in the ground, and sprouting up here and there before either of them wrote at all. Smith's position on that subject, moreover, is so much more solid, balanced, and moderate than Turgot's, that it is different in positive character; the extremer form of the doctrine taught by Turgot appears to have been taught also by Smith in earlier years and abandoned. At least the fragment published by Stewart of Smith's Society paper of 1755--eleven years before Turgot wrote his book or saw Smith--proclaims individualism of the extremer form, and intimates that he had taught the same views in Edinburgh in 1750. Smith had thus been teaching free trade many years before he met Turgot, and teaching it in Turgot's own form; he had converted many of the merchants of Glasgow to it and a future Prime Minister of England; he had probably, moreover, thought out the main truths of the work he was even then busy upon. He was therefore in a position to meet Turgot on equal terms, and give full value for anything he might take, and if obligations must needs be assessed and the balance adjusted, who shall say whether Smith owes most to the conversation of Turgot or Turgot owes most to the conversation of Smith? The state of the exchange cannot be determined from mere priority of publication; no other means of determining it exist, and it is of no great moment to determine it at all. Turgot and Smith are said--on authority which cannot be altogether disregarded, Condorcet, the biographer of Turgot--to have continued their economic discussions by correspondence after Smith returned to this country; but though every search has been made for this correspondence, as Dugald Stewart informs us, no trace of anything of the kind was ever discovered on either side of the Channel, and Smith's friends never heard him allude to such a thing. "It is scarcely to be supposed," says Stewart, "that Mr. Smith would destroy the letters of such a correspondent as M. Turgot, and still less probable that such an intercourse was carried on between them without the knowledge of Mr. Smith's friends. From some inquiries that have been made at Paris by a gentleman of this society[165] since Smith's death, I have reason to believe that no evidence of the correspondence exists among the papers of M. Turgot, and that the whole story has taken its rise from a report suggested by the knowledge of their former intimacy."[166] Some of Hume's letters to Turgot--one from this year 1766, combating among other things Turgot's principle of the single tax on the net product of the land--still exist among the Turgot family archives, but none from Smith, for Leon Say examined those archives a few years ago with this purpose among others expressly in view. An occasional letter, however, certainly did pass between them, for, as Smith himself mentions in a letter which will appear in a subsequent chapter, it was "by the particular favour of M. Turgot" that he received the copy of the _Mémoires concernant les Impositions_, which he quotes so often in the _Wealth of Nations_. This book was not printed when he was in France, and as it needed much influence to get a copy of it, his was most probably got after Turgot became Controller-General of the Finances in 1774. But in any case it would involve the exchange of letters. Smith, with all his admiration for Turgot, thought him too simple-hearted for a practical statesman, too prone, as noble natures often are, to underrate the selfishness, stupidity, and prejudice that prevail in the world and resist the course of just and rational reform. He described Turgot to Samuel Rogers as an excellent person, very honest and well-meaning, but so unacquainted with the world and human nature that it was a maxim with him, as he had himself told David Hume, that whatever is right may be done.[167] Smith would deny the name of statesman altogether to the politician who did not make it his aim to establish the right, or, in other words, had no public ideal; such a man is only "that crafty and insidious animal vulgarly termed a statesman." But he insists that the truly wise statesman in pressing his ideal must always practise considerable accommodation. If he cannot carry the right he will not disdain to ameliorate the wrong, but, "like Solon, when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear."[168] Turgot made too little account, he thought, of the resisting power of vested interests and confirmed habits. He was too optimist, and the peculiarity attaches to his theoretical as well as his practical work. Smith himself was prone rather to the contrary error of overrating the resisting power of interests and prejudices. If Turgot was too sanguine when he told the king that popular education would in ten years change the people past all recognition, Smith was too incredulous when he despaired of the ultimate realisation of slave emancipation and free trade; and under a biographical aspect, it is curious to find the man who has spent his life in the practical business of the world taking the more enthusiastic view we expect from the recluse, and the man who has spent his life in his library taking the more critical and measured view we expect from the man of the world. Another statesman whom Smith knew well in Paris was Necker. His wife had very possibly begun by this time her rather austere salon, where free-thinking was strictly tabooed, and Morellet, her right-hand man in the entertainment of the guests, confesses the restraint was really irksome; and if she had, Morellet would probably have brought Smith there. But anyhow Sir James Mackintosh, who had means of hearing about Smith from competent sources, states explicitly that he was upon intimate terms with Necker during his residence in the French capital, that he formed only a poor opinion of that minister's abilities, and that he used to predict the fall of his political reputation the moment his head was put to any real proof, always saying of him with emphasis, "He is a mere man of detail."[169] Smith was not always lucky in his predictions, but here for once he was right. While Smith was frequenting these various literary and philosophical salons they were all thrown into a state of unusual commotion by the famous quarrel between Rousseau and Hume. The world has long since ceased to take any interest in that quarrel, having assured itself that it all originated in the suspicions of Rousseau's insane fancy, but during the whole summer of 1766 it filled column after column of the English and continental newspapers, and it occupied much of the attention of Smith and the other friends of Hume in Paris. It will be remembered that when Rousseau was expelled from Switzerland, Hume, who was an extravagant admirer of his, offered to find him a home in England, and on the offer being accepted, brought him over to this country in January 1766. Hume first found quarters for him at Chiswick, but the capricious philosopher would not live at Chiswick because it was too near town. Hume then got him a gentleman's house in the Peak of Derby, but Rousseau would not enter it unless the owner agreed to take board. Hume induced the owner to gratify even this whim, and Rousseau departed and established himself comfortably at Wootton in the Peak of Derby. Hume next procured for him a pension of £100 a year from the king. Rousseau would not touch it unless it were kept secret; the king agreed to keep it secret. Rousseau then would not have it unless it were made public; the king again agreed to meet his whim. But the more Hume did for him the more Rousseau suspected the sincerity of his motives, and used first to assail him with the most ridiculous accusations, and then fall on his neck and implore forgiveness for ever doubting him. But at last, on the 23rd of June, in reply to Hume's note intimating the king's remission of the condition of secrecy, and the consequent removal of every obstacle to the acceptance of the pension, Rousseau gave way entirely to the evil spirit that haunted him, and wrote Hume the notorious letter, declaring that his horrible designs were at last found out. Hume lost no time in going with his troubles to Smith, and asking him to lay the true state of the case before their Paris friends. To that letter Smith wrote the following reply:-- PARIS, _6th July 1766_. MY DEAR FRIEND--I am thoroughly convinced that Rousseau is as great a rascal as you and as every man here believe him to be. Yet let me beg of you not to think of publishing anything to the world upon the very great impertinence which he has been guilty of. By refusing the pension which you had the goodness to solicit for him with his own consent, he may have thrown, by the baseness of his proceedings, a little ridicule upon you in the eyes of the court and the ministry. Stand this ridicule; expose his brutal letter, but without giving it out of your own hand, so that it may never be printed, and, if you can, laugh at yourself, and I will pawn my life that before three weeks are at an end this little affair which at present gives you so much uneasiness shall be understood to do you as much honour as anything that has ever happened to you. By endeavouring to unmask before the public this hypocritical pedant, you run the risk of disturbing the tranquillity of your whole life. By leaving him alone he cannot give you a fortnight's uneasiness. To write against him is, you may depend upon it, the very thing he wishes you to do. He is in danger of falling into obscurity in England, and he hopes to make himself considerable by provoking an illustrious adversary. He will have a great party--the Church, the Whigs, the Jacobites, the whole wise English nation--who will love to mortify a Scotchman, and to applaud a man who has refused a pension from the king. It is not unlikely, too, that they may pay him very well for having refused it, and that even he may have had in view this compensation. Your whole friends here wish you not to write,--the Baron, D'Alembert, Madame Riccoboni, Mademoiselle Rianecourt, M. Turgot, etc. etc. M. Turgot, a friend every way worthy of you, desired me to recommend this advice to you in a particular manner as his most earnest entreaty and opinion. He and I are both afraid that you are surrounded with evil counsellors, and that the advice of your English _literati_, who are themselves accustomed to publishing all their little gossiping stories in newspapers, may have too much influence upon you. Remember me to Mr. Walpole, and believe me, etc. P.S.--Make my apology to Millar for not having yet answered his last very kind letter. I am preparing the answer to it, which he will certainly receive by next post. Remember me to Mrs. Millar. Do you ever see Mr. Townshend?[170] The deep love of tranquillity this letter breathes, the dislike of publicity as a snare fatal to future quiet, the contempt for the petty vanity that makes men of letters run into print with their little personal affairs, as if they were of moment to anybody but themselves, are all very characteristic of Smith's philosophic temper of mind; and there is also--what appears on other occasions as well as this in the intercourse of the two philosophers--a certain note of affectionate anxiety on the part of the younger and graver philosopher towards the elder as towards a man of less weight of natural character and experience, and perhaps less of the wisdom of this world, than himself. Smith seems to have shown Hume's letter to their common friends in Paris, and while deeply interested, as was only natural, in the quarrel, they with one consent took Hume's side, the only possible view of the transaction. The subject continued to furnish matter of conversation and conference among Hume's French literary friends during the whole time of Smith's residence in Paris. Hume sent Smith another letter a little later on in the month of July, which he asked him specially to show to D'Alembert. This Smith did on the 21 st, when he met D'Alembert at dinner at Mademoiselle de l'Espinasse's, in company with Turgot, Marmontel, Roux, Morellet, Saurin, and Duclos; and on the same evening D'Alembert wrote Hume that he had just had the honour of seeing Mr. Smith, who had shown him the letter he had received, and that they had talked much together about Hume and his affairs. Apparently Smith's objections to Hume publishing anything on the quarrel were now overcome; at all events, the result of this consultation of Hume's French friends was to advise publication; and accordingly a week or two later Hume sent on a complete narrative of his relations with Rousseau, together with the whole correspondence from first to last, to D'Alembert, with full permission to make any use of it he thought best, and he wrote Smith at the same time asking him to go and get a sight of it. "Pray tell me," he adds, "your judgment of my work, if it deserves the name. Tell D'Alembert I make him absolute master to retrench or alter what he thinks proper in order to suit it to the latitude of Paris."[171] On the 27th of July Turgot writes Hume, mentioning that he had that day met Smith at Baron d'Holbach's, and they had discussed the Rousseau affair together. Smith had told him of the letter from Rousseau to General Conway, which he had been shown on the 25th by the Comtesse de Boufflers, and had repeated to him the same interpretation of that letter which he had already expressed to the Comtesse, viz. that Rousseau had not made the secrecy a ground for refusing the pension, but merely regretted that that condition made it impossible for him adequately to show his gratitude. Smith was thus inclined to give Rousseau the benefit of a better construction when a better construction was possible, but Hume writes Turgot on the 5th of August that Smith was quite wrong in that supposition. One of those two letters of Smith's on the Rousseau affair mentions the name of Madame Riccoboni among those of Hume's friends with whom he had been in communication on the subject, and Madame Riccoboni about the same date writes Garrick that Smith and Changuion, the English ambassador's private secretary, were her two great confidants on the business of this famous quarrel. Madame Riccoboni had been a popular actress, but giving up the stage for letters, had become the most popular novelist in France. Her _Letters of Fanny Butler_ and her _History of Miss Jenny_ were dividing the attention of Paris with the novels of our own Richardson; and Smith, in the 1790 edition of his _Theory_, brackets her with Racine, Voltaire, and Richardson as instructors in "the refinements and delicacies of love and friendship." She was an effusive admirer of Smith, as, indeed, she was of Changuion, and of that _bel Anglais_ Richard Burke, and of Garrick himself;--"you are," she writes the player, "the dearling of my heart";--and when Smith was returning home from France, she gave him the following letter of introduction to Garrick:-- Je suis bien vaine, my dear Mr. Garrick, de pouvoir vous donner ce que je perds avec un regret trés-vif, le plaisir de voir Mr. Smith. Ce charming philosopher vous dira combien il a d'esprit, car je le défie de parler sans en montrer. Je sui vraiment fâchée que la politesse m'oblige à lui donner ma lettre ouverte: cet usage établi retient mon coeur tout prêt à lui rendre justice, mais sa modestie est aussi grande que son mérite, et je craindrois que la plus simple vérité ne parût à ses yeux une grosse flaterie; je puis vous dire de lui, ce qu'il disoit un jour d'un autre--le métier de cet homme-là est d'être aimable. J'ajouterai,--et de mériter l'estime de tous ceux qui ont le bonheur de le connoitre. Oh ces Ecossois! ces chiens d'Ecossois! ils viennent me plaire et m'affliger. Je suis comme ces folles jeunes filles qui écoutent un amant sans penser an regret, toujours voisin du plaisir. Grondez-moi, battez-moi, tuez-moi! mais j'aime Mr. Smith, je l'aime beaucoup. Je voudrois que le diable emportât tous nos gens de lettres, tous nos philosophes, et qu'il me rapportât Mr. Smith. Les hommes supérieurs se cherchent. Rempli d'estime pour Mr. Garrick, désirant le voir et l'entretenir, Mr. Smith a voulu être introduit par moi. Il me flate infiniment par cette préférence, bien des gens se mélent de présenter un ami à un autre ami, peu sont comme moi dans le cas d'être sûre de la reconnoissance des tous deux. Adieu, mon très-aimable et très-paresseux ami. Embrassez pour moi vôtre gracieuse compagne. La mienne vous assure l'un et l'autre de sa plus tendre amitié. RICCOBONI.[172] Not content with this letter of recommendation which she gave to Smith to deliver, Madame Riccoboni at the same time sent Garrick another through the post, and shows the sincerity of the feelings of high esteem she had expressed in the open letter by expressing them again quite as decisively in the closed one:-- _6 Octobre._ Aujourd'huy je vous écris uniquement pour vous prévenir sur une visite que vous recevrez à Londres. Mr. Smith, un Ecossois, homme d'un très grand mérite, aussi distingué par son bon naturel, par la douceur de son caractère que par son esprit et son sçavoir, me demande une lettre pour vous. Vous verrez un philosophe moral et pratique; gay, riant, à cent lieues de la pédanterie des nôtres. Il vous estime beaucoup et désire vous connoître particulièrement. Donnez son nom à votre porte, je vous en prie, vous perdriez beaucoup à ne pas le voir, et je serois désolée de ne pas recevoir de lui un détail du bon accueil que vous lui aurez fait.... Donnez son nom à votre porte, je vous le répète. S'il ne vous voit pas, je vous étrangle.[173] Smith had apparently begged of her also a letter of introduction to R. Burke, and she wrote him one, but he went away without it; as she says to Garrick, in a letter of 3rd January 1767: "Ma bête de philosophe est partie sans songer à la prendre." Nor apparently had Smith as yet delivered her letter to Garrick, for she asks, "Vous ne l'avez pas encore vu Mr. Smith? c'est la plus distraite créature! mais c'est une des plus aimables. Je l'aime beaucoup et je l'estime encore d'avantage."[174] A few weeks later, on the 29th of January, she again returns to the subject of Smith, asking Garrick whether he had yet seen him, whether he was in London or had delivered her letter, and adding, "C'est un homme charmant, n'est-il pas?"[175] Madame Riccoboni was not the only Frenchwoman who was touched with Smith's personal charms; we hear of another, a marquise, "a woman too of talents and wit," who actually fell in love with him. It was during an excursion Smith made from Paris to Abbeville, with the Duke of Buccleugh and several other English noblemen and a certain Captain Lloyd, a retired officer, who was afterwards a friend, perhaps a patient, of Dr. Currie, the author of the _Life of Burns_, and told the doctor this and many other anecdotes about the economist. Lloyd was, according to Currie, a most interesting and accomplished man, and his acquaintance with Smith was one of great intimacy. The party seem to have stayed some days at Abbeville--to visit Crecy, no doubt, like patriotic Englishmen, and this French marquise was stopping at the same hotel. She had just come from Paris, where she found all the world talking about Hume, and having heard that Smith was Hume's particular friend and almost as great a philosopher as he, she was bent on making so famous a conquest, but after many persistent efforts was obliged eventually to abandon the attempt. Her philosopher could not endure her, nor could he--and this greatly amused his own party--conceal his embarrassment; but it was not philosophy altogether that steeled his breast. The truth, according to Lloyd, was that the philosopher was deeply in love with another, an English lady, who was also stopping in Abbeville at the time. Of all Currie heard concerning Smith from Captain Lloyd this is the only thing he has chosen to record, and slight though it is, it contributes a touch of nature to that more personal aspect of Smith's life of which we have least knowledge. Stewart makes mention of an attachment which Smith was known to have cherished for several years in the early part of his life to a young lady of great beauty and accomplishment, whom Stewart had himself seen when she was past eighty, but "still retained evident traces of her former beauty," while "the powers of her understanding and the gaiety of her temper seemed to have suffered nothing from the hand of time." Nobody ever knew what prevented their union, or how far Smith's addresses were favourably received, but she never married any more than he. Stewart says that "after this disappointment he laid aside all thoughts of marriage"; but the Abbeville attachment seems to have been a different one from this and a later. While in Paris Smith was a very steady playgoer. He was always a great admirer of the French dramatists, and now enjoyed very much seeing their plays actually represented on the stage, and discussing them afterwards, we may be sure, with an expert like Madame Riccoboni. Speaking of his admiration for the great French dramatists, Dugald Stewart states that "this admiration (resulting originally from the general character of his taste, which delighted more to remark that pliancy of genius which accommodates itself to general rules than to wonder at the bolder flights of an undisciplined imagination) was increased to a great degree when he saw the beauties that had struck him in the closet heightened by the utmost perfection of theatrical exhibition."[176] The French theatre, indeed, gave him much material for reflection. In his later years his thoughts and his conversation often recurred to the philosophy of the imitative arts. He meant had he lived to have written a book on the subject; he has actually left us a single essay, one of the most finished pieces of work he ever did; and among his friends he was very fond in those days of speaking and theorising on that topic, and supporting his conclusions by illustrations from his wide reading and his observation of life. These illustrations seem to have been drawn frequently from his experiences of the French theatre. The Earl of Buchan says that Smith had no ear for music, but there are few things he seems to have nevertheless enjoyed better than the opera, both serious and comic. He thought the "sprightly airs" of the comic opera, though a more "temperate joy" than "the scenes of the common comedy," were still a "most delicious" one.'[177] "They do not make us laugh so loud, but they make us smile more frequently." And he held the strongest opinion that music was always on virtue's side, for he says the only musical passions are the good ones, the bad and unsocial passions being, in his view, essentially unmelodious. But he thought scenery was much abused on the French operatic stage. "In the French operas not only thunder and lightning, storms and tempests, are commonly represented in the ridiculous manner above mentioned, but all the marvellous, all the supernatural of epic poetry, all the metamorphoses of mythology, all the wonders of witchcraft and magic, everything that is most unfit to be represented upon the stage, are every day exhibited with the most complete approbation and applause of that ingenious nation."[178] Amid all this gaiety of salons and playhouses Smith found a graver retreat with the philanthropic sect of the economists in the apartments of the king's physician, Dr. Quesnay, in Paris and Versailles. Dupont de Nemours told J.B. Say that he had often met Smith at their little meetings, and that they looked on him as a judicious and simple man, and apparently nothing more, for, he adds, Smith had not at that time shown the stuff he was made of.[179] If they did not then recognise his paramount capacity as they afterwards did, there were some things about his opinions which Dupont thought they learnt better then than they could from the great work in which he subsequently expounded them. In a note to one of Turgot's works, of which he was editor, Dupont appeals from an opinion expressed, or understood to be expressed, by Smith in his published writings, to the opinion on the same subject which he used to hear from Smith's own lips in the unreserved intercourse of private life. "Smith at liberty," he says, "Smith in his own room or in that of a friend, as I have seen him when we were fellow-disciples of M. Quesnay, would not have said that."[180] Though Smith met with them, and was indeed their very close scientific as well as personal associate, it is of course impossible, strictly speaking, to count him, as Dupont does, among the disciples of Quesnay. He was no more a disciple of Quesnay than Peter was a disciple of Paul, although, it is true, Paul wrote first. He neither agreed with all the creed of the French economists, nor did he acquire the articles he agreed with from the teaching of their master. He had been for sixteen years before he met them teaching the two principal truths which they set themselves to proclaim: (1) that the wealth of a country does not consist in its gold and silver, but in its stock of consumable commodities; and (2) that the true way of increasing it is not by conferring privileges or imposing restraints, but by assuring its producers a fair field and no favour. He had taught those truths in 1750, and Quesnay had not written anything bearing on them till 1756. Moreover, much in their system on which they laid most stress he has publicly repudiated. Still he speaks both of their system and of their master with a veneration which no disciple could easily surpass. He pronounces the system to be, "with all its imperfections, perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy," and the author of the system to be "ingenious and profound," "a man of the greatest simplicity and modesty, who was honoured by his disciples with a reverence not inferior to that of any of the ancient philosophers for the founders of their respective systems."[181] He might not, like the Marquis de Mirabeau, call Quesnay a greater than Socrates, or the _Economic Table_ a discovery equal to the invention of printing or of money, but he thought him so clearly the head of the economic inquirers of the world that he meant to have dedicated the _Wealth of Nations_ to Quesnay had the venerable French economist been alive at the time of its publication. Smith was therefore a very sympathetic associate of this new sect, though not a strict adherent. It may be well to explain in a word to the general reader that this sect were patriots and practical social and political reformers quite as much as theoretical economists. They believed the condition of the French people to have grown so bad as to be a grave danger to the State, and they preached their system as a revelation of the only way of salvation. They were too earnest for the Paris wits. Voltaire always sneered at them till he came to know Turgot. Grimm calls them "the pietists of philosophy," and Hume, bantering Morellet, wonders how a man like Turgot could herd with such cattle, "the most chimerical and the most arrogant that now exist since the annihilation of the Sorbonne." But they were grappling with living problems, and seeing into the real situation so much further than their contemporaries, that an historian like de Tocqueville thinks the best key to the Revolution is to be found in their writings. The malady of the age, they held, was the ever-increasing distress of the agricultural population. The great nobles, the financiers, the farmers-general, the monopolists, were very rich; but the agriculturists--the vast body of the people--were sinking into a hopeless impoverishment, for between tithes and heavy war taxes and farmer-generals' extortions, and the high rents which, to Turgot's despair, the smaller peasantry would persist in offering without reflecting in the least on the rise in their burdens,--between all these things, the net product of agriculture--what was left in the hands of the cultivator after all expenses were paid away--was getting less and less every year, and the ruin of the peasantry meant the ruin of the nation. "Poor peasants, poor kingdom," said they; "poor kingdom, poor king." And the remedy was plain: the net product of agriculture must somehow be made to rise instead of fall. They supported their contention with a certain erroneous theory that agriculture is the sole source of wealth, but the error made little practical difference to the argument, for agriculture is always a sufficiently important source of wealth to make its improvement a national concern. How then was the net product to be increased? By better methods of cultivation, by removal of legal and official interferences, and by lightening the public burdens through the abolition of all existing taxes and of the existing system of collecting them through farmers-general, and the institution instead of a single tax on the net product of the soil, to be collected directly by responsible officials. According to the reminiscences of strangers who happened to fall into their company, the talk of the economists always ran much on the net product and the single tax, for they believed the two great needs of the country were agricultural improvement and financial reform. When Quesnay was offered a farmer-generalship of the taxes for his son, he said, "No; let the welfare of my children be bound up with the public prosperity," and made his son a farmer of the land instead. In Quesnay's rooms in the palace of Versailles Smith would sometimes hear words that would sound very strange in the house of the king. Mercier de la Rivière, Quesnay's favourite disciple, while writing his book on the _Natural and Essential Order of Political Societies_, published in 1767, almost lived in Quesnay's apartments, discussing the work point by point with the master. The Marquis de Mirabeau mentions having seen him there six whole weeks running, "moulding and remoulding his work, and consequently denying father and mother" for the time. One day Madame du Hausset heard a memorable conversation there between these two economists. "This kingdom," observed Mirabeau, "is in a miserable state. There is neither energy in the nation nor money to serve in its place." "No," replied Mercier de la Rivière, counsellor of the Parliament of Paris and late Governor of Martinico, "it cannot be regenerated except by a conquest like that of China, or by a great internal convulsion; but woe to those who will be there then, for the French people does nothing by halves." The words made the little lady-in-waiting tremble, and she hurried out of the room; but M. de Marigny, brother of the king's mistress, who was also present, followed her, and bade her have no fear, for these were honest men, if a little chimerical, and they were even, he thought, on the right road, though they knew not when to stop and went past the goal.[182] The doctor's room was a little sanctuary of free speech pitched by an odd chance in the heart of a despotic court, but his loyalty was known to be as sterling as his patriotism, and Louis himself would come round and listen to his economic parables, and call him the king's thinker?-as indeed he was, for he was no believer in states-general or states-particular, he had no interest in court or party intrigues, and his thought was always for the power of the king as well as for the welfare of the people. Marmontel, who used to come to him feigning an interest in the net product and the single tax, merely, as he confesses, to secure the doctor's word with Madame de Pompadour about an appointment he wanted, writes that "while storms gathered and dispersed again underneath Quesnay's _entre-sol_, he wrought at his axioms and his calculations in rural economy as calmly and with as much indifference to the movements of the court as if he were a hundred leagues away. Below they discussed peace and war, the choice of generals, the dismissal of ministers, while we up in the entre-sol reasoned about agriculture and calculated the net product, or sometimes dined gaily with Diderot, D'Alembert, Duclos, Helvetius, Turgot, Buffon; and Madame de Pompadour, not being able to get that company of philosophers to descend into her salon, used to come up there herself to see them at table, and have a talk with them."[183] None of the famous men mentioned here were members of the sect except Turgot. The year 1766 was a year of exceptional activity in this economist camp. Turgot, as we have seen, was writing an important work, and Mercier de la Rivière another. The other members of the group were busy too, for they had just for the first time secured an organ in the press in the _Journal de l'Agriculture du Commerce et des Finances_, of which their youngest convert, Dupont de Nemours, was made editor in June 1765, and in which Quesnay himself wrote an article almost every month till Dupont's dismissal in November 1766. The Government, moreover, which had thrown Mirabeau into prison for his first book and had suppressed his second only a year or two before, now ceased from troubling, and gave even a certain official countenance to the _Journal de l'Agriculture_, for after the war it no longer shut its eyes to the distress that prevailed, and began to give an ear to remedies. They were making converts too, among others the Abbé Baudeau, who used to write them down in his journal, the _Éphémérides du Citoyen_, but now offered to make it their organ when they lost the _Journal de l'Agriculture_. They were thus in the first flush of their active propaganda, which in a year or two more made political economy, Grimm says, the _science de la mode_ in France, and won converts to the single tax among the crowned heads of Europe. Quesnay too had taken apartments in town in the house of a disciple to be nearer his friends for pushing the propaganda, so that Smith had especially abundant opportunities of seeing him and them that year. No memorial of all their intercourse, however, has survived except the slight and rather indefinite reminiscence of Dupont de Nemours, to which allusion has been made. Dupont remembers that Smith used to discuss with them a question, which they no doubt would be often discussing, for they were greatly interested in it,--the question of the effect upon the wages of labour of a tax upon the commodities consumed by the labourers; and he says that Smith, in the freedom of private intercourse with them, expressed quite a different opinion upon that subject from that which he delivered in the _Wealth of Nations_, with the fear of vested interests before his eyes. Dupont could not have read the _Wealth of Nations_ very carefully when he hinted this accusation of timidity before vested interests, for there was scarcely a vested interest existing at the time that has not incurred in its turn most vigorous censure in that work. But as the alleged difference amounts merely to this, that Smith in his book asserts a principle with a certain specific limitation to it which he used to assert in conversation without the limitation, it probably represents no real change of opinion, but only a difference between the more exact expositions of the book and the less exact expositions of conversation. The point was this. Smith held, with Dupont and his friends, that a direct tax on the wages of labour, like the French industrial _taille_, would, if the demand for labour and the price of provisions remained the same, have the effect of raising the wages of labour by the sum required to pay the tax. He held, again, with them that an indirect tax on the commodities consumed by the labourers would act in exactly the same way if the commodities taxed were necessaries of life, because a rise in the price of necessaries would imperil the labourer's ability to bring up his family. But what seemed new to Dupont was that Smith now in his book held that if the commodities taxed were luxuries, the tax would not act in that way. It would act as a sumptuary law. The labourer would merely spend less on such superfluities, and since this forced frugality would probably increase rather than diminish his ability to bring up a family, he would neither require nor obtain any rise of wages. The high tobacco duty in France and England and a recent rise of three shillings on the barrel of beer had no effect whatever on wages. That is what Dupont says Smith would not have contended in France. He would not have drawn this distinction between the taxation of a necessary and the taxation of a luxury, and he only drew it in his book to avert the clamour of offended interests, though against his real convictions. The imputation of dissimulation, though explicitly enough made, may be disregarded. The alternative of a real change of opinion is quite possible, inasmuch as the position Smith has actually reached on this question in his book is far from final or perfect; it is obvious at a glance that in a community such as he supposes, where the labourers are in the habit of consuming both necessaries and luxuries, a tax on necessaries would have exactly the same effect as he attributes to a tax on luxuries; it would force the labourer to give up some of his luxuries. But there might be no real change of opinion, and yet a good deal of apparent difference between the loose statements of a speaker in a language of which he had only imperfect command and his more complete and precise statements in a written book. Dupont, it may be added, seems to think that Smith in his talks with the French economists expressed much more unfavourable views of the inconveniences, changes, and general evils of the English system of taxation than would be gathered from the _Wealth of Nations_. Before Smith left France he had occasion, unhappily, to resort to Quesnay the physician as well as to Quesnay the economist. He had been in the habit while in Paris of taking his pupils for excursions to interesting places in the vicinity, as he had done from Toulouse, and in August 1766 they went to Compiègne to see the camp and the military evolutions which were to take place during the residence of the Court there. In Compiègne the Duke of Buccleugh took seriously ill of a fever,--the consequence of a fall from his horse while hunting, says his aunt, Lady Mary Coke,--and, as will be seen from the following letter, he was watched and nursed by his distinguished tutor with a care and devotion almost more than paternal. The letter is written to Charles Townshend, the Duke's step-father:-- COMPIÈGNE, _26th August 1766_. DEAR SIR--It is, you may believe, with the greatest concern that I find myself obliged to give you an account of a slight fever from which the Duke of Buccleugh is not yet entirely recovered, though it is this day very much abated. He came here to see the camp and to hunt with the King and the Court. On Thursday last he returned from hunting about seven at night very hungry, and ate heartily of a cold supper with a vast quantity of sallad, and drank some cold punch after it. This supper, it seems, disagreed with him. He had no appetite next day, but appeared well and hearty as usual. He found himself uneasy on the field and returned home before the rest of the company. He dined with my Lord George Lennox, and, as he tells me, ate heartily. He found himself very much fatigued after dinner and threw himself upon his servant's bed. He slept there about an hour, and awaked about eight at night in a good deal of disorder. He vomited, but not enough to relieve him. I found his pulse extremely quick. He went to bed immediately and drank some vinegar whey, quite confident that a night's rest and a sweat, his usual remedy, would relieve him. He slept little that night but sweat profusely. The moment I saw him next day (Sunday) I was sure he had a fever, and begged of him to send for a physician. He refused a long time, but at last, upon seeing me uneasy, consented. I sent for Quenay, first ordinary physician to the King. He sent me word he was ill. I then sent for Senac; he was ill likewise. I went to Quenay myself to beg that, notwithstanding his illness, which was not dangerous, he would come to see the Duke. He told me he was an old infirm man, whose attendance could not be depended on, and advised me as his friend to depend upon De la Saone, first physician to the Queen. I went to De la Saone. He was gone out, and was not expected home that night. I returned to Quenay, who followed me immediately to the Duke. It was by this time seven at night. The Duke was in the same profuse sweat which he had been in all day and all the preceding night. In this situation Quenay declared that it was improper to do anything till the sweat should be over. He only ordered him some cooling ptisane drink. Ouenay's illness made it impossible for him to return next day (Monday) and De la Saone has waited on the Duke ever since, to my entire satisfaction. On Monday he found the Duke's fever so moderate that he judged it unnecessary to bleed him.... To-day, Wednesday, upon finding some little extraordinary heat upon the Duke's skin in the morning, he proposed ordering a small quantity of blood to be taken from him at two o'clock, but upon returning at that hour he found him so very cool and easy that he judged it unnecessary. When a French physician judges bleeding unnecessary, you may be sure that the fever is not very violent. The Duke has never had the smallest headache nor any pain in any part of his body; he has good spirits; his head and his eye are both clear; he has no extraordinary redness in his face; his tongue is not more foul than in a common cold. There is some little quickness in his pulse, but it is soft, full, and regular. In short, there is no one bad symptom about him, only he has a fever and keeps his bed.... De la Saone imagines the whole illness owing to the indigestion of Thursday night. Some part of the undigested matter having got into his blood, the violent commotion which this had occasioned had burst, he supposes, some small vessel in his veins.... Depend upon hearing from me by every post till his perfect recovery; if any threatening symptom should appear I shall immediately despatch an express to you; so keep your mind as easy as possible. There is not the least probability that any such symptom ever will appear. I never stirr from his room from eight in the morning till ten at night, and watch for the smallest change that happens to him. I should sit by him all night too if the ridiculous, impertinent jealousy of Cook, who thinks my assiduity an encroachment upon his duty, would not be so much alarmed, as it gave some disturbance even to his master in his present illness. The King has inquired almost every day at his levée of my Lord George and of Mr. De la Saone concerning the Duke's illness. The Duke and Dutchess of Fitzjames, the Chevalier de Clermont, the Comte de Guerchy, etc. etc., together with the whole English nation here and at Paris, have expressed the greatest anxiety for his recovery. Remember me in the most respectful manner to Lady Dalkeith, and believe me to be with the greatest regard, dear sir, your most obliged and most humble servant, ADAM SMITH. COMPIÈGNE, _26th August 1766_. Wednesday, 5 o'clock afternoon.[184] Could there be a more pleasing exhibition of the thorough kindness of a manly heart than this picture of the great philosopher sitting day after day by the bedside of his pupil, watching eagerly every indication of change, and only consenting to leave the room for a time at night out of consideration for the silly jealousy of the valet, who thought the tutor's presence an invasion of his own rights? The Duke recovered and they returned to Paris. But while still at Compiègne they heard of a sad event that could not fail to shock them greatly, the death of their greatly esteemed young friend and fellow-traveller, Sir James Macdonald. "Were you and I together, dear Smith," writes Hume at this time, "we should shed tears at present for the death of poor Sir James Macdonald. We could not possibly have suffered a greater loss than in that valuable young man."[185] In this letter Hume had dropped a remark showing that he was still clinging to the idea which he had repeatedly mentioned to Smith of returning and making his home for the remainder of his days somewhere in France--in Paris, or "Toulouse, or Montauban, or some provincial town in the South of France, where"--to quote his words to Sir G. Elliot--"I shall spend contentedly the rest of my life with more money, under a finer sky and in better company than I was born to enjoy." Of this idea Smith strongly disapproved. He thought that Hume would find himself too old to transplant, and that he was being carried away by the great kindness and flatteries he had received in Paris into entertaining a plan which could never promote his happiness, because, in the first place, it would probably prove fatal to work, and in the next, it would certainly deprive him of the support of those old and rooted friendships which could not be replaced by the incense of an hour. For his own part, and with a view to his own future, Smith was of an entirely opposite mind. The contrast between the two friends in natural character stands out very strongly here. Smith had enjoyed his stay in France almost as much as Hume, and had been welcomed everywhere by the best men and women in the country with high respect, but now that the term of his tutorship is approaching its end, he longs passionately for home, feels that he has had his fill of travel, and says if he once gets among his old friends again, he will never wander more. This appears from a letter he wrote Millar, the bookseller, probably after his return from Compiègne, of which Millar sent the following extract to Hume: "Though I am very happy here, I long passionately to rejoin my old friends, and if I had once got fairly to your side of the water, I think I should never cross it again. Recommend the same sober way of thinking to Hume. He is light-headed, tell him, when he talks of coming to spend the remainder of his days here or in France. Remember me to him most affectionately."[186] His return, for which he was then looking with so much desire, came sooner than he anticipated, and came, unfortunately, with a cloud. His younger pupil, the Hon. Hew Campbell Scott, was assassinated in the streets of Paris, on the 18th of October 1766, in his nineteenth year;[187] and immediately thereafter they set out for London, bringing the remains of Mr. Scott along with them, and accompanied by Lord George Lennox, Hume's successor as Secretary of Legation. The London papers announce their arrival at Dover on the 1st of November. The tutorship, which ended with this melancholy event, was always remembered with great satisfaction and gratitude by the surviving pupil. "In October 1766," writes the Duke of Buccleugh to Dugald Stewart, "we returned to London, after having spent near three years together without the slightest disagreement or coolness, and, on my part, with every advantage that could be expected from the society of such a man. We continued to live in friendship till the hour of his death, and I shall always remain with the impression of having lost a friend whom I loved and respected, not only for his great talents, but for every private virtue." Smith's choice for this post of travelling tutor was thought in many quarters at the time to be a very strange choice. Shrewd old Dr. Carlyle thought it so strange that he professes to be quite unable as a man of the world to understand Charles Townshend making it, except "for his own glory of having sent an eminent Scotch philosopher to travel with the Duke."[188] He thought Smith had too much "probity and benevolence" in his own soul to suspect ill in another or check it, and that a man who seemed too absent to make his own way about could hardly be expected to look efficiently after the goings of another. "He was," says Carlyle, "the most absent man in company I ever knew," and "he appeared very unfit for the intercourse of the world as a travelling tutor."[189] Still Townshend's choice was thoroughly justified by the result, and Carlyle admits it, but thinks that was due less to the efficiency of the tutor than to the natural excellence of the pupil. And there is no doubt that Smith was exceptionally fortunate in his pupil. In his after life this Duke Henry took little part in politics, but he made himself singularly beloved among his countrymen by a long career filled with works of beneficence and patriotism, and brightened by that love of science which has for generations distinguished the house of Buccleuch. It may be true that with such a pupil Smith's natural defects would find little opportunity of causing trouble, but it seems certain, as I have before said, that these defects were habitually exaggerated by Smith's contemporaries, and Carlyle himself acknowledges that Smith's travels with the Duke cured him considerably of his fits of abstraction. This is confirmed by Ramsay of Ochtertyre, who says that Smith grew smarter during his stay abroad, and lost much of the awkwardness of manner he previously exhibited. Stewart is disposed to think, however, that the public have not the same reason to be satisfied with Smith's acceptance of this tutorship as either he himself or his pupil had, and that the world at large has been seriously the loser for it, because "it interrupted that studious leisure for which nature seemed to have designed him, and in which alone he could have hoped to accomplish those literary projects which had flattered the ambition of his youthful genius." Now it is, of course, idle to speculate on the things that might have been. Kant was never forty miles from Konigsberg, and had Smith remained in Glasgow all his days there is no reason to doubt he could have produced works of lasting importance. But it is a truism to say that the works would have been other and different from what we have. To a political philosopher foreign travel is an immense advantage, and there never was a country where graver or more interesting problems, both economic and constitutional, offered themselves for study than France in the latter half of last century, nor any political philosopher who enjoyed better opportunities than Smith of discussing such problems with the ablest and best-informed minds on the spot. Smith's residence in France, whatever it was to his pupil, must have been an invaluable education to himself, supplying him day after day with constant materials for fresh comparison and thought. Samuel Rogers was greatly struck with the difference between Smith and the historian Robertson. The conversation of Robertson, who, as we know, had never been out of his own country, was much more limited in its range of interest, but Smith's was the rich conversation of a man who had seen and known a great deal of the world. It does not appear that Smith suffered in France from any such want of literary leisure as Stewart speaks of, for he began writing a book in Toulouse because he had so little else to do, and he had not attempted anything of the kind in Glasgow, so far as we know, for five years; but, at all events, for the wealth of illustration which his new book exhibits, the variety of its points of view, the copiousness of its data drawn from personal observation, the world is greatly indebted to the author's residence abroad. And had Smith lived to finish his work on Government we should probably have had more results of his observation of France, but the _Wealth of Nations_ itself contains many. M'Culloch has expressed astonishment that for all his long stay in France Smith should have never perceived any foreshadowings of the coming Revolution, such as were visible even to a passing traveller like Smollett. But Smith was quite aware of all the gravities and possibilities of the situation, and occasionally gave expression to anticipations of vital change. He formed possibly a less gloomy view of the actual condition of the French people than he would have heard uttered in Quesnay's room at Versailles, because he always mentally compared the state of things he saw in France with the state of things he knew in Scotland, and though it was plain to him that France was not going forward so fast as Scotland, he thought the common opinion that it was going backward to be ill founded.[190] Then France was a much richer country, with a better soil and climate, and "better stocked," he says, "with all those things which it requires a long time to raise up and accumulate, such as great towns and convenient and well-built houses both in town and country."[191] In spite of these advantages, however, the common people in France were decidedly worse off than the common people of Scotland. The wages of labour were lower--the real wages--for the people evidently lived harder. Their dress and countenance showed it at once. "When you go from Scotland to England the difference which you may remark between the dress and countenance of the common people in the one country and in the other sufficiently indicates the difference in their condition. The contrast is still greater when you return from France." In England nobody was too poor to wear leather shoes; in Scotland even the lowest orders of men wore them, though the same orders of women still went about barefooted. But "in France they are necessaries neither to men nor to women; the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes and sometimes barefooted."[192] Another little circumstance struck him as a proof that the classes immediately above the rank of labourer were worse off in France than they were here. The taste for dressing yew-trees into the shape of pyramids and obelisks by "that very clumsy instrument of sculpture" the gardener's shears had gone out of fashion in this country, merely because it got too common, and was discarded by the rich and vain. The multitude of persons able to indulge the taste was sufficiently great to drive the custom out of fashion. In France, on the other hand, he found this custom still in good repute, "notwithstanding," he adds, "that inconstancy of fashion with which we sometimes reproach the natives of that country." The reason was that the number of people in that country able to indulge this taste was too few to deprive the custom of the requisite degree of rarity. "In France the condition of the inferior ranks of people is seldom so happy as it frequently is in England, and you will there seldom find even pyramids and obelisks of yew in the garden of a tallow-chandler. Such ornaments, not having in that country been degraded by their vulgarity, have not yet been excluded from the gardens of princes and great lords."[193] He discusses one great cause of the poorer condition of the French than of the English people. It was generally acknowledged, he says, that "the people of France was much more oppressed by taxation than the people of Great Britain"; and the oppression he found, by personal investigation, to be all due to bad taxes and bad methods of collecting them. The sum that reached the public treasury represented a much smaller burden per head of population than it did in this country. Smith calculated the public revenue of Great Britain to represent an assessment of about 25s. a head of population, and in 1765 and 1766, the years he was in France, according to the best, though, he admits, imperfect, accounts he could get of the matter, the whole sum passed into the French treasury would only represent an assessment of 12s. 6d. per head of the French population.[194] Taxation ought thus to be really lighter in France than in Great Britain, but it was made into a scourge by vicious modes of assessment and collection. Smith even suggested for France various moderate financial reforms, repealing some taxes, increasing others, making a third class uniform over the kingdom, and abolishing the farming system; but though these reforms would be sufficient to restore prosperity to a country with the resources of France, he had no hope of it being possible to carry them against the active opposition of individuals interested in maintaining things as they were. Smith was thus perfectly alive to the prevailing poverty and distress of the French population, to the oppression they suffered, to the extreme difficulty, the hopelessness even, of any improvement of their situation while the existing distribution of political forces continued, and was able to defeat all efforts at reform. Now from all this it was not very far to the idea of a political upheaval and a new distribution of political forces, and Smith saw tendencies abroad in that direction also. He told Professor Saint Fond in 1782 that the "Social Compact" would one day avenge Rousseau for all the persecutions he had suffered from the powers that were. FOOTNOTES: [159] _Hume MSS._, R.S.E. Partially published in Burton's _Life_. [160] _Correspondance Littéraire_, I. iv. 291. [161] _Burton's Letters of Eminent Persons to David Hume_, p. 238. [162] Lady Minto, _Memoirs of Hugh Elliot_, p. 13. [163] Morellet's _Mémoires_, i. 237. [164] Schelle, _Dupont de Nemours et les Physiocrates_, p. 159. [165] _i.e._ the Royal Society of Edinburgh, to whom Stewart first read his _Life of Smith_. [166] Stewart's _Works_, v. 47. [167] Clayden's _Early Life of Samuel Rogers_, p. 95. [168] _Theory of Moral Sentiments_, Part VI. sec. ii. [169] Mackintosh, _Miscellaneous Works_, iii. 13. [170] Brougham's Men of Letters, ii. 226. [171] Burton's Hume, ii. 348. [172] Garrick Correspondence, ii. 550. [173] Garrick Correspondence, ii. 549. [174] Ibid. ii. 501. [175] Ibid. ii. 511. [176] Stewart's _Works,_ x. 49, 50. [177] "Essay on the Imitative Arts," _Works_, v. 281. [178] _Works_, v. 294. [179] Say, _Cours Complet, OEuvres_, p. 870. [180] Turgot's _OEuvres_, v. 136. [181] _Wealth of Nations_, Book IV. chap. ix. [182] Memoirs of Madame du Hausset, p. 141. [183] Marmontel's Memoirs, English Translation, ii. 37. [184] Fraser's _Scotts of Buccleuch_, ii. 405. [185] Burton's _Life of Hume_, ii. 348. [186] Hill's _Letters of Hume_, p. 59. Original in R.S.E. [187] _New Statistical Account of Scotland_, i. 490. (Account of Dalkeith by the late Dr. Norman Macleod, then minister of that parish, and Mr. Peter Steel, Rector of Dalkeith Grammar School.) [188] _Autobiography_, p. 280. [189] _Ibid._ [190] _Wealth of Nations_, Book I. chap. ix. [191] _Ibid._, Book V. chap. ii. art. iii. [192] _Wealth of Nations_, Book V. chap. ii. art. iv. [193] "Essay on the Imitative Arts," _Works_, v. 260. [194] _Wealth of Nations_, Book V. chap. ii. art. iv. CHAPTER XV LONDON 1766-1767. _Aet._ 43 Arriving in London early in November, Smith seems to have remained on in the capital for the next six months. The body of his unfortunate pupil, which he brought over with him, was ultimately buried in the family vault at Dalkeith, for Dr. Norman Macleod and Mr. Steel say so; but the interment there does not seem to have taken place immediately after the arrival from France, for the London journals, which announce the Duke of Buccleugh's landing at Dover on the 1st of November, mention his presence at the Guildhall with his stepfather, Mr. Townshend, Chancellor of the Exchequer, on the 10th, Lord Mayor's Day; and the Duke, who is stated by Dr. Macleod to have brought his brother's remains north, could not have been to Scotland and back in that interval. Smith was accordingly not required to proceed to Scotland on that sad duty, and on the 22nd of November Andrew Millar, the publisher, writing to David Hume in Edinburgh, mentions the fact that Smith was then in London and moving about among the great. This letter was written about a question on which Hume had sought Smith's counsel, and on which Millar had held some conversation with Smith, the upshot of which he now communicates to Hume--the question whether he should continue his _History of England_. While Smith was still in Paris Hume had written saying: "Some push me to continue my _History_. Millar offers any price. All the Marlborough papers are offered me, and I believe nobody would venture to refuse me, but _cui bono?_ Why should I forego dalliance and sauntering and society, and expose myself again to the clamours of a stupid factious public? I am not yet tired of doing nothing, and am become too wise either to want censure or praise. By and by I shall be too old to undergo so much labour."[195] Smith does not appear to have answered this letter at the time, but his opinion is communicated to Hume in this letter from Millar, who no doubt had a conversation with him on the subject. Millar says: "He is of opinion, with many more of your very good sensible friends, that the history of this country from the Revolution is not to be met with in books yet printed, but from MSS. in this country, to which he is sure you will have ready access, from all accounts he learns from the great here; and therefore you should lay the groundwork here after your perusal of the MSS. you may have access to, and doing it below will be laying the wrong foundation. I think it my duty to inform you the opinion of your most judicious friends, and I think he and Sir John Pringle may be reckoned amongst that number."[196] Smith was himself publishing with Millar at this time a new edition of his _Theory of Moral Sentiments_--the third, which appeared in 1767, containing, like the second, the addition of the _Dissertation upon the Origin of Languages_. One of his reasons for staying so long in London this winter was no doubt to see the sheets through the press. The book was printed by Strahan, who was also a partner in Millar's publishing business; and there is a letter to him from Smith which, though bearing no date but Friday and no place of writing at all, must have been written, as indeed those two very circumstances indicate, in London, and some time during the winter of 1766-67. MY DEAR STRAHAN--I go to the country for a few days this afternoon, so that it will be unnecessary to send me any more sheets till I return. The _Dissertation upon the Origin of Languages_ is to be printed at the end of the _Theory_. There are some literal errors in the printed copy of it which I should have been glad to have corrected, but have not the opportunity, as I have no copy by me. They are of no great consequence. In the titles, both of the _Theory_ and _Dissertation_, call me simply Adam Smith without any addition either before or behind.--I ever am, etc., ADAM SMITH. Friday.[197] When the _Wealth of Nations_ came out in 1776 the author described himself on the title-page as LL.D. and F.R.S., late Professor of Moral Philosophy in Glasgow University, but he wants here on the _Theory_ nothing but plain Adam Smith, his mind being at this period apparently averse to making use of his degree even on public and formal occasions, as it always was to using it in private life. He described himself on his visiting cards as "Mr. Adam Smith," he was known in the inner circle of his personal friends as Mr. Smith, and when Dugald Stewart was found fault with by certain critics for speaking of him so in his memoirs, he replied that he never heard Smith called anything else. But while Smith was superintending the republication of his first book, he was at the same time using his opportunities in London to read up at the British Museum, then newly established, or elsewhere, for his second and greater, of which he had laid the keel in France. One of the subjects which he was engaged in studying at that time was colonial administration. He seems to have been discussing the subject with Lord Shelburne, who was now Secretary of State, and he gives that statesman the results of his further investigations into at least one branch of the subject in the following letter, written in the first instance, like so many others of Smith's extant letters, to do a service to a friend. He wished to interest Lord Shelburne in the claims of a Scotch friend, Alexander Dalrymple, for the command of the exploring expedition which it was then in contemplation to send to the South Sea, and which was eventually committed to Captain Wallis. This Alexander Dalrymple was afterwards the well-known Hydrographer to the Admiralty and the East India Company, to whom the progress of geographical knowledge lies under deep obligations. He was one of the numerous younger brothers of Lord Hailes, the Scotch judge and historian, and having returned in 1765 from thirteen years' work in the East India Company's service, had devoted himself since then to the study of discoveries in the South Sea, and arrived at a confident belief in the existence of a great undiscovered continent in that quarter. Lord Shelburne would have given him the command of this expedition had not Captain Wallis been already engaged, and next year he was actually offered, and had he been granted naval rank, which he thought essential for maintaining discipline on board ship, he would have undertaken command of the more memorable expedition to observe the transit of Venus, which made Captain Cook the most famous explorer of his age. The following is Smith's letter:-- MY LORD--I send you enclosed Quiros's memorial, presented to Philip the Second after his return from his voyage, translated from the Spanish in which it is published in Purchass. The voyage itself is long, obscure, and difficult to be understood, except by those who are particularly acquainted with the geography and navigation of those countries, and upon looking over a great number of Dalrymple's papers I imagined this was what you would like best to see. He is besides just finishing a geographical account of all the discoveries that have yet been made in the South Seas from the west coast of America to Tasman's discoveries. If your lordship will give him leave, he would be glad to read this to you himself, and show you on his map the geographical ascertainment of the situation of each island. I have seen it; it is extremely short; not much longer than this memorial of Quiros. Whether this may be convenient for your lordship I know not; whether this continent exists or not may perhaps be uncertain; but supposing it does exist, I am very certain you never will find a man fitter for discovering it, or more determined to hazard everything in order to discover it. The terms that he would ask are, first, the absolute command of the ship, with the naming of all the officers, in order that he may have people who both have confidence in him and in whom he has confidence; and secondly, that in case he should lose his ship by the common course of accidents before he gets into the South Sea, that the Government will undertake to give him another. These are all the terms he would insist upon. The ship properest for such an expedition, he says, would be an old fifty-gun ship without her guns. He does not, however, insist upon this, as a _sine quâ non_, but will go in any ship from an hundred to a thousand tons. He wishes to have but one ship with a good many boats. Most expeditions of this kind have miscarried from one ship's being obliged to wait for the other, or losing time in looking out for the other. Within these two days I have looked over everything I can find relating to the Roman Colonys. I have not yet found anything of much consequence. They were governed upon the model of the Republic: had two consuls called _duumviri_; a senate called _decuriones_ or _collegium decurionum_, and other magistrates similar to those of the Republic. The colonists lost their right of voting or of being elected to any magistracy in the Roman comitia. In this respect they were inferior to many municipia. They retained, however, all the other privileges of Roman citizens. They seem to have been very independent. Of thirty colonies of whom the Romans demanded troops in the second Carthaginian war, twelve refused to obey. They frequently rebelled and joined the enemies of the Republic; being in some measure little independent republics, they naturally followed the interests which their peculiar situation pointed out to them.--I have the honour to be, with the highest regard, my lord, your lordship's most obedient humble servant, ADAM SMITH. Tuesday, _12th February 1767_.[198] The problem of colonial rights and responsibilities had just come rapidly to the forefront of public questions in England. The abandonment of North America by the French in 1763 had given a new importance to the plantations, and seemed to develop at the same time a stronger disposition to assert colonial rights on the one side of the Atlantic, and to interfere with them on the other. The Stamp Act of 1765 had already begun the struggle against imperial taxation which Charles Townshend's tea duty, imposed a few months after this letter was written, was to precipitate into rebellion. There was therefore very good reason why statesmen like Lord Shelburne should be studying the relations of dependencies to mother countries, and turning their attention to earlier colonial experiments such as those of ancient Rome. It will be observed that Smith came in the _Wealth of Nations_ to modify somewhat the view he expresses in this letter of the independence of the Roman colonies, and explains that the reason they were less prosperous than the Greek colonies was because they were not, like the latter, independent, and were "not always at liberty to manage their own affairs in the way that they judged most suitable to their own interest."[199] Smith's absent-minded habit, while it seems from various accounts to have been lessened by his travels abroad, was not entirely removed by them, for on the 11th of February 1767 Lady Mary Coke writes her sister that Lady George Lennox and Sir Gilbert Elliot had happened to meet while visiting her, and had talked of "Mr. Smith, the gentleman that went abroad with the Duke of Buccleugh," saying many things in his praise, but adding that he was the most absent man they ever knew. Sir Gilbert mentioned that Mr. Damer (probably Mr. John Damer, Lord Milton's son) had paid Smith a visit a few mornings before as he was sitting down to breakfast, and falling into discourse Smith took a piece of bread and butter, and after rolling it round and round put it into the teapot and poured the water upon it. Shortly after he poured out a cup, and on tasting it declared it was the worst tea he had ever met with. "I have not the least doubt of it," said Mr. Damer, "for you have made it of bread and butter instead of tea."[200] The Duke of Buccleugh was married in London on the 3rd of May 1767 to Lady Betsy, only daughter of the Duke of Montagu, and Smith probably returned to Scotland immediately after that event. For in writing Hume from Kirkcaldy on the 9th of June 1767, he mentions having now been settled down to his work for about a month. Another circumstance confirms this inference. He was elected a Fellow of the Royal Society of London on the 21st of May 1767, but was not admitted till the 27th of May 1773, and that seems to imply that he had left London before the former date, and never returned to it again till shortly before the latter one. FOOTNOTES: [195] Burton's _Life of Hume_, ii. 392. [196] Ibid. [197] _New York Evening Post._ Original in possession of Mr. David A. Wells of Norwich, U.S.A. [198] Lansdowne MSS. [199] _Wealth of Nations_, Book IV. chap. vii. [200] Lady Mary Coke's _Journal_, i. 141. CHAPTER XVI KIRKCALDY 1767-1773. _Aet._ 44-50 When Smith left Glasgow his mother and cousin went back again to Kirkcaldy, and he now joined them and remained with them there for the next eleven years. Hume, who thought the country an unsuitable place for a man of letters, used every endeavour to persuade him to remove to Edinburgh, but without success. The gaiety and fulness of city life were evidently much less to him than they were to Hume, and he must have found what sufficed him in the little town of his birth. He had his work, he had his mother, he had his books, he had his daily walks in the sea breeze, and he had Edinburgh always in the offing as a place of occasional resort. He is said to have taken much real pleasure, like Shakespeare at Stratford, in mingling again with the simple old folk who were about him in his youth, and he had a few neighbours whose pursuits corresponded more nearly with his own. James Oswald, indeed, was now struck down with illness--"terrible distress" is Smith's expression--and he died in the second year after Smith's return to Scotland. Oswald spent some months in Kirkcaldy, however, in the fall of 1767, and probably again in 1768. One of Smith's other literary neighbours, whom he saw much of during this eleven years' residence in Fife, was Robert Beatson, author of the _Political Index_ and other works, to whom there will be occasion to refer again later on. His chief resource, however, throughout this period was his work, which engaged his mind late and early till it told hard, as we shall presently see, on his health. After being established in Kirkcaldy for some weeks Smith wrote Hume that he was immersed in study, which was the only business he had, that his sole amusements were long solitary walks by the seaside (which, with a man of his gift or infirmity of abstraction, would only be protractions of the study that preoccupied him), and that he never was happier or more contented in all his life. The immediate object of this letter, as so usual with Smith, was to serve a friend--a motive which never failed to overcome his aversion to writing. A French friend--"the best and most agreeable friend I had in France," says Smith--was then in London, and Smith wishes Hume, who was now Under Secretary of State, to show him some attentions during his residence there. This friend was Count de Sarsfield, a gentleman of Irish extraction, an associate of Turgot and the other men of letters in Paris, and a man who added to almost universal knowledge a special predilection for economics, and indeed wrote a number of essays on economic questions, though he never published any of them. He seems to have really been, as Smith indicates, the perfection of an agreeable companion. John Adams, the second President of the United States, when envoy for that country in Paris, was very intimate with him, and says that Sarsfield was the happiest man he knew, for he led the life of a peripatetic philosopher. "Observation and reflection are all his business, and his dinner and his friend all his pleasure. If a man were born for himself alone, I would take him for a model."[201] He was "the greatest rider of hobby-horses" in all President Adams's acquaintance, and some of his hobbies were for the most serious studies. He published a work in metaphysics, and wrote essays against serfdom and slavery, and on a number of other subjects, which were found in MS. among President Adams's papers. Yet he was a problem--and not a very soluble one--to the worthy President, for he laid a weight on the merest trifles of ceremony or etiquette which seemed difficult to reconcile with his devotion to profound and learned studies. He visited Adams at Washington during his presidency, and used constantly to lecture the President on his little omissions. After any entertainment Sarsfield would say, writes Adams, "that I should have placed the Ambassador of France at my right hand and the Minister of Spain at my left, and have arranged the other principal personages; and when I rose from the table I should have said, Messieurs, voudrez vous, etc., or Monsieur or Duc voudrez vous, etc.... How is it possible to reconcile these trifling contemplations of a master of the ceremonies with the vast knowledge of arts, sciences, history, government, etc., possessed by this nobleman?"[202] Sarsfield kept a journal about all the people he met with, from which Adams makes some interesting quotations, and which, if extant, might be expected to add to our information regarding Smith. Having said so much of Smith's "best and most agreeable friend in France," I will now give the letter:-- KIRKALDY, _7th June 1767_. MY DEAREST FRIEND--The Principal design of this Letter is to Recommend to your particular attention the Count de Sarsfield, the best and most agreeable friend I had in France. Introduce him, if you find it proper, to all the friends of yr. absent friend, to Oswald and to Elliot in particular. I cannot express to you how anxious I am that his stay in London should be rendered agreeable to him. You know him, and must know what a plain, worthy, honourable man he is. I enclose a letter for him, which you may either send to him, or rather, if the weighty affairs of State will permit it, deliver it to him yourself. The letter to Dr. Morton[203] you may send by the Penny Post. My Business here is study, in which I have been very deeply engaged for about a month past. My amusements are long solitary walks by the seaside. You may judge how I spend my time. I feel myself, however, extremely happy, comfortable, and contented. I never was perhaps more so in all my life. You will give me great comfort by writing to me now and then, and by letting me know what is passing among my friends at London. Remember me to them all, particularly to Mr. Adams's family and to Mrs. Montagu.[204] What has become of Rousseau? Has he gone abroad because he cannot contrive to get himself sufficiently persecuted in Great Britain? What is the meaning of the bargain that your ministry have made with the India Company? They have not, I see, prolonged their charter, which is a good circumstance.[205] The rest of the sheet is torn. Hume replies on the 13th that Sarsfield was a very good friend of his own, whom he had always great pleasure in meeting, as he was a man of merit; but that he did not introduce him, as Smith desired, to Sir Gilbert Elliot, because "this gentleman's reserve and indolence would make him neglect the acquaintance"; nor to Oswald, because he found his intimacy with Oswald, which had lasted more than a quarter of a century, was broken for ever. He goes on to describe his quarrel with Oswald's brother the bishop; and concludes: "If I were sure, dear Smith, that you and I should not some day quarrel in some such manner, I should tell you that I am yours affectionately and sincerely."[206] Count de Sarsfield seems to have gone on to Scotland to pay Smith a visit, for on the 14th of July Hume writes Smith, enclosing a packet, which he desires to be delivered to the Count. Smith did not reply to either of these letters till the 13th of September, when he writes from Dalkeith House, where he has gone for the home-coming of the Duke and Duchess of Buccleugh. After expressing his mind in the plainest terms about the bishop with whom Hume had the tussle--"He is a brute and a beast," says Smith--he goes on to bespeak Hume's favour for a young cousin of his who happened to be living in the same house with Hume in London, Captain David Skene, afterwards of Pitlour, who was in 1787 made inspector of military roads in Scotland. Be so good (he says) as convey the enclosed letter to the Count de Sarsfield. I have been much in the wrong for having delayed so long to write both to him and you. There is a very amiable, modest, brave, worthy young gentleman who lives in the same house with you. His name is David Skeene. He and I are sisters' sons, but my regard for him is much more founded on his personal qualities than upon the relations in which he stands to me. He acted lately in a very gallant manner in America, of which he never acquainted me himself, and of which I came to the knowledge only within these few days. If you can be of any service to him you could not possibly do a more obliging thing to me. The Duke and Dutchess of Buccleugh have been here now for almost a fortnight. They begin to open their house on Monday next, and, I flatter myself, will both be very agreeable to the People of this country. I am not sure that I have ever seen a more agreeable woman than the Dutchess. I am sorry that you are not here, because I am sure you would be perfectly in love with her. I shall probably be here some weeks. I could wish, however, that both you and the Count de Sarsfield would direct for me as usual at Kirkaldy. I should be glad to know the true history of Rousseau before and since he left England. You may perfectly depend upon my never quoting you to any living soul upon that subject.--I ever am, dear sir, most faithfully yours, ADAM SMITH.[207] The Duke of Buccleugh had never been at Dalkeith since his infancy--if indeed he had been even then, for Dr. Carlyle's words in describing this celebration are, "where his grace had never been before"--because his stepfather, Charles Townshend, was afraid he might grow up too Scotch in accent and feeling; and his home-coming now, with his young and beautiful bride, excited the liveliest interest and expectation, not only on the Buccleugh estates, but over the whole lowlands of Scotland, from the Forth to the Solway. The day originally fixed for the celebration was the Duke's birthday, the 13th of September, the very day Smith wrote Hume; but the event had to be postponed in consequence of the sudden death of Townshend, from an attack of putrid fever, between the day of the Duke's arrival at Dalkeith and the anniversary of his birth. It came off, however, two or three weeks later. An entertainment was given to about fifty ladies and gentlemen of the neighbourhood; but Dr. Carlyle, who was present, and wrote indeed an ode for the occasion, says that though the fare was sumptuous, the company was formal and dull, because the guests were all strangers to their host and hostess except Adam Smith, and Adam Smith, says Carlyle, "was but ill qualified to promote the jollity of a birthday." "Had it not been for Alexander Macmillan, W.S., and myself," he proceeds, "the meeting would have been very dull, and might have been dissolved without even drinking the health of the day.... Smith remained with them (the Duke and Duchess) for two months, and then returned to Kirkcaldy to his mother and his studies. I have often thought since that if they had brought down a man of more address than he was, how much sooner their first appearance might have been."[208] The ice, which Smith is thus blamed for not being able to break on this first meeting of his pupil with his Scotch neighbours, was not long in melting naturally away under the warmth of the Duke's own kindness of heart. He almost settled among them, for on Townshend's death he gave up the idea on which that statesman had set his heart, and which was one of his reasons for committing the training of the young Duke to the care of a political philosopher,--the idea of going into politics as an active career; and he lived largely on his Scotch estates; becoming a father to his numerous tenantry, and a powerful and enlightened promoter of all sound agricultural improvement. Dr. Carlyle says the family were always kind to their tenants, but Duke Henry "surpassed them all, as much in justice and humanity as he did in superiority of understanding and good sense." Without claiming for Smith's teaching what must in any case have been largely the result of a fine natural character, it is certain that no young man could live for three years in daily intimacy with Adam Smith without being powerfully influenced by that deep love of justice and humanity which animated Smith beyond his fellows, and ran as warmly through his conversation in private life as we see it still runs through his published writings. Smith was always vigorous and weighty in his denunciation of wrong, and so impatient of anything in the nature of indifference or palliation towards it, that he could scarce feel at ease in the presence of the palliator. "We can breathe more freely now," he once said when a person of that sort had just left the company; "that man has no indignation in him."[209] Smith remained the mentor of his pupil all his life. At "Dalkeith, which all the virtues love," he was always a most honoured guest, and Dugald Stewart says he always spoke with much satisfaction and gratitude of his relations with the family of Buccleugh. Several of the traditional anecdotes of Smith's absence of mind are localised at Dalkeith House. Lord Brougham, for example, has preserved a story of Smith breaking out at dinner into a strong condemnation of the public conduct of some leading statesman of the day, then suddenly stopping short on perceiving that statesman's nearest relation on the opposite side of the table, and presently losing self-recollection again and muttering to himself, "Deil care, deil care, it's all true." Or there is the less pointed story told by Archdeacon Sinclair of another occasion when Smith was dining at Dalkeith, and two sons of Lord Dorchester were of the company. The conversation all turned on Lord Dorchester's estates and Lord Dorchester's affairs, and at last Smith interposed and said, "Pray, who is Lord Dorchester? I have never heard so much of him before." The former anecdote shows at once that Smith was in the habit of speaking his mind with considerable plainness, and that he shrank at the same time from everything like personal discourtesy; and the latter, like other stories of his absence of mind, is hardly worth repeating, except for showing that he continued to possess a redeeming infirmity. From Dalkeith Smith returns to Kirkcaldy and his work. We find him in 1768 in correspondence with the Duke's law-agent, Mr. A. Campbell, W.S., and with Sir James Johnstone of Westerhall, about some investigation, apparently of no public importance, into the genealogy of the Scotts, in connection with which he first got Campbell to make a search in the charter-room of Dalkeith for ancient papers connected with the Scotts of Thirlestane, and then wanted to know the explanation Sir James Johnstone had given of Scott of Davington's claim as heir of Rennaldburn upon the Duke of Buccleugh.[210] It shows Smith, however, taking an interest, as if he were entitled to do so, in the business affairs of the Duke. We find him too in correspondence with Lord Hailes on historical points of some consequence to the economic inquiries he was now busy upon. Lord Hailes was one of the precursors of sound historical investigation in this country, and to Smith, with whom he was long intimate, he afterwards paid the curious compliment of translating his letter to Strahan on the death of Hume into Latin. Of Smith's correspondence with Hailes only two letters have been preserved. The first is as follows:-- _KIRKALDY, 5th March 1769_. MY LORD--I should now be extremely obliged to your Lordship if you would send me the papers you mentioned upon the prices of provisions in former times. In order that the conveyance may be perfectly secure, if your Lordship will give me leave I shall send my own servant sometime this week to receive them at your Lordship's house at Edinburgh. I have not been able to get the papers in the cause of Lord Galloway and Lord Morton. If your Lordship is possessed of them it would likewise be a great obligation if you would send me them. I shall return both as soon as possible. If your Lordship will give me leave I shall transcribe the manuscript papers; this, however, entirely depends upon your Lordship. Since the last time I had the honour of writing to your Lordship I have read over with more care than before the Acts of James I., and compared them with your Lordship's remarks. From this last I have received both much pleasure and much instruction. Your Lordship's remarks will, I plainly see, be of much more use to me than, I am afraid, mine will be to you. I have read law entirely with a view to form some general notion of the great outlines of the plan according to which justice has been administered in different ages and nations; and I have entered very little into the detail of particulars of which I see your Lordship is very much master. Your Lordship's particular facts will be of great use to correct my general views; but the latter, I fear, will always be too vague and superficial to be of much use to your Lordship. I have nothing to add to what your Lordship has observed upon the Acts of James I. They are framed in general in a much ruder and more inaccurate manner than either the English statutes or French ordinances of the same period; and Scotland seems to have been, even during this vigorous reign, as our historians represent it, in greater disorder than either France or England had been from the time of the Danish and Norwegian incursions. The 5, 24, 56, and 85 statutes seem all to attempt a remedy to one and the same abuse. Travelling, from the disorders of the country, must have been extremely dangerous, and consequently very rare. Few people therefore would propose to live by entertaining travellers, and consequently there would be few or no inns. Travellers would be obliged to have recourse to the hospitality of private families in the same manner as in all other barbarous countries; and being in this situation real objects of compassion, private families would think themselves obliged to receive them even though this hospitality was extremely oppressive. Strangers, says Homer, are sacred persons, and under the protection of Jupiter, but no wise man would ever choose to send for a stranger unless he was a bard or a soothsayer. The danger too of travelling either alone or with few attendants made all men of consequence carry along with them a numerous suite of retainers, which rendered this hospitality still more oppressive. Hence the orders to build hostellaries in 24 and 85; and as many people had chosen to follow the old fashion and to live rather at the expense of other people than at their own, hence the complaint of the keepers of the hostellaries and the order thereupon in Act 85. I cannot conclude this letter, though already too long, without expressing to your Lordship my concern, and still more my indignation, at what has lately passed both at London and at Edinburgh. I have often thought that the Supreme Court of the United Kingdom very much resembled a jury. The law lords generally take upon them to sum up the evidence and to explain the law to the other peers, who generally follow their opinion implicitly. Of the two law lords who upon this occasion instructed them, the one has always run after the applause of the mob; the other, by far the most intelligent, has always shown the greatest dread of popular odium, which, however, he has not been able to avoid. His inclinations also have always been suspected to favour one of the parties. He has upon this occasion, I suspect, followed rather his fears and his inclinations than his judgment. I could say a great deal more upon this subject to your Lordship, but I am afraid I have already said too much. I would rather, for my own part, have the solid reputation of your most respectable president, though exposed to the insults of a brutal mob, than all the vain and flimsy applause that has ever yet been bestowed upon either or both the other two.--I have the honour to be, with the highest esteem and regard, my Lord, your Lordship's most obliged and obedient servant, ADAM SMITH.[211] A week later Smith wrote Lord Hailes another letter, "giving," says Lord Brougham, "what is evidently the beginning of his speculations on the price of silver," but the letter seems to be now lost, and Lord Brougham quotes from it only the following sentences on the Douglas cause. "If the rejoicings which I read of in the public papers in different places on account of the Douglas cause, had no more foundation than those which were said to have been in this place, there has been very little joy upon the occasion. There was here no sort of rejoicing of any kind, unless four schoolboys having set up three candles upon the trone by way of an illumination, is to be considered as such."[212] The first of these letters was written almost immediately after Smith heard of the decision of the House of Lords in the famous Douglas case. The news of the decision only reached Edinburgh on the 2nd of March, and was received with such popular enthusiasm that the whole city was illuminated. Smith walking by the shore at Kirkcaldy would have seen the bonfires blazing on Salisbury Crags, and he seems to have heard before writing that the house of the Lord President of the Court of Session, who was opposed to the Douglas claim, was attacked by the mob, and the President himself insulted next morning in the street on his way to Court. No civil lawsuit ever excited so much popular interest or feeling. The question, it will be remembered, was whether Mr. Douglas, who had been served heir to the estates of the late Duke of Douglas, was really the son of the Duke's sister, Lady Jane, by her husband, Sir John Stewart of Grandtully, whom she had secretly married abroad when she was already fifty years old, or whether he was an impostor, the son of a Frenchwoman, whom Lady Jane had brought up as her own son with a view to the inheritance of those estates. Everybody in Scotland was for the time either a Douglas or a Hamilton, and the sentimental elements in the case had enlisted popular sympathy strongly on the Douglas side. Smith, as will be seen from those letters, was quite as strong and even impassioned a partisan on the unpopular and losing side, and Lord Hailes having been one of the judges who voted with the Lord President for the decision against Mr. Douglas which the House of Lords now reversed, he feels he can give free vent to his disappointment. Brougham, in publishing the letters, calls the opinion Smith gives not only "very strong" but "very rash," and his impeachment of the impartiality of the two great English judges--Lord Camden and Lord Mansfield--cannot seem defensible. But David Hume, though a Tory and an Under Secretary of State, is not a whit less sparing in his denunciation of those two law lords and in his contempt for the general body of the peers than Smith. "To one who understands the case as I do," he writes to Dr. Blair, "nothing could appear more scandalous than the pleading of the two law lords. Such curious misrepresentation, such impudent assertions, such groundless imputations, never came from that place; but they were good enough for the audience, who, bating their quality, are most of them little better than their brothers the Wilkites of the streets." Hume, having lost his place with a change of ministry, returned to Edinburgh for good in August 1769, and presently wrote Smith inviting him over:-- JAMES'S COURT, _20th August 1769_. DEAR SMITH--I am glad to have come within sight of you, and to have a view of Kirkaldy from my windows, but as I wish also to be within speaking terms of you, I wish we could concert measures for that purpose. I am miserably sick at sea, and regard with horror and a kind of hydrophobia the great gulf that lies between us. I am also tired of travelling as much as you ought naturally to be of staying at home. I therefore propose to you to come hither and pass some days with me in this solitude. I want to know what you have been doing, and purpose to exact a rigorous account of the method in which you have employed yourself during your retreat. I am positive you are in the wrong in many of your speculations, especially when you have the misfortune to differ from me. All these are reasons for our meeting, and I wish you would make me some reasonable proposal for that purpose. There is no habitation on the island of Inchkeith, otherwise I should challenge you to meet me on that spot, and neither of us ever to leave the place till we were fully agreed on all points of controversy. I expect General Conway here to-morrow, whom I shall attend to Roseneath, and I shall remain there a few days. On my return I expect to find a letter from you containing a bold acceptance of this defiance. I am, dear Smith, yours sincerely.[213] Smith seems to have made such progress with his work in the two years of what Hume here calls his retreat at Kirkcaldy that in the beginning of 1770 there was some word of his going up with it to London for publication. For on the 6th of February Hume again writes him: "What is the meaning of this, dear Smith, which we hear, that you are not to be here above a day or two on your passage to London? How can you so much as entertain a thought of publishing a book full of reason, sense, and learning to those wicked abandoned madmen?"[214] He had probably completed his first draft of the work from beginning to end, but he kept constantly amplifying and altering parts of it for six years more. He did not go to London in 1770, if he ever contemplated doing so, but he came to Edinburgh and received the freedom of the city in June. He seems to have received this honour for the merits of the Duke of Buccleugh rather than for his own. For the entry in the minutes of the Council of 6th June 1770 runs thus: "Appoint the Dean of Guild and his Council to admit and receive their Graces the Duke of Buccleugh and the Duke of Montagu in the most ample form, for good services done by them and their noble ancestors to the kingdome. And also Adam Smith, LL.D., and the Reverend Mr. John Hallam to be Burgesses and Gild Brethren of this city in the most ample form. (Signed) JAMES STUART, Provost." The Duke of Montagu was the Duke of Buccleugh's father-in-law, and the Rev. Mr. John Hallam--afterwards Dean of Windsor, and father of Henry Hallam, the historian--was the Duke's tutor at Eton, as Adam Smith was his tutor abroad. The freedom was therefore given to the Duke of Buccleugh and party. Smith's burgess-ticket is one of the few relics of him still extant; it is possessed by Professor Cunningham of Belfast. Smith promised Hume a visit about Christmas 1771, but the visit was postponed in consequence of the illness of Hume's sister, and on the 28th of January he received the following letter, in reply apparently to a request for the address of the Comtesse de Boufflers in Paris:-- EDINBURGH, _28th January 1772_. DEAR SMITH--I should certainly before this time have challenged the Performance of your Promise of being with me about Christmas had it not been for the misfortunes of my family. Last month my sister fell dangerously ill of a fever, and though the fever be now gone, she is still so weak and low, and recovers so slowly, that I was afraid it would be but a melancholy house to invite you to. However, I expect that time will reinstate her in her former health, in which case I shall look for your company. I shall not take any excuse from your own state of health, which I suppose only a subterfuge invented by indolence and love of solitude. Indeed, my dear Smith, if you continue to hearken to complaints of this nature, you will cut yourself out entirely from human society, to the great loss of both parties. The Lady's Direction is M^e la Comtesse de B., Douanière au Temple. She has a daughter-in-law, which makes it requisite to distinguish her.--Yours sincerely, DAVID HUME. _P.S._--I have not yet read _Orlando Inamorato_. I am now in a course of reading the Italian historians, and am confirmed in my former opinion that that language has not produced one author who knew how to write elegant correct prose though it contains several excellent poets. You say nothing to me of your own work.[215] Smith seems to have perhaps sent him _Orlando Inamorato_, or at any rate to have been previously in communication, either by letter or conversation, on the subject, for the Italian poets were favourite reading of his. But a more important point in the letter is the indication it affords that Smith's labours and solitude were beginning to tell on the state of his health. Indeed, poor health had now become one of the chief causes of his delay in finishing his work, and it continued to go from bad to worse. He writes his friend Pulteney in September that his book would have been ready for the press by the first of that winter if it were not for the interruptions caused by bad health, "arising," he says, "from want of amusement and from thinking too much upon one thing," together with other interruptions of an equally anxious nature, occasioned by his endeavours to extricate some of his personal friends from the difficulties in which they were involved by the commercial crisis of that time. KIRKALDY, _5th September 1772_. MY DEAR PULTENEY--I have received your most friendly letter in due course, and I have delayed a great deal too long to answer it. Though I have had no concern myself in the Public calamities, some of the friends in whom I interest myself the most have been deeply concerned in them; and my attention has been a good deal occupied about the most proper method of extricating them. In the Book which I am now preparing for the press I have treated fully and distinctly of every part of the subject which you have recommended to me; and I intended to send you some extracts from it; but upon looking them over I find that they are too much interwoven with other parts of the work to be easily separated from it. I have the same opinion of Sir James Stewart's book that you have. Without once mentioning it, I flatter myself that any fallacious principle in it will meet with a clear and distinct confutation in mine.[216] I think myself very much honoured and obliged to you for having mentioned me to the E. India Directors as a person who would be of use to them. You have acted in your old way of doing your friends a good office behind their backs, pretty much as other people do them a bad one. There is no labour of any kind which you can impose upon me which I will not readily undertake. By what Mr. Stewart and Mr. Ferguson hinted to me concerning your notice of the proper remedy for the disorders of the coin in Bengal, I believe our opinions upon that subject are perfectly the same. My book would have been ready for the press by the beginning of this winter, but interruptions occasioned partly by bad health, arising from want of amusement and from thinking too much upon one thing, and partly by the avocations above mentioned, will oblige me to retard its publication for a few months longer.--I ever am, my dearest Pulteney, most faithfully and affectionately your obliged servant, ADAM SMITH. _To_ WILLIAM PULTENEY Esq., _Member of Parliament_, BATH HOUSE, LONDON.[217] The public calamities to which Smith refers in the opening paragraph of his letter are the bankruptcies of the severe commercial crisis of that year, and the friends he was so much occupied in extricating from its results were, I think it most likely, the family of Buccleugh. The crash was especially disastrous in Scotland; only three private banks in Edinburgh out of thirty survived it, and a large joint-stock bank, Douglas Heron and Company, started only three years before, for the public-spirited purpose of promoting improvements, particularly improvements of land, now seemed to shake all commercial Scotland with its fall. In this company the Duke of Buccleugh was one of the largest shareholders, and, liability being unlimited, it was impossible to foresee how much of its £800,000 of liabilities his Grace might be eventually called upon to pay. The suggestion that Smith was much consulted by the Duke and his advisers about this grave business is to some extent confirmed by the familiarity which he shows with the whole circumstances of this bank at the time of its failure in the second chapter of the second book of the _Wealth of Nations_. The situation for which Pulteney had recommended him to the Court of Directors of the East India Company was, no doubt, a place as member of the Special Commission of Supervision which they then contemplated establishing. In 1772 the East India Company was in extremities; in July they were nearly a million and a half sterling behind for their next quarter's payments; and they proposed to send out to India a commission of three independent and competent men, with full authority to institute a complete examination into every detail of the administration, and to exercise a certain supervision and control of the whole. Burke had already been offered one of the seats on this commission, but had refused it on finding that Lord Rockingham was unwilling to part with him; and at the time this letter was written two of Smith's own Scotch friends, whose names he happens to mention in the letter--Adam Ferguson and Andrew Stuart, M.P.--were actually candidates for the places, and had apparently been recently seeing Pulteney in London on the subject. Pulteney, who had great influence at the India House, had probably mentioned the names of Smith, Ferguson, and Stuart to the Court of Directors at the same time, and if so, that must have been at least two months before Smith wrote this letter, for Ferguson was in the month of July getting influence brought to bear on the Edinburgh Town Council to secure their permission to retain his professorship in the event of his going to India.[218] Ferguson pushed his candidature vigorously, and went to London repeatedly about it between July and November, but Smith, although he would have accepted the post if he received the offer of it, does not seem to have taken any steps to procure it, and did not even answer Pulteney's letter till September. Stuart's candidature was defeated, Horace Walpole says, by Lord Mansfield, but eventually no appointment was made, because Parliament intervened, and forbade any such commission to be sent out at all. In sending the letter to the _Academy_ for publication Professor Rogers observes that it is plain the delay in the publication of the _Wealth of Nations_ was due to the negotiations which Mr. Pulteney was evidently making for the purpose of getting Smith appointed to this place. "Had he succeeded," proceeds Mr. Rogers, "it is probable that the _Wealth of Nations_ would never have seen the light; for every one knows that in the first and second books of that work the East India Company is criticised with the greatest severity.... I have no doubt that owing to Pulteney's negotiations it lay unrevised and unaltered during four years in the author's desk." With all respect, this is a strange remark to fall from an editor of the _Wealth of Nations_, for the evidences of continuous revision and alteration during those four years are very numerous in the text of the work itself. He made many changes or additions in 1773; for example, the remarks on the price of hides,[219] in the chapter on Rent, were written in February 1773; and those on the decline of sugar-refining in colonies taken from the French, in the chapter on the Colonies,[220] were written in October; while the passage on American wages, in the chapter on Wages, was inserted some time in the same year. The extensive additions in the chapters on the Revenue, occasioned by reading the _Mémoires concernant les Droits_, must have been written after 1774, because Smith probably obtained that book after Turgot became Minister in the middle of that year; his remarks, in the chapter on Colonies, on the effects of recent events on the trade with North America,[221] and his remarks on the Irish revenue in the chapter on Public Debts, were added in 1775.[222] The chapter on the Regulated Companies, in which the East India Company receives most systematic attention, and which did not appear in the first edition of the book, was apparently not written till 1782.[223] The book therefore did not lie "unrevised and unaltered" in the author's desk from 1772 to 1776; on the contrary, the chief cause of the four years' delay was the revision and alteration to which it was being incessantly subjected during that whole term. The particular Indian appointment for which Pulteney had recommended him could have nothing to do with the delay, inasmuch as the proposed office was suppressed altogether within two months after this letter was written; and even if he entertained expectations of any other sort from the East India Company, there is no reason why he should on that account have withheld his work from publication. The more elaborate criticism of that Company in the chapter on Public Works did not appear in the original edition of the book at all, but the only remarks on Indian administration which did appear in that edition, although they are merely incidental in character, are very strong and decided, and might easily have been omitted, had the author been so minded, to please the Company, without any injury to the general argument with which they are connected. On the other hand, there exists abundance of evidence that Smith was busy for most of three years after this date, and mainly in London, altering, improving, and adding to the manuscript of the book. New lines of investigation would suggest themselves, new theories to be thought out, and the task would grow day by day by a very simple but unforeseen process of natural accretion. Hume thought it near completion in 1769; but towards the end of 1772, a couple of months after Smith's answer to Pulteney, he gives it most of another year yet for being finished. He writes from his new quarters in St. Andrew Square, asking Smith to break off his studies for a few weeks' relaxation with him in Edinburgh about Christmas, and then to return and finish his work before the following autumn. ST. ANDREW'S SQUARE, _23rd November 1772_. DEAR SMITH--I should agree to your Reasoning if I could trust your Resolution. Come hither for some weeks about Christmas; dissipate yourself a little; return to Kirkaldy; finish your work before autumn; go to London, print it, return and settle in this town, which suits your studious, independent turn even better than London. Execute this plan faithfully, and I forgive you.... Ferguson has returned fat and fair and in good humour, notwithstanding his disappointment,[224] which I am glad of. He comes over next week to a house in this neighbourhood. Pray come over this winter and join us.--I am, my dear Smith, ever yours, DAVID HUME.[225] While Pulteney was suggesting Smith's name for employment under the East India Company, Baron Mure was trying to secure his services as tutor to the Duke of Hamilton, and Lord Stanhope possibly offered him the position of tutor to his lordship's ward, the young Earl of Chesterfield. Baron Mure was one of the guardians of the young Duke of Hamilton (the son of the beautiful Miss Gunning), and had in that capacity had the chief responsibility in raising and carrying on the great Douglas cause. He was a man of great sagacity and weight, whom we have seen in communication with Hume and Oswald on economic subjects; he had long been also on terms of personal intimacy with Smith, and he seems to have been anxious in 1772 to send Smith abroad with the Duke of Hamilton, as he had already been sent abroad with the Duke of Buccleugh. Smith would appear to have been sounded on the subject, and even to have given what was considered a favourable reply, for Andrew Stuart, a fellow-guardian of the Duke along with Mure, writes the latter acknowledging receipt of his letter "intimating"--these are the words--"the practicability of having Mr. Smith," but the Duke's mother (then Duchess of Argyle) and the Duke himself preferred Dr. John Moore, the author of _Zelucco_, who was the family medical attendant, and was indeed chosen because he could act in that capacity to his very delicate young charge, though he was strictly required to drop the "doctor," and was severely censured by the Duchess for assisting at a surgical operation in Geneva, inasmuch as if it got known that he was a medical man it would be a bar to their reception in the best society.[226] Accordingly Mure was told that it was "the united opinion of all concerned that matters go no further with Mr. Smith." The circumstance that so wise and practical a head as Baron Mure's should have thought of Smith for this post is at least a proof that the Buccleugh tutorship had been a success, and that Smith was not considered by other men of the world who knew him well as being so unfit for the situation of travelling tutor as some of his friends thought him. During this period of severe study in Kirkcaldy his fits of absence might be expected to recur occasionally, and Dr. Charles Rogers relates an anecdote of one of them, which may be repeated here, though Dr. Rogers omits mentioning any authority for it; and stories of that kind must naturally be accepted with scruples, because they are so apt to agglomerate round any person noted for the failing they indicate. According to Dr. Rogers, however, Smith, during his residence in Kirkcaldy, went out one Sunday morning in his dressing-gown to walk in the garden, but once in the garden he went on to the path leading to the turnpike road, and then to the road itself, along which he continued in a condition of reverie till he reached Dunfermline, fifteen miles distant, just as the bells were sounding and the people were proceeding to church. The strange sound of the bells was the first thing that roused the philosopher from the meditation in which he was immersed.[227] The story is very open to criticism, but if correct it points to sleepless nights and an incapacity to get a subject out of the head, due to over-application. The persistency of his occupation with his book, according to Robert Chambers in his _Picture of Scotland_, left a mark on the wall of his study which remained there till the room was repainted shortly before that author wrote of it in 1827. Chambers says that it was Smith's habit to compose _standing_, and to dictate to an amanuensis. He usually stood with his back to the fire, and unconsciously in the process of thought used to make his head vibrate, or rather, rub sidewise against the wall above the chimney-piece. His head being dressed, in the ordinary style of that period, with pomatum, could not fail to make a mark on the wall. M'Culloch says Smith dictated the _Wealth of Nations_ but did not dictate the _Theory of Moral Sentiments_. Whether he had any external ground for making this assertion I cannot tell, and, apart from such, the probability would seem to be that if he dictated his lectures in Edinburgh to an amanuensis, as seems probable, as well as his _Wealth of Nations_, he would have done the same with his _Theory_. But M'Culloch professes to see internal evidences of this difference of manual method in the different style of the respective works. Moore met M'Culloch one evening at Longman's, and they were discussing writers who were in the habit of dictating as they composed. One of the party said the habit of dictating always bred a diffuse style, and M'Culloch supported this view by the example of Adam Smith, whose _Wealth of Nations_, he said, was very diffuse because it had been dictated, while his _Theory_, which was not dictated, was admirable in style. But in reality there is probably more diffuse writing in the _Theory_ than in the _Wealth of Nations_, which is for the most part packed tightly enough. Another Scotch critic, Archibald Alison the elder, the author of the _Essay on Taste_, even surpasses M'Culloch in his keenness in detecting the effects of this dictating habit. He says that Smith used to walk up and down the room while he dictated, and that the consequence is that his sentences are nearly all the same length, each containing as much as the amanuensis could write down while the author took a single turn.[228] This is excessive acuteness. Smith's sentences are not by any means all of one length, or all of the same construction. It need only be added that the habit of dictating would in his case arise naturally from his slow and laboured penmanship. As I have mentioned the house in which the _Wealth of Nations_ was composed, it may be added that it stood in the main street of the town, but its garden ran down to the beach, and that it was only pulled down in 1844, without anybody in the place realising at the moment, though it has been a cause of much regret since, that they were suffering their most interesting association to be destroyed. An engraving of it, however, exists. FOOTNOTES: [201] Adams's _Works_, ix. 589. [202] Adams's _Works_, iii. 276. [203] Secretary of the Royal Society. The letter was probably in acknowledgment of the intimation of his election as Fellow. [204] Mr. Adams is Adam the architect, and Mrs. Montagu is the well-known Mrs. Elizabeth Montagu of Portman Square, whose hospitable house was a rival to any of the most brilliant salons of Paris. [205] _Hume MSS._, R.S.E. Library. [206] Burton's _Life of Hume_, ii. 390. [207] _Hume MSS._, R.S.E. Library. [208] Carlyle's _Autobiography_, p. 489. [209] Sinclair's _Life of Sir John Sinclair_, i. 37. [210] Fraser's _Scotts of Buccleuch_, I. lxxxviii., II. 406. [211] Brougham's _Men of Letters_, ii. 219. [212] Brougham's Men of Letters, ii. 219. [213] Burton's _Life of Hume_, ii. 429. [214] _Ibid._, ii. 433. [215] _Hume MSS._, R.S.E. Library. Partially published by Burton. [216] Sir James Steuart's _Inquiry into the Principles of Political Economy_ was published in 1767. [217] Published by Professor Thorold Rogers in the _Academy_ of 28th February 1885. [218] _Caldwell Papers_, iii. 207. [219] _Wealth of Nations_, Book I. chap. xi. [220] _Ibid._, Book IV. chap. vii. [221] _Wealth of Nations_, Book IV. chap. vii. [222] _Ibid._, Book V. chap. iii. [223] _Ibid._, Book V. chap. i. [224] From the suppression of the Indian supervisorship; see p. 255. [225] _Hume MSS._, R.S.E. Library. [226] _Caldwell Papers_, i. 192. [227] Rogers' _Social Life of Scotland_, iii. 181. [228] Sinclair's _Old Times and Distant Places_, p. 9. CHAPTER XVII LONDON 1773-1776. _Aet._ 50-53 In the spring of 1773, Smith, having, as he thought, virtually completed the _Wealth of Nations_, set out with the manuscript for London, to give it perhaps some finishing touches and then place it in the hands of a publisher. But his labours had told so seriously on his health and spirits that he thought it not improbable he might die, and even die suddenly, before the work got through the press, and he wrote Hume a formal letter before he started on his journey, constituting him his literary executor, and giving him directions about the destination of the various unpublished manuscripts that lay in his depositories:-- MY DEAR FRIEND--As I have left the care of all my literary papers to you, I must tell you that except those which I carry along with me, there are none worth the publishing but a fragment of a great work which contains a history of the astronomical systems that were successively in fashion down to the time of Descartes. Whether that might not be published as a fragment of an intended juvenile work I leave entirely to your judgment, tho' I begin to suspect myself that there is more refinement than solidity in some parts of it. This little work you will find in a thin folio paper book in my writing-desk in my book-room. All the other loose paper which you will find either in that desk or within the glass folding-doors of a bureau which stands in my bedroom, together with about eighteen thin paper folio books, which you will likewise find within the same glass folding-doors, I desire may be destroyed without any examination. Unless I die very suddenly, I shall take care that the Papers I carry with me shall be carefully sent to you.--I ever am, my dear friend, most faithfully yours, ADAM SMITH. EDINBURGH, _16th April 1773_. _To_ DAVID HUME, Esq., 9 St. Andrew's Square, Edinburgh.[229] Smith went to London shortly after writing this letter, and spent most of the next four years there. We find him there in May 1773, for he is admitted to the Royal Society on the 27th of that month; he is there in September, for Ferguson then writes to him as if he were still there. He is there in February 1774, for Hume writes him in that month, "Pray what accounts are these we hear of Franklyn's conduct?"--a question he would hardly have addressed except to one in a better position for hearing the truth about Franklin than he was himself. He is there in September 1774, for he writes Cullen from town in that month, and speaks of having been for some time in it. He is there in January 1775, for on the 11th Bishop Percy met him at dinner at Sir Joshua Reynolds', along with Johnson, Burke, Gibbon, and others.[230] He is there in February, for a young friend, Patrick Clason, addresses a letter to him during that month to the care of Cadell, the bookseller, in the Strand. He is there in December, for on the 27th Horace Walpole writes the Countess of Ossory that "Adam Smith told us t'other night at Beauclerk's that Major Preston--one of two, but he is not sure which--would have been an excellent commander some years hence if he had seen any service. I said it was a pity that the war had not been put off till the Major should be some years older."[231] He returned to Scotland in April 1776, about a month after his book was issued, but we find him back again in London in January 1777, for his letter to Governor Pownall in that month is dated from Suffolk Street. Whether the first three years of his stay in London was continuous I cannot say, but it would almost appear so from the circumstance that nothing remains to indicate the contrary. Those three years were spent upon the _Wealth of Nations_. Much of the book as we know it must have been written in London. When he went up to London he had no idea that any fresh investigations he contemplated instituting there would detain him so long. He wrote Pulteney, as we have seen, even in the previous September that the book would be finished in a few months, and he led not only Hume but Adam Ferguson also to look for its publication in 1773. In a footnote to the fourth edition of his _History of Civil Society_, published in that year, Ferguson says, "The public will probably soon be furnished (by Mr. Smith, author of the _Theory of Moral Sentiments_) with a theory of national economy equal to what has ever appeared on any subject of science whatever." But the researches the author now made in London must have been much more important than he expected, and have occasioned extensive alterations and additions, so that Hume, in congratulating him on the eventual appearance of the work in 1776, writes, "It is probably much improved by your last abode in London." Whole chapters seem to have been put through the forge afresh; and on some of them the author has tool-marked the date of his handiwork himself. A very circumstantial account of Smith's London labours at the book comes from America. Mr. Watson, author of the _Annals of Philadelphia_, says: "Dr. Franklin once told Dr. Logan that the celebrated Adam Smith when writing his _Wealth of Nations_ was in the habit of bringing chapter after chapter as he composed it to himself, Dr. Price, and others of the literati; then patiently hear their observations and profit by their discussions and criticisms, sometimes submitting to write whole chapters anew, and even to reverse some of his propositions."[232] Franklin's remark may have itself undergone enlargement before it appeared in print, but though it may have been exaggerated, there seems no ground for rejecting it altogether. Smith became acquainted with Franklin in Edinburgh in 1759, and could not fail to see much of him in London, because some of the most intimate of his own London friends, Sir John Pringle and Strahan, for example, were also among the most intimate friends of Franklin. Then a considerable proportion of the additions, which we know from the text of the _Wealth of Nations_ itself to have been made to the work during this London period, bear on colonial or American experience.[233] And as Smith always obtained a great deal of his information from the conversation of competent men, no one would be more likely than Franklin to be laid under contribution or to be able to contribute something worth learning on such questions. The biographer of Franklin states that his papers which belong to this particular period "contain sets of problems and queries as though jotted down at some meeting of philosophers for particular consideration at home," and then he adds: "A glance at the index of the _Wealth of Nations_ will suffice to show that its author possessed just that kind of knowledge of the American Colonies which Franklin was of all men the best fitted to impart. The allusions to the Colonies may be counted by hundreds; illustrations from their condition and growth occur in nearly every chapter. We may go further and say that the American Colonies constitute the experimental evidence of the essential truth of the book, without which many of its leading positions had been little more than theory."[234] It ought of course to be borne in mind that Smith had been in the constant habit of hearing much about the American Colonies and their affairs during his thirteen years in Glasgow from the intelligent merchants and returned planters of that city. After coming to London Smith seems to have renewed his acquaintance with Lord Stanhope, who sought Smith's counsel as to a tutor for his ward the Earl of Chesterfield, and appointed Adam Ferguson on Smith's recommendation. The negotiations with Ferguson were conducted through Smith, and some of Ferguson's letters to Smith on the matter still exist, but contain nothing of any interest for the biography of the latter. But in contemplation of Ferguson's going abroad with the Earl of Chesterfield, Hume, ever anxious to have his friend near him, sounds Smith on the possibility of his agreeing to act during Ferguson's absence as his substitute in the Moral Philosophy chair at Edinburgh. Smith, however, was apparently unwilling to undertake that duty. As we have already seen, he was strongly opposed to professorial absenteeism, and in the present case it was associated with unpleasant circumstances. The Town Council, the administrators of the College, refused to sanction Ferguson's absence, and called upon him either to stay at home or to resign his chair. Ferguson merely snapped his fingers, appointed young Dugald Stewart his substitute, and went off on his travels, quietly remarking that fools and knaves were necessary in the world to give other people something to do. Hume's letter is as follows:-- ST. ANDREW'S SQUARE, _13th February 1774_. DEAR SMITH--You are in the wrong for never informing me of your intentions and resolutions, if you have fix'd any. I am now obliged to write to you on a subject without knowing whether the proposal, or rather Hint, which I am to give you be an absurdity or not. The settlement to be made on Ferguson is a very narrow compensation for his class if he must lose it. He wishes to keep it and to serve by a Deputy in his absence. But besides that this scheme will appear invidious and is really scarce admissible, those in the Town Council who aim at filling the vacancy with a friend will strenuously object to it, and he himself cannot think of one who will make a proper substitute. I fancy that the chief difficulty would be removed if you could offer to supply his class either as his substitute or his successor, with a purpose of resigning upon his return. This notion is entirely my own, and shall never be known to Ferguson if it appear to you improper. I shall only say that he deserves this friendly treatment by his friendly conduct of a similar kind towards poor Russell's family. Pray what strange accounts are these we hear of Franklyn's conduct? I am very slow in believing that he has been guilty in the extreme degree that is pretended, tho' I always knew him to be a very factious man, and Faction next to Fanaticism is of all passions the most destructive of morality. I hear that Wedderburn's treatment of him before the Council was most cruel without being in the least blamable. What a pity![235] Smith's headquarters in London, to which Hume's letters to him were addressed, was the British Coffee-House in Cockspur Street, a great Scotch resort in last century, kept, as I have said, by a sister of his old Balliol friend, Bishop Douglas, "a woman," according to Henry Mackenzie, "of uncommon talents and the most agreeable conversation." Wedderburn founded a weekly dining club in this house, which Robertson and Carlyle used to frequent when they came to town, and no doubt Smith would do the same, for many of his Scotch friends belonged to it--Dr. William Hunter, John Home, Robert Adam the architect, and Sir Gilbert Elliot. Indeed, though men like Goldsmith, Sir Joshua Reynolds, Garrick, and Richard Cumberland were members, it was predominantly a Scotch club, and both Carlyle and Richard Cumberland say an extremely agreeable one. But during his residence at this period in London Smith was in 1775 admitted to the membership of a much more famous club, the Literary Club of Johnson and Burke and Reynolds at the Turk's Head in Gerrard Street, and he no doubt attended their fortnightly dinners. The only members present on the night of his election were Beauclerk, Gibbon, Sir William Jones, and Sir Joshua Reynolds. Boswell, writing his friend Temple on 28th April 1776, immediately after the _Wealth of Nations_ was published, says, "Smith too is now of our club. It has lost its select merit." But another member of the club, Dean Barnard--husband of the authoress of "Auld Robin Gray"--appreciates his worth better, though he wrote the lines in which his appreciation occurs before the _Wealth of Nations_ appeared, and his words may therefore be taken perhaps to convey the impression made by Smith's conversation. One of the Dean's verses runs-- If I have thoughts and can't express 'em, Gibbon shall teach me how to dress 'em In form select and terse; Jones teach me modesty and Greek, Smith how to think, Burke how to speak, And Beauclerk to converse. Smith's conversation seems, from all the accounts we have of it, to have been the conversation of a thinker, often lecturing rather than talk, but always instructive and solid. William Playfair, the brother of Professor John Playfair, the mathematician, says, "Those persons who have ever had the pleasure to be in his company may recollect that even in his common conversation the order and method he pursued without the smallest degree of formality or stiffness were beautiful, and gave a sort of pleasure to all who listened to him."[236] Bennet Langton mentions the "decisive professorial manner" in which he was used to talk, and according to Boswell, Topham Beauclerk conceived a high opinion of Smith's conversation at first, but afterwards lost it, for reasons unreported, though if Beauclerk was himself, as Dean Barnard indicates, the model converser of the club, he would probably grow tired of expository lectures, however excellent and instructive. A criticism of Garrick's is more curious. After listening to Smith one evening, the great player turned to a friend and whispered, "What say you to this? eh, flabby, eh?" but whatever may have been the case that particular evening, flabbiness at least was not a characteristic of Smith's talk. It erred rather in excess of substance. He had Johnson's solidity and weight, without Johnson's force and vivacity. Henry Mackenzie, author of the _Man of Feeling_, talking of Smith soon after his death with Samuel Rogers, said of him, "With a most retentive memory, his conversation was solid beyond that of any man. I have often told him after half an hour's conversation, 'Sir, you have said enough to make a book.'"[237] His conversation, moreover, was particularly wide in its range. Dugald Stewart says that though Smith seldom started a topic of conversation, there were few topics raised on which he was not found contributing something worth hearing, and Boswell, no very partial witness, admits that his talk evinced "a mind crowded with all manner of subjects." Like Sir Walter Scott, Smith has been unjustly accused of habitually abstaining from conversing on the subjects he had made his own. Boswell tells us that Smith once said to Sir Joshua Reynolds that he made it a rule in company never to talk of what he understood, and he alleges the reason to have been that Smith had bookmaking ever in his mind, and the fear of the plagiarist ever before his eyes. But the fact thus reported by Boswell cannot be accepted exactly as he reports it, and his explanation cannot be accepted at all. Men able to converse on a variety of subjects will naturally prefer to converse on those unconnected with their own shop, because they go into company for diversion from their own shop, but it is a question of company and circumstances. If Smith ever made any such rule as Boswell speaks of, he certainly seems to have honoured it as often by the breach as by the observance, for when his friends brought round the conversation to his special lines of research, he never seems to have failed to give his ideas quite freely, nay, as may be seen from the remark just quoted from Henry Mackenzie, not freely merely but abundantly--as many as would make a book. He does not appear to have been in this respect a grudging giver. I have already quoted his remark on hearing of Blair's borrowing some of his juridical ideas, "There's enough left." When Sir John Sinclair was writing his _History of the Revenue_ Smith offered him the use of everything, either printed or manuscript, in his possession bearing upon the subject. And if it is true that he was discussing his own book chapter by chapter with Franklin, Price, and others, about the very period when this remark to Sir Joshua purports to have been made, it appears most unlikely that he could have thought of setting any churlish watch on his lips in ordinary conversation. But however it be with his disposition to talk about his own pursuits, we know from Dugald Stewart that he was very fond of talking of subjects remote from them, and as Stewart says, he was never more entertaining than when he gave a loose rein to his speculation on subjects off his own line. "Nor do I think," says Stewart, "I shall be accused of going too far when I say that he was scarcely ever known to start a new topic himself, or to appear unprepared upon those topics that were introduced by others. Indeed, his conversation was never more amusing than when he gave a loose rein to his genius upon the very few branches of knowledge of which he only possessed the outlines."[238] One of his defects, according to both Stewart and Carlyle, was his poor penetration into personal character; but he was very fond of drawing the character of any person whose name came up in conversation, and Stewart says his judgments of this kind, though always decided and lively, were generally too systematic to be just, leaning ever, however, to charity's side, and erring by partiality rather than prejudice; while Carlyle completes the description by stating that when any one challenged or disputed his opinion of a character, he would retrace his steps with the greatest ease and nonchalance and contradict every word he had been saying. Carlyle's statement is confirmed by the remarks of certain of Smith's other friends who speak incidentally of the amusing inconsistencies in which he indulged in private conversation. He was fond of starting theories and supporting them, but it is not so easy to explain a man on a theory as to explain some abstract subject on a theory. His voice seems to have been harsh, his utterance often stammering, and his manner, especially among strangers, often embarrassed, but many writers speak of the remarkable animation of his features as he warmed to his subject, and of the peculiar radiancy of his smile. "His smile of approbation," says Dr. Carlyle, "was captivating." "In the society of those he loved," says Stewart, "his features were often brightened with a smile of inexpressible benignity." While living in London, Smith, along with Gibbon, attended Dr. William Hunter's lectures on anatomy,[239] as we are told by a writer who was one of Hunter's students at the time, and during that very period he had an opportunity of vindicating the value of the lectures of private teachers of medicine like Hunter against pretensions to monopoly set up at the moment on behalf of the universities. In a long letter written to Cullen in September 1774 Smith defends with great vigour and vivacity the most absolute and unlimited freedom of medical education, treating the University claims as mere expressions of the craft spirit, and recognising none of those exceptional features of medical education which have constrained even the most extreme partisans of economic liberty now to approve of government interference in that matter. The letter was occasioned by an agitation which had been long gathering strength in Scotch medical circles against the laxity with which certain of the Scotch universities--St. Andrews and Aberdeen in particular--were in the habit of conferring their medical degrees. The candidate was not required either to attend classes or to pass an examination, but got the degree by merely paying the fees and producing a certificate of proficiency from two medical practitioners, into whose qualifications no inquiry was instituted. In London a special class of agent--the broker in Scotch degrees--sprang up to transact the business, and England was being overrun with a horde of Scotch doctors of medicine who hardly knew a vein from an artery, and had created south of the Border a deep prejudice against all Scotch graduates, even those from the unoffending Universities of Edinburgh and Glasgow. A case seemed to be brought home even to Edinburgh in the year 1771. The offender--one Leeds--had not, indeed, got his degree from Edinburgh without examination, but he showed his competency to be so doubtful in his duties at the London Hospital that the governors made it a condition of the continuance of his services that he should obtain the diploma of the London College of Physicians, and he failed to pass this London examination and was deprived of his post. This case created much sensation both in London and Edinburgh, and when the Duke of Buccleugh was elected an honorary Fellow of the College of Physicians of Edinburgh in 1774, he made that body something like an offer to take up the question of examination for medical degrees in Parliament and try what could be done to remove this reproach from his country. The College of Physicians thereupon drew up a memorial to Government for the Duke of Buccleugh to present, praying for the prohibition of the universities from granting medical degrees, except honorary ones, to any person in absence, or to any person without first undergoing a personal examination into his proficiency, and bringing a certificate of having attended for two years at a university where physic was regularly taught, and of having applied himself to all branches of medical study. They add that they fix on two years not because they think two years enough, but because that was the term adopted by the London College of Physicians, and they suggest the appointment of a royal commission of inquiry if Government is not prepared for immediate action. The Duke of Buccleugh sent the memorial for the consideration of Adam Smith, and asked him to write to Cullen his views on the subject. Smith thought that it was not very practicable in any event for the public to obtain a satisfactory test of medical efficiency, that it was certainly not practicable if the competition by the private teachers were suppressed, that otherwise the medical examination might become as great a quackery as the medical degree, and that the whole question was a mere squabble between the big quack and the little one. He unfolds his views in the following letter:-- DEAR DOCTOR--I have been very much in the wrong both to you and to the Duke of Buccleugh, to whom I certainly promised to write you in a post or two, for having delayed so long to fulfil my promise. The truth is that some occurrences which interested me a good deal, and which happened here immediately after the Duke's departure, made me forget altogether a business which, I do acknowledge, interested me very little. In the present state of the Scotch universities I do most sincerely look upon them as, in spite of all their faults, without exception the best seminaries of learning that are to be found anywhere in Europe. They are perhaps, upon the whole, as unexceptionable as any public institutions of that kind, which all contain in their very nature the seeds and causes of negligency and corruption, have ever been or are ever likely to be. That, however, they are still capable of amendment, and even of considerable amendment, I know very well, and a Visitation (that is, a Royal Commission) is, I believe, the only proper means of procuring them this amendment. Before any wise man, however, would apply for the appointment of so arbitrary a tribunal in order to improve what is already, upon the whole, very well, he ought certainly to know with some degree of certainty, first, who are likely to be appointed visitors, and secondly, what plan of reformation those visitors are likely to follow; but in the present multiplicity of pretenders to some share in the prudential management of Scotch affairs, these are two points which, I apprehend, neither you nor I, nor the Solicitor-General nor the Duke of Buccleugh, can possibly know anything about. In the present state of our affairs, therefore, to apply for a Visitation in order to remedy an abuse which is not perhaps of great consequence to the public, would appear to me to be extremely unwise. Hereafter, perhaps, an opportunity may present itself for making such an application with more safety. With regard to an admonition, or threatening, or any other method of interfering in the affairs of a body corporate which is not perfectly and strictly regular and legal, these are expedients which I am convinced neither his Majesty nor any of his present Ministers would choose to employ either now or at any time hereafter in order to obtain an object even of much greater consequence than this reformation of Scottish degrees. You propose, I observe, that no person should be admitted to examination for his degrees unless he brought a certificate of his having studied at least two years in some university. Would not such a regulation be oppressive upon all private teachers, such as the Hunters, Hewson, Fordyce, etc.? The scholars of such teachers surely merit whatever honour or advantage a degree can confer much more than the greater part of those who have spent many years in some universities, where the different branches of medical knowledge are either not taught at all, or are taught so superficially that they had as well not be taught at all. When a man has learnt his lesson very well, it surely can be of little importance where or from whom he has learnt it. The monopoly of medical education which this regulation would establish in favour of universities would, I apprehend, be hurtful to the lasting prosperity of such bodies corporate. Monopolists very seldom make good work, and a lecture which a certain number of students must attend, whether they profit by it or no, is certainly not very likely to be a good one. I have thought a great deal upon this subject, and have inquired very carefully into the constitution and history of several of the principal universities of Europe; I have satisfied myself that the present state of degradation and contempt into which the greater part of these societies have fallen in almost every part of Europe arises principally, first, from the large salaries which in some universities are given to professors, and which render them altogether independent of their diligence and success in their professions; and secondly, from the great number of students who, in order to get degrees or to be admitted to exercise certain professions, or who, for the sake of bursaries, exhibitions, scholarships, fellowships, etc., are obliged to resort to certain societies of this kind, whether the instructions which they are likely to receive there are or are not worth the receiving. All these different cases of negligence and corruption no doubt take place in some degree in all our Scotch universities. In the best of them, however, these cases take place in a much less degree than in the greater part of other considerable societies of the same kind; and I look upon this circumstance as the real cause of their present excellence. In the Medical College of Edinburgh in particular the salaries of the professors are insignificant. There are few or no bursaries or exhibitions, and their monopoly of degrees is broken in upon by all other universities, foreign and domestic. I require no other explication of its present acknowledged superiority over every other society of the same kind in Europe. To sign a certificate in favour of any man whom we know little or nothing about is most certainly a practice which cannot be strictly vindicated. It is a practice, however, which from mere good-nature and without interest of any kind the most scrupulous men in the world are sometimes guilty of. I certainly do not mean to defend it. Bating the unhandsomeness of the practice, however, I would ask in what manner does the public suffer by it? The title of Doctor, such as it is, you will say, gives some credit and authority to the man upon whom it is bestowed; it extends his practice and consequently his field for doing mischief; it is not improbable too that it may increase his presumption and consequently his disposition to do mischief. That a degree injudiciously conferred may sometimes have some little effect of this kind it would surely be absurd to deny, but that this effect should be very considerable I cannot bring myself to believe. That Doctors are sometimes fools as well as other people is not in the present time one of those profound secrets which is known only to the learned. The title is not so very imposing, and it very seldom happens that a man trusts his health to another merely because that other is a Doctor. The person so trusted has almost always some knowledge or some craft which would procure him nearly the same trust, though he was not decorated with any such title. In fact the persons who apply for degrees in the irregular manner complained of are, the greater part of them, surgeons or apothecaries who are in the custom of advising and prescribing, that is, of practising as physicians; but who, being only surgeons and apothecaries, are not fee-ed as physicians. It is not so much to extend their practice as to increase their fees that they are desirous of being made Doctors. Degrees conferred even undeservedly upon such persons can surely do very little harm to the public. When the University of St. Andrews very rashly and imprudently conferred a degree upon one Green who happened to be a stage-doctor, they no doubt brought much ridicule and discredit upon themselves, but in what respect did they hurt the public? Green still continued to be what he was before, a stage-doctor, and probably never poisoned a single man more than he would have done though the honours of graduation had never been conferred upon him. Stage-doctors, I must observe, do not much excite the indignation of the faculty; more reputable quacks do. The former are too contemptible to be considered as rivals; they only poison the poor people; and the copper pence which are thrown up to them in handkerchiefs could never find their way to the pocket of a regular physician. It is otherwise with the latter: they sometimes intercept a part of what perhaps would have been better bestowed in another place. Do not all the old women in the country practise physic without exciting murmur or complaint? And if here and there a graduated Doctor should be as ignorant as an old woman, where can be the great harm? The beardless old woman indeed takes no fees; the bearded one does, and it is this circumstance, I strongly suspect, which exasperates his brethren so much against him. There never was, and I will venture to say there never will be, a university from which a degree could give any tolerable security that the person upon whom it had been conferred was fit to practise physic. The strictest universities confer degrees only upon students of a certain standing. Their real motive for requiring this standing is that the student may spend more money among them and that they may make more profit by him. When he has attained this standing therefore, though he still undergoes what they call an examination, it scarce ever happens that he is refused his degree. Your examination at Edinburgh, I have all reason to believe, is as serious, and perhaps more so, than that of any other university in Europe; but when a student has resided a few years among you, has behaved dutifully to all his professors, and has attended regularly all their lectures, when he comes to his examination I suspect you are disposed to be as good-natured as other people. Several of your graduates, upon applying for license from the College of Physicians here, have had it recommended to them to continue their studies. From a particular knowledge of some of the cases I am satisfied that the decision of the College in refusing them their license was perfectly just--that is, was perfectly agreeable to the principles which ought to regulate all such decisions; and that the candidates were really very ignorant of their profession. A degree can pretend to give security for nothing but the science of the graduate; and even for that it can give but a very slender security. For his good sense and discretion, qualities not discoverable by an academical examination, it can give no security at all; but without these the presumption which commonly attends science must render it in the practice of physic ten times more dangerous than the grossest ignorance when accompanied, as it sometimes is, with some degree of modesty and diffidence. If a degree, in short, always has been, and, in spite of all the regulations which can be made, always must be, a mere piece of quackery, it is certainly for the advantage of the public that it should be understood to be so. It is in a particular manner for the advantage of the universities that for the resort of students they should be obliged to depend, not upon their privileges but upon their merit, upon their abilities to teach and their diligence in teaching; and that they should not have it in their power to use any of those quackish arts which have disgraced and degraded the half of them. A degree which can be conferred only upon students of a certain standing is a statute of apprenticeship which is likely to contribute to the advancement of science, just as other statutes of apprenticeship have contributed to that of arts and manufactures. Those statutes of apprenticeship, assisted by other corporation laws, have banished arts and manufactures from the greater part of towns corporate. Such degrees, assisted by some other regulations of a similar tendency, have banished almost all useful and solid education from the greater part of universities. Bad work and high price have been the effect of the monopoly introduced by the former; quackery, imposture, and exorbitant fees have been the consequences of that established by the latter. The industry of manufacturing villages has remedied in part the inconveniences which the monopolies established by towns corporate had occasioned. The private interest of some poor Professors of Physic in some poor universities inconveniently situated for the resort of students has in part remedied the inconveniences which would certainly have resulted from that sort of monopoly which the great and rich universities had attempted to establish. The great and rich universities seldom graduated anybody but their own students, and not even these till after a long and tedious standing; five and seven years for a Master of Arts; eleven and sixteen for a Doctor of Law, Physic, or Divinity. The poor universities on account of the inconvenience of their situation, not being able to get many students, endeavoured to turn a penny in the only way in which they could turn it, and sold their degrees to whoever would buy them, generally without requiring any residence or standing, and frequently without subjecting the candidate even to a decent examination. The less trouble they gave, the more money they got, and I certainly do not pretend to vindicate so dirty a practice. All universities being ecclesiastical establishments under the immediate protection of the Pope, a degree from one of them gave all over Christendom very nearly the same privileges which a degree from any other could have given; and the respect which is to this day paid to foreign degrees, even in Protestant countries, must be considered as a remnant of Popery. The facility of obtaining degrees, particularly in physic, from those poor universities had two effects, both extremely advantageous to the public, but extremely disagreeable to graduates of other universities whose degrees had cost them much time and expense. First, it multiplied very much the number of doctors, and thereby no doubt sunk their fees, or at least hindered them from rising so very high as they otherwise would have done. Had the universities of Oxford and Cambridge been able to maintain themselves in the exclusive privilege of graduating all the doctors who could practise in England, the price of feeling the pulse might by this time have risen from two and three guineas, the price which it has now happily arrived at, to double or triple that sum; and English physicians might, and probably would, have been at the same time the most ignorant and quackish in the world. Secondly, it reduced a good deal the rank and dignity of a doctor, but if the physician was a man of sense and science it would not surely prevent his being respected and employed as a man of sense and science. If he was neither the one nor the other, indeed, his doctorship would no doubt avail him the less. But ought it in this case to avail him at all? Had the hopeful project of the rich and great universities succeeded, there would have been no occasion for sense or science. To have been a doctor would alone have been sufficient to give any man rank, dignity, and fortune enough. That in every profession the fortune of every individual should depend as much as possible upon his merit and as little as possible upon his privilege is certainly for the interest of the public. It is even for the interest of every particular profession, which can never so effectually support the general merit and real honour of the greater part of those who exercise it, as by resting on such liberal principles. Those principles are even most effectual for procuring them all the employment which the country can afford. The great success of quacks in England has been altogether owing to the real quackery of the regular physicians. Our regular physicians in Scotland have little quackery, and no quack accordingly has ever made his fortune among us. After all, this trade in degrees I acknowledge to be a most disgraceful trade to those who exercise it; and I am extremely sorry that it should be exercised by such respectable bodies as any of our Scotch universities. But as it serves as a corrective of what would otherwise soon grow up to be an intolerable nuisance, the exclusive and corporation spirit of all thriving professions and of all great universities, I deny that it is hurtful to the public. What the physicians of Edinburgh at present feel as a hardship is perhaps the real cause of their acknowledged superiority over the greater part of other physicians. The Royal College of Physicians there, you say, are obliged by their charter to grant a license without examination to all the graduates of Scotch universities. You are all obliged, I suppose, in consequence of this, to consult sometimes with very unworthy brethren. You are all made to feel that you must rest no part of your dignity upon your degree, a distinction which you share with the men in the world perhaps whom you despise the most, but that you must found the whole of it upon your merit. Not being able to derive much consequence from the character of Doctor, you are obliged perhaps to attend more to your character as men, as gentlemen, and as men of letters. The unworthiness of some of your brethren may perhaps in this manner be in part the cause of the very eminent and superior worth of many of the rest. The very abuse which you complain of may in this manner perhaps be the real source of your present excellence. You are at present well, wonderfully well, and when you are so, be assured there is always some danger in attempting to be better. Adieu, my dear Doctor; after having delayed to write to you I am afraid I shall _get my lug_ (ear) _in my lufe_ (hand), as we say, for what I have written. But I ever am, most affectionately yours, ADAM SMITH. LONDON, _20th September 1774_.[240] Whether this decided expression of unfavourable opinion on the part of his old and venerated tutor altered the Duke of Buccleugh's mind on the subject, or in any way prevented him from persevering in his contemplated application to Government, we have no means of knowing, but at any rate no further action seems to have been taken in the matter, and it was left to the Scottish universities themselves to remedy abuses which were seriously telling on their own interest and good name. The last year of Smith's residence in London was overcast by growing anxiety about the condition of his friend Hume, who had always enjoyed fairly good health till the beginning of the year 1775, and then seemed to fall rapidly away. As Smith said one evening at Lord Shelburne's to Dr. Price, who asked him about Hume's health, it seemed as if Hume was one of those persons who after a certain time of life go down not gradually but by jumps.[241] Under those circumstances Smith had determined as soon as his new book was out to go down to Edinburgh and if possible persuade Hume to come back with him to London, to try the effect of change of scene and a little wholesome diversion. But, bad correspondent that he was, he appears to have left Hume to gather his intentions from the reports of friends, and consequently received from Hume the following remonstrance a few weeks before the publication of his work:-- EDINBURGH, _8th February, 1776_. DEAR SMITH--I am as lazy a correspondent as you, but my anxiety about you makes me write. By all accounts your book has been printed long ago, yet it has never yet been so much as advertised. What is the reason? If you wait till the fate of Bavaria be decided you may wait long. By all accounts you intend to settle with us this spring, yet we hear no more of it. What is the reason? Your chamber in my house is always unengaged; I am always at home; I expect you to land here. I have been, am, and shall be probably in an indifferent state of health. I weighed myself t'other day, and find I have fallen five compleat stones. If you delay much longer I shall probably disappear altogether. The Duke of Buccleugh tells me that you are very zealous in American affairs. My notion is that this matter is not so important as is commonly imagined. If I be mistaken I shall probably correct my error when I see you or read you. For navigation and general commerce may suffer more than our manufactures. Should London fall as much in its size as I have done it will be the better. It is nothing but a Hulk of bad and unclean Humours.[242] The American question was of course the great question of the hour, for the Colonies were already a year in active rebellion, and they issued their declaration of independence but a few months later. Smith followed the struggle, as we see from many evidences in the concluding portion of the _Wealth of Nations_, with the most patriotic interest and anxiety, and having long made a special study of the whole problem of colonial administration, had arrived at the most decided opinions not only on the rights and wrongs of the particular quarrel then at issue, but on the general policy it was requisite to adopt in the government of dependencies. Hume was in favour of separation, because he believed separation to be inevitable sooner or later in the ordinary course of nature, like the separation of the fruit from the tree or the child from the parent. But Smith, shunning all such misleading metaphors, held that there need never be any occasion for separation as long as mother country and dependency were wise enough to keep together, and that the sound policy to adopt was really the policy of closer union--of imperial federation, as we should now call it. He would not say, "Perish dependencies," but "Incorporate them." He would treat a colony as but a natural expansion of the territory of the kingdom, and have its inhabitants enjoy the same rights and bear the same burdens as other citizens. He did not think it wrong to tax the Colonies; on the contrary, he would make them pay every tax the inhabitants of Great Britain had to pay; but he thought it wrong to put restrictions on their commerce from which the commerce of Great Britain was free, and he thought it wrong to tax them for imperial purposes without giving them representation in the Imperial Parliament--full and equal representation, "bearing the same proportion to the produce of their taxes as the representation of Great Britain might bear to the produce of the taxes levied upon Great Britain." The union he contemplated was to be more than federal; it was to preclude home rule by local assemblies; it was to be like the union which had been established with Scotland, and which he strongly desired to see established with Ireland; and the Imperial Parliament in London was to make laws for the local affairs of the provinces across the Atlantic exactly as it made laws for the local affairs of the province across the Tweed. He shrank from none of the consequences of his scheme, admitting even that when the Colonies grew in population and wealth, as grow they must, till the real centre of empire changed, the time would then arrive when the American members of the Imperial Parliament would far outnumber the British, and the seat of Parliament itself would require to be transferred from London to some Constantinople on the other side of the Atlantic. He was quite sensible that this scheme of his would be thought wild and called a "new Utopia," but he was not one of those who counted the old Utopia of Sir Thomas More to be either useless or chimerical, and he says that this Utopia of his own is "no more useless or chimerical than the old one." The difficulties it would encounter came, he says, "not from the nature of things, but from the prejudices and opinions of the people both on this and on the other side of the Atlantic." He held, moreover, very strongly that a union of this kind was the only means of making the Colonies a useful factor instead of a showy and expensive appendage of the empire, and the only alternative that could really prevent their total separation from Great Britain. He pleaded for union, too, not merely for the salvation of the Colonies to the mother country, but even more for the salvation of the Colonies to themselves. Separation merely meant mediocrity for Great Britain, but for the Colonies it meant ruin. There would no longer be any check on the spirit of rancorous and virulent faction which was always inseparable from small democracies. The coercive power of the mother country had hitherto prevented the colonial factions from breaking out into anything worse than brutality and insult, but if that coercive power were entirely taken away they would probably soon break out into open violence and bloodshed.[243] The event has falsified the last anticipation, but this is not the place to criticise Smith's scheme. It was only requisite to recall for a moment the ideas which, according to the Duke of Buccleugh's statement to Hume, Smith was at this time so zealously working for in the important circles in which he then moved in London. FOOTNOTES: [229] _Hume MSS._, R.S.E. Library. [230] Add. MSS., 32,336. It must have been during this period that Smith entertained Reynolds at dinner at Mrs. Hill's, Dartmouth Street, Westminster, on Sunday 11th March, and not, as Mr. Tom Taylor places it, in 1764, from finding the dinner engagement noted on "a tiny old-fashioned card bearing the name of 'Mr. Adam Smith'" lying in one of Reynolds' pocket-books for 1764. In March 1764 Smith, as we know, was in France, and Mr. Taylor must have mistaken the year for 1774, unless, indeed, it may have been 1767. [231] Walpole's _Letters_, vi. 302. [232] Watson's _Annals of Philadelphia_, i. 533. [233] See above, pp. 256-7. [234] Parton's _Life of Franklin_, i. 537. [235] _Hume MSS._, R.S.E. Library. [236] Playfair's edition of _Wealth of Nations_, I. xiii. [237] Clayden's _Early Life of Samuel Rogers_, p. 168. [238] _Works_, v. 519. [239] Taylor's _Records of my Life_, ii. 262. [240] Thomson's _Life of Cullen_, i. 481. [241] Notes of S. Rogers' Conversation. Add. MSS., 32, 571. [242] Burton's _Life of Hume_, ii. 483. [243] _Wealth of Nations_, Book V. chap. iii. CHAPTER XVIII "THE WEALTH OF NATIONS" 1776. _Aet._ 52 The _Inquiry into the Nature and Causes of the Wealth of Nations_ was at length published on the 9th of March 1776. Bishop Horne, one of Smith's antagonists, of whom we shall presently hear more, said the books which live longest are those which have been carried longest in the womb of the parent. The _Wealth of Nations_ took twelve years to write, and was in contemplation for probably twelve years before that. It was explicitly and publicly promised in 1759, in the concluding paragraph of the _Theory of Moral Sentiments_, though it is only the partial fulfilment of that promise. The promise is: "I shall in another discourse endeavour to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns policy revenue and arms, and whatever else is the object of law." In speaking of this promise in the preface of the sixth edition of the _Theory_ in 1790, Smith says, "In the _Inquiry concerning the Nature and Causes of the Wealth of Nations_ I have partially executed this promise, at least so far as concerns policy revenue and arms." Now doubtless when Smith began writing his book in Toulouse he began it on the large plan originally in contemplation, and some part of the long delay that took place in its composition is probably to be explained by the fact that he would have possibly been a considerable time at work before he determined to break his book in two, and push on meanwhile with the section on policy revenue and arms, leaving to a separate publication in the future his discussion of the theory of jurisprudence. The work was published in two vols. 4to, at the price of £1:16s. in boards, and the author uses this time all his honours on the title-page, describing himself as Adam Smith, LL.D. and F.R.S., formerly Professor of Moral Philosophy in the University of Glasgow. What was the extent of this edition, or the terms, as between author and publisher, on which it was put out, is not exactly known. The terms were not half-profits, for that arrangement is proposed by Smith for the second edition as if it were a new one, and is accepted in the same way by Strahan, who in a letter which I shall presently quote, pronounces it a "very fair" proposal, "and therefore very agreeable to Mr. Cadell and me"; nor was it printed for the author, for the presentation copies he gave away were deducted from the copy money he received. On the whole, it seems most probable that the book was purchased from him for a definite sum, and as he mentions in his letter of the 13th November 1776 that he had received, £300 of his money at that time, and had still a balance owing to him, one may reasonably conjecture that the full sum was £500--the same sum Cadell's firm had paid for the last economic work they had undertaken, Sir James Steuart's _Inquiry into the Principles of Political Economy_. The book sold well. The first edition, of whose extent, however, we are ignorant, was exhausted in six months, and the sale was from the first better than the publishers expected, for on the 12th of April, when it had only been a month out, Strahan takes notice of a remark of David Hume that Smith's book required too much thought to be as popular as Gibbon's, and states, "What you say of Mr. Gibbon's and Dr. Smith's book is exactly just. The former is the most popular work; but the sale of the latter, though not near so rapid, has been more than I could have expected from a work that requires much thought and reflection (qualities that do not abound among modern readers) to peruse to any purpose."[244] The sale is the more remarkable because it was scarce to any degree helped on by reviews, favourable or otherwise. The book was not noticed at all, for example, in the _Gentleman's Magazine_, and it was allowed only two pages in the _Annual Register_, while in the same number Watson's _History of Philip_ got sixteen. This review of the book, however, was probably written by Burke. Smith speaks in one of his letters to Strahan of having distributed numerous presentation copies. One of the first of these was of course sent to his old friend David Hume, and that copy, by the way, with its inscription, probably still exists, having been possessed for a time by the late Mr. Babbage. Hume acknowledged receipt of it in the following letter, which shows among other things that not even Hume had seen the manuscript of the book before publication:-- EDINBURGH, _1st April 1776_. EUGE! BELLE! DEAR MR. SMITH--I am much pleased with your performance, and the perusal of it has taken me from a state of great anxiety. It was a work of so much expectation, by yourself, by your friends, and by the public, that I trembled for its appearance, but am now much relieved. Not but that the reading of it necessarily requires so much attention, and the public is disposed to give so little that I shall still doubt for some time of its being at first very popular, but it has depth and solidity and acuteness, and is so much illustrated by curious facts that it must at last attract the public attention. It is probably much improved by your last abode in London. If you were here at my fireside, I should dispute some of your principles. I cannot think that the rent of farms makes any part of the price of the produce, but that the price is determined altogether by the quantity and the demand. It appears to me impossible that the King of France can take a seignorage of 8 per cent upon the coinage. Nobody would bring bullion to the mint, it would be all sent to Holland or England, where it might be coined and sent back to France for less than 2 per cent. Accordingly Necker says that the French king takes only 2 per cent of seignorage. But these and a hundred other points are fit only to be discussed in conversation, which till you tell me the contrary I still flatter myself with soon. I hope it will be soon, for I am in a very bad state of health and cannot afford a long delay. I fancy you are acquainted with Mr. Gibbon. I like his performance extremely, and have ventured to tell him that had I not been personally acquainted with him I should never have expected such an excellent work from the pen of an Englishman. It is lamentable to consider how much that nation has declined in literature during our time. I hope he did not take amiss this national reflection. All your friends here are in deep grief at present for the death of Baron Mure, which is an irreparable loss to our society. He was among the oldest and best friends I had in the world.[245] On the same day as Hume wrote this letter from Edinburgh, Gibbon wrote from London to Adam Ferguson and said among other things, "What an excellent work is that with which our common friend Mr. Adam Smith has enriched the public! An extensive science in a single book, and the most profound ideas expressed in the most perspicuous language. He proposes visiting you very soon, and I find he means to exert his most strenuous endeavours to persuade Mr. Hume to return with him to town. I am sorry to hear that the health and spirits of that truly great man are in a less favourable state than his friends could wish, and I am sure you will join your efforts in convincing him of the benefits of exercise, dissipation, and change of air." Some of Smith's personal friends seem to have entertained the common prejudice that a good work on commerce could not be reasonably expected from a man who had never been engaged in any branch of practical business, and seemed in outward air and appearance so ill fitted to succeed in such a line of business if he had engaged in it. One of these was Sir John Pringle, President of the Royal Society, and formerly, like Smith himself, Professor of Moral Philosophy at a Scotch university. When the _Wealth of Nations_ appeared Sir John Pringle remarked to Boswell that Smith, having never been in trade, could not be expected to write well on that subject any more than a lawyer upon physic, and Boswell repeated the remark to Johnson, who at once, however, sent it to the winds. "He is mistaken, sir," said the Doctor; "a man who has never been engaged in trade himself may undoubtedly write well upon trade, and there is nothing that requires more to be illustrated by philosophy than does trade. As to mere wealth--that is to say, money--it is clear that one nation or one individual cannot increase its store but by making another poorer; but trade procures what is more valuable, the reciprocation of the peculiar advantages of different countries. A merchant seldom thinks but of his own particular trade. To write a good book upon it a man must have extensive views; it is not necessary to have practised to write well upon a subject." It is not within the scope of a work like the present to give an account of the doctrines of the _Wealth of Nations_, or any estimate of their originality or value, or of their influence on the progress of science, on the policy and prosperity of nations, or on the practical happiness of mankind. Buckle, as we know, declared it to be "in its ultimate results probably the most important book that has ever been written"; a book, he said, which has "done more towards the happiness of man than has been effected by the united abilities of all the statesmen and legislators of whom history has preserved an authentic account";[246] and even those who take the most sober view of the place of this work in history readily admit that its public career, which is far from being ended yet, is a very remarkable story of successive conquest. It has been seriously asserted that the fortune of the book in this country was made by Fox quoting it one day in the House of Commons. But this happened in November 1783, after the book had already gone through two editions and was on the eve of appearing in a third. It is curious, however, that that was the first time it was quoted in the House, and it is curious, again, that the person to quote it then was Fox, who was neither an admirer of the book, nor a believer in its principles, nor a lover of its subject. He once told Charles Butler that he had never read the book, and the remark must have been made many years after its publication, for it was made at St. Anne's Hill, to which Fox only went in 1785. "There is something in all these subjects," the statesman added in explanation, "which passes my comprehension; something so wide that I could never embrace them myself nor find any one who did."[247] On another occasion, when he was dining one evening in 1796 at Sergeant Heywood's, Fox showed his hearty disdain for Smith and political economy together. The Earl of Lauderdale, who was himself an economist of great ability, and by no means a blind follower of Smith, made the remark that we knew nothing of political economy before Adam Smith wrote. "Pooh," said Fox, "your Adam Smiths are nothing, but" (he added, turning to the company) "that is his love; we must spare him there." "I think," replied Lauderdale, "he is everything." "That," rejoined Fox, "is a great proof of your affection." Fox was no believer in free trade, and actively opposed the Commercial Treaty with France in 1787 on the express and most illiberal ground that it proceeded from a novel system of doctrines, that it was a dangerous departure from the established principles of our forefathers, and that France and England were enemies by nature, and ought to be kept enemies by legislation. It is curious therefore that in a House where Smith had many admirers and not a few disciples, his book was never mentioned for near eight years after its appearance, and was mentioned then by an enemy of its principles. Fox's quotation from it on that occasion was of the most unimportant character. It was in his speech on the Address of Thanks to the Throne, and he said: "There was a maxim laid down in an excellent book upon the Wealth of Nations which had been ridiculed for its simplicity, but which was indisputable as to its truth. In that book it was stated that the only way to become rich was to manage matters so as to make one's income exceed one's expenses. This maxim applied equally to an individual and to a nation. The proper line of conduct therefore was by a well-directed economy to retrench every current expense, and to make as large a saving during the peace as possible."[248] To think of this allusion having any influence on the fortunes of the work is of course out of reason. It was never even mentioned in the House again till the year 1787, when Mr. Robert Thornton invoked it in support of the Commercial Treaty with France, and Mr. George Dempster read an extract from it in the debate on the proposal to farm the post-horse duties. It was quoted once in 1788, by Mr. Hussy on the Wool Exportation Bill, and not referred to again until Pitt introduced his Budget on the 17th February 1792. In then explaining the progressive accumulation of capital that was always spontaneously going on in a country when it was not checked by calamity or by vicious legislation, that great minister, a deep student of Smith's book and the most convinced of all Smith's disciples, made the remark: "Simple and obvious as this principle is, and felt and observed as it must have been in a greater or less degree even from the earliest periods, I doubt whether it has ever been fully developed and sufficiently explained but in the writings of an author of our own time, now unfortunately no more (I mean the author of the celebrated treatise on the _Wealth of Nations_), whose extensive knowledge of detail and depth of philosophical research will, I believe, furnish the best solution of every question connected with the history of commerce and with the system of political economy."[249] In the same year it was quoted by Mr. Whitbread and by Fox (from the exposition of the division of labour in the first book) in the debate on the armament against Russia, and by Wilberforce in his speech introducing his Bill for the Abolition of the Slave Trade. It was not mentioned in the House of Lords till 1793, when in the debate on the King's Message for an Augmentation of the Forces it was referred to by Smith's two old friends, the Earl of Shelburne (now Marquis of Lansdowne) and Alexander Wedderburn (now Lord Loughborough, and presiding over the House as Lord Chancellor, of England). The Marquis of Lansdowne said: "With respect to French principles, as they had been denominated, those principles had been exported from us to France, and could not be said to have originated among the population of the latter country. The new principles of government founded on the abolition of the old feudal system were originally propagated among us by the Dean of Gloucester, Mr. Tucker, and had since been more generally inculcated by Dr. Adam Smith in his work on the _Wealth of Nations_, which had been recommended as a book necessary for the information of youth by Mr. Dugald Stewart in his _Elements of the Philosophy of the Human Mind_." The Lord Chancellor in replying merely said that "in the works of Dean Tucker, Adam Smith, and Mr. Stewart, to which allusion had been made, no doctrines inimical to the principles of civil government, the morals or religion of mankind, were contained, and therefore to trace the errors of the French to these causes was manifestly fallacious."[250] Lord Lansdowne's endeavour to shield Smith's political orthodoxy under the countenance lent to his book by so safe and trusted a teacher of the sons of the Whig nobility as Dugald Stewart, is hardly less curious than his unreserved identification of the new political economy with that moving cloud of ideas which, under the name of French principles, excited so much alarm in the public mind of that time. For Dugald Stewart was in that same year 1793 (on the evenings of 21st January and 18th March) reading his _Memoir of Adam Smith_ to the Royal Society of Edinburgh, and he tells us himself (in 1810) how he was compelled to abandon the idea of giving a long account of Smith's opinions which he intended to have done, because at that period, he says, "it was not unusual, even among men of some talents and information, to confound studiously the speculative doctrines of political economy with those discussions concerning the first principles of government, which happened unfortunately at that time to agitate the public mind. The doctrine of a Free Trade was itself represented as of a revolutionary tendency, and some who had formerly prided themselves on their intimacy with Mr. Smith, and on their zeal for the propagation of his liberal system, began to call in question the expediency of subjecting to the disputation of philosophers the arcana of State policy, and the unfathomable wisdom of feudal ages."[251] People's teeth had been so set on edge by the events in France that, as Lord Cockburn tells us, when Stewart first began to give a course of lectures in the University on political economy in the winter 1801-2, the mere term "political economy" made them start. "They thought it included questions touching the constitution of governments, and not a few hoped to catch Stewart in dangerous propositions."[252] The French Revolution seems to have checked for a time the growing vogue of Smith's book and the advance of his principles in this country, just as it checked the progress of parliamentary and social reform, because it filled men's mind with a fear of change, with a suspicion of all novelty, with an unreasoning dislike of anything in the nature of a general principle. By French principles the public understood, it is true, much more than the abolition of all commercial and agrarian privilege which was advocated by Smith, but in their recoil they made no fine distinctions, and they naturally felt their prejudices strongly confirmed when they found men like the Marquis of Lansdowne, who were believers in the so-called French principles and believers at the same time in the principles of Adam Smith, declaring that the two things were substantially the same. Whether and how far Smith or Tucker had any influence on that development of opinion which eventuated in the Revolution, it would be difficult to gauge. Before Lord Lansdowne made this speech in 1793 two different translations of the _Wealth of Nations_ into French had already been published; a third (by the Abbé Morellet) had been written but not published, and a fourth was possibly under way, for it appeared in a few years. The first and worst of these translations, moreover (Blavet's), had already gone through three separate editions, after having originally run through a periodical in monthly sections for two years. These are all tokens that the work was unquestionably influencing French opinion. But if the French Revolution stopped for a time, as is most likely, the onward advance of Smith's free-trade principles, it does not seem to have exercised the same effect on the actual sale of the book. I do not know whether the successive editions were uniform in number of copies, but as many editions of the _Wealth of Nations_--four English and one Irish--appeared between the years 1791 and 1799 as between the years 1776 and 1786, and since none was called for from 1786 till 1791, the edition of 1786 took longer to sell off than the subsequent editions of 1791, 1793, and 1796. It is quite possible--indeed it is only natural--that the wave of active antagonism which, according to Stewart's testimony, rose against the principles of the book after the outbreak of the French Revolution would have helped on the sale of the book itself by keeping it more constantly under public attention, discussion, and, if you will, vituperation. The fortune of a book, like that of a public man, is often made by its enemies. But the very early influence of the _Wealth of Nations_ in the English political world is established by much better proofs than quotations in Parliament. It had actually shaped parts of the policy of the country years before it was ever publicly alluded to in either House. The very first budget after its publication bore its marks. Lord North was then on the outlook for fresh and comparatively unburdensome means of increasing the revenue, and obtained valuable assistance from the _Wealth of Nations_. He imposed two new taxes in 1777, of which he got the idea there; one on man-servants, and the other on property sold by auction. And the budget of 1778 owed still more important features to Smith's suggestions, for it introduced the inhabited house duty so strongly recommended by him, and the malt tax.[253] Then in the following year 1779 we find Smith consulted by statesmen like Dundas and the Earl of Carlisle on the pressing and anxious question of giving Ireland free trade. His answers still exist, and will appear later on in this work.[254] FOOTNOTES: [244] _Hume MSS._, R.S.E. [245] Burton's _Life of Hume_, ii. 487. [246] Buckle's _History of Civilisation_, ed. 1869, i. 214. [247] Butler's _Reminiscences_, i. 176. [248] _Parliamentary History_, xxiii. 1152. [249] _Parliamentary History_, xxix. 834. [250] _Ibid._, xxx. 330, 334. [251] Stewart's _Works_, x. 87. [252] Cockburn's _Memorials of My Own Time_, p. 174. [253] See Dowell's _Taxation_, ii. 169. [254] See below, pp. 350, 352. CHAPTER XIX THE DEATH OF HUME 1776 After the publication of his book in the beginning of March, Smith still dallied in London, without taking any steps to carry out his plan of going to see Hume in Edinburgh and bring him up to London. But some hope seems to have been entertained of Hume coming up even without Smith's persuasion and escort. John Home, who was in London and was in correspondence with him, thought so, but he at length received a direct negative to the idea in a letter from Hume himself, written on the 12th of April; and then Smith and John Home set out together immediately for the northern capital, but when the coach stopped at Morpeth, whom should they see standing in the door of the inn but Colin, their friend's servant? Hume had determined to undertake the journey to London after all to consult Sir John Pringle, and was now so far on his way. John Home thereupon accompanied Hume back to London, but Smith, having heard of his mother being taken ill, and being anxious about her, as she was now over eighty years old, continued his journey on to Kirkcaldy. At Morpeth, however, he and Hume had time to discuss the question of the publication, in the event of Hume's death, of certain of his unpublished works. Hume had already on the 4th of January 1776 made Smith his literary executor by will, leaving him full power over all his papers except the _Dialogues on Natural Religion_, which he explicitly desired him to publish. It was years since this work had been written, but its publication had been deferred in submission to the representations of Sir Gilbert Elliot and other friends as to the annoying clamour it was sure to excite. Its author, however, had never ceased to cherish a peculiar paternal pride in the work, and now that his serious illness forced him to face the possibility of its extinction, he resolved at last to save it from that fate, clamour or no clamour. If he lived, he would publish it himself; if he died, he charged his executor to do so. But this was a duty for which Smith had no mind. He was opposed to the publication of these _Dialogues_ on general grounds and under any editorship whatever, as will appear in the course of the correspondence which follows, but he had also personal scruples against editing them, of the same character as those which had already so long prevented their author himself from publishing them. He shrank from the public clamour in which it would involve him, and the injury it might do to his prospects of preferment from the Crown. When he met Hume at Morpeth accordingly he laid his mind fully before his friend, and the result was that Hume agreed to leave the whole question of publication or no publication absolutely to Smith's discretion, and on reaching London sent Smith a formal letter of authority empowering him to deal with the _Dialogues_ as he judged best. LONDON, _3rd May 1776_. MY DEAR FRIEND--I send you enclosed a new ostensible letter, conformably to your desire. I think, however, your scruples groundless. Was Mallet anywise hurt by his publication of Lord Bolingbroke? He received an office afterwards from the present king and Lord Bute, the most prudent men in the world, and he always justified himself by his sacred regard to the will of a dead friend. At the same time I own that your scruples have a specious appearance, but my opinion is that if upon my death you determine never to publish these papers, you should leave them sealed up with my brother and family, with some inscription that you reserve to yourself the power of reclaiming them whenever you think proper. If I live a few years longer I shall publish them myself. I consider an observation of Rochefoucault that the wind, though it extinguishes a candle, blows up a fire. You may be surprised to hear me talk of living years, considering the state you saw me in and the sentiments both I and all my friends at Edinburgh entertained on that subject. But though I cannot come up entirely to the sanguine notions of our friend John, I find myself very much recovered on the road, and I hope Bath waters and further journies may effect my cure. By the little company I have seen I find the town very full of your book, which meets with general approbation. Many people think particular parts disputable, but this you certainly expected. I am glad that I am one of the number, as these parts will be the subject of future conversation between us. I set out for Bath, I believe, on Monday, by Sir John Pringle's directions. He says that he sees nothing to be apprehended in my case. If you write to me (hem! hem!)--I say if you write to me, send your letter under cover to Mr. Strahan, who will have my direction.[255] The ostensible letter which accompanied the other is-- LONDON, _3rd May 1776_. MY DEAR SIR--After reflecting more maturely on that article of my will by which I leave you the disposal of all my papers, with a request that you should publish my _Dialogues concerning Natural Religion_, I have become sensible that both on account of the nature of the work and of your situation it may be improper to hurry on that publication. I therefore take the present opportunity of qualifying that friendly request. I am content to leave it entirely to your discretion at what time you will publish that piece, or whether you will publish it at all. You will find among my papers a very inoffensive piece called "My Own Life," which I composed a few days before I left Edinburgh, when I thought, as did all my friends, that my life was despaired of. There can be no objection that the small piece should be sent to Messrs. Strahan and Cadell and the proprietors of my other works, to be prefixed to any future edition of them.[256] The ink of those letters was scarcely dry before Hume's heart softened again towards his _Dialogues_, and in order to make more sure of their eventual publication than he could feel while they were entrusted to Smith's hands, he wrote Strahan from Bath on the 8th of June asking if he would agree to act as literary executor and undertake the editing and publishing of the work. In this letter he says: "I have hitherto forborne to publish it because I was of late desirous to live quietly and keep remote from all clamour, for though it be not more exceptionable than some things I had formerly published, yet you know some of them were thought exceptionable, and in prudence perhaps I ought to have suppressed them. I there introduce a sceptic who is indeed refuted and at last gives up the argument; nay, confesses that he was only amusing himself by all his cavils, yet before he is silenced he advances several topics which will give umbrage and will be deemed for bold and free as well as much out of the common road. As soon as I arrive at Edinburgh I intend to print a small edition of 500, of which I may give away about 100 in presents, and shall make you the property of the whole, provided you have no scruple, in your present situation, of being the editor. It is not necessary you should prefix any name to the Title-page. I seriously declare that after Mr. Miller and you and Mr. Cadell have publicly avowed your publication of the _Inquiry concerning Human Understanding_, I know no reason why you should have the least scruple with regard to these _Dialogues_. They will be much less obnoxious to the Law and not more exposed to popular clamour. Whatever your resolution be, I beg you would keep an entire silence on this subject. If I leave them to you by will, your executing the desire of a dead friend will render the publication still more excusable. Mallet never suffered anything by being the editor of Bolingbroke's works."[257] Strahan agreed to undertake this duty, and Hume on the 12th of June added a codicil to his will making Strahan his literary executor and entire master of all his manuscripts. Hume, however, got rapidly worse in health, so that he never printed the small edition he spoke of, and feeling his end to be near, he added a fresh codicil to his will on the 7th of August, desiring Strahan to publish the _Dialogues_ within two years, and adding that if they were not published in two years and a half the property should return to his nephew (afterwards Baron of Exchequer), "whose duty," he says, "in publishing them, as the last request of his uncle, must be approved of by all the world."[258] Hume had meanwhile on the 4th of July 1776 gathered his group of more intimate friends about him to eat together a last farewell dinner before he made the great departure. Smith was present at this touching and unusual reunion, and may possibly have remained some days thereafter, for he speaks in a letter in the following month of having had several conversations with Hume lately, among them being that which he afterwards published in his letter to Strahan. But he was in Kirkcaldy again in the beginning of August, and received there on the 22nd of August the following letter which Hume had written on the 15th, and which, having gone, through some mistake, by the carrier instead of the post, had lain for a week at the carrier's house without being delivered. The delay occasioned by this accident was the more unfortunate on account of the earnest appeal for an early answer with which the letter closes, and which seems to contain a recollection of many past transgressions, for Smith was always a dilatory and backward correspondent, the act of writing, as he repeatedly mentions, being a real pain to him. EDINBURGH, _15th August 1776_. MY DEAR SMITH--I have ordered a new copy of my _Dialogues_ to be made besides that wh. will be sent to Mr. Strahan, and to be kept by my nephew. If you will permit me, I shall order a third copy to be made and consigned to you. It will bind you to nothing, but will serve as a security. On revising them (which I have not done these five years) I find that nothing can be more cautiously and more artfully written. You had certainly forgotten them. Will you permit me to leave you the property of the copy, in case they should not be published in five years after my decease? Be so good as write me an answer soon. My state of health does not permit me to wait months for it.--Yours affectionately, DAVID HUME.[259] To this letter Smith, immediately on receiving it, sent the following reply:-- KIRKALDY, _22nd August 1776_. MY DEAREST FRIEND--I have this moment received yr. letter of the 15th inst. You had, in order to save me the sum of one penny sterling, sent it by the carrier instead of the Post, and (if you have not mistaken the date) it has lain at his quarters these eight days, and was, I presume, very likely to lie there for ever. I shall be very happy to receive a copy of your _Dialogues_, and if I should happen to die before they are published, I shall take care that my copy shall be as carefully preserved as if I was to live a hundred years. With regard to leaving me the property in case they are not published within five years after yr. decease, you may do as you think proper. I think, however, you should not menace Strahan with the loss of anything, in case he does not publish yr. work within a certain time. There is no probability of his delaying it, and if anything could make him delay it, it wd. be a clause of this kind, wh. wd. give him an honourable pretence for doing so. It would then be said I had published, for the sake of an emolument, not from respect to the memory of my friend, what even a printer, for the sake of the same emolument, had not published. That Strahan is sufficiently jealous you will see by the enclosed letter, wh. I will beg the favour of you to return to me, but by the Post, and not by the carrier. If you will give me leave I will add a few lines to yr. account of your own life, giving some account in my own name of your behaviour in this illness, if, contrary to my own hopes, it should prove your last. Some conversations we had lately together, particularly that concerning your want of an excuse to make to Charon, the excuse you at last thought of, and the very bad reception wh. Charon was likely to give it, would, I imagine, make no disagreeable part of the history. You have in a declining state of health, under an exhausting disease, for more than two years together now looked at the approach of death with a steady cheerfulness such as very few men have been able to maintain for a few hours, tho' otherwise in the most perfect Health. I shall likewise, if you give me leave, correct the sheets of the new edition of your works, and shall take care that it shall be published exactly according to your last corrections. As I shall be at London this winter, it will cost me very little trouble. All this I have written upon the supposition that the event of yr. disease should prove different from what I still hope it may do. For your spirits are so good, the spirit of life is still so very strong in you, and the progress of your disorder is so slow and gradual, that I still hope it may take a turn. Even the cool and steady Dr. Black, by a letter I received from him last week, seems not to be averse to the same hopes. I hope I need not repeat to you that I am ready to wait on you whenever you wish to see me. Whenever you do so I hope you will not scruple to call on me. I beg to be remembered in the kindest and most respectful manner to yr. Brother, your sister, your nephew, and all other friends.--I ever am, my dearest friend, most affectionately yours, ADAM SMITH.[260] Hume answered this letter next day. EDINBURGH, _23rd August 1776_. MY DEAREST FRIEND--I am obliged to make use of my nephew's hand in writing to you, as I do not rise to-day. There is no man in whom I have a greater confidence than Mr. Strahan, yet I have left the property of that manuscript to my nephew David, in case by any accident it should not be published within three years after my decease. The only accident I could foresee was one to Mr. Strahan's life, and without this clause my nephew would have had no right to publish it. Be so good as to inform Mr. Strahan of this circumstance. You are too good in thinking any trifles that concern me are so much worth of your attention, but I give you entire liberty to make what additions you please to the account of my life. I go very fast to decline, and last night had a small fever, wh. I hoped might put a quicker period to this tedious illness, but unluckily it has in a great measure gone off. I cannot submit to your coming over here on my account, as it is possible for me to see you so small a portion of the day, but Dr. Black can better inform you concerning the degree of strength which may from time to time remain with me.--Adieu, my dearest friend, DAVID HUME. _P.S._--It was a strange blunder to send yr. letter by the carrier.[261] These were the last words of this long and memorable friendship. Two days after they were written Hume passed peacefully away, and his bones were laid in the new cemetery on the Calton Crags, and covered a little later, according to his own express provision, with that great round tower, designed by Robert Adam, which Smith once pointed out to the Earl of Dunmore as they were walking together down the North Bridge, and said, "I don't like that monument; it is the greatest piece of vanity I ever saw in my friend Hume." Smith was no doubt at the funeral, and seems to have been present when the will was read, and to have had some conversation about it with Hume's elder brother, John Home of Ninewells,[262] for on the 31st of August he writes from Dalkeith House, where he had gone on a visit to his old pupil, discharging Ninewells of any obligation to pay the legacy of £200 which he had been left by Hume in consideration of acting as his literary executor, and which had not been revoked in the codicil superseding him by Strahan. This legacy Smith felt that he could not in the circumstances honourably accept, and he consequently lost no time in forwarding to Ninewells the following letter:-- DALKEITH HOUSE, _31st August 1776_. DEAR SIR--As the Duke proposes to stay here till Thursday next I may not have an opportunity of seeing you before yr. return to Ninewells. I therefore take the opportunity of discharging you and all others concerned of the Legacy which you was so good as to think might upon a certain event become due to me by your Brother's will, but which I think could upon no event become so, viz. the legacy of two hundred pounds sterling. I hereby therefore discharge it for ever, and least this discharge should be lost I shall be careful to mention it in a note at the bottom of my will. I shall be glad to hear that you have received this letter, and hope you will believe me to be, both on yr. Brother's account and your own, with great truth, most affectionately yours, ADAM SMITH. _P.S._--I do not hereby mean to discharge the other Legacy, viz. that of a copy of his works.[263] Mr. Home answered him on the 2nd of September as follows:-- DEAR SIR--I was favoured with yours of Saturday, and I assure you that on perusing the destination I was more of oppinion than when I saw you that the pecuniary part of it was not altered by the codicil, and that it was intended for you at all events, that my brother, knowing your liberal way of thinking, laid on you something as an equivalent, not imagining you would refuse a small gratuity from the hands it was to come from as a testimony of his friendship, and tho' I most highly esteem the motives and manner, I cannot agree to accept of your renunciation, but leave you full master to dispose of it which way is most agreeable to you. The copys of the _Dialogues_ are finished, and of the life, and will be sent to Mr. Strahan to-morrow, and I will mention to him your intention of adding to the last something to finish so valuable a life, and will leave you at liberty to look into the correction of the first as it either answers your leisure or ideas with regard to his composition or what effects you think it may have with regard to yourself. The two copys intended for you will be left with my sister when you please to require them, and the copy of the new edition of his works you shall be sure to receive, tho' you have, no better title to that part than the other, tho' much you have to the friendship and esteem, dr. sir, of him who is most sincerely yours, JOHN HOME. EDINBURGH, _2nd September 1776_.[264] Smith's reply was that though the legacy might be due to him in strict law, he was fully satisfied it was not due to him in justice, because it was expressly given in the will as a reward for a task which he had declined to undertake. This reply was given in a letter of the 7th October, in which he enclosed a copy of the account of Hume's death which he proposed to add to his friend's own account of his life. DEAR SIR--I send you under the same cover with this letter what I propose should be added to the account which your never-to-be-forgotten brother has left of his own life. When you have read it I beg you will return it to me, and at the same time let me know if you wd. wish to have anything either added to it or taken from it. I think there is a propriety in addressing it as a letter to Mr. Strahan, to whom he has left the care of his works. If you approve of it I shall send it to him as soon as I receive it from you. I have added at the bottom of my will the note discharging the legacy of two hundred pounds which your brother was so kind as to leave me. Upon the most mature deliberation I am fully satisfied that in justice it is not due to me. Tho' it should be due to me therefore in strict law, I cannot with honour accept of it. You will easily believe that my refusal does not proceed from any want of the highest respect for the memory of your deceased brother.--I have the honour to be, with the highest respect and esteem, dear sir, most sincerely and affectionately yours, ADAM SMITH. KIRKALDY, FIFESHIRE, _7th October 1776_.[265] Mr. Home returned Smith's manuscript to him on the 14th of October, and expressed his entire approbation of it except "that as it is to be added to what is wrote in so short and simple a manner, he would have wished that the detail had been less minutely entered into, particularly of the journey which, being of a private concern and having drawn to no consequences, does not interest the publick," but still he expressed that opinion, he said, with diffidence, and thought the piece would perhaps best stand as it was. He says, too, that instead of the words, "as my worst enemies could wish" in the remark to Dr. Dundas, he was told that the words his brother actually used were, "as my enemies, if I have any, could wish"--a correction which was adopted by Smith. And he repeats that by his interpretation of his brother's will he considers the legacy to belong to Smith both in law and in equity. Meanwhile Smith had also written Strahan from Dalkeith:-- MY DEAR STRAHAN--By a codicil to the will of our late most valuable friend Mr. Hume, the care of his manuscripts is left to you. Both from his will and from his conversation I understand that there are only two which he meant should be published--an account of his life and _Dialogues concerning Natural Religion_. The latter, tho' finely written, I could have wished had remained in manuscript to be communicated only to a few people. When you read the work you will see my reasons without my giving you the trouble of reading them in a letter. But he has ordered it otherwise. In case of their not being published within three years after his decease, he has left the property of them to his nephew. Upon my objecting to this clause as unnecessary and improper, he wrote to me by his nephew's hand in the following terms: "There is no man in whom I have a greater confidence than Mr. Strahan, yet have I left the property of that manuscript to my nephew David, in case by any accident they should not be published within three years after my decease. The only accident I could foresee was one to Mr. Strahan's life, and without this clause my nephew would have had no right to publish it. Be so good as inform Mr. Strahan of this circumstance." Thus far this letter, which was dated on the 23rd of August. He dyed on the 25th at 4 o'clock afternoon. I once had persuaded him to leave it entirely to my discretion either to publish them at what time I thought proper, or not to publish them at all. Had he continued of this mind the manuscript should have been most carefully preserved, and upon my decease restored to his family; but it never should have been published in my lifetime. When you have read it you will perhaps think it not unreasonable to consult some prudent friend about what you ought to do. I propose to add to his Life a very well authenticated account of his behaviour during his last illness. I must, however, beg that his life and those _Dialogues_ may not be published together, as I am resolved for many reasons to have no concern in the publication of the _Dialogues_. His life, I think, ought to be prefixed to the next edition of his former works, upon which he has made many very proper corrections, chiefly in what concerns the language. If this edition is published while I am at London, I shall revise the sheets and authenticate its being according to his last corrections. I promised him that I would do so. If my mother's health will permit me to leave her, I shall be in London by the beginning of November. I shall write to Mr. Home to take my lodgings as soon as I return to Fife, which will be on Monday or Tuesday next. The Duke of Buccleugh leaves this on Sunday. Direct for me at Kirkaldy, Fifeshire, where I shall remain all the rest of the season.--I remain, my dear Strahan, most faithfully yours, ADAM SMITH. DALKEITH HOUSE, _5th September 1776_. Let me hear from you soon.[266] To this Strahan replied on the 16th of September, and then towards the end of October Smith wrote the following answer, of which the first draft, in Smith's own handwriting, unsigned and undated and containing considerable erasures, exists in the R.S.E. Library. It shows that Smith submitted his account of Hume's illness to the whole circle of Hume's intimate friends, and that at the moment of writing he was waiting for the arrival of John Home, the poet, in Edinburgh, to obtain his remarks upon it. DEAR SIR--When I received your last letter I had not begun the small addition I proposed to make to the life of our late friend. It is now more than three weeks since I finished it, and sent one copy to his brother and another to Dr. Black. That which I sent to his brother is returned with remarks, all of which I approve of and shall adopt. Dr. Black waits for John Home, the Poet, who is expected every day in Edinburgh, whose remarks he proposes to send along with those of all our common friends. The work consists only of two sheets, in the form of a letter to you, but without one word of flattery or compliment. It will not cost my servant a forenoon to transcribe it, so that you will receive it by the first post after it is returned to me. I am much obliged to you for so readily agreeing to print the life together with my additions separate from the _Dialogues_. I even flatter myself that this arrangement will contribute not only to my quiet but to your interest. The clamour against the _Dialogues_, if published first, might hurt for some time the sale of the new edition of his works, and when the clamour has a little subsided the _Dialogues_ may hereafter occasion a quicker sale of another edition. I do not propose being with you till the Christmas holidays; in the meantime I should be glad to know how things stand between us, what copies of my last book are either sold or unsold, and when the balance of our bargain is likely to be due to me. I beg my most respectful and affectionate compliments to Mr. Cadell; I should have written him, but you know the pain it gives me to write with my own hand, and I look upon writing to him and you as the same thing. I have been since I came to Scotland most exceedingly idle. It is partly in order to bring up in some measure my leeway that I propose to stay here two months longer than I once intended. If my presence, however, was at all necessary in London, I could easily set out immediately. I beg the favour of you to send the enclosed to Mr. Home. The purpose of it is to bespeak my lodgings.[267] The second and third paragraphs of this letter as they stood at first are erased entirely, but their original substance is in no way altered in their corrected form. One of the original sentences about the clamour he dreaded may perhaps be transcribed. "I am still," he says, "uneasy about the clamour which I foresee they will excite." It may also be noticed that he does not seem to have dictated his account of Hume's illness to his amanuensis, but to have written it with his own hand and then got his amanuensis to transcribe it. The Mr. Home whom he wishes to bespeak lodgings for him must be John Home the poet, in spite of the circumstance that he speaks of John Home the poet as being expected in Edinburgh every day at the time of writing; and in the event Home does not seem to have come to Edinburgh, for in a subsequent letter to Strahan on 13th of November Smith again mentions having written Mr. Home to engage lodgings for him from Christmas. This letter is as follows:-- DEAR SIR--The enclosed is the small addition which I propose to make to the account which our late invaluable friend left of his own life. I have received £300 of the copy money of the first edition of my book. But as I got a good number of copies to make presents of from Mr. Cadell, I do not exactly know what balance may be due to me. I should therefore be glad he would send me the account. I shall write to him upon this subject. With regard to the next edition, my present opinion is that it should be printed in four vol. octavo; and I would propose that it should be printed at your expense, and that we should divide the profits. Let me know if this is agreeable to you. My mother begs to be remembered to Mrs. Strahan and Miss Strahan, and thinks herself much obliged both to you and them for being so good as to remember her.--I ever am, dear sir, most affectionately yours, ADAM SMITH. KIRKALDY, FIFESHIRE, _13th November 1776_. I shall certainly be in town before the end of the Christmas holidays. I do not apprehend it can be necessary for me to come sooner. I have therefore written to Mr. Home to bespeak my lodgings from Christmas.[268] Strahan acknowledges this letter on the 26th of November, and asks Smith's opinion on an idea that has occurred to him of publishing the interesting series of letters from Hume to himself which he possessed, and which, after a curious and remarkable history, have been now preserved for the world through the liberality of Lord Rosebery and the learned devotion of Mr. Birkbeck Hill. To these letters Strahan, if he obtained Smith's concurrence, would like to add those of Hume to Smith himself, to John Home, to Robertson, and other friends, which have now for the most part been lost. But Smith put his foot on this proposal decisively, on the ground apparently that it was most improper for a man's friends to publish anything he had written which he had himself given no express direction or leave to publish either by his will or otherwise. Strahan's letter runs thus:-- DEAR SIR--I received yours of the 13th enclosing the addition to Mr. Hume's Life, which I like exceedingly. But as the whole put together is very short and will not make a volume even of the _smallest size_, I have been advised by some very good judges to annex some of his letters to me on political subjects. What think you of this? I will do nothing without your advice and approbation, nor would I for the world publish any letter of his but such as in yr. opinion would do him honour. Mr. Gibbon thinks such as I have shown him would have that tendency. Now if you approve of this in any manner, you may perhaps add partly to the collection from your own cabinet and those of Mr. John Home, Dr. Robertson, and others of your mutual friends which you may pick up before you return hither. But if you wholly disapprove of this scheme say nothing of it, here let it drop, for without your concurrence I will not publish a single word of his. I should be glad, however, of your sentiments as soon as you can, and let me know at the same time as nearly as may be what day you purpose to be in London, for I must again repeat to you that without your approbation I will do nothing. Your proposal to print the next edition of your work in 4 vols. octavo at _our_ expense and to divide the Profits is a very fair one, and therefore very agreeable to Mr. Cadell and me. Enclosed is the List of Books delivered to you of the 1st edit. My wife and daughter join kindest compliments to your amiable Parent, who, I hope, is still able to enjoy your company, which must be her greatest comfort.--Dear sir, your faithful and affectionate humble servant, WILL. STRAHAN. LONDON, _26th November 1776_.[269] The following is Smith's reply:-- DEAR SIR--It always gives me great uneasiness whenever I am obliged to give an opinion contrary to the inclination of my friend. I am sensible that many of Mr. Hume's letters would do him great honour, and that you would publish none but such as would. But what in this case ought principally to be considered is the will of the Dead. Mr. Hume's constant injunction was to burn all his Papers except the _Dialogues_ and the account of his own life. This injunction was even inserted in the body of his will. I know he always disliked the thought of his letters ever being published. He had been in long and intimate correspondence with a relation of his own who dyed a few years ago. When that gentleman's health began to decline he was extremely anxious to get back his letters, least the heir should think of publishing them. They were accordingly returned, and burnt as soon as returned. If a collection of Mr. Hume's letters besides was to receive the public approbation, as yours certainly would, the Curls of the times would immediately set about rummaging the cabinets of all those who had ever received a scrap of paper from him. Many things would be published not fit to see the light, to the great mortification of all those who wish well to his memory. Nothing has contributed so much to sink the value of Swift's works as the undistinguished publication of his letters; and be assured that your publication, however select, would soon be followed by an undistinguished one. I should therefore be sorry to see any beginning given to the publication of his letters. His life will not make a volume, but it will make a small pamphlet. I shall certainly be in London by the tenth of January at furthest. I have a little business at Edinburgh which may detain me a few days about Christmas, otherwise I should be with you by the new year. I have a great deal more to say to you; but the post is just going. I shall write to Mr. Cadell by next post.--I ever am, dear sir, most affectionately yours, ADAM SMITH. KIRKALDY, _2nd December 1776_.[270] When we consider Smith's concern about the clamour he expected to arise from the _Dialogues_, and his entire unconcern about the clamour he did not expect to arise from the letter to Strahan on Hume's last illness, the actual event seems one of those teasing perversities which drew from Lord Bolingbroke the exclamation, "What a world is this, and how does fortune banter us!" The _Dialogues_ fell flat; the world had apparently had its surfeit of theological controversy. A contemporary German observer of things in England states that while the book made something of a sensation in his own country, it excited nothing of that sort here, and was already at the moment he wrote (1785) entirely forgotten.[271] The letter to Strahan, on the other hand, excited a long reverberation of angry criticism. Smith had certainly in writing it no thought of undermining the faith, or of anything more than speaking a good word for the friend he loved, and putting on record some things which he considered very remarkable when he observed them, but in the ear of that age his simple words rang like a challenge to religion itself. Men had always heard that without religion they could neither live a virtuous life nor die an untroubled death, and yet here was the foremost foe of Christianity represented as leading more than the life of the just, and meeting death not only without perturbation, but with a positive gaiety of spirits. His cheerfulness without frivolity, his firmness, his magnanimity, his charity, his generosity, his entire freedom from malice, his intellectual elevation and strenuous labour, are all described with the affection and confidence of a friend who had known them well; and they are finally summed up in the conclusion: "Upon the whole I have always considered him, both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man as perhaps the nature of human frailty will permit." Hume's character was certainly one of great beauty and nobleness, and churchmen who knew him well speak of him in quite as strong admiration as Smith. Robertson used to call him "the virtuous heathen"; Blair said every word Smith wrote about him was true; and Lord Hailes, a grave religious man and a public apologist of Christianity, showed sufficient approbation of this letter to translate it into Latin verse. But in the world generally it raised a great outcry. It was false, it was incredible, it was a wicked defiance of the surest verities of religion. Even Boswell calls it a piece of "daring effrontery," and as he thinks of it being done by his old professor, says, "Surely now have I more understanding than my teachers." Though nothing was further from the intention of the author, it was generally regarded as an attack upon religion, which imperatively called for repulsion; and a champion soon appeared in the person of Dr. George Horne, President of Magdalen College, Oxford, author of a well-known commentary on the Psalms, and afterwards Bishop of Norwich. In an anonymous pamphlet, entitled "A Letter to Adam Smith, LL.D., on the Life, Death, and Philosophy of David Hume, Esq., by one of the People called Christians," which ran rapidly through a number of editions, Horne, begging the whole question he raises, contends that a man of Hume's known opinions could not by any possibility be the good and virtuous man Smith represented him to be, for had he been really generous, or compassionate, or good-natured, or charitable, or gentle-minded, he could never have thought of erasing from the hearts of mankind the knowledge of God and the comfortable faith in His fatherly care, or been guilty of "the atrocious wickedness of diffusing atheism through the land." Horne goes on to charge this "atrocious wickedness" against Smith too. "You would persuade us," he says, "by the example of David Hume, Esq., that atheism is the only cordial for low spirits and the proper antidote against the fear of death, but surely he who can reflect with complacency on a friend thus employing his talents in this life, and thus amusing himself with Lucian, whist, and Charon at his death, can smile over Babylon in ruins, esteem the earthquakes which destroyed Lisbon as agreeable occurrences, and congratulate the hardened Pharaoh on his overthrow in the Red Sea." Smith never wrote any reply to this attack, nor took any public notice of it whatever, though he had too much real human nature in him to agree with Bishop Horne's own ethereal maxim that "a man reproached with a crime of which he knows himself to be innocent should feel no more uneasiness than if he was said to be ill when he felt himself in perfect health." It was of course quite unjust to accuse Smith of atheism, or of desiring to propagate atheism. His published writings, which the Bishop ought in fairness to have consulted, show him to have been a Theist, and there is some ground for thinking that he believed Hume, as many others of Hume's personal friends did, to have been a Theist likewise. Though Hume was philosophically a doubter about matter, about his own existence, about God, he did not practically think so differently from the rest of the world about any of the three as was often supposed. Dr. Carlyle always thought him a believer. Miss Mure of Caldwell, the sister of his great friend the Baron of Exchequer, says he was the most superstitious man she ever knew.[272] He told Holbach that an atheist never existed, and once, while walking with Adam Ferguson on a beautiful clear night, he stopped suddenly and exclaimed, pointing to the sky, "Can any one contemplate the wonders of that firmament and not believe that there is a God?"[273] That Smith would not have been surprised to hear his friend make such a confession is apparent from the well-known anecdote told of his absence of mind in connection with Henry Mackenzie's story of "La Roche." That story was written soon after Hume's death; it was published in the _Mirror_ in 1779, while Horne's agitation was raging; and the author introduced Hume as one of the characters of the piece for the very purpose of presenting this more favourable view of the great sceptic's religious position with which Mackenzie had been impressed in his own intercourse with him. Hume appears in the story as a visitor in Switzerland, an inmate of the simple household of the pastor La Roche, and after describing him as being deeply taken with the sweet and unaffected piety of this family's life and with the faith that sustained them in their troubles, the author goes on to observe, "I have heard him long after confess that there were moments when, amidst the pride of philosophical discovery and the pride of literary fame, he recalled to his mind the venerable figure of the good La Roche and wished he had never doubted." Before publishing his story Mackenzie read it to Adam Smith, in order to be told whether anything should be omitted or altered as being out of keeping with Hume's character, and so completely was Smith carried away by the verisimilitude that he not only said he found not a syllable to object to, but added that he was surprised he had never heard the anecdote before. In his absence of mind he had forgotten for the moment that he had been asked to listen to the story as a work of fiction, and his answer was the best compliment Mackenzie could receive to his fidelity to the probabilities of character.[274] FOOTNOTES: [255] Burton's _Life of Hume_, ii. 492. [256] _Ibid._, ii. 493. [257] Hill's _Letters of Hume to Strahan_, p. 330. [258] Burton's _Life of Hume_, ii. 494. [259] _Hume Correspondence_, R.S.E. Library. [260] _Hume Correspondence_, R.S.E. Library. [261] _Hume Correspondence,_ R.S.E. Library. [262] Hume's brother always spelt his name with an _o_. [263] _Hume Correspondence_, R.S.E. Library. [264] _Ibid._ [265] _Hume Correspondence_, R.S.E. Library. [266] _New York Evening Post,_ 30th April 1887. Original in possession of Mr. Worthington C. Ford of Washington, U.S.A. The first draft of this letter, in Smith's handwriting but without the last paragraph and the signature, seems to have been preserved by him as a copy for reference, and having been sent by him with his other Hume letters to the historian's nephew, is now in the Royal Society Library, Edinburgh. [267] _Hume Correspondence_, R.S.E. Library. [268] _New York Evening Post_, 30th March 1887. Original in possession of Mr. Worthington C. Ford of Washington, U.S.A. [269] _Hume Correspondence_, R.S.E. Library. [270] Hill's _Letters of Hume_, p. 351. [271] Wendeborn, _Zustand des Staats, etc., in Gross-britannien_, ii. 365. [272] _Caldwell Papers_, i. 41. [273] Burton's _Hume_, ii. 451. [274] See Mackenzie's "La Roche," and Mackenzie's _Works of J. Home_, i. 21. CHAPTER XX LONDON AGAIN--APPOINTED COMMISSIONER OF CUSTOMS Smith remained at Kirkcaldy from May to December 1776, except for occasional visits to Edinburgh or Dalkeith, but his thoughts, as we have noticed from time to time, were again bent on London, as soon as his mother's health should permit of his leaving home. He seems to have enjoyed London thoroughly during his recent prolonged sojourn, and inspired some hopes in friends like Strahan that he might even settle there as a permanent place of residence. After his departure for Scotland in April Strahan used to write him from time to time a long letter of political news keeping him abreast of all that was going on, and in a letter of the 16th of September he says: "I hope your mother's health will not prevent you from returning hither at the time you propose. You know I once mentioned to you how happy I thought it would make you both if you could bring her along with you to spend the remainder of her days in this Place, but perhaps it will not be easy to remove her so far at this time of her life. I pray you offer her the respectful compliments of my family, who do not forget her genteel and hospitable reception at Kircaldy some years ago."[275] The time Smith proposed to return, as he had written Strahan early in September, was November, but he afterwards put the journey off for two months on account of his own health, which had suffered from his long spell of literary labour, and was in need of more rest; and he might have postponed it still further but for the visit being necessary in order to carry the second edition of his work through the press. Early in January 1777 he is already in London, having found lodgings in Suffolk Street, near the British Coffee-House, and on the 14th of March we find him attending a dinner of the Literary Club, with Fox in the chair, and Gibbon, Garrick, Reynolds, Johnson, Burke, and Fordyce for the rest of the company.[276] His great work had not yet attracted much public notice. Its merits were being fully recognised by the learned, and it was already leaving its mark on the budget of the year; but it was probable Smith was more talked about in general company at the time for his letter to Strahan than for his _Wealth of Nations_. In one little literary circle he was being zealously but most unjustly decried for taking a shabby revenge on a worthy young Scotch poet who had ventured to differ from him in opinion about the merits of the East India Company. Mickle, the author of the popular song "There's nae luck aboot the hoose," published his translation of the _Lusiad_ of Camoens in 1775, and dedicated the book by permission to the Duke of Buccleugh, whose family had been his father's patrons, and from whose interest he hoped to obtain some advancement himself. When the work appeared the author sent a nicely-bound presentation copy to the Duke, but received no acknowledgment, and at length a common friend waited on his Grace, and, says one of Mickle's biographers, "heard with the indignation and contempt it deserved, a declaration that the work was at that time unread, and had been represented not to have the merit it had been first said to possess, and therefore nothing could be done on the subject of his mission." A dedication in those days was often only a more dignified begging letter, and Mickle's friends declared that he had been cruelly wronged, because the Duke had not only done nothing for him himself, but by accepting the dedication had prevented the author from going to some other patron who might have done something. Whatever could have been the reason for this sudden coolness of the Duke? Mickle and his little group of admirers declared it was all due to an ill word from the Duke's great mentor, Adam Smith, whom they alleged to have borne Mickle a grudge for having in the preface to the _Lusiad_ successfully exposed the futility of some of the views about the East India Company propounded in the _Wealth of Nations_.[277] But since the _Wealth of Nations_ was only published in 1776, its opinions obviously could not, even with the vision and faculty divine of the poet, be commented on either favourably or unfavourably in the _Lusiad_, which was published in 1775. The comments on Smith's views appeared first in subsequent editions of Mickle's work, and were probably effects of the injury the author fancied himself to have suffered. Anyhow they could not have been its causes, and the whole story, so thoroughly opposed to the unusual tolerancy and benevolence of Smith's character, merits no attention. It sprang manifestly from some imaginary suspicion of a sensitive minor poet, but Mickle used to denounce Smith without stint, and, thinking he had an opportunity for retaliation when the letter to Strahan appeared, he wrote a satire entitled, "An Heroic Epistle from Hume in the Shades to Dr. Adam Smith," which he never published indeed, though he showed it about among his friends, but in which, says Sim, who had seen it, Smith and his noble pupil were rather roughly handled.[278] Mickle afterwards burnt this _jeu d'esprit_, and very probably came to entertain better views of Smith, for he seems to have been not only quick to suspect injuries, but ready after a space to perceive his error. He once inserted an angry note in one of his poems against Garrick, who had, as he imagined, used him ill; but going afterwards to see the great actor in _King Lear_, he listened to the first three acts without saying a word, and after a fine passage in the fourth, heaved a deep sigh, and turning to his companion said, "I wish that note was out of my book." Had he foreseen the noise his several friends continued to make, even after his death, about this purely imaginary offence on the part of Adam Smith, the poet would not improbably wish the polemical prefaces out of his book. Smith did not think much of Mickle's translation of the _Lusiad_, holding the French version to be much superior,[279] but if he happened to express this unfavourable opinion to the Duke of Buccleugh, it could not have been with any thought of injuring a struggling and meritorious young author. He has never shown any such intolerance of public contradiction as Mickle's friends chose to attribute to him. Dr. James Anderson, the first and true author of what is known as Ricardo's theory of rent, won Smith's friendship by a controversial pamphlet challenging some of his doctrines; Bentham won--what is rarer--his conversion from the doctrines impugned, and a very kindly letter still exists which Smith wrote to another hostile critic, Governor Pownall, and which I shall give here, as it was one of the first things he did after now arriving in London. Pownall had been Governor of Massachusetts, a man of much activity of mind and experience of affairs, and author of respectable works on the _Principles of Polity_, the _Administration of the Colonies_, and the _Middle States of America_. He was one of the forty-two persons to whom the authorship of the letters of Junius has been attributed. He differed strongly from many of Smith's views, especially from his condemnation of the monopoly of the colonial trade, and wrote a pamphlet setting forth his criticisms in the form of a letter to Adam Smith. This pamphlet Smith received in Edinburgh, just before his departure for London, and when he arrived he wrote the Governor as follows:-- SIR--I received the day before I left Edinburgh the very great honour of your letter. Though I arrived here on Sunday last, I have been almost from the day of my arrival confined by a cold, which I caught upon the road; otherwise I should before this time have done myself the honour of waiting on you in person, and of thanking you for the very great politeness with which you have everywhere treated me. There is not, I give you my word, in your whole letter a single syllable relating to myself which I could wish to have altered, and the publication of your remarks does me much more honour than the communication of them by a private letter could have done. I hope in a few days to have the honour of waiting on you, and of discussing in person with you both the points on which we agree and those on which we differ. Whether you will think me, what I mean to be, a fair disputant, I know not; I can venture to promise you will not find me an irascible one. In the meantime I have the honour to be, with the highest respect and esteem, etc. etc. ADAM SMITH. SUFFOLK STREET, _12th January 1777_.[280] The gentleman who forwarded this letter to the editor of the _Gentleman's Magazine_ in 1795, but whose name is not published, states, in further evidence, as he says, of Smith's liberality of mind, that "he altered in his second edition some of the parts objected to, and instead of a reply, sent to Governor Pownall a printed copy of this second edition so altered, and there all contest closed." Smith, however, does not appear to have made any such alterations. In feet, in the second edition he hardly made more than three or four alterations, and these were confined to the introduction of an additional fact or two in confirmation of his argument; and besides, when we refer to Pownall's pamphlet we find that their differences were all about points on which Smith's views were mature and the Governor's raw. Smith probably remained most of the year 1777 in London, for, as we have seen, one of his reasons for being there was to see the second edition of his work through the press, and the second edition of his work did not appear till 1778. But he was back in Kirkcaldy again before December, and while there he received from Lord North the appointment of Commissioner of Customs in Scotland, vacant through the death of Mr. Archibald Menzies. The offence he unexpectedly gave to the world's religious sensibilities by his account of Hume's last days had not interfered, as he feared such an offence would, with his prospects of employment in the public service, nor, what is quite as remarkable, had his political opinions. For he was always a strong Whig, and the preferment was bestowed by a Tory ministry. It is usually attributed to the influence of the Duke of Buccleugh and Henry Dundas, then a member of the ministry as Lord Advocate for Scotland, and their word may no doubt have helped; but there is reason to believe that the appointment was really a direct reward to the author of the _Wealth of Nations_ for the benefit Lord North, who was Chancellor of the Exchequer as well as Prime Minister, derived from that book in preparing the budgets for the years 1777 and 1778. Smith himself, in a letter to Strahan which will presently appear (p. 323) attributes the appointment largely to the favour of Sir Grey Cooper, who had been Secretary to the Treasury since 1765, and was naturally Lord North's right-hand man in the preparation of his budgets. At the time the _Wealth of Nations_ appeared the English Chancellor of the Exchequer was at his wits' end for fresh and convenient and easy means of increasing the revenue to carry on the American war, and the book was a mine of suggestions to him. He imposed two new taxes in 1777, of which he got the idea there,--one on man-servants, estimated by him to bring in £105,000, though in the event it yielded only £18,000, and the other on property sold by auction, which was to bring in £37,000; but in the budget of 1778, which he would have under consideration at the very moment of Smith's appointment, he introduced two new taxes recommended by Smith,--the inhabited house duty, estimated to yield £264,000, and the malt tax, estimated to yield £310,000. Under those circumstances Smith's appointment to the Commissionership of Customs is to be regarded not as a private favour to the Duke of Buccleugh, but as an express recognition on the part of the Premier of the public value of Smith's work, and the more honourable because rendered to a political opponent who had condemned important parts of the ministerial policy--their American policy, for example--in his recent work. The appointment was worth £600 a year,--£500 for the Commissionership of Customs and £100 for the Commissionership of the Salt Duties; and Smith still retained his pension of £300 from the House of Buccleugh. When he obtained this place he thought himself bound in honour to give up his Buccleugh pension, possibly because of the assistance he may have believed the Duke to have given in securing it; but he was informed that the pension was meant to be permanent and unconditional, and that if he were consulting his own honour in offering to give it up, he was not thinking of the honour of the Duke of Buccleugh. Smith now settled in Edinburgh accordingly with an assured income of £900 a year, and £900 a year was a comparatively princely revenue in the Scottish capital at a time when a Lord of Session had only £700 a year, and a professor in the best chair in the University seldom made as much as £300. Though the appointment was made probably in November 1777, Smith did not receive the Commission till January 1778, and there were still fees to pay and other business to transact about the matter, which he got Strahan to do for him. That occasioned the following letters:-- DEAR SIR--The last letter I had the pleasure of receiving from you congratulated me upon my being appointed one of the Commissioners of Customs in Scotland. You told me at the same time that you had dined that day with Sir Grey Cooper, and that you had both been so good as to speak very favourably of me. I have received from London several other congratulations of the same kind. But I have not yet received, nor has the office here received, any official information that any such appointment had been made. It is possible that the Commission is not made out on account of the fees. If this is the case, you may either draw upon me for the amount, which I understand to be about £160, or you may write to me, and I shall by return of post remit you the money to London. Whatever be the cause of the delay, I beg you will endeavour to find it out and let me know as soon as possible, that I may at least be at the end of my hope. Remember me most affectionately to all your family, and believe me to be, most faithfully yours, ADAM SMITH. EDINBURGH, _20th December 1777_. Neither you nor Mr. Cadell have wrote me anything concerning the new Edition of my Book. Is it published? does it sell well? does it sell ill? does it sell at all? I left directions with Mr. Cadell to send copies of it to several of my friends. If John Hunter was not among the number, put him in _ex dono authoris_, and desire Cadell to send me the account of the whole, that I may pay it. I should write to him, but it would only be plaguing him. If you draw upon me make your bill payable at five days' sight. I return to Kirkaldy on Christmas Day.[281] On returning to Kirkcaldy Smith again wrote Strahan:-- DEAR SIR--I should have sent you the enclosed bill the day after I received your letter accompanyed with a note from Mr. Spottiswood, had not Mr. Charteris, the Solicitor of the Customs here, told me that the fees were not paid in London, but at Edinburgh, where Mr. Shadrach Moyes acted as receiver and agent for the officers of the treasury at London. I have drawn the bill for £120, in order to pay, first, what you have advanced for me; secondly, the exchange between Edinburgh and London; and lastly, the account which I shall owe to Mr. Cadell, after he has delivered the presents I desired him to make of the second edition of my book. To this I beg he will add two copies, handsomely bound and guilt (_sic_), one to Lord North, the other to Sir Gray Cooper. I received Sir Gray's letter, and shall write to him as soon as the new Commission arrives, in order not to trouble him with answering two Letters. I believe that I have been very highly obliged to him in this business. I shall not say anything to you of the obligations I owe you for the concern you have shewn and the diligence you have exerted on my account. Remember me to Mr. Spottiswood. I shall write to him as soon as the affair is over. Would it be proper to send him any present or fee? I am much obliged to him, and should be glad to express my sense of it in every way in my power. I would not make any alteration in my title-page on account of my new office. Remember me to Mrs. and Miss Strahan, likewise to the Homes and the Hunters. How does the Painter go on? I hope he thrives.--I ever am, my dear sir, most faithfully and affectionately yours, ADAM SMITH. KIRKALDY, _14th January 1777_.[282] The Mr. Spottiswood mentioned in this letter was a nephew of Strahan, and no doubt an ancestor of Strahan's present successor in his printing business. The Hunters are John and William Hunter, the Homes are John Home and his wife, and the painter is Allan Ramsay. In the course of a fortnight the Commission arrived, and Smith then wrote Strahan again:-- EDINBURGH, _5th February 1778_. MY DEAR STRAHAN--I received the Commission in due course, and have now to thank you for your great attention to my interest in every respect, but above all, for your generosity in so readily forgiving the sally of bad humour which, in consequence of General Skeenes, who meant too very well, most unreasonably broke out upon you. I can only say in my own vindication that I am not very subject to such sallies, and that upon the very few occasions on which I have happened to fall into them, I have soon recovered from them. I am told that no commission ever came so soon to Edinburgh, many having been delayed 3 weeks or a month after appearing in the Gazette. This extraordinary despatch I can impute to nothing but your friendly diligence and that of Mr. Spottiswood, to whom I beg to be remembered in the most respectful manner. You have made a small mistake in stating our account. You credit me with £150 only, instead of £170; the first bill for £120, the second for £50. Cadell, however, still remains unpaid. As soon as I understand he has delivered the books, or before it, if he will send me the account of them, I shall send him the money.--I ever am, dear sir, most faithfully yours, ADAM SMITH.[283] What was the cause of Smith's outbreak of very unhabitual irritation with Strahan on the occasion alluded to in this letter, I cannot say, nor probably does it in the least matter. His temper, indeed, was one of unusual serenity and constancy, and but for his own confession in this letter, we should never have known that it was liable, like others, to occasional perturbations, from which it appears, however, he speedily recovered, and of which he is evidently heartily ashamed. General Skeenes was probably one of his relations, the Skenes of Pitlour. The money transactions mentioned in the concluding paragraph refer doubtless to his Commission fees, which from some calculations made, probably by Strahan, on the back of the letter, seem to have come to £147:18s. But the reference to Mr. Cadell's account shows that the second edition of his book had now appeared. It was not published in four volumes octavo, as he originally proposed to Strahan, but, like the former edition, in two volumes quarto, and the price was now raised from £1:16s. to two guineas, so that under the half-profit arrangement which was agreed upon, he must have obtained a very reasonable sum out of this edition, and we can understand how, from the four authorised editions published during his lifetime, he made, according to his friend Professor Dalzel, a "genteel fortune," as genteel fortunes went in those days. FOOTNOTES: [275] _Hume MSS._, R.S.E. Library. [276] Leslie and Taylor, _Life of Reynolds_, ii. 199. [277] Sim's _Works of Mickle_, Preface, xl. [278] _Ibid._, Preface, xliii. [279] _The Bee_, 1st May 1791. [280] _Gentleman's Magazine_, lxv. 635. [281] Original with Mr. F. Barker. [282] Original in possession of Mr. Alfred Morrison. [283] Original in possession of Mr. Alfred Morrison. CHAPTER XXI IN EDINBURGH 1778-1790. _Aet._ 55-67 On settling in Edinburgh Smith took a house in the Canongate--Panmure House, at the foot of Panmure Close, one of the steep and narrow wynds that descend from the north side of the Canongate towards the base of the Calton Hill; and this house was his home for the rest of his days, and in it he died. The Canongate--the old Court end of the Scottish capital--was still at the close of last century the fashionable residential quarter of the city, although Holyrood had then long lain deserted--as Hamilton of Bangour called it, A virtuous palace where no monarch dwells. The Scottish nobility had their town-houses in its gloomy courts, and great dowagers and famous generals still toiled up its cheerless stairs. Panmure House itself had been the residence of the Panmure family before Smith occupied it, and became the residence of the Countess of Aberdeen after his death. Most of his own more particular friends too--the better aristocracy of letters and science--lived about him here. If it was to Edinburgh, as Gibbon remarks, that "taste and philosophy seemed to have retired from the smoke and hurry of the immense capital of London," it was in the ancient smoke and leisure of the Canongate they found their sanctuary. Robertson flitted out, indeed, to the Grange House; Black--Smith's special crony in this Edinburgh period--to the present Blind Asylum in Nicolson Street, then a country villa; and Adam Ferguson to a place at the Sciennes which, though scarce two miles from the Cross, was thought so outrageously remote by the people of the compact little Edinburgh of those days, that his friends always called it Kamtschatka, as if it lay in the ends of the earth. But Kames and Hailes still lived in New Street, Sir John Dalrymple and Monboddo and many other notabilities in St. John Street, Cullen in the Mint, and Dugald Stewart in the Lothian Hut (the town-house of the Marquis of Lothian) in the Horse Wynd. Panmure House is still standing. It is a much more modern structure than the houses near it, having been built towards the middle of last century; and although its rooms are now mostly tenantless, and its garden a cooper's yard, it wears to this day an air of spacious and substantial comfort which is entirely wanting in the rest of the neighbourhood. William Windham, the statesman, who dined in it repeatedly when he was in Edinburgh with Burke in 1785, thought it a very stately house indeed for a philosopher. "House magnificent," he enters in his diary, "and place fine," and one can still imagine how it would appear so when the plastered walls were yet white, and the eye looked over the long strip of terraced garden on to the soft green slopes of the Calton. There was then no building of any kind on or about the Calton Hill, except the Observatory, and Dugald Stewart, who was very fond of rural scenery, always said that the great charm of his own house a few closes up was its view of the Calton crags and braes. Smith brought over his mother and his cousin, Miss Douglas, from Kirkcaldy, and a few months later the youngest son of his cousin, Colonel Douglas of Strathendry, who was to attend school and college with a view to the bar, and whom he made his heir. Windham, after visiting them, makes the same note twice in his diary, "Felt strongly the impression of a family completely Scotch." Smith's house was noted for its simple and unpretending hospitality. He liked to have his friends about him without the formality of an invitation, and few strangers of distinction visited Edinburgh without being entertained in Panmure House. His Sunday suppers were still remembered and spoken of in Edinburgh when M'Culloch lived there as a young man. Scotch Sabbatarianism had not at that time reached the rigour that came in with the evangelical revival in the beginning of this century, and the Sunday supper was a regular Edinburgh institution. Even the Evangelical leaders patronised it. Lord Cockburn and Mrs. Somerville both speak with very agreeable recollections of the Sunday supper parties of the Rev. Sir Harry Moncreiff, and Boswell mentions being invited to one by another Evangelical leader, Dr. Alexander Webster. His mother, his friends, his books--these were Smith's three great joys. He had a library of about 3000 volumes, as varied a collection in point of subject-matter as it would be possible to find. Professor Shield Nicholson, who saw a large portion of it, says: "I was most struck by the large number of books of travel and of poetry, of some of which there were more than one edition, and occasionally _éditions de luxe_. I had hoped to find marginal notes or references which might have thrown light on the authorities of some passages in the _Wealth of Nations_ (for Smith gives no references), but even the ingenious oft-quoted author of the _Tracts on the Corn Laws_ has escaped without a mark. At the same time pamphlets have been carefully bound together and indexes prefixed in Smith's own writing."[284] Mr. James Bonar has been able to collect a list of probably two-thirds of Smith's books--about 1000 books, or 2200 volumes.[285] Nearly a third of the whole are in French, another third in Latin, Greek, and Italian, and a little more than a third in English. According to Mr. Bonar's analysis, a fifth of them were on Literature and Art; a fifth were Latin and Greek classics; a fifth on Law, Politics, and Biography; a fifth on Political Economy and History; and the remaining fifth on Science and Philosophy. One cannot help remarking, as an indication of the economist's tastes, the almost complete absence of works in theology and prose fiction. Hume's _Dialogues on Natural Religion_ and Pascal's _Pensées_ belong as much to philosophy as theology; Jeremy Taylor's _Antiquitates Christianae_, Father Paul Sarpi's _History of the Council of Trent_, and Ruchat's _Histoire de la Reformation de la Suisse_ belong as much to history; and except these the only representatives of theology on Smith's shelves were the English Bible, Watson's edition, 1722--probably his parents' family Bible--a French translation of the Koran, and Van Maestricht's _Theologia_. The only sermons, except those of Massillon in French, are the _Sermons of Mr. Yorick_. Those sermons, however, were the only representative of Sterne. Goldsmith was represented by his poems, but not by his fiction; and Defoe, Fielding, Richardson, and Smollett were not represented at all. One or two French novels were there, but except Gulliver, which came in with the complete edition of Swift's works in 1784, the only English novel Smith seems to have possessed was the _Man of the World_, by his friend Henry Mackenzie. It is perhaps stranger that he ignored the novel than that he ignored theology, for the novel was then a very rising and popular literary form, and Smith began life as a professed literary critic. His mind seems to have been too positive to care much for tales. On the other hand, of the Greek and Latin classics he not unfrequently had several different editions. He had eight, for example, of _Horace_, who seems to have been an especial favourite. Like most men who are fond of books, he seems to have bound them well, and often elegantly. Smellie, the printer, says that the first time he happened to be in Smith's library he was "looking at the books with some degree of curiosity, and perhaps surprise, for most of the volumes were elegantly, and some of them superbly bound," when Smith, observing him, said, "You must have remarked that I am a beau in nothing but my books."[286] M'Culloch, however, who had seen the books, doubts whether their condition warranted the account given of them by Smellie, and says that while they were neatly, and in some cases even elegantly bound, he saw few or none of which the binding could with propriety be called superb. The Custom House was on the upper floors of the Royal Exchange, in Exchange Square, off the High Street; and Kay, standing in his shop over at the corner of the Parliament Close, must often have seen Smith walk past from his house to his office in the morning exactly as he has depicted him in one of his portraits,--in a light-coloured coat, probably linen; knee-breeches, white silk stockings, buckle shoes, and flat broad-brimmed beaver hat; walking erect with a bunch of flowers in his left hand, and his cane, held by the middle, borne on his right shoulder, as Smellie tells us was Smith's usual habit, "as a soldier carries his musket." When he walked his head always moved gently from side to side, and his body swayed, Smellie says, "vermicularly," as if at each alternate step "he meant to alter his direction, or even to turn back." Often, moreover, his lips would be moving all the while, and smiling in rapt conversation with invisible companions. A very noticeable figure he was as he went up and down the High Street, and he used to tell himself the observations of two market women about him as he marched past them one day. "Hegh sirs!" said one, shaking her head significantly. "And he's weel put on too!" rejoined the other, surprised that one who appeared from his dress to be likely to have friends should be left by them to walk abroad alone. There were five Commissioners in the Scotch Board of Customs, but Smith's colleagues were none of them men of any public reputation at the time, and they are now mere names; but the name of the Secretary of the Board, R.E. Phillips, may be mentioned for the circumstance that, after living to the great age of 104, he was buried--for what reason I know not--in the same grave with Adam Smith in Canongate Churchyard. The business of the office was mostly of a routine and simple character: considering appeals from merchants against the local collector's assessments; the appointment of a new officer here, the suppression of one there; a report on a projected colliery; a plan for a lighthouse, a petition from a wine importer, or the owner of a bounty sloop; a representation about the increase of illicit trade in Orkney, or the appearance of smuggling vessels in the Minch; the despatch of troops to repress illegal practices at some distillery, or to watch a suspected part of the coast; the preparation of the annual returns of income and expenditure, the payment of salaries, and transmission of the balance to the Treasury. Smith attended to those duties with uncommon diligence; he says himself, in his letter to the Principal of Glasgow College in 1787 on his appointment to the Rectorship, that he was so regular an attendant at the Custom House that he could "take the play for a week at any time" without giving offence or provoking comment. He was evidently a very conscientious and on the whole, no doubt, a satisfactory administrator, though he may have been in some things slower than a clerk bred to business would have been, and caused occasionally a ludicrous mistake through his incidental absence of mind. Sir Walter Scott relates two anecdotes illustrative of that weakness, on the authority of one of Smith's colleagues on the Board of Customs. Having one day to sign an official document as Commissioner, Smith, instead of signing his own name, wrote an imitation of the signature of the Commissioner who had written before him. The other story, though, possibly enough, embellished unconsciously by the teller in some details, is yet of too distinct and peculiar a character to be easily rejected, and for the same reason will best be given in Scott's own words:-- "That Board (the Board of Customs) had in their service as porter a stately person, who, dressed in a huge scarlet gown or cloak covered with frogs of worsted lace, and holding in his hand a staff about seven feet high as an emblem of his office, used to mount guard before the Custom House when a Board was to be held. It was the etiquette that as each Commissioner entered the porter should go through a sort of salute with his staff of office, resembling that which officers used formerly to perform through their spontoon, and then marshal the dignitary to the hall of meeting. This ceremony had been performed before the great economist perhaps five hundred times. Nevertheless one day, as he was about to enter the Custom House, the motions of this janitor seem to have attracted his eye without their character or purpose reaching his apprehension, and on a sudden he began to imitate his gestures as a recruit does those of his drill serjeant. The porter having drawn up in front of the door, presented his staff as a soldier does his musket. The Commissioner, raising his cane and holding it with both hands by the middle, returned the salute with the utmost gravity. The inferior officer, much annoyed, levelled his weapon, wheeled to the right, stepping a pace back to give the Commissioner room to pass, lowering his staff at the same time in token of obeisance. Dr. Smith, instead of passing on, drew up on the opposite side and lowered his cane to the same angle. The functionary, much out of consequence, next moved upstairs with his staff upraised, while the author of the _Wealth of Nations_ followed with his bamboo in precisely the same posture, and his whole soul apparently wrapped in the purpose of placing his foot exactly on the same spot of each step which had been occupied by the officer who preceded him. At the door of the hall the porter again drew off, saluted with his staff, and bowed reverentially. The philosopher again imitated his motions, and returned his bow with the most profound gravity. When the Doctor entered the apartment the spell under which he seemed to act was entirely broken, and our informant, who, very much amused, had followed him the whole way, had some difficulty to convince him that he had been doing anything extraordinary."[287] This inability to recollect in a completely waking state what had taken place during the morbid one separates this story from all the rest that are told of Smith's absence of mind. For his friends used always to observe of his fits of abstraction what a remarkable faculty he possessed of recovering, when he came to himself, long portions of the conversation that had been going on around him while his mind was absent. But here there is an entire break between the one state and the other; the case seems more allied to trance, though it doubtless had the same origin as the more ordinary fits of absence, and, like them, was only one of the penalties of that power of profound and prolonged concentration to which the world owes so much; it was thinker's cramp, if I may use the expression. In one way Smith took more interest in his official work than ordinary Commissioners would do, because he found it useful to his economic studies. In 1778 he wrote Sir John Sinclair, who had desired a loan of the French inquiry entitled _Mémoires concernant les Impositions_, that "he had frequent occasion to consult the book himself both in the course of his private studies and in the business of his present employment," and Sir John states that Smith used to admit "that he derived great advantage from the practical information he derived by means of his official situation, and that he would not have otherwise known or believed how essential practical knowledge was to the thorough understanding of political subjects."[288] This is confirmed by the fact that most of the additions and corrections introduced into the third edition of the _Wealth of Nations_--the first published after his settlement in the Customs--are connected with that branch of the public service. Still his friends were perhaps right in lamenting that the duties of this office, light though they really were, used up his time and energy too completely to permit his application to the great work on government which he had projected. "Though they required little exertion of thought, they were yet," says Dugald Stewart, "sufficient to waste his spirits and dissipate his attention; and now that his career is closed, it is impossible to reflect on the time they consumed without lamenting that it had not been employed in labours more profitable to the world and more equal to his mind. During the first years of his residence in this city his studies seemed to be entirely suspended, and his passion for letters served only to amuse his leisure and to animate his conversation. The infirmities of age, of which he very early began to feel the approach, reminded him at last, when it was too late, of what he yet owed to the public and to his own fame. The principal materials of the works which he had announced had been long ago collected, and little probably was wanting but a few years of health and retirement to bestow on them that systematical arrangement in which he delighted."[289] His leisure seems to have been passed during these later years of his life very largely in the study of the Greek poets, and he frequently remarked to Dugald Stewart, when found in his library with Sophocles or Euripides open before him on the table, that of all the amusements of old age, the most grateful and soothing was the renewal of acquaintance with the favourite studies and the favourite authors of our youth.[290] Besides, the work of composition seems to have grown really more arduous to him. He was always a slow composer, and had never acquired increased facility from increased practice. Much of his time too was now given to the enjoyments of friendship. I have already mentioned his Sunday suppers, but besides these he founded, soon after settling in Edinburgh, in co-operation with the two friends who were his closest associates during the whole of this last period of his career--Black the chemist, and Hutton the geologist--a weekly dining club, which met every Friday at two o'clock in a tavern in the Grassmarket. Dr. Swediaur, the Paris physician, who spent some time in Edinburgh in 1784 making researches along with Cullen, and was made a member of this club during his stay, writes Jeremy Bentham: "We have a club here which consists of nothing but philosophers. Dr. Adam Smith, Cullen, Black, Mr. M'Gowan, etc., belong to it, and I am also a member of it. Thus I spend once a week in a most enlightened and agreeable, cheerful and social company." And of Smith, with whom he says he is intimately acquainted, he tells Bentham he "is quite our man"--in opinion and tendencies, I presume. Ferguson was a member of the club, though after being struck with paralysis in 1780 he never dined out; but among the constant attenders were Henry Mackenzie, Dugald Stewart, Professor John Playfair, Sir James Hall the geologist; Robert Adam, architect; Adam's brother-in-law, John Clerk of Eldin, inventor of the new system of naval tactics; and Lord Daer--the "noble youthful Daer"--who was the first lord Burns ever met, and taught the poet that in a lord he after all but "met a brither," with nothing uncommon about him, Except good sense and social glee, An' (what surprised me) modesty. Lord Daer was the eldest son of the fourth Earl of Selkirk, and, on the outbreak of the French Revolution, a few years after Burns met him, became one of the most ardent of the "Friends of the People"; and was intimate with Mirabeau, to whom he ventured to speak a word for the king's safety, and was told that the French would not commit the English blunder of cutting off their king's head, because that was the usual way to establish a despotism.[291] Great expectations were cherished of Lord Daer's future, but they were defeated by his premature death in 1794. The Mr. M'Gowan mentioned by Swediaur is little known now, but he was an antiquary and naturalist, a friend and correspondent of Shenstone, Pennant, and Bishop Percy. M'Gowan kept house with a friend of his youth, who had returned to him after long political exile, Andrew Lumisden, Prince Charlie's Secretary, who was also a warm friend of Smith, and whose portrait by Tassie is one of the few relics of Smith's household effects which still exist. Lumisden had been Hamilton of Bangour's companion in exile at Rouen, and was no doubt also a member of this club. According to Playfair, the chief delight of the club was to listen to the conversation of its three founders. "As all the three possessed great talents, enlarged views, and extensive information, without any of the stateliness and formality which men of letters think it sometimes necessary to affect, as they were all three easily amused, and as the sincerity of their friendship had never been darkened by the least shade of envy, it would be hard to find an example where everything favourable to good society was more perfectly united, and everything adverse more entirely excluded."[292] This friendship of Smith, Black, and Hutton, if not so famous as the friendship between Smith and Hume, was not less really memorable. Each of them had founded--or done more than any other single person to found--a science; they may be called the fathers of modern chemistry, of modern geology, and of modern political economy; and for all their great achievements, they were yet men of the most unaffected simplicity of character. In other respects they were very different from one another, but their differences only knit them closer together, and made them more interesting to their friends. Black was a man of fine presence and courtly bearing, grave, calm, polished, well dressed, speaking, what was then rare, correct English without a trace of Scotch accent, and always with sense and insight even in fields beyond his own. Smith used to say that he never knew a man with less nonsense in him than Dr. Black, and that he was often indebted to his better discrimination in the judgment of character, a point in which Smith, not only by the general testimony of his acquaintance, but by his own confession, was by no means strong, inasmuch as he was, as he acknowledges, too apt to form his opinion from a single feature. Now the judgment of character was, according to Robison, Black's very strongest point. "Indeed," says Robison, "were I to say what natural talent Dr. Black possessed in the most uncommon degree, I should say it was his judgment of human character, and a talent which he had of expressing his opinion in a single short phrase, which fixed it in the mind never to be forgotten."[293] He was a very brilliant lecturer, for Brougham, who had been one of his students, said that he had heard Pitt and Fox and Plunket, but for mere intellectual gratification he should prefer sitting again on the old benches of the chemistry classroom, "while the first philosopher of his age was the historian of his own discoveries"; and, adored as he was by his students, he was the object of scarce less veneration and pride to the whole body of his fellow-citizens. Lord Cockburn tells us how even the wildest boys used to respect Black. "No lad," says he, "could ever be irreverent towards a man so pale, so gentle, so elegant, and so illustrious." Hutton was in many respects the reverse of Black. He was a dweller out of doors, a man of strong vitality and high spirits, careless of dress and appearance, setting little store by the world's prejudices or fashions, and speaking the broadest Scotch, but overflowing with views and speculations and fun, and with a certain originality of expression, often very piquant. Every face brightened, says Playfair, when Hutton entered a room. He had been bred a doctor, though he never practised, but, devoting himself to agriculture, had been for years one of the leading improvers of the Border counties, and is said, indeed, to have been the first man in Scotland to plough with a pair of horses and no driver, the old eight-ox plough being then in universal use. Between his early chemical studies and his later agricultural pursuits, his curiosity was deeply aroused as he walked about the fields and dales, not merely concerning the composition but the origin of the soils and rocks and minerals that lay in the crust of the globe, and he never ceased examining and speculating till he completed his theory of the earth which became a new starting-point for all subsequent geological research. He was a bold investigator, and Playfair distinguishes him finely in this respect from Black by remarking that "Dr. Black hated nothing so much as error, and Dr. Hutton nothing so much as ignorance. The one was always afraid of going beyond the truth, and the other of not reaching it." He went little into general society, but Playfair says that in the more private circles which he preferred he was the most delightful of companions. The conversation of the club was often, as was to be expected from its composition, scientific, but Professor Playfair says it was always free, and never didactic or disputatious, and that "as the club was much the resort of the strangers who visited Edinburgh from any objects connected with art or with science, it derived from them an extraordinary degree of vivacity and interest."[294] Its name was the Oyster Club, and it may be thought from that circumstance that those great philosophers did not spurn the delights of more ordinary mortals. But probably no three men could be found who cared less for the pleasures of the table. Hutton was an abstainer; Black a vegetarian, his usual fare being "some bread, a few prunes, and a measured quantity of milk diluted with water"; and as for Smith, his only weakness seems to have been for lump sugar, according to an anecdote preserved by Scott, which, trivial though it be, may be repeated here, under the shelter of the great novelist's example and of Smith's own biographical principle that nothing about a great man is too minute not to be worth knowing. Scott, speaking apparently as an eye-witness, says: "We shall never forget one particular evening when he (Smith) put an elderly maiden lady who presided at the tea-table to sore confusion by neglecting utterly her invitation to be seated, and walking round and round the circle, stopping ever and anon to steal a lump from the sugar basin, which the venerable spinster was at length constrained to place on her own knee, as the only method of securing it from his uneconomical depredations. His appearance mumping the eternal sugar was something indescribable." It is probably the same story Robert Chambers gives in his _Traditions of Edinburgh_, and he makes the scene Smith's own parlour, and the elderly spinster his cousin, Miss Jean Douglas. It may have been so, for Scott, as a school companion of young David Douglas, would very likely have been occasionally at Panmure House. FOOTNOTES: [284] Nicholson's edition of _Wealth of Nations_, p. 8. [285] Bonar's _Catalogue of the Library of Adam Smith_, p. viii. [286] Smellie's _Life of Smith_, p. 297. [287] _Quarterly Review_, xxxvi. 200. [288] _Sir J. Sinclair's Correspondence_, i. 389. [289] Stewart's _Works_, x. 73. [290] Stewart's _Life of Reid_, sec. iii. [291] Sinclair's _Old Times and Distant Places_, p. 7. [292] Stewart's _Life of Reid_, sec. iii. [293] Black's _Works_, I. xxxii. [294] _Transactions_, R.S.E., v. 98. CHAPTER XXII VARIOUS CORRESPONDENCE IN 1778 Soon after Smith settled in Edinburgh he received from his old French friends, the Duchesse d'Enville and her son the Duc de la Rochefoucauld, a presentation copy of a new edition of their ancestor's _Maximes_, accompanied by the following letter from the Duke himself, in which he informs Smith of the interesting circumstance that, in spite of the way his famous ancestor is mentioned in the _Theory of Moral Sentiments_, he had himself at one time undertaken a translation of that work, and only abandoned the task when he found himself anticipated by the publication of the translation by Abbé Blavet in 1774. It is a little curious that a disciple of Quesnay, a regular frequenter of Mirabeau's economic dinners, should take no notice in his letter of Smith's greater work, so lately published. PARIS, _3 mars 1778_. Le désir de se rappeller à votre souvenir, monsieur, quand on a eu l'honneur de vous connoître doit vous paroître fort naturel; permettez que nous saisissons pour cela, ma mère et moi, l'occasion d'une édition nouvelle des _Maximes de la Rochefoucauld_, dont nous prenons la liberté de vous offrir un exemplaire. Vous voyez que vous n'avons point de rancune, puisque le mal que vous avez, dit de lui dans la _Théorie des Sentimens Moraux_ ne nous empêche point de vous envoyer ce même ouvrage. Il s'en est même fallu de peu que je ne fisse encore plus, car j'avois eu peutêtre la témérité d'entreprendre une traduction de votre _Théorie_; mais comme je venois de terminer la première partie, j'ai vu paroître la traduction de M. l'Abbé Blavet, et j'ai été forcé de renoncer au plaisir que j'aurois eu de faire passer dans ma langue un des meilleurs ouvrages de la vôtre. Il auroit bien fallu pour lors entreprendre une justification de mon grandpère. Peutêtre n'auroit-il pas été difficile premièrement de l'excuser, en disant, qu'il avoit toujours vu les hommes à la Cour, et dans la guerre civile, _deux théâtres sur lesquels ils sont certainement plus mauvais qu'ailleurs_; et ensuite de justifier, par la conduite personnelle de l'auteur, les principes qui sont certainement trop généralisés dans son ouvrage. Il a pris la partie pour le tout; et parceque les gens qu'il avoit eu le plus sous les yeux étoient animés par _l'amour-propre_, il en a fait le mobile général de tous les hommes. Au reste quoique son ouvrage mérite à certains égards d'être combattu, il est cependant estimable même pour le fond, et beaucoup pour la forme. Permettez-moi de vous demander, si nous aurons bientôt une édition complète des oeuvres de votre illustre ami M. Hume? Nous l'avons sincèrement regretté. Recevez, je vous supplie, l'expression sincère de tous les sentimens d'estime et d'attachement avec lesquels j'ai l'honneur d'être, monsieur, votre très humble et très obéissant serviteur, LE DUC DE LA ROCHEFOUCAULD.[295] What immediate answer Smith gave to this letter is unknown, and he certainly suffered the offending allusion to his correspondent's ancestor to remain unmodified in the new edition of the _Theory_ which appeared in 1781, but eventually at any rate he came to think that he had done the author of the _Maximes_ an injustice by associating him in the same condemnation with Mandeville, and when Dugald Stewart visited Paris in 1789 he was commissioned by Smith to express to the Duc de la Rochefoucauld his sincere regret for having done so, and to inform him that the error would be repaired in the forthcoming edition of the work, which was at that time in preparation.[296] This was done. In that final edition the allusion to Rochefoucauld was entirely suppressed, and the censure confined to Mandeville alone. While Smith's French friends were remonstrating with him about an incidental allusion in the _Theory of Moral Sentiments_, his old friend, Lord Kames--still at eighty-three as keen for metaphysical controversy as he had been with Bishop Butler sixty years before--was preparing an elaborate attack upon the theory of the book itself, which he proposed to incorporate in a new edition of his own _Principles of Morality and Religion_. Before publishing this examination of the theory, however, he sent the manuscript to Smith for perusal, and received the following reply:-- _16th November 1778._ MY DEAR LORD--I am much obliged to you for the kind communication of the objections you propose to make in yr. new edition to my system. Nothing can be more perfectly friendly and polite than the terms in which you express yourself with regard to me, and I should be extremely peevish and ill-tempered if I could make the slightest opposition to their publication. I am no doubt extremely sorry to find myself of a different opinion both from so able a judge of the subject and from so old and good a friend; but differences of this kind are inevitable, and besides, _Partium contentionibus respublica crescit_. I should have been waiting on your Lordship before this time, but the remains of a cold have for these four or five days past made it inconvenient for me to go out in the evening. Remember me to Mrs. Drummond,[297] and believe me to be, my dear Lord, your most obliged and most humble servant, ADAM SMITH. Smith had most probably discussed the merits of Lord Kames's objections with his lordship already, so that he saw no occasion to reply to them in his letter. What Kames principally combated was the idea that sympathy with the sufferings of another originated in any way in our imagining what would be our own feelings if we were in the sufferer's place. He contends, on the contrary, that it is excited directly by the perception of the screams, contortions, tears, or other outward signs of the pain that is endured; and that trying to put ourselves in the sufferer's place produces really a self-satisfaction, on account of our own immunity from his troubles, which has the effect not of awakening the feeling of pity but of moderating and diminishing it. A second objection he raises is that if Smith's theory were true, those in whom the power of imagination was strongest would feel the force of the moral duties most sensibly, and vice versa, which, he says, is contradicted by experience. His last objection is that while the theory proposes to explain the origin of the moral sentiments so far as they respect other persons, it fails entirely to account for those sentiments in regard to ourselves. Our distress on losing an only son and our gratitude for a kindly office neither need to be explained nor can they be explained by imagining ourselves to be other persons. One of the first acquaintances Smith made in Edinburgh was a young Caithness laird who was presently to make a considerable figure in public life--the patriotic and laborious Sir John Sinclair, founder of the Board of Agriculture, promoter of the Statistical Account of Scotland, and author of the _History of the Public Revenue_, _the Code of Agriculture_, _the Code of Health_, and innumerable pamphlets on innumerable subjects. Sinclair was not yet in Parliament when Smith came to Edinburgh in the end of 1777, but his hands were already full of serious work. He was busy with his _History of the Public Revenue_, in which Smith gave him every assistance in his power, and he had actually finished a treatise on the Christian Sabbath, which, in deference to Smith's advice, he never gave to the press. The object of this treatise was to show that the puritanical Sabbath observance of Scotland had no countenance in Holy Scripture, and that, while part of the day ought certainly to be devoted to divine service, the rest might be usefully employed in occupations of a character not strictly religious without infringing any divine law. When the work was completed, Sinclair showed the manuscript to Smith, who dissuaded him strongly from printing it. "Your work, Mr. Sinclair," said he, "is very ably written, but I advise you not to publish it, for rest assured that the Sabbath as a political institution is of inestimable value independently of its claim to divine authority."[298] One day Sinclair brought Smith the news of the surrender of Burgoyne at Saratoga in October 1777, and exclaimed in the deepest concern that the nation was ruined. "There is a great deal of ruin in a nation," was Smith's calm reply. In November 1778 Sinclair wanted Smith to send him to Thurso Castle the loan of the important French book on contemporary systems of taxation, which is so often quoted in the _Wealth of Nations_--the _Mémoires concernant les Impositions_--and of which only 100 copies were originally printed, and only four apparently found their way to this country. Smith naturally hesitated to send so rare a book so far, but promised his young correspondent to give him, when he returned to Edinburgh, not only that book but everything else, printed or written, which he possessed on the subject. Smith's letter is as follows:-- Mr. Smith presents his most respectful compliments to Mr. Sinclair of Ulbster. The _Mémoires sur les Finances_[299] are engaged for four months to come to Mr. John Davidson;[300] when he is done with them Mr. Smith would be very happy to accommodate Mr. Sinclair, but acknowledges he is a little uneasy about the safety of the conveyance and the greatness of the distance. He has frequent occasion to consult the book himself, both in the course of his private studies and in the business of his present employment, and is therefore not very willing to let it go out of Edinburgh. The book was never properly published, but there were a few more copies printed than was necessary for the Commission, for whose use it was compiled. One of these I obtained by the particular favour of Mr. Turgot, the late Controller-General of the Finances. I have heard but of three copies in Great Britain: one belongs to a noble lord, who obtained it by connivance, as he told me;[301] one is in the Secretary of State's office, and the third belongs to a private gentleman. How these two were obtained I know not, but suspect it was in the same manner. If any accident should happen to my book, the loss is perfectly irreparable. When Mr. Sinclair comes to Edinburgh I shall be very happy to communicate to him not only that book, but everything else I have upon the subject, both printed and manuscript, and am, with the highest respect for his character, his most obedient humble servant, ADAM SMITH. EDINBURGH, _24th November 1778_.[302] The _Mémoires_ was printed in 1768, but it may be reasonably inferred, from Smith's account of the extreme difficulty of getting a copy, that he only obtained his in 1774, on the advent of Turgot to power. If that be so, much in the chapters on taxation in the _Wealth of Nations_ must have been written in London after that date. Sir John's biographer quotes a passage from another letter of Smith in connection with his correspondent's financial studies. This letter--which Archdeacon Sinclair describes as a "holograph letter in six folio pages"--is no longer extant, but it concluded with the following remarks on the taxation of the necessaries and luxuries of the poor:-- I dislike all taxes that may affect the necessary expenses of the poor. They, according to circumstances, either oppress the people immediately subject to them, or are repaid with great interest by the rich, _i.e._ by their employers in the advanced wages of their labour. Taxes on the _luxuries_ of the poor, upon their beer and other spirituous liquors, for example, as long as they are so moderate as not to give much temptation to smuggling, I am so far from disapproving, that I look upon them as the best of sumptuary laws. I could write a volume upon the folly and the bad effects of all the legal encouragements that have been given either to the linen manufacture or to the fisheries.--I have the honour to be, with most sincere regard, my dear friend, most affectionately yours, ADAM SMITH.[303] FOOTNOTES: [295] Stewart's _Works_, x. 46. [296] _Ibid._, v. 256. [297] Mrs. Drummond is Lord Kames's wife. She had succeeded to the estate of her father, Mr. Drummond of Blair Drummond, and having along with her husband assumed her father's surname in addition to her own, was now Mrs. Home Drummond. It may perhaps be necessary to add that the title of a Scotch judge is not extended, even by courtesy, to his wife. [298] Sinclair's _Memoirs of Sir John Sinclair_, i. 36. [299] Smith, writing from memory and without the book at hand, makes a verbal mistake in the title. [300] Doubtless John Davidson, W.S., a well-known antiquary of the period, who is mentioned favourably in the preface to Robertson's _History of Scotland_ as a special authority on certain facts of the life of Mary Stuart. [301] Probably Lord Rosslyn, for Bentham, in writing to advise Lord Shelburne to procure a copy of this book, mentions that he knew Lord Rosslyn had a copy, which he had obtained from Mr. Anstruther, M.P., who happened to be in Paris when it was printed, and contrived to get a copy somehow there. [302] _Sir J. Sinclair's Correspondence_, i. 388. [303] Sinclair's _Life of Sir J. Sinclair_, i. 39. CHAPTER XXIII FREE TRADE FOR IRELAND 1779 In 1779 Smith was consulted by various members of the Government with respect to the probable effects of the contemplated concession of free trade to Ireland, and two letters of Smith still remain--one to the Earl of Carlisle, First Lord of Trade and Plantations, and the other to Henry Dundas--which state his views on this subject. A few preliminary words will explain the situation. The policy of commercial restriction has probably never been used with more cruelty or more disaster than it was used against the people of Ireland between the Restoration and the Union. They were not allowed to trade as they would with Great Britain or her colonies, because they were aliens, and they were not allowed to trade as they would with foreign countries, because they were British subjects. There were various industries they had special advantages for establishing, but the moment they began to export the products the English Parliament, or their own Irish Parliament under English influence, closed the markets against them. Living in an excellent grazing country, their first great product was cattle, and the export of cattle was prohibited. When stopped from sending live meat, they tried to send dead, but the embargo was promptly extended to salt provisions. Driven from cattle, they betook themselves to sheep, and sent over wool; that was stopped, allowed, and stopped again. When their raw wool was denied a market, they next tried cloth, but England then bargained for the suppression of the chief branches of Irish woollen manufacture by promising Ireland a monopoly of the manufacture of linen. Other infant industries which gave signs of growing to prosperity were by the same means crushed in the cradle, and Ireland was in consequence never able to acquire that nest-egg of industrial capital and training which England won in the eighteenth century. All this systematic oppression of national industry had produced its natural fruit in a distressing scarcity of employment, and in 1778, though it was a year of plenty, and meal was at its cheapest, many thousands of the population were starving because they had not the means to buy it; the farmers were unable to pay their rents because they got such poor prices; processions of unemployed paraded the streets of Dublin carrying a black fleece in token of their want; and the Viceroy from the Castle warned the English ministry that an enlargement of the trade of Ireland had become a matter of the merest necessity, without which she could never pay her national obligations to the English Exchequer. But it was neither the voice of justice nor the cry of distress that moved the Government; it was the alarm of external danger. The strength of England was then strained as it has never been before or since in an unequal war with the combined forces of France, Spain, and America, and it was no time either to feed or to neglect discontent at home. Ireland had already sent many recruits to the revolutionary army in America, and at this very moment the Irish Protestants, incensed at the indifference of Government to the protection of their ports, had, under the lead of Lord Charlemont, raised an illegal army of 42,000 volunteers, and placed them under arms without the consent of the Crown. The demand of free trade for Ireland came therefore with sanctions that could not be ignored, and Lord North's first idea was to give Ireland the same rights of trading with the colonies and foreign countries as England enjoyed, except in the two particulars of the export of wool and glass and the import of tobacco. This proposal was not satisfactory to the Irish, because it failed to remove their chief grievance, the restriction on their trade in woollen goods, but it provoked a storm of indignation in Liverpool, Manchester, Glasgow, and all the great manufacturing and trading centres of Great Britain. They petitioned the Government declaring that the proposed measure would ruin them, for a reason with which we are still very familiar, because it would be impossible for any English or Scotch manufacturer to compete against the pauper labour of Ireland. Lord North, frightened, as Burke said, into some concessions by the menaces of Ireland, was now frightened out of them again by the menaces of England, and he cut down his original proposals till the Irish thought he was merely trifling with their troubles, and their whole island was aflame. Associations were formed, commotions broke out; a great meeting in Dublin in April 1779 pledged itself to buy nothing of English or Scotch manufacture; many of the county meetings instructed their representatives in Parliament to vote no money bill for more than six months till Irish grievances were redressed; and the Lord-Lieutenant wrote the Government that popular discontent was seriously increasing, that French and American emissaries were actively abroad, that the outlook was black indeed if next session of Parliament passed without giving the Irish a satisfactory measure of free trade, and that "nothing short of permission to export coarse woollen goods would in any degree give general satisfaction." As soon as the Irish Parliament met in October a new member of the House, who was presently to become a new power in the country, Henry Grattan, rose and moved an amendment to the address, urging the necessity for a free export trade; and the amendment was, on the suggestion of Flood, extended to a general demand for free trade, including imports as well as exports, and in this form was carried without a division. The reply to the address, however, seemed studiously ambiguous, and inflamed the prevailing discontent. On King William's birthday the statue of that monarch in Dublin was hung over with expressive placards, and the city volunteers turned out and paraded round it; a few days later a mob from the Liberties attacked the house of the Attorney-General, and proceeding to Parliament, swore all the members they found to vote only short money bills till free trade were conceded; and then Grattan, in his place in the House, carried by three to one a resolution to grant no new taxes and to give only six months' bills for the appropriated duties. The Government was now thoroughly alarmed; they must at last face the question of free trade for Ireland in dead earnest, and applied themselves without delay to learn from all who understood the subject what would be the real effect on England of removing the Irish restrictions. They requested many of the leading public men whom they trusted in Ireland--Lord Lifford, Hely Hutchinson, Henry Burgh, and others--to prepare detailed statements of their views on the commercial grievances of their country and the operation of the proposed remedies. Mr. Lecky, who has seen those statements at the Record Office, says they are conspicuous for their clear grasp of the principles of free trade, and I think that they may with great probability be considered a fruit of Smith's then recently published work, because Hely Hutchinson's statement, or its substance, has been published--it was, indeed, the last book publicly burned in this country--and it makes frequent quotations from the _Wealth of Nations_. It was in these circumstances that the Board of Trade made a double application to Adam Smith for his opinion on the subject. Lord Carlisle, the head of the Board, applied to him through Adam Ferguson, who had been Secretary of the Commission, of which Lord Carlisle had been President, sent out to America the year before to negotiate terms of peace; and Mr. William Eden, Secretary of the Board, applied to him through Henry Dundas. With Eden (afterwards the first Lord Auckland) Smith became later on well acquainted; he was married in 1776 to a daughter of Smith's old friend, Sir Gilbert Elliot, but at the date of this correspondence their personal acquaintance does not seem to have been intimate. Smith's letter to Lord Carlisle is as follows:-- MY LORD--My friend Mr. Ferguson showed me a few days ago a letter in which your Lordship was so good as to say that you wished to know my opinion concerning the consequence of granting to the Irish that _free trade_ which they at present demand so importunately. I shall not attempt to express how much I feel myself flattered by your Lordship's very honourable remembrance of me, but shall without further preface endeavour to explain that opinion, such as it may be, as distinctly as I can. Till we see the heads of the bill which the Irish propose to send over, it is impossible to know precisely what they mean by a free trade. It is possible they may mean by it no more than the freedom of exporting all goods, whether of their own produce or imported from abroad, to all countries (Great Britain and the British settlements excepted) subject to no other duties or restraints than such as their own Parliament may impose. At present they can export glass, tho' of their own manufacture, to no country whatever. Raw silk, a foreign commodity, is under the same restraint. Wool they can export only to Great Britain. Woollen manufactures they can export only from certain ports in Ireland to certain ports in Great Britain. A very slender interest of our own manufacturers is the foundation of all these unjust and oppressive restraints. The watchful jealousy of those gentlemen is alarmed least the Irish, who have never been able to supply compleatly even their own market with glass or woollen manufactures, should be able to rival them in foreign markets. The Irish may mean by a _free trade_ to demand, besides, the freedom of importing from wherever they can buy them cheapest all such foreign goods as they have occasion for. At present they can import glass, sugars of foreign plantations, except those of Spain or Portugal, and certain sorts of East India goods, from no country but Great Britain. Tho' Ireland was relieved from these and from all restraints of the same kind, the interest of Great Britain could surely suffer very little. The Irish probably mean to demand no more than this most just and reasonable freedom of exportation and importation; in restraining which we seem to me rather to have gratified the impertinence than to have promoted any solid interest of our merchants and manufacturers. The Irish may, however, mean to demand, besides, the same freedom of exportation and importation to and from the British settlements in Africa and America which is enjoyed by the inhabitants of Great Britain. As Ireland has contributed little either to the establishment or defence of these settlements, this demand would be less reasonable than the other two. But as I never believed that the monopoly of our Plantation trade was really advantageous to Great Britain, so I cannot believe that the admission of Ireland to a share in that monopoly, or the extension of this monopoly to all the British islands, would be really disadvantageous. Over and above all this, the Irish may mean to demand the freedom of importing their own produce and manufactures into Great Britain, subject to no other duties than such as are equivalent to the duties imposed upon the like goods of British produce or manufacture. Tho' even this demand, the most unreasonable of all, should be granted, I cannot believe that the interest of Britain would be hurt by it. On the contrary, the competition of Irish goods in the British market might contribute to break down in part that monopoly which we have most absurdly granted to the greater part of our own workmen against ourselves. It would, however, be a long time before this competition could be very considerable. In the present state of Ireland centuries must pass away before the greater part of its manufactures could vie with those of England. Ireland has little coal, the coallieries about Lough Neagh being of little consequence to the greater part of the country; it is ill provided with wood: two articles essentially necessary to the progress of great manufactures. It wants order, police, and a regular administration of justice, both to protect and to restrain the inferior ranks of people: articles more essential to the progress of industry than both coal and wood put together, and which Ireland must continue to want as long as it continues to be divided between two hostile nations, the oppressors and the oppressed, the Protestants and the Papists. Should the industry of Ireland, in consequence of freedom and good government, ever equal that of England, so much the better would it be not only for the whole British Empire, but for the particular province of England. As the wealth and industry of Lancashire does not obstruct but promote that of Yorkshire, so the wealth and industry of Ireland would not obstruct but promote that of England. It makes me very happy to find that in the midst of the public misfortunes a person of your Lordship's rank and elevation of mind doth not despair of the commonwealth, but is willing to accept of an active share in administration. That your Lordship may be the happy means of restoring vigour and decision to our counsels, and in consequence of them, success to our arms, is the sincere wish of, my Lord, your Lordship's most obliged and most obedient servant, ADAM SMITH.[304] EDINBURGH, _8th November 1779_. The letter to Dundas was published in the _English Historical Review_ for April 1886 (p. 308), by Mr. Oscar Browning, from a copy in the Auckland papers then in his possession. Mr. Browning gives at the same time the previous letters of Dundas to Eden and Smith respectively. To Eden he writes:-- MELVILLE, _30th October 1779_. MY DEAR SIR--I received yours last night and have sent it this morning to Smith. When I see or hear from him you shall hear again from me upon the different parts of your letter. The enclosed is a copy of my letter to Smith, which will show you what are my present crude ideas upon the subject of Ireland.--Yours faithfully, HENRY DUNDAS. His letter to Smith is as follows:-- MELVILLE, _30th October 1779_. DEAR SIR--I received the enclosed last night from Mr. Eden. The questions he puts would require a Volume to answer them in place of a Letter. Think of it, however, and let me have your ideas upon it. For my own part I confess myself little alarmed about what others seem so much alarmed. I doubt much if a free trade to Ireland is so very much to be dreaded. There is trade enough in the World for the Industry both of Britain and Ireland, and if two or three places either in South or North Britain should suffer some damage, which, by the bye, will be very gradual, from the loss of their monopoly, that is a very small consideration in the general scale and policy of the country. The only thing to be guarded against is the people in Ireland being able to undersell us in foreign mercates from the want of taxes and the cheapness of Labour. But a wise statesman will be able to regulate that by proper distribution of taxes upon the materials and commodities of the respective Countrys. I believe a Union would be best if it can be accomplished; if not the Irish Parliament might be managed by the proper distribution of the Loaves and Fishes, so that the Legislatures of the two countrys may act in union together. In short, it has long appeared to me that the bearing down of Ireland was in truth bearing down a substantial part of the Naval and Military strength of our own Country. Indeed, it has often shocked me in the House of Commons for these two years past, when anything was hinted in favour of Ireland by friends of giving them only the benefit of making the most of what their soil and climate afforded them, to hear it received as a sufficient answer that a town in England or Scotland would be hurt by such an Indulgence. This kind of reasoning will no longer do. But I find, in place of asking yours, I am giving you my opinion. So adieu.--Yours sincerely, HENRY DUNDAS. To this manly, but somewhat inconsistent letter, acknowledging the full right of a people to make the most of what their soil and climate afforded, but yet afraid to give them the whole advantage of their cheapness of labour, Smith sent the following reply, probably on the 1st of November:-- MY DEAR LORD[305]--I am very happy to find that Your Lordship's opinion concerning the circumstance of granting a free trade to Ireland coincides so perfectly with my own. I cannot believe that the manufacturers of Great Britain can for a century to come suffer much from the Rivalship of those of Ireland, even though the Irish should be indulged in a free trade. Ireland has neither the skill nor the stock which would enable Her to rival England, and tho' both may be acquired in time, to acquire them completely will require the opperation of little less than a Century. Ireland has neither Coal nor wood; the former seems to have been denied to her by nature; and though her Soil and Climate are perfectly suited for raising the Latter, yet to raise it to the same degree as in England will require more than a Century. I perfectly agree with your Lordship too that to Crush the Industry of so great and so fine a Province of the Empire in order to favour the monopoly of some particular Towns in Scotland or England is equally injurious and impolitic. The general opulence and improvement of Ireland must certainly, under proper management, afford much greater Resources to Government than can ever be drawn from a few mercantile or manufacturing Towns. Till the Irish Parliament sends over the Heads of their proposed Bill, it may perhaps be uncertain what they understand by a Free Trade. They may perhaps understand by it no more than the power of exporting their own produce to the foreign country where they can find the best mercate. Nothing can be more just and reasonable than this demand, nor can anything be more unjust and unreasonable than some of the restraints which their Industry in this respect at present labours under. They are prohibited under the heaviest penalties to export Glass to any Country. Wool they can export only to Great Britain. Woolen goods they can export only from certain Ports in their own Country and to certain Ports in Great Britain. They may mean to demand the Power of importing such foods as they have occasion for from any Country where they can find them cheapest, subject to no other duties and restraints than such as may be imposed by their own Parliament. This freedom, tho' in my opinion perfectly reasonable, will interfere a little with some of our paltry monopolies. Glass, Hops, Foreign Sugars, several sorts of East Indian goods can at present be imported only from Great Britain. They may mean to demand a free trade to our American and African Plantations, free from the restraints which the 18th of the present King imposed upon it, or at least from some of those restraints, such as the prohibition of exporting thither their own Woolen and Cotton manufactures, Glass, Hatts, Hops, Gunpowder, etc. This freedom, tho' it would interfere with some of our monopolies, I am convinced, would do no harm to Great Britain. It would be reasonable, indeed, that whatever goods were exported from Ireland to these Plantations should be subject to the like duties as those of the same kind exported from England in the terms of the 18th of the present King. They may mean to demand a free trade to Great Britain, their manufactures and produce when Imported into this country being subjected to no other duties than the like manufactures and produce of our own. Nothing, in my opinion, would be more highly advantageous to both countries than this mutual freedom of trade. It would help to break down that absurd monopoly which we have most absurdly established against ourselves in favour of almost all the different Classes of our own manufacturers. Whatever the Irish mean to demand in this way, in the present situation of our affairs I should think it madness not to grant it. Whatever they may demand, our manufacturers, unless the leading and principal men among them are properly dealt with beforehand, will probably oppose it. That they may be so dealt with I know from experience, and that it may be done at little expense and with no great trouble. I could even point to some persons who, I think, are fit and likely to deal with them successfully for this purpose. I shall not say more upon this till I see you, which I shall do the first moment I can get out of this Town. I am much honoured by Mr. Eden's remembrance of me. I beg you will present my most respectful compliments to him, and that you will believe me to be, my dear Lord, most faithfully yours, ADAM SMITH. _1st November 1779._ I cannot explain the allusion in the closing parts of the letter to the writer's personal experience of the ease with which the opposition of manufacturers to proposed measures of public policy could be averted by sagacious management and a little expenditure of money. Nor can I say what persons he had in view to recommend as likely to do this work successfully; but his advice seems to imply that he agreed with the political maxim that the opposition of the pocket is best met through the pocket. He takes no notice of Dundas's suggestion of a union with Great Britain, but we know from the _Wealth of Nations_ that he was a strong advocate of a union--not, of course, on Dundas's ground that a union would better enable the English Parliament to counteract the effects of the competition of Irish pauper labour, but for a reason which will sound curiously perhaps in the middle of our present agitations, that a union would deliver the Irish people from the tyranny of an oppressive aristocracy, which was the great cause of that kingdom being then divided into "two hostile nations," to use his words to Lord Carlisle, "the oppressors and the oppressed." He avers in the _Wealth of Nations_ that "without a union with Great Britain the inhabitants of Ireland are not likely for many ages to consider themselves one people."[306] FOOTNOTES: [304] Morrison MSS. [305] The Lord Advocate is usually addressed as My Lord. [306] Book V. chap. iii. CHAPTER XXIV THE "WEALTH OF NATIONS" ABROAD AND AT HOME While these communications with leading statesmen were showing the impression the _Wealth of Nations_ had made in this country, Smith was receiving equally satisfactory proofs of its recognition abroad. The book had been translated into Danish by F. Dräbye, and the translation published in two volumes in 1779-80. Apparently the translator was contemplating the publication of a second edition, for he communicated with Smith through a Danish friend, desiring to know what alterations Smith proposed to make in his second edition, of whose appearance the translator had manifestly not heard. Smith thereupon wrote Strahan the following letter, asking him to send a copy of the second edition to Dräbye:-- DEAR SIR--I think it is predestined that I shall never write to you except to ask some favour of you or to put you to some trouble. This letter is not to depart from the style of all the rest. I am a subscriber for Watt's Copying Machine. The price is six guineas for the machine and five shillings for the packing-box; I should be glad too he would send me a ream of the copying paper, together with all the other specimens of ink, etc., which commonly accompany the machine. For payment of this to Mr. Woodmason, the seller, whose printed letter I have enclosed, you will herewith receive a bill of eight Guineas payable at sight. If, after paying for all these, there should be any remnant, there is a tailour in Craven Street, one Heddington, an acquaintance of James M'Pherson, to whom I owe some shillings, I believe under ten, certainly under twenty; pay him what I owe. He is a very honest man, and will ask no more than is due. Before I left London I had sent several times for his account, but he always put it off. I had almost forgot I was the author of the inquiry concerning the Wealth of Nations, but some time ago I received a letter from a friend in Denmark telling me that it had been translated into Danish by one Mr. Dreby, secretary to a new erected board of trade and Economy in that Kingdom. My correspondent, Mr. Holt, who is an assessor of that Board, desires me, in the name of Mr. Dreby, to know what alterations I propose to make in a second Edition. The shortest answer to this is to send them the second edition. I propose, therefore, by this Post to desire Mr. Cadell to send three copies of the second Edition, handsomely bound and gilt, to Mr. Anker, Consul-General of Denmark, who is an old acquaintance--one for himself and the other two to be by him transmitted to Mr. Holt and Mr. Dreby. At our final settlement I shall debit myself with these three Books. I suspect I am now almost your only customer for my own book. Let me know, however, how matters go on in this respect. After begging your pardon a thousand times for having so long neglected to write you, I shall conclude with assuring you that notwithstanding this neglect I have the highest respect and esteem for you and for your whole family, and that I am, most sincerely and affectionately, ever yours, ADAM SMITH. EDINBURGH, CANONGATE, _26 Oct. 1780_.[307] As this Danish translation has come up, it may be mentioned here that the _Wealth of Nations_ had already been translated into several other languages. The Abbé Blavet's French version ran through the pages of the _Journal de l'Agriculture, des Commerce, des Finances, et des Arts_ month by month in the course of the years 1779 and 1780, and was then published in book form in 1781. This was not a satisfactory translation, though through mere priority of occupation it held the field for a number of years and went through a number of editions. In 1790 a second translation appeared by Roucher and the Marquise de Condorcet, and in 1802 a third, the best, by Germain Garnier. Smith's own friend Morellet, receiving a presentation copy from the author through Lord Shelburne on its publication, carried it with him to Brienne, the seat of his old Sorbonne comrade the Archbishop of Toulouse, and set at work to translate it there. But he tells us himself that the ex-Benedictine Abbé (Blavet), who had formerly murdered the _Theory of Moral Sentiments_ by a bad translation, anticipated him by his equally bad translation of the _Wealth of Nations_; and so, adds Morellet, "poor Smith was again betrayed instead of being translated, according to the Italian proverb, _Tradottore traditore_."[308] Morellet still thought, however, of publishing his own version, offering it to the booksellers first for 100 louis-d'or and then for nothing, and many years afterwards he asked his friend the Archbishop of Toulouse, when he had become Minister of France, for a grant of 100 louis to pay for its production, but was as unsuccessful with the Minister as he was with the booksellers. All the good Abbé says is that he is sure the money would have been well spent, because the translation was carefully done, and he knew the subject better than any of the other translators. Everything that was abstract in the theory of Smith was, he says, quite unintelligible in Blavet's translation, and even in Roucher's subsequent one, and could be read to more advantage in his own; but after a good translation was published by Garnier in 1802, the Abbé gave up all thought of giving his to the press. A German translation by J.F. Schuler appeared, the first volume in 1776 and the second in 1778, but Roscher says it is worse done than Blavet's translation; and little attention was paid to Smith or his work in Germany until about the close of the century, when a new translation was published by Professor Garve, the metaphysician. Roscher observes that neither Frederick the Great nor the Emperor Joseph, nor any of the princes who patronised the Physiocrats so much, paid the least heed to the _Wealth of Nations_; that in the German press it was neither quoted nor confuted, but merely ignored; and that he himself had taken the trouble to look through the economic literature published between 1776 and 1794, to discover any marks of the reception of the book, and found that Smith's name was very seldom mentioned, and then without any idea of his importance. One spot ought to be excepted--the little kingdom of Hanover, which, from its connection with the English Crown, participated in the contemporary French complaint of Anglomania. Göttingen had its influential school of admirers of English institutions and literature; the _Wealth of Nations_ was reviewed in the _Gelehrte Anzeigen_ of Göttingen early in 1777, and one of the professors of the University there announced a course of lectures upon it in the winter session of 1777-78.[309] But before Smith died his work was beginning to be clearly understood among German thinkers. Gentz, the well-known politician, writes a friend in December 1790 that he had been reading the book for the third time, and thought it "far the most important work which is written in any language on this subject";[310] and Professor C.J. Kraus writes Voigt in 1796 that the world had never seen a more important work, and that no book since the New Testament has produced more beneficial effects than this book would produce when it got better known. A few years later it was avowedly shaping the policy of Stein. It was translated into Italian in 1780, and in Spain it had the curious fortune of being suppressed by the Inquisition on account of "the lowness of its style and the looseness of its morals." Sir John Macpherson--Warren Hastings' successor as Governor-General of India--writes Gibbon as if he saw the sentence of the Inquisition posted on the church doors in a Spanish tour he made in 1792;[311] but a change must have speedily come over the censorial mind, for a Spanish translation by J.A. Ortez was published in four volumes in 1794, with additions relating to Spain. Smith continued, as he says, to be a good customer for his own book. There is another letter which, though undated and unaddressed, was evidently written about this time to Cadell, directing presentation copies of both his books to be sent to Mrs. Ross of Crighton, the wife of his own "very near relation," Colonel Patrick Ross. DEAR SIR--Mrs. Ross of Crighton, now living in Welbeck Street, is my particular friend, and the wife of Lieutenant-Collonel (_sic_) Patrick Ross, in the service of the East India Company, my very near relation. When she left this she seemed to intimate that she wished to have a copy of my last book from the author. May I therefore beg the favour of you to send her a copy of both my books, viz. of the Theory of Moral Sentiments and of the Enquiry concerning the "Wealth of Nations," handsomely bound and gilt, placing the same to my account, and writing upon the blank-leaf of each, _From the Authour_. Be so good as to remember me to Mrs. Cadell, Mr. Strahan and family, and all other friends, and believe me, ever yours, ADAM SMITH.[312] Smith's new duties did not pre-engage his pen from higher work altogether, for before the close of 1782 he had written some considerable additions to the _Wealth of Nations_, which he proposed to insert in the third edition, among them a history of the trading companies of Great Britain, including, no doubt, his history of the East India Company, which Mr. Thorold Rogers supposed him to have written ten years before and kept in his desk. He writes Cadell on the 7th December 1782:-- I have many apologies to make to you for my idleness since I came to Scotland. The truth is, I bought at London a good many partly new books or editions that were new to me, and the amusement I found in reading and diverting myself with them debauched me from my proper business, the preparing a new edition of the _Wealth of Nations_. I am now, however, heartily engaged at my proper work, and I hope in two or three months to send you up the second edition corrected in many places, with three or four very considerable additions, chiefly to the second volume. Among the rest is a short but, I flatter myself, a complete history of all the trading companies in Great Britain. These additions I mean not only to be inserted at their proper places into the new edition, but to be printed separately and to be sold for a shilling or half-a-crown to the purchasers of the old edition. The price must depend on the bulk of the additions when they are all written out. It would give me great satisfaction if you would let me know by the return of the Post if this delay will not be inconvenient. Remember me to Strahan. He will be so good as excuse my not writing to him, as I have nothing to say but what I have now said to you, and he knows my aversion to writing.[313] The additions of which he speaks in this letter were published separately in 1783 in quarto, so as to suit the two previous editions of the work, and the new edition containing them was published in the end of 1784 in three volumes octavo, at the price of a guinea. The delay was due to booksellers' reasons. Dr. Swediaur, the eminent Paris physician, who was resident in Edinburgh at the time studying with Cullen, wrote Bentham in November 1784 that Smith, whom he used to see at least once a week, had shown him the new edition printed and finished, but had told him that Cadell would not publish it till all the people of fashion had arrived in London, and would then at once push a large sale. Swediaur adds that he found this was a bookseller's trick very generally practised, and of Smith himself he says he found him "a very unprejudiced and good man."[314] The principal additions are the result of investigations to which he seems to have been prompted by current agitations of the stream of political opinion. He gives now, for example, a fuller account of the working of the bounty system in the Scotch fisheries, which was then the subject of a special parliamentary inquiry, and on which his experience as a Commissioner of Customs furnished him with many opportunities of gaining accurate information; and he enters on a careful examination of the chartered and regulated corporations, and especially of the East India Company, whose government of the great oriental dependency was at the moment a question of such urgency that Fox introduced his India Bill which killed the Coalition Ministry in 1783, and Pitt established the Board of Control in 1784. The new matter contains two recommendations which have attracted comment as ostensible contraventions of free trade doctrine. One of them is the recommendation of a tax on the export of wool; but then the tax was to take the place of the absolute prohibition of the export which then existed, and it was not to be imposed for protectionist reasons, but for the simple financial purpose of raising a revenue. Smith thought few taxes would yield so considerable a revenue with so little inconvenience to anybody. The other supposed contravention of free trade doctrine is the sanction he lends to temporary commercial monopolies; but then this is avowedly a device for an exceptional situation in which a project promises great eventual benefit to the public, but the projectors might without the monopoly be debarred from undertaking it by the magnitude of the risk it involved. He places this temporary monopoly in the same category with authors' copyrights and inventors' patents; it was the easiest and most natural way of recompensing a projector for hazarding a dangerous and expensive experiment of which the public was afterwards to reap the benefit.[315] It was only to be granted for a fixed term, and upon proof of the ultimate advantage of the enterprise to the public. FOOTNOTES: [307] _New York Evening Post_, 30th April 1887. Original in possession of Mr. Worthington C. Ford, Washington, U.S.A. [308] Morellet, _Mémoires_, i. 244. [309] Roscher, _Geschichte_, p. 599. [310] Gentz, _Briefe an Christian Garve_, p. 63. [311] Gibbon's _Miscellaneous Works_, ii. 479. [312] _New York Evening Post_, 30th April 1887. Original in possession of Mr. Worthington C. Ford, Washington, U.S.A. [313] Printed in a catalogue of a sale of autographs at Messrs. Sotheby, Wilkinson, and Hodge's on 26th and 27th November 1891. [314] Add. MSS., 33,540. [315] _Wealth of Nations_, Book V. chap. i. CHAPTER XXV SMITH INTERVIEWED In his letter to Cadell Smith reproaches himself with his idleness during his first few years in Edinburgh. He had bought a good many new books in London, or new editions of old ones, and, says he, "The amusement I found in reading and diverting myself with them debauched me from my proper business, the preparing a new edition of the _Wealth of Nations_." While he was engaged in this dissipation of miscellaneous reading a young interviewer from Glasgow, who happened to be much in his company in connection with business in the year 1780, elicited his opinions on most of the famous authors of the world, noted them down, and gave them to the public after Smith's death in the pages of the _Bee_ for 1791. In introducing these recollections the editor of the _Bee_, Dr. James Anderson--author of Ricardo's rent theory--says that even if they had not been sent to him with the strongest assurances of authenticity, he could entertain no doubt on that point after their perusal from the coincidence of the opinions reported in them with those he himself had heard Smith express. The writer, who takes the name Amicus, describes himself as "young, inquisitive, and full of respect" for Smith, and says their conversation, after they finished their business, always took a literary turn, and Smith was "extremely communicative, and delivered himself with a freedom and even boldness quite opposite to the apparent reserve of his appearance." The first author Amicus mentions is Dr. Johnson, of whom he thought Smith had a "very contemptuous opinion." "I have seen that creature," said Smith, "bolt up in the midst of a mixed company, and without any previous notice fall upon his knees behind a chair, repeat the Lord's Prayer, and then resume his seat at table. He has played this trick over and over, perhaps five or six times in the course of an evening. It is not hypocrisy but madness. Though an honest sort of man himself, he is always patronising scoundrels. Savage, for example, whom he so loudly praises, was but a worthless fellow; his pension of £50 never lasted him longer than a few days. As a sample of his economy you may take a circumstance that Johnson himself once told me. It was at that period fashionable to wear scarlet cloaks trimmed with gold lace, and the Doctor met him one day just after he had got his pension with one of those cloaks on his back, while at the same time his naked toes were sticking through his shoes." He spoke highly, however, of Johnson's political pamphlets on the American question, in spite of his disapproval of their opinions, and he was especially charmed with the pamphlet about the Falkland Islands, because it presented in such forcible language the madness of modern wars. "Contemptuous opinion" is too strong an expression for Smith's view of Johnson, but it is certain he never rated him so high as the world did then or does now. He told Samuel Rogers that he was astonished at Johnson's immense reputation, but, on the other hand, he frequently praised some of the Doctor's individual writings very highly, as he did to this young gentleman of Glasgow. He once said to Seward that Johnson's preface to Shakespeare was "the most manly piece of criticism that was ever published in any country."[316] Amicus then inquired of Smith his opinion of his countryman Dr. Campbell, author of the _Political Survey_, and Smith replied that he had never met him but once, but that he was one of those authors who wrote on from one end of the week to the other, and had therefore with his own hand produced almost a library of books. A gentleman who met Campbell out at dinner said he would be glad to have a complete set of his works, and next morning a cart-load came to his door, and the driver's bill was £70. He used to get a few copies of each of his works from the printers, and keep them for such chances as that. A visitor one day, casting his eye on these books, asked Campbell, "Have you read all these books?" "Nay," said the other, "I have written them." Smith often praised Swift, and praised him highly, saying he wanted nothing but inclination to have become one of the greatest of all poets. "But in place of that he is only a gossiper, writing merely for the entertainment of a private circle." He regarded Swift, however, as a pattern of correctness both in style and sentiment, and he read to his young friend some of the short poetical addresses to _Stella_. Amicus says Smith expressed particular pleasure with one couplet-- Say, Stella, feel you no content, Reflecting on a life well spent? But it was more probably not so much of these two lines as of the whole passage of which they are the opening that Smith was thinking. He thought Swift a great master of the poetic art, because he produced an impression of ease and simplicity, though the work of composition was to him a work of much difficulty, a verse coming from him, as Swift himself said, like a guinea. The Dean's masterpiece was, in Smith's opinion, the lines on his own death, and his poetry was on the whole more correct after he settled in Ireland, and was surrounded, as he himself said, "only by humble friends." Among historians Smith rated Livy first either in the ancient or the modern world. He knew of no other who had even a pretence to rival him, unless David Hume perhaps could claim that honour. When asked about Shakespeare Smith quoted with apparent approval Voltaire's remarks that _Hamlet_ was the dream of a drunken savage, and that Shakespeare had good scenes but not a good play; but Amicus gathered that he would not permit anybody else to pass such a verdict with impunity, for when he himself once ventured to say something derogatory of _Hamlet_, Smith replied, "Yes, but still _Hamlet_ is full of fine passages." This opinion of Shakespeare was of course common to most of the great men of last century. They were not so much insensible to the poet's genius as perplexed by it. His plays were full of imagination, dramatic power, natural gifts of every kind--that was admitted; but then they seemed wild, unregulated, savage--even "drunken savage," to use Voltaire's expression; they were magnificent, but they were not poetry, for they broke every rule of the art, and poetry after all was an art. And so we find Addison at the beginning of last century writing on the greatest English poets and leaving the name of Shakespeare out; and we find Charles James Fox, a true lover of letters, telling Reynolds at the close of the century that Shakespeare's reputation would have stood higher if he had never written _Hamlet_. Smith thought Shakespeare had more than ten times the dramatic genius of Dryden, but Dryden had more of the poetic art. He praised Dryden for rhyming his plays, and said--as Pope and Voltaire used also to say--that it was nothing but laziness that prevented our tragic poets from writing in rhyme like those of France. "Dryden," said he, "had he possessed but a tenth part of Shakespeare's dramatic genius, would have brought rhyming tragedies into fashion here as they were in France, and then the mob would have admired them just as much as they then pretended to despise them." Beattie's _Minstrel_ he would not allow to be called a poem at all, because it had no plan, no beginning, middle, or end. It was only a series of verses, some of them, however, he admitted, very happy. As for Pope's translation of the _Iliad_, he said, "They do well to call it Pope's _Iliad_, for it is not Homer's _Iliad_. It has no resemblance to the majesty and simplicity of the Greek." He read over to Amicus Milton's _L'Allegro_ and _Il Penseroso_, and explained the respective beauties of each; but he added that all the rest of Milton's short poems were trash. He could not imagine what made Johnson praise the poem on the death of Mrs. Killigrew, and compare it with _Alexander's Feast_. Johnson's praise of it had induced him to read the poem over and with attention twice, but he could not discover even a spark of merit in it. On the other hand, Smith considered Gray's _Odes_, which Johnson had damned, to be the standard of lyric excellence. _The Gentle Shepherd_ he did not admire much. He preferred the _Pastor Fido_, of which, says Amicus, he "spoke with rapture," and the _Eclogues_ of Virgil. Amicus put in a word in favour of the poet of his own country, but Smith would not yield a point. "It is the duty of a poet," he said, "to write like a gentleman. I dislike that homely style which some think fit to call the language of nature and simplicity and so forth. In Percy's _Reliques_ too a few tolerable pieces are buried under a heap of rubbish. You have read perhaps _Adam Bell, Clym of the Cleugh, and William of Cloudesley_." "Yes," said Amicus. "Well then," continued Smith, "do you think that was worth printing?" Of Goldsmith Smith spoke somewhat severely--of Goldsmith as a man apparently, not as a writer--relating some anecdotes of his easy morals, which Amicus does not repeat. But when Amicus mentioned some story about Burke seducing a young lady, Smith at once declared it an invention. "I imagine," said he, "that you have got that fine story out of some of the Magazines. If anything can be lower than the Reviews, they are so. They once had the impudence to publish a story of a gentleman having debauched his own sister, and on inquiry it came out that the gentleman never had a sister. As to Mr. Burke, he is a worthy, honest man, who married an accomplished girl without a shilling of fortune." Of the Reviews Smith never spoke but with ridicule and detestation. Amicus tried to get the _Gentleman's Magazine_ exempted from the general condemnation, but Smith would not hear of that, and said that for his part he never looked at a Review, nor even at the names of the publishers. Pope was a great favourite with him as a poet, and he knew by heart many passages from his poems, though he disliked Pope's personal character as a man, saying he was all affectation, and speaking of his letter to Arbuthnot when the latter was dying as a consummate piece of canting. Dryden was another of his favourite poets, and when he was speaking one day in high praise of Dryden's fables, Amicus mentioned Hume's objections, and was told, "You will learn more as to poetry by reading one good poem than by a thousand volumes of criticism." Smith regarded the French theatre as the standard of dramatic excellence. Amicus concludes his reminiscences by quoting one of Smith's observations on a political subject. He said that at the beginning of the reign of George the Third the dissenting ministers used to receive £2000 a year from Government, but that the Earl of Bute had most improperly deprived them of this allowance, and that he supposed this to be the real motive of their virulent opposition to Government. These recollections of Amicus provoked a letter in a succeeding number of the _Bee_ from Ascanius (the Earl of Buchan) complaining of their publication, not as in any way misrepresenting any of Smith's views, but as obtruding the trifles of the ordinary social hour upon the learned world in a way Smith himself would have extremely disliked. Smith, he says, would rather have had his body injected by Hunter and Monro, and exhibited in Fleet Street or in Weir's Museum. That may very possibly be so; but though Smith, if he were to give his views on literary topics to the public, might prefer putting them in more elaborate dress, yet the opinions he expressed were, it must be remembered, mature opinions on subjects on which he had long thought and even lectured, and if neither Dr. Anderson nor the Earl of Buchan has any fault to find with the correctness of Amicus's report of them, Smith cannot be considered to be any way wronged. The Earl complains too of the matter of the letter being "such frivolous matter"; but it is not so frivolous, and, if it were, is it not Smith himself who used to say to his class at Glasgow, as we are informed by Boswell, that there was nothing too frivolous to be learnt about a great man, and that, for his own part, he was always glad to know that Milton wore latchets to his shoes and not buckles? In 1781 Gibbon seems to have been in doubt as to continuing his _History_, and desired Robertson, who happened to be up in London at the time, to talk the matter over with Smith after his return to Edinburgh. The result of this consultation is communicated in a letter from Robertson to Gibbon on 6th November 1781. "Soon after my return," says Robertson, "I had a long conversation with our friend Mr. Smith, in which I stated to him every particular you mentioned to me with respect to the propriety of going on with your work. I was happy to find that his opinion coincided perfectly with that which I had ventured to give you. His decisions, you know, are both prompt and vigorous, and he could not allow that you ought to hesitate a moment in your choice. He promised to write his sentiments to you very fully, but as he may have neglected to do this, for it is not willingly he puts pen to paper, I thought it might be agreeable to you to know his opinion, though I imagine you could hardly entertain any doubt concerning it."[317] Professor B. Faujas Saint Fond, Professor of Geology in the Museum of Natural History at Paris and member of the National Institute of France, paid a visit to Edinburgh in October or November 1782 in the course of a tour he made through Scotland, and received many civilities from Adam Smith, as he mentions in the account of his travels which he published in 1783. Saint Fond says there was nobody in Edinburgh he visited more frequently than Smith, and nobody received him more kindly or studied more to procure for him every information and amusement Edinburgh could afford. He was struck with Smith's numerous and, as he says, excellently chosen library. "The best French authors occupied a distinguished place in his library, for he was fond of our language." "Though advanced in years, he still possessed a fine figure; the animation of his countenance was striking when he spoke of Voltaire." I have already quoted the remark he made (p. 190). One evening when the geologist was at tea with him, Smith spoke about Rousseau also, and spoke of him "with a kind of religious respect." "Voltaire," he said, "set himself to correct the vices and follies of mankind by laughing at them, and sometimes by treating them with severity, but Rousseau conducts the reader to reason and truth by the attractions of sentiment and the force of conviction. His 'Social Compact' will one day avenge all the persecutions he suffered." Smith asked the Professor if he loved music, and on being told that it was one of his chief delights whenever it was well executed, rejoined, "I am very glad of it; I shall put you to a proof which will be very interesting for me, for I shall take you to hear a kind of music of which it is impossible you can have formed any idea, and it will afford me great pleasure to know the impression it makes upon you." The annual bagpipe competition was to take place next day, and accordingly in the morning Smith came to the Professor's lodgings at nine o'clock, and they proceeded at ten to a spacious concert-room, plainly but neatly decorated, which they found already filled with a numerous assembly of ladies and gentlemen. A large space was reserved in the middle of the room and occupied by gentlemen only, who, Smith said, were the judges of the performances that were to take place, and who were all inhabitants of the Highlands or Islands. The prize was for the best execution of some favourite piece of Highland music, and the same air was to be played successively by all the competitors. In about half an hour a folding door opened at the bottom of the hall, and the Professor was surprised to see a Highlander advance playing on a bagpipe, and dressed in the ancient kilt and plaid of his country. "He walked up and down the vacant space in the middle of the hall with rapid steps and a martial air playing his noisy instrument, the discordant sounds of which were sufficient to rend the ear. The tune was a kind of sonata divided into three periods. Smith requested me to pay my whole attention to the music, and to explain to him afterwards the impression it made upon me. But I confess that at first I could not distinguish either air or design in the music. I was only struck with a piper marching backward and forward with great rapidity, and still presenting the same warlike countenance, he made incredible efforts with his body and his fingers to bring into play the different reeds of his instrument, which emitted sounds that were to me almost insupportable. He received, however, great praise." Then came a second piper, who seemed to excel the first, judging from the clapping of hands and cries of bravo that greeted him from every side; and then a third and a fourth, till eight were heard successively; and the Professor began at length to realise that the first part of the music was meant to represent the clash and din and fury of war, and the last part the wailing for the slain,--and this last part, he observed, always drew tears from the eyes of a number of "the beautiful Scotch ladies" in the audience. After the music came a "lively and animated dance," in which some of the pipers engaged, and the rest all played together "suitable airs possessing expression and character, though the union of so many bagpipes produced a most hideous noise." He does not say whether his verdict was satisfactory to Smith, but the verdict was that it seemed to him like a bear's dancing, and that "the impression the wild instrument made on the greater part of the audience was so different from the impression it made on himself, that he could not help thinking that the lively emotion of the persons around him was not occasioned by the musical effect of the air itself, but by some association of ideas which connected the discordant sounds of the pipe with historical events brought forcibly to their recollection."[318] Nor were these annual competitions the only local institutions in which Smith took a more or less active interest. One of the duties of a citizen which he undertook will perhaps occasion surprise--he became a Captain of the City Guard. He was made Honorary Captain of the Trained Bands of Edinburgh--the City Guard--on the 4th of June 1781, "with the usual solemnity," the minutes state, "and after spending the evening with grate joy, the whole corps retired, but in distinct divisions and good order, to quarters."[319] The business of this body, according to its minutes, seems practically to have been mostly of a convivial character, and we can sympathise with the honest pride of the clerk in recording in what a condition of good order they were able to retire after celebrating that auspicious occasion with the joy it deserved. Smith no doubt attended their periodical festivities, or paid his fine of eight magnums of claret for absence. But their business was not all claret and punch. On the 8th September 1784, for example, the captains, lieutenants, and ensigns of the Trained Bands were called out, in consequence of an order from the Lord Provost, "to attend the wheeping of Paull and Anderson, actors in the late riots at Cannonmills." A rescue riot was apprehended, and the Trained Bands met in the old Justiciary Court-room, and were armed there with "stowt oaken sticks." Marching forth in regular order, they acted as guard to the magistrates during the day, and "by their formidable and respectable appearance had the good effect of detering the multitude so that they became only peaceable spectators." Whether an honorary captain could be called upon for active service in an emergency I cannot say, but Smith's name is not mentioned in the list of absentee captains upon this occasion. In 1783 Smith joined Robertson and others in founding the Royal Society of Edinburgh. Robertson had long entertained the idea of establishing a society on the model of the foreign academies for the cultivation of every branch of science, learning, and taste, and he was at length moved into action by the steps taken in 1782 by the Earl of Buchan and others to obtain a royal charter for the Society of Antiquaries of Scotland, founded two years before. Robertson was very anxious to have only one learned society in Edinburgh, of which antiquities might be made a branch subject, and he even induced the University authorities to petition Parliament against granting a charter of incorporation to the Antiquarian Society. In this strong step the University was seconded by the Faculty of Advocates and the old Philosophical Society, founded by Colin Maclaurin in 1739, but their efforts failed. Out of the agitation, however, the Royal Society came into being. Whether Smith actively supported Robertson, or supported him at all, in his exertions against the Antiquarian Society, I do not know. He was not, as Robertson was, a member of the Society of Antiquaries. But he was one of the original members of the Royal Society. The society was divided into two branches,--a physical branch or class devoted to science; and a literary branch or class devoted to history and polite letters,--and Smith was one of the four presidents of the literary class. The Duke of Buccleugh was President of the whole society; and Smith's colleagues in the presidency of the literary class were Robertson, Blair, and Baron Gordon (Cosmo Gordon of Cluny, a Baron of Exchequer and most accomplished man). Smith never read a paper to this society, nor does he ever seem to have spoken in it except once or twice on a matter of business which had been entrusted to him. The only mention of his name in the printed _Transactions_ is in connection with two prizes of 1000 ducats and 500 ducats respectively, which were offered to all the world in 1785 by Count J.N. de Windischgraetz for the two most successful inventions of such legal terminology for every sort of deed as, without imposing any new restraints on natural liberty, would yet leave no possible room for doubt or litigation, and would thereby diminish the number of lawsuits. The Count wished the prizes to be decided by three of the most distinguished literary academies in Europe, and had chosen for that purpose the Royal Academy of Science in Paris, which had already consented to undertake the duty; the Royal Society of Edinburgh, whose consent the Count now sought; and one of the academies of Germany or Switzerland which he was afterwards to name. He addressed his communication to the society through Adam Smith, who must therefore be assumed to have had some private acquaintance or connection with him; and on the 9th of July Smith laid the proposal before the Council of the society, and, as is reported in the _Transactions_, "signified to the meeting that although he entertained great doubt whether the problem of the Count de Windischgraetz admitted of any complete and rational solution, yet the views of the proposer being so highly laudable, and the object itself being of that nature that even an approximation to its attainment would be of importance to mankind, he was therefore of opinion that the society ought to agree to the request that was made to them. He added that it was his intention to communicate his sentiments on the subject to the Count by a letter which he would lay before the Council at a subsequent meeting."[320] This letter was read to the Council on the 13th of December, and after being approved, a copy of it was requested for preservation among their papers, as the author "did not incline that it should be published in the Transactions of the society." Nothing further is heard of this business till the 6th of August 1787, when "Mr. Commissioner Smith acquainted the society that the Count de Windischgraetz had transmitted to him three dissertations offered as solutions of his problem, and had desired the judgment of the society upon their merits. The society referred the consideration of these papers to Mr. Smith, Mr. Henry Mackenzie of the Exchequer, and Mr. William Craig, advocate, as a committee to appraise and consider them, and to report their opinion to the society at a subsequent meeting." At length, on the 21st January 1788, Mr. Commissioner Smith reported that this committee thought none of the three dissertations amounted either to a solution or an approximation to a solution of the Count's problem, but that one of them was a work of great merit, and the society asked Mr. A. Fraser Tytler, one of their secretaries, to send on this opinion to the Count as their verdict.[321] FOOTNOTES: [316] Seward's _Anecdotes_, ii. 464. [317] Gibbon's _Miscellaneous Works_, ii. 255. [318] Saint Fond, _Travels in England, Scotland, and the Hebrides_, ii. 241. [319] Skinner's _Society of Trained Bands of Edinburgh_, p. 99. [320] _Transactions_, R.S.E., i. 39. [321] _Ibid._, R.S.E., ii. 24. CHAPTER XXVI THE AMERICAN QUESTION AND OTHER POLITICS Notwithstanding the patronage he received from Lord North and his relations of friendship and obligation with the Duke of Buccleugh and Henry Dundas, Smith continued to be a warm political supporter of the Rockingham Whigs and a warm opponent of the North ministry. The first Earl of Minto (then Sir Gilbert Elliot) visited Edinburgh in 1782, and wrote in his journal. "I have found one just man in Gomorrah, Adam Smith, author of the _Wealth of Nations_. He was the Duke of Buccleugh's tutor, is a wise and deep philosopher, and although made Commissioner of the Customs here by the Duke and Lord Advocate, is what I call an _honest fellow_. He wrote a most kind as well as elegant letter to Burke on his resignation, as I believe I told you before, and on my mentioning it to him he told me he was the only man here who spoke out for the Rockinghams."[322] This letter is now lost, but Burke's answer to it remains, and was sold at Sotheby's a few years ago. Smith must have expressed the warmest approval of the step Fox and Burke had taken, on the death of the Marquis of Rockingham in July 1782, in resigning their offices in the Ministry rather than serve under their colleague Lord Shelburne, and he must have felt strongly on the subject to overcome his aversion to letter-writing on the occasion. Fox and Burke have been much censured for their refusal to serve under Shelburne, inasmuch as that refusal meant a practical disruption of the Whig party; and Burke could not help feeling strengthened, as he says he was in his letter, by the approval of a man like Smith, who was not only a profound political philosopher, but a thorough and loyal Whig. Notwithstanding his personal friendship with Lord Shelburne, Smith never seems to have trusted him as a political leader. We have already seen him condemning Shelburne at the time of that statesman's first collision with Fox--the "pious fraud" occasion--and now nineteen years later he shows the same distrust of Shelburne, and doubtless for the same reason, that he believed Shelburne was willing to be subservient to the king's designs, and to increase the power of the Crown, which it had ever been the aim of the Whigs to limit. Shelburne's acceptance of office, after the king's positive refusal to listen to the views of the Rockinghams themselves regarding the leadership of their own party, was probably regarded by Smith as a piece of open treason to the popular cause, and open espousal of the cause of the Court. In those critical times the thoughts of even private citizens brooded on the arts of war. An Edinburgh lawyer who had never been at sea invented the system of naval tactics which gave Rodney his victories, and here is a Highland laird, who had spent his days among his herds in Skye, writing Smith about a treatise he has composed on fortification, which he believes to contain original discoveries of great importance, and which he sends up to Smith and Henry Mackenzie, with a five-pound note to pay the expenses of its publication. The author was Charles Mackinnon of Mackinnon, the chief of his clan, who fell into adverse circumstances shortly after the date of this correspondence, and parted with all the old clan property, and the treatise on fortification itself still exists among the manuscripts of the British Museum. It is certainly a poor affair, from which the author could have reaped nothing but disappointment, and Smith, who seems to have held Mr. Mackinnon in high esteem personally, strongly dissuades him from giving it to the press. This opinion is communicated in the following candid but kind letter:-- DEAR SIR--I received your favour of the 13th of this month, and am under some concern to be obliged to tell you that I have not only not got out of the press, but that I have not yet gone into it, and would most earnestly once more recommend it to your consideration whether upon this occasion we should go into it at all. It was but within these few days that I could obtain a meeting with Mr. Mackinzie, who was occupied with the Exchequer Business. I find he had seen your papers before, and was of the same opinion with me that in their present condition they would not do you the honour we wish you to derive from whatever work you publish. We read them over together with great care and attention, and we both continued of our first opinion. I hope you will pardon me if I take the liberty to tell you that I cannot discover in them those original ideas which you seem to suppose that they contain. I am not very certain whether I understand what you hint obscurely in your former letter, but it seems to me as if you had some fear that some person might anticipate you, and claim the merit of your discoveries by publishing them as his own. From the character of the gentleman to whom your property has been communicated, I should hope there is no danger of this. But to prevent the Possibility of the Public being imposed upon in this manner, your Papers now lie sealed up in my writing Desk, superscribed with directions to my executors to return them unopened to you or your heirs as their proper owners. In case of my death and that of Mr. M'Kinzie, the production of these papers under my seal and superscribed by my hand will be sufficient to refute any plagiarism of this kind. While we live our evidence will secure to you the reputation of whatever discoveries may be contained in them. I return you the five Pound note, in hopes that you will not insist upon this publication, at least for some time; at any rate, I shall always be happy to advance a larger sum upon your account, though I own I could wish it was for some other purpose. I have not shown your Papers to Smellie. It will give me great pleasure to hear from you, and to be informed that you forgive the freedom I have used in offering you, I am afraid, a disagreeable advice. I can assure you that nothing but the respect which I think I owe to the character of a person whom I know to be a man of worth, delicacy, and honour, could have extorted it from me.--I ever am, dear sir, most faithfully yours, ADAM SMITH. CUSTOM HOUSE, EDINBURGH, _21st August 1782_. If you should not chuse that your Papers should remain in my custody, I shall either send them to you or deliver to whom you please.[323] While one Highland laird was planning to save his country by an improved system of fortification, another was conceiving a grander project of saving her by continental alliances. The moment was among the darkest England has ever passed through. We were engaged in a death-struggle against France, Spain, and the American colonies combined. Cornwallis had just repeated at Yorktown the humiliating surrender of Burgoyne at Saratoga. Elliot lay locked in Gibraltar. Ireland was growing restive and menacing on one side, and the Northern powers of Europe on the other--the Armed Neutrality, as they were called--sat and watched, with their hands on their sword-hilts and a grudge against England in their hearts. Now Sir John Sinclair believed that these neutral powers held the key of the situation, and wrote a pamphlet in 1782, which he proposed to translate into their respective tongues for the purpose of persuading them to join this country in a crusade against the House of Bourbon, and "to emancipate the colonies both in the West Indies and on the continent of America for the general interest of all nations." The price he was prepared to offer these powers for their adhesion was to be a share in the colonial commerce of England, and the acquisition of some of the French and Spanish colonial dependencies for themselves. Sinclair sent his pamphlet to Smith, apparently with a request for his opinion on the advisability of translating it for the conversion of the powers, and he received the following reply. I may add that I have not been able to see this pamphlet, but that it is evidently not the pamphlet entitled "Impartial Considerations on the Propriety of retaining Gibraltar," as Sinclair's biographer supposes; for in the former pamphlet Sinclair is advocating not only a continuance, but an extension of the war, whereas in the latter he has come round to the advocacy of peace, and instead of contemplating the deprivation of France and Spain of their colonies, he recommends the cession of Gibraltar as a useless and expensive possession, using very much the same line of argument which Smith suggests in this letter. Smith's letter very probably had some influence in changing his views, though it is true the idea of ceding Gibraltar was in 1782 much favoured by a party in Lord Shelburne's government, and even by the king himself. Smith's letter ran thus:-- MY DEAR SIR--I have read your pamphlet several times with great pleasure, and am very much pleased with the style and composition. As to what effect it might produce if translated upon the Powers concerned in the Armed Neutrality, I am a little doubtful. It is too plainly partial to England. It proposes that the force of the Armed Neutrality should be employed in recovering to England the islands she has lost, and the compensation which it is proposed that England should give for this service is the islands which they may conquer for themselves, with the assistance of England indeed, from France and Spain. There seems to me besides to be some inconsistency in the argument. If it be just to emancipate the continent of America from the dominion of every European power, how can it be just to subject the islands to such dominion? and if the monopoly of the trade of the continent be contrary to the rights of mankind, how can that of the islands be agreeable to these rights? The real futility of all distant dominions, of which the defence is necessarily most expensive, and which contribute nothing, either by revenue or military forces, to the general defence of the empire, and very little even to their own particular defence, is, I think, the subject on which the public prejudices of Europe require most to be set right. In order to defend the barren rock of Gibraltar (to the possession of which we owe the union of France and Spain, contrary to the natural interests and inveterate prejudices of both countries, the important enmity of Spain and the futile and expensive friendship of Portugal) we have now left our own coasts defenceless, and sent out a great fleet, to which any considerable disaster may prove fatal to our domestic security; and which, in order to effectuate its purpose, must probably engage a fleet of superior force. Sore eyes have made me delay writing to you so long.--I ever am, my dear sir, your most faithful and affectionate humble servant, ADAM SMITH. CUSTOM HOUSE, EDINBURGH, _14th October 1782_.[324] The strong opinion expressed in this letter of the uselessness of colonial dependencies, which contributed nothing to the maintenance of the mother country, had of course been already expressed in the _Wealth of Nations_. "Perish uncontributing colonies" is the very pith of the last sentence of that work. "If any of the provinces of the British Empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expense of defending those provinces in time of war and of supporting any part of their civil or military establishments in time of peace; and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances." The principles of free trade presently got an impetus from the conclusion of peace with America and France in 1783. Lord Shelburne wrote Abbé Morellet in 1783 that the treaties of that year were inspired from beginning to end by "the great principle of free trade," and that "a peace was good in the exact proportion that it recognised that principle." A fitting opportunity was thought to have arisen for making somewhat extended applications of the principle, and many questions were asked about how far such applications should go in this direction or that. When the American Intercourse Bill was before the House in 1783, one of Lord Shelburne's colleagues in the Ministry, William Eden, approached Smith in considerable perplexity as to the wisdom of conceding to the new republic free commercial intercourse with this country and our colonies. Eden had already done something for free trade in Ireland, and he was presently to earn a name as a great champion of that principle, after successfully negotiating with Dupont de Nemours the Commercial Treaty with France in 1786; but in 1787 he had not accepted the principle so completely as his chief, Lord Shelburne. Perhaps, indeed, he never took a firm hold of the principle at any time, for Smith always said of him, "He is but a man of detail."[325] Anyhow, when he wrote Smith in 1783 he was under serious alarm at the proposal to give the United States the same freedom to trade with Canada and Nova Scotia as we enjoyed ourselves. Being so near those colonies, the States would be sure to oust Great Britain and Ireland entirely out of the trade of provisioning them. The Irish fisheries would be ruined, the English carrying trade would be lost. The Americans, with fur at their doors, could easily beat us in hats, and if we allowed them to import our tools free, they would beat us in everything else for which they had the raw materials in plenty. Eden and Smith seem to have exchanged several letters on this subject, but none of them remain except the following one from Smith, in which he declares that it would be an injustice to our own colonies to restrict their trade with the United States merely to benefit Irish fish-curers or English hatters, and to be bad policy to impose special discouragements on the trade of one foreign nation which are not imposed on the trade of others. His argument is not, it will be observed, for free trade, which he perhaps thought then impracticable, but merely for equality of treatment,--equality of treatment between the British subject in Canada and the British subject in England, and equality of treatment between the American nation and the Russian, or French, or Spanish. DEAR SIR--If the Americans really mean to subject the goods of all different nations to the same duties and to grant them the same indulgence, they set an example of good sense which all other nations ought to imitate. At any rate it is certainly just that their goods, their naval stores for example, should be subjected to the same duties to which we subject those of Russia, Sweden, and Denmark, and that we should treat them as they mean to treat us and all other nations. What degree of commercial connection we should allow between the remaining colonies, whether in North America or the West Indies, and the United States may to some people appear a more difficult question. My own opinion is that it should be allowed to go on as before, and whatever inconveniences result from this freedom may be remedied as they occur. The lumber and provisions of the United States are more necessary to our West India Islands than the rum and sugar of the latter are to the former. Any interruption or restraint of commerce would hurt our loyal much more than our revolted subjects. Canada and Nova Scotia cannot justly be refused at least the same freedom of commerce which we grant to the United States. I suspect the Americans do not mean what they say. I have seen a Revenue Act of South Carolina by which two shillings are laid upon every hundredweight of brown sugar imported from the British plantations, and only eighteenpence upon that imported from any foreign colony. Upon every pound of refined sugar from the former one penny, from the latter one halfpenny. Upon every gallon of French wine twopence; of Spanish wine threepence; of Portuguese wine fourpence. I have little anxiety about what becomes of the American commerce. By an equality of treatment of all nations we must soon open a commerce with the neighbouring nations of Europe infinitely more advantageous than that of so distant a country as America. This is an immense subject upon which when I wrote to you last I intended to have sent you a letter of many sheets, but as I expect to see you in a few weeks I shall not trouble you with so tedious a dissertation. I shall only say at present that every extraordinary, either encouragement or discouragement that is given to the trade of any country more than to that of another may, I think, be demonstrated to be in every case a complete piece of dupery, by which the interest of the state and the nation is constantly sacrificed to that of some particular class of traders. I heartily congratulate you upon the triumphant manner in which the East India Bill has been carried through the Lower House. I have no doubt of its passing through the Upper House in the same manner. The decisive judgment and resolution with which Mr. Fox has introduced and supported that Bill does him the highest honour.--I ever am, with the greatest respect and esteem, dear sir, your most affectionate and most humble servant, ADAM SMITH. EDINBURGH, _15th December 1783_.[326] Fox's East India Bill, of which Smith expresses such unqualified commendation, proposed to transfer the government of British India from the Court of Directors of the East India Company to a new board of Crown nominees. This measure was entirely to Smith's mind. He had already in the former editions of his book condemned the company which, as he says, "oppresses and domineers in India," and in the additional matter which he wrote about the company immediately before this bill was introduced he declared of them that "no other sovereigns ever were, or, from the nature of things, ever could be, so perfectly indifferent about the happiness or misery of their subjects, the improvement or waste of their dominions, the glory or disgrace of their administration, as, from irresistible moral causes, the greater part of the proprietors of such a mercantile company are and necessarily must be." FOOTNOTES: [322] Lady Minto's _Life of the Earl of Minto_, i. 84. [323] Add. MSS., 5035. [324] _Correspondence of Sir John Sinclair_, i. 389. [325] Mackintosh, _Miscellaneous Works_, iii. 17. [326] _Journals and Correspondence of Lord Auckland_, i. 64. CHAPTER XXVII BURKE IN SCOTLAND 1784-1785 Burke had been elected Lord Rector of the University of Glasgow in November 1783 in succession to Dundas, and he came down to Scotland to be installed in the following April. He spent altogether eight or ten days in the country, and he spent them all in the company of Smith, who attended him wherever he went. Burke and Smith, always profound admirers of one another's writings, had grown warm friends during the recent lengthened residence of the latter in London. Even in the brilliant circle round the brown table in Gerrard Street there was none Burke loved or esteemed more highly than Smith. One of the statesman's biographers informs us, on the authority of an eminent literary friend, who paid him a visit at Beaconsfield after his retirement from public life, that he then spoke with the warmest admiration of Smith's vast learning, his profound understanding, and the great importance of his writings, and added that his heart was as good and rare as his head, and that his manners were "peculiarly pleasing."[327] Smith on his part was drawn to Burke by no less powerful an attraction. He once paid him a compliment with which the latter appears to have been particularly gratified, for he repeated it to his literary friend on this same occasion. "Burke," said the economist, "is the only man I ever knew who thinks on economic subjects exactly as I do, without any previous communications having passed between us."[328] The installation of Lord Rector was to take place on Saturday the 10th of April, and Burke arrived in Edinburgh on Tuesday or Wednesday previous. Whether he was Smith's guest while there I am unable to say, but at any rate it was Smith who did the honours of the town to him, and accompanied him wherever he went. Dalzel, the Greek professor, gives an account of the statesman's visit, to his old friend and class-fellow, Sir Robert Liston, and states that "Lord Maitland attended him constantly and Mr. Adam Smith. They brought him," he adds, "to my house the day after he arrived." Lord Maitland was the eldest son of the Earl of Lauderdale, and became a well-known figure both in politics and in scientific economics after he succeeded to the peerage himself. I have already mentioned him for his admiration of Smith, and his defence of him from the disparaging remarks of Fox, though he was himself no blind follower of the _Wealth of Nations_, but one of the earliest and not the least acute of the critics of that work. He was at this time one of the rising hopes of the Whigs in the House of Commons, which he had entered as representative of a Cornish borough in 1780. Dalzel had been his tutor, and had accompanied him in that capacity to Oxford; and being also a great favourite with Smith, whom he respected above all things for his knowledge of Greek, he was naturally among the first of the eminent citizens to whom they introduced their distinguished guest. On Thursday morning Burke and Smith went out with Lord Maitland to Hatton, the Lauderdale seat in Midlothian, to dine and stay the night there on their way to Glasgow, and Dugald Stewart and Dalzel joined them later in the day after they had finished their college classes. The conversation happened very naturally to touch on party prospects, for they were at the moment in the thick of a general election--the famous election of 1784, so fatal to the Whigs, when near 160 supporters of the Coalition Ministry--"Fox's martyrs"--lost their seats, and Pitt was sent back with an enormous majority behind him. Parliament had been dissolved a fortnight before, and many of the elections were already past; Burke himself had been returned for Malton on his way north, but the battle was still raging; in Westminster, where the Whig chief was himself fighting, it lasted a month longer, and in many other constituencies the event was as yet undecided. As far as returns had been made, however, things had gone hard with the Whigs, and Burke was despondent. He had been some twenty years in public life without his party being in power as many months, and since the party seemed now doomed, as indeed it was, to twenty years of opposition again, he turned to Lord Maitland and said, "Lord Maitland, if you want to be in office, if you have any ambition or wish to be successful in life, shake us off, give us up." But Smith intervened, and with singular hopefulness ventured to prophesy that in two years things would certainly come round again. "Why," replied Burke, "I have already been in a minority nineteen years, and your two years, Mr. Smith, will just make me twenty-one, and it will surely be high time for me to be then in my majority."[329] Smith's hearty remark implies his continued loyalty to the Rockinghams, and shows that just as he two years before approved of their separation from Lord Shelburne, which many Whig critics have censured, so he now equally approved of their coalition with their old adversary, Lord North, which Whig critics have censured more severely still. But his sanguine forecast was far astray. Burke never again returned to office, and the whole conversation reads strangely in the light of subsequent events. Only a few years more and Burke had himself shaken off his friends--from no view to power, it is true--and the young nobleman to whom he gave the advice in jest was to take the lead in avenging the desertion, and to denounce the pension it was proposed to give him as the wages of apostasy. The French Revolution, which drove Burke back to a more conservative position, carried Lord Maitland, who had drunk in Radicalism from Professor John Millar, forward into the republican camp. He went over to Paris with Dugald Stewart and harangued the mob on the streets _pour la liberté_,[330] and he said one day to the Duchess of Gordon, "I hope, madame, ere long to have the pleasure of introducing Mrs. Maitland to Mrs. Gordon."[331] On the present occasion at Hatton, however, they were all one in their lamentations over the temporary eclipse the cause of liberty had suffered. On the following morning they all set out together for Glasgow, Stewart and Dalzel being able to accompany them because it was Good Friday, and Good Friday was then a holiday at Edinburgh University. They supped that evening with Professor John Millar, Smith's pupil and Lord Maitland's master, and next day they assisted at the ceremony of installation. The chief business was of course the Rector's address, described in the _Annual Register_ of the year as "a very polite and elegant speech suited to the occasion." Tradition says Burke broke down in this speech, and after speaking five minutes concluded abruptly by saying he was unable to proceed, as he had never addressed so learned an audience before; but though the tradition is mentioned by Jeffrey, who was a student at Glasgow only three years afterwards, and is more definitely stated by Professor Young of the same University in his _Lectures on Intellectual Philosophy_ (p. 334), there appears to be no solid foundation for it whatever. It is not mentioned by Dalzel, who would be unlikely to omit so interesting a circumstance in the gossiping account of the affair which he gives in his letter to Sir R. Liston. After the installation they adjourned to the College chapel for divine service, where they heard a sermon from Professor Arthur, and then they dined in the College Hall. On Sunday Stewart and Dalzel returned to Edinburgh for their classes next day, but Smith and Lord Maitland accompanied Burke on an excursion to Loch Lomond, of which we know Smith was a great admirer. He said to Samuel Rogers it was the finest lake in Great Britain, and the feature that pleased him particularly was the contrast between the islands and the shore.[332] They did not return to Edinburgh till Wednesday, and they returned then by way of Carron, probably to see the ironworks. On Thursday evening they dined at Smith's, Dalzel being again of the party. Burke seems to have been at his best--"the most agreeable and entertaining man in conversation I ever knew," says Dalzel. "We got a vast deal of political anecdotes from him, and fine pictures of political characters both dead and living. Whether they were impartially drawn or not, that is questionable, but they were admirably drawn."[333] The elections were still proceeding, and the 29th of April was fixed for the election in Lanarkshire, which had been represented for the previous ten years by a strong personal friend of Smith, Andrew Stuart of Torrance. I have already mentioned Stuart's name in connection with his candidature for the Indian Commissionership, for which Sir William Pulteney thought of proposing Smith. Though now forgotten, he was a notable person in his day. He came first strongly into public notice during the proceedings in the Douglas cause. Having, as law-agent for the Duke of Hamilton, borne the chief part in preparing the Hamilton side of the case, he was attacked in the House of Lords--and attacked with quite unusual virulence--both by Thurlow, the counsel for the other side, and by Lord Mansfield, one of the judges; and he met those attacks by fighting a duel with Thurlow, and writing a series of letters to Lord Mansfield, which obtained much attention and won him a high name for ability. Shortly thereafter--in 1774--he entered Parliament as member for Lanarkshire, and made such rapid mark that he was appointed a Commissioner of Trade and Plantations in 1779, and seemed destined to higher office. But now in 1784, on the very eve of the election, Stuart suddenly retired from the field, in consequence apparently of some personal considerations arising between himself and the Duke of Hamilton. He was extremely anxious to have his reasons for this unexpected step immediately and fully explained to his personal friends in Edinburgh, and on the 22nd of April--the day before he wrote his resignation--he sent his whole correspondence with the Duke of Hamilton about the matter through to John Davidson, W.S., for their perusal, and especially, it would appear, for the perusal of Smith, the only one he names. "There is particularly," he says, "one friend, Mr. Adam Smith, whom I wish to be fully informed of everything." Being the only friend specifically named in the letter, Smith seems to have been consulted by Davidson as to any other "particular friends" to whom the correspondence should be submitted, and he wrote Davidson on the 7th of May 1784 advising him to show it to Campbell of Stonefield, one of the Lords of Session, and a brother-in-law of Lord Bute. He says-- My Lord Stonefield is an old attached and faithful friend of A. Stuart. The papers relative to the County of Lanark may safely be communicated to him. He is perfectly convinced of the propriety of what you and I agreed upon, that the subject ought to be talked of as little as possible, and never but among his most intimate and cordial friends. A. SMITH. _Friday, 7th May_.[334] After being brightened by the agreeable visit of Burke, Smith was presently cast into the deepest sadness by what seems to have been the first trouble of his singularly serene and smooth life--the death of his mother. She died on the 23rd of May, in her ninetieth year. The three avenues to Smith, says the Earl of Buchan, were always his mother, his books, and his political opinions--his mother apparently first of all. They had lived together, off and on, for sixty years, and being most tenderly attached to her, he is said, after her death, never to have seemed the same again. According to Ramsay of Ochtertyre, he was so disconsolate that people in general could find no explanation except in his supposed unbelief in the resurrection. He sorrowed, they said, as those who have no hope. People in general would seem to have little belief in the natural affections; but while they extracted from Smith's filial love a proof of his infidelity, Archdeacon John Sinclair seeks to extract from it a demonstration of his religious faith. It appears that when Mrs. Smith was visited on her deathbed by her minister, her famous son always remained in the room and joined in the prayers, though they were made in the name and for the sake of Christ; and the worthy Archdeacon thinks no infidel would have done that. The depression Smith showed after his mother's death, however, was unfortunately due in part to the fact that his own health was beginning to fail. He was now sixty-one; as Stewart tells us, he aged very rapidly, and in two years more he was in the toils of the malady that carried him off. The shock of his mother's death could not help therefore telling severely upon him in his declining bodily condition. Burke was--no doubt at Smith's instance--elected Fellow of the Royal Society of Edinburgh in June 1784, in spite of several black balls; for, as Dalzel observes, "it would seem that there are some violent politicians among us"; and in August 1785 he was again in Scotland attending to the duties of his Rectorship. He was accompanied this time by Windham, who was the most attached and the most beloved of his political disciples, and who had been a student at Glasgow himself in 1766. If Dalzel was delighted with Burke, he was enchanted with Windham, for, says he to Liston, "besides his being a polite man and a man of the world, he is perhaps the very best Greek scholar I ever met with. He did me the honour of breakfasting with me one morning, and sat for three hours talking about Greek. When we were at Hatton he and I stole away as often as we could from the rest of the company to read and talk about Greek.... You may judge how I would delight in him." Smith was not at Hatton with them this time, but he saw much of them in Edinburgh. Smith had probably known Windham already, but at any rate, as soon as Burke and he arrived in Edinburgh on the 24th of August and took their quarters in Dun's Hotel, they paid a visit to Smith, and next day they dined with him at his house. Among the guests mentioned by Windham as being present were Robertson; Henry Erskine, who had recently been Burke's colleague in the Coalition Ministry as Lord Advocate; and Mr. Cullen, probably the doctor, though it may have been his son (afterwards a judge), who lives in fame chiefly for his feats as a mimic. Windham gives us no scrap of their conversation except a few remarks of Robertson about Holyrood; and though he says he recollected no one else of the company except those he has mentioned, there was at least one other guest whose presence there that evening he was shortly afterwards to have somewhat romantic occasion to recall. This was Sir John Sinclair, who had just re-entered Parliament for a constituency at the Land's End, after having been defeated in the Wick burghs by Fox. Burke and Windham proposed making a tour in the Highlands, and Sir John advised them strongly, when they came to the beautiful district between Blair-Athole and Dunkeld, to leave their post-chaise for that stage and walk through the woods and glens on foot. They took the advice, and about ten miles from Dunkeld came upon a young lady, the daughter of a neighbouring proprietor, reading a novel under a tree. They entered into conversation with her, and Windham was so much struck with her smartness and talent that though he was obliged at the time, as he said, most reluctantly to leave her, he, three years afterwards, came to Sinclair in the House of Commons and said to him, "I have never been able to get this beautiful mountain nymph out of my mind, and I wish you to ascertain whether she is married or single." Windham was too late. She was already married to Dr. Dick--afterwards a much-trusted medical adviser of Sir Walter Scott--and had gone with her husband to the East Indies. They returned to Edinburgh on the 13th of September, and, says Windham, "after dinner walked to Adam Smith's. Felt strongly the impression of a family completely Scotch. House magnificent and place fine.... Found there Colonels Balfour and Ross, the former late aide-de-camp to General Howe, the latter to Lord Cornwallis. Felt strongly the impression of a company completely Scotch." Colonel Nesbit Balfour, who won great distinction in the American war, was the son of one of Smith's old Fifeshire neighbours, a proprietor in that county, and became afterwards well known in Parliament, where he sat from 1790 to 1812. Colonel (afterwards General) Alexander Ross had also taken a distinguished part in the American war, and was Cornwallis's most intimate friend and correspondent. He was at this time Deputy-Adjutant-General of the Forces in Scotland. Whether he was a relation of the Colonel Patrick Ross of whom Smith speaks in one of his letters as a kinsman of his own,[335] I cannot say. Next day, the 14th, Burke and Windham dined with Smith. There was no other guest except a Mr. Skene, no doubt one of Smith's cousins from Pitlour, probably the Inspector-General of Scotch Roads already mentioned.[336] On the following morning the two statesmen proceeded on their way southward. One of the visits Burke paid in Edinburgh was to a charming poet, to whom fortune has been singularly unkind, not only treating him cruelly when alive, but instead of granting the usual posthumous reparation, treating him even more cruelly after his death. I mean John Logan, the author of the _Ode to the Cuckoo_, which Burke thought the most beautiful lyric in the language. Logan was at the moment in the thick of his troubles. He had written a tragedy called _Runnymede_, which, though accepted by the management of Covent Garden, was prohibited by the Lord Chamberlain, who scented current politics in the bold speeches of the Barons of King John, but it was eventually produced in the Edinburgh theatre in 1783. Its production immediately involved the author, as one of the ministers of Leith, in difficulties with his parishioners and the ecclesiastical courts similar to those which John Home had encountered twenty years before, and the trouble ended in Logan resigning his charge in December 1786 on a pension of £40 a year. Smith, who was an admirer and, as Dr. Carlyle mentions to Bishop Douglas, a "great patron" of Logan, stood by him through these troubles. When they first broke out in 1783 he wished, as Logan himself tells his old pupil Sir John Sinclair, to get the poet transferred if possible from his parish in Leith to the more liberal and enlightened parish of the Canongate, and when Logan eventually made up his mind to take refuge in literature, Smith gave him the following letter of introduction to Andrew Strahan, who had, since his father's death, become the head of the firm:-- DEAR SIR--Mr. Logan, a clergyman of uncommon learning, taste, and ingenuity, but who cannot easily submit to the puritanical spirit of this country, quits his charge and proposes to settle in London, where he will probably exercise what may be called the trade of a man of letters. He has published a few poems, of which several have great merit, and which are probably not unknown to you. He has likewise published a tragedy, which I cannot say I admire in the least. He has another in manuscript, founded and almost translated from a French drama, which is much better. But the best of all his works which I have seen are some lectures upon universal history, which were read here some years ago, but which, notwithstanding they were approved and even admired by some of the best and most impartial judges, were run down by the prevalence of a hostile literary faction, to the leaders of which he had imprudently given some personal offence. Give me leave to recommend him most earnestly to your countenance and protection. If he was employed on a review he would be an excellent hand for giving an account of all books of taste, of history, and of moral and abstract philosophy.--I ever am, my dear sir, most faithfully and affectionately yours, ADAM SMITH.[337] EDINBURGH, _29th September 1785_. The lectures which Smith praises so highly were published in 1779, and are interesting as one of the first adventures in what was afterwards known as the philosophy of history. But his memory rests now on his poems, which Smith thought less of, and especially on his _Ode to the Cuckoo_, which he has been accused so often of stealing from his deceased friend Michael Bruce, but to which his title has at last been put beyond all doubt by Mr. Small's publication of a letter, written to Principal Baird in 1791, by Dr. Robertson of Dalmeny, who acted as joint editor with him of their common friend Bruce's poems.[338] FOOTNOTES: [327] Bisset's _Life of Burke_, ii. 429. [328] Bisset's _Life of Burke_, ii. 429. [329] Innes's Memoir of Dalzel in Dalzel's _History of University of Edinburgh_, i. 42. [330] Add. MSS., 32,567. [331] Best's _Anecdotes_, p. 25. [332] Clayden's _Early Life of Samuel Rogers_, p. 92. [333] Dalzel's _History of the University of Edinburgh_, i. 42. [334] Edinburgh University Library. [335] See above, p. 361. [336] See above, p. 243. [337] Morrison MSS. [338] Small, _Michael Bruce and the Ode to the Cuckoo_, p. 7. CHAPTER XXVIII THE POPULATION QUESTION Dr. Richard Price had recently stirred a sensation by his attempt to prove that the population of England was declining, and had actually declined by nearly 30 per cent since the Revolution, and the first to enter the lists against him was William Eden, who in his _Fifth Letter to the Earl of Carlisle_, published in 1780, exposes the weakness of Price's statistics, and argues that both the population and the trade of the country had increased. Price replied to these criticisms in the same year, and now in 1785 Eden appears to have been contemplating a return to the subject and the publication of another work upon it, in connection with which he entered upon a correspondence with Smith, for the two following letters bearing on this population question of last century, though neither of them bears any name or address, seem most likely to have been written to that politician. Price had drawn his alarmist conclusions from rough estimates founded on the revenue returns. From a comparison of the hearth-money returns before the Revolution with the window and house tax returns of his own time he guessed at the number of dwelling-houses in the country, and from the number of dwelling-houses he guessed at the number of inhabitants by simply supposing each house to contain five persons. He further tried to support his conclusion by figures drawn from bills of mortality and by references to colonial emigration, consolidation of farms, the growth of London, and the progress of luxury. Smith thought very poorly of those ill-founded speculations, and even of their author generally, and he appears to have called Eden's attention to a population return relative to Scotland which furnished a sounder basis for a just estimate of the numbers of the people than the statistics on which Price relied. This was a return of the number of examinable persons in every parish of Scotland which had been obtained in 1755 by Dr. Alexander Webster, at the desire of Lord President Dundas, for the information of the Government. Public catechisings were then, and in many parishes are still, part of the ordinary duties of the minister, who visited each hamlet and district of his parish successively for the purpose every year, and consequently every minister kept a list of the examinable persons in his parish--the persons who were old enough to answer his questions on the Bible or Shorter Catechism. None were too old to be exempt. Webster procured copies of these lists for every parish in Scotland, and when he added to each a certain proportion to represent the number of persons under examinable age, he had a fairly accurate statement of the population of the country. He appears to have procured the lists for 1779 as well as those for 1755, and to have ascertained from a comparison of the two that the population of Scotland had remained virtually stationary during that quarter of a century, the increase in the commercial and manufacturing districts being counterbalanced by a diminution in the purely agricultural districts, due to the consolidation of farms. That, at least, was the impression of the officials of the Ministers' Widows' Fund, through whom the correspondence on the subject with the ministers had been conducted; and they threw doubt on an observation of a contrary import--apparently to the effect that the population of Scotland was increasing--which Smith heard Webster make in one of those hours of merriment for which that popular and useful divine seems destined to be remembered when his public services are forgotten. Smith's first letter runs thus:-- SIR--I have been so long in answering your very obliging letter of the 8th inst. that I am afraid you will imagine I have been forgetting or neglecting it. I hoped to send one of the accounts by the post after I received your letter, but some difficulties have occurred which I was not aware of, and you may yet be obliged to wait a few days for it. In the meantime I send you a note extracted from Mr. Webster's book by his clerk, who was of great use to him in composing it, and who has made several corrections upon it since. My letters as a Commissioner of the Customs are paid at the Custom House, and my correspondents receive them duty free. I should otherwise have taken the liberty to enclose them, as you direct, under Mr. Rose's cover. It may perhaps give that gentleman pleasure to be informed that the net revenue arising from the customs in Scotland is at least four times greater than it was seven or eight years ago. It has been increasing rapidly these four or five years past, and the revenue of this year has overleaped by at least one-half the revenue of the greatest former year. I flatter myself it is likely to increase still further. The development of the causes of this augmentation would require a longer discussion than this letter will admit. Price's speculations cannot fail to sink into the neglect that they have always deserved. I have always considered him as a factious citizen, a most superficial philosopher, and by no means an able calculator.--I have the honour to be, with great respect and esteem, sir, your most faithful humble servant, ADAM SMITH. CUSTOM HOUSE, EDINBURGH, _22nd December 1785_. I shall certainly think myself very much honoured by any notice you may think proper to take of my book.[339] The second letter followed in a few days:-- EDINBURGH, _3rd January 1786_. SIR--The accounts of the imports and exports of Scotland which you wanted are sent by this day's post to Mr. Rose. Since I wrote to you last I have conversed with Sir Henry Moncreiff, Dr. Webster's successor as collector of the fund for the maintenance of clergymen's widows, and with his clerk, who was likewise clerk to Dr. Webster, and who was of great use to the Doctor in the composition of the very book which I mentioned to you in a former letter. They are both of opinion that the conversation I had with Dr. Webster a few months before his death must have been the effect of a momentary and sudden thought, and not of any serious or deliberate consideration or inquiry. It was, indeed, at a very jolly table and in the midst of much mirth and jollity, of which the worthy Doctor, among many other useful and amiable qualities, was a very great lover and promoter. They told me that in the year 1779 a copy of the Doctor's book was made out by his clerk for the use of my Lord North. That at the end of that book the Doctor had subjoined a note to the following purpose, that though between 1755 and 1779 the numbers in the great trading and manufacturing towns and villages were considerably increased, yet the Highlands and Islands were much depopulated, and even the low country, by the enlargement of farms, in some degree; so that the whole numbers, he imagined, must be nearly the same at both periods. Both these gentlemen believe that this was the last deliberate judgment which Dr. Webster ever formed upon this subject. The lists mentioned in the note are the lists of what are called examinable persons--that is, of persons upwards of seven or eight years of age, who are supposed fit to be publicly examined upon religious and moral subjects. Most of our country clergy keep examination rolls of this kind. My Lord North will, I dare to say, be happy to accommodate you with the use of this book. It is a great curiosity, though the conversation I mentioned to you had a little shaken my faith in it--I am glad now to suppose, without much reason.--I have the honour to be, with the highest regard, sir, your most obedient humble servant, ADAM SMITH.[340] A new edition of the _Wealth of Nations_--the fourth--appeared in 1786, without any alteration in the text from the previous one, but the author prefixed to it an advertisement acknowledging the very great obligations he had been under to Mr. Henry Hope, the banker at Amsterdam, for (to quote the words of the advertisement) "the most distinct as well as the most liberal information concerning a very interesting and important subject, the Bank of Amsterdam, of which no printed account has ever appeared to me satisfactory or even intelligible. The name of that gentleman is so well known in Europe, the information which comes from him must do so much honour to whoever has been favoured with it, and my vanity is so much interested in making this acknowledgment, that I can no longer refuse myself the pleasure of prefixing this advertisement to this new edition of my book." Smith had now, as he says in the following letter, reached his grand climacteric--his sixty-third year, according to the old belief, the last and most dangerous of the periodical crises to which man's bodily life was supposed to be subject--and the winter of 1786-87 laid him so low with a chronic obstruction of the bowels that Robertson wrote Gibbon they were in great danger of losing him. That was the winter Burns was in Edinburgh, and it was doubtless owing to this illness and Smith's consequent inability to go into society, that he and the poet never met. Burns obtained a letter of introduction to Smith from their common friend Mrs. Dunlop, but writes her on the 19th of April that when he called he found Smith had gone to London the day before, having recovered, as we know he did, sufficiently in spring to go up there for the purpose of consulting John Hunter. He was still in Edinburgh in March, however, and wrote Bishop Douglas a letter introducing one of his Fifeshire neighbours, Robert Beatson, the author of the well-known and very useful _Political Index_. Beatson had been an officer of the Engineers, but had retired on half-pay in 1766 and become an agriculturist in his native county. While there he compiled his unique and valuable work, which he published in 1786 and dedicated to his old friend Adam Smith. A new edition was called for within a year, and the author proposed to add some new matter, on which he desired the advice of Bishop Douglas. Hence this letter:-- DEAR SIR--This letter will be delivered to you by Mr. Robert Beatson of Vicars Grange, in Fifeshire, a very worthy friend of mine, and my neighbour in the country for more than ten years together. He has lately published a very useful book called a Political Index, which has been very successful, and which he now proposes to republish with some additions. He wishes much to have your good advice with regard to these additions, and indeed with regard to every other part of his book. And indeed, without flattering you, I know no man so fit to give him good advice upon this subject. May I therefore beg leave to introduce him to your acquaintance, and to recommend him most earnestly to your best advice and assistance. You will find him a very good-natured, well-informed, inoffensive, and obliging companion. I was exceedingly vexed and not a little offended when I heard that you had passed through this town some time ago without calling upon me, or letting me know that you was in our neighbourhood. My anger, however, which was very fierce, is now a good deal abated, and if you promise to behave better for the future, it is not impossible that I may forgive the past. This year I am in my grand climacteric, and the state of my health has been a good deal worse than usual. I am getting better and better, however, every day, and I begin to flatter myself that with good pilotage I shall be able to weather this dangerous promontory of human life, after which I hope to sail in smooth water for the remainder of my days.--I am ever, my dear sir, most faithfully and affectionately yours, ADAM SMITH. EDINBURGH, _6th March 1787_.[341] FOOTNOTES: [339] Original in possession of Mr. Alfred Morrison. [340] Original in Edinburgh University Library. [341] Egerton MSS., British Museum, 2181. CHAPTER XXIX VISIT TO LONDON 1787. _Aet._ 64 In April he had improved enough to undertake the journey to London to consult Hunter, but he was wasted to a skeleton. William Playfair--brother of his friend the Professor of Mathematics, and afterwards one of the early editors of the _Wealth of Nations_--met him soon after his arrival in London, and says he was looking very ill, and was evidently going to decay. While in his usual health he was, though not corpulent, yet rather stout than spare, but he was now reduced to skin and bone. He was able, however, to move about in society and see old friends and make new. Windham in his Diary mentions meeting him at several different places, and he was now introduced for the first time to the young statesman who was only a student in the Temple when he was last in London in 1777, but who was already one of the most powerful ministers England had ever seen, and was at the moment reforming the national finances with the _Wealth of Nations_ in his hand. Pitt always confessed himself one of Smith's most convinced disciples. The first few years of his long ministry saw the daybreak of free trade. He brought in a measure of commercial emancipation for Ireland; he carried a commercial treaty with France; he passed, in accordance with Smith's recommendations, laws simplifying the collection and administration of the revenue. In this very year 1787 he introduced his great Consolidation Bill, which created order out of the previous chaos of customs and excise, and was so extensive a work that it took 2537 separate resolutions to state its provisions, and these resolutions had only just been read on the 7th of March, a few weeks before Smith arrived in London. No one in London therefore was more interested to meet Smith than the young minister who was carrying the economist's principles out so extensively in practical legislation. They met repeatedly, but they met on one occasion, of which recollection has been preserved, at Dundas's house on Wimbledon Green,--Addington, Wilberforce, and Grenville being also of the company; and it is said that when Smith, who was one of the last guests to arrive, entered the room, the whole company rose from their seats to receive him and remained standing. "Be seated, gentlemen," said Smith. "No," replied Pitt; "we will stand till you are first seated, for we are all your scholars." This story seems to rest on Edinburgh tradition, and was first published, so far as I know, in the 1838 edition of Kay's _Portraits_, more than half a century after the date of the incident it relates. Most of the biographies contained in that work were written by James Paterson, but a few of the earliest, including this of Smith, were not. They were all written, however, from materials which had been long collected by Kay himself, who only died in 1832, or which were obtained before the time of publication from local residents who had known the men themselves, or had mingled with those who did. The whole were edited by the well-known and learned antiquary, James Maidment, whose acceptance of the story is some security that it came from an authoritative though unnamed source. Smith was highly taken with Pitt, and one evening when dining with him, he remarked to Addington after dinner, "What an extraordinary man Pitt is; he understands my ideas better than I do myself."[342] Other statesmen have been converts to free trade. Pitt never had any other creed; it was his first faith. He was forming his opinions as a young man when the _Wealth of Nations_ appeared, and he formed them upon that work. Smith saw much of this group of statesmen during his visit to the capital in that year.[343] We find Wilberforce sounding him about some of his philanthropic schemes, Addington writing an ode to him after meeting him at Pitt's, and Pitt himself seeking his counsels concerning some contemplated legislation, and perhaps setting him to some task of investigation for his assistance. Bentham had in the early part of 1787 sent from Russia the manuscript of his _Defence of Usury_, written in antagonism to Smith's doctrine on the subject, to his friend George Wilson, barrister, and Wilson a month or two later--14th of July--writes of "Dr. Smith," who can, I think, be no other than the economist: "Dr. Smith has been very ill here of an inflammation in the neck of the bladder, which was increased by very bad piles. He has been cut for the piles, and the other complaint is since much mended. The physicians say he may do some time longer. He is much with the Ministry, and the clerks of the public offices have orders to furnish him with all papers, and to employ additional hands, if necessary, to copy for him. I am vexed that Pitt should have done so right a thing as to consult Smith, but if any of his schemes are effectuated I shall be comforted."[344] It may be, of course, that Smith was examining papers in the public offices in connection with his own work on Government, but Wilson's statement rather leaves the impression that the researches were instituted in pursuance of some idea of Pitt's, probably related to the reform of the finances. If the Dr. Smith of Wilson's letter is the economist, he would appear to have stayed in London a considerable time on this occasion, and to have suffered a serious relapse of ill-health during his stay there. Wilberforce did not think quite so highly of Smith as Pitt did, being disappointed to find him too hard-headed to share his own enthusiasm about a great philanthropic adventure of the day, which, to the very practical mind of the economist, seemed entirely wanting in the ordinary conditions of success. With some of the other philanthropic movements in which Wilberforce was interested--with his anti-slavery agitation, for example, begun in that very year 1787--he would have found no more cordial sympathiser than Smith, who had condemned slavery so strongly in his book. The Sunday school movement, too, started by Thomas Raikes two or three years before, won Smith's strongest commendation; for Raikes writes William Fox on 27th July of this same year, and writes as if the remark had been made in conversation with himself, "Dr. Adam Smith, who has very ably written on the Wealth of Nations, says: 'No plan has promised to effect a change of manners with equal ease and simplicity since the days of the Apostles.'" These schools were instituted for the purpose of giving gratuitous instruction to all comers for four or five hours every Sunday in the ordinary branches of primary education, and they were opposed by some leading ecclesiastics--among others by a liberal divine like Bishop Horsley--on the ground that they might become subservient to purposes of political propagandism. The ecclesiastical mind is too often suspicious of the consequences of mental improvement and independence, but to Smith these were merely the first broad conditions of all popular progress. No man could be less chargeable with indifference to honest and practicable schemes of philanthropy, but the particular scheme towards which Wilberforce found him "characteristically cool" was one which, in his opinion, held out extravagant expectations that could not possibly be realised. It was a project--first suggested, I believe, by Sir James Steuart, the economist, and taken up warmly after him by Dr. James Anderson, and especially by that earliest and most persistent of crofters' friends, John Knox, bookseller in the Strand--for checking the depopulation and distress of the Scotch Highlands by planting a series of fishing villages all round the Highland coast. Knox's idea was to plant forty fishing villages at spots twenty-five miles apart between the Mull of Cantyre and the Dornoch Firth at a cost of £2000 apiece, or at least as many of them as money could be obtained to start; and the scheme rose high in public favour when the parliamentary committee on Scotch Fisheries gave it a general recommendation in 1785, and suggested the incorporation of a limited liability company by Act of Parliament in order to carry it out. The Scotch nobility adopted the suggestion with great spirit, and in 1786 the British Society for extending the Fisheries was incorporated for that purpose by Royal Charter with a capital of £150,000, with the Duke of Argyle for Governor, and many leading personages, one of them being Wilberforce, for directors. It was indeed the grand philanthropic scheme of the day. The shares were rapidly subscribed for sufficiently to justify a start, and when Smith was in London in 1787 the society had just begun operations on a paid-up capital of £35,000. One of the directors, Isaac Hawkins Browne, M.P., was actually down in Scotland choosing the sites for the villages; and Wilberforce was already almost hearing the "busy hum" of the little hives of fishermen, coopers, boat-builders, and ropemakers, whom they were settling along the desolate coasts. He naturally spoke to Smith about this large and generous project for the benefit of his countrymen, but was disappointed to find him very sceptical indeed as to its practical results. "Dr. Smith," writes Wilberforce to Hawkins Browne, "with a certain characteristic coolness, observed to me that he looked for no other consequence from the scheme than the entire loss of every shilling that should be expended on it, granting, however, with uncommon candour, that the public would be no great sufferer, because he believed the individuals meant to put their hands only in their own pockets."[345] The event, however, has justified the sagacity of Smith's prognostication. The society began by purchasing the ground for three fishing settlements on the west coast,--one at Ullapool, in Ross-shire; a second at Lochbeg, in Inverness-shire; and a third at Tobermory, in Argyle. They prepared their feuing plans, built a few houses at their own cost, tried to attract settlers by offering building feus at low rents and fishing-boats on credit at low rates, but, except to a slight extent at Ullapool, their offers were not taken; not a single boat ever sailed from Tobermory under their auspices, and before many years elapsed the society deserted these three original west coast stations and sold its interest in them at a loss of some £2000. But meanwhile the directors had in 1803 bought land at a small port on the east coast, Wick, where a flourishing fishery with 400 boats had already been established by local enterprise without their aid, and they founded there the settlement of Pulteneytown (named by them after Smith's friend, Sir William Pulteney), which has grown with the industry of the port. The society never again tried to resume its original purpose of creating new fishing centres, and here in Pulteneytown it has obviously only acted the part of the shrewd building speculator, investing in the ground-rents of a rising community and prudently helping in its development. Through this change of purpose it has contrived to save some of its capital, and having recently resolved to be wound up, it sold its whole estate in 1893 for £20,000, and after all claims are met may probably have £15,000 of its original capital of £35,000 left to divide. The net result of the scheme therefore on the development of Highland fisheries has been as near _nil_ as Smith anticipated; and if the shareholders have not, as he predicted, lost every shilling of their money, they have lost half of it, and only saved the other half by abandoning the scheme for which it was subscribed. In the whole course of its one hundred and eight years' existence the society never paid more than eleven annual dividends, because for many years it saved up its income for building an extension to its harbour, and eventually lost all these savings and £100,000 of Government money besides in a great breakwater, which proved an irremediable engineering failure, and lies now in the bottom of the sea. Smith returned to Edinburgh deeply pleased with the reception he met with from the ministers and the progress he saw his principles making. He came back, says the Earl of Buchan, "a Tory and a Pittite instead of a Whig and a Foxite, as he was when he set out. By and by the impression wore off and his former sentiments returned, but unconnected either with Pitt, Fox, or anybody else."[346] Had the impression remained till his death, it would be no matter for wonder. A Liberal has little satisfaction in contemplating the conflict of parties during the first years of Pitt's long administration, and seeing the young Tory minister introducing one great measure of commercial reform after another, while his own Whig chief, Charles Fox, offers to every one of them a most factious and unscrupulous opposition. Soon after his return Smith received another, and to him a very touching, recognition of his merit in being chosen in November Lord Rector of his old alma mater, the University of Glasgow. The appointment lay with the whole University, professors and students together, but as the students had the advantage of numbers, the decision was virtually in their hands, and their unanimous choice came to Smith (as Carlyle said a similar choice came to him) at the end of his labours like a voice of "Well done" from the University which had sent him forth to do them, and from the coming generation which was to enter upon the fruits of them. There was at first some word of opposition to his candidature, on the good old electioneering plea that he was the professors' nominee, and that it was essential for the students to resent dictation and assert their independence. One of Smith's keenest opponents among the students was Francis Jeffrey, who was then a Tory. Principal Haldane, who was also a student at Glasgow at the time, used to tell of seeing Jeffrey--a little, black, quick-motioned creature with a rapid utterance and a prematurely-developed moustache, on which his audience teased him mercilessly--haranguing a mob of boys on the green and trying to rouse them to their manifest duty of organising opposition to the professors' nominee. His exertions failed, however, and Smith was chosen without a contest. On receiving intimation of his appointment Smith wrote to Principal Davidson the following reply:-- REVEREND AND DEAR SIR--I have this moment received the honour of your letter of the 15th instant. I accept with gratitude and pleasure the very great honour which the University of Glasgow have done me in electing me for the ensuing year to be the Rector of that illustrious Body. No preferment could have given me so much real satisfaction. No man can own greater obligations to a Society than I do to the University of Glasgow. They educated me, they sent me to Oxford, soon after my return to Scotland they elected me one of their own members, and afterwards preferred me to another office to which the abilities and virtues of the never-to-be-forgotten Dr. Hutcheson had given a superior degree of illustration. The period of thirteen years which I spent as a member of that Society, I remember as by far the most useful and therefore as by far the happiest and most honourable period of my life; and now, after three-and-twenty years' absence, to be remembered in so very agreeable a manner by my old friends and protectors gives me a heartfelt joy which I cannot easily express to you. I shall be happy to receive the commands of my colleagues concerning the time when it may be convenient for them to do me the honour of admitting me to the office. Mr. Millar mentions Christmass. We have commonly at the Board of Customs a vacation of five or six days at that time. But I am so regular an attendant that I think myself entitled to take the play for a week at any time. It will be no inconveniency to me therefore to wait upon you at whatever time you please. I beg to be remembered to my colleagues in the most respectful and the most affectionate manner; and that you would believe me to be, with great truth, reverend and dear sir, your and their most obliged, most obedient, and most humble servant, ADAM SMITH. EDINBURGH, _16th November 1787_. The Rev. Dr. ARCHIBALD DAVIDSON, Principal of the College, Glasgow.[347] He was installed as Rector on the 12th December 1787 with the usual ceremonies. He gave no inaugural address, nor apparently so much as a formal word of thanks. At least Jeffrey, who might have been present, though he does not seem to speak from personal recollection, says he remained altogether silent. His predecessor, Graham of Gartmore, held the Rector's chair for only one year, but Smith, like Burke and Dundas, was re-elected for a second term, and was Rector therefore from November 1787 till November 1789. One of the new friends Smith made during his last visit to London was Sir Joseph Banks, President of the Royal Society, who seems to have shown him particular attentions; and shortly after his return he gave a young Scotch scientific man a letter of very warm recommendation to Sir Joseph. The young man of science was John Leslie, afterwards Sir John, the celebrated Professor of Natural Philosophy in Edinburgh University. Leslie, who belonged to the neighbourhood of Smith's own town of Kirkcaldy, had been employed by him for the previous two years as tutor to his cousin and heir, David Douglas, and being thus a daily visitor at Smith's house, had won a high place in his affections and regard. Accordingly when Leslie in 1787 gave up his original idea of entering the Church, and resolved to migrate to London with a view to literary or scientific employment, Smith furnished him with a number of letters of introduction, and, as Leslie informed the writer of his biography in Chambers's _Biographical Dictionary_, advised him, when the letter was addressed to an author, to be always sure to read that author's book before presenting it, so as to be able to speak of the book should a fit opportunity occur. The letter to Sir Joseph Banks runs as follows:-- SIR--The very great politeness and attention with which you was so good as to honour me when I was last in London has emboldened me to use a freedom which I am afraid I am not entitled to, and to introduce to your acquaintance a young gentleman of very great merit, and who is very ambitious of being known to you. Mr. Leslie, the bearer of this letter, has been known to me for several years past. He has a very particular happy turn for the mathematical sciences. It is no more than two years and a half ago that he undertook the instruction of a young gentleman, my nearest relation, in some of the higher parts of these sciences, and acquitted himself most perfectly both to my satisfaction and to that of the young gentleman. He proposes to pursue the same lines in London, and would be glad to accept of employment in some of the mathematical academies. Besides his knowledge in mathematics he is, I am assured, a tolerable Botanist and Chymist. Your countenance and good opinion, provided you shall find he deserves them, may be of the highest importance to him. Give me leave, upon that condition, to recommend him in the most anxious and earnest manner to your protection. I have the honour to be, with the highest respect and regard, sir, your most obliged and most obedient humble servant, ADAM SMITH.[348] EDINBURGH, _18th December 178(sic)_. Sir JOSEPH BANKS. Why does so large a proportion of Smith's extant letters consist of letters of introduction? Have they a better principle of vitality than others, that they should be more frequently preserved? There certainly seems less reason to preserve them, but then there is also less reason to destroy them. Smith's health appears to have improved so much during the spring of 1788 that his friends, who, as we know from Robertson's letter to Gibbon, had been seriously alarmed about his condition, were now again free from anxiety. He seemed to them to be "perfectly re-established." But in the autumn he suffered another great personal loss in the death of his cousin, Miss Jean Douglas, who had lived under his roof for so many years. His home was now desolate. His mother and his cousin--the two lifelong companions of his hearth--were both gone; his young heir was only with him during the vacations from Glasgow College, where he was now living with Professor John Millar, and being a man for whom the domestic affections went for so much, there seemed, amid all the honour, love, obedience, troops of friends that enrich the close of an important career, to remain a void in his life that could not be filled. Gibbon had sent him a present of the three concluding volumes of the _Decline and Fall_, and Smith writes him in November a brief letter of thanks, in which he sets the English historian where he used to set Voltaire, at the head of all living men of letters. EDINBURGH, _18th December 1788_. MY DEAR FRIEND--I have ten thousand apologies to make for not having long ago returned you my best thanks for the very agreeable present you made me of the three last volumes of your History. I cannot express to you the pleasure it gives me to find that by the universal consent of every man of taste and learning whom I either know or correspond with, it sets you at the very head of the whole literary tribe at present existing in Europe.--I ever am, my dear friend, most affectionately yours, ADAM SMITH.[349] In this letter Smith makes no complaint of his condition of health, but he seems to have got worse again in the course of the winter, for we find Gibbon writing Cadell, the bookseller, with some apparent anxiety on the 11th of February 1789: "If you can send me a good account of Adam Smith, there is no man more sincerely interested in his welfare than myself." If, however, he were ill then, he recovered in the summer, and was in excellent spirits in July, when Samuel Rogers saw him often during a week he spent in Edinburgh. FOOTNOTES: [342] Pellew's _Life of Sidmouth_, i. 151. [343] Wilberforce's _Correspondence_, i. 40. [344] Bowring's Memoir of Bentham, Bentham's _Works_, x. 173. [345] Wilberforce's _Correspondence_, i. 40. [346] The _Bee_, vol. in. p. 165. [347] Glasgow College Minutes. [348] Morrison MSS. [349] Gibbon's _Miscellaneous Works_, ii. 429. CHAPTER XXX VISIT OF SAMUEL ROGERS 1789 The author of the _Pleasures of Memory_, going to Scotland to make the home tour, as it was called, then much in vogue, brought with him letters of introduction to Smith from Dr. Price and Dr. Kippis, the editor of the _Biographia Britannica_. The poet was then a young man of twenty-three, who had published nothing but his _Ode to Superstition_, and these old Unitarian friends of his father were as yet his chief acquaintances in the world of letters. Their names, notwithstanding the disparaging allusion Smith makes to Price in a letter previously given, won for Rogers the kindest possible reception, and even a continuous succession of civilities, of which he has left a grateful record in the journal he kept during his tour. This journal has been published in Mr. Clayden's _Early Tears of Samuel Rogers_, and a few additional particulars omitted in it are found in Dyce's published and Mitford's unpublished recollections of Rogers's table-talk. Rogers arrived in Edinburgh apparently on the 14th of July--that momentous 14th of July 1789 which set the world aflame, though not a spark of information of it had reached Edinburgh before he left the city on the 21st; and on the morning of the 15th he walked down Panmure Close and paid his first visit to the economist. He found Smith sitting at breakfast quite alone, with a dish of strawberries before him, and he has preserved some scraps of the conversation, none of them in any way remarkable. Starting from the business then on hand, Smith said that fruit was his favourite diet at that season of the year, and that Scotland produced excellent strawberries, for the strawberry was a northern fruit, and was at its best in Orkney or Sweden. Passing to the subject of Rogers's tour, he said that Edinburgh deserved little notice, that the old town had given Scotland a bad name (for its filth, presumably), and that he himself was anxious to remove to the newer quarters of the town, and had set his heart on George Square (the place where Walter Scott was brought up and Henry Dundas died). He explained that Edinburgh was entirely supported by the three Courts of Session, Exchequer, and Justiciary (possibly to account for the filth of the place, in accordance with his theory that there was always more squalor and misery in a residential than in an industrial town). While thus apparently slighting or ignoring the beauties of Edinburgh, which were all there then as they are now, he praised Loch Lomond highly. It was the finest lake in Great Britain, the islands being very beautiful and forming a very striking contrast to the shores. The conversation passed from the scenery of Scotland to the soil, and Smith said Scotland had an excellent soil, but a climate so severe that its harvests were too often overtaken by winter before they were housed. The consequence was that the Scotch on the Borders were still in extreme poverty, just as he had noticed half a century before when he rode across the Borders as a student to Oxford, and was greatly struck with the different condition of things he saw as he approached Carlisle. From agriculture they passed on to discuss the corn trade, and Smith denounced the Government's late refusal of corn to France, saying it ought to excite indignation and contempt, inasmuch as the quantity required was so trifling that it would not support the population of Edinburgh for a single day. The population of Edinburgh suggested their houses, and Smith said that the houses were piled high on one another in Paris as well as in Edinburgh. They then touched on Sir John Sinclair, of whom Smith spoke disparagingly in certain aspects, but said that he never knew a man who was in earnest and did not do something at last. Before leaving to return to his hotel Rogers seems to have asked Smith if he knew Mrs. Piozzi, who was then living there, and had called upon Rogers after learning from the landlord that Smith and Robertson had left cards for him, and Smith said he did not know her, but believed she was spoiled by keeping company with odd people. Smith then invited his visitor to dine with him next day at the usual Friday dinner of the Oyster Club, and Rogers came away delighted with the interview, and with the illustrious philosopher's genuine kindness of heart. On Friday, as appointed, Rogers dined with the Oyster Club as Smith's guest, but he has made no specific entry of the event in his journal, and no record of the conversation. Black and Playfair seem to have been there, and possibly other men of eminence; but the whole talk was usurped by a commonplace member, and Smith felt--and possibly Rogers too--that the day was lost. For next time they met Smith asked Rogers how he liked the club, and said, "_That_ Bogle, I was sorry he talked so much; he spoiled our evening." That Bogle was the Laird of Daldowie, on the Clyde. His father had been Rector of Glasgow University in Smith's professorial days, and one of his brothers, George Bogle, attained some eminence through the embassy on which he was sent by Warren Hastings to the Llama of Thibet, and his account of which has been published quite recently; and the offender himself was a man of ability and knowledge, who had been a West India merchant for many years, was well versed in economic and commercial subjects, and very fond of writing to the Government of the day long communications on those subjects, which seem to have been generally read, and sometimes even acted upon. In society, as we are told by one of his relations, Mr. Morehead, he was generally considered very "tedious, from the long lectures on mercantile and political subjects (for he did not converse when he entered on these, but rather declaimed) which he was in the habit of delivering in the most humdrum and monotonous manner."[350] His tedious lectures must, however, have had more in them than ordinary hearers appreciated, for Smith thought so highly of Bogle's conversation that when he invited Rogers to the club on this particular occasion he mentioned that Bogle, a very clever person, was to be there, and said "I must go and hear Bogle talk."[351] Rogers was with Smith again on Sunday the 19th, and used ever afterwards to speak of that particular Sunday as the most memorable in his life, for he breakfasted with Robertson, heard him preach in the Old Greyfriars in the forenoon, heard Blair preach in the High Church in the afternoon, drank coffee thereafter with Mrs. Piozzi, and finished the day by supping with Adam Smith. He had called on Smith "between sermons," as they say in Scotland, and apparently close on the hour for service, since "all the bells of the kirks" were ringing. But Smith was going for an airing, and his chair was at the door. The sedan was much in vogue in Edinburgh at that period, because it threaded the narrow wynds and alleys better than any other sort of carriage was able to do. Smith met Rogers at the door, and after exchanging the few observations about Bogle and the club to which I have already alluded, he invited his young friend to come back to supper in the evening, and also to dinner on Monday, because he had asked Henry Mackenzie, the author of the _Man of Feeling_, to meet him. "Who could refuse?" writes Rogers. Smith then set out in his sedan, and Rogers walked up to the High Church to hear Blair. Returning to Panmure House at nine, he found there, he says, all the company who were at the club on Friday except Bogle and Macaulay, and with the addition of a Mr. Muir from Göttingen. (I do not know who Macaulay and Muir were.) They spoke of Junius, and Smith suspected Single-speech Hamilton of the authorship, on the ground of the well-known story, which seems to have been then new to Rogers, and which Smith had been told by Gibbon, that on one occasion when Hamilton was on a visit at Goodwood, he informed the Duke of Richmond that there was a devilish keen letter from Junius in the _Public Advertiser_ of that day, and mentioned even some of the points it made; but when the Duke got hold of the paper he found the letter itself was not there, but only an apology for its absence. From this circumstance Hamilton's name came to be mentioned in connection with the authorship of the letters, and they ceased to appear. Smith's argument was that so long as the letters were attributed to men who were not their writers, such as Lord Lansdowne or Burke, they continued to go on, but immediately the true author was named they stopped. The conversation passed on to Turgot and Voltaire and the Duke of Richelieu, and its particulars have been stated already in previous parts of this work.[352] On Monday Rogers dined at Smith's house to meet Henry Mackenzie, as had been arranged, and the other guests seem to have been the Mr. Muir of the evening before and Mr. M'Gowan--John M'Gowan, Clerk of the Signet, already referred to. Dr. Hutton came in afterwards and joined them at tea. The chief share in the conversation seems to have been taken by Mackenzie, who, as we know from Scott, was always "the life of company with anecdotes and fun," and related on this occasion many stories of second sight in the Highlands, and especially of the eccentric Caithness laird, who used the pretension as a very effectual instrument for maintaining authority and discipline among his tenantry. They spoke much too about the poetesses,--Hannah More, and Mrs. Charlotte Smith, and Mrs. John Hunter, the great surgeon's wife; but it appears to have still been Mackenzie who bore the burden of the talk. The only thing Rogers reports Smith as saying is a very ordinary remark about Dr. Blair. They had been speaking, as was natural, about the sermon which Rogers--and Mackenzie also--had heard the previous afternoon on "Curiosity concerning the Affairs of Others," and one passage in which, though it reads now commonplace enough in the printed page, Rogers seems to have admired greatly. Smith observed that Blair was too puffed up, and the worthy divine would have been more or less than human if he had escaped the necessary effects of the excessive popularity he so long enjoyed at once as a preacher and as a critic. It will be remembered how Burns detested Blair's absurd condescension and pomposity. From Smith's the company seems to have proceeded in a body to a meeting of the Royal Society, of which all were members except Muir and Rogers himself. Before going Mackenzie repeated an epigram which had been written on Smith sleeping at the meetings of this society, but the epigram has not been preserved. Only seven persons were present--Smith and his guests and the reader of the paper for the day, who happened to be the economist, Dr. James Anderson, already mentioned repeatedly in this book as the original propounder of Ricardo's theory of rent. His paper was on "Debtors and the Revision of the Laws that respect them," and Rogers says it was "very long and dull," and, as a natural consequence, "Mr. Commissioner Smith fell asleep, and Mackenzie touched my elbow and smiled,"[353]--a curious tableau. When the meeting was over Rogers took leave of his host, went to the play with Mrs. Piozzi, and, though he no doubt saw Smith again before finally quitting Edinburgh, mentions him no more. Having been so much with Smith during those few days, Rogers's impressions are in some respects of considerable value. He was deeply impressed with the warmth of Smith's kindness. "He is a very friendly, agreeable man, and I should have dined and supped with him every day, if I had accepted all his invitations."[354] He was very communicative,[355] and to Rogers's surprise, considering the disparity of their years and the greatness of his reputation, Smith was "quite familiar." "Who shall we have to dinner?" he would ask. Rogers observed in him no sign of absence of mind,[356] and felt that as compared with Robertson, Smith was far more of a man who had seen much of the world. His communicativeness impressed itself also upon other casual visitors, because his first appearance sometimes gave them the opposite suggestion of reserve. "He was extremely communicative," says the anonymous writer who sent the first letter of reminiscences to the editor of the _Bee_, "and delivered himself on every subject with a freedom and boldness quite opposite to the apparent reserve of his appearance." Another visitor to Scotland that year who enjoyed a talk with Smith, and has something interesting to communicate about the conversation, is William Adam, barrister and M.P., afterwards Chief Commissioner of the Jury Court in Scotland, who was a nephew of Smith's schoolfellow and lifelong friend, Robert Adam, the architect. William Adam was an intimate personal friend of Bentham since the days when they ate their way to the bar together and spent their nights in endless discussions about Hume's philosophy and other thorny subjects, and when in Scotland in the summer of 1789 he met Smith, and drew the conversation to his friend Bentham's recently published _Defence of Usury_. This book, it will be remembered, was written expressly to controvert Smith's recommendation of a legal limitation of the rate of interest, and from this conversation with Adam there seems to be some ground for thinking that the book had the very unusual controversial effect of converting the antagonist against whom it was written. Smith's reason for wanting to fix the legal rate of interest at a maximum just a little above the ordinary market rate was to prevent undue facilities being given to prodigals and projectors; but Bentham replied very justly that, whatever might be said of prodigals, projectors at any rate were one of the most useful classes a community could possess, that a wise government ought to do all it could to encourage their enterprise instead of thwarting it, and that the best policy therefore was to leave the rate of interest alone. In conducting his polemic Bentham wrote as an admiring pupil towards a venerated master, to whom he said he owed everything, and over whom he could gain no advantage except, to use his own words, "with weapons which you have taught me to wield and with which you have furnished me; for as all the great standards of truth which can be appealed to in this line owe, as far as I can understand, their establishment to you, I can see scarce any other way of convicting you of an error or oversight than by judging you out of your own mouth."[357] Smith was touched with the handsome spirit in which his adversary wrote, and candidly admitted to Adam the force of his assaults. The conversation is preserved in a letter written to Bentham on the 4th December 1789 by another friend and fellow-barrister, George Wilson, as he apparently had the story from Adam's own lips. "Did we ever tell you," writes Wilson, "what Dr. Adam Smith said to Mr. William Adam, the Council M.P., last summer in Scotland? The Doctor's expressions were that 'the _Defence of Usury_ was the work of a very superior man, and that tho' he had given him some hard knocks, it was done in so handsome a way that he could not complain,' and seemed to admit that you were right."[358] This admission, though apparently not made in so many words by Smith, but rather inferred by Adam from the general purport of the conversation, is still not far removed from the confession so definitely reported that his position suffered some hard knocks from the assaults of Bentham. After that confession it is reasonable to think that if Smith had lived to publish another edition of his work, he would have modified his position on the rate of interest. FOOTNOTES: [350] Morehead's _Life of the Rev. R. Morehead_, p. 43. [351] Add. MSS., 32, 566. [352] See above, pp. 189, 190, 205. [353] Clayden's _Early Life of Samuel Rogers_, p. 96. [354] Clayden's _Early Life of Samuel Rogers_, p. 90. [355] Dyce's _Recollections of the Table-talk of Samuel Rogers_, p. 45. [356] Add. MSS., 32, 566. [357] Bentham's _Works_, iii. 21. [358] Bentham MSS., British Museum. CHAPTER XXXI REVISION OF THE "THEORY" A revision of the _Theory of Moral Sentiments_ was a task Smith had long had in contemplation. The book had been thirty years before the world and had passed through five editions, but it had never undergone any revision or alteration whatever. This was the task of the last year of the author's life. He made considerable changes, especially by way of addition, and though he wrote the additions, as Stewart informs us, while he was suffering under severe illness, he has never written anything better in point of literary style. Before the new edition appeared there was a preliminary difference between author and publisher regarding the propriety of issuing the additions as the additions to the _Wealth of Nations_ had been issued, in a separate form, for the use of those who already possessed copies of the previous editions of the book. Cadell favoured that course, notwithstanding that it would obviously interfere with the sale of the new book, because he was unwilling to incur the charge of being illiberal in his dealings with the public. But Smith refused to assent to it, for reasons quite apart from the sale, but connected, whatever they were, with "the nature of the work." He communicated his decision through Dugald Stewart, who was in London in May 1789 on his way to Paris, and Stewart reports the result of his interview with Cadell in the following letter, bearing the post stamp of 6th May 1789:-- DEAR SIR--I was so extremely hurried during the very short stay I made in London that I had not a moment's time to write you till now. The day after my arrival I called on Cadell, and luckily found Strachan (_sic_) with him. They both assured me in the most positive terms that they had published no Edition of the _Theory_ since the _Fifth_, which was printed in 1781, and that if a _6th_ has been mentioned in any of the newspapers, it must have been owing to a typographical mistake. For your farther satisfaction Cadell stated the fact in his own handwriting on a little bit of paper which I send you enclosed. I mentioned also to Cadell the resolution you had formed not to allow the Additions to the _Theory_ to be printed separately, which he said embarrassed him much, as he had already in similar circumstances more than once incurred the charge of illiberality with the public. On my telling him, however, that you had made up your mind on the subject, and that it was perfectly unnecessary to write to you, as the nature of the work made it impossible for you to comply with his proposal, he requested of me to submit to your consideration whether it might not (be) proper for you to mention this circumstance, for his justification, in an advertisement prefixed to the Book. This was all, I think, that passed in the course of our conversation. I write this from Dover, which I am just leaving with a fair wind, so that I hope to be in Paris on Thursday. It will give me great-pleasure to receive your commands, if I can be of any use to you in executing any of your commissions.--I ever am, dear sir, your much obliged and most obedient servant, DUGALD STEWART.[359] In the preface to the 1790 edition the author refers to the promise he had made in that of 1759 of treating in a future work of the general principles of law and government, and of the different revolutions they had undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns policy, revenue, and arms, and whatever else is the object of law; and he says that in the _Wealth of Nations_ he had executed this promise so far as policy, revenue, and arms were concerned, but that the remaining part of the task, the theory of jurisprudence, he had been prevented from executing by the same occupations which had till then prevented him from revising the _Theory_. He adds: "Though my very advanced age leaves me, I acknowledge, very little expectation of ever being able to execute this great work to my own satisfaction, yet, as I have not altogether abandoned the design, and as I wish still to continue under the obligation of doing what I can, I have allowed the paragraph to remain as it was published more than thirty years ago, when I entertained no doubt of being able to execute everything which it announced." The most important of the new contributions to this last edition of the _Theory_ is the chapter "on the corruption of our moral sentiments, which is occasioned by our disposition to admire the rich and the great, and to despise or neglect persons of poor and mean condition." In spite of his alleged republicanism he was still a sort of believer in the principle of birth. It was not, in his view, a rational principle, but it was a natural and beneficial delusion. In the light of reason the vulgar esteem for rank and fortune above wisdom and virtue was utterly indefensible, but it had a certain advantage as a practical aid to good government. The maintenance of social order required the establishment of popular deference to some species of superiority, and the superiorities of birth and fortune were at least plain and palpable to the mob of mankind who have to be governed, whereas the superiorities of wisdom and virtue were often invisible and uncertain, even to the discerning. But however useful this admiration for the wrong things might be for the establishment of settled authority, he held it to be "at the same time the great and most universal cause of the corruption of our moral sentiments."[360] But the additions attracted little notice compared with the deletions--the deletion of the allusion to Rochefoucauld associating that writer in the same condemnation with Mandeville, and the deletion of the passage in which the revealed doctrine of the atonement was stated to coincide with the repentant sinner's natural feeling of the necessity of some other intercession and sacrifice than his own. The omission of the reference to Rochefoucauld has been blamed as a concession to feelings of private friendship in the teeth of the claims of truth; but Stewart, who knew the whole circumstances, says that Smith came to believe that truth as well as friendship required the emendation, and there is certainly difference enough between Rochefoucauld and Mandeville to support such a view. The suppression of the passage about the atonement escaped notice for twenty years, till a notable divine, Archbishop Magee, in entire ignorance of the suppression, quoted the passage from one of the earlier editions as a strong testimony to the reasonableness of the Scriptural doctrine of the atonement from a man whose intellectual capacity and independence were above all dispute. "Such," he says, "are the reflections of a man whose powers of thinking and reasoning will surely not be pronounced inferior to those of any, even of the most distinguished champions of the Unitarian school, and whose theological opinions cannot be charged with any supposed taint from professional habits or interests. A layman (and he too a familiar friend of David Hume), whose life was employed in scientific, political, and philosophical researches, has given to the world those sentiments as the natural suggestions of reason. Yet these are the sentiments which are the scoff of sciolists and witlings."[361] The sciolists and witlings were not slow in returning the scoff, and pointing out that while Smith was, no doubt, as an intellectual authority all that the Archbishop claimed for him, his authority really ran against the Archbishop's view and not in favour of it, inasmuch as he had withdrawn the passage relied on from the last edition of his work. Dr. Magee instantly changed his tune, and without thinking whether he had any ground for the statement, attributed the omission to the unhappy influence over Smith's mind of the aggressive infidelity of Hume. "It adds one proof more," says his Grace, who, having failed to make Smith an evidence for Christianity, will now have him turned into a warning against unbelief,--"it adds one proof more to the many that already existed of the danger, even to the most enlightened, from a familiar contact with infidelity." His intercourse with Hume was at its closest when he first published the passage in 1759, whereas Hume was fourteen years in his grave when the passage was omitted; besides there is probably as much left in the context which Hume would object to as is deleted, and in any case, there is no reason to believe that Smith's opinion about the atonement was anywise different in 1790 from what it was in 1759, or for doubting his own explanation of the omission, which he is said to have given to certain Edinburgh friends, that he thought the passage unnecessary and misplaced.[362] As if taking an odd revenge for its suppression, the original manuscript of this particular passage seems to have reappeared from between the leaves of a volume of Aristotle in the year 1831, when all the rest of the MS. of the book and of Smith's other works had long gone to destruction.[363] It may be added, as so much attention has been paid to Smith's religious opinions, that he gives a fresh expression to his belief in a future state and an all-seeing Judge in one of the new passages he wrote for this same edition of his _Theory_. It is in connection with his remarks on the Calas case. He says that to persons in the circumstances of Calas, condemned to an unjust death, "Religion can alone afford them every effectual comfort. She also can tell them that it is of little importance what men may think of their conduct while the all-seeing Judge of the world approves of it. She alone can present to them a view of another world,--a world of more candour, humanity, and justice than the present, where their innocence is in due time to be declared and their virtue to be finally rewarded, and the same great principle which can alone strike terror into triumphant vice affords the only effectual consolation of disgraced and insulted innocence."[364] Whatever may have been his attitude towards historical Christianity, these words, written on the eve of his own death, show that he died as he lived, in the full faith of those doctrines of natural religion which he had publicly taught. FOOTNOTES: [359] Original in possession of Professor Cunningham, Belfast. [360] _Theory_, ed. 1790, i. 146. [361] Magee's _Works_, p. 138. [362] Sinclair's _Life of Sir John Sinclair_, i. 40. [363] Add. MSS., 32, 574. [364] _Theory_, ed. 1790, i. 303, 304. CHAPTER XXXII LAST DAYS The new edition of the _Theory_ was the last work Smith published. A French newspaper, the _Moniteur Universelle_ of Paris, announced on 11th March 1790 that a critical examination of Montesquieu's _Esprit des Lois_ was about to appear from the pen of the celebrated author of the _Wealth of Nations_, and ventured to predict that the work would make an epoch in the history of politics and of philosophy. That at least, it added, is the judgment of well-informed people who have seen parts of it, of which they speak with an enthusiasm of the happiest augury. But notwithstanding this last statement the announcement was not made on any good authority. Smith may probably enough have dealt with Montesquieu as he dealt with many other topics in the papers he had prepared towards his projected work on government, but there is no evidence that he ever intended to publish a separate work on that remarkable writer, and before March 1790 his strength seems to have been much wasted. The Earl of Buchan, who had some time before gone to live in the country, was in town in February, and paid a visit to his old professor and friend. On taking leave of him the Earl said, "My dear Doctor, I hope to see you oftener when I come to town next February," but Smith squeezed his lordship's hand and replied, "My dear Lord Buchan,[365] I may be alive then and perhaps half a dozen Februaries, but you never will see your old friend any more. I find that the machine is breaking down, so that I shall be little better than a mummy"--with a by-thought possibly to the mummies of Toulouse. "I found a great inclination," adds the Earl, "to visit the Doctor in his last illness, but the mummy stared me in the face and I was intimidated."[366] During the spring months Smith got worse and weaker, and though he seemed to rally somewhat at the first approach of the warm weather, he at length sank again in June, and his condition seemed to his friends to be already hopeless. Long and painful as his illness was, he bore it throughout not with patience merely but with a serene and even cheerful resignation. On the 21st of June Henry Mackenzie wrote his brother-in-law, Sir J. Grant, that Edinburgh had just lost its finest woman, and in a few weeks it would in all probability lose its greatest man. The finest woman was the beautiful Miss Burnet of Monboddo, whom Burns called "the most heavenly of all God's works," and the greatest man was Adam Smith. "He is now," says Mackenzie, "past all hopes of recovery, with which about three weeks ago we had flattered ourselves." A week later Smellie, the printer, wrote Smith's young friend, Patrick Clason, in London: "Poor Smith! we must soon lose him, and the moment in which he departs will give a heart-pang to thousands. Mr. Smith's spirits are flat, and I am afraid the exertions he sometimes makes to please his friends do him no good. His intellect as well as his senses are clear and distinct. He wishes to be cheerful, but nature is omnipotent. His body is extremely emaciated, and his stomach cannot admit of sufficient nourishment; but, like a man, he is perfectly patient and resigned."[367] In all his own weakness he was still thoughtful of the care of his friends, and one of his last acts was to commend to the good offices of the Duke of Buccleugh the children of his old friend and physician, Cullen, who died only a few months before himself. "In many respects," says Lord Buchan, "Adam Smith was a chaste disciple of Epicurus as that philosopher is properly understood, and Smith's last act resembled that of Epicurus leaving as a legacy to his friend and patron the children of his Metrodorus, the excellent Cullen."[368] When it became evident that the sickness was to prove mortal, Smith's old friend Adam Ferguson, who had been apparently estranged from him for some time, immediately forgot their coolness, whatever it was about, and came and waited on him with the old affection. "Your friend Smith," writes Ferguson on 31st July 1790, announcing the death to Sir John Macpherson, Warren Hastings' successor as Governor-General of India--"your old friend Smith is no more. We knew he was dying for some months, and though matters, as you know, were a little awkward when he was in health, upon that appearance I turned my face that way and went to him without further consideration, and continued my attentions to the last."[369] Dr. Carlyle mentions that the harmony of the famous Edinburgh literary circle of last century was often ruffled by little tifts, which he and John Home were generally called in to compose, and that the usual source of the trouble was Ferguson's "great jealousy of rivals," and especially of his three more distinguished friends, Hume, Smith, and Robertson. But it would not be right to ascribe the fault to Ferguson merely on that account, for Carlyle hints that Smith too had "a little jealousy in his nature," although he admits him to have been a man of "unbounded benevolence." But whatever it was that had come between them, it is pleasant to find Ferguson dismissing it so unreservedly, and forgetting his own infirmities too--for he had been long since hopelessly paralysed, and went about, Cockburn tells us, buried in furs "like a philosopher from Lapland"--in order to cheer the last days of the friend of his youth. When Smith felt his end to be approaching he evinced great anxiety to have all his papers destroyed except the few which he judged to be in a sufficiently finished state to deserve publication, and being apparently too feeble to undertake the task himself, he repeatedly begged his friends Black and Hutton to destroy them for him. A third friend, Mr. Riddell, was present on one of the occasions when this request was made, and mentions that Smith expressed regret that "he had done so little." "But I meant," he said, "to have done more, and there are materials in my papers of which I could have made a great deal, but that is now out of the question."[370] Black and Hutton always put off complying with Smith's entreaties in the hope of his recovering his health or perhaps changing his mind; but at length, a week before his death, he expressly sent for them, and asked them then and there to burn sixteen volumes of manuscript to which he directed them. This they did without knowing or asking what they contained. It will be remembered that seventeen years before, when he went up to London with the manuscript of the _Wealth of Nations_, he made Hume his literary executor, and left instructions with him to destroy all his loose papers and eighteen thin paper folio books "without any examination," and to spare nothing but his fragment on the history of astronomy. When the sixteen volumes of manuscript were burnt Smith's mind seemed to be greatly relieved. It appears to have been on a Sunday, and when his friends came, as they were accustomed to do, on the Sunday evening to supper--and they seem to have mustered strongly on this particular evening--he was able to receive them with something of his usual cheerfulness. He would even have stayed up and sat with them had they allowed him, but they pressed him not to do so, and he retired to bed about half-past nine. As he left the room he turned and said, "I love your company, gentlemen, but I believe I must leave you to go to another world." These are the words as reported by Henry Mackenzie, who was present, in giving Samuel Rogers an account of Smith's death during a visit he paid to London in the course of the following year.[371] But Hutton, in the account he gave Stewart of the incident, employs the slightly different form of expression, "I believe we must adjourn this meeting to some other place." Possibly both sentences were used by Smith, for both are needed for the complete expression of the parting consolation he obviously meant to convey--that death is not a final separation, but only an adjournment of the meeting. That was his last meeting with them in the earthly meeting-place. He had gone to the other world before the next Sunday came round, having died on Saturday the 17th of July 1790. He was buried in the Canongate churchyard, near by the simple stone which Burns placed on the grave of Fergusson, and not far from the statelier tomb which later on received the remains of his friend Dugald Stewart. The grave is marked by an unpretending monument, stating that Adam Smith, the author of the _Wealth of Nations_, lies buried there. His death made less stir or rumour in the world than many of his admirers expected. Sir Samuel Romilly, for example, writing on the 20th of August to a French lady who had wanted a copy of the new edition of the _Theory of Moral Sentiments_, says: "I have been surprised and, I own, a little indignant to observe how little impression his death has made here. Scarce any notice has been taken of it, while for above a year together after the death of Dr. Johnson nothing was to be heard of but panegyrics of him,--lives, letters, and anecdotes,--and even at this moment there are two more lives of him to start into existence. Indeed, one ought not perhaps to be very much surprised that the public does not do justice to the works of A. Smith since he did not do justice to them himself, but always considered his _Theory of Moral Sentiments_ a much superior work to his _Wealth of Nations_."[372] Even in Edinburgh it seemed to make less impression than the death of a bustling divine would have made--certainly considerably less than the death of the excellent but far less illustrious Dugald Stewart a generation later. The newspapers had an obituary notice of two small paragraphs, and the only facts in his life the writers appear to have been able to find were his early abduction by the gipsies, of which both the Mercury and the Advertiser give a circumstantial account, and the characteristics which the Advertiser mentions, that "in private life Dr. Smith was distinguished for philanthropy, benevolence, humanity, and charity." Lord Cockburn, who was then beginning to read and think, was struck with the general ignorance of Smith's merits which his fellow-citizens exhibited shortly after his death. "The middle-aged seemed to me to know little about the founder of the science (political economy) except that he had recently been a Commissioner of Customs and had written a sensible book. The young--by which I mean the Liberal young of Edinburgh--lived upon him."[373] Stewart was no sooner dead than a monument was raised to him on one of the best sites in the city. The greater name of Smith has to this day no public monument in the city he so long adorned. Black and Hutton were his literary executors, and published in 1795 the literary fragments which had been spared from the flames. By his will, dated 6th February 1790, he left his whole property to his cousin, David Douglas, afterwards Lord Reston, subject to the condition that the legatee should follow the instructions of Black and Hutton in disposing of the MSS. and writings, and pay an annuity of £20 a year to Mrs. Janet Douglas, and after her death, a sum of £400 to Professor Hugh Cleghorn of St. Andrews and his wife.[374] The property Smith left, however, was very moderate, and his friends could not at first help expressing some surprise that it should have been so little, because, though known to be very hospitable, he had never maintained anything more than a moderate establishment. But they had not then known, though many of them had long suspected, that he gave away large sums in secret charity. William Playfair mentions that Smith's friends, suspecting him of doing this, had sometimes in his lifetime formed special juries for the purpose of discovering evidences of it, but that the economist was "so ingenious in concealing his charity" that they never could discover it from witnesses, though they often found the strongest circumstantial evidence of it.[375] Dugald Stewart was more fortunate. He says: "Some very affecting instances of Mr. Smith's beneficence in cases where he found it impossible to conceal entirely his good offices have been mentioned to me by a near relation of his and one of his most confidential friends, Miss Ross, daughter of the late Patrick Ross, Esq., of Innernethy. They were all on a scale much beyond what would have been expected from his fortune, and were combined with circumstances equally honourable to the delicacy of his feelings and the liberality of his heart." One recalls the saying of Sir James Mackintosh, who was a student of Cullen and Black's in Smith's closing years, and used occasionally to meet the economist in private society. "I have known," said Mackintosh to Empson many years after this--"I have known Adam Smith slightly, Ricardo well, and Malthus intimately. Is it not something to say for a science that its three greatest masters were about the three best men I ever knew?"[376] Smith never sat for his picture, but nevertheless we possess excellent portraits of him by two very talented artists who had many opportunities of seeing and sketching him. Tassie was a student at Foulis's Academy of Design in Glasgow College when Smith was there, and he may possibly even then have occasionally modelled the distinguished Professor, for we hear of models of Smith being in all the booksellers' windows in Glasgow at that time, and these models would, for a certainty, have been made in the Academy of Design. However that may be, Tassie executed in later days two different medallions of Smith. Raspe, in his catalogue of Tassie's enamels, describes one of these in a list of portraits of the largest size that that kind of work admitted of, as being modelled and cast by Tassie in his hard white enamel paste so as to resemble a cameo. From this model J. Jackson, R.A., made a drawing, which was engraved in stipple by C. Picart, and published in 1811 by Cadell and Davies. Line engravings of the same model were subsequently made by John Horsburgh and R.C. Bell for successive editions of the _Wealth of Nations_, and it is accordingly the best known, as well as probably the best, portrait of the author of that work. It is a profile bust showing rather handsome features, full forehead, prominent eyeballs, well curved eyebrows, slightly aquiline nose, and firm mouth and chin, and it is inscribed, "Adam Smith in his 64th year, 1787. Tassie F." In this medallion Smith wears a wig, but Tassie executed another, Mr. J.M. Gray tells us, in what he called "the antique manner," without the wig, and with neck and breast bare. "This work," says Mr. Gray, "has the advantage of showing the rounded form of the head, covered with rather curling hair and curving upwards from the brow to a point above the large ear, which is hidden in the other version."[377] It bears the same date as the former, and it appears never to have been engraved. Raspe mentions a third medallion of Smith in his catalogue of Tassie's enamels--"a bust in enamel, being in colour an imitation of chalcedony, engraved by F. Warner, after a model by J. Tassie,"--but this appears from Mr. Gray's account to be a reduced version of the first of the two just mentioned. Kay made two portraits of Smith: the first, done in 1787, representing him as he walked in the street, and the second, issued in 1790, and occasioned, no doubt, by his death, representing him as he has entered an office, probably the Custom House. There is a painting by T. Collopy in the National Museum of Antiquities at Edinburgh, which is thought to be a portrait of Adam Smith from the circumstance that the title _Wealth of Nations_ appears on the back of a book on the table in the picture; but in the teeth of Stewart's very explicit statement that Smith never sat for his portrait, the inference drawn from that circumstance cannot but remain very doubtful. All other likenesses of Smith are founded on those of Tassie and Kay. Smith was of middle height, full but not corpulent, with erect figure, well-set head, and large gray or light blue eyes, which are said to have beamed with "inexpressible benignity." He dressed well--so well that nobody seems to have remarked it; for while we hear, on the one hand, of Hume's black-spotted yellow coat and Gibbon's flowered velvet, and on the other, of Hutton's battered attire and Henry Erskine's gray hat with the torn rim, we meet with no allusion to Smith's dress either for fault or merit. Smith's books, which went on his death to his heir, Lord Reston, were divided, on the death of the latter, between his two daughters; the economic books going to Mrs. Bannerman, the wife of the late Professor Bannerman of Edinburgh, and the works on other subjects to Mrs. Cunningham, wife of the Rev. Mr. Cunningham of Prestonpans. Both portions still exist, the former in the Library of the New College, Edinburgh, to which they have been presented by Dr. D. Douglas Bannerman of Perth; and the latter in the possession of Professor Cunningham of Queen's College, Belfast, except a small number which were sold in Edinburgh in 1878, and a section, consisting almost exclusively of Greek and Latin classics, which Professor Cunningham has presented to the library of the college of which he is a member. Among other relics of Smith that are still extant are four medallions by Tassie, which very probably hung in his library. They are medallions of his personal friends: Black, the chemist; Hutton, the geologist; Dr. Thomas Reid, the metaphysician; and Andrew Lumisden, the Pretender's old secretary, and author of the work on the antiquities of Rome. FOOTNOTES: [365] "My dear Ascanius" are the words of the text, because Ascanius was the pseudonym under which the Earl happened to be writing. [366] The _Bee_, 1791, iii. 166. [367] Kerr's _Memoirs of W. Smellie_, i. 295. [368] The _Bee_, 1791, iii. 167. [369] Original letter in Edinburgh University Library. [370] Stewart's _Works_, x. 74. [371] Clayden's _Early Life of Samuel Rogers_, p. 168. [372] _Memoirs of Sir Samuel Romilly_, i. 403. [373] Cockburn's _Memorials of My Own Time_, p. 45. [374] Bonar's _Library of Adam Smith_, p. xiv. [375] Playfair's edition of _Wealth of Nations_, p. xxxiv. [376] _Edinburgh Review_, January 1837, p. 473. [377] Bonar's _Library of Adam Smith_, p. xxii. INDEX Abbeville, Smith at, 213 Abercromby, Professor, expected resignation of chair of Law of Nature, 132 Absence of mind, Smith's, in childhood, 4; at Glasgow, 60; exaggerated, 66; Glasgow anecdote of, 147; London anecdote, 237; Dalkeith anecdotes, 245; Kirkcaldy anecdote, 259; the story of "La Roche," 314; Custom House anecdotes, 330; unobserved by Samuel Rogers, 422 Academy of Dancing, Fencing, and Riding in Glasgow College, 79 Academy of Design, Glasgow, 72; Smith's interest in, 74 Adam, Robert, architect, schoolfellow of Smith, 7 Adam, William, M.P., Smith's remark on Bentham's _Defence of Usury_, 422 Addington, H. (Lord Sidmouth), writes an ode to Smith, 406 Alison, Rev. Archibald, effects of Smith's habit of dictating, 261 American Intercourse Bill, Smith's opinion, 385 American question, Smith's views, 281 Anderson, Dr. James, paper to R.S.E., 421 Anderson, Professor John, his classes for working men, 72; voting for his own appointment to Natural Philosophy chair, 83; tutorial engagement abroad, 85 Anderston Club, 97 Armed Neutrality, the, Smith on, 382 Astronomy, Smith's history of, 262 Auckland, Lord, _see_ Eden, W. Bagpipe competition, Smith at, 372; Professor Saint Pond's description of, 373 Balfour, Colonel Nesbit, 395 Balliol College, Oxford, Smith enters, 18; state of learning at, 22; Smith's reading at, 24; confiscation of Hume's _Treatise_, 24; treatment of Scotch students, 25; complaints of Snell exhibitioners, 26; correspondence between heads of Balliol and Glasgow Colleges, 27 Banks, Sir Joseph, Smith's letter to, 413 Barnard, Dean, verses on Smith and other members of "the club," 268 Barré, Colonel, with Smith at Bordeaux, 179 Beatson, Robert, Smith's letter introducing, 402 Beattie's Minstrel, Smith's opinion of, 368 Beauclerk, Topham, on Smith's conversation, 269 Bellamy, Mrs., invited to open Glasgow theatre, 80; on beauty of Glasgow, 88 Beneficence, Smith's, 437 Bentham, Jeremy, on state of learning at Oxford, 21; Smith on his _Defence of Usury_, 422 Berkeley, Mrs. Prebendary, her dinners, 97 Black, Dr. Joseph, professorial losses by light guineas, 49; Smith's opinion of, 336; Robison's account of, 336; appointed Smith's literary executor, 434 Blair, Dr. Hugh, his indebtedness to Smith's lectures on rhetoric, 32; his preaching, 420; Smith on, 421 Blank verse, Smith on, 35 Bogle, Robert, of Daldowie, 418 Bogle, Robert, of Shettleston, promoter of Glasgow theatre, 79 Bonar, James, on Smith's manifesto of 1755, 65; Smith's library, 327 Bonnet, Charles, of Geneva, friendship with Smith, 191 Bordeaux, Smith at, 179; condition of people, 180 Boswell, James, Smith's teaching on blank verse, 35; pupil of Smith, 58 Johnson's remark about Glasgow, 88; Smith's altercation with Johnson, 155; on Smith's admission to "the club," 268 Boufflers-Rouvel, Comtesse de, Smith's visits to her salon, 198; her purpose to translate his _Theory_, 199 Brienne, Loménie de, Archbishop of Toulouse, 177; his refusal to give Morellet help to publish his translation of _Wealth of Nations_, 359 British Coffee-House, Smith's headquarters in London, 267 British Fisheries Society, Smith on, 408; his prognostication confirmed, 409 Brougham, Lord, on Dr. J. Black, 336 Buccleugh, Duke of, Smith tutor to, 165; illness at Compiègne, 222; character, 227; marriage, 238; home-coming to Dalkeith, 243; memorial on medical degrees, 272; Mickle's complaint against, 318 Buchan, Earl of, on Smith's love for his mother, 4; pupil of Smith, 51; Smith's remark about, 52; learns etching in Glasgow College, 72; on Smith's religious views, 130; on Smith's dislike of publicity, 370; Smith's declining health, 431; Smith's character, 433 Buckle, T.H., on _Wealth of Nations_, 288 Burgoyne's surrender at Saratoga, Smith's remark, 343 Burke, Edmund, reported candidature for Glasgow Logic chair, 46; his high opinion of the _Theory_, 144; his review of it, 145; Smith's defence of, 369; his visit to Scotland in 1784, 387; his remark on Smith, 387; Smith's remark on him, 387; in Edinburgh, 388; conversation, with Smith at Hatton, 389; rectorial installation at Glasgow, 390; Did he break down? 390; made F.R.S.E., 393; again in Edinburgh in 1785, 394; dinner at Smith's, 395; visits John Logan, the poet, 396 Burns, Robert, his letter of introduction to Smith, 402 Butler, Bishop, on state of learning at Oxford, 20 Calas case, the, 186; Smith on, 187, 429 Campbell, Dr., of the _Political Survey_, 366 Carlisle, Earl of, Smith's letter to, on free trade for Ireland, 350 Carlyle, Dr. A., on spirit of inquiry among Glasgow students, 9; on Earl of Buchan, 52; takes part in theatricals in Glasgow College, 79; on Smith's obligations to Provost Cochrane, 90; on the Glasgow Political Economy Club, 91; on "Mr. Robin Simson's Club," 99; on Smith's elocution, 108; on Smith's appointment as travelling tutor, 226; thought Hume a Theist, 313; on Smith's jealousy, 433 Chambers, Robert, on Smith's habits of composition, 260 Chicken-broth, 97 Club, Glasgow Political Economy, 92; Professor Robert Simson's, 96; the Literary, London, 267; Edinburgh Oyster, 334 Cochrane, Provost Andrew, Smith's obligations to, 90; Political Economy Club, 91; spirited conduct during Rebellion, 91; attempt to break his bank, 92; correspondence with Oswald on duty on iron, 93; views on bank notes, 94 Cockburn, Lord, on current belief in danger of political economy, 292; on Dr. Black, 336; on appreciation of Smith by young Edinburgh, 436 Colbert, the French minister, claim to descent from Scotch Cuthberts, 176 Colbert, Abbé (Bishop of Rodez), 175; on Smith, 176 College administrator, Smith as, 66 Colonial incorporation, Smith's views, 281 Colonies, Roman, 236; American, 381; when not valuable, in Smith's opinion, 383 Compiègne, Smith at, 222 Composition, Smith's habits of, 260 Conversation, Smith's, 268 Conyers, Lady, at Geneva, 191, 193 Cooper, Sir Grey, helps Smith to Commissionership of Customs, 320, 323 Craufurd, William, friend of Hamilton of Bangour, 40 Critic, Smith as, 34 Cullen, Professor W., letter from Smith to, 44; letter from Smith to, 45; Smith's letter to, on medical degrees, 273; Smith's interest in his family, 433 Custom dues in Glasgow meal-market on students' meal, 67 Customs, salaries of officers, 2; Smith made Commissioner, 320; his work in Custom House, 330 Daer, Lord, 334 D'Alembert, intimacy with Smith, 202 Dalrymple, Alexander, hydrographer, Smith's recommendation of, to Shelburne, 235 Dalrymple, Sir David, _see_ Hailes Dalrymple, Sir John, on dedication of Hamilton's poems, 40; Smith's connection with Foulis's Academy of Design, 75; fortunes of Glasgow merchants, 90 Dalzel, Professor A., on Smith's knowledge of Greek, 23; on Burke, 391; on Windham, 394 Dancing, Academy of, in Glasgow College, 79 Death of Smith, 435; Romilly on, 435 Design, Academy of, in Glasgow College, 79 Smith's interest in this academy, 74 Dictation, Smith's habit of, in composition, 260 Dillon, Cardinal, 184 _Douglas_, Home's tragedy, Smith's interest in, 82, 130 Douglas, Bishop, friend of Smith at Balliol, 28; his _Criterion of Miracles_, said to be addressed to Smith, 129; letter from Smith to, 403 Douglas cause, the, Smith on, 249, 249 Douglas, David (Lord Reston), Smith's heir, 436 Douglas Heron and Company, bankruptcy of, 254 Douglas of Strathendry, Smith's mother's family, 4 Drysdale, Dr. John, schoolfellow of Smith, 7 Dundas, Henry (Lord Melville), letter to Smith on free trade for Ireland, 352; Smith's reply, 353; dinner to Smith, 405 Dupont de Nemours, reminiscences of Smith in Paris, 215; recollection of Smith's views on taxation of the poor, 220 East India Bill, Smith on, 386 East India Company, Smith on, 242; Smith mentioned for supervisorship, 253 Economists, the French sect of, 216; their great activity in 1766, 219 Eden, William (Lord Auckland), applies for Smith's opinion on free trade for Ireland, 352; Smith's opinion of, 384; Smith's letter to, on American affairs, 385 Edinburgh, Smith's lectures in, 30; Smith made freeman of burgh, 251; Smith's permanent residence there, 325; Royal Society of, 375; Smith on, 417; New College possesses part of Smith's books, 439 _Edinburgh Review_, 120; Smith's review of Johnson's Dictionary, 121; his review of contemporary literature, 122; death of, 124; Hume's exclusion from, 125 Elliot, Sir Gilbert, M.P., reported candidature for chair of Moral Philosophy, 46 Enville, Duchesse d', hospitality to Smith at Geneva, 191; on Smith's French, 192 Erskine, Henry, Lord Advocate, pupil of Smith, 58 Espinasse, Mademoiselle de 1', Smith's visits to her salon, 201 Fencing, Academy of, in Glasgow College, 79 Ferguson, Dr. Adam, was he the object of Smith's 1755 manifesto? 65; on a national militia, 138; candidate for Indian supervisorship, 255; appointed tutor to Lord Chesterfield on Smith's recommendation, 258; his announcement in 1773 of the _Wealth of Nations_, 264; intermediary between Lord Carlisle and Smith, 350; reconciliation with Smith, 433 Fitzmaurice, Hon. T., pupil of Smith, 154 Foulis, Robert, University press, 71; Academy of Design, 72; economic publications, 76 Fox, Charles James, quotes _Wealth of Nations_, 289; on Smith, 289; Smith's approbation of his East India Bill, 386 France, Smith's account of condition of the people of, 229; sobriety of southern, 180 Franklin, Benjamin, makes Smith's acquaintance, 150; alleged assistance to Smith in composing _Wealth of Nations_, 264 Free trade, Smith's advocacy of, in 1750, 36; his conversion of the Glasgow merchants to, 60; his 1755 manifesto about, 62; alleged revolutionary character of the doctrine, 292; for Ireland, 349; Smith's opinion, 350, 353 French principles and the _Wealth of Nations_, 291 Funeral expenses, Smith's father's, 3 Garrick, David, letter introducing Smith to, 211; on Smith's conversation, 269 Geneva, Smith at, 188; the constitutional struggle then proceeding, 188 Gibbon, Edward, on state of learning at Oxford, 20; on _Wealth of Nations_, 287; obtains Smith's opinion as to continuation of his _History_, 371; Smith's admiration for his work, 414 Gibraltar, Smith against retaining, 382 Gipsies, Smith stolen by, 4 Glasgow in Smith's time, 87; its beauty, 88; passage between Johnson and Smith about, 88 Mrs. Montagu, Mrs. Bellamy, Dr. Johnson on, 88; its trade, 88; its industries, 89; its merchants, 90 Glasgow College, Smith a student at, 9; its professors then, 10; his companions there, 10; correspondence of Senate with Balliol College about Snell exhibitioners, 26; Smith Professor of Logic at, 42; Professor of Moral Philosophy, 43; Smith's courses at, 43; fees and classes, 49; students, 57; Rector's Court, 68; divisions in Senate, 69; peculiarities of constitution, 69; advanced educational policy, 71; Smith's resignation of chair, 172; Smith Rector, 410; his letter of acceptance, 411; installation, 412 Glassford, John, Glasgow, his wealth, 90; views on bank notes, 94 Grattan, Henry, motion on free trade for Ireland, 348 Gray's _Odes_, Smith on, 369 Gray, J.M., on Tassie's medallion of Smith, 438 Hailes, Lord, letters of Smith to, 247 Hamilton, Duke of, Smith and tutorship to, 258 Hamilton, William, of Bangour, poems edited by Smith, 38; dedication to second edition written by Smith, 40; Kames's friendship with, 41 Hamilton, Professor J., Dr. J. Moore's verses on, 100 _Hamlet_, Smith on, 368 Helvetius, his dinners, 200 Hepburn, Miss, 133 Herbert, Henry, introduced by Smith to Hume, 161 Herbert, Nicolas, his remarkable memory, 162 Highlands, depopulation of, 401 Holbach, Baron d', gets _Theory of Moral Sentiments_ translated, 164; his dinners, 199 Home, Henry, _see_ Kames Home, John, poet, Smith's interest in _Douglas_, 82, 130; journey north with Smith, 295 Home, John, of Ninewells, correspondence with Smith about Hume's legacy, 302; and about the _Dialogues_, 305 Hope, Henry, banker, Amsterdam, Smith's acknowledgment to, 401 Home, Bishop, the "Letter to Adam Smith", 312 Horne Tooke, J., visits Smith at Montpellier, 183 Horsley, Bishop, disapproval of Sunday schools, 407 Hostellaries in Scotland, Smith on, 247 Hume, David, presents Smith with his _Treatise_, 15; candidature for Logic chair, Glasgow, 46; Essays on Commerce, subject of paper by Smith, 95; friendship with Smith, 105; descriptions of Select Society, 109; exclusion from _Edinburgh Review_, 125; letter to Smith on chair of Law of Mature and Nations, 132; letters on _Theory of Moral Sentiments_, 141; Secretary of Legation at Paris, 162; reception in Paris, 163; perplexity where to fix his abode, 195; quarrel with Rousseau, 206; Smith's letter on quarrel, 208; Smith on his idea of residing in France, 225; Smith on his continuing his _History_, 233; appointed by Smith his literary executor, 262; letter on _Wealth of Nations_, 286; correspondence with Smith about publication of _Dialogues on Natural Religion_, 296, 299; farewell dinner with his friends, 299; death, 302; Smith on his monument in Calton Cemetery, 302; Smith's letter to Strahan on his death, 304, 307, 311; proposal to publish selection from his letters, 309; Smith's objection to this, 310; Was Hume a Theist? 313; Smith's opinion of Hume as historian, 368 Hutcheson, Francis, influence over Smith, 11; power as lecturer, 11; author of phrase, "greatest happiness of greatest number," 12; specific influences on Smith in theology, 13; in ethics, 14; in political economy, 14; taught doctrine of industrial liberty, 15 Hutchinson, Hely, report on free trade for Ireland, 349 Hutton, Dr. James, geologist, 339; Smith's literary executor, 434 India Company, East, Smith on, 242; Smith mentioned for supervisorship, 253; Smith on Fox's Bill, 386 Indignation, Smith's dislike of the man without, 245 Ireland, free trade for, 346; discontent in, 347; Smith's letter to Lord-Lieutenant on free trade for, 350; Dundas on free trade for, 352; Smith's reply to Dundas's letter, 353 Jardine, Rev. Dr., a writer in _Edinburgh Review_, 125 Jeffrey, Francis (Lord), on the Johnson and Smith altercation, 156; his opposition to Smith's election as Rector, 411 Johnson, Dr. Samuel, on Smith's views of blank verse, 35; on Glasgow, 88; _Dictionary_, reviewed by Smith, 121; altercation with Smith, 154; on _Wealth of Nations_, 288; Smith's opinion of, 366 Johnstone, William, _see_ Pulteney, Sir W. Judge Advocate, nature of office, 1 Junius, Smith on authorship of letters by, 420 Kames, Lord, patron of Smith, 31; place in literature, 31; letter from Smith to, on sympathy, 341 Kay, John, portraits of Smith, 439 Kirkcaldy, inhabitants and industries in last century, 8; Smith's residence 1767-73, 238 Knox, John, bookseller, his plan for improving Scotch Highlands, 408 Laing, David, Smith's editing Hamilton's poems, 39 Langton, Bennet, on Smith's conversation, 268 Languedoc, the States of, 183 Lansdowne, Marquis of, _see_ Shelburne Lauderdale, Earl of, conversation with Fox on Smith, 289; entertains Burke and Smith at Hatton, 389; his democratic sentiments in early life, 390 Lecturer, Smith as, 56 Le Sage, Professor G.L., Geneva, friendship with Smith, 191 Leslie, Sir John, tutor to Smith's cousin and heir, 412; introduced by Smith to Sir Joseph Banks, 413 L'Espinasse, _see_ Espinasse Library, Smith's, 327, 439 Lindsay, Professor Hercules, takes Smith's classes, 42; gives up lecturing in Latin, 99 Literary Club, _see_ Club Literary Society, Glasgow, _see_ Society Livy, Smith's opinion of, 367 Lloyd, Captain, reminiscences of Smith in Abbeville, 212 Logan, John, poet, Burke's visit to, 396; Smith's admiration for, 396; introduced by Smith to Andrew Strahan, 396 Loménie de Brienne, Archbishop of Toulouse, 177 London, Smith's first visit to, 152; Smith's residence there 1766-67, 252; his residence there 1773-76, 262; residence there again 1777, 314 Loudon, Earl of, 1 M'Culloch, J.R., on Smith's failure to foresee French Revolution, 229; on Smith's habit of dictating to amanuensis, 260; on Smith's books, 329 Macdonald, Sir James, in Paris, 174; his death, 225 M'Gowan, John, antiquary, 335 Mackenzie, Henry, on Smith's wealth of conversation, 33, 269; his story of "La Roche" and Hume's religious opinions, 313; account of Smith's last words to his friends, 435 Mackinnon of Mackinnon, letter from Smith to, 380 Mackintosh, Sir James, on the _Edinburgh Review_, 124; remark on Smith, 437 Maclaine, Dr. Archibald, college friend of Smith, 17; Smith's remark about, 17; acts in college theatricals, 79 Magee, Archbishop, on suppressed passage in _Theory of Moral Sentiments_ about the Atonement, 428 Manifesto of doctrine, Smith's, in 1755, 62 Market women on Smith, 329 Marseilles, Smith at, 188 Medical degrees, freedom of, 271; Smith's letter to Cullen on, 273 Mickle, translator of _Lusiad_, takes offence at Smith, 316 Militia question in Poker Club, 135; Smith's views, 137 Millar, David, Smith's schoolmaster, 5; his play, 6 Millar, Professor John, pupil of Smith, 43, 53; Jeffrey on, 53; on Smith as lecturer, 56 Miller, Sir Thomas, Rector of Glasgow College, 68 Milton's shorter poems, Smith on, 369 Mirabeau, Marquis de, on state of France, 218 Montagu, Mrs., on beauty of Glasgow, 88; on culture of Glasgow merchants, 90 Montesquieu, Smith's reported book on, 431 Montpellier, Smith at, 181 Moor, Professor James, 99 Moral Philosophy, Smith professor of, 43; fees and classes, 49; students, 57; his parting with them, 170; his resignation, 172 _Moral Sentiments, Theory of_, 141; Hume on its reception, 142; translated into French, 196; author's last revision, 425; suppressed passage on Atonement, 428 Morellet, Abbé, intimacy with Smith, 200; opinion of Smith, 201; on Madame Necker's salon, 206; on the French translations of Smith's works, 759; his own translation of Wealth of Nations, 359 Mother, death of Smith's, 393 Mure, Baron, correspondence of Hume and Oswald on Balance of Trade, 38; in Glasgow Literary Society, 95; connection with Douglas cause, 258; desires Smith for tutor to Duke of Hamilton, 258 Mure, Miss, of Caldwell, on Hume's superstition, 313 Music, Smith's alleged absence of ear for, 214; his criticism of, 214 Necker, Smith's acquaintance with, 206; and opinion of, 206 Neutrality, the Armed, Smith on, 382 New College, Edinburgh, possessor of Smith's economic books, 439 Nicholson, Professor Shield, on Smith's books, 327 North, Lord, adopts suggestions for his budget from _Wealth of Nations_, 294, 310; rewards the author with Commissionership of Customs, 320 Opera, French, Smith on, 214 Oswald, James, Treasurer of Navy, home friend of Smith, 6; influence on Smith, 37; correspondence with Hume on Balance of Trade, 38; works for removal of duty on American iron, 93 Oxford, Smith's matriculation, 18; expenses of education there then, 19; Did Smith graduate? 20; state of learning there, 20; Smith on, 21; his friendlessness at, 27; never revisited by him, 29 Oyster Club, Edinburgh, 334; Samuel Rogers at, 418 Panmure House, Smith's Edinburgh residence, 325 Paris, Smith in, 175, 194 _Pastor Fido_, Smith's opinion of, 369 Percy's _Reliques_, Smith's opinion of, 369 Physiocrats, the, 216 Pitt, William, disciple of Smith, 404; his remark to Smith at Dundas's, 405; Smith's remark on, 405; consults Smith on public affairs, 406 Plagiarism, Smith's alleged accusation of Blair, 32; his alleged fear of, 64, 269 Playfair, Professor John, on Oyster Club, 335; on Dr. Hutton, 337 Playfair, William, on Smith's conversation, 268; on Smith's declining health, 405 Poker Club, 134 Pope, Alexander, Smith on, 369, 370 Population question, 398 Portraits of Smith, 438 Pownall, Governor, Smith's letter to, 319 Price, Dr. Richard, on decline of population, 398; Smith's opinion of, 400 Pringle, Sir John, on _Wealth of Nations_, 288 Pulteney, Sir William, attends Smith's lectures, 32; introduced by Smith to Oswald, 103; Smith's letter to, on Indian supervisorship, 253 Quacks in medicine, 276, 279 Quæstor of Glasgow College, office held by Smith, 68 Quesnay, Dr. F., Smith not his disciple, 215; Smith's admiration for, 215; refusal of farmer-generalship for his son, 218; discussions in his room, 219; called in by Smith to treat Duke of Buccleugh, 222 Ramsay, Allan, Smith on _Gentle Shepherd_, 369 Ramsay, Allan, painter, founder of Select Society, 107 Ramsay, John, of Ochtertyre, on Kames's friendship with Bangour, 41; on Smith's religious views, 60; on Smith at whist, 97; on Smith's smartening during his foreign travels, 227; on Smith's depression after his mother's death, 393 Rector of Glasgow University, Smith's appointment, 410 Reid, Dr. Thomas, on students of Moral Philosophy class, Glasgow, 58 Religion, Smith's views suspected in Glasgow, 60; his views obliged to be controverted by Bishop Douglas, 393; his final testimony, 429 Republicanism, Smith's, 124 Reston, Lord, _see_ Douglas, David Reviews, Smith's opinion of the, 370 Revolution, French, Did Smith foresee? 229 Reynolds, Sir Joshua, on Smith's conversation, 269 Riccoboni, Madame, friendship with Smith, 210; Smith's opinion of, 210; introduces him to Garrick, 211 Richardson, Professor, on Smith's political lectures, 55 Richelieu, Duc de, visited by Smith, 181; Voltaire on, 190 Riding, Academy of, in Glasgow College, 79 Ritchie, James, merchant, Glasgow, on the spread of Smith's opinions among Glasgow merchants, 60 Rivière, Mercier de la, on condition of France, 218 Robison, Professor, on Dr. Black, 336 Rochefoucauld's _Maximes_, Smith's allusion to, in _Theory_, 340, 428 Rochefoucauld, Duc de la, Smith's friendship with, in Geneva, 191; letter to Smith from, 339 Roebuck, Dr., anecdote of Wilkie, the poet, and, 102 Rogers, Professor Thorold, on Smith's obligations to Turgot, 203; on the Indian supervisorship and the _Wealth of Nations_, 256 Rogers, Samuel, on Smith's absence of mind, 66, 422; on Smith and Robertson, 228; conversations with Smith in Edinburgh, 416 Romilly, Sir S., on Smith's death, 435 Ross, General Alexander, 395 Ross, Colonel Patrick, 361 Ross, Miss, on Smith's charities, 437 Rouet, Professor, expenses of journey to London, 19; with young Tronchin, 59; his absenteeism, 89 Rousseau, discourse on inequality reviewed by Smith, 123; in Paris with Hume, 196; quarrel with Hume, 206; Smith's letter on the quarrel, 208; Smith on his "Social Compact," 372 Royal Society of London, Smith elected, 238; admitted, 263 Royal Society of Edinburgh, foundation of, 375; Smith's participation, 376; Smith at, with Rogers, 421 Sabbath, the, Smith on, 342 Saint Fond, Professor, his reminiscences of Smith, 372 Saratoga, Smith's remark on the defeat at, 343 Sarsfield, Count de, Smith's chief friend in France, 240 Savage, Richard, Smith on, 366 Say, Leon, on Smith and Turgot, 203 School, Burgh, of Kirkcaldy, 5 Scotland, people of, 401 Scott, Hon. Hew Campbell, joins Smith at Toulouse, 182; his death, 226 Scott, Sir Walter, Smith's altercation with Johnson, 156; anecdotes of Smith's absence of mind, 330 Select Society, _see_ Society Shakespeare, Smith on, 368 Shelburne, Earl of (afterwards Marquis of Lansdowne), his admiration of Smith's _Theory_, 144; his conversion by Smith to free trade, 153; Smith's opinion of his negotiations with Pitt for Bute, 162; letter of Smith to, 235; Smith's political distrust of, 379 Sheridan, Thomas, elocution class at Edinburgh, 119 Simson, Professor Robert, influence on Smith, 10; Smith's opinion of, 11; his club, 96; his Greek and Latin odes, 98 Sinclair, Sir John, his treatise on the Sabbath, 342; conversation with Smith on Burgoyne's surrender, 343; letter of Smith to, on _Mémoires_, 343; letter of Smith on the Armed Neutrality, 382; Windham's romantic attachment, 394; Smith's opinion of Sinclair, 418 Skene, Captain David, 243 Smellie, William, printer, on Smith's books, 329 Smith, Adam, W.S., Kirkcaldy, 1 Smith, Adam, Collector of Customs, Alloa, 2 Snell exhibitions at Oxford, 16 Society, British Fisheries, Smith on, 408 Society, Glasgow Literary, 94 Smith's paper on Home's Essays on Commerce, 95 Society, Select, 107; Smith's opening speech, 108; its economic discussions, 110; its work for improvement of Scots arts and manufactures, 112; its dissolution, 118 Stage-doctors, 276 Stanhope, Earl, friendship with Smith at Geneva, 191, 193; consults Smith about Chesterfield tutorship, 266 Steuart, Sir James, economist, acts in school theatricals, 5; on free trade among Glasgow merchants, 61 Stewart, Professor Dugald, on Smith's mathematical tastes, 10; on Smith's judgment in art, 74; on Smith's travelling tutorship, 217; on Smith's being styled "Mr.," 234; on Smith's conversation, 269, 270; on alleged revolutionary character of free trade doctrine, 292 Stewart, Professor Matthew, college friend of Smith, 10; Smith's taste for mathematics, 10; Smith's opinion of, 11 Strahan, William, printer, letter from Smith to, about new edition of the _Theory_, 149; friend of Franklin, 151; Hume's literary executor, 298; Smith's letter to, on Hume's illness and death, 304; letter on Hume's _Dialogues_ from Smith to, 305; letter from Smith to, 308; proposes publication of selection of Hume's letters, 309; Smith's reply, 310; correspondence of Smith with, on Commissionership of Customs, 321 Stuart, Andrew, W.S. and M.P., candidate for Indian supervisorship, 255; withdrawal from contest for Lanarkshire, 391; letter of Smith, 392 Sugar, Smith's fondness for, 338 Sunday schools, Smith on, 407 Sunday suppers, Smith's, 327 Swediaur, Dr., on the Oyster Club, 334; on Smith, 334 Swift, Jonathan, Smith on, 367 Tassie, J., his medallions of Smith, 438 Taxation of poor, 220, 344; in France, 230 Theatre, erection in Glasgow, 79; opposition of Senatus and Smith, 79; in France frequented by Smith, 213 _Theory of Moral Sentiments_, 141; of its reception in London, 142; last revision, 425 Thompson, Dr. W., historian, Smith on, 17 Tooke, Horne, visits Smith at Montpellier, 183 Toulouse, Smith at, 175; dulness of Smith at, 179; its Parliament, 185; the Calas case, 186 Townshend, Charles, his admiration for Smith's _Theory_, 144; his proposal of tutorship for Smith, 144; his visit to Glasgow, 147; letter of Smith to, 148; letter to Smith, 164; letter of Smith from Compiègne to, 223 Trained Bands of Edinburgh, Smith made Honorary Captain, 374 Tronchin, Dr., sends son to be Smith's pupil, 59 Turgot, M., friendship with Smith in Paris, 202; their obligations to one another, 203; their alleged correspondence, 204; Smith's opinion of, 205; procures copy of the _Mémoires_ for Smith, 344 Tutorships, travelling, Smith's views of, 166 Union, Smith on the Scotch, 150; Smith on Irish, 355 Urquhart, Mr., of Cromartie, 183 _Usury_, Smith on Bentham's _Defence_, 423 Utopia, Smith on, 282 Vice-rector of Glasgow University, office held by Smith, 68 Virgil's _Eclogues_, Smith on, 369 Voltaire, conversation with Smith in Geneva, 189; Smith's admiration for, 190; Smith's comparison of Rousseau and, 372 Walpole, Horace, Smith's acquaintance with, in Paris, 194; reports remark of Smith, 263 Ward, Rev. William, Smith on his Rational Grammar, 159 Watt, James, made mathematical instrument maker to Glasgow University, 71; makes ivory bust of Smith with his sculpture machine, 74; on Professor Simson's Club, 98 _Wealth of Nations_, various dates of composition toolmarked in the text, 256; publication, 284; reception, 285; Hume's letter on, 286; Gibbon on, 287; quoted in Parliament, 290; editions, 293; early influence on public affairs, 294; Danish translation, 356; French translations, 359; German, 359; Spanish, 360; letter of Smith to Cadell about third edition, 362 Webster, Dr. A., lists of examinable persons, 399, 400 Wedderburn, Alexander (Earl of Rosslyn), attends Smith's lectures, 32; connection with Foulis's Academy of Design, 75; editor of _Edinburgh Review_, 121 Whiggism, Smith's, 162, 379, 389, 410 Whist, Smith at, 97 Wilberforce, Bishop, account of Smith's altercation with Johnson, 156 Wilberforce, William, opinion of Smith, 447; promoter of British Fisheries Society, 408 Wilkes, John, Smith on, 163 Wilkie, the poet, on Smith, 102 Will, Smith's, 436 Wilson, Professor A., his type-foundry, 71; Smith's interest in the foundry, 77; new foundry in Glasgow College grounds, 78 Windham, William, on Smith's house in Edinburgh, 326; romantic incident, 394; on Smith's family circle, 395 Windischgraetz, Count J.N. de, his proposed reform of legal terminology, 376 Wordsworth, William, on Smith as a critic, 34 THE END 
33310	----	file was produced from images generously made available by the Posner Memorial Collection (http://posner.library.cmu.edu/Posner/)) +---------------------------------------------------+ | Transcriber's note: | | Corrections in the ERRATA section have been made | | and duplicate Chapter numbers are marked by | | asterisks as shown in the original text. | +---------------------------------------------------+ ON THE PRINCIPLES OF POLITICAL ECONOMY, AND TAXATION. BY DAVID RICARDO, Esq. LONDON: JOHN MURRAY, ALBEMARLE-STREET 1817. J. M^{c}CREERY. Printer, Black Horse Court, London. PREFACE. The produce of the earth--all that is derived from its surface by the united application of labour, machinery, and capital, is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated. But in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes, under the names of rent, profit, and wages, will be essentially different; depending mainly on the actual fertility of the soil, on the accumulation of capital and population, and on the skill, ingenuity, and instruments employed in agriculture. To determine the laws which regulate this distribution, is the principal problem in Political Economy: much as the science has been improved by the writings of Turgot, Stuart, Smith, Say, Sismondi, and others, they afford very little satisfactory information respecting the natural course of rent, profit, and wages. In 1815, Mr. Malthus in his "Inquiry into the Nature and Progress of Rent," and a Fellow of University College, Oxford, in his "Essay on the Application of Capital to Land," presented to the world, nearly at the same moment, the true doctrine of rent; without a knowledge of which it is impossible to understand the effect of the progress of wealth on profits and wages, or to trace satisfactorily the influence of taxation on different classes of the community, particularly when the commodities taxed are the productions immediately derived from the surface of the earth. Adam Smith, and the other able writers to whom I have alluded, not having viewed correctly the principles of rent, have, it appears to me, overlooked many important truths, which can only be discovered after the subject of rent is thoroughly understood. To supply this deficiency, abilities are required of a far superior cast to any possessed by the writer of the following pages; yet after having given to this subject his best consideration--after the aid which he has derived from the works of the above-mentioned eminent writers--and after the valuable experience which a few late years, abounding in facts, have yielded to the present generation--it will not, he trusts, be deemed presumptuous in him to state his opinions on the laws of profits and wages, and on the operation of taxes. If the principles which he deems correct should be found to be so, it will be for others more able than himself to trace them to all their important consequences. The writer, in combating received opinions, has found it necessary to advert more particularly to those passages in the writings of Adam Smith from which he sees reason to differ; but he hopes it will not on that account be suspected that he does not, in common with all those who acknowledge the importance of the science of Political Economy, participate in the admiration which the profound work of this celebrated author so justly excites. The same remark may be applied to the excellent works of M. Say, who not only was the first, or among the first, of continental writers, who justly appreciated and applied the principles of Smith, and who has done more than all other continental writers taken together, to recommend the principles of that enlightened and beneficial system to the nations of Europe; but who has succeeded in placing the science in a more logical, and more instructive order; and has enriched it by several discussions, original, accurate, and profound.[1] The respect, however, which the author entertains for the writings of this gentleman, has not prevented him from commenting with that freedom which he thinks the interests of science require, on such passages of the "Economie Politique," as appeared at variance with his own ideas. CONTENTS. CHAP. Page I. _On Value_ 1 II. _On Rent_ 49 III. _On the Rent of Mines_ 77 IV. _On Natural and Market Price_ 82 V. _On Wages_ 90 V*. _On Profits_ 116 VI. _On Foreign Trade_ 146 VII. _On Taxes_ 186 VIII. _Taxes on Raw Produce_ 194 VIII*. _Taxes on Rent_ 221 IX. _Tithes_ 225 X. _Land-Tax_ 232 XI. _Taxes on Gold_ 247 XII. _Taxes on Houses_ 262 XIII. _Taxes on Profits_ 269 XIV. _Taxes on Wages_ 285 XV. _Taxes on other Commodities than Raw Produce_ 330 XVI. _Poor Rates_ 354 XVII. _On Sudden Changes in the Channels of Trade_ 363 XVIII. _Value and Riches, their Distinctive Properties_ 377 XIX. _Effects of Accumulation on Profits and Interest_ 398 XX. _Bounties on Exportation, and Prohibitions of Importation_ 417 XXI. _On Bounties on Production_ 449 XXII. _Doctrine of Adam Smith concerning the Rent of Land_ 458 XXIII. _On Colonial Trade_ 476 XXIV. _On Gross and Net Revenue_ 491 XXV. _On Currency and Banks_ 499 XXVI. _On the comparative Value of Gold, Corn, and Labour, in Rich and in Poor Countries_ 527 XXVII. _Taxes paid by the Producer_ 538 XXVIII. _On the Influence of Demand and Supply on Prices_ 542 XXIX. _Mr. Malthus's Opinions on Rent_ 549 CHAPTER I. ON VALUE. It has been observed by Adam Smith, that "the word Value has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called _value in use_; the other, _value in exchange_. The things," he continues, "which have the greatest value in use, have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange, have little or no value in use." Water and air are abundantly useful; they are indeed indispensable to existence, yet, under ordinary circumstances, nothing can be obtained in exchange for them. Gold, on the contrary, though of little use compared with air or water, will exchange for a great quantity of other goods. Utility then is not the measure of exchangeable value, although it is absolutely essential to it. If a commodity were in no way useful,--in other words, if it could in no way contribute to our gratification,--it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it. Possessing utility, commodities derive their exchangeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them. There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labour originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them. These commodities, however, form a very small part of the mass of commodities daily exchanged in the market. By far the greatest part of those goods which are the objects of desire, are procured by labour; and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labour necessary to obtain them. In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint. In the early stages of society, the exchangeable value of these commodities, or the rule which determines how much of one shall be given in exchange for another, depends solely on the comparative quantity of labour expended on each. "The real price of every thing," says Adam Smith, "what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people." "Labour was the first price--the original purchase-money that was paid for all things." Again, "in that early and rude state of society, which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually cost twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth two deer. It is natural that what is usually the produce of two days', or two hours' labour, should be worth double of what is usually the produce of one day's, or one hour's labour."[2] That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy; for from no source do so many errors, and so much difference of opinion in that science proceed, as from the vague ideas, which are attached to the word value. If the quantity of labour realized in commodities, regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is exercised, as every diminution must lower it. Adam Smith, who so accurately defined the original source of exchangeable value, and who was bound in consistency to maintain, that all things became more or less valuable in proportion as more or less labour was bestowed on their production, has himself erected another standard measure of value, and speaks of things being more or less valuable, in proportion as they will exchange for more or less of this standard measure. Sometimes he speaks of corn, at other times of labour, as a standard measure; not the quantity of labour bestowed on the production of any object, but the quantity which it can command in the market: as if these were two equivalent expressions, and as if because a man's labour had become doubly efficient, and he could therefore produce twice the quantity of a commodity, he would necessarily receive twice the former quantity in exchange for it. If this indeed were true, if the reward of the labourer were always in proportion to what he produced, the quantity of labour bestowed on a commodity, and the quantity of labour which that commodity would purchase, would be equal, and either might accurately measure the variations of other things: but they are not equal; the first is under many circumstances an invariable standard, indicating correctly the variations of other things; the latter is subject to as many fluctuations as the commodities compared with it. Adam Smith, after most ably shewing the insufficiency of a variable medium, such as gold and silver, for the purpose of determining the varying value of other things, has himself, by fixing on corn or labour, chosen a medium no less variable. Gold and silver are no doubt subject to fluctuations, from the discovery of new and more abundant mines; but such discoveries are rare, and their effects, though powerful, are limited to periods of comparatively short duration. They are subject also to fluctuation, from improvements in the skill and machinery with which the mines may be worked; as in consequence of such improvements, a greater quantity may be obtained with the same labour. They are further subject to fluctuation from the decreasing produce of the mines, after they have yielded a supply to the world, for a succession of ages. But from which of these sources of fluctuation is corn exempted? Does not that also vary, on one hand, from improvements in agriculture, from improved machinery and implements used in husbandry, as well as from the discovery of new tracts of fertile land, which in other countries may be taken into cultivation, and which will affect the value of corn in every market where importation is free? Is it not on the other hand subject to be enhanced in value from prohibitions of importation, from increasing population and wealth, and the greater difficulty of obtaining the increased supplies, on account of the additional quantity of labour which the cultivation of inferior lands requires? Is not the value of labour equally variable; being not only affected, as all other things are, by the proportion between the supply and demand, which uniformly varies with every change in the condition of the community, but also by the varying price of food and other necessaries, on which the wages of labour are expended? In the same country double the quantity of labour may be required to produce a given quantity of food and necessaries at one time, that may be necessary at another, and a distant time; yet the labourer's reward may possibly be very little diminished. If the labourer's wages at the former period, were a certain quantity of food and necessaries, he probably could not have subsisted if that quantity had been reduced. Food and necessaries in this case will have risen 100 per cent. if estimated by the _quantity_ of labour necessary to their production, while they will scarcely have increased in value, if measured by the quantity of labour for which they will _exchange_. The same remark may be made respecting two or more countries. In America and Poland, a year's labour will produce much more corn than in England. Now, supposing all other necessaries to be equally cheap in those three countries, would it not be a great mistake to conclude, that the quantity of corn awarded to the labourer, would in each country be in proportion to the facility of production? If the shoes and clothing of the labourer, could, by improvements in machinery, be produced by one fourth of the labour now necessary to their production, they would probably fall 75 per cent.; but so far is it from being true, that the labourer would thereby be enabled permanently to consume four coats, or four pair of shoes, instead of one, that his wages would in no long time be adjusted by the effects of competition, and the stimulus to population, to the new value of the necessaries on which they were expended. If these improvements extended to all the objects of the labourer's consumption, we should find him probably at the end of a very few years, in possession of only a small, if any, addition to his enjoyments, although the exchangeable value of those commodities, compared with any other commodity, in the manufacture of which no such improvement were made, had sustained a very considerable reduction; and though they were the produce of a very considerably diminished quantity of labour. It cannot then be correct, to say with Adam Smith, "that as labour may sometimes _purchase_ a greater, and sometimes a smaller quantity of goods, it is their value which varies, not that of the labour which purchases them;" and therefore, "that labour _alone never varying in its own value_, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared;"--but it is correct to say, as Adam Smith had previously said, "that the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another;" or in other words, that it is the comparative quantity of commodities which labour will produce, that determines their present or past relative value, and not the comparative quantities of commodities, which are given to the labourer in exchange for his labour. If any one commodity could be found, which now and at all times required precisely the same quantity of labour to produce it, that commodity would be of an unvarying value, and would be eminently useful as a standard by which the variations of other things might be measured. Of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value. It is, however, of considerable use towards attaining a correct theory, to ascertain what the essential qualities of a standard are, that we may know the causes of the variation in the relative value of commodities, and that we may be enabled to calculate the degree in which they are likely to operate. * * * * * In speaking however of labour, as being the foundation of all value, and the relative quantity of labour as determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour's, or a day's labour, in one employment, with the same duration of labour in another. The estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer, and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day's labour of a working jeweller be more valuable than a day's labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value.[3] In comparing therefore the value of the same commodity, at different periods of time, the consideration of the comparative skill and intensity of labour, required for that particular commodity, needs scarcely to be attended to, as it operates equally at both periods. One description of labour at one time is compared with the same description of labour at another; if a tenth, a fifth, or a fourth, has been added or taken away, an effect proportioned to the cause will be produced on the relative value of the commodity. If a piece of cloth be now of the value of two pieces of linen, and if, in ten years hence, the ordinary value of a piece of cloth should be four pieces of linen, we may safely conclude, that either more labour is required to make the cloth, or less to make the linen, or that both causes have operated. As the inquiry to which I wish to draw the reader's attention, relates to the effect of the variations in the relative value of commodities, and not in their absolute value, it will be of little importance to examine into the comparative degree of estimation in which the different kinds of human labour are held. We may fairly conclude, that whatever inequality there might originally have been in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another; or at least, that the variation is very inconsiderable from year to year, and therefore, can have little effect for short periods on the relative value of commodities. "The proportion between the different rates both of wages and profit in the different employments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must in the end affect them equally in all different employments. The proportion between them therefore must remain the same, and cannot well be altered, at least for any considerable time, by any such revolutions."[4] It will be seen by the extract which I have made in page 4, from the "Wealth of Nations," that though Adam Smith fully recognized the principle, that the proportion between the quantities of labour necessary for acquiring different objects, is the only circumstance which can afford any rule for our exchanging them for one another, yet he limits its application to "that early and rude state of society, which precedes both the accumulation of stock and the appropriation of land;" as if, when profits and rent were to be paid, they would have some influence on the relative value of commodities, independent of the mere quantity of labour that was necessary to their production. Adam Smith, however, has no where analyzed the effects of the accumulation of capital, and the appropriation of land, on relative value. It is of importance, therefore, to determine how far the effects which are avowedly produced on the exchangeable value of commodities, by the comparative quantity of labour bestowed on their production, are modified or altered by the accumulation of capital and the payment of rent. First, as to the accumulation of capital. Even in that early state to which Adam Smith refers, some capital, though possibly made and accumulated by the hunter himself would be necessary to enable him to kill his game. Without some weapon, neither the beaver nor the deer could be destroyed, and therefore the value of these animals would be regulated, not solely by the time and labour necessary to their destruction, but also by the time and labour necessary for providing the hunter's capital, the weapon, by the aid of which their destruction was effected. Suppose the weapon necessary to kill the beaver, were constructed with much more labour than that necessary to kill the deer, on account of the greater difficulty of approaching near to the former animal, and the consequent necessity of its being more true to its mark; one beaver would naturally be of more value than two deer, and precisely for this reason, that more labour would on the whole be necessary to its destruction. All the implements necessary to kill the beaver and deer might belong to one class of men, and the labour employed in their destruction might be furnished by another class; still, their comparative prices would be in proportion to the actual labour bestowed, both on the formation of the capital, and on the destruction of the animals. Under different circumstances of plenty or scarcity of capital, as compared with labour, under different circumstances of plenty or scarcity of the food and necessaries essential to the support of men, those who furnished an equal value of capital for either one employment or for the other, might have a half, a fourth, or an eighth of the produce obtained, the remainder being paid as wages to those who furnished the labour; yet this division could not affect the relative value of these commodities, since whether the profits of capital were greater or less, whether they were 50, 20, or 10 per cent., or whether the wages of labour were high or low, they would operate equally on both employments. If we suppose the occupations of the society extended, that some provide canoes and tackle necessary for fishing, others the seed and rude machinery first used in agriculture, still the same principle would hold true, that the exchangeable value of the commodities produced would be in proportion to the labour bestowed on their production; not on their immediate production only, but on all those implements or machines required to give effect to the particular labour to which they were applied. If we look to a state of society in which greater improvements have been made, and in which arts and commerce flourish, we shall still find that commodities vary in value conformably with this principle: in estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them, and bring them to market. First, there is the labour necessary to cultivate the land on which the raw cotton is grown; secondly, the labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the goods; thirdly, the labour of the spinner and weaver; fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made; fifthly, the labour of the retail dealer, and of many others, whom it is unnecessary further to particularize. The aggregate sum of these various kinds of labour, determines the quantity of other things for which these stockings will exchange, while the same consideration of the various quantities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings. To convince ourselves that this is the real foundation of exchangeable value, let us suppose any improvement to be made in the means of abridging labour in any one of the various processes through which the raw cotton must pass, before the manufactured stockings come to the market, to be exchanged for other things; and observe the effects which will follow. If fewer men were required to cultivate the raw cotton, or if fewer sailors were employed in navigating, or shipwrights in constructing the ship, in which it was conveyed to us; if fewer hands were employed in raising the buildings and machinery, or if these when raised, were rendered more efficient, the stockings would inevitably fall in value, and consequently command less of other things. They would fall, because a less quantity of labour was necessary to their production, and would therefore exchange for a smaller quantity of those things in which no such abridgment of labour had been made. Economy in the use of labour never fails to reduce the relative value of a commodity, whether the saving be in the labour necessary to the manufacture of the commodity itself, or in that necessary to the formation of the capital, by the aid of which it is produced. In either case the price of stockings would fall, whether there were fewer men employed as bleachers, spinners, and weavers, persons immediately necessary to their manufacture; or as sailors, carriers, engineers, and smiths, persons more indirectly concerned. In the one case, the whole saving of labour would fall on the stockings, because that portion of labour was wholly confined to the stockings; in the other, a portion only would fall on the stockings, the remainder being applied to all those other commodities, to the production of which the buildings, machinery, and carriage, were subservient. In every society the capital which is employed in production, is necessarily of limited durability. The food and clothing consumed by the labourer, the buildings in which he works, the implements with which his labour is assisted, are all of a perishable nature. There is however a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the labourer, and the clothing of the labourer longer than the food which he consumes. According as capital is rapidly perishable, and requires to be frequently reproduced, or is of slow consumption, it is classed under the heads of circulating, or of fixed capital. A brewer, whose buildings and machinery are valuable and durable, is said to employ a large portion of fixed capital: on the contrary, a shoemaker, whose capital is chiefly employed in the payment of wages, which are expended on food and clothing, commodities more perishable than buildings and machinery, is said to employ a large proportion of his capital as circulating capital. Two trades then may employ the same amount of capital; but it may be very differently divided with respect to the portion which is fixed, and that which is circulating. Again two manufacturers may employ the same amount of fixed, and the same amount of circulating capital; but the durability of their fixed capitals may be very unequal. One may have steam engines of the value of 10,000_l._ the other, ships of the same value. Besides the alteration in the relative value of commodities, occasioned by more or less labour being required to produce them, they are also subject to fluctuations from a rise of wages, and consequent fall of profits, if the fixed capitals employed be either of unequal value, or of unequal duration. Suppose that in the early stages of society, the bows and arrows of the hunter were of equal value, and of equal durability, with the canoe and implements of the fisherman, both being the produce of the same quantity of labour. Under such circumstances the value of the deer, the produce of the hunter's day's labour, would be exactly equal to the value of the fish, the produce of the fisherman's day's labour. The comparative value of the fish and the game, would be entirely regulated by the quantity of labour realised in each; whatever might be the quantity of production, or however high or low general wages or profits might be. If for example the canoes and implements of the fisherman were of the value of 100_l._ and were calculated to last for ten years, and he employed ten men, whose annual labour cost 100_l._ and who in one day obtained by their labour twenty salmon: If the weapons employed by the hunter were also of 100_l._ value and calculated to last ten years, and if he also employed ten men, whose annual labour cost 100_l._ and who in one day procured him ten deer; then the natural price of a deer would be two salmon, whether the proportion of the whole produce bestowed on the men who obtained it, were large or small. The proportion which might be paid for wages, is of the utmost importance in the question of profits; for it must at once be seen, that profits would be high or low, exactly in proportion as wages were low or high; but it could not in the least affect the relative value of fish and game, as wages would be high or low at the same time in both occupations. If the hunter urged the plea of his paying a large proportion, or the value of a large proportion of his game for wages, as an inducement to the fisherman to give him more fish in exchange for his game, the latter would state that he was equally affected by the same cause; and therefore under all variations of wages and profits, under all the effects of accumulation of capital, as long as they continued by a day's labour to obtain respectively the same quantity of fish, and the same quantity of game, the natural rate of exchange would be, one deer for two salmon. If with the same quantity of labour a less quantity of fish, or a greater quantity of game were obtained, the value of fish would rise in comparison with that of game. If, on the contrary, with the same quantity of labour a less quantity of game, or a greater quantity of fish was obtained, game would rise in comparison with fish. If there were any other commodity which was invariable in its value, requiring at all times, and under all circumstances, precisely the same quantity of labour to obtain it, we should be able to ascertain, by comparing the value of fish and game with this commodity, how much of the variation was to be attributed to a cause which affected the value of fish, and how much to a cause which affected the value of game. Suppose money to be that commodity. If a salmon were worth 1_l._ and a deer 2_l._ one deer would be worth two salmon. But a deer might become of the value of three salmon, for more labour might be required to obtain the deer, or less to get the salmon, or both these causes might operate at the same time. If we had this invariable standard, we might easily ascertain in what degree either of these causes operated. If salmon continued to sell for 1_l._ whilst deer rose to 3_l._ we might conclude that more labour was required to obtain the deer. If deer continued at the same price of 2_l._ and salmon sold for 13_s._ 4_d._ we might then be sure that less labour was required to obtain the salmon; and if deer rose to 2_l._ 10_s._ and salmon fell to 16_s._ 8_d._ we should be convinced that both causes had operated in producing the alteration of the relative value of these commodities. No alteration in the wages of labour could produce any alteration in the relative value of these commodities; for if profits were 10 per cent., then to replace the 100_l._ circulating capital with 10 per cent. profit, there must be a return of 110_l._: to replace the equal portion of fixed capital, when profits are at the rate of 10 per cent. there should be annually received 16.27_l._; for, the present value of an annuity of 16.27_l._ for ten years, when money is at 10 per cent., is 100_l._; consequently all the game of the hunter should annually sell for 126.27_l._ But the capital of the fisherman being the same in quantity, and divided in the same proportion into fixed and circulating capital, and being also of the same durability, he, to obtain the same profits, must sell his goods for the same value. If wages rose 10 per cent. and consequently 10 per cent. more circulating capital were required in each trade, it would equally affect both employments. In both, 210_l._ instead of 200_l._ would be required in order to produce the former quantity of commodities; and these would sell precisely for the same money, namely 126.27_l._: they would therefore be at the same relative value, and profits would be equally reduced in both trades. The prices of the commodities would not rise, because the money in which they are valued is by the supposition of an invariable value, always requiring the same quantity of labour to produce it. If the gold mine from which money was obtained were in the same country, in that case, after the rise of wages, 210_l._ might be necessary to be employed, as capital, to obtain the same quantity of metal that 200_l._ obtained before: for the same reason that the hunter and fisherman required 10_l._ in addition to their capitals, the miner would require an equal addition to his. No greater quantity of labour would be required in any of these occupations, but it would be paid for at a higher price, and the same reasons which should make the hunter and fisherman endeavour to raise the value of their game and fish, would cause the owner of the mine to raise the value of his gold. This inducement acting with the same force on all these three occupations, and the relative situation of those engaged in them being the same before and after the rise of wages, the relative value of game, fish, and gold, would continue unaltered. Wages might rise twenty per cent., and profits consequently fall in a greater or less proportion, without occasioning the least alteration in the relative value of these commodities. Now suppose, that with the same labour and fixed capital, more fish could be produced, but no more gold or game, the relative value of fish would fall in comparison with gold or game. If, instead of twenty salmon, twenty-five were the produce of one day's labour, the price of a salmon would be sixteen shillings instead of a pound, and two salmon and a half, instead of two salmon, would be given in exchange for one deer, but the price of deer would continue at 2_l._ as before. In the same manner, if fewer fish could be obtained with the same capital and labour, fish would rise in comparative value. Fish then would rise or fall in exchangeable value, only because more or less labour was required to obtain a given quantity; and it never could rise or fall beyond the proportion of the increased or diminished quantity of labour required. If we had then an invariable standard, by which we could measure the variation in other commodities, we should find that the utmost limit to which they could permanently rise, was proportioned to the additional quantity of labour required for their production; and that unless more labour were required for their production, they could not rise in any degree whatever. A rise of wages would not raise them in money value, nor relatively to any other commodities, the production of which required no additional quantity of labour, which employed the same proportion of fixed and circulating capital, and fixed capital of the same durability. If more or less labour were required in the production of the other commodity, we have already stated that this will immediately occasion an alteration in its relative value, but such alteration is owing to the altered quantity of requisite labour, and not to the rise of wages. If the fixed and circulating capitals were in different proportions, or if the fixed capital were of different durability, then the relative value of the commodities produced, would be altered in consequence of a rise of wages. First, when the fixed and circulating capitals were in different proportions, suppose that instead of 100_l._ fixed capital and 100_l._ circulating capital, the hunter should employ 150_l._ fixed capital and 50_l._ circulating capital, and that the fisherman should on the contrary employ only 50_l._ fixed capital and 150_l._ circulating capital. If profits be 10 per cent., the hunter must sell his goods for 79_l._ 8_s._ For, To replace his circulating capital of 50_l._ with a profit of 10 per cent. would require a value of 55_l._ To replace his fixed capital with 10 per cent. profit, the present value of an annuity for ten years of 24.4_l._ at 10 per cent. being 150_l._ 24.4_l._ ------ 79.4_l._ If profits be 10 per cent., the fisherman must sell his goods for 173_l._ 2_s._ 7_d._ To replace his circulating capital of 150_l._ with 10 per cent. profit 165_l._ To replace his fixed capital with 10 per cent. profit, one-third of the hunter's 8.13 ------ 173.13_l._ Now if wages rise, although neither of these commodities should require more labour for their production, yet their relative value will be altered. Suppose wages to rise 6 per cent., the hunter would not require more than an increase of 3_l._ to his capital, to employ the same number of men, and obtain the same quantity of game; the fisherman would require three times that sum, or 9_l._ The profits of stock would fall to 4 per cent., the hunter would be obliged to sell his game for 73_l._ 12_s._ 2_d._ To replace his circulating capital of 53_l._ with a profit of 4 per cent. 55.12_l._ To replace fixed capital, annually wasted, the present value of an annuity of 18.49_l._ for ten years, when money is at 4 per cent., being 150_l._ 18.49 ----- £73.61 The fisherman would sell his fish for 171_l._ 11_s._ 5_d._ viz. To replace his circulating capital of 159_l._ with a profit of 4 per cent. £165.360 To replace fixed capital annually wasted, the present value of an annuity of 6.163_l._, for ten years at 4 per cent., being 50_l._ 6.163 -------- £171.523 Game was to fish before as 100 to 218. It would now be as 100 to 233. Thus we see, that with every rise of wages, in proportion as the capital employed in any occupation consists of circulating capital, its produce will be of greater relative value than the goods produced in another occupation, where a less proportion of circulating, and a greater proportion of fixed capital are employed. Secondly, suppose the proportions of fixed capital to be the same; but of different degrees of durability. In proportion as fixed capital is less durable, it approaches to the nature of circulating capital. It will be consumed in a shorter time, and its value reproduced in order to preserve the capital of the manufacturer. We have just seen, that in proportion as circulating capital preponderates in a manufacture, when wages rise, the value of commodities produced in that manufacture, is relatively higher than that of commodities produced in manufactures where fixed capital preponderates. In proportion to the less durability of fixed capital, and its approach to the nature of circulating capital, the same effect will be produced by the same cause. Suppose that an engine is made, which will last for a hundred years, and that its value is 20,000_l._. Suppose too, that this machine, without any labour whatever, could produce a certain quantity of commodities annually, and that profits were 10 per cent.: the whole value of the goods produced would be annually 2,000_l._ 2_s._ 11_d._; for the profit of 20,000_l._ at 10 per cent. per annum, is £2,000 And an annuity of 2_s._ 11_d._ for 100 years, at 10 per cent. will, at the end of that period, replace a capital of 20,000_l._ 2 11 ---------- Consequently the goods must sell for £2000 2 11 ---------- If the same amount of capital, viz. 20,000_l._, be employed in supporting productive labour, and be annually consumed and reproduced, as it is when employed in paying wages, then to give an equal profit of 10 per cent. on 20,000_l._ the commodities produced must sell for 22,000_l._ Now suppose labour so to rise, that instead of 20,000_l._ being sufficient to pay the wages of those employed in producing the latter commodities, 20,952_l._ is required; then profits will fall to 5 per cent.: for as these commodities would sell for no more than before, viz. £22,000 and to produce them £20,952 would be requisite, there would remain ------- no more than £1,048 on a capital of 20,952_l._ If labour so rose, that 21,153_l._ were required, profits would fall to 4 per cent. and if it rose, so that 21,359_l._ was employed, profits would fall to 3 per cent. But, as no wages would be paid by the owner of the machine, which would last 100 years, when profits fell to 5 per cent. the price of his goods must fall to 1007_l._ 13_s._ 8_d._ viz. 1000_l._ to pay his profits, and 7_l._ 13_s._ 8_d._ to accumulate for 100 years at 5 per cent. to replace his capital of 20,000_l._ When profits fell to 4 per cent. his goods must sell for 816_l._ 3_s._ 2_d._, and when at 3 per cent. for 632_l._ 16_s._ 7_d._ By a rise in the price of labour then, under 7 per cent., which has no effect on the prices of commodities wholly produced by labour, a fall of no less than 68 per cent. is effected on those commodities wholly produced by machinery. If the proprietor of the machine sold his goods for more than 632_l._ 16_s._ 7_d._, he would get more than 3 per cent., the general profit of stock; and as others could furnish themselves with machines at the same price of 20,000_l._ they would be so multiplied, that he would be inevitably obliged to sink the price of his goods, till they afforded only the usual and general profits of stock. In proportion as this machine were less durable, prices would be less affected by the fall of profit, and the rise of wages. If, for example, the machine would last only ten years, when profits were at 10 per cent. the goods should sell for £3254 when at 5 per cent. 2590 4 per cent. 2465 3 per cent. 2344 for such are the sums requisite to place his profits on a par with others, and to replace his capital at the end of ten years; or, which is the same thing, such are the annuities which 20,000_l._ would purchase for ten years at those rates. If the machine would last only three years, when profits were 10 per cent. the price of the goods would be £8042 at 5 per cent. 7344 4 per cent. 7206 3 per cent. 7070 If it would last only one year, when profits were 10 per cent. the goods would sell for £22,000 at 5 per cent. 21,000 4 per cent. 20,800 3 per cent. 20,600: therefore when profits fell from 10 to 3 per cent. the goods, which were produced with equal capitals, would fall 68 per cent. if the machine would last 100 years. 28 per cent. if the machine would last 10 years. 13 per cent. if it would last 3 years. And little more than 6 per cent. if it} would last only } 1 year. These results are of such importance to the science of political economy, yet accord so little with some of its received doctrines, which maintain that every rise in wages is necessarily transferred to the price of commodities, that it may not be superfluous to elucidate the subject still further. A manufacturer of hats employs a hundred men at an annual expense of 50_l._ each, who produce him commodities of the value of 8000_l._ A machine calculated to last precisely a year, and to do equally well the same work as the 100 men, is offered to him for 5000_l._, the sum, exactly, that he is expending on wages. It will be a matter of indifference to the manufacturer, whether he purchase the machine, or continue to employ the men. Now if the wages of labour rise 10 per cent. and an additional capital of 500_l._ be consequently required to enable him to employ the same labour, whilst his commodities continue to sell for 8000_l._, he will no longer hesitate, but will at once purchase the machine, and will do the same annually, while wages continue above the original 5000_l._ But will he be able now to purchase the machine at the former price? will not its value be increased, in consequence of the rise of labour? It would be increased, if there were no stock employed in its construction, and no profits to be paid to the maker of it. If, for example, the machine were produced by 100 men working one year upon it with wages of 50_l._ each, and its price were 5000_l._, should those wages rise to 55_l._ its price would be 5500_l._: but this cannot be the case; less than 100 men are employed, or it could not be sold for 5000_l._; for out of the 5000_l._ must be paid the profits of the stock which employed the men. Suppose then that only eighty-five men were employed at an expense of 4250_l._ per annum, and that the 750_l._, which the sale of the machine would produce over and above the wages advanced to the men, constituted the profits of the engineer's stock. When wages rose 10 per cent., he would be obliged to employ an additional capital of 425_l._, and would therefore employ 4675_l._, instead of 4250_l._, on which capital he would only get a profit of 325_l._ if he continued to sell his machine for 5000_l._; but this is precisely the case of all manufacturers and capitalists; the rise of wages affects them all. If therefore the maker of the machine should raise the price of his machine in consequence of a rise of wages, an unusual quantity of capital would be employed in the construction of such machines, till their price afforded only the usual profits. The manufacturer of hats, by the employment of the machine, if he sells his hats for 8000_l._, is precisely in the same situation as before; he employs no more capital, and obtains the same profits. The competition of trade would not long allow this; for as capital would flow to the most profitable employment, he would be obliged to lower the price of hats, till his profits had sunk to the general level. Thus then is the public benefited by machinery: these mute agents are always the produce of much less labour than that which they displace, even when they are of the same money value. Through their influence, an increase in the price of provisions which raises wages, will affect fewer persons: it will reach, as in the above instance, eighty-five men instead of a hundred; and the saving which is the consequence, shews itself in the reduced price of the commodity manufactured. Neither machines nor any other commodities are raised in price, but all commodities which are made by machines fall, and fall in proportion to their durability. It appears, then, that in proportion to the quantity and the durability of the fixed capital employed in any kind of production, the relative prices of those commodities on which such capital is employed, will vary inversely as wages; they will fall as wages rise. It appears too that no commodities whatever are raised in absolute price, merely because wages rise; that they never rise unless additional labour be bestowed on them; but that all commodities in the production of which fixed capital enters, not only do not rise with a rise of wages, but absolutely fall; fall too as much as 68 per cent., with a rise of seven per cent. in wages, if fixed capital be exclusively employed, and be of the duration of 100 years. The above statement, which asserts the compatibility of a rise of wages, with a fall of prices, has, I know, the disadvantage of novelty, and must trust to its own merits for advocates; whilst it has for its opponents, writers of distinguished and deserved reputation. It should however be carefully remembered, that in this whole argument I am supposing money to be of an invariable value; in other words, to be always the produce of the same quantity of unassisted labour. Money, however, is a variable commodity; and the rise of wages as well as of commodities, is frequently occasioned by a fall in the value of money. A rise of wages from this cause will indeed be invariably accompanied by a rise in the price of commodities: but in such cases, it will be found that labour and all commodities have not varied in regard to each other, and that the variation has been confined to money. Money, from its being a commodity obtained from a foreign country, from its being the general medium of exchange between all civilized countries, and from its being also distributed among those countries in proportions which are ever changing with every improvement in commerce and machinery, and with every increasing difficulty of obtaining food and necessaries for an increasing population, is subject to incessant variations. In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the commodity itself, and those which are occasioned by a variation in the medium in which value is estimated, or price expressed. A rise in wages, from an alteration in the value of money, produces a general effect on price, and for that reason it produces no real effect whatever on profits. On the contrary, a rise of wages, from the circumstance of the labourer being more liberally rewarded, or from a difficulty of procuring the necessaries on which wages are expended, does not produce the effect of raising price, but has a great effect in lowering profits. In the one case, no greater proportion of the annual labour of the country is devoted to the support of the labourers, in the other case, a larger portion is so devoted. It is according to the division of the whole produce of the land and labour of the country, between the three classes of landlords, capitalists, and labourers, that we are to judge of rent, profit, and wages, and not according to the value at which that produce may be estimated in a medium which is confessedly variable. It is not by the absolute quantity of produce obtained by either class, that we can correctly judge of the rate of profit, rent, and wages, but by the quantity of labour required to obtain that produce. By improvements in machinery and agriculture, the whole produce may be doubled; but if wages, rent, and profit, be also doubled, these three will bear the same proportions to one another, and neither could be said to have relatively varied. But if wages partook not of the whole of this increase; if they, instead of being doubled, were only increased one half, if rent, instead of being doubled, were only increased three-fourths, and the remaining increase went to profit, it would, I apprehend, be correct for me to say, that rent and wages had fallen, while profits had risen; for if we had an invariable standard, by which to measure the value of this produce, we should find that a less value had fallen to the class of labourers and landlords, and a greater to the class of capitalists, than had been given before. We might find for example, that though the absolute quantity of commodities had been doubled, they were the produce of precisely the former quantity of labour. Of every hundred hats, coats, and quarters of corn produced, if the labourers had 25 The landlords 25 And the capitalists 50 --- 100 And if, after these commodities were doubled in quantity, of every 100 The labourers had only 22 The landlords 22 And the capitalists 56 --- 100 In that case I should say, that wages and rent had fallen, and profits risen; though in consequence of the abundance of commodities, the quantity paid to the labourer and landlord would have increased in the proportion of 25 to 44. Wages are to be estimated by their real value, viz. by the quantity of labour and capital employed in producing them, and not by their nominal value either in coats, hats, money, or corn. Under the circumstances I have just supposed, commodities would have fallen to half their former value; and, if money had not varied, to half their former price also. If then in this medium, which had not varied in value, the wages of the labourer should be found to have fallen, it will not the less be a real fall, because they might furnish him with a greater quantity of cheap commodities, than his former wages. The variation in the value of money, however great, makes no difference in the _rate_ of profits; for suppose the goods of the manufacturer to rise from 1000_l._ to 2000_l._, or 100 per cent., if his capital, on which the variations of money have as much effect as on the value of produce, if his machinery, buildings, and stock in trade rise more than 100 per cent., his rate of profits has fallen, and he has a proportionably less quantity of the produce of the labour of the country at his command. If, with capital of a given value, he double the quantity of produce, its value falls one half, and then it will bear the same proportion to the capital which produced it, as it did before. If at the same time that he doubles the quantity of produce by the employment of the same capital, the value of money is by any accident lowered one half, the produce will sell for twice the money value that it did before; but the capital employed to produce it, will also be of twice its former money value; and therefore in this case too, the value of the produce will bear the same proportion to the value of the capital as it did before; and although the produce be doubled, rent, wages, and profits will only vary as the proportions vary, in which this double produce may be divided among the three classes that share it. It appears then that the accumulation of capital, by occasioning different proportions of fixed and circulating capital to be employed in different trades, and by giving different degrees of durability to such fixed capital, introduces a considerable modification to the rule, which is of universal application in the early states of society. Commodities, though they continue to rise and fall, in proportion as more or less labour is necessary to their production, are also affected in their relative value by a rise or fall of profits, since equal profits may be derived from goods which sell for 2,000_l._ and from those which sell for 10,000_l._; and consequently the variations of those profits, independently of any increased or diminished quantity of labour required for the goods in question, must affect their prices in different proportions. It appears too, that commodities may be lowered in value in consequence of a real rise of wages, but they never can be raised from that cause. On the other hand, they may rise from a fall of wages, as they then lose the peculiar advantages of production, which high wages afforded them. CHAPTER II. ON RENT. It remains however to be considered, whether the appropriation of land, and the consequent creation of rent, will occasion any variation in the relative value of commodities, independently of the quantity of labour necessary to production. In order to understand this part of the subject, we must inquire into the nature of rent, and the laws by which its rise or fall is regulated. Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often however confounded with the interest and profit of capital, and in popular language the term is applied to whatever is annually paid by a farmer to his landlord. If, of two adjoining farms of the same extent, and of the same natural fertility, one had all the conveniences of farming buildings, were, besides, properly drained and manured, and advantageously divided by hedges, fences, and walls, while the other had none of these advantages, more remuneration would naturally be paid for the use of one, than for the use of the other; yet in both cases this remuneration would be called rent. But it is evident, that a portion only of the money annually to be paid for the improved farm, would be given for the original and indestructible powers of the soil; the other portion would be paid for the use of the capital which had been employed in ameliorating the quality of the land, and in erecting such buildings as were necessary to secure and preserve the produce. Adam Smith sometimes speaks of rent, in the strict sense to which I am desirous of confining it, but more often in the popular sense, in which the term is usually employed. He tells us, that the demand for timber, and its consequent high price, in the more southern countries of Europe, caused a rent to be paid for forests in Norway, which could before afford no rent. Is it not however evident, that the person who paid, what he thus calls rent, paid it in consideration of the valuable commodity which was then standing on the land, and that he actually repaid himself with a profit, by the sale of the timber? If, indeed, after the timber was removed, any compensation were paid to the landlord for the use of the land, for the purpose of growing timber or any other produce, with a view to future demand, such compensation might justly be called rent, because it would be paid for the productive powers of the land; but in the case stated by Adam Smith, the compensation was paid for the liberty of removing and selling the timber, and not for the liberty of growing it. He speaks also of the rent of coal mines, and of stone quarries, to which the same observation applies--that the compensation given for the mine or quarry, is paid for the value of the coal or stone which can be removed from them, and has no connexion with the original and indestructible powers of the land. This is a distinction of great importance, in an inquiry concerning rent and profits; for it is found, that the laws which regulate the progress of rent, are widely different from those which regulate the progress of profits, and seldom operate in the same direction. In all improved countries, that which is annually paid to the landlord, partaking of both characters, rent and profit, is sometimes kept stationary by the effects of opposing causes, at other times advances or recedes, as one or other of these causes preponderates. In the future pages of this work, then, whenever I speak of the rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers. On the first settling of a country, in which there is an abundance of rich and fertile land, a very small proportion of which is required to be cultivated for the support of the actual population, or indeed can be cultivated with the capital which the population can command, there will be no rent; for no one would pay for the use of land, when there was an abundant quantity not yet appropriated, and therefore at the disposal of whosoever might choose to cultivate it. On the common principles of supply and demand, no rent could be paid for such land, for the reason stated, why nothing is given for the use of air and water, or for any other of the gifts of nature which exist in boundless quantity. With a given quantity of materials, and with the assistance of the pressure of the atmosphere, and the elasticity of steam, engines may perform work, and abridge human labour to a very great extent; but no charge is made for the use of these natural aids, because they are inexhaustible, and at every man's disposal. In the same manner the brewer, the distiller, the dyer, make incessant use of the air and water for the production of their commodities; but as the supply is boundless, it bears no price.[5] If all land had the same properties, if it were boundless in quantity, and uniform in quality, no charge could be made for its use, unless where it possessed peculiar advantages of situation. It is only then because land is of different qualities with respect to its productive powers, and because in the progress of population, land of an inferior quality, or less advantageously situated, is called into cultivation, that rent is ever paid for the use of it. When, in the progress of society, land of the second degree of fertility is taken into cultivation, rent immediately commences on that of the first quality, and the amount of that rent will depend on the difference in the quality of these two portions of land. When land of the third quality is taken into cultivation, rent immediately commences on the second, and it is regulated as before, by the difference in their productive powers. At the same time, the rent of the first quality will rise, for that must always be above the rent of the second, by the difference between the produce which they yield with a given quantity of capital and labour. With every step in the progress of population, which shall oblige a country to have recourse to land of a worse quality, to enable it to raise its supply of food, rent, on all the more fertile land, will rise. Thus suppose land--No. 1, 2, 3,--to yield, with an equal employment of capital and labour, a net produce of 100, 90, and 80 quarters of corn. In a new country, where there is an abundance of fertile land compared with the population, and where therefore it is only necessary to cultivate No. 1, the whole net produce will belong to the cultivator, and will be the profits of the stock which he advances. As soon as population had so far increased as to make it necessary to cultivate No. 2, from which ninety quarters only can be obtained after supporting the labourers, rent would commence on No. 1; for either there must be two rates of profit on agricultural capital, or ten quarters, or the value of ten quarters must be withdrawn from the produce of No. 1, for some other purpose. Whether the proprietor of the land, or any other person, cultivated No. 1, these ten quarters would equally constitute rent; for the cultivator of No. 2 would get the same result with his capital, whether he cultivated No. 1, paying ten quarters for rent, or continued to cultivate No. 2, paying no rent. In the same manner it might be shewn that when No. 3 is brought into cultivation, the rent of No. 2 must be ten quarters, or the value of ten quarters, whilst the rent of No. 1 would rise to twenty quarters; for the cultivator of No. 3 would have the same profits whether he paid twenty quarters for the rent of No. 1, ten quarters for the rent of No. 2, or cultivated No. 3 free of all rent. It often, and indeed commonly happens that before No. 2, 3, 4, or 5, or the inferior lands are cultivated, capital can be employed more productively on those lands which are already in cultivation. It may perhaps be found, that by doubling the original capital employed on No. 1, though the produce will not be doubled, will not be increased by 100 quarters, it may be increased by eighty-five quarters, and that this quantity exceeds what could be obtained by employing the same capital on land, No. 3. In such case, capital will be preferably employed on the old land, and will equally create a rent; for rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour. If with a capital of 1000_l._ a tenant obtain 100 quarters of wheat from his land, and by the employment of a second capital of 1000_l._, he obtain a further return of eighty-five, his landlord would have the power at the expiration of his lease, of obliging him to pay fifteen quarters, or an equivalent value, for additional rent; for there cannot be two rates of profit. If he is satisfied with a diminution of fifteen quarters in the return for his second 1000_l._, it is because no employment more profitable can be found for it. The common rate of profit would be in that proportion, and if the original tenant refused, some other person would be found willing to give all which exceeded that rate of profit to the owner of the land from which he derived it. In this case, as well as in the other, the capital last employed pays no rent. For the greater productive powers of the first 1000_l._, fifteen quarters is paid for rent, for the employment of the second 1000_l._ no rent whatever is paid. If a third 1000_l._ be employed on the same land, with a return of seventy-five quarters, rent will then be paid for the second 1000_l._ and will be equal to the difference between the produce of these two, or ten quarters; and at the same time the rent of the first 1000_l._ will rise from fifteen to twenty-five quarters; while the last 1000_l._ will pay no rent whatever. If then good land existed in a quantity much more abundant than the production of food for an increasing population required, or if capital could be indefinitely employed without a diminished return on the old land, there could be no rise of rent; for rent invariably proceeds from the employment of an additional quantity of labour with a proportionally less return. The most fertile, and most favourably situated land will be first cultivated, and the exchangeable value of its produce will be adjusted in the same manner as the exchangeable value of all other commodities, by the total quantity of labour necessary in various forms, from first to last, to produce it, and bring it to market. When land of an inferior quality is taken into cultivation, the exchangeable value of raw produce will rise, because more labour is required to produce it. The exchangeable value of all commodities, whether they be manufactured, or the produce of the mines, or the produce of land, is always regulated, not by the less quantity of labour that will suffice for their production under circumstances highly favourable, and exclusively enjoyed by those who have peculiar facilities of production; but by the greater quantity of labour necessarily bestowed on their production by those who have no such facilities; by those who continue to produce them under the most unfavourable circumstances; meaning--by the most unfavourable circumstances, the most unfavourable under which the quantity of produce required renders it necessary to carry on the production. Thus, in a charitable institution, where the poor are set to work with the funds of benefactors, the general prices of the commodities, which are the produce of such work, will not be governed by the peculiar facilities afforded to these workmen, but by the common, usual, and natural difficulties, which every other manufacturer will have to encounter. The manufacturer enjoying none of these facilities might indeed be driven altogether from the market, if the supply afforded by these favoured workmen were equal to all the wants of the community; but if he continued the trade, it would be only on condition that he should derive from it the usual and general rate of profits on stock; and that could only happen when his commodity sold for a price proportioned to the quantity of labour bestowed on its production.[6] It is true, that on the best land, the same produce would still be obtained with the same labour as before, but its value would be enhanced in consequence of the diminished returns obtained by those who employed fresh labour and stock on the less fertile land. Notwithstanding then, that the advantages of fertile over inferior lands are in no case lost, but only transferred from the cultivator, or consumer, to the landlord, yet since more labour is required on the inferior lands, and since it is from such land only that we are enabled to furnish ourselves with the additional supply of raw produce, the comparative value of that produce will continue permanently above its former level, and make it exchange for more hats, cloth, shoes, &c. &c. in the production of which no such additional quantity of labour is required. The reason then, why raw produce rises in comparative value, is because more labour is employed in the production of the last portion obtained, and not because a rent is paid to the landlord. The value of corn is regulated by the quantity of labour bestowed on its production on that quality of land, or with that portion of capital, which pays no rent. Corn is not high because a rent is paid, but a rent is paid because corn is high; and it has been justly observed, that no reduction would take place in the price of corn, although landlords should forego the whole of their rent. Such a measure would only enable some farmers to live like gentlemen, but would not diminish the quantity of labour necessary to raise raw produce on the least productive land in cultivation. Nothing is more common than to hear of the advantages which the land possesses over every other source of useful produce, on account of the surplus which it yields in the form of rent. Yet when land is most abundant, when most productive, and most fertile, it yields no rent; and it is only when its powers decay, and less is yielded in return for labour, that a share of the original produce of the more fertile portions is set apart for rent. It is singular that this quality in the land, which should have been noticed as an imperfection, compared with the natural agents by which manufacturers are assisted, should have been pointed out as constituting its peculiar pre-eminence. If air, water, the elasticity of steam, and the pressure of the atmosphere, were of various qualities; if they could be appropriated, and each quality existed only in moderate abundance, they as well as the land would afford a rent, as the successive qualities were brought into use. With every worse quality employed, the value of the commodities in the manufacture of which they were used would rise, because equal quantities of labour would be less productive. Man would do more by the sweat of his brow, and nature perform less; and the land would be no longer pre-eminent for its limited powers. If the surplus produce which land affords in the form of rent be an advantage, it is desirable that, every year, the machinery newly constructed should be less efficient than the old, as that would undoubtedly give a greater exchangeable value to the goods manufactured, not only by that machinery, but by all the other machinery in the kingdom; and a rent would be paid to all those who possessed the most productive machinery.[7] The rise of rent is always the effect of the increasing wealth of the country, and of the difficulty of providing food for its augmented population. It is a symptom, but it is never a cause of wealth; for wealth often increases most rapidly while rent is either stationary, or even falling. Rent increases most rapidly, as the disposable land decreases in its productive powers. Wealth increases most rapidly in those countries where the disposable land is most fertile, where importation is least restricted, and where through agricultural improvements, productions can be multiplied without any increase in the proportional quantity of labour, and where consequently the progress of rent is slow. If the high price of corn were the effect, and not the cause of rent, price would be proportionally influenced as rents were high or low, and rent would be a component part of price. But that corn which is produced with the greatest quantity of labour is the regulator of the price of corn, and rent does not and cannot enter in the least degree as a component part of its price. Adam Smith, therefore, cannot be correct in supposing that the original rule which regulated the exchangeable value of commodities, namely the comparative quantity of labour by which they were produced, can be at all altered by the appropriation of land and the payment of rent. Raw material enters into the composition of most commodities, but the value of that raw material as well as corn, is regulated by the productiveness of the portion of capital last employed on the land, and paying no rent; and therefore rent is not a component part of the price of commodities. We have been hitherto considering the effects of the natural progress of wealth and population on rent, in a country in which the land is of variously productive powers; and we have seen, that with every portion of additional capital which it becomes necessary to employ on the land with a less productive return, rent would rise. It follows from the same principles, that any circumstances in the society which should make it unnecessary to employ the same amount of capital on the land, and which should therefore make the portion last employed more productive, would lower rent. Any great reduction in the capital of a country, which should materially diminish the funds destined for the maintenance of labour, would naturally have this effect. Population regulates itself by the funds which are to employ it, and therefore always increases or diminishes with the increase or diminution of capital. Every reduction of capital is therefore necessarily followed by a less effective demand for corn, by a fall of price, and by diminished cultivation. In the reverse order to that in which the accumulation of capital raises rent, will the diminution of it lower rent. Land of a less unproductive quality will be in succession relinquished, the exchangeable value of produce will fall, and land of a superior quality will be the land last cultivated, and that which will then pay no rent. The same effects may however be produced when the wealth and population of a country are increased, if that increase is accompanied by such marked improvements in agriculture, as shall have the same effect of diminishing the necessity of cultivating the poorer lands, or of expending the same amount of capital on the cultivation of the more fertile portions. If a million of quarters of corn be necessary for the support of a given population, and it be raised on land of the qualities of No. 1, 2, 3; and if an improvement be afterwards discovered by which it can be raised on No. 1 and 2, without employing No. 3, it is evident that the immediate effect must be a fall of rent; for No. 2, instead of No. 3, will then be cultivated without paying any rent; and the rent of No. 1, instead of being the difference between the produce of No. 3 and No. 1, will be the difference only between No. 2 and 1. With the same population, and no more, there can be no demand for any additional quantity of corn; the capital and labour employed on No. 3, will be devoted to the production of other commodities desirable to the community, and can have no effect in raising rent unless the raw material from which they are made cannot be obtained without employing capital less advantageously on the land, in which case No. 3 must again be cultivated. It is undoubtedly true, that the fall in the relative price of raw produce, in consequence of the improvement in agriculture, or rather in consequence of less labour being bestowed on its production, would naturally lead to increased accumulation; for the profits of stock would be greatly augmented. This accumulation would lead to an increased demand for labour, to higher wages, to an increased population, to a further demand for raw produce, and to an increased cultivation. It is only, however, after the increase in the population, that rent would be as high as before; that is to say, after No. 3 was taken into cultivation. A considerable period would have elapsed, attended with a positive diminution of rent. But improvements in agriculture are of two kinds: those which increase the productive powers of the land, and those which enable us to obtain its produce with less labour. They both lead to a fall in the price of raw produce; they both affect rent, but they do not affect it equally. If they did not occasion a fall in the price of raw produce, they would not be improvements; for it is the essential quality of an improvement to diminish the quantity of labour before required to produce a commodity; and this diminution cannot take place without a fall of its price or relative value. The improvements which increase the productive powers of the land, are such as the more skilful rotation of crops, or the better choice of manure. These improvements absolutely enable us to obtain the same produce from a smaller quantity of land. If, by the introduction of a course of turnips, I can feed my sheep besides raising my corn, the land on which the sheep were fed becomes unnecessary, and the same quantity of raw produce is raised by the employment of a less quantity of land. If I discover a manure which will enable me to make a piece of land produce 20 per cent. more corn, I may withdraw at least a portion of my capital from the most unproductive part of my farm. But, as I have before observed, it is not necessary that land should be thrown out of cultivation, in order to reduce rent: to produce this effect, it is sufficient that successive portions of capital are employed on the same land with different results, and that the portion which gives the least result should be withdrawn. If, by the introduction of the turnip husbandry, or by the use of a more invigorating manure, I can obtain the same produce with less capital, and without disturbing the difference between the productive powers of the successive portions of capital, I shall lower rent; for a different and more productive portion will be that which will form the standard from which every other will be reckoned. If, for example, the successive portions of capital yielded 100, 90, 80, 70; whilst I employed these four portions, my rent would be 60, or the difference between 70 and 100 = 30 } { 100 70 and 90 = 20 } { 90 70 and 80 = 10 } whilst the produce { 80 -- } would be 340 { 70 60 } { --- { 340 and while I employed these portions, the rent would remain the same, although the produce of each should have an equal augmentation. If, instead of 100, 90, 80, 70, the produce should be increased to 125, 115, 105, 95, the rent would still be 60, or the difference between 95 and 125 = 30 } { 125 95 and 115 = 20 } whilst the produce { 115 95 and 105 = 10 } would be increased { 105 -- } to 440 { 95 60 } { --- { 440 But with such an increase of produce, without an increase of demand, there could be no motive for employing so much capital on the land; one portion would be withdrawn, and consequently the last portion of capital would yield 105 instead of 95, and rent would fall to 30, or the difference between 105 and 125 = 20 } whilst the produce would be still { 125 105 and 115 = 10 } adequate to the wants of the { 115 -- } population, for it would be 345 { 105 30 } quarters, or { --- { 345 the demand being only for 340 quarters.--But there are improvements which may lower the relative value of produce without lowering the corn rent, though they will lower the money rent of land. Such improvements do not increase the productive powers of the land, but they enable us to obtain its produce with less labour. They are rather directed to the formation of the capital applied to the land, than to the cultivation of the land itself. Improvements in agricultural implements, such as the plough and the threshing machine, economy in the use of horses employed in husbandry, and a better knowledge of the veterinary art, are of this nature. Less capital, which is the same thing as less labour, will be employed on the land; but to obtain the same produce, less land cannot be cultivated. Whether improvements of this kind, however, affect corn rent, must depend on the question, whether the difference between the produce obtained by the employment of different portions of capital be increased, stationary, or diminished. If four portions of capital, 50, 60, 70, 80, be employed on the land, giving each the same results, and any improvement in the formation of such capital should enable me to withdraw 5 from each, so that they should be 45, 55, 65, and 75, no alteration would take place in the corn rent; but if the improvements were such as to enable me to make the whole saving on the largest portion of capital, that portion which is least productively employed, corn rent would immediately fall, because the difference between the capital most productive and the capital least productive would be diminished; and it is this difference which constitutes rent. Without multiplying instances, I hope enough has been said to shew, that whatever diminishes the inequality in the produce obtained from successive portions of capital employed on the same or on new land, tends to lower rent; and that whatever increases that inequality, necessarily produces an opposite effect, and tends to raise it. In speaking of the rent of the landlord, we have rather considered it as the proportion of the whole produce, without any reference to its exchangeable value; but since the same cause, the difficulty of production, raises the exchangeable value of raw produce, and raises also the proportion of raw produce paid to the landlord for rent, it is obvious that the landlord is doubly benefited by difficulty of production. First he obtains a greater share, and secondly the commodity in which he is paid is of greater value.[8] CHAPTER III. ON THE RENT OF MINES. The metals, like other things, are obtained by labour. Nature, indeed, produces them; but it is the labour of man which extracts them from the bowels of the earth, and prepares them for our service. Mines, as well as land, generally pay a rent to their owner; and this rent, as well as the rent of land, is the effect, and never the cause of the high value of their produce. If there were abundance of equally fertile mines, which any one might appropriate, they could yield no rent; the value of their produce would depend on the quantity of labour necessary to extract the metal from the mine and bring it to market. But there are mines of various qualities, affording very different results, with equal quantities of labour. The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market, but also to afford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. This mine is supposed to yield the usual profits of stock. All that the other mines produce more than this, will necessarily be paid to the owners for rent. Since this principle is precisely the same as that which we have already laid down respecting land, it will not be necessary further to enlarge on it. It will be sufficient to remark, that the same general rule which regulates the value of raw produce and manufactured commodities, is applicable also to the metals; their value depending not on the rate of profits, nor on the rate of wages, nor on the rent paid for mines, but on the total quantity of labour necessary to obtain the metal, and to bring it to market. Like every other commodity, the value of the metals is subject to variation. Improvements may be made in the implements and machinery used in mining, which may considerably abridge labour; new and more productive mines may be discovered, in which, with the same labour, more metal may be obtained; or the facilities of bringing it to market may be increased. In either of these cases the metals would fall in value, and would therefore exchange for a less quantity of other things. On the other hand, from the increasing difficulty of obtaining the metal, occasioned by the greater depth at which the mine must be worked, and the accumulation of water, or any other contingency, its value, compared with that of other things, might be considerably increased. It has therefore been justly observed, that however honestly the coin of a country may conform to its standard, money made of gold and silver is still liable to fluctuations in value, not only to accidental and temporary, but to permanent and natural variations, in the same manner as other commodities. By the discovery of America and the rich mines in which it abounds, a very great effect was produced on the natural price of the precious metals. This effect is by many supposed not yet to have terminated. It is probable however that all the effects on the value of the metals, resulting from the discovery of America have long ceased, and if any fall has of late years taken place in their value, it is to be attributed to improvements in the mode of working the mines. From whatever cause it may have proceeded, the effect has been so slow and gradual, that little practical inconvenience has been felt from gold and silver being the general medium in which the value of all other things is estimated. Though undoubtedly a variable measure of value, there is probably no commodity subject to fewer variations. This and the other advantages which these metals possess, such as their hardness, their malleability, their divisibility, and many more, have justly secured the preference every where given to them, as a standard for the money of civilized countries. Having acknowledged the imperfections to which money made of gold and silver is liable as a measure of value, from the greater or less quantity of labour which may, under varying circumstances, be necessary for the production of those metals, we may be permitted to make the supposition that all these imperfections were removed, and that equal quantities of labour could at all times obtain, from that mine which paid no rent, equal quantities of gold. Gold would then be an invariable measure of value. The quantity indeed would enlarge with the demand, but its value would be invariable, and it would be eminently well calculated to measure the varying value of all other things. I have already in a former part of this work considered gold as endowed with this uniformity, and in the following chapter I shall continue the supposition. In speaking therefore of varying price, the variation will be always considered as being in the commodity, and never in the medium in which it is estimated. CHAPTER IV. ON NATURAL AND MARKET PRICE. In making labour the foundation of the value of commodities, and the comparative quantity of labour which is necessary to their production, the rule which determines the respective quantities of goods which shall be given in exchange for each other, we must not be supposed to deny the accidental and temporary deviations of the actual or market price of commodities from this, their primary and natural price. In the ordinary course of events, there is no commodity which continues for any length of time to be supplied precisely in that decree of abundance, which the wants and wishes of mankind require, and therefore there is none which is not subject to accidental and temporary variations of price. It is only in consequence of such variations, that capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in demand. With the rise or fall of price, profits are elevated above, or depressed below their general level, and capital is either encouraged to enter into, or is warned to depart from the particular employment in which the variation has taken place. Whilst every man is free to employ his capital where he pleases, he will naturally seek for it that employment which is most advantageous; he will naturally be dissatisfied with a profit of 10 per cent., if by removing his capital he can obtain a profit of 15 per cent. This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalize the rate of profits of all, or to fix them in such proportions, as may in the estimation of the parties, compensate for any advantage which one may have, or may appear to have over the other. It is perhaps very difficult to trace the steps by which this change is effected: it is probably effected, by a manufacturer not absolutely changing his employment, but only lessening the quantity of capital he has in that employment. In all rich countries, there is a number of men forming what is called the monied class; these men are engaged in no trade, but live on the interest of their money, which is employed in discounting bills, or in loans to the more industrious part of the community. The bankers too employ a large capital on the same objects. The capital so employed forms a circulating capital of a large amount, and is employed, in larger or smaller proportions, by all the different trades of a country. There is perhaps no manufacturer, however rich, who limits his business to the extent that his own funds alone will allow: he has always some portion of this floating capital, increasing or diminishing according to the activity of the demand for his commodities. When the demand for silks increases, and that for cloth diminishes, the clothier does not remove with his capital to the silk trade, but he dismisses some of his workmen, he discontinues his demand for the loan from bankers and monied men; while the case of the silk manufacturer is the reverse: he wishes to employ more workmen, and thus his motive for borrowing is increased: he borrows more, and thus capital is transferred from one employment to another, without the necessity of a manufacturer discontinuing his usual occupation. When we look to the markets of a large town, and observe how regularly they are supplied both with home and foreign commodities, in the quantity in which they are required, under all the circumstances of varying demand, arising from the caprice of taste, or a change in the amount of population, without often producing either the effects of a glut from a too abundant supply, or an enormously high price from the supply being unequal to the demand, we must confess that the principle which apportions capital to each trade in the precise amount that it is required, is more active than is generally supposed. A capitalist, in seeking profitable employment for his funds, will naturally take into consideration all the advantages which one occupation possesses over another. He may therefore be willing to forego a part of his money profit, in consideration of the security, cleanliness, ease, or any other real or fancied advantage which one employment may possess over another. If from a consideration of these circumstances, the profits of stock should be so adjusted that in one trade they were 20, in another 25, and in another 30 per cent., they would probably continue permanently with that relative difference, and with that difference only; for if any cause should elevate the profits of one of these trades 10 per cent. either these profits would be temporary, and would soon again fall back to their usual station, or the profits of the others would be elevated in the same proportion. Let us suppose that all commodities are at their natural price, and consequently that the profits of capital in all employments are exactly at the same rate, or differ only so much as, in the estimation of the parties, is equivalent to any real or fancied advantage which they possess or forego. Suppose now, that a change of fashion should increase the demand for silks, and lessen that for woollens; their natural price, the quantity of labour necessary to their production, would continue unaltered, but the market price of silks would rise, and that of woollens would fall; and consequently the profits of the silk manufacturer would be above, whilst those of the woollen manufacturer would be below, the general and adjusted rate of profits. Not only the profits, but the wages of the workmen would be affected in these employments. This increased demand for silks would however soon be supplied, by the transference of capital and labour from the woollen to the silk manufacture; when the market prices of silks and woollens would again approach their natural prices, and then the usual profits would be obtained by the respective manufacturers of those commodities. It is then the desire, which every capitalist has, of diverting his funds from a less to a more profitable employment, that prevents the market price of commodities from continuing for any length of time either much above, or much below their natural price. It is this competition which so adjusts the exchangeable value of commodities, that after paying the wages for the labour necessary to their production, and all other expenses required to put the capital employed in its original state of efficiency, the remaining value or overplus will in each trade be in proportion to the value of the capital employed. In the 7th chap. of the Wealth of Nations, all that concerns this question is most ably treated. Having fully acknowledged the temporary effects which, in particular employments of capital, may be produced on the prices of commodities, as well as on the wages of labour, and the profits of stock, by accidental causes, without influencing the general price of commodities, wages, or profits, since these effects are equally operative in all stages of society, we may be permitted to leave them entirely out of our consideration, whilst we are treating of the laws which regulate natural prices, natural wages, and natural profits, effects totally independent of these accidental causes. In speaking then of the exchangeable value of commodities, or the power of purchasing possessed by any one commodity, I mean always that power which it would possess, if not disturbed by any temporary or accidental cause, and which is its natural price. CHAPTER V. ON WAGES Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution. The power of the labourer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the quantity of money, which he may receive for wages; but on the quantity of food, necessaries, and conveniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise; with the fall in their price, the natural price of labour will fall. With the progress of society, the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural price is regulated, has a tendency to become dearer, from the greater difficulty of producing it. As, however, the improvements in agriculture, the discovery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so will the same causes produce the correspondent effects on the natural price of labour. The natural price of all commodities excepting raw produce and labour has a tendency to fall, in the progress of wealth and population; for though, on one hand, they are enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counterbalanced by the improvements in machinery, by the better division and distribution of labour, and by the increasing skill, both in science and art, of the producers. The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it. It is when the market price of labour exceeds its natural price, that the condition of the labourer is flourishing and happy, that he has it in his power to command a greater proportion of the necessaries and enjoyments of life, and therefore to rear a healthy and numerous family. When however, by the encouragement which high wages give to the increase of population, the number of labourers is increased, wages again fall to their natural price, and indeed from a re-action sometimes fall below it. When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price, and that the labourer will have the moderate comforts, which the natural price of wages will afford. Notwithstanding the tendency of wages to conform to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it; for no sooner may the impulse, which an increased capital gives to a new demand for labour be obeyed, than another increase of capital may produce the same effect; and thus if the increase of capital be gradual and constant, the demand for labour may give a continued stimulus to an increase of people. Capital is that part of the wealth of a country, which is employed in production, and consists of food, clothing, tools, raw material, machinery, &c. necessary to give effect to labour. Capital may increase in quantity at the same time that its value rises. An addition may be made to the food and clothing of a country, at the same time that more labour may be required to produce the additional quantity than before; in that case not only the quantity, but the value of capital will rise. Or capital may increase without its value increasing, and even while its value is actually diminishing; not only may an addition be made to the food and clothing of a country, but the addition may be made by the aid of machinery, without any increase, and even with an absolute diminution in the proportional quantity of labour required to produce them. The quantity of capital may increase, while neither the whole together, nor any part of it singly, will have a greater value than before. In the first case, the natural price of wages, which always depends on the price of food, clothing, and other necessaries, will rise; in the second, it will remain stationary, or fall; but in both cases the market rate of wages will rise, for in proportion to the increase of capital will be the increase in the demand for labour; in proportion to the work to be done will be the demand for those who are to do it. In both cases too the market price of labour will rise above its natural price; and in both cases it will have a tendency to conform to its natural price, but in the first case this agreement will be most speedily effected. The situation of the labourer will be improved, but not much improved; for the increased price of food and necessaries will absorb a large portion of his increased wages; consequently a small supply of labour, or a trifling increase in the population, will soon reduce the market price to the then increased natural price of labour. In the second case, the condition of the labourer will be very greatly improved; he will receive increased money wages, without having to pay any increased price, and perhaps, even a diminished price for the commodities which he and his family consume; and it will not be till after a great addition has been made to the population, that the market price of wages will again sink to their then low and reduced natural price. Thus, then, with every improvement of society, with every increase in its capital, the market wages of labour will rise; but the permanence of their rise will depend on the question, whether the natural price of wages has also risen; and this again will depend on the rise in the natural price of those necessaries, on which the wages of labour are expended. It is not to be understood that the natural price of wages, estimated even in food and necessaries, is absolutely fixed and constant. It varies at different times in the same country, and very materially differs in different countries. It essentially depends on the habits and customs of the people. An English labourer would consider his wages under their natural rate, and too scanty to support a family, if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin; yet these moderate demands of nature are often deemed sufficient in countries where "man's life is cheap," and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an early period of our history. From manufactured commodities always falling, and raw produce always rising, with the progress of society, such a disproportion in their relative value is at length created, that in rich countries a labourer, by the sacrifice of a very small quantity only of his food, is able to provide liberally for all his other wants. Independently of the variations in the value of money, which necessarily affect wages, but which we have here supposed to have no operation, as we have considered money to be uniformly of the same value, wages are subject to a rise or fall from two causes: 1st. The supply and demand of labourers. 2dly. The price of the commodities on which the wages of labour are expended. In different stages of society, the accumulation of capital, or of the means of employing labour, is more or less rapid, and must in all cases depend on the productive powers of labour. The productive powers of labour are generally greatest when there is an abundance of fertile land: at such periods accumulation is often so rapid, that labourers cannot be supplied with the same rapidity as capital. It has been calculated, that under favourable circumstances population may be doubled in twenty-five years; but under the same favourable circumstances, the whole capital of a country might possibly be doubled in a shorter period. In that case, wages during the whole period would have a tendency to rise, because the demand for labour would increase still faster than the supply. In new settlements, where the arts and knowledge of countries far advanced in refinement are introduced, it is probable that capital has a tendency to increase faster than mankind: and if the deficiency of labourers were not supplied by more populous countries, this tendency would very much raise the price of labour. In proportion as these countries become populous, and land of a worse quality is taken into cultivation, the tendency to an increase of capital diminishes; for the surplus produce remaining, after satisfying the wants of the existing population, must necessarily be in proportion to the facility of production, viz. to the smaller number of persons employed in production. Although, then, it is probable, that under the most favourable circumstances, the power of production is still greater than that of population, it will not long continue so; for the land being limited in quantity, and differing in quality; with every increased portion of capital employed on it, there will be a decreased rate of production, whilst the power of population continues always the same. In those countries where there is abundance of fertile land, but where, from the ignorance, indolence, and barbarism of the inhabitants, they are exposed to all the evils of want and famine, and where it has been said that population presses against the means of subsistence, a very different remedy should be applied from that which is necessary in long settled countries, where, from the diminishing rate of the supply of raw produce, all the evils of a crowded population are experienced. In the one case, the misery proceeds from the inactivity of the people. To be made happier, they need only to be stimulated to exertion; with such exertion, no increase in the population can be too great, as the powers of production are still greater. In the other case, the population increases faster than the funds required for its support. Every exertion of industry, unless accompanied by a diminished rate of increase in the population, will add to the evil, for production cannot keep pace with it. In some countries of Europe, and many of Asia, as well as in the islands in the South Seas, the people are miserable, either from a vicious government or from habits of indolence, which make them prefer present ease and inactivity, though without security against want, to a moderate degree of exertion, with plenty of food and necessaries. By diminishing their population, no relief would be afforded, for productions would diminish in as great, or even in a greater, proportion. The remedy for the evils under which Poland and Ireland suffer, which are similar to those experienced in the South Seas, is to stimulate exertion, to create new wants, and to implant new tastes; for those countries must accumulate a much larger amount of capital, before the diminished rate of production will render the progress of capital necessarily less rapid than the progress of population. The facility with which the wants of the Irish are supplied, permits that people to pass a great part of their time in idleness: if the population were diminished, this evil would increase, because wages would rise, and therefore the labourer would be enabled, in exchange for a still less portion of his labour, to obtain all that his moderate wants require. Give to the Irish labourer a taste for the comforts and enjoyments which habit has made essential to the English labourer, and he would be then content to devote a further portion of his time to industry, that he might be enabled to obtain them. Not only would all the food now produced be obtained, but a vast additional value in those other commodities, to the production of which the now unemployed labour of the country might be directed. In those countries, where the labouring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the greatest vicissitudes and miseries. They have no place of refuge from calamity; they cannot seek safety in a lower station; they are already so low, that they can fall no lower. On any deficiency of the chief article of their subsistence, there are few substitutes of which they can avail themselves, and dearth to them is attended with almost all the evils of famine. In the natural advance of society, the wages of labour will have a tendency to fall, as far as they are regulated by supply and demand; for the supply of labourers will continue to increase at the same rate, whilst the demand for them will increase at a slower rate. If, for instance, wages were regulated by a yearly increase of capital, at the rate of 2 per cent., they would fall when it accumulated only at the rate of 1-1/2 per cent. They would fall still lower when it increased only at the rate of 1, or 1/2 per cent., and would continue to do so until the capital became stationary, when wages also would become stationary, and be only sufficient to keep up the numbers of the actual population. I say that, under these circumstances, wages would fall, if they were regulated only by the supply and demand of labourers; but we must not forget, that wages are also regulated by the prices of the commodities on which they are expended. As population increases, these necessaries will be constantly rising in price, because more labour will be necessary to produce them. If, then, the money wages of labour should fall, whilst every commodity on which the wages of labour were expended rose, the labourer would be doubly affected, and would be soon totally deprived of subsistence. Instead, therefore, of the money wages of labour falling, they would rise; but they would not rise sufficiently to enable the labourer to purchase as many comforts and necessaries as he did before the rise in the price of those commodities. If his annual wages were before 24_l._, or six quarters of corn when the price was 4_l._ per quarter, he would probably receive only the value of five quarters when corn rose to 5_l._ per quarter. But five quarters would cost 25_l._; he would therefore receive an addition in his money wages, though with that addition he would be unable to furnish himself with the same quantity of corn and other commodities, which he had before consumed in his family. Notwithstanding, then, that the labourer would be really worse paid, yet this increase in his wages would necessarily diminish the profits of the manufacturer; for his goods would sell at no higher price, and yet the expense of producing them would be increased. This, however, will be considered in our examination into the principles which regulate profits. It appears, then, that the same cause which raises rent, namely, the increasing difficulty of providing an additional quantity of food with the same proportional quantity of labour, will also raise wages; and therefore if money be of an unvarying value, both rent and wages will have a tendency to rise with the progress of wealth and population. But there is this essential difference between the rise of rent and the rise of wages. The rise in the money value of rent is accompanied by an increased share of the produce; not only is the landlord's money rent greater, but his corn rent also; he will have more corn, and each defined measure of that corn will exchange for a greater quantity of all other goods which have not been raised in value. The fate of the labourer will be less happy: he will receive more money wages, it is true, but his corn wages will be reduced; and not only his command of corn, but his general condition will be deteriorated, by his finding it more difficult to maintain the market rate of wages above their natural rate. While the price of corn rises 10 per cent., wages will always rise less than 10 per cent., but rent will always rise more; the condition of the labourer will generally decline, and that of the landlord will always be improved. When wheat was at 4_l._ per quarter, suppose the labourer's wages to be 24_l._ per annum, or the value of six quarters of wheat, and suppose half his wages to be expended on wheat, and the other half, or 12_l._, on other things. He would receive £24.14. } { £4.4.8. } { 5.83 qrs. 25.10. } when wheat { 4.10. } or the { 5.66 qrs. 26.8. } was at { 4.16. } value of { 5.50 qrs. 27.8.6 } { 5.2.10 } { 5.33 qrs. He would receive these wages to enable him to live just as well, and no better, than before; for when corn was at 4_l._ per quarter, he would expend for three quarters of corn, at 4_l._ per qr. £12 and on other things 12 -- 24 When wheat was 4_l._ 4_s._ 8_d._, three quarters, which he and his family consumed, would cost him £12.14 other things not altered in price 12 ----- 24.14 When at 4_l._ 10_s._, three quarters of wheat would cost £13.10 and other things 12 ----- 25.10 When at 4_l._ 16_s._, three qrs. of wheat £14.8 Other things 12 ---- 26.8 When at 5.2.10_l._ three quarters of wheat would cost £15.8.6. Other things 12 ------ 27.8.6 In proportion as corn became dear, he would receive less corn wages, but his money wages would always increase, whilst his enjoyments on the above supposition, would be precisely the same. But as other commodities would be raised in price in proportion as raw produce entered into their composition, he would have more to pay for some of them. Although his tea, sugar, soap, candles, and house rent, would probably be no dearer, he would pay more for his bacon, cheese, butter, linen, shoes, and cloth; and therefore, even with the above increase of wages, his situation would be comparatively worse. But it may be said that I have been considering the effect of wages on price, on the supposition that gold, or the metal from which money is made, is the produce of the country in which wages varied; and that the consequences which I have deduced agree little with the actual state of things, because gold is a metal of foreign production. The circumstance however, of gold being a foreign production, will not invalidate the truth of the argument, because it may be shewn, that whether it were found at home, or were imported from abroad, the effects ultimately and indeed immediately would be the same. When wages rise, it is generally because the increase of wealth and capital have occasioned a new demand for labour, which will infallibly be attended with an increased production of commodities. To circulate these additional commodities, even at the same prices as before, more money is required, more of this foreign commodity from which money is made, and which can only be obtained by importation. Whenever a commodity is required in greater abundance than before, its relative value rises comparatively with those commodities with which its purchase is made. If more hats were wanted, their price would rise, and more gold would be given for them. If more gold were required, gold would rise, and hats would fall in price, as a greater quantity of hats and of all other things would then be necessary to purchase the same quantity of gold. But in the case supposed, to say that commodities will rise, because wages rise, is to affirm a positive contradiction; for we first say that gold will rise in relative value in consequence of demand, and secondly, that it will fall in relative value because prices will rise, two effects which are totally incompatible with each other. To say that commodities are raised in price, is the same thing as to say that money is lowered in relative value; for it is by commodities that the relative value of gold is estimated. If then all commodities rose in price, gold could not come from abroad to purchase those dear commodities, but it would go from home to be employed with advantage in purchasing the comparatively cheaper foreign commodities. It appears then, that the rise of wages will not raise the prices of commodities, whether the metal from which money is made be produced at home or in a foreign country. All commodities cannot rise at the same time without an addition to the quantity of money. This addition could not be obtained at home, as we have already shewn; nor could it be imported from abroad. To purchase any additional quantity of gold from abroad, commodities at home must be cheap, not dear. The importation of gold, and a rise in the price of all home-made commodities with which gold is purchased or paid for, are effects absolutely incompatible. The extensive use of paper money does not alter this question, for paper money conforms, or ought to conform to the value of gold, and therefore its value is influenced by such causes only as influence the value of that metal. These then are the laws by which wages are regulated, and by which the happiness of far the greatest part of every community is governed. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature. The clear and direct tendency of the poor laws, is in direct opposition to these obvious principles: it is not, as the legislature benevolently intended, to amend the condition of the poor, but to deteriorate the condition of both poor and rich; instead of making the poor rich, they are calculated to make the rich poor; and whilst the present laws are in force, it is quite in the natural order of things that the fund for the maintenance of the poor should progressively increase, till it has absorbed all the neat revenue of the country, or at least so much of it as the state shall leave to us, after satisfying its own never failing demands for the public expenditure.[9] This pernicious tendency of these laws is no longer a mystery, since it has been fully developed by the able hand of Mr. Malthus; and every friend to the poor must ardently wish for their abolition. Unfortunately however they have been so long established, and the habits of the poor have been so formed upon their operation, that to eradicate them with safety from our political system requires the most cautious and skilful management. It is agreed by all who are most friendly to a repeal of these laws, that if it be desirable to prevent the most overwhelming distress to those for whose benefit they were erroneously enacted, their abolition should be effected by the most gradual steps. It is a truth which admits not a doubt, that the comforts and well being of the poor cannot be permanently secured without some regard on their part, or some effort on the part of the legislature, to regulate the increase of their numbers, and to render less frequent among them early and improvident marriages. The operation of the system of poor laws has been directly contrary to this. They have rendered restraint superfluous, and have invited imprudence by offering it a portion of the wages of prudence and industry. The nature of the evil points out the remedy. By gradually contracting the sphere of the poor laws; by impressing on the poor the value of independence, by teaching them that they must look not to systematic or casual charity, but to their own exertions for support, that prudence and forethought are neither unnecessary nor unprofitable virtues, we shall by degrees approach a sounder and more healthful state. No scheme for the amendment of the poor laws merits the least attention, which has not their abolition for its ultimate object; and he is the best friend to the poor, and to the cause of humanity, who can point out how this end can be attained with the most security, and at the same time with the least violence. It is not by raising in any manner different from the present, the fund from which the poor are supported, that the evil can be mitigated. It would not only be no improvement, but it would be an aggravation of the distress which we wish to see removed, if the fund were increased in amount, or were levied according to some late proposals, as a general fund from the country at large. The present mode of its collection and application has served to mitigate its pernicious effects. Each parish raises a separate fund for the support of its own poor. Hence it becomes an object of more interest and more practicability to keep the rates low, than if one general fund were raised for the relief of the poor of the whole kingdom. A parish is much more interested in an economical collection of the rate, and a sparing distribution of relief, when the whole saving will be for its own benefit, than if hundreds of other parishes were to partake of it. It is to this cause, that we must ascribe the fact of the poor laws not having yet absorbed all the net revenue of the country; it is to the rigour with which they are applied, that we are indebted for their not having become overwhelmingly oppressive. If by law every human being wanting support could be sure to obtain it, and obtain it in such a degree as to make life tolerably comfortable, theory would lead us to expect that all other taxes together would be light compared with the single one of poor rates. The principle of gravitation is not more certain than the tendency of such laws to change wealth and power into misery and weakness; to call away the exertions of labour from every object, except that of providing mere subsistence; to confound all intellectual distinction; to busy the mind continually in supplying the body's wants; until at last all classes should be infected with the plague of universal poverty. Happily these laws have been in operation during a period of progressive prosperity, when the funds for the maintenance of labour have regularly increased, and when an increase of population would be naturally called for. But if our progress should become more slow; if we should attain the stationary state, from which I trust we are yet far distant, then will the pernicious nature of these laws become more manifest and alarming; and then too will their removal be obstructed by many additional difficulties. CHAPTER V*. ON PROFITS. The profits of stock in different employments, having been shewn to bear a proportion to each other, and to have a tendency to vary all in the same degree and in the same direction, it remains for us to consider what is the cause of the permanent variations in the rate of profit, and the consequent permanent alterations in the rate of interest. We have seen that the price[10] of corn is regulated by the quantity of labour necessary to produce it, with that portion of capital which pays no rent. We have seen too that all manufactured commodities rise and fall in price, in proportion as more or less labour becomes necessary to their production. Neither the farmer who cultivates that quality of land, which regulates price, nor the manufacturer, who manufactures goods, sacrifice any portion of the produce for rent. The whole value of their commodities is divided into two portions only: one constitutes the profits of stock, the other the wages of labour. Supposing corn and manufactured goods always to sell at the same price, profits would be high or low in proportion as wages were low or high. But suppose corn to rise in price because more labour is necessary to produce it; that cause will not raise the price of manufactured goods in the production of which no additional quantity of labour is required. If then wages continued the same, profits would remain the same; but if, as is absolutely certain, wages should rise with the rise of corn, then profits would necessarily fall. If a manufacturer always sold his goods for the same money, for 1000_l._ for example, his profits would depend on the price of the labour necessary to manufacture those goods. His profits would be less when wages amounted to 800_l._ than when he paid only 600_l._ In proportion then as wages rose, would profits fall. But if the price of raw produce would increase, it may be asked, whether the farmer at least would not have the same rate of profits, although he should pay an additional price for wages? Certainly not: for he will not only have to pay, in common with the manufacturer, an increase of wages to each labourer he employs, but he will be obliged either to pay rent, or to employ an additional number of labourers to obtain the same produce; and the rise in the price of raw produce will be proportioned only to that rent, or that additional number, and will not compensate him for the rise of wages. If both the manufacturer and farmer employed ten men, on wages rising from 24_l._ to 25_l._ per annum. per man, the whole sum paid by each would be 250_l._ instead of 240_l._ This is, however, the whole addition that would be paid by the manufacturer to obtain the same quantity of commodities; but the farmer on new land would probably be obliged to employ an additional man, and therefore to pay an additional sum of 25_l._ for wages; and the farmer on the old land would be obliged to pay precisely the same additional sum of 25_l._ for rent; without which additional labour, corn would not have risen. One will therefore have to pay 275_l._ for wages alone, the other, for wages and rent together; each 25_l._ more than the manufacturer: for this latter 25_l._ they are compensated by the addition to the price of raw produce, and therefore their profits still conform to the profits of the manufacturer. As this proposition is important, I will endeavour still further to elucidate it. We have shewn that in early stages of society, both the landlord's and the labourer's share of the _value_ of the produce of the earth, would be but small; and that it would increase in proportion to the progress of wealth, and the difficulty of procuring food. We have shewn too, that although the value of the labourer's portion will be increased by the high value of food, his real share will be diminished; whilst that of the landlord will not only be raised in value, but will also be increased in quantity. The remaining quantity of the produce of the land, after the landlord and labourer are paid, necessarily belongs to the farmer, and constitutes the profits of his stock. But it may be alleged, that though as society advances, his proportion of the whole produce will be diminished, yet as it will rise in value, he, as well as the landlord and labourer, may, notwithstanding, receive a greater value. It may be said for example, that when corn rose from 4_l._ to 10_l._, the 180 quarters obtained from the best land would sell for 1800_l._ instead of 720_l._; and therefore, though the landlord and labourer be proved to have a greater value for rent and wages, still the value of the farmer's profit might also be augmented. This however is impossible, as I shall now endeavour to shew. In the first place, the price of corn would rise only in proportion to the increased difficulty of growing it on land of a worse quality. It has been already remarked, that if the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value be 4_l._ per quarter, or 720_l._; and if the labour of ten additional men, will on the same or any other land, produce only 170 quarters in addition, wheat would rise from 4_l._ to 4_l._ 4_s._ 8_d._; for 170: 180:: 4_l._: 4_l._ 4_s._ 8_d._ In other words, as for the production of 170 quarters, the labour of ten men is necessary, in the one case, and only that of 9.44 in the other, the rise would be as 9.44 to 10, or as 4_l._ to 4_l._ 4_s._ 8_d._ In the same manner it might be shewn, that if the labour of ten additional men would only produce 160 quarters, the price would further rise to 4_l._ 10_s._; if 150, to 4_l._ 16_s._, &c. &c. But when 180 quarters were produced on the land paying no rent, and its price was 4_l._ per quarter, it sold for £720 And when 170 quarters were produced on the land paying no rent, and the price rose to 4_l._ 4_s._ 8_d._ it still sold for 720 So, 160 quarters at 4_l._ 10_s._ produce 720 And 150 quarters at 4_l._ 16_s._ produce the same sum of 720 Now it is evident, that if out of these equal values, the farmer is at one time obliged to pay wages regulated by the price of wheat at 4_l._, and at other times at higher prices, the rate of his profits will diminish in proportion to the rise in the price of corn. In this case, therefore, I think it is clearly demonstrated that a rise in the price of corn, which increases the money wages of the labourer, diminishes the money value of the farmer's profits. But the case of the farmer of the old and better land will be in no way different; he also will have increased wages to pay, and will never retain more of the value of the produce, however high may be its price, than 720_l._ to be divided between himself and his always equal number of labourers; in proportion therefore as they get more, he must retain less. When the price of corn was at 4_l._, the whole 180 quarters belonged to the cultivator, and he sold it for 720_l._ When corn rose to 4_l._ 4_s._ 8_d._ he was obliged to pay the value of ten quarters out of his 180 for rent, consequently the remaining 170 yielded him no more than 720_l._: when it rose further to 4_l._ 10_s._ he paid twenty quarters, or their value, for rent, and consequently only retained 160 quarters, which yielded the same sum of 720_l._ It will be seen then, that whatever rise may take place in the price of corn, in consequence of the necessity of employing more labour and capital to obtain a given additional quantity of produce, such rise will always be equalled in value by the additional rent, or additional labour employed; so that whether corn sells for 4_l._, 4_l._ 10_s._, or 5_l._ 2_s._ 10_d._, the farmer will obtain for that which remains to him, after paying rent, the same real value. Thus we see, that whether the produce belonging to the farmer be 180, 170, 160, or 150 quarters, he always obtains the same sum of 720_l._ for it; the price increasing in an inverse proportion to the quantity. Rent then, it appears, always falls on the consumer, and never on the farmer; for if the produce of his farm should uniformly be 180 quarters, with the rise of price, he would retain the value of a less quantity for himself, and give the value of a larger quantity to his landlord; but the deduction would be such as to leave him always the same sum of 720_l._ It will be seen too that, in all cases, the same sum of 720_l._ must be divided between wages and profits. If the value of the raw produce from the land exceed this value, it belongs to rent, whatever may be its amount. If there be no excess, there will be no rent. Whether wages or profits rise or fall, it is this sum of 720_l._ from which they must both be provided. On the one hand, profits can never rise so high as to absorb so much of this 720_l._, that enough will not be left to furnish the labourers with absolute necessaries; on the other hand, wages can never rise so high as to leave no portion of this sum for profits. Thus in every case, agricultural, as well as manufacturing profits are lowered by a rise in the price of raw produce, if it be accompanied by a rise of wages.[11] If the farmer gets no additional value for the corn which remains to him after paying rent, if the manufacturer gets no additional value for the goods which he manufactures, and if both are obliged to pay a greater value in wages, can any point be more clearly established than that profits must fall, with a rise of wages? The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price of produce low. As a consumer of raw produce, and of those things into which raw produce enters as a component part, he will in common with all other consumers, be interested in keeping the price low. But he is most materially concerned with the high price of corn as it affects wages. With every rise in the price of corn, he will have to pay out of an equal and unvarying sum of 720_l._, an additional sum for wages to the ten men whom he is supposed constantly to employ. We have seen in treating on wages, that they invariably rise with the rise in the price of raw produce. On a basis assumed for the purpose of calculation, page 106, it will be seen that if when wheat is at 4_l._ per quarter, wages should be 24_l._ per annum. £ _s._ _d._ £ _s._ _d._ { 4 4 8 } { 24 14 0 When Wheat { 4 10 0 } wages would be { 25 10 0 is at { 4 16 0 } { 26 8 0 { 5 2 10 } { 27 8 6 Now, of the unvarying fund of 720_l._ to be distributed between labourers and farmers, £ _s._ _d._ _s._ _d._ £ _s._ _d._ When the { 4 0 0 } the { 240 0 } the { 480 0 0 price of { 4 4 8 } labourer { 247 0 } farmer { 473 0 0 Wheat is { 4 10 0 } will { 255 0 } will { 465 0 0 at { 4 16 0 } receive { 264 0 } receive { 456 0 0 { 5 2 10 } { 274 5 } { 445 15 [12] And supposing that the original capital of the farmer was 3000_l._, the profits of his stock being in the first instance 480_l._, would be at the rate of 16 per cent. When his profits fell to 473_l._, they would be at the rate of 15.7 per cent. 465_l._ 15.5 456_l._ 15.2 445_l._ 14.8 But the _rate_ of profits will fall still more, because the capital of the farmer, it must be recollected, consists in a great measure of raw produce, such as his corn and hay-ricks, his unthreshed wheat and barley, his horses and cows, which would all rise in price in consequence of the rise of produce. His absolute profits would fall from 480_l._ to 445_l._ 15_s._; but if from the cause which I have just stated, his capital should rise from 3000_l._ to 3200_l._ the rate of his profits would, when corn was at 5_l._ 2_s._ 10_d._, be under 14 per cent. If a manufacturer had also employed 3000_l._ in his business, he would be obliged in consequence of the rise of wages, to increase his capital, in order to be enabled to carry on the same business. If his commodities sold before for 720_l._, they would continue to sell at the same price; but the wages of labour, which were before 240_l._, would rise when corn was at 5_l._ 2_s._ 10_d._ to 274_l._ 5_s._ In the first case he would have a balance of 480_l._ as profit on 3000_l._, in the second he would have a profit only of 445_l._ 15_s._, on an increased capital, and therefore his profits would conform to the altered rate of those of the farmer. There are few commodities which are not more or less affected in their price by the rise of raw produce, because some raw material from the land enters into the composition of most commodities. Cotton goods, linen, and cloth, will all rise in price with the rise of wheat; but they rise on account of the greater quantity of labour expended on the raw material from which they are made, and not because more was paid by the manufacturer to the labourers whom he employed on those commodities. In all cases, commodities rise because more labour is expended on them, and not because the labour which is expended on them is at a higher value. Articles of jewellery, of iron, of plate, and of copper, would not rise, because none of the raw produce from the surface of the earth enters into their composition. It may be said that I have taken it for granted, that money wages would rise with a rise in the price of raw produce, but that this is by no means a necessary consequence, as the labourer may be contented with fewer enjoyments. It is true that the wages of labour may previously have been at a high level, and that they may bear some reduction. If so, the fall of profits will be checked; but it is impossible to conceive that the money price of wages should fall, or remain stationary with a gradually increasing price of necessaries; and therefore it may be taken for granted that, under ordinary circumstances, no permanent rise takes place in the price of necessaries, without occasioning, or having been preceded by a rise in wages. The effects produced on profits, would have been the same, or nearly the same, if there had been any rise in the price of those other necessaries, besides food, on which the wages of labour are expended. The necessity which the labourer would be under of paying an increased price for such necessaries, would oblige him to demand more wages; and whatever increases wages, necessarily reduces profits. But suppose the price of silks, velvets, furniture, and any other commodities, not required by the labourer, to rise in consequence of more labour being expended on them, would not that affect profits? certainly not: for nothing can affect profits but a rise in wages; silks and velvets are not consumed by the labourer, and therefore cannot raise wages. It is to be understood that I am speaking of profits generally. I have already remarked that the market price of a commodity may exceed its natural or necessary price, as it may be produced in less abundance than the new demand for it requires. This however is but a temporary effect. The high profits on capital employed in producing that commodity will naturally attract capital to that trade; and as soon as the requisite funds are supplied, and the quantity of the commodity is duly increased, its price will fall, and the profits of the trade will conform to the general level. A fall in the general rate of profits is by no means incompatible with a partial rise of profits in particular employments. It is through the inequality of profits, that capital is moved from one employment to another. Whilst then general profits are falling, and gradually settling at a lower level in consequence of the rise of wages, and the increasing difficulty of supplying the increasing population with necessaries, the profits of the farmer, may, for an interval of some little duration, be above the former level. An extraordinary stimulus may be also given for a certain time, to a particular branch of foreign and colonial trade; but the admission of this fact by no means invalidates the theory, that profits depend on high or low wages, wages on the price of necessaries, and the price of necessaries chiefly on the price of food, because all other requisites may be increased almost without limit. It should be recollected that prices always vary in the market, and in the first instance, through the comparative state of demand and supply. Although cloth could be furnished at 40_s._ per yard, and give the usual profits of stock, it may rise to 60 or 80_s._ from a general change of fashion, or from any other cause which should suddenly and unexpectedly increase the demand, or diminish the supply of it. The makers of cloth will for a time have unusual profits, but capital will naturally flow to that manufacture, till the supply and demand are again at their fair level, when the price of cloth will again sink to 40_s._, its natural or necessary price. In the same manner, with every increased demand for corn, it may rise so high as to afford more than the general profits to the farmer. If there be plenty of fertile land, the price of corn will again fall to its former standard, after the requisite quantity of capital has been employed in producing it, and profits will be as before; but if there be not plenty of fertile land, if, to produce this additional quantity, more than the usual quantity of capital and labour be required, corn will not fall to its former level. Its natural price will be raised, and the farmer, instead of obtaining permanently larger profits, will find himself obliged to be satisfied with the diminished rate which is the inevitable consequence of the rise of wages, produced by the rise of necessaries. The natural tendency of profits then is to fall; for, in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labour. This tendency, this gravitation as it were of profits, is happily checked at repeated intervals by the improvements in machinery, connected with the production of necessaries, as well as by discoveries in the science of agriculture which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer. The rise in the price of necessaries and in the wages of labour is however limited; for as soon as wages should be equal (as in the case formerly stated) to 720_l._, the whole receipts of the farmer, there must be an end of accumulation; for no capital can then yield any profit whatever, and no additional labour can be demanded, and consequently population will have reached its highest point. Long indeed before this period, the very low rate of profits will have arrested all accumulation, and almost the whole produce of the country, after paying the labourers, will be the property of the owners of land and the receivers of tithes and taxes. Thus, taking the former very imperfect basis as the grounds of my calculation, it would appear that when corn was at 20_l._ per quarter, the whole net income of the country would belong to the landlords, for then the same quantity of labour that was originally necessary to produce 180 quarters, would be necessary to produce 36; since 20_l._ : 4_l._ :: 180 : 36. The farmer then, who originally produced 180 quarters, (if any such there were, for the old and new capital employed on the land would be so blended, that it could in no way be distinguished,) would sell the 180 qrs. at 20_l._ per qr. or £3600 the value of 144 qrs. {to landlord for rent, being the } --- {difference between 36 and 180 qrs.} 2880 36 qrs. 720 the value of 36 qrs. to labourers ten in number 720 --- leaving nothing whatever for profit. At this price of 20_l._ the labourers would continue to consume three quarters each per annum or £60 And on other commodities they would expend 12 -- 72 for each labourer. -- And therefore ten labourers would cost 720_l._ per annum. In all these calculations I have been desirous only to elucidate the principle, and it is scarcely necessary to observe, that my whole basis is assumed at random, and merely for the purpose of exemplification. The results though different in degree, would have been the same in principle, however accurately I might have set out in stating the difference in the number of labourers necessary to obtain the successive quantities of corn required by an increasing population, the quantity consumed by the labourer's family, &c. &c. My object has been to simplify the subject, and I have therefore made no allowance for the increasing price of the other necessaries, besides food, of the labourer; an increase which would be the consequence of the increased value of the raw material from which they are made, and which would of course further increase wages, and lower profits. I have already said, that long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and it is only when so employed that it operates on profits. Without a motive there could be no accumulation, and consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively. I must again observe, that the rate of profits would fall much more rapidly than I have estimated in my calculation: for the value of the produce being what I have stated it under the circumstances supposed, the value of the farmer's stock would be greatly increased from its necessarily consisting of many of the commodities which had risen in value. Before corn could rise from 4_l._ to 12_l._ his capital would probably be doubled in exchangeable value, and be worth 6000_l._ instead of 3000_l._ If then his profit were 180_l._, or 6 per cent. on his original capital, profits would not at that time be really at a higher _rate_ than 3 per cent.; for 6000_l._ at 3 per cent. gives 180_l._; and on those terms only could a new farmer with 6000_l._ money in his pocket enter into the farming business. Many trades would derive some advantage, more or less, from the same source. The brewer, the distiller, the clothier, the linen manufacturer, would be partly compensated for the diminution of their profits, by the rise in the value of their stock of raw and finished materials; but a manufacturer of hardware, of jewellery, and of many other commodities, as well as those whose capitals uniformly consisted of money, would be subject to the whole fall in the rate of profits, without any compensation whatever. We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land, and the rise of wages, yet the aggregate amount of profits would increase. Thus supposing that, with repeated accumulations of 100,000_l._, the rate of profit should fall from 20 to 19, to 18, to 17 per cent., a constantly diminishing rate, we should expect that the whole amount of profits received by those successive owners of capital would be always progressive; that it would be greater when the capital was 200,000_l._, than when 100,000_l._; still greater when 300,000_l._; and so on, increasing, though at a diminishing rate, with every increase of capital. This progression however is only true for a certain time: thus 19 per cent. on 200,000_l._ is more than 20 on 100,000_l._; again 18 per cent. on 300,000_l._ is more than 19 per cent. on 200,000_l._; but after capital has accumulated to a large amount, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus suppose the accumulation should be 1,000,000_l._, and the profits 7 per cent. the whole amount of profits will be 70,000_l._; now if an addition of 100,000_l._ capital be made to the million, and profits should fall to 6 per cent., 66,000_l._ or a diminution of 4000_l._ will be received by the owners of stock, although the whole amount of stock will be increased from 1,000,000_l._ to 1,100,000_l._ There can, however, be no accumulation of capital, so long as stock yields any profit at all, without its yielding not only an increase of produce, but an increase of value. By employing 100,000_l._ additional capital, no part of the former capital will be rendered less productive. The produce of the land and labour of the country must increase, and its value will be raised, not only by the value of the addition which is made to the former quantity of productions, but by the new value which is given to the whole produce of the land, by the increased difficulty of producing the last portion of it, which new value always goes to rent. When the accumulation of capital, however, becomes very great, notwithstanding this increased value, it will be so distributed that a less value than before will be appropriated to profits, while that which is devoted to rent and wages will be increased. Thus with successive additions of 100,000_l._ to capital, with a fall in the rate of profits, from 20 to 19, to 18, to 17 per cent. &c. the productions annually obtained will increase in quantity, and be of more than the whole additional value, which the additional capital is calculated to produce. From 20,000_l._ it will rise to more than 39,000_l._ and then to more than 57,000_l._, and when the capital employed is a million, as we before supposed, if 100,000_l._ more be added to it, and the aggregate of profits is actually lower than before, more than 6000_l._ will nevertheless be added to the revenue of the country, but it will be to the revenue of the landlords; they will obtain more than the additional produce, and will from their situation be enabled to encroach even on the former gains of the capitalist. Thus, suppose the price of corn to be 4_l._ per quarter, and that therefore, as we before calculated, of every 720_l._ remaining to the farmer after payment of his rent, 480_l._ were retained by him, and 240_l._ were paid to his labourers; when the price rose to 6_l._ per quarter, he would be obliged to pay his labourers 300_l._ and retain only 420_l._ for profits. Now if the capital employed were so large as to yield a hundred thousand times 720_l._ or 72,000,000_l._ the aggregate of profits would be 48,000,000_l._ when wheat was at 4_l._ per quarter; and if by employing a larger capital, 105,000 times 720_l._ were obtained when wheat was at 6_l._, or 75,600,000_l._, profits would actually fall from 48,000,000_l._ to 44,100,000_l._ or 105,000 times 420_l._, and wages would rise from 24,000,000_l._ to 31,500,000_l._ Wages would rise because more labourers would be employed, in proportion to capital; and each labourer would receive more money wages; but the condition of the labourer, as we have already shewn, would be worse, inasmuch as he would be able to command a less quantity of the produce of the country. The only real gainers would be the landlords; they would receive higher rents, first, because produce would be of a higher value, and secondly, because they would have a greatly increased proportion. Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits. Whilst the land yields abundantly, wages may temporarily rise, and the producers may consume more than their accustomed proportion; but the stimulus which will thus be given to population, will speedily reduce the labourers to their usual consumption. But when poor lands are taken into cultivation, or when more capital and labour are expended on the old land, with a less return of produce, the effect must be permanent. A greater proportion of that part of the produce which remains to be divided, after paying rent, between the owners of stock and the labourers, will be apportioned to the latter. Each man may, and probably will, have a less absolute quantity; but as more labourers are employed in proportion to the whole produce retained by the farmer, the value of a greater proportion of the whole produce will be absorbed by wages, and consequently the value of a smaller proportion will be devoted to profits. This will necessarily be rendered permanent by the laws of nature, which have limited the productive powers of the land. Thus we again arrive at the same conclusion which we have before attempted to establish:--that in all countries, and at all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or with that capital which yields no rent. The effects then of accumulation will be different in different countries, and will depend chiefly on the fertility of the land. However extensive a country may be where the land is of a poor quality, and where the importation of food is prohibited, the most moderate accumulations of capital will be attended with great reductions in the rate of profit, and a rapid rise in rent; and on the contrary a small but fertile country, particularly if it freely permits the importation of food, may accumulate a large stock of capital without any great diminution in the rate of profits, or any great increase in the rent of land. In the Chapter on Wages, we have endeavoured to shew that the money price of commodities would not be raised by a rise of wages, either on the supposition that gold, the standard of money, was the produce of this country, or that it was imported from abroad. But if it were otherwise, if the prices of commodities were permanently raised by high wages, the proposition would not be less true, which asserts that high wages invariably affect the employers of labour, by depriving them of a portion of their real profits. Supposing the hatter, the hosier, and the shoemaker, each paid 10_l._ more wages in the manufacture of a particular quantity of their commodities, and that the price of hats, stockings, and shoes, rose by a sum sufficient to repay the manufacturer the 10_l._; their situation would be no better than if no such rise took place. If the hosier sold his stockings for 110_l._ instead of 100_l._, his profits would be precisely the same money amount as before; but as he would obtain in exchange for this equal sum, one tenth less of hats, shoes, and every other commodity, and as he could with his former amount of savings employ fewer labourers at the increased wages, and purchase fewer raw materials at the increased prices, he would be in no better situation than if his money profits had been really diminished in amount, and every thing had remained at its former price. Thus then I have endeavoured to shew, first, that a rise of wages would not raise the price of commodities, but would invariably lower profits; and secondly, that if the prices of commodities could be raised, still the effect on profits would be the same; and that in fact the value of the medium only in which prices and profits are estimated would be lowered. CHAPTER VI. ON FOREIGN TRADE. No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we should have no greater value, if by the discovery of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of ours. If by the purchase of English goods to the amount of 1000_l._ a merchant can obtain a quantity of foreign goods, which he can sell in the English market for 1,200_l._, he will obtain 20 per cent. profit by such an employment of his capital; but neither his gains, nor the value of the commodities imported, will be increased or diminished by the greater or smaller quantity of foreign goods obtained. Whether, for example, he imports twenty-five or fifty pipes of wine, his interest can be no way affected, if at one time the twenty-five pipes, and at another the fifty pipes, equally sell for 1,200_l._ In either case his profit will be limited to 200_l._, or 20 per cent. on his capital; and in either case the same value will be imported into England. If the fifty pipes sold for more than 1,200_l._, the profits of this individual merchant would exceed the general rate of profits, and capital would naturally flow into this advantageous trade, till the fall of the price of wine had brought every thing to the former level. It has indeed been contended, that the great profits which are sometimes made by particular merchants in foreign trade, will elevate the general rate of profits in the country, and that the abstraction of capital from other employments, to partake of the new and beneficial foreign commerce, will raise prices generally, and thereby increase profits. It has been said, by high authority, that less capital being necessarily devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c. while the demand continues the same, the price of these commodities will be so increased, that the farmer, hatter, clothier, and shoemaker, will have an increase of profits, as well as the foreign merchant.[13] They who hold this argument agree with me, that the profits of different employments have a tendency to conform to one another; to advance and recede together. Our variance consists in this: They contend, that the equality of profits will be brought about by the general rise of profits; and I am of opinion, that the profits of the favoured trade will speedily subside to the general level. For, first, I deny that less capital will necessarily be devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c., unless the demand for these commodities be diminished; and if so, their price will not rise. In the purchase of foreign commodities, either the same, a larger, or a less portion of the produce of the land and labour of England will be employed. If the same portion be so employed, then will the same demand exist for cloth, shoes, corn, and hats, as before, and the same portion of capital will be devoted to their production. If, in consequence of the price of foreign commodities being cheaper, a less portion of the annual produce of the land and labour of England is employed in the purchase of foreign commodities, more will remain for the purchase of other things. If there be a greater demand for hats, shoes, corn, &c. than before, which there may be, the consumers of foreign commodities having an additional portion of their revenue disposable, the capital is also disposable with which the greater value of foreign commodities was before purchased; so that with the increased demand for corn, shoes, &c. there exists also the means of procuring an increased supply, and therefore neither prices nor profits can permanently rise. If more of the produce of the land and labour of England be employed in the purchase of foreign commodities, less can be employed in the purchase of other things, and therefore fewer hats, shoes, &c. will be required. At the same time that capital is liberated from the production of shoes, hats, &c. more must be employed in manufacturing those commodities with which foreign commodities are purchased; and consequently in all cases the demand for foreign and home commodities together, as far as regards value, is limited by the revenue and capital of the country. If one increases, the other must diminish. If the importation of wine, given in exchange for the same quantity of English commodities be doubled, the people of England can either consume double the quantity of wine that they did before, or the same quantity of wine and a greater quantity of English commodities. If my revenue had been 1000_l._, with which I purchased annually one pipe of wine for 100_l._ and a certain quantity of English commodities for 900_l._; when wine fell to 50_l._ per pipe, I might lay out the 50_l._ saved, either in the purchase of an additional pipe of wine, or in the purchase of more English commodities. If I bought more wine, and every wine-drinker did the same, the foreign trade would not be in the least disturbed; the same quantity of English commodities would be exported in exchange for wine, and we should receive double the quantity, though not double the value of wine. But if I, and others contented ourselves with the same quantity of wine as before, fewer English commodities would be exported, and the wine-drinkers might either consume the commodities which were before exported, or any others for which they had an inclination. The capital required for their production would be supplied by the capital liberated from the foreign trade. There are two ways in which capital may be accumulated: it may be saved either in consequence of increased revenue, or of diminished consumption. If my profits are raised from 1000_l._ to 1200_l._ while my expenditure continues the same, I accumulate annually 200_l._ more than I did before. If I save 200_l._ out of my expenditure while my profits continue the same, the same effect will be produced; 200_l._ per annum will be added to my capital. The merchant who imported wine after profits had been raised from 20 per cent. to 40 per cent., instead of purchasing his English goods for 1000_l._, must purchase them for 857_l._ 2_s._ 10_d._, still selling the wine which he imports in return for those goods for 1200_l._; or, if he continued to purchase his English goods for 1000_l._, must raise the price of his wine to 1400_l._; he would thus obtain 40 instead of 20 per cent. profit on his capital; but if, in consequence of the cheapness of all the commodities on which his revenue was expended, he and all other consumers could save the value of 200_l._ out of every 1000_l._ they before expended, they would more effectually add to the real wealth of the country; in one case, the savings would be made in consequence of an increase of revenue, in the other in consequence of diminished expenditure. If, by the introduction of machinery, the generality of the commodities on which revenue was expended fell 20 per cent. in value, I should be enabled to save as effectually as if my revenue had been raised 20 per cent.; but in one case the rate of profits is stationary, in the other it is raised 20 per cent.--If, by the introduction of cheap foreign goods, I can save 20 per cent. from my expenditure, the effect will be precisely the same as if machinery had lowered the expense of their production, but profits would not be raised. It is not, therefore, in consequence of the extension of the market that the rate of profits is raised, although such extension may be equally efficacious in increasing the mass of commodities, and may thereby enable us to augment the funds destined for the maintenance of labour, and the materials on which labour may be employed. It is quite as important to the happiness of mankind, that our enjoyments should be increased by the better distribution of labour, by each country producing those commodities for which by its situation, its climate, and its other natural or artificial advantages it is adapted, and by their exchanging them for the commodities of other countries, as that they should be augmented by a rise in the rate of profits. It has been my endeavour to shew throughout this work, that the rate of profits can never be increased but by a fall in wages, and that there can be no permanent fall of wages but in consequence of a fall of the necessaries on which wages are expended. If, therefore, by the extension of foreign trade, or by improvements in machinery, the food and necessaries of the labourer can be brought to market at a reduced price, profits will rise. If, instead of growing our own corn, or manufacturing the clothing and other necessaries of the labourer, we discover a new market from which we can supply ourselves with these commodities at a cheaper price, wages will fall and profits rise; but if the commodities obtained at a cheaper rate, by the extension of foreign commerce, or by the improvement of machinery, be exclusively the commodities consumed by the rich, no alteration will take place in the rate of profits. The rate of wages would not be affected, although wine, velvets, silks, and other expensive commodities, should fall 50 per cent., and consequently profits would continue unaltered. Foreign trade, then, though highly beneficial to a country, as it increases the amount and variety of the objects on which revenue may be expended, and affords, by the abundance and cheapness of commodities, incentives to saving, and to the accumulation of capital, has no tendency to raise the profits of stock, unless the commodities imported be of that description on which the wages of labour are expended. The remarks which have been made respecting foreign trade, apply equally to home trade. The rate of profits is never increased by a better distribution of labour, by the invention of machinery, by the establishment of roads and canals, or by any means of abridging labour either in the manufacture or in the conveyance of goods. These are causes which operate on price, and never fail to be highly beneficial to consumers; since they enable them with the same labour, or with the value of the produce of the same labour, to obtain in exchange a greater quantity of the commodity to which the improvement is applied; but they have no effect whatever on profit. On the other hand, every diminution in the wages of labour raises profits, but produces no effect on the price of commodities. One is advantageous to all classes, for all classes are consumers; the other is beneficial only to producers; they gain more, but every thing remains at its former price. In the first case, they get the same as before; but every thing on which their gains are expended, is diminished in exchangeable value. The same rule which regulates the relative value of commodities in one country, does not regulate the relative value of the commodities exchanged between two or more countries. Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world. It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England. In one and the same country, profits are, generally speaking, always on the same level; or differ only as the employment of capital may be more or less secure and agreeable. It is not so between different countries. If the profits of capital employed in Yorkshire, should exceed those of capital employed in London, capital would speedily move from London to Yorkshire, and an equality of profits would be effected; but if in consequence of the diminished rate of production in the lands of England, from the increase of capital and population, wages should rise, and profits fall, it would not follow that capital and population would necessarily move from England to Holland, or Spain, or Russia, where profits might be higher. If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity. The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal. England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth. To produce the wine in Portugal, might require only the labour of eighty men for one year, and to produce the cloth in the same country, might require the labour of ninety men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of ninety men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth. Thus, England would give the produce of the labour of 100 men for the produce of the labour of 80. Such an exchange could not take place between the individuals of the same country. The labour of 100 Englishmen cannot be given for that of 80 Englishmen, but the produce of the labour of 100 Englishmen may be given for the produce of the labour of 80 Portuguese, 60 Russians, or 120 East Indians. The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country.[14] It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries, that under such circumstances, the wine and the cloth should both be made in Portugal, and therefore that the capital and labour of England employed in making cloth, should be removed to Portugal for that purpose. In that case, the relative value of these commodities would be regulated by the same principle, as if one were the produce of Yorkshire, and the other of London; and in every other case, if capital freely flowed towards those countries where it could be most profitably employed, there could be no difference in the rate of profit, and no other difference in the real or labour price of commodities, than the additional quantity of labour required to convey them to the various markets where they were to be sold. Experience however shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations. Gold and silver having been chosen for the general medium of circulation, they are, by the competition of commerce, distributed in such proportions amongst the different countries of the world, as to accommodate themselves to the natural traffic which would take place if no such metals existed, and the trade between countries were purely a trade of barter. Thus, cloth cannot be imported into Portugal, unless it sell there for more gold than it cost in the country from which it was imported; and wine cannot be imported into England, unless it will sell for more there than it cost in Portugal. If the trade were purely a trade of barter, it could only continue whilst England could make cloth so cheap as to obtain a greater quantity of wine with a given quantity of labour, by manufacturing cloth than by growing vines; and also whilst the industry of Portugal were attended by the reverse effects. Now suppose England to discover a process for making wine, so that it should become her interest rather to grow it than import it: she would naturally divert a portion of her capital from the foreign trade to the home trade; she would cease to manufacture cloth for exportation, and would grow wine for herself. The money price of these commodities would be regulated accordingly; wine would fall here while cloth continued at its former price, and in Portugal no alteration would take place in the price of either commodity. Cloth would continue for some time to be exported from this country, because its price would continue to be higher in Portugal than here; but money instead of wine would be given in exchange for it, till the accumulation of money here, and its diminution abroad, should so operate on the relative value of cloth in the two countries, that it would cease to be profitable to export it. If the improvement in making wine were of a very important description, it might become profitable for the two countries to exchange employments; for England to make all the wine, and Portugal all the cloth, consumed by them: but this could be effected only by a new distribution of the precious metals, which should raise the price of cloth in England, and lower it in Portugal. The relative price of wine would fall in England in consequence of the real advantage from the improvement of its manufacture; that is to say, its natural price would fall: the relative price of cloth would rise there from the accumulation of money. Thus, suppose before the improvement in making wine in England, the price of wine here were 50_l._ per pipe, and the price of a certain quantity of cloth were 45_l._, whilst in Portugal the price of the same quantity of wine was 45_l._, and that of the same quantity of cloth 50_l._; wine would be exported from Portugal with a profit of 5_l._, and cloth from England with a profit of the same amount. Suppose that, after the improvement, wine falls to 45_l._ in England, the cloth continuing at the same price. Every transaction in commerce is an independent transaction. Whilst a merchant can buy cloth in England for 45_l._, and sell it with the usual profit in Portugal, he will continue to export it from England. His business is simply to purchase English cloth, and to pay for it by a bill of exchange, which he purchases with Portuguese money. It is to him of no importance what becomes of this money; he has discharged his debt by the remittance of the bill. His transaction is undoubtedly regulated by the terms on which he can obtain this bill, but they are known to him at the time; and the causes which may influence the market price of bills, or the rate of exchange, is no consideration of his. If the markets be favourable for the exportation of wine from Portugal to England, the exporter of the wine will be a seller of a bill, which will be purchased either by the importer of the cloth, or by the person who sold him his bill; and thus without the necessity of money passing from either country, the exporters in each country will be paid for their goods. Without having any direct transaction with each other, the money paid in Portugal by the importer of cloth will be paid to the Portuguese exporter of wine; and in England by the negociation of the same bill, the exporter of the cloth will be authorized to receive its value from the importer of wine. But if the prices of wine were such that no wine could be exported to England, the importer of cloth would equally purchase a bill; but the price of that bill would be higher, from the knowledge which the seller of it would possess, that there was no counter bill in the market by which he could ultimately settle the transactions between the two countries: he might know that the gold or silver money which he received in exchange for his bill, must be actually exported to his correspondent in England, to enable him to pay the demand which he had authorized to be made upon him, and he might therefore charge in the price of his bill all the expenses to be incurred, together with his fair and usual profit. If then this premium for a bill on England should be equal to the profit on importing cloth, the importation would of course cease; but if the premium on the bill were only 2 per cent., if to be enabled to pay a debt in England of 100_l._, 102_l._ should be paid in Portugal, whilst cloth which cost 45_l._ would sell for 50_l._, cloth would be imported, bills would be bought, and money would be exported, till the diminution of money in Portugal, and its accumulation in England, had produced such a state of prices, as would make it no longer profitable to continue these transactions. But the diminution of money in one country, and its increase in another, do not operate on the price of one commodity only, but on the prices of all, and therefore the price of wine and cloth will be both raised in England, and both lowered in Portugal. The price of cloth from being 45_l._ in one country, and 50_l._ in the other, would probably fall to 49_l._ or 48_l._ in Portugal, and rise to 46_l._ or 47_l._ in England, and not afford a sufficient profit after paying a premium for a bill, to induce any merchant to import that commodity. It is thus that the money of each country is apportioned to it in such quantities only as may be necessary to regulate a profitable trade of barter. England exported cloth in exchange for wine, because by so doing, her industry was rendered more productive to her; she had more cloth and wine than if she had manufactured both for herself; and Portugal imported cloth, and exported wine, because the industry of Portugal could be more beneficially employed for both countries in producing wine. Let there be more difficulty in England in producing cloth, or in Portugal in producing wine, or let there be more facility in England in producing wine, or in Portugal in producing cloth, and the trade must immediately cease. No change whatever takes place in the circumstances of Portugal; but England finds that she can employ her labour more productively in the manufacture of wine, and instantly the trade of barter between the two countries changes. Not only is the exportation of wine from Portugal stopped, but a new distribution of the precious metals takes place, and her importation of cloth is also prevented. Both countries would probably find it their interest to make their own wine and their own cloth; but this singular result would take place: in England, though wine would be cheaper, cloth would be elevated in price, more would be paid for it by the consumer; while in Portugal the consumers, both of cloth and of wine, would be able to purchase those commodities cheaper. In the country where the improvement was made, prices would be enhanced; in that where no change had taken place, but where they had been deprived of a profitable branch of foreign trade, prices would fall. This, however, is only a seeming advantage to Portugal, for the quantity of cloth and wine together produced in that country would be diminished, while the quantity produced in England would be increased. Money would in some degree have changed its value in the two countries--it would be lowered in England, and raised in Portugal. Estimated in money, the whole revenue of Portugal would be diminished; estimated in the same medium, the whole revenue of England would be increased. Thus then it appears, that the improvement of a manufacture in any country tends to alter the distribution of the precious metals amongst the nations of the world: it tends to increase the quantity of commodities, at the same time that it raises general prices in the country where the improvement takes place. To simplify the question, I have been supposing the trade between two countries to be confined to two commodities, to wine and cloth, but it is well known that many and various articles enter into the list of exports and imports. By the abstraction of money from one country, and the accumulation of it in another, all commodities are affected in price, and consequently encouragement is given to the exportation of many more commodities besides money, which will therefore prevent so great an effect from taking place on the value of money in the two countries, as might otherwise be expected. Beside the improvements in arts and machinery, there are various other causes which are constantly operating on the natural course of trade, and which interfere with the equilibrium, and the relative value of money. Bounties on exportation or importation, new taxes on commodities, sometimes by their direct, and at other times by their indirect operation, disturb the natural trade of barter, and produce a consequent necessity of importing or exporting money, in order that prices may be accommodated to the natural course of commerce; and this effect is produced not only in the country where the disturbing cause takes place, but, in a greater or less degree, in every country of the commercial world. This will in some measure account for the different value of money in different countries; it will explain to us why the prices of home commodities, and those of great bulk, are, independently of other causes, higher in those countries where manufactures flourish. Of two countries having precisely the same population, and the same quantity of land of equal fertility in cultivation, with the same knowledge too of agriculture, the prices of raw produce will be highest in that where the greater skill, and the better machinery is used in the manufacture of exportable commodities. The rate of profits will probably differ but little; for wages, or the real reward of the labourer, may be the same in both; but those wages, as well as raw produce, will be rated higher in money in that country, into which, from the advantages attending their skill and machinery, an abundance of money is imported in exchange for their goods. Of these two countries, if one had the advantage in the manufacture of goods of one quality, and the other in the manufacture of goods of another quality, there would be no decided influx of the precious metals into either; but if the advantage very heavily preponderated in favour of either, that effect would be inevitable. In the former part of this work, we have assumed for the purpose of argument, that money always continued of the same value; we are now endeavouring to shew that besides the ordinary variations in the value of money, and those which are common to the whole commercial world, there are also partial variations to which money is subject in particular countries; and in fact, that the value of money is never the same in any two countries, depending as it does on relative taxation, on manufacturing skill, on the advantages of climate, natural productions, and many other causes. Although, however, money is subject to such perpetual variations, and consequently the prices of the commodities which are common to most countries, are also subject to considerable difference, yet no effect will be produced on the rate of profits, either from the influx or efflux of money. Capital will not be increased, because the circulating medium is augmented. If the rent paid by the farmer to his landlord, and the wages to his labourers, be 20 per cent. higher in one country than another, and if at the same time the nominal value of the farmer's capital be 20 per cent. more, he will receive precisely the same rate of profits, although he should sell his raw produce 20 per cent. higher. Profits, it cannot be too often repeated, depend on wages; not on nominal, but real wages; not on the number of pounds that may be annually paid to the labourer, but on the number of days' work necessary to obtain those pounds. Wages may therefore be precisely the same in two countries: they may bear too the same proportion to rent, and to the whole produce obtained from the land, although in one of those countries the labourer should receive ten shillings per week, and in the other twelve. In the early states of society, when manufactures have made little progress, and the produce of all countries is nearly similar, consisting of the bulky and most useful commodities, the value of money in different countries will be chiefly regulated by their distance from the mines which supply the precious metals; but as the arts and improvements of society advance, and different nations excel in particular manufactures, although distance will still enter into the calculation, the value of the precious metals will be chiefly regulated by the superiority of those manufactures. Suppose all nations to produce corn, cattle, and coarse clothing only, and that it was by the exportation of such commodities that gold could be obtained from the countries which produced them, or from those who held them in subjection; gold would naturally be of greater exchangeable value in Poland than in England, on account of the greater expense of sending such a bulky commodity as corn the more distant voyage, and also the greater expense attending the conveying of gold to Poland. This difference in the value of gold, or which is the same thing, this difference in the price of corn in the two countries, would exist although the facilities of producing corn in England should far exceed those of Poland, from the greater fertility of the land, and the superiority in the skill and implements of the labourer. If however Poland should be the first to improve her manufactures, if she should succeed in making a commodity which was generally desirable, including great value in little bulk, or if she should be exclusively blessed with some natural production, generally desirable, and not possessed by other countries, she would obtain an additional quantity of gold in exchange for this commodity, which would operate on the price of her corn, cattle, and coarse clothing. The disadvantage of distance would probably be more than compensated by the advantage of having an exportable commodity of great value, and money would be permanently of lower value in Poland than in England. If on the contrary, the advantage of skill and machinery were possessed by England, another reason would be added to that which before existed, why gold should be less valuable in England than in Poland, and why corn, cattle, and clothing, should be at a higher price in the former country. These I believe to be the only two causes which regulate the comparative value of money in the different countries of the world; for although taxation occasions a disturbance of the equilibrium of money, it does so by depriving the country in which it is imposed of some of the advantages attending skill, industry, and climate. It has been my endeavour carefully to distinguish between a low value of money, and a high value of corn, or any other commodity with which money may be compared. These have been generally considered as meaning the same thing; but it is evident, that when corn rises from five to ten shillings a bushel, it may be owing either to a fall in the value of money, or to a rise in the value of corn. Thus we have seen, that from the necessity of having recourse successively to land of a worse and worse quality, in order to feed an increasing population, corn must rise in relative value to other things. If therefore money continue permanently of the same value, corn will exchange for more of such money, that is to say, it will rise in price. The same rise in the price of corn will be produced by such improvement of machinery in manufactures, as shall enable us to manufacture commodities with peculiar advantages: for the influx of money will be the consequence; it will fall in value, and therefore exchange for less corn. But the effects resulting from a high price of corn when produced by the rise in the value of corn, and when caused by a fall in the value of money, are totally different. In both cases the money price of wages will rise, but if it be in consequence of the fall in the value of money, not only wages and corn, but all other commodities will rise. If the manufacturer has more to pay for wages, he will receive more for his manufactured goods, and the rate of profits will remain unaffected. But when the rise in the price of corn is the effect of the difficulty of production, profits will fall; for the manufacturer will be obliged to pay more wages, and will not be enabled to remunerate himself by raising the price of his manufactured commodity. Any improvement in the facility of working the mines, by which the precious metals may be produced with a less quantity of labour, will sink the value of money generally. It will then exchange for fewer commodities in all countries; but when any particular country excels in manufactures, so as to occasion an influx of money towards it, the value of money will be lower, and the prices of corn and labour will be relatively higher in that country, than in any other. This higher value of money will not be indicated by the exchange; bills may continue to be negotiated at par, although the prices of corn and labour should be 10, 20, or 30 per cent. higher in one country than another. Under the circumstances supposed, such a difference of prices is the natural order of things, and the exchange can only be at par when a sufficient quantity of money is introduced into the country excelling in manufactures, so as to raise the price of its corn and labour. If foreign countries should prohibit the exportation of money, and could successfully enforce obedience to such a law, they might indeed prevent the rise in the prices of the corn and labour of the manufacturing country; for such rise can only take place after the influx of the precious metals, supposing paper money not to be used; but they could not prevent the exchange from being very unfavourable to them. If England were the manufacturing country, and it were possible to prevent the importation of money, the exchange with France, Holland, and Spain, might be 5, 10, or 20 per cent. against those countries. Whenever the current of money is forcibly stopped, and when money is prevented from settling at its just level, there are no limits to the possible variations of the exchange. The effects are similar to those which follow, when a paper money, not exchangeable for specie at the will of the holder, is forced into circulation. Such a currency is necessarily confined to the country where it is issued: it cannot, when too abundant, diffuse itself generally amongst other countries. The level of circulation is destroyed, and the exchange will inevitably be unfavourable to the country where it is excessive in quantity: just so would be the effects of a metallic circulation, if by forcible means, by laws which could not be evaded, money should be detained in a country, when the stream of trade gave it an impetus towards other countries. When each country has precisely the quantity of money which it ought to have, money will not indeed be of the same value in each, for with respect to many commodities it may differ 5, 10, or even 20 per cent., but the exchange will be at par. One hundred pounds in England, or the silver which is in 100_l._, will purchase a bill of 100_l._, or an equal quantity of silver in France, Spain, or Holland. In speaking of the exchange and the comparative value of money in different countries, we must not in the least refer to the value of money estimated in commodities, in either country. The exchange is never ascertained by estimating the comparative value of money in corn, cloth, or any commodity whatever, but by estimating the value of the currency of one country, in the currency of another. It may also be ascertained by comparing it with some standard common to both countries. If a bill on England for 100_l._ will purchase the same quantity of goods in France or Spain, that a bill on Hamburgh for the same sum will do, the exchange between Hamburgh and England is at par; but if a bill on England for 130_l._, will purchase no more than a bill on Hamburgh for 100_l._, the exchange is 30 per cent. against England. In England 100_l._ may purchase a bill, or the right of receiving 101_l._ in Holland, 102_l._ in France, and 105_l._ in Spain. The exchange with England is, in that case, said to be 1 per cent. against Holland, 2 per cent. against France, and 5 per cent. against Spain. It indicates that the level of currency is higher than it should be in those countries, and the comparative value of their currencies, and that of England, would be immediately restored to par, by abstracting from theirs, or by adding to that of England. Those who maintained that our currency was depreciated during the last ten years, when the exchange varied from 20 to 30 per cent. against this country, have never contended, as they have been accused of doing, that money could not be more valuable in one country than another, as compared with various commodities; but they did contend, that 130_l._ could not be detained in England, when it was of no more value, estimated in the money of Hamburgh, or of Holland, than 100_l._ By sending 130_l._ good English pounds sterling to Hamburgh, even at an expense of 5_l._, I should be possessed there of 125_l._; what then could make me consent to give 130_l._ for a bill which would give me 100_l._ in Hamburgh, but that my pounds were not good pounds sterling?--they were deteriorated, were degraded in intrinsic value below the pounds sterling of Hamburgh, and if actually sent there, at an expense of 5_l._, would sell only for 100_l._ With metallic pounds sterling, it is not denied that my 130_l._ would procure me 125_l._ in Hamburgh, but with paper pounds sterling I can only obtain 100_l._; and yet it is maintained that 130_l._ in paper, is of equal value with 130_l._ in silver or gold. Some indeed more reasonably maintained, that 130_l._ in paper was not of equal value with 130_l._ in metallic money; but they said that it was the metallic money which had changed its value, and not the paper money. They wished to confine the meaning of the word depreciation to an actual fall of value, and not to a comparative difference between the value of money, and the standard by which by law it is regulated. One hundred pounds of English money was formerly of equal value with, and could purchase 100_l._ of Hamburgh money: in any other country a bill of 100_l._ on England, or on Hamburgh, could purchase precisely the same quantity of commodities. To obtain the same things, I was lately obliged to give 130_l._ English money, when Hamburgh could obtain them for 100_l._ Hamburgh money. If English money was of the same value then as before, Hamburgh money must have risen in value. But where is the proof of this? How is it to be ascertained whether English money has fallen, or Hamburgh money has risen? there is no standard by which this can be determined. It is a plea which admits of no proof, and can neither be positively affirmed, nor positively contradicted. The nations of the world must have been early convinced, that there was no standard of value in nature, to which we might unerringly refer, and therefore chose a medium, which, on the whole appeared to them less variable than any other commodity. To this standard we must conform till the law is changed, and till some other commodity is discovered, by the use of which we shall obtain a more perfect standard, than that which we have established. While gold is exclusively the standard in this country, money will be depreciated, when a pound sterling is not of equal value with 5 dwts. and 3 grs. of standard gold, and that, whether gold rises or falls in general value. CHAPTER VII. ON TAXES. Taxes are a portion of the produce of the land and labour of a country, placed at the disposal of the government; and are always ultimately paid, either from the capital, or from the revenue of the country. We have already shewn how the capital of a country is either fixed or circulating, according as it is of a more or of a less durable nature. It is difficult to define strictly, where the distinction between circulating and fixed capital begins; for there are almost infinite degrees in the durability of capital. The food of a country is consumed and reproduced, at least once in every year; the clothing of the labourer is probably not consumed and reproduced in less than two years; whilst his house and furniture are calculated to endure for a period of ten or twenty years. When the annual productions of a country exceed its annual consumption, it is said to increase its capital; when its annual consumption at least is not replaced by its annual production, it is said to diminish its capital. Capital may therefore be increased by an increased production, or by a diminished consumption. If the consumption of the government, when increased by the levy of additional taxes, be met either by an increased production, or by a diminished consumption on the part of the people, the taxes will fall upon revenue, and the national capital will remain unimpaired; but if there be no increased production or diminished consumption on the part of the people, the taxes will necessarily fall on capital. In proportion as the capital of a country is diminished, its productions will be necessarily diminished; and therefore, if the same expenditure on the part of the people and of the government continue, with a constantly diminishing annual reproduction, the resources of the people and the state will fall away with increasing rapidity, and distress and ruin will follow. Notwithstanding the immense expenditure of the English government during the last twenty years, there can be little doubt but that the increased production on the part of the people has more than compensated for it. The national capital has not merely been unimpaired, it has been greatly increased, and the annual revenue of the people, even after the payment of their taxes, is probably greater at the present time than at any former period of our history. For the proof of this we might refer to the increase of population--to the extension of agriculture--to the increase of shipping and manufactures--to the building of docks--to the opening of numerous canals, as well as to many other expensive undertakings; all denoting an increase both of capital and of annual production. There are no taxes which have not a tendency to impede accumulation, because there are none which may not be considered as checking production, and as causing the same effects as a bad soil or climate, a diminution of skill or industry, a worse distribution of labour, or the loss of some useful machinery; and although some taxes will produce these effects in a much greater degree than others, it must be confessed that the great evil of taxation is to be found, not so much in any selection of its objects, as in the general amount of its effects taken collectively. Taxes are not necessarily taxes on capital, because they are laid on capital; nor on income, because they are laid on income. If from my income of 1000_l._ per annum, I am required to pay 100_l._, it will really be a tax on my income, should I be content with the expenditure of the remaining 900_l._; but it will be a tax on capital, if I continue to spend 1000_l._ The capital from which my income of 1000_l._ is derived may be of the value of 10,000_l._; a tax of one per cent. on such capital would be 100_l._; but my capital would be unaffected, if after paying this tax, I in like manner contented myself with the expenditure of 900_l._ The desire which every man has to keep his station in life, and to maintain his wealth at the height which it has once attained, occasions most taxes, whether laid on capital or on income, to be paid from income; and therefore as taxation proceeds, or as government increases its expenditure, the annual expenditure of the people must be diminished, unless they are enabled proportionally to increase their capitals and income. It should be the policy of governments to encourage a disposition to do this in the people, and never to lay such taxes as will inevitably fall on capital; since by so doing, they impair the funds for the maintenance of labour, and thereby diminish the future production of the country. In England this policy has been neglected, in taxing the probates of wills, in the legacy duty, and in all taxes affecting the transference of property from the dead to the living. If a legacy of 1000_l._ be subject to a tax of 100_l._, the legatee considers his legacy as only 900_l._, and feels no particular motive to save the 100_l._ duty from his expenditure, and thus the capital of the country is diminished; but if he had really received 1000_l._ and had been required to pay 100_l._ as a tax on income, on wine, on horses, or on servants, he would probably have diminished, or rather not increased his expenditure by that sum, and the capital of the country would have been unimpaired. "Taxes upon the transference of property from the dead to the living," says Adam Smith, "fall finally, as well as immediately, upon the persons to whom the property is transferred. Taxes on the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must therefore take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will therefore only give such a price as he likes. He considers what the land will cost him in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must therefore be very cruel and oppressive." "Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and in fact are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the neat value of it when acquired. All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of labour. They are all more or less unthrifty taxes, that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers, at the expense of the capital of the people, which maintains none but productive." But this is not the only objection to taxes on the transference of property; they prevent the national capital from being distributed in the way most beneficial to the community. For the general prosperity, there cannot be too much facility given to the conveyance and exchange of all kinds of property, as it is by such means that capital of every species is likely to find its way into the hands of those who will best employ it in increasing the productions of the country. "Why," asks M. Say, "does an individual wish to sell his land? it is because he has another employment in view in which his funds will be more productive. Why does another wish to purchase this same land? it is to employ a capital which brings him in too little, which was unemployed, or the use of which he thinks susceptible of improvement. This exchange will increase the general income, since it increases the income of these parties. But if the charges are so exorbitant as to prevent the exchange, they are an obstacle to this increase of the general income." Those taxes however are easily collected; and this by many may be thought to afford some compensation for their injurious effects. CHAPTER VIII. TAXES ON RAW PRODUCE. Having in a former part of this work established, I hope satisfactorily, the principle, that the price of corn is regulated by the cost of its production on that land exclusively, or rather with that capital exclusively, which pays no rent, it will follow that whatever may increase the cost of production will increase the price; whatever may reduce it, will lower the price. The necessity of cultivating poorer land, or of obtaining a less return with a given additional capital on land already in cultivation, will inevitably raise the exchangeable value of raw produce. The discovery of machinery, which will enable the cultivator to obtain his corn at a less cost of production, will necessarily lower its exchangeable value. Any tax which may be imposed on the cultivator, whether in the shape of land-tax, tithes, or a tax on the produce when obtained, will increase the cost of production, and will therefore raise the price of raw produce. If the price of raw produce did not rise so as to compensate the cultivator for the tax, he would naturally quit a trade where his profits were reduced below the general level of profits: this would occasion a diminution of supply, until the unabated demand should have produced such a rise in the price of raw produce, as to make the cultivation of it equally profitable with the investment of capital in any other trade. A rise of price is the only means by which he could pay the tax, and continue to derive the usual and general profits from this employment of his capital. He could not deduct the tax from his rent, and oblige his landlord to pay it, for he pays no rent. He would not deduct it from his profits, for there is no reason why he should continue in an employment which yields small profits, when all other employments are yielding greater. There can then be no question, but that he will have the power of raising the price of raw produce by a sum equal to the tax. A tax on raw produce would not be paid by the landlord; it would not be paid by the farmer; but it would be paid, in an increased price, by the consumer. Rent, it should be remembered, is the difference between the produce obtained by equal portions of labour and capital employed on land of the same or different qualities. It should be remembered too, that the money rent of land, and the corn rent of land, do not vary in the same proportion. In the case of a tax on raw produce, of a land tax, or tithes, the corn rent of land will vary, while the money rent will remain as before. If, as we have before supposed, the land in cultivation were of three qualities, and that with an equal amount of capital, 180 qrs. of corn were obtained from land No. 1. 170 " " " from " 2. 160 " " " from " 3. the rent of No. 1 would be 20 quarters, the difference between that of No. 3 and No. 1; and of No. 2, 10 quarters, the difference between that of No. 3 and No. 2; while No. 3 would pay no rent whatever. Now if the price of corn were 4_l._ per quarter, the money rent of No. 1 would be 80_l._, and that of No. 2, 40_l._ Suppose a tax of 8_s._ per quarter to be imposed on corn; then the price would rise to 4_l._ 8_s._; and if the landlords obtained the same corn rent as before, the rent of No. 1 would be 88_l._, and that of No. 2, 44_l._ But they would not obtain the same corn rent; the tax would fall heavier on No. 1 than on No. 2, and on No. 2 than on No. 3, because it would be levied on a greater quantity of corn. It is the difficulty of production on No. 3 which regulates price; and corn rises to 4_l._ 8_s._, that the profits of the capital employed on No. 3 may be on a level with the general profits of stock. The produce and tax on the three qualities of land will be as follows: No. 1, yielding 180 qrs. at 4_l._ 8_s._ per qr. £792 Deduct the value of 16.3 or 8_s._ per qr. on 180 qrs. 72 ----- ---- Net corn produce 163.7 Net money produce £720 ----- ---- No. 2, yielding 170 qrs. at 4_l._ 8_s._ per qr. £748 Deduct the value of 15.4 {qrs. at 4_l._ 8_s._ or 8_s._ per} { qr. on 170 qrs. } 68 ----- ---- Net corn produce 154.6 Net money produce of £680 ----- ---- No. 3, 160 qrs. at 4_l._ 8_s._ £704 Deduct the value of 14.5 {qrs. at 4_l._ 8_s._ or 8_s._ per} { qr. on 160 } 64 ----- ---- Net corn produce 145.5 Net money produce £640 ----- ---- The money rent of No. 1 would continue to be 80_l._, or the difference between 640 and 720_l._; and that of No. 2, 40_l._, or the difference between 640_l._ and 680_l._, precisely the same as before; but the corn rent will be reduced from 20 quarters on No. 1 to 18.2 quarters, and that on No. 2 from 10 to 9.1 quarters. A tax on corn, then, would fall on the consumers of corn, and would raise its value as compared with all other commodities, in a degree proportioned to the tax. In proportion as raw produce entered into the composition of other commodities, would their value also be raised, unless the tax were countervailed by other causes. They would in fact be indirectly taxed, and their value would rise in proportion to the tax. A tax, however, on raw produce, and on the necessaries of the labourer, would have another effect--it would raise wages. From the effect of the principle of population on the increase of mankind, wages of the lowest kind never continue much above that rate which nature and habit demand for the support of the labourers. This class is never able to bear any considerable portion of taxation; and, consequently, if they had to pay 8_s._ per quarter in addition for wheat, and in some smaller proportion for other necessaries, they would not be able to subsist on the same wages as before, and to keep up the race of labourers. Wages would inevitably and necessarily rise; and in proportion as they rose, profits would fall. Government would receive a tax of 8_s._ per quarter on all the corn consumed in the country, a part of which would be paid directly by the consumers of corn; the other part would be paid indirectly by those who employed labour, and would affect profits in the same manner as if wages had been raised from the increased demand for labour compared with the supply, or from an increasing difficulty of obtaining the food and necessaries required by the labourer. In as far as the tax might affect consumers, it would be an equal tax, but in as far as it would affect profits, it would be a partial tax; for it would neither operate on the landlord nor on the stockholder, since they would continue to receive, the one the same money rent, the other the same money dividends as before. A tax on the produce of the land then would operate as follows: 1st. It would raise the price of raw produce by a sum equal to the tax, and would therefore fall on each consumer in proportion to his consumption. 2dly. It would raise the wages of labour, and lower profits. It may then be objected against such a tax, 1st. That by raising the wages of labour, and lowering profits, it is an unequal tax, as it affects the income of the farmer, trader, and manufacturer, and leaves untaxed the income of the landlord, stockholder, and others enjoying fixed incomes. 2dly. That there would be a considerable interval between the rise in the price of corn and the rise of wages, during which much distress would be experienced by the labourer. 3rdly. That raising wages and lowering profits is a discouragement to accumulation, and acts in the same way as a natural poverty of soil. 4thly. That by raising the price of raw produce, the prices of all commodities into which raw produce enters, would be raised, and that therefore we should not meet the foreign manufacture on equal terms in the general market. With respect to the first objection, that by raising the wages of labour and lowering profits it acts unequally, as it affects the income of the farmer, trader, and manufacturer, and leaves untaxed the income of the landlord, stockholder, and others enjoying fixed incomes,--it may be answered, that if the operation of the tax be unequal, it is for the legislature to make it equal, by taxing directly the rent of land, and the dividends from stock. By so doing, all the objects of an income tax would be obtained, without the inconvenience of having recourse to the obnoxious measure of prying into every man's concerns, and arming commissioners with powers repugnant to the habits and feelings of a free country. With respect to the second objection, that there would be a considerable interval between the rise of the price of corn and the rise of wages, during which much distress would be experienced by the lower classes,--I answer, that under different circumstances, wages follow the price of raw produce with very different degrees of celerity; that in some cases no effect whatever is produced on wages by a rise of corn; in others, the rise of wages precedes the rise in the price of corn; again, in some the effect is slow, and in others the interval must be very short. Those who maintain that it is the price of necessaries which regulates the price of labour, always allowing for the particular state of progression in which the society, may be seem to have conceded too readily, that a rise or fall in the price of necessaries will be very slowly succeeded by a rise or fall of wages. A high price of provisions may arise from very different causes, and may accordingly produce very different effects. It may arise from 1st. A deficient supply. 2nd. From a gradually increasing demand, which may be ultimately attended with an increased cost of production. 3dly. From a fall in the value of money. 4thly. From taxes on necessaries. These four causes have not been sufficiently distinguished and separated by those who have inquired into the influence of a high price of necessaries on wages. We will examine them severally. A bad harvest will produce a high price of provisions, and the high price is the only means by which the consumption is compelled to conform to the state of the supply. If all the purchasers of corn were rich, the price might rise to any degree, but the result would remain unaltered; the price would at last be so high, that the least rich would be obliged to forego the use of a part of the quantity which they usually consumed, as by diminished consumption alone, the demand could be brought down to the limits of the supply. Under such circumstances no policy can be more absurd, than that of forcibly regulating money wages by the price of food, as is frequently done, by misapplication of the poor laws. Such a measure affords no real relief to the labourer, because its effect is to raise still higher the price of corn, and at last he must be obliged to limit his consumption in proportion to the limited supply. In the natural course of affairs a deficient supply from bad seasons, without any pernicious and unwise interference, would not be followed by a rise of wages. The raising of wages is merely nominal to those who receive them; it increases the competition in the corn market, and its ultimate effect is to raise the profits of the growers and dealers in corn. The wages of labour are really regulated by the proportion between the supply and demand of necessaries, and the supply and demand of labour; and money is merely the medium, or measure, in which wages are expressed. In this case then the distress of the labourer is unavoidable, and no legislation can afford a remedy, except by the importation of additional food. When a high price of corn is the effect of an increasing demand, it is always preceded by an increase of wages, for demand cannot increase, without an increase of means in the people to pay for that which they desire. An accumulation of capital naturally produces an increased competition among the employers of labour, and a consequent rise in its price. The increased wages are not immediately expended on food, but are first made to contribute to the other enjoyments of the labourer. His improved condition however induces, and enables him to marry, and then the demand for food for the support of his family naturally supersedes that of those other enjoyments on which his wages were temporarily expended. Corn rises then because the demand for it increases, because there are those in the society who have improved means of paying for it; and the profits of the farmer will be raised above the general level of profits, till the requisite quantity of capital has been employed on its production. Whether, after this has taken place, corn shall again fall to its former price, or shall continue permanently higher, will depend on the quality of the land from which the increased quantity of corn has been supplied. If it be obtained from land of the same fertility, as that which was last in cultivation, and with no greater cost of labour, the price will fall to its former state; if from poorer land, it will continue permanently higher. The high wages in the first instance proceeded from an increase in the demand for labour: inasmuch as it encouraged marriage, and supported children, it produced the effect of increasing the supply of labour. But when the supply is obtained, wages will again fall to their former price, if corn has fallen to its former price: to a higher than the former price, if the increased supply of corn has been produced from land of an inferior quality. A high price is by no means incompatible with an abundant supply: the price is permanently high, not because the quantity is deficient, but because there has been an increased cost in producing it. It generally happens indeed, that when a stimulus has been given to population, an effect is produced beyond what the case requires; the population may be, and generally is so much increased as, notwithstanding the increased demand for labour, to bear a greater proportion to the funds for maintaining labourers than before the increase of capital. In this case a re-action will take place, wages will be below their natural level, and will continue so, till the usual proportion between the supply and demand has been restored. In this case then, the rise in the price of corn is preceded by a rise of wages, and therefore entails no distress on the labourer. A fall in the value of money, in consequence of an influx of the precious metals from the mines, or from the abuse of the privileges of banking, is another cause for the rise of the price of food; but it will make no alteration in the quantity produced. It leaves undisturbed too the number of labourers, as well as the demand for them; for there will be neither an increase nor a diminution of capital. The quantity of necessaries to be allotted to the labourer, depends on the comparative demand and supply of necessaries, with the comparative demand and supply of labour; money being only the medium in which the quantity is expressed; and as neither of these is altered, the real reward of the labourer will not alter. Money wages will rise, but they will only enable him to furnish himself with the same quantity of necessaries as before. Those who dispute this principle, are bound to shew why an increase of money should not have the same effect in raising the price of labour, the quantity of which has not been increased, as they acknowledge it would have on the price of shoes, of hats, and of corn, if the quantity of those commodities were not increased. The relative market value of hats and shoes is regulated by the demand and supply of hats, compared with the demand and supply of shoes, and money is but the medium in which their value is expressed. If shoes be doubled in price, hats will also be doubled in price, and they will retain the same comparative value. So if corn and all the necessaries of the labourer be doubled in price, labour will be doubled in price also, and while there is no interruption to the usual demand and supply of necessaries and of labour, there can be no reason why they should not preserve their relative value. Neither a fall in the value of money, nor a tax on raw produce, though each will raise the price, will _necessarily_ interfere with the quantity of raw produce; or with the number of people, who are both able to purchase, and willing to consume it. It is very easy to perceive why, when the capital of a country increases irregularly, wages should rise, whilst the price of corn remains stationary, or rises in a less proportion; and why, when the capital of a country diminishes, wages should fall whilst corn remains stationary, or falls in a much less proportion, and this too for a considerable time; the reason is, because labour is a commodity which cannot be increased and diminished at pleasure. If there are too few hats in the market for the demand, the price will rise, but only for a short time; for in the course of one year, by employing more capital in that trade, any reasonable addition may be made to the quantity of hats, and therefore their market price cannot long very much exceed their natural price; but it is not so with men; you cannot increase their number in one or two years when there is an increase of capital, nor can you rapidly diminish their number when capital is in a retrograde state; and therefore, the number of hands increasing or diminishing slowly, whilst the funds for the maintenance of labour increase or diminish rapidly, there must be a considerable interval before the price of labour is exactly regulated by the price of corn and necessaries; but in the case of a fall in the value of money, or of a tax on corn, there is not necessarily any excess in the supply of labour, nor any abatement of demand, and therefore there can be no reason why the labourer should sustain a real diminution of wages. A tax on corn does not necessarily diminish the quantity of corn, it only raises its money price; it does not necessarily diminish the demand compared with the supply of labour; why then should it diminish the portion paid to the labourer? Suppose it true that it did diminish the quantity given to the labourer, in other words, that it did not raise his money wages in the same proportion as the tax raised the price of the corn which he consumed; would not the supply of corn exceed the demand?--would it not fall in price? and would not the labourer thus obtain his usual portion? In such case indeed capital would be withdrawn from agriculture; for if the price were not increased by the whole amount of the tax, agricultural profits would be lower than the general level of profits, and capital would seek more advantageous employment. In regard then to a tax on raw produce, which is the point under discussion, it appears to me that no interval which could bear oppressively on the labourer, would elapse between the rise in the price of raw produce, and the rise in the wages of the labourer; and that therefore no other inconvenience would be suffered by this class, than that which they would suffer from any other mode of taxation, namely, the risk that the tax might infringe on the funds destined for the maintenance of labour, and might therefore check or abate the demand for it. With respect to the third objection against taxes on raw produce, namely, that the raising wages, and lowering profits, is a discouragement to accumulation, and acts in the same way as a natural poverty of soil; I have endeavoured to shew in another part of this work that savings may be as effectually made from expenditure as from production; from a reduction in the value of commodities, as from a rise in the rate of profits. By increasing my profits from 1000_l._ to 1200_l._, whilst prices continue the same, my power of increasing my capital by savings is increased but it is not increased so much as it would be if my profits continued as before, whilst commodities were so lowered in price, that 800_l._ would procure me as much as 1000_l._ purchased before. Taxation under every form presents but a choice of evils; if it does not act on profit, it must act on expenditure; and provided the burden be equally borne, and do not repress reproduction, it is indifferent on which it is laid. Taxes on production, or on the profits of stock, whether applied immediately to profits, or indirectly, by taxing the land or its produce, have this advantage over other taxes; no class of the community can escape them, and each contributes according to his means. From taxes on expenditure a miser may escape; he may have an income of 10,000 per annum, and expend only 300_l._; but from taxes on profits, whether direct or indirect, he cannot escape; he will contribute to them either by giving up a part or the value of a part of his produce; or by the advanced prices of the necessaries essential to production, he will be unable to continue to accumulate at the same rate. He may indeed have an income of the same value, but he will not have the same command of labour, nor of an equal quantity of materials on which such labour can be exercised. If a country is insulated from all others, having no commerce with any of its neighbours, it can in no way shift any portion of its taxes from itself. A portion of the produce of its land and labour will be devoted to the service of the state; and I cannot but think that, unless it presses unequally on that class which accumulates and saves, it will be of little importance whether the taxes be levied on profits, on agricultural, or on manufactured commodities. If my revenue be 1000_l._ per annum, and I must pay taxes to the amount of 100_l._, it is of little importance whether I pay it from my revenue, leaving myself only 900_l._, or pay 100_l._ in addition for my agricultural commodities, or for my manufactured goods. If 100_l._ is my fair proportion of the expenses of the country, the virtue of taxation consists in making sure that I shall pay that 100_l._, neither more nor less; and that cannot be effected in any manner so securely as by taxes on wages, profits, or raw produce. The fourth and last objection which remains to be noticed is: That by raising the price of raw produce, the prices of all commodities into which raw produce enters, will be raised, and that therefore we shall not meet the foreign manufacturer on equal terms in the general market. In the first place, corn and _all_ home commodities could not be materially raised in price without an influx of the precious metals; for the same quantity of money could not circulate the same quantity of commodities, at high as at low prices, and the precious metals never could be purchased with dear commodities. When more gold is required, it must be obtained by giving more, and not fewer commodities in exchange for it. Neither could the want of money be supplied by paper, for it is not paper that regulates the value of gold as a commodity, but gold that regulates the value of paper. Unless then the value of gold could be lowered, no paper could be added to the circulation without being depreciated. And that the value of gold could not be lowered appears clear, when we consider that the value of gold as a commodity must be regulated by the quantity of goods which must be given to foreigners in exchange for it. When gold is cheap, commodities are dear; and when gold is dear, commodities are cheap, and fall in price. Now as no cause is shewn why foreigners should sell their gold cheaper than usual, it does not appear probable that there would be any influx of gold. Without such an influx there can be no increase of quantity, no fall in its value, no rise in the general price of goods. The probable effect of a tax on raw produce would be to raise the price of all commodities in which raw produce entered, but not in any degree proportioned to the tax; while other commodities in which no raw produce entered, such as articles made of the metals and the earths, would fall in price: so that the same quantity of money as before would be adequate to the whole circulation. A tax which should have the effect of raising the price of all home productions, would not discourage exportation, except during a very limited time. If they were raised in price at home, they could not indeed immediately be profitably exported, because they would be subject to a burthen here from which abroad they were free. The tax would produce the same effect as an alteration in the value of money, which was not general and common to all countries, but confined to a single one. If England were that country, she might not be able to sell, but she would be able to buy, because importable commodities would not be raised in price. Under these circumstances nothing but money could be exported in return for foreign commodities, but this is a trade which could not long continue; a nation cannot be exhausted of its money, for after a certain quantity has left it, the value of the remainder will rise, and such a price of commodities will be the consequence, that they will again be capable of being profitably exported. When money had risen, therefore, we should no longer export it in return for goods imported, but we should export those manufactures which had first been raised in price, by the rise in the price of the raw produce from which they were made, and then again lowered by the exportation of money. But it may be objected, that when money so rose in value, it would rise with respect to foreign as well as home commodities, and therefore that all encouragement to import foreign goods would cease. Thus, suppose we imported goods which cost 100_l._ abroad, and which sold for 120_l._ here, we should cease to import them, when the value of money had so risen in England, that they would only sell for 100_l._ here: this however could never happen. The motive which determines us to import a commodity, is the discovery of its relative cheapness abroad: it is the comparison of its natural price abroad, with its natural price at home. If a country exports hats, and imports cloth, it does so because it can obtain more cloth by making hats, and exchanging them for cloth, than if it made the cloth itself. If the rise of raw produce occasions any increased cost of production in making hats, it would occasion also an increased cost in making cloth. If therefore both commodities were made at home, they would both rise. One, however, being a commodity which we import, would not rise, neither would it fall, when the value of money rose; for by not falling, it would regain its natural relation to the exported commodity. The rise of raw produce makes a hat rise from 30 to 33 shillings, or 10 per cent.: the same cause if we manufactured cloth, would make it rise from 20_s._ to 22_s._ per yard. This rise does not destroy the relation between cloth and hats; a hat was, and continues to be, worth one yard and a half of cloth. But if we import cloth, its price will continue uniformly at 20_s._ per yard, unaffected first by the fall, and then by the rise in the value of money; whilst hats, which had risen from 30_s._ to 33_s._, will again fall from 33_s._ to 30_s._, at which point the relation between cloth and hats will be restored. To simplify the consideration of this subject, I have been supposing that a rise in the value of raw materials would affect, in an equal proportion, all home commodities; that if the effect on one were to raise it 10 per cent., it would raise all 10 per cent.; but as the value of commodities is very differently made up of raw material and labour; as some commodities, for instance all those made from the metals, would be unaffected by the rise of raw produce from the surface of the earth, it is evident that there would be the greatest variety in the effects produced on the value of commodities, by a tax on raw produce. As far as this effect was produced, it would stimulate or retard the exportation of particular commodities, and would undoubtedly be attended with the same inconvenience that attends the taxing of commodities; it would destroy the natural relation between the value of each. Thus, the natural price of a hat, instead of being the same as a yard and a half of cloth, might only be of the value of a yard and a quarter, or it might be of the value of a yard and three quarters, and therefore rather a different direction might be given to foreign trade. All these inconveniences would not interfere with the value of the exports and imports; they would only prevent the very best distribution of the capital of the whole world, which is never so well regulated, as when every commodity is freely allowed to settle at its natural price. Although then the rise in the price of most of our own commodities, would for a time check exportation generally, and might permanently prevent the exportation of a few commodities, it could not materially interfere with foreign trade, and would not place us under any comparative disadvantage as far as regarded competition in foreign markets. CHAPTER VIII.* TAXES ON RENT. A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every other quality. Three sorts of land, No. 1, 2, and 3, are in cultivation, and yield respectively with the same labour 180, 170, and 160 quarters of wheat; but No. 3 pays no rent, and is therefore untaxed: the rent then of No. 2 cannot be made to exceed the value of ten, nor No. 1, of twenty quarters. Such a tax could not raise the price of raw produce, because as the cultivator of No. 3 pays neither rent nor tax, he would in no way be enabled to raise the price of the commodity produced. A tax on rent would not discourage the cultivation of fresh land, for such land pays no rent, and would be untaxed. If No. 4 were taken into cultivation, and yielded 150 quarters, no tax would be paid for such land; but it would create a rent of ten quarters on No. 3, which would then commence paying the tax. A tax on rent, as rent is constituted, would discourage cultivation, because it would be a tax on the profits of the landlord. The term rent of land, as I have elsewhere observed, is applied to the whole amount of the value paid by the farmer to his landlord, a part only of which is strictly rent. The buildings and fixtures, and other expenses paid for by the landlord, form strictly a part of the stock of the farm, and must have been furnished by the tenant, if not provided by the landlord. Rent is the sum paid to the landlord for the use of the land, and for the use of the land only. The further sum that is paid to him under the name of rent, is for the use of the buildings, &c., and is really the profits of the landlord's stock. In taxing rent, as no distinction would be made between that part paid for the use of the land, and that paid for the use of the landlord's stock, a portion of the tax would fall on the landlord's profits, and would therefore discourage cultivation, unless the price of raw produce rose. On that land, for the use of which no rent was paid, a compensation under that name might be given to the landlord for the use of his buildings. These buildings would not be erected, nor would raw produce be grown on such land, till the price at which it sold would not only pay for all the usual outgoings, but also for this additional one of the tax. This part of the tax does not fall on the landlord, nor on the farmer, but on the consumer of raw produce. There can be little doubt, but that if a tax were laid on rent, landlords would soon find a way to discriminate between that which was paid to them for the use of the land, and that which was paid for the use of the buildings, and the improvements which were made by the landlord's stock. The latter would either be called the rent of house and buildings, or in all new land taken into cultivation such buildings and improvements would be made by the tenant, and not by the landlord. The landlord's capital might indeed be really employed for that purpose; it might be nominally expended by the tenant, the landlord furnishing him with the means, either in the shape of a loan, or in the purchase of an annuity for the duration of the lease. Whether distinguished or not, there is a real difference between the nature of the compensations which the landlord receives for these different objects; and it is quite certain, that a tax on the real rent of land falls wholly on the landlord, but that a tax on that remuneration which the landlord receives for the use of his stock expended on the farm, falls on the consumer of raw produce. If a tax were laid on rent, and no means of separating the remuneration now paid by the tenant to the landlord under the name of rent were adopted, the tax, as far as it regarded the rent on the buildings and other fixtures, would never fall for any length of time on the landlord, but on the consumer. The capital expended on these buildings, &c., must afford the usual profits of stock; but it would cease to afford this profit on the land last cultivated, if the expenses of those buildings, &c. did not fall on the tenant; and if they did, the tenant would then cease to make his usual profits of stock, unless he could charge them on the consumer. CHAPTER IX. TITHES. Tithes are a tax on the gross produce of the land, and, like taxes on raw produce, fall wholly on the consumer. They differ from a tax on rent, inasmuch as they affect land which such a tax would not reach; and raise the price of raw produce, which that tax e of raw produce, which that tax would not alter. Lands of the worst quality, as well as of the best, pay tithes, and exactly in proportion to the quantity of produce obtained from them; tithes are therefore an equal tax. If land of the last quality, or that which pays no rent, and which regulates the price of corn, yield a sufficient quantity to give the farmer the usual profits of stock, when the price of wheat is 4_l._ per quarter, the price must rise to 4_l._ 8_s._ before the same profits can be obtained after the tithes are imposed, because for every quarter of wheat the cultivator must pay eight shillings to the church. The only difference between tithes and taxes on raw produce, is, that one is a variable money tax, the other a fixed money tax. In a stationary state of society, where there is neither increased nor diminished facility of producing corn, they will be precisely the same in their effects; for in such a state corn will be at an invariable price, and the tax will therefore be also invariable. In either a retrograde state, or in a state in which great improvements are made in agriculture, and where consequently raw produce will fall in value comparatively with other things, tithes will be a lighter tax than a permanent money tax; for if the price of corn should fall from 4_l._ to 3_l._, the tax would fall from eight to six shillings. In a progressive state of society, yet without any marked improvements in agriculture, the price of corn would rise, and tithes would be a heavier tax than a permanent money tax. If corn rose from 4_l._ to 5_l._, the tithes on the same land would advance from eight to ten shillings. Neither tithes nor a money tax will affect the money rent of landlords, but both will materially affect corn rents. We have already observed how a money tax operates on corn rents, and it is equally evident that a similar effect would be produced by tithes. If the lands, No. 1, 2, 3, respectively produced 180, 170, and 160 quarters, the rents might be on No. 1, twenty quarters, and on No. 2, ten quarters; but they would no longer preserve that proportion after the payment of tithes: for if a tenth be taken from each, the remaining produce will be 162, 153, 144, and consequently the corn rent of No. 1 will be reduced to eighteen, and that of No. 2 to nine quarters. But the price of corn would rise from 4_l._ to 4_l._ 8_s._ 10-2/3_d._; for nine quarters are to 4_l._ as ten quarters to 4_l._ 8_s._ 10-2/3_d._, and consequently the money rent would continue unaltered; for on No. 1 it would be 80_l._, and on No. 2, 40_l._ The chief objection against tithes is, that they are not a permanent and fixed tax, but increase in value, in proportion as the difficulty of producing corn increases. If those difficulties should make the price of corn 4_l._ the tax is 8_s._, if they should increase it to 5_l._, the tax is 10_s._, and at 6_l._, it is 12_s._ They not only rise in value, but they increase in amount: thus, when No. 1 was cultivated, the tax was only levied on 180 quarters; when No. 2 was cultivated, it was levied on 180 + 170, or 350 quarters; and when No. 3 was cultivated, on 180 + 170 + 160 = 510 quarters. Not only is the amount of the tax increased from 100,000 quarters, to 200,000 quarters, when the produce is increased from one to two millions of quarters; but, owing to the increased labour necessary to produce the second million, the relative value of raw produce is so advanced, that the 200,000 quarters may be, though only twice in quantity, yet in value three times that of the 100,000 quarters which were paid before. If an equal value were raised for the church by any other means, increasing in the same manner as tithes increase, proportionably with the difficulty of cultivation, the effect would be the same. The church would be constantly obtaining an increased portion of the net produce of the land and labour of the country. In an improving state of society, the net produce of land is always diminishing in proportion to its gross produce; but it is from the net income of a country that all taxes are ultimately paid, either in a progressive or in a stationary country. A tax increasing with the gross income, and falling on the net income, must necessarily be a very burdensome, and a very intolerable tax. Tithes are a tenth of the gross, and not of the net produce of the land, and therefore as society improves in wealth, they must, though the same proportion of the gross produce, become a larger and larger portion of the net produce. Tithes however may be considered as injurious to landlords, inasmuch as they act as a bounty on importation, by taxing the growth of home corn, while the importation of foreign corn remains unfettered. And if in order to relieve the landlords from the effects of the diminished demand for land, which such a bounty must encourage, imported corn were also taxed one tenth, and the produce paid to the state, no measure could be more fair and equitable; since whatever were paid to the state by this tax, would go to diminish the other taxes which the expenses of government make necessary: but if such a tax were devoted only to increase the fund paid to the church, it might indeed on the whole increase the general mass of production, but it would diminish the portion of that mass allotted to the productive classes. If the trade of cloth were left perfectly free, our manufacturers might be able to sell cloth cheaper than we could import it. If a tax were laid on the home manufacturer, and not on the importer of cloth, capital might be injuriously driven from the manufacture of cloth to the manufacture of some other commodity, as it might then be imported cheaper than it could be made at home. If imported cloth should also be taxed, cloth would again be manufactured at home. The consumer first bought cloth at home, because it was cheaper than foreign cloth; he then bought foreign cloth, because it was cheaper untaxed than home cloth taxed: he lastly bought it again at home, because it was cheaper when both home and foreign cloth were taxed. It is in the last case that he pays the greatest price for his cloth, but all his additional payment is gained by the state. In the second case, he pays more than in the first, but all he pays in addition is not received by the state, it is an increased price caused by difficulty of production, which is incurred, because the easiest means of production are taken away from us, by being fettered with a tax. CHAPTER X. LAND-TAX. A land-tax, levied in proportion to the rent of land, and varying with every variation of rent, is in effect a tax on rent; and as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on the land with a view to profit merely, and which never pays rent, it will not in any way affect the price of raw produce, but will fall wholly on the landlords. In no respect would such a tax differ from a tax on rent. But if a land-tax be imposed on all cultivated land, however moderate that tax may be, it will be a tax on produce, and will therefore raise the price of produce. If No. 3 be the land last cultivated, although it should pay no rent, it cannot, after the tax, be cultivated, and afford the general rate of profit, unless the price of produce rise to meet the tax. Either capital will be withheld from that employment until the price of corn shall have risen, in consequence of demand, sufficiently to afford the usual profit; or if already employed on such land, it will quit it, to seek a more advantageous employment. The tax cannot be removed to the landlord, for by the supposition he receives no rent. Such a tax may be proportioned to the quality of the land and the abundance of its produce, and then it differs in no respect from tithes; or it may be a fixed tax per acre on all land cultivated, whatever its quality may be. A land-tax of this latter description would be a very unequal tax, and would be contrary to one of the four maxims with regard to taxes in general, to which, according to Adam Smith, all taxes should conform. The four maxims are as follow: 1. "The subjects of every state ought to contribute towards the support of the Government, as nearly as possible in proportion to their respective abilities. 2. "The tax which each individual is bound to pay ought to be certain and not arbitrary. 3. "Every tax ought to be levied at the time, or in the manner in which it is most likely to be convenient for the contributor to pay it. 4. "Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state." An equal land-tax, imposed indiscriminately and without any regard to the distinction of its quality, on all land cultivated, will raise the price of corn in proportion to the tax paid by the cultivator of the land of the worst quality. Lands of different quality, with the employment of the same capital, will yield very different quantities of raw produce. If on the land which yields a thousand quarters of corn with a given capital, a tax of 100_l._ be laid, corn will rise 2_s._ per quarter to compensate the farmer for the tax. But with the same capital on land of a better quality, 2,000 quarters may be produced, which at 2_s._ a quarter advance, would give 200_l._; the tax, however, bearing equally on both lands will be 100_l._ on the better as well as on the inferior, and consequently the consumer of corn will be taxed, not only to pay the exigencies of the state, but also to give to the cultivator of the better land, 100_l._ per annum. during the period of his lease, and afterwards to raise the rent of the landlord to that amount. A tax of this description then would be contrary to the fourth maxim of Adam Smith, it would take out and keep out of the pockets of the people, more than what it brought into the treasury of the state. The taille in France before the Revolution, was a tax of this description; those lands only were taxed, which were held by an ignoble tenure, the price of raw produce rose in proportion to the tax, and therefore they whose lands were not taxed, were benefited by the increase of their rent. Taxes on raw produce as well as tithes are free from this objection: they raise the price of raw produce, but they take from each quality of land a contribution in proportion to its actual produce, and not in proportion to the produce of that which is the least productive. From the peculiar view which Adam Smith took of rent, from his not having observed that much capital is expended in every country, on the land for which no rent is paid, he concluded that all taxes on the land, whether they were laid on the land itself in the form of land-tax or tithes, or on the produce of the land, or were taken from the profits of the farmer, were all invariably paid by the landlord, and that he was in all cases the real contributor, although the tax was in general, nominally advanced by the tenant. "Taxes upon the produce of the land," he says, "are in reality taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord. When a certain portion of the produce is to be paid away for a tax, the farmer computes as well as he can, what the value of this portion is, one year with another, likely to amount to, and he makes a proportionable abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute before hand what the church tithe, which is a land-tax of this kind, is, one year with another, likely to amount to." It is undoubtedly true, that the farmer does calculate his probable outgoings of all descriptions, when agreeing with his landlord concerning the rent of his farm; and if for the tithe paid to the church, or for the tax on the produce of the land, he were not compensated by a rise in the relative value of the produce of his farm, he would naturally deduct them from his rent. But this is precisely the question in dispute: whether he will eventually deduct them from his rent, or be compensated by a higher price of produce. For the reasons which have been already given, I cannot have the least doubt but that they would raise the price of produce, and consequently that Adam Smith has taken an incorrect view of this important question. Dr. Smith's view of this subject is probably the reason why he has described "the tithe, and every other land-tax of this kind, under the appearance of perfect equality, as very unequal taxes; a certain portion of the produce being in different situations, equivalent to a very different portion of the rent." I have endeavoured to shew that such taxes do not fall with unequal weight on the different classes of farmers or landlords, as they are both compensated by the rise of raw produce, and only contribute to the tax in proportion as they are consumers of raw produce. Inasmuch indeed as wages, and through wages, the rate of profits are affected, landlords, instead of contributing their full share to such a tax, are the class peculiarly exempted. It is the profits of stock, from which that portion of the tax is derived which falls on those labourers, who from the insufficiency of their funds, are incapable of paying taxes; this portion is exclusively borne by all those whose income is derived from the employment of stock, and therefore it in no degree affects landlords. It is not to be inferred from this view of tithes, and taxes on the land and its produce, that they do not discourage cultivation. Every thing which raises the exchangeable value of commodities of any kind, which are in very general demand, tends to discourage both cultivation and production; but this is an evil inseparable from all taxation, and is not confined to the particular taxes of which we are now speaking. This may be considered indeed as the unavoidable disadvantage attending all taxes received and expended by the state. Every new tax becomes a new charge on production, and raises natural price. A portion of the labour of the country which was before at the disposal of the contributor to the tax, is placed at the disposal of the state. This portion may become so large, that sufficient surplus produce may not be left to stimulate the exertions of those who usually augment by their savings the capital of the state. Taxation has happily never yet in any free country been carried so far as constantly from year to year to diminish its capital. Such a state of taxation could not be long endured; or if endured, it would be constantly absorbing so much of the annual produce of the country as to occasion the most extensive scene of misery, famine, and depopulation. "A land-tax," says Adam Smith, "which like that of Great Britain, is assessed upon each district according to a certain invariable canon, though it should be equal at the time of its first establishment, necessarily becomes unequal in process of time, according to the unequal degrees of improvement or neglect in the cultivation of the different parts of the country. In England the valuation according to which the different counties and parishes were assessed to the land-tax by the 4th. William and Mary, was very unequal, even at its first establishment. This tax, therefore, so far offends against the first of the four maxims above mentioned. It is perfectly agreeable to the other three. It is perfectly certain. The time of payment for the tax being the same as that for the rent, is as convenient as it can be to the contributor. Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in the payment of the rent." If the tax be shifted by the tenant not on the landlord but on the consumer, then if it be not unequal at first, it can never become so; for the price of produce has been at once raised in proportion to the tax, and will afterwards vary no more on that account. It may offend if unequal, as I have attempted to shew that it will, against the fourth maxim above mentioned, but it will not offend against the first. It may take more out of the pockets of the people than it brings into the public treasury of the state, but it will not fall unequally on any particular class of contributors. M. Say appears to me to have mistaken the nature and effects of the English land-tax, when he says, "Many persons attribute to this fixed valuation, the great prosperity of English agriculture. That it has very much contributed to it there can be no doubt. But what should we say to a Government, which, addressing itself to a small trader, should hold this language: 'With a small capital you are carrying on a limited trade, and your direct contribution is in consequence very small. Borrow, and accumulate capital; extend your trade, so that it may procure you immense profits; yet you shall never pay a greater contribution. Moreover, when your successors shall inherit your profits, and shall have further increased them, they shall not be valued higher to them than they are to you; and your successors shall not bear a greater portion of the public burdens.' "Without doubt this would be a great encouragement given to manufactures and trade; but would it be just? Could not their advancement be obtained at any other price? In England itself, has not manufacturing and commercial industry made even greater progress, since the same period, without being distinguished with so much partiality? A landlord by his assiduity, economy, and skill, increases his annual revenue by 5000 francs. If the state claim of him the fifth part of his augmented income, will there not remain 4000 francs of increase to stimulate his further exertions?" If Mr. Say's suggestion were followed, and the state were to claim the fifth part of the augmented income of the farmer, it would be a partial tax, acting on the farmer's profits, and not affecting the profits of other employments. The tax would be paid by all lands, by those which yielded scantily as well as by those which yielded abundantly; and on some lands there could be no compensation for it by deduction from rent, for no rent is paid. A partial tax on profits never falls on the trade on which it is laid, for the trader will either quit his employment, or remunerate himself for the tax. Now those who pay no rent could be recompensed only by a rise in the price of produce, and thus would M. Say's proposed tax fall on the consumer, and not either on the landlord or farmer. If the proposed tax were increased in proportion to the increased quantity, or value, of the gross produce obtained from the land, it would differ in nothing from tithes, and would equally be transferred to the consumer. Whether then it fell on the gross or on the net produce of land, it would be equally a tax on consumption, and would only affect the landlord and farmer in the same way as other taxes on raw produce. If no tax whatever had been laid on the land, and the same sum had been raised by any other means, agriculture would have flourished at least as well as it has done; for it is impossible that any tax on land can be an encouragement to agriculture; a moderate tax may not, and probably does not, greatly prevent, but it cannot encourage production. The English Government has held no such language as M. Say has supposed. It did not promise to exempt the agricultural class and their successors from all future taxation, and to raise the further supplies which the state might require, from the other classes of society; it said only, "in this mode we will no further burthen the land; but we retain to ourselves the most perfect liberty of making you pay, under some other form, your full quota to the future exigencies of the state." Speaking of taxes in kind, or a tax of a certain proportion of the produce, which is precisely the same as tithes, M. Say says, "This mode of taxation appears to be the most equitable; there is however none which is less so: it totally leaves out of consideration the advances made by the producer; it is proportioned to the gross, and not to the net revenue. Two agriculturists cultivate different kinds of raw produce: one cultivates corn on middling land, his expenses amounting annually on an average to 8000 francs; the raw produce from his lands sells for 12,000 francs; he has then a net revenue of 4000 francs. "His neighbour has pasture or wood land, which brings in every year a like sum of 12,000 francs, but his expenses amount only to 2000 francs. He has therefore on an average a net revenue of 10,000 francs. "A law ordains that a twelfth of the produce of all the fruits of the earth be levied in kind, whatever they may be. From the first is taken in consequence of this law, corn of the value of 1000 francs; and from the second, hay, cattle, or wood, of the same value of 1000 francs. What has happened? From the one, a quarter of his net income, 4000 francs, has been taken; from the other, whose income was 10,000 francs, a tenth only has been taken. Income is the net profit which remains after replacing the capital exactly in its former state. Has a merchant an income equal to all the sales which he makes in the course of a year? certainly not; his income only amounts to the excess of his sales above his advances, and it is on this excess only that taxes on income should fall." M. Say's error in the above passage lies in supposing that because the value of the produce of one of these two farms, after re-instating the capital, is greater than the value of the produce of the other, on that account the net income of the cultivators will differ by the same amount. M. Say has wholly omitted the consideration of the different amount of rent, which these cultivators would have to pay. There cannot be two rates of profit in the same employment, and therefore when produce is in different proportions to capital, it is the rent which will differ, and not the profit. Upon what pretence would one man with a capital of 2000 francs, be allowed to obtain a net profit of 10,000 francs from its employment, whilst another with a capital of 8000 francs would only obtain 4000 francs? Let M. Say make a due allowance for rent; let him further allow for the effect which such a tax would have on the prices of these different kinds of raw produce, and he will then perceive that it is not an unequal tax, and further that the producers themselves will not otherwise contribute to it, than any other class of consumers. CHAPTER XI. TAXES ON GOLD. The rise in the price of commodities, in consequence of taxation or of difficulty of production, will in all cases ultimately ensue; but the duration of the interval, before the market price of commodities conforms to their natural price, must depend on the nature of the commodity, and on the facility with which it can be reduced in quantity. If the quantity of the commodity taxed could not be diminished, if the capital of the farmer or of the hatter for instance, could not be withdrawn to other employments, it would be of no consequence that their profits were reduced below the general level by means of a tax; unless the demand for their commodities should increase, they would never be able to elevate the market price of corn and hats up to the increased natural price. Their threats to leave their employments, and remove their capitals to more favoured trades, would be treated as an idle menace which could not be carried into effect; and consequently the price would not be raised by diminished production. Commodities however of all descriptions can be reduced in quantity, and capital can be removed from trades which are less profitable to those which are more so, but with different degrees of rapidity. In proportion as the supply of a particular commodity can be more easily reduced, the price of it will more quickly rise after the difficulty of its production has been increased by taxation, or by any other means. Corn being a commodity indispensably necessary to every one, little effect will be produced on the demand for it in consequence of a tax, and therefore the supply could not be long excessive, even if the producers had great difficulty in removing their capitals from the land; the price of corn therefore, will speedily be raised by taxation, and the farmer will be enabled to transfer the tax from himself to the consumer. If the mines which supply us with gold were in this country, and if gold were taxed, it could not rise in relative value to other things till its quantity were reduced. This would be more particularly the case, if gold were exclusively used for money. It is true that the least productive mines, those which paid no rent, could no longer be worked, as they could not afford the general rate of profits till the relative value of gold rose, by a sum equal to the tax. The quantity of gold, and therefore the quantity of money would be slowly reduced; it would be a little diminished in one year, a little more in another, and finally its value would be raised in proportion to the tax; but in the interval, the proprietors or holders, as they would pay the tax, would be the sufferers, and not those who used money. If out of every 1000 quarters of wheat in the country, and every 1000 produced in future, government should exact 100 quarters as a tax, the remaining 900 quarters would exchange for the same quantity of other commodities that 1000 did before; but if the same thing took place with respect to gold, if of every 1000_l._ money now in the country, or in future to be brought into it, government could exact 100_l._ as a tax, the remaining 900_l._ would purchase very little more than 900_l._ purchased before. The tax would fall upon him, whose property consisted of money, and would continue to do so till its quantity were reduced in proportion to the increased cost of its production caused by the tax. This perhaps would be more particularly the case with respect to a metal used for money, than any other commodity, because the demand for money is not for a definite quantity, as is the demand for clothes, or for food. The demand for money is regulated entirely by its value, and its value by its quantity. If gold were of double the value, half the quantity would perform the same functions in circulation, and if it were of half the value, double the quantity would be required. If the market value of corn be increased one tenth by taxation, or by difficulty of production, it is doubtful, whether any effect whatever would be produced on the quantity consumed, because every man's want is for a definite quantity, and, therefore, if he has the means of purchasing, he will continue to consume as before; but for money, the demand is exactly proportioned to its value. No man could consume twice the quantity of corn, which is usually necessary for his support, but every man purchasing and selling only the same quantity of goods, may be obliged to employ twice, thrice, or any number of times the same quantity of money. The argument which I have just been using, applies only to those states of society in which the precious metals are used for money, and where paper credit is not established. The metal gold like all other commodities has its value in the market ultimately regulated by the comparative facility or difficulty of producing it; and although from its durable nature, and from the difficulty of reducing its quantity, it does not readily bend to variations in its market value, yet that difficulty is much increased from the circumstance of its being used as money. If the quantity of gold in the market for the purpose of commerce only, were 10,000 ounces, and the consumption in our manufactures were 2000 ounces annually, it might be raised one fourth, or 25 per cent. in its value, in one year, by withholding the annual supply; but if in consequence of its being used as money, the quantity employed were 100,000 ounces, it would not be raised one fourth in value in less than ten years. As money made of paper may be readily reduced in quantity, its value, though its standard were gold, would be increased as rapidly as that of the metal itself would be increased if it had no connexion whatever with money. If gold were the produce of one country only, and it were used universally for money, a very considerable tax might be imposed on it, which would not fall on any country, except in proportion as they used it in manufactures, and for utensils; upon that portion which was used for money, though a large tax might be received, nobody would pay it. This is a quality peculiar to money. All other commodities of which there exists a limited quantity, and which cannot be increased by competition, are dependant for their value, on the tastes, the caprice, and the power of purchasers; but money is a commodity which no country has any wish or necessity to increase: no more advantage results from using twenty millions, than from using ten millions of currency. A country might have a monopoly of silk, or of wine, and yet the prices of silks and wine might fall, because from caprice or fashion, or taste, cloth and brandy might be preferred, and substituted; the same effect might in a degree take place with gold, as far as its use is confined to manufactures: but while money is the general medium of exchange, the demand for it is never a matter of choice, but always of necessity; you must take it in exchange for your goods, and therefore there are no limits to the quantity which may be forced on you by foreign trade, if it fall in value; and no reduction to which you must not submit, if it rise. You may indeed substitute paper money, but by this you do not, and cannot lessen the quantity of money; it is only by the rise of the price of commodities, that you can prevent them from being exported from a country where they are purchased with little money, to a country where they can be sold for more, and this rise can only be effected by an importation of metallic money from abroad, or by the creation or addition of paper money at home. If then the King of Spain, supposing him to be in exclusive possession of the mines, and gold alone to be used for money, were to lay a considerable tax on gold, he would very much raise its natural value; and as its market value in Europe is ultimately regulated by its natural value in Spanish America, more commodities would be given by Europe for a given quantity of gold. But the same quantity of gold would not be produced in America, as its value would only be increased in proportion to the diminution of quantity consequent on its increased cost of production. No more goods then would be obtained in America, in exchange for all their gold exported, than before; and it may be asked, where then would be the benefit to Spain and her colonies? The benefit would be this, that if less gold were produced, less capital would be employed in producing it; the same value of goods from Europe would be imported by the employment of the smaller capital, that was before obtained by the employment of the larger; and therefore all the productions obtained by the employment of the capital withdrawn from the mines, would be a benefit which Spain would derive from the imposition of the tax, and which she could not obtain in such abundance, or with such certainty, by possessing the monopoly of any other commodity whatever. From such a tax, as far as money was concerned, the nations of Europe would suffer no injury whatever; they would have the same quantity of goods, and consequently the same means of enjoyment as before, but these goods would be circulated with a less quantity of money. If in consequence of the tax, only one tenth of the present quantity of gold were obtained from the mines, that tenth would be of equal value with the ten tenths now produced. But the King of Spain is not exclusively in possession of the mines of the precious metals; and if he were, his advantage from their possession, and the power of taxation, would be very much reduced by the limitation of demand and consumption in Europe, in consequence of the universal substitution, in a greater or less degree, of paper money. The agreement of the market and natural prices of all commodities, depends at all times on the facility with which the supply can be increased or diminished. In the case of gold, houses, and labour, as well as many other things, this effect cannot, under some circumstances, be speedily produced. But it is different with those commodities which are consumed and reproduced from year to year, such as hats, shoes, corn, and cloth; they may be reduced if necessary, and the interval cannot be long before the supply is contracted in proportion to the increased charge of producing them. A tax on raw produce from the surface of the earth, will, as we have seen, fall on the consumer, and will in no way affect rent; unless, by diminishing the funds for the maintenance of labour, it lowers wages, reduces the population, and diminishes the demand for corn. But a tax on the produce of gold mines must, by enhancing the value of that metal, necessarily reduce the demand for it, and must therefore necessarily displace capital from the employment to which it was applied. Notwithstanding then, that Spain would derive all the benefits which I have stated from a tax on gold, the proprietors of mines from which capital was withdrawn would lose all their rent. This would be a loss to individuals, but not a national loss; rent being not a creation, but merely a transfer of wealth: the King of Spain, and the proprietors of the mines which continued to be worked, would together receive not only all that the liberated capital produced, but all that the other proprietors lost. Suppose the mines of the 1st, 2nd, and 3rd quality to be worked, and to produce respectively 100, 80, and 70 pounds weight of gold, and therefore the rent of No. 1 to be thirty pounds, and that of No. 2 ten pounds. Suppose now the tax to be seventy pounds of gold per annum on each mine worked; and consequently that No. 1 alone could be profitably worked; it is evident that all rent would immediately disappear. Before the imposition of the tax, out of the 100 pounds produced on No. 1, a rent was paid of thirty pounds, and the worker of the mine retained seventy, a sum equal to the produce of the least productive mine. The value then of what remains to the capitalist of the mine No. 1 must be the same as before, or he would not obtain the common profits of stock; and consequently, after paying seventy out of his 100 pounds for tax, the value of the remaining thirty must be as great as seventy were before, and therefore the value of the whole hundred as great as 233 pounds before. Its value might be higher, but it could not be lower, or even this mine would cease to be worked. Being a monopolised commodity, it could exceed its natural value, and then it would pay a rent equal to that excess; but no funds would be employed in the mine, if it were below this value. In return for one-third of the labour and capital employed in the mines, Spain would obtain as much gold as would exchange for the same, or very nearly the same, quantity of commodities as before. She would be richer by the produce of the two thirds liberated from the mines. If the value of the 100 pounds of gold should be equal to that of the 250 pounds extracted before; the king of Spain's portion, his seventy pounds, would be equal to 175 at the former value: a small part of the king's tax only would fall on his own subjects, the greater part being obtained by the better distribution of capital. The account of Spain would stand thus: _Formerly produced_: Gold 250 pounds, of the value of (suppose) 10,000 yards of cloth. _Now produced_: By the two capitalists who quitted the mines,} 5,600 yards of the value of 140 pounds of gold, or } cloth. By the capitalist who works the mine, No. 1, } thirty pounds of gold increased in value, } 3,000 yards of as 1 to 2-1/2, and therefore now of the } cloth. value of } Tax to the king seventy pounds, now of the } 7,000 yards of value of } cloth. ------ 15,600 ------ Of the 7000 received by the king, the people of Spain would contribute only 1400, and 5600 would be pure gain, effected by the liberated capital. If the tax, instead of being a fixed sum per mine worked, were a certain portion of its produce, the quantity would not be reduced in consequence. If a half, a fourth, or a third of each mine were taken for the tax, it would nevertheless be the interest of the proprietors to make their mines yield as abundantly as before; but if the quantity were not reduced, but only a part of it transferred from the proprietor to the king, its value would not rise; the tax would fall on the people of the colonies, and no advantage would be gained. A tax of this kind would have the effect that Adam Smith supposes taxes on raw produce would have on the rent of land--it would fall entirely on the rent of the mine. If pushed a little further, the tax would not only absorb the whole rent, but would deprive the worker of the mine of the common profits of stock, and he would consequently withdraw his capital from the production of gold. If still further extended, the rent of still better mines would be absorbed, and capital would be further withdrawn; and thus the quantity would be continually reduced, and its value raised, and the same effects would take place as we have already pointed out; a part of the tax would be paid by the people of the Spanish colonies, and the other part would be a new creation of produce, by increasing the power of the instrument used as a medium of exchange. Taxes on gold are of two kinds, one on the actual quantity of gold in circulation, the other on the quantity that is annually produced from the mines. Both have a tendency to reduce the quantity, and to raise the value of gold; but by neither will its value be raised till the quantity is reduced, and therefore such taxes will fall for a time, until the supply is diminished, on the proprietors of money, but ultimately they will be paid by the owner of the mine in the reduction of rent, and by the purchasers of that portion of gold, which is used as a commodity contributing to the enjoyments of mankind, and not set apart exclusively for a circulating medium. CHAPTER XII. TAXES ON HOUSES. There are also other commodities besides gold which cannot be speedily reduced in quantity; any tax on which will therefore fall on the proprietor, if the increase of price should lessen the demand. Taxes on houses are of this description; though laid on the occupier, they will frequently fall by a diminution of rent on the landlord. The produce of the land is consumed and reproduced from year to year, and so are many other commodities; as they may therefore be speedily brought to a level with the demand, they cannot long exceed their natural price. But as a tax on houses may be considered in the light of an additional rent paid by the tenant, its tendency will be to diminish the demand for houses of the same annual rent, without diminishing their supply. Rent will therefore fall, and a part of the tax will be paid indirectly by the landlord. "The rent of a house," says Adam Smith, "may be distinguished into two parts, of which the one may very properly be called the building rent, the other is commonly called the ground rent. The building rent is the interest or profit of the capital expended in building the house. In order to put the trade of a builder upon a level with other trades, it is necessary that this rent should be sufficient first to pay the same interest which he would have got for his capital, if he had lent it upon good security; and secondly, to keep the house in constant repair, or what comes to the same thing, to replace within a certain term of years the capital which had been employed in building it." "If in proportion to the interest of money, the trade of the builder affords at any time a much greater profit than this, it will soon draw so much capital from other trades, as will reduce the profit to its proper level. If it affords at any time much less than this, other trades will soon draw so much capital from it as will again raise that profit. Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit, naturally goes to the ground rent; and where the owner of the ground, and the owner of the building are two different persons, it is in most cases completely paid to the former. In country houses, at a distance from any great town, where there is a plentiful choice of ground, the ground rent is scarcely any thing, or no more than what the space upon which the house stands, would pay if employed in agriculture. In country villas, in the neighbourhood of some great town, it is sometimes a good deal higher, and the peculiar conveniency, or beauty of situation, is there frequently very highly paid for. Ground rents are generally highest in the capital, and in those particular parts of it, where there happens to be the greatest demand for houses, whatever be the reason for that demand, whether for trade and business, for pleasure and society, or for mere vanity and fashion." A tax on the rent of houses may either fall on the occupier, on the ground landlord, or on the building landlord. In ordinary cases it may be presumed, that the whole tax would be paid both immediately and finally by the occupier. If the tax be moderate, and the circumstances of the country such, that it is either stationary or advancing, there would be little motive for the occupier of a house to content himself with one of a worse description. But if the tax be high, or any other circumstances should diminish the demand for houses, the landlord's income would fall, for the occupier would be partly compensated for the tax by a diminution of rent. It is, however, difficult to say, in what proportions that part of the tax, which was saved by the occupier by a fall of rent, would fall on the building rent and the ground rent. It is probable, that in the first instance, both would be affected; but as houses are, though slowly, yet certainly perishable, and as no more would be built, till the profits of the builder were restored to the general level, building rent, would, after an interval, be restored to its natural price. As the builder receives rent only whilst the building endures, he could pay no part of the tax, under the most disastrous circumstances, for any longer period. The payment of this tax, then, would ultimately fall on the occupier and ground landlord, but "in what proportion, this final payment would be divided between them," says Adam Smith, "it is not perhaps very easy to ascertain. The division would probably be very different in different circumstances, and a tax of this kind might, according to those different circumstances, affect very unequally both the inhabitant of the house, and the owner of the ground."[15] Adam Smith considers ground rents as peculiarly fit subjects for taxation. "Both ground rents, and the ordinary rent of land," he says, "are a species of revenue, which the owner in many cases enjoys, without any care or attention of his own. Though a part of this revenue should be taken from him, in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents, and the ordinary rent of land, are, therefore, perhaps the species of revenue, which can best bear to have a peculiar tax imposed upon them." It must be admitted that the effects of these taxes would be such as Adam Smith has described; but it would surely be very unjust, to tax exclusively the revenue of any particular class of a community. The burdens of the state should be borne by all in proportion to their means: this is one of the four maxims mentioned by Adam Smith, which should govern all taxation. Rent often belongs to those who after many years of toil, have realised their gains, and expended their fortunes in the purchase of land; and it certainly would be an infringement of that principle which should ever be held sacred, the security of property, to subject it to unequal taxation. It is to be lamented, that the duty by stamps, with which the transfer of landed property is loaded, materially impedes the conveyance of it into those hands, where it would probably be made most productive. And if it be considered, that land, regarded as a fit subject for exclusive taxation, would not only be reduced in price, to compensate for the risk of that taxation, but in proportion to the indefinite nature and uncertain value of the risk, would become a fit subject for speculations, partaking more of the nature of gambling, than of sober trade, it will appear probable, that the hands into which land would in that case be most apt to fall, would be the hands of those, who possess more of the qualities of the gambler, than of the qualities of the sober-minded proprietor, who is likely to employ his land to the greatest advantage. CHAPTER XIII. TAXES ON PROFITS. Taxes on those commodities, which are generally denominated luxuries, fall on those only who make use of them. A tax on wine is paid by the consumer of wine. A tax on pleasure horses, or on coaches, is paid by those who provide for themselves such enjoyments, and in exact proportion as they provide them. But taxes on necessaries do not affect the consumers of necessaries, in proportion to the quantity that may be consumed by them, but often in a much higher proportion. A tax on corn, we have observed, not only affects a manufacturer in the proportion that he and his family may consume corn, but it alters the rate of profits of stock, and therefore also affects his income. Whatever raises the wages of labour, lowers the profits of stock; therefore every tax on any commodity consumed by the labourer, has a tendency to lower the rate of profits. A tax on hats will raise the price of hats; a tax on shoes, the price of shoes; if this were not the case, the tax would be finally paid by the manufacturer; his profits would be reduced below the general level, and he would quit his trade. A partial tax on profits will raise the price of the commodity on which it falls: a tax, for example, on the profits of the hatter, would raise the price of hats; for if his profits were taxed, and not those of any other trade, his profits, unless he raised the price of his hats, would be below the general rate of profits, and he would quit his employment for another. In the same manner a tax on the profits of the farmer would raise the price of corn; a tax on the profits of the clothier, the price of cloth; and if a tax in proportion to profits were laid on all trades, every commodity would be raised in price. But if the mine, which supplied us with the standard of our money, were in this country, and the profits of the miner were also taxed, the price of no commodity would rise, each man would give an equal proportion of his income, and every thing would be as before. If money be not taxed, and therefore be permitted to preserve its value, whilst every thing else is taxed, and is raised in value, the hatter, the farmer, and clothier, each employing the same capitals, and obtaining the same profits, will pay the same amount of tax. If the tax be 100_l._, the hats, the cloth, and the corn, will each be increased in value 100_l._ If the hatter gain by his hats 1100_l._, instead of 1000_l._, he will pay 100_l._ to Government for the tax; and therefore will still have 1000_l._ to lay out on goods for his own consumption. But as the cloth, corn, and all other commodities, will be raised in price from the same cause, he will not obtain more for his 1000_l._ than he before obtained for 910_l._, and thus will he contribute by his diminished expenditure to the exigencies of the state; he will, by the payment of the tax, have placed a portion of the produce of the land and labour of the country at the disposal of Government, instead of using that portion himself. If instead of expending his 1000_l._, he adds it to his capital, he will find in the rise of wages, and in the increased cost of the raw material and machinery, that his saving of 1000_l._ does not amount to more than a saving of 910_l._ amounted to before. If money be taxed, or if by any other cause its value be altered, and all commodities remain precisely at the same price as before, the profits of the manufacturer and farmer will also be the same as before, they will continue to be 1000_l._; and as they will each have to pay 100_l._ to Government, they will retain only 900_l._, which will give them a less command over the produce of the land and labour of the country, whether they expend it in productive or unproductive labour. Precisely what they lose, Government will gain. In the first case the contributor to the tax would, for 1000_l._, have as great a quantity of goods as he before had for 910_l._; in the second, he would have only as much as he before had for 900_l._ This proceeds from the difference in the amount of the tax; in the first case it is only an eleventh of his income, in the second it is a tenth; money in the two cases being of a different value. But although, if money be not taxed, and do not alter in value, all commodities will rise in price, they will not rise in the same proportion; they will not after the tax bear the same relative value to each other which they did before the tax. In a former part of this work, we discussed the effects of the division of capital into fixed and circulating, or rather into durable and perishable capital, on the prices of commodities. We shewed that two manufacturers might employ precisely the same amount of capital, and might derive from it precisely the same amount of profits, but that they would sell their commodities for very different sums of money, according as the capitals they employed were rapidly, or slowly, consumed and reproduced. The one might sell his goods for 4000_l._, the other for 10,000_l._, and they might both employ 10,000_l._ of capital, and obtain 20 per cent. profit, or 2000_l._ The capital of one might consist for example of 2000_l._ circulating capital, to be reproduced, and 8000_l._ fixed, in buildings and machinery; the capital of the other on the contrary might consist of 8000_l._ of circulating, and of only 2000_l._ fixed capital in machinery and buildings. Now if each of these persons were to be taxed 10 per cent. on his income, or 200_l._, the one, to make his business yield him the general rate of profit, must raise his goods from 10,000_l._ to 10,200_l._; the other would also be obliged to raise the price of his goods from 4000_l._ to 4200_l._ Before the tax, the goods sold by one of these manufacturers were 2-1/2 times more valuable than the goods of the other; after the tax they will be 2.42 times more valuable: the one kind will have risen 2 per cent.; the other 5 per cent.: consequently a tax upon income, whilst money continued unaltered in value, would alter the relative prices and value of commodities. This is true, if the tax instead of being laid on the profits were laid on the commodities themselves: provided they were taxed in proportion to the value of the capital employed on their production, they would rise equally, whatever might be their value, and therefore they would not preserve the same proportion as before. A commodity, which rose from ten to eleven thousand pounds, would not bear the same relation as before, to another which rose from 2 to 3000_l._ If under these circumstances money rose in value, from whatever cause it might proceed, it would not affect the prices of commodities in the same proportion. The same cause which would lower the price of one from 10,200_l._ to 10,000_l._ or less than 2 per cent., would lower the price of the other from 4200_l._ to 4000_l._ or 4-3/4 per cent. If they fell in any different proportion, profits would not be equal; for to make them equal, when the price of the first commodity was 10,000_l._, the price of the second should be 4000_l._; and when the price of the first was 10,200_l._, the price of the other should be 4200_l._ The consideration of this fact will lead to the understanding of a very important principle, which I believe has never been adverted to. It is this; that in a country where no taxation subsists, the alteration in the value of money arising from scarcity or abundance will operate in an equal proportion on the prices of all commodities; that if a commodity of 1000_l._ value rise to 1200_l._, or fall to 800_l._, a commodity of 10,000_l._ value will rise to 12,000_l._ or fall to 8000_l._; but in a country where prices are artificially raised by taxation, the abundance of money from an influx, or the exportation and consequent scarcity of it from foreign demand, will not operate in the same proportion on the prices of all commodities; some it will raise or lower 5, 6, or 12 per cent., others 3, 4, or 7 per cent. If a country were not taxed, and money should fall in value, its abundance in every market would produce similar effects in each. If meat rose 20 per cent., bread, beer, shoes, labour, and every commodity, would also rise 20 per cent.; it is necessary they should do so, to secure to each trade the same rate of profits. But this is no longer true when any of these commodities is taxed; if in that case they should all rise in proportion to the fall in the value of money, profits would be rendered unequal; in the case of the commodities taxed profits would be raised above the general level, and capital would be removed from one employment to another, till an equilibrium of profits was restored, which could only be, after the relative prices were altered. Will not this principle account for the different effects, which it was remarked were produced on the prices of commodities, from the altered value of money during the Bank-restriction? It was objected to those who contended that the currency was at that period depreciated, from the too great abundance of the paper circulation, that, if that were the fact, all commodities ought to have risen in the same proportion; but it was found that many had varied considerably more than others, and thence it was inferred that the rise of prices was owing to something affecting the value of commodities, and not to any alteration in the value of the currency. It appears however, as we have just seen, that in a country where commodities are taxed, they will not all vary in price in the same proportion, either in consequence of a rise or of a fall in the value of currency. If the profits of all trades were taxed, excepting the profits of the farmer, all goods would rise in money value, excepting raw produce. The farmer would have the same corn income as before, and would sell his corn also for the same money price; but as he would be obliged to pay an additional price for all the commodities, except corn, which he consumed, it would be to him a tax on expenditure. Nor would he be relieved from this tax by an alteration in the value of money, for an alteration in the value of money might sink all the taxed commodities to their former price, but the untaxed one would sink below its former level; and therefore, though the farmer would purchase his commodities at the same price as before, he would have less money with which to purchase them. The landlord too would be precisely in the same situation, he would have the same corn, and the same money rent as before, if all commodities rose in price, and money remained at the same value; and he would have the same corn, but a less money rent, if all commodities remained at the same price: so that in either case, though his income were not directly taxed, he would indirectly contribute towards the money raised. But suppose the profits of the farmer to be also taxed, he then would be in the same situation as other traders; his raw produce would rise, so that he would have the same money revenue, after paying the tax, but he would pay an additional price for all the commodities he consumed, raw produce included. His landlord however would be differently situated, he would be benefited by the tax on his tenant's profits, as he would be compensated for the additional price at which he would purchase his manufactured commodities, if they rose in price; and he would have the same money revenue, if in consequence of a rise in the value of money, commodities sold at their former price. A tax on the profits of the farmer, is not a tax proportioned to the gross produce of the land, but to its net produce, after the payment of rent, wages, and all other charges. As the cultivators of the different kinds of land, No. 1, 2, and 3, employ precisely the same capitals, they will get precisely the same profits, whatever may be the quantity of gross produce, which one may obtain more than the other; and consequently they will be all taxed alike. Suppose the gross produce of the land of the quality No. 1, to be 180 qrs., that of No. 2, 170 qrs., and of No 3, 160, and each to be taxed 10 quarters, the difference between the produce of No. 1, No. 2, and No. 3, after paying the tax, will be the same as before; for if No. 1 be reduced to 170, No. 2 to 160, and No. 3 to 150 qrs.; the difference between 3 and 1 will be as before, 20 qrs.; and of No. 3 and No. 2, 10 qrs. If after the tax the prices of corn and of every other commodity should remain the same as before, money rent as well as corn rent, would continue unaltered; but if the price of corn, and every other commodity should rise in consequence of the tax, money rent will also rise in the same proportion. If the price of corn were 4_l._ per quarter, the rent of No. 1 would have been 80_l._, and that of No. 2, 40_l._; but if corn rose ten per cent., or to 4_l._ 8_s._, rent would also rise ten per cent., for twenty quarters of corn would then be worth 88_l._, and ten quarters 44_l._; so that in every case the landlord will be unaffected by such a tax. A tax on the profits of stock always leaves corn rent unaltered, and therefore money rent varies with the price of corn; but a tax on raw produce, or tithes, never leaves corn rent unaltered, but generally leaves money rent the same as before. In another part of this work I have observed, that if a land-tax of the same money amount, were laid on every kind of land in cultivation, without any allowance for difference of fertility, it would be very unequal in its operation, as it would be a profit to the landlord of the more fertile lands. It would raise the price of corn in proportion to the burden borne by the farmer of the worst land; but this additional price being obtained for the greater quantity of produce yielded by the better land, farmers of such land would be benefited during their leases, and afterwards, the advantage would go to the landlord in the form of an increase of rent. The effect of an equal tax on the profits of the farmer is precisely the same; it raises the money rent of the landlords, if money retains the same value; but as the profits of all other trades are taxed, as well as those of the farmer, and consequently the prices of all goods, as well as corn, are raised, the landlord loses as much by the increased money price of the goods and corn on which his rent is expended, as he gains by the rise of his rent. If money should rise in value, and all things should, after a tax on the profits of stock, fall to their former prices, rent also would be the same as before. The landlord would receive the same money rent, and would obtain all the commodities on which it was expended at their former price; so that under all circumstances he would continue untaxed. A tax on the profits of stock would also affect the stockholder, if all commodities were to rise in proportion to the tax; but if from the alteration in the value of money, all commodities were to sink to their former price, the stockholder would pay nothing towards the tax; he would purchase all his commodities at the same price, but would still receive the same money dividend. If it be agreed, that by taxing the profits of one manufacturer only, the price of his goods would rise, to put him on an equality with all other manufacturers; and that by taxing the profits of two manufacturers, the prices of two descriptions of goods must rise, I do not see how it can be disputed, that by taxing the profits of all manufacturers, the prices of all goods would rise, provided the mine which supplied us with money, were in the country taxed. But as money, or the standard of money, is a commodity imported from abroad, the prices of all goods could not rise; for such an effect could not take place without an additional quantity of money, which could not be obtained in exchange for dear goods, as was shewn in page 108. If however, such a rise could take place, it could not be permanent, for it would have a powerful influence on foreign trade. In return for commodities imported, those dear goods could not be exported, and therefore we should for a time continue to buy, although we ceased to sell; and should export money, or bullion, till the relative prices of commodities were nearly the same as before. It appears to me absolutely certain, that a well regulated tax on profits, would ultimately restore commodities both of home and foreign manufacture, to the same money price which they bore before the tax was imposed. As taxes on raw produce, tithes, taxes on wages, and on the necessaries of the labourer, will, by raising wages, lower profits, they will all, though not in an equal degree, be attended with the same effects. The discovery of machinery, which materially improves home manufactures, always tends to raise the relative value of money, and therefore to encourage its importation. All taxation, all increased impediments, either to the manufacturer, or the grower of commodities, tend on the contrary to lower the relative value of money, and therefore to encourage its exportation. CHAPTER XIV. TAXES ON WAGES. Taxes on wages will raise wages, and therefore will diminish the rate of the profits of stock. We have already seen that a tax on necessaries will raise their prices, and will be followed by a rise of wages. The only difference between a tax on necessaries, and a tax on wages is, that the former will necessarily be accompanied by a rise in the price of necessaries, but the latter will not; towards a tax on wages, consequently, neither the stockholder, the landlord, nor any other class but the employers of labour will contribute. A tax on wages is wholly a tax on profits, a tax on necessaries is partly a tax on profits, and partly a tax on rich consumers. The ultimate effects which will result from such taxes then are precisely the same as those which result from a direct tax on profits. "The wages of the inferior classes of workmen," says Adam Smith, "I have endeavoured to shew in the first book, are every where necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary, or declining, or to require an increasing, stationary, or declining population, regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The _ordinary or average_ price of provisions determines the quantity of money which must be paid to the workman, in order to enable him one year with another to purchase this liberal, moderate, or scanty subsistence. While the demand for labour, and the price of provisions, therefore remain the same, a direct tax upon the wages of labour can have no other effect than to raise them somewhat higher than the tax." To the proposition, as it is here advanced by Dr. Smith, Mr. Buchanan offers two objections. First, he denies that the money wages of labour are regulated by the price of provisions; and secondly, he denies that a tax on the wages of labour would raise the price of labour. On the first point, Mr. Buchanan's argument is as follows, page 59: "The wages of labour, it has already been remarked, consist not in money, but in what money purchases, namely, provisions and other necessaries; and the allowance of the labourer out of the common stock, will always be in proportion to the supply. Where provisions are _cheap and abundant_, his share will be the larger; and where they are _scarce and dear_, it will be the less. His wages will always give him his just share, and they cannot give him more. It is an opinion indeed, adopted by Dr. Smith and most other writers, that the money price of labour is regulated by the money price of provisions, and that when provisions rise in price, wages rise in proportion. But it is clear that the price of labour has no necessary connexion with the price of food, since it depends entirely on the supply of labourers compared with the demand. Besides, it is to be observed, that the high price of provisions is a certain indication of a deficient supply, and arises in the natural course of things, for the purpose of retarding the consumption. A smaller supply of food, shared among the same number of consumers, will evidently leave a smaller portion to each, and the labourer must bear his share of the common want. To distribute this burden equally, and to prevent the labourer from consuming subsistence so freely as before, the price rises. But wages it seems must rise along with it, that he may still use the same quantity of a scarcer commodity; and thus nature is represented as counteracting her own purposes: first, raising the price of food, to diminish the consumption, and afterwards, raising wages to give the labourer the same supply as before." In this argument of Mr. Buchanan, there appears to me, to be a great mixture of truth and error. Because a high price of provisions is sometimes occasioned by a deficient supply, Mr. Buchanan assumes it as a certain indication of a deficient supply. He attributes to one cause exclusively, that which may arise from many. It is undoubtedly true, that in the case of a deficient supply, a smaller quantity will be shared among the same number of consumers, and a smaller portion will fall to each. To distribute this privation equally, and to prevent the labourer from consuming subsistence so freely as before, the price rises. It must therefore be conceded to Mr. Buchanan, that any rise in the price of provisions, occasioned by a deficient supply, will not necessarily raise the money wages of labour; as the consumption must be retarded; which can only be effected by diminishing the power of the consumers to purchase. But, because the price of provisions is raised by a deficient supply, we are by no means warranted in concluding, as Mr. Buchanan appears to do, that there may not be an abundant supply, with a high price; not a high price with regard to money only, but with regard to all other things. The natural price of commodities, which always ultimately governs their market price, depends on the facility of production; but the quantity produced is not in proportion to that facility. Although the lands, which are now taken into cultivation, are much inferior to the lands in cultivation three centuries ago, and therefore the difficulty of production is increased, who can entertain any doubt, but that the quantity produced now, very far exceeds the quantity then produced? Not only is a high price compatible with an increased supply, but it rarely fails to accompany it. If, then, in consequence of taxation, or of difficulty of production, the price of provisions be raised, and the quantity be not diminished, the money wages of labour will rise; for as Mr. Buchanan has justly observed, "The wages of labour consist not in money, but in what money purchases, namely, provisions and other necessaries; and the allowance of the labourer out of the common stock, will always be in proportion to the supply." With respect to the second point, whether a tax on the wages of labour would raise the price of labour, Mr. Buchanan says, "After the labourer has received the fair recompense of his labour, how can he have recourse on his employer, for what he is afterwards compelled to pay away in taxes? There is no law or principle in human affairs to warrant such a conclusion. After the labourer has received his wages, they are in his own keeping, and he must, as far as he is able, bear the burthen of whatever exactions he may ever afterwards be exposed to: for he has clearly no way of compelling those to reimburse him, who have already paid him the fair price of his work." Mr. Buchanan has quoted with great approbation, the following able passage from Mr. Malthus's work on population, which appears to me completely to answer his objection. "The price of labour, when left to find its natural level, is a most important political barometer, expressing the relation between the supply of provisions, and the demand for them, between the quantity to be consumed, and the number of consumers; and, taken on the average, independently of accidental circumstances, it further expresses, clearly, the wants of the society respecting population, that is, whatever may be the number of children to a marriage necessary to maintain exactly the present population, the price of labour will be just sufficient to support this number, or be above it, or below it, according to the state of the real funds, for the maintenance of labour, whether stationary, progressive, or retrograde. Instead, however, of considering it in this light, we consider it as something which we may raise or depress at pleasure, something which depends principally on his majesty's justices of the peace. When an advance in the price of provisions already expresses that the demand is too great for the supply, in order to put the labourer in the same condition as before, we raise the price of labour, that is, we increase the demand, and are then much surprised, that the price of provisions continues rising. In this, we act much in the same manner, as if, when the quicksilver in the common weather glass, stood at _stormy_, we were to raise it by some forcible pressure to settled fair, and then be greatly astonished that it continued raining." "The price of labour will express, clearly, the wants of the society respecting population;" it will be just sufficient to support the population, which at that time the state of the funds for the maintenance of labourers, requires. If the labourer's wages were before only adequate to supply the requisite population, they will, after the tax, be inadequate to that supply, for he will not have the same funds to expend on his family. Labour will therefore rise, because the demand continues, and it is only by raising the price, that the supply is not checked. Nothing is more common, than to see hats or malt rise when taxed; they rise because the requisite supply would not be afforded if they did not rise: so with labour, when wages are taxed, its price rises, because, if it did not, the requisite population would not be kept up. Does not Mr. Buchanan allow all that is contended for, when he says, that "were he (the labourer) indeed reduced to a bare allowance of necessaries, he would then suffer no further abatement of his wages, as he could not on such conditions continue his race?" Suppose the circumstances of the country to be such, that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would have been regulated accordingly. Can they multiply, if a tax takes from them a part of their wages, and reduces them to bare necessaries? It is undoubtedly true, that a taxed commodity will not rise in proportion to the tax, if the demand for it will diminish, and if the quantity cannot be reduced. If metallic money were in general use, its value would not for a considerable time be increased by a tax, in proportion to the amount of the tax, because at a higher price, the demand would be diminished, and the quantity would not be diminished; and unquestionably the same cause frequently influences the wages of labour, the number of labourers cannot be rapidly increased or diminished in proportion to the increase or diminution of the fund, which is to employ them; but in the case supposed, there is no necessary diminution of demand for labour, and if diminished, the demand does not abate in proportion to the tax. Mr. Buchanan forgets that the fund raised by the tax is employed by Government in maintaining labourers, unproductive indeed, but still labourers. If labour were not to rise when wages are taxed, there would be a great increase in the competition for labour, because the owners of capital, who would have nothing to pay towards such a tax, would have the same funds for imploying labour; whilst the Government who received the tax would have an additional fund for the same purpose. Government and the people thus become competitors, and the consequence of their competition is a rise in the price of labour. The same number of men only will be employed, but they will be employed at additional wages. If the tax had been laid at once on the people, their fund for the maintenance of labour would have been diminished in the very same degree that the fund of Government for that purpose had been increased; and therefore there would have been no rise in wages; for though there would be the same demand, there would not be the same competition. If when the tax were levied, Government at once exported the produce of it as a subsidy to a foreign state, and if therefore these funds were devoted to the maintenance of foreign, and not of English labourers, such as soldiers, sailors, &c. &c.; then, indeed, there would be a diminished demand for labour, and wages might not increase although they were taxed; but the same thing would happen if the tax had been laid on consumable commodities, on the profits of stock, or if in any other manner the same sum had been raised to supply this subsidy: less labour could be employed at home. In one case wages are prevented from rising, in the other they must absolutely fall. But suppose the amount of a tax on wages were, after being raised on the labourers, paid gratuitously to their employers, it would increase their money fund for the maintenance of labour, but it would not increase either commodities or labour. It would consequently increase the competition amongst the employers of labour, and the tax would be ultimately attended with no loss either to master or labourer. The master would pay an increased price for labour; the addition which the labourer received would be paid as a tax to Government, and would be again returned to the masters. It must however not be forgotten that the produce of taxes is often wastefully expended, and that by diminishing capital they tend to diminish the real fund destined for the maintenance of labour; and therefore to diminish the real demand for it. Taxes then, generally, as far as they impair the real capital of the country, diminish the demand for labour, and therefore it is a probable, but not a necessary, nor a peculiar consequence of a tax on wages, that though wages would rise, they would not rise by a sum precisely equal to the tax. Adam Smith, as we have seen, has fully allowed that the effect of a tax on wages would be to raise wages by a sum at least equal to the tax, and would be finally, if not immediately, paid by the employer of labour. Thus far we fully agree; but we essentially differ in our views of the subsequent operation of such a tax. "A direct tax upon the wages of labour, therefore," says Adam Smith, "though the labourer might perhaps pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would in different cases fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour, would be advanced by the master manufacturer, _who would be entitled and obliged to charge it with a profit, upon the price of his goods_. The rise which such a tax might occasion in country labour would be advanced by the farmer, who, in order to maintain the same number of labourers as before, would be obliged to employ a greater capital. In order to get back this greater capital, _together with the ordinary profits of stock_, it would be necessary that he should retain a larger portion, or what comes to the same thing, the price of a larger portion of the produce of the land, and consequently that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would in this case fall upon the landlord, _together with the additional profits of the farmer who had advanced it_. In all cases a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed, from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities." Vol. iii. p. 337. In this passage it is asserted that the additional wages paid by farmers will ultimately fall on the landlords, who will receive a diminished rent; but that the additional wages paid by manufacturers will occasion a rise in the price of manufactured goods, and will therefore fall on the consumers of those commodities. Now suppose a society to consist of landlords, manufacturers, farmers, and labourers. The labourers, it is agreed, would be recompensed for the tax;--but by whom?--who would pay that portion which did not fall on the landlords?--the manufacturers could pay no part of it; for if the price of their commodities should rise in proportion to the additional wages they paid, they would be in a better situation after than before the tax. If the clothier, the hatter, the shoemaker, &c., should be each able to raise the price of their goods 10 per cent.,--supposing 10 per cent. to recompense them completely for the additional wages they paid,--if, as Adam Smith says, "they would be entitled and obliged to charge the additional wages _with a profit_ upon the price of their goods," they could each consume as much as before of each other's goods, and therefore they would pay nothing towards the tax. If the clothier paid more for his hats and shoes, he would receive more for his cloth, and if the hatter paid more for his cloth and shoes, he would receive more for his hats. All manufactured commodities then would be bought by them with as much advantage as before, and inasmuch as corn would not be raised in price whilst they had an additional sum to lay out upon its purchase, they would be benefited, and not injured by such a tax. If then neither the labourers nor the manufacturers would contribute towards such a tax; if the farmers would be also recompensed by a fall of rent, landlords alone must not only bear its whole weight, but they must also contribute to the increased gains of the manufacturers. To do this, however, they should consume all the manufactured commodities in the country, for the additional price charged on the whole mass is little more than the tax originally imposed on the labourers in manufactures. Now it will not be disputed that the clothier, the hatter, and all other manufacturers, are consumers of each other's goods; it will not be disputed that labourers of all descriptions consume soap, cloth, shoes, candles, and various other commodities: it is therefore impossible that the whole weight of these taxes should fall on landlords only. But if the labourers pay no part of the tax, and yet manufactured commodities rise in price, wages must rise, not only to compensate them for the tax, but for the increased price of manufactured necessaries, which, as far as it affects agricultural labour, will be a new cause for the fall of rent; and, as far as it affects manufacturing labour, for a further rise in the price of goods. This rise in the price of goods will again operate on wages, and the action and re-action, first of wages on goods, and then of goods on wages, will be extended without any assignable limits. The arguments by which this theory is supported, lead to such absurd conclusions that it may at once be seen that the principle is wholly indefensible. All the effects which are produced on the profits of stock and the wages of labour, by a rise of rent and a rise of necessaries, in the natural progress of society, and increasing difficulty of production, will be produced by a rise of wages in consequence of taxation; and therefore the enjoyments of the labourer, as well as those of his employers, will be curtailed by the tax; and not by this tax particularly, but by any other which should raise an equal amount. The error of Adam Smith proceeds in the first place from supposing, that all taxes paid by the farmer must necessarily fall on the landlord, in the shape of a deduction from rent. On this subject I have explained myself most fully, and I trust that it has been shewn, to the satisfaction of the reader, that since much capital is employed on the land which pays no rent, and since it is the result obtained by this capital which regulates the price of raw produce, no deduction can be made from rent; and consequently either no remuneration will be made to the farmer for a tax on wages, or if made, it must be made by an addition to the price of raw produce. If taxes press unequally on the farmer, he will be enabled to raise the price of raw produce, to place himself on a level with those who carry on other trades; but a tax on wages, which would not affect him more than it would affect any other trade, could not be removed or compensated by a high price of raw produce; for, the same reason which should induce him to raise the price of corn, namely, to remunerate himself for the tax, would induce the clothier to raise the price of cloth, the shoemaker, hatter, and upholsterer, to raise the price of shoes, hats, and furniture. If they could all raise the price of their goods, so as to remunerate themselves, with a profit, for the tax; as they are all consumers of each other's commodities, it is obvious that the tax could never be paid; for who would be the contributors if all were compensated? I hope then that I have succeeded in shewing, that any tax which shall have the effect of raising wages, will be paid by a diminution of profits, and therefore that a tax on wages is in fact a tax on profits. This principle of the division of the produce of labour and capital between wages and profits, which I have attempted to establish, appears to me so certain, that excepting in the immediate effects, I should think it of little importance whether the profits of stock, or the wages of labour, were taxed. By taxing the profits of stock, you would probably alter the rate at which the funds for the maintenance of labour increase, and wages would be disproportioned to the state of that fund, by being too high. By taxing wages, the reward paid to the labourer would also be disproportioned to the state of that fund, by being too low. In the one case by a fall, and in the other by a rise in money wages, the natural equilibrium between profits and wages would be restored. A tax on wages then does not fall on the landlord, but it falls on the profits of stock: it does not "entitle and oblige the master manufacturer to charge it with a profit on the prices of his goods," for he will be unable to increase their price, and therefore he must himself wholly and without compensation pay such a tax.[16] If the effect of taxes on wages be such as I have described, they do not merit the censure cast upon them by Dr. Smith. He observes of such taxes, "These, and some other taxes of the same kind, by raising the price of labour, are said to have ruined the greater part of the manufactures of Holland. Similar taxes, though not quite so heavy, take place in the Milanese, in the states of Genoa, in the duchy of Modena, in the duchies of Parma, Placentia, and Guastalla, and in the ecclesiastical states. A French author of some note, has proposed to reform the finances of his country, by substituting in the room of other taxes, this most ruinous of all taxes. 'There is nothing so absurd,' says Cicero, 'which has not sometimes been asserted by some philosophers.'" And in another place he says: "taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures, and consequently to diminish the extent of their sale and consumption." They would not merit this censure; even if Dr. Smith's principle were correct that such taxes would enhance the prices of manufactured commodities; for such an effect could be only temporary, and would subject us to no disadvantage in our foreign trade. If any cause should raise the price of a few manufactured commodities, it would prevent or check their exportation; but if the same cause operated generally on all, the effect would be merely nominal, and would neither interfere with their relative value, nor in any degree diminish the stimulus to a trade of barter; which all commerce, both foreign and domestic, really is. I have already attempted to shew, that when any cause raises the prices of all commodities in general, the effects are nearly similar to a fall in the value of money. If money falls in value, all commodities rise in price; and if the effect is confined to one country, it will affect its foreign commerce in the same way as a high price of commodities caused by general taxation; and therefore in examining the effects of a low value of money confined to one country, we are also examining the effects of a high price of commodities confined to one country. Indeed Adam Smith was fully aware of the resemblance between these two cases, and consistently maintained that the low value of money, or, as he calls it, of silver in Spain, in consequence of the prohibition against its exportation, was very highly prejudicial to the manufactures and foreign commerce of Spain. "But that degradation in the value of silver, which being the effect either of the peculiar situation, or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that county, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them not only in the foreign, but even in the home market." Vol. ii. page 278. One, and I think the only one of the disadvantages of a low value of silver in a country, proceeding from a forced abundance, has been ably explained by Dr. Smith. If the trade in gold and silver were free, "the gold and silver which would go abroad, would not go abroad for nothing, but would bring back an equal value of goods of some kind or another. Those goods too would not be all matters of mere luxury and expense, to be consumed by idle people, who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so would neither their consumption be augmented by it. Those goods would, probably the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before." By not allowing a free trade in the precious metals when the prices of commodities are raised, either by taxation, or by the influx of the precious metals, you prevent a part of the dead stock of the society from being turned into active stock--you prevent a greater quantity of industry from being employed. But this is the whole amount of the evil; an evil never felt by those countries where the exportation of silver is either allowed or connived at. The exchanges between countries are at par only, whilst they have precisely that quantity of currency which in the actual situation of things they should have to carry on the circulation of their commodities. If the trade in the precious metals were perfectly free, and money could be exported without any expense whatever, the exchanges could be no otherwise in every country than at par. If the trade in the precious metals were perfectly free, if they were generally used in circulation, even with the expenses of transporting them, the exchange could never in any of them deviate more from par, than by these expenses. These principles I believe are now no where disputed. If a country used paper money not exchangeable for specie, and therefore not regulated by any fixed standard, the exchanges in that country might deviate as much from par, as its money might be multiplied beyond that quantity which would have been allotted to it by general commerce, if the trade in money had been free, and the precious metals had been used, either for money, or for the standard of money. If by the general operations of commerce, 10 millions of pounds sterling, of a known weight and fineness of bullion, should be the portion of England, and 10 millions of paper pounds were substituted, no effect would be produced on the exchange; but if by the abuse of the power of issuing paper money, 11 millions of pounds should be employed in the circulation, the exchange would be 9 per cent. against England; if 12 millions were employed, the exchange would be 16 per cent.; and if 20 millions, the exchange would be 50 per cent. against England. To produce this effect it is not however necessary that paper money should be employed: any cause which retains in circulation a greater quantity of pounds than would have circulated, if commerce had been free, and the precious metals of a known weight and fineness had been used, either for money, or for the standard of money, would exactly produce the same effects. Suppose that by clipping the money, each pound did not contain the quantity of gold or silver which by law it should contain, a greater number of such pounds might be employed in the circulation, than if they were not clipped. If from each pound one tenth were taken away, 11 millions of such pounds might be used instead of 10; if two tenths were taken away, 12 millions might be employed; and if one half were taken away, 20 millions might not be found superfluous. If the latter sum were used instead of 10 millions, every commodity in England would be raised to double its former price, and the exchange would be 50 per cent. against England, but this would occasion no disturbance in foreign commerce, nor discourage the manufacture of any one commodity. If for example, cloth rose in England from 20_l._ to 40_l._ per piece, we should just as freely export it after as before the rise, for a compensation of 50 per cent. would be made to the foreign purchaser in the exchange; so that with 20_l._ of his money, he could purchase a bill which would enable him to pay a debt of 40_l._ in England. In the same manner if he exported a commodity which cost 20_l._ at home, and which sold in England for 40_l._ he would only receive 20_l._, for 40_l._ in England would only purchase a bill for 20_l._ on a foreign country. The same effects would follow from whatever cause 20 millions could be forced to perform the business of circulation in England, if 10 millions only were necessary. If so absurd a law, as the prohibition of the exportation of the precious metals, could be enforced, and the consequence of such prohibition were to force 11 millions instead of 10 into circulation, the exchange would be 9 per cent. against England; if 12 millions, 16 per cent.; and if 20 millions, 50 per cent. against England. But no discouragement would be given to the manufactures of England; if home commodities sold at a high price in England, so would foreign commodities; and whether they were high or low would be of little importance to the foreign exporter and importer, whilst he would, on the one hand, be obliged to allow a compensation in the exchange when his commodities sold at a dear rate, and would receive the same compensation, when he was obliged to purchase English commodities at a high price. The sole disadvantage then which could happen to a country from retaining by prohibitory laws a greater quantity of gold and silver in circulation than would otherwise remain there, would be the loss which it would sustain from employing a portion of its capital unproductively, instead of employing it productively. In the form of money this capital is productive of no profit; in the form of materials, machinery, and food, for which it might be exchanged, it would be productive of revenue, and would add to the wealth and the resources of the state. Thus then I hope I have satisfactorily proved, that a comparatively low price of the precious metals, in consequence of taxation, or in other words, a generally high price of commodities, would be of no disadvantage to a state, as a part of the metals would be exported, which, by raising their value, would again lower the prices of commodities. And further, that if they were not exported, if by prohibitory laws they could be retained in a country, the effect on the exchange would counterbalance the effect of high prices. If then taxes on necessaries and on wages would not raise the prices of all commodities on which labour was expended, they cannot be condemned on such grounds; and moreover, even if the opinion that they would have such an effect were well founded, they would be in no degree injurious on that account. It is undoubtedly true, that "taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed;" but it is not true, that "taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures." It is true, that "taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution. They fall indifferently upon every species of revenue, the wages of labour, the profits of stock, and the rent of land;" but it is not true, "that taxes upon necessaries _so far as they affect the labouring poor_, are finally paid partly by landlords in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods;" for _so far as these taxes affect the labouring poor_, they will be almost wholly paid by the diminished profits of stock, a small part only being paid by the labourers themselves in the diminished demand for labour, which taxation of every kind has a tendency to produce. It is from Dr. Smith's erroneous view of the effect of those taxes, that he has been led to the conclusion, that "the middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all direct taxes upon the wages of labour." This conclusion follows from his reasoning, "that the final payment of both one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity; in that of landlords, by the reduction of their rent, and in that of rich consumers, by the increase of their expense. The observation of Sir Matthew Decker, that certain taxes are in the price of certain goods, sometimes repeated and accumulated four or five times, is perfectly just with regard to taxes upon the necessaries of life. In the price of leather, for example, you must pay, not only for the tax upon the leather of your own shoes, but for a part of that upon those of the shoemaker and the tanner. You must pay too for the tax upon the salt, upon the soap, and upon the candles, which those workmen consume while employed in your service, and for the tax upon the leather, which the salt-maker, the soap-maker, and the candle-maker consume, while employed in their service." Now as Dr. Smith does not contend that the tanner, the salt-maker, the soap-maker, and the candle-maker, will either of them be benefited by the tax on leather, salt, soap, and candles; and as it is certain, that government will receive no more than the tax imposed, it is impossible to conceive, that more can be paid by the public upon whomsoever the tax may fall. The rich consumers may, and indeed will, pay for the poor consumer, but they will pay no more than the whole amount of the tax; and it is not in the nature of things, that "the tax should be repeated and accumulated four or five times." A system of taxation may be defective; more may be raised from the people, than what finds its way into the coffers of the state, as a part, in consequence of its effect on prices, may possibly be received by those, who are benefited by the peculiar mode in which taxes are laid. Such taxes are pernicious, and should not be encouraged; for it may be laid down as a principle, that when taxes operate justly, they conform to the first of Dr. Smith's maxims, and raise from the people as little as possible beyond what enters into the public treasury of the state. M. Say says, "others offer plans of finance, and propose means for filling the coffers of the sovereign, without any charge to his subjects. But unless a plan of finance is of the nature of a commercial undertaking, it cannot give government more than it takes away, either from individuals, or from government itself, under some other form. Something cannot be made out of nothing, by the stroke of a wand. In whatever way an operation may be disguised, whatever forms we may constrain a value to take, whatever metamorphosis we may make it undergo, we can only have a value by creating it, or by taking it from others. The very best of all plans of finance is to spend little, and the best of all taxes is, that which is the least in amount." Dr. Smith uniformly, and I think justly, contends, that the labouring classes cannot materially contribute to the burdens of the state. A tax on necessaries, or on wages, will therefore be shifted from the poor to the rich: if then, the meaning of Dr. Smith is, "that certain taxes are in the price of certain goods sometimes repeated, and accumulated four or five times," for the purpose only of accomplishing this end, namely, the transference of the tax from the poor to the rich, they cannot be liable to censure on that account. Suppose the just share of the taxes of a rich consumer to be 100_l._, and that he would pay it directly, if the tax were laid on income, on wine, or on any other luxury, he would suffer no injury if by the taxation of necessaries, he should be only called upon for the payment of 25_l._, as far as his own consumption of necessaries, and that of his family was concerned, but should be required to repeat this tax three times, by paying an additional price for other commodities to remunerate the labourers, or their employers, for the tax which they have been called upon to advance. Even in that case the reasoning is inconclusive: for if there be no more paid than what is required by Government; of what importance can it be to the rich consumer, whether he pay the tax directly, by paying an increased price for an object of luxury, or indirectly, by paying an increased price for the necessaries and other commodities he consumes? If more be not paid by the people, than what is received by Government, the rich consumer will only pay his equitable share; if more is paid, Adam Smith should have stated by whom it is received. M. Say does not appear to me to have consistently adhered to the obvious principle, which I have quoted from his able work; for in the next page, speaking of taxation, he says, "When it is pushed too far, it produces this lamentable effect, it deprives the contributor of a portion of his riches, without enriching the state. This is what we may comprehend, if we consider that every man's power of consuming, whether productively or not, is limited by his income. He cannot then be deprived of a part of his income, without being obliged proportionally to reduce his consumption. Hence arises a diminution of demand for those goods, which he no longer consumes, and particularly for those on which the tax is imposed. From this diminution of demand, there results a diminution of production, and consequently of taxable commodities. The contributor then will lose a portion of his enjoyments; the producer, a portion of his profits; and the treasury, a portion of its receipts." M. Say instances the tax on salt in France, previous to the revolution; which, he says, diminished the production of salt by one half. If, however, less salt was consumed, less capital was employed in producing it; and therefore, though the producer would obtain less profits on the production of salt, he would obtain more on the production of other things. If a tax, however burdensome it may be, falls on revenue, and not on capital, it does not diminish demand, it only alters the nature of it. It enables Government to consume as much of the produce of the land and labour of the country, as was before consumed by the individuals who contribute to the tax. If my income is 1000_l._ per annum, and I am called upon for 100_l._ per annum for a tax, I shall only be able to demand nine tenths of the quantity of goods, which I before consumed, but I enable Government to demand the other tenth. If the commodity taxed be corn, it is not necessary that my demand for corn should diminish, as I may prefer to pay 100_l._ per annum more for my corn, and to the same amount abate in my demand for wine, furniture, or any other luxury.[17] Less capital will consequently be employed in the wine or upholstery trade, but more will be employed in manufacturing those commodities, on which the taxes levied by Government will be expended. M. Say says that M. Turgot, by reducing the market dues on fish (_les droits d'entrée et de halle sur la marée_) in Paris one half, did not diminish the amount of their produce, and that consequently, the consumption of fish must have doubled. He infers from this, that the profits of the fisherman and those engaged in the trade, must also have doubled, and that the income of the country must have increased, by the whole amount of these increased profits; and by giving a stimulus to accumulation, must have increased the resources of the state.[18] Without calling in question the policy, which dictated this alteration of the tax, I may be permitted to doubt whether it gave any great stimulus to accumulation. If the profits of the fisherman and others engaged in the trade, were doubled in consequence of more fish being consumed, capital and labour must have been withdrawn from other occupations to engage them in this particular trade. But in those occupations capital and labour were productive of profits, which must have been given up when they were withdrawn. The ability of the country to accumulate was only increased by the difference between the profits obtained in the business in which the capital was newly engaged, and those obtained in that from which it was withdrawn. Whether taxes be taken from revenue or capital, they diminish the taxable commodities of the state. If I cease to expend 100_l._ on wine, because by paying a tax of that amount I have enabled Government to expend 100_l._ instead of expending it myself, one hundred pounds worth of goods are necessarily withdrawn from the list of taxable commodities. If the revenue of the individuals of a country be 10 millions, they will have at least 10 millions worth of taxable commodities. If by taxing some, one million be transferred to the disposal of Government, their revenue will still be nominally 10 millions, but they will remain with only nine millions worth of taxable commodities. There are no circumstances under which taxation does not abridge the enjoyments of those on whom the taxes ultimately fall, and no means by which those enjoyments can again be extended, but the accumulation of new revenue. Taxation can never be so equally applied, as to operate in the same proportion on the value of all commodities, and still to preserve them at the same relative value. It frequently operates very differently from the intention of the legislature, by its indirect effects. We have already seen, that the effect of a direct tax on corn and raw produce, is, if money be also produced in the country, to raise the price of all commodities, in proportion as raw produce enters into their composition, and thereby to destroy the natural relation which previously existed between them. Another indirect effect is, that it raises wages, and lowers the rate of profits; and we have also seen, in another part of this work, that the effect of a rise of wages, and a fall of profits, is to lower the money prices of those commodities which are produced in a greater degree by the employment of fixed capital. That a commodity when taxed can no longer be so profitably exported, is so well understood, that a drawback is frequently allowed on its exportation, and a duty laid on its importation. If these drawbacks and duties be accurately laid, not only on the commodities themselves, but on all which they may indirectly affect, then indeed there will be no disturbance in the value of the precious metals. Since we could as readily export a commodity after being taxed as before, and since no peculiar facility would be given to importation, the precious metals would not, more than before, enter into the list of exportable commodities. Of all commodities, none are perhaps so proper for taxation, as those which either by the aid of nature or art, are produced with peculiar facility. With respect to foreign countries, such commodities may be classed under the head of those which are not regulated in their price by the quantity of labour bestowed, but rather by the caprice, the tastes, and the power of the purchasers. If England had more productive tin mines than other countries, or if from superior machinery or fuel she had peculiar facilities in manufacturing cotton goods, the prices of tin, and of cotton goods would still in England be regulated by the comparative quantity of labour and capital required to produce them, and the competition of our merchants would make them very little dearer to the foreign consumer. Our advantage in the production of these commodities might be so decided, that probably they could bear a very great additional price in the foreign market, without very materially diminishing their consumption. This price they never could attain, whilst competition was free at home, by any other means but by a tax on their exportation. This tax would fall wholly on foreign consumers, and part of the expenses of the Government of England would be defrayed, by a tax on the land and labour of other countries. The tax on tea, which at present is paid by the people of England, and goes to aid the expenses of the Government of England, might, if laid in China, on the exportation of the tea, be diverted to the payment of the expenses of the Government of China. Taxes on luxuries have some advantage over taxes on necessaries. They are generally paid from income, and therefore do not diminish the productive capital of the country. If wine were much raised in price in consequence of taxation, it is probable that a man would rather forego the enjoyments of wine, than make any important encroachments on his capital, to be enabled to purchase it. They are so identified with price, that the contributor is hardly aware that he is paying a tax. But they have also their disadvantages. First, they never reach capital, and on some extraordinary occasions it may be expedient that even capital should contribute towards the public exigencies; and secondly, there is no certainty as to the amount of the tax, for it may not reach even income. A man intent on saving will exempt himself from a tax on wine, by giving up the use of it. The income of the country may be undiminished, and yet the state may be unable to raise a shilling by the tax. Whatever habit has rendered delightful, will be relinquished with reluctance, and will continue to be consumed notwithstanding a very heavy tax; but this reluctance has its limits, and experience every day demonstrates that an increase in the nominal amount of taxation, often diminishes the produce. One man will continue to drink the same quantity of wine, though the price of every bottle should be raised three shillings, who would yet relinquish the use of wine rather than pay four. Another will be content to pay four, yet refuse to pay five shillings. The same may be said of other taxes on luxuries: many would pay a tax of 5_l._ for the enjoyment which a horse affords, who would not pay 10_l._ or 20_l._ It is not because they cannot pay more, that they give up the use of wine and of horses, but because they will not pay more. Every man has some standard in his own mind by which he estimates the value of his enjoyments, but that standard is as various as the human character. A country whose financial situation has become extremely artificial, by the mischievous policy of accumulating a large national debt, and a consequently enormous taxation, is particularly exposed to the inconvenience attendant on this mode of raising taxes. After visiting with a tax the whole round of luxuries; after laying horses, carriages, wine, servants, and all the other enjoyments of the rich, under contribution; a minister is disposed to conclude that the country is arrived at the maximum of taxation, because by increasing the rate, he cannot increase the amount of any one of these taxes. But in this conclusion he will not be always correct, for it is very possible that such a country could bear a very great addition to its burdens without infringing on the integrity of its capital. CHAPTER XV. TAXES ON OTHER COMMODITIES THAN RAW PRODUCE. On the same principle that a tax on corn would raise the price of corn, a tax on any other commodity would raise the price of that commodity. If the commodity did not rise by a sum equal to the tax, it would not give the same profit to the producer which he had before, and he would remove his capital to some other employment. The taxing of all commodities, whether they be necessaries or luxuries, will, while money remains at an unaltered value, raise their prices by a sum at least equal to the tax.[19] A tax on the manufactured necessaries of the labourer would have the same effect on wages as a tax on corn, which differs from other necessaries only by being the first and most important on the list; and it would produce precisely the same effects on the profits of stock and foreign trade. But a tax on luxuries would have no other effect than to raise their price. It would fall wholly on the consumer, and could neither increase wages, nor lower profits. Taxes which are levied on a country for the purpose of supporting war, or for the ordinary expenses of the state, and which are chiefly devoted to the support of unproductive labourers, are taken from the productive industry of the country; and every saving which can be made from such expenses will be generally added to the income, if not to the capital of the contributors. When for the expenses of a year's war, twenty millions are raised by means of a loan, it is the twenty millions which are withdrawn from the productive capital of the nation. The million per annum which is raised by taxes to pay the interest of this loan, is merely transferred from those who pay it to those who receive it, from the contributor to the tax to the national creditor. The real expense is the twenty millions, and not the interest which must be paid for it.[20] Whether the interest be or be not paid, the country will neither be richer nor poorer. Government might at once have required the twenty millions in the shape of taxes; in which case it would not have been necessary to raise annual taxes to the amount of a million. This however would not have changed the nature of the transaction. An individual instead of being called upon to pay 100_l._ per annum, might have been obliged to pay 2000_l._ once for all. It might also have suited his convenience rather to borrow this 2000_l._, and to pay 100_l._ per annum for interest to the lender, than to spare the larger sum from his own funds. In one case it is a private transaction between A and B, in the other Government guarantees to B the payment of the interest to be equally paid by A. If the transaction had been of a private nature, no public record would be kept of it, and it would be a matter of comparative indifference to the country whether A faithfully performed his contract to B, or unjustly retained, the 100_l._ per annum in his own possession. The country would have a general interest in the faithful performance of a contract, but with respect to the national wealth, it would have no other interest than whether A or B would make this 100_l._ most productive, but on this question it would neither have the right nor the ability to decide. It might be possible, that if A retained it for his own use, he might squander it unprofitably, and if it were paid to B, he might add it to his capital, and employ it productively. And the converse would also be possible, B might squander it, and A might employ it productively. With a view to wealth only, it might be equally or more desirable that A should or should not pay it; but the claims of justice and good faith, a greater utility, are not to be compelled to yield to those of a less; and accordingly, if the state were called upon to interfere, the courts of justice would oblige A to perform his contract. A debt guaranteed by the nation, differs in no respect from the above transaction. Justice and good faith demand that the interest of the national debt should continue to be paid, and that those who have advanced their capitals for the general benefit, should not be required to forego their equitable claims, on the plea of expediency. But independently of this consideration, it is by no means certain, that political utility would gain any thing by the sacrifice of political integrity; it does by no means follow, that the party exonerated from the payment of the interest of the national debt would employ it more productively than those to whom indisputably it is due. By cancelling the national debt, one man's income might be raised from 1000_l._ to 1500_l._, but another man's would be lowered from 1500_l._ to 1000_l._ These two men's income now amount to 2500_l._, they would amount to no more then. If it be the object of Government to raise taxes, there would be precisely the same taxable capital and income in one case, as in the other. It is not then by the payment of the interest on the national debt that a country is distressed, nor is it by the exoneration from payment that it can be relieved. It is only by saving from income, and retrenching in expenditure, that the national capital can be increased; and neither the income would be increased, nor the expenditure diminished by the annihilation of the national debt. It is by the profuse expenditure of Government, and of individuals, and by loans, that a country is impoverished; every measure therefore which is calculated to promote public and private oeconomy will relieve the public distress; but it is error and delusion, to suppose that a real national difficulty can be removed, by shifting it from the shoulders of one class of the community, who justly ought to bear it, to the shoulders of another class, who upon every principle of equity ought to bear no more than their share. From what I have said, it must not be inferred that I consider the system of borrowing as the best calculated to defray the extraordinary expenses of the state. It is a system which tends to make us less thrifty--to blind us to our real situation. If the expenses of a war be 40 millions per annum, and the share which a man would have to contribute towards that annual expense were 100_l._, he would endeavour, on being at once called upon for his portion, to save speedily the 100_l._ from his income. By the system of loans he is called upon to pay only the interest of this 100_l._, or 5_l._ per annum, and considers that he does enough by saving this 5_l._ from his expenditure, and then deludes himself with the belief that he is as rich as before. The whole nation, by reasoning and acting in this manner, save only the interest of 40 millions, or two millions; and thus, not only lose all the interest or profit which 40 millions of capital, employed productively, would afford, but also 38 millions, the difference between their savings and expenditure. If, as I before observed, each man had to make his own loan, and contribute his full proportion to the exigencies of the state, as soon as the war ceased, taxation would cease, and we should immediately fall into a natural state of prices. Out of his private funds, A might have to pay to B interest for the money he borrowed of him during the war, to enable him to pay his quota of the expense; but with this the nation would have no concern. A country which has accumulated a large debt is placed in a most artificial situation; and although the amount of taxes, and the increased price of labour, may not, and I believe does not, place it under any other disadvantage with respect to foreign countries, except the unavoidable one of paying those taxes, yet it becomes the interest of every contributor to withdraw his shoulder from the burthen, and to shift this payment from himself to another; and the temptation to remove himself and his capital to another country, where he will be exempted from such burthens, becomes at last irresistible, and overcomes the natural reluctance which every man feels to quit the place of his birth, and the scene of his early associations. A country which has involved itself in the difficulties attending this artificial system, would act wisely by ransoming itself from them, at the sacrifice of any portion of its property which might be necessary to redeem its debt. That which is wise in an individual, is wise also in a nation. A man who has 10,000_l._, paying him an income of 500_l._, out of which he has to pay 100_l._ per annum towards the interest of the debt, is really worth only 8000_l._, and would be equally rich, whether he continued to pay 100_l._ per annum, or at once, and for only once, sacrificed 2000_l._ But where, it is asked, would be the purchaser of the property which he must sell to obtain this 2000_l._? The answer is plain: the national creditor, who is to receive this 2000_l._, will want an investment for his money, and will be disposed either to lend it to the landholder, or manufacturer, or to purchase from them a part of the property of which they have to dispose. To such an effect the stockholders themselves would largely contribute. Such a scheme has been often recommended, but we have, I fear, neither wisdom enough, nor virtue enough, to adopt it. It must however be admitted, that during peace, our unceasing efforts should be directed towards paying off that part of the debt which has been contracted during war; and that no temptation of relief, no desire of escape from present, and I hope temporary distresses, should induce us to relax in our attention to that great object. No sinking fund can be efficient for the purpose of diminishing the debt, if it be not derived from the excess of the public revenue over the public expenditure. It is to be regretted, that the sinking fund in this country is only such in name; for there is no excess of revenue above expenditure. It ought by economy, to be made what it is professed to be, a really efficient fund for the payment of the debt. If on the breaking out of any future war, we shall not have very considerably reduced our debt, one of two things must happen, either the whole expenses of that war must be defrayed by taxes raised from year to year, or we must, at the end of that war, if not before, submit to a national bankruptcy; not that we shall be unable to bear any large additions to the debt; it would be difficult to set limits to the powers of a great nation; but assuredly there are limits to the price, which in the form of perpetual taxation, individuals will submit to pay for the privilege merely of living in their native country. When a commodity is at a monopoly price, it is at the very highest price at which the consumers are willing to purchase it. Commodities are only at a monopoly price, when by no possible device their quantity can be augmented; and when therefore, the competition is wholly on one side--amongst the buyers. The monopoly price of one period may be much lower or higher than the monopoly price of another, because the competition amongst the purchasers must depend on their wealth, and their tastes and caprices. Those peculiar wines, which are produced in very limited quantity, and those works of art, which from their excellence or rarity, have acquired a fanciful value, will be exchanged for a very different quantity of the produce of ordinary labour, according as the society is rich or poor, as it possesses an abundance or scarcity of such produce, or as it may be in a rude or polished state. The exchangeable value therefore of a commodity which is at a monopoly price, is no where regulated by the cost of production. Raw produce is not at a monopoly price, because the market price of barley and wheat is as much regulated by their cost of production, as the market price of cloth and linen. The only difference is this, that one portion of the capital employed in agriculture regulates the price of corn, namely, that portion which pays no rent; whereas, in the production of manufactured commodities, every portion of capital is employed with the same results; and as no portion pays rent, every portion is equally a regulator of price: corn, and other raw produce, can be augmented too in quantity, by the employment of more capital on the land, and therefore they are not at a monopoly price. There is competition among the sellers, as well as amongst the buyers. This is not the case in the production of those rare wines, and those valuable specimens of art, of which we have been speaking; their quantity cannot be increased, and their price is limited only by the extent of the power and will of the purchasers. The rent of these vineyards may be raised beyond any moderately assignable limits, because no other land being able to produce such wines, none can be brought into competition with them. The corn and raw produce of a country, may indeed for a time sell at a monopoly price; but they can do so permanently only when no more capital can be profitably employed on the lands, and when, therefore, their produce cannot be increased. At such time, every portion of land in cultivation, and every portion of capital employed on the land will yield a rent, differing indeed in proportion to the difference in the return. At such a time too, any tax which may be imposed on the farmer, will fall on rent, and not on the consumer. He cannot raise the price of his corn, because, by the supposition, it is already at the highest price at which the purchasers will or can buy it. He will not be satisfied with a lower rate of profits, than that obtained by other capitalists, and, therefore, his only alternative will be to obtain a reduction of rent, or to quit his employment. Mr. Buchanan considers corn and raw produce as at a monopoly price, because they yield a rent: all commodities which yield a rent, he supposes must be at a monopoly price; and thence he infers, that all taxes on raw produce would fall on the landlord, and not on the consumer. "The price of corn," he says, "which always affords a rent, being in no respect influenced by the expenses of its production, those expenses must be paid out of the rent; and when they rise or fall, therefore, the consequence is not a higher or a lower price, but a higher or a lower rent. In this view, all taxes on farm servants, horses, or the implements of agriculture, are in reality land-taxes; the burden falling on the farmer during the currency of his lease, and on the landlord, when the lease comes to be renewed. In like manner all those improved implements of husbandry which save expense to the farmer, such as machines for threshing and reaping, whatever gives him easier access to the market, such as good roads, canals, and bridges, though they lessen the original cost of corn, do not lessen its market price. Whatever is saved by those improvements, therefore, belongs to the landlord as part of his rent." It is evident that if we yield to Mr. Buchanan the basis on which his argument is built, namely, that the price of corn always yields a rent, all the consequences which he contends for would follow of course. Taxes on the farmer would then fall not on the consumer but on rent; and all improvements in husbandry would increase rent: but I hope I have made it sufficiently clear, that until a country is cultivated in every part, and up to the highest degree, there is always a portion of capital employed on the land which yields no rent, and that it is this portion of capital, the result of which, as in manufactures, is divided between profits and wages, that regulates the price of corn. The price of corn then, which does not afford a rent, being influenced by the expenses of its production, those expenses cannot be paid out of rent. The consequence therefore of those expenses increasing, is a higher price, and not a lower rent.[21] It is remarkable that both Adam Smith and Mr. Buchanan, who entirely agree that taxes on raw produce, a land-tax, and tithes, all fall on the rent of land, and not on the consumers of raw produce, should nevertheless admit that taxes on malt would fall on the consumer of beer, and not on the rent of the landlord. Adam Smith's argument is so able a statement of the view which I take of the subject of the tax on malt, and every other tax on raw produce, that I cannot refrain from offering it to the attention of the reader. "The rent and profits of barley land must always be nearly equal to those of other equally fertile, and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit[22] of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand, that its price is always above the natural proportion to that of other equally fertile, and equally well cultivated land, would necessarily reduce the rent and profit[22] of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity; and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit;[23] properly upon the _rent_ of the vineyard." "But the ordinary price of barley has never been a monopoly price; and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land. The different taxes which have been imposed upon malt, beer, and ale, _have never lowered the price of barley_; have never reduced the rent and profit[24] of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it; and those taxes, together with the different duties upon beer and ale, have constantly either raised the price, or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer, and not upon the producer." On this passage Mr. Buchanan remarks, "A duty on malt never could reduce the price of barley, because, unless as much could be made of barley by malting it as by selling it unmalted, the quantity required would not be brought to market. It is clear, therefore, that the price of malt must rise in proportion to the tax imposed on it, as the demand could not otherwise be supplied. The price of barley, however, is just as much a monopoly price as that of sugar; they both yield a rent, and the market price of both has equally lost all connexion with the original cost." It appears then to be the opinion of Mr. Buchanan, that a tax on malt would raise the price of malt, but that a tax on the barley from which malt is made, would not raise the price of barley; and therefore, if malt is taxed, the tax will be paid by the consumer; if barley is taxed, it will be paid by the landlord, as he will receive a diminished rent. According to Mr. Buchanan then, barley is at a monopoly price, at the highest price which the purchasers are willing to give for it; but malt made of barley is not at a monopoly price, and consequently it can be raised in proportion to the taxes that may be imposed upon it. This opinion of Mr. Buchanan of the effects of a tax on malt appears to me to be in direct contradiction to the opinion he has given of a similar tax, a tax on bread. "A tax on bread will be ultimately paid, not by a rise of price, but by a reduction of rent."[25] If a tax on malt would raise the price of beer, a tax on bread must raise the price of bread. The following argument of M. Say is founded on the same views as Mr. Buchanan's: "The quantity of wine or corn which a piece of land will produce, will remain nearly the same, whatever may be the tax with which it is charged. The tax may take away a half, or even three-fourths of its net produce, or of its rent if you please, yet the land would nevertheless be cultivated for the half or the quarter not absorbed by the tax. The rent, that is to say the landlord's share, would merely be somewhat lower. The reason of this will be perceived, if we consider, that in the case supposed, the quantity of produce obtained from the land, and sent to market, will remain nevertheless the same. On the other hand the motives on which the demand for the produce is founded continue also the same. "Now, if the quantity of produce supplied, and the quantity demanded, necessarily continue the same, notwithstanding the establishment or the increase of the tax, the price of that produce will not vary; and if the price do not vary, the consumer will not pay the smallest portion of this tax. "Will it be said that the farmer, he who furnishes labour and capital, will, jointly with the landlord, bear the burden of this tax? certainly not; because the circumstance or the tax has not diminished the number of farms to be let, nor increased the number of farmers. Since in this instance also the supply and demand remain the same, the rent of farms must also remain the same. The example of the manufacturer of salt, who can only make the consumers pay a portion of the tax, and that of the landlord who cannot reimburse himself in the smallest degree, prove the error of those who maintain, in opposition to the economists, that all taxes fall ultimately on the consumer."--Vol. ii. p. 338. If the tax "took away half, or even three-fourths of the net produce of the land," and the price of produce did not rise, how could those farmers obtain the usual profits of stock who paid very moderate rents, having that quality of land which required a much larger proportion of labour to obtain a given result, than land of a more fertile quality? If the whole rent were remitted, they would still obtain lower profits than those in other trades, and would therefore not continue to cultivate their land, unless they could raise the price of its produce. If the tax fell on the farmers, there would be fewer farmers disposed to hire farms; if it fell on the landlord, many farms would not be let at all, for they would afford no rent. But from what fund would those pay the tax who produce corn without paying any rent? It is quite clear that the tax must fall on the consumer. How would such land, as M. Say describes in the following passage, pay a tax of one-half or three-fourths of its produce? "We see in Scotland poor lands thus cultivated by the proprietor, and which could be cultivated by no other person. Thus too we see in the interior provinces of the United States vast and fertile lands, the revenue of which alone would not be sufficient for the maintenance of the proprietor. These lands are cultivated nevertheless, but it must be by the proprietor himself, or, in other words, he must add to the rent, which is little or nothing, the profits of his capital and industry, to enable him to live in competence. It is well known that land, though cultivated, yields no revenue to the landlord when no farmer will be willing to pay a rent for it: which is a proof that such land will give only the profits of the capital and of the industry necessary for its cultivation."--_Say_, Vol. ii. p. 127. CHAPTER XVI. POOR RATES. We have seen that taxes on raw produce, and on the profits of the farmer, will fall on the consumer of raw produce; since unless he had the power of remunerating himself by an increase of price, the tax would reduce his profits below the general level of profits, and would urge him to remove his capital to some other trade. We have seen too that he could not, by deducting it from his rent, transfer the tax to his landlord; because that farmer who paid no rent, would, equally with the cultivator of better land, be subject to the tax, whether it were laid on raw produce, or on the profits of the farmer. I have also attempted to shew, that if a tax were general, and affected equally all profits, whether manufacturing or agricultural, it would not operate either on the price of goods or raw produce, but would be immediately, as well as ultimately, paid by the producers. A tax on rent, it has been observed, would fall on the landlord only, and could not by any means be made to devolve on the tenant. The poor rate is a tax which partakes of the nature of all these taxes, and under different circumstances falls on the consumer of raw produce and goods, on the profits of stock, and on the rent of land. It is a tax which falls with peculiar weight on the profits of the farmer, and therefore may be considered as affecting the price of raw produce. According to the degree in which it bears on manufacturing and agricultural profits equally, it will be a general tax on the profits of stock, and will occasion no alteration in the price of raw produce and manufactures. In proportion to the farmer's inability to remunerate himself, by raising the price of raw produce, for that portion of the tax which peculiarly affects him, it will be a tax on rent, and will be paid by the landlord. To know then the operation of the poor rate at any particular time, we must ascertain whether at that time it affects in an equal or unequal degree the profits of the farmer and manufacturer; and also whether the circumstances be such as to afford to the farmer the power of raising the price of raw produce. The poor rates are professed to be levied on the farmer in proportion to his rent; and accordingly, the farmer who paid a very small rent, or no rent at all, should pay little or no tax. If this were true, poor rates, as far as they are paid by the agricultural class, would entirely fall on the landlord, and could not be shifted to the consumer of raw produce. But I believe that is not true; the poor rate is not levied according to the rent which a farmer actually pays to his landlord; it is proportioned to the annual value of his land, whether that annual value be given to it by the capital of the landlord or of the tenant. If two farmers rented land of two different qualities in the same parish, the one paying a rent of 100_l._ per annum for 50 acres of the most fertile land, and the other the same sum of 100_l._ for 1000 acres of the least fertile land, they would pay the same amount of poor rates, if neither of them attempted to improve the land; but if the farmer of the poor land, presuming on a very long lease, should be induced at a great expense to improve the productive powers of his land, by manuring, draining, fencing, &c., he would contribute to the poor rates, not in proportion to the actual rent paid to the landlord, but to the actual annual value of the land. The rate might equal or exceed the rent; but whether it did or not, no part of this rate would be paid by the landlord. It would have been previously calculated upon by the tenant; and if the price of produce were not sufficient to compensate him for all his expenses, together with this additional charge for poor rates, his improvements would not have been undertaken. It is evident then that the tax in this case is paid by the consumer; for if there had been no rate, the same improvements would have been undertaken, and the usual and general rate of profits would have been obtained on the stock employed, with a lower price of corn. Nor would it make the slightest difference in this question, if the landlord had made these improvements himself, and had in consequence raised his rent from 100_l._ to 500_l._; the rate would be equally charged to the consumer; for whether he should expend a large sum of money on his land, would depend on the rent, or what is called rent, which he would receive as a remuneration for it; and this again would depend on the price of corn, or other raw produce, being sufficiently high not only to cover this additional rent, but also the rate to which the land would be subject. But if at the same time all manufacturing capital contributed to the poor rates, in the same proportion as the capital expended by the farmer or landlord in improving the land, then it would no longer be a partial tax on the profits of the farmer's or landlord's capital, but a tax on the capital of all producers; and therefore it could no longer be shifted either on the consumer of raw produce or on the landlord. The farmer's profits would feel the effect of the rate no more than those of the manufacturer; and the former could not, any more than the latter, plead it as a reason for an advance in the price of his commodity. It is not the absolute, but the relative fall of profits, which prevents capital from being employed in any particular trade: it is the difference of profit which sends capital from one employment to another. It must be acknowledged however, that in the actual state of the poor rates, a much larger amount falls on the farmer than on the manufacturer, in proportion to their respective profits; the farmer being rated according to the actual productions which he obtains, the manufacturer only according to the value of the buildings in which he works, without any regard to the value of the machinery, labour, or stock, which he may employ. From this circumstance it follows, that the farmer will be enabled to raise the price of his produce by this whole difference. For since the tax falls unequally, and peculiarly on his profits, he would have less motive to devote his capital to the land, than to employ it in some other trade, unless the price of raw produce were raised. If on the contrary, the rate had fallen with greater weight on the manufacturer than on the farmer, he would have been enabled to raise the price of his goods by the amount of the difference, for the same reason that the farmer, under similar circumstances, could raise the price of raw produce. In a society therefore, which is extending its agriculture, when poor rates fall with peculiar weight on the land, they will be paid partly by the employers of capital in a diminution of the profits of stock, and partly by the consumer of raw produce in its increased price. In such a state of things, the tax may, under some circumstances, be even advantageous rather than injurious to landlords; for if the tax paid by the cultivator of the worst land, be higher in proportion to the quantity of produce obtained, than that paid by the farmers of the more fertile lands, the rise in the price of corn, which will extend to all corn, will more than compensate the latter for the tax. This advantage will remain with them during the continuance of their leases, but it will afterwards be transferred to their landlords. This then would be the effect of poor rates in an advancing society; but in a stationary, or in a retrograde country, so far as capital could not be withdrawn from the land, if a further rate were levied for the support of the poor, that part of it which fell on agriculture would be paid, during the current leases, by the farmers, but at the expiration of those leases it would almost wholly fall on the landlords. The farmer, who during his former lease, had expended his capital in improving his land, if it were still in his own hands, would be rated for this new tax according to the new value which the land had acquired by its improvement, and this amount he would be obliged to pay during his lease, although his profits might thereby be reduced below the general rate of profits; for the capital which he has expended may be so incorporated with the land, that it cannot be removed from it. If indeed he, or his landlord, (should it have been expended by him) were able to remove this capital, and thereby reduce the annual value of the land, the rate would proportionably fall, and as the produce would at the same time be diminished, its price would rise; he would be compensated for the tax, by charging it to the consumer, and no part would fall on rent; but this is impossible, at least with respect to some proportion of the capital, and consequently in that proportion the tax will be paid by the farmers during their leases, and by landlords at their expiration. This additional tax, as far as it fell unequally on manufacturers, would under such circumstances be added to the price of their goods; for there can be no reason why their profits should be reduced below the general rate of profits, when their capitals might be easily removed to agriculture.[26] CHAPTER XVII. ON SUDDEN CHANGES IN THE CHANNELS OF TRADE. A great manufacturing country is peculiarly exposed to temporary reverses and contingencies, produced by the removal of capital from one employment to another. The demands for the produce of agriculture are uniform, they are not under the influence of fashion, prejudice, or caprice. To sustain life, food is necessary, and the demand for food must continue in all ages, and in all countries. It is different with manufactures; the demand for any particular manufactured commodity, is subject not only to the wants, but to the tastes and caprice of the purchasers. A new tax too may destroy the comparative advantage which a country before possessed in the manufacture of a particular commodity; or the effects of war may so raise the freight and insurance on its conveyance, that it can no longer enter into competition with the home manufacture of the country to which it was before exported. In all such cases, considerable distress, and no doubt some loss, will be experienced by those who are engaged in the manufacture of such commodities; and it will be felt not only at the time of the change, but through the whole interval during which they are removing their capitals, and the labour which they can command, from one employment to another. Nor will distress be experienced in that country alone where such difficulties originate, but in the countries to which its commodities were before exported. No country can long import unless it also exports, or can long export unless it also imports. If then any circumstance should occur, which should permanently prevent a country from importing the usual amount of foreign commodities, it will necessarily diminish the manufacture of some of those commodities which were usually exported; and although the total value of the productions of the country will probably be but little altered, since the same capital will be employed, yet they will not be equally abundant and cheap; and considerable distress will be experienced through the change of employments. If by the employment of 10,000_l._ in the manufacture of cotton goods for exportation, we imported annually 3000 pair of silk stockings of the value of 2000_l._, and by the interruption of foreign trade we should be obliged to withdraw this capital from the manufacture of cotton, and employ it ourselves in the manufacture of stockings, we should still obtain stockings of the value of 2000_l._ provided no part of the capital were destroyed; but instead of having 3000 pair, we might only have 2,500. In the removal of the capital from the cotton to the stocking trade, much distress might be experienced, but it would not considerably impair the value of the national property, although it might lessen the quantity of our annual productions. The commencement of war after a long peace, or of peace after a long war, generally produces considerable distress in trade. It changes in a great degree the nature of the employments to which the respective capitals of countries were before devoted; and during the interval while they are settling in the situations which new circumstances have made the most beneficial, much fixed capital is unemployed, perhaps wholly lost, and labourers are without full employment. The duration of this distress will be longer or shorter according to the strength of that disinclination, which most men feel to abandon that employment of their capital to which they have long been accustomed. It is often protracted too by the restrictions and prohibitions, to which the absurd jealousies which prevail between the different states of the commercial commonwealth give rise. The distress which proceeds from a revulsion of trade, is often mistaken for that which accompanies a diminution of the national capital, and a retrograde state of society; and it would perhaps be difficult to point out any marks by which they may be accurately distinguished. When, however, such distress immediately accompanies a change from war to peace, our knowledge of the existence of such a cause will make it reasonable to believe, that the funds for the maintenance of labour have rather been diverted from their usual channel than materially impaired, and that after temporary suffering, the nation will again advance in prosperity. It must be remembered too that the retrograde condition is always an unnatural state of society. Man from youth grows to manhood, then decays, and dies; but this is not the progress of nations. When arrived to a state of the greatest vigour, their further advance may indeed be arrested, but their natural tendency is to continue for ages, to sustain undiminished their wealth, and their population. In rich and powerful countries where large capitals are invested in machinery, more distress will be experienced from a revulsion in trade, than in poorer countries where there is proportionally a much smaller amount of fixed, and a much larger amount of circulating capital, and where consequently more work is done by the labour of men. It is not so difficult to withdraw a circulating as a fixed capital, from any employment in which it may be engaged. It is often impossible to divert the machinery which may have been erected for one manufacture, to the purposes of another; but the clothing, the food, and the lodging of the labourer in one employment may be devoted to the support of the labourer in another, or the same labourer may receive the same food, clothing, and lodging, whilst his employment is changed. This, however, is an evil to which a rich nation must submit; and it would not be more reasonable to complain of it, than it would be in a rich merchant to lament that his ship was exposed to the dangers of the sea, whilst his poor neighbour's cottage was safe from all such hazard. From contingencies of this kind, though in an inferior degree, even agriculture is not exempted. War, which in a commercial country, interrupts the commerce of states, frequently prevents the exportation of corn from countries where it can be produced with little cost, to others not so favourably situated. Under such circumstances an unusual quantity of capital is drawn to agriculture, and the country which before imported becomes independent of foreign aid. At the termination of the war, the obstacles to importation are removed, and a competition destructive to the home-grower commences, from which he is unable to withdraw, without the sacrifice of a great part of his capital. The best policy of the state would be, to lay a tax, decreasing in amount from time to time, on the importation of foreign corn, for a limited number of years, in order to afford to the home-grower an opportunity to withdraw his capital gradually from the land. In so doing the country might not be making the most advantageous distribution of its capital, but the temporary tax to which it was subjected, would be for the advantage of a particular class, the distribution of whose capital was highly useful in procuring a supply of food when importation was stopped. If such exertions in a period of emergency were followed by risk of ruin on the termination of the difficulty, capital would shun such an employment. Besides the usual profits of stock, farmers would expect to be compensated for the risk which they incurred of a sudden influx of corn, and therefore the price to the consumer, at the seasons when he most required a supply, would be enhanced, not only by the superior cost of growing corn at home, but also by the insurance which he would have to pay, in the price, for the peculiar risk to which this employment of capital was exposed. Notwithstanding then, that it would be more productive of wealth to the country, at whatever sacrifice of capital it might be done, to allow the importation of cheap corn, it would perhaps be advisable to charge it with a duty for a few years. In examining the question of rent, we found, that with every increase in the supply of corn, and with the consequent fall of its price, capital would be withdrawn from the poorer land; and land of a better description, which would then pay no rent, would become the standard by which the natural price of corn would be regulated. At 4_l._ per quarter, land of an inferior quality, which may be designated by No. 6, might be cultivated; at 3_l._ 10_s._ No. 5; at 3_l._ No. 4, and so on. If corn, in consequence of permanent abundance, fell to 3_l._ 10_s._ the capital employed on No. 6 would cease to be employed; for it was only when corn was at 4_l._ that it could obtain the general profits, even without paying rent: it would therefore be withdrawn to manufacture those commodities with which all the corn grown on No. 6 would be purchased and imported. In this employment it would necessarily be more productive to its owner, or it would not be withdrawn from the other; for if he could obtain more corn by growing it on land for which he paid no rent, than by manufacturing a commodity with which he purchased it, its price could not be under 4_l._ It has, however, been said that capital cannot be withdrawn from the land; that it takes the form of expenses, which cannot be recovered, such as manuring, fencing, draining, &c., which are necessarily inseparable from the land. This is in some degree true; but that capital which consists of cattle, sheep, hay and corn ricks, carts, &c. may be withdrawn; and it always becomes a matter of calculation whether these shall continue to be employed on the land, notwithstanding the low price of corn, or whether they shall be sold, and their value transferred to another employment. Suppose, however, the fact to be as stated, and that no part of the capital could be withdrawn; the farmer would continue to raise corn, and precisely the same quantity too, at whatever price it might sell; for it could not be his interest to produce less, and if he did not so employ his capital, he would obtain from it no return whatever. Corn could not be imported, because he would sell it lower than 3_l._ 10_s._ rather than not sell it at all, and by the supposition the importer could not sell it under that price. Although then the farmers, who cultivated land of this quality, would undoubtedly be injured by the fall in the exchangeable value of the commodity which they produced,--how would the country be affected? We should have precisely the same quantity of every commodity produced, but raw produce and corn would sell at a much cheaper price. The capital of a country consists of its commodities, and as these would be the same as before, reproduction would go on at the same rate. This low price of corn would however only afford the usual profits of stock to the land, No. 5, which would then pay no rent, and the rent of all better land would fall: wages would also fall, and profits would rise. However low the price of corn might fall; if capital could not be removed from the land, and the demand did not increase, no importation would take place; for the same quantity as before would be produced at home. Although there would be a different division of the produce, and some classes would be benefited, and others injured, the aggregate of production would be precisely the same, and the nation collectively would neither be richer nor poorer. But there is this advantage always resulting from a relatively low price of corn,--that the division of the actual production is more likely to increase the fund for the maintenance of labour, inasmuch as more will be allotted, under the name of profit, to the productive class, a less, under the name of rent, to the unproductive class. This is true, even if the capital cannot be withdrawn from the land, and must be employed there, or not be employed at all: but if great part of the capital could be withdrawn, as it evidently could, it will be only withdrawn, when it will yield more to the owner by being withdrawn than by being suffered to remain where it was; it will only be withdrawn then, when it can elsewhere be employed more productively both for the owner and the public. He consents to sink that part of his capital which cannot be separated from the land, because with that part which he can take away, he can obtain a greater value, and a greater quantity of raw produce, than by not sinking this part of the capital. His case is precisely similar to that of a man who has erected machinery in his manufactory at a great expense, machinery which is afterwards so much improved upon by more modern inventions, that the commodities manufactured by him very much sink in value. It would be entirely a matter of calculation with him whether he should abandon the old machinery, and erect the more perfect, _losing all the value of the old_, or continue to avail himself of its comparatively feeble powers. Who, under such circumstances, would exhort him to forego the use of the better machinery, because it would deteriorate or annihilate the value of the old? Yet this is the argument of those who would wish us to prohibit the importation of corn, because it will deteriorate or annihilate that part of the capital of the farmer which is for ever sunk in land. They do not see that the end of all commerce is to increase production, and that by increasing production, though you may occasion partial loss, you increase the general happiness. To be consistent, they should endeavour to arrest all improvements in agriculture and manufactures, and all inventions of machinery; for though these contribute to general abundance, and therefore to the general happiness, they never fail, at the moment of their introduction, to deteriorate or annihilate a part of the existing capital of farmers and manufacturers. Agriculture like all other trades, and particularly in a commercial country, is subject to a re-action, which, in an opposite direction, succeeds the action of a strong stimulus. Thus, when war interrupts the importation of corn, its consequent high price attracts capital to the land, from the large profits which such an employment of it affords; this will probably cause more capital to be employed, and more raw produce to be brought to market than the demands of the country require. In such case, the price of corn will fall from the effects of a glut, and much agricultural distress will be produced, till the average supply is brought to a level with the average demand. CHAPTER XVIII. VALUE AND RICHES, THEIR DISTINCTIVE PROPERTIES. "A man is rich or poor," says Adam Smith, "according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life." Value then essentially differs from riches, for value depends not on abundance, but on the difficulty or facility of production. The labour of a million of men in manufactures, will always produce the same value, but will not always produce the same riches. By the invention of machinery, by improvements in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double, or treble the amount of riches, of "necessaries, conveniences, and amusements," in one state of society, that they could produce in another, but they will not on that account add any thing to value; for every thing rises or falls in value, in proportion to the facility or difficulty of producing it, or in other words, in proportion to the quantity of labour employed on its production. Suppose with a given capital, the labour of a certain number of men produced 1000 pair of stockings, and that by inventions in machinery, the same number of men can produce 2000 pair, or that they can continue to produce 1000 pair, and can produce besides 500 hats; then the value of the 2000 pair of stockings; or of the 1000 pair of stockings, and 500 hats, will be neither more nor less than that of the 1000 pair of stockings before the introduction of machinery; for they will be the produce of the same quantity of labour. But the value of the general mass of commodities will nevertheless be diminished; for although the value of the increased quantity produced in consequence of the improvement will be the same exactly as the value would have been of the less quantity that would have been produced, had no improvement taken place, an effect is also produced on the portion of goods still unconsumed, which were manufactured previously to the improvement; the value of those goods will be reduced, inasmuch as they must fall to the level, quantity for quantity, of the goods produced under all the advantages of the improvement: and the society will, notwithstanding the increased quantity of its commodities, notwithstanding its augmented riches, and its augmented means of enjoyment, have a less amount of value. By constantly increasing the facility of production, we constantly diminish the value of some of the commodities before produced, though by the same means we not only add to the national riches, but also to the power of future production. Many of the errors in political economy have arisen from errors on this subject, from considering an increase of riches, and an increase of value, as meaning the same thing, and from unfounded notions as to what constituted a standard measure of value. One man considers money as a standard of value, and a nation grows richer or poorer, according to him, in proportion as its commodities of all kinds can exchange for more or less money. Others represent money as a very convenient medium for the purpose of barter, but not as a proper measure by which to estimate the value of other things: the real measure of value according to them is corn,[27] and a country is rich or poor, according as its commodities will exchange for more or less corn. There are others again, who consider a country rich or poor, according to the quantity of labour that it can purchase.[28] But why should gold, or corn, or labour, be the standard measure of value, more than coals or iron?--more than cloth, soap, candles, and the other necessaries of the labourer?--why, in short, should any commodity, or all commodities together, be the standard, when such a standard is itself subject to fluctuations in value? Corn, as well as gold, may from difficulty or facility of production, vary 10, 20, or 30 per cent., relatively to other things; why should we always say, that it is those other things which have varied, and not the corn? That commodity is alone invariable, which at all times requires the same sacrifice of toil and labour to produce it. Of such a commodity we have no knowledge, but we may hypothetically argue and speak about it, as if we had; and may improve our knowledge of the science, by shewing distinctly the absolute inapplicability of all the standards which have been hitherto adopted. But supposing either of these to be a correct standard of value, still it would not be a standard of riches, for riches do not depend on value. A man is rich or poor, according to the abundance of necessaries and luxuries, which he can command; and whether the exchangeable value of these for money, for corn, or for labour, be high or low, they will equally contribute to the enjoyment of their possessor. It is through confounding the ideas of value and wealth, or riches, that it has been asserted, that by diminishing the quantity of commodities, that is to say, of the necessaries, conveniences, and enjoyments of human life, riches may be increased. If value were the measure of riches this could not be denied, because by scarcity the value of commodities is raised; but if Adam Smith be correct, if riches consist in necessaries and enjoyments, then they cannot be increased by a diminution of quantity. It is true, that the man in possession of a scarce commodity is richer, if by means of it he can command more of the necessaries and enjoyments of human life; but as the general stock out of which each man's riches are drawn, is diminished in quantity, by all that any individual takes from it, other men's shares must necessarily be reduced in proportion as this favoured individual is able to appropriate a greater quantity to himself. Let water become scarce, says Lord Lauderdale, and be exclusively possessed by an individual, and you will increase his riches, because water will then have value; and if wealth be the aggregate of individual riches, you will by the same means also increase wealth. You undoubtedly will increase the riches of this individual, but inasmuch as the farmer must sell a part of his corn, the shoemaker a part of his shoes, and all men give up a portion of their possessions for the sole purpose of supplying themselves with water, which they before had for nothing, they are poorer by the whole quantity of commodities which they are obliged to devote to this purpose, and the proprietor of water is benefited precisely by the amount of their loss. The same quantity of water, and the same quantity of commodities, are enjoyed by the whole society, but they are differently distributed. This is however supposing rather a monopoly of water than a scarcity of it. If it should be scarce, then the riches of the country and of individuals would be actually diminished, inasmuch as it would be deprived of a portion of one of its enjoyments. The farmer would not only have less corn to exchange for the other commodities which might be necessary or desirable to him, but he and every other individual would be abridged in the enjoyment of one of the most essential of their comforts. Not only would there be a different distribution of riches, but an actual loss of wealth. It may be said then of two countries possessing precisely the same quantity of all the necessaries and comforts of life, that they are equally rich, but the value of their respective riches would depend on the comparative facility or difficulty with which they were produced. For if an improved piece of machinery should enable us to make two pair of stockings, instead of one, without additional labour, double the quantity would be given in exchange for a yard of cloth. If a similar improvement be made in the manufacture of cloth, stockings and cloth will exchange in the same proportions as before, but they will both have fallen in value; for in exchanging them for hats, for gold, or other commodities in general, twice the former quantity must be given. Extend the improvement to the production of gold, and every other commodity; and they will all regain their former proportions. There will be double the quantity of commodities annually produced in the country, and therefore the wealth of the country will be doubled, but this wealth will not have increased in value. Although Adam Smith has given the correct description of riches, which I have more than once noticed, he afterwards explains them differently, and says, "that a man must be rich or poor according to the quantity of labour which he can afford to purchase." Now this description differs essentially from the other, and is certainly incorrect; for suppose the mines were to become more productive, so that gold and silver fell in value, from the greater facility of their production; or that velvets were to be manufactured with so much less labour than before, that they fell to half their former value; the riches of all those who purchased those commodities would be increased: one man might increase the quantity of his plate, another might buy double the quantity of velvet; but with the possession of this additional plate, and velvet, they could employ no more labour than before; because as the exchangeable value of velvet and of plate would be lowered, they must part with proportionally more of these species of riches to purchase a day's labour. Riches then cannot be estimated by the quantity of labour which they can purchase. From what has been said, it will be seen that the wealth of a country may be increased in two ways: it may be increased by employing a greater portion of revenue in the maintenance of productive labour,--which will not only add to the quantity, but to the value of the mass of commodities; or it may be increased, without employing any additional quantity of labour, by making the same quantity more productive,--which will add to the abundance, but not to the value of commodities. In the first case, a country would not only become rich, but the value of its riches would increase. It would become rich by parsimony; by diminishing its expenditure on objects of luxury and enjoyment; and employing those savings in reproduction. In the second case, there will not necessarily be either any diminished expenditure on luxuries and enjoyments, or any increased quantity of productive labour employed, but with the same labour more would be produced; wealth would increase, but not value. Of these two modes of increasing wealth, the last must be preferred, since it produces the same effect without the privation and diminution of enjoyments, which can never fail to accompany the first mode. Capital is that part of the wealth of a country which is employed with a view to future production, and may be increased in the same manner as wealth. An additional capital will be equally efficacious in the production of future wealth, whether it be obtained from improvements in skill and machinery, or from using more revenue reproductively; for wealth always depends on the quantity of commodities produced, without any regard to the facility with which the instruments employed in production may have been procured. A certain quantity of clothes and provisions will maintain and employ the same number of men, and will therefore procure the same quantity of work to be done, whether they be produced by the labour of 100 or of 200 men; but they will be of twice the value if 200 have been employed on their production. M. Say appears to me to have been singularly unfortunate in his definition of riches and value in the first chapter of his excellent work: the following is the substance of his reasoning: riches, he observes, consist only of things which have a value in themselves: riches are great, when the sum of the values of which they are composed is great. They are small when the sum of their values is small. Two things having an equal value, are riches of equal amount. They are of equal value, when by general consent they are freely exchanged for each other. Now, if mankind attach value to a thing, it is on account of the _uses_ to which it is applicable. This faculty, which certain things have, of satisfying the various wants of mankind, I call utility. To create objects that have a value of any kind is to create riches, since the utility of things is the first foundation of their value, and it is the value of things which constitutes riches. But we do not create objects: all we can do is to reproduce matter under another form--we can give it utility. Production then is a creation, not of matter but of utility, and it is measured by the value arising from the utility of the object produced. The utility of any object, according to general estimation, is pointed out by the quantity of other commodities for which it will exchange. This valuation, arising from the general estimate formed by society, constitutes what Adam Smith calls value in exchange; what Turgot calls appreciable value; and what we may more briefly designate by the term _value_. Thus far M. Say, but in his account of value and riches he has confounded two things which ought always to be kept separate, and which are called by Adam Smith, value in use and value in exchange. If by an improved machine I can, with the same quantity of labour, make two pair of stockings instead of one, I in no way impair the _utility_ of one pair of stockings, though I diminish their value. If then I had precisely the same quantity of coats, shoes, stockings, and all other things, as before, I should have precisely the same quantity of useful objects, and should therefore be equally rich, if utility were the measure of riches; but I should have a less amount of value, for my stockings would be of only half their former value. Utility then is not the measure of exchangeable value. If we ask M. Say in what riches consist, he tells us in the possession of objects having value. If we then ask him what he means by value, he tells us that things are valuable in proportion as they possess utility. If again we ask him to explain to us by what means we are to judge of the utility of objects, he answers, by their value. Thus then the measure of value is utility, and the measure of utility is value. M. Say, in speaking of the excellences and imperfections of the great work of Adam Smith, imputes to him, as an error, that "he attributes to the labour of man alone the power of producing value. A more correct analysis shews us that value is owing to the action of labour, or rather the industry of man, combined with the action of those agents which nature supplies, and with that of capital. His ignorance of this principle prevented him from establishing the true theory of the influence of machinery in the production of riches." In contradiction to the opinion of Adam Smith, M. Say, in the fourth chapter, speaks of the value which is given to commodities by natural agents, such as the sun, the air, the pressure of the atmosphere &c., which are sometimes substituted for the labour of man, and sometimes concur with him in producing.[29] But these natural agents, though they add greatly to _value in use_, never add exchangeable value, of which M. Say is speaking, to a commodity: as soon as by the aid of machinery, or by the knowledge of natural philosophy, you oblige natural agents to do the work which was before done by man, the exchangeable value of such work falls accordingly. If ten men turned a corn mill, and it be discovered that by the assistance of wind, or of water, the labour of these ten men may be spared, the flour, which is the produce of the work performed by the mill, would immediately fall in value, in proportion to the quantity of labour saved; and the society would be richer by the commodities which the labour of the ten men could produce, the funds destined for their maintenance being in no degree impaired. M. Say accuses Dr. Smith of having overlooked the value which is given to commodities by natural agents, and by machinery, because he considered that the value of all things was derived from the labour of man; but it does not appear to me, that this charge is made out; for Adam Smith no where under-values the services which these natural agents and machinery perform for us, but he very justly distinguishes the nature of the value which they add to commodities--they are serviceable to us, by increasing the abundance of productions, by making men richer, by adding to value in use; but as they perform their work gratuitously, as nothing is paid for the use of air, of heat, and of water, the assistance which they afford us, adds nothing to value in exchange. In the first chapter of the second book, M. Say himself gives a similar statement of value, for he says that "utility is the foundation of value, that commodities are only desirable, because they are in some way useful, but that their value depends not on their utility, not on the degree in which they are desired, but on the quantity of labour necessary to procure them." "The utility of a commodity thus understood, makes it an object of man's desire, makes him wish for it, and establishes a demand for it. When to obtain a thing, it is sufficient to desire it, it may be considered as an article of natural wealth, given to man in an unlimited quantity, and which he enjoys, without purchasing it by any sacrifice; such are the air, water, the light of the sun. If he obtained in this manner all the objects of his wants and desires, he would be infinitely rich: he would be in want of nothing. But unfortunately this is not the case; the greater part of the things which are convenient and agreeable to him, as well as those which are indispensably necessary in the social state, for which man seems to be specifically formed, are not given to him gratuitously; they could only exist by the exertion of certain labour, the employment of a certain capital, and, in many cases, by the use of land. These are obstacles in the way of gratuitous enjoyment; obstacles from which result a real expense of production; because we are obliged to pay for the assistance of these agents of production." "It is only when this utility has thus been communicated to a thing (viz. by industry, capital, and land,) that it is a production, _and that it has a value_. It is its utility which is the foundation of the demand for it, _but the sacrifices, and the charges necessary to obtain it, or in other words, its price_, limits the extent of this demand." The confusion which arises from confounding the terms "value" and "riches" will best be seen in the following passages.[31] His pupil observes: "You have said, besides, that the riches of a society were composed of the sum total of the values which it possessed; it appears to me to follow, that the fall of one production, of stockings for example, by diminishing the sum total of the value belonging to the society, diminishes the mass of its riches;" to which the following answer is given: "the _sum_ of the society's riches will not fall on that account. Two pair of stockings are produced instead of one; and two pair at three francs, are equally valuable with one pair at six francs. The income of the society remains the same, because the manufacturer has gained as much on two pair at three francs, as he gained on one pair at six francs." Thus far M. Say, though incorrect, is at least consistent. If value be the measure of riches, the society is equally rich, because the value of all its commodities is the same as before. But now for his inference. "But when the income remains the same, and productions fall in price, the society is really enriched. If the same fall took place in all commodities at the same time, which is not absolutely impossible, the society by procuring at half their former price, all the objects of its consumption, without having lost any portion of its income, would really be twice as rich as before, and could purchase twice the quantity of goods." In the first passage we are told, that if every thing fell to half its value, from abundance, the society would be equally rich, because there would be double the quantity of commodities at half their former value, or in other words, there would be the same value. But in the last passage we are informed, that by doubling the quantity of commodities, although the value of each commodity should be diminished one half, and therefore the value of all the commodities together be precisely the same as before, yet the society would be twice as rich as before. In the first case riches are estimated by the amount of value: in the second, they are estimated by the abundance of commodities contributing to human enjoyments. M. Say further says, "that a man is infinitely rich without valuables, if he can for nothing obtain all the objects he desires;" yet in another place we are told, "that riches consist, not in the product itself, for it is not riches if it have not value, but in its value." Vol. ii. p. 2. CHAPTER XIX. EFFECTS OF ACCUMULATION ON PROFITS AND INTEREST. From the account which has been given of the profits of stock, it will appear, that no accumulation of capital will permanently lower profits, unless there be some permanent cause for the rise of wages. If the funds for the maintenance of labour were doubled, trebled, or quadrupled, there would not long be any difficulty in procuring the requisite number of hands, to be employed by those funds; but owing to the increasing difficulty of making constant additions to the food of the country, funds of the same value would probably not maintain the same quantity of labour. If the necessaries of the workman could be constantly increased with the same facility, there could be no permanent alteration in the rate of profits or wages, to whatever amount capital might be accumulated. Adam Smith, however, uniformly ascribes the fall of profits to accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ. "The increase of stock he says, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in all." Adam Smith speaks here of a rise of wages, but it is of a temporary rise, proceeding from increased funds before the population is increased; and he does not appear to see, that at the same time that capital is increased, the work to be effected by capital, is increased in the same proportion. M. Say has however most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and therefore it is not probable that he will continually produce a commodity for which there is no demand.[32] There cannot then be accumulated in a country any amount of capital which cannot be employed productively, until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases.[33] While the profits of stock are high, men will have a motive to accumulate. Whilst a man has any wished-for gratification unsupplied he will have a demand for more commodities; and it will be an effectual demand while he has any new value to offer in exchange for them. If ten thousand pounds were given to a man having 100,000_l._ per annum, he would not lock it up in a chest, but would either increase his expenses by 10,000_l._; employ it himself productively, or lend it to some other person for that purpose; in either case, demand would be increased, although it would be for different objects. If he increased his expenses, his effectual demand might probably be for buildings, furniture, or some such enjoyment. If he employed his 10,000_l._ productively, his effectual demand would be for food, clothing, and raw material, which might set new labourers to work; but still it would be demand.[34] Productions are always bought by productions, money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities; the demand for corn is limited by the mouths which are to eat it, for shoes and coats by the persons who are to wear them; but though a community, or a part of a community, may have as much corn, and as many hats and shoes, as it is able or may wish to consume, the same cannot be said of every commodity produced by nature or by art. Some would consume more wine, if they had the ability to procure it. Others having enough of wine, would wish to increase the quantity or improve the quality of their furniture. Others might wish to ornament their grounds, or to enlarge their houses. The wish to do all or some of these is implanted in every man's breast; nothing is required but the means, and nothing can afford the means, but an increase of production. If I had food and necessaries at my disposal, I should not be long in want of workmen who would put me in possession of some of the objects most useful or most desirable to me. Whether these increased productions, and the consequent demand which they occasion, shall or shall not lower profits, depends solely on the rise of wages; and the rise of wages, excepting for a limited period, on the facility of producing the food and necessaries of the labourer. I say excepting for a limited period, because no point is better established, than that the supply of labourers will always ultimately be in proportion to the means of supporting them. There is only one case, and that will be temporary, in which the accumulation of capital with a low price of food may be attended with a fall of profits; and that is, when the funds for the maintenance of labour increase much more rapidly than population;--wages will then be high, and profits low. If every man were to forego the use of luxuries, and be intent only on accumulation, a quantity of necessaries might be produced, for which there could not be any immediate consumption. Of commodities so limited in number, there might undoubtedly be an universal glut, and consequently there might neither be demand for an additional quantity of such commodities, nor profits on the employment of more capital. If men ceased to consume, they would cease to produce. This admission, does not impugn the general principle. In such a country as England, for example, it is difficult to suppose that there can be any disposition to devote the whole capital and labour of the country to the production of necessaries only. When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will be somewhat greater than in the home trade. Adam Smith has justly observed "that the desire of food is limited in every man by the narrow capacity of the human stomach, but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary." Nature then has necessarily limited the amount of capital which can at any one time be profitably engaged in agriculture, but she has placed no limits to the amount of capital that may be employed in procuring "the conveniences and ornaments" of life. To procure these gratifications in the greatest abundance is the object in view, and it is only because foreign trade, or the carrying trade, will accomplish it better, that men engage in them, in preference to manufacturing the commodities required, or a substitute for them, at home. If, however, from peculiar circumstances, we were precluded from engaging capital in foreign trade, or in the carrying trade, we should, though with less advantage, employ it at home; and while there is no limit to the desire of "conveniences, ornaments of building, dress, equipage, and household furniture," there can be no limit to the capital that may be employed in procuring them, except that which bounds our power to maintain the workmen who are to produce them. Adam Smith however, speaks of the carrying trade as one not of choice, but of necessity; as if the capital engaged in it would be inert if not so employed, as if the capital in the home trade could overflow, if not confined to a limited amount. He says, "when the capital stock of any country is increased to such a degree, _that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country_, the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries." "About ninety-six thousand hogsheads of tobacco are annually purchased with a part of the surplus produce of British industry. But the demand of Great Britain does not require, perhaps, more than fourteen thousand. If the remaining eighty-two thousand, therefore, could not be sent abroad _and exchanged for something more in demand at home_, the importation of them would cease immediately, _and with it the productive labour of all the inhabitants of Great Britain, who are at present employed in preparing the goods with which these eighty-two thousand hogsheads are annually purchased_." But could not this portion of the productive labour of Great Britain be employed in preparing some other sort of goods, with which something more in demand at home might be purchased? And if it could not, might we not employ this productive labour, though with less advantage, in making those goods in demand at home, or at least some substitute for them? If we wanted velvets, might we not attempt to make velvets; and if we could not succeed, might we not make more cloth, or some other object desirable to us? We manufacture commodities, and with them buy goods abroad, because we can obtain a greater quantity than we could make at home. Deprive us of this trade, and we immediately manufacture again for ourselves. But this opinion of Adam Smith is at variance with all his general doctrines on this subject. "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. _The general industry of the country being always in proportion to the capital which employs it_, will not thereby be diminished, but only left to find out the way in which it can be employed with the greatest advantage." Again. "Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of another kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labours, the quantity of materials which they can work up increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones." Adam Smith has justly observed, that it is extremely difficult to determine the rate of the profits of stock. "Profit is so fluctuating, that even in a particular trade, and much more in trades in general, it would be difficult to state the average rate of it. To judge of what it may have been formerly, or in remote periods of time, with any degree of precision, must be altogether impossible." Yet since it is evident that much will be given for the use of money, when much can be made by it, he suggests, that "the market rate of interest will lead us to form some notion of the rate of profits, and the history of the progress of interest afford us that of the progress of profits." Undoubtedly if the market rate of interest could be accurately known for any considerable period, we should have a tolerably correct criterion, by which to estimate the progress of profits. But in all countries, from mistaken notions of policy, the state has interfered to prevent a fair and free market rate of interest, by imposing heavy and ruinous penalties on all those who shall take more than the rate fixed by law. In all countries probably these laws are evaded, but records give us little information on this head, and point out rather the legal and fixed rate, than the market rate of interest. During the present war, exchequer and navy bills have frequently been at so high a discount, as to afford the purchasers of them 7, 8 per cent., or a greater rate of interest for their money. Loans have been raised by Government at an interest exceeding 6 per cent., and individuals have been frequently obliged, by indirect means, to pay more than 10 per cent., for the interest of money; yet during this same period the legal rate of interest has been uniformly at 5 per cent. Little dependance for information then can be placed on that which is the fixed and legal rate of interest, when we find it may differ so considerably from the market rate. Adam Smith informs us, that from the 37th of Henry VIII., to 21st of James I., 10 per cent. continued to be the legal rate of interest. Soon after the restoration, it was reduced to 6 per cent., and by the 12th of Anne, to 5 per cent. He thinks the legal rate followed, and did not precede the market rate of interest. Before the American War, Government borrowed at 3 per cent., and the people of credit in the capital, and in many other parts of the kingdom at 3-1/2, 4, and 4-1/2 per cent. The rate of interest, though ultimately and permanently governed by the rate of profit, is however subject to temporary variations from other causes. With every fluctuation in the quantity and value of money, the prices of commodities naturally vary. They vary also, as we have already shewn, from the alteration in the proportion of supply to demand, although there should not be either greater facility or difficulty of production. When the market prices of goods fall from an abundant supply, from a diminished demand, or from a rise in the value of money, a manufacturer naturally accumulates an unusual quantity of finished goods, being unwilling to sell them at very depressed prices. To meet his ordinary payments, for which he used to depend on the sale of his goods, he now endeavours to borrow on credit, and is often obliged to give an increased rate of interest. This however is but of temporary duration; for either the manufacturer's expectations were well grounded, and the market price of his commodities rises, or he discovers that there is a permanently diminished demand, and he no longer resists the course of affairs: prices fall, and money and interest regain their real value. If by the discovery of a new mine, by the abuses of banking, or by any other cause, the quantity of money be greatly increased, its ultimate effect is to raise the prices of commodities in proportion to the increased quantity of money; but there is probably always an interval, during which some effect is produced on the rate of interest. The price of funded property is not a steady criterion by which to judge of the rate of interest. In time of war, the stock market is so loaded by the continual loans of Government, that the price of stock has not time to settle at its fair level before a new operation of funding takes place, or it is affected by anticipation of political events. In time of peace, on the contrary, the operations of the sinking fund, the unwillingness, which a particular class of persons feel to divert their funds to any other employment than that to which they have been accustomed, which they think secure, and in which their dividends are paid with the utmost regularity, elevates the price of stock, and consequently depresses the rate of interest on these securities below the general market rate. It is observable too, that for different securities, Government pays very different rates of interest. Whilst 100_l._ capital in 5 per cent. stock is selling for 95_l._, an exchequer bill of 100_l._, will be sometimes selling for 100_l._ 5_s._, for which exchequer bill, no more interest will be annually paid than 4_l._ 11_s._ 3_d._: one of these securities pays to a purchaser at the above prices, an interest of more than 5-1/4 per cent., the other but little more than 4-1/4; a certain quantity of these exchequer bills is required as a safe and marketable investment for bankers; if they were increased much beyond this demand, they would probably be as much depreciated as the 5 per cent. stock. A stock paying 3 per cent. per annum will always sell at a proportionally greater price than stock paying 5 per cent., for the capital debt of neither can be discharged but at par, or 100_l._ money for 100_l._ stock. The market rate of interest may fall to 4 per cent., and Government would then pay the holder of 5 per cent. stock at par, unless he consented to take 4 per cent., or some diminished rate of interest under 5 per cent.: they would have no advantage from so paying the holder of 3 per cent. stock, till the market rate of interest had fallen below 3 per cent. per annum. To pay the interest on the national debt, large sums of money are withdrawn from circulation four times in the year for a few days. These demands for money being only temporary, seldom affect prices; they are generally surmounted by the payment of a large rate of interest.[36] CHAPTER XX. BOUNTIES ON EXPORTATION, AND PROHIBITIONS OF IMPORTATION. A bounty on the exportation of corn tends to lower its price to the foreign consumer, but it has no permanent effect on its price in the home market. Suppose that to afford the usual and general profits of stock, the price of corn should in England be 4_l._ per quarter; it could not then be exported to foreign countries where it sold for 3_l._ 15_s._ per quarter. But if a bounty of 10_s._ per quarter were given on exportation, it could be sold in the foreign market at 3_l._ 10_s._, and consequently the same profit would be afforded to the corn grower, whether he sold it at 3_l._ 10_s._ in the foreign, or at 4_l._ in the home market. A bounty then, which should lower the price of British corn in the foreign country, below the cost of producing corn in that country, would naturally extend the demand for British, and diminish the demand for their own corn. This extension of demand for British corn could not fail to raise its price for a time in the home market, and during that time to prevent also its falling so low in the foreign market as the bounty has a tendency to effect. But the causes which would thus operate on the market price of corn in England would produce no effect whatever on its natural price, on its real cost of production. To grow corn would neither require more labour nor more capital, and, consequently, if the profits of the farmer's stock were before only equal to the profits of the stock of other traders, they will, after the rise of price, be considerably above them. By raising the profits of the farmer's stock, the bounty will operate as an encouragement to agriculture, and capital will be withdrawn from manufactures to be employed on the land, till the enlarged demand for the foreign market has been supplied, when the price of corn will again fall in the home market to its natural and necessary price, and profits will be again at their ordinary and accustomed level. The increased supply of grain operating on the foreign market, will also lower its price in the country to which it is exported, and will thereby restrict the profits of the exporter to the lowest rate at which he can afford to trade. The ultimate effect then of a bounty on the exportation of corn, is not to raise or to lower the price in the home market, but to lower the price of corn to the foreign consumer--to the whole extent of the bounty, if the price of corn had not before been lower in the foreign, than in the home market--and in a less degree, if the price in the home had been above the price in the foreign market. A writer in the fifth vol. of the Edinburgh Review on the subject of a bounty on the exportation of corn, has very clearly pointed out its effects on the foreign and home demand. He has also justly remarked, that it would not fail to give encouragement to agriculture in the exporting country; but he appears to have imbibed the common error which has misled Dr. Smith, and I believe most other writers on this subject. He supposes, because the price of corn ultimately regulates wages, that therefore it will regulate the price of all other commodities. He says that the bounty, "by raising the profits of farming, will operate as an encouragement to husbandry; by raising the price of corn to the consumers at home, it will diminish for the time their power of purchasing this necessary of life, and thus abridge their real wealth. It is evident, however, that this last effect must be temporary: the wages of the labouring consumers had been adjusted before by competition, and the same principle will adjust them again to the same rate, by raising the money price of labour, _and, through that, of other commodities, to the money price of corn_. The bounty upon exportation, therefore, will ultimately raise the money price of corn in the home market; not directly, however, but through the medium of an extended demand in the foreign market, and a consequent enhancement of the real price at home: _and this rise of the money price, when it has once been communicated to other commodities, will of course become fixed_." If, however, I have succeeded in shewing that it is not the rise in the money wages of labour which raises the price of commodities, but that such rise always affects profits, it will follow that the prices of commodities would not rise in consequence of a bounty. But a temporary rise in the price of corn, produced by an increased demand from abroad, would have no effect on the money price of wages. The rise of corn is occasioned by a competition for that supply which was before exclusively appropriated to the home market. By raising profits, additional capital is employed in agriculture, and the increased supply is obtained; but till it be obtained, the high price is absolutely necessary to proportion the consumption to the supply, which would be counteracted by a rise of wages. The rise of corn is the consequence of its scarcity, and is the means by which the demand of the home purchasers is diminished. If wages were increased, the competition would increase, and a further rise of the price of corn would become necessary. In this account of the effects of a bounty, nothing has been supposed to occur to raise the natural price of corn, by which its market price is ultimately governed; for it has not been supposed that any additional labour would be required on the land to insure a given production, and this alone can raise natural price. If the natural price of cloth were 20_s._ per yard, a great increase in the foreign demand might raise the price to 25_s._, or more, but the profits which would then be made by the clothier would not fail to attract capital in that direction, and although the demand should be doubled, trebled, or quadrupled, the supply would ultimately be obtained, and cloth would fall to its natural price of 20_s._ So in the supply of corn, although we should export 2, 3, or 800,000 quarters, annually, it would ultimately be produced at its natural price, which never varies unless a different quantity of labour becomes necessary to production. Perhaps in no part of Adam Smith's justly celebrated work are his conclusions more liable to objection, than in the chapter on bounties. In the first place, he speaks of corn as of a commodity of which the production cannot be increased in consequence of a bounty on exportation; he supposes invariably that it acts only on the quantity actually produced, and is no stimulus to further production. "In years of plenty," he says, "by occasioning an extraordinary exportation, it necessarily keeps up the price of corn in the home market above what it would naturally fall to. In years of scarcity, though the bounty is frequently suspended, yet the great exportation which it occasions in years of plenty, must frequently hinder, more or less, the plenty of one year from relieving the scarcity of another. Both in the years of plenty and in years of scarcity, therefore, the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market."[37] Adam Smith appears to have been fully aware, that the correctness of his argument entirely depended on the fact, whether the increase "of the money price of corn, by rendering that commodity more profitable to the farmer, would not necessarily encourage its production." "I answer," he says, "that this might be the case, if the effect of the bounty was to raise the real price of corn, or to enable the farmer, with an equal quantity of it, to maintain a greater number of labourers in the same manner, whether liberal, moderate, or scanty, as other labourers are commonly maintained in his neighbourhood." If nothing were consumed by the labourer but corn, and if the portion which he received, was the very lowest which his sustenance required, there might be some ground for supposing that the quantity paid to the labourer could, under no circumstances, be reduced,--but the money wages of labour sometimes do not rise at all, and never rise in proportion to the rise in the money price of corn, because corn, though an important part, is only a part of the consumption of the labourer. If half his wages were expended on corn, and the other half on soap, candles, fuel, tea, sugar, clothing, &c., commodities on which no rise is supposed to take place, it is evident that he would be quite as well paid with a bushel and a half of wheat, when it was 16_s._ a bushel, as he was with two bushels, when the price was 8_s._ per bushel; or with 24_s._ in money, as he was before with 16_s._ His wages would rise only 50 per cent. though corn rose 100 per cent., and, consequently, there would be sufficient motive to divert more capital to the land, if profits on other trades continued the same as before. But such a rise of wages would also induce manufacturers to withdraw their capitals from manufactures, to employ them on the land; for whilst the farmer increased the price of his commodity 100 per cent., and his wages only 50 per cent., the manufacturer would be obliged also to raise wages 50 per cent., whilst he had no compensation whatever, in the rise of his manufactured commodity, for this increased charge of production; capital would consequently flow from manufactures to agriculture, till the supply would again lower the price of corn to 8_s._ per bushel, and wages to 16_s._ per week; when the manufacturer would obtain the same profits as the farmer, and the tide of capital would cease to set in either direction. This is in fact the mode in which the cultivation of corn is always extended, and the increased wants of the market supplied. The funds for the maintenance of labour increase, and wages are raised. The comfortable situation of the labourer induces him to marry--population increases, and the demand for corn raises its price relatively to other things,--more capital is profitably employed on agriculture, and continues to flow towards it, till the supply is equal to the demand, when the price again falls, and agricultural and manufacturing profits are again brought to a level. But whether wages were stationary after the rise in the price of corn, or advanced moderately, or enormously, is of no importance to this question, for wages are paid by the manufacturer as well as by the farmer, and, therefore, in this respect they must be equally affected by a rise in the price of corn. But they are unequally affected in their profits, inasmuch as the farmer sells his commodity at an advanced price, while the manufacturer sells his for the same price as before. It is however the inequality of profit, which is always the inducement to remove capital from one employment to another, and therefore more corn would be produced, and fewer commodities manufactured. Manufactures would not rise, because fewer were manufactured, for a supply of them would be obtained in exchange for the exported corn. A bounty, if it raises the price of corn, either raises it in comparison with the price of other commodities, or it does not. If the affirmative be true, it is impossible to deny the greater profits of the farmer, and the temptation to the removal of capital, till its price is again lowered by an abundant supply. If it does not raise it in comparison with other commodities, where is the injury to the home consumer, beyond the inconvenience of paying the tax? If the manufacturer pays a greater price for his corn, he is compensated by the greater price at which he sells his commodity, with which his corn is ultimately purchased. The error of Adam Smith proceeds precisely from the same source as that of the writer in the Edinburgh Review; for they both think "that the money price of corn regulates that of all other home-made commodities."[38] "It regulates," says Adam Smith, "the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family, either in the liberal, moderate, or scanty manner, in which the advancing, stationary, or declining circumstances of the society oblige his employers to maintain him. By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of almost all manufactures. By regulating the money price of labour, it regulates that of manufacturing art, and industry; and by regulating both, it regulates that of the complete manufacture. _The money price of labour, and of every thing that is the produce either of land and labour, must necessarily rise or fall in proportion to the money price of corn._" This opinion of Adam Smith, I have before attempted to refute. In considering a rise in the price of commodities as a necessary consequence of a rise in the price of corn, he reasons as though there were no other fund from which the increased charge could be paid. He has wholly neglected the consideration of profits, the diminution of which forms that fund, without raising the price of commodities. If this opinion of Dr. Smith were well founded, profits could never really fall, whatever accumulation of capital there might be. If when wages rose, the farmer could raise the price of his corn, and the clothier, the hatter, the shoemaker, and every other manufacturer, could also raise the price of their goods in proportion to the advance, although estimated in money, they might be all raised, they would continue to bear the same value relatively to each other. Each of these trades could command the same quantity as before of the goods of the others, which, since it is goods, and not money, which constitute wealth, is the only circumstance that could be of importance to them; and the whole rise in the price of raw produce and of goods, would be injurious to no other persons but to those whose property consisted of gold and silver, or whose annual income was paid in a contributed quantity of those metals, whether in the form of bullion or of money. Suppose the use of money to be wholly laid aside, and all trade to be carried on by barter. Under such circumstances, could corn rise in exchangeable value with other things? If it could, then it is not true that the value of corn regulates the value of all other commodities; for to do that, it should not vary in relative value to them. If it could not, then it must be maintained, that whether corn be obtained on rich, or on poor land, with much labour, or with little, with the aid of machinery, or without, it would always exchange for an equal quantity of all other commodities. I cannot, however, but remark that, though Adam Smith's general doctrines correspond with this which I have just quoted, yet in one part of his work he appears to have given a correct account of the nature of value. "The proportion between the value of gold and silver, and that of goods of any other kind, _depends in all cases_," he says, "_upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods_." Does he not here fully acknowledge that if any increase takes place in the quantity of labour, required to bring one sort of goods to market, whilst no such increase takes place in bringing another sort thither, those goods will rise in relative value. If no more labour be required to bring cloth and gold to market, they will not vary in relative value, but if more labour be required to bring corn and shoes to market, will not corn and shoes rise in value relatively to cloth, and money made of gold? Adam Smith again considers that the effect of the bounty is to cause a partial degradation in the value of money. "That degradation," says he "in the value of silver, which is the effect of the fertility of the mines, and which operates equally, or very nearly equally, through the greater part of the commercial world, is a matter of very little consequence to any particular country. The consequent rise of all money prices, though it does not make those who receive them really richer, does not make them really poorer. A service of plate becomes really cheaper, and every thing else remains precisely of the same real value as before." This observation is most correct. "But that degradation in the value of silver, which being the effect either of the peculiar situation, or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that country, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them, not only in the foreign, but even in the home market." I have elsewhere attempted to shew that a partial degradation in the value of money, which shall affect both agricultural produce, and manufactured commodities, cannot possibly be permanent. To say that money is partially degraded, in this sense, is to say that all commodities are at a high price; but while gold and silver are at liberty to make purchases in the cheapest market, they will be exported for the cheaper goods of other countries, and the reduction of their quantity will increase their value at home; commodities will regain their usual level, and those fitted for foreign markets will be exported, as before. A bounty therefore cannot, I think, be objected to on this ground. If then, a bounty raises the price of corn in comparison with all other things, the farmer will be benefited, and more land will be cultivated; but if the bounty do not raise the value of corn relatively to other things, then no other inconvenience will attend it, than that of paying the bounty; one which I neither wish to conceal nor underrate. Dr. Smith states, that "by establishing high duties on the importation, and bounties on the exportation of corn, the country gentlemen seemed to have imitated the conduct of the manufacturers." By the same means both had endeavoured to raise the value of their commodities. "They did not perhaps attend to the great and essential difference which nature has established between corn, and almost every other sort of goods. When by either of the above means, you enable our manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise not only the nominal, but the real price of those goods. You increase not only the nominal, but the real profit, the real wealth and revenue of those manufacturers--you really encourage those manufactures. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value, you do not increase the real wealth of our farmers or country gentlemen, you do not encourage the growth of corn. The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. Through the world in general, that value is equal to the quantity of labour which it can maintain." I have already attempted to shew, that the market price of corn, would, under an increased demand from the effects of a bounty, exceed its natural price, till the requisite additional supply was obtained, and that then it would again fall to its natural price. But the natural price of corn is not so fixed as the natural price of commodities; because, with any great additional demand for corn, land of a worse quality must be taken into cultivation, on which more labour will be required to produce a given quantity, and the natural price of corn would be raised. By a continued bounty, therefore, on the exportation of corn, there would be created a tendency to a permanent rise in the price of corn, and this, as I have shewn elsewhere,[39] never fails to raise rent. Country gentlemen then have not only a temporary but a permanent interest in prohibitions of the importation of corn, and in bounties on its exportation; but manufacturers have no permanent interest in a bounty on the exportation of commodities, their interest is wholly temporary. A bounty on the exportation of manufactures will undoubtedly, as Dr. Smith contends, raise the market price of manufactures, but it will not raise their natural price. The labour of 200 men will produce double the quantity of these goods that 100 could produce before; and consequently, when the requisite quantity of capital was employed in supplying the requisite quantity of manufactures, they would again fall to their natural price. It is then only during the interval after the rise in the market price of commodities, and before the additional supply is obtained, that the manufacturers will enjoy high profits; for as soon as prices had subsided, their profits would sink to the general level. Instead of agreeing, therefore, with Adam Smith, that the country gentlemen had not so great an interest in prohibiting the importation of corn, as the manufacturer had in prohibiting the importation of manufactured goods, I contend that they have a much superior interest; for their advantage is permanent, while that of the manufacturer is only temporary. Dr. Smith observes, that nature has established a great and essential difference between corn and other goods, but the proper inference from that circumstance is directly the reverse of that which he draws from it; for it is on account of this difference that rent is created, and that country gentlemen have an interest in the rise of the natural price of corn. Instead of comparing the interest of the manufacturer with the interest of the country gentleman, Dr. Smith should have compared it with the interest of the farmer, which is very distinct from that of his landlord. Manufacturers have no interest in the rise of the natural price of their commodities, nor have farmers any interest in the rise of the natural price of corn, or other raw produce, though both these classes are benefited while the market price of their productions exceeds their natural price. On the contrary, landlords have a most decided interest in the rise of the natural price of corn; for the rise of rent is the inevitable consequence of the difficulty of producing raw produce, without which its natural price could not rise. Now as bounties on exportation and prohibitions of the importation of corn increase the demand, and drive us to the cultivation of poorer lands, they necessarily occasion an increased difficulty of production. The sole effect of the bounty either on the exportation of manufactures, or of corn, is to divert a portion of capital to an employment, which it would not naturally seek. It causes a pernicious distribution of the general funds of the society--it bribes a manufacturer to commence or continue in a comparatively less profitable employment. It is the worst species of taxation, for it does not give to the foreign country all that it takes away from the home country, the balance of loss being made up by the less advantageous distribution of the general capital. Thus, if the price of corn is in England 4_l._, and in France 3_l._ 15_s._ a bounty of 10_s._ will ultimately reduce it to 3_l._ 10_s._ in France, and maintain it at the same price of 4_l._ in England. For every quarter exported, England pays a tax of 10_s._ For every quarter imported into France, France gains only 5_s._, so that the value of 5_s._ per quarter is absolutely lost to the world, by such a distribution of its funds as to cause diminished production, probably not of corn, but of some other object of necessity or enjoyment. Mr. Buchanan appears to have seen the fallacy of Dr. Smith's arguments respecting bounties, and on the last passage which I have quoted, very judiciously remarks: "In asserting that nature has stamped a real value on corn, which cannot be altered by merely altering its money price, Dr. Smith confounds its value in use, with its value in exchange. A bushel of wheat will not feed more people during scarcity than during plenty; but a bushel of wheat will exchange for a greater quantity of luxuries and conveniences when it is scarce, than when it is abundant; and the landed proprietors, who have a surplus of food to dispose of, will therefore, in times of scarcity, be richer men; they will exchange their surplus for a greater value of other enjoyments, than when corn is in greater plenty. It is vain to argue, therefore, that if the bounty occasions a forced exportation of corn, it will not also occasion a real rise of price." The whole of Mr. Buchanan's arguments on this part of the subject of bounties, appear to me to be perfectly clear and satisfactory. Mr. Buchanan however has not, I think, any more than Dr. Smith, or the writer in the Edinburgh Review, correct opinions as to the influence of a rise in the price of labour on manufactured commodities. From his peculiar views, which I have elsewhere noticed, he thinks that the price of labour has no connexion with the price of corn, and therefore that the real value of corn might and would rise without affecting the price of labour; but if labour were affected, he would maintain with Adam Smith and the writer in the Edinburgh Review, that the price of manufactured commodities would also rise; and then I do not see how he would distinguish such a rise of corn, from a fall in the value of money, or how he could come to any other conclusion than that of Dr. Smith. In a note to page 276, vol. i. of the Wealth of Nations, Mr. Buchanan observes, "but the price of corn does not regulate the money price of all the other parts of the rude produce of land. It regulates the price neither of metals, nor of various other useful substances, such as coals, wood, stones, &c.; _and as it does not regulate the price of labour, it does not regulate the price of manufactures_; so that the bounty, in so far as it raises the price of corn, is undoubtedly a real benefit to the farmer. It is not on this ground, therefore, that its policy must be argued. Its encouragement to agriculture, by raising the price of corn, must be admitted; and the question then comes to be, whether agriculture ought to be thus encouraged?"--It is then, according to Mr. Buchanan, a real benefit to the farmer, because it does not raise the price of labour; but if it did, it would raise the price of all things in proportion, and then it would afford no particular encouragement to agriculture. It must, however, be conceded, that the tendency of a bounty on the exportation of any commodity is to lower in a small degree the value of money. Whatever facilitates exportation, tends to accumulate money in a country; and on the contrary, whatever impedes exportation, tends to diminish it. The general effect of taxation, by raising the prices of the commodities taxed, tends to diminish exportation, and therefore to check the influx of money; and on the same principle, a bounty encourages the influx of money. This is more fully explained in the general observations on taxation. The injurious effects of the mercantile system have been fully exposed by Dr. Smith; the whole aim of that system was to raise the price of commodities, in the home market, by prohibiting foreign competition; but this system was no more injurious to the agricultural classes than to any other part of the community. By forcing capital into channels where it would not otherwise flow, it diminished the whole amount of commodities produced. The price, though permanently higher, was not sustained by scarcity, but by difficulty of production; and therefore, though the sellers of such commodities sold them for a higher price, they did not sell them, after the requisite quantity of capital was employed in producing them, at higher profits.[40] The manufacturers themselves, as consumers, had to pay an additional price for such commodities, and therefore it cannot be correctly said, that "the enhancement of price occasioned by both, (corporation laws and high duties on the importation of foreign commodities,) is every where finally paid by the landlords, farmers, and labourers of the country." It is the more necessary, to make this remark, as in the present day the authority of Adam Smith is quoted by country gentlemen for imposing similar high duties on the importation of foreign corn. Because the cost of production, and therefore the prices of various manufactured commodities, are raised to the consumer by one error in legislation, the country has been called upon, on the plea of justice, quietly to submit to fresh exactions. Because we all pay an additional price for our linen, muslin, and cottons, it is thought just that we should pay also an additional price for our corn. Because, in the general distribution of the labour of the world, we have prevented the greatest amount of productions from being obtained by that labour in manufactured commodities; we should further punish ourselves by diminishing the productive powers of the general labour in the supply of raw produce. It would be much wiser to acknowledge the errors which a mistaken policy has induced us to adopt, and immediately to commence a gradual recurrence to the sound principles of an universally free trade. "I have already had occasion to remark," observes M. Say, "in speaking of what is improperly called the balance of trade, that if it suits a merchant better to export the precious metals to a foreign country than any other goods, it is also the interest of the state that he should export them, because the state only gains or loses through the channel of its citizens; and in what concerns foreign trade, that which best suits the individual, best suits also the state; therefore, by opposing obstacles to the exportation which individuals would be inclined to make of the precious metals, nothing more is done, than to force them to substitute some other commodity less profitable to themselves, and to the state. It must however be remarked, that I say only _in what concerns foreign trade_; because the profits which merchants make by their dealings with their countrymen, as well as those which are made in the exclusive commerce with colonies, are not entirely gains for the state. In the trade between individuals of the same country, there is no other gain but the value of an utility produced; _Que la valeur d'une utilité produite_."[41] Vol. i. p. 401. I cannot see the distinction here made between the profits of the home and foreign trade. The object of all trade is to increase productions. If for the purchase of a pipe of wine, I had it in my power to export bullion, which was bought with the value of the produce of 100 days' labour, but Government, by prohibiting the exportation of bullion, should oblige me to purchase my wine with a commodity bought with the value of the produce of one hundred and five days' labour, the produce of five days' labour is lost to me, and, through me, to the state. But if these transactions took place between individuals, in different provinces of the same country, the same advantage would accrue both to the individual, and, through him, to the country, if he were unfettered in his choice of the commodities, with which he made his purchases; and the same disadvantage, if he were obliged by Government to purchase with the least beneficial commodity. If a manufacturer could work up with the same capital, more iron where coals are plentiful, than he could where coals are scarce, the country would be benefited by the difference. But if coals were no where plentiful, and he imported iron, and could get this additional quantity, by the manufacture of a commodity, with the same capital and labour, he would in like manner benefit his country by the additional quantity of iron. In the 6th Chap. of this work, I have endeavoured to shew that all trade, whether foreign or domestic, is beneficial, by increasing the quantity, and not by increasing the value of productions. We shall have no greater value, whether we carry on the most beneficial home and foreign trade, or in consequence of being fettered by prohibitory laws, we are obliged to content ourselves with the least advantageous. The rate of profits, and the value produced, will be the same. The advantage always resolves itself into that which M. Say appears to confine to the home trade; in both cases there is no other gain but that of the value of an _utilité produite_. CHAPTER XXI. ON BOUNTIES ON PRODUCTION. It may not be uninstructive to consider the effects of a bounty on the _production_ of raw produce and other commodities, with a view to observe the application of the principles which I have been endeavouring to establish, with regard to the profits of stock, the annual produce of the land and labour, and the relative prices of manufactures and raw produce. In the first place, let us suppose that a tax was imposed on all commodities, for the purpose of raising a fund to be employed by Government, in giving a bounty on the _production_ of corn. As no part of such a tax would be expended by Government, and as all that was received from one class of the people, would be returned to another, the nation collectively would neither be richer nor poorer, from such a tax and bounty. It would be readily allowed, that the tax on commodities by which the fund was created, would raise the price of the commodities taxed; all the consumers of those commodities therefore would contribute towards that fund; in other words, their natural or necessary price being raised, so would too their market price. But for the same reason that the natural price of those commodities would be raised, the natural price of corn would be lowered; before the bounty was paid on production, the farmers obtained as great a price for their corn as was necessary to repay them their rent and their expenses, and afford them the general rate of profits; after the bounty, they would receive more than that rate, unless the price of corn fell by a sum at least equal to the bounty. The effect then of the tax and bounty, would be to raise the price of commodities in a degree equal to the tax levied on them, and to lower the price of corn by a sum equal to the bounty paid. It will be observed too, that no permanent alteration could be made in the distribution of capital between agriculture and manufactures, because as there would be no alteration, either in the amount of capital or population, there would be precisely the same demand for bread and manufactures. The profits of the farmer would be no higher than the general level, after the fall in the price of corn; nor would the profits of the manufacturer be lower after the rise of manufactured goods; the bounty then would not occasion any more capital to be employed on the land in the production of corn, nor any less in the manufacture of goods. But how would the interest of the landlord be affected? On the same principles that a tax on raw produce would lower the corn rent of land, leaving the money rent unaltered, a bounty on production, which is directly the contrary of a tax, would raise corn rent, leaving the money rent unaltered.[42] With the same money rent the landlord would have a greater price to pay for his manufactured goods, and a less price for his corn; he would probably therefore be neither richer nor poorer. Now whether such a measure would have any operation on the wages of labour, would depend on the question, whether the labourer, in purchasing commodities, would pay as much towards the tax, as he would receive from the bounty, in the low price of his food. If these two quantities were equal, wages would continue unaltered; but if the commodities taxed were not those consumed by the labourer, his wages would fall, and his employer would be benefited by the difference. But this is no real advantage to his employer; it would indeed operate to increase the rate of his profits, as every fall of wages must do; but in proportion as the labourer contributed less to the fund from which the bounty was paid, and which, let it be remembered, must be raised, his employer must contribute more; in other words, he would contribute as much to the tax by his expenditure, as he would receive in the effects of the bounty and the higher rate of profits together. He obtains a higher rate of profits to requite him for his payment, not only of his own quota of the tax, but of his labourer's also; the remuneration which he receives for his labourer's quota appears in diminished wages, or, which is the same thing, in increased profits; the remuneration for his own appears in the diminution in the price of the corn which he consumes, arising from the bounty. Here it will be proper to remark the different effects produced on profits from an alteration in the real labour value of corn, and an alteration in the relative value of corn, from taxation and from bounties. If corn is lowered in price by an alteration in its labour price, not only will the rate of the profits of stock be altered, but the absolute profits also; which does not happen, as we have just seen, when the fall is occasioned artificially by a bounty. In the real fall in the value of corn, arising from less labour being required to produce one of the most important objects of man's consumption, labour is rendered more productive. With the same capital the same labour is employed, and an increase of productions is the result; not only then will the rate of profits, but the absolute profits of stock be increased; not only will each capitalist have a greater money revenue, if he employs the same money capital, but also when that money is expended, it will procure him a greater sum of commodities; his enjoyments will be augmented. In the case of the bounty, to balance the advantage which he derives from the fall of one commodity, he has the disadvantage of paying a price more than proportionally high for another; he receives an increased rate of profits in order to enable him to pay this higher price; so that his real situation is in no way improved: though he gets a higher rate of profits, he has no greater command of the produce of the land and labour of the country. When the fall in the value of corn is brought about by natural causes, it is not counteracted by the rise of other commodities; on the contrary, they fall from the raw material falling from which they are made: but when the fall in corn is occasioned by artificial means, it is always counteracted by a real rise in the value of some other commodity, so that if corn be bought cheaper, other commodities are bought dearer. This then is a further proof, that no particular disadvantage arises from taxes on necessaries, on account of their raising wages and lowering the rate of profits. Profits are indeed lowered, but only to the amount of the labourer's portion of the tax, which must at all events, be paid either by his employer, or by the consumer of the produce of the labourer's work. Whether you deduct 50_l._ per annum from the employer's revenue, or add 50_l._ to the prices of the commodities which he consumes, can be of no other consequence to him or to the community, than as it may equally affect all other classes. If it be added to the prices of the commodity, a miser may avoid the tax by not consuming; if it be indirectly deducted from every man's revenue, he cannot avoid paying his fair proportion of the public burthens. A bounty on the production of corn then, would produce no real effect on the annual produce of the land and labour of the country, although it would make corn relatively cheap, and manufactures relatively dear. But suppose now that a contrary measure should be adopted, that a tax should be raised on corn for the purpose of affording a fund for a bounty on the production of commodities. In such case, it is evident that corn would be dear, and commodities cheap; labour would continue at the same price, if the labourer were as much benefited by the cheapness of commodities as he was injured by the dearness of corn; but if he were not, wages would rise, and profits would fall, while money rent would continue the same as before; profits would fall, because, as we have just explained, that would be the mode in which the labourer's share of the tax would be paid by the employers of labour. By the increase of wages the labourer would be compensated for the tax which he would pay in the increased price of corn; by not expending any part of his wages on the manufactured commodities, he would receive no part of the bounty; the bounty would be all received by the employers, and the tax would be partly paid by the employed; a remuneration would be made to the labourers, in the shape of wages, for this increased burden laid upon them, and thus the rate of profits would be reduced. In this case too there would be a complicated measure producing no national result whatever. In considering this question, we have purposely left out of our consideration the effect of such a measure on foreign trade; we have rather been supposing the case of an insulated country, having no commercial connexion with other countries. We have seen that as the demand of the country for corn and commodities would be the same, whatever direction the bounty might take, there would be no temptation to remove capital from one employment to another: but this would no longer be the case if there were foreign commerce, and that commerce were free. By altering the relative value of commodities and corn, by producing so powerful an effect on their natural prices, we should be applying a strong stimulus to the exportation of those commodities whose natural prices were lowered, and an equal stimulus to the importation of those commodities whose natural prices were raised, and thus such a financial measure might entirely alter the natural distribution of employments; to the advantage indeed of the foreign countries, but ruinously to that in which so absurd a policy was adopted. CHAPTER XXII. DOCTRINE OF ADAM SMITH CONCERNING THE RENT OF LAND. "Such parts only of the produce of land," says Adam Smith, "can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of land. _If it is not more, though the commodity can be brought to market, it can afford no rent to the landlord._ Whether the price is, or is not more, depends upon the demand." This passage would naturally lead the reader to conclude that its author could not have mistaken the nature of rent, and that he must have seen that the quality of land which the exigencies of society might require to be taken into cultivation would depend on "_the ordinary price of its produce," whether it were "sufficient to replace the stock, which must be employed in cultivating it, together with its ordinary profits_." But he had adopted the notion that "there were some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market;" and he considered food as one of those parts. He says, that "land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus too is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord." But what proof does he give of this?--no other than the assertion that "the most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient, not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer, or owner of the herd or flock, but to afford some small rent to the landlord." Now of this I may be permitted to entertain a doubt. I believe that as yet in every country, from the rudest to the most refined, there is land of such a quality that it cannot yield a produce more than sufficiently valuable to replace the stock employed upon it, together with the profits ordinary and usual in that country. In America we all know that this is the case, and yet no one maintains that the principles which regulate rent are different in that country and in Europe. But if it were true that England had so far advanced in cultivation, that at this time there were no lands remaining which did not afford a rent, it would be equally true that there formerly must have been such lands; and that whether there be or not is of no importance to this question, for it is the same thing if there be any capital employed in Great Britain on land which yields only the return of stock with its ordinary profits, whether it be employed on old or on new land. If a farmer agrees for land on a lease of seven or fourteen years, he may propose to employ on it a capital of 10,000_l._, knowing that at the existing price of grain and raw produce, he can replace that part of his stock which he is obliged to expend, pay his rent, and obtain the general rate of profit. He will not employ 11,000_l._, unless the last 1,000_l._ can be employed so productively as to afford him the usual profits of stock. In his calculation, whether he shall employ it or not, he considers only whether the price of raw produce is sufficient to replace his expenses and profits, for he knows that he shall have no additional rent to pay. Even at the expiration of his lease his rent will not be raised; for if his landlord should require rent, because this additional 1000_l._ was employed, he would withdraw it; since by employing it he gets, by the supposition, only the ordinary and usual profits which he may obtain by any other employment of stock; and therefore he cannot afford to pay rent for it, unless the price of raw produce should further rise, or, which is the same thing, unless the usual and general rate of profits should fall. If the comprehensive mind of Adam Smith had been directed to this fact, he would not have maintained that rent forms one of the component parts of the price of raw produce; for price is everywhere regulated by the return obtained by this last portion of capital, for which no rent whatever is paid. If he had adverted to this principle, he would have made no distinction between the law which regulates the rent of mines and the rent of land. "Whether a coal mine, for example," he says, "can afford any rent, depends partly upon its fertility, and partly upon its situation. A mine of any kind may be said to be either fertile or barren, according as the quantity of mineral which can brought from it by a certain quantity of labour, is greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. Some coal mines, advantageously situated, cannot be wrought on account of their barrenness. The produce does not pay the expense. They can afford neither profit nor rent. There are some, of which the produce is barely sufficient to pay the labour, and replace, together with its ordinary profits, the stock employed in working them. They afford some profit to the undertaker of the work, but no rent to the landlord. They can be wrought advantageously by nobody but the landlord, who being himself the undertaker of the work, gets the ordinary profit of the capital which he employs in it. Many coal mines in Scotland are wrought in this manner, and can be wrought in no other. The landlord will allow nobody else to work them without paying some rent, and nobody can afford to pay any. "Other coal mines in the same country, sufficiently fertile, cannot be wrought on account of their situation. A quantity of mineral sufficient to defray the expense of working, could be brought from the mine by the ordinary, or even less than the ordinary quantity of labour; but in an inland country, thinly inhabited, and without either good roads or water-carriage, this quantity could not be sold." The whole principle of rent is here admirably and perspicuously explained, but every word is as applicable to land as it is to mines; yet he affirms that "it is otherwise in estates above ground. The proportion, both of their produce and of their rent, is in proportion to their absolute, and not to their relative fertility." But suppose that there were no land which did not afford a rent; then, the amount of rent on the worst land would be in proportion to the excess of the value of the produce above the expenditure of capital and the ordinary profits of stock: the same principle would govern the rent of land of a somewhat better quality, or more favourably situated, and therefore the rent of this land would exceed the rent of that inferior to it, by the superior advantages which it possessed; the same might be said of that of the third quality, and so on to the very best. Is it not then as certain that it is the relative fertility of the land which determines the portion of the produce which shall be paid for the rent of land, as it is that the relative fertility of mines determines the portion of their produce, which shall be paid for the rent of mines? After Adam Smith has declared that there are some mines which can only be worked by the owners, as they will afford only sufficient to defray the expense of working, together with the ordinary profits of the capital employed, we should expect that he would admit that it was these particular mines which regulated the price of the produce. If the old mines are insufficient to supply the quantity of coal required, the price of coal will rise, and will continue rising till the owner of a new and inferior mine finds that he can obtain the usual profits of stock by working his mine. If his mine be tolerably fertile, the rise will not be great before it becomes his interest so to employ his capital; but if it be less productive, it is evident that the price must continue to rise till it will afford him the means of paying his expenses, and obtaining the ordinary profits of stock. It appears, then, that it is always the least fertile mine which regulates the price of coal. Adam Smith, however, is of a different opinion: he observes, that "the most fertile coal mine too regulates the price of coals at all the other mines in its neighbourhood. Both the proprietor and the undertaker of the work find, the one that he can get a greater rent, the other, that he can get a greater profit, by somewhat underselling all their neighbours. Their neighbours are soon obliged to sell at the same price, though they cannot so well afford it, and though it always diminishes, and sometimes takes away altogether, both their rent and their profit. Some works are abandoned altogether; others can afford no rent, and can be wrought only by the proprietor." If the demand for coal should be diminished, or if by new processes the quantity should be increased, the price would fall, and some mines would be abandoned; but in every case, the price must be sufficient to pay the expenses and profit of that mine which is worked without being charged with rent. It is therefore the least fertile mine which regulates price. Indeed it is so stated in another place by Adam Smith himself, for he says, "The lowest price at which coals can be sold for any considerable time, is like that of all other commodities, the price which is barely sufficient to replace, together with its ordinary profits, the stock which must be employed in bringing them to market. At a coal mine for which the landlord can get no rent, but which he must either work himself, or let it alone all together, the price of coals must generally be nearly about this price." But the same circumstance, namely, the abundance and consequent cheapness of coals, from whatever cause it may arise, which would make it necessary to abandon those mines on which there was no rent, or a very moderate one, would, if there were the same abundance, and consequent cheapness of raw produce, render it necessary to abandon the cultivation of those lands for which either no rent was paid, or a very moderate one. If, for example, potatoes should become the general and common food of the people, as rice is in some countries, one fourth, or one half of the land now in cultivation, would probably be immediately abandoned; for if, as Adam Smith says, "an acre of potatoes will produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat," there could not be for a considerable time such a multiplication of people, as to consume the quantity that might be raised on the land before employed for the cultivation of wheat; much land would consequently be abandoned, and rent would fall; and it would not be till the population had been doubled or trebled, that the same quantity of land could be in cultivation, and the rent paid for it as high as before. Neither would any greater proportion of the gross produce be paid to the landlord, whether it consisted of potatoes, which would feed three hundred people, or of wheat, which would feed only one hundred; because, though the expenses of production would be very much diminished if the labourer's wages were chiefly regulated by the price of potatoes and not by the price of wheat, and though therefore the proportion of the whole gross produce, after paying the labourers, would be greatly increased, yet no part of that additional proportion would go to rent, but the whole invariably to profits,--profits being at all times raised as wages fall, and lowered as wages rise. Whether wheat or potatoes were cultivated, rent would be governed by the same principle--it would be always equal to the difference between the quantities of produce obtained with equal capitals, either on the same land or on land of different qualities; and therefore, while lands of the same quality were cultivated, and there was no alteration in their relative fertility or advantages, rent would always bear the same proportion to the gross produce. Adam Smith, however, maintains that the proportion which falls to the landlord would be increased by a diminished cost of production, and therefore, that he would receive a larger share as well as a larger quantity, from an abundant than from a scanty produce. "A rice field," he says, "produces a much greater quantity of food than the most fertile corn field. Two crops in the year, from thirty to sixty bushels each, are said to be the ordinary produce of an acre. Though its cultivation therefore requires more labour, a much greater surplus remains after maintaining all that labour. In those rice countries therefore, where rice is the common and favourite vegetable food of the people, and where the cultivators are chiefly maintained with it, _a greater share of this greater surplus should belong to the landlord than in corn countries_." Mr. Buchanan also remarks, that "it is quite clear, that if any other produce which the land yielded more abundantly than corn, were to become the common food of the people, the rent of the landlord would be improved in proportion to its greater abundance." If potatoes were to become the common food of the people, there would be a long interval during which the landlords would suffer an enormous deduction of rent. They would not probably receive nearly so much of the sustenance of man as they now receive, while that sustenance would fall to a third of its present value. But all manufactured commodities, on which a part of the landlord's rent is expended, would suffer no other fall than that which proceeded from the fall in the raw material of which they were made, and which would arise only from the greater fertility of the land, which might then be devoted to its production. When from the progress of population, land of the same quality as before should be taken into cultivation, to produce the food required, and the same number of men should be employed in producing it, the landlord would have not only the same proportion of the produce as before, but that proportion would also be of the same value as before. Rent then would be the same as before; profits, however, would be much higher, because the price of food, and consequently of wages, would be much lower. High profits are favourable to the accumulation of capital. The demand for labour would further increase, and landlords would be permanently benefited by the increased demand for land. The interest of the landlord is always opposed to that of the consumer and manufacturer. Corn can be permanently at an advanced price, only because additional labour is necessary to produce it; because its cost of production is increased. The same cause invariably raises rent, it is therefore for the interest of the landlord that the cost attending the production of corn should be increased. This, however, is not the interest of the consumer; to him it is desirable that corn should be low relatively to money and commodities, for it is always with commodities or money that corn is purchased. Neither is it the interest of the manufacturer that corn should be at a high price, for the high price of corn will occasion high wages, but will not raise the price of his commodity. Not only then must more of his commodity, or, which comes to the same thing, the value of more of his commodity, be given in exchange for the corn which he himself consumes, but more must be given, or the value of more, for wages to his workmen, for which he will receive no remuneration. All classes therefore, except the landlords, will be injured by the increase in the price of corn. The dealings between the landlord and the public are not like dealings in trade, whereby both the seller and buyer may equally be said to gain, but the loss is wholly on one side, and the gain wholly on the other; and if corn could by importation be procured cheaper, the loss in consequence of not importing is far greater on one side, than the gain is on the other. Adam Smith never makes any distinction between a low value of money, and a high value of corn, and therefore infers, that the interest of the landlord is not opposed to that of the rest of the community. In the first case, money is low relatively to all commodities; in the other, corn is high relatively to all. In the first, corn and commodities continue at the same relative values, in the second, corn is higher relatively to commodities as well as money. The following observation of Adam Smith is applicable to a low value of money, but it is totally inapplicable to a high value of corn. "If importation (of corn) was at all times free, our farmers and country gentlemen would probably one year with another, get less money for their corn than they do at present, when importation is at most times in effect prohibited; but the money which they got would be of more value, _would buy more goods of all other kinds_, and would employ more labour. Their real wealth, their real revenue, therefore, would be the same as at present, though it might be expressed by a smaller quantity of silver; and they would neither be disabled nor discouraged from cultivating corn as much as they do at present. On the contrary, as the rise in the real value of silver, in consequence of lowering the money price of corn, lowers somewhat the money price of all other commodities, it gives the industry of the country where it takes place, some advantage in all foreign markets, and thereby tends to encourage and increase that industry. But the extent of the home market for corn, must be in proportion to the general industry of the country where it grows, or to the number of those who produce something else, to give in exchange for corn. But in every country the home market, as it is the nearest and most convenient, so is it likewise the greatest and most important market for corn. That rise in the real value of silver, therefore, which is the effect of lowering the average money price of corn, tends to enlarge the greatest and most important market for corn, and thereby to encourage, instead of discouraging its growth." A high or low money price of corn, arising from the abundance and cheapness of gold and silver, is of no importance to the landlord, as every sort of produce would be equally affected, just as Adam Smith describes; but a relatively high price of corn is at all times greatly beneficial to the landlord, as with the same quantity of corn it not only gives him a command over a greater quantity of money, but over a greater quantity of every commodity which money can purchase. CHAPTER XXIII. ON COLONIAL TRADE. Adam Smith, in his observations on colonial trade, has shewn, most satisfactorily, the advantages of a free trade, and the injustice suffered by colonies, in being prevented by their mother countries, from selling their produce at the dearest market, and buying their manufactures and stores at the cheapest. He has shewn, that by permitting every country freely to exchange the produce of its industry when and where it pleases, the best distribution of the labour of the world will be effected, and the greatest abundance of the necessaries and enjoyments of human life will be secured. He has attempted also to shew, that this freedom of commerce, which undoubtedly promotes the interest of the whole, promotes also that of each particular country; and that the narrow policy adopted in the countries of Europe respecting their colonies, is not less injurious to the mother countries themselves, than to the colonies whose interests are sacrificed. "The monopoly of the colony trade," he says, "like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without, in the least, increasing, but on the contrary diminishing, that of the country in whose favour it is established." This part of his subject, however, is not treated in so clear and convincing a manner as that in which he shews the injustice of this system towards the colony. Without affirming or denying, that the actual practice of Europe with regard to their colonies is injurious to the mother countries, I may be permitted to doubt whether a mother country may not sometimes be benefited by the restraints to which she subjects her colonial possessions. Who can doubt, for example, that if England were the colony of France, the latter country would be benefited by a heavy bounty paid by England on the exportation of corn, cloth, or any other commodities? In examining the question of bounties, on the supposition of corn being at 4_l._ per quarter in this country, we saw, that with a bounty of 10_s._ per quarter, on exportation in England, corn would have been reduced to 3_l._ 10_s._ in France. Now, if corn had previously been at 3_l._ 15_s._ per quarter in France, the French consumers would have been benefited by 5_s._ per quarter on all imported corn; if the natural price of corn in France were before 4_l._, they would have gained the whole bounty of 10_s._ per quarter. France would thus be benefited by the loss sustained by England: she would not gain a part only of what England lost, but in some cases the whole. It may however be said, that a bounty on exportation is a measure of internal policy, and could not easily be imposed by the mother country. If it would suit the interests of Jamaica and Holland to make an exchange of the commodities which they respectively produce, without the intervention of England, it is quite certain, that by their being prevented from so doing, the interests of Holland and Jamaica would suffer; but if Jamaica is obliged to send her goods to England, and there exchange them for Dutch goods, an English capital, or English agency, will be employed in a trade in which it would not otherwise be engaged. It is allured thither by a bounty, not paid by England, but by Holland and Jamaica. That the loss sustained, through a disadvantageous distribution of labour in two countries, may be beneficial to one of them, while the other is made to suffer more than the loss actually belonging to such a distribution, has been stated by Adam Smith himself; which, if true, will at once prove that a measure, which may be greatly hurtful to a colony, may be partially beneficial to the mother country. Speaking of treaties of commerce, he says, "When a nation binds itself by treaty, either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country, which is so indulgent to them. That country becomes a market both more extensive and more advantageous for their goods; more extensive, because the goods of other nations, being either excluded or subjected to heavier duties, it takes off a greater quantity of them; more advantageous, because the merchants of the favoured country enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations." Let the two nations, between which the commercial treaty is made, be the mother country and her colony, and Adam Smith, it is evident, admits, that a mother country may be benefited by oppressing her colony. It may, however, be again remarked, that unless the monopoly of the foreign market be in the hands of an exclusive company, no more will be paid for commodities by foreign purchasers than by home purchasers; the price which they will both pay will not differ greatly from their natural price in the country where they are produced. England, for example, will, under ordinary circumstances, always be able to buy French goods, at the natural price of those goods in France, and France would have an equal privilege of buying English goods at their natural price in England. But at these prices, goods would be bought without a treaty. Of what advantage or disadvantage then is the treaty to either party? The disadvantage of the treaty to the importing country would be this: it would bind her to purchase a commodity, from England for example, at the natural price of that commodity in England, when she might perhaps have bought it at the much lower natural price of some other country. It occasions then a disadvantageous distribution of the general capital, which falls chiefly on the country bound by its treaty to buy in the least productive market; but it gives no advantage to the seller on account of any supposed monopoly, for he is prevented by the competition of his own countrymen from selling his goods above their natural price; at which he would sell them, whether he exported them to France, Spain, or the West Indies, or sold them for home consumption. In what then does the advantage of the stipulation in the treaty consist? It consists in this: these particular goods could not have been made in England for exportation, but for the privilege which she alone had of serving this particular market; for the competition of that country, where the natural price was lower, would have deprived her of all chance of selling those commodities. This, however, would have been of little importance, if England were quite secure that she could sell to the same amount any other goods which she might fabricate, either in the French market, or with equal advantage in any other. The object which England has in view, is, for example, to buy a quantity of French wines of the value of 5000_l._--she desires then to sell goods somewhere by which she may get 5000_l._ for this purpose. If France gives her a monopoly of the cloth market, she will readily export cloth for this purpose; but if the trade is free, the competition of other countries may prevent the natural price of cloth in England from being sufficiently low to enable her to get 5000_l._ by the sale of cloth, and to obtain the usual profits by such an employment of her stock. The industry of England must be employed then on some other commodity; but there may be none of her productions which, at the existing value of money, she can afford to sell at the natural price of other countries. What is the consequence? The wine drinkers of England are still willing to give 5000_l._ for their wine, and consequently 5000_l._ in money is exported to France for that purpose. By this exportation of money its value is raised in England, and lowered in other countries; and with it the _natural price_ of all commodities produced by British industry is also lowered. The advance in the price of money is the same thing as the decline in the price of commodities. To obtain 5000_l._, British commodities may now be exported; for at their reduced natural price they may now enter into competition with the goods of other countries. More goods are sold, however, at the low prices to obtain the 5000_l._ required, which, when obtained, will not procure the same quantity of wine; because, whilst the diminution of money in England has lowered the natural price of goods there, the increase of money in France has raised the natural price of goods and wine in France. Less wine then will be imported into England, in exchange for its commodities, when the trade is perfectly free, than when she is peculiarly favoured by commercial treaties. The _rate_ of profits however will not have varied; money will have altered in relative value in the two countries, and the advantage gained by France will be the obtaining a greater quantity of English, in exchange for a given quantity of French goods, while the loss sustained by England will consist in obtaining a smaller quantity of French goods in exchange for a given quantity of those of England. Foreign trade then, whether fettered, encouraged, or free, will always continue, whatever may be the comparative difficulty of production in different countries; but it can only be regulated by altering the natural price, not the natural value at which commodities can be produced in those countries, and that is effected by altering the distribution of the precious metals. This explanation confirms the opinion which I have elsewhere given, that there is not a tax, a bounty, or a prohibition on the importation or exportation commodities which does not occasion a different distribution of the precious metals, and which does not therefore every where alter both the natural and the market price of commodities. It is evident then, that the trade with a colony may be so regulated, that it shall at the same time be less beneficial to the colony, and more beneficial to the mother country, than a perfectly free trade. As it is disadvantageous to a single consumer to be restricted in his dealings to one particular shop, so is it disadvantageous for a nation of consumers to be obliged to purchase of one particular country. If the shop or the country afforded the goods required the cheapest, they would be secure of selling them without any such exclusive privilege; and if they did not sell cheaper, the general interest would require that they should not be encouraged to continue a trade which they could not carry on at an equal advantage with others. The shop, or the selling country, might lose by the change of employments, but the general benefit is never so fully secured, as by the most productive distribution of the general capital; that is to say, by an universally free trade. An increase in the cost of production of a commodity, if it be an article of the first necessity, will not necessarily diminish its consumption; for although the general power of the purchasers to consume, is diminished by the rise of any one commodity, yet they may relinquish the consumption of some other commodity whose cost of production has not risen. In that case, the quantity supplied will be in the same proportion to the demand as before; the cost of production only will have increased, and yet the price will rise, and must rise, to place the profits of the producer of the enhanced commodity on a level with the profits derived from other trades. M. Say acknowledges that the cost of production is the foundation of price, and yet in various parts of his book he maintains that price is regulated by the proportion which demand bears to supply. The real and ultimate regulator of the relative value of any two commodities, is the cost of their production, and neither the respective quantities which may be produced, nor the competition amongst the purchasers. According to Adam Smith the colony trade, by being one in which British capital only can be employed, has raised the rate of profits of all other trades; and as in his opinion high profits, as well as high wages, raise the prices of commodities, the monopoly of the colony trade has been, according to him, injurious to the mother country; as it has diminished her power of selling manufactured commodities as cheap as other countries. He says, that "in consequence of the monopoly, the increase of the colony trade has not so much occasioned an addition to the trade which Great Britain had before, as a total change in its direction. Secondly, this monopoly has necessarily contributed to keep up the rate of profit in all the different branches of British trade, higher than it naturally would have been, had all nations been allowed a free trade to the British colonies." "But whatever raises in any country the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. It subjects her to an absolute disadvantage, because in such branches of trade, her merchants cannot get this greater profit without selling dearer than they otherwise would do, both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less and sell less; must both enjoy less and produce less than she otherwise would do." "Our merchants frequently complain of the high wages of British labour as the cause of their manufactures being undersold in foreign markets; but they are silent about the high profits of stock. They complain of the extravagant gain of other people, but they say nothing of their own. The high profits of British stock, however, may contribute towards raising the price of British manufacture in many cases as much, and in some perhaps more, than the high wages of British labour." I allow that the monopoly of the colony trade will change, and often prejudicially, the direction of capital; but from what I have already said on the subject of profits, it will be seen that any change from one foreign trade to another, or from home to foreign trade, cannot, in my opinion, affect the rate of profits. The injury suffered will be what I have just described; there will be a worse distribution of the general capital and industry, and therefore less will be produced. The natural price of commodities will be raised, and therefore, though the consumer will be able to purchase to the same money value, he will obtain a less quantity of commodities. It will be seen too, that if it even had the effect of raising profits, it would not occasion the least alteration in prices; prices being regulated neither by wages nor profits. And does not Adam Smith agree in this opinion, when he says, that "the prices of commodities, or the value of gold and silver, as compared with commodities, depends upon the proportion between the _quantity of labour_ which is necessary, in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods?" That quantity will not be affected, whether profits be high or low, or wages low or high. How then can prices be raised by high profits? CHAPTER XXIV. ON GROSS AND NET REVENUE. Adam Smith constantly magnifies the advantages which a country derives from a large gross, rather than a large net income. "In proportion as a greater share of the capital of a country is employed in agriculture," he says, "the greater will be the quantity of productive labour which it puts into motion within the country; as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. After agriculture, the capital employed in manufactures puts into motion the greatest quantity of productive labour, and adds the greatest value to the annual produce. That which is employed in the trade of exportation has the least effect of any of the three."[43] Granting for a moment that this were true; what would be the advantage resulting to a country from the employment of a great quantity of productive labour, if, whether it employed that quantity or a smaller, its net rent and profits together would be the same. The whole produce of the land and labour of every country is divided into three portions; of these, one portion is devoted to wages, another to profits, and the other to rent. It is from the two last portions only, that any deductions can be made for taxes, or for savings; the former, if moderate, constituting always the necessary expenses of production. To an individual, with a capital of 20,000_l._, whose profits were 2000_l._ per annum, it would be a matter quite indifferent, whether his capital would employ a hundred, or a thousand men, whether the commodity produced sold for 10,000_l._, or for 20,000_l._, provided, in all cases, his profits were not diminished below 2000_l._ Is not the real interest of the nation similar? Provided its net real income, its rent and profits be the same, it is of no importance whether the nation consists of ten or of twelve millions of inhabitants. Its power of supporting fleets and armies, and all species of unproductive labour, must be in proportion to its net, and not in proportion to its gross income. If five millions of men could produce as much food and clothing as was necessary for ten millions, food and clothing for five millions would be the net revenue. Would it be of any advantage to the country, that to produce this same net revenue, seven millions of men should be required, that is to say, that seven millions should be employed to produce food and clothing sufficient for twelve millions? The food and clothing of five millions would be still the net revenue. The employing a greater number of men would enable us neither to add a man to our army and navy, nor to contribute one guinea more in taxes. It is not on the grounds of any supposed advantage accruing from a large population, or of the happiness that may be enjoyed by a greater number of human beings, that Adam Smith supports the preference of that employment of capital, which gives motion to the greatest quantity of industry, but expressly on the ground of its increasing the power of the country; for he says, that "the riches, and, so far as power depends upon riches, the power of every country must always be in proportion to the value of its annual produce, the fund from which all taxes must ultimately be paid." It must however be obvious, that the power of paying taxes, is in proportion to the net, and not in proportion to the gross revenue. In the distribution of employments amongst all countries, the capital of poorer nations will be naturally employed in those pursuits, wherein a great quantity of labour is supported at home, because in such countries the food and necessaries for an increasing population can be most easily procured. In rich countries, on the contrary, where food is dear, capital will naturally flow, when trade is free, into those occupations, wherein the least quantity of labour is required to be maintained at home: such as the carrying trade, the distant foreign trade, where profits are in proportion to the capital, and not in proportion to the quantity of labour employed.[44] Although I admit, that from the nature of rent, a given capital employed in agriculture, on any but the land last cultivated, puts in motion a greater quantity of labour than an equal capital employed in manufactures and trade, yet I cannot admit that there is any difference in the quantity of labour employed by a capital engaged in the home trade, and an equal capital engaged in the foreign trade. "The capital which sends Scots manufactures to London, and brings back English corn and manufactures to Edinburgh," says Adam Smith, "necessarily replaces, by every such operation, two British capitals which had both been employed in the agriculture or manufactures of Great Britain. "The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces too, by every such operation, two distinct capitals; but one of them only is employed in supporting domestic industry. The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces, by every such operation, only one British capital, the other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption should be as quick as the home trade, the capital employed in it will give but one half the encouragement to the industry or productive labour of the country." This argument appears to me to be fallacious; for though two capitals, one Portuguese and one English, be employed, as Dr. Smith supposes, still a capital will be employed in the foreign trade, double of what would be employed in the home trade. Suppose that Scotland employs a capital of a thousand pounds in making linen, which she exchanges for the produce of a similar capital employed in making silks in England. Two thousand pounds, and a proportional quantity of labour will be employed by the two countries. Suppose now, that England discovers, that she can import more linen from Germany, for the silks which she before exported to Scotland, and that Scotland discovers that she can obtain more silks from France in return for her linen, than she before obtained from England,--will not England and Scotland immediately cease trading with each other, and will not the home trade of consumption be changed for a foreign trade of consumption? But although two additional capitals will enter into this trade, the capital of Germany and that of France, will not the same amount of Scotch and of English capital continue to be employed, and will it not give motion to the same quantity of industry as when it was engaged in the home trade? CHAPTER XXV. ON CURRENCY AND BANKS. It is not my intention to detain the reader by any long dissertation on the subject of money. So much has already been written on currency, that of those who give their attention to such subjects, none but the prejudiced are ignorant of its true principles. I shall therefore take only a brief survey of some of the general laws which regulate its quantity and value. Gold and silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them, and bring them to market. Gold is about fifteen times dearer than silver, not because there is a greater demand for it, nor because the supply of silver is fifteen times greater than that of gold, but solely because fifteen times the quantity of labour is necessary to procure a given quantity of it. The quantity of money that can be employed in a country must depend on its value: if gold alone were employed for the circulation of commodities, a quantity would be required, one fifteenth only of what would be necessary, if silver were made use of for the same purpose. A circulation can never be so abundant as to overflow; for by diminishing its value, in the same proportion you will increase its quantity, and by increasing its value, diminish its quantity.[45] While the state coins money, and charges no seignorage, money will be of the same value as any other piece of the same metal of equal weight and fineness; but if the state charges a seignorage for coinage, the coined piece of money will generally exceed the value of the uncoined piece of metal by the whole seignorage charged, because it will require a greater quantity of labour, or, which is the same thing, the value of the produce of a greater quantity of labour, to procure it. While the state alone coins, there can be no limit to this charge of seignorage; for by limiting the quantity of coin, it can be raised to any conceivable value. It is on this principle that paper money circulates: the whole charge for paper money may be considered as seignorage. Though it has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin. On the same principle too, namely, by a limitation of its quantity, a debased coin would circulate at the value it should bear, if it were of the legal weight and fineness, not at the value of the quantity of metal which it actually contained. In the history of the British coinage, we find accordingly that the currency was never depreciated in the same proportion that it was debased; the reason of which was, that it never was multiplied in proportion to its diminished value.[46] After the establishment of banks, the state has not the sole power of coining or issuing money. The currency may as effectually be increased by paper as by coin; so that if a state were to debase its money, and limit its quantity, it could not support its value, because the banks would have an equal power of adding to the whole quantity of circulation. On these principles it will be seen, that it is not necessary that paper money should be payable in specie to secure its value; it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard. If the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effects, with every rise in the price of goods. "By issuing too great a quantity of paper," says Dr. Smith, "of which the excess was continually returning, in order to be exchanged for gold and silver, the Bank of England was, for many years together, obliged to coin gold to the extent of between eight hundred thousand pounds and a million a year, or at an average, about eight hundred and fifty thousand pounds. For this great coinage the Bank, in consequence of the worn and degraded state into which the gold coin had fallen a few years ago, was frequently obliged to purchase bullion, at the high price of four pounds an ounce, which it soon after issued in coin at 3_l._ 17_s._ 10-1/2_d._ an ounce, losing in this manner between two and a half and three per cent. upon the coinage of so very large a sum. Though the Bank therefore paid no seignorage, though the Government was properly at the expense of the coinage, this liberality of Government did not prevent altogether the expense of the Bank." On the principle above stated, it appears to me most clear, that by not re-issuing the paper thus brought in, the value of the whole currency, of the degraded as well as the new gold coin, would have been raised; when all demands on the Bank would have ceased. Mr. Buchanan, however, is not of this opinion, for he says, "that the great expense to which the Bank was at this time exposed, was occasioned, not, as Dr. Smith seems to imagine, by any imprudent issue of paper, but by the debased state of the currency, and the consequent high price of bullion. The Bank, it will be observed, having no other way of procuring[47] guineas but by sending bullion to the mint to be coined, was always forced to issue new coined guineas, in exchange for its returned notes; and when the currency was generally deficient in weight, and the price of bullion high in proportion, it became profitable to draw these heavy guineas from the Bank in exchange for its paper; to convert them into bullion, and to sell them with a profit for bank paper, to be again returned to the Bank for a new supply of guineas, which were again melted and sold. To this drain of specie, the Bank must always be exposed while the currency is deficient in weight, as both an easy and a certain profit then arises from the constant interchange of paper for specie. It may be remarked, however, that to whatever inconvenience and expense the Bank was then exposed by the drain of its specie, it never was imagined necessary to rescind the obligation to pay money for its notes." Mr. Buchanan evidently thinks that the whole currency must, necessarily, be brought down to the level of the value of the debased pieces; but surely by a diminution of the quantity of the currency, the whole that remains can be elevated to the value of the best pieces. Dr. Smith appears to have forgotten his own principle, in his argument on colony currency. Instead of ascribing the depreciation of that paper to its too great abundance, he asks whether, allowing the colony security to be perfectly good, a hundred pounds, payable fifteen years hence, would be equally valuable with a hundred pounds to be paid immediately? I answer yes, if it be not too abundant. Experience however shews, that neither a state nor a bank ever have had the unrestricted power of issuing paper money, without abusing that power: in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion. A currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent. The use of paper instead of gold substitutes the cheapest in place of the most expensive medium, and enables the country, without loss to any individual, to exchange all the gold which it before used for this purpose, for raw materials, utensils, and food, by the use of which both its wealth and its enjoyments are increased. In a national point of view it is of no importance whether the issuers of this well regulated paper money, be the government or a bank, it will on the whole be equally productive of riches, whether it be issued by one or by the other; but it is not so with respect to the interest of individuals. In a country where the market rate of interest is 7 per cent., and where the state requires for a particular expense 70,000_l._ per annum, it is a question of importance to the individuals of that country, whether they must be taxed to pay this 70,000_l._ per annum, or whether they could raise it without taxes. Suppose that a million of money should be required to fit out an expedition. If the state issued a million of paper, and displaced a million of coin, the expedition would be fitted out without any charge to the people; but if a bank issued a million of paper, and lent it to Government at 7 per cent., thereby displacing a million of coin, the country would be charged with a continual tax of 70,000_l._ per annum: the people would pay the tax, the bank would receive it, and the society would in either case be as wealthy as before; the expedition would have been really fitted out by the improvement of our system, by rendering capital, of the value of a million, productive in the form of commodities, instead of letting it remain unproductive in the form of coin; but the advantage would always be in favour of the issuers of paper; and as the state represents the people, the people would have saved the tax, if they, and not the bank, had issued this million. I have already observed, that if there were perfect security that the power of issuing paper money would not be abused, it would be of no importance with respect to the riches of the country collectively, by whom it was issued; and I have now shewn that the public would have a direct interest that the issuers should be the state, and not a company of merchants or bankers. The danger, however, is, that this power would be more likely to be abused, if in the hands of Government, than if in the hands of a banking company. A company would, it is said, be more under the control of law, and although it might be their interest to extend their issues beyond the bounds of discretion, they would be limited and checked by the power which individuals would have of calling for bullion or specie. It is argued that the same check would not be long respected, if Government had the privilege of issuing money; that they would be too apt to consider present convenience, rather than future security, and might, therefore, on the alleged grounds of expediency, be too much inclined to remove the checks, by which the amount of their issues was controlled. Under an arbitrary government this objection would have great force, but in a free country, with an enlightened legislature, the power of issuing paper money, under the requisite checks of convertibility at the will of the holder, might be safely lodged in the hands of commissioners appointed for that special purpose, and they might be made totally independent of the control of ministers. The sinking fund is managed by commissioners, responsible only to parliament, and the investment of the money entrusted to their charge, proceeds with the utmost regularity; what reason can there be to doubt that the issues of paper money might be regulated with equal fidelity, if placed under similar management? It may be said, that although the advantage accruing to the state, and, therefore, to the public, from issuing paper money, is sufficiently manifest, as it would exchange a portion of the national debt, on which interest is paid by the public, into a debt bearing no interest, yet it would be disadvantageous to commerce, as it would preclude the merchants from borrowing money, and getting their bills discounted, the method in which bank paper is partly issued. This, however, is to suppose that money could not be borrowed, if the Bank did not lend it, and that the market rate of interest and profit depends on the amounts of the issues of money, and on the channel through which it is issued. But as a country would have no deficiency of cloth, of wine, or any other commodity, if they had the means of paying for it, in the same manner neither would there be any deficiency of money to be lent, if the borrowers offered good security, and were willing to pay the market rate of interest for it. In another part of this work, I have endeavoured to shew, that the real value of a commodity is regulated, not by the accidental advantages which may be enjoyed by some of its producers, but by the real difficulties encountered by that producer who is least favoured. It is so with respect to the interest for money; it is not regulated by the rate at which the Bank will lend, whether it be 5, 4, or 3 per cent., but by the rate of profits, which can be made by the employment of capital, and which is totally independent of the quantity, or of the value of money. Whether a bank lent one million, ten millions, or a hundred millions, they would not permanently alter the market rate of interest; they would alter only the value of the money which they thus issued. In one case 10 or 20 times more money might be required to carry on the same business, than what might be required in the other. The applications to the Bank for money, then, depend on the comparison between the rate of profits that may be made by the employment of it, and the rate at which they are willing to lend it. If they charge less than the market rate of interest, there is no amount of money which they might not lend,--if they charge more than that rate, none but spendthrifts and prodigals would be found to borrow of them. We accordingly find, that when the market rate of interest exceeds the rate of 5 per cent. at which the Bank uniformly lend, the discount office is besieged with applicants for money; and, on the contrary, when the market rate is even temporarily under 5 per cent. the clerks of that office have no employment. The reason then why for the last twenty years, the Bank is said to have given so much aid to commerce, by assisting the merchants with money, is, because they have, during that whole period, lent money below the market rate of interest; below that rate at which the merchants could have borrowed elsewhere; but I confess that to me this seems rather an objection to their establishment, than an argument in favour of it. What should we say of an establishment which should regularly supply half the clothiers with their wool under the market price? Of what benefit would it be to the community? It would not extend our trade, because the wool would equally have been bought, if they had charged the market price for it. It would not lower the price of cloth to the consumer, because the price, as I have said before, would be regulated by the cost of its production to those who were the least favoured. Its sole effect then, would be to swell the profits of a part of the clothiers beyond the general and common rate of profits. The establishment would be deprived of its fair profits, and another part of the community would be in the same degree benefited. Now this is precisely the effect of our banking establishments; a rate of interest is fixed by the law below that at which it can be borrowed in the market, and at this rate the Bank are required to lend, or not to lend at all. From the nature of their establishment, they have large funds which they can only dispose of in this way; and a part of the traders of the country are unfairly, and for the country unprofitably, benefited by being enabled to supply themselves with an instrument of trade, at a less charge than those who must be influenced only by market price. The whole business, which the whole community can carry on, depends on the quantity of capital, that is, of its raw material, machinery, food, vessels, &c., employed in production. After a well regulated paper money is established, these can neither be increased nor diminished by the operations of banking. If then the state were to issue the paper money of the country, although it should never discount a bill, or lend one shilling to the public, there would be no alteration in the amount of trade; for we should have the same quantity of raw materials, of machinery, food, and ships; and it is probable too, that the same amount of money might be lent, not at 5 per cent. indeed, a rate fixed by law, but at 6, 7, or 8 per cent., the result of the fair competition in the market between the lenders and the borrowers. Adam Smith speaks of the advantages derived by merchants from the superiority of the Scotch mode of affording accommodation to trade, over the English mode, by means of cash accounts. These cash accounts are credits given by the Scotch banker to his customers, in addition to the bills which he discounts for them; but as the banker, in proportion as he advances money, and sends it into circulation in one way, is debarred from issuing so much in the other, it is difficult to perceive in what the advantage consists. If the whole circulation will bear only one million of paper, one million only will be circulated; and it can be of no real importance either to the Banker or merchant, whether the whole be issued in discounting bills, or a part be so issued, and the remainder be issued by means of these cash accounts. It may perhaps be necessary to say a few words on the subject of the two metals, gold and silver, which are employed in currency, particularly as this question appears to perplex, in many people's minds, the plain and simple principles of currency. "In England," says Dr. Smith, "gold was not considered as a legal tender for a long time after it was coined into money. The proportion between the values of gold and silver money was not fixed by any public law or proclamation; but was left to be settled by the market. If a debtor offered payment in gold, the creditor might either reject such payment altogether, or accept of it at such a valuation of the gold, as he and his debtor could agree upon." In this state of things it is evident that a guinea might sometimes pass for 22_s._ or more, and sometimes for 18_s._ or less, depending entirely on the alteration in the relative market value of gold and silver. All the variations too in the value of gold, as well as in the value of silver, would be rated in the gold coin,--it would appear as if silver was invariable, and that gold only was subject to rise or fall. Thus, although a guinea passed for 22_s._ instead of 18_s._ gold might not have varied in value, the variation might have been wholly confined to the silver, and therefore 22_s._ might have been of no more value than 18_s._ were before. And on the contrary, the whole variation might have been in the gold: a guinea, which was worth 18_s._ might have risen to the value of 22_s._ If now we suppose this silver currency to be debased by clipping, and also increased in quantity, a guinea might pass for 30_s._; for the silver in 30_s._ of such debased money might be of no more value than the gold in one guinea. By restoring the silver currency to its mint value, silver money would rise; but it would appear as if gold fell, for a guinea would probably be of no more value than 21 of such good shillings. If now gold be also made a legal tender, and every debtor be at liberty to discharge a debt by the payment of 420 shillings, or twenty guineas, for every 21_l._ that he owes, he will pay in one or the other according as he can most cheaply discharge his debt. If with five quarters of wheat he can procure as much gold bullion as the mint will coin into twenty guineas, and for the same wheat as much silver bullion as the mint will coin for him into 430 shillings, he will prefer paying in silver, because he would be a gainer of ten shillings by so paying his debt. But if on the contrary he could obtain with this wheat as much gold as would be coined into twenty guineas and a half, and as much silver only as would coin into 420 shillings, he would naturally prefer paying his debt in gold. If the quantity of gold which he could procure could be coined only into twenty guineas, and the quantity of silver into 420 shillings, it would be a matter of perfect indifference to him in which money, silver or gold, it was that he paid his debt. It is not then a matter of chance; it is not because gold is better fitted for carrying on the circulation of a rich country, that gold is ever preferred for the purpose of paying debts; but simply because it is the interest of the debtor so to pay them. During a long period previous to 1797, the year of the restriction on the Bank payments in coin, gold was so cheap, compared with silver, that it suited the Bank of England, and all other debtors, to purchase gold in the market, and not silver, for the purpose of carrying it to the mint to be coined, as they could in that coined metal more cheaply discharge their debts. The silver currency was during a great part of this period very much debased, but it existed in a degree of scarcity, and therefore on the principle which I have before explained, it never sunk in its current value. Though so debased, it was still the interest of debtors to pay in the gold coin. If indeed the quantity of this debased silver coin had been enormously great, or if the mint had issued such debased pieces, it might have been the interest of debtors to pay in this debased money; but its quantity was limited and it sustained its value, and therefore gold was in practice the real standard of currency. That it was so, is no where denied; but it has been contended that it was made so by the law which declared that silver should not be a legal tender for any debt exceeding 25_l._, unless by weight, according to the mint standard. But this law did not prevent any debtor from paying any debt, however large its amount, in silver currency fresh from the mint; that the debtor did not pay in this metal, was not a matter of chance, nor a matter of compulsion, but wholly the effect of choice; it did not suit him to take silver to the mint, it did suit him to take gold thither. It is probable that if the quantity of this debased silver in circulation had been enormously great, and also a legal tender, that a guinea would have been again worth thirty shillings; but it would have been the debased shilling that would have fallen in value, and not the guinea that had risen. It appears then, that whilst each of the two metals was equally a legal tender for debts of any amount, we were subject to a constant change in the principal standard measure of value. It would sometimes be gold, sometimes silver, depending entirely on the variations in the relative value of the two metals, and at such times the metal, which was not the standard, would be melted, and withdrawn from circulation, as its value would be greater in bullion than in coin. This was an inconvenience which it was highly desirable should be remedied, but so slow is the progress of improvement, that although it had been unanswerably demonstrated by Mr. Locke, and had been noticed by all writers on the subject of money since his day, a better system was never adopted till the last session of Parliament, when it was enacted that gold only should be a legal tender for any sum exceeding forty-two shillings. Dr. Smith does not appear to have been quite aware of the effect of employing two metals as currency, and both a legal tender for debts of any amount; for he says that "in reality, during the continuance of any one regulated proportion between the respective values of the different metals in coin, the value of the most precious metal regulates the value of the whole coin." Because gold was in his day the medium in which it suited debtors to pay their debts, he thought that it had some inherent quality by which it did then, and always would regulate the value of silver coin. On the reformation of the gold coin in 1774 a new guinea fresh from the mint would exchange for only twenty-one debased shillings; but in the reign of King William, when the silver coin was in precisely the same condition, a guinea also new and fresh from the mint would exchange for thirty shillings. On this Mr. Buchanan observes, "here, then, is a most singular fact, of which the common theories of currency offer no account; the guinea exchanging at one time for thirty shillings, its intrinsic worth in a debased silver currency, and afterwards the same guinea exchanged for only twenty-one of those debased shillings. It is clear that some great change must have intervened in the state of the currency between these two different periods, of which Dr. Smith's hypothesis offers no explanation." It appears to me, that the difficulty may be very simply solved, by referring this different state of the value of the guinea at the two periods mentioned, to the different _quantities_ of debased silver currency in circulation. In King William's reign gold was not a legal tender, it passed only at a conventional value. All the large payments were probably made in silver, particularly as paper currency, and the operations of banking, were then little understood. The quantity of this debased silver money exceeded the quantity of silver money, which would have been maintained in circulation, if nothing but undebased money had been in use; and consequently it was depreciated as well as debased. But in the succeeding period when gold was a legal tender, when bank-notes also were used in effecting payments, the quantity of debased silver money did not exceed the quantity of silver coin fresh from the mint, which would have circulated if there had been no debased silver money; hence though the money was debased, it was not depreciated. Mr. Buchanan's explanation is somewhat different, he thinks that a subsidiary currency is not liable to depreciation, but that the main currency is. In King William's reign silver was the main currency, and hence was liable to depreciation. In 1774 it was a subsidiary currency, and therefore maintained its value. Depreciation, however, does not depend on a currency being the subsidiary or the main currency, it depends wholly on its being in excess of quantity. To a moderate seignorage on the coinage of money there cannot be much objection, particularly on that currency which is to effect the smaller payments. Money is generally enhanced in value to the full amount of the seignorage, and therefore it is a tax which in no way affects those who pay it, while the quantity of money is not in excess. It must, however, be remarked, that in a country where a paper currency is established, although the issuers of such paper should be liable to pay it in specie on the demand of the holder, still, both their notes and the coin might be depreciated to the full amount of the seignorage on that coin, which is alone the legal tender, before the check, which limits the circulation of paper, would operate. If the seignorage on gold coin were 5 per cent., for instance, the currency, by an abundant issue of bank-notes, might be really depreciated 5 per cent. before it would be the interest of the holders to demand coin for the purpose of melting it into bullion; a depreciation to which we should never be exposed, if either there was no seignorage on the gold coin; or, if a seignorage were allowed, the holders of bank-notes might demand bullion, and not coin, in exchange for them, at the mint price of 3_l._ 17_s._ 10-1/2_d._ Unless then the bank should be obliged to pay their notes in bullion or coin, at the will of the holder, the late law which allows a seignorage of 6 per cent., or four pence per oz., on the silver coin, but which directs that gold shall be coined by the mint without any charge whatever, is perhaps the most proper, as it will more effectually prevent any unnecessary variation of the currency.[48] CHAPTER XXVI. ON THE COMPARATIVE VALUE OF GOLD, CORN, AND LABOUR, IN RICH AND IN POOR COUNTRIES. "Gold and silver, like all other commodities," says Adam Smith, "naturally seek the market where the best price is given for them; and the best price is commonly given for every thing in the country which can best afford it. Labour, it must be remembered, is the ultimate price which is paid for every thing; and in countries where labour is equally well rewarded, the money price of labour will be in proportion to that of the subsistence of the labourer. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country; in a country which abounds with subsistence, than in one which is but indifferently supplied with it." But corn is a commodity, as well as gold, silver, and other things; if all commodities, therefore, have a high exchangeable value in a rich country, corn must not be excepted; and hence we might correctly say, that corn exchanged for a great deal of money, because it was dear, and that money too exchanged for a great deal of corn, because that also was dear; which is to assert that corn is dear and cheap at the same time. No point in political economy can be better established, than that a rich country is prevented from increasing in population, in the same ratio as a poor country, by the progressive difficulty of providing food. That difficulty must necessarily raise the relative price of food, and give encouragement to its importation. How then can money, or gold and silver, exchange for more corn in rich, than in poor countries? It is only in rich countries, where corn is dear, that landholders induce the legislature to prohibit the importation of corn. Who ever heard of a law to prevent the importation of raw produce in America or Poland?--Nature has effectually precluded its importation by the comparative facility of its production in those countries. How then can it be true, that "if you except corn, and such other vegetables, as are raised altogether by human industry, all other sorts of rude produce--cattle, poultry, game of all kinds, the useful fossils and minerals of the earth, &c., naturally grow dearer as the society advances." Why should corn and vegetables alone be excepted? Dr. Smith's error throughout his whole work, lies in supposing that the value of corn is constant; that though the value of all other things may, the value of corn never can be raised. Corn, according to him, is always of the same value, because it will always feed the same number of people. In the same manner it might be said, that cloth is always of the same value, because it will always make the same number of coats. What can value have to do with the power of feeding and clothing? Corn, like every other commodity, has in every country its natural price, viz. that price which is necessary to its production, and without which it could not be cultivated: it is this price which governs its market price, and which determines the expediency of exporting it to foreign countries. If the importation of corn were prohibited in England, its natural price might rise to 6_l._ per quarter in England, whilst it was only at half that price in France. If at this time, the prohibition of importation were removed, corn would fall in the English market, not to a price between 6_l._ and 3_l._, but ultimately and permanently to the natural price of France, the price at which it could be furnished to the English market, and afford the usual and ordinary profits of stock in France; and it would remain at this price, whether England consumed a hundred thousand, or a million of quarters. If the demand of England were for the latter quantity, it is probable that, owing to the necessity under which France would be, of having recourse to land of a worse quality, to furnish this large supply, the natural price would rise in France; and this would of course affect also the price of corn in England. All that I contend for is, that it is the natural price of commodities in the exporting country, which ultimately regulates the prices at which they shall be sold, if they are not the objects of monopoly, in the importing country. But Dr. Smith, who has so ably supported the doctrine of the natural price of commodities ultimately regulating their market price, has supposed a case in which he thinks that the market price would not be regulated either by the natural price of the exporting or of the importing country. "Diminish the real opulence either of Holland, or the territory of Genoa," he says, "while the number of their inhabitants remains the same; diminish their power of supplying themselves from distant countries, and the price of corn, instead of sinking with that diminution in the quantity of their silver which must necessarily accompany this declension, either as its cause or as its effect, will rise to the price of a famine." To me it appears, that the very reverse would take place: the diminished power of the Dutch or Genoese to purchase generally, might depress the price of corn for a time below its natural price in the country from which it was exported, as well as in the countries in which it was imported, but it is quite impossible that it could ever raise it above that price. It is only by increasing the opulence of the Dutch or Genoese, that you could increase the demand, and raise the price of corn above its former price; and that would take place only for a very limited time, unless new difficulties should arise in obtaining the supply. Dr. Smith further observes on this subject: "When we are in want of necessaries, we must part with all superfluities, of which the value, as it rises in times of opulence and prosperity, so it sinks in times of poverty and distress." This is undoubtedly true; but he continues, "it is otherwise with necessaries. Their real price, the quantity of labour which they can purchase or command, rises in times of poverty and distress, and sinks in times of opulence and prosperity, which are always times of great abundance, for they could not otherwise be times of opulence and prosperity. Corn is a necessary, silver is only a superfluity." Two propositions are here advanced, which have no connexion with each other; one, that under the circumstances supposed, corn would command more labour, which is not disputed; the other, that corn would sell at a higher money price, that it would exchange for more silver; this I contend to be erroneous. It might be true, if corn were at the same time scarce, if the usual supply had not been furnished. But in this case it is abundant, it is not pretended that a less quantity than usual is imported, or that more is required. To purchase corn, the Dutch or Genoese want money, and to obtain this money, they are obliged to sell their superfluities. It is the market value and price of these superfluities which falls, and money appears to rise as compared with them. But this will not tend to increase the demand for corn, nor to lower the value of money, the only two causes which can raise the price of corn. Money, from a want of credit, and from other causes, may be in great demand, and consequently dear, comparatively with corn; but on no just principle can it be maintained, that under such circumstances money would be cheap, and therefore, that the price of corn would rise. When we speak of the high or low value of gold, silver, or any other commodity in different countries, we should always mention some medium in which we are estimating them, or no idea can be attached to the proposition. Thus, when gold is said to be dearer in England than in Spain, if no commodity is mentioned, what notion does the assertion convey? If corn, olives, oil, wine, and wool, be at a cheaper price in Spain than in England; estimated in those commodities, gold is dearer in Spain. If again, hardware, sugar, cloth, &c. be at a lower price in England than in Spain, then, estimated in those commodities, gold is dearer in England. Thus gold appears dearer or cheaper in Spain, as the fancy of the observer may fix on the medium by which he estimates its value. Adam Smith, having stamped corn and labour as an universal measure of value, would naturally estimate the comparative value of gold by the quantity of those two objects for which it would exchange: and, accordingly, when he speaks of the comparative value of gold in two countries, I understand him to mean its value estimated in corn and labour. But we have seen, that, estimated in corn, gold may be of very different value in two countries. I have endeavoured to shew that it will be low in rich countries, and high in poor countries; Adam Smith is of a different opinion: he thinks that the value of gold estimated in corn is highest in rich countries. But without further examining which of these opinions is correct, either of them is sufficient to shew, that gold will not necessarily be lower in those countries which are in possession of the mines, though this is a proposition maintained by Adam Smith. Suppose England to be possessed of the mines, and Adam Smith's opinion, that gold is of the greatest value in rich countries, to be correct: although gold would naturally flow from England to all other countries in exchange for their _goods_, it would not follow that gold was necessarily lower in England, as compared with corn and labour, than in those countries. In another place, however, Adam Smith speaks of the precious metals being necessarily lower in Spain and Portugal, than in other parts of Europe, because those countries happen to be almost the exclusive possessors of the mines which produce them. "Poland, where the feudal system still continues to take place at this day as beggarly a country as it was before the discovery of America. _The money price of corn, however, has risen_; THE REAL VALUE OF THE PRECIOUS METALS HAS FALLEN in Poland, in the same manner as in other parts of Europe. Their quantity, therefore, must have increased there as in other places, _and nearly in the same proportion to the annual produce of the land and labour_. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants. Spain and Portugal, the countries which possess the mines, are, after Poland, perhaps, the two most beggarly countries in Europe. The value of the precious metals, however, _must be lower in Spain and Portugal_ than in any other parts of Europe, loaded, not only with a freight and insurance, but with the expense of smuggling, their exportation being either prohibited, or subjected to a duty. _In proportion to the annual produce of the land and labour, therefore, their quantity must be greater in_ those countries than in any other part of Europe: those countries, however, are poorer than the greater part of Europe. Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better." Dr. Smith's argument appears to me to be this:--Gold, when estimated in corn, is cheaper in Spain than in other countries, and the proof of this is, not that corn is given by other countries to Spain for gold, but that cloth, sugar, hardware, are by those countries given in exchange for that metal. CHAPTER XXVII. TAXES PAID BY THE PRODUCER. M. Say greatly magnifies the inconveniences which result if a tax on a manufactured commodity is levied at an early, rather than at a late period of its manufacture. The manufacturers, he observes, through whose hands the commodity may successively pass, must employ greater funds in consequence of having to advance the tax, which is often attended with considerable difficulty to a manufacturer of very limited capital and credit. To this observation no objection can be made. Another inconvenience on which he dwells is, that in consequence of the advance of the tax, the profits on the advance also must be charged to the consumer, and that this additional tax is one from which the treasury derives no advantage. In this latter objection I cannot agree with M. Say. The state, we will suppose, wants to raise _immediately_ 1000_l._ and levies it on a manufacturer, who will not, for a twelve-month, be able to charge it to the consumer on his finished commodity. In consequence of such delay, he is obliged to charge for his commodity an additional price, not only of 1000_l._ the amount of the tax, but probably of 1100_l._, 100_l._ being for interest on the 1000_l._ advanced. But in return for this additional 100_l._ paid by the consumer, he has a real benefit, inasmuch as his payment of the tax which Government required immediately, and which he must finally pay, has been postponed for a year; an opportunity, therefore, has been afforded to him of lending to the manufacturer, who had occasion for it, the 1000_l._ at 10 per cent., or at any other rate of interest which might be agreed upon. Eleven hundred pounds payable at the end of one year, when money is at 10 per cent. interest, is of no more value than 1000_l._ to be paid immediately. If Government delayed receiving the tax for one year till the manufacture of the commodity was completed, it would, perhaps, be obliged to issue an Exchequer bill bearing interest, and it would pay as much for interest as the consumer would save in price, excepting, indeed, that portion of the price which the manufacturer might be enabled, in consequence of the tax, to add to his own real gains. If, for the interest of the Exchequer bill, Government would have paid 5 per cent., a tax of 50_l._ is saved by not issuing it. If the manufacturer borrowed the additional capital at 5 per cent., and charged the consumer 10 per cent., he also will have gained 5 per cent. on his advance over and above his usual profits, so that the manufacturer and Government together gain, or save, precisely the sum which the consumer pays. M. Simonde, in his excellent work, _De la Richesse Commerciale_, following the same line of argument as M. Say, has calculated that a tax of 4000 francs, paid originally by a manufacturer, whose profits were at the moderate rate of 10 per cent., would, if the commodity manufactured only passed through the hands of five different persons, be raised to the consumer to the sum of 6734 francs. This calculation proceeds on the supposition, that he who first advanced the tax, would receive from the next manufacturer 4400 francs, and he again from the next, 4840 francs; so that at each step 10 per cent. on its value would be added to it. This is to suppose that the value of the tax would be accumulating at compound interest, not at the rate of 10 per cent. per annum, but at an absolute rate of 10 per cent., at every step of its progress. This opinion of M. de Simonde would be correct if five years elapsed between the first advance of the tax, and the sale of the taxed commodity to the consumer; but if one year only elapsed, a remuneration of 400 francs, instead of 2734, would give a profit at the rate of 10 per cent. per annum, to all who had contributed to the advance of the tax, whether the commodity had passed through the hands of five manufacturers or fifty. CHAPTER XXVIII. ON THE INFLUENCE OF DEMAND AND SUPPLY ON PRICES. It is the cost of production which must ultimately regulate the price of commodities, and not, as has been often said, the proportion between the supply and demand: the proportion between supply and demand may, indeed, for a time affect the market value of a commodity, until it is supplied in greater or less abundance, according as the demand may have increased or diminished; but this effect will be only of temporary duration. Diminish the cost of production of hats, and their price will ultimately fall to their new natural price, although the demand should be doubled, trebled, or quadrupled. Diminish the cost of subsistence of men, by diminishing the natural price of the food and clothing, by which life is sustained, and wages will ultimately fall, notwithstanding that the demand for labourers may very greatly increase. The opinion that the price of commodities depends solely on the proportion of supply to demand, or demand to supply, has become almost an axiom in political economy, and has been the source of much error in that science. It is this opinion which has made Mr. Buchanan maintain that wages are not influenced by a rise or fall in the price of provisions, but solely by the demand and supply of labour; and that a tax on the wages of labour would not raise wages, because it would not alter the proportion of the demand of labourers to the supply. The demand for a commodity cannot be said to increase, if no additional quantity of it be purchased or consumed; and yet under such circumstances its money value may rise. Thus, if the value of money were to fall, the price of every commodity would rise, for each of the competitors would be willing to spend more money than before on its purchase; but though its price rose 10 or 20 per cent. if no more were bought than before, it would not, I apprehend, be admissible to say, that the variation in the price of the commodity was caused by the increased demand for it. Its natural price, its money cost of production, would be really altered by the altered value of money; and without any increase of demand, the price of the commodity would be naturally adjusted to that new value. "We have seen," says M. Say, "that the cost of production determines the lowest price to which things can fall: the price below which they cannot remain for any length of time, because production would then be either entirely stopped or diminished." Vol. ii. p. 26. He afterwards says that the demand for gold having increased in a still greater proportion than the supply, since the discovery of the mines, "its price in goods, instead of falling in the proportion of ten to one, fell only in the proportion of four to one;" that is to say, instead of falling in proportion as its natural price had fallen, fell in proportion as the supply exceeded the demand.[49] "_The value of every commodity rises always in a direct ratio to the demand, and in an inverse ratio to the supply._" The same opinion is expressed by the Earl of Lauderdale. "With respect to the variations in value, of which every thing valuable is susceptible, if we could for a moment suppose that any substance possessed intrinsic and fixed value, so as to render an assumed quantity of it constantly, under all circumstances, of an equal value, then the degree of value of all things, ascertained by such a fixed standard, would vary according to the proportion _betwixt the quantity of them_, and the demand for them, and every commodity would of course be subject to a variation in its value, from four different circumstances. 1. "It would be subject to an increase of its value, from a diminution of its quantity. 2. "To a diminution of its value, from an augmentation of its quantity. 3. "It might suffer an augmentation in its value, from the circumstance of an increased demand. 4. "Its value might be diminished by a failure of demand. "As it will, however, clearly appear that no commodity can possess fixed and intrinsic value, so as to qualify it for a measure of the value of other commodities, mankind are induced to select, as a practical measure of value, that which appears the least liable to any of these four sources of variations, _which are the sole causes of alteration of value_. "When in common language, therefore, we express the _value_ of any commodity, it may vary at one period from what it is at another, in consequence of eight different contingencies. 1. "From the four circumstances above stated, in relation to the commodity of which we mean to express the value. 2. "From the same four circumstances, in relation to the commodity we have adopted as a measure of value."[50] This is true of monopolized commodities, and indeed of the market price of all other commodities for a limited period. If the demand for hats should be doubled, the price would immediately rise, but that rise would be only temporary, unless the cost of production of hats, or their natural price, were raised. If the natural price of bread should fall 50 per cent. from some great discovery in the science of agriculture, the demand would not greatly increase, for no man would desire more than would satisfy his wants, and as the demand would not increase, neither would the supply; for a commodity is not supplied merely because it can be produced, but because there is a demand for it. Here then we have a case where the supply and demand have scarcely varied, or if they have increased they have increased in the same proportion; and yet the price of bread will have fallen 50 per cent. at a time too when the value of money had continued invariable. Commodities which are monopolized, either by an individual, or by a company, vary according to the law which Lord Lauderdale has laid down: they fall in proportion as the sellers augment their quantity, and rise in proportion to the eagerness of the buyers to purchase them; their price has no necessary connexion with their natural value: but the prices of commodities, which are subject to competition, and whose quantity may be increased in any moderate degree, will ultimately depend, not on the state of demand and supply, but on the increased or diminished cost of their production. CHAPTER XXIX. MR. MALTHUS'S OPINIONS ON RENT. Although the nature of rent has in the former pages of this work been treated on at some length; yet I consider myself bound to notice some opinions on the subject, which appear to me erroneous, and which are the more important, as they are found in the writings of one to whom, of all men of the present day, some branches of economical science are the most indebted. Of Mr. Malthus's Essay on Population, I am happy in the opportunity here afforded me of expressing my admiration. The assaults of the opponents of this great work have only served to prove its strength; and I am persuaded that its just reputation will spread with the cultivation of that science of which it is so eminent an ornament. Mr. Malthus too--has satisfactorily explained the principles of rent, and shewed that it rises or falls in proportion to the relative advantages, either of fertility or situation, of the different lands in cultivation, and has thereby thrown much light on many difficult points connected with the subject of rent, which were before either unknown, or very imperfectly understood; yet he appears to me to have fallen into some errors, which his authority makes it the more necessary, whilst his characteristic candour renders it less unpleasing to notice. One of these errors lies in supposing rent to be a clear gain and a new creation of riches. I do not assent to all the opinions of Mr. Buchanan concerning rent; but with those expressed in the following passage, quoted from his work by Mr. Malthus, I fully agree; and therefore I must dissent from Mr. Malthus's comment on them. "In this view it (rent) can form no general addition to the stock of the community, as the neat surplus in question is nothing more than a revenue transferred from one class to another; and from the mere circumstance of its thus changing hands, it is clear that no fund can arise, out of which to pay taxes. The revenue which pays for the produce of the land, exists already in the hands of those who purchase that produce; and, if the price of subsistence were lower, it would still remain in their hands, where it would be just as available for taxation as when, by a higher price, it is transferred to the landed proprietor." After various observations on the difference between raw produce and manufactured commodities, Mr. Malthus asks, "Is it possible then, with M. de Sismondi, to regard rent as the sole produce of labour, which has a value purely nominal, and the mere result of that augmentation of price which a seller obtains in consequence of a peculiar privilege; or, with Mr. Buchanan, to consider it as no addition to the national wealth, but merely transfer of value, advantageous only to the landlords, and proportionably _injurious_ to the consumers?"[51] I have already expressed my opinion on this subject in treating of rent, and have now only further to add, that rent is a creation of value, as I understand that word, but not a creation of wealth. If the price of corn, from the difficulty of producing any portion of it, should rise from 4_l._ to 5_l._ per quarter, a million of quarters will be of the value of 5,000,000_l._ instead of 4,000,000_l._, and as this corn will exchange not only for more money but for more of every other commodity, the possessors will have a greater amount of value; and as no one else will in consequence have a less, the society altogether will be possessed of greater value, and in that sense rent is a creation of value. But this value is so far nominal that it adds nothing to the wealth, that is to say, to the necessaries, conveniences, and enjoyments of the society. We should have precisely the same quantity, and no more of commodities, and the same million quarters of corn as before; but the effect of its being rated at 5_l._ per quarter, instead of 4_l._, would be to transfer a portion of the value of the corn and commodities from their former possessors to the landlords. Rent then is a creation of value, but not a creation of wealth; it adds nothing to the resources of a country, it does not enable it to maintain fleets and armies; for the country would have a greater disposable fund if its land were of a better quality, and it could employ the same capital without generating a rent. In another part of Mr. Malthus's "inquiry" he observes, "that the immediate cause of rent is obviously the excess of price above the cost of production at which raw produce sells in the market," and in another place he says, "that the causes of the high price of raw produce may be stated to be three:-- "First, and mainly, that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land. "2dly. That quality peculiar to the necessaries of life of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced. "And 3dly. The comparative scarcity of the most fertile land." In speaking of the high price of corn, Mr. Malthus evidently does not mean the price per quarter or per bushel, but rather the excess of price for which the whole produce will sell, above the cost of its production, including always in the term "cost of production," profits as well as wages. One hundred and fifty quarters of corn at 3_l._ 10_s._ per quarter, would yield a larger rent to the landlord than 100 quarters at 4_l._, provided the cost of production were in both cases the same. High price, if the expression be used in this sense, cannot then be called a _cause_ of rent; it cannot be said "that the immediate cause of rent is obviously the excess of price above the cost of production, at which raw produce sells in the market," for that excess is itself rent. Rent, Mr. Malthus has defined to be "that portion of the value of the whole produce which remains to the owner of the land, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate of the profits of agricultural stock at the time being." Now whatever sum this excess may sell for, is money rent; it is what Mr. Malthus means by "the excess of price above the cost of production at which raw produce sells in the markets;" and therefore in an inquiry into the causes which may elevate the price of raw produce, compared with the cost of production, we are inquiring into the causes which may elevate rent. In reference to the first cause of the rise of rent, Mr. Malthus has the following observations: "We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the _fertility_ of the earth in producing the necessaries of life. Diminish this plenty, diminish the fertility of the soil, and the excess will diminish; diminish it still further, and it will disappear." True, the excess of necessaries will diminish and disappear, but that is not the question. The question is, whether the excess of their price above the cost of their production will diminish and disappear, for it is on this, that money rent depends. Is Mr. Malthus warranted in his inference, that because the excess of quantity will diminish and disappear, therefore "the cause of the _high price_ of the necessaries of life above the cost of production is to be found in their abundance, rather than in their scarcity; and is not only essentially different from the high price occasioned by artificial monopolies, but from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies?" Are there no circumstances under which the fertility of the land, and the plenty of its produce may be diminished, without occasioning a diminished excess of its price above the cost of production, that is to say, a diminished rent? If there are, Mr. Malthus's proposition is much too universal; for he appears to me to state it as a general principle, true under all circumstances, that rent will rise with the increased fertility of the land, and will fall with its diminished fertility. Mr. Malthus would undoubtedly be right, if, in proportion as the land yielded abundantly, a greater share of the whole produce were paid to the landlord; but the contrary is the fact: when no other but the most fertile land is in cultivation, the landlord has the smallest share of the whole produce, as well as the smallest value, and it is only when inferior lands are required to feed an augmenting population, that both the landlord's share of the whole produce, and the value he receives, progressively increase. Suppose that the demand is for a million of quarters of corn, and that they are the produce of the land actually in cultivation. Now, suppose the fertility of all the land to be so diminished, that the very same lands will yield only 900,000 quarters. The demand being for a million of quarters, the price of corn would rise, and recourse must necessarily be had to land of an inferior quality sooner than if the superior land had continued to produce a million of quarters. But it is this necessity of taking inferior land into cultivation which is the cause of the rise of rent. Rent, it must be remembered, is not in proportion to the absolute fertility of the land in cultivation, but in proportion to its relative fertility. Whatever cause may drive capital to inferior land, must elevate rent; the cause of rent being, as stated by Mr. Malthus in his third proposition, "the comparative scarcity of the most fertile land." The price of corn will naturally rise with the difficulty of producing the last portions of it; but as the cost of production will not increase, as wages and profits taken together will continue always of the same value,[52] it is evident that the excess of price above the cost of production, or, in other words, rent, must rise with the diminished fertility of the land, unless it is counteracted by a great reduction of capital, population, and demand. It does not appear then that Mr. Malthus's proposition is correct: rent does not immediately and necessarily rise or fall with the increased or diminished fertility of the land; but its increased fertility renders it capable of paying at some future time an augmented rent. Land possessed of very little fertility can never bear any rent; land of moderate fertility may be made, as population increases, to bear a moderate rent; and land of great fertility a high rent; but it is one thing to be able to bear a high rent, and another thing actually to pay it. Rent may be lower in a country where lands are exceedingly fertile than in a country where they yield a moderate return, it being in proportion rather to relative than absolute fertility--to the value of the produce, and not to its abundance. Mr. Malthus says, that the "cause of the excess of price of the necessaries of life above the cost of production, is to be found in their abundance rather than their scarcity, and is essentially different from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies." In what are they essentially different? Would not the abundance of those peculiar products of the earth cause a rise of rent, if the demand for them at the same time increased? and can rent ever rise, whatever the commodity produced may be, from abundance merely, and without an increase of demand? The second cause of rent mentioned by Mr. Malthus, namely, "that quality peculiar to the necessaries of life, of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced," does not appear to me to be any way essential to it. It is not the abundance of necessaries which raises up demanders, but the abundance of demanders which raises up necessaries. We are under no necessity of producing permanently any greater quantity of a commodity than that which is demanded. If by accident any greater quantity were produced, it would fall below its natural price, and therefore would not pay the cost of production, together with the usual and ordinary profits of stock: thus the supply would be checked till it conformed to the demand, and the market price rose to the natural price. Mr. Malthus appears to me to be too much inclined to think that population is only increased by the previous provision of food,--"that it is food that creates its own demand,"--that it is by first providing food that encouragement is given to marriage, instead of considering that the general progress of population is affected by the increase of capital, the consequent demand for labour, and the rise of wages; and that the production of food is but the effect of that demand. It is by giving the workman more money, or any other commodity in which wages are paid, and which has not fallen in value, that his situation is improved. The increase of population, and the increase of food will generally be the effect, but not the necessary effect of high wages. The amended condition of the labourer, in consequence of the increased value which is paid him, does not necessarily oblige him to marry and take upon himself the charge of a family--he may, if it please him, exchange his increased wages for any commodities that may contribute to his enjoyments--for chairs, tables, and hardware; or for better clothes, sugar, and tobacco. His increased wages then will be attended with no other effect than an increased demand for some of those commodities; and as the race of labourers will not be materially increased, his wages will continue permanently high. But although this might be the consequence of high wages, yet so great are the delights of domestic society, that in practice it is invariably found that an increase of population follows the amended condition of the labourer; and it is only because it does so, that a new and increased demand arises for food. This demand then is the effect of an increase of population, but not the cause--it is only because the expenditure of the people takes this direction, that the market price of necessaries exceeds the natural price, and that the quantity of food required is produced; and it is because the number of people is increased, that wages again fall. What motive can a farmer have to produce more corn than is actually demanded, when the consequence would be a depression of its market price below its natural price, and consequently a privation to him of a portion of his profits, by reducing them below the general rate? "If," says Mr. Malthus, "the necessaries of life, the most important products of land, had not the property of creating an increase of demand proportioned to their increased quantity, such increased quantity would occasion a fall in their exchangeable value.[53] However abundant might be the produce of a country, its population might remain stationary. And this abundance without a proportionate demand, and with a very high corn price of labour, which would naturally take place under these circumstances, might reduce the price of raw produce, like the price of manufactures, to the cost of production." "Might reduce the price of raw produce to the cost of production?" Is it ever for any length of time either above or below this price? Does not Mr. Malthus himself, state it never to be so? "I hope," he says, "to be excused for dwelling a little, and presenting to the reader in various forms the doctrine, that corn, in reference to the quantity _actually produced_, is sold at its necessary price like manufactures, because I consider it as a truth of the highest importance, which has been overlooked by the economists, by Adam Smith, and all those writers, who have represented raw produce as selling always at a monopoly price." "Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to shew at once the _necessity of the actual price of corn to the actual produce_, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce."[54] How are these passages to be reconciled to that which affirms, that if the necessaries of life had not the property of creating an increase of demand proportioned to their increased quantity, the abundant quantity produced would then, and then only, reduce the price of raw produce to the cost of production? If corn is never under its natural price, it is never more abundant than the actual population require it to be for their own consumption; no store can be laid up for the consumption of others; it can never then by its cheapness and abundance be a stimulus to population. In proportion as corn can be produced cheaply, the increased wages of the labourers will have more power to maintain families. In America, population increases rapidly, because food can be produced at a cheap price, and not because an abundant supply has been previously provided. In Europe population increases comparatively slowly, because food cannot be produced at a cheap value. In the usual and ordinary course of things, the demand for all commodities precedes their supply. By saying, that corn would, like manufactures, sink to its price of production, if it could not raise up demanders, Mr. Malthus cannot mean that all rent would be absorbed; for he has himself justly remarked, that if all rent were given up by the landlords, corn would not fall in price; rent being the effect, and not the cause of high price, and there being always one quality of land in cultivation which pays no rent whatever, the corn from which replaces by its price, only wages and profits. In the following passage, Mr. Malthus has given an able exposition of the causes of the rise in the price of raw produce in rich and progressive countries, in every word of which I concur; but it appears to me to be at variance with some of the propositions maintained by him in some parts of his Essay on Rent. "I have no hesitation in stating, that, independently of the irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn is its high comparative _real price_, or the greater quantity of capital and labour which must be employed to produce it; and that the reasons why the real price of corn is higher, and continually rising in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land, to machines which require a greater expenditure to work them, and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost; in short, it is to be found in the important truth, that corn in a progressive country, is sold at the price necessary to yield the actual supply; and that, as this supply becomes more and more difficult, the price rises in proportion." The real price of a commodity is here properly stated to depend on the greater or less quantity of labour and capital (that is, accumulated labour) which must be employed to produce it. Real price does not, as some have contended, depend on money value; nor, as others have said, on value relatively to corn, labour, or any other commodity taken singly, or to all commodities collectively; but, as Mr. Malthus justly says, "on the greater (or less) quantity of capital and labour which must be employed to produce it." Among the causes of the rise of rent, Mr. Malthus mentions, "such an increase of population as will lower the wages of labour." But if, as the wages of labour fall, the profits of stock rise, and they be together always of the same value,[55] no fall of wages can raise rent, for it will neither diminish the portion, nor the value of the portion of the produce which will be allotted to the farmer and labourer together, and therefore will not leave a larger portion, nor a larger value for the landlord. In proportion as less is appropriated for wages, more will be appropriated for profits, and _vice versa_. This division will be settled by the farmer and his labourers, without any interference of the landlord; and indeed it is a matter in which he can have no interest, otherwise than as one division may be more favourable than another, to new accumulations, and to a further demand for land. If wages fall, profits, and not rent, would rise. If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause--the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price. If the landlord were to forego his whole rent, the labourers would not be in the least benefited. If the labourers were to give up their whole wages, the landlords would derive no advantage from such a circumstance; but in both cases the farmer would receive and retain all which they relinquished. It has been my endeavour to shew in this work, that a fall of wages would have no other effect than to raise profits. Another cause of the rise of rent, according to Mr. Malthus, is "such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect." This would not raise the value of the whole produce, and would therefore not increase rent. It would rather have a contrary tendency, it would lower rent; for if in consequence of these improvements, the actual quantity of food required could be furnished either with fewer hands, or with a less quantity of land, the price of raw produce would fall, and capital would be withdrawn from the land.[56] Nothing can raise rent, but a demand for new land of an inferior quality, or some cause which shall occasion an alteration in the relative fertility of the land already under cultivation.[57] Improvements in agriculture, and in the division of labour, are common to all land; they increase the absolute quantity of raw produce obtained from each, but probably do not much disturb the relative proportions which before existed between them. Mr. Malthus has justly commented on an error of Adam Smith, and says, "the substance of his (Dr. Smith's) argument is, that corn is of so peculiar a nature, that its real price cannot be raised by an increase of its money price; and that, as it is clearly an increase of real price alone, which can encourage its production, the rise of money price, occasioned by a bounty, can have no such effect." He continues: "It is by no means intended to deny the powerful influence of the price of corn upon the price of labour, on an average of a considerable number of years; but that this influence is not such as to prevent the movement of capital to, or from the land, which is the precise point in question, will be made sufficiently evident by a short inquiry into the manner in which labour is paid, and brought into the market, and by a consideration of the consequences to which the assumption of Adam Smith's proposition would inevitably lead."[58] Mr. Malthus then proceeds to shew, that demand and high price will as effectually encourage the production of raw produce, as the demand and high price of any other commodity will encourage its production. In this view it will be seen, from what I have said of the effects of bounties, that I entirely concur. I have noticed the passage Mr. Malthus's "Observations on the Corn Laws," for the purpose of shewing in what a different sense the term real price is used here, and in his other pamphlet, entitled "Grounds of an Opinion, &c." In this passage Mr. Malthus tells us, that "it is clearly an increase of real price alone which can encourage the production of corn," and by real price he evidently means the increase in its value relatively to all other things, or in other words, the rise in its market above its natural price, or the cost of its production. If by real price this is what is meant, Mr. Malthus's opinion is undoubtedly correct; it is the rise in the market price of corn which alone encourages its production, for it may be laid down as a principle uniformly true, that the only encouragement to the increased production of a commodity, is its market value exceeding its natural or necessary value. But this is not the meaning which Mr. Malthus, on other occasions, attaches to the term, real price. In the Essay on Rent, Mr. Malthus says, by "the real growing price of corn, I mean the real _quantity_ of labour and capital, _which has been employed_ to produce the last additions which have been made to the national produce." In another part he states "the cause of the high comparative real price of corn to be the greater _quantity_ of capital and labour, which must be _employed_ to produce it."[59] Suppose that in the foregoing passage we were to substitute this definition of real price, would it not then run thus?--"It is clearly the increase in the quantity of labour and capital which must be employed to produce corn, which alone can encourage its production." This would be to say, that it is clearly the rise in the natural or necessary price of corn, which encourages its production--a proposition which could not be maintained. It is not the price at which corn can be produced, that has any influence on the quantity produced, but the price at which it can be sold. It is in proportion to the degree of the excess of its price above the cost of production, that capital is attracted to or repelled from the land. If that excess be such as to give to capital so employed, a greater than the general profit of stock, capital will go to the land; if less, it will be withdrawn from it. It is not then by an alteration in the real price of corn that its production is encouraged, but by an alteration in its market price. It is not "because a greater quantity of capital and labour must be employed to produce it," Mr. Malthus's just definition of real price, that more capital and labour are attracted to the land, but because the market price rises above this its real price, and, notwithstanding the increased charge, makes the cultivation of land the more profitable employment of capital. Nothing can be more just than the following observations of Mr. Malthus, on Adam Smith's standard of value. "Adam Smith was evidently led into this train of argument, from his habit of considering _labour as the standard measure of value_, and corn as the measure of labour. But that corn is a very inaccurate measure of labour, the history of our own country will amply demonstrate; where labour, compared with corn, will be found to have experienced very great and striking variations, not only from year to year, but from century to century; and for ten, twenty, and thirty years together. _And that neither labour nor any other commodity can be an accurate measure of real value in exchange_, is now considered as one of the most incontrovertible doctrines of political economy; and, indeed, follows from the very definition of value in exchange." If neither corn nor labour are accurate measures of real value in exchange, which they clearly are not, what other commodity is?--certainly none. If then the expression real price of commodities, have any meaning, it must be that which Mr. Malthus has stated, in the Essay on Rent--it must be measured by the proportionate quantity of capital and labour necessary to produce them. In Mr. Malthus's "Inquiry into the Nature of Rent," he says, "that, independently of irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn, is its high comparative real price, _or the greater quantity of capital and labour which must be employed to produce it_."[60] This, I apprehend, is the correct account of all permanent variations in price, whether of corn or of any other commodity. A commodity can only permanently rise in price, either because a greater quantity of capital and labour must be employed to produce it, or because money has fallen in value; and on the contrary, it can only fall in price, either because a less quantity of capital and labour may be employed to produce it, or because money has risen in value. A variation arising from the latter of either of these alternatives, an altered value of money, is common at once to all commodities; but a variation arising from the former cause, is confined to the particular commodity requiring more or less labour in its production. By allowing the free importation of corn, or by improvements in agriculture, raw produce would fall; but the price of no other commodity would be affected, except in proportion to the fall in the real value, or cost of production, of the raw produce which entered into its composition. Mr. Malthus, having acknowledged this principle, cannot, I think, consistently maintain that the whole money value of all the commodities in the country must sink exactly in proportion to the fall in the price of corn. If the corn consumed in the country were of the value of ten millions per annum, and the manufactured and foreign commodities consumed were of the value of twenty millions, making altogether thirty millions, it would not be admissible to infer that the annual expenditure was reduced to 15 millions, because corn had fallen 50 per cent., or from 10 to 5 millions. The value of the raw produce which entered into the composition of these manufactures might not, for example, exceed 20 per cent. of their whole value, and, therefore, the fall in the value of manufactured commodities, instead of being from 20 to 10 millions, would be only from 20 to 18 millions; and after the fall in the price of corn of 50 per cent., the whole amount of the annual expenditure, instead of falling from 30 to 25 millions, would fall from 30 to 23 millions.[61] Instead of thus considering the effect of a fall in the value of raw produce; as Mr. Malthus was bound to do by his previous admission; he considers it as precisely the same thing with a rise of 100 per cent. in the value of money, and, therefore, argues as if all commodities would sink to half their former price. "During the twenty years, beginning with 1794," he says, "and ending with 1813, the average price of British corn per quarter was about eighty-three shillings; during the ten years ending with 1813, ninety-two shillings; and during the last five years of the twenty, one hundred and eight shillings. In the course of these twenty years, the Government borrowed near five hundred millions of real capital; for which, on a rough average, exclusive of the sinking fund, it engaged to pay about five per cent. But if corn should fall to fifty shillings a quarter, and other commodities in proportion, instead of an interest of about five per cent., the Government would really pay an interest of seven, eight, nine, and, for the last two hundred millions, ten per cent. "To this extraordinary generosity towards the stockholders, I should be disposed to make no kind of objection, if it were not necessary to consider by whom it is to be paid; and a moment's reflection will shew us, that it can only be paid by the industrious classes of society, and the landlords, that is, by all those whose nominal income will vary with the variations in the measure of value. The nominal revenues of this part of the society, compared with the average of the last five years, will be diminished one half, and out of this nominally reduced income, they will have to pay the same nominal amount of taxes."[62] In the first place, I think, I have already shewn, that the nominal income of the whole country will not be diminished in the proportion for which Mr. Malthus here contends; it would not follow, that because corn fell fifty per cent., each man's income would be reduced fifty per cent. in value.[63] In the second place, I think the reader will agree with me, that the increased charge, if admitted, would not fall exclusively "on the landlords and the industrious classes of society:" the stockholder, by his expenditure, contributes his share to the support of the public burdens in the same way as the other classes of society. If then money became really more valuable, although he would receive a greater value, he would also pay a greater value in taxes, and, therefore, it cannot be true that the whole addition to the real value of the interest would be paid by "the landlords and the industrious classes." The whole argument, however, of Mr. Malthus, is built on an infirm basis: it supposes, because the gross income of the country is diminished, that, therefore, the net income must also be diminished, in the same proportion. It has been one of the objects of this work to shew, that with every fall in the real value of necessaries, the wages of labour would fall, and that the profits of stock would rise--in other words, that of any given annual value a less portion would be paid to the labouring class, and a larger portion to those whose funds employed this class. Suppose the value of the commodities produced in a particular manufacture to be 1000_l._, and to be divided between the master and his labourers, in the proportion of 800_l._ to labourers, and 200_l._ to the master; if the value of these commodities should fall to 900_l._, and 100_l._ be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired, and, therefore, he could with just as much facility pay the same amount of taxes, after, as before the reduction of price.[64] And that wages would fall as much as the mass of commodities, or rather that the net income remaining to landlords, farmers, manufacturers, traders, and stockholders, the only real payers of taxes, would be as great as before, is very highly probable; for nothing would be even nominally lost to the society by the freest importation of corn, but that portion of rent of which the landlords would be deprived in consequence of the fall of raw produce. The difference between the value of corn and all other commodities sold in the country, before and after the importation of cheap corn, would be only equal to the fall of rent; because, independently of rent, the same quantity of labour would always produce the same value. The whole reduction which is made in wages, is a value actually added to the value of the net income before possessed by the society; whilst the only value which is taken from that net income is the value of that part of their rent of which the landlords will be deprived by a fall of raw produce. When we consider that the fall of produce acts upon a limited number of landlords, while it reduces the wages not only of those who are employed in agriculture, but of all those who are occupied in manufactures and commerce, it may well be doubted, whether the net revenue of the society would suffer any abatement whatever.[65] But, if it did, it must not be supposed that the ability to pay taxes will diminish in the same degree, as the money value, even of the net revenue. Suppose that my net revenue were diminished from 1000_l._ to 900_l._; but that my taxes continued to be the same, to be 100_l._: is it not probable that my ability to pay this 100_l._ may be greater with the smaller than with the larger revenue? Commodities cannot fall so universally as Mr. Malthus supposes, without greatly benefiting the consumers, without enabling them with a much smaller money revenue to command more of the conveniences, necessaries, and luxuries of human life; and the question resolves itself into this--whether those who are in possession of the net revenue of the country will be benefited as much by the diminished price of commodities, as they will suffer by the greater real taxation. On which side the balance may preponderate, will depend on the proportion which taxes bear to the annual revenue; if it be enormously large, it may undoubtedly more than counterbalance the advantages from cheap necessaries; but I trust enough has been said, to shew, that Mr. Malthus has very greatly over-rated the loss to the tax-payers, from a fall in one of the most important necessaries of life; and that if they were not entirely remunerated for the real increase of taxes, by the fall of wages and increase of profits, they would be more than compensated, by the cheaper price of all objects on which their incomes were expended. That the stockholder is benefited by a great fall in the value of corn, cannot be doubted; but if no one else be injured, that is no reason why corn should be made dear: for the gains of the stockholder are national gains, and increase, as all other gains do, the real wealth and power of the country. If they are unjustly benefited, let the degree in which they are so, be accurately ascertained, and then it is for the legislature to devise a remedy; but no policy can be more unwise than to shut ourselves out from the great advantages arising from cheap corn, and abundant productions, merely because the stockholder would have an undue proportion of the increase. To regulate the dividends on stock by the money value of corn, has never yet been attempted. If justice and good faith required such a regulation, a great debt is due to the old stockholders; for they have been receiving the same money dividends for more than a century, although corn has, perhaps, been doubled or trebled in price.[66] Mr. Malthus says, "It is true, that the last additions to the agricultural produce of an improving country are not attended with a large proportion of rent; and it is precisely this circumstance that may make it answer to a rich country to import some of its corn, if it can be secure of obtaining an equable supply. But in all cases the importation of foreign corn must fail to answer nationally, if it is not so much cheaper than the corn that can be grown at home, as to equal both the profits and the rent of the grain which it displaces." _Grounds_, &c. p. 36. As rent is the effect of the high price of corn, the loss of rent is the effect of a low price. Foreign corn never enters into competition with such home corn as affords a rent; the fall of price invariably affects the landlord till the whole of his rent is absorbed;--if it fall still more, the price will not afford even the common profits of stock; capital will then quit the land for some other employment, and the corn, which was before grown upon it, will then, and not till then, be imported. From the loss of rent, there will be a loss of value, of estimated money value, but there will be a gain of wealth. The amount of the raw produce and other productions together will be increased, from the greater facility with which they are produced; they will, though augmented in quantity, be diminished in value. Two men employ equal capitals--one in agriculture, the other in manufactures. That in agriculture produces a net annual value of 1200_l._ of which 1000_l._ is retained for profit, and 200_l._ is paid for rent; the other in manufactures produces only an annual value of 1000_l._ Suppose that by importation, the same quantity of corn can be obtained for commodities which cost 950_l._, and that, in consequence, the capital employed in agriculture is diverted to manufactures, where it can produce a value of 1000_l._ the net revenue of the country will be of less value, it will be reduced from 2200_l._ to 2000_l._, but there will not only be the same quantity of commodities and corn for its own consumption, but also as much addition to that quantity as 50_l._ would purchase, the difference between the value at which its manufactures were sold to the foreign country, and the value of the corn which was purchased from it. Mr. Malthus says, "It has been justly observed by Adam Smith, that no equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction as in agriculture." If Adam Smith speaks of value, he is correct, but if he speaks of riches, which is the important point, he is mistaken, for he has himself defined riches to consist of the necessaries, conveniences, and enjoyments of human life. One set of necessaries and conveniences admits of no comparison with another set; value in use cannot be measured by any known standard, it is differently estimated by different persons. FOOTNOTES: [1] Chap. xv. part i. "Des Débouchés," contains in particular some very important principles, which I believe were first explained by this distinguished writer. [2] Book i. chap. 5. [3] "But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hours' easy business; or, in an hour's application to a trade, which it costs ten years' labour to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure, either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality, which, though not exact, is sufficient for carrying on the business of common life."--_Wealth of Nations._ Book i. chap. 10. [4] Wealth of Nations, book i. chap. 10. [5] "The earth, as we have already seen, is not the only agent of nature which has a productive power; but it is the only one, or nearly so, that one set of men take to themselves, to the exclusion of others; and of which consequently they can appropriate the benefits. The waters of rivers, and of the sea, by the power which they have of giving movement to our machines, carrying our boats, nourishing our fish, have also a productive power; the wind which turns our mills, and even the heat of the sun, work for us; but happily no one has yet been able to say: the 'wind and the sun are mine, and the service which they render must be paid for.'"--_Economie Politique, par J. B. Say_, vol. ii. p. 124. [6] Has not M. Say forgotten, in the following passage, that it is the cost of production which ultimately regulates price? "The produce of labour employed on the land has this peculiar property, that it does not become more dear by becoming more scarce, because population always diminishes at the same time that food diminishes, and consequently the quantity of these products _demanded_, diminishes at the same time as the quantity supplied. Besides it is not observed that corn is more dear in those places where there is plenty of uncultivated land, than in completely cultivated countries. England and France were much more imperfectly cultivated in the middle ages than they are now; they produced much less raw produce: nevertheless from all that we can judge by a comparison with the value of other things, corn was not sold at a dearer price. If the produce was less, so was the population; the weakness of the demand compensated the feebleness of the supply." vol. ii. 338. M. Say being impressed with the opinion that the price of commodities is regulated by the price of labour, and justly supposing that charitable institutions of all sorts tend to increase the population beyond what it otherwise would be, and therefore to lower wages, says, "I suspect that the cheapness of the goods, which come from England is partly caused by the numerous charitable institutions which exist in that country." vol. ii. 277. This is a consistent opinion in one who maintains that wages regulate price. [7] "In agriculture too," says Adam Smith, "nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workman." The labour of nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts, she exacts a greater price for her work. Where she is munificently beneficent, she always works gratis. "The labouring cattle employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer. It is greater or smaller according to the supposed extent of those powers, or in other words, according to the supposed natural or improved fertility of the land. It is the work of nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great a reproduction. _In them nature does nothing, man does all_; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion too to the quantity of the productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the _real_ wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to the society."--Book II. chap. v. p. 15. Does nature nothing for man in manufactures? Are the powers of wind and water, which move our machinery, and assist navigation, nothing? The pressure of the atmosphere and the elasticity of steam, which enable us to work the most stupendous engines--are they not the gifts of nature? to say nothing of the effects of the matter of heat in softening and melting metals, of the decomposition of the atmosphere in the process of dyeing and fermentation. There is not a manufacture which can be mentioned, in which nature does not give her assistance to man, and give it too, generously and gratuitously. In remarking on the passage which I have copied from Adam Smith, Mr. Buchanan observes, "I have endeavoured to shew, in the observations on productive and unproductive Footnote: labour, contained in the fourth volume, that agriculture adds no more to the national stock than any other sort of industry. In dwelling on the reproduction of rent as so great an advantage to society, Dr. Smith does not reflect that rent is the effect of high price, and that what the landlord gains in this way, he gains at the expense of the community at large. There is no absolute gain to the society by the reproduction of rent; it is only one class profiting at the expense of another class. The notion of agriculture yielding a produce, and a rent in consequence, because nature concurs with human industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived; and this price is got, not because nature assists in the production, but because it is the price which suits the consumption to the supply." [8] To make this obvious, and to shew the degrees in which corn and money rent will vary, let us suppose that the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value to be 4_l._ per quarter, or 720_l._; and that the labour of ten additional men will, on the same or any other land, produce only 170 quarters in addition; wheat would rise from 4_l._ to 4_l._ 4_s._. 8_d._ for 170: 180:: 4_l._: 4_l._ 4_s._ 8_d._; or, as in the production of 170 quarters, the labour of 10 men is necessary in one case, and only of 9.44 in the other, the rise would be as 9.44 to 10, or as 4_l._ to 4_l._ 4_s._ 8_d._ If 10 men be further employed, and the return be 160, the price will rise to £4 10 0 150, " " " " " 4 16 0 140, " " " " " 5 2 10 Now if no rent was paid for the land which yielded 180 quarters when corn was at 4_l._ per quarter, the value of 10 quarters would be paid as rent when only 170 could be procured, which, at 4_l._ 4_s._ 8_d._ would be 42_l._ 7_s._ 6_d._ 20 qrs. when 160 were produced, which at £4 10 0 would be £ 90 0 0 30 qrs. " 150 " " " " 4 16 0 " " 144 0 0 40 qrs. " 140 " " " " 5 2 10 " " 205 13 4 {100} { 100 Corn rent then would increase {200} and money rent in the { 212 in the proportion of {300} proportion of { 340 {400} { 485 [9] With Mr. Buchanan in the following passage, if it refers to temporary states of misery, I so far agree, that "the great evil of the labourer's condition, is poverty, arising either from a scarcity of food or of work; and in all countries, laws without number have been enacted for his relief. But there are miseries in the social state which legislation cannot relieve; and it is useful therefore to know its limits, that we may not, by aiming at what is impracticable, miss the good which is really in our power."--_Buchanan_, page 61. [10] The reader is desired to bear in mind, that for the purpose of making the subject more clear, I consider money to be invariable in value, and therefore every variation of price to be referable to an alteration in the value of the commodity. [11] The reader is aware, that we are leaving out of our consideration the accidental variations arising from bad and good seasons, or from the demand increasing or diminishing by any sudden effect on the state of population. We are speaking of the natural and constant, not of the accidental and fluctuating price of corn. [12] The 180 quarters of corn would be divided in the following proportions between landlords, farmers, and labourers, with the above-named variations in the value of corn. Price per qr. Rent. Profit. Wages. Total. _£. s. d._ In Wheat. In Wheat. In Wheat. 4 0 0 None. 120 qrs. 60 qrs.} 4 4 8 10 qrs. 111.7 58.3 } 4 10 0 20 103.4 56.6 } 180 4 16 0 30 95 55 } 5 2 10 40 86.7 53.5 } and, under the same circumstances, money rent, wages, and profit, would be as follows: Price per qr. Rent. Profit. Wages. Total. _£. s. d._ _£. s. d._ _£. s. d._ _£. s. d._ _£. s. d._ 4 0 0 None. 480 0 0 240 0 0 720 0 0 4 4 8 42 7 6 473 0 0 247 0 0 762 7 6 4 10 0 90 0 0 465 0 0 255 0 0 810 0 0 4 16 0 144 0 0 456 0 0 264 0 0 864 0 0 5 2 10 205 13 4 445 15 0 274 5 0 925 13 4 [13] See Adam Smith, book i. chap. 9. [14] It will appear then, that a country possessing very considerable advantages in machinery and skill, and which may therefore be enabled to manufacture commodities with much less labour than her neighbours, may in return for such commodities, import a portion of the corn required for its consumption, even if its land were more fertile, and corn could be grown with less labour than in the country from which it was imported. Two men can both make shoes and hats, and one is superior to the other in both employments; but in making hats, he can only exceed his competitor by one-fifth or 20 per cent., and in making shoes he can excel him by one-third or 33 per cent.;--will it not be for the interest of both, that the superior man should employ himself exclusively in making shoes, and the inferior man in making hats? [15] Book V. ch. ii. [16] M. Say appears to have imbibed the general opinion on this subject. Speaking of corn, he says, "thence it results, that its price influences the price of _all_ other commodities. A farmer, a manufacturer, or a merchant, employs a certain number of workmen, who all have occasion to consume a certain quantity of corn. If the price of corn rises, he is obliged to raise, in an equal proportion, the price of his productions." Vol. i. p. 255. [17] M. Say says, that "the tax, added to the price of a commodity, raises its price. Every increase in the price of a commodity, necessarily reduces the number of those who are able to purchase it, or at least the quantity they will consume of it." This is by no means a necessary consequence. I do not believe, that if bread were taxed, the consumption of bread would be diminished, more than if cloth, wine, or soap, were taxed. [18] The following remark of the same author appears to me equally erroneous: "When a high duty is laid on cotton, the production of all those goods, of which cotton is the basis, is diminished. If the total value added to cotton in its various manufactures, in a particular country, amounted to 100 millions of francs per annum, and the effect of the tax was, to diminish the consumption one half, then the tax would deprive that country every year of 50 millions of francs, in addition to the sum received by government." Vol. ii. p. 314. [19] It is observed by M. Say, "that a manufacturer is not enabled to make the consumer pay the whole tax levied on his commodity, because its increased price will diminish its consumption." Should this be the case, should the consumption be diminished, will not the supply also speedily be diminished? Why should the manufacturer continue in the trade if his profits are below the general level? M. Say appears here also to have forgotten the doctrine which he elsewhere supports, "that the cost of production determines the price, below which commodities cannot fall for any length of time, because production would then be either suspended or diminished."--Vol. ii. p. 26. "The tax in this case falls then partly on the consumer who is obliged to give more for the commodity taxed, and partly on the producer, who, after deducting the tax, will receive less. The public treasury will be benefited by what the purchaser pays in addition, and also by the sacrifice which the producer is obliged to make of a part of his profits. It is the effort of gunpowder, which acts at the same time on the bullet which it projects, and on the gun which it causes to recoil." Vol. ii. p. 333. [20] "Melon says, that the debts of a nation are debts due from the right hand to the left, by which the body is not weakened. It is true that the general wealth is not diminished by the payment of the interest on arrears of the debt: The dividends are a value which passes from the hand of the contributor to the national creditor: Whether it be the national creditor or the contributor who accumulates or consumes it, is I agree of little importance to the society; but the principal of the debt--what has become of that? It exists no more. The consumption which has followed the loan has annihilated a capital which will never yield any further revenue. The society is deprived not of the amount of interest, since that passes from one hand to the other, but of the revenue from a destroyed capital. This capital, if it had been employed productively by him who lent it to the state, would equally have yielded him an income, but that income would have been derived from a real production, and would not have been furnished from the pocket of a fellow citizen."--_Say_, vol. ii. p. 357. This is both conceived and expressed in the true spirit of the science. [21] "Manufacturing industry increases its produce in proportion to the demand, and the price falls; _but the produce of land cannot be so increased_; and a high price is still necessary to prevent the consumption from exceeding the supply." _Buchanan_, vol. iv. p. 40. Is it possible that Mr. Buchanan can seriously assert, that the produce of the land cannot be increased, if the demand increases? [22] I wish the word "Profit" had been omitted. Dr. Smith must suppose the profits of the tenants of these precious vineyards to be above the general rate of profits. If they were not, they would not pay the tax, unless they could shift it either to the landlord or consumer. [23] See note, p. 346. [24] See note, p. 346. [25] Vol. iii. p. 355. [26] In a former part of this work, I have noticed the difference between rent, properly so called, and the remuneration paid to the landlord under that name, for the advantages which the expenditure of his capital has procured to his tenant; but I did not perhaps sufficiently distinguish the difference which would arise from the different modes in which this capital might be applied. As a part of this capital, when once expended in the improvement of a farm, is inseparably amalgamated with the land, and tends to increase its productive powers, the remuneration paid to the landlord for its use is strictly of the nature of rent, and is subject to all the laws of rent. Whether the improvement be made at the expense of the landlord or the tenant, it will not be undertaken in the first instance, unless there is a strong probability that the return will at least be equal to the profit that can be made by the disposition of any other equal capital; but when once made, the return obtained will ever after be wholly of the nature of rent, and will be subject to all the variations of rent. Some of these expenses however, only give advantages to the land for a limited period, and do not add permanently to its productive powers: being bestowed on buildings, and other perishable improvements, they require to be constantly renewed, and therefore do not obtain for the landlord any permanent addition to his real rent. [27] Adam Smith says, "that the difference between the real and the nominal price of commodities and labour, is not a matter of mere speculation, but may sometimes be of considerable use in practice." I agree with him; but the real price of labour and commodities, is no more to be ascertained by their price in goods, Adam Smith's real measure, than by their price in gold and silver, his nominal measure. The labourer is only paid a really high price for his labour, when his wages will purchase the produce of a great deal of labour. [28] In vol. i. p. 108, M. Say infers, that silver is now of the same value, as in the reign of Louis XIV. "because the same quantity of silver will buy the same quantity of corn." [29] "The first man who knew how to soften metals by fire, is not the creator of the value which that process adds to the melted metal. That value is the result of the physical action of fire added to the industry and capital of those who availed themselves of this knowledge." "From this error Smith has drawn this false result, that the value of all productions represents the recent or former labour of man, _or in other words, that riches are nothing else but accumulated labour; from which, by a second consequence, equally false, labour is the sole measure of riches, or of the value of productions_."[30] The inferences with which M. Say concludes are his own, and not Dr. Smith's; they are correct if no distinction be made between value and riches: but though Adam Smith, who defined riches to consist in the abundance of necessaries, conveniences, and enjoyments of human life, would have allowed that machines and natural agents might very greatly add to the riches of a country, he would not have allowed that they add any thing to value in exchange. [30] Chap. iv. p. 31. [31] M. Say, _Catechisme d'Economie Politique_, p. 99. [32] Adam Smith speaks of Holland, as affording an instance of the fall of profits from the accumulation of capital, and from every employment being consequently overcharged. "The Government there borrow at 2 per cent., and private people of good credit, at 3 per cent." But it should be remembered, that Holland was obliged to import almost all the corn which she consumed, and by imposing heavy taxes on the necessaries of the labourer, she further raised the wages of labour. These facts will sufficiently account for the low rate of profits and interest in Holland. [33] Is the following quite consistent with M. Say's principle? "The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall."--Vol. ii. p. 108. If capital to any extent can be employed by a country, how can it be said to be abundant compared with the extent of employment for it? [34] Adam Smith says, that "When the produce of any particular branch of industry exceeds what the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. _Without such exportation a part of the productive labour of the country must cease, and the value of its annual produce diminish._ The land and labour of great Britain produce generally more corn, woollens, and hardware, than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such exportation, that this surplus can acquire a value sufficient to compensate the labour and expense of producing it." One would be led to think by the above passage, that Adam Smith concluded we were under some necessity of producing a surplus of corn, woollen goods, and hardware, and that the capital which produced them could not be otherwise employed. It is, however, always a matter of choice in what way a capital shall be employed, and therefore there can never, for any length of time, be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment. No writer has more satisfactorily and ably shewn than Dr. Smith, the tendency of capital to move from employments in which the goods produced do not repay by their price the whole expenses, including the ordinary profits, of producing and bringing them to market.[35] [35] See Chap. 10. Book I. [36] "All kinds of public loans," observes M. Say, "are attended with the inconvenience of withdrawing capital, or portions of capital, from productive employments, to devote them to consumption; and when they take place in a country, _the Government of which does not inspire much confidence_, they have the further inconvenience of raising the interest of capital. Who would lend at 5 per cent. per annum to agriculture, to manufacturers, and to commerce, when a borrower may be found ready to pay an interest of 7 or 8 per cent.? That sort of income, which is called profit of stock, would rise then at the expense of the consumer. Consumption would be reduced by the rise in the price of produce; and the other productive services would be less in demand, less well paid. The whole nation, capitalists excepted, would be the sufferers from such a state of things." To the question: "who would lend money to farmers, manufacturers, and merchants, at 5 per cent. per annum, when another borrower having little credit, would give 7 or 8?" I reply, that every prudent and reasonable man would. Because the rate of interest is 7 or 8 per cent. there where the lender runs extraordinary risk, is this any reason that it should be equally high in those places where they are secured from such risks? M. Say allows, that the rate of interest depends on the rate of profits; but it does not therefore follow, that the rate of profits depends on the rate of interest. One is the cause, the other the effect, and it is impossible for any circumstances to make them change places. [37] In another place he says, that "whatever extension of the foreign market can be occasioned by the bounty, must, in every particular year, be altogether at the expense of the home market; as every bushel of corn which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and, secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchasers of corn, must in this particular commodity be paid by the whole body of the people. In this particular commodity, therefore, this second tax is by much the heaviest of the two." "For every five shillings, therefore, which they contribute to the payment of the first tax, they must contribute six pounds four shillings to the payment of the second." "The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home market, and thereby, in the long run, rather to diminish than to augment the whole market and consumption of corn." [38] The same opinion is held by M. Say. Vol. ii. p. 335. [39] See Chap. on Rent. [40] M. Say supposes the advantage of the manufacturers at home to be more than temporary. "A Government which absolutely prohibits the importation of certain foreign goods, establishes a monopoly _in favour of those_ who produce such commodities at home, _against those_ who consume them; in other words, those at home who produce them having the exclusive privilege of selling them, may elevate their price above the natural price; and the consumers at home, not being able to obtain them elsewhere, are obliged to purchase them at a higher price." Vol. i. p. 201. But how can they permanently support the market price of their goods above the natural price, when every one of their fellow citizens is free to enter into the trade? they are guaranteed against foreign, but not against home competition. The real evil arising to the country from such monopolies, if they can be called by that name, lies, not in raising the market price of such goods, but in raising their real and natural price. By increasing the cost of production, a portion of the labour of the country is less productively employed. [41] Are not the following passages contradictory to the one above quoted? "Besides, that home trade, though less noticed, (because it is in a variety of hands) is the most considerable, it is also the most profitable. The commodities exchanged in that trade are necessarily the productions of the same country." Vol. i. p. 84. "The English Government has not observed, that the most profitable sales are those which a country makes to itself, because they cannot take place, without two values being produced by the nation; the value which is sold, and the value with which the purchase is made." Vol. i. p. 221. I shall, in the 24th chapter, examine the soundness of this opinion. [42] See page 198. [43] M. Say is of the same opinion with Adam Smith: "The most productive employment of capital, for the country in general, after that on the land, is that of manufactures and of home trade; because it puts in activity an industry of which the profits are gained in the country, while those capitals which are employed in foreign commerce, make the industry and lands of all countries to be productive, without distinction. "The employment of capital, the least favourable to a nation, is that of carrying the produce of one foreign country to another." _Say_, vol. ii. p. 120. [44] "It is fortunate that the natural course of things draws capital, not to those employments where the greatest profits are made, but to those where their operation is most profitable to the community."--Vol. ii. p. 122. M. Say has not told us what those employments are, which, while they are the most profitable to the individual, are not the most profitable to the state. If countries with limited capitals, but with abundance of fertile land, do not early engage in foreign trade, the reason is, because it is less profitable to individuals, and therefore also less profitable to the state. [45] "The use of gold and silver then establishes in every place a certain necessity for these commodities; and when the country possesses the quantity necessary to satisfy this want, all that is further imported, not being in demand, is unfruitful in value, and of no use to its owners."--_Say_, vol. i. p. 187. In page 196, M. Say says, that supposing a country to require 1000 carriages, and to be possessed of 1500--all above 1000 would be useless; and thence he infers, that if it possesses more money than is _necessary_, the overplus will not be employed. [46] Whatever I say of gold coin, is equally applicable to silver coin; but it is not necessary to mention both on every occasion. [47] "In the transactions of Government with individuals, and in those of individuals between themselves, a piece of money is never received, whatever denomination may be given to it, but at its intrinsic value, increased by the value of the utility which the impression it bears has added to it."--_Say_, vol. i. p. 327. "Money is so little a mark of value, that if the pieces of money lose a part of their value by friction, from use, or by the knavery of the clippers of money, all goods rise in price in proportion to the alteration which they have experienced; and if Government orders a recoinage, and restores each piece to its legal weight and fineness, goods will fall to their former price; if they have not been exposed to variations from other causes."--_Say_, vol. i. p. 346. [48] M. Say recommends that the seignorage should vary according to the quantity of business that the mint might be called upon to perform. "Government should not coin the bullion of individuals except on payment, not only of the expenses, but also of the profits of coining. This profit might be carried to a considerable height, in consequence of the exclusive privilege of coining; but it must vary according to the circumstances of the mint, and the quantity required for circulation." Vol. i. p. 380. Such a regulation would be extremely pernicious, and would expose us to considerable and unnecessary variation in the bullion value of the currency. [49] If with the quantity of gold and silver which actually exists, these metals only served for the manufacture of utensils and ornaments, they would be abundant, and would be much cheaper than they are at present; in other words, in exchanging them for any other species of goods, we should be obliged to give proportionally a greater quantity of them. But as a large quantity of these metals is used for money, and as this portion is used for no other purpose, there remains less to be employed in furniture and jewellery; now this scarcity adds to their value.--_Say_, vol. i. p. 316. See also note to p. 78. [50] An Inquiry into the Nature and Origin of Public Wealth, page 13. [51] An Inquiry into the Nature and Progress of Rent, p. 15. [52] See page 124, where I have endeavoured to shew, that whatever facility or difficulty there may be in the production of corn; wages and profits together will be of the same value. When wages rise, it is always at the expense of profits, and when they fall, profits always rise. [53] Of what increased quantity does Mr. Malthus speak? Who is to produce it? Who can have any motive to produce it, before any demand exists for an additional quantity? [54] Inquiry, &c. "In all progressive countries, the average price of corn is never higher than what is necessary to continue the average increase of produce." Observations, p. 21. "In the employment of fresh capital upon the land, to provide for the wants of an increasing population, whether this fresh capital is employed in bringing more land under the plough, or improving land already in cultivation, the main question always depends upon the expected returns of this capital; and no part of the gross profits can be diminished, without diminishing the motive to this mode of employing it. Every diminution of price, not fully and immediately balanced by a proportioned fall in all the necessary expenses of a farm, every tax on the land, every tax on farming stock, every tax on the necessaries of farmers, will tell in the computation; and if, after all these outgoings are allowed for, the price of the produce will not leave a fair remuneration for the capital employed, according to the general rate of profits, and a rent at least equal to the rent of the land in its former state, no sufficient motive can exist to undertake the projected improvement." Observations, p. 22. [55] See p. 124. [56] See p. 70, &c. [57] It is not necessary to state on every occasion, but it must be always understood, that the same effect will be produced by employing different, but equal portions of capital on the land already in cultivation, with different results. Rent is the difference of produce obtained with equal capitals, and with equal labour on the same, or on different qualities of land. [58] Observations on the Corn Laws, p. 4. [59] Upon shewing this passage to Mr. Malthus, at the time when these papers were going to the press, he observed, "that in these two instances he had inadvertently used the term _real price_, instead of _cost of production_." It will be seen from what I have already said, that to me it appears, that in these two instances he has used the term _real price_ in its true and just acceptation, and that in the former case only it is incorrectly applied. [60] Page 40. [61] Manufactures, indeed, could not fall in any such proportion, because, under the circumstances supposed, there would be a new distribution of the precious metals among the different countries. Our cheap commodities would be exported in exchange for corn and gold, till the accumulation of gold should lower its value, and raise the money price of commodities. [62] The Grounds of an Opinion, &c. page 36. [63] Mr. Malthus, in another part of the same work, supposes commodities to vary 25 or 20 per cent. when corn varies 33-1/3. [64] In Chap. 24. I have observed, that the real resources of a country, and its ability to pay taxes, depend on its net, and not on its gross income. [65] This is on the supposition that money continued at the same value. In the last note, I have endeavoured to shew that money would not continue of the same value,--that it would fall, from increased importation; a fact which is much more favourable to my argument. [66] Mr. M'Culloch, in an able publication, has very strongly contended for the justice of making the dividends on the national debt conform to the reduced value of corn. He is in favour of a free trade in corn, but he thinks it should be accompanied by a reduction of interest to the national creditor. THE END. ERRATA. _Page_ 190, _line_ 8, _for_ obtained, _read_ attained. 521, _line_ 20, _for_ twenty-one shillings, _read_ forty-two shillings. 543, _last line_, _for_ give, _read_ spend. 555, _last line_, _for_ rent money, _read_ money rent. INDEX. A. _Accumulation_ of capital, effects of, on the relative value of commodities, 16-42. And on profits and interest, 398-416. _Agriculture_, effects of improvements in, on rents, 70-76. Is affected by the distress proceeding from sudden revulsions of trade, 368-372. Agricultural improvements, no cause of the increase of rent, 570, 571. B. _Banks_, establishment of, affects the sole power of the state in coining money, 502. Consequence of the Bank of England issuing too great a quantity of paper, 503-506. The assistance given by the Bank of England to commerce, accounted for, 513, 514.--See _Paper Currency_. _Bounties_, on the exportation of corn, lower its price to the foreign consumer, 417-427. Effects of a bounty in raising the price of corn, illustrated, 428. Though such bounty may cause a partial degradation in the value of money, yet such degradation cannot be permanent, 432-434. Bounties on the exportation of manufactures raise their _market_ but not their _natural_ price, 436-438. The sole effect of bounty is to divert a portion of capital to an employment which it would not naturally seek, 438. Evils of such a system, 439-445. A bounty on the production of corn, will produce no real effect on the annual produce of the land and labour of the country, though it would make corn relatively cheap, and manufactures relatively dear, 449-455. But the effect of a tax on corn, in order to afford a fund for a bounty on the production of commodities, would be to enhance the price of corn, and render commodities cheap, 456, 457. _Buchanan_ (Mr.), observations of, on Adam Smith's doctrine of productive and unproductive labour, 64-66, _note_. Remarks on his opinions respecting bounties on exportation, 440-442. C. _Capital_, nature of, effects of the accumulation of, on the relative value of commodities investigated, 16. Effects of, in a savage or infant state of society, 17, 18, 23, 24. And in a more advanced state of society, 19-21. The relative values of _circulating_ and _fixed_ capitals considered, 22, 23. The distinction between circulating and fixed capitals difficult to be strictly defined, 186, 187. Considerations on the different modes of employing it, 83-88. The increase of capital in quantity and value, productive of a rise in the natural price of wages, 94, 95. Increase of capital in quantity only, productive of a rise in the market price of wages, _ibid._ Effects of the accumulation of capital on profits and interest, 398-416. The sole effect of bounties on exportation, upon capital, is to divert a portion of it to an employment which it would not naturally seek, 438. Remarks on such effect, 439-445. The profits, made by the employment of capital, regulate the rate of interest for money, 512, 513. _Carrying trade_, observations on, 407. _Circulation_ of money can never overflow, and why, 500, 501. Circulation of Paper, see _Paper Currency_. _Colonial Trade_, observations on, 476, 477. Proofs, that trade with a colony may be so regulated as to be less beneficial to the colony, and more beneficial to the mother country, than a perfectly free trade, 477-486. Benefits of a colonial trade, 487-490. _Commodities_, gold and silver an insufficient medium for determining the varying value of, 7, 8. Corn, an inadequate standard of the value of, 9-12. The effects of an accumulation of capital on the relative value of commodities, considered, 16-42. Effects of a rise in wages on their value, 43, 44, and of the payment of rent, 45, 46. Their exchangeable value regulated by the greater quantity of labour bestowed on their production by those who labour under the most unfavourable circumstances, 59, 60. The prices of commodities not necessarily increased by a rise in the price of labour, 109, 110. The cost of production regulates the price of commodities, 542, 567, 568, 572, 573. _Corn_, a variable standard for determining the varying value of things, 7-12. Effects of the price of, on rent, 67-70. Corn-rents materially affected by tithes, 227. Advantage resulting from the relatively low price of corn, 373. Bounties on the exportation of it, lower its price to the foreign consumer, 417-427. Effects of a bounty in raising the price of corn, 428. A bounty on the production of, productive of no real effect on the annual produce of the land and labour of the country, 449-455. The price of corn enhanced by a tax on it, in order to afford a fund for a bounty on the production of commodities, 456, 457. Benefit of a high price of corn to landlords, 474, 475. Investigation of the comparative value of corn, gold, and labour, in rich and in poor countries, 527-537. The production of corn encouraged by alteration in its market price, 574, 575. A fall in the value of corn beneficial to the stockholder, 586. _Cultivation_, not discouraged by a tax on land and its produce, 238. _Currency_. See _Gold_ and _Silver_, _Paper Currency_. D. _Demand_ and supply, influence of, on prices, considered, 542. Opinion of M. Say on this subject, 544. And of the Earl of Lauderdale, 545-547. Observations thereon, 547, 548. E. _Economy_ in labour, reduces the relative value of commodities, 21. Illustration of this principle, 22-42. _Exchange_, no criterion of the increased value of money, 178. To be ascertained by estimating the value of the currency in the currency of another country, 181, and also by comparing it with some standard common to both countries, 181-184. Effects of paper currency on exchange, 310-314. _Exportation_ of corn, bounties on, lower its price to the foreign consumer, 417-427. Effects of, in raising the price of corn, illustrated, 428. Bounties on the exportation of manufactures raise the market, but not the natural, price of these, 436-438. F. _Farmers_ pay more poor-rate than the manufacturers, 359-362. _Foreign Trade_, effects of an extension of, 146, 147. Proofs that the profits of the favoured trade will speedily subside to the general level, 148-154. _Funded Property_, the price of, no steady criterion by which to judge of the rate of interest, 413-415. G. _Gold_, and Silver, an insufficient medium for determining the _variable_ value of commodities, 7, 8. But, upon the whole, the least inconvenient standard for money, 80, 81. On whom a tax upon gold would ultimately fall, 249, 250. The value of gold ultimately regulated by the comparative facility or difficulty of producing it, 251. Effects of a tax upon gold, 252-261. Evils of prohibiting a free trade in the precious metals, when the prices of commodities are raised, 309. The value of gold and silver proportioned to the quantity of labour necessary to produce them and bring them to market, 499. Remarks on the employment of these metals in currency, 516. Their relative values at different periods, accounted for, 516-526. Investigation of the comparative value of gold, corn, and labour, in rich and in poor countries, 527-537. _Gross Revenue_, advantages of, over-rated by Adam Smith, 491. And by M. Say, 492, _note_. Examination of this doctrine, 492-498. A diminution of gross income, no diminution of net income, 579-583. H. _Holland_, low rate of interest in, accounted for, 400, note. _Houses_, rents of, distinguished into two parts, 263. Difference between rent of houses and that of land, 264. Taxes on houses by whom ultimately borne, 266. I. _Importation_ of corn, effects of a prohibition of, considered, 437, 438. _Interest_, low rate of, in Holland, accounted for, 400, _note_. Effects of accumulation on profits and interest, 398-410. Observations on the rates of interest, 412-416. The interest for money is regulated by the rate of profits which can be made by the employment of capital, 512, 513. L. _Labour_, the quantity of, requisite to obtain commodities, the _principal_ source of their exchangeable value, 4, 5. Effects of machinery on, considered, 9-11. Economy in labour reduces the relative value of a commodity, 21, 22. Illustrations of this principle, 22-42. Adam Smith's theory of productive and unproductive labour, considered, 64-66, _notes_. Natural price of, explained, 90, 91. Market price of, what, 92. Its influence on the happiness of the labourer, 92, 93. Investigation of the comparative value of labour, gold, and corn, in rich and in poor countries, 527-537. _Land_, the division of the whole produce of, between landlords, capitalists, and labourers, is the criterion of rent, profits, and wages, 44-48. Its different productive qualities, a cause of rent, 54-58. Effects of increasing its productive powers by agricultural improvements, 70-76. _Landlords_, tithes injurious to, 229, 230. Benefit of a high price of corn to them, 474, 475. _Land-Tax_, virtually a tax on rent, 232. Effects of an equal land-tax, imposed indiscriminately on all land cultivated, 234, 235. Error of Dr. Adam Smith, on the inequality of land and all other taxes, accounted for, 236-238. Tax on land and its produce, no bar to cultivation, 238, 239. Operation of the land-tax of Great Britain, considered, 239, 240. Mistake of M. Say, corrected, 241, 242-246. _Lauderdale_ (Earl of), opinion of, on the influence of demand and supply on prices, 545-547. Remarks thereon, 547, 548. _Luxuries_, observations on the taxing of, 314. Advantages and disadvantages of taxing them, considered, 327-329. M. _Machinery_, effects of, in fixing the relative values of commodities, 34-41. _Malthus_ (Mr.), examination of the opinions of, on rent, 549-566. The real cost of production regulates the price of commodities, 567, 568, 572, 573. Increase of population no cause of the rise of rent, 569; nor agricultural improvements, 570, 571. His supposition, that net income is diminished, in proportion to a diminution of gross income, disproved, 579-583. Loss of rent, the effect of a low price of corn, 587, 588. _Manufactures_, improvement of, in any country, tends to alter the distribution of the precious metals among the nations of the world, 157-170. Manufacturers pay less poor rate than farmers, 359-362. The market price of manufactures, but not their natural price, raised by bounties on their exportation, 436-438. _Mines_, distinguished by their fertility or barrenness, 77-79. Effect of discovering the rich mines of America on the price of the precious metals, 80. Observations on the rent of mines, 462-467. _Money_, effects of the rise of, in value, on the price of commodities, 43, 44. The rate of profit not affected by variations in the value of money, 46-48. Different value of money in different countries, accounted for, 170-173. The value of money, _generally_, diminished by improvements in the facility of working the mines of the precious metals, 178. The demand for, regulated by its value, and its value by its quantity, 250, 251. Low value of, in Spain, prejudicial to the commerce and manufactures of that country, 307. Observations on the rates of interest for money, 412-416, 512, 513. The value of, though partially degraded by a bounty on corn, yet not permanently degraded, 432-434. The quantity of, employed in a country, dependant upon its value, 500. Effects of the state charging a seignorage on coining money, 501, 524, 525. _Monopoly-price_, observations on, 340-345. N. _National Debt_, observations on, 340. _Net Revenue_, advantages of, unduly estimated by Adam Smith, 491, and by M. Say, 492, _note_. Examination of their doctrines, 492-498. Is not diminished by a proportionate diminution of gross revenue, 579-583. P. _Paper Currency_, circulation of, explained, 501. Paper-money not necessarily payable in specie, to secure its value, 502. But the quantity issued must be regulated according to the value of the standard metal, _ibid._ 503. The Bank of England, why liable to be drained of specie for its paper currency, 504-506. Compelling the issuers of paper money to pay their notes either in gold coin or bullion, is the only control upon their abusing their power of issuing such money, 507. Provided there were perfect security against such abuse, it is immaterial by whom paper money is issued, 509. Illustration of this point, 510-516. _Poor-Laws_, pernicious tendency of, as they now exist, 111, 112, 115. Remedies for, 113, 114. _Poor-Rates_, nature of, 355. How levied, 356-358. More falls on the farmer than on the manufacturer, in proportion to their respective profits, 359-362. _Population_, increase of, no cause of the rise of rent, 569. _Price_ (real), of things, distinguished, 4. Natural and market prices distinguished, and how governed, 82-89. The prices of commodities not necessarily raised by a rise in the price of labour, 109, 110. Rise of price on raw produce, the only means by which the cultivator can pay the tax imposed thereon, 195. The market, but not the natural price of manufactures, raised by bounties on their exportation, 436-438. The influence of demand and supply on prices, considered, 542-548, 567, 568, 572, 573. Alteration in the market price of corn encourages its production, 574, 575. _Produce_ of land, and labour of the country, must be divided between capitalists, landlords, and labourers, to afford a criterion of rent, profits, and wages, 44-48. Effect of taxes on raw produce, 194. Tax on raw produce raises the price of wages, 199. Objections against taxing the produce of land, considered, 201-224. Remarks on the inconveniences supposed to result from the payment of taxes by the producer, 538-541. _Production_, difficulty of, benefits the landlord, 76. The cost of production, the regulator of the price of commodities, 542, 567, 568, 572, 573. _Profits_ of stock difficult to ascertain, 410. The quantity of labour necessary to obtain the produce of land, is the criterion by which to estimate the rate of profit, wages, and rent, 44-48. A rise in the price of corn, productive of a diminution in the money value of the farmer's profits, 117-122. A rise in the price of raw produce, if accompanied by a rise of wages, lowers the agricultural and manufacturing profits, 125-130. Proofs, that profits depend on the quantity of labour requisite to provide necessaries for labourers, on that land, or with that capital which yields no rent, 131-144. Effects of an extension of foreign trade on profits, 146, 147. Proofs, that the profits of the favoured trade will speedily subside to the general level, 148-154. And so with respect to home trade, 155-157. Further proofs that profits depend on real wages, 173-175. Tax on necessaries virtually a tax on profits, 269, 270. Effects of a taxation of profits, considered, 270-284. The profits of stock diminished by a tax on wages, 285. Effects of accumulation on profits and interest, 398-416. _Prohibition_ of importation of corn, effects of, considered, 437, 438. _Provisions_, causes of the high prices of, 203. First, a deficient supply, _ibid._--204. Secondly, a gradually increasing demand, ultimately attended with an increased cost of production, 205. Thirdly, a fall in the value of money, 209. Fourthly, a tax on necessaries, 210. R. _Rent_, nature of, 49, 50, 52, 362, _note_. Adam Smith's doctrine of rents, considered, 50, 51. The different productive qualities of land and increase of population, the cause of rents, 54-58. Rise of, the _effect_ of the increasing wealth of a country, 65, 66. Influence of the prices of corn on rent, 67-69. Effects of agricultural improvements on rent, 70-76. Observations on the rent of mines, 77-81. Tax on rent falls wholly on the landlords, 220-224. Corn-rents materially affected by tithes, 227. Examination of Dr. Adam Smith's doctrine concerning the rent of land, 458-475. And of Mr. Malthus's opinions on rent, 549-566. Increase of population is no cause of the rise of rent, 569. Neither are agricultural improvements, 570, 571. Loss of rent, the effect of low price of corn, 587, 588. _Riches_, defined, 377. Difference between value and riches, 377-386. Means of increasing the riches of a country, 386-388. Erroneous views of M. Say on this subject considered, 388-397. S. _Say_ (M.), erroneous views of, concerning the principles of the land-tax in Great Britain, corrected, 241-244. Examination of some of his principles of taxation, 319-324, 330, 331, _notes_. Remarks on his mistaken view of value and riches, 388-397. Examination of his doctrine concerning bounties on exportation, 443-448. And on gross and net revenue, 492-498. Danger resulting from his recommendation respecting the charging of seignorage for coining money, 525, 526, _notes_. Observations on his statement of the inconveniences resulting from payment of taxes by the producer, 538-540. His opinion on the influence of demand and supply on prices, considered, 544, 545. _Scarcity_, a source of exchangeable value, 2. _Seignorage_, effects of, on the value of money, 501, 524, 525. _Simonde_ (M.), remarks on the opinion of, concerning the inconveniences resulting from the payment of taxes by the producer, 540, 541. _Silver._ See _Gold_ and _Silver_. _Sinking fund_, in England, merely nominal, 340. How conducted, 510. _Smith_ (Dr. Adam), on the meaning of the term value, 1. His doctrine that corn is a proper medium for fixing the varying value of other things, examined, 7-9. Strictures on his doctrine relative to labour being the _sole_ ultimate standard of the exchangeable value of commodities, 10, 11, 575, 576. And on his definitions of rent, 49, 50. His theory of productive and unproductive labour considered, 64-66, _notes_. Correction of his erroneous view of the inequality of taxes on land, and all other taxes, 236-238. His opinion on the taxes upon the wages of labour, 286. Examination thereof by Mr. Buchanan, 287-292. Observations thereon by the author of this work, 293-306. Correction of his mistaken view of taxes upon luxuries, 314-319. Remarks on his doctrine concerning bounties on exportation, 420, 422-439. Examination of his doctrine concerning the rent of land, 458-475. And on gross and net revenue, 492-498. Strictures on his principles of paper-currency, 503-508. His statement respecting the advantages of the Scottish mode of affording accommodation to trade, disproved, 515, 516-523. Remarks on his doctrine relative to the comparative value of gold, corn, and labour, in rich and in poor countries, 529-537. _Spain_, commerce and manufactures of, injured by the low value of money there, 307. _Stamp-duty_, weight of, a bar to the transfer of landed property, 267, 268. T. _Taxes_, nature of, explained, 186. Impolicy of taxes on capital, 190. Taxes upon the transfer of property, 191. On whom the several kinds of taxes principally fall, 192. Objections to taxes on the transference of property, 192, 193. Effect of taxes on raw produce, 194. A rise of price in raw produce the only means by which the cultivator can pay the tax, 195. Such tax in fact paid by the consumer, 196-198. Tax on raw produce and on the necessaries of the labourer, raises the price of wages, 199. Objections against the taxation of the produce of land, considered and refuted, 201-224. Tithes, an equal tax, 225. Difference between them and a tax on raw produce, 226. Objections to them, 227-231. Tax on land, virtually a tax on rent, 232. They ought to be clear and certain, 233, 234. Effects of taxes on gold, considered, 247-261. Ground rents, not a fair subject of taxation, 267. Taxes on houses by whom ultimately borne, 266. Taxes on necessaries, virtually a tax on profits, 269, 270. Effects of taxation of profits considered, 270-284. Taxes upon luxuries, 314. Advantages and disadvantages of, 327-329. Supposed absurdities in taxation, explained and obviated, 315-317. Proper objects of taxation, 326. Observations on the taxation of other commodities than raw produce, 330. Effect of taxes to defray the interest of loans, 332-334. Remarks on the tax upon malt, and every other tax on raw produce, 346-353. Nature and operation of the poor-rate, 355-362. Examination of the inconveniences supposed to be sustained by the payment of taxes by the producer, 538-541. _Tithes_, nature of, 225. Are an equal tax, _ibid._ Difference between tithes and a tax on raw produce, 226. Tithes materially affect corn-rents, 227. They act as a bounty on importation, and therefore are injurious to landlords, 229, 230. Do not discourage cultivation, 237, 238. _Trade_, general causes of sudden changes in the channels of, 363-365. More particularly the commencement of war after a long peace, or vice versa, 365-368. The effects of such revulsions on agriculture, considered, 369-376. Observations on the carrying trade, 407. See _Foreign Trade_. U. _Utility_, essential to exchangeable value, 2. V. _Value_, definition of, 1. The distinctive properties of value and riches considered, 377-397. See _Labour_. Utility essential to exchangeable value, 2. Scarcity, one source of such value, _ibid._ The quantity of labour required to obtain commodities, the principal source of their exchangeable value, 3-15. The effects of accumulation of capital on relative value, 16-42. Effects of a rise in wages, on relative value, 43, 44. Effects of payment of rent, on value, 45, 46. Variations in the value of money make no difference in the _rate_ of profits, 46, 47. The value of gold and silver is in proportion to the labour necessary to produce and bring them to market, 499, 500. Investigation of the comparative value of gold, corn, and labour, in rich and in poor countries, 527-537. W. _Wages_, effects of a rise in, on relative value, 27-33, 43, 44, 48. Natural and market prices of labour, 90-93. Increase of capital in quantity and value, increases the natural price of wages, 94, 95. Increase of capital, but not in value, augments the market price of wages, _ibid._ Proofs that the increasing difficulty of providing an additional quantity of food with the same proportional quantity of labour, will raise wages, 97-104. A rise in wages not necessarily productive of comfort to the labourer, 105-108. A rise of wages not _necessarily_ productive of a rise in the prices of commodities, 109, 110, 286-289. Wages will be raised by a tax on necessaries, 269-270. And by a tax on wages, 285. Effects of a tax upon wages, considered, 297-306. _Wealth_, causes of the increase of, 66. J. M^{c}Creery, Printer, Black-Horse-court, London. _Albemarle-street, London, May, 1817._ NEW PUBLICATIONS. SPEECH of the Rt. Hon. GEORGE CANNING, 25th Feb. on the Motion for a Reduction of the Lords of the Admiralty, 8vo. 2_s._ The APOSTATE; a Tragedy, in Five Acts: now performing at the Theatre in Covent Garden. By RICHARD SHEIL, Esq. 8vo. 3_s._ LETTER to WILLIAM SMITH, ESQ. M. P. for Norwich, from ROBERT SOUTHEY, ESQ. 8vo. 2_s._ A SERMON, preached at St. Mary's, Oxford, on Thursday, March 6, 1817, before the Honourable Sir James Allan Park, one of the Justices of his Majesty's Court of Common Pleas, and the Honourable Sir James Burrough, one of the Justices of His Majesty's Court of King's Bench, and before the University, at the Lent Assizes, by JOHN DAVISON, M. A. Fellow of Oriel College, Oxford, 4to. 1_s._ 6_d._ PHROSYNE, a Grecian Tale. ALASHTAR, an Arabian Tale, by H. GALLY KNIGHT, ESQ. 8vo. 5_s._ 6_d._ MODERN GREECE: a Poem, 8vo. 5_s._ 6_d._ MANUSCRIT, VENU DE ST. HELENE, d'une Manière inconnue; 8vo. 7_s._ 6_d._ This Work, which is equally distinguished by its spirit and its ingenuity, was given to the Publisher with an assurance of its being brought from St. Helena, though an air of mystery was affectedly thrown round the mode of its conveyance. Whether it be really written by Buonaparte, or by some confidential friend, is a matter that must be left entirely to conjecture. It bears some resemblance to his style, more to his manner, and is altogether just what the ostensible Author, or an able apologist under his name, might be expected to say of his opinions, motives, and actions. A TRANSLATION of the Above, 8vo. 7_s._ 6_d._ On the PRINCIPLES of POLITICAL ECONOMY and TAXATION. By DAVID RICARDO, Esq. 8vo. 14_s._ PRIVATE MEMOIRS, which, with the Work of M. HUE, and the Journal of Clery, complete the History of the Captivity of the Royal Family of France in the Temple. Written originally with a Pencil and preserved by stealth, by MADAME ROYALE, now DUCHESS of ANGOULEME. Translated from the French, with Notes by the Translator. Neatly printed in a small Volume, 5_s._ 6_d._ NARRATIVE of the Loss of the AMERICAN BRIG COMMERCE, wrecked on the Western Coast of Africa, in 1815; with an account of the Sufferings of her surviving Officers and Crew, who were enslaved by the Wandering Arabs on the Great African Desert; and Observations, made during the Travels of the Author, while a Slave to the Arabs. By JAMES RILEY, late Master and Supercargo. Concluded by a Description of the City of Tombuctoo, on the River Niger, and of another large City, far south of it, on the same River, called Wassannah. Printed uniformly with PARK'S, and ADAMS's Travels in Africa, 4to. with a Map. ARMATA: a FRAGMENT, THIRD EDITION. 8vo. 8_s._ 6_d._ MANUEL: a Tragedy. By the Author of BERTRAM; 8vo. 4_s._ 6_d._ ALGEBRA of the HINDUS, with Arithmetic and Mensuration; translated from the Sanscrit. By H. T. COLEBROOKE, Esq. 4to. 3_l._ 3_s._ "AN HEIR in HIS OLD AGE," A CHINESE COMEDY; being the second Drama ever translated from the original Chinese into any language. By J. F. DAVIS, Esq. of Canton: with a brief View of the Chinese Drama, and of their Theatrical Exhibitions, by the Editor, small 8vo. 5_s._ 6_d._ THE COMFORTS of OLD AGE. With Biographical Illustrations. By Sir THOMAS BERNARD, Bart. Second Edition, small 8vo. 7_s._ CURIOSITIES of LITERATURE. SIXTH Edition, (with an additional Volume) 3 vols. 8vo. 36_s._ The THIRD Volume, 12_s._ TALES OF MY LANDLORD. THIRD Edition. In four Volumes, 12mo. 28_s._ NARRATIVE of a RESIDENCE in BELGIUM during the Campaign of 1815, and of a Visit to the FIELD of WATERLOO. By an ENGLISHWOMAN, 8vo. 10_s._ 6_d._ STORIES selected from the HISTORY of ENGLAND. For Children. Second Edition. 3_s._ 6_d._ Bound. TRAVELS ABOVE THE CATARACTS OF EGYPT, NUBIA, &c. By THOMAS LEGH, Esq. M. P. with a Map, 4to. 21_s._ The LIFE of RAFFAELLO of URBINO. By the Author of the Life of Michael Angelo, 8vo. 8_s._ 6_d._ AN ACCOUNT of the singular Habits and Circumstances of the PEOPLE of the TONGA ISLANDS, in the South Pacific Ocean. By Mr. WILLIAM MARINER, of the PORT AU PRINCE, private Ship of War; the greater part of whose crew was massacred by the natives of Lefooga. 2 vols. 8vo, with a Portrait, 24_s._ LORD BYRON'S POEMS, printed uniformly, and sold separately, in Octavo.--1. CHILDE HAROLD, Cantos I. and II, 12s.--2. CHILDE HAROLD, Canto III, 5s. 6d.--3. The GIAOUR, 5s. 6d.--4. The BRIDE of ABYDOS, 5s. 6d.--5. The CORSAIR, 5s. 6d.--6. LARA, 5s. 6d.--7. SIEGE of CORINTH and PARISINA, 5s. 6d.--8. PRISONER of CHILLON, 5s. 6d.--9. ODE to NAPOLEON BONAPARTE, 1s. 6d.--10. HEBREW MELODIES, 5s. 6d.--11. POEMS, containing FARE THEE WELL, &c. 2s.--12. _Monody_ on SHERIDAN, 1s.--Forming, together Three Octavo Volumes. TWELVE PLATES, illustrative of the Poems of LORD BYRON, engraved by C. Heath, and other Artists, from the original Designs of Stothard. Printed in 8vo. to suit the above Edition, 1l. 10s. JOURNAL of a TOUR in GERMANY, SWEDEN, RUSSIA, POLAND, &c. during the Years 1813 and 1814. By J. T. JAMES, Esq. Student of Christ Church, Oxford. SECOND EDITION, 2 vol. 8vo. with Twelve Plates, 30_s._ OUTLINES of GEOLOGY. Being the Substance of a Course of Lectures delivered in the Royal Institution of Great Britain, by W. T. BRANDE, Sec. R. S. F. R. S. E. Prof. Chem. R. I. 8vo. 7_s._ 6_d._ THE UNEDITED ANTIQUITIES of ATTICA, comprising the ARCHITECTURAL REMAINS of ELEUSIS, RHAMNUS, SUNIUM, and THORICUS. By the Dilettanti Society. Printed uniformly with STUART'S ATHENS, with 84 Plates, in folio. 10_l._ 10_s._ A COURSE OF MILITARY INSTRUCTION, by C. W. PASLEY, Lieut. Colonel in the Corps of Royal Engineers, and F. R. S. Comprising PRACTICAL GEOMETRY, the PRINCIPLES OF PLAN DRAWING, and ELEMENTARY FORTIFICATION, in three vols. 8vo. containing 1190 Engravings, 3_l._ in boards. Vols. II. and III. containing ELEMENTARY FORTIFICATION, may be had separately, 2_l._ 5_s._ TRAVELS in the INTERIOR of AFRICA, by ROBERT ADAMS, who was detained three years in Slavery by the Arabs of the Great Desert, and resided several Months at TOMBUCTOO. With a Map. Printed uniformly with Park's Travels, in 4to. 25_s._ STATEMENTS RESPECTING THE EAST INDIA COLLEGE. By the Rev. T. R. MALTHUS, 8vo. 3_s._ 6_d._ On the OPERATION of the SALT DUTIES, and a Proposal for their Repeal. By Sir THOMAS BERNARD, Bart. 8vo. 3_s._ HISTORY of the UNIVERSITY of EDINBURGH, compiled from Original Papers and Records. By ALEXANDER BOWER, 2 vol. 8vo. 24_s._ London: Printed by W. Bulmer and Co. Cleveland-row, St. James's. 
8214	----	Copyright (C) 2007 by Lidija Rangelovska. Please see the corresponding RTF file for this eBook. RTF is Rich Text Format, and is readable in nearly any modern word processing program. 
8436	----	SPECULATIONS FROM POLITICAL ECONOMY By C. B. Clarke, F.R.S. INTRODUCTION The following nine articles are "Speculations," by no means altogether recommendations. They are _from_ Political Economy, i.e. they have nearly all of them been suggested by considering mere propositions of Political Economy. Some of them are old, or given me by friends: some are, I believe, new: these many persons will set aside as unpractical or impracticable, as that is the approved word by which people indicate that an idea is new to them. The topics of the nine articles have been largely taken from those now under political discussion, but they can hardly be called ephemeral; and, though they do not form a treatise, they will hardly be called disconnected. As they are speculations, no trouble has been taken to work out suggestions in detail, or give the "shillings and pence" correctly. CONTENTS 1. EFFICIENCY OF LABOUR 2. RECIPROCITY AND RETALIATION 3. UNIVERSAL FREE TRADE 4. THE RANSOM OF THE LAND 5. MAKING THE MOST OF OUR LAND 6. FREE TRADE IN RAILWAYS 7. REFORM IN LAND LAW 8. EQUALISING OF TAXATION 9. WEALTH OF THE NATION SPECULATIONS _FROM POLITICAL ECONOMY_ 1. EFFICIENCY OF LABOUR. Political economists have not overlooked efficiency of labour: they have underestimated its importance in the opinion of Edward Wilson, who has supplied me with the examples and arguments that follow and who has verbally given me leave to publish as much as I like. The English workman, especially in a country town of moderate size, regards capital as unlimited, employment ("work") as limited. A wall six feet high is to be built along the length of a certain garden: if one bricklayer is employed, the fewer bricks he lays daily the more days' employment he will get; if several bricklayers are employed, the fewer bricks one lays daily the more employment is left for the others. It thus appears that the more inefficient the labourer is, the better for himself, his fellow-handicraftsmen, and for "labour" in general: the more money is drawn from the capitalist. There is a grain of truth in this view with respect to petty unavoidable repairs in a narrow locality: but the capital spent on such is as a drop in the ocean compared with that embarked in a single large work. Consider the case of the London Building Trade, as practised in the suburbs on all sides of London. The London bricklayers thoroughly believe that it is their interest to be inefficient: it is said that they have a rule that no bricklayer shall ever lay a brick with the right hand; they have also a rule against "chasing," i.e. that no bricklayer, whatever his skill, shall lay more than a certain number of bricks a day; they believe that if the bricklayer laid a larger number of bricks he would get no more pay for a harder day's work, while the "work" would afford employment to a smaller number of labourers. Look however a little further. The speculative builders round London compete against each other, so that they carry on their trade on ordinary trade profits. Such a builder is building streets, house after house, each house costing him £800, and selling for £1000 say; and this, after paying his interest at the bank, etc., pays him about 10 to 15 per cent on his own capital embarked. Suppose now that the bricklayers increase their inefficiency either by a trade rule or by a combination to shorten the hours of labour. The cost of each house is increased £50 to him: nothing in the new bricklaying rules or rates affects the purchasers; the builder estimates that his profits will fall to 5 to 8 per cent on his capital. He does not care to pursue so risky a business at this rate of profit; he determines to contract operations. When he goes to his bank, a branch of one of the gigantic London joint-stock banks, at the end of the quarter, the manager of the branch comes forward as usual ready to continue the bank advances; but the builder says simply, "The building trade is not so good as it was," and declines. The increased cost of bricklaying has affected all other speculative builders in much the same way; the consequence is that "gold" accumulates in the branch banks. The secretaries and managers of the great joint-stock banks do not let their capital idly accumulate; they buy New Zealand 6 per cents, or transfer to Frankfort or New York the capital that, but for the rise in cost of bricklaying, would have gone to the London bricklayers. In this case it is easy to see that the quantity of work to be done is not limited. Should the cost of building diminish but a little, the rate of profit of the builders on their _own_ capital (in many cases not one-tenth of the capital they employ) will run up to 20 or 30 per cent, or even more; and at even a 20 per cent profit the bricklayers would find that a perfect rage for building would set in. Every speculative builder in the trade would strain his credit to the utmost, and take up every £100 from his bank that he could induce the bank manager to let him have. A second illustration. Forty years ago, on our farm in the south of England, two men with flails used to begin threshing wheat in the long barn about 1st November, and used to thresh till 1st April. They got eight shillings a week with us, but in adjoining counties seven shillings (and even six) were winter wages. Now the steam threshing-machine will empty that long barn in two short days' work. It takes half a dozen men to do the work, and they get about fifteen shillings a week, though their labour is much shorter and easier than that of the old flail men. At the same time our farmers now are much poorer men than they were forty years ago: they have less capital, they have made for many years past a low rate of profit, and they are frequently themselves complaining that they cannot afford to pay their labourers well, and inferring that they should get Protection back again in some shape or other. The labourers on their part imagine very generally that their increased wages for less work are due to Mr. Arch and agitation; that the employers of labour will never pay more than is wrested from them (this is in large measure true); and that employers must pay whatever agitators are strong enough to demand (this is wholly erroneous). In this case it is evident on the surface that the labourers who thresh with the steam-thresher are more efficient than the flail-men: their labour is worth the half-a-crown a day to the employer, and therefore the employer, however poor, can afford to pay it as he receives it back with a profit. On the other hand, if the flail-men were raised from the dead, no farmer would now pay them even eight shillings a week for threshing; their labour would not be worth even that. One illustration more. Thirty years ago there were few more wretched trades than the shoemakers of Northampton. Wages were low, the labour was severe, the social condition of the workmen was necessarily low also. The sewing-machine, with some special adaptations to make it sew leather, increased about sixfold the bootmaking power of a workman. It is needless to say that the Northampton shoemakers met the introduction of this machine with the fiercest opposition: they said five-sixths of their number must be thrown out of employment. The struggle was won by the machine (as in other cases); shoemakers' wages have ruled 50 to 100 per cent higher ever since, at the same time that the shoemaking population has largely increased; and the social comforts and character of the workpeople have improved vastly too. This is an example that has always puzzled the workmen themselves; but it requires no explanation after what has been said about the efficiency of labour. The puzzle to the shoemakers is what becomes of the additional boots and shoes made. They do not reflect that, even of a necessary of life, only a certain quantity is used at a certain price. Nothing is more necessary in London, especially in winter, than coal; but, when coal some years ago went up to 40s. a ton in London, it was marvellous how people in all ranks managed to reduce their consumption of coal. Much more in the case of boots, which will bear the cost of export to remote countries, did the demand increase as the price fell. A fall of 10 per cent only in the price of boots would cause every wholesale boot exporter to export on the largest scale. No doubt the invention of a self-acting machine which should turn out 1000 pairs of boots an hour at a nominal cost of workmanship per pair would reduce the shoemakers of Northampton to idleness and starvation. But in practice it has rarely happened that any machine has been introduced in any trade that has thus completely choked the increased demand. It has happened often that the workmen who could only work the old way, and were not able to take up the new machine, have been reduced to starvation. Even then, after this generation has passed away, the new machine-workers have been better off than their predecessors. Employers of labour cannot pay as wages more than the labour is worth: no organisation or rules will make them. But employers may pay a good deal less than the labour is worth, and often have done so. However great their profits, there is, according to J. S. Mill, always a tacit understanding among all employers of labour to pay the minimum the labourers can be induced to accept. It is only by combination that the labourers can get the full value of their efficiency. Here Mr. Arch comes in: I have little doubt that the flail-threshers might, under a well-managed large trade combination, have got nine shillings a week instead of eight shillings forty years ago. But every rise in wages gained by the workmen, unless springing from or in conjunction with an increase in efficiency, will tell against themselves; it must increase the price of the article, whether houses, wheat, or boots; this must diminish the demand for the article, and this must throw some of the workmen out of employ. It is difficult to find an example of price of wages which presents any difficulty of explanation when we apply to it the consideration of efficiency. If bricklayers were to offer to exert themselves to the utmost, and do in eight hours the same amount and quality of work they now do in nine, the speculative builders would doubtless be willing to give the same wages for eight hours' work that they now give for nine. In case the labourers by increase in their efficiency are able to get higher wages, the choice will (in general) lie with them how much of the increase they take in increased money wages, how much they take in shortened hours of labour. We thus see how, in an uncivilised community, owing to the inefficiency of their labour, their whole time and energies are expended on their hunting, or otherwise providing bare subsistence. The greater skill of our civilised labourers, working with machines provided by our science, and profiting by our fixed capital (as our railway tunnels and embankments), is vastly more efficient: it ensures the labourers a certainty and regularity of food which the savage does not enjoy, and provides him a certain margin of leisure beyond what the inefficient savage labourer can count upon; it also provides the whole surplus production out of which the intellectual and leisure classes are supported. It is to be noted that an increase of efficiency in any industry (and very largely in the case of industries producing generally essential utilities) raises real wages in all other industries, and this, whether the particular trade gains (as we have seen it nearly always do) or loses, as is conceivable, though rarely occurring. Thus, if the introduction of a boot-sewing machine lowers the price of boots 50 per cent, this can have no effect in lowering the money wages of farm labourers; and, as a matter of fact, the fall in cost of boots has sensibly improved the position of farm labourers. In the same way the superior efficiency of carriers by railway over the old road carriers has diminished the cost of coal and all articles (the bulky ones most sensibly) in all parts of England. There thus arises the instructive result that handicrafts in which there has been no improvement in the last forty years have obtained a rise of real wages (amounting in some cases to 50 per cent) by the improvements in efficiency in all the trades around them. To sum up: No man in ordinary business will give a price for anything that he intends to sell again unless he expects to profit by selling it again. No capitalist will pay a workman to make a table unless he expects to sell the table for a sum somewhat exceeding the cost of the wood and the workman's labour. It follows directly that the one grand object of the workman, both as an individual, a trade, and a class, should be to improve the efficiency of his labour. He may gain something by combination and higgling for the turn of the market, but the limit to what he can get is the value of his labour to his employer. In order to attain this improved efficiency the most important practical aid is piecework. This has done much even in agriculture: the turnip-hoer by the acre earns more, while he does his work at his own time with more comfort to himself than the old day-labourer. What is more important, the men who by head and hand are superior at turnip-hoeing are able to do the work cheaper than ordinary labourers, and turnip-hoeing thus falls entirely to the most efficient hoers, whose efficiency thus again gets constantly improved. There is no doubt to me that, if the London bricklayers would arrange to work by contract, they would soon obtain more wages without being compelled (as they imagine would be the case) to work more severely or longer hours to gain those wages. If they were more efficient, nothing could prevent the competition of employers soon giving extra wages for extra value of work. But it may, finally, be urged that there is surely such a thing as over-production. If there is an over-production of boots, trade is flat, the wholesale dealers find they are making no profit, they stop their purchases, the workmen are thrown out of employ on a large scale. To this the reply is that there is almost a necessary alternation of up and down in every particular trade, whether the efficiency of the workmen is high or low. If trade is good, the large dealers will extend their purchases, and very commonly rather over-extend their purchases: a reaction follows, and _vice versa_ when trade is bad. But it must be recollected over-production in all trades at once is impossible: capital is now not buried in pots by our great joint-stock banks; if one trade is at standstill the capital is carried to the most remunerative use that the experienced bank secretaries can discover. If agriculture is, as we have lately seen it, in a depressed state for years, inasmuch as wheat is "over-produced" in America till the price in England falls to 36s. per quarter (and less), at which it hardly pays to produce it in England; this of itself implies an enormous spur to all other industries--the real cost of labour has in them fallen (for the labourer will not be able to keep to himself the whole benefit of cheapened food)--the rate of profit in all other industries has risen (_pro tanto_). If we ever do arrive at a state when all the desires are fully satisfied--when there is over-production in all industries--we shall have general reduction in the hours of labour: "efficiency" will take that form. 2. RECIPROCITY AND RETALIATION. The wealth of England is the sum of the wealth of each individual in England. An individual may have £10,000 in England, £5000 invested in Australia. We may reckon his wealth in England either as including or excluding the £5000, which he could transfer (probably very speedily) to England in gold if he desired it tangibly. Whichever way we reckon his wealth and that of other individuals, we shall in like manner in the sum get the wealth of England: it will be in one case the wealth in England-in the other case the wealth in England plus the lien which residents in England have on other countries in the world. In parallel manner the effective capital of England, which can be brought into the wages fund, must be the sum of the capital of all the individuals. These two self-evident truths are capable of many applications: we see directly from them that the National Debt, so far as it is held by residents in England, neither diminishes the national wealth nor affects the wages fund. We see also directly that any exchange between an Englishman and a foreigner which gives a profit to the Englishman gives an equal profit to the English nation. When a merchant buys 1000 quarters of wheat from America and pays in gold, he does so to make a profit for himself; but he cannot make a profit for himself without making an equal profit for the nation. The exchange of the wheat for gold is profitable to both seller and buyer; otherwise the bargain would not be struck. A value is added to the wheat by its being brought from Minnesota (where it is wanted, as all good things are wanted) to London, where it is much more wanted, and this increased value is greater than the cost of moving the wheat from Minnesota to London; this excess is the profit on the exchange which the buyer and seller divide between them. The exact shares in which they divide the profit between them depend on some of the most complicated considerations in the science of political economy. Indeed, political economy can no more work out a case in figures, even when every circumstance is given, than political economy can tell in pounds sterling what should be the rent of a given farm. But the point required for our present purpose is easy and certain,--unless the English buyer got _some_ share in the profit he would not give his gold for the wheat. The great principle of Free Trade is that in this, and in all similar cases, the individual shall be left to make what profit he can; that his dealings with foreigners shall be interfered with by Government in no way; that he shall not be checked in his operations by import duties, bounties on exports, staples, or any other of the numerous obsolete interferences in the statute-book. The principle is that each individual can manage his own trade better than Government can manage it for him; that, therefore, Government shall let any individual do his best in trade his own way, knowing that whatever profit an individual makes in foreign trade is an equal national profit. It may be shortly stated that in the old Protectionist theory, destroyed by Adam Smith, gold was considered to be wealth. Hence, if an individual bought foreign wheat for gold, the English suffered a national loss of wealth, and the foreign nation made a national gain. It is unnecessary to occupy space in refuting this (to us absurd) idea, as no refutation can be more satisfactory than Adam Smith's own. If I profit on the transaction of buying 1000 quarters of wheat for gold, I do so irrespectively of all other exchanges by others. Whether the firm next door to me has succeeded in selling to a Boston house £2000 worth of Sheffield cutlery or no is a matter entirely beside my bargain. My profit will depend practically on the movements in the English corn trade: a small rise in the price of wheat at Mark Lane between the date of my purchasing by cable the wheat in America and my selling it at Mark Lane, may give me a large profit, or _vice versa_. But my exchange of gold for the wheat is a separate transaction of itself: it stands entirely on its own bottom. It is perfectly true that if my neighbour in Threadneedle Street does succeed in selling £2000 worth of cutlery to the New Englander, there is another distinct national profit to England and to America. [Footnote: I am assuming for simplicity throughout that every exchange made by private merchants in this foreign trade is a successful speculation; if in any particular speculation a merchant loses, his country loses the same amount. As foreign trade, on the whole, is an enormous national profit, I am justified in sinking the particular cases of loss. It may be said, "But perhaps all your exchange of gold for wheat is a national loss": it is evident that when the trade takes this form the merchants who import foreign corn stop their operations instantly; in practice they stop them with prescient instinct.] But whether he succeeds in making a bargain or not, I object to being interfered with by Government, and prevented making my own little profit. If my neighbour is practically deprived of his profitable bargain by Government action on the part of the Americans--if they are Protectionists and believe that gold is the only National Wealth, and put a heavy duty on cutlery--if by doing this they prevent an exchange profitable to both nations--they stop TWO merchants from a profitable stroke of business. Whether they injure the English merchant or the Bostonian would-be purchaser of cutlery MOST is (as above explained) very difficult to prove in any well-ascertained instance, but it is quite certain that the interference of the American import duty causes a loss to each merchant and to each nation. Where now is Reciprocity and where Retaliation? We can no doubt say to the Americans, "As you have injured us in the matter of cutlery, so will we injure you by putting a duty on wheat." But it is merely cutting off one's nose to spite one's face. In the exchange of gold for wheat the division of the profit on one transaction is uncertain, but in the long run it is probably about equal between the English and the American merchants, i.e. between the English and the American nations. (I am not overlooking the fact that the ultimate benefit to England is cheap bread; but it is unnecessary in the present argument to follow the food down the throats of the consumers: the wheat is really worth to the corn merchants what they can get for it from the consumers.) We cannot stop the corn trade with America by a duty (or diminish it) without as great a loss to ourselves (probably a greater) than to them; the retaliation in putting a duty on corn because the Americans put a duty on cutlery would be (with our lights) mere spite: it would be as though a farmer who took one sample of wheat to market and one of barley, should meet a factor who offered him his price for the wheat, but would not spring to his price for the barley, and the farmer should thereupon sulkily carry both his samples home again. The ideas of Reciprocity and Retaliation are pure relics of the old Protectionist commercial theory, viz. that there is always a national loss in parting with gold--that the foreign trade can only be profitable to England so long as the value of the exports exceeds that of the imports, so that a continual accumulation of gold may go on. Now, first, we may meet this with the abstract scientific argument that there is no character by which gold can be diagnosed as wealth from steel or broadcloth. Our merchant who buys wheat for gold could buy from the Americans wheat for cutlery or wheat for broadcloth. The reason he gives gold for the wheat is merely because he makes a better profit by giving gold than by giving anything else in exchange for the wheat. The nation therefore gets a better profit that way too. Descending a little from this abstract argument, our opponent says, "If you go on buying wheat for gold, and cannot sell your cutlery and broadcloth out of the country for gold, you _must_ run out of gold." But the fact has been proved by many years' experience not so to be: for many years our imports have been some £150,000,000 sterling more than our exports, while our stock of gold in the Bank of England (and the gold in circulation) remain the same from year to year. This is one of those many things (like the supply of meat to London) which will regulate itself perfectly and insensibly (without any violent disturbances in trade or the money market) if Government will only leave the matter entirely alone. If our stock of gold is at all short our merchants give a little less per quarter for American wheat; the trade is checked; the sensibility of the market--the experience of our corn-traders--is such that the balance is preserved with very slight oscillations. The refusal of the Americans (enforced by an import duty) to purchase our cutlery, etc., _does_ partially check the reflux of gold to this country, and does lower sensibly the price which the Americans get for their wheat from us. Errors in political economy avenge themselves--often fearfully--on their perpetrators. But our objector will still want to have explained to him where the £150,000,000 sterling required in England annually comes from. It is not essential to, or indeed any part of, my present argument to explain this; but I will anticipate matters so far as to say shortly here that this £150,000,000 is, roughly speaking, the interest on English capital invested in foreign countries paid in cash to the owners resident in England--it is equivalent to an annual tribute. Professor Henry Fawcett's _Lectures on Free Trade_ is a sound and admirable book: it is occupied a good deal with the practical question why so few foreign nations have adopted Free Trade, and how such foreign nations are to be converted to the orthodox creed of Adam Smith. But, as I think, unfortunately Professor Fawcett has in that book used the words Reciprocity and Retaliation pretty freely. Their mere use is enough to fortify a French or American Protectionist in his present policy; he naturally says, "The English Free-traders themselves admit that we are making money out of them: we take their gold for our wine and wheat; we refuse to give our gold for their cutlery and broadcloth: those English have now to come to us whining for Reciprocity; as to their Retaliation we are not alarmed--we know they _must_ have wheat and _will_ have wine." I would wish to expunge the words Reciprocity and Retaliation from the subject, as being words merely suggestive of false views. But the most fatal course to the adoption of a Free Trade policy by foreign nations has been our plan of humbling, begging (and indirectly giving a consideration for) Commercial Treaties. Such a course is enough to (and does) counterbalance with foreign nations all our theoretical writings about Free Trade. We go to France and say, "We will let in your wines at a lower duty provided you do us the favour and give us the advantage of lowering your duties on English manufactures." I cannot conceive any way of putting the matter more strongly calculated to convince the French that we believe we lose by purchasing their wines and gain by selling them our manufactures. It appears to me that if we wish to convince Europe and America of the truth of Free Trade (as understood by our political economists), our proper course is to adopt Free Trade ourselves FULLY (if the principle is good for wheat it is good for tea--I shall return to this), and then to say to foreigners, "See how we prosper under Free Trade." If the Americans continue to maintain Protectionist duties on our manufactures, our line of conduct is not to offer to pay them indirectly to relax those duties, but to say, "You are losing more by your duties than we are; the proof of the pudding is in the eating." If I believe, as I do, that the Americans are gaining less wealth under Protection than they would under Free Trade, I cannot imagine any plan less likely to convert them to my views than my going to them and saying, "We will give you £5,000,000 sterling (or some valued political advantage) if you will alter your mistaken policy." If this course did not confirm the Americans in the very deepest suspicions that Protection is really advantageous to them, and that we in our inmost heart think so too, my ideas of human nature are altogether at fault. But every foreign debate, whether in France, Germany, or America, on Free Trade, convinces me that I am not mistaken in the effect which I attribute to our prayers to every foreign nation to grant us a Commercial Treaty. 3. UNIVERSAL FREE TRADE. Wheat is now admitted to England free of duty. Tea pays a duty of about £4,000,000 sterling a year. This is called a duty for revenue, not for protection. Tea is an article of universal consumption; the tax on it is open to the objections against a poll tax or hearth tax, viz. that by it many a poor old woman is taxed as heavily as far richer people; indeed, owing to the poor consuming the lower-priced teas, they are by the present duty taxed at a higher rate than those who can afford the more expensive teas. The reply in defence of these anomalies is, "We have to raise £4,000,000 sterling by a duty on something; on whatever we put it, it will no doubt be bad." Granting, however, this for a moment, the onus lies on the defender of the existing tariff to prove that it is better to raise the £4,000,000 required from tea than from wheat, or than to raise £2,000,000 from tea, £2,000,000 from wheat. Mr. Raban, a leading tea-planter in Assam, has observed that if the duty on tea was replaced by one on wheat to raise the same gross amount, the pressure on the English poor would be less; while an encouragement would thus be given both to tea-planting in India and to agriculture in England. I adduce this case of the duty on tea merely to bring out strongly the fact that Free Trade in wheat is not universal Free Trade. I do not recommend that the duty on tea should be replaced by other duties: I am going to raise the question whether it should not be replaced by direct taxation. In the case of tea, the duty can hardly be said to be "protective," except so far as by raising the cost of tea it impels English drinkers to have more free recourse than they otherwise would to other drinks; but in a large number of cases a duty operates both as a revenue and as a protective duty. It is a curious fact that the fanners, after unanimously struggling FOR the duty on wheat because it was a protective duty, subsequently unanimously struggled for thirty years AGAINST the malt tax (involving a duty on barley) because it was a revenue duty. As soon, however, as the malt duty was repealed, they discovered that it had been a protective duty; barley fell in price (malting samples) about l2s. a quarter, and has never recovered, nor does any farmer now suppose it ever will. This is rather a complex case, because on the abolition of the malt tax an equal tax (in gross amount) was put on beer; and it might be supposed at first sight that this would not affect the price of barley. It has in several ways: Firstly, Many brewers now brew common beer with one-third malt, two-thirds molasses, cane sugar, etc. The tax being on the beer, Government no longer cares whether it is brewed from malt or from rubbish, and the consumers grow soon accustomed to the lowered taste of malt in their beer; Secondly, The admission of foreign malt and barley without duty has quickened the importation by removing those restraints and interferences which hamper trade out of all proportion to their expressed amounts in pounds, shillings, and pence. In order to establish a Universal Free Trade and to make every port in England a free port, it would be necessary to raise by direct taxation about £40,000,000 annually, because the excise on beer, etc., would have to be abandoned with the Customs duties. We will consider the possibility of raising this £40,000,000 by direct taxation before we dilate on the advantages which would follow Universal Free Trade. Ricardo, at the end of his masterly consideration of the effect of taxation variously levied, comes to the general conclusion that the best tax is that which is least in amount. Adam Smith and the older economists held that one test which a well-devised tax had to satisfy was that it should take the money from the taxpayer insensibly, indirectly. Now, all taxes that thus insensibly drain the taxpayers invariably take more in gross from them than reaches the Government. To raise £40,000,000 by customs and excise costs about £3,000,000; so that the people have to pay £43,000,000, while the Government gets £40,000,000. In direct taxes, as income taxes, property rates, the cost of collection is very small--about two-pence in the pound. In public as in private business it is much more economic to look payments in the face and make them with our eyes open than to let the money slip away in driblets. Moreover, modern politicians think, in opposition to Adam Smith, that it has a good moral effect on the body politic to be made to feel exactly what taxes they pay, so that they cannot help knowing whenever taxation is increased. A serious objection to indirect taxation is that it always falls with unfair weight on the poor, as in the case of tea duties stated above. It may be urged that the existing duties are (except tea) nearly all on luxuries, as beer, spirits, tobacco. But the English have drunk beer for many hundred years; the taste for beer is largely fixed by inheritance; beer as supplying sustenance in a form that _rapidly_ assists exhausted nature is, to very many at least, as much a necessary of life as tea is. Whether we believe tobacco to be injurious or not, we have no right to impose on an article so very largely consumed a duty which amounts to taxing the poor out of proportion to the rich. If all the indirect taxes are removed, the poor (at least down to those earning £1 a week and upwards) must be made to contribute to direct taxes. It may be urged against Universal Free Trade that the poor are so ignorant that they would sooner pay sixteen-pence a week in taxes indirectly than eightpence directly. This might prove a fatal objection to carrying out Universal Free Trade at the first attempt; but one of the objects to be gained by direct taxation is the education of the people. It may also be urged that the whole political power being now in the hands of the masses, they are so selfish and unjust that if taxation is made a plain matter they will put all taxation on the rich and refuse to pay anything themselves. The reply to this is, If this is your estimate of the understanding and morality of the masses, you should not have put the whole political power in their hands. We are only attempting at present to show that the £40,000,000 sterling (to replace duties and those parts of the excise which hang on duties) _could_ be raised by direct taxation: we are not attempting to show the best way it could be raised by direct taxation; it will be seen hereafter that a portion of it might perhaps be better raised by a National Property Rate. The £40,000,000 would be raised by an income tax of sixteen-pence in the pound--(I am underestimating safely--about a shilling in the pound would raise it really),--carried down to £156 a year without any reductions; while incomes of £1 a week paid eightpence weekly, and incomes of £2 a week paid twelvepence weekly. In the Crimean War the nation endured an income tax of sixteen-pence in the pound; it is certain that the nation is richer now, and better able to bear such a rate. But this is not the strength of the argument. In the Crimean War England endured sixteen-pence in the pound _extra_, in addition to all existing taxes (some of which were raised too), and the capital thus taken from the people was destroyed (much of it) or dissipated in the Crimea. But the sixteen-pence in the pound here suggested would be in lieu of an equal amount of taxes taken off (it would be rather less in amount than the taxes taken off): the nation therefore, would not feel it at all, though individuals would feel it in different ways. A poor man would have eightpence a week deducted from his wages, but he would get his beer at three-fifths the present price, his tea at two-thirds the present price, etc. He would soon feel that he gained by the change. The rich would find that they lost; but that loss would, I believe, be made up to them over and over again. First, I believe it is impossible to realise the effect on our trade of having London, Liverpool, etc., free ports. We possess at present half the ocean trade of the world: with our ports free, we should get a yet larger share of the world's trade, and secure it permanently. That is to say, we should certainly keep it until other nations adopted Universal Free Trade. Secondly, The fall in the price of tea, beer, etc., would be more than the amount of the tax remitted: the freedom of universal manufacture without any Government interference, the liberty to land tea without delay, and put it into the market without having to advance the duty, would cause at once a great activity in the trades, and at the same time a fall in price. By diminishing the need for middle-men the quality of the beer, tea, etc., would be raised, and adulteration diminished. Thirdly, The fall in the price of tea and beer would bring down the price of all competing drinks: it would at first diminish the consumption of competing drinks. The cheapening the price of some of the prime necessaries of life would be to some extent divided between capital and labour. As in the case of wheat, the labourer would be made better off, while the profits of capital would be raised. A general and permanent improvement in all trades would result, except possibly in those of the tea-dealer and brewer--but I do not think they would lose. I see no end to the developments from Universal Free Trade: we can only gain some idea of what they would be by tracing as far as we may what the results of Free Trade in one article--wheat--have been; and in doing this we must recollect that before 1846 the quantity of wheat imported was trifling compared with the present importation. To this scheme of direct taxation Edward Wilson objects, "Taxation should fall on expenditure, not on income." It is true that our object must always be to encourage accumulation, and discourage destruction of capital (expenditure). Practically, it does not appear that a heavy income tax diminishes the taste for accumulation in England: it does increase the tendency of large capitalists to invest their capital out of England, so as to avoid the State charges on capital in England. But the capital in England and the quantity of English capital invested abroad are already so enormous that the "tendency" of an increased income tax may be disregarded. Lastly, it may be objected, Would the sixteen-pence income tax levied as you propose (or nearly so) raise £40,000,000? At the time of the Crimean War each penny in the pound income tax brought in a million sterling. At the present time, each penny in the pound income tax brings in nearer two millions sterling, but the productiveness of the tax is much interfered with by the large remissions now allowed, and subtractions which take effect just where the contributors to the tax are most numerous, say from £100 to £300 a year. I therefore reckon that, without remissions, the tax of sixteen-pence in the pound down to £156 a year would produce about £30,000,000, and that the tax down to £52 a year would about produce the rest. The _total_ income that income tax is now levied on is nearly £600,000,000. We need not be surprised at the productiveness of the income tax. A man of £10,000 a year pays tax on that. But he has a steward on £300 a year, he is worth to his firm of lawyers £100 a year, and so on: these pay income tax on the £300 and the £100 over again. When the income tax is carried down to incomes on £1 a week, the tax will be levied on the same income over and over again. Even a spendthrift with £10,000 a year usually scatters more than he actually destroys. Lastly, It has not been overlooked that there is an income tax now: and if the whole proceeds of the sixteen-pence income tax were used to fill up the deficiency in customs and excise, then we have to make up a deficiency equal to the present proceeds of the income tax. This might be done (to start with) by the National Property Rate now to be suggested. But the expectation is, that with Universal Free Trade, and the tremendous stimulus thereby given to commerce and manufacture, the National Income would rise with a bound, and that in two or three years a much lower rate than sixteen-pence income tax in the pound would supply the amount of all the indirect taxes abandoned. 4. THE RANSOM OF THE LAND. Many people see quite clearly that, the population of England being 25,000,000, the next baby born has a right to one twenty-fifth-millionth part of the area of England in soil of average fertility. The arrangements of society by which the laud is partitioned among a limited class, and the complicated rights sanctioned by law in one plot of land, are considered of no validity as against the natural right of the new-born baby. I do not see this theory to be self-evident: on the other hand the supporters of it always give it as fundamental, axiomatic; they no doubt presume rightly that the land is limited, and that if one man holds more than his arithmetical share, he must push out somebody else from his arithmetical share: while a man who keeps a hundred pocket-knives does not perceptibly hinder other people having numerous pocket-knives. Still I do not see how this consideration weighs against Lord Derby's title to his lands, if the body politic has determined that on the whole it is best for the community that land should not be held equally by all, and sanctions by law Lord Derby's monopoly of a large area. On the theory of the natural right of every infant born to its arithmetical share, the monopolisers of land are liable to a perpetually recurring ransom: this can only practically be carried out by a special National Rate on Real Property (_i.e._ Land, with the houses, mines, etc., inseparably attached to it), which must be in addition to such taxes as income tax, succession duty, etc., which land already suffers equally with trades, professions, offices, and personalty. The local rates in England exceed £25,000,000 annually; and the ratepayers perhaps reckon this a large enough ransom. I should remark in passing that one man with 1000 acres of land does not dispossess any more babies of their rights than do ten men with 100 acres each. The ransom therefore must be a strictly level rate: to put a higher rate on large holders, or to despoil large holders of a portion of their landed property, will be to work the ransom unfairly. It hence will follow that any heavy ransom is now impracticable. Of late years some farms have gone out of cultivation because they will not pay the tithe, land tax, and rates already on them: to put any heavy ransom on the land would at once throw large areas in England out of cultivation. The question of the ransom, therefore, is not so all-important as has been considered; the rates at present being £25,000,000, it might be possible to levy an additional national rate of £5,000,000 to keep down the perpetually upspringing rights of new-born infants, without throwing land out of cultivation to any sensible extent. The whole question will lie thus between a total rate of £25,000,000 and £30,000,000. I am about, however, as a corollary to this subject, to suggest a way of forming a National Rate Book which probably would not materially alter the present rating, but which would alter entirely the taking of land for public purposes, and would effectuate all that is good in the phrase the Nationalisation of Land. This phrase is liberally used but rarely defined. Different orators appear to have quite different ideas as to what it means; and when they explain what they suppose it to mean, they generally prove that, in the way they understand it, it would be serious national damage. It is unnecessary to observe that landlords now (omitting individual exceptions and idiosyncrasies) expend their best endeavours in getting the best rent they can for their land. They have no prejudices in favour of farms of a particular size; a landlord of a farm of 1000 acres would let it directly in five-acre plots if he could get a better (and equally certain) gross rent by so doing. "Nationalisation" is often taken to mean that Government is to buy land and let it out in small plots. But apart from expense of Government management and objections to Government interference, we may safely assume that there would be a national loss by this procedure: the private owner would discover very quickly if he could make a profit by letting his farms piecemeal. All Government interference can do to improve the produce of the land is to abolish all restrictive laws, and to make the general tenure of land such that every piece of land shall fall into the hands of that man who is able to make the most of it. The National Rate Book now suggested is designed to accomplish this end. We will subsequently consider how it might assist public companies. As the suggested way of getting a National Rate Book is at first sight rather startling, I would premise that it is no rash invention of mine; it worked admirably in Attica--as see Demosthenes or Boeckh. To make the National Rate Book, each landowner values (with the magistrate) his land at what price he pleases; the State has the right to buy the land at any time at that price, plus 33-1/3 per cent for compulsory purchase. The magistrate sees that each separate house, farm, and plot is valued separately. No person need prove his title; any man can value any piece of land, and need not prove himself to be owner, tenant, or agent; but any piece of land valued by no one would be claimed as public property. A man who valued himself unfairly low would not be bought out at once and dispossessed by Government, unless it happened that during that year his land was taken up by Government or by a railway company for some public purpose. The regular course of business would be as follows:--An owner A would put his house and curtilage in the Rate Book at £1200. The sycophant B would come to the magistrate, offer £1600 for the property, and lodge the £1600 with the magistrate. The magistrate then, without divulging the name of the sycophant, would write to A either to rate his house at £1600 (paying a fine for so doing), or to take £1600 for it. If he took the £1600, B would get the property, and Government the increased rate. If A preferred raising his rateable value to £1600, B would get the fine, Government would get the increased rate. _The utmost pressure put upon any owner under this system would be that, if he would not pay rates on x pounds for his property, he would lie obliged to take x pounds for the property._ The 33-1/3 per cent for compulsory purchase is illusory, and I have only put it in the statement of the scheme to meet an objection which I know to be common (and equally illusory). It is clear that if I know I am going to get 33-1/3 per cent for compulsory purchase, whether from Government or a secret sycophant, I shall proportionately undervalue my property. Thus if I estimate the real value of my house and curtilage at £1200, and feel that I do not care if I sell at that price, I shall put it down in the Rate Book at £900. This applies to all owners, so that the allowance for compulsory sale would only artificially depreciate by one-fourth all the rateable values put down in the magistrate's book. I have not stopped to cumber the statement of this simple plan by adding the details necessary to meet severance of a farm by a railway company, etc. The provisions to meet complicated tenures, etc., would run much the same as in the Lands Clauses Consolidation Act. It will be at once seen that this form of Rate Book would really nationalise the land by bringing each piece into the hands of him who could make most out of it. If I saw my way to use a piece of laud so that it should be worth £1000 to me, and if on looking into the Rate Book I saw that the present owner only considered it worth £600 to him, I should at once lodge my £900 with the magistrate. A few owners would really feel as Naboth. They could indulge this feeling by putting a very high rateable value on their property. The high rates they would thus have to pay would be the due ransom of the land; but in general every piece of land would pass into the hands of him who could make most of it. There would spring up, as in Attica, a large class of professional sycophants. By their incessant operations, properties small and great would be continually passing from the slothful and the old-fashioned to the enterprising and modern-educated. No nationalisation of the land could get so much out of it or conduce so highly to progress as the National Rate Book. We should have companies and adventurers buying up all sorts of pieces of land, just as formerly they speculated in taking up land for mining in Cornwall. We should see an extraordinary activity in the employment of capital in England. For all public improvements, as a new street or a Government military station, a few minutes with the map and Rate Book would show the Government officer or engineer the best route or plot to take, and would also show him the exact cost of the land for the scheme. There would be no law expenses, no prolonged fights, no juries, no arbitrations. Wastes, downs, heaths, bogs, would be rated very low. It would be in the power of Government to take up largely and at small cost large areas of Surrey heaths, etc., to provide air and recreation ground for an evergrowing metropolis. In this manner, too, public commons and quasi-public commons might be secured to the public all over England: a public-spirited town-council or a local Kyrle Society would have a wide field and an immense stimulus for action. I have not stopped to rebut the common (but mistaken) idea that burdens on the land (being in gross not more than the rackrent) affect the cultivation. Partners have long drunk at market dinners "Confusion to the black slug that devours the English farmer." How is it that these farmers did not (do not) see that there are tithe-free farms (and some tithe-free parishes) in England, and that the tenants of such farms get no advantage by being tithe-free? As I explain elsewhere, a tenant with several years of his lease to run is (economically considered) a part landowner: if the tithe were suddenly abolished, tenants with leases would get relief as well as their landlords. So if a new tax or rate is laid on land (and made payable by the tenant), all tenants with leases will have to pay such tax or rate out of their own pocket so long as their lease lasts; afterwards it will fall wholly on the landlords. It is repeated now, in nearly every country newspaper, that the English farmer cannot compete with the American grower because of the burdens on the land of England. I will not write out (I cannot improve) Ricardo's proof that rent does not enter into price. The "burdens" on land are really first charges on the rackrent and do not affect a year-to-year tenant at all. When a farmer meditates taking a farm he asks not merely what is the rent: he inquires what is the tithe, what the average amount of the rates (and is that likely to increase or diminish during the next seven years); the intending tenant only wants to know what sum in all he will have to pay for the farm; whether any of this payment is called tithe or not, or whether some of it is quit-rent, or whether he is to pay the land tax for his landlord's convenience,--about all this he cares nothing; they are mere questions of names to him. 5. MAKING THE MOST OF OUR LAND. John S. Mill, following W. T. Thornton, advocated a system of petty proprietors against the English system of large farms with hired labourers. Figures were quoted to show the splendid produce got by petty proprietors in France and elsewhere--as the result, however, of infinite toil. The petty proprietors were, moreover, shown to be much better off than our hired labourers; and the magic of property combined with independence was represented as having produced a superior class. These things may have been so, at least in some cases and particular countries, at the date (before 1846) when J. S. Mill originally put forward these views. The liberal, and radical writers on political economy and sociology still follow (most of them) on the same side, which has become in a manner historically the liberal side. There is much against it. First, Production on the large scale is cheaper than on the small; this is as true of agriculture as of other industries. The large farmer has one fixed and one movable steam-engine of his own; he has his own drills, threshing and winnowing machines, reaping and mowing machines. The petty proprietor may hire these, but at a dear rate, and few of them can work to any advantage on his small patches of corn. The large farmer has large fields; he saves area as against the petty proprietors; he has fewer headlands and fences, harbouring weeds and stopping the sun and air. The large farmer can work corn and sheep together; one shepherd and his boy will look after 500 ewes. You may travel 200 miles by rail in France and not see two flocks of sheep. Sheep-farming is seen all the world over to be an industry that pays on the large scale; and the want of it injures the corn produce of the French petty proprietor. Louis Napoleon sent Lavergne to make a report on English farming; the substance of his report is, that were France farmed on the English system by English farmers, the corn produce would be four or five times what it is now; leaving sheep out of the question. The advocates of peasant-proprietorship, at least the better informed ones, do not now suppose that a peasant receiving a few acres out of a large English average farm (and capital to make a start) could make a subsistence out of it. They believe that peasant-proprietors could maintain themselves on small plots of rich land in and close to towns, working as market-gardeners or cowkeepers rather than as farmers. This narrows down the peasant-proprietor theory vastly in its practical application; it remains hardly a national question. But I have been astonished to see in the neighbourhood of London of late years the large "gentleman" market-gardeners steadily displacing the smaller and all the single-handed men. The subject is so important that I will take one of two instances in detail. I have seen a gentleman market-gardener, eight miles or so from Covent Garden, growing strawberries, several acres in each patch. He had young men (a separate staff) out at daybreak to keep the birds off. The small gardener, growing a few long beds of strawberries, is ruined by the birds, whether he lets them eat or goes into the expense and labour of netting. The gentleman has his own large spring-vans waiting; these vans are fitted for fruit, and as the pickers gather the strawberries they deliver them in small and frequent parcels to the packers. The moment the first van is laden it starts at three miles per hour and travels to Covent Garden itself, where the strawberries are delivered to the fruit-dealer, who buys them wholesale of the gentleman-gardener. The small grower has to get his strawberries to the local railway station, and to arrange to get them from the London terminus to market; his trouble and expense are considerable; but, more important still, his strawberries do not come into the hands of the wholesale dealer in the "condition" that the large grower's do. This large grower admitted that he was paying £12 an acre per annum for some of his land; he added, "My labour per acre, and even my manure per acre, costs so much that I do not think about a few pounds rent more or less." These gentleman-gardeners are on the average better educated than the small market-gardeners; they travel about the country, gather hints, and pick up new good varieties of strawberries, etc. From their scale of operations and varied sorts of strawberries they can, even in rough wet weather or in drought, always supply to their wholesale dealer some fruit. In fine, they beat the small grower at every point; they undersell him at Covent Garden; they outbid him for desirable garden-land within reach of London. It may be said that in growing plain vegetables the small gardener would not be at such a disadvantage. I will reply (without detailing all my observations) that I have seen the same gentleman-gardener growing a two-acre plot of early radishes, and that he completely spoilt early radishes for all the small gardeners. The advocates of peasant-proprietors have thought cowkeeping hopeful for small men. In my experience dairies of fifty or sixty cows have an enormous advantage; they can have perfectly designed dairies; they have enough cream to make butter daily throughout the year (which saves much trouble, loss, and occasionally inferior butter); they can maintain approximately a uniform supply. In short, they beat, undersell, and displace the small cowkeepers wherever the large dairy is moderately well managed. The cottager or peasant-proprietor has, I believe, an advantage in poultry of all kinds. When poultry are kept in very large numbers they are more liable to disease, and the diseases are more disastrous--sweeping off the whole large stock. Fowl and egg farming is one of the most successful, perhaps the most successful point with the French peasant-proprietors. To make birdfarming successful the proper plan is to keep a moderate number of as many birds as possible--fowls, "galeenies," ducks, geese, turkeys, large pigeons--and to go in for eggs as well as fowls. I have not seen peasant-proprietors in England attempting this, which seems to me one of the most hopeful of experiments for them. The second point urged by Mill, and still by some, is that peasant-proprietors are better off than English labourers. With the present price of agricultural labour in England this seems to be very generally not the case; the French peasant-proprietors and the agricultural lower classes in Germany are (with small exceptions) now worse off than the English farm-labourer; they work very much harder and they get less to eat. The economic truth doubtless is that the hired labourer may or may not be better off than the peasant-proprietor, according to circumstances; and circumstances in England just now are in favour of the hired labourer. Then as to independence, it may fairly be questioned whether a good agricultural workman, now practically liberated from the Law of Settlement, and who can command a fair wage anywhere, is not really more independent than a French peasant absolutely tied to a three-acre plot for life. The real difference between the advocates of the nationalisation of the land and the Conservatives is this. The Conservative says, "Leave everything to its natural course, and let us have no Government interference. If the peasant-proprietor really can maintain himself while paying as high a rent as the ordinary farmer, we shall soon have plenty of them." Or, the Conservative has no objection to a philanthropist starting a few picked peasant-proprietors as an experiment. But he objects to starting any gigantic new scheme of working the land, except as a matter of business; he objects to Government philanthropy, which means giving away other people's money. Our farm-labourers, as a rule, know nothing of gardening, and few of them can command £10 capital. I have sometimes looked round to select a picked man, and wondered whether, if I put him in a selected five-acre plot near a town, and also lent him the £200 or so capital requisite to give him a chance, this picked agricultural labourer would succeed; and I have inclined to think he would not succeed. I need not therefore express any opinion as to what would happen if Government were to take 10,000 or 100,000 farm-labourers, advance them £200 each, and place them in five-acre or ten-acre plots: there would be a tremendous bill to pay, and the plan of peasant-proprietors would be put aside for many a day. If the plan is to be successful it must be introduced gradually and in a business manner, _i.e._ what does not pay must not be persisted in. The plan, now frequently put forward, that Government is to employ all men out of work to reclaim and bring into cultivation waste lands, is liable to additional objections. Who is to fix the wages, the hours of labour, and the tale of work for the Government labourers? If these were fixed as the advocates of the plan wish them fixed, Government would soon have all the labourers of the country in its employ. If, on the other hand, these were fixed below the market rate, Government would only have such labour as the Poor-Law Unions now have, and which they find hardly worth employing. Leaving this (practically grave) difficulty aside, if a heath or a moor is now uncultivated it is because nobody sees how it can be profitably brought into cultivation; it can always at a sufficient outlay be reclaimed, but that will not be done unless it is calculated that the rent of the land when reclaimed will pay the interest on the whole expense of reclamation, and something besides. If Government reclaims land that private persons cannot reclaim with profit, we may be sure that Government will suffer a considerable loss. This must be provided out of taxes: are the promoters of reclamation of wastes by Government prepared for this? The wastes of England are the only land left the public. Elsewhere the public can only walk along a pavement or a high road. The good land is all pretty well in cultivation; and the best of what is left can give but a moderate profit on reclamation, while its enclosure, under Act of Parliament, deprives the public of it for ever. Hence Professor H. Fawcett, throughout his parliamentary career, put his veto with great success on all enclosure schemes. It is possible that there might be a profit on the enclosure of Epping Forest: who will now support that reclamation? It is very desirable that wealthy private philanthropic individuals and wealthy private philosophic societies, should try experiments in small farming, market-gardening, co-operative farming, reclamation of wastes, etc. There is no hindrance to their so doing: they can readily hire as many farms as they please at cheap rents, and subdivide them, and put in picked labourers with an advance of capital. But that Government should embark in uncertain speculations of this kind is quite another thing. The safe general principle, whether in the sale of horses, the letting of houses, or the letting of land, is that Government should not interfere; or, to speak more correctly, Government interference should only interfere to prevent restrictive covenants and to ensure Free Trade, so that every article (land included) may pass without restraint into the hands of the man to whom it is worth most. The greater the individual profit the greater the national profit. Under a section headed "Law," below, I will say something about the removal of entail, etc.--a dry but important branch of the question. The National Property Rate, with the aid of sycophants, would remove many obstructions. There has been much controversy and several Parliamentary Acts concerning the regulation of bargains between landlord and tenant. How a tenant or a landlord can be injured in such a bargain is impossible to understand, except in so far as a man is injured who gives £30 for a horse worth only £20. Will Parliament interfere to protect such horse-purchasers? The matter has been obscured by omitting to notice that a tenant with a long lease at a fixed rent possesses a share (often the larger share) of the "landlord interest," in the language of political economy. As a simple example: A tenant took, say in 1850, a Scotch farm on a Scotch lease absolute of nineteen years, at £500 a year. Within two or three years of his so taking it the rise in wool, potatoes, and other things, caused the value of the farm to rise to £600 a year, and this increased value lasted the whole of his lease and some time after. Now, treating the increase of value of £100 a year as permanent (as it was very soon regarded both by landlord and tenant), it is clear that this £100 a year for the period of the lease (say seventeen years to run) went to the tenant, not to the landlord; and the first seventeen years of an annuity in fee is worth more than all the rest. It is evident that on a seven years' (absolute) lease the tenant would similarly get a good share (not the larger share) in all the improvement in value that occurred during his lease. Up to ten or twelve years ago the value of land had been rising very steadily in the South of England for near half a century. Rents were pushed up very generally at the termination of every lease, though noblemen, great county gentlemen, the Church, and the Universities, as a rule, never raised the rent on an old tenant; but they could raise the rent all the more by a jump when a new man came in. During all these years the tenant-farmers complained rarely of their leases, though they were often subject to covenant nuisances about cropping, selling off the farm, game, and incoming for the new tenant. But during the last ten years the process is reversed. A farmer took a farm for £500 a year for seven years in the south of England, and before the lease had run half out the farm was not worth £400 (and in many cases not £300). Here the tenant suffered a heavy loss. When in former years he got a gain he never proposed to allow his landlord 15 per cent extra rent. But now that the drop in value of such farms has taken place, and probably will not proceed further, a tenant who takes a new lease requires no Act of Parliament to protect him: he can protect himself. By the date the Abolition of the Game Laws (a wrong but intelligible phrase) was carried, the farmers in the South of England were in a position not to take any benefit under that Act, but to covenant for all the game and sporting on their farms for themselves. So as to the Act regulating the leases between tenant and landlord, where they chose to avail themselves of it, the tenant now can generally get more favourable terms outside the provisions of the Act. Farms are so down, tenants so scarce, that landlords have to give way on all minor points. Wherever Government interference operates at all, it is almost sure to operate harmfully. Consider for a moment the case of "incoming." Formerly, by the "custom of the country" south of London, the incoming tenant paid for two years' dressing for the corn crops, north of London he paid the outgoing tenant only for one year's dressing, by the custom of the country too. The question practically only amounted to increasing by 5 per cent the capital necessary to take the farm south of London. Now what can be gained by Government interference in such a matter as this, in which each farmer and land-agent was in general in favour of the "custom" he had grown up under? A prevalent idea is that the land is not highly farmed enough, and that the land of England might be made to yield much more, and that Government is to cause this to be done. It is most unfortunate to raise this theory at the moment when land is "down," i.e. when produce is cheap, labour expensive. Every farmer knows that the only way to meet these conditions is to farm "lower." In a south country farm the farmer will sow much less corn, and try to keep more sheep. In the Western States of America, where produce is very cheap, labour very dear, the "lowness" of the farming is always abused by the English traveller (who thus shows that he knows nothing about either farming or political economy). A farmer, twenty-five years ago, took a very large and fine corn farm: it had been worked on the five-course system, i.e. three white crops in five years; the farmer made a careful calculation whether a four-course husbandry, i.e. two white crops in four years, would not be more profitable; it appeared to come to exactly the same thing. At this juncture a rise of a shilling a week in wages took place; this gave a clear advantage to the four-course, and the farm was at once worked round to the four course shift. In this simple case a small rise in wages brought about a considerable diminution in gross produce, while the loss to the farmer was small. The remarks in this section have been directed to the case, common in the South of England, where there has been within the last twelve years a fall of rent from 25 to 50 per cent. In pasture farms, in rich land, and in potato farms (wherein you can keep one-sixth the land in potatoes), the fall in rent has been much less--sometimes inappreciable. But, some person may urge, if Government interferes, and compels the farmer to farm higher than he wishes to himself, the gross produce will be more, and the employment for labourers will be at the same time better. True, and this is the quintessence of Protection. The whole point of Free Trade is to allow capital to be employed where it is most profitable: high farming is only to be preferred (both for individual and nation) to low when it is the more profitable. Capital that cannot be employed to ordinary trade profit on the land must be transferred to other industries where it will earn the ordinary rate of trade profit; or, if there is no trade yielding such profit ready to absorb it in England, the capital must go to the United States or New Zealand and earn an increased profit. As to the labourers, they must follow the capital; or they may starve in England leaving few progeny, while the well-fed labourers of the Western States of America and New Zealand leave large families: this will do instead of emigration. It is to be noted that great improvements in farming, especially in machinery, have been effected in the last thirty years, largely by the operation of the All England and County Agricultural Societies. I note further that the people who abuse the farmers for bad farming and clamour for Government interference to promote high farming, conspicuously refrain from supporting these agricultural societies. 6. FREE TRADE IN RAILWAYS. Government might monopolise the retailing of tea in England. At present, in a country town like Exeter or Canterbury, there may be fifty grocers selling tea. In their competition they lay out a good deal in advertisement and handsome shop fronts in the most expensive streets; they keep (the fifty between them) many more hands than are necessary to retail the tea. All this outlay has to come out of the consumer. Government would buy pure tea first-hand in large quantities cheap; a few trustworthy highly-paid officials would test it, value it, and see it done up in sealed packages of sizes from 16 lbs. down to 2 oz.: these might be sold in an odd room attached to the Post Office in each town and village. There can be little doubt but that a saving in capital and labour would thus be effected, while the public would get the tea cheaper and purer than at present. The 2 oz. purchaser, in particular, would pay a good deal less for 2 oz. of real tea than she pays now for 2 oz. of rubbish. Or,--Government might hand over the tea-retailing of Canterbury and five miles round to a company as a monopoly: the state of things would be something like what we experience in the large stores now: the public would get their tea probably cheaper (quality considered) than at present; the company would make a large profit on their capital. If Government sanctioned two tea-retailing companies at Canterbury, these would probably make a less rate of profit: though, after the first heat of fight was over, they would probably agree to sell the same tea at the same (profitable) rates, and the consumers would gain little out of so restricted a competition. If a new company were to apply for a private Act to enable them to retail tea at Canterbury, the old company would show Parliament that themselves sufficed to satisfy the requirements of the public. The case of tea is a very specious one. By Government taking to itself each branch of business in succession till all was in Government hands we should arrive at Communism. For each successive interference of Government a reason from economy can generally be found: as in the case of telegraphs, so in the case of tea. The real objection to Government monopolising the retail of tea is, that so long as we live under a system of competition we had better stick to that plan altogether. At every turn of our present struggling system there is waste; but the ultimate effect of competition is to reduce the waste to a minimum. In the extreme case of tea it is pretty clear that the system of stores will, when fully developed, give the public all or nearly all they might hope to get from Government retailing, and at the same time will reduce the loss by competition among tea-retailers. But there is one industry, one branch of the public service, which should be the very last to be monopolised or restricted by Government, viz., the carrying of passengers and goods from one place to another, especially carrying by railway; and yet this particular industry is hampered by law and restricted by monopolies above all others--as I suppose, most unnecessarily; but I will take a few cases in detail before arguing from the general principle of Free Trade. There is one railway from London to Brighton: there are two railways from London to Exeter. There are fewer quick trains daily from London to Brighton than from London to Exeter. There are third-class carriages at a penny a mile on all the quick trains from Waterloo to Exeter: from London to Brighton the only penny a mile train starts at an inconvenient hour and travels exceedingly slow. The Brighton charge express fares on every convenient quick train they run; the South-Western have no express fares at all. The South-Western third-class carriages are padded, and as comfortable as the first; the Brighton third-class carriages are bare, very long, and run so badly that the shaking, the rattling of glass, and the draughts, keep everybody (who can possibly afford it) out of them. Naturally there have been numerous schemes for a second railway from London to Brighton in the course of the last twenty-five years. The present railway company has (they are not to blame for it) opposed each scheme tooth and nail. They have shown that they themselves satisfy the requirements of the public, and at the same time do not make a very high dividend. If a new grocer required an Act of Parliament to set up as a tea-retailer in Canterbury, could not all the existing tea-retailers there prove most triumphantly that an additional grocer was not wanted, and that their own profits were reasonable? It is not too much to say that the greater part of the evidence admitted by Parliamentary Committees against proposed new railways is foolery: without wasting time on it, the Parliamentary Committee might assume as proved that no monopolist trader wants a competitor. But the only safety for the public is in competition. In railway competition the public always profit: if the two companies agree to run at the same fares, the public gain in number and speed of trains, better carriages, and attentive consideration of their comfort. Moreover, in the case of two railways between London and Exeter, or between London and Brighton, the two lines only meet (not then quite) at the two termini; and the public is accommodated at all the new intermediate stations where there was no station at all before. The North-Western Railway was many years ago opposing a directly competing scheme. They brought before the Parliamentary Committee the late Mr. Horne, whom they justly credited with ability enough to throw dust in the eyes of almost any Parliamentary five. Mr Home's evidence was: "I understand railway traffic as well as anybody; the public are deluded in thinking they would gain by competition: the two companies might fight for a week or two, then they would more wisely agree, and put up their fares above the present North-Western fares, till they had recouped themselves out of the public all they had lost by their fight." This did very well for the Parliamentary Committee; but it is a fallacy. At present the North-Western Railway, though empowered by law to charge three-pence a mile first-class, charge twopence a mile only: why?--because twopence a mile they find to be on the whole the most paying rate. Ergo, after the fight with their directly competing brother was over, they would settle down to twopence a mile again. The public could not lose by the competition; they might gain. All experience shows that they invariably do gain. In France, Government has restricted the construction of railways very greatly, and protected the monopoly of each existing company closely. The mileage of railway open in France, in proportion to area and population, is very small in comparison with that in England. Moreover, the French lines are worked by quasi-Government officials, whose object is to avoid work, and still more to avoid responsibility, and who will not make the slightest effort to accommodate the public: they do not wish the trade at their station increased. Under this system the traffic on the French railways is low; especially when we consider how little each is interfered with by other lines, and what a broad band of country it has to drain. The immense progress made by England since 1846, as compared with the progress of France or of Germany, is often attributed _solely_ to Free Trade. I believe Free Trade has done much for us: but I am sure that our railway superiority (to France, Germany, etc.) has done much also. Probably no one who has not _resided_ some time in a French town (say a station on a main railway 150 miles from Paris as the least favourable case for my argument) can realise the enormous disadvantage by loss of time that a French business man is under, as compared with the Englishman. To get some necessary manufactured article from Paris is a matter of days; during which his machinery may all stand still. The communication with Paris, however, is where the Frenchman suffers least: the number of trains is so small, and the slowness of all (but the express) is such that the "local" traffic is nothing: unless a man intends to go a good many miles he would ride or even walk rather than go by train. He does not mind getting up at 2 a.m. to go to Paris; but he will not get up at that hour to go six or eight miles, especially if he is given no choice as to the hour at which he must return. But the usual remark about the French railways is, "See how much better they manage these things in France. While our railway companies are all spending their money in fighting and in competition, and pay dividends of 4 or 5 per cent, the French railways have their routes settled by Government engineers, and pay 8 or 10 per cent." I am going to propose a plan for stopping all company fighting in England for ever: but--as to the dividend--it can only mean that, like any other Government monopoly, the French public are being made to pay more for travelling than they need. As regards the interest of the public, the rate of dividend paid by a great railway company is of very small importance. For many years the South-Western Company paid double the dividend the Great Western did. How did this affect the work each did for the public--the conveyance of passengers and goods? Many common highways have been made by parishes and landowners combined for the public convenience; the capital so laid out paid no direct interest (the road was a highway, not a turnpike): how does this case differ from a railway that pays no dividend on the original stock? If the railway carried me from Exeter to London in five hours for thirteen shillings, what does it matter to me whether the company pays 2-1/2 per cent or 6-1/2 per cent to its original shareholders? In a very few small and special cases we have seen a railway line not pay for the working, and be closed. In a few other cases, where the dividend paid is less than 4-1/2 per cent, it is possible that the utility of the line to the public is less than the loss of the shareholders in a non-paying investment. I say this is a possible and conceivable case--in some very short lines or in some very thinly inhabited districts. Such cases I believe rare. Not rarely the initial cost of the line has been seriously increased by promotion, legal and parliamentary expenses, enormous sums extorted for land, severance, etc.; if these expenses can be done away with, these cases of railways constructed at a loss _on the whole_ to the nation may be made fewer still. The way in which the railway monopoly, the monopoly of the great companies, has grown up is noteworthy. To enable a company to take the land of a private man compulsorily a private Act of Parliament was necessary. The Parliamentary Committees then said, We will not enable you to dispossess forcibly private owners of their land for "a public purpose" unless you further shew that this includes a public advantage. Private owners were of course let in to show cause against a new railway; they always talked like Naboth (the Parliamentary Committees must have been wearied by the continual references to Naboth), but the genuine private owners sold themselves at the last minute; after they had pushed the company up to the highest bid, they well knew that this was above what they could get in the after arbitration, and "closed," withdrawing their opposition the last day in the Committee room. The opposition company, besides the grounds of insufficient need for a new line, etc., always supports and comforts the opposing landowners: but the great resource of the opposing company is to hire a landowner to oppose, especially a local attorney or agent who owns land proposed to be taken by the new line. Such an attorney, employed professionally by the opposing company, cannot be bought off at any price; he is a real Naboth, and in his character of a dispossessed landowner he will fight for the company every point that they cannot decently fight for themselves. Opposing a railway bill in Parliament has thus become an art; so much so, that no independent small line can be made unless they can get the support of one (at least) of the great companies that are supposed to occupy the area. The lines made (economically often) by the great companies themselves are not primarily designed for the accommodation of the public, but for the private purposes of the great company; sometimes they are made merely to diddle another great company. It is well to compare the law regarding making a new railway with that for making a new main-drain in the fens. In the latter case the new drain company receives extraordinary powers and may put a rate on the land benefited. In the case of a railway passing through a farm, the common estimate is that it adds a shilling an acre value to the rent of the farm; if there is a station on the farm it often adds much more to the agricultural value. Landlords are up to this: a landlord triumphantly told me, "I got £7000 from that company for cutting me up; but I would have given them £14,000 to cut me up more." (In this case, however, building value came in.) But the disgraceful squabbling of companies, who "sell" any owner without scruple when they come to terms among themselves, has disgusted landlords from actively supporting railway schemes. A great deal of the opposition between rival companies has been from their point of view an error, as they have subsequently discovered for themselves. When the Great Western Company first opened their station at Basingstoke there was war between them and the South-Western, who thought all their London West-End passengers would transfer themselves to the Great Western at Basingstoke in order to avoid a cab drive from Waterloo to Paddington. Some passengers do so transfer themselves. But _via_ Basingstoke a fine trade sprang up between the south of England and the Oxford and Leamington route, which far more than compensated the South-Western Company for the London passengers they lost at Basingstoke. So in a very few years there was peace at Basingstoke, and a through-carriage daily from Birkenhead to Southampton. I think it is impossible to estimate how much one railway company profits by the facilities afforded by all the surrounding companies. The loss at a limited number of competing termini is seen; the gain in the local and cross-country traffic is not. I propose Free Trade in Railways. I mean that any person or company shall be free to make a railway wherever they please. They will have, before commencing the line, to lodge with the Board of Trade the cost of the land they take as valued in the National Rate Book, with the 30 per cent for compulsory purchase. They will not have to lodge the money where they have come to terms with the owner; and the Board of Trade will allow them to construct the line in reasonable sections. Having lodged their money, the company (or private speculator) will only have to go to work under the (amended) Lands Clauses Consolidation Act. If this scheme were sanctioned we should have in the course of the next twenty years, _as I estimate_, £100,000,000 additional invested in England profitably--not under Government pressure, but by business men to get interest. Even where the new lines paid little interest we should get the accommodation of the public. We should have no big village without its railway; and we should have a great extension of private sidings. On the eastern half of England we might get a great number of narrow gauge steam trams running along the present trunk roads. (Suppose a steam tram from London to York by the Royston route, going through all the towns, running trams an hour apart all day, going eight miles an hour through the towns, sixteen or twenty miles an hour in the country, taking up and setting down everywhere, would it not pay?) The only objection to Free Trade in railways is that it would injure the existing railway monopoly. Under this principle no monopoly ever would have been or ever will be put down. But I believe the existing great companies would very generally gain by Free Trade in railways. For, first, few new railways would be in direct competition with the old. The old lines have level roads; they can run quicker and with less wear and tear than the new ones, which would generally have steeper gradients. The new Free Trade lines would be in the main a network in the interstices of the present lines. By this the existing companies would gain enormously; they would be the trunk lines which the network would feed. It is true that there would soon be a second line to Brighton; the present Brighton Company would possibly pay as good a dividend then as they do now. But if they did not, it would only show how they tax the public now as well as hinder trade. I am not bound to show that the monopolists would profit by Free Trade; I deny that the monopolists have any vested interest in their monopoly, or that Parliament, i.e. the nation, has made any covenant with them that their monopoly shall never be invaded. I have suggested three great changes: (1) Perfect Free Trade at all our ports; (2) The exploitation of the land through the National Rate Book machinery; (3) Free Trade in Railways. Of these the last is clearly advisable, nor is there anything (in my opinion) to be urged on the other side. At the same time it is not less important than either of the two other suggestions. But the three would work best together--each aiding and reacting on the other; they would thus provide "progress" (which means comfort to all classes) in England for at least two generations of men. If there was no National Rate Book, the new railways would have to pay exorbitantly for the land they took up under the existing arbitration system; they would be relieved merely from the parliamentary opposition of other companies and of private individuals. The private owner must be deprived of his present privilege of parliamentary opposition, which gives him the power to extort an exorbitant price for his land--because a company can always oppose in the garb of some private owner whom they have hired. A less but important branch of this reform is the narrowing of Government interference under pretence of protecting the public. Great expenses are thus thrown on railway companies. The companies cannot, therefore, charge increased fares, but such expenses diminish the number of new railway schemes brought forward. Nor do Government rules protect the public so well as the old plan (abolished by Chief-Justice Cockburn) of making the railway company pay for killing or injuring people. Now, after a great railway smash, the company comes forward and shows that there was no negligence on their part; that in the signals, breaks, etc., they had satisfied all the Board of Trade regulations, and the injured passengers can get nothing. The real way to protect the passengers is to allow the company to make their own arrangements, and to compel them to pay heavily for killing and maiming passengers. This is quite defensible in theory, as in the case of manslaughter by an individual we give him some punishment out of our civilised respect for human life, though he may have been little to blame. Great cost is thrown on railway companies (i.e. much injury is done the public) by standing orders (cast-iron orders) about gradients, etc. The company's solicitors order the company's engineer to comply with standing orders at all costs rather than introduce any special clause. The consequence is that we see much money spent and a most inconvenient level-crossing placed at the entrance to some large town, where a steep gradient for two hundred yards on a straight piece of road (to which there is no objection) would have avoided all difficulty. The responsibility in all such cases should be thrown on the company, and Government interference abolished. 7. REFORM IN LAND LAW. The transfer of stock in the name of two trustees in the funds is done in a few minutes at small expense. The transfer of land in South Australia is done in a few minutes at small expense at the Government registry. The transfer of land in England requires an uncertain time and cost--usually some weeks, and 5 per cent on the purchase money; sometimes months, and 10 to 25 per cent on the purchase money. It is equally expensive and slow in the register counties of York and Middlesex. The Acts of Brougham, Bethell, Cairns, to facilitate transfer have not materially reduced the evil. In many cases, however much the land may be wanted for public or other purposes, the lawyers tell you that no title can be made without a private Act of Parliament--so effectually has the land been tied up. The common idea is that this peculiar difficulty, delay, and cost in the transfer of land arise from the law of inheritance and the legal machinery of entail; but stock in the funds can be virtually entailed and made to "follow the estate," and yet this stock can be transferred just as readily as any other stock. The explanation is known to every lawyer; but I have met with more than one Member of Parliament who, though blatant about entail, understood no more about the matter than a chimney-sweep. The point is that, under English law, the trusts in the case of stock attach to the trustees, not to the stock; in the case of land, the trusts attach to the land itself as well as to the trustees. Hence, when I purchase stock of trustees I need not trouble about how they apply the purchase money; in the case of land I have to go into the whole title. A simple illustration. I provide for a daughter £300 a year by putting £10,000 in the hands of two trustees in the funds. Should the trustees prove rascals, sell the stock, and decamp with the money, my daughter will lose everything; the purchaser from the trustees can hold the stock clear of all charges or liability. But if I provide for my daughter by charging an estate with £300 a year for her, then however wrongfully that estate may be sold, mortgaged, or otherwise dealt with, she gets safely her £300 a year. If the bank B has advanced money on mortgage on that estate, not knowing the existence of the charge of £300 a year for my daughter's benefit, the law simply says to the bank, "It was your business to know; you should have completely investigated the title before you advanced your money." It follows, therefore, that if, with a Government Land Registry Office (say one for each county), you required the purchaser only to get in the legal estate, _i.e._ holding him not responsible for the trusts or the application of the purchase money, then land could be transferred exactly as money in the funds is now, in spite of all the complications of our law (or rather custom) of entail. The law of entail in England (so called) is not what the popular orators suppose. The eldest son inherits really; that is, if there be no will, no settlement, or other disposition of the property. But there nearly always is. It is a very rare thing for the heir-at-law to take land (except some very small pieces) by the law of inheritance. As to entail, it is practically carried out by a continued system of surrender and re-settlement--a device of lawyers which is, in its historical development, an evasion (rather than a part) of the law. Nevertheless, I think it is a matter of importance that the shackles which fetter land should be loosened, and that the present powers of owners to tie up land legally should be very much curtailed. It is a sad proof of the way riches cling to the heart of man even when he is leaving this world, that, whatever powers of tying up land are sanctioned, an owner will usually exert them to the uttermost. He is leaving his property, but he will keep a hold on it fifty years after he is dead if he can. He will, after exhausting his powers in life interests, leave the residuum to an unborn child "in strict tail-male so far as the rules of law will permit;" and he will stick in a springing use to effect that, if his greatnephew, the Rev. George, should ever from an Anglican become a pervert to Roman Catholicism, he shall take no benefit under the will. Now the fact is that all tying up is to the detriment of the public. No man can provide for all contingencies. Indeed he can see so little a way ahead that in a few years it frequently happens that all the careful provisions of the will are working exactly as the testator would have desired them not to work. Land tied up is always worth less to the owner because it is tied up; and we have seen that the interest of the commonwealth is the sum of the interests of all its component members. When you tell me that an estate is now of small value to its life-owner and unget-at-able for any public purposes, in consequence of a will made by a man who died twenty years ago, it appears to me that you shew me convincingly that we have not Free Trade in land. I would propose that, either by will, settlement, or other instrument, an owner should be able to give any number of life interests, and nothing more; all trusts being placed outside the law. The first objection will be that if the powers of owners are so restricted, the desire for the ownership of land will be lessened: the value of all the land in England will fall. This might be so, I admit, to some extent; and it would favour the employ of the land for agricultural profit. The next objection is that it would become necessary to give land (and money) directly to women without the intervention of trustees: that women do not understand business and require to be taken care of. My reply is that they always will require to be taken care of unless they are entrusted with the management of their own affairs. The loss to the nation, the expenses, the sacrifice of time and labour in trusteeships, have now assumed gigantic proportions. If women were given their own property to manage, some would (at first) fool it away: we know what high interest, adventurers, unprincipled persons, etc., can effect. But each woman defrauded or stripped of her property to starve would be a warning to all the rest: in a few years women would manage their property just as well as men. I believe they would manage it better. A smaller percentage of women would gamble on the Stock Exchange, the Mining Exchange, Austrian and Spanish lotteries, and horse-races; and a much smaller percentage of women would embark in desperate "business" speculations, heavy purchases of foreign produce, etc. It should be noted that in cutting down the powers of owners to legally tie up, I do not interfere with honourable trusteeships of any kind not enforceable by law or in equity. Such exist now, and more largely than is generally supposed. The absolute devises and bequests to friends (not relatives) are often on private (not expressed) trust to provide for illegitimate children or numerous other purposes which a man may not wish to parade to his family. 8. EQUALISING OF TAXATION. There has been no readjustment of the land tax for very many years. It is a property rate, and originally was rateably levied at four shillings in the pound. By the small increase in value of some land, the large increase in value of other land, since the days of Queen Anne, it has now become unequal in the highest degree. The farm A, gross rental £100 a year, has a land tax of £5 a year; the suburban estate B, gross rental £1000 a year, has a land tax of £2:l0s. a year. The land tax assessors were sworn in annually (twenty years ago, and may be still) to assess the tax equally, but it was perfectly understood that the tax was to be collected every year on the old long-standing assessment. Suppose that the estates A and B above were reassessed, and that the land tax on A was put 15s. per annum, that on B £6:15s. a year. Land tax can be redeemed at about thirty years' purchase. The effect of the readjustment would have been to take about £120 from the owner of B and give it in a lump sum to the owner of A. It is probable that the present owners of both A and B (or predecessors under whom they claim) had purchased the estates A and B after the land tax had become fixed on them, and the amount of land tax would then have been fully considered in the price paid. We see thus that in the case of the land tax, as we saw above of the tithe, and as is also the case in any tax permanently on, a disturbance of the existing taxation is inequitable. This point is so much misunderstood that I will give one more illustration. I am purchasing an estate, intending to farm it myself. There are 400 acres of land, and I reckon the land worth 30s. an acre. I am willing to give twenty-five years' purchase. I find the tithe is £100 a year. I therefore propose to give twenty-five times £500 = £12,500 for the land. But before the bargain is completed I find that the tithe is £150 a year. I at once sink my bid to twenty-five times £450 = £11,250, and buy the estate at that price. The next year some financier "equalises" the tithe, and my tithe is reduced to £100. Is it not clear that, by the equalisation, I pocket £1250, and somebody else loses it? New taxes when imposed should be "equal," as far as can be arranged. When a legacy duty was imposed, it would have been just to impose a succession duty also. But, after the legacy duty had been imposed twenty years with no succession duty, it was similarly inequitable to put on a succession duty; for quantities of land had been bought in the interval of twenty years at a slightly higher price than if there had been no legacy duty, because there was no succession duty. The proposal for "equalising" taxes is usually put forward in order to get a somewhat larger gross income from the taxes equalised, or as a political cry. Nothing can be more absurd than the cry that the land is over-burdened in comparison with other property. There is no comparison in the case. Some land being tithe free, some land tax free, some nearly rate free, those persons who do not trouble themselves to master the political economy may yet be satisfied that the "burdens" of the land affect neither the farmer, the labourer, nor the produce of the farm; the burdens fall _wholly_ on the landlord (a farmer with a lease being, as above shown, a part landlord). The efforts of some Conservative orators for the last twenty-five years to prove the contrary are erroneous in the reasoning; or I should say, much of the "reasoning" does not hang together at all. Without formally refuting these efforts, I repeat that they are fully refuted in the result. It is therefore that I have insisted above that, in order to carry out the proposed ransom of the land, a new Property Rate, separate from and in addition to all other taxes, is necessary. Though the manner of levying a National Property Rate which I have proposed lends itself very nicely to getting in such an extra tax, it is not at all on that ground that I have suggested the new manner of levy. The object of the new manner of levy and the sycophants is to get every piece of land in the country into the hands of that man who can make most of it; including herein as an important item the cheap and easy acquisition of land required for Government, public and commercial (railway, etc.) enterprises. In any great reform of our whole system of taxation a disturbance of existing interests must take place. Though I would not disturb existing interests for the sake of mere equalisation or official beauty of work, I would not let the fear of disturbing private interests stand in the way of any real or important reform. The introduction of Universal Free Trade and the abolition of all duties would be accompanied by a disturbance; but, as far as I can see, no one would lose, while many would gain enormously. On the same ground of equality of new taxation I should propose to replace the amount now levied in duties mainly by an income tax. That is a perfectly level tax; the idea that temporary incomes ought to pay a lower rate is fallacious. We are all agreed to tax the poor at a _lower_ rate; we have now a section of advanced Radicals proposing to tax the rich at a higher rate. One present candidate for Parliament is even willing to tax people of £100,000 a year and upwards at nineteen shillings in the pound. This of course, or anything approaching it, is unpractical. But I have suggested above, as a rough plan in accordance with the existing one, eight-pence a week on incomes of £1 a week, twelvepence a week on incomes of £2 a week, sixteen-pence a week on incomes of £3 a week and upwards. The question may very fairly be raised, Why stop this process at £3? why not continue the series and develop it into a mathematical law? This might be done more easily with a sixpenny income tax than a heavy one. To tax earnings and savings (that is an income tax) instead of expenditure can only be carried a certain way; if the tax is large enough to diminish saving and promote living up to one's income, and at the same time to send capital abroad, its effects would be serious. For a particular and noble purpose I have suggested sixteen-pence in the pound (which we bore without serious inconvenience in the Russian war); I should imagine twenty to twenty-four pence in the pound about the maximum that could be imposed for any purpose--such as the prevention of hostile invasion. It must be noted that more than the maximum bearable cannot be put on large incomes, £100,000 a year, etc., any more than on small ones. Indeed it is rather the contrary; for persons with large incomes are usually the very people who already invest largely abroad, and who could (and would) transfer their capital rapidly out of the country if they were subjected to anything like confiscation. Instead therefore of proceeding _upwards_ in our income tax sliding-scale we must proceed downwards. Taking sixteen-pence in the pound as the maximum rate we can impose on the big fish, the problem will be, What is the highest income to which you will allow any remission from the maximum rate? I think those having above £150 a year possess more than the necessaries for healthful existence; looking therefore to the equity and productiveness of the tax, I suggested remission to those earning less than £3 a week. 9. WEALTH OF THE NATION. The Wealth of Nations is a well-considered title. The economists anterior to Adam Smith conceived England as surrounded by a barrier impassable to property and money except by trade. In trade there was an exchange apparently on equal terms; but the old economists saw a difference in nature between imports and exports; when wool was sold to Flanders gold was received, and remained somewhere in the nation; it formed the national purchasing power, and could hire mercenaries or otherwise command foreign labour and productions. Inversely, when we imported wine or tea, we had to part with a portion of our national purchasing power, while the wine and tea went down our throats, leaving nothing in its place. It appeared clear that for any increase in national wealth the value of the exports must exceed that of the imports. Every well-prepared boy can now show in ten minutes' scribbling in a Government examination the ridiculous folly of the old economists; but several of them were experienced London merchants, and perhaps were not the complete idiots they are now triumphantly shown to be. If they had been asked whether wool was a part of the national wealth they might have returned an answer that their modern detractors are not quite prepared for. Adam Smith and his followers, and still more closely Ricardo, divided their Political Economy into two parts: in the first they consider the wealth of the nation without the "complication" of foreign trade, _i.e._ they, in fact, contemplate no money or goods as going out or coming in whatever. They then in separate chapters, forming a big appendix, consider the effects of Foreign Trade as a series of exchanges. They do not discuss even the payment of a lump sum of gold to a victorious nation. Senior, in his _Handbook of Political Economy_, has considered, first, the economy of the world conceived as a solitary, island of small size in a world-covered sea; secondly, he treats foreign trade by conceiving two such islands. There is no better way of treating Political Economy than this; and it is well for the beginner to conceive the solitary island with fifty (or a limited number of) families only on it, and work through the ordinary theorems (with figures) in this restricted case. Whatever is true of the fifty families in a small island must be true for 5,000,000 families in a big island. The facilities of modern communications have caused most countries to differ in their circumstances materially from the conditions assumed by Adam Smith and his successors as axioms. In the case of England, owing to its numerous wealthy colonies, gigantic foreign trade, and consequently world-over-spread capital, the circumstances are so completely altered that many results of the grammar of Political Economy no longer apply even in the rough to England. If Adam Smith had been asked what would happen to England if the imports for one year exceeded the exports by £150,000,000 sterling, he would have given the same answer as his predecessors, who reckoned wealth in gold and silver, or more probably he would have declined answer, pronouncing such a state of things an impossible conception. It is now as difficult to treat politico-economically the wealth of the nation as the wealth of Warwickshire--a difficulty that Adam Smith would have shrunk from. It is true that every abstract proposition concerning rent, capital, and wages now (and always) holds true for the whole world; but, so conceived, the propositions give no practical result. These things do not lesson the value of the science of Political Economy, Mr. Ranken or Dr. Pole would estimate very highly the value of a knowledge of elementary mechanics to the humblest engineer, though such elementary mechanics might not extend to the consideration of friction, etc., and might not be applicable to any bridge or steam-engine. Of this £150,000,000 that is now annually remitted to England, not in the way of exchange, some small portion is transferred by wealthy Australians returning to settle in England for purchase of houses, etc., in England; but by far the greater portion is the interest of capital owned by men resident in England, but invested abroad: it may be shortly termed tribute. This is mainly invested in the Colonies and India; New Zealand and Australia taking large shares. There is also much English capital invested in Continental railways, etc.; but it is noteworthy how capital (as well as commerce) follows the flag. The English capital invested in the United States is absolutely large, but relatively (to that invested in Canada, etc.) very small. It is certain that if the United States were under Queen Victoria the amount of English capital invested there would be far greater than at present. As far as England is concerned this £150,000,000 a year is a tribute paid her by the rest of the world. New Zealand or South Australia may take up a million sterling in London (because they get the loan placed there at 5 or 6 per cent, while the local rate of interest in Australia is far higher) in order to make a railway which perhaps pays the local Government as much as the interest of the money they give to England. Still, the capital being once fixed in Australia while (by hypothesis) the stock is held in England, the result is equivalent to a tribute. All Liberal stump-orators now agree in telling the agricultural population that their improved position is due to Free Trade (in wheat), and that therefore they should vote for the Liberals. Nothing is done more confidently in politics and history than the settling the causes of events, or predicting what would have been the course of events had some result been different, as, for instance, had the separation of the United States from England not occurred. The truth is that in politics causes are many; they act and react on each other in their operations; and to say exactly how much is due to one cause, or how much that cause acting alone would have effected, is impossible. To get some judgment how much of the present prosperity of the agricultural labourers (admitted on all sides as compared with their position in 1846) is due to free importation of wheat alone, let us (merely as a scientific artifice) imagine that a regular sliding-scale duty on wheat were put on now, bringing wheat to 48s. a quarter permanently. What would be the effect on the agricultural population? We may suppose that the produce of the duty, were it five or eight millions, or any other sum, was employed in remitting the duties on tea or other productions generally consumed by agricultural labourers. The placing of wheat at 48s. a quarter permanently would at once recall a good deal of capital to the land, it would carry out further the margin of cultivation, and at the same time cause a higher farming of that within the non-existing margin; in both ways it would raise the demand for agricultural labour, and would raise wages. On the whole, I incline to think that a sliding-scale duty on wheat up to 48s. a quarter would not perceptibly alter the position of the agricultural labourer, or might possibly improve it: it would lower the wages and diminish the profits of capital in other trades. This is not (as before explained) a fair way of arguing the question; because it is impossible to calculate the indirect effects of Free Trade in wheat, which ultimately came round to benefit the agricultural labourer. But considering how the efficiency of the agricultural labourer has been improved by improved machines since 1846, it is hardly possible to doubt that the agricultural labourer is much more indebted to the engineers than to the Corn Law League for his improved position. Under "machines" too may be included railway communications: also let us not forget how much the agricultural labourer owes, not only to drills and mowing-machines, but to boot-sewing machines, improved tea-ships, etc. If we look to the general increase of wealth in England since 1846, the first thing that strikes us is the increase in the tribute, which is about thrice what it was. This increase is largely imperial, i.e. due to colonisation, annexation, etc. But here again we must not overlook the reaction of causes on each other: our Free Trade in corn, our improvements in machinery and ships, have so largely contributed to spread our empire that it becomes impossible to disentangle the separate work, or indeed to speak of any one cause as a simple element: the causes all act together. England is the most comfortable country in the world for a rich man to live in, and consequently rich men congregate there; or, if they travel, keep a headquarters there. In this way we have congregated a disproportionate population in England. It may be argued that it would be a healthier economic state if the exports and imports balanced, and if the population of England was no larger than the country itself could grow wheat for, _at a price not exceeding 40s. a quarter_. However that may be, the important point for the working men of England to mark is, that every loss of rich men resident, every loss of tribute, every reduction of the wage-fund, every pressure on the population to emigrate, everything that leads in the direction of a self-supporting England, means immediate pressure on the poor, with reduction of wages. That is the only way emigration could be by natural law enforced. It is the poor, the labouring population, who are so hugely interested in the empire. Of all the follies taught to the labouring man the most foolish is the doctrine that the empire abroad is maintained to provide incomes for the rich, at the cost of the taxes paid for wars by the poor. It matters comparatively little to the rich whether they live at Florence or Dresden four or eight months in the year, whether the population of England is to be maintained stationary, to increase at its present rate of increase, or to be squeezed down to half its present number: but it matters vitally to the poor. Whether, ultimately, after our empire is gone and the population of England is stationary at fifteen millions say, the poor in England would be better off than now is a very difficult question, concerning which doctors differ; but it is absolutely certain that during the Banting process, in the reduction of the population down to that fifteen millions by a process of starvation and emigration, continued for two generations of men, the poor would have to go through experiences altogether novel. It is a thing that would revolutionise England; and in spite of the superior education of our labourers might lead to a break up of society. Starvation and bankruptcy make any and every man a Radical if not a Communist. To keep the poor comfortable for the present and for many years immediately in front of us, we require a continual increase in the wealth laid out in England annually in the purchase of labour. The growth of the empire, the profitable investment of capital in foreign countries (whereof the interest is paid and consumed in England), is one great resource: the profitable investment of capital in England itself is the other great, probably safer, resource. To effect this we require every acre of land to fall into the hand of the man (or company) who can make most of it: we require a Universal Free Trade that shall render our hold on the commerce of the world secure until all nations adopt Universal Free Trade (when we shall gain so much in other ways that we shall be able to afford to share our monopoly with others); we require the removal of all restraints on railways, tramways, electric lights, etc., that hamper or prevent the employment of capital in England (in other words, that send English capital abroad). Finally, underlying the whole, and as the prime cause that shall induce capitalists to employ their capital in England rather than to send it abroad, we require the labour of every working man to be in the highest degree efficient: this retards the fall of the natural rate of profits to a minimum, and the attainment of the stationary state. Whatever ideal beauty has been discovered in the stationary state by J. S. Mill, it is pretty clear that England is not approaching it. It is as difficult for us to stand still as it is impossible to go back; and our only (third) course open (for the present and for many years to come) is to progress. 
36541	----	UNTO THIS LAST AND OTHER ESSAYS ON POLITICAL ECONOMY by JOHN RUSKIN London Melbourne & Toronto Ward Lock & Co Limited 1912 CONTENTS. PART I. PAGE THE POLITICAL ECONOMY OF ART 7 LECTURE I. 11 1. Discovery 23 2. Application 28 LECTURE II. 46 3. Accumulation 46 4. Distribution 65 ADDENDA 86 Note 1.--"Fatherly Authority" 86 " 2.--"Right to Public Support" 90 " 3.--"Trial Schools" 95 " 4.--"Public Favour" 101 " 5.--"Invention of new wants" 102 " 6.--"Economy of Literature" 104 " 7.--"Pilots of the State" 106 " 8.--"Silk and Purple" 107 PART II. UNTO THIS LAST 117 ESSAY I.--The Roots of Honour 127 II.--The Veins of Wealth 143 III.--"Qui Judicatis Terram" 156 IV.--Ad Valorem 173 PART III. ESSAYS ON POLITICAL ECONOMY[A] I.--MAINTENANCE OF LIFE: WEALTH, MONEY AND RICHES 207 Section 1. Wealth 214 " 2. Money 219 " 3. Riches 222 II.--NATURE OF WEALTH, VARIATIONS OF VALUE, THE NATIONAL STORE, NATURE OF LABOUR, VALUE AND PRICE, THE CURRENCY 225 III.--THE CURRENCY-HOLDERS AND STORE-HOLDERS, THE DISEASE OF DESIRE 252 IV.--LAWS AND GOVERNMENTS: LABOUR AND RICHES 278 [A] These Essays were afterwards revised and amplified, and published with others under the title "Munera Pulveris." THE POLITICAL ECONOMY OF ART. PREFACE. The greater part of the following treatise remains in the exact form in which it was read at Manchester; but the more familiar passages of it, which were trusted to extempore delivery, have been since written with greater explicitness and fullness than I could give them in speaking; and a considerable number of notes are added, to explain the points which could not be sufficiently considered in the time I had at my disposal in the lecture-room. Some apology may be thought due to the reader, for an endeavour to engage his attention on a subject of which no profound study seems compatible with the work in which I am usually employed. But profound study is not, in this case, necessary either to writer or reader, while accurate study, up to a certain point, is necessary for us all. Political economy means, in plain English, nothing more than "citizens' economy"; and its first principles ought, therefore, to be understood by all who mean to take the responsibility of citizens, as those of household economy by all who take the responsibility of householders. Nor are its first principles in the least obscure: they are, many of them, disagreeable in their practical requirements, and people in general pretend that they cannot understand, because they are unwilling to obey them; or, rather, by habitual disobedience, destroy their capacity of understanding them. But there is not one of the really great principles of the science which is either obscure or disputable--which might not be taught to a youth as soon as he can be trusted with an annual allowance, or to a young lady as soon as she is of age to be taken into counsel by the housekeeper. I might, with more appearance of justice, be blamed for thinking it necessary to enforce what everybody is supposed to know. But this fault will hardly be found with me, while the commercial events recorded daily in our journals, and still more the explanations attempted to be given of them, show that a large number of our so-called merchants are as ignorant of the nature of money as they are reckless, unjust, and unfortunate in its employment. The statements of economical principle given in the text, though I know that most, if not all, of them are accepted by existing authorities on the science, are not supported by references, because I have never read any author on political economy, except Adam Smith, twenty years ago.[1] Whenever I have taken up any modern book upon this subject, I have usually found it encumbered with inquiries into accidental or minor commercial results, for the pursuit of which an ordinary reader could have no leisure, and, by the complication of which, it seemed to me, the authors themselves had been not unfrequently prevented from seeing to the root of the business. [1] 1857. Finally, if the reader should feel inclined to blame me for too sanguine a statement of future possibilities in political practice, let him consider how absurd it would have appeared in the days of Edward I. if the present state of social economy had been then predicted as necessary, or even described as possible. And I believe the advance from the days of Edward I. to our own, great as it is confessedly, consists, not so much in what we have actually accomplished, as in what we are now enabled to conceive. LECTURE I. Among the various characteristics of the age in which we live, as compared with other ages of this not yet _very_ experienced world, one of the most notable appears to me to be the just and wholesome contempt in which we hold poverty. I repeat, the _just_ and _wholesome_ contempt; though I see that some of my hearers look surprised at the expression. I assure them, I use it in sincerity; and I should not have ventured to ask you to listen to me this evening, unless I had entertained a profound respect for wealth--true wealth, that is to say; for, of course, we ought to respect neither wealth nor anything else that is false of its kind: and the distinction between real and false wealth is one of the points on which I shall have a few words presently to say to you. But true wealth I hold, as I said, in great honour; and sympathize, for the most part, with that extraordinary feeling of the present age which publicly pays this honour to riches. I cannot, however, help noticing how extraordinary it is, and how this epoch of ours differs from all bygone epochs in having no philosophical nor religious worshippers of the ragged godship of poverty. In the classical ages, not only there were people who voluntarily lived in tubs, and who used gravely to maintain the superiority of tub-life to town-life, but the Greeks and Latins seem to have looked on these eccentric, and I do not scruple to say, absurd people, with as much respect as we do upon large capitalists and landed proprietors; so that really, in those days, no one could be described as purse proud, but only as empty-purse proud. And no less distinct than the honour which those curious Greek people pay to their conceited poor, is the disrespectful manner in which they speak of the rich; so that one cannot listen long either to them, or to the Roman writers who imitated them, without finding oneself entangled in all sorts of plausible absurdities; hard upon being convinced of the uselessness of collecting that heavy yellow substance which we call gold, and led generally to doubt all the most established maxims of political economy. Nor are matters much better in the middle ages. For the Greeks and Romans contented themselves with mocking at rich people, and constructing merry dialogues between Charon and Diogenes or Menippus, in which the ferryman and the cynic rejoiced together as they saw kings and rich men coming down to the shore of Acheron, in lamenting and lamentable crowds, casting their crowns into the dark waters, and searching, sometimes in vain, for the last coin out of all their treasures that could ever be of use to them. But these Pagan views of the matter were indulgent, compared with those which were held in the middle ages, when wealth seems to have been looked upon by the best men not only as contemptible, but as criminal. The purse round the neck is, then, one of the principal signs of condemnation in the pictured Inferno; and the Spirit of Poverty is reverenced with subjection of heart, and faithfulness of affection, like that of a loyal knight for his lady, or a loyal subject for his queen. And truly, it requires some boldness to quit ourselves of these feelings, and to confess their partiality or their error, which, nevertheless, we are certainly bound to do. For wealth is simply one of the greatest powers which can be entrusted to human hands: a power, not indeed to be envied, because it seldom makes us happy; but still less to be abdicated or despised; while, in these days, and in this country, it has become a power all the more notable, in that the possessions of a rich man are not represented, as they used to be, by wedges of gold or coffers of jewels, but by masses of men variously employed, over whose bodies and minds the wealth, according to its direction, exercises harmful or helpful influence, and becomes, in that alternative, Mammon either of Unrighteousness or of Righteousness. Now, it seemed to me that since, in the name you have given to this great gathering of British pictures, you recognise them as Treasures--that is, I suppose, as part and parcel of the real wealth of the country--you might not be uninterested in tracing certain commercial questions connected with this particular form of wealth. Most persons express themselves as surprised at its quantity; not having known before to what an extent good art had been accumulated in England: and it will, therefore, I should think, be held a worthy subject of consideration, what are the political interests involved in such accumulations; what kind of labour they represent, and how this labour may in general be applied and economized, so as to produce the richest results. Now, you must have patience with me, if in approaching the specialty of this subject, I dwell a little on certain points of general political science already known or established: for though thus, as I believe, established, some which I shall have occasion to rest arguments on are not yet by any means universally accepted; and therefore, though I will not lose time in any detailed defence of them, it is necessary that I should distinctly tell you in what form I receive, and wish to argue from them; and this the more, because there may perhaps be a part of my audience who have not interested themselves in political economy, as it bears on ordinary fields of labour, but may yet wish to hear in what way its principles can be applied to Art. I shall, therefore, take leave to trespass on your patience with a few elementary statements in the outset, and with, the expression of some general principles, here and there, in the course of our particular inquiry. To begin, then, with one of these necessary truisms: all economy, whether of states, households, or individuals, may be defined to be the art of managing labour. The world is so regulated by the laws of Providence, that a man's labour, well applied, is always amply sufficient to provide him during his life with all things needful to him, and not only with those, but with many pleasant objects of luxury; and yet farther, to procure him large intervals of healthful rest and serviceable leisure. And a nation's labour, well applied, is in like manner, amply sufficient to provide its whole population with good food and comfortable habitation; and not with those only, but with good education besides, and objects of luxury, art treasures, such as these you have around you now. But by those same laws of Nature and Providence, if the labour of the nation or of the individual be misapplied, and much more if it be insufficient,--if the nation or man be indolent and unwise,--suffering and want result, exactly in proportion to the indolence and improvidence,--to the refusal of labour, or to the misapplication of it. Wherever you see want, or misery, or degradation, in this world about you, there, be sure, either industry has been wanting, or industry has been in error. It is not accident, it is not Heaven-commanded calamity, it is not the original and inevitable evil of man's nature, which fill your streets with lamentation, and your graves with prey. It is only that, when there should have been providence, there has been waste; when there should have been labour, there has been lasciviousness; and, wilfulness, when there should have been subordination.[2] [2] Proverbs xiii. 23: "Much food is in the tillage of the poor: but there is that is destroyed for want of judgment." Now, we have warped the word "economy" in our English: language into a meaning which it has no business whatever to bear. In our use of it, it constantly signifies merely sparing or saving; economy of money means saving money--economy of time, sparing time, and so on. But that is a wholly barbarous use of the word--barbarous in a double sense, for it is not English, and it is bad Greek; barbarous in a treble sense, for it is not English, it is bad Greek, and it is worse sense. Economy no more means saving money than it means spending money. It means, the administration of a house; its stewardship; spending or saving, that is, whether money or time, or anything else, to the best possible advantage. In the simplest and clearest definition of it, economy, whether public or private, means the wise management of labour; and it means this mainly in three senses: namely, first, _applying_ your labour rationally; secondly, _preserving_ its produce carefully; lastly, _distributing_ its produce seasonably. I say first, applying your labour rationally; that is, so as to obtain the most precious things you can, and the most lasting things, by it: not growing oats in land where you can grow wheat, nor putting fine embroidery on a stuff that will not wear. Secondly, preserving its produce carefully; that is to say, laying up your wheat wisely in storehouses for the time of famine, and keeping your embroidery watchfully from the moth: and lastly, distributing its produce seasonably; that is to say, being able to carry your corn at once to the place where the people are hungry, and your embroideries to the places where they are gay, so fulfilling in all ways the Wise Man's description, whether of the queenly housewife or queenly nation. "She riseth while it is yet night, and giveth meat to her household, and a portion to her maidens. She maketh herself coverings of tapestry, her clothing is silk and purple. Strength and honour are in her clothing, and she shall rejoice in time to come." Now, you will observe that in this description of the perfect economist, or mistress of a household, there is a studied expression of the balanced division of her care between the two great objects of utility and splendour; in her right hand, food and flax, for life and clothing; in her left hand, the purple and the needlework, for honour and for beauty. All perfect housewifery or national economy is known by these two divisions; wherever either is wanting, the economy is imperfect. If the motive of pomp prevails, and the care of the national economist is directed only to the accumulation of gold, and of pictures, and of silk and marble, you know at once that the time must soon come when all these treasures shall be scattered and blasted in national ruin. If, on the contrary, the element of utility prevails, and the nation disdains to occupy itself in any wise with the arts of beauty or delight, not only a certain quantity of its energy calculated for exercise in those arts alone must be entirely wasted, which is bad economy, but also the passions connected with the utilities of property become morbidly strong, and a mean lust of accumulation merely for the sake of accumulation, or even of labour merely for the sake of labour, will banish at last the serenity and the morality of life, as completely, and perhaps more ignobly, than even the lavishness of pride and the lightness of pleasure. And similarly, and much more visibly, in private and household economy, you may judge always of its perfectness by its fair balance between the use and the pleasure of its possessions. You will see the wise cottager's garden trimly divided between its well-set vegetables, and its fragrant flowers; you will see the good housewife taking pride in her pretty table-cloth, and her glittering shelves, no less than in her well-dressed dish, and her full storeroom; the care in her countenance will alternate with gaiety, and though you will reverence her in her seriousness, you will know her best by her smile. Now, as you will have anticipated, I am going to address you, on this and our succeeding evening, chiefly on the subject of that economy which relates rather to the garden than the farm-yard. I shall ask you to consider with me the kind of laws by which we shall best distribute the beds of our national garden, and raise in it the sweetest succession of trees pleasant to the sight, and (in no forbidden sense) to be desired to make us wise. But, before proceeding to open this specialty of our subject, let me pause for a few moments to plead with you for the acceptance of that principle of government or authority which must be at the root of all economy, whether for use or for pleasure. I said, a few minutes ago, that a nation's labour, well applied, was amply sufficient to provide its whole population with good food, comfortable clothing, and pleasant luxury. But the good, instant, and constant application is everything. We must not, when our strong hands are thrown out of work, look wildly about for want of something to do with them. If ever we feel that want, it is a sign that all our household is out of order. Fancy a farmer's wife, to whom one or two of her servants should come at twelve o'clock at noon, crying that they had got nothing to do; that they did not know what to do next: and fancy still farther, the said farmer's wife looking hopelessly about her rooms and yard, they being all the while considerably in disorder, not knowing where to set the spare hand-maidens to work, and at last complaining bitterly that she had been obliged to give them their dinner for nothing. That's the type of the kind of political economy we practise too often in England. Would you not at once assert of such a mistress that she knew nothing of her duties? and would you not be certain, if the household were rightly managed, the mistress would be only too glad at any moment to have the help of any number of spare hands; that she would know in an instant what to set them to;--in an instant what part of to-morrow's work might be most serviceably forwarded, what part of next month's work most wisely provided for, or what new task of some profitable kind undertaken? and when the evening came, and she dismissed her servants to their recreation or their rest, or gathered them to the reading round the work-table, under the eaves in the sunset, would you not be sure to find that none of them had been overtasked by her, just because none had been left idle; that everything had been accomplished because all had been employed; that the kindness of the mistress had aided her presence of mind, and the slight labour had been entrusted to the weak, and the formidable to the strong; and that as none had been dishonoured by inactivity so none had been broken by toil? Now, the precise counterpart of such a household would be seen in a nation in which political economy was rightly understood. You complain of the difficulty of finding work for your men. Depend upon it, the real difficulty rather is to find men for your work. The serious question for you is not how many you have to feed, but how much you have to do; it is our inactivity, not our hunger, that ruins us: let us never fear that our servants should have a good appetite--our wealth is in their strength, not in their starvation. Look around this island of yours, and see what you have to do in it. The sea roars against your harbourless cliffs--you have to build the breakwater, and dig the port of refuge; the unclean pestilence ravins in your streets--you have to bring the full stream from the hills, and to send the free winds through the thoroughfare; the famine blanches your lips and eats away your flesh--you have to dig the moor and dry the marsh, to bid the morass give forth instead of engulphing, and to wring the honey and oil out of the rock. These things, and thousands such, we have to do, and shall have to do constantly, on this great farm of ours; for do not suppose that it is anything else than that. Precisely the same laws of economy which apply to the cultivation of a farm or an estate apply to the cultivation of a province or of an island. Whatever rebuke you would address to the improvident master of an ill-managed patrimony, precisely that rebuke we should address to ourselves, so far as we leave our population in idleness and our country in disorder. What would you say to the lord of an estate who complained to you of his poverty and disabilities, and, when you pointed out to him that his land was half of it overrun with weeds, and that his fences were all in ruin, and that his cattle-sheds were roofless, and his labourers lying under the hedges faint for want of food, he answered to you that it would ruin him to weed his land or to roof his sheds--that those were too costly operations for him to undertake, and that he knew not how to feed his labourers nor pay them? Would you not instantly answer, that instead of ruining him to weed his fields, it would save him; that his inactivity was his destruction, and that to set his labourers to work was to feed them? Now, you may add acre to acre, and estate to estate, as far as you like, but you will never reach a compass of ground which shall escape from the authority of these simple laws. The principles which are right in the administration of a few fields, are right also in the administration of a great country from horizon to horizon: idleness does not cease to be ruinous because it is extensive, nor labour to be productive because it is universal. Nay, but you reply, there is one vast difference between the nation's economy and the private man's: the farmer has full authority over his labourers; he can direct them to do what is needed to be done, whether they like it or not; and he can turn them away if they refuse to work, or impede others in their working, or are disobedient, or quarrelsome. There _is_ this great difference; it is precisely this difference on which I wish to fix your attention, for it is precisely this difference which you have to do away with. We know the necessity of authority in farm, or in fleet, or in army; but we commonly refuse to admit it in the body of the nation. Let us consider this point a little. In the various awkward and unfortunate efforts which the French have made at the development of a social system, they have at least stated one true principle, that of fraternity or brotherhood. Do not be alarmed; they got all wrong in their experiments, because they quite forgot that this fact of fraternity implied another fact quite as important--that of paternity or fatherhood. That is to say, if they were to regard the nation as one family, the condition of unity in that family consisted no less in their having a head, or a father, than in their being faithful and affectionate members, or brothers. But we must not forget this, for we have long confessed it with our lips, though we refuse to confess it in our lives. For half an hour every Sunday we expect a man in a black gown, supposed to be telling us truth, to address us as brethren, though we should be shocked at the notion of any brotherhood existing among us out of church. And we can hardly read a few sentences on any political subject without running a chance of crossing the phrase "paternal government," though we should be utterly horror-struck at the idea of governments claiming anything like a father's authority over us. Now, I believe those two formal phrases are in both instances perfectly binding and accurate, and that the image of the farm and its servants which I have hitherto used, as expressing a wholesome national organization, fails only of doing so, not because it is too domestic, but because it is not domestic enough; because the real type of a well-organized nation must be presented, not by a farm cultivated by servants who wrought for hire, and might be turned away if they refused to labour, but by a farm in which the master was a father, and in which all the servants were sons; which implied, therefore, in all its regulations, not merely the order of expediency, but the bonds of affection and responsibilities of relationship; and in which all acts and services were not only to be sweetened by brotherly concord, but to be enforced by fatherly authority.[3] [3] See note 1st, in Addenda [p. 86]. Observe, I do not mean in the least that we ought to place such an authority in the hands of any one person, or of any class or body of persons. But I do mean to say that as an individual who conducts himself wisely must make laws for himself which at some time or other may appear irksome or injurious, but which, precisely at the time they appear most irksome, it is most necessary he should obey, so a nation which means to conduct itself wisely, must establish authority over itself, vested either in kings, councils, or laws, which it must resolve to obey, even at times when the law or authority appears irksome to the body of the people, or injurious to certain masses of it. And this kind of national law has hitherto been only judicial; contented, that is, with an endeavour to prevent and punish violence and crime: but, as we advance in our social knowledge; we shall endeavour to make our government paternal as well as judicial; that is, to establish such laws and authorities as may at once direct us in our occupations, protect us against our follies, and visit us in our distresses: a government which shall repress dishonesty, as now it punishes theft; which shall show how the discipline of the masses may be brought to aid the toils of peace, as discipline of the masses has hitherto knit the sinews of battle; a government which shall have its soldiers of the ploughshare as well as its soldiers of the sword, and which shall distribute more proudly its golden crosses of industry--golden as the glow of the harvest, than now it grants its bronze crosses of honour--bronzed with the crimson of blood. I have not, of course, time to insist on the nature or details of government of this kind; only I wish to plead for your several and future consideration of this one truth, that the notion of Discipline and Interference lies at the very root of all human progress or power; that the "Let alone" principle is, in all things which man has to do with, the principle of death; that it is ruin to him, certain and total, if he lets his land alone--if he lets his fellow-men alone--if he lets his own soul alone. That his whole life, on the contrary, must, if it is healthy life, be continually one of ploughing and pruning, rebuking and helping, governing and punishing; and that therefore it is only in the concession of some great principle of restraint and interference in national action that he can ever hope to find the secret of protection against national degradation. I believe that the masses have a right to claim education from their government; but only so far as they acknowledge the duty of yielding obedience to their government. I believe they have a right to claim employment from their governours; but only so far as they yield to the governour the direction and discipline of their labour; and it is only so far as they grant to the men whom they may set over them the father's authority to check the childishnesses of national fancy, and direct the waywardnesses of national energy, that they have a right to ask that none of their distresses should be unrelieved, none of their weaknesses unwatched; and that no grief, nor nakedness, nor peril should exist for them, against which the father's hand was not outstretched, or the father's shield uplifted.[4] [4] Compare Wordsworth's Essay on the Poor-Law Amendment Bill. I quote one important passage:--"But, if it be not safe to touch the abstract question of man's right in a social state to help himself even in the last extremity, may we not still contend for the duty of a Christian government, standing _in loco parentis_ towards all its subjects, to make such effectual provision that no one shall be in danger of perishing either through the neglect or harshness of its legislation? Or, waiving this, is it not indisputable that the claim of the State to the allegiance, involves the protection of the subject? And, as all rights in one party impose a correlative duty upon another, it follows that the right of the State to require the services of its members, even to the jeoparding of their lives in the common defence, establishes a right in the people (not to be gainsaid by utilitarians and economists) to public support when, from any cause, they may be unable to support themselves."--(See note 2nd in Addenda [p. 90]). Now, I have pressed this upon you at more length than is needful or proportioned to our present purposes of inquiry, because I would not for the first time speak to you on this subject of political economy without clearly stating what I believe to be its first grand principle. But its bearing on the matter in hand is chiefly to prevent you from at once too violently dissenting from me when what I may state to you as advisable economy in art appears to imply too much restraint or interference with the freedom of the patron or artist. We are a little apt, though, on the whole a prudent nation, to act too immediately on our impulses, even in matters merely commercial; much more in those involving continual appeals to our fancies. How far, therefore, the proposed systems or restraints may be advisable, it is for you to judge; only I pray you not to be offended with them merely because they _are_ systems and restraints. Do you at all recollect that interesting passage of Carlyle, in which he compares, in this country and at this day, the understood and commercial value of man and horse; and in which he wonders that the horse, with its inferior brains and its awkward hoofiness, instead of handiness, should be always worth so many tens or scores of pounds in the market, while the man, so far from always commanding his price in the market, would often be thought to confer a service on the community by simply killing himself out of their way? Well, Carlyle does not answer his own question, because he supposes we shall at once see the answer. The value of the horse consists simply in the fact of your being able to put a bridle on him. The value of the man consists precisely in the same thing. If you can bridle him, or which is better, if he can bridle himself, he will be a valuable creature directly. Otherwise, in a commercial point of view, his value is either nothing, or accidental only. Only, of course, the proper bridle of man is not a leathern one: what kind of texture it is rightly made of, we find from that command, "Be ye not as the horse or as the mule which have no understanding, whose mouths must be held in with bit and bridle." You are not to be without the reins, indeed, but they are to be of another kind; "I will guide thee with mine Eye." So the bridle of man is to be the Eye of God; and if he rejects that guidance, then the next best for him is the horse's and the mule's, which have no understanding; and if he rejects that, and takes the bit fairly in his teeth, then there is nothing left for him than the blood that comes out of the city, up to the horsebridles. Quitting, however, at last these general and serious laws of government--or rather bringing them down to our own business in hand--we have to consider three points of discipline in that particular branch of human labour which is concerned, not with procuring of food, but the expression of emotion; we have to consider respecting art: first, how to apply our labour to it; then, how to accumulate or preserve the results of labour; and then, how to distribute them. But since in art the labour which we have to employ is the labour of a particular class of men--men who have special genius for the business, we have not only to consider how to apply the labour, but first of all, how to produce the labourer; and thus the question in this particular case becomes fourfold: first, how to get your man of genius; then, how to employ your man of genius; then, how to accumulate and preserve his work in the greatest quantity; and lastly, how to distribute his work to the best national advantage. Let us take up these questions in succession. I. DISCOVERY.--How are we to get our men of genius: that is to say, by what means may we produce among us, at any given time, the greatest quantity of effective art-intellect? A wide question, you say, involving an account of all the best means of art education. Yes, but I do not mean to go into the consideration of those; I want only to state the few principles which lie at the foundation of the matter. Of these, the first is that you have always to find your artist, not to make him; you can't manufacture him, any more than you can manufacture gold. You can find him, and refine him: you dig him out as he lies nugget-fashion in the mountain-stream; you bring him home; and you make him into current coin, or household plate, but not one grain of him can you originally produce. A certain quantity of art-intellect is born annually in every nation, greater or less according to the nature and cultivation of the nation or race of men; but a perfectly fixed quantity annually, not increaseable by one grain. You may lose it, or you may gather it; you may let it lie loose in the ravine, and buried in the sands, or you may make kings' thrones of it, and overlay temple gates with it, as you choose: but the best you can do with it is always merely sifting, melting, hammering, purifying--never creating. And there is another thing notable about this artistical gold; not only is it limited in quantity, but in use. You need not make thrones or golden gates with it unless you like, but assuredly you can't do anything else with it. You can't make knives of it, nor armour, nor railroads. The gold won't cut you, and it won't carry you; put it to a mechanical use, and you destroy it at once. It is quite true that in the greatest artists, their proper artistical faculty is united with every other; and you may make use of the other faculties, and let the artistical one lie dormant. For aught I know, there may be two or three Leonardo da Vincis employed at this moment in your harbours and railroads: but you are not employing their Leonardesque or golden faculty there, you are only oppressing and destroying it. And the artistical gift in average men is not joined with others; your born painter, if you don't make a painter of him, won't be a first-rate merchant, or lawyer; at all events, whatever he turns out, his own special gift is unemployed by you; and in no wise helps him in that other business. So here you have a certain quantity of a particular sort of intelligence, produced for you annually by providential laws, which you can only make use of by setting it to its own proper work, and which any attempt to use otherwise involves the dead loss of so much human energy. Well, then, supposing we wish to employ it, how is it to be best discovered and refined? It is easily enough discovered. To wish to employ it is to discover it. All that you need is, a school of trial[5] in every important town, in which those idle farmers' lads whom their masters never can keep out of mischief, and those stupid tailors' 'prentices who are always stitching the sleeves in wrong way upwards, may have a try at this other trade; only this school of trial must not be entirely regulated by formal laws of art education, but must ultimately be the workshop of a good master painter, who will try the lads with one kind of art and another, till he finds out what they are fit for. Next, after your trial school, you want your easy and secure employment, which is the matter of chief importance. For, even on the present system, the boys who have really intense art capacity, generally make painters of themselves; but then, the best half of their early energy is lost in the battle of life. Before a good painter can get employment, his mind has always been embittered, and his genius distorted. A common mind usually stoops, in plastic chill, to whatever is asked of it, and scrapes or daubs its way complacently into public favour.[6] But your great men quarrel with you, and you revenge yourselves by starving them for the first half of their lives. Precisely in the degree in which any painter possesses original genius, is at present the increase of moral certainty that during his early years he will have a hard battle to fight; and that just at the time when his conceptions ought to be full and happy, his temper gentle, and his hopes enthusiastic--just at that most critical period, his heart is full of anxieties and household cares; he is chilled by disappointments, and vexed by injustice; he becomes obstinate in his errors, no less than in his virtues, and the arrows of his aims are blunted, as the reeds of his trust are broken. [5] See note 3rd, in Addenda [p. 95]. [6] See note 4th, in Addenda [p. 101]. What we mainly want, therefore, is a means of sufficient and unagitated employment: not holding out great prizes for which young painters are to scramble; but furnishing all with adequate support, and opportunity to display such power as they possess without rejection or mortification. I need not say that the best field of labour of this kind would be presented by the constant progress of public works involving various decoration; and we will presently examine what kind of public works may thus, advantageously for the nation, be in constant progress. But a more important matter even than this of steady employment, is the kind of criticism with which you, the public, receive the works of the young men submitted to you. You may do much harm by indiscreet praise and by indiscreet blame; but remember, the chief harm is always done by blame. It stands to reason that a young man's work cannot be perfect. It _must_ be more or less ignorant; it must be more or less feeble; it is likely that it may be more or less experimental, and if experimental, here and there mistaken. If, therefore, you allow yourself to launch out into sudden barking at the first faults you see, the probability is that you are abusing the youth for some defect naturally and inevitably belonging to that stage of his progress; and that you might just as rationally find fault with a child for not being as prudent as a privy councillor, or with a kitten for not being as grave as a cat. But there is one fault which you may be quite sure is unnecessary, and therefore a real and blameable fault: that is haste, involving negligence. Whenever you see that a young man's work is either bold or slovenly, then you may attack it firmly; sure of being right. If his work is bold, it is insolent; repress his insolence: if it is slovenly, it is indolent; spur his indolence. So long as he works in that dashing or impetuous way, the best hope for him is in your contempt: and it is only by the fact of his seeming not to seek your approbation that you may conjecture he deserves it. But if he does deserve it, be sure that you give it him, else you not only run a chance of driving him from the right road by want of encouragement, but you deprive yourselves of the happiest privilege you will ever have of rewarding his labour. For it is only the young who can receive much reward from men's praise: the old, when they are great, get too far beyond and above you to care what you think of them. You may urge them then with sympathy, and surround them then with acclamation; but they will doubt your pleasure, and despise your praise. You might have cheered them in their race through the asphodel meadows of their youth; you might have brought the proud, bright scarlet into their faces, if you had but cried once to them "Well done," as they dashed up to the first goal of their early ambition. But now, their pleasure is in memory, and their ambition is in heaven. They can be kind to you, but you never more can be kind to them. You may be fed with the fruit and fullness of their old age, but you were as the nipping blight to them in their blossoming, and your praise is only as the warm winds of autumn to the dying branches. There is one thought still, the saddest of all, bearing on this withholding of early help. It is possible, in some noble natures, that the warmth and the affections of childhood may remain unchilled, though unanswered; and that the old man's heart may still be capable of gladness, when the long-withheld sympathy is given at last. But in these noble natures it nearly always happens, that the chief motive of earthly ambition has not been to give delight to themselves, but to their parents. Every noble youth looks back, as to the chiefest joy which this world's honour ever gave him, to the moment when first he saw his father's eyes flash with pride, and his mother turn away her head lest he should take her tears for tears of sorrow. Even the lover's joy, when some worthiness of his is acknowledged before his mistress, is not so great as that, for it is not so pure--the desire to exalt himself in her eyes mixes with that of giving her delight; but he does not need to exalt himself in his parents' eyes: it is with the pure hope of giving them pleasure that he comes to tell them what he has done, or what has been said of him; and therefore he has a purer pleasure of his own. And this purest and best of rewards you keep from him if you can: you feed him in his tender youth with ashes and dishonour; and then you come to him, obsequious, but too late, with your sharp laurel crown, the dew all dried from off its leaves; and you thrust it into his languid hand, and he looks at you wistfully. What shall he do with it? What can he do, but go and lay it on his mother's grave? Thus, then, you see that you have to provide for your young men: first, the searching or discovering school; then the calm employment; then the justice of praise: one thing more you have to do for them in preparing them for full service--namely, to make, in the noble sense of the word, gentlemen of them; that is to say, to take care that their minds receive such training, that in all they paint they shall see and feel the noblest things. I am sorry to say, that of all parts of an artist's education this is the most neglected among us; and that even where the natural taste and feeling of the youth have been pure and true, where there was the right stuff in him to make a gentleman of, you may too frequently discern some jarring rents in his mind, and elements of degradation in his treatment of subject, owing to want of gentle training, and of the liberal influence of literature. This is quite visible in our greatest artists, even in men like Turner and Gainsborough; while in the common grade of our second-rate painters the evil attains a pitch which is far too sadly manifest to need my dwelling upon it. Now, no branch of art economy is more important than that of making the intellect at your disposal pure as well as powerful; so that it may always gather for you the sweetest and fairest things. The same quantity of labour from the same man's hand, will, according as you have trained him, produce a lovely and useful work, or a base and hurtful one, and depend upon it, whatever value it may possess, by reason of the painter's skill, its chief and final value, to any nation, depends upon its being able to exalt and refine, as well as to please; and that the picture which most truly deserves the name of an art-treasure, is that which has been painted by a good man. You cannot but see how far this would lead, if I were to enlarge upon it. I must take it up as a separate subject some other time: only noticing at present that no money could be better spent by a nation than in providing a liberal and disciplined education for its painters, as they advance into the critical period of their youth; and that also, a large part of their power during life depends upon the kind of subjects which you, the public, ask them for, and therefore the kind of thoughts with which you require them to be habitually familiar. I shall have more to say on this head when we come to consider what employment they should have in public buildings. There are many other points of nearly as much importance as these, to be explained with reference to the development of genius; but I should have to ask you to come and hear six lectures instead of two if I were to go into their detail. For instance, I have not spoken of the way in which you ought to look for those artificers in various manual trades, who, without possessing the order of genius which you would desire to devote to higher purposes, yet possess wit, and humour, and sense of colour, and fancy for form--all commercially valuable as quantities of intellect, and all more or less expressible in the lower arts of ironwork, pottery, decorative sculpture, and such like. But these details, interesting as they are, I must commend to your own consideration, or leave for some future inquiry. I want just now only to set the bearings of the entire subject broadly before you, with enough of detailed illustration to make it intelligible; and therefore I must quit the first head of it here, and pass to the second, namely, how best to employ the genius we discover. A certain quantity of able hands and heads being placed at our disposal, what shall we most advisably set them upon? II. APPLICATION.--There are three main points the economist has to attend to in this. First, To set his men to various work. Secondly, To easy work. Thirdly, To lasting work. I shall briefly touch on the first two, for I want to arrest your attention on the last. I say first, to various work. Supposing you have two men of equal power as landscape painters--and both of them have an hour at your disposal. You would not set them both to paint the same piece of landscape. You would, of course, rather have two subjects than a repetition of one. Well, supposing them sculptors, will not the same rule hold? You naturally conclude at once that it will; but you will have hard work to convince your modern architects of that. They will put twenty men to work, to carve twenty capitals; and all shall be the same. If I could show you the architects' yards in England just now, all open at once, perhaps you might see a thousand clever men, all employed in carving the same design. Of the degradation and deathfulness to the art-intellect of the country involved in such a habit, I have more or less been led to speak before now; but I have not hitherto marked its definite tendency to increase the price of _work_, as such. When men are employed continually in carving the same ornaments, they get into a monotonous and methodical habit of labour--precisely correspondent to that in which they would break stones, or paint house-walls. Of course, what they do so constantly, they do easily; and if you excite them temporarily by an increase of wages, you may get much work done by them in a little time. But, unless so stimulated, men condemned to a monotonous exertion, work--and always, by the laws of human nature, _must_ work--only at a tranquil rate, not producing by any means a maximum result in a given time. But if you allow them to vary their designs, and thus interest their heads and hearts in what they are doing, you will find them become eager, first, to get their ideas expressed, and then to finish the expression of them; and the moral energy thus brought to bear on the matter quickens, and therefore cheapens, the production in a most important degree. Sir Thomas Deane, the architect of the new Museum at Oxford, told me, as I passed through Oxford on my way here, that he found that, owing to this cause alone, capitals of various design could be executed cheaper than capitals of similar design (the amount of hand labour in each being the same) by about 30 per cent. Well, that is the first way, then, in which you will employ your intellect well; and the simple observance of this plain rule of political economy will effect a noble revolution in your architecture, such as you cannot at present so much as conceive. Then the second way in which we are to guard against waste is by setting our men to the easiest, and therefore the quickest, work which will answer the purpose. Marble, for instance, lasts quite as long as granite, and is much softer to work; therefore, when you get hold of a good sculptor, give him marble to carve--not granite. That, you say, is obvious enough. Yes; but it is not so obvious how much of your workmen's time you waste annually in making them cut glass, after it has got hard, when you ought to make them mould it while it is soft. It is not so obvious how much expense you waste in cutting diamonds and rubies, which are the hardest things you can find, into shapes that mean nothing, when the same men might be cutting sandstone and freestone into shapes that meant something. It is not so obvious how much of the artists' time in Italy you waste, by forcing them to make wretched little pictures for you out of crumbs of stone glued together at enormous cost, when the tenth of the time would make good and noble pictures for you out of water-colour. I could go on giving you almost numberless instances of this great commercial mistake; but I should only weary and confuse you. I therefore commend also this head of our subject to your own meditation, and proceed to the last I named--the last I shall task your patience with to-night. You know we are now considering how to apply our genius; and we were to do it as economists, in three ways:-- To _various_ work; To _easy_ work; To _lasting_ work. This lasting of the work, then, is our final question. Many of you may, perhaps, remember that Michael Angelo was once commanded by Pietro di Medici to mould a statue out of snow, and that he obeyed the command.[7] I am glad, and we have all reason to be glad, that such a fancy ever came into the mind of the unworthy prince, and for this cause: that Pietro di Medici then gave, at the period of one great epoch of consummate power in the arts, the perfect, accurate; and intensest possible type of the greatest error which nations and princes can commit, respecting the power of genius entrusted to their guidance. You had there, observe, the strongest genius in the most perfect obedience; capable of iron independence, yet wholly submissive to the patron's will; at once the most highly accomplished and the most original, capable of doing as much as man could do, in any direction that man could ask. And its governour, and guide, and patron sets it to build a statue in snow--to put itself into the service of annihilation--to make a cloud of itself, and pass away from the earth. [7] See the noble passage on this tradition in "Casa Guidi Windows." Now this, so precisely and completely done by Pietro di Medici, is what we are all doing, exactly in the degree in which we direct the genius under our patronage to work in more or less perishable materials. So far as we induce painters to work in fading colours, or architects to build with imperfect structure, or in any other way consult only immediate ease and cheapness in the production of what we want, to the exclusion of provident thought as to its permanence and serviceableness in after ages; so far we are forcing our Michael Angelos to carve in snow. The first duty of the economist in art is, to see that no intellect shall thus glitter merely in the manner of hoar-frost; but that it shall be well vitrified, like a painted window, and shall be set so between shafts of stone and bands of iron, that it shall bear the sunshine upon it, and send the sunshine through it, from generation to generation. I can conceive, however, some political economist to interrupt me here, and say, "If you make your art wear too well, you will soon have too much of it; you will throw your artists quite out of work. Better allow for a little wholesome evanescence--beneficent destruction: let each age provide art for itself, or we shall soon have so many good pictures that we shall not know what to do with them." Remember, my dear hearers, who are thus thinking, that political economy, like every other subject, cannot be dealt with effectively if we try to solve two questions at a time instead of one. It is one question, how to get plenty of a thing; and another, whether plenty of it will be good for us. Consider these two matters separately; never confuse yourself by interweaving one with the other. It is one question, how to treat your fields so as to get a good harvest; another, whether you wish to have a good harvest, or would rather like to keep up the price of corn. It is one question, how to graft your trees so as to grow most apples; and quite another, whether having such a heap of apples in the store-room will not make them all rot. Now, therefore, that we are talking only about grafting and growing, pray do not vex yourselves with thinking what you are to do with the pippins. It may be desirable for us to have much art, or little--we will examine that by and by; but just now, let us keep to the simple consideration how to get plenty of good art if we want it. Perhaps it might be just as well that a man of moderate income should be able to possess a good picture, as that any work of real merit should cost £500 or £1,000; at all events, it is certainly one of the branches of political economy to ascertain how, if we like, we can get things in quantities--plenty of corn, plenty of wine, plenty of gold, or plenty of pictures. It has just been said, that the first great secret is to produce work that will last. Now, the conditions of work lasting are twofold: it must not only be in materials that will last, but it must be itself of a quality that will last--it must be good enough to bear the test of time. If it is not good, we shall tire of it quickly, and throw it aside--we shall have no pleasure in the accumulation of it. So that the first question of a good art-economist respecting any work is, Will it lose its flavour by keeping? It may be very amusing now, and look much like a work of genius. But what will be its value a hundred years hence? You cannot always ascertain this. You may get what you fancy to be work of the best quality, and yet find to your astonishment that it won't keep. But of one thing you may be sure, that art which is produced hastily will also perish hastily; and that what is cheapest to you now, is likely to be dearest in the end. I am sorry to say, the great tendency of this age is to expend its genius in perishable art of this kind, as if it were a triumph to burn its thoughts away in bonfires. There is a vast quantity of intellect and of labour consumed annually in our cheap illustrated publications; you triumph in them; and you think it is so grand a thing to get so many woodcuts for a penny. Why, woodcuts, penny and all, are as much lost to you as if you had invested your money in gossamer. More lost, for the gossamer could only tickle your face, and glitter in your eyes; it could not catch your feet and trip you up: but the bad art can, and does; for you can't like good woodcuts as long as you look at the bad ones. If we were at this moment to come across a Titian woodcut, or a Durer woodcut, we should not like it--those of us at least who are accustomed to the cheap work of the day. We don't like, and can't like, _that_ long; but when we are tired of one bad cheap thing, we throw it aside and buy another bad cheap thing; and so keep looking at bad things all our lives. Now, the very men who do all that quick bad work for us are capable of doing perfect work. Only, perfect work can't be hurried, and therefore it can't be cheap beyond a certain point. But suppose you pay twelve times as much as you do now, and you have one woodcut for a shilling instead of twelve; and the one woodcut for a shilling is as good as art can be, so that you will never tire of looking at it; and is struck on good paper with good ink, so that you will never wear it out by handling it; while you are sick of your penny-each cuts by the end of the week, and have torn them mostly in half too. Isn't your shilling's worth the best bargain? It is not, however, only in getting prints or woodcuts of the best kind that you will practise economy. There is a certain quality about an original drawing which you cannot get in a woodcut, and the best part of the genius of many men is only expressible in original work, whether with pen and ink--pencil or colours. This is not always the case; but in general, the best men are those who can only express themselves on paper or canvass; and you will, therefore, in the long run, get most for your money by buying original work; proceeding on the principle already laid down, that the best is likely to be the cheapest in the end. Of course, original work cannot be produced under a certain cost. If you want a man to make you a drawing which takes him six days, you must, at all events, keep him for six days in bread and water, fire and lodging; that is the lowest price at which he can do it for you, but that is not very dear: and the best bargain which can possibly be made honestly in art--the very ideal of a cheap purchase to the purchaser--is the original work of a great man fed for as many days as are necessary on bread and water, or perhaps we may say with as many onions as will keep him in good humour. That is the way by which you will always get most for your money; no mechanical multiplication or ingenuity of commercial arrangements will ever get you a better penny's worth of art than that. Without, however, pushing our calculations quite to this prison-discipline extreme, we may lay it down as a rule in art-economy, that original work is, on the whole, cheapest and best worth having. But precisely in proportion to the value of it as a production, becomes the importance of having it executed in permanent materials. And here we come to note the second main error of the day, that we not only ask our workmen for bad art, but we make them put it into bad substance. We have, for example, put a great quantity of genius, within the last twenty years, into water-colour drawing, and we have done this with the most reckless disregard whether either the colours or the paper will stand. In most instances, neither will. By accident, it may happen that the colours in a given drawing have been of good quality, and its paper uninjured by chemical processes. But you take not the least care to ensure these being so; I have myself seen the most destructive changes take place in water-colour drawings within twenty years after they were painted; and from all I can gather respecting the recklessness of modern paper manufacture, my belief is, that though you may still handle an Albert Durer engraving, two hundred years old, fearlessly, not one-half of that time will have passed over your modern water-colours, before most of them will be reduced to mere white or brown rags; and your descendants, twitching them contemptuously into fragments between finger and thumb, will mutter against you, half in scorn and half in anger, "Those wretched nineteenth-century people! they kept vapouring and fuming about the world, doing what they called business, and they couldn't make a sheet of paper that wasn't rotten." And note that this is no unimportant portion of your art economy at this time. Your water-colour painters are becoming every day capable of expressing greater and better things; and their material is especially adapted to the turn of your best artists' minds. The value which you could accumulate in work of this kind would soon become a most important item in the national art-wealth, if only you would take the little pains necessary to secure its permanence. I am inclined to think, myself, that water-colour ought not to be used on paper at all, but only on vellum, and then, if properly taken care of, the drawing would be almost imperishable. Still, paper is a much more convenient material for rapid work; and it is an infinite absurdity not to secure the goodness of its quality, when we could do so without the slightest trouble. Among the many favours which I am going to ask from our paternal government, when we get it, will be that it will supply its little boys with good paper. You have nothing to do but to let the government establish a paper manufactory, under the superintendence of any of our leading chemists, who should be answerable for the safety and completeness of all the processes of the manufacture. The government stamp on the corner of your sheet of drawing-paper, made in the perfect way, should cost you a shilling, which would add something to the revenue; and when you bought a water-colour drawing for fifty or a hundred guineas, you would have merely to look in the corner for your stamp, and pay your extra shilling for the security that your hundred guineas were given really for a drawing, and not for a coloured rag. There need be no monopoly or restriction in the matter; let the paper manufacturers compete with the government, and if people liked to save their shilling, and take their chance, let them; only, the artist and purchaser might then be sure of good material, if they liked, and now they cannot be. I should like also to have a government colour manufactory; though that is not so necessary, as the quality of colour is more within the artist's power of testing, and I have no doubt that any painter may get permanent colour from the respectable manufacturers, if he chooses. I will not attempt to follow the subject out at all as it respects architecture, and our methods of modern building; respecting which I have had occasion to speak before now. But I cannot pass without some brief notice our habit--continually, as it seems to me, gaining strength--of putting a large quantity of thought and work, annually, into things which are either in their nature necessarily perishable, as dress; or else into compliances with the fashion of the day, in things not necessarily perishable, as plate. I am afraid almost the first idea of a young rich couple setting up house in London, is, that they must have new plate. Their father's plate may be very handsome, but the fashion is changed. They will have a new service from the leading manufacturer, and the old plate, except a few apostle spoons, and a cup which Charles the Second drank a health in to their pretty ancestress, is sent to be melted down, and made up with new flourishes and fresh lustre. Now, so long as this is the case--so long, observe, as fashion has influence on the manufacture of plate--so long _you cannot have a goldsmith's art in this country_. Do you suppose any workman worthy the name will put his brains into a cup or an urn, which he knows is to go to the melting pot in half a score years? He will not; you don't ask or expect it of him. You ask of him nothing but a little quick handicraft--a clever twist of a handle here, and a foot there, a convolvulus from the newest school of design, a pheasant from Landseer's game cards; a couple of sentimental figures for supporters, in the style of the signs of insurance offices, then a clever touch with the burnisher, and there's your epergne, the admiration of all the footmen at the wedding-breakfast, and the torment of some unfortunate youth who cannot see the pretty girl opposite to him, through its tyrannous branches. But you don't suppose that _that's_ goldsmith's work? Goldsmith's work is made to last, and made with the man's whole heart and soul in it; true goldsmith's work, when it exists, is generally the means of education of the greatest painters and sculptors of the day. Francia was a goldsmith; Francia was not his own name, but that of his master the jeweller; and he signed his pictures almost always, "Francia, the goldsmith," for love of his master; Ghirlandajo was a goldsmith, and was the master of Michael Angelo; Verrocchio was a goldsmith, and was the master of Leonardo da Vinci. Ghiberti was a goldsmith, and beat out the bronze gates which Michael Angelo said might serve for gates of Paradise.[8] But if ever you want work like theirs again, you must keep it, though it should have the misfortune to become old fashioned. You must not break it up, nor melt it any more. There is no economy in that; you could not easily waste intellect more grievously. Nature may melt her goldsmith's work at every sunset if she chooses; and beat it out into chased bars again at every sunrise; but you must not. The way to have a truly noble service of plate, is to keep adding to it, not melting it. At every marriage, and at every birth, get a new piece of gold or silver if you will, but with noble workmanship on it, done for all time, and put it among your treasures; that is one of the chief things which gold was made for, and made incorruptible for. When we know a little more of political economy, we shall find that none but partially savage nations need, imperatively, gold for their currency;[9] but gold has been given us, among other things, that we might put beautiful work into its imperishable splendour, and that the artists who have the most wilful fancies may have a material which will drag out, and beat out, as their dreams require, and will hold itself together with fantastic tenacity, whatever rare and delicate service they set it upon. [8] Several reasons may account for the fact that goldsmith's work is so wholesome for young artists; first, that it gives great firmness of hand to deal for some time with a solid substance; again, that it induces caution and steadiness--a boy trusted with chalk and paper suffers an immediate temptation to scrawl upon it and play with it, but he dares not scrawl on gold, and he cannot play with it; and, lastly, that it gives great delicacy and precision of touch to work upon minute forms, and to aim at producing richness and finish of design correspondent to the preciousness of the material. [9] See note in Addenda on the nature of property [p. 107]. So here is one branch of decorative art in which rich people may indulge themselves unselfishly; if they ask for good art in it, they may be sure in buying gold and silver plate that they are enforcing useful education on young artists. But there is another branch of decorative art in which I am sorry to say we cannot, at least under existing circumstances, indulge ourselves, with the hope of doing good to anybody, I mean the great and subtle art of dress. And here I must interrupt the pursuit of our subject for a moment or two, in order to state one of the principles of political economy, which, though it is, I believe, now sufficiently understood and asserted by the leading masters of the science, is not yet, I grieve to say, acted upon by the plurality of those who have the management of riches. Whenever we spend money, we of course set people to work: that is the meaning of spending money; we may, indeed, lose it without employing anybody; but, whenever we spend it, we set a number of people to work, greater or less, of course, according to the rate of wages, but, in the long run, proportioned to the sum we spend. Well, your shallow people, because they see that however they spend money they are always employing somebody, and, therefore, doing some good, think and say to themselves, that it is all one _how_ they spend it--that all their apparently selfish luxury is, in reality, unselfish, and is doing just as much good as if they gave all their money away, or perhaps more good; and I have heard foolish people even declare it as a principle of political economy, that whoever invented a new want[10] conferred a good on the community. I have not words strong enough--at least I could not, without shocking you, use the words which would be strong enough--to express my estimate of the absurdity and the mischievousness of this popular fallacy. So, putting a great restraint upon myself, and using no hard words, I will simply try to state the nature of it, and the extent of its influence. [10] See note 5th, in Addenda [p. 102]. Granted, that whenever we spend money for whatever purpose, we set people to work; and, passing by, for the moment, the question whether the work we set them to is all equally healthy and good for them, we will assume that whenever we spend a guinea we provide an equal number of people with healthy maintenance for a given time. But, by the way in which we spend it, we entirely direct the labour of those people during that given time. We become their masters or mistresses, and we compel them to produce, within a certain period, a certain article. Now, that article may be a useful and lasting one, or it may be a useless and perishable one--it may be one useful to the whole community, or useful only to ourselves. And our selfishness and folly, or our virtue and prudence, are shown, not by our spending money, but by our spending it for the wrong or the right thing; and we are wise and kind, not in maintaining a certain number of people for a given period, but only in requiring them to produce, during that period, the kind of things which shall be useful to society, instead of those which are only useful to ourselves. Thus, for instance: if you are a young lady, and employ a certain number of sempstresses for a given time, in making a given number of simple and serviceable dresses, suppose, seven; of which you can wear one yourself for half the winter, and give six away to poor girls who have none, you are spending your money unselfishly. But if you employ the same number of sempstresses for the same number of days, in making four, or five, or six beautiful flounces for your own ball-dress--flounces which will clothe no one but yourself, and which you will yourself be unable to wear at more than one ball--you are employing your money selfishly. You have maintained, indeed, in each case, the same number of people; but in the one case you have directed their labour to the service of the community; in the other case you have consumed it wholly upon yourself. I don't say you are never to do so; I don't say you ought not sometimes to think of yourselves only, and to make yourselves as pretty as you can; only do not confuse coquettishness with benevolence, nor cheat yourselves into thinking that all the finery you can wear is so much put into the hungry mouths of those beneath you: it is not so; it is what you yourselves, whether you will or no, must sometimes instinctively feel it to be--it is what those who stand shivering in the streets, forming a line to watch you as you step out of your carriages, _know_ it to be; those fine dresses do not mean that so much has been put into their mouths, but that so much has been taken out of their mouths. The real politico-economical signification of every one of those beautiful toilettes, is just this; that you have had a certain number of people put for a certain number of days wholly under your authority, by the sternest of slave-masters--hunger and cold; and you have said to them, "I will feed you, indeed, and clothe you, and give you fuel for so many days; but during those days you shall work for me only: your little brothers need clothes, but you shall make none for them: your sick friend needs clothes, but you shall make none for her: you yourself will soon need another, and a warmer dress; but you shall make none for yourself. You shall make nothing but lace and roses for me; for this fortnight to come, you shall work at the patterns and petals, and then I will crush and consume them away in an hour." You will perhaps answer--"It may not be particularly benevolent to do this, and we won't call it so; but at any rate we do no wrong in taking their labour when we pay them their wages: if we pay for their work we have a right to it." No;--a thousand times no. The labour which you have paid for, does indeed become, by the act of purchase, your own labour: you have bought the hands and the time of those workers; they are, by right and justice, your own hands, your own time. But, have you a right to spend your own time, to work with your own hands, only for your own advantage?--much more, when, by purchase, you have invested your own person with the strength of others; and added to your own life, a part of the life of others? You may, indeed, to a certain extent, use their labour for your delight: remember, I am making no general assertions against splendour of dress, or pomp of accessories of life; on the contrary, there are many reasons for thinking that we do not at present attach enough importance to beautiful dress, as one of the means of influencing general taste and character. But I _do_ say, that you must weigh the value of what you ask these workers to produce for you in its own distinct balance; that on its own worthiness or desirableness rests the question of your kindness, and not merely on the fact of your having employed people in producing it: and I say farther, that as long as there are cold and nakedness in the land around you, so long there can be no question at all but that splendour of dress is a crime. In due time, when we have nothing better to set people to work at, it may be right to let them make lace and cut jewels; but, as long as there are any who have no blankets for their beds, and no rags for their bodies, so long it is blanket-making and tailoring we must set people to work at--not lace. And it would be strange, if at any great assembly which, while it dazzled the young and the thoughtless, beguiled the gentler hearts that beat beneath the embroidery, with a placid sensation of luxurious benevolence--as if by all that they wore in waywardness of beauty, comfort had been first given to the distressed, and aid to the indigent; it would be strange, I say, if, for a moment, the spirits of Truth and of Terror, which walk invisibly among the masques of the earth, would lift the dimness from our erring thoughts, and show us how--inasmuch as the sums exhausted for that magnificence would have given back the failing breath to many an unsheltered outcast on moor and street--they who wear it have literally entered into partnership with Death; and dressed themselves in his spoils. Yes, if the veil could be lifted not only from your thoughts, but from your human sight, you would see--the angels do see--on those gay white dresses of yours, strange dark spots, and crimson patterns that you knew not of--spots of the inextinguishable red that all the seas cannot wash away; yes, and among the pleasant flowers that crown your fair heads, and glow on your wreathed hair, you would see that one weed was always twisted which no one thought of--the grass that grows on graves. It was not, however, this last, this clearest and most appalling view of our subject, that I intended to ask you to take this evening; only it is impossible to set any part of the matter in its true light, until we go to the root of it. But the point which it is our special business to consider is, not whether costliness of dress is contrary to charity; but whether it is not contrary to mere worldly wisdom: whether, even supposing we knew that splendour of dress did not cost suffering or hunger, we might not put the splendour better in other things than dress. And, supposing our mode of dress were really graceful or beautiful, this might be a very doubtful question; for I believe true nobleness of dress to be an important means of education, as it certainly is a necessity to any nation which wishes to possess living art, concerned with portraiture of human nature. No good historical painting ever yet existed, or ever can exist, where the dresses of the people of the time are not beautiful: and had it not been for the lovely and fantastic dressing of the 13th to the 16th centuries, neither French, nor Florentine, nor Venetian art could have risen to anything like the rank it reached. Still, even then, the best dressing was never the costliest; and its effect depended much more on its beautiful and, in early times, modest, arrangement, and on the simple and lovely masses of its colour, than on gorgeousness of clasp or embroidery. Whether we can ever return to any of those more perfect types of form, is questionable; but there can be no question, that all the money we spend on the forms of dress at present worn, is, so far as any good purpose is concerned, wholly lost. Mind, in saying this, I reckon among good purposes, the purpose which young ladies are said sometimes to entertain--of being married; but they would be married quite as soon (and probably to wiser and better husbands) by dressing quietly, as by dressing brilliantly: and I believe it would only be needed to lay fairly and largely before them the real good which might be effected by the sums they spend in toilettes, to make them trust at once only to their bright eyes and braided hair for all the mischief they have a mind to. I wish we could, for once, get the statistics of a London season. There was much complaining talk in Parliament last week, of the vast sum the nation has given for the best Paul Veronese in Venice--£14,000: I wonder what the nation meanwhile has given for its ball-dresses! Suppose we could see the London milliners' bills, simply for unnecessary breadths of slip and flounce, from April to July; I wonder whether £14,000 would cover _them_. But the breadths of slip and flounce are by this time as much lost and vanished as last year's snow; only they have done less good: but the Paul Veronese will last for centuries, if we take care of it; and yet we grumble at the price given for the painting, while no one grumbles at the price of pride. Time does not permit me to go into any farther illustration of the various modes in which we build our statue out of snow, and waste our labour on things that vanish. I must leave you to follow out the subject for yourselves, as I said I should, and proceed, in our next lecture, to examine the two other branches of our subject, namely, how to accumulate our art, and how to distribute it. But, in closing, as we have been much on the topic of good government, both of ourselves and others, let me just give you one more illustration of what it means, from that old art of which, next evening, I shall try to convince you that the value, both moral and mercantile, is greater than we usually suppose. One of the frescoes by Ambrozio Lorenzetti, in the town-hall of Siena, represents, by means of symbolical figures, the principles of Good Civic Government and of Good Government in general. The figure representing this noble Civic Government is enthroned, and surrounded by figures representing the Virtues, variously supporting or administering its authority. Now, observe what work is given to each of these virtues. Three winged ones--Faith, Hope, and Charity--surround the head of the figure, not in mere compliance with the common and heraldic laws of precedence among Virtues, such as we moderns observe habitually, but with peculiar purpose on the part of the painter. Faith, as thus represented, ruling the thoughts of the Good Governour, does not mean merely religious faith, understood in those times to be necessary to all persons--governed no less than governours--but it means the faith which enables work to be carried out steadily, in spite of adverse appearances and expediencies; the faith in great principles, by which a civic ruler looks past all the immediate checks and shadows that would daunt a common man, knowing that what is rightly done will have a right issue, and holding his way in spite of pullings at his cloak and whisperings in his ear, enduring, as having in him a faith which is evidence of things unseen. And Hope, in like manner, is here not the heavenward hope which ought to animate the hearts of all men; but she attends upon Good Government, to show that all such government is _expectant_ as well as _conservative_; that if it ceases to be hopeful of better things, it ceases to be a wise guardian of present things: that it ought never, as long as the world lasts, to be wholly content with any existing state of institution or possession, but to be hopeful still of more wisdom and power; not clutching at it restlessly or hastily, but feeling that its real life consists in steady ascent from high to higher: conservative, indeed, and jealously conservative of old things, but conservative of them as pillars, not as pinnacles--as aids, but not as idols; and hopeful chiefly, and active, in times of national trial or distress, according to those first and notable words describing the queenly nation. "She riseth, _while it is yet night_." And again, the winged Charity which is attendant on Good Government has, in this fresco, a peculiar office. Can you guess what? If you consider the character of contest which so often takes place among kings for their crowns, and the selfish and tyrannous means they commonly take to aggrandize or secure their power, you will, perhaps, be surprised to hear that the office of Charity is to crown the King. And yet, if you think of it a little, you will see the beauty of the thought which sets her in this function: since in the first place, all the authority of a good governor should be desired by him only for the good of his people, so that it is only Love that makes him accept or guard his crown: in the second place, his chief greatness consists in the exercise of this love, and he is truly to be revered only so far as his acts and thoughts are those of kindness; so that Love is the light of his crown, as well as the giver of it: lastly, because his strength depends on the affections of his people, and it is only their love which can securely crown him, and for ever. So that Love is the strength of his crown as well as the light of it. Then, surrounding the King, or in various obedience to him, appear the dependent virtues, as Fortitude, Temperance, Truth, and other attendant spirits, of all which I cannot now give account, wishing you only to notice the one to whom are entrusted the guidance and administration of the public revenues. Can you guess which it is likely to be? Charity, you would have thought, should have something to do with the business; but not so, for she is too hot to attend carefully to it. Prudence, perhaps, you think of in the next place. No, she is too timid, and loses opportunities in making up her mind. Can it be Liberality then? No: Liberality is entrusted with some small sums; but she is a bad accountant, and is allowed no important place in the exchequer. But the treasures are given in charge to a virtue of which we hear too little in modern times, as distinct from others; Magnanimity: largeness of heart: not softness or weakness of heart, mind you--but capacity of heart--the great _measuring_ virtue, which weighs in heavenly balances all that may be given, and all that may be gained; and sees how to do noblest things in noblest ways: which of two goods comprehends and therefore chooses the greatest: which of two personal sacrifices dares and accepts the largest: which, out of the avenues of beneficence, treads always that which opens farthest into the blue fields of futurity: that character, in fine, which, in those words taken by us at first for the description of a Queen among the nations, looks less to the present power than to the distant promise; "Strength and honour are in her clothing--and she shall rejoice IN TIME TO COME." LECTURE II. The heads of our subject which remain for our consideration this evening are, you will remember, the accumulation and the distribution of works of art. Our complete inquiry fell into four divisions--first, how to get our genius; then, how to apply our genius; then, how to accumulate its results; and lastly, how to distribute them. We considered, last evening, how to discover and apply it;--we have to-night to examine the modes of its preservation and distribution. III. ACCUMULATION.--And now, in the outset, it will be well to face that objection which we put aside a little while ago; namely, that perhaps it is not well to have a great deal of good art; and that it should not be made too cheap. "Nay," I can imagine some of the more generous among you, exclaiming, "we will not trouble you to disprove that objection; of course it is a selfish and base one: good art, as well as other good things, ought to be made as cheap as possible, and put as far as we can within the reach of everybody." Pardon me, I am not prepared to admit that. I rather side with the selfish objectors, and believe that art ought not to be made cheap, beyond a certain point; for the amount of pleasure that you can receive from any great work, depends wholly on the quantity of attention and energy of mind you can bring to bear upon it. Now, that attention and energy depend much more on the freshness of the thing than you would at all suppose; unless you very carefully studied the movements of your own minds. If you see things of the same kind and of equal value very frequently, your reverence for them is infallibly diminished, your powers of attention get gradually wearied, and your interest and enthusiasm worn out; and you cannot in that state bring to any given work the energy necessary to enjoy it. If, indeed, the question were only between enjoying a great many pictures each a little, or one picture very much, the sum of enjoyment being in each case the same, you might rationally desire to possess rather the larger quantity, than the small; both because one work of art always in some sort illustrates another, and because quantity diminishes the chances of destruction. But the question is not a merely arithmetical one of this kind. Your fragments of broken admirations will not, when they are put together, make up one whole admiration; two and two, in this case, do not make four, nor anything like four. Your good picture, or book, or work of art of any kind, is always in some degree fenced and closed about with difficulty. You may think of it as of a kind of cocoa-nut, with very often rather an unseemly shell, but good milk and kernel inside. Now, if you possess twenty cocoa-nuts, and being thirsty, go impatiently from one to the other, giving only a single scratch with the point of your knife to the shell of each, you will get no milk from all the twenty. But if you leave nineteen of them alone, and give twenty cuts to the shell of one, you will get through it, and at the milk of it. And the tendency of the human mind is always to get tired before it has made its twenty cuts; and to try another nut; and moreover, even if it has perseverance enough to crack its nuts, it is sure to try to eat too many, and so choke itself. Hence, it is wisely appointed for us that few of the things we desire can be had without considerable labour, and at considerable intervals of time. We cannot generally get our dinner without working for it, and that gives us appetite for it; we cannot get our holiday without waiting for it, and that gives us zest for it; and we ought not to get our picture without paying for it, and that gives us a mind to look at it. Nay, I will even go so far as to say, that we ought not to get books too cheaply. No book, I believe, is ever worth half so much to its reader as one that has been coveted for a year at a bookstall, and bought out of saved half-pence; and perhaps a day or two's fasting. That's the way to get at the cream of a book. And I should say more on this matter, and protest as energetically as I could against the plague of cheap literature, with which we are just now afflicted, but that I fear your calling me to order, as being unpractical, because I don't quite see my way at present to making everybody fast for their books. But one may see that a thing is desirable and possible, even though one may not at once know the best way to it--and in my island of Barataria, when I get it well into order, I assure you no book shall be sold for less than a pound sterling; if it can be published cheaper than that, the surplus shall all go into my treasury, and save my subjects taxation in other directions; only people really poor, who cannot pay the pound, shall be supplied with the books they want for nothing, in a certain limited quantity. I haven't made up my mind about the number yet, and there are several other points in the system yet unsettled; when they are all determined, if you will allow me, I will come and give you another lecture, on the political economy of literature.[11] [11] See note 6th, in Addenda [p. 104]. Meantime, returning to our immediate subject, I say to my generous hearers, who want to shower Titians and Turners upon us, like falling leaves, "Pictures ought not to be too cheap;" but in much stronger tone I would say to those who want to keep up the prices of pictorial property, that pictures ought not to be too dear, that is to say, not as dear as they are. For, as matters at present stand, it is wholly impossible for any man in the ordinary circumstances of English life to possess himself of a piece of great art. A modern drawing of average merit, or a first-class engraving, may perhaps, not without some self-reproach, be purchased out of his savings by a man of narrow income; but a satisfactory example of first-rate art--masterhands' work--is wholly out of his reach. And we are so accustomed to look upon this as the natural course and necessity of things, that we never set ourselves in any wise to diminish the evil; and yet it is an evil perfectly capable of diminution. It is an evil precisely similar in kind to that which existed in the middle ages, respecting good books, and which everybody then, I suppose, thought as natural as we do now our small supply of good pictures. You could not then study the work of a great historian, or great poet, any more than you can now study that of a great painter, but at heavy cost. If you wanted a book, you had to get it written out for you, or to write it out for yourself. But printing came, and the poor man may read his Dante and his Homer; and Dante and Homer are none the worse for that. But it is only in literature that private persons of moderate fortune can possess and study greatness: they can study at home no greatness in art; and the object of that accumulation which we are at present aiming at, as our third object in political economy, is to bring great art in some degree within the reach of the multitude; and, both in larger and more numerous galleries than we now possess, and by distribution, according to his wealth and wish, in each man's home, to render the influence of art somewhat correspondent in extent to that of literature. Here, then, is the subtle balance which your economist has to strike: to accumulate so much art as to be able to give the whole nation a supply of it, according to its need, and yet to regulate its distribution so that there shall be no glut of it, nor contempt. A difficult balance, indeed, for us to hold, if it were left merely to our skill to poise; but the just point between poverty and profusion has been fixed for us accurately by the wise laws of Providence. If you carefully watch for all the genius you can detect, apply it to good service, and then reverently preserve what it produces, you will never have too little art; and if, on the other hand, you never force an artist to work hurriedly, for daily bread, nor imperfectly, because you would rather have showy works than complete ones, you will never have too much. Do not force the multiplication of art, and you will not have it too cheap; do not wantonly destroy it, and you will not have it too dear. "But who wantonly destroys it?" you will ask. Why, we all do. Perhaps you thought, when I came to this part of our subject, corresponding to that set forth in our housewife's economy by the "keeping her embroidery from the moth," that I was going to tell you only how to take better care of pictures, how to clean them, and varnish them, and where to put them away safely when you went out of town. Ah, not at all. The utmost I have to ask of you is, that you will not pull them to pieces, and trample them under your feet. "What!" you will say, "when do we do such things? Haven't we built a perfectly beautiful gallery for all the pictures we have to take care of?" Yes, you have, for the pictures which are definitely sent to Manchester to be taken care of. But there are quantities of pictures out of Manchester which it is your business, and mine too, to take care of no less than of these, and which we are at this moment employing ourselves in pulling to pieces by deputy. I will tell you what they are, and where they are, in a minute; only first let me state one more of those main principles of political economy on which the matter hinges. I must begin a little apparently wide of the mark, and ask you to reflect if there is any way in which we waste money more in England, than in building fine tombs? Our respect for the dead, when they are _just_ dead, is something wonderful, and the way we show it more wonderful still. We show it with black feathers and black horses; we show it with black dresses and bright heraldries; we show it with costly obelisks and sculptures of sorrow, which spoil half of our most beautiful cathedrals. We show it with frightful gratings and vaults, and lids of dismal stone, in the midst of the quiet grass; and last, and not least, we show it by permitting ourselves to tell any number of lies we think amiable or credible, in the epitaph. This feeling is common to the poor as well as the rich, and we all know how many a poor family will nearly ruin themselves, to testify their respect for some member of it in his coffin, whom they never much cared for when he was out of it; and how often it happens that a poor old woman will starve herself to death, in order that she may be respectably buried. Now, this being one of the most complete and special ways of wasting money;--no money being less productive of good, or of any percentage whatever, than that which we shake away from the ends of undertakers' plumes--it is of course the duty of all good economists, and kind persons, to prove and proclaim continually, to the poor as well as the rich, that respect for the dead is not really shown by laying great stones on them to tell us where they are laid; but by remembering where they are laid, without a stone to help us; trusting them to the sacred grass and saddened flowers; and still more, that respect and love are shown to them, not by great monuments to them which we build with _our_ hands, but by letting the monuments stand, which they built with _their own_. And this is the point now in question. Observe, there are two great reciprocal duties concerning industry, constantly to be exchanged between the living and the dead. We, as we live and work, are to be always thinking of those who are to come after us; that what we do may be serviceable, as far as we can make it so, to them as well as to us. Then, when we die, it is the duty of those who come after us to accept this work of ours with thanks and remembrance, not thrusting it aside or tearing it down the moment they think they have no use for it. And each generation will only be happy or powerful to the pitch that it ought to be, in fulfilling these two duties to the Past and the Future. Its own work will never be rightly done, even for itself--never good, or noble, or pleasurable to its own eyes--if it does not prepare it also for the eyes of generations yet to come. And its own possessions will never be enough for it, and its own wisdom never enough for it, unless it avails itself gratefully and tenderly of the treasures and the wisdom bequeathed to it by its ancestors. For, be assured, that all the best things and treasures of this world are not to be produced by each generation for itself; but we are all intended, not to carve our work in snow that will melt, but each and all of us to be continually rolling a great white gathering snowball, higher and higher--larger and larger--along the Alps of human power. Thus the science of nations is to be accumulative from father to son: each learning a little more and a little more; each receiving all that was known, and adding its own gain: the history and poetry of nations are to be accumulative; each generation treasuring the history and the songs of its ancestors, adding its own history and its own songs: and the art of nations is to be accumulative, just as science and history are; the work of living men not superseding, but building itself upon the work of the past. Nearly every great and intellectual race of the world has produced, at every period of its career, an art with some peculiar and precious character about it, wholly unattainable by any other race, and at any other time; and the intention of Providence concerning that art, is evidently that it should all grow together into one mighty temple; the rough stones and the smooth all finding their place, and rising, day by day, in richer and higher pinnacles to heaven. Now, just fancy what a position the world, considered as one great workroom--one great factory in the form of a globe--would have been in by this time, if it had in the least understood this duty, or been capable of it. Fancy what we should have had around us now, if, instead of quarrelling and fighting over their work, the nations had aided each other in their work, or if even in their conquests, instead of effacing the memorials of those they succeeded and subdued, they had guarded the spoils of their victories. Fancy what Europe would be now, if the delicate statues and temples of the Greeks,--if the broad roads and massy walls of the Romans,--if the noble and pathetic architecture of the middle ages, had not been ground to dust by mere human rage. You talk of the scythe of Time, and the tooth of Time: I tell you, Time is scytheless and toothless; it is we who gnaw like the worm--we who smite like the scythe. It is ourselves who abolish--ourselves who consume: we are the mildew, and the flame, and the soul of man is to its own work as the moth, that frets when it cannot fly, and as the hidden flame that blasts where it cannot illumine. All these lost treasures of human intellect have been wholly destroyed by human industry of destruction; the marble would have stood its two thousand years as well in the polished statue as in the Parian cliff; but we men have ground it to powder, and mixed it with our own ashes. The walls and the ways would have stood--it is we who have left not one stone upon another, and restored its pathlessness to the desert; the great cathedrals of old religion would have stood--it is we who have dashed down the carved work with axes and hammers, and bid the mountain-grass bloom upon the pavement, and the sea-winds chaunt in the galleries. You will perhaps think all this was somehow necessary for the development of the human race. I cannot stay now to dispute that, though I would willingly; but do you think it is _still_ necessary for that development? Do you think that in this nineteenth century it is still necessary for the European nations to turn all the places where their principal art-treasures are into battle-fields? For that is what they are doing even while I speak; the great firm of the world is managing its business at this moment, just as it has done in past time. Imagine what would be the thriving circumstances of a manufacturer of some delicate produce--suppose glass, or china--in whose workshop and exhibition rooms all the workmen and clerks began fighting at least once a day, first blowing off the steam, and breaking all the machinery they could reach; and then making fortresses of all the cupboards, and attacking and defending the show-tables, the victorious party finally throwing everything they could get hold of out of the window, by way of showing their triumph, and the poor manufacturer picking up and putting away at last a cup here and a handle there. A fine prosperous business that would be, would it not? and yet that is precisely the way the great manufacturing firm of the world carries on its business. It has so arranged its political squabbles for the last six or seven hundred years, that not one of them could be fought out but in the midst of its most precious art; and it so arranges them to this day. For example, if I were asked to lay my finger, in a map of the world, on the spot of the world's surface which contained at this moment the most singular concentration of art-teaching and art-treasure, I should lay it on the name of the town of Verona. Other cities, indeed, contain more works of carriageable art, but none contain so much of the glorious local art, and of the springs and sources of art, which can by no means be made subjects of package or porterage, nor, I grieve to say, of salvage. Verona possesses, in the first place, not the largest, but the most perfect and intelligible Roman amphitheatre that exists, still unbroken in circle of step, and strong in succession of vault and arch: it contains minor Roman monuments, gateways, theatres, baths, wrecks of temples, which give the streets of its suburbs a character of antiquity unexampled elsewhere, except in Rome itself. But it contains, in the next place, what Rome does not contain--perfect examples of the great twelfth-century Lombardic architecture, which was the root of all the mediæval art of Italy, without which no Giottos, no Angelicos, no Raphaels would have been possible: it contains that architecture, not in rude forms, but in the most perfect and loveliest types it ever attained--contains those, not in ruins, nor in altered and hardly decipherable fragments, but in churches perfect from porch to apse, with all their carving fresh, their pillars firm, their joints unloosened. Besides these, it includes examples of the great thirteenth- and fourteenth-century Gothic of Italy, not merely perfect, but elsewhere unrivalled. At Rome, the Roman--at Pisa, the Lombard, architecture may be seen in greater or in equal nobleness; but not at Rome, nor Pisa, nor Florence, nor in any city of the world, is there a great mediæval Gothic like the Gothic of Verona. Elsewhere, it is either less pure in type or less lovely in completion: only at Verona may you see it in the simplicity of its youthful power, and the tenderness of its accomplished beauty. And Verona possesses, in the last place, the loveliest Renaissance architecture of Italy, not disturbed by pride, nor defiled by luxury, but rising in fair fulfilment of domestic service, serenity of effortless grace, and modesty of home seclusion; its richest work given to the windows that open on the narrowest streets and most silent gardens. All this she possesses, in the midst of natural scenery such as assuredly exists nowhere else in the habitable globe--a wild Alpine river foaming at her feet, from whose shore the rocks rise in a great crescent, dark with cypress, and misty with olive: illimitably, from before her southern gates, the tufted plains of Italy sweep and fade in golden light; around her, north and west, the Alps crowd in crested troops, and the winds of Benacus bear to her the coolness of their snows. And this is the city--such, and possessing such things as these--at whose gates the decisive battles of Italy are fought continually: three days her towers trembled with the echo of the cannon of Arcola; heaped pebbles of the Mincio divide her fields to this hour with lines of broken rampart, whence the tide of war rolled back to Novara; and now on that crescent of her eastern cliffs, whence the full moon used to rise through the bars of the cypresses in her burning summer twilights, touching with soft increase of silver light the rosy marbles of her balconies--along the ridge of that encompassing rock, other circles are increasing now, white and pale; walled towers of cruel strength, sable-spotted with cannon-courses. I tell you, I have seen, when the thunderclouds came down on those Italian hills, and all their crags were dipped in the dark, terrible purple, as if the winepress of the wrath of God had stained their mountain-raiment--I have seen the hail fall in Italy till the forest branches stood stripped and bare as if blasted by the locust; but the white hail never fell from those clouds of heaven as the black hail will fall from the clouds of hell, if ever one breath of Italian life stirs again in the streets of Verona. Sad as you will feel this to be, I do not say that you can directly prevent it; you cannot drive the Austrians out of Italy, nor prevent them from building forts where they choose. But I do say,[12] that you, and I, and all of us, ought to be both acting and feeling with a full knowledge and understanding of these things, and that, without trying to excite revolutions or weaken governments, we may give our own thoughts and help, so as in a measure to prevent needless destruction. We should do this, if we only realized the thing thoroughly. You drive out day by day through your own pretty suburbs, and you think only of making, with what money you have to spare, your gateways handsomer, and your carriage-drives wider--and your drawing-rooms more splendid, having a vague notion that you are all the while patronizing and advancing art, and you make no effort to conceal the fact, that within a few hours' journey of you, there are gateways and drawing-rooms which might just as well be yours as these, all built already; gateways built by the greatest masters of sculpture that ever struck marble; drawing-rooms, painted by Titian and Veronese; and you won't accept, nor save these as they are, but you will rather fetch the house-painter from over the way, and let Titian and Veronese house the rats. "Yes," of course, you answer; "we want nice houses here, not houses in Verona. What should we do with houses in Verona?" And I answer, do precisely what you do with the most expensive part of your possessions here: take pride in them--only a noble pride. You know well, when you examine your own hearts, that the greater part of the sums you spend on possessions are spent for pride. Why are your carriages nicely painted and finished outside? You don't see the outsides as you sit in them--the outsides are for other people to see. Why are your exteriors of houses so well finished, your furniture so polished and costly, but for other people to see? You are just as comfortable yourselves, writing on your old friend of a desk, with the white cloudings in his leather, and using the light of a window which is nothing but a hole in the brick wall. And all that is desirable to be done in this matter, is merely to take pride in preserving great art, instead of in producing mean art; pride in the possession of precious and enduring things, a little way off, instead of slight and perishing things near at hand. You know, in old English times, our kings liked to have lordships and dukedoms abroad, and why should not you merchant princes like to have lordships and estates abroad? Believe me, rightly understood, it would be a prouder, and in the full sense of our English word, more "respectable" thing to be lord of a palace at Verona, or of a cloister full of frescos at Florence, than to have a file of servants dressed in the finest liveries that ever tailor stitched, as long as would reach from here to Bolton:--yes, and a prouder thing to send people to travel in Italy, who would have to say every now and then, of some fair piece of art, "Ah! this was _kept_ here for us by the good people of Manchester," than to bring them travelling all the way here, exclaiming of your various art treasures, "These were _brought_ here for us, (not altogether without harm) by the good people of Manchester." "Ah!" but you say, "the Art Treasures Exhibition will pay; but Veronese palaces won't." Pardon me. They _would_ pay, less directly, but far more richly. Do you suppose it is in the long run good for Manchester, or good for England, that the Continent should be in the state it is? Do you think the perpetual fear of revolution, or the perpetual repression of thought and energy that clouds and encumbers the nations of Europe, is eventually profitable for _us_? Were we any the better of the course of affairs in '48; or has the stabling of the dragoon horses in the great houses of Italy, any distinct effect in the promotion of the cotton-trade? Not so. But every stake that you could hold in the stability of the Continent, and every effort that you could make to give example of English habits and principles on the Continent, and every kind deed that you could do in relieving distress and preventing despair on the Continent, would have tenfold reaction on the prosperity of England, and open and urge, in a thousand unforeseen directions, the sluices of commerce and the springs of industry. [12] The reader can hardly but remember Mrs. Browning's beautiful appeal for Italy, made on the occasion of the first great Exhibition of Art in England:-- "O Magi of the east and of the west, Your incense, gold, and myrrh are excellent!-- What gifts for Christ, then, bring ye with the rest? Your hands have worked well. Is your courage spent In handwork only? Have you nothing best, Which generous souls may perfect and present, And He shall thank the givers for? no light Of teaching, liberal nations, for the poor, Who sit in darkness when it is not night? No cure for wicked children? Christ,--no cure, No help for women, sobbing out of sight Because men made the laws? no brothel-lure Burnt out by popular lightnings? Hast thou found No remedy, my England, for such woes? No outlet, Austria, for the scourged and bound, No call back for the exiled? no repose, Russia, for knouted Poles worked underground, And gentle ladies bleached among the snows? No mercy for the slave, America? No hope for Rome, free France, chivalric France? Alas, great nations have great shames, I say. No pity, O world, no tender utterance Of benediction, and prayers stretched this way For poor Italia, baffled by mischance? O gracious nations, give some ear to me! You all go to your Fair, and I am one Who at the roadside of humanity Beseech your alms,--God's justice to be done. So, prosper!" I could press, if I chose, both these motives upon you, of pride and self-interest, with more force, but these are not motives which ought to be urged upon you at all. The only motive that I ought to put before you is simply that it would be right to do this; that the holding of property abroad, and the personal efforts of Englishmen to redeem the condition of foreign nations, are among the most direct pieces of duty which our wealth renders incumbent upon us. I do not--and in all truth and deliberateness I say this--I do not know anything more ludicrous among the self-deceptions of well-meaning people than their notion of patriotism, as requiring them to limit their efforts to the good of their own country;--the notion that charity is a geographical virtue, and that what it is holy and righteous to do for people on one bank of a river, it is quite improper and unnatural to do for people on the other. It will be a wonderful thing, some day or other, for the Christian world to remember, that it went on thinking for two thousand years that neighbours were neighbours at Jerusalem, but not at Jericho; a wonderful thing for us English to reflect, in after-years, how long it was before we could shake hands with anybody across that shallow salt wash, which the very chalk-dust of its two shores whitens from Folkestone to Ambleteuse. Nor ought the motive of gratitude, as well as that of mercy, to be without its influence on you, who have been the first to ask to see, and the first to show to us, the treasures which this poor lost Italy has given to England. Remember all these things that delight you here were hers--hers either in fact or in teaching; hers, in fact, are all the most powerful and most touching paintings of old time that now glow upon your walls; hers in teaching are all the best and greatest of descendant souls--your Reynolds and your Gainsborough never could have painted but for Venice; and the energies which have given the only true life to your existing art were first stirred by voices of the dead, that haunted the Sacred Field of Pisa. Well, all these motives for some definite course of action on our part towards foreign countries rest upon very serious facts; too serious, perhaps you will think, to be interfered with; for we are all of us in the habit of leaving great things alone, as if Providence would mind them, and attending ourselves only to little things which we know, practically, Providence doesn't mind unless we do. We are ready enough to give care to the growing of pines and lettuces, knowing that they don't grow Providentially sweet or large unless we look after them; but we don't give any care to the good of Italy or Germany, because we think that they will grow Providentially happy without any of our meddling. Let us leave the great things, then, and think of little things; not of the destruction of whole provinces in war, which it may not be any business of ours to prevent; but of the destruction of poor little pictures in peace, from which it surely would not be much out of our way to save them. You know I said, just now, we were all of us engaged in pulling pictures to pieces by deputy, and you did not believe me. Consider, then, this similitude of ourselves. Suppose you saw (as I doubt not you often do see) a prudent and kind young lady sitting at work, in the corner of a quiet room, knitting comforters for her cousins, and that just outside, in the hall, you saw a cat and her kittens at play among the family pictures; amusing themselves especially with the best Vandykes, by getting on the tops of the frames, and then scrambling down the canvasses by their claws; and on someone's informing the young lady of these proceedings of the cat and kittens, suppose she answered that it wasn't her cat, but her sister's, and the pictures weren't hers, but her uncle's, and she couldn't leave her work, for she had to make so many pairs of comforters before dinner. Would you not say that the prudent and kind young lady was, on the whole, answerable for the additional touches of claw on the Vandykes? Now, that is precisely what we prudent and kind English are doing, only on a larger scale. Here we sit in Manchester, hard at work, very properly, making comforters for our cousins all over the world. Just outside there in the hall--that beautiful marble hall of Italy--the cats and kittens and monkeys are at play among the pictures: I assure you, in the course of the fifteen years in which I have been working in those places in which the most precious remnants of European art exist, a sensation, whether I would or no, was gradually made distinct and deep in my mind, that I was living and working in the midst of a den of monkeys;--sometimes amiable and affectionate monkeys, with all manner of winning ways and kind intentions;--more frequently selfish and malicious monkeys, but, whatever their disposition, squabbling continually about nuts, and the best places on the barren sticks of trees; and that all this monkeys' den was filled, by mischance, with precious pictures, and the witty and wilful beasts were always wrapping themselves up and going to sleep in pictures, or tearing holes in them to grin through; or tasting them and spitting them out again, or twisting them up into ropes and making swings of them; and that sometimes only, by watching one's opportunity, and bearing a scratch or a bite, one could rescue the corner of a Tintoret, or Paul Veronese, and push it through the bars into a place of safety. Literally, I assure you, this was, and this is, the fixed impression on my mind of the state of matters in Italy. And see how. The professors of art in Italy, having long followed a method of study peculiar to themselves, have at last arrived at a form of art peculiar to themselves; very different from that which was arrived at by Correggio and Titian. Naturally, the professors like their own form the best; and, as the old pictures are generally not so startling to the eye as the modern ones, the dukes and counts who possess them, and who like to see their galleries look new and fine (and are persuaded also that a celebrated chef-d'oeuvre ought always to catch the eye at a quarter of a mile off), believe the professors who tell them their sober pictures are quite faded, and good for nothing, and should all be brought bright again; and, accordingly, give the sober pictures to the professors, to be put right by rules of art. Then, the professors repaint the old pictures in all the principal places, leaving perhaps only a bit of background to set off their own work. And thus the professors come to be generally figured in my mind, as the monkeys who tear holes in the pictures, to grin through. Then the picture-dealers, who live by the pictures, cannot sell them to the English in their old and pure state; all the good work must be covered with new paint, and varnished so as to look like one of the professorial pictures in the great gallery, before it is saleable. And thus the dealers come to be imaged, in my mind, as the monkeys who make ropes of the pictures, to swing by. Then, every now and then, in some old stable or wine-cellar, or timber-shed, behind some forgotten vats or faggots, somebody finds a fresco of Perugino's or Giotto's, but doesn't think much of it, and has no idea of having people coming into his cellar, or being obliged to move his faggots; and so he whitewashes the fresco, and puts the faggots back again; and these kind of persons, therefore, come generally to be imaged in my mind, as the monkeys who taste the pictures, and spit them out, not finding them nice. While, finally, the squabbling for nuts and apples (called in Italy "bella libertà") goes on all day long. Now, all this might soon be put an end to, if we English, who are so fond of travelling in the body, would also travel a little in soul. We think it a great triumph to get our packages and our persons carried at a fast pace, but we never take the slightest trouble to put any pace into our perceptions; we stay usually at home in thought, or if we ever mentally see the world, it is at the old stage-coach or waggon rate. Do but consider what an odd sight it would be, if it were only quite clear to you how things are really going on--how, here in England, we are making enormous and expensive efforts to produce new art of all kinds, knowing and confessing all the while that the greater part of it is bad, but struggling still to produce new patterns of wall-papers, and new shapes of tea-pots, and new pictures, and statues, and architecture; and pluming and cackling if ever a tea-pot or a picture has the least good in it;--all the while taking no thought whatever of the best possible pictures, and statues, and wall-patterns already in existence, which require nothing but to be taken common care of, and kept from damp and dust: but we let the walls fall that Giotto patterned, and the canvasses rot that Tintoret painted, and the architecture be dashed to pieces that St. Louis built, while we are furnishing our drawing-rooms with prize upholstery, and writing accounts of our handsome warehouses to the country papers. Don't think I use my words vaguely or generally: I speak of literal facts. Giotto's frescos at Assisi are perishing at this moment for want of decent care; Tintoret's pictures in San Sebastian at Venice, are at this instant rotting piecemeal into grey rags; St. Louis's Chapel, at Carcassonne, is at this moment lying in shattered fragments in the market-place. And here we are all cawing and crowing, poor little half-fledged daws as we are, about the pretty sticks and wool in our own nests. There's hardly a day passes, when I am at home, but I get a letter from some well-meaning country clergyman, deeply anxious about the state of his parish church, and breaking his heart to get money together that he may hold up some wretched remnant of Tudor tracery, with one niche in the corner and no statue--when all the while the mightiest piles of religious architecture and sculpture that ever the world saw are being blasted and withered away, without one glance of pity or regret. The country clergyman does not care for _them_--he has a sea-sick imagination that cannot cross Channel. What is it to him, if the angels of Assisi fade from its vaults, or the queens and kings of Chartres fall from their pedestals? They are not in his parish. "What!" you will say, "are we not to produce any new art, nor take care of our parish churches?" No, certainly not, until you have taken proper care of the art you have got already, and of the best churches out of the parish. Your first and proper standing is not as churchwardens and parish overseers in an English county, but as members of the great Christian community of Europe. And as members of that community (in which alone, observe, pure and precious ancient art exists, for there is none in America, none in Asia, none in Africa), you conduct yourselves precisely as a manufacturer would, who attended to his looms, but left his warehouse without a roof. The rain floods your warehouse, the rats frolic in it, the spiders spin in it, the choughs build in it, the wall-plague frets and festers in it, and still you keep weave, weave, weaving at your wretched webs, and thinking you are growing rich, while more is gnawed out of your warehouse in an hour than you can weave in a twelvemonth. Even this similitude is not absurd enough to set us rightly forth. The weaver would, or might, at least, hope that his new woof was as stout as the old ones, and that, therefore, in spite of rain and ravage, he would have something to wrap himself in when he needed it. But _our_ webs rot as we spin. The very fact that we despise the great art of the past shows that we cannot produce great art now. If we could do it, we should love it when we saw it done--if we really cared for it, we should recognise it and keep it; but we don't care for it. It is not art that we want; it is amusement, gratification of pride, present gain--anything in the world but art: let it rot, we shall always have enough to talk about and hang over our sideboards. You will (I hope) finally ask me what is the outcome of all this, practicable, to-morrow morning by us who are sitting here? These are the main practical outcomes of it: In the first place, don't grumble when you hear of a new picture being bought by Government at a large price. There are many pictures in Europe now in danger of destruction which are, in the true sense of the word, priceless; the proper price is simply that which it is necessary to give to get and to save them. If you can get them for fifty pounds, do; if not for less than a hundred, do; if not for less than five thousand, do; if not for less than twenty thousand, do; never mind being imposed upon: there is nothing disgraceful in being imposed upon; the only disgrace is in imposing; and you can't in general get anything much worth having, in the way of Continental art, but it must be with the help or connivance of numbers of people who, indeed, ought to have nothing to do with the matter, but who practically have, and always will have, everything to do with it; and if you don't choose to submit to be cheated by them out of a ducat here and a zecchin there, you will be cheated by them out of your picture; and whether you are most imposed upon in losing that, or the zecchins, I think I may leave you to judge; though I know there are many political economists, who would rather leave a bag of gold on a garret-table, than give a porter sixpence extra to carry it downstairs. That, then, is the first practical outcome of the matter. Never grumble, but be glad when you hear of a new picture being bought at a large price. In the long run, the dearest pictures are always the best bargains; and, I repeat (for else you might think I said it in mere hurry of talk, and not deliberately), there are some pictures which are without price. You should stand, nationally, at the edge of Dover cliffs--Shakespeare's--and wave blank cheques in the eyes of the nations on the other side of the sea, freely offered, for such and such canvasses of theirs. Then the next practical outcome of it is: Never buy a copy of a picture, under any circumstances whatever. All copies are bad; because no painter who is worth a straw ever _will_ copy. He will make a study of a picture he likes, for his own use, in his own way; but he won't and can't copy; whenever you buy a copy, you buy so much misunderstanding of the original, and encourage a dull person in following a business he is not fit for, besides increasing ultimately chances of mistake and imposture, and farthering, as directly as money _can_ farther, the cause of ignorance in all directions. You may, in fact, consider yourself as having purchased a certain quantity of mistakes; and, according to your power, being engaged in disseminating them. I do not mean, however, that copies should never be made. A certain number of dull persons should always be employed by a Government in making the most accurate copies possible of all good pictures; these copies, though artistically valueless, would be historically and documentarily valuable, in the event of the destruction of the original picture. The studies also made by great artists for their own use, should be sought after with the greatest eagerness; they are often to be bought cheap; and in connection with the mechanical copies, would become very precious: tracings from frescos and other large works are also of great value; for though a tracing is liable to just as many mistakes as a copy, the mistakes in a tracing are of one kind only, which may be allowed for, but the mistakes of a common copyist are of all conceivable kinds: finally, engravings, in so far as they convey certain facts about the pictures, without pretending adequately to represent or give an idea of the pictures, are often serviceable and valuable. I can't, of course, enter into details in these matters just now; only this main piece of advice I can safely give you--never to buy copies of pictures (for your private possession) which pretend to give a _facsimile_ that shall be in any wise representative of, or equal to, the original. Whenever you do so, you are only lowering your taste, and wasting your money. And if you are generous and wise, you will be ready rather to subscribe as much as you would have given for a copy of a great picture, towards its purchase, or the purchase of some other like it, by the nation. There ought to be a great National Society instituted for the purchase of pictures; presenting them to the various galleries in our great cities, and watching there over their safety: but in the meantime, you can always act safely and beneficially by merely allowing your artist friends to buy pictures for you, when they see good ones. Never buy for yourselves, nor go to the foreign dealers; but let any painter whom you know be entrusted, when he finds a neglected old picture in an old house, to try if he cannot get it for you; then, if you like it, keep it; if not, send it to the hammer, and you will find that you do not lose money on pictures so purchased. And the third and chief practical outcome of the matter is this general one: Wherever you go, whatever you do, act more for _preservation_ and less for _production_. I assure you, the world is, generally speaking, in calamitous disorder, and just because you have managed to thrust some of the lumber aside, and get an available corner for yourselves, you think you should do nothing but sit spinning in it all day long--while, as householders and economists, your first thought and effort should be, to set things more square all about you. Try to set the ground floors in order, and get the rottenness out of your granaries. _Then_ sit and spin, but not till then. IV. DISTRIBUTION.--And now, lastly, we come to the fourth great head of our inquiry, the question of the wise distribution of the art we have gathered and preserved. It must be evident to us, at a moment's thought, that the way in which works of art are on the whole most useful to the nation to which they belong, must be by their collection in public galleries, supposing those galleries properly managed. But there is one disadvantage attached necessarily to gallery exhibition, namely, the extent of mischief which may be done by one foolish curator. As long as the pictures which form the national wealth are disposed in private collections, the chance is always that the people who buy them will be just the people who are fond of them; and that the sense of exchangeable value in the commodity they possess, will induce them, even if they do not esteem it themselves, to take such care of it as will preserve its value undiminished. At all events, so long as works of art are scattered through the nation, no universal destruction of them is possible; a certain average only are lost by accidents from time to time. But when they are once collected in a large public gallery, if the appointment of curator becomes in any way a matter of formality, or the post is so lucrative as to be disputed by place-hunters, let but one foolish or careless person get possession of it, and perhaps you may have all your fine pictures repainted, and the national property destroyed, in a month. That is actually the case at this moment, in several great foreign galleries. They are the places of execution of pictures: over their doors you only want the Dantesque inscription, "Lasciate ogni speranza, voi che entrate." Supposing, however, this danger properly guarded against, as it would be always by a nation which either knew the value, or understood the meaning, of painting,[13] arrangement in a public gallery is the safest, as well as the most serviceable, method of exhibiting pictures; and it is the only mode in which their historical value can be brought out, and their historical meaning made clear. But great good is also to be done by encouraging the private possession of pictures; partly as a means of study (much more being always discovered in any work of art by a person who has it perpetually near him than by one who only sees it from time to time), and also as a means of refining the habits and touching the hearts of the masses of the nation in their domestic life. [13] It would be a great point gained towards the preservation of pictures if it were made a rule that at every operation they underwent, the exact spots in which they have been re-painted should be recorded in writing. For these last purposes the most serviceable art is the living art of the time; the particular tastes of the people will be best met, and their particular ignorances best corrected, by painters labouring in the midst of them, more or less guided to the knowledge of what is wanted by the degree of sympathy with which their work is received. So then, generally, it should be the object of government, and of all patrons of art, to collect, as far as may be, the works of dead masters in public galleries, arranging them so as to illustrate the history of nations, and the progress and influence of their arts; and to encourage the private possession of the works of _living_ masters. And the first and best way in which to encourage such private possession is, of course, to keep down the prices of them as far as you can. I hope there are not a great many painters in the room; if there are, I entreat their patience for the next quarter of an hour: if they will bear with me for so long, I hope they will not, finally, be offended by what I am going to say. I repeat, trusting to their indulgence in the interim, that the first object of our national economy, as respects the distribution of modern art, should be steadily and rationally to limit its prices, since by doing so, you will produce two effects; you will make the painters produce more pictures, two or three instead of one, if they wish to make money; and you will, by bringing good pictures within the reach of people of moderate income, excite the general interest of the nation in them, increase a thousandfold the demand for the commodity, and therefore its wholesome and natural production. I know how many objections must arise in your minds at this moment to what I say; but you must be aware that it is not possible for me in an hour to explain all the moral and commercial bearings of such a principle as this. Only, believe me, I do not speak lightly; I think I have considered all the objections which could be rationally brought forward, though I have time at present only to glance at the main one, namely, the idea that the high prices paid for modern pictures are either honourable, or serviceable, to the painter. So far from this being so, I believe one of the principal obstacles to the progress of modern art to be the high prices given for good modern pictures. For observe, first, the action of this high remuneration on the artist's mind. If he "gets on," as it is called, catches the eye of the public, and especially of the public of the upper classes, there is hardly any limit to the fortune he may acquire; so that, in his early years, his mind is naturally led to dwell on this worldly and wealthy eminence as the main thing to be reached by his art; if he finds that he is not gradually rising towards it, he thinks there is something wrong in his work; or, if he is too proud to think that, still the bribe of wealth and honour warps him from his honest labour into efforts to attract attention; and he gradually loses both his power of mind and his rectitude of purpose. This, according to the degree of avarice or ambition which exists in any painter's mind, is the necessary influence upon him of the hope of great wealth and reputation. But the harm is still greater, in so far as the possibility of attaining fortune of this kind tempts people continually to become painters who have no real gift for the work; and on whom these motives of mere worldly interest have exclusive influence;--men who torment and abuse the patient workers, eclipse or thrust aside all delicate and good pictures by their own gaudy and coarse ones, corrupt the taste of the public, and do the greatest amount of mischief to the schools of art in their day which it is possible for their capacities to effect; and it is quite wonderful how much mischief may be done even by small capacity. If you could by any means succeed in keeping the prices of pictures down, you would throw all these disturbers out of the way at once. You may perhaps think that this severe treatment would do more harm than good, by withdrawing the wholesome element of emulation, and giving no stimulus to exertion; but I am sorry to say that artists will always be sufficiently jealous of one another, whether you pay them large or low prices; and as for stimulus to exertion, believe me, no good work in this world was ever done for money, nor while the slightest thought of money affected the painter's mind. Whatever idea of pecuniary value enters into his thoughts as he works, will, in proportion to the distinctness of its presence, shorten his power. A real painter will work for you exquisitely, if you give him, as I told you a little while ago, bread and water and salt; and a bad painter will work badly and hastily, though you give him a palace to live in, and a princedom to live upon. Turner got, in his earlier years, half-a-crown a day and his supper (not bad pay, neither); and he learned to paint upon that. And I believe that there is no chance of art's truly flourishing in any country, until you make it a simple and plain business, providing its masters with an easy competence, but rarely with anything more. And I say this, not because I despise the great painter, but because I honour him; and I should no more think of adding to his respectability or happiness by giving him riches, than, if Shakespeare or Milton were alive, I should think we added to _their_ respectability, or were likely to get better work from them, by making them millionaires. But, observe, it is not only the painter himself whom you injure, by giving him too high prices; you injure all the inferior painters of the day. If they are modest, they will be discouraged and depressed by the feeling that their doings are worth so little, comparatively, in your eyes;--if proud, all their worst passions will be aroused, and the insult or opprobrium which they will try to cast on their successful rival will not only afflict and wound him, but at last sour and harden him: he cannot pass through such a trial without grievous harm. That, then, is the effect you produce on the painter of mark, and on the inferior ones of his own standing. But you do worse than this; you deprive yourselves, by what you give for the fashionable picture, of the power of helping the younger men who are coming forward. Be it admitted, for argument's sake if you are not convinced by what I have said, that you do no harm to the great man by paying him well; yet certainly you do him no special good. His reputation is established, and his fortune made; he does not care whether you buy or not: he thinks he is rather doing you a favour than otherwise by letting you have one of his pictures at all. All the good you do him is to help him to buy a new pair of carriage horses; whereas, with that same sum which thus you cast away, you might have relieved the hearts and preserved the health of twenty young painters; and if among those twenty, you but chanced on one in whom a true latent power had been hindered by his poverty, just consider what a far-branching, far-embracing good you have wrought with that lucky expenditure of yours. I say, "Consider it" in vain; you cannot consider it, for you cannot conceive the sickness of heart with which a young painter of deep feeling toils through his first obscurity;--his sense of the strong voice within him, which you will not hear;--his vain, fond, wondering witness to the things you will not see;--his far away perception of things that he could accomplish if he had but peace, and time, all unapproachable and vanishing from him, because no one will leave him peace or grant him time: all his friends falling back from him; those whom he would most reverently obey rebuking and paralysing him; and last and worst of all, those who believe in him the most faithfully suffering by him the most bitterly;--the wife's eyes, in their sweet ambition, shining brighter as the cheek wastes away; and the little lips at his side parched and pale, which one day, he knows, though he may never see it, will quiver so proudly when they name his name, calling him "our father." You deprive yourselves, by your large expenditure for pictures of mark, of the power of relieving and redeeming _this_ distress; you injure the painter whom you pay so largely;--and what, after all, have you done for yourselves, or got for yourselves? It does not in the least follow that the hurried work of a fashionable painter will contain more for your money than the quiet work of some unknown man. In all probability, you will find, if you rashly purchase what is popular at a high price, that you have got one picture you don't care for, for a sum which would have bought twenty you would have delighted in. For remember always that the price of a picture by a living artist, never represents, never _can_ represent, the quantity of labour or value in it. Its price represents, for the most part, the degree of desire which the rich people of the country have to possess it. Once get the wealthy classes to imagine that the possession of pictures by a given artist adds to their "gentility," and there is no price which his work may not immediately reach, and for years maintain; and in buying at that price, you are not getting value for your money, but merely disputing for victory in a contest of ostentation. And it is hardly possible to spend your money in a worse or more wasteful way; for though you may not be doing it for ostentation yourself, you are, by your pertinacity, nourishing the ostentation of others; you meet them in their game of wealth, and continue it for them; if they had not found an opposite player, the game would have been done; for a proud man can find no enjoyment in possessing himself of what nobody disputes with him. So that by every farthing you give for a picture beyond its fair price--that is to say, the price which will pay the painter for his time--you are not only cheating yourself and buying vanity, but you are stimulating the vanity of others; paying literally, for the cultivation of pride. You may consider every pound that you spend above the just price of a work of art, as an investment in a cargo of mental quick-lime or guano, which, being laid on the fields of human nature, is to grow a harvest of pride. You are in fact ploughing and harrowing, in a most valuable part of your land, in order to reap the whirlwind; you are setting your hand stoutly to Job's agriculture, "Let thistles grow instead of wheat, and cockle instead of barley." Well, but you will say, there is one advantage in high prices, which more than counterbalances all this mischief, namely, that by great reward we both urge and enable a painter to produce rather one perfect picture than many inferior ones: and one perfect picture (so you tell us, and we believe it) is worth a great number of inferior ones. It is so; but you cannot get it by paying for it. A great work is only done when the painter gets into the humour for it, likes his subject, and determines to paint it as well as he can, whether he is paid for it or not; but bad work, and generally the worst sort of bad work, is done when he is trying to produce a showy picture, or one that shall appear to have as much labour in it as shall be worth a high price.[14] [14] When this lecture was delivered, I gave here some data for approximate estimates of the average value of good modern pictures of different classes; but the subject is too complicated to be adequately treated in writing, without introducing more detail than the reader will have patience for. But I may state, roughly, that prices above a hundred guineas are in general extravagant for water-colours, and above five hundred for oils. An artist almost always does wrong who puts more work than these prices will remunerate him for into any single canvass--his talent would be better employed in painting two pictures than one so elaborate. The water-colour painters also are getting into the habit of making their drawings too large, and in a measure attaching their price rather to breadth and extent of touch than to thoughtful labour. Of course marked exceptions occur here and there, as in the case of John Lewis, whose drawings are wrought with unfailing precision throughout, whatever their scale. Hardly any price can be remunerative for such work. There is however, another point, and a still more important one, bearing on this matter of purchase, than the keeping down of prices to a rational standard. And that is, that you pay your prices into the hands of living men, and do not pour them into coffins. For observe that, as we arrange our payment of pictures at present, no artist's work is worth half its proper value while he is alive. The moment he dies, his pictures, if they are good, reach double their former value; but, that rise of price represents simply a profit made by the intelligent dealer or purchaser on his past purchases. So that the real facts of the matter are, that the British public, spending a certain sum annually in art, determines that, of every thousand it pays, only five hundred shall go to the painter, or shall be at all concerned in the production of art; and that the other five hundred shall be paid merely as a testimonial to the intelligent dealer, who knew what to buy. Now, testimonials are very pretty and proper things, within due limits; but testimonial to the amount of a hundred per cent. on the total expenditure is not good political economy. Do not therefore, in general, unless you see it to be necessary for its preservation, buy the picture of a dead artist. If you fear that it may be exposed to contempt or neglect, buy it; its price will then, probably, not be high: if you want to put it into a public gallery, buy it; you are sure, then, that you do not spend your money selfishly: or, if you loved the man's work while he was alive, and bought it then, buy it also now, if you can see no living work equal to it. But if you did not buy it while the man was living, never buy it after he is dead: you are then doing no good to him, and you are doing some shame to yourself. Look around you for pictures that you really like, and in buying which you can help some genius yet unperished--that is the best atonement you can make to the one you have neglected--and give to the living and struggling painter at once wages, and testimonial. So far, then, of the motives which should induce us to keep down the prices of modern art, and thus render it, as a private possession, attainable by greater numbers of people than at present. But we should strive to render it accessible to them in other ways also--chiefly by the permanent decoration of public buildings; and it is in this field that I think we may look for the profitable means of providing that constant employment for young painters of which we were speaking last evening. The first and most important kind of public buildings which we are always sure to want, are schools: and I would ask you to consider very carefully, whether we may not wisely introduce some great changes in the way of school decoration. Hitherto, as far as I know, it has either been so difficult to give all the education we wanted to our lads, that we have been obliged to do it, if at all, with cheap furniture in bare walls; or else we have considered that cheap furniture and bare walls are a proper part of the means of education; and supposed that boys learned best when they sat on hard forms, and had nothing but blank plaster about and above them whereupon to employ their spare attention; also, that it was as well they should be accustomed to rough and ugly conditions of things, partly by way of preparing them for the hardships of life, and partly that there might be the least possible damage done to floors and forms, in the event of their becoming, during the master's absence, the fields or instruments of battle. All this is so far well and necessary, as it relates to the training of country lads, and the first training of boys in general. But there certainly comes a period in the life of a well educated youth, in which one of the principal elements of his education is, or ought to be, to give him refinement of habits; and not only to teach him the strong exercises of which his frame is capable, but also to increase his bodily sensibility and refinement, and show him such small matters as the way of handling things properly, and treating them considerately. Not only so, but I believe the notion of fixing the attention by keeping the room empty, is a wholly mistaken one: I think it is just in the emptiest room that the mind wanders most; for it gets restless, like a bird, for want of a perch, and casts about for any possible means of getting out and away. And even if it be fixed, by an effort, on the business in hand, that business becomes itself repulsive, more than it need be, by the vileness of its associations; and many a study appears dull or painful to a boy when it is pursued on a blotted deal desk, under a wall with nothing on it but scratches and pegs, which would have been pursued pleasantly enough in a curtained corner of his father's library, or at the lattice window of his cottage. Nay, my own belief is, that the best study of all is the most beautiful; and that a quiet glade of forest, or the nook of a lake shore, are worth all the schoolrooms in Christendom, when once you are past the multiplication table; but be that as it may, there is no question at all but that a time ought to come in the life of a well trained youth, when he can sit at a writing table without wanting to throw the inkstand at his neighbour; and when also he will feel more capable of certain efforts of mind with beautiful and refined forms about him than with ugly ones. When that time comes, he ought to be advanced into the decorated schools; and this advance ought to be one of the important and honourable epochs of his life. I have not time, however, to insist on the mere serviceableness to our youth of refined architectural decoration, as such; for I want you to consider the probable influence of the particular kind of decoration which I wish you to get for them, namely, historical painting. You know we have hitherto been in the habit of conveying all our historical knowledge, such as it is, by the ear only, never by the eye; all our notions of things being ostensibly derived from verbal description, not from sight. Now, I have no doubt that, as we grow gradually wiser--and we are doing so every day--we shall discover at last that the eye is a nobler organ than the ear; and that through the eye we must, in reality, obtain, or put into form, nearly all the useful information we are to have about this world. Even as the matter stands, you will find that the knowledge which a boy is supposed to receive from verbal description is only available to him so far as in any underhand way he gets a sight of the thing you are talking about. I remember well that, for many years of my life, the only notion I had of the look of a Greek knight was complicated between recollection of a small engraving in my pocket Pope's Homer, and reverent study of the Horse Guards. And though I believe that most boys collect their ideas from more varied sources, and arrange them more carefully than I did; still, whatever sources they seek must always be ocular: if they are clever boys, they will go and look at the Greek vases and sculptures in the British Museum, and at the weapons in our armouries--they will see what real armour is like in lustre, and what Greek armour was like in form, and so put a fairly true image together, but still not, in ordinary cases, a very living or interesting one. Now, the use of your decorative painting would be, in myriads of ways, to animate their history for them, and to put the living aspect of past things before their eyes as faithfully as intelligent invention can; so that the master shall have nothing to do but once to point to the schoolroom walls, and for ever afterwards the meaning of any word would be fixed in a boy's mind in the best possible way. Is it a question of classical dress--what a tunic was like, or a chlamys, or a peplus? At this day, you have to point to some vile woodcut, in the middle of a dictionary page, representing the thing hung upon a stick, but then, you would point to a hundred figures, wearing the actual dress, in its fiery colours, in all actions of various stateliness or strength; you would understand at once how it fell round the people's limbs as they stood, how it drifted from their shoulders as they went, how it veiled their faces as they wept, how it covered their heads in the day of battle. _Now_, if you want to see what a weapon is like, you refer, in like manner, to a numbered page, in which there are spear-heads in rows, and sword-hilts in symmetrical groups; and gradually the boy gets a dim mathematical notion how one scymitar is hooked to the right and another to the left, and one javelin has a knob to it and another none: while one glance at your good picture would show him,--and the first rainy afternoon in the schoolroom would for ever fix in his mind,--the look of the sword and spear as they fell or flew; and how they pierced, or bent, or shattered--how men wielded them, and how men died by them. But far more than all this, is it a question not of clothes or weapons, but of men? how can we sufficiently estimate the effect on the mind of a noble youth, at the time when the world opens to him, of having faithful and touching representations put before him of the acts and presences of great men--how many a resolution, which would alter and exalt the whole course of his after-life, might be formed, when in some dreamy twilight he met, through his own tears, the fixed eyes of those shadows of the great dead, unescapable and calm, piercing to his soul; or fancied that their lips moved in dread reproof or soundless exhortation. And if but for one out of many this were true--if yet, in a few, you could be sure that such influence had indeed changed their thoughts and destinies, and turned the eager and reckless youth, who would have cast away his energies on the race-horse or the gambling-table, to that noble life-race, that holy life-hazard, which should win all glory to himself and all good to his country--would not that, to some purpose, be "political economy of art?" And observe, there could be no monotony, no exhaustibleness, in the scenes required to be thus pourtrayed. Even if there were, and you wanted for every school in the kingdom, one death of Leonidas; one battle of Marathon; one death of Cleobis and Bito; there need not therefore be more monotony in your art than there was in the repetition of a given cycle of subjects by the religious painters of Italy. But we ought not to admit a cycle at all. For though we had as many great schools as we have great cities (one day I hope we _shall_ have), centuries of painting would not exhaust, in all the number of them, the noble and pathetic subjects which might be chosen from the history of even one noble nation. But, besides this, you will not, in a little while, limit your youths' studies to so narrow fields as you do now. There will come a time--I am sure of it--when it will be found that the same practical results, both in mental discipline, and in political philosophy, are to be attained by the accurate study of mediæval and modern as of ancient history; and that the facts of mediæval and modern history are, on the whole, the most important to us. And among these noble groups of constellated schools which I foresee arising in our England, I foresee also that there will be divided fields of thought; and that while each will give its scholars a great general idea of the world's history, such as all men should possess--each will also take upon itself, as its own special duty, the closer study of the course of events in some given place or time. It will review the rest of history, but it will exhaust its own special field of it; and found its moral and political teaching on the most perfect possible analysis of the results of human conduct in one place, and at one epoch. And then, the galleries of that school will be painted with the historical scenes belonging to the age which it has chosen for its special study. So far, then, of art as you may apply it to that great series of public buildings which you devote to the education of youth. The next large class of public buildings in which we should introduce it, is one which I think a few years more of national progress will render more serviceable to us than they have been lately. I mean, buildings for the meetings of guilds of trades. And here, for the last time, I must again interrupt the course of our chief inquiry, in order to state one other principle of political economy, which is perfectly simple and indisputable; but which, nevertheless, we continually get into commercial embarrassments for want of understanding; and not only so, but suffer much hindrance in our commercial discoveries, because many of our business men do not practically admit it. Supposing half a dozen or a dozen men were cast ashore from a wreck on an uninhabited island and left to their own resources, one of course, according to his capacity, would be set to one business and one to another; the strongest to dig and to cut wood, and to build huts for the rest: the most dexterous to make shoes out of bark and coats out of skins; the best educated to look for iron or lead in the rocks, and to plan the channels for the irrigation of the fields. But though their labours were thus naturally severed, that small group of shipwrecked men would understand well enough that the speediest progress was to be made by helping each other,--not by opposing each other; and they would know that this help could only be properly given so long as they were frank and open in their relations, and the difficulties which each lay under properly explained to the rest. So that any appearance of secresy or separateness in the actions of any of them would instantly, and justly, be looked upon with suspicion by the rest, as the sign of some selfish or foolish proceeding on the part of the individual. If, for instance, the scientific man were found to have gone out at night, unknown to the rest, to alter the sluices, the others would think, and in all probability rightly think, that he wanted to get the best supply of water to his own field; and if the shoemaker refused to show them where the bark grew which he made the sandals of, they would naturally think, and in all probability rightly think, that he didn't want them to see how much there was of it, and that he meant to ask from them more corn and potatoes in exchange for his sandals than the trouble of making them deserved. And thus, although each man would have a portion of time to himself in which he was allowed to do what he chose without let or inquiry,--so long as he was working in that particular business which he had undertaken for the common benefit, any secresy on his part would be immediately supposed to mean mischief; and would require to be accounted for, or put an end to: and this all the more because, whatever the work might be, certainly there would be difficulties about it which, when once they were well explained, might be more or less done away with by the help of the rest; so that assuredly every one of them would advance with his labour not only more happily, but more profitably and quickly, by having no secrets, and by frankly bestowing, and frankly receiving, such help as lay in his way to get or to give. And, just as the best and richest result of wealth and happiness to the whole of them, would follow on their perseverance in such a system of frank communication and of helpful labour;--so precisely the worst and poorest result would be obtained by a system of secresy and of enmity; and each man's happiness and wealth would assuredly be diminished in proportion to the degree in which jealousy and concealment became their social and economical principles. It would not, in the long run, bring good, but only evil, to the man of science, if, instead of telling openly where he had found good iron, he carefully concealed every new bed of it, that he might ask, in exchange for the rare ploughshare, more corn from the farmer, or in exchange for the rude needle, more labour from the sempstress: and it would not ultimately bring good, but only evil, to the farmers, if they sought to burn each other's cornstacks, that they might raise the value of their grain, or if the sempstresses tried to break each other's needles, that each might get all the stitching to herself. Now, these laws of human action are precisely as authoritative in their application to the conduct of a million of men, as to that of six or twelve. All enmity, jealousy, opposition, and secresy are wholly, and in all circumstances, destructive in their nature--not productive; and all kindness, fellowship, and communicativeness are invariably productive in their operation,--not destructive; and the evil principles of opposition and exclusiveness are not rendered less fatal, but more fatal, by their acceptance among large masses of men; more fatal, I say, exactly in proportion as their influence is more secret. For though the opposition does always its own simple, necessary, direct quantity of harm, and withdraws always its own simple, necessary, measurable quantity of wealth from the sum possessed by the community, yet, in proportion to the size of the community, it does another and more refined mischief than this, by concealing its own fatality under aspects of mercantile complication and expediency, and giving rise to multitudes of false theories based on a mean belief in narrow and immediate appearances of good done here and there by things which have the universal and everlasting nature of evil. So that the time and powers of the nation are wasted, not only in wretched struggling against each other, but in vain complaints, and groundless discouragements, and empty investigations, and useless experiments in laws, and elections, and inventions; with hope always to pull wisdom through some new-shaped slit in a ballot-box, and to drag prosperity down out of the clouds along some new knot of electric wire; while all the while Wisdom stands calling at the corners of the streets, and the blessing of heaven waits ready to rain down upon us, deeper than the rivers and broader than the dew, if only we will obey the first plain principles of humanity, and the first plain precepts of the skies; "Execute true judgment, and show mercy and compassion, every man to his brother; and let none of you imagine evil against his brother in your heart."[15] [15] It would be well if, instead of preaching continually about the doctrine of faith and good works, our clergymen would simply explain to their people a little what good works mean. There is not a chapter in all the Book we profess to believe, more specially and directly written for England, than the second of Habakkuk, and I never in all my life heard one of its practical texts preached from. I suppose the clergymen are all afraid, and know that their flocks, while they will sit quite politely to hear syllogisms out of the epistle to the Romans, would get restive directly if they ever pressed a practical text home to them. But we should have no mercantile catastrophes, and no distressful pauperism, if we only read often, and took to heart, those plain words:--"Yea, also, because he is a proud man, neither keepeth at home, who enlargeth his desire as hell, and cannot be satisfied,--Shall not all these take up a parable against him, and a taunting proverb against him, and say, 'Woe to him that increaseth that which is not his: and to him that _ladeth himself with thick clay_.'" (What a glorious history, in one metaphor, of the life of a man greedy of fortune.) "Woe to him that coveteth an evil covetousness that he may set his nest on high. Woe to him that buildeth a town with blood, and stablisheth a city by iniquity. Behold, is it not of the Lord of Hosts that the people shall labour in the very fire, and the people shall weary themselves for very vanity." The Americans, who have been sending out ships with sham bolt-heads on their timbers, and only half their bolts, may meditate on that "buildeth a town with blood." Therefore, I believe most firmly, that as the laws of national prosperity get familiar to us, we shall more and more cast our toil into social and communicative systems; and that one of the first means of our doing so, will be the re-establishing guilds of every important trade in a vital, not formal, condition;--that there will be a great council or government house for the members of every trade, built in whatever town of the kingdom occupies itself principally in such trade, with minor council halls in other cities; and to each council-hall, officers attached, whose first business may be to examine into the circumstances of every operative, in that trade, who chooses to report himself to them when out of work, and to set him to work, if he is indeed able and willing, at a fixed rate of wages, determined at regular periods in the council-meetings; and whose next duty may be to bring reports before the council of all improvements made in the business, and means of its extension: not allowing private patents of any kind, but making all improvements available to every member of the guild, only allotting, after successful trial of them, a certain reward to the inventors. For these, and many other such purposes, such halls will be again, I trust, fully established, and then, in the paintings and decorations of them, especial effort ought to be made to express the worthiness and honourableness of the trade for whose members they are founded. For I believe one of the worst symptoms of modern society to be, its notion of great inferiority, and ungentlemanliness, as necessarily belonging to the character of a tradesman. I believe tradesmen may be, ought to be--often are, more gentlemen than idle and useless people: and I believe that art may do noble work by recording in the hall of each trade, the services which men belonging to that trade have done for their country, both preserving the portraits, and recording the important incidents in the lives, of those who have made great advances in commerce and civilization. I cannot follow out this subject, it branches too far, and in too many directions; besides, I have no doubt you will at once see and accept the truth of the main principle, and be able to think it out for yourselves. I would fain also have said something of what might be done, in the same manner, for almshouses and hospitals, and for what, as I shall try to explain in notes to this lecture, we may hope to see, some day, established with a different meaning in their name than that they now bear--workhouses; but I have detained you too long already, and cannot permit myself to trespass further on your patience except only to recapitulate, in closing, the simple principles respecting wealth which we have gathered during the course of our inquiry; principles which are nothing more than the literal and practical acceptance of the saying, which is in all good men's mouths; namely, that they are stewards or ministers of whatever talents are entrusted to them. Only, is it not a strange thing, that while we more or less accept the meaning of that saying, so long as it is considered metaphorical, we never accept its meaning in its own terms? You know the lesson is given us under the form of a story about money. Money was given to the servants to make use of: the unprofitable servant dug in the earth, and hid his Lord's money. Well, we, in our poetical and spiritual application of this, say, that of course money doesn't mean money, it means wit, it means intellect, it means influence in high quarters, it means everything in the world except itself. And do not you see what a pretty and pleasant come-off there is for most of us, in this spiritual application? Of course, if we had wit, we would use it for the good of our fellow-creatures. But we haven't wit. Of course, if we had influence with the bishops, we would use it for the good of the Church; but we haven't any influence with the bishops. Of course, if we had political power, we would use it for the good of the nation; but we have no political power; we have no talents entrusted to _us_ of any sort or kind. It is true we have a little money, but the parable can't possibly mean anything so vulgar as money; our money's our own. I believe, if you think seriously of this matter, you will feel that the first and most literal application is just as necessary a one as any other--that the story does very specially mean what it says--plain money; and that the reason we don't at once believe it does so, is a sort of tacit idea that while thought, wit, and intellect, and all power of birth and position, are indeed _given_ to us, and, therefore, to be laid out for the Giver,--our wealth has not been given to us; but we have worked for it, and have a right to spend it as we choose. I think you will find that is the real substance of our understanding in this matter. Beauty, we say, is given by God--it is a talent; strength is given by God--it is a talent; position is given by God--it is a talent; but money is proper wages for our day's work--it is not a talent, it is a due. We may justly spend it on ourselves, if we have worked for it. And there would be some shadow of excuse for this, were it not that the very power of making the money is itself only one of the applications of that intellect or strength which we confess to be talents. Why is one man richer than another? Because he is more industrious, more persevering, and more sagacious. Well, who made him more persevering or more sagacious than others? That power of endurance, that quickness of apprehension, that calmness of judgment, which enable him to seize the opportunities that others lose, and persist in the lines of conduct in which others fail--are these not talents?--are they not, in the present state of the world, among the most distinguished and influential of mental gifts? And is it not wonderful, that while we should be utterly ashamed to use a superiority of body, in order to thrust our weaker companions aside from some place of advantage, we unhesitatingly use our superiorities of mind to thrust them back from whatever good that strength of mind can attain? You would be indignant if you saw a strong man walk into a theatre or a lecture-room, and, calmly choosing the best place, take his feeble neighbour by the shoulder, and turn him out of it into the back seats, or the street. You would be equally indignant if you saw a stout fellow thrust himself up to a table where some hungry children were being fed, and reach his arm over their heads and take their bread from them. But you are not the least indignant if, when a man has stoutness of thought and swiftness of capacity, and, instead of being long-armed only, has the much greater gift of being long-headed--you think it perfectly just that he should use his intellect to take the bread out of the mouths of all the other men in the town who are of the same trade with him; or use his breadth and sweep of sight to gather some branch of the commerce of the country into one great cobweb, of which he is himself to be the central spider, making every thread vibrate with the points of his claws, and commanding every avenue with the facets of his eyes. You see no injustice in this. But there is injustice; and, let us trust, one of which honourable men will at no very distant period disdain to be guilty. In some degree, however, it is indeed not unjust; in some degree it is necessary and intended. It is assuredly just that idleness should be surpassed by energy; that the widest influence should be possessed by those who are best able to wield it; and that a wise man, at the end of his career, should be better off than a fool. But for that reason, is the fool to be wretched, utterly crushed down, and left in all the suffering which his conduct and capacity naturally inflict?--Not so. What do you suppose fools were made for? That you might tread upon them, and starve them, and get the better of them in every possible way? By no means. They were made that wise people might take care of them. That is the true and plain fact concerning the relations of every strong and wise man to the world about him. He has his strength given him, not that he may crush the weak, but that he may support and guide them. In his own household he is to be the guide and the support of his children; out of his household he is still to be the father, that is, the guide and support of the weak and the poor; not merely of the meritoriously weak and the innocently poor, but of the guiltily and punishably poor; of the men who ought to have known better--of the poor who ought to be ashamed of themselves. It is nothing to give pension and cottage to the widow who has lost her son; it is nothing to give food and medicine to the workman who has broken his arm, or the decrepit woman wasting in sickness. But it is something to use your time and strength to war with the waywardness and thoughtlessness of mankind; to keep the erring workman in your service till you have made him an unerring one; and to direct your fellow-merchant to the opportunity which his dullness would have lost. This is much; but it is yet more, when you have fully achieved the superiority which is due to you, and acquired the wealth which is the fitting reward of your sagacity, if you solemnly accept the responsibility of it, as it is the helm and guide of labour far and near. For you who have it in your hands, are in reality the pilots of the power and effort of the State.[16] It is entrusted to you as an authority to be used for good or evil, just as completely as kingly authority was ever given to a prince, or military command to a captain. And, according to the quantity of it that you have in your hands you are the arbiters of the will and work of England; and the whole issue, whether the work of the State shall suffice for the State or not, depends upon you. You may stretch out your sceptre over the heads of the English labourers, and say to them, as they stoop to its waving, "Subdue this obstacle that has baffled our fathers, put away this plague that consumes our children; water these dry places, plough these desert ones, carry this food to those who are in hunger; carry this light to those who are in darkness; carry this life to those who are in death;" or on the other side you may say to her labourers: "Here am I; this power is in my hand; come, build a mound here for me to be throned upon, high and wide; come, make crowns for my head, that men may see them shine from far away; come, weave tapestries for my feet, that I may tread softly on the silk and purple;[17] come, dance before me, that I may be gay; and sing sweetly to me, that I may slumber; so shall I live in joy, and die in honour." And better than such an honourable death, it were that the day had perished wherein we were born, and the night in which it was said there is a child conceived. [16] See note 7th, in Addenda [p. 106]. [17] See note 8th, in Addenda [p. 107]. I trust, that in a little while, there will be few of our rich men who, through carelessness or covetousness, thus forfeit the glorious office which is intended for their hands. I said, just now, that wealth ill used was as the net of the spider, entangling and destroying: but wealth well used, is as the net of the sacred fisher who gathers souls of men out of the deep. A time will come--I do not think even now it is far from us--when this golden net of the world's wealth will be spread abroad as the flaming meshes of morning cloud are over the sky; bearing with them the joy of light and the dew of the morning, as well as the summons to honourable and peaceful toil. What less can we hope from your wealth than this, rich men of England, when once you feel fully how, by the strength of your possessions--not, observe, by the exhaustion, but by the administration of them and the power--you can direct the acts,--command the energies,--inform the ignorance,--prolong the existence, of the whole human race; and how, even of worldly wisdom, which man employs faithfully, it is true, not only that her ways are pleasantness, but that her paths are peace; and that, for all the children of men, as well as for those to whom she is given, Length of days are in her right hand, as in her left hand Riches and Honour? ADDENDA. Note, p. 19.--"_Fatherly authority._" This statement could not, of course, be heard without displeasure by a certain class of politicians; and in one of the notices of these lectures given in the Manchester journals at the time, endeavour was made to get quit of it by referring to the Divine authority, as the only Paternal power with respect to which men were truly styled "brethren." Of course it is so, and, equally of course, all human government is nothing else than the executive expression of this Divine authority. The moment government ceases to be the practical enforcement of Divine law, it is tyranny; and the meaning which I attach to the words, "paternal government," is, in more extended terms, simply this--"The executive fulfilment, by formal human methods, of the will of the Father of mankind respecting His children." I could not give such a definition of Government as this in a popular lecture; and even in written form, it will necessarily suggest many objections, of which I must notice and answer the most probable. Only, in order to avoid the recurrence of such tiresome phrases as "it may be answered in the second place," and "it will be objected in the third place," etc., I will ask the reader's leave to arrange the discussion in the form of simple dialogue, letting _O._ stand for objector, and _R._ for response. _O._--You define your paternal government to be the executive fulfilment, by formal human methods, of the Divine will. But, assuredly, that will cannot stand in need of aid or expression from human laws. It cannot fail of its fulfilment. _R._--In the final sense it cannot; and in that sense, men who are committing murder and stealing are fulfilling the will of God as much as the best and kindest people in the world. But in the limited and present sense, the only sense with which _we_ have anything to do, God's will concerning man is fulfilled by some men, and thwarted by others. And those men who either persuade or enforce the doing of it, stand towards those who are rebellious against it exactly in the position of faithful children in a family, who, when the father is out of sight, either compel or persuade the rest to do as their father would have them, were he present; and in so far as they are expressing and maintaining, for the time, the paternal authority, they exercise, in the exact sense in which I mean the phrase to be understood, paternal government over the rest. _O._--But, if Providence has left a liberty to man in many things in order to prove him, why should human law abridge that liberty, and take upon itself to compel what the great Lawgiver does not compel? _R._--It is confessed, in the enactment of any law whatsoever, that human lawgivers have a right to do this. For, if you have no right to abridge any of the liberty which Providence has left to man, you have no right to punish any one for committing murder or robbery. You ought to leave them to the punishment of God and Nature. But if you think yourself under obligation to punish, as far as human laws can, the violation of the will of God by those great sins, you are certainly under the same obligation to punish, with proportionately less punishment, the violation of His will in less sins. _O._--No; you must not attempt to punish less sins by law, because you cannot properly define nor ascertain them. Everybody can determine whether murder has been committed or not, but you cannot determine how far people have been unjust or cruel in minor matters, and therefore cannot make or execute laws concerning minor matters. _R._--If I propose to you to punish faults which cannot be defined, or to execute laws which cannot be made equitable, reject the laws I propose. But do not generally object to the principle of law. _O._--Yes; I generally object to the principle of law as applied to minor things; because, if you could succeed (which you cannot) in regulating the entire conduct of men by law in little things as well as great, you would take away from human life all its probationary character, and render many virtues and pleasures impossible. You would reduce virtue to the movement of a machine, instead of the act of a spirit. _R._--You have just said, parenthetically, and I fully and willingly admit it, that it is impossible to regulate all minor matters by law. Is it not probable, therefore, that the degree in which it is _possible_ to regulate them by it, is also the degree in which it is _right_ to regulate them by it? Or what other means of judgment will you employ, to separate the things which ought to be formally regulated from the things which ought not. You admit that great sins should be legally repressed; but you say that small sins should not be legally repressed. How do you distinguish between great and small sins; and how do you intend to determine, or do you in practice of daily life determine, on what occasions you should compel people to do right, and on what occasions you should leave them the option of doing wrong? _O._--I think you cannot make any accurate or logical distinction in such matters; but that common sense and instinct have, in all civilized nations, indicated certain crimes of great social harmfulness, such as murder, theft, adultery, slander, and such like, which it is proper to repress legally; and that common sense and instinct indicate also the kind of crimes which it is proper for laws to let alone, such as miserliness, ill-natured speaking, and many of those commercial dishonesties which I have a notion you want your paternal government to interfere with. _R._--Pray do not alarm yourself about what my paternal government is likely to interfere with, but keep to the matter in hand. You say that "common sense and instinct" have, in all civilized nations, distinguished between the sins that ought to be legally dealt with and that ought not. Do you mean that the laws of all civilized nations are perfect? _O._--No; certainly not. _R._--Or that they are perfect at least in their discrimination of what crimes they should deal with, and what crimes they should let alone? _O._--No; not exactly. _R._--What _do_ you mean, then? _O._--I mean that the general tendency is right in the laws of civilized nations; and that, in due course of time, natural sense and instinct point out the matters they should be brought to bear upon. And each question of legislation must be made a separate subject of inquiry as it presents itself: you cannot fix any general principles about what should be dealt with legally, and what should not. _R._--Supposing it to be so, do you think there are any points in which our English legislation is capable of amendment, as it bears on commercial and economical matters, in this present time? _O._--Of course I do. _R._--Well, then, let us discuss these together quietly; and if the points that I want amended seem to you incapable of amendment, or not in need of amendment, say so: but don't object, at starting, to the mere proposition of applying law to things which have not had law applied to them before. You have admitted the fitness of my expression, "paternal government:" it only has been, and remains, a question between us, how far such government should extend. Perhaps you would like it only to regulate, among the children, the length of their lessons; and perhaps I should like it also to regulate the hardness of their cricket-balls: but cannot you wait quietly till you know what I want it to do, before quarrelling with the thing itself? _O._--No; I cannot wait quietly: in fact I don't see any use in beginning such a discussion at all, because I am quite sure from the first, that you want to meddle with things that you have no business with, and to interfere with healthy liberty of action in all sorts of ways; and I know that you can't propose any laws that would be of real use.[18] [18] If the reader is displeased with me for putting this foolish speech into his mouth, I entreat his pardon; but he may be assured that it is a speech which would be made by many people, and the substance of which would be tacitly felt by many more, at this point of the discussion. I have really tried, up to this point, to make the objector as intelligent a person as it is possible for an author to imagine anybody to be, who differs with him. _R._--If you indeed know that, you would be wrong to hear me any farther. But if you are only in painful doubt about me, which makes you unwilling to run the risk of wasting your time, I will tell you beforehand what I really do think about this same liberty of action, namely, that whenever we can make a perfectly equitable law about any matter, or even a law securing, on the whole, more just conduct than unjust, we ought to make that law; and that there will yet, on these conditions, always remain a number of matters respecting which legalism and formalism are impossible; enough, and more than enough, to exercise all human powers of individual judgment, and afford all kinds of scope to individual character. I think this; but of course it can only be proved by separate examination of the possibilities of formal restraint in each given field of action; and these two lectures are nothing more than a sketch of such a detailed examination in one field, namely, that of art. You will find, however, one or two other remarks on such possibilities in the next note. Note 2nd, p. 21.--"_Right to public support._" It did not appear to me desirable, in the course of the spoken lecture, to enter into details or offer suggestions on the questions of the regulation of labour and distribution of relief, as it would have been impossible to do so without touching in many disputed or disputable points, not easily handled before a general audience. But I must now supply what is wanting to make my general statement clear. I believe, in the first place, that no Christian nation has any business to see one of its members in distress without helping him, though, perhaps, at the same time punishing him: help, of course--in nine cases out of ten--meaning guidance, much more than gift, and, therefore, interference with liberty. When a peasant mother sees one of her careless children fall into a ditch, her first proceeding is to pull him out; her second, to box his ears; her third, ordinarily, to lead him carefully a little way by the hand, or send him home for the rest of the day. The child usually cries, and very often would clearly prefer remaining in the ditch; and if he understood any of the terms of politics, would certainly express resentment at the interference with his individual liberty: but the mother has done her duty. Whereas the usual call of the mother nation to any of her children, under such circumstances, has lately been nothing more than the foxhunter's,--"Stay still there; I shall clear you." And if we always _could_ clear them, their requests to be left in muddy independence might be sometimes allowed by kind people, or their cries for help disdained by unkind ones. But we can't clear them. The whole nation is, in fact, bound together, as men are by ropes on a glacier--if one falls, the rest must either lift him or drag him along with them[19] as dead weight, not without much increase of danger to themselves. And the law of right being manifestly in this, as, whether manifestly or not, it is always, the law of prudence, the only question is, how this wholesome help and interference are to be administered. [19] It is very curious to watch the efforts of two shopkeepers to ruin each other, neither having the least idea that his ruined neighbour must eventually be supported at his own expense, with an increase of poor rates; and that the contest between them is not in reality which shall get everything for himself, but which shall first take upon himself and his customers the gratuitous maintenance of the other's family. The first interference should be in education. In order that men may be able to support themselves when they are grown, their strength must be properly developed while they are young; and the state should always see to this--not allowing their health to be broken by too early labour, nor their powers to be wasted for want of knowledge. Some questions connected with this matter are noticed farther on under the head "Trial Schools:" one point I must notice here, that I believe all youths of whatever rank, ought to learn some manual trade thoroughly; for it is quite wonderful how much a man's views of life are cleared by the attainment of the capacity of doing any one thing well with his hands and arms. For a long time, what right life there was in the upper classes of Europe depended in no small degree on the necessity which each man was under of being able to fence; at this day, the most useful things which boys learn at public schools, are, I believe, riding, rowing, and cricketing. But it would be far better that members of Parliament should be able to plough straight, and make a horseshoe, than only to feather oars neatly or point their toes prettily in stirrups. Then, in literary and scientific teaching, the great point of economy is to give the discipline of it through knowledge which will immediately bear on practical life. Our literary work has long been economically useless to us because too much concerned with dead languages; and our scientific work will yet, for some time, be a good deal lost, because scientific men are too fond or too vain of their systems, and waste the student's time in endeavouring to give him large views, and make him perceive interesting connections of facts; when there is not one student, no, nor one man, in a thousand, who can feel the beauty of a system, or even take it clearly into his head; but nearly all men can understand, and most will be interested in, the facts which bear on daily life. Botanists have discovered some wonderful connection between nettles and figs, which a cowboy who will never see a ripe fig in his life need not be at all troubled about; but it will be interesting to him to know what effect nettles have on hay, and what taste they will give to porridge; and it will give him nearly a new life if he can be got but once, in a spring time, to look well at the beautiful circlet of the white nettle blossom, and work out with his schoolmaster the curves of its petals, and the way it is set on its central mast. So, the principle of chemical equivalents, beautiful as it is, matters far less to a peasant boy, and even to most sons of gentlemen, than their knowing how to find whether the water is wholesome in the back-kitchen cistern, or whether the seven-acre field wants sand or chalk. Having, then, directed the studies of our youth so as to make them practically serviceable men at the time of their entrance into life, that entrance should always be ready for them in cases where their private circumstances present no opening. There ought to be government establishments for every trade, in which all youths who desired it should be received as apprentices on their leaving school; and men thrown out of work received at all times. At these government manufactories the discipline should be strict, and the wages steady, not varying at all in proportion to the demand for the article, but only in proportion to the price of food; the commodities produced being laid up in store to meet sudden demands, and sudden fluctuations in prices prevented:--that gradual and necessary fluctuation only being allowed which is properly consequent on larger or more limited supply of raw material and other natural causes. When there was a visible tendency to produce a glut of any commodity, that tendency should be checked by directing the youth at the government schools into other trades; and the yearly surplus of commodities should be the principal means of government provision for the poor. That provision should be large, and not disgraceful to them. At present there are very strange notions in the public mind respecting the receiving of alms: most people are willing to take them in the form of a pension from government, but unwilling to take them in the form of a pension from their parishes. There may be some reason for this singular prejudice, in the fact of the government pension being usually given as a definite acknowledgment of some service done to the country;--but the parish pension is, or ought to be, given precisely on the same terms. A labourer serves his country with his spade, just as a man in the middle ranks of life serves it with his sword, pen, or lancet: if the service is less, and therefore the wages during health less, then the reward, when health is broken, may be less, but not, therefore, less honourable; and it ought to be quite as natural and straightforward a matter for a labourer to take his pension from his parish, because he has deserved well of his parish, as for a man in higher rank to take his pension from his country, because he has deserved well of his country. If there be any disgrace in coming to the parish, because it may imply improvidence in early life, much more is there disgrace in coming to the government: since improvidence is far less justifiable in a highly educated than in an imperfectly educated man; and far less justifiable in a high rank, where extravagance must have been luxury, than in a low rank, where it may only have been comfort. So that the real fact of the matter is, that people will take alms delightedly, consisting of a carriage and footmen, because those do not look like alms to the people in the street; but they will not take alms consisting only of bread and water and coals, because everybody would understand what those meant. Mind, I do not want any one to refuse the carriage who ought to have it; but neither do I want them to refuse the coals. I should indeed be sorry if any change in our views on these subjects involved the least lessening of self-dependence in the English mind: but the common shrinking of men from the acceptance of public charity is not self-dependence, but mere base and selfish pride. It is not that they are unwilling to live at their neighbours' expense, but that they are unwilling to confess they do: it is not dependence they wish to avoid, but gratitude. They will take places in which they know there is nothing to be done--they will borrow money they know they cannot repay--they will carry on a losing business with other people's capital--they will cheat the public in their shops, or sponge on their friends at their houses; but to say plainly they are poor men, who need the nation's help, and go into an almshouse--this they loftily repudiate, and virtuously prefer being thieves to being paupers. I trust that these deceptive efforts of dishonest men to appear independent, and the agonizing efforts of unfortunate men to remain independent, may both be in some degree checked by a better administration and understanding of laws respecting the poor. But the ordinances for relief and the ordinances for labour must go together; otherwise distress caused by misfortune will always be confounded, as it is now, with distress caused by idleness, unthrift, and fraud. It is only when the state watches and guides the middle life of men, that it can, without disgrace to them, protect their old age, acknowledging in that protection that they have done their duty, or at least some portion of their duty, in better days. I know well how strange, fanciful, or impracticable these suggestions will appear to most of the business men of this day; men who conceive the proper state of the world to be simply that of a vast and disorganized mob, scrambling each for what he can get, trampling down its children and old men in the mire, and doing what work it finds _must_ be done with any irregular squad of labourers it can bribe or inveigle together, and afterwards scatter to starvation. A great deal may, indeed, be done in this way by a nation strong-elbowed and strong-hearted as we are--not easily frightened by pushing, nor discouraged by falls. But it is still not the right way of doing things for people who call themselves Christians. Every so named soul of man claims from every other such soul, protection and education in childhood--help or punishment in middle life--reward or relief, if needed, in old age; all of these should be completely and unstintingly given; and they can only be given by the organization of such a system as I have described. Note 3rd, p. 24.--"_Trial Schools._" It may be seriously questioned by the reader how much of painting talent we really lose on our present system,[20] and how much we should gain by the proposed trial schools. For it might be thought, that as matters stand at present, we have more painters than we ought to have, having so many bad ones, and that all youths who had true painters' genius forced their way out of obscurity. [20] It will be observed that, in the lecture, it is _assumed_ that works of art are national treasures; and that it is desirable to withdraw all the hands capable of painting or carving from other employments, in order that they may produce this kind of wealth. I do not, in assuming this, mean that works of art add to the monetary resources of a nation, or form part of its wealth, in the vulgar sense. The result of the sale of a picture in the country itself is merely that a certain sum of money is transferred from the hands of B. the purchaser, to those of A. the producer; the sum ultimately to be distributed remaining the same, only A. ultimately spending it instead of B., while the labour of A. has been in the meantime withdrawn from productive channels; he has painted a picture which nobody can live upon, or live in, when he might have grown corn or built houses; when the sale therefore is effected in the country itself, it does not add to, but diminishes, the monetary resources of the country, except only so far as it may appear probable, on other grounds, that A. is likely to spend the sum he receives for his picture more rationally and usefully than B. would have spent it. If, indeed, the picture, or other work of art, be sold in foreign countries, either the money or the useful products of the foreign country being imported in exchange for it, such sale adds to the monetary resources of the selling, and diminishes those of the purchasing nation. But sound political economy, strange as it may at first appear to say so, has nothing whatever to do with separations between national interests. Political economy means the management of the affairs of _citizens_; and it either regards exclusively the administration of the affairs of one nation, or the administration of the affairs of the world considered as one nation. So when a transaction between individuals which enriches A., impoverishes B. in precisely the same degree, the sound economist considers it an unproductive transaction between the individuals; and if a trade between two nations which enriches one, impoverishes the other in the same degree, the sound eoonomist considers it an unproductive trade between the nations. It is not a general question of political economy, but only a particular question of local expediency, whether an article in itself valueless, may bear a value of exchange in transactions with some other nation. The economist considers only the actual value of the thing done or produced; and if he sees a quantity of labour spent, for instance, by the Swiss, in producing woodwork for sale to the English, he at once sets the commercial impoverishment of the English purchaser against the commercial enrichment of the Swiss seller; and considers the whole transaction productive only so far as the woodwork itself is a real addition to the wealth of the world. For the arrangement of the laws of a nation so as to procure the greatest advantages to itself, and leave the smallest advantages to other nations, is not a part of the science of political economy, but merely a broad application of the science of fraud. Considered thus in the abstract, pictures are not an _addition_ to the monetary wealth of the world, except in the amount of pleasure or instruction to be got out of them day by day: but there is a certain protective effect on wealth exercised by works of high art which must always be included in the estimate of their value. Generally speaking, persons who decorate their houses with pictures, will not spend so much money in papers, carpets, curtains, or other expensive and perishable luxuries as they would otherwise. Works of good art, like books, exercise a conservative effect on the rooms they are kept in; and the wall of the library or picture gallery remains undisturbed, when those of other rooms are re-papered or re-panelled. Of course, this effect is still more definite when the picture is on the walls themselves, either on canvass stretched into fixed shapes on their panels, or in fresco; involving, of course, the preservation of the building from all unnecessary and capricious alteration. And generally speaking, the occupation of a large number of hands in painting or sculpture in any nation may be considered as tending to check the disposition to indulge in perishable luxury. I do not, however, in my assumption that works of art are treasures, take much into consideration this collateral monetary result. I consider them treasures, merely as permanent means of pleasure and instruction; and having at other times tried to show the several ways in which they can please and teach, assume here that they are thus useful; and that it is desirable to make as many painters as we can. This is not so. It is difficult to analyse the characters of mind which cause youths to mistake their vocation, and to endeavour to become artists, when they have no true artist's gift. But the fact is, that multitudes of young men do this, and that by far the greater number of living artists are men who have mistaken their vocation. The peculiar circumstances of modern life, which exhibit art in almost every form to the sight of the youths in our great cities, have a natural tendency to fill their imaginations with borrowed ideas, and their minds with imperfect science; the mere dislike of mechanical employments, either felt to be irksome, or believed to be degrading, urges numbers of young men to become painters, in the same temper in which they would enlist or go to sea; others, the sons of engravers or artists, taught the business of the art by their parents, and having no gift for it themselves, follow it as the means of livelihood, in an ignoble patience; or, if ambitious, seek to attract regard, or distance rivalry, by fantastic, meretricious, or unprecedented applications of their mechanical skill; while finally, many men earnest in feeling, and conscientious in principle, mistake their desire to be useful for a love of art, and their quickness of emotion for its capacity, and pass their lives in painting moral and instructive pictures, which might almost justify us in thinking nobody could be a painter but a rogue. On the other hand, I believe that much of the best artistical intellect is daily lost in other avocations. Generally, the temper which would make an admirable artist is humble and observant, capable of taking much interest in little things, and of entertaining itself pleasantly in the dullest circumstances. Suppose, added to these characters, a steady conscientiousness which seeks to do its duty wherever it may be placed, and the power, denied to few artistical minds, of ingenious invention in almost any practical department of human skill, and it can hardly be doubted that the very humility and conscientiousness which would have perfected the painter, have in many instances prevented his becoming one; and that in the quiet life of our steady craftsmen--sagacious manufacturers and uncomplaining clerks--there may frequently be concealed more genius than ever is raised to the direction of our public works, or to be the mark of our public praises. It is indeed probable, that intense disposition for art will conquer the most formidable obstacles, if the surrounding circumstances are such as at all to present the idea of such conquest, to the mind; but we have no ground for concluding that Giotto would ever have been more than a shepherd, if Cimabue had not by chance found him drawing; or that among the shepherds of the Apennines there were no other Giottos, undiscovered by Cimabue. We are too much in the habit of considering happy accidents as what are called "special Providences;" and thinking that when any great work needs to be done, the man who is to do it will certainly be pointed out by Providence, be he shepherd or sea-boy; and prepared for his work by all kinds of minor providences, in the best possible way. Whereas all the analogies of God's operations in other matters prove the contrary of this; we find that "of thousand seeds, He often brings but one to bear," often not one; and the one seed which He appoints to bear is allowed to bear crude or perfect fruit according to the dealings of the husbandman with it. And there cannot be a doubt in the mind of any person accustomed to take broad and logical views of the world's history, that its events are ruled by Providence in precisely the same manner as its harvests; that the seeds of good and evil are broadcast among men, just as the seeds of thistles and fruits are; and that according to the force of our industry, and wisdom of our husbandry, the ground will bring forth to us figs or thistles. So that when it seems needed that a certain work should be done for the world, and no man is there to do it, we have no right to say that God did not wish it to be done, and therefore sent no man able to do it. The probability (if I wrote my own convictions, I should say certainty) is, that He sent many men, hundreds of men, able to do it; and that we have rejected them, or crushed them; by our previous folly of conduct or of institution, we have rendered it impossible to distinguish, or impossible to reach them; and when the need for them comes, and we suffer for the want of them, it is not that God refuses to send us deliverers, and specially appoints all our consequent sufferings; but that He has sent, and we have refused, the deliverers; and the pain is then wrought out by His eternal law, as surely as famine is wrought out by eternal law for a nation which will neither plough nor sow. No less are we in error in supposing, as we so frequently do, that if a man be found, he is sure to be in all respects fitted for the work to be done, as the key is to the lock; and that every accident which happened in the forging him, only adapted him more truly to the wards. It is pitiful to hear historians beguiling themselves and their readers, by tracing in the early history of great men, the minor circumstances which fitted them for the work they did, without ever taking notice of the other circumstances which as assuredly unfitted them for it; so concluding that miraculous interposition prepared them in all points for everything and that they did all that could have been desired or hoped for from them: whereas the certainty of the matter is that, throughout their lives, they were thwarted and corrupted by some things as certainly as they were helped and disciplined by others; and that, in the kindliest and most reverent view which can justly be taken of them, they were but poor mistaken creatures, struggling with a world more profoundly mistaken than they;--assuredly sinned against, or sinning in thousands of ways, and bringing out at last a maimed result--not what they might or ought to have done, but all that could be done against the world's resistance, and in spite of their own sorrowful falsehood to themselves. And this being so, it is the practical duty of a wise nation, first to withdraw, as far as may be, its youth from destructive influences;--then to try its material as far as possible, and to lose the use of none that is good. I do not mean by "withdrawing from destructive influences" the keeping of youths out of trials; but the keeping them out of the way of things purely and absolutely mischievous. I do not mean that we should shade our green corn in all heat, and shelter it in all frost, but only that we should dyke out the inundation from it, and drive the fowls away from it. Let your youth labour and suffer; but do not let it starve, nor steal, nor blaspheme. It is not, of course, in my power here to enter into details of schemes of education; and it will be long before the results of experiments now in progress will give data for the solution of the most difficult questions connected with the subject, of which the principal one is the mode in which the chance of advancement in life is to be extended to all, and yet made compatible with contentment in the pursuit of lower avocations by those whose abilities do not qualify them for the higher. But the general principle of trial schools lies at the root of the matter--of schools, that is to say, in which the knowledge offered and discipline enforced shall be all a part of a great assay of the human soul, and in which the one shall be increased, the other directed, as the tried heart and brain will best bear, and no otherwise. One thing, however, I must say, that in this trial I believe all emulation to be a false motive, and all giving of prizes a false means. All that you can depend upon in a boy, as significative of true power, likely to issue in good fruit, is his will to work for the work's sake, not his desire to surpass his schoolfellows; and the aim of the teaching you give him ought to be, to prove to him and strengthen in him his own separate gift, not to puff him into swollen rivalry with those who are everlastingly greater than he: still less ought you to hang favours and ribands about the neck of the creature who is the greatest, to make the rest envy him. Try to make them love him and follow him, not struggle with him. There must, of course, be examination to ascertain and attest both progress and relative capacity; but our aim should be to make the students rather look upon it as a means of ascertaining their own true positions and powers in the world, than as an arena in which to carry away a present victory. I have not, perhaps, in the course of the lecture, insisted enough on the nature of relative capacity and individual character, as the roots of all real _value_ in Art. We are too much in the habit, in these days, of acting as if Art worth a price in the market were a commodity which people could be generally taught to produce, and as if the _education_ of the artist, not his _capacity_, gave the sterling value to his work. No impression can possibly be more absurd or false. Whatever people can teach each other to do, they will estimate, and ought to estimate, only as common industry; nothing will ever fetch a high price but precisely that which cannot be taught, and which nobody can do but the man from whom it is purchased. No state of society, nor stage of knowledge, ever does away with the natural pre-eminence of one man over another; and it is that pre-eminence, and that only, which will give work high value in the market, or which ought to do so. It is a bad sign of the judgment, and bad omen for the progress, of a nation, if it supposes itself to possess many artists of equal merit. Noble art is nothing less than the expression of a great soul; and great souls are not common things. If ever we confound their work with that of others, it is not through liberality, but through blindness. Note 4th, p. 24.--"_Public favour._" There is great difficulty in making any short or general statement of the difference between great and ignoble minds in their behaviour to the "public." It is by no means _universally_ the case that a mean mind, as stated in the text, will bend itself to what you ask of it: on the contrary, there is one kind of mind, the meanest of all, which perpetually complains of the public, contemplates and proclaims itself as a "genius," refuses all wholesome discipline or humble office, and ends in miserable and revengeful ruin; also, the greatest minds are marked by nothing more distinctly than an inconceivable humility, and acceptance of work or instruction in any form, and from any quarter. They will learn from everybody, and do anything that anybody asks of them, so long as it involves only toil, or what other men would think degradation. But the point of quarrel, nevertheless, assuredly rises some day between the public and them, respecting some matter, not of humiliation, but of Fact. Your great man always at last comes to see something the public don't see. This something he will assuredly persist in asserting, whether with tongue or pencil, to be as _he_ sees it, not as _they_ see it; and all the world in a heap on the other side will not get him to say otherwise. Then, if the world objects to the saying, he may happen to get stoned or burnt for it, but that does not in the least matter to him; if the world has no particular objection to the saying, he may get leave to mutter it to himself till he dies, and be merely taken for an idiot; that also does not matter to him--mutter it he will, according to what he perceives to be fact, and not at all according to the roaring of the walls of Red sea on the right hand or left of him. Hence the quarrel, sure at some time or other to be started between the public and him; while your mean man, though he will spit and scratch spiritedly at the public, while it does not attend to him, will bow to it for its clap in any direction, and say anything when he has got its ear, which he thinks will bring him another clap; and thus, as stated in the text, he and it go on smoothly together. There are, however, times when the obstinacy of the mean man looks very like the obstinacy of the great one; but if you look closely into the matter, you will always see that the obstinacy of the first is in the pronunciation of "I;" and of the second, in the pronunciation of "It." Note 5th, p. 38.--"_Invention of new wants._" It would have been impossible for political economists long to have endured the error spoken of in the text,[21] had they not been confused by an idea, in part well founded, that the energies and refinements, as well as the riches of civilized life arose from imaginary wants. It is quite true, that the savage who knows no needs but those of food, shelter, and sleep, and after he has snared his venison and patched the rents of his hut, passes the rest of his time in animal repose, is in a lower state than the man who labours incessantly that he may procure for himself the luxuries of civilization; and true also, that the difference between one and another nation in progressive power depends in great part on vain desires; but these idle motives are merely to be considered as giving exercise to the national body and mind; they are not sources of wealth, except so far as they give the habits of industry and acquisitiveness. If a boy is clumsy and lazy, we shall do good if we can persuade him to carve cherrystones and fly kites; and this use of his fingers and limbs may eventually be the cause of his becoming a wealthy and happy man; but we must not therefore argue that cherrystones are valuable property, or that kite-flying is a profitable mode of passing time. In like manner, a nation always wastes its time and labour _directly_, when it invents a new want of a frivolous kind, and yet the invention of such a want may be the sign of a healthy activity, and the labour undergone to satisfy the new want may lead, _indirectly_, to useful discoveries or to noble arts; so that a nation is not to be discouraged in its fancies when it is either too weak or foolish to be moved to exertion by anything but fancies, or has attended to its serious business first. If a nation will not forge iron, but likes distilling lavender, by all means give it lavender to distil; only do not let its economists suppose that lavender is as profitable to it as oats, or that it helps poor people to live, any more than the schoolboy's kite provides him his dinner. Luxuries, whether national or personal, must be paid for by labour withdrawn from useful things; and no nation has a right to indulge in them until all its poor are comfortably housed and fed. [21] I have given the political economists too much credit in saying this. Actually, while these sheets are passing through the press, the blunt, broad, unmitigated fallacy is enunciated, formally and precisely, by the Common Councilmen of New York, in their report on the present commercial crisis. Here is their collective opinion, published in the _Times_ of November 23rd, 1857:--"Another erroneous idea is that luxurious living, extravagant dressing, splendid turn-outs and fine houses, are the cause of distress to a nation. No more erroneous impression could exist. Every extravagance that the man of 100,000 or 1,000,000 dollars indulges in adds to the means, the support, the wealth of ten or a hundred who had little or nothing else but their labour, their intellect, or their taste. If a man of 1,000,000 dollars spends principal and interest in ten years, and finds himself beggared at the end of that time, he has actually made a hundred who have catered to his extravagance, employers or employed, so much richer by the division of his wealth. He may be ruined, but the nation is better off and richer, for one hundred minds and hands, with 10,000 dollars apiece, are far more productive than one with the whole." Yes, gentlemen of the Common Council! but what has been doing in the time of the transfer? The spending of the fortune has taken a certain number of years (suppose ten), and during that time 1,000,000 dollars' worth of work has been done by the people, who have been paid that sum for it. Where is the product of that work? By your own statement, wholly consumed; for the man for whom it has been done is now a beggar. You have given, therefore, as a nation, 1,000,000 dollars' worth of work, and ten years of time, and you have produced, as ultimate result, one beggar! Excellent economy, gentlemen! and sure to conduce, in due sequence, to the production of _more_ than one beggar. Perhaps the matter may be made clearer to you, however, by a more familiar instance. If a schoolboy goes out in the morning with five shillings in his pocket, and comes home at night penniless, having spent his all in tarts; principal and interest are gone, and fruiterer and baker are enriched. So far so good. But suppose the schoolboy, instead, has bought a book and a knife; principal and interest are gone, and bookseller and cutler are enriched. But the schoolboy is enriched also, and may help his schoolfellows next day with knife and book, instead of lying in bed and incurring a debt to the doctor. The enervating influence of luxury, and its tendencies to increase vice, are points which I keep entirely out of consideration in the present essay; but, so far as they bear on any question discussed, they merely furnish additional evidence on the side which I have taken. Thus, in the present case, I assume that the luxuries of civilized life are in possession harmless, and in acquirement, serviceable as a motive for exertion; and even on these favourable terms, we arrive at the conclusion that the nation ought not to indulge in them except under severe limitations. Much less ought it to indulge in them if the temptation consequent on their possession, or fatality incident to their manufacture, more than counterbalances the good done by the effort to obtain them. Note 6th, p. 48.--"_Economy of Literature._" I have been much impressed lately by one of the results of the quantity of our books; namely, the stern impossibility of getting anything understood, that required patience to understand. I observe always, in the case of my own writings, that if ever I state anything which has cost me any trouble to ascertain, and which, therefore, will probably require a minute or two of reflection from the reader before it can be accepted,--that statement will not only be misunderstood, but in all probability taken to mean something very nearly the reverse of what it does mean. Now, whatever faults there may be in my modes of expression, I know that the words I use will always be found, by Johnson's dictionary, to bear, first of all, the sense I use them in; and that the sentences, whether awkwardly turned or not, will, by the ordinary rules of grammar, bear no other interpretation than that I mean them to bear; so that the misunderstanding of them must result, ultimately, from the mere fact that their matter sometimes requires a little patience. And I see the same kind of misinterpretation put on the words of other writers, whenever they require the same kind of thought. I was at first a little despondent about this; but, on the whole, I believe it will have a good effect upon our literature for some time to come; and then, perhaps, the public may recover its patience again. For certainly it is excellent discipline for an author to feel that he must say all he has to say in the fewest possible words, or his reader is sure to skip them; and in the plainest possible words, or his reader will certainly misunderstand them. Generally, also, a downright fact may be told in a plain way; and we want downright facts at present more than any thing else. And though I often hear moral people complaining of the bad effects of want of thought, for my part, it seems to me that one of the worst diseases to which the human creature is liable is its disease of thinking. If it would only just _look_[22] at a thing instead of thinking what it must be like, or _do_ a thing, instead of thinking it cannot be done, we should all get on far better. [22] There can be no question, however, of the mischievous tendency of the hurry of the present day, in the way people undertake this very _looking_. I gave three years' close and incessant labour to the examination of the chronology of the architecture of Venice; two long winters being wholly spent in the drawing of details on the spot: and yet I see constantly that architects who pass three or four days in a gondola going up and down the Grand Canal, think that their first impressions are just as likely to be true as my patiently wrought conclusions. Mr. Street, for instance, glances hastily at the façade of the Ducal Palace--so hastily that he does not even see what its pattern is, and misses the alternation of red and black in the centres of its squares--and yet he instantly ventures on an opinion on the chronology of its capitals, which is one of the most complicated and difficult subjects in the whole range of Gothic archæology. It may, nevertheless, be ascertained with very fair probability of correctness by any person who will give a month's hard work to it, but it can be ascertained no otherwise. Note 7th, p. 84.--"_Pilots of the State._" While, however, undoubtedly, these responsibilities attach to every person possessed of wealth, it is necessary both to avoid any stringency of statement respecting the benevolent modes of spending money, and to admit and approve so much liberty of spending it for selfish pleasures as may distinctly make wealth a personal _reward_ for toil, and secure in the minds of all men the right of property. For although, without doubt, the purest pleasures it can procure are not selfish, it is only as a means of personal gratification that it will be desired by a large majority of workers; and it would be no less false ethics than false policy to check their energy by any forms of public opinion which bore hardly against the wanton expenditure of honestly got wealth. It would be hard if a man who had passed the greater part of his life at the desk or counter could not at last innocently gratify a caprice; and all the best and most sacred ends of almsgiving would be at once disappointed, if the idea of a moral claim took the place of affectionate gratitude in the mind of the receiver. Some distinction is made by us naturally in this respect between earned and inherited wealth; that which is inherited appearing to involve the most definite responsibilities, especially when consisting in revenues derived from the soil. The form of taxation which constitutes rental of lands places annually a certain portion of the national wealth in the hands of the nobles, or other proprietors of the soil, under conditions peculiarly calculated to induce them to give their best care to its efficient administration. The want of instruction in even the simplest principles of commerce and economy, which hitherto has disgraced our schools and universities, has indeed been the cause of ruin or total inutility of life to multitudes of our men of estate; but this deficiency in our public education cannot exist much longer, and it appears to be highly advantageous for the State that a certain number of persons distinguished by race should be permitted to set examples of wise expenditure, whether in the advancement of science, or in patronage of art and literature; only they must see to it that they take their right standing more firmly than they have done hitherto, for the position of a rich man in relation to those around him is, in our present real life, and is also contemplated generally by political economists as being, precisely the reverse of what it ought to be. A rich man ought to be continually examining how he may spend his money for the advantage of others: at present, others are continually plotting how they may beguile him into spending it apparently for his own. The aspect which he presents to the eyes of the world is generally that of a person holding a bag of money with a staunch grasp, and resolved to part with none of it unless he is forced, and all the people about him are plotting how they may force him; that is to say, how they may persuade him that he wants this thing or that; or how they may produce things that he will covet and buy. One man tries to persuade him that he wants perfumes; another that he wants jewellery; another that he wants sugarplums; another that he wants roses at Christmas. Anybody who can invent a new want for him is supposed to be a benefactor to society: and thus the energies of the poorer people about him are continually directed to the production of covetable, instead of serviceable things; and the rich man has the general aspect of a fool, plotted against by all the world. Whereas the real aspect which he ought to have is that of a person wiser than others, entrusted with the management of a larger quantity of capital, which he administers for the profit of all, directing each man to the labour which is most healthy for him, and most serviceable for the community. Note 8th, p. 84.--"_Silk and Purple._" In various places throughout these lectures I have had to allude to the distinction between productive and unproductive labour, and between true and false wealth. I shall here endeavour, as clearly as I can, to explain the distinction I mean. Property may be divided generally into two kinds; that which produces life, and that which produces the objects of life. That which produces or maintains life consists of food, in so far as it is nourishing; of furniture and clothing, in so far as they are protective or cherishing; of fuel; and of all land, instruments, or materials, necessary to produce food, houses, clothes and fuel. It is specially and rightly called useful property. The property which produces the objects of life consists of all that gives pleasure or suggests and preserves thought: of food, furniture, and land, in so far as they are pleasing to the appetite or the eye, of luxurious dress; and all other kinds of luxuries; of books, pictures, and architecture. But the modes of connection of certain minor forms of property with human labour render it desirable to arrange them under more than these two heads. Property may therefore be conveniently considered as of five kinds. 1st. Property necessary to life, but not producible by labour, and therefore belonging of right, in a due measure, to every human being as soon as he is born, and morally unalienable. As, for instance, his proper share of the atmosphere, without which he cannot breathe, and of water, which he needs to quench his thirst. As much land as he needs to feed from is also inalienable; but in well regulated communities this quantity of land may often be represented by other possessions, or its need supplied by wages and privileges. 2. Property necessary to life, but only producible by labour, and of which the possession is morally connected with labour, so that no person capable of doing the work necessary for its production has a right to it until he has done that work:--"he that will not work, neither should he eat." It consists of simple food, clothing, and habitation, with their seeds and materials, or instruments and machinery, and animals used for necessary draught or locomotion, etc. It is to be observed of this kind of property, that its increase cannot usually be carried beyond a certain point, because it depends not on labour only, but on things of which the supply is limited by nature. The possible accumulation of corn depends on the quantity of corn-growing land possessed or commercially accessible; and that of steel, similarly, on the accessible quantity of coal and ironstone. It follows from this natural limitation of supply that the accumulation of property of this kind in large masses at one point, or in one person's hands, commonly involves, more or less, the scarcity of it at another point and in other persons' hands; so that the accidents or energies which may enable one man to procure a great deal of it, may, and in all likelihood will partially prevent other men procuring a sufficiency of it, however willing they may be to work for it; therefore, the modes of its accumulation and distribution need to be in some degree regulated by law and by national treaties, in order to secure justice to all men. Another point requiring notice respecting this sort of property is, that no work can be wasted in producing it, provided only the kind of it produced be preservable and distributable, since for every grain of such commodities we produce we are rendering so much more life possible on earth.[23] But though we are sure, thus, that we are employing people well, we cannot be sure we might not have employed them _better_; for it is possible to direct labour to the production of life, until little or none is left for that of the objects of life, and thus to increase population at the expense of civilization, learning, and morality: on the other hand, it is just as possible--and the error is one to which the world is, on the whole, more liable--to direct labour to the objects of life till too little is left for life, and thus to increase luxury or learning at the expense of population. Right political economy holds its aim poised justly between the two extremes, desiring neither to crowd its dominions with a race of savages, nor to found courts and colleges in the midst of a desert. [23] This point has sometimes been disputed; for instance, opening Mill's "Political Economy" the other day, I chanced on a passage in which he says that a man who makes a coat, if the person who wears the coat does nothing useful while he wears it, has done no more good to society than the man who has only raised a pineapple. But this is a fallacy induced by endeavour after too much subtlety. None of us have a right to say that the life of a man is of no use to _him_, though it may be of no use to _us_; and the man who made the coat, and thereby prolonged another man's life, has done a gracious and useful work, whatever may come of the life so prolonged. We may say to the wearer of the coat, "You who are wearing coats, and doing nothing in them, are at present wasting your own life and other people's;" but we have no right to say that his existence, however wasted, is wasted _away_. It may be just dragging itself on, in its thin golden line, with nothing dependent upon it, to the point where it is to strengthen into good chain cable, and have thousands of other lives dependent on it. Meantime, the simple fact respecting the coat-maker is, that he has given so much life to the creature, the results of which he cannot calculate; they may be--in all probability will be--infinite results in some way. But the raiser of pines, who has only given a pleasant taste in the mouth to some one, may see with tolerable clearness to the end of the taste in the mouth, and of all conceivable results therefrom. 3. The third kind of property is that which conduces to bodily pleasures and conveniences, without directly tending to sustain life; perhaps sometimes indirectly tending to destroy it. All dainty (as distinguished from nourishing) food, and means of producing it; all scents not needed for health; substances valued only for their appearance and rarity (as gold and jewels); flowers of difficult culture; animals used for delight (as horses for racing), and such like, form property of this class; to which the term "luxury, or luxuries," ought exclusively to belong. Respecting which we have to note first, that all such property is of doubtful advantage even to its possessor. Furniture tempting to indolence, sweet odours, and luscious food, are more or less injurious to health: while jewels, liveries, and other such common belongings of wealthy people, certainly convey no pleasure to their owners proportionate to their cost. Farther, such property, for the most part, perishes in the using. Jewels form a great exception--but rich food, fine dresses, horses and carriages, are consumed by the owner's use. It ought much oftener to be brought to the notice of rich men what sums of interest of money they are paying towards the close of their lives, for luxuries consumed in the middle of them. It would be very interesting, for instance, to know the exact sum which the money spent in London for ices, at its desserts and balls, during the last twenty years, had it been saved and put out at compound interest, would at this moment have furnished for useful purposes. Also, in most cases, the enjoyment of such property is wholly selfish, and limited to its possessor. Splendid dress and equipage, however, when so arranged as to produce real beauty of effect, may often be rather a generous than a selfish channel of expenditure. They will, however, necessarily in such case involve some of the arts of design; and therefore take their place in a higher category than that of luxuries merely. 4. The fourth kind of property is that which bestows intellectual or emotional pleasure, consisting of land set apart for purposes of delight more than for agriculture, of books, works of art, and objects of natural history. It is, of course, impossible to fix an accurate limit between property of the last class and of this class, since things which are a mere luxury to one person are a means of intellectual occupation to another. Flowers in a London ball-room are a luxury; in a botanical garden, a delight of the intellect; and in their native fields, both; while the most noble works of art are continually made material of vulgar luxury or of criminal pride; but, when rightly used, property of this fourth class is the only kind which deserves the name of _real_ property; it is the only kind which a man can truly be said to "possess." What a man eats, or drinks, or wears, so long as it is only what is needful for life, can no more be thought of as his possession than the air he breathes. The air is as needful to him as the food; but we do not talk of a man's wealth of air; and what food or clothing a man possesses more than he himself requires, must be for others to use (and, to him, therefore, not a real property in itself, but only a means of obtaining some real property in exchange for it). Whereas the things that give intellectual or emotional enjoyment may be accumulated and do not perish in using; but continually supply new pleasures and new powers of giving pleasures to others. And these, therefore, are the only things which can rightly be thought of as giving "wealth" or "well being." Food conduces only to "being," but these to "_well_ being." And there is not any broader general distinction between lower and higher orders of men than rests on their possession of this real property. The human race may be properly divided by zoologists into "men who have gardens, libraries, or works of art; and who have none;" and the former class will include all noble persons, except only a few who make the world their garden or museum; while the people who have not, or, which is the same thing, do not care for gardens or libraries, but care for nothing but money or luxuries, will include none but ignoble persons: only it is necessary to understand that I mean by the term "garden" as much the Carthusian's plot of ground fifteen feet square between his monastery buttresses, as I do the grounds of Chatsworth or Kew; and I mean by the term "art" as much the old sailor's print of the Arethusa bearing up to engage the Belle Poule, as I do Raphael's "Disputa," and even rather more; for when abundant, beautiful possessions of this kind are almost always associated with vulgar luxury, and become then anything but indicative of noble character in their possessors. The ideal of human life is a union of Spartan simplicity of manners with Athenian sensibility and imagination, but in actual results, we are continually mistaking ignorance for simplicity, and sensuality for refinement. 5. The fifth kind of property is representative property, consisting of documents or money, or rather documents only, for money itself is only a transferable document, current among societies of men, giving claim, at sight, to some definite benefit or advantage, most commonly to a certain share of real property existing in those societies. The money is only genuine when the property it gives claim to is real, or the advantages it gives claim to certain; otherwise, it is false money, and may be considered as much "forged" when issued by a government, or a bank, as when by an individual. Thus, if a dozen of men, cast ashore on a desert island, pick up a number of stones, put a red spot on each stone, and pass a law that every stone marked with a red spot shall give claim to a peck of wheat;--so long as no wheat exists, or can exist, on the island, the stones are not money. But the moment as much wheat exists as shall render it possible for the society always to give a peck for every spotted stone, the spotted stones would become money, and might be exchanged by their possessors for whatever other commodities they chose, to the value of the peck of wheat which the stones represented. If more stones were issued than the quantity of wheat could answer the demand of, the value of the stone coinage would be depreciated, in proportion to its increase above the quantity needed to answer it. Again, supposing a certain number of the men so cast ashore were set aside by lot, or any other convention, to do the rougher labour necessary for the whole society, they themselves being maintained by the daily allotment of a certain quantity of food, clothing, etc. Then, if it were agreed that the stones spotted with red should be signs of a Government order for the labour of these men; and that any person presenting a spotted stone at the office of the labourers, should be entitled to a man's work for a week or a day, the red stones would be money; and might--probably would--immediately pass current in the island for as much food, or clothing, or iron, or any other article as a man's work for the period secured by the stone was worth. But if the Government issued so many spotted stones that it was impossible for the body of men they employed to comply with the orders; as, suppose, if they only employed twelve men, and issued eighteen spotted stones daily, ordering a day's work each, then the six extra stones would be forged or false money; and the effect of this forgery would be the depreciation of the value of the whole coinage by one-third, that being the period of shortcoming which would, on the average, necessarily ensue in the execution of each order. Much occasional work may be done in a state or society, by help of an issue of false money (or false promises) by way of stimulants; and the fruit of this work, if it comes into the promiser's hands, may sometimes enable the false promises at last to be fulfilled: hence the frequent issue of false money by governments and banks, and the not unfrequent escapes from the natural and proper consequences of such false issues, so as to cause a confused conception in most people's minds of what money really is. I am not sure whether some quantity of such false issue may not really be permissible in a nation, accurately proportioned to the minimum average produce of the labour it excites; but all such procedures are more or less unsound; and the notion of unlimited issue of currency is simply one of the absurdest and most monstrous that ever came into disjointed human wits. The use of objects of real or supposed value for currency, as gold, jewellery, etc., is barbarous; and it always expresses either the measure of the distrust in the society of its own government, or the proportion of distrustful or barbarous nations with whom it has to deal. A metal not easily corroded or imitated, is a desirable medium of currency for the sake of cleanliness and convenience, but were it possible to prevent forgery, the more worthless the metal itself, the better. The use of worthless media, unrestrained by the use of valuable media, has always hitherto involved, and is therefore supposed to involve necessarily, unlimited, or at least improperly extended, issue; but we might as well suppose that a man must necessarily issue unlimited promises because his words cost nothing. Intercourse with foreign nations must, indeed, for ages yet to come, at the world's present rate of progress, be carried on by valuable currencies; but such transactions are nothing more than forms of barter. The gold used at present as a currency is not, in point of fact, currency at all, but the real property[24] which the currency gives claim to, stamped to measure its quantity, and mingling with the real currency occasionally by barter. [24] Or rather, equivalent, to such real property, because everybody has been accustomed to look upon it as valuable: and therefore everybody is willing to give labour or goods for it. But real property does ultimately consist only in things that nourish body or mind; gold would be useless to us if we could not get mutton or books for it. Ultimately all commercial mistakes and embarrassments result from people expecting to get goods without working for them, or wasting them after they have got them. A nation which labours, and takes care of the fruits of labour, would be rich and happy; though there were no gold in the universe. A nation which is idle, and wastes the produce of what work it does, would be poor and miserable, though all its mountains were of gold, and had glens filled with diamonds instead of glacier. The evils necessarily resulting from the use of baseless currencies have been terribly illustrated while these sheets have been passing through the press; I have not had time to examine the various conditions of dishonest or absurd trading which have led to the late "panic" in America and England; this only I know, that no merchant deserving the name ought to be more liable to "panic" than a soldier should; for his name should never be on more paper than he can at any instant meet the call of, happen what will. I do not say this without feeling at the same time how difficult it is to mark, in existing commerce, the just limits between the spirit of enterprise and of speculation. Something of the same temper which makes the English soldier do always all that is possible, and attempt more than is possible, joins its influence with that of mere avarice in tempting the English merchant into risks which he cannot justify, and efforts which he cannot sustain; and the same passion for adventure which our travellers gratify every summer on perilous snow wreaths, and cloud-encompassed precipices, surrounds with a romantic fascination the glittering of a hollow investment, and gilds the clouds that curl round gulfs of ruin. Nay, a higher and a more serious feeling frequently mingles in the motley temptation; and men apply themselves to the task of growing rich, as to a labour of providential appointment, from which they cannot pause without culpability, nor retire without dishonour. Our large trading cities bear to me very nearly the aspect of monastic establishments in which the roar of the mill-wheel and the crane takes the place of other devotional music; and in which the worship of Mammon or Moloch is conducted with a tender reverence and an exact propriety; the merchant rising to his Mammon matins with the self-denial of an anchorite, and expiating the frivolities into which he may be beguiled, in the course of the day by late attendance at Mammon vespers. But, with every allowance that can be made for these conscientious and romantic persons, the fact remains the same, that by far the greater number of the transactions which lead to these times of commercial embarrassment may be ranged simply under two great heads,--gambling and stealing; and both of these in their most culpable form, namely, gambling with money which is not ours, and stealing from those who trust us. I have sometimes thought a day might come, when the nation would perceive that a well-educated man who steals a hundred thousand pounds, involving the entire means of subsistence of a hundred families, deserves, on the whole, as severe a punishment as an ill-educated man who steals a purse from a pocket, or a mug from a pantry. But without hoping for this excess of clearsightedness, we may at least labour for a system of greater honesty and kindness in the minor commerce of our daily life; since the great dishonesty of the great buyers and sellers is nothing more than the natural growth and outcome from the little dishonesty of the little buyers and sellers. Every person who tries to buy an article for less than its proper value, or who tries to sell it at more than its proper value--every consumer who keeps a tradesman waiting for his money, and every tradesman who bribes a consumer to extravagance by credit, is helping forward, according to his own measure of power, a system of baseless and dishonourable commerce, and forcing his country down into poverty and shame. And people of moderate means and average powers of mind would do far more real good by merely carrying out stern principles of justice and honesty in common matters of trade, than by the most ingenious schemes of extended philanthropy, or vociferous declarations of theological doctrine. There are three weighty matters of the law--justice, mercy, and truth; and of these the Teacher puts truth last, because that cannot be known but by a course of acts of justice and love. But men put, in all their efforts, truth first, because they mean by it their own opinions; and thus, while the world has many people who would suffer martyrdom in the cause of what they call truth, it has few who will suffer even a little inconvenience, in that of justice and mercy. UNTO THIS LAST: FOUR ESSAYS ON THE FIRST PRINCIPLES OF POLITICAL ECONOMY. "FRIEND, I DO THEE NO WRONG. DID'ST NOT THOU AGREE WITH ME FOR A PENNY? TAKE THAT THINE IS, AND GO THY WAY. I WILL GIVE UNTO THIS LAST EVEN AS UNTO THEE." "IF YE THINK GOOD, GIVE ME MY PRICE; AND IF NOT, FORBEAR. SO THEY WEIGHED FOR MY PRICE THIRTY PIECES OF SILVER." PREFACE. The four following essays were published eighteen months ago in the _Cornhill Magazine_, and were reprobated in a violent manner, as far as I could hear, by most of the readers they met with. Not a whit the less, I believe them to be the best, that is to say, the truest, rightest-worded, and most serviceable things I have ever written; and the last of them, having had especial pains spent on it, is probably the best I shall ever write. "This," the reader may reply, "it might be, yet not therefore well written." Which, in no mock humility, admitting, I yet rest satisfied with the work, though with nothing else that I have done; and purposing shortly to follow out the subjects opened in these papers, as I may find leisure, I wish the introductory statements to be within the reach of any one who may care to refer to them. So I republish the essays as they appeared. One word only is changed, correcting the estimate of a weight; and no word is added. Although, however, I find nothing to modify in these papers, it is a matter of regret to me that the most startling of all the statements in them--that respecting the necessity of the organization of labour, with fixed wages,--should have found its way into the first essay; it being quite one of the least important, though by no means the least certain, of the positions to be defended. The real gist of these papers, their central meaning and aim, is to give, as I believe for the first time in plain English--it has often been incidentally given in good Greek by Plato and Xenophon, and good Latin by Cicero and Horace,--a logical definition of WEALTH: such definition being absolutely needed for a basis of economical science. The most reputed essay on that subject which has appeared in modern times, after opening with the statement that "writers on political economy profess to teach, or to investigate,[25] the nature of wealth," thus follows up the declaration of its thesis--"Every one has a notion, sufficiently correct for common purposes, of what is meant by wealth." ... "It is no part of the design of this treatise to aim at metaphysical nicety of definition."[26] [25] Which? for where investigation is necessary, teaching is impossible. [26] "Principles of Political Economy." By J. S. Mill. Preliminary remarks, p. 2. Metaphysical nicety, we assuredly do not need; but physical nicety, and logical accuracy, with respect to a physical subject, we as assuredly do. Suppose the subject of inquiry, instead of being House-law (_Oikonomia_), had been Star-law (_Astronomia_), and that, ignoring distinction between stars fixed and wandering, as here between wealth radiant and wealth reflective, the writer had begun thus: "Every one has a notion, sufficiently correct for common purposes, of what is meant by stars. Metaphysical nicety in the definition of a star is not the object of this treatise;"--the essay so opened might yet have been far more true in its final statements, and a thousand-fold more serviceable to the navigator, than any treatise on wealth, which founds its conclusions on the popular conception of wealth, can ever become to the economist. * * * * * It was, therefore, the first object of these following papers to give an accurate and stable definition of wealth. Their second object was to show that the acquisition of wealth was finally possible only under certain moral conditions of society, of which quite the first was a belief in the existence and even, for practical purposes, in the attainability of honesty. Without venturing to pronounce--since on such a matter human judgment is by no means conclusive--what is, or is not, the noblest of God's works, we may yet admit so much of Pope's assertion as that an honest man is among His best works presently visible, and, as things stand, a somewhat rare one; but not an incredible or miraculous work; still less an abnormal one. Honesty is not a disturbing force, which deranges the orbits of economy; but a consistent and commanding force, by obedience to which--and by no other obedience--those orbits can continue clear of chaos. It is true, I have sometimes heard Pope condemned for the lowness, instead of the height, of his standard:--"Honesty is indeed a respectable virtue; but how much higher may men attain! Shall nothing more be asked of us than that we be honest?" For the present, good friends, nothing. It seems that in our aspirations to be more than that, we have to some extent lost sight of the propriety of being so much as that. What else we may have lost faith in, there shall be here no question; but assuredly we have lost faith in common honesty, and in the working power of it. And this faith, with the facts on which it may rest, it is quite our first business to recover and keep: not only believing, but even by experience assuring ourselves, that there are yet in the world men who can be restrained from fraud otherwise than by the fear of losing employment;[27] nay that it is even accurately in proportion to the number of such men in any State, that the said State does or can prolong its existence. [27] "The effectual discipline which is exercised over a workman is not that of his corporation, but of his customers. It is the fear of losing their employment which restrains his frauds, and corrects his negligence" (_Wealth of Nations_, Book I. chap. 10). To these two points, then, the following essays are mainly directed. The subject of the organization of labour is only casually touched upon; because, if we once can get a sufficient quantity of honesty in our captains, the organization of labour is easy, and will develop itself without quarrel or difficulty; but if we cannot get honesty in our captains, the organization of labour is for evermore impossible. The several conditions of its possibility I purpose to examine at length in the sequel. Yet, lest the reader should be alarmed by the hints thrown out during the following investigation of first principles, as if they were leading him into unexpectedly dangerous ground, I will, for his better assurance, state at once the worst of the political creed at which I wish him to arrive. 1. First,--that there should be training schools for youth established, at Government cost,[28] and under Government discipline, over the whole country; that every child born in the country should, at the parent's wish, be permitted (and, in certain cases, be under penalty required) to pass through them; and that, in these schools, the child should (with other minor pieces of knowledge hereafter to be considered) imperatively be taught, with the best skill of teaching that the country could produce, the following three things:-- (_a_) the laws of health, and the exercises enjoined by them; (_b_) habits of gentleness and justice; and (_c_) the calling by which he is to live. [28] It will probably be inquired by near-sighted persons, out of what funds such schools could be supported. The expedient modes of direct provision for them I will examine hereafter; indirectly, they would be far more than self-supporting. The economy in crime alone (quite one of the most costly articles of luxury in the modern European market), which such schools would induce, would suffice to support them ten times over. Their economy of labour would be pure gain, and that too large to be presently calculable. 2. Secondly,--that, in connection with these training schools, there should be established, also entirely under Government regulation, manufactories and workshops, for the production and sale of every necessary of life, and for the exercise of every useful art. And that, interfering no whit with private enterprise, nor setting any restraints or tax on private trade, but leaving both to do their best, and beat the Government if they could,--there should, at these Government manufactories and shops, be authoritatively good and exemplary work done, and pure and true substance sold; so that a man could be sure, if he chose to pay the Government price, that he got for his money bread that was bread, ale that was ale, and work that was work. 3. Thirdly,--that any man, or woman, or boy, or girl, out of employment, should be at once received at the nearest Government school, and set to such work as it appeared, on trial, they were fit for, at a fixed rate of wages determinable every year:--that, being found incapable of work through ignorance, they should be taught, or being found incapable of work through sickness, should be tended; but that being found objecting to work, they should be set, under compulsion of the strictest nature, to the more painful and degrading forms of necessary toil, especially to that in mines and other places of danger (such danger being, however, diminished to the utmost by careful regulation and discipline) and the due wages of such work be retained--cost of compulsion first abstracted--to be at the workman's command, so soon as he has come to sounder mind respecting the laws of employment. 4. Lastly,--that for the old and destitute, comfort and home should be provided; which provision, when misfortune had been by the working of such a system sifted from guilt, would be honourable instead of disgraceful to the receiver. For (I repeat this passage out of my _Political Economy of Art_, to which the reader is referred for farther detail[29]) "a labourer serves his country with his spade, just as a man in the middle ranks of life serves it with sword, pen, or lancet: if the service is less, and, therefore the wages during health less, then the reward, when health is broken, may be less, but not, therefore, less honourable; and it ought to be quite as natural and straightforward a matter for a labourer to take his pension from his parish, because he has deserved well of his parish, as for a man in higher rank to take his pension from his country, because he has deserved well of his country." [29] "The Political Economy of Art:" Addenda, p. 93. To which statement, I will only add, for conclusion, respecting the discipline and pay of life and death, that, for both high and low, Livy's last words touching Valerius Publicola, "_de publico est elatus_,"[30] ought not to be a dishonourable close of epitaph. [30] "P. Valerius, omnium consensu princeps belli pacisque artibus, anno post moritur; gloriâ ingenti, copiis familiaribus adeo exiguis, ut funeri sumtus deesset: de publico est elatus. Luxêre matronæ ut Brutum."--Lib. II. c. xvi. These things, then, I believe, and am about, as I find power, to explain and illustrate in their various bearings; following out also what belongs to them of collateral inquiry. Here I state them only in brief, to prevent the reader casting about in alarm for my ultimate meaning; yet requesting him, for the present to remember, that in a science dealing with so subtle elements as those of human nature, it is only possible to answer for the final truth of principles, not for the direct success of plans: and that in the best of these last, what can be immediately accomplished is always questionable, and what can be finally accomplished, inconceivable. _Denmark Hill, 10th May, 1862._ ESSAY I. THE ROOTS OF HONOUR. Among the delusions which at different periods have possessed themselves of the minds of large masses of the human race, perhaps the most curious--certainly the least creditable--is the modern _soi-disant_ science of political economy, based on the idea that an advantageous code of social action may be determined irrespectively of the influence of social affection. Of course, as in the instances of alchemy, astrology, witchcraft, and other such popular creeds, political economy has a plausible idea at the root of it. "The social affections," says the economist, "are accidental and disturbing elements in human nature; but avarice and the desire of progress are constant elements. Let us eliminate the inconstants, and, considering the human being merely as a covetous machine, examine by what laws of labour, purchase, and sale, the greatest accumulative result in wealth is obtainable. Those laws once determined, it will be for each individual afterwards to introduce as much of the disturbing affectionate element as he chooses, and to determine for himself the result on the new conditions supposed." This would be a perfectly logical and successful method of analysis, if the accidentals afterwards to be introduced were of the same nature as the powers first examined. Supposing a body in motion to be influenced by constant and inconstant forces, it is usually the simplest way of examining its course to trace it first under the persistent conditions, and afterwards introduce the causes of variation. But the disturbing elements in the social problem are not of the same nature as the constant ones; they alter the essence of the creature under examination the moment they are added; they operate, not mathematically, but chemically, introducing conditions which render all our previous knowledge unavailable. We made learned experiments upon pure nitrogen, and have convinced ourselves that it is a very manageable gas: but behold! the thing which we have practically to deal with is its chloride; and this, the moment we touch it on our established principles, sends us and our apparatus through the ceiling. Observe, I neither impugn nor doubt the conclusions of the science, if its terms are accepted. I am simply uninterested in them, as I should be in those of a science of gymnastics which assumed that men had no skeletons. It might be shown, on that supposition, that it would be advantageous to roll the students up into pellets, flatten them into cakes, or stretch them into cables; and that when these results were effected, the re-insertion of the skeleton would be attended with various inconveniences to their constitution. The reasoning might be admirable, the conclusions true, and the science deficient only in applicability. Modern political economy stands on a precisely similar basis. Assuming, not that the human being has no skeleton, but that it is all skeleton, it founds an ossifiant theory of progress on this negation of a soul; and having shown the utmost that may be made of bones, and constructed a number of interesting geometrical figures with death's-heads and humeri, successfully proves the inconvenience of the reappearance of a soul among these corpuscular structures. I do not deny the truth of this theory: I simply deny its applicability to the present phase of the world. This inapplicability has been curiously manifested during the embarrassment caused by the late strikes of our workmen. Here occurs one of the simplest cases, in a pertinent and positive form, of the first vital problem which political economy has to deal with (the relation between employer and employed); and at a severe crisis, when lives in multitudes, and wealth in masses, are at stake, the political economists are helpless--practically mute; no demonstrable solution of the difficulty can be given by them, such as may convince or calm the opposing parties. Obstinately the masters take one view of the matter; obstinately the operatives another; and no political science can set them at one. It would be strange if it could, it being not by "science" of any kind that men were ever intended to be set at one. Disputant after disputant vainly strives to show that the interests of the masters are, or are not, antagonistic to those of the men: none of the pleaders ever seeming to remember that it does not absolutely or always follow that the persons must be antagonistic because their interests are. If there is only a crust of bread in the house, and mother and children are starving, their interests are not the same. If the mother eats it, the children want it; if the children eat it, the mother must go hungry to her work. Yet it does not necessarily follow that there will be "antagonism" between them, that they will fight for the crust, and that the mother, being strongest, will get it, and eat it. Neither, in any other case, whatever the relations of the persons may be, can it be assumed for certain that, because their interests are diverse, they must necessarily regard each other with hostility, and use violence or cunning to obtain the advantage. Even if this were so, and it were as just as it is convenient to consider men as actuated by no other moral influences than those which affect rats or swine, the logical conditions of the question are still indeterminable. It can never be shown generally either that the interests of master and labourer are alike, or that they are opposed; for, according to circumstances, they may be either. It is, indeed, always the interest of both that the work should be rightly done, and a just price obtained for it; but, in the division of profits, the gain of the one may or may not be the loss of the other. It is not the master's interest to pay wages so low as to leave the men sickly and depressed, nor the workman's interest to be paid high wages if the smallness of the master's profit hinders him from enlarging his business, or conducting it in a safe and liberal way. A stoker ought not to desire high pay if the company is too poor to keep the engine-wheels in repair. And the varieties of circumstance which influence these reciprocal interests are so endless, that all endeavour to deduce rules of action from balance of expediency is in vain. And it is meant to be in vain. For no human actions ever were intended by the Maker of men to be guided by balances of expediency, but by balances of justice. He has therefore rendered all endeavours to determine expediency futile for evermore. No man ever knew or can know, what will be the ultimate result to himself, or to others, of any given line of conduct. But every man may know, and most of us do know, what is a just and unjust act. And all of us may know also, that the consequences of justice will be ultimately the best possible, both to others and ourselves, though we can neither say what _is_ best, or how it is likely to come to pass. I have said balances of justice, meaning, in the term justice, to include affection,--such affection as one man _owes_ to another. All right relations between master and operative, and all their best interests, ultimately depend on these. We shall find the best and simplest illustration of the relations of master and operative in the position of domestic servants. We will suppose that the master of a household desires only to get as much work out of his servants as he can, at the rate of wages he gives. He never allows them to be idle; feeds them as poorly and lodges them as ill as they will endure, and in all things pushes his requirements to the exact point beyond which he cannot go without forcing the servant to leave him. In doing this, there is no violation on his part of what is commonly called "justice." He agrees with the domestic for his whole time and service, and takes them;--the limits of hardship in treatment being fixed by the practice of other masters in his neighbourhood; that is to say, by the current rate of wages for domestic labour. If the servant can get a better place, he is free to take one, and the master can only tell what is the real market value of his labour, by requiring as much as he will give. This is the politico-economical view of the case, according to the doctors of that science; who assert that by this procedure the greatest average of work will be obtained from the servant, and therefore, the greatest benefit to the community, and through the community, by reversion, to the servant himself. That, however, is not so. It would be so if the servant were an engine of which the motive power was steam, magnetism, gravitation, or any other agent of calculable force. But he being, on the contrary, an engine whose motive power is a Soul, the force of this very peculiar agent, as an unknown quantity, enters into all the political economist's equations, without his knowledge, and falsifies every one of their results. The largest quantity of work will not be done by this curious engine for pay, or under pressure, or by help of any kind of fuel which may be supplied by the chaldron. It will be done only when the motive force, that is to say, the will or spirit of the creature, is brought to its greatest strength by its own proper fuel; namely, by the affections. It may indeed happen, and does happen often, that if the master is a man of sense and energy, a large quantity of material work may be done under mechanical pressure, enforced by strong will and guided by wise method; also it may happen, and does happen often, that if the master is indolent and weak (however good-natured), a very small quantity of work, and that bad, may be produced by the servant's undirected strength, and contemptuous gratitude. But the universal law of the matter is that, assuming any given quantity of energy and sense in master and servant, the greatest material result obtainable by them will be, not through antagonism to each other, but through affection for each other; and that if the master, instead of endeavouring to get as much work as possible from the servant, seeks rather to render his appointed and necessary work beneficial to him, and to forward his interests in all just and wholesome ways, the real amount of work ultimately done, or of good rendered, by the person so cared for, will indeed be the greatest possible. Observe, I say, "of good rendered," for a servant's work is not necessarily or always the best thing he can give his master. But good of all kinds, whether in material service, in protective watchfulness of his master's interest and credit, or in joyful readiness to seize unexpected and irregular occasions of help. Nor is this one whit less generally true because indulgence will be frequently abused, and kindness met with ingratitude. For the servant who, gently treated, is ungrateful, treated ungently, will be revengeful; and the man who is dishonest to a liberal master will be injurious to an unjust one. In any case, and with any person, this unselfish treatment will produce the most effective return. Observe, I am here considering the affections wholly as a motive power; not at all as things in themselves desirable or noble, or in any other way abstractedly good. I look at them simply as an anomalous force, rendering every one of the ordinary political economist's calculations nugatory; while, even if he desired to introduce this new element into his estimates, he has no power of dealing with it; for the affections only become a true motive power when they ignore every other motive and condition of political economy. Treat the servant kindly, with the idea of turning his gratitude to account, and you will get, as you deserve, no gratitude, nor any value for your kindness; but treat him kindly without any economical purpose, and all economical purposes will be answered; in this, as in all other matters, whosoever will save his life shall lose it, whoso loses it shall find it.[31] [31] The difference between the two modes of treatment, and between their effective material results, may be seen very accurately by a comparison of the relations of Esther and Charlie in _Bleak House_, with those of Miss Brass and the Marchioness in _Master Humphrey's Clock_. The essential value and truth of Dickens's writings have been unwisely lost sight of by many thoughtful persons, merely because he presents his truth with some colour of caricature. Unwisely, because Dickens's caricature, though often gross, is never mistaken. Allowing for his manner of telling them, the things he tells us are always true. I wish that he could think it right to limit his brilliant exaggeration to works written only for public amusement; and when he takes up a subject of high national importance, such as that which he handled in _Hard Times_, that he would use severer and more accurate analysis. The usefulness of that work (to my mind, in several respects, the greatest he has written) is with many persons seriously diminished because Mr. Bounderby is a dramatic monster, instead of a characteristic example of a worldly master; and Stephen Blackpool a dramatic perfection, instead of a characteristic example of an honest workman. But let us not lose the use of Dickens's wit and insight, because he chooses to speak in a circle of stage fire. He is entirely right in his main drift and purpose in every book he has written; and all of them, but especially _Hard Times_, should be studied with close and earnest care by persons interested in social questions. They will find much that is partial, and, because partial, apparently unjust; but if they examine all the evidence on the other side, which Dickens seems to overlook, it will appear, after all their trouble, that his view was the finally right one, grossly and sharply told. The next clearest and simplest example of relation between master and operative is that which exists between the commander of a regiment and his men. Supposing the officer only desires to apply the rules of discipline so as, with least trouble to himself, to make the regiment most effective, he will not be able, by any rules, or administration of rules, on this selfish principle, to develop the full strength of his subordinates. If a man of sense and firmness, he may, as in the former instance, produce a better result than would be obtained by the irregular kindness of a weak officer; but let the sense and firmness be the same in both cases, and assuredly the officer who has the most direct personal relations with his men, the most care for their interests, and the most value for their lives, will develop their effective strength, through their affection for his own person, and trust in his character, to a degree wholly unattainable by other means. The law applies still more stringently as the numbers concerned are larger; a charge may often be successful, though the men dislike their officers; a battle has rarely been won, unless they loved their general. Passing from these simple examples to the more complicated relations existing between a manufacturer and his workmen, we are met first by certain curious difficulties, resulting, apparently, from a harder and colder state of moral elements. It is easy to imagine an enthusiastic affection existing among soldiers for the colonel, not so easy to imagine an enthusiastic affection among cotton-spinners for the proprietor of the mill. A body of men associated for purposes of robbery (as a Highland clan in ancient times) shall be animated by perfect affection, and every member of it be ready to lay down his life for the life of his chief. But a band of men associated for purposes of legal production and accumulation is usually animated, it appears, by no such emotions, and none of them are in anywise willing to give his life for the life of his chief. Not only are we met by this apparent anomaly, in moral matters, but by others connected with it, in administration of system. For a servant or a soldier is engaged at a definite rate of wages, for a definite period; but a workman at a rate of wages variable according to the demand for labour, and with the risk of being at any time thrown out of his situation by chances of trade. Now, as, under these contingencies, no action of the affections can take place, but only an explosive action of _dis_affections, two points offer themselves for consideration in the matter. The first--How far the rate of wages may be so regulated as not to vary with the demand for labour. The second--How far it is possible that bodies of workmen may be engaged and maintained at such fixed rate of wages (whatever the state of trade may be), without enlarging or diminishing their number, so as to give them permanent interest in the establishment with which they are connected, like that of the domestic servants in an old family, or an _esprit de corps_, like that of the soldiers in a crack regiment. The first question is, I say, how far it may be possible to fix the rate of wages irrespectively of the demand for labour. Perhaps one of the most curious facts in the history of human error is the denial by the common political economist of the possibility of thus regulating wages; while, for all the important, and much of the unimportant, labour on the earth, wages are already so regulated. We do not sell our prime-ministership by Dutch auction; nor, on the decease of a bishop, whatever may be the general advantages of simony, do we (yet) offer his diocese to the clergyman who will take the episcopacy at the lowest contract. We (with exquisite sagacity of political economy!) do indeed sell commissions, but not, openly, generalships: sick, we do not inquire for a physician who takes less than a guinea; litigious, we never think of reducing six-and-eightpence to four-and-sixpence; caught in a shower, we do not canvass the cabmen, to find one who values his driving at less than a sixpence a mile. It is true that in all these cases there is, and in every conceivable case there must be, ultimate reference to the presumed difficulty of the work, or number of candidates for the office. If it were thought that the labour necessary to make a good physician would be gone through by a sufficient number of students with the prospect of only half-guinea fees, public consent would soon withdraw the unnecessary half-guinea. In this ultimate sense, the price of labour is indeed always regulated by the demand for it; but so far as the practical and immediate administration of the matter is regarded, the best labour always has been, and is, as _all_ labour ought to be, paid by an invariable standard. "What!" the reader, perhaps, answers amazedly: "pay good and bad workmen alike?" Certainly. The difference between one prelate's sermons and his successor's,--or between one physician's opinion and another's,--is far greater, as respects the qualities of mind involved, and far more important in result to you personally, than the difference between good and bad laying of bricks (though that is greater than most people suppose). Yet you pay with equal fee, contentedly, the good and bad workmen upon your soul, and the good and bad workmen upon your body; much more may you pay, contentedly, with equal fees, the good and bad workmen upon your house. "Nay, but I choose my physician and (?) my clergyman, thus indicating my sense of the quality of their work." By all means, also, choose your bricklayer; that is the proper reward of the good workman, to be "chosen." The natural and right system respecting all labour is, that it should be paid at a fixed rate, but the good workman employed, and the bad workmen unemployed. The false, unnatural, and destructive system is, when the bad workman is allowed to offer his work at half-price, and either take the place of the good, or force him by his competition to work for an inadequate sum. This equality of wages, then, being the first object towards which we have to discover the directest available road; the second is, as above stated, that of maintaining constant numbers of workmen in employment, whatever may be the accidental demand for the article they produce. I believe the sudden and extensive inequalities of demand which necessarily arise in the mercantile operations of an active nation, constitute the only essential difficulty which has to be overcome in a just organization of labour. The subject opens into too many branches to admit of being investigated in a paper of this kind; but the following general facts bearing on it may be noted. The wages which enable any workman to live are necessarily higher, if his work is liable to intermission, than if it is assured and continuous; and however severe the struggle for work may become, the general law will always hold, that men must get more daily pay if, on the average, they can only calculate on work three days a week, than they would require if they were sure of work six days a week. Supposing that a man cannot live on less than a shilling a day, his seven shillings he must get, either for three days' violent work, or six days' deliberate work. The tendency of all modern mercantile operations is to throw both wages and trade into the form of a lottery, and to make the workman's pay depend on intermittent exertion, and the principal's profit on dexterously used chance. In what partial degree, I repeat, this may be necessary, in consequence of the activities of modern trade, I do not here investigate; contenting myself with the fact, that in its fatallest aspects it is assuredly unnecessary, and results merely from love of gambling on the part of the masters, and from ignorance and sensuality in the men. The masters cannot bear to let any opportunity of gain escape them, and frantically rush at every gap and breach in the walls of Fortune, raging to be rich, and affronting, with impatient covetousness, every risk of ruin; while the men prefer three days of violent labour, and three days of drunkenness, to six days of moderate work and wise rest. There is no way in which a principal, who really desires to help his workmen, may do it more effectually than by checking these disorderly habits both in himself and them; keeping his own business operations on a scale which will enable him to pursue them securely, not yielding to temptations of precarious gain; and, at the same time, leading his workmen into regular habits of labour and life, either by inducing them rather to take low wages in the form of a fixed salary, than high wages, subject to the chance of their being thrown out of work; or, if this be impossible, by discouraging the system of violent exertion for nominally high day wages, and leading the men to take lower pay for more regular labour. In effecting any radical changes of this kind, doubtless there would be great inconvenience and loss incurred by all the originators of movement. That which can be done with perfect convenience and without loss, is not always the thing that most needs to be done, or which we are most imperatively required to do. I have already alluded to the difference hitherto existing between regiments of men associated for purposes of violence, and for purposes of manufacture; in that the former appear capable of self-sacrifice--the latter, not; which singular fact is the real reason of the general lowness of estimate in which the profession of commerce is held, as compared with that of arms. Philosophically, it does not, at first sight, appear reasonable (many writers have endeavoured to prove it unreasonable) that a peaceable and rational person, whose trade is buying and selling, should be held in less honour than an unpeaceable and often irrational person, whose trade is slaying. Nevertheless, the consent of mankind has always, in spite of the philosophers, given precedence to the soldier. And this is right. For the soldier's trade, verily and essentially, is not slaying, but being slain. This, without well knowing its own meaning, the world honours it for. A bravo's trade is slaying; but the world has never respected bravos more than merchants: the reason it honours the soldier is, because he holds his life at the service of the State. Reckless he may be--fond of pleasure or of adventure--all kinds of bye-motives and mean impulses may have determined the choice of his profession, and may affect (to all appearance exclusively) his daily conduct in it; but our estimate of him is based on this ultimate fact--of which we are well assured--that, put him in a fortress breach, with all the pleasures of the world behind him, and only death and his duty in front of him, he will keep his face to the front; and he knows that this choice may be put to him at any moment, and has beforehand taken his part--virtually takes such part continually--does, in reality, die daily. Not less is the respect we pay to the lawyer and physician, founded ultimately on their self-sacrifice. Whatever the learning or acuteness of a great lawyer, our chief respect for him depends on our belief that, set in a judge's seat, he will strive to judge justly, come of it what may. Could we suppose that he would take bribes, and use his acuteness and legal knowledge to give plausibility to iniquitous decisions, no degree of intellect would win for him our respect. Nothing will win it, short of our tacit conviction, that in all important acts of his life justice is first with him; his own interest, second. In the case of a physician, the ground of the honour we render him is clearer still. Whatever his science, we should shrink from him in horror if we found him regard his patients merely as subjects to experiment upon; much more, if we found that, receiving bribes from persons interested in their deaths, he was using his best skill to give poison in the mask of medicine. Finally, the principle holds with utmost clearness as it respects clergymen. No goodness of disposition will excuse want of science in a physician, or of shrewdness in an advocate; but a clergyman, even though his power of intellect be small, is respected on the presumed ground of his unselfishness and serviceableness. Now there can be no question but that the tact, foresight, decision, and other mental powers, required for the successful management of a large mercantile concern, if not such as could be compared with those of a great lawyer, general, or divine, would at least match the general conditions of mind required in the subordinate officers of a ship, or of a regiment, or in the curate of a country parish. If, therefore, all the efficient members of the so-called liberal professions are still, somehow, in public estimate of honour, preferred before the head of a commercial firm, the reason must lie deeper than in the measurement of their several powers of mind. And the essential reason for such preference will be found to lie in the fact that the merchant is presumed to act always selfishly. His work may be very necessary to the community; but the motive of it is understood to be wholly personal. The merchant's first object in all his dealings must be (the public believe) to get as much for himself, and leave as little to his neighbour (or customer) as possible. Enforcing this upon him, by political statute, as the necessary principle of his action; recommending it to him on all occasions, and themselves reciprocally adopting it; proclaiming vociferously, for law of the universe, that a buyer's function is to cheapen, and a seller's to cheat,--the public, nevertheless, involuntarily condemn the man of commerce for his compliance with their own statement, and stamp him for ever as belonging to an inferior grade of human personality. This they will find, eventually, they must give up doing. They must not cease to condemn selfishness; but they will have to discover a kind of commerce which is not exclusively selfish. Or, rather, they will have to discover that there never was, or can be, any other kind of commerce; that this which they have called commerce was not commerce at all, but cozening; and that a true merchant differs as much from a merchant according to laws of modern political economy, as the hero of the _Excursion_ from Autolycus. They will find that commerce is an occupation which gentlemen will every day see more need to engage in, rather than in the businesses of talking to men, or slaying them; that, in true commerce, as in true preaching, or true fighting, it is necessary to admit the idea of occasional voluntary loss; that sixpences have to be lost, as well as lives, under a sense of duty; that the market may have its martyrdoms as well as the pulpit; and trade its heroisms, as well as war. May have--in the final issue, must have--and only has not had yet, because men of heroic temper have always been misguided in their youth into other fields, not recognizing what is in our days, perhaps, the most important of all fields; so that, while many a zealous person loses his life in trying to teach the form of a gospel, very few will lose a hundred pounds in showing the practice of one. The fact is, that people never have had clearly explained to them the true functions of a merchant with respect to other people. I should like the reader to be very clear about this. Five great intellectual professions, relating to daily necessities of life, have hitherto existed--three exist necessarily, in every civilized nation: The Soldier's profession is to _defend_ it. The Pastor's, to _teach_ it. The Physician's, to _keep it in health_. The Lawyer's, to _enforce justice_ in it. The Merchant's, _to provide_ for it. And the duty of all these men is, on due occasion, to _die_ for it. "On due occasion," namely:-- The Soldier, rather than leave his post in battle. The Physician, rather than leave his post in plague. The Pastor, rather than teach Falsehood. The Lawyer, rather than countenance Injustice. The Merchant--What is _his_ "due occasion" of death? It is the main question for the merchant, as for all of us. For, truly, the man who does not know when to die, does not know how to live. Observe, the merchant's function (or manufacturer's, for in the broad sense in which it is here used the word must be understood to include both) is to provide for the nation. It is no more his function to get profit for himself out of that provision than it is a clergyman's function to get his stipend. The stipend is a due and necessary adjunct, but not the object, of his life, if he be a true clergyman, any more than his fee (or _honorarium_) is the object of life to a true physician. Neither is his fee the object of life to a true merchant. All three, if true men, have a work to be done irrespective of fee--to be done even at any cost, or for quite the contrary of fee; the pastor's function being to teach, the physician's to heal, and the merchant's, as I have said, to provide. That is to say, he has to understand to their very root the qualities of the thing he deals in, and the means of obtaining or producing it; and he has to apply all his sagacity and energy to the producing or obtaining it in perfect state, and distributing it at the cheapest possible price where it is most needed. And because the production or obtaining of any commodity involves necessarily the agency of many lives and hands, the merchant becomes in the course of his business the master and governor of large masses of men in a more direct, though less confessed way, than a military officer or pastor; so that on him falls, in great part, the responsibility for the kind of life they lead: and it becomes his duty, not only to be always considering how to produce what he sells in the purest and cheapest forms, but how to make the various employments involved in the production, or transference of it, most beneficial to the men employed. And as into these two functions, requiring for their right exercise the highest intelligence, as well as patience, kindness, and tact, the merchant is bound to put all his energy, so for their just discharge he is bound, as soldier or physician is bound, to give up, if need be, his life, in such way as it may be demanded of him. Two main points he has in his providing function to maintain: first, his engagements (faithfulness to engagements being the real root of all possibilities in commerce); and, secondly, the perfectness and purity of the thing provided; so that, rather than fail in any engagement, or consent to any deterioration, adulteration, or unjust and exorbitant price of that which he provides, he is bound to meet fearlessly any form of distress, poverty, or labour, which may, through maintenance of these points, come upon him. Again: in his office as governor of the men employed by him, the merchant or manufacturer is invested with a distinctly paternal authority and responsibility. In most cases, a youth entering a commercial establishment is withdrawn altogether from home influence; his master must become his father, else he has, for practical and constant help, no father at hand: in all cases the master's authority, together with the general tone and atmosphere of his business, and the character of the men with whom the youth is compelled in the course of it to associate, have more immediate and pressing weight than the home influence, and will usually neutralize it either for good or evil; so that the only means which the master has of doing justice to the men employed by him is to ask himself sternly whether he is dealing with such subordinate as he would with his own son, if compelled by circumstances to take such a position. Supposing the captain of a frigate saw it right, or were by any chance obliged, to place his own son in the position of a common sailor; as he would then treat his son, he is bound always to treat every one of the men under him. So, also; supposing the master of a manufactory saw it right, or were by any chance obliged, to place his own son in the position of an ordinary workman; as he would then treat his son, he is bound always to treat every one of his men. This is the only effective true, or practical RULE which can be given on this point of political economy. And as the captain of a ship is bound to be the last man to leave his ship in case of wreck, and to share his last crust with the sailors in case of famine, so the manufacturer, in any commercial crisis or distress, is bound to take the suffering of it with his men, and even to take more of it for himself than he allows his men to feel; as a father would in a famine, shipwreck, or battle, sacrifice himself for his son. All which sounds very strange: the only real strangeness in the matter being, nevertheless, that it should so sound. For all this is true, and that not partially nor theoretically, but everlastingly and practically: all other doctrine than this respecting matters political being false in premises, absurd in deduction, and impossible in practice, consistently with any progressive state of national life; all the life which we now possess as a nation showing itself in the resolute denial and scorn, by a few strong minds and faithful hearts, of the economic principles taught to our multitudes, which principles, so far as accepted, lead straight to national destruction. Respecting the modes and forms of destruction to which they lead, and, on the other hand, respecting the farther practical working of true polity, I hope to reason further in a following paper. ESSAY II. THE VEINS OF WEALTH. The answer which would be made by any ordinary political economist to the statements contained in the preceding paper, is in few words as follows:-- "It is indeed true that certain advantages of a general nature may be obtained by the development of social affections. But political economists never professed, nor profess, to take advantages of a general nature into consideration. Our science is simply the science of getting rich. So far from being a fallacious or visionary one, it is found by experience to be practically effective. Persons who follow its precepts do actually become rich, and persons who disobey them become poor. Every capitalist of Europe has acquired his fortune by following the known laws of our science, and increases his capital daily by an adherence to them. It is vain to bring forward tricks of logic, against the force of accomplished facts. Every man of business knows by experience how money is made, and how it is lost." Pardon me. Men of business do indeed know how they themselves made their money, or how, on occasion, they lost it. Playing a long-practised game, they are familiar with the chances of its cards, and can rightly explain their losses and gains. But they neither know who keeps the bank of the gambling-house, nor what other games may be played with the same cards, nor what other losses and gains, far away among the dark streets, are essentially, though invisibly, dependent on theirs in the lighted rooms. They have learned a few, and only a few, of the laws of mercantile economy; but not one of those of political economy. Primarily, which is very notable and curious, I observe that men of business rarely know the meaning of the word "rich." At least if they know, they do not in their reasonings allow for the fact that it is a relative word, implying its opposite "poor" as positively as the word "north" implies its opposite "south." Men nearly always speak and write as if riches were absolute, and it were possible, by following certain scientific precepts, for everybody to be rich. Whereas riches are a power like that of electricity, acting only through inequalities or negations of itself. The force of the guinea you have in your pocket depends wholly on the default of a guinea in your neighbour's pocket. If he did not want it, it would be of no use to you; the degree of power it possesses depends accurately upon the need or desire he has for it,--and the art of making yourself rich, in the ordinary mercantile economist's sense, is therefore equally and necessarily the art of keeping your neighbour poor. I would not contend in this matter (and rarely in any matter), for the acceptance of terms. But I wish the reader clearly and deeply to understand the difference between the two economies, to which the terms "Political" and "Mercantile" might not unadvisably be attached. Political economy (the economy of a State, or of citizens) consists simply in the production, preservation, and distribution, at fittest time and place, of useful or pleasurable things. The farmer who cuts his hay at the right time; the shipwright who drives his bolts well home in sound wood; the builder who lays good bricks in well-tempered mortar; the housewife who takes care of her furniture in the parlour, and guards against all waste in her kitchen; and the singer who rightly disciplines, and never overstrains her voice: are all political economists in the true and final sense; adding continually to the riches and well-being of the nation to which they belong. But mercantile economy, the economy of "merces" or of "pay," signifies the accumulation, in the hands of individuals, of legal, or moral claim upon, or power over, the labour of others; every such claim implying precisely as much poverty or debt on one side, as it implies riches or right on the other. It does not, therefore, necessarily involve an addition to the actual property, or well-being, of the State in which it exists. But since this commercial wealth, or power over labour, is nearly always convertible at once into real property, while real property is not always convertible at once into power over labour, the idea of riches among active men in civilized nations, generally refers to commercial wealth; and in estimating their possessions, they rather calculate the value of their horses and fields by the number of guineas they could get for them, than the value of their guineas by the number of horses and fields they could buy with them. There is, however, another reason for this habit of mind; namely, that an accumulation of real property is of little use to its owner, unless, together with it, he has commercial power over labour. Thus, suppose any person to be put in possession of a large estate of fruitful land, with rich beds of gold in its gravel, countless herds of cattle in its pastures; houses, and gardens, and storehouses full of useful stores; but suppose, after all, that he could get no servants? In order that he may be able to have servants, some one in his neighbourhood must be poor, and in want of his gold--or his corn. Assume that no one is in want of either, and that no servants are to be had. He must, therefore, bake his own bread, make his own clothes, plough his own ground, and shepherd his own flocks. His gold will be as useful to him as any other yellow pebbles on his estate. His stores must rot, for he cannot consume them. He can eat no more than another man could eat, and wear no more than another man could wear. He must lead a life of severe and common labour to procure even ordinary comforts; he will be ultimately unable to keep either houses in repair, or fields in cultivation; and forced to content himself with a poor man's portion of cottage and garden, in the midst of a desert of waste land, trampled by wild cattle, and encumbered by ruins of palaces, which he will hardly mock at himself by calling "his own." The most covetous of mankind would, with small exultation, I presume, accept riches of this kind on these terms. What is really desired, under the name of riches, is, essentially, power over men; in its simplest sense, the power of obtaining for our own advantage the labour of servant, tradesman, and artist; in wider sense, authority of directing large masses of the nation to various ends (good, trivial, or hurtful, according to the mind of the rich person). And this power of wealth of course is greater or less in direct proportion to the poverty of the men over whom it is exercised, and in inverse proportion to the number of persons who are as rich as ourselves, and who are ready to give the same price for an article of which the supply is limited. If the musician is poor, he will sing for small pay, as long as there is only one person who can pay him; but if there be two or three, he will sing for the one who offers him most. And thus the power of the riches of the patron (always imperfect and doubtful, as we shall see presently, even when most authoritative) depends first on the poverty of the artist, and then on the limitation of the number of equally wealthy persons, who also wants seats at the concert. So that, as above stated, the art of becoming "rich," in the common sense, is not absolutely nor finally the art of accumulating much money for ourselves, but also of contriving that our neighbours shall have less. In accurate terms, it is "the art of establishing the maximum inequality in our own favour." Now the establishment of such inequality cannot be shown in the abstract to be either advantageous or disadvantageous to the body of the nation. The rash and absurd assumption that such inequalities are necessarily advantageous, lies at the root of most of the popular fallacies on the subject of political economy. For the eternal and inevitable law in this matter is, that the beneficialness of the inequality depends, first, on the methods by which it was accomplished, and, secondly, on the purposes to which it is applied. Inequalities of wealth, unjustly established, have assuredly injured the nation in which they exist during their establishment; and, unjustly directed, injure it yet more during their existence. But inequalities of wealth justly established, benefit the nation in the course of their establishment; and, nobly used, aid it yet more by their existence. That is to say, among every active and well-governed people, the various strength of individuals, tested by full exertion and specially applied to various need, issues in unequal, but harmonious results, receiving reward or authority according to its class and service;[32] while, in the inactive or ill-governed nation, the gradations of decay and the victories of treason work out also their own rugged system of subjection and success; and substitute, for the melodious inequalities of concurrent power, the iniquitous dominances and depressions of guilt and misfortune. [32] I have been naturally asked several times, with respect to the sentence in the first of these papers, "the bad workmen unemployed," "But what are you to do with your bad unemployed workmen?" Well, it seems to me the question might have occurred to you before. Your housemaid's place is vacant--you give twenty pounds a year--two girls come for it, one neatly dressed, the other dirtily; one with good recommendations, the other with none. You do not, under these circumstances, usually ask the dirty one if she will come for fifteen pounds, or twelve; and, on her consenting, take her instead of the well-recommended one. Still less do you try to beat both down by making them bid against each other, till you can hire both, one at twelve pounds a year, and the other at eight. You simply take the one fittest for the place, and send away the other, not perhaps concerning yourself quite as much as you should with the question which you now impatiently put to me, "What is to become of her?" For all that I advise you to do, is to deal with workmen as with servants; and verily the question is of weight: "Your bad workman, idler, and rogue--what are you to do with him?" We will consider of this presently: remember that the administration of a complete system of national commerce and industry cannot be explained in full detail within the space of twelve pages. Meantime, consider whether, there being confessedly some difficulty in dealing with rogues and idlers, it may not be advisable to produce as few of them as possible. If you examine into the history of rogues, you will find they are as truly manufactured articles as anything else, and it is just because our present system of political economy gives so large a stimulus to that manufacture that you may know it to be a false one. We had better seek for a system which will develop honest men, than for one which will deal cunningly with vagabonds. Let us reform our schools, and we shall find little reform needed in our prisons. Thus the circulation of wealth in a nation resembles that of the blood in the natural body. There is one quickness of the current which comes of cheerful emotion or wholesome exercise; and another which comes of shame or of fever. There is a flush of the body which is full of warmth and life; and another which will pass into putrefaction. The analogy will hold, down even to minute particulars. For as diseased local determination of the blood involves depression of the general health of the system, all morbid local action of riches will be found ultimately to involve a weakening of the resources of the body politic. The mode in which this is produced may be at once understood by examining one or two instances of the development of wealth in the simplest possible circumstances. Suppose two sailors cast away on an uninhabited coast, and obliged to maintain themselves there by their own labour for a series of years. If they both kept their health, and worked steadily, and in amity with each other, they might build themselves a convenient house, and in time come to possess a certain quantity of cultivated land, together with various stores laid up for future use. All these things would be real riches or property; and, supposing the men both to have worked equally hard, they would each have right to equal share or use of it. Their political economy would consist merely in careful preservation and just division of these possessions. Perhaps, however, after some time one or other might be dissatisfied with the results of their common farming; and they might in consequence agree to divide the land they had brought under the spade into equal shares, so that each might thenceforward work in his own field and live by it. Suppose that after this arrangement had been made, one of them were to fall ill, and be unable to work on his land at a critical time--say of sowing or harvest. He would naturally ask the other to sow or reap for him. Then his companion might say, with perfect justice, "I will do this additional work for you; but if I do it, you must promise to do as much for me at another time. I will count how many hours I spend on your ground, and you shall give me a written promise to work for the same number of hours on mine, whenever I need your help, and you are able to give it." Suppose the disabled man's sickness to continue, and that under various circumstances, for several years, requiring the help of the other, he on each occasion gave a written pledge to work, as soon as he was able, at his companion's orders, for the same number of hours which the other had given up to him. What will the positions of the two men be when the invalid is able to resume work? Considered as a "Polis," or state, they will be poorer than they would have been otherwise: poorer by the withdrawal of what the sick man's labour would have produced in the interval. His friend may perhaps have toiled with an energy quickened by the enlarged need, but in the end his own land and property must have suffered by the withdrawal of so much of his time and thought from them; and the united property of the two men will be certainly less than it would have been if both had remained in health and activity. But the relations in which they stand to each other are also widely altered. The sick man has not only pledged his labour for some years, but will probably have exhausted his own share of the accumulated stores, and will be in consequence for some time dependent on the other for food, which he can only "pay" or reward him for by yet more deeply pledging his own labour. Supposing the written promises to be held entirely valid (among civilized nations their validity is secured by legal measures[33]), the person who had hitherto worked for both might now, if he chose, rest altogether, and pass his time in idleness, not only forcing his companion to redeem all the engagements he had already entered into, but exacting from him pledges for further labour, to an arbitrary amount, for what food he had to advance to him. [33] The disputes which exist respecting the real nature of money arise more from the disputants examining its functions on different sides, than from any real dissent in their opinions. All money, properly so called, is an acknowledgment of debt; but as such, it may either be considered to represent the labour and property of the creditor, or the idleness and penury of the debtor. The intricacy of the question has been much increased by the (hitherto necessary) use of marketable commodities, such as gold, silver, salt, shells, etc., to give intrinsic value or security to currency; but the final and best definition of money is that it is a documentary promise ratified and guaranteed by the nation to give or find a certain quantity of labour on demand. A man's labour for a day is a better standard of value than a measure of any produce, because no produce ever maintains a consistent rate of productibility. There might not, from first to last, be the least illegality (in the ordinary sense of the word) in the arrangement; but if a stranger arrived on the coast at this advanced epoch of their political economy, he would find one man commercially Rich; the other commercially Poor. He would see, perhaps with no small surprise, one passing his days in idleness; the other labouring for both, and living sparely, in the hope of recovering his independence, at some distant period. This is, of course, an example of one only out of many ways in which inequality of possession may be established between different persons, giving rise to the Mercantile forms of Riches and Poverty. In the instance before us, one of the men might from the first have deliberately chosen to be idle, and to put his life in pawn for present ease; or he might have mismanaged his land, and been compelled to have recourse to his neighbour for food and help, pledging his future labour for it. But what I want the reader to note especially is the fact, common to a large number of typical cases of this kind, that the establishment of the mercantile wealth which consists in a claim upon labour, signifies a political diminution of the real wealth which consists in substantial possessions. Take another example, more consistent with the ordinary course of affairs of trade. Suppose that three men, instead of two, formed the little isolated republic, and found themselves obliged to separate in order to farm different pieces of land at some distance from each other along the coast; each estate furnishing a distinct kind of produce, and each more or less in need of the material raised on the other. Suppose that the third man, in order to save the time of all three, undertakes simply to superintend the transference of commodities from one farm to the other; on condition of receiving some sufficiently remunerative share of every parcel of goods conveyed, or of some other parcel received in exchange for it. If this carrier or messenger always brings to each estate, from the other, what is chiefly wanted, at the right time, the operations of the two farmers will go on prosperously, and the largest possible result in produce, or wealth, will be attained by the little community. But suppose no intercourse between the landowners is possible, except through the travelling agent; and that, after a time, this agent, watching the course of each man's agriculture, keeps back the articles with which he has been entrusted until there comes a period of extreme necessity for them, on one side or other, and then exacts in exchange for them all that the distressed farmer can spare of other kinds of produce; it is easy to see that by ingeniously watching his opportunities, he might possess himself regularly of the greater part of the superfluous produce of the two estates, and at last, in some year of severest trial or scarcity, purchase both for himself, and maintain the former proprietors thenceforward as his labourers or servants. This would be a case of commercial wealth acquired on the exactest principles of modern political economy. But more distinctly even than in the former instance, it is manifest in this that the wealth of the State, or of the three men considered as a society, is collectively less than it would have been had the merchant been content with juster profit. The operations of the two agriculturists have been cramped to the utmost; and the continual limitations of the supply of things they wanted at critical times, together with the failure of courage consequent on the prolongation of a struggle for mere existence, without any sense of permanent gain, must have seriously diminished the effective results of their labour; and the stores finally accumulated in the merchant's hands will not in anywise be of equivalent value to those which, had his dealings been honest, would have filled at once the granaries of the farmers and his own. The whole question, therefore, respecting not only the advantage, but even the quantity, of national wealth, resolves itself finally into one of abstract justice. It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as sternly as that of a mathematical quantity depends on the algebraical sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities; or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicane. Some treasures are heavy with human tears, as an ill-stored harvest with untimely rain; and some gold is brighter in sunshine than it is in substance. And these are not, observe, merely moral or pathetic attributes of riches, which the seeker of riches may, if he chooses, despise; they are, literally and sternly, material attributes of riches, depreciating or exalting, incalculably, the monetary signification of the sum in question. One mass of money is the outcome of action which has created,--another, of action which has annihilated,--ten times as much in the gathering of it; such and such strong hands have been paralysed, as if they had been numbed by nightshade: so many strong men's courage broken, so many productive operations hindered; this and the other false direction given to labour, and lying image of prosperity set up, on Dura plains dug into seven-times-heated furnaces. That which seems to be wealth may in verity be only the gilded index of far-reaching ruin; a wrecker's handful of coin gleaned from the beach to which he has beguiled an argosy; a camp-follower's bundle of rags unwrapped from the breasts of goodly soldiers dead; the purchase-pieces of potter's fields, wherein shall be buried together the citizen and the stranger. And therefore, the idea that directions can be given for the gaining of wealth, irrespectively of the consideration of its moral sources, or that any general and technical law of purchase and gain can be set down for national practice, is perhaps the most insolently futile of all that ever beguiled men through their vices. So far as I know, there is not in history record of anything so disgraceful to the human intellect as the modern idea that the commercial text, "Buy in the cheapest market and sell in the dearest," represents, or under any circumstances could represent, an available principle of national economy. Buy in the cheapest market?--yes; but what made your market cheap? Charcoal may be cheap among your roof timbers after a fire, and bricks may be cheap in your streets after an earthquake; but fire and earthquake may not therefore be national benefits. Sell in the dearest?--yes, truly; but what made your market dear? You sold your bread well to-day; was it to a dying man who gave his last coin for it, and will never need bread more, or to a rich man who to-morrow will buy your farm over your head; or to a soldier on his way to pillage the bank in which you have put your fortune? None of these things you can know. One thing only you can know, namely, whether this dealing of yours is a just and faithful one, which is all you need concern yourself about respecting it; sure thus to have done your own part in bringing about ultimately in the world a state of things which will not issue in pillage or in death. And thus every question concerning these things merges itself ultimately in the great question of justice, which, the ground being thus far cleared for it, I will enter upon in the next paper, leaving only, in this, three final points for the reader's consideration. It has been shown that the chief value and virtue of money consists in its having power over human beings; that, without this power, large material possessions are useless, and, to any person possessing such power, comparatively unnecessary. But power over human beings is attainable by other means than by money. As I said a few pages back, the money power is always imperfect and doubtful; there are many things which cannot be reached with it, others which cannot be retained by it. Many joys may be given to men which cannot be bought for gold, and many fidelities found in them which cannot be rewarded with it. Trite enough,--the reader thinks. Yes: but it is not so trite,--I wish it were,--that in this moral power, quite inscrutable and immeasurable though it be, there is a monetary value just as real as that represented by more ponderous currencies. A man's hand may be full of invisible gold, and the wave of it, or the grasp, shall do more than another's with a shower of bullion. This invisible gold, also, does not necessarily diminish in spending. Political economists will do well some day to take heed of it, though they cannot take measure. But farther. Since the essence of wealth consists in its authority over men, if the apparent or nominal wealth fail in this power, it fails in essence; in fact, ceases to be wealth at all. It does not appear lately in England, that our authority over men is absolute. The servants show some disposition to rush riotously upstairs, under an impression that their wages are not regularly paid. We should augur ill of any gentleman's property to whom this happened every other day in his drawing-room. So also, the power of our wealth seems limited as respects the comfort of the servants, no less than their quietude. The persons in the kitchen appear to be ill-dressed, squalid, half-starved. One cannot help imagining that the riches of the establishment must be of a very theoretical and documentary character. Finally. Since the essence of wealth consists in power over men, will it not follow that the nobler and the more in number the persons are over whom it has power, the greater the wealth? Perhaps it may even appear after some consideration, that the persons themselves _are_ the wealth--that these pieces of gold with which we are in the habit of guiding them, are, in fact, nothing more than a kind of Byzantine harness or trappings, very glittering and beautiful in barbaric sight, wherewith we bridle the creatures; but that if these same living creatures could be guided without the fretting and jingling of the byzants in their mouths and ears, they might themselves be more valuable than their bridles. In fact, it may be discovered that the true veins of wealth are purple--and not in Rock, but in Flesh--perhaps even that the final outcome and consummation of all wealth is in the producing as many as possible full-breathed, bright-eyed, and happy-hearted human creatures. Our modern wealth, I think, has rather a tendency the other way;--most political economists appearing to consider multitudes of human creatures not conducive to wealth, or at best conducive to it only by remaining in a dim-eyed and narrow-chested state of being. Nevertheless, it is open, I repeat, to serious question, which I leave to the reader's pondering, whether, among national manufactures, that of Souls of a good quality may not at last turn out a quite leadingly lucrative one? Nay, in some faraway and yet undreamt-of hour, I can even imagine that England may cast all thoughts of possessive wealth back to the barbaric nations among whom they first arose; and that, while the sands of the Indus and adamant of Golconda may yet stiffen the housings of the charger, and flash from the turban of the slave, she, as a Christian mother, may at last attain to the virtues and the treasures of a Heathen one, and be able to lead forth her Sons, saying-- "These are MY Jewels." ESSAY III. "QUI JUDICATIS TERRAM." Some centuries before the Christian era, a Jew merchant, largely engaged in business on the Gold Coast, and reported to have made one of the largest fortunes of his time (held also in repute for much practical sagacity), left among his ledgers some general maxims concerning wealth, which have been preserved, strangely enough, even to our own days. They were held in considerable respect by the most active traders of the middle ages, especially by the Venetians, who even went so far in their admiration as to place a statue of the old Jew on the angle of one of their principal public buildings. Of late years these writings have fallen into disrepute, being opposed in every particular to the spirit of modern commerce. Nevertheless, I shall reproduce a passage or two from them here, partly because they may interest the reader by their novelty; and chiefly because they will show him that it is possible for a very practical and acquisitive tradesman to hold, through a not unsuccessful career, that principle of distinction between well-gotten and ill-gotten wealth, which, partially insisted on in my last paper, it must be our work more completely to examine in this. He says, for instance, in one place: "The getting of treasures by a lying tongue is a vanity tossed to and fro of them that seek death:" adding in another, with the same meaning (he has a curious way of doubling his sayings): "Treasures of wickedness profit nothing: but justice delivers from death." Both these passages are notable for their assertion of death as the only real issue and sum of attainment by any unjust scheme of wealth. If we read, instead of "lying tongue," "lying label, title, pretence, or advertisement," we shall more clearly perceive the bearing of the words on modern business. The seeking of death is a grand expression of the true course of men's toil in such business. We usually speak as if death pursued us, and we fled from him; but that is only so in rare instances. Ordinarily, he masks himself--makes himself beautiful--all-glorious; not like the King's daughter, all-glorious within, but outwardly: his clothing of wrought gold. We pursue him frantically all our days, he flying or hiding from us. Our crowning success at three-score and ten is utterly and perfectly to seize, and hold him in his eternal integrity---robes, ashes, and sting. Again: the merchant says, "He that oppresseth the poor to increase his riches, shall surely come to want." And again, more strongly: "Rob not the poor because he is poor; neither oppress the afflicted in the place of business. For God shall spoil the soul of those that spoiled them." This "robbing the poor because he is poor" is especially the mercantile form of theft, consisting in taking advantage of a man's necessities in order to obtain his labour or property at a reduced price. The ordinary highwayman's opposite form of robbery--of the rich, because he is rich--does not appear to occur so often to the old merchant's mind; probably because, being less profitable and more dangerous than the robbery of the poor, it is rarely practised by persons of discretion. But the two most remarkable passages in their deep general significance are the following:-- "The rich and the poor have met. God is their maker." "The rich and the poor have met. God is their light." They "have met:" more literally, have stood in each other's way, (_obviaverunt_). That is to say, as long as the world lasts, the action and counteraction of wealth and poverty, the meeting, face to face, of rich and poor, is just as appointed and necessary a law of that world as the flow of stream to sea, or the interchange of power among the electric clouds:--"God is their maker." But, also, this action may be either gentle and just, or convulsive and destructive: it may be by rage of devouring flood, or by lapse of serviceable wave;--in blackness of thunderstroke, or continual force of vital fire, soft, and shapeable into love-syllables from far away. And which of these it shall be depends on both rich and poor knowing that God is their light; that in the mystery of human life, there is no other light than this by which they can see each other's faces, and live;--light, which is called in another of the books among which the merchant's maxims have been preserved, the "sun of justice,"[34] of which it is promised that it shall rise at last with "healing" (health-giving or helping, making whole or setting at one) in its wings. For truly this healing is only possible by means of justice; no love, no faith, no hope will do it; men will be unwisely fond--vainly faithful, unless primarily they are just; and the mistake of the best men through generation after generation, has been that great one of thinking to help the poor by almsgiving, and by preaching of patience or of hope, and by every other means, emollient or consolatory, except the one thing which God orders for them, justice. But this justice, with its accompanying holiness or helpfulness, being even by the best men denied in its trial time, is by the mass of men hated wherever it appears: so that, when the choice was one day fairly put to them, they denied the Helpful One and the Just;[35] and desired a murderer, sedition-raiser, and robber, to be granted to them;--the murderer instead of the Lord of Life, the sedition-raiser instead of the Prince of Peace, and the robber instead of the Just Judge of all the world. [34] More accurately, Sun of Justness; but, instead of the harsh word "Justness," the old English "Righteousness" being commonly employed, has, by getting confused with "godliness," or attracting about it various vague and broken meanings, prevented most persons from receiving the force of the passages in which it occurs. The word "righteousness" properly refers to the justice of rule, or right, as distinguished from "equity," which refers to the justice of balance. More broadly, Righteousness is King's justice; and Equity, Judge's justice; the King guiding or ruling all, the Judge dividing or discerning between opposites (therefore, the double question, "Man, who made me a ruler--[Greek: dikastês]--or a divider--[Greek: meristês]--over you?") Thus, with respect to the Justice of Choice (selection, the feebler and passive justice), we have from lego,--lex, legal, loi, and loyal; and with respect to the Justice of Rule (direction, the stronger and active justice), we have from rego,--rex, regal, roi, and royal. [35] In another place written with the same meaning, "Just, and having salvation." I have just spoken of the flowing of streams to the sea as a partial image of the action of wealth. In one respect it is not a partial, but a perfect image. The popular economist thinks himself wise in having discovered that wealth, or the forms of property in general, must go where they are required; that where demand is, supply must follow. He farther declares that this course of demand and supply cannot be forbidden by human laws. Precisely in the same sense, and with the same certainty, the waters of the world go where they are required. Where the land falls, the water flows. The course neither of clouds nor rivers can be forbidden by human will. But the disposition and administration of them can be altered by human forethought. Whether the stream shall be a curse or a blessing, depends upon man's labour, and administrating intelligence. For centuries after centuries, great districts of the world, rich in soil, and favoured in climate, have lain desert under the rage of their own rivers; not only desert, but plague-struck. The stream which, rightly directed, would have flowed in soft irrigation from field to field--would have purified the air, given food to man and beast, and carried their burdens for them on its bosom--now overwhelms the plain, and poisons the wind; its breath pestilence, and its work famine. In like manner this wealth "goes where it is required." No human laws can withstand its flow. They can only guide it: but this, the leading trench and limiting mound can do so thoroughly, that it shall become water of life--the riches of the hand of wisdom;[36] or, on the contrary, by leaving it to its own lawless flow, they may make it, what it has been too often, the last and deadliest of national plagues: water of Marah--the water which feeds the roots of all evil. [36] "Length of days in her right hand; in her left, riches and honour." The necessity of these laws of distribution or restraint is curiously overlooked in the ordinary political economist's definition of his own "science." He calls it, shortly, the "science of getting rich." But there are many sciences, as well as many arts, of getting rich. Poisoning people of large estates was one employed largely in the middle ages; adulteration of food of people of small estates is one employed largely now. The ancient and honourable Highland method of black mail; the more modern and less honourable system of obtaining goods on credit, and the other variously improved methods of appropriation--which, in major and minor scales of industry, down to the most artistic pocket-picking, we owe to recent genius,--all come under the general head of sciences, or arts, of getting rich. So that it is clear the popular economist, in calling his science the science _par excellence_ of getting rich, must attach some peculiar ideas of limitation to its character. I hope I do not misrepresent him, by assuming that he means _his_ science to be the science of "getting rich by legal or just means." In this definition, is the word "just," or "legal," finally to stand? For it is possible among certain nations, or under certain rulers, or by help of certain advocates, that proceedings may be legal which are by no means just. If, therefore, we leave at last only the word "just" in that place of our definition, the insertion of this solitary and small word will make a notable difference in the grammar of our science. For then it will follow that, in order to grow rich scientifically we must grow rich justly; and, therefore, know what is just; so that our economy will no longer depend merely on prudence, but on jurisprudence--and that of divine, not human law. Which prudence is indeed of no mean order, holding itself, as it were, high in the air of heaven, and gazing for ever on the light of the sun of justice; hence the souls which have excelled in it are represented by Dante as stars forming in heaven for ever the figure of the eye of an eagle: they having been in life the discerners of light from darkness; or to the whole human race, as the light of the body, which is the eye; while those souls which form the wings of the bird (giving power and dominion to justice, "healing in its wings") trace also in light the inscription in heaven: "DILIGITE JUSTITIAM QUI JUDICATIS TERRAM." "Ye who judge the earth, give" (not, observe, merely love, but) "diligent love to justice:" the love which seeks diligently, that is to say, choosingly, and by preference to all things else. Which judging or doing judgment in the earth is, according to their capacity and position, required not of judges only, nor of rulers only, but of all men:[37] a truth sorrowfully lost sight of even by those who are ready enough to apply to themselves passages in which Christian men are spoken of as called to be "saints" (_i.e._, to helpful or healing functions); and "chosen to be kings" (_i.e._, to knowing or directing functions); the true meaning of these titles having been long lost through the pretences of unhelpful and unable persons to saintly and kingly character; also through the once popular idea that both the sanctity and royalty are to consist in wearing long robes and high crowns, instead of in mercy and judgment; whereas all true sanctity is saving power, as all true royalty is ruling power; and injustice is part and parcel of the denial of such power, which "makes men as the creeping things, as the fishes of the sea, that have no ruler over them."[38] [37] I hear that several of our lawyers have been greatly amused by the statement in the first of these papers that a lawyer's function was to do justice. I did not intend it for a jest; nevertheless it will be seen that in the above passage neither the determination nor doing of justice are contemplated as functions wholly peculiar to the lawyer. Possibly, the more our standing armies, whether of soldiers, pastors, or legislators (the generic term "pastor" including all teachers, and the generic term "lawyer" including makers as well as interpreters of law), can be superseded by the force of national heroism, wisdom, and honesty, the better it may be for the nation. [38] It being the privilege of the fishes, as it is of rats and wolves, to live by the laws of demand and supply; but the distinction of humanity, to live by those of right. Absolute justice is indeed no more attainable than absolute truth; but the righteous man is distinguished from the unrighteous by his desire and hope of justice, as the true man from the false by his desire and hope of truth. And though absolute justice be unattainable, as much justice as we need for all practical use is attainable by all those who make it their aim. We have to examine, then, in the subject before us, what are the laws of justice respecting payment of labour--no small part, these, of the foundations of all jurisprudence. I reduced, in my last paper, the idea of money payment to its simplest or radical terms. In those terms its nature, and the conditions of justice respecting it, can be best ascertained. Money payment, as there stated, consists radically in a promise to some person working for us, that for the time and labour he spends in our service to-day we will give or procure equivalent time and labour in his service at any future time when he may demand it.[39] [39] It might appear at first that the market price of labour expressed such an exchange: but this is a fallacy, for the market price is the momentary price of the kind of labour required, but the just price is its equivalent of the productive labour of mankind. This difference will be analysed in its place. It must be noted also that I speak here only of the exchangeable value of labour, not of that of commodities. The exchangeable value of a commodity is that of the labour required to produce it, multiplied into the force of the demand for it. If the value of the labour = _x_ and the force of demand = _y_, the exchangeable value of the commodity is _xy_, in which if either _x_ = 0, or _y_ = 0, _xy_ = 0. If we promise to give him less labour than he has given us, we under-pay him. If we promise to give him more labour than he has given us, we over-pay him. In practice, according to the laws of demand and supply, when two men are ready to do the work, and only one man wants to have it done, the two men under-bid each other for it; and the one who gets it to do, is under-paid. But when two men want the work done, and there is only one man ready to do it, the two men who want it done over-bid each other, and the workman is over-paid. I will examine these two points of injustice in succession, but first I wish the reader to clearly understand the central principle lying between the two, of right or just payment. When we ask a service of any man, he may either give it us freely, or demand payment for it. Respecting free gift of service, there is no question at present, that being a matter of affection--not of traffic. But if he demand payment for it, and we wish to treat him with absolute equity, it is evident that this equity can only consist in giving time for time, strength for strength, and skill for skill. If a man works an hour for us, and we only promise to work half an hour for him in return, we obtain an unjust advantage. If, on the contrary, we promise to work an hour and a half for him in return, he has an unjust advantage. The justice consists in absolute exchange; or, if there be any respect to the stations of the parties, it will not be in favour of the employer: there is certainly no equitable reason in a man's being poor, that if he give me a pound of bread to-day, I should return him less than a pound of bread to-morrow; or any equitable reason in a man's being uneducated, that if he uses a certain quantity of skill and knowledge in my service, I should use a less quantity of skill and knowledge in his. Perhaps, ultimately, it may appear desirable, or, to say the least, gracious, that I should give in return somewhat more than I received. But at present, we are concerned on the law of justice only, which is that of perfect and accurate exchange;--one circumstance only interfering with the simplicity of this radical idea of just payment--that inasmuch as labour (rightly directed) is fruitful just as seed is, the fruit (or "interest" as it is called) of the labour first given, or "advanced," ought to be taken into account, and balanced by an additional quantity of labour in the subsequent repayment. Supposing the repayment to take place at the end of a year, or of any other given time, this calculation could be approximately made; but as money (that is to say, cash) payment involves no reference to time (it being optional with the person paid to spend what he receives at once or after any number of years), we can only assume, generally, that some slight advantage must in equity be allowed to the person who advances the labour, so that the typical form of bargain will be: If you give me an hour to-day, I will give you an hour and five minutes on demand. If you give me a pound of bread to-day, I will give you seventeen ounces on demand, and so on. All that is necessary for the reader to note is, that the amount returned is at least in equity not to be _less_ than the amount given. The abstract idea, then, of just or due wages, as respects the labourer, is that they will consist in a sum of money which will at any time procure for him at least as much labour as he has given, rather more than less. And this equity or justice of payment is, observe, wholly independent of any reference to the number of men who are willing to do the work. I want a horseshoe for my horse. Twenty smiths, or twenty thousand smiths, may be ready to forge it; their number does not in one atom's weight affect the question of the equitable payment of the one who _does_ forge it. It costs him a quarter of an hour of his life, and so much skill and strength of arm to make that horseshoe for me. Then at some future time I am bound in equity to give a quarter of an hour, and some minutes more, of my life (or of some other person's at my disposal), and also as much strength of arm and skill, and a little more, in making or doing what the smith may have need of. Such being the abstract theory of just remunerative payment, its application is practically modified by the fact that the order for labour, given in payment, is general, while the labour received is special. The current coin or document is practically an order on the nation for so much work of any kind; and this universal applicability to immediate need renders it so much more valuable than special labour can be, that an order for a less quantity of this general toil will always be accepted as a just equivalent for a greater quantity of special toil. Any given craftsman will always be willing to give an hour of his own work in order to receive command over half an hour, or even much less, of national work. This source of uncertainty, together with the difficulty of determining the monetary value of skill,[40] renders the ascertainment (even approximate) of the proper wages of any given labour in terms of currency, matter of considerable complexity. But they do not affect the principle of exchange. The worth of the work may not be easily known; but it _has_ a worth, just as fixed and real as the specific gravity of a substance, though such specific gravity may not be easily ascertainable when the substance is united with many others. Nor is there so much difficulty or chance in determining it as in determining the ordinary maxima and minima of vulgar political economy. There are few bargains in which the buyer can ascertain with anything like precision that the seller would have taken no less;--or the seller acquire more than a comfortable faith that the purchaser would have given no more. This impossibility of precise knowledge prevents neither from striving to attain the desired point of greatest vexation and injury to the other, nor from accepting it for a scientific principle that he is to buy for the least and sell for the most possible, though what the real least or most may be he cannot tell. In like manner, a just person lays it down for a scientific principle that he is to pay a just price, and, without being able precisely to ascertain the limits of such a price, will nevertheless strive to attain the closest possible approximation to them. A practically serviceable approximation he _can_ obtain. It is easier to determine scientifically what a man ought to have for his work, than what his necessities will compel him to take for it. His necessities can only be ascertained by empirical, but his due by analytical, investigation. In the one case, you try your answer to the sum like a puzzled schoolboy--till you find one that fits; in the other, you bring out your result within certain limits, by process of calculation. [40] Under the term "skill" I mean to include the united force of experience, intellect, and passion in their operation on manual labour: and under the term "passion," to include the entire range and agency of the moral feelings; from the simple patience and gentleness of mind which will give continuity and fineness to the touch, or enable one person to work without fatigue, and with good effect, twice as long as another, up to the qualities of character which render science possible--(the retardation of science by envy is one of the most tremendous losses in the economy of the present century)--and to the incommunicable emotion and imagination which are the first and mightiest sources of all value in art. It is highly singular that political economists should not yet have perceived, if not the moral, at least the passionate element, to be an inextricable quantity in every calculation. I cannot conceive, for instance, how it was possible that Mr. Mill should have followed the true clue so far as to write,--"No limit can be set to the importance--even in a purely productive and material point of view--of mere thought," without seeing that it was logically necessary to add also, "and of mere feeling." And this the more, because in his first definition of labour he includes in the idea of it "all feelings of a disagreeable kind connected with the employment of one's thoughts in a particular occupation." True; but why not also, "feelings of an agreeable kind?" It can hardly be supposed that the feelings which retard labour are more essentially a part of the labour than those which accelerate it. The first are paid for as pain, the second as power. The workman is merely indemnified for the first; but the second both produce a part of the exchangeable value of the work, and materially increase its actual quantity. "Fritz is with us. _He_ is worth fifty thousand men." Truly, a large addition to the material force;--consisting, however, be it observed, not more in operations carried on in Fritz's head, than in operations carried on in his armies' heart. "No limit can be set to the importance of _mere_ thought." Perhaps not! Nay, suppose some day it should turn out that "mere" thought was in itself a recommendable object of production, and that all Material production was only a step towards this more precious Immaterial one? Supposing, then, the just wages of any quantity of given labour to have been ascertained, let us examine the first results of just and unjust payment, when in favour of the purchaser or employer; _i.e._, when two men are ready to do the work, and only one wants to have it done. The unjust purchaser forces the two to bid against each other till he has reduced their demand to its lowest terms. Let us assume that the lowest bidder offers to do the work at half its just price. The purchaser employs him, and does not employ the other. The first or _apparent_ result, is, therefore, that one of the two men is left out of employ, or to starvation, just as definitely as by the just procedure of giving fair price to the best workman. The various writers who endeavoured to invalidate the positions of my first paper never saw this, and assumed that the unjust hirer employed _both_. He employs both no more than the just hirer. The only difference (in the outset) is that the just man pays sufficiently, the unjust man insufficiently, for the labour of the single person employed. I say, in "the outset;" for this first or apparent difference is not the actual difference. By the unjust procedure, half the proper price of the work is left in the hands of the employer. This enables him to hire another man at the same unjust rate on some other kind of work; and the final result is that he has two men working for him at half-price, and two are out of employ. By the just procedure, the whole price of the first piece of work goes into the hands of the man who does it. No surplus being left in the employer's hands, _he_ cannot hire another man for another piece of labour. But by precisely so much as his power is diminished, the hired workman's power is increased; that is to say, by the additional half of the price he has received; which additional half _he_ has the power of using to employ another man in _his_ service. I will suppose, for the moment, the least favourable, though quite probable, case--that, though justly treated himself, he yet will act unjustly to his subordinate; and hire at half-price, if he can. The final result will then be, that one man works for the employer, at just price; one for the workman, at half-price; and two, as in the first case, are still out of employ. These two, as I said before, are out of employ in _both_ cases. The difference between the just and unjust procedure does not lie in the number of men hired, but in the price paid to them, and the _persons by whom_ it is paid. The essential difference, that which I want the reader to see clearly, is, that in the unjust case, two men work for one, the first hirer. In the just case, one man works for the first hirer, one for the person hired, and so on, down or up through the various grades of service; the influence being carried forward by justice, and arrested by injustice. The universal and constant action of justice in this matter is therefore to diminish the power of wealth, in the hands of one individual, over masses of men, and to distribute it through a chain of men. The actual power exerted by the wealth is the same in both cases; but by injustice it is put all into one man's hands, so that he directs at once and with equal force the labour of a circle of men about him; by the just procedure, he is permitted to touch the nearest only, through whom, with diminished force, modified by new minds, the energy of the wealth passes on to others, and so till it exhausts itself. The immediate operation of justice in this respect is, therefore, to diminish the power of wealth, first in acquisition of luxury, and, secondly, in exercise of moral influence. The employer cannot concentrate so multitudinous labour on his own interests, nor can he subdue so multitudinous mind to his own will. But the secondary operation of justice is not less important. The insufficient payment of the group of men working for one, places each under a maximum of difficulty in rising above his position. The tendency of the system is to check advancement. But the sufficient or just payment, distributed through a descending series of offices or grades of labour,[41] gives each subordinated person fair and sufficient means of rising in the social scale, if he chooses to use them; and thus not only diminishes the immediate power of wealth, but removes the worst disabilities of poverty. [41] I am sorry to lose time by answering, however curtly, the equivocations of the writers who sought to obscure the instances given of regulated labour in the first of these papers, by confusing kinds, ranks, and quantities of labour with its qualities. I never said that a colonel should have the same pay as a private, nor a bishop the same pay as a curate. Neither did I say that more work ought to be paid as less work (so that the curate of a parish of two thousand souls should have no more than the curate of a parish of five hundred). But I said that, so far as you employ it at all, bad work should be paid no less than good work; as a bad clergyman yet takes his tithes, a bad physician takes his fee, and a bad lawyer his costs. And this, as will be farther shown in the conclusion, I said, and say, partly because the best work never was, nor ever will be, done for money at all; but chiefly because, the moment people know they have to pay the bad and good alike, they will try to discern the one from the other, and not use the bad. A sagacious writer in the _Scotsman_ asks me if I should like any common scribbler to be paid by Messrs. Smith, Elder and Co. [the original publishers of this work] as their good authors are. I should, if they employed him--but would seriously recommend them, for the scribbler's sake, as well as their own, _not_ to employ him. The quantity of its money which the country at present invests in scribbling is not, in the outcome of it, economically spent; and even the highly ingenious person to whom this question occurred, might perhaps have been more beneficially employed than in printing it. It is on this vital problem that the entire destiny of the labourer is ultimately dependent. Many minor interests may sometimes appear to interfere with it, but all branch from it. For instance, considerable agitation is often caused in the minds of the lower classes when they discover the share which they nominally, and to all appearance, actually, pay out of their wages in taxation (I believe thirty-five or forty per cent.). This sounds very grievous; but in reality the labourer does not pay it, but his employer. If the workman had not to pay it, his wages would be less by just that sum: competition would still reduce them to the lowest rate at which life was possible. Similarly the lower orders agitated for the repeal of the corn laws,[42] thinking they would be better off if bread were cheaper; never perceiving that as soon as bread was permanently cheaper, wages would permanently fall in precisely that proportion. The corn laws were rightly repealed; not, however, because they directly oppressed the poor, but because they indirectly oppressed them in causing a large quantity of their labour to be consumed unproductively. So also unnecessary taxation oppresses them, through destruction of capital, but the destiny of the poor depends primarily always on this one question of dueness of wages. Their distress (irrespectively of that caused by sloth, minor error, or crime) arises on the grand scale from the two reacting forces of competition and oppression. There is not yet, nor will yet for ages be, any real over-population in the world; but a local over-population, or, more accurately, a degree of population locally unmanageable under existing circumstances for want of forethought and sufficient machinery, necessarily shows itself by pressure of competition; and the taking advantage of this competition by the purchaser to obtain their labour unjustly cheap, consummates at once their suffering and his own; for in this (as I believe in every other kind of slavery) the oppressor suffers at last more than the oppressed, and those magnificent lines of Pope, even in all their force, fall short of the truth-- "Yet, to be just to these poor men of pelf, Each does but HATE HIS NEIGHBOUR AS HIMSELF: Damned to the mines, an equal fate betides The slave that digs it, and the slave that hides." [42] I have to acknowledge an interesting communication on the subject of free trade from Paisley (for a short letter from "A Well-wisher" at ----, my thanks are yet more due). But the Scottish writer will, I fear, be disagreeably surprised to hear, that I am, and always have been, an utterly fearless and unscrupulous free trader. Seven years ago, speaking of the various signs of infancy in the European mind (_Stones of Venice_, vol. iii. p. 168), I wrote: "The first principles of commerce were acknowledged by the English parliament only a few months ago, in its free trade measures, and are still so little understood by the million, that _no nation dares to abolish its custom-houses_." It will be observed that I do not admit even the idea of reciprocity. Let other nations, if they like, keep their ports shut; every wise nation will throw its own open. It is not the opening them, but a sudden, inconsiderate, and blunderingly experimental manner of opening them, which does harm. If you have been protecting a manufacture for a long series of years, you must not take the protection off in a moment, so as to throw every one of its operatives at once out of employ, any more than you must take all its wrappings off a feeble child at once in cold weather, though the cumber of them may have been radically injuring its health. Little by little, you must restore it to freedom and to air. Most people's minds are in curious confusion on the subject of free trade, because they suppose it to imply enlarged competition. On the contrary, free trade puts an end to all competition. "Protection" (among various other mischievous functions) endeavours to enable one country to compete with another in the production of an article at a disadvantage. When trade is entirely free, no country can be competed with in the articles for the production of which it is naturally calculated; nor can it compete with any other, in the production of articles for which it is not naturally calculated. Tuscany, for instance, cannot compete with England in steel, nor England with Tuscany in oil. They must exchange their steel and oil. Which exchange should be as frank and free as honesty and the sea-winds can make it. Competition, indeed, arises at first, and sharply, in order to prove which is strongest in any given manufacture possible to both: this point once ascertained, competition is at an end. The collateral and reversionary operations of justice in this matter I shall examine hereafter (it being needful first to define the nature of value); proceeding then to consider within what practical terms a juster system may be established; and ultimately the vexed question of the destinies of the unemployed workmen.[43] Lest, however, the reader should be alarmed at some of the issues to which our investigations seem to be tending, as if in their bearing against the power of wealth they had something in common with those of socialism, I wish him to know, in accurate terms, one or two of the main points which I have in view. [43] I should be glad if the reader would first clear the ground for himself so far as to determine whether the difficulty lies in getting the work or getting the pay for it. Does he consider occupation itself to be an expensive luxury, difficult of attainment, of which too little is to be found in the world? or is it rather that, while in the enjoyment even of the most athletic delight, men must nevertheless be maintained, and this maintenance is not always forthcoming? We must be clear on this head before going farther, as most people are loosely in the habit of talking of the difficulty of "finding employment." Is it employment that we want to find, or support during employment? Is it idleness we wish to put an end to, or hunger? We have to take up both questions in succession, only not both at the same time. No doubt that work _is_ a luxury, and a very great one. It is, indeed, at once a luxury and a necessity; no man can retain either health of mind or body without it. So profoundly do I feel this, that, as will be seen in the sequel, one of the principal objects I would recommend to benevolent and practical persons, is to induce rich people to seek for a larger quantity of this luxury than they at present possess. Nevertheless, it appears by experience that even this healthiest of pleasures may be indulged in to excess, and that human beings are just as liable to surfeit of labour as to surfeit of meat; so that, as on the one hand, it may be charitable to provide, for some people, lighter dinner, and more work,--for others, it may be equally expedient to provide lighter work, and more dinner. Whether socialism has made more progress among the army and navy (where payment is made on my principles), or among the manufacturing operatives (who are paid on my opponents' principles), I leave it to those opponents to ascertain and declare. Whatever their conclusions may be, I think it necessary to answer for myself only this: that if there be any one point insisted on throughout my works more frequently than another, that one point is the impossibility of Equality. My continual aim has been to show the eternal superiority of some men to others, sometimes even of one man to all others; and to show also the advisability of appointing such persons or person to guide, to lead, or on occasion even to compel and subdue, their inferiors, according to their own better knowledge and wiser will. My principles of Political Economy were all involved in a single phrase spoken three years ago at Manchester: "Soldiers of the Ploughshare as well as Soldiers of the Sword:" and they were all summed in a single sentence in the last volume of _Modern Painters_--"Government and co-operation are in all things the Laws of Life; Anarchy and competition the Laws of Death." And with respect to the mode in which these general principles affect the secure possession of property, so far am I from invalidating such security, that the whole gist of these papers will be found ultimately to aim at an extension in its range; and whereas it has long been known and declared that the poor have no right to the property of the rich, I wish it also to be known and declared that the rich have no right to the property of the poor. But that the working of the system which I have undertaken to develop would in many ways shorten the apparent and direct, though not the unseen and collateral, power, both of wealth, as the Lady of Pleasure, and of capital, as the Lord of Toil, I do not deny: on the contrary, I affirm it in all joyfulness; knowing that the attraction of riches is already too strong, as their authority is already too weighty, for the reason of mankind. I said in my last paper that nothing in history had ever been so disgraceful to human intellect as the acceptance among us of the common doctrines of political economy as a science. I have many grounds for saying this, but one of the chief may be given in few words. I know no previous instance in history of a nation's establishing a systematic disobedience to the first principles of its professed religion. The writings which we (verbally) esteem as divine, not only denounce the love of money as the source of all evil, and as an idolatry abhorred of the Deity, but declare mammon service to be the accurate and irreconcileable opposite of God's service; and, whenever they speak of riches absolute, and poverty absolute, declare woe to the rich, and blessing to the poor. Whereupon we forthwith investigate a science of becoming rich, as the shortest road to national prosperity. "Tai Cristian dannerà l'Etiòpe, Quando si partiranno i due collegi, L'UNO IN ETERNO RICCO, E L'ALTRO IN�PE." ESSAY IV. AD VALOREM. In the last paper we saw that just payment of labour consisted in a sum of money which would approximately obtain equivalent labour at a future time: we have now to examine the means of obtaining such equivalence. Which question involves the definition of Value, Wealth, Price, and Produce. None of these terms are yet defined so as to be understood by the public. But the last, Produce, which one might have thought the clearest of all, is, in use, the most ambiguous; and the examination of the kind of ambiguity attendant on its present employment will best open the way to our work. In his Chapter on Capital,[44] Mr. J. S. Mill instances, as a capitalist, a hardware manufacturer, who, having intended to spend a certain portion of the proceeds of his business in buying plate and jewels, changes his mind, and "pays it as wages to additional workpeople." The effect is stated by Mr. Mill to be that "more food is appropriated to the consumption of productive labourers." [44] Book I. chap. iv. s. 1. To save space, my future references to Mr. Mill's work will be by numerals only, as in this instance, I. iv. 1. Ed. in 2 vols. 8vo, Parker, 1848. Now I do not ask, though, had I written this paragraph, it would surely have been asked of me, What is to become of the silversmiths? If they are truly unproductive persons, we will acquiesce in their extinction. And though in another part of the same passage, the hardware merchant is supposed also to dispense with a number of servants, whose "food is thus set free for productive purposes," I do not inquire what will be the effect, painful or otherwise, upon the servants, of this emancipation of their food. But I very seriously inquire why ironware is produce, and silverware is not? That the merchant consumes the one, and sells the other, certainly does not constitute the difference, unless it can be shown (which, indeed, I perceive it to be becoming daily more and more the aim of tradesmen to show) that commodities are made to be sold, and not to be consumed. The merchant is an agent of conveyance to the consumer in one case, and is himself the consumer in the other:[45] but the labourers are in either case equally productive, since they have produced goods to the same value, if the hardware and the plate are both goods. [45] If Mr. Mill had wished to show the difference in result between consumption and sale, he should have represented the hardware merchant as consuming his own goods instead of selling them; similarly, the silver merchant as consuming his own goods instead of selling them. Had he done this, he would have made his position clearer, though less tenable; and perhaps this was the position he really intended to take, tacitly involving his theory, elsewhere stated, and shown in the sequel of this paper to be false, that demand for commodities is not demand for labour. But by the most diligent scrutiny of the paragraph now under examination, I cannot determine whether it is a fallacy pure and simple, or the half of one fallacy supported by the whole of a greater one; so that I treat it here on the kinder assumption that it is one fallacy only. And what distinction separates them? It is indeed possible that in the "comparative estimate of the moralist," with which Mr. Mill says political economy has nothing to do (III. i. 2), a steel fork might appear a more substantial production than a silver one: we may grant also that knives, no less than forks, are good produce; and scythes and ploughshares serviceable articles. But, how of bayonets? Supposing the hardware merchant to effect large sales of _these_, by help of the "setting free" of the food of his servants and his silversmith,--is he still employing productive labourers, or, in Mr. Mill's words, labourers who increase "the stock of permanent means of enjoyment" (I. iii. 4)? Or if, instead of bayonets, he supply bombs, will not the absolute and final "enjoyment" of even these energetically productive articles (each of which costs ten pounds[46]) be dependent on a proper choice of time and place for their _enfantement_; choice, that is to say, depending on those philosophical considerations with which political economy has nothing to do?[47] [46] I take Mr. [afterwards Sir A.] Helps' estimate in his essay on War. [47] Also when the wrought silver vases of Spain were dashed to fragments by our custom-house officers, because bullion might be imported free of duty, but not brains, was the axe that broke them productive?--the artist who wrought them unproductive? Or again. If the woodman's axe is productive, is the executioner's? as also, if the hemp of a cable be productive, does not the productiveness of hemp in a halter depend on its moral more than on its material application? I should have regretted the need of pointing out inconsistency in any portion of Mr. Mill's work, had not the value of his work proceeded from its inconsistencies. He deserves honour among economists by inadvertently disclaiming the principles which he states, and tacitly introducing the moral considerations with which he declares his science has no connection. Many of his chapters, are, therefore, true and valuable; and the only conclusions of his which I have to dispute are those which follow from his premises. Thus, the idea which lies at the root of the passage we have just been examining, namely, that labour applied to produce luxuries will not support so many persons as labour applied to produce useful articles, is entirely true; but the instance given fails--and in four directions of failure at once--because Mr. Mill has not defined the real meaning of usefulness. The definition which he has given--"capacity to satisfy a desire, or serve a purpose" (III. i. 2)--applies equally to the iron and silver; while the true definition,--which he has not given, but which nevertheless underlies the false verbal definition in his mind, and comes out once or twice by accident (as in the words "any support to life or strength" in I. i. 5)--applies to some articles of iron, but not to others, and to some articles of silver, but not to others. It applies to ploughs, but not to bayonets; and to forks, but not to filigree.[48] [48] Filigree: that is to say, generally, ornament dependent on complexity, not on art. The eliciting of the true definition will give us the reply to our first question, "What is value?" respecting which, however, we must first hear the popular statements. "The word 'value,' when used without adjunct, always means, in political economy, value in exchange" (Mill, III. i. 3). So that, if two ships cannot exchange their rudders, their rudders are, in politico-economic language, of no value to either. But "the subject of political economy is wealth."--(Preliminary remarks, page 1.) And wealth "consists of all useful and agreeable objects which possess exchangeable value."--(Preliminary remarks, page 10.) It appears then, according to Mr. Mill, that usefulness and agreeableness underlie the exchange value, and must be ascertained to exist in the thing, before we can esteem it an object of wealth. Now, the economical usefulness of a thing depends not merely on its own nature, but on the number of people who can and will use it. A horse is useless, and therefore unsaleable, if no one can ride,--a sword if no one can strike, and meat, if no one can eat. Thus every material utility depends on its relative human capacity. Similarly: The agreeableness of a thing depends not merely on its own likeableness, but on the number of people who can be got to like it. The relative agreeableness, and therefore saleableness, of "a pot of the smallest ale," and of "Adonis painted by a running brook," depends virtually on the opinion of Demos, in the shape of Christopher Sly. That is to say, the agreeableness of a thing depends on its relative human disposition.[49] Therefore, political economy, being a science of wealth, must be a science respecting human capacities and dispositions. But moral considerations have nothing to do with political economy (III. i. 2). Therefore, moral considerations have nothing to do with human capacities and dispositions. [49] These statements sound crude in their brevity; but will be found of the utmost importance when they are developed. Thus, in the above instance, economists have never perceived that disposition to buy is a wholly _moral_ element in demand: that is to say, when you give a man half-a-crown, it depends on his disposition whether he is rich or poor with it--whether he will buy disease, ruin, and hatred, or buy health, advancement, and domestic love. And thus the agreeableness or exchange value of every offered commodity depends on production, not merely of the commodity, but of buyers of it; therefore on the education of buyers, and on all the moral elements by which their disposition to buy this, or that, is formed. I will illustrate and expand into final consequences every one of these definitions in its place: at present they can only be given with extremest brevity; for in order to put the subject at once in a connected form before the reader, I have thrown into one, the opening definitions of four chapters; namely, of that on Value ("Ad Valorem"); on Price ("Thirty Pieces"); on Production ("Demeter"); and on Economy ("The Law of the House"). I do not wholly like the look of this conclusion from Mr. Mill's statements:--let us try Mr. Ricardo's. "Utility is not the measure of exchangeable value, though it is absolutely essential to it."--(Chap. 1. sect. i.) Essential to what degree, Mr. Ricardo? There may be greater and less degrees of utility. Meat, for instance, may be so good as to be fit for any one to eat, or so bad as to be fit for no one to eat. What is the exact degree of goodness which is "essential" to its exchangeable value, but not "the measure" of it? How good must the meat be, in order to possess any exchangeable value; and how bad must it be--(I wish this were a settled question in London markets)--in order to possess none? There appears to be some hitch, I think, in the working even of Mr. Ricardo's principles; but let him take his own example. "Suppose that in the early stages of society the bows and arrows of the hunter were of equal value with the implements of the fisherman. Under such circumstances the value of the deer, the produce of the hunter's day's labour, would be _exactly_" (italics mine) "equal to the value of the fish, the product of the fisherman's day's labour. The comparative value of the fish and game would be _entirely_ regulated by the quantity of labour realized in each." (Ricardo, chap. iii. On Value.) Indeed! Therefore, if the fisherman catches one sprat, and the huntsman one deer, one sprat will be equal in value to one deer; but if the fisherman catches no sprat, and the huntsman two deer, no sprat will be equal in value to two deer? Nay; but--Mr. Ricardo's supporters may say--he means, on an average;--if the average product of a day's work of fisher and hunter be one fish and one deer, the one fish will always be equal in value to the one deer. Might I inquire the species of fish. Whale? or whitebait?[50] [50] Perhaps it may be said, in farther support of Mr. Ricardo, that he meant, "when the utility is constant or given, the price varies as the quantity of labour." If he meant this, he should have said it; but, had he meant it, he could have hardly missed the necessary result, that utility would be one measure of price (which he expressly denies it to be); and that, to prove saleableness, he had to prove a given quantity of utility, as well as a given quantity of labour: to wit, in his own instance, that the deer and fish would each feed the same number of men, for the same number of days, with equal pleasure to their palates. The fact is, he did not know what he meant himself. The general idea which he had derived from commercial experience, without being able to analyse it, was, that when the demand is constant, the price varies as the quantity of labour required for production; or,--using the formula I gave in last paper--when _y_ is constant, _xy_ varies as _x_. But demand never is, nor can be, ultimately constant, if _x_ varies distinctly; for, as price rises, consumers fall away; and as soon as there is a monopoly (and all scarcity is a form of monopoly; so that every commodity is affected occasionally by some colour of monopoly), _y_ becomes the most influential condition of the price. Thus the price of a painting depends less on its merit than on the interest taken in it by the public; the price of singing less on the labour of the singer than the number of persons who desire to hear him; and the price of gold less on the scarcity which affects it in common with cerium or iridium, than on the sun-light colour and unalterable purity by which it attracts the admiration and answers the trust of mankind. It must be kept in mind, however, that I use the word "demand" in a somewhat different sense from economists usually. They mean by it "the quantity of a thing sold." I mean by it "the force of the buyer's capable intention to buy." In good English, a person's "demand" signifies, not what he gets, but what he asks for. Economists also do not notice that objects are not valued by absolute bulk or weight, but by such bulk and weight as is necessary to bring them into use. They say, for instance, that water bears no price in the market. It is true that a cupful does not, but a lake does; just as a handful of dust does not, but an acre does. And were it possible to make even the possession of the cupful or handful permanent (_i.e._, to find a place for them), the earth and sea would be bought up by handfuls and cupfuls. It would be waste of time to pursue these fallacies farther; we will seek for a true definition. Much store has been set for centuries upon the use of our English classical education. It were to be wished that our well-educated merchants recalled to mind always this much of their Latin schooling,--that the nominative of _valorem_ (a word already sufficiently familiar to them) is _valor_; a word which, therefore, ought to be familiar to them. _Valor_, from _valere_, to be well, or strong ([Greek: hugiainô]);--strong, _in_ life (if a man), or valiant; strong, _for_ life (if a thing), or valuable. To be "valuable," therefore, is to "avail towards life." A truly valuable or availing thing is that which leads to life with its whole strength. In proportion as it does not lead to life, or as its strength is broken, it is less valuable; in proportion as it leads away from life, it is unvaluable or malignant. The value of a thing, therefore, is independent of opinion, and of quantity. Think what you will of it, gain how much you may of it, the value of the thing itself is neither greater nor less. For ever it avails, or avails not; no estimate can raise, no disdain depress, the power which it holds from the Maker of things and of men. The real science of political economy, which has yet to be distinguished from the bastard science, as medicine from witchcraft, and astronomy from astrology, is that which teaches nations to desire and labour for the things that lead to life; and which teaches them to scorn and destroy the things that lead to destruction. And if, in a state of infancy, they suppose indifferent things, such as excrescences of shellfish, and pieces of blue and red stone, to be valuable, and spend large measure of the labour which ought to be employed for the extension and ennobling of life, in diving or digging for them, and cutting them into various shapes,--or if, in the same state of infancy, they imagine precious and beneficent things, such as air, light, and cleanliness, to be valueless,--or if, finally, they imagine the conditions of their own existence, by which alone they can truly possess or use anything, such, for instance, as peace, trust, and love, to be prudently exchangeable, when the market offers, for gold, iron, or excrescences of shells--the great and only science of Political Economy teaches them, in all these cases, what is vanity, and what substance; and how the service of Death, the Lord of Waste, and of eternal emptiness, differs from the service of Wisdom, the Lady of Saving, and of eternal fulness; she who has said, "I will cause those that love me to inherit SUBSTANCE; and I will FILL their treasures." The "Lady of Saving," in a profounder sense than that of the savings' bank, though that is a good one: Madonna della Salute,--Lady of Health--which, though commonly spoken of as if separate from wealth, is indeed a part of wealth. This word, "wealth," it will be remembered, is the next we have to define. "To be wealthy," says Mr. Mill, is "to have a large stock of useful articles." I accept this definition. Only let us perfectly understand it. My opponents often lament my not giving them enough logic: I fear I must at present use a little more than they will like; but this business of Political Economy is no light one, and we must allow no loose terms in it. We have, therefore, to ascertain in the above definition, first, what is the meaning of "having," or the nature of Possession. Then, what is the meaning of "useful," or the nature of Utility. And first of possession. At the crossing of the transepts of Milan Cathedral has lain, for three hundred years, the embalmed body of St. Carlo Borromeo. It holds a golden crosier, and has a cross of emeralds on its breast. Admitting the crosier and emeralds to be useful articles, is the body to be considered as "having" them? Do they, in the politico-economical sense of property, belong to it? If not, and if we may, therefore, conclude generally that a dead body cannot possess property, what degree and period of animation in the body will render possession possible? As thus: lately in a wreck of a Californian ship, one of the passengers fastened a belt about him with two hundred pounds of gold in it, with which he was found afterwards at the bottom. Now, as he was sinking--had he the gold? or had the gold him?[51] [51] Compare George Herbert, _The Church Porch_, Stanza 28. And if, instead of sinking him in the sea by its weight, the gold had struck him on the forehead, and thereby caused incurable disease--suppose palsy or insanity,--would the gold in that case have been more a "possession" than in the first? Without pressing the inquiry up through instances of gradually increasing vital power over the gold (which I will, however, give, if they are asked for), I presume the reader will see that possession, or "having," is not an absolute, but a gradated, power; and consists not only in the quantity or nature of the thing possessed, but also (and in a greater degree) in its suitableness to the person possessing it, and in his vital power to use it. And our definition of Wealth, expanded, becomes: "The possession of useful articles, _which we can use_." This is a very serious change. For wealth, instead of depending merely on a "have," is thus seen to depend on a "can." Gladiator's death, on a "habet"; but soldier's victory, and state's salvation, on a "quo plurimum posset." (Liv. VII. 6.) And what we reasoned of only as accumulation of material, is seen to demand also accumulation of capacity. So much for our verb. Next for our adjective. What is the meaning of "useful?" The inquiry is closely connected with the last. For what is capable of use in the hands of some persons, is capable, in the hands of others, of the opposite of use, called commonly, "from-use," or "ab-use." And it depends on the person, much more than on the article, whether its usefulness or ab-usefulness will be the quality developed in it. Thus, wine, which the Greeks, in their Bacchus, made, rightly, the type of all passion, and which, when used, "cheereth god and man" (that is to say, strengthens both the divine life, or reasoning power, and the earthly, or carnal power, of man); yet, when abused, becomes "Dionusos," hurtful especially to the divine part of man, or reason. And again, the body itself, being equally liable to use and to abuse, and, when rightly disciplined, serviceable to the State, both for war and labour;--but when not disciplined, or abused, valueless to the State, and capable only of continuing the private or single existence of the individual (and that but feebly)--the Greeks called such a body an "idiotic" or "private" body, from their word signifying a person employed in no way directly useful to the State: whence, finally, our "idiot," meaning a person entirely occupied with his own concerns. Hence, it follows, that if a thing is to be useful, it must be not only of an availing nature, but in availing hands. Or, in accurate terms, usefulness is value in the hands of the valiant; so that this science of wealth being, as we have just seen, when regarded as the science of Accumulation, accumulative of capacity as well as of material,--when regarded as the science of Distribution, is distribution not absolute, but discriminate; not of every thing to every man, but of the right thing to the right man. A difficult science, dependent on more than arithmetic. Wealth, therefore, is "THE POSSESSION OF THE VALUABLE BY THE VALIANT;" and in considering it as a power existing in a nation, the two elements, the value of the thing, and the valour of its possessor, must be estimated together. Whence it appears that many of the persons commonly considered wealthy, are in reality no more wealthy than the locks of their own strong boxes are; they being inherently and eternally incapable of wealth; and operating for the nation, in an economical point of view, either as pools of dead water, and eddies in a stream (which, so long as the stream flows, are useless, or serve only to drown people, but may become of importance in a state of stagnation, should the stream dry); or else, as dams in a river, of which the ultimate service depends not on the dam, but the miller; or else, as mere accidental stays and impediments, acting, not as wealth, but (for we ought to have a correspondent term) as "illth," causing various devastation and trouble around them in all directions; or lastly, act not at all, but are merely animated conditions of delay (no use being possible of anything they have until they are dead), in which last condition they are nevertheless often useful _as_ delays, and "impedimenta," if a nation is apt to move too fast. This being so, the difficulty of the true science of Political Economy lies not merely in the need of developing manly character to deal with material value, but in the fact, that while the manly character and material value only form wealth by their conjunction, they have nevertheless a mutually destructive operation on each other. For the manly character is apt to ignore, or even cast away, the material value:--whence that of Pope:-- "Sure, of qualities demanding praise More go to ruin fortunes, than to raise." And on the other hand, the material value is apt to undermine the manly character; so that it must be our work, in the issue, to examine what evidence there is of the effect of wealth on the minds of its possessors; also, what kind of person it is who usually sets himself to obtain wealth, and succeeds in doing so; and whether the world owes more gratitude to rich or to poor men, either for their moral influence upon it, or for chief goods, discoveries, and practical advancements. I may, however, anticipate future conclusions so far as to state that in a community regulated only by laws of demand and supply, but protected from open violence, the persons who become rich are, generally speaking, industrious, resolute, proud, covetous, prompt, methodical, sensible, unimaginative, insensitive, and ignorant. The persons who remain poor are the entirely foolish, the entirely wise,[52] the idle, the reckless, the humble, the thoughtful, the dull, the imaginative, the sensitive, the well-informed, the improvident, the irregularly and impulsively wicked, the clumsy knave, the open thief, and the entirely merciful, just, and godly person. [52] "[Greek: ho Zeus dêpou penetai.]"--_Arist. Plut._ 582. It would but weaken the grand words to lean on the preceding ones:--"[Greek: hoti tou Ploutou parecho beltionas andras, kai ten gnomen, kai ten idean.]" Thus far then of wealth. Next, we have to ascertain the nature of PRICE; that is to say, of exchange value, and its expression by currencies. Note first, of exchange, there can be no _profit_ in it. It is only in labour there can be profit--that is to say a "making in advance," or "making in favour of" (from proficio). In exchange, there is only advantage, _i.e._, a bringing of vantage or power to the exchanging persons. Thus, one man, by sowing and reaping, turns one measure of corn into two measures. That is Profit. Another by digging and forging, turns one spade into two spades. That is Profit. But the man who has two measures of corn wants sometimes to dig; and the man who has two spades wants sometimes to eat:--They exchange the gained grain for the gained tool; and both are the better for the exchange; but though there is much advantage in the transaction, there is no profit. Nothing is constructed or produced. Only that which had been before constructed is given to the person by whom it can be used. If labour is necessary to effect the exchange, that labour is in reality involved in the production, and, like all other labour, bears profit. Whatever number of men are concerned in the manufacture, or in the conveyance, have share in the profit; but neither the manufacture nor the conveyance are the exchange, and in the exchange itself there is no profit. There may, however, be acquisition, which is a very different thing. If, in the exchange, one man is able to give what cost him little labour for what has cost the other much, he "acquires" a certain quantity of the produce of the other's labour. And precisely what he acquires, the other loses. In mercantile language, the person who thus acquires is commonly said to have "made a profit;" and I believe that many of our merchants are seriously under the impression that it is possible for everybody, somehow, to make a profit in this manner. Whereas, by the unfortunate constitution of the world we live in, the laws both of matter and motion have quite rigorously forbidden universal acquisition of this kind. Profit, or material gain, is attainable only by construction or by discovery; not by exchange. Whenever material gain follows exchange, for every _plus_ there is a precisely equal _minus_. Unhappily for the progress of the science of Political Economy, the plus quantities, or--if I may be allowed to coin an awkward plural--the pluses, make a very positive and venerable appearance in the world, so that every one is eager to learn the science which produces results so magnificent; whereas the minuses have, on the other hand, a tendency to retire into back streets, and other places of shade,--or even to get themselves wholly and finally put out of sight in graves: which renders the algebra of this science peculiar, and difficultly legible; a large number of its negative signs being written by the account-keeper in a kind of red ink, which starvation thins, and makes strangely pale, or even quite invisible ink, for the present. The science of Exchange, or, as I hear it has been proposed to call it, of "Catallactics," considered as one of gain, is, therefore, simply nugatory; but considered as one of acquisition, it is a very curious science, differing in its data and basis from every other science known. Thus:--If I can exchange a needle with a savage for a diamond, my power of doing so depends either on the savage's ignorance of social arrangements in Europe, or on his want of power to take advantage of them, by selling the diamond to any one else for more needles. If, farther, I make the bargain as completely advantageous to myself as possible, by giving to the savage a needle with no eye in it (reaching, thus, a sufficiently satisfactory type of the perfect operation of catallactic science), the advantage to me in the entire transaction depends wholly upon the ignorance, powerlessness, or heedlessness of the person dealt with. Do away with these, and catallactic advantage becomes impossible. So far, therefore as the science of exchange relates to the advantage of one of the exchanging persons only, it is founded on the ignorance or incapacity of the opposite person. Where these vanish, it also vanishes. It is therefore a science founded on nescience, and an art founded on artlessness. But all other sciences and arts, except this, have for their object the doing away with their opposite nescience and artlessness. _This_ science, alone of sciences, must, by all available means, promulgate and prolong its opposite nescience; otherwise the science itself is impossible. It is, therefore, peculiarly and alone, the science of darkness; probably a bastard science--not by any means a _divina scientia_, but one begotten of another father, that father who, advising his children to turn stones into bread, is himself employed in turning bread into stones, and who, if you ask a fish of him (fish not being producible on his estate), can but give you a serpent. The general law, then, respecting just or economical exchange, is simply this:--There must be advantage on both sides (or if only advantage on one, at least no disadvantage on the other) to the persons exchanging; and just payment for his time, intelligence, and labour, to any intermediate person effecting the transaction (commonly called a merchant): and whatever advantage there is on either side, and whatever pay is given to the intermediate person, should be thoroughly known to all concerned. All attempt at concealment implies some practice of the opposite, or undivine science, founded on nescience. Whence another saying of the Jew merchant's--"As a nail between the stone joints, so doth sin stick fast between buying and selling." Which peculiar riveting of stone and timber, in men's dealing with each other, is again set forth in the house which was to be destroyed--timber and stones together--when Zechariah's roll (more probably "curved sword") flew over it: "the curse that goeth forth over all the earth upon every one that stealeth and holdeth himself guiltless," instantly followed by the vision of the Great Measure;--the measure "of the injustice of them in all the earth" ([Greek: autê hê adikia autôn en pasê tê gê]), with the weight of lead for its lid, and the woman, the spirit of wickedness, within it;--that is to say, Wickedness hidden by Dulness, and formalized, outwardly, into ponderously established cruelty. "It shall be set upon its own base in the land on Babel."[53] [53] Zech. v. 11. See note on the passage, at pp. 191-2. I have hitherto carefully restricted myself, in speaking of exchange, to the use of the term "advantage;" but that term includes two ideas: the advantage, namely, of getting what we _need_, and that of getting what we _wish for_. Three-fourths of the demands existing in the world are romantic; founded on visions, idealisms, hopes, and affections; and the regulation of the purse is, in its essence, regulation of the imagination and the heart. Hence, the right discussion of the nature of price is a very high metaphysical and psychical problem; sometimes to be solved only in a passionate manner, as by David in his counting the price of the water of the well by the gate of Bethlehem; but its first conditions are the following:--The price of anything is the quantity of labour given by the person desiring it, in order to obtain possession of it. This price depends on four variable quantities. _A_. The quantity of wish the purchaser has for the thing; opposed to [Greek: a], the quantity of wish the seller has to keep it. _B_. The quantity of labour the purchaser can afford, to obtain the thing; opposed to [Greek: b], the quantity of labour the seller can afford, to keep it. These quantities are operative only in excess; _i.e._, the quantity of wish (_A_) means the quantity of wish for this thing, above wish for other things; and the quantity of work (_B_) means the quantity which can be spared to get this thing from the quantity needed to get other things. Phenomena of price, therefore, are intensely complex, curious, and interesting--too complex, however, to be examined yet; every one of them, when traced far enough, showing itself at last as a part of the bargain of the Poor of the Flock (or "flock of slaughter"), "If ye think good, give ME my price, and if not, forbear"--Zech. xi. 12; but as the price of everything is to be calculated finally in labour, it is necessary to define the nature of that standard. Labour is the contest of the life of man with an opposite:--the term "life" including his intellect, soul, and physical power, contending with question, difficulty, trial, or material force. Labour is of a higher or lower order, as it includes more or fewer of the elements of life: and labour of good quality, in any kind, includes always as much intellect and feeling as will fully and harmoniously regulate the physical force. In speaking of the value and price of labour, it is necessary always to understand labour of a given rank and quality, as we should speak of gold or silver of a given standard. Bad (that is, heartless, inexperienced, or senseless) labour cannot be valued; it is like gold of uncertain alloy, or flawed iron.[54] [54] Labour which is entirely good of its kind, that is to say, effective, or efficient, the Greeks called "weighable," or [Greek: axios], translated usually "worthy," and because thus substantial and true, they called its price [Greek: timê], the "honourable estimate" of it (honorarium): this word being founded on their conception of true labour as a divine thing, to be honoured with the kind of honour given to the gods; whereas the price of false labour, or of that which led away from life, was to be, not honour, but vengeance; for which they reserved another word, attributing the exaction of such price to a peculiar goddess called Tisiphone, the "requiter (or quittance-taker) of death;" a person versed in the highest branches of arithmetic, and punctual in her habits; with whom accounts current have been opened also in modern days. The quality and kind of labour being given, its value, like that of all other valuable things, is invariable. But the quantity of it which must be given for other things is variable: and in estimating this variation, the price of other things must always be counted by the quantity of labour; not the price of labour by the quantity of other things. Thus, if we want to plant an apple sapling in rocky ground, it may take two hours' work; in soft ground, perhaps only half an hour. Grant the soil equally good for the tree in each case. Then the value of the sapling planted by two hours' work is nowise greater than that of the sapling planted in half an hour. One will bear no more fruit than the other. Also, one half-hour of work is as valuable as another half-hour; nevertheless the one sapling has cost four such pieces of work, the other only one. Now the proper statement of this fact is, not that the labour on the hard ground is cheaper than on the soft; but that the tree is dearer. The exchange value may, or may not, afterwards depend on this fact. If other people have plenty of soft ground to plant in, they will take no cognizance of our two hours' labour, in the price they will offer for the plant on the rock. And if, through want of sufficient botanical science, we have planted an upas-tree instead of an apple, the exchange value will be a negative quantity; still less proportionate to the labour expended. What is commonly called cheapness of labour, signifies, therefore, in reality, that many obstacles have to be overcome by it; so that much labour is required to produce a small result. But this should never be spoken of as cheapness of labour, but as dearness of the object wrought for. It would be just as rational to say that walking was cheap, because we had ten miles to walk home to our dinner, as that labour was cheap, because we had to work ten hours to earn it. The last word which we have to define is "Production." I have hitherto spoken of all labour as profitable; because it is impossible to consider under one head the quality or value of labour, and its aim. But labour of the best quality may be various in aim. It may be either constructive ("gathering," from con and struo), as agriculture; nugatory, as jewel-cutting; or destructive ("scattering," from de and struo), as war. It is not, however, always easy to prove labour, apparently nugatory, to be actually so;[55] generally, the formula holds good, "he that gathereth not, scattereth;" thus, the jeweller's art is probably very harmful in its ministering to a clumsy and inelegant pride. So that, finally, I believe nearly all labour may be shortly divided into positive and negative labour: positive, that which produces life; negative, that which produces death; the most directly negative labour being murder, and the most directly positive, the bearing and rearing of children: so that in the precise degree in which murder is hateful, on the negative side of idleness, in that exact degree child-rearing is admirable, on the positive side of idleness. For which reason, and because of the honour that there is in rearing[56] children, while the wife is said to be as the vine (for cheering), the children are as the olive-branch, for praise; nor for praise only, but for peace (because large families can only be reared in times of peace): though since, in their spreading and voyaging in various directions, they distribute strength, they are, to the home strength, as arrows in the hand of the giant--striking here and there, far away. [55] The most accurately nugatory labour is, perhaps, that of which not enough is given to answer a purpose effectually, and which, therefore, has all to be done over again. Also, labour which fails of effect through non-cooperation. The curé of a little village near Bellinzona, to whom I had expressed wonder that the peasants allowed the Ticino to flood their fields, told me that they would not join to build an effectual embankment high up the valley, because everybody said "that would help his neighbours as much as himself." So every proprietor built a bit of low embankment about his own field; and the Ticino, as soon as it had a mind, swept away and swallowed all up together. [56] Observe, I say, "rearing," not "begetting." The praise is in the seventh season, not in [Greek: sporêtos], nor in [Greek: phytalia], but in [Greek: opôra]. It is strange that men always praise enthusiastically any person who, by a momentary exertion, saves a life; but praise very hesitatingly a person who, by exertion and self-denial prolonged through years, creates one. We give the crown "ob civem servatum,"--why not "ob civem natum"? Born, I mean, to the full, in soul as well as body. England has oak enough, I think, for both chaplets. Labour being thus various in its result, the prosperity of any nation is in exact proportion to the quantity of labour which it spends in obtaining and employing means of life. Observe,--I say, obtaining and employing; that is to say, not merely wisely producing, but wisely distributing and consuming. Economists usually speak as if there were no good in consumption absolute.[57] So far from this being so, consumption absolute is the end, crown, and perfection of production; and wise consumption is a far more difficult art than wise production. Twenty people can gain money for one who can use it; and the vital question, for individual and for nation, is, never "how much do they make?" but "to what purpose do they spend?" [57] When Mr. Mill speaks of productive consumption, he only means consumption which results in increase of capital, or material wealth. See I. iii. 4, and I. iii. 5. The reader may, perhaps, have been surprised at the slight reference I have hitherto made to "capital," and its functions. It is here the place to define them. Capital signifies "head, or source, or root material"--it is material by which some derivative or secondary good is produced. It is only capital proper (caput vivum, not caput mortuum) when it is thus producing something different from itself. It is a root, which does not enter into vital function till it produces something else than a root; namely, fruit. That fruit will in time again produce roots; and so all living capital issues in reproduction of capital; but capital which produces nothing but capital is only root producing root; bulb issuing in bulb, never in tulip; seed issuing in seed, never in bread. The Political Economy of Europe has hitherto devoted itself wholly to the multiplication, or (less even) the aggregation, of bulbs. It never saw, nor conceived such a thing as a tulip. Nay, boiled bulbs they might have been--glass bulbs--Prince Rupert's drops, consummated in powder (well, if it were glass-powder and not gunpowder), for any end or meaning the economists had in defining the laws of aggregation. We will try and get a clearer notion of them. The best and simplest general type of capital is a well-made ploughshare. Now, if that ploughshare did nothing but beget other ploughshares, in a polypous manner,--however the great cluster of polypous plough might glitter in the sun, it would have lost its function of capital. It becomes true capital only by another kind of splendour,--when it is seen "splendescere sulco," to grow bright in the furrow; rather with diminution of its substance, than addition, by the noble friction. And the true home question, to every capitalist and to every nation, is not, "how many ploughs have you?" but, "where are your furrows?" not--"how quickly will this capital reproduce itself?"--but, "what will it do during reproduction?" What substance will it furnish, good for life? what work construct, protective of life? if none, its own reproduction is useless--if worse than none (for capital may destroy life as well as support it), its own reproduction is worse than useless; it is merely an advance from Tisiphone, on mortgage--not a profit by any means. Not a profit, as the ancients truly saw, and showed in the type of Ixion;--for capital is the head, or fountain head, of wealth--the "well-head" of wealth, as the clouds are the well-heads of rain: but when clouds are without water, and only beget clouds, they issue in wrath at last, instead of rain, and in lightning instead of harvest; whence Ixion is said first to have invited his guests to a banquet, and then made them fall into a pit filled with fire; which is the type of the temptation of riches issuing in imprisoned torment,--torment in a pit (as also Demas' silver mine), after which, to show the rage of riches passing from lust of pleasure to lust of power, yet power not truly understood, Ixion is said to have desired Juno, and instead, embracing a cloud (or phantasm), to have begotten the Centaurs; the power of mere wealth being, in itself, as the embrace of a shadow,--comfortless (so also "Ephraim feedeth on wind and followeth after the east wind"; or "that which is not"--Prov. xxiii. 5; and again Dante's Geryon, the type of avaricious fraud, as he flies, gathers the _air_ up with retractile claws,--"l'aer a se raccolse"[58]), but in its offspring, a mingling of the brutal with the human nature: human in sagacity--using both intellect and arrow; but brutal in its body and hoof, for consuming, and trampling down. For which sin Ixion is at last bound upon a wheel--fiery and toothed, and rolling perpetually in the air;--the type of human labour when selfish and fruitless (kept far into the middle ages in their wheel of fortune); the wheel which has in it no breath or spirit, but is whirled by chance only; whereas of all true work the Ezekiel vision is true, that the Spirit of the living creature is in the wheels, and where the angels go, the wheels go by them; but move no otherwise. [58] So also in the vision of the women bearing the ephah, before quoted, "the wind was in their wings," not wings "of a stork," as in our version; but "_milvi_," of a kite, in the Vulgate, or perhaps more accurately still in the Septuagint, "hoopoe," a bird connected typically with the power of riches by many traditions, of which that of its petition for a crest of gold is perhaps the most interesting. The "Birds" of Aristophanes, in which its part is principal, is full of them; note especially the "fortification of the air with baked bricks, like Babylon," l. 550; and, again, compare the Plutus of Dante, who (to show the influence of riches in destroying the reason) is the only one of the powers of the Inferno who cannot speak intelligibly; and also the cowardliest; he is not merely quelled or restrained, but literally "collapses" at a word; the sudden and helpless operation of mercantile panic being all told in the brief metaphor, "as the sails, swollen with the wind, fall, when the mast breaks." This being the real nature of capital, it follows that there are two kinds of true production, always going on in an active State; one of seed, and one of food; or production for the Ground, and for the Mouth; both of which are by covetous persons thought to be production only for the granary; whereas the function of the granary is but intermediate and conservative, fulfilled in distribution; else it ends in nothing but mildew, and nourishment of rats and worms. And since production for the Ground is only useful with future hope of harvest, all _essential_ production is for the Mouth; and is finally measured by the mouth; hence, as I said above, consumption is the crown of production; and the wealth of a nation is only to be estimated by what it consumes. The want of any clear sight of this fact is the capital error, issuing in rich interest and revenue of error among the political economists. Their minds are continually set on money-gain, not on mouth-gain; and they fall into every sort of net and snare, dazzled by the coin-glitter as birds by the fowler's glass; or rather (for there is not much else like birds in them) they are like children trying to jump on the heads of their own shadows; the money-gain being only the shadow of the true gain, which is humanity. The final object of political economy, therefore, is to get good method of consumption, and great quantity of consumption: in other words, to use everything, and to use it nobly; whether it be substance, service, or service perfecting substance. The most curious error in Mr. Mill's entire work (provided for him originally by Ricardo) is his endeavour to distinguish between direct and indirect service, and consequent assertion that a demand for commodities is not demand for labour (I. v. 9, _et seq._). He distinguishes between labourers employed to lay out pleasure grounds, and to manufacture velvet; declaring that it makes material difference to the labouring classes in which of these two ways a capitalist spends his money; because the employment of the gardeners is a demand for labour, but the purchase of velvet is not.[59] Error colossal as well as strange. It will, indeed, make a difference to the labourer whether we bid him swing his scythe in the spring winds, or drive the loom in pestilential air; but, so far as his pocket is concerned, it makes to him absolutely no difference whether we order him to make green velvet, with seed and a scythe, or red velvet, with silk and scissors. Neither does it anywise concern him whether, when the velvet is made, we consume it by walking on it, or wearing it, so long as our consumption of it is wholly selfish. But if our consumption is to be in any wise unselfish, not only our mode of consuming the articles we require interests him, but also the _kind_ of article we require with a view to consumption. As thus (returning for a moment to Mr. Mill's great hardware theory[60]): it matters, so far as the labourer's immediate profit is concerned, not an iron filing whether I employ him in growing a peach, or forging a bombshell; but my probable mode of consumption of those articles matters seriously. Admit that it is to be in both cases "unselfish," and the difference, to him, is final, whether when his child is ill, I walk into his cottage and give it the peach, or drop the shell down his chimney, and blow his roof off. [59] The value of raw material, which has, indeed, to be deducted from the price of the labour, is not contemplated in the passages referred to, Mr. Mill having fallen into the mistake solely by pursuing the collateral results of the payment of wages to middlemen. He says:--"The consumer does not, with his own funds, pay the weaver for his day's work." Pardon me; the consumer of the velvet pays the weaver with his own funds as much as he pays the gardener. He pays, probably, an intermediate ship-owner, velvet merchant, and shopman; pays carriage money, shop rent, damage money, time money, and care money; all these are above and beside the velvet price (just as the wages of a head gardener would be above the grass price); but the velvet is as much produced by the consumer's capital, though he does not pay for it till six months after production, as the grass is produced by his capital, though he does not pay the man who mowed and rolled it on Monday, till Saturday afternoon. I do not know if Mr. Mill's conclusion--"the capital cannot be dispensed with, the purchasers can"--has yet been reduced to practice in the City on any large scale. [60] Which, observe, is the precise opposite of the one under examination. The hardware theory required us to discharge our gardeners and engage manufacturers; the velvet theory requires us to discharge our manufacturers and engage gardeners. The worst of it, for the peasant, is, that the capitalist's consumption of the peach is apt to be selfish, and of the shell, distributive;[61] but, in all cases, this is the broad and general fact, that on due catallactic commercial principles, _somebody's_ roof must go off in fulfilment of the bomb's destiny. You may grow for your neighbour, at your liking, grapes or grapeshot; he will also, catallactically, grow grapes or grapeshot for you, and you will each reap what you have sown. [61] It is one very awful form of the operation of wealth in Europe that it is entirely capitalists' wealth which supports unjust wars. Just wars do not need so much money to support them; for most of the men who wage such, wage them gratis; but for an unjust war, men's bodies and souls have both to be bought; and the best tools of war for them besides; which makes such war costly to the maximum; not to speak of the cost of base fear, and angry suspicion, between nations which have not grace nor honesty enough in all their multitudes to buy an hour's peace of mind with: as, at present, France and England, purchasing of each other ten millions sterling worth of consternation annually (a remarkably light crop, half thorns and half aspen leaves,--sown, reaped, and granaried by "the science" of the modern political economist, teaching covetousness instead of truth). And all unjust war being supportable, if not by pillage of the enemy, only by loans from capitalists, these loans are repaid by subsequent taxation of the people, who appear to have no will in the matter, the capitalists' will being the primary root of the war; but its real root is the covetousness of the whole nation, rendering it incapable of faith, frankness, or justice, and bringing about, therefore, in due time, his own separate loss and punishment to each person. It is, therefore, the manner and issue of consumption which are the real tests of production. Production does not consist in things laboriously made, but in things serviceably consumable; and the question for the nation is not how much labour it employs, but how much life it produces. For as consumption is the end and aim of production, so life is the end and aim of consumption. I left this question to the reader's thought two months ago, choosing rather that he should work it out for himself than have it sharply stated to him. But now, the ground being sufficiently broken (and the details into which the several questions, here opened, must lead us, being too complex for discussion in the pages of a periodical, so that I must pursue them elsewhere), I desire, in closing the series of introductory papers, to leave this one great fact clearly stated. THERE IS NO WEALTH BUT LIFE. Life, including all its powers of love, of joy, and of admiration. That country is the richest which nourishes the greatest number of noble and happy human beings; that man is richest who, having perfected the functions of his own life to the utmost, has also the widest helpful influence, both personal and by means of his possessions, over the lives of others. A strange political economy; the only one, nevertheless, that ever was or can be: all political economy founded on self-interest[62] being but the fulfilment of that which once brought schism into the Policy of angels, and ruin into the Economy of Heaven. [62] "In all reasoning about prices, the proviso must be understood, 'supposing all parties to take care of their own interest.'"--Mill, III. i. 5. "The greatest number of human beings noble and happy." But is the nobleness consistent with the number? Yes, not only consistent with it, but essential to it. The maximum of life can only be reached by the maximum of virtue. In this respect the law of human population differs wholly from that of animal life. The multiplication of animals is checked only by want of food, and by the hostility of races; the population of the gnat is restrained by the hunger of the swallow, and that of the swallow by the scarcity of gnats. Man, considered as an animal, is indeed limited by the same laws: hunger, or plague, or war, are the necessary and only restraints upon his increase,--effectual restraints hitherto,--his principal study having been how most swiftly to destroy himself, or ravage his dwelling-places, and his highest skill directed to give range to the famine, seed to the plague, and sway to the sword. But, considered as other than an animal, his increase is not limited by these laws. It is limited only by the limits of his courage and his love. Both of these _have_ their bounds; and ought to have: his race has its bounds also; but these have not yet been reached, nor will be reached for ages. In all the ranges of human thought I know none so melancholy as the speculations of political economists on the population question. It is proposed to better the condition of the labourer by giving him higher wages. "Nay," says the economist, "if you raise his wages, he will either drag people down to the same point of misery at which you found him, or drink your wages away." He will. I know it. Who gave him this will? Suppose it were your own son of whom you spoke, declaring to me that you dared not take him into your firm, nor even give him his just labourer's wages, because if you did, he would die of drunkenness, and leave half a score of children to the parish. "Who gave your son these dispositions?"--I should inquire. Has he them by inheritance or by education? By one or other they _must_ come; and as in him, so also in the poor. Either these poor are of a race essentially different from ours, and unredeemable (which, however often implied, I have heard none yet openly say), or else by such care as we have ourselves received, we may make them continent and sober as ourselves--wise and dispassionate as we are--models arduous of imitation. "But," it is answered, "they cannot receive education." Why not? That is precisely the point at issue. Charitable persons suppose the worst fault of the rich is to refuse the people meat; and the people cry for their meat, kept back by fraud, to the Lord of Multitudes.[63] Alas! it is not meat of which the refusal is cruelest, or to which the claim is validest. The life is more than the meat. The rich not only refuse food to the poor; they refuse wisdom; they refuse virtue; they refuse salvation. Ye sheep without shepherd, it is not the pasture that has been shut from you, but the presence. Meat! perhaps your right to that may be pleadable; but other rights have to be pleaded first. Claim your crumbs from the table, if you will; but claim them as children, not as dogs; claim your right to be fed, but claim more loudly your right to be holy, perfect, and pure. [63] James v. 4. Observe, in these statements I am not taking up, nor countenancing one whit, the common socialist idea of division of property; division of property is its destruction; and with it the destruction of all hope, all industry, and all justice: it is simply chaos--a chaos towards which the believers in modern political economy are fast tending, and from which I am striving to save them. The rich man does not keep back meat from the poor by retaining his riches; but by basely using them. Riches are a form of strength; and a strong man does not injure others by keeping his strength, but by using it injuriously. The socialist, seeing a strong man oppress a weak one, cries out--"Break the strong man's arms"; but I say, "Teach him to use them to better purpose." The fortitude and intelligence which acquire riches are intended, by the Giver of both, not to scatter, nor to give away, but to employ those riches in the service of mankind; in other words, in the redemption of the erring and aid of the weak--that is to say, there is first to be the work to gain money; then the Sabbath of use for it--the Sabbath, whose law is, not to lose life, but to save. It is continually the fault or the folly of the poor that they are poor, as it is usually a child's fault if it falls into a pond, and a cripple's weakness that slips at a crossing; nevertheless, most passers-by would pull the child out, or help up the cripple. Put it at the worst, that all the poor of the world are but disobedient children, or careless cripples, and that all rich people are wise and strong, and you will see at once that neither is the socialist right in desiring to make everybody poor, powerless, and foolish as he is himself, nor the rich man right in leaving the children in the mire. Strange words to be used of working people: "What! holy; without any long robes nor anointing oils; these rough-jacketed, rough-worded persons set to nameless and dishonoured service? Perfect!--these, with dim eyes and cramped limbs, and slowly wakening minds? Pure!--these, with sensual desire and grovelling thought; foul of body, and coarse of soul?" It may be so; nevertheless, such as they are, they are the holiest, perfectest, purest persons the earth can at present show. They may be what you have said; but if so, they yet are holier than we, who have left them thus. But what can be done for them? Who can clothe--who teach--who restrain their multitudes? What end can there be for them at last, but to consume one another? I hope for another end, though not, indeed, from any of the three remedies for over-population commonly suggested by economists. These three are, in brief--Colonization; Bringing in of waste lands; or Discouragement of Marriage. The first and second of these expedients merely evade or delay the question. It will, indeed, be long before the world has been all colonized, and its deserts all brought under cultivation. But the radical question is not how much habitable land is in the world, but how many human beings ought to be maintained on a given space of habitable land. Observe, I say, _ought_ to be, not how many _can_ be. Ricardo, with his usual inaccuracy, defines what he calls the "natural rate of wages" as "that which will maintain the labourer." Maintain him! yes; but how?--the question was instantly thus asked of me by a working girl, to whom I read the passage. I will amplify her question for her. "Maintain him, how?" As, first, to what length of life? Out of a given number of fed persons how many are to be old--how many young; that is to say, will you arrange their maintenance so as to kill them early--say at thirty or thirty-five on the average, including deaths of weakly or ill-fed children?--or so as to enable them to live out a natural life? You will feed a greater number, in the first case,[64] by rapidity of succession; probably a happier number in the second: which does Mr. Ricardo mean to be their natural state, and to which state belongs the natural rate of wages? [64] The quantity of life is the same in both cases; but it is differently allotted. Again: A piece of land which will only support ten idle, ignorant, and improvident persons, will support thirty or forty intelligent and industrious ones. Which of these is their natural state, and to which of them belongs the natural rate of wages? Again: If a piece of land support forty persons in industrious ignorance; and if, tired of this ignorance, they set apart ten of their number to study the properties of cones, and the sizes of stars; the labour of these ten, being withdrawn from the ground, must either tend to the increase of food in some transitional manner, or the persons set apart for sidereal and conic purposes must starve, or some one else starve instead of them. What is, therefore, the natural rate of wages of the scientific persons, and how does this rate relate to, or measure, their reverted or transitional productiveness? Again: If the ground maintains, at first, forty labourers in a peaceable and pious state of mind, but they become in a few years so quarrelsome and impious that they have to set apart five, to meditate upon and settle their disputes; ten, armed to the teeth with costly instruments, to enforce the decisions; and five to remind everybody in an eloquent manner of the existence of a God;--what will be the result upon the general power of production, and what is the "natural rate of wages" of the meditative, muscular, and oracular labourers? Leaving these questions to be discussed, or waived, at their pleasure, by Mr. Ricardo's followers, I proceed to state the main facts bearing on that probable future of the labouring classes which has been partially glanced at by Mr. Mill. That chapter and the preceding one differ from the common writing of political economists in admitting some value in the aspect of nature, and expressing regret at the probability of the destruction of natural scenery. But we may spare our anxieties, on this head. Men can neither drink steam, nor eat stone. The maximum of population on a given space of land implies also the relative maximum of edible vegetable, whether for men or cattle; it implies a maximum of pure air; and of pure water. Therefore: a maximum of wood, to transmute the air, and of sloping ground, protected by herbage from the extreme heat of the sun, to feed the streams. All England may, if it so chooses, become one manufacturing town; and Englishmen, sacrificing themselves to the good of general humanity, may live diminished lives in the midst of noise, of darkness, and of deadly exhalation. But the world cannot become a factory, nor a mine. No amount of ingenuity will ever make iron digestible by the million, nor substitute hydrogen for wine. Neither the avarice nor the rage of men will ever feed them, and however the apple of Sodom and the grape of Gomorrah may spread their table for a time with dainties of ashes, and nectar of asps,--so long as men live by bread, the far away valleys must laugh as they are covered with the gold of God, and the shouts of His happy multitudes ring round the winepress and the well. Nor need our more sentimental economists fear the too wide spread of the formalities of a mechanical agriculture. The presence of a wise population implies the search for felicity as well as for food; nor can any population reach its maximum but through that wisdom which "rejoices" in the habitable parts of the earth. The desert has its appointed place and work; the eternal engine, whose beam is the earth's axle, whose beat is its year, and whose breath is its ocean, will still divide imperiously to their desert kingdoms, bound with unfurrowable rock, and swept by unarrested sand, their powers of frost and fire: but the zones and lands between, habitable, will be loveliest in habitation. The desire of the heart is also the light of the eyes. No scene is continually and untiringly loved, but one rich by joyful human labour; smooth in field; fair in garden; full in orchard; trim, sweet, and frequent in homestead; ringing with voices of vivid existence. No air is sweet that is silent; it is only sweet when full of low currents of under sound--triplets of birds, and murmur and chirp of insects, and deep-toned words of men, and wayward trebles of childhood. As the art of life is learned, it will be found at last that all lovely things are also necessary:--the wild flower by the wayside, as well as the tended corn; and the wild birds and creatures of the forest, as well as the tended cattle; because man doth not live by bread only, but also by the desert manna; by every wondrous word and unknowable work of God. Happy, in that he knew them not, nor did his fathers know; and that round about him reaches yet into the infinite, the amazement of his existence. Note, finally, that all effectual advancement towards this true felicity of the human race must be by individual, not public effort. Certain general measures may aid, certain revised laws guide, such advancement; but the measure and law which have first to be determined are those of each man's home. We continually hear it recommended by sagacious people to complaining neighbours (usually less well placed in the world than themselves), that they should "remain content in the station in which Providence has placed them." There are perhaps some circumstances of life in which Providence has no intention that people _should_ be content. Nevertheless, the maxim is on the whole a good one; but it is peculiarly for home use. That your neighbour should, or should not, remain content with _his_ position, is not your business; but it is very much your business to remain content with your own. What is chiefly needed in England at the present day is to show the quantity of pleasure that may be obtained by a consistent, well-administered competence, modest, confessed, and laborious. We need examples of people who, leaving Heaven to decide whether they are to rise in the world, decide for themselves that they will be happy in it, and have resolved to seek--not greater wealth, but simpler pleasure; not higher fortune, but deeper felicity; making the first of possessions, self-possession; and honouring themselves in the harmless pride and calm pursuits of peace. Of which lowly peace it is written that "justice and peace have kissed each other;" and that the fruit of justice is "sown in peace of them that make peace"; not "peace-makers" in the common understanding--reconcilers of quarrels; (though that function also follows on the greater one;) but peace-Creators; Givers of Calm. Which you cannot give, unless you first gain; nor is this gain one which will follow assuredly on any course of business, commonly so called. No form of gain is less probable, business being (as is shown in the language of all nations--[Greek: pôlein] from [Greek: pelô], [Greek: prasis] from [Greek: peraô], venire, vendre, and venal, from venio, etc.) essentially restless--and probably contentious;--having a raven-like mind to the motion to and fro, as to the carrion food; whereas the olive-feeding and bearing birds look for rest for their feet: thus it is said of Wisdom that she "hath builded her house, and hewn out her seven pillars;" and even when, though apt to wait long at the doorposts, she has to leave her house and go abroad, her paths are peace also. For us, at all events, her work must begin at the entry of the doors: all true economy is "Law of the house." Strive to make that law strict, simple, generous: waste nothing, and grudge nothing. Care in nowise to make more of money, but care to make much of it; remembering always the great, palpable, inevitable fact--the rule and root of all economy--that what one person has, another cannot have; and that every atom of substance, of whatever kind, used or consumed, is so much human life spent; which, if it issue in the saving present life, or gaining more, is well spent, but if not, is either so much life prevented, or so much slain. In all buying, consider, first, what condition of existence you cause in the producers of what you buy; secondly, whether the sum you have paid is just to the producer, and in due proportion lodged in his hands;[65] thirdly, to how much clear use, for food, knowledge, or joy, this that you have bought can be put; and fourthly, to whom and in what way it can be most speedily and serviceably distributed: in all dealings whatsoever insisting on entire openness and stern fulfilment; and in all doings, on perfection and loveliness of accomplishment; especially on fineness and purity of all marketable commodity: watching at the same time for all ways of gaining, or teaching, powers of simple pleasure; and of showing "hoson en asphodelph geg honeiar"--the sum of enjoyment depending not on the quantity of things tasted, but on the vivacity and patience of taste. [65] The proper offices of middlemen, namely, overseers (or authoritative workmen), conveyancers (merchants, sailors, retail dealers, etc.), and order-takers (persons employed to receive directions from the consumer), must, of course, be examined before I can enter farther into the question of just payment of the first producer. But I have not spoken of them in these introductory papers, because the evils attendant on the abuse of such intermediate functions result not from any alleged principle of modern political economy, but from private carelessness or iniquity. And if, on due and honest thought over these things, it seems that the kind of existence to which men are now summoned by every plea of pity and claim of right, may, for some time at least, not be a luxurious one:--consider whether, even, supposing it guiltless, luxury would be desired by any of us, if we saw clearly at our sides the suffering which accompanies it in the world. Luxury is indeed possible in the future--innocent and exquisite: luxury for all, and by the help of all; but luxury at present can only be enjoyed by the ignorant; the cruelest man living could not sit at his feast, unless he sat blindfold. Raise the veil boldly; face the light; and if, as yet, the light of the eye can only be through tears, and the light of the body through sackcloth, go thou forth weeping, bearing precious seed, until the time come, and the kingdom, when Christ's gift of bread, and bequest of peace shall be Unto this last as unto thee; and when, for earth's severed multitudes of the wicked and the weary, there shall be holier reconciliation than that of the narrow home, and calm economy, where the Wicked cease--not from trouble, but from troubling--and the Weary are at rest. ESSAYS ON POLITICAL ECONOMY: CONTRIBUTED TO "FRASER'S MAGAZINE" IN 1862 AND 1863, BEING A SEQUEL TO PAPERS WHICH APPEARED IN THE "CORNHILL MAGAZINE," UNDER THE TITLE OF "UNTO THIS LAST." I. MAINTENANCE OF LIFE; WEALTH, MONEY, AND RICHES. As domestic economy regulates the acts and habits of a household, political economy regulates those of a society or State, with reference to its maintenance. Political economy is neither an art nor a science,[66] but a system of conduct and legislature, founded on the sciences, directing the arts, and impossible, except under certain conditions of moral culture. By the "maintenance" of a State is to be understood the support of its population in healthy and happy life; and the increase of their numbers, so far as that increase is consistent with their happiness. It is not the object of political economy to increase the numbers of a nation at the cost of common health or comfort; nor to increase indefinitely the comfort of individuals, by sacrifice of surrounding lives, or possibilities of life. [66] The science which in modern days had been called Political Economy is in reality nothing more than the investigation of the phenomena of commercial operations. It has no connexion with political economy, as understood and treated of by the great thinkers of past ages; and as long as it is allowed to pass under the same name, every word written by those thinkers--and chiefly the words of Plato, Xenophon, Cicero, and Bacon--must be either misunderstood or misapplied. The reader must not, therefore, be surprised at the care and insistence with which I have retained the literal and earliest sense of all important terms used in these papers; for a word is usually well made at the time it is first wanted; its youngest meaning has in it the full strength of its youth; subsequent senses are commonly warped or weakened; and as a misused word always is liable to involve an obscured thought, and all careful thinkers, either on this or any other subject, are sure to have used their words accurately, the first condition, in order to be able to avail ourselves of their sayings at all, is a firm definition of terms. The assumption which lies at the root of nearly all erroneous reasoning on political economy--namely, that its object is to accumulate money or exchangeable property--may be shown in few words to be without foundation. For no economist would admit national economy to be legitimate which proposed to itself only the building of a pyramid of gold. He would declare the gold to be wasted, were it to remain in the monumental form, and would say it ought to be employed. But to what end? Either it must be used only to gain more gold, and build a larger pyramid, or to some purpose other than the gaining of gold. And this other purpose, however at first apprehended, will be found to resolve itself finally into the service of man--that is to say, the extension, defence, or comfort of his life. The golden pyramid may perhaps be providently built, perhaps improvidently; but, at all events, the wisdom or folly of the accumulation can only be determined by our having first clearly stated the aim of all economy, namely, the extension of life. If the accumulation of money, or of exchangeable property, were a certain means of extending existence, it would be useless, in discussing economical questions, to fix our attention upon the more distant object--life--instead of the immediate one--money. But it is not so. Money may sometimes be accumulated at the cost of life, or by limitations of it; that is to say, either by hastening the deaths of men, or preventing their births. It is therefore necessary to keep clearly in view the ultimate object of economy, and to determine the expediency of minor operations with reference to that ulterior end. It has been just stated that the object of political economy is the continuance not only of life, but of healthy and happy life. But all true happiness is both a consequence and cause of life; it is a sign of its vigour, and means of its continuance. All true suffering is in like manner a consequence and cause of death. I shall therefore, in future, use the word "Life" singly: but let it be understood to include in its signification the happiness and power of the entire human nature, body and soul. That human nature, as its Creator made it, and maintains it wherever His laws are observed, is entirely harmonious. No physical error can be more profound, no moral error more dangerous than that involved in the monkish doctrine of the opposition of body to soul. No soul can be perfect in an imperfect body; no body perfect without perfect soul. Every right action and true thought sets the seal of its beauty on person and face; every wrong action and foul thought its seal of distortion; and the various aspects of humanity might be read as plainly as a printed history, were it not that the impressions are so complex that it must always in some cases--and, in the present state of our knowledge, in all cases--be impossible to decipher them completely. Nevertheless, the face of a consistently just, and of a consistently unjust person, may always be rightly discerned at a glance; and if the qualities are continued by descent through a generation or two, there arises a complete distinction of race. Both moral and physical qualities are communicated by descent, far more than they can be developed by education (though both may be destroyed for want of education), and there is as yet no ascertained limit to the nobleness of person and mind which the human creature may attain, by persevering observance of the laws of God respecting its birth and training. We must therefore yet farther define the aim of political economy to be "the multiplication of human life at the highest standard." It might at first seem questionable whether we should endeavour to maintain a small number of persons of the highest type of beauty and intelligence, or a larger number of an inferior class. But I shall be able to show in the sequel, that the way to maintain the largest number is first to aim at the highest standard. Determine the noblest type of man, and aim simply at maintaining the largest possible number of persons of that class, and it will be found that the largest possible number of every healthy subordinate class must necessarily be produced also. The perfect type of manhood, as just stated, involves the perfections (whatever we may hereafter determine these to be) of his body, affections, and intelligence. The material things, therefore, which it is the object of political economy to produce and use (or accumulate for use), are things which serve either to sustain and comfort the body, or exercise rightly the affections and form the intelligence.[67] Whatever truly serves either of these purposes is "useful" to man, wholesome, healthful, helpful, or holy. By seeking such things, man prolongs and increases his life upon the earth. [67] It may be observed, in anticipation of some of our future results, that while some conditions of the affections are aimed at by the economist as final, others are necessary to him as his own instruments: as he obtains them in greater or less degree his own farther work becomes more or less possible. Such, for instance, are the fortifying virtues, which the wisest men of all time have, with more or less distinctness, arranged under the general heads of Prudence, or Discretion (the spirit which discerns and adopts rightly); Justice (the spirit which rules and divides rightly); Fortitude (the spirit which persists and endures rightly); and Temperance (the spirit which stops and refuses rightly); or in shorter terms still, the virtues which teach how to consist, assist, persist, and desist. These outermost virtues are not only the means of protecting and prolonging life itself, but they are the chief guards or sources of the material means of life, and are the visible governing powers and princes of economy. Thus (reserving detailed statements for the sequel) precisely according to the number of just men in a nation, is their power of avoiding either intestine or foreign war. All disputes may be peaceably settled, if a sufficient number of persons have been trained to submit to the principles of justice. The necessity for war is in direct ratio to the number of unjust persons who are incapable of determining a quarrel but by violence. Whether the injustice take the form of the desire of dominion, or of refusal to submit to it, or of lust of territory, or lust of money, or of mere irregular passion and wanton will, the result is economically the same;--loss of the quantity of power and life consumed in repressing the injustice, as well as of that requiring to be repressed, added to the material and moral destruction caused by the fact of war. The early civil wars of England, and the existing war in America, are curious examples--these under monarchical, this under republican institutions--of the results of the want of education of large masses of nations in principles of justice. This latter war, especially, may perhaps at least serve for some visible, or if that be impossible (for the Greeks told us that Plutus was blind, as Dante that he was speechless), some feelable proof that true political economy is an ethical, and by no means a commercial business. The Americans imagined themselves to know somewhat of money-making; bowed low before their Dollar, expecting Divine help from it; more than potent--even omnipotent. Yet all the while this apparently tangible, was indeed an imaginary Deity;--and had they shown the substance of him to any true economist, or even true mineralogist, they would have been told, long years ago,--"Alas, gentlemen, this that you are gaining is not gold,--not a particle of it. It is yellow, and glittering, and like enough to the real metal,--but see--it is brittle, cat-gold, 'iron firestone.' Out of this, heap it as high as you will, you will get so much steel and brimstone--nothing else; and in a year or two, when (had you known a little of right economy) you might have had quiet roof-trees over your heads, and a fair account at your banker's, you shall instead have to sleep a-field, under red tapestries, costliest, yet comfortless; and at your banker's find deficit at compound interest." But the mere dread or distrust resulting from the want of inner virtues of Faith and Charity among nations, is often no less costly than war itself. The fear which France and England have of each other costs each nation about fifteen millions sterling annually, besides various paralyses of commerce; that sum being spent in the manufacture of means of destruction instead of means of production. There is no more reason in the nature of things that France and England should be hostile to each other than that England and Scotland should be, or Lancashire and Yorkshire; and the reciprocal terrors of the opposite sides of the English Channel are neither more necessary, more economical, nor more virtuous than the old riding and reiving on opposite flanks of the Cheviots, or than England's own weaving for herself of crowns of thorn from the stems of her Red and White Roses. On the other hand, whatever does not serve either of these purposes,--much more whatever counteracts them,--is in like manner useless to man, unwholesome, unhelpful, or unholy; and by seeking such things man shortens and diminishes his life upon the earth. And neither with respect to things useful or useless can man's estimate of them alter their nature. Certain substances being good for his food, and others noxious to him, what he thinks or wishes respecting them can neither change their nature, nor prevent their power. If he eats corn, he will live; if nightshade, he will die. If he produce or make good and beautiful things, they will "recreate" him (note the solemnity and weight of the word); if bad and ugly things, they will "corrupt" or break in pieces--that is, in the exact degree of their power, kill him. For every hour of labour, however enthusiastic or well intended, which he spends for that which is not bread, so much possibility of life is lost to him. His fancies, likings, beliefs, however brilliant, eager, or obstinate, are of no avail if they are set on a false object. Of all that he has laboured for, the eternal law of heaven and earth measures out to him for reward, to the utmost atom, that part which he ought to have laboured for, and withdraws from him (or enforces on him, it may be) inexorably that part which he ought not to have laboured for. The dust and chaff are all, to the last speck, winnowed away, and on his summer threshing-floor stands his heap of corn; little or much, not according to his labour, but to his discretion. No "commercial arrangements," no painting of surfaces nor alloying of substances, will avail him a pennyweight. Nature asks of him calmly and inevitably, What have you found, or formed--the right thing or the wrong? By the right thing you shall live; by the wrong you shall die. To thoughtless persons it seems otherwise. The world looks to them as if they could cozen it out of some ways and means of life. But they cannot cozen IT; they can only cozen their neighbours. The world is not to be cheated of a grain; not so much as a breath of its air can be drawn surreptitiously. For every piece of wise work done, so much life is granted; for every piece of foolish work, nothing; for every piece of wicked work, so much death. This is as sure as the courses of day and night. But when the means of life are once produced, men, by their various struggles and industries of accumulation or exchange, may variously gather, waste, restrain, or distribute them; necessitating, in proportion to the waste or restraint, accurately so much more death. The rate and range of additional death is measured by the rate and range of waste, and is inevitable;--the only question (determined mostly by fraud in peace, and force in war) is, Who is to die, and how? Such being the everlasting law of human existence, the essential work of the political economist is to determine what are in reality useful and life-giving things, and by what degrees and kinds of labour they are attainable and distributable. This investigation divides itself under three great heads--first, of Wealth; secondly, of Money; and thirdly, of Riches. These terms are often used as synonymous, but they signify entirely different things. "Wealth," consists of things in themselves valuable; "Money," of documentary claims to the possession of such things; and "Riches" is a relative term, expressing the magnitude of the possessions of one person or society as compared with those of other persons or societies. The study of Wealth is a province of natural science:--it deals with the essential properties of things. The study of Money is a province of commercial science:--it deals with conditions of engagement and exchange. The study of Riches is a province of moral science:--it deals with the due relations of men to each other in regard of material possessions; and with the just laws of their association for purposes of labour. I shall in this paper shortly sketch out the range of subjects which will come before us as we follow these three branches of inquiry. SECTION I.--WEALTH. Wealth, it has been said, consists of things essentially valuable. We now, therefore, need a definition of "value." Value signifies the strength or "availing" of anything towards the sustaining of life, and is always twofold; that is to say, primarily, INTRINSIC, and, secondarily, EFFECTUAL. The reader must, by anticipation, be warned against confusing value with cost, or with price. Value is the life-giving power of anything; cost, the quantity of labour required to produce it; price, the quantity of labour which its possessor will take in exchange for it. Cost and price are commercial conditions, to be studied under the head of Money. Intrinsic value is the absolute power of anything to support life. A sheaf of wheat of given quality and weight has in it a measurable power of sustaining the substance of the body; a cubic foot of pure air, a fixed power of sustaining its warmth; and a cluster of flowers of given beauty, a fixed power of enlivening or animating the senses and heart. It does not in the least affect the intrinsic value of the wheat, the air, or the flowers, that men refuse or despise them. Used or not, their own power is in them, and that particular power is in nothing else. But in order that this value of theirs may become effectual, a certain state is necessary in the recipient of it. The digesting, the breathing, and perceiving functions must be perfect in the human creature before the food, air, or flowers can become their full value to it. The production of effectual value, therefore, always involves two needs; first, the production of a thing essentially useful; then the production of the capacity to use it. Where the intrinsic value and acceptant capacity come together there is EFFECTUAL value, or wealth. Where there is either no intrinsic value, or no acceptant capacity, there is no effectual value; that is to say, no wealth. A horse is no wealth to us if we cannot ride, nor a picture if we cannot see, nor can any noble thing be wealth, except to a noble person. As the aptness of the user increases, the effectual value of the thing used increases; and in its entirety can co-exist only with perfect skill of use, or harmony of nature. The effectual value of a given quantity of any commodity existing in the world at any moment is therefore a mathematical function of the capacity existing in the human race to enjoy it. Let its intrinsic value be represented by _x_, and the recipient faculty by _y_; its effectual value is _x y_, in which the sum varies as either co-efficient varies, is increased by either's increase,[68] and cancelled by either's absence. [68] With this somewhat strange and ungeometrical limitation, however, which, here expressed for the moment in the briefest terms, we must afterwards trace in detail--that _x y_ may be indefinitely increased by the increase of _y_ only; but not by the increase of _x_, unless _y_ increases also in a fixed proportion. Valuable material things may be conveniently referred to five heads:-- 1. Land, with an associated air, water, and organisms. 2. Houses, furniture, and instruments. 3. Stored or prepared food and medicine, and articles of bodily luxury, including clothing. 4. Books. 5. Works of art. We shall enter into separate inquiry as to the conditions of value under each of these heads. The following sketch of the entire subject may be useful for future reference:-- 1. Land. Its value is twofold-- A. As producing food and mechanical power. B. As an object of sight and thought, producing intellectual power. A. Its value, as a means of producing food and mechanical power, varies with its form (as mountain or plain), with its substance (in soil or mineral contents), and with its climate. All these conditions of intrinsic value, in order to give effectual value, must be known and complied with by the men who have to deal with it; but at any given time, or place, the intrinsic value is fixed; such and such a piece of land, with its associated lakes and seas, rightly treated in surface and substance, can produce precisely so much food and power, and no more. Its surface treatment (agriculture) and substance treatment (practical geology and chemistry), are the first roots of economical science. By surface treatment, however, I mean more than agriculture as commonly understood; I mean land and sea culture;--dominion over both the fixed and the flowing fields;--perfect acquaintance with the laws of climate, and of vegetable and animal growth in the given tracts of earth or ocean, and of their relations regulating especially the production of those articles of food which, being in each particular spot producible in the highest perfection, will bring the best price in commercial exchanges. B. The second element of value in land is its beauty, united with such conditions of space and form as are necessary for exercise, or pleasant to the eye, associated with vital organism. Land of the highest value in these respects is that lying in temperate climates, and boldly varied in form; removed from unhealthy or dangerous influences (as of miasm or volcano); and capable of sustaining a rich fauna and flora. Such land, carefully tended by the hand of man, so far as to remove from it unsightlinesses and evidences of decay; guarded from violence, and inhabited, under man's affectionate protection, by every kind of living creature that can occupy it in peace, forms the most precious "property" that human beings can possess. The determination of the degree in which these two elements of value can be united in land, or in which either element must, or should, in particular cases, be sacrificed to the other, forms the most important branch of economical inquiry respecting preferences of things. 2. Buildings, furniture, and instruments. The value of buildings consists--A, in permanent strength, with convenience of form, of size, and of position; so as to render employment peaceful, social intercourse easy, temperature and air healthy. The advisable or possible magnitude of cities and mode of their distribution in squares, streets, courts, etc., the relative value of sites of land, and the modes of structure which are healthiest and most permanent, have to be studied under this head. B. The value of buildings consists, secondarily, in historical association and architectural beauty, of which we have to examine the influence on manners and life. The value of instruments consists-- A. In their power of shortening labour, or otherwise accomplishing (as ships) what human strength unaided could not. The kinds of work which are severally best accomplished by hand or by machine;--the effect of machinery in gathering and multiplying population, and its influence on the minds and bodies of such population; together with the conceivable uses of machinery on a colossal scale in accomplishing mighty and useful works, hitherto unthought of, such as the deepening of large river channels;--changing the surface of mountainous districts;--irrigating tracts of desert in the torrid zone;--breaking up, and thus rendering capable of quicker fusion edges of ice in the northern and southern Arctic seas, etc., so rendering parts of the earth habitable which hitherto have not been so, are to be studied under this head. B. The value of instruments is, secondarily, in their aid to abstract sciences. The degree in which the multiplication of such instruments should be encouraged, so as to make them, if large, easy of access to numbers (as costly telescopes), or so cheap as that they might, in a serviceable form, become a common part of the furniture of households, is to be considered under this head. 3. Food, medicine, and articles of luxury. Under this head we shall have to examine the possible methods of obtaining pure and nourishing food in such security and equality of supply as to avoid both waste and famine; then the economy of medicine and just range of sanitary law; finally, the economy of luxury, partly an aesthetic and partly an ethical question. 4. Books. The value of these consists-- A. In their power of preserving and communicating the knowledge of facts. B. In their power of exciting vital or noble emotion and intellectual action. They have also their corresponding negative powers of disguising and effacing the memory of facts, and killing the noble emotions, or exciting base ones. Under these two heads we have to consider the economical and educational value, positive and negative, of literature;--the means of producing and educating good authors, and the means and advisability of rendering good books generally accessible, and directing the reader's choice to them. 5. Works of art. The value of these is of the same nature as that of books, but the laws of their production and possible modes of distribution are very different, and require separate examination. SECTION II.--MONEY. Under this head, we shall have to examine the laws of currency and exchange; of which I will note here the first principles. Money has been inaccurately spoken of as merely a means of circulation. It is, on the contrary, an expression of right. It is not wealth, being the sign[69] of the relative quantities of it, to which, at a given time, persons or societies are entitled. [69] Always, and necessarily, an imperfect sign; but capable of approximate accuracy if rightly ordered. If all the money in the world, notes and gold, were destroyed in an instant, it would leave the world neither richer nor poorer than it was. But it would leave the individual inhabitants of it in different relations. Money is, therefore, correspondent in its nature to the title-deed of an estate. Though the deed be burned, the estate still exists, but the right to it has become disputable. The worth of money remains unchanged, as long as the proportion of the quantity of existing money to the quantity of existing wealth, or available labour which it professes to represent, remains unchanged. If the wealth increases, but not the money, the worth of the money increases; if the money increases, but not the wealth, the worth of the money diminishes. Money, therefore, cannot be arbitrarily multiplied, any more than title-deeds can. So long as the existing wealth or available labour is not fully represented by the currency, the currency may be increased without diminution of the assigned worth of its pieces. But when the existing wealth, or available labour, is once fully represented, every piece of money thrown into circulation diminishes the worth of every other existing piece, in the proportion it bears to the number of them, provided the new piece be received with equal credit; if not, the depreciation of worth takes place exclusively in the new piece, according to the inferiority of its credit. When, however, new money, composed of some substance of supposed intrinsic value (as of gold), is brought into the market, or when new notes are issued which are supposed to be deserving of credit, the desire to obtain money will, under certain circumstances, stimulate industry; an additional quantity of wealth is immediately produced, and if this be in proportion to the new claims advanced, the value of the existing currency is undepreciated. If the stimulus given be so great as to produce more goods than are proportioned to the additional coinage, the worth of the existing currency will be raised. Arbitrary control and issues of currency affect the production of wealth, by acting on the hopes and fears of men; and are, under certain circumstances, wise. But the issue of additional currency to meet the exigencies of immediate expense, is merely one of the disguised forms of borrowing or taxing. It is, however, in the present low state of economical knowledge, often possible for Governments to venture on an issue of currency, when they could not venture on an additional loan or tax, because the real operation of such issue is not understood by the people, and the pressure of it is irregularly distributed, and with an unperceived gradation. Finally, the use of substances of intrinsic value as the materials of a currency, is a barbarism;--a remnant of the conditions of barter, which alone can render commerce possible among savage nations. It is, however, still necessary, partly as a mechanical check on arbitrary issues; partly as a means of exchanges with foreign nations. In proportion to the extension of civilization, and increase of trustworthiness in Governments, it will cease. So long as it exists, the phenomena of the cost and price of the articles used for currency, are mingled with those of currency itself, in an almost inextricable manner; and the worth of money in the market is affected by multitudinous accidental circumstances, which have been traced, with more or less success, by writers on commercial operations; but with these variations the true political economist has no more to do than an engineer fortifying a harbour of refuge against Atlantic tide, has to concern himself with the cries or quarrels of children who dig pools with their fingers for its ebbing currents among the sand. SECTION III.--RICHES. According to the various industry, capacity, good fortune, and desires of men, they obtain greater or smaller share of, and claim upon, the wealth of the world. The inequalities between these shares, always in some degree just and necessary, may be either restrained by law (or circumstance) within certain limits; or may increase indefinitely. Where no moral or legal restraint is put upon the exercise of the will and intellect of the stronger, shrewder, or more covetous men, these differences become ultimately enormous. But as soon as they become so distinct in their extremes as that, on one side, there shall be manifest redundance of possession, and on the other manifest pressure of need,--the terms "riches" and "poverty" are used to express the opposite states; being contrary only in the manner of the terms "warmth" and "cold"; which neither of them imply an actual degree, but only a relation to other degrees, of temperature. Respecting riches, the economist has to inquire, first, into the advisable modes of their collection; secondly, into the advisable modes of their administration. Respecting the collection of national riches, he has to inquire, first, whether he is justified in calling the nation rich; if the quantity of money it possesses relatively to that possessed by other nations be large, irrespectively of the manner of its distribution. Or does the mode of distribution in any wise affect the nature of the riches? Thus, if the king alone be rich--suppose Croesus or Mausolus--are the Lydians and Carians therefore a rich nation? Or if one or two slave-masters be rich, and the nation be otherwise composed of slaves, is it to be called a rich nation? For if not, and the ideas of a certain mode of distribution or operation in the riches, and of a certain degree of freedom in the people, enter into our idea of riches as attributed to a people, we shall have to define the degree of fluency or circulative character which is essential to their vitality; and the degree of independence of action required in their possessors. Questions which look as if they would take time in answering. And farther. Since there are two modes in which the inequality, which is indeed the condition and constituent of riches, may be established--namely, by increase of possession on the one side, and by decrease of it on the other--we have to inquire, with respect to any given state of riches, precisely in what manner the correlative poverty was produced; that is to say, whether by being surpassed only, or being depressed, what are the advantages, or the contrary, conceivable in the depression. For instance, it being one of the commonest advantages of being rich to entertain a number of servants, we have to inquire, on the one side, what economical process produced the poverty of the persons who serve him; and what advantage each (on his own side) derives from the result. These being the main questions touching the collection of riches, the next, or last, part of the inquiry is into their administration. They have in the main three great economical powers which require separate examination: namely, the powers of selection, direction, and provision. A. Their power of SELECTION relates to things of which the supply is limited (as the supply of best things is always). When it becomes matter of question to whom such things are to belong, the richest person has necessarily the first choice, unless some arbitrary mode of distribution be otherwise determined upon. The business of the economist is to show how this choice may be a Wise one. B. Their power of DIRECTION arises out of the necessary relation of rich men to poor, which ultimately, in one way or another, involves the direction of, or authority over, the labour of the poor; and this nearly as much over their mental as their bodily labour. The business of the economist is to show how this direction may be a Just one. C. Their power of PROVISION or "preparatory sight" (for pro-accumulation is by no means necessarily pro-vision), is dependent upon their redundance; which may of course by active persons be made available in preparation for future work or future profit; in which function riches have generally received the name of capital; that is to say, of head- or source-material. The business of the economist is to show how this provision may be a Distant one. The examination of these three functions of riches will embrace every final problem of political economy;--and, above, or before all, this curious and vital problem,--whether, since the wholesome action of riches in these three functions will depend (it appears) on the Wisdom, Justice, and Far-sightedness of the holders; and it is by no means to be assumed that persons primarily rich, must therefore be just and wise,--it may not be ultimately possible so, or somewhat so, to arrange matters, as that persons primarily just and wise, should therefore be rich. Such being the general plan of the inquiry before us, I shall not limit myself to any consecutive following of it, having hardly any good hope of being able to complete so laborious a work as it must prove to me; but from time to time, as I have leisure, shall endeavour to carry forward this part or that, as may be immediately possible; indicating always with accuracy the place which the particular essay will or should take in the completed system. II. NATURE OF WEALTH, VARIATIONS OF VALUE, THE NATIONAL STORE, NATURE OF LABOUR, VALUE AND PRICE, THE CURRENCY. The last paper having consisted of little more than definition of terms, I purpose, in this, to expand and illustrate the given definitions, so as to avoid confusion in their use when we enter into the detail of our subject. The view which has been taken of the nature of wealth, namely, that it consists in an intrinsic value developed by a vital power, is directly opposed to two nearly universal conceptions of wealth. In the assertion that value is primarily intrinsic, it opposes the idea that anything which is an object of desire to numbers, and is limited in quantity, may be called, or virtually become, wealth. And in the assertion that value is secondarily dependent upon power in the possessor, it opposes the idea that wealth consists of things exchangeable at rated prices. Before going farther, we will make these two positions clearer. First. All wealth is intrinsic, and is not constituted by the judgment of men. This is easily seen in the case of things affecting the body; we know that no force of fantasy will make stones nourishing, or poison innocent; but it is less apparent in things affecting the mind. We are easily--perhaps willingly--misled by the appearance of beneficial results obtained by industries addressed wholly to the gratification of fanciful desire; and apt to suppose that whatever is widely coveted, dearly bought, and pleasurable in possession, must be included in our definition of wealth. It is the more difficult to quit ourselves of this error because many things which are true wealth in moderate use, yet become false wealth in immoderate; and many things are mixed of good and evil,--as, mostly, books and works of art,--out of which one person will get the good, and another the evil; so that it seems as if there were no fixed good or evil in the things themselves, but only in the view taken, and use made of them. But that is not so. The evil and good are fixed in essence and in proportion. They are separable by instinct and judgment, but not interchangeable; and in things in which evil depends upon excess, the point of excess, though indefinable, is fixed; and the power of the thing is on the hither side for good, and on the farther side for evil. And in all cases this power is inherent, not dependent on opinion or choice. Our thoughts of things neither make, nor mar their eternal force; nor--which is the most serious point for future consideration--can they prevent the effect of it upon ourselves. Therefore, the object of special analysis of wealth into which we have presently to enter will be not so much to enumerate what is serviceable, as to distinguish what is destructive; and to show that it is inevitably destructive; that to receive pleasure from an evil thing is not to escape from, or alter the evil of it, but to be altered by it; that is, to suffer from it to the utmost, having our own nature, in that degree, made evil also. And it will be shown farther that, through whatever length of time or subtleties of connexion the harm is accomplished (being also less or more according to the fineness and worth of the humanity on which it is wrought), still, nothing but harm ever comes of a bad thing. So that, finally, wealth is not the accidental object of a morbid desire, but the constant object of a legitimate one.[70] By the fury of ignorance, and fitfulness of caprice, large interests may be continually attached to things unserviceable or hurtful; if their nature could be altered by our passions, the science of Political Economy would be but as the weighing of clouds, and the portioning out of shadows. But of ignorance there is no science; and of caprice no law. Their disturbing forces interfere with the operations of economy, but have nothing in common with them; the calm arbiter of national destiny regards only essential power for good in all it accumulates, and alike disdains the wanderings of imagination and the thirsts of disease. [70] Few passages of the Book which at least some part of the nations at present most advanced in civilization accept as an expression of final truth, have been more distorted than those bearing on Idolatry. For the idolatry there denounced is neither sculpture, nor veneration of sculpture. It is simply the substitution of an "Eidolon," phantasm, or imagination of Good, for that which is real and enduring; from the Highest Living Good, which gives life, to the lowest material good which ministers to it. The Creator, and the things created, which He is said to have "seen good" in creating, are in this their eternal goodness always called Helpful or Holy: and the sweep and range of idolatry extend to the rejection of all or any of these, "calling evil good, or good evil,--putting bitter for sweet, and sweet for bitter," so betraying the first of all Loyalties, to the fixed Law of life, and with resolute opposite loyalty serving our own imagination of good, which is the law, not of the dwelling, but of the Grave (otherwise called the law of error; or "mark missing," which we translate law of "Sin"), these "two masters," between whose services we have to choose, being otherwise distinguished as God and "Mammon," which Mammon, though we narrowly take it as the power of money only, is in truth the great evil spirit of false and fond desire, or "Covetousness, which is Idolatry." So that Iconoclasm--image or likeness-breaking--is easy; but an idol cannot be broken--it must be forsaken, and this is not so easy, either in resolution or persuasion. For men may readily be convinced of the weakness of an image, but not of the emptiness of a phantasm. Secondly. The assertion that wealth is not only intrinsic, but dependent, in order to become effectual, on a given degree of vital power in its possessor, is opposed to another popular view of wealth;--namely, that though it may always be constituted by caprice, it is, when so constituted, a substantial thing, of which given quantities may be counted as existing here, or there, and exchangeable at rated prices. In this view there are three errors. The first and chief is the overlooking the fact that all exchangeableness of commodity, or effective demand for it, depends on the sum of capacity for its use existing, here or elsewhere. The book we cannot read, or picture we take no delight in, may indeed be called part of our wealth, in so far as we have power of exchanging either for something we like better. But our power of effecting such exchange, and yet more, of effecting it to advantage, depends absolutely on the number of accessible persons who can understand the book, or enjoy the painting, and who will dispute the possession of them. Thus the actual worth of either, even to us, depends no less on their essential goodness than on the capacity consisting somewhere for the perception of it; and it is vain in any completed system of production to think of obtaining one without the other. So that, though the great political economist knows that co-existence of capacity for use with temporary possession cannot be always secured, the final fact, on which he bases all action and administration, is that, in the whole nation, or group of nations, he has to deal with, for every grain of intrinsic value produced he must with exactest chemistry produce its twin grain of governing capacity, or in the degrees of his failure he has no wealth. Nature's challenge to us is in earnest, as the Assyrian's mock, "I will give you two thousand horses, if thou be able on thy part to set riders upon them." Bavieca's paces are brave, if the Cid backs him; but woe to us, if we take the dust of capacity, wearing the armour of it, for capacity itself, for so all procession, however goodly in the show of it, is to the tomb. The second error in this popular view of wealth is that, in estimating property which we cannot use as wealth, because it is exchangeable, we in reality confuse wealth with money. The land we have no skill to cultivate, the book which is sealed to us, or dress which is superfluous, may indeed be exchangeable, but as such are nothing more than a cumbrous form of bank-note, of doubtful and slow convertibility. As long as we retain possession of them, we merely keep our bank-notes in the shape of gravel or clay, of book leaves, or of embroidered tissue. Circumstances may perhaps render such forms the safest, or a certain complacency may attach to the exhibition of them;--into both these advantages we shall inquire afterwards; I wish the reader only to observe here, that exchangeable property which we cannot use is, to us personally, merely one of the forms of money, not of wealth. The third error in the popular view is the confusion of guardianship with possession; the real state of men of property being, too commonly that of curators, not possessors of wealth. For a man's power of Use, Administration, Ostentation, Destruction, or Bequest; and possession is in use only, which for each man is sternly limited; so that such things, and so much of them, are well for him, or Wealth; and more of them, or any other things, are ill for him, or Illth. Plunged to the lips in Orinoco, he shall drink to his thirst measure,--more, at his peril; with a thousand oxen on his lands, he shall eat to his hunger measure,--more, at his peril. He cannot live in two houses at once; a few bales of silk or wool will suffice for the fabric of all the clothes he can ever wear, and a few books will probably hold all the furniture good for his brain.[71] Beyond these, in the best of us but narrow, capacities, we have but the power of administering, or if for harm, mal-administering, wealth (that is to say, distributing, lending, or increasing it);--of exhibiting it (as in magnificence of retinue or furniture), of destroying, or, finally, of bequeathing it. And with multitudes of rich men, administration degenerates into curatorship; they merely hold their property in charge, as Trustees, for the benefit of some person or persons to whom it is to be delivered upon their death; and the position, explained in clear terms, would hardly seem a covetable one. What would be the probable decision of a youth on his entrance into life, to whom the career hoped for him was proposed in terms such as these: "You must work unremittingly, and with your utmost intelligence, during all your available years; you will thus accumulate wealth to a large amount; but you must touch none of it, beyond what is needful for your support. Whatever sums you may gain beyond those required for your decent and moderate maintenance shall be properly taken care of, and on your death-bed you shall have the power of determining to whom they shall belong, or to what purposes be applied?" [71] I reserve, until the completion and collection of these papers, any support by the authority of other writers of the statements made in them; were, indeed, such authorities wisely sought for and shown, there would be no occasion for my writing at all. Even in the scattered passages referring to this subject in three books of Carlyle's:--"Sartor Resartus"; "Past and Present"; and the "Latter-Day Pamphlets"; all has been said that needs to be said, and far better than I shall ever say it again. But the habit of the public mind at the present is to require everything to be uttered diffusely, loudly, and seven times over, before it will listen; and it has exclaimed against these papers of mine, as if they contained things daring and new, when there is not one assertion in them of which the truth has not been for ages known to the wisest, and proclaimed by the most eloquent of men. It will be a far greater pleasure to me hereafter, to collect their words than add to mine; Horace's clear rendering of the substance of the preceding passages in the text may be found room for at once:-- Si quis emat citharas, emptas comportet in unum, Nec studio citharae, nec Musae deditus ulli; Si scalpra et formas, non sutor; nautica vela, Aversus mercaturis: delirus et amens Undique dicatur merito. Quî discrepat istis, Qui nummos aurumque recondit, nescius uti Compositis, metuensque velut contingere sacrum? With which it is perhaps desirable also to give Xenophon's statement, it being clearer than any English one can be, owing to the power of the general Greek term for wealth, "useable things":-- [Greek: Tauta ara onta, tô men epistamenô chrêsthai autôn hekastois chrêmata esti, tô de mê epistamenô, ou chrêmata; hôsper ge auloi tô men epistamenô axiôs logou aulein chrêmata eisi, tô de mê epistamenô ouden mallon ê achrêstoi lithoi, ei mê apsdidoito ge autous. * * * Mê pôloumenoi men gar ou chrêmata eisin hoi auloi; (ouden gar chrêsimoi eisi) pôloumenoi de chrêmata; Pros tauta d' ho Sôkratês eipen, ên epistêtai ge pôlein. Ei de pôloin hau pros touton hos mê epistêtai chrêsthai, oude pôloumenoi eisi chrêmata.] The labour of life, under such conditions, would probably be neither zealous nor cheerful; yet the only difference between this position and that of the ordinary capitalist is the power which the latter delights in supposing himself to possess, and which is attributed to him by others, of spending his money at any moment. This pleasure, taken in the imagination of power to part with that which we have no intention of parting with, is one of the most curious though commonest forms of Eidolon, or Phantasm of Wealth. But the political economist has nothing to do with this idealism, and looks only to the practical issue of it,--namely, that the holder of wealth, in such temper, may be regarded simply as a mechanical means of collection; or as a money-chest with a slit in it,[72] set in the public thoroughfare;--chest of which only Death has the key, and probably Chance the distribution of contents. In his function of lender (which, however, is one of administration, not use, as far as he is himself concerned), the capitalist takes, indeed, a more interesting aspect; but even in that function, his relations with the state are apt to degenerate into a mechanism for the convenient contraction of debt;--a function the more mischievous, because a nation invariably appeases its conscience with respect to an unjustifiable expense by meeting it with borrowed funds,--expresses its repentance of a foolish piece of business by letting its tradesmen wait for their money,--and always leaves its descendants to pay for the work which will be of the least service to them.[73] [72] The orifice being not merely of a receptant, but of a suctional character. Among the types of human virtue and vice presented grotesquely by the lower animals, perhaps none is more curiously definite that that of avarice in the Cephalopod, a creature which has a purse for a body; a hawk's beak for a mouth; suckers for feet and hands; and whose house is its own skeleton. [73] It would be well if a somewhat dogged conviction could be enforced on nations as on individuals, that, with few exceptions, what they cannot at present pay for, they should not at present have. Quit of these three sources of misconception, the reader will have little farther difficulty in apprehending the real nature of Effectual value. He may, however, at first not without surprise, perceive the consequences involved in the acceptance of our definition. For if the actual existence of wealth be dependent on the power of its possessor, it follows that the sum of wealth held by the nation, instead of being constant or calculable, varies hourly, nay, momentarily, with the number and character of its holders; and that in changing hands, it changes in quantity. And farther, since the worth of the currency is proportioned to the sum of material wealth which it represents, if the sum of the wealth changes, the worth of the currency changes. And thus both the sum of the property, and power of the currency, of the State, vary momentarily, as the character and number of the holders. And not only so, but a different rate and manner of variation is caused by the character of the holders of different kinds of wealth. The transitions of value caused by the character of the holders of land differ in mode from those caused by character in holders of works of art; and these again from those caused by character in holders of machinery or other working capital. But we cannot examine these special phenomena of any kind of wealth until we have a clear idea of the way in which true currency expresses them; and of the resulting modes in which the cost and price of any article are related to its value. To obtain this we must approach the subject in its first elements. Let us suppose a national store of wealth, real or imaginary (that is to say, composed of material things either useful, or believed to be so), presided over by a Government,[74] and that every workman, having produced any article involving labour in its production, and for which he has no immediate use, brings it to add to this store, receiving, from the Government, in exchange an order either for the return of the thing itself, or of its equivalent in other things,[75] such as he may choose out of the store at any time when he needs them. Now, supposing that the labourer speedily uses this general order, or, in common language, "spends the money," he has neither changed the circumstances of the nation nor his own, except in so far as he may have produced useful and consumed useless articles, or vice versa. But if he does not use, or uses in part only, the order he receives, and lays aside some portion of it; and thus every day bringing his contribution to the national store, lays by some percentage of the order received in exchange for it, he increases the national wealth daily by as much as he does not use of the received order, and to the same amount accumulates a monetary claim on the Government. It is of course always in his power, as it is his legal right, to bring forward this accumulation of claim, and at once to consume, to destroy, or distribute, the sum of his wealth. Supposing he never does so, but dies, leaving his claim to others, he has enriched the State during his life by the quantity of wealth over which that claim extends, or has, in other words, rendered so much additional life possible in the State, of which additional life he bequeaths the immediate possibility to those whom he invests with his claim, he would distribute this possibility of life among the nation at large. [74] The reader is to include here in the idea of "Government," any branch of the Executive, or even any body of private persons, entrusted with the practical management of public interests unconnected directly with their own personal ones. In theoretical discussions of legislative interference with political economy, it is usually and of course unnecessarily, assumed that Government must be always of that form and force in which we have been accustomed to see it;--that its abuses can never be less, nor its wisdom greater, nor its powers more numerous. But, practically, the custom in most civilized countries is, for every man to deprecate the interference of Government as long as things tell for his personal advantage, and to call for it when they cease to do so. The request of the Manchester Economists to be supplied with cotton by the Government (the system of supply and demand having, for the time, fallen sorrowfully short of the expectations of scientific persons from it), is an interesting case in point. It were to be wished that less wide and bitter suffering (suffering, too, of the innocent) had been needed to force the nation, or some part of it, to ask itself why a body of men, already confessedly capable of managing matters both military and divine, should not be permitted, or even requested at need to provide in some wise for sustenance as well as for defence, and secure, if it might be (and it might, I think, even the rather be), purity of bodily ailment, as well as of religious conviction? Why, having made many roads for the passage of armies, they may not make a few for the conveyance of food; and after organizing, with applause, various schemes of spiritual instruction for the Public, organize, moreover, some methods of bodily nourishment for them? Or is the soul so much less trustworthy in its instincts than the stomach, that legislation is necessary for the one, but inconvenient to the other? There is a strange fallacy running at this time through all talk about free trade. It is continually assumed that every kind of Government interference takes away liberty of trade. Whereas liberty is lost only when interference hinders, not when it helps. You do not take away a man's freedom by showing him his road--nor by making it smoother for him (not that it is always desirable to do so, but it may be); nor even by fencing it for him, if there is an open ditch at the side of it. The real mode in which protection interferes with liberty, and the real evil of it, is not in its "protecting" one person, but in its hindering another; a form of interference which invariably does most mischief to the person it is intended to serve, which the Northern Americans are about discomfortably to discover, unless they think better of it. There is also a ludicrous confusion in many persons' minds between protection and encouragement; they differ materially. "Protection" is saying to the commercial schoolboy, "Nobody shall hit you." "Encouragement," is saying to him, "That's the way to hit." [75] The question of equivalence (namely, how much wine a man is to receive in return for so much corn, or how much coal in return for so much iron) is a quite separate one, which we will examine presently. For the time let it be assumed that this equivalence has been determined, and that the Government order in exchange for a fixed weight of any article (called, suppose, _a_), is either for the return of that weight of the article itself, or of another fixed weight of the article _b_, or another of the article _c_, and so on. We hitherto consider the Government itself as simply a conservative power, taking charge of the wealth entrusted to it. But a Government may be far other than a conservative power. It may be on the one hand constructive, on the other destructive. If a constructive, or improving power, using all the wealth entrusted to it to the best advantage, the nation is enriched in root and branch at once, and the Government is enabled for every order presented, to return a quantity of wealth greater than the order was written for, according to the fructification obtained in the interim.[76] [76] The reader must be warned in advance that the conditions here supposed have nothing to do with the "interest" of money commonly so called. This ability may be either concealed, in which case the currency does not completely represent the wealth of the country, or it may be manifested by the continual payment of the excess of value on each order, in which case there is (irrespectively, observe, of collateral results afterwards to be examined) a perpetual rise in the worth of the currency, that is to say, a fall in the price of all articles represented by it. But if the Government be destructive, or a consuming power, it becomes unable to return the value received on the presentation of the order. This inability may either (A), be concealed by meeting demands to the full, until it issue in bankruptcy, or in some form of national debt;--or (B), it may be concealed during oscillatory movements between destructiveness and productiveness, which result on the whole in stability;--or (C), it may be manifested by the consistent return of less than value received on each presented order, in which case there is a consistent fall in the worth of the currency, or rise in the price of the things represented by it. Now, if for this conception of a central Government, we substitute that of another body of persons occupied in industrial pursuits, of whom each adds in his private capacity to the common store: so that the store itself, instead of remaining a public property of ascertainable quantity, for the guardianship of which a body of public men are responsible, becomes disseminated private property, each man giving in exchange for any article received from another, a general order for its equivalent in whatever other article the claimant may desire (such general order being payable by any member of the society in whose possession the demanded article may be found), we at once obtain an approximation to the actual condition of a civilized mercantile community from which approximation we might easily proceed into still completer analysis. I purpose, however, to arrive at every result by the gradual expansion of the simpler conception; but I wish the reader to observe, in the meantime, that both the social conditions thus supposed (and I will by anticipation say also all possible social conditions) agree in two great points; namely, in the primal importance of the supposed national store or stock, and in its destructibility or improvability by the holders of it. I. Observe that in both conditions, that of central Government-holding, and diffused private-holding, the quantity of stock is of the same national moment. In the one case, indeed, its amount may be known by examination of the persons to whom it is confided; in the other it cannot be known but by exposing the private affairs of every individual. But, known or unknown, its significance is the same under each condition. The riches of the nation consist in the abundance, and their wealth depends on the nature of this store. II. In the second place, both conditions (and all other possible ones) agree in the destructibility or improvability of the store by its holders. Whether in private hands, or under Government charge, the national store may be daily consumed, or daily enlarged, by its possessors; and while the currency remains apparently unaltered, the property it represents may diminish or increase. The first question, then, which we have to put under our simple conception of central Government, namely, "What store has it?" is one of equal importance, whatever may be the constitution of the State; while the second question--namely, "Who are the holders of the store?"--involves the discussion of the constitution of the State itself. The first inquiry resolves itself into three heads: 1. What is the nature of the store? 2. What is its quantity in relation to the population? 3. What is its quantity in relation to the currency? The second inquiry, into two: 1. Who are the Holders of the store, and in what proportions? 2. Who are the Claimants of the store (that is to say, the holders of the currency), and in what proportions? We will examine the range of the first three questions in the present paper; of the two following, in the sequel. Question First. What is the nature of the store? Has the nation hitherto worked for and gathered the right thing or the wrong? On that issue rest the possibilities of its life. For example, let us imagine a society, of no great extent, occupied in procuring and laying up store of corn, wine, wool, silk, and other such preservable materials of food and clothing; and that it has a currency representing them. Imagine farther, that on days of festivity, the society, discovering itself to derive satisfaction from pyrotechnics, gradually turns its attention more and more to the manufacture of gunpowder; so that an increasing number of labourers, giving what time they can spare to this branch of industry, bring increasing quantities of combustibles into the store, and use the general orders received in exchange to obtain such wine, wool, or corn as they may have need of. The currency remains the same, and represents precisely the same amount of material in the store, and of labour spent in producing it. But the corn and wine gradually vanish, and in their place, as gradually, appear sulphur and saltpetre; till at last, the labourers who have consumed corn and supplied nitre, presenting on a festal morning some of their currency to obtain materials for the feast, discover that no amount of currency will command anything Festive, except Fire. The supply of rockets is unlimited, but that of food limited in a quite final manner; and the whole currency in the hands of the society represents an infinite power of detonation, but none of existence. The statement, caricatured as it may seem, is only exaggerated in assuming the persistence of the folly to extremity, unchecked, as in reality it would be, by the gradual rise in price of food. But it falls short of the actual facts of human life in expression of the depth and intensity of the folly itself. For a great part (the reader would not believe how great until he saw the statistics in detail) of the most earnest and ingenious industry of the world is spent in producing munitions of war; gathering that is to say the materials, not of festive, but of consuming fire; filling its stores with all power of the instruments of pain, and all affluence of the ministries of death. It was no true Trionfo della Morte which men have seen and feared (sometimes scarcely feared) so long;--wherein he brought them rest from their labours. We see and share another and higher form of his triumph now. Task-master instead of Releaser, he rules the dust of the arena no less than of the tomb; and, content once in the grave whither man went, to make his works cease and his devices to vanish,--now, in the busy city and on the serviceable sea, makes his work to increase, and his devices to multiply. To this doubled loss, or negative power of labour, spent in producing means of destruction, we have to add in our estimate of the consequences of human folly, whatever more insidious waste of toil there is in the production of unnecessary luxury. Such and such an occupation (it is said) supports so many labourers, because so many obtain wages in following it; but it is never considered that unless there be a supporting power in the product of the occupation, the wages given to one man are merely withdrawn from another. We cannot say of any trade that it maintains such and such a number of persons, unless we know how and where the money, now spent in the purchase of its produce, would have been spent, if that produce had not been manufactured. The purchasing funds truly support a number of people in making This; but (probably) leave unsupported an equal number who are making, or could have made That. The manufacturers of small watches thrive in Geneva;--it is well;--but where would the money spent on small watches have gone, had there been no small watches to buy? If the so frequently uttered aphorism of mercantile economy--"labour is limited by capital"--were true, this question would be a definite one. But it is untrue; and that widely. Out of a given quantity of wages, more or less labour is to be had, according to the quantity of will with which we can inspire the workman; and the true limit of labour is only in the limit of this moral stimulus of the will, and the bodily power. In an ultimate, but entirely practical sense, labour is limited by capital, as it is by matter--that is to say, where there is no material, there can be no work--but in the practical sense, labour is limited only by the great original capital[77] of Head, Heart, and Hand. Even in the most artificial relations of commerce, it is to capital as fire to fuel: out of so much fuel you shall have so much fire--not in proportion to the mass of combustibles, but to the force of wind that fans and water that quenches; and the appliance of both. And labour is furthered, as conflagration is, not so much by added fuel, as by admitted air. [77] The aphorism, being hurried English for "labour is limited by want of capital," involves also awkward English in its denial, which cannot be helped. For which reasons, I had to insert, above, the qualifying "probably"; for it can never be said positively that the purchase money, or wages fund of any trade is withdrawn from some other trade. The object itself may be the stimulus of the production of the money which buys it; that is to say, the work by which the purchaser obtained the means of buying it would not have been done by him, unless he had wanted that particular thing. And the production of any article not intrinsically (nor in the process of manufacture) injurious, is useful, if the desire of it causes productive labour in other directions. In the national store, therefore, the presence of things intrinsically valueless does not imply an entirely correlative absence of things valuable. We cannot be certain that all the labour spent on vanity has been diverted from reality, and that for every bad thing produced, a precious thing has been lost. In great measure, the vain things represent the results of roused indolence; they have been carved, as toys, in extra time; and, if they had not been made, nothing else would have been made. Even to munitions of war this principle applies; they partly represent the work of men who, if they had not made spears, would never have made pruning-hooks, and who are incapable of any activities but those of contest. Thus, then, finally, the nature of the store has to be considered under two main lights, the one, that of its immediate and actual utility; the other, that of the past national character which it signifies by its production, and future character which it must develop by its uses. And the issue of this investigation will be to show us that Economy does not depend merely on principles of "demand and supply," but primarily on what is demanded, and what is supplied. Question Second. What is the quantity of the store in relation to the population? It follows from what has been already stated that the accurate form in which this question has to be put is--"What quantity of each article composing the store exists in proportion to the real need for it by the population?" But we shall for the time assume, in order to keep all our terms at the simplest, that the store is wholly composed of useful articles, and accurately proportioned to the several needs of them. Now it does not follow, because the store is large in proportion to the number of people, that the people must be in comfort, nor because it is small, that they must be in distress. An active and economical race always produces more than it requires, and lives (if it is permitted to do so) in competence on the produce of its daily labour. The quantity of its store, great or small, is therefore in many respects indifferent to it, and cannot be inferred by its aspect. Similarly an inactive and wasteful population, which cannot live by its daily labour, but is dependent, partly or wholly, on consumption of its store, may be (by various difficulties hereafter to be examined, in realization of getting at such store) retained in a state of abject distress, though its possessions may be immense. But the results always involved in the magnitude of store are, the commercial power of the nation, its security, and its mental character. Its commercial power, in that according to the quantity of its store, may be the extent of its dealings; its security, in that according to the quantity of its store are its means of sudden exertion or sustained endurance; and its character, in that certain conditions of civilization cannot be attained without permanent and continually accumulating store, of great intrinsic value, and of peculiar nature. Now, seeing that these three advantages arise from largeness of store in proportion to population, the question arises immediately, "Given the store--is the nation enriched by diminution of its numbers? Are a successful national speculation and a pestilence, economically the same thing?" This is in part a sophistical question; such as it would be to ask whether a man was richer when struck by disease which must limit his life within a predicable period than he was when in health. He is enabled to enlarge his current expenses, and has for all purposes a larger sum at his immediate disposal (for, given the fortune, the shorter the life the larger the annuity); yet no man considers himself richer because he is condemned by his physician. The logical reply is that, since Wealth is by definition only the means of life, a nation cannot be enriched by its own mortality. Or in shorter words, the life is more than the meat; and existence itself more wealth than the means of existence. Whence, of two nations who have equal store, the more numerous is to be considered the richer, provided the type of the inhabitant be as high (for, though the relative bulk of their store be less, its relative efficiency, or the amount of effectual wealth, must be greater). But if the type of the population be deteriorated by increase of its numbers, we have evidence of poverty in its worst influence; and then, to determine whether the nation in its total may still be justifiably esteemed rich, we must set or weigh the number of the poor against that of the rich. To effect which piece of scalework, it is of course necessary to determine, first, who are poor and who are rich; nor this only, but also how poor and how rich they are! Which will prove a curious thermometrical investigation; for we shall have to do for gold and for silver what we have done for quicksilver--determine, namely, their freezing-point, their zero, their temperate and fever-heat points; finally, their vaporescent point, at which riches, sometimes explosively, as lately in America, "make to themselves wings";--and correspondently the number of degrees below zero at which poverty, ceasing to brace with any wholesome cold, burns to the bone. For the performance of these operations, in the strictest sense scientific, we will first look to the existing so-called "science" of Political Economy; we will ask it to define for us the comparatively and superlatively rich, and the comparatively and superlatively poor; and on its own terms--if any terms it can pronounce--examine, in our prosperous England, how many rich and how many poor people there are; and whether the quantity and intensity of the poverty is indeed so overbalanced by the quantity and intensity of wealth, that we may permit ourselves a luxurious blindness to it, and call ourselves, complacently, a rich country. And if we find no clear definition in the existing science, we will endeavour for ourselves to fix the true degrees of the Plutonic scale, and to apply them. Question Third. What is the quantity of the store in relation to the Currency? We have seen that the real worth of the currency, so far as dependent on its relation to the magnitude of the store, may vary within certain limits, without affecting its worth in exchange. The diminution or increase of the represented wealth may be unperceived, and the currency may be taken either for more or less than it is truly worth. Usually, it is taken for more; and its power in exchange, or credit-power, is thus increased (or retained) up to a given strain upon its relation to existing wealth. This credit-power is of chief importance in the thoughts, because most sharply present to the experience, of a mercantile community; but the conditions of its stability[78] and all other relations of the currency to the material store are entirely simple in principle, if not in action. Far other than simple are the relations of the currency to that "available labour" which by our definition (p. 219) it also represents. For this relation is involved not only with that of the magnitude of the store to the number, but with that of the magnitude of the store to the mind, of the population. Its proportion to their number, and the resulting worth of currency, are calculable; but its proportion to their will for labour is not. The worth of the piece of money which claims a given quantity of the store, is, in exchange, less or greater according to the facility of obtaining the same quantity of the same thing without having recourse to the store. In other words, it depends on the immediate Cost and Price of the thing. We must now, therefore, complete the definition of these terms. [78] These are nearly all briefly represented by the image used for the force of money by Dante, of mast and sail,-- "Quali dal vento be gonfiate vele Caggiono avvolte, poi chè l'alber fiacca Tal cadde a terra la fiera crudele." The image may be followed out, like all of Dante's, into as close detail as the reader chooses. Thus the stress of the sail must be proportioned to the strength of mast, and it is only in unforeseen danger that a skilful seaman ever carries all the canvas his spars will bear: states of mercantile languor are like the flap of the sail in a calm,--of mercantile precaution, like taking in reefs; and the mercantile ruin is instant on the breaking of the mast. All cost and price are counted in Labour. We must know first, therefore, what is to be counted as Labour. I have already defined labour to be the Contest of the life of man with an opposite.[79] Literally, it is the quantity of "Lapse," loss, or failure of human life caused by any effort. It is usually confused with effort itself, or the application of power (opera); but there is much effort which is merely a mode of recreation, or of pleasure. The most beautiful actions of the human body and the highest results of the human intelligence, are conditions, or achievements, of quite unlaborious, nay, of recreative, effort. But labour is the suffering in effort. It is the negative quantity, or quantity of de-feat which has to be counted against every Feat, and of de-fect which has to be counted against every Fact, or Deed of men. In brief, it is "that quantity of our toils which we die in." [79] That is to say, its only price is its return. Compare "Unto This Last," p. 162 and what follows. We might, therefore, à priori, conjecture (as we shall ultimately find) that it cannot be bought, nor sold. Everything else is bought and sold for Labour, but labour itself cannot be bought nor sold for anything, being priceless.[80] The idea that it is a commodity to be bought or sold, is the alpha and omega of Politico-Economic fallacy. [80] The object of Political Economy is not to buy, nor to sell labour,--but to spare it. Every attempt to buy or sell it is, in the outcome, ineffectual;--so far as successful, it is not sale, but Betrayal; and the purchase money is a part of that typical thirty pieces which bought, first the greatest of labours, and afterwards the burial field of the Stranger; for this purchase-money, being in its very smallness or vileness the exactly measured opposite of "vilis annona amicorum," makes all men strangers to each other. This being the nature of labour, the "Cost" of anything is the quantity of labour necessary to obtain it;--the quantity for which, or at which, it "stands" (constat). It is literally the "Constancy" of the thing;--you shall win it--move it--come at it--for no less than this. Cost is measured and measurable only in "labor," not in "opera."[81] It does not matter how much power a thing needs to produce it; it matters only how much distress. Generally the more power it requires, the less the distress; so that the noblest works of man cost less than the meanest. [81] Cicero's distinction, "sordidi quæstus, quorum operæ, non quorum artes emuntur," admirable in principle, is inaccurate in expression, because Cicero did not practically know how much operative dexterity is necessary in all the higher arts; but the cost of this dexterity is incalculable. Be it great or small, the "cost" of the mere authority and perfectness of touch in a hammerstroke of Donatello's, or a pencil touch of Correggio's, is inestimable by any ordinary arithmetic. (The best masters themselves usually estimate it at sums varying from two to three or four shillings a day, with wine or soup extra.) True labour, or spending of life, is either of the body, in fatigue or pain, of the temper or heart (as in perseverance of search for things,--patience in waiting for them,--fortitude or degradation in suffering for them, and the like), or of the intellect. All these kinds of labour are supposed to be included in the general term, and the quantity of labour is then expressed by the time it lasts. So that a unit of labour is "an hour's work" or a day's work, as we may determine.[82] [82] Only observe, as some labour is more destructive of life than other labour, the hour or day of the more destructive toil is supposed to include proportionate rest. Though men do not, or cannot, usually take such rest, except in death. Cost, like value, is both intrinsic and effectual. Intrinsic cost is that of getting the thing in the right way; effectual cost is that of getting the thing in the way we set about it. But intrinsic cannot be made a subject of analytical investigation, being only partially discoverable, and that by long experience. Effectual cost is all that the political economist can deal with; that is to say, the cost of the thing under existing circumstances and by known processes. Cost (irrespectively of any question of demand or supply) varies with the quantity of the thing wanted, and with the number of persons who work for it. It is easy to get a little of some things, but difficult to get much; it is impossible to get some things with few hands, but easy to get them with many. The cost and value of things, however difficult to determine accurately, are thus both dependent on ascertainable physical circumstances.[83] [83] There is, therefore, observe, no such thing as cheapness (in the common use of that term), without some error or injustice. A thing is said to be cheap, not because it is common, but because it is supposed to be sold under its worth. Everything has its proper and true worth at any given time, in relation to everything else; and at that worth should be bought and sold. If sold under it, it is cheap to the buyer by exactly so much as the seller loses, and no more. Putrid meat, at twopence a pound, is not "cheaper" than wholesome meat at sevenpence a pound; it is probably much dearer; but if, by watching your opportunity, you can get the wholesome meat for sixpence a pound, it is cheaper to you by a penny, which you have gained, and the seller has lost. The present rage for cheapness is either, therefore, simply and literally, a rage for badness of all commodities, or it is an attempt to find persons whose necessities will force them to let you have more than you should for your money. It is quite easy to produce such persons, and in large numbers; for the more distress there is in a nation, the more cheapness of this sort you can obtain, and your boasted cheapness is thus merely a measure of the extent of your national distress. There is, indeed, a condition of apparent cheapness, which we confuse, in practice and in reasoning, with the other; namely, the real reduction in cost of articles by right application of labour. But in this case the article is only cheap with reference to its former price, the so-called cheapness is only our expression for the sensation of contrast between its former and existing prices. So soon as the new methods of producing the article are established, it ceases to be esteemed either cheap or dear, at the new price, as at the old one, and is felt to be cheap only when accident enables it to be purchased beneath this new value. And it is to no advantage to produce the article more easily, except as it enables you to multiply your population. Cheapness of this kind is merely the discovery that more men can be maintained on the same ground; and the question, how many you will maintain in proportion to your means, remains exactly in the same terms that it did before. A form of immediate cheapness results, however, in many cases, without distress, from the labour of a population where food is redundant, or where the labour by which the food is produced leaves much idle time on their hands, which may be applied to the production of "cheap" articles. All such phenomena indicate to the political economist places where the labour is unbalanced. In the first case, the just balance is to be effected by taking labourers from the spot where the pressure exists, and sending them to that where food is redundant. In the second, the cheapness is a local accident, advantageous to the local purchaser, disadvantageous to the local producer. It is one of the first duties of commerce to extend the market and thus give the local producer his full advantage. Cheapness caused by natural accidents of harvest, weather, etc., is always counterbalanced, in due time, by natural scarcity similarly caused. It is the part of wise Government, and healthy commerce, so to provide in times and places of plenty for times and places of dearth, as that there shall never be waste, nor famine. Cheapness caused by gluts of the market is merely a disease of clumsy and wanton commerce. But their price is dependent on the human will. Such and such a thing is demonstrably good for so much. And it may demonstrably be bad for so much. But it remains questionable, and in all manner of ways questionable, whether I choose to give so much.[84] [84] Price has already been defined (pp. 214, 215) to be the quantity of labour which the possessor of a thing is willing to take for it. It is best to consider the price to be that fixed by the possessor, because the possessor has absolute power of refusing sale, while the purchaser has no absolute power of compelling it; but the effectual or market price is that at which their estimates coincide. This choice is always a relative one. It is a choice to give a price for this, rather than for that;--a resolution to have the thing, if getting it does not involve the loss of a better thing. Price depends, therefore, not only on the cost of the commodity itself, but on its relation to the cost of every other attainable thing. Farther. The power of choice is also a relative one. It depends not merely on our own estimate of the thing, but on everybody else's estimate; therefore on the number and force of the will of the concurrent buyers, and on the existing quantity of the thing in proportion to that number and force. Hence the price of anything depends on four variables.[85] 1. Its cost. 2. Its attainable quantity at that cost. 3. The number and power of the persons who want it. 4. The estimate they have formed of its desirableness. (Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all.) [85] The two first of these variables are included in the _x_, and the two last in the _y_, of the formula given at p. 162 of "Unto This Last," and the four are the radical conditions which regulate the price of things on first production; in their price in exchange, the third and fourth of these divide each into two others, forming the Four which are stated at p. 186 of "Unto This Last." Now, in order to show the manner in which price is expressed in terms of a currency, we must assume these four quantities to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, _a_ and _b_. Their demand for these articles (if the reader likes better, he may say their need) is to be absolute, existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel in a cold country, and let _a_ represent the least quantity of bread, and _b_ the least quantity of fuel, which will support a man's life for a day. Let _a_ be producible by an hour's labour but _b_ only by two hours' labour; then the cost of _a_ is one hour, and of _b_ two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.[86] Then if A works three hours, he produces 3_a_, which is one _a_ more than both the men want. And if B works three hours, he produces only 1-1/2_b_, or half of _b_ less than both want. But if A works three hours and B six, A has 3_a_, and B has 3_b_, a maintenance in the right proportion for both for a day and a half; so that each might take a half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore, the just exchange should be, A, giving two _a_ for one _b_, has one _a_ and one _b_;--maintenance for a day. B, giving one _b_ for two _a_, has two _a_ and two _b_;--maintenance for two days. [86] This "greater ease" ought to be allowed for by a diminution in the times of the divided work; but as the proportion of times would remain the same, I do not introduce this unnecessary complexity into the calculation. But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces _a_, and two, B and C, produce _b_;--A, working three hours, has three _a_;--B, three hours, 1-1/2_b_;--C, three hours, 1-1/2_b_. B and C each give half of _b_ for _a_, and all have their equal daily maintenance for equal daily work. To carry the example a single step farther, let three articles, _a_, _b_, and _c_, be needed. Let _a_ need one hour's work, _b_ two, and _c_ four; then the day's work must be seven hours, and one man in a day's work can make 7_a_, or 3-1/2_b_, or 1-3/4_c_. Therefore one A works for _a_, producing 7_a_; two B's work for _b_, producing 7_b_; four C's work for _c_, producing 7_c_. A has six _a_ to spare, and gives two _a_ for one _b_, and four _a_ for one _c_. Each B has 2-1/2_b_ to spare, and gives 1/2_b_ for one _a_, and two _b_ for one _c_. Each C has 3/4 of _c_ to spare, and gives 1/2_c_ for one _b_, and 1/4 of _c_ for one _a_. And all have their day's maintenance. Generally, therefore, it follows that, if the demand is constant,[87] the relative prices of things are as their costs, or as the quantities of labour involved in production. [87] Compare "Unto This Last," p. 177, et seq. Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quantity of any given article (with us it is in the form of orders for gold), and all quantities of other articles are priced by the relation they bear to the article which the currency claims. But the worth of the currency itself is not in the slightest degree founded more on the worth of the article for which the gold is exchangeable. It is just as accurate to say, "So many pounds are worth an acre of land," as "An acre of land is worth so many pounds." The worth of gold, of land, of houses, and of food, and of all other things, depends at any moment on the existing quantities and relative demands for all and each; and a change in the worth of, or demand for, any one, involves an instantaneously correspondent change in the worth, and demand for, all the rest--a change as inevitable and as accurately balanced (though often in its process as untraceable) as the change in volume of the outflowing river from some vast lake, caused by change in the volume of the inflowing streams, though no eye can trace, no instrument detect motion either on its surface, or in the depth. Thus, then, the real working power or worth of the currency is founded on the entire sum of the relative estimates formed by the population of its possessions; a change in this estimate in any direction (and therefore every change in the national character), instantly alters the value of money, in its second great function of commanding labour. But we must always carefully and sternly distinguish between this worth of currency, dependent on the conceived or appreciated value of what it represents, and the worth of it, dependent on the existence of what it represents. A currency is true or false, in proportion to the security with which it gives claim to the possession of land, house, horse, or picture; but a currency is strong or weak, worth much or worth little, in proportion to the degree of estimate in which the nation holds the house, horse, or picture which is claimed. Thus the power of the English currency has been, till of late, largely based on the national estimate of horses and of wine: so that a man might always give any price to furnish choicely his stable, or his cellar, and receive public approval therefor: but if he gave the same sum to furnish his library, he was called mad, or a Bibliomaniac. And although he might lose his fortune by his horses, and his health or life by his cellar, and rarely lost either by his books, he was yet never called a Hippomaniac nor an Oinomaniac; but only Bibliomaniac, because the current worth of money was understood to be legitimately founded on cattle and wine, but not on literature. The prices lately given at sales for pictures and MSS. indicate some tendency to change in the national character in this respect, so that the worth of the currency may even come in time to rest, in an acknowledged manner, somewhat on the state and keeping of the Bedford missal, as well as on the health of Caractacus or Blink Bonny; and old pictures be considered property, no less than old port. They might have been so before now, but it is more difficult to choose the one than the other. Now, observe, all these sources of variation in the power of the currency exist wholly irrespective of the influences of vice, indolence, and improvidence. We have hitherto supposed, throughout the analysis, every professing labourer to labour honestly, heartily, and in harmony with his fellows. We have now to bring farther into the calculation the effects of relative industry, honour, and forethought, and thus to follow out the bearings of our second inquiry: Who are the holders of the Store and Currency, and in what proportions? This, however, we must reserve for our next paper,--noticing here only that, however distinct the several branches of the subject are, radically, they are so interwoven in their issues that we cannot rightly treat any one, till we have taken cognisance of all. Thus the quantity of the currency in proportion to number of population is materially influenced by the number of the holders in proportion to the non-holders; and this again by the number of holders of goods. For as, by definition, the currency is a claim to goods which are not possessed, its quantity indicates the number of claimants in proportion to the number of holders; and the force and complexity of claim. For if the claims be not complex, currency as a means of exchange may be very small in quantity. A sells some corn to B, receiving a promise from B to pay in cattle, which A then hands over to C, to get some wine. C in due time claims the cattle from B; and B takes back his promise. These exchanges have, or might have been, all effected with a single coin or promise; and the proportion of the currency to the store would in such circumstances indicate only the circulating vitality of it--that is to say, the quantity and convenient divisibility of that part of the store which the habits of the nation keep in circulation. If a cattle-breeder is content to live with his household chiefly on meat and milk, and does not want rich furniture, or jewels, or books,--if a wine- and corn-grower maintains himself and his men chiefly on grapes and bread;--if the wives and daughters of families weave and spin the clothing of the household, and the nation, as a whole, remains content with the produce of its own soil and the work of its own hands, it has little occasion for circulating media. It pledges and promises little and seldom; exchanges only so far as exchange is necessary for life. The store belongs to the people in whose hands it is found, and money is little needed either as an expression of right, or practical means of division and exchange. But in proportion as the habits of the nation become complex and fantastic (and they may be both, without therefore being civilized), its circulating medium must increase in proportion to its store. If everyone wants a little of everything,--if food must be of many kinds, and dress of many fashions,--if multitudes live by work which, ministering to fancy, has its pay measured by fancy, so that large prices will be given by one person for what is valueless to another,--if there are great inequalities of knowledge, causing great inequalities of estimate,--and finally, and worst of all, if the currency itself, from its largeness, and the power which the possession of it implies, becomes the sole object of desire with large numbers of the nation, so that the holding of it is disputed among them as the main object of life:--in each and all these cases, the currency enlarges in proportion to the store, and, as a means of exchange and division, as a bond of right, and as an expression of passion, plays a more and more important part in the nation's dealings, character, and life. Against which part, when, as a bond of Right, it becomes too conspicuous and too burdensome, the popular voice is apt to be raised in a violent and irrational manner, leading to revolution instead of remedy. Whereas all possibility of Economy depends on the clear assertion and maintenance of this bond of right, however burdensome. The first necessity of all economical government is to secure the unquestioned and unquestionable working of the great law of Property--that a man who works for a thing shall be allowed to get it, keep it, and consume it, in peace; and that he who does not eat his cake to-day, shall be seen, without grudging, to have his cake to-morrow. This, I say, is the first point to be secured by social law; without this, no political advance, nay, no political existence, is in any sort possible. Whatever evil, luxury, iniquity, may seem to result from it, this is nevertheless the first of all Equities; and to the enforcement of this, by law and by police-truncheon, the nation must always primarily set its mind--that the cupboard door may have a firm lock to it, and no man's dinner be carried off by the mob, on its way home from the baker's. Which, thus fearlessly asserting, we shall endeavour in the next paper to consider how far it may be practicable for the mob itself, also, in due breadth of dish, to have dinners to carry home. III. THE CURRENCY-HOLDERS AND STORE-HOLDERS. THE DISEASE OF DESIRE. It will be seen by reference to the last paper that our present task is to examine the relation of holders of store to holders of currency; and of both to those who hold neither. In order to do this, we must determine on which side we are to place substances such as gold, commonly known as bases of currency. By aid of previous definitions the reader will now be able to understand closer statements than have yet been possible. The currency of any country consists of every document acknowledging debt which is transferable in the country. This transferableness depends upon its intelligibility and credit. Its intelligibility depends chiefly on the difficulty of forging anything like it;--its credit much on national character, but ultimately always on the existence of substantial means of meeting its demand. As the degrees of transferableness are variable (some documents passing only in certain places, and others passing, if at all, for less than their inscribed value), both the mass and, so to speak, fluidity, of the currency, are variable. True or perfect currency flows freely, like a pure stream; it becomes sluggish or stagnant in proportion to the quantity of less transferable matter which mixes with it, adding to its bulk, but diminishing its purity. Substances of intrinsic value, such as gold, mingle also with the currency, and increase, while they modify, its power; these are carried by it as stones are carried by a torrent, sometimes momentarily impeding, sometimes concentrating its force, but not affecting its purity. These substances of intrinsic value may be also stamped or signed so as to become acknowledgments of debt, and then become, so far as they operate independently of their intrinsic value, part of the real currency. Deferring consideration of minor forms of currency, consisting of documents bearing private signature, we will examine the principle of legally authorized or national currency. This, in its perfect condition, is a form of public acknowledgment of debt, so regulated and divided that any person presenting a commodity of tried worth in the public market, shall, if he please, receive in exchange for it a document giving him claim for the return of its equivalent, (1) in any place, (2) at any time, and (3) in any kind. When currency is quite healthy and vital, the persons entrusted with its management are always able to give on demand either-- A. The assigning document for the assigned quantity of goods. Or, B. The assigned quantity of goods for the assigning document. If they cannot give document for goods, the national exchange is at fault. If they cannot give goods for document, the national credit is at fault. The nature and power of the document are therefore to be examined under the three relations which it bears to Place, Time, and Kind. 1. It gives claim to the return of equivalent wealth in any Place. Its use in this function is to save carriage, so that parting with a bushel of corn in London, we may receive an order for a bushel of corn for the Antipodes, or elsewhere. To be perfect in this use, the substance of currency must be to the maximum portable, credible, and intelligible. Its non-acceptance or discredit results always from some form of ignorance or dishonour: so far as such interruptions rise out of differences in denomination, there is no ground for their continuance among civilized nations. It may be convenient in one country to use chiefly copper for coinage, in another silver, and in another gold,--reckoning accordingly in centimes, francs, or sequins; but that a French franc should be different in weight from an English shilling, and an Austrian zwanziger vary in weight and alloy from both, is wanton loss of commercial power. 2. It gives claim to the return of equivalent wealth at any Time. In this second use, currency is the exponent of accumulation: it renders the laying up of store at the command of individuals unlimitedly possible;--whereas, but for its intervention, all gathering would be confined within certain limits by the bulk of poverty, or by its decay, or the difficulty of its guardianship. "I will pull down my barns and build greater" cannot be a daily saying; and all material investment is enlargement of care. The national currency transfers the guardianship of the store to many; and preserves to the original producer the right of re-entering on its possession at any future period. 3. It gives claim (practical, though not legal) to the return of equivalent wealth in any Kind. It is a transferable right, not merely to this or that, but to anything; and its power in this function is proportioned to the range of choice. If you give a child an apple or a toy, you give him a determinate pleasure, but if you give him a penny, an indeterminate one, proportioned to the range of selection offered by the shops in the village. The power of the world's currency is similarly in proportion to the openness of the world's fair, and commonly enhanced by the brilliancy of external aspect, rather than solidity of its wares. We have said that the currency consists of orders for equivalent goods. If equivalent, their quality must be guaranteed. The kinds of goods chosen for specific claim must, therefore, be capable of test, while, also, that a store may be kept in hand to meet the call of the currency, smallness of bulk, with great relative value, is desirable; and indestructibility, over at least a certain period, essential. Such indestructibility and facility of being tested are united in gold; its intrinsic value is great, and its imaginary value is greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;--with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold--half currency and half commodity, in unison of functions which partly neutralize, partly enhance each other's force. They partly neutralize, since in so far as the gold is commodity, it is bad currency, because liable to sale; and in so far as it is currency, it is bad commodity, because its exchange value interferes with its practical use. Especially its employment in the higher branches of the arts becomes unsafe on account of its liability to be melted down for exchange. Again. They partly enhance, since in so far as the gold has acknowledged intrinsic value, it is good currency, because everywhere acceptable; and in so far as it has legal exchangeable value, its worth as a commodity is increased. We want no gold in the form of dust or crystal; but we seek for it coined because in that form it will pay baker and butcher. And this worth in exchange not only absorbs a large quantity in that use,[88] but greatly increases the effect on the imagination of the quantity used in the arts. Thus, in brief, the force of the functions is increased, but their precision blunted, by their unison. [88] The waste of labour in obtaining the gold, though it cannot be estimated by help of any existing data, may be understood in its bearing on entire economy by supposing it limited to transactions between two persons. If two farmers in Australia have been exchanging corn and cattle with each other for years, keeping their accounts of reciprocal debt in any simple way, the sum of the possessions of either would not be diminished, though the part of it which was lent or borrowed were only reckoned by marks on a stone, or notches on a tree; and the one counted himself accordingly, so many scratches, or so many notches, better than the other. But it would soon be seriously diminished if, discovering gold in their fields, each resolved only to accept golden counters for a reckoning; and accordingly, whenever he wanted a sack of corn or a cow, was obliged to go and wash sand for a week before he could get the means of giving a receipt for them. These inconveniences, however, attach to gold as a basis of currency on account of its portability and preciousness. But a far greater inconvenience attaches to it as the only legal basis of currency. Imagine gold to be only attainable in masses weighing several pounds each, and its value, like that of a malachite or marble, proportioned to its largeness of bulk;--it could not then get itself confused with the currency in daily use, but it might still remain as its basis; and this second inconvenience would still affect it, namely, that its significance as an expression of debt, varies, as that of every other article would, with the popular estimate of its desirableness, and with the quantity offered in the market. My power of obtaining other goods for gold depends always on the strength of public passion for gold, and on the limitation of its quantity, so that when either of two things happen--that the world esteems gold less, or finds it more easily,--my right of claim is in that degree effaced; and it has been even gravely maintained that a discovery of a mountain of gold would cancel the National Debt; in other words, that men may be paid for what costs much in what costs nothing. Now, if it is true that there is little chance of sudden convulsion in this respect, the world will not rapidly increase in wisdom so as to despise gold, and perhaps may even desire it more eagerly the more easily it is obtained; nevertheless the right of debt ought not to rest on a basis of imagination; nor should the frame of a national currency vibrate with every miser's panic and every merchant's imprudence. There are two methods of avoiding this insecurity, which would have been fallen upon long ago if, instead of calculating the conditions of the supply of gold, men had only considered how the world might live and manage its affairs without gold at all.[89] One is to base the currency on substances of truer intrinsic value; the other, to base it on several substances instead of one. If I can only claim gold, the discovery of a continent of cornfields need not trouble me. If, however, I wish to exchange my bread for other things, a good harvest will for the time limit my power in this respect; but if I can claim either bread, iron, or silk at pleasure, the standard of value has three feet instead of one, and will be proportionally firm. Thus, ultimately the steadiness of currency depends upon the breadth of its base; but the difficulty of organization increasing with this breadth, the discovery of the condition at once safest and most convenient[90] can only be by long analysis which must for the present be deferred. Gold or silver[91] may always be retained in limited use, as a luxury of coinage and questionless standard, of one weight and alloy among nations, varying only in the die. The purity of coinage when metallic, is closely indicative of the honesty of the system of revenue, and even of the general dignity of the State.[92] [89] It is difficult to estimate the curious futility of discussions such as that which lately occupied a section of the British Association, on the absorption of gold, while no one can produce even the simplest of the data necessary for the inquiry. To take the first occurring one,--What means have we of ascertaining the weight of gold employed this year in the toilettes of the women of Europe (not to speak of Asia); and, supposing it known, what means of conjecturing the weight by which, next year, their fancies, and the changes of style among their jewellers, will diminish or increase it? [90] See, in Pope's epistle to Lord Bathurst, his sketch of the difficulties and uses of a currency literally "pecuniary"-- "His Grace will game--to White's a bull he led," etc. [91] Perhaps both; perhaps silver only. It may be found expedient ultimately to leave gold free for use in the arts. As a means of reckoning, the standard might be, and in some cases has already been, entirely ideal.--See Mill's "Political Economy," book iii., chap. 7, at beginning. [92] The purity of the drachma and sequin were not without significance of the state of intellect, art, and policy, both in Athens and Venice;--a fact first impressed upon me ten years ago, when, in daguerreotypes of Venetian architecture, I found no purchasable gold pure enough to gild them with, but that of the old Venetian sequin. Whatever the article or articles may be which the national currency promises to pay, a premium on that article indicates bankruptcy of the Government in that proportion, the division of the assets being restrained only by the remaining confidence of the holders of notes in the return of prosperity to the firm. Incontrovertible currencies, those of forced acceptance, or of unlimited issue, are merely various modes of disguising taxation, and delaying its pressure, until it is too late to interfere with its causes. To do away with the possibility of such disguise would have been among the first results of a true economical science, had any such existed; but there have been too many motives for the concealment, so long as it could by any artifices be maintained, to permit hitherto even the founding of such a science. And, indeed, it is only through evil conduct, wilfully persisted in, that there is any embarrassment either in the theory or the working of currency. No exchequer is ever embarrassed, nor is any financial question difficult of solution, when people keep their practice honest, and their heads cool. But when Governments lose all office of pilotage, protection, scrutiny, and witness; and live only in magnificence of proclaimed larceny, effulgent mendacity, and polished mendicity; or when the people choosing Speculation (the S usual redundant in the spelling) instead of Toil, pursue no dishonesty with chastisement, that each may with impunity take his dishonest turn; and enlarge their lust of wealth through ignorance of its use, making their harlot of the dust, and setting Earth, the Mother, at the mercy of Earth, the Destroyer, so that she has to seek in hell the children she left playing in the meadows,--there are no tricks of financial terminology that will save them; all signature and mintage do but magnify the ruin they retard; and even the riches that remain, stagnant or current, change only from the slime of Avernus to the sand of Phlegethon;--quicksand at the embouchure;--land fluently recommended by recent auctioneers as "eligible for building leases." Finally, then, the power of true currency is fourfold. 1. Credit power. Its worth in exchange, dependent on public opinion of the stability and honesty of the issuer. 2. Real worth. Supposing the gold, or whatever else the currency expressly promises, to be required from the issuer, for all his notes; and that the call cannot be met in full. Then the actual worth of the document (whatever its credit power) would be, and its actual worth at any moment is to be defined as being, what the division of the assets of the issuer, and his subsequent will work, would produce for it. 3. The exchange power of its base. Granting that we can get five pounds in gold for our note, it remains a question how much of other things we can get for five pounds in gold. The more of other things exist, and the less gold, the greater this power. 4. The power over labour, exercised by the given quantity of the base, or of the things to be got for it. The question in this case is, how much work, and (question of questions) whose work, is to be had for the food which five pounds will buy. This depends on the number of the population; on their gifts, and on their dispositions, with which, down to their slightest humours and up to their strongest impulses, the power of the currency varies; and in this last of its ranges,--the range of passion, price, or praise (converso in pretium Deo), is at once least, and greatest. Such being the main conditions of national currency, we proceed to examine those of the total currency, under the broad definition, "transferable acknowledgment of debt";[93] among the many forms of which there are in effect only two, distinctly opposed; namely, the acknowledgments of debts which will be paid, and of debts which will not. Documents, whether in whole or part, of bad debt, being to those of good debt as bad money to bullion, we put for the present these forms of imposture aside (as in analysing a metal we should wash it clear of dross), and then range, in their exact quantities, the true currency of the country on one side, and the store or property of the country on the other. We place gold, and all such substances, on the side of documents, as far as they operate by signature;--on the side of store as far as they operate by value. Then the currency represents the quantity of debt in the country, and the store the quantity of its possession. The ownership of all the property is divided between the holders of currency and holders of store, and whatever the claiming value of the currency is at any moment, that value is to be deducted from the riches of the store-holders, the deduction being practically made in the payment of rent for houses and lands, of interest on stock, and in other ways to be hereafter examined. [93] Under which term, observe, we include all documents of debt which, being honest, might be transferable, though they practically are not transferred; while we exclude all documents which are in reality worthless, though in fact transferred temporarily as bad money is. The document of honest debt, not transferred, is merely to paper currency as gold withdrawn from circulation is to that of bullion. Much confusion has crept into the reasoning on this subject from the idea that withdrawal from circulation is a definable state, whereas it is a gradated state, and indefinable. The sovereign in my pocket is withdrawn from circulation as long as I choose to keep it there. It is no otherwise withdrawn if I bury it, nor even if I choose to make it, and others, into a golden cup, and drink out of them; since a rise in the price of the wine, or of other things, may at any time cause me to melt the cup and throw it back into currency; and the bullion operates on the prices of the things in the market as directly, though not as forcibly, while it is in the form of a cup, as it does in the form of a sovereign. No calculation can be founded on my humour in any ease. If I like to handle rouleaus, and therefore keep a quantity of gold, to play with, in the form of jointed basaltic columns, it is all one in its effect on the market as if I kept it in the form of twisted filigree, or steadily amicus lamnæ, beat the narrow gold pieces into broad ones, and dined off them. The probability is greater that I break the rouleau than that I melt the plate; but the increased probability is not calculable. Thus, documents are only withdrawn from the currency when cancelled, and bullion when it is so effectually lost as that the probability of finding it is no greater than that of finding new gold in the mine. At present I wish only to note the broad relations of the two great classes--the currency-holders and store-holders.[94] Of course they are partly united, most monied men having possessions of land or other goods; but they are separate in their nature and functions. The currency-holders as a class regulate the demand for labour, and the store-holders the laws of it; the currency-holders determine what shall be produced, and the store-holders the conditions of its production. Farther, as true currency represents by definition debts which will be paid, it represents either the debtor's wealth, or his ability and willingness; that is to say, either wealth existing in his hands transferred to him by the creditor, or wealth which, as he is at some time surely to return it, he is either increasing, or, if diminishing, has the will and strength to reproduce. A sound currency, therefore, as by its increase it represents enlarging debt, represents also enlarging means; but in this curious way, that a certain quantity of it marks the deficiency of the wealth of the country from what it would have been if that currency had not existed.[95] In this respect it is like the detritus of a mountain; assume that it lies at a fixed angle, and the more the detritus, the larger must be the mountain; but it would have been larger still, had there been none. [94] They are (up to the amount of the currency) simply creditors and debtors--the commercial types of the two great sects of humanity which those words describe; for debt and credit are of course merely the mercantile forms of the words "duty" and "creed," which give the central ideas: only it is more accurate to say "faith" than "creed," because creed has been applied carelessly to mere forms of words. Duty properly signifies whatever in substance or act one person owes to another, and faith the other's trust in his rendering it. The French "devoir" and "foi" are fuller and clearer words than ours; for, faith being the passive of fact, foi comes straight through fides from fio; and the French keep the group of words formed from the infinitive--fieri, "se fier," "se défier," "défiance," and the grand following "défi." Our English "affiance," "defiance," "confidence," "diffidence," retain accurate meanings; but our "faithful" has become obscure, from being used for "faithworthy," as well as "full of faith." "His name that sat on him was called Faithful and True." Trust is the passive of true saying, as faith is the passive of due doing; and the right learning of these etymologies, which are in the strictest sense only to be learned "by heart," is of considerably more importance to the youth of a nation than its reading and ciphering. [95] For example, suppose an active peasant, having got his ground into good order and built himself a comfortable house, finding still time on his hands, sees one of his neighbours little able to work, and ill lodged, and offers to build him also a house, and to put his land in order, on condition of receiving for a given period rent for the building and tithe of the fruits. The offer is accepted, and a document given promissory of rent and tithe. This note is money. It can only be good money if the man who has incurred the debt so far recovers his strength as to be able to take advantage of the help he has received, and meet the demand of the note; if he lets his house fall to ruin, and his field to waste, his promissory note will soon be valueless: but the existence of the note at all is a consequence of his not having worked so stoutly as the other. Let him gain as much as to be able to pay back the entire debt; the note is cancelled and we have two rich store-holders and no currency. Finally, though, as above stated, every man possessing money has usually also some property beyond what is necessary for his immediate wants, and men possessing property usually also hold currency beyond what is necessary for their immediate exchanges, it mainly determines the class to which they belong, whether in their eyes the money is an adjunct of the property, or the property of the money. In the first case, the holder's pleasure is in his possessions, and in his money subordinately, as the means of bettering or adding to them. In the second, his pleasure is in his money, and in his possessions only as representing it. In the first case, the money is as an atmosphere surrounding the wealth, rising from it and raining back upon it; but in the second, it is a deluge, with the wealth floating, and for the most part perishing in it. The shortest distinction between the men is that the one wishes always to buy and the other to sell. Such being the great relations of the classes, their several characters are of the highest importance to the nation; for on the character of the store-holders depends the preservation, display, and serviceableness of its wealth;--on that of the currency-holders its nature, and in great part its distribution; and on both its production. The store-holders are either constructive, or neutral, or destructive; and in subsequent papers we shall, with respect to every kind of wealth, examine the relative power of the store-holder for its improvement or destruction; and we shall then find it to be of incomparably greater importance to the nation in whose hands the thing is put, than how much of it is got; and that the character of the holders may be conjectured by the quality of the store, for such and such a thing; nor only asks for it, but if to be bettered, betters it: so that possession and possessor reciprocally act on each other through the entire sum of national possession. The base nation asking for base things sinks daily to deeper vileness of nature and of use; while the noble nation, asking for noble things, rises daily into diviner eminence in both; the tendency to degradation being surely marked by [Greek: ataxia], carelessness as to the hands in which things are put, competition for the acquisition of them, disorderliness in accumulation, inaccuracy in reckoning, and bluntness in conception as to the entire nature of possession. Now, the currency-holders always increase in number and influence in proportion to the bluntness of nature and clumsiness of the store-holders; for the less use people can make of things the more they tire of them, and want to change them for something else, and all frequency of change increases the quantity and power of currency; while the large currency-holder himself is essentially a person who never has been able to make up his mind as to what he will have, and proceeds, therefore, in vague collection and aggregation, with more and more infuriate passion, urged by complacency in progress, and pride in conquest. While, however, there is this obscurity in the nature of possession of currency, there is a charm in the absoluteness of it, which is to some people very enticing. In the enjoyment of real property others must partly share. The groom has some enjoyment of the stud, and the gardener of the garden; but the money is, or seems shut up; it is wholly enviable. No one else can have part in any complacencies arising from it. The power of arithmetical comparison is also a great thing to unimaginative people. They know always they are so much better than they were, in money; so much better than others, in money; wit cannot be so compared, nor character. My neighbour cannot be convinced I am wiser than he is, but he can that I am worth so much more; and the universality of the conviction is no less flattering than its clearness. Only a few can understand, none measure, superiorities in other things; but everybody can understand money, and count it. Now, these various temptations to accumulation would be politically harmless, if what was vainly accumulated had any fair chance of being wisely spent. For as accumulation cannot go on for ever, but must some day end in its reverse--if this reverse were indeed a beneficial distribution and use, as irrigation from reservoir, the fever of gathering, though perilous to the gatherer, might be serviceable to the community. But it constantly happens (so constantly, that it may be stated as a political law having few exceptions), that what is unreasonably gathered is also unreasonably spent by the persons into whose hands it finally falls. Very frequently it is spent in war, or else in stupefying luxury, twice hurtful, both in being indulged by the rich and witnessed by the poor. So that the _mal tener_ and _mal dare_ are as correlative as complementary colours; and the circulation of wealth, which ought to be soft, steady, strong, far-sweeping, and full of warmth, like the Gulf Stream, being narrowed into an eddy, and concentrated on a point, changes into the alternate suction and surrender of Charybdis. Which is, indeed, I doubt not, the true meaning of that marvellous fable, "infinite," as Bacon said of it, "in matter of meditation."[96] [96] It is a strange habit of wise humanity to speak in enigmas only, so that the highest truths and usefullest laws must be hunted for through whole picture-galleries of dreams, which to the vulgar seem dreams only. Thus Homer, the Greek tragedians, Plato, Dante, Chaucer, Shakespeare, and Goethe, have hidden all that is chiefly serviceable in their work, and in all the various literature they absorbed and re-embodied, under types which have rendered it quite useless to the multitude. What is worse, the two primal declarers of moral discovery, Homer and Plato, are partly at issue; for Plato's logical power quenched his imagination, and he became incapable of understanding the purely imaginative element either in poetry or painting; he therefore somewhat overrates the pure discipline of passionate art in song and music, and misses that of meditative art. There is, however, a deeper reason for his distrust of Homer. His love of justice, and reverently religious nature made him dread as death, every form of fallacy; but chiefly, fallacy respecting the world to come (his own myths being only symbolic exponents of a rational hope). We shall perhaps now every day discover more clearly how right Plato was in this, and feel ourselves more and more wonderstruck that men such as Homer and Dante (and, in an inferior sphere, Milton), not to speak of the great sculptors and painters of every age, have permitted themselves, though full of all nobleness and wisdom, to coin idle imaginations of the mysteries of eternity, and mould the faiths of the families of the earth by the courses of their own vague and visionary arts: while the indisputable truths respecting human life and duty, respecting which they all have but one voice, lie hidden behind these veils of phantasy, unsought and often unsuspected. I will gather carefully, out of Dante and Homer, what of this kind bears on our subject, in its due place; the first broad intention of their symbols may be sketched at once. The rewards of a worthy use of riches, subordinate to other ends, are shown by Dante in the fifth and sixth orbs of Paradise; for the punishment of their unworthy use, three places are assigned; one for the avaricious and prodigal whose souls are lost ("Hell": Canto 7); one for the avaricious and prodigal whose souls are capable of purification ("Purgatory": Canto 19); and one for the usurers, of whom none can be redeemed ("Hell": Canto 17). The first group, the largest in all hell (gente piu che altrove troppa), meet in contrary currents, as the waves of Charybdis, casting weights at each other from opposite sides. This weariness of contention is the chief element of their torture; so marked by the beautiful lines, beginning, Or puoi, figliuol, etc. (but the usurers, who made their money inactively, sit on the sand, equally without rest, however, "Di qua, di la soccorrien," etc.). For it is not avarice but contention for riches, leading to this double misuse of them, which, in Dante's sight, is the unredeemable sin. The place of its punishment is guarded by Plutus, "the great enemy," and "la fièra crudele," a spirit quite different from the Greek Plutus, who, though old and blind, is not cruel, and is curable, so as to become far-sighted ([Greek: hou typhlos all' oxy blepôn]--Plato's epithets in first book of the Laws). Still more does this Dantesque type differ from the resplendent Plutus of Goethe in the second part of "Faust," who is the personified power of wealth for good or evil; not the passion for wealth; and again from the Plutus of Spenser, who is the passion of mere aggregation. Dante's Plutus is specially and definitely the spirit of Contention and Competition, or Evil Commerce; and because, as I showed in my last paper, this kind of commerce "makes all men strangers," his speech is unintelligible, and no single soul of all those ruined by him has recognizable features. (La sconescente vita-- Ad ogni conoscenza or li fa bruni). On the other hand, the redeemable sins of avarice and prodigality are, in Dante's sight, those which are without deliberate or calculated operation. The lust, or lavishness, of riches can be purged, so long as there has been no servile consistency of dispute and competition for them. The sin is spoken of as that of degradation by the love of earth; it is purified by deeper humiliation--the souls crawl on their bellies; their chant, "my soul cleaveth unto the dust." But the spirits here condemned are all recognizable, and even the worst examples of the thirst for gold, which they are compelled to tell the histories of during the night, are of men swept by the passion of avarice into violent crime, but not sold to its steady work. The precept given to each of these spirits for its deliverance is--Turn thine eyes to the lucre (lure) which the Eternal King rolls with the mighty wheels: otherwise, the wheels of the "Greater Fortune," of which the constellation is ascending when Dante's dream begins. Compare George Herbert,-- "Lift up thy head; Take stars for money; stars, not to be told By any art, yet to be purchased." And Plato's notable sentence in the third book of "Polity":--"Tell them they have divine gold and silver in their souls for ever; that they need no money stamped of men--neither may they otherwise than impiously mingle the gathering of the divine with the mortal treasure, for through that which the law of the multitude has coined, endless crimes have been done and suffered; but in theirs is neither pollution nor sorrow." At the entrance of this place of punishment an evil spirit is seen by Dante, quite other than the "Gran Nemico." The great enemy is obeyed knowingly and willingly; but this spirit--feminine--and called a Siren--is the "Deceitfulness of riches," [Greek: apatê ploutou] of the gospels, winning obedience by guile. This is the Idol of Riches, made doubly phantasmal by Dante's seeing her in a dream. She is lovely to look upon, and enchants by her sweet singing, but her womb is loathsome. Now, Dante does not call her one of the Sirens carelessly, any more than he speaks of Charybdis carelessly, and though he had only got at the meaning of the Homeric fable through Virgil's obscure tradition of it, the clue he has given us is quite enough. Bacon's interpretation, "the Sirens, or pleasures," which has become universal since his time, is opposed alike to Plato's meaning and Homer's. The Sirens are not pleasures, but Desires: in the Odyssey they are the phantoms of vain desire; but in Plato's vision of Destiny, phantoms of constant Desire; singing each a different note on the circles of the distaff of Necessity, but forming one harmony, to which the three great Fates put words. Dante, however, adopted the Homeric conception of them, which was that they were demons of the Imagination, not carnal (desire of the eyes; not lust of the flesh); therefore said to be daughters of the Muses. Yet not of the muses, heavenly or historical, but of the muse of pleasure; and they are at first winged, because even vain hope excites and helps when first formed; but afterwards, contending for the possession of the imagination with the muses themselves, they are deprived of their wings, and thus we are to distinguish the Siren power from the Power of Circe, who is no daughter of the muses, but of the strong elements, Sun and Sea; her power is that of frank and full vital pleasure, which, if governed and watched, nourishes men; but, unwatched, and having no "moly," bitterness or delay mixed with it, turns men into beasts, but does not slay them, leaves them, on the contrary, power of revival. She is herself indeed an Enchantress;--pure Animal life; transforming--or degrading--but always wonderful (she puts the stores on board the ship invisibly, and is gone again, like a ghost); even the wild beasts rejoice and are softened around her cave; to men, she gives no rich feast, nothing but pure and right nourishment,--Pramnian wine, cheese and flour; that is corn, milk, and wine, the three great sustainers of life--it is their own fault if these make swine of them; and swine are chosen merely as the type of consumption; as Plato's [Greek: huôn polis] in the second book of the "Polity," and perhaps chosen by Homer with a deeper knowledge of the likeness of nourishment, and internal form of body. "Et quel est, s'il vous plaît, cet audacieux animal qui se permet d'être bâti au dedans comme une jolie petite fille?" "Hélas! chère enfant, j'ai honte de le nommer, et il ne foudra pas m'en vouloir. C'est ... c'est le cochon. Ce n'est pas précisément flatteur pour vous; mais nous en sommes tous là, et si cela vous contrarie par trop, il faut aller vous plaindre au bon Dieu qui a voulu que les choses fussent arrangées ainsï: seulement le cochon, qui ne pense qu' à manger, a l'estomac bien plus vaste que nous, et c'est toujours une consolation." ("Histoire d'une Bouchée de Pain," Lettre ix.) But the deadly Sirens are all things opposed to the Circean power. They promise pleasure, but never give it. They nourish in no wise; but slay by slow death. And whereas they corrupt the heart and the head, instead of merely betraying the senses, there is no recovery from their power; they do not tear nor snatch, like Scylla, but the men who have listened to them are poisoned, and waste away. Note that the Sirens' field is covered, not merely with the bones, but with the skins of those who have been consumed there. They address themselves, in the part of the song which Homer gives, not to the passions of Ulysses, but to his vanity, and the only man who ever came within hearing of them, and escaped untempted, was Orpheus, who silenced the vain imaginations by singing the praises of the gods. It is, then, one of these Sirens whom Dante takes as the phantasm or deceitfulness of riches; but note further, that she says it was her song that deceived Ulysses. Look back to Dante's account of Ulysses' death, and we find it was not the love of money, but pride of knowledge, that betrayed him; whence we get the clue to Dante's complete meaning: that the souls whose love of wealth is pardonable have been first deceived into pursuit of it by a dream of its higher uses, or by ambition. His Siren is therefore the Philotimé of Spenser, daughter of Mammon-- "Whom all that folk with such contention Do flock about, my deare, my daughter is-- Honour and dignitie from her alone Derived are." By comparing Spenser's entire account of this Philotimé with Dante's of the Wealth-Siren, we shall get at the full meaning of both poets; but that of Homer lies hidden much more deeply. For his Sirens are indefinite, and they are desires of any evil thing; power of wealth is not specially indicated by him, until, escaping the harmonious danger of imagination, Ulysses has to choose between two practical ways of life, indicated by the two rocks of Scylla and Charybdis. The monsters that haunt them are quite distinct from the rocks themselves, which, having many other subordinate significations, are in the main Labour and Idleness, or getting and spending; each with its attendant monster, or betraying demon. The rock of gaining has its summit in the clouds, invisible and not to be climbed; that of spending is low, but marked by the cursed fig-tree, which has leaves but no fruit. We know the type elsewhere; and there is a curious lateral allusion to it by Dante when Jacopo di Sant' Andrea, who had ruined himself by profusion and committed suicide, scatters the leaves of the bush of Lotto degli Agli, endeavouring to hide himself among them. We shall hereafter examine the type completely; here I will only give an approximate rendering of Homer's words, which have been obscured more by translation than even by tradition-- "They are overhanging rocks. The great waves of blue water break round them; and the blessed Gods call them the Wanderers. "By one of them no winged thing can pass--not even the wild doves that bring ambrosia to their father Jove--but the smooth rock seizes its sacrifice of them." (Not even ambrosia to be had without Labour. The word is peculiar--as a part of anything offered for sacrifice; especially used of heave-offering.) "It reaches the wide heaven with its top, and a dark-blue cloud rests on it, and never passes; neither does the clear sky hold it in summer nor in harvest. Nor can any man climb it--not if he had twenty feet and hands, for it is smooth as though it were hewn. "And in the midst of it is a cave which is turned the way of hell. And therein dwells Scylla, whining for prey: her cry, indeed, is no louder than that of a newly-born whelp: but she herself is an awful thing--nor can any creature see her face and be glad; no, though it were a god that rose against her. For she has twelve feet, all fore-feet, and six necks, and terrible heads on them; and each has three rows of teeth, full of black death. "But the opposite rock is lower than this, though but a bow-shot distant; and upon it there is a great fig-tree, full of leaves; and under it the terrible Charybdis sucks it down, and thrice casts it up again; be not thou there when she sucks down, for Neptune himself could not save thee." The reader will find the meaning of these types gradually elicited as we proceed. This disease of desire having especial relation to the great art of Exchange, or Commerce, we must, in order to complete our code of first principles, shortly state the nature and limits of that art. As the currency conveys right of choice out of many things in exchange for one, so Commerce is the agency by which the power of choice is obtained; and countries producing only timber can obtain for their timber silk and gold; or, naturally producing only jewels and frankincense, can obtain for them cattle and corn. In this function commerce is of more importance to a country in proportion to the limitations of its products and the restlessness of its fancy;--generally of greater importance towards Northern latitudes. Commerce is necessary, however, not only to exchange local products, but local skill. Labour requiring the agency of fire can only be given abundantly in cold countries; labour requiring suppleness of body and sensitiveness of touch only in warm ones; labour involving accurate vivacity of thought only in temperate ones; while peculiar imaginative actions are produced by extremes of heat and cold, and of light and darkness. The production of great art is limited to climates warm enough to admit of repose in the open air, and cool enough to render such repose delightful. Minor variations in modes of skill distinguish every locality. The labour which at any place is easiest, is in that place cheapest; and it becomes often desirable that products raised in one country should be wrought in another. Hence have arisen discussions on "International values," which will be one day remembered as highly curious exercises of the human mind. For it will be discovered, in due course of tide and time, that international value is regulated just as inter-provincial or inter-parishional value is. Coals and hops are exchanged between Northumberland and Kent on absolutely the same principles as iron and wine between Lancashire and Spain. The greater breadth of an arm of the sea increases the cost, but does not modify the principle of exchange; and a bargain written in two languages will have no other economical results than a bargain written in one. The distances of nations are measured not by seas, but by ignorances; and their divisions determined, not by dialects, but by enmities. Of course, a system of international values may always be constructed if we assume a relation of moral law to physical geography; as, for instance, that it is right to cheat across a river, though not across a road; or across a lake, though not across a river; or over a mountain, though not across a lake, etc.:--again, a system of such values may be constructed by assuming similar relations of taxation to physical geography; as, for instance, that an article should be taxed in crossing a river, but not in crossing a road; or in being carried over a mountain, but not over a ferry, etc.: such positions are indeed not easily maintained when once put in logical form; but one law of international value is maintainable in any form; namely, that the farther your neighbour lives from you, and the less he understands you, the more you are bound to be true in your dealings with him; because your power over him is greater in proportion to his ignorance, and his remedy more difficult in proportion to his distance. I have just said the breadth of sea increases the cost of exchange. Exchange or commerce, as such, is always costly; the sum of the value of the goods being diminished by the cost of their conveyance, and by the maintenance of the persons employed in it. So that it is only when there is advantage to both producers (in getting the one thing for the other), greater than the loss in conveyance, that the exchange is expedient. And it is only justly conducted when the porters kept by the producers (commonly called merchants) look only for pay, and not for profit. For in just commerce there are but three parties--the two persons or societies exchanging and the agent or agents of exchange: the value of the things to be exchanged is known by both the exchangers, and each receives equivalent value, neither gaining nor losing (for whatever one gains the other loses). The intermediate agent is paid an equal and known percentage by both, partly for labour in conveyance, partly for care, knowledge, and risk; every attempt at concealment of the amount of the pay indicates either effort on the part of the agent to obtain exorbitant percentage, or effort on the part of the exchangers to refuse him a just one. But for the most part it is the first, namely, the effort on the part of the merchant to obtain larger profit (so called) by buying cheap and selling dear. Some part, indeed, of this larger gain is deserved, and might be openly demanded, because it is the reward of the merchant's knowledge, and foresight of probable necessity; but the greater part of such gain is unjust; and unjust in this most fatal way, that it depends first on keeping the exchangers ignorant of the exchange value of the articles, and secondly, on taking advantage of the buyer's need and the seller's poverty. It is, therefore, one of the essential, and quite the most fatal, forms of usury; for usury means merely taking an exorbitant sum for the use of anything, and it is no matter whether the exorbitance is on loan or exchange, in rent or in price--the essence of the usury being that it is obtained by advantage of opportunity or necessity, and not as due reward for labour. All the great thinkers, therefore, have held it to be unnatural and impious, in so far as it feeds on the distress of others, or their folly.[97] Nevertheless attempts to repress it by law (in other words, to regulate prices by law so far as their variations depend on iniquity, and not on nature) must for ever be ineffective; though Plato, Bacon, and the First Napoleon--all three of them men who knew somewhat more of humanity than the "British merchant" usually does--tried their hands at it, and have left some (probably) good moderative forms of law, which we will examine in their place. But the only final check upon it must be radical purifying of the national character, for being, as Bacon calls it, "concessum propter duritiem cordis," it is to be done away with by touching the heart only; not, however, without medicinal law--as in the case of the other permission, "propter duritiem." But in this, more than in anything (though much in all, and though in this he would not himself allow of their application, for his own laws against usury are sharp enough), Plato's words are true in the fourth book of the "Polity," that neither drugs, nor charms, nor burnings, will touch a deep-lying political sore, any more than a deep bodily one; but only right and utter change of constitution; and that "they do but lose their labour who think that by any tricks of law they can get the better of these mischiefs of intercourse, and see not that they hew at a Hydra." [97] Hence Dante's companionship of Cahors, Inf., canto xi., supported by the view taken of the matter throughout the middle ages, in common with the Greeks. And indeed this Hydra seems so unslayable, and sin sticks so fast between the joinings of the stones of buying and selling, that "to trade" in things, or literally "cross-give" them, has warped itself, by the instinct of nations, into their worst word for fraud; for, because in trade there cannot but be trust, and it seems also that there cannot but also be injury in answer to it, what is merely fraud between enemies becomes treachery among friends: and "trader," "traditor," and "traitor" are but the same word. For which simplicity of language there is more reason than at first appears; for as in true commerce there is no "profit," so in true commerce there is no "sale." The idea of sale is that of an interchange between enemies respectively endeavouring to get the better of one another; but commerce is an exchange between friends; and there is no desire but that it should be just, any more than there would be between members of the same family. The moment there is a bargain over the pottage, the family relation is dissolved;--typically "the days of mourning for my father are at hand." Whereupon follows the resolve "then will I slay my brother." This inhumanity of mercenary commerce is the more notable because it is a fulfilment of the law that the corruption of the best is the worst. For as, taking the body natural for symbol of the body politic, the governing and forming powers may be likened to the brain and the labouring to the limbs, the mercantile, presiding over circulation and communication of things in changed utilities is symbolized by the heart; which, if it harden, all is lost. And this is the ultimate lesson which the leader of English intellect meant for us (a lesson, indeed, not all his own, but part of the old wisdom of humanity), in the tale of the "Merchant of Venice"; in which the true and incorrupt merchant,--kind and free, beyond every other Shakespearian conception of men,--is opposed to the corrupted merchant, or usurer; the lesson being deepened by the expression of the strange hatred which the corrupted merchant bears to the pure one, mixed with intense scorn-- "This is the fool that lent out money gratis; look to him, jailor," (as to lunatic no less than criminal); the enmity, observe, having its symbolism literally carried out by being aimed straight at the heart, and finally foiled by a literal appeal to the great moral law that flesh and blood cannot be weighed, enforced by "Portia" ("Portion"), the type of divine Fortune,[98] found, not in gold, nor in silver, but in lead, that is to say, in endurance and patience, not in splendour; and finally taught by her lips also, declaring, instead of the law and quality of "merces," the greater law and quality of mercy, which is not strained, but drops as the rain, blessing him that gives and him that takes. And observe that this "mercy" is not the mean "Misericordia," but the mighty "Gratia," answered by Gratitude (observe Shylock's leaning on the, to him detestable, word gratis, and compare the relation of Grace to Equity given in the second chapter of the second book of the "Memorabilia"); that is to say, it is the gracious or loving, instead of the strained, or competing manner, of doing things, answered, not only with "merces" or pay, but with "merci," or thanks. And this is indeed the meaning of the great benediction, "Grace, mercy, and peace," for there can be no peace without grace (not even by help of rifled cannon),[99] nor even without triplicity of graciousness, for the Greeks, who began with but one Grace, had to open their scheme into three before they had done. [98] Shakespeare would certainly never have chosen this name had he been forced to retain the Roman spelling. Like Perdita, "lost lady," or "Cordelia," "heart-lady," Portia is "fortune-lady." The two great relative groups of words, Fortune, fero, and fors--Portio, porto, and pars (with the lateral branch, op-portune, im-portune, opportunity, etc.), are of deep and intrinsic significance; their various senses of bringing, abstracting, and sustaining, being all centralized by the wheel (which bears and moves at once), or still better, the ball (spera) of Fortune,--"Volve sua spera, e beata si gode:" the motive power of this wheel distinguishing its goddess from the fixed majesty of Necessitas with her iron nails; or [Greek: anankê], with her pillar of fire and iridescent orbits, fixed at the centre. Portus and porta, and gate in its connexion with gain, form another interesting branch group; and Mors, the concentration of delaying, is always to be remembered with Fors, the concentration of bringing and bearing, passing on into Fortis and Fortitude. [99] Out of whose mouths, indeed, no peace was ever promulgated, but only equipoise of panic, highly tremulous on the edge in changes in the wind. With the usual tendency of long-repeated thought to take the surface for the deep, we have conceived their goddesses as if they only gave loveliness to gesture; whereas their true function is to give graciousness to deed, the other loveliness arising naturally out of that. In which function Charis becomes Charitas[100] and has a name and praise even greater than that of Faith or truth, for these may be maintained sullenly and proudly; but Charis[101] is in her countenance always gladdening (Aglaia), and in her service instant and humble; and the true wife of Vulcan, or Labour. And it is not until her sincerity of function is lost, and her mere beauty contemplated, instead of her patience, that she is born again of the foam flake, and becomes Aphrodité; then only capable of joining herself to War and to the enmities of men, instead of to Labour and their services. Therefore the fable of Mars and Venus is, chosen by Homer, picturing himself as Demodocus, to sing at the games in the Court of Alcinous. Phæacia is the Homeric island of Atlantis; an image of noble and wise government, concealed, how slightly! merely by the change of a short vowel for a long one in the name of its queen; yet misunderstood by all later writers, even by Horace in his "pinguis, Phæaxque," etc. That fable expresses the perpetual error of men, thinking that grace and dignity can only be reached by the soldier, and never by the artizan; so that commerce and the useful arts have had the honour and beauty taken away, and only the Fraud[102] and Pain left to them, with the lucre. Which is, indeed, one great reason of the continual blundering about the offices of government with respect to commerce. The higher classes are ashamed to deal with it; and though ready enough to fight for (or occasionally against) the people,--to preach to them,--or judge them, will not break bread for them; the refined upper servant who has willingly looked after the burnishing of the armoury and ordering of the library, not liking to set foot into the larder. [100] The reader must not think that any care can be misspent in tracing the connexion and power of the words which we have to use in the sequel. Not only does all soundness of reasoning depend on the work thus done in the outset, but we may sometimes gain more by insistence on the expression of a truth, than by much wordless thinking about it; for to strive to express it clearly is often to detect it thoroughly; and education, even as regards thought, nearly sums itself in making men economise their words, and understand them. Nor is it possible to estimate the harm that has been done, in matters of higher speculation and conduct, by loose verbiage, though we may guess at it by observing the dislike which people show to having anything about their religion said to them in simple words, because then they understand it. Thus congregations meet weekly to invoke the influence of a Spirit of Life and Truth; yet if any part of that character were intelligibly expressed to them by the formulas of the service, they would be offended. Suppose, for instance, in the closing benediction, the clergyman were to give its vital significance to the word "Holy," and were to say, "the Fellowship of the Helpful and Honest Ghost be with you, and remain with you always," what would be the horror of many, first, at the irreverence of so intelligible an expression, and, secondly, at the discomfortable entry of the suspicion that (while throughout the commercial dealings of the week they had denied the propriety of Help, and possibility of Honesty) the Person whose company they had been asking to be blessed with could have no fellowship with knaves. [101] As Charis becomes Charitas [see next page], the word "Cher," or "Dear," passes from Shylock's sense of it (to buy cheap and sell dear) into Antonio's sense of it: emphasized with the final i in tender "Cheri," and hushed to English calmness in our noble "Cherish." [102] While I have traced the finer and higher laws of this matter for those whom they concern, I have also to note the material law--vulgarly expressed in the proverb, "Honesty is the best policy." That proverb is indeed wholly inapplicable to matters of private interest. It is not true that honesty, as far as material gain is concerned, profits individuals. A clever and cruel knave will, in a mixed society, always be richer than an honest person can be. But Honesty is the best "policy," if policy means practice of State. For fraud gains nothing in a State. It only enables the knaves in it to live at the expense of honest people; while there is for every act of fraud, however small, a loss of wealth to the community. Whatever the fraudulent person gains, some other person loses, as fraud produces nothing; and there is, besides, the loss of the time and thought spent in accomplishing the fraud; and of the strength otherwise obtainable by mutual help (not to speak of the fevers of anxiety and jealousy in the blood, which are a heavy physical loss, as I will show in due time). Practically, when the nation is deeply corrupt, cheat answers to cheat, every one is in turn imposed upon, and there is to the body politic the dead loss of ingenuity, together with the incalculable mischief of the injury to each defrauded person, producing collateral effect unexpectedly. My neighbour sells me bad meat: I sell him in return flawed iron. We neither of us get one atom of pecuniary advantage on the whole transaction, but we both suffer unexpected inconvenience;--my men get scurvy, and his cattle-truck runs off the rails. Farther still. As Charis becomes Charitas on the one side, she becomes--better still--Chara, Joy, on the other; or rather this is her very mother's milk and the beauty of her childhood; for God brings no enduring Love, nor any other good, out of pain, nor out of contention; but out of joy and harmony.[103] And in this sense, human and divine, music and gladness, and the measures of both, come into her name; and Cher becomes full-vowelled Cheer, and Cheerful; and Chara, companioned, opens into Choir and Choral. [103] "[Greek: ta men houn alla zôa ouk echein aisthêsin tôn en tais kinêsesi taxeôn oude ataxiôn, hoi dê rhuthmos onoma kai harmonia hêmin de ous eipomen tous theous] [Apollo, the Muses, and Bacchus--the grave Bacchus, that is---ruling the choir of age; or Bacchus restraining; 'sæva _tene_, cum Berecyntio cornu, tympana,' etc.] [Greek: sunchoreutas dedosthai, toutous einai kai tous dedôkotas tên enruthmon te kai henarmonion aisthêsin meth' êdonês ... chorous te ônomakenai para tês charas emphyton unoma.]"--"Laws," book ii. And lastly. As Grace passes into Freedom of action, Charis becomes Eleutheria, or liberality; a form of liberty quite curiously and intensely different from the thing usually understood by "Liberty" in modern language; indeed, much more like what some people would call slavery; for a Greek always understood, primarily, by liberty, deliverance from the law of his own passions (or from what the Christian writers call bondage of corruption), and this a complete liberty: not having to resist the passion, but making it fawn upon, and follow him--(this may be again partly the meaning of the fawning beasts about the Circean cave; so, again, George Herbert-- Correct thy passion's spite; Then may the beasts draw thee to happy light)-- not being merely safe from the Siren, but also unbound from the mast. And it is only in such generosity that any man becomes capable of so governing others as to take true part in any system of national economy. Nor is there any other eternal distinction between the upper and lower classes than this form of liberty, Eleutheria, or benignity, in the one, and its opposite of slavery, Douleia, or malignity, in the other; the separation of these two orders of men, and the firm government of the lower by the higher, being the first conditions of possible wealth and economy in any state,--the Gods giving it no greater gift than the power to discern its freemen, and "malignum spernere vulgus." The examination of this form of Charis must, therefore, lead us into the discussion of the principles of government in general, and especially of that of the poor by the rich, discovering how the Graciousness joined with the Greatness, or Love with Majestas, is the true Dei Gratia, or Divine Right, of every form and manner of King; _i.e._, specifically, of the thrones, dominations, princedoms, virtues, and powers of the earth;--of the thrones, stable, or "ruling," literally right-doing powers ("rex eris, recte si facies:") of the dominations, lordly, edifying, dominant, and harmonious powers; chiefly domestic, over the "built thing," domus, or house; and inherently twofold, Dominus and Domina; Lord and Lady: of the Princedoms, pre-eminent, incipient, creative, and demonstrative powers; thus poetic and mercantile, in the "princeps carmen deduxisse" and the merchant-prince: of the Virtues or Courages; militant, guiding, or Ducal powers; and finally of the Strengths and Forces pure; magistral powers, of the more over the less, and the forceful and free over the weak and servile elements of life. Subject enough for the next paper involving "economical" principles of some importance, of which, for theme, here is a sentence, which I do not care to translate, for it would sound harsh in English, though, truly, it is one of the tenderest ever uttered by man; which may be meditated over, or rather through, in the meanwhile, by any one who will take the pains:-- [Greek: Arh oun, hôsper hippos tô anepistêmoni men encheirounti de chrêsthai zêmia estin, houtô kai adelphos hotan tis autô mê epistamenos encheirê chrêsthai, zêmia esti?] IV. LAWS AND GOVERNMENTS: LABOUR AND RICHES. It remains, in order to complete the series of our definitions, that we examine the general conditions of government, and fix the sense in which we are to use, in future, the terms applied to them. The government of a state consists in its customs, laws, and councils, and their enforcements. I.--CUSTOMS. As one person primarily differs from another by fineness of nature, and secondarily, by fineness of training, so also, a polite nation differs from a savage one, first by the refinement of its nature, and secondly by the delicacy of its customs. In the completeness, or accomplishment of custom, which is the nation's self-government, there are three stages--first, fineness in method of doing or of being;--called the manner or moral of acts: secondly, firmness in holding such method after adoption, so that it shall become a habit in the character: _i.e._, a constant "having" or "behaving"; and, lastly, practice, or ethical power in performance and endurance, which is the skill following on habit, and the ease reached by frequency of right doing. The sensibility of the nation is indicated by the fineness of its customs; its courage, patience, and temperance by its persistence in them. By sensibility I mean its natural perception of beauty, fitness, and rightness; or of what is lovely, decent, and just: faculties dependent much on race, and the primal signs of fine breeding in man; but cultivable also by education, and necessary perishing without it. True education has, indeed, no other function than the development of these faculties, and of the relative will. It has been the great error of modern intelligence to mistake science for education. You do not educate a man by telling him what he knew not, but by making him what he was not. And making him what he will remain for ever: for no wash of weeds will bring back the faded purple. And in that dyeing there are two processes--first, the cleansing and wringing out, which is the baptism with water; and then the infusing of the blue and scarlet colours, gentleness and justice, which is the baptism with fire. The customs and manners of a sensitive and highly-trained race are always vital: that is to say, they are orderly manifestations of intense life (like the habitual action of the fingers of a musician). The customs and manners of a vile and rude race, on the contrary, are conditions of decay: they are not, properly speaking, habits, but incrustations; not restraints, or forms, of life; but gangrenes;--noisome, and the beginnings of death. And generally, so far as custom attaches itself to indolence instead of action, and to prejudice instead of perception, it takes this deadly character, so that thus "Custom hangs upon us with a weight Heavy as frost, and deep almost as life." This power and depth are, however, just what give value to custom, when it works with life, instead of against it. The high ethical training, of a nation being threefold, of body, heart, and practice (compare the statement in the preface to "Unto This Last"), involves exquisiteness in all its perceptions of circumstance,--all its occupations of thought. It implies perfect Grace, Pitifulness, and Peace; it is irreconcilably inconsistent with filthy or mechanical employments,--with the desire of money,--and with mental states of anxiety, jealousy, and indifference to pain. The present insensibility of the upper classes of Europe to the aspects of suffering, uncleanness, and crime, binds them not only into one responsibility with the sin, but into one dishonour with the foulness, which rot at their thresholds. The crimes daily recorded in the police courts of London and Paris (and much more those which are unrecorded) are a disgrace to the whole body politic;[104] they are, as in the body natural, stains of disease on a face of delicate skin, making the delicacy itself frightful. Similarly, the filth and poverty permitted or ignored in the midst of us are as dishonourable to the whole social body, as in the body natural it is to wash the face, but leave the hands and feet foul. Christ's way is the only true one: begin at the feet; the face will take care of itself. Yet, since necessarily, in the frame of a nation, nothing but the head can be of gold, and the feet, for the work they have to do, must be part of iron, part of clay;--foul or mechanical work is always reduced by a noble race to the minimum in quantity; and, even then, performed and endured, not without sense of degradation, as a fine temper is wounded by the sight of the lower offices of the body. The highest conditions of human society reached hitherto, have cast such work to slaves;--supposing slavery of a politically defined kind to be done away with, mechanical and foul employment must in all highly-organized states take the aspect either of punishment or probation. All criminals should at once be set to the most dangerous and painful forms of it, especially to work in mines and at furnaces,[105] so as to relieve the innocent population as far as possible: of merely rough (not mechanical) manual labour, especially agricultural, a large portion should be done by the upper classes;--bodily health, and sufficient contrast and repose for the mental functions, being unattainable without it; what necessarily inferior labour remains to be done, as especially in manufactures, should, and always will, when the relations of society are reverent and harmonious, fall to the lot of those who, for the time, are fit for nothing better. For as, whatever the perfectness of the educational system, there must remain infinite differences between the natures and capacities of men; and these differing natures are generally rangeable under the two qualities of lordly (or tending towards rule, construction, and harmony) and servile (or tending towards misrule, destruction, and discord); and, since the lordly part is only in a state of profitableness while ruling, and the servile only in a state of redeemableness while serving, the whole health of the state depends on the manifest separation of these two elements of its mind: for, if the servile part be not separated and rendered visible in service, it mixes with and corrupts the entire body of the state; and if the lordly part be not distinguished, and set to rule, it is crushed and lost, being turned to no account, so that the rarest qualities of the nation are all given to it in vain.[106] The effecting of which distinction is the first object, as we shall see presently, of national councils. [104] "The ordinary brute, who flourishes in the very centre of ornate life, tells us of unknown depths on the verge of which we totter, being bound to thank our stars every day we live that there is not a general outbreak and a revolt from the yoke of civilization."--_Times_ leader, Dec. 25th, 1862. Admitting that our stars are to be thanked for our safety, whom are we to thank for the danger? [105] Our politicians, even the best of them, regard only the distress caused by the failure of mechanical labour. The degradation caused by its excess is a far more serious subject of thought, and of future fear. I shall examine this part of our subject at length hereafter. There can hardly be any doubt, at present, cast on the truth of the above passages, as all the great thinkers are unanimous on the matter. Plato's words are terrific in their scorn and pity whenever he touches on the mechanical arts. He calls the men employed in them not even human,--but partially and diminutively human, "[Greek: anthrôpiskoi]," and opposes such work to noble occupations, not merely as prison is opposed to freedom, but as a convict's dishonoured prison is to the temple (escape from them being like that of a criminal to the sanctuary), and the destruction caused by them being of soul no less than body.--Rep., vi. 9. Compare "Laws," v. 11. Xenophon dwells on the evil of occupations at the furnace (root of [Greek: banausos]), and especially their "[Greek: ascholia], want of leisure"--Econ. i. 4. (Modern England, with all its pride of education, has lost that first sense of the word "school," and till it recover that it will find no other rightly.) His word for the harm to the soul is to "break" it, as we say of the heart.--Econ. i. 6. And herein also is the root of the scorn, otherwise apparently most strange and cruel, with which Homer, Dante, and Shakespeare always speak of the populace; for it is entirely true that in great states the lower orders are low by nature as well as by task, being precisely that part of the commonwealth which has been thrust down for its coarseness or unworthiness (by coarseness I mean especially insensibility and irreverence; the "profane" of Horace); and when this ceases to be so, and the corruption and the profanity are in the higher instead of the lower orders, there arises, first, helpless confusion; then, if the lower classes deserve power, ensues swift revolution, and they get it: but if neither the populace nor their rulers deserve it, there follows mere darkness and dissolution, till, out of the putrid elements, some new capacity of order rises, like grass on a grave; if not, there is no more hope, nor shadow of turning, for that nation. Atropos has her way with it. So that the law of national health is like that of a great lake or sea, in perfect but slow circulation, letting the dregs fall continually to the lowest place, and the clear water rise; yet so as that there shall be no neglect of the lower orders, but perfect supervision and sympathy, so that if one member suffer, all members shall suffer with it. [106] "[Greek: oligês, kai allôs gignomenês.]" The bitter sentence never was so true as at this day. II.--LAWS. These are the definitions and bonds of custom, or, of what the nation desires should become custom. Law is either archic[107] (of direction), meristic (of division), or critic (of judgment). Archic law is that of appointment and precept: it defines what is and is not to be done. Meristic law is that of balance and distribution: it defines what is and is not to be possessed. Critic law is that of discernment and award: it defines what is and is not to be suffered. [107] Thetic, or Thesmic, would perhaps be a better term than Archic; but liable to be confused with some which we shall want relating to Theoria. The administrators of the three great divisions of law are severally Archons, Merists, and Dicasts. The Archons are the true princes, or beginners of things; or leaders (as of an orchestra); the Merists are properly the Domini, or Lords (law-words) of houses and nations; the Dicasts properly the judges, and that with Olympian justice, which reaches to heaven and hell. The violation of archic law is [Greek: hamartia] (error) [Greek: ponêria] (failure), [Greek: plêmmeleia] (discord). The violation of meristic law is [Greek: anomia] (iniquity). The violation of critic law is [Greek: adikia] (injury). Iniquity is central generic term; for all law is _fatal_; it is the division to men of their fate; as the fold of their pasture, it is [Greek: nomos]; as the assigning of their portion, [Greek: moira]. If we choose to class the laws of precept and distribution under the general head of "statutes," all law is simply either of statute or judgment; that is, first, the establishment of ordinance, and, secondly, the assignment of the reward or penalty due to its observance or violation. To some extent these two forms of law must be associated, and, with every ordinance, the penalty of disobedience to it be also determined. But since the degrees and guilt of disobedience vary, the determination of due reward and punishment must be modified by discernment of special fact, which is peculiarly the office of the judge, as distinguished from that of the lawgiver and lawsustainer, or king; not but that the two offices are always theoretically and, in early stages, or limited numbers, of society, are often practically, united in the same person or persons. Also, it is necessary to keep clearly in view the distinction between these two kinds of law, because the possible range of law is wider in proportion to their separation. There are many points of conduct respecting which the nation may wisely express its will by a written precept or resolve; yet not enforce it by penalty; and the expedient degree of penalty is always quite a separate consideration from the expedience of the statute, for the statute may often be better enforced by mercy than severity, and is also easier in bearing, and less likely to be abrogated. Farther, laws of precept have reference especially to youth, and concern themselves with training; but laws of judgment to manhood, and concern themselves with remedy and reward. There is a highly curious feeling in the English mind against educational law; we think no man's liberty should be interfered with till he has done irrevocable wrong; whereas it is then just too late for the only gracious and kingly interference, which is to hinder him from doing it. Make your educational laws strict, and your criminal ones may be gentle; but, leave youth its liberty, and you will have to dig dungeons for age. And it is good for a man that he wear the yoke in his youth; for the yoke of youth, if you know how to hold it, may be of silken thread; and there is sweet chime of silver bells at that bridle rein; but, for the captivity of age, you must forge the iron fetter, and cast the passing bell. Since no law can be in a final or true sense established, but by right (all unjust laws involving the ultimate necessity of their own abrogation), the law-sustaining power in so far as it is Royal, or "right doing";--in so far, that is, as it rules, not mis-rules, and orders, not dis-orders, the things submitted to it. Throned on this rock of justice, the kingly power becomes established and establishing, "[Greek: theios]," or divine, and, therefore, it is literally true that no ruler can err, so long as he is a ruler, or [Greek: archôn oudeis hamartanei tote hotan archôn ê] (perverted by careless thought, which has cost the world somewhat, into "the king can do no wrong"). Which is a divine right of kings indeed, and quite unassailable, so long as the terms of it are "God and my Right," and not "Satan and my Wrong," which is apt, in some coinages, to appear on the reverse of the die, under a good lens. Meristic law, or that of tenure of property, first determines what every individual possesses by right, and secures it to him; and what he possesses by wrong, and deprives him of it. But it has a far higher provisory function: it determines what every man should possess, and puts it within his reach on due conditions; and what he should not possess, and puts this out of his reach conclusively. Every article of human wealth has certain conditions attached to its merited possession, which, when they are unobserved, possession becomes rapine. The object of meristic law is not only to secure every man his rightful share (the share, that is, which he has worked for, produced, or received by gift from a rightful owner), but to enforce the due conditions of possession, as far as law may conveniently reach; for instance, that land shall not be wantonly allowed to run to waste, that streams shall not be poisoned by the persons through whose properties they pass, nor air be rendered unwholesome beyond given limits. Laws of this kind exist already in rudimentary degree, but needing large development; the just laws respecting the possession of works of art have not hitherto been so much as conceived, and the daily loss of national wealth, and of its use, in this respect, is quite incalculable.[108] While, finally, in certain conditions of a nation's progress, laws limiting accumulation of property may be found expedient. [108] These laws need revision quite as much respecting property in national as in private hands. For instance: the public are under a vague impression, that because they have paid for the contents of the British Museum, every one has an equal right to see and to handle them. But the public have similarly paid for the contents of Woolwich Arsenal; yet do not expect free access to it, or handling of its contents. The British Museum is neither a free circulating library, nor a free school; it is a place for the safe preservation, and exhibition on due occasion, of unique books, unique objects of natural history, and unique works of art; its books can no more be used by everybody than its coins can be handled, or its statues cast. Free libraries there ought to be in every quarter of London, with large and complete reading-rooms attached; so also free educational institutions should be open in every quarter of London, all day long and till late at night, well lighted, well catalogued, and rich in contents both of art and natural history. But neither the British Museum nor National Gallery are schools; they are treasuries; and both should be severely restricted in access and in use. Unless some order is taken, and that soon, in the MSS. department of the Museum (Sir Frederic Madden was complaining of this to me only the other day), the best MSS. in the collection will be destroyed, irretrievably, by the careless and continual handling to which they are now subjected. Critic law determines questions of injury, and assigns due rewards and punishments to conduct.[109] [109] Two curious economical questions arise laterally with respect to this branch of law, namely, the cost of crime and the cost of judgment. The cost of crime is endured by nations ignorantly, not being clearly stated in their budgets; the cost of judgment patiently (provided only it can be had pure for the money), because the science, or perhaps we ought rather to say the art, of law, is felt to found a noble profession, and discipline; so that civilized nations are usually glad that a number of persons should be supported by funds devoted to disputation and analysis. But it has not yet been calculated what the practical value might have been, in other directions, of the intelligence now occupied in deciding, through courses of years, what might have been decided as justly, had the date of judgment been fixed, in as many hours. Imagine one half of the funds which any great nation devotes to dispute by law, applied to the determination of physical questions in medicine, agriculture, and theoretic science; and calculate the probable results within the next ten years. I say nothing yet, of the more deadly, more lamentable loss, involved in the use of purchased instead of personal justice,--[Greek: epaktô par' allôn--aporia' oikeiôn]. Therefore, in order to true analysis of it, we must understand the real meaning of this word "injury." We commonly understand by it any kind of harm done by one man to another; but we do not define the idea of harm; sometimes we limit it to the harm which the sufferer is conscious of, whereas much the worst injuries are those he is unconscious of; and, at other times, we limit the idea to violence, or restraint, whereas much the worse forms of injury are to be accomplished by carelessness, and the withdrawal of restraint. "Injury" is, then, simply the refusal, or violation of any man's right or claim upon his fellows: which claim, much talked of in modern times, under the term "right," is mainly resolvable into two branches: a man's claim not to be hindered from doing what he should; and his claim to be hindered from doing what he should not; these two forms of hindrance being intensified by reward, or help and fortune, or Fors on one side, and punishment, impediment, and even final arrest, or Mors, on the other. Now, in order to a man's obtaining these two rights, it is clearly needful that the worth of him should be approximately known; as well as the want of worth, which has, unhappily, been usually the principal subject of study for critic law, careful hitherto only to mark degrees of de-merit, instead of merit;--assigning, indeed, to the deficiencies (not always, alas! even to these) just fine, diminution, or (with the broad vowels) damnation; but to the efficiencies, on the other side, which are by much the more interesting, as well as the only profitable part of its subject, assigning in any clear way neither measurement nor aid. Now, it is in this higher and perfect function of critic law, enabling as well as disabling, that it becomes truly kingly or basilican, instead of Draconic (what Providence gave the great, old, wrathful legislator his name?); that is, it becomes the law of man and of life, instead of the law of the worm and of death--both of these laws being set in everlasting poise one against another, and the enforcement of both being the eternal function of the lawgiver, and true claim of every living soul: such claim being indeed as straight and earnest to be mercifully hindered, and even, if need be, abolished, when longer existence means only deeper destruction, as to be mercifully helped and recreated when longer existence and new creation mean nobler life. So that what we vulgarly term reward and punishment will be found to resolve themselves mainly into help and hindrance, and these again will issue naturally from true recognition of deserving, and the just reverence and just wrath which follow instinctively on such recognition. I say "follow," but in reality they are the recognition. Reverence is but the perceiving of the thing in its entire truth: truth reverted is truth revered (vereor and veritas having clearly the same root), so that Goethe is for once, and for a wonder, wrong in that part of the noble scheme of education in "Wilhelm Meister," in which he says that reverence is not innate, and must be taught. Reverence is as instinctive as anger;--both of them instant on true vision: it is sight and understanding that we have to teach, and these are reverence. Make a man perceive worth, and in its reflection he sees his own relative unworth, and worships thereupon inevitably, not with stiff courtesy, but rejoicingly, passionately, and, best of all, restfully: for the inner capacity of awe and love is infinite in man; and when his eyes are once opened to the sight of beauty and honour, it is with him as with a lover, who, falling at his mistress's feet, would cast himself through the earth, if it might be, to fall lower, and find a deeper and humbler place. And the common insolences and petulances of the people, and their talk of equality, are not irreverence in them in the least, but mere blindness, stupefaction, and fog in the brains,[110] which pass away in the degree that they are raised and purified: the first sign of which raising is, that they gain some power of discerning, and some patience in submitting to their true counsellors and governors; the modes of such discernment forming the real "constitution" of the state, and not the titles or offices of the discerned person; for it is no matter, save in degree of mischief, to what office a man is appointed, if he cannot fulfil it. And this brings us to the third division of our subject. [110] Compare Chaucer's "villany" (clownishness). "Full foul and chorlishe seemed she, And eke villanous for to be, And little coulde of norture To worship any creature." III.--GOVERNMENT BY COUNCIL. This is the determination, by living authority, of the national conduct to be observed under existing circumstances; and the modification or enlargement, abrogation or enforcement, of the code of national law according to present needs or purposes. This government is necessarily always by Council, for though the authority of it may be vested in one person, that person cannot form any opinion on a matter of public interest but by (voluntarily or involuntarily) submitting himself to the influence of others. This government is always twofold--visible and invisible. The visible government is that which nominally carries on the national business; determines its foreign relations, raises taxes, levies soldiers, fights battles, or directs that they be fought, and otherwise becomes the exponent of the national fortune. The invisible government is that exercised by all energetic and intelligent men, each in his sphere, regulating the inner will and secret ways of the people, essentially forming its character, and preparing its fate. Visible governments are the toys of some nations, the diseases of others, the harness of some, the burdens of the more, the necessity of all. Sometimes their career is quite distinct from that of the people, and to write it, as the national history, is as if one should number the accidents which befall a man's weapons and wardrobe, and call the list his biography. Nevertheless a truly noble and wise nation necessarily has a noble and wise visible government, for its wisdom issues in that conclusively. "Not out of the oak, nor out of the rock, but out of the temper of man, is his polity:" where the temper inclines, it inclines as Samson by his pillar, and draws all down with it. Visible governments are, in their agencies, capable of three pure forms, and of no more than three. They are either monarchies, where the authority is vested in one person; oligarchies, when it is vested in a minority; or democracies, when vested in a majority. But these three forms are not only, in practice, variously limited and combined, but capable of infinite difference in character and use, receiving specific names according to their variations; which names, being nowise agreed upon, nor consistently used, either in thought or writing, no man can at present tell, in speaking of any kind of government, whether he is understood, nor in hearing whether he understands. Thus we usually call a just government by one person a monarchy, and an unjust or cruel one, a tyranny; this might be reasonable if it had reference to the divinity of true government; but to limit the term "oligarchy" to government by a few rich people, and to call government by a few wise or noble people "aristocracies," is evidently absurd, unless it were proved that rich people never could be wise, or noble people rich; and farther absurd because there are other distinctions in character, as well as riches or wisdom (greater purity of race, or strength of purpose, for instance), which may give the power of government to the few. So that if we had to give names to every group or kind of minority, we should have verbiage enough. But there is one right name--"oligarchy." So also the terms "republic" and "democracy" are confused, especially in modern use; and both of them are liable to every sort of misconception. A republic means, properly, a polity in which the state, with its all, is at every man's service, and every man, with his all, at the state's service (people are apt to lose sight of the last condition); but its government may nevertheless be oligarchic (consular, or decemviral, for instance), or monarchic (dictatorial). But a democracy means a state in which the government rests directly with the majority of the citizens. And both these conditions have been judged only by such accidents and aspects of them as each of us has had experience of; and sometimes both have been confused with anarchy, as it is the fashion at present to talk of the "failure of republican institutions in America," when there has never yet been in America any such thing as an institution; neither any such thing as a res-publica, but only a multitudinous res-privata; every man for himself. It is not republicanism which fails now in America; it is your model science of political economy, brought to its perfect practice. There you may see competition, and the "law of demand and supply" (especially in paper), in beautiful and unhindered operation.[111] Lust of wealth, and trust in it; vulgar faith in magnitude and multitude, instead of nobleness; besides that faith natural to backwoodsmen,--"lucum ligna,"--perpetual self-contemplation, issuing in passionate vanity: total ignorance of the finer and higher arts, and of all that they teach and bestow;[112] and the discontent of energetic minds unoccupied, frantic with hope of uncomprehended change, and progress they know not whither;[113] these are the things that they have "failed" with in America; and yet not altogether failed--it is not collapse, but collision; the greatest railroad accident on record, with fire caught from the furnace, and Catiline's quenching "non aquá, sed ruinâ." But I see not, in any of our talk of them, justice enough done to their erratic strength of purpose, nor any estimate taken of the strength of endurance of domestic sorrow in what their women and children suppose a righteous cause. And out of that endurance and suffering, its own fruit will be born with time; and Carlyle's prophecy of them (June, 1850), as it has now come true in the first clause, will in the last. America too will find that caucuses, division-lists, stump-oratory and speeches to Buncombe will _not_ carry men to the immortal gods; that the Washington Congress, and constitutional battle of Kilkenny cats is, there as here, naught for such objects; quite incompetent for such; and, in fine, that said sublime constitutional arrangement will require to be (with terrible throes, and travail such as few expect yet) remodelled, abridged, extended, suppressed; torn asunder, put together again;--not without heroic labour, and effort quite other than that of the Stump-Orator and the Revival Preacher, one day! [111] "Supply-and-demand,--alas! For what noble work was there ever any audible 'demand' in that poor sense?" ("Past and Present"). Nay, the demand is not loud even for ignoble work. See "Average earnings of Betty Taylor," in _Times_, of 4th February, of this year [1863]: "Worked from Monday morning at 8 a.m., to Friday night at 5.30 p.m., for 1_s._ 5-1/2_d._"--Laissez faire. [112] See Bacon's note in the "Advancement of Learning," on "didicisse fideliter artes" (but indeed the accent had need be upon "fideliter"). "It taketh away vain admiration of anything, which is the root of all weakness: for all things are admired either because they are new, or because they are great," etc. [113] Ames, by report of Waldo Emerson, expressed the popular security wisely, saying, "that a monarchy is a merchantman, which sails well, but will sometimes strike on a rock, and go to the bottom; whilst a republic is a raft, which would never sink, but then your feet are always in the water." Yes, and when the four winds (your only pilots) steer competitively from the four corners, [Greek: hôs d' hot' opôrinos Boreês phoreêsin akanthas], perhaps the wiser mariner may wish for keel and wheel again. Understand, then, once for all, that no form of government, provided it be a government at all, is, as such, either to be condemned or praised, or contested for in anywise but by fools. But all forms of government are good just so far as they attain this one vital necessity of policy--that the wise and kind, few or many, shall govern the unwise and unkind; and they are evil so far as they miss of this or reverse it. Nor does the form in any case signify one whit, but its firmness and adaptation to the need; for if there be many foolish persons in a state, and few wise, then it is good that the few govern; and if there be many wise and few foolish, then it is good that many govern; and if many be wise, yet one wiser, then it is good that one should govern; and so on. Thus, we may have "the ants' republic, and the realm of bees," both good in their kind; one for groping, and the other for building; and nobler still, for flying, the Ducal monarchy of those "Intelligent of seasons, that set forth The aery caravan, high over seas." Nor need we want examples, among the inferior creatures, of dissoluteness, as well as resoluteness in, government. I once saw democracy finely illustrated by the beetles of North Switzerland, who, by universal suffrage, and elytric acclamation, one May twilight, carried it that they would fly over the Lake of Zug; and flew short, to the great disfigurement of the Lake of Zug--[Greek: Kantharou limên]--over some leagues square, and to the close of the Cockchafer democracy for that year. The old fable of the frogs and the stork finely touches one form of tyranny; but truth will touch it more nearly than fable, for tyranny is not complete when it is only over the idle, but when it is over the laborious and the blind. This description of pelicans and climbing perch which I find quoted in one of our popular natural histories, out of Sir Emerson Tennent's "Ceylon," comes as near as may be to the true image of the thing:-- Heavy rains came on, and as we stood on the high ground, we observed a pelican on the margin of the shallow pool gorging himself; our people went towards him, and raised a cry of "Fish! fish!" We hurried down, and found numbers of fish struggling upward through the grass, in the rills formed by the trickling of the rain. There was scarcely water to cover them, but nevertheless they made rapid progress up the bank, on which our followers collected about two baskets of them. They were forcing their way up the knoll, and had they not been interrupted, first by the pelican, and afterwards by ourselves, they would in a few minutes have gained the highest point, and descended on the other side into a pool which formed another portion of the tank. In going this distance, however, they must have used muscular exertion enough to have taken them half a mile on level ground; for at these places all the cattle and wild animals of the neighbourhood had latterly come to drink, so that the surface was everywhere indented with footmarks, in addition to the cracks in the surrounding baked mud, into which the fish tumbled in their progress. In those holes which were deep, and the sides perpendicular, they remained to die, and were carried off by kites and crows. But whether governments be bad or good, one general disadvantage seems to attach to them in modern times--that they are all costly. This, however, is not essentially the fault of the governments. If nations choose to play at war, they will always find their governments willing to lead the game, and soon coming under that term of Aristophanes, "[Greek: kapêloi aspidôn]," shield-sellers. And when ([Greek: pêm' epipêmati]) the shields take the form of iron ships, with apparatus "for defence against liquid fire"--as I see by latest accounts they are now arranging the decks in English dockyards,--they become costly biers enough for the grey convoy of chief-mourner waves, wreathed with funereal foam, to bear back the dead upon; the massy shoulders of those corpse-bearers being intended for quite other work, and to bear the living, if we would let them. Nor have we the least right to complain of our governments being expensive so long as we set the government to do precisely the work which brings no return. If our present doctrines of political economy be just, let us trust them to the utmost; take that war business out of the government's hands, and test therein the principles of supply and demand. Let our future sieges of Sebastopol be done by contract--no capture, no pay--(I am prepared to admit that things might go better so); and let us sell the commands of our prospective battles, with our vicarages, to the lowest bidder; so may we have cheap victories and divinity. On the other hand, if we have so much suspicion of our science that we dare not trust it on military or spiritual business, it would be but reasonable to try whether some authoritative handling may not prosper in matters utilitarian. If we were to set our governments to do useful things instead of mischievous, possibly even the apparatus might in time come to be less costly! The machine, applied to the building of the house, might perhaps pay, when it seems not to pay, applied to pulling it down. If we made in our dockyards ships to carry timber and coals, instead of cannon, and with provision for brightening of domestic solid culinary fire, instead of for the averting of hostile liquid fire, it might have some effect on the taxes? Or if the iron bottoms were to bring us home nothing better than ivory and peacocks, instead of martial glory, we might at least have gayer suppers, and doors of the right material for dreams after them. Or suppose that we tried the experiment on land instead of water carriage; already the government, not unapproved, carries letters and parcels for us; larger packages may in time follow:--parcels;--even general merchandise? Why not, at last, ourselves? Had the money spent in local mistakes and vain private litigation, on the railroads of England, been laid out, instead, under proper government restraint, on really useful railroad work, and had no absurd expense been incurred in ornamenting stations, we might already have had,--what ultimately will be found we must have,--quadruple rails, two for passengers, and two for traffic, on every great line; and we might have been carried in swift safety, and watched and warded by well-paid pointsmen, for half the present fares. "[Greek: hô Dêmidion, horas ta lagô' ha soi pherô]?" Suppose it should turn out, finally, that a true government set to true work, instead of being a costly engine, was a paying one? that your government, rightly organized, instead of itself subsisting by an income tax, would produce its subjects some subsistence in the shape of an income dividend!--police and judges duly paid besides, only with less work than the state at present provides for them. A true government set to true work!--Not easily imagined, still less obtained, but not beyond human hope or ingenuity. Only you will have to alter your election systems somewhat, first. Not by universal suffrage, nor by votes purchasable with beer, is such government to be had. That is to say, not by universal equal suffrage. Every man upwards of twenty, who had been convicted of no legal crime, should have his say in this matter; but afterwards a louder voice, as he grows older, and approves himself wiser. If he has one vote at twenty, he should have two at thirty, four at forty, and ten at fifty. For every one vote which he has with an income of a hundred a year, he should have ten with an income of a thousand (provided you first see to it that wealth is, as nature intended it to be, the reward of sagacity and industry,--not of good luck in a scramble or a lottery.) For every one vote which he had as subordinate in any business, he should have two when he became a master; and every office and authority nationally bestowed, inferring trustworthiness and intellect, should have its known proportional number of votes attached to it. But into the detail and working of a true system in these matters we cannot now enter; we are concerned as yet with definitions only, and statements of first principles, which will be established now sufficiently for our purposes when we have examined the nature of that form of government last on the list in the previous paper,--the purely "Magistral," exciting at present its full share of public notice, under its ambiguous title of "slavery." I have not, however, been able to ascertain in definite terms, from the declaimers against slavery, what they understand by it. If they mean only the imprisonment or compulsion being in many cases highly expedient, slavery, so defined, would be no evil in itself, but only in its abuse; that is, when men are slaves, who should not be, or masters, who should not be, or under conditions which should not be. It is not, for instance, a necessary condition of slavery, nor a desirable one, that parents should be separated from children, or husbands from wives; but the institution of war, against which people declaim with less violence, effects such separations--not unfrequently in a higher permanent manner. To press a sailor, seize a white youth by conscription for a soldier, or carry off a black one for a labourer, may all be right, or all wrong, according to needs and circumstances. It is wrong to scourge a man unnecessarily. So it is to shoot him. Both must be done on occasion; and it is better and kinder to flog a man to his work, than to leave him idle till he robs, and flog him afterwards. The essential thing for all creatures is to be made to do right; how they are made to do it--by pleasant promises, or hard necessities, pathetic oratory, or the whip, is comparatively immaterial. To be deceived is perhaps as incompatible with human dignity as to be whipped, and I suspect the last instrument to be not the worst, for the help of many individuals. The Jewish nation throve under it, in the hand of a monarch reputed not unwise; it is only the change of whip for scorpion which is expedient, and yet that change is as likely to come to pass on the side of licence as of law; for the true scorpion whips are those of the nation's pleasant vices, which are to it as St. John's locusts--crown on the head, ravin in the mouth, and sting in the tail. If it will not bear the rule of Athena and her brother, who shepherd without smiting ([Greek: ou plêgê nemontes]), Athena at last calls no more in the corners of the streets; and then follows the rule of Tisiphone, who smites without shepherding. If, however, slavery, instead of absolute compulsion, is meant the purchase, by money, of the right of compulsion, such purchase is necessarily made whenever a portion of any territory is transferred, for money, from one monarch to another: which has happened frequently enough in history, without its being supposed that the inhabitants of the districts so transferred became their slaves. In this, as in the former case, the dispute seems about the fashion of the thing rather than the fact of it. There are two rocks in mid-sea, on each of which, neglected equally by instructive and commercial powers, a handful of inhabitants live as they may. Two merchants bid for the two properties, but not in the same terms. One bids for the people, buys them, and sets them to work, under pain of scourge; the other bids for the rock, buys it, and throws the inhabitants into the sea. The former is the American, the latter the English method, of slavery; much is to be said for, and something against, both, which I hope to say in due time and place. If, however, slavery mean not merely the purchase of the right of compulsion, but the purchase of the body and soul of the creature itself for money, it is not, I think, among the black races that purchases of this kind are most extensively made, or that separate souls of a fine make fetch the highest price. This branch of the inquiry we shall have occasion also to follow out at some length; for in the worst instance of the "[Greek: Biôn prasis]" we are apt to get only Pyrrhon's answer--[Greek: ti phês?--epriamên se? Adêlon]. The fact is that slavery is not a political institution at all, but an inherent, natural, and eternal inheritance of a large portion of the human race--to whom the more you give of their own will, the more slaves they will make themselves. In common parlance, we idly confuse captivity with slavery, and are always thinking of the difference between pine-trunks and cowslip bells, or between carrying wood and clothes-stealing, instead of noting the far more serious differences between Ariel and Caliban, and the means by which practically that difference may be brought about.[114] [114] The passage of Plato, referred to in note p. 280, in its context, respecting the slave who, well dressed and washed, aspires to the hand of his master's daughter, corresponds curiously to the attack of Caliban on Prospero's cell, and there is an undercurrent of meaning throughout, in the "Tempest" as well as in the "Merchant of Venice"; referring in this case to government, as in that to commerce. Miranda ("the wonderful," so addressed first by Ferdinand, "Oh, you wonder!") corresponds to Homer's Arete: Ariel and Caliban are respectively the spirits of freedom and mechanical labour. Prospero ("for hope"), a true governor, opposed to Sycorax, the mother of slavery, her name, "Swine-raven," indicating at once brutality and deathfulness; hence the line--"As wicked dew as e'er my mother brushed, with raven's feather,"--etc. For all dreams of Shakespeare, as those of true and strong men must be, are "[Greek: phantasmata theia, kai skiai tôn ontôn]," phantasms of God, and shadows of things that are. We hardly tell our children, willingly, a fable with no purport in it; yet we think God sends His best messengers only to say fairy tales to us, all fondness and emptiness. The "Tempest" is just like a grotesque in a rich missal, "clasped where paynims pray." Ariel is the spirit of true liberty, in early stages of human society oppressed by ignorance and wild tyranny; venting groans as fast as mill-wheels strike; in shipwreck of states, fearful; so that "all but mariners plunge in the brine, and quit the vessel, then all afire with me," yet having in itself the will and sweetness of truest peace, whence that is especially called "Ariel's" song, "Come unto these yellow sands"--(fenceless, and countless--changing with the sweep of the sea--"vaga arena." Compare Horace's opposition of the sea-sand to the dust of the grave: "numero carentis"--"exigui;" and again compare "animo rotundum percurrisse" with "put a girdle round the earth")--"and then take hands: court'sied when you have, and kiss'd,--the wild waves whist:" (mind it is "courtesia," not "curtsey") and read "quiet" for "whist" if you want the full sense. Then may you indeed foot it featly, and sweet spirits bear the burden for you--with watch in the night, and call in early morning. The power of liberty in elemental transformation follows--"Full fathom five thy father lies, of his bones are coral made." Then, giving rest after labour, it "fetches dew from the still-vex'd Bermoothes, and, with a charm joined to their suffered labour, leaves men asleep." Snatching away the feast of the cruel, it seems to them as a harpy, followed by the utterly vile, who cannot see it in any shape, but to whom it is the picture of nobody, it still gives shrill harmony to their false and mocking catch, "Thought is free," but leads them into briars and foul places, and at last hollas the hounds upon them. Minister of fate against the great criminal, it joins itself with the "incensed seas and shores"--the sword that layeth at it cannot hold, and may, "with bemocked-at stabs as soon kill the still-closing waters, as diminish one dowle that's in my plume." As the guide and aid of true love, it is always called by Prospero "fine" (the French "fine"--not the English), or "delicate"--another long note would be needed to explain all the meaning in this word. Lastly, its work done, and war, it resolves itself to the elements. The intense significance of the last song, "Where the bee sucks," I will examine in its due place. The types of slavery in Caliban are more palpable, and need not be dwelt on now: though I will notice them also, severally, in their proper places;--the heart of his slavery is in his worship: "That's a brave god, and bears celestial liquor." But, in illustration of the sense in which the Latin "benignus" and "malignus," are to be coupled with Eleutheria and Douleia, not that Caliban's torment is always the physical reflection of his own nature--"cramps" and "side-stitches that shall pen thy breath up"--"thou shalt be pinched as thick as honeycomb:" the whole nature of slavery being one cramp and cretinous contraction. Fancy this of Ariel! You may fetter him, but yet set no mark on him; you may put him to hard work and far journey, but you cannot give him a cramp. Of Shakespeare's names I will afterwards speak at more length: they are curiously--often barbarously--mixed out of various traditions and languages. Three of the clearest in meaning have been already noticed. Desdemona, "[Greek: dysdaimonia]," "miserable fortune," is also plain enough. Othello is, I believe, "the careful"; all the calamity of the tragedy arising from the single flaw and error in his magnificently collected strength. Ophelia, "serviceableness," the true lost wife of Hamlet, is marked as having a Greek name by that last word of her, where her gentle preciousness is opposed to the uselessness of the churlish clergy--"A ministering angel shall my sister be when thou liest howling." Hamlet is, I believe, connected in some way with "homely," the entire event of the tragedy turning on betrayal of home duty. Hermione ([Greek: herma]), "pillar-like" ([Greek: hê eidos eche chrysês Aphroditês]). Titania ([Greek: titênê]), "the queen;" Benedict and Beatrice, "blessed and blessing;" Valentine and Proteus, enduring (or strong) (valens) and changeful. Iago and Iachimo have evidently the same root--probably the Spanish Iago, Jacob, "the supplanter." Leonatus, and other such names are interpreted, or played with, in the plays themselves. For the interpretation of Sycorax, and reference to her raven's feather, I am indebted to Mr. John R. Wise. I should dwell, even in these prefatory papers, at somewhat more length on this matter, had not all I would say, been said (already in vain) by Carlyle, in the first of the "Latter-Day Pamphlets," which I commend to the reader's gravest reading: together with that as much neglected, and still more immediately needed, on model prisons, and with the great chapter on "Permanence" (fifth of the last section of "Past and Present"), which sums, what is known, and foreshadows,--or rather fore-lights, all that is to be learned, of National Discipline. I have only here farther to examine the nature of one world-wide and everlasting form of slavery, wholesome in use, deadly in abuse--the service of the rich by the poor. As in all previous discussions of our subject, we must study this relation in its simplest elements in order to reach its first principles. The simplest state of it is, then, this:[115] a wise and provident person works much, consumes little, and lays by store; an improvident person works little, consumes all the produce, and lays by no store. Accident interrupts the daily work, or renders it less productive; the idle person must then starve, or be supported by the provident one,--who, having him thus at his mercy, may either refuse to maintain him altogether, or, which will evidently be more to his own interest, say to him, "I will maintain you, indeed, but you shall now work hard, instead of indolently, and instead of being allowed to lay by what you save, as you might have done, had you remained independent, I will take all the surplus. You would not lay it up yourself; it is wholly your own fault that has thrown you into my power, and I will force you to work, or starve; yet you shall have no profit, only your daily bread." This mode of treatment has now become so universal that it is supposed the only natural--nay, the only possible one; and the market wages are calmly defined by economists as "the sum which will maintain the labourer." [115] In the present general examination I concede so much to ordinary economists as to ignore all innocent poverty. I assume poverty to be always criminal; the conceivable exceptions we will examine afterwards. The power of the provident person to do this is only checked by the correlative power of some neighbour of similarly frugal habits, who says to the labourer--"I will give you a little more than my provident friend:--come and work for me." The power of the provident over the improvident depends thus primarily on their relative numbers; secondarily, on the modes of agreement of the adverse parties with each other. The level of wages is a variable function of the number of provident and idle persons in the world, of the enmity between them as classes, and of the agreement between those of the same class. It depends, from beginning to end, on moral conditions. Supposing the rich to be entirely selfish, it is always for their interest that the poor should be as numerous as they can employ and restrain. For, granting the entire population no larger than the ground can easily maintain,--that the classes are stringently divided,--and that there is sense or strength of hand enough with the rich to secure obedience; then, if nine-tenths of a nation are poor, the remaining tenth have the service of nine persons each;[116] but, if eight-tenths are poor, only of four each; if seven-tenths are poor, of two and a third each; but, practically if the rich strive always to obtain more power over the poor, instead of to raise them,--and if, on the other hand, the poor become continually more vicious and numerous, through neglect and oppression--though the range of the power of the rich increases, its tenure becomes less secure; until, at last, the measure of iniquity being full, revolution, civil war, or the subjection of the state to a healthier or stronger one, closes the moral corruption and industrial disease. [116] I say nothing yet of the quality of the servants, which, nevertheless, is the gist of the business. Will you have Paul Veronese to paint your ceiling, or the plumber from over the way? Both will work for the same money; Paul, if anything, a little cheaper of the two, if you keep him in good humour; only you have to discern him first, which will need eyes. It is rare, however, that things come to this extremity. Kind persons among the rich, and wise among the poor, modify the connexion of the classes: the efforts made to raise and relieve on the one side, and the success and honest toil on the other, bind and blend the orders of society into the confused tissue of half-felt obligation, sullenly-rendered obedience, and variously-directed, or mis-directed, toil, which form the warp of daily life. But this great law rules all the wild design of the weaving; that success (while society is guided by laws of competition) signifies always so much victory over your neighbour as to obtain the direction of his work, and to take the profits of it. This is the real source of all great riches. No man can become largely rich by his personal toil.[117] The work of his own hands, wisely directed, will indeed always maintain himself and his family, and make fitting provision for his age. But it is only by the discovery of some method of taxing the labour of others that he can become opulent. Every increase of his capital enables him to extend this taxation more widely; that is, to invest larger funds in the maintenance of his labourers--to direct, accordingly, vaster and yet vaster masses of labour; and to appropriate its profits. There is much confusion of idea on the subject of this appropriation. It is, of course, the interest of the employer to disguise it from the persons employed; and for his own comfort and complacency he often desires no less to disguise it from himself. And it is matter of much doubt with me, how far the foolish arguments used habitually on this subject are indeed the honest expressions of foolish convictions,--or rather (as I am sometimes forced to conclude from the irritation with which they are advanced) are resolutely dishonest, wilful sophisms, arranged so as to mask to the last moment the real state of economy, and future duties of men. By taking a simple example, and working it thoroughly out, the subject may be rescued from all but determined misconception. [117] By his heart he may; but only when its produce, or the sight or hearing of it, becomes a subject of dispute, so as to enable the artist to tax the labour of multitudes highly, in exchange for his own. Let us imagine a society of peasants, living on a river-shore, exposed to destructive inundation at somewhat extended intervals; and that each peasant possesses of this good, but imperilled ground, more than he needs to cultivate for immediate subsistence. We will assume farther (and with too great probability of justice) that the greater part of them indolently keep in tillage just as much land as supplies them with daily food;--that they leave their children idle and untaught; and take no precautions against the rise of the stream. But one of them (we will say only one, for the sake of greater clearness) cultivates carefully all the ground of his estate; makes his children work hard and healthily; uses his spare time and theirs in building a rampart against the river; and at the end of some years has in his storehouses large reserves of food and clothing, and in his stables a well-tended breed of cattle. The torrent rises at last--sweeps away the harvests and many of the cottages of the careless peasantry, and leaves them destitute. They naturally come for help to the provident one, whose fields are unwasted and whose granaries are full. He has the right to refuse it them; no one disputes his right. But he will probably not refuse it; it is not his interest to do so, even were he entirely selfish and cruel. The only question with him will be on what terms his aid is to be granted. Clearly not on terms of mere charity. To maintain his neighbours in idleness would be his ruin and theirs. He will require work from them in exchange for their maintenance; and whether in kindness or cruelty, all the work they can give. Not now the three or four hours they were wont to spend on their own land, but the eight or ten hours they ought to have spent. But how will he apply this labour? The men are now his slaves--nothing less. On pain of starvation, he can force them to work in the manner and to the end he chooses. And it is by his wisdom in this choice that the worthiness of his mastership is proved, or its unworthiness. Evidently he must first set them to bank out the water in some temporary way, and to get their ground cleansed and resown; else, in any case, their continued maintenance will be impossible. That done, and while he has still to feed them, suppose he makes them raise a secure rampart for their own ground against all future flood, and rebuild their houses in safer places, with the best material they can find; being allowed time out of their working hours to fetch such material from a distance. And for the food and clothing advanced, he takes security in land that as much shall be returned at a convenient period. At the end of a few years, we may conceive this security redeemed, and the debt paid. The prudent peasant has sustained no loss; but is no richer than he was, and has had all his trouble for nothing. But he has enriched his neighbours materially; bettered their houses, secured their land, and rendered them, in worldly matters, equal to himself. In all true and final sense, he has been throughout their lord and king. We will next trace his probable line of conduct, presuming his object to be exclusively the increase of his own fortune. After roughly recovering and cleansing the ground, he allows the ruined peasantry only to build huts upon it, such as he thinks protective enough from the weather to keep them in working health. The rest of their time he occupies first in pulling down and rebuilding on a magnificent scale his own house, and in adding large dependencies to it. This done, he follows the example of the first great Hebrew financier, and in exchange for his continued supply of corn, buys as much of his neighbours! land, as he thinks he can superintend the management of; and makes the former owners securely embank and protect the ceded portion. By this arrangement he leaves to a certain number of the peasantry only as much ground as will just maintain them in their existing numbers: as the population increases, he takes the extra hands, who cannot be maintained on the narrow estates, for his own servants; employs some to cultivate the ground he has bought, giving them of its produce merely enough for subsistence; with the surplus, which, under his energetic and careful superintendence, will be large, he supports a train of servants for state, and a body of workmen, whom he educates in ornamental arts. He now can splendidly decorate his house, lay out its grounds magnificently, and richly supply his table, and that of his household and retinue. And thus, without any abuse of right, we should find established all the phenomena of poverty and riches, which (it is supposed necessarily) accompany modern civilization. In one part of the district, we should have unhealthy land, miserable dwellings and half-starved poor; in another, a well-ordered estate, well-fed servants, and refined conditions of highly-educated and luxurious life. I have put the two cases in simplicity, and to some extremity. But though in more complex and qualified operation, all the relations of society are but the expansion of these two typical sequences of conduct and result. I do not say, observe, that the first procedure is entirely right; still less, that the second is wholly wrong. Servants and artists, and splendour of habitation and retinue, have all their use, propriety and office. I only wish the reader to understand clearly what they cost; that the condition of having them is the subjection to you of a certain number of imprudent or unfortunate persons (or, it may be, more fortunate than their master), over whose destinies you exercise a boundless control. "Riches" mean eternally and essentially this; and may heaven send at last a time when those words of our best-reputed economist shall be true, and we shall indeed "all know what it is to be rich;" that is to be slave-master over farthest earth, and over all ways and thoughts of men. Every operative you employ is your true servant: distant or near, subject to your immediate orders, or ministering to your widely-communicated caprice--for the pay he stipulates, or the price he tempts,--all are alike under this great dominion of the gold. The milliner who makes the dress is as much a servant (more so, in that she uses more intelligence in the service) as the maid who puts it on; the carpenter who smoothes the door, as the footman who opens it; the tradesmen who supply the table, as the labourers and sailors who supply the tradesmen. Why speak of these lower services? Painters and singers (whether of note or rhyme), jesters and story-tellers, moralists, historians, priests--so far as these, in any degree, paint, or sing, or tell their tale, or charm their charm, or "perform" their rite, for pay, in so far they are all slaves; abject utterly, if the service be for pay only; abject less and less in proportion to the degrees of love and wisdom which enter into their duty, or can enter into it, according as their function is to do the bidding and the work of a man;--or to amuse, tempt, and deceive a child. There may be thus, and, to a certain extent, there always is, a government of the rich by the poor, as of the poor by the rich; but the latter is the prevailing and necessary one, and it consists, observe, of two distinct functions,--the collection of the profits of labour from those who would have misused them, and the administration of those profits for the service either of the same person in future, or of others; or, as is more frequently the case in modern times, for the service of the collector himself. The examination of these various modes of collection and use of riches will form the third branch of our future inquiries; but the key to the whole subject lies in the clear understanding of the difference between selfish and unselfish expenditure. It is not easy, by any course of reasoning, to enforce this on the generally unwilling hearer; yet the definition of unselfish expenditure is brief and simple. It is expenditure which if you are a capitalist, does not pay you, but pays somebody else; and if you are a consumer, does not please you, but pleases somebody else. Take one special instance, in further illustration of the general type given above. I did not invent that type, but spoke of a real river, and of real peasantry, the languid and sickly race which inhabits, or haunts--for they are often more like spectres than living men--the thorny desolation on the banks of the Arve. Some years ago, a society formed at Geneva offered to embank the river, for the ground which would have been recovered by the operation; but the offer was refused by the (then Sardinian) government. The capitalists saw that this expenditure would have "paid," if the ground saved from the river was to be theirs. But if when the offer that had this aspect of profit was refused, they had nevertheless persisted in the plan and, merely taking security for the return of their outlay, lent the funds for the work, and thus saved a whole race of human souls from perishing in a pestiferous fen (as, I presume, some among them would, at personal risk, have dragged any one drowning creature out of the current of the stream, and not expected payment therefor), such expenditure would have precisely corresponded to the use of his power made, in the first instance, by our supposed richest peasant--it would have been the king's, of grace, instead of the usurer's, for gain. "Impossible, absurd, Utopian!" exclaim nine-tenths of the few readers whom these words may find. No, good reader, this is not Utopian: but I will tell you what would have seemed, if we had not seen it, Utopian on the side of evil instead of good: that ever men should have come to value their money so much more than their lives, that if you call upon them to become soldiers, and take chance of bullet, for their pride's sake, they will do it gaily, without thinking twice; but if you ask them for their country's sake to spend a hundred pounds without security of getting back a hundred-and-five[118] they will laugh in your face. [118] I have not hitherto touched on the subject of interest of money; it is too complex; and must be reserved for its proper place in the body of the work. (I should be glad if a writer, who sent me some valuable notes on this subject, and asked me to return a letter which I still keep at his service, would send me his address.) The definition of interest (apart from compensation for risk) is, "the exponent of the comfort of accomplished labour, separated from its power;" the power being what is lent: and the French economists who have maintained the entire illegality of interest are wrong; yet by no means so curiously or wildly wrong as the English and French ones opposed to them, whose opinions have been collected by Dr. Whewell at page 41 of his Lectures; it never seeming to occur to the mind of the compiler any more than to the writers whom he quotes, that it is quite possible, and even (according to Jewish proverb) prudent, for men to hoard, as ants and mice do, for use, not usury; and lay by something for winter nights, in the expectation of rather sharing than lending the scrapings. My Savoyard squirrels would pass a pleasant time of it under the snow-laden pine-branches, if they always declined to economize because no one would pay them interest on nuts. Not but that also this game of life-giving-and-taking is, in the end, somewhat more costly than other forms of play might be. Rifle practice is, indeed, a not unhealthy pastime, and a feather on the top of the head is a pleasing appendage; but while learning the stops and fingering of the sweet instrument, does no one ever calculate the cost of an overture? What melody does Tityrus meditate on his tenderly spiral pipe? The leaden seed of it, broad cast, true conical "Dents de Lion" seed--needing leas allowance for the wind than is usual with that kind of herb--what crop are you likely to have of it? Suppose, instead of this volunteer marching and countermarching, you were to do a little volunteer ploughing and counterploughing? It is more difficult to do it straight: the dust of the earth, so disturbed, is more grateful than for merely rhythmic footsteps. Golden cups, also, given for good ploughing would be more suitable in colour (ruby glass, for the wine which "giveth his colour" on the ground, as well as in the cup, might be fitter for the rifle prize in the ladies' hands); or, conceive a little volunteer exercise with the spade, other than such as is needed for moat and breastwork, or even for the burial of the fruit of the leaden avena-seed, subject to the shrill Lemures' criticism-- "Wer hat das Haus so schlecht gebaut?" If you were to embank Lincolnshire now,--more stoutly against the sea? or strip the peat of Solway, or plant Plinlimmon moors with larch--then, in due hour of year, some amateur reaping and threshing? "Nay, we reap and thresh by steam in these advanced days." I know it, my wise and economical friends. The stout arms God gave you to win your bread by, you would fain shoot your neighbours--and God's sweet singers--with;[119] then you invoke the friends to your farm-service, and-- "When young and old come forth to play On a sulphurous holiday, Tell how the darling goblin sweat (His feast of cinders duly set), And belching night, where breathed the morn. His shadowy flail hath threshed the corn That ten day-labourers could not end." But we will press the example closer. On a green knoll above that plain of the Arve, between Cluses and Bonneville, there was, in the year 1860, a cottage, inhabited by a well-doing family--man and wife, three children, and the grandmother. I call it a cottage but, in truth, it was a large chimney on the ground, wide at the bottom (so that the family might live round the fire), with one broken window in it, and an unclosing door. The family, I say, was "well-doing," at least, it was hopeful and cheerful; the wife healthy, the children, for Savoyards, pretty and active, but the husband threatened with decline, from exposure under the cliffs of the Mont Vergi by day, and to draughts between every plank of his chimney in the frosty nights. "Why could he not plaster the chinks?" asks the practical reader. For the same reason that your child cannot wash its face and hands till you have washed them many a day for it, and will not wash them when it can, till you force it. [119] Compare Chaucer's feeling respecting birds (from Canace's falcon, to the nightingale, singing "Domine labia "--to the Lord of Love) with the usual modern British sentiments on this subject. Or even Cowley's:-- "What prince's choir of music can excel That which within this shade does dwell. To which we nothing pay, or give, They, like all other poets, live Without reward, or thanks for their obliging pains! 'Tis well if they became not prey." Yes; it is better than well; particularly since the seed sown by the wayside has been protected by the peculiar appropriation of part of the church rates in our country parishes. See the remonstrance from a "Country Parson," in the _Times_ of June 4th (or 5th; the letter is dated June 3rd, 1862):--"I have heard at a vestry meeting a good deal of higgling over a few shillings' outlay in cleaning the church; but I have never heard any dissatisfaction expressed on account of the part of the rate which is invested in fifty or 100 dozens of birds' heads." I passed this cottage often in my walks, had its window and door mended, sometimes mended also a little the meal of sour bread and broth, and generally got kind greeting and smile from the face of young or old; which greeting, this year, narrowed itself into the half-recognizing stare of the elder child and the old woman's tears; for the father and mother were both dead,--one of sickness, the other of sorrow. It happened that I passed not alone, but with a companion, a practised English joiner, who, while these people were dying of cold, had been employed from six in the morning to six of the evening for two months, in fitting the panels without nails, of a single door in a large house in London. Three days of his work taken, at the right time, from the oak panels, and applied to the larch timbers, would have saved these Savoyards' lives. He would have been maintained equally (I suppose him equally paid for his work by the owner of the greater house, only the work not consumed selfishly on his own walls;) and the two peasants, and eventually, probably their children, saved. There are, therefore, let me finally enforce and leave with the reader this broad conclusion,--three things to be considered in employing any poor person. It is not enough to give him employment. You must employ him first to produce useful things; secondly, of the several (suppose equally useful) things he can equally well produce, you must set him to make that which will cause him to lead the healthiest life; lastly, of the things produced, it remains a question of wisdom and conscience how much you are to take yourself, and how much to leave to others. A large quantity, remember, unless you destroy it, must always be so left at one time or another; the only questions you have to decide are, not what you will give, and what you will keep, but when, and how, and to whom, you will give. The natural law of human life is, of course, that in youth a man shall labour and lay by store for his old age, and when age comes, should use what he has laid by, gradually slackening his toil, and allowing himself more frank use of his store, taking care always to leave himself as much as will surely suffice for him beyond any possible length of life. What he has gained, or by tranquil and unanxious toil, continues to gain, more than is enough for his own need, he ought so to administer, while he yet lives, as to see the good of it again beginning in other hands; for thus he has himself the greatest sum of pleasure from it, and faithfully uses his sagacity in its control. Whereas most men, it appears, dislike the sight of their fortunes going out into service again, and say to themselves,--"I can indeed nowise prevent this money from falling at last into the hands of others, nor hinder the good of it, such as it is, from becoming theirs, not mine; but at least let a merciful death save me from being a witness of their satisfaction; and may God so far be gracious to me as to let no good come of any of this money of mine before my eyes." Supposing this feeling unconquerable, the safest way of rationally indulging it would be for the capitalist at once to spend all his fortune on himself, which might actually, in many cases, be quite the rightest as well as the pleasantest thing to do, if he had just tastes and worthy passions. But, whether for himself only, or through the hands and for the sake of others also, the law of wise life is, that the maker of the money should also be the spender of it, and spend it, approximately, all, before he dies; so that his true ambition as an economist should be, to die, not as rich, but as poor, as possible, calculating the ebb tide of possession in true and calm proportion to the ebb tide of life. Which law, checking the wing of accumulative desire in the mid-volley,[120] and leading to peace of possession and fulness of fruition in old age, is also wholesome in that by the freedom of gift, together with present help and counsel, it at once endears and dignifies age in the sight of youth, which then no longer strips the bodies of the dead, but receives the grace of the living. Its chief use would (or will be, for men are indeed capable of attaining to this much use for their reason), that some temperance and measure will be put to the acquisitiveness of commerce.[121] For as things stand, a man holds it his duty to be temperate in his food, and of his body, but for no duty to be temperate in his riches, and of his mind. He sees that he ought not to waste his youth and his flesh for luxury; but he will waste his age, and his soul, for money, and think it no wrong, nor the delirium tremens of the intellect any evil. But the law of life is, that a man should fix the sum he desires to make annually, as the food he desires to eat daily; and stay when he has reached the limit, refusing increase of business, and leaving it to others, so obtaining due freedom of time for better thoughts. How the gluttony of business is punished, a bill of health for the principals of the richest city houses, issued annually, would show in a sufficiently impressive manner. [120] [Greek: kai penian hêgoumenous heinai mê to tên ousian elattô poiein, alla to tên aplêstian pleiô.]--"Laws," v. 8. Read the context and compare. "He who spends for all that is noble, and gains by nothing but what is just, will hardly be notably wealthy, or distressfully poor."--"Laws," v. 42. [121] The fury of modern trade arises chiefly out of the possibility of making sudden fortune by largeness of transaction, and accident of discovery or contrivance. I have no doubt that the final interest of every nation is to check the action of these commercial lotteries. But speculation absolute, unconnected with commercial effort, is an unmitigated evil in a state, and the root of countless evils beside. I know, of course, that these statements will be received by the modern merchant, as an active Border rider of the sixteenth century would have heard of its being proper for men of the Marches to get their living by the spade instead of the spur. But my business is only to state veracities and necessities; I neither look for the acceptance of the one, nor promise anything for the nearness of the other. Near or distant, the day will assuredly come when the merchants of a state shall be its true "ministers of exchange," its porters, in the double sense of carriers and gate-keepers, bringing all lands into frank and faithful communication, and knowing for their master of guild, Hermes the herald, instead of Mercury the gain-guarder. And now, finally, for immediate rule to whom it concerns. The distress of any population means that they need food, houseroom, clothes, and fuel. You can never, therefore, be wrong in employing any labourer to produce food, houseroom, clothes, or fuel: but you are always wrong if you employ him to produce nothing (for then some other labourer must be worked double time to feed him); and you are generally wrong, at present, if you employ him (unless he can do nothing else) to produce works of art, or luxuries; because modern art is mostly on a false basis, and modern luxury is criminally great.[122] [122] It is especially necessary that the reader should keep his mind fixed on the methods of consumption and destruction, as the true sources of national poverty. Men are apt to watch rather the exchanges in a state than its damages; but the exchanges are only of importance so far as they bring about these last. A large number of the purchases made by the richer classes are mere forms of interchange of unused property, wholly without effect on national prosperity. It matters nothing to the state, whether if a china pipkin be rated as worth a hundred pounds, A has the pipkin, and B the pounds, or A the pounds and B the pipkin. But if the pipkin is pretty, and A or B breaks it, there is national loss; not otherwise. So again, when the loss has really taken place, no shifting of the shoulders that bear it will do away with the fact of it. There is an intensely ludicrous notion in the public mind respecting the abolishment of debt by denying it. When a debt is denied, the lender loses instead of the borrower, that is all; the loss is precisely, accurately, everlastingly the same. The Americans borrow money to spend in blowing up their own houses. They deny their debt; by one third already, gold being at fifty premium; and will probably deny it wholly. That merely means that the holders of the notes are to be the losers instead of the issuers. The quantity of loss is precisely equal, and irrevocable; it is the quantity of human industry spent in explosion, plus the quantity of goods exploded. Honour only decides who shall pay the sum lost, not whether it is to be paid or not. Paid it must be and to the uttermost farthing. The way to produce more food is mainly to bring in fresh ground, and increase facilities of carriage;--to break rock, exchange earth, drain the moist, and water the dry, to mend roads, and build harbours of refuge. Taxation thus spent will annihilate taxation, but spent in war, it annihilates revenue. The way to produce houseroom is to apply your force first to the humbler dwellings. When your bricklayers are out of employ, do not build splendid new streets, but better the old ones: send your paviours and slaters to the poorest villages, and see that your poor are healthily lodged before you try your hand on stately architecture. You will find its stateliness rise better under the trowel afterwards; and we do not yet build so well as that we need hasten to display our skill to future ages. Had the labour which has decorated the Houses of Parliament filled, instead, rents in walls and roofs throughout the county of Middlesex; and our deputies met to talk within massive walls that would have needed no stucco for five hundred years,--the decoration might have been better afterwards, and the talk now. And touching even our highly conscientious church building, it may be well to remember that in the best days of church plans, their masons called themselves "logeurs du bon Dieu;" and that since, according to the most trusted reports, God spends a good deal of His time in cottages as well as in churches, He might perhaps like to be a little better lodged there also. The way to get more clothes is,--not necessarily, to get more cotton. There were words written twenty years ago which would have saved many of us some shivering had they been minded in time. Shall we read them? "The Continental people, it would seem, are 'importing our machinery, beginning to spin cotton and manufacture for themselves, to cut us out of this market and then out of that!' Sad news indeed; but irremediable;--by no means. The saddest news is, that we should find our National Existence, as I sometimes hear it said, depend on selling manufactured cotton at a farthing an ell cheaper than any other People. A most narrow stand for a great Nation to base itself on! A stand which, with all the Corn-Law Abrogations conceivable, I do not think will be capable of enduring. "My friends, suppose we quitted that stand; suppose we came honestly down from it and said: 'This is our minimum cotton-prices. We care not, for the present, to make cotton any cheaper. Do you, if it seem so blessed to you, make cotton cheaper. Fill your lungs with cotton-fuzz, your hearts with copperas-fumes, with rage and mutiny; become ye the general gnomes of Europe, slaves of the lamp!' I admire a Nation which fancies it will die if it do not undersell all other Nations, to the end of the world. Brothers, we will cease to _under_sell them; we will be content to _equal_-sell them; to be happy selling equally with them! I do not see the use of underselling them. Cotton-cloth is already two-pence a yard or lower; and yet bare backs were never more numerous among us. Let inventive men cease to spend their existence incessantly contriving how cotton can be made cheaper; and try to invent, a little, how cotton at its present cheapness could be somewhat justlier divided among us. Let inventive men consider, Whether the Secret of this Universe, and of Man's Life there, does, after all, as we rashly fancy it, consist in making money?... With a Hell which means--'Failing to make money,' I do not think there is any Heaven possible that would suit one well; nor so much as an Earth that can be habitable long! In brief, all this Mammon-Gospel of Supply-and-demand, Competition, Laissez-faire, and Devil take the hindmost" (foremost, is it not, rather, Mr. Carlyle?) "begins to be one of the shabbiest Gospels ever preached." (In the matter of clothes, decidedly.) The way to produce more fuel is first to make your coal mines safer, by sinking more shafts; then set all your convicts to work in them, and if, as is to be hoped, you succeed in diminishing the supply of that sort of labourer, consider what means there may be, first of growing forest where its growth will improve climate; then of splintering the forests which now make continents of fruitful land pathless and poisonous, into faggots for fire;--so gaining at once dominion sunwards and icewards. Your steam power has been given you (you will find eventually) for work such as that; and not for excursion trains, to give the labourer a moment's breath, at the peril of his breath for ever, from amidst the cities which you have crushed into masses of corruption. When you know how to build cities, and how to rule them, you will be able to breathe in their streets, and the "excursion" will be the afternoon's walk or game in the fields round them. Long ago, Claudian's peasant of Verona knew, and we must yet learn, in his fashion, the difference between via and vita. But nothing of this work will pay. No; no more than it pays to dust your rooms or wash your doorsteps. It will pay; not at first in currency, but in that which is the end and the source of currency,--in life (and in currency richly afterwards). It will pay in that which is more than life,--in "God's first creature, which was light," whose true price has not yet been reckoned in any currency, and yet into the image of which all wealth, one way or other, must be cast. For your riches must either as the lightning, which, "begot but in a cloud, Though shining bright, and speaking loud, Whilst it begins, concludes its violent race, And, where it gilds, it wounds the place;" or else as the lightning of the sacred sign, which shines from one part of the heaven to the other. There is no other choice; you must either take dust for deity, spectre for possession, fettered dream for life, and for epitaph, this reversed verse of the great Hebrew hymn of economy (Psalm cxii.):--"He hath gathered together, he hath stripped the poor, his iniquity remaineth for ever." Or else, having the sun for justice to shine on you, and the sincere substance of good in your possession, and the pure law and liberty of life within you, leave men to write this better legend over your grave: "He hath dispersed abroad. He hath given to the poor. His righteousness remaineth for ever." * * * * * The present paper completes the definitions necessary for future service. The next in order will be the first chapter of the body of the work. These introductory essays are as yet in imperfect form; I suffer them to appear, though they were not intended for immediate publication, for the sake of such chance service as may be found in them. [Here the author indicated certain corrections, which have been carried out in this edition. He then went on to say that the note on Charis (p. 274) required a word or two in further illustration, as follows:--] The derivation of words is like that of rivers: there is one real source, usually small, unlikely, and difficult to find, far up among the hills; then, as the word flows on and comes into service, it takes in the force of other words from other sources, and becomes itself quite another word--even more than one word, after the junction--a word as it were of many waters, sometimes both sweet and bitter. Thus the whole force of our English "charity" depends on the guttural in "Charis" getting confused with the "c" of the Latin "carus;" thenceforward throughout the middle ages, the two ideas ran on together, and both got confused with St. Paul's [Greek: agapê], which expresses a different idea in all sorts of ways; our "charity," having not only brought in the entirely foreign sense of almsgiving, but lost the essential sense of contentment, and lost much more in getting too far away from the "charis," of the final Gospel benedictions. For truly it is fine Christianity we have come to, which professing to expect the perpetual grace of its Founder, has not itself grace enough to save it from overreaching its friends in sixpenny bargains; and which, supplicating evening and morning the forgiveness of its own debts, goes forth in the daytime to take its fellow-servants by the throat, saying--not "Pay me that thou owest," but "Pay me that thou owest me not." Not but that we sometimes wear Ophelia's rue with a difference, and call it, "Herb o' grace o' Sundays," taking consolation out of the offertory with--"Look, what he layeth out, it shall be paid him again." Comfortable words, indeed, and good to set against the old royalty of Largesse-- "Whose moste joie was, I wis, When that she gave, and said, 'Have this.'" Again: the first root of the word faith being far away in----(compare my note on this force of it in "Modern Painters," vol. v., p. 255), the Latins, as proved by Cicero's derivation of the word, got their "facio," also involved in the idea; and so the word, and the world with it, gradually lose themselves in an arachnoid web of disputation concerning faith and works, no one ever taking the pains to limit the meaning of the term: which in earliest Scriptural use is as nearly as possible our English "obedience." Then the Latin "fides," a quite different word, alternately active and passive in different uses, runs into "foi;" "facere," through "ficare," into "fier," at the end of words; and "fidere," into "fier" absolute; and out of this endless reticulation of thought and word rise still more finely reticulated theories concerning salvation by faith--the things which the populace expected to be saved from, being indeed carved for them in a very graphic manner in their cathedral porches, but the things they were expected to believe being carved for them not so clearly. Lastly I debated with myself whether to make the note on Homer longer by examining the typical meaning of the shipwreck of Ulysses, and his escape from Charybdis by help of her fig-tree; but as I should have had to go on to the lovely myth of Leucothea's veil, and did not care to spoil this by a hurried account of it, I left it for future examination; and three days after the paper was published, observed that the reviewers, with their usual useful ingenuity, were endeavouring to throw the whole subject back into confusion by dwelling on the single (as they imagined) oversight. I omitted also a note on the sense of the word [Greek: lygron], with respect to the pharmacy of Circe, and herb-fields of Helen (compare its use in Odyssey, xvii. 473, etc.), which would further have illustrated the nature of the Circean power. But, not to be led too far into the subtleness of these myths, respecting them all I have but this to say: Even in very simple parables, it is not always easy to attach indisputable meaning to every part of them. I recollect some years ago, throwing an assembly of learned persons who had met to delight themselves with interpretations of the parable of the prodigal son (interpretations which had up to that moment gone very smoothly) into high indignation, by inadvertently asking who the prodigal son was, and what was to be learned by his example. The leading divine of the company (still one of our great popular preachers) at last explained to me that the unprodigal son was a lay figure, put in for dramatic effect, to make the story prettier, and that no note was to be taken of him. Without, however, admitting that Homer put in the last escape of Ulysses merely to make his story prettier, this is nevertheless true of all Greek myths, that they have many opposite lights and shades: they are as changeful as opal and, like opal, usually have one colour by reflected, and another by transmitted, light. But they are true jewels for all that, and full of noble enchantment for those who can use them; for those who cannot, I am content to repeat the words I wrote four years ago, in the appendix to the "Two Paths"-- "The entire purpose of a great thinker may be difficult to fathom, and we may be over and over again more or less mistaken in guessing at his meaning; but the real, profound, nay, quite bottomless and unredeemable mistake, is the fool's thought, that he had no meaning." LONDON: WARD, LOCK & CO., LIMITED. * * * * * Transcriber's note: 1. Text in italics is enclosed by underscores (_italics_). 2. Footnotes have been renumbered and moved from the middle of the paragraph to the closest paragraph break. 3. The original text includes Greek characters. For this text version these letters have been replaced with transliterations. For example, [Greek: b] represents greek letter beta. 4. Certain words use an oe ligature in the original. 5. Mixed fractions are indicated with a hyphen and forward slash. For example, 3-1/2 indicates three and a half. 6. Obvious misprints and punctuation errors have been silently corrected in this text version. 7. Other than the changes listed above, printer's inconsistencies in hyphenation and ligature usage have been retained. 
48446	----	generously made available by The Internet Archive/American Libraries.) KARL MARX A SKETCH BY ACHILLE LORIA KARL MARX BY ACHILLE LORIA AUTHORISED TRANSLATION FROM THE ITALIAN WITH A FOREWORD BY EDEN & CEDAR PAUL [Illustration: Logo] NEW YORK THOMAS SELTZER 1920 COPYRIGHT, 1920, BY THOMAS SELTZER, INC. All Rights Reserved Printed in the United States of America _The socialism that inspires hopes and fears to-day is of the school of Marx. No one is seriously apprehensive of any other so-called socialistic movement, and no one is seriously concerned to criticise or refute the doctrines set forth by any other school of "socialists."_ FOREWORD BY EDEN AND CEDAR PAUL FOREWORD It has been said that the professional and professorial exponents of economic science confine themselves to variants of a single theme. Usually belonging to the master class by birth and education, and at any rate attached to that class by the ties of economic interest, they are ever guided by the conscious or subconscious aim of providing a theoretical justification for the capitalist system, and their lives are devoted to inculcating the art of extracting honey from the hive without alarming the bees. Achille Loria is an exception to this generalisation. Professor of political economy at Turin, and one of the most learned economists of the day, he is anything but an apologist for the bourgeois economy. With the exception of the first volume of Marx's _Capital_, no more telling indictment of capitalism has ever been penned than Loria's _Analysis of Capitalist Property_ (1889). This gigantic work has not been translated, but a number of Loria's books are available to English readers: _The Economic Foundations of Society_, 1902; _Contemporary Social Problems_, 1911; _The Economic Synthesis_, 1914. A biographical and critical study of Malthus, in the Italian, was rendered into English in 1917 and published in the United States as the opening chapter of a symposium on _Population and Birth Control_ edited by the writers of this foreword. _The Economic Foundations of Society_ has run through five editions in Swan Sonnenschein's (now Allen & Unwin's) "Social Science Series." But on the whole Loria's works are less widely known in England and America than on the continent, far less widely known than they deserve to be. An exposition of his outlook and a study of his relationship to Marx will not only be of interest in themselves, but will help readers to surmount certain terminological difficulties in the _Karl Marx_. All original thinkers write perforce in a language of their own minting. Those of us to whom "surplus value," the "class struggle," the "materialist conception," "economic determinism," have been familiar concepts from childhood upwards, are apt to forget that Marx's contemporaries were repelled by what they regarded as superfluous jargon. The first students of Kant, the first students of Darwin, the first students of all great innovators in philosophy, science, and the arts, have had to master a new vocabulary before they could understand what these writers were driving at; for new ideas must be conveyed in a new speech or by the use of old words refashioned. We cannot understand Loria, we cannot appreciate Loria's criticism of Marx, we cannot grasp the nature of Loria's own affiliation to Marx, unless we realise precisely what the Italian economist means by the speciously familiar terms "income," "subsistence," "unproductive labourers," "recipients of income," and the like. The familiarity of the words makes them all the more misleading to those who do not hold the Lorian clue to guide them through the economic labyrinth. Does this sound alarming? Yet Loria's doctrines, like those of Marx, like those of Darwin, like those of--but we must not say "like those of Kant"--are simplicity itself to anyone who is able to survive the first shock of the encounter, to surmount the first agony of a new idea. In our own view the difficulty of economics in large part depends upon the fact that it is either a system of apologetics or else a system of attack. There are, in fact, two conflicting sciences: the economic science of the master class, and the economic science of the proletariat. Both are necessarily tendentious, and the conflicting tendencies will remain irreconcilable as long as the class struggle continues. Not until that struggle has been fought to a successful issue, not until the co-operative commonwealth has come into existence, can there be a comparatively dispassionate political economy. As dispassionate as conic sections it can never be, for it is biological, sociological, is by its very nature tinged with human interest, and can therefore never be wholly impartial. But many of the contradictions and perplexities of economics are by no means inherent; they are, we contend, no more than confusing reflexes of the class struggle. Loria seems to hold a somewhat similar opinion. In _Contemporary Social Problems_ (pp. 99, 100) he writes: "I am inclined to consider political economy and socialism as two intellectual weapons which, for a long time separate and mutually antagonistic owing to the apologetic theories of the one and the subversive utopianism of the other, are drawing closer and closer together as they become more human and the old animosities disappear. Perhaps the day is not far distant when the two forces will unite under one standard." To a casual reader this might suggest that Loria thinks that the class struggle, that the conflict between orthodox economics and socialism, can be overcome within the framework of the bourgeois economy--that the capitalist Old-Man-of-the-Sea can at one and the same time remain seated upon the back of the proletarian Sindbad the Sailor, and walk beside him amicably arm in arm as the two climb the mount of human endeavour. But an attentive student of Loria's _Karl Marx_ will realise that when the Italian speaks of "a day not far distant," he means the morrow of the social revolution, when Marx's promethean work shall have been completed, and when, led by Marx "the emperor in the realm of mind," the human race shall have reached "the brilliant goal which awaits it in a future not perhaps immeasurably remote" (infra p. 162). For Loria, one of the greatest living champions of the doctrine of economic determinism, sees no difficulty in reconciling that doctrine with a firm belief in the magistral efficacy, at the stage which evolution has now reached, of the deliberate human will. "The economic natural force," writes Eduard Bernstein (_Evolutionary Socialism_, p. 14), "like the physical, changes from the ruler of mankind to its servant, according as its nature is recognised." Herein is embodied the application in the special economic field of the profound general truth that by scientific study man, the child of nature, learns to control nature, and thereby to mould his own being and social environment in accordance with the dictates of his own enlightened will. Similarly Loria is far from the rigid economic determinism which would refuse to admit the existence of "ideal" causation, or the possibility in the sphere of sociology of intelligently adapting means to ends. "Idealism" is a word which has been soiled by such ignoble use that one really hesitates to employ it; but we must distinguish between idealism and sentimentalism, and between idealism and window dressing. The right sort of idealism is realist idealism, and Loria is a realist idealist. He distinguishes clearly between fatalism and quietism, on the one hand, and economic determinism tempered by rationalist guidance, on the other. In _The Economic Foundations of Society_ (pp. 376 et seq.) he writes: "Can we say that a doctrine leads to fatalism which concedes a fertile field to human activity, and which only seeks to mark out the limits within which such efforts may be applied? Can we give the name of quietism to a theory whose aims lie in the direction of substituting enlightened action, aware of its ends, for blind and ignorant innovation which is powerless to realise its purposes?... Turning to consider the great social transformations which alter the structure of property, our theory does, it is true, deny that such movements can be effected before the necessary change in economic conditions has rendered them inevitable; but far from this conclusion leading to the degradation of human nature, it seems to us to inspire the highest sentiments. If we examine the great spontaneous movements that have sought to modify economic conditions before their time, we shall find that they all lacked definite purpose. There was no clear idea of the new order of things to be substituted for the old; on this account these movements were wanting in discipline; they were anarchic, and hence their lack of effect. Our theory, on the contrary, declares that it is first of all necessary to learn the nature of the future social system, and, after this knowledge has been acquired, to substitute a co-ordination of effort towards this rigorously determined end for the blind and disorganised attempts that have thus far been made in this direction.... Far from leading towards fatalism our theory tends to encourage rational human activity, which alone can prevent, or at least mitigate, the confusion otherwise attendant upon the social metamorphosis.... A wide field is thus opened to human activity, and it is certainly a noble mission for mankind to withdraw social development from the operation of the blind and brutal forces of physical evolution and to submit the process to the kindlier and more civilised action of human reason." The definitive exposition of Loria's views is to be found in _The Economic Synthesis_; but since in his theory of social evolution the effects of increasing population play so notable a part, reference must first be made to his examination of Malthus' theory of population. At the outset, however, let us recall Marx's attitude to the Malthusian doctrine. Marx rejected the idea that, for human beings, population tends to grow in such a manner as necessarily to press on the means of subsistence. Though he accepted Darwinism and had a profound admiration for Darwin, as far as the human species is concerned he rejected Malthusianism (on which Darwinism is based), and wrote of Malthus in terms of bitter personal hostility. The animus we may ignore, but the arguments are worth recapitulating. Pressure of population, he says, is the outcome of capitalism. On p. 645 of _Capital_ Marx writes: "The labouring population ... produces, along with the accumulation of capital produced by it, the means by which it is itself made relatively superfluous, is turned into a relatively surplus population, and it does this always to an increasing extent. This is a law of population peculiar to the capitalist mode of production, and in fact every special historic mode of production has its own special laws of population, historically valid within its limits alone. An abstract law of population exists for plants and animals only, and only in so far as man has not interfered with them." Later in the same chapter he says (in effect) that undue fertility is characteristic of poverty-stricken circumstances, and that with improved conditions the population difficulty tends to settle itself. We shall see that Loria says much the same thing, and shall consider the assertion presently. At a later date (1875) Marx writes somewhat more guardedly. In his _Criticism of the Gotha Programme_ the reference to the Malthusian doctrine of population runs as follows: "But if I accept this law [the iron law of wages] as formulated by Lassalle, I must likewise accept its foundation. What is this foundation? As F. A. Lange showed shortly after Lassalle's death, the iron law of wages is founded upon Malthus' theory of population, a theory which Lange himself espoused. Now if the iron law of wages be correct, it is impossible to abrogate it, even if we should do away with wage labour a hundred times over, for not the wage system alone, but every social system, must be governed by the law. Upon this foundation, for fifty years and more, economists have continued to demonstrate that socialism could never suppress poverty, which they regard as resulting from the nature of things. Socialism, they declare, can only generalise poverty, can only diffuse it simultaneously over the whole surface of society!" Does it not almost seem as if Marx, by 1875, had, for a moment at least, glimpsed the real difficulty? For if we grant for the sake of argument that the excess of population under capitalism be only a relative excess, if we grant that each historic mode of production has its own special law of population, the question we have to ask ourselves as socialists is, "What will be the law of population under socialism?" May not socialism tend to promote an _absolute_ excess of population? Will not natural increase, stimulated by easy circumstances, threaten the stability of the system unless the growth of population be deliberately checked? Will not the inhabitants of each area have to specify some limit beyond which it is undesirable that the population of that area should increase? Ways and means, social and individual, lie beyond our present scope. But in our opinion Paul Lafargue, Henry George, and many others who have written on this question, and who have endeavoured to meet the Malthusian difficulty by a simple denial of the facts upon which "Parson Malthus" grounded his theory, have displayed more zeal than knowledge. As Karl Pearson wrote thirty years ago: "Marx by abusing Malthus has not solved the population difficulty"; and we agree with the same writer that "the acceptance of the law discovered by Malthus is an essential of any socialistic theory which pretends to be scientific"; but happily it is no longer true that "Kautsky seems to stand alone among socialists in accepting the Malthusian law and its consequences" (_The Ethic of Free-thought_, 1888, pp. 438-9). Loria's treatment of the subject is closely akin to that of Marx, though Loria differs from Marx in that he speaks with admiration, nay almost with veneration, of the author of _The Principles of Population_. As regards the main issue, Loria contends that while Malthus elucidated a profoundly important truth, he erred in respect of many of its applications. In present conditions, i.e., under capitalism, says Loria, there is no excess of population over food supply, but merely (in certain countries) an excess of people in relation to the privately owned capital which is able to secure profitable investment. Hence, as a result not of over-population but simply of capitalist conditions, we have in addition to the mass of the workers who obtain subsistence, on the one hand an owning class with a superfluity, and on the other a parasitic class of dependents, paupers, semi-criminals, and criminals. He contends, further, that Malthus' theory is invalidated by the ascertained fact that, as far as human beings are concerned, an excess of food over population does not necessarily lead to an increase in the birth rate--that a rising standard of life is nowadays apt to be characterised by diminished procreation. Speaking of certain postmalthusian applications of Malthus' theory, he writes (_Contemporary Social Problems_, p. 79): "Some also suggest various physiological expedients--the obscene abominations of the so-called neomalthusians--to limit population. Do they not see that there is no excess of mouths to be fed, and that procreation will of itself diminish with the amelioration of the condition of the working classes, without recourse to loathsome and unnatural practices?" In this passage, as repeatedly in his _Malthus_, Loria fails oddly (for so acute a mind) in his analysis of operating causes. As the result of a rising standard of life--consequent upon improved economic conditions among the proletariat--the workers, we are told (_Malthus_, p. 80), "become less prolific." Thus the growth of population is "automatically" regulated by economic means, and there is no need to have recourse to "physiological expedients" to limit population. Yet he nowhere endeavours to elucidate the working of this economic factor in the biologic field, or to show how it can possibly operate unless precisely in virtue of what he is so strangely and so inconsistently moved to condemn, viz., the deliberate application of increasing physiological knowledge by individual couples in order to regulate the number of their offspring. In a word, by birth control. As far as past stages of economic evolution are concerned, the transition from primitive tribal communism to slavery, from slavery to serfdom and the guild system, and from these to capitalism, Loria himself insists that the prime motive force has been the pressure of increasing population on the means of subsistence. Thus in _Contemporary Social Problems_ (pp. 128 et seq.) he writes: "We easily understand how evolution takes place in the sphere of economic phenomena provided we steadfastly hold in mind the simple premise that ceaseless increase in population makes necessary the occupation and cultivation of lands ever less fertile, hence requiring more efficacious means of production to combat the increasing resistance of matter. Given, therefore, a certain density of population and a certain degree of fertility of cultivated land, there is rendered not only possible, but also necessary, a determinate economic system permitting human labour to attain a commensurate productivity; but population increasing, and the necessity of cultivating less fertile lands becoming urgent, the economic system hitherto existing proves inadequate, since the degree of productivity which it permits to labour is insufficient to combat matter now become more rebellious. As the economic and productive system which corresponded with the preceding degree of the productivity of the soil has grown incompatible with the new and more exacting conditions, it must be supplanted by a better system. Then follows an epoch of social disintegration which destroys the superannuated form, from whose ashes a new structure arises; on the ruins of the shattered economic system is erected a new one which allows human nature to become more productive, and is therefore adapted, for a time, to combat the increasing resistance of matter. However, with each additional increment to population, a moment comes when it is necessary to bring under cultivation lands which are still more resistant, and for the development of which the prevailing economic system is found to be inadequate; consequently this system suffers the fate of those which have preceded it, and it is in turn destroyed to give place to a new and superior form." The detailed application of these ideas is one of the main themes of Loria's _Analysis of Capitalist Property_. We learn, he says, from history and statistics that capitalistic property (the term is here used by Loria in the widest sense to include all the forms of property which render possible the exploitation of one human being by another) is everywhere and at all times due to one and the same cause, the suppression of free land. As long as there is any free land, as long as any man who so desires can take possession of a piece of land and develop it by his labour, capitalistic property is impossible, because no man will willingly work for another when he can establish himself for his own account on a piece of land without paying for it. Where there is free land, labour owns the means of production, so that agriculture is carried on by free peasants on small holdings, whilst manufacturing industry (in so far as this exists at such a stage) is in the hands of independent artisans. In these conditions labour is isolated, and isolated labour rarely produces anything more than the labourer's subsistence. The regular supplementary production of "income" is the characteristic feature of associated labour. This brings us to _The Economic Synthesis_, a work which bears as sub-title "A Study of the Laws of Income." It is, Loria tells us, "the complement and the theoretic crown" of all his earlier writings. The meaning he attaches to the word income is, in truth, simple enough; but that meaning is the very core of Lorianism, just as surplus value is (for many) the very core of Marxism. Isolated labour, labour of the kind described in the last paragraph, produces, says Loria, first of all subsistence--the bare necessities of life. In exceptionally favourable conditions even isolated labour may produce something more than this, and that something more is income. But as a rule, and more and more as population increases and land of diminishing fertility has to be brought under cultivation, _isolated_ labour fails to produce anything beyond subsistence, fails to produce even that, so that it becomes necessary to have recourse to the superior productivity of _associated_ labour. Now for this, since the natural man is averse from associated labour, some form of _coercion_, direct or indirect, is essential; and the history of all the developed economic systems that have hitherto prevailed is the history, in one form or another, of the _coercion to associated labour_. Income, in the Lorian sense of the term, is "the specific product of associated labour"; i.e., it is the surplus produced by labour because it is associated, over and above what the labourers could have produced in isolation. Working in isolation they produce, or theoretically might have produced, subsistence for themselves; associated they produce something more, which is income, and this accrues to those who control and direct the associating force. In primitive tribal communism that force emanates from the collectivity of economic equals, and the "undifferentiated income" is communally owned and consumed. But subsequently "differentiated income," received by non-labourers, makes its appearance. In slave-owning communities, differentiated income goes to the slave owners; in feudal serfdom, it accrues to the baronage; under modern capitalist conditions the dispossessed proletarian masses produce of course their own subsistence, and produce in addition income for the legal owners of land and capital. Slave owners, barons, capitalists, are in successive stages the "recipients of [differentiated] income." Throughout the history of these economic phases there has been a conflict between the interests of the labourers and those of the recipients of income, taking the form, in times of exceptional stress, of slave insurrections and slave wars, of jacqueries and ruthless reprisals by the baronage, of strikes and lock-outs. Here we have one aspect of what Loria terms "the struggle between subsistence and income," and this aspect coincides obviously enough with one aspect of the Marxist class struggle. The association of labour is the prime cause of labour's enhanced productivity. But while the association increases productivity, the coercion that is requisite to secure association exercises a restrictive influence upon productivity, the restriction being more marked in proportion to the severity of the coercion. Thus the crude and harsh coercion of the slave-owning system makes slave labour (in part for psychological reasons dependent upon the mentality of the labourer) less productive than serf labour under the feudal system, wherein coercion was somewhat milder. In modern capitalism coercion, though still very real, is veiled, and for this reason (quite apart from the peculiar advantages of machinofacture) associated labour is more productive under capitalism. It is the superior productivity of each successive system which has rendered it victorious over its predecessor. With the dry light of economic science Loria displays for us the working of the type of production dominant to-day, the most effective system of production the world has yet known. Such is Loria's outline picture of the succession of economic phases. It is impossible here to trace the Italian economist's detailed analysis of the causes which lead to the break up of one economic system and its replacement by another. Suffice it to say that in his view an important part is played by the action of those whom he calls "unproductive labourers," members of the educated caste living also on differentiated income, on portions of income reallotted by the primary recipients of income, whose interests, in the prosperous phase of any system of income, the educated caste is thus paid to serve. A typical service is that of the priestly order, which is maintained "to pervert the egoism" of the labourers, to delude them into the belief that they are pursuing their own better interests by peacefully and diligently producing income for the master class. But in the declining phase of any economic system (and Loria considers that the wage system of capitalism has now, despite its imposing appearance, actually entered its declining phase), the diminution of income curtails the amount available for reallotment to the unproductive labourers. Hence from supporters of the existing system they are speedily transformed into its active opponents. These "intellectuals" now make common cause with the labourers, the disinherited of the earth; and the old property system totters to its fall. He writes (_The Economic Foundations of Society_, p. 347): "All revolutions undertaken by the non-proprietary classes alone, without the support of the unproductive labourers, are ... foredoomed to failure. The rebels, divided and disorganised, not at all sure of themselves and uncertain of the ends they would attain, soon fall back under the dominion of the proprietary class.... The ancient economy was not destroyed by the revolt of the slaves, nor was the ruin of the medieval economy effected by the armed uprising of the serfs. These two economic systems did not succumb until the clients of the Roman economy and the ecclesiastics of the medieval economy were induced by a falling-off of their share in the constantly decreasing revenues [income] to break their long-standing alliance with the revenue holders [recipients of income] and to lend their support to the final revolt of the labouring classes." To the Lorian theory of revolution we shall return in conclusion, after we have discussed the relationships of Loria to Marx. The theory involves tactical questions of the utmost interest and importance. Apart from these, the crux of the problem of transition to the co-operative commonwealth centres, as most thoughtful socialists are coming to see, around the question of the coercion to associated labour. A fundamental part of the socialist outlook is the belief that the existence of a special class of recipients of income, whether these be slave owners, feudal barons, or legal monopolists of land and capital, is not needful to modern civilisation. We affirm that the disappearance of such a class (though that class may have played a necessary part in social evolution) can now be witnessed by the enlightened without a single regret. But what is to ensure the continuance of that high social productivity which will be necessary to the maintenance of general wellbeing? Now that our race is at length becoming truly self-conscious, will it be possible "to transform the economic natural force from the ruler of mankind to its servant?" The closing sentences of The _Economic Synthesis_ show in outline how Loria envisages that possibility: "The essential social contradiction can be eliminated, economic equilibrium can be established, only by means of a profound transformation, affecting not merely the process of distribution but also the process of production, relieving this latter process from the coercion which has hitherto environed it and restricted its efficiency; in other words by the destruction of the coercive association of labour and its replacement by the free association of labour. Herein is to be found the supreme objective towards which must converge all the forces of social renovation." And in a terminal footnote he adds: "This is now understood by all the most enlightened economists, not excepting the socialists, who point out that a reform which effects no more than the distribution of income among the proletarians, while leaving unaffected the method by which that income is actually produced, would have no more than an extremely restricted and fugitive effect; and that a decisive and durable social renovation must be initiated by a radical metamorphosis in the process of production." We have now to ask, what does Loria consider the most important elements of Marxist teaching? In his account of the _Communist Manifesto_ (infra p. 68) he tells us that "this writing contains the whole Marxist system in miniature, and ... supplies a critique of all doctrinaire, idealist, and utopian forms of socialism. Thus the _Manifesto_ voices the two fundamentals of Marxism: the dependence of economic evolution upon the evolution of the instrument of production, in other words the _technicist determination of economics_; and the derivation of the political, moral, and ideal order from the economic order, in other words the _economic determination of sociology_--or, as we should express it to-day, historical materialism." On pp. 145 and 146 he tells us that we must "recognise in Marx the supreme merit of having been the first to introduce the evolutionary concept into the domain of sociology, the first to introduce it in the only form appropriate to social phenomena and social institutions; not as" an "unceasing and gradual upward movement," but as a "succession of age-long cycles rhythmically interrupted by revolutionary explosions." Speaking of Marx's "masterly investigation into the successive forms of the technical instrument, of productive machinery," he says that Marx may be termed "the Darwin of technology.... This physiology of industry, which is now the least studied and least appreciated of Marx's scientific labours, nevertheless constitutes his most considerable and most enduring contribution to science." Loria wrote his _Karl Marx_ nearly two years before the publication of William Paul's _The State_, of which pp. 2 to 7, the section on "Man and Tools" is devoted to a restatement of this aspect of Marxism; and the Italian economist is not acquainted with the thought-trend of Walton Newbold. As far as the young but rapidly growing and vigorous school of British Marxists is concerned, it is certainly no longer true that Marx's work as "the Darwin of technology" is the least studied and least appreciated of Marx's scientific labours. To the class struggle Loria does not refer at any length in this essay on Karl Marx. We have already seen that he recognises the enormous part the class struggle has played in history; but he has throughout life remained the man of science, the man of the study; he has never entered the arena as what the French term a "militant." In 1904, when the Italian Socialist Party wished him to be socialist parliamentary candidate for Turin, Loria refused on the ground that parliamentary life would interfere with his theoretical studies; and it may be that for these and other reasons he is less keenly impressed than are most left-wing socialists of the profound importance of diffusing among the workers awareness of the class struggle. Economic determinism has been sufficiently considered in what has gone before. If in the present study Loria says less about it than about some of the other elements of Marxism, this is not because he considers it of minor importance, nor because he accepts it uncritically, but because he has devoted an entire volume to the exposition of this aspect of reality. It remains, then, to discuss Loria's outlook on the Marxist theory of value. It is here that Lorianism will be most strenuously challenged by those more enthusiastic disciples of Marx who, even if they do not accept the dogma of Marx's infallibility, none the less regard the doctrine of value, based on the labour theory of value, as the very heart of Marxist socialism. We must remember that it is natural for persons who do not gain their subsistence by applying their labour power to the production of commodities, and whose claim to the title of "workers" will nevertheless hardly be disputed, to question the labour theory of value. Bernard Shaw, for example, in his pamphlet _The Impossibilities of Anarchism_, protests that it is "natural for the [manual] labourer to insist that labour _ought to be_ the measure of price, and that the just wage of labour is its average product; but the first lesson he has to learn in economics is that labour is not and never can be the measure of price under a competitive system. Not until the progress of socialism replaces competitive production and distribution with individual greed for its incentive, by collectivist production and distribution with fair play all round for its incentive, will the prices either of labour or of commodities represent their just value." Leaving Shaw to the tender mercies of the orthodox Marxists who will not be slow to declare that if he means "value" he should not say "price," and that if he thinks that "price" and "value" are interchangeable terms he is not worth powder and shot, and without ourselves venturing to rush into the fray, we may suggest that our propagandists would be less inclined to make the Marxist theory of value an article of faith, "which faith except everyone do keep whole and undefiled without doubt he shall perish everlastingly"--if they could realise that the theory is perhaps no more than a difficult point of abstract economic doctrine which is not essential to the use of the conception of surplus value as a means of making the worker aware of the basic character of capitalist exploitation. Bernstein explains the matter very well in the book previously quoted (p. 35): "Practical experience shows that in the production and distribution of commodities a part only of the community takes an active share, whilst another part consists of persons who either enjoy an income for services which have no direct relation to the process of production, or have an income without working at all. An essentially greater number of men thus live on the labour of all those engaged in production than are actively engaged in it, and income statistics show that the classes not actively engaged in production appropriate, moreover, a much greater share of the total produced than the ratio of their number to that of the actively producing class. The surplus labour of the latter is an empiric fact, demonstrable by experience, which needs no deductive proof. Whether the Marxist theory of value be correct or not, is quite immaterial to the proof of surplus labour. It is in this respect no demonstration, but only a means of analysis and illustration." The professional economist, however, cannot rest content with these loose formulations. Loria feels that there is a void in the Marxist system, and it seems to us (though Loria nowhere tells us so in set terms) that the Lorian doctrine of differentiated income, the most essential part of the Italian economist's teaching, is really an attempt to restate the theory of surplus value in a form absolutely proof against enemy attack. Be this as it may, the conception, however interesting, is far less easy to convey to the uninstructed mind, and it is unlikely, for propaganda purposes, to replace the simple formula of surplus value. But is it not essential that those who undertake to teach socialist economics should themselves fully understand the objections to the Marxist theory of value, and that they should have a clear grasp of Loria's alternative doctrine of the nature of capitalist exploitation? Let us return, in conclusion, to the Lorian theory of revolution. If we may summarise that theory in colloquial phraseology, it is that, while economic evolution must pave the way for revolution, the final stages of revolution have been effected in the past, and can only be effected in the future, through the co-operation of "disgruntled intellectuals." These are the "unproductive labourers" of Loria's scheme, who have served as hirelings of the master class during the prosperous phase of an economic system: but in the declining phase of that system, when the diminution of income curtails the amount available for these secondary recipients of income, they turn against the primary recipients, their employers, make common cause with the subject class, and give the death-blow to the old order. This may possibly have been true of the fall of the slave economy, and it may possibly have been true of the fall of the medieval economy; but we do not think it is true that a revolution of the non-proprietary classes under capitalism is "foredoomed to failure" unless these classes secure the support of the unproductive labourers. Their support for a genuinely _proletarian_ revolution can hardly be expected, on Loria's own theory. The intellectuals who aided in the overthrow of the slave economy, and the intellectuals who helped to subvert the feudal order and to promote the bourgeois and industrial revolution, did so, says Loria, in order to maintain their position as "recipients of income," to maintain their position as members of a privileged class. What have such as they to gain from a proletarian revolution, which will abolish class, will put an end to exploitation, will do away for ever with the private appropriation of income and surplus value? We need only turn our eyes eastward to see how such "intellectuals" will hail the revolution of the propertiless. Despite the onslaughts of the capitalist powers, the Russian Socialist Federative Soviet Republic has lived long enough to show the sort of help socialists may expect from the Kerenskys. Men of this calibre, "people whose interests lie in the opposite direction," even if they "are carried away by the new ideas and enter the lists for the new order of things" (Boudin, _The Theoretical System of Karl Marx_, 1918), are aghast when the real revolution comes, and endeavour to lay the red spectre they have helped to conjure up. In truth, a revolution foredoomed to failure would be that of proletarians who should depend in large measure upon the support of disgruntled intellectuals. A serf's life was on the average better than that of a chattel slave; a wage labourer's life is on the average better than was that of slave or serf. But neither the replacement of slavery by feudalism, nor the replacement of feudalism by capitalism, secured the emancipation of labour in any adequate sense of that term. All that a proletarian revolution carried through with the help of middle-class intellectuals is likely to bring about is some form of Fabian collectivism or state capitalism--in a word, the servile state. As far as the _productive_ labourers are concerned the revolution would be a sham. The form of the state might be revolutionised, but the authoritative state would endure, and production would be effected, not by the free, but by the coercive association of labour. What Loria has failed to recognise is that the conditions of the problem are now radically changed. As he says, in the old revolutions the rebels were divided and disorganised, were not sure of themselves, and were uncertain of the ends they would attain. As far as the workers were concerned, revolt only was possible, not revolution. It is otherwise to-day; and still more will it be otherwise the day after to-morrow. Thanks to the new forms of organisation now being worked out: thanks to industrial unionism and the growth of the workers committees and shop stewards movements; and thanks above all to independent working class education, which is forging the new weapons and simultaneously teaching the workers how to use them, which is fashioning the limbs of the co-operative commonwealth within the womb of the capitalist order--thanks to all these things, the workers of the day after to-morrow need not put their trust in the frail reed of the support of intellectuals. Once more we raise the Marxist slogan and cry: "The emancipation of the workers must be the work of the workers themselves." And if we modify another Marxist watchword, quoted on p. 154 below, that force is the midwife of every old society pregnant with a new one, it is only to say that, while we do not repudiate force (which the skilled accoucheur ever has in reserve), new times bring new methods. The self-educated workers of the future may have no occasion to use force, and certainly need not await the aid of Loria's unproductive labourers. For the day draws nigh, and on that day the workers will achieve their own salvation. They will achieve the salvation of all the workers, and indeed of all the world of man; but it will not be all the workers that will actively participate. No more will be possible than that there should be a considerable minority of educated workers. A minority they must inevitably remain until after the social revolution; but a little leaven can leaven a large lump. The midwife of revolution is not force but--independent working class education. In a word, the "dynamogenic function" of which Loria speaks (infra pp. 159 and 160), attaches not to poverty but to slavery. The poor have seldom failed to realise their poverty, and poverty when extreme has at times led to revolt; but it is the new realisation of the _slavery_ of wagedom that is organising the workers for the social revolution. By means of Marxist education "the proletarian is breaking his chains and entering upon an era of conscious and glorious freedom." Do we seem to imply that there is no place in our movement for middle-class intellectuals? Such is not our meaning. They have played in the past a rôle of supreme importance, and may still have a notable part to play in the future. But the intellectuals for whom there is a place are not the kind of intellectuals described in Loria's theory of revolution, and the rôle of the intellectual is no longer the one which he assigns. It is not those intellectuals who are dissatisfied with their reallotment of income, not those who are discontented with their ration of loaves and fishes, not those who sigh for the vanishing cakes and ale, who will help the coming of the definitive social revolution. Rarely indeed, too, is the function of the socialist intellectual the function of leadership. To an increasing extent, under the new conditions, he tends to be no more than the fifth wheel of the revolutionary coach. The right sort of intellectual had a function in the past; it was to help the workers to overcome their division and disorganisation, to help them to be sure of themselves, to help them to clear views of the ends they must attain. That work is afoot. The ferment has been created: created by such men as Marx, whose abilities would have secured him ease, comfort, wealth, had he made his peace with bourgeoisdom, but who was a revolutionist by deliberate choice; by such men as Engels, a well-to-do manufacturer; by such men as Loria himself, a university professor; by such men as the American, Scott Nearing, who recently forfeited his academic position because he would not keep the class struggle out of his lectures on economics. Can it be said that men like Herzen, Bakunin, and Kropotkin, have been, or that men like Trotzky and Lenin are, the disgruntled intellectuals of Loria's theory of revolution? Quite apart from leadership under such peculiar conditions as obtain in Russia, there is work for socialist intellectuals, the work of promoting independent working-class education, the work of assisting in the spread of the ferment generated by the writings of earlier revolutionary thinkers. Our conviction that we ourselves, declassed bourgeois, have a modest function, that though not part of the team, not even spokes of a fifth wheel, we may at least help to complete the outfit as little dogs under the waggon, is witnessed by our translation of Achille Loria's monograph on Karl Marx. EDEN AND CEDAR PAUL. LONDON, _The Centenary of Karl Marx_. KARL MARX CHAPTER I It is unquestionably one of the strangest of anomalies exhibited by the polychrome flora of human thought that revolutionary blossoms should so frequently spring from aristocratic seeds, and that the most incendiary and rebellious spirits should emerge from a domestic and social environment compounded of conservatism and reaction. Yet when we look closely into the matter, we find it less strange than it may have appeared at first sight. It is, in fact, not difficult to understand that those only who live in a certain milieu can fully apprehend its vices and its constitutional defects, which are hidden as by a cloud from those who live elsewhere. It is true enough that many dwellers in the perverted environment lack the intelligence which would enable them to understand its defects. Others, again, are induced by considerations of personal advantage to close their eyes to the evils they discern, or cynically to ignore them. But if a man who grows to maturity in such an environment be at once intelligent and free from base elements, the sight of the evil medium from which he himself has sprung will arouse in his mind a righteous wrath and a spirit of indomitable rebellion, will transform the easy-going and cheerful patrician into the prophet and the revolutionary. Such has been the lot of the great rebels of the world, of men like Dante, Voltaire, Byron, Kropotkin, and Tolstoi, who all sprang from the gentle class, and whose birthright placed them among the owners of property. Similar was the lot of Karl Marx. It would, indeed, be difficult to imagine a more typically refined and aristocratic entourage than the one wherein the future high priest of the revolution was born and passed his early years. He was born at Treves on May 5, 1818. His ancestors on both sides had been distinguished rabbis, famed for their commentaries on the scriptures. The father's family was originally known as Mordechai, whilst the mother's family, Pressburg by name, had come from Hungary to settle in Holland. His father, an employee in the state service, became a Christian, and the whole family was baptised when Karl was five years of age. As he grew up, the young man was an intimate in the best houses of the district, and one of his closest friends was Edgar von Westphalen, who subsequently became a member of the reactionary Manteuffel ministry. In 1843 Marx married Westphalen's sister, the beautiful and brilliant Jenny. The match proved well assorted, and was blessed by a love so intense and so unfailing as to lead a certain German pastor to say that it had been ratified in heaven. Thus by origin Marx belonged to an extremely ancient stock devoted to the accumulation of wealth, whilst his marriage united him to the race of German feudatories, fierce paladins of the throne and of the altar. Is it not then truly remarkable that from such an environment, eminently calculated to foster ideas of obscurantism and reaction, there should emerge the most brilliant, most consistent, and most invincible example of a thinker and revolutionary agitator? Unquestionably, Marx's thought, essentially slow-moving, laborious, and ever subjected to a rigorous process of self-criticism, does not seem at first sight characteristically negational and rebellious. In youth, indeed, he was still no more than the earnest student. Engels tells us that he closed his university career at Bonn in 1841 by writing a brilliant thesis upon the philosophy of Epicurus, while in leisure moments Marx penned verses of no mean order. These latter compositions display numerous defects of style; they are heavy and turgid; the movement is sluggish; their sonorous gravity reminds the reader of a company of medieval warriors in heavy armour mounting the grand staircase: but they are none the less distinguished by remarkable profundity of thought, and they may be looked upon as versified philosophy rather than as poetry in the proper sense of the term. In the following year we find Marx at Cologne as editor of the "Rhenish Gazette." His editorials, it is true, were at first devoted to harmless topics of general interest; but he soon began to turn his attention to social questions, such as forest thefts, the subdivision of landed property, the condition of the peasantry in the Moselle district, and French socialism. To this last doctrine, the editor declared himself adverse, while professing a great personal admiration for Proudhon. But the discussion upon socialism revealed to him his own ignorance and incompetence, and induced him to withdraw from the journalistic arena that he might devote himself to study. An excuse for resigning his editorship was furnished in 1843, when the "Rhenish Gazette" found it necessary to assume an extremely cautious tone in order to avoid the attentions of the police. But, like all the more brilliant and free-spirited among his contemporaries, he soon found himself incommoded by the obscurantism of Prussia, and, accompanied by his young wife, he hastened to Paris, the city of light, where there shortly assembled a circle of intellectual rebels from all lands--France, Germany, England, Italy, and Russia. The Russians predominated, and indeed we learn from Marx himself that the most fervent of his disciples at this date were drawn from among the scions of the Russian nobility and upper bourgeoisie, who, when they returned to their country, were unhesitatingly to become the sycophants of authority. In this cohort of spiritual rebels he assumed from the first the position of dictator, and none competed for the crown with the revolutionary Cæsar. People were already beginning to talk of the Marxists, and the police made a black cross against the name of a Parisian café where the associates of Marx were wont to assemble. He struck up a friendship with Heinrich Heine, and one day, accompanied by his staff, he paid a formal visit to the poet and declared that the latter ought to divide among the exiles the pension granted him by Guizot, to which suggestion Heine cynically replied that he could spend the pension more profitably upon himself. Marx had a yet closer intimacy with Proudhon, with whom he passed long evenings talking about Hegel and discussing the problems of socialism; but this friendship was destined ere long to be replaced by fierce hostility, aroused by fundamental differences of opinion. In 1844, in conjunction with Arnold Ruge, Marx founded the "Franco-German Year Book," of which, however, there appeared but one volume, containing writings by Marx himself on the philosophy of law and upon the Jews, in addition to letters from Holland, and articles by Engels, Heine, Freiligrath, and other more or less rebellious spirits. These outward activities represent nothing more than an interlude or partial episode in the series of his essential occupations, science and philosophy. Engels' contribution to the "Year Book," a criticism of political economy, initiated between the two thinkers a friendship which time was to strengthen and to render indissoluble. The first fruit of this friendship was a joint work entitled _The Holy Family_, a criticism of the philosophy of Bruno Bauer and his followers (1845), stuffed with sallies and orphic sayings of doubtful taste and still more doubtful value. The young men next turned to a weightier task, a criticism of posthegelian philosophy, which filled two huge octavo manuscript volumes, but has never found a publisher. Nevertheless, Marx tells us, this enormous labour cannot be regarded as utterly wasted, for it enabled the writers to gain an understanding of themselves, and traced the lines by which henceforward they were to be safely guided through the labyrinth of social investigation. But revolutionary agitation (which Marx continued even amid his philosophical meditations), and the editorship of the definitely antiprussian journal "Forward," now attracted the hostile attention of the Prussian government, upon whose demand, in January, 1845, Guizot suppressed the periodical and expelled Marx from France. Marx removed to Brussels, where Engels was living, and for the first time devoted himself to prolonged and profound labours. In the year 1847, he published in the Belgian capital his book _The Poverty of Philosophy, a Reply to Proudhon's Philosophy of Poverty_, a harsh criticism of the "economic contradictions" of his rival. Marx reproached Proudhon for complete ignorance of that Hegelian philosophy which Proudhon tried to apply to economics, and reproached the French socialist yet more for arbitrary and fallacious expositions, for the idealisation of a tortuous series of fantastic categories (division of labour, machines, competition, rent, etc.), declaring that Proudhon confined himself in each case to an examination of the good and the bad effects without ever troubling to throw light upon the nature of the phenomena under consideration or upon the course of their formation and development. The criticism is apt, but might well rebound upon Marx himself, enmeshed at this epoch in a series of categories whose progressive evolution he arbitrarily asserted. Further, Marx fiercely criticised Proudhon's theory of "constituted value," according to which the reduction of value to labour cannot be effected in extant society, and must be deferred to the future society, fashioned in the brain of the thinker. It is well to point out that Marx, though in the first volume of _Capital_ he conceives the reduction of value to the quantity of effective labour to be one of the immanent laws of capitalist economy, nevertheless admits in the third volume that in the capitalist economic phase value neither is nor can be reduced to the quantity of labour, and that value as measured by labour is merely an archetype or suprasensible entity, but not a concrete reality. Substantially this means that Marx's labour measure of value is, after all, not essentially different from the constituted value of Proudhon. But amid these unjust or excessive criticisms, Marx's book gives utterance to the idea, profoundly true, and at that time practically original, that economic relationships are no mere arbitrary products or derivatives of human will, but are the inevitable issue of the existing condition of the forces of production. The deduction drawn from this is that utopian socialism, which exhausts itself in futile declamations or in yet more futile imaginary reconstructions of the social order, must yield place to scientific socialism, wholly devoted to the analysis of the necessary process of economic evolution and to the possibility of accelerating that evolution. The same idea can be read between the lines of the _Lecture on Free Exchange_ delivered by Marx at Brussels on January 9, 1849. Herein he asserted that socialism ought to declare in favour of freedom of trade, for this, hastening the dissolution of the old nationalities and accentuating the contrast between the bourgeoisie and the proletariat, would precipitate the dissolution of the capitalist economy. But the idea is affirmed far more categorically in the _Manifesto of the Communist Party_, the joint composition of Engels and Marx, published in the year 1848, embodying the first and most decisive formulation of the latter's teaching. Even though some of his special theories, subsequently to secure fuller development in _Capital_, are but cursorily sketched in the _Manifesto_, even though some of these theories (for example, the theory of wages, stated to be the price of "wage labour" instead of being the price of "labour power") are still in an undeveloped and imperfect state, it is nevertheless true that this writing contains the whole Marxist system in miniature, and that it supplies a critique of all doctrinaire, idealist, and utopian forms of socialism. Thus the _Manifesto_ voices the two fundamentals of Marxism: the dependence of economic evolution upon the evolution of the instrument of production, in other words the _technicist determination of economics_; and the derivation of the political, moral and ideal order from the economic order, in other words the _economic determination of sociology_--or, as we should express it to-day, historical materialism. This dependence of the political order upon the economic order, leading as it does to the concentration of political power in the hands of those who hold economic power, or in the hands of their representatives and agents, renders absurd the idea of effecting by peaceful political means any amelioration in the condition of the proletarian classes, and indicates to the dispossessed that revolution is their only hope of salvation. To revolution, then, or to the compact federation which can alone pave the way for revolution, the _Manifesto_ incites the sufferers of the world with the historic phrase: "Workers of the world, unite." The epoch-making significance of the _Manifesto_ is not to-day disputed by the most resolute adversaries of that document. It is, in fact, the Declaration of Rights of the Fourth Estate, the Magna Charta of the revolutionary proletariat, the oriflamme of fire and blood, the standard round which the insurrectionary phalanxes have ever since mustered. Hardly had the message been launched upon the world when the young leader hoped to translate it into action, for the movements of 1848 and 1849 led the rebel masses to entertain new and bolder aspirations. Expelled from Belgium, Marx first went to Paris, and hastened thence to his German homeland, now in a ferment, assuming there editorial charge of the "New Rhenish Gazette." But although the skill of the able editor was for a brief period successful in saving the barque of the imperilled gazette from the waves of police persecution, a day soon arrived when the situation became untenable. An appeal to the German people published in the columns of the journal advocating a refusal to pay taxes led to its suppression and to two criminal charges against the editor. Triumphantly acquitted by the Cologne jury, but none the less exiled by the Prussian government, he immediately returned to Paris, where it seemed to his restless imagination that events were taking a more favourable turn. But France proved a no securer refuge than Germany, and the Parisian government propounded to our agitator a peremptory dilemma, interment in the remote department of Morbihan or exile from France. He was not likely to hesitate in his choice, and indeed at this juncture was glad to accept an invitation from the executive committee of the Communist Party, then centred in London, to remove with his devoted wife to that great metropolis (1849). CHAPTER II In London the saddest trials awaited him, for poverty, gloomy companion, sat ever at his board from the day of his entry into the British capital down to the hour of his last breath. One after another of his children died in the unwholesome dwellings of his exile, and he was forced to beg from friends and comrades the scanty coins needed to pay for their burial; he and his family had to make the best of a diet of bread and potatoes; he was forced to pawn his watch and his clothing, to sell his books, to tramp the streets in search of any help that might offer; the day came when, under the lash of hunger, he was compelled to contemplate seeking work as railway clerk, of placing his daughters out to service, of making them governesses or actresses, whilst himself retiring with his unhappy wife to dwell in the proletarian quarter of Whitechapel. The severity of these sufferings did much to add a tinge of gall to a character naturally acerb, a character which amid the upheavals and horrors of exile frequently showed itself far from amiable. Mingled sentiments of grief and anger fill our minds when, in Marx's private letters to Engels, we trace the manifestations of this harshness, which left him unmoved by the misfortunes of his dearest friends, which led him to make any use he could of these friends and then to overwhelm them with reproaches and accusations, which showed itself (and this is the worst of all) in a jealous hatred of comrades less unfortunate than himself. Deplorable from every point of view was his conduct towards Freiligrath and Lassalle, in especial towards Lassalle, who had shown him the utmost friendliness, had given him ample financial assistance, had entertained him in Berlin, had helped him to find a publisher; for Marx subsequently censured Lassalle's works with much acrimony, beheld his triumphs askance, and commented upon the incidents of Lassalle's death in a tone of tepid apology. But you well-fed folk who amid easy circumstances are studying the life of our agitator, be not too ready to blame him, and before stoning him bethink yourselves of all the miseries the exile must suffer, of all the tortures amid which he must bear his cross. Vainly did he endeavour by hard work to free himself from the sad restraints of poverty. It is true he was able to place articles with the "New York Tribune," writing for this paper essays on political, economic, and financial questions, which secured much appreciation. But the pay was only one pound per article, and he could write but one article a week. Collaboration in the production of an American encyclopædia, to be paid at the rate of two dollars a page, seemed to promise more ample funds, and with feverish anxiety he devoted himself to the production of articles on the most varied topics, well stored with facts. But this source of income, limited at best, was suddenly interrupted by the outbreak of the American civil war. The loss was not adequately compensated by the possibility of occasionally inserting some poorly paid contribution in a German newspaper like the "New Oder Gazette" or in one of the Viennese periodicals. He was lucky in that certain turns of fortune favoured him from those sources of property and inheritance which he condemned and attacked with such persistence and vehemence. He had a legacy from his mother-in-law; a legacy from his mother; a trifling legacy from an aunt; and Wilhelm Wolff, a companion in exile, bequeathed him £800. An uncle in Holland, whom he had begged for some trifling help, gave him £160; from Lassalle and Freiligrath came generous gifts; and Droncke, another companion in exile, gave £250 to enable him to complete the scientific work on which he was engaged. But none of these casual resources, however extensive, would have saved him from ruin had it not been for the providential assistance of his friend Friedrich Engels, who applied himself to the care of Marx with inexhaustible generosity, and with the tenderness of a woman. Engels, indeed, will secure a splendid place in the history of socialist thought, were it only because of the way in which he devoted himself to Marx. It was through Engels that Marx was enabled to continue his studies and to complete the work which is his title to eternal fame. Engels, a well-to-do cotton spinner at Manchester, gladly responded to his friend's unremitting requests for aid, succouring him in every emergency. Engels was an expert upon military topics, and penned articles which Marx passed on to the "Tribune" and to the encyclopædia, articles for which Marx was paid; Engels sent Marx weekly subsidies, and frequently despatched gifts of port wine; he made presents of £100 or £150 at a time; and at length, when his business prospered, he gave his friend a regular allowance of £350 a year. Not even these strokes of good luck sufficed, it is true, to restore a satisfactory balance to Marx's finances, for he was a bad manager, and the disorder was probably incurable. However, they enabled our thinker to furnish aid to companions yet more unfortunate, to Pieper, Eccarius, and Dupont; they enabled him to escape from the worst extremities of poverty and to establish himself in life under conditions more worthy of an honest and respectable bourgeois. He was able to move from the decayed neighbourhood of Soho Square and to settle in Maitland Park Road on Haverstock Hill; it became possible for him to secure a good education for his daughters, to have them taught French and Italian, drawing and music; he could weigh the financial status of aspirants to their hands, and could choose Lafargue and Longuet, who were comparatively well off. He often went to the theatre, and with one of his daughters he attended at the Society of Arts a soirée graced by the presence of royalty; from time to time he took his family to the seaside; he liked his wife to sign herself "Jenny, née Baronne de Westphalen"; he was well received in affluent circles, and was frequently consulted by the "Times" upon financial affairs; finally he accepted the office of constable of the vestry of St. Pancras, taking the customary oath, and donning the regulation uniform on gala occasions. Nevertheless, neither this final settlement in a foreign land nor the persecution he suffered from the government of his own country could destroy or even lessen his devotion to Germany. To the day of his death he remained a faithful child of the fatherland, for which he hoped the greatest of futures. He sang the praises of German music and literature; he delighted in German victories and German expansion; he dreaded a weakening of German protectionism which might strengthen the commercial hegemony of Britain; and in 1870 he refused to sign an appeal in favour of peace unless it were definitely stated that Germany was waging a purely defensive war. The French and Russian exiles in London were indignant, and circulated whispers that Marx was a Prussian emissary, and had received a bribe of £10,000. An idle tale! It is true that among German conservatives and among the beneficiaries of Germany there could not be found a supporter more sincere and more fervent than was this proscribed rebel. But he was no paladin on behalf of Prussian imperialism, as we can learn beyond dispute from a letter he sent to the "Daily News" in 1878 denouncing Bismarckian ambitions and the Bismarckian expansionist policy as a growing peril. Yet the supreme aim of his activity and his life enormously transcended the circumscribed range of country and of nation, for he aspired to a loftier goal, to the organisation of the mental and manual workers of all countries so that they might constitute a united revolutionary force. Within a brief time of his arrival in the British metropolis he again became the chief, nay the dictator, of a circle to which none could be admitted without passing a severe examination as to knowledge of science in general and of political economy in particular, an examination so rigorous that even Wilhelm Liebknecht was unable at first to satisfy its requirements, an examination that was physical as well as mental, for the aspirants were subjected (rejoice, shade of Lombroso!) to precise craniometrical tests. Thus our thinker, crowned as if by divine right with a kind of imperial halo, exercised undisputed sway over the troop of exiles, Pieper, Bauer, Blind, Biskamp, Eccarius, Liebknecht, Freiligrath, Cesare Orsini (brother of the regicide), and even over the revolutionary agitators in Germany. Soon, however, his mind was invaded and dominated by a yet more ambitious design, for he planned the formation of a society which should unite the proletarians of all the world into one formidable International, to resist the aggressions of capital and to work for the destruction of the capitalist system. It was at first an association of modest proportions, consisting merely of a few revolutionaries assembled in London. Marx absolutely refused the chairmanship, contenting himself with the post, ostensibly less important, of delegate for the German section. From the first formation of the new federation Marx did his utmost to counteract the influence of Mazzini, for Mazzini, through the instrumentality of two of his followers, Fontana and the elder Wolff, wished to inspire the International with his idealist conceptions and to initiate it into the secrets of conspiracy. Marx, on the other hand, was unwearying in his efforts to advocate his own view that material interests preponderate, and that these interests must be publicly asserted and defended in the arena of history. Soon the federation established branches in France, Germany, the United States, and even the Latin countries; and this involved for Marx, who was really the chief, a mass of work in the way of organisation, and of struggle against those who held conflicting views. Everywhere, in fact, he had to encounter trends differing from his own, and differing no less extensively one from another owing to the varying characters of the countries concerned. In Germany he had to fight the opportunism of Lassalle, a man inclined to compromises and to elastic unions with constituted authority. In France anti-intellectual tendencies were already manifest, so that there was an inclination to restrict the socialist outlook to an aspiration for immediately practical labour legislation of minor importance. In Italy and in Spain, Marx's troubles arose from the anarchist tendencies characteristic of those countries, tendencies fostered by the propaganda of Bakunin. As against these divergent aims, Marx, with inflexible tenacity, maintained his own programme with the utmost rigour, insisting that it was essential to federate the proletarian forces of the world into an invincible organisation which in all possible ways, by strikes, by parliamentary and legal methods, but also by force should need arise, should deliver onslaughts upon the bourgeoisie and upon constituted authority, should exact concessions of increasing importance, and should ultimately secure a complete triumph. The proletarians of the two hemispheres were not slow to accept the programme; and this man who was himself suffering from actual hunger, now secured a great position as a thinker, so that the operatives of Paris, New York, and Düsseldorf did honour to his name. These activities, however, did not completely interrupt his intellectual labours, for during the period at which we have now arrived he published in the "New York Tribune" a series of articles upon _Revolution and Counter-revolution in Germany_ and upon _Political Struggles in France_. In 1852, in "The Revolution," published in the German tongue in New York, there had appeared the article _The Eighteenth Brumaire of Louis Bonaparte_. Substantially these writings are an application of the materialist conception of history to the more conspicuous events of the recent political history of Germany and of France. In addition, Marx published in the "Tribune" a series of articles of a more distinctively political character, dealing with _The Eastern Question_, displaying marvellous erudition and a wonderful power of forecasting events. CHAPTER III Nevertheless, the organisation of the proletariat, and his journalistic labours, however intense and however weighty, did not represent in the life of Marx anything more than a vexatious parenthesis or a regrettable delay in the fulfilment of the supreme task he had set before himself from the very outset of his life in Britain. Hardly, in fact, had Marx settled down in the wonderful town of London, to the economist so inexhaustible a field for study and experience, than he proposed to rebuild from the foundations the entire edifice of his economic and statistical knowledge, which was at that time comparatively small when contrasted with the vast extent of his preliminary readings in philosophy. In the British Museum library, therefore, he plunged into the study of the classical economists of the island realm, showing inexhaustible patience in tracing the earliest and most trifling ramifications of economic science. Beginning with the study of the theory of rent, he went on to the study of money, of the relationship between the quantity of metal in circulation and the rate of exchange, of the influence of bank reserves upon prices, and so forth. He then devoted himself to the theories of value, profit, interest, and population. Simultaneously he studied without remission statistics, blue books, ministerial and parliamentary concerns. From all this gigantic toil he derived the materials for the writing of the work which was henceforward to be at once the sorrow and the joy of his life. His first intention was to limit himself to a critical history of political economy, or a detailed analysis of the theories which he had so often enunciated, as well as of the lacunae which had become apparent in them. But an unexpected result issued from the mental contact with this huge mass of science and analysis, for he believed that he had made a splendid and startling discovery whereby the sacred theory of profit could be utterly exploded. Now, therefore, he outlined the design of his great work, which was to consist of two parts; a first, historico-critical, intended to elucidate the different forms of the theory of profit as expounded by the various British economists; and a second, theoretical and constructive, which was to announce to the world the author's own doctrine. This method of exposition is substantially identical with that followed by Böhm-Bawerk in his _Capital and Interest_, and it corresponds moreover to the immediate requirements of the investigation, which ought to begin with the study of prevailing opinions and doctrines, and then only proceed to innovation. But a more attentive examination of the question soon convinced Marx that this would not be the most efficacious method of furnishing a theoretical reproduction of actualities, since, to this end, we must let the phenomena tell their own tale before we proceed to call to account those who have already analysed them, and before we draw attention to the ways in which their conception of the facts diverges from that which reality, when directly questioned, reveals. The method has ever been preferred by the most gifted theorists, and has been applied by Bergson with admirable dexterity in his _Creative Evolution_. Marx, therefore, never weary of destroying and refashioning, inverted his original design, and promptly began the study and analysis of concrete phenomena, to proceed then only to a criticism of the theories of his precursors. It was in accordance with such criteria that he wrote his _Criticism of Political Economy_, of which the first instalment was published at Berlin in 1859. The most notable portion of this work is the preface, which contains the first statement of the theory of historical materialism. The relationships of men in social life, says Marx, are determined by the conditions of production, are necessary relationships independent of the individual will; these determined relationships constitute the real foundation upon which is erected the legislative, political, moral, and religious superstructure of every age. The relationships of production, or the economic relationships prevailing at a given period, are a natural and necessary outcome of the method of production, or rather of the historic phase of the instrument of production. But sooner or later the further development of the productive forces generates a new configuration in technical method, a configuration incompatible with the prevailing relationships of production, those correlative to the productive order hitherto dominant. There then occurs an explosion, a social revolution, which disintegrates economic relationships, and, by ricochet, disintegrates existing social relationships, replacing them by better economic relationships, adequate to the new and more highly evolved phase of the productive instrument. In broad outline it may be said that economic evolution has exhibited four progressive phases; the Asiatic economy, the classical economy, the feudalist economy, and the modern bourgeois or capitalist economy. The evolution of the productive instrument, never arrested in its secular march, will in due course renew the eternally recurrent opposition between the method of production and the relationships of production, rendering these incompatible. Once more will come an explosion, the last of the great social convulsions, whereby the bourgeois economic order will be overthrown and will be replaced by the co-operative commonwealth. This new development will close the primary epoch of the history of human society. But the work we are discussing is further noteworthy inasmuch as it reflects a special phase of our author's thought, a thought which never ceased to exhibit a struggle between opposing trends and was ever oppressed by their contrast. The book, in fact, shows Marx continually involved in antiquated Hegelian machinery, or proceeding through a chain of categories evolving one from another--capital, landed property, the wage system, the state, foreign commerce, the world market. From each of these categories we may infer how the process of their successive development is accomplished. We are led to infer that the wage system is the outcome of landed proprietorship, for the expropriation of the peasant proprietors produces the proletarianised masses offering labour power for sale; and we are led to infer that the constitution of the world market is the crown and the epilogue of modern capitalist economy. In fact, according to Marx, the historic mission of capitalism based upon wage labour, whose origins go back to the sixteenth century, is the creation of the world market. The world market is now devoted to the colonisation of California and Australia and to the opening of trading ports in China and Japan; its creation marks the climax of capitalism's historic mission, and indicates the approaching end of the economic form which was destined to fulfill it. Now these ideas, in themselves arbitrary and fantastic, show how Marx's thought at that epoch was still in an undecided or amphibious phase, in which the torrid sun of British economic science had not as yet succeeded in totally dispelling the fogs of German philosophy. But another incompatibility lessens the value of the book or diminishes its doctrinal efficacy; for Marx, at this stage of his studies, invariably gave to the history of doctrine too preponderant a place, introducing it insistently into the course of his own exposition, which was thus deprived of continuity and weakened in force. Further, the book we are considering did not directly bear upon any of the social questions which strongly arouse public interest, but was restricted to the study of two theories whose importance at first sight seems purely academic, the theory of value and the theory of money. Marx contended that the value of commodities is exclusively determined by the quantity of labour incorporated into them; he traced the affiliations of this thesis with the work of its first enunciators in Italy and in England; but he did not offer any reasoned demonstration of its truth. On the contrary, he frankly recognised that this contention is full of contradictions alike theoretical and practical, contradictions that appear insoluble; but he promised to vanquish them in the subsequent course of his exposition. Far more noteworthy is the chapter on money, for it contains a masterly criticism of the quantitative theory of Ricardo, and an effective refutation of the "labour notes" idea of Bray, Gray, Proudhon, and others. According to this plan, every producer performing a certain quantum of labour would receive from the state a voucher entitling him to obtain from other producers the result of an equal quantum of labour; but the suggestion implies complete ignorance of the intrinsic conditions of the individualistic economy, wherein each producer creates an object without any certainty that there will be a market for it, or that it represents a real utility and will fetch a definite price. It obviously follows that the producer cannot be sure that he will be able to sell the article which he has produced, or that he will be able to transform it into anything with universal purchasing power; the product has to be baptised or sanctioned by the market, which alone has power to stamp it as useful by purchasing it. Now the "labour note" system claims that it can forcibly dispense with the market by supplying to the producer of an article whose utility and saleable value has not been recognised by the market, a universally available purchasing power. The practical outcome of this forcible method is that the producer of a useless article can by means of his "labour note" secure for himself a useful article, whereas the producer of this latter will not in turn be able to exchange his own "labour note" for any object possessing utility; that is to say, the article made by the first producer will find no purchaser, and the "labour note" of the second producer will effect no purchase. This is inevitable, for the proposed reform is inconsistent, eclectic, and incomplete, since it pretends to socialise exchange while maintaining production and distribution upon their old individualistic basis, and overlooks the incongruity of any such supposition. The "labour note" system cannot rationally be instituted until production has been socialised, or until the state shall impose upon each individual the production of a specified quantity and quality of commodities, correlatively imposing upon the consumer the obligation to acquire these. In such conditions, however, we could no longer speak of commodities or of exchange, for these phenomena belong exclusively to an individualistic economy and would have no place in a socialised economy. This means that the reform of exchange by the suppression of profit can only be effected by the suppression of exchange itself, by the institution of the co-operative commonwealth. Indeed, Robert Owen, who proposed the "labour note" system in 1832, and was the most brilliant of its advocates, clearly recognised this difficulty, and understood that the socialisation of production would be an indispensable preliminary to the adoption of the plan. It was the impatience of his disciples which forced him to inaugurate the system within the framework of the capitalist economy by founding the National Equitable Labour Exchange. The logic of facts gave a patent demonstration of the irrationality of the attempt; and Owen, saddened and humiliated, was compelled to witness the failure of the new institution. It will readily be understood that these abstruse and abstract investigations, devoid as they are of any tangible connection with the burning problems of property, were not likely to arouse interest among the members of the party. Nothing could be more natural than the tone of hopeless discouragement with which the volume was greeted even by the author's most devoted friends. Liebknecht, for example, declared that he had never before experienced so great a disappointment. Biskamp enquired what on earth it was all about; Burgers deplored that Marx should have published a work so dull and fragmentary. It is true that the book had a moderate sale; Rau quoted it in his treatise; certain Russian and American economists made it the subject of profound studies. Nevertheless, the publisher refused to proceed with the issue. Hardly had this literary bickering come to an end when Marx became involved in a violent quarrel with the distinguished naturalist Karl Vogt, who publicly charged him with setting snares for the German exiles and with having sordid relationships with the police. Marx replied with a savage booklet entitled _Herr Vogt_ (London, 1860). The style of this polemic writing is intolerably vulgar; but in other respects the book is noteworthy, for it contains interesting revelations anent the Italian campaign and the relationships between Turin and the Tuileries. We must remember, moreover, that the accusation here launched against Vogt, that he was in the pay of the Second Empire, was subsequently confirmed beyond dispute, for in 1871 among the ruins of the Tuileries there was found a receipt for frs. 40,000 which had been paid over to Vogt. But scientific failures, personal contests, persistent and distressing domestic discomforts, seemed to inspire our athlete with renewed strength for the continuance of the work he had begun. Nevertheless, profiting by experience, he decided upon a yet further modification in the plan of his book, resolving to defer to its final section all historico-critical disquisitions, and to concentrate his energies upon the positive analysis of concrete reality. Further, being prevented by frequent illness from tackling the more difficult themes of pure economics, he devoted these long intervals of comparative leisure to statistical investigations and to the perusal of factory inspectors' reports, of white books and of blue books, and he plunged into the study of the economic history of Great Britain, so that it became possible for him to interleave the pages of abstract theory, necessarily difficult to understand, with pages that are really living, pages that vibrate with the reflex of reality. At length, abandoning the method he had previously followed of publishing fragmentary essays, he decided to rewrite the work throughout before sending it to press. After several years of incredible labour, the days being devoted to reading in the British Museum library, and the nights (for he often went on writing until four in the morning) to literary composition; falling again and again beneath the burden of his cross, but ever rising to his feet once more, thanks to the demon within urging him on and thanks also to the sustaining hand of his incomparable friend; he at length completed his task, and in the spring of 1867 sailed for Hamburg with the manuscript of the first volume of _Capital_, which he entrusted to Meissner for publication. In Hamburg he passed pleasant days with Dr. Kugelmann, a friend and fervent admirer, and with various officials, generals, and bankers; he was visited by a lawyer named Warnebold, an emissary from Bismarck, who, acting on the minister's instructions, exhorted him "to employ his brilliant talents for the advantage of the German people." Before long, however, he returned to London, where he earnestly devoted himself to giving the last touches to his book, which was finally issued from the press in the autumn of the same year. Thus was at length given to the world the monumental work destined to revolutionise sociological thought, and to give a new and higher trend, not to socialism alone, but to political economy itself. To sum up its drift very briefly, we may say that the argument follows three chief lines, value, machinery, and primitive accumulation. He set out from the fundamental principle (a principle which the philosopher Krause had declared to be as important to political economy as the fall of heavy bodies is important to physics) that the value of products is measured by the mass of labour incorporated into them, and drew the conclusion that the profit of capital is nothing other than the materialisation of a quantity of labour expended by the worker, and is in other words unpaid labour, stolen and usurped income. The worker, that is to say, transmits into the product a value equal to the quantity of labour incorporated therein, but receives from the capitalist a value less than this, a value equal to the quantity of labour embodied in the commodities necessary to reproduce the energy expended by the worker. Now the difference between the value of the product (that is to say the quantity of labour transmitted by the worker into the product) and the value of the labour power (that is to say the quantity of labour employed in producing the commodities consumed by the worker) constitute the surplus value which is gratuitously pocketed by the owner of the means of production in virtue of the fact that he is owner. In this way Marx attains to the qualitative notion of the income of capital, or explains whereof that income effectively consists. It remains to determine the quantity of income, which cannot be specified unless there have previously been precisely determined the measure and the figure of wages. Now though it be true that the growth of accumulation virtually tends to bring about an increase in the amount paid in wages, it is nevertheless within the power of the capitalist to obviate this undesirable event by investing the growing accumulation in the form of technical capital, which by its very nature is without influence upon wages. But the capitalist can do more than this. He can transform into technical capital a part of the capital which has hitherto been utilised in paying wages, thus throwing some of the workers out of employment, or creating an industrial reserve army. This reserve army, on the one hand stifles all resistance on the part of the workers in active employment, keeping their wages at a level which will purchase the barest necessaries, and on the other hand permits to capitalist industry the sudden expansions in times of prosperity which to the capitalist are so desirable and so profitable. Thus Marx's qualitative investigation is succeeded by a quantitative investigation, so that we learn, not only what surplus value is, but that it is equal to all the excess over and above the more or less limited subsistence of the worker, and that the worker is not merely defrauded of part of the value resulting from his labour, but is reduced to a wretched pittance, happy if he can secure this, and if he be not condemned by the hopeless entanglements of capitalist relationships to submergence in the backwater of the most terrible poverty. The result is that to the favoured recipients of surplus value there is subject a brutalised crowd reduced to a narrow wage, while at a yet lower level there struggles in the morass the amorphous mass of those who are condemned to labour without end. We thus realise, adds Marx, how profit is born of capital and is in its turn transformed into capital. But none of the considerations hitherto adduced suffice to make it clear what was the origin of primitive capital, that which first of all gave birth to profit, and consequently cannot be the product of profit. The celebrated section on the secret of primitive accumulation was intended to solve this problem. Classical political economy, said Marx, regarded the formation of primitive capital as an episode which occurred during the first days of creation. In times long gone by, there were two sorts of people; one, the diligent, intelligent, and above all frugal élite; the other, lazy rascals, spending their substance, and more, in riotous living. Thus it came to pass before long that the former became impoverished whilst the latter grew wealthy, and the wealthy earned the gratitude of the poor by hiring these to work for them in return for a paltry wage. The theological legend of original sin tells us how man came to be condemned to eat his bread in the sweat of his brow; but the economic history of original sin reveals to us that there are people to whom this is by no means essential. We learn that one section of humanity has succeeded in eluding the divine judgment and in procuring for itself bread and cakes by the sweat of others. Unfortunately, continues Marx, a conscientious questioning of history discloses that primitive capital originated in very various ways, of a character anything but idyllic. Until the close of the fifteenth century there existed in England a race of peasant proprietors, nominally subject to the jurisdiction of the great lords of the soil. But the increasing demand for wool which resulted from the expansion of the Flemish wool industry, and the increasing demand for flesh meat consequent upon the growth of population, induced the great landowners to destroy an agrarian system by which their returns from rent were rendered practically nil. The free cultivators were brutally evicted from the fields which their ancestors had arduously tilled for centuries past, to be replaced by shepherds and flocks, the crowds of the expropriated hastening to the towns to offer the strength of their arms for hire. Here they happened upon a rout of usurers, traders, house-owners, enriched craftsmen, and lucky speculators; and here too were those who had expropriated them, the landowners who had heaped up savings by fair means or foul, but had hitherto been unable to turn their savings to account owing to the restrictions imposed by the corporative economy (guild system). These accepted as a gift from heaven the influx of the proletarian multitude, and were not slow in setting the newcomers to work on behalf of the growing manufactures. Modern capitalist industry thus originated in a terrible expropriation of the working population which transformed the independent peasants into an impoverished and hunger-stricken mob. But historic nemesis awaits this society conceived in theft, and Marx predicts its disastrous end in the ominous words: "The knell of capitalist property will sound; the expropriators will be expropriated." The fulfilment of the process will be effected by the forces inherent in the mechanism of the capitalist economy. The more extensive the development of that economy, the fiercer becomes the internecine struggle between the individual aggregations of capital, the more extensive become the accumulations of wealth in the hands of capitalists of the upper stratum, and the smaller becomes the number of these; correlatively there takes place an increase in the size of the working and poverty-stricken crowd, the more hopeless and more pitiful becomes its degradation, whilst simultaneously its cohesion grows more compact, for the workers are disciplined and organised by the very process which associates labour in the factory and upon the land. At a given moment, when the number of mammoth capitalists has conspicuously diminished, and when the pullulating mass of proletarians has increased to an immeasurable degree and has been forced down into the most abject poverty, it will at length be easy to the dispossessed to expropriate the small group of usurpers. Thus the expropriation of the masses by the few, which greeted the dawn of the contemporary economic order, will be counterposed by the expropriation of the restricted number of masters at the hands of the proletarian masses, and this will triumphantly herald a calmer and more resplendent sunrise. CHAPTER IV A broad outline has now been given of the marvellous work which, whatever judgment we may feel it necessary to pass upon the value of the doctrines it enunciates, will remain for all time one of the loftiest summits ever climbed by human thought, one of the imperishable monuments of the creative powers of the human mind. Above all we are impressed and charmed by the magnificent quality of the exposition, in which but one defect can be pointed out, and this was probably imposed by the abnormal conditions under which the author wrote. We allude to the last chapter, the one that crowns the story of the historic expropriation of the workers with the eloquent example of the colonies. Logically this chapter should precede the penultimate chapter, wherein Marx, from his account of these terrible happenings, casts the horoscope of revolution. It is probable that the inversion was deliberate, for the prophetic call to the proletarian revolution would have been more likely to attract the attention of the censorship had it been placed at the end of the volume. Apart from this trifling matter, we cannot but admire the shapely pyramidal construction, the harmonious and flowing movement of the book, which, passing from the most subtle disquisitions upon the algebra of value, deals with the complexities of factory life and machine production, plunges into the inferno of workshops and mines and into the infamous stews of unspeakable poverty, to conclude with a description of the tragic expropriation of a suffering population. The work is a masterpiece wherein all is great, all alike incomparable and wonderful--the acuteness of the analysis, the statuesque majesty of the whole, the style vibrant with sorrow or with indignation according as the author is sympathising with the woes of the poor or scourging the villainies of the mighty, the vast learning, and the torrential impetus of passion. There is a stupendous harmony of irreconcilables, so that, as in the mysterious creations of nature, we find an almost inconceivable association of real symmetry with apparent disorder; an association of minute attention to detail with monumental synthesis, an association of mathematics with history, an association of repose with movement; so that in all its fibres the book seems to be the offspring of an unfathomable and transcendental union between superhuman labour and superhuman pain. Nothing, therefore, is more natural or more readily explicable than the phenomenal success of _Capital_, a success which has rarely been paralleled in the history of intellectual productions. Translated into almost every language (recently even into Chinese); eagerly read by men of learning no less than by statesmen, by reactionaries as well as by rebels; quoted in parliaments and in meetings of the plebs, from the pulpit and from the platform, in huts and in palaces--it speedily secured a world-wide reputation for its author, making him the idol of the most irreconcilable classes and of the most contrasted stocks. Whereas, in fact, the prophetic announcement of the glorious advent of collective property led to the assembling round Marx of all the common people of the west, who hailed him as avenger, as leader, and as seer of the onward march of the proletariat; in such countries as Russia, where capitalist development was as yet in its infancy, the bourgeois classes sang the praises of the book which announced the historic mission of capitalism, and thus it was that the idol of the western pétroleurs became in the far east of Europe the fetich of bankers and manufacturers. After the first shock of surprise, however, readers turned to the dispassionate analysis of the individual doctrines advocated in the work, and were not slow to bring to light certain gaps and sophisms. To say truth, no sovereign importance can be attributed to any of these criticisms, nor is it necessary to make much of the numerous attacks upon the statistical demonstrations of _Capital_. It is undeniable that Marx's thesis of the progressive concentration of wealth into the hands of an ever-diminishing number of owners, and of the correlatively progressive impoverishment of the common people, has not been confirmed. It has indeed been confuted by the most authoritative statistics collected since the publication of the book, for these show that the greater recipients of income increase more than proportionally to the medium and lesser recipients, whereas the number of taxpayers in the lowest grades diminishes, with a proportionate increase in the number of those at a slightly higher level. Further, as far as this last fact is concerned, there can be no doubt that wages have increased of late, so that they not merely rise above the miserable level of bare subsistence specified by Lassalle, but also rise above the level (which is still miserable, though a trifle higher) expressed in the calculations of Marx. It is, however, needful to add that the Marxist thesis merely points to a general tendency, and does not imply a denial that more or less considerable fluctuations may occur at particular periods. Moreover, the concentration of wealth does not find expression solely in the diminution of the numerical proportion between the greater and the lesser recipients of income, but in addition in a diminution of the ratio between the taxpayers and the population and in an increase in the contrast between the wealth of the recipients of income in various grades. Further, the most authoritative statistics demonstrate a growing diminution in the ratio between the owners and the general population. Again, no one can deny that the contrast between high grade and low grade incomes has of late exhibited an enormous increase; that banking concentration and the sway of the banks over industry (a source of increasing disparity in fortunes) has attained in recent years an intensity which even Marx could not have foreseen; and that, subsequently to the publication of _Capital_ and to the death of its author, the social fauna has been enriched by an economic animal of a species previously unknown, the multimillionaire, whose existence undeniably reveals an unprecedented advance in capitalist concentration. Nay more, after Marx's death, agrarian and industrial concentration attained preposterous proportions, such as he had never ventured to predict. In the American Union, a single landed estate will embrace territories equal to entire provinces, while industrial capital becomes amassed by milliards in the hands of a few despotic trusts, so that two-thirds of the entire working population are employed by one-twentieth of all the separate enterprises in the country. These statements concern the apex of the social pyramid; but even at the base of that structure the phenomena are far from invalidating the Marxist conception to the extent which many contend. Correlatively with the undeniable rise in wages (which, moreover, has been arrested of late, and has been replaced by a definite movement of retrogression), there has occurred an enormously greater increase in income, and therefore a deterioration in the relative condition of the workers. There has further been manifest an increasing instability of employment, so that unemployment has become more widespread and more frequent, exposing the working classes to impoverishment and incurable degradation. Marx's other theses, however, are open to more serious objection. Retracing the thread of his demonstrations with special attention to his study of primitive accumulation, no one can deny the absolute authenticity of the facts he narrated. Nor can Marx be blamed for having restricted his historic demonstration to England; though in actual fact the expropriation of the cultivators has been carried out everywhere, openly or tacitly, and everywhere this expropriation has been an initial stage in the foundation of capitalist property. Even Russia, who flattered herself upon her independence of the universal law and upon escaping the fated expropriation of her peasants, Russia, whom Marx himself, as if in a sudden fit of mental aberration, was on the point of excluding from the sphere of his generalisations, has to submit to the invariable rule, and to witness the transformation of her independent peasant proprietors into proletarians. The constitutional defect of this portion of Marx's book is of a very different character. Although he tells the story of the expropriation of the cultivators, he fails to explain why such expropriation must always take place, he fails to bring this great historical event beneath the sway of a universal economic theory. Now, putting aside the incongruity that a book essentially founded upon logical demonstration should all at once break off that demonstration to turn to a historical disquisition and a simple record of facts, no one has any right to construct a theoretical generalisation upon the bare narration of hard facts without referring these to the general psychological and logical causes which have produced them. It cannot be denied that in this respect Marx's demonstration presents a defect which it is impossible to make good. Yet more serious criticism may be directed against the theory of the industrial reserve army, the theory wherein Marx attempts to sum up the law of population of the capitalist era. For the theory is wholly based upon the premise that the conversion of wage capital into technical capital is competent to bring about the permanent unemployment of labour, or definitively to reduce the demand for labour. Now this premise will not hold, for technical capital, by promptly increasing the profit of capital, and by lowering the price of the product in the long run, provides for the capitalist, first of all, and subsequently for the consumer, the possibility of fresh savings, and these in the end create a further demand for labour, so that sooner or later there will be a call upon the active services of the workers who are temporarily unemployed. Vain, therefore, is any attempt to make technical capital responsible for the relative excess of population, which technical capital cannot possibly produce, for this phenomenon must be referred to the presence and to the activity of a very different variety of capital, and one not considered by Marx, namely unproductive capital. But these criticisms, which after all touch no more than points of detail, are mere trifles in comparison with the incurable contradictions in which the author's fundamental theory is involved. In fact, by a vigorous deduction from his premise that the value of commodities is measured by the mass of labour incorporated in them, Marx arrives at the fundamental and logical distinction between constant capital and variable capital. If, however, the value of products be exclusively determined by the mass of labour incorporated in them, it is evident that the capital invested in machinery or in raw material can only transmit to the product a value exactly equal to the quantity of labour contained therein, without adding any surplus, and that it is therefore constant capital; whereas wage capital transmits to the product value equal to all the quantity of labour which it maintains and sets in motion, a quantity which, as we know, exceeds the quantity of labour contained in the capital itself. In other words, wage capital, besides reproducing its own value, furnishes a supplement or a surplus value, and is therefore variable capital. Consequently surplus value arises exclusively from variable capital, and is therefore precisely proportional to the quantity of this capital. It further ensues that of two undertakings employing equal amounts of aggregate capital, the one which employs a larger proportion of constant capital ought to furnish a profit and a rate of profit lower than that furnished by the other. But free competition among the capitalists enforces an equal rate of profit upon the capitals invested in the various undertakings, and leads to the immediate abandonment of undertakings requiring a greater proportion of constant capital, and to the correlative expansion of the others. There consequently results an increase in the value of the products of the former undertakings, and a diminution in the value of the products of the latter. This process continues until the value of the respective products furnishes an equal rate of profit to the capitals respectively employed in producing them. Value, therefore, though in the first instance it is equivalent to the labour employed in producing the products, necessarily diverges from that standard in the end, and has then an utterly different measure. Thus the theory we are discussing is peremptorily refuted, or is reduced to absurdity. From the outset Marx is distinctly aware of the existence of this striking contradiction, which emerges in so formidable a manner in the first stage of his investigation; he frankly recognises it, but postpones its solution to the later volumes of his treatise. On the very morrow, indeed, of the publication of the first volume, he ardently set to work once more, and sketched to his friend, in monumental pages, the design of the complete book. Just as St. Augustine was grieved that the duties of his episcopate deprived him of the hours which he would have preferred to devote to the writing of a volume to be the crown of his _City of God_, so Marx was harassed by the thought of the time which the work of party organisation filched from his scientific labours, and it was solely that he might escape from the absorbing engagements involved in the former task that in the Hague congress of 1872 he proposed the transfer of the International to New York. But now we unexpectedly reach a "dead point" in the biography of our thinker, for his mental life, otherwise so normal and so brilliant, here suddenly becomes obscured, and is tinged with mystery and enigma. For, on the one hand, Marx clearly affirmed, and showed by his actions, that he definitely wished to devote himself to the completion of his treatise, whereas, on the other hand, it is undeniable that after the publication of the first volume of _Capital_, he never wrote another line of the book, and that all the posthumous additions to this volume were composed prior to 1867. I do not mean to imply that during subsequent years he gave himself up to inertia or repose, for it was during this period that he wrote all the economic section in Engels' booklet against Dühring; he learned Russian; he read the agricultural statistics of numerous countries and the reports on poverty in Ireland; he studied the matriarchal system; carried on ingenious discussions with Engels concerning Carey's theory of rent and Bastiat's theory of the cost of reproduction; threw light on the influence of fluctuations in the value of money upon the rate of profit; sketched a mathematical theory of commercial cycles--in a word, his thought-process remained so active that when a certain publisher asked for the right to issue his complete works, he replied, "My works, those which represent my present thought, are not yet written." But the essential work of his life, the work which had been so much cherished and which he again and again turned over in his thoughts, seems, as far as palpable traces are concerned, to have been entirely dismissed from his mind. We thus look on, marvelling and grieved, at the sight of the enfeebled hero withdrawing from the field, what time his banner, whose staff is not yet firmly implanted in the ground, is left as a target for the easy assaults of his emboldened adversaries. There certainly contributed to this intellectual shipwreck the illnesses and the misfortunes from which Marx suffered during the later years of his life. His health had been gravely undermined by overwork during the composition of the first volume of _Capital_ and during the task of proletarian organisation; trouble from boils alternated with bronchitis, liver disorder, headache, and lumbago. In vain did he seek health in gentler climes, at Ramsgate, Ventnor, Neuenahr, Carlsbad, Algiers, Monte Carlo, Vevey, and other fashionable health resorts. All attempts at cure proving inefficacious, he had at length to settle down once more in London. In 1881 occurred the death of his wife; while the death of his beautiful daughter Jenny, Longuet's wife, in January, 1883, was, if possible, a yet more cruel blow. Marx never recovered from this last shock; henceforward he was a broken man, the mere shadow of his former self; he passed his time contemplating the portraits of his two dear ones which Engels was to bury with him, and he no longer took any interest in the world around him or in the social tumult of which he was the inspirer and the originator. He died suddenly at two in the afternoon of March 14, 1883, while seated in his study chair. The titanic brain, which had given a new world to humanity, which had broken once for all the spiritual and material bondage of mankind, had ceased to live and to vibrate. Most distressing of all, he had taken with him to the grave the solution of the formidable enigma which everyone, the vulgar and the thinkers alike, had expected his genius to solve, and which no one else could unravel. It is true that shortly before his death he showed his friend the bulky manuscripts dictated in earlier days relating to the _Criticism of Political Economy_, suggesting that something might be made of this collection. It is also true that Engels, faithful executor of his divinity's wishes, devoted himself with splendid zeal to the publication of the manuscripts. But alas what delusion was in store for the admirers of the master! What a Russian campaign of disaster organised by enthusiastic lieutenants to the hurt of this Napoleon of thought! In 1885, two years after the death of Marx, there was published under Engels' supervision a so-called second volume of _Capital_. But the careless and pedestrian editorship, the long theoretical disquisitions making no appeal to facts for their justification, disquisitions in which the argumentative thread is continually broken, suffice to show that what we have before us is not a book, hardly even a sketch for a book, but a series of casual writings composed for the purposes of study and for personal illumination. Moreover, the work is wholly devoted to uninspiring monetary discussions upon the circulation of capital, to dissertations concerning fixed and circulating capital, the formation of metallic reserves, the circulation of commodity-capital, etc. Noteworthy, in any case, are the investigations which aim at throwing light on the process in virtue of which there is effected the formation of metallic reserves which remain out of circulation for a longer or shorter period. If, says Marx, a certain commodity requires for its production six months of labour, and cannot be sold until two months after its production has been completed, the capitalist, if he is to continue the work of production during the period in which the commodity remains unsold, has need of additional capital which he could dispense with if the sale could be effected immediately after production. But when, at the close of the circulation period, the capitalist resumes possession of the capital first utilised and realises it in money, he has no immediate need of all this capital, but only of the quantity necessary to make good the additional capital which he has invested, that is to say, a quantity of capital equal to the difference between the primary capital and the supplementary capital; consequently the excess remains at liberty, and goes to constitute and to increase monetary reserves. These reserves are formed in addition, and by an analogous process, on account of the wear of machinery; for the portions of value transmitted by the machines to the product and correlative to the wear of these machines are pent up until the day of the complete destruction of the machines or of their necessary replacement. Thus the difference between the period of production and the period of exchange of the commodities, and the difference between the period of economic redintegration and the period of technical redintegration of the productive machinery, give rise to the formation of monetary or capitalistic reserves, which become in their turn the source of intricate developments and interesting complications. The book likewise contains a masterly, though wordy and disconnected, account of the circulation of capital. But absolutely nowhere does it touch on or even hint at the theoretical enigma left unsolved in the first volume. Solely in Engels' preface do we find an announcement that the definitive solution will be furnished in a subsequent volume, and a suggestion that in the interim economists engage in a sort of academic debate, and bring forward their respective solutions. There actually took part in this strange competition, with varying success, Conrad Schmidt, Landé, Lexis, Skworzoff, Stiebeling, Julius Wolf, Fireman, Lafargue, Soldi, Coletti, Graziadei, and myself. At length, however, in 1894, appeared the third volume, which was to reveal to an impatient world the desired solution. The solution reduces itself to this. It is true, says Marx, that the value commensurate to labour ends by assigning to the capitals respectively employed as constant and as variable, different rates of profit, and that this is radically incompatible with competition. But it is likewise true that products are not actually sold for their value, but for their price of production, which is equal to the capital consumed plus profit at the ordinary rate on the total capital employed. Certainly if we consider the mass of products sold, we find that their total price is precisely equal to their total value. But this integral value is not distributed among the various products in proportion to the quantity of labour incorporated in them, but in a lesser or greater proportion, according as the products themselves contain a greater or less proportion of the mean between the constant capital and the total capital; that is to say, the products containing a proportion of constant capital superior to the mean are sold at a price above their value in order to eliminate the deficiency of profit due to the preponderance of the capital which does not produce surplus value; whereas the products containing a proportion of constant capital inferior to the mean are sold at a price less than their value so as to eliminate the excess of profit due to the preponderance of the capital that produces surplus value; whilst only the products containing the mean proportion of constant capital and total capital are sold at a price precisely identical with their value. But it soon becomes apparent that this so-called solution is little more than a play upon words, or, better expressed, little more than a solemn mystification. For when economists endeavour to throw light upon the laws of value, they naturally consider the value at which the commodities are actually sold, and not a fantastical or transcendental value, not a value which neither possesses nor can possess any concrete relationship to facts. It may well be that value as determined by abstract economic theory will not always correspond precisely with value as a concrete fact, for the complexities and the manifold vicissitudes of real life impose obstacles; it may well be, indeed, that to the rigidity of normal value, constituting the type of the relationship of exchange, we ought to counterpose the comparatively transient fluctuations of current value. But it must be understood that no logical fact should stand in the way of the realisation of normal value, for this, conversely, ought to be derived by logical necessity from fundamental economic premises. Of a value, indeed, which not only is not realised, but is not logically capable of realisation, the economist neither can nor ought to take any account; he should show in what respect, instead of being the expression of what value is, it is the expression of what value is not and cannot be; he should point out the negation of every correct and positive theory of value. Now this value commensurate to labour, value as defined by Marx's theory, not merely has its realisation restricted or modified by the vicissitudes of reality, but further, as Marx himself is constrained to recognise, is not logically capable of realisation, seeing that it would give rise to results incompatible with the most elementary advantage of those who effect the exchange of commodities; consequently, it is not merely an abstraction remote from reality, but is incompatible with reality; not only is it an impossibility in the realm of fact, but further and above all it is a logical impossibility. Thus, far from effecting the salvation of the threatened doctrine, this alleged solution administers a death-blow, and implies the categorical negation of what it professes to support. For what meaning can there possibly be in this reduction of value to labour, the doctrine dogmatically affirmed in the first volume, to one who already knows that the author is himself calmly prepared to jettison it? Is there any reason for surprise at Marx's hesitation to publish this so-called defence; need we wonder that his hand trembled, that his spirit quailed, before the inexorable act of destruction? Despite all, however, genius will not be denied, and even this volume contains here and there masterly disquisitions, enriching the science of economics with new and fertile truths. It will be enough, in this connection, to refer to two theories. The first of these, the theory of the decline in the rate of profit, though not free from objection, is none the less inspired and profound. The second is the theory of absolute rent, a brilliant and acute deduction from the Marxist theory of value. This theory, indeed, as we saw just now, leads to the conclusion that value commensurate to labour furnishes an extra profit to the capital which produces commodities requiring for their production an above-average proportion of variable capital. Now, where free competition exists, such extra profit cannot continue, and must necessarily be eliminated by a reduction in the price of the product to a point below its value. But when competition is not fully free, there is no reason why such extra profit should not be permanent. Now agrarian production requires an abnormally high proportion of variable capital, and consequently agricultural produce, when sold for its value, furnishes an extra profit. But since land is a monopolised element, this extra profit can be permanently assigned to the owners of the soil, because there is no effective competition to prevent their continuing to draw it. There thus comes into existence an absolute land rent, in opposition to or in addition to the differential rent of Ricardo's theory. This absolute rent is not due to the varying cost of production in different areas; it is not the exclusive appanage of lands more favourably situated or of lands of better quality; it arises solely from the excess in the value of agrarian produce over its cost of production, and is a general attribute of land per se, in virtue of its quality as a monopolised element. Marx acutely studies the manifold varieties of this rent according as it is rendered in work, in produce, or in money; and with sound and far-reaching intuition he deduces from his theory explanations of the intricate agrarian relationships among the various peoples of the globe. Nor is this the only gem with which the work is adorned. Very remarkable are the pages upon merchants' capital and moneylenders' capital, on their despotic predominance prior to the inauguration of the capitalist régime, and upon their inevitable dissolution after the advent of that régime. The closing pages, however, seem to breathe a vague weariness, and we find hardly any trace of masterly theoretical discussion of the class struggle, of its origin, of the instruments through which it operates, although this discussion, according to the author's original plan, was to be the monumental crown of the titanic work. Thus, however fragmentarily, and thanks to the help of lieutenants and of disciples who were not always adequately instructed, the theoretical treatise, at once the pride and the torment of our prophet, at length arrived at completion. But the reader will not forget that to the positive treatment of his subject, Marx always counterposed a historico-critical investigation of the theories of his precursors, and in the more mature design of his work such an exposition was to follow upon the exposition of his own doctrines and to form their apt complement. It remained, therefore, to bring to light this last part of his researches, a duty which was faithfully discharged (after the death of Engels) by Karl Kautsky, with the publication of the _History of the Theory of Surplus Value_, which appeared in four volumes during the years 1905 to 1910. Substantially, though publishers have preferred to treat it as a work apart, this book is nothing other than the concluding section of _Capital_, announced in the preface to the first volume, where the author tells of a sequel to be devoted to the history of this theory. In the posthumous work Marx traces the development of the theory of surplus value through its three essential stages, the prericardian, the Ricardian, and the postricardian. To the first of these phases belong the theories of the physiocratic school, whose essence Marx grasps with marvellous acuteness, maintaining that the theories in question were the doctrinal reflection of the interests of the rising capitalist class, constrained to pretend that its own economic claims were the logical expression of the advantage of the landed and feudalist classes then politically dominant. Particularly noteworthy are the comments on the teaching of Adam Smith. The second volume contains a searching criticism of the Ricardian system, and above all of Ricardo's theories of value and of profit. In the third section Marx passes judgment on the theories of Ricardo's successors, Malthus, Senior, and John Stuart Mill, for these writers, says Marx, follow the setting sun of bourgeois economic science, follow that science to its now inevitable doom. It was a fixed idea with Marx that the theoretical analysis of capitalist relationships had secured its fullest and most adequate expression in the pages of Ricardo; he believed that Ricardo had supplied the ultimate synthesis possible on these lines; that any further progress of economic science in its bourgeois trappings had become impossible; that its decline amid contradictions and perversions was inevitable; and that economics could only be renewed and reborn when the disintegrated vesture of bourgeois economic relationships had been completely thrown aside to give place to a definitive and superior social form. It is scarcely necessary to point to the sophisms and the arbitrary assumptions upon which this concept is based; but it must be admitted that the poverty, deficiency, and incurable vanity of current economic science increasingly tend to give the theory an awkward semblance of truth. CHAPTER V To-day, now that the fruits of Marx's meditations, be it only as the result of the work of collaborators, be it only with many gaps and imperfections, have all been given forth to the reading world, it is at length possible to take a general view, and to pass a dispassionate judgment upon the pre-eminent worth of his writings. The most austere criticism must bow reverently before such gigantic mental attainments as have few counterparts in the history of scientific thought, garnering from all branches of knowledge on behalf of the undying cause of mankind. The most inexorable criticism should recognise in Marx the supreme merit of having been the first to introduce the evolutionary concept into the domain of sociology, the first to introduce it in the only form appropriate to social phenomena and social institutions; not as the unceasing and gradual upward-movement outlined by Spencer, but as the succession of agelong cycles rhythmically interrupted by revolutionary explosions, proceeding in accordance with the manner sketched by Lyell for geological evolution, and in our own time by de Vries for biological evolution. With the aid of this concept, strictly positive and scientific, Marx triumphantly overthrew, on the one hand classical economic science, taken prisoner by its own notion of a petrified society, and on the other the philosophy of law and idealist socialism which were convinced that it was possible to mould the world in accordance with the arbitrary conceptions of the thinker. Looked at in this light, the work of Marx presents a new instrument for the use of the philosophy of history and for the use of sociology; and it has contributed no less powerfully to the advance of technological science, thanks to the writer's masterly investigation into the successive forms of the technical instrument of productive machinery. In this respect more than in any others Marx may be compared with Darwin, and may indeed be spoken of as the Darwin of technology: for no one has ever had a profounder knowledge than Marx of the structural development of the industrial mechanism, no one else has followed step by step the formation and upward elaboration of productive technique; just as Darwin, with invincible mental energy, traced the evolution of animal technique, the development of the functional apparatus of organised beings. This physiology of industry, which is now the least studied and least appreciated of Marx's scientific labours, nevertheless constitutes his most considerable and most enduring contribution to science. Noteworthy, in especial, and destined to form a permanent and integral part of the economic science of the world, are Marx's analyses of money, credit, the circulation of capital, poverty, primitive accumulation, not to speak of the historico-critical investigations into the work of the British classical economists--for here Marx, without prejudice to the merits of those who have fought honourably in this difficult arena, will ever remain the most brilliant and most profound commentator. For these mighty and noble contributions, his name will be inscribed in imperishable letters in the history of creative thought. But if his sociological, historical, and technological investigations, if his studies of money, the banking system, and industrial statistics, be so many intellectual jewels of which no praise can be excessive, it is none the less true that his fundamental economic theory is essentially vitiated and sophistical, and that he is himself responsible for reducing it to hopeless absurdity. We arrive, therefore, at this remarkable result: that Marx, whose primary aim it was to be a theorist of political economy, and to deal only in subsidiary fashion with the philosophy of history and technology, secured a triumphant success in these subordinate fields; whereas in respect of the fundamental object of his thought, his work was a complete failure. Nor can we deny that the very design of Marx's work, however marvellous in the Michelangelesque grandeur of its ensemble, does not satisfy those who insist upon strictly scientific method, and that in this respect Marx stands far below the great masters of positive science. For, however admirable and however great this man who succeeded in subsuming an entire world within the limits of an extremely simple initial principle, and whose life was but the development of an equation which he had formulated at its outset, how far more straightforward and trustworthy, how far more scientific, was the method of Darwin, who never formulated any apriorist principles, but, quite free from preconceptions, accepted phenomena in the order of progressive complexity in which life itself presented them. Darwin first studied the natural formation of organised beings, then devoted himself to an examination of the larger types, and was finally led to infer their development by evolutionary growth. This method, which follows nature and reflects it, seems far more worthy of respect, far more honest, far more strictly scientific, than the other method, which manipulates the truth, does violence to the truth, in order to accommodate it to hidden ends. There is no reason, therefore, to be surprised that such a flood of criticism should have been directed against this colossus, or that on the morrow of the completion of Marx's work the skies of the two hemispheres should have rung with disorderly clamour proclaiming the crisis, nay the failure, of Marxism. But that which is less easy to understand, that which discloses the utter immaturity of economic science as well as of contemporary socialism, is that criticism has not been directed against the truly vulnerable point of the system, but has been solely concerned in attacking its better defended and less fragile parts. In fact the scientific and socialist currents partially or wholly opposed to Marxism display a strange reverence for his theory of value, or do not venture to attack it, but concentrate their forces against the statistical and historical theories which are the deductions and complements of the Marxist theory of value. In this respect the critics of Marxism form two very distinct groups. The first of these, the reformist or revisionist school, has a high respect for the master's theory of value, and reiterates it as an indisputable truth; whereas reformists criticise the theory of increasing misery, the theory of the concentration of capital, and above all the catastrophic vision of the proletarian revolution. The writers of this school affirm, and think that in so doing they are setting up an antithesis to Marxism, that to await the millennium of the social revolution is futile utopianism; they contend, that the progressive reduction in the number of the wealthy, paralleled by the ceaseless increase in the number of more and more impoverished proletarians, a development which according to Marx's vision was to provide the apparatus destined to destroy the contemporary economy, is negatived by an actual tendency towards a more democratic distribution of commodities; and they insist, therefore, that socialism should aim at securing the triumph of its cause by means that are less violent but far more efficacious, namely by social legislation or by reforms tending to reduce inequality. Now, without troubling to repeat what I have already said, that the Marxist dynamic of the distribution of wealth is far from being as completely negatived by contemporary facts as these critics are pleased to insist, I merely propose to point out that this paying of high honour to reform and social legislation nowise conflicts with the doctrine or with the work of Marx, who, on the contrary, was the first to throw into high relief the pre-eminent value of social legislation, devoting classical chapters to the elucidation of its most memorable manifestations. In this light, therefore, revisionism or reformism, far from being a negation or correction of Marxism, is a specific application or partial realisation of the doctrine, for it brings into the lime-light one of the numerous sides of that marvellous polyhedron, and deserves credit for having explained and developed this particular aspect of Marxism. But revisionism errs gravely in that it wishes to replace the beautiful and complex multiplicity of the Marxist system by forcing us to contemplate this unilateral aspect alone. The reformists err in that they fail to see that legislative reforms, though desirable and extremely opportune, are invariably circumscribed by the prepotent opposition of the privileged classes, and can never do anything more than mitigate a few of the grosser harshnesses of the present system--whilst, precisely because they effect this mitigation, reforms tend to preserve an increasingly unstable economic order from the imminent disaster of a destructive cataclysm. If the reformist school mutilates Marxism thus violently, by reducing the whole of _Capital_ to the paragraphs extolling social legislation, the syndicalists inflict a yet cruder mutilation on the Marxist system by tearing a single page out of _Capital_, to make of this page the alpha and the omega of their revolutionary creed. It is true that Marx, in the thirty-first chapter of _Capital_, makes an explicit appeal to force, the midwife of every old society pregnant with a new one; but this appeal is not made until it has been fully demonstrated that the social revolution can only be effected at the close of a slow and lengthy evolutionary process which shall have caused complete disintegration of the existing economic order and shall have paved the way for its inevitable transformation into a superior order. Now the syndicalists unhesitatingly sponge all this demonstration from the slate, and affirm that the proletarian masses can undertake action at any moment, can violently overthrow the prevailing economic order whenever it shall please them to do so; and they declare that it is needless for revolutionists to keep their eyes fixed upon the clock of history, in order to see if this is about to sound the knell of the present social order. It would be superfluous to demonstrate the absurdity of such a thesis, for the very school which proclaims it has assumed the task of giving it the lie in clamorous accents. For if, as the new apostles of force contend, the proletarian masses can at any moment annihilate the prevailing economic order, why do they not rise against the capitalism they detest, and replace it with the co-operative commonwealth for which they long? Why is it that after so much noisy organisation, after so much declamation and delirious excitement, the utmost they are able to do is to tear up a few yards of railway track or to smash a street lamp? Do we not find here an irrefragable demonstration that force is not realisable at any given moment but only in the historic hour when evolution shall have prepared the inevitable fall of the dominant economic system? Thus whatever they can do, it always seems that the infirm will of the disciples who demand an arbitrary renovation of the social system (whether by legal measures or by force) breaks vainly against the fatality of evolution, and that reformism and syndicalism are merely caricatures, counterfeits, or exaggerations of the many-sided and well-balanced theory of the master, who proposed a threefold line of advance: by social legislation; by the activity of the organised workers; and by revolution. In face of these various forms of neo-marxism, the outcome of mutilations and of one-sided exclusivism, Marx redivivus would have excellent reason for repeating his own adage, so thoughtful and so true, "I am not a Marxist." However striking the temporary success of these new forms among the crowd or among the learned, we may confidently predict that neither reformism nor syndicalism will definitively supplant the Marxist system, which despite all and against all remains and will remain a supreme and invincible force at once of theory and of organisation for the proletarian assault upon the long-enduring fortress of property. The value of Marx's work is, in fact, displayed in the most brilliant light by the detailed criticism of the theorists and by the contrast with opposing trends; all the more when we compare the aspect of economic thought and of proletarian organisation before and after the publication of _Capital_. For if we study the utterances of thinkers upon these matters during the middle of the nineteenth century, we find that nearly all are dominated by the categorical idea that the social order is of an absolutely immobile character, and that none but a few utopians entertain the thought of changing that order by means of precipitate legislation inspired by their individual preconceptions. In any case, it was an idea common to all, to revolutionists as well as to conservatives, that the poverty of the masses was a negative and distressing residue from the economic system, that it was a purely passive feature of that system which must be accepted with resignation, for it could not exercise any propulsive influence in the general social movement. This is substantially the notion which emerges from Victor Hugo's _Les Misérables_, for poverty is here regarded as an overwhelming mass of suffering for which it is impossible to assign the responsibility; it is looked upon as a load pressing with inexorable cruelty upon suffering humanity, which is unable to respond by anything more effective than complaints and tears. But how utterly different is the notion prevailing in our own days upon this matter. Not only is the conviction now rooted in the mind of every thinker that the economic order is subject to unceasing change, is advancing towards predestined destruction; but it is considered certain that the artificer, the demiurge, the most potent factor of this destruction, will be the active resistance, the unrest, the rebellion, of the proletarians in the grasp of the capitalist machine and eager to destroy it. This conception of the dynamogenic function of poverty is the most characteristic feature of the social thought of our day, the feature wherein that thought contrasts most categorically with the ideas of an earlier age. Just as the Christian sect, represented by Gibbon as a mere pathological efflorescence growing on the margin of Roman society, is by the better equipped science of our own time looked upon as having been the most potent solvent of the imperial complex and as the ferment generating a new and better life, so the proletarian masses, regarded by the science and the art of the past as a crushed and pitiful appendage of the bourgeois economy, now appear to contemporary science as the most vigorous among the forces tending to disintegrate that economy, as tending irresistibly to create a higher and better balanced form of association. Correlatively with this development, whereas the proletarians of other days were content to sulk in their hovels as they contemplated the brilliant gyrations of the capitalist constellation, merely cursing in secret the sorrows of their lot, to-day the workers of the two worlds are advancing in serried ranks to the conquest of a new humanity and a new life. Thus the immobility of our fathers has given place to rapid movement; their discouragement and resignation, to rebellious demands; and whereas of old a chasm yawned between the scattered visionaries who entertained dreams of social rebirth and the inert mass of the poverty-stricken, we find to-day that the impoverished are themselves becoming the artificers, the heralds, the pioneers, of the irresistible ascent of humanity towards a juster and better social order. Now all this new moral and social world, unknown to our grandparents, the glory and the plague of science, of society, of contemporary life; all this gigantic tumult of ideas, facts, claims, of assaults, wounds, innovating reconstructions; all this marvellous necromancy is the work of one man, a sage and a martyr. All this we owe to Karl Marx. It measures, concretes, and materialises for us his colossal worth and the omnipotent vastness of his achievement. Though science may well and with full right complain of the gaps in his doctrinal system, though life may furnish the most definite refutations of his theoretical visions, and though future history may display forms of which he never dreamed, nevertheless, no one will ever be able to unseat him from his throne, or to dispute the sovereignty which accrues to him on account of his splendid contributions to civil progress. Whether praised and accepted, or despised and rejected, by practice or by theory, by history or by reason, he will always remain the emperor in the realm of mind, the Prometheus foredestined to lead the human race towards the brilliant goal which awaits it in a future not perhaps immeasurably remote. For the day is coming. And in that day, when remorseless time shall have destroyed the statues of the saints and of the warriors, renascent humanity will raise in honour of the author of this work of destruction, upon the shores of his native stream, a huge mausoleum representing the proletarian breaking his chains and entering upon an era of conscious and glorious freedom. Thither will come the regenerated peoples bearing garlands of remembrance and of gratitude to lay upon the shrine of the great thinker, who, amid sufferings, humiliations, and numberless privations, fought unceasingly for the ransom of mankind. And the mothers, as they show to their children the suffering and suggestive figure, will say, their voices trembling with emotion and joy: See from what darkness our light has come forth; see how many tears have watered the seeds of our joy; look, and pay reverence to him who struggled, who suffered, who died for the Supreme Redemption. 
7361	----	A BRIEF HISTORY OF PANICS AND THEIR PERIODICAL OCCURRENCE IN THE UNITED STATES BY CLEMENT JUGLAR MEMBER OF THE INSTITUTE, VICE-PRESIDENT OF LA SOCIETE D'ECONOMIE POLITIQUE THIRD EDITION TRANSLATED AND EDITED WITH AN INTRODUCTION AND BROUGHT DOWN FROM 1889 TO DATE BY DECOURCY W. THOM FORMER MEMBER OF THE BALTIMORE STOCK EXCHANGE AND OF THE CONSOLIDATED EXCHANGE OF NEW YORK TO GOLDEN DAYS Tonight at "Blakeford," I set down this dedication of the third edition of this book which has proved to be the pleasant companion of two visitations--one at "Wakefield Manor," Rappahannock County, Virginia, in 1891, the other at my old home "Blakeford," Queen Anne's County, Maryland, in 1915. The memories that entwine it there, and here mingle in perfect keeping and have made of a dry study something that stirs anew within me as I consider the work accomplished, my love and remembrance of the old days, and my love and unforgettingness of these other golden days under whose spell I have brought the book up to the present year. DECOURCY W. THOM. "BLAKEFORD," October 10, 1915. PREFACE TO THIRD EDITION The second edition of this study of _Panics in the United States_ brought us through the year 1891. I originated about one fourth of it. This third edition brings us practically up to date. Of this edition I originated about one half. I hope it will prove helpful in many ways. I trust that it will force an appreciable number of men to realize that "business" or "financial" panic is not merely fear, as some have asserted; but is based upon the knowledge that constriction, oppression, unhappy and radical change in this, that, or the other kind of business must tend to drag down many others successively, just as a whole line of bricks standing on end and a few inches apart will fall if an end one is toppled upon its next neighbor. Indeed, the major cause of "business" or "financial" panic is just reasoning upon existing conditions rather than a foolish fear of them. Over-trading and loss of nerve constitute the medium. Recent national legislation has gone far in enabling the business world in the United States to prevent panics, and farther yet in providing the means to cope with them when, in spite of precautions, they shall recur. DEC. W. THOM. "BLAKEFORD," October 10, 1915. A BRIEF HISTORY OF PANICS INTRODUCTION COMPRISING A CONDENSATION OF THE THEORY OF PANICS, BY M. JUGLAR, RENDERED INTO ENGLISH, WITH CERTAIN ADDITIONAL MATERIAL, BY DECOURCY W. THOM. In this translation, made with the author's consent, my chief object being to convey his entire meaning, I have unhesitatingly rendered the French very freely sometimes, and again very literally. Style has thus suffered for the sake of clearness and brevity, necessary to secure and retain the attention of readers of this class of books. This same conciseness has also been imposed on our author by the inherent dryness and minuteness of his faithful inquiry into hundreds of figures, tables showing the condition of banks at the time of various panics, etc., etc., essential to his demonstration. As an extreme instance of the latitude I have sometimes allowed myself, I cite my rendering of the title: "_Des Crises Commerciales et de Leur Retour Periodique en France, en Angleterre et aux Etats-Unis_" merely as "Panics and Their Periodical Occurrence in the United States": for M. Juglar himself states that a commercial panic is always a financial panic, as a falling away of the metallic reserve indicates its breaking out; and I have only translated that portion dealing with the United States, deeming the rest unnecessary, for this amply illustrates and proves the theorem in hand. To this sketch of the financial history of the United States up to 1889, when M. Juglar published his second edition, I have added a brief account to date, including the panic of 1890, the table headed "National Banks of the United States," and some additions to the other tables scattered through this book. From the prefaces to the French editions of 1860 and of 1889, and other introductory matter, I have condensed his theory as follows: A Crisis or Panic may be defined as a stoppage of the rise of prices: that is to say, the period when new buyers are not to be found. It is always accompanied by a reactionary movement in prices. A panic may be broadly stated as due to overtrading, which causes general business to need more than the available capital, thus producing general lack of credit. Its precipitating causes are broadly anything leading to overtrading: In the United States they may be classed as follows: I. PANICS OF CIRCULATION, as in 1857, when the steadily increased circulation, which had almost doubled in nine years, had rendered it very easy to grant excessive discounts and loans, which had thus over-stimulated business, so that the above relapse occurred; or, we may imagine the converse case, leading to a quicker and even greater disaster: a sudden and proportionate shrinkage of circulation, which, of course, would have fatally cut down loans and discounts, and so precipitated general ruin. 2. A PANIC OF CREDIT, as in 1866, when the failure of Overend, Gurney, & Co. rendered the whole business world over cautious, and led to a universal shrinkage of credit. [I take the liberty of adding that it seems evident to me that such a danger must soon confront us in the United States, unless our Silver Law is changed, because of a finally inevitable distrust of the government's ability to keep 67-cent silver dollars on an equality with 100-cent gold dollars.] 3. PANICS OF CAPITAL, as in 1847, when capital was so locked up in internal improvements as to prove largely useless. 4. GENERAL TARIFF CHANGES. To the three causes given above the translator adds a fourth and most important one: Any change in our tariff laws general enough to rise to the dignity of a new tariff has with one exception in our history precipitated a panic. This exception is the tariff of 1846, which was for revenue only, and introduced after long notice and upon a graduated scale. This had put the nation at large in such good condition that when the apparently inevitable Decennial Panic occurred in 1848 recovery from it was very speedy. The reason for this general effect of new tariffs is obvious. Usual prices and confidence are so disturbed that buyers either hold off, keeping their money available, or else draw unusually large amounts so as to buy stock before adverse tariff changes, thus tightening money in both ways by interfering with its accustomed circulation. This tendency towards contraction spreads and induces further withdrawal of deposits, thus requiring the banks to reduce their loans; and so runs on and on to increasing discomfort and uneasiness until panic is speedily produced. The practical coincidence and significance of our tariff changes and panics is shown by an extract below from an article written by the translator in October-November, 1890, predicting the recent panic which was hastened somewhat by the Baring collapse. [Footnote: _Inter-relations of Tariffs, Panics, and the Condition of Agriculture, as Developed in the History of the United States of America_. This brief sketch of our economic history in the United States seeks to show that Protective Tariffs have always impoverished a majority of our people, the Agriculturists; that agriculture has thus been made a most unprofitable vocation throughout the States, and that this unsoundness at the very foundation of the business of the American people has often forced our finances into such makeshift conditions, that under any unusual financial strain a panic, with all its wretched accompaniments, has resulted. To consider this properly, we must note the well known fact that in this land, those who live by agriculture directly, are more than one half of our population. Their votes can cause to be made such laws as they see fit, hence, one would expect the enactment of laws to raise the price of farm products, and to lower the price of all that the farmer has to buy. But the farmers vote as the manufacturers and other active classes of the minority of our voters may influence; and only twice in our history, from 1789 to 1808, and from 1846 to 1860, have enough of the minority found their interests sufficiently identical with that of the unorganized farmer-majority to join votes, and thus secure at once their common end. In consequence of this coalition during these two periods, two remarkable things happened: 1st, agriculture flourished, and comfortable living was more widely spread: 2d, panics were very infrequent, and the hardships and far-reaching discomforts that must ever attend adjustments to new financial conditions after disturbances were, of course, minimized. It is not fair to deduce very much from the first period of prosperity among the farmers, 1789 to 1808, for, during this time, there were no important business interests unconnected with agriculture; but we may summarize the facts that from 1789 to 1808, there was, 1st, no protection, the average duty during this time being 5 per cent., and that laid for revenue only; 2d, that agriculture flourished; 3d, that there was not a single panic. "The Embargo" of 1808, followed by the Non-Intercourse Act in 1809 and the War of 1812-15, and the war tariff, by which double duties were charged in order to raise money for war purposes, caused us to suffer all the economic disasters flowing from tariffs ranging between absolute protection, and those practically prohibiting, and intensified by the sufferings inseparable from war. During this period agriculture, for the first time in our history, was in a miserable condition. It is significant that for the first time too, we had a protective tariff. Though our people made heroic efforts to make for themselves those articles formerly imported, thus starting our manufacturing interests, they had, of course, lost their export trade and its profits. When the peace of 1814 came, we again began exporting our produce, and aided by the short harvests abroad, and our own accumulated crops, resumed the profitable business which for six years our farmers and our people generally had entirely lost. Our first panic, that of 1814, came as a result of our long exclusion from foreign markets, being followed by the stimulation given business through resumption of our foreign trade in 1814, which was immensely heightened by the banks issuing enormous quantities of irredeemable paper, instead of bending all their energies to paying off the paper they had issued during the war. But worse than the suffering entailed by this panic, was the engrafting upon our economic policy of the fallacious theory made possible by the Embargo and the Non-Intercourse Act, (which was equivalent, let me enforce it once more, to that highest protective tariff, a prohibitory one) that _all infant manufactures must be protected, that is, guaranteed a home market_, though such home market be one where all goods cost more to the purchaser than similar goods bought elsewhere, and this in order that the compact little band of sellers in the home market may make their profit. This demand for protection was made by those who had started manufactures during the years from 1808 to the end of the war of 1815, when, as we have seen, imports were practically excluded. In 1816 their demand met explicit assent, for, in the tariff of that year, duty for protection, not for revenue, was granted; and an average of 25 per cent. duties for six years, to be followed by an average of 20 per cent. duties, was laid upon imports. For a few years bad bread crops in Europe, demand for our cotton, and an inflation of our currency delayed a panic. But, we had started on our unreasoning course. We had tried to ignore the laws of demand and supply, and had forgotten that it is also artificial to attempt preventing purchases in the cheapest, and selling in the highest markets; and to help a few manufacturers we had put up prices for all that a large majority of our population,--the agriculturists mainly--had to buy. In a short while the demand for what the farmers had to sell fell away, and bills could not be met, and their troubles were added to those of the minority of the consumers of the country; the volume of business fell off, and a panic came in 1818. The influences that led up to it continued until 1846, as follows: The great factors in producing this state of affairs were the successive tariffs of 1818, with its 25 per cent. duty upon cottons and woollens, and its increased duties on all forms of manufactured iron, (the tariff of 1824 which increased duties considerably), and the tariff of 1828, imposing an average of 50 per cent. duties, and in which the protective movement reached its acme (omitting, of course, the present McKinley Bill with its 60 per cent. average duty). In 1832, consequently, a great reaction in sentiment took place, and the "Compromise Tariff" was passed and duties were lowered. From this period, the advocacy of a high tariff in order to protect "Infant Industries," no longer "Infant" was largely abandoned, and its advocacy was generally based upon the fallacy, less obvious then than now, of securing high wages to laborers by means of high import duties. This plea for high duties the laborer found to be fallacious. They (agriculturists mainly) found that they had to pay more for manufactured goods, so that the manufacturers could still buy their raw materials at the advanced prices, pay themselves the accustomed or increased profits, and then possibly pay the laborer a small advance in wages. The advance did not compensate for increased cost of necessaries of life. If competition reduced the manufacturers' profit, the first reduction of expenses was always in the laborer's pay. The recognition of these truths brought about the further reduction of duties until 1842, in which year the tariff was once more raised. It was not until 1846 that we enjoyed a tariff which sought to eliminate the protective features. It is significant that a period of greater profit and stability among our business men, but especially among our farmers, was then inaugurated. This was the first tariff, since that of 1816, not affected by politics. It lasted-until 1857, and the country flourished marvellously under it. From 1816, when protection was first resorted to, until today, tariff rates have been almost continually raised, mainly by votes of the agriculturists, misled by the manufacturers and politicians, influenced by the manufacturers' money. And a fact worth noting is that financial panics have come quick and furious. They came in 1818, and in 1825-26, in 1829-30, and so on, (see page 13). Sudden changes in our tariff rates have unvaryingly been followed by financial panics within a short period. Changes to lower rates have not brought panics so quickly as changes in the reverse direction. Low tariff without protective features, maintained steadily, has been coincident with constantly increasing prosperity to the country at large: but most especially to the agriculturists. This is readily understood, for purchases of imported and manufactured goods and all outfit needed for the farmers' land and family can be made at low--and owing to the competition that always arises to supply a steady and natural market--lowering prices. Moreover, the settled prices prevailing throughout the country allow of assured calculations and precautions as to business ventures, and permit such a ratio to be established between expenses and income, that at the end of the fiscal year a profit, not a loss, may be counted upon. This was the experience of our agriculturists during the second and last prosperous time of our farmers, 1846-60. During that period agriculture flourished; the tariff was low and there were only two panics, that of 1848, and the one of 1857, and the first (a non-protective one) should not be considered as precipitated by the tariff of 1846, except that some few suffered briefly in readjusting themselves to the changed, (though better), condition of the new tariff. The vast majority of the nation reaped enormous benefits from the changes inaugurated. The panic of 1857 was caused by over-activity in trade speculation, and over-banking, and the tariff of the same year was really passed to help avert the panic threatening. It had the contrary effect, it is believed, for it still further, of course, unsettled rates for goods, when prices were already unstable. But the point is to be noted that in reality tariff change followed practical panic in this instance rather than practical panic tariff change. The high protective war tariffs, beginning in 1860, and increased for war purposes and granted largely as an offset for those internal revenue taxes laid to carry on the war, have been continued as a body ever since, as is well known, despite the internal revenue taxes having been abolished except on whiskey and tobacco. It is equally well known that farming has grown less and less remunerative since 1860, and that the panics of 1864, 1873, and 1884 have been unfortunate culminations of almost unceasing financial discomfort, which has been most forcibly exemplified during the last two months. Even now the financial fabric is in unstable equilibrium, and this latest monstrosity--the McKinley Bill--imposing the highest tariff we have ever exacted--an average duty of 60 per cent., and coming when a panic was due, bids fair to hurry us into another and a terrible financial panic. If it does not do so, it will be because our crops are too bountiful to allow it, but it will at least have made the agriculturists and all buyers of other commodities than agricultural produce pay more for all purchases. It will bring no more money into their pockets, but it must take out considerably more. The people appreciate this. The nation's pocket nerve has been touched. This is the meaning of the recent election, it seems to the writer. But whether the impending danger can be averted even if a prompt, though wise and slow reversal of tariff policy can be forced by the next Congress is doubtful, for unrest and timidity have been evoked and require time to be allayed before easy and orderly business operations will in general be resumed, unless indeed bountiful crops here and demand abroad once again reverse the logic of the situation. Certain it is that our tariff laws must interfere as little as possible with the natural law of demand and supply in making prices, or we must be content to suffer from the instability that artificiality always brings with it. Our plain duty is to enact as speedily as possible a tariff that shall by small but continued changes cut down our protective duties and substitute non-protective duties until our tariff is for revenue only; for thus and thus only can the vast majority of the agriculturists buy what they need most cheaply, and so find that to purchase necessaries does not cost them more than the total of their sales; and our exports of produce, chiefly owing to agricultural prosperity, would increase, thus materially helping to build up our general business so that the other nations will have to pay us, in the gold we require for comfortable management of our business, the growing trade balances against them. The rough table below suggests that sudden tariff changes have precipitated panics, which have come quickly if the change was to higher protective duties and somewhat slower if the change was to lower protective duties; that slow and well considered changes doing away with protective duties generally have not caused disturbances; and that agriculture has flourished in proportion as we approached tariff for revenue only. It has for obvious reasons required about one year for financial trouble to be shown by decrease in value of farm produce as evinced by wheat-flour exports. Special conditions, such as excessive wheat corps here and deficiency abroad or special tariff favors to flour export, may even increase the amount exported despite an otherwise untoward effect of the new tariff upon farmers. I have selected flour exports as the article best reflecting the chief interest of the farmers, and at the same time the state of general business for manufacturing, transportation and such other branches as are concerned with it. ------------------------------+---------+-------------------------------- TARIFFS ,- They have all | | Condition of agriculture and | been designedly | | incidentally of general + protective | Panics. | business as suggested by export | save the one | | of wheat flour from 1790-1890. '- of 1846. +---------+-------------------------------- | | Year. Barrels. Dollars. | | 1790 724,623 4,591,293 | | 1791 619,681 3,408,246 | | 1792 824,464 ......... | | 1793 1,074,639 ......... | | 1794 846,010 ......... | | 1795 687,369 ......... | | 1796 725,194 ......... | | 1797 515,633 ......... | | 1798 567,558 ......... | | 1799 519,265 ......... | | 1800 653,056 ......... | | 1801 1,102,444 ......... | | 1802 1,156,248 ......... | | 1803 1,311,853 9,310,000 | | 1804 810,008 7,100,000 | | 1805 777,513 8,325,000 | | 1806 782,724 6,867,000 | | 1807 1,249,819 10,753,000 | | 1808 263,813 1,936,000 | | 1809 846,247 5,944,000 | | 1810 798,431 6,846,000 ,- Practical | | 1811 1,445,012 14,662,000 | exclusion of | | ,- 1812 1,443,492 13,687,000 Say + all imports | | | 1813 1,260,943 13,591,000 1814 | through the war = | 1814 | + 1814 193,274 1,734,000 '- Prohibitory Tariff. | | '- 1815 862,739 7,209,000 | | ,- 1816 729,053 7,712,000 ,- Duties for six | | '- 1817 1,479,198 17,751,376 1816 + years @ 25% and | 1818 | ,- 1818 1,157,697 11,576,970 '- thereafter @ 20%. | | | 1819 750,669 6,005,280 | | | 1820 1,177,036 5,296,664 1818 ,- Duties 25% on | | | 1821 1,056,119 4,298,043 | Cotton and Woollens, | | + 1822 827,865 5,103,280 + and all duties | | | 1823 756,702 4,962,373 | on Manufactured | | | 1824 996,792 5,759,176 '- Iron increased. | 1825-26 | | 1825 813,906 4,212,127 | | | 1826 857,820 4,121,466 | | '- 1827 868,492 4,420,081 | | ,- 1828 860,809 4,286,939 1828 { Average duty of 50%. | | | 1829 837,385 5,793,651 | | + 1830 1,227,434 6,085,953 | | | 1831 1,806,529 9,938,458 | | '- 1832 864,919 4,880,623 ,- Compromise Tariff, | | ,- 1833 955,768 5,613,010 | gradual reduction | | | 1834 835,352 4,520,781 | of duties from | | | 1835 779,396 4,394,777 | 50% average until | | | 1836 505,400 3,572,599 1833 + in 1842 the average | 1836-39 | + 1837 318,719 2,987,269 | was 20%. But this | | | 1838 448,161 3,603,299 | was levied for | | | 1839 923,151 6,925,170 | Protection not | | | 1840 1,897,501 10,143,615 '- merely for Revenue. | | '- 1841 1,515,817 7,759,646 | | ,- 1842 1,283,602 7,375,356 1842 {Imposed higher duties. | | + 1843 841,474 3,763,073 | | | 1844 1,438,574 6,759,488 | | '- 1845 1,195,230 5,398,593 | | ,- 1846 2,289,476 11,668,669 ,- Imposed lower | | | 1847 4,382,496 26,133,811 | duties and these | | | 1848 2,119,393 13,194,109 1846 | were not for | | | 1849 2,108,013 11,280,582 + Protection purposes, | | | 1850 1,385,448 7,098,570 | they were simply | 1848 | + 1851 2,202,335 10,524,331 '- for Revenue. | | | 1852 2,799,339 11,869,143 | | | 1853 2,920,918 14,783,394 ,- Reduced Tariff | | | 1854 4,022,386 27,701,444 | rates on above | | | 1855 1,204,540 10,896,908 1857 + plan because of | | '- 1856 3,510,626 29,275,148 | redundant | | ,- 1857 3,712,053 25,882,316 '- prosperity. | 1857 | + 1858 3,512,169 19,328,884 | | '- 1859 2,431,824 14,433,591 ,- War Tariff | | | protection restored | | ,- 1860 2,611,596 15,448,507 1860 + as compensation for | 1864 | '- 1861 4,323,756 24,645,849 | Internal Revenue | | '- taxes. | | | | 1862 As above.......... | | 1862 4,882,033 27,534,677 1864 As above.......... | | 1863 4,390,055 28,366,069 | | ,- 1864 3,557,347 25,588,249 | | | 1865 2,641,298 27,507,084 | | | 1866 2,183,050 18,396,686 | | + 1867 1,300,106 12,803,775 | | | 1868 2,076,423 20,887,798 | | | 1869 2,431,873 18,813,865 ,- 10% reduction, but | | | 1870 3,463,333 21,169,593 | coffee and tea put | | '- 1871 3,653,841 24,093,184 1872 + on Free List and | | ,- 1872 2,514,535 17,955,684 | whiskey and tobacco | 1873 | | 1873 2,562,086 19,381,664 '- taxes reduced. | | | 1874 4,094,094 29,258,094 | | | 1875 3,973,128 23,712,440 1875 ,- 10% reduction | | | 1876 3,935,512 24,433,470 '- above repealed. | | + 1877 3,343,665 21,663,947 | | | 1878 3,947,333 25,695,721 | | | 1879 5,629,714 29,567,713 | | | 1880 6,011,419 35,333,197 ,- Duties really raised | | | 1881 7,945,786 45,047,257 | on class of goods | | '- 1882 5,915,686 36,375,055 | most used, but | | ,- 1883 9,205,664 54,824,459 | apparently lowered | 1884 | | 1884 9,152,260 51,139,695 1883 + the tariff, for | | | 1885 10,648,145 52,146,336 | it considerably | | + 1886 8,179,241 38,443,955 | reduced rates on | | | 1887 11,518,449 51,950,082 | many little used | | | 1888 11,963,574 54,777,710 '- classes of goods. | | '- 1889 9,374,803 45,296,485 | | 1890 ,- McKinley Bill | | ,- 1890 12,231,711 57,036,168 '- average of 60% duty. | | '- 1891 11,344,304 54,705,616 | | 1892 15,196,769 75,362,283 ,- Free silver | | | and sudden | | 1893 16,620,339 75,494,347 1893 + ill-distributed | | 1894 16,859,533 69,271,770 -94 | and drastic tariff | | 1895 15,268,892 51,651,928 | reductions and | | 1896 14,620,864 52,025,217 '- insufficient revenue.| | | | 1897 14,569,545 55,914,347 1897 ,- | | 1898 15,349,943 69,263,718 | Tariff | | 1899 18,485,690 73,093,870 | disturbance | | 1900 18,699,194 67,760,886 | to | | 1901 18,650,979 69,459,296 | higher | | 1902 17,759,203 65,661,974 1903 | rates. | | 1903 19,716,203 73,756,404 | | | 1904 16,699,432 68,894,836 + The | | 1905 8,826,335 40,176,136 | propaganda | | 1906 13,919,048 59,106,869 1907 | for | | 1907 15,584,667 62,175,397 | keener | | 1908 13,937,247 64,170,508 | regulation | | 1909 10,521,161 51,157,366 | of | | 1910 9,040,987 47,621,467 | business. | | 1911 10,129,435 49,386,946 '- | | 1912 11,006,487 50,999,797 | | 1913 ,- Tariff reductions to | | 1913 11,394,805 53,171,537 | produce a revenue; | | 1914 12,768,073 62,391,503 | not on a protective | | + basis. The further | | | regulating of | | | business. | | '- The "World War." | | ------------------------------+---------+--------------------------------] The retarding or precipitating influence of a good or bad condition of agriculture upon the advent of a panic is also indicated. The symptoms of approaching panic, generally patent to every one, are wonderful prosperity as indicated by very numerous enterprises and schemes of all sorts, by a rise in the price of all commodities, of land, of houses, etc., etc., by an active request for workmen, a rise in salaries, a lowering of interest, by the gullibility of the public, by a general taste for speculating in order to grow rich at once, by a growing luxury leading to excessive expenditures, a very large amount of discounts and loans and bank notes [Footnote: Our recent banking history has proved rather an exception to this law as far as bank notes are concerned, because of the obviously unusual cause of sudden and enormous calling in of government bonds, the basis of bank-note issue.] and a very small reserve in specie and legal-tender notes and poor and decreasing deposits. On the other hand, the lowest point of depression following a panic is accompanied by the converse of the symptoms just enumerated. Bank balance sheets reflect in cold figures the result of the above influences. Prices being high, and discounts and loans large in proportion to deposits, and having steadily increased for years, danger is near; further, when discounts and loans are not only large in proportion to deposits, having increased steadily for years, and then suddenly fallen off noticeably for a considerable time, only to increase again, danger is imminent. On the other hand, a steady and radical reduction of loans and discounts, following a panic and extending until new enterprises are very scarce, till prices are very low, till there is wide-spread idleness among workmen, a decrease in salaries and in interest rates, when the public is wary and speculation dead, and expenditures are cut down as far as possible, may be taken to mean a rapid and continued resumption of every prosperous business: but if the above process is only partially performed, renewed trouble must result;--in other words, liquidation to really be helpful (to congested business) must be thorough. A study of the first of the following tables, "National Banks of the United States," illustrates the above generalization. It is unnecessary to mention that 1878, 1884, and 1890 have been the last three panic years. But it is very necessary in studying this table, to bear in mind that its figures are taken from the standing of the banks at the first of the year, while the panics generally occurred later in the year: the last two, for instance in the second and fourth quarter, respectively. The third and fourth tables will give more exact figures in this connection. Table Two, dealing with State Banks, is given merely to round out our banking history as told in figures. The increase or diminution of deposits of course reflects a confident and successful, or a panicky and impoverishing, state of general business. TABLE NO. 1.--NATIONAL BANKS OF THE UNITED STATES _________________________________________________________________________ Percentage of Difference (over or under) | between Deposits and Loans and Discounts. | ________________________________________________________________ \ | Difference between Deposits and Loans and Discounts. (Millions) | | _________________________________________________________ \ | | Percentage "Working Capital" exceeds Loans and Discounts.| | | ____________________________________________________ \ | | | Excess of Capital (Surplus, Undivided Profits, | | | | and Deposits) over Loans and Discounts. (Millions) | | | | _____________________________________________ \ | | | | | LOANS | "WORKING CAPITAL." | | | | | | AND |__________________________| | | | | | DISCOUNTS.| Capital. | | | | | |______ \ | / ___________________| | | | | | | | | Undivided Profits | | | | | | | | | and Surplus, etc. | | | | | YEAR|MONTH.| | | / _____________| | | | | | | | | | Deposits | | | | | | | | | | / ______| | | | | | | | | | |TOTAL.| | | | | ========================================================================== | |-----------In Millions.----------| | | | | 1863|Oct. 5| 5.464| 7.188|0.128| 8.497|15.913|10.347|65.4|+3.031|35.6 ovr| 1864|Jan. 4|10.666|14.740|0.432|19.450|34.622|23.956|69.2|+8.784|45.1 " | 1865|Jan. 2| 166 | 135 | 20 | 183 | 338 | 152 |47.7|+ 17 | 9.2 " | 1866|Jan. 1| 500 | 403 | 71 | 522 | 996 | 496 |49.8|+ 22 | 4.2 " | 1867|Jan. 7| 608 | 420 | 86 | 538 | 1064 | 456 |42.8|- 50 | 8.9 und| 1868|Jan. 6| 616 | 420 | 101 | 534 | 1055 | 439 |41.6|- 82 |15.3 " | 1869|Jan. 4| 644 | 419 | 116 | 568 | 1103 | 559 |46.4|- 76 |13.3 " | 1870|Jan.22| 688 | 426 | 124 | 546 | 1096 | 408 |37.2|- 142 |26 " | 1871|Mch.18| 767 | 444 | 140 | 561 | 1145 | 378 |33. |- 206 |36.7 " | 1872|Feb.27| 839 | 464 | 147 | 593 | 1204 | 365 |30.3|- 246 |41.4 " | *1873|Feb.28| 913 | 484 | 163 | 656 | 1303 | 390 |29.9|- 257 |29.1 " | 1874|Feb.27| 897 | 490 | 173 | 595 | 1258 | 361 |28.6|- 302 |52.4 " | 1875|Mch. 1| 956 | 496 | 182 | 647 | 1325 | 369 |27.8|- 309 |47.7 " | 1876|Mch.10| 950 | 504 | 184 | 620 | 1308 | 358 |27.3|- 330 |53.2 " | 1877|Jan.20| 920 | 493 | 167 | 659 | 1319 | 399 |30.2|- 261 |39.6 " | 1878|Mch.15| 854 | 473 | 165 | 602 | 1240 | 386 |31.1|- 252 |41.8 " | 1879|Jan. 1| 823 | 462 | 153 | 643 | 1258 | 435 |34.5|- 180 |27.9 " | 1880|Feb.21| 974 | 454 | 159 | 848 | 1461 | 487 |33.3|- 126 |14.8 " | 1881|Mch.11| 1073 | 458 | 176 | 933 | 1567 | 494 |31.5|- 140 |15 " | 1882|Mch.11| 1182 | 469 | 191 | 1036 | 1696 | 514 |30.3|- 146 |14 " | 1883|Mch.13| 1249 | 490 | 196 | 1004 | 1690 | 441 |26.1|- 245 |24.4 " | *1884|Mch. 7| 1321 | 515 | 209 | 1046 | 1770 | 449 |25.3|- 275 |26.2 " | 1885|Mch.10| 1232 | 524 | 206 | 996 | 1726 | 494 |28.6|- 236 |23.6 " | 1886|Mch. 1| 1367 | 533 | 212 | 1152 | 1897 | 530 |27.9|- 215 |18.6 " | 1887|Mch. 4| 1515 | 555 | 231 | 1224 | 2010 | 495 |24.6|- 291 |23.7 " | 1888|Feb.14| 1584 | 582 | 246 | 1251 | 2079 | 495 |23.7|- 333 |26.6 " | 1889|Feb.26| 1704 | 596 | 269 | 1354 | 2219 | 515 |23.1|- 350 |25.8 " | *1890|Feb.28| 1844 | 626 | 290 | 1479 | 2395 | 551 |22.2|- 365 |24.6 " | 1891|Feb.26| 1927 | 662 | 316 | 1483 | 2461 | 534 |21.7|- 444 |29.8 " | 1892|Mch. 1| 2044 | 679 | 330 | 1702 | 2711 | 667 |24.6|- 342 |20.1 " | 1893|Mch. 6| 2159 | 688 | 348 | 1751 | 2787 | 627 |22.6|- 408 |23.3 " | 1894|Feb.28| 1872 | 678 | 332 | 1586 | 2596 | 724 |27.9|- 286 |18. " | 1895|Mch. 5| 1965 | 662 | 329 | 1667 | 2658 | 693 |26.2|- 298 |17.8 " | 1896|Feb.28| 1966 | 653 | 334 | 1648 | 2635 | 669 |25.4|- 318 |19.2 " | 1897|Mch. 9| 1898 | 642 | 333 | 1669 | 2644 | 746 |29. |- 229 |13.6 " | 1898|Feb.18| 2152 | 628 | 334 | 1982 | 2944 | 792 |27. |- 170 | 8.5 " | 1899|Feb. 4| 2299 | 608 | 332 | 2232 | 3172 | 873 |27.6|- 67 | 3. " | 1900|Feb.13| 2481 | 613 | 363 | 2481 | 3457 | 976 |28.3|+ | 0. | 1901|Feb. 5| 2814 | 634 | 398 | 2753 | 3785 | 971 |25.7|- 61 | 2.2 " | 1902|Feb.25| 3128 | 667 | 448 | 2982 | 4097 | 969 |23.7|- 146 | 4.9 " | 1903|Feb. 6| 3350 | 731 | 516 | 3159 | 4406 | 1056 |24. |- 191 | 5.6 " | 1904|Jan.22| 3469 | 765 | 562 | 3300 | 4627 | 1158 |25.1|- 169 | 5.1 " | 1905|Jan.11| 3728 | 776 | 589 | 3612 | 4977 | 1279 |25.1|- 116 | 3.2 " | 1906|Jan.29| 4071 | 814 | 635 | 4088 | 5537 | 1466 |26.5|+ 17 | .41 ovr| 1907|Jan.26| 4463 | 860 | 689 | 4115 | 5664 | 1201 |21.3|- 348 | 8.4 und| 1908|Feb.14| 4422 | 905 | 742 | 4105 | 5752 | 1330 |23.2|- 317 | 7.7 " | 1909|Feb. 5| 4840 | 927 | 772 | 4699 | 6398 | 1558 |24.4|- 141 | 2.9 " | 1910|Jan.31| 5229 | 960 | 818 | 5190 | 6968 | 1739 |25. |- 39 | .73 " | 1911|Jan. 7| 5402 | 1007 | 884 | 5113 | 7004 | 1602 |22.9|- 289 | 5.6 " | 1912|Feb.20| 5810 | 1031 | 927 | 5630 | 7588 | 1778 |23.5|- 180 | 3.1 " | 1913|Feb. 4| 6125 | 1048 | 958 | 5985 | 7991 | 1866 |23.4|- 140 | 2.3 " | 1914|Jan.13| 6175 | 1057 | 991 | 6072 | 8120 | 1945 |23.9|- 103 | 1.7 " | 1915|Mch. 4| 6499 | 1066 |1012 | 7148 | 9226 | 2727 |29.6|+ 649 | 9.9 ovr| ----+------+------+------+-----+------+------+------+----+------+--------+ NOTE:--These Figures are for the standing at the first part of the year as indicated. *Panic Years. TABLE NO. 2. UNITED STATES TABLE OF BALANCE SHEETS. MILLIONS OF DOLLARS. ------+-----------+---------+----------+-----------+----------+---------+ | | SPECIE | DISCOUNTS| INDIVIDUAL| NUMBER | | YEAR |CIRCULATION| ON | AND | DEPOSITS | OF | CAPITAL | | | HAND | LOANS | | BANKS | | ------+-----------+---------+----------+-----------+----------+---------+ 1811 | 28 | 15 | | | 89 | 52 | 1815 *| 45 | 17 | | | 208 | 88 | 1816 *| 68 | 19 | | | 246 | 89 | 1819 | 35 | 9 | 73 | | | 72 | 1820 *| 44 | 19 | | 35 | 308 | 137 | 1830 | 61 | 22 | 200 | 55 | 330 | 145 | 1834 | 94 | | | | | | 1835 | 103 | 43 | 324 | 75 | 506 | 200 | 1836 | 140 | 40 | 365 | 83 | 704 | 231 | 1837 | 149 | 37 | 457 | 115 | 713 | 251 | | | | 525 | 127 | 788 | 290 | 1838 | 116 | 35 | 485 | 84 | 829 | 317 | 1839_*| 135 | 45 | 492 | 90 | 840 | 327 | 1840 | 106 | 33 | 462 | 75 | 901 | 358 | 1841 | 107 | 34 | 386 | 64 | 784 | 313 | 1842 | 83 | 28 | 323 | 62 | 692 | 260 | 1843 | 58 | 33 | 254 | 56 | 691 | 228 | 1844 | 75 | 49 | 264 | 84 | 696 | 210 | 1845 | 89 | 44 | 288 | 88 | 707 | 206 | 1846 | 105 | 42 | 312 | 96 | 707 | 196 | 1847 | 105 | 35 | 310 | 91 | 715 | 203 | 1848_*| 128 | 46 | 344 | 103 | 751 | 204 | 1849 | 114 | 43 | 332 | 91 | 782 | 207 | 1850 | 131 | 45 | 364 | 109 | 824 | 217 | 1851 | 155 | 48 | 413 | 128 | 879 | 227 | 1854 | 204 | 59 | 557 | 188 | 1208 | 301 | 1855 | 186 | 53 | 576 | 190 | 1307 | 332 | 1856 | 195 | 59 | 634 | 212 | 1398 | 343 | 1857_*| 214 | 58 | 684 | 230 | 1416 | 370 | 1858 | 155 | 74 | 583 | 185 | 1422 | 394 | 1859 | 193 | 104 | 657 | 259 | 1476 | 401 | 1860 | 207 | 83 | 691 | 253 | 1562 | 421 | 1861 | 202 | 87 | 696 | 257 | 1601 | 429 | 1862 | 183 | 102 | 646 | 296 | 1492 | 418 | 1863 *| 238 | 101 | 648 | 393 | 1466 | 405 | ------+-----------+---------+----------+-----------+----------+---------+ *PANIC YEARS TABLE NO. 3. UNITED STATES TABLE OF BALANCE SHEETS OF THE NATIONAL BANKS--QUARTERLY STATEMENT. MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| | | | | | | | | | 1865 | 66| 4| 72| 166| 183|1500 |393 |20 | 2nd Q| | | | | | | | | 3rd "| |18 |189 | | | | | | 4th "|171 | | |487 | | | | | 1866 | | | | |500 | | | | 2nd "| 213|19 |187 |500 | | | | | 3rd "| | | | | 522|1644 |415 |71 | 4th "|280 | | | | | | | | 1867 | | |205 |603 |564 | | | | 2nd "| | 9| | |558 | | | | 3rd "| | | | | 512|1642 |420 |86 | 4th "|293 | | 92| | | | | | 1868 | |20 |114 |609 | 532|1643 |420 |101 | 2nd "| | | 84| | | | | | 3rd "| | | | | | | | | 4th "|295 | | | | | | | | 1869 | |29 | | | |1617 |426 |116 | 2nd "| | | |657 |580 | | | | 3rd "| | | 80| | | | | | 4th "| |48 | | | | | | | 1870 | | | |686 |574 | | | | 2nd "| | | |688 | 511|1648 |430 |124 | 3rd "| | 18| 94 79| |546 | | | | 4th "|296 | | | | 501| | | | 1871 | | | |725 | | | | | 2nd "| | |122 | | | | | | 3rd "| | 13| 93| | |1790 |458 |140 | 4th "|318 | | 97 | | | | | | 1872 | | | |831 |611 | | | | 2nd "| | |122 | | | | | | 3rd "| | 10| | | |1940 |479 |147 | 4th "|336 | | | |620 | | | | 1873 *| | | | | | | | | 2nd "| | 16|10 97|885 |656 | | | | 3rd "|339 | 19| | |622 616|1976 |491 |153 | 4th "|341 |33 | 92|944 | | | | | 1874 | | |103 | | | | | | 2nd "| | 21| | 836| 540| | | | 3rd "| | | 80|897 | 595|2027 |493 |173 | 4th "| 331| | |955 |682 | | | | 1875 | | | | |695 | | | | 2nd "| | 8| |984 | |2087 |504 |182 | 3rd "| | | | | 618| | | | 4th "| 314| | 70| | | | | | ------+-------+-------+-------+-------+---------+-------+-------+-------+ *PANIC YEARS MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| | | | | | | | | | 1876 | | | | | |2089 |499 |184 | 2nd Q| | 21| | | 612| | | | 3rd "| | | | | | | | | 4th "| 291|32 |90 | | | | | | 1877 | |49 | 66| 929| | | | | 2nd "| 290| | | |659 |2080 |479 | | 3rd "| | 21| | | | | |167 | 4th "| | | 66| | | | | | 1878 | |54 | | | | | | | 2nd "| | 29| | 881| 604| | | | 3rd "| | | | |625 |2053 |466 |165 | 4th "|303 | | | | | | | | 1879 | |41 | 54| 826| 588| | | | 2nd "| | | | 814| |2048 |454 |153 | 3rd "| | | | | | | | | 4th "|321 |79 | 54|933 |765 | | | | 1880 | | | | | | | | | 2nd "| |86 | | | | | | | 3rd "| |109 |64 |974 | |2090 |457 |159 | 4th "| 317| 105| |1040 | | | | | 1881 | | | 52| |1000 | | | | 2nd "| 298|128 | | | 932|2132 |463 | | 3rd "| | | | | | | |176 | 4th "|323 | | | | | | | | 1882 | | 109| |1100 |1100 1000|2268 |483 | | 2nd "| |112 | | | | | | | 3rd "| | 102| |1200 |1122 | | |191 | 4th "|315 | |68 | | | | | | 1883 | | | | | | | | | 2nd "| | 97| | | | | | | 3rd "| 304|115 | | | | | | | 4th "| | | | | 1000|2501 |509 |196 | 1884 *| | |80 |1300 |1100 | | | | 2nd "| |109 | 75| | |2664 |524 | | 3rd "| 289|128 |77 |1306 | | | |209 | 4th "| |167 | | 1200|1000 975| | | | 1885 | | | | | | | | | 2nd "| |177 |79 | | | | | | 3rd "| | | 69| 1200| |2714 |527 |206 | 4th "| 268| | | |1100 | | | | 1886 | |171 | 62| | | | | | 2nd "| | 149| |1470 |1152 |2852 |548 | | 3rd "| | | | |1172 | | |212 | 4th "| 202| | | | | | | | 1887 | |171 |79 | | |3049 |578 | | 2nd "| | | 73|1587 |1285 | | |231 | 3rd "| | | | | | | | | 4th "| 164| 159| | | | | | | 1888 | | 172|83 | | | | | | 2nd "| |178 | | | | | | | 3rd "| | | | | |3120 |588 | | 4th "| 151|182 | | | | | |246 | 1889 | | | 81|1684 |1350 | | | | 2nd "| | |97 | | |3170 |596 |269 | 3rd "| | | | | | | | | 4th "| 126| 164| | | | | | | 1890 *| |171 | 84|1811 |1436 | | | | 2nd "| | | | | |3383 |626 |290 | 3rd "| |178 | | | | | | | 4th "| 123|190 | | | | | | | 1891 | | | 82|1932 |1521 | | | | 2nd "| | | | | 1483|3601 |662 |316 | 3rd "| 123|199 | | |1575 | | | | 4th "| | |100 |1962 |1525 | | | | ------+-------+-------+-------+-------+---------+-------+-------+-------+ *PANIC YEARS MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| 1892 | | | | | | | | | 1st Q|141 |230 |99 |2044 |1702 |3711 |678 |330 | 2nd "| |239 | |2171 |1769 | | | | 3rd "| | |113 | | | | | | 4th "|145 | 209| | | |3784 |689 |353 | 1893 | | | | | | | | | 1st "| 149| | 90|2161 |1751 |3830 |688 |352 | 2nd "| | 186| | | | | | | 3rd "| 182| | | 1843| | | | | 4th "| |251 |131 | | 1451| | | | 1894 | | | | | | | | | 1st "|174 |259 |146 | 1872| |3777 |678 | | 2nd "| | | | | | | | | 3rd "| 189| | |2007 |1728 | | | | 4th "| | 218| 119| | | | |339 | 1895 | | | | | | | | | 1st "| 169|220 | | 1965| |3728 |662 | | 2nd "| | | | | | | | | 3rd "| | | | |1736 | | | | 4th "|185 | 196| 93|2059 | | | |340 | 1896 | | | | | | | | | 1st "| 187| 196| |1982 |1687 |3699 |653 | | 2nd "| | |118 | | | | | | 3rd "| | | | | | | | | 4th "|210 | | 110| 1893| 1597| | |342 | 1897 | | | | | | | | | 1st "|202 | 233| | | 1669|3634 |642 | | 2nd "| | |126 | | | | | | 3rd "| | | | | | | | | 4th "| 193|252 | 107|2100 |1916 | | |341 | 1898 | | | | | | | | | 1st "| 184| 271|120 | | |3594 |628 | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | | 110|2214 |2225 | | |340 | 1899 | | | | | | | | | 1st "| |371 |116 | | | |608 | | 2nd "| 199| | | | | | | | 3rd "| | | | | | | | | 4th "| | 314| 101|2496 |2522 |3602 | |363 | 1900 | | | | | | | | | 1st "| 204| 339| 122| | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | |145 |2706 |2623 |3942 |632 |403 | 1901 | | | | | | | | | 1st "| 309|399 | | | | | | | 2nd "| | | | | | | | | 3rd "| | |164 | | | | | | 4th "| | 369| 151|3038 |2964 |4291 |665 |448 | 1902 | | | | | | | | | 1st "| 309| | | | | | | | 2nd "| 309| |164 | | | | | | 3rd "| | | | | | | | | 4th "| | 366| 141|3303 |3209 |4666 |714 |516 | 1903 | | | | | | | | | 1st "| 335| | | | | | | | 2nd "| | |163 | |3200 | | | | 3rd "| | | | | | | | | 4th "| | 378| 142|3481 | |5118 |758 |564 | ------+-------+-------+-------+-------+---------+-------+-------+-------+ MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| 1904 | | | | | | | | | 1st Q| 380| 453| | | | | | | 2nd "| | | | | | | | | 3rd "| | |169 | | | | | | 4th "| |504 | |3772 |3707 |5477 |776 |594 | 1905 | | | | | | | | | 1st "| 424| |178 | | | | | | 2nd "| | | 157| | | | | | 3rd "| |495 | | | | | | | 4th "| | 460| |4016 |3889 |5833 |808 |632 | 1906 | | | | | | | | | 1st "| 498|492 |175 | | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | 459| 152|4366 |4289 |6199 |847 |687 | 1907 | | | | | | | | | 1st "| | |173 | | | | | | 2nd "| 543| | | | | | | | 3rd "| | | | | | | | | 4th "| |531 | 151|4678 |4819 |6625 |901 |749 | 1908 | | | | | | | | | 1st "| | | | | | | | | 2nd "| | |192 | | | | | | 3rd "| | | | | | | | | 4th "| 599|680 | |4840 |4720 |6865 |921 |779 | 1909 | | | | | | | | | 1st "| | |198 | | | | | | 2nd "| 615| | | | | | | | 3rd "| | | | | | | | | 4th "| |694 | 176|5148 |5120 |7006 |953 |825 | 1910 | | | | | | | | | 1st "| 667| | | | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| |672 | 169|5467 |5304 |7204 |1004 |894 | 1911 | | | | | | | | | 1st "| 680| | 168| | | | | | 2nd "| | | | | | | | | 3rd "| | |185 | | | | | | 4th "| |761 | |5663 |5536 |7328 |1026 |930 | 1912 | | | | | | | | | 1st "| 704| | | | | | | | 2nd "| |769 |188 | | | | | | 3rd "| | | | | | | | | 4th "| | | |6058 |5944 |7420 |1046 |969 | 1913 | | | | | | | | | 1st "| 717|749 | | | | | | | 2nd "| | |189 | | | | | | 3rd "| | | | | | | | | 4th "| | | |6260 |6051 |7509 |1059 |1007 | 1914 | | | | | | | | | 1st "| 720| |201 | | | | | | 2nd "| |792 | |6357 |6111 |7493 |1057 |1003 | 3rd "|1018 | 746| | | | | | | 4th "| 848| 534| 128| | |7581 |1065 |1007 | 1915 | | | | | | | | | 1st "| 746| 591| 127|6499 |6348 |7599 |1066 |1012 | ------+-------+-------+-------+-------+---------+-------+-------+-------+ The adage "buy cheap and sell dear," or its practical equivalent--so scary and imitative are investors--_Buy during the last of a selling movement and sell during the last of a buying movement_, resolves itself, we venture to repeat, into: _Buy when the decline caused by a panic has produced such liquidation that discounts and loans, after steady and long-continued diminution, either become stationary for a period or else increase progressively coincident with a steady increase in available funds; and sell for converse reasons_. These conclusions are also reached by our author through analyses of the Financial History of England, France, Prussia, Austria, etc. These I omit as unnecessarily wearisome to the reader since I give that of our own country. However, I will here quote the following: "What must be noted is the reiteration and sequence of the same points _(faits)_ under varying circumstances, at all times, in all countries and under all governments," and also this table showing all the panics and their practical coincidence in the past eighty-five years, in France, England, and the United States. France England United States 1804 1803 1810 1810 1813-14 1815 1814 1818 1818 1818 1825 1825 1826 1830 1830 1829-31 1836-39 1836-39 1837-39 1847 1847 1848 1857 1857 1857 1864 1864-66 1864 1873 1873 1882 1882 1884 (a 1889-90 (a 1890-91 1890-91 p 1894 p 1894 1893-94 p 1897 p 1897 1897 r 1903 r 19O3 1903 o 1907 o 1907 1907 x 1913 x 1913 1913 i i m m a a t t e e l l y) y) Truly these thirteen panics in the three countries have been practically simultaneous and one common cause must have originated them. The only cause common to all was overtrading to such an extent that neither credit nor money were to be had, so that a forced liquidation or panic inevitably ensued. The above table effectually does away with the theory that new tariffs are directly productive of panics. For most certainly new tariffs did not occur in England, France, and the United States just before or during all the panic years enumerated, and yet, practically simultaneously in free-trade England, high-protection France, and sometimes low-tariff, sometimes high-protection United States have panics occurred for eighty years. But, as I have shown in a note attached to this Introduction, a new tariff or a general change of duties is apt to precipitate a panic, on account of the unsettling of business, and that the consequent shaking of credit adds its quota to the forces finally culminating in a panic cannot be doubted. As a matter of history with us, substantially new tariffs have always happened to be the immediate forerunners of a panic, and this I believe to be true in the case of other countries. Why is this? Is it not because the people instinctively turn to tinkering at and changing their chief tax--the tariff--whenever they as a whole need financial relief; and have we not shown that such relief is needed almost every ten years, when the overtrading, inseparable from the development of all thriving communities has made the call for credit impossible to grant? A new tariff may defer, or hurry, or, occurring simultaneously, will intensify a panic, but it may not hope to avert one when due: yet if its changes be very gradual, fixed and long predicted, and of a nature to bring about or confirm a judicious tariff for revenue only, they will materially help to put business on so firm and sound a basis that recovery from the inevitable, and approximately decennial panics, will be wonderfully expedited. Thus a new tariff is a quite accurate forewarning of a panic, and is also to no inconsiderable extent a contributory cause. (See foot-note on page 5, _seq., Interrelations of Panics, Tariffs, and the Condition of Agriculture_, etc.; and especially what is said of the panic of 1848, on page 10.) M. Juglar has fully analyzed the three phases of our business life into Prosperity, Panic, and Liquidation, which three constitute themselves into the business cycle, that for forty years past (that is, since the present Bank of England Act, and practically since that of the Law governing the Bank of France, both of which then increased the required specie reserve) has been of about ten years. These ten years may be apportioned roughly as follows: say, Prosperity for five to seven years; Panic a few months to a few years, [Footnote: The panic after 1873 is the only one I know extending to anything like the length it attained. This may be ascribed to the immense development and consequent speculation, and to the inflation of the currency coming after the period about the Civil War.] and Liquidation about a few years. I have already pointed out the signs of prosperity, of panic, and of liquidation, but in view of existing conditions perhaps it may be well to restate here the quite familiar fact that the completion of liquidation that precedes the beginning of another period of prosperity is characterized by lack of business, steady prices, and a marked growth in available banking funds. [The various tables spread through this pamphlet are fully explained by their headings and the text.] In conclusion I wish to express my thanks for the courtesy M. Juglar has extended me, and to state my appreciation of the motives, painstaking patience, and undoubted originality he has shown in explaining and executing so faithfully and with such genius a most laborious and yet spirited work. It is only justice that such an achievement should have been awarded a prize by the French Institute (Academy of Moral and Political Sciences) and have gained for M. Juglar the Vice-Presidency of the "Society for the Study of Political Economy." DeCourcy W. Thom. Wakefield Manor. A HISTORY OF PANICS IN THE UNITED STATES CONSIDERED WITH SPECIAL REFERENCE TO AMERICAN BANKS. The English Colonies soon after their settlement issued paper money. The first was Massachusetts, which issued it even before her independence, in 1690, to obtain funds in order to besiege Quebec. This example was followed to such an extent that it caused a marked speculation in favor of hard money, varying according to the quantity of notes in circulation. In 1745, after a successful campaign against Louisburg and the taking of that fortress, two million pounds of paper money were issued, which step decreased its value. When liquidation occurred these paper pounds were not worth 10 per cent. of their face value. The War of Independence obliged Congress to issue three million of paper dollars. This amount increased to $160,000,000, so that Congress declared, in 1779, that it would not issue more than $200,000,000. Notwithstanding this guaranty, notwithstanding the forced and legal rating conferred by this enactment, notwithstanding the war spirit, it depreciated; and in 1779 it was necessary to decree that, disregarding its normal value, it should be taken at its face. In 1780 it was no longer taken for customs dues. In 1781 it had no rating and was not even taken at 1 per cent. of its face value. Between 1776 and 1780 the issue of paper money increased to $359,000,000. BANK OF NORTH AMERICA.--In 1781 Mr. Morris, Treasurer, persuaded Congress to form a bank (the Bank of North America) with a capital of $10,000,000, of which $400,000 should be turned over to help the national finances. The capital was too insignificant and the course of politics too unpropitious to accomplish this end. However, the example encouraged the States to take up their paper money. Upon the adoption of the United States Constitution the issuing of paper money ceased, and gold and silver were the only means of circulation. Thence arose great embarrassment for the Bank of North America, which, hampered by its loans to the Government, increased its note circulation to an enormous proportion. The ebb of paper through every channel finally aroused the public fears, and people refused the notes. Every one struggled to obtain metallic money, hence it became impossible to borrow, and bankruptcy followed. Such was the, excitement that the Philadelphians as a body demanded and obtained from the Assembly of Representatives a withdrawal of the charter; but the Bank, relying upon Congress, continued until March 17, 1787; succeeded even in extending its charter fourteen years; and later obtained a second extension, limited, however, to Pennsylvania. The difficulty experienced in the manufacture of money led Mr. Hamilton, Secretary of the Treasury, to propose to Congress in 1790 the founding of a National Bank. After some doubts as to the power of Congress, it was authorized. It began operations in 1794, under the title of "Bank of the United States," with a capital of ten millions, eight millions being subscribed by private individuals, and two millions by the Government. Two millions of the first sum were to be paid in metallic money, and six millions in 6 per cent. State bonds; the charter was to run till March 4, 1811. It seemed to be a good thing for the public and the stockholders, for during twenty-one years it paid an average of 8 per cent. dividends. In 1819 the question of renewing its privileges came up, the situation being as follows: ASSETS. LIABILITIES. 6 per cent. Paper $ 2,230,000 Capital Stock $10,000,000 Loans and Discounts 15,000,000 Deposits 8,500,000 Cash 10,000,000 Circulation 4,500,000 The profits from the Bank, the prosperous state of the country, and the increase of productions led people to think that the issuing of paper money caused it all; seduced by this alluring theory the "Farmers' Bank" was founded in Lancaster in 1810, with a capital of $300,000. Others followed; such was the mania that the Pennsylvania Legislature was forced to forbid every corporation to issue notes. Despite this preventive message the excitement rose so high that companies, formed to build harbors and canals, also put notes into circulation; in this way the law was eluded. From 1782 to 1812 the capital of the banks rose to $77,258,000; upon the 1st of January, 1811, there were already eighty-eight banks in existence. Until the declaration of war (June, 1812), the issuing of notes was always made with the intention of redeeming them, but the over-issue soon became general, and depreciation followed. The periodical demands for dollar-pieces for the East Indian and Chinese trade were warnings of the over-speculations on the part of those companies whose members were not personally liable. Traders, who through their notes or their deposits had a right to credit with the banks, did not hesitate to ask for $100,000, whereas, formerly they would have hesitated to ask for $1,000. The war put a stop to the exportation of precious metals, which, in the ordinary course of things, limits the issue and circulation of paper. The upshot of this was to redouble the note issue, each one believing its only duty was to get the largest amount into circulation. Loans, and enormous sums of money, were distributed above all reason among individuals and among the States. The increase of dividends and the ease of obtaining them extended the spirit of speculation in certain districts, and especially among those who owned land. The remarkable results shown by the Bank of Lancaster, the "Farmers' Bank," which, by means of an extraordinary issue of notes, had yielded as much as 12 per cent. and piled up in capital twice the amount of its stock, caused it to be no longer thought of as a bank intended to assist trade with available capital, but as a mint destined to coin money for all owning nothing at all. Led by this error, laborers, shopkeepers, manufacturers, and merchants betook themselves to quitting active occupations to indulge in golden dreams. Fear alone restrained some stockholders connected with the non-authorized companies, and led them to seek for a legal incorporation. In Pennsylvania, during the session of 1812, an act was passed authorizing twenty-five banks, with a capital of $9,000,000. The Executive nevertheless refused to ratify it, and returned it with some very well-deserved comments. In a second debate the first resolution was rescinded by a vote of 40 to 38. In the following session the proposition was renewed with more vigor, and forty-one banks with a capital of $17,000,000 were authorized by a large majority; the representations of the Executive proved useless, and they immediately entered upon their duties with an insufficient capital. To discount their own stock was a soon-discovered method. They thus increased the amount of notes, which depreciated in comparison with hard money, and dissipated on all hands the hope of exchanging with it. In the absence of a demand from abroad for hard money, the demand came from within our own borders. The laws of New England, which were very severe upon the banks, had placed a penalty of 12 per cent. upon the annual interest payments of those persons who did not pay their notes. The natural result was a difference of value between New England and Pennsylvania, which measured the depreciation caused by paper in the latter district. As remittances on New England could only be made in hard money, the equilibrium of the banks was disturbed; they were not able to respond to the demands for redemption, and a suspension of payments by the banks of the United States, except those of New England, took place in August and September, 1814. THE PANIC OF 1814.--An agreement took place at Philadelphia between the bank and the chief houses allied with it to resume payments at the end of the war. Unhappily, the public did not demand the accomplishment of this promise at the time fixed, and the banks, led on by the thirst of gain, issued an unprecedented amount of bank notes. The general approbation brought about a still further increase in their number: the bank notes of the Bank of Philadelphia were at a discount of 80 per cent.; the others at 75 per cent, and 50 per cent., and metallic money disappeared to such an extent that paper had to be used to replace copper coin. The depreciation of fiat money raised the price of everything; this superficial occurrence was looked upon as a real increase, and gave rise to all the consequences that a general inflation of value could produce. This mistake on the subject of artificial wealth made landed proprietors desire unusual proceeds. The villager, deceived by a demand surpassing his ordinary profits, extended his credit and filled his stores with the highest-priced goods; and importations, having no other proportion to the real needs than the wishes of the retailers, soon glutted the market. Every one wished to speculate, and every one eagerly ran up debts. Such was the abundance of paper money that the banks were alarmed lest they could not always find an investment for what they manufactured. It thus happened that it was proposed to lend money on collateral, while the greatest efforts to bring about its redemption were being made. This state of things lasted till the end of 1815, when it was recognized that the paper circulation had not enriched the community, but that metallic money had enhanced. The intelligent portion of the nation comprehended that even where the estimated value of property had been highest, the true welfare of society had diminished. They learned too late the baleful effects of this circulation of paper money; the greater part of the States and cities had nothing to show for it. A new class of speculators then appeared, trying to pass these worthless bank notes: forgers of paper money became more active. In the midst of this disorder a National Bank, which should afford a solid basis for the paper circulation, was considered. Influenced by these difficulties, and in hopes of remedying them, the Secretary of the Treasury proposed to Congress, in September, 1814, a few days after suspension, to found a national bank, in order to re-establish metallic circulation, an end which the State banks had failed to accomplish. This project, which lent the national credit to the capital of the bank, was antagonized by a good many members who exaggerated its consequences; at the same time that they took more or less important sums in bank notes, or borrowed from the banks upon the nation's guaranty, in order to re-establish the public credit and to obtain means for prolonging the war. CAUSES OF THE PANIC OF 18l4.--The bank directors laid the blame upon the blockade of the ports, which, interfering with, indeed even preventing, the export of products, occasioned the outflow of the metals. The national loans to carry on the war also had their influence. From the beginning of hostilities until 1814 they increased to $52,848,000, distributed as follows: Eastern States, $13,920,000; New York, Pennsylvania, Maryland, and District of Columbia, $27,792,000; Southern and Western States, $11,186,000. Nearly all of this was advanced by the cities of New York, Philadelphia, and Baltimore. The banks made advances beyond their resources, augmenting their circulation in consequence. [Footnote: The cause of the crisis, according to the Committee of the Senate, was the abuse of the banking system; the great number and bad administration of the banks; and their speculations designed to advance their stock, and to distribute usurious dividends. When the Bank of the United States saw the danger that menaced it, it reduced its discounts and circulation. The circulation of the country banks fell from $5,000,000 to $1,300,000, and the total circulation from $10,000,000 to $3,000,000. Increase and Decrease Circulation in Pennsylvania. City Banks. Country. Total. 1814 ........ $3,300,000 $1,900,000 $5,200,000 1815 ........ 4,800,000 5,300,000 10,100,000 1816 ........ 3,400,000 4,700,000 8,100,000 1817 ........ 2,300,000 3,800,000 6,100,000 1818 ........ 1,900,000 3,000,000 4,900,000 1819 ........ 1,600,000 1,300,000 2,900,000 Number of Banks. Capital. Circulation. Specie. 1811 ... 88 $52,000 00 $28,000 00 $15,000 00 1815 ... 208 82,000 00 45,000 00 17,000 00 1816 ... 246 89,000 00 68,000 00 19,000 00] From the 1st of January, 1811, to the 1st of January, 1815, one hundred and twenty new banks were registered, thus raising their capital to more than $80,000,000; this increase took place during a war that entirely did away with foreign trade. The expenses of the war declared against Great Britain in June, 1812, were defrayed by notes issued by the banks of the various States. Six million dollars were obtained from them in 1812, in the following year, 1813, twenty million, and then fifteen million in exchange for twelve million of Federal stock, issued at the price of $125 face for every $100 paid in. Until January 1, 1814, in order to avoid taxation, Treasury bonds were issued in addition to what was contributed by the banks. In 1812 ..................... $3,000,000 " 1813 ..................... 6,000,000 " 1814 ..................... 8,000,000 Up to this time no account of their administration had been rendered, but now Mr. Bland, a Maryland representative, called attention to the fact that all their operations seemed veiled from the public. Unfortunately we have been unable to find a statement of the discounts. The suspension of specie payments differed with the corresponding state of affairs in England, inasmuch as it was not general, and, since each State was independent, the depreciation varied. It became very difficult to circulate paper, and the Government was again obliged to issue Treasury bonds, bearing 6 per cent. interest. In February, 1815, peace having been proclaimed, it was hoped that the banks would resume specie payments. There was no sign of it. The re-establishment of peace merely made some of the legal regulations seem less pressing upon the banks. In the middle of May, 1815, the first English vessel arrived, and business became very active again. In May, June, and July it might have been said "This is the golden age of commerce." Discounts of unsecured paper were easy, and it was not an unusual occurrence to have notes of $60,000 offered. The banks had authorized a suspension of specie payment in order to force the issue of bank notes, and to stimulate trade, although Mr. Carey pretends that no over-trading had taken place. He blames them for having restricted their loans in October and November, thus producing a decline in prices; and the necessity of cutting down credits came about, according to him, from the speculations in National securities. Six Philadelphia banks with a capital of $10,000,000 held $3,000,000 in Government stock. On the 15th of February, 1815, when scarcely through with all this confusion, an effort was made to re-establish for the second time a United States Bank. It was authorized on the 10th of April, 1816, the Act permitting the formation of a Company, with a capital of $35,000,000, divided into 350,000 shares of $100 each, of which the Government took 70,000 shares and the public 180,000 shares. These last were payable in $7,000,000 of gold or silver, of the United States of North America, and $21,000,000 in like money, or, in the funded debt of the United States either in the 6 per cent. Consolidated Debt at par, the 3 per cent. at 65, or the 7 per cent. at 106-1/2 per cent.; upon subscription $30 was payable, of which at least $5 had to be in gold or silver; in six months after, $35, of which $10 had to be in metal, and twelve months after the same amount was to be paid in the same manner. The directors were authorized to sell shares every year to the amount of $2,000,000, after having offered them at the current price to the Secretary of the Treasury for fourteen days. The Government reserved the right to redeem the debt at the subscription price. The charter, made out in the name of the president, ran until March 3, 1836. There were twenty-five directors of the concern, five of whom were appointed by the President of the United States with the consent of the Senate, and not more than three by the State; the stockholders chose the others. The corporation could not accept any inconvertible property, or any farm-mortgage, unless for its immediate use, either as security for an existing debt, or to wipe out a credit. It had no right to contract any debt greater than $35,000,000, more than its deposits, unless by special act; the directors were made responsible for every violation, and could be sued by each creditor. They could only deal in gold and silver exchange, and not in other country securities which could not be realized upon at once. The Bank could purchase no public debt nor exceed 6 per cent. interest on its discounts and loans. It could lend no more than $500,000, to the United States, $50,000, to each State, and nothing to foreigners. It could give no bill of exchange greater than $5,000; bank notes less than $100 were to be payable on demand, and greater sums were not allowed to run longer than sixty days. Two settlements were to take place every year. Branches were to be established upon demand of legislative authorities, wherever 2,000 shares of stock were subscribed for. There were to be no bank notes less than $5.00, and every bill of exchange, or bill payable at sight, was to be receivable by the public Treasury. The duty of the Bank was especially to pay out and receive the public money, without profit or loss. It was to serve as agent for every State contracting a loan; the cash belonging to the United States was to be deposited at the Bank whenever the Secretary of the Treasury did not dispose of it otherwise, in which case he was to notify Congress. Neither the Directory nor Congress could suspend payment of the bank notes, discounts, or deposits: such refusal carried a right to 12 per cent. interest. In exchange for this charter the Bank was to give $1,000,000, to the Government in three instalments. The charter was exclusive during its life, excepting in the District of Columbia, where banks might be authorized, provided their capital did not exceed $6,000,000. The Bank did not open at once, for it sent an agent to Europe to look up bullion. Between July, 1817, and December, 1818, it thus procured $7,311,750, at an expense of $525,000. On the 20th of February, 1817, it was decided that, excepting gold and silver and Treasury notes, no notes would be received at the Government Treasuries, save such as were payable to the banks in hard money. Notwithstanding this discrimination the Banks decided not to resume specie payment until the 1st of July, 1817. In the meantime an immense speculation had taken place in its stock, which was compromising for the Bank and for the credit of its Directory, because several of its Directors appointed by the Government took part in it. For example, it became customary to loan a very large amount of money on the Bank's own stock, as much as $125 on each share of $100. Thus more than the purchase price was loaned upon them: in furnishing the means of paying for them by credit, speculation was aroused, and on the 1st of September, 1817, the market price advanced to $156.50, at which rate it continued until December, 1818, when it fell to $110. At last the public perceived that the excessive issue depreciated the bank-note circulation, and that a greater shrinkage was imminent. An office for the payment of bank dividends was opened in Europe, so as to increase the price of the stock and the speculation in it through this facility, rather than for the permanent benefit of the institution. Let us note here the short-sightedness of the Directors, who thought they would stem the depreciation of their means of payment by persuading all the banks to declare what was not true, that the bank notes were worth par. On the 21st of February, still aiming at the same end, they announced the resumption of specie payment. The State Banks, remembering the embarrassment of the public, which for two years had paid an exchange of 6 per cent., persuaded themselves that few people would dare to ask for large sums. They hoped to come to an understanding and to cause the acceptance of a promise to pay upon a designated day. We say "a promise to pay," for this was not a serious proposition, inasmuch as foreign money and that of the United States had enjoyed a higher market value for a long time. The depreciation of the bank notes might result just as well, from the fear of the public's enforcing its rights, as from a refusal of the banks to make good their promises. This understanding was not, properly speaking, a resumption of specie payment, but rather a kind of humbug. In January the banks of New York, Philadelphia, Baltimore, Richmond, and Norfolk decided to resume specie payment on the 20th of February, provided the balance showing against them was not demanded by the Bank of the United States before discounts became $2,000,000, at New York, as much in Philadelphia, and $1,500,000 in Baltimore; and these conditions were accepted. The discount line of the Bank of the United States was thus greatly increased; it grew from $3,000,000 on the 27th of February to $20,000,000 on the 30th of April; to $25,000,000 on July 29th, and to $33,000,000 on the 31st of October. The Bank imported much metallic money, redeemed its notes and those of its branches without distinction; the notes of its Eastern and Southern branches were returned as soon as those of the North had paid them, and they were newly issued; consequently eighteen months after this practice began the cash boxes of the North were drained of their capital, the length of discount was reduced, and 5 per cent. was charged for sixty days. On April 1, 1819, only $126,000, cash remained on hand, on the 12th only $7l,000, remained, $196,000, was owed to the city banks. Scarcely had the Directors of the National Bank succeeded in replacing the paper issued but not redeemed by their bank-note circulation, being fully aware from their own experience that the circulation could only reach a limited amount, than they inundated the market with it, and in a few months all reductions vanished. In this way the market price shortly resumed its former quotation, and all the difficulties reappeared. This imprudent management necessarily threw one portion of the public into debt, from which it had saved itself; and the other portion into the vortex which it had avoided. The critical moment was delayed somewhat, but the day of reckoning was near. THE PANIC OF 1818.--The Bank at last discovered that it had passed the bounds of safety through its issues, and that it was at the mercy of its creditors. It saw firstly, on October 21, 1818, the payment of part of the State of Louisiana's foreign debt withdraw large sums, and then Chinese, Indian, and other goods reach fancy prices because of the depreciation of the circulating medium. All these influences produced a demand for specie payment which the Bank as a public one was obliged to meet, under penalty of 12 per cent. interest, and without power to avail itself of the same accounts as the State banks. From this moment it thought fixedly of its safety and of how to reduce its notes; this reduction obliged the other banks to imitate it, and a new crisis shook trade in the end of October, 1818. During one year the National Bank furnished from its cash boxes more than $7,000,000, and the others more than $3,000,000. The State banks naturally followed the same policy in their connection, and their circulation became reduced as follows: On November 1, 1816, to ............ $4,756,000 " " " 1817, " ............ 3,782,000 " " " 1818, " ............ 3,011,000 " " " 1819, " ............ 1,318,000 It will give a faint idea of the excessive issue to state that the only difficulty was the impossibility of examination by the President and Cashier, and of their jointly signing the notes, which was made obligatory by the regulations; hence they asked power from Congress to grant this right to the Presidents and Cashiers of the Branch Banks. This facility was refused, but Congress granted a Vice-President and a Vice-Cashier to sign. With these issues and a simple capital of $2,000,000, the Bank discounted as much as $43,000,000, during one year, in addition to $11,000,000, to $12,000,000, loaned upon public securities. In order to carry on its operations, it exchanged in Europe a portion of its funded debt for gold and silver, and bought specie in the West Indies. From July, 1817, to July, 1818, it imported $6,000,000, of specie, at an expense of $500,000, but the excessive issue of paper drained away the cash more rapidly than the Bank could import it. In the face of this hopeless struggle, in July, 1818, it entirely changed its course and reduced its discounts, and 10 per cent. premium was then paid for cash, and the reduction of nearly $5,000,000, in the discount line in three months only had a disastrous effect, while at the same time they would only receive for redemption the notes issued by each Branch Bank: hence general embarrassment arose, and as the Bank of the United States was withdrawing cash from the local banks, Congress wished to forbid the exportation of gold and silver. The committee appointed on the 30th of November, 1818, to examine the affairs of the Bank concluded that it had violated its charter: 1. In buying $2,000,000, of the Public Debt. 2. In not requiring from the purchasers of its stock the payment of the second and third instalments in cash, and in the Public Debt of the United States. 3. In paying dividends to purchasers of its stock who had not entirely paid up. 4. In allowing voting by proxy to a greater extent than the charter permitted. Upon receipt of the report the Governor fled, and the shares fell to $93. In 1818 the speculation was so wild that no one failed on account of a smaller sum than $100,000. A drawing-room that had cost $40,000, and a bankrupt's wine-cellar estimated to have cost $7,000, were cited as instances of the general prodigality. The Senatorial Committee of Inquiry declared that the panic imposed ruinous losses upon landed property, which had fallen from a quarter to even a half of its value. In consequence forced sales, bankruptcies, scarcity of money, and a stoppage of work occurred. House-rents fell from $1,200, to $450; the Federal stock alone held its own at 103 to 104. On the 13th of December, 1819, a Committee of the House of Representatives reported that the panic extended from the greatest to the smallest capitalists. It concluded by demanding the intervention of the legislative power to restrain the corporation, which, spreading its branches throughout the Union had inundated it with nearly $100,000,000, of new circulating medium. Those who unfortunately owed money lost all the fruit of long work, and skilled laborers were obliged to exchange the shelter of their old homes for the inhospitable western forests. Forced sales of provisions, merchandise, and implements were made, greatly below their purchase price. Many families were obliged to limit their most necessary wants. Money and credit were so scarce that it became impossible to obtain a loan upon lands with the securest titles; work ceased with its pay, and the most skilful workman was brought to misery; trade restricted itself to the narrowest wants of life; machinery and manufactories lay idle; the debtor's prison overflowed; the courts of justice were not able to look after their cases, and the wealthiest families could hardly obtain enough money for their daily wants. The Committee appointed by the Senate of Pennsylvania reported on the 29th of January, 1820, that, to prevent a bad administration of the banks, it was necessary: 1. To forbid them to issue more than half of their capital in notes. 2. To divide with the State all dividends in excess of 6 per cent. 3. Excepting the president, that no director should be re-appointed until after an interval of three years. 4. To submit to the State's inspection the bank's business and books. From this period excessive profits and losses ceased on the part of the American banks. The change of directory of the National Bank, called forth by the unfortunate experience of 1818, was the beginning of a very fortunate epoch. As was always the case, business affairs resumed their usual course when liquidation ceased. Among the various causes assigned for the panic, the increase of import duties had to be pointed out, and the decrease of the Public Debt which was reduced between 1817 and 1818 more than $80,000,000. It was impossible to turn any portion of the public deposits in proper time either into Federal stock or such other forms of value as its creditors might demand, without staking or breaking down any respectable institution whatever. But these seem to be only secondary causes. Panic of 1825 to 1826.--In 1824 in Pennsylvania there was a new rage for banks, and in 1825 there was a repetition of the marvellous days of 1815. American banking bubbles have always been exactly similar to the English South Sea bubble, and to Law's bank in France. In July, after an advance dating from 1819, there was a reaction, a panic, and liquidation. Here we cannot point out any of the causes which we have indicated above; the growth of trade and the exaggeration of discount sufficiently explain the difficulties of the situation. In Pennsylvania in 1824 a bill was passed re-establishing the charters of all the banks which had failed in 1814. In New York they thought of banks alone; companies with a capital of $52,000,000 were formed. Ready money had never been so abundant, if we can judge of it by the amount of subscriptions and the great speculations in stocks. Three millions were subscribed to the "New Jersey Protection Company" in one day. But in July, when the decline on the London market was reported, the want of hard money forced itself into notice. Exchange on England rose from 5 per cent. to 10 per cent.; the discount on New Orleans notes, from 3 per cent. became 50 per cent., and on the 4th of December it had fallen back to 4 per cent. What fluctuation! What disasters! Mr. Biddle, the President of the United States Stock Bank, said that the crisis of 1825 was the most severe that England had ever experienced, superinduced as it was by the wild American speculation in cottons and mines. Cotton cloth fell from 18 to 13 cents per yard; and out of 4,000 weavers employed in Philadelphia in 1825 not more than 1,000 remained. The reaction of liquidation was experienced in 1826, and from 1827 money was abundant. EMBARRASSMENT OF THE LOCAL BANKS IN 1828 TO 1829.--Is it necessary to mention these embarrassments? The trouble of 1828 affected only the local banks and not at a11 those of the United States. The chief cause was the Bank of the United States' increase of circulation from August, 1822, to August, 1828. From $5,400,000 it had become $13,000,000 without adding anything to the circulation, merely displacing an equal amount of local bank notes through drafts of branches that it put into circulation. These branch banks' drafts were in form of bank notes, signed by the chief employees of the branches, drawn, it might be, on each other or on the main bank. A great issue of paper was thus brought about; without this roundabout method it would have been impossible to have forced the issue of the notes from the mere physical inability of the president and cashier to sign so large a number. Congress had always refused to delegate this power to any other persons; in consequence of this practice the inevitable result occurred in 1828, as might have been foreseen, and a conflict between notes of the Bank of the United States and that of the local banks occurred. These drafts circulated everywhere; the branch banks received them on deposit, but did not redeem them: hence it was necessary to guard against panic by keeping hold of cash. This course increased the issue of the Bank of the United States, and of the local banks which discounted the paper of the central bank as if it were so much cash. The local banks, then, whose paper did not widely circulate, exchanged their bank notes for drafts, thus reducing the amount of circulation of the first, increasing that of the central bank, and hence that of the total issue of its bank notes; the local banks continued to exchange their paper with its narrow and limited circulation for drafts of this latter, which passed everywhere. There occurred, then, in 1828 and 1829 an accidental and very brief scarcity of cash, whose cause we have just indicated; but since the second half of the year difficulties arising from metallic circulation had disappeared. PANIC OF 183l.--The course of business, having scarcely suffered a stoppage, continued until 1831, and not till then did The Bank, being the agent of the Treasury and having $11,600,000 on deposit, would have been forced to become a borrower in order to pay out the $2,700,000 demanded from it. However, its request was granted. Jackson soon learned with surprise that, business being more impeded than ever, the President had despatched an agent to England to contract with the Barings a loan of $6,000,000. Seeing the Bank to be insolvent he resolved not to renew its charter. The Bank tried to hide its insolvency by the most foolish land speculations, which had already caused such great disaster in 1818 and 1820. The issue of bank notes had given fresh spirit to speculation. These bank notes were received by the National Treasury and returned to the Bank on deposit, which again loaned them to pay for land upon security of the land sold, with the result that the credit granted the Nation was merely fictitious. In 1832, Congress having voted for the extension of the Bank's charter, President Jackson refused to ratify it on account especially of certain changes, it sought to introduce. "Why," said he, "grant a capital of $35,000,000 when the first company only had $11,000,000?" But though the Bank's charter could not be arranged, the law of July 10, 1832, dealing with the regulation of banks, prescribed that "a report" upon their exact condition should be submitted to Congress every year. In 1833 General Jackson ordered the withdrawal of the Government deposits from the Bank. The law required that the reasons for the withdrawal of the deposits should be given, and the secretary, Mr. Duane, refused to give them, saying the Bank was not insolvent. He was dismissed and replaced by a more amenable secretary. The deposits were withdrawn and placed in different State Banks, The Bank of the United States was obliged to limit its discounts and loans, thus causing trouble; however, the President wished at any loss to establish a metallic circulation. President Adams favored small paper notes of 25 to 10 cents, to the extent of $1,000,000. From 1831 to 1837, $3,400,000 twenty-five cent notes, $5,187,000 ten-cent notes, and $9,771,000 five-cent notes were issued. To prevent an abuse of this it was necessary to resume a metallic circulation immediately. In 1833 the amount of small notes issued had already reached $37,000,000; in 1837 it became $73,000,000; it even exceeded these figures; it was this circulation of small paper notes that had to be made smaller than $120,000,000 Notwithstanding these frequent panics the national prosperity and the increase of wealth were unquestionable and astonished all observers. From 1817 to 1834 the national expenses diminished from $39,000,000 to $24,000,000, decreasing even to $14,000,000 in 1835, while the income grew to $37,000,000. From 1826 to 1836 the condition of business, despite the panic of 1831, grew easier. Industries, agriculture, and commerce were prosperous and every enterprise was successful. Both in New Orleans and in New York there was much building, and more than 1508 houses were erected between January 1 and September 1, 1836. This general prosperity carried with it the seeds of trouble. The rapid increase of the National revenue gave birth to the belief that capital had increased in the same proportion. This superabundance of income produced temporarily by the inflation in business was recklessly thrown away. People speculated in land, projected a hundred railroads, canals, mines, and every sort of scheme, which would have absorbed $300,000,000 if carried out. The national capital being insufficient, loans were made in England and Holland, where the rate of interest being more moderate stimulated the passion for enterprises. Finally, in order to stop the flow of English capital to America, the Bank of England raised the rate of interest; this brought people to their senses. They saw the impossibility of carrying out a third of their schemes. Cotton fell, and panic seized the public. Since 1818 a period of flow and ebb in trade had been seen every five or six years, but this stoppage was much more serious. The lack of ready money and capital destroyed confidence. Money was not to be had upon any collateral; and the banks stopped discounting. The people lacked bread, the streets were deserted, the theatres empty; social observances were in abeyance, there were no more concerts, and the whole social round was stopped. The Bank of the United States used various expedients to temporarily moderate the crisis until the very moment that it burst all the more violently in 1839, and brought about a new and radical reform. From the time that the separation of the Bank of the United States from the Government and the cessation of its operations as the National Bank was brought about, the quotation on bank notes considerably decreased, as well for those payable at sight as for the deferred notes payable in twelve months. The President sent an agent to London to raise money upon the bank shares. Fearing that General Jackson would not establish a new bank, and by way of counterpoise, one hundred banks were created with a capital of more than $125,000,000; issues of bank stock were not to exceed three times the amount of the capital, but this provision was not observed; the issue was without regulation and without limits, and during an inflation in prices of the necessaries of life which had doubled in value, and which had turned the people's attention to agriculture. The price of land had for some time advanced tenfold, and the advance in cotton caused the Southern planters to abandon indigo and rice. Imports in 1836 exceeded the exports by $50,000,000, which had to be paid in gold or silver. This outflow of metal created a great void. The advance in the discount rate in the Bank of England under such circumstances came like a thunder-clap, and the distended bladder burst. Banks suspended payment, and bank notes lost from 10 to 20 per cent. Exchange on France and England rose to 22 per cent., all metal disappeared from circulation, and a thousand failures took place. The English export houses lost from L5,000,000 to L6,000,000 sterling; values fell from maximum to minimum. The losses in America were even greater; cotton fell to nothing. At the worst of the panic people turned to the Bank of the United States, and its President, being examined as to the means of remedying the trouble, stated that it was above all necessary to maintain the credit of the Bank of England in stead and in place of private credit, which had disappeared. He proposed to pay everything in bank paper on Paris, London, and Amsterdam. When the panic came the Bank was very much shaken. At the beginning of April, 1837, the New York banks suspended payments because demands for hard money for export played the chief role; the other banks suspended in their turn, promising to resume with them. The Bank of the United States, suspended also, Mr. Biddle, the President, asserting that it would have continued to pay were it not for the injury done by New York. This was false, for the New York banks shortly after resumed payment, hoping they would be imitated, but the other banks refused to do so. Mr. Biddle wished, in the first place, to await the result of the harvest. To uphold the Bank, he tried to bring about exchanges, both with banks and general business, not only in America but in Europe, in order to establish a unity of interests which would sustain him and conceal his real condition. In this he was successful to a certain degree, for in 1840 in his balance sheet $53,000,000 of paper of the different States was shown up. He wished above all to secure the monopoly of the sale of cotton: a senseless speculation hitherto unexampled, [Footnote: A similar episode has occurred in our time in the speculation in metals by the "Comptoir d'Escompte."] the like of which may never be seen again. Whilst the Bank came to the relief of New York business through its exchange and its deferred notes, Biddle posed as the great cotton agent, on condition that the Bank's agents should be consigned to at Havre and Liverpool. In their embarrassment this proposition was accepted by the planters. Cotton was thus accumulated in those two places. This monopoly advanced the price, and vast sums were realized, which enabled him to enlarge the scope of his business. In 1837 he was enabled by this means to draw on London for L3,000,000 sterling; the difference between 5 to 6 per cent. interest and discount at 2 per cent. produced a very handsome profit. The cotton merchants prospered as well as the exchange agent, and Mr. Biddle paid the planters in bank notes which the Bank could furnish without limit, while he received in Europe hard money for the cotton; this aroused opposition. In the second half of 1837 he established in Missouri, Arkansas, Alabama, Georgia, and Louisiana a number of new banks, to make advances to the planters, and to sell their products for them in Europe. They started with very slight capital, they observed no rules in issuing paper, their bank notes fell 30 per cent. in 1838, and the planters would not take them. The Bank of the United States, fearing lest foreign capitalists should take advantage of the difficulties of the planters by buying this cotton, cheapened on account of the encumbrances upon the district producing it, resolved to come to the rescue of the Southern banks, and to join them in their operations by purchasing their shares and their long-time paper, having two years to run. It thus put $100,000,000 into the business, and in 1838 it had loaned them upon their cotton crops not less than $20,000,000 at 7 per cent. payable in three years. It had bought the bank shares at 28 per cent. below par; through its help they had risen again to par; and then it threw them upon the London market, which absorbed them. In order to explain the immense credit enjoyed in Europe by the United States and their banks, we must observe that the extinguishment of the National obligations through surplus crops threw a false light upon the credit of the States, as well as particularly upon that of the corporation. For many years American investments had been sought for above all others in London, and as nothing happened during the first year to destroy that confidence, the amount thus employed increased from $150,000,000 to $200,000,000 in 1840. In Pennsylvania $16,000,000 of European money was used in the Bank of the United States, and $40,000,000 in those of the different States, all of which was payable in two or three years. Mr. Biddle had succeeded in sustaining the different States with the National credit. He knew how to utilize the credit of American goods in Europe, and drew from the London market an immense sum against exchange long-time paper and paper payable in America. The Bank's paper fell from 4 to 6 per cent., and it was in such demand that the Bank of England took it at 2 to 3 per cent. discount. But finally the market had all that it could take. The attention of merchants was attracted to Mr. Biddle's gigantic speculations, who paid paper in America and collected hard money in London. Business interests complained about the contraction in the market. The Bank's stock of cotton increased steadily, and between June and July it rose from fifty-eight to ninety million bales. This speculation had already yielded $15,000,000 profit, but the market was overloaded, and quotations could not keep up. The planters had made a great deal by the advance in cotton, but the paper money remitted them lost from 15 to 25 per cent. A panic was approaching. The cotton crop, amounting to 400,000 bales, was one fifth less than was expected; they awaited an advance in price, but the contrary occurred. The high prices had brought out all the stored cotton; the factories had reduced their work. Nevertheless bale after bale was forwarded to Liverpool and to Havre. The sale in this last port in February and March, 1839, having produced a loss, they continued to store it. As soon as Mr. Biddle was aware of this stoppage he sought to hide the difficulty by extending his business. He proposed to start a new bank in New York (the other had headquarters in Philadelphia) with a capital of $50,000,000. He once more issued long-time paper, and bought with American paper canals, rail-roads, and shares which he threw upon the English market. This lasted until the long-time paper lost 18 per cent. in America, and until American exchange and investments were no longer received on the Continent. The Parisian house of Hottinguer like its other agents, sold little until the first of July, and when it saw that the effort to monopolize cotton could not succeed, fearing to continue this gigantic operation, it declared that it employed too much capital. In the midst of all this, some new bills of exchange reached Paris without consignment of corresponding value; and the house of Hottinguer protested. Hope of Amsterdam discontinued his connection. The London agent called upon the Bank of England for help, which was granted upon the guaranty of certain firms of that place and a deposit of good American paper. Rothschild accepted the refused bills of exchange, after having found out that a sum of L400,000 would suffice for Mr. Biddle's agent; these L400,000 offered as a guaranty consisted of Government stock, and of shares in railroads, canals, and banks. This agreement was not given out freely, which still further increased the feeling of distrust. A crisis in which $150,000,000 of European capital were destined to be engulfed was rapidly approaching. BREAKING OUT OF THE PANIC OF 1839.--The English papers had already warned the people to be distrustful. The _Times_ said it was impossible to have any confidence in the Bank as long as it would not resume specie payments. Mr. Biddle defended himself through papers paid for the purpose, finally in the Augsburg Gazette, while he waited for the soap bubble to burst. His retained defenders claimed that the 150,000 bales of cotton sent to Europe had not been sold, but received on commission. Advances in paper had been made which in the month of August, 1839, were to be paid in notes by the Southern banks, for a new grant made to the Bank by the State of Pennsylvania permitted it to buy the shares of other banks, and by this means to gain their management; their notes lost 20 to 50 per cent. as compared with the Northern banks. Through his profit upon the difference of the notes, and through the payment for the cotton in paper, and through the sale of bullion exchange, Mr. Biddle had made five to six million dollars, which lay at his command in London. The protection of his bills of exchange made a great impression in England; the rebound was felt in America, where the panic, moderated in 1837 through the intervention of the Bank, burst forth with renewed fury in 1839, and brought about the complete liquidation of that establishment. At the same time the English market was very much pressed, for, according to a notice of the Chamber of Commerce, the number of that year's bankruptcies was greater than usual. From June 11, 1838 to June, 1839, there were 306 bankruptcies in London, and 781 in the "provinces,"--in all, 1,087. At Manchester there were 82, at Birmingham 54, at Liverpool 44, at Leeds 33. The London Exchange was flooded with unsalable paper, an occurrence which had also taken place on a smaller scale in 1837. Such was the interruption of business that interest for money rose to 20 per cent., and the discount rate for the best paper to 15 or 18 per cent. The various States in the Union had contracted debts with inconceivable ease, and interest payments were provided for by new loans. President Jackson declared it necessary to make a loan in order to pay interest moneys. It was deemed inexpedient to impose new taxes to provide for the cost of the public works. Great was the embarrassment in America, and as no more money came from England, it was necessary for the Americans to look for it in their own country. Business circles were flooded with long-time paper running at a discount of one half of 1 per cent. a month. Discount rose to 25 per cent. The panic was so great that all confidence was destroyed. The Bank of the United States, in order to maintain its credit, paid its depreciated long-time paper. The struggle between the Bank and its opponents, led by President Van Buren, re-commenced. These last declared that the Bank had erred in circulating the $4,000,000 of notes of the old bank, which should have been retired coincidently with the charter; and the Senate forbade their circulation. The Government claimed large sums from the Bank, the statement of which showed close to $4,000,000; and, as it could not secure this amount in money, it was decided to issue $10,000,000 of Treasury bonds. The Bank party wished to push the Government into bankruptcy, in order to induce it to turn to them for help, and, through the issue of "circular specie," oblige it to adopt a system of paper money. A bill was brought forward with this view. Biddle, who wished to increase the circulation, said he could resume specie payments, and thus forced his shares to rise; but the rejoicing of the Bank party was soon disturbed by the fact that collectors of taxes were forbidden to receive any bank note for less than $20, which was not redeemable in hard money. After a struggle of eight years the separation became complete, and the administration of National finances was withdrawn from the Bank. In 1836, a law was passed providing that upon the expiration of its charter, the National funds should be again deposited with it, as soon as the Bank resumed specie payment. Upon the suspension in 1837, the Government was forced to abate the law, in order to protect the specie, and imposed on its financial and postal agents some of the duties of the Treasury. In 1840, the management of the public Treasury constituted a separate and distinct department. Such was the liquidation following the panic, that Congress granted the Bank three months in which it must either resume specie payment or liquidate. To conform to this decree the State of Pennsylvania fixed the resumption of specie payments by its banks, for January 15, 1841. The shares of the Bank, which had yielded no dividend in 1839, and offered a similar outlook for the first half of 1840, fell to $61. They had been quoted as high as $1,500. General liquidation and a loss of 50 per cent. was inevitable. This occurred in 1841. Thus ceased for a time the bank mania in the United States. We will recall here Buchanan's opinion about the Bank: "If the Bank of the United States, after ceasing to be a national bank, and obtaining a new charter in Pennsylvania, had restrained itself to legitimate banking, had used its resources to regulate the rate of home exchange, and had done everything to hasten the resumption of specie payments, it would have resurrected the National Bank. "But this is no longer possible; it has defied Congress, violated the laws, and is mixed up in politics. The people have recognized the viciousness of its administration; the President, Mr. Biddle, has concluded the work Jackson began." Tables indicating the banks which suspended during the panic: In 1814, 90; in 1830, 165; in 1837, 618; in 1839, 959. The last panic, from 1837 to 1839, produced, according to some pretty accurate reports of 1841, 33,000 failures, involving a loss of $440,000,000. PANIC OF 1848.--The entire discounts, which had risen to $525,000,000 in 1837, fell to $485,000,000 in 1838, only to rise again to $492,000,000 in 1839, and the real liquidation of the panic occurred only then. Discounts fell at once to $462,000,000, then $386,000,000; the abundance of capital, and the low price at which it was offered, cleared out bank paper until it was reduced from $525,000,000 to $254,000,000 in 1843. [Footnote: We have not the outside figures, the maximum or minimum.] The metallic reserve increased from $37,000,000 to $49,000,000 (1844); the circulation was reduced from $149,000,000 to $58,000,000. The number of banks in 1840, from 901 fell to 691 in 1843, and the capital itself from $350,000,000 in 1840 was reduced to $200,000,000 in 1845 and to even $196,000,000 in 1846. All these figures clearly indicate liquidation. The market, freed from its exchange, was enabled to permit affairs to resume their ordinary course. In fact an upward movement was taking place. Discounts rose from $264,000,000 to $344,000,006 in 1848. Banks increased from 691 in 1843 to 751 in 1848, and their capital grew from $196,000,000 in 1846 to $207,000,000. The paper circulation rose from $58,000,000 to $128,000,000 in 1848. Deposits from $62,000,000 reached $103,000,000 in 1848. The metallic reserve alone fell from $49,000,000 in 1844 to $35,000,000 in 1848. The consequences of the European panic were felt in America, but without causing much trouble. The liquidation of the panic of 1839 was barely over, and was still too recent to have permitted sufficient extension of business. Embarrassments were slight and brief; discounts, nevertheless, fell from $344,000,000 to $332,000,000. The store of bullion, in spite of the surplus and the favorable balance produced by the export of grain to Europe, fell from $49,000,000 to $35,000,000; with the following year the forward movement recommenced. PANIC IN 1857.--The stoppage in 1848 was very brief. Discounts rose regularly from $332,000,000 to $364,000,000, $413,000,000, $557,000,000, $576,000,000, $634,000,000, and finally $684,000,000 in 1857. The progression was irresistible. The circulation rose from $114,000,000 to $214,000,000. The banks increased at such a rate that, from 707 in 1846, with a capital of $196,000,000, there were in 1857 1416, whose capital had risen to $370,000,000,--a very inferior figure, in comparison to the number of banks, to that of 1840, when 901 banks only had a capital of $358,000,000. The metallic reserve, from $35,000,000 in 1847, easily reached $59,000,000 in 1856: but it was in proportion neither with the number of the banks nor their discounts and circulation; and, after all, this is only a moderate sum. We have not the extreme maximum or minimum, and the suspension of specie payments took place notwithstanding the amount of cash on hand, which was greater in 1857 than in 1856. Deposits accumulated from $91,000,000 to $230,000,000; they rose to their greatest height in the very year of the crisis; nevertheless, they could not be drawn out. During the Eastern war the prosperity of the United States had been so great that the clearing-houses established in New York in 1853, and in Boston in 1855, offered only a slight opposition to the excessive issue: at least, in 1837 the Congressional report stated the cash on hand was $6,500,00--that is to say, $1.00 in metal to each $6,00 in paper. In 1857 cash on hand was $14,300,000, or $1.00 in hard money for each $8.00 in paper. The banks had attracted deposits by high interest, and loaned the money to wild speculators. On the 22d of August, 1857, the amount of loans had become almost $12,000,000, counting together metal, notes, and deposits. From December, 1856, to June, 1857, they had shown great strength. Discounts had risen from $183,000,000 to $190,000,000 in June; cash on hand had risen from $11,000,000 to $14,000,000. The only evidence of weakness, so to speak, was that the withdrawal of deposits had risen from $94,000,000 to $104,000,000, while the circulation diminished $1,000,000. In June "the position of the Bank ought not to have caused any fear, to the most far-sighted," says the report of the Committee of Inquiry. Foreign exchange was favorable, and it is known that is the bankers' guide. June, July, and August were tranquil, except for a slight disturbance in business experienced by the country bankers through the constantly increasing amount of notes presented for redemption, and among the city bankers by requests for discount. The collapse of the "Ohio Life," which had the best New York connection, was the first muttering of the storm, and was soon followed by the suspension of the Mechanics' Banking Association, one of the oldest banks in the country. The suspension of the Pennsylvania and Maryland banks followed. Public confidence remained unshaken--it relied upon the circulating medium. Only one bank went to protest, and that on September 4th, on a $250 demand. Another protest followed on the 12th, a third on the 15th, both for insignificant amounts. Demands in the way of withdrawal amounted to almost nothing, and there was nothing like a panic. The deposits at the savings banks were a little less, but this did not continue. Only at the close of September was the demand by the country banks for payment upon the Metropolitan American Exchange Bank for payment greater than it had ever been. On the 13th of October, with exchange at par, an abundant harvest, with a premium of 1/4 to 1/2 per cent. on metal, the banks suspended specie payment, but resumed it on the 11th of December. The most critical period lasted about a month. The first step towards resumption of payments was made after the resolution adopted by the Committee of Liquidation to call upon the country banks to redeem the notes of the Metropolitan Bank, paying an allowance of 1/4 of 1 per cent. interest, running from the 20th of November. At this time the city bankers held, in bills issued and in signed parcels of $5,000 each, about $7,000,000 due by the country banks. They were thus enabled to accomplish the payment of their notes at the rate of 20 per cent. a month by the 1st of January, 1858. The same favor of repaying their notes at the rate of 6 per cent. was granted to the city banks. We need not inquire if, having granted this delay, the banks proved their liberality. The abundant harvest also assisted liquidation. From 1853 to 1857 the metallic reserve fell to $7,000,000, deposits rose to $99,000,000, and discounts and loans to $122,000,000. BANKS OF NEW YORK. Proportion of Metallic Reserve. Deposits. Discounts, the Metallic Advances. Reserve to Deposits. 1854 ... $15,000,000 $ 58,000,000 $ 80,000,000 26% 1855 ... 9,900,000 85,000,000 101,000,000 11% 1856 ... 10,000,000 100,000,000 112,000,000 10% 1857 ... 7,000,000 99,000,000 122,600,000 7% The reduction of the metallic reserve, increase of deposits and of discounts and of advances, are here clearly indicated. From 1853 to 1857 the bank circulation hardly varied $100,000, indicating that the demand for hard money came from abroad and from the interior. The circulation was not the cause of the suspension,--at least such was the opinion expressed by the superintendent of the New York banks in his report. In 1856 twenty-five companies were started, and three bankers opened business with a capital of $7,500,000, of which $7,200,000, was paid in. In 1857 there were only five of these banks and three bankers having a capital of $6,000,000, of which only $4,000,000 were paid in. The collateral deposited by the banks represented $2,500,000 in 1856, on which credit of $2,000,000 in notes was granted. In 1857 the same collateral did not exceed $560,000 estimated value, on which a credit of $383,000 in paper was granted. At the height of the crisis failures were so numerous that a general suspension of payments, and, in consequence, a stoppage of business was dreaded. This suspension, in place of being general, turned out to be merely partial; it occurred at a juncture when it might well be feared that it would lead on to the very greatest disasters, but, far from harming, it helped the market. The banks had suspended payment upon a common understanding among themselves and with business circles. The critical moment having passed, tranquillity reappeared as soon as the course determined on was known. If suspension of payment hurts the credit of a bank, it does not necessarily lead to the depreciation of its bank notes. There are a good many proofs of this: in 1796, when the Bank of England suspended, its bank notes did not depreciate; and if this state of things did not last, the blame must be laid upon the excessive issue. And in France, in 1848 as well as in 1871, the Bank of France suspended without the depreciation of its bank notes becoming very noticeable. So, in New York, bank notes passed at 2 or 3 per cent. loss at this crisis. The crisis disappeared with the end of the year, and resumption of payments took place between New York and Hamburg, with the return of specie and a rate of 4 per cent. It was the same in France and England. A more serious panic and a more rapid recovery had never been seen. The rigidness and not the severity of the pressure that had to be exercised shows the condition of business. There had been most blamable practices employed; but the market as a whole was sound, and had faced the storm. Only four banks had suspended, three of which were shaky before the panic, and the fourth had already resumed payments. At no other period could one have obtained such an amount of credit upon a simple paper circulation; fictitious paper was the source of all the wrecks. To get it into circulation the most varied contrivances were resorted to, and fraud itself was not wanting; the signatures even became fictitious, their owners could not be found. Shams and discriminations under all forms, designed to permit speculation without capital, without exchange of goods, without real transactions between the drawer and the acceptor of the bill of exchange, were rife. In his message, President Buchanan ascribed the crisis to the vicious system of the fiduciary circulation, and to the extravagant credits granted by the banks, although he was aware that Congress had no power to curb these excesses. When there is too much paper, when the public has created an endless chain of bank notes, representing no real value, it is enough that the first ring break for the whole gear, thus no longer held together, to fall to pieces. If we mark the situation of the New York banks before and during the panic--that is to say, in 1852 and in 1857, we will ascertain as follows: June, 1851. June, 1856. June, 1857. Capital ............ $59,700,000 $92,300,000 $107,500,000 Circulation ........ 27,900,000 30,700,000 27,100,000 Deposits ........... 65,600,000 96,200,000 84,500,000 Paper discounted ... 127,000,000 174,100,000 170,800,000 Cash on hand ....... 13,300,000 18,500,000 14,300,000 This table demonstrates that two items show a great increase: capital increased $47,000,000 and paper discounted $43,000,000; while, in face of an increase of $1,000,000 of specie on hand, the note circulation decreased $800,000. Far from finding a mistake, we find a proof of the Directors' prudence. If there was an error in the issuing of paper, it was not on the side of the banks; it was the public itself that was chiefly in fault. We find the causes of the panic in the issues of railway obligations and shares, which had chiefly been placed in European markets, and whose gross amount was estimated at L1,000,000. The speculation in land and railroads had been carried on either with borrowed money or by open credits, and by accommodation notes, back of which there was no second party. The mistake of the banks was in trying to conduct their whole business by their note circulation and to concentrate their capital in the bank offices, and meanwhile, as they refused to loan to the stockholders of the banks, discounts in New York fell off $10,000,000. Finally the capital could not be entrusted to the disposal of the banks and it was necessary to compel them to make a deposit of $100,000 for each association, and $50,000 for each banker. Such were the final advices given by the inspector-general of the banks of New York at the close of his report, dealing with how to prevent the recurrence of panics. To have confidence in their efficacy, it was necessary to forget the past and its lessons. The reforms already made and those still asked for in the bank system could yield no remedy for those abuses lying beyond legislative action. The American newspapers did not hesitate to demand them, well aware that they would produce no effect; however, they congratulated themselves with having drawn away from effete Europe one million sterling now realized upon the soil of the United States without any equivalent given for it to the foreign lenders. PANIC OF 1864.--The crisis of 1864 was mixed up in the United States with the War of Secession; it was a political crisis, and is not properly to be considered here. PANIC OF 1873.--During the last two months of 1872 the American market had been very much embarrassed; the lowest rate of discount was 7 per cent., and in December it was quoted at even 1/32 of 1 per cent. or a quarter of 1 per cent. a day! The year 1873 was anxiously awaited in hope of better times. In the middle of January, 1873 the rate of interest declined a little to 6 or 7 per cent., but soon the rate of 1/32 of 1 per cent. per day reappeared and continued until the month of May. In the first days of April the market was in full panic; it grew steadier in the first week of May, and in the month following. It relapsed on September 1st, and requests for accommodation redoubled until the sharpest moment of the panic. On that day there were no quoted rates; money could not be had at any price: some few loans were made at 1-1/2 per cent. per day. This panic broke forth on September 18th, through the failure of Jay Cooke, after a miserable year, during which money was constantly sought for and was held at very high prices in all branches of business. As to the loans for building railroads, they followed one another so rapidly that, from the month of October, 1871, to the month of May, 1873, they could not be placed at a lower rate than 7 per cent. Bankers succumbed beneath the burden of their unsalable issues. This was a grave misfortune for the railroads. In the single year 1873 there were constructed 4,190 miles of railroad in the United States, which, at $29,000 per mile, represented the enormous sum of $121,000,000, and in the last five years $1,700,000,000. The commercial situation was not so bad, and the number of failures did not reach the proportion that might have been feared. After the failure of Jay Cooke came those of Fiske & Hatch, of the Union Trust Company, of the National Trust Company, and of the National Bank of the Commonwealth. On the 20th of September, for the first time, the Stock Exchange in New York City was closed for ten days, during which legal-tender notes were at a premium of 1/4 per cent. to 3 per cent. above certified cheques. On the 18th there was a run on the deposits. Withdrawals continued on the 19th and 20th, especially by the country banks, and the banks' correspondents. No security could be realized upon; and in order to relieve the situation the Secretary of the Treasury bought $13,500,000 of National 5-20 bonds, stating that he could do no more. The New York Stock Exchange was reopened September 30th, without any notable occurrence; but everything was very low. Several other suspensions occurred--for instance, that of Sprague, Claflin, & Co. The rate of discount being 9 per cent., a panic was feared in London. The banks passed the most critical period on October 14th; out of $32,278,000 legal-tender dollars at the beginning of the panic, only $5,800,000 remained on hand. Not until the middle of November did the decline stop and a slight advance take place. Throughout the panic the bank reserves were much below the legal requirement of 25 per cent; from the 13th to the 30th of September they fell to 24.44 and 23.55 per cent. The New York Clearing House in September adopted a measure which permitted dealings to continue. It authorized the banks to deposit the bills on hand, or the other securities they had accepted, in exchange for which they issued certificates of deposit bearing 7 per cent. in notes of $5,000 to $10,000 to the extent of 70 per cent. of the security deposited. Thus $26,565,000 of them were put into circulation. Furthermore, they made a common fund of the legal tenders belonging to the Associated Banks for mutual aid and protection. The suspension of payment took place first in New York and then extended to the large cities of the Union; it lasted forty days, until the 1st of November; this measure was looked upon as having prevented the greatest disasters. The table setting forth the situation, compared with the balance sheets of the Associated Banks of New York on January 1st, April 1st, July 1st, September 1st, and October 1st of the years 1870, 1871, 1872, and 1873, shows us the following changes: discounts had fluctuated from $250,000,000 in January, 1870, to $309,000,000 in September, 1871; they had become reduced to $278,000,000 in September, 1873, on the eve of the panic, and from the month of September, liquidation of the panic having begun, they were reduced to $250,000,000. Deposits from $179,000,000 in January, 1870, rose to $248,000,000 in July, 1871, with $296,000,000 of bills discounted, and once more reached $198,000,000 in September, 1873, with $278,000,000 of discounts and $195,000,000 in December. Even at the most critical moment of the panic they continued larger than the usual average of the preceding years. The metallic reserves played too feeble a role to have caused failure; they had varied from $34,000,000 in June, 1870, to $9,000,000 in September, 1871, $18,000,000 in September, 1873, and $23,000,000 in December, 1873. The circulation varied still less: from $34,000,000 in January, 1876, it decreased to $27,000,000 in July, 1872, and remained at the same figure during the year 1873, if we can judge of this by the balance sheet rendered on the first day of each quarter. In each case there is no opportunity for us to charge an excessive issue. According to the statement of the Comptroller of the Currency, paper discounted decreased between the 12th of September and the 1st of November from $199,000,000 to $169,000,000. To sum up, the circulation had fluctuated very little; deposits from $99,000,000 had increased to $167,000,000 between the 12th and 20th of September, at the most critical period; and when suspension was universal, they had declined to $89,000,000. After the breaking out on the 18th of October, and since then from the 22d of November, they had risen to $138,000,000. The metallic reserve, after a brief revival from $14,000,000 to $18,000,000 between the 12th and 20th of September, had fallen back to $10,000,000, only to rise to $14,000,000 in November. In the midst of these difficulties, the securities of the various States held up. Since the first months of 1873, the demands of the English market caused an upward movement in them; in September it was impossible to make a loan, without using them as collateral. In order to help the market somewhat, the Treasury bought about $13,000,000 of National securities on the Stock Exchange, but, lacking resources, that was the only effort it could make. The German Government invested quite a large sum in the new five per cents., so that the advance in public securities lasted through the whole year: the market rate for 5-20's advanced from 91 per cent. in April to 96 per cent. in October, in the midst of the market's panic. The $15,000,000 of indemnity awarded by the Geneva Court of Arbitration, and paid by England for having admitted privateers into her ports, was put into 5-2O's. Apart from this strength in the public securities, the railway obligations, especially those upon new roads, were very much depressed; they could no longer be placed, ninety new companies having stopped paying their coupons, whilst those of the old lines held their quotations. Great speculators, Vanderbilt at the head, formed syndicates, embracing several companies, and made prices as suited their plans. The death of Mr. Clarke in June dealt the first blow to this combination, and the failure of George Bird Grinnell brought about its dissolution. The liquidation of this tremendous concern kept down prices for a long time. The price of gold, still quoted at 112-1/2 per cent. in January, 1873, rose to 119-1/2 per cent. in April, superinduced by speculation, for at the height of the panic it declined to 106 on the 6th of November. It is true that at that time all doubtful accounts were liquidated, and demands for gold had disappeared; if we were to rely upon the export figures only, we would find them less than in the preceding years. Exchange rates were much more depressed; from 109.45, representing par, they fell to 107.25 for the best 60-day paper. This paper was much sought after by speculators, who, when discounting it, procured bonds authorizing them to transfer the titles unless payment was made promptly at maturity. Prices fell so low that it was often impossible to negotiate paper at any price. The activity reigning at the beginning of the year showed itself in the Exchange movement; the excess of imports over exports rose in the first months to $100,000,000, whilst in the preceding year it did not exceed $62,000,000; prices ruling in the American market attracted goods from all quarters. PANIC OF 1884.--The panic which burst upon the United States in 1884 was the last thunder-clap of the commercial tempest which had reigned since the month of January, 1882. Public opinion already recalled the decennial period which separated the existing panic from that of 1873. The acute period was of short duration; the crash occurred on May 14th, and the decline of values had touched bottom by the end of June. From the 9th of June the people began to steady up, they felt the ground firmer under their feet. The situation gave evidence of great strength; and, notwithstanding the dearness of money, and an enormous fall in prices, there were only a few failures, and at the close of the year equilibrium was re-established, although the liability of the losses had risen to $240,000,000. These losses, it is true, were almost entirely borne by financiers and speculators, rather than by manufacturers and traders. The month of May, 1884, concludes the prosperous period which followed the crisis of 1873. During this period the most gigantic speculations in railroads occurred; the zenith of the movement was in 1880, and as early as 1881 a retrograde movement began, only to end in the disasters in question. The decline in prices had been steady for three years; they had sunk little by little under the influence of a ruinous competition, caused by the number of new lines and the lowering of rates, but above all through the manipulations by the managers on a scale unexampled until now. In connection with the disasters of May, 1884, the names of certain speculators who misused other people's money, such as Ward, of Grant & Ward; Fish, President of the Marine Bank; and John C. Eno, of the Second National Bank, will long be remembered. General Grant, who was a silent partner in Ward's concern, was an innocent sufferer, both in fortune and reputation. The Marine Bank suspended on the 5th of May, and in the following week the Metropolitan drew down in its train a large number of bankers and houses of the second order. The confusion was then at its height. Owing to the very delicate mechanism of the credit circulation, the banks and the clearing house were the first attacked and the most shaken, but they immediately formed themselves into a syndicate to resist the storm which was upsetting all about them. As cheques were no longer paid, settlements no longer took place, and the credit circulation was suspended; this stoppage was liable to induce the greatest consequences, hence it was necessary to be very circumspect. Here it was not possible to suspend the law, as in England the Act of 1844 was suspended, permitting an excess of the official limit for the note issue, but the banks could have been empowered to demand authority to change the proportion enacted by the law creating National Banks. They had no recourse to any of these violations of the Statutes, which prove only too often under such circumstances that regulation by law is impossible; they satisfied themselves, without having the public powers intervene, with issuing clearing-house certificates, that is to say, promises, which they were bound to accept as cheques in settling up the operations of each day. It was through this help that the Metropolitan Bank was enabled to resume payments on the 15th of May, the evening of the day following its suspension. The Second National Bank was a loser through the acts of its President, Mr. John C. Eno, but his father and the Directors hastened to make good the deficit. At this moment the excitement was intense, deposits were withdrawn, and 1 per cent. a day was paid, and even more, to obtain ready money or credit; under the influence of numerous sales of securities, exchange fell rapidly, metallic money was secured in London even, to be hurried to New York. Never could purchases be made under better auspices. Above all is this true when we observe that the condition of companies was much better known than in 1873. The year 1883 had been disturbed by numerous failures. There had been no crash, but prices, far from advancing, had held their own with difficulty. On the eve of the breaking out of the panic there was complaint about the accumulation of goods in the warehouses, and of the difficulty of making exports. No scheme worked out, despite a very high protective tariff, and people were asking themselves what was its effect under the influence of unfavorable exchanges. Gold flowed away from the country, and cash on hand decreased each day. On the 1st of January, 1884, the New York & New England Railroad was placed in the hands of a receiver by order of the court. The same thing happened on the 12th of January to the North River Company. In February, March, and April many houses exhibited their balance sheets. The fall in prices grew accentuated not only on the Stock Exchange, but in all markets. The discomfort increased until the 6th of May, the day on which occurred the failure of the National Marine Bank, whose President was associated with the house of Grant and Ward, which went down shortly afterwards with a liability of $17,000,000. This financial disaster made a great stir. Anxiety spread everywhere, when on the 13th of May the President of the Second National Bank of New York was also forced to suspend payment with a liability of $3,000,000; this was the final blow to credit. Every operation was suspended, all exchange became impossible; not securities but money was lacking. At one time the panic was such that the rate of discount and loans rose to 4 per cent. a day! Although the panic was general, it was rather a panic of securities in the chief places of the United States, especially in New York. One no longer knew on whom to count to provide ready money. Offerings were made on the Stock Exchange where there were no bidders, and the market disappeared in the midst of a panic which paralyzed every one. This melancholy state of things was still further aggravated on the 14th of May by the failure of Donnel, Lawson, & Simpson and Hatch & Foote. On May 15th it was the turn of the Savings Banks of New York, of Piske & Hatch, and of many others. It was impossible to obtain any credit from the banks, and all securities were unsalable, unless at ruinous rates. Reduced to such an extremity, it was necessary to adopt some course to help the market and avoid suspension of payments. The certified checks issued by the banks did not answer, and it was necessary to have recourse to a new means of settlement. The members of the clearing house emerged from their usual passive role to intervene and to do a novel thing: they issued certificates that they accepted in the name of the most embarrassed institutions whose fall they wished to avert, in order to prevent the failure of others. Then, as everybody was making default, the Secretary of the Treasury in his turn wished to aid the common effort to sustain the credit of the situation, and, in order to accomplish this by the most regular methods, he pledged himself to prepay the debt, whose term was close at hand. Despite these last helps it was easily seen how great must be the disorder, to induce recourse to such methods. Never had they been employed until now, which is proof enough of the enormity of the situation, whose equilibrium, had been disturbed since 1887, the year in which high prices in everything had been reached on the Stock Exchange. To still further increase the joint responsibility of the members of the clearing house, it was agreed that a committee should be charged with receiving as collateral bills and securities in exchange for which certificates of deposit bearing 3 per cent. were issued at the rate of 75 per cent. of the amounts deposited. This agreement being adopted, a way to re-open the National Metropolitan Bank was sought. A selection made from its collection of bills showed the securities it could pledge for clearing-house certificates; and, its circulation being thus re-established, it was enabled on May 15th to take part in settlements. Upon the announcement of a syndicate composed of the banks and the clearing house, things settled down; the general distrust diminished; there was the necessity and wish to realize, but funds were lacking. The rise in the discount rate attracted foreign capital little by little, and exchange grew easier. With the help of the syndicate the credit circulation became re-established, and the rate of discount declined to 5 per cent. For commercial needs money was always to be had at 4-1/2 per cent. and at 5 per cent. when at the Stock Exchange it was necessary to pay 4 per cent. per day! The panic was terrible from the 3d to the 10th of May; for two days no one wished to part with his money; it was impossible to borrow on any collateral, at any price whatever. Hence came a decline in the public securities, which fell below the low prices of 1873. The public complained that it could not have foreseen the panic, because the loss of gold had been concealed by the oft-repeated assurance that there was a reserve of $600,000,000 in Washington. Similar situations in 1857 and in 1873 were recalled, and it was remarked that like troubles had not occurred until after a long period of high prices, when capital was scarce and the rate of interest high, whereas this was far from being the case at this period. It was nevertheless notorious that the decline in prices began two years back, that the advance in prices had been stopped by the breaking out of the panic of 1882 in Europe, at Paris, and that since that moment prices had begun to decline, less rapidly, however, than in Europe, because the shock had then merely disturbed a market which had not yet recovered from the panic of 1873, from which, in consequence of the Franco-Prussian war, France had escaped. The mine not being sufficiently charged in the United States the explosion had not recurred. Speculation, unable to restore a new impulse to the rise in prices, was nevertheless able to hold its own, until May, 1884, when the delayed explosion finally occurred, covering the market with ruins and bringing about a liquidation with its accustomed train, a great and lengthy decline of prices. We may here note similar delays in the breaking out of panics, in the period of 1837, 1839, 1864-1866 in France and in England. Even an involved state of affairs may be hidden by certain conditions, and the situation, although itself exposed to the same excessive speculation, may witness the breaking out of the panic which has been delayed for a certain time, only to occur simultaneously with the beginning of a decline of prices, and when it is thought that danger has been escaped. As in Brussels and in the United States in 1837-1839 and in England in 1864-1866, large houses and powerful institutions of credit had maintained a whole scaffolding of speculation which was already out of plumb, but still able to stand upright through the general effect of the parts which connected them, and in this unstable equilibrium it sufficed for a single one to detach itself in order to overthrow the whole edifice at a juncture at which it was hoped it would continue to stand and even grow stronger. Does not this prove that after these epochs of expansion and activity characterizing prosperous periods (and there is no prosperous period without a rise in prices) a stoppage is necessary, a panic allowing a period of rest to permit the liquidation of transactions employed in helping to make a series of exchanges at high prices, and to allow the capital and savings of countries which had been too rapidly scattered and exhausted to reconstruct themselves during these years of tranquillity and of slackening business? Confidence had already returned in New York despite the steady demands of the country bankers upon their correspondents, which pulled down the reserve below the legal limit; nevertheless in the midst of all the failures there was no suspension of specie payments. The crisis of 1884, according to the Comptroller of the Currency, had been less foreseen than the crisis of 1873, and this notwithstanding it was sufficient to observe the number of enterprises and schemes flung as a prey to speculation, in order to foresee that financial troubles and disasters to the country must result. The continuation of payments in gold, the low prices, and the outlook for a fine harvest gave courage, preserved the remaining confidence, and already allowed a speedy resumption of business to be anticipated. The panic, although spreading over the whole Union, raged especially in New York. Without wishing to expatiate upon its primary causes, the Comptroller of the Treasury could not help remarking that it had shown itself under the same circumstances as recently as in 1873; above all there were issues for new enterprises; the speculation had rushed to take them up at a premium, and people now asked their true value. At this juncture railroad earnings, instead of increasing, showed weakness, and suffered a slight reaction; the solvency of houses interested began to be doubted; new loans were refused them, and immediately the artificially constructed edifice gave way. To advance prices on the Stock Exchange, the banks had made immense loans on the shares and obligations of the new railway issues, and as soon as quotations, artificially maintained at the rates to which they had been carried, began to drop, everything became unsalable. Until this occurrence, led on and fascinated by the rise in prices, every one had bought; hardly was the advance arrested when every one reversed their operations at the same time. The bankers had loaned not only their capital but in addition a part of their clients' deposits; brokers had encouraged a speculation which brought them business; and thus it was that all hands had flung themselves upon a path that could only lead to ruin. The Comptroller of the Currency remarks with pride that, in the midst of the general upheaval and numerous failures of honorable houses, only two National Banks were involved: one of them failed, the other suspended payment. The amount of liability of the banks and bankers of New York who succumbed during the month of May was estimated at $32,000,000, whereas that of the only National Bank which shared their fate did not exceed $4,000,000, the bank which suspended not having occasioned any loss. Unhappily the year did not pass without its being necessary to mention new misfortunes: eleven National Banks failed, and it is a fact that among the banks and private bankers more than a hundred were counted in the list. Despite the close watch bestowed upon the banks it was surprising to uncover all the tricks to which the National Marine Bank of New York was given over, and, which until now had escaped the official examiners. It suspended payment on May 6th, and the same day it was debited with $555,000; the books had been erased and overcharged for the benefit of one client alone to the amount of $766,000. He was a debtor to the amount of $2,400,000, six times the Bank's capital, and a portion of this debt was under a good many names of subordinate clerks. This same client had three open accounts, one as administrator, then a general account, and a special account. The whole thing was fictitious; the schemers sought to conceal irregularities, and had thus imposed on the examiners and on the Directors themselves. The certificates issued by the clearing house, when credit had entirely disappeared, rendered a great service and sustained a great number of houses in equilibrium, which without this assistance must have succumbed. They were granted especially to the banks belonging to the Association, in order to make their daily settlements. During the crisis of 1873 the same means had been resorted to, but too late; the panic was already at its height and the commotion general, so that nothing could re-establish confidence. This was not the case in 1884: the rapidity and decision with which the Associated Banks took steps gradually re-established confidence throughout the country. The maximum of issue did not exceed $24,900,000, of which $7,000,000 were for the National Metropolitan Bank; from the 10th of June balances at the clearing house were paid in legal money. Commercial paper, which for the most part was the collateral for these certificates, had already been redeemed. The Metropolitan National Bank alone requested time to liquidate. The issue of these certificates was very rapid: $3,800,000 on the 15th day of May, $6,800,000 on the 16th, $6,700,000 on the 17th, or more than $17,000,000 in these first three days; then on the 19th, 20th, and 22d, $1,500,000, and that was all. The remainder of the amount was given in driblets. Payments, although slower, were made from the 1st of July to the 1st of August. Let us now run over these occurrences: in 1873 instead of $24,900,000 in certificates $26,565,000 had been issued; $22,000,000, had been issued between the 22d and the 29th of September, the redemptions took place from the 3d of November to the 31st of December. In both cases the same amount, so to speak, had been sufficient to answer for all needs. If so small a difference sufficed to save a disordered market, people could not understand why panics could not be provided against. It was necessary to remember that this assistance was only felt when the decline of prices had already re-established an exchange of goods, bringing about the liquidation of houses unfortunately involved. From the month of June, owing to the bank balances or the rate of exchange, the tranquillity and steadiness which had become re-established grew daily; after the storm of the first few days no new disasters had occurred except the failures of Mathew and of Morgan. The position of the market grew firmer and the clearing house reduced its loan certificates, which now replaced the former excessive issues of bank notes. From $24,000,000 they had already decreased to $18,000,000; of this amount $6,000,000 were taken by banks as a last resource, and there then remained only $12,000,000 in circulation. These $6,000,000 had served to sustain the shaken banks, and it is pleasant to state that outside of these requirements the amount needed was no larger. Failures had ceased in the great centres, but they continued in the interior of the country; the shock, like a great wave, took a certain time to overrun the various States. SUCCESSION OF PANICS IN THE UNITED STATES STUDIED THROUGH THE BALANCES OF THE BANKS.--Following the historical summary of panics in the United States it will be useful to have a general table, so as to glance at the very rare documents which permit us to follow the working of the Banks through their balance sheets. We know their organization, and we take upon ourselves to state results flowing from it. It strikes us at once that abuses and panics have constantly occurred. Can we note a difference in the frequency and gravity of the casualties, according to whether we observe them working under the former or the new (the National Bank) system, inaugurated during the War of the Secession in 1864, when the machinery for the issue of bank notes was insufficient for the new requirements? Without lingering over the regulations before and after 1864, let us consider the differences we may ascertain by examining the balance sheets. Unfortunately, the exactness of our observation is lessened on account of the very diversity of the field it covers. In the case of the banks of the United States we have had to content ourselves with the returns that the Comptroller of the Currency gives in his annual report on a stated day during the months of February, May, June, October, and December, beginning with the year 1865. Before that period we had only the yearly situation of the banks of the different States upon one given day; we are better informed on the second period; however, basing our conclusions upon the few balance sheets we possess, we ascertain the same series of development and increase. Although there are lapses, still, from another point of view, the table will be more complete, because it embraces all the banks of the United States. On such an extended field, it is true, we risk seeing great discrepancies disappear and lose themselves in the magnitude of the amounts whose movements we follow. In order better to grasp them, we have put before us the returns of the banks of the United States, together with those of the Associated Banks of New York City; we may thus recognize and follow the share played by each of them. During the first period of the State Banks (1811-1864), the increase in the number of the banks was continuous, except for two stoppages, in 1841 and in 1862; in 1841, during the liquidation of the panic of 1839, and in 1862 at the beginning of the War of Secession; the crisis of 1857 did not interrupt the movement. The capital of the banks had followed the same changes. From $52,000,000 in 1811 to $368,000,000 in 1840, a reduction to $196,000,000 in 1846, and finally the last maximum reached in 1861, $429,000,000, at the breaking out of the war. In 1864 a new organization of the banks under the name of "National Banks" presented to the State Banks, without suppressing them, a state of affairs destined to cause their liquidation, which, in fact, practically occurred. As in England and France, the amount of discounts, as the balance sheets give it to us, rose each year during the prosperous period. Thus from 1830 to 1839 it reached $492,000,000 from $200,000,000, to decline again to $254,000,000 at the end of the liquidation in 1843. In the following period the same rising movement from $254,000,000 to $344,000,000 was reproduced in 1848. The panic in Europe burst forth in 1847; it resounded very slightly in the United States in 1848, as its subsequent liquidation in 1849 indicates, which only reduced the local discounts to $332,000,000. A new period of prosperity followed the preceding events; the growing movement re-appeared, and from $332,000,000 carried the amount of the discounts to $684,000,000 between 1849 and 1857. The panic broke out simultaneously throughout the whole world; but notwithstanding the wrecks it caused, such was the saving already, so healthy was the general situation of business, that, after having thrown out a little scum, the current of affairs resumed its course until 1861, and discounts had already reached the amount of $696,000,000. This amount is greater than that we have noted in 1857, but at that time (whilst the movement continued in Europe up to 1864), despite the shock it received by the declaration of war here, there was complete stoppage until the end of the struggle; we have here come across a political panic, not a business one. Peace re-established, the movement resumed its course under new conditions and with a reorganization of the banks under the name of "National Banks." A change was due, but, as everything was made ready, it was speedy. The first balance sheet of the National Banks dates from 1864. The amount of discounts had already exceeded the sum of $100,000,000 in 1865, and grew to $500,000,000 in 1866. Once started the movement took its own course: 1865 ...... $166,000,000 1870 ...... $725,000,000 1866 ....... 500,000,000 1871 ....... 831,000,000 1867 ....... 609,000,000 1872 ....... 885,000,000 1868 ....... 657,000,000 1873 ....... 944,000,000 1869 ....... 686,000,000 The yearly progression was interrupted as in Europe, and the explosion occurred at the same time. The rise in prices stopped, and incipient liquidation became apparent at the end of the year, and reduced the amount of paper on hand to $846,000,000, but, instead of lasting, as in Europe, a movement of revival, analogous to that which had followed the panic of 1864 in England, occurred. The amount of discounts rose from $856,000,000 to $984,000,000 in 1875, and then, and then only, the real retrograde movement showed itself as in Europe, and reduced the amount of the discounts to $814,000,000 in 1879, simultaneously with the movement in France and in England, when prices had reached the lowest quotations, and when a resumption of business was about to occur. In a word, affairs resumed their course; from the end of the year the amount of paper discounted rose to $933,000,000, and the steady advance as set forth in table No. 3 continued each year, until it reached $1,300,000,000 in 1884. The panic had burst forth in Europe in 1882, and the agitation, so lively was its impulse, lasted during eighteen months; but, as we have stated, the rise in prices ceased in 1882. Starting from this time, a reaction appeared. The paper on hand lowered to $1,200,000,000 in 1885. This liquidation was scarcely noticeable, because we cover the whole Union, and there is always an upward movement in the new portions of it which have not yet taken part in business movements. If we note what occurred in the Associated Banks of New York, the very place where the greatest amount of business is carried on, the depression of the amount of paper on hand is most noticeable after the inflation observed at the height of the panic, while the decrease that we point out showed itself more slowly with the slackening of business. Thus, in the last period, the greatest amount of paper appears on hand--at the close of 1881, $350,000,000, and the minimum in December, 1884, the very year the panic had burst forth, and when, during the first months, the sum of $351,000,000 reappeared once more; except for a million, exactly the same amount there was in 1881. This maximum amount was only an accident, under the influence of pressing needs at the time of the difficulty, for since 1881 the yearly reduction of the maximum and minimum amounts ensued. This tendency had occurred suddenly, and disappeared likewise; the resumption dating from 1885, a year sooner than in Europe. The discounts of the New York Banks, which had been reduced to $287,000,000, rose immediately upon the opening of the new period of prosperity, and a growing activity carried them to $408,000,000 in 1889; after a few more fortunate years we come to the end of the period of prosperity and high prices. We gather the following about discounts from the balance sheets of the Associated Banks of New York. If we cast our eyes over the balance sheets of the National Banks of the Union, we must note a falling off of $100,000,000 in the paper discounted, that is, from $1,300,000,000 to $1,200,000,000 (1884-1885). After this short period of stoppage, clearly indicating the necessity for liquidation, discounts resumed their steady expansion, and rose to $1,470,000,000 in 1886, to $1,587,000,000 in 1887, and finally to $1,684,000,000 in 1888, when we were in the midst of a period of development and consequently of high prices and of prosperity; and the same is true in France and England. The study of a single section of the balance sheets, that of discounts and loans, has allowed us to follow the periods of prosperity, of panic, and of liquidation. When we next consider the other sections, we find the confirmation of our anticipations. Among these sections, in the order of importance, we notice first, public deposits in the form of running accounts; they constitute the reverse of the loans and discounts, whose total is immediately credited to the banks' clients, and the increase of paper on hand also follows. From 1865 to 1873 the steady increase was uninterrupted, viz., from $183,000,000 to $656,000,000; the maximum amount shows itself in the first quarter of 1873, eight months before the maximum of discounts and loans; in 1888 they ran down to $622,000,000; there is, say, a difference of $300,000,000 between the two totals, and this difference is the same, we observe, as that between the highest and the lowest of the two sections, as we notice it in the same year, during the liquidation of the panic of 1873. [Footnote: See table of balance sheets of the Banks of the United States.] In the last period the progression is the same; from $598,000,000 the amount of deposits advanced to $1,350,000,000, whilst discounts and loans reached $1,684,000,000; that is to say, there was still a difference of $334,000,000. The relationship of the two sections was much more marked than in France and in England, where the amounts carried in accounts current vary more. In the United States we then experienced a market based on credit, which, through discounts or loans by the banks, had reached the amount of the accounts current, and was about to call the clearing house into action to settle debts everywhere. The office of the circulation of bank notes, subsequent to the severe regulations enacted in 1863 for the organization of National Banks, had varied in the last two periods that we are studying. From 1863 to 1873, after the war troubles, in proportion as greenbacks were withdrawn, the bank notes issued by the National Banks not only took their place, but replaced those of the State Banks, whose position the National Banks had taken. We observe them rise firstly from $66,000,000 to $341,000,000 (1865-1873) at the sharpest period of the panic. We might even charge them with causing it, if the disproportion alone of the two sums, $341,000,000 bank notes compared with $944,000,000 of bills discounted, did not at once repel this theory. It is only necessary to glance at this idea to see its falsity. The maximum circulation of bank notes has here coincided with the panic, a thing which had not happened either in France or in England for a long time, and instead of presenting its highest figure during the liquidation of the panic of 1873, it shows us its lowest figure, $290,000,000 in 1877. Far indeed from increasing at this time as happened in Europe, the amount of bank notes in circulation decreased by means of the ebbs of metallic cash into the coffers of the banks: in reality the cause was lacking here; the ebb of specie was hardly felt at all. With $4,000,000 in 1865, the reserve was poorly provided, increasing to $48,000,000 in 1870. At the end of the bursting forth of the panic of 1873 it became reduced to $10,000,000, at the worst of the panic to $16,000,000; then, under the influence of a slight whirl, it rose to $33,000,000 in 1874, without reaching the highest figure of the preceding period, but soon the flow reappeared and reduced this metallic reserve to $8,000,000 in 1875. It was not until after this depression that the true ebb reappeared, when the circulation of bank notes was at its lowest figure ($290,000,000). Whilst the $8,000,000 specie reserve grew successively to $54,000,000, $79,000,000; $109,000,000, and finally to $128,000,000 in 1878, 1879, 1880, and 1881; that is to say, upon the approach of the panic, the circulation also expanded from $290,000,000 to its highest figure $323,000,000 in 1882, the year of the European crash and of the stoppage of the rise of prices in the United States. As to the minimum amount of the specie reserve, it is to be noted in 1883, between the critical years 1882 and 1884. Metallic reserves are too small in the United States for their fluctuations to exhibit the same regular course they offer us in Europe; the least need exhausts them, and the smallest payments fill them to overflowing. The panic soon brought about a default in payment and a need of metallic money to re-establish equilibrium, but this remedy, if it does precede panics, sometimes precedes them by a year, as we have observed in 1883, and the same irregularity is apparent whether we observe the banks of the whole United States, or the Associated Banks of the City of New York. After the panic of 1882-1884, the ebb of specie into the coffers of the National Banks of the United States and of the Associated Banks of New York resumed its usual course, and raised its level in the case of the National Banks from $97,000,000 to $177,000,000 between 1883 and 1885, and even to $181,000,000 in 1888. This ebb occurred both in England and France at the same time, proving that cash reserves do not increase to the detriment of each other; it is a flood of specie or of bar-gold rendered easily available, through the conclusion of the decline of prices and the slackening of business, extending to the whole world, and in which each one partakes in proportion to its wealth, and above all in proportion to its credit circulation, and of the perfection of the settlements by means of clearing houses. This regular course in the metallic reserves is no longer to be noted in the circulation of bank notes; instead of increasing and of entering its exchanges during the return of specie into the coffers of the banks, they again took part in the paper-money reserves. From $323,000,000 in 1882 we see the circulation of bank notes decrease each year little by little until it is reduced to $151,000,000 in 1888; and this remarkable fact confronts us in the face of an unheard of expansion of business, almost 50 per cent. greater than in 1873; and of a twofold simultaneous reappearance of $84,000,000 specie and of $172,000,000 bank notes. What then is the role of specie and of bank notes in the course of business in the United States? Much inferior to that which it plays in Europe in the absence of the machinery of a clearing house embracing the whole country, instead of being limited to some large cities. The multiplicity of banks has strikingly helped the economic progress of the United States. From 1,500 National Banks in 1865 with a capital of $393,000,000, the number rapidly rose to 2,089 in 1876. The panic of 1873 did not hinder the movement; however, during its liquidation, the number shrank to 2,048, only to rapidly advance to 2,500 by the close of 1882, and 2,664 in 1884, and this movement did not even suffer a slackening as in 1873 during the liquidation of its crisis; it continued steadily, and we enumerate 3,120 banks in 1888. The increase is a third more than in 1876, but it is far from being thus in the case of the capital, which only rose from $504,000,000 to $588,000,000--that is, only 16 per cent. The small banks in the new centres of population are the factor, then, which annually increases the number. THE CONDITION OF BUSINESS IN 1888-92.--[Footnote: The facts I state in this _resume_ are based upon statistics printed in the _Commercial and Financial Chronicle_.--DEC. W. THOM.]--The year 1888 was fairly prosperous despite a Presidential election, but securities were heavy, depression was general, and some few stocks shrank amazingly. Excessive issue of new railroad securities and disastrous competition between certain of the Southwestern roads were without prudence. Money was easy, bank-note circulation continued to decrease till it was only $151,000,000, and legal tenders to $81,000,000, but specie reserve rose to $181,000,000, the banking capital to $592,000,000 plus, the exports to $1,350,000,000, and discounts and loans rose to $1,684,000,000. The sharp speculations in wheat and the formation of the French copper corner caused a certain fluctuation in general business. Large crops, excepting wheat; a flourishing cotton manufacture, a decline in production of petroleum by agreement, a 6 per cent. decline in pig-iron production, a very heavy one in Bessemer iron, and a very small export trade as compared with imports occurred. But in the year 1889, the export movement, consisting largely of cotton, was very great, being the greatest since 1880, and near the maximum, and compared favorably with the immense imports induced by the new tariff of 1890. In fact, the year 1889 surpassed all its predecessors in the volume of trade movements; the bank clearings showing an increase of 13 per cent. over 1888. The cotton, corn, and oats crops were the largest ever raised, and the wheat crop was almost the largest. But cotton brought fair prices, and cotton manufactures and production of iron were also considerably ahead of any previous year, while petroleum played an important part at good prices. Railroad earnings showed a wonderful recovery from 1888, and many reports gave the largest figures ever recorded. During this year many consolidations and a number of foreclosures occurred. Railroad building fell to 5,000 miles compared to 7,000 in 1888. In general business, manufacturing and trade were extremely active, yielding plenty of work, good wages, and fair profits. But the wool crop and its manufacture, a decline in the anthracite coal production, farm-mortgage pressure in the middle West, and low rates for corn and oats were untoward circumstances. Speculation on the general exchange was small, indicating a growing congestion, as was proved by the low bank reserves, especially in the last quarter of the year; but there was a heavy absorption of investment securities. Gold, to the amount of $37,000,000, was exported in the first six months. A small amount of it returned before 1890. Failures exceeded those of 1888 by 203 in number and about 20 per cent. in money. The woollen trade contributed much of this showing. Importations surpassed all previous years, while exports exceeded them by nearly $20,000,000, and the net export of gold amounted to nearly $40,000,000. Money was easy during the first quarter, and then for a week a 10 per cent. rate occurred. Thereafter, excepting the usual July 1st hardening, easy rates prevailed till August. Stiffening and fluctuating rates ensued till 30 to 40 per cent. in exceptional cases had been reached in December. During the year, bank circulation declined to $126,000,000. Specie reserve sank to $164,000,000 and rose to $171,000,000 with the ending of the year; legal tenders to $84,000,000, and the number of banks rose to 3,326; their capital to $617,000,000; their deposits to $1,436,000,000, and their discounts and loans to $1,817,000,000, and surplus and undivided profits to $269,000,000. Unused deposits, capital, surplus, and undivided profits were growing very small in comparison with loans and discounts at the end of the year. The banks had to work closely, and the demands of the South and West for currency were severely felt. PANIC OF 1890.--In this condition the year 1890 opened, and, with ever growing pressure for bank accommodation, displayed great activity throughout all departments of trade and transportation, with an unequalled volume of transactions. But it was as impossible to grant to the overtrading the money needed,--though the Secretary of the Treasury, in seventy days, threw a million a day into the market by buying Government Bonds,--as it had been for the "Gentleman's Agreement" of 1888--that of the chief railroad presidents--to maintain rates, to permanently sustain prices of railroad securities against an oversupply of them; however, both delayed the inevitable. The debates on the silver question in Congress, leading to hopes of cheap money, and the higher prices due to this temporary and delusive stimulus; the large gross railroad earnings, demand for structural iron; the Buenos Ayres crisis, leading London to ship us large amounts of our securities; our small wheat, oats, and corn crops, and large cotton crop; the tariff discussion, ending with the McKinley Bill on October 6th, and the low bank reserves and money pressure beginning in August and lasting pretty steadily till December, and an immense shrinking of securities, were the chief features of the year; and failures beginning with that of Decker, Howell, & Co., in New York, on November 11th, and reaching a climax with the embarrassment of Baring Brothers [Footnote: Meanwhile Messrs. Charles M. Whitney & Co., David Richmond, J. C. Walcott & Co., Mills, Roberson, & Smith, Randall & Wierum, Gregory & Ballou, P. Gallaudet & Co., had failed in New York, the North River Bank of that city had been thrown into a receivership, and in Philadelphia the failure of Messrs. Barker Brothers, had been followed by a number of others. This was all bad enough, but sinks into insignificance when we recall the financial terror inspired by the great and historic house of Baring Brothers proving unable to meet its engagements, amounting to about, L28,000,000. The Bank of England received notice of its difficulties on September 7th, and by the 15th had secured from a syndicate, composed of the great London houses, a guaranty that it would be protected from loss to the amount of L4,000,000 if it would liquidate the Barings' business, and from the British Government the right to issue L7,000,000 of notes provided that sum was used to loan the Barings, and it therefore assumed on that date the task of paying the Barings' acceptances of L21,000,000 and L7,500,000 of other liabilities. Thus was averted what would probably have been the greatest panic in the world's history. That which occurred was a mere bagatelle to what was threatened. It is difficult to bestow too much credit upon Mr. William Lidderdale, Governor of the Bank of England, for conceiving and managing this plan. He has saved hundreds of thousands of homes and interests from misery. Under his able administration it is expected to extinguish the Barings' liabilities without calling on the Government, and it is believed something will be saved for the Barings from their former assets in business. This is deeply to be wished, for though the Barings have continued business under form of a stock concern with a million pounds capital, they are wonderfully restricted as compared with their former state. They have performed in banking too many helpful actions in furtherance of civilization to be eclipsed without sincere regret.] in mid-November, which failure itself greatly accelerated the panic, were the chief events of the year. Railroad building had increased to 6,081 miles, and the consequent new securities were poorly absorbed. Manufactures were generally prosperous. The huge imports to take advantage of old tariff rates absorbed much money, while the Baring liquidation and that of other houses identified with South American enterprises, and the distrust bred by our Silver Bill caused a return of our securities, necessitating such a curtailment of credit that our panic took place. From July through December 31st, money ruled high and fluctuating. The year shows a decline in circulation to $123,000,000, a decline of specie reserve to $178,000,000 with a subsequent rise to $190,000,000, a decline in legal tenders to $82,000,000, and of deposits to $1,485,000,000, while the banks increased to 3,573 with a capital of $657,000,000, and a surplus and reserve of $316,000,000, and discounts and loans rose to $1,932,000,000. The year 1891 has exhibited the usual incidents succeeding a time of reorganizations after panics and, after a period of selling and settlement, a rehabilitation of affairs and the consequent advance in prices of securities. The unprecedented abundance of our crops as a whole, coupled with the almost universal shortage in European countries, largely aided the rehabilitation. Bank balances reflected this startlingly. On February 26, 1891, loans and discounts and over-drafts amounted to $1,927,654,559.80. On May 4, 1891, loans and discounts and over-drafts amounted to $1,969,-$46,379.67. On the former date capital, deposits, surplus, and undivided profits amounted to $2,462,456,677.92, and on the latter date to $2,567,288,143.45. On July 9, 1891, discounts, loans, and over-drafts amounted to $1,963,704,948.07, and capital, deposits, surplus, and undivided profits to $2,522,609,679.78. Confidence is restored and prices have advanced, and should advance still further. There seem to be only three things that could check the advancing market, and of those the two chief ones seem pretty surely relegated to a fairly distant future. These latter two are, in the order of importance: (1) a free silver law, _i.e._, a law making, say, 67 cents' worth of silver pass for an equivalent of a 100-cent dollar; and (2) a very radical and abrupt change in our tariff law. The remaining and very minor influence is the breaking out of a general European war, which would at first induce a selling of our securities, and so lower prices, but which finally and shortly would benefit us by a subsequent returning flood of money exchanged for our various bread-stuffs, and supplies, and even securities of different sorts. It would be better for our future if the liquidation of the last panic had been more radical in some cases, notably in land speculation. In this liquidation has not been thorough, and, as far as these cases influence the market, it has remained for a long time unsound, and even now is not fully recovered. The past twelve months have witnessed a continued settling of old accounts, and the undertaking of new business, in a limited way, despite a somewhat uneasy feeling about silver and the now accomplished Presidential election. But the fact that an analysis of the bank returns to the Comptroller of the Treasury shows that available resources (capital, deposits, surplus, and undivided profits), as compared with demands (loans and discounts), are good and growing, considered in regard to the other signs indicating prosperity (see Introduction), justifies the prediction of the steady development of a prosperous period. PANIC OF 1893-4.--It was early in 1893 that I wrote the last page of _A Brief History of Panics in the United States_. Two of the three checks to business prosperity to which I then referred, virtually occurred very soon. The determined resolve of the "free silver" members of Congress to continue the heavy monthly utterance of silver dollars redeemable at par in gold kept many business men most disquieted. They saw that the free gold in the Treasury was sinking greatly and steadily. They knew, also, that there was semi-official assertion of the right of the United States to redeem its silver dollars in Government notes. The Free-Coinage Bill had been passed by the Senate in July. The House defeated it. The legal fights against certain great railroad combinations and frequent labor strikes put additional burdens on the market. In the United States and abroad the doubt of our willingness and ability to redeem our obligations at par in gold on demand grew most rapidly. Accordingly, exports of gold increased and hoarding of it began at home. To all this was added the expectation of a severe downward revision of our tariff laws if the Democratic Party should succeed, as was expected, in the Presidential election in November. Business was scared and slowing down and, therefore, using less and less of its working capital. The false ease of increasing loanable funds in the custody of the banks lulled many into a specious confidence. But gold was exported in increasing quantities. Should the Government issue bonds in exchange for gold for the purposes of redemption? The Philadelphia & Reading receivership occurred. Easy money led to many consolidations of transportation properties and to very many large commitments. Money tightened. In March, it loaned at 60% per annum. Would President Cleveland call an extra session of Congress in March to repeal the silver law and to issue bonds in order to replenish the free gold in the Treasury? The Stock Market showed a great decline in quotations. In April, 1894, Secretary of the Treasury Jno. G. Carlisle forbade the further issuance of gold certificates for gold deposited in the Treasury under Act of July 12, 1882, whenever the gold in the Treasury "reserved for the redemption of United States notes falls below $100,000,000." This further alarmed the business world, which was not reassured when on the 20th Carlisle announced that the Treasury would pay gold for all Treasury notes so long as he had "gold lawfully available for that purpose." President Cleveland, that stalwart man, uttered this high and firm pronouncement on April 24th: "The President and his Cabinet are absolutely harmonious in the determination to exercise every power conferred upon them to maintain the public credit, to keep the public faith, and to preserve the parity between gold and silver and between all financial obligations of the Government." Very good, thought business, but how and when will you act accordingly? Lack of business confidence increased greatly. Money rates advanced. Security values fell; imports greatly exceeded exports. Silver certificates were at 83. Something was about to snap in the general business machine. National Cordage broke from 57 to 15-1/2 on May 1st, receivers were appointed, and the panic of 1894 had declared itself and grew worse on the 4th and 5th. Call money rose to 40%. June witnessed great distress in business circles. On the 27th the Government of India stopped the coinage of silver for individuals and decreed the exchange value of the rupee at 16 pence. This lowered the exchange value of our silver bullion certificates to 62. President Cleveland helped matters somewhat by announcing that Congress would be convened early in September. In early July the panic increased somewhat despite the President's call for Congress to assemble on August 7th. Time loans were hardly obtainable. Conditions in August grew worse. Business was almost at a standstill, and failures were very frequent. From August 7th until the affirmative action on the 28th by the House of Representatives as to the repeal of the Silver Act, there was great concern. Then hope revived; but hoarding of currency increased. Great banking interests in New York helped the situation mightily by importing over $40,000,000 gold. September was an anxious but more hopeful month as the prompt adoption by the Senate of the Free-Silver Bill was anticipated. However, the weary debate dragged on in the Senate. President Cleveland demanded the unconditional adoption of the House measure. Certain compromisers, led by Senator Arthur P. German of Maryland, suggested that during each of the following fifteen months the Government purchase the minimum amount of 1,000,000 ounces of silver, and then stop all such purchases against which silver certificates had to be issued. This plan for speedy action President Cleveland and the Secretary of the Treasury opposed as worthless unless concurrently there was an issue of $100,000,000 of Government bonds to replenish the gold in the Treasury. They asserted that new legislation must be had before any such bonds could be validated. So the business world continued to suffer. Let me here state the fact, that without any fresh authorization, Secretary of the Treasury Carlisle did in January, 1895, issue $50,000,000 of Government bonds to replenish the free gold in the Treasury, and that an injunction suit against their sale was dissolved by Judge Cox at Washington on the 30th of that month. Gorman had been right. The credit of the country would not have suffered by the additional issuance of some final $60,000,000 (?) of silver certificates if the gold in the Treasury had concurrently been upbuilt to the extent of $50,000,000 to $100,000,000; but an immensity of business loss would have been averted. But to resume the orderly recital of those times. October dragged along its weary length, while the Senate debated and business withered. Finally, on the 30th, the Senate accepted unconditional repeal of the Free-Silver Act. On November 1st, it became a law. The fear of repudiation thus escaped, though with fearful loss, the country plunged into all the unsettlement caused by a too sudden and too extensive change in the tariff. These changes were announced by the House Committee on December 27th. The conditions mentioned in the last paragraph beginning on page 22 of the introduction to this book, were at work. Before the market had recovered from the "Silver panic" of 1893-4, the terror caused to the business world by the proposed very decided changes in the customs dues laid hold upon every trader in the United States and reflectedly upon every one of its citizens. It shook business throughout. Would not such a plan as is set forth in the footnote below [Footnote: "Mr. DeCourcy W. Thorn expressed himself yesterday as heartily indorsing the Democratic celebration to be held in this city January 17 next, to which all the party leaders will be invited and at which subjects of interest to the party will be discussed. "When asked to give his opinion on some of the questions worthy of discussion at this gathering Mr. Thorn mentioned the tariff and economy in the conduct of national affairs. "In the coming national Democratic celebration," he said, "I hope suggestions dealing with a rational reformation of the tariff and the need for national economy of every kind will be duly considered, and that on these two subjects alone, to be treated thoroughly but temperately, will this national Democratic gathering advise our party as to its best course to pursue. "In three successive Presidential canvasses since the Civil War the Democratic party has received a majority vote of the people of the United States, and in my opinion would have gained three thereby, instead of the alternate two, elections to the Presidency if the tariff issue, the major one of the two great issues--namely, tariff and economy--on which they won, had been so sought to be applied as not to threaten unduly to affect general business." PROTESTS AGAINST EXTRAVAGANCE "All will agree with me that a reasonable economy, instead of the actual wild extravagance of government, is more than ever a national need. Who will disagree with me, that in addition to the contribution from internal revenue, the tariff should be used merely to contribute towards the due expenses of the Government economically administered, but so applied as not to break down the standard of American citizenship, as exemplified in the working people of our country; and eked out, if it is possible, by contributions into the national treasury of sound inheritance taxes?" URGES CUT ON NECESSARIES "Is it not possible to apply that general plan as follows: Divide, say, all of the articles now upon the tariff list into three classes. "(_a_) All such as are usually found in the typical American homes--I mean the homes of those admirably called by Grover Cleveland the 'plain people,' who are just the same class, I believe, as those indicated by Abraham Lincoln, when he said, 'God must greatly love the common people, for he made so many of them'--and put that list of articles on a free list or a severely tariff-for-revenue-only list. "(_b_) Create a second division composed of all the articles of luxury. Put upon them the very highest tariff they will stand and yet come into the country, except in the case of articles of antique art. These latter should be admitted free. "(_c_) Keep upon all other articles now in the tariff list the actual duties for the period of one year, but after that period and the actual imposition of the proposed new tariff I am discussing shall have begun, put all the articles involved in Class _c_ upon a tariff-for-revenue-only basis, so constructed as not to break down the standard of the American workingman's living." YEAR TO MARKET STOCK "This period of one year--say, would allow manufacturers to market their stock on hand or already required to be produced on the basis of the market influenced by the quasi-Government protection extended by the existing tax laws of the nation. "At the end of this period the manufacturer would be obliged to produce at less cost in order to find a market in competition with his foreign competitor, which competition would result in lower prices that he and his foreign competitors would have to offer to the working people and other citizens of our country," EFFECT ON WAGES "Those working people and other citizens would for a year have been enjoying at lesser cost all of the articles used in the typical American home I have referred to and could without loss therefore well afford to submit to a reduction in wages so long as that reduction in wages was contemporaneous with affording them a proportionate or more than proportionate reduction in cost of the articles for whose purchase those wages were sought to be expended. At the same time, the manufacturer at a proportionately lesser cost of production, through this reduction in wage-paying, would be selling as much or more of his old products at their old profit. "Could we add to the income from the tariff and internal revenue the sums derived from the sound national inheritance tax I have mentioned above it is evident we would have supplied for the period of change from one tax system to another an 'adequate governor' to use a mechanical illustration, to prevent undue oscillation of prices in the business world." BANK RESOURCES TO PREVENT STRAIN "The further use of the existing financial agencies for cooperation of the banks in all sections to mass resources and apply them to prevent undue local strain upon credit dispels the fear of any necessary injury to the financial fabric in effecting this change. "Grover Cleveland, whose character and principles I have long revered, seemed to me in the application of his plan for tariff reform to have endangered at once the success and the permanence of his reform of the tariff--which you recall was confessedly and very properly not a reformation to free trade--by failing to provide in it a method for avoiding or at least minimizing and shortening any incident disturbance to the business world. His plans, further, failed by not reasonably insuring for the transition period from the old tariff to the new one sufficient national income for national expenses."] have virtually prevented all that? When I sent that plan, which I had stated in an interview in the _Baltimore Sun_ of December 24, 1910, to the various members of the Finance Committee of the United States Senate and to the Committee on Ways and Means of the House of Representatives, very many of them wrote me affirmatively on the subject. To revert, however to the due order of our tale. It was on January 17, 1893, that Secretary of the Treasury John G. Carlisle, without any new legislative authority, offered to sell $50,000,000 Government bonds already mentioned. If issued during the Silver-repeal fight when Gorman proposed his compromise, and if Carlisle had made it clear very early that as many such issues for gold would be made as were needed to keep the trading public safeguarded against any monetary-business cramping caused by the governmental policy affecting the tariff, a minimum rather than something approaching a maximum of disturbance would have followed. In better spirits because of the issuance of the $50,000,000 Government bonds for gold, the business world worked along. The House had passed the Tariff Bill early in February by a big majority. Business soon looked up decidedly. But the Seigniorage Bill was adopted in March. President Cleveland, that sturdy upholder of the Nation's credit, vetoed it. He knew that any new moral obligation to keep at a parity with gold dollars worth in themselves less than one hundred cents in gold would materially shake domestic and foreign credit. The veto had a deservedly splendid effect upon all our trading interests. This was increased by the failure of the House to override the President's veto of the Seigniorage Bill. But the Senate had not acted on the Tariff Bill. Business dwindled and there occurred strikes and other widespread labor troubles, especially in the bituminous coal trade. In many parts of the country the militia, and in Chicago United States troops, had to be employed to maintain order. Call money was a drug on the market. The net gold in the Treasury was very low. The Tariff Bill dragged its weary length along. President Cleveland and Chairman William L. Wilson of the Ways and Means Committee of the House insisted that the bill would produce sufficient revenue for the expenses of the Government. Senator Gorman and others in the United States Senate insisted to the contrary and demanded that the tariff on sugar should be kept at a high figure. A bitter controversy ensued. Finally, on August 13th, the House accepted the Senate Tariff Bill. It was time for some affirmative action, for among other threatening conditions the net gold in the Treasury had fallen to the lowest figure since resumption of specie payments in 1879. Business began to revive. The issue of $50,000,000 Government bonds for gold to replenish the Treasury stock was a very stimulating influence. The improvement dated virtually from the agreement in February between the Government and the Morgan-Belmont Syndicate to prevent the export of gold. In June, 1895, the Government gold was thus brought up to a round $100,000,000 for the first time since December, 1894. But notwithstanding the fact that the business outlook was decidedly better, the inevitable disturbances to business following a general change in the tariff, unsettled political conditions in Europe and the selling of American securities owned abroad, the shortage of the American cotton crop, President Cleveland's Venezuela message, which many persons thought might bring on war with England, and another decline in the Treasury free gold, again shook business confidence. Improvement, however, was stimulated by a remarkable increase in the supply of money in our balance of trade and by the virtual settlement of the Venezuelan question. The business situation was steadily clearing. The ills from the panic of 1893-4 were well behind us. The Spanish-American war proved to be harmless to us financially, while it tended to show that National neighborliness could be exercised in a splendidly unselfish way. By our treaty of peace with Spain on December 10, 1898, an additional emphasis was given to the revival of trade. During 1899 a great rush to speculate brought the pinches in money inevitable in those pre-Reserve Bank days, but could not stop the general broadening of business interests although the industrial situation was unsatisfactory in spots. Indeed, the succeeding year was to witness severe industrial trouble destined to cause a general set-back in business. The situation cleared considerably when the November elections of 1900 showed the country to be safe from the Bryan silver policy. Big business interests took hold of market conditions. Huge combinations of trade interests became the order of the day. The United States Steel trust was the vastest and was the transcendent achievement of J. Pierpont Morgan. The Stock Exchange was wild with speculation. The collapse came there in the famous decline of the 9th of May, 1901, precipitated by the Northern Pacific corner. In a month the market was tranquil again. The shooting of President McKinley produced great financial nervousness. The over-trading abroad, especially in Germany, was influencing us and all the rest of the world, which had not yet recovered from the vast financial cost of the English Boer War. The ever increasing closeness of business relations the world over--their virtual solidarity, in fact--was being illustrated again with us. A chief example was trouble in the copper groups following a slackened world demand for their products. Overtrading was doing its usual work. This induced loss of business courage in many quarters, or shall I say a realization that nowhere in the American business system was there any arrangement empowered so to marshal the competent strength of financial America that large and overwhelming disturbances should become impossible in business generally. Indeed, the Government forces seemed to tend contrariwise to big business practices. They took virtually their first step in "trust-busting" when they tried to break up the Northern Securities Company, which had been concocted to handle the celebrated Northern Pacific case. Labor troubles supervened. Many great speculative stock campaigns collapsed. The banks yielded to the imperative need to reduce credits. The year 1902 had almost experienced a widespread panic: but the marshaling of great private resources had restored confidence temporarily, and it closed in peace. PANIC OF 1903.--Then came the real beginning of the protracted "trust busting" campaign. Business took fright, for it believed it was to be bullied rather than soundly regulated. Great failures oh the Stock Exchange were its sure indications. Fear and distrust was upon all the American business world. Industries languished. Money was easy because less and less employed in trade. The great captains of industrial finance, however, patched up troubles and differences here and there and, availing themselves of the plentiful supply of money, soon had a notable speculation at work. Gradually the country took heart again and business experienced a revival. It was thought that President Roosevelt, elected in November, 1904, would help bring about discrimination between "good" trusts and "bad" trusts, and whose "trust" is bad! But "trust busting" became an even more popular and political pursuit. Indeed, the abuses practised by many of them had created a situation regarding which the question was becoming in the popular mind simply this, "Shall trustdom rule the people or the people rule the trusts?" The sound control of both before the Constitution of their country must be the happy solution. The Bill of May 9th of the House of Representatives, giving the Interstate Commerce Commission power to fix railroad rates, was ominous, and little noticed by the general business world; but some noticed and acted. The Senate had not voted; nor did they realize what rate-regulation implied to railroad balance sheets and so to the Stock Exchange. Some interest was selling securities. The business public was awakening to the fact that legislators, legislation, the people, and the law were hot after the business methods of many organizers. Fear, founded on a tardy awakening to facts, declared itself, but spasmodically, for now and again the great captains of finance and industry were trying to save the situation. They successfully aided whatever of momentum there was in general business. But Congressional activity as to any combinations in restraint of trade was unabated. It called upon the President for such information as the Interstate Commerce Commission might have as to a combination in restraint of trade between the Pennsylvania Railroad and certain lines allied with it. The battle between the old style and the new style of managing great corporations was fairly on. Labor troubles added to the existing disarrangement of business. San Francisco's vast earthquake and consuming fire sucked much capital away from financial centres in order to replace the $350,000,000 of capital destroyed. The money market was greatly restricted. The stock market showed signs of panic. The Secretary of the Treasury continued to help the situation as best he knew how. Notably, he offered $30,000,000 Panama Canal Bonds, and very successfully sold them. That afforded an additional basis for bank-note issuing. The stock market responded with a fine upward swing. Heavy dividends were declared by certain leading railroad and other corporations. Indeed many high records were made by securities and so distracted attention from that steady tide of keener inspection and stricter regulation by the agents of the people which was destined to unmoor and toss and injure many a financial craft. Railroads asserted that the country needed a great increase in railroad trackage, but that the actual treatment of the roads deterred extensions through frightening capital. So the year 1906 wore away after having sorely tried the nerves of the whole business world which it left in a most justly apprehensive state. THE PANIC OF 1907.--The panic of 1907 opened with great but feverish activity in business. Driven by necessity the railroads adopted the issuance of short-time notes for new capital, as the market would absorb no long-time obligations except at forbidding interest rates. Any signally untoward happening could promptly precipitate a panic. The United States Treasury withdrawal of Government deposits from the banks, and the collapse of the Knickerbocker Trust Company in New York were such happenings. On March 14th, the panic declared itself and pandemonium ruled on the New York Stock Exchange,--that prominent barometer of business conditions. In its coming it had exemplified again the characteristic symptoms of a panic which I have set forth on pages 7-16 of the introduction to this book. After the spasm of March 14th and the business cataclysm of the following October, the business world staggered along, but with the strength merely that results from courage and the exercise of reserve power husbanding its resources and lightening its load. The decrescendo movement of another business cycle had begun. Runs on financial institutions were prominent in our country. But throughout all the western world resources were strained. Money had been overused. Money rates were extremely high. Failures were frequent everywhere. In our own country painful disturbances, relaxation, and unrest were everywhere apparent. The radical doctrines of many political leaders tended to further unrest. The business of the country was halting between the need sanely to regulate "big business" and the fact that "big business" had been obliged to fight for prosperity in the welter of unallowable but very often undeniable conditions. The railroads justly claimed that they were forbidden living rates. Their opponents accused them of carelessness and waste. The railroads and the Interstate Commerce Commission were the protagonists respectively of the conservative and the radical thought of the country, which is so rich in natural wealth and is inhabited by so resourceful a people that though by statutes they be well managed or not, their National wealth increases. So ran the business world away, but with a very slow and steady approach towards a rational rectification of disputed legislation as affecting business. Meanwhile the courageous "captains of industry" were leading in business as best they could and were better appreciating the temper and needs of the American people. Added to the difficulties resulting from our languishing trade at home, we suffered reflectedly from the constriction of business in Europe, which was acutely aware that the disturbance in the Balkans threatened to destroy the peace of Europe. Conditions were not yet quite ready there for a cataclysmic war. For example, statistics had not quite demonstrated to Germany that the physique of her people and the rate of increase of their families were declining while the expenditures for superpreparedness for war was demanding either retroaction in that regard or else an expenditure from the principal of their property. Germany did make in one year the sacrifice of five per cent. of her principal for yet fuller preparedness for war. Indeed since late in 1908, it is fair to say that consciously or unconsciously the whole world has been in travail. Whatever broad measures statesmen anywhere have promulgated, have been subjected to the unusual stress and strain of world-wide unrest. Like the treacherous undertow that wrenches those who venture in, has been the world unrest upon all phases, incidences, and predicates of business. Some of us have long realized this; some have not. With November, 1908, came the election of that great constitutionist, Taft, to the American Presidency upon a platform less radical than that of his opponent. This heartened the constructive forces of the country. But very little upbuilding resulted. The coming revision of the tariff was of itself sufficient further to restrict business undertakings, and to cause many great producers of goods to arrange to unload at lowering prices their actual and their future outputs. But the conserving of resources since the panic had helped the superficial situation, and the spasmodic stimulus that so often follows a general heightening of the tariff showed itself after the adoption of the tariff bill in August, 1909. The illness and after a month or two the death of the great business leader, Harriman, caused in the securities market a great decline. Fundamental conditions were unsettled. The best that could be expected was a see-saw movement until some power should set our country and the business world at large once more securely on their respective bases. The Anti-Trust Law, the Interstate Commerce Law, and such like influences continued to disturb the United States, while Europe was beneath the surface unendingly agitated. General business marked time while statesmen or pseudo-statesmen planned and promised panaceas. President Taft joined that populous group. The securities market, that barometer of business, fell beneath such assurance of further unsettlement. How can you continue to trade unless reasonably sure that conditions will remain fairly constant! All this militated against a normally quick recovery from a great panic. Little scares were frequently experienced. Influences matured and presented one great political party split into two great factions, while the other chief party endured something of the same development. A conservative handling of National policies, or a radical one was the question in each case. The November elections indicated a popular revolt against the party in power--the Republican. Unshaken, President Taft followed his convictions and in his Presidential message, of December, 1910, to Congress called for a halt in legislating to regulate corporations, until the effect of the laws on the statute books could be studied. The stock, money, and industrial markets were marking time. Not to go forward in business or elsewhere is in itself to retrograde. Thus opened the year 1911. Under the influence of easy money, better business on some of the western railroads, better dividend declarations here and there, a rosy "prediction as to the early future of the iron market, and the belief that the Interstate Commerce Commission would grant better rates to the railroads, general business felt encouraged and prices advanced somewhat. But in February the Interstate Commerce Commission forbade the railroads any increase whatever in rates. The roads were obliged to institute many cramping economies which to them very often meant the using up of their corpus and to the business world of the United States a permeating retrogressive influence. Reductions in railroad dividends were symptomatic of that. To add to all this there developed additional business unrest predicated in the general tariff change favored by the House of Representatives in April. The United States Supreme Court decision interpreting the Sherman Anti-Trust Law of 1890 as affecting the Standard Oil Company case and the American Tobacco Company case were delivered late in May and were unexpectedly reassuring to business. This was another evidence that the best thought of the Nation everywhere was seeking to rectify the looseness of the past without killing business initiative and continued endeavor. So matters see-sawed in the business world. It was indeed in a state of unstable equilibrum. Stocks declined now abruptly; then, after some slight recovery, gently; but the slant was decidedly downward. The Government felt that its duty required it to push forward the investigation of industrial corporations; and that the Nation so demanded. And it was in October that the chief of such corporations--the United States Steel Trust--had a Government suit for dissolution filed against it. The sturdy bell-wether of the corporation flock was attacked by the great United States Government. What would happen to the humbler members of the flock! Certain court decisions were reassuring to corporations in November and business brightened for the time being and during much of December in certain notable instances, for in that month the Interstate Commerce Commission report appeared and seemed less drastic in tone. The year 1912 opened with an additional influence promising increased alarm and marking of time. I mean that candidates for the Presidential nomination began their canvasses, which, of course, implied new plans for making new laws to govern business conditions. Former President Roosevelt announced his candidacy in February. President Taft was already constructively in the field. Governor Harmon of Ohio was mentioned in many quarters as a successful reformer who wished soundly to guide but not unwittingly injure business, while Underwood was similarly praised in addition to his record on the recasting of the tariff into a further revenue measure. Champ Clark, Speaker of the House of Representatives, was a popular candidate. And Woodrow Wilson loomed up as though forecast by destiny. At first and in many important sections of the country considerably more delegates to the Republican National Presidential Convention were chosen for Mr. Taft than for Mr. Roosevelt. This and brisker business served to hearten conservative interests, and the general market revived despite the decidedly downward influence in our country of the gigantic strike among English coal operators, who thereby spread trouble throughout the British Empire, and, through the solidarity of the financial world to-day, affected every financial centre. The remainder of the year was dominated by the Presidential canvass. Taft, called by many a "stand-patter"; Roosevelt, "the insurgent," who proposed to mend all the troubles of the political public by his usual brusque methods; and Woodrow Wilson, the "conservative with a move on," made their appeals for popular support. Until the verdict in November a see-saw market took place in the United States, while Europe and reflectedly the remainder of the world became alarmed lest the war declared in October by the Balkan States against Turkey should produce world-wide trouble. The November Presidential election showed that Woodrow Wilson received 435 votes, Mr. Roosevelt 90, and Mr. Taft 8. However, the popular vote for Woodrow Wilson was more than 1,000,000 below that cast for Messrs. Roosevelt and Taft jointly, and about 2,000,000 short of a majority of all the votes cast for the Presidential nominees--Socialist, Republican, Democratic, and so on. But the vitally significant fact is that the popular vote for the "stand-pat" candidate--Mr. Taft--was very small in comparison with the joint vote of the three candidates whose platforms called for a drastic handling of National policies,--Debs, Roosevelt, and Wilson. Drastic recasting of the rules of any game unsettles play. The market dropped. But fortunately for the country the ripe and balanced and active intellect and character of Woodrow Wilson, elected President, lent much re-assurance against the extensive political surgery he had been chosen to perform. All knew that he would be thorough and reasoning. All the grievous handicaps that business suffers from uncertainty of regulation, it was thought would be overcome as promptly as possible. But the pledged great change of the tariff was enough to induce retrenchment of business endeavor. With a major factor unusual in any proposition, how can stability, much less progress, be expected in any interest? THE PANIC OF 19l3.--Retrogression in business began very early in 1913 and increased until mid-October, 1914. On October 3, 1913, the new Tariff had become a law; but other reforms still jostled business. However, by mid-October, 1914, the Interstate Commerce Commission seemed to have become less radical in its views, the Industrial Trade Commission was at work apparently studying the essentials of the industrial situation, the United States Supreme Court was delivering opinions in check of indeterminate statutory meddling with business and the splendid potential of the Reserve Bank system was offering for use. It is hard not to overstate the vast re-assurance offered to business by linking together the banking power of the country through the Reserve Bank system. Just as an enormously large number of troops skilfully thrown into an endangered--a panicky--position will ensure success, so can the vast resources of the Reserve Bank system restore financial order when panic fear is declaring itself. During the past two years of threatening from the disturbances in Mexico, our country has learned to forecast the benefit that the Reserve Bank system predicates; but our stay and confidence has been the cool and far-seeing statesmanship of our great President, Woodrow Wilson. The breaking out of the "World War" in August, 1914, had so flooded our market with securities held in Europe that the Stock Exchange, following the continental example, closed from July 31st till November 28th, when the New York Stock Exchange and other American stock exchanges opened for restricted business in bonds and on December 15th to unlimited trading in stocks and bonds. Other kinds of exchanges acted much the same. This checked business in every direction, despite the great issuance of temporary Clearing House certificates. In two months the latter tendency was changed in many quarters. Then began the "war boom." Gradually it has spread, bringing such enormous profits in all our lines of business supplying the needs of the "Great War," that the first twelve months of it showed more than a billion dollars trade balance in our favor, and that balance then began increasing on a progressive scale. Money is yet plentiful. All business is stimulated. Our crops are unexampled in quantity and money value. Everything points to great prosperity unchecked until the "Great War" ceases and withdraws the stimulating demand for our supplies. Then will come a readjustment of our trade. Money will have become actually or potentially scarce because of the previous vast expansion of our business, and all the banking power of our country will be requisite to prevent a crashing panic. The Reserve Banks will have gotten fully to work by then, it is to be hoped. They will be needed to lead in the life-saving operations. Such first aid to the injured will obviate such financial sufferings as the old-time panics presented. They can hardly be expected to reduce the casualties to the volume of the slow panic in securities in the year 1913, for the volume of business involved at present is vastly more swollen and the kind more circumscribed. It is interesting to note that panics have continued to appear about as regularly as usual, but less crushingly, since 1890, the date up to which the first and second editions of this book had traced them. Remedial or partially preventive measures have been more and more utilized by the financial powers to control them. Never will panics cease so long as trade and fear are exemplified on this earth, but just as modern medicine is overcoming the dangers threatening the physical man, so is modern finance overcoming panic and the other dangers which threaten financial stability. After all, reserve power and only a rational use of financial resources are the surest preventive of panic. And that the American people have not been forced through entrance into the "World War" to deplete their reserve strength, especially in a financial way, is due to the splendid conduct of our great President. He is leading this country to unexampled prosperity. Instead of consenting that old abuses in the business world should continue until an over-indignant public had grown riotously injurious, he has guided the current of their wrath, initiated or promulgated the methods for redressing their grievances, and has saved to the country, to its people, and to general business itself, the splendid and full service of business enterprise freed from the abuses and handicaps that unregulated conditions had forced it to employ in the unrestrained struggles of the open mart. DECOURCY W. THOM. 
38439	----	generously made available by The Internet Archive.) CURIOSITIES OF IMPECUNIOSITY. BY H. G. SOMERVILLE, AUTHOR OF "NOT YET," "SELF AND SELF-SACRIFICE," ETC. LONDON: RICHARD BENTLEY & SON, NEW BURLINGTON STREET, W. Publishers in Ordinary to Her Majesty the Queen. 1896. LONDON: PRINTED BY WILLIAM CLOWES AND SONS, LIMITED, STAMFORD STREET AND CHARING CROSS. PREFACE. It is customary for the proprietor when starting a newspaper or periodical to issue a notice to the public explaining--or purporting to explain--the _raison d'être_ of the new venture, which notices, with very trifling exceptions, are to the effect that the projected journal "will supply a want long felt." I might, in sending forth the following pages, state something similar with perfect truth, since if the little work be as successful as (I say it with all modesty) it ought to be, it will unquestionably _supply_ a want long felt--by the author. It is frequently averred nowadays that much that is written bears evidence of being of a non-practical character, and under these circumstances, I felt I should take a pardonable pride in being able to point to one volume in the English language to which this stigma could not be applied; for I flatter myself the subject of Impecuniosity is one with which I have long--too long--been practically familiar. H. G. SOMERVILLE. CONTENTS. CHAP. PAGE I. THE MORAL AND IMMORAL EFFECTS OF IMPECUNIOSITY 1 II. IMPECUNIOSITY OF THE GREAT 13 III. THE SHIFTS OF IMPECUNIOSITY 25 IV. THE LUCK AND ILL LUCK OF IMPECUNIOSITY 48 V. THE INGENUITY OF IMPECUNIOSITY 73 VI. THE IMPECUNIOSITY OF ACTORS 87 VII. IMPECUNIOSITY OF ARTISTS 132 VIII. IMPECUNIOSITY OF AUTHORS 158 IX. THE ROMANCE OF IMPECUNIOSITY 196 CURIOSITIES OF IMPECUNIOSITY. CHAPTER I. THE MORAL AND IMMORAL EFFECTS OF IMPECUNIOSITY. "I wish the good old times would come again, when we were not quite so rich," says Bridget Elia. "I am sure we were a great deal happier. A purchase is but a purchase now that you have money enough. Formerly it used to be a triumph. When we coveted a cheap luxury, we were used to have a debate two or three days before, and to weigh the for and against, and think what we might spare it out of, and what savings we could hit upon that would be an equivalent. A thing was worth buying then, when we felt the money we paid for it. Do you remember the brown suit which you made to hang upon you, it grew so threadbare, and all because of that folio Beaumont and Fletcher which you dragged home late at night from Barker's in Covent Garden? Do you remember how we eyed it for weeks before we could make up our minds to the purchase, and had not come to a determination till it was near ten o'clock on the Saturday night, when you set off from Islington, fearing you should be too late; and when the old bookseller with some grumbling opened his shop, and by the twinkling taper lighted out the relic from his dusty treasure-house, and when you lugged it home wishing it were twice as cumbersome, and when you presented it to me, and when we were exploring the perfection of it, and while I was repairing some of the loose leaves with paste, which your impatience would not suffer to be left till daybreak, was there no pleasure in being a poor man? Do you remember our pleasant walks to Enfield, and Potter's Bar, and Waltham, when we had a holiday? Holidays and all other fun are gone now we are rich,--and the little hand-basket in which I used to deposit our day's fare of savoury cold lamb, and how you would pry about at noontide for some decent house where we might go in and produce our store, only paying for the ale that you must call for, and speculate upon the looks of the landlady. We had cheerful looks for one another, and would eat our plain food savourily. You are too proud to see a play anywhere now but in the pit. Do you remember where it was we sat when we saw the 'Battle of Hexham,' and 'The Surrender of Calais,' and Bannister and Mrs. Bland in 'The Children of the Wood,' when we squeezed out our shillings apiece to sit three or four times in a season in the one shilling gallery? You used to say that the gallery was the best place for seeing, and was the best place of all for enjoying a play socially, that the company we met there, not being in general readers of plays, were obliged to attend the more. I appeal to you whether, as a woman, I met generally with less attention and accommodation than I have since in more expensive situations in the house. You cannot see, you say, in the gallery now. I am sure we saw--and heard too--well enough then; but sight and all, I think, is gone with our poverty." But this is not the experience of every one. "Moralists," Sydney Smith remarks, "tell you of the evils of wealth and station, and the happiness of poverty. I have been very poor the greater part of my life and have borne it, I believe, as well as most people; but I can safely say I have been happier for every guinea I have earned." Doctor Johnson, in addition to alleging that "Poverty is a great enemy to human happiness; it certainly destroys liberty, and it makes some virtues impracticable and others extremely difficult," maintains that "poverty takes away so many means of doing good, and produces so much inability to resist evil, both natural and moral, that it is by all virtuous means to be avoided." Burns is stronger still in his denunciation, exclaiming, "Poverty, thou half-sister of death, thou cousin-german of hell, where shall I find force of execration equal to the amplitude of thy demerits?" But in striking contrast to these, is that remarkable passage in George Sand's 'Consuelo,' in which every known blessing and virtue is attributed to "the goddess--the good goddess--of poverty." Samuel Smiles is of opinion that "nothing sharpens a man's wits like poverty. Hence many of the greatest men have originally been poor men. Poverty often purifies and braces a man's morals. To spirited people difficult tasks are usually the most delightful ones. If we may rely upon the testimony of history, men are brave, truthful, and magnanimous, not in proportion to their wealth, but in proportion to the smallness of their means." With this I agree to a certain extent; but I claim for impecuniosity certain charms and characteristics not associated with poverty. To me the former conveys the idea of a temporary shortness of funds; the latter of a chronic state of want. I should also have preferred to say, "Nothing sharpens a man's wits like impecuniosity," for to many minds poverty, _pur et simple_, has been simply crushing. A volume might be filled with the different opinions that have been expressed on this subject, and as there is abundant proof that many who have become great in science, literature, and art, have found insufficient means a stimulus to exertion, it must be conceded that poverty is a splendid thing for those who are equal to fighting against it. Although impecuniosity has been most extensively experienced by actors, authors, and artists, many of the mighty in law, medicine, and the army and navy, have furnished instances of its universality, but comparatively few cases are to be found connected with commerce. Of course it may be urged that the struggles of business men are, with few exceptions, unrecorded; but still I think their experience on this subject is rather of "the trials of poverty." The history of George Moore furnishes an interesting instance of the early struggles of a literally "commercial" man. When he came to London in 1825, he was possessed of a most modest amount of money; and on the day following his arrival in London he made application after application for employment without success, being sometimes received with laughter on account of his country-cut clothes and Cumberland dialect. At the establishment of Messrs. Meeking in Holborn, he was asked if he wanted a porter's situation. So broken-hearted was he at his many rebuffs, that he could not send a letter home, it was so blotted with tears. At last he was engaged by Mr. Ray, of Soho Square, at a salary of £30 a year, and bargained with a man driving a pony-cart to convey the box containing all his personal effects. They had not proceeded far when Moore missed the man: pony, cart, and trunk had vanished. The poor fellow sat down on a doorstep almost broken-hearted at his misfortune. After waiting for two hours, not knowing what to do for the best, he beheld a pony-cart approaching, and his joy may be imagined when he recognised the identical man with his identical trunk. The carrier, who had called somewhere in a bye-street and so missed Moore, did not scruple to laugh at him for his "greenness" in trusting a stranger. In gratitude, young Moore proffered the man his whole capital, consisting of nine shillings, which the driver declined, saying "he had agreed for five, and five was all he wanted," an instance of honesty which Mr. Moore, the merchant, never forgot. Want of money does not always demoralise. Andrew Marvell, the son of a Yorkshire minister and schoolmaster, entered Trinity College, Cambridge, at the early age of thirteen. Decoyed from home by the Jesuits, he was discovered by his father in a bookseller's in London, and induced to return to college, where he took his B.A. degree in 1628. He then appears to have travelled considerably in France and Italy, while from 1663 to 1665 he was secretary to the Embassy to Muscovy, Sweden, and Denmark. In 1660 he was chosen to represent his native town, Kingston-on-Hull, in Parliament. Here he made himself so obnoxious to the governing party, that his life was threatened, and he was forced to go into hiding. His conspicuous ability and marvellous wit were acknowledged by all, and appreciated by Charles II., who took pleasure in his company, and on one occasion instructed his Lord Treasurer to ferret him out, and ascertain in what way he could help him. At this time Marvell was living in a court off the Strand, up two pair of stairs, and there Lord Danby, abruptly opening the door, discovered him writing. He suggested that the Treasurer had mistaken his way; but his lordship replied, "Not now I have found Mr. Marvell;" adding that "His Majesty wished to know what he could do to serve him." Marvell replied that "it was not in His Majesty's power to serve him;" adding that "he knew full well the nature of Courts, having been in many; and that whosoever is distinguished by the favour of the prince, is expected to vote in his interest." Lord Danby told him that "His Majesty, from the just sense he had of his merit alone, desired to know whether there was any place at Court he could be pleased with." The answer to this was that "he could not with honour accept the offer, since if he did he must either be ungrateful to the king in voting against him, or false to his country in giving in to the measures of the Court. The only favour therefore which he begged of His Majesty was, that he would esteem him as faithful a subject as any he had, and more truly in his interest by refusing his offers, than he could have been by embracing them." After this Lord Danby said that "the king had ordered Mr. Marvell £1000, which he hoped he would receive till he could think of something farther to ask His Majesty;" whereupon Marvell called to his serving-boy,-- "Jack, what had I for dinner yesterday?" "The little shoulder of mutton." "Right! What shall I have to-day?" "The blade bone boiled." "Right! You see, my lord, my dinner is provided, and I do not want the piece of paper." The Lord Treasurer departed, finding his mission vain; and, shortly afterwards, Marvell sent his boy out to borrow a guinea from a friend. The incorruptible integrity he had displayed was by no means due to affluence. Another historical case where poverty and patriotism have been blended is that of Admiral Rodney. At the general election in 1768 he was returned for Northampton, after a violent contest, the expense of which, combined with a fatal passion for gaming, compelled him to fly from the importunities of his creditors. While residing in Paris he is said to have been occasionally in want of the veriest trifle for necessaries, which fact becoming known, the French Government, through the Duc de Biron, offered him high rank in their navy. His reply was worthy of a sailor and a gentleman. "Monsieur le Duc," said he, "my distresses have driven me from my country, but no temptation can estrange me from her service; had this offer been voluntary on your part, I should have considered it an insult; but it proceeds from a source that can do no wrong." The foregoing illustrations of the inability of impecuniosity to drag certain characters from off their high pedestal of honour, are unfortunately counterbalanced by the considerably too numerous instances of those who have not been proof against its degrading effects. The characteristics of such as have succumbed are naturally the antitheses of those just referred to; instead of strong, healthy, moral minds, their natures are found to be more or less weak, selfish, and in every case wanting, to some extent, in self-respect. The last-named attribute undoubtedly supplying the chief cause of defection. In this category may be placed Desiderius Erasmus, one of the most remarkable scholars of the 15th and 16th centuries, if not, as is considered by some, one of the most illustrious men that ever lived. The benefits that he conferred on the world at large by his profound and extensive erudition are so priceless that it seems a shame to pillory one so revered; but "necessity has no law," and as he was chronically necessitous his weakness on one occasion must be laid bare. Independently of his failing to rise superior to the want of money, which will be referred to directly, it will be seen that his character lacked nobility, by his own confession. He was at the time of Luther pre-eminent in the world of letters, his fame as a student of the deepest research was world-wide, acknowledged not only by the sovereigns and popes of Europe, but by our own monarch, Henry VIII., and by all the men of learning of that age. Thus his power and influence were immense, and it is deeply to be regretted that his cowardice should have prevented him from espousing the doctrines of Luther, since there is no doubt he believed in them. "Many loved truth and lavished life's best oil Amid the dust of books to find her, Content at last for guerdon of their toil With the cast mantle she had left behind her. Many in sad faith sought for her, Many with crossed hands sighed for her, But these our brothers fought for her, At life's dear peril wrought for her, So loved her that they died for her." Erasmus was not one of those who died for the love of truth, but rather one who "with crossed hands, sighed for her," since in one of his letters he says,-- "Wherein could I have assisted Luther if I had declared myself for him, and shared the danger along with him? Only thus far, that, instead of one man, two would have perished. I cannot conceive what he means by writing with such a spirit (so fearlessly); one thing I know too well, that he hath brought a great odium upon the lovers of literature. It is true that he hath given us many wholesome doctrines and many good counsels, and I wish he had not defeated the effect of them by his intolerable faults. But if he had written everything in the most unexceptionable manner I had no inclination to die for the sake of truth. Every man has not the courage requisite to make a martyr; and I am afraid, that if I were put to the trial, I should imitate St. Peter." Deliciously truthful this, is it not? The practical way in which he reveals his creed, "self-preservation is the first law of nature," is particularly interesting, more especially as it is so thoroughly in keeping with the sentiments displayed on the occasion when from want of money he penned the following letter to his friend James Battus, beseeching him to dun the Marchioness of Vere, in the following terms: "You must go to her and excuse my shyness on the ground that I cannot tolerate explaining my difficulties in person. Tell her the need I am in. That Italy is the place to get a degree; explain to her how much more honour I am likely to do her than those theologians she keeps about her. They give forth mere commonplaces. I write what will last for ever. Tell her that fellows like them are to be met with everywhere--the like of me only appears in the course of many ages--_i.e._ if you don't mind drawing the long-bow in the cause of friendship. What a discredit it would be to her should St. Jerome"--whose works he was preparing--"appear with discredit for the want of a few gold pieces." That the opinions expressed were perfectly truthful there is no gainsaying; but the taste, or rather, want of it, that dictated such an epistle is pitiable, and materially mars the character of one who as far as learning is concerned was indisputably great. If culture could avail against the deteriorating effects of impecuniosity the career of Orator Henley would have been a different one. The son of a Leicestershire vicar, and educated at St. John's, Cambridge, he attained considerable eminence as a linguist, and while keeping a school in his native place compiled his 'Universal Grammar,' which was written in ten languages. He afterwards came to be regarded as a sort of ecclesiastical outlaw, having a room in Newport Market, Leicester Square, where he started as a quack divine and public lecturer, Sundays being devoted to divinity, Wednesdays and Thursdays to secular orations, the charge for admission one shilling. He afterwards migrated to Clare Market, and became a favourite among the butchers; but though gifted with much oratorical power, he obtained but a precarious subsistence. When at his pecuniary worst he seems to have been at his inventive best, and in proportion to the lowness of his funds his audacity rose. On one occasion when particularly pressed he advertised a meeting for shoemakers to witness a new invention for making shoes, undertaking to make a pair in presence of the audience in an incredibly short space. When the evening arrived, and the room was filled with the followers of Crispin, Mr. Henley simply cut the tops off a pair of old boots, and thereby illustrating the motto to his advertisement, "Omne majus continent in se minus" ("The greater includes the less").[1] [1] The elder D'Israeli in summing up the character of this extraordinary man, who left behind him more than 6000 MSS., says, "A scholar of great acquirements and of no mean genius; hardy and inventive, eloquent and witty; he might have been an ornament to literature, which he made ridiculous; and the pride of the pulpit which he so egregiously disgraced; but having blunted and worn out that interior feeling which is the instinct of the good man, and the wisdom of the wise, there was no balance in his passions, and the decorum of life was sacrificed to its selfishness. He condescended to live on the follies of the people, and his sordid nature had changed him till he crept, 'licking the dust with the serpent.'" Dr. Howard, the Rector of St. George's, Southwark, and Chaplain to the Dowager Princess of Wales, towards the close of the last century, was invariably short of money, a fact pretty well known to his tradesmen. On one occasion he ordered a canonical wig from a peruke-maker's in Leicester Fields, and the porter had instructions not to leave it till the bill was paid. Arrived at the rectory, the man asked for the doctor. "I've brought your wig home, sir." "Oh, ah," replied the doctor; "quite right--you can leave it. Just put it down there." "No, I can't leave it, sir--that is, without the money." "Oh, very well, then. I'll try it on." The man handed him the wig, and as soon as the doctor put it on, he said to the messenger,-- "This article has been bought and delivered; if you dare to touch it, I will prosecute you for robbery." Dr. Howard once preached from the text, "Have patience with me, and I will pay thee all"--a passage gratifying to the feelings of an audience including many of his creditors. He dwelt at considerable length on the blessings and duty of patience, till it was time to close, and then said, "Now, brethren, I am come to the second part of my discourse, which is, 'And I will pay ye all,' _but that I shall defer to a future opportunity_." Colton, the author of 'Lacon,' who became vicar of the poor living of Kew and Petersham, must likewise be included in the list of those who have succumbed to circumstances. Finding himself unable to pay the price of apartments in the neighbourhood of his living, he transported his gun, fishing-rod, and few books (one of which was De Foe's 'History of the Devil') to Soho, where he rented a couple of rooms in a small house overlooking St. Anne's burial-ground. There he wrote his book of 'Aphorisms,' a broken phial placed in a saucer serving him as an inkstand. His copy was written on scraps of paper and blank sides of letters, and he dined at an eating-house, or cooked a chop for himself. At one time he opened a wine-cellar in another person's name under a Methodist chapel in Dean Street, Soho, a position for a spiritual adviser which would scarcely be tolerated even in these days of considerable religious liberty. Many amusing stories are told of Joe Haines, a comedian of the time of Charles II., sometimes called "Count" Haines. It is said that he was arrested one morning by two bailiffs for a debt of £20, when he saw a bishop, to whom he was related, passing along in his coach. With ready resource he immediately saw a loophole for escape, and, turning to the men he said, "Let me speak to his lordship, to whom I am well known, and he will pay the debt and your charges into the bargain." The bailiffs thought they might venture this, as they were within two or three yards of the coach, and acceded to his request. Joe boldly advanced and took his hat off to the bishop. His lordship ordered the coach to stop, when Joe whispered to the divine that the two men were suffering from such scruples of conscience that he feared they would hang themselves, suggesting that his lordship should invite them to his house, and promise to satisfy them. The bishop agreed, and calling to the bailiffs, he said, "You two men come to me to-morrow morning, and I will satisfy you." The men bowed and went away pleased, and early the next day waited on his lordship, who, when they were ushered in, said, "Well, my men, what are these scruples of conscience?" "Scruples?" replied one of them, "we have no scruples! We are bailiffs, my lord, who yesterday arrested your cousin, Joe Haines, for a debt of £20, and your lordship kindly promised to satisfy us." The trick was strange, but the result was stranger, for his lordship, either appreciating its cleverness, or considering himself bound by the promise he had unintentionally given, there and then settled with the men in full. John Rich, manager of the Lincoln's Inn Fields and Covent Garden Theatres, 1681-1761, was another dramatic delinquent. It was owing to his marvellous ability as harlequin that pantomime achieved its popularity. His gesticulation is said to have been so perfectly expressive of his meaning that every motion of his hand or head was a kind of dumb eloquence, readily understood by the audience. One evening, when returning from the theatre in a cab, having ordered the coachman to drive to the "Sun," a tavern in Clare Market, he threw himself out of the coach window and through the open window of the tavern parlour, just as the driver was about to draw up. The man then descended from the box, touched his hat, and stood waiting for his passenger to alight. Finding at length there was no one visible he besought a few blessings on the scoundrel who had imposed upon him, remounted his box, and was about to drive off, when Rich, who had been watching, vaulted back into the vehicle, and, putting his head out, asked, "where the devil he was driving to?" Almost paralyzed with fear the driver got down again, but could not be persuaded to take his fare, though he was offered a shilling for himself, exclaiming, "No no, that won't do. I know you too well for all your shoes; and so Mr. Devil, for once you're outwitted." In addition to his successful pantomimes, his production of the 'Beggar's Opera' was a wonderful hit; but he seems never to have been well off, and was at one time in such difficulties that he hit upon the clever expedient of taking a house situated in three different counties in order to free himself from the attentions of sheriffs' officers. One name must not be omitted from this section of the subject, that of Richard Brinsley Sheridan. His adroitness in profiting by his very practical jokes commenced soon after his leaving Harrow, when spending a few days at Bristol. He wanted a new pair of boots, but, not having money to pay for them, ordered a pair from two bootmakers, to be sent home on the morning of his departure, payment being promised on delivery. When the first tradesman arrived he complained of the fit of one boot, and when the second came he objected to his make of the boot for the other foot. Each bootmaker took a boot back to be stretched. When the dupes called next day, each displaying a boot, they found that Sheridan had departed in the fellow pieces of their property. Later in life his difficulties became chronic, but his ingenuity was generally equal to them. Having arranged to give a banquet to the leaders of the Opposition, he found himself on the morning of the event without port or sherry, his wine-merchant having positively refused to supply any more without payment. In this dilemma he sent for Chalier, and told him he wished to settle his account. The wine-merchant, much delighted, proposed running home for it, when Sheridan stopped him with "What do you say to dining with me to-day? Lord This, and Sir So-and-so That" (mentioning several celebrities), "will be here." The offer was accepted with enthusiasm, the merchant leaving his office early in order to dress for the occasion. As soon as he made his appearance Sheridan despatched a messenger to the clerk at the office, to the effect that Mr. Chalier desired so many dozen of different kinds of wine sent at once, which instructions were promptly executed, the Burgundy, hock, &c., &c. arriving just in time for the dinner. One Friday evening at Drury Lane, just after the half-price money had been taken, Sheridan was informed by his treasurer that unless a certain amount could be raised there was not sufficient to pay the salaries of even the subordinates, and the house would have to close the following Monday. After making certain suggestions which were voted useless by his business-man, Sherry took a look at the meagrely-filled house, and calling a servant, said to him, "You see that stout, goodtempered-looking man in such and such a box?" "Yes, sir." "Immediately the act-drop is down go to him; have a boy who can bow gracefully precede you with a pair of wax candles. Open the box-door, and in a voice loud enough to be heard by everyone, say, 'Mr. Sheridan requests the pleasure of a private interview with you, sir.' Treat him with the greatest attention, and see that a bottle of the best port and a couple of wine-glasses are placed in my study." These directions were all carried out, and when the manager was alone with his visitor, after expressing the great pleasure he always experienced in seeing any one from Staffordshire, he said, "I think you told me you came to London twice a year." "Yes," was the reply, "January and June, to receive my dividends. I have been to the bank to-day and got my £600." "Ah you are in Consols, whilst I, alas, am Reduced and can get nothing till April, when you know the interest is paid, and till then I shall be in great distress." "Oh," said his constituent, "let not that make you uneasy; if you give me the power of attorney to receive the money for you, I can let you have £300, which I shall not want till then." "Only a real friend," said Sheridan, "could have made such a proposition." The £300 duly changed hands, and when April came the power of attorney was handed to Sheridan to sign, "I never spoke of Consols in Reduced," said he, "I only spoke of my Consols being reduced. Unhappy is the man who cannot understand the weight of prepositions." The Stafford man went to Sheridan in a fearful rage, but the latter was as cool as a cucumber. He made a clean breast of it, and told all. "But," he said, "my dear sir, I am now commanded to go to the Prince Regent, to whom I shall narrate your noble conduct. My carriage is waiting, and I can take you to Carlton House." The creditor was delighted. He shook Sherry by the hand, exclaiming, "I forgive you, never mention the debt again," to which Sheridan readily assented, and we may be sure kept his word for once. The carriage came, into which both entered, but when it arrived at Carlton House Sheridan alighted, closed the door, and told the coachman to drive the gentleman to his hotel. The Stafford man expostulated that he understood he was going into Carlton House, when Sheridan calmly told him, "That's another mistake of yours," and of course, though his statement inferred as much, he only said he would take his constituent _to_ Carlton House. It goes without saying that at the next election the Staffordshire elector voted on the other side. There is no doubt that at last Sheridan was so desperately involved that his life became, "not to put too fine a point on it," that of a schemer. He lived in an atmosphere of duns, but such a thorough master was he of the subject that it was the tradesmen who eventually were "done" by him. It was customary for them to assemble early in the morning to catch him before he went out, and when informed "Mr. Sheridan is not down yet, sir," they were shown into the rooms on each side of the entrance-hall. When he had finished his breakfast he would say, "Are those doors all shut, John?" and on being informed that they were, would deliberately walk out as pleased as though he had obtained a great moral victory. CHAPTER II. IMPECUNIOSITY OF THE GREAT. It must be admitted that impecuniosity is impartial, the peer and the peasant being equally open to its visits, and the Sovereign, under certain conditions, as liable to its influence as the subject. Edward the Third was compelled to pawn his jewels, and his imperial crown three times, once abroad, and twice to Sir John Wosenham, his banker, in whose custody the crown remained eight years. Henry the Fifth was also under the necessity of pawning his crown and the silver table and stools which he had from Spain. The Black Prince made the same use of his plate, and Queen Elizabeth was obliged to part with some of her jewels. More than two centuries ago when Clerkenwell was a sort of Court quarter of London, and could boast amongst other distinguished residents the Duke and Duchess of Newcastle, this couple, both of whom are remembered by their literary eccentricities, had more than once to patronise the pawnbroker. The duke, who was a devoted Royalist, after his defeat at Marston Moor, retired with his wife to the Continent, and with many privations owing to pecuniary embarrassments suffered an exile of eighteen years, chiefly in Antwerp, in a house which belonged to the widow of Rubens. Many of our most illustrious families have been indebted to the exertions or the genius of some humble ancestor. The case of Charles Abbot, afterwards Lord Tenterden, is a typical one. He was the son of a Canterbury barber, and at the age of seven was admitted on the foundation of the King's School in that town, where he soon attracted attention by his industry and intelligence. At an early age he much wished to become a chorister, and was so disappointed when he failed that in after years, when visiting the Cathedral with Mr. Justice Richards, who commended the voice of a singer in the choir, his lordship exclaimed, "Ah, that is the only man I ever envied. When at school in this town, we were candidates for a chorister's place and he obtained it." When seventeen, there was no prospect for the clever youth but the drudgery of trade, and on this becoming known in the school there was a general wish expressed that his perseverance and ability should be rewarded. To private generosity he was indebted for his outfit, the trustees conferring a small exhibition upon him, and adding a pittance which enabled him to live, with rigid economy, until he took his B.A. degree. When asked by Mr. Lamont, the father of the lady to whom he was engaged, what means he had to maintain a wife, he replied, "The books in this room and two pupils in the next." Sir Peter Laurie, when Lord Mayor of London, said at a dinner given to the judges: "What a country is this we live in! In other parts of the world there is no chance except for men of high birth and aristocratic connections, but here genius and industry are sure to be rewarded. You see before you the example of myself, the chief magistrate of the metropolis of this great empire, with the Chief Justice of England sitting at my right hand, both now in the highest offices of the State, and both sprung from the very dregs of the people." There are many men who would have been anything but pleased at this reference to their humble extraction; but it was not distasteful to his lordship. Macready, in recounting a visit to Canterbury Cathedral, says he was shown by the verger the spot where a little shop once stood, and was informed that when Lord Tenterden last visited the Cathedral, he said to his son, "Charles, you see this little shop. I have brought you here on purpose to show it you. In that shop your grandfather used to shave for a penny. That is the proudest reflection of my life. While you live never forget that, my dear Charles," an injunction which, coming from a Chief Justice of England who died worth £120,000, ought to have a salutary effect on upstarts. The equally famous Lord Erskine, though a man of gentle birth, was nevertheless indebted, to a certain extent, to impecuniosity for the greatness he achieved, since that impelled him to the spirited defence of Captain Baillie, which attracted the attention of all England. Called to the bar on the 3rd July, 1778, Erskine made his first appearance in public on the 24th November. Previous to this time he had been unknown. His first brief fell to his lot in this way: A certain Captain Baillie, who, for gallant services, had been appointed to a post in Greenwich Hospital, discovered the gravest abuses there, and brought the state of things to the notice of those in power, but being unable to get them remedied, determined to publish the facts of the case. His statement implicated Lord Sandwich, the First Lord of the Admiralty, who, to serve his political purposes, had filled the vacant posts at the Hospital with certain landsmen. The Board of Admiralty immediately suspended the captain, and a criminal information for libel was lodged against him, the case exciting the greatest public interest. During the vacation Erskine had met Captain Baillie at the house of a mutual friend, and, utterly unconscious of his presence, had, after dinner, so strongly censured the shameful practices ascribed to Lord Sandwich that the captain immediately inquired who the young fellow was, and on being told that Erskine had formerly been in the navy, but had recently been called to the bar, he exclaimed with warmth, "Then that's the man I'll have for my counsel!" In due course this now historic trial came on, when the young barrister's marvellous speech created an impression called by Lord Campbell, "the most wonderful forensic effort of which we have any account in our annals. It was the _début_ of a barrister just called, and wholly unpractised in public speaking, before a court crowded with men of the greatest distinction, belonging to all parties of the State. He came after four eminent counsel, who might have been supposed to have exhausted the subject. He was called to order by a venerable judge, whose word had been law in that hall above a quarter of a century. His exclamation, 'I will _bring_ him' (Lord Sandwich) 'before the Court!' and the crushing denunciation of Lord Sandwich, in which he was enabled to persevere, from the sympathy of the bystanders, and even of the judges, who, in strictness, ought to have checked his irregularity, are as soul-stirring as anything in this species of eloquence presented to us by ancient or modern times." As Erskine walked along the hall after the rising of the judges, attorneys flocked around him with their briefs. When asked how he had the courage to stand up so boldly against Lord Mansfield, he replied that he fancied he could feel his little children plucking at his robe, and that he heard them saying, "_Now, father, is the time to get us bread!_" Lord Eldon's life furnishes abundant proof that he was perfectly familiar with adversity. The son of a "fitter" employed in conveying coals in barges from the pits to the different ports on the Tyne, John Scott was born at Newcastle on the 4th June, 1751, and after being educated at the Grammar School in the town would have been apprenticed to his father's business but for the remonstrances of his brother William (afterwards Lord Stowell), who had obtained an Oxford scholarship, and subsequently a fellowship at the University. The success of the one son induced the father to send John also to college, where he at first studied for the church. While at Oxford he made a runaway match with Miss Bessy Surtees, the daughter of a Newcastle banker. The young couple went to the Queen's Head, at Morpeth, but on the third morning of their married life their funds were exhausted, and they had no home to go to. Mrs. Scott was naturally very much upset at the predicament in which they were placed, but while lamenting it she suddenly caught sight of a fine wolf-dog belonging to the family, called Loup, whose presence at Morpeth was to her the joyous sign that help was at hand. In a few moments Mr. Henry Scott, her husband's brother, entered the room. John Scott had written a repentant letter from Morpeth to his father, which had the desired effect, and the younger brother had been sent to announce pardon to the offending couple, and to invite them to take up their abode under the parental roof. The year of grace allowed for retaining a fellowship after marriage having elapsed, Mr. Scott abandoned the thought of taking holy orders and studied law. He was called to the bar in 1776, when he says, "Bessy and I thought all our troubles were over, and we were to be rich almost immediately." This golden dream was however speedily dissipated, for during the first year the total amount of his professional income was ten shillings and sixpence. But when Lord Chancellor, and living in a magnificent mansion in the vicinity of Hyde Park, he often referred to this period of poverty as the happiest time of his life, for then, he maintained, his wife, to whom he was always passionately attached, was able to show him attentions never so freely bestowed when Society asserted its claims on them. Like Lord Tenterden he gloried in the obstacles he had overcome, and used to point to a small house in Cursitor Street, saying "There was my first perch; many a time have I run down to Fleet Market to buy sixpennyworth of sprats for supper." Edward Lord Thurlow, who rose to the woolsack in 1778, was not always affluent. After being called to the bar in 1758 he seldom had the means of going on circuit, and it is asserted that on one occasion he reached the assizes on a horse that _he had taken out on trial from London_. Lord Chief Justice Kenyon is found guilty of having been poor on the evidence of Horne Tooke, his constant companion when they were students, who, with a friend named Dunning, used to dine with him in vacation-time at a small eating-house in Chancery Lane, for 7-1/2_d._ a head. Says Tooke, "Dunning and myself were generous for we gave the girl who waited on us a penny a piece, but Kenyon rewarded her with a halfpenny, and sometimes with only a promise." Sir Samuel Romilly also says, "At a later period of my life--after a success at the bar which my wildest and most sanguine dreams had never painted to me--when I was gaining an income of £8000 or £9000 a year--I have often reflected how all that prosperity had arisen out of the pecuniary difficulties and confined circumstances of my father." Lord Campbell, before he was Lord Chief Justice and Lord Chancellor of England, often knew the inconvenience of want of money. The son of the Rev. Dr. Geo. Campbell, second minister of Cupar, Fifeshire, he was educated at the local Grammar School and the University of St. Andrew's, and though intended originally for the ministry, after spending some years at college gave up the idea of the church, and went up to London to try some more congenial occupation. His first appointment was as tutor to a Mr. Webster, and while engaged in that capacity he penned the following letter: "My dear brother,--I live very economically; I dine at home for a shilling, go to the coffee-house once a day, 4_d._, to the theatre once a week, 3_s._ 6_d._ My pen will keep me in pocket-money. I this day begin a job which I must finish in a fortnight, and for which I am promised two guineas, but alas! Willy Thompson paymaster. He owes me divers yellow-boys already. I go no farther than write the history of the last war in India for him till he pays me all." After this he obtained the post of reporter and dramatic critic to the _Morning Chronicle_, but in 1800 he determined to try the law, and entered himself a student of Lincoln's Inn. At this time, however, there was a strong feeling against one of their set having anything to do with journalism, so that his position was uncomfortable and mortifying, and his reporting prevented him from forming any acquaintance with his fellow-students. He entered a special pleader's office in 1804, and in June 1805, was able exultingly to announce that "he was no longer a newspaper man." Called to the bar in 1806, he became a bencher in 1827; member of Parliament for Stafford in 1830; Solicitor-General in 1832; Attorney-General in 1834; Lord Chancellor of Ireland in 1841; Chancellor of the Duchy of Lancaster in 1846 (in which year he produced his celebrated work 'The Lives of the Chancellors'); Lord Chief Justice in 1850, and Lord Chancellor in 1859. Sir Rowland Hill, to whom we are indebted for the penny postage system, was the son of a Birmingham schoolmaster, a man of simple, but high character. An outbuilding attached to their house contained benches, blacksmith's forge, and a vice. Here Rowland and his brother spent much spare time and cash, which latter he remarks was very scanty. "Ever since I can remember," he writes, "I have had a taste for mechanics, but the best mechanician wants materials and materials cost money," and this want caused his brother and himself on Good Friday morning to turn tradesmen. They had been sent with a basket to buy a quantity of hot cross buns for the family and as they went along were much amused by the itinerant vendors, who were calling out, as was the custom in Birmingham then, "Hot cross buns! Hot cross buns! One a penny, two a penny, hot cross buns, Sugar 'em, and butter 'em, and clap 'em in your muns, one a penny, two a penny, hot cross buns." On their way home the boys in the pure spirit of fun began to repeat the cry, Matthew, the elder, being a capable mimic; and to their surprise they found the public respond to their offers, the result being that the youngsters soon "sold out," and had to return for more to the wholesale establishment, the difference in this case between buying and selling being, as is usual, very well worth the trouble. When the family lived at Hill Top, his mother presented Rowland with a portion of the garden for his own use, covered with horehound, which he was about to root out to make way for his flowers, when he was given to understand that the horehound possessed a monetary value. Immediately on discovering this, he cut it up carefully, tied it in bundles, and borrowing a basket from his mother started off to the market-place, where he took up his position with all the air of a regular trader, but was saved the bother of retail dealing by disposing of his entire stock for eightpence to a woman standing near, who he presumed made a hundred per cent. by the transaction, though with true business tact she complained of her purchase, and told him to tell his mother, "she must tie up bigger bunches next time." The proceeds of the sale went to purchase some tools and materials for the mechanical contrivances spoken of. The early years of Benjamin Franklin (one of a family of seventeen) were uncongenially spent with his father, a soap-boiler and tallow-chandler, and his brother, a printer. When seventeen years old he sold his books and took a passage from Boston to New York, whence he was advised to proceed to Philadelphia in search of work. On arriving there he tells us that he was "fatigued with walking, rowing, and the want of sleep, and very hungry: my whole stock of cash consisted in a single dollar, and about a shilling in copper coin, which I gave to the boatmen for my passage. At first they refused it, on account of my having rowed: but I insisted on their taking it. Man is sometimes more generous when he has little money than when he has plenty, perhaps to prevent his being thought to have but little. I walked towards the top of the street, gazing about till near Market Street, where I met a boy with bread. I had often made a meal of dry bread, and inquiring where he had bought it, I went immediately to the baker's he directed me to. I asked for biscuits, meaning such as we had in Boston. That sort it seems was not made in Philadelphia. I then asked for a threepenny loaf, and was told they had none. Not knowing the different prices, nor the names of the different sorts of bread, I told him to give me three pennyworth of any sort. He gave me accordingly, three great puffy rolls. I was surprised at the quantity, but took it; and having no room in my pockets, walked off with a roll under each arm, and eating the other. Thus I went up Market Street, as far as Fourth Street, passing by the door of Mr. Read, my future wife's father, when she, standing at the door, saw me, and thought I made, as I certainly did, a most awkward, ridiculous appearance. Then I turned and went down Chestnut Street, and part of Walnut Street, eating my roll all the way, and coming round, found myself again at Market Street Wharf, near the boat I came in, to which I went for a draught of the river water; gave my other rolls to a woman and her child that came down the river in the boat with us, and were waiting to go farther. Thus refreshed, I walked again up the street, which by this time had many clean-dressed people in it, who were all walking the same way. I joined them, and thereby was led into the great Meeting House of the Quakers, near the market. I sat down among them, and after looking round awhile and hearing nothing said, being very drowsy through labour and want of rest the preceding night, I fell fast asleep, and continued so till the meeting broke up, when some one was kind enough to rouse me. This, therefore, was the first house I was in, or slept in, in Philadelphia." A strange beginning to the career of one who, in addition to his valuable discoveries in electricity, lived to attain the highest honours his country could bestow, and to be the ambassador to foreign countries; whose marvellous intelligence carried out diplomatic undertakings which undoubtedly affected the destinies of nations. It is interesting to note, now that electricity plays such a leading part in the inventions of the day, that when Franklin made his discovery of the identity of lightning and electricity, it was sneered at, and people asked, "Of what use is it?" To which he replied, "What is the use of a child? It may become a man." William Cobbett is another example of the wonderful results to be attained by temperance, frugality, and unflagging industry, who, originally an uninteresting yokel, rose to be a power in the land, to edit political papers, to write political pamphlets (one of which had a circulation of 100,000), and to pen, amongst other most important matter, a volume of 'Advice to Young Men,' which, if followed by the rising generation, could not fail to make them more worthy the name of Englishmen. At the time referred to, when he was eleven years old, he was employed in the Bishop of Winchester's garden at Farnham Castle, and happening to hear of the royal gardens at Kew, he thought that he should like to be employed there, started off next morning with only the clothes he was wearing, and sixpence halfpenny in his pocket, he arrived at Richmond towards evening, having expended threepence halfpenny on bread and cheese and small beer and as he jogged along tired and weary with his walk of thirty miles he was attracted to a bookseller's window, in which was displayed a second-hand copy of Swift's 'Tale of a Tub,' price 3_d._ He expended his remaining coppers on its purchase, sat down in an adjoining field, read till he could see no longer, then putting the book into his pocket he dropped off to sleep by the side of a haystack. In the morning, roused by the birds, he continued his journey to Kew Gardens, where he succeeded in getting engaged by an old Scotch gardener. A year, or two after this, when he was working again in his native town of Farnham, the old idea of getting into a larger field of action came back to him, and while waiting one day for some young women whom he had arranged to escort to Guildford fair, he was tempted by the sight of the London coach, secured the one vacant place, and before he had time to realise the importance of the step, was being whirled away in the direction of the metropolis. When he arrived the next morning at the Saracen's Head on Ludgate Hill, his possessions amounted to two shillings and sixpence, but fortunately he had managed to interest a hop merchant, one of his fellow-passengers, who took him home, and in the course of a day or two managed to obtain a situation for him in a lawyer's office. Here he soon discovered that he had made a "miserable exchange," for his want of skill as a penman made his duties exceptionally irksome, and his close, confined lodging was very wretched to one coming fresh from fields musical with the sweet songsters of the spring. Eight months later, he enlisted in the 54th regiment of foot, and was ordered to Nova Scotia in twelve months. Here in five years, by temperance and industry, he managed (doing clerical work for the quarter-master and pay-sergeant) to save £150, and it was while serving with this regiment that he acquired a knowledge of Lindley Murray. "I learned grammar," he says, "when I was a private soldier on the pay of sixpence a day. The edge of my berth was my seat to study in; my knapsack was my book-case; a bit of board lying on my lap was my writing-table, and the task did not demand anything like a year of my life. I had no money to purchase candle or oil; in winter time I could rarely get any evening light but that of the fire, and only my turn even of that. And if I, under such circumstances, and without parent or friend to advise or encourage me, accomplished this undertaking, what excuse can there be for any youth, however poor, however pressed with business, or however circumstanced as to room or other conveniences? To buy a pen or a sheet of paper, I was compelled to forego some portion of food, though in a state of half-starvation; I had no moment of time that I could call my own, and I had to read and to write amidst the talking, laughing, singing, whistling, and brawling of at least half a score of the most thoughtless of men, and that, too, in the hours of their freedom from all control. Think not lightly of the farthing that I had to give now and then, for pen, ink, or paper! That farthing was, alas! a great sum to me! I was tall as I am now; I had great health and great exercise. The whole of the money not expended for us at market was twopence a week for each man. I remember, and well I may, that on one occasion, I, after all necessary expenses, had on a Friday made shifts to have a halfpenny in reserve, which I had destined for the purchase of a red herring in the morning; but when I pulled off my clothes at night, so hungry then as to be hardly able to endure life, I found that I had lost my halfpenny! I buried my head under the miserable sheet and rug, and cried like a child!" Wonderful, however, as were the achievements of Franklin and Cobbett in self-education, they were both eclipsed by Elihu Burritt. The son of a shoemaker, he was at the age of sixteen apprenticed to the "village blacksmith," and from that time applied himself to the study of languages with such success, that he mastered French, German, Italian, Latin, Greek, Hebrew, Spanish, Bohemian, Polish, Danish, Syriac, Samaritan, Turkish, Ethiopic and Persian. To understand how he accomplished this, we take a glance at his diary. "_Monday, June 18_: Headache; forty pages Cuvier's 'Theory of the Earth,' sixty-four pages French, eleven hours' forging. _Tuesday_: sixty-five lines of Hebrew, thirty pages of French, ten pages Cuvier's 'Theory,' eight lines Syriac, ten ditto Danish, ten ditto Bohemian, nine ditto Polish, fifteen names of stars, ten hours' forging. _Wednesday_: twenty-five lines Hebrew, fifty pages of astronomy, seven hours' forging. _Thursday_: fifty-five lines Hebrew, eight ditto Syriac, eleven hours' forging. _Friday_: unwell; twelve hours' forging. _Saturday_: unwell; fifty pages of Natural History, ten hours' forging. _Sunday_: lessons for Bible class." There were times when, for a short season, he abandoned the anvil, and devoted his whole time to study; but after a few months' absence from the forge he would return to earn money for his support, and for the purchase of books. Hearing one day of an Antiquarian Library at Worcester, U.S., he determined to go there to work as a journeyman, for the sake of obtaining access to such rare books, and started off to walk. It was a long journey, and when he reached Boston Bridge, footsore and weary, he encountered a waggon being driven by a boy, who was going to Worcester, forty miles distant. All his valuables consisted of a dollar and an old silver watch. He availed himself of the chance of a lift, but felt reluctant to part with his single dollar, and suggested that the waggoner should take his watch, which, if properly repaired, would be worth a great deal more than his indebtedness, also suggesting that, in the event of the boy having the watch mended, he should give Burritt the difference in money if they met again in Worcester. The young blacksmith obtained work on his arrival, and some short time after received a visit from the waggon lad, who honourably brought him a few dollars, the estimated difference. Some years afterwards Burritt happened to be travelling from Worcester to New Britain by railway, when he was accosted by a handsome, well-dressed fellow-traveller. "You have forgotten me, Mr. Burritt?" Burritt was obliged to confess that he had. "Oh," said he, "I'm the boy to whom you gave the watch. I'm now a student of Harvard College." After chatting for a bit, Burritt said,-- "I should like to have that watch back again." "You shall," said the student. "I sold it, but I know where it is." In a few days he received the watch, which hung for many years in his printing-office as a memento of early vicissitudes. Michael Faraday, unquestionably one of the greatest English chemists and natural philosophers, had few educational advantages before he was apprenticed to a bookbinder in Blandford Street, Manchester Square, and while working at his trade he constructed an electrical machine and other scientific apparatus. These having been seen by his master, Mr. Riebau, he called the attention of Mr. Dance to them, and he took the boy with him to hear the last four lectures delivered by Sir Humphry Davy at the Royal Institution. Faraday took copious notes of the lectures, and afterwards wrote them out fairly in a quarto volume, and sent it to Sir Humphry, begging him for employment, that he might quit the trade he hated, and follow science, which he loved. The answer is a model of kindness and courtesy: "_December 24th, 1812._ "SIR, "I am far from displeased with the proof you have given me of your confidence, and which displays great zeal, power of memory, and attention. I am obliged to go out of town, and shall not be settled in town till the end of January. I will then see you at any time you wish. It would gratify me to be of any service to you. I wish it may be in my power. "I am, sir, "Your obedient, humble servant, "H. DAVY." Through Sir Humphry's interest, Faraday obtained the post of assistant in the laboratory of the Royal Institution, where he remained ever afterwards, eventually becoming its first professor. Tyndall says of Faraday, "His work excites admiration, but contact with him warms and elevates the heart. Here, surely, is a strong man. I love strength, but let me not forget its union with modesty, tenderness, and sweetness in the character of Faraday.... Taking the duration of his life into account, this son of a blacksmith and apprentice to a bookbinder had to decide between a fortune of £150,000 on the one side, and his unendowed science on the other. He chose the latter, and died a poor man. But his was the glory of holding aloft among the nations the scientific name of England for a period of forty years." In 1835, when Sir Robert Peel retired from office, he recommended Faraday to William IV. for a pension of £300. The minute was placed in the hands of Lord Melbourne, Peel's successor, who saw Faraday, and involved him in religious and political discussion, wanting to entrap the philosopher into a promise to support the Government. Failing in this, Lord Melbourne said, "I look upon the whole system of giving pensions to literary and scientific people as a piece of gross humbug." To which Faraday replied, "After this, my lord, I see that my business with you is ended. I wish you good morning." The next day Lord Melbourne received the following letter: "MY LORD, "After the pithy manner in which your Lordship was pleased to express your sentiments on the subject of pensions that have been granted to literary and scientific persons, it only remains for me to relieve you, as far as I am concerned, from all further uneasiness. I will not accept any favour at your hands nor at the hands of any Cabinet of which you are a member. "M. FARADAY." It is said that for some years Faraday's income never exceeded £22 a year, and it is a fact that when a youth he was much exercised about the purchase of an electrical machine which he had seen in an optician's window, price 4_s._ 6_d._ He had no money, but out of his dinner allowance he saved the requisite sum, and this machine was the one he used in all those early experiments which led to some of his great discoveries. CHAPTER III. THE SHIFTS OF IMPECUNIOSITY. In 1748 there resided in the wilds of Connaught a lady named Gunning, of whom little is known but that before her marriage she was the Hon. Bridget Bourke, and that after it she became the mother of two exquisitely beautiful daughters, destined to make such a stir in Society, as was unknown before, and has been unequalled since. Before they left Dublin they were invited to some brilliant festivities at the Castle, which were on a scale of magnificence unequalled, it is said, in the memory of the oldest courtier. To such an entertainment Mrs. Gunning was anxious to introduce her daughters, for their faces were literally their fortunes; but the overwhelming difficulty of dress presented itself. They had nothing that by any amount of manipulation could be transformed into Court costumes, so in her difficulty Mrs. Gunning obtained an introduction to Tom Sheridan, who was then managing the Dublin Theatre. He was struck by the beauty and grace of the girls, placed the wardrobe of the theatre at their disposal; and by lending them the dresses of Lady Macbeth and Juliet, in which they appeared most lovely, enabled them to obtain the _entrée_ to that aristocratic circle in which they afterwards shone so brilliantly. In addition to providing the necessary garments for the great event Tom Sheridan is credited with superintending the finishing touches of their toilets, for which it is said he claimed a kiss from each as his reward. These beautiful creatures were at one time in even greater straits for funds. Miss Bellamy, the actress, asserts that she once found Mrs. Gunning and her children in the greatest distress, with bailiffs in the house and the family threatened with immediate eviction. With the assistance of her man-servant, who stood under the windows of the house at night, after the bailiffs were admitted, everything that could be carried away, was removed. But for this and other help the Gunnings were not grateful. Indeed, in the case of the Countess of Coventry who had borrowed money from Miss Bellamy, presumably for her wedding _trousseau_, the monetary obligation was repaid by unpardonable insult. One night when this actress was playing Juliet, and had just arrived at the most impressive part of the tragedy, the countess, who occupied the stage-box, uttered a loud laugh. Miss Bellamy was so overcome by the interruption that she was obliged to leave the stage, and when Lady Coventry was remonstrated with, she replied that "since she had seen Mrs. Cibber act Juliet she could not _endure_ Miss Bellamy." When they came to London in the autumn of 1751 the fashionable world went mad after "the beautiful Miss Gunnings," who were positively mobbed in the Park and elsewhere, and were compelled on one occasion to obtain the protection of a file of the Guards. When they travelled in the country the roads were lined with people anxious to catch a glimpse of their lovely faces; and hundreds of people were known to remain all night outside an inn at which they were staying, in order to behold them in the morning. Not many months after their _début_ in London, the Duke of Hamilton, owner of three dukedoms in Scotland, England, and France, and regarded as the haughtiest man in the kingdom, became deeply enamoured of the younger sister, and was married to her at Mayfair Chapel one night at half-past twelve o'clock, the suddenness of the ceremony compelling the divine who performed the service to make use of a ring from a bed-curtain. The elder sister, became Countess of Coventry in the following March, and was then acknowledged as leader of fashion in the metropolis, although from the seclusion in which the early part of her life had been spent in Ireland, she was little fitted, so far as accomplishments were concerned, to hold that post. Her reign was brief as it was brilliant. In 1759 her health completely broke down, and she died in October 1760, of consumption, the result of artificial aids to beauty, which in her case were utterly unnecessary. Curran, the advocate and wit, experienced vicissitudes almost as startling. He was born at Newmarket, County Cork, in 1750, and describes himself as "a little ragged apprentice to every kind of idleness and mischief, all day studying whatever was eccentric in those older, and half the night practising it for the amusement of those who were younger than myself. One morning I was playing at marbles in the village ball alley, with a light heart and a lighter pocket. The gibe, and the jest, and the plunder, went gaily round. Those who won laughed, and those who lost cheated, when suddenly there appeared amongst us a stranger of a very venerable and cheerful aspect. His intrusion was not the least restraint upon our merry little assemblage; he was a benevolent creature, and the days of infancy (after all, the happiest we shall ever see) perhaps rose upon his memory. God bless him! I see his fine form, at the distance of half a century, just as he stood before me in the little ball alley in the days of my childhood. His name was Boyse; he was the rector of Newmarket. To me he took a particular fancy.... Some sweetmeats easily bribed me home with him. I learned from poor Boyse my alphabet, and my grammar, and the rudiments of the classics: he taught me all he could, and then he sent me to the school at Middleton--in short, _he made a man of me_. I recollect it was about five-and-thirty years afterwards when I had risen to some eminence at the bar, and when I had a seat in Parliament, and a good house in Ely Place, on my return one day from Court, I found an old gentleman seated alone in the drawing-room, his feet familiarly placed on each side of the Italian marble chimney-piece, and his whole air bespeaking the consciousness of one quite at home. He turned round--it was _my friend of the ball alley_. I rushed instinctively into his arms. I could not help bursting into tears. Words cannot describe the scene that followed. 'You are right, sir--you are right; the chimney-piece is yours, the pictures are yours, the house is yours; you gave me all I have--my friend--my father!'"[2] [2] Many struggles had to be endured, however, before this pinnacle of prosperity was attained. After leaving school at Middleton, Curran passed to Trinity College, Dublin, which he entered as a sizar when nineteen years of age. He does not appear to have distinguished himself at the University, from whence he proceeded to London, and contrived, _quodcunque modo_, to enter his name on the books of the Middle Temple. At that time, he says, he read "ten hours every day; seven at law, and three at history and the general principles of politics, and that I may have time enough"--it is believed he wrote for the magazines, etc., as a means of support--"I rise at half-past four. I have contrived a machine after the manner of an hour-glass, which wakens me regularly at that hour. Exactly over my head I have suspended two vessels of tin, one above the other. When I go to bed, which is always at ten, I pour a bottle of water into the upper vessel, in the bottom of which is a hole of such a size as to let the water pass through so as to make the inferior reservoir overflow in six hours and a half;" so that if he wished to remain in bed after daylight, he could only do so by consenting to a cold shower-bath. He was called to the bar in 1775, and for some time had a tremendously uphill fight, wearing, according to his own account, his teeth to the stumps at the Cork Sessions without any adequate recompense. He then removed to Dublin, and for a time fared no better. "I then lived" said he, "upon Hog Hill: my wife and children were the chief furniture of my apartments, and as to my rent it stood pretty much the same chance of liquidation with the National Debt. Mrs. Curran, however, was a barrister's lady, and what she wanted in wealth she was determined should be supplied by dignity. The landlady, on the other hand, had no idea of any gradation except that of pounds, shillings, and pence. I walked out one morning to avoid the perpetual altercations on the subject, in no very enviable mood. I fell into the gloom, to which from my infancy I had been occasionally subject. I had a family for whom I had no dinner, and a landlady for whom I had no rent. I had gone abroad in despondence, I returned home almost in desperation. When I opened the door of my study, where _Lavater_ alone could have found a library, the first object which presented itself was an immense folio of a brief, twenty gold guineas wrapped up beside it, and the name of _Old Bob Lyons_ marked upon the back of it. I paid my landlady, bought a good dinner, gave Bob Lyons a share of it, and that dinner was the date of my prosperity." From this time he rapidly rose to the top of his profession, and his services were eagerly sought for. Wonderfully eloquent, with a highly imaginative and powerfully poetic mind, his sway was something marvellous, for, added to these gifts, his wit and power of mimicry were unapproachable. In the case of Valentine Jamerai Duval, who ultimately became Professor of Antiquities and Ancient and Modern Geography in the Academy of Luneville, youthful hardships occasioned extraordinary expedients. The son of labouring people, at the age of fourteen he was ignorant of the alphabet. His occupation was that of turkey-keeper, but after an attack of small-pox, which nearly killed him, he wandered through certain parts of Champagne, then in a condition of famine, in search of employment. When he reached the Duchy of Lorraine, he obtained a situation as shepherd, and became acquainted with the hermit, Brother Palimon, whom he helped in his rural labours. In return for these services the hermit gave him instruction, and subsequently he lived as a labourer with the four hermits of St. Anne, studying arithmetic and geography in his leisure moments. His one object then was to obtain books, impossible without money, which, situated as he was, seemed equally unattainable. Finding out, however, that a furrier at Luneville purchased skins, he set snares for wild animals, and by this means realised enough money to procure the books he coveted. But beyond the self-denial of Curran with his primitive invention for early rising, and the contrivance of Duval for obtaining the needful, is the interesting career of Bernard Palissy, the Potter, who, in addition to his fame as an artist in pottery, was celebrated as a glass painter, naturalist, philosopher, and for his devotion to the Protestant cause in the sixteenth century. Born in 1510, at Chapelle Biron, a poor hamlet near the small town of Perigord, he was brought up as a worker in painted glass, in pursuit of which occupation he travelled considerably, devoting all the spare time of his wanderings to the study of natural history, in which he delighted. Though an ardent student of nature, he yet found opportunity to make himself acquainted with the teaching of Paracelsus, of the alchemists and of the reformers of the Church. He did not settle down till nearly thirty years of age, when he established himself at Saintes as a painter on glass, and surveyor, and then turned his attention to the making of pottery and the production of white enamel, which latter was useless excepting as a covering for ornamental pottery, and at this time Palissy was not sufficiently skilled to make a rough pipkin. Under these circumstances it is not surprising that his wife took exception to the money expended in the purchase of drugs, the buying of pots, and the building of a furnace, as the loss of time told heavily on his limited resources; and it would be perfectly truthful to say that the first things Bernard Palissy produced in the way of pottery were family jars. Mrs. Palissy was undoubtedly very wroth at his going on in this way, more especially because, as is so frequently the case, his family increased as his income decreased, and she succeeded at last in stopping his experiments for a time. He then obtained an appointment as Surveyor to the Government, in which profession he was remarkably proficient, but before very long the old craving for experimenting returned with redoubled vigour, and he again set to work in search of white enamel. The expense incurred was so great that his wife and children became ragged and hungry: nothing daunted, he broke up twelve new earthen pots, hired a glass furnace, and for months continued watching, burning, and baking. At last his eager eyes were gladdened by the sight of a piece of white enamel amidst the bakings. Urged on by this, he felt he must have another furnace; he succeeded in obtaining the bricks on credit, became his own bricklayer's boy and mason, and built the structure himself. On one occasion he spent six days and nights watching his baking clay, sleeping only a few minutes at a time near his fire, but disappointment was all the result. The vessels were spoilt. In desperation he borrowed more money for his experiments, which was consumed in like manner, until at last he was without fuel for the furnace. Insensible to everything but the project on which he was bent, he tore up the palings from the garden, and when these were exhausted he broke up the chairs and tables. His wife and children rushed about frantic, thinking that he had lost his senses, and well they might when they saw the demolition of the furniture followed by the tearing up of the floor. Success ultimately crowned his praiseworthy perseverance, but not until he had devoted sixteen years of unremunerated labour, enduring unexampled fatigue and discouragements. When at length he succeeded in obtaining a pure white enamel he was enabled to produce works in which natural objects were represented with remarkable skill, his fame spread rapidly, his sculptures in clay and his enamelled pottery being at once accepted as works of art of the highest order. His career, however, was destined to be remarkable at every stage, for no sooner had he acquired renown and riches than he was subjected to religious persecution, which would have ended in death had it not been for the Duke de Montmorency, one of his patrons, who succeeded in rescuing him from prison. When established in Paris, assisted by his sons, he continued to produce most remarkable specimens of ornamental pottery, and in addition to his artistic labours instituted a series of conferences which were attended by the most distinguished doctors and scientific _savants_, where he set forth his views on fountains, stones, metals, etc., desirous of knowing whether the great philosophers of antiquity interpreted nature as he did. Although in the ordinary sense an unlettered man, his theories were never once controverted, and for ten years his lectures were delivered before the most enlightened of that age, but his teaching once more arousing the animosity of his religious opponents, he was thrown into the Bastille, where he died after being incarcerated for two years. After such a "shift" as having to tear up the floor of a dwelling, most other instances might be expected to appear more or less tame; but the experiences of William Thom, the Inverary poet, are scarcely inferior in intensity. This untutored, but extremely sweet songster, whose first poem, 'Blind Boys' Pranks,' appeared in the _Edinburgh Herald_, was a hand-loom weaver, who was deprived of his occupation by the failure of certain American firms, and compelled to tramp the country as a pedlar. Before resorting to that line of life, and when in the receipt of the sum of five shillings weekly, he relates how on a memorable spring morning, he anxiously awaited the arrival of this small amount: and though the clock had struck eleven, the windows of the room were still curtained, in order that the four sleeping children, who were bound to be hungry when awake, might be deluded into believing that it was still night, for the only food in their parents' possession was one handful of meal saved from the previous day. The mother with the tenderest anxiety sat by the babes' bedside lulling them off to sleep as soon as they exhibited the least sign of wakefulness, and speaking to her husband in whispers as to the cooking of the little meal remaining, for the youngest child could no longer be kept asleep, and by its whimpering woke the others. Face after face sprang up, each little one exclaiming, "Oh, mither, mither, give me a piece;" and says the poor fellow, "The word sorrow was too weak to apply to the feelings of myself and wife during the remainder of that long and dreary forenoon." When compelled to leave the humble dwelling which, poverty-stricken though it was, had all the endearing influences of home, he made up a pack consisting of second-hand books and some trifling articles of merchandise, and sadly started with wife and bairns through mountain paths and rugged roads, often sleeping at night in barns and outhouses. The precarious nature of a pedlar's life must have been terribly trying to one so sensitive, especially when, as in his case, it ended in his having to have recourse to the profession of musical beggar. Before entering Methven he sold a book to a stone-breaker on the road, the proceeds of which (fivepence halfpenny) was all the money he possessed. The purchaser when making the bargain had noticed Thom's flute which he carried with him, and had offered such a good price for the instrument that the poet had been much tempted to part with it, though it had been his solace and companion on many and many an occasion. Thinking that possibly it might be the means of his earning a few pence, he resisted the temptation to part with it, and soon after took up his post outside a genteel-looking house, and played 'The Flowers of the Forest' with such exquisite expression that window after window was raised, and in ten minutes after he found himself possessed of three and ninepence, which sum was increased to five shillings before he reached his lodging. It would hardly be possible to conceive anything more truly touching than the shift of William Thom, when he practised the pardonable deception upon his hungry children of turning day into night, though for downright deprivation the experience of John Ledyard, the traveller, may be said to excel it. This celebrated discoverer, who came into Europe from the United States in 1776, when making a tour of the world with Captain Cook, as corporal of a troop of Marines, arrived in England in 1780. He then formed the design of penetrating from the North West to the East Coast of America, for which purpose Sir Joseph Banks furnished him with some money. He bought sea stores with the intention of sailing to Nootka Sound, but altered his mind, and determined to travel overland to Kamschkatka, from whence the passage is short to the opposite shore of the American continent. Towards the close of the year 1786, he started with ten guineas in his pocket, went to and from Stockholm, because the Gulf of Bothnia was frozen; proceeding north he walked to the Arctic Circle, passed round the head of the Gulf of Bothnia, and descended on its east side to St. Petersburg, where he arrived in March 1787, without shoes or stockings. He proceeded to the house of the Portuguese Ambassador, who gave him a good dinner, and obtained for him twenty guineas on a bill drawn in the name of Sir Joseph Banks, with which sum he proceeded to Yakutz, accompanying a convoy of provisions, and there met Captain Cook. He says in his Journal, "I have known both hunger and nakedness to the utmost extremity of human endurance. I have known what it is to have food given me as charity to a madman, and I have at times been obliged to shelter myself under the miseries of that character to avoid a heavier calamity. My distresses have been greater than I have ever owned, or will own to any man. Such evils are terrible to bear, but they never yet had power to turn me from my purpose." To have to submit to be thought a lunatic to escape starvation must certainly have been rather trying, though from the fact of part of the journey being performed without shoes or stockings it would certainly look as if John Ledyard were anything but particular; and it is well for us that he and other glorious pioneers were not, otherwise we should not be living in such an age of marvellous enlightenment as is our present privilege. Round the world in eighty days, facilitated by Cook's tourist coupons would hardly have been practicable, had not men like Ledyard been martyrs in the cause of exploration. _Apropos_ of travelling in days gone by, an incident in the life of the Rev. Henry Tevuge presents a somewhat strange shift; at any rate, strange for a clergyman. This eccentric clerical was Rector of Alcester in 1670, and afterwards Incumbent of Spernall, which he appears to have left in 1675, for on May 20th in that year he writes, "This day I began my voyage from my house at Spernall, in the county of Warwick, with small accoutrements, saving what I carried under me in an old sack. My steed like that of Hudibras, for mettle, courage, and colour (though not of the same bigness), and for flesh, one of Pharaoh's lean mares ready to seize (for hunger) on those that went before her, had she not been short-winged, or rather leaden-heeled. My stock of moneys was also proportionable to the rest; being little more than what brought me to London in an old coat and breeches of the same, an old pair of hose, and shoes, and a leathern doublet of nine years old and upwards. Indeed, by reason of the suddenness of my journey, I had nothing but what I was ashamed of, save only "An old fox broad sword, and a good black gown, And thus old Henry came to London Town." At that time chaplains were not provided with bed or bedding, and the divine, having no money, and wishing to redeem a cloak which had been long in pawn for 10_s._, he sold his lean mare, saddle and bridle for 26_s._, released the cloak, but only to re-pledge it for £2. A writer, alluding to that period, says "it must have been a rare time for cavaliers, clerical and secular, when the cloak that had been pawned for 10_s._ acquired a fourfold value when offered as a new pledge." It must have been a rare time for clergymen of the Church of England when a navy chaplain is found on such intimate terms with "No. 1 round the corner," but that circumstance is accounted for by the fact that the Rev. Mr. Tevuge is spoken of as having "contracted convivial and expensive habits." The literary, musical, and dramatic professions are the most prolific in furnishing curious cases of impecuniosity; and separate chapters will be devoted to those three branches of art, but there are a few instances more directly of the nature of "shifts" which I have included in the present portion of the subject; amongst others being the incident of Dr. Johnson dining with his publisher, and being so shabby that, as there was a third person present, he hid behind a screen. This happened soon after the publication of the lexicographer's 'Life of Savage,' which was written anonymously, and though the circumstance of the hiding must have been rather humiliating to the mighty Samuel, yet the attendant consequences were pleasant. The visitor who was dining with Harte, the publisher, was Cave, who, in course of conversation, referred to 'Savage's Life,' and spoke of the work in the most flattering terms. The next day, when they met again, Harte said, "You made a man very happy yesterday by your encomiums on a certain book." "I did?" replied Cave. "Why, how could that be; there was no one present but you and I?" "You might have observed," explained Harte, "that I sent a plate of meat behind a screen. There skulked the biographer, one Johnson, whose dress was so shabby that he durst not make his appearance. He overheard our conversation, and your applause of his performance delighted him exceedingly." It is also recorded that so indigent was the doctor on another occasion that he had not money sufficient for a bed, and had to make shift by walking round and round St. James' Square with Savage; when, according to Boswell, they were not at all depressed by their situation, but in high spirits, and brimful of patriotism; inveighing against the ministry, and resolving that they would _stand_ by their country. Being thus intimately associated, it is only natural that the doctor in his 'Life of Savage' should thoroughly believe that individual's version of his own birth and parentage, which was that he was the illegitimate son of the Countess of Macclesfield, and that his father was Lord Rivers; the birth of Richard Savage giving his mother an excuse for obtaining a divorce from her husband, whom she hated. It is stated that "he was born in 1696, in Fox Court, a low alley leading out of Holborn, whither his mother had repaired under the name of Mrs. Smith--her features concealed in a mask, which she wore throughout her confinement. Discovery was embarrassed by a complication of witnesses; the child was handed from one woman to another until, like a story bandied from mouth to mouth, it seemed to lose its paternity." Lord Rivers, it is alleged, looked on the boy as his own, but his mother seems always to have disliked him; and the fact that Lady Mason, the mother of the countess, looked after the child's education, and had him put to a Grammar School at St. Albans, certainly favours the view of his aristocratic parentage. He was subsequently apprenticed to a shoemaker, but discovering the secret, or the supposed secret, of his birth, for not a few discredit his story, he cut leather for literature, and appealed to his mother for assistance. His habit was to walk of an evening before her door in the hope of seeing her, and making an appeal; but his efforts were in vain, he could neither open her heart nor her purse. He was befriended by many, notably by Steele, Wilks the actor, and Mrs. Oldfield, a "beautiful" actress, who allowed him an annuity of £50 during her life; but in spite of all the assistance he received, his state was one of chronic impecuniosity. No sooner was he helped out of one difficulty than he managed to get into another, and though he is described by some biographers as a literary genius, his genius seemed principally a knack of getting into debt. Rambling about like a vagabond, with scarcely a shirt to his back, he was in such a plight when he composed his tragedy (without a lodging, and often, without a dinner) that he used to write it on scraps of paper picked up by accident, or begged in the shops which he occasionally stepped into, as thoughts occurred to him, craving the favour of pen and ink as if it were just to make a memorandum. The able author of 'The Road to Ruin' was likewise one who had travelled some distance on that thorny path, for at one time he found himself in the streets of London without money, without a home, or a friend to whom his shame or pride would permit his making known his necessity. Wandering along he knew not whither, plunged in the deepest despondency, his eye caught sight of a printed placard, "To Young Men," inviting all spirited young fellows to make their fortunes as common soldiers in the East India Company's Service. After reading it over a second time he determined without hesitation to hasten off and enroll himself in that honourable corps, when he met with a person he had known at a sporting club he had been in the habit of frequenting. His companion seeing his bundle and rueful face, asked him where he was going, to which Holcroft replied that had he enquired five minutes before he could not have told him, but that now he was "for the wars." At this his friend appeared greatly surprised, and told him he thought he could put him up to something better than that. Macklin, the famous London actor, was going over to play in Dublin, and had asked him if he happened to be acquainted with a young fellow who had a turn for the stage, and, said his friend, "I should be happy to introduce you." The offer was gladly accepted, and when the introduction had been managed Holcroft was asked by Macklin "what had put it into his head to turn actor?" to which he replied, "He had taken it into his head to suppose it was genius, but that it was very possible he might be mistaken." Holcroft was engaged for the tour, became an actor, and though he does not appear to have shone particularly strong on the stage, acquired considerable celebrity as a dramatic author, his play before mentioned being one of the few works of the old dramatists that has not become out of date with the playgoing public. More than one literary man of note, has been compelled by poverty to accept the Queen's shilling. Coleridge, according to one of his biographers, left Cambridge partly through the loss of his friend Middleton, and partly on account of college debts. Vexed and fretted by the latter, he was overtaken by that inward grief which in after life he described in his 'Ode to Dejection.' "A grief without a pang, void, dark, and drear, A stifled, drowsy, unimpassioned grief, Which finds no natural outlet, no relief, In word, or sigh, or tear." In this state of mind he came to London, strolled about the streets till night, and then rested on the steps of a house in Chancery Lane. Beggars importuned him for alms and to them he gave the little money he had left. Next morning he noticed a bill to the effect that a few smart lads were wanted for the 15th Elliot's Light Dragoons. Thinking to himself "I have all my life had a violent antipathy to soldiers and horses, and the sooner I can cure myself of such absurd prejudices the better," he went to the enlisting-station, where the sergeant finding that Coleridge had not been in bed all night, made him have some breakfast and rest himself. Afterwards, he told him to cheer up, to well consider the step he was about to take, and suggested that he had better have half-a-guinea, go to the play, shake off his melancholy and not return. Coleridge went to the theatre, but afterwards resought the sergeant, who was extremely sorry to see him, and saying with evident emotion, "Then it must be so," enrolled him. In the morning he was marched to Reading with his new comrades, and there inspected by the general of the district. Looking at Coleridge, that officer said,-- "What's your name?" "Comberback!" "What do you come here for, sir?" "For what most other persons come, to be made a soldier!" "Do you think you can run a Frenchman through the body, sir?" "I do not know," said Coleridge, "as I never tried, but I'll let a Frenchman run me through the body, before I'll run away." "That will do," said the general; and Coleridge was turned into the ranks. Alexander Somerville, author of 'Cobdenic Policy,' 'Conservative Science of Nations,' &c., &c., was also driven to the extremity of enlisting under circumstances more or less humorous. Unlike Coleridge, Alexander Somerville was not of gentle birth, being, as he styles himself in 'The Autobiography of a Working Man,' "One who has whistled at the plough." He received as a boy but scant education, being sent to a common day school where cruel discipline and unnecessary severity preponderated over learning. Though put to farm-work, where he was by turns carter, mower, stable-boy, thresher, wood-sawyer and excavator, his natural intelligence and love of books made him anxious to turn his face from the parish of Oldhamstocks, where he was brought up, in a westerly direction towards Edinburgh. When about eighteen years of age he was much interested in the Reform Bill of 1830, and gave evidence then of his enthusiasm for politics, became canvasser for a weekly newspaper, but does not appear to have succeeded in this vocation, for his circumstances were such that he wandered about moneyless; and meeting with an old chum they agreed to go and have a chat at any rate with the recruiting corporal of the dragoon regiment popularly known as the Scots Greys. "My companion," he says, "had seen the Greys in Dublin, and having a natural disposition to be charmed with the picturesque, was charmed with them. He knew where to enquire for the corporal, and having enquired, we found him in his lodging up a great many pairs of stairs, I do not know how many, stretched in his military cloak, on his bed. He said he was glad to see anybody upstairs in his little place, now that the regimental order had come out against moustachios; for since he had been ordered to shave his off, his wife had sat moping at the fireside, refusing all consolation to herself and all peace to him. 'I ha'e had a weary life o't,' he said plaintively 'since the order came out to shave the upper lip. She grat there. I'm sure she grat as if her heart would ha'e broken when she saw me the first day without the moustachios.' Having listened to this and heard a confirmation of it from the lady herself, as also a hint that the corporal had been lying in bed half the day, when he should have been out looking for recruits, for each of whom he had a payment of ten shillings, we told him that we had come looking for him to offer ourselves as recruits. He looked at us for a few moments, and said if we 'meant' it he saw nothing about us to object to; and as neither seemed to have any beard from which moustachios could grow, he could only congratulate us on the order that had come out against them as we should not have to be at the expense of getting burnt corks to blacken our upper lips, to make us look uniform with those who wore hair. We assured the corporal that we were in earnest, and that we did mean to enlist, whereupon he began by putting the formal question, 'Are you free, able and willing to serve his Majesty King William the Fourth?' "But there was a hitch, two shillings were requisite to enlist two recruits, and there was only one shilling. We proposed that he should enlist one of us with it, and that this one should then lend it to him to enlist the other. But his wife would not have the enlistment done in that way. She said 'That would not be _law_: and a bonny thing it would be to do it without it being law. Na na,' she continued, 'it maun be done as the law directs.' The corporal made a movement as if he would take us out with him to some place where he could get another shilling but she thought it possible that another of the recruiting party might share the prize with him--take one of us or both: so she detained him, shut the door on us, locked it, took the key with her and went in search of the King's requisite coin. Meanwhile as my friend was impatient I allowed him to take precedence of me, and have the ceremony performed with the shilling then present. On the return of the corporal's wife, who though younger than he in years seemed to be an 'older soldier,' I also became the King's man." In connection with music the name of Loder, the clever composer (author of the 'Night Dancers' and other charming musical compositions), recalls an interesting episode in his life revealing a remarkable shift to which he was put. One evening when leaving his lodgings with a friend named Jay for the purpose of enjoying a quiet little dinner at Simpson's, he received an ominous tap on the shoulder from one of those individuals whose attentions are not appetising, since without you can settle the little amount, they require your immediate company. Loder was by no means able to satisfy the law's demands, and the sheriff's officer refused to lose sight of his man, even though "he had a most particular appointment;" so the only thing to be done was to invite the bailiff to join them at dinner. After the repast was concluded the party repaired to Sloman's, a notorious spunging-house in Cursitor Street, Chancery Lane, when just as Jay was taking leave of Loder the latter remembered having something in his pocket which might be turned to account. It was a song by Samuel Lover. "Goodbye, old fellow," said Loder. "Come to-morrow morning, and see what I shall have ready." As soon as his friend had gone he set to work and set Lover's words of 'The Three Stages of Love' to music, which was a most successful and satisfactory way of composing himself to sleep, for when Jay called in the morning he received a manuscript which, when taken to Chappell's, realised £30. The proceeds enabled Loder to pay the debt, and dine with his friend at Simpson's in the afternoon, without the unwelcome guest of the preceding day. John Palmer, the original Joseph Surface, in which character he was considered unapproachable, was a man evidently of the greatest plausibility. When complimented by a friend upon the ease of his address, he said, "No, I really don't give myself the credit of being so irresistible as you have fancied me. There is one thing, though, which I think I _am_ able to do. Whenever I am arrested I can always persuade the sheriff's officer to bail me." Contemporary with John Palmer was another celebrated comedian, also addicted to more extravagant tastes than his income warranted--Charles Bannister, who made his first appearance in London with Palmer in a piece called the "Orators" in May 1762. In this he gave musical imitations, but the performances taking place in the mornings, his convivial habits over night precluded him from shining as he might have done; a fact which was noticed by Foote, the manager. To this Bannister replied, "I knew it would be so; I am all right at night, but neither I, nor my voice, can _get up_ in the morning." He was invariably in difficulties: on the death of Sir Theodosius Boughton, the topic of the hour in 1781, as he was said to have been poisoned by laurel water, Bannister, said "Pooh! Don't tell me of your laurel leaves; I fear none but a bay-leaf" (bailiff). Once when returning from Epsom to town in a gig, accompanied by a friend, they were unable to pay the toll at Kennington Gate, and the man would not let them pass. Bannister immediately offered to sing a song, and struck up 'The Tempest of War.' His voice was heard afar, the gate being soon thronged by voters returning from Brentford, who encored his effort, and the turnpike-man, calling him a noble fellow, expressed his willingness to pay "fifty tolls for him at any gate." John Joseph Winckelmann, who became one of the most famous of German writers on classical antiquities, was the son of a poor cobbler, who not only had to struggle with poverty, but with disease which, while his boy was yet young, compelled him to avail himself of the hospital. When placed at the burgh seminary there, the rector was struck with young Winckelmann's dawning genius, and by accepting less than the usual fee, and getting him placed in the choir, contrived that the boy should receive all the advantages the school afforded. The rector continued to take the greatest interest in his apt pupil, made him usher, and when seventeen years of age, sent him to Berlin with a letter of introduction to the rector of a gymnasium, with whom he remained twelve months. While there Winckelmann heard that the library of the celebrated Fabricius was about to be sold at Hamburgh, and he determined to proceed there on foot and be present at the sale. He set out accordingly, asking charity (a practice not considered derogatory to struggling students in Germany) of the clergymen whose houses he passed; and, having collected in this way sufficient to purchase some of his darling poets at the sale, returned to Berlin in great glee. After studying at Halle and elsewhere for six years, his early passion for wandering revived, and fascinated with a fresh perusal of Cæsar's 'Commentaries,' he began in the summer of 1740 a pedestrian journey to France, to visit the scene of the great Roman's military exploits. His funds, however, soon became exhausted, and when close to Frankfort-on-the-Maine, he was obliged to return. When he arrived at the bridge of Fulda, he remarked his own dishevelled, travel-stained appearance, and believing himself alone, began to effect an alteration. He had pulled out a razor, and was about to operate on his chin, when he was disturbed by shrieks from a party of ladies, who, imagining that he was about to make away with himself, cried loudly for help. The facts were soon explained, and the fair ones insisted on his accepting a monetary gift that enabled him to return without inconvenience. It was not until the year 1755, when Winckelmann was thirty-eight years of age, and had published his first book, the 'Reflections on Imitation of the Greeks in Painting and Statuary,' that he freed himself from penury. Flaxman, who throughout his honourable life seems to have entertained a most modest view of his own talents, married before he had acquired distinction, though regarded as a skilful and exceedingly promising pupil; and when Sir Joshua Reynolds heard of the indiscretion of which he had been guilty, he exclaimed, "Flaxman is ruined for an artist!" But his mistake was soon made manifest. When Mrs. Flaxman heard of the remark, she said, "Let us work and economize. It shall never be said that Ann Denham ruined John Flaxman as an artist;" and they economised accordingly, her husband undertaking amongst other things to collect the local rates in Soho. It is to a "shift" of this nature that we are to a certain extent indebted for the writings of Bishop Jeremy Taylor. After the death of Charles I., Dr. Taylor's living of Uppingham, in Rutlandshire, was sequestered, and the gifted ecclesiastic repaired to Golden Grove, Carmarthenshire, and taught a school for the subsistence of his children and himself. While thus employed, he produced some of those copious and fervent discourses, whose fertility of composition, eloquence of expression and comprehensiveness of thought, have enabled him to rank as one of the first writers in the English language. Beau Brummell, the autocrat of fashion when in his zenith, was in the days of his decline particularly shifty. After George IV. had cut him, and when he was about to depart for France to undertake the consulate of Caen, he made a desperate effort to raise money, and, amongst other people, he wrote to Scrope Davies for a couple of hundred pounds, which he promised to repay on the following morning, giving as a reason for his request, that the banks were shut for the day, and all his money was in the Three per Cents. To this Davies, who happened to know how hard up Brummell was, sent the following laconic reply:-- "MY DEAR GEORGE, "'Tis very unfortunate, but all _my_ money is in the Three per Cents. "Yours, "S. DAVIES." Brummell's appointment at Caen, owing to the representations of Madame la Marquise de Seran, and others who had known him in London, was known in that place some time before he arrived, which had the effect of making all the young Frenchmen of the Carlist party anxious to become acquainted with him. Soon after he was settled down, three of them paid him a morning visit, and, though late in the day, found him deep in the mysteries of his toilet. They naturally wished to retire, but Brummell insisted on their remaining. "Pray stay," said he, as he laid down the silver tweezers with which he had just removed a straggling hair, "pray remain; I have not yet breakfasted--no excuses. There is a _pâté de foie gras_, a game pie," and many other dainties that he enumerated with becoming gastronomic fervour, but which failed to overcome the scruples of the young men, who went away enchanted with Brummell's politeness and hospitality, one of the trio afterwards remarking that "he must live very well." There is not the slightest doubt that the beau was pretty sure his visitors had breakfasted, and it was only the extreme improbability of their accepting his invitation that made him give it. Had they taken him at his word, instead of the magnificent repast which he offered them, his guests would have sat down to an uncommonly plain breakfast, for the polite and hospitable host had nothing but a penny roll and the coffee simmering by his bedroom fire. On another occasion a visitor called on him, and in course of conversation said he was going to dine with a certain Mr. Jones, a retired soap-boiler, who had radically opposed the appointment of a man like Brummell to superintend the British interests at Caen. "Well I think I shall dine there too," said Brummell. "But you haven't an invitation, have you?" "No," was the reply; "but I think I shall dine there all the same." As soon as the caller left, Brummell sent a _pâté de foie gras_, which he had received from Paris, with a grand message to Jones. The courtesy seemed so disinterested, that the Radical sent a pressing invitation by return; and when Brummell's visitor of the morning joined the party, he saw the beau installed in the seat of honour at the hostess's right. Brummell told his friend next day how he had managed. The gentleman said, "But I did not see the pie on the table." "True," explained Brummell; "I know it never made its appearance. It was a splendid pie--a _chef-d'oeuvre_, and I felt deeply interested in its fate. When going away I inquired what had been done with the pie. The cook said, 'Master had kept it for Master Harry's birthday.' To be the 'cut and come again' of a nursery dinner. To be the prey of the little Joneses and their nurses was atrocious. It was an insult to me and my pie! 'Go,' I said, 'to your kitchen; I particularly want to see the _pâté de foie gras_.' Feeling that it would have been a sin to leave it with such people, I took it away. It was not honest, but as I cut into it this morning I almost felt justified, for I never inserted a knife into such another." It certainly was anything but honest, and it would have been well had Brummell remembered the childish saying about "give a thing and take a thing," but where a person's _amour-propre_ is touched on such an important matter as a game pie it would not be right of course to judge the action by the ordinary standard. The idea of taking the pie back for the reasons alleged was really funny, though the fact of the beau being extremely "hard up" very possibly had a good deal to do with his conduct. _Apropos_ of this condition it may be news to some to know that there once existed an institution called the "Hard Up Club" the formation of which is alluded to by "Baron" Nicholson in his autobiography. He says "just before I left the Queen's Bench I had a visit from Pellatt (a well-known man about town in that day, who had formerly been clerk and solicitor to the Ironmongers' Company), with the news that he and another jolly old friend of mine had made a discovery of a place of rest suitable to our condition in life, which I must say was seedy in every respect. Pellatt had been in the habit of coming over to the Bench almost daily to dine with me and others, who were delighted with his amusing qualities. He gave excellent imitations of the past and present London actors, and his genius for entertaining was brought into active operation in our prison circle. The history of the discovery of 'The Nest,' or tranquil house of entertainment, was this: Pellatt and a friend of his, 'Old Beans' (whose right name was Bennett, yclept 'Old Beans' for shortness), were strolling about the Strand one foggy November night, their habiliments were uncomfortably ventilated, their crab-shells of the order hydraulic; snow was on the ground, and their castors 'shocking bad hats.' Not liking to enter any very public places they strayed round the back streets on the river side of the Strand, and turning from Norfolk Street into Howard Street, _vis-à-vis_ they perceived a tavern, a dull, unlighted (save by a dim lamp), small, old-fashioned public-house in Arundel Street, with the sign of 'The Swan.' '"The Swan,"' said Pellatt, as he read the sign, 'will never sink! Beans, old fellow, we'll go into the 'Never Sink!' "The house was better known for years afterwards by this name than by its real sign. The two wayfarers entered. Old Charles Mathews in his 'At Home' used to tell a story of pulling up at a road-side inn, and interrogating the waiter as to what he could have for dinner. "'Any hot joint?' said the traveller. "'No, sir; no hot joint, sir.' "'Any cold one?' "'Cold one, sir? No, sir; no cold one, sir.' "'Can you broil me a fowl?' "'Fowl, sir? No, sir; no fowl, sir.' "'No fowl, and in a country inn!' exclaimed Mathews. 'Let me have some eggs and bacon then.' "'Eggs and bacon, sir?' said the waiter. 'No eggs and bacon, sir.' "'Confound it,' at length said the traveller. 'What have you got in the house?' "'An execution, sir,' was the prompt response of the doleful waiter. "And so it was at 'The Swan.' When Pellatt and his friend entered the parlour there was but a glimmer of light, and no fire. A most civil man, whose name turned out to be Mathews, informed his guests that he would instantly light a fire and make them comfortable. "'Not worth while,' said Pellatt, 'We only want a glass of gin and water, and a pipe.' "The host would not be denied. In a few minutes there was a blazing fire, the hot grog was upon the table, and Pellatt and Old Beans were smoking away like steam. The supposed landlord was invited to take a seat with them, and during the conversation informed them that he was the man in possession, and that he was allowed to provide a little spirits, and a cask of beer, and reap the profits himself just to keep the house open until a purchaser could be found for it, and he further stated how glad he should be if the gentlemen would come again. Being told by Pellatt all about the 'Never Sink,' when I again left the Queen's Bench Prison, and visited the outer world, I aided them in establishing what we dignified by the title of 'The Hard Up Club.' Its institution commenced by Old Beans being appointed steward, and in that capacity began his campaign by buying a pound of cold boiled beef at Cautis's, Temple Bar, and four pennyworth of hot roasted potatoes from the man who stood with the baked 'tatur' can in front of Clement's Inn. As the club increased in number so did our commissariat in supplies and importance, and the office of 'Old Beans' became no sinecure. His duty, and it was performed _con amore_, was to be in attendance early in the day at the club to provide the dinner. The money to pay for this was invariably collected over night; and I have known the funds to be so short that 'Old Beans's' ingenuity has been frequently and greatly taxed to meet the necessary requirements and expenditure. A shoulder of mutton was a familiar dish, Beans preparing heaps of potatoes, and with a skilful culinary nicety, for which he was eminent, making the onion sauce himself. A bullock's heart was also a favourite with us, provided always that Old Beans made the gravy and stuffing. I said to our gracious and economical steward the first day we had the ox heart, 'Beany, you'll want some gravy beef.' "'The deaf ears' (the hard, gristly substance attached to the top of a bullock's heart), said he, 'will make excellent gravy. The 'Hard Ups' can't afford beef. No, no, we'll make the deaf ears do.' It may be imagined that Old Beans's place was a difficult one. One Kay, a large, seedy lawyer, who wore shabby black and white stockings, and shoes, was always behindhand with his share of cash. If a shilling were required, Kay would pay into the hands of the steward about nine pence halfpenny, vowing that he had no more, and Beans always declared himself out of pocket by Kay. We had, however, a visitor who added lustre to our association, but he was not a dining member--he could not be--his means were too limited even for our humble carousings. This member was a very old man, Colonel Curry, formerly a member of the Irish Parliament. He lodged in one room in Arundel Street, therefore the 'Never Sink' was to him a convenient hostelry, and he could do as he liked. He did so. On a small shelf over the parlour-door the colonel kept his own table-napkin, mustard, pepper, and salt. He also had a small gravy-tight tin case, and in that he brought with him every day four pennyworth of hot meat, generally bought at the corner of Angel Inn Yard, Clement's Inn. All he spent at the 'Never Sink' was three halfpence for a glass of rum, which he diluted from six o'clock in the evening till eleven o'clock at night: in the last mixing the rum was unrecognisable, the water colourless. Curry was a proud Irishman, never accepting the oft-proffered hospitality of others. His conversation was delightful, amusing, instructive. He never complained, and we were left to doubt whether his economy proceeded from parsimony or poverty; but from his highly honourable sentiments I should conclude the latter. It was a rule with the club that all the good sort of fellows with whom the members might be acquainted should be pressed into the general service of the club: thus any member who in better days had been a good customer to a thriving publican (and there was scarcely one exception in the whole society) should use his best endeavour to introduce that publican to the 'Never Sink,' and get him to stand treat. The number of dinners and liquors obtained by such endeavours were prodigious. The club included several members of the republic of letters, who, to quote Tom Hood, had not a sovereign amongst them. Indeed, they had but one passable crown. One hat served nine; their shirts were latent; their dinners intermittent, and their grog often eleemosynary. Nothing sparkled about them but their wit, which was as keen as their appetites. The man of genius crouches in social poverty in a commonwealth of mutual privation. "'There wit, subdued by poverty's sharp thorn, Was joined by wisdom equally forlorn; And stinted genius took a draught of malt On baked potatoes mixed with attic salt.'" CHAPTER IV. THE LUCK AND ILL LUCK OF IMPECUNIOSITY. Shakespeare, though he says "There's a divinity doth shape our ends, rough-hew them how we will," admits that "There is a tide in the affairs of men, which, taken at the flood, leads on to fortune," which certainly looks as if we had something to do with the matter. "Man," it has been said, "is the architect of his own fortune," but it is equally a fact that some individuals have many more chances than others of making that fortune, especially those who are apparently undeserving. In the same way, impecuniosity has with some been the very means of introducing them to the road to success, while it has only plunged others in suffering. Amongst the former may be ranked Benjamin Charles Incledon, who flourished in the latter part of the eighteenth century, and in the beginning of the nineteenth. He was born at Callington, in Cornwall, and at a very early age was a choir-boy in Exeter Cathedral, in which city he received his musical education from Jackson, the composer. At sixteen he entered the navy, and in the course of the two years that he remained in the service was in several engagements. When the _Formidable_ was paid off at Chatham, in 1784, the young sailor turned his steps towards Cornwall, but when he reached Hitchen Ferry, near Southampton, he had got rid of whatever money he started with, and had to ask assistance of a recruiting sergeant, who not only gave him the means to get ferried over, but invited him to a public-house in the town, where they made merry over bread and cheese, and ale. The company became convivial, and Incledon, in his turn, sang a ballad which delighted everybody, but especially the prompter of the Southampton Theatre, who happened to be sitting in the bar-parlour smoking his pipe, and who rushed out to his manager before the song was finished to tell him of the _rara avis_ he had found. Collins, the manager, returned forthwith, and was so delighted with the sailor's vocal abilities that he offered him an engagement at _half-a-guinea a week_, there and then, which offer was accepted, Incledon making his first appearance as Alphonso in 'The Castle of Andalusia.' His career was most successful, and he is spoken of by more than one authority as the first English singer on the stage of his day. Under the circumstances it must surely be conceded, that the impecuniosity which caused him to sing that song at that particular time, was particularly lucky, and Incledon is not the only individual who has been blessed with good fortune through the same means. In 'The Life of a Showman,' by D. G. Miller, that gentleman relates that one winter's afternoon he arrived with his family at a Cumberland village in a most pitiable plight, for though he had several "children he had but one sixpence." The journey, effected with a horse and cart, had been extremely trying, because across the road they had travelled ran a small rivulet, which was frozen, and a passage through which had to be made for the horse, the driver standing upon the shafts across the back of the horse, while the showman waded through the water nearly up to his waist, a state of discomfort enhanced by the plunging of the horse and the shrieks of the children. When the party arrived at the public-house (where there was a large room which was occasionally let for entertainments, &c.), they were nearly frozen, and proceeded to warm themselves by the kitchen fire. After calling for a quart of ale, and paying for it with the solitary sixpence in his possession, the showman proceeded to look after his properties, and found that the man with the cart, being anxious to get back, had unloaded the luggage at the door. Enquiring of the landlady if he could engage the large room for a few nights for a very superior exhibition, the itinerant performer was informed by her, "I can't tell, but I think not. The last people who were here didn't pay the rent. However, the landlord is not at home, and I can say nothing about it." After this he asked if they could be supplied with some tea, and on being replied to in the affirmative, says, "The expression on my wife's face seemed to say, 'Are you mad--where will you get the money to pay for it?' I paid no attention, however, to her look: the tea was got ready, and we sat down and made a hearty meal--at least, the children and I did. As to my wife, she was alarmed at my conduct, and was too frightened to eat, although she had tasted nothing since breakfast." After tea he asked if they could be accommodated with beds, but was refused by the landlord, who showed his suspicions. The showman pointed to the snow, which was falling heavily, and asked permission for his wife and children to remain by the fire all night, professing to be able to pay, and at last the landlord sulkily agreed to let them have beds. After the wife and children retired, a good number of customers came in, and a raffle was started for a watch, thirty members at a shilling. While this was being arranged the visitors joked and sang, and presently the showman was asked if he would oblige with a song; he readily complied, and was voted a jolly good fellow by all present, including the landlord, who apologised then for having demurred about the accommodation. When the raffle began, it was found there was one more subscriber wanted, and the showman was asked to join, which he said he would gladly do, but his wife kept the purse and she had gone to bed, and being very tired he did not like to disturb her. The landlord at once said, "Certainly not, here's a shilling; pay me in the morning." He accepted the proffered coin, threw the dice, and won the watch, which he sold for a sovereign. He then gave an exhibition of his skill with sleight of hand tricks, to the great delight of the customers, and was informed by the landlord before he went to bed that he could have the big room for a night or two. To this he replied, "I will think it over," and joined his wife, whom he found in a state of the greatest trepidation at the thought of their not having the money to pay for their board and lodging. He set her fears literally at rest, by showing her the proceeds of the watch he had sold. The next and two following evenings he gave three most successful performances in the big room, and finally left the village with flying colours, _en route_ for Carlisle. His good fortune, as in the case of Incledon, being fairly attributable to the singing of a song; which savours strongly to my mind of what is generally understood by the term "lucky." Though somewhat different in detail, the impecuniosity of the late distinguished journalist, G. A. Sala, when a young man, was equally felicitous. Born in 1827 of not over-wealthy parents (Mrs. Sala was an operatic singer and teacher of music), he from an early age suffered with bad eyes, which prevented him learning to read until he was nine years old. When fourteen he began to earn his own living, and from that time till he was four-and-twenty, his mode of existence seems to have been more or less precarious. At one time engaged in copying plans of projected railways, then acting as assistant scene-painter at fifteen shillings a week, afterwards designing the cheapest and least elegant description of valentines, and subsequently drawing woodcuts for those inferior periodicals pretty generally known as "penny dreadfuls." In the year 1851 his health gave way while he was pursuing the avocation of an engraver. The acids used in engraving so affecting his eyes that for a time he was quite blind, and loss of eyesight meant loss of work, and loss of work involved loss of income. The poverty he suffered at this time must have been of the direst; but though he had lost almost everything else, he never apparently quite lost heart, and when his sight improved he dashed off an article called "The Key of the Street," descriptive of a night spent by a poor wanderer in London, which he sent in to Dickens, who had not long started _Household Words_. The feelings of the homeless man were described in a manner that shows the writer _felt_ his subject, although it is hinted that the experiences related may have been the result of caprice. He says, "I have no bed to-night. Why, it matters not. Perhaps I have lost my latch-key--perhaps I never had one; yet am fearful of knocking up my landlady after midnight. Perhaps I have a caprice--a fancy--for stopping up all night. At all events, I have no bed; and, saving ninepence (sixpence in silver, and threepence in coppers), no money. I must walk the streets all night; for I cannot, look you, get anything in the shape of a bed for less than a shilling. Coffee-houses, into which--seduced by their cheap appearance--I have entered, and where I have humbly sought a lodging, laugh my ninepence to scorn. They demand impossible eighteenpences--unattainable shillings. There is clearly no bed for me. "It is midnight--so the clanging tongue of St. Dunstan's tells me--as I stand thus bedless at Temple Bar. I have walked a good deal during the day, and have an uncomfortable sensation in my feet, suggesting the idea that the soles of my boots are made of roasted brickbats. I am thirsty too (it is July and sultry), and just as the last chime of St. Dunstan's is heard, I have half-a-pint of porter, and a ninth part of my ninepence is gone from me for ever. The public-house where I have it (or rather the beer-shop, for it is an establishment of 'the glass of ale and sandwich' description) is an early closing one, and the proprietor, as he serves me, yawningly orders the potboy to put the shutters up, for he is 'off to bed.' Happy proprietor! There is a bristly-bearded tailor too, very beery, having his last pint, who utters a similar somniferous intention. He calls it 'Bedfordshire.' Thrice happy tailor! "I envy him fiercely, as he goes out, though, God wot, his bedchamber may be but a squalid attic, and his bed a tattered hop-sack, with a slop great-coat from the emporium of Messrs. Melchisedek & Son, and which he had been working at all day, for a coverlid. I envy his children (I am sure he has a frouzy, ragged brood of them) _for they have at least somewhere to sleep. I haven't_." Then follows a most graphic account of the persons encountered during the eight hours' enforced prowl (including a flying visit to a fourpenny lodging-house, which was not a "model" of cleanliness), all the personages met with, and the occurrences witnessed being described with a freshness and fidelity that stamped the author as a descriptive writer of uncommon power. Charles Dickens at once forwarded a cheque for the contribution named, and, in the words of Oliver Twist, "asked for more;" and the late George Augustus Sala has for years been regarded as the journalist _par excellence_ of the day. In like manner the needy circumstances of Charlotte Cushman had much to do with her obtaining an engagement at the Princess's Theatre, and making the great reputation she achieved in England. When first introduced to Mr. Maddox, the then lessee and manager of the house in Oxford Street, she did not impress him favourably. She had no pretensions to beauty, and Mr. Maddox considered she had not the qualities essential to a stage heroine. From London she went to Paris, in the hope of getting engaged by an English company performing there, but failing, and having obtained a letter of introduction from some one supposed to have great influence with the lessee, she again sought Mr. Maddox, with no better result. Stung to the quick by this second repulse, and made desperate by her critical situation, she turned when she had almost reached the door, exclaiming, "I know I have enemies in this country, but" (here she cast herself on her knees, raising her clenched hand aloft), "so help me Heaven, I'll defeat them!" Mr. Maddox was at once satisfied with the tragic power of his visitor, and offered her an engagement forthwith. If there is any doubt as to Charlotte Cushman's success being attributable to impecuniosity the case of O'Brien, the celebrated Irish giant, is most clear. This lengthy individual, whose height was 8ft. 7in., was born at Kinsale, where, with his father, he laboured as a bricklayer. His extraordinary size soon attracted the attention of a travelling showman, who, on payment of £50 per annum, acquired the right of exhibiting him for three years in England. Not satisfied with this extremely good bargain, his master tried to sublet him to another person in the show business, a proceeding which Cotter (the giant's real name) objected to, and for which objection he was saddled with a fictitious debt, and thrown into Bristol Jail. This apparent misfortune was, in the end, one of the luckiest things that could have happened to him. While in prison he was visited by a gentleman who took compassion on his distress, and believing him to be unjustly detained, very generously became his bail, ultimately investigating the affair so successfully as to obtain for him not only his liberty but his freedom to discontinue serving his taskmaster any longer. It happened to be September when he was liberated, and by the further assistance of his benefactor he was enabled to set up for himself in the fair then held in St. James's, and such an attraction did he prove that in three days he realised the considerable sum of £30. From that time he continued to exhibit himself for twenty-six years, when, having realised a fortune sufficient to enable him to keep a carriage and live in luxury, he retired into private life. A practical joke led to the ultimate success of Edward Knight, a popular comedian of last century. While with Mr. Nunns, manager of the Stafford company, he received a message from a stranger desiring his presence at a certain inn. On repairing thither he was courteously received by a gentleman who desired to show his gratification at Knight's performance by giving him permission to use his name (Phillips) to Mr. Tate Wilkinson, the manager of the York Theatre, who, the stranger felt sure, on account of his intimacy with him would be sure to give Knight a good engagement. Next morning a letter was sent by the elated actor, who in due course received the following reply: "Sir,--I am not acquainted with any Mr. Phillips, except a rigid Quaker, and he is the last man in the world to recommend an actor to my theatre. I don't want you. "TATE WILKINSON." This rebuff was so unexpected, and so mortifying, that the recipient sent a short and sharp answer: "Sir,--I should as soon think of applying to a Methodist parson to preach for my benefit as to a Quaker to recommend me to Mr. Wilkinson. I don't want to come. "E. KNIGHT." After an interval of twelve months, when the elder Mathews seceded from his company, he wrote to Knight as follows: "Mr. Methodist Parson,--I have a living that produces twenty-five shillings per week. Will you hold forth? "TATE WILKINSON." The invitation was gladly accepted, and for seven years he continued at York with unvarying success; at the end of which time he obtained an engagement at Drury Lane, and became a metropolitan favourite. Though perhaps not so striking an example as any of the foregoing, an episode in the life of William Dobson (called by Charles the First "the English Tintoret") is more or less of the same fortunate nature. Dobson, who always betrayed in his best efforts the want of proper training, was, as a boy, apprenticed to a Mr. Peake, who was more of a dealer in, than a painter of, pictures, and who consequently was anything but a competent teacher. Nevertheless, his collection of paintings, which included some by Titian and Van Dyck, was most valuable to the youngster, who copied both those masters with such wonderful correctness that none but an _expert_ could detect the difference. When very young, and very poor, he managed to get one of his copies of a Van Dyck exhibited in a shop window on Snow Hill, which, strangely enough, was seen by no less a person than the author of the original, who immediately sought out the individual who had reproduced his work with such fidelity, and finding him toiling away in a miserable garret, took him by the hand, and brought him to the notice of King Charles. Another instance of luck not dissociated with impecuniosity is found in the case of Perry, of _The Morning Chronicle_. Educated at Marischal College, Aberdeen, which he entered in 1771, he was first employed in that town as a lawyer's clerk; but full of literary ambition, and possessed of much literary culture, he made his way to Edinburgh, where he almost starved, not being able to find employment of any kind. From Edinburgh he went to Manchester, where he just managed to eke out an existence; but believing London was the El Dorado for men of letters, he was not content till he had started for the great city. Amongst others who had promised him work was Urquart, the bookseller, to whom he wrote without success. One morning he called upon that gentleman, and was leaving the shop after a fruitless interview, when the bookseller said he had just experienced great pleasure in reading an article in _The General Advertiser_, and, said he, "If you could write like that, I could soon find you an engagement." It so happened that Perry had sent in an article to that paper, and his joy may be imagined when he was able to claim the lauded production as his own; bringing out of his pocket another of the same sort, which he was about to drop into the editor's box as before. He was immediately engaged as a paid contributor to _The General Advertiser_ and _Evening Post_, and ultimately became editor and proprietor of _The Morning Chronicle_. One of the most remarkable of the lucky illustrations, however, is that of Hogarth, when he was a struggling artist. At the time referred to, when studying at St. Martin's Lane Academy, he was oftentimes reduced to the lowest possible water-mark; and while laying the foundation of his future celebrity, he was exposed to all the humiliating inconveniences too frequently associated with penury, not the least of such annoyances being the contemptuous insolence of an ignorant letter of lodgings. The story goes that on one of these occasions when he was unmercifully dunned by his landlady for the small sum of a sovereign, he was so exasperated that, with a view to being revenged upon her, he made a sketch of her face so excruciatingly ugly, that it revealed at once his marvellous power as a caricaturist. Turning to the opposite side of the subject--the unlucky, there is, it must be admitted, a dearth of similarly appropriate examples. It is not that there is any scarcity of cases of great misfortune in connection with impecuniosity, but the circumstances connected with such cases are not so apparently the result of accident. In the lucky instances enumerated the chance element was conspicuous, but the same cannot be said of the adverse anecdotes; for they, or rather those that have come under my notice, are unfortunate cases rather than unlucky. For instance, the impecuniosity that introduced the Irish giant to some one he would not otherwise have met, who put him in the way of realising a competency, was manifestly lucky; but the impecuniosity that attended Stow, the antiquary, in his latest years, could not in the same sense be called _un_lucky, inasmuch as it was owing to no particular act or chance circumstance that he continued poor. The kind of cases that I consider would more properly illustrate this phase of the subject would be those of persons who, from, say, missing an appointment with some patron of eminence owing to being hard up, lost an opportunity of advancement, which never occurred again; or by not having some small amount of ready money were unable to avail themselves of an advantageous offer, which would have resulted in a fortune. That such mishaps have occurred in the long list of unrecorded lives there is little doubt; but I cannot call any to remembrance at the present time. The only instances I have met with in my research being those of unfortunate persons, whose histories of hardship would be more fittingly recounted as the sad side of impecuniosity. The individual just referred to, John Stow, the antiquary, is a most melancholy case in point. A profound scholar in every sense, he devoted his life and substance to the study of English antiquities; oftentimes travelling tremendous distances on foot to save monuments, and rescue rare works from the dispersed libraries of monasteries. His enthusiasm for study was unbounded, and at his death he left stupendous excerpts in his own handwriting. At an advanced age, when worn out by study and travel, and the cares and anxieties of poverty--for he was utterly neglected by the pretended patrons of learning--his other troubles were increased by most acute pains in the feet, which he good-humouredly referred to by saying "his affliction lay in that part which formerly he had made so much use of." At last he became so necessitous that he petitioned James the First for a licence to collect alms for himself, "as a recompense for his labour and travel of forty-five years, in setting forth the Chronicles of England, and eight years taken up in the Survey of the Cities of London and Westminster, towards his relief now in his old age: having left his former means of living, and only employing himself for the service and good of his country"--which petition was granted by letters patent under the Great Seal, permitting him to seek assistance from all well-disposed people within this realm of England. The terms in which this permit was set forth ("to ask, gather, and take the alms of all our loving subjects") were scarcely correct; that is to say, "to ask, gather, and take the alms of all our loving subjects--who will give" would have been more complete; for though the letters patent were published by the clergy from their pulpits, the result was so trifling that they had to be renewed for another twelvemonth; one entire parish in the city subscribing but seven and sixpence to the poor scholar's appeal. Learning in Stow's time, and for a long time after, was evidently but poorly patronised, for his is by no means an isolated experience. Myles Davies, author of 'Athenæ Britannicæ,' &c., published in 1716, suffered similar neglect; his mind, it is alleged, becoming quite confused amidst the loud cries of penury and despair. Alluding to those who were supposed to support such as himself, he scathingly says, "Some parsons would halloo enough to raise the whole house and home of the domestics to raise a poor crown; at last all that flutter ends in sending Jack or Tom out to change a guinea, and then 'tis reckoned over half-a-dozen times before the fatal crown can be picked out, which must be taken as it is given, with all the parade of almsgiving [Davies, be it remembered, was a Welsh divine], and so to be received with all the active and passive ceremonial of mendication and alms-receiving, as if the books, printing, and paper were worth nothing at all, and as if it were the greatest charity for them to touch them, or let them be in the house. 'For I shall never read them,' says one of the five-shilling chaps. 'I have no time to look into them,' says a third. ''Tis so much money lost,' says a grave dean. 'My eyes being so bad,' said a bishop, 'that I can scarce read at all.' 'What do you want with me?' said another. 'Sir, I presented you the other day with my 'Athenæ Britannicæ,' being the last part published.' 'I don't want books, take them again; I don't understand what they mean.' 'The title is very plain,' said I, 'and they are writ mostly in English.' 'I'll give you a crown for both the volumes.' 'They stand me, sir, in more than that, and 'tis for a bare subsistence I present or sell them; how shall I live?' 'I care not a farthing for that--live or die, 'tis all one to me.' 'Damn my master,' said Jack, ''twas but last night he was commending your books and your learning to the skies, and now he would not care if you were starving before his eyes; nay, he often makes game at your clothes, though he thinks you the greatest scholar in England.'" So much for the way literature was encouraged in the sixteenth and seventeenth centuries, and that it was little better in the eighteenth century is only too well-known a fact; for "in those days, a large proportion of working literary men were little better than outcasts;--persons exiled from decent society, partly by their own vices, partly by the fact of their following a profession which had hardly acquired a recognised standing in the world, or found for itself a definite and indisputable sphere of usefulness. The reading public was not sufficient to maintain an extensive fraternity of writers, and the writers consequently often starved, and broke their hearts in wretched garrets, or earned a despicable living by flattering the great." These animadversions are especially meant to apply to that class of _littérateurs_ known as "Grub Street pamphleteers," but not a few notable names in the world of letters can be found to verify the gloomy picture. Nathaniel, or "Nat" Lee, as he is more often called, was one of those who failed to find fortune, but it must be admitted his "own vices" are answerable for his indigence. The son of a clergyman, he was educated at Westminster School, and Trinity College, Cambridge, where he took his B.A.; and, at a very early age, manifested conspicuous ability for dramatic writing; his first effort, 'Nero, Emperor of Rome,' produced in 1675, being received with marked success. From that time until his death, which occurred fifteen years later, he brought out eleven plays, not one of which was a failure, but he was so rakishly extravagant as to be frequently plunged into the lowest depths of misery. In November 1684, his excesses, coupled with a naturally excitable temperament, succeeded in fitting him to be an inmate of Bedlam, where he was confined for four years. On his release in April 1688, he resumed his occupation of dramatist, producing 'The Princess of Cleve' in 1689, and 'The Massacre of Paris' the following year. Notwithstanding the considerable profits arising from these performances he was reduced to so low an ebb, that a weekly stipend of 10_s._ from the Theatre Royal was his chief dependence. He died the same year, 1690, the result of a drunken frolic in the street; and although the author of eleven plays, all acted with applause, and dedicated, when printed, to the Earls of Dorset, Mulgrave, and Pembroke, and the Duchesses of Portsmouth and Richmond, who were numbered among his patrons, _he was buried by the Parish_ of St. Clement Danes, Strand. The vicissitudes of Spenser, in contrast to those of the author just referred to, were undoubtedly due to a want of appreciation on the part of those in power; for none of his biographers even hint at want of rectitude in his past life. Created Poet Laureate by Queen Elizabeth, he, for some time, only wore the barren laurel, and possessed the place without the pension; for Lord Treasurer Burleigh, for some motive or other, intercepted the Queen's intended bounty to him. It is said that Her Majesty, upon Spenser presenting some poems to her, ordered him £100, but that her Lord Treasurer, objecting to it, said with considerable scorn, "What! all this for a song?" Whereupon the Queen replied, "Then give him what is reason." Some time after, the poet, not having received the promised gift, penned the following poetic petition-- "I was promised on a time, To have reason for my rime; (_sic_) From that time unto this season I received nor rime nor reason"-- which, when sent to his sovereign, had the desired effect of producing the monetary reward, and also obtained for Lord Burleigh the reprimand he so well deserved. That Spenser felt keenly the neglect to which he was subsequently subjected is pretty clearly shown in the following lines-- "Full little knowest thou, that hast not try'd What hell it is in suing long to bide: To lose good days that might be better spent, To wast long nights in pensive discontent: To speed to-day, to be put back to-morrow, To feed on hope, to pine with fear and sorrow: To have thy Prince's grace, yet want her peers, To have thy asking, yet wait many years: To fret thy soul with crosses and with cares, To eat thy heart with comfortless despairs: To fawn, to crouch, to wait, to ride, to run, To spend, to give, to want, to be undone"-- which is but one of many bemoanings of hard and undeserved treatment; and though there be some who have accused him of lacking philosophy in thus making known his poverty, I should think it very much too literally _poor_ philosophy that would suffer in silence when it comes to a matter of bread and cheese. There were times, of course, in Spenser's history, when his genius was fully acknowledged, both before and after the neglect recorded, when, for instance, he made the acquaintance of that chivalrous poet soldier, Sir Philip Sidney--the historically self-denying Sir Philip, who when mortally wounded at the battle of Zutphen, and about to revel in a draught of water that he had called for, denied himself the coveted drink, and gave it away to a poor comrade. He it was who was the first to recognise Spenser's great claim as a poet. It is stated that when a perfect stranger to Sir Philip, Spenser went to Leicester House, and introduced himself by sending in the ninth canto of 'The Fairy Queen,' which he had just completed. The young nobleman was much surprised with the description of "Despair" in that canto, and betrayed an unusual kind of transport on the discovery of so new and uncommon a genius. After he had read some verses he called his steward, and bade him give the person who brought those verses £50; but upon reading the next stanza, he ordered the sum to be doubled. The steward was as much surprised as his master, and thought it his duty to make some delay in executing so sudden and lavish a bounty; but upon reading one stanza more, Sir Philip raised his gratuity to £200, and commanded the steward to give it immediately, lest, as he read farther, he might be tempted to give away his whole estate. Unfortunately this generous patron was killed at the early age of thirty-two, and it was after his decease that Spenser for a time was under a cloud. Subsequently he was befriended by the Earl of Leicester, and upon the appointment of Lord Grey of Wilton to be Lord Deputy of Ireland, the poet became his secretary, and was rewarded by a grant from the Queen of three thousand acres. This he was not destined to enjoy very long, for in the rebellion of Tyrone he was plundered, and deprived of his estate, and when he arrived in England he was heart-broken by his misfortunes. He died in the greatest distress on the 16th January, 1599, and though interred in Westminster Abbey at the expense of the Earl of Essex, his death according to Ben Jonson was actually occasioned by "lack of bread." It is difficult to determine which is the more pitiable, the want and misery produced by the neglect of others, or the destitution resulting from evil courses; both demand our commiseration, though some of the stern moralists affect to have "no pity" for those whose troubles are the outcome of self-indulgence and dissipation. "A fellow-feeling makes us wondrous kind," and only those who have been the victims of that enslaving mania for drink, which has blasted so many bright lives will have compassion for such a man as Samuel Boyce. This misguided mortal, the son of a dissenting minister, was born at Dublin in the year 1708, and when eighteen was sent to the Glasgow University, his father having designed him for the ministry. He married when he had been at college little more than a year, and soon developed habits of indulgence and extravagance, which effectually ruined him, in spite of much assistance received from the nobility and others. In the year 1731 he published a volume of poems, to which is subjoined the "Tablature of Cebes," and a letter upon liberty, which appeared originally in the _Dublin Journal_ five years previously. These productions gained him considerable reputation and substantial patronage from the Countess of Eglinton, to whom they were dedicated. His next successful effort was an elegy upon the death of the Viscountess Stormont (a woman of the most refined taste, well versed in science, and a great admirer of poetry), entitled, 'The Tears of the Muses,' which so pleased Lord Stormont, the deceased lady's husband, that he advertised for the author in one of the weekly papers, and caused his attorney to make him a very handsome present. In addition to the favour of Lady Eglinton and Lord Stormont, he was also befriended by the Duchess of Gordon, who gave him most material assistance while he continued in Scotland; and when he went to London, gave him a letter of introduction to Pope, and obtained another for him to Sir Peter King, Lord Chancellor of England. He had many other most valuable recommendations when he arrived in the metropolis, and possessing as he did ability of no common order, his opportunities were exceptionally fine; but nothing can withstand the devastating influences of the demon of drink; and at the age of thirty-two he is described as reduced to such an extremity of human wretchedness that he had not a shirt, a coat, or any kind of apparel to put on. The sheets in which he lay were carried to the pawnbroker's, and he was obliged to be confined to his bed with no other covering than a blanket, and in this condition, thrusting his arm through a hole, he scribbled a quantity of verse for the _Gentleman's Magazine_. His genius was not confined to poetry, for he was skilled in painting, music, and heraldry; but by his pen alone, had he chosen to live decently, he could have commanded a very good living. His translations from the French were admittedly excellent; but the drawback to employing him at this work was that when he had copied a page or two he would pawn the original and re-pawn it as often he could induce his acquaintances to "get it out" for him. On one occasion Dr. Johnson managed to get up a sixpenny subscription for him in order to redeem his clothes, but the effort to help him was useless, for within two days he pawned them again, and the last state was at any rate no better than the first. He seems to have been so demoralised by drink that he was dead to every sense of honour and humanity; for, whenever he obtained half-a-guinea, whether by writing poetry or a begging letter, he would sit squandering it in a tavern while his wife and child starved at home. He got from bad to worse, and in 1742, when locked up in a spunging-house, sent the following appeal to Cave: "I am every moment threatened to be turned out here, because I have not money to pay for my bed two nights past, which is usually paid beforehand; and I am loth to go into the Compter, till I can see if my affairs can possibly be made up. I hope, therefore, you will have the humanity to send me half-a-guinea for support till I finish your papers in my hands. I humbly entreat your answer, not having tasted anything since Tuesday evening I came here; and my coat will be taken off my back for the charge of the bed, so that I must go into prison naked, which is too shocking for me to think of." There are several accounts given of his death, which occurred when he was but forty-one years of age; and, though they vary as to the precise nature of his end, there is no doubt that it was accelerated by the habit he indulged in--of drinking hot beer to excess, which at last obscured and confused his intellectual faculties. The sad side of impecuniosity is, unfortunately, so vast a subject that it would require an entire volume, instead of part of a chapter, to properly record the miseries of mind and body endured by those in past ages, who, not unknown to fame, have been permitted to pine and die in despair. The poets alone, so prolific are they in this respect, would furnish material sufficient; but the neglect of genius is anything but an uncommon thing, and therefore commonplace sufferings might not be regarded as "_Curiosities_ of impecuniosity," though in one sense it certainly is curious that their wants should not have been recognised. Men like Henry Carey or Cary, the author of 'Sally in our Alley,' and said by some to be the composer of the National Anthem, who was considered by all authorities to be a true son of the Muses, have been driven to desperation through want. It is said, "At the time that this poet could neither walk the streets nor be seated at the convivial board without listening to his own songs and his own music--for in truth the whole nation was echoing his verse, and crowded theatres were applauding his wit and humour; while this very man himself, urged by his strong humanity, founded a 'Fund for Decayed Musicians'--he was so broken-hearted, and his own common comforts so utterly neglected, that in despair, not waiting for nature to relieve him from the burden of existence, he laid violent hands on himself; and when found dead _had only a halfpenny in his pocket_." The following lines written some time before his melancholy end show that he was no stranger to the "slings and arrows of outrageous fortune," and that his self-destruction was not the result of momentary madness, but rather induced by the humiliating torture of ills long borne. "Far, far away then chase the harlot Muse, Nor let her thus thy noon of life abuse; Mix with the common crowd, unheard, unseen, And if again thou tempt'st the vulgar praise, May'st thou be crown'd with birch instead of bays!" The untimely end of Chatterton is a companion picture to that of Cary, but the circumstances of his early death, his being without food for two days, and his poisoning himself with arsenic and water, when lodging at Mrs. Angel's, a sack-maker in Brook Street, Holborn, are so well known that it is only necessary to mention his melancholy fate, which if it stood alone in the history of literature would be sufficient to show there is a very pathetic side to impecuniosity. Although this rash act is attributed to the state of starvation to which the poet was reduced, there is little doubt that Horace Walpole by his unsympathising, though strictly correct, reproof had much to do with the disordered condition of the poor fellow's mind. When living at Bristol, Chatterton became possessed of some parchments which had been extracted from the coffin of a Mr. Canynge, and upon these he produced some poetry, which he described as a production of Thomas Canynge, and of his friend, one Thomas Rowley, a priest; sent them to Walpole and asked for assistance to enable him to quit his uncongenial occupation, and pursue one more poetic. The poems were submitted to competent antiquaries, and pronounced forgeries, whereupon Horace Walpole refused the boy's application for help, at the same time reproving the attempted fraud in the most cold and cutting terms. For this treatment the great wit and prince of letter-writers has been severely censured; one writer remarking, "Just or unjust, the world has never forgiven Horace Walpole for Chatterton's misery. His indifference has been contrasted with the generosity of Edmund Burke to Crabbe, a generosity to which we owe 'The Village,' 'The Borough,' and to which Crabbe owed his peaceful old age, and almost his existance. The cases were different, but Crabbe had his faults, and Chatterton was worth saving. It is well for genius that there are souls in the world more sympathising, less worldly, and more indulgent, than those of such men as Horace Walpole." Another most melancholy, and equally tragical record connected with impecuniosity is furnished in the life of Dr. Dodd, a literary divine, and one of the most popular preachers of the last century; though _his_ troubles were not the outcome of actual want, but rather the result of want of self-control and principle. He commenced as a writer for the press, published 'The Beauties of Shakespeare,' obtained several lectureships, which he held with great success, and subsequently became Chaplain to the King. The list of his different appointments is most numerous, and most of them not only important, but highly remunerative, but his extravagance was such that no income would have been sufficient to keep him out of debt. Owing to his excesses he lost the royal favour, and though he was in the receipt of a large income from his preaching, it was not enough to satisfy his expensive habits, and he foolishly sent an anonymous letter to Lady Apsley offering her £3000 if she would prevail on her husband, the Lord Chancellor, to appoint him to the rectory of St. George's, Hanover Square. The letter was traced to the doctor, and in consequence his name was struck off the list of royal chaplains. After a sojourn abroad he returned to this country, obtained from Lord Chesterfield a living in Buckinghamshire, but could not forsake his old habits; he still plunged into debt, and _from being pressed for money_ forged the name of his patron to a bill for £4200, was tried, found guilty, and executed at the Old Bailey, in 1777. The career of Thomas Otway, the dramatist, though short, for he was but thirty-four years of age when he died, was one continued course of monetary difficulty, the result of irregular living. The son of a Sussex rector and educated at Winchester and Christ Church, Oxford, he betrayed no anxiety to follow his father's footsteps, but at the age of twenty-three manifested a most practical preference for Thespis rather than theology, though he does not seem to have possessed any great genius for acting. He subsequently became a cornet in a regiment, which was sent to Flanders, but distinguished himself most as a dramatic writer, for which profession he was eminently suited, many of his plays meeting with exceptional success, particularly 'Venice Preserved,' which has held possession of the stage for about two hundred years. His circumstances, never good, gradually went from bad to worse, owing to his dissolute proclivities, and he died at last on the 14th April, 1685, in a wretched state of penury, at a public-house called 'The Bull,' on Tower Hill, whither he had gone to avoid the too pressing attention of his creditors. It is generally believed that the actual cause of his death was choking, which occurred through his having been without food for some time, and then too eagerly devouring a piece of bread which, through the generosity of a friend, he had been able to purchase. That Otway should have excelled in tragedy is not surprising, the power that he displayed in depicting domestic suffering being easily accounted for by the fact that he must have been constantly experiencing distress in private life, for when his tragic end was brought about he was hiding from sheriff's officers, his misery terminating only with death. It is terribly sad to see such men as these, blessed with natural gifts far beyond the common, yet in spite of these endowments sinking to a lower level than their inferiors in intellect; and unfortunately the literary list of these erring ones is a long one, for since the days of Robert Greene, said to be the first Englishman who wrote for a living, and who died in the house of a poor shoemaker, who took pity upon him when he was destitute, there have always been men unable to withstand the seductions of vicious courses, and who have consequently paid the penalty of intemperance, and immorality, by death-beds of misery, and remorse, to say nothing of the life-long inconveniences of impecuniosity. Lamentable as is the contemplation of these lost lives, there is yet a sadder picture still, for pitiable as it is to think of men, indifferent alike to their well-being in this world and in that which is to come, the sadness is intensified when the object of pity is a woman, one who has been referred to as "a sort of female Otway, without his genius." The individual in question was Colley Cibber's younger daughter, Charlotte, whose education from her earliest years was eminently masculine, which resulted in the girl becoming proficient in manly sports and pastimes, such as shooting, hunting, riding, &c. When very young she married Mr. Richard Clarke, a celebrated violinist, with whom she soon disagreed, and from whom she speedily separated, and she then devoted herself to the stage, and commenced a career, which for strange and harrowing vicissitudes is unequalled in the annals of British biography--one day courted, admired and affluent; the next an outcast, uncared for, and despised. Singularly enough, the first character she assumed on the stage after the quarrel with her husband was Mademoiselle in 'The Provoked Wife,' in which character, and several subsequent assumptions at the Haymarket Theatre, she was highly successful, and obtained an uncommonly good salary. Her temper however, like herself, was eccentric, and it was not long before she quarrelled with Fleetwood, the manager, and left the theatre at a moment's notice. From being a regular performer, she then took to travelling about the country with strollers, and shared with them the starvation fate that is so often associated with their nomadic existence. Tiring of this, she set up as a grocer, in Long Acre, but failed in that business, as well as at puppet-show keeping, at which she tried her hand in a street near the Haymarket. On the death of her husband, she was thrown into prison for debt, but released by the subscriptions of ladies of questionable repute, whose charity is proverbially more conspicuous than their virtue. After remarrying, and again becoming a widow, Charlotte Clarke (for by that name she has always been known) assumed male attire, and obtained occasional engagements at the theatres, and, though she suffered most distressing deprivations was able to present so good an appearance, that an heiress became madly attached to her, and was inconsolable when the wretched woman revealed her sex. The next adventure she claims to have participated in is her becoming valet to an Irish nobleman, which situation she did not retain for any length of time; and then she attempted to earn her living as a sausage-maker, but was unsuccessful. Twice she became a tavern proprietor, and for a time was in the most flourishing circumstances, but her prosperity was excessively ephemeral, and amongst the other occupations that she is credited with having undertaken are those of waiter at the King's Head, Marylebone; worker of a set of puppets, and authoress of her extraordinary biography, which she published in 1755. It was with the proceeds of this book that she was enabled to open one of the public-houses mentioned; but the amount realised by its sale was not of much benefit to the poor misguided creature, for within five years (she died in 1760), she was discovered in a more wretched, forlorn condition than ever, according to the account of two gentlemen who visited her. The widow, who, petted and pampered by her parents, had, as a child been brought up in luxury, was then domiciled in a wretched, thatched hovel in the purlieus of Clerkenwell Bridewell, at that time a wild suburb, where the scavengers used to throw the cleansings of the streets. The house and its scanty furniture sufficiently indicated the extreme poverty of the inmates. "Mrs. Clarke sat on a broken chair by a little scrap of fire, and the visitors were accommodated with a rickety deal board. A half-starved dog lay at the authoress's feet; a cat sat on one hob, and a monkey on the other; while a magpie perched on the back of its mistress's chair. A worn-out pair of bellows served for a writing-desk, and a broken cup for an inkstand; these were matched by the pen, which was worn down to the stump, and was the only one on the premises. The lady asked thirty guineas for the copyright. The bookseller offered five, but was at length induced by his friend to give ten, on condition that Mr. Whyte (the friend) would pay a moiety and take half the risk of the novel." In the year 1759 she played Marplot, in 'The Busybody,' for her own benefit at the Haymarket, when the following advertisement appeared. "As I am entirely dependent on chance for a subsistence, and am desirous of getting into business, I hope the town will favour me on the occasion, which, added to the rest of their indulgence, will ever be gratefully acknowledged by their truly obliged, and obedient servant, CHARLOTTE CLARKE." This was shortly before her death, which took place on the 6th April, 1760. It would be extremely difficult to find a more sorrowful story in connection with impecuniosity than that of Colley Cibber's daughter; and though the degraded character of the greater part of her life has robbed her misfortunes of much of the sympathy that would otherwise have been freely accorded, it would have been well if some who have animadverted so severely upon her shortcomings had remembered that much in her life that was so unwomanly was undoubtedly due to her masculine and defective training. The celebrated actress Mrs. Jordan--whose acting, according to Hazlitt--"gave more pleasure than that of any other actress, because she had the greatest spirit of enjoyment in herself"--was so unfortunate in her last days, that she is fully entitled to a place with those whose monetary embarrassments have been particularly sad. For years she had lived in uninterrupted domestic harmony with the Duke of Clarence, afterwards William the Fourth; but when the connection was suddenly severed in 1811, a yearly allowance of £4400, was settled upon her for the maintenance of herself and daughters; with a provision that, if Mrs. Jordan should resume her profession, the care of the duke's daughters, together with £1500 per annum allowed for them, should revert to his Royal Highness. Within a few months of this arrangement she did return to the stage, but through having incautiously given blank notes of hand to a friend in difficulties on the understanding that the amounts to be filled in were but small, she awoke one morning to find herself called upon to pay amounts utterly beyond her power. In her terror and dismay she fled to France, but her peace of mind was gone. Separated from her children, and racked by the torturing thought of the liability she was unable to discharge, she gradually pined away, and died in terrible distress of mind at St. Cloud in June 1816. Contrasted with its brilliant beginning the close of Mrs. Jordan's life is painfully sad, and it might be urged that the sorrowful end was but an instance of retributive justice on account of the fair and frail one's social sin. Experience, however, proves that the breaking of the moral law does not always involve punishment in this life, and even if this were not so, many instances could be cited of misfortunes as heavy, and far heavier, falling to the lot of those who to all intents and purposes have led blameless lives. Foremost among such cases would be the crushing blow that befell the noble and greatly gifted novelist and poet, Sir Walter Scott, at the age of fifty-five years, when, having given to the world the greater part of those glorious works that have placed his name pre-eminent in the world of literature, and being, as was supposed, the happy enjoyer of a handsome fortune and splendid estate, it transpired that he was a ruined man. So successful had been his literary labours for thirty years that it was generally and naturally supposed that the enormous sums spent on Abbotsford were the proceeds of his novels and poems, but it seems he had for a long time been a partner in the printing firm of Ballantyne & Co., who were closely connected with Messrs. Constable, the publishers. These firms had engaged in transactions of a speculative character, and in the commercial crisis of 1825 both failed, Sir Walter's immense private fortune being swallowed up in the crash, while as a partner in the house of Ballantyne he was responsible for the enormous amount of £147,000. At the time of this calamity his health had already been considerably shattered, the slightly grey hair had in the year 1819 been turned to snowy white by an attack of jaundice, and his frame further enfeebled four years later by an attack of apoplexy, so that it would not have been surprising if this frightful crash had proved his death-blow. Far from it; with a heroism unparalleled, and a high sense of honour, that adds more lustre to his name than the most brilliant effusion of his pen, he determined manfully to face this overwhelming catastrophe, refusing all proffered aid, and merely asking for time. "Gentlemen," said he to the creditors, "time and I against any two. Let me take this good ally into my company, and I believe I shall be able to pay you every farthing. It is very hard thus to lose all the labours of a lifetime and to be made a poor man at last when I ought to have been otherwise, but, if God grant me life and strength for a few years longer, I have no doubt I shall redeem it all." The redemption referred to his property, all of which he gave up, retiring into modest lodgings, where he zealously set to work to accomplish the Herculean task of writing off the gigantic sum named. 'Woodstock,' which realised £8228, was the first novel after his misfortune, and that occupied him only three months; but it was as, he said, "very hard" at his time of life to every day perform the allotted task of producing thirty pages of printed matter, for the work on which he was then occupied was not that fiction which he wrote with such facility, but a voluminous 'Life of Napoleon Buonaparte,' necessitating reference to no end of books and papers; and day after day for many a month might he have been seen, slowly and sorrowfully, wading through work after work in order to verify each date and fact. The nine volumes were finished in 1827, and these were followed by 'The Chronicles of the Canongate,' 'Tales of a Grandfather,' 'The Fair Maid of Perth,' 'Count Robert,' and 'Castle Dangerous'--the last named published in 1831--a year before his death, which may be fairly attributed to the undue strain of mind and body; the _raison-d'être_ of this overtaxing of his strength being simply and solely impecuniosity. The picture of this truly great man being obliged to wear out the last years of his life by unceasing labour when he should have been enjoying a well-earned rest, is excessively sad and touching--but the sadness is to some extent relieved by the heroic nature of the act. The melancholy end of the man is swallowed up in the imperishable name he has left behind, which name, for generations to come, will serve as the synonym of honour. Sad, far more sad, were the closing days of Sheridan, whose last moments were also darkened by impecuniosity, but utterly unrelieved by any acts of self-sacrifice; and made far more melancholy by the fact that the monetary misery was caused by unnecessary extravagance. Alas, poor Sheridan! If ever man in his declining days had good reason to say with the preacher, "Vanity of vanities, all is vanity," thou hadst! for thou wert bitterly punished at the last, by the desertion and neglect of those who should have succoured and solaced thee. True thy shortcomings were many, but only one blessed with such brilliant gifts could possibly realise thy temptation; and the sorrow thou didst endure must silence detraction. Says one of his biographers, "For six years after the burning of the old theatre, he continued to go down and down. Disease now attacked him fiercely. In the spring of 1816 he was fast waning towards extinction. His day was past, he had outlived his fame as a wit and social light; he was forgotten by many, if not by most, of his old associates. He wrote to Rogers, 'I am absolutely undone and broken-hearted.' Poor Sheridan! in spite of all thy faults, who is he whose morality is so stern that he cannot shed one tear over thy latter days! God forgive us, we are all sinners; and if we weep not for this man's deficiency, how shall we ask tears when our day comes? Even as I write, I feel my hand tremble and my eyes moisten over the sad end of one whom I love, though he died before I was born. 'They are going to put the carpets out of window,' he wrote to Rogers, 'and break into Mrs. S.'s room and _take me_. For God's sake let me see you!' See him! see one friend who could and would help him in his misery! Oh, happy man may that man count himself who has never wanted that one friend, and felt the utter helplessness of that want. Poor Sheridan! had he ever asked, or hoped, or looked for that Friend out of _this_ world it had been better; for 'the Lord thy God is a jealous God,' and we go on seeking human friendship and neglecting the divine till it is too late. He found one hearty friend in his physician, Dr. Bain, when all others had forsaken him. The spirit of White's and Brookes', the companion of a prince and a score of noblemen, the enlivener of every fashionable table, was forgotten by all but this one doctor. Let us read Moore's description. 'A sheriff's officer at length arrested the dying man _in his bed_, and was about to carry him off in his blankets to a spunging-house, when Dr. Bain interfered?' Who would live the life of revelry that Sheridan lived to have such an end? A few days after, on the 7th July, 1816, in his sixty-fifth year, he died. Of his last hours the late Professor Smythe wrote an admirable and most touching account, a copy of which was circulated in manuscript. The professor, hearing of Sheridan's condition asked to see him, with a view not only of alleviating present distress, but of calling the dying man to repentance. From his hands the unhappy Sheridan received the Holy Communion; his face during that solemn rite--doubly solemn when it is performed in the chamber of death--'expressed,' Smythe relates, '_the deepest awe_.' That phrase conveys to the mind impressions not easy to be defined, not easy to be forgotten. "Peace! There was not peace even in death, and the creditor pursued him even into the 'waste wide,' even to the coffin. He was lying in state, when a gentleman in the deepest mourning called, it is said, at the house, and introducing himself as an old and much-attached friend of the deceased, begged to be allowed to look upon his face. The tears which rose in his eyes, the tremulousness of his quiet voice, the pallor of his mournful face, deceived the unsuspecting servant, who accompanied him to the chamber of death, removed the lid of the coffin, turned down the shroud, and revealed features which had once been handsome, but long since rendered almost hideous by drinking. The stranger gazed with profound emotion, while he quietly drew from his pocket a bailiff's wand, and touching the corpse's face with it, suddenly altered his manner to one of considerable glee, and informed the servant that he had arrested the corpse in the King's name for a debt of £500. It was the morning of the funeral, which was to be attended by half the grandees of England, and in a few minutes the mourners began to arrive. But the corpse was the bailiff's property till his claim was paid, and nought but the money would soften the iron capturer. Canning and Lord Sidmouth agreed to settle the matter, and over the coffin the debt was paid." The pall-bearers were the Duke of Bedford, the Earl of Lauderdale, Earl Mulgrave, Lord Holland, Lord Spencer, and the Bishop of London, and the body was followed by two Royal Highnesses--the Dukes of York and Sussex--by two Marquises, seven Earls, three Viscounts, five Lords, and a perfect army of honourables and right honourables. This _show_ of respect and homage after death, when nothing had been done to assuage his last sufferings in life, was regarded by those who loved him as a bitter mockery, and Moore's lines justly denounced it. "Oh, it sickens the heart to see bosoms so hollow, And friendship so false in the great and high-born, To think what a long line of titles may follow, The relics of him who died friendless and lorn! How proud they can press to the funeral array Of him whom they shunned in his sickness and sorrow, How bailiffs may seize his last blanket to-day, Whose pall shall be held up by nobles to-morrow!" CHAPTER V. THE INGENUITY OF IMPECUNIOSITY. In the opening chapter, several instances of considerable ingenuity were referred to; but as the conduct of the individuals in question was not _sans peur et sans reproche_, the cases came under the head of the immoral effects of the want of money, and were necessarily not illustrations of ingenuity proper, but ingenuity slightly improper. In the present chapter, the majority of the reminiscences related are innocent of the unscrupulous characteristics, and are intended to be examples of the theory that "nothing sharpens a man's wits like poverty," which assertion can be supported by the accepted axiom "necessity is the mother of invention;" for it stands to reason that people are more or less stimulated to exercise their faculties of contrivance in proportion to their need. Hence it is that the very needy become exceptionally sharp in more senses than one. The men who have made their mark in any department of knowledge, or have achieved positions of eminence, are for the most part, those who have wanted to be clever, or those who have wanted to attain certain celebrity. It is the _want_ of the thing that has enabled them to devote their whole lives to study, or given them the power to persevere; and so it is with regard to impecuniosity. The want of money--that is an anxious desire for it on account of its being needed--has caused men to cudgel their brains to extricate themselves from their difficulties, has made them plot and plan, scheme and contrive, or, in other words, has greatly developed the gift of ingenuity. Charles Phillips, the barrister, who, when first he practised at the Old Bailey bar, was remarkably hard up, was wont to relate, with great glee, how he succeeded with one of his early briefs, which he had from an Israelite attorney, in what might be termed "Jewing" the Jew. The case involved an indictment brought by one omnibus company against another for "nursing" (that is, too closely following one another for the purpose of driving the rival off the road), and the trial lasted over three days. For this brief, which was an important one, he had received a disgracefully small fee, which he could not decline on account of his necessitous condition; but he determined, if he could get a chance, to be equal with his parsimonious employer, and on the last day of the trial the opportunity came. The attorney was most anxious that Phillips himself should examine a noted Paddington driver, who was a most important witness, and early on the morning he accosted the barrister, saying: "What an interesting day this will be in Court. You have to examine the Paddington coachman. The Court is crowded with conductors and drivers from all parts." "Indeed," said Phillips, "I feel no interest in it. The trial has lasted three days, and look at my miserable fee. Now you _must_ give me ten guineas, or I won't examine him." The Jew was thunderstruck, and white with fear for the issue of his cause, declared he had not such a sum with him, but said he would leave the amount at Phillips' chambers after the trial. The counsel knowing his man, and what his promise was worth, declined the proposition, whereupon the other produced his cheque-book, and forthwith wrote out a cheque for the sum demanded. As soon as the barrister received it, he asked to be excused for a few moments, on the plea that he would have to hand over another brief which he had to a brother counsel. He then privately gave the cheque to one of the attendants, telling him to run as hard as he could, or take a cab, and get the cheque cashed as quickly as possible. On his return, he managed to keep his victim engaged in conversation till he thought the messenger had obtained a sufficient start, feeling sure that the Jew, although so much interested in the trial, would rush off to the bank and stop payment. It was as Phillips anticipated; but the attorney was not quite quick enough, for, as he rushed into the bank, the man with the money came out, and the state of perspiration and cursing in which the baffled Israelite regained the Old Bailey can be understood without detailing. There is no doubt in Phillips' case that impecuniosity sharpened his wits; for the transaction was nothing more nor less than a piece of _sharp practice_, indefensible on strictly moral grounds, but hardly blameable when the character and conduct of the grinding attorney are remembered. The name of Phillips is associated with another record of ingenuity; but in the second instance it was Harlequin Phillips--no relation whatever of the legal luminary, though from his aptitude in taking advantage of an adversary he was worthy to be related, or at any rate his anecdote is. This celebrated pantomimist, who was contemporaneous with Garrick, and was regarded as one of the cleverest men in his profession at that time, was not clever enough to keep himself out of debt and the spunging-house, though he proved himself equal to making his escape from custody by an admirably-conceived plan. After treating the bailiff very freely, he pretended that he had a dozen of particularly choice wine at home, already packed, which he begged permission to send for, to drink while he was detained, offering to pay sixpence a bottle for the privilege. His custodian acceded to the request, and Phillips wrote a letter giving particulars of what he wanted, which letter was duly despatched to his residence. Some time after, a sturdy porter presented himself with the load, and the turnkey called to his master that a porter with a hamper for Mr. Phillips had come. "All right," replied the bailiff; "then let nothing but the porter and hamper out." The messenger, who was an actor thoroughly accustomed to "heavy business," came in, apparently loaded with a weighty hamper, and went out as lightly as if he were carrying an empty package, though in reality it contained Mr. Phillips inside. This was indeed _carrying out the character of harlequin_ (who is always supposed to be invisible) "to the letter;" and shows that the pantomimist of the past was an inventive genius, in addition to being an agile acrobat, and more or less up to tricks. _A propos_ of tricks, the life of Philippe, the conjuror, introduces a legitimate illustration of a man poor in pocket, but rich in resource. Though he appeared at the St. James' and Strand Theatres in 1845, under the name of Philippe, his real cognomen was Talon-Philippe Talon. Born at Alais, near Nismes, where he carried on the trade of confectioner, he came to London, and subsequently went to Aberdeen, in the hope of succeeding as a manufacturer of Scotch sweets; but found himself unable to compete with the native makers, and in possession at last of nothing but a quantity of unsaleable confectionery. In utter despair of being ever able to get rid of his stock, he bethought him of turning conjuror, having always had a great _penchant_ for sleight-of-hand performances, and being, he believed, equal to giving an exhibition in public. Certain apparatus, was, however, necessary, which, of course, in his insolvent condition, he was unable to purchase. He made a visit to the theatre, and found that--fortunately for him--the entertainment being given was anything but successful; the bill, theatrically speaking, was "a frost," and the manager consequently open to discuss any scheme for pulling up the business. In a moment Philippe saw his opportunity, and suggested that two or three special performances should be given, at which every person paying for admission should have with his check a packet of confectionery given to him, and a ticket entitling the holder to a chance in a prize of the value of £15. The suggestion was acted upon, the bait took, and the result was a succession of crowded houses, whereby Talon cleared off all his stock of sweets, netting a sufficient sum to enable him to purchase conjuring apparatus, which enabled him to give a series of entertainments with great success; the same that were subsequently represented with such profit in England, France, Austria, and elsewhere. Talon, or Philippe, as he was known to the entertaining public, was the first to perform with bare arms, and was one of the first to introduce the "globes of fish" trick in this country. Another of the "legitimate" description of examples is found connected with the theatrical experience of Mr. C. W. Montague, who for years was a very well-known circus-manager, having been connected at one time or another with the equestrian establishments of Messrs. Sanger, Bell, F. Ginnetts, Myers, Newsome, and George Ginnett. Some years ago, when he joined the circus owned by the last-named at Greenwich, he found that business was in a most melancholy condition; the show, although a very good one, failed to fetch the people in, and the receipts, not sufficient to pay expenses, were getting worse and worse. This dismal state of things was most disheartening to Montague, who was at his wits' end to know what to do, when one day, while he was being shaved, the barber noticing some one who had just passed the shop, said: "There goes poor Townsend." "And who might he be?" asked the manager; being told in reply that the gentleman referred to had originally represented Greenwich in Parliament, but owing to great pecuniary difficulties had been obliged to resign. It also transpired that the late M.P. was a most excellent actor, the barber having seen him enact Richard III. "quite as good as any right down reg'ler perfeshional." In addition, Mr. Townsend had been deservedly popular in the district, and especially in Deptford; for he had been the means, when in the House of Commons, of getting dockyard labourers' wages considerably advanced. These two facts, combined with the broken-down appearance of the gentleman spoken of, immediately presented themselves to Mr. Montague in a business light. What a capital idea it would be if he could manage to get the ex-M.P. to appear in the circus! So popular a man would be a tremendous draw! With this object in view, he waited upon Mr. Townsend the next morning, and put the proposition to him, but without success. The unfortunate gentleman admitted that his circumstances were such that the prospect of making money by the venture was most tempting; but his pride would not admit of his accepting the offer. The idea of appearing as a paid performer in a circus in the very place where he had been regarded with such respect was repugnant to his feelings, and he felt that he could not consent to the sacrifice of dignity. Away from Greenwich he would not have minded; but this arrangement of course would have been no good to Mr. Montague. Nothing daunted by the refusal, the theatrical man of business determined not to give up the idea, but on several subsequent occasions pressed him hard, using such powerful arguments in favour of the scheme that at last Mr. Townsend consented to appear as Richard "for twelve nights only," on sharing terms. As soon as this was arranged, another and by no means unimportant difficulty presented itself. With the exception of Mr. Ginnett and his manager, there was no one in the company capable of supporting the tragedian; but stimulated by the seriousness of the situation, Mr. Montague set to work, cut down the tragedy with unsparing energy, and so arranged a version that enabled Mr. Ginnett and himself to double the parts of Richmond, Catesby, Norfolk, Ratcliffe, Stanley, and the ghosts. Notwithstanding these drawbacks, the production (which would never have been thought of or undertaken but for the impecunious state of affairs) proved a palpable hit, Townsend's share being so considerable that he insisted on treating the company to a supper, shortly after which he went to America. The mention of America, and connected with circus managing, naturally suggests to the mind the name of that arch-humbug, but most successful showman, P. T. Barnum, who was not always the wealthy caterer he now is. On the contrary, his early life was associated with such poverty-stricken surroundings, that the want of money had undoubtedly much to do with that smartness for which his name has become famous. His father died leaving the family very badly off, the mother being put to all sorts of straits to keep the home together; and when Barnum--who was first of all a farmer's boy--commenced his career, he, according to his own account, "began the world with nothing, and was barefooted at that." His first berth of any consequence was a clerkship in a general store, at which time he was "dreadfully poor;" but, says he, "I determined to have some money." Consequently, impelled by impecuniosity, he speedily became ingenious. One day, when left in charge of the business, a pedlar called with a waggon full of common green glass bottles, varying in size from half a pint to half a gallon. The store was what was called a barter store. A number of hat manufacturers traded there, paying in hats, and giving store orders to many of their _employés_, and other firms did likewise, so that the business boasted an immense number of small customers. The pedlar was anxious to do business, and Barnum knew that his employers had a quantity of goods that were regarded as unsaleable stock. Upon these he put inordinately high prices, and then expressed his willingness to barter some goods for the whole lot of bottles. The pedlar was only too glad, never dreaming of disposing of all his load, and the exchange was effected. Shortly after, Mr. Keeler, one of the firm, returned, and, on beholding the place crowded with the bottles, asked in amazement, "What _have_ you been doing?" "Trading goods for bottles," replied Barnum; to which his employer made the unpalatable rejoinder, "You are a fool;" adding, "You have bottles enough for twenty years." Barnum took the reproof very meekly, only saying that he hoped to get rid of them in less than three months, and then explained what goods he had given in exchange. The master was very pleased when he found that his assistant had got rid of what was regarded as little better than lumber, but still was dubious as to how on earth he would be able to find customers for the glass, more especially as there was a quantity of old tinware, dirty and flyblown, about which Barnum was equally sanguine. In a few days the secret was out. His _modus operandi_ was this: a gigantic lottery--1000 tickets at 50 cents each. The highest prize 25 dollars, payable in goods; any that the customers desired to that amount. Fifty prizes of five dollars each, the goods to that amount being mentioned, and consisting as a rule of one pair cotton hose, one cotton handkerchief, two tin cups, four pint glass bottles, three tin skimmers, one quart glass bottle, six nutmeg graters, and eleven half-pint glass bottles. There were 100 prizes of one dollar each, and 100 prizes of fifty cents each, and 300 prizes of twenty-five cents each, glass and tinware forming the greater part of each prize. Headed in glaring capitals "Twenty-five dollars for fifty cents; over 500 prizes." The thousand tickets sold like wild-fire, the customers never stopping to consider the nature of the prizes. Journeyman hatters, boss hatters, apprentice boys, hat-trimmers, people of every class and kind bought chances in the lottery, and in less than ten days all the tickets were sold. This was Barnum's first stroke of business, the success of it no doubt having much to do with his subsequent enterprises; and as, according to his own showing, the scheme was the result of needy circumstances, and a determination to have money, it is impossible to say how much his present prosperity is due to that early expedient. To give a less modern instance of the power of impecuniosity to render people ingenious, there is an anecdote of this nature recorded of Captain William Winde, a celebrated architect, the dates of some of whose designs are 1663-1665. Amongst many other of his achievements is included Buckingham House, in St. James's Park, which he designed for the Duke of Buckingham, but the money for which he could not obtain. The edifice was nearly finished when the arrears of payment were so considerable that the architect felt he could not continue unless he obtained a settlement; but how to do it? That was the thing. Asking was perfectly useless, and writing to his grace was equally ineffectual. At last a brilliant idea occurred to him. He requested the duke to mount the leads, to behold the wonderful view that could be obtained therefrom, and when the noble owner complied, he locked the trap-door, and threw the key away. "Now," said Winde, "I am a ruined man, and unless I have your word of honour that the debts shall be paid, I will instantly throw myself over." "What is to become of me?" asked the duke. "_You shall come along with me!_" replied Winde; whereat his grace immediately promised to pay, and the trap was opened at a given signal by a workman who was in the plot. There is a similar kind of story told of Sir Richard Steele and a carpenter who had built a theatre for him, but who was unable to get his money. Finding all ordinary means of no avail, the carpenter took the opportunity when Sir Richard had some friends present, who had assembled for the purpose of testing the capabilities of the building, of going to the other end of the theatre; and when told to speak out something pretty loudly, to test the acoustic properties, roared as loud as ever he could that he wished to goodness Sir Richard Steele would settle his account. This is the same individual who gave a splendid entertainment to all the leading people of the time, and had them waited upon by a number of liveried servants. After dinner Steele was asked how such an expensive retinue could be kept upon his fortune, when he replied he should be only too glad to dispense with his servants' services, but he found it impossible to get rid of them. "Impossible to get rid of them?" asked his friends. "What do you mean?" "Why, simply that these lordly retainers are bailiffs with an execution," replied Steele, adding that "he thought it but right that while they remained they should do him credit." It is said that his friends were so amused by the humorous ingenuity displayed, that they paid the debt, which is not unlikely, considering how popular he was. As a literary man, Steele was always regarded with the highest esteem, and his personal merits were equally recognised, since his want of economy was considered his only sin, it having been said of him that "he was the most innocent rake that ever entered the rounds of dissipation." The same could not be said of Sheridan unfortunately, whose ingenuity under monetary pressure (and when wasn't he pressed for money?) was remarkable. One of the least harmless of the many incidents recorded of this character is the circumstance of his obtaining a handsome watch from Harris the proprietor of Covent Garden Theatre. He had made innumerable appointments with Harris, none of which had ever been kept, and at last the manager sent word through a friend that if Sherry failed to be with him at one o'clock as arranged, he would positively have nothing more to do with him. Notwithstanding the importance of the interview, at three o'clock Sheridan was at Tregent's, a famous watchmaker's, and in course of conversation he told Tregent that he was on his way to see Harris. "Ah!" said the watchmaker, "I was at the theatre a little while ago, and he was in a terrible rage with you--said he had been waiting for you since one." "Indeed," said Sheridan; "and what took you to Covent Garden?" "Harris is going to present Bate Dudley with a gold watch," was the reply; "and I took him a dozen to choose from." Sheridan left on hearing this, and went straight to the theatre, where he found Harris exceedingly wroth at having, as he said "had to wait over two hours." "My dear Harris," began the incorrigible one, "these things occur more from my misfortune than my faults, I assure you. I thought it was but one o'clock. It happens I have no watch, and am too poor to buy one. When I have one, I shall be as punctual as any one else." "Well," replied the manager, "you shall not want one long. Here are half-a-dozen of Tregent's best--choose whichever you like." Sheridan did not hesitate to avail himself of the offer; nor did he, as it will be understood, select the least expensive one of the number. _A propos_ of watchmakers, there is the story of Theodore Hook dining with one with whom he was utterly unacquainted save by name, which ingenious plan was evolved through lack of funds. Driving out one afternoon with a friend in the neighbourhood of Uxbridge, Hook remembered that he had not the means wherewith to procure dinner, and turning to his companion said, "By the way, I suppose you have some money with you?" But he had reckoned without his host. "Not a sixpence--not a sou," was the reply, the last turnpike having taken his friend's last coin. Both were considerably crestfallen, for it was getting late, and the drive had made them remarkably hungry. What was to be done? Presently they passed an exceedingly pretty residence. "Stay," said Hook, "do you see that house--pretty villa, isn't it? Cool and comfortable--lawn like a billiard-table. Suppose we dine there?" "Do you know the owner?" asked the friend. "Not the least in the world," laughed Hook. "I know his name. He is the celebrated chronometer-maker. The man who got £10,000 premium from Government, and then wound up his affairs and his watches." Without another word they drove up to the door, asked for the proprietor, and were ushered into the worthy tradesman's presence. "Oh, sir," said Hook, "happening to pass through your neighbourhood, I could not deny myself the pleasure and honour of paying my respects to you. I am conscious it may seem impertinent, but your celebrity overcame my regard for the common forms of society, and I, and my friend here, were resolved, come what might, to have it in our power to say that we had seen you, and enjoyed for a few minutes, the company of an individual famous throughout the civilised world." The old man blushed, shook hands, and after conversing for a few minutes, asked them if they would remain to dinner, and partake of his hospitality? Hook gravely consulted with his friend, and then replied that he feared it would be impossible for them to remain. This only increased the watchmaker's desire for their society, and made him invite them more pressingly, till, at length the pretended scruples were overcome, the pair sitting down to a most excellent repast, to which they both did more than justice. On another occasion, when Hook was very much worried for money, he went as a _dernier ressort_ to a publisher who knew him, in the hope that he would help him; but unfortunately the man knew him "too well," and refused, unless he had something to show that he would get his money's worth, or at any rate a portion of it. Thereupon Hook went home, sat up all night, wrote an introduction to a novel "on a new plan," appended a hurried chapter, which he took the next day to the publisher, asserting that he had had a most liberal offer for it elsewhere, and so persuaded the man to advance the required sum. Amusing as are many of the anecdotes quoted, there is one which may be called "divinely" funny, being connected with a once well-known theologian--Dr. John Brown of Haddington. This famous Biblical commentator, who flourished from 1784 to 1858, was anything but rich in this world's goods; and so poor when staying at Dunse, that he went into a shop and asked to be accommodated with a halfpennyworth of cheese. The shopman, awfully disgusted with the meanness of the order, remarked haughtily, that "they did not make" such small quantities; upon which the doctor asked, "Then what's the least you can sell?" "A penn'orth," was the reply. On the divine saying "Very well," the man proceeded to weigh that quantity, and then placed it on the counter, anticipating to be paid for it. "Now," said Dr. Brown, "I will show you how to sell a halfpennyworth of cheese;" upon which, in the coolest manner conceivable, he cut the modicum into two pieces, and appropriating one half, put down his coin and departed. Impecuniosity in addition to sharpening men's wits, by which expression is understood the sharpening of the inventive faculties, has also the power of making sharp man's wit, as instanced in the case of the beggar who accosted Marivaux, the well-known French writer of romance. This mendicant, who appears to have been what we were wont to call a "sturdy rogue," looked so unlike what one soliciting alms should, that the man of letters said to him, "My good friend, strong and stout as you are, it is a great shame that you do not go to work;" when he was met with the reply, "Ah, master, if you did but know how lazy I am!" for which amazing audacity, he was rewarded by Marivaux, who said, "Well, I see thou are an honest fellow. Here's a piece of money for you." Though, perhaps not strictly witty, the man's remark was excessively comic, and for aught I know, it may have been his conduct that gave rise to the now well-known expression--"funny beggar." For impromptu wit connected with impecuniosity, there is the case of Ben Jonson, who was invited to dinner at the Falcon Tavern, by a vintner, to whom he was much in debt, and then told that if he could give an immediate answer to four questions, his debt should be forgiven him. The interrogatories put to him by the vintner were these, "What is God best pleased with? What is the Devil best pleased with? What is the World best pleased with? and what am I best pleased with?" To which Ben replied: "God is best pleased when men forsake their sin. The devil is best pleased when they persist therein. The world's best pleased when thou dost sell good wine, And thou'rt best pleased when I do pay for mine." To return to the instances of ingenuity, the late Charles Mathews must be remembered; for he claims the credit of having been successful in extracting money from Jew bailiffs, which, incredible as it may seem at first, would really appear to have been the case. He says, "I might relate a thousand stories of my hair-breadth 'scapes and adventures, with a class of persons wholly unknown, happily, to a large portion of the population, and whose names inspire terror to those who do not know them;--officers of the Jewish persuasion, who are supposed to represent the majesty of the law in its most forbidding aspect, but to whom I have been indebted for so many acts of kindness, that I have frequently blessed my stars that they were interposed between me and the tomahawking Christians by whom they were employed, and from whom no mercy could have been extracted. I have had two of those functionaries in adjacent rooms, and _have borrowed the money from one to pay out the other_, with many such like incidents." There is no doubt that on the subject of bailiffs this most popular light comedian was an authority; for his experience of them was considerable, and it is therefore gratifying to find him bearing testimony to the good qualities of the much-maligned individual, who, as "the man in possession," is so often provocative of anger, malice, and all uncharitableness in the breasts of those who have to entertain him. It would be unwise, however, for any one to be so led away by the eulogistic remarks of Charles Mathews as to expect to be able to go and do likewise, in the matter of borrowing money from them; for it must be remembered, that without exception he was the most entertaining man in existence, and blest with persuasive powers unparalleled. At the same time, it is perfectly true that they are nothing like as formidable as they are supposed to be (this is reliable--for a distant relation of mine once knew a person, who had a friend that was sold up--Ahem!), and if it were not for their partiality for wearing an extra number of coats and waistcoats, and invariably carrying a stout stick, which characteristics render them unmistakable to the practised eye, they would not be so objectionable, as they are by no means devoid of sympathy, and are always open to reason in the shape of gin and water. Though not of so pronounced a type as some that have been quoted, there is an anecdote illustrative of ingenuity, recorded of Samuel Foote, who, in the days of his youth, and hard-upishness, wrote 'The Genuine Memoirs of the Life of Sir John Dinely Goodere, Bart., who was murdered by the contrivance of his own brother.' The author was nephew to the murdered man, and the assassin; but so poor was he, that on the day he took his MS. to the publishers he was actually without stockings. On receiving his pay for the book (£10), he stopped at a hosier's in Fleet Street, to replenish his wardrobe, but just as he issued from the shop, he met two old Oxford associates, lately arrived in London for a frolic, and they bore him off to a dinner at the "Bedford:" where, as the wine began to take effect, his unclad condition began to be perceivable, and he was questioned as to "what the deuce had become of his stockings?" "Why," said Foote--the stockingless Foote--"I never wear any at this time of the year, till I am going to dress for the evening, and you see"--pulling his purchase out of his pocket, and silencing the laugh and suspicion of his friends--"I am always provided with a pair for the occasion." Equally humorous is the story told of the Honourable George Talbot, the brother of the Earl of Shrewsbury, a man well known about town during the time of the Peninsular War. He was a reckless spendthrift, and in Paris, where he had spent thousands, he was reduced to absolute want. Though a man of decidedly bad principles, he was what is termed a good Roman Catholic; that is to say, a regular attendant at Mass, and when he found it impossible to raise money anywhere else he bethought him of the clergy, and repaired to confession. He revealed everything to the priest, at least with regard to his penniless condition, and after much interrogation, and deliberation, was told to "trust in Providence." Seemingly much struck by the advice, he said he would come again, and on his second visit, retold his story, with the addition that nothing at the time of the interview had turned up; when he was met with the same counsel as before, and enjoined to "trust in Providence." Somewhat chapfallen at the failure of his visit, he went away, but after a few days again presented himself to the abbé, whom he thanked effusively for his good advice on the two previous occasions, and then begged the pleasure of his company to dinner at a well-known fashionable restaurant. The invitation was accepted, and the two sat down to a most sumptuous repast, the delicacy of the viands being only surpassed by the choiceness of the wine. When the meal was concluded the bill was handed to Talbot, who said that his purse was quite empty, and had been so for a long time, but that he thought he could not do better than follow his confessor's advice and "trust in Providence." The Abbé Pecheron (the confessor) saw the joke, paid for the dinner, and so interested himself in Talbot's case, that he obtained from the spendthrift's friends in England sufficient to enable him to return to this country. Not the least ingenious of the many instances to be met with, however, is one attributed to a widow, who, in the days of Whitecross Street and the Bench, was arrested for debt. This lady, who is described as of fair and dashing appearance, with great powers of fascination, soon began to pine for her liberty, and petitioned for leave "to live within the rules," which request was granted. She then took a house in Nelson Square, and became a reigning queen of pleasure, her Thursday evening _réunions_ being deemed so delightful, that invitations for them were most eagerly sought for. Her admirers were legion (that is of the male sex), one at last being successful in obtaining her coveted hand, and the marriage took place in due course. When the happy pair returned to Nelson Square after the ceremony, the tipstaves, who had become acquainted with the affair, put in an appearance as the newly married couple were about to start on their honeymoon, informing the lady that they would arrest her, and take her to the Bench, if she attempted to leave "the rules." Nothing disconcerted by this apparent stopper to her happiness, she calmly, but majestically exclaimed, "Indeed! You forget there is no such person as the lady named in your warrant. I am no longer Mrs. A., but Mrs. B. There is my husband, and he is responsible for my debts." "Then, sir," said the tipstaff, "I must arrest you." The lady smiled sarcastically, saying, "I think it will be time enough to arrest my husband when you have served him with a writ. If you have one, produce it; if not, kindly stand aside, and allow us to enter the coach." The officers could but comply, for they saw they had been outwitted, and were compelled to stand meekly by, while the clever widow, observing "Now, my love, let us be off," jumped into the carriage, and drove away with her husband. CHAPTER VI. THE IMPECUNIOSITY OF ACTORS. There is a letter extant, written to Sir Francis Walsingham in 1586, in which the writer speaks "with pious indignation of overcrowded playhouses and deserted churches;" and says "it was a wofull sight to see two hundred proude players jett in their silks where fyve hundred pore people sterve in the streetes." From this and many similar allusions we glean that actors were not in the infancy of our English dramatic art the shabby impecunious class they afterwards became. They were on the whole well to do, and highly respectable men of college education, who were in most cases poets as well as players, patronised and encouraged by all classes, except those who were so bitterly jealous of their extraordinary influence--the clergy. A special Act of Parliament was passed in the reign of Queen Elizabeth for their encouragement and protection, and they had that which many of the well-born and wealthy envied them--the right of wearing the badges of royal and noble families, ensuring them respect, hospitality, and protection, wherever they went. The profession of the player was not then open to all comers, and those who dared to adopt it without licence from "any baron, or person of high rank, or two justices of the peace," were "deemed and treated as rogues and vagabonds;" prison and the whipping-post, or cart-tail, stocks, and the pillory, being but the milder forms of that treatment promised them in the often quoted, commonly misrepresented, Act of "good Queen Bess." Some of the dramatic poets and players, plunging headlong into dissipation and debauchery, were at length abandoned by their fellows, and sank into the depths of misery and extreme poverty; but the majority prospered, and went about in their silks and velvets, with roses in their shoes, and swords by their sides, no longer the poor scholars they had been in their college days--the licensed beggars, who, when they came into a town, set all the dogs barking--but prosperous gentlemen of fair repute, such as were Shakespeare, and Edward Alleyn, the founder of the Hospital and College at Dulwich. But a great change was at hand when the rebellion broke out, and civil war gave the Puritans dominant power. Their stage-plays and interludes were abolished, and the players' occupation was gone. Worse still, the very Act of Parliament which had been created for their protection was turned against them, and they were classed with the rogues and vagabonds against whom it had formerly protected them. Then the whipping and imprisonment, and even selling into slavery, became the poor players' miserable ill-fortune, and the reign of impecuniosity began in all its rigorous severity and terror. The London playhouses, which, between the years 1570 and 1629, had grown from one (the Theatre in Shoreditch) to seventeen, were shut up, and had all their stages, chambers (boxes, we call them), and galleries pulled down. Small wonder was it, therefore, that the players, almost to a man, drew their swords for the King, and fought stoutly under the royal banner. In the 'Historia Histrionica,' printed in 1699, we read the following dialogue: "Lovewit. 'Prythee, Trueman, what became of these players when the stage was put down, and the rebellion raised?' "Trueman. 'Most of 'em, except Lown, Taylor, and Pollard, who were superannuated, went into the King's army, and, like good men and true, served their old master, though in a different, yet more honourable, capacity. Robinson was killed at the taking of a place (I think Basing House) by Harrison (he that was after hanged at Charing Cross), who refused him quarter, and shot him in the head after he had laid down his arms, abusing Scripture at the same time in saying, "Cursed is he that doeth the work of the Lord negligently." Mohun was a captain (and after the wars were ended here served in Flanders, where he received pay as a major); Hart was a lieutenant of horse under Sir Thomas Dathson, in Prince Rupert's regiment; Burt was cornet in the same troop, and Shatterd, quarter-master. Allen, of the Cockpit, was a major, and quarter-master-general at Oxford. I have not heard of one of these players of note who sided with the other party, but only Swanston, and he professed himself a Presbyterian, took up the trade of a jeweller, and lived in Aldermanbury, within the territory of Father Calamy: the rest either lost, or exposed, their lives for their King. When the wars were over, and the Royalists wholly subdued, most of 'em who were left alive gathered to London, and for a subsistence endeavoured to revive their old trade privately. They made up one company out of all the scattered members of several; and in the winter before the King's murder, 1648, they ventured to act some plays, with as much caution and privity as could be, at the Cockpit (now Drury Lane Theatre). They continued undisturbed for three or four days; but at last, as they were representing the tragedy of 'The Bloody Brother' (in which Lowin acted Aubrey; Taylor, Rolla; Pollard, the cook; Burt, Latorch; and, I think, Hart, Otto), a party of foot-soldiers beset the house, surprised 'em about the middle of the play, and carried them away in their habits, not permitting them to shift, to Hatton House, then a prison, where, having detained them some time, they plundered them of their clothes and let 'em loose again. Afterwards, in Oliver's time, they used to act privately, three or four miles, or more, out of town, now here, now there, sometimes in noblemen's houses, in particular Holland House, at Kensington, where the nobility and gentry who met--but in no great numbers--used to make up a sum for them--each giving a broad piece, or the like--and Alexander Goffe (the woman-actor at Blackfriars) used to be jackall, and give notice of the time and place. At Christmas and Bartholomew Fair they used to bribe the officer who commanded at Whitehall, and were thereupon connived at, to act, for a few days, at the "Red Bull," but were sometimes, notwithstanding, disturbed by soldiers. Some picked up a little money by publishing the copies of plays never before printed, but kept up in MS.; for instance, in the year 1652, Beaumont and Fletcher's 'Wild Goose Chase' was printed in folio, for the public use of all the ingenious, as the title-page says, and the private benefit of Jown Lowin and Joseph Taylor, servants to his late Majesty; and by them dedicated to the honoured few lovers of dramatic poetry: wherein they modestly intimate their wants, and with sufficient cause; whatever they were before the wars, they were afterwards reduced to a necessitous condition.'" Hard times these for the poor wandering players. It is curious to note that a reputed natural son of Oliver Cromwell became an actor. This was Joe Trefusis, nicknamed "Honest Joe," described as a person of "infinite humour and shrewd conceits." On one occasion, driven, we presume, by impecuniosity, Joe volunteered as a seaman, and served under the Duke of York. This was just before the memorable sea-fight between the duke and the Dutch admiral, Van Tromp, in which Joe took part, as he confessed, with great fear, which was not, you may be sure, decreased when one of the sailors, grimly preparing for the strife, said to him "Now, master play-actor, you're a-going to take part in one of the deepest and bloodiest tragedies you ever heard of." Another player of Puritan descent was the famous American actress, Charlotte Cushman, the name of her ancestor, Robert Cushman, being one that figures honourably and prominently as a leader amongst the Pilgrim Fathers. She tells us many anecdotes of the impecuniosity which afflicted her in the early days of her career. It was decided that she should abandon singing, and commence acting, and her first essay was to be in--of all parts--"Lady Macbeth"! She was then a tall, thin, fair-skinned, country girl, and being unable to procure a suitable costume, Madame Closel, a short, fat, dark-complexioned French woman, was applied to, and laughed heartily at the ludicrous idea of her clothes being worn by Miss Cushman, who says,-- "By dint of piecing out the skirt of one dress it was made to answer for an under-skirt, and then another dress was taken in in every direction to do duty as an over-dress, and so make up the costume. And thus I essayed for the first time the part of Lady Macbeth." At that time her only place for study was an empty garret in the house in which she lodged, and her practice was to shut herself up in it alone, and sitting on the floor commit her "lines" to memory. Miss Cushman was not the only actress whom impecuniosity and consequent vocal efforts led to the stage. The famous Kitty Clive, whose maiden name was Rafter, was originally maid-of-all-work to Miss Knowles, who lodged at Mrs. Snells, a well-known fan-painter, in Church Row, Hounsditch. The Bell Tavern immediately opposite this house, was kept by a Drury Lane box-keeper, named Watson, at which house an actor's beef-steak club was held. One morning, when Harry Woodward, Dunstall, and other well-known London actors were in their club-room, they heard a girl singing very sweetly and prettily in the street outside, and going to the window found that the cheerful notes emanated from the throat of a charming little maid-servant, who was scrubbing the street-door step at Mrs. Snell's house. The actors looked at each other and smiled, as they crowded the open window to listen, and the final result was, in 1728, the introduction of the poor singer to the stage. She afterwards married Counsellor Clive, and being not a little of the shrew, it is said, quarrelled with him so seriously, that before the honeymoon was fairly out, the "happy pair" agreed to separate. It must not, however, be supposed that Kitty Clive was born to a menial position: she was the daughter of an Irish gentleman, ruined, as so many Irish gentlemen were, by their adherence to the cause of James II. Amongst those so ruined was the father of the illustrious actor and dramatic author, Charles Macklin, who on one occasion, when about to insure some property, was asked, "How the clerk should designate him?" "Call me," replied the actor, "Charles Macklin, a vagabond by Act of Parliament"--the old law of Queen Elizabeth, which the Puritans had extended to all players, being then unrepealed. There was doubtless a tinge of bitterness in the joke; for Macklin's early experience had been a severe and trying one, in the gaunt school of poverty and hardship. When in his twenty-sixth year, being ashamed of depending upon his poor old mother for his living, he left home, and travelling as a steerage passenger from Dublin to Bristol, arrived in that opulent city when a third-class company of players were performing there. He took lodgings over a mean little snuff and tobacco shop, next door but one to the theatre, and there became acquainted with a couple of the players, a man and a woman, who introduced him behind the scenes. To this he owed his introduction to the stage; for the manager detecting signs of histrionic taste and ambition in the young Irishman, engaged him, despite his strongly pronounced brogue, to play Richmond in Shakespeare's 'Richard III.' James Kirkman, said to have been a natural son of Macklin's, writing of his _début_, said, "Considering the strong vernacular accent with which Mr. Macklin (then MacLaughlin) spoke, the reader would be at a loss to account for the applause which he met with on his first appearance, if he was not told that Bristol has always been so much inhabited by the Irish that their tones in speaking have become familiar there." The young Irish enthusiast afterwards travelled with this little company, making himself generally useful, by writing the playbills and distributing them--printing was too costly for poor strollers in those days--by carpentery when the stage had to be set up in some barn or inn-yard, by writing on occasions prologue or epilogue, without which no play was then considered complete, by composing and singing topical songs, "complimentary and adulatory to the village in which they happen to play," to use his fist, which he did with great skill and strength, when the vulgar rustic audiences were disturbed by the quarrelsome, or were rude and coarsely offensive to his professional sisters and brethren. Kirkman says, "His circle of acting was more enlarged than Garrick's; for in one night he played Antonia, and Belvidera in 'Venice Preserved,' harlequin in the interlude, or entertainment, sang three comic songs between the acts, and between the play and the entertainment indulged the audience with an Irish jig"; often doing this when his share of the profits (for the original sharing system of Shakespeare's day then prevailed among strollers) was not more than four or five pence per night, to which was usually added a share of the candle-ends, candles being in use for lighting the stage, affixed round hoops to form chandeliers for the auditorium, in the making of which Macklin displayed peculiar skill. There is a good story told by Kirkman of a time when Macklin was with a company of strollers in Wales. One night they had the misfortune to arrive in Llangadoc, a little place in Carmarthenshire, so late that neither shelter, beds, nor food enough for all could be obtained, and Macklin, who, "from the high rank he held in the company was entitled to the first choice," resigned his claim in favour of a member of the corps who was too sick and weak to pass the night in the open air. Kirkman, telling the story, says: "After supping with 'Lady Hawley,' Macklin made his bow and retired to the room where the luggage was stored. Here he undressed himself and adopted the following humorous expedient: He instantly arrayed himself in the dress of Emilia in the 'Moor of Venice' (a part he occasionally played), tied up a small bundle in a handkerchief and slipped out of the house unperceived. In about a quarter of an hour he returned, apparently much fatigued, and addressing the landlady in the most piteous terms, recounted a variety of misfortunes that had befallen 'her,' and concluded the speech with a heart-moving request that 'she' might have shelter for the night, as 'she' was a total stranger in that part of the country. The supposed young woman was informed by the unsuspecting landlady that all her beds were full, but that in pity for her distressed condition some contrivance would be made to let her have part of a bed. Charles now hugged himself at the success of his scheme, and, after he had partaken of some refreshment, was, to his great astonishment, conducted by the servant to the bedroom of the landlady herself, where he was left alone to undress. In this dilemma he scarcely knew how to act. To retreat he knew not how without risking discovery. However, into bed he went, convulsed with silent laughter. He had not been in bed many minutes before Mrs. 'Boniface,' who was upwards of sixty years, but completely the character in size and shape, made her appearance. Charles struggled hard with himself for some moments, but the comic scene had such an effect on him at last that he could contain himself no longer, and at the instant the old lady got into bed burst into a fit of laughter." Mrs. Boniface, believing "the poor young girl was in a fit," got up as fast as she could, and roared out so loudly and effectually for help that everybody in the house was alarmed, and the itinerant actresses coming into the chamber discovered, to their intense astonishment, who it was that the landlady had given half of her bed to. The laughter spread, was taken up on the stairs, and echoed from room to room, until the whole house rang with it. The anger of the landlady was appeased. This occurred in 1730 or 1731. An old friend of mine, who in his time has been actor, artist, journalist, dramatist, and novelist, and is now a well-known London editor, once told me the following story of his first connection with the stage. He was a feeble, consumptive lad of sixteen, when the drunkenness and cruelty of a worthless step-father drove him penniless from home. All through one long, wretched, and utterly hopeless day he had been wandering through the streets of London seeking employment. Naturally shy, reserved, and timid, his awkward mode of addressing a stranger while perplexed what account to give of himself, together with the hesitation, stammering, and blushing which accompanied it, had brought upon him nothing but scornful treatment, insulting suspicions, and failure after failure. He found himself at the close of a long, hot day, with burning feet and aching limbs, hungry, faint, and plunged into the very lowest depths of despair, on the banks of the New River, where he had often been before to fish. His desire was to escape observation, and he dragged himself along, passed fishermen and boys, until, finding their line stretched out from one to another still far ahead, he sat down in the long grass completely exhausted, and turning on his face, wept silently. Now it so happened that a tall, lank, sallow-faced young fisherman, with a beard of a fortnight's growth, and clothes of a once fashionable cut, but then threadbare, discoloured, ill-fitting, and very greasy at the cuffs and collar, particularly noted the tall, thin boy, and presently strolled up to, and sat down beside him. "Hallo, guv'nor," said he; "what's up?" The poor boy had no voice and no heart to reply, so he pretended to be asleep. "Wat's yer been a doin' on? Run away from home?" After a pause, and without moving, the poor lad said,-- "I've got no home now." "Where do you come from?" "Not very far." "Where are you going to?" "Don't know." "Have you got any money?" "None." "Where's your father and mother?" "Father's dead." "And yer mother? Can't she keep yer? Ain't she got no home neither?" The boy felt that any attempt to reply would betray his violent emotion. He got up silently and walked away. The stranger followed, overtook him, and walked beside him. "You've come from a long way off, young un--ain't yer?" The runaway nodded, although he was really within about a mile and a half of his starting-point. "Yer seems awfully tired. Why I do b'lieve as yer a crying. Wot's the matter?" There was an expression of sincere sympathy in the man's face, and my young friend answered in a low faint voice, broken with sobs,-- "I've no home, and no relatives or friends to go to; and I don't know what to do." The man eyed him very curiously before he replied,-- "My lodgin's in Clerkenwell, not so very far from here; the bed 'ull 'old two. Come home and sleep with me; and we'll take in a couple of black puddin's, or a faggot, or something nice an' 'ot for supper. Come along." The stranger was a poor mender of shoes, who lived in a squalid garret, at the top of an old house, overcrowded with lodgers; a foolish lazy fellow enough, without a principle of honesty, or a care for respectability or cleanliness in his entire composition, but withal a kindly one. Necessity drives sternly. The boy looked at his companion's dirty linen and unwashed face and neck, and with a glance at the river, a longing, despairing look, which did not escape the stranger's quick observation, turned and reluctantly went with him. When they were in bed he began to tell his mournful story, and fell asleep at the beginning of it. In the morning the dirty son of St. Crispin explained that he was a supernumerary at the theatres, as well as a snob, and that he was engaged for the Princess's Theatre, where Macready was then playing. "If you like," said he, "I'll take you to the super-master; he lives close by in Hatton Garden, all amongst the Italians on the Hill." He did so, and an engagement followed. This piece of luck filled the unfortunate lad's heart with delight. The pay was only a shilling a night, but he could live on it; and it was the first step in a profession of which he had dreamed as the summit of human ambition and felicity ever since he first saw a play performed "with real water" on the boards of old Sadler's Wells. With what tremulous eagerness and delight he went to rehearsal with his dirty friend and benefactor! With what wonder and curiosity he inspected the stage-door, the wings and the dressing-room under the stage, and with what awe he eyed the mighty magician who lorded it above his fellows with such undemonstratively quiet and yet most impressive dignity! The play was Shakespeare's 'King Lear,' and in the combat scene the lists were formed on the stage by short battle-axes and long spears, the former being stuck upright in holes arranged for their reception, two of the latter placed crossways, and one on the top of them horizontally between each axe. Macready was particularly anxious that this should be done rapidly, and without hesitation; and the efforts of the supers to carry out his instructions were simply ludicrous. The men with the battle-axes couldn't hit upon the holes, and some absolutely went down upon their knees to feel for them, while the spearmen either were awfully slow and nervously careful, or they missed the supports and created a clatter and confusion, which appeared to plunge Macready into a furious state of anger and disgust. The new super, all eyes and ears, shared the great tragedian's feelings; he saw at once that the entire effect depended upon the dash and spirit of the soldier's action in eagerly and readily extemporising these warlike barriers; and he devised a plan by which his axe was thrust as it were at once into the earth, with scarcely a downward glance. He was pointing out how readily this was done, to his neighbours on either side, and telling them to pass the hint along, when he was startled by the deep strong voice of the tragedian, who had come up to him, and said abruptly, "What's your name, my man?" "My friend did, what I am not going to do (not having his permission), he told Macready his name, and he, after a grunt, and a quick, keen glance from under his knitted brows, repeated it aloud, saying,-- "I shall not forget it. It's the name of the first super I ever saw with brains." On the night of the first performance some few days after, my friend was taken out of his ordinary soldier costume, and arrayed more carefully and picturesquely in a more costly fashion to play the part of a knight in special attendance upon the king, from whom he had the honour of receiving a message. Alas! that honour cost him a friend--the jealousy of the shoemaker broke out in spite and bitterness which accumulated and intensified to such an extent that at the end of the week he was caught in the act of hiding in the dark behind one of the beams of wood supporting the stage, for the purpose of throwing a big stone at the poor fellow with whom, under the influence of pity, he had shared his food and lodging. It was impossible to conceive a more cowardly or malignant rascal than this fellow had become under the influence of envy and jealousy. The class of theatrical people employed as supernumeraries (commonly called "supers") form the background figures of stage pictures, soldiers, sailors, peasants, citizens, mobs, &c., playing the dumb accessory parts; and they are as a rule neither too respectable nor too intelligent. To train and teach them is a task which sorely tries the patience of the super-master, and their lazy, poverty-stricken, and generally not too cleanly aspect is provocative of contempt and dislike amongst the actors. Their pay is not extravagant, being usually a shilling a night, but their histrionic pride is great, and their reverence for the actors profound, while for one to stand a little closer to the footlights than his fellows do, and consequently nearer the audience, or to be selected to go on alone to deliver a letter or receive a message, is the very summit of his ambition; a dangerous elevation, too, for from the time that he is so gloriously distinguished he is regarded with envy, spite, and malice, by his fellows, who try their best to oust him and take his place. This, my friend, above mentioned, soon experienced, for his life became a succession of bitter annoyances and coarse insults, varied when necessity compelled with an occasional fight, in which, despite his feeble health he generally contrived to give a fair account of his adversary, inheriting some of his father's skill as a boxer, and having been a constant student of that art when at school. At the termination of the Macready performances he was engaged at one of the old tavern theatres of those days, now known as the Britannia Theatre, then as the Britannia Saloon, where the stage-manager, a gentle and kindly old man (Mr. Wilton) was particularly good to him, and at last, after hearing him read a Shakespearian speech, entrusted him with small parts, contrary to the conviction of Mrs. Lane, the clever wife of the then proprietor, in whose place she now reigns. She, finding that the boy blushed and stammered when she spoke to him, pronounced him unfit for the experiment. "He has an impediment in his speech," said she. Some years after, my friend having in the meantime abandoned the stage for art (of which he was for years an ardent, indefatigable student), under the pressure of severe impecuniosity, became a country scene-painter and afterwards an actor, playing in the course of his theatrical career a wide range of second and third-rate parts, sometimes doubling as many as three or four in a single piece, and often both playing and painting scenery. Once, while Miss Mary Glover was manageress of the Cheltenham and Bath theatres, in consequence of the non-arrival of about half the expected company, he doubled tremendously, playing four characters in the burlesque and two in the farce, with the most rapid changes of "make up" and costume, one being a comic nigger with songs. Miss Glover had taken the theatre under the pressure of impecuniosity, trusting to the chance of success for the payment of her company. At the end of the first week she paid half salaries, at the end of the second and third weeks no salaries, or, in the parlance of the initiated, "the ghost did not walk," and great doubtless was the trouble and suffering consequently endured. My friend was reduced to bread and butter for meals, and found even those materials none too plentiful, when one evening he was summoned into the dressing-room of Miss Glover. The lady was in tears, but they were tears of indignant rage. "Sir!" said she, "I was never so insulted in all my life!" "What's wrong, madam? Who has insulted you?" "Who has insulted me, sir! Why you have!" cried she, with a look of astonishment. "I, madam! How?" he exclaimed with a similar expression. "Look at your gloves, sir!" "Well, madam, they are clean, I washed them myself." "But, sir! Berlin gloves! It's monstrous! I was never so treated before in all my life! Paltry cotton. You ought to be ashamed of yourself--a leading character too. I never played with a gentleman before in your part who did not wear new white kids!" "I laughed," said my friend. "It was rude, I know, but for the life of me I couldn't help it. Here was my employer living in comparative luxury at first-class lodgings in a fashionable town, abusing a poor devil whom she had cheated and half-starved, because, in a back-street garret with scarcely a penny in his pocket, he did not wear nightly, as he otherwise would have done, a new pair of white kid gloves!" The late Miss Oliver, who stood by at the time, called the fellow who dared to laugh at a manageress in such dire distress, "a brute." On another occasion Mr. Huntley May Macarthy, a once well-known and very eccentric provincial manager, abruptly closed the theatre at Bury St. Edmunds, after keeping it open a week or ten days, leaving the unfortunate company to escape from the dilemma of debt and difficulty into which so many of them were deeply plunged. Some had drawn a fortnight's salary in advance, to pay their travelling expenses to Bury St. Edmunds, and they had all been gathered from far and near by the London agent. In that case my friend the editor found his ark of safety in falling back upon his old profession. He painted the portrait of a local celebrity, which, being exhibited in the town, soon brought him sitters enough to enable him to help himself and spare something for one or two of his less happily situated brothers and sisters in misfortune. I remember my friend remarked as curious on each of these occasions the quietude with which the histrionics submitted to be so unfairly treated. Neither in the case of Miss Glover nor that of Mr. Macarthy were there any attacks made upon them to the face, heartily as they were cursed and abused behind their backs. In explanation of this I may recall what Mrs. Mathews said of her husband, the elder Mathews, when he suffered under the same infliction, which in the old days of "circuits" and "strolling companies" was a very common one and is still by no means unknown. She said,-- "I have heard Mr. Mathews say that he has gone to the theatre at night without having tasted anything since a meagre breakfast, determined to refuse to go on the stage unless some portion of his arrears was first paid. When, however, he entered the green-room his spirits were so cheered by the attention of his brethren, and the _éclat_ of his reception that his fainting resolution was restored, all his discontent utterly banished for the time, and he was again reconciled to starvation: nay, he even felt afraid of offending the unfeeling manager, and returned home silent upon the subject of his claims." No actor was ever better acquainted with poverty than that extraordinary man Edmund Kean. Endowed with rare genius, and a potency of will, that impelled him to surmount any obstacle lying in the pathway leading towards fame, this player's fate was yet infelicitous. Maternal solicitude, moral training, and those circumstantial influences which induce regular habits, were alike denied him. All the regularities, vicissitudes, vexations, disappointments, sorrows, trials and romance common to the lives of strolling players, characterized the early career of Edmund Kean. Through his mother he was related to George Saville, Marquis of Halifax. That mother was Ann Carey, grand-daughter of Henry Carey, the reputed author of our National Anthem. The father of Edmund Kean was Aaron Kean, generally described as an architect, but described by some as a stage carpenter, and by others as a tailor. In a melancholy and miserable chamber of a house, situated at no great distance from Holborn, Edmund Kean first saw the light, on November 4th, 1787. It is stated by Miss Tidswell, the actress, that "about half-past three in the morning Aaron Kean, the father, came to me, and said, 'Nance Carey is with child, and begs you to go to her at her lodgings in Chancery Lane.' Accordingly my aunt and I went with him and found Nance Carey near her time. We asked her if she had proper necessaries, and she replied, 'No--nothing'; whereupon Mrs. Byrne begged the loan of some baby-clothes, and Nance Carey was removed to the chambers in Gray's Inn, which her father then occupied, and it was there that the future tragedian was born." Ann Carey had been under the protection of Aaron Kean, and he afterwards abandoned her. She came of an unfortunate stock, for Henry Carey, as I have stated, notwithstanding his talents was always in difficulties, which only forsook him when he committed self-destruction; and his son, George Saville Carey--printer, mimic, scientific lecturer, and occasional poetaster and dramatist--would have been without a decent burial, but for the charity of a few friends. His daughter when only fifteen years old, quitted her home and became a strolling actress; but when out of an engagement she would return to London, and pick up a scanty home in its streets as a hawker. It was in such occupation that Aaron Kean first saw the woman. In addition to her irregular habits, Edmund Kean's mother was selfish, calculating, and cruel. It was not long after his birth that the child, with his strangely beautiful dark eyes and winning ways, was actually abandoned by his unnatural parent. Ann Carey quitted the metropolis to join a wandering troupe of Thespians, and when she next saw her child, he was three years old, and living under the protection of a poor man and his wife, in Soho. It is said that these worthy people had found little Edmund hungry and forlorn, and left in a doorway, one winter's night. Of the boy's history, after the mother had abandoned him to the period when he found succour from the kind couple in Soho, nothing is known. Ann Carey demanded her child, and quickly turned her offspring to profit; getting him engaged to appear as a reposing Cupid in one of the Opera House ballets, and subsequently to appear in a Drury Lane pantomime--the boy was little more than three years old. When in 1794 at Drury Lane, John Kemble produced 'Macbeth' with exceedingly novel stage business, Edmund Kean was one of the goblin troupe, introduced for the purpose of giving additional impressiveness to the incantation scene. It was not long afterwards that he played the part of a page in the 'Merry Wives of Windsor.' His education was of the slightest, and intermittent; he was a pupil at a small school in Orange Court, Leicester Square, and at another place of instruction in Chapel Street, Soho; and the expenses for such education were defrayed by a few generously disposed people, who were impressed by the boy's beauty and intelligence. Ann Carey, almost destitute, went away from Castle Street, Leicester Fields, and, with her boy found a lodging in Ewer Street, Southwark. Young Edmund, restive and adventurous, determined to run away from home, and with a few necessaries tied up in a bundle slung on a stick, made his way to Portsmouth, and engaged himself in the capacity of cabin boy for a ship bound to Madeira. Not sufficiently robust to do some of the work incidental to his duties, he resolved to be again free; which he accomplished by feigning deafness. Discharged at the end of the return voyage, he walked from Portsmouth to London, and hungry, footsore and heart-weary, made his way to the old lodging in Southwark. He found that his mother had left her shabby tenement for a place in Richardson's show troupe, then perambulating the country. He bethought him that he might find a shelter under the roof of his uncle, Moses Kean, who lived in Lisle Street, Leicester Square. This uncle, who was a mimic, ventriloquist, and general entertainer, received young Edmund Kean kindly, gave him a home, and became his preceptor in many of the mysteries belonging to the histrionic art. Miss Tidswell, the acquaintance of his mother, and an actress of respectable position at Drury Lane, also showed great interest in the welfare of the boy. He made progress in the arts of dancing, singing, declamation, and fencing, and even in those days he became familiar with the creations of Shakespeare. Through the influence of Miss Tidswell, he obtained an engagement for some parts at Drury Lane, Prince Arthur in 'King John' being one. The boy excited notice, as the following anecdote related by Mrs. Charles Kemble shows. "One morning before the rehearsal commenced, I was crossing the stage, when my attention was attracted by the sounds of loud applause issuing from the direction of the green-room. I enquired the cause, and was told that it was only little Kean reciting 'Richard III.' My informant said that he was very clever. I went into the green-room and saw the little fellow facing an admiring group, and reciting lustily." On the death of Moses Kean, his nephew's only real friend was Miss Tidswell. Under her he studied Shakespearian characters, and while residing with her joined the company of Saunders, Bartholomew Fair. There he gave imitations of the nightingale and monkey, of the form and movement of the snake; and at Bartholomew Fair he acted the part of Tom Thumb. Soon afterwards, hearing that his mother was acting at Portsmouth, he set out from London for the seaport named; but on reaching it discovered that the information given him concerning Anna Carey was incorrect. His situation was trying, for he was destitute and friendless. Young Kean, however, had a bold heart, and a brain full of resources. He hired, on credit, a room in one of the Portsmouth taverns, and announced an entertainment consisting of "Selections from 'Hamlet,' 'Richard III.,' and 'Jane Shore,' with a series of acrobatic performances, and some exquisite singing, and all by Master Carey, of the Theatre Royal, Drury Lane." The entertainment was sufficiently successful for it to be repeated, and having paid all expenses, the entertainer found himself three pounds in pocket. Edmund Kean at this time was fourteen years old. Reciting Rolla's "address to the Peruvians" one evening before an audience at Sadler's Wells, a country manager, then present, was so much impressed by the declamation of the lad, that young Kean received an offer to play leading characters for twenty nights at the York Theatre. The offer was accepted, he was highly successful, and for many years from the time of that York engagement, the future tragedian of Drury Lane underwent the vicissitudes peculiar to the life of the old-fashioned stroller. It was not long ere he encountered the famous showman, Richardson, who speedily made terms with the precocious and versatile youth. It turned out that Anne Carey was in the company. She proposed that her son should join with her in her labours, and that she should receive his earnings. But they did not long labour together, and parted, not to meet again till Kean made his great success in 1814 at Drury Lane. While with a manager named Butler, at Northampton, Kean played walking gentlemen, Harlequin, and sang comic songs for a salary of fifteen shillings a week. While attached to Butler's company, he enacted the character of Octavian, in the 'Mountaineers' with such ability, that a gentleman connected with the Haymarket, who saw the performance, undertook to procure the young tragedian an engagement, provided that he could reach London to appear at a specified time. Kean, being without money, could only have travelled on foot, and the journey to London by such means would have taken up so much time, that he despairingly saw that the engagement must remain unfulfilled. Butler, with the greatest good nature, said "that he would defray the expenses of a stage-coach journey." Kean, overcome with emotion, exclaimed, "If ever fortune smiles upon my efforts, I will not forget you." The Haymarket engagement proved humiliating, the young actor being cast for very insignificant parts. However, in one character, Ganem, in the 'Mountaineers,' by the admirable manner in which he spoke certain words, he drew forth such unmistakable applause, that he availed himself of a recommendation addressed to John Kemble. In an interview with that celebrity, Kean found the eminent tragedian so chilling and unsympathetic in manner, that the poor fellow hurried from the theatre stung to the quick by his inauspicious reception. He again visited the provinces, and again experienced many privations, disappointments, humiliations, and rebuffs. Fate appeared to frown upon him; but it must be remembered that Kean was young, exceedingly small of stature, unconventional in his style of acting, and thoroughly original in every assumption that he undertook. Moreover, his temper was violent, haughty, and sensitive. It was during those days, when Edmund Kean, as a strolling player, was learning his art, and was making acquaintance with poverty in its most bitter forms, that he acquired those habits of intemperance which afterwards effected his ruin. After the engagement at the Haymarket, he acted at Tunbridge Wells, Portsmouth, Haddesden, Birmingham, and Edinburgh. More than once in these journeyings he exhibited at fairs and public houses; and for a short time he earned a scanty income in the capacity of usher at a school in Hertfordshire. In 1807 at Belfast, he played with Mrs. Siddons; and as Jaffier in 'Venice Preserved' made a strong impression. But the tragedienne's opinion of him was not flattering; for on first seeing him, she remarked, "he was a horrid little man," and criticising his enaction in Otway's pathetic drama said, "He plays the part very, very well, but there is too little of him wherewith to make a great actor." Notwithstanding taunts, impecuniosity, heart-burnings, and neglect, the young aspirant studied laboriously, and allowed no opportunity to slip by which he might gain increased knowledge of stage art, and of human nature; but during his hard apprenticeship, he was forced to have recourse to many shifts, and to endure much suffering. After playing an engagement in Kent, he accepted another for a single night at Braintree, in Essex. On the day that the performance was to take place at Braintree, the actor stood, without a farthing in his pocket, on the Kent bank of the Thames. Bound to fulfil his engagement, it was necessary for him to cross the river; and his impecunious condition precluded all possibility of hiring a boat. The strong-willed stroller was not to be daunted. He threw off his clothes, tied them into a bundle, which he held in his teeth, plunged into the river, and speedily reached the shore. With his clothes saturated with water, half-famished, and tired in every limb, he yet went on for "Rolla," before the Braintree audience. While performing he fainted, and an illness of fever and ague was the consequence of his swimming expedition. On recovering he tramped all the way to Swansea, and played in that town. He was then in his twentieth year. Proceeding to Gloucester, he became a member of Beverley's company, and was advertised to play Young Rapid. The usual means had been taken to attract an audience, but at the time for the rising of the curtain there were only two persons in the auditorium; so the eighteenpence taken at the doors were returned to the couple of playgoers, and the theatre lights extinguished. A few nights Kean performed with a lady who had left the scholastic profession for that of the stage, and this lady, Miss Chambers, afterwards became Mrs. Kean. When at Stroud, Master Betty was announced to perform Hamlet and Norval; Kean found himself cast for Laertes and Glenalvon. The actor could not brook what he deemed an indignity,--that of playing secondary characters to a mere boy; and for three days and three nights, he was away from the theatre, every individual connected with it being ignorant of his whereabouts. On reappearing he said, "I have been in the fields, in the woods, I am starved; I have eaten nothing but turnips and cabbages since I've been out; but I'll go again, and as often as I see myself put in such characters. I won't play second to any man living, except to John Kemble." In the summer of 1808, Kean married Mary Chambers, the wife being nine years older than the husband. Soon after the marriage, Beverley told them that he intended dispensing with their services, and they soon had to drain the cup of poverty to its dregs. To the honour of the woman he had taken to his heart, she cheered and soothed him in his tremendous struggle. He suffered not only the pangs of poverty, but too often the stings of hostile criticisms from provincial scribes, utterly unable to appreciate his passionate and original renderings of dramatic characterization. At Birmingham he thought himself and his wife well paid, when during an engagement they each received a pound for their weekly services. So ably did he act that Stephen Kemble made proposals to negotiate a London engagement; but Kean deemed that further experience was necessary before he should attempt a metropolitan appearance in leading characters. Terrible toil and terrible suffering had to be undergone ere he was to reach the pinnacle of success. Closing his performances at Birmingham, he made terms with Andrew Cherry to appear at Swansea. So indigent was the actor, that he was necessitated to undertake the journey on foot, a journey of 200 miles; and his wife, who accompanied him, was likely soon to become a mother. Mr. and Mrs. Kean owed money in Birmingham, or possibly the wife might have remained in the town; and from it--early one summer morning--they departed on their long and wearisome way, adding to their miserable store of money some additions as they proceeded, by giving recitations at the residences of the gentry. In a fortnight they reached Bristol, were ferried over to Newport, and at last reached Swansea, where they obtained lodgings. Kean's acting was not warmly received; and referring to one of his impersonations in the town, he remarked, "I played the part finely, and yet they would not applaud me!" The actor grew moody, splenetic, and gave way to insobriety. A son born to him at this period he named Howard; and it was soon after the birth of the child that the Keans left Swansea, with Cherry, for other towns in the principality, and subsequently they crossed over to Ireland. At Waterford, Kean played tragedy, and in addition for his benefit, gave an exhibition of pugilism, tight-rope dancing, singing, and wound up by playing the Chimpanzee in the piece called 'La Perouse.' It was at Waterford that Edmund Kean's second son, Charles, was born. Beaching Scotland, so exhausted were the funds of the actor, that at Dumfries he got up an entertainment at a tavern, and the only patron was a shoe-maker, who paid sixpence for admission. At Carlisle Kean appealed to the barristers on Assize, asking for their presence, when he would deliver a series of recitations, his reward to be at their discretion; but the appeal was made in vain. In the autumn of 1811, the family in the most miserable condition arrived in York, and from the ball-room, Minster Yard, Kean issued a circular announcing, "for one night only," an entertainment comprising recitals, dramatic selections, imitations of actors, and singing by himself, assisted by his wife; but the scheme ended with anything but a prosperous result. Under their struggles, husband and wife broke into a wail of grief, as they contemplated their innocent and unfortunate babes. The mother on her knees, supplicated for spiritual influence to annihilate their sufferings by death, but the fiery-willed player still kept courage, "I will go on, I will hope against hope!!" They got to London, where, at Sadler's Wells, Kean had a short engagement at two pounds a week, and then he had engagements at Weymouth and Exeter; in which latter place he played for a salary of one pound a week. Through the influence of an old friend, Dr. Drury, Kean at length obtained an engagement at Drury Lane. But ere his triumph on the London boards was effected, the child, Howard, died, an event to which the actor never alluded without feelings of grief. While Kean was concluding his Exeter performances, his wife and child were desolate in the garret of a house in Cecil Street, Strand; and they would have starved, but that the liberality of Dr. Drury succoured them. Even on the eve of his Drury Lane success, Kean underwent many trials and sufferings. Save Dr. Drury he was without a friend. On his _début_, that memorable evening at Drury Lane, 26th January, 1814, the directors of the establishment denied him everything calculated to awaken hope and courage. Kean went to the dressing-room, and from the dressing-room to the stage, conscious that he had been treated with superciliousness, apathy, and injustice. Under such treatment, and with all his previous trials, it was only a perfect knowledge of his own transcendent powers, that carried him through the ordeal. The effect of his triumph in Shylock, may best be described in the words of his late biographer. "In an almost phrenzied ecstasy he rushed through the wet to his humble lodging, sprang up the stairs, and threw open the door. His wife ran to meet him; no words were required, his radiant countenance told all--and they mingled together the first tears of true happiness they had as yet experienced. He told her of his proud achievement, and in a burst of exultation exclaimed, 'Mary, you shall ride in your carriage, and, Charley my boy,' taking the child from the cradle and kissing him, 'you shall go to Eton, and'--a sad reminiscence crossed his mind, his joy was overshadowed, and he murmured in broken accents, 'Oh that Howard had lived to see it! But he is better where he is.'" Pity that so fine a nature as Edmund Kean's, with his genius, and generous sympathies, should have struck on the rock of self-indulgence. But in any estimate of his moral shortcomings, the evil influence around his early life, and the effect of his early privation, should be steadfastly, and charitably, borne in mind. When we remember the conditions under which the actor pursues his calling, it is scarcely surprising that the term "poor players," should have become proverbial. The victims of a social ban, originating in the bigotry of church and conventicle; following a profession, perhaps of all professions the most scouted by smooth, smug respectability, and certainly of all professions the most liable to fluctuations of success from the caprices, whims and "breeches-pocket" condition of its patrons; it seems but natural that the history of the stage should yield numerous illustrations of man impecunious. Then, too, it must be borne in mind, that the greater number of men and women who have recruited the ranks of the histrionics have been people of romantic and "happy-go-lucky" temperament; light-hearted, generous to a fault, unworldly in the money-making sense, and frequently of the most irregular and unbusiness-like habits. Such characteristics had Theophilus Cibber, Shuter, George Frederick Cooke, Edmund Kean, Ward, and John Reeve; and though the precarious nature of the profession, the necessarily unsettled habits of its followers, and the unreality of the life, may be conducive in a degree to impecuniosity, it seems to me--and I have strutted several fretful hours--the only real cause of players being poorer than other people is due to extravagance and irregularity. Frugal, steady, trustworthy habits invariably increase a man's well-being, in any calling; and the theatrical profession is no exception to the rule. Richardson, the showman, was born in a workhouse, and was in his early years a mere little social arab, cast upon the world without friends or education; and he began his social career by exhibiting a little child with spotted skin, calling him the "spotted boy." The first venture was profitable, and the showman went on making money, and saved it. He then set up a show theatre, succeeded so well that year after year he had to enlarge it, and at last it became the largest in the kingdom. Richardson likewise established a character for honesty, and all that is summed up in the words "manly conduct." John Quick--George the Third's favourite comedian--had, too, in his time been poor enough. He was the son of a Whitechapel brewer, and when only fourteen years old ran away from home, with the idea of taking to the stage for a profession. Without any money in his pocket he started on his romantic journey, and managed to find a booth company at Fulham, where he was allowed to enact Altamont in the 'Fair Penitent.' Having played to the satisfaction of the manager, that worthy commanded his wife to set the _débutant_ down for a whole share of the night's receipts, which at the close of the last piece amounted to three shillings. Quick rose in his profession, and by forethought and prudence amassed a fortune of £10,000. Braham's boyhood was surrounded with hardships and privations. Early left an orphan, he was obliged to walk the streets of London as a vendor of pencils. In that situation he was befriended by Leoni, a vocalist at the synagogue in Duke's Place, Covent Garden, who trained the lad's voice, so remarkable for its peculiar sweetness of tone and expression. For Leoni's benefit, in 1787, at the Royalty Theatre, Wellclose Square, young Braham made his _début_. His genius, of its kind, was unsurpassable; but it was the prudence added to it which laid the foundation of his fortune, which would have remained in the possessor's hands but that the vocalist entered unwittingly on theatrical management. Even in the more humble departments of theatrical life may be found thrifty examples of people, who, versed in the somewhat difficult part of making both ends meet, at length found themselves in a reputable and flourishing position. Such an instance is that of Bennett, a theatrical manager once well known in the Midlands. Bennett possessed a gift for doing things himself--his only assistant being an old lady, one Mrs. Gamage. He began his career with a puppet-show, was thrifty on its poor proceeds, and eventually became proprietor of a theatre. Bennett was successful as an actor at Worcester, Coventry, Shrewsbury, and towns adjacent. His travelling-cases, boxes, and chests, had their surfaces touched up by the scenic artist, and in the theatre did duty for castle walls, palace terraces, and palatial furniture; his helmets, and other stage properties, were of canvas, easy to fold up for packing, and many of his properties combined several utilities. He would arrange with his friends to take money at the doors, and Mrs. Gamage combined the offices of candle-snuffer and constable, and during the day she cooked and cleaned up at home. Bennett has been known to seek out musical young men in a town, and allow them the privilege of singing on his stage; or, if they were at all proficient on an instrument, allow them to play in his orchestra. He dressed as a fine gentleman by day, and like a mechanic in the evening. He died prosperous, and, above all, a churchwarden. Old Philip Astley, Davidge, John Douglas, and Samuel Phelps, all poor men at the outset of life, entered on theatrical management, carried it on with care, tact and probity, and all of them died reputable, and in comfort. Garrick, the Kembles, Charles Mayne Young, Munden, Richard Jones, William Farren, Liston, Macready, and a host of other gifted actors, died rich, having lived amidst the respect of the highest social circles; but it will be found in each particular case, that they were men of high character, and prudent habits. In some other instances the impecuniosity of actors has resulted from short-sightedness to their own interests, imprudence, and utter incompetence in business matters, but unfortunately extravagance, and other irregular habits of life, have been the frequent cause of poverty. Nicholson, once lessee of the Newcastle Theatre, by want of business habits gradually became a poor man, so poor that he became money-taker at Drury Lane, and subsequently died in the workhouse of the town where he had been theatrical manager; and Faucit-Saville, formerly lessee and manager at Gravesend, Margate, Deal and other theatres, died while engaged as money-taker at the City of London Theatre. Some who saw 'Manfred,' when revived at Drury Lane by Mr. Chatterton, with Phelps as the hero of Byron's sombre, but impressive, dramatic poem, may possibly, when leaving the house between the acts, have noticed one of the checktakers, an old gentleman of stagy deportment, enveloped in an old, faded cloak. That individual was no other than the once famous tragedian, Mr. Denvil, who was the original Manfred when Bunn produced the tragedy at Covent Garden, long ere Mr. Phelps made his _début_ at the Haymarket. In the character of Manfred, Denvil made an intense and abiding impression, became lessee of theatres in town and country, but from want of _nous_, and from want of prudence, dwindled in the social scale, and sank to the menial capacity in which he was to be seen at Drury Lane. Another specimen of an unsuccessful manager was Huntley May, who had been lessee of nearly all the small provincial theatres in the kingdom. This man had but a very imperfect sense of honour, part of his business being to issue as large bills as he could possibly get printed, announcing the most splendid dramatic productions, which, when the evening arrived, were never presented. Often his audience grew riotous and pugnacious. One night, an assemblage threatened to pull up his benches; but Mr. May, not unaccustomed to such scenes, appeared before the footlights and exclaimed,-- "What's up now, boys?" "Money, money. It's a swindle!" "Hark at 'em now. Murder and Moses! there's broths of boys for yer. Money's just what I want myself. Think of your Cathedral ground; who lies in it? My sainted wife, Norah; poor soul! she loved Exeter so that she would come here to be buried among ye. We all love ye! myself and little Pat. Aisy now, I'll give you a thrate. To-morrow night's my benefit, make me a thumping house; Norah won't forget you in heaven. Behave like gentlemen, come early to-morrow night. Good luck to ye!" which audacious address seems by all accounts to have satisfied his easily satisfied audience. But even when the old country managers, and there were many, got their living honestly, and by fair means, the profession frequently had the hardest of lots. The strolling players were a merry-headed and easily contented race; but it would be difficult to name any class of people that have known greater oppression. Regarded by a large section of English people as rogues and vagabonds, they were often at the mercy of common informers and petty-minded magistrates. A circumstance in the career of Moss, a clever actor, and respectable manager, well illustrates such petty persecution. He opened the Whitehaven Theatre for a night or two with some success, but in less than a week the manager and his troupe were put in "durance vile." Arrested on a Saturday night, they had to remain in the "lock-up" throughout Sunday. On Monday morning they were taken up before the magistrates, and arraigned upon a somewhat extraordinary charge. An inhabitant of Whitehaven, a person to whom credit was given by his acquaintances for sanity and truthfulness, appeared in open court to denounce the strollers, not only as a curse to society generally, but to his town in particular. It was declared by this individual that "before the theatre opened there was an immense haul of herrings; but since the players had entered the place, the fish had all fled, and that in consequence the fishermen were suffering. Misfortune always followed the wake of actors; wherever they appeared, they carried a curse." In spite of reference to sundry tomes of jurisprudence, and notwithstanding consultation with the town-clerk, the magistrates could not pronounce a verdict. However they prohibited the reopening of the theatre, and the sons of the "wicked one" had to pack about their business in the best way they could. Edward Stirling applying to a local magistrate at Romford in Essex, for permission to perform for a few nights in the Town Hall, received but sorry treatment from the bigoted official. "What, sir! Bring your beggarly actors into this town to demoralize the people? No, sir. I'll have no such profligacy in Romford; poor people shall not be wheedled out of their money by your tomfooleries. The first player that comes here I'll clap in the stocks as a rogue and a vagabond. Good morning, sir." Even in fair seasons the pay of the strollers was wretched in the extreme. In 1826, Mrs. John Noel, desirous of getting her two daughters into practical training for the stage, applied to a wandering manager--Black Beverley--as to whether he could find room for the young ladies in his company. Mrs. Noel was informed that his troupe was about visiting Highgate, and that her daughters could join, on condition that they would put up with the sharing system, and find their own costumes. The engagement was accepted, the elder of the two girls (afterwards Mrs. George Hodson) being cast for Juliana, and the younger (afterwards Mrs. Henry Marston) for Volante in Tobin's comedy of 'The Honeymoon.' Black Beverley was to be the Duke Aranza, and the performance was to take place at the White Lion Tavern. The young ladies _débuted_, and their remuneration was one shilling and sixpence each. The men and women were homely, respectable people, and the leading actors eagerly accepted Mrs. John Noel's invitation to a substantial supper she had packed in a hamper, and of which the poor players gratefully partook, eating as if they had been without food for days. A well-known actor remembers playing the Stranger, Philip, in 'Luke the Labourer,' and a farce character at a small theatre in Chelsea, and receiving twopence for his services, and then having to walk to the Mile End Road! Phelps, when attached to Huggins' company, has tramped with his bag on his shoulders, more than once a distance of five-and-twenty miles, being without coach-money; and his wife and child at Preston had, in the early time of Phelps' career, for nearly a week to subsist on a rather small meat-pie. It was a terrible thing some fifty years ago, for some stage-stricken swain, or maiden, to depart hundreds of miles, perchance so far as Scotland, and find themselves in some poorly-paid company. Twenty shillings a week would be considered a fair salary. There would be scores of miles to travel, certain dresses to find, and upon the residue of the scant income the player had to live. When things failed it was sometimes literally tragic; for the tyros had little chance of escape, railways and cheap steamers being unknown. What a _bizarre_ picture is that drawn by Edmund Stirling of Ben Smithson's Agency for Actors, at the "White Hart" in Drury Lane! "Kind-hearted considerate Ben," writes his remembrancer, "a real Samaritan, ever ready with food and kindly words to cheer and encourage the poor stroller. Ben, strongly impregnated with the 'Mysteries of Udolpho' school, was wont to use grandiloquent words for every day purposes. His hostel became a 'castle'; back parlours, smelling strongly of 'baccy,' tapestry chambers; dilapidated staircases, lumber closets, and dark landings, 'galleries, crow's-nests, and eagle towers;' his beer-cellars were known as 'dungeon keeps;' 'Barclay's entire' at fourpence per pot became 'nectar,' like Mr. Dick Swiveller's 'rosy wine;' and his two serving-men, plain Bob and Dick, were transformed into 'Robarto' and 'Ricardo.' Every poor player that arrived, footsore and hungered, was styled according to his robe, Kemble, Kean, Munden, or Siddons; Smithson knowing full well how pleasantly a little flattery would tickle the palate. There was always a bed, supper, and breakfast, money or not, in that Mecca for wanderers. Such liberality brought failure in its train, and the 'White Hart's' doors speedily closed on Ben and his 'good intentions.'" Not less amusing, too, is Mr. Stirling's description of the Brothers Strickland and their lesseeship of the Oddfellows' lodge-room, at the Chiswick "Red Cow," where they announced "A London company for two nights, with 'Pizarro,' as played at the Theatre Royal, Drury Lane; elaborate scenery and heart-rending effects. Pit, one shilling; boxes, two; and standing room, sixpence. Seats booked at the 'Red Cow' daily from 10 till 4. Schools and children half-price." Stirling tried to get employment under the Stricklands, and having wended his way to the tavern, was shown into the kitchen, and there found the company dressed for the evening's performance of 'Pizarro.' At a table, superintending the tea, Elvira sat in faded black robes, wielding a tea-pot, and ever and anon scowling at her base destroyer, Pizarro. He sat aloof, encased in rusty tin armour, a ferocious wig and locks to match, in his hand a long pipe, and by his side an empty glass. Cora, the lovely Peruvian maid, employed her soft hands in toasting muffins, assisted by her husband, the Spanish Alonzo. Such was the heat of the climate, combined with the effects of something short, that Peruvians and Spaniards sat socially together, doing their pipes and beer. Strickland engaged Stirling to play Richmond on the following Monday, but he wasn't to have anything for it. Perhaps there is no more pertinent illustration of a chequered career--a career with indigence at one end and splendid wealth at the other--than that furnished by the life of Harriet Mellon, afterwards Mrs. Coutts, and subsequently Duchess of St. Alban's. She was not the only actress who made a fortunate marriage. Anastasia Robinson married the Earl of Peterborough; Lavinia Fenton, the original Polly Peachem, in the 'Beggar's Opera,' gave her hand to the Duke of Bolton; Louisa Brunton became Countess of Craven, and Elizabeth Farren exchanged her name for that of Countess of Derby. But not one of those enumerated had known the privations and hardships suffered by Harriet Mellon. When raised to affluence as Mrs. Coutts, and when coroneted as a duchess, she sometimes with mirth and sometimes with pathos referred to those old days of her life, when she was downcast by harsh treatment and impecuniosity, and was never ashamed of the time when she was nothing more than a poor strolling actress. In 1789 Harriet Mellon, with her mother and Entwisle, her step-father, joined the theatrical company of Stanton. In the city of Lichfield the tenement is still pointed out where the Entwisles lodged in a couple of rooms, each ten feet by four and three-quarters across, with windows two feet square; the rent for the lodgings being two shillings a week. Stanton on one occasion obtained a bespeak from a squire, who requested a performance of the 'Country Girl.' The manager was only too glad to play anything, so low had been the ebb of his fortunes. No copy of the comedy being in the manager's possession, an actor was despatched to a town not many miles distant for the necessary volume. Extra delay took place, the needy _commissionnaire_ having gone on foot, putting the coach-money in his pocket. When he returned the play-book was cut up leaf by leaf and distributed to the company to transcribe; at least to those acquainted with the art of penmanship. It is stated that the copyists were few. Harriet Mellon, though of junior rank in the company, was cast for Peggy. She had the part given her in virtue of her ready and trustworthy memory. The girl's heart filled with enthusiasm when she learned that she was to perform the title _rôle_. But her heart filled with sorrow an hour or two afterwards when she inspected the square-cut and dingy, snuff-coloured coat, held aloft by the manager, as the garment in which Peggy should appear as the boy, the character assumed in the park scene by the country girl. Being made acquainted with Harriet's disgust at the costume furnished by the manager, Mrs. Entwisle bethought her of acquaintances who might help her daughter out of the trouble. A lady housekeeper to whom the mother applied, suggested the loan of a fashionable suit from one of her young masters. The proposition was declined. The housekeeper then stated that an idea crossed her: she might be enabled to procure a small and well-cut suit of clothes elsewhere. Mother and daughter spent an anxious afternoon, and about four o'clock, at their lodgings, a lad made his appearance with a parcel, and not long afterwards the friendly housekeeper appeared too. The old lady said she had called on another old lady in a similar capacity to herself, and by her kind offices had procured not the clothes of any young gentleman, but the wedding-dress of her old master, and as he was only a "dwarfy" when young, probably the clothes would fit Harriet. A pang smote the breast of Miss Mellon as she thought the garments must be at least thirty years old; but the parcel was unfastened, and it was found to contain a light amber-coloured silk coat, silver trimmed white satin waistcoat and smalls; pale blue silk stockings, shoes laced, stock buckles, and ruffles. Harriet Mellon was in raptures. Half-past six o'clock came, the barn was crowded, and the one musician, Entwisle, led off with 'Rule Britannia,' 'Britons, strike Home,' and 'The Bonny Pitman.' Up went the curtain, and the comedy began. The family whose bespeak proved so attractive were delighted with the performance, and especially with the acting of Miss Harriet. In the park scene the baronet and lady grew particularly grave of countenance as they surveyed Peggy in the boy's clothes, which gravity continued during the remaining part of the entertainment. Next morning as Harriet was at breakfast, a groom rode up to the door of the house where she lodged, and a letter was left for Miss Mellon, which proved a formal and frigid communication, requesting information respecting the means by which she had acquired the male attire worn by her on the previous evening. The truth soon afterwards came out. The housekeeper to whom Mrs. Entwisle applied, not knowing when or for what the dress was wanted, went to the housekeeper of the very gentleman who bespoke the play; and his servant lent his wedding-dress that had been stowed away since the occasion of his nuptials. The young actress was cleared of all imputation, and on leaving the neighbourhood received from the baronet's lady a present in the shape of a handsome frock. Before that time, Harriet's mother would not allow, on account of shabby attire, the girl's attendance at Stafford church, but used to send her to Ingestre for Sunday morning worship, because at that place she was unknown. Harriet's salary for some years was only fifteen shillings a week. Sheridan and the Hon. Mr. Monckton were appointed stewards of the Stafford races in 1794, and at the theatre in the town those gentlemen witnessed the acting of Miss Mellon as Letitia Hardy and Priscilla Tomboy. On Sheridan, the arbiter of London theatricals, affording hope to her that she might obtain an engagement at Drury Lane, the Entwisles with their daughter left for the metropolis. At a humble lodging in Walworth the family subsisted by means of a small sum of money, the proceeds from Harriet's farewell benefit in the country. Sheridan, a careless and procrastinating man, kept Mrs. Entwisle in cruel suspense concerning her daughter's _début_ at Drury Lane, mother and daughter being continually put off by the manager with excuses; but at last the opportunity came. Drury Lane opened for the season 1795-1796 on the evening of September 16th, and on that occasion Miss Mellon went on as one of the vocalists, to join in the National Anthem. On September 17th the bill of the night announced a performance of 'The Rivals,' "Lydia Languish by a young lady, her first appearance." The young lady was the daughter of Mrs. Entwisle. She was very nervous at her _début_, and Sheridan thought it desirable that some time should elapse for her to become acquainted with the size and extent of the house, by joining in choruses before she again tried a prominent character. She remained in the background till October. The Michaelmas day before the family were exceedingly depressed, the girl's prospects being uncertain, and her salary only thirty shillings a week. Old-fashioned people, and exceedingly superstitious, the Entwisles and Harriet bewailed the absence of the luck-bringing goose on the 29th September. Through a gift, or by pinching, when strollers, they had usually managed to get Christmas mince pies, Shrove Tuesday pancakes, Easter tansy pudding, and the Michaelmas goose. It was a matter of sorrow to poor Harriet, that her finances would not allow her to purchase a goose, for the sake of tasting a bit for good-luck. When informed that she could at a Drury Lane cook-shop buy a quarter of the much-honoured bird the girl's delight knew no bounds. The purchase was made, and she was happy. It came to pass that her fortunes brightened at Drury Lane, where she remained twenty years. When Tobin's comedy of 'The Honeymoon' was produced, Harriet Mellon made a great hit in the character of Volante. Through drawing a prize in the Lottery she was enabled to purchase Holly Lodge, Highgate. The _Times_ of March the 2nd announced the marriage of "Thomas Coutts, Esq., to Miss Harriet Mellon, of Holly Lodge, Highgate." Her husband was a man of enormous wealth. Mrs. Coutts subsequently married the Duke of St. Albans, and at her death, in addition to other magnificent bequests, left to the lady now known as the Baroness Burdett Coutts, a fortune of £1,800,000. One of the most gifted men that ever trod the stage was George Frederick Cooke. Indeed the splendour of his genius is said to have been almost as exceptional as the fierceness of his passions, and the recklessness of his habits. Drink, gambling, licentiousness, and prodigality, ruined his fortunes, and cut short his life. It may be urged in mitigation of his excesses, that like Kean he had indifferent home training, and that at a very early age he was left to the exercise of his own wilful and sensual nature. His father had been a soldier who left his widow in unprosperous circumstances. She quitted London, and settled at Berwick-upon-Tweed, where her son received an indifferent education, and where on several occasions he saw part of the Edinburgh Company perform. Cooke states, "that from that time plays and playing were never absent from his thoughts, that he pinched his belly to procure play-books, and actually studied one particular character,--Horatio, in the 'Fair Penitent.'" His mania to get into the play-house has amusing proof in a story, which, in after years, Cooke used to relate with gusto, and comicality. He much wished to see 'Douglas,' as did some companions, but all of them were without a farthing. They contrived to get into the theatre by a private entrance, and secreted themselves under the stage. Hope told them the flattering tale that they might steal out during the performance, and join the audience, by means of an aperture they had discovered in a passage leading to the pit. In carrying out the enterprise they were discovered by one of the company, and after a trying interrogatory shamefully turned out at the stage-door. Young Cooke, reckless, and persistent, urged his companions to go in and conquer notwithstanding an ignominious defeat; so they were constantly on the alert, and found by observation that a back door was left unguarded, which one evening they entered unperceived. Fairly in, the next consideration was, how they could conceal themselves until the rising of the curtain; their hope being that amidst the confusion and preparation behind the scenes, they might escape notice, and enjoy the magic show. Cooke saw a barrel, took advantage of the safe and snug retreat, creeping in like the hero of the famous melodrama 'Tekeli,'--in those days the admiration of the polished playgoing populace of the British metropolis. Unfortunately however there was danger in the lurking place; he had for companions two large cannon-balls, but the youth not being initiated into the mysteries of the scene, did not suspect that cannon-balls helped to make thunder in a barrel as well as in a twenty-four pounder, and little did poor George Frederick imagine where he was. The play was 'Macbeth,' and in the first scene the thunder was required to give due effect to the situation of the crouching witches, as the ascending baize revealed those beldames about to depart on their mission to meet Macbeth. It was not long ere the Jupiter Tonans of the theatre, _alias_ the property-man, approached and seized the barrel, and the horror of the concealed boy may be imagined as the man proceeded to cover the open end with a piece of old carpet, and tie it carefully, to prevent the thunder from being spilt. Cooke was profoundly and heroically silent. The machine was lifted by the brawny stage servitor and carried carefully to the side-scene, lest in rolling, the thunder should rumble before its cue. All was made ready, the witches took their places amidst flames of resin, the thunder-bell rang, the barrel received its impetus with young Cooke and the cannon-balls,--the stage-stricken lad roaring lustily to the amazement of the thunderer, who neglected to stop the rolling machine, which entered on the stage, and Cooke, bursting off the carpet head of the barrel, appeared before the audience to the horror of the weird sisters, and to the hilarity of the spectators. In Stukely, Sir Pertinax, Kitely, Iago, and Richard III., George Frederick Cooke was allowed to be unrivalled. But his social position was lowered and his fine talents deteriorated by intemperance and debauchery. He was in constant debt and difficulties, in spite of excellent emoluments. After much trouble, he on one occasion obtained a suit of clothes from a tailor indisposed to give credit. Cooke explained to him that there would be no doubt about the price being ready on his benefit, which was at hand. The tailor, a stage-struck swain, said that if he were allowed to appear on the benefit night, in addition to stage tuition from Cooke, the garments should be forthcoming. The tragedian agreed to give the instruction, and cast him for the post of Catesby, Cooke of course playing Richard. The night came, and the "snip" ranted and strutted, and in the tent scene, after, "Richard's himself again," on the entrance of Catesby, the tailor in answer to Richard's "Who's there?" halted, and stuttered "'Tis I, my lord, the early village cock." The audience roared; but after silence came, the tailor merely repeated the words just as before; upon which Cooke unable to keep his gravity or restrain his temper, roared out, "Then why the devil don't you crow?" Another good story in connection with impecuniosity and a stage performance, is that told of Mossop, who, when at the Smock Alley Theatre, Dublin, found himself in a peculiar predicament (the result of irregular payments) one night when he was playing Lear. His Kent was a creditor, who, as he personated the faithful nobleman supporting his aged master, whispered, "If you don't give me your honour, sir, that you'll pay me the arrears this night before I go home, I'll let you drop about the boards." Mossop alarmed said, "Don't talk to me now." "I will," said Kent, "I will;" adding, "Down you go." The manager was obliged to give the promise, and the actor before leaving the theatre received his wages. John O'Keefe the author of 'Wild Oats,' relates a similar curious, and humorous anecdote concerning the "silver tongued" Spranger Barry. "The first character I saw Barry in was Jaffier, Mossop Pierre, and Mrs. Dancer the Belvidera. According to the usual compliment of assisting a dead tragic hero to get upon his legs, after the dropping of the curtain, two very curt persons walked on the stage to where Barry (the Jaffier) lay dead, and, stooping over him with great politeness and attention, helped him to rise. All three thus standing one of them said: 'I have an action, sir, against you,' and touched him on the shoulder. 'Indeed' replied Barry. 'This is rather a piece of treachery; at whose suit?' The plaintiff was named and Barry had no alternative but to walk off the stage, and was going out of the theatre in their custody. At that moment some scene-shifters and carpenters who had been observing the proceedings, and knew the situation of Barry, went off and returned almost immediately, dragging with them a huge piece of wood, in the rear of which was a bold and ferocious looking property-man who grasped a hatchet. Barry said, 'What are you about?' 'Sir,' said one, 'we are only preparing the altar of Merope, for we are going to make a sacrifice.' The speaker having concluded, grasped his hatchet and sternly eyed the bailiffs. 'Be quiet, you foolish fellows,' remonstrated the tragedian, who began to think the business serious. The minions of the law also grew apprehensive as the sacrificators looked on with fixed and stony eyes. Barry noticing the bailiffs beckon, went to them, and drawing him aside they said they would quit him if he would give his word of honour that the debt should be settled next day." The actor was gratefully complimentary to his supporters, not forgetting the altar of Merope. The circumstance occurred at the Dublin Theatre in 1778. The narrator of this story has one equally amusing of Mahon and Macklin. "Bob," on one occasion said Macklin, "I intend to have you arrested for the debt you owe me, but I am considering whether I shall arrest you before or after your benefit." "Oh," said Mahon, "don't arrest me at all." "Yes, yes, Bob, you know I must; to prison you will have to go." "There's no occasion." "Oh yes, there is." "Well then, sir, if you must, wait till my benefit is over." "No! Bob, then you take the money and knock it about no one knows how nor where, and I shall never get a shilling of it; but if I arrest you before your benefit, some of those lords that you sing for in clubs and taverns and jovial bouts may come forward and pay this money for you. No, no, I'll have you touched on the shoulder before your benefit." King, one of the finest comedians of the eighteenth century, and the original Sir Peter Teazle, made a large fortune; but lost it at the gambling-table. On one occasion he borrowed five guineas for a last stake, and he then won two hundred pounds. Escaping from the chamber, he fell on his knees, and in answer to a request from a companion, made oath on a Bible that he would relinquish his gamester's mania. But he became a member of the Miles Club, in St. James', and at the tables soon lost everything, and died in extreme poverty. Bayle Bernard's father--John Bernard, a clever comedian, and, in his after years, a well-known manager of American theatres, went through many adventures during the period of his novitiate. After playing at Poole in Dorsetshire, and having spent the money he had earned, he thought he should return home, according to a promise made to his mother; but his success at Poole in playing the character of Major Oakley in the comedy of 'The Jealous Wife,' suppressed the dramatic tyro's notion about duty. A mania for the stage again seized him, and hearing that his old manager, Taylor, was playing at Shaftesbury, Bernard actually determined to join him in defiance of any privations that might arise from his being without a shilling in his pocket. Having given his mother assurance that he would not act again upon closing his engagement at Poole, writing home for supplies was out of the question; and though on paying his bill at an inn, he discovered that all his coppers at command did not amount to six, Bernard persisted in going on to Shaftesbury, a distance of thirty-six miles. Entrusting his trunk to a waggoner, he ate his breakfast, scribbled a note to his mother, making apology for his delay; tied up his linen in a bundle, and took a path across the fields to the high road, in order to escape notice from acquaintances who had known him in seemingly dashing circumstances. After having proceeded a few miles, he heard the horn of the guard from the stage-coach, and fearing it might contain some of his old companions, he jumped over a hedge for concealment, and in so doing alighted in a ditch, and sank up to his knees. On extricating his legs, a shoe was left behind, and its loser was compelled to take off his coat, roll up his shirt sleeves, and thrust his arm down the deep aperture, to recover what had been lost. But it was necessary to support himself by planting one foot against the hedge, and by grasping the roots of a holly bush, and while so doing his hold gave way at the most critical moment, and he was precipitated headlong into the mire. In consequence of the disaster he had to delay his journey two hours on the sunny side of a hayrick, for the purpose of putting his apparel in something like decent order. Arriving at Blandford, fear, fatigue, and vexation, continued to exhaust him, and he considered in what way he could most effectually lay out the threepence in his pocket. He determined on a glass of brandy, and going into an inn, called for the first that he had ever tasted. About to depart, having thrown down his coppers, the landlady informed him that two of them were bad. Bernard states that a feather might have felled him to the ground, and that he seemed to be without sense or motion, while the brandy seemed to congeal within him. The landlady looked in his face, and noticing his agitation, surmised doubtless the cause; for she good-naturedly told him not to mind it, but that should he ever again get within easy distance of the place not to forget her. Nearly twenty years afterwards, Bernard in company with Incledon, the vocalist, put up at the identical place, and related the adventure. Incledon thought on hearing the story, that it was Bernard's duty to give the house a good turn, and so he very generously assisted Bernard to run up a bill in five days to twenty pounds. Ben Webster possessed a budget of amusing stories, involving ludicrous and startling incidents, connected with his ups and downs as a poor player. He began his professional career as a teacher of music and dancing, and having a passion for the stage, was undaunted in his fight with fortune, notwithstanding defeats and even humiliation. Hearing that Beverley, of the old Tottenham Street theatre, was about opening the Croydon theatre for a short season, Webster applied to that manager for the situation of walking gentleman. "Full," said Beverley. "Can I get in for 'little business,' and utility?" pleaded Webster. "Full." "Is there any chance for harlequin, and dancing?" "I don't do pantomime or ballets; besides, I don't like male dancers; their legs are no draw." "Could you give me a berth in the orchestra?" "Well," said Beverley, in his peculiar manner, and with a strong word, which need not be repeated, "Why, just now you were a walking gentleman!" "So I am, sir; but I have had a musical education, and necessity sometimes compels me to turn it to account." "Well! what's your instrument?" "Violin, tenor, violoncello, double bass, and double drum." "Well! by Nero! (he played the fiddle you know) here, Harry (calling his son), bring the double--no, I mean a violin out of the orchestra." Harry Beverley appeared with the instrument, and Webster was requested to give a taste of his quality. He began Tartini's 'Devil's Solo,' and had not gone far when the manager said that the specimen was sufficient, offering the soloist an engagement for the orchestral leadership at a guinea a week. Webster affirms, "That had a storm of gold fallen on him it could not have delighted Semele more than it did himself. He felt himself plucked out of the slough of despond." Webster had others to support, had to board himself, and in addition he resolved to get out of debt. To successfully carry out such arrangements the young professional had to practise considerable self-denial, walking to Croydon, ten miles every day, for rehearsal, and back to Shoreditch, on twopence--one penny for oatmeal, and the other for milk; and he did it for six weeks, Sundays excepted, when he luxuriated on shin of beef and cheek. While Webster was at Croydon, the gallery used to pelt the gentlemen of the orchestra with mutton pies. Indignation at first was uppermost, but on reflection, the assailed musicians made a virtue of necessity, collecting the fragments of not over-light pastry, ate them under the stage, and whatever might have been their composition, considered them as "ambrosia." To be glad to eat the mutton pies with which the gods pelted the orchestra is undoubtedly a realisation of "out of evil cometh good," and is a curiosity of impecuniosity; but of all the curious curiosities commend me to an arithmetical calculation made by a modern actor, who entered on a five nights' engagement at Swansea, at the termination of which he had from the treasurer the sum of twenty-five shillings. Mr. Edward Atkins, who had to find his own wardrobe, upon entering into an arithmetical calculation, discovered that after deducting six shillings for coach fares, and five shillings for lodgings, there remained fourteen for professional work, being within a fraction of two shillings and ninepence halfpenny per evening's labour. The following is the list of parts played by the comedian, and the amount received for each:-- "Monday: 'Widow of Palermo'--Jeremy (with a handful of snuff and a glass of water thrown in his face), 10-1/2_d._; 'Is he Jealous?'--Belmour, 9-1/2_d._; 'Young Widow'--Splash, 1_s._ 1-1/2_d._ Tuesday: 'Englishman in France; or, Why Didn't I Kill Myself Yesterday?'--James, 9-1/2_d._; 'Mrs. White'--Peter White (with a medley duet, and mock gavotte, that caused a stiffness in the joints for three days), 1_s._ 1-1/2_d._; 'Secret' (without a panel in the scene)--Thomas, 10-1/2_d._ Wednesday: 'Carlitz and Christine'--Carlitz, very cheap, 7-1/2_d._; 'Two Gregories'--Gregory, without goose or ship, 10_d._; song, 'What's a Woman like?' 1-3/4_d._; 'Fortune's Frolic'--Robin, the talk of the town, 1_s._ 2-1/4_d._ Thursday: fully prepared with tools and syllables for three pieces, but the theatre was closed, 2_s._ 9-1/2_d._ Friday: 'Review'--Caleb Quotem, with two songs, 10-3/4_d._; 'Our Mary Ann'--Jonathan Junks, 9-1/2_d._; 'Loan Me a Crown'--Lightfoot, fifteen lengths, 7-1/4_d._; 'Captain's not Amiss'--John Stock, with clean shirt, the part requiring the actor to take off coat and waistcoat, 6_d._; walking over to next town on managerial business, 1/2_d._ Total, 14_s._" For years the name of Charles Mathews was continually bandied about in connection with the subject of impecuniosity. Yet the harassing and unpleasant circumstances in which the comedian too often found himself through want of money were not produced by causes which in many instances have brought players into straits, insolvency, and sometimes even destitution. The parentage of Mathews was most reputable, his moral and intellectual training was all that could be desired, while his business habits must have been respectable, holding as he did for some time, with credit and capability, an appointment as a district surveyor. His social position too was excellent. But he married a very extravagant lady, and in conjunction with her entered on theatrical speculations, which his tastes and nature ill-fitted him to successfully promote; and not possessing adequate capital to legitimately advance his various theatrical schemes, he became the prey of money-lenders, and bill-discounters. Charles Mathews married Madame Vestris on July 18th, 1838, the lady being at that period the lessee of the Olympic Theatre, where her management had been characterised by exceptional taste and enterprise. But her expenditure, whether in relation to her theatre, or private life, had been lavish even to recklessness. After playing the seasons in the metropolis and making a provincial tour, Mr. and Mrs. Mathews accepted an offer from Stephen Price, manager of the Park Theatre, New York, to perform upon secured engagements of £20,000, with power at option to prolong their stay. However, Price's speculation proved a failure, Mathews' scheme of making a speedy fortune "melted into thin air," and then, affirms the disappointed comedian, "began the series of troubles which were destined to clog a great portion of my life." During the absence of Mr. and Mrs. Mathews for their American engagement the Olympic was kept open under the direction of a manager appointed by them, and on their return they found the finances in a very crippled state; a large amount of debt having been incurred, despite the large sums of money Mathews had transmitted across the Atlantic. In the hope of extricating himself from his great liabilities he took Covent Garden, never calculating the dangers of the perilous and uncertain sea on which he was about floating the bark of his fortunes. "Money," he says, "had to be procured at all hazards, and by every means, to prop up the concern till this new mine could be worked; and I was initiated for the first time in my life into all the mysteries of the money-lending art, and the concoction of those fatal instruments of destruction called Bills of Exchange.... Brokers and sheriff's officers soon entered on the scene, and I, who had never known what pecuniary difficulty meant, and had never had a debt in my life before, was gradually drawn into the inextricable vortex of involvement, a web which once thrown over a man can seldom be thrown off again. The consequence was not conceived at the time. It was a great speculation, and great difficulties appeared the legitimate consequences. Every Saturday was looked forward to with terror, for on every Saturday I had to pay, including the company, authors, band, carpenters, and workmen, employed before and behind the curtain, six hundred and eighty-four souls, with their wives and families all dependent upon my exertions." His liabilities were so numerous and heavy, that Mathews conceived that the best plan for him to pursue was without delay to wind up the speculation. Pity for him that he did not carry out the resolution. But the great success attending revivals of the 'Beggar's Opera,' the 'Merry Wives of Windsor,' and other pieces, added to the subsequent still greater success of Boucicault's 'London Assurance,' induced the lessee to continue the management. Everything looked brilliant and prosperous, but he found his position more intolerable as the sun of prosperity rose higher over his theatre. He states that when he paid no one, no one seemed to care, but the moment Jenkins got his money Jones became rampant. "Why pay Jenkins? Why not pay me? You've used me shamefully, and you must take the consequences." Writs and executions poured in, and in every direction Mathews beheld the harpies of the law waiting to spring upon him, and the thousands he paid were partially swallowed up in legal expenses and interest. The hydra-headed monster, sixty per cent. was always about his legs. His shifts and escapades during this period read like passages from one of those comedies to which he used to impart such amusement by his animal spirits and humours. Some of the stories told by Mathews of his impecunious day, smack of a grim humour. Borrowing money at sixty per cent., he informs us, is not the facile operation some imagine, and, he adds, is attended by risk and worry even worse than the fearful percentage. He well remembered, after a fortnight of very hot weather and thinly attended seats at his theatre, having occasion to borrow two hundred pounds to patch up the Saturday's treasury, and making application to a bill-discounter three days before wanting the money. "Ah, Mr. Mathews! how d'ye do? Glad to see you. Have a glass of sherry." "No, thank you. I want a couple of hundred pounds to-morrow." "Certainly, with pleasure. How long do you want it for? Have a glass of sherry?" "Say three months." "What security?" "None." "Very good--I must have a warrant of attorney." "Of course." "All right, Mr. Mathews; look in at twelve o'clock to-morrow, and I'll have it ready. Do have a glass of sherry!" Mathews had no belief that the money would be ready at the time named, though the impecunious actor kept the appointment. He knew that the money-lender was gratified by the frequent appearance of a brougham at the door. "Well, Mr. Mathews, I find I can't manage the £200. I can only let you have £150. I had no idea I was so short at my bankers. Amount actually overdrawn. But I've got a friend to do it for you; it's all the same. He'll be here directly. Bless me, how long he is. Have a glass of sherry? Are you going back to the theatre? I'll bring him with me in half-an-hour." Neither money-lender nor his friend appeared at the theatre. On Friday Mathews again made application for the money. "Didn't come till too late; but all right--you don't want it till to-morrow, you know. What's your treasury hour?" "Two." "Be here at twelve and it shall be ready." The actor was there, punctual to the moment. "All right. Have a glass of sherry? My nephew Dick has gone to the city for the cheque." "But the time is getting on." "Never mind. I'll be with you as the clock strikes two." Four o'clock arrived, and neither usurer nor money was forthcoming, the salaries of the company of course remaining unpaid. A note forwarded announced that the money-lender would be with Mathews at six to the moment. At seven the long-expected gentleman rushed in breathless. "Such a job Dick's had for you, Mr. Matthews! But here I am with the money. My friend disappointed me, but I managed without him. My nephew will read over the warrant of attorney." "But I'm just going on the stage; there's no time now." "Won't take five minutes. Dick, read the warrant. Now, here is the money. Let's see, £15 left off the old account." "Oh, pray don't deduct that now." "Better, Mr. Mathews, keeps all square. That's £15, then the interest three months, £17 10_s._, and £15, £32 10_s._ Warrant of Attorney £7 10_s._, that's £40. Then my nephew's fee, £1 1_s._, and my trouble, say £1, £42 10_s._ Here's 15_s._, that's £42 16_s._ Dick, have you got 4_s._?" "I've got 3_s._ 6_d._" "That will do; I've got 6_d._, that's £43; and £7 cash makes the £50." "Yes; but I only get £7 odd." "Never mind, keeps all square. Now the £100. Here is a cheque of Gribble and Co. on Lloyd's for £25 10_s._" "What's the use of a cheque at this time of night?" "Good as the bank, good as the money; you can pay it as money. Fifty sovereigns makes £75 10_s._, and a ten-pound note makes £85 10_s._--stay, it ought to be £95 10_s._ Here's another ten pound note. I forgot--there you are, £95 10_s._--only wants £4 10_s._ to make up the £100. You haven't got £4 10_s._ about you, have you Mr. Mathews, you could lend me till the morning, just to get it straight, you know." "I believe I have; there are four sovereigns and ten shillings in silver." "That's all right; £4 makes £99 10_s._ and 10_s._--stop, let's count them--count after your own father, as the saying is--four and five's nine, and three fourpenny pieces; all right. Stop--one's a threepenny. Got a penny, or a post-office stamp? Never mind, I won't be hard upon you for the penny. There you are, all comfortable. Good evening." Mathews paid away the cheque "as money." Two days afterwards he got an indignant note, stating that the cheque was dishonoured. Out of temper, Mathews sent for the discounter, and he appeared with alacrity. "Not paid! Gribble's cheque not paid--some mistake--it's as good as the Bank. Here, give it to me, I'll get it for you in five minutes. How long shall you be here?" "An hour." "I'll be back in twenty minutes." Mathews saw no more of the discounter or the cheque, the scoundrel entirely disappearing with the only proof in his pocket. But sometimes biters were bit, for an entry in one of the actor's diaries, dated January 1843, states, "called on Lawrence Levy to pay him £30, but borrowed £20 of him instead." On one occasion a very gentlemanly man waited on Mathews. "I'm sorry to trouble you," he quietly said, "but I've a duty to perform, and I am sure you are too much a man of the world to quarrel with me. I have a writ against you for a hundred pounds, and must request immediate payment, or the pleasure of your company elsewhere." "Quite impossible," said Mathews, "at this moment to meet it; but I will consult with my treasurer, and see what can be done." "Excuse me," said the sheriff's officer, "but I cannot lose sight of you; and whatever is to be done, must be done here. Come, pay the money, and there's an end." "It can't be done," said Mathews. "Why didn't you get him to renew the bill?" replied the other. "He wouldn't renew it; nothing would induce him." "Nonsense," said he, "accept this bill for the same amount, and put your own time for payment, and I undertake to get you his receipt." "Agreed," answered the actor, accepting the bill, which, without another word the sheriff's officer took up, threw down the receipt, and walked towards the door. "Stop," said Mathews, "you said you couldn't leave me without the money. What does all this mean?" "It means that I paid your debt as I knew you couldn't, and now you owe it me instead. Be punctual, and I'll do as much again." The sheriff's officer just described was not the only one who befriended the luckless manager. A kindred functionary of the law, having been struck by the cruel conduct of a vindictive tradesman, actually paying the bill himself, and receiving the money back from Mathews in instalments of ten pounds. Instances grave and gay might be multiplied of the actor's unfortunate position and the financial entanglements that, like heavy fetters, constrained him at every step. He said that the results of the Covent Garden speculation were for the first season _sowing_, for the second _hoeing_, and for the third _owing_. On his debts being called in, to his dismay he found that including rent the responsibilities amounted to the sum of £30,000. Mathews when he learned the fact was aghast, and his only remedy was the Insolvent Debtors' Court. Things were made easy for him, and he passed a week in an elegantly fitted chamber above the Porters' Lodge of the Queen's Bench Prison. He was not unacquainted with that prison, having had residence there soon after his first notorious American trip, and during that imprisonment he took advantage of the old rules pertaining to the liberties of the Bench, and played an engagement at the Surrey Theatre. The theatre being a few yards beyond the boundaries of the Queen's Bench liberties, Davidge, the Surrey lessee, and Cross, lessee of the Surrey Zoological Gardens, gave extra bail to enable Charles Mathews to have the day rule extended through the evening. A tipstaff was stationed at his dressing-room door and at each wing of the stage, to watch the actor, who, though out of the Bench, was in custody. When absolutely free from his Covent Garden liabilities he with a sense of honour that did him credit gave securities for what he considered purely personal debts, making himself still liable to the amount of about £4000, anticipating that the creditors would treat him with consideration and thoughtfulness. He was mistaken, and for years he still had the millstone round his neck. During his lesseeship of the Lyceum he was in the same straits as he was in the Old Covent Garden days. Accumulated interest, law expenses for raising money, grew year after year and Mathews was still in his miserable plight of impecuniosity. At length in July 1856, while about to play at the Preston Theatre, he was arrested and imprisoned in Lancaster Gaol. He chafed under the incarceration, and he has left a touching account of the misery he felt on being separated from his wife, and of the melancholy influences of his prison-house. His imprisonment created much gossip, and ere he left "durance vile" a somewhat singular recognition of his circumstances took place. His fellow-prisoners in Lancaster Gaol communicated with him as follows: Letter addressed to Charles J. Mathews, in Lancaster Castle, July 1856:-- "ILLUSTRIOUS SIR, "Permit us to address you as a brother-debtor surrounded by oppressive circumstances akin to our own, which are rendered the more striking to one who like yourself has acquired a world-wide reputation as an artist and elocutionist; and whose uniform kindness and manly conduct has excited the admiration of those who now respectfully, through this medium, tender you what they consider to be a just meed of approbation. "With the newspaper gossip relative to your alleged state of affairs, which has been extensively circulated we have nothing to do and we know not whether you are fiercely opposed or otherwise; we seek not to elicit any facts connected with your position, but we beg most earnestly and respectfully to compassionate you as one of the most ingenious amongst our common manhood; and having for the most part felt the pangs attendant upon the day and hour of tribulation, allow us to express the strength of our sympathetic feeling by stating that we heartily wish you a signal, complete, and honourable release from that load of embarrassment which so unhappily depresses us all, but which, by reason of your refined sensibility must necessarily press with great force upon your mental organization; and this feeling compels us to say, 'Go on and conquer.' "Signed on behalf of the members of the Long Room, "JOHN HARRIDGE, "_Chairman_." Mathews thought that there was an odd flavour of Mr. Micawber about the foregoing epistle. Subsequently he did what he should have done years before, sought freedom from his liabilities under legal protection. Many droll scenes took place when the comedian was under Bankruptcy examination. On one occasion Mr. Commissioner Law asked him why he had kept a brougham, instead of taking a cab to and fro between his residence and the theatre; and the lawyer was told thereupon by the debtor, that the brougham was hired from the purest motives of economy. "In a word," said Mathews, "I really could not afford the price of cabs." "I should have thought that cabs were more economical than a private carriage," replied Law. "Not at all," said Mathews. "Cabs take ready money, a precious article, to be carefully treasured and only parted with under absolute necessity, but a brougham can always be hired on credit." Mathews, free of his liabilities, became prosperous, and his latter days were marked by success and happiness. Of his attractiveness on the stage it is almost superfluous to speak; it may be said with truth, "We shall not look upon his like again;" for though not a great actor, he was unapproachable in those light comedy parts that require dash and go. I remember seeing him play Dazzle in 'London Assurance,' at Melbourne, exactly thirty years, to the very day, from the date of its first performance; and though he was the oldest member of the company on the stage that night, he was in manner and appearance by far the youngest. CHAPTER VII. IMPECUNIOSITY OF ARTISTS. If there be two things on earth that may be said to have a more direct affinity for each other than aught else, those two things are Painting and Poverty. The artistic records of the past literally teem with sorrowful instances of their close relationship; and unfortunately the alliterative connection is by no means unknown in the present day. Ruskin, who upholds contempt for poverty as a characteristic of our age which is both "just and wholesome," complains that we starve our great men for the first half of their lives by way of revenge, because they quarrel with us, and adds,-- "Precisely in the degree in which any painter possesses original genius, is at present the increase of moral certainty that during his early years he will have a hard battle to fight: and that just at the time when his conceptions ought to be full and happy, his temper gentle, and his hopes enthusiastic--just at that most critical period, his heart is full of anxieties and household cares: he is chilled by disappointments, and vexed by injustice, he becomes obstinate in his errors, no less than in his virtues, and the arrows of his aim are blunted, as the reeds of his trust are broken.... You may be fed with the fruit and fulness of his old age, but you were as the nipping blight in his blossoming, and your praise is only as the warm winds of autumn to the dying branches.... You feed him in his tender youth with ashes and dishonour: and then you come to him, obsequious but too late, with your sharp laurel crown, the dew all dried from off its leaves: and you thrust it into his languid hand, and he looks at you wistfully. What shall he do with it? What can he do, but go and lay it on his mother's grave." In another part of the same work from which I have quoted, he says, with exquisite pathos,-- "You cannot consider, for you cannot conceive, the sickness of heart with which a young painter of deep feeling toils through his first obscurity--his sense of the strong voice within him which you will not hear, his vain, fond, wondering witness to the things you will not see--his far-away perception of things that he could accomplish if he had but peace and time, all unapproachable and vanishing from him, because no one will leave him peace or grant him time: all his friends falling back from him: those whom he would most reverently obey rebuking and paralyzing him: and last and worst of all, those who believe in him most faithfully, suffering by him the most bitterly. The wife's eyes, in their sweet ambition, shining brighter as the cheek wastes away: and the little lips at his side parched and pale, which one day, he knows, although he may never see it, will quiver so proudly when they name his name, calling him 'Our father.'" But if these pictures are now drawn from artist life, what must that life have been fifty or a hundred years ago? Art was always a plant of slow growth in England, and the great masters who were cherished in the Old World trade guilds, and flourished so grandly in Italy, Flanders, and Holland, had not a single native representative in this country. And when at last the land that had so long since produced a Shakespeare, could boast its Hogarth, native artists were still few and far between, and their chief means of living was found in painting signs. Neglected and scornfully humiliated by all classes, isolated from refined society--such as it was--they suffered the extremes of poverty, with cheerful bravery, endured with a light heart, paid back scorn with scorn, and were linked together by sympathy and pity in such a bond of brotherly fellowship as is now utterly unknown. The taverns were their clubs, bread and cheese their fare: and if the rent of their garret homes were not forthcoming, they slept in the streets, and, careless Bohemians that they were, laughed together over the strangeness, or the dangers, of their nocturnal exposures. That their lives often found tragic endings may readily be known. Many a terrible story is extant of their heart-sickness and despair, of last awful struggles silently, heroically continued against overwhelming odds, and of lingering sufferings endured with martyr-like patience. The earliest exhibitions of pictures--they were mainly street signs and portraits--were organized by the artists themselves for charitable purposes, as may be seen by the catalogue of one opened in Spring Gardens, in 1761; which contained a design by Samuel Wale, one of the founders of the Royal Academy, engraved by Charles Grignion, representing "The genius of painting, sculpture, and architecture relieving the distressed;" and these exhibitions were first established in the reign of George II. The Samuel Wale here mentioned, afterwards R.A., was himself a sign-painter; and for many years a whole-length figure of Shakespeare, painted by him in the zenith of his powers, figured as the sign of a public-house at the north-west corner of Little Russell Street, in Drury Lane: while Charles Grignion, when an old man, suffered the then usual fate of artists old and young; and an appeal made for him by his brethren in 1808, now before me, speaks of him in his ninetieth year in the deepest distress, unable to work, with a wife entirely, and a nearly blind daughter partially, dependent upon him for support, saying, "Behold, reader, the united claims of virtue, old age, and professional merit, and filial and parental suffering." It also expressed a not unreasonable hope that "the claims of, a man who had done so much, and done so well, would be speedily attended to." Grignion died four years afterwards, his latest days made smooth by the personal contributions of a few artists and some of their patrons, so that the general appeal quoted from above seems to have fallen flatly; as well it might when the public regarded English artists with contempt, and their brethren were so meanly, miserably poor. The first native artist whose fame extended beyond his birthplace was William Hogarth; but poverty, the bitter badge of all his tribe, he too wore. His father, a north-country schoolmaster, settled in London as an author and press-reader in the Old Bailey, where on the 10th November, 1697, the great painter to be was born. Everybody knows how the child's taste for art found its earliest expression in the eagerness with which he watched some poor artist at his work, and not less well known is the fact that he was the apprentice of a "silver plate engraver," and afterwards devoted himself to engraving on copper coats of arms and ornamental headings for shop bills, creeping upwards from such "small beginnings" to more ambitious efforts, until at last he made a hit by illustrating 'Hudibras,' the commission for which, it is said, he owed to that successful caricature of his landlady to which I have previously referred. There were then in all London but two print-shops, and they dealt principally in foreign productions; so that it can be easily understood how, to eke out the shortcomings of his graver, Hogarth taught himself painting. Speaking long afterwards of this portion of his career, he said, "I could do little more than maintain myself till I was near thirty;" and added, "I remember the time when I have gone moping into the city with scarce a shilling, but as soon as I had obtained ten guineas there for a plate, I have returned home, put on my sword, and sallied forth again, with all the confidence of a man who had thousands in his pocket." At another time he sold to the print-seller, W. Bowles, some plates he had just finished, by weight at half-a-crown a pound avoirdupois; but even when Hogarth was a famous man, and, compared with his former state, a prosperous one, we find such pictures as "The Harlot's Progress" and "The Rake's Progress" selling at from fourteen to twenty-two guineas each picture, and "The Strolling Players" bought by Francis Beckford, Esq., for £27 6_s._: but as he afterwards complained of that price as much too high, Hogarth took it back, and resold it for the same amount. "Marriage à la Mode," after the artist had published engravings from the set of six paintings so called, realised £19 6_s._ In 1797 they were sold for £1381, and now form part of our national collection through the bequest of Mr. Angerstein. Another of his famous works, "March of the Guards to Finchley," was more satisfactorily disposed of by lottery, and it was this fact that Hogarth referred to when he said, "A lottery is the only chance a living painter has of being paid for his time." From that lottery sprang our modern art unions. It was of this picture, in a spirit of bitterness provoked by the poverty of his dear friend, its painter, that David Garrick wrote in a letter to Henry Fielding:-- "Its first and great fault is its being too new, and having too great a resemblance to the objects it represents; if this appears a paradox, you ought to take particular care in confessing it. This picture has too much of the lustre, of that despicable freshness which we discover in nature, and which is never seen in the cabinets of the curious. Time has not obscured it with that venerable smoke, that sacred cloud which will one day conceal it from the profane eye of the vulgar, so that its beauties may only be seen by those who are initiated into the mysteries of art: these are almost its only faults." To the last Hogarth seems to have been a needy, struggling man. That unfrocked clergyman and satirical poet, Churchill, after quarrelling with the painter "over a rubber of shilling whist," at the Bedford Arms, near Covent Garden, attacked him with the bitterest scorn and hatred. Hogarth was then growing old and feeble, his health was bad, and he was melancholy and depressed by the fact that Sir Robert Grosvenor, having commissioned him to paint a picture ("Sigismunda"), had refused to pay for it when finished. At this juncture the mistress of Churchill told the poet that he had given Hogarth his death-blow; whereupon he unfeelingly remarked, "How sweet is flattery from the woman we love," adding, "He has broken into the pale of my private life, and has set the example of illiberality, _which I wanted_, and as he is dying from the effects of my former chastisement I will hasten his death by writing his elegy." The painter's death followed soon after, and all he had to leave his wife were his unsold plates, the copyrights of which were secured to her for twenty years by an Act of Parliament. Amongst Hogarth's foreign predecessors John Mabuse, or Mabegius, an historical and portrait painter, born in 1499, may be mentioned, for the sake of telling a story about an ingenious way in which he contrived to avoid what might have been the very serious consequences of his impecuniosity. While he was in the service of the Emperor Charles V. (many of his finest works were painted in this country, he was employed by Henry VIII. to paint some of the royal children, and he had among his admirers no less a judge of art than Albert Durer), a lord of the court making special preparations to receive the Emperor, commanded the whole of the royal household to be dressed in rich damask brocade. When the painter was measured for his suit he persuaded the tailor to let him have the material, and wanting money for a drinking-bout sold it to a tavern-keeper, having first made a suit of white paper, which he painted in imitation of the damask, and appeared in it before the Emperor, who afterwards said the painter's costume was of all he saw the handsomest and richest. The trick was discovered, but as the Emperor enjoyed the joke and laughed heartily, no ill came of it. Some similar freak, however, soon after threw him into prison, where he continued to paint. The mention of art work done in a prison recalls the name of William Ryland, an English artist, who was born in London in 1732, studied under Francis Boucher in Paris, and soon after his return was appointed engraver to the King. He was the first who engraved in the dotted style, and his works won him more fame than money. Angelo, the fencing-master, who knew Ryland from his boyhood, says he lived in a house in which John Gwynn, the painter, whose 'Essay on Design,' published in 1749, is still known amongst students, also occupied apartments. Ryland had a wife and children to support, and in the year 1783, to relieve the pressure of his creditors (he was then in receipt of a small pension from the King), he forged a bond for three thousand pounds, to escape probably by its aid from his pecuniary difficulties and his country. The document forged was a most extraordinary specimen of imitative art, having thirty or more distinctive signatures in every variety of handwriting; some bold and large, some cramped, some small, written in various kinds of inks. When it was presented for payment at the India House, the cashier after carefully examining it and referring to the ledger said, "Here is a mistake, sir; the bond as entered does not become due until to-morrow." Ryland begged permission to look at the book, and after leisurely and coolly inspecting it, said, "There must be an error in your entry of one day," and quietly offered to leave the bond. The cashier, however, believing the entry to be an erroneous one, paid the money, with which Ryland departed. On the following day the true bond was presented, and the crime detected; large placards were soon posted all over London, offering a reward of £500 for his apprehension. Ryland's first hiding-place was in the Minories, where he remained concealed for some days. One evening after dusk he stole out for a walk, disguised in a seaman's dreadnaught. On Little Tower Hill, one of the officers in search of him eyed him very earnestly, passed, repassed him, and then advancing said abruptly and confidentially, "So you are the very man I am seeking." The artist said so calmly, "I think you are mistaken, I don't remember you," that the "runner" apologised and wished him "good night." He was taken, however, tried and condemned to death, amidst universal expressions of sorrow and regret. Interest was made to obtain mercy on the ground of his previous excellent character, and his extraordinary talent as an artist and engraver. The King's reply was: "No! a man with such talent could not have been unable to provide amply for all his wants." Angelo said, "Had a Shakespeare or a Milton committed a similar act of fraud in those iron days of jurisprudence, their fate had doubtless been the same." Ryland petitioned for a respite, on the ground that he was then engraving the last of a series of plates from the paintings of Signora Angelica Kauffman, and was anxious to complete it to enable his wife after his execution to support herself and his children. His request was granted, and it is stated, "he laboured incessantly at this his last work, and when he received from his printer, Haddril, who was the first in his line, the finished proof impression, he calmly said, 'Mr. Haddril, I thank you; my task is now accomplished.'" Having just mentioned Angelica Kauffman, I may pause to note that the greatest misfortune of her life has been traced to the poverty of her father, Johann Kauffman, for though the story, which is as follows, is discredited by some, it has many believers. She was travelling with him in her early girlhood through Switzerland, and being very poor they went on foot, sleeping at night after each long day's journey in some humble wayside tavern. On one occasion they were refused admission on the ground that two grand English seigneurs had bespoken all the accommodation. The poor artist, anxious not to overtax his young daughter's failing strength, pleaded and protested in vain; and the dispute between him and the landlord waxing loud and warm, the attention of one of the Englishmen was attracted, and coming forward he politely invited them to become the guests of himself and friend. Not quite concealed by the polished courtesy of his manner lurked that which secretly alarmed and offended the pale-faced, weary girl, and while her unsuspecting father was full of grateful thanks, and glad to avail himself of the stranger's apparent kindness, she whisperingly entreated him to come away. Too anxious on her account to risk the chance of a night in the open air, her father accepted the invitation, and at table the nobleman, forgetting the respect due to her innocence and youth, attempted some liberty, which being repeated, caused her to rise suddenly and leave the room. Her father followed, and was induced to go with her out of the house. Some years after, when Angelica Kauffman had become famous, and was living in England, welcomed with pride and enthusiasm in the highest society, and sought after by the noblest and most gifted, she met this peer in one of the most brilliant circles of the fashionable world, who with great amazement recognised in the elegant woman and famous artist the humble pedestrian of the Swiss mountains. Seeking an opportunity he passionately entreated her to forgive him, pleaded that he had never forgotten her, and never could, and begged that she would at least accept his most respectful friendship. She believed him, trusted him, was again insulted, and refused thenceforth to admit him to her society. To induce her to restore him to her favour, he offered her marriage, and was calmly and resolutely refused; and on his rejection forced himself into her presence, and strove even to win by violence that which no other means could give him, but was again baffled. To humble and disgrace her he devised a plan, which most probably suggested to Lord Lytton the story of his play, _The Lady of Lyons_. He secured the aid of a low-born adventurer, who assumed the name of Count Frederic de Horn, introduced him in some way to fashionable society, where, approaching Angelica Kauffman, then twenty-six, and in the full bloom of womanhood, he rendered the most flattering homage to her genius, with an air of the most profound respect and admiration, and gradually became familiar and dear to her; and at last told some strange romantic story of a terrible misfortune from which she could save him by at once, and secretly, becoming his wife. The snare caught her; the marriage was performed by a Catholic priest without writings or witnesses. One day while painting a portrait of the Queen at Buckingham Palace, in the course of conversation the young artist confided to her royal friend the secret of her recent mysterious wedding, which resulted in the Count de Horn being invited to court. This invitation was, however, not accepted, the impostor fearing detection. Her father's suspicions being aroused, and the facts of the marriage explained to him, he made inquiries and induced others to pursue them, which ended in the appearance of the real Count de Horn, and the unmasking of the impostor, who only laughed at his dupe, and commanded her to follow him, claiming that entire control over her person and property to which the poor woman believed he was entitled, until further inquiries brought to light the fact that the man had been previously married, when the false marriage was formally declared null and void. For my next anecdote I turn to Elizabeth le Brun, the favourite court painter of the unfortunate Marie Antoinette, who, when her husband's reckless and heartless extravagance had reduced her to comparative poverty, found herself unable to terminate the once grand receptions at which she had received the _crème de la crème_ of her contemporaries. They crowded her smaller house as they had crowded her larger one, and for lack of chairs seated themselves upon the floor, and she herself tells the embarrassment of the Duc de Noailles, who was so old and so excessively fat, that as he could neither get down so low, nor rise without assistance, was therefore obliged to endure the terrible fatigue of standing. The early years of a more modern, but equally famous, lady-artist, Rosa Bonheur, were embittered by her father's want of money. As a school-girl she felt severely the contrast between the silk dresses, silver mugs, spoons, and forks, with a plentiful supply of pocket-money, which her companions possessed, and her calico frocks, iron spoon, tin mug, coarse shoes, and empty pockets; and her earliest ideas of art, as a means of escaping such humiliating conditions, were thereby developed, strengthened, and intensified into a restless craving and feverish anxiety. Hence she soon began to draw and model in imitation of her father, with a passionate eagerness that kept her constantly at work from early morning until late at night, and at last startling her father (who had long and despairingly considered her too indolent, self-willed, and stupid, ever to be in any way useful) by the progress she made, he took her through a serious course of preparatory study, and so made her an artist. The director of the Louvre, M. Jousselin, declared that while she was there forming her judgment, and training eye and hand, he had never before witnessed such untiring eagerness and ardour. In her case, the impecuniosity which Ruskin regards as so often fatal to the aspirations of young and ambitious artists, appears to have been the strongest incentive. Surrounded and stimulated by the glorious creations of great artists, the first to enter the gallery, and the last to leave it, her strongest desire was to aid her artist father in his weary struggle for the support of his family; to which she soon began to contribute by the sale of her copies, making up for the extreme smallness of the sums they commanded by the rapidity with which she produced them. In her seventeenth year she achieved such success in making a study from a goat, that she determined to turn her attention to the painting of animals from life. Too poor to pay for models, she went out daily into the country to study them in the fields and lanes. Laden with clay, or canvas, brushes, and colours, she would set out in the grey dawn, with nothing but a piece of bread in her pocket for the day's food, and finding a subject, work on it until the light had faded, and then, soaked by rain, or struggling in the rude wind, she would make her way, sometimes ten or a dozen miles, through the darkness, a sun-browned, hardy, peasant-looking girl, to reach home cheerful, and contented with the day's work, although hungry and exhausted by fatigue. Another way in which she contrived to get models cheaply was by passing days amongst the lowing and bleating victims of one of the great Parisian slaughter-houses, the _Abattoir du Roule_, where, seated on a bundle of hay, with her colour-box beside her, she painted on from morning until dusk, frequently so absorbed that she forgot to eat the piece of bread in her pocket. She also studied from the animals when they were under the influence of terror and agony, just before they received the death-stroke; forcing herself to endure a woman's natural repugnance to such scenes of blood and torture, rendered doubly painful to her by the loving sympathy with which she regarded all the brute creation. In the evening she would return home from such studies with her face and clothes thickly marked by the flies which in such places congregate so thickly. With equal perseverance she also studied in the stables of the Veterinary School of Alfort, in the _Jardin des Plantes_, and in all the horse and cattle fairs held in the neighbourhood of Paris; always in the latter case wearing male attire, to avoid certain dangers and annoyances to which a woman would be subjected if dressed in the clothing of her sex. She was regarded as a good-natured, merry boy, and a clever little fellow, by the rough characters who visited the fairs, and sympathising with her apparent poverty, the graziers and horse-dealers whose animals she drew constantly insisted upon standing treat. Occasionally, too, a village dairy-maid would make amorous overtures to the handsome "lad." So she gallantly wrought, and fought, and paved her upward way to fame and prosperity, her father and nature her only teachers, the former's impecuniosity her constant incentive. I am reminded here of Sir Thomas Lawrence, P.R.A., for whom also the first stimulants to activity in the pursuit of art were the poverty and necessities of his father, an exciseman, actor, and innkeeper, who had achieved no lasting success in either calling. At one time despairing of pecuniary success in the profession he began to excel in when but five years old, he resolved to take to the stage, despite the anxious opposition of his father, who was then looking forward to his son's artistic efforts for support, having failed as an actor, failed in business at Devizes, where he kept "The Black Bear," and having previously failed as landlord of "The White Lion," at Bath. Bernard in his 'Retrospections,' speaks of "Young Lawrence the painter," then about seventeen, as "receiving professional instructions from Mr. Hoare of Bath," and some little time after, with a view to his adopting the stage as a profession, Tom Lawrence recited before Bernard and John Palmer the actor, when the latter strove to enforce his father's opinion, and convince him that his prospects as a painter were superior to those he would have as an actor. It was some time before he could realize this, and when he did he said with a sigh, "If I could go upon the stage, I thought I might be able to help my family much sooner than I can in my present employment." The earnestness and the regret he expressed in the tone of these words deeply affected all who were present. It was many years before Thomas Lawrence escaped from the fangs of impecuniosity, so absorbing were the drafts made upon his purse by the wants of his parents. His father used to hawk his son's crayon drawings about London at half a guinea each. One of his contemporary biographers, says, "Sir Thomas, though he sometimes confidentially accounted for his straitened circumstances through life by referring to his early burdens, never regretted them, nor murmured at their reminiscence." But the early practice of a painter is seldom profitable, and Nicholas Poussin asserts that at the commencement of _his_ career his landscapes sold for less than the cost of canvas, oil, and pigments. Still more remarkable as an instance of artistic success snatched from the depths of impecuniosity, is that furnished by the early history of Isaac Ware, the famous architect. One day while sitting to Roubillac for his bust, he told him the story of himself as a thin, sickly child, who had been apprenticed to a chimney-sweep, enduring a life of pain and hardship at an age when happier children were in the nursery, and winter or summer, in storm or darkness, out in the streets, wailing forth his pitiful "s-w-eee-p," before the day broke; chalking on the walls wherever he went drawings of the buildings he met with in his travels through the streets. One day a gentleman passing Whitehall on horseback saw the feeble-looking, sooty child tip-toeing to draw the outlines of the street front of that building upon its own basement wall; now running into the middle of the street to look up at the building, now back to continue his drawing. After watching him some little time the gentleman rode up and called to him, when the startled boy dropped his chalk in terror, and came forward with downcast eyes full of fear. To restore confidence the equestrian threw him a shilling, and after inquiring his name, and that of his master, &c., he went instantly to the latter, who said the little fellow was of very little use to him, being so weak, and, complaining of his chalking propensity, showed his visitor what a state his walls were in through the young sweep's having drawn upon them various views of St. Martin's Church. The gentleman concluded his visit by purchasing the remainder of the boy's time, and taking him away. It was to this noble benefactor that Ware owed not only his education, which was an excellent one, but the means which enabled him afterwards to pursue his art studies in Italy, and upon his return his introduction to commissions as an architect. It is said that Ware retained the stain of soot in his skin to the day of his death. This story of Ware's boyhood we owe to Nathaniel Smith, the engraver, who heard the architect tell it; and speaking of Smith reminds me of a story told by his son, who was called in his time "Rainy-day Smith." It is a tale of Alderman Boydell, who at twenty-one years of age walked to London, because he had no money to come by the waggon, and apprenticed himself to Mr. Thorns, an engraver and artist, attending whenever possible, an academy opened in St. Martin's Lane for poor art students by a group of well-known artists, whose subscriptions paid for its support, and to which Hogarth contributed his father-in-law's casts and models, learning perspective at the same time in his own humble lodging after his return at night. Boydell being out of his time, and unable to obtain regular employment, used to engrave small plates--views of London and landscapes--print them himself, make them up into little books, and sell them to keepers of toyshops to re-sell at sixpence a set of six, or a penny each. These shops he visited regularly every Saturday to see if any had been sold, and leave others to replace those that had happily been disposed of. His best customer was found at the sign of "The Cricket Bat" (all shops then had signs) in Duke's Court, St. Martin's Lane. On one occasion his delight was so excessive on finding so many had been sold there as realized five-and-sixpence, that in an outburst of gratitude to the shopkeeper he laid out the entire amount with him in the purchase of a silver pencil case, which he preserved as a memento of the great event all through the rest of his life. Of a kindred nature to Boydell's vicissitudes were the earliest experiences of John Opie. As a lad in Cornwall he was so wretchedly poor that Dr. Walcot, then practising as a physician at Foy, out of compassion employed him to clean knives and forks, and to save him from the ill-usage of his father took him into his own house. John going to the slaughter-house for paunches to feed the doctor's dog with, made a portrait of the butcher, which so delighted his employer that he also sat for a portrait to the errand boy, which production was equally astonishing. The portraits being shown amongst the doctor's friends and neighbours, one named Phillips sent to London for a complete set of artist's materials, which he presented to Opie, who painted with them the portrait of a parrot so naturally that it spread his fame far and near, and started him fairly in art as a portrait painter, his fee for a likeness being seven-and-sixpence. The doctor once asked the lad how he liked painting, to which question Opie replied enthusiastically, "Better than my bread and meat." He was soon afterwards in London, where Sir Joshua Reynolds befriended him, and he became known and popular as "the wonderful Cornish genius." George Morland must have found impecuniosity a sharp spur, when his father, hopelessly weary of his indolence and bad conduct, turned him from home, saying, "I am determined to no longer encourage your idleness; there is a guinea, take it and go about your business." George succeeded in supporting himself, and lived a life of the most degrading dissipation, his favourite companions being jockeys, ostlers, carters, money-lenders, gipsies, and women of abandoned character. He so cruelly ill-used his wife--a sister of James Ward, R.A.--that although strongly attached to him, she dared not live with him. "He died," as Smith says, "drunk, in a sponging-house in Eyre Street Hill, near Hatton Garden." Such a career could not but be fruitful of the troubles, cares, dangers, and difficulties arising from impecuniosity. At one time, when on an excursion to the coast of Kent with one of his favourite companions, a brother artist, probably to escape duns, they spent their money so freely on the road, that long before they reached their destination they were penniless and hungry. When nearing Canterbury they espied a homely roadside alehouse called "The Black Bull," and hailing it with delight they entered, and soon made alarming havoc amongst the lowly edibles and potables set before them; smuggled full-proof spirits being ordered and disposed of in the most astonishing manner. When the bill was produced Morland frankly confessed they were a couple of poor itinerant artists in search of employment, and without a penny in the world. "But," said he, "your sign is in a most shameful condition for so respectable a house; let me repaint it in settlement of the bill"--which amounted to twelve shillings and sixpence. The landlord had long wanted a new sign; he agreed to the proposition. Morland began the work, and as it could not be finished on that day, the host supplied him and his friend with lodging for the night. On the following day the new sign was so much to the satisfaction of the innkeeper that he furnished the friends with gin to the amount of two guineas, together with some food, and when it was finished added a few shillings to help them on their way. Many similar stories are extant of this celebrated painter. "The Goat and Boots" in the Fulham Road received a new sign from him in the same way; and to pay another tavern score he did a like service for "The Cricketers" near Chelsea. Mr. E. V. Rippingale, the painter, used to tell with what despondency, when he was a tall, thin, pale, self-taught youth eagerly studying art, he was taken one bright morning to see Sir David Wilkie, then residing in Kensington. He had just previously been introduced to a Scotch landscape painter of some eminence, who, when he asked him what materials were used in landscape painting, had eyed him with grim suspicion, and grunted-- "Sur, there are sacreets in the art, whuch whun a mon hae foound oot, he mun keep to himsel." Consequently Sir David's kindly reception made a deep impression upon him. After inquiring what subject the youth was painting, and what branch of art his inclinations led him to adopt? if he had studied from the antique and from life? whether he was instructed or self-taught? &c., the talented Scotchman, then a tall, bony young man, with reddish hair, grey eyes, high cheek bones, and a broad Scotch accent, said,-- "I shall be very happy to tell you anything I know. You need not fear to ask me; the art of a painter is unlike that of a juggler, it does not depend upon a trick. In art we have no secrets, and all painters are always glad to tell what they know to young fellow-students." The rest of the interview was devoted to the giving of sound practical advice, the inspection of Wilkie's paintings and studies, and in the end the lanky lad from the country was pressed to come again and bring his drawings with him. Rippingale's first visit to Wilkie was paid in 1815, and Haydon has told how, after the closing of the Royal Academy Exhibition in 1805, he went to breakfast with Wilkie, and reaching his apartment--he then had but one--a little before the appointed time, found him stark naked on that chilly autumnal morning, making a study from himself by the aid of a looking-glass. On another occasion the enthusiastic young Scotchman was found in a fireless room, shivering with cold, drawing from his own naked leg. Wilkie's employment was of a very humble and precarious kind at that time, and he was then copying the pictures of Barry, in the great room of the Society of Arts, for an engraver. When the painter of those world-famous productions was no more, and his body lay in state in the very room which contained them, Wilkie was anxious to be present at the funeral, but alas! he had not a black coat, and could not afford to buy one. However Haydon had two, and was quite willing to lend one, and did so; but unfortunately he was short and slight, and Wilkie was tall and big-boned. The effect of the former's coat upon the latter's figure was consequently intensely ludicrous; the sleeves terminated far above his wrists, his broad shoulders stretched the seams to the very verge of cracking, and the waist buttons had "gone aloft" half-way up his back. When Haydon met him thus oddly attired, not even the solemnity of the occasion could quite suppress his merriment, and the piteous entreaty of the young Scotchman's looks, and significantly upheld finger, increased rather than decreased the tendency, so that the English painter afterwards said he once thought the desperate effort he made to suppress his laughter would have killed him. When Wilkie was hawking his pictures from one shop to another, and returning home heart-sick, weary, and hungry, evening after evening, he received in nearly every case but one reply, "We don't purchase modern pictures." Happily this is altered now to some extent, though the reception awarded a novice in the present day is not very encouraging if all aspirants are treated in a like manner to an extremely clever young friend of mine, who, I doubt not, will be heard of some day. When he presented his canvas, or sketch, he was told, "We don't buy the paintings of unknown men." One of Wilkie's pictures thus rejected was a little one of a subject afterwards re-painted on a larger scale, "The Blind Fiddler." Haydon tells how he first saw a notice of Wilkie in a newspaper, and hurried to him with huge delight. "Wilkie," he says, "was breakfasting. 'Wilkie,' said I, 'here's your name in the paper.' 'Where, where?' said Wilkie, ceasing to drink his tea. I then read it aloud to him. Wilkie stood up and huzzaed, in which we joined. We then took hands, and danced round the table, and sallying forth, spent the day in wandering about in a sort of ecstasy in the fields. We supped with Wilkie on red herrings, and he took down his little kit, and played us Scotch airs till the dreary hour of separation--these were delightful feelings! The novelty of a thing first felt, the freshness of youth, all contributed to render them intense and exciting." It was said by some one that Wilkie never painted better than when he used to take his penny roll and moisten it at the pump. But this statement was indignantly contradicted by his friend Haydon in his lectures, and he certainly was an authority on the difficulty of painting under difficulties. Another illustration of success preceded by disappointment is to be found in the case of Sontagg, who, according to Mr. Robert Kemp, before he found his true vocation in landscape painting, aspired to the glory of historical and high art. Environed by the bitter poverty of an art student, he painted his ideal. It was a Madonna, and as he afterwards said, "one of the worst ever painted." When it was finished, he pawned his only decent coat to raise $7.50 for a frame in which it was sent to an art mart. "Then he spent the day walking around, and calculating what he would do with the thousand the great work would bring him in. Then he called at the auction room to collect. 'Had the picture been sold?' 'It had,' said the clerk. 'How much?' 'Five dollars and a half.'" Sontagg dined on a "free lunch," and went to bed in the dark. I may remark for the benefit of those uninitiated in Colonial and American drinking customs, the "free lunch" here spoken of means a meal which is provided gratis by many tavern-keepers in America, Australia, and elsewhere. It consists of bread and meat, or bread and cheese, placed on the counter, and to which all patronising the establishment are welcome. It is said that years after this occurrence, when Sontagg became famous, he found this painting over the chimney-piece of a little wayside inn in the Wabash County where it was a standing jest, and valued as a source of the laughter which kept a quarrelsome man and wife from desperate extremes. When their violence was at its worst a glance at Sontagg's Madonna was sure to provoke such merriment that after it they invariably became friendly. The early life of John Philip, whose glorious pictures of Spanish life won him such wide-spread fame, presents an instance of greatness won despite extreme poverty, with its attendant drawbacks, and the friendlessness of utter obscurity. He began his career as a painter when a mere boy; though not upon canvas, millboard nor panel, but upon watering-cans. When seventeen years of age he worked his passage from Scotland to London on board a coasting-vessel, for the purpose of seeing the exhibition of the Royal Academy, and on his return, with a mind richly stored by close investigation of the pictures he saw there and in the National Galleries--of which those by Wilkie were the most fascinating and instructive--he painted a picture which attracted the attention of Lord Panmure, who generously sent him to study in London, and supplied him with the means of support while so engaged. Philip died, as so many sadly remember, on Feb. 27th, 1867. One of his earliest attempts was long visible outside an old tavern, in the village of Dyce, near his native town Aberdeen, where he was born in 1817. At Dyce he was employed as herd-boy, and a story is told of his having at that time but two shirts, and when one of these was stolen, Johnny said cheerfully to his relative, Mrs. Allardyce, "Never min, ye can mak a shift, wash the ane I hae on, and I'll gang to my bed till it's dry. My puir mither hae often to do that." Inconvenient as such circumstances must have been, John Philip in the days of his prosperity often spoke of the happy days he knew when he was a poor little herd-laddie in the pretty little village of Dyce. Somewhat similar in its start was the life of Henry Dawson, who died in 1878. Born at Hull in 1811, he commenced the world as a factory-lad at Nottingham, in which position he began to paint pictures, which he sold at prices ranging from two to twenty shillings; but it was long before he achieved the grand success the latter price implied, not indeed before 1835, and the munificent patron to whose liberality he owed the advance was a hairdresser, who for many years remained his best customer. So slowly came the fame and prosperity he sought so laboriously and patiently, and at last so honourably won, that when he was in his fortieth year he actually contemplated opening a small-ware shop to aid him in bringing up and educating his family. Indeed had it not been for John Ruskin, to whom he applied for advice as to whether he should reluctantly abandon his beloved art or persevere in its practice, the profession would have lost one of the most powerful of our modern masters in landscape. He was for many years known only to dealers, who made a glorious harvest by reaping where he sowed amidst the cares, anxieties, and inconveniences of impecuniosity. A further proof of what genius and industry can accomplish, be the difficulties never so great, is shown by the ultimate success of G. M. Kemp, the architect who designed the Scott monument at Edinburgh. He was originally a journeyman millwright, and while working at his trade contrived, not only to teach himself to draw, but to visit and make studies from all the principal ecclesiastical edifices in Scotland, and afterwards in England. His plan was to find work in the different places he desired to visit; and by this means he acquired such a knowledge of architecture that when a prize was offered in open competition for the Scott monument, his design was the one unanimously selected, notwithstanding the fact that amongst his rivals were many of the leading professional architects. Success unfortunately does not always attend those who work hard and deserve substantial recognition; for when some one congratulated William Behnes, the sculptor, on his triumphs, and the prosperity that was presumed to have followed in their wake, he replied, "When I die, be that event when it may, there will not be two penny pieces left to close my eyes." He died in the Middlesex Hospital, in January, 1864, realising his prediction to the very letter, so few were his sitters, so small the sums they paid. While Behnes began life as a pianoforte-maker, the great sculptor Chantrey commenced his career as a journeyman carpenter, in connection with which fact there is an odd story told. One day while inspecting a costly vase in the house of the wealthy poet Rogers, he asked with a smile who made the table on which the curio stood. "Curiously enough," said Rogers, "it was not made by a cabinet-maker, but by a common carpenter." Chantrey asked, "Did you see it made?" and Rogers, supposing the query to be one of incredulity, replied positively, "Certainly! I was in the room while the man finished it with the chisel, and I gave him instructions in placing it." Chantrey laughed, and said, "You did. I remember that, and all the circumstances perfectly well." "You!" exclaimed the poet. "Yes," said Chantrey quietly. "I was the carpenter." When speaking of signs I omitted to mention George Henry Harlow, an artist of considerable eminence, who, like Morland and others, was glad on occasions to paint signs to liquidate liquor scores. Harlow, who was born in 1787, and died in 1819, quarrelled in the plenitude of his conceit with his master, Sir Thomas Lawrence, left his house, and went to live at "The Queen's Head," in Epsom, where, living extravagantly, his expenses outran his means, and he was glad to escape the penalty of his folly by repainting the landlord's sign. In doing so, with a view to the annoyance of Sir Thomas, who had found in Queen Caroline a kind friend and patron, he very cleverly caricatured at once Her Majesty, and his late master's style of portraiture, even putting underneath it his initials and address--T. L., Greek St., Soho. One of the funny ideas of this sign was that of painting on one side the face of the Queen, and on the other Her Majesty's royal back. There was a sign long displayed at Mole, in North Wales, which was painted in the same way by Richard Wilson, "The English Claude." It belonged to a tavern called "The Three Loggerheads;" only two appeared on the sign, the third was to be he who read the sign, as many did, aloud. This same Richard Wilson, R.A., was a Welshman, the son of the Rector of Pineges, where he was born in 1714; and after unsuccessfully working for a long time as a painter of portraits, landscapes, and historical subjects, he at last achieved eminence, and forthwith enjoyed, with so many of his talented _confrères_, glory and--poverty. The incident of his first commission from the King will illustrate the kind of remuneration even royalty gave for the works of men who had attained the highest rank in their arduous profession. Dalton, the artist, having been appointed keeper of the King's pictures, suggested that a landscape by Richard Wilson should be included in His Majesty's collection; and the monarch reposing great faith in his judgment, sent poor Dick a commission for a landscape of a given size to fit a vacant space in the gallery. In due time the work was finished and placed before the King, who exclaimed indignantly,-- "Hey! what! Do _you_ call this painting, Dalton? Take it away! I call it daubing, hey! What! It's a mere daub." Poor Dalton, who was one of Wilson's friends and admirers, bowed, looked sheepish, and was silent. Presently his, on this occasion, not over gracious Majesty peevishly inquired, "What does he ask for this daub?" And when Dalton replied "One hundred guineas," the King's astonishment was immense. "One hundred guineas! Hey! What, Dalton! Then you may tell Mr. Wilson it's the dearest picture I ever saw. Too much--too much--tell him I say so." A few days after, the artist, being as usual in need of cash, called upon Dalton, and in his bluff manner said,-- "Well, Dicky Dalton, what says his Majesty?" Dalton replied hesitatingly, and with confusion, "Why--a--with--a--regard to the picture--a--As for my--a--own opinion--why--a--you know, Mr. Wilson, that--a--indeed----" Wilson interrupted him with an oath. He saw his friend's perplexity, and said at once, "His Majesty don't approve--but I know your friendly zeal--go on." "Why in truth, my dear friend, I venture to think the a--the finishing is--not altogether answerable to His Majesty's anticipations." "Humph! Not every leaf made out, hey?--not every blade of grass? What else? Out with it, man." "Why then--a--His--His Majesty thinks--a--that the price is--is--is a great deal of money." Wilson took him by the button-hole, looked cautiously round, and in a comical whisper said,-- "Tell His Majesty I do not wish to distress him, I will take it by instalments--say a guinea a week." Neglect and disappointment soured Wilson's temper, and made him a very surly, irritable man, sometimes quite misanthropical; as well they might, considering his great talents and his extreme poverty. It is said that one of his most famous historical paintings, on which he had expended many months of thought and labour, was sold under the influence of absolute necessity for a pot of beer, and the remains of a Stilton cheese! Mortimer, an artist who used to sometimes occupy an armchair by Wilson's fireside, and there hear him in splenetic humour moralise like another melancholy Jaques, making cynical strictures upon that scoundrel man, would say, "Come, come, my old Trojan--come, old boy--I wish I could set you purring like old puss there." Angelo tells how a friend of Dr. Johnson's, hearing of Wilson's distress, said to Mr. Taylor, the artist, "I wish I knew how to send him ten pounds in some delicate way which could not give him offence. Do you think he has some very trifling sketch I could buy for that sum? I have no taste for pictures, but I would give him a commission if my income were not too slender. I am so distressed that so great a genius should be entirely without means." Taylor told this story delicately to Wilson, who was much touched by it, and said, "I have no scrap such as your friend desires to have, but if the thing were not bruited about I would be happy to send him one of my easel pictures, which you know I never sell for less than sixteen guineas." The result was that Wilson received the ten pounds, Dr. Johnson's friend the sixteen-guinea picture, which it is said he gave away the same evening to one of the waiters at Vauxhall. At the close of his life, when worn out by indifference and neglect, he was reduced to solicit the office of librarian to the Royal Academy, of which he was acknowledged to be one of the brightest ornaments. He died in May 1782, his death accelerated, if not produced, by want; and, sad to state, just previous to his decease, help came to him, when it was, alas, too late! As is well known, William Hazlitt, the critic, began life as an artist, and was indeed an artist in taste, judgment, and knowledge, all his life. He speaks of his painter's experience with enthusiasm in one of his papers, saying, "One of the most delightful parts of my life was one fine summer, when I used to walk out of an evening to catch the last light of the sun, gemming the green slopes of the russet lawns, and gilding tower or tree, while the blue sky, gradually turning to purple and gold, or skirted with dusky grey, flung its broad mantle over all, as we see it in the great master of Italian landscape." Hazlitt abandoned the brush for the pen when he found that he could not realize his own conceptions, nor satisfy his own critical judgment; but it is evident from the following extract that his early art-life was not free from the imputation of being impecunious. He says, after receiving the money for a portrait he had finished in great haste for the sake of getting the cash, "I went to market myself and dined on sausages and mashed potatoes; and, while they were getting ready, and I could hear them frying in the pan, read a volume of 'Gil Blas' containing the account of the fair Aurora. This was in the days of my youth. Do not smile, gentle reader. Neither M. de Verry nor Louis XVIII. over an oyster _pâte_, nor Apicius himself, ever understood the meaning of the word luxury better than I did at that moment." Daniel Maclise--the son of a Scotch cobbler, who had been a soldier and had settled in Ireland--was sent adrift in the world at a very early age, and became a bank clerk. In 1828 he came to London, where he succeeded in getting a studentship in the Royal Academy. The money which enabled him to do this was earned by a portrait-sketch he made stealthily from Sir Walter Scott, while the great Wizard of the North was in the shop of a bookseller, named Bolster. Bolster afterwards saw the sketch, and showed it to Sir Walter, who, pleased with the lad's talent, attached his autograph to it. The drawing was lithographed, sold in Bolster's shop, and with his share of the profit Maclise started himself in his art career. Poor Benjamin Haydon--odd compound of greatness and littleness, bravery and cowardice, genius and folly, now patient, now despairing, now bitterly envious and jealous, and anon sympathetically gleeful over a brother's triumph--sipped many a cup of bitterness through his constant state of impecuniosity; which chronic condition, he sorrowfully admits in his diary, was the result of borrowing, as shown by this extract. "Here began debt and obligation, out of which I have never been, and never shall be, extricated as long as I live." Haydon, as I said, was a strange mixture, and though possessed of a nature truly poetical, he was in some things wondrously practical; for the bailiffs put into his house he utilized as models. One sat, he tells us in his diary, "for Cassandra's head, and put on a Persian bracelet. When the broker came for his money, he burst out laughing. There was the fellow, an old soldier, pointing in the attitude of Cassandra, upright, and steady as if on guard. Lazarus's head was painted just after an arrest: Eucles finished from a man in possession: the beautiful face in Xenophon in the afternoon after a morning spent in begging mercy of lawyers: and Cassandra's head was finished in agony not to be described, and her hand completed from a broker's man." Sculptors, like artists, have frequently found art a very hard school; and amongst others of whom this is true may be mentioned Peter Scheemakers, the master Nollekens studied under. When a youth, so fervent was his desire to study in Rome, that he actually endured the fatigue of travelling from Antwerp into Italy on foot. Unfortunately in Denmark he fell sick, and when again fit for the road, he was compelled to sell his shirts from his knapsack to procure food; but he was none the less joyous when, footsore, haggard, and hungry, he at last entered the Eternal City. This was in 1700. The fine figure of King Edward VI., which used to stand in the courtyard of St. Thomas's Hospital, was the production of Scheemakers. Another sculptor whose history furnishes something curious in connection with impecuniosity is John Bacon, who, born in 1740, commenced life as an ordinary workman in a Lambeth pottery, where he taught himself to paint on china. Afterwards he went as modeller to Mrs. Coade's artificial stone manufactory, and when he began to display remarkable talent as a sculptor, Johnson, who built Berners Street, was very kind to him. He took premises for him in Newman Street, and told him to start at once in business for himself. Young Bacon was astonished, and frightened. "How could you do so?" he exclaimed. "I am not fit for anything of the kind. How can I ever hope to pay you the money back?" Johnson, however, insisted upon the trial being made, and said he was quite willing to lose the money if Bacon were never able to repay him. The result was that Bacon flourished so well that when his first great benefactor had become a banker in Bond Street, and feared a serious run upon his house, the sculptor came forward eagerly to his aid with a loan of forty thousand pounds! This was truly a freak of fortune, and as a companion picture may be mentioned a freak of misfortune, which is attributed to Capitsoldi, a talented sculptor, who came from Italy to this country in the last century. It is asserted that when he was living in a garret in Warwick Street, Golden Square, he had no furniture beyond a table and two chairs; but he painted on the walls a suite of furniture with window curtains, pictures, and statuary in such excellent perspective, and with such an aspect of relief and solidity, that the mean apartment actually appeared to be most handsomely and completely furnished. To return to our subject--the impecuniosity of artists. The experience of John Zoffany, R.A., may be cited. He came to England from Frankfort in 1735, and about that time there was a celebrated maker of musical clocks, named Rimbault, living in Great St. Andrew's Street, who was asked one day by some one he employed if he could find work for a poor starving artist who occupied a garret in the same house. Rimbault desired the man to send him, and Zoffany was ultimately engaged to paint clock faces. A portrait he painted of Rimbault won him a better engagement of £40 a year as assistant to a portrait painter named Benjamin Wilson, who was employed by Garrick, the actor. Garrick, being struck by the sudden and remarkable improvement which immediately ensued, suspected the truth, and, causing enquiries to be made, discovered Zoffany, employed him direct, introduced him to his wealthy friends, and gave him that new start in life which brought him fame and honour, and made Sir Joshua Reynolds his friend. Zoffany is now chiefly known in connection with his excellent character-portraits of famous old actors and actresses. The last, but by no means the least celebrated of the artists I shall mention, whose fortunes, or the reverse, have been curiously associated with lack of means, is James Barry--at whose state funeral in St. Paul's Churchyard poor Wilkie cut such a queer figure in Haydon's coat. Barry was as eccentric as he was poor. Unlike Richard Wilson, to display his poverty was a matter of pride rather than pain; open reproach to those who neglected his talent, and embittered his life, rather than shame to him. His house at 36, Castle Street, Oxford Market, was a standing disgrace to the thoroughfare, every window in it was either cracked or broken, and part of the roof had fallen in. The iron railing before it was rusty for want of paint, broken, and sloping partly inward and partly outward; the doorsteps were cracked and broken, the door thickly coated with mud and dirt. The room in which he painted had been a carpenter's shop, and the dust-covered shavings were still in it, while cobwebs hung like thick dust-coloured drapery from beams and rafter, and were suspended in festoons from every corner, while here and there the daylight shot long rays into its dingy, dust-laden atmosphere, through holes where the tiles had been broken, or had slipped aside. It had a small fireplace just large enough for the glue-pot it was constructed for, and boasted one three-legged old deal table, hardly large enough to eat a meal from. Here he painted, and etched, and printed his own proofs from a little old printing press; and here he received the Right Honourable Edmund Burke on that memorable occasion when he was, at his own particular request, invited to dine with the painter, and take "pot luck." Barry owed much to the generosity of Burke, who had been one of his earliest friends and patrons. It is said that he once quarrelled with the great statesman for attacking the then anonymous work 'An Essay on the Sublime and Beautiful,' every line of which the young Irish painter, being unable to buy the book, had copied, and he would entirely have lost control of his temper if Burke had not with a laugh transformed his rage into a whirlwind of delight and passionate admiration, by confessing himself its author. When Burke arrived, on the evening appointed, at the ruinous, dirty, shabby house in Castle Street, Barry had altogether forgotten the appointment. However he ushered him into his studio-wilderness of dust and cobwebs, gave him a seat, made up the fire, which was smoking, and while it burnt up, went out to purchase some steak, and brought it in wrapped in a cabbage leaf. Placing the meat on a gridiron, he spread a towel over the little round table, and on it placed a couple of plates, a salt-cellar, a little roll of bread, and a dish, which nearly filled it; then, putting the tongs into his visitor's hands, bade him turn the steak while he went out to fetch the beer. He came back quickly, swearing and grumbling at the wind because it had blown off the frothy head of the stout as he was crossing Titchfield Street, and produced from his pocket a couple of bottles of port. The meal was enjoyed, the evening passed merrily; and Burke afterwards confessed that he had never enjoyed himself more, nor eaten more heartily, even at the most sumptuous feast. Owing to his impecunious circumstances, Barry had been accustomed to take his meals in cookshops and coffee-houses of the cheaper kind; and Angelo notes as one of his eccentricities his always insisting upon paying for his meal at coffee or cookshop rate wherever he might chance to feed. On one occasion he was invited to dine with Sir William Beechy and some noble guests, and rose at nine o'clock to depart, having as usual placed two shillings upon the table where he had been sitting. The lively knight, who knew "his customer," followed him from the dining-room into the hall, leaving the door of the former open that his friends might hear. "What are these for?" asked Sir William, presenting the coins. "How can you put so preposterous a question? For my dinner to be sure, man." "But two shillings is not fair compensation, Barry. Surely it was worth a crown." "Baw-baw, man! You know I never pay more." "But you have not paid for your wine." "Shu-shu! If you can't afford it, why do you give it? Painters have no business with wine." "Barry," says Angelo, "who boasted of making his dinner on a biscuit and an apple, had no mercy for those who lessened their means by self-indulgence. He was once highly indignant with a lord, who when dining at 'Old Slaughter's' in St. Martin's Lane--a famous resort of artists and their patrons--had straw laid down before the house to deaden the noise of passing vehicles." He used to say, as he may have said on the memorable evening with Burke, "Half the common dishes would supersede turtle and venison, if your old, pampered peers and mighty patricians were to peep and peer into their own cook's pot." CHAPTER VIII. IMPECUNIOSITY OF AUTHORS. That memory of William Makepeace Thackeray upon which I care least to dwell is the low estimate he had of men of genius in his own profession. It may be that this was with him, as it was with Doctor Johnson, a species of mock modesty; but it is none the less unpleasant for one to remember who so enthusiastically admires his great works. Men of letters have never lacked more than enough to slander them and magnify their peccadilloes, to sneer at their pride, and lower their social status, without finding such enemies in their own camp. You may remember how, in his lectures on the English humourists of the last century, Thackeray denied that there was any lack of goodwill and kindness towards men of genius in this country, or that they often failed to meet with generous and helping hands in the time of their necessity. Ignoring all but men of one class (whose follies and vices were after all those of their age), and painting these in his darkest colours and most repulsive forms, he asked,-- "What claim had one of these of whom I have been speaking but genius? What return of gratitude, fame, affection, did it not bring to all? What punishment befell those who were unfortunate among them but that which follows reckless habits and careless lives? For these faults a wit must suffer like the dullest prodigal that ever ran in debt. He must pay the tailor if he wears the coat; his children must go in rags if he spends his money at the tavern; he can't come to London and be made Lord Chancellor if he stops on the road and gambles away his last shilling at Dublin, and he must pay the social penalty of these follies, too, and expect that the world will shun the man of bad habits; that women will avoid the man of loose life; that prudent folks will close their doors as a precaution, and before a demand should be made on their pockets by the needy prodigal." There is no gainsaying all this, it is so highly respectable, and I would endorse its application as heartily as those did who once so loudly applauded it, if (and there is, you know, _much_ virtue in an "if") the discouragement spoken of had really been awarded to the vices and follies and not to the genius; whereas it must be patent to all who have studied the social life of the last century, as Thackeray did, that the direct reverse of this was the case--that such bad habits and such loose lives were absolutely the chief conditions upon which the wits of society were patronised and encouraged. Therefore a degree of hardness and cruelty in the rigid and virtuous superiority of this great writer, who, happily, born in a more refined and purer time, so magnifies the vices of the unfortunate dead, in order to lessen the pity and respect which their greatness won for them. It is this which I do not like to associate with the memory of our great novelist. Poor, half-starved Robert Burns, chained to the oar of impecuniosity, toiling like a galley-slave, as he said, for the means of supporting his parents and seizing every spare moment for such intellectual improvement as was within his reach, had written most of his finest works before the patronage of the great introduced him to their bacchanalian revels, and carried him as a wonder, and an extraordinary novelty (a peasant poet), into the very best Edinburgh society for a season; during which, by dining out with the noble and great, he ran a serious risk of dying at home through starvation. It can hardly be said that eighteenth-century patronage and appreciation did much for him, or for us. It won him perhaps the dangerous and trying occupation of exciseman, at a salary of £70 a year: it matured, if it did not absolutely create, the bad habits which plunged him into pecuniary cares and difficulties, weakened his intellectual stamina, and destroyed his self-respect. He was witty, eloquent, amusing, a genius, and a wonder; but when he ceased to be a novelty, the idol of society was ruthlessly cast aside, to live or die, any how he could, and we find him copying music to procure food for himself and those dear to him. Dissipation and trouble carried him off in the prime of his manhood, and the full maturity of his genius, when without such patronage as Thackeray believed in, seemingly, he might have achieved triumphs loftier than those in the full pride of which every patriot has a share. An extract from a letter written by Burns to Thomson on the 19th of July, 1796, says: "After all my boasted independence, cursed necessity compels me to implore you for five pounds. A cruel scoundrel of a haberdasher, to whom I owe an account, taking it into his head that I am dying, has commenced a process and will infallibly put me in jail. Do for God's sake send me that sum, and by return of post. Forgive me this earnestness; but the horrors of a jail have made me half disheartened; I do not ask all this gratuitously; for upon returning health I promise, and engage to furnish you with five pounds' worth of the neatest song-genius you have seen." Robert Bloomfield did not find those generous and helpful friends of genius whom the imagination of Thackeray created to people the eighteenth century. He, like Burns, was a farmer's boy, who afterward became a shoemaker's errand-boy, living in a garret at 7, Fisher's Court, Coleman Street, in which he and four others, one being his brother, worked, and slept on "turn-up" beds. There he fetched the dinners from the cookshop, did the inferior part of the work, and ran errands; taught himself to read by the aid of borrowed newspapers and a little dictionary, bought for him at a second-hand stall, for fourpence, by one of his fellow-workers, and by listening to an eloquent dissenting minister named Fawcett, acquired the proper pronunciation of words. He began verse-writing at sixteen, and at that age also began to instruct his brother and his partners in the Fisher's Court garret (for which they paid five shillings a week), and in another "parlour next the sky" in Blue Hart Court, Bell Alley, where a fellow-lodger made him inexpressibly happy by the loan of Milton's 'Paradise Lost' and Thomson's 'Seasons.' When he fell in love with a young woman named Church, daughter of a boat-builder in the Government Yard at Woolwich, he sold his most precious possession (to purchase which he had practised much self-denial), his fiddle, on which he had taught himself to play. Writing to his brother, he said, "I have sold my fiddle and got a wife." His brother says, "Like most poor men, he got a wife first, and had to get household stuff afterwards." It took him some years to get out of ready furnished lodgings. At length, by hard working, etc., he acquired a bed of his own, and hired the room up one pair of stairs at 14, Bell Alley, Coleman Street; and there, as he worked unaided by costly writing materials, amongst the noise and bustle of seven other workmen who, conjointly with himself, had hired a garret in the same house as their work-room, he composed his famous poem 'The Farmer's Boy,' the latter portion of his 'Autumn,' and the whole of his 'Winter.' Not a line of either was committed to paper before each was corrected, altered, improved, and finally completed. The poet Crabbe was another eighteenth-century genius who failed to find the generous, ever-ready patronage and friendship, whereof Thackeray said, "It would hardly be grateful to alter my old opinion that we (men of letters) do meet with good will and kindness, with generous and helping hands, in the time of our necessity; with cordial and friendly recognition." Having failed in his medical practice at Aldborough, in Suffolk, where, in 1789 he was born, Crabbe borrowed five pounds, and with that sum came to London. Taking lodgings near the Exchange, he began his literary career full of hope and vigour. But the booksellers, Dodsley and Becket, civilly declined his productions; and when he published some poems cheaply at his own expense his publisher failed; and the poor poet's little, carefully husbanded money being exhausted, he applied to Lord North for assistance,--in vain. Then he addressed verses to Lord Chancellor Thurlow, who said in reply, "his avocations did not leave him leisure to read verse." For a time he lived by selling his clothes, and pawning his watch and surgical instruments; then his books were reluctantly sold, and then debt came, and he was threatened with imprisonment. In the midst of these anxious cares, fears, and sufferings, with starvation staring him in the face, he bade the muse a sorrowful adieu, and sought work as a druggist's assistant. He had but eightpence in the world when he wrote to Edmund Burke, and himself left the letter at that eminent statesman's house in Charles Street. Begging letters from starving poets and literary men were familiar enough in those days, and Burke received more than his fair share of them. Crabbe has himself told us how, weary, penniless, and hungry, being afraid to go back to his lodging, he traversed Westminster Bridge all throughout the night following the delivery of that letter until daybreak. The letter itself, a memorable curiosity of impecuniosity, I here append: "_To Edmund Burke, Esq._ "SIR,--I am sensible that I need even your talents to apologize for the freedom I now take, but I have a plea which, however simply urged, will with a mind like yours, sir, procure me pardon. I am one of those outcasts on the world who are without a friend, without employment, without bread. "Pardon me a short preface. I had a partial father who gave me a better education than his broken fortune would have allowed, and a better than was necessary, as he could give me that only. I was designed for the profession of Physic; but not having the wherewithal to complete the necessary studies, the design but served to convince me of a parent's affection and the error it had occasioned. In April last I came to London with three pounds, and flattered myself this would be sufficient to supply me with the common necessaries of life till my abilities should procure me more; of these I had the highest opinion, and a poetical vanity contributed to my delusion. I knew little of the world and had read books only. I wrote, and fancied perfection in my compositions; when I wanted bread they promised me affluence and soothed me with dreams of reputation, whilst my appearance subjected me to contempt. In time reflection and want have shown me my mistake. I see my trifles in that which I think the true light, and whilst I deem them such have yet the opinion that holds them superior to the common run of poetical publications. "I had some knowledge of the late Mr. Nassau, the brother of Lord Rochford; in consequence of which I asked his lordship's permission to inscribe my little work to him, knowing it to be free from all political allusions and personal abuse. It was no material point to me to whom it was dedicated, his lordship thought it none to him, and obligingly consented to my request. "I was told a subscription would be the more profitable method for me, and therefore endeavoured to circulate copies of the enclosed proposals. "I am afraid, sir, I disgust you with this very drill narration, but believe me punished in the misery that occasions it. You will conclude that during this time I must have been at more expense than I could afford--indeed, the most parsimonious could not have avoided it. The printer deceived me, and my little business has had every delay. The people with whom I live perceive my situation and find me to be indigent and without friends. About ten days since I was compelled to give a note for seven pounds to avoid an arrest for about double that sum which I owe. I wrote to every friend I had, but my friends are poor likewise; the time of payment approached, and I ventured to represent my case to Lord Rochford. I begged to be credited for this sum till I received it of my subscribers, which I believe will be within one month: but to this letter I had no reply, and I have probably offended by my importunity. Having used every honest means in vain, I yesterday confessed my inability, and obtained with much entreaty and as the greatest favour a week's forbearance, when I am positively told that I must pay the money or prepare for a prison. "You will guess the purpose of so long an introduction. I appeal to you, sir, as a good, and let me add, a great man. I have no other pretensions to your favour than that I am an unhappy one. It is not easy to support the thought of confinement, and I am coward enough to dread such an end to my suspense. "Can you, sir, in any degree aid me with propriety? "Will you ask any demonstration of my veracity? "I have imposed upon myself, but I have been guilty of no other imposition. Let me, if possible, interest your compassion. I know those of rank and fashion are teased with frequent petitions, and are compelled to refuse the requests even of those whom they know to be in distress; it is therefore with a distant hope I ventured to solicit such favour, but you will forgive me, sir, if you do not think proper to relieve. It is impossible that sentiments like yours can proceed from any but a humane and generous heart. "I will call upon you, sir, to-morrow, and if I have not the happiness to obtain credit with you I must submit to my fate. My existence is a pain to myself, and every one near and dear to me are distressed in my distress. My connections, once the source of happiness, embitter the reverse of my fortune, and I have only to hope a speedy end to a life so unpromisingly begun, in which (though it ought not to be boasted of) I can reap some consolation from looking to the end of it. "I am, sir, with the greatest respect, "Your obedient and most humble servant, "GEORGE CRABBE." Burke replied immediately, appointing an interview, from which dated the change in Crabbe's fortune. Money was given to him, apartments provided for him at Beaconsfield, where he was treated as if he belonged to the generous statesman's own family,--the very publisher who had refused his poems was ready enough to publish them when Edmund Burke suggested his doing so, and even Lord Thurlow gave him a hundred-pound note. Through his patron's influence the surgeon afterwards became a clergyman and chaplain to the Duke of Rutland. In 1807 the copyright of Crabbe's poems was sold for three thousand pounds. Another article in Thackeray's belief was, that "without necessity," as he said in _Fraser's Magazine_ (1846), "men of genius would not work at all, or very little. It does not follow," said he, "that a man would produce a great work even if he had leisure. Squire Shakespeare of Stratford-on-Avon with his land, and his rents, and his arms over the porch, was not the working Shakespeare; and indolence, or contemplation if you like, is no unusual quality in literary men." The reader will find, in my chapter on the "Impecuniosity of Artists," a curious contrast to this opinion in that expressed by Ruskin, in his 'Political Economy of Art.' Our great art critic draws a touching picture of the man of genius, toiling painfully through his early years of obscurity and neglect, yearning vainly for the peace and time requisite for producing great works. And Sir Bulwer Lytton, writing pathetically of poor Leman Blanchard, whom Thackeray knew personally, said,-- "Few men had experienced more to sour them, or had gone through the author's hardening ordeal of narrow circumstances, of daily labour, and of that disappointment in the higher aims of ambition, which must almost inevitably befall those who retain ideal standards of excellence _to be reached but by time and leisure_, and who are yet compelled to draw hourly upon immatured resources for the practical wants of life." Blanchard's father was a painter and glazier in Southwark, who doubtless practised no little self-denial to give his son a good education, which could not but, as Sir Bulwer Lytton said, with a faint tinge of an old-world prejudice in his words, "unfit young Leman for the calling of his father;" "for it developed the abilities and bestowed the learning which may be said to lift a youth morally out of trade, and to refine him at once into a gentleman." He began life at the desk as a clerk in the office of Mr. Charles Pearson, a proctor in Doctors' Commons, and soon began to contribute some promising characteristic sketches to a publication called _The Drama_. As a clerk, he was not satisfactory nor satisfied; and his father was about to take him from it, and teach him his own trade, to avoid which Blanchard tried through the influence of the actor, Mr. Henry Johnston, to find an opening on the stage. The histrionic friend, however, painted the miseries and uncertainties of his profession in such gloomy and terrible colours, that the poor boy's heart sank within him, and he had turned with despair to obscurity and trade when the manager of the Margate Theatre offered him an engagement, which he accepted. "A week," says Mr. Buckstone, who was then on intimate terms with him, "was sufficient to disgust him with the beggary and drudgery of the country player's life, and as there was no 'Harlequin' steaming it from Margate to London Bridge at that day, he performed his journey back on foot, having on reaching Rochester but his last shilling--the poet's veritable last shilling--in his pocket." Buckstone also wrote: "At that time a circumstance occurred which my poor friend's fate has naturally brought to my recollection. He came to me late one evening in a state of great excitement, informed me that his father had turned him out of doors, that he was utterly hopeless and wretched, and was resolved to destroy himself. I used my best endeavours to console him, to lead his thoughts to the future, and hope in what chance and perseverance might effect for him. Our discourse took a livelier turn, and after making up a bed on a sofa in my own room I retired to rest. I soon slept soundly, but was awakened by hearing a footstep descending the stairs. I looked towards the sofa and discovered he had left it. I heard the street-door close. I instantly hurried on my clothes and followed him. I called to him, but received no answer. I ran till I saw him in the distance, also running. I again called his name, I implored him to stop, but he would not answer me. Still continuing his pace, I became alarmed, and doubled my speed. I came up to him near Westminster Bridge; he was hurrying to the steps leading to the river. I seized him, he threatened to strike me if I did not release him. I called for the watch, I entreated him to return; he became more pacified, but still seemed anxious to escape from me. By entreaties, by every means of persuasion I could think of, by threats to call for help, I succeeded in taking him back." After that desperate attempt, Blanchard obtained work as a printer's reader with Messrs. Bayliss, of Fleet Street. Thackeray summed up his poor friend's condition at this time thus briefly: "The young fellow, forced to the proctor's desk, quite angry with the drudgery, theatre-stricken, poetry-stricken, writing dramatic sketches in Barry Cornwall's manner, spouting 'Leonidas' before a manager, driven away starving from home, penniless and full of romance, courting his beautiful young wife.... Then there comes that pathetic little outbreak of despair, when the poor young fellow is nearly giving up, his father banishes him, no one will buy his poetry, he has no chance on his darling theatre, no chance of the wife that he is longing for. Why not finish life at once? He has read 'Werter,' and can understand suicide. 'None,' he says in a sonnet, 'None, not the hoariest sage, may tell of all The strong heart struggles, wills, before it fall.' If respectability wanted to point a moral, isn't there one here? Eschew poetry--avoid the theatre--stick to your business--do not read German novels--do not marry at twenty: and yet the young poet marries at twenty in the teeth of poverty and experience, labours away not unsuccessfully, puts Pegasus into harness, rises in social rank and public estimation, brings up happily an affectionate family, gets for himself a circle of the warmest friends, and thus carries on for twenty years, when a providential calamity visits him and the poor wife almost together, and removes them both." The "providential calamity" came in the beginning of 1844, when Mrs. Blanchard, the most tenderly-loving of wives, and a devoted mother, was attacked by paralysis, which affected the brain, and terminated in madness, speedily followed by death. Partial paralysis seized her husband, and in a burst of delirium, "having his little boy in bed by his side, and having said the Lord's prayer but a short time before, he sprang out of bed in the absence of his nurse (whom he had besought not to leave him), and made away with himself with a razor.... At the very moment of his death his friends were making the kindest and most generous exertions on his behalf." Thackeray, whom I have quoted, adds: "Such a noble, loving, and generous creature is never without such. The world, it is pleasant to think, is always a good and gentle world to the gentle and good, and reflects the benevolence with which they regard it." This is comfortable doctrine, and I would I were sure of its truthfulness. I wonder what poor Gerald Griffin would have said of it in the year 1825, when he was residing at 15, Paddington Street, Regent's Park, London, and, writing to his mother in Ireland, said: "Until within a short time back I have not had, since I left Ireland, a single moment's peace of mind; constantly running backwards and forwards, and trying a thousand expedients, only to meet disappointments everywhere I turned.... I never will think or talk upon the subject again. It was such a year that I did not think it possible I could have outlived, and the very recollection of it puts me into the horrors.... When I first came to London my own self-conceit, backed by the opinion of one of the most original geniuses of the age, induced me to set about revolutionising the dramatic taste of the time by writing for the stage. Indeed, the design was formed and the first step taken (a couple of pieces written) in Ireland. I cannot with my present experience conceive anything more comical than my own views and measures at that time. A young gentleman totally unknown even to a single family in London coming into town with a few pounds in one pocket, and a brace of tragedies in the other, supposing that the one will set him up before the others are exhausted, is not a very novel, but a very laughable delusion. I would weary you, or I would carry you through a number of curious scenes into which it led me. Only imagine the model young Munsterman spouting his tragedy to a roomful of literary ladies and gentlemen; some of high consideration. The applause, however, of that circle on that night was sweeter, far sweeter, to me then than would be the bravos of a whole theatre at present, being united at the time to the confident anticipation of it." The result was his introduction to a manager--all the actors were eager to introduce him to their managers, and to one he went. "He," continues poor Griffin, "let down the pegs that made my music.... He was very polite, talked, and chatted about himself, and Shiel, and my excellent friend Banim. He kept my play four months, wrote me some nonsensical apologies about keeping it so long, and cut off to Ireland, leaving orders to have it sent to my lodgings without any opinion. I was quite surprised at this, and the more so that Banim, who is one of the most successful dramatic writers, at the same time saying, what indeed I found every person who had the least theatric knowledge join in, that I acted most unwisely in putting a play into an actor's hands. It was then that I set about writing for those weekly publications, all of which, except the _Literary Gazette_, cheated me most abominably. Then finding this to be the case, I wrote for the great magazines. My articles were generally inserted, but on calling for payment, seeing that I was but a poor inexperienced devil, there was so much shuffling and shabby work, that it disgusted me, and I gave up the idea of making money that way. I now lost heart for everything, got into the cheapest lodging I could make out, and there worked on, rather to divert my mind from the horrible gloom that I felt growing on me, in spite of myself, than with any hope of being remunerated. This, and the recollection of the expense I had put William to, and the fears that every moment became conviction that I should never be able to fulfil his hopes, or my own expectations, all came pressing together upon my mind and made me miserable. A thousand and a thousand times I wished that I could lie down quietly and die at once, and be forgotten for ever. I can describe to you my state of mind at this time. It was not an indolent despondency, for I was working hard as I am now, and it is only receiving money for the labour of those dreadful hours. I used not to see a face that I knew, and after sitting writing all day, when I walked in the streets in the evening, it actually seemed to me as if I was a different species altogether from the people about me. The fact was, from pure anxiety alone, I was more than half dead, and would most certainly have given up the ghost, I believe, were it not that by the merest accident on earth the library friend (Mr. Forster), who had procured me the unfortunate introduction a year before, dropped in one evening to have a talk with me. I had not seen him, nor anybody else that I knew, for some months, and he frightened me by saying I looked like a ghost. In a few days, however, a publisher of his acquaintance had got me some things to do, works to arrange, regulate, and revise, so he asked me if I would devote a few hours in the middle of every day to the purpose for £50 a year. I did so, and among other things which I got to revise was a weekly fashionable journal." In this letter to his mother he said nothing of being without the commonest necessaries of life, of being ashamed to go out by daylight because his clothes were so shabby, of passing entire days without food--on one occasion no less than three. There was in poor old Gerald Griffin no signs of that "indolence, or contemplation if you like," which Thackeray considered "no unusual quality in the literary man." With despair in his heart he still wrote on, simply because the labour in which he had delight physicked the pains of impecuniosity. But it was not under such conditions that even Griffin did his best work. Mr. R. P. Gillies, in his 'Memoirs of a Literary Veteran,' tells how, when he was contemplating work of a higher and more ambitious character than he had then attempted, "in consequence of domestic anxieties little or nothing was accomplished." He merely built some grand literary castles in the air (for which he was ridiculed in the 'Noctes Ambrosianæ,' under the name of "Kempferhausen"); but he says: "There were some awkward conditions attached to the basis of my aerial structures; for example, I must have unbroken tranquillity like that of an anchoret. There must be no shadow on the mind of worldly cares and perturbation, otherwise the spells would be broken." Bread was his incentive to work, but it was the hack work of which Scott so bitterly complained, not the great work he yearned to accomplish, and could not for want of "peace and time." The above allusion is to Sir Walter in the zenith of his fame when, through "long-winded" publishers' money being in immediate demand, he contemplated abandoning original fiction for the more rapid work of compilation. He wanted that to secure not only bread, but the peace and time which in common with Ruskin he thought essential to the production of great work; and he wrote in his diary, under the date December 18th, 1825: "The general knowledge that an author must write for bread, at least for improving his pittance, degrades him and his productions in the public eye. He falls into the second rank of estimation, "'When the harness sore galls, and the spurs his sides goad, And the high-mettled racer's a hack on the road.' It is a bitter thought, but, if tears start, let them flow." Thackeray, despite his self-satisfying opinion about the world's being always "so good and gentle" to the "gentle and good," here held Sir Walter's opinion, for under the signature of Michael Angelo Titmarsh, Esq., he wrote: "Our calling is only sneered at because it is not well paid. The world has no other criterion for respectability. In Heaven's name, what made the people talk of setting up a statue to Sir William Follet? What had he done? He had made thirty thousand pounds!... Directly the men of letters get rich they will come in for their share of honour too; and a future writer in this miscellany (Fraser's) may be getting his guineas where we get one, and dining at Buckingham Palace while you and your humble servant, dear Padre Francisco, are glad to smoke our pipes over the sanded floor of the little D----." Sir Walter Scott's opinion of writing under peaceful and under troublous circumstances was also shown in the following entry, under the same date as the above. It runs as follows: "Poor T. S. called again yesterday. Through his incoherent miserable tale I could see that he had exhausted each access to credit, and yet fondly imagines that, bereft of all his accustomed indulgences, he can work with a literary zeal unknown to his happier days. I hope he may labour enough to gain the mere support of his family." Poverty is not, however, always fatal to the highest efforts of genius, even if it be not essential as an incentive to work; and there is often found in "the labour we delight in" that which "physics pain" (as Shakespeare said), even the pains of impecuniosity. Goldoni, speaking of his dramatic writings and consequent poverty, says, "Though in any other situation I might have been in easier circumstances, I should never have been so happy;" and who can doubt the happiness of the illustrious Linnæus when he was wandering a-foot with his stylus, magnifying-glass and baskets of plants, sharing the peasants' rustic meals and homely shelter, when he gave his own name to the little Lapland flower now called the Linnæus Borealis, because it reminded him of his own position, being "a little northern plant, flowering early, depressed, abject, and long overlooked"? Rousseau, writing of his works and life, says: "It was in a small garret in the new street of St. Etienne du Mont, where I resided four years in the midst of physical suffering and domestic trouble, that I enjoyed the most exquisite pleasure of my life, that of writing and publishing my 'Studies of Nature.'" The _Quarterly Review_ (vol. viii.), comparing the writer who goes to his work in a spirit of love for it, and pride in it, with him who labours at it merely for the money it produces, says: "The one is like a thirsty hart that comes joyously to refresh itself at the water-brooks, and the other to the same beast panting and jaded with the dogs of hunger and necessity behind." When Olivet presented his elaborate edition of Cicero to the public, he said the glory and pleasure he had received in producing it were all he required by way of remuneration; money he refused. Pieresc, one of the most liberal and generous of men, although his fortune was a small one, loved learning only for its own sweet sake, and was never so happy as he was when shut up in his study amongst his books and MSS. "A literary man's true wealth," said he, "consists in works of art, the treasures of a library, and the affections of his fellow-students." Lord Wodehouse, when re-writing his 'Lectures on History,' said: "The task rewarded him with that peculiar delight which has often been observed in the latter years of literary men, the delight of returning again to the studies of their youth and of feeling under the snows of age the cheerful memories of their spring." Petrarch, writing of himself to a friend, said, "I read, I write, I think; such is my life and my pleasures as they were in my youth." Beranger, when he was living on the fifth story in the Boulevard St. Martin, "without money and with no certain prospect for the future," as he himself said, had installed himself in his garret "with inexpressible satisfaction" because, as he wrote, "To live alone and to compose verses at my leisure appeared to me the very summit of felicity." Speaking in the spirit of his "sky parlour," he said: "What a beautiful prospect I enjoyed from its window! What delight I had to sit there in the evening hovering as it were over the immense city, from which a loud, hoarse murmur incessantly ascended, especially when there blended with it the noise and tumult of some great storm." But there were two sides to this life, and time revealed both. With peace and time, bread and cheese and dreams of glory, the poet was content and happy, even when thin and pale; he grew every day so weak that his father used to say frequently, "I shall soon bury you." But he was not dismayed, but starved and wrote on placidly enough until the fear of the conscription fell upon him. But even then, as he tells us, Providence befriended him and out of evil brought good. He says: "I was bald at twenty-three in consequence, as I suppose, of continuous headaches. When the gendarmes came in search for conscripts I removed my hat. They looked at my bald head and were satisfied. They went away without me." Again he writes in his fragmentary autobiography: "Fortune at last suffered herself to be touched by my sorrows. Three years had I been vainly seeking some humble form of employment, when, urged by a terrible necessity in the beginning of 1804, I sent a letter and verses to M. Lucien Bonaparte. My gold watch had been long where I left it pledged at the Mont de Piété. My wardrobe had dwindled to three old patched and often mended shirts, a threadbare overcoat also carefully adorned with patches, with one pair of trousers with a newly discovered hole in the knee, and a pair of boots which filled me with despair whenever I cleaned them, they grew so rapidly worse. I had posted to M. Bonaparte four or five hundred verses, and had told no one that I had done so, so many applications had been fruitless." One day, while sitting in his garret, needle in hand, eyeing lugubriously the rent in his trousers, and thinking over some bitter misanthropical verses which he was then writing, a letter was brought to him. It seemed a letter of consequence--the handwriting was strange. Trembling with excitement, he broke the seal. Joy! joy! joy! The Senator Bonaparte desired to see him! "It was not," he wrote, "my fortune that I first thought of, but Glory! My eyes were full of tears, and I thanked God, whom in my moments of prosperity I never forgot." And yet of such men as these Thackeray wrote: "Bread is the main incentive. Do not let us try to blink this fact or imagine that the men of the press are working for their honour and glory or go onward impelled by the inevitable afflatus of genius." The elder Disraeli, who said, "Great authors sustain their own genius by a sense of their own glory," when Dr. Johnson expressed views on this subject according to some extent with Thackeray's, called them "commercial, agricultural, and manufacturing views of human nature," and complained that they lowered genius to the level of a machine, only to be set in action by a force exterior to itself. But doctors disagree, and opinions on every subject always differ. As mentioned by me elsewhere, one of the first poets who tried to live by his pen was Robert Greene, whose melancholy story is one of the most degrading and painful passages in literary biography. He lived in the days of good Queen Bess, and has left his own records of forlorn and miserable experience. Isaac Disraeli calls him "the great patriarch and primeval dealer in English literature, the most facetious, profligate, and indefatigable of the Scribleri family." Quaint Anthony Wood, sneering at him and his entire fraternity, as he often did, said, "He wrote to maintain his wife and that high, loose course of living which poets generally follow;" one accusation being about as true as the other, for so far from maintaining his wife, he shamefully deserted both her and her child, leaving her foodless; and the Elizabethan poets are said on the whole to have been thrifty, god-fearing men, leading sober and steady lives. Charles Knight wrote of him as one who was made desperate and reckless by wrongs and neglect, but the pamphlet he wrote called 'The Repentance of Robert Greene, Master of Arts,' taken with his other confession, shows him to have been, as Mr. A. H. Wall said (in his 'Poets and Players of Shakespeare's Time'), "an entirely bad and worthless fellow, who disgusted his fellow-poets of the Bankside, and plunged into such disgraceful excesses that he became shunned and contemned by them, finding a welcome nowhere but in the lowest haunts of vice and profligacy." This was the man who fell foul of his fellow-players and the player-poets, calling them "apes," "rude grooms," "buckram gentlemen," and "painted monsters," who attacked young Shakespeare when he was dressing up, improving, and re-writing old plays, "as an upstart crow, beautified with our feathers," and aroused our great bard's many friends to anger and indignation by saying he had "a tiger's heart wrapped in a player's hide, and was a bad actor, conceited enough to suppose himself as well able to bombast out a blank verse as the best, one who was vain enough to imagine himself an absolute Johannes Factotum, the only Shakespeare in the country:" accusations which even Henry Cheetle, who was concerned in their publication, afterwards denounced as slanderous and spiteful, saying, "I am as sorry as if the original fault had been my fault, because myself hath seen his (Shakespeare's) demeanour no less civil than he is excellent in the quality he professes, besides divers of worship have reported his uprightness of dealing, which argues his honesty, and his facetious grace in writing that approves his art." Greene spent his time now in debauchery and drunkenness, now homeless, penniless, and starving, one extreme following the other with fearful frequency and rapidity. A contemporary poet, Gabriel Harvey, wrote of him as follows: "Who in London hath not heard of his (Greene's) dissolute and licentious living, his fond disguisinge of a Master of Arts with ruffianly hair, unseemly apparel, and more unseemly company, of his vaine glorious and Thrasonicall brassinge; his piperly extemporising and Tarletonizing; his apeish counterfeiting of every ridiculous and absurd toy ... hys villainous cogging and foisting, his monstrous swearinge and horrible forswearing, his impious profaning of sacred textes; his other scandalous and blasphemous ravinge: his riotous and outrageous surfeitinge: his continual shifting of lodgings; his plausable musteringe and banquettynge of roysterly acquaintance at his first comminge; his beggarly departing in every hostesses debt; his infamous resorting to the Banckside, Shoreditch, Southwarke, and other filthy haunts; his obscure lurkinge in basest corners; his pawning of his sword, cloake, and what not, when money came short?" etc. a catalogue of monstrous crimes, vices, and follies (which fills page after page) fully borne out by Greene's own confessions. He wrote of himself, "In prime of youth a rose, in age a weed, That for a minute's joy payes endless meed." His last letter to the poor Lincolnshire lady whom he married, ill-used, and cruelly abandoned, was dated from a squalid lodging in Dowgate, where he died of want and disease. It ran as follows: "Doll, I charge thee by the love of our youth and by my soules rest that thou wilt see this man (the shoemaker) paide; for if hee and his wife had not succoured me I had died in the streetes. "ROBERT GREENE." Doll was the amiable and worthy woman to whom he had previously written: "The remembrance of many wrongs offered thee and thy unreproved virtues add greater sorrow to my miserable state than I can utter or thou conceive, neither is it lessened by consideration of thy absence (though shame would hardly let me behold thy face) but exceedingly aggravated." Akin in character to Greene was John Skelton, a popular poet in the reign of the seventh Henry, and King Henry the Eighth's poet laureate, who wrote of himself: "A King to me mine habit gave At Oxford the University, Advanced I was to that degree: By whole consent of their Senate, I was made Poet Laureate." The title being then a university degree, and the habit a robe of white and green, embroidered in silk and gold. He took holy orders in 1498, and, as old Anthony Wood said, "having been guilty of many crimes, as most poets are," Bishop Wykke suspended him from his benefice. In 1501 he was in prison for marrying and keeping a mistress, "a crime amongst the clergy of the Romish persuasion both in those days and these," says Cibber, "more subjected to punishment than adultery." He was a fierce and bitter assailant of the clergy, the Dominicans, and Cardinal Wolsey. Many of his productions were never printed, but were chanted at markets and fairs, in village ale-houses, and in the streets by itinerant ballad-singers, who learned them by heart and sent them abroad like floating seeds borne hither and thither by the vagrant winds. The author of the 'Lives of the Laureates' said of this poet: "The brief glance we have of him, the scholar and the buffoon, a priest with his married concubine and bastardized children, mocking, half in anger half in jest, or it might be in the wantonness of sorrow, at the falsehoods by which he was surrounded, may justly awaken our sympathy nor fail to suggest a moral." The misfortunes of poor Spenser I have referred to in dealing with the sad side of the subject, but another of the laureates who tasted the full bitterness of poverty was Ben Jonson, who began life as a bricklayer, became a soldier, and a brave one too, abandoned arms to tread the stage, and strolled about the country, trudging beside the waggon containing the players' scenes, and "properties," many a weary mile. From acting plays he took to writing plays, the two arts being then more intimately and nobly associated than they ever have been since, for the stage has fallen out of the hands of poets and players into those of showmen and buffoons. He was married and had a son, to whom some of the players stood sponsors. Shakespeare, it is traditionally said, was one of them, and what his necessities were may be readily guessed from the entry in Henslowe's diary preserved at Dulwich College, in which small sums are entered as advanced to Ben Jonson for work he was then doing. A story is related of how he came, after many other vain efforts, to the Globe Theatre on the Bankside with his play of _Every Man in His Humour_, which after the manager had superficially glanced at he coldly returned as unsuitable. Shakespeare, it is said, stood by, and noting, we presume, the melancholy and despairing way in which his future dear friend and rival turned to leave the theatre, spoke to him, begging leave to read his play, with which he was so well pleased that he brought about its acceptance. Poverty haunted Ben with more or less closeness all through his career (often it must be confessed through the extravagance of his hospitality to brother poets) and was, it is said, sadly too intimate with him when he died. When sick in 1629, Charles I., who had been generous to him, being supplicated in his favour, sent him ten guineas, of which mean gift Smollett says, Jonson spoke as follows to the messenger of whom he received it: "His Majesty has sent me ten guineas because I am poor and live in an alley. Go and tell him his soul lives in an alley." Jonson died on the 6th August, 1637, having long outlived his wife and all his children. It is curious still to note how many of our literary lions began to make their way in the world, as Jonson did, on the stage. It was so with William Leman Rede, who, starting as an actor at Margate (the Margate boards formed indeed the porch through which a very large number of histrionic aspirants entered the theatrical profession), became an itinerant actor, at one time playing Hamlet in a barn and at another Rover on a billiard-table; sometimes foodless and hungry, travelling on foot and sometimes luxuriating in a waggon, but always light-hearted and gay. Once when he was laughing merrily at the plight he was in on a "treasury day," when, in the phraseology of the profession, "the ghost didn't walk," that is to say when there was no money in hand to pay the actors' salaries, some one asked how he continued to be jolly under such miserably depressing circumstances. He replied, "I drink spring water and dance." Rede was always a sober, abstemious man. Coming to London in 1825, he published his first novel, 'The Wedded Wanderer,' which was followed by a second, 'The White Tower,' each in three volumes. This was followed by his 'Crimes and Criminals in Yorkshire,' and his connection with a weekly publication belonging to his brother Thomas, called _Oxberry's Dramatic Biography_--Thomas having married the widow of Oxberry the comedian, by whom the serial had been started. As actor, magazine writer, dramatist, journalist and novelist Rede acquired fame but not wealth. One evening he was arrested for debt while acting on the stage, by a sheriff's officer, who sprang from the pit over the orchestra and footlights to secure his prisoner. Rede originated the Dramatic Authors' Society. Sheridan, to whom I have previously alluded, was another famous literary man familiar with the boards and--need I say?--with impecuniosity. He was, according to Haydon, "in debt all round to milkman, grocer, baker, and butcher. Sometimes his wife would be kept waiting for an hour or more while the servants were beating up the neighbourhood for coffee, butter, eggs and rolls. While Sheridan was Paymaster of the Navy, a butcher one day brought a leg of mutton; the cook took it and clapped it in the pot to boil and went upstairs for the money, but the cook not returning, the butcher removed the pot-lid, took out the mutton, and walked away with it." On another occasion Michael Kelly, the musical celebrity, was complaining to him of a wine merchant at Hochheim who instead of six dozen of wine had sent him sixteen. Sheridan said he would take some off his hands if he were not quite able to pay for it, but, said he, "you can get rid of it easily, put up a sign over your door and write on it, 'Michael Kelly, Composer of Wines and Importer of Music;'" a sly rub which the composer received with a laugh, wittily retorting that there was one wine so poisonous and intoxicating that he would neither compose nor import, and that was "Old Sherry" (Sheridan's nickname). One night when Sheridan was at home in a cottage he had about a mile from Hounslow Heath, his son Tom asked him for some cash. "Money, I have none," was the reply. "But let the consequences be what they may, money I must have," said Tom fiercely. "In that case, my dear Tom," said the father, "you will find a case of loaded pistols upstairs and a horse ready saddled in the stable, the night is dark and you are within half a mile of Hounslow Heath"--a place of terrible repute for highway robbers. "I understand," said Tom, "but I tried that before I came to you. Unluckily the man I stopped was Peake, your treasurer, and he told me that you had been beforehand with him and robbed him of every sixpence he had in the world." Kelly saw many instances of Sheridan raising money, but one instance in particular astonished him. Sheridan was £3000 in arrear with the Italian Opera performance; there were continual postponements, and at last the singers resolved to strike. Kelly, as manager, received a note that on the evening of a certain day they would not sing unless paid, and hurried off to Morlands, the bankers in Pall Mall, for advances. The bankers were inexorable; like the singers, they were worn out. The manager then flew off to Sheridan at his residence in Hertford Street, Mayfair, where he was kept waiting two hours. Sheridan was told that if he could not raise £3000 the theatre must be closed. "£3000, Kelly," he said; "there is no such sum in nature. Are you an admirer of Shakespeare?" "To be sure I am," said Kelly, "but what has Shakespeare to do with £3000 or the Italian singers?" "There is one passage in Shakespeare," said Sherry, "which I have always admired particularly, and it is where Falstaff says, 'Master Robert Shallow, I owe you £1000.' 'Yes, Sir John,' says Shallow, 'which I beg you will let me take home with me.' 'That may not so easily be, Master Robert Shallow,' replies Falstaff. And so say I unto thee, Master Michael Kelly, to get £3000 may not so easy be." Kelly answered that there was no alternative then but to close the theatre. Sheridan made Kelly ring the bell and have a Hackney coach called, then sat down quite at his ease and read the newspaper. Kelly was in an agony. The coach arrived, Sheridan requested Kelly to get into it, and went with him. The coach was driven to Morlands' banking-house--Kelly remained in the coach bewildered. In a quarter of an hour Sherry came out of the bank with the required sum in bank notes. Kelly never knew how it was obtained. Sherry told Kelly to take the money to the theatre, but to save enough out of it for a barrel of oysters, which he, Sheridan, would partake of that night at Kelly's lodgings in Suffolk Street. On another occasion Kelly and Sheridan were one day in conversation close to the gate of the path which was then open to the public, leading across the churchyard of St. Paul's, Covent Garden, from King Street to Henrietta Street. Holloway, a creditor of Sherry's, went by on horseback. He spoke to Sherry in loud and angry tones, complaining that he could never get admittance at Sheridan's house, and vowed vengeance on François, Sherry's valet, if he did not let him in next time he called in Hertford Street. Holloway was in a passion; Sherry, who knew he was vain of his judgment of horseflesh, took no notice of the angry boast of Holloway, and burst into exclamations of rapture on Holloway's steed. Holloway was softened, and said his horse was one of the prettiest of creatures. Would not Mrs. Sheridan like to have one like it? "She would if he could canter well," said Sheridan. "Beautifully," said Holloway. "Perhaps I should not mind stretching a point for such a one. Will you have the kindness to let me see his paces?" "To be sure," said the lawyer. The action was suited to the word, and Sherry cut off through the churchyard, where no horse could follow. In spite of his many faults, his utter unscrupulousness in money-matters being not the least, it is particularly pleasant to refer to one of the incidents at the close of his career which reveals a delightful little bit of sentiment and good feeling, of which many of his detractors would have us think he was incapable. When his goods were taken in execution in Hertford Street, Mayfair, Paston, the sheriff's officer, said that if there was any particular article upon which he set affectionate value, he might secrete or carry it off from the premises. "Thank you, my generous fellow," said Sheridan. "No, let all go--affection and sentiment in my situation are quite out of the question. But," said he, recollecting himself, "there is one thing which I wish to have." "What is it?" said Paston, expecting him to name some cabinet or piece of plate. "Don't be alarmed," said Sheridan, "it is only this old book, worth all others in the world, and to me of special value, because it belonged to my father, and was the favourite of my first wife." Paston looked into it, and it was a dogs'-eared edition of Shakespeare. Another great man in the literary and histrionic professions, the novelist, Fielding, although of an aristocratic stock, and liberally educated, began life almost without pecuniary resources. He came before the public first in 1725, and in succession was a showman at Bartholomew and other fairs, the owner of a booth for theatrical performances, at one time set up in George Yard, from which he found his way to the regular boards. In spite of being the son of a general, and the great grandson of an earl, his impecuniosity was often great, although he met his difficulties with the light-hearted gaiety of a Sheridan, and the careless imprudence of a Goldsmith. Once, when in Ireland, he got into disgrace through giving a dancing-party at his rooms; sold his books the next day, ran away from college, loafed about Dublin till only a shilling was left, and then went to Cork. There he lived three days on the shilling, and said afterwards the most delicious meal he ever tasted was a handful of grey peas, given him by a girl at a wake, after twenty-four hours' fasting. Poor Oliver Goldsmith must, of course, have his place in this chapter, for from the time when he wrote street ballads to save himself from starving, and was delighted to hear them sung, to when he started on "the grand tour," alone and friendless, with one spare shirt, a flute, and a guinea in his pocket, to the last scene of hopeless insolvency in which he died, his life was one long, hard struggle against pecuniary difficulties. When his relatives raised £50 to send him to London to study, he spent and gambled all away, and got no farther than Dublin. The result of his wildly rash act of going abroad so ill provided he has himself described. In a foreign land, when without money, he turned to his flute as a last resource, and whenever he approached a peasant's cottage towards nightfall, he played one of his merriest tunes, and so generally contrived to win a shelter for the night, and some food for his next day's journey. In this way he passed through Flanders, parts of France, Germany and Switzerland, reaching Padua at last; remaining there six months to secure his medical degree. Returning in 1756, and failing to find employment, he was at last taken in by a chemist by way of charity, and to preserve him from starvation. His friend, Dr. Sleigh, next befriended him, and then he became usher to Dr. Milner's school in Peckham. Soon after he found literary employment, and took a lodging at No. 12, Green Arbour Court, in the Old Bailey--a miserable, dirty room, with but one chair. He did not emerge from this squalid, dismal abode until 1760, when improved circumstances enabled him to lodge in Wine Office Court, Fleet Street, where he received his friends with a freedom and hospitality which soon reduced his means to the level of impecuniosity. Here he first met Dr. Johnson, who became his dearest friend and best adviser. Johnson has described how he received one morning a message from poor Goldsmith, to the effect that he was in great distress, and as it was not in his power to go to the Doctor, begging that the Doctor would come to him as soon as possible. "I sent him a guinea," says Johnson, "and promised to come to him directly. I accordingly went as soon as I was dressed, and found that his landlady had arrested him for rent, at which he was in a violent passion. I perceived that he had already changed my guinea, and had got a bottle of Madeira and a glass before him. I put the cork into the bottle, desired he would be calm, and began to talk to him of the means by which he might be extricated. He then told me that he had a novel ready for the press, which he produced to me. I looked into it and saw its merits, and told the landlady I should soon return, and, having gone to a bookseller, sold it for £60. I brought Goldsmith the money, and he discharged his rent, not without rating his landlady for having used him so ill." The novel thus sold was the 'Vicar of Wakefield,' and its purchaser, Francis Newberry, the bookseller, who kept it unprinted for two years, when its author's 'Traveller,' having appeared and proved successful, the novel was published (in March 1766) and in a month reached a second edition. In Forster's 'Life of Goldsmith,' the following account of his earliest state of penury has no little romantic interest:-- "It was," says the author of that famous work, "a year and a half after he had entered college, at the commencement of 1747, his father suddenly died. The scanty sums required for his support had often been intercepted; but this stopped them altogether. It may have been the least and most trifling loss connected with that sorrow; but 'squalid poverty,' relieved by occasional gifts, according to his small means, from Uncle Contarine, by petty loans from Bryanton or Beatty, or by desperate pawning of his books of study, was Goldsmith's lot henceforward. Yet even in the depths of that despair arose the consciousness of faculties reserved for better fortune than continual contempt and failure. He would write street ballads to save himself from actual starving; sell them at the Reindeer repository in Mountrath Court for five shillings apiece, and steal out of the college at night to hear them sung. "Happy night, to him worth all the dreary days! Hidden by some dusky wall, or creeping within darkling shadows of the ill-lighted streets, this poor neglected sizar watched, waited, lingered, listened there, for the only effort of his life which had not wholly failed. Few and dull perhaps the beggar's audience at first, but more thronging, eager, and delighted as he shouted forth his newly-gotten ware; cracked enough, I doubt not, were those ballad singing tunes; nay, harsh, extremely discordant, and passing from loud to low without meaning or melody; but not the less did the sweetest music which this earth affords fall with them on the ear of Goldsmith. Gentle faces, pleased old men, stopping by the way; young lads, venturing a purchase with their last remaining farthing; why here was a world in little with its fame at the sizar's feet! 'The greater world will be listening one day,' perhaps he muttered as he turned with a lighter heart to his dull home." Johnson's sympathy with Goldsmith was, no doubt, warmed and quickened by the remembrance of his own early struggles with the foul fiend impecuniosity. He remembered well enough his first London lodging in Exeter Street, Strand, when, as he said, "I dined very well for eightpence, with very good company, at the Pine Apple in New Street fast by. Several of them had travelled, they expected to meet every day; but they did not know one another's names. It used to cost the rest a shilling, for they drank wine; but I had a cut of meat for sixpence, and bread for a penny, so that I was quite well served, nay, better than the rest, for they gave the waiter nothing." Johnson used to relate of an Irish painter, that he, the painter, practically realised a theory that £30 a year was enough to enable a man to live there without being contemptible. He allowed £10 for clothes and linen. He said, "A man might live in a garret at eighteen pence a week. Few people would inquire where he lodged; and if they did it was easy to say, 'Sir, I am to be found at such a place.' By spending threepence in a coffee-house, he might be for some hours in very good company; he might dine for sixpence, breakfast on bread and milk for a penny, and do without supper. On clean shirt day he could go abroad and pay visits." I have already quoted the Doctor's views on the subject of impecuniosity, and this reminds me of a very suggestive incident of his life, which perhaps will prove better than anything else the non-desirability of want of means. It is unquestionable that in his marvellous dictionary, there are parts that are much superior to others, which has been accounted for by the fact that he was paid for the work as it progressed--the publisher paying him as his "copy" was delivered. Consequently, when his purse was full, he worked away _con amore_, and produced the best result; but on the purse growing empty, as those mercenary creditors will do, the Doctor worked hurriedly, aiming at making as much "copy" as possible, so as to replenish his failing treasury. Thomas Cooper, author of the 'Purgatory of Suicides,' who also found out by severe experience the cheapest way of living in London, tells in his autobiography how, after having been at Lincoln as reporter, journalist, and miscellaneous literary man, he with his wife left that city for London. He says: "On the 1st of June, 1839, we got on the stage-coach with our boxes of books at Stamford, and away I went to make my first venture in London. We lodged in Elliott's Row, Southwark; I earned five pounds by contributing reviews and prose sketches to some papers having but an ephemeral existence. I had other ventures and adventures in a small way; but it would weary any mortal man to recite; and the recital would only be one which has been often told already, by poor literary adventurers. The very little I could bring to London was soon gone, and then I had to sell my books. I happily turned into Chancery Lane and asked Mr. Lumley to buy my beautifully-bound 'Tasso' and 'Don Belleanis of Greece,' a small quarto black-letter romance, which I had bought of an auctioneer in Gainsboro', who knew nothing of its value. Mr. Lumley gave me liberal prices, wished I could bring him more such books, and conversed with me very kindly. We were often at 'low-water mark' now in our fortunes; but my dear wife and I never suffered ourselves to sink into low spirits. Our experience, we cheerily said, was a part of London adventure, and who did not know that adventurers in London often underwent great trials before success was reached? We strolled out together in the evenings all over London, making ourselves acquainted with its highways and byways, and always finding something to interest us in its streets and shop-windows. Every book I brought from Lincolnshire, and I had had about 500 volumes great and small, had been sold by degrees, and at last I was obliged to enter a pawnshop. Spare articles of clothing, and my father's old silver watch, 'went up the spout,' as the experience goes of those who most sorrowfully know what it means. Travelling-cloak, large box, hat-box, and every box or movable that could be spared in any possible way, had 'gone to our uncle's,' and we saw ourselves on the very verge of being reduced to threadbare suits when deliverance came. I had been in London from the evening of 11th June, 1839, until near the end of March, 1840, when I answered an advertisement respecting the editorship of a country paper printed in London. I went to the printing office in Great Windmill Street, Haymarket, and was engaged at a salary of £3 per week; the paper was the _Kentish Mercury_." Very similar was the experience of Robert Southey, who, disowned by friends, and without money, came to London seeking literary employment, in which alone he found content and happiness. "For it," say his biographers, Messrs. Austin and Ralph, "he sacrificed proffered rank and power; and joyfully devoted to its service a toiling life of unexampled industry. Yet this man so wedded to his absorbing vocation, in the social capacity of husband, father, relative, and friend, stands above reproach. "His life is one emphatic denial of the daring falsehood, that genius and virtue are incompatible. "England knew not a happier circle than that which for years assembled by the humble hearthstone at Greta Hall. It is refreshing to turn aside from the world and contemplate that peaceful home, nestling amid the Cumberland Mountains." Such an opinion again hardly fits in with that of Thackeray already quoted. "On Friday, October 18th, 1794, his aunt, Miss Tyler, turned him out of doors on a stormy night, and without a penny in his pocket. He made his way on foot, through wind and driving rain, along the dark country roads to Bath. Without any visible resource he was thrown upon the world, and as he paced the streets, weary, footsore, and sick at heart, he dreamed of the lofty things in literature he would strive to accomplish, now that he was his own master, with a will unfettered by a care for wishes other than his own, and of the pride that would glow within the swelling bosom of the fair Edith of his love, for whose dear sake he had submitted to be thus cast adrift. An uncle from Portugal wished to take him back with him to that country. 'My Edith persuades me to go,' said he, 'and yet weeps at my going.' And we are told how sadly after their secret marriage in Redcliffe Church, his maiden wife watched his departure with the wedding-ring she was afraid to wear suspended round her neck." In Southey's life by his son, we read that he had recourse under the pressure of impecuniosity to delivering lectures at Bristol, and the following prospectus is quoted:-- "Robert Southey, of Balliol College, Oxford, proposes to read a course of Historical Lectures in the following order:--1st. Introductory on the Origin and Progress of Society; 2nd. Legislation of Solon and Lycurgus; 3rd. State of Greece from the Persian War to the Dissolution of the Achaian League; 4th. Rise, Progress, and Decay of the Roman Empire; 5th. Progress of Christianity; 6th. Manners and Irruptions of the Northern Nations; Growth of the European States; Feudal System, and other equally abstruse subjects." The lectures were given in 1795, tickets for the course, 10_s._ 6_d._, sold at Cottle's, bookseller, High Street. Southey stated about this time that if he and Coleridge could get £150 a year between them, they would marry and retire into the country. Another of these friendless dreamers who came to London, seeking literary employment and reputation, was George Borrow, the famous author of 'Romany Rye,' 'The Bible in Spain,' 'Wild Wales,' etc., the son of a military officer. He was born in Norfolk, early in the present century, and began life at the desk of a solicitor at Norwich. Becoming disgusted with that life, he started off with his stick and bundle to walk to London, where with his knowledge of languages he hoped to have no difficulty in earning a living. Reaching the great metropolis, he found out Sir Richard Phillips, editor and proprietor of the _Monthly Magazine_, who suggested that the young literary adventurer should devote himself to the writing of Newgate lives and trials. Having spent his loose cash in buying books on the subject, he went carefully to work. Sir Richard Phillips wanted less care and more expedition. Borrow sent in his copy too slowly to please his exacting and overbearing employer, whose parsimony was only equalled by his greediness. He was paid in bills subject to discount, and led altogether a very wretched life. One morning he awoke with the disagreeable conviction that his plight had grown desperate, only half-a-crown remaining in his purse. Wandering out disconsolately, he saw a bill in the shop window of a bookseller, giving notice that a "novel or tale was much wanted," went to his garret, and after a meal of bread and water, began to write a fictitious biography of 'Joseph Tell.' At this he continued to work unceasingly, day after day, eating nothing but bread, drinking only water, until on the fifth day the story was finished. And none too soon, for after he had laid aside the pen, want of rest and nourishment had so exhausted him that he swooned away. He had threepence left, and to reinvigorate him after he had left his MS., he spent the whole of that sum at one fell swoop on bread and milk, and went to bed penniless. When he called, the bookseller was willing to buy the novel, and after some haggling over the price, gave him twenty pounds for it, a sum which was as veritable a godsend to him as the price of the 'Vicar of Wakefield' was to Oliver Goldsmith. Borrow's incessant writing reminds me of the incessant reading of the poet, Gerald Massey, who was born in 1828, near Tring, in Herts, in a little stone hovel, the rent of which was one shilling per week. His father was a poor canal boatman, who supported himself and family on ten shillings per week, and could not of course afford to give Gerald any opportunities of educating himself. As soon as he had attained his eighth year, he was set to work at a silk-mill, beginning work at five in the morning, and quitting it at half-past six in the evening, for a weekly wage of 1_s._ 9_d._ He was fifteen years of age when he came to London and obtained employment as an errand-boy, and having taught himself to read, eagerly devoured every book, paper, and magazine that was within his reach. Says Massey himself: "Now I began to think that the course of all desire and the sum of all existence was to read and get knowledge. Read, read, read. I used to read at all possible times and all possible places; up in bed till two or three in the morning, nothing daunted by once setting the bed on fire. Greatly indebted was I to the bookstalls, where I have read a great deal, often folding a leaf in a book, and returning the next day to continue the subject; but sometimes the book was gone, and then great was my grief. When out of a situation I have often gone without a meal to purchase a book." Another English poet who sprang from as low an origin, and who as a boy was as uneducated as Massey, was John Clare, known as the Northamptonshire poet. He was born at Helpston, a village near Peterboro', in 1793. His father was a poverty-stricken farm labourer, a cripple, unable to exist without occasional help from the parish, and whose struggle to keep the most wretched of homes, and supply potatoes and water gruel for food, was a ceaseless and desperate one. For all that, when the sickly little fellow Jack was old enough for school, the few pence requisite for sending him there were squeezed out of the poor father's weekly pittance, and when the boy's own paltry earnings in the fields began to come in, merely a few pence a week, he was sent to an evening school, the master of which allowed him the run of his little library, a privilege of which John enthusiastically and gratefully availed himself. Often his parents returning from work found the boy, after being at school till late, crouching down by the fire, and tracing in the faint glimmer of a burning log, incomprehensible signs upon bits of paper and even wood, too poor to buy paper of the coarsest kind. John was in the habit of picking up shreds of the same material, such as used by grocers and other tradesmen, and of scratching thereon signs and figures, sometimes with pencil, oftener with charcoal. Never were there more ungracious and unfavourable conditions for the study of arithmetic and algebra. A maternal uncle, footman to a lawyer at Wisbech, called one day at Helpston, and told the family there was a vacancy for a clerk in his master's office. John was to apply. The mother ransacked her scanty wardrobe, to try and give her son a decent appearance, made him a pair of breeches out of an old dress, and a waistcoat out of a shawl, and begged from village crones an old white necktie and a pair of old black woollen gloves. What he wore was very large and also ancient. His costume excited amazement as he went his way. He reached Wisbech by canal boat, saw his uncle, was taken to Mr. Councillor Bellamy, who, after inspecting the nephew, said, "Well, I may see him again." John, after staying a day or two with his uncle, then went back home and became serving lad at the Blue Bell, where he was treated well, and was able to pursue his beloved studies. There, too, he fell in love with Mary Joyce, daughter of a farmer, who forbade his daughter to have anything to do with the beggar boy, so he carved her name on every tree. At this time occurred a great event in the poet's life, one ever to be remembered with a quickening pulse and a sense of mighty triumph. He had read Thomson's 'Seasons,' which had been described to him as only a trumpery book which could be bought for 1_s._ 6_d._ at Stamford. John had only sixpence, and his wages were not due. He went to his father for a shilling. Hopeless chance! His mother was also tried for that amount, and by superhuman exertion she raised sevenpence; the fraction remaining and required was raised at the Blue Bell. The day of the purchase came. Unable to sleep through excitement, he was up before daybreak, and started off for Stamford in hot haste. A six or seven mile walk was as nothing to the ardent lad, and he arrived before the bookseller's shop he was seeking had its shutters down. He waited and waited, and you can imagine his dismay when at last he found that the shop never opened at all that day. So he went back to Helpston. By the way a bright thought occurred. By making a tremendous effort he obtained twopence more--proposed to a cowherd boy that for one penny he should look after the cattle, and for another penny keep the secret that he was going away for a few hours. Monday morning arrived, and his confederate. John soon walked the eight miles to Stamford. Bookseller's shop closed. John sat on the doorstep and waited. Directly the door opened, the poor, thin, haggard country boy, with wild gleaming eyes, rushed to him for a copy of the 'Seasons.' The tradesman asked questions. John told his story in hurried words, and the bookseller said that he would let him have a copy for a shilling. "Keep the sixpence, my boy," said the man, and away went John. In Barnack Park, amidst some thick shrubs, John Clare read the book. He did not know how to give vent to his happiness, but he had a pencil and a piece of coarse crumpled paper in his pocket, and on that he wrote his poem the 'Morning Walk.' The remainder of Clare's life presents nothing specially remarkable beyond the fact that he was throughout it curiously unlucky; and though from time to time he met with good friends, misfortune had marked him for her own, and eventually, through brooding over some unsuccessful commercial enterprises, his mind gave way. From John Clare to George Gordon Noel, Lord Byron, is a far cry; the former being purely a small pastoral poet, the latter impurely a great genius. _A propos_ of being involved and being indebted to the children of Israel for supplies, his lordship wrote: "In my young days they lent me cash that way, Which I found very troublesome to pay." Tom Moore says that Byron's marriage with the daughter of Sir Ralph Milbank was contracted in the hope that her dowry would extricate him from his monetary difficulties, but it apparently only increased his misery, and, notwithstanding the serious reason for their separation, as given by Mrs. Beecher Stowe, there is no doubt debt had a considerable share in bringing it about, for "during the first year of his marriage his house was nine times in the possession of bailiffs, his door almost daily beset by duns, and he was only saved from gaol by the privileges of his rank." Coming down to the more modern school of writers, it is especially noticeable that the circumstances connected with their impecuniosity are much less sombre in character than those of the like previous age. Douglas Jerrold, the novelist, dramatist and essayist, contributes an amusing reminiscence in connection with the first money he earned, a story which he himself was wont to relate with great delight in after years. At the time of the incident the young fellow's home was far from cheerful; his mother and sister were away (in all probability acting in the provinces), and he and his father were the sole occupants of the lodgings. Old Mr. Jerrold was weak and ailing, and anything but good company for the high-spirited, happy-natured boy, who eventually developed into one of the most witty and satirical authors of his time. The picture of the poor old gentleman sitting helplessly in the corner, when the wants of the family so needed a strong arm to work for them, was undoubtedly depressing; but the dreary monotony was broken on the day when Douglas Jerrold returned home excitedly jubilant with his first earnings as an apprentice. A thorough Englishman, he naturally thought the occasion must be celebrated by a dinner and at once proceeded to purchase the ingredients of a beef-steak pie. When he returned, amply repaid for the money he had expended by the proud satisfaction visible on his father's face, he was met by rather a serious difficulty. It was true the materials for the dish were all there, but who was to make the delicacy? Mr. Jerrold, senior, was incapable, and there was, therefore, nothing for it but for the boy to turn to and try his hand at a crust. He did so, and amidst much merriment the pie was made, taken to the baker's, and eaten by the happy pair (at any rate, happy on that occasion), with a relish and pleasure no doubt far in excess of that experienced at many of those grander banquets which he afterwards graced by his presence. It is said by his son that "the memory of this day always remained vivid to him. There was an odd kind of humour about it that tickled him. It so thoroughly illustrated his notions on independence that he could not forbear from dwelling again and again on it among his friends." There is no doubt that Douglas Jerrold cherished the memory of this honourable impecuniosity as he did everything else that was noble and pure, for in his slashing satire levelled against those meaningless decorations or orders of the wealthy he clearly shows his lasting sympathy for poverty with honour. He says: "The Order of Poverty--how many sub-orders might it embrace! As the spirit of Gothic chivalry has its fraternities, so might the Order of Poverty have its distinct devices." He then goes on to enumerate the nobility and dignity of labour exemplified in the cases of the peasant, the shepherd, the weaver, the potter, and other callings, not neglecting even the pauper, of whom he writes:-- "And here is a pauper, missioned from the workhouse to break stones at the roadside. How he strikes and strikes at that unyielding bit of flint! Is it not the stony heart of the world's injustice knocked at by poverty? What haggardness is in his face! What a blight hangs about him! There are more years in his looks than in his bones. Time has marked him with an iron pen. He wailed as a babe for bread his father was not allowed to earn. He can recollect every dinner--they were so few--of his childhood. He grew up, and want was with him, even as his shadow. He has shivered with cold, fainted with hunger. His every-day life has been set about by goading wretchedness. "Around him, too, were the stores of plenty. Food, raiment, and money mocked the man half-mad--mad with destitution. Yet, with a valorous heart, a proud conquest of the shuddering spirit, he walked with honesty and starved. His long journey of life has been through stormy places, and now he sits upon a pile of stones on the wayside, breaking them for workhouse bread. Could loftiest chivalry show greater heroism, nobler self-control, than this old man--this weary breaker of flints? Shall he not be of the Order of Poverty? Is not penury to him even as a robe of honour? His grey workhouse coat braver than purple and miniver? He shall be Knight of the Granite if you will. A workhouse gem, indeed--a wretched highway jewel--yet, to the eye of truth, finer than many a ducal diamond.... And so, indeed, in the mind of wisdom, is poverty ennobled. And for the Knights of the Golden Calf, how are they outnumbered! Let us then revive the Order of Poverty. Ponder, reader, on its antiquity! For was not Christ Himself Chancellor of the Order, and the Apostles Knight Companions?" Although Douglas Jerrold may be best remembered by the many for his felicitous epigrams and wondrous wit, it should be borne in mind that he contributed materially to the high tone that now prevails in our literature. The fine spirit was touched to fine issues, and the influences which he aided by his life will be his enduring bequest to the future. He was, like Dickens, constantly at war with abuses, ever writing with a purpose, and always aiming to crush tyranny, injustice, or some kindred social monster. Like Dickens, he delighted in assisting the cause of the poor and weak, which characteristic, so conspicuous in both, may be accounted for by the impecunious surroundings in which they were both reared. With regard to Charles Dickens, undeniably the most popular novelist of this century, and generally considered to be one of the greatest humourists we have ever had, it would seem as if we had to thank impecuniosity for much of his marvellous characterisation; and though he bitterly deplored the want of early education and proper home-training, it is possible that but for the hardness of his youthful lot he might never have developed the faculty of observation to the extent he did. From the needy circumstances of his parents he was compelled from very early years to think for himself; and this is, according to John Forster, what he thought of his father:-- "He was proud of me in his way, and had a great admiration of the comic singing. But in the ease of his temper and the straitness of his means he appeared to have utterly lost at this time the idea of educating me at all, and to have put from him the notion that I had any claim upon him in that regard whatever. So I degenerated into cleaning his boots of a morning and my own, and making myself useful in the work of the little house, and looking after my younger brothers and sisters (we were now six in all), and going on such poor errands as arose out of our poor way of living." After his father's arrest for debt and his incarceration in the Marshalsea (particulars of which are so graphically described in 'David Copperfield'), Charles Dickens, when little more than ten years of age, was placed at a blacking manufactory, where he earned the sum of six shillings per week, and which is thus described by him:-- "The blacking warehouse was the last house on the left hand side of the way, at old Hungerford Stairs. It was a crazy tumble-down old house abutting, of course, on the river, and literally overrun with rats. The wainscotted rooms and its rotten floors and staircase and the old grey rats swarming down in the cellars, and the sound of their squeaking and scuffling coming up the stairs at all times, and the dirt and decay of the place, rise up visibly before me as if I were there again. My work was to cover the pots of paste blacking first with a piece of oil paper and then with a piece of blue paper, to tie them round with a string, and then to clip the paper close and neat all round, until it looked as smart as a pot of ointment from an apothecary's shop. When a certain number of grosses of pots had attained this pitch of perfection, I was to paste on each a printed label, and then go on again with more pots." With regard to the way he lived at this time, he says: "Usually I either carried my dinner with me or went and bought it at some neighbouring shop. In the latter case it was commonly a saveloy and a penny loaf, and sometimes a fourpenny plate of beef from a cookshop, sometimes a plate of bread and cheese and a glass of beer from a miserable old public-house over the way--the 'Swan,' if I remember right, or the Swan and something else that I have forgotten. Once I remember tucking my own bread (which I had brought from home in the morning) under my arm, wrapped up in a piece of paper like a book, and going into the best dining-room in Johnson's Alamode Beef House in Charles' Court, Drury Lane, and magnificently ordering a small plate of Alamode beef to eat with it. What the waiter thought of such a strange little apparition coming in all alone, I don't know, but I can see him now staring at me as I ate my dinner, and bringing up the other waiter to look. I gave him a halfpenny, and I wish now that he had not taken it." Soon after Dickens entered upon his engagement at the uncongenial blacking establishment, his mother's home was broken up and she joined his father in the debtors' prison, and Master Charles was then placed with a Mrs. Roylance at Camden Town, with whom he lodged for some time, boarding himself on his six shillings a week, which he apparently found by no means an easy job, as his appetite seems to have troubled him considerably by this. "I was so young and childish and so little qualified--how could I be otherwise?--to undertake the whole charge of my own existence, that in going to Hungerford Stairs of a morning I could not resist the stale pastry put out at half price on trays at the confectioner's doors in Tottenham Court Road. I often spent in that the money I should have kept for my dinner. Then I went without my dinner, or bought a roll or a slice of pudding. There were two pudding shops between which I was divided according to my finances. One was in a court close to St. Martin's Church (at the back of the church), which is now removed altogether. The pudding at that shop was made with currants, and was rather a special pudding, but was dear: two penn'orth not being larger than a penn'orth of more ordinary pudding. A good shop for the latter was in the Strand, somewhere near where the Lowther Arcade is now. It was a stout, hale pudding, heavy and flabby, with great raisins in it stuck in whole, at great distances apart. It came up hot, at about noon every day, and many and many a day did I dine off it. I know I do not exaggerate, unconsciously and unintentionally, the scantiness of my resources and the difficulties of my life. I know that if a shilling or so were given me by any one I spent it in a dinner or a tea. I know that I worked from morning to night with common men and boys, a shabby child. I know that I tried, but ineffectually, not to anticipate my money, and to make it last the week through, by putting it away in a drawer I had in the counting-house, wrapped into six little parcels, each parcel containing the same amount, and labelled with a different day. I know that I have lounged about the streets insufficiently and unsatisfactorily fed. I know that, but for the mercy of God, I might easily have been, for any care that was taken of me, a little robber or a little vagabond." Contemporary with Dickens figured another popular writer of light fiction, who, though perhaps a trifle jollier and more genial in his fun, cannot claim to be placed in the same category with the immortal author of 'Nicholas Nickleby,' 'A Tale of Two Cities,' etc. etc. I allude to Albert Smith, who whether detailing on paper "The Adventures of Mr. Ledbury" or recounting to an audience at the Egyptian Hall his "Ascent of Mont Blanc," was always extremely amusing. Owing to a slight similarity in the style of their writing it sometimes happened that unfortunate comparisons were made between the two men, when naturally poor Albert Smith suffered. For instance, when a friend speaking of the two authors to Douglas Jerrold said, that as humourists Charles Dickens and Albert Smith "rowed in the same boat," Jerrold replied with more or less warmth, "True, they do row in the same boat, but with very different skulls." Unlike Dickens, Albert Smith was not practically acquainted with absolute poverty, though at times as a student there is no doubt he was familiar with that condition known as "rather short of funds," and his account of an Alpine journey made on the most economical principles may be cited as curious and not unconnected with impecuniosity. In September 1838 he started from Paris for Chamounix with another equally humbly appointed traveller, who like himself intended to do the grand Alpine tour with £12, which was to pay for travelling expenses and board and lodging for five weeks. They carried their money in five-franc pieces, stuffed in leathern belts round their waists, bought two old military knapsacks at three francs each, and two pairs of hobnailed shoes at five and a half francs each. Before starting they made a good breakfast at a _café_ and obtained from the cook a dozen hard-boiled eggs for the journey, supplying themselves also with a _litre_ of _vin ordinaire_, a flat bottle of brandy, and a leathern cup that folded up. Opposition _diligences_ were running on the road from Paris to Geneva, and for two pounds they secured seats on one which took seventy-eight successive hours--_i.e._, from 8 o'clock on Friday morning till 2 P.M. on the following Monday. On arriving at the place where the other passengers lunched at a cost of three francs, Smith and his friend regaled themselves on their eggs, with the addition of some bread and pears bought in the town, which place they inspected while their fellow-travellers were luxuriating over their _déjeûner_. When dinner-time came, instead of patronising the hotel, they repaired to a more humble restaurant, and for 24 sous each obtained all that they required. At night they crept under the tarpaulin roof of the _diligence_, stacked all the luggage on each side, and collecting some straw, on which they reclined, slept tolerably well. In the morning they walked on before the conveyance started, bathed in the river, and after breakfast (managed in the same inexpensive way), were picked up by the diligence. In this manner they travelled for the three days, observing pretty much the same routine (except on the Sunday, when they washed at the fountain in the market-place at Dole, to the great delight and amusement of a party of girls, who lent them towels and a huge piece of soap), their expenses for the journey to Geneva being £2 12_s._ 6_d._ each. As a specimen of how they managed to do and see so much on so very little: at Arpenay, where a cannon is fired to produce a certain marvellous echo, they simply waited until a party more capable of paying for such a luxury arrived, and then availed themselves of the opportunity. On the same principle, when starting for the Mer de Glace they followed a party at some little distance, and by this means dispensed with the services of a guide. They bathed on the top of the Foxlay, and there in the springs, washed their linen, spreading their things on the stones afterwards to dry; and in such way the Alpine tour was made by the two friends completely, safely, and without exceeding the amount of funds they possessed. Scarcely so honourable, though a trifle more exciting, is a reminiscence related of the late Robert Brough, more generally known to those who were acquainted with him and loved him dearly as Bob Brough. Unfortunately he was a man who was unable to make his income and expenditure balance: whether it was that the former was too small, or the latter too large, it matters not; but as a natural consequence, debt and difficulty were his constant companions. At one time when things had been going very badly (that is, in all probability to mine uncle's) he found it necessary to seek a more congenial clime. England was found to be unpleasantly hot, owing to the warm attention of a money-lending creditor, and foreign travel was known to be absolutely imperative. The proprietor of the _Sunday Times_ being made acquainted with the circumstances commissioned him to write a series of articles, to be entitled "Brussels Sprouts." Desirous of executing the commission, and longing for a dip in the sea, he started off to Ostend, and on arriving there, was not long in going through the preliminaries of taking "a header." He took it, but to his horror on coming to the surface he met with what is slangily termed a "facer," for he found himself face to face with the identical creditor from whom he was fleeing. "Oh, this is the way my money goes, is it! I'll lock you up, you----" began the money-lender, but before the sentence was finished Brough dived again, swam to shore, secured his luggage, started for Paris, and left the "Brussels Sprouts" to take care of themselves. As I commenced this chapter by quoting the somewhat ungenerous strictures of Thackeray on his unhappy brethren, it will be a fitting termination to close with an incident of impecuniosity connected with his life, which circumstance, by the way, was caused by no fault of his. How could it have been? He was so terribly correct and proper! However, when sojourning on one occasion in France, he had the misfortune to be robbed of his purse, and immediately wrote off to a relative for fresh supplies. In the meantime he borrowed a ten-pound note, which he spent in little more than a week, thinking he should by that time be in possession of a remittance from his aunt. But no remittance came. He then humorously describes the horrors that arose in his mind as day after day passed on and there was no response from England. His intense desire for a frothy pot of beer, ungratified of course from his impecunious state, his alarm lest the landlord should present his bill, and his forebodings when passing a prison-house, with his elation of spirits when the long-delayed cheque at length arrived, are presented with all the charm of comedy and the interest of romance, and playfully alluded to in these four lines:-- "My heart is weary, my peace is gone, How shall I e'er my woes reveal? I have no money, I lie in pawn, A stranger in the town of Lille." CHAPTER IX. THE ROMANCE OF IMPECUNIOSITY. Although at first sight the condition of impecuniosity seems more calculated to produce practicality, and render persons matter-of-fact, in the foregoing chapters there have not been wanting illustrations to prove that impecuniosity has been responsible for some romance. The case of Angelica Kauffman may be taken as an example. Owing to the poverty of her father she was compelled to accept the hospitality of an English peer in Switzerland, who insulted her, and afterwards, when unable to obtain a favourable reception of his suit, in revenge induced a married adventurer to make love to and marry her. This was romantic, without question, and undoubtedly attributable to want of money, as but for that she would never have been brought in contact with the disgraceful nobleman in question. When we remember, however, how impecuniosity has been produced, how that it has been brought about by misfortune, extravagance, heroism, want of principle, want of foresight, inadequacies of justice, eccentricity of character, extreme benevolence of disposition, and by other equally varied causes, it is not surprising that there should be found considerable connection between it and romance, more especially as the consequences of the condition have been crime of every description, from comparatively venial offences against society to the universally reprobated sins of forgery and murder. Again, the strange and unexpected means by which people have been delivered from their impecuniosity savours strongly of the unreal, of the world of fiction rather than of the world of fact. But that real life is prolific of romance has long been acknowledged by all but those whose knowledge of human life is small, and whose ignorance of history is entire. As the poet pithily puts it-- "Truth is always strange, Stranger than fiction: if it could be told, How much would novels gain by the exchange." Admitting this, and judging from the facts that we are possessed of, what marvellously romantic deeds must impecuniosity have been connected with that will never be recorded!--devoted deeds of self-sacrifice that will never be known to any save the sufferers! Not long since I read in a popular periodical of something suggestively similar. A girl on the way to join her husband, to whom she has been only married by the Scotch law, learns by accident that her marriage alone stands between her husband and a fortune. Circumstances so happening that she can make it appear credible that she was on board a vessel that was lost, she does so, believing that by her renunciation she is giving up "all for him." "Truth is stranger than fiction," and it follows, therefore, that such instances of self-abnegation induced by impecuniosity have been and will be found. But to facts. I have included in the list of the causes of impecuniosity the want of foresight, and this is painfully instanced by the story of a poor old woman at Plymouth, who did not like the formality, or could not afford the expense, of having a will prepared. Being exceedingly ill, she thought she would like to leave her little property--furniture, a small amount of money, and household movables--to her neighbours and acquaintances. This wish _vivâ voce_ she practically carried out. Of her own proper authority she gave and willed away chairs and tables to one, her bed to this friend, her cloak to that, money, utensils, nicknacks, to others. Crones, housewives, and young women gathered sympathetically around her, and soon carried away the various things bequeathed to them. It was not long after they had departed that she unexpectedly recovered from her illness, and sent to have her things back again, but not one of them could she get, and she was left without a rag to cover her or a friend to give her a kind word. Strange as was this circumstance, here is something surpassing strange, being the romantic record of one who was literally "a funny beggar." Less than half a century since there used to be seen on the Quai des Celestines in Paris a mendicant holding in one hand some lucifer-matches. Wan, self-possessed, scantily but neatly attired, there were in the beggar's visage traces of refinement and good breeding. Round his neck was a loop of black silk ribbon, to which was suspended a piece of pasteboard having an inscription to the effect that the wearer was a poor man, and craved relief on the plea that "_he had lived longer than he should_." The petitioner's history was a singular one. Jules André Gueret, when twenty-five years old, became the possessor of a large fortune. He remained a bachelor, and turned his estate into hard cash. An epicurean, a man of some taste, and a bit of a philosopher, he began a calculation to ascertain how he could best enjoy himself. Making no investments, he kept his cash at home. Gueret came to the conclusion that a sober man's life averaged seventy years, but that a pleasure-seeking, gay man's life might only last fifty-five or sixty years. He then divided his finances into so many equal portions. Each portion was to be an annual allowance, the pleasure-seeker arranging that the money should last five-and-thirty years. Gueret, in conclusion, made a compact with himself that if he lived beyond sixty years of age, suicide would prevent his suffering ills at the hands of poverty. But when turned sixty years of age, and when his money was exhausted, either love of life or fear of death prevented the once gay and opulent Gueret from committing self-destruction. It will be seen that it was a terribly true inscription on the bit of pasteboard hanging from the neck of the beggar haunting the Quai des Celestines. The vicissitudes of Gueret were obviously self-created, and _à propos_ of a man's idiosyncrasy impelling him on to impecuniosity, there is hardly a more curious illustration to be found than that contained in the biography of Combe, the author of the 'Adventures of Dr. Syntax.' This man was a born eccentric, perverse, whimsical, and humorous. Possessing natural gifts, and the heir to a large fortune, he frittered away his mental resources, wasted his patrimony, and often committed acts worthy of the simpleton or lunatic. He went through the curriculum of Eton and Oxford, and by the refinements of his taste and the elegance of his manners won the title of "Duke Combe." In a comparatively short period, by his prodigality and reckless expenditure he was reduced to penury, and finding no means of subsistence, enlisted as a private in the army. While in the ranks he was reading one day, when an officer passing him managed to see the book, which was a copy of Horace. "My friend," said the officer, "is it possible that you can read Horace in the original?" "If I cannot," said Combe, "a great deal of money has been thrown away on my education." Escaping from the English army, he joined the French service, and again fleeing, he entered a French monastery, remaining there until he had passed his noviciate. He subsequently left the Continent and became a waiter in South Wales. On several occasions, while in that capacity, he met with acquaintances whom he had known in college days, but he was never embarrassed even when seen tripping along with a napkin under his arm. Combe afterwards married an amiable and devoted woman, and settled down for a time as an author. Some of his writings contained questionable morality, and others were of scurrilous and venal character. 'Letters from a Nobleman to his Son,' said to be by Lord Lyttelton, and 'Letters from an Italian Nun to an English Nobleman,' said to be by Rousseau, were both from the pen of "Duke Combe." At last he became an inmate of the King's Bench Prison, and he remained there several years. When a friend offered to make an arrangement with his creditors, he replied: "If I compounded with those to whom I owe money I should be obliged to give up the little I possess, and on which I can manage to live in prison. These rooms in the Bench are mine at a very few shillings a week in right of my seniority as a prisoner. My habits have become so sedentary, that if I lived in the airiest square of West-End London, I should not walk round it once a month. I am quite content with my cheap quarters." It was in the King's Bench Prison that Combe wrote for the publisher Ackerman, 'The Adventures of Dr. Syntax in Search of the Picturesque,' 'The Dance of Life,' and 'The Dance of Death.' At one period of Combe's career Roger Kemble gave him a theatrical benefit, and Combe promised to speak an address on the occasion. There had been much gossip and many conjectures concerning his real name, history, and condition. To such gossip and conjectures he referred when he stood before the curtain, and in the presence of a crowded auditory. Then he added, "But now, ladies and gentlemen, I shall tell you who and what I am." There was an eager and expectant expression on the countenances before him. Combe paused--all present leaning forward to hear him--gathered himself up, as if for a great effort, and then said, "I am, ladies and gentlemen--your most obedient, humble servant." It is evident Combe's peculiar disposition was the cause of his peculiar circumstances. He was a perverse, whimsical man, rather than an unfortunate one, and it was much the same with the son of Lady Mary Wortley Montague, the Hon. Mr. Wortley Montague, notorious for his roving and adventurous disposition. When a boy he ran away from home, and became a chimney sweep. It is true that young Montague's father was cold in his manners and severe in his discipline to the lad, who in addition chafed under the somewhat stringent arrangements of the Westminster masters, for enforcing law and order amongst their pupils. At Westminster School, however, where the lad was placed in 1729, he at once showed himself brilliant and precocious, but vain, impatient of control, and of truant disposition. Reckless and petulant, he resolved to see the world, and without a single confidant, one day quitted the seminary, roamed the streets, and at night made his way into the fields about Chelsea, and there slept till morning. After a few days his stock of money became low, and while reading the newspapers over his tavern breakfast, he noticed in an advertisement an accurate description of his face, figure, and costume, with the notification that a handsome reward would be paid by his parents to recover their lost child. Hastily paying his bill, he made his way from the tavern, perambulated the streets, utterly at a loss how to act in order to shun the humiliation of meeting his father and mother, and of again having to undergo the restrictions of domestic and scholastic routine. Meeting a chimney-sweeper's apprentice, Montague entered into conversation with him and agreed to exchange clothes, which transformation was accomplished in an empty house. The truant was not satisfied yet, and actually accompanied the apprentice to his master's house for the purpose of trying to become a chimney-sweep himself. From motives of benevolence or cupidity the master sweep agreed to induct young Montague into the mysteries of cleansing flues, and the lad remained in his employment for some months. During the period of his connection with the "sooty trade" the aristocratic young truant went through many adventures and played many pranks. His roaming disposition, however, caused him to run away from his master, which he did without warning, and he soon found himself again walking about the streets of the metropolis, his money exhausted. He had but one thing left, a carefully-preserved watch, by which he could obtain the necessaries of life; driven to desperation, he walked into a jeweller's shop and offered the watch for sale. The proprietor was courteous but wary, and being suspicious that the lad had become possessed of the valuable article in a dishonest manner, took the opportunity of sending for a constable. Montague was arrested and conveyed to Bow Street, where the magistrate closely questioned the culprit. Young Montague, with the utmost frankness, gave an account of his strange and romantic adventures from the moment when he had quitted Westminster School. It was not long ere his parents were made acquainted with the particulars of their son's flight and safety, and the foolish wanderer was speedily taken back with caresses and delight. All was forgotten and forgiven, and in a few weeks Montague was reinstated in his old place at Westminster. It is said that what is bred in the bone comes out in the flesh, and it was not long before the crack-brained scholar again became unsettled. Through an older companion, young Montague sought the good offices of a knavish money-lender, who, making himself acquainted with the lad's position and prospects, advanced him a sum of money. With the loan he felt free to make another flight, and away he went to Newmarket. He was amused and delighted with the spectacle of horses, jockeys, and bruisers. Enjoying himself at an inn, he fell into the company of card-sharpers, who soon eased him of the guineas he had brought down from London. His position was unfortunate and perilous, but wandering out through the town, he encountered a friend of the family, who resolutely conveyed him back to his parents, who, as before, after due admonition, forgave him. The debt to the money-lender was paid, and the youngster again found himself surrounded by all the luxuries of an aristocratic home. But his restless spirit could not endure the harness of conventional life. Once more he sought the office of the usurer, who made the required advances, and he then made up his mind to taste the joys of sea voyages and the novelties of foreign travel. Making his way to Wapping, he struck up a friendship with the captain of a trading-vessel bound for Cadiz. Montague agreed to visit Cadiz with him, making the commander acquainted with the particulars of his history. The youth prepared for the journey, and thought that his last night in England should be a convivial one, and consequently ordered at one of the Wapping taverns a sumptuous supper. The landlord during the evening introduced some card-sharping rogues who proposed play, and in the course of an hour or two the son of Lady Mary had lost heavily. He was made drunk and taken away senseless to bed. When he came to himself in the morning he found that he had been robbed of everything, including his watch, and that he was utterly impotent to pay the heavy bill for the previous night's banquet. The landlord affected much indignation, and went out of the house under the pretence of procuring a constable. Young Montague was at his wit's end, when the hostess advised him to quit the tavern. Taking the hint, he hurried to the captain and told his story, and the captain intimated that he would seek the landlord. Captain James being a rogue, came to an understanding with the Wapping host, who agreed to hand over part of the spoil. James returned to the young dupe, and informed him that no redress could be afforded, but that if he liked he might work his way out to Cadiz. So Montague was the victim of both landlord and captain. During the voyage to Cadiz the youth underwent numerous trials and hardships. On landing at Cadiz he at once left Captain James and found himself in a foreign town without money and without friends. However, he found the Wapping card-sharpers had left him a pair of Mocoa sleeve-buttons set in gold, and having sold them he lived on the money for a few weeks. When that money was exhausted he happened to make the acquaintance of a muleteer, who, wanting a helper, found a ready and active one in the adventurous youth. All his subsequent adventures were of like irrational character, and he died of a fever contracted during foreign travel when a comparatively young man. I now turn to a pathetic story of poverty, in which the victim, but for the cruel deeds of a crafty and malignant woman, might have been surrounded by the auxiliaries of wealth and feudal splendour. Fortune occasionally plays strange pranks, and in the instance I am about to quote it will be seen that her caprices sometimes fall on unoffending and worthy men with pitiless and tremendous severity. More than two hundred and fifty years since a miserable bowed man might have been seen working about the fields and roads outside Leicester, doing that slavish and drudging work which falls to the lot of the English peasant. But for an unhappy episode connected with his ancestors he might have been summoned to dinner by sound of horn and taken his food from burnished silver. He was the heir of the famous Sir Robert Scott of Thirlestane, a cadet of the House of Buccleuch. Sir Robert Scott lived in the time of the sixth James of Scotland, and was a man of noble character, though of iron will and fiery blood, and little knew the awful cloud that gathered over his house when he married his second wife. Scott of Thirlestane had a son by his first marriage, and the heir was loved by the father with all the intensity and tenderness of a strong man's nature. From the time the second wife bore children to Sir Robert, she hated the stepson with unceasing and sleepless malignity. She saw that as long as he lived the future possessions of her own children would be but little. She was cruel, crafty, and unscrupulous: and her worst feelings were excited when she learned that Sir Robert proposed building a tower at Gamescleugh in honour of the young laird's majority. The father had also arranged a marriage for his son. The stepmother then entered upon plans to murder him on the occasion of the opening of the new castle, when a great festival was to take place. Her agent in the crime was John Lally, the family piper, who obtained three adders, from which he abstracted poison, and conveyed it to Lady Thirlestane, who mixed it with a bottle of wine. On the day of festivity the young laird inspected the tower and received from Lally's hand the poisoned wine in a silver flagon, and drank a hearty draught. In an hour the heir of the house of Thirlestane was dead, and Lally had fled no one knew whither. News of the heir's death soon reached the ears of the father, who had the alarm bugle sounded to call together his retainers. On the earl calling out to his assemblage, "Are we all here?" a voice answered, "Yes, all but John Lally, the piper." It was ominous, for the husband knew the confidence his wife placed in that retainer, and Sir Robert swooned. Strange was it that Sir Robert could not be induced to make a public example of his wife; but he announced to his friends that the estate belonged to his murdered son, who, if he could not enjoy it living, should enjoy it dead. The body of the heir was embalmed with drugs and spices, and laid out in state for a year and a day. For twelve months the unhappy father kept up one continuous round of costly and magnificent revels. Wine flowed like a river, and the scenes of carousal were of unprecedented extravagance. Soon after the funeral Sir Robert was borne to the grave and the family reduced to utter beggary. The stepmother wandered about an outcast and pauper, and in after years the heir of the Thirlestane family worked as a common ditcher, as I have described. A similar strange and pathetic story, in which it is shown that the innocent suffered for the guilty, is that of Sir John Dinely, who, at the beginning of the century, was one of the Poor Knights of Windsor. Dinely was a singularly eccentric and unfortunate man. He was often to be seen mysteriously creeping by the first light of a winter's morning through the great gate of the lower ward of Windsor Castle into the narrow back streets of the town. He used to wear a roquelaure, beneath which appeared a pair of thin legs encased in dirty silk stockings. In wet weather he carried a large umbrella and walked on pattens. He lived in one of the houses of the military knights, then called Poor Knights, to which body he belonged. Except the eccentric possessor, no human being entered his abode, and he dispensed with all domestic service. Dinely in the morning went forth to make his frugal purchases for the day--a faggot, a candle, a small loaf, and perhaps a herring. The Poor Knight of Windsor might have fared better, but every penny except those laid out for absolute necessaries of life was capitalised in the promotion of an absorbing and quixotic scheme. Regular attendance at St. George's Chapel was Dinely's duty; and the long blue mantle which the Poor Knights wore covered his shabby habiliments, as the dingy morning cloak hid red herrings and farthing candles. Such were some of the phases--sombre, squalid phases--of Sir John's existence. But there were periods when the Poor Knight assumed the externals of aristocratic opulence. The poor hunchback lover in the introduction to the pantomime, who, by the enchanter's wand in the transformation-scene, becomes the gay and spangled harlequin, typifies Dinely dressed for his marketing, and Dinely dressed for the promenade. Any circumstances drawing together a crowd at Windsor, whether the presence of royalty, the attractions of the military parade, or of the promenade, did not fail to draw forth Dinely from his poverty-stricken home. When he appeared on festive occasions, his cloak was cast aside, and he might have sat to any painter desiring to reproduce on canvas a gentleman of the time of George II. An embroidered coat, silk flowered waistcoat, nether garments of velvet, carefully meeting silk stockings, which surmounted shoes and silver buckles, in addition to a lace-edged cocked hat, and powdered wig, set off the attenuated figure of the Poor Knight of Windsor. His object in so presenting himself was to attract the notice of some rich lady for matrimonial ends, matrimony being the medium through which he imagined he could transform his splendid dreams into no less splendid realities--the reason for his eccentric economy being explained by his history. In January, 1741, there were two brothers living at Bristol who had become enemies on account of an entail of property. The elder of these brothers was Sir John Dinely Goodyere, Baronet, the other Samuel Dinely Goodyere, a captain in the navy. Estrangement had taken place, but a common friend, at Samuel's request, brought them together. They dined, had pleasant hours, and fraternal words were exchanged. On parting Sir John went his way across College Green, and while there was met by his brother and six other sailors. Sir John was brutally treated, carried away to a ship, and on it he was strangled. Retribution followed swiftly, and in two months Samuel Dinely Goodyere had expiated his crime on the gallows. The Poor Knight of Windsor was the son of the murderer, and it is generally believed that the family estates which might have come to Captain Goodyere were forfeited to the Crown. To recover the family estates was the day dream of Sir John. Not having sufficient money to obtain the requisite legal help to regain the lost inheritance, the poor old man resorted to the matrimonial scheme. His proceedings were perfectly serious, dignified, and earnest. Frequently has he been seen on the terrace at Windsor presenting to some county widow or elegantly attired gentlewoman a printed paper which with the utmost gravity he would take from his pocket. Should the lady accept the paper, Sir John Dinely would make her the most profound of bows, and then withdraw. The following is an extract from one of the documents:-- "_For a Wife._" "As the prospect of my marriage has much increased lately, I am determined to take the best means to discover the lady most liberal in her esteem by giving her fourteen days more to make her quickest steps towards matrimony: from the date of this paper until eleven o'clock the next morning: and as the contest evidently will be superb, honourable, sacred, and lawfully affectionate, pray do not let false delicacy interrupt you. An eminent attorney here is lately returned from a view of my superb gates, built in the form of the Queen's house. I have ordered him, as the next attorney here, who can satisfy you of my possession in my estate, and every desirable particular concerning it, to make you the most liberal settlement you can desire, to the vast extent of three thousand pounds." Some verses conclude, the words being-- "A beautiful page shall hold, Your ladyship's train surrounded with gold." The advertiser alludes to the forfeiture of the estates in another paper: "Pray, my young charmers, give me a fair hearing; do not let your avaricious guardians unjustly fright you into a false account of a forfeiture." Sir John did not scatter his papers broadcast. It was only to those whom he deemed suitable ladies that he distributed his precious and grandiloquent invitations. Notwithstanding the seeming allurements of his circulars, Sir John Dinely found no nibblers for his bait. One morning the accustomed seat in St. George's Chapel knew him no more. He was missing. The door of his lodging was forced, and in his room he was found ill and helpless. Everything about him was of the poorest and most squalid character. There was little furniture--a table and a chair or two. The room was strewed with printing type, for he printed his own bills; and in a few days Sir John Dinely was borne to the grave. "Wise judges are we of each other," said Claude Melnotte contemptuously to Colonel Damar when that officer remarked that he "envied" the pretended Prince of Como, and it would be well for many of us were we to remember the rebuke in forming our judgment of our fellows in connection with their pecuniary position. A very pitiful story illustrating the argument is narrated by Charles Lamb in his essay, "Christ's Hospital Five and Thirty Years Ago." Referring to some cartoons connected with his old school, the author writes:-- "L---- has recorded his repugnance of the school to 'gags,' or the fat of fresh boiled beef, and sets it down to some superstition; but these unctuous morsels are never grateful to young palates (children are universal fat-haters), and in strong, coarse, boiled meats, unsalted, are detestable. A gag-eater in our time was equivalent to a ghoul, and held in equal detestation. There was a lad who suffered under this imputation. 'It was said He ate strange flesh.' "He was observed, after dinner, carefully to gather up the remnants left at the table (not many nor very choice fragments, you may credit me), and in an especial manner these disreputable morsels he would convey, and secretly stow, in the settle that stood at his bedside. None saw when he ate them. It was rumoured that he privately devoured them in the night. He was watched, but no traces of them, of such midnight practices were discoverable. Some reported that on leave-days he had been seen to carry out of the bounds a large blue check handkerchief, full of something. This, then, must be the accursed thing. Conjecture next was at work to imagine how he could dispose of it. Some said he sold it to the beggars. This belief generally prevailed. He went about moping--none spake to him. No one would play with him. He was excommunicated--put out of the pale of the school. He was too powerful a boy to be beaten, but he underwent every mode of that negative punishment which is more grievous than many stripes. Still he persevered. At length he was observed by two of his schoolfellows, who were determined to get at the secret, and had traced him one leave day for the purpose, to enter a large worn-out building, such as there exists specimens of in Chancery Lane, which are let out to various scales of pauperism, with open door and a common staircase. After him they silently slunk in, and followed by stealth up four flights of stairs, and saw him tap at a poor wicket, which was opened by a poor woman meanly clad. Suspicion was now ripened into certainty. The informers had secured their victim. Accusation was formally preferred, and retribution most signal was looked for. Mr. Hatherway investigated the matter. The supposed mendicants, the receivers of the mysterious scraps, turned out to be the parents of the boy. This young stork, at the expense of his own good name, had all this while been feeding the old birds." A striking story of the unknown resources and trials of the poverty-stricken is the following, a favourite one with that capital _raconteur_, the late Julian Young. A certain diplomatist was many years ago despatched by the English Government on an embassy extraordinary to one of the continental courts, where his handsome person and the urbanity of his manners made him a general favourite. On his departure the sovereign to whom he was accredited presented him with a small box of unusual value as a mark of his esteem. It had on its lid a miniature of the king set in brilliants of great beauty. When he had retired from public life and happened to give a dinner to any of his friends, he was fond of producing it at the dessert, as it afforded him an opportunity of descanting on the king's appreciation of his services. On one of these occasions the box was brought forth, handed by the butler to the master, and passed round. The last person into whose hands it went was an old general, who, from some failure in investments, was known to be in embarrassed circumstances. In due course all rose to join the ladies, and in so doing the owner of the snuff-box looked round for it in order that it might be replaced in the cabinet. Not seeing the box, the owner immediately made inquiries concerning it, and asked the gentlemen to make search for it, suggesting that it was possible that some one in a fit of absence might have placed it in his pocket. Everybody denied having any knowledge of it, though one or two present declared that the old general was the last person in whose hands they remembered to have seen it. "Having seen it before," the old general said, "he had but bestowed a cursory glance upon it and then placed it in the centre." The strictest search about the room was then made, but only with fruitless results. The owner of the box assumed much gravity of manner, and having referred to the seriousness of the loss, said, "I suspect no one, and that I may have no cause to do so, I must ask you to let me search you all without distinction." Two or three rose to depart, but they were anticipated by their entertainer, who put his back against the door and refused egress to any one. The old general stepped forward and said, "Sir, do you mean to insult us because we have drunk your wine? If any one dares to oppose my exit from this room, I shall call him to account." The old grizzled warrior strode out with a firm and defiant air. Known to be poor, and from his determined departure on the occasion of the proposed search, the general was coldly and shyly regarded by those who knew the circumstances, and by those who afterwards heard of them. Some time later, at the same host's table, the butler, hearing the story of the lost snuff-box, informed his master that on the occasion alluded to be had taken it up and deposited it in a little drawer at the end of a sideboard, where it had been occasionally kept, and the butler went to the drawer and found the lost treasure. As quickly as possible the next morning the owner of the snuff-box sought the old general, told him everything, and made him an ample apology. They were at once friendly as of old. After some conversation, the owner of the snuff-box said, "But may I ask you why you so resolutely refused to be searched?" "Alas!" said the soldier, "I refused to be searched because, though I had not stolen your snuff-box, I had stolen your food. I blush to own, sir, that the greater part of every morsel put upon my plate was transferred to a pocket-handkerchief (spread upon my knee beneath the table), and taken home to a starving wife and family." Equally, if not more romantic is another military story, also related by Julian Young, which, were it not for the unquestionable _bona fides_ of that gentleman, might well be questioned, so suggestive is it of a page from a novel. An aristocratic lady residing on the family estate in Ireland advertised for a governess for her daughters. The successful candidate was a young French lady of talent and fascinating manners. She had not long taken up her residence with the lady and her daughters when she inspired the nephew of her mistress with a tender passion. A gentleman of principle, and only possessing slender means, he resolved to control his sentiment and in no way reveal it. Some months elapsed, and one morning while the family were at breakfast, they were surprised by the entrance of a servant, who inquired of the lady of the house if she could see visitors. Asking who they were, she was informed that the party consisted of two gentlemen, who had travelled there in a coach-and-four, attended by a livery servant, evidently a foreigner. Thinking that visitors at such an early hour must have important business, the servant was told by his mistress that she would at once see them. She remained with the visitors some little time, and then returned, informing the governess that her presence was immediately required by the two gentlemen, who had come on important business. The governess was absent more than half an hour, and on her return to the breakfast-room appeared to be labouring under strong excitement. She then begged Lady E---- to be kind enough to step into the library to speak to two friends of hers, who had something of great importance to communicate. The mistress of the establishment complied, and the governess, left with her pupils, was interrogated with much amusing curiosity by them on the strange visit of two gentlemen at such an early hour in the day. The governess, in a tremor of nervousness, answered nothing, left her pupils, and going to her own apartment, locked herself in. The interview between Lady E---- and the strangers was exceedingly interesting. One of the visitors spoke to her in French, and at great length. Having prefaced what he had to say by apologising for the seeming intrusion, Lady E---- was informed that he was delegated by the governess to perform a duty which rightly devolved upon herself, but which she had not the moral courage to discharge. It was also stated by the speaker that Mademoiselle H---- acknowledged gratefully the extraordinary kindness with which she had been treated. Lady E---- was then told that in pretending to be dependent on her own exertions for bread, the governess had imposed on her mistress. She was, it was said, as well born as Lady E----, and almost as opulent. It was at the request of the visitors that Mademoiselle H---- had answered the advertisement, for the reason that perhaps under such a roof as Lady E----'s the young lady would be spared the persecution of an unscrupulous kinsman, who conceived that his cousin was endeavouring to supplant him in the good graces of a relative whose favours he had forfeited solely by misconduct. The older kinsman alluded to had just died, and had bequeathed his sole possessions to the governess. She was mistress of a château in Southern France, in addition to an unencumbered rent-roll of £7000 a year. In conclusion, the gentleman in his own name and that of his fellow trustee begged to state that in a month's time the presence of Mademoiselle H---- would be imperative, for the purpose of hearing the will read, and to meet the avocat, the executors, and certain other persons interested. Complimenting the mistress of the Irish mansion upon her urbanity, the visitors withdrew, jumped into their carriage, and were driven away as rapidly as they came. The daughters of Lady E---- and her nephew were made acquainted with the good fortune of the French governess. She had won the affections of her pupils, and they regretted parting with her. However, they rejoiced at her prosperity. The nephew's heart glowed with hope and affection. Had he been richer he would before have declared his passion. On hearing his aunt's recital of the governess's actual position he at once resolved to press his suit. When Mademoiselle H---- had listened to his declaration of love, she met it with haughty demeanour and frigid words, stating that she suspected her money had more attraction for him than her person, assigning as her reason for such impression that he had shunned her while he thought her poor, but had sought her as soon as he had found her to be rich. He assured her that he had loved her at first sight, but had been deterred by honourable motives and the smallness of his fortune from thinking of matrimony; that he had purposely kept out of danger's way, but that as to wishing to marry her for the sake of her money, it was a cruel imputation, and stung him to the quick. He then quitted her soon afterwards, mounted a horse, rode away and found a notary public. When he again saw Mademoiselle H---- he put into her hands a document by which he conveyed to her unconditionally and absolutely every farthing he had in the world. In return for it he asked for the lady's hand and heart. He added that if he proved unworthy of her, her money would be in her own power, and that if he lived to deserve her love, he was sure she would never let him want. She yielded to his solicitations, and they eloped. Scarcely had the honeymoon run its course when the husband discovered that he was united to a penniless woman. In spite of his reserve the governess had detected his passion, and by the aid of confederates and her own adroitness had made herself possessor of his patrimony. The victim sought to repair his fortune at the sword's point in the Crimean war, where he obtained considerable distinction. Incredible as this narrative may seem, there is a yet more marvellous one which must be true, since "it was in the papers." In the autumn of 1827 two men were examined at the Marylebone police-court under circumstances of a peculiar and suspicious nature. The night previously a patrol in the New Road watched the men, and subsequently saw them deep in conversation by a lamp-post, and soon afterwards one man deliberately began to tie his companion up to the lamp-post, the suspended man offering no resistance to the labours of the improvised Jack Ketch. The patrol interfered, and both men proceeded to beat him with great violence. Some watchmen of the district hearing the cries of the assailed constable hastened to the spot, and the constable's assailants were secured. While being examined before the magistrate, the men stated that they had been gambling by the light from the lamp, and that one of them had lost all his money to the other, and had then staked his clothes. The winner demurred to continue playing for the reason that if he again won he should not care to strip the loser of his habiliments. His enthusiastic companion rejoined that should he again lose, life would be worthless to him. A bargain was made to again play, it being understood that the unsuccessful gambler if again unlucky should be hung by his companion, who should strip him when dead. The fellow lost, and informed the magistrate that he was only submitting to the terms of the treaty when the patrol came up and interfered with himself and his companion. The magistrate concluding they had been intoxicated, discharged them with a caution. A remarkably grim passage this in a gambler's life, and unfortunately most of the selections in this section of the subject are more or less sombre, for romance is naturally more associated with tragedy than comedy. "Pitiful, wondrous pitiful," is my next illustration, which is related by Sir Walter Scott, who when attending Dugald Stewart's lectures on Moral Philosophy used to sit by the side of an amiable youth, in whose society he afterwards took great interest. They became companions, and frequently used to stroll out beyond the city, enjoying the charms of road and stream. One day during the perambulation they met a singularly venerable "Blue Gown," a beggar of the Edie Ochiltree stamp, clean and ruddy. The beggar had three or four times previously encountered Scott, who with his usual good-heartedness had relieved him in answer to solicitation. When Mr. Scott and his fellow-student passed the old man, the companion of Scott exhibited peculiar restlessness and confusion. The beggar again had something dropped into his hand by Scott, who said soon afterwards to his companion, "Do you know anything to the dishonour of the old beggar?" "God forbid!" said the youth, and bursting into tears added, "I am ashamed to speak to him; he is my father! He has laid by for himself, but he stands bleaching his head in the wind, that he may get means to pay for my education." Scott spoke words of tenderness and sympathy to the mendicant's son, and kept his secret. Some time afterwards he again met the hale "Blue Gown." "God bless you!" said the old man; "you have been kind to Willie. He has often spoken of it. Come to our roof, for my boy has been ill. It will strengthen him, if you will go and see him." At 2 o'clock on the following Saturday, Willie's old fellow-student found the old man and his son waiting to receive him at their little cottage outside the city. It was a modest little tenement, and Willie sat on a bench before the door to enjoy the sunshine. The son of the voluntary mendicant looked wan and emaciated. He had been very ill. There was a dinner of mutton, potatoes and whisky. They all enjoyed themselves, and during their conversation the old man said, "Please God I may live to see my bairn wag his head in a pulpit yet." Scott left them with tokens of good will and friendship. He communicated the story to his mother, who informed her husband, and it was at no distant time that Dr. Erskine's influence (through the good offices of Mr. and Mrs. Scott) obtained the old man's son a tutorship in the north of Scotland. To quit the pathetic for a moment, it would scarcely be thought likely that that necessary but extremely practical article--blacking--has ever been associated with romance; but Mr. Smiles tells the story of a poor soldier having one day called at the shop of a hairdresser who was busy with his customers and asked relief, stating that he had stayed beyond his leave of absence, and unless he could get a lift on the coach, fatigue and severe punishment awaited him. The hairdresser listened to his story respectfully, and gave him a guinea. "God bless you, sir!" exclaimed the soldier, astonished at the amount. "How can I repay you? I have nothing in the world but this," pulling out a dirty piece of paper from his pocket; "it is a receipt for making blacking--it is the best that was ever seen; many a half-guinea I have had for it from the officers, and many bottles I have sold. May you be able to get something for it to repay you for your kindness to the poor soldier!" Oddly enough that dirty piece of paper proved worth half a million of money to the hairdresser. It was no less than a receipt for the famous Day and Martin's blacking, the hairdresser being the late Mr. Day. The picture of little ones asking for bread and the parents finding none in the cupboard is a very old story. Domestic affection, struggling amidst difficulties and distress, has produced heroes and martyrs innumerable, but few more interesting than Peter Stokes, famous in years gone by as the "Flying Pieman." Every day at the beginning of the present century (excepting when it rained) the familiar figure of that now historic personage might have been seen in the steep thoroughfare between Staple's Inn and Field Lane. Peter obtained the _sobriquet_ of "Flying Pieman" from the celerity of his movements. There was some slight mistake concerning his nickname, for Peter Stokes sold baked plum pudding, not pies. Stokes was one of the celebrated old-fashioned London characters, as well known to cockneys of that period as Billy Waters or the negro crossing-sweeper at the foot of Ludgate Hill. Soon after the clock of St. Andrew's Church struck twelve, Stokes used to turn out of Fetter Lane with a tray of smoking hot plum pudding, the pudding cut into twelve slices, the price of each being a penny. Peter carried his tray in one hand and a bright silver scapula in the other. The customer received his slice of pudding from the scapula after a penny had been deposited upon the tray (Peter never gave change), the "Flying Pieman," as he perambulated or as he stopped, never being known to utter any other word than "Buy, buy, buy." He always wore a black vest, swallow-tailed coat, stout silk stockings, and shoes with bright silver buckles, while a snowy white apron and faultlessly frilled shirt completed a modish and impressive costume. No hat or cap adorned his head, the hair of which was close cropped and powdered. Peter Stokes was sometimes known to have disposed of fifty rounds of pudding _per diem_. His customers have often included aldermen, ladies of quality, and blue blood bucks, but they received no more attention than did rougher and humbler patrons. The "Flying Pieman" was attentive to everybody, but he never turned back for anybody. Making his way deftly through crowds of pedestrians, hackney coaches or waggons, the "Flying Pieman" went straight on, calling out "Buy," and only stopped for the proffered penny; but his real history was indeed a curious one. Contemporary with him was a portrait painter in Rathbone Place. The artist painted with great assiduity in the morning, and his evening parties though homely, were pleasant and refined. A devoted wife and affectionate children cheered the life of the amiable and industrious artist. He was a genial-faced man, with dark brown hair. This artist and Peter Stokes were identical. When young, Stokes made a love-match, married upon next to nothing, and in a few years found himself the father of several children. A modest, industrious, painstaking artist, he found but few to sit to him for a portrait. Things grew exceedingly bad with him. One day he heard one of his boys crying for something to eat, and the artist found that his wife had no bread to give the hungry child. Peter Stokes hurried from his home with an almost wet picture, which he deposited at a neighbouring pawnbroker's. Returning, the needy artist saw at a street-corner a boy selling baked potatoes, and moreover the artist observed that the boy was doing a busy trade. Crushing pride, and taking his faithful and devoted wife into close confidence, Peter unfolded a plan by which he too might sell something profitable in the street. Mrs. Stokes seconded the suggestion, and Peter soon commenced his career as a vendor of baked plum pudding. He threw a desperate card, but it turned up trumps. Stokes's portraits have gone to the limbo of oblivion, but the peculiar method by which he impressed the crowd with his tray of baked plum pudding shows at any rate that its vendor had a good eye for artistic effect. If it were, as some will doubtless say, "a sin and shame" that an artist of Peter Stokes's ability should have to turn itinerant vendor of pennyworths of pudding, the old adage "Be sure your sin will find you out" was at fault for once; but to make up for the omission in his case, how wonderfully true was the proverb in the romantic history of Lord Chief Justice Holt, whose impecuniosity caused him to commit an act that resulted in a truly tragic _finale_. Sir John Holt, famous for his integrity, firmness, and great legal knowledge, who filled the office of Recorder of London for a year and a half, losing it in consequence of his uncompromising opposition to the abolition of the "Test" Act, and whose upright discharge of the important duties of Lord Chief Justice gained him the highest honour and esteem, was as a youth wilful and dissipated. In some respects his deeds at that period bore likeness to those of the madcap Prince Hal, when that personage was the associate of Falstaff. He was a roysterer, gambler and, according to some, highwayman. To use Lord Campbell's words, "They even relate, many years after that, when he was going the circuit as Chief Justice, he recognised a man convicted capitally before him as one of his own accomplices in a robbery, and that having visited him in gaol, and inquired after the rest of the gang, he received this answer: 'Ah! my lord, they are all hanged but myself and your lordship.'" On one occasion, Holt, with a band of dissolute and reckless companions, found himself participator in the perplexing results of a common bankruptcy. They were without the prospect of obtaining a supper. It was then agreed that they should make their way singly, each individual to do the best he could for himself. The band of roysterers separated, Holt finding himself on a lonely and cheerless road. He was intrepid, nimble witted, and full of self-possession. Spurring his horse, he set off at a gallop. Arriving in front of a little hostelry, he alighted from his steed, handed it over to the care of an ostler, and without more ado went into the house and ordered the best entertainment that it could afford. Whatever hardships he had undergone, Holt had now the pleasing expectation of a savoury supper and comfortable lodgment. Waiting for a smoking dish, the odour from which pleasantly saluted his nostrils, he carelessly strolled from the chamber where he had been sitting into the kitchen. There the hostess was busy in her culinary labours, while near the blazing fire sat a girl about thirteen years old, pale, haggard, and shivering in an ague fit. John Holt, though a "ne'er do weel," and a wild impetuous fellow was not without the instinct of a compassionate heart. He asked many questions concerning the malady of the young girl as she moaned and rocked herself in the warmth of the ruddy embers. The mother replied that for a year her daughter had been stricken by the ague, that the labour of the doctors trying to cure her had been in vain, and that their charges had nearly brought the fortunes of the house to ruin. The young student having listened to the story of the mother's misfortune, then spoke in contemptuous terms of doctors all round, bade her take courage and be of good cheer, for he was acquainted with a specific that would speedily take away her daughter's ague. "Indeed," said Holt, "you need be under no further concern, for you may assure yourself the girl shall never have another fit." Taking a piece of parchment from his breast pocket, he with much gravity and deliberation proceeded to inscribe some Greek characters on the scrap, and having concluded his work, charged the mother to bind the parchment upon her daughter's wrist, allowing it to remain there until the ague departed. By some strange coincidence, or by the effects wrought upon the sympathies of the girl at the appearance and touch of the supposed charm, her ague did depart, and returned no more, at least not during the week John Holt remained the guest of mine hostess. When he deemed it prudent or convenient to depart, he asked for his bill with that confidence so often masking the demeanour of the bold adventurer reduced to impecuniosity. But the hostess, smiling and embarrassed, said she could make no demand for payment, and further added that she rather felt in the position of one owing something, than as one having something to receive. Indeed, she expressed sorrowfully that she could in no way compensate her guest for the miraculous cure which he had wrought, and that had she but known him sooner the expense of forty pounds would not have been swallowed up by the _posse_ of useless doctors. Overcome by the profuse thanks and grateful acknowledgments of his hostess John Holt condescended to waive paying his week's bill, and departed with much hilarity on his journey. As months and years rolled away, the incidents of a busy life and the assiduous practice of his profession crowded out of John Holt's memory the recollection of his strange and facetious adventure at the hostelry on the Oxford road. Holt's habits changed. He became the wise and impartial judge, so admirable and so competent, that even his stern Tory father (spite of the son's Liberal politics) grew proud of the man who in his youthful career at Oxford had been the wildest of the wild, and the most erring of the erring. The years have gone on, and when we turn again to John Holt, he is approaching his sixtieth year. The scene is still in the county of Oxford, but this time in one of the principal towns. The Summer Assizes are being held, and the judges are sitting in all wonted solemnity and state. In the Criminal Court a cause of unusual interest is being heard. At the bar there stands a poor, miserable and decrepit old woman. As she looks at the grave and dignified judge she shakes with terror. The causes of her fear are solemn and significant, for she is about to be tried for her life, on the charge of being a witch. In those days of which I am writing, there existed a terrible superstition in the popular mind concerning witchcraft, believed as it was to be the crime of all others the most destructive to man and the most impious in the sight of God. The comely, dignified and shrewd-eyed judge excites the keenest interest in the crowded court, for he is one of the "men of mark" of his age, the profound lawyer, the incorruptible dispenser of justice, and the champion of truth and freedom. Witnesses are called. They give their evidence in a plain unpretentious manner, and it is certain that they possess a firm faith in what they allege against the miserable prisoner. The principal accusation against her is that she holds in her possession a potent and mysterious charm. It enables her to spread disease, or to cure it, and it is further stated that she has lately been detected using it. "Has anybody seen it?" inquires the judge. "Yes, please you, my lord, and it is now here ready to be produced." His lordship directs that it shall be handed to him, and his order is obeyed. Behold! nothing but a dirty ball wrapped round with rag and pack-thread. Removing these, he discovers a scrap of stained and time-worn parchment inscribed with characters in his own handwriting. Chief Justice Holt, after the lapse of forty years, recognises the Greek letters which he had scrawled in the inn kitchen situate on the Oxford road. Deep silence reigns in the crowded court-house, and every eye is turned on the judge. Lifting his head from his hands, in which it had been buried for a few moments, he says to the jury,-- "Gentlemen, I must now relate an incident of my life which ill-suits my position. To conceal that incident would be to increase the awful folly which I must atone. Did I conceal that folly of which I was guilty, I should endanger innocence and countenance superstition. This so-called charm which these poor ignorant people suppose to have the power of life and death is a senseless piece of parchment, on which with my own hand I wrote and gave the poor woman. This poor woman for no other reason stands before me accused of witchcraft." Chief Justice Holt then narrated the whole story of his adventure in his early years at the woman's hostelry on the Oxford road, and the recital produced such an effect upon the minds of the jury that his old hostess was not only acquitted, but was one of the last persons tried for the crime of witchcraft in this country. I turn to another country and to incidents enveloped in a brighter and pleasanter atmosphere. Readers of the older French literature are familiar with the notes, verses, and dramas of Alexis Piron. The Burgundian _bon-vivant_ knew many adventures and much impecuniosity; but notwithstanding Fortune's buffets he retained "a revenue of good spirits," and when turned fifty years of age he participated in a bit of romance. One evening after supper he went to the shop of a grocer, Gallet, a song-writer and boon companion. A female entered the shop and asked for some coffee and matches. Gallet was away, so the poet undertook to serve the lady, saying to her, "Is that all you want?" The grocer entering added, "Mademoiselle ought to have a husband in the bargain." "Excellent," said Piron, "if the damsel will take up with any kind of wood for her arrow." A blush suffused the lady's cheeks, and she departed without making rejoinder. Next morning she visited the poet. "Monsieur," said she with trepidation, "we are two children of Burgundy. I have long wanted to see a man of so much wit, and having learned yesterday that it was you with whom I had to do in M. Gallet's shop, I have come to-day without ceremony to pay you a visit. How weary you must grow here! I was very much afraid of finding some handsome lady from the theatre, but, heaven be praised!"--with a glance at the extreme poverty of his surroundings--"you live like a Trappist. Have you never thought of making an end of this?" Said Piron: "I leave the care of that to la Camarde; but if you please, what do you mean?" "I wish to say, have you ever thought of marriage?" "Not much. Mademoiselle, pray sit down while I light the fire." "You don't know, Monsieur Piron! it will make you laugh." "So much the worse." "I shall speak plainly. If your heart, has the same sentiment as mine"--the poet was wonder-stricken, and looked at the lady in silence--"in a word, Monsieur Piron, I come to offer you my hand and heart, not forgetting my life-annuity of two thousand livres." The poet controlled his merry temper, and was touched when he thought what a compassionate friend had been vouchsafed to him. He saw the woman's eyes moist with tears, and he embraced her. "I leave to you," said he, "all the preparations for the wedding. Gallet will write the epithalamium." "You will make me, Monsieur Piron, the happiest person in the world I did not hope for so happy a conclusion, for--I do not wish to conceal anything from you--I am _fifty-five_!" "Well," said Piron, with a slight shrug, "we have over a hundred years between us. We would have done well to have met sooner." This marriage took place amid festivity. The old maid had a good heart and an amiable temper. She proved a faithful sister, friend, and servant to Piron. He had aromatic coffee in the morning, the beverage being all the more palatable, as it was accompanied by the maker's cheerful gossip in the chimney-corner. Madame Piron expressed herself enthusiastically about her husband's writings, and Piron felt no longer alone, was able to refuse going out to dinner in bad weather, and had a crown in his pocket when he sauntered in the sunshine. He was well off enough to occasionally give alms, and at last he could receive friends at his hearth. This episode in the life of Piron is one of the brightest romances of impecuniosity. Scarcely less happy is an anecdote of Quin the actor, who, if he said many spiteful things, was not incapable of a generous action. James Thomson, another of the brotherhood of genius, found himself immured in a sponging-house. In his dolorous and solitary condition he was one evening surprised by a visit from Quin. They cracked a bottle, and as the night wore away a choice supper was served by one of the attendants of the prison. Thomson, a sensitive nervous man, partook of the dishes with indifferent appetite, for his thoughts wandered to the payment of the bill. Another bottle of claret was drunk, and the visitor rose to depart. "Mr. Thomson," said Quin, "before I go, let me say that there is an account between us." Thomson was alarmed, and stammered out that he was unaware of any obligations. "They are mine," replied Quin. "I have received so much delight from the writings of James Thomson, that I consider myself his debtor at least for a hundred pounds." Saying this, he placed a note for that amount on the table, shook the astonished poet by the hand, and bowed himself out. I will conclude the selections of romantic impecuniosity with the case of Thomas De Quincey, who, according to some authorities, being afraid of an oral examination at Oxford College, left the university by stealth and wandered away, his stock of money being scant and his whereabouts quite unknown to his friends. He wandered about Denbighshire, Merionethshire, and Carnarvonshire. Lodging at some place, De Quincey took affront at something said by a landlady, and abruptly left his quarters. In his "Confessions of an Opium Eater" he says,-- "This leaving the lodgings turned out a very unfortunate occurrence for me, because living henceforward at inns, I was drained of my money very rapidly. In a fortnight I was reduced to short allowance, that is I could allow myself only one meal a day. From the keen appetite produced by constant exercise and mountain air acting on a youthful stomach I soon began to suffer greatly on this slender regimen, for the single meal which I could venture to order was coffee or tea. This, however, was at length withdrawn, and afterwards so long as I remained in Wales I subsisted either on blackberries, hips, haws, etc., or on the usual hospitalities which I now and then received for such little services as I had an opportunity of rendering. Sometimes I wrote letters of business for cottagers who happened to have relations in Liverpool or London. More often I wrote love-letters to their sweethearts for young women who had lived as servants in Shrewsbury or any other towns on the English border. On all such occasions I gave great satisfaction to my humble friends, and was generally treated with hospitality; and once in particular near the village of Llan-y-styndw (or some such name), in a sequestered part of Merionethshire, I was entertained for upwards of three days by a family of young people with an affectionate and fraternal kindness that left an impression upon my heart not yet impaired. The family consisted at that time of four sisters and three brothers, all grown up, and all remarkable for elegance and delicacy of manners. So much beauty and so much native good breeding and refinement I do not remember to have seen before or since, in any cottage, except once or twice in Westmoreland and Devonshire. They spoke English, an accomplishment not often met with in so many members of one family, especially in villages remote from the high road. There I wrote, in my first introduction, a letter about prize-money for one of the brothers, who had served on board an English man-of-war, and more privately, two love-letters for two of the sisters. They were both interesting-looking girls, and one of uncommon loveliness. In the midst of their confusion and blushes whilst dictating, or rather giving me general instructions, it did not require any great penetration to discover that what they wished was "that their letters should be as kind as was consistent with proper maidenly pride." I continued so to temper my expressions as to reconcile the gratification of both feelings, and they were as much pleased with the way in which I expressed their thoughts as, in their simplicity, they were astonished at my having so readily discovered them. The reception one meets with from the women of a family generally determines the tenor of one's whole entertainment. In this case I had discharged my confidential duties as secretary so much to the general satisfaction, perhaps also amusing them with my conversation, that I was pressed to stay with a cordiality which I had little inclination to resist. I slept with the brothers, the only unoccupied bed standing in the apartment of the young women; but in all other points they treated me with a respect not usually paid to purses as light as mine, as if my scholarship were sufficient evidence that I was of gentle blood." Farther on he says,-- "The only friend I had in this strange poverty of mine on first coming to London was a young woman. She was one of that unhappy class who belong to the outcasts and pariahs of our female population. For many weeks I had walked at night with this poor friendless girl up and down Oxford Street, or had rested with her on steps, or under the shelter of porticoes. One night when we were pacing slowly along Oxford Street, and after a day when I had felt unusually ill and faint, I requested her to turn off with me into Soho Square. Thither we went, and we sat down on the steps of a house which to this hour I never pass without a pang of grief and an inner act of homage to the spirit of the unhappy girl in memory of the noble act she performed. Suddenly as we sat I grew much worse: I had been leaning my head against her bosom. I sank from her arms and fell backwards on the steps. Uttering a cry of terror, but without a moment's delay, she ran off into Oxford Street, and in less time than could be imagined returned to me with a glass of port wine and spices that acted upon my empty stomach, which at that time would have rejected all solid food, with an instantaneous power of restoration, and for this glass the generous girl without a murmur paid out of her own humble purse, at a time, be it remembered, when she had scarcely wherewithal to purchase the bare necessaries of life, and when she could have no reason to expect that I should ever be able to reimburse her." I will conclude this chapter with two most truly remarkable stories. The first is one which Sir Walter Scott used to relate with his own inimitable powers of story-telling, and which, as the victim was his own cousin, the narrative on the lips of the novelist ever excited profound interest in the minds of listeners. It would seem that as a midshipman his cousin Watty was extremely popular on ship-board and on shore. He was a bit of a rip, but generous to a fault, handsome, merry and reckless. After one memorable long voyage he put in with others at Portsmouth, and enjoyed those roysterings, love passages, tavern pleasures, and adventures so dear to the heart of "Jack ashore." With a couple of companions Watty Scott was in the unenviable position of being left high and dry on the strand of impecuniosity. Moreover the three jolly sailors had run up an immense bill at a tavern on the Point, the settlement of which haunted them by day and by night. In their recklessness, almost amounting to despair, they still went on living high, and steeping recollection of their liabilities in the fumes of baccy and the odours of the flowing bowl. At last came the fatal and imperative orders from official quarters that they must "ship off." Summoning up their best graces and most insinuating powers of expression in the way of eloquence, they sought an interview with their hostess, and acquainted her with their foolish but unfortunate position; to which account she listened with attention and deep interest. She was informed not only of their perfect inability to meet the bill, but that in a short period they were bound to be on board ship. Their caterer turned a deaf ear to the revelation of their poverty, and in the most virago-like manner fiercely informed them "that they could not budge an inch." The sailors pleaded in earnest tones for her mercy, but in the course of an hour they found themselves guarded by bailiffs, and in one of the parlours of the hostelry the three youths, for they were nothing more, sat in moody contemplation of their impending disgrace. Towards evening their creditor sought them with a less fierce aspect and uttered words less bitter and explosive than those of which she had delivered herself in the morning. She told her debtors she would give them a chance, and proposed a plan by which her claim could be cancelled. The sailors were told by her that she was a lone woman and had long wanted a marriage certificate "to give her a respectable position in her calling," that one of them must marry her--which one she didn't care a curse--but by all that was holy if she didn't marry one of them, all three should be packed off to gaol, and the ship must go without them. Remonstrance, promises to pay in a few months, the unreasonableness of the request, in fact everything said by the discomfited sailors was in vain. It was impossible to pacify her, and the victims of impecuniosity saw that the woman's proposal was the only means of escaping from disgrace and humiliation. After taking counsel among themselves, the three sailors drew lots for the hymeneal martyrdom, and the ill-luck fell on Watty Scott. Next morning the midshipman and the landlady were spliced, and returned to the tavern, where a rich and liberal dinner awaited the newly married couple and the two fortunate companions of the bridegroom; and in the afternoon the three sailors were tumbled into a wherry, and were soon aboard ship. The marriage was kept a secret, and the first to reveal it was Watty Scott, who one day at a town in Jamaica, reading a newspaper, saw an account of a trial for murder and robbery in connection with a Portsmouth tavern, and having read all particulars, exclaimed, "Thank God, my wife's hanged!" The other anecdote is more appalling in detail than anything I can remember, and is recorded of a German nobleman who was a contemporary of the first Napoleon. The story opens in the solitary chamber of a dilapidated château situated on the skirts of the Black Forest in Germany. In a corner of the chamber sits a young man of aristocratic mien and military garb, his face buried in his hands, and his whole demeanour indicating the most intense hopelessness and sorrow. The courtyard and gardens of the château, as they may be seen from the windows of the room in which the young man has sunk upon a seat, are everywhere pervaded by an air of desolation. Tokens of past opulence and taste may be observed in dismantled and untended flower-beds, fallen vases and statues, and in the unhinged and rusting iron gates. Forlorn as is the appearance of the interior and exterior of the once beautiful château, it is not more forlorn and desolate than the heart of the young soldier, sole tenant of the silent and deserted chamber. The young man's history had been most melancholy. His mother, harshly used by the man who at the altar had sworn to love and cherish her, had died when he was only nineteen years of age. Her death was caused by a broken heart, and the son, finding that he held no place in the esteem or affections of the surviving parent, gladly accepted the offer of a commission in an Austrian company of hussars. After five years of hard and active service, respite and tranquil leisure fell to the lot of the young soldier, and with the instincts of a loyal and affectionate heart, he set out in the direction of his father's residence on horseback, attended by his ordinary military servant. On the second day's journey while going in the direction of the parental home he found himself benighted in the midst of the Black Forest. It was a perilous and wearisome journey, which, however, found relief by the appearance of lights in what seemed to be some kind of human habitation. It proved to be a rough and isolated inn, where the officer and his orderly were soon housed, after accommodation had been found for their horses. Everything about the cabaret was rough, uncomfortable, and unprepossessing. The only man in attendance was of ruffianly and sinister aspect. The orderly after supper was requested by his master to sleep (ready for call) near the horses under the manger in the stable, and afterwards the officer (carefully concealing a pair of pistols under his cloak) requested to be shown to his sleeping apartment, which proved to be little better than a loft. He placed the oil lamp on a chair, laid his sword by it, and threw himself down on the rude pallet-bed without taking off his clothes. Not feeling sleepy he turned his pillow, and found that it was stained with blood recently shed, and which strengthening the apprehensions formed on his entrance into the house, at once impelled him to cock his pistols and draw his sword. For an hour or two the house seemed to be wrapped in profound silence, and just as the wearied guest found that drowsiness was stealing over him he cast his eyes across the room and noticed that a portion of the flooring heaved and rose. The officer crept from the bed and stood sword in hand watching a trap-door which had been quietly raised by a hand. With all the strength he could command and with all the quickness he could exercise he smote the hand, when the trap closed, and beneath it he heard a smothered cry. Hurrying down stairs, he reached the front door, unbarred it, made his way to the stable, and roused the servant. In a short time master and man were galloping away on the road, and the rest of their journey was secure and without adventure. On the third day he reached the château of his father. It was the soldier's birthplace, and his heart filled with grief when he saw that his once-loved home was deserted and seemingly tenantless. Decay seemed to have invaded everything. No summons awaited their thundering knocks at the hall-door, but at one of the windows could be seen the pallid, ghastly visage of a man watching. Master and man made a forcible entry into the house, and sought the room at the window of which had peered the strange and repulsive face. On entering the room the young soldier recognised his father, haggard and scowling, who when he saw his son's extended hand held up a mutilated stump and said, "That's your answer." The father, ruined by reckless living, had, owing to his impecuniosity, joined a lawless gang frequenting the cabaret, and had sought to rob and murder his own son. THE END LONDON: PRINTED BY WILLIAM CLOWES AND SONS, LIMITED, STAMFORD STREET AND CHARING CROSS. 
4239	----	An Essay on the Principle of Population Thomas Malthus 1798 AN ESSAY ON THE PRINCIPLE OF POPULATION, AS IT AFFECTS THE FUTURE IMPROVEMENT OF SOCIETY WITH REMARKS ON THE SPECULATIONS OF MR. GODWIN, M. CONDORCET, AND OTHER WRITERS. LONDON, PRINTED FOR J. JOHNSON, IN ST. PAUL'S CHURCH-YARD, 1798. Preface The following Essay owes its origin to a conversation with a friend, on the subject of Mr Godwin's essay on avarice and profusion, in his Enquirer. The discussion started the general question of the future improvement of society, and the Author at first sat down with an intention of merely stating his thoughts to his friend, upon paper, in a clearer manner than he thought he could do in conversation. But as the subject opened upon him, some ideas occurred, which he did not recollect to have met with before; and as he conceived that every least light, on a topic so generally interesting, might be received with candour, he determined to put his thoughts in a form for publication. The Essay might, undoubtedly, have been rendered much more complete by a collection of a greater number of facts in elucidation of the general argument. But a long and almost total interruption from very particular business, joined to a desire (perhaps imprudent) of not delaying the publication much beyond the time that he originally proposed, prevented the Author from giving to the subject an undivided attention. He presumes, however, that the facts which he has adduced will be found to form no inconsiderable evidence for the truth of his opinion respecting the future improvement of mankind. As the Author contemplates this opinion at present, little more appears to him to be necessary than a plain statement, in addition to the most cursory view of society, to establish it. It is an obvious truth, which has been taken notice of by many writers, that population must always be kept down to the level of the means of subsistence; but no writer that the Author recollects has inquired particularly into the means by which this level is effected: and it is a view of these means which forms, to his mind, the strongest obstacle in the way to any very great future improvement of society. He hopes it will appear that, in the discussion of this interesting subject, he is actuated solely by a love of truth, and not by any prejudices against any particular set of men, or of opinions. He professes to have read some of the speculations on the future improvement of society in a temper very different from a wish to find them visionary, but he has not acquired that command over his understanding which would enable him to believe what he wishes, without evidence, or to refuse his assent to what might be unpleasing, when accompanied with evidence. The view which he has given of human life has a melancholy hue, but he feels conscious that he has drawn these dark tints from a conviction that they are really in the picture, and not from a jaundiced eye or an inherent spleen of disposition. The theory of mind which he has sketched in the two last chapters accounts to his own understanding in a satisfactory manner for the existence of most of the evils of life, but whether it will have the same effect upon others must be left to the judgement of his readers. If he should succeed in drawing the attention of more able men to what he conceives to be the principal difficulty in the way to the improvement of society and should, in consequence, see this difficulty removed, even in theory, he will gladly retract his present opinions and rejoice in a conviction of his error. 7 June 1798 CHAPTER 1 Question stated--Little prospect of a determination of it, from the enmity of the opposing parties--The principal argument against the perfectibility of man and of society has never been fairly answered--Nature of the difficulty arising from population--Outline of the principal argument of the Essay The great and unlooked for discoveries that have taken place of late years in natural philosophy, the increasing diffusion of general knowledge from the extension of the art of printing, the ardent and unshackled spirit of inquiry that prevails throughout the lettered and even unlettered world, the new and extraordinary lights that have been thrown on political subjects which dazzle and astonish the understanding, and particularly that tremendous phenomenon in the political horizon, the French Revolution, which, like a blazing comet, seems destined either to inspire with fresh life and vigour, or to scorch up and destroy the shrinking inhabitants of the earth, have all concurred to lead many able men into the opinion that we were touching on a period big with the most important changes, changes that would in some measure be decisive of the future fate of mankind. It has been said that the great question is now at issue, whether man shall henceforth start forwards with accelerated velocity towards illimitable, and hitherto unconceived improvement, or be condemned to a perpetual oscillation between happiness and misery, and after every effort remain still at an immeasurable distance from the wished-for goal. Yet, anxiously as every friend of mankind must look forwards to the termination of this painful suspense, and eagerly as the inquiring mind would hail every ray of light that might assist its view into futurity, it is much to be lamented that the writers on each side of this momentous question still keep far aloof from each other. Their mutual arguments do not meet with a candid examination. The question is not brought to rest on fewer points, and even in theory scarcely seems to be approaching to a decision. The advocate for the present order of things is apt to treat the sect of speculative philosophers either as a set of artful and designing knaves who preach up ardent benevolence and draw captivating pictures of a happier state of society only the better to enable them to destroy the present establishments and to forward their own deep-laid schemes of ambition, or as wild and mad-headed enthusiasts whose silly speculations and absurd paradoxes are not worthy the attention of any reasonable man. The advocate for the perfectibility of man, and of society, retorts on the defender of establishments a more than equal contempt. He brands him as the slave of the most miserable and narrow prejudices; or as the defender of the abuses of civil society only because he profits by them. He paints him either as a character who prostitutes his understanding to his interest, or as one whose powers of mind are not of a size to grasp any thing great and noble, who cannot see above five yards before him, and who must therefore be utterly unable to take in the views of the enlightened benefactor of mankind. In this unamicable contest the cause of truth cannot but suffer. The really good arguments on each side of the question are not allowed to have their proper weight. Each pursues his own theory, little solicitous to correct or improve it by an attention to what is advanced by his opponents. The friend of the present order of things condemns all political speculations in the gross. He will not even condescend to examine the grounds from which the perfectibility of society is inferred. Much less will he give himself the trouble in a fair and candid manner to attempt an exposition of their fallacy. The speculative philosopher equally offends against the cause of truth. With eyes fixed on a happier state of society, the blessings of which he paints in the most captivating colours, he allows himself to indulge in the most bitter invectives against every present establishment, without applying his talents to consider the best and safest means of removing abuses and without seeming to be aware of the tremendous obstacles that threaten, even in theory, to oppose the progress of man towards perfection. It is an acknowledged truth in philosophy that a just theory will always be confirmed by experiment. Yet so much friction, and so many minute circumstances occur in practice, which it is next to impossible for the most enlarged and penetrating mind to foresee, that on few subjects can any theory be pronounced just, till all the arguments against it have been maturely weighed and clearly and consistently refuted. I have read some of the speculations on the perfectibility of man and of society with great pleasure. I have been warmed and delighted with the enchanting picture which they hold forth. I ardently wish for such happy improvements. But I see great, and, to my understanding, unconquerable difficulties in the way to them. These difficulties it is my present purpose to state, declaring, at the same time, that so far from exulting in them, as a cause of triumph over the friends of innovation, nothing would give me greater pleasure than to see them completely removed. The most important argument that I shall adduce is certainly not new. The principles on which it depends have been explained in part by Hume, and more at large by Dr Adam Smith. It has been advanced and applied to the present subject, though not with its proper weight, or in the most forcible point of view, by Mr Wallace, and it may probably have been stated by many writers that I have never met with. I should certainly therefore not think of advancing it again, though I mean to place it in a point of view in some degree different from any that I have hitherto seen, if it had ever been fairly and satisfactorily answered. The cause of this neglect on the part of the advocates for the perfectibility of mankind is not easily accounted for. I cannot doubt the talents of such men as Godwin and Condorcet. I am unwilling to doubt their candour. To my understanding, and probably to that of most others, the difficulty appears insurmountable. Yet these men of acknowledged ability and penetration scarcely deign to notice it, and hold on their course in such speculations with unabated ardour and undiminished confidence. I have certainly no right to say that they purposely shut their eyes to such arguments. I ought rather to doubt the validity of them, when neglected by such men, however forcibly their truth may strike my own mind. Yet in this respect it must be acknowledged that we are all of us too prone to err. If I saw a glass of wine repeatedly presented to a man, and he took no notice of it, I should be apt to think that he was blind or uncivil. A juster philosophy might teach me rather to think that my eyes deceived me and that the offer was not really what I conceived it to be. In entering upon the argument I must premise that I put out of the question, at present, all mere conjectures, that is, all suppositions, the probable realization of which cannot be inferred upon any just philosophical grounds. A writer may tell me that he thinks man will ultimately become an ostrich. I cannot properly contradict him. But before he can expect to bring any reasonable person over to his opinion, he ought to shew that the necks of mankind have been gradually elongating, that the lips have grown harder and more prominent, that the legs and feet are daily altering their shape, and that the hair is beginning to change into stubs of feathers. And till the probability of so wonderful a conversion can be shewn, it is surely lost time and lost eloquence to expatiate on the happiness of man in such a state; to describe his powers, both of running and flying, to paint him in a condition where all narrow luxuries would be contemned, where he would be employed only in collecting the necessaries of life, and where, consequently, each man's share of labour would be light, and his portion of leisure ample. I think I may fairly make two postulata. First, That food is necessary to the existence of man. Secondly, That the passion between the sexes is necessary and will remain nearly in its present state. These two laws, ever since we have had any knowledge of mankind, appear to have been fixed laws of our nature, and, as we have not hitherto seen any alteration in them, we have no right to conclude that they will ever cease to be what they now are, without an immediate act of power in that Being who first arranged the system of the universe, and for the advantage of his creatures, still executes, according to fixed laws, all its various operations. I do not know that any writer has supposed that on this earth man will ultimately be able to live without food. But Mr Godwin has conjectured that the passion between the sexes may in time be extinguished. As, however, he calls this part of his work a deviation into the land of conjecture, I will not dwell longer upon it at present than to say that the best arguments for the perfectibility of man are drawn from a contemplation of the great progress that he has already made from the savage state and the difficulty of saying where he is to stop. But towards the extinction of the passion between the sexes, no progress whatever has hitherto been made. It appears to exist in as much force at present as it did two thousand or four thousand years ago. There are individual exceptions now as there always have been. But, as these exceptions do not appear to increase in number, it would surely be a very unphilosophical mode of arguing to infer, merely from the existence of an exception, that the exception would, in time, become the rule, and the rule the exception. Assuming then my postulata as granted, I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man. Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second. By that law of our nature which makes food necessary to the life of man, the effects of these two unequal powers must be kept equal. This implies a strong and constantly operating check on population from the difficulty of subsistence. This difficulty must fall somewhere and must necessarily be severely felt by a large portion of mankind. Through the animal and vegetable kingdoms, nature has scattered the seeds of life abroad with the most profuse and liberal hand. She has been comparatively sparing in the room and the nourishment necessary to rear them. The germs of existence contained in this spot of earth, with ample food, and ample room to expand in, would fill millions of worlds in the course of a few thousand years. Necessity, that imperious all pervading law of nature, restrains them within the prescribed bounds. The race of plants and the race of animals shrink under this great restrictive law. And the race of man cannot, by any efforts of reason, escape from it. Among plants and animals its effects are waste of seed, sickness, and premature death. Among mankind, misery and vice. The former, misery, is an absolutely necessary consequence of it. Vice is a highly probable consequence, and we therefore see it abundantly prevail, but it ought not, perhaps, to be called an absolutely necessary consequence. The ordeal of virtue is to resist all temptation to evil. This natural inequality of the two powers of population and of production in the earth, and that great law of our nature which must constantly keep their effects equal, form the great difficulty that to me appears insurmountable in the way to the perfectibility of society. All other arguments are of slight and subordinate consideration in comparison of this. I see no way by which man can escape from the weight of this law which pervades all animated nature. No fancied equality, no agrarian regulations in their utmost extent, could remove the pressure of it even for a single century. And it appears, therefore, to be decisive against the possible existence of a society, all the members of which should live in ease, happiness, and comparative leisure; and feel no anxiety about providing the means of subsistence for themselves and families. Consequently, if the premises are just, the argument is conclusive against the perfectibility of the mass of mankind. I have thus sketched the general outline of the argument, but I will examine it more particularly, and I think it will be found that experience, the true source and foundation of all knowledge, invariably confirms its truth. CHAPTER 2 The different ratio in which population and food increase--The necessary effects of these different ratios of increase--Oscillation produced by them in the condition of the lower classes of society--Reasons why this oscillation has not been so much observed as might be expected--Three propositions on which the general argument of the Essay depends--The different states in which mankind have been known to exist proposed to be examined with reference to these three propositions. I said that population, when unchecked, increased in a geometrical ratio, and subsistence for man in an arithmetical ratio. Let us examine whether this position be just. I think it will be allowed, that no state has hitherto existed (at least that we have any account of) where the manners were so pure and simple, and the means of subsistence so abundant, that no check whatever has existed to early marriages, among the lower classes, from a fear of not providing well for their families, or among the higher classes, from a fear of lowering their condition in life. Consequently in no state that we have yet known has the power of population been left to exert itself with perfect freedom. Whether the law of marriage be instituted or not, the dictate of nature and virtue seems to be an early attachment to one woman. Supposing a liberty of changing in the case of an unfortunate choice, this liberty would not affect population till it arose to a height greatly vicious; and we are now supposing the existence of a society where vice is scarcely known. In a state therefore of great equality and virtue, where pure and simple manners prevailed, and where the means of subsistence were so abundant that no part of the society could have any fears about providing amply for a family, the power of population being left to exert itself unchecked, the increase of the human species would evidently be much greater than any increase that has been hitherto known. In the United States of America, where the means of subsistence have been more ample, the manners of the people more pure, and consequently the checks to early marriages fewer, than in any of the modern states of Europe, the population has been found to double itself in twenty-five years. This ratio of increase, though short of the utmost power of population, yet as the result of actual experience, we will take as our rule, and say, that population, when unchecked, goes on doubling itself every twenty-five years or increases in a geometrical ratio. Let us now take any spot of earth, this Island for instance, and see in what ratio the subsistence it affords can be supposed to increase. We will begin with it under its present state of cultivation. If I allow that by the best possible policy, by breaking up more land and by great encouragements to agriculture, the produce of this Island may be doubled in the first twenty-five years, I think it will be allowing as much as any person can well demand. In the next twenty-five years, it is impossible to suppose that the produce could be quadrupled. It would be contrary to all our knowledge of the qualities of land. The very utmost that we can conceive, is, that the increase in the second twenty-five years might equal the present produce. Let us then take this for our rule, though certainly far beyond the truth, and allow that, by great exertion, the whole produce of the Island might be increased every twenty-five years, by a quantity of subsistence equal to what it at present produces. The most enthusiastic speculator cannot suppose a greater increase than this. In a few centuries it would make every acre of land in the Island like a garden. Yet this ratio of increase is evidently arithmetical. It may be fairly said, therefore, that the means of subsistence increase in an arithmetical ratio. Let us now bring the effects of these two ratios together. The population of the Island is computed to be about seven millions, and we will suppose the present produce equal to the support of such a number. In the first twenty-five years the population would be fourteen millions, and the food being also doubled, the means of subsistence would be equal to this increase. In the next twenty-five years the population would be twenty-eight millions, and the means of subsistence only equal to the support of twenty-one millions. In the next period, the population would be fifty-six millions, and the means of subsistence just sufficient for half that number. And at the conclusion of the first century the population would be one hundred and twelve millions and the means of subsistence only equal to the support of thirty-five millions, which would leave a population of seventy-seven millions totally unprovided for. A great emigration necessarily implies unhappiness of some kind or other in the country that is deserted. For few persons will leave their families, connections, friends, and native land, to seek a settlement in untried foreign climes, without some strong subsisting causes of uneasiness where they are, or the hope of some great advantages in the place to which they are going. But to make the argument more general and less interrupted by the partial views of emigration, let us take the whole earth, instead of one spot, and suppose that the restraints to population were universally removed. If the subsistence for man that the earth affords was to be increased every twenty-five years by a quantity equal to what the whole world at present produces, this would allow the power of production in the earth to be absolutely unlimited, and its ratio of increase much greater than we can conceive that any possible exertions of mankind could make it. Taking the population of the world at any number, a thousand millions, for instance, the human species would increase in the ratio of--1, 2, 4, 8, 16, 32, 64, 128, 256, 512, etc. and subsistence as--1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc. In two centuries and a quarter, the population would be to the means of subsistence as 512 to 10: in three centuries as 4096 to 13, and in two thousand years the difference would be almost incalculable, though the produce in that time would have increased to an immense extent. No limits whatever are placed to the productions of the earth; they may increase for ever and be greater than any assignable quantity, yet still the power of population being a power of a superior order, the increase of the human species can only be kept commensurate to the increase of the means of subsistence by the constant operation of the strong law of necessity acting as a check upon the greater power. The effects of this check remain now to be considered. Among plants and animals the view of the subject is simple. They are all impelled by a powerful instinct to the increase of their species, and this instinct is interrupted by no reasoning or doubts about providing for their offspring. Wherever therefore there is liberty, the power of increase is exerted, and the superabundant effects are repressed afterwards by want of room and nourishment, which is common to animals and plants, and among animals by becoming the prey of others. The effects of this check on man are more complicated. Impelled to the increase of his species by an equally powerful instinct, reason interrupts his career and asks him whether he may not bring beings into the world for whom he cannot provide the means of subsistence. In a state of equality, this would be the simple question. In the present state of society, other considerations occur. Will he not lower his rank in life? Will he not subject himself to greater difficulties than he at present feels? Will he not be obliged to labour harder? and if he has a large family, will his utmost exertions enable him to support them? May he not see his offspring in rags and misery, and clamouring for bread that he cannot give them? And may he not be reduced to the grating necessity of forfeiting his independence, and of being obliged to the sparing hand of charity for support? These considerations are calculated to prevent, and certainly do prevent, a very great number in all civilized nations from pursuing the dictate of nature in an early attachment to one woman. And this restraint almost necessarily, though not absolutely so, produces vice. Yet in all societies, even those that are most vicious, the tendency to a virtuous attachment is so strong that there is a constant effort towards an increase of population. This constant effort as constantly tends to subject the lower classes of the society to distress and to prevent any great permanent amelioration of their condition. The way in which, these effects are produced seems to be this. We will suppose the means of subsistence in any country just equal to the easy support of its inhabitants. The constant effort towards population, which is found to act even in the most vicious societies, increases the number of people before the means of subsistence are increased. The food therefore which before supported seven millions must now be divided among seven millions and a half or eight millions. The poor consequently must live much worse, and many of them be reduced to severe distress. The number of labourers also being above the proportion of the work in the market, the price of labour must tend toward a decrease, while the price of provisions would at the same time tend to rise. The labourer therefore must work harder to earn the same as he did before. During this season of distress, the discouragements to marriage, and the difficulty of rearing a family are so great that population is at a stand. In the mean time the cheapness of labour, the plenty of labourers, and the necessity of an increased industry amongst them, encourage cultivators to employ more labour upon their land, to turn up fresh soil, and to manure and improve more completely what is already in tillage, till ultimately the means of subsistence become in the same proportion to the population as at the period from which we set out. The situation of the labourer being then again tolerably comfortable, the restraints to population are in some degree loosened, and the same retrograde and progressive movements with respect to happiness are repeated. This sort of oscillation will not be remarked by superficial observers, and it may be difficult even for the most penetrating mind to calculate its periods. Yet that in all old states some such vibration does exist, though from various transverse causes, in a much less marked, and in a much more irregular manner than I have described it, no reflecting man who considers the subject deeply can well doubt. Many reasons occur why this oscillation has been less obvious, and less decidedly confirmed by experience, than might naturally be expected. One principal reason is that the histories of mankind that we possess are histories only of the higher classes. We have but few accounts that can be depended upon of the manners and customs of that part of mankind where these retrograde and progressive movements chiefly take place. A satisfactory history of this kind, on one people, and of one period, would require the constant and minute attention of an observing mind during a long life. Some of the objects of inquiry would be, in what proportion to the number of adults was the number of marriages, to what extent vicious customs prevailed in consequence of the restraints upon matrimony, what was the comparative mortality among the children of the most distressed part of the community and those who lived rather more at their ease, what were the variations in the real price of labour, and what were the observable differences in the state of the lower classes of society with respect to ease and happiness, at different times during a certain period. Such a history would tend greatly to elucidate the manner in which the constant check upon population acts and would probably prove the existence of the retrograde and progressive movements that have been mentioned, though the times of their vibrations must necessarily be rendered irregular from the operation of many interrupting causes, such as the introduction or failure of certain manufactures, a greater or less prevalent spirit of agricultural enterprise, years of plenty, or years of scarcity, wars and pestilence, poor laws, the invention of processes for shortening labour without the proportional extension of the market for the commodity, and, particularly, the difference between the nominal and real price of labour, a circumstance which has perhaps more than any other contributed to conceal this oscillation from common view. It very rarely happens that the nominal price of labour universally falls, but we well know that it frequently remains the same, while the nominal price of provisions has been gradually increasing. This is, in effect, a real fall in the price of labour, and during this period the condition of the lower orders of the community must gradually grow worse and worse. But the farmers and capitalists are growing rich from the real cheapness of labour. Their increased capitals enable them to employ a greater number of men. Work therefore may be plentiful, and the price of labour would consequently rise. But the want of freedom in the market of labour, which occurs more or less in all communities, either from parish laws, or the more general cause of the facility of combination among the rich, and its difficulty among the poor, operates to prevent the price of labour from rising at the natural period, and keeps it down some time longer; perhaps till a year of scarcity, when the clamour is too loud and the necessity too apparent to be resisted. The true cause of the advance in the price of labour is thus concealed, and the rich affect to grant it as an act of compassion and favour to the poor, in consideration of a year of scarcity, and, when plenty returns, indulge themselves in the most unreasonable of all complaints, that the price does not again fall, when a little rejection would shew them that it must have risen long before but from an unjust conspiracy of their own. But though the rich by unfair combinations contribute frequently to prolong a season of distress among the poor, yet no possible form of society could prevent the almost constant action of misery upon a great part of mankind, if in a state of inequality, and upon all, if all were equal. The theory on which the truth of this position depends appears to me so extremely clear that I feel at a loss to conjecture what part of it can be denied. That population cannot increase without the means of subsistence is a proposition so evident that it needs no illustration. That population does invariably increase where there are the means of subsistence, the history of every people that have ever existed will abundantly prove. And that the superior power of population cannot be checked without producing misery or vice, the ample portion of these too bitter ingredients in the cup of human life and the continuance of the physical causes that seem to have produced them bear too convincing a testimony. But, in order more fully to ascertain the validity of these three propositions, let us examine the different states in which mankind have been known to exist. Even a cursory review will, I think, be sufficient to convince us that these propositions are incontrovertible truths. CHAPTER 3 The savage or hunter state shortly reviewed--The shepherd state, or the tribes of barbarians that overran the Roman Empire--The superiority of the power of population to the means of subsistence--the cause of the great tide of Northern Emigration. In the rudest state of mankind, in which hunting is the principal occupation, and the only mode of acquiring food; the means of subsistence being scattered over a large extent of territory, the comparative population must necessarily be thin. It is said that the passion between the sexes is less ardent among the North American Indians, than among any other race of men. Yet, notwithstanding this apathy, the effort towards population, even in this people, seems to be always greater than the means to support it. This appears, from the comparatively rapid population that takes place, whenever any of the tribes happen to settle in some fertile spot, and to draw nourishment from more fruitful sources than that of hunting; and it has been frequently remarked that when an Indian family has taken up its abode near any European settlement, and adopted a more easy and civilized mode of life, that one woman has reared five, or six, or more children; though in the savage state it rarely happens that above one or two in a family grow up to maturity. The same observation has been made with regard to the Hottentots near the Cape. These facts prove the superior power of population to the means of subsistence in nations of hunters, and that this power always shews itself the moment it is left to act with freedom. It remains to inquire whether this power can be checked, and its effects kept equal to the means of subsistence, without vice or misery. The North American Indians, considered as a people, cannot justly be called free and equal. In all the accounts we have of them, and, indeed, of most other savage nations, the women are represented as much more completely in a state of slavery to the men than the poor are to the rich in civilized countries. One half the nation appears to act as Helots to the other half, and the misery that checks population falls chiefly, as it always must do, upon that part whose condition is lowest in the scale of society. The infancy of man in the simplest state requires considerable attention, but this necessary attention the women cannot give, condemned as they are to the inconveniences and hardships of frequent change of place and to the constant and unremitting drudgery of preparing every thing for the reception of their tyrannic lords. These exertions, sometimes during pregnancy or with children at their backs, must occasion frequent miscarriages, and prevent any but the most robust infants from growing to maturity. Add to these hardships of the women the constant war that prevails among savages, and the necessity which they frequently labour under of exposing their aged and helpless parents, and of thus violating the first feelings of nature, and the picture will not appear very free from the blot of misery. In estimating the happiness of a savage nation, we must not fix our eyes only on the warrior in the prime of life: he is one of a hundred: he is the gentleman, the man of fortune, the chances have been in his favour and many efforts have failed ere this fortunate being was produced, whose guardian genius should preserve him through the numberless dangers with which he would be surrounded from infancy to manhood. The true points of comparison between two nations seem to be the ranks in each which appear nearest to answer to each other. And in this view, I should compare the warriors in the prime of life with the gentlemen, and the women, children, and aged, with the lower classes of the community in civilized states. May we not then fairly infer from this short review, or rather, from the accounts that may be referred to of nations of hunters, that their population is thin from the scarcity of food, that it would immediately increase if food was in greater plenty, and that, putting vice out of the question among savages, misery is the check that represses the superior power of population and keeps its effects equal to the means of subsistence. Actual observation and experience tell us that this check, with a few local and temporary exceptions, is constantly acting now upon all savage nations, and the theory indicates that it probably acted with nearly equal strength a thousand years ago, and it may not be much greater a thousand years hence. Of the manners and habits that prevail among nations of shepherds, the next state of mankind, we are even more ignorant than of the savage state. But that these nations could not escape the general lot of misery arising from the want of subsistence, Europe, and all the fairest countries in the world, bear ample testimony. Want was the goad that drove the Scythian shepherds from their native haunts, like so many famished wolves in search of prey. Set in motion by this all powerful cause, clouds of Barbarians seemed to collect from all points of the northern hemisphere. Gathering fresh darkness and terror as they rolled on, the congregated bodies at length obscured the sun of Italy and sunk the whole world in universal night. These tremendous effects, so long and so deeply felt throughout the fairest portions of the earth, may be traced to the simple cause of the superior power of population to the means of subsistence. It is well known that a country in pasture cannot support so many inhabitants as a country in tillage, but what renders nations of shepherds so formidable is the power which they possess of moving all together and the necessity they frequently feel of exerting this power in search of fresh pasture for their herds. A tribe that was rich in cattle had an immediate plenty of food. Even the parent stock might be devoured in a case of absolute necessity. The women lived in greater ease than among nations of hunters. The men bold in their united strength and confiding in their power of procuring pasture for their cattle by change of place, felt, probably, but few fears about providing for a family. These combined causes soon produced their natural and invariable effect, an extended population. A more frequent and rapid change of place became then necessary. A wider and more extensive territory was successively occupied. A broader desolation extended all around them. Want pinched the less fortunate members of the society, and, at length, the impossibility of supporting such a number together became too evident to be resisted. Young scions were then pushed out from the parent-stock and instructed to explore fresh regions and to gain happier seats for themselves by their swords. 'The world was all before them where to choose.' Restless from present distress, flushed with the hope of fairer prospects, and animated with the spirit of hardy enterprise, these daring adventurers were likely to become formidable adversaries to all who opposed them. The peaceful inhabitants of the countries on which they rushed could not long withstand the energy of men acting under such powerful motives of exertion. And when they fell in with any tribes like their own, the contest was a struggle for existence, and they fought with a desperate courage, inspired by the rejection that death was the punishment of defeat and life the prize of victory. In these savage contests many tribes must have been utterly exterminated. Some, probably, perished by hardship and famine. Others, whose leading star had given them a happier direction, became great and powerful tribes, and, in their turns, sent off fresh adventurers in search of still more fertile seats. The prodigious waste of human life occasioned by this perpetual struggle for room and food was more than supplied by the mighty power of population, acting, in some degree, unshackled from the consent habit of emigration. The tribes that migrated towards the South, though they won these more fruitful regions by continual battles, rapidly increased in number and power, from the increased means of subsistence. Till at length the whole territory, from the confines of China to the shores of the Baltic, was peopled by a various race of Barbarians, brave, robust, and enterprising, inured to hardship, and delighting in war. Some tribes maintained their independence. Others ranged themselves under the standard of some barbaric chieftain who led them to victory after victory, and what was of more importance, to regions abounding in corn, wine, and oil, the long wished for consummation, and great reward of their labours. An Alaric, an Attila, or a Zingis Khan, and the chiefs around them, might fight for glory, for the fame of extensive conquests, but the true cause that set in motion the great tide of northern emigration, and that continued to propel it till it rolled at different periods against China, Persia, Italy, and even Egypt, was a scarcity of food, a population extended beyond the means of supporting it. The absolute population at any one period, in proportion to the extent of territory, could never be great, on account of the unproductive nature of some of the regions occupied; but there appears to have been a most rapid succession of human beings, and as fast as some were mowed down by the scythe of war or of famine, others rose in increased numbers to supply their place. Among these bold and improvident Barbarians, population was probably but little checked, as in modern states, from a fear of future difficulties. A prevailing hope of bettering their condition by change of place, a constant expectation of plunder, a power even, if distressed, of selling their children as slaves, added to the natural carelessness of the barbaric character, all conspired to raise a population which remained to be repressed afterwards by famine or war. Where there is any inequality of conditions, and among nations of shepherds this soon takes place, the distress arising from a scarcity of provisions must fall hardest upon the least fortunate members of the society. This distress also must frequently have been felt by the women, exposed to casual plunder in the absence of their husbands, and subject to continual disappointments in their expected return. But without knowing enough of the minute and intimate history of these people, to point out precisely on what part the distress for want of food chiefly fell, and to what extent it was generally felt, I think we may fairly say, from all the accounts that we have of nations of shepherds, that population invariably increased among them whenever, by emigration or any other cause, the means of subsistence were increased, and that a further population was checked, and the actual population kept equal to the means of subsistence, by misery and vice. For, independently of any vicious customs that might have prevailed amongst them with regard to women, which always operate as checks to population, it must be acknowledged, I think, that the commission of war is vice, and the effect of it misery, and none can doubt the misery of want of food. CHAPTER 4 State of civilized nations--Probability that Europe is much more populous now than in the time of Julius Caesar--Best criterion of population--Probable error of Hume in one the criterions that he proposes as assisting in an estimate of population--Slow increase of population at present in most of the states of Europe--The two principal checks to population--The first, or preventive check examined with regard to England. In examining the next state of mankind with relation to the question before us, the state of mixed pasture and tillage, in which with some variation in the proportions the most civilized nations must always remain, we shall be assisted in our review by what we daily see around us, by actual experience, by facts that come within the scope of every man's observation. Notwithstanding the exaggerations of some old historians, there can remain no doubt in the mind of any thinking man that the population of the principal countries of Europe, France, England, Germany, Russia, Poland, Sweden, and Denmark is much greater than ever it was in former times. The obvious reason of these exaggerations is the formidable aspect that even a thinly peopled nation must have, when collected together and moving all at once in search of fresh seats. If to this tremendous appearance be added a succession at certain intervals of similar emigrations, we shall not be much surprised that the fears of the timid nations of the South represented the North as a region absolutely swarming with human beings. A nearer and juster view of the subject at present enables us to see that the inference was as absurd as if a man in this country, who was continually meeting on the road droves of cattle from Wales and the North, was immediately to conclude that these countries were the most productive of all the parts of the kingdom. The reason that the greater part of Europe is more populous now than it was in former times, is that the industry of the inhabitants has made these countries produce a greater quantity of human subsistence. For I conceive that it may be laid down as a position not to be controverted, that, taking a sufficient extent of territory to include within it exportation and importation, and allowing some variation for the prevalence of luxury, or of frugal habits, that population constantly bears a regular proportion to the food that the earth is made to produce. In the controversy concerning the populousness of ancient and modern nations, could it be clearly ascertained that the average produce of the countries in question, taken altogether, is greater now than it was in the times of Julius Caesar, the dispute would be at once determined. When we are assured that China is the most fertile country in the world, that almost all the land is in tillage, and that a great part of it bears two crops every year, and further, that the people live very frugally, we may infer with certainty that the population must be immense, without busying ourselves in inquiries into the manners and habits of the lower classes and the encouragements to early marriages. But these inquiries are of the utmost importance, and a minute history of the customs of the lower Chinese would be of the greatest use in ascertaining in what manner the checks to a further population operate; what are the vices, and what are the distresses that prevent an increase of numbers beyond the ability of the country to support. Hume, in his essay on the populousness of ancient and modern nations, when he intermingles, as he says, an inquiry concerning causes with that concerning facts, does not seem to see with his usual penetration how very little some of the causes he alludes to could enable him to form any judgement of the actual population of ancient nations. If any inference can be drawn from them, perhaps it should be directly the reverse of what Hume draws, though I certainly ought to speak with great diffidence in dissenting from a man who of all others on such subjects was the least likely to be deceived by first appearances. If I find that at a certain period in ancient history, the encouragements to have a family were great, that early marriages were consequently very prevalent, and that few persons remained single, I should infer with certainty that population was rapidly increasing, but by no means that it was then actually very great, rather; indeed, the contrary, that it was then thin and that there was room and food for a much greater number. On the other hand, if I find that at this period the difficulties attending a family were very great, that, consequently, few early marriages took place, and that a great number of both sexes remained single, I infer with certainty that population was at a stand, and, probably, because the actual population was very great in proportion to the fertility of the land and that there was scarcely room and food for more. The number of footmen, housemaids, and other persons remaining unmarried in modern states, Hume allows to be rather an argument against their population. I should rather draw a contrary inference and consider it an argument of their fullness, though this inference is not certain, because there are many thinly inhabited states that are yet stationary in their population. To speak, therefore, correctly, perhaps it may be said that the number of unmarried persons in proportion to the whole number, existing at different periods, in the same or different states will enable us to judge whether population at these periods was increasing, stationary, or decreasing, but will form no criterion by which we can determine the actual population. There is, however, a circumstance taken notice of in most of the accounts we have of China that it seems difficult to reconcile with this reasoning. It is said that early marriages very generally prevail through all the ranks of the Chinese. Yet Dr Adam Smith supposes that population in China is stationary. These two circumstances appear to be irreconcilable. It certainly seems very little probable that the population of China is fast increasing. Every acre of land has been so long in cultivation that we can hardly conceive there is any great yearly addition to the average produce. The fact, perhaps, of the universality of early marriages may not be sufficiently ascertained. If it be supposed true, the only way of accounting for the difficulty, with our present knowledge of the subject, appears to be that the redundant population, necessarily occasioned by the prevalence of early marriages, must be repressed by occasional famines, and by the custom of exposing children, which, in times of distress, is probably more frequent than is ever acknowledged to Europeans. Relative to this barbarous practice, it is difficult to avoid remarking, that there cannot be a stronger proof of the distresses that have been felt by mankind for want of food, than the existence of a custom that thus violates the most natural principle of the human heart. It appears to have been very general among ancient nations, and certainly tended rather to increase population. In examining the principal states of modern Europe, we shall find that though they have increased very considerably in population since they were nations of shepherds, yet that at present their progress is but slow, and instead of doubling their numbers every twenty-five years they require three or four hundred years, or more, for that purpose. Some, indeed, may be absolutely stationary, and others even retrograde. The cause of this slow progress in population cannot be traced to a decay of the passion between the sexes. We have sufficient reason to think that this natural propensity exists still in undiminished vigour. Why then do not its effects appear in a rapid increase of the human species? An intimate view of the state of society in any one country in Europe, which may serve equally for all, will enable us to answer this question, and to say that a foresight of the difficulties attending the rearing of a family acts as a preventive check, and the actual distresses of some of the lower classes, by which they are disabled from giving the proper food and attention to their children, act as a positive check to the natural increase of population. England, as one of the most flourishing states of Europe, may be fairly taken for an example, and the observations made will apply with but little variation to any other country where the population increases slowly. The preventive check appears to operate in some degree through all the ranks of society in England. There are some men, even in the highest rank, who are prevented from marrying by the idea of the expenses that they must retrench, and the fancied pleasures that they must deprive themselves of, on the supposition of having a family. These considerations are certainly trivial, but a preventive foresight of this kind has objects of much greater weight for its contemplation as we go lower. A man of liberal education, but with an income only just sufficient to enable him to associate in the rank of gentlemen, must feel absolutely certain that if he marries and has a family he shall be obliged, if he mixes at all in society, to rank himself with moderate farmers and the lower class of tradesmen. The woman that a man of education would naturally make the object of his choice would be one brought up in the same tastes and sentiments with himself and used to the familiar intercourse of a society totally different from that to which she must be reduced by marriage. Can a man consent to place the object of his affection in a situation so discordant, probably, to her tastes and inclinations? Two or three steps of descent in society, particularly at this round of the ladder, where education ends and ignorance begins, will not be considered by the generality of people as a fancied and chimerical, but a real and essential evil. If society be held desirable, it surely must be free, equal, and reciprocal society, where benefits are conferred as well as received, and not such as the dependent finds with his patron or the poor with the rich. These considerations undoubtedly prevent a great number in this rank of life from following the bent of their inclinations in an early attachment. Others, guided either by a stronger passion, or a weaker judgement, break through these restraints, and it would be hard indeed, if the gratification of so delightful a passion as virtuous love, did not, sometimes, more than counterbalance all its attendant evils. But I fear it must be owned that the more general consequences of such marriages are rather calculated to justify than to repress the forebodings of the prudent. The sons of tradesmen and farmers are exhorted not to marry, and generally find it necessary to pursue this advice till they are settled in some business or farm that may enable them to support a family. These events may not, perhaps, occur till they are far advanced in life. The scarcity of farms is a very general complaint in England. And the competition in every kind of business is so great that it is not possible that all should be successful. The labourer who earns eighteen pence a day and lives with some degree of comfort as a single man, will hesitate a little before he divides that pittance among four or five, which seems to be but just sufficient for one. Harder fare and harder labour he would submit to for the sake of living with the woman that he loves, but he must feel conscious, if he thinks at all, that should he have a large family, and any ill luck whatever, no degree of frugality, no possible exertion of his manual strength could preserve him from the heart-rending sensation of seeing his children starve, or of forfeiting his independence, and being obliged to the parish for their support. The love of independence is a sentiment that surely none would wish to be erased from the breast of man, though the parish law of England, it must be confessed, is a system of all others the most calculated gradually to weaken this sentiment, and in the end may eradicate it completely. The servants who live in gentlemen's families have restraints that are yet stronger to break through in venturing upon marriage. They possess the necessaries, and even the comforts of life, almost in as great plenty as their masters. Their work is easy and their food luxurious compared with the class of labourers. And their sense of dependence is weakened by the conscious power of changing their masters, if they feel themselves offended. Thus comfortably situated at present, what are their prospects in marrying? Without knowledge or capital, either for business, or farming, and unused and therefore unable, to earn a subsistence by daily labour, their only refuge seems to be a miserable ale-house, which certainly offers no very enchanting prospect of a happy evening to their lives. By much the greater part, therefore, deterred by this uninviting view of their future situation, content themselves with remaining single where they are. If this sketch of the state of society in England be near the truth, and I do not conceive that it is exaggerated, it will be allowed that the preventive check to population in this country operates, though with varied force, through all the classes of the community. The same observation will hold true with regard to all old states. The effects, indeed, of these restraints upon marriage are but too conspicuous in the consequent vices that are produced in almost every part of the world, vices that are continually involving both sexes in inextricable unhappiness. CHAPTER 5 The second, or positive check to population examined, in England--The true cause why the immense sum collected in England for the poor does not better their condition--The powerful tendency of the poor laws to defeat their own purpose--Palliative of the distresses of the poor proposed--The absolute impossibility, from the fixed laws of our nature, that the pressure of want can ever be completely removed from the lower classes of society--All the checks to population may be resolved into misery or vice. The positive check to population, by which I mean the check that represses an increase which is already begun, is confined chiefly, though not perhaps solely, to the lowest orders of society. This check is not so obvious to common view as the other I have mentioned, and, to prove distinctly the force and extent of its operation would require, perhaps, more data than we are in possession of. But I believe it has been very generally remarked by those who have attended to bills of mortality that of the number of children who die annually, much too great a proportion belongs to those who may be supposed unable to give their offspring proper food and attention, exposed as they are occasionally to severe distress and confined, perhaps, to unwholesome habitations and hard labour. This mortality among the children of the poor has been constantly taken notice of in all towns. It certainly does not prevail in an equal degree in the country, but the subject has not hitherto received sufficient attention to enable anyone to say that there are not more deaths in proportion among the children of the poor, even in the country, than among those of the middling and higher classes. Indeed, it seems difficult to suppose that a labourer's wife who has six children, and who is sometimes in absolute want of bread, should be able always to give them the food and attention necessary to support life. The sons and daughters of peasants will not be found such rosy cherubs in real life as they are described to be in romances. It cannot fail to be remarked by those who live much in the country that the sons of labourers are very apt to be stunted in their growth, and are a long while arriving at maturity. Boys that you would guess to be fourteen or fifteen are, upon inquiry, frequently found to be eighteen or nineteen. And the lads who drive plough, which must certainly be a healthy exercise, are very rarely seen with any appearance of calves to their legs: a circumstance which can only be attributed to a want either of proper or of sufficient nourishment. To remedy the frequent distresses of the common people, the poor laws of England have been instituted; but it is to be feared, that though they may have alleviated a little the intensity of individual misfortune, they have spread the general evil over a much larger surface. It is a subject often started in conversation and mentioned always as a matter of great surprise that, notwithstanding the immense sum that is annually collected for the poor in England, there is still so much distress among them. Some think that the money must be embezzled, others that the church-wardens and overseers consume the greater part of it in dinners. All agree that somehow or other it must be very ill-managed. In short the fact that nearly three millions are collected annually for the poor and yet that their distresses are not removed is the subject of continual astonishment. But a man who sees a little below the surface of things would be very much more astonished if the fact were otherwise than it is observed to be, or even if a collection universally of eighteen shillings in the pound, instead of four, were materially to alter it. I will state a case which I hope will elucidate my meaning. Suppose that by a subscription of the rich the eighteen pence a day which men earn now was made up five shillings, it might be imagined, perhaps, that they would then be able to live comfortably and have a piece of meat every day for their dinners. But this would be a very false conclusion. The transfer of three shillings and sixpence a day to every labourer would not increase the quantity of meat in the country. There is not at present enough for all to have a decent share. What would then be the consequence? The competition among the buyers in the market of meat would rapidly raise the price from sixpence or sevenpence, to two or three shillings in the pound, and the commodity would not be divided among many more than it is at present. When an article is scarce, and cannot be distributed to all, he that can shew the most valid patent, that is, he that offers most money, becomes the possessor. If we can suppose the competition among the buyers of meat to continue long enough for a greater number of cattle to be reared annually, this could only be done at the expense of the corn, which would be a very disadvantagous exchange, for it is well known that the country could not then support the same population, and when subsistence is scarce in proportion to the number of people, it is of little consequence whether the lowest members of the society possess eighteen pence or five shillings. They must at all events be reduced to live upon the hardest fare and in the smallest quantity. It will be said, perhaps, that the increased number of purchasers in every article would give a spur to productive industry and that the whole produce of the island would be increased. This might in some degree be the case. But the spur that these fancied riches would give to population would more than counterbalance it, and the increased produce would be to be divided among a more than proportionably increased number of people. All this time I am supposing that the same quantity of work would be done as before. But this would not really take place. The receipt of five shillings a day, instead of eighteen pence, would make every man fancy himself comparatively rich and able to indulge himself in many hours or days of leisure. This would give a strong and immediate check to productive industry, and, in a short time, not only the nation would be poorer, but the lower classes themselves would be much more distressed than when they received only eighteen pence a day. A collection from the rich of eighteen shillings in the pound, even if distributed in the most judicious manner, would have a little the same effect as that resulting from the supposition I have just made, and no possible contributions or sacrifices of the rich, particularly in money, could for any time prevent the recurrence of distress among the lower members of society, whoever they were. Great changes might, indeed, be made. The rich might become poor, and some of the poor rich, but a part of the society must necessarily feel a difficulty of living, and this difficulty will naturally fall on the least fortunate members. It may at first appear strange, but I believe it is true, that I cannot by means of money raise a poor man and enable him to live much better than he did before, without proportionably depressing others in the same class. If I retrench the quantity of food consumed in my house, and give him what I have cut off, I then benefit him, without depressing any but myself and family, who, perhaps, may be well able to bear it. If I turn up a piece of uncultivated land, and give him the produce, I then benefit both him and all the members of the society, because what he before consumed is thrown into the common stock, and probably some of the new produce with it. But if I only give him money, supposing the produce of the country to remain the same, I give him a title to a larger share of that produce than formerly, which share he cannot receive without diminishing the shares of others. It is evident that this effect, in individual instances, must be so small as to be totally imperceptible; but still it must exist, as many other effects do, which, like some of the insects that people the air, elude our grosser perceptions. Supposing the quantity of food in any country to remain the same for many years together, it is evident that this food must be divided according to the value of each man's patent, or the sum of money that he can afford to spend on this commodity so universally in request. (Mr Godwin calls the wealth that a man receives from his ancestors a mouldy patent. It may, I think, very properly be termed a patent, but I hardly see the propriety of calling it a mouldy one, as it is an article in such constant use.) It is a demonstrative truth, therefore, that the patents of one set of men could not be increased in value without diminishing the value of the patents of some other set of men. If the rich were to subscribe and give five shillings a day to five hundred thousand men without retrenching their own tables, no doubt can exist, that as these men would naturally live more at their ease and consume a greater quantity of provisions, there would be less food remaining to divide among the rest, and consequently each man's patent would be diminished in value or the same number of pieces of silver would purchase a smaller quantity of subsistence. An increase of population without a proportional increase of food will evidently have the same effect in lowering the value of each man's patent. The food must necessarily be distributed in smaller quantities, and consequently a day's labour will purchase a smaller quantity of provisions. An increase in the price of provisions would arise either from an increase of population faster than the means of subsistence, or from a different distribution of the money of the society. The food of a country that has been long occupied, if it be increasing, increases slowly and regularly and cannot be made to answer any sudden demands, but variations in the distribution of the money of a society are not infrequently occurring, and are undoubtedly among the causes that occasion the continual variations which we observe in the price of provisions. The poor laws of England tend to depress the general condition of the poor in these two ways. Their first obvious tendency is to increase population without increasing the food for its support. A poor man may marry with little or no prospect of being able to support a family in independence. They may be said therefore in some measure to create the poor which they maintain, and as the provisions of the country must, in consequence of the increased population, be distributed to every man in smaller proportions, it is evident that the labour of those who are not supported by parish assistance will purchase a smaller quantity of provisions than before and consequently more of them must be driven to ask for support. Secondly, the quantity of provisions consumed in workhouses upon a part of the society that cannot in general be considered as the most valuable part diminishes the shares that would otherwise belong to more industrious and more worthy members, and thus in the same manner forces more to become dependent. If the poor in the workhouses were to live better than they now do, this new distribution of the money of the society would tend more conspicuously to depress the condition of those out of the workhouses by occasioning a rise in the price of provisions. Fortunately for England, a spirit of independence still remains among the peasantry. The poor laws are strongly calculated to eradicate this spirit. They have succeeded in part, but had they succeeded as completely as might have been expected their pernicious tendency would not have been so long concealed. Hard as it may appear in individual instances, dependent poverty ought to be held disgraceful. Such a stimulus seems to be absolutely necessary to promote the happiness of the great mass of mankind, and every general attempt to weaken this stimulus, however benevolent its apparent intention, will always defeat its own purpose. If men are induced to marry from a prospect of parish provision, with little or no chance of maintaining their families in independence, they are not only unjustly tempted to bring unhappiness and dependence upon themselves and children, but they are tempted, without knowing it, to injure all in the same class with themselves. A labourer who marries without being able to support a family may in some respects be considered as an enemy to all his fellow-labourers. I feel no doubt whatever that the parish laws of England have contributed to raise the price of provisions and to lower the real price of labour. They have therefore contributed to impoverish that class of people whose only possession is their labour. It is also difficult to suppose that they have not powerfully contributed to generate that carelessness and want of frugality observable among the poor, so contrary to the disposition frequently to be remarked among petty tradesmen and small farmers. The labouring poor, to use a vulgar expression, seem always to live from hand to mouth. Their present wants employ their whole attention, and they seldom think of the future. Even when they have an opportunity of saving they seldom exercise it, but all that is beyond their present necessities goes, generally speaking, to the ale-house. The poor laws of England may therefore be said to diminish both the power and the will to save among the common people, and thus to weaken one of the strongest incentives to sobriety and industry, and consequently to happiness. It is a general complaint among master manufacturers that high wages ruin all their workmen, but it is difficult to conceive that these men would not save a part of their high wages for the future support of their families, instead of spending it in drunkenness and dissipation, if they did not rely on parish assistance for support in case of accidents. And that the poor employed in manufactures consider this assistance as a reason why they may spend all the wages they earn and enjoy themselves while they can appears to be evident from the number of families that, upon the failure of any great manufactory, immediately fall upon the parish, when perhaps the wages earned in this manufactory while it flourished were sufficiently above the price of common country labour to have allowed them to save enough for their support till they could find some other channel for their industry. A man who might not be deterred from going to the ale-house from the consideration that on his death, or sickness, he should leave his wife and family upon the parish might yet hesitate in thus dissipating his earnings if he were assured that, in either of these cases, his family must starve or be left to the support of casual bounty. In China, where the real as well as nominal price of labour is very low, sons are yet obliged by law to support their aged and helpless parents. Whether such a law would be advisable in this country I will not pretend to determine. But it seems at any rate highly improper, by positive institutions, which render dependent poverty so general, to weaken that disgrace, which for the best and most humane reasons ought to attach to it. The mass of happiness among the common people cannot but be diminished when one of the strongest checks to idleness and dissipation is thus removed, and when men are thus allured to marry with little or no prospect of being able to maintain a family in independence. Every obstacle in the way of marriage must undoubtedly be considered as a species of unhappiness. But as from the laws of our nature some check to population must exist, it is better that it should be checked from a foresight of the difficulties attending a family and the fear of dependent poverty than that it should be encouraged, only to be repressed afterwards by want and sickness. It should be remembered always that there is an essential difference between food and those wrought commodities, the raw materials of which are in great plenty. A demand for these last will not fail to create them in as great a quantity as they are wanted. The demand for food has by no means the same creative power. In a country where all the fertile spots have been seized, high offers are necessary to encourage the farmer to lay his dressing on land from which he cannot expect a profitable return for some years. And before the prospect of advantage is sufficiently great to encourage this sort of agricultural enterprise, and while the new produce is rising, great distresses may be suffered from the want of it. The demand for an increased quantity of subsistence is, with few exceptions, constant everywhere, yet we see how slowly it is answered in all those countries that have been long occupied. The poor laws of England were undoubtedly instituted for the most benevolent purpose, but there is great reason to think that they have not succeeded in their intention. They certainly mitigate some cases of very severe distress which might otherwise occur, yet the state of the poor who are supported by parishes, considered in all its circumstances, is very far from being free from misery. But one of the principal objections to them is that for this assistance which some of the poor receive, in itself almost a doubtful blessing, the whole class of the common people of England is subjected to a set of grating, inconvenient, and tyrannical laws, totally inconsistent with the genuine spirit of the constitution. The whole business of settlements, even in its present amended state, is utterly contradictory to all ideas of freedom. The parish persecution of men whose families are likely to become chargeable, and of poor women who are near lying-in, is a most disgraceful and disgusting tyranny. And the obstructions continuity occasioned in the market of labour by these laws have a constant tendency to add to the difficulties of those who are struggling to support themselves without assistance. These evils attendant on the poor laws are in some degree irremediable. If assistance be to be distributed to a certain class of people, a power must be given somewhere of discriminating the proper objects and of managing the concerns of the institutions that are necessary, but any great interference with the affairs of other people is a species of tyranny, and in the common course of things the exercise of this power may be expected to become grating to those who are driven to ask for support. The tyranny of Justices, Church-wardens, and Overseers, is a common complaint among the poor, but the fault does not lie so much in these persons, who probably, before they were in power, were not worse than other people, but in the nature of all such institutions. The evil is perhaps gone too far to be remedied, but I feel little doubt in my own mind that if the poor laws had never existed, though there might have been a few more instances of very severe distress, yet that the aggregate mass of happiness among the common people would have been much greater than it is at present. Mr Pitt's Poor Bill has the appearance of being framed with benevolent intentions, and the clamour raised against it was in many respects ill directed, and unreasonable. But it must be confessed that it possesses in a high degree the great and radical defect of all systems of the kind, that of tending to increase population without increasing the means for its support, and thus to depress the condition of those that are not supported by parishes, and, consequently, to create more poor. To remove the wants of the lower classes of society is indeed an arduous task. The truth is that the pressure of distress on this part of a community is an evil so deeply seated that no human ingenuity can reach it. Were I to propose a palliative, and palliatives are all that the nature of the case will admit, it should be, in the first place, the total abolition of all the present parish-laws. This would at any rate give liberty and freedom of action to the peasantry of England, which they can hardly be said to possess at present. They would then be able to settle without interruption, wherever there was a prospect of a greater plenty of work and a higher price for labour. The market of labour would then be free, and those obstacles removed which, as things are now, often for a considerable time prevent the price from rising according to the demand. Secondly, premiums might be given for turning up fresh land, and it possible encouragements held out to agriculture above manufactures, and to tillage above grazing. Every endeavour should be used to weaken and destroy all those institutions relating to corporations, apprenticeships, etc., which cause the labours of agriculture to be worse paid than the labours of trade and manufactures. For a country can never produce its proper quantity of food while these distinctions remain in favour of artisans. Such encouragements to agriculture would tend to furnish the market with an increasing quantity of healthy work, and at the same time, by augmenting the produce of the country, would raise the comparative price of labour and ameliorate the condition of the labourer. Being now in better circumstances, and seeing no prospect of parish assistance, he would be more able, as well as more inclined, to enter into associations for providing against the sickness of himself or family. Lastly, for cases of extreme distress, county workhouses might be established, supported by rates upon the whole kingdom, and free for persons of all counties, and indeed of all nations. The fare should be hard, and those that were able obliged to work. It would be desirable that they should not be considered as comfortable asylums in all difficulties, but merely as places where severe distress might find some alleviation. A part of these houses might be separated, or others built for a most beneficial purpose, which has not been infrequently taken notice of, that of providing a place where any person, whether native or foreigner, might do a day's work at all times and receive the market price for it. Many cases would undoubtedly be left for the exertion of individual benevolence. A plan of this kind, the preliminary of which should be an abolition of all the present parish laws, seems to be the best calculated to increase the mass of happiness among the common people of England. To prevent the recurrence of misery, is, alas! beyond the power of man. In the vain endeavour to attain what in the nature of things is impossible, we now sacrifice not only possible but certain benefits. We tell the common people that if they will submit to a code of tyrannical regulations, they shall never be in want. They do submit to these regulations. They perform their part of the contract, but we do not, nay cannot, perform ours, and thus the poor sacrifice the valuable blessing of liberty and receive nothing that can be called an equivalent in return. Notwithstanding, then, the institution of the poor laws in England, I think it will be allowed that considering the state of the lower classes altogether, both in the towns and in the country, the distresses which they suffer from the want of proper and sufficient food, from hard labour and unwholesome habitations, must operate as a constant check to incipient population. To these two great checks to population, in all long occupied countries, which I have called the preventive and the positive checks, may be added vicious customs with respect to women, great cities, unwholesome manufactures, luxury, pestilence, and war. All these checks may be fairly resolved into misery and vice. And that these are the true causes of the slow increase of population in all the states of modern Europe, will appear sufficiently evident from the comparatively rapid increase that has invariably taken place whenever these causes have been in any considerable degree removed. CHAPTER 6 New colonies--Reasons for their rapid increase--North American Colonies--Extraordinary instance of increase in the back settlements--Rapidity with which even old states recover the ravages of war, pestilence, famine, or the convulsions of nature. It has been universally remarked that all new colonies settled in healthy countries, where there was plenty of room and food, have constantly increased with astonishing rapidity in their population. Some of the colonies from ancient Greece, in no very long period, more than equalled their parent states in numbers and strength. And not to dwell on remote instances, the European settlements in the new world bear ample testimony to the truth of a remark, which, indeed, has never, that I know of, been doubted. A plenty of rich land, to be had for little or nothing, is so powerful a cause of population as to overcome all other obstacles. No settlements could well have been worse managed than those of Spain in Mexico, Peru, and Quito. The tyranny, superstition, and vices of the mother-country were introduced in ample quantities among her children. Exorbitant taxes were exacted by the Crown. The most arbitrary restrictions were imposed on their trade. And the governors were not behind hand in rapacity and extortion for themselves as well as their master. Yet, under all these difficulties, the colonies made a quick progress in population. The city of Lima, founded since the conquest, is represented by Ulloa as containing fifty thousand inhabitants near fifty years ago. Quito, which had been but a hamlet of indians, is represented by the same author as in his time equally populous. Mexico is said to contain a hundred thousand inhabitants, which, notwithstanding the exaggerations of the Spanish writers, is supposed to be five times greater than what it contained in the time of Montezuma. In the Portuguese colony of Brazil, governed with almost equal tyranny, there were supposed to be, thirty years since, six hundred thousand inhabitants of European extraction. The Dutch and French colonies, though under the government of exclusive companies of merchants, which, as Dr Adam Smith says very justly, is the worst of all possible governments, still persisted in thriving under every disadvantage. But the English North American colonies, now the powerful people of the United States of America, made by far the most rapid progress. To the plenty of good land which they possessed in common with the Spanish and Portuguese settlements, they added a greater degree of liberty and equality. Though not without some restrictions on their foreign commerce, they were allowed a perfect liberty of managing their own internal affairs. The political institutions that prevailed were favourable to the alienation and division of property. Lands that were not cultivated by the proprietor within a limited time were declared grantable to any other person. In Pennsylvania there was no right of primogeniture, and in the provinces of New England the eldest had only a double share. There were no tithes in any of the States, and scarcely any taxes. And on account of the extreme cheapness of good land a capital could not be more advantageously employed than in agriculture, which at the same time that it supplies the greatest quantity of healthy work affords much the most valuable produce to the society. The consequence of these favourable circumstances united was a rapidity of increase probably without parallel in history. Throughout all the northern colonies, the population was found to double itself in twenty-five years. The original number of persons who had settled in the four provinces of new England in 1643 was 21,200.(I take these figures from Dr Price's two volumes of Observations; not having Dr Styles' pamphlet, from which he quotes, by me.) Afterwards, it is supposed that more left them than went to them. In the year 1760, they were increased to half a million. They had therefore all along doubled their own number in twenty-five years. In New Jersey the period of doubling appeared to be twenty-two years; and in Rhode island still less. In the back settlements, where the inhabitants applied themselves solely to agriculture, and luxury was not known, they were found to double their own number in fifteen years, a most extraordinary instance of increase. Along the sea coast, which would naturally be first inhabited, the period of doubling was about thirty-five years; and in some of the maritime towns, the population was absolutely at a stand. (In instances of this kind the powers of the earth appear to be fully equal to answer it the demands for food that can be made upon it by man. But we should be led into an error if we were thence to suppose that population and food ever really increase in the same ratio. The one is still a geometrical and the other an arithmetical ratio, that is, one increases by multiplication, and the other by addition. Where there are few people, and a great quantity of fertile land, the power of the earth to afford a yearly increase of food may be compared to a great reservoir of water, supplied by a moderate stream. The faster population increases, the more help will be got to draw off the water, and consequently an increasing quantity will be taken every year. But the sooner, undoubtedly, will the reservoir be exhausted, and the streams only remain. When acre has been added to acre, till all the fertile land is occupied, the yearly increase of food will depend upon the amelioration of the land already in possession; and even this moderate stream will be gradually diminishing. But population, could it be supplied with food, would go on with unexhausted vigour, and the increase of one period would furnish the power of a greater increase the next, and this without any limit.) These facts seem to shew that population increases exactly in the proportion that the two great checks to it, misery and vice, are removed, and that there is not a truer criterion of the happiness and innocence of a people than the rapidity of their increase. The unwholesomeness of towns, to which some persons are necessarily driven from the nature of their trades, must be considered as a species of misery, and every the slightest check to marriage, from a prospect of the difficulty of maintaining a family, may be fairly classed under the same head. In short it is difficult to conceive any check to population which does not come under the description of some species of misery or vice. The population of the thirteen American States before the war was reckoned at about three millions. Nobody imagines that Great Britain is less populous at present for the emigration of the small parent stock that produced these numbers. On the contrary, a certain degree of emigration is known to be favourable to the population of the mother country. It has been particularly remarked that the two Spanish provinces from which the greatest number of people emigrated to America, became in consequence more populous. Whatever was the original number of British emigrants that increased so fast in the North American Colonies, let us ask, why does not an equal number produce an equal increase in the same time in Great Britain? The great and obvious cause to be assigned is the want of room and food, or, in other words, misery, and that this is a much more powerful cause even than vice appears sufficiently evident from the rapidity with which even old states recover the desolations of war, pestilence, or the accidents of nature. They are then for a short time placed a little in the situation of new states, and the effect is always answerable to what might be expected. If the industry of the inhabitants be not destroyed by fear or tyranny, subsistence will soon increase beyond the wants of the reduced numbers, and the invariable consequence will be that population which before, perhaps, was nearly stationary, will begin immediately to increase. The fertile province of Flanders, which has been so often the seat of the most destructive wars, after a respite of a few years, has appeared always as fruitful and as populous as ever. Even the Palatinate lifted up its head again after the execrable ravages of Louis the Fourteenth. The effects of the dreadful plague in London in 1666 were not perceptible fifteen or twenty years afterwards. The traces of the most destructive famines in China and Indostan are by all accounts very soon obliterated. It may even be doubted whether Turkey and Egypt are upon an average much less populous for the plagues that periodically lay them waste. If the number of people which they contain be less now than formerly, it is, probably, rather to be attributed to the tyranny and oppression of the government under which they groan, and the consequent discouragements to agriculture, than to the loss which they sustain by the plague. The most tremendous convulsions of nature, such as volcanic eruptions and earthquakes, if they do not happen so frequently as to drive away the inhabitants, or to destroy their spirit of industry, have but a trifling effect on the average population of any state. Naples, and the country under Vesuvius, are still very populous, notwithstanding the repeated eruptions of that mountain. And Lisbon and Lima are now, probably, nearly in the same state with regard to population as they were before the last earthquakes. CHAPTER 7 A probable cause of epidemics--Extracts from Mr Suessmilch's tables--Periodical returns of sickly seasons to be expected in certain cases--Proportion of births to burials for short periods in any country an inadequate criterion of the real average increase of population--Best criterion of a permanent increase of population--Great frugality of living one of the causes of the famines of China and Indostan--Evil tendency of one of the clauses in Mr Pitt's Poor Bill--Only one proper way of encouraging population--Causes of the Happiness of nations--Famine, the last and most dreadful mode by which nature represses a redundant population--The three propositions considered as established. By great attention to cleanliness, the plague seems at length to be completely expelled from London. But it is not improbable that among the secondary causes that produce even sickly seasons and epidemics ought to be ranked a crowded population and unwholesome and insufficient food. I have been led to this remark, by looking over some of the tables of Mr Suessmilch, which Dr Price has extracted in one of his notes to the postscript on the controversy respecting the population of England and Wales. They are considered as very correct, and if such tables were general, they would throw great light on the different ways by which population is repressed and prevented from increasing beyond the means of subsistence in any country. I will extract a part of the tables, with Dr Price's remarks. IN THE KINGDOM OF PRUSSIA, AND DUKEDOM OF LITHUANIA Proportion Proportion Births Burials Marriages of Births to of Births to Marriages Burials 10 Yrs to 1702 21,963 14,718 5,928 37 to 10 150 to 100 5 Yrs to 1716 21,602 11,984 4,968 37 to 10 180 to 100 5 Yrs to 1756 28,392 19,154 5,599 50 to 10 148 to 100 "N.B. In 1709 and 1710, a pestilence carried off 247,733 of the inhabitants of this country, and in 1736 and 1737, epidemics prevailed, which again checked its increase." It may be remarked, that the greatest proportion of births to burials, was in the five years after the great pestilence. DUCHY OF POMERANIA Proportion Proportion Annual Average Births Burials Marriages of Births to of Births to Marriages Burials 6 yrs to 1702 6,540 4,647 1,810 36 to 10 140 to 100 6 yrs to 1708 7,455 4,208 1,875 39 to 10 177 to 100 6 yrs to 1726 8,432 5,627 2,131 39 to 10 150 to 100 6 yrs to 1756 12,767 9,281 2,957 43 to 10 137 to 100 "In this instance the inhabitants appear to have been almost doubled in fifty-six years, no very bad epidemics having once interrupted the increase, but the three years immediately follow ing the last period (to 1759) were so sickly that the births were sunk to 10,229 and the burials raised to 15,068." Is it not probable that in this case the number of inhabitants had increased faster than the food and the accommodations necessary to preserve them in health? The mass of the people would, upon this supposition, be obliged to live harder, and a greater number would be crowded together in one house, and it is not surely improbable that these were among the natural causes that produced the three sickly years. These causes may produce such an effect, though the country, absolutely considered, may not be extremely crowded and populous. In a country even thinly inhabited, if an increase of population take place, before more food is raised, and more houses are built, the inhabitants must be distressed in some degree for room and subsistence. Were the marriages in England, for the next eight or ten years, to be more prolifick than usual, or even were a greater number of marriages than usual to take place, supposing the number of houses to remain the same, instead of five or six to a cottage, there must be seven or eight, and this, added to the necessity of harder living, would probably have a very unfavourable effect on the health of the common people. NEUMARK OF BRANDENBURGH Proportion Proportion Annual Average Births Burials Marriages of Births to of Births to Marriages Burials 5 yrs to 1701 5,433 3,483 1,436 37 to 10 155 to 100 5 yrs to 1726 7,012 4,254 1,713 40 to 10 164 to 100 5 yrs to 1756 7,978 5,567 1,891 42 to 10 143 to 100 "Epidemics prevailed for six years, from 1736, to 1741, which checked the increase." DUKEDOM OF MAGDEBURGH Proportion Proportion Annual Average Births Burials Marriages of Births to of Births to Marriages Burials 5 yrs to 1702 6,431 4,103 1,681 38 to 10 156 to 100 5 yrs to 1717 7,590 5,335 2,076 36 to 10 142 to 100 5 yrs to 1756 8,850 8,069 2,193 40 to 10 109 to 100 "The years 1738, 1740, 1750, and 1751, were particularly sickly." For further information on this subject, I refer the reader to Mr Suessmilch's tables. The extracts that I have made are sufficient to shew the periodical, though irregular, returns of sickly seasons, and it seems highly probable that a scantiness of room and food was one of the principal causes that occasioned them. It appears from the tables that these countries were increasing rather fast for old states, notwithstanding the occasional seasons that prevailed. Cultivation must have been improving, and marriages, consequently, encouraged. For the checks to population appear to have been rather of the positive, than of the preventive kind. When from a prospect of increasing plenty in any country, the weight that represses population is in some degree removed, it is highly probable that the motion will be continued beyond the operation of the cause that first impelled it. Or, to be more particular, when the increasing produce of a country, and the increasing demand for labour, so far ameliorate the condition of the labourer as greatly to encourage marriage, it is probable that the custom of early marriages will continue till the population of the country has gone beyond the increased produce, and sickly seasons appear to be the natural and necessary consequence. I should expect, therefore, that those countries where subsistence was increasing sufficiency at times to encourage population but not to answer all its demands, would be more subject to periodical epidemics than those where the population could more completely accommodate itself to the average produce. An observation the converse of this will probably also be found true. In those countries that are subject to periodical sicknesses, the increase of population, or the excess of births above the burials, will be greater in the intervals of these periods than is usual, caeteris paribus, in the countries not so much subject to such disorders. If Turkey and Egypt have been nearly stationary in their average population for the last century, in the intervals of their periodical plagues, the births must have exceeded the burials in a greater proportion than in such countries as France and England. The average proportion of births to burials in any country for a period of five to ten years, will hence appear to be a very inadequate criterion by which to judge of its real progress in population. This proportion certainly shews the rate of increase during those five or ten years; but we can by no means thence infer what had been the increase for the twenty years before, or what would be the increase for the twenty years after. Dr Price observes that Sweden, Norway, Russia, and the kingdom of Naples, are increasing fast; but the extracts from registers that he has given are not for periods of sufficient extent to establish the fact. It is highly probable, however, that Sweden, Norway, and Russia, are really increasing their population, though not at the rate that the proportion of births to burials for the short periods that Dr Price takes would seem to shew. (See Dr Price's Observations, Vol. ii, postscript to the controversy on the population of England and Wales.) For five years, ending in 1777, the proportion of births to burials in the kingdom of Naples was 144 to 100, but there is reason to suppose that this proportion would indicate an increase much greater than would be really found to have taken place in that kingdom during a period of a hundred years. Dr Short compared the registers of many villages and market towns in England for two periods; the first, from Queen Elizabeth to the middle of the last century, and the second, from different years at the end of the last century to the middle of the present. And from a comparison of these extracts, it appears that in the former period the births exceeded the burials in the proportion of 124 to 100, but in the latter, only in the proportion of 111 to 100. Dr Price thinks that the registers in the former period are not to be depended upon, but, probably, in this instance they do not give incorrect proportions. At least there are many reasons for expecting to find a greater excess of births above the burials in the former period than in the latter. In the natural progress of the population of any country, more good land will, caeteris paribus, be taken into cultivation in the earlier stages of it than in the later. (I say 'caeteris paribus', because the increase of the produce of any country will always very greatly depend on the spirit of industry that prevails, and the way in which it is directed. The knowledge and habits of the people, and other temporary causes, particularly the degree of civil liberty and equality existing at the time, must always have great influence in exciting and directing this spirit.) And a greater proportional yearly increase of produce will almost invariably be followed by a greater proportional increase of population. But, besides this great cause, which would naturally give the excess of births above burials greater at the end of Queen Elizabeth's reign than in the middle of the present century, I cannot help thinking that the occasional ravages of the plague in the former period must have had some tendency to increase this proportion. If an average of ten years had been taken in the intervals of the returns of this dreadful disorder, or if the years of plague had been rejected as accidental, the registers would certainly give the proportion of births to burials too high for the real average increase of the population. For some few years after the great plague in 1666, it is probable that there was a more than usual excess of births above burials, particularly if Dr Price's opinion be founded, that England was more populous at the revolution (which happened only twenty-two years afterwards) than it is at present. Mr King, in 1693, stated the proportion of the births to the burials throughout the Kingdom, exclusive of London, as 115 to 100. Dr Short makes it, in the middle of the present century, 111 to 100, including London. The proportion in France for five years, ending in 1774, was 117 to 100. If these statements are near the truth; and if there are no very great variations at particular periods in the proportions, it would appear that the population of France and England has accommodated itself very nearly to the average produce of each country. The discouragements to marriage, the consequent vicious habits, war, luxury, the silent though certain depopulation of large towns, and the close habitations, and insufficient food of many of the poor, prevent population from increasing beyond the means of subsistence; and, if I may use an expression which certainly at first appears strange, supercede the necessity of great and ravaging epidemics to repress what is redundant. Were a wasting plague to sweep off two millions in England, and six millions in France, there can be no doubt whatever that, after the inhabitants had recovered from the dreadful shock, the proportion of births to burials would be much above what it is in either country at present. In New Jersey, the proportion of births to deaths on an average of seven years, ending in 1743, was as 300 to 100. In France and England, taking the highest proportion, it is as 117 to 100. Great and astonishing as this difference is, we ought not to be so wonder-struck at it as to attribute it to the miraculous interposition of heaven. The causes of it are not remote, latent and mysterious; but near us, round about us, and open to the investigation of every inquiring mind. It accords with the most liberal spirit of philosophy to suppose that not a stone can fall, or a plant rise, without the immediate agency of divine power. But we know from experience that these operations of what we call nature have been conducted almost invariably according to fixed laws. And since the world began, the causes of population and depopulation have probably been as constant as any of the laws of nature with which we are acquainted. The passion between the sexes has appeared in every age to be so nearly the same that it may always be considered, in algebraic language, as a given quantity. The great law of necessity which prevents population from increasing in any country beyond the food which it can either produce or acquire, is a law so open to our view, so obvious and evident to our understandings, and so completely confirmed by the experience of every age, that we cannot for a moment doubt it. The different modes which nature takes to prevent or repress a redundant population do not appear, indeed, to us so certain and regular, but though we cannot always predict the mode we may with certainty predict the fact. If the proportion of births to deaths for a few years indicate an increase of numbers much beyond the proportional increased or acquired produce of the country, we may be perfectly certain that unless an emigration takes place, the deaths will shortly exceed the births; and that the increase that had taken place for a few years cannot be the real average increase of the population of the country. Were there no other depopulating causes, every country would, without doubt, be subject to periodical pestilences or famine. The only true criterion of a real and permanent increase in the population of any country is the increase of the means of subsistence. But even, this criterion is subject to some slight variations which are, however, completely open to our view and observations. In some countries population appears to have been forced, that is, the people have been habituated by degrees to live almost upon the smallest possible quantity of food. There must have been periods in such counties when population increased permanently, without an increase in the means of subsistence. China seems to answer to this description. If the accounts we have of it are to be trusted, the lower classes of people are in the habit of living almost upon the smallest possible quantity of food and are glad to get any putrid offals that European labourers would rather starve than eat. The law in China which permits parents to expose their children has tended principally thus to force the population. A nation in this state must necessarily be subject to famines. Where a country is so populous in proportion to the means of subsistence that the average produce of it is but barely sufficient to support the lives of the inhabitants, any deficiency from the badness of seasons must be fatal. It is probable that the very frugal manner in which the Gentoos are in the habit of living contributes in some degree to the famines of Indostan. In America, where the reward of labour is at present so liberal, the lower classes might retrench very considerably in a year of scarcity without materially distressing themselves. A famine therefore seems to be almost impossible. It may be expected that in the progress of the population of America, the labourers will in time be much less liberally rewarded. The numbers will in this case permanently increase without a proportional increase in the means of subsistence. In the different states of Europe there must be some variations in the proportion between the number of inhabitants and the quantity of food consumed, arising from the different habits of living that prevail in each state. The labourers of the South of England are so accustomed to eat fine wheaten bread that they will suffer themselves to be half starved before they will submit to live like the Scotch peasants. They might perhaps in time, by the constant operation of the hard law of necessity, be reduced to live even like the Lower Chinese, and the country would then, with the same quantity of food, support a greater population. But to effect this must always be a most difficult, and, every friend to humanity will hope, an abortive attempt. Nothing is so common as to hear of encouragements that ought to be given to population. If the tendency of mankind to increase be so great as I have represented it to be, it may appear strange that this increase does not come when it is thus repeatedly called for. The true reason is that the demand for a greater population is made without preparing the funds necessary to support it. Increase the demand for agricultural labour by promoting cultivation, and with it consequently increase the produce of the country, and ameliorate the condition of the labourer, and no apprehensions whatever need be entertained of the proportional increase of population. An attempt to effect this purpose in any other way is vicious, cruel, and tyrannical, and in any state of tolerable freedom cannot therefore succeed. It may appear to be the interest of the rulers, and the rich of a state, to force population, and thereby lower the price of labour, and consequently the expense of fleets and armies, and the cost of manufactures for foreign sale; but every attempt of the kind should be carefully watched and strenuously resisted by the friends of the poor, particularly when it comes under the deceitful garb of benevolence, and is likely, on that account, to be cheerfully and cordially received by the common people. I entirely acquit Mr Pitt of any sinister intention in that clause of his Poor Bill which allows a shilling a week to every labourer for each child he has above three. I confess, that before the bill was brought into Parliament, and for some time after, I thought that such a regulation would be highly beneficial, but further reflection on the subject has convinced me that if its object be to better the condition of the poor, it is calculated to defeat the very purpose which it has in view. It has no tendency that I can discover to increase the produce of the country, and if it tend to increase the population, without increasing the produce, the necessary and inevitable consequence appears to be that the same produce must be divided among a greater number, and consequently that a day's labour will purchase a smaller quantity of provisions, and the poor therefore in general must be more distressed. I have mentioned some cases where population may permanently increase without a proportional increase in the means of subsistence. But it is evident that the variation in different states, between the food and the numbers supported by it, is restricted to a limit beyond which it cannot pass. In every country, the population of which is not absolutely decreasing, the food must be necessarily sufficient to support, and to continue, the race of labourers. Other circumstances being the same, it may be affirmed that countries are populous according to the quantity of human food which they produce, and happy according to the liberality with which that food is divided, or the quantity which a day's labour will purchase. Corn countries are more populous than pasture countries, and rice countries more populous than corn countries. The lands in England are not suited to rice, but they would all bear potatoes; and Dr Adam Smith observes that if potatoes were to become the favourite vegetable food of the common people, and if the same quantity of land was employed in their culture as is now employed in the culture of corn, the country would be able to support a much greater population, and would consequently in a very short time have it. The happiness of a country does not depend, absolutely, upon its poverty or its riches, upon its youth or its age, upon its being thinly or fully inhabited, but upon the rapidity with which it is increasing, upon the degree in which the yearly increase of food approaches to the yearly increase of an unrestricted population. This approximation is always the nearest in new colonies, where the knowledge and industry of an old state operate on the fertile unappropriated land of a new one. In other cases, the youth or the age of a state is not in this respect of very great importance. It is probable that the food of Great Britain is divided in as great plenty to the inhabitants, at the present period, as it was two thousand, three thousand, or four thousand years ago. And there is reason to believe that the poor and thinly inhabited tracts of the Scotch Highlands are as much distressed by an overcharged population as the rich and populous province of Flanders. Were a country never to be overrun by a people more advanced in arts, but left to its own natural progress in civilization; from the time that its produce might be considered as an unit, to the time that it might be considered as a million, during the lapse of many hundred years, there would not be a single period when the mass of the people could be said to be free from distress, either directly or indirectly, for want of food. In every state in Europe, since we have first had accounts of it, millions and millions of human existences have been repressed from this simple cause; though perhaps in some of these states an absolute famine has never been known. Famine seems to be the last, the most dreadful resource of nature. The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction; and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague, advance in terrific array, and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world. Must it not then be acknowledged by an attentive examiner of the histories of mankind, that in every age and in every state in which man has existed, or does now exist. That the increase of population is necessarily limited by the means of subsistence. That population does invariably increase when the means of subsistence increase. And that the superior power of population it repressed, and the actual population kept equal to the means of subsistence, by misery and vice? CHAPTER 8 Mr Wallace--Error of supposing that the difficulty arising from population is at a great distance--Mr Condorcet's sketch of the progress of the human mind--Period when the oscillation, mentioned by Mr Condorcet, ought to be applied to the human race. To a person who draws the preceding obvious inferences, from a view of the past and present state of mankind, it cannot but be a matter of astonishment that all the writers on the perfectibility of man and of society who have noticed the argument of an overcharged population, treat it always very slightly and invariably represent the difficulties arising from it as at a great and almost immeasurable distance. Even Mr Wallace, who thought the argument itself of so much weight as to destroy his whole system of equality, did not seem to be aware that any difficulty would occur from this cause till the whole earth had been cultivated like a garden and was incapable of any further increase of produce. Were this really the case, and were a beautiful system of equality in other respects practicable, I cannot think that our ardour in the pursuit of such a scheme ought to be damped by the contemplation of so remote a difficulty. An event at such a distance might fairly be left to providence, but the truth is that if the view of the argument given in this Essay be just the difficulty, so far from being remote, would be imminent and immediate. At every period during the progress of cultivation, from the present moment to the time when the whole earth was become like a garden, the distress for want of food would be constantly pressing on all mankind, if they were equal. Though the produce of the earth might be increasing every year, population would be increasing much faster, and the redundancy must necessarily be repressed by the periodical or constant action of misery or vice. Mr Condorcet's Esquisse d'un Tableau Historique des Progres de l'Esprit Humain, was written, it is said, under the pressure of that cruel proscription which terminated in his death. If he had no hopes of its being seen during his life and of its interesting France in his favour, it is a singular instance of the attachment of a man to principles, which every day's experience was so fatally for himself contradicting. To see the human mind in one of the most enlightened nations of the world, and after a lapse of some thousand years, debased by such a fermentation of disgusting passions, of fear, cruelty, malice, revenge, ambition, madness, and folly as would have disgraced the most savage nation in the most barbarous age must have been such a tremendous shock to his ideas of the necessary and inevitable progress of the human mind that nothing but the firmest conviction of the truth of his principles, in spite of all appearances, could have withstood. This posthumous publication is only a sketch of a much larger work, which he proposed should be executed. It necessarily, therefore, wants that detail and application which can alone prove the truth of any theory. A few observations will be sufficient to shew how completely the theory is contradicted when it is applied to the real, and not to an imaginary, state of things. In the last division of the work, which treats of the future progress of man towards perfection, he says, that comparing, in the different civilized nations of Europe, the actual population with the extent of territory, and observing their cultivation, their industry, their divisions of labour, and their means of subsistence, we shall see that it would be impossible to preserve the same means of subsistence, and, consequently, the same population, without a number of individuals who have no other means of supplying their wants than their industry. Having allowed the necessity of such a class of men, and adverting afterwards to the precarious revenue of those families that would depend so entirely on the life and health of their chief, he says, very justly: 'There exists then, a necessary cause of inequality, of dependence, and even of misery, which menaces, without ceasing, the most numerous and active class of our societies.' (To save time and long quotations, I shall here give the substance of some of Mr Condorcet's sentiments, and hope I shall not misrepresent them. But I refer the reader to the work itself, which will amuse, if it does not convince him.) The difficulty is just and well stated, and I am afraid that the mode by which he proposes it should be removed will be found inefficacious. By the application of calculations to the probabilities of life and the interest of money, he proposes that a fund should be established which should assure to the old an assistance, produced, in part, by their own former savings, and, in part, by the savings of individuals who in making the same sacrifice die before they reap the benefit of it. The same, or a similar fund, should give assistance to women and children who lose their husbands, or fathers, and afford a capital to those who were of an age to found a new family, sufficient for the proper development of their industry. These establishments, he observes, might be made in the name and under the protection of the society. Going still further, he says that, by the just application of calculations, means might be found of more completely preserving a state of equality, by preventing credit from being the exclusive privilege of great fortunes, and yet giving it a basis equally solid, and by rendering the progress of industry, and the activity of commerce, less dependent on great capitalists. Such establishments and calculations may appear very promising upon paper, but when applied to real life they will be found to be absolutely nugatory. Mr Condorcet allows that a class of people which maintains itself entirely by industry is necessary to every state. Why does he allow this? No other reason can well be assigned than that he conceives that the labour necessary to procure subsistence for an extended population will not be performed without the goad of necessity. If by establishments of this kind of spur to industry be removed, if the idle and the negligent are placed upon the same footing with regard to their credit, and the future support of their wives and families, as the active and industrious, can we expect to see men exert that animated activity in bettering their condition which now forms the master spring of public prosperity? If an inquisition were to be established to examine the claims of each individual and to determine whether he had or had not exerted himself to the utmost, and to grant or refuse assistance accordingly, this would be little else than a repetition upon a larger scale of the English poor laws and would be completely destructive of the true principles of liberty and equality. But independent of this great objection to these establishments, and supposing for a moment that they would give no check to productive industry, by far the greatest difficulty remains yet behind. Were every man sure of a comfortable provision for his family, almost every man would have one, and were the rising generation free from the 'killing frost' of misery, population must rapidly increase. Of this Mr Condorcet seems to be fully aware himself, and after having described further improvements, he says: But in this process of industry and happiness, each generation will be called to more extended enjoyments, and in consequence, by the physical constitution of the human frame, to an increase in the number of individuals. Must not there arrive a period then, when these laws, equally necessary, shall counteract each other? When the increase of the number of men surpassing their means of subsistence, the necessary result must be either a continual diminution of happiness and population, a movement truly retrograde, or, at least, a kind of oscillation between good and evil? In societies arrived at this term, will not this oscillation be a constantly subsisting cause of periodical misery? Will it not mark the limit when all further amelioration will become impossible, and point out that term to the perfectibility of the human race which it may reach in the course of ages, but can never pass? He then adds, There is no person who does not see how very distant such a period is from us, but shall we ever arrive at it? It is equally impossible to pronounce for or against the future realization of an event which cannot take place but at an era when the human race will have attained improvements, of which we can at present scarcely form a conception. Mr Condorcet's picture of what may be expected to happen when the number of men shall surpass the means of their subsistence is justly drawn. The oscillation which he describes will certainly take place and will without doubt be a constantly subsisting cause of periodical misery. The only point in which I differ from Mr Condorcet with regard to this picture is the period when it may be applied to the human race. Mr Condorcet thinks that it cannot possibly be applicable but at an era extremely distant. If the proportion between the natural increase of population and food which I have given be in any degree near the truth, it will appear, on the contrary, that the period when the number of men surpass their means of subsistence has long since arrived, and that this necessity oscillation, this constantly subsisting cause of periodical misery, has existed ever since we have had any histories of mankind, does exist at present, and will for ever continue to exist, unless some decided change take place in the physical constitution of our nature. Mr Condorcet, however, goes on to say that should the period, which he conceives to be so distant, ever arrive, the human race, and the advocates for the perfectibility of man, need not be alarmed at it. He then proceeds to remove the difficulty in a manner which I profess not to understand. Having observed, that the ridiculous prejudices of superstition would by that time have ceased to throw over morals a corrupt and degrading austerity, he alludes, either to a promiscuous concubinage, which would prevent breeding, or to something else as unnatural. To remove the difficulty in this way will, surely, in the opinion of most men, be to destroy that virtue and purity of manners, which the advocates of equality, and of the perfectibility of man, profess to be the end and object of their views. CHAPTER 9 Mr Condorcet's conjecture concerning the organic perfectibility of man, and the indefinite prolongation of human life--Fallacy of the argument, which infers an unlimited progress from a partial improvement, the limit of which cannot be ascertained, illustrated in the breeding of animals, and the cultivation of plants. The last question which Mr Condorcet proposes for examination is the organic perfectibility of man. He observes that if the proofs which have been already given and which, in their development will receive greater force in the work itself, are sufficient to establish the indefinite perfectibility of man upon the supposition of the same natural faculties and the same organization which he has at present, what will be the certainty, what the extent of our hope, if this organization, these natural faculties themselves, are susceptible of amelioration? From the improvement of medicine, from the use of more wholesome food and habitations, from a manner of living which will improve the strength of the body by exercise without impairing it by excess, from the destruction of the two great causes of the degradation of man, misery, and too great riches, from the gradual removal of transmissible and contagious disorders by the improvement of physical knowledge, rendered more efficacious by the progress of reason and of social order, he infers that though man will not absolutely become immortal, yet that the duration between his birth and natural death will increase without ceasing, will have no assignable term, and may properly be expressed by the word 'indefinite'. He then defines this word to mean either a constant approach to an unlimited extent, without ever reaching it, or an increase. In the immensity of ages to an extent greater than any assignable quantity. But surely the application of this term in either of these senses to the duration of human life is in the highest degree unphilosophical and totally unwarranted by any appearances in the laws of nature. Variations from different causes are essentially distinct from a regular and unretrograde increase. The average duration of human life will to a certain degree vary from healthy or unhealthy climates, from wholesome or unwholesome food, from virtuous or vicious manners, and other causes, but it may be fairly doubted whether there is really the smallest perceptible advance in the natural duration of human life since first we have had any authentic history of man. The prejudices of all ages have indeed been directly contrary to this supposition, and though I would not lay much stress upon these prejudices, they will in some measure tend to prove that there has been no marked advance in an opposite direction. It may perhaps be said that the world is yet so young, so completely in its infancy, that it ought not to be expected that any difference should appear so soon. If this be the case, there is at once an end of all human science. The whole train of reasonings from effects to causes will be destroyed. We may shut our eyes to the book of nature, as it will no longer be of any use to read it. The wildest and most improbable conjectures may be advanced with as much certainty as the most just and sublime theories, founded on careful and reiterated experiments. We may return again to the old mode of philosophising and make facts bend to systems, instead of establishing systems upon facts. The grand and consistent theory of Newton will be placed upon the same footing as the wild and eccentric hypotheses of Descartes. In short, if the laws of nature are thus fickle and inconstant, if it can be affirmed and be believed that they will change, when for ages and ages they have appeared immutable, the human mind will no longer have any incitements to inquiry, but must remain fixed in inactive torpor, or amuse itself only in bewildering dreams and extravagant fancies. The constancy of the laws of nature and of effects and causes is the foundation of all human knowledge, though far be it from me to say that the same power which framed and executes the laws of nature may not change them all 'in a moment, in the twinkling of an eye.' Such a change may undoubtedly happen. All that I mean to say is that it is impossible to infer it from reasoning. If without any previous observable symptoms or indications of a change, we can infer that a change will take place, we may as well make any assertion whatever and think it as unreasonable to be contradicted in affirming that the moon will come in contact with the earth tomorrow, as in saying that the sun will rise at its usual time. With regard to the duration of human life, there does not appear to have existed from the earliest ages of the world to the present moment the smallest permanent symptom or indication of increasing prolongation. The observable effects of climate, habit, diet, and other causes, on length of life have furnished the pretext for asserting its indefinite extension; and the sandy foundation on which the argument rests is that because the limit of human life is undefined; because you cannot mark its precise term, and say so far exactly shall it go and no further; that therefore its extent may increase for ever, and be properly termed indefinite or unlimited. But the fallacy and absurdity of this argument will sufficiently appear from a slight examination of what Mr Condorcet calls the organic perfectibility, or degeneration, of the race of plants and animals, which he says may be regarded as one of the general laws of nature. I am told that it is a maxim among the improvers of cattle that you may breed to any degree of nicety you please, and they found this maxim upon another, which is that some of the offspring will possess the desirable qualities of the parents in a greater degree. In the famous Leicestershire breed of sheep, the object is to procure them with small heads and small legs. Proceeding upon these breeding maxims, it is evident that we might go on till the heads and legs were evanescent quantities, but this is so palpable an absurdity that we may be quite sure that the premises are not just and that there really is a limit, though we cannot see it or say exactly where it is. In this case, the point of the greatest degree of improvement, or the smallest size of the head and legs, may be said to be undefined, but this is very different from unlimited, or from indefinite, in Mr Condorcet's acceptation of the term. Though I may not be able in the present instance to mark the limit at which further improvement will stop, I can very easily mention a point at which it will not arrive. I should not scruple to assert that were the breeding to continue for ever, the head and legs of these sheep would never be so small as the head and legs of a rat. It cannot be true, therefore, that among animals, some of the offspring will possess the desirable qualities of the parents in a greater degree, or that animals are indefinitely perfectible. The progress of a wild plant to a beautiful garden flower is perhaps more marked and striking than anything that takes place among animals, yet even here it would be the height of absurdity to assert that the progress was unlimited or indefinite. One of the most obvious features of the improvement is the increase of size. The flower has grown gradually larger by cultivation. If the progress were really unlimited it might be increased ad infinitum, but this is so gross an absurdity that we may be quite sure that among plants as well as among animals there is a limit to improvement, though we do not exactly know where it is. It is probable that the gardeners who contend for flower prizes have often applied stronger dressing without success. At the same time it would be highly presumptuous in any man to say that he had seen the finest carnation or anemone that could ever be made to grow. He might however assert without the smallest chance of being contradicted by a future fact, that no carnation or anemone could ever by cultivation be increased to the size of a large cabbage; and yet there are assignable quantities much greater than a cabbage. No man can say that he has seen the largest ear of wheat, or the largest oak that could ever grow; but he might easily, and with perfect certainty, name a point of magnitude at which they would not arrive. In all these cases therefore, a careful distinction should be made, between an unlimited progress, and a progress where the limit is merely undefined. It will be said, perhaps, that the reason why plants and animals cannot increase indefinitely in size is, that they would fall by their own weight. I answer, how do we know this but from experience?--from experience of the degree of strength with which these bodies are formed. I know that a carnation, long before it reached the size of a cabbage, would not be supported by its stalk, but I only know this from my experience of the weakness and want of tenacity in the materials of a carnation stalk. There are many substances in nature of the same size that would support as large a head as a cabbage. The reasons of the mortality of plants are at present perfectly unknown to us. No man can say why such a plant is annual, another biennial, and another endures for ages. The whole affair in all these cases, in plants, animals, and in the human race, is an affair of experience, and I only conclude that man is mortal because the invariable experience of all ages has proved the mortality of those materials of which his visible body is made: What can we reason, but from what we know? Sound philosophy will not authorize me to alter this opinion of the mortality of man on earth, till it can be clearly proved that the human race has made, and is making, a decided progress towards an illimitable extent of life. And the chief reason why I adduced the two particular instances from animals and plants was to expose and illustrate, if I could, the fallacy of that argument which infers an unlimited progress, merely because some partial improvement has taken place, and that the limit of this improvement cannot be precisely ascertained. The capacity of improvement in plants and animals, to a certain degree, no person can possibly doubt. A clear and decided progress has already been made, and yet, I think, it appears that it would be highly absurd to say that this progress has no limits. In human life, though there are great variations from different causes, it may be doubted whether, since the world began, any organic improvement whatever in the human frame can be clearly ascertained. The foundations, therefore, on which the arguments for the organic perfectibility of man rest, are unusually weak, and can only be considered as mere conjectures. It does not, however, by any means seem impossible that by an attention to breed, a certain degree of improvement, similar to that among animals, might take place among men. Whether intellect could be communicated may be a matter of doubt: but size, strength, beauty, complexion, and perhaps even longevity are in a degree transmissible. The error does not seem to lie in supposing a small degree of improvement possible, but in not discriminating between a small improvement, the limit of which is undefined, and an improvement really unlimited. As the human race, however, could not be improved in this way, without condemning all the bad specimens to celibacy, it is not probable that an attention to breed should ever become general; indeed, I know of no well-directed attempts of this kind, except in the ancient family of the Bickerstaffs, who are said to have been very successful in whitening the skins and increasing the height of their race by prudent marriages, particularly by that very judicious cross with Maud, the milk-maid, by which some capital defects in the constitutions of the family were corrected. It will not be necessary, I think, in order more completely to shew the improbability of any approach in man towards immortality on earth, to urge the very great additional weight that an increase in the duration of life would give to the argument of population. Many, I doubt not, will think that the attempting gravely to controvert so absurd a paradox as the immortality of man on earth, or indeed, even the perfectibility of man and society, is a waste of time and words, and that such unfounded conjectures are best answered by neglect. I profess, however, to be of a different opinion. When paradoxes of this kind are advanced by ingenious and able men, neglect has no tendency to convince them of their mistakes. Priding themselves on what they conceive to be a mark of the reach and size of their own understandings, of the extent and comprehensiveness of their views, they will look upon this neglect merely as an indication of poverty, and narrowness, in the mental exertions of their contemporaries, and only think that the world is not yet prepared to receive their sublime truths. On the contrary, a candid investigation of these subjects, accompanied with a perfect readiness to adopt any theory warranted by sound philosophy, may have a tendency to convince them that in forming improbable and unfounded hypotheses, so far from enlarging the bounds of human science, they are contracting it, so far from promoting the improvement of the human mind, they are obstructing it; they are throwing us back again almost into the infancy of knowledge and weakening the foundations of that mode of philosophising, under the auspices of which science has of late made such rapid advances. The present rage for wide and unrestrained speculation seems to be a kind of mental intoxication, arising, perhaps, from the great and unexpected discoveries which have been made of late years, in various branches of science. To men elate and giddy with such successes, every thing appeared to be within the grasp of human powers; and, under this illusion, they confounded subjects where no real progress could be proved with those where the progress had been marked, certain, and acknowledged. Could they be persuaded to sober themselves with a little severe and chastised thinking, they would see, that the cause of truth, and of sound philosophy, cannot but suffer by substituting wild flights and unsupported assertions for patient investigation, and well authenticated proofs. Mr Condorcet's book may be considered not only as a sketch of the opinions of a celebrated individual, but of many of the literary men in France at the beginning of the Revolution. As such, though merely a sketch, it seems worthy of attention. CHAPTER 10 Mr Godwin's system of equality--Error of attributing all the vices of mankind to human institutions--Mr Godwin's first answer to the difficulty arising from population totally insufficient--Mr Godwin's beautiful system of equality supposed to be realized--Its utter destruction simply from the principle of population in so short a time as thirty years. In reading Mr Godwin's ingenious and able work on political justice, it is impossible not to be struck with the spirit and energy of his style, the force and precision of some of his reasonings, the ardent tone of his thoughts, and particularly with that impressive earnestness of manner which gives an air of truth to the whole. At the same time, it must be confessed that he has not proceeded in his inquiries with the caution that sound philosophy seems to require. His conclusions are often unwarranted by his premises. He fails sometimes in removing the objections which he himself brings forward. He relies too much on general and abstract propositions which will not admit of application. And his conjectures certainly far outstrip the modesty of nature. The system of equality which Mr Godwin proposes is, without doubt, by far the most beautiful and engaging of any that has yet appeared. An amelioration of society to be produced merely by reason and conviction wears much more the promise of permanence than any change effected and maintained by force. The unlimited exercise of private judgement is a doctrine inexpressibly grand and captivating and has a vast superiority over those systems where every individual is in a manner the slave of the public. The substitution of benevolence as the master-spring and moving principle of society, instead of self-love, is a consummation devoutly to be wished. In short, it is impossible to contemplate the whole of this fair structure without emotions of delight and admiration, accompanied with ardent longing for the period of its accomplishment. But, alas! that moment can never arrive. The whole is little better than a dream, a beautiful phantom of the imagination. These 'gorgeous palaces' of happiness and immortality, these 'solemn temples' of truth and virtue will dissolve, 'like the baseless fabric of a vision', when we awaken to real life and contemplate the true and genuine situation of man on earth. Mr Godwin, at the conclusion of the third chapter of his eighth book, speaking of population, says: There is a principle in human society, by which population is perpetually kept down to the level of the means of subsistence. Thus among the wandering tribes of America and Asia, we never find through the lapse of ages that population has so increased as to render necessary the cultivation of the earth. This principle, which Mr Godwin thus mentions as some mysterious and occult cause and which he does not attempt to investigate, will be found to be the grinding law of necessity, misery, and the fear of misery. The great error under which Mr Godwin labours throughout his whole work is the attributing almost all the vices and misery that are seen in civil society to human institutions. Political regulations and the established administration of property are with him the fruitful sources of all evil, the hotbeds of all the crimes that degrade mankind. Were this really a true state of the case, it would not seem a hopeless task to remove evil completely from the world, and reason seems to be the proper and adequate instrument for effecting so great a purpose. But the truth is, that though human institutions appear to be the obvious and obtrusive causes of much mischief to mankind, yet in reality they are light and superficial, they are mere feathers that float on the surface, in comparison with those deeper seated causes of impurity that corrupt the springs and render turbid the whole stream of human life. Mr Godwin, in his chapter on the benefits attendant on a system of equality, says: The spirit of oppression, the spirit of servility, and the spirit of fraud, these are the immediate growth of the established administration of property. They are alike hostile to intellectual improvement. The other vices of envy, malice, and revenge are their inseparable companions. In a state of society where men lived in the midst of plenty and where all shared alike the bounties of nature, these sentiments would inevitably expire. The narrow principle of selfishness would vanish. No man being obliged to guard his little store or provide with anxiety and pain for his restless wants, each would lose his individual existence in the thought of the general good. No man would be an enemy to his neighbour, for they would have no subject of contention, and, of consequence, philanthropy would resume the empire which reason assigns her. Mind would be delivered from her perpetual anxiety about corporal support, and free to expatiate in the field of thought, which is congenial to her. Each would assist the inquiries of all. This would, indeed, be a happy state. But that it is merely an imaginary picture, with scarcely a feature near the truth, the reader, I am afraid, is already too well convinced. Man cannot live in the midst of plenty. All cannot share alike the bounties of nature. Were there no established administration of property, every man would be obliged to guard with force his little store. Selfishness would be triumphant. The subjects of contention would be perpetual. Every individual mind would be under a constant anxiety about corporal support, and not a single intellect would be left free to expatiate in the field of thought. How little Mr Godwin has turned the attention of his penetrating mind to the real state of man on earth will sufficiently appear from the manner in which he endeavours to remove the difficulty of an overcharged population. He says: The obvious answer to this objection, is, that to reason thus is to foresee difficulties at a great distance. Three fourths of the habitable globe is now uncultivated. The parts already cultivated are capable of immeasurable improvement. Myriads of centuries of still increasing population may pass away, and the earth be still found sufficient for the subsistence of its inhabitants. I have already pointed out the error of supposing that no distress and difficulty would arise from an overcharged population before the earth absolutely refused to produce any more. But let us imagine for a moment Mr Godwin's beautiful system of equality realized in its utmost purity, and see how soon this difficulty might be expected to press under so perfect a form of society. A theory that will not admit of application cannot possibly be just. Let us suppose all the causes of misery and vice in this island removed. War and contention cease. Unwholesome trades and manufactories do not exist. Crowds no longer collect together in great and pestilent cities for purposes of court intrigue, of commerce, and vicious gratifications. Simple, healthy, and rational amusements take place of drinking, gaming, and debauchery. There are no towns sufficiently large to have any prejudicial effects on the human constitution. The greater part of the happy inhabitants of this terrestrial paradise live in hamlets and farmhouses scattered over the face of the country. Every house is clean, airy, sufficiently roomy, and in a healthy situation. All men are equal. The labours of luxury are at end. And the necessary labours of agriculture are shared amicably among all. The number of persons, and the produce of the island, we suppose to be the same as at present. The spirit of benevolence, guided by impartial justice, will divide this produce among all the members of the society according to their wants. Though it would be impossible that they should all have animal food every day, yet vegetable food, with meat occasionally, would satisfy the desires of a frugal people and would be sufficient to preserve them in health, strength, and spirits. Mr Godwin considers marriage as a fraud and a monopoly. Let us suppose the commerce of the sexes established upon principles of the most perfect freedom. Mr Godwin does not think himself that this freedom would lead to a promiscuous intercourse, and in this I perfectly agree with him. The love of variety is a vicious, corrupt, and unnatural taste and could not prevail in any great degree in a simple and virtuous state of society. Each man would probably select himself a partner, to whom he would adhere as long as that adherence continued to be the choice of both parties. It would be of little consequence, according to Mr Godwin, how many children a woman had or to whom they belonged. Provisions and assistance would spontaneously flow from the quarter in which they abounded, to the quarter that was deficient. (See Bk VIII, ch. 8; in the third edition, Vol II, p. 512) And every man would be ready to furnish instruction to the rising generation according to his capacity. I cannot conceive a form of society so favourable upon the whole to population. The irremediableness of marriage, as it is at present constituted, undoubtedly deters many from entering into that state. An unshackled intercourse on the contrary would be a most powerful incitement to early attachments, and as we are supposing no anxiety about the future support of children to exist, I do not conceive that there would be one woman in a hundred, of twenty-three, without a family. With these extraordinary encouragements to population, and every cause of depopulation, as we have supposed, removed, the numbers would necessarily increase faster than in any society that has ever yet been known. I have mentioned, on the authority of a pamphlet published by a Dr Styles and referred to by Dr Price, that the inhabitants of the back settlements of America doubled their numbers in fifteen years. England is certainly a more healthy country than the back settlements of America, and as we have supposed every house in the island to be airy and wholesome, and the encouragements to have a family greater even than with the back settlers, no probable reason can be assigned why the population should not double itself in less, if possible, than fifteen years. But to be quite sure that we do not go beyond the truth, we will only suppose the period of doubling to be twenty-five years, a ratio of increase which is well known to have taken place throughout all the Northern States of America. There can be little doubt that the equalization of property which we have supposed, added to the circumstance of the labour of the whole community being directed chiefly to agriculture, would tend greatly to augment the produce of the country. But to answer the demands of a population increasing so rapidly, Mr Godwin's calculation of half an hour a day for each man would certainly not be sufficient. It is probable that the half of every man's time must be employed for this purpose. Yet with such, or much greater exertions, a person who is acquainted with the nature of the soil in this country, and who reflects on the fertility of the lands already in cultivation, and the barrenness of those that are not cultivated, will be very much disposed to doubt whether the whole average produce could possibly be doubled in twenty-five years from the present period. The only chance of success would be the ploughing up all the grazing countries and putting an end almost entirely to the use of animal food. Yet a part of this scheme might defeat itself. The soil of England will not produce much without dressing, and cattle seem to be necessary to make that species of manure which best suits the land. In China it is said that the soil in some of the provinces is so fertile as to produce two crops of rice in the year without dressing. None of the lands in England will answer to this description. Difficult, however, as it might be to double the average produce of the island in twenty-five years, let us suppose it effected. At the expiration of the first period therefore, the food, though almost entirely vegetable, would be sufficient to support in health the doubled population of fourteen millions. During the next period of doubling, where will the food be found to satisfy the importunate demands of the increasing numbers? Where is the fresh land to turn up? Where is the dressing necessary to improve that which is already in cultivation? There is no person with the smallest knowledge of land but would say that it was impossible that the average produce of the country could be increased during the second twenty-five years by a quantity equal to what it at present yields. Yet we will suppose this increase, however improbable, to take place. The exuberant strength of the argument allows of almost any concession. Even with this concession, however, there would be seven millions at the expiration of the second term unprovided for. A quantity of food equal to the frugal support of twenty-one millions, would be to be divided among twenty-eight millions. Alas! what becomes of the picture where men lived in the midst of plenty, where no man was obliged to provide with anxiety and pain for his restless wants, where the narrow principle of selfishness did not exist, where Mind was delivered from her perpetual anxiety about corporal support and free to expatiate in the field of thought which is congenial to her. This beautiful fabric of imagination vanishes at the severe touch of truth. The spirit of benevolence, cherished and invigorated by plenty, is repressed by the chilling breath of want. The hateful passions that had vanished reappear. The mighty law of self-preservation expels all the softer and more exalted emotions of the soul. The temptations to evil are too strong for human nature to resist. The corn is plucked before it is ripe, or secreted in unfair proportions, and the whole black train of vices that belong to falsehood are immediately generated. Provisions no longer flow in for the support of the mother with a large family. The children are sickly from insufficient food. The rosy flush of health gives place to the pallid cheek and hollow eye of misery. Benevolence, yet lingering in a few bosoms, makes some faint expiring struggles, till at length self-love resumes his wonted empire and lords it triumphant over the world. No human institutions here existed, to the perverseness of which Mr Godwin ascribes the original sin of the worst men. (Bk VIII, ch. 3; in the third edition, Vol. II, p. 462) No opposition had been produced by them between public and private good. No monopoly had been created of those advantages which reason directs to be left in common. No man had been goaded to the breach of order by unjust laws. Benevolence had established her reign in all hearts: and yet in so short a period as within fifty years, violence, oppression, falsehood, misery, every hateful vice, and every form of distress, which degrade and sadden the present state of society, seem to have been generated by the most imperious circumstances, by laws inherent in the nature of man, and absolutely independent of it human regulations. If we are not yet too well convinced of the reality of this melancholy picture, let us but look for a moment into the next period of twenty-five years; and we shall see twenty-eight millions of human beings without the means of support; and before the conclusion of the first century, the population would be one hundred and twelve millions, and the food only sufficient for thirty-five millions, leaving seventy-seven millions unprovided for. In these ages want would be indeed triumphant, and rapine and murder must reign at large: and yet all this time we are supposing the produce of the earth absolutely unlimited, and the yearly increase greater than the boldest speculator can imagine. This is undoubtedly a very different view of the difficulty arising from population from that which Mr Godwin gives, when he says, 'Myriads of centuries of still increasing population may pass away, and the earth be still found sufficient for the subsistence of its inhabitants.' I am sufficiently aware that the redundant twenty-eight millions, or seventy-seven millions, that I have mentioned, could never have existed. It is a perfectly just observation of Mr Godwin, that, 'There is a principle in human society, by which population is perpetually kept down to the level of the means of subsistence.' The sole question is, what is this principle? is it some obscure and occult cause? Is it some mysterious interference of heaven which, at a certain period, strikes the men with impotence, and the women with barrenness? Or is it a cause, open to our researches, within our view, a cause, which has constantly been observed to operate, though with varied force, in every state in which man has been placed? Is it not a degree of misery, the necessary and inevitable result of the laws of nature, which human institutions, so far from aggravating, have tended considerably to mitigate, though they never can remove? It may be curious to observe, in the case that we have been supposing, how some of the laws which at present govern civilized society, would be successively dictated by the most imperious necessity. As man, according to Mr Godwin, is the creature of the impressions to which he is subject, the goadings of want could not continue long, before some violations of public or private stock would necessarily take place. As these violations increased in number and extent, the more active and comprehensive intellects of the society would soon perceive, that while population was fast increasing, the yearly produce of the country would shortly begin to diminish. The urgency of the case would suggest the necessity of some mediate measures to be taken for the general safety. Some kind of convention would then be called, and the dangerous situation of the country stated in the strongest terms. It would be observed, that while they lived in the midst of plenty, it was of little consequence who laboured the least, or who possessed the least, as every man was perfectly willing and ready to supply the wants of his neighbour. But that the question was no longer whether one man should give to another that which he did not use himself, but whether he should give to his neighbour the food which was absolutely necessary to his own existence. It would be represented, that the number of those that were in want very greatly exceeded the number and means of those who should supply them; that these pressing wants, which from the state of the produce of the country could not all be gratified, had occasioned some flagrant violations of justice; that these violations had already checked the increase of food, and would, if they were not by some means or other prevented, throw the whole community in confusion; that imperious necessity seemed to dictate that a yearly increase of produce should, if possible, be obtained at all events; that in order to effect this first, great, and indispensable purpose, it would be advisable to make a more complete division of land, and to secure every man's stock against violation by the most powerful sanctions, even by death itself. It might be urged perhaps by some objectors that, as the fertility of the land increased, and various accidents occurred, the share of some men might be much more than sufficient for their support, and that when the reign of self-love was once established, they would not distribute their surplus produce without some compensation in return. It would be observed, in answer, that this was an inconvenience greatly to be lamented; but that it was an evil which bore no comparison to the black train of distresses that would inevitably be occasioned by the insecurity of property; that the quantity of food which one man could consume was necessarily limited by the narrow capacity of the human stomach; that it was not certainly probable that he should throw away the rest; but that even if he exchanged his surplus food for the labour of others, and made them in some degree dependent on him, this would still be better than that these others should absolutely starve. It seems highly probable, therefore, that an administration of property, not very different from that which prevails in civilized states at present, would be established, as the best, though inadequate, remedy for the evils which were pressing on the society. The next subject that would come under discussion, intimately connected with the preceding, is the commerce between the sexes. It would be urged by those who had turned their attention to the true cause of the difficulties under which the community laboured, that while every man felt secure that all his children would be well provided for by general benevolence, the powers of the earth would be absolutely inadequate to produce food for the population which would inevitably ensue; that even if the whole attention and labour of the society were directed to this sole point, and if, by the most perfect security of property, and every other encouragement that could be thought of, the greatest possible increase of produce were yearly obtained; yet still, that the increase of food would by no means keep pace with the much more rapid increase of population; that some check to population therefore was imperiously called for; that the most natural and obvious check seemed to be to make every man provide for his own children; that this would operate in some respect as a measure and guide in the increase of population, as it might be expected that no man would bring beings into the world, for whom he could not find the means of support; that where this notwithstanding was the case, it seemed necessary, for the example of others, that the disgrace and inconvenience attending such a conduct should fall upon the individual, who had thus inconsiderately plunged himself and innocent children in misery and want. The institution of marriage, or at least, of some express or implied obligation on every man to support his own children, seems to be the natural result of these reasonings in a community under the difficulties that we have supposed. The view of these difficulties presents us with a very natural origin of the superior disgrace which attends a breach of chastity in the woman than in the man. It could not be expected that women should have resources sufficient to support their own children. When therefore a woman was connected with a man, who had entered into no compact to maintain her children, and, aware of the inconveniences that he might bring upon himself, had deserted her, these children must necessarily fall for support upon the society, or starve. And to prevent the frequent recurrence of such an inconvenience, as it would be highly unjust to punish so natural a fault by personal restraint or infliction, the men might agree to punish it with disgrace. The offence is besides more obvious and conspicuous in the woman, and less liable to any mistake. The father of a child may not always be known, but the same uncertainty cannot easily exist with regard to the mother. Where the evidence of the offence was most complete, and the inconvenience to the society at the same time the greatest, there it was agreed that the large share of blame should fall. The obligation on every man to maintain his children, the society would enforce, if there were occasion; and the greater degree of inconvenience or labour, to which a family would necessarily subject him, added to some portion of disgrace which every human being must incur who leads another into unhappiness, might be considered as a sufficient punishment for the man. That a woman should at present be almost driven from society for an offence which men commit nearly with impunity, seems to be undoubtedly a breach of natural justice. But the origin of the custom, as the most obvious and effectual method of preventing the frequent recurrence of a serious inconvenience to a community, appears to be natural, though not perhaps perfectly justifiable. This origin, however, is now lost in the new train of ideas which the custom has since generated. What at first might be dictated by state necessity is now supported by female delicacy, and operates with the greatest force on that part of society where, if the original intention of the custom were preserved, there is the least real occasion for it. When these two fundamental laws of society, the security of property, and the institution of marriage, were once established, inequality of conditions must necessarily follow. Those who were born after the division of property would come into a world already possessed. If their parents, from having too large a family, could not give them sufficient for their support, what are they to do in a world where everything is appropriated? We have seen the fatal effects that would result to a society, if every man had a valid claim to an equal share of the produce of the earth. The members of a family which was grown too large for the original division of land appropriated to it could not then demand a part of the surplus produce of others, as a debt of justice. It has appeared, that from the inevitable laws of our nature some human beings must suffer from want. These are the unhappy persons who, in the great lottery of life, have drawn a blank. The number of these claimants would soon exceed the ability of the surplus produce to supply. Moral merit is a very difficult distinguishing criterion, except in extreme cases. The owners of surplus produce would in general seek some more obvious mark of distinction. And it seems both natural and just that, except upon particular occasions, their choice should fall upon those who were able, and professed themselves willing, to exert their strength in procuring a further surplus produce; and thus at once benefiting the community, and enabling these proprietors to afford assistance to greater numbers. All who were in want of food would be urged by imperious necessity to offer their labour in exchange for this article so absolutely essential to existence. The fund appropriated to the maintenance of labour would be the aggregate quantity of food possessed by the owners of land beyond their own consumption. When the demands upon this fund were great and numerous, it would naturally be divided in very small shares. Labour would be ill paid. Men would offer to work for a bare subsistence, and the rearing of families would be checked by sickness and misery. On the contrary, when this fund was increasing fast, when it was great in proportion to the number of claimants, it would be divided in much larger shares. No man would exchange his labour without receiving an ample quantity of food in return. Labourers would live in ease and comfort, and would consequently be able to rear a numerous and vigorous offspring. On the state of this fund, the happiness, or the degree of misery, prevailing among the lower classes of people in every known state at present chiefly depends. And on this happiness, or degree of misery, depends the increase, stationariness, or decrease of population. And thus it appears, that a society constituted according to the most beautiful form that imagination can conceive, with benevolence for its moving principle, instead of self-love, and with every evil disposition in all its members corrected by reason and not force, would, from the inevitable laws of nature, and not from any original depravity of man, in a very short period degenerate into a society constructed upon a plan not essentially different from that which prevails in every known state at present; I mean, a society divided into a class of proprietors, and a class of labourers, and with self-love the main-spring of the great machine. In the supposition I have made, I have undoubtedly taken the increase of population smaller, and the increase of produce greater, than they really would be. No reason can be assigned why, under the circumstances I have supposed, population should not increase faster than in any known instance. If then we were to take the period of doubling at fifteen years, instead of twenty-five years, and reflect upon the labour necessary to double the produce in so short a time, even if we allow it possible, we may venture to pronounce with certainty that if Mr Godwin's system of society was established in its utmost perfection, instead of myriads of centuries, not thirty years could elapse before its utter destruction from the simple principle of population. I have taken no notice of emigration for obvious reasons. If such societies were instituted in other parts of Europe, these countries would be under the same difficulties with regard to population, and could admit no fresh members into their bosoms. If this beautiful society were confined to this island, it must have degenerated strangely from its original purity, and administer but a very small portion of the happiness it proposed; in short, its essential principle must be completely destroyed, before any of its members would voluntarily consent to leave it, and live under such governments as at present exist in Europe, or submit to the extreme hardships of first settlers in new regions. We well know, from repeated experience, how much misery and hardship men will undergo in their own country, before they can determine to desert it; and how often the most tempting proposals of embarking for new settlements have been rejected by people who appeared to be almost starving. CHAPTER 11 Mr Godwin's conjecture concerning the future extinction of the passion between the sexes--Little apparent grounds for such a conjecture--Passion of love not inconsistent either with reason or virtue. We have supported Mr Godwin's system of society once completely established. But it is supposing an impossibility. The same causes in nature which would destroy it so rapidly, were it once established, would prevent the possibility of its establishment. And upon what grounds we can presume a change in these natural causes, I am utterly at a loss to conjecture. No move towards the extinction of the passion between the sexes has taken place in the five or six thousand years that the world has existed. Men in the decline of life have in all ages declaimed against a passion which they have ceased to feel, but with as little reason as success. Those who from coldness of constitutional temperament have never felt what love is, will surely be allowed to be very incompetent judges with regard to the power of this passion to contribute to the sum of pleasurable sensations in life. Those who have spent their youth in criminal excesses and have prepared for themselves, as the comforts of their age, corporeal debility and mental remorse may well inveigh against such pleasures as vain and futile, and unproductive of lasting satisfaction. But the pleasures of pure love will bear the contemplation of the most improved reason, and the most exalted virtue. Perhaps there is scarcely a man who has once experienced the genuine delight of virtuous love, however great his intellectual pleasure may have been, that does not look back to the period as the sunny spot in his whole life, where his imagination loves to bask, which he recollects and contemplates with the fondest regrets, and which he would most wish to live over again. The superiority of intellectual to sensual pleasures consists rather in their filling up more time, in their having a larger range, and in their being less liable to satiety, than in their being more real and essential. Intemperance in every enjoyment defeats its own purpose. A walk in the finest day through the most beautiful country, if pursued too far, ends in pain and fatigue. The most wholesome and invigorating food, eaten with an unrestrained appetite, produces weakness instead of strength. Even intellectual pleasures, though certainly less liable than others to satiety, pursued with too little intermission, debilitate the body, and impair the vigour of the mind. To argue against the reality of these pleasures from their abuse seems to be hardly just. Morality, according to Mr Godwin, is a calculation of consequences, or, as Archdeacon Paley very justly expresses it, the will of God, as collected from general expediency. According to either of these definitions, a sensual pleasure not attended with the probability of unhappy consequences does not offend against the laws of morality, and if it be pursued with such a degree of temperance as to leave the most ample room for intellectual attainments, it must undoubtedly add to the sum of pleasurable sensations in life. Virtuous love, exalted by friendship, seems to be that sort of mixture of sensual and intellectual enjoyment particularly suited to the nature of man, and most powerfully calculated to awaken the sympathies of the soul, and produce the most exquisite gratifications. Mr Godwin says, in order to shew the evident inferiority of the pleasures of sense, 'Strip the commerce of the sexes of all its attendant circumstances, and it would be generally despised' (Bk. I, ch. 5; in the third edition, Vol. I, pp. 71-72). He might as well say to a man who admired trees: strip them of their spreading branches and lovely foliage, and what beauty can you see in a bare pole? But it was the tree with the branches and foliage, and not without them, that excited admiration. One feature of an object may be as distinct, and excite as different emotions, from the aggregate as any two things the most remote, as a beautiful woman, and a map of Madagascar. It is 'the symmetry of person, the vivacity, the voluptuous softness of temper, the affectionate kindness of feelings, the imagination and the wit' of a woman that excite the passion of love, and not the mere distinction of her being female. Urged by the passion of love, men have been driven into acts highly prejudicial to the general interests of society, but probably they would have found no difficulty in resisting the temptation, had it appeared in the form of a woman with no other attractions whatever but her sex. To strip sensual pleasures of all their adjuncts, in order to prove their inferiority, is to deprive a magnet of some of its most essential causes of attraction, and then to say that it is weak and inefficient. In the pursuit of every enjoyment, whether sensual or intellectual, reason, that faculty which enables us to calculate consequences, is the proper corrective and guide. It is probable therefore that improved reason will always tend to prevent the abuse of sensual pleasures, though it by no means follows that it will extinguish them. I have endeavoured to expose the fallacy of that argument which infers an unlimited progress from a partial improvement, the limits of which cannot be exactly ascertained. It has appeared, I think, that there are many instances in which a decided progress has been observed, where yet it would be a gross absurdity to suppose that progress indefinite. But towards the extinction of the passion between the sexes, no observable progress whatever has hitherto been made. To suppose such an extinction, therefore, is merely to offer an unfounded conjecture, unsupported by any philosophical probabilities. It is a truth, which history I am afraid makes too clear, that some men of the highest mental powers have been addicted not only to a moderate, but even to an immoderate indulgence in the pleasures of sensual love. But allowing, as I should be inclined to do, notwithstanding numerous instances to the contrary, that great intellectual exertions tend to diminish the empire of this passion over man, it is evident that the mass of mankind must be improved more highly than the brightest ornaments of the species at present before any difference can take place sufficient sensibly to affect population. I would by no means suppose that the mass of mankind has reached its term of improvement, but the principal argument of this essay tends to place in a strong point of view the improbability that the lower classes of people in any country should ever be sufficiently free from want and labour to obtain any high degree of intellectual improvement. CHAPTER 12 Mr Godwin's conjecture concerning the indefinite prolongation of human life--Improper inference drawn from the effects of mental stimulants on the human frame, illustrated in various instances--Conjectures not founded on any indications in the past not to be considered as philosophical conjectures--Mr Godwin's and Mr Condorcet's conjecture respecting the approach of man towards immortality on earth, a curious instance of the inconsistency of scepticism. Mr Godwin's conjecture respecting the future approach of man towards immortality on earth seems to be rather oddly placed in a chapter which professes to remove the objection to his system of equality from the principle of population. Unless he supposes the passion between the sexes to decrease faster than the duration of life increases, the earth would be more encumbered than ever. But leaving this difficulty to Mr Godwin, let us examine a few of the appearances from which the probable immortality of man is inferred. To prove the power of the mind over the body, Mr Godwin observes, "How often do we find a piece of good news dissipating a distemper? How common is the remark that those accidents which are to the indolent a source of disease are forgotten and extirpated in the busy and active? I walk twenty miles in an indolent and half determined temper and am extremely fatigued. I walk twenty miles full of ardour, and with a motive that engrosses my soul, and I come in as fresh and as alert as when I began my journey. Emotion excited by some unexpected word, by a letter that is delivered to us, occasions the most extraordinary revolutions in our frame, accelerates the circulation, causes the heart to palpitate, the tongue to refuse its office, and has been known to occasion death by extreme anguish or extreme joy. There is nothing indeed of which the physician is more aware than of the power of the mind in assisting or reading convalescence." The instances here mentioned are chiefly instances of the effects of mental stimulants on the bodily frame. No person has ever for a moment doubted the near, though mysterious, connection of mind and body. But it is arguing totally without knowledge of the nature of stimulants to suppose, either that they can be applied continually with equal strength, or if they could be so applied, for a time, that they would not exhaust and wear out the subject. In some of the cases here noticed, the strength of the stimulus depends upon its novelty and unexpectedness. Such a stimulus cannot, from its nature, be repeated often with the same effect, as it would by repetition lose that property which gives it its strength. In the other cases, the argument is from a small and partial effect, to a great and general effect, which will in numberless instances be found to be a very fallacious mode of reasoning. The busy and active man may in some degree counteract, or what is perhaps nearer the truth, may disregard those slight disorders of frame which fix the attention of a man who has nothing else to think of; but this does not tend to prove that activity of mind will enable a man to disregard a high fever, the smallpox, or the plague. The man who walks twenty miles with a motive that engrosses his soul does not attend to his slight fatigue of body when he comes in; but double his motive, and set him to walk another twenty miles, quadruple it, and let him start a third time, and so on; and the length of his walk will ultimately depend upon muscle and not mind. Powell, for a motive of ten guineas, would have walked further probably than Mr Godwin, for a motive of half a million. A motive of uncommon power acting upon a frame of moderate strength would, perhaps, make the man kill himself by his exertions, but it would not make him walk a hundred miles in twenty-four hours. This statement of the case shews the fallacy of supposing that the person was really not at all tired in his first walk of twenty miles, because he did not appear to be so, or, perhaps, scarcely felt any fatigue himself. The mind cannot fix its attention strongly on more than one object at once. The twenty thousand pounds so engrossed his thoughts that he did not attend to any slight soreness of foot, or stiffness of limb. But had he been really as fresh and as alert, as when he first set off, he would be able to go the second twenty miles with as much ease as the first, and so on, the third, &c. Which leads to a palpable absurdity. When a horse of spirit is nearly half tired, by the stimulus of the spur, added to the proper management of the bit, he may be put so much upon his mettle, that he would appear to a standerby, as fresh and as high spirited as if he had not gone a mile. Nay, probably, the horse himself, while in the heat and passion occasioned by this stimulus, would not feel any fatigue; but it would be strangely contrary to all reason and experience, to argue from such an appearance that, if the stimulus were continued, the horse would never be tired. The cry of a pack of hounds will make some horses, after a journey of forty miles on the road, appear as fresh, and as lively, as when they first set out. Were they then to be hunted, no perceptible abatement would at first be felt by their riders in their strength and spirits, but towards the end of a hard day, the previous fatigue would have its full weight and effect, and make them tire sooner. When I have taken a long walk with my gun, and met with no success, I have frequently returned home feeling a considerable degree of uncomfortableness from fatigue. Another day, perhaps, going over nearly the same extent of ground with a good deal of sport, I have come home fresh, and alert. The difference in the sensation of fatigue upon coming in, on the different days, may have been very striking, but on the following mornings I have found no such difference. I have not perceived that I was less stiff in my limbs, or less footsore, on the morning after the day of the sport, than on the other morning. In all these cases, stimulants upon the mind seem to act rather by taking off the attention from the bodily fatigue, than by really and truly counteracting it. If the energy of my mind had really counteracted the fatigue of my body, why should I feel tired the next morning? if the stimulus of the hounds had as completely overcome the fatigue of the journey in reality, as it did in appearance, why should the horse be tired sooner than if he had not gone the forty miles? I happen to have a very bad fit of the toothache at the time I am writing this. In the eagerness of composition, I every now and then, for a moment or two, forget it. Yet I cannot help thinking that the process, which causes the pain, is still going forwards, and that the nerves which carry the information of it to the brain are even during these moments demanding attention and room for their appropriate vibrations. The multiplicity of vibrations of another kind may perhaps prevent their admission, or overcome them for a time when admitted, till a shoot of extraordinary energy puts all other vibration to the rout, destroys the vividness of my argumentative conceptions, and rides triumphant in the brain. In this case, as in the others, the mind seems to have little or no power in counteracting or curing the disorder, but merely possesses a power, if strongly excited, of fixing its attention on other subjects. I do not, however, mean to say that a sound and vigorous mind has no tendency whatever to keep the body in a similar state. So close and intimate is the union of mind and body that it would be highly extraordinary if they did not mutually assist each other's functions. But, perhaps, upon a comparison, the body has more effect upon the mind than the mind upon the body. The first object of the mind is to act as purveyor to the wants of the body. When these wants are completely satisfied, an active mind is indeed apt to wander further, to range over the fields of science, or sport in the regions of. Imagination, to fancy that it has 'shuffled off this mortal coil', and is seeking its kindred element. But all these efforts are like the vain exertions of the hare in the fable. The slowly moving tortoise, the body, never fails to overtake the mind, however widely and extensively it may have ranged, and the brightest and most energetic intellects, unwillingly as they may attend to the first or second summons, must ultimately yield the empire of the brain to the calls of hunger, or sink with the exhausted body in sleep. It seems as if one might say with certainty that if a medicine could be found to immortalize the body there would be no fear of its [not] being accompanied by the immortality of the mind. But the immortality of the mind by no means seems to infer the immortality of the body. On the contrary, the greatest conceivable energy of mind would probably exhaust and destroy the strength of the body. A temperate vigour of mind appears to be favourable to health, but very great intellectual exertions tend rather, as has been often observed, to wear out the scabbard. Most of the instances which Mr Godwin has brought to prove the power of the mind over the body, and the consequent probability of the immortality of man, are of this latter description, and could such stimulants be continually applied, instead of tending to immortalize, they would tend very rapidly to destroy the human frame. The probable increase of the voluntary power of man over his animal frame comes next under Mr Godwin's consideration, and he concludes by saying, that the voluntary power of some men, in this respect, is found to extend to various articles in which other men are impotent. But this is reasoning against an almost universal rule from a few exceptions; and these exceptions seem to be rather tricks, than powers that may be exerted to any good purpose. I have never heard of any man who could regulate his pulse in a fever, and doubt much, if any of the persons here alluded to have made the smallest perceptible progress in the regular correction of the disorders of their frames and the consequent prolongation of their lives. Mr Godwin says, 'Nothing can be more unphilosophical than to conclude, that, because a certain species of power is beyond the train of our present observation, that it is beyond the limits of the human mind.' I own my ideas of philosophy are in this respect widely different from Mr Godwin's. The only distinction that I see, between a philosophical conjecture, and the assertions of the Prophet Mr Brothers, is, that one is founded upon indications arising from the train of our present observations, and the other has no foundation at all. I expect that great discoveries are yet to take place in all the branches of human science, particularly in physics; but the moment we leave past experience as the foundation of our conjectures concerning the future, and, still more, if our conjectures absolutely contradict past experience, we are thrown upon a wide field of uncertainty, and any one supposition is then just as good as another. If a person were to tell me that men would ultimately have eyes and hands behind them as well as before them, I should admit the usefulness of the addition, but should give as a reason for my disbelief of it, that I saw no indications whatever in the past from which I could infer the smallest probability of such a change. If this be not allowed a valid objection, all conjectures are alike, and all equally philosophical. I own it appears to me that in the train of our present observations, there are no more genuine indications that man will become immortal upon earth than that he will have four eyes and four hands, or that trees will grow horizontally instead of perpendicularly. It will be said, perhaps, that many discoveries have already taken place in the world that were totally unforeseen and unexpected. This I grant to be true; but if a person had predicted these discoveries without being guided by any analogies or indications from past facts, he would deserve the name of seer or prophet, but not of philosopher. The wonder that some of our modern discoveries would excite in the savage inhabitants of Europe in the times of Theseus and Achilles, proves but little. Persons almost entirely unacquainted with the powers of a machine cannot be expected to guess at its effects. I am far from saying, that we are at present by any means fully acquainted with the powers of the human mind; but we certainly know more of this instrument than was known four thousand years ago; and therefore, though not to be called competent judges, we are certainly much better able than savages to say what is, or is not, within its grasp. A watch would strike a savage with as much surprise as a perpetual motion; yet one is to us a most familiar piece of mechanism, and the other has constantly eluded the efforts of the most acute intellects. In many instances we are now able to perceive the causes, which prevent an unlimited improvement in those inventions, which seemed to promise fairly for it at first. The original improvers of telescopes would probably think, that as long as the size of the specula and the length of the tubes could be increased, the powers and advantages of the instrument would increase; but experience has since taught us, that the smallness of the field, the deficiency of light, and the circumstance of the atmosphere being magnified, prevent the beneficial results that were to be expected from telescopes of extraordinary size and power. In many parts of knowledge, man has been almost constantly making some progress; in other parts, his efforts have been invariably baffled. The savage would not probably be able to guess at the causes of this mighty difference. Our further experience has given us some little insight into these causes, and has therefore enabled us better to judge, if not of what we are to expect in future, at least of what we are not to expect, which, though negative, is a very useful piece of information. As the necessity of sleep seems rather to depend upon the body than the mind, it does not appear how the improvement of the mind can tend very greatly to supersede this 'conspicuous infirmity'. A man who by great excitements on his mind is able to pass two or three nights without sleep, proportionably exhausts the vigour of his body, and this diminution of health and strength will soon disturb the operations of his understanding, so that by these great efforts he appears to have made no real progress whatever in superseding the necessity of this species of rest. There is certainly a sufficiently marked difference in the various characters of which we have some knowledge, relative to the energies of their minds, their benevolent pursuits, etc., to enable us to judge whether the operations of intellect have any decided effect in prolonging the duration of human life. It is certain that no decided effect of this kind has yet been observed. Though no attention of any kind has ever produced such an effect as could be construed into the smallest semblance of an approach towards immortality, yet of the two, a certain attention to the body seems to have more effect in this respect than an attention to the mind. The man who takes his temperate meals and his bodily exercise, with scrupulous regularity, will generally be found more healthy than the man who, very deeply engaged in intellectual pursuits, often forgets for a time these bodily cravings. The citizen who has retired, and whose ideas, perhaps, scarcely soar above or extend beyond his little garden, puddling all the morning about his borders of box, will, perhaps, live as long as the philosopher whose range of intellect is the most extensive, and whose views are the clearest of any of his contemporaries. It has been positively observed by those who have attended to the bills of mortality that women live longer upon an average than men, and, though I would not by any means say that their intellectual faculties are inferior, yet, I think, it must be allowed that, from their different education, there are not so many women as men, who are excited to vigorous mental exertion. As in these and similar instances, or to take a larger range, as in the great diversity of characters that have existed during some thousand years, no decided difference has been observed in the duration of human life from the operation of intellect, the mortality of man on earth seems to be as completely established, and exactly upon the same grounds, as any one, the most constant, of the laws of nature. An immediate act of power in the Creator of the Universe might, indeed, change one or all of these laws, either suddenly or gradually, but without some indications of such a change, and such indications do not exist, it. Is just as unphilosophical to suppose that the life of man may be prolonged beyond any assignable limits, as to suppose that the attraction of the earth will gradually be changed into repulsion and that stones will ultimately rise instead of fall or that the earth will fly off at a certain period to some more genial and warmer sun. The conclusion of this chapter presents us, undoubtedly, with a very beautiful and desirable picture, but like some of the landscapes drawn from fancy and not imagined with truth, it fails of that interest in the heart which nature and probability can alone give. I cannot quit this subject without taking notice of these conjectures of Mr Godwin and Mr Condorcet concerning the indefinite prolongation of human life, as a very curious instance of the longing of the soul after immortality. Both these gentlemen have rejected the light of revelation which absolutely promises eternal life in another state. They have also rejected the light of natural religion, which to the ablest intellects in all ages has indicated the future existence of the soul. Yet so congenial is the idea of immortality to the mind of man that they cannot consent entirely to throw it out of their systems. After all their fastidious scepticisms concerning the only probable mode of immortality, they introduce a species of immortality of their own, not only completely contradictory to every law of philosophical probability, but in itself in the highest degree narrow, partial, and unjust. They suppose that all the great, virtuous, and exalted minds that have ever existed or that may exist for some thousands, perhaps millions of years, will be sunk in annihilation, and that only a few beings, not greater in number than can exist at once upon the earth, will be ultimately crowned with immortality. Had such a tenet been advanced as a tenet of revelation I am very sure that all the enemies of religion, and probably Mr Godwin and Mr Condorcet among the rest, would have exhausted the whole force of their ridicule upon it, as the most puerile, the most absurd, the poorest, the most pitiful, the most iniquitously unjust, and, consequently, the most unworthy of the Deity that the superstitious folly of man could invent. What a strange and curious proof do these conjectures exhibit of the inconsistency of scepticism! For it should be observed, that there is a very striking and essential difference between believing an assertion which absolutely contradicts the most uniform experience, and an assertion which contradicts nothing, but is merely beyond the power of our present observation and knowledge. So diversified are the natural objects around us, so many instances of mighty power daily offer themselves to our view, that we may fairly presume, that there are many forms and operations of nature which we have not yet observed, or which, perhaps, we are not capable of observing with our present confined inlets of knowledge. The resurrection of a spiritual body from a natural body does not appear in itself a more wonderful instance of power than the germination of a blade of wheat from the grain, or of an oak from an acorn. Could we conceive an intelligent being, so placed as to be conversant only with inanimate or full grown objects, and never to have witnessed the process of vegetation and growth; and were another being to shew him two little pieces of matter, a grain of wheat, and an acorn, to desire him to examine them, to analyse them if he pleased, and endeavour to find out their properties and essences; and then to tell him, that however trifling these little bits of matter might appear to him, that they possessed such curious powers of selection, combination, arrangement, and almost of creation, that upon being put into the ground, they would choose, amongst all the dirt and moisture that surrounded them, those parts which best suited their purpose, that they would collect and arrange these parts with wonderful taste, judgement, and execution, and would rise up into beautiful forms, scarcely in any respect analogous to the little bits of matter which were first placed in the earth. I feel very little doubt that the imaginary being which I have supposed would hesitate more, would require better authority, and stronger proofs, before he believed these strange assertions, than if he had been told, that a being of mighty power, who had been the cause of all that he saw around him, and of that existence of which he himself was conscious, would, by a great act of power upon the death and corruption of human creatures, raise up the essence of thought in an incorporeal, or at least invisible form, to give it a happier existence in another state. The only difference, with regard to our own apprehensions, that is not in favour of the latter assertion is that the first miracle we have repeatedly seen, and the last miracle we have not seen. I admit the full weight of this prodigious difference, but surely no man can hesitate a moment in saying that, putting Revelation out of the question, the resurrection of a spiritual body from a natural body, which may be merely one among the many operations of nature which we cannot see, is an event indefinitely more probable than the immortality of man on earth, which is not only an event of which no symptoms or indications have yet appeared, but is a positive contradiction to one of the most constant of the laws of nature that has ever come within the observation of man. When we extend our view beyond this life, it is evident that we can have no other guides than authority, or conjecture, and perhaps, indeed, an obscure and undefined feeling. What I say here, therefore, does not appear to me in any respect to contradict what I said before, when I observed that it was unphilosophical to expect any specifick event that was not indicated by some kind of analogy in the past. In ranging beyond the bourne from which no traveller returns, we must necessarily quit this rule; but with regard to events that may be expected to happen on earth, we can seldom quit it consistently with true philosophy. Analogy has, however, as I conceive, great latitude. For instance, man has discovered many of the laws of nature: analogy seems to indicate that he will discover many more; but no analogy seems to indicate that he will discover a sixth sense, or a new species of power in the human mind, entirely beyond the train of our present observations. The powers of selection, combination, and transmutation, which every seed shews, are truly miraculous. Who can imagine that these wonderful faculties are contained in these little bits of matter? To me it appears much more philosophical to suppose that the mighty God of nature is present in full energy in all these operations. To this all powerful Being, it would be equally easy to raise an oak without an acorn as with one. The preparatory process of putting seeds into the ground is merely ordained for the use of man, as one among the various other excitements necessary to awaken matter into mind. It is an idea that will be found consistent, equally with the natural phenomena around us, with the various events of human life, and with the successive revelations of God to man, to suppose that the world is a mighty process for the creation and formation of mind. Many vessels will necessarily come out of this great furnace in wrong shapes. These will be broken and thrown aside as useless; while those vessels whose forms are full of truth, grace, and loveliness, will be wafted into happier situations, nearer the presence of the mighty maker. I ought perhaps again to make an apology to my readers for dwelling so long upon a conjecture which many, I know, will think too absurd and improbable to require the least discussion. But if it be as improbable and as contrary to the genuine spirit of philosophy as I own I think it is, why should it not be shewn to be so in a candid examination? A conjecture, however improbable on the first view of it, advanced by able and ingenious men, seems at least to deserve investigation. For my own part I feel no disinclination whatever to give that degree of credit to the opinion of the probable immortality of man on earth, which the appearances that can be brought in support of it deserve. Before we decide upon the utter improbability of such an event, it is but fair impartially to examine these appearances; and from such an examination I think we may conclude, that we have rather less reason for supposing that the life of man may be indefinitely prolonged, than that trees may be made to grow indefinitely high, or potatoes indefinitely large. Though Mr Godwin advances the idea of the indefinite prolongation of human life merely as a conjecture, yet as he has produced some appearances, which in his conception favour the supposition, he must certainly intend that these appearances should be examined and this is all that I have meant to do. CHAPTER 13 Error of Mr Godwin is considering man too much in the light of a being merely rational--In the compound being, man, the passions will always act as disturbing forces in the decisions of the understanding--Reasonings of Mr Godwin on the subject of coercion--Some truths of a nature not to be communicated from one man to another. In the chapter which I have been examining, Mr Godwin professes to consider the objection to his system of equality from the principle of population. It has appeared, I think clearly, that he is greatly erroneous in his statement of the distance of this difficulty, and that instead of myriads of centuries, it is really not thirty years, or even thirty days, distant from us. The supposition of the approach of man to immortality on earth is certainly not of a kind to soften the difficulty. The only argument, therefore, in the chapter which has any tendency to remove the objection is the conjecture concerning the extinction of the passion between the sexes, but as this is a mere conjecture, unsupported by the smallest shadow of proof, the force of the objection may be fairly said to remain unimpaired, and it is undoubtedly of sufficient weight of itself completely to overturn Mr Godwin's whole system of equality. I will, however, make one or two observations on a few of the prominent parts of Mr Godwin's reasonings which will contribute to place in a still clearer point of view the little hope that we can reasonably entertain of those vast improvements in the nature of man and of society which he holds up to our admiring gaze in his Political Justice. Mr Godwin considers man too much in the light of a being merely intellectual. This error, at least such I conceive it to be, pervades his whole work and mixes itself with all his reasonings. The voluntary actions of men may originate in their opinions, but these opinions will be very differently modified in creatures compounded of a rational faculty and corporal propensities from what they would be in beings wholly intellectual. Mr Godwin, in proving that sound reasoning and truth are capable of being adequately communicated, examines the proposition first practically, and then adds, 'Such is the appearance which this proposition assumes, when examined in a loose and practical view. In strict consideration it will not admit of debate. Man is a rational being, etc.' (Bk. I, ch. 5; in the third edition Vol. I, p. 88). So far from calling this a strict consideration of the subject, I own I should call it the loosest, and most erroneous, way possible, of considering it. It is the calculating the velocity of a falling body in vacuo, and persisting in it, that it would be the same through whatever resisting mediums it might fall. This was not Newton's mode of philosophizing. Very few general propositions are just in application to a particular subject. The moon is not kept in her orbit round the earth, nor the earth in her orbit round the sun, by a force that varies merely in the inverse ratio of the squares of the distances. To make the general theory just in application to the revolutions of these bodies, it was necessary to calculate accurately the disturbing force of the sun upon the moon, and of the moon upon the earth; and till these disturbing forces were properly estimated, actual observations on the motions of these bodies would have proved that the theory was not accurately true. I am willing to allow that every voluntary act is preceded by a decision of the mind, but it is strangely opposite to what I should conceive to be the just theory upon the subject, and a palpable contradiction to all experience, to say that the corporal propensities of man do not act very powerfully, as disturbing forces, in these decisions. The question, therefore, does not merely depend upon whether a man may be made to understand a distinct proposition or be convinced by an unanswerable argument. A truth may be brought home to his conviction as a rational being, though he may determine to act contrary to it, as a compound being. The cravings of hunger, the love of liquor, the desire of possessing a beautiful woman, will urge men to actions, of the fatal consequences of which, to the general interests of society, they are perfectly well convinced, even at the very time they commit them. Remove their bodily cravings, and they would not hesitate a moment in determining against such actions. Ask them their opinion of the same conduct in another person, and they would immediately reprobate it. But in their own case, and under all the circumstances of their situation with these bodily cravings, the decision of the compound being is different from the conviction of the rational being. If this be the just view of the subject, and both theory and experience unite to prove that it is, almost all Mr Godwin's reasonings on the subject of coercion in his seventh chapter, will appear to be founded on error. He spends some time in placing in a ridiculous point of view the attempt to convince a man's understanding and to clear up a doubtful proposition in his mind, by blows. Undoubtedly it is both ridiculous and barbarous, and so is cock-fighting, but one has little more to do with the real object of human punishments than the other. One frequent (indeed much too frequent) mode of punishment is death. Mr Godwin will hardly think this intended for conviction, at least it does not appear how the individual or the society could reap much future benefit from an understanding enlightened in this manner. The principal objects which human punishments have in view are undoubtedly restraint and example; restraint, or removal, of an individual member whose vicious habits are likely to be prejudicial to the society'; and example, which by expressing the sense of the community with regard to a particular crime, and by associating more nearly and visibly crime and punishment, holds out a moral motive to dissuade others from the commission of it. Restraint, Mr Godwin thinks, may be permitted as a temporary expedient, though he reprobates solitary imprisonment, which has certainly been the most successful, and, indeed, almost the only attempt towards the moral amelioration of offenders. He talks of the selfish passions that are fostered by solitude and of the virtues generated in society. But surely these virtues are not generated in the society of a prison. Were the offender confined to the society of able and virtuous men he would probably be more improved than in solitude. But is this practicable? Mr Godwin's ingenuity is more frequently employed in finding out evils than in suggesting practical remedies. Punishment, for example, is totally reprobated. By endeavouring to make examples too impressive and terrible, nations have, indeed, been led into the most barbarous cruelties, but the abuse of any practice is not a good argument against its use. The indefatigable pains taken in this country to find out a murder, and the certainty of its punishment, has powerfully contributed to generate that sentiment which is frequent in the mouths of the common people, that a murder will sooner or later come to light; and the habitual horror in which murder is in consequence held will make a man, in the agony of passion, throw down his knife for fear he should be tempted to use it in the gratification of his revenge. In Italy, where murderers, by flying to a sanctuary, are allowed more frequently to escape, the crime has never been held in the same detestation and has consequently been more frequent. No man, who is at all aware of the operation of moral motives, can doubt for a moment, that if every murder in Italy had been invariably punished, the use of the stiletto in transports of passion would have been comparatively but little known. That human laws either do, or can, proportion the punishment accurately to the offence, no person will have the folly to assert. From the inscrutability of motives the thing is absolutely impossible, but this imperfection, though it may be called a species of injustice, is no valid argument against human laws. It is the lot of man, that he will frequently have to choose between two evils; and it is a sufficient reason for the adoption of any institution, that it is the best mode that suggests itself of preventing greater evils. A continual endeavour should undoubtedly prevail to make these institutions as perfect as the nature of them will admit. But nothing is so easy as to find fault with human institutions; nothing so difficult as to suggest adequate practical improvements. It is to be lamented, that more men of talents employ their time in the former occupation than in the latter. The frequency of crime among men, who, as the common saying is, know better, sufficiently proves, that some truths may be brought home to the conviction of the mind without always producing the proper effect upon the conduct. There are other truths of a nature that perhaps never can be adequately communicated from one man to another. The superiority of the pleasures of intellect to those of sense, Mr Godwin considers as a fundamental truth. Taking all circumstances into consideration, I should be disposed to agree with him; but how am I to communicate this truth to a person who has scarcely ever felt intellectual pleasure? I may as well attempt to explain the nature and beauty of colours to a blind man. If I am ever so laborious, patient, and clear, and have the most repeated opportunities of expostulation, any real progress toward the accomplishment of my purpose seems absolutely hopeless. There is no common measure between us. I cannot proceed step by step.. It is a truth of a nature absolutely incapable of demonstration. All that I can say is, that the wisest and best men in all ages had agreed in giving the preference, very greatly, to the pleasures of intellect; and that my own experience completely confirmed the truth of their decisions; that I had found sensual pleasures vain, transient, and continually attended with tedium and disgust; but that intellectual pleasures appeared to me ever fresh and young, filled up all my hours satisfactorily, gave a new zest to life, and diffused a lasting serenity over my mind. If he believe me, it can only be from respect and veneration for my authority. It is credulity, and not conviction. I have not said any thing, nor can any thing be said, of a nature to produce real conviction. The affair is not an affair of reasoning, but of experience. He would probably observe in reply, what you say may be very true with regard to yourself and many other good men, but for my own part I feel very differently upon the subject. I have very frequently taken up a book and almost as frequently gone to sleep over it; but when I pass an evening with a gay party, or a pretty woman, I feel alive, and in spirits, and truly enjoy my existence. Under such circumstances, reasoning and arguments are not instruments from which success can be expected. At some future time perhaps, real satiety of sensual pleasures, or some accidental impressions that awakened the energies of his mind, might effect that, in a month, which the most patient and able expostulations might be incapable of effecting in forty years. CHAPTER 14 Mr Godwin's five propositions respecting political truth, on which his whole work hinges, not established--Reasons we have for supposing, from the distress occasioned by the principle of population, that the vices and moral weakness of man can never be wholly eradicated--Perfectibility, in the sense in which Mr Godwin uses the term, not applicable to man--Nature of the real perfectibility of man illustrated. If the reasonings of the preceding chapter are just, the corollaries respecting political truth, which Mr Godwin draws from the proposition, that the voluntary actions of men originate in their opinions, will not appear to be clearly established. These corollaries are, "Sound reasoning and truth, when adequately communicated, must always be victorious over error: Sound reasoning and truth are capable of being so communicated: Truth is omnipotent: The vices and moral weakness of man are not invincible: Man is perfectible, or in other words, susceptible of perpetual improvement." The first three propositions may be considered a complete syllogism. If by adequately communicated, be meant such a conviction as to produce an adequate effect upon the conduct, the major may be allowed and the minor denied. The consequent, or the omnipotence of truth, of course falls to the ground. If by 'adequately communicated' be meant merely the conviction of the rational faculty, the major must be denied, the minor will be only true in cases capable of demonstration, and the consequent equally falls. The fourth proposition Mr Godwin calls the preceding proposition, with a slight variation in the statement. If so, it must accompany the preceding proposition in its fall. But it may be worth while to inquire, with reference to the principal argument of this essay, into the particular reasons which we have for supposing that the vices and moral weakness of man can never be wholly overcome in this world. Man, according to Mr Godwin, is a creature formed what he is by the successive impressions which he has received, from the first moment that the germ from which he sprung was animated. Could he be placed in a situation, where he was subject to no evil impressions whatever, though it might be doubted whether in such a situation virtue could exist, vice would certainly be banished. The great bent of Mr Godwin's work on Political Justice, if I understand it rightly, is to shew that the greater part of the vices and weaknesses of men proceed from the injustice of their political and social institutions, and that if these were removed and the understandings of men more enlightened, there would be little or no temptation in the world to evil. As it has been clearly proved, however, (at least as I think) that this is entirely a false conception, and that, independent of any political or social institutions whatever, the greater part of mankind, from the fixed and unalterable laws of nature, must ever be subject to the evil temptations arising from want, besides other passions, it follows from Mr Godwin's definition of man that such impressions, and combinations of impressions, cannot be afloat in the world without generating a variety of bad men. According to Mr Godwin's own conception of the formation of character, it is surely as improbable that under such circumstances all men will be virtuous as that sixes will come up a hundred times following upon the dice. The great variety of combinations upon the dice in a repeated succession of throws appears to me not inaptly to represent the great variety of character that must necessarily exist in the world, supposing every individual to be formed what he is by that combination of impressions which he has received since his first existence. And this comparison will, in some measure, shew the absurdity of supposing, that exceptions will ever become general rules; that extraordinary and unusual combinations will be frequent; or that the individual instances of great virtue which had appeared in all ages of the world will ever prevail universally. I am aware that Mr Godwin might say that the comparison is in one respect inaccurate, that in the case of the dice, the preceding causes, or rather the chances respecting the preceding causes, were always the same, and that, therefore, I could have no good reason for supposing that a greater number of sixes would come up in the next hundred times of throwing than in the preceding same number of throws. But, that man had in some sort a power of influencing those causes that formed character, and that every good and virtuous man that was produced, by the influence which he must necessarily have, rather increased the probability that another such virtuous character would be generated, whereas the coming up of sixes upon the dice once, would certainly not increase the probability of their coming up a second time. I admit this objection to the accuracy of the comparison, but it is only partially valid. Repeated experience has assured us, that the influence of the most virtuous character will rarely prevail against very strong temptations to evil. It will undoubtedly affect some, but it will fail with a much greater number. Had Mr Godwin succeeded in his attempt to prove that these temptations to evil could by the exertions of man be removed, I would give up the comparison; or at least allow, that a man might be so far enlightened with regard to the mode of shaking his elbow, that he would be able to throw sixes every time. But as long as a great number of those impressions which form character, like the nice motions of the arm, remain absolutely independent of the will of man, though it would be the height of folly and presumption to attempt to calculate the relative proportions of virtue and vice at the future periods of the world, it may be safely asserted that the vices and moral weakness of mankind, taken in the mass, are invincible. The fifth proposition is the general deduction from the four former and will consequently fall, as the foundations which support it have given way. In the sense in which Mr Godwin understands the term 'perfectible', the perfectibility of man cannot be asserted, unless the preceding propositions could have been clearly established. There is, however, one sense, which the term will bear, in which it is, perhaps, just. It may be said with truth that man is always susceptible of improvement, or that there never has been, or will be, a period of his history, in which he can be said to have reached his possible acme of perfection. Yet it does not by any means follow from this, that our efforts to improve man will always succeed, or even that he will ever make, in the greatest number of ages, any extraordinary strides towards perfection. The only inference that can be drawn is that the precise limit of his improvement cannot possibly be known. And I cannot help again reminding the reader of a distinction which, it appears to me, ought particularly to be attended to in the present question: I mean, the essential difference there is between an unlimited improvement and an improvement the limit of which cannot be ascertained. The former is an improvement not applicable to man under the present laws of his nature. The latter, undoubtedly, is applicable. The real perfectibility of man may be illustrated, as I have mentioned before, by the perfectibility of a plant. The object of the enterprising florist is, as I conceive, to unite size, symmetry, and beauty of colour. It would surely be presumptuous in the most successful improver to affirm, that he possessed a carnation in which these qualities existed in the greatest possible state of perfection. However beautiful his flower may be, other care, other soil, or other suns, might produce one still more beautiful. Yet, although he may be aware of the absurdity of supposing that he has reached perfection, and though he may know by what means he attained that degree of beauty in the flower which he at present possesses, yet he cannot be sure that by pursuing similar means, rather increased in strength, he will obtain a more beautiful blossom. By endeavouring to improve one quality, he may impair the beauty of another. The richer mould which he would employ to increase the size of his plant would probably burst the calyx, and destroy at once its symmetry. In a similar manner, the forcing manure used to bring about the French Revolution, and to give a greater freedom and energy to the human mind, has burst the calyx of humanity, the restraining bond of all society; and, however large the separate petals have grown, however strongly, or even beautifully, a few of them have been marked, the whole is at present a loose, deformed, disjointed mass, without union, symmetry, or harmony of colouring. Were it of consequence to improve pinks and carnations, though we could have no hope of raising them as large as cabbages, we might undoubtedly expect, by successive efforts, to obtain more beautiful specimens than we at present possess. No person can deny the importance of improving the happiness of the human species. Every the least advance in this respect is highly valuable. But an experiment with the human race is not like an experiment upon inanimate objects. The bursting of a flower may be a trifle. Another will soon succeed it. But the bursting of the bonds of society is such a separation of parts as cannot take place without giving the most acute pain to thousands: and a long time may elapse, and much misery may be endured, before the wound grows up again. As the five propositions which I have been examining may be considered as the corner stones of Mr Godwin's fanciful structure, and, indeed, as expressing the aim and bent of his whole work, however excellent much of his detached reasoning may be, he must be considered as having failed in the great object of his undertaking. Besides the difficulties arising from the compound nature of man, which he has by no means sufficiently smoothed, the principal argument against the perfectibility of man and society remains whole and unimpaired from any thing that he has advanced. And as far as I can trust my own judgement, this argument appears to be conclusive, not only against the perfectibility of man, in the enlarged sense in which Mr Godwin understands the term, but against any very marked and striking change for the better, in the form and structure of general society; by which I mean any great and decided amelioration of the condition of the lower classes of mankind, the most numerous, and, consequently, in a general view of the subject, the most important part of the human race. Were I to live a thousand years, and the laws of nature to remain the same, I should little fear, or rather little hope, a contradiction from experience in asserting that no possible sacrifices or exertions of the rich, in a country which had been long inhabited, could for any time place the lower classes of the community in a situation equal, with regard to circumstances, to the situation of the common people about thirty years ago in the northern States of America. The lower classes of people in Europe may at some future period be much better instructed than they are at present; they may be taught to employ the little spare time they have in many better ways than at the ale-house; they may live under better and more equal laws than they have ever hitherto done, perhaps, in any country; and I even conceive it possible, though not probable that they may have more leisure; but it is not in the nature of things that they can be awarded such a quantity of money or subsistence as will allow them all to marry early, in the full confidence that they shall be able to provide with ease for a numerous family. CHAPTER 15 Models too perfect may sometimes rather impede than promote improvement--Mr Godwin's essay on 'Avarice and Profusion'--Impossibility of dividing the necessary labour of a society amicably among all--Invectives against labour may produce present evil, with little or no chance of producing future good--An accession to the mass of agricultural labour must always be an advantage to the labourer. Mr Godwin in the preface to his Enquirer, drops a few expressions which seem to hint at some change in his opinions since he wrote the Political Justice; and as this is a work now of some years standing, I should certainly think that I had been arguing against opinions which the author had himself seen reason to alter, but that in some of the essays of the Enquirer, Mr Godwin's peculiar mode of thinking appears in as striking a light as ever. It has been frequently observed that though we cannot hope to reach perfection in any thing, yet that it must always be advantageous to us to place before our eyes the most perfect models. This observation has a plausible appearance, but is very far from being generally true. I even doubt its truth in one of the most obvious exemplifications that would occur. I doubt whether a very young painter would receive so much benefit, from an attempt to copy a highly finished and perfect picture, as from copying one where the outlines were more strongly marked and the manner of laying on the colours was more easily discoverable. But in cases where the perfection of the model is a perfection of a different and superior nature from that towards which we should naturally advance, we shall not always fail in making any progress towards it, but we shall in all probability impede the progress which we might have expected to make had we not fixed our eyes upon so perfect a model. A highly intellectual being, exempt from the infirm calls of hunger or sleep, is undoubtedly a much more perfect existence than man, but were man to attempt to copy such a model, he would not only fail in making any advances towards it; but by unwisely straining to imitate what was inimitable, he would probably destroy the little intellect which he was endeavouring to improve. The form and structure of society which Mr Godwin describes is as essentially distinct from any forms of society which have hitherto prevailed in the world as a being that can live without food or sleep is from a man. By improving society in its present form, we are making no more advances towards such a state of things as he pictures than we should make approaches towards a line, with regard to which we were walking parallel. The question, therefore, is whether, by looking to such a form of society as our polar star, we are likely to advance or retard the improvement of the human species? Mr Godwin appears to me to have decided this question against himself in his essay on 'Avarice and Profusion' in the Enquirer. Dr Adam Smith has very justly observed that nations as well as individuals grow rich by parsimony and poor by profusion, and that, therefore, every frugal man was a friend and every spendthrift an enemy to his country. The reason he gives is that what is saved from revenue is always added to stock, and is therefore taken from the maintenance of labour that is generally unproductive and employed in the maintenance of labour that realizes itself in valuable commodities. No observation can be more evidently just. The subject of Mr Godwin's essay is a little similar in its first appearance, but in essence is as distinct as possible. He considers the mischief of profusion as an acknowledged truth, and therefore makes his comparison between the avaricious man, and the man who spends his income. But the avaricious man of Mr Godwin is totally a distinct character, at least with regard to his effect upon the prosperity of the state, from the frugal man of Dr Adam Smith. The frugal man in order to make more money saves from his income and adds to his capital, and this capital he either employs himself in the maintenance of productive labour, or he lends it to some other person who will probably employ it in this way. He benefits the state because he adds to its general capital, and because wealth employed as capital not only sets in motion more labour than when spent as income, but the labour is besides of a more valuable kind. But the avaricious man of Mr Godwin locks up his wealth in a chest and sets in motion no labour of any kind, either productive or unproductive. This is so essential a difference that Mr Godwin's decision in his essay appears at once as evidently false as Dr Adam Smith's position is evidently true. It could not, indeed, but occur to Mr Godwin that some present inconvenience might arise to the poor from thus locking up the funds destined for the maintenance of labour. The only way, therefore, he had of weakening this objection was to compare the two characters chiefly with regard to their tendency to accelerate the approach of that happy state of cultivated equality, on which he says we ought always to fix our eyes as our polar star. I think it has been proved in the former parts of this essay that such a state of society is absolutely impracticable. What consequences then are we to expect from looking to such a point as our guide and polar star in the great sea of political discovery? Reason would teach us to expect no other than winds perpetually adverse, constant but fruitless toil, frequent shipwreck, and certain misery. We shall not only fail in making the smallest real approach towards such a perfect form of society; but by wasting our strength of mind and body, in a direction in which it is impossible to proceed, and by the frequent distress which we must necessarily occasion by our repeated failures, we shall evidently impede that degree of improvement in society, which is really attainable. It has appeared that a society constituted according to Mr Godwin's system must, from the inevitable laws of our nature, degenerate into a class of proprietors and a class of labourers, and that the substitution of benevolence for self-love as the moving principle of society, instead of producing the happy effects that might be expected from so fair a name, would cause the same pressure of want to be felt by the whole of society, which is now felt only by a part. It is to the established administration of property and to the apparently narrow principle of self-love that we are indebted for all the noblest exertions of human genius, all the finer and more delicate emotions of the soul, for everything, indeed, that distinguishes the civilized from the savage state; and no sufficient change has as yet taken place in the nature of civilized man to enable us to say that he either is, or ever will be, in a state when he may safely throw down the ladder by which he has risen to this eminence. If in every society that has advanced beyond the savage state, a class of proprietors and a class of labourers must necessarily exist, it is evident that, as labour is the only property of the class of labourers, every thing that tends to diminish the value of this property must tend to diminish the possession of this part of society. The only way that a poor man has of supporting himself in independence is by the exertion of his bodily strength. This is the only commodity he has to give in exchange for the necessaries of life. It would hardly appear then that you benefit him by narrowing the market for this commodity, by decreasing the demand for labour, and lessening the value of the only property that he possesses. It should be observed that the principal argument of this Essay only goes to prove the necessity of a class of proprietors, and a class of labourers, but by no means infers that the present great inequality of property is either necessary or useful to society. On the contrary, it must certainly be considered as an evil, and every institution that promotes it is essentially bad and impolitic. But whether a government could with advantage to society actively interfere to repress inequality of fortunes may be a matter of doubt. Perhaps the generous system of perfect liberty adopted by Dr Adam Smith and the French economists would be ill exchanged for any system of restraint. Mr Godwin would perhaps say that the whole system of barter and exchange is a vile and iniquitous traffic. If you would essentially relieve the poor man, you should take a part of his labour upon yourself, or give him your money, without exacting so severe a return for it. In answer to the first method proposed, it may be observed, that even if the rich could be persuaded to assist the poor in this way, the value of the assistance would be comparatively trifling. The rich, though they think themselves of great importance, bear but a small proportion in point of numbers to the poor, and would, therefore, relieve them but of a small part of their burdens by taking a share. Were all those that are employed in the labours of luxuries added to the number of those employed in producing necessaries, and could these necessary labours be amicably divided among all, each man's share might indeed be comparatively light; but desirable as such an amicable division would undoubtedly be, I cannot conceive any practical principle according to which it could take place. It has been shewn, that the spirit of benevolence, guided by the strict impartial justice that Mr Godwin describes, would, if vigorously acted upon, depress in want and misery the whole human race. Let us examine what would be the consequence, if the proprietor were to retain a decent share for himself, but to give the rest away to the poor, without exacting a task from them in return. Not to mention the idleness and the vice that such a proceeding, if general, would probably create in the present state of society, and the great risk there would be, of diminishing the produce of land, as well as the labours of luxury, another objection yet remains. Mr Godwin seems to have but little respect for practical principles; but I own it appears to me, that he is a much greater benefactor to mankind, who points out how an inferior good may be attained, than he who merely expatiates on the deformity of the present state of society, and the beauty of a different state, without pointing out a practical method, that might be immediately applied, of accelerating our advances from the one, to the other. It has appeared that from the principle of population more will always be in want than can be adequately supplied. The surplus of the rich man might be sufficient for three, but four will be desirous to obtain it. He cannot make this selection of three out of the four without conferring a great favour on those that are the objects of his choice. These persons must consider themselves as under a great obligation to him and as dependent upon him for their support. The rich man would feel his power and the poor man his dependence, and the evil effects of these two impressions on the human heart are well known. Though I perfectly agree with Mr Godwin therefore in the evil of hard labour, yet I still think it a less evil, and less calculated to debase the human mind, than dependence, and every history of man that we have ever read places in a strong point of view the danger to which that mind is exposed which is entrusted with constant power. In the present state of things, and particularly when labour is in request, the man who does a day's work for me confers full as great an obligation upon me as I do upon him. I possess what he wants, he possesses what I want. We make an amicable exchange. The poor man walks erect in conscious independence; and the mind of his employer is not vitiated by a sense of power. Three or four hundred years ago there was undoubtedly much less labour in England, in proportion to the population, than at present, but there was much more dependence, and we probably should not now enjoy our present degree of civil liberty if the poor, by the introduction of manufactures, had not been enabled to give something in exchange for the provisions of the great Lords, instead of being dependent upon their bounty. Even the greatest enemies of trade and manufactures, and I do not reckon myself a very determined friend to them, must allow that when they were introduced into England, liberty came in their train. Nothing that has been said tends in the most remote degree to undervalue the principle of benevolence. It is one of the noblest and most godlike qualities of the human heart, generated, perhaps, slowly and gradually from self-love, and afterwards intended to act as a general law, whose kind office it should be, to soften the partial deformities, to correct the asperities, and to smooth the wrinkles of its parent: and this seems to be the analog of all nature. Perhaps there is no one general law of nature that will not appear, to us at least, to produce partial evil; and we frequently observe at the same time, some bountiful provision which, acting as another general law, corrects the inequalities of the first. The proper office of benevolence is to soften the partial evils arising from self-love, but it can never be substituted in its place. If no man were to allow himself to act till he had completely determined that the action he was about to perform was more conducive than any other to the general good, the most enlightened minds would hesitate in perplexity and amazement; and the unenlightened would be continually committing the grossest mistakes. As Mr Godwin, therefore, has not laid down any practical principle according to which the necessary labours of agriculture might be amicably shared among the whole class of labourers, by general invectives against employing the poor he appears to pursue an unattainable good through much present evil. For if every man who employs the poor ought to be considered as their enemy, and as adding to the weight of their oppressions, and if the miser is for this reason to be preferred to the man who spends his income, it follows that any number of men who now spend their incomes might, to the advantage of society, be converted into misers. Suppose then that a hundred thousand persons who now employ ten men each were to lock up their wealth from general use, it is evident, that a million of working men of different kinds would be completely thrown out of all employment. The extensive misery that such an event would produce in the present state of society Mr Godwin himself could hardly refuse to acknowledge, and I question whether he might not find some difficulty in proving that a conduct of this kind tended more than the conduct of those who spend their incomes to 'place human beings in the condition in which they ought to be placed.' But Mr Godwin says that the miser really locks up nothing, that the point has not been rightly understood, and that the true development and definition of the nature of wealth have not been applied to illustrate it. Having defined therefore wealth, very justly, to be the commodities raised and fostered by human labour, he observes that the miser locks up neither corn, nor oxen, nor clothes, nor houses. Undoubtedly he does not really lock up these articles, but he locks up the power of producing them, which is virtually the same. These things are certainly used and consumed by his contemporaries, as truly, and to as great an extent, as if he were a beggar; but not to as great an extent as if he had employed his wealth in turning up more land, in breeding more oxen, in employing more tailors, and in building more houses. But supposing, for a moment, that the conduct of the miser did not tend to check any really useful produce, how are all those who are thrown out of employment to obtain patents which they may shew in order to be awarded a proper share of the food and raiment produced by the society? This is the unconquerable difficulty. I am perfectly willing to concede to Mr Godwin that there is much more labour in the world than is really necessary, and that, if the lower classes of society could agree among themselves never to work more than six or seven hours in the day, the commodities essential to human happiness might still be produced in as great abundance as at present. But it is almost impossible to conceive that such an agreement could be adhered to. From the principle of population, some would necessarily be more in want than others. Those that had large families would naturally be desirous of exchanging two hours more of their labour for an ampler quantity of subsistence. How are they to be prevented from making this exchange? it would be a violation of the first and most sacred property that a man possesses to attempt, by positive institutions, to interfere with his command over his own labour. Till Mr Godwin, therefore, can point out some practical plan according to which the necessary labour in a society might be equitably divided, his invectives against labour, if they were attended to, would certainly produce much present evil without approximating us to that state of cultivated equality to which he looks forward as his polar star, and which, he seems to think, should at present be our guide in determining the nature and tendency of human actions. A mariner guided by such a polar star is in danger of shipwreck. Perhaps there is no possible way in which wealth could in general be employed so beneficially to a state, and particularly to the lower orders of it, as by improving and rendering productive that land which to a farmer would not answer the expense of cultivation. Had Mr Godwin exerted his energetic eloquence in painting the superior worth and usefulness of the character who employed the poor in this way, to him who employed them in narrow luxuries, every enlightened man must have applauded his efforts. The increasing demand for agricultural labour must always tend to better the condition of the poor; and if the accession of work be of this kind, so far is it from being true that the poor would be obliged to work ten hours for the same price that they before worked eight, that the very reverse would be the fact; and a labourer might then support his wife and family as well by the labour of six hours as he could before by the labour of eight. The labour created by luxuries, though useful in distributing the produce of the country, without vitiating the proprietor by power, or debasing the labourer by dependence, has not, indeed, the same beneficial effects on the state of the poor. A great accession of work from manufacturers, though it may raise the price of labour even more than an increasing demand for agricultural labour, yet, as in this case the quantity of food in the country may not be proportionably increasing, the advantage to the poor will be but temporary, as the price of provisions must necessarily rise in proportion to the price of labour. Relative to this subject, I cannot avoid venturing a few remarks on a part of Dr Adam Smith's Wealth of Nations, speaking at the same time with that diffidence which I ought certainly to feel in differing from a person so justly celebrated in the political world. CHAPTER 16 Probable error of Dr Adam Smith in representing every increase of the revenue or stock of a society as an increase in the funds for the maintenance of labour--Instances where an increase of wealth can have no tendency to better the condition of the labouring poor--England has increased in riches without a proportional increase in the funds for the maintenance of labour--The state of the poor in China would not be improved by an increase of wealth from manufactures. The professed object of Dr Adam Smith's inquiry is the nature and causes of the wealth of nations. There is another inquiry, however, perhaps still more interesting, which he occasionally mixes with it; I mean an inquiry into the causes which affect the happiness of nations or the happiness and comfort of the lower orders of society, which is the most numerous class in every nation. I am sufficiency aware of the near connection of these two subjects, and that the causes which tend to increase the wealth of a state tend also, generally speaking, to increase the happiness of the lower classes of the people. But perhaps Dr Adam Smith has considered these two inquiries as still more nearly connected than they really are; at least, he has not stopped to take notice of those instances where the wealth of a society may increase (according to his definition of 'wealth') without having any tendency to increase the comforts of the labouring part of it. I do not mean to enter into a philosophical discussion of what constitutes the proper happiness of man, but shall merely consider two universally acknowledged ingredients, health, and the command of the necessaries and conveniences of life. Little or no doubt can exist that the comforts of the labouring poor depend upon the increase of the funds destined for the maintenance of labour, and will be very exactly in proportion to the rapidity of this increase. The demand for labour which such increase would occasion, by creating a competition in the market, must necessarily raise the value of labour, and, till the additional number of hands required were reared, the increased funds would be distributed to the same number of persons as before the increase, and therefore every labourer would live comparatively at his ease. But perhaps Dr Adam Smith errs in representing every increase of the revenue or stock of a society as an increase of these funds. Such surplus stock or revenue will, indeed, always be considered by the individual possessing it as an additional fund from which he may maintain more labour: but it will not be a real and effectual fund for the maintenance of an additional number of labourers, unless the whole, or at least a great part of this increase of the stock or revenue of the society, be convertible into a proportional quantity of provisions; and it will not be so convertible where the increase has arisen merely from the produce of labour, and not from the produce of land. A distinction will in this case occur, between the number of hands which the stock of the society could employ, and the number which its territory can maintain. To explain myself by an instance. Dr Adam Smith defines the wealth of a nation to consist. In the annual produce of its land and labour. This definition evidently includes manufactured produce, as well as the produce of the land. Now supposing a nation for a course of years was to add what it saved from its yearly revenue to its manufacturing capital solely, and not to its capital employed upon land, it is evident that it might grow richer according to the above definition, without a power of supporting a greater number of labourers, and, therefore, without an increase in the real funds for the maintenance of labour. There would, notwithstanding, be a demand for labour from the power which each manufacturer would possess, or at least think he possessed, of extending his old stock in trade or of setting up fresh works. This demand would of course raise the price of labour, but if the yearly stock of provisions in the country was not increasing, this rise would soon turn out to be merely nominal, as the price of provisions must necessarily rise with it. The demand for manufacturing labourers might, indeed, entice many from agriculture and thus tend to diminish the annual produce of the land, but we will suppose any effect of this kind to be compensated by improvements in the instruments of agriculture, and the quantity of provisions therefore to remain the same. Improvements in manufacturing machinery would of course take place, and this circumstance, added to the greater number of hands employed in manufactures, would cause the annual produce of the labour of the country to be upon the whole greatly increased. The wealth therefore of the country would be increasing annually, according to the definition, and might not, perhaps, be increasing very slowly. The question is whether wealth, increasing in this way, has any tendency to better the condition of the labouring poor. It is a self-evident proposition that any general rise in the price of labour, the stock of provisions remaining the same, can only be a nominal rise, as it must very shortly be followed by a proportional rise in the price of provisions. The increase in the price of labour, therefore, which we have supposed, would have little or no effect in giving the labouring poor a greater command over the necessaries and conveniences of life. In this respect they would be nearly in the same state as before. In one other respect they would be in a worse state. A greater proportion of them would be employed in manufactures, and fewer, consequently, in agriculture. And this exchange of professions will be allowed, I think, by all, to be very unfavourable in respect of health, one essential ingredient of happiness, besides the greater uncertainty of manufacturing labour, arising from the capricious taste of man, the accidents of war, and other causes. It may be said, perhaps, that such an instance as I have supposed could not occur, because the rise in the price of provisions would immediately turn some additional capital into the channel of agriculture. But this is an event which may take place very slowly, as it should be remarked that a rise in the price of labour had preceded the rise of provisions, and would, therefore, impede the good effects upon agriculture, which the increased value of the produce of the land might otherwise have occasioned. It might also be said, that the additional capital of the nation would enable it to import provisions sufficient for the maintenance of those whom its stock could employ. A small country with a large navy, and great inland accommodations for carriage, such as Holland, may, indeed, import and distribute an effectual quantity of provisions; but the price of provisions must be very high to make such an importation and distribution answer in large countries less advantageously circumstanced in this respect. An instance, accurately such as I have supposed, may not, perhaps, ever have occurred, but I have little doubt that instances nearly approximating to it may be found without any very laborious search. Indeed I am strongly inclined to think that England herself, since the Revolution, affords a very striking elucidation of the argument in question. The commerce of this country, internal as well as external, has certainly been rapidly advancing during the last century. The exchangeable value in the market of Europe of the annual produce of its land and labour has, without doubt, increased very considerably. But, upon examination, it will be found that the increase has been chiefly in the produce of labour and not in the produce of land, and therefore, though the wealth of the nation has been advancing with a quick pace, the effectual funds for the maintenance of labour have been increasing very slowly, and the result is such as might be expected. The increasing wealth of the nation has had little or no tendency to better the condition of the labouring poor. They have not, I believe, a greater command of the necessaries and conveniences of life, and a much greater proportion of them than at the period of the Revolution is employed in manufactures and crowded together in close and unwholesome rooms. Could we believe the statement of Dr Price that the population of England has decreased since the Revolution, it would even appear that the effectual funds for the maintenance of labour had been declining during the progress of wealth in other respects. For I conceive that it may be laid down as a general rule that if the effectual funds for the maintenance of labour are increasing, that is, if the territory can maintain as well as the stock employ a greater number of labourers, this additional number will quickly spring up, even in spite of such wars as Dr Price enumerates. And, consequently, if the population of any country has been stationary, or declining, we may safely infer, that, however it may have advanced in manufacturing wealth, its effectual funds for the maintenance of labour cannot have increased. It is difficult, however, to conceive that the population of England has been declining since the Revolution, though every testimony concurs to prove that its increase, if it has increased, has been very slow. In the controversy which the question has occasioned, Dr Price undoubtedly appears to be much more completely master of his subject, and to possess more accurate information, than his opponents. Judging simply from this controversy, I think one should say that Dr Price's point is nearer being proved than Mr Howlett's. Truth, probably, lies between the two statements, but this supposition makes the increase of population since the Revolution to have been very slow in comparison with the increase of wealth. That the produce of the land has been decreasing, or even that it has been absolutely stationary during the last century, few will be disposed to believe. The enclosure of commons and waste lands certainly tends to increase the food of the country, but it has been asserted with confidence that the enclosure of common fields has frequently had a contrary effect, and that large tracts of land which formerly produced great quantities of corn, by being converted into pasture both employ fewer hands and feed fewer mouths than before their enclosure. It is, indeed, an acknowledged truth, that pasture land produces a smaller quantity of human subsistence than corn land of the same natural fertility, and could it be clearly ascertained that from the increased demand for butchers' meat of the best quality, and its increased price in consequence, a greater quantity of good land has annually been employed in grazing, the diminution of human subsistence, which this circumstance would occasion, might have counterbalanced the advantages derived from the enclosure of waste lands, and the general improvements in husbandry. It scarcely need be remarked that the high price of butchers' meat at present, and its low price formerly, were not caused by the scarcity in the one case or the plenty in the other, but by the different expense sustained at the different periods, in preparing cattle for the market. It is, however, possible, that there might have been more cattle a hundred years ago in the country than at present; but no doubt can be entertained, that there is much more meat of a superior quality brought to market at present than ever there was. When the price of butchers' meat was very low, cattle were reared chiefly upon waste lands; and except for some of the principal markets, were probably killed with but little other fatting. The veal that is sold so cheap in some distant counties at present bears little other resemblance than the name, to that which is bought in London. Formerly, the price of butchers, meat would not pay for rearing, and scarcely for feeding, cattle on land that would answer in tillage; but the present price will not only pay for fatting cattle on the very best land, but will even allow of the rearing many, on land that would bear good crops of corn. The same number of cattle, or even the same weight of cattle at the different periods when killed, will have consumed (if I may be allowed the expression) very different quantities of human substance. A fatted beast may in some respects be considered, in the language of the French economists, as an unproductive labourer: he has added nothing to the value of the raw produce that he has consumed. The present system of grating, undoubtedly tends more than the former system to diminish the quantity of human subsistence in the country, in proportion to the general fertility of the land. I would not by any means be understood to say that the former system either could or ought to have continued. The increasing price of butchers' meat is a natural and inevitable consequence of the general progress of cultivation; but I cannot help thinking, that the present great demand for butchers' meat of the best quality, and the quantity of good land that is in consequence annually employed to produce it, together with the great number of horses at present kept for pleasure, are the chief causes that have prevented the quantity of human food in the country from keeping pace with the generally increased fertility of the soil; and a change of custom in these respects would, I have little doubt, have a very sensible effect on the quantity of subsistence in the country, and consequently on its population. The employment of much of the most fertile land in grating, the improvements in agricultural instruments, the increase of large farms, and particularly the diminution of the number of cottages throughout the kingdom, all concur to prove, that there are not probably so many persons employed in agricultural labour now as at the period of the Revolution. Whatever increase of population, therefore, has taken place, must be employed almost wholly in manufactures, and it is well known that the failure of some of these manufactures, merely from the caprice of fashion, such as the adoption of muslins instead of silks, or of shoe-strings and covered buttons, instead of buckles and metal buttons, combined with the restraints in the market of labour arising from corporation and parish laws, have frequently driven thousands on charity for support. The great increase of the poor rates is, indeed, of itself a strong evidence that the poor have not a greater command of the necessaries and conveniences of life, and if to the consideration, that their condition in this respect is rather worse than better, be added the circumstance, that a much greater proportion of them is employed in large manufactories, unfavourable both to health and virtue, it must be acknowledged, that the increase of wealth of late years has had no tendency to increase the happiness of the labouring poor. That every increase of the stock or revenue of a nation cannot be considered as an increase of the real funds for the maintenance of labour and, therefore, cannot have the same good effect upon the condition of the poor, will appear in a strong light if the argument be applied to China. Dr Adam Smith observes that China has probably long been as rich as the nature of her laws and institutions will admit, but that with other laws and institutions, and if foreign commerce were had in honour, she might still be much richer. The question is, would such an increase of wealth be an increase of the real funds for the maintenance of labour, and consequently tend to place the lower classes of people in China in a state of greater plenty? It is evident, that if trade and foreign commerce were held in great honour in China, from the plenty of labourers, and the cheapness of labour, she might work up manufactures for foreign sale to an immense amount. It is equally evident that from the great bulk of provisions and the amazing extent of her inland territory she could not in return import such a quantity as would be any sensible addition to the annual stock of subsistence in the country. Her immense amount of manufactures, therefore, she would exchange, chiefly, for luxuries collected from all parts of the world. At present, it appears, that no labour whatever is spared in the production of food. The country is rather over-people in proportion to what its stock can employ, and labour is, therefore, so abundant, that no pains are taken to abridge it. The consequence of this is, probably, the greatest production of food that the soil can possibly afford, for it will be generally observed, that processes for abridging labour, though they may enable a farmer to bring a certain quantity of grain cheaper to market, tend rather to diminish than increase the whole produce; and in agriculture, therefore, may, in some respects, be considered rather as private than public advantages. An immense capital could not be employed in China in preparing manufactures for foreign trade without taking off so many labourers from agriculture as to alter this state of things, and in some degree to diminish the produce of the country. The demand for manufacturing labourers would naturally raise the price of labour, but as the quantity of subsistence would not be increased, the price of provisions would keep pace with it, or even more than keep pace with it if the quantity of provisions were really decreasing. The country would be evidently advancing in wealth, the exchangeable value of the annual produce of its land and labour would be annually augmented, yet the real funds for the maintenance of labour would be stationary, or even declining, and, consequently, the increasing wealth of the nation would rather tend to depress than to raise the condition of the poor. With regard to the command over the necessaries and comforts of life, they would be in the same or rather worse state than before; and a great part of them would have exchanged the healthy labours of agriculture for the unhealthy occupations of manufacturing industry. The argument, perhaps, appears clearer when applied to China, because it is generally allowed that the wealth of China has been long stationary. With regard to any other country it might be always a matter of dispute at which of the two periods, compared, wealth was increasing the fastest, as it is upon the rapidity of the increase of wealth at any particular period that Dr Adam Smith says the condition of the poor depends. It is evident, however, that two nations might increase exactly with the same rapidity in the exchangeable value of the annual produce of their land and labour, yet if one had applied itself chiefly to agriculture, and the other chiefly to commerce, the funds for the maintenance of labour, and consequently the effect of the increase of wealth in each nation, would be extremely different. In that which had applied itself chiefly to agriculture, the poor would live in great plenty, and population would rapidly increase. In that which had applied itself chiefly to commerce, the poor would be comparatively but little benefited and consequently population would increase slowly. CHAPTER 17 Question of the proper definition of the wealth of a state--Reason given by the French economists for considering all manufacturers as unproductive labourers, not the true reason--The labour of artificers and manufacturers sufficiently productive to individuals, though not to the state--A remarkable passage in Dr Price's two volumes of Observations--Error of Dr Price in attributing the happiness and rapid population of America, chiefly, to its peculiar state of civilization--No advantage can be expected from shutting our eyes to the difficulties in the way to the improvement of society. A question seems naturally to arise here whether the exchangeable value of the annual produce of the land and labour be the proper definition of the wealth of a country, or whether the gross produce of the land, according to the French economists, may not be a more accurate definition. Certain it is that every increase of wealth, according to the definition of the economists, will be an increase of the funds for the maintenance of labour, and consequently will always tend to ameliorate the condition of the labouring poor, though an increase of wealth, according to Dr Adam Smith's definition, will by no means invariably have the same tendency. And yet it may not follow from this consideration that Dr Adam Smith's definition is not just. It seems in many respects improper to exclude the clothing and lodging of a whole people from any part of their revenue. Much of it may, indeed, be of very trivial and unimportant value in comparison with the food of the country, yet still it may be fairly considered as a part of its revenue; and, therefore, the only point in which I should differ from Dr Adam Smith is where he seems to consider every increase of the revenue or stock of a society as an increase of the funds for the maintenance of labour, and consequently as tending always to ameliorate the condition of the poor. The fine silks and cottons, the laces, and other ornamental luxuries of a rich country, may contribute very considerably to augment the exchangeable value of its annual produce; yet they contribute but in a very small degree to augment the mass of happiness in the society, and it appears to me that it is with some view to the real utility of the produce that we ought to estimate the productiveness or unproductiveness of different sorts of labour. The French economists consider all labour employed in manufactures as unproductive. Comparing it with the labour employed upon land, I should be perfectly disposed to agree with them, but not exactly for the reasons which they give. They say that labour employed upon land is productive because the produce, over and above completely paying the labourer and the farmer, affords a clear rent to the landlord, and that the labour employed upon a piece of lace is unproductive because it merely replaces the provisions that the workman had consumed, and the stock of his employer, without affording any clear rent whatever. But supposing the value of the wrought lace to be such as that, besides paying in the most complete manner the workman and his employer, it could afford a clear rent to a third person, it appears to me that, in comparison with the labour employed upon land, it would be still as unproductive as ever. Though, according to the reasoning used by the French economists, the man employed in the manufacture of lace would, in this case, seem to be a productive labourer. Yet according to their definition of the wealth of a state, he ought not to be considered in that light. He will have added nothing to the gross produce of the land: he has consumed a portion of this gross produce, and has left a bit of lace in return; and though he may sell this bit of lace for three times the quantity of provisions that he consumed whilst he was making it, and thus be a very productive labourer with regard to himself, yet he cannot be considered as having added by his labour to any essential part of the riches of the state. The clear rent, therefore, that a certain produce can afford, after paying the expenses of procuring it, does not appear to be the sole criterion, by which to judge of the productiveness or unproductiveness to a state of any particular species of labour. Suppose that two hundred thousand men, who are now employed in producing manufactures that only tend to gratify the vanity of a few rich people, were to be employed upon some barren and uncultivated lands, and to produce only half the quantity of food that they themselves consumed; they would be still more productive labourers with regard to the state than they were before, though their labour, so far from affording a rent to a third person, would but half replace the provisions used in obtaining the produce. In their former employment they consumed a certain portion of the food of the country and left in return some silks and laces. In their latter employment they consumed the same quantity of food and left in return provision for a hundred thousand men. There can be little doubt which of the two legacies would be the most really beneficial to the country, and it will, I think, be allowed that the wealth which supported the two hundred thousand men while they were producing silks and laces would have been more usefully employed in supporting them while they were producing the additional quantity of food. A capital employed upon land may be unproductive to the individual that employs it and yet be highly productive to the society. A capital employed in trade, on the contrary, may be highly productive to the individual, and yet be almost totally unproductive to the society: and this is the reason why I should call manufacturing labour unproductive, in comparison of that which is employed in agriculture, and not for the reason given by the French economists. It is, indeed, almost impossible to see the great fortunes that are made in trade, and the liberality with which so many merchants live, and yet agree in the statement of the economists, that manufacturers can only grow rich by depriving themselves of the funds destined for their support. In many branches of trade the profits are so great as would allow of a clear rent to a third person; but as there is no third person in the case, and as all the profits centre in the master manufacturer, or merchant, he seems to have a fair chance of growing rich, without much privation; and we consequently see large fortunes acquired in trade by persons who have not been remarked for their parsimony. Daily experience proves that the labour employed in trade and manufactures is sufficiently productive to individuals, but it certainly is not productive in the same degree to the state. Every accession to the food of a country tends to the immediate benefit of the whole society; but the fortunes made in trade tend but in a remote and uncertain manner to the same end, and in some respects have even a contrary tendency. The home trade of consumption is by far the most important trade of every nation. China is the richest country in the world, without any other. Putting then, for a moment, foreign trade out of the question, the man who, by an ingenious manufacture, obtains a double portion out of the old stock of provisions, will certainly not to be so useful to the state as the man who, by his labour, adds a single share to the former stock. The consumable commodities of silks, laces, trinkets, and expensive furniture, are undoubtedly a part of the revenue of the society; but they are the revenue only of the rich, and not of the society in general. An increase in this part of the revenue of a state, cannot, therefore, be considered of the same importance as an increase of food, which forms the principal revenue of the great mass of the people. Foreign commerce adds to the wealth of a state, according to Dr Adam Smith's definition, though not according to the definition of the economists. Its principal use, and the reason, probably, that it has in general been held in such high estimation is that it adds greatly to the external power of a nation or to its power of commanding the labour of other countries; but it will be found, upon a near examination, to contribute but little to the increase of the internal funds for the maintenance of labour, and consequently but little to the happiness of the greatest part of society. In the natural progress of a state towards riches, manufactures, and foreign commerce would follow, in their order, the high cultivation of the soil. In Europe, this natural order of things has been inverted, and the soil has been cultivated from the redundancy of manufacturing capital, instead of manufactures rising from the redundancy of capital employed upon land. The superior encouragement that has been given to the industry of the towns, and the consequent higher price that is paid for the labour of artificers than for the labour of those employed in husbandry, are probably the reasons why so much soil in Europe remains uncultivated. Had a different policy been pursued throughout Europe, it might undoubtedly have been much more populous than at present, and yet not be more incumbered by its population. I cannot quit this curious subject of the difficulty arising from population, a subject that appears to me to deserve a minute investigation and able discussion much beyond my power to give it, without taking notice of an extraordinary passage in Dr Price's two volumes of Observations. Having given some tables on the probabilities of life, in towns and in the country, he says (Vol. II, p. 243): From this comparison, it appears with how much truth great cities have been called the graves of mankind. It must also convince all who consider it, that according to the observation, at the end of the fourth essay, in the former volume, it is by no means strictly proper to consider our diseases as the original intention of nature. They are, without doubt, in general our own creation. Were there a country where the inhabitants led lives entirely natural and virtuous, few of them would die without measuring out the whole period of present existence allotted to them; pain and distemper would be unknown among them, and death would come upon them like a sleep, in consequence of no other cause than gradual and unavoidable decay. I own that I felt myself obliged to draw a very opposite conclusion from the facts advanced in Dr Price's two volumes. I had for some time been aware that population and food increased in different ratios, and a vague opinion had been floating in my mind that they could only be kept equal by some species of misery or vice, but the perusal of Dr Price's two volumes of Observations, after that opinion had been conceived, raised it at once to conviction. With so many facts in his view to prove the extraordinary rapidity with which population increases when unchecked, and with such a body of evidence before him to elucidate even the manner by which the general laws of nature repress a redundant population, it is perfectly inconceivable to me how he could write the passage that I have quoted. He was a strenuous advocate for early marriages, as the best preservative against vicious manners. He had no fanciful conceptions about the extinction of the passion between the sexes, like Mr Godwin, nor did he ever think of eluding the difficulty in the ways hinted at by Mr Condorcet. He frequently talks of giving the prolifick powers of nature room to exert themselves. Yet with these ideas, that his understanding could escape from the obvious and necessary inference that an unchecked population would increase, beyond comparison, faster than the earth, by the best directed exertions of man, could produce food for its support, appears to me as astonishing as if he had resisted the conclusion of one of the plainest propositions of Euclid. Dr Price, speaking of the different stages of the civilized state, says, 'The first, or simple stages of civilization, are those which favour most the increase and the happiness of mankind.' He then instances the American colonies, as being at that time in the first and happiest of the states that he had described, and as affording a very striking proof of the effects of the different stages of civilization on population. But he does not seem to be aware that the happiness of the Americans depended much less upon their peculiar degree of civilization than upon the peculiarity of their situation, as new colonies, upon their having a great plenty of fertile uncultivated land. In parts of Norway, Denmark, or Sweden, or in this country, two or three hundred years ago, he might have found perhaps nearly the same degree of civilization, but by no means the same happiness or the same increase of population. He quotes himself a statute of Henry the Eighth, complaining of the decay of tillage, and the enhanced price of provisions, 'whereby a marvellous number of people were rendered incapable of maintaining themselves and families.' The superior degree of civil liberty which prevailed in America contributed, without doubt, its share to promote the industry, happiness, and population of these states, but even civil liberty, all powerful as it is, will not create fresh land. The Americans may be said, perhaps, to enjoy a greater degree of civil liberty, now they are an independent people, than while they were in subjection in England, but we may be perfectly sure that population will not long continue to increase with the same rapidity as it did then. A person who contemplated the happy state of the lower classes of people in America twenty years ago would naturally wish to retain them for ever in that state, and might think, perhaps, that by preventing the introduction of manufactures and luxury he might effect his purpose, but he might as reasonably expect to prevent a wife or mistress from growing old by never exposing her to the sun or air. The situation of new colonies, well governed, is a bloom of youth that no efforts can arrest. There are, indeed, many modes of treatment in the political, as well as animal, body, that contribute to accelerate or retard the approaches of age, but there can be no chance of success, in any mode that could be devised, for keeping either of them in perpetual youth. By encouraging the industry of the towns more than the industry of the country, Europe may be said, perhaps, to have brought on a premature old age. A different policy in this respect would infuse fresh life and vigour into every state. While from the law of primogeniture, and other European customs, land bears a monopoly price, a capital can never be employed in it with much advantage to the individual; and, therefore, it is not probable that the soil should be properly cultivated. And, though in every civilized state a class of proprietors and a class of labourers must exist, yet one permanent advantage would always result from a nearer equalization of property. The greater the number of proprietors, the smaller must be the number of labourers: a greater part of society would be in the happy state of possessing property: and a smaller part in the unhappy state of possessing no other property than their labour. But the best directed exertions, though they may alleviate, can never remove the pressure of want, and it will be difficult for any person who contemplates the genuine situation of man on earth, and the general laws of nature, to suppose it possible that any, the most enlightened, efforts could place mankind in a state where 'few would die without measuring out the whole period of present existence allotted to them; where pain and distemper would be unknown among them; and death would come upon them like a sleep, in consequence of no other cause than gradual and unavoidable decay.' It is, undoubtedly, a most disheartening reflection that the great obstacle in the way to any extraordinary improvement in society is of a nature that we can never hope to overcome. The perpetual tendency in the race of man to increase beyond the means of subsistence is one of the general laws of animated nature which we can have no reason to expect will change. Yet, discouraging as the contemplation of this difficulty must be to those whose exertions are laudably directed to the improvement of the human species, it is evident that no possible good can arise from any endeavours to slur it over or keep it in the background. On the contrary, the most baleful mischiefs may be expected from the unmanly conduct of not daring to face truth because it is unpleasing. Independently of what relates to this great obstacle, sufficient yet remains to be done for mankind to animate us to the most unremitted exertion. But if we proceed without a thorough knowledge and accurate comprehension of the nature, extent, and magnitude of the difficulties we have to encounter, or if we unwisely direct our efforts towards an object in which we cannot hope for success, we shall not only exhaust our strength in fruitless exertions and remain at as great a distance as ever from the summit of our wishes, but we shall be perpetually crushed by the recoil of this rock of Sisyphus. CHAPTER 18 The constant pressure of distress on man, from the principle of population, seems to direct our hopes to the future--State of trial inconsistent with our ideas of the foreknowledge of God--The world, probably, a mighty process for awakening matter into mind--Theory of the formation of mind--Excitements from the wants of the body--Excitements from the operation of general laws--Excitements from the difficulties of life arising from the principle of population. The view of human life which results from the contemplation of the constant pressure of distress on man from the difficulty of subsistence, by shewing the little expectation that he can reasonably entertain of perfectibility on earth, seems strongly to point his hopes to the future. And the temptations to which he must necessarily be exposed, from the operation of those laws of nature which we have been examining, would seem to represent the world in the light in which it has been frequently considered, as a state of trial and school of virtue preparatory to a superior state of happiness. But I hope I shall be pardoned if I attempt to give a view in some degree different of the situation of man on earth, which appears to me to be more consistent with the various phenomena of nature which we observe around us and more consonant to our ideas of the power, goodness, and foreknowledge of the Deity. It cannot be considered as an unimproving exercise of the human mind to endeavour to 'vindicate the ways of God to man' if we proceed with a proper distrust of our own understandings and a just sense of our insufficiency to comprehend the reason of all we see, if we hail every ray of light with gratitude, and, when no light appears, think that the darkness is from within and not from without, and bow with humble deference to the supreme wisdom of him whose 'thoughts are above our thoughts' 'as the heavens are high above the earth.' In all our feeble attempts, however, to 'find out the Almighty to perfection', it seems absolutely necessary that we should reason from nature up to nature's God and not presume to reason from God to nature. The moment we allow ourselves to ask why some things are not otherwise, instead of endeavouring to account for them as they are, we shall never know where to stop, we shall be led into the grossest and most childish absurdities, all progress in the knowledge of the ways of Providence must necessarily be at an end, and the study will even cease to be an improving exercise of the human mind. Infinite power is so vast and incomprehensible an idea that the mind of man must necessarily be bewildered in the contemplation of it. With the crude and puerile conceptions which we sometimes form of this attribute of the Deity, we might imagine that God could call into being myriads and myriads of existences, all free from pain and imperfection, all eminent in goodness and wisdom, all capable of the highest enjoyments, and unnumbered as the points throughout infinite space. But when from these vain and extravagant dreams of fancy, we turn our eyes to the book of nature, where alone we can read God as he is, we see a constant succession of sentient beings, rising apparently from so many specks of matter, going through a long and sometimes painful process in this world, but many of them attaining, ere the termination of it, such high qualities and powers as seem to indicate their fitness for some superior state. Ought we not then to correct our crude and puerile ideas of infinite Power from the contemplation of what we actually see existing? Can we judge of the Creator but from his creation? And, unless we wish to exalt the power of God at the expense of his goodness, ought we not to conclude that even to the great Creator, almighty as he is, a certain process may be necessary, a certain time (or at least what appears to us as time) may be requisite, in order to form beings with those exalted qualities of mind which will fit them for his high purposes? A state of trial seems to imply a previously formed existence that does not agree with the appearance of man in infancy and indicates something like suspicion and want of foreknowledge, inconsistent with those ideas which we wish to cherish of the Supreme Being. I should be inclined, therefore, as I have hinted before, to consider the world and this life as the mighty process of God, not for the trial, but for the creation and formation of mind, a process necessary to awaken inert, chaotic matter into spirit, to sublimate the dust of the earth into soul, to elicit an ethereal spark from the clod of clay. And in this view of the subject, the various impressions and excitements which man receives through life may be considered as the forming hand of his Creator, acting by general laws, and awakening his sluggish existence, by the animating touches of the Divinity, into a capacity of superior enjoyment. The original sin of man is the torpor and corruption of the chaotic matter in which he may be said to be born. It could answer no good purpose to enter into the question whether mind be a distinct substance from matter, or only a finer form of it. The question is, perhaps, after all, a question merely of words. Mind is as essentially mind, whether formed from matter or any other substance. We know from experience that soul and body are most intimately united, and every appearance seems to indicate that they grow from infancy together. It would be a supposition attended with very little probability to believe that a complete and full formed spirit existed in every infant, but that it was clogged and impeded in its operations during the first twenty years of life by the weakness, or hebetude, of the organs in which it was enclosed. As we shall all be disposed to agree that God is the creator of mind as well as of body, and as they both seem to be forming and unfolding themselves at the same time, it cannot appear inconsistent either with reason or revelation, if it appear to be consistent with phenomena of nature, to suppose that God is constantly occupied in forming mind out of matter and that the various impressions that man receives through life is the process for that purpose. The employment is surely worthy of the highest attributes of the Deity. This view of the state of man on earth will not seem to be unattended with probability, if, judging from the little experience we have of the nature of mind, it shall appear upon investigation that the phenomena around us, and the various events of human life, seem peculiarly calculated to promote this great end, and especially if, upon this supposition, we can account, even to our own narrow understandings, for many of those roughnesses and inequalities in life which querulous man too frequently makes the subject of his complaint against the God of nature. The first great awakeners of the mind seem to be the wants of the body. (It was my intention to have entered at some length into this subject as a kind of second part to the Essay. A long interruption, from particular business, has obliged me to lay aside this intention, at least for the present. I shall now, therefore, only give a sketch of a few of the leading circumstances that appear to me to favour the general supposition that I have advanced.) They are the first stimulants that rouse the brain of infant man into sentient activity, and such seems to be the sluggishness of original matter that unless by a peculiar course of excitements other wants, equally powerful, are generated, these stimulants seem, even afterwards, to be necessary to continue that activity which they first awakened. The savage would slumber for ever under his tree unless he were roused from his torpor by the cravings of hunger or the pinchings of cold, and the exertions that he makes to avoid these evils, by procuring food, and building himself a covering, are the exercises which form and keep in motion his faculties, which otherwise would sink into listless inactivity. From all that experience has taught us concerning the structure of the human mind, if those stimulants to exertion which arise from the wants of the body were removed from the mass of mankind, we have much more reason to think that they would be sunk to the level of brutes, from a deficiency of excitements, than that they would be raised to the rank of philosophers by the possession of leisure. In those countries where nature is the most redundant in spontaneous produce the inhabitants will not be found the most remarkable for acuteness of intellect. Necessity has been with great truth called the mother of invention. Some of the noblest exertions of the human mind have been set in motion by the necessity of satisfying the wants of the body. Want has not unfrequently given wings to the imagination of the poet, pointed the flowing periods of the historian, and added acuteness to the researches of the philosopher, and though there are undoubtedly many minds at present so far improved by the various excitements of knowledge, or of social sympathy, that they would not relapse into listlessness if their bodily stimulants were removed, yet it can scarcely be doubted that these stimulants could not be withdrawn from the mass of mankind without producing a general and fatal torpor, destructive of all the germs of future improvement. Locke, if I recollect, says that the endeavour to avoid pain rather than the pursuit of pleasure is the great stimulus to action in life: and that in looking to any particular pleasure, we shall not be roused into action in order to obtain it, till the contemplation of it has continued so long as to amount to a sensation of pain or uneasiness under the absence of it. To avoid evil and to pursue good seem to be the great duty and business of man, and this world appears to be peculiarly calculated to afford opportunity of the most unremitted exertion of this kind, and it is by this exertion, by these stimulants, that mind is formed. If Locke's idea be just, and there is great reason to think that it is, evil seems to be necessary to create exertion, and exertion seems evidently necessary to create mind. The necessity of food for the support of life gives rise, probably, to a greater quantity of exertion than any other want, bodily or mental. The Supreme Being has ordained that the earth shall not produce good in great quantities till much preparatory labour and ingenuity has been exercised upon its surface. There is no conceivable connection to our comprehensions, between the seed and the plant or tree that rises from it. The Supreme Creator might, undoubtedly, raise up plants of all kinds, for the use of his creatures, without the assistance of those little bits of matter, which we call seed, or even without the assisting labour and attention of man. The processes of ploughing and clearing the ground, of collecting and sowing seeds, are not surely for the assistance of God in his creation, but are made previously necessary to the enjoyment of the blessings of life, in order to rouse man into action, and form his mind to reason. To furnish the most unremitted excitements of this kind, and to urge man to further the gracious designs of Providence by the full cultivation of the earth, it has been ordained that population should increase much faster than food. This general law (as it has appeared in the former parts of this Essay) undoubtedly produces much partial evil, but a little reflection may, perhaps, satisfy us, that it produces a great overbalance of good. Strong excitements seem necessary to create exertion, and to direct this exertion, and form the reasoning faculty, it seems absolutely necessary, that the Supreme Being should act always according to general laws. The constancy of the laws of nature, or the certainty with which we may expect the same effects from the same causes, is the foundation of the faculty of reason. If in the ordinary course of things, the finger of God were frequently visible, or to speak more correctly, if God were frequently to change his purpose (for the finger of God is, indeed, visible in every blade of grass that we see), a general and fatal torpor of the human faculties would probably ensue; even the bodily wants of mankind would cease to stimulate them to exertion, could they not reasonably expect that if their efforts were well directed they would be crowned with success. The constancy of the laws of nature is the foundation of the industry and foresight of the husbandman, the indefatigable ingenuity of the artificer, the skilful researches of the physician and anatomist, and the watchful observation and patient investigation of the natural philosopher. To this constancy we owe all the greatest and noblest efforts of intellect. To this constancy we owe the immortal mind of a Newton. As the reasons, therefore, for the constancy of the laws of nature seem, even to our understandings, obvious and striking; if we return to the principle of population and consider man as he really is, inert, sluggish, and averse from labour, unless compelled by necessity (and it is surely the height of folly to talk of man, according to our crude fancies of what he might be), we may pronounce with certainty that the world would not have been peopled, but for the superiority of the power of population to the means of subsistence. Strong and constantly operative as this stimulus is on man to urge him to the cultivation of the earth, if we still see that cultivation proceeds very slowly, we may fairly conclude that a less stimulus would have been insufficient. Even under the operation of this constant excitement, savages will inhabit countries of the greatest natural fertility for a long period before they betake themselves to pasturage or agriculture. Had population and food increased in the same ratio, it is probable that man might never have emerged from the savage state. But supposing the earth once well peopled, an Alexander, a Julius Caesar, a Tamberlane, or a bloody revolution might irrecoverably thin the human race, and defeat the great designs of the Creator. The ravages of a contagious disorder would be felt for ages; and an earthquake might unpeople a region for ever. The principle, according to which population increases, prevents the vices of mankind, or the accidents of nature, the partial evils arising from general laws, from obstructing the high purpose of the creation. It keeps the inhabitants of the earth always fully up to the level of the means of subsistence; and is constantly acting upon man as a powerful stimulus, urging him to the further cultivation of the earth, and to enable it, consequently, to support a more extended population. But it is impossible that this law can operate, and produce the effects apparently intended by the Supreme Being, without occasioning partial evil. Unless the principle of population were to be altered according to the circumstances of each separate country (which would not only be contrary to our universal experience, with regard to the laws of nature, but would contradict even our own reason, which sees the absolute necessity of general laws for the formation of intellect), it is evident that the same principle which, seconded by industry, will people a fertile region in a few years must produce distress in countries that have been long inhabited. It seems, however, every way probable that even the acknowledged difficulties occasioned by the law of population tend rather to promote than impede the general purpose of Providence. They excite universal exertion and contribute to that infinite variety of situations, and consequently of impressions, which seems upon the whole favourable to the growth of mind. It is probable, that too great or too little excitement, extreme poverty, or too great riches may be alike unfavourable in this respect. The middle regions of society seem to be best suited to intellectual improvement, but it is contrary to the analogy of all nature to expect that the whole of society can be a middle region. The temperate zones of the earth seem to be the most favourable to the mental and corporal energies of man, but all cannot be temperate zones. A world, warmed and enlightened but by one sun, must from the laws of matter have some parts chilled by perpetual frosts and others scorched by perpetual heats. Every piece of matter lying on a surface must have an upper and an under side, all the particles cannot be in the middle. The most valuable parts of an oak, to a timber merchant, are not either the roots or the branches, but these are absolutely necessary to the existence of the middle part, or stem, which is the object in request. The timber merchant could not possibly expect to make an oak grow without roots or branches, but if he could find out a mode of cultivation which would cause more of the substance to go to stem, and less to root and branch, he would be right to exert himself in bringing such a system into general use. In the same manner, though we cannot possibly expect to exclude riches and poverty from society, yet if we could find out a mode of government by which the numbers in the extreme regions would be lessened and the numbers in the middle regions increased, it would be undoubtedly our duty to adopt it. It is not, however, improbable that as in the oak, the roots and branches could not be diminished very greatly without weakening the vigorous circulation of the sap in the stem, so in society the extreme parts could not be diminished beyond a certain degree without lessening that animated exertion throughout the middle parts, which is the very cause that they are the most favourable to the growth of intellect. If no man could hope to rise or fear to fall, in society, if industry did not bring with it its reward and idleness its punishment, the middle parts would not certainly be what they now are. In reasoning upon this subject, it is evident that we ought to consider chiefly the mass of mankind and not individual instances. There are undoubtedly many minds, and there ought to be many, according to the chances out of so great a mass, that, having been vivified early by a peculiar course of excitements, would not need the constant action of narrow motives to continue them in activity. But if we were to review the various useful discoveries, the valuable writings, and other laudable exertions of mankind, I believe we should find that more were to be attributed to the narrow motives that operate upon the many than to the apparently more enlarged motives that operate upon the few. Leisure is, without doubt, highly valuable to man, but taking man as he is, the probability seems to be that in the greater number of instances it will produce evil rather than good. It has been not infrequently remarked that talents are more common among younger brothers than among elder brothers, but it can scarcely be imagined that younger brothers are, upon an average, born with a greater original susceptibility of parts. The difference, if there really is any observable difference, can only arise from their different situations. Exertion and activity are in general absolutely necessary in one case and are only optional in the other. That the difficulties of life contribute to generate talents, every day's experience must convince us. The exertions that men find it necessary to make, in order to support themselves or families, frequently awaken faculties that might otherwise have lain for ever dormant, and it has been commonly remarked that new and extraordinary situations generally create minds adequate to grapple with the difficulties in which they are involved. CHAPTER 19 The sorrows of life necessary to soften and humanize the heart--The excitement of social sympathy often produce characters of a higher order than the mere possessors of talents--Moral evil probably necessary to the production of moral excellence--Excitements from intellectual wants continually kept up by the infinite variety of nature, and the obscurity that involves metaphysical subjects--The difficulties in revelation to be accounted for upon this principle--The degree of evidence which the scriptures contain, probably, best suited to the improvements of the human faculties, and the moral amelioration of mankind--The idea that mind is created by excitements seems to account for the existence of natural and moral evil. The sorrows and distresses of life form another class of excitements, which seem to be necessary, by a peculiar train of impressions, to soften and humanize the heart, to awaken social sympathy, to generate all the Christian virtues, and to afford scope for the ample exertion of benevolence. The general tendency of an uniform course of prosperity is rather to degrade than exalt the character. The heart that has never known sorrow itself will seldom be feelingly alive to the pains and pleasures, the wants and wishes, of its fellow beings. It will seldom be overflowing with that warmth of brotherly love, those kind and amiable affections, which dignify the human character even more than the possession of the highest talents. Talents, indeed, though undoubtedly a very prominent and fine feature of mind, can by no means be considered as constituting the whole of it. There are many minds which have not been exposed to those excitements that usually form talents, that have yet been vivified to a high degree by the excitements of social sympathy. In every rank of life, in the lowest as frequently as in the highest, characters are to be found overflowing with the milk of human kindness, breathing love towards God and man, and, though without those peculiar powers of mind called talents, evidently holding a higher rank in the scale of beings than many who possess them. Evangelical charity, meekness, piety, and all that class of virtues distinguished particularly by the name of Christian virtues do not seem necessarily to include abilities; yet a soul possessed of these amiable qualities, a soul awakened and vivified by these delightful sympathies, seems to hold a nearer commerce with the skies than mere acuteness of intellect. The greatest talents have been frequently misapplied and have produced evil proportionate to the extent of their powers. Both reason and revelation seem to assure us that such minds will be condemned to eternal death, but while on earth, these vicious instruments performed their part in the great mass of impressions, by the disgust and abhorrence which they excited. It seems highly probable that moral evil is absolutely necessary to the production of moral excellence. A being with only good placed in view may be justly said to be impelled by a blind necessity. The pursuit of good in this case can be no indication of virtuous propensities. It might be said, perhaps, that infinite Wisdom cannot want such an indication as outward action, but would foreknow with certainly whether the being would choose good or evil. This might be a plausible argument against a state of trial, but will not hold against the supposition that mind in this world is in a state of formation. Upon this idea, the being that has seen moral evil and has felt disapprobation and disgust at it is essentially different from the being that has seen only good. They are pieces of clay that have received distinct impressions: they must, therefore, necessarily be in different shapes; or, even if we allow them both to have the same lovely form of virtue, it must be acknowledged that one has undergone the further process, necessary to give firmness and durability to its substance, while the other is still exposed to injury, and liable to be broken by every accidental impulse. An ardent love and admiration of virtue seems to imply the existence of something opposite to it, and it seems highly probable that the same beauty of form and substance, the same perfection of character, could not be generated without the impressions of disapprobation which arise from the spectacle of moral evil. When the mind has been awakened into activity by the passions, and the wants of the body, intellectual wants arise; and the desire of knowledge, and the impatience under ignorance, form a new and important class of excitements. Every part of nature seems peculiarly calculated to furnish stimulants to mental exertion of this kind, and to offer inexhaustible food for the most unremitted inquiry. Our mortal Bard says of Cleopatra: Custom cannot stale Her infinite variety. The expression, when applied to any one object, may be considered as a poetical amplification, but it is accurately true when applied to nature. Infinite variety seems, indeed, eminently her characteristic feature. The shades that are here and there blended in the picture give spirit, life, and prominence to her exuberant beauties, and those roughnesses and inequalities, those inferior parts that support the superior, though they sometimes offend the fastidious microscopic eye of short-sighted man, contribute to the symmetry, grace, and fair proportion of the whole. The infinite variety of the forms and operations of nature, besides tending immediately to awaken and improve the mind by the variety of impressions that it creates, opens other fertile sources of improvement by offering so wide and extensive a field for investigation and research. Uniform, undiversified perfection could not possess the same awakening powers. When we endeavour then to contemplate the system of the universe, when we think of the stars as the suns of other systems scattered throughout infinite space, when we reflect that we do not probably see a millionth part of those bright orbs that are beaming light and life to unnumbered worlds, when our minds, unable to grasp the immeasurable conception, sink, lost and confounded, in admiration at the mighty incomprehensible power of the Creator, let us not querulously complain that all climates are not equally genial, that perpetual spring does not reign throughout the year, that God's creatures do not possess the same advantages, that clouds and tempests sometimes darken the natural world and vice and misery the moral world, and that all the works of the creation are not formed with equal perfection. Both reason and experience seem to indicate to us that the infinite variety of nature (and variety cannot exist without inferior parts, or apparent blemishes) is admirably adapted to further the high purpose of the creation and to produce the greatest possible quantity of good. The obscurity that involves all metaphysical subjects appears to me, in the same manner, peculiarly calculated to add to that class of excitements which arise from the thirst of knowledge. It is probable that man, while on earth, will never be able to attain complete satisfaction on these subjects; but this is by no means a reason that he should not engage in them. The darkness that surrounds these interesting topics of human curiosity may be intended to furnish endless motives to intellectual activity and exertion. The constant effort to dispel this darkness, even if it fail of success, invigorates and improves the thinking faculty. If the subjects of human inquiry were once exhausted, mind would probably stagnate; but the infinitely diversified forms and operations of nature, together with the endless food for speculation which metaphysical subjects offer, prevent the possibility that such a period should ever arrive. It is by no means one of the wisest sayings of Solomon that 'there is no new thing under the sun.' On the contrary, it is probable that were the present system to continue for millions of years, continual additions would be making to the mass of human knowledge, and yet, perhaps, it may be a matter of doubt whether what may be called the capacity of mind be in any marked and decided manner increasing. A Socrates, a Plato, or an Aristotle, however confessedly inferior in knowledge to the philosophers of the present day, do not appear to have been much below them in intellectual capacity. Intellect rises from a speck, continues in vigour only for a certain period, and will not perhaps admit while on earth of above a certain number of impressions. These impressions may, indeed, be infinitely modified, and from these various modifications, added probably to a difference in the susceptibility of the original germs, arise the endless diversity of character that we see in the world; but reason and experience seem both to assure us that the capacity of individual minds does not increase in proportion to the mass of existing knowledge. (It is probable that no two grains of wheat are exactly alike. Soil undoubtedly makes the principal difference in the blades that spring up, but probably not all. It seems natural to suppose some sort of difference in the original germs that are afterwards awakened into thought, and the extraordinary difference of susceptibility in very young children seems to confirm the supposition.) The finest minds seem to be formed rather by efforts at original thinking, by endeavours to form new combinations, and to discover new truths, than by passively receiving the impressions of other men's ideas. Could we suppose the period arrived, when there was not further hope of future discoveries, and the only employment of mind was to acquire pre-existing knowledge, without any efforts to form new and original combinations, though the mass of human knowledge were a thousand times greater than it is at present, yet it is evident that one of the noblest stimulants to mental exertion would have ceased; the finest feature of intellect would be lost; everything allied to genius would be at an end; and it appears to be impossible, that, under such circumstances, any individuals could possess the same intellectual energies as were possessed by a Locke, a Newton, or a Shakespeare, or even by a Socrates, a Plato, an Aristotle or a Homer. If a revelation from heaven of which no person could feel the smallest doubt were to dispel the mists that now hang over metaphysical subjects, were to explain the nature and structure of mind, the affections and essences of all substances, the mode in which the Supreme Being operates in the works of the creation, and the whole plan and scheme of the Universe, such an accession of knowledge so obtained, instead of giving additional vigour and activity to the human mind, would in all probability tend to repress future exertion and to damp the soaring wings of intellect. For this reason I have never considered the doubts and difficulties that involve some parts of the sacred writings as any ardent against their divine original. The Supreme Being might, undoubtedly, have accompanied his revelations to man by such a succession of miracles, and of such a nature, as would have produced universal overpowering conviction and have put an end at once to all hesitation and discussion. But weak as our reason is to comprehend the plans of the great Creator, it is yet sufficiently strong to see the most striking objections to such a revelation. From the little we know of the structure of the human understanding, we must be convinced that an overpowering conviction of this kind, instead of tending to the improvement and moral amelioration of man, would act like the touch of a torpedo on all intellectual exertion and would almost put an end to the existence of virtue. If the scriptural denunciations of eternal punishment were brought home with the same certainty to every man's mind as that the night will follow the day, this one vast and gloomy idea would take such full possession of the human faculties as to leave no room for any other conceptions, the external actions of men would be all nearly alike, virtuous conduct would be no indication of virtuous disposition, vice and virtue would be blended together in one common mass, and though the all-seeing eye of God might distinguish them they must necessarily make the same impressions on man, who can judge only from external appearances. Under such a dispensation, it is difficult to conceive how human beings could be formed to a detestation of moral evil, and a love and admiration of God, and of moral excellence. Our ideas of virtue and vice are not, perhaps, very accurate and well-defined; but few, I think, would call an action really virtuous which was performed simply and solely from the dread of a very great punishment or the expectation of a very great reward. The fear of the Lord is very justly said to be the beginning of wisdom, but the end of wisdom is the love of the Lord and the admiration of moral good. The denunciations of future punishment contained in the scriptures seem to be well calculated to arrest the progress of the vicious and awaken the attention of the careless, but we see from repeated experience that they are not accompanied with evidence of such a nature as to overpower the human will and to make men lead virtuous lives with vicious dispositions, merely from a dread of hereafter. A genuine faith, by which I mean a faith that shews itself in it the virtues of a truly Christian life, may generally be considered as an indication of an amiable and virtuous disposition, operated upon more by love than by pure unmixed fear. When we reflect on the temptations to which man must necessarily be exposed in this world, from the structure of his frame, and the operation of the laws of nature, and the consequent moral certainty that many vessels will come out of this mighty creative furnace in wrong shapes, it is perfectly impossible to conceive that any of these creatures of God's hand can be condemned to eternal suffering. Could we once admit such an idea, it our natural conceptions of goodness and justice would be completely overthrown, and we could no longer look up to God as a merciful and righteous Being. But the doctrine of life and Mortality which was brought to light by the gospel, the doctrine that the end of righteousness is everlasting life, but that the wages of sin are death, is in every respect just and merciful, and worthy of the great Creator. Nothing can appear more consonant to our reason than that those beings which come out of the creative process of the world in lovely and beautiful forms should be crowned with immortality, while those which come out misshapen, those whose minds are not suited to a purer and happier state of existence, should perish and be condemned to mix again with their original clay. Eternal condemnation of this kind may be considered as a species of eternal punishment, and it is not wonderful that it should be represented, sometimes, under images of suffering. But life and death, salvation and destruction, are more frequently opposed to each other in the New Testament than happiness and misery. The Supreme Being would appear to us in a very different view if we were to consider him as pursuing the creatures that had offended him with eternal hate and torture, instead of merely condemning to their original insensibility those beings that, by the operation of general laws, had not been formed with qualities suited to a purer state of happiness. Life is, generally speaking, a blessing independent of a future state. It is a gift which the vicious would not always be ready to throw away, even if they had no fear of death. The partial pain, therefore, that is inflicted by the supreme Creator, while he is forming numberless beings to a capacity of the highest enjoyments, is but as the dust of the balance in comparison of the happiness that is communicated, and we have every reason to think that there is no more evil in the world than what is absolutely necessary as one of the ingredients in the mighty process. The striking necessity of general laws for the formation of intellect will not in any respect be contradicted by one or two exceptions, and these evidently not intended for partial purposes, but calculated to operate upon a great part of mankind, and through many ages. Upon the idea that I have given of the formation of mind, the infringement of the general law of nature, by a divine revelation, will appear in the light of the immediate hand of God mixing new ingredients in the mighty mass, suited to the particular state of the process, and calculated to give rise to a new and powerful train of impressions, tending to purify, exalt, and improve the human mind. The miracles that accompanied these revelations when they had once excited the attention of mankind, and rendered it a matter of most interesting discussion, whether the doctrine was from God or man, had performed their part, had answered the purpose of the Creator, and these communications of the divine will were afterwards left to make their way by their own intrinsic excellence; and, by operating as moral motives, gradually to influence and improve, and not to overpower and stagnate the faculties of man. It would be, undoubtedly, presumptuous to say that the Supreme Being could not possibly have effected his purpose in any other way than that which he has chosen, but as the revelation of the divine will which we possess is attended with some doubts and difficulties, and as our reason points out to us the strongest objections to a revelation which would force immediate, implicit, universal belief, we have surely just cause to think that these doubts and difficulties are no argument against the divine origin of the scriptures, and that the species of evidence which they possess is best suited to the improvement of the human faculties and the moral amelioration of mankind. The idea that the impressions and excitements of this world are the instruments with which the Supreme Being forms matter into mind, and that the necessity of constant exertion to avoid evil and to pursue good is the principal spring of these impressions and excitements, seems to smooth many of the difficulties that occur in a contemplation of human life, and appears to me to give a satisfactory reason for the existence of natural and moral evil, and, consequently, for that part of both, and it certainly is not a very small part, which arises from the principle of population. But, though, upon this supposition, it seems highly improbable that evil should ever be removed from the world; yet it is evident that this impression would not answer the apparent purpose of the Creator; it would not act so powerfully as an excitement to exertion, if the quantity of it did not diminish or increase with the activity or the indolence of man. The continual variations in the weight and in the distribution of this pressure keep alive a constant expectation of throwing it off. "Hope springs eternal in the Human breast, Man never is, but always to be blest." Evil exists in the world not to create despair but activity. We are not patiently to submit to it, but to exert ourselves to avoid it. It is not only the interest but the duty of every individual to use his utmost efforts to remove evil from himself and from as large a circle as he can influence, and the more he exercises himself in this duty, the more wisely he directs his efforts, and the more successful these efforts are; the more he will probably improve and exalt his own mind, and the more completely does he appear to fulfil the will of his Creator. 
31159	----	ESSENTIALS OF ECONOMIC THEORY _AS APPLIED TO MODERN PROBLEMS OF INDUSTRY AND PUBLIC POLICY_ BY JOHN BATES CLARK PROFESSOR OF POLITICAL ECONOMY IN COLUMBIA UNIVERSITY AUTHOR OF "THE DISTRIBUTION OF WEALTH," "THE PHILOSOPHY OF WEALTH," "THE PROBLEM OF MONOPOLY," ETC. New York THE MACMILLAN COMPANY 1915 _All rights reserved_ COPYRIGHT, 1907, BY THE MACMILLAN COMPANY. Set up and electrotyped. Published October, 1907. Reprinted July, 1909; July, 1915. PREFACE In a work on the "Distribution of Wealth," which was published in 1899, I expressed an intention of offering later to my readers a volume on "Economic Dynamics, or The Laws of Industrial Progress." Though eight years have since passed, that purpose is still unexecuted, and it has become apparent that any adequate treatment of Economic Dynamics will require more than one volume of the size of the present one. In the meanwhile it is possible to offer a brief and provisional statement of the more general laws of progress. Industrial society is going through an evolution which is transforming its structure and all its activities. Four general changes are going on within the producing organization, and the resultant of them, under favorable conditions, should be an enrichment in which all classes would share. Population is increasing, capital is accumulating, technical methods are improving, and the organization of productive establishments is perfecting itself; while over against these changes in industry is an evolution in the wants of the individual consumer, whom industry has to serve. The nature, the causes, and the effects of these changes are among the subjects treated in this volume. The Political Economy of the century following the publication of the "Wealth of Nations" dealt more with static problems than with dynamic ones. It sought to obtain laws which fixed the "natural" prices of goods and those which, in a like way, governed the natural wages of labor and the interest on capital. This term _natural_ as thus used, was equivalent to static. If the laws of value, wages, and interest had at this time been correctly stated, they would have furnished standards to which, in the absence of all change and disturbance, actual values, wages, and interest would ultimately have conformed. The economic theory of this time succeeded in formulating, correctly or otherwise, principles of economic statics and a fragment or two of a science of economic dynamics, although the distinction between the two divisions of the science was not clearly before the writers' eyes. The law of population contained in the work of Malthus is the only systematic statement then made of a general law of economic change. Though histories of wages, prices, etc., furnished some material for a science of Economic Dynamics, none of them attained the dignity of a presentation of law or merited a place in Economic Theory. Students of Political Economy were at that date scarcely awakened to the perception of laws of dynamics, and still less were they conscious of the need of a systematic statement of them. A modest beginning in the way of formulating such laws the present work endeavors to make. The first fact which becomes apparent when economic progress is studied, is that static laws have a general application and are as efficient in a society which is undergoing rapid transformation as in one that is altogether changeless. Water in a tranquil pool is affected by static forces. Let a quantity of other water rush in and there are superinduced on these forces others which are highly dynamic. The original forces are as strongly operative as ever, and if the inflow were to stop, would again reduce the surface to a level. The laws of hydrostatics affect the waters in the rapids of Niagara as truly as they do those in a tranquil pool; but in the rapids a further set of forces is also operative. In the work referred to, issued in 1899, an effort was made to isolate the phenomena of Economic Statics and to attain the laws which govern them. Necessarily this study made a certain impression of unreality, since it put out of sight changes which are actually going on and are the conspicuous fact of modern life. It assumed the conditions of a world without any such movement and endeavored to formulate laws which, in such a condition, would fix standards of value, wages, interest, etc. It put actual changes out of sight, intentionally and heroically, but with a full recognition of the fact that they are actually taking place and must in due time be introduced and studied. We live in what is _par excellence_ an age of progress, and it is in part for the sake of perceiving the laws of progress that we first disentangle from them the laws of rest and make a separate study of these. The world from which change is excluded is unreal, but the _static laws_ which can be most clearly discerned by mentally creating such a world have reality. Every day's transactions are governed by them as truly as a physical element like water in active movement is affected by forces which, if they acted alone, would bring it to a state of permanent rest. The first purpose, therefore, of the present work is to show the presence and dominance in the real world of the forces described in the earlier work. It brings static laws into view and endeavors to show how they act at any one particular stage of industrial evolution. Even while changes are examined, the fact is perceived that there are steadily at work forces which, if changes should cease, would make society conform to a certain imaginary static model and makes wages and interest also conform to static standards. Another purpose of the work is to examine seriatim the effects of different changes, to gauge the probability of their continuance, and to determine the resultant of all of them acting together. It is important to know under what conditions changes proceed at a normal rate, and when the standard of wages rises as it naturally should. As the actual rate of wages pursues its rising standard, but lags somewhat behind it, it is necessary to know what determines the interval between the two, and when the interval is normal. What is called "economic friction" is the cause of this interval and is an element that is amenable to law. There is to be studied, not only the friction which obstructs the action of natural forces, but positive perversions of the forces themselves. Of these the chief is monopoly; and its influence, its growth, the sources of its power, and its prospect of continuance have to be determined. The actual tendencies of the economic system are against it, and so--if we except a few monopolies created for special ends--are both the spirit and the letter of the civil law. In a country in which law held complete sway, all objectionable monopolies would be held in repression. In order to see how much economic forces can be made to do in this direction, the present work discusses railroads and their charges, and some of the practices of great industrial corporations, and tries to determine what type of measures a government should take in dealing with these powerful agents. In connection with monopoly and with the conditions of economic progress a study is made of trade unions, strikes, boycotts, and the arbitration of disputes between employers and employed, and also of the policy of the state in connection with them, and with money and protective duties. It is my belief that students should become acquainted with the laws of Economic Dynamics, and that they can approach the study of them advantageously only after a study of Economic Statics. The present work is in a form which, as is hoped, will make it available for use in class rooms, not as a substitute for elementary text-books, but as supplementary to them. It omits a large part of what such books contain, presents what they do not contain, and tries to be of service to those who wish for more than a single introductory volume can offer. An essential part of the theory of wages here stated was presented in a paper read before the American Economic Association, in December, 1888, and published in a monograph of the American Economic Association in March, 1889; and other parts of this theory were issued at intervals following that date. The theory of value was published in the _New Englander_ for July, 1881. I had not then chanced to see the early statements of the principle of marginal appraisal contained in the works of Von Thünen and Jevons, and did not consciously borrow anything from their writings, but I gladly render to them the credit that is their due. I do not fear that I shall be supposed to have borrowed other parts of the general theory here offered. The theory of capital here stated was first presented in a monograph of the American Economic Association for May, 1888, and the discussion of money of which the present work gives a summary, in articles in the _Political Science Quarterly_ for September, 1895, and for June and September, 1896. The discussion of the relation of protective duties to monopoly appeared in the same quarterly for September, 1904. The author should, perhaps, apologize for the fewness of the citations from other works which this volume contains. The richness of the recent literature of Economic Theory, especially in America, would have made it necessary to use much space if the resemblances and the contrasts presented by points in this volume, and corresponding points in other volumes, had been noted. Worthy of special attention, if citations had been given, would have been the writings of Professors Irving Fisher, Simon N. Patten, and Frank A. Fetter of this country, and Professor Friedrich von Wieser of Prague, who have worked in various parts of the same field in which the studies here offered belong, and also those of Minister Eugen von Böhm-Bawerk of Vienna, who has treated some of the same themes in a strongly contrasted way. If merited attention were paid to the works of Hadley, Taussig, Carver, Seligman, Giddings, Seager, Walker, and a host of eminent foreign scholars, a large part of the space in the book would have to be thus preëmpted. I desire most gratefully to acknowledge the assistance which in the preparation of this book I have received from my colleague, Professor H. L. Moore of Columbia University, from my son, Mr. John Maurice Clark, Fellow in Economics in Columbia University, and from my former colleague, Professor A. S. Johnson of the University of Nebraska. Besides reading the manuscript and offering valuable suggestions, Professor Johnson has kindly taken upon himself the reading of the proof. JOHN BATES CLARK. CONTENTS CHAPTER PAGE I. WEALTH AND ITS ORIGIN 1 II. VARIETIES OF ECONOMIC GOODS 20 III. THE MEASURE OF CONSUMERS' WEALTH 39 IV. THE SOCIALIZATION OF INDUSTRY 59 V. PRODUCTION A SYNTHESIS; DISTRIBUTION AN ANALYSIS 74 VI. VALUE AND ITS RELATION TO DIFFERENT INCOMES 92 VII. NORMAL VALUE 114 VIII. WAGES 127 IX. THE LAW OF INTEREST 146 X. RENT 159 XI. LAND AND ARTIFICIAL INSTRUMENTS 174 XII. ECONOMIC DYNAMICS 195 XIII. THE LIMITS OF AN ECONOMIC SOCIETY 210 XIV. EFFECTS OF DYNAMIC INFLUENCES WITHIN THE LIMITED ECONOMIC SOCIETY 229 XV. PERPETUAL CHANGE OF THE SOCIAL STRUCTURE 244 XVI. EFFECT OF IMPROVEMENTS IN METHODS OF PRODUCTION 256 XVII. FURTHER INFLUENCES WHICH REDUCE THE HARDSHIPS ENTAILED BY DYNAMIC CHANGES 282 XVIII. CAPITAL AS AFFECTED BY CHANGES OF METHOD 301 XIX. THE LAW OF POPULATION 321 XX. THE LAW OF ACCUMULATION OF CAPITAL 339 XXI. CONDITIONS INSURING PROGRESS IN METHOD AND ORGANIZATION 358 XXII. INFLUENCES WHICH PERVERT THE FORCES OF PROGRESS 372 XXIII. GENERAL ECONOMIC LAWS AFFECTING TRANSPORTATION 396 XXIV. THE FOREGOING PRINCIPLES APPLIED TO THE RAILROAD PROBLEM 416 XXV. ORGANIZATION OF LABOR 451 XXVI. THE BASIS OF WAGES AS FIXED BY ARBITRATION 470 XXVII. BOYCOTTS AND THE LIMITING OF PRODUCTS 503 XXVIII. PROTECTION AND MONOPOLY 517 XXIX. LEADING FACTS CONCERNING MONEY 538 XXX. SUMMARY OF CONCLUSIONS 555 INDEX 563 ESSENTIALS OF ECONOMIC THEORY CHAPTER I WEALTH AND ITS ORIGIN The creation and the use of wealth are everywhere governed by natural laws, and these, as discovered and stated, constitute the science of Economics. Some of them come into operation only when men live in more or less civilized societies and work in an organized way, while others are operative wherever men work at all. Every man who lives must have something that can be called wealth, and, unless it is given to him, he must do something in order to get it. A solitary hunter, living in a cave, eating the flesh of animals and clothing himself in their skins, would create wealth and use it; but he would not take part in a social kind of industry. What he does could not be described as a bit of "social," "national," or "political" economy. Yet the gaining of his living would be an economic operation and would involve a creating and using of wealth. A statement of the laws governing the processes by which such a man makes the earth yield to him means of support and comfort would constitute a Science of the Economy of Isolated Life, which is a part of the general Science of Economics. _Primitive Capital._--If an isolated man hunts with good implements, he gets more game than he would have done if he had not used some of his time in making such implements. It pays such a man to interrupt his hunting long enough to make a spear or a bow and arrows. This amounts to saying that it is an advantage to him to become, in a simple way, a capitalist as well as a laborer; for the primitive implements of the chase are forms of _productive_ wealth, or capital. Moreover, if he possesses foresight, he will keep enough food within reach to tide him over periods when game is not to be had, and such a store is another form of capital. _The Field of General Economics._--The economy of a man who works only for himself is subject to laws that are based on his own nature and the character of his material environment. Because he is what he is and because nature is what it is there is a certain way in which he must proceed, if he will live at all, and there are certain conditions which must exist, if he is to live well. The inherent productive power of labor and of capital is of vital concern to him, since he is both a laborer and a capitalist; but he is in no way interested in what we commonly call the relations of labor and capital, since that expression always suggests the dealings of one class of men, who labor, with another class, who own or control productive wealth. The study of such relations takes us at once into the domain of _Social_ Economy; but we can study certain universal laws of wealth without at all entering that domain. When we speak of the power that resides in a bow and arrow, we refer to a truth of _General_ Economics and one which illustrates the inherent power of capital, though we may be far from thinking of lenders and borrowers in a modern "money market" or of dealings of any one class of men with any other. _The Field of Social Economics._--The moment that we begin to examine economic relations that different classes of men sustain to each other, we enter the realm of _Social_ Economics; and we do this whenever we study modern business dealings. Even our hunter would take part in a social economy if he began to sell some of his game; and from that time on his income would depend, not wholly on his relation to material nature, but partly on his relation to other men. A good market for his game would come to be of the greatest importance to him; and a market for anything implies a social method of securing wealth. _Fundamental Facts Common to Primitive Life and Social Life._--The relations which men sustain to each other in civilized industry are thrown into the foreground in the science of Social or "Political" Economy.[1] It is an organized system of industry in which we are engaged, and it is that which we care most to understand. Until recently we have had a far less satisfactory understanding of the social element in industry--that is, of the relations that men who are producing wealth sustain to each other--than we have had of such general facts as a primitive producer needs to know. We have had, for example, much information concerning the materials which the earth contains and the way to make them useful. We have had a practical knowledge of what wealth is and of the mode of creating it, and we have been able to identify it as we have seen it either in the raw or the finished state. We have known what labor is, how it proceeds and what helps it needs to enable it to make clothing, to prepare food, etc. We have not known as much about the way in which the modern market for such products is regulated, and how a modern tailor or baker shares gains with the man who employs him and provides him with materials and tools, and the main purpose of studying Economics is to get an understanding of such social facts; but this cannot be done without first bringing before the mind the more general facts concerning the inherent nature of wealth itself and of the activities that are always necessary--in uncivilized life as well as in civilized--for creating and using it. [1] Past usage renders the somewhat misleading term _Political Economy_ more available than the more accurately descriptive term _Social Economics_, as the title of the science which treats of the creation and use of wealth by an organized society. Either title implies the existence of such an organization, but the word _political_ calls attention to the fact that it is under a government. The fact that, in a study of wealth, is most important is that the exchanges of products which spontaneously take place create an industrial society whose activities, going on as they do under a government, constitute the subject of the studies which are properly indicated by the traditional term, Political Economy. Government as such is not the subject of those studies. _General Facts First in the Natural Order of Study._--The primitive and general facts concerning industry, which, in a broad sense, is the creating of wealth, need to be known before the social facts can profitably be studied; and a statement of the principles of Political Economy should therefore begin by presenting a body of truth which is independent of politics and sociology and so general that it is illustrated even in that simplest of all conditions, in which no market exists and every man makes by his own labor all the goods that he uses. The wealth of a Crusoe, that of a solitary Esquimau, and that of a pygmy in equatorial Africa have laws as well as that of a European or American employer or bondholder. The qualities in matter which make a share of it important for promoting the welfare of its possessor can be detected in the simplest commodities that are anywhere used. All kinds of industrial products have a common origin. Labor and capital act together in making a birch canoe as truly as they do in producing a transatlantic liner; and the productive power of each of these two agents is everywhere governed by certain general laws. Before ascertaining what is true of wealth when capital has become complex and when laborers have become specialists, each producing one particular part of one product and securing many finished goods in exchange for it, it is well to state some facts relating to wealth which are so general that they appear in all stages of civilization. _The Nature of Wealth._--The old English word _weal_ describes a condition of life. It is the state of being "well off," or of having one's wants amply supplied. Well-being in a broad sense of the term may depend largely on a man's state of health, his temperament, his conscience, or his relation to his friends; but the weal that is so secured is not described as a state of wealth. That depends on the possession of useful and material things, and the rich man has more of them than other men. The term _wealth_, which originally signified the state of being rich, afterwards came to be applied to the things which make a man rich, and it is thus that the term is used in the science of Economics. _What Things constitute Wealth._--It is clear that useful things, like air, which are at hand in unlimited quantity, do not make any one rich in this comparative sense, for they benefit all alike; and, in so far as they are concerned, all men are on the same level of welfare. Moreover, since they are so abundant as to shower benefits everywhere in profusion, the quantity of them that a man has at his disposal may be lost or thrown away with entire impunity. He would only have to help himself again from the abounding supply which nature thrusts on him in order to be as well off as he was before. A bucketful of water on the shore of Lake Superior is of no importance to the man who has it. If it were spilled on the sand, the man would have only to dip up another bucketful, with an expenditure of effort that would be too small to take account of. If, however, fresh water were scarce, every bucketful would have its importance, and the loss of that quantity would make a distinct impression on the man's well-being. Whenever each particular part of the supply has this power to make a possessor better off than he would be without it, the substance is a form of wealth. The quality of being _specifically_ important is, therefore, the essential attribute of all the concrete forms of wealth. Sand by the seashore does not have any specific importance, since it is so abundant that the gain or loss of a wheelbarrow load would not make a man better off or worse off; but a pile of sand by the side of an unfinished building has this quality. There every barrow load is of consequence, for the available quantity is so small that diminutions reduce and additions increase the wealth of the possessor. Sand on the shore has the inherent power to help make mortar, and water in Lake Superior has the power to quench thirst, but neither of them has the attribute which would make it a form of wealth, namely, specific importance. Particular parts of the supply may be lost with impunity. _Varieties of Utility._--We have used the term _importance_, rather than usefulness or utility, to describe the quality which, if it exists in every particular bit of a substance, makes it all a form of wealth. With due care we may use the term _utility_. In a way even a cup of water dipped by a fisherman from the lake is useful, for it renders a service. Though the man might lose it and be no poorer, he cannot say that the thing has no utility of any kind. He can say that it has no importance. What it has we may call _absolute_ utility, or the power to do for a man something which he wishes to have done. When the fisherman is thirsty the water will do him good. It has an absolute service-rendering power; and yet this cupful makes the owner no better off than he would be without it, since the service which it is capable of rendering would be rendered whether the man had it or not. Absolute utility in an article is the power to render any service whatever, regardless of the question whether it would be rendered equally well if the article were absent. If conditions were such that the man would have to go thirsty in case he spilled his cupful of water, then this little supply would have what we may term _effective_ utility, and this means that the presence of the particular bit is a positive element in conducing to the man's welfare. Usable things have absolute utility even when they are superabundant, but they have effective utility only when the quantity of them is so limited that every particular bit of it is of some importance. Absolute utility and limitation of supply insure to them this quality; and this principle holds true in the economy of the most primitive state as well as in that of a civilized one. _The Origin of Wealth._--Some of the things that have this kind[2] of utility have been given to man by nature. She has furnished some materials that are useful and has not furnished them in quantities sufficient to prevent them from being _specifically_ important. On account of the comparatively niggardly way in which she has doled them out to man, every bit of the supply has a power to benefit him; and if he gains some portions, he goes upward in the scale of well-being, and if he loses some, he goes downward. Wild fruits and fruit trees come in this category; and a savage who should build his hut in a small grove of banana trees, if he could keep other people out of it, would be, by so much, better off than they. The grove and its fruits would constitute their owner's wealth. [2] The term _final_ utility is used with much the same significance as specific importance. It is the utility of the last and least important part of the supply, and the use of the term requires us to think of the supply as offered to users unit by unit till the whole amount is in their hands. The first unit, when it stands alone, is more important than any later one will be. The second is of less consequence, and the last is the least important of all. When, however, all have been supplied and are together available for use, one is as important as another. Each one has an effective utility which is measured by the service rendered by the last one. The term _specific_ indicates that we measure the importance of the supply of an article not in its entirety, but bit by bit, while the term _effective_ is the antithesis of _absolute_ and means that each bit of the supply not only renders an absolute service, but renders one which would not be gratuitously rendered by some other part of the supply in case this portion were removed or destroyed. We do not here think of the supply as built up from nothing to its present size bit by bit, but look at it as it stands and measure the importance of any particular quantity. When we speak of final utility, we think of a series of "increments" supplied one after another, and in this case the successive increments become less and less important, since, after some have been supplied, the want of the kind of good that they represent is less keenly felt. The conception of the series of units is merely a means of isolating one unit from a total number and obtaining a mental measurement of its importance which corresponds with the effective importance of any unit in the entire quantity. _Land an Original Form of Wealth._--Land is the original gift of nature to humanity, and wherever there are people enough to make the possession of a particular piece of it important, it becomes a form of wealth. It can be valueless only when population is very sparse; and then an increase in the number of people dwelling on it gives to it early the attribute of specific importance. The land that is accessible to a growing population cannot long be superabundant. _Forms of Wealth produced by Labor._--Few useful goods are presented to man by nature in a finished state, and it is therefore necessary for man to exert himself in order to get the goods that he needs in the condition in which he can use them. He must make raw substances more useful than they naturally are, and as he does this the things become partly products of his labor. Of course the supply of them is limited, since labor is so. _Labor a Wealth Creator._--Labor is a wealth-creating effort, and there is no labor that is successful in attaining its purpose that does not help to bring into a serviceable condition something that can be identified as an economic good or a form of wealth. Some effort, indeed, fails in what it attempts to do and therefore produces nothing. We may build a machine that will not work, or make a product that no one wants; but labor that attains a rational purpose is always economically productive. _Protective Labor and the Attribute it imparts to Useful Matter._--Labor may be classed according to the particular result that it accomplishes. In saying that the banana grove in our illustration is wealth to the savage who resides in it, we had to insert the proviso that he is able to keep other persons out of it. Exclusive possession or ownership is necessary in order that things may continue to be effectively useful to any particular person or persons. If they are superabundant, as we have seen, no part of the supply is important; but it is also true that if they are scarce and a man is not able to keep any of them, they will not serve him. In order that an economic good may be effective, it must be appropriable, and where claimants are numerous and lawless it may take much of the owner's time and effort to keep the article in his possession. The savage must personally protect his goods, and to some extent the civilized man must do so; for however well policed a city may be, it will not do to leave purses or portable goods by the wayside. Protective labor is necessary in all stages of social advancement. In civilized life, indeed, we delegate much of it to a special class of persons,--policemen, judges, lawyers, and legislators,--and this is the most fundamental division of labor that civilization entails; but the work has to be done in any stage of social evolution. Crusoe's goods would have been worth nothing to him if he could not have kept them from the savages who, in time, appeared on his island; and they would have been worth little if he had been forced to spend most of his time in guarding them. Appropriability is, therefore, a further essential attribute of the things which can make particular men richer by reason of their presence. When such things are actually brought into ownership, their utilities become available, as they would not otherwise be. Effort expended in protecting property is wealth-creating, since it causes those service-rendering powers which otherwise would be only potential in goods to become active. In other words, it gives to things which are otherwise in a condition to be effectively useful a further quality which they require in order that they may actually promote an owner's well-being. _Industrial Labor._--Industrial labor is the antithesis of protective labor, and it invariably changes the qualities of material objects in such a way as to make them useful; that is to say, it directly creates utilities.[3] These utilities are of different kinds, and the labor may be classified according to the kind it creates. [3] The term _create_ is here used in a somewhat loose sense and does not imply that the man originates matter or even that he always transforms it without calling in, as an aid, the forces of nature. The farmer must depend on vital forces in soil and air in order to raise a crop. What he and other laborers do is to cause the product in some way to come into existence, and he and they may in this sense be said to create the products which would not appear without them. _Elementary Utility._--An elementary utility is created when a substance is either dug out of the ground, as is done in mining, or when it is secured through the vital forces of the earth, as is done in agriculture. Hunting, fishing, and stock raising should be classed with agriculture, since they use the resources of animate nature to secure for mankind new raw products on which labor will confer further useful qualities. This utility has to be created by men in every stage of industrial development, from that of a tropical savage to that of men in the most advanced civilization.[4] [4] The distinction between elementary utility and others does not need to be applied with the utmost strictness, for mining creates form utility by breaking up masses of ore, and place utility by making them accessible. Agriculture shapes its products and moves them to places of storage. It is convenient in practice to adhere to the more general classification suggested in the text. _Form Utility._--A form utility is created when a raw material is fashioned into a new shape, subdivided, or combined with other materials, as is done in manufacturing and, in a certain way, in commerce. Buying goods in bulk and selling them in small quantities is the creating of form utilities and makes an addition to total wealth. Oil in small cans is worth far more for consumption than it would be if each consumer were forced to buy a tankful. Sugar is worth more to a consumer when it is doled out to him in paper sacks than it would be if it were to be had only in hogsheads. Merchants are not mere exchangers, for they make positive additions to the utility of goods. In primitive life no such class exists; and yet form utilities of every kind are created, since men make for themselves the goods that they use and adapt them in shape and in quantity to their current needs. _Place Utility._--Carrying things to places where they become more useful creates place utilities. In primitive life men do their own carrying; but in civilized states the common carrier does most of it, and so imparts place utility to matter on the most extensive scale. All useful transportation creates this quality, which is a general attribute of wealth; and the operation of so moving matter as to create place utility is one of the general functions of labor.[5] [5] In a way all kinds of production may be analyzed into the moving of matter. In cutting up raw materials a manufacturer moves waste portions away from those that are to be utilized, while combining materials, of course, moves them toward each other. Neither of these operations creates place utility. This quality consists in a relation, not between some materials and others, but between goods and the persons who are to use them. Bringing things to us from a distance changes their local relation to us, and in this is the essence of place utility, and every article that we use must have acquired this quality. The service-rendering power which it possesses is only potential until it reaches a place where the power can be exercised. _Time Utility._--There is, moreover, a kind of utility which depends on the existence of a good at the time when it is needed. Ice in the warm season, a plow in the spring or the fall, a pleasure boat in summer, and anything which, by the aid of capital, is presented to a user when he needs it, illustrate this quality. We may call it time utility, and creating it is a function of capital. We shall see how capital assists in the production of the other utilities; but the creation of time utility it accomplishes without assistance. _Executive and Directive Labor._--Labor involves the whole man, physical, mental, and moral. No labor is so simple that it is not better done when intelligence is used in the performance of it. The savage's hut, his canoe, his bows and arrows, etc., vary in their efficiency and value, not merely according to the time and muscular effort spent in making them, but also according to the efficiency of the thought by which those efforts are guided. There is here the germ of the difference between the executive labor of the modern employee and the directive labor of the manager. Yet no manager directs in more than a general way the muscular movements of his subordinates, and their own intelligence must still be trusted to do much of the directing. The mental labor that guides and controls the physical is universal in industry, but becomes more and more a distinct and dominant factor as civilization increases. _Fidelity as affecting the Productivity of Labor._--The fact that all workmen are largely their own directors brings fidelity into the foreground as an element in determining men's earning power; but this element counts for much more in the civilized state than it does in the primitive one, for here fidelity in directive laborers of the highest type is most important and difficult to secure. One of the greatest problems of modern business is how to make directors and executive officers of corporations faithful to the stockholders who employ them. In the primitive state these problems do not arise. When a man is working for himself, mere interest largely takes the place of fidelity. If to-day any one secures a good house of his own to live in, it is because he employs contractors, overseers, and artisans all of whom are, in the main, faithful to his interests and see that the work of building is properly done. A savage looks after his own interests as his personal work proceeds; and yet even in his case there is the germ of that enthronement of character in the supreme place which is the prominent feature of highly organized industry. In building a hut to shelter his family, a savage puts into his work conscience and affection as well as muscular effort; and when the mother of the family does this work, the altruistic element in it is still more conspicuous. As society becomes highly organized the importance of the moral element in all labor increases till the further progress, or even the existence, of the social order may be said to depend on it. In the world of business there is now distrust and turmoil, and revolutions are feared, because of the unfaithfulness of a class of men to trusts committed to them.[6] [6] On the ground of convenience, we may classify labor as physical or mental, according as the work of muscle or of brain is especially prominent. Digging a ditch requires more than an average amount of strength and not even an average amount of intelligence, and it is, therefore, physical labor rather than mental; while writing a brief or arguing a case in court requires much power of thought and only a small amount of muscular strength, and is typically mental labor. Managing an estate for an absent owner is more largely a moral function, since the value of the service depends chiefly on the fidelity of the man who renders it; but physical and intellectual labor are also involved. These three types of personal effort are exerted wherever wealth is created. _The Requisites of Production._--If we start with nothing but the earth in its natural state, inhabited by empty-handed men, and seek to know what is necessary in order that some wealth may be created, we find that nothing is absolutely necessary except labor. By working for a few minutes it is possible to get something that will minister directly to wants. Yet if men begin operations in a state of such poverty that they have only their bare hands to apply to the elements about them, they do not commonly get the usable goods immediately. If a savage wants fish and makes the rudest net with which to catch them, he makes what is a _capital good_. This is wanted only for the sake of the consumers' wealth which it will help to produce. The end in view has all the while been fish; but the man works first on an instrument for catching them. He makes the net by mere labor, but he catches the fish by means of labor and the net. Without such instruments to aid in production a dense population could not live at all, and a very sparse one could live only in a meager and precarious way. If the instruments are artificially made, or if they are furnished by nature in limited amounts, they are forms of wealth, or goods; but as their function is not to minister directly to consumers' wants, but to help in making things which do this, we distinguish them by the name "producers' goods" or "capital goods." In contrast with them those commodities which directly minister to wants may be called "consumers' goods." _The Production of Intermediate Goods._--All economic goods are means to an end. Wealth is always mediate. It is usually a connecting link between man's labor and the satisfaction of his wants. Man, the worker, first spends himself on nature, and then nature in turn spends itself on him. In production nature is the recipient, but in consumption the recipient is man. This is saying that man serves himself by means of some element in nature which, under his manipulation, becomes a form of wealth. He thrusts a bit of natural matter between himself as a producer and himself as a consumer. All kinds of wealth, then, stand in an intermediate position between original labor and the gratification that ultimately results from it. Some goods, however, are means in the special sense of standing between labor and other goods. Instruments help to make consumers' goods and these add to man's pleasure. Using a tool is not generally agreeable. The tool stands not only between the effort and the gratification that will ultimately follow, but between the effort and the further material good that will directly produce gratification. The hatchet intervenes between the labor that makes it and the firewood it will cut, while the wood acts directly on the man and keeps him warm. Capital goods are in this special sense mediate. They are not wanted for their own sake, but for the sake of something else that is directly useful.[7] [7] For an elaboration of the conception of mediate goods the reader is referred to Von Böhm-Bawerk's work on "Positive Theory of Capital" and to John Rae's work on "The Sociological Theory of Capital." _All Labor immediately Productive of Wealth._--When a savage abandons the plan of fishing from the shore and gives his labor for a fortnight to making a canoe with which to fish more effectively, he interposes an interval of time between his labor and its ultimate fruits, the consumers' goods. There is no such interval between the labor and the kind of wealth that it first creates, namely, the canoe. This immediate product of labor is itself a form of wealth and at once rewards the laborer, since it is what he needs, though he does not need it for consumption. Industry always pays as it goes and tolerates no hiatus between labor and wealth in some form. _Organized Industry immediately Productive of Consumers' Goods._--If one man were keeping the stock of canoes of a few fishermen in repair and taking as his pay a share of each day's catch, he would not have to wait for his food any longer than the fishermen themselves. This mode of conducting the industry, however, involves organization. If each fisherman had to make his first canoe, it would be necessary for him to wait for fish; but as soon as a stock of canoes has been obtained and a special set of men assigned to the work of keeping this stock intact in number and quality, that necessity entirely ceases. Five men may do nothing but fish while a sixth keeps their stock of canoes intact by repairing old ones left on the shore and making new ones to replace such as are beyond repairing. Fishing and boat building may go on simultaneously, and all the men may go share and share in each day's catch.[8] This is a type of what goes on in modern industry, where a complex stock of capital goods always exists and is kept intact by the action of a class of persons who share the returns that come from using the stock. None of these persons has to wait for food, although some of them devote themselves exclusively to the production of tools. This fact shows that the necessity for waiting, as well as working, wherever instruments are in the process of manufacture, is not among the universal phenomena of economics, and that it is not present in that organized industry which we chiefly study. Such a permanent stock of capital goods as the fishing community of our illustration possesses would enable it to get its food, the fish, day by day, by working in different ways and using the permanent stock. If we call this permanent supply of canoes, etc., _capital_, it is, _in a causal way_, mediate wealth, though it is not so in point of time. Some labor is spent each day on it, and itself creates each day some consumers' wealth. These two operations go on simultaneously, and the men who work to maintain the stock and those who use it get their returns together. In very primitive life the work spent on capital goods and that spent on consumers' goods are not always synchronous, but organization and the acquiring of a permanent fund of capital make them so. Work to-day and you eat to-day food that is a consequence of the working. In point of time the canoe makers are fed as promptly as the fishermen, and this fact is duplicated in every part of the industrial system. We shall later see more fully what this signifies, but it is clear that any study of this phenomenon--the synchronizing of labor and its reward--takes us out of the field of Universal Economics, since it does not appear in the industry of primitive beginnings, but is the fruit of organization.[9] [8] One man might be employed in guarding canoes and fish against theft, which is doing protective rather than industrial labor; and economic forces would tend to give him a share as large as each of the others receives, provided, of course, that the men are of equal capacity as workers. [9] The conception of capital goods as always putting enjoyments into the future has crept into economic science because in certain illustrations taken from primitive life they seem to have that effect. We shall see that they do not have it at all in _static_ social industry, and that they have it only in a limited way in _dynamic_ social industry, or that which is carried on by a society undergoing organic change. CHAPTER II VARIETIES OF ECONOMIC GOODS _Passive Capital Goods._--Labor spends itself on materials, and these, in their rawest state, are furnished by nature herself. They "ripen" as the work goes on. Every touch that is put on them imparts to them more of the utility which is the essence of wealth. They are technically "goods," or concrete forms of wealth, from the moment when they begin to acquire this utility, though for a time they are in an unfinished state. The function of materials, raw or partly finished, in the physical operation of industry is a passive one, since they receive utility and do not impart it. The iron is passive under the blows of the blacksmith's hammer; leather is passive under the action of the shoemaker's sewing machine; a log is passive under the action of the lumberman's saw, etc. The materials which are thus receiving utilities under the producers' manipulations constitute a distinct variety of capital goods, while the implements which help to impart the utilities constitute another variety, and both kinds are present in all stages of industrial evolution. Savages use raw materials and tools for fashioning them. _Active Capital Goods._--The hammer which fashions the iron, the awl which pierces the leather, and the saw that cuts the log into boards have an active function to perform. They do not receive utilities, but impart them. They manipulate other things and are not themselves manipulated; and except as unavoidable wear and tear injure or destroy them, they are not themselves at all changed by the processes in which they take part. They are the workman's active assistants in the attacks that he makes on the resisting elements of nature. Passive instruments, then, and active ones--things which receive utility, as industry goes on, and those which impart utility--constitute the two generic kinds of capital goods. What is commonly called "circulating capital" is a permanent stock of passive capital goods; and, in like manner, what is usually known as "fixed capital" is such a stock of capital goods of the active kind. The materials and the unfinished goods that are scattered through a modern mill and receiving utility are what the manufacturer would at this moment identify if he were asked to point out the things in which he has circulating capital invested; while the mill, the machinery, the land, etc., which are imparting utility, are what he can point to as now constituting his fixed capital. At a later time there will be other goods of both kinds in his possession, and these will at that time embody the two kinds of capital. While a primitive man would have little occasion to use the term _capital goods_, he would possess both varieties of the goods which the term denotes. _Varieties of Active Capital Goods._--Mere hand tools act as armatures attached to the person of the worker, and they enable him effectively to attack resisting substances. The hammer fortifies the blacksmith's hand against the injuries it would suffer if he delivered blows with his fist, and it multiplies the efficiency of the blows. Machines, however, substitute themselves for the person of the worker and carry the tool through its movements. A steam hammer, so called, is an engine that gets power from a boiler and wields an armature, which is the real hammer, much as a smith would do it, though with far greater force and effect. Machines do rapidly and accurately what a manual laborer would, without them, have to do slowly and imperfectly, by carrying the armature in his own hand and moving it by his own muscular strength. Tools and machines impart "form utility" to materials. Vehicles which carry goods impart "place utility" to them by putting them where they are more useful than they would be elsewhere. Buildings protect goods and workers alike, and enable the operation of transforming them to go on successfully. They also make it possible to store goods at a time when they are not needed and take them out for use when they are needed. In doing this, buildings help to impart "time utility" to the merchandise that is put into them by keeping them intact till the time comes when they will be useful. Tools, machines, reservoirs of water, canals, roadways, buildings, and even land itself are active capital goods, and are, for that reason, component elements of that part of the permanent productive fund which is known as fixed capital. They aid workers in their efforts to bring materials into usable shapes, and this is as true of the hole in the earth in which a savage stores provisions as it is of a fireproof warehouse in a modern city. _Materials which are at first Passive and later pass into the Active State._--The hammer itself has to be made out of raw material, and, while it is in the making, the material that enters into it is as passive as anything else. While the ore is smelting and while the steel is forging, the future hammer is in a preliminary stage of its existence and is discharging a passive function. When it is completely finished, its period of activity begins, and from this time on it helps to manipulate other things. The materials which enter into consumers' goods go through no such transition. The leather remains passive till, in the form of a pair of shoes, it clothes its user's feet; and at this point it ceases to be a capital good at all. The steel of the hammer is first a passive good and later an active one. _The Use of Capital Goods Universal._--There is no doubt that capital goods are used in the most primitive industry. Implements existed in times too remote for tracing; and even if they had not been used, raw material would have been indispensable. People living in an economic stage so ultraprimitive as to use no mediate goods whatever could sustain life only by plucking wild fruit or gathering fish or other food stuff by hand, and so long as they could do this their industry might conceivably consist in getting consumers' goods by labor only. The rudest pick, shovel, or ax and the simplest hunting implement are early types of what, in "capitalistic production," is represented by mills with their intricate machines, ships, railroads, and the like. Primitive industry has capital but is not highly capitalistic, since labor and a little capital in simple forms are all that it requires. These primitive capital goods are still essential. _Capital._--It might seem that we have already described the nature of capital, but we have not. We have described the kinds of goods of which it consists. A sharp distinction is to be drawn between two ways of treating capital goods, and only one of these ways affords a treatment of capital properly so called. To attain that concept we must think of goods as in some way constituting a stock which abides as long as the business continues. And yet the things themselves separately considered do not abide. Goods are perishable things; no one lasts forever, and some last only a very short time. Raw materials best serve their purpose when they are quickly transformed into usable goods and taken out of the category of productive instruments. Tools may last longer, but they ultimately wear out and have to be replaced. _How Capital Goods Originate and Perish._--If you watch a particular mediate good of the passive kind, say wood in a growing tree, you see it beginning its career as an absolutely raw material, and then under the hand of labor, aided by tools, receiving utility till it takes its final form in some article for a consumer's use, say a dining table. Little labor is applied to it during the first stage of the process, that in which the tree is guarded and allowed to grow to a size that fits it for conversion into lumber; but the cutting, carrying, sawing, and fashioning are done by labor and tools, and under their manipulations the wood "ripens" in the economic sense--that is, it becomes quite fit for consumption. It is ready to serve a consumer as a table, and, when this service begins, the wood that up to this point has been a passive capital good, constantly receiving utilities, will cease to be a capital good at all and begin slowly to wear out in the service of its owner.[1] [1] In the economic sense consumption is the utilization rather than the destruction of the thing consumed, though many things go rapidly to destruction in the process. Food is destroyed in the moment of using; clothing perishes more slowly by use, and furniture and dwellings more slowly still. Some things that go gradually to destruction during the process of utilization do not perish the more rapidly because of it. A vase, a statue, or a picture is consumed, in the economic sense, by a person's act of looking at it and getting pleasure from it; but this does not hasten its deterioration except as keeping such an ornament where it can be seen exposes it to deterioration or accident. Climbing a hill to get a view "consumes" the hill in a true sense, and looking from the summit over a wide stretch of picturesque country even consumes--that is, utilizes--the landscape; and certainly this act does not injure the thing utilized. The general fact, however, that goods for final use are, as a rule, injured or destroyed either by the act of consumption or by the exposures that are incidental to it, justifies the use of this term to express the receiving of a service from the usable article. It is a process in which the commodity acts on men's sensibilities and, as a general rule, exhausts itself while so doing. It is worth remembering that this exhaustion of the good is not the essential part of consumption. On the man's side that consists in deriving benefits from the good, while on the side of the good itself it consists in conferring benefit on the man--in doing him good and not in doing itself harm. _The Transition of Goods from one State to Another._--The beginning of its service in the purchaser's dining room takes the wood of the table out of the category of producers' goods; but there is some raw material that is never destined to emerge from that category and enter another. Its last state of existence as a good will be that in which it is embodied, not in an article for consumers' use, but in an active tool. Our tree might have furnished some of its wood for a wheelbarrow, and if so, that part of it would have been a capital good until it ceased to be an economic good at all. If we watch it as it grows toward its economic maturity, we see it sawed, planed, and otherwise fashioned under the laborer's hand, and maintaining during all this time its passive attitude, just as does the wood that is destined to constitute a table. When the wheelbarrow is completed, it does not, like the table, begin to minister directly to consumers' wants, but begins actively to aid some laborer in a further productive operation. It carries mortar to the wall of an unfinished building and is thus taken out of the list of passive goods--recipients of utility--and is ranged with other active tools which impart utility. The same thing is true of the steel that is destined to compose the head of a modern woodman's ax or the stone that is in process of fashioning into the rude hatchet of some primitive savage. As raw or partly wrought material it is a passive capital good; later it becomes an instrument of the active sort. _The Ultimate Perishability of all Kinds of Goods artificially Made._--In the end both kinds of material will cease to be capital goods. The raw stuff that goes into food, clothing, furnishings, or the like will become consumers' goods, while the raw material of tools will, in its final form, the tools themselves, have one more lease of life as capital goods. In the end, however, as wheelbarrows, axes, hatchets, and the whole long list of active implements are used up, they cease to be capital goods because they cease to be economic goods at all. They are as truly ordained to be ultimately used up as are food and clothing, and this is true of the most durable things that are artificially made. Walls, roadways, bridges, and buildings slowly deteriorate till the time comes when for productive purposes their room is worth more than their company. _Why the Perishability of Capital Goods does not put Capital out of Existence._--Perishability is the most striking trait of capital goods. Each particular one comes and goes, but there is always a stock of them on hand; for when one is on the point of going, another is ready to take its place and keep up the succession. New tools replace old tools; new materials replace those that are finished and withdrawn, and so it comes about that a stock of such things abides forever. Not one of the individual instruments is permanent, for each one only does its part in keeping up an endless procession. It is the procession that is always there--a moving series of individual goods, not one of which has more than a transient economic career. Each one helps to keep up the supply of permanent capital just as each man, taking his turn in an endless succession of laborers, serves during his brief life to keep up the permanent force of laboring humanity. Men come and go, but "labor"--a mass of working humanity--abides; and so capital goods come and go, but a stock of them abides, kept up by perpetual replacement. We may trace the career of any single instrument from a beginning to an end; but we may, on the other hand, cease to look at any instruments that we single out and identify and look rather at the procession of them; and if we do this, we look at a body which never wastes away, though the things that compose it are, separately considered, forever wasting. There are many kinds of transient things which, by the same process of renewal, constitute permanent entities. Composing a human body at this moment are certain tissues that can be separately identified; and if we watch any one of them, we shall see it going in a short time to destruction. Yet the body lasts while life continues. Indeed, the evidence of the life itself is the discarding and replacing of the tissues. A living body is a durable thing, though the particular tissues that at any one time compose it are not so. In a like way drops of water make a river, and this is a permanent thing, however rapidly its composition changes. The waterfall that drives the machinery of a mill is permanent, though no particular particle of water remains in it for more than a moment. Society is permanent, though the men who compose it are short-lived. In an exactly similar way a body of capital goods is maintained as a perpetual instrumentality of production. _This is capital properly so called._ It is, as it were, a quasi-living body, perpetuated by the constant replacement of the component parts, which are destroyed as its normal activities go on. _The Difference between Capital Goods and Capital Summarized._--The distinction between capital goods, on the one hand, and capital, on the other, is, then, like that between particular tissues and a living body, or like that between particular particles of water in the river and the river that flows forever. We can single out and watch certain drops of the water as they flow from a spring, and we can trace them through their brief careers, and say truly that the river is composed of fickle and transient stuff; but we cannot say that the river is transient. That is perpetuated by the renewing of the supply of water as the original drops disappear. We can mentally watch a particular man, as he enters the social force of workmen, labors for a time, and drops out of the line, and can see that society is composed of transient material; but society itself is an abiding thing. So we can study a particular bit of ore or wool or leather or a particular hammer or spindle or sewing machine, and in those cases we shall be studying capital goods and finding how perishable they are; but we shall also see that a stock of them always abides as the capital of economic society. We can cease to look at individual things and study the permanent fund of productive wealth, which is made up of goods like ore, wool, leather, hammers, spindles, and sewing machines. The identity of the things which make up this stock is forever changing. The same list of things we shall never find in the stock on any two dates, but a supply of similar things forever abides. _Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital goods are the shifting component parts of this permanent aggregate._ They are the particular instruments that, each during its own brief economic lifetime, take their places in the endless procession of things which in its entirety is an abiding productive agent--the co-worker of labor and its perpetual assistant in creating consumers' wealth. _The Business Man's View of Capital._--It is as such an abiding entity that a business man regards capital. He describes it nearly always as a sum of money. Thus the capital of a manufacturer is "a million dollars" because a stock of instruments worth that amount is kept intact in his possession. It is not allowed to waste away, however much the constituent parts of it may shift. The waste and renewal which business entails leave the equivalent of the million dollars always on hand, though never in the literal shape of money. A stock of shifting goods always worth a million dollars is, by a figure of speech, described as a million dollars "invested in the goods."[2] [2] We here put out of sight all questions connected with the changing purchasing power of money. This is, in ordinary times, the business man's habit. He considers his capital intact if the number of dollars invested originally in his business still appears on his inventory as representing the net surplus of his assets over his liabilities. If a currency were undergoing rapid inflation, a fixed amount of invested money would represent a shrinking stock of capital goods. This stock would last always, but would grow smaller by a true standard of measurement. All that we are at present interested in knowing is that practical usage treats capital as a permanent fund of productive wealth, and most conveniently describes it as a fixed amount of money "invested" in goods of a productive kind. What is thought of as "money" abides. Of course the practical man does not regard it as actually composed of currency. _The Chief Attribute of Capital._--A chief attribute of capital, properly so called, is permanence. If a man's productive fund does not last, he is impoverished. The farmer keeps on hand a more or less constant supply of the implements he has to use. He takes a part of the proceeds of the sale of his crops, puts it into the shape of implements and materials, and in this way keeps an amount of them on hand as the auxiliary capital of agriculture. Particular goods are not constant, but the sum of money or quantum of wealth "invested" in the moving procession of them is so. At any one instant the capital is composed of particular instruments which can be sought out and identified, but at no two instants are the goods the same. _The Reasons for describing Capital as a Sum of Money._--This fact explains the general practice of describing capital in terms of money. The manufacturer just referred to will speak of his capital as "a million dollars" and consider that sum as a "permanent investment" because he knows that while the goods that now represent that value will soon pass from him, the "dollars"--that is, the value which is equivalent to the dollars--will abide. There is, moreover, no failure on his part to discriminate between his capital and literal money, for he knows in what his productive fund consists, and is fully aware that only the minutest part of it is in the shape of actual currency. Instruments of production compose the fund, but the dollars serve to describe it. They indicate the amount and the abiding quality of it, since they describe what he has invested or embodied in the shifting things and can, by a fair sale, get out of them. _Why Abstract Terms are used in popularly describing Capital._--In certain connections money is, in unintelligent thinking, confused with real capital in ways that we should guard against. In avoiding such errors we need to be even more careful that we do not miss the truth that is at the basis of the common mode of describing capital. A permanent fund that is spoken of as a million dollars invested in a business does not suggest to any one a literal pile of a million silver or paper dollars or of a hundred thousand gold eagles. It suggests what is actually in the business, a procession of things each of which comes into the man's possession and then leaves him, and helps him to keep the constant stock of goods that at any time is a potential million of dollars. A permanent body of any kind, if it is made up of shifting tissues, is commonly described by the use of an abstract term. A waterfall, made as it is of rapidly changing drops of water, is spoken of as a "water power," since the power is the abiding thing. An endless series of living human beings is described as "humanity," since that remains through all personal changes. An endless series of workingmen is described as "labor," and we study the "wages of labor," the "relations of labor to capital," etc., because these are permanent relations. Men come and go, but labor continues and is the source of a permanent income. It is actually the fact that in speaking of the "labor problem" or the "relation of capital and labor" we usually think of "labor in the abstract," as we might term it; but this is very far from implying that we consider a series of generations of actual workingmen as an abstraction. We may, using terms in a like way, speak of the problem of interest as concerning "capital in the abstract"; but this is far from meaning that we consider an endless series of material instruments of industry an abstraction. We describe these real things by the use of an abstract term, just as we describe a thousand other realities. A "fund," a "value," a "permanent quantum of wealth," is capital; but with the abstract notion the mind always merges the thought of the concrete entity. It is the tools of industry that, in their endless march, come into and go out of the industrial field that we think of even when we use the abstract term. This term, however, saves us from the danger of thinking merely of particular tools that we can identify and trace to their final destruction when we form the concept of capital. _The Importance of discriminating between the Concept of Capital Goods and that of Capital._--Very great is the importance of keeping sharply distinct the two concepts of productive wealth of which one is described by the term _capital goods_ and the other by the term _capital_. In the one case we think of a particular thing which we identify, keep in mind, and watch as it goes through its transformations, does its final work, and perishes. The brilliant studies of Professor Böhm-Bawerk are based on the idea that such a tracing of the biography of a particular instrument is the true way to solve the problem of interest. Yet the very term _interest_ itself suggests the existence of what we have defined as permanent capital--an abiding fund or sum of wealth that every year yields as an income a certain percentage of itself. The "hundred dollars" yields five dollars; that is, the fund yields a twentieth of the amount which, amid all the changes of its constituent parts, it continues to embody. It is true, indeed, that a study of _all_ capital goods which have existed or will exist, with due attention to their relations to each other, would reveal the fact that they maintain such an endless procession as has been here described, and it would thus bring before the mind such a concept of capital as the business man has and describes by the monetary form of expression. By making a synthetic study of capital goods in general, and not separate studies of particular goods as they come and go, we can obtain a grand resultant of the action of all of them, which is nothing less than permanent capital doing its continuous work. Such a comprehensive study of capital goods, if it is carried far enough, becomes a study of the abiding entity, capital. Allowing ourselves, however, to put the abiding entity out of sight and merely to trace the origin, growth, and productive action of separate instruments of production would be disastrous. The undying body in which the particular things are tissues absolutely needs to come into view. The very mention of a problem of interest--of the percentage of itself that a fund of a given amount can annually earn--puts before us at once the permanent entity, capital, and the problems relating to it.[3] [3] Consumers' goods may be regarded in the two distinct ways in which it is necessary to regard capital goods. We may look at particular articles for consumption, as they begin their careers by ministering to their owners' needs, and follow them as they wear out and finally perish. This gives a conception of them which is analogous to the conception of capital goods rather than to that of capital. On the other hand, we may look at the permanent stock of usable articles, which is maintained by the constant coming of new ones to replace those which are worn out, and in this way we get a conception of _permanent consumers' wealth_. The flow of finished goods from the shops to the users offsetting the concurrent destruction of such articles in the users' hands, has the effect of maintaining a permanent fund of consumers' wealth consisting of perishable goods the identity of which is always changing; and this fund is analogous to permanent capital as we have defined it. Professor C. A. Tuttle has advocated the use of the generic term _wealth_ to denote the two continuing funds which we have here termed, on the one hand, capital, and, on the other hand, the permanent stock of consumers' wealth. We have preferred to use the term _wealth_ in a sense that is generic enough to include both capital and capital goods, and both the permanent stock of consumers' goods and the particular articles that, in turn, compose it. Wealth consists of effectively useful concrete things regarded either as particular articles that can be identified and watched till they perish in the using, or as an abiding stock of articles of this genus, each one of which has in itself only a transient existence. See an article on "The Wealth Concept," by Professor Charles A. Tuttle, in the _Annals of the American Academy of Political and Social Science_, for April, 1891, and other articles by the same author. _Labor as a Permanent Entity._--The term _labor_ is sometimes used to describe a permanent aggregation of laborers no one of whom lives and works through more than a brief period. Labor is thus analogous to capital and laborers to capital goods. A permanent working force is composed of perishable beings as a permanent producing fund is composed of perishable goods. Both are commonly described by the use of abstract terms, but both are in reality concrete things; and actually to reduce either to a mere abstraction would be to put a material entity out of existence. We instinctively speak of a value--a given number of dollars--in describing a man's capital, but it is dollars "invested in" productive instruments; and we instinctively speak of labor when we mean an abiding force of workingmen. Neither capital nor labor is like an immaterial soul that can live apart from its body. Each consists of a permanent body with a shifting composition. A permanent sum, on the one hand, a permanent amount of working energy, on the other, are always present, but they are in goods and men respectively. Each may well be described by the use of an abstract term, and in practical life it commonly is so; but it is a concrete reality. _Peculiarity of Land as a Capital Good._--One reservation needs to be made when we call capital goods perishable. If we include land under this term, we must make it an exception to the rule of destructibility. It is the only thing that does not go out of existence in the using. It is not a produced good at all and does not stand, like other goods, in an intermediate position between labor and the gratification that labor is intended to produce. Work did not create it and using will not end it. It will be called, in our study, a capital good, for it is a form of wealth which produces other wealth. It enters into the permanent productive fund that society is using. _Differences between Land and Other Capital Goods Important in Economic Dynamics._--It is in a later part of the study which deals with economic changes--the part which we shall call Economic Dynamics--that the differences between land and artificially made goods become prominent, and these differences will receive due emphasis in their proper place. In studying the law which would govern economic society if no essential economic changes were taking place,--in reducing society, as it were, to a static state,--we find that there is a certain set of characteristics which land shares with those capital goods which are the products of human industry. In static studies it is best to group the productive instruments which men make with the one unmade good which nature furnishes and to recognize that together they embody the permanent fund of productive wealth.[4] [4] What is commonly termed land contains elements which perish in the using. Such are deposits of coal, ores, or oil, and those ingredients of loam which are exhausted by tillage. Such elements of the soil are not land in the economic sense. How they should be regarded will be shown in a later chapter. _Mobility an Attribute of Capital._--Even in a static society capital would be permanent, while particular capital goods would be perishable. In dynamic studies another quality of capital, as distinguished from capital goods, comes into the foreground, namely, mobility. It is the power to move without loss from one industry to another. Goods cannot be thus moved with any freedom. A loom cannot be taken out of a woolen mill and made to do duty in a carpenter's shop, nor can a circular saw be made available in weaving. When the loom wears out and needs replacement, it is in the owner's power to procure either another loom or a circular saw, and if he chooses the latter alternative, he causes capital to move into the woodworking business. A whaling ship would not be useful as a cotton mill; but much capital that was once invested in the whale fishery of New England has since found its way into manufacturing. The transfer can often be made without waste. If the earnings of an instrument have sufficed to replace it with another that is like it, they may suffice for producing an instrument that is unlike it. Waste, if it occurs, results from a failure of the original instrument to earn the fund for replacement. Capital which thus abides but passes from one employment to another is a body the identity and the character of whose component parts change. The transfer of capital from one industry to another is a dynamic phenomenon which is later to be considered. What is here important is the fact that it is in the main accomplished without entailing transfers of capital goods. An instrument wears itself out in one industry, and instead of being succeeded by a like instrument in the same industry, it is succeeded by one of a different kind which is used in a different branch of production. Goods have not moved from one branch to another, but capital has done so. _How Capital itself may be Destroyed._--When we speak of capital as permanent, we mean that using does not destroy it as it destroys the tissues of which it is composed. Fires, earthquakes, and business disasters put parts of it out of existence and affect the volume of the fund as a whole; but production itself leaves it intact. It is this very production which destroys capital goods and makes it necessary to replace them. CHAPTER III THE MEASURE OF CONSUMERS' WEALTH In all stages of social development the economic motives that actuate men remain essentially the same. All men seek to get as much net service from material wealth as they can. The more wealth they have, other things remaining the same, the better off they are, and the more personal sacrifice they are compelled to undergo in the securing of the wealth, the worse off they are. Some of the benefit received is neutralized by the sacrifice incurred; but there is a net surplus of gains not thus canceled by sacrifices, and the generic motive which may properly be called economic is the desire to make this surplus large. Except in a perfectly isolated individual life, there is opportunity for ethical motives to affect men's economic actions. Altruism has a place in any _social_ system of economics, and so have the sense of justice and the positive compulsion of the law. Altruism does its largest work in causing men to give away wealth after they have acquired it, but conscience and the law powerfully affect their actions in acquiring it. These are forces of which Social Economics has to take account; but the more egoistic motive, desire to secure the largest net benefit from the wealth-creating process, is one of the premises of any economic science. This involves a general pursuit of wealth; but men seek the wealth for a certain personal effect which comes from the use of it, and they measure it, when attained, by means of this subjective effect. _How Specific Utilities are Measured._--As the essential quality of wealth is specific effective utility, we measure wealth by estimating the amount of this quality, and it is always a consumer who must make the measurement. He must discover the importance to himself of a small quantity of a particular commodity. The hunter must find out how much worse off he would be if he were to lose a small part of his supply of game and endure some hunger as a consequence. In doing this he gets the measure of the effective utility of any like quantity of game, since any one specific part of his supply is as important as any other and no more so. The estimate of the importance of such a supply of food material has to be made in this specific way, by taking the amount on hand piece by piece, and not by gauging the importance of the whole of it at once. _Value the Measure of Specific Effective Utility._--If any consumer will estimate the importance to himself of a single unit of goods of a certain kind, and multiply the measure so gained by the number of units he is appraising, he will make a measurement of the value of the total amount. _Values not based on the Importance of the Total Supply of Goods._--It is essential that the consumer, in determining the value of a kind of goods, should not estimate the importance of the supply in its entirety, since that would give an exaggerated measure. Measurements of value are always made specifically, and single units of the supply of goods are appraised apart from the remainder. The total utility of atmospheric air is infinite, since the loss of the whole of it would mean the total destruction of animal life; but the specific utility and the value of air is _nil_, since no one limited part of the supply has any practical importance. A roomful of it might be destroyed with impunity. So the cereal crops of the world, taken as a whole, have almost infinite importance, since their destruction would result in universal famine; but each bushel of grain has an importance that is relatively small. The loss of it would impose no serious hardship upon the average consumer, since he could easily replace it. The value of the crop is determined by the importance of one bushel taken separately and by the number of the bushels. If we estimate the importance of one unit of the supply of anything, express the result of the estimate in a number, and then multiply this by the number of units in the supply, we express the _value_ of this total amount. The _total utility_ of it, on the other hand, is measured by the benefit which we get from the supply in its entirety, or by the difference between the state we are in when we have it all and that to which we should be reduced if we lost it all and were unable to replace it. To measure any such total utility we contrast, in imagination, our condition with the full supply on hand and a condition of total and hopeless privation, in so far as these goods and similar ones are concerned. _This Method of measuring Wealth Universal._--These principles apply as well to the economy of a solitary islander of the Crusoe type as they do to that of a civilized society. A Crusoe does not need to measure values for purposes of exchange, but he has other reasons for measuring them. It is for his interest to use his own labor economically, and to that end he should not put too much of it into one occupation and too little into another. When, by reason of a large store of wheat on hand, the specific importance of it is small,--or, if we use a common expression, when the utility of the "final increment" of it, which a man might secure by making an addition to his supply, is small,--he should divert his labor to raising goats or building huts, where the utility of the increment of product to be gained is, for the time, greater. The solitary man thus well illustrates the act of the society which, in its own peculiar way, sends labor from one department of industry where the "final utility" of its product is small to another where it is larger. It is all done by measuring the specific importance of goods.[1] [1] For extended discussions of the relations of utility and value the reader is referred to the works of Jevons, Menger, Von Wieser, Von Böhm-Bawerk, and Walras. A study of "effective" utility and its relations to value, by the writer of the present treatise, is contained in the _New Englander_ for July, 1881. _The Utility of Producers' Goods._--Consumers' goods have a direct utility, which is a power immediately to serve a consumer. Instruments of production, on the other hand, have indirect utility, since all that they are good for is to help produce things that render the immediate service. They have _productivity_, and this has to be measured in determining their value. What we need to know about hoes and shovels, hammers and anvils, spindles and looms, etc., is how much power they have to create the goods that we want for consumption. Here again the measurement has to be made in the specific way. The capital goods have to be taken unit by unit if their value for productive purposes is to be rightly gauged. A part of a supply of potatoes is traceable to the hoes that dig them; but in valuing the hoes we do not try to find out how much worse off we should be if we had no hoes at all. We endeavor simply to ascertain how badly the loss of one hoe would affect us or how much good the restoration of it would do us. This truth, like the foregoing ones, has a universal application in economics; for primitive men as well as civilized ones must estimate the specific productivity of the tools that they use, and make hoes, shovels, or axes according as the procuring of a single tool of one kind becomes more important than procuring one of another kind. Indeed, the measuring of the utility has to be done, as we shall soon see, in a way that is even more specific than this; for the man has to determine not only how many hoes he will make, but how good he shall make them. The quality of each tool has to be determined in a manner that we must hereafter examine with care. The earning power of capital is, as we shall later see, governed by a specific power of productivity which resides in capital goods. _Cost and Utility._--A ripe consumers' good, in exhausting itself on man, benefits him; but during the period in which it is being prepared for use, when it is receiving utilities at the hands of successive producers, it has an opposite relation to the men who handle it. In making the material useful a man confines and tires himself. He is willing to do it if the reward that he expects will more than pay for the sacrifice, but not otherwise. Moreover, this sacrifice itself has to be estimated specifically in a way that is akin to the method of measuring utilities which determines the values of goods. It is necessary for a man to gauge the sacrifice which is entailed on him, not by his labor as a whole, but by a specific part of it. He finds himself in the evening feeling the fatigue and the sense of confinement which the day of labor has imposed and asks himself how much it would burden him to work a little longer. If what he can get by this means pays for the extra sacrifice involved in thus getting it, he will work for the few minutes, but otherwise he will not. His objection to a few minutes of additional work measures what we may call the specific disutility of labor; and men, whether they be primitive or civilized, are forever making such measurements. They consider how much it will cost them to add slightly to the length of their working day or how much it will benefit them to shorten it. In this way they measure the _specific disutility_ of labor rather than the _total disutility_ of it, since they do not gauge the relief that it would afford to cease working altogether. _The Increasing Cost of Successive Periods of Labor._--It is easy to work when one is not tired, and the first hour or two of labor may even afford a pleasure that largely offsets the burden that it entails; but it is hard to work when one is tired and painfully conscious of the confinement of the shop. Adding anything to the length of a working day imposes on a man the necessity of working at the time when the burden is greatest; and shortening his day, for a like reason, relieves him of some of his most costly toil. _The Natural Length of the Working Day._--Any laborer, as his work goes on, hour after hour, is certain to reach a point at which it is unprofitable to go farther. However greatly he may need more goods, he will not need them as much as he needs rest and change. It may be that he has worked twelve hours, and that, by working longer, he can improve his wardrobe, his food, or his furnishings; but if he has a tolerable supply of such things, he will hardly choose to add to it by staying in the shop when his strength has been exhausted and he is eager to reach his home. _Specific Cost at its Maximum a Measure of Specific Utility._--Two very important principles are at work whenever a man is performing labor in order to create wealth. The more consumers' wealth he gets, the less important to him are the successive units of it, and the more do these successive units cost him. The tenth hour of labor adds to his supply of food, but this addition is not as important as the supplies that were already on hand. If we divide the supply into tenths and let the man produce a tenth in each successive hour, the first tenth, which rescues him from starvation, is the most important, while the last tenth, which comes nearest to glutting his appetite, is least important. This last increment, however, is produced by the greatest sacrifice, for it is gained by making the working day ten hours long instead of nine. [Illustration] Let the hours of the working day be counted along the line _AD_, and let us suppose that a man gets unit after unit of consumers' wealth, as he works hour after hour, and the units grow less and less important. The first and most important we may measure by the vertical line _AB_. The second is worth less, the third still less, and the last one is worth only the amount _CD_. This means that the successive units of what we may call general commodity for personal use have declined in utility along the curve _BC_. On the other hand, as the man's labor has been prolonged, it has grown more and more wearying and irksome. The sacrifice that it involved at first was almost nothing, but the sacrifice of the succeeding hours has increased until, in the last hour, it amounts to the quantity expressed by _CD_.[2] As the man has continued to work, the onerousness of working has increased along the ascending line _AC_ until the point has been reached where it is so great that it is barely compensated by the fruits of the labor. The man will then work no longer. If he were to do so, his sacrifice would become still larger and his reward still less. Up to this point it is profitable to work, for every hour of labor has brought him something so useful that it has more than paid for whatever sacrifice he has made in order to get it. Beyond this point this is not the case. The line _CD_ represents the cost of labor at its maximum, and it is this which acts as a measure of effective utility and value. [2] If we should try to describe all the possibilities in the case, we should take account of the fact that a man may get a positive pleasure from his first hour or two of labor and construct a figure thus to express this fact:-- [Illustration] _AC_ is the curve representing the sacrifice entailed by successive hours of labor. [Illustration] In like manner we should have to recognize the fact that the utility of some kinds of goods may not reach a maximum with the first increment, and should construct a utility curve to express this fact. _BC_ here represents the increase and the following decrease in the specific utility of the supply of an article of this kind. _The Coincident Measure of Cost and Utility._--It now appears that the line _CD_ signifies two different things. It measures the utility of the last unit of the man's consumers' wealth, and it also measures the sacrifice that he has incurred in order to get it. These are opposing influences, but are equally strong. The one, of itself, makes man better off, while the other, of itself alone, makes him worse off. At the last instant of the working day they neutralize each other, though in all the earlier periods the utility secured is greater than the sacrifice incurred and the net gain thus secured has kept the man working. _The Point at which Utility and Disutility are mutually Neutralizing._--At a certain test point, then, production acts on man in such a way as exactly to offset the effect experienced from the consuming of the product. Man, as a consumer, has to measure a beneficial effect on himself, and, as a producer, he has to measure an unpleasant effect. He finds how much he is benefited by the last unit of wealth which he gets for personal use, and also how much he is burdened by the last bit of labor that he performs. If this sacrifice just offsets the benefit derived from the final consumption, it is the best unit for measuring all kinds of utilities. A man secures by means of this final and most costly labor a variety of things, for if he works up to this point every day in the year, he will have at his disposal, say, a hundred hours of labor in excess of what he would have had if he had worked a third of an hour less each day. The product of this extra labor will be taken in the shape of goods that are also extra, or additional to whatever he would otherwise have secured. They will represent special comforts and luxuries of many kinds. The values of these goods may be measured and compared by means of the quantity of labor that the man has thought it worth while to perform in order to get them. If he values one of them highly enough to think it worth while to work for an extra period of twenty minutes at the end of a day in order to get it, it may be said to have one unit of value; and if he is anxious enough to get something else by doing this on two successive days, this second article may be said to have two units of value. The savage who, by working for an extra hour, makes some improvement in his canoe, and by doing the same thing on another day makes some improvement in his food, establishes thereby the fact that he values these two additional bits of consumers' wealth equally. If he uses ten hours of the same costly kind of labor in making an addition to his hut, he proves that he values that gain ten times as highly as he does either of the others. Establishing values by means of such final costs is a process that goes on in every stage of social evolution. _Unlike Results of Creating Wealth and Using it Summarized._--Wealth, then, affects a man as a consumer in one way and the same man as a producer in an opposite way. In the one case the effects are favorable, and in the other they are unfavorable. At a certain test point the two effects may be equally strong as motives to action, and so may be said to be equivalent. The man is impelled to work by his desire for a final unit of wealth, and he is deterred from it by his aversion for the final unit of labor which he will have to incur if he secures the benefit. If he performs the labor and gets the benefit, he neither gains nor loses as the net result of this particular part of his labor, though from all other parts of his labor he gets a net surplus of benefit. It is natural to measure all such economic gains in terms of sacrifices incurred at the test point where these are greatest. This is the labor one would have to incur in order to add the means of gratification to his previous supply of consumers' goods. _Minimum Gains offset Maximum Pains._--Running through and through the economic process are these two different measuring operations. Man is forever estimating the amount of harm that wealth does him when he is in the act of producing it, and the amount of good it does him when he consumes it; and there is always to be found a point where the two amounts are equal. It is the point at which gains are smallest and sacrifices greatest. It is at this point that men measure values in primitive life and in civilized life. How in the intricate life of a modern society the measuring is done we shall in due time see; for the present it is enough that we perceive the universality of the law according to which value is best measured by the disutility of the labor which is most costly to the worker. Organized societies do something which is tantamount to this. It is as though the whole social organism were an individual counting the sacrifices of his most costly labor and getting therefrom a unit for comparing the effective utilities of different goods. _How Primitive Man tests Value._--It is a mistake to suppose that what is essential in value depends on the existence of an actual market in which things are exchanged for each other. In a market, it is true, values are established and their amounts are expressed in ways that cannot be adopted in primitive life. When we buy a thing, we help to fix the value of it and of other things which are like it. The mere ratios in which things exchange for each other in a market are, however, by no means the essence of value itself. That is something deeper and is one of the universal phenomena of wealth. Value, as we have said, is the measure of the effective utility of things, a kind of measure that every one is frequently compelled to employ, whether he is making goods for himself or buying them from others. A producer who has the option of making different things for himself needs to know what variety of goods can be increased in supply with the greatest advantage to himself as a consumer. Adding to the supply of any one of them is getting a "final" or "marginal" unit of consumers' wealth. It is something that is needed less than the things that were already on hand. Without making such a comparison of the importance of marginal units of different commodities he cannot use his resources in the way that will do him the most good.[3] [3] [Illustration] The terms _marginal_ and _final_ mean essentially the same thing, but the modes of conceiving it differ. When utilities are thought of as supplied one after another, the last is the least important. We may represent a man's enlarging gratifications, not by such a mere series of quantitative increments, but by an enlarging area. We may draw a series of concentric circles, beginning with the smallest, and let this central area inclose the most necessary forms of consumers' wealth. When we draw a second and larger circle, we inclose between it and the first one a zone which includes those forms which come next in importance. By continuing to draw circles we reach an outermost one which bounds a zone in which are included the least important of the consumer's acquisitions. These are the things which he gets with his costliest increment of labor, and the things which lie beyond the circle last drawn would not pay for the sacrifice which acquiring them would cost. In the accompanying figure the fifth zone includes these "marginal" forms of wealth. _How Isolated Men measure Final Utility._--If a cave dweller possesses a store of one hundred measures of nuts, he measures the final utility and the value of this store in the manner which we have described. If he were to be deprived of the whole stock, he might starve, but this fact does not afford the basis of the value which he puts on the nuts. He measures the importance of this consumers' wealth specifically. He tests the effect of losing one measure and no more, and finds that he could lose the single measure without suffering greatly. The difference between having an appetite fully satiated and having it very nearly so is not serious. [Illustration] Let _AD_ represent the savage's total supply of food. _AB_ will represent the utility of the first unit; _CD_ of the hundredth. If we supply the food unit by unit, the utility of the successive increments will decline along the curve _BC_. When the man has a hundred units of food, no one unit of it is worth any more than the last one, since if any one were taken away, the last one could be put in the place of it. The _total absolute utility_ of the food is measured by the area _ABCD_, but the total _value_ will be represented by the rectangle _ADCE_. The area _EBC_ measures the surplus of utility contained in the earlier units in the series. _The Motive for measuring Values in Primitive Life._--Even the cave dweller would have to measure values, and would thus have to apply the principle of final utility, because he would need to spend his limited productive energies in the way that would do him the most good. When he is nearly satiated with food, he needs other things more than he does food stuffs. If he has secured so much of one product that any additional amount that he may get by an hour's labor would be of less use to him than what he could get of some other product by the same amount of labor, it is important for him to change his occupation and produce that thing of which an additional unit--which will perhaps be the final unit of this more desirable article--has the higher degree of usefulness. _Final Utility and Labor Cost._--On the supposition that a small store of roots and nuts were incapable of being replaced by any amount of effort and that no other food were to be had, the utility of it would be indefinitely great, since the man's life would depend on this one increment of food alone. A man would value that life-sustaining good for what it would do for him and without any reference to the amount of work he had performed in order to get it, or to the amount he would have to perform in order to get another store like it. On the supposition that by labor the man could replace this essential supply, the effective utility of it would be gauged by the sacrifice he would have to make in order to replace it. The effective utility of any unit of a good that an hour's labor will produce can never be more than enough to offset the disutility of a marginal or final hour of labor; and thus even a single unit of replaceable food stuff, even when it stands alone and constitutes the whole supply, is valued according to the cost of getting another one like it. A man will prize it according to his dread of the sacrifice involved in getting the duplicate. If he gets this by adding an hour of labor to his day's work, this fact is an evidence that the importance of the original supply of the food is measured and expressed by this personal cost of replacement; and as any similar quantity in a large supply of food can be duplicated by the same amount of labor, it appears that, by a standard based on cost, the _effective_ utilities of all units are equal, that of each one is measured by the "disutility" of an hour's labor and that of the whole supply is this amount multiplied by the number of units that this supply contains.[4] [4] [Illustration] Although we may use the terms _final utility_ and _effective utility_ in a way that makes them nearly interchangeable, it is clear that the qualities for which the two terms stand are by no means identical, and that effective utility must be studied in any complete analysis of value. In distinguishing final utility we assume that the units of the supply of goods of a particular kind are furnished one by one, and we measure the absolute utility of each unit. The line _AB_ measures the _absolute_ utility of the first unit supplied. This measurement does not take any account of the cost of replacing this unit, for it does not recognize the possibility of replacing it. What is estimated is the absolute importance of the service which this first unit of the article renders, on the supposition that, if this first increment of the supply were wanting, the service would not be rendered at all. It is, in like manner, the absolute utility of the successive increments supplied which declines along the curve _BC_. _DC_ measures the _absolute_ utility of the final increment, and the area _ABCD_ the total absolute utility of the supply. If the goods can be reproduced by labor, the total effective utility is less, since it is measured, as we have seen, by the amount of sacrifice which the replacing of one lost unit would entail multiplied by the number of units in the supply. It is the amount expressed by the area _AECD_ which is the amount of the value of the goods, since measure of effective utility and value are the same, both in the case of a single unit and in that of a total supply. We have discovered two reasons why the effective utility of any one of the earlier units is equal to the absolute utility of the final one. The first reason is that, if any one of them were lost, the final one would be put in the place of it and the consumer would suffer no loss except what would be entailed by going without the last unit. The second reason is that if the consumer should lose any one of the earlier units, he could replace it by the same amount of labor that would replace the final one. We have seen that the line _DC_ of the figure expresses not only the absolute utility of the final unit of goods, but the disutility of the labor of reproducing it or of reproducing any other unit. The cost of replacing the whole supply is expressed by the area _AECD_, on the supposition that the units are replaced, one at a time, by means of labor performed at the end of several working days when the sacrifice is greatest. Total value is thus quantitatively equivalent to total _effective sacrifice of replacement_, as well as to total effective utility. If, by adding a brief period to the length of one working day, a man can make good the loss of one unit of the goods, by adding the same period to the length of a number of working days, he can make good the loss of the total supply. For simplicity we assume that the man's physical condition remains unchanged, and that an extra hour of labor at the end of any one day costs him as much as it would at the end of any other. _How Primitive Man measures the Productivity of Labor and Capital._--There is a truth relating to producers' wealth that resembles the truth that we have just stated with regard to consumers' wealth. The more consumers' goods of one kind a man has, the less is the value that any one of them has to him. The more producers' goods of a given kind a man has, the less is the efficiency that any particular one of them possesses as an aid to labor. The last bit of bread serves the man himself in a less important way than does the first, inasmuch as it gratifies a want that is less intense; and the last implement of a given kind--the last hatchet or spade or arrow--helps him less in his productive operations than did the first one. On the one hand, we have the law of the diminishing utility of successive units of consumers' goods, and on the other hand, we have a parallel law of the diminishing productivity of successive increments of producers' goods. _The Necessity for measuring the Productive Powers of Capital Goods even in Primitive Life._--Now, it is necessary for every producer, though living in the simplest possible manner, to measure in some way the efficiency of the last unit of each kind of productive instrument that he uses. He has, let us say, a certain number of hatchets and of arrows, and he can produce one hatchet with the same amount of labor that would produce an arrow. Now, if a hatchet will do more good than an arrow, he will direct his energies to the making of the hatchet. It is important that any producer should bring the final units of the different parts of his equipment to a certain uniformity of producing power. He must not go on adding to the stock of implement No. 1 when implement No. 2, which could be had by the same expenditure of labor, would do more good; nor must he add to the stock of either of these after he has acquired such a supply of them that the first unit of implement No. 3 would be of greater importance. Measuring the efficiency of producers' goods is necessary in the case of every one who creates wealth at all, and such measurements reveal the fact that the more producers' goods of one kind a man has, the less is the productive power that resides in one of them.[5] [5] The law of diminishing returns of successive units of _capital goods_ is based on the same principle as the law of diminishing returns of _capital_, but it is not identical with it. We shall see, in due time, how a permanent fund of producers' wealth actually grows and why each new unit, as it adds itself to the fund, creates a smaller income than did its predecessor. _The Foregoing Truths Universal._--All the general facts which have been thus far stated hold true wherever wealth is produced. They do not presuppose the facts of a division of labor and a system of exchanges, and they do not even require that there should be any social organization. Men in the most primitive tribes and even men living in Crusoe-like isolation would create wealth by labor aided by capital. The essence of that wealth would be effective utility, and the measure of this, which is value, would be made in the specific way that we have described. The varieties of capital, the distinction between capital and capital goods, and the law of diminishing productivity of such goods would appear in the most primitive economics as well as in the most advanced. These are by no means all of the facts and principles which are thus of universal application. They are merely a few of the more important and may serve as a foundation or a "Grundlegung," for further study. If we should extend our list of general and basic truths, it would quickly appear that the incomes that have been treated as rent and the various surplus gains which are analogous to rent are universal economic phenomena which it would be not illogical to discuss in the preliminary part of this treatise. What has been stated, however, concerning the laws of diminishing productivity of successive units of producers' wealth, concerning the diminishing utility of successive units of consumers' wealth, and also concerning the increasing burdensomeness of continuous hours of labor, presents the essential principles on which all rents and quasi-rents rest. It is best to study the applications of these principles as they are made in a civilized state. _Universal Economic Truths independent of the Special Facts of Sociology._--This first division of economic science borrows none of its premises from sociology, for the truths which compose it would abide if there were no society in existence. Basic facts it takes from Physics, Biology, Psychology, Chemistry, etc. Facts concerning man, nature, and the relation between them are material for it, but relations between man and man come into view only in the later divisions. There, indeed, they do come into the very foreground with results which immeasurably enrich the science. What we may call the socialization of the economic process we shall have next before us, and we shall find it full of critical problems involving the future well-being of humanity. Industry is carried on by a social organism in which men are atomic parts and to which nature has given a constitution with laws of action and development. We have first to study the nature of this industrial organism and the mode in which it would act if it were not subject to any constitutional change; and later we must study it in its process of growth. The economic action of a society which is undergoing no organic changes is the subject of Social Economic Statics, while such changes with their causes and effects constitute the subject of the science of Social Economic Dynamics. CHAPTER IV THE SOCIALIZATION OF INDUSTRY We have now before us a few principles of so general a kind that they apply to the economy of the most primitive state as well as to that of the most advanced. It is not necessary that men should live in any particular relation to each other, in order that, in creating and consuming wealth, they should exemplify these principles. They would do this even though they never came into touch with each other, but lived, as best they could, each man on his solitary farm. Laws of this general kind result from man's relation to nature, and not at all from the relation of different men to each other. Let a man keep wholly aloof from other men, apply his labor directly to nature, and he can produce wealth of the various kinds that we have described. He can secure food, clothing, and other things for his own use, and he can make tools to help him in securing them. He will appraise the consumers' goods according to the law of what has been called _final utility_ or, in another view, effective specific utility, and he will also test the comparative usefulness of his various tools by an appeal to the law of final or specific productivity. _Social Economy the Chief Subject of Study._--We care most to know how an organized society produces and uses its wealth, and in making this inquiry we encounter at once phenomena that are not universal. The civilized society creates its wealth coöperatively, by the joint action of its various members; that is, it proceeds by means of a division of labor and an exchanging of products. Moreover, it has, in some way, to share the sum total of its gains among its various members. It has to apportion labor among different occupations for the sake of collective production, which is a grand synthetic operation whereby each man puts something into a common total which is the income of all society. It has, further, to divide the grand total into shares for its different members--an analytical operation in which each man takes something out of the aggregate for his personal use. This is distribution in the narrower sense of that term--the apportionment among the members of a civilized society of the fruits of production. In the wider sense the term also includes the apportionment of the sacrifices incurred in the joint production. Distribution, as thus defined, is the element that appears in economic life in consequence of social organization. This is a secondary element, indeed; for man, nature and their relations and interactions are the primary facts, and the relations of men to each other come logically after these. Social organization, however, is so transforming in its effects as to reduce to small proportions the amount of attention it is worth our while to devote to the economy of the primitive types of life. It is necessary to make some study of that economy, for it is thus that we place before ourselves the fact that there are universal economic laws and perceive distinctly the nature of some of the more important of them. _Facts Peculiar to Socialized Industry._--The term _Political Economy_ denotes a science of industry[1] as thus socialized, for it is a science of the wealth which is produced in an organized way by the people of a more or less civilized state. The general truths which we have thus far stated apply to such an economy, indeed, but they also apply to the wealth-creating and wealth-consuming processes of uncivilized peoples, and even of isolated individuals who have no dealings with each other. They are truths of Economics in the unrestricted sense, and we have now to study the special truths of _Political_ Economy. When production goes on by division of labor, as when one man works at one occupation and another at another, phenomena appear that do not appear in more primitive life; and still others appear when, within each occupation, there is a division of functions between the laborer and the capitalist, as is the case whenever one set of men furnish tools of production and another set do the work. The special laws of this highly developed economic system require far more extended study than do those more general laws which are common to it and simpler systems. We now continue to recognize the universal and basic truths which have been stated in the foregoing chapters and proceed to the study of the special principles which apply only to organized economic life. [1] We use this term in a broad sense, including agriculture and commerce as well as manufacturing. _Specialized Production the Means of Diversified Consumption._--As the kinds of goods that we individually make become fewer, the things which we get and use become more numerous and varied--such is the law of economic specialization. Society as a whole produces an infinite variety of things, and the individual member of it secures for himself goods of very many kinds. The typical modern worker is, in his production, a very narrow specialist, but in his consumption he is far less a specialist than was the rude hunter who was able to enjoy only the few goods which he himself produced. The modern worker's tastes are omnivorous, for he has developed an immense variety of wants and, through social organization, he has acquired the means of satisfying many of them. _The Position of Individuals in the Producing Organism._--When we say that production has been socialized, we mean something very far-reaching. We mean that an organization has grown up in which men are members or parts of members, and that this great organization has undertaken to do the productive work for all the individuals that compose it. For the first time we now recognize a sociological fact among the premises of economic science. When men, whose predecessors may have lived in isolated families or in a society organized for defense or for the mere pleasures of association, now develop a truly economic society, the individual depends on other individuals as well as on nature for the supply of his wants. Economic independence gives way to interdependence, because the fortune of each man is largely dependent, not merely on his own efforts, but on the relations which he sustains to other men. Simple laws of nature still largely control his income, but social laws also have a certain control over it. _Exchanges in their Primitive Stage._--The exchanging of products is, of course, the process with which the organization begins, and this process is introduced by easy and natural stages. The man who at first makes everything for himself develops a particular aptitude for making some one thing; and, though he may still continue to make most things for himself, he finds it advantageous to barter off a part of the supply of the one article for the making of which he is especially well fitted. He seeks out a neighbor whose special aptitude lies in a different direction and who has a surplus of some other article. It may be that one is a successful fisherman and the other is, by preference, a maker of clothing, and that they can get a mutual benefit by an exchange of food for raiment.[2] [2] If we were giving a history of the division of labor, we should have to record the effects of differences of climate and of agricultural and mineral resources in occasioning, at an early period, a territorial division of labor. We are here describing the division of labor which occurs within a society and in consequence of what may be called social economic causes. _The Intermediate Type of Exchanges and the Final One._--In the next stage a man becomes wholly a specialist, making one kind of product only and bartering it away for others. It might seem, at the first glance, that differentiation has now done its full work; but it is very far from having done so. Making one complete good for consumption is still a complex operation, which can advantageously be subdivided in such a way that one man produces a raw material while another works it up into a useful shape. A gain may be made by a further division of the manufacturing process, whereby the first worker makes only the rawest material, another fashions it somewhat, a third carries the process farther, and a fourth or a still later one completes it. In modern industry the material must often pass through very many hands before it is ready to be made over to the consumer. Each man in the series puts a touch on it and passes it on to his successor. A´´´ A´´ A´ A A´´´ is an article of consumers' wealth and A is the rawest material that enters into it. A´ is this material somewhat transformed; A´´ is the same material after it has received the second transformation and needs only a final touch to convert it into A´´´, in which state it will be ready for the consumer's use. We have here a symbol of what is actually taking place in the industry of the world. Cattle are grazing on western ranches; hides are tanning in the woods of Pennsylvania; leather is going through the many changes that fashion it into shoes in the mills of Brockton; shoes are arranged on the shelves of retailers in New York in readiness for the people who are to wear them. These are stages in the making of a single product, and a thousand different products are coming into existence in a like way. _A Representation of the Groups, or Specific Industries, which compose Economic Society._--If we put beside the series of A's a series of B's and one of C's, we have a much simplified representation of what is actually taking place. There are, in reality, a myriad of different things which almost every consumer uses, and every one of them is made by a series of productive operations like the one we have described. The very fact that there are so many of them that it is hopeless to try to represent them all in the table makes it desirable to illustrate the principle by tabulating only a few and to assume that these few are all that there are. For the purposes that we have in mind it is entirely safe to suppose that a series of A's, one of B's, and one of C's represent all the consumers' goods that society uses. What we wish to ascertain is how the different series work together to furnish an income for each member of society. _The Organization Spontaneous._--Laborers can go where they will, and yet they are in some way brought into an orderly relation to each other, being placed in certain proportions in different industries. Capitalists also are free to invest their funds as they will, and yet there is a certain amount that is naturally devoted to each branch of business. How this apportionment takes place we can most readily ascertain by creating such an imaginary and very much simplified society as this table furnishes. A´´´ B´´´ C´´´ A´´ B´´ C´´ A´ B´ C´ A B C The series of A's, which we have already studied, represents one kind of raw material ripening into a finished product. B represents a second kind of raw material, which, like the A, is produced by its own set of workers and is then passed on to a second, who transform it into B´--a partly finished product. These then pass it on, as the corresponding set of men passed on the A´. They hand it over to a set of workmen who change it into B´´, a nearly completed product, and these hand it over to men at B´´´, who, by giving the final fashioning, bring it into the form of a finished consumers' good. The C's represent another general group of workers who transform the raw material, C, into the finished product, C´´´. _Industrial Groups and Subgroups._--Each of these more general bodies of workmen and employers, such as the entire series of A's, we may call an industrial group, and the divisions within each of them, such as A´ or A´´, we may term subgroups. The product of a group is a complete article, while that of a subgroup is not a complete article nor any part of an article that can be taken bodily from it. Yet it is a distinguishable element in the article. The product of the shoe factory is certainly not complete shoes, for the owners of the factory buy leather which has already passed through the hands of tanners; and the tanners themselves bought it in the shape of raw hides, which were furnished by still earlier producers. What the shoe factory has done is to impart a new utility to dressed leather by transforming it into shoes. It would be impossible ever to get that utility out again, or to point to any one part of the shoe as the only part that contains it. What the factory has really made is therefore a utility--a distinguishable quality which pervades a concrete thing. It makes the difference between the leather and the shoes. What the tanner has created is, in like manner, another utility, which makes the difference between raw hides and leather. Groups, then, in their entirety produce whole articles for direct use, while subgroups produce distinguishable utilities which are embodied in such articles. The sum total of all the different utilities constitutes the article. It is a complex of useful qualities held together by the fact that they are attached to the same original matter. _Proportionate Production._--All the subgroups working together in an orderly way not only produce the consumers' wealth that society needs, but produce the different kinds of consumers' goods in nicely adjusted proportions. Unless the general order of the group system is disturbed, there is a normal amount of A´´´ put on the market and also normal amounts of B´´´ and C´´´. This result is attained by influences that run through the productive organism and bring about an adjustment of the comparative amounts of labor in the different occupations. If competition worked quite freely, this adjustment would be so nice that no military apportionment of forces among different brigades, regiments, etc., made consciously and by the most intelligent commanding officer, could surpass the perfection of it. There would be also an equally fine adjustment of the comparative amounts of capital devoted to different industries. In the actual productive organism each man goes where he will--capitalist, laborer, and employer of capital and labor alike. Each man acts in this respect as though there were no such thing as coercion, and as though he might, with unchecked freedom, do solely what is good in his own sight. By reason of the fact that all are seeking to produce what they can in order that they may get what they can, there comes into operation an organic law which brings the groups and subgroups into a delicate balance, in point of size and output, whereby the grand total of force that society commands is prevented from making too much of one product and too little of another, and is made to do its utmost in getting a large sum total of wealth for the benefit of its various members. _What the "Division of Labor" Involves._--This is the real signification of what it has been common to call the division of labor. It is the socialization of labor, or the gathering of isolated laborers into a great organism that, entirely without coercion, determines in some way what each one shall do, and not only makes the product of the whole a myriadfold greater than without any organization it could be, but causes this product to take certain well-adjusted shapes which, as we shall later see, serve consumers better than they could be served by products in misadjusted proportions. _Capital as well as Labor Apportioned._--As we have said, there is a corresponding division of capital or an assignment of different parts of the total fund to different employments; and this is made in the same way as is the division of labor and results in an equally nice adjustment. Each bit of capital, like each workman, becomes, as it were, a specialist. It may take the shape of an instrument which is capable of performing only its one service, like the loom, which is capable of doing nothing except weaving; but even if the tool is somewhat adaptable, like a hammer which can be used in several trades, it is, as it were, stationed in one trade and held, by economic influences, at that one point in the system. The house carpenter keeps his hammer though the cabinet maker could use it. Each bit of capital helps to create a particular utility, and the number of units of the fund that each subgroup contains is, as we shall see, so arranged as to enable the fund as a whole to do its utmost for the general good. It is all without the use of force, since each bit of capital does what its owner pleases to have it do. _A Government Presupposed._--Of course there must be a government over it all. Such a method of producing wealth could never continue unless property were secure and unless it were made so without much effort on the part of its owners. A blacksmith who should have at one moment to use his hammer as a tool and at another to wield it as a weapon of defense could make but poor headway, and a society in which such a state of things existed in various trades would be too anarchic to permit the elaborate division of trades which is the key to success in industry. The most noticeable fact about organized production is that man is forever letting go the thing he has made or helped to make and allowing it to pass out of sight and reach without losing or greatly imperiling his title to the amount of wealth it represents. He casts his bread on the waters, but they bring him a return for it. Under these circumstances it is impossible for him to protect his product as the savage protects his tools, his clothing, and his hut. What a modern worker makes passes into the hands of other men and gets completely out of the maker's direct personal control. If he wanted it again, he could never find it; and if he could find it, it would be in a new shape and other men would have claims upon it. The man who has sold some hides that in the end have become shoes can hardly identify his product on the shelves of retail shoe dealers all over the country, or perhaps all over the world. If by a miracle he could find the particular bits of leather that in their raw stage he himself has furnished, they would be in new and far more valuable forms than they were when he had possession of them. The shoes contain utilities which the man who furnished the hides cannot claim to have created. They have been changed and improved by elements contributed by many other persons, such as manufacturers, carriers, merchants, etc., and he could never carry away the concrete thing that he himself produced without carrying with it other men's property. _The Surrendering of Goods and the Retention of Values Features of Social Industry._--Socialization of industry means, then, that individuals forego all effort to retain their own concrete products, but that they retain certain parts of the value of the products to which they have made contributions. The value of A´´´ when it is sold is claimed by men at A´´´, A´´, A´, and A according to some principle. The values of B´´´ and C´´´ can be followed until they reach the pockets of the men who have contributed their several shares to the making of these things. All this requires a government and a well-developed system of laws and courts for the protection of property, including the protection of it in the form of a claim to a value that is embodied in things which have gone beyond the maker's reach. Property here takes a refined form which requires that the man should forego all desire to keep the literal thing he has made and should make it his aim to retain the value of it in some other form. It is a comparatively simple matter to guard a concrete article which a man has in his possession, though even that requires some energy on the part of the police force and is never quite perfectly accomplished; but it is a far more difficult matter to enforce a claim that a man has against other men, in consequence of some utility that has been created by him but has gone away from him and mingled with utilities created by many other persons in a product that the man will never see. It is the problem of guaranteeing to the shoemaker the due return for the stitches he has put into shoes when the shoes themselves have gone to buyers and wearers in every quarter of the land and many quarters of the globe. _Groups under a Socialistic State._--In _political_ economy as distinct from _general_ economy we take one premise from sociology and another from politics. We assume that society exists and that it has taken on a political character, by establishing laws with courts to interpret them and officials to enforce them. We do not, however, assume that the direction of industrial affairs is in the hands of such officials. In the main industry is organized in a spontaneous way. Men choose such occupations as they like, and when there are too many of them in one group and too few in another, the rewards naturally increase in the group where a larger force is needed, and this lures men in that direction. In a socialistic society such adjustments would be made under the direction of the state. Officials would have to decide when more workers are needed in the A series and less in the B series and would have to use either inducements or some kind of compulsion in order to move them from the one group to the other. What we actually have to deal with is a society that shapes itself by the free acts of individuals, and we have to see how, in this way, it organizes itself for production and divides among different claimants the product that, by the joint action of all of them, it creates. _Gains from the Organization of Industry._--The advantages of the division of labor consist in an increase in the quantity of products and in an improvement in their quality, and the quantitative gain is almost beyond computing. The advantage appears mainly in the middle and upper subgroups of the series, which transform the materials, rather than in the lower subgroups, which produce them; and yet there is a gain everywhere from such organization. A man produces far more when he performs the same operation many times than when he goes through a whole series of unlike operations. Moreover, he can perform the single operation far more accurately and can thus attain a more perfect result. He can learn his minute trade more easily than he could a complex one. Where unusual strength or skill is required, the work may be given to persons who have the requisite quality so that a good product can be insured, and none of the labor of these superior workers will need to be wasted on work which inferior labor can perfectly well perform. _Improvement in the Forms of Capital._--The greatest of all the advantages that come from this division and subdivision of wealth-creating processes comes in the way of applying machinery. A machine is a hopeless specialist and can, as a rule, put only a single minute touch on the material submitted to it; and the introduction of machines differentiates capital in a way that is parallel to the minute subdivision of labor. If the machine is to work at all economically, it must put its touch quickly on one after another of a series of articles, as they are submitted to it in uninterrupted succession. If only one kind of machine were employed in the making of shoes--if, for instance, the sewing of the uppers to the soles were done on sewing machines, even though all the rest were done by hand--it would be natural and almost necessary to have one class of workers to prepare the uppers, another to prepare the soles, and a third to sew them together by aid of the machine. When the several stages of the process are thus given over to different classes of workers, the situation is ripe for the application of more machines, and inventors readily devise apparatus that will perform one or another minute part of the manufacturing process. In the end most branches of manufacture take such shapes that the raw material is intrusted to a series of machines and passes from one to another by a nearly continuous movement, till it emerges from the hands of these automata as complete as any manipulation can make it and ready for the merchants who will convey it to their customers. _Economy of Capital._--There is an economy of capital involved in the fact that instruments can be used thus continuously. A worker does not have to have several sets of tools, many of which would be idle the greater part of the time, as would be the case if the man performed several unlike operations; but the greatest economy comes from the energy, rapidity, and accuracy with which the new instruments act. The tools are far more efficient than they could be if human muscles furnished the power and eyes and nerves supplied the deftness and accuracy that the making of the goods requires. Automata which men set working excel hand tools with men wielding them by a greater ratio than can be calculated. CHAPTER V PRODUCTION A SYNTHESIS; DISTRIBUTION AN ANALYSIS The essential fact about production, as it is carried on by all society, is that it is a synthetic operation, by which a grand total is made up by the contributions of different industries. There is a corresponding fact about the production which is carried on within a particular line of business, or, as we should express it, within a particular subgroup; for within the subgroup there are laborers, on the one hand, and capitalists, on the other, helping each other to make a joint product. In our table A´´´, B´´´, and C´´´ are the goods of which the social income is composed. Subgroups, such as A, A´, etc., help to make this grand total of finished goods; but in A, A´, and all the other subdivisions there are laborers and capitalists working together. Farming, mining, cotton spinning, shoemaking, building, and a myriad of other occupations all work together to create an aggregate of goods which constitute the social income. In each of these branches of business there are men and working appliances contributing each a part to the quota that this branch furnishes. _Distribution as an Analysis._--The essential fact about distribution is that it is an analysis. It reverses the synthetic operation step by step, resolving the grand total produced by society into shares corresponding with the amounts contributed by the specific industries, such as mining, cotton spinning, shoemaking, etc. The men who own and work the mines do not keep the ore they secure, nor do they wish to keep it. The ore goes into a stock of goods for the general use of society, and it constitutes a definite addition to the value of that stock. As ore it is transmuted into a myriad of forms, merged with other materials and lost; but the amount that it adds to the total product of society is definite. It is a certain definable quantity of wealth, and that quantity of wealth the producers of the ore should get for themselves. Distribution further resolves the share of each particular industry into final portions for the use of the laborers and capitalists in that industry; and these correspond with the amounts which these laborers and capitalists contribute. The result of distribution is to fix the rate of wages, the rate of interest, and the amount of the profits of employers, if such profits exist; and the general thesis which is here advanced and remains to be proved is that, if society were without changes and disturbances, if competition were absolutely free, and if labor and capital were so mobile that the slightest inducement would cause them to pass from one branch of business to another,[1] there would be no true profits[2] in any business, and labor and capital would create and get the whole social income. Moreover, each laborer and each capitalist would get the amount of his personal contribution to this sum total. Amid all the complications of society the modern worker would be in a position akin to that of the solitary hunter in a primitive forest--his income would be essentially of his own making and would include all that he makes. He would not, like the primitive man, get the literal things that he fashions, but he would get the _amount of wealth_ that he creates--the value of the literal products which take shape under his hand. [1] It will be seen that we here assume for the process known as competition a degree of perfection which it does not attain in actual life. This process would be absolutely free if labor could and would instantly abandon one industry and enter another whenever it appeared that it could create an increased product by so doing, and if capital also moved with the same promptness on the smallest inducement. In actual life there is friction to be overcome in the making of such transfers, and this constitutes one of the subjects of the theory of Economic Dynamics and will in later chapters be fully considered. Whenever either labor or capital thus moves to a new place in the group system, it becomes an active competitor of the labor or capital that was already there. We need a definition of the competing process. In the case of producing agents it consists in a rivalry in selling. The laborer who moves from A´ of the table that, in the preceding chapter, has been used to represent organized industry to B´, offers for sale, as some would say, his service, or more accurately, the product which his labor can create. The purchasers are the employers in the subgroup B´, and in order to induce them to accept the new labor it is necessary to offer it at a rate of pay which will make it worth their while to take it. If the workers already in this division of the field are getting just what they are worth, a larger force cannot be employed at the same rate of wages, because, for a reason that will later appear, the new labor cannot offer for sale as large a product as an equal amount of the labor that is already there. If the transfer to B´ were made, the new labor would have to accept lower pay than the old has been getting, and the old labor would be forced to accept a cut in its rate of pay or be supplanted by the new. A rate sufficiently low would insure the employment of all. If the labor formerly in this subgroup has been getting less than it is worth, there will ensue a competition among employers who desire to realize, each for himself, the margin of profit which can be made by getting additional labor, and this will either raise the pay of the men already in this subgroup or call new men into it, or do both. In any case it will, in the absence of all trace of monopoly on the side of the employers, end by giving to the men what they are worth. It is, in fact, such a bidding for new labor by employers in any branch of business that moves labor from point to point in the industrial system. The _entrepreneur_ is the agent in the case, profits are the lure, and competition--rivalry in buying--is the means; and competition is, as we use terms, absolutely free whenever it is certain that the smallest margin of net profit will set it working and draw labor or capital to the profit-yielding point. There is competition among the _entrepreneurs_ at A´´´ in selling this finished product to the consuming public, and among different purchasers in buying it. Whenever the price of A´´´ is so high that the whole output of it cannot be sold, each vender tries to supplant others and insure a sale of his own product rather than that of any one else. Competition here is overt and active. When all can be sold at the current price, finding a market for one vender's supply does not require that he win away another's customers, and although the different sellers continue to be rivals and each would welcome an increase of patronage made at others' cost, no one is forced to underbid others in order to continue to sell his accustomed output. Competition is here quiescent, since actual underbidding and the luring away of rivals' customers do not take place. When _entrepreneurs_ who are not now in the subgroup A´´´ are ready to enter it and to become rivals of those already there whenever any profit is to be had by such a course, their competition is not actual but potential; and yet it is a real influence and serves to deter producers already in the field from establishing such a price for their product that the possible competitors will become real and active ones. These three influences may conceivably act without obstruction or may be hindered and deprived of much of their power. In actual life they are subjected to hindrances, and whether they shall hereafter insure a certain approximation to the general state which a perfectly free competition would insure or whether the economic condition of the world shall be permitted to drift far from that normal state, depends on the success which governments will have in reducing or removing the hindrances. [2] In this treatise the term _profits_ will be used to designate the net increase which may remain in employers' hands after paying the wages of labor of every kind and interest on all capital used. The term _gross profits_ describes a sum made up of this net profit and interest on the capital. _Standards of Wages and Interest._--This accurate correspondence between men's incomes and their contributions to the general earnings of society would exist only in the absence of certain changes and disturbances which it will be our aim, in the latter part of this work, to study. These changes give to society the quality that we shall term _dynamic_, and we shall examine them at length. What can, however, be asserted in advance is that the rates of wages and interest which would prevail if the changes and disturbances were entirely absent constitute standards toward which, in spite of all the changes that are going on, actual wages and interest are continually tending. How nearly in practice the earnings of labor and capital approximate the ideal rates which perfect competition would establish is a question which it is not necessary at this point to raise. We have to define the standard rates and show that fundamental forces impel the actual rates toward them. The waters of a pond have an ideal level toward which they tend under the action of gravity; and though a gale were to force them to one end of the pond and cause the surface there to stand much higher than the surface at the other end, the standard level would be unaffected and the steady force of gravity would all the while be drawing the actual surface toward it. In our study of Economic Dynamics we shall encounter influences which act like the gale in the illustration, but at present we are studying what is more akin to gravity--a fundamental and steady force drawing wages and interest toward certain definable levels. In our present study of Economic Statics we must seek to discover how these standards are fixed, in the midst of the overturnings which industrial society undergoes. A´´´ B´´´ C´´´ H´´´ A´´ B´´ C´´ H´´ A´ B´ C´ H´ A B C H We have already represented, in a highly simplified form, the synthesis by which the goods which make up the income of society are produced. A, B, and C represent different raw materials, and they are changed by a series of transmutations into A´´´, B´´´, and C´´´, which stand for all the consumers' goods that the society uses. They represent food, clothing, furnishings, vehicles, and countless means of comfort and pleasure. _The Making of Active Instruments of Production._--It is necessary always to have and use a stock of tools, machines, buildings, and other active instruments of production; and as these wear out in the using, it is necessary that there should be persons who occupy themselves in keeping the stock replenished. Under a system of division of labor there would be special industries devoted to the making of new appliances of production to take the place of those which are worn out and discarded, and also to make repairs on those which are still in use. For illustration, we may let the symbol H´´´ represent all active capital goods that the society uses, the various raw materials which enter into such active goods being represented by H and the partly made instruments by H´ and H´´. If the stock of appliances is not growing larger, just enough of the articles H´´´ are made to replace the discarded ones. No producer gets new machinery, but every one keeps his stock intact. _The Simplified Representation Correct in Principle._--We have now a very simple representation of what actually goes on under the name of the division of labor, and yet the representation is in essential points accurate. In reality a very detailed and minute division and subdivision of industries takes place and the varieties of goods produced are innumerable. Society, as a whole, is making the most highly composite product that can be conceived; namely, consumers' wealth in its countless forms. Each of the grand divisions of society--the general groups that we have represented by the series of A's or of B's--makes a complete article; but even that is in its own way far more composite than the symbol indicates, for it is apt to contain several kinds of raw material and to be made up of a large number of distinct utilities, each of which has its own set of producers. This complexity of the process of production does not change the principle of distribution, by which the product is virtually analyzed into its component elements and the value of each element is assigned to those who create it. This principle can be clearly represented by assuming that each subgroup has one distinct utility to create and that it takes only four of these to make an A´´´, a B´´´ or a C´´´. _A Synthesis within Each Subgroup._--There is within each subgroup a synthesis going on, and this also may be complex. Labor and capital dig ore from the ground--an unusually simple process; and yet there are several distinct operations to be performed before the ore is ready for smelting. When it comes to fashioning the metal into useful shapes, the operations become very numerous and require many subordinate trades even for the making of one product. How many mechanical operations go to the making of a bicycle, an automobile, or a steam yacht? Too many to be represented in any table, but not enough to change at all the principle according to which those who help to make one of these composite products are paid according to their contributions to it. We may consider that all the work that is done in one kind of mill creates one utility. Though there are many subtrades in making a shoe and many more in making a watch, we may proceed as though there were only one transformation of the raw material required in each case. We may let the division between the contiguous subgroups be made commercially rather than merely mechanically, and regard the establishments that buy material and sell it in a more highly wrought condition as moving it forward by one stage on the road to completion, however many changes they may have made in it in the different departments of their several mills. The difference between shoes, on the one hand, and the leather and findings of which they are made, on the other, thus passes for one utility. A manufacturer of shoes puts his leather and findings through many operations before he has shoes for sale; but it is convenient to call all that the manufacturer imparts to these raw elements before he makes them over in their new form to the merchant, one subproduct. _Further Complexities which may be Disregarded._--One man may be in several of the general groups. It is possible, for example, that he may furnish raw materials which enter into more than one finished article. Iron is so extensively used that it goes into more products than can easily be counted. The man who digs iron ore contributes to the making of bridges, rails, locomotives, buildings, machines, ships, and tools in indefinite number and variety. The price of each of the articles into which any of this material goes contains in itself the price of that part of the raw material which goes into it. There is steel in a ship, and the maker of that part of the output of raw steel which goes into a ship gets his pay from the price of the vessel; and so with the crude metal which goes into a bridge, a building, an engine, etc. What the producer of a material gets from each source tends, under perfectly free competition, to equal in amount what he contributes toward the value of the corresponding article. In terms of our table a miner may furnish ore from which iron is taken for the making of both A´´´ and B´´´; and if so, when the distributive process analyzes these products into their elements, the value of what he has in each case contributed will fall to him. He will be paid according to the help he has afforded in the making of the A´´´ and the B´´´, and this fact does not change in principle the manner in which the income of society is divided. If the man helped to make only one thing, he would get a part of the price of that one thing; but if he helps to make several, he will get a part of the price of each of them. Each group has one grand function to perform, such as the making of an A´´´, and if the man helps in more than one, and is paid accordingly, his total pay is according to the amount he produces in all the different functions he performs, and the principle of distribution works as perfectly as it would if the man were confined to the single subgroup A. For simplicity we assume that he is so. _The Functions of Capitalist, Laborer, and Entrepreneur often performed by One Person._--One person may perform several functions, not only by contributing to the products of several groups, but by contributing in more than one way to the product of one subgroup. He may, for example, both labor and furnish capital, and he may, further, perform a special coördinating function which is not labor, in the technical sense, and scarcely involves any continuous personal activity at all, but is essential for rendering labor and capital productive. What this function is we shall presently see. We shall term it the function of the _entrepreneur_, using this term in an unusually strict way. We shall keep this function quite distinct from the work of the superintendent or manager of a business. _How Much the Term "Labor" Covers._--We include under the term _labor_ all effort expended in a routine way in carrying on business. The overseers in the shops, the bookkeepers, clerks, secretaries, treasurers, agents, and, in short, all who perform any of the labor of management for which they get or can get salaries are laborers in the comprehensive sense in which we use the word. It comes about that the employer usually labors; for he does the highest and most responsible work in his own mill or shop. It is not, however, in his capacity as _entrepreneur_, or "_undertaker_," that he labors; for, as the _entrepreneur_, properly speaking, he employs and pays for all the work that receives a stipend. He may employ himself, indeed, and set aside a stated sum to pay his own salary; but this means that in his capacity as _entrepreneur_ he needs a good manager and hires himself to act in that capacity. Scrupulous fidelity is the most important quality that a manager can possess, and the employer can always trust himself to possess it so long as it is his own interests that he controls. _Entrepreneur and Capitalist._--In the same way we include in the capital of an establishment whatever invested funds the employer himself supplies, as well as what he hires from others. Here again a man is likely to serve in more than one capacity, for as an _entrepreneur_ he hires capital and as a capitalist he lets it out for hire, so that in the one capacity he hires capital from himself acting in the other capacity. The man "puts money" into his own business and gets interest for the use of it. _The Different Functions of the Same Man distinguished in Business._--This distinction between the different functions that one person may perform is not a mere refinement of theory, but is something that is recognized in business and has great practical importance. In a corporation officials who are also stockholders receive salaries that are usually reckoned on the basis of the amount that they could get in the market if they were to enter the employment of other corporations and do the same kind of work they are now doing. Favoritism may give them considerably more than this amount, but even then this amount is the basis of the calculation which fixes their stipend. If they are paid more than their work is worth to their own corporations, what they get is something besides wages or any other normal and legitimate income. If they accept for their time less than they are worth, they make a donation to the corporation. Neither filching something for nothing out of the returns of the corporation, nor giving it a gratuity, is to be here assumed as existent, since we are not dealing with the phenomena of quasi-plunder or eccentric benevolence. The character of wages of management, as the reward for a high grade of labor, is recognized in business life, and the salary of the manager, whether he is a stockholder or not, is usually expressed in a definite sum of money and is gauged, crudely or accurately, according to his value as a servant of the company. _Dividends often Composite._--In like manner it is important in the bookkeeping of a company to ascertain how much of the return to the stockholders is merely interest on the capital they have themselves invested and how much is true profit, or the net gain which is over and above interest. In business life a distinction is pretty clearly maintained between the three kinds of income that have been described; namely, the reward of labor in all its forms, the reward of capital, going to whoever furnishes it, and the reward of a coördinating function, or the function of hiring both labor and capital and getting whatever their joint product is worth above the cost of the elements which enter into it. This essentially commercial margin of returns from production above all costs of production is profits in the strict sense and would be nonexistent in an absolutely static industry. It comes into existence in consequence of the changes with which social Economic Dynamics deals. _Three Incomes entirely Distinct._--Wages, interest, and profits, then, are the three incomes that we shall distinguish. We shall keep profits completely separated from the wages of any kind of labor and from the interest on any kind of capital. This income falls to the _entrepreneur_, otherwise called the undertaker, or the employer and coördinator of labor and capital, and it comes only when the product of the operations carried on in his establishment exceeds all wages and all interest that he has to pay. _How a Man could be an Entrepreneur Only._--If a man should hire all the capital that he needs in a business and also all the labor, including the labor of every man in the office force, and reside thereafter in a distant country, holding no consultations with his managers, whatever income he might get would be purely an _entrepreneur's_ profit. It would not be interest--for that amount would have to be paid to the men who had loaned the capital--and it would not be wages--for they would have to be made over to the men actually doing the work. The absent _entrepreneur_ would be, in the eye of the law, the purchaser of all the elements which go into the product, since all the purchases are made in his name. The managers are only his agents, and when they buy raw materials or supplies for the mill, they buy them for him and by his authority, and he is under the obligation to pay for them. Moreover paying wages is, in reality, buying the share which labor contributes to the product of the mill. The workmen have a natural right to the value which their work, _of itself and aside from the aid furnished by others_, imparts to the material that is put into their hands, and when they sell their labor, they are really selling their part of the product of the mill. In like manner paying interest is buying the share which capital contributes to the product. The owners of the capital have an original right to what the machines, the tools, the buildings, the land, and the raw materials, of themselves _and apart from other contributions_, put into the joint product. In reality they sell this share for a consideration in the form of interest. In a static state labor and capital together create the whole product of the mill; wages and interest are the prices that they get for their several contributions, and the _entrepreneur_ pays these purchase prices and by virtue of this becomes the owner of the whole product. Having the product, he sells it in the market for what he can get. If this were more than the cost to him of all the elements that have gone into it, he would have a net profit remaining. It would be a remainder accruing to the owner and seller of the product after the costs of getting a title to it have been defrayed. Whether the absent _entrepreneur_ of our illustration gets anything from his business or not depends on the question whether such a remainder of returns above costs is afforded. _Profits Nil in a Static Society._--We shall see that if labor and capital can move about in the system of groups so freely that each agent is as productive in one place as it is in another, there will be no product anywhere in excess of wages and interest. Labor and capital then create and claim for themselves the whole output of their industries. When the _entrepreneur_ has given them their shares, by paying wages and interest, and has paid for raw materials, he has nothing left. In actual business competition is often sharp enough to prevent men from getting more than interest on their capital and a fair return for the labor they spend in directing their business; and pure theory here assumes that competition is always and everywhere sharp enough to do this. It is ideally efficient. Labor and capital are ideally mobile and ready to flow at once to the points where any net profits can be made. Such a condition implies that society is in a _static_ state, and we shall see what this condition is. It implies an absence of organic change in society. The great collective producer does not alter either its form or its mode of producing wealth. Industry goes on, indeed, but it goes on in a changeless way. Reserving the full description of this state for a later chapter, we note here that the adjustment which would theoretically bring a society to such a state would preclude all gains for its _entrepreneurs_.[3] [3] The preceding paragraphs may seem to show that if an _entrepreneur_ ever gets an income, he does it by wresting from labor and capital a part of their products. We shall see that in _dynamic industry_ there is a normal way in which he may get an income without taking anything from the incomes that labor and capital would get if he did not perform his part. His return may come from the result of an enabling act which he performs, whereby both the labor and the capital of a particular subgroup become more productive than other labor and capital are and more so than they would be if the _entrepreneur's_ enabling act were not performed. _The Merging of Functions Desirable._--The uniting in one person of the functions of capitalist, laborer, and _entrepreneur_ contributed much to the productivity of the small-shop system of former days. The man who had a few thousand dollars invested in a little shop and employed a few men to assist him got three different kinds of income, and the sum of the three was larger than anything he could have secured if he had been only a laborer or only a small capitalist and _entrepreneur_. He worked harder and more intelligently than a hired superintendent would have done; he was led to be cautious because his own capital was risked in his business, and yet he was spurred to enterprise by the fact that when, by virtue of the influences which we call _dynamic_, profits were made, he got them. Even in the largest corporations the same conditions contribute to success, and it is best that managers should be owners of some part of the capital which they handle and receivers of some portion of the profits which they try to secure for their companies. Where competition is sharp, companies directed by their owners may supplant those of which the direction is given over to hired managers. The growth of corporations does, however, tend to put salaried men more and more into controlling positions and to reduce the power of the body of stockholders, who perform a joint function as capitalists and _entrepreneurs_. In itself this tends to reduce profits and detracts from the advantages which the incorporation of a business offers. _Distribution primarily Functional rather than Personal._--Where men get incomes that are composed of wages, interest, and profits, economic science should, in the first instance, tell us how the rates of wages and interest and the amount of profits are determined. A study of the static laws of distribution concerns itself with the reward of labor as such, and the reward of capital as such, while a study of dynamics takes account of pure profits. When we know what the rates of wages and interest are, we can tell what any capitalist-manager should have by knowing how much capital he furnishes and how much and how well he works as a manager. If the business is yielding a net profit, over and above the interest on its capital, we can tell what part of this net income any one stockholder will get--in the form of a rate of dividends in excess of the rate of interest--if we know how much of the common stock of the company he owns. His personal income depends on the incomes attaching to the functions he performs. The science of distribution should tell us primarily, not what any man personally gets as a total income and how well off he is as compared with other men, but in what way the wages of his labor, the interest on his capital, and the return for the _entrepreneur's_ function are fixed. In technical terms this is saying that distribution is primarily _functional_ and not personal. Certain forces assign certain rewards to different functions which are involved in the creating of wealth, and the science of distribution tells us how these forces work--tells us, in short, how wages, interest, and true profits are, in and of themselves, determined. If any man works and gets wages, that part of his income will be determined by the wages law. If he furnishes capital, a second part of his income will be determined by the interest law. If he also coördinates labor and capital, whatever he may thus gain is determined by the law of profit. Economic science has to ascertain and state what these three laws are, though in its static division it has only to account for two of them. _Costs as well as Gains Apportioned._--The term _distribution_, as commonly used, denotes a division of the gains of industry; but as we have said, there are sacrifices which have to be borne in getting the gains, and these also have to be shared. Wealth benefits men in the using, but puts burdens upon them in the making; and when all society does the making, it has to apportion, in some way, not only the benefits but the burdens. We shall take account of these sacrifices because of the relation that they bear to the gains. They act as an ultimate check on production. Men would go on producing indefinitely if the operation cost them nothing, since it would always be agreeable to have a further income; but they necessarily encounter pains and sacrifices that, sooner, or later, bring the enlargement of their incomes to an end. Much that is of importance occurs at that critical point where the sacrifices of production put an end to the extension of it. It is the positive fruits of production that we have first to consider; and what in this connection we wish first to know is how wages and interest are determined when industry is carried on in a social way and under a system of competition. We shall find that these incomes are always tending toward standards which they would reach if society were in the state which we have described as static. How they are forced away from their standards by the changes and disturbances of actual life, and how the standards themselves change with social development, will be the subject of the latter part of this treatise. CHAPTER VI VALUE AND ITS RELATION TO DIFFERENT INCOMES Functional distribution controls personal incomes since each man who gets, in a normal way, any income at all performs one or more productive functions, and his total income is the sum of the returns for these several functions. Moreover under such a condition of ideally perfect competition as we have assumed each of these functions is rewarded according to the product that it creates; and each man accordingly is paid an amount that equals the total product which he personally creates. Men's products, even in the disturbed conditions of actual life, set the _standards_ to which their returns tend to conform, though they vary from them in ways that we shall not fail to notice. _Group Distribution._--The grand total of the social income has to go through a preliminary division before it is shared by laborers, capitalists, and _entrepreneurs_. In each industry the pay of all these functionaries comes from the selling price of the commercial article that they coöperate in making. The price of shoes pays all shoemakers, whether what they contribute to the manufacturing is labor, capital, or mere coördination; and it also pays ranchmen and tanners for what they contribute in the shape of leather, raw and dressed. If the price of shoes should rise, there would be a larger income for the group whose activities create them. So if woolen clothing were to become dearer, there would be more money for the group that makes it, and this would include those who raise sheep and those who convert wool into cloth, as well as the garment makers themselves. The question, what members of a group would get the benefit of a rise in the price of its product, is one that must be discussed in connection with economic dynamics, and we shall find, when we reach this part of the subject, that it is _entrepreneurs'_ gains which come largely from sources like this. We have already seen that, in a static condition and with prices, wages, and interest immovably held at rates to which perfectly free competition would bring them, _entrepreneurs_ as such would get _nil_, and the whole price of every article would be distributed among the laborers and the capitalists who make it. The proof of this will appear when we have examined the process by which the values of goods are adjusted, and this will help to prepare the way for a study of the sources of net profits, which are an all-important feature of actual business. Society is honest or dishonest according as this _entrepreneurs'_ income is gained in one way or in another; and it is not too much to say that before the court of last resort, the body of the people, no system of business will be allowed permanently to stand unless the basic principle of it tends to eliminate dishonest profits. A chief purpose of static studies is to afford a means of testing the legitimacy of the incomes that come to _entrepreneurs_. _Market Price._--The old phrase _supply and demand_ describes the process by which the market price of anything is determined. The total mercantile stock of goods of a particular kind at any one time on hand is, of course, an exact quantity, and the law of "market value," when these words are used in a restricted and technical sense, determines the price at which this predetermined amount can be sold. _How a Normal Supply is Determined._--This present stock, however, was brought into existence by producers who looked forward to the time when they could probably sell it at a certain price; and the higher this anticipated return for the article, the more of it they were induced to make. The price, which to-day depends on the quantity on hand, acted in advance as a lure to bring that quantity into existence, and among the different articles which men can produce, they are forever singling out for increased production those things which offer the strongest lures--that is, the things that sell for the largest amounts as compared with the cost of making them. The ultimate tendency of all this is a certain adjustment of the relative supplies of different commodities. It is that adjustment which brings all prices to a level determined by cost. _Natural Value._--This tendency toward cost prices--those which afford to the producers wages for all their labor but no true _entrepreneurs'_ profit--establishes a further law, that of "natural value," and this it is that fixes the standard to which, in the long run, market values, as adjusted by supply and demand, tend to conform. A market value is natural or unnatural according as it does or does not conform to a certain standard, and this ultimate standard itself is the cost of producing the several kinds of goods. What the term _cost_ in this connection really means we must later see; but for the present we may take the common and practical view that it is the amount of money that an _entrepreneur_ must pay out in order to bring the article into existence. If there were very little wheat in the granaries of the world, demand acting on this limited supply would determine the selling price of it, and this price would be high as compared with the cost of raising this grain. It would also be higher than the selling prices of other things which are produced by the same expenditure of labor and capital that has to be made in raising the wheat. The market price would, for the time being, be unnatural and would in due time be brought down; but this would have to be done by the raising of more wheat. In other words, though the selling price of a small supply of wheat may be _normal for that amount_, the amount supplied is itself abnormally small, and in view of that fact the resulting price is too high to be allowed to continue. As a permanent price it would not be natural. The quantity supplied tends to increase till the market price conforms to the cost of raising the wheat. We have to see, first, how demand fixes the price of a definite amount of anything which is offered for sale and, later, how the quantity offered is controlled. _How Prices are Determined._--It is certain that if, in a given market, we increase the quantity of goods that are to be sold, we lower the price,[1] while, if we diminish the quantity, we raise the price. That is the commercial fact and it furnishes a beginning for a theory of value. [1] The term _market_, as used in this discussion, means a local area within which goods of given kinds are bought and sold; and for different purposes we may make the area small or large. For some purposes it is necessary to take a "world market" into consideration, while for others it is desirable to include only that part of the world within which competition is very active and within which also goods and persons move freely and cheaply from place to place. A single country like the United States affords a market large enough to illustrate the laws of value, though one must always keep in view the relation of this circumscribed area to its environment. How local areas may, in a scientific way, be delimited and isolated for purposes of study will appear in a later chapter. Let us suppose that we have a fixed quantity of goods on hand, that all must be sold, and that no one knows at the outset what price they will bring. There might conceivably go on an inverted kind of auctioning process, in which the sellers at the outset would ask a high rate, sell a few of their goods, and then gradually reduce the price till the last article should be sold. At each reduction of the price the "effectual demand," so-called, would increase. This means that the people who want the article are actually willing to take and pay for larger quantities the lower the price falls. Mere desire does not influence the market, but an "effectual demand" means a desire and a tender of the money that is asked for the goods. It is, in short, an actual purchase and the amount of it becomes larger as the price goes down. People who did not buy the article before now add it to the list of goods that they take for use, and the people who were already taking a certain quantity of it now take more. _Equation of Supply and Effective Demand._--If this effective demand, or amount of goods actually bought and paid for, becomes steadily larger the lower the price becomes, it is clear that, however large the total supply may be, it can all be sold by making the price low enough. It was once thought that this is all we need to know of prices current or market values. At some selling rate or other the quantity actually offered will come to equal the quantity that is actually bought. This is the equation of demand and supply. The quantity offered is here supposed to be fixed and to include all of the article that is in dealers' hands and that has to be sold; and the price, starting at a high rate, is supposed to go down till the sale of the entire quantity is effected. _Varying Demand and Price._--The facts that have just been stated account only in a partial way for the adjustment of market price. One who wishes to trace phenomena to their causes cannot help asking why demand and supply insure the selling of a given amount of goods at one rate rather than at another. If apples are offering at two dollars a barrel, why is it that, in a particular local market, one thousand barrels and no more can, at that rate, be sold? We can readily see that at one dollar a barrel more could be sold than at two, and that at three less would be sold. But why is it that, at two dollars, the definite number of one thousand barrels is the amount that is taken and paid for? Why is the equation of demand and supply established at exactly that price? _Demand and Final Utility._--We come nearer to the cause that acts in adjusting the price of apples when we say that they sell at two dollars a barrel because that sum expresses their "final utility." This means that, if such an auctioning process as we have described were resorted to, the last barrel of apples which would be sold would have to the buyer an amount of utility just equal to that of the final unit of any other article that could have been had for the same money. The auctioning, however, would cause different barrels of apples to sell at different prices, whereas there is something in the working of competition which causes all of them to sell at the same price. It is necessary to see, first, how the price of the "final" one is adjusted and, secondly, how that fixes the price of all the others. _The Law of Diminishing Utility._--We revert here to one of those general laws of economics that we have already stated and see it acting under the conditions of distinctly social life. Goods of a given kind have less and less utility, per unit, the more the user has of them. If you offer him apples in increased quantity, he will value the first part of the supply highly, but will attach less value to the later parts. When the desire for this fruit is fairly well satisfied, he will find other articles of more importance. At the price of two dollars a barrel it is just worth his while to buy a final barrel of them. That quantity, as added to his winter's supply, will give him two dollars' worth of benefit. This means that it will do him as much good as anything else which he can get for the same amount of money. _The Equalization of Final Utilities._--Two dollars spent in adding to his previous stock of other things will do the man in the illustration the same amount of good that he can get from a final barrel of apples, and no more. In the case of goods which are all alike and of which consumers are always glad to use an additional amount, prices tend to adjust themselves in such a way that a final unit of any one which the consumer buys with a dollar is worth just as much to him as a final unit of any other article he buys with that amount. The last dollar paid for apples is as remunerative, in the way of pleasure and benefit secured, as is the last dollar used to improve his wardrobe, to add something to his stock of furniture, to buy tickets to the theater, etc. Apples have, as it were, to compete with clothing, furniture, and amusements for the consumer's favor, and if the vender charges more for them than do the venders of other things having the same power to give pleasure, some of the apples will remain unsold; for though customers will always give as much as they would have to pay for other things of equal final utility, they will not give more. _The Prices of All Increments of Supply Equal._--A consumer always gets a net surplus of benefit from the early increments of the goods he consumes. If the last barrel of apples is worth two dollars,--or, what is the same thing, if the last barrel has in it an amount of utility equal to the final utility of other things that two dollars will buy,--the first barrel has a larger utility; and yet it costs no more than the last one. The sellers of apples, if they expect to dispose of all that they have, must at the outset fix the price at such a point that the very last increment of the supply will successfully compete with other articles for the favor of purchasers. Competition forces them to sell the whole amount so cheaply that the least important part of it may be as important to the purchaser of that part as the corresponding and least important part of the supply of other things. Nothing but a monopoly of the entire available stock would enable them to carry out the auctioning plan and offer the stock piecemeal, so as to get a higher price for the parts offered early. Even then buyers who should perceive the fact that a large part of the stock remained in reserve and that it must ultimately be sold would be able, by delaying their purchases, to get the benefit of a later and lower rate, so that the monopoly itself would be only partially successful in its policy. In the absence of a monopoly venders are compelled to sell all articles of one kind and quality at one price. The man who should fix a higher price on his portion of the supply would be passed by in favor of other sellers who were disposing of their final increments, and his business would quietly drift away from him. _There cannot be two prices for one commodity in the same market_ at the same time. This fact is fundamental. Even the monopoly is able to get different prices for different parts of its output only by offering them at different times; and competing producers cannot do this. They are forced to keep the price of all they offer at a level that expresses its final utility. _The Law of Value affected by the Difficulty of using Two Similar Goods at Once._--There are two imperfections in the common statement of this law of final utility which need to be removed in order that the theory of value, which is based on the law, may be true and useful. The first lies in the assumption that people buy completed articles, such as coats, tables, vehicles, watches, etc., in regular series of units, adding to their stock coat after coat, watch after watch, etc., all just alike, till the utility of the last one becomes so small that it is better to buy other things. On this supposition the price of the whole supply of any such thing corresponds with the utility of the last one in the consumer's series. This fairly well describes the case of commodities like apples, of which men consume now more and now less per day or per week and are always glad to increase the amount they use. Of most kinds of consumers' goods a person wants at one time one unit and no more, and a second unit, if he has to use it himself within the same time in which he uses the first, would be an incumbrance. Its utility would be a negative quantity. Two quite similar coats would never be bought by the same person if he had only his own needs in view and must use both coats through the same period. The first unit of his supply is, for this period, also the last. _The Law of Value affected by the Fact that the Final Unit of a Good is usually a Complex of Unlike Utilities._--The second imperfection consists in the assumption that in measuring the utility of such a unit the consumer estimates the importance to himself of the article taken in its entirety. In the case of the apples of our illustration the difficulty is not obvious. A man, as we have just noticed, may increase or diminish his consumption of this fruit; the first few apples that he uses will give him more pleasure than a second similar quantity, and the price of apples in the market may actually depend on the utility of the final peck of apples that each of the customers consumes in a season. In other words, there is, in this instance, a probability that the goods, although supplied at once, may be appraised as if they were offered in a regular series and that the law of final utility, in its common and simple form of statement, may in this particular apply to the case. The second difficulty, however, remains, and even in the case of such goods as apples renders the common statement somewhat inaccurate, while in the case of most kinds of consumers' goods the inaccuracy is glaring. If the price of fine watches corresponded with the utility of the last one that a consumer uses, it would be many times greater than it is. Rather than go without watches altogether many a man would pay one thousand dollars for one for which he actually gives a hundred; and, moreover, this watch may be the "final" one in his case. The utility of the last overcoat that a man uses in the winter may be such that, if he could have it on no other condition, he would readily give five hundred dollars for it instead of fifty. _How Unlike Services may be rendered by One Good at the Same Time._--What people want of any useful thing is an effect in themselves,--a pleasure or a benefit which they expect to get,--and apart from this subjective result they would not want the thing at all. The power to confer a particular benefit is a utility. Men buy goods solely for their utilities, and they measure these service-rendering powers in the things offered to them and pay for them accordingly. Now, it happens that articles often combine in themselves a considerable number of different utilities, or service-rendering powers, and that in buying an article the man pays for them all. It is as though four or five different servants, each having his own specialty, were to offer themselves for hire and invite an employer to consider what each one could do for him. In buying an article which will serve him in several ways, a man appraises all the unlike services that the article will render. He secures several services at once, as he would do if he hired, in a body, several actual servants. The same thing would happen if, instead of hiring human servants with different aptitudes, one should buy different commodities each of which is, in reality, an inanimate servant, able, in its own way, to do something useful or agreeable for the purchaser. We could bunch a lot of these goods and buy them collectively. Venders of the goods could tie them together in bundles and offer them thus for sale. If the different goods were also sold separately in the market, they would command in the bundles the same prices that they would command when sold each by itself, and a bundle would bring the sum of the several prices of its component articles. _In just this way in which an aggregate of different goods would get its valuation does any one article which is made up of different utilities get its rating. The utilities are appraised separately._ In buying an article which is a composite of different utilities, we virtually employ a company of servants who have different specialties and insist on being hired all together or not at all. _How the Normal Price of a Bundle of Unlike Goods would be Fixed._--We have now to see how the action of the market analyzes an article and puts a price on the several utilities which compose it. The market does this in exactly the same way in which it would appraise a bundle of dissimilar articles which had to be sold separately, and we will therefore trace the operation by which a package containing the commodities A, B, C, and D would get its value in an actual market. _How the Normal Price of a Single Good in a Bundle of Unlike Goods would be Fixed._--Let us see how a bundle made up of commodities A, B, C, and D would get its value in the market. We will suppose that these articles are here named in the order of their importance, and that A has the highest utility, since it renders the most important service, and that D has the least. It may be that the article A has a utility rated at one hundred dollars in a particular man's esteem. He would give one hundred dollars for it rather than do without it altogether. The service, then, that one article of this kind can render is expressed by the sum one hundred dollars. Article B taken separately may be worth fifty dollars, since it may render such services that the man would give fifty dollars rather than be without it. A third article, C, may in the same way be valued at twenty dollars and a fourth at ten. Now, if a man has to buy the whole bundle, must he pay one hundred dollars plus fifty plus twenty plus ten, or one hundred and eighty for the whole? This does not by any means follow. The first article may be sold separately at a price far below one hundred dollars. There may be so large a supply of it that, in order to find a market for it all, the makers must take ten dollars for it. This fixes the market price of that amount of this commodity at ten dollars. If we now glance beyond the question of the "market price" of the goods and consider their more permanent or "normal price," the inquiry requires us to do more than ascertain why a definite quantity of the goods offered at a certain time sells for a certain amount. An appeal to the law of final utility answers that question. To know, however, why the permanent price is what it is, we have to know what fixes the permanent supply, and we discover that the cost of making the goods is here a dominant influence. For the present we assume that this cost does not change, since such changes are a subject for the dynamic studies which will come later. The present fact is that production has been carried to such a point that no more of these goods can be sold at the cost price, and there the enlargement of the output has stopped; the supply has at some time in the past reached this normal point and now remains there. Ten dollars represents the final utility of the article, and this sum is what it costs to make it. If it could be sold for any more than that, competition would bring new producers into this business and would impel those already in it to enlarge their production till the price would stand at the normal or cost level of ten dollars. _The Consumers' Surplus._--In every such case there are men who would give much more for the article rather than be without it, and we have supposed that some one would pay a hundred dollars for this commodity if he could not otherwise obtain it. Ninety dollars, then, measures what we may call his _consumers' surplus_, or the clear benefit he gets from buying at its market price an article that is worth to him so much more. This comes about by the fact that the makers of article A, in order to sell the amount of goods that competition has impelled them to make, must accept the offers of persons who can consistently give only ten dollars for it. These are relatively poor persons, and as the sum of ten dollars expended on other articles would benefit them as much as ten dollars spent on this one, it is a "final" purchase, or a final increment of their consumers' wealth. In order to get it they sacrifice, in some other form, a benefit as great as the one they get from acquiring this commodity and receive, therefore, no consumers' surplus from it. These are the men whose demand helps to fix the price of the article A, and the willingness of other persons to give more does not make it bring any more. The rich men, who stand ready to pay a hundred dollars, if necessary, are gainers by letting poorer men fix this price. It is by catching the patronage of these poorer men that the makers can dispose of their large output, and in doing this they have to bring the price down to ten dollars. _The Function of a Special Class of Marginal Purchasers of Each Article._--In like manner there is a class of "marginal purchasers" of the article B, or the persons who pay for it so much that they get no net benefit or consumers' surplus from the purchase. If they did not buy this article, they could get something else that would do them as much good for the same outlay. It costs, let us say, only ten dollars in the making, and enough of these articles are made and offered for sale at that price to supply all customers who are attracted by the offer. The men who would pay more for it do not count. Each of the other articles in the bundle, when it is offered separately and at the cost price which competition establishes, represents a final utility to some one class of purchasers. Competition has made the whole supply so large that, in order to dispose of it, venders must attract the particular class who will take it at the ten-dollar rate. This class is in the strategic position of market-price makers for this one thing. They are the last class to whom the producers can afford to cater. If each of the five articles in the bundle costs the makers ten dollars, and if so many of each are made that they just supply the needs of the classes that will buy them at ten dollars apiece, the price of all five, when sold separately, will be fifty dollars. Most of the purchasers of each article would give more than ten for it if they had to, but some would not do so, and the producers cater to the needs of these marginal persons. _How the Prices of the Goods are fixed when they are sold in Various Combinations._--How do these articles get their valuation when they are tied in bundles containing all five of them and the bundles are sold unbroken? In essentially the same way as when sold separately. Article A, we will suppose, is one of the necessaries of life and is to be had by itself in the market. Article B represents a comfort, and C and D are luxuries. The bundles are so made that A and B are often sold together; as are also A, B, and C; and A, B, C, and D. A purchaser may have at his option the first only, the first and the second combined, the first three, or all four. Article A, when it stands alone, can be had at the natural or cost price and in quantity sufficient to supply the wants of all classes of buyers from the highest down to the class which will take it at ten dollars--the cost of making it--but at no higher price. Any one can have the A either alone or tied to other articles at this price. One who buys A and B in combination will pay for article A only the same price that it commands when sold separately; and since he buys B, the utility of which is less than that of A, at ten dollars, it is clear that he gets A for less than it is worth to him, but the ten dollars may be all he would give for the B. This man is not the marginal purchaser of A, for in buying it he realizes a consumers' surplus; but for the article B, which is tied to it, he may pay all that it is worth to him. For that he is a marginal purchaser, and as such he gets no consumers' surplus out of it. What he pays for B will just suffice to buy something else which is equally important to him. The price of this bundle of two articles is ultimately determined by the cost of the two components, which is twenty dollars, and enough of each component is made and offered in the market to supply the wants of a class of persons who will barely decide to take it at the cost rate. The class that hesitates at taking A will not consider B, but the class that hesitates at taking B gets a clear benefit from buying A at the price that expresses the utility of A to a poorer class of persons. _How Different Classes of Purchasers coöperate in this Price Making._--The rule of one price for one article of course holds, and the man who would have a clear and decisive motive for buying the A for more than ten dollars, if he had to do so, gets the benefit of two facts: first, that it costs only that amount in the producing, and secondly, that competition makes the supply of it so large that it is brought within the reach of those persons who value it at only ten dollars. It takes two different classes of purchasers to fix the price of this package of two articles, and their ratings fix it at twenty dollars. Exactly the same influences regulate the price of the bundle which includes A, B, and C. Men who buy C can afford to have a luxury, and therefore, if they had had to do so, would have given more than they do give for the articles of necessity and comfort. If the price of A and B were higher than it is, they would still buy these two things, but they would not raise their bids for C, since for this they are marginal purchasers. This commodity is therefore sold at the price that will just induce this class of persons to add it to their list of consumers' goods. There is a further class in whose list of purchases D is marginal, while A, B, and C yield a consumers' surplus in the form of an uncompensated personal benefit. _Different Utilities in an Article appraised as are Different Goods in a Package._--It is an actual fact that most commodities are like these packages of unlike articles. They are bundles of unlike utilities, and the market actually finds a way to analyze composite things and put a separate price on each utility. It may seem very theoretical to say that a concrete thing, like a watch, a coat, a dining table, or a roast fowl, is made up of such abstract things as utilities and that each of these has its separate price; yet such is actually the fact, and if goods were not valued in the market in this way, the prices of all articles of comfort and luxury would be very much higher than they are. A man pays seventy-five dollars for an overcoat, but if he could not get the service that the coat as a whole renders without paying five hundred dollars for it, he would pay it; for otherwise he could hardly get through a winter. No man who buys an overcoat worth seventy-five dollars would refuse to pay more if that were the necessary condition of having an overcoat at all. The garment as a whole is far from being a "marginal utility" to any one; and yet there is something in it that is so. This element is like the article D in the fourth bundle referred to in our illustration. There is a particular utility in the composite good for which the man pays all that it is worth to him; and he would go without that utility if the seller charged more than he does. The most important service that the coat renders is that of keeping the man warm; but a very cheap garment would render that service, and six dollars will buy such a garment. The man does not need to pay more than six dollars for that one service. The supply of cheap coats is such that the final one must be offered for six dollars in order to induce certain poor purchasers to buy it, and that, moreover, is all that it costs to make it. No one, therefore, is obliged to pay more than six dollars for something that will keep him warm, however much such a service may be worth to him. Coats of another grade have a second utility combined with this one, since they are made of better cloth and are more comely in appearance. Utilities of an æsthetic kind are combined with the crude qualities represented by the cheapest coats. The supply of coats of this grade is such that they must be offered for twenty dollars in order to induce some one to take the final or marginal one. What does this mean? It means that this purchaser will pay fourteen dollars and no more in order to have the second utility, consisting in comeliness, added to the first utility, capacity to keep him warm. This man would give more than twenty dollars rather than go uncloaked; for it is plain that, if he will pay fourteen dollars for comeliness, he will give more than six for warmth. Probably he would pay one hundred dollars for the article if he had to, and in getting it for twenty he gets a large consumers' surplus. This is because he secures the first utility (1) for less than it is worth to him, (2) for just what it costs in the making, and (3) for just what it is worth to the poorer purchasers. He is willing to pay only fourteen dollars for the comeliness, which is the second utility that the garment contains, and he is therefore a marginal purchaser of this second utility. It costs only the sum of fourteen dollars to add the second utility to the first, and enough coats of the second grade are made to catch the patronage of the class of buyers who will give so much and no more for it. They are the persons whose demand figures in adjusting the market price of this second utility. Competing producers of coats cause the supply of those of the second grade to be so large that they could not all be sold unless the second utility were offered for fourteen dollars. This makes the price of the entire coat twenty dollars as the result of catering in a detailed way to the demand of two different classes of buyers. In exactly the same way the price of the third grade is fixed at forty dollars and that of the still higher grade at seventy-five. In the third grade there is a utility which it costs twenty dollars to add to those possessed by garments of the second grade, and this is added to enough of them to supply all persons who will pay twenty dollars or more for it. These coats are made of more highly finished goods and have better linings, and this gives them the third utility which the market appraises at its cost, which is twenty dollars. The men who buy the forty dollar coats get a surplus of benefit in securing the first two of the utilities that are embodied in them, since for these they pay less than they would pay if they had to; but they get no surplus over the cost of the third utility. It is to secure their custom that the vender must sell it for twenty dollars. In a like manner a coat of the next grade, which is a more fashionable garment, sells for seventy-five dollars because it has a fourth utility which costs another sum of thirty-five dollars and, to the marginal buyers, is worth that amount. These men get a surplus from buying the first three utilities at what they cost their producers and what they are worth to poorer purchasers. It appears, then, that a seventy-five dollar coat is a bundle of distinct elements, or utilities, each of which has its separate cost and is sold at that cost price to a particular marginal class of purchasers. Each element is valued exactly as if it were in itself a complete article tied in this case to others, but also offered separately in the market. Persons of one class are final purchasers of the first utility when it is offered at its cost, six dollars. Another class, in a like manner, helps to set the price of the second utility at fourteen, and still other classes figure in the adjustment of the prices of the third and fourth utilities. These cost the manufacturers twenty dollars and thirty-five dollars respectively, and competition insures the making of enough of them to catch the patronage of those who will pay just these amounts. Members of one class act as marginal purchasers in price making in the case of one utility only. The concurrent action of all of them results in setting the price of the best coat at eighty dollars. It is a very practical fact that the rates at which all fine articles sell in the market are fixed in this way. Such articles contain utilities unlike each other. They have power to render services of varying degrees of importance, and each of the several services gets its normal valuation when producers make enough to supply the want of a particular group of persons to whom it is a marginal service and who are willing to pay only what it costs. They would go without that one service if they had to pay more for it. _This Method of Valuation Applicable to All Commodities of High Grade._--Illustrations of this principle might be multiplied indefinitely. A fine watch tells the time of day, but something that would do that could be had for a dollar, and that is all that this fundamental element in the fine watch sells for. It takes a series of purchasers bidding on the higher utilities of the fine watch to make it sell for five hundred dollars. The man who buys such a watch would give, perhaps, ten thousand for it rather than be without a watch altogether, but he is saved from the necessity of doing so by the fact that poorer customers have done the appraising in the case of all the more fundamental qualities which the watch possesses. So long as an Ingersoll "dollar watch" will tell the time of day, no one will pay more than a dollar for exactly that same service rendered by any watch whatever; and the same thing is true of other services. Social in a very concrete and literal sense is the operation of fixing prices. Only the simplest and cheapest things that are sold in the market at all bring just what they are worth to the buyers, and all articles of higher grade offer to all who buy them a surplus of service not offset by what is paid for them. If we rule out the cheapest and poorest grades of articles, we find all others affording a "consumers' surplus."[2] [2] It will be seen that to a man who buys the seventy-five dollar coat that article in its entirety is the final one of its kind which he will buy. He does not want a second coat exactly like the first. The same thing is true of the man who buys the five hundred dollar watch, since he does not think of buying more than one. In each case the first unit of the article bought is the last one, and it contains utilities which are worth more than they cost. It contains one utility only which is marginal in the true sense of affording no surplus of gain above cost. This utility stands on the boundary line where consumers' surpluses stop. CHAPTER VII NORMAL VALUE _Natural Supply._--We have attained a law of market value, which determines the price at which a given amount of any commodity will sell, and have taken a quick glance at the influence which fixes the amount that is offered and thus furnishes a natural standard to which the market value tends to conform. At any one moment the amount which is supplied is an exact quantity, and if it all has to be sold, it will bring a price which is fixed by the final utility of that amount of the commodity. If the quantity offered for sale should become greater or less, the final utility and the price would change. Final utility controls the immediate selling price, and if that is above the cost of production, a margin of gain is afforded which appeals to producers, sets competition working, and brings the quantity made up to the full amount which can be sold at cost. The amount of the supply itself is therefore not a matter of chance or caprice. It is natural that a certain quantity of each article should be supplied, and that the price should hover about the level which the final utility of that quantity of the good fixes. "Natural" or "normal" price is, in this view, the market price of a natural quantity. _Cost as a Standard of Normal Price._--It is commonly and correctly stated that the normal price of anything is that which just covers the cost of producing it. Cost in this case is the total amount of money that the _entrepreneur_ pays out in order to bring the commodity into existence. He buys raw materials and pays for all the labor and capital that transform them into a new and saleable shape. If he can make a net profit, he does so; but competition tends to adjust the quantity produced and the consequent price in such a way that he can make no net profit. What he gets for the article will then reimburse him for his total outlay, but it will do no more. Since the quantity produced is normal when it brings the market price to this level of cost, it appears that the cost is the ultimate standard in the case. The quantity supplied varies till it causes the market price just to cover the cost; and so long as the quantity supplied is thus natural, other influences remaining the same, the price is so. This states the cost of production in terms of money paid by an _entrepreneur_ and the returns from the operation as money received by him; but there is a more philosophical way of conceiving the law of cost, and to this we shall soon recur. _Elements of Cost._--Whatever the _entrepreneur_ has to pay for in the production of an article is of course an element in its monetary cost to him. If he does not begin the making of it by drawing his raw materials from what nature freely furnishes, he must pay some one for the raw material. He must also pay for the labor, and this is equivalent to buying the fraction of the article that is produced by labor; for the laborer, as we have seen, is the producer of a certain fractional share of the article and the natural owner of that share, and when he agrees to let his labor for hire, what he really does is to sell out his individual interest in the forthcoming product of the industry in which he is about to engage. When a workman in a shoe factory agrees to work for two dollars and a half a day, he really contracts to sell every day for that amount a certain quantity of shoes. The leather is one element which enters into the finished shoes, and therefore the entire shoe is not really made in the factory; but of the part which is there made, namely, the utility that results from transforming the leather into shoes, one part is made by labor and another by capital. The _entrepreneur_ has to buy both of these if he is to acquire a valid title to the product and have a right to sell it. These costs are therefore "purchase money" paid for undivided shares of goods. _Labor of Management._--It usually happens that an _entrepreneur_, or employer of labor and capital, performs some labor himself; and we have already noted the reason for this in the fact that the kind of labor that he performs is so important that the fate of the business often depends on it. He may manage the business so well as to make it succeed or so ill as to make it fail. He pays himself for this labor when he draws a salary for his services. As an _entrepreneur_ he treats his own labor as he does that of any one else and buys the fraction of the product of his business that his own labor of management has created. In this he illustrates the general law that all payments of wages are payments of the purchase of a certain quantity of product. Though the owner's own contribution to the product is not always mentioned in terms in the accounting, that is what his salary is paid for, though it is spoken of as a payment for his "time," or his labor. _The Capitalist as the Vender of a Share in a Product._--Capital, as we have seen, also contributes a definite share toward the total amount of every product in the making of which it coöperates. Labor does not do all the transforming of leather into shoes which is done in the factory, since machines, fuel, etc., help; and we shall later find that there is a way of determining how much of the product the help so given creates. It adds a certain amount to what labor can claim as its own special product, and the man who owns the capital becomes the lawful claimant for this additional share. When he agrees to let his capital work for an employer, he virtually sells to the employer the undivided share of the product--shoes or what not--that the capital really creates. The furnisher of productive instruments, like the furnisher of labor, is a vender, and the _entrepreneur_ is a buyer. _Entrepreneur and Capitalist._--As was stated in an earlier chapter, an actual employer nearly always furnishes some of the capital that he uses. If he did not do so, he would have difficulty in borrowing more, since banks or other lenders do not loan to empty-handed men. It is clear that what the employer gets in return for such capital as he may put into the business is in reality a payment for a contribution which that particular part of the capital makes to the product. Since each bit of capital in an establishment contributes something toward the creating of the product, the employer's own capital has the same right to the value of its contributary share as has the capital of any one else. What the employer-capitalist gets for capital the employer, pure and simple, pays. As the furnisher of instruments the man is a vender of the product of these instruments, while as an _entrepreneur_ proper he is the buyer. He must purchase the product of his own capital just as he purchased the product of his own labor. In paying, therefore, wages for all labor, including what he performs himself, interest on all capital, including his own, and the price of raw materials, he gets something which, if competition does a perfect work, he has to sell for what he gives for it. The shoes, when he sells them, tend, under active competition, to yield only what has been paid for them in the making and, in a perfectly static state, would actually yield no net profit. All the _entrepreneur's_ costs, therefore, resolve themselves into purchase money paid, his receipts are money accruing from sales; and under ideally free competition the two sums total are equal. _The Entrepreneur's Proper Function not Labor of Management._--In some theoretical discussions the management of a business figures as the principal function of the _entrepreneur_, and all or nearly all of the reward that comes to him is represented as coming in the shape of a reward for a responsible kind of labor that calls great abilities into requisition. But it is very clear that, whether he personally performs any labor or not, the employer has a distinctly mercantile function to perform; and this in itself is totally unlike the work of overseeing the mill, the shop, or the salesroom. He acquires a title to the whole product by paying for the contributions which labor and producers of raw material separately make toward it, and then parts with the product; and if he gets any more than he has paid out, he makes a profit. When industry is in what we have termed a dynamic state, such a difference between the value of the product and the cost of the elements that go into it is continually appearing, and that, too, largely in consequence of causes over which, as a mere manager, the employer has no control. A profit so gained cannot be wages of management. It is a purely commercial gain, or a difference between what is paid for something and what is received for it. _Mercantile Profit._--It is best, therefore, to distinguish in some perfectly clear way between that function of the _entrepreneur_, which consists in buying and selling, and any work that he may find it best to do in the way of superintending the business. At the cost of using the term _entrepreneur_ in a stricter sense than the one customarily attached to it, we will make this word describe the purely mercantile functionary who pays for the elements of a product and then sells the product. The reason for the very division between gains from this source and gains from management we shall soon appreciate, for we shall see that competition tends to reduce one of these incomes to nothing, but tends to perpetuate the other and to make the amount of it conform to a positive standard. The _entrepreneur_, as we shall use the term, is neither the manager nor the capitalist, and when we have occasion to speak of either of these functionaries, we shall call him by his own distinctive name; though we know perfectly well that, in actual business, it is desirable and often quite essential that the same one who acts as an _entrepreneur_ should also put into the business some labor as well as some capital. A man who performs two unlike functions, buying and selling, on the one hand, and managing the business, on the other, serves in two capacities that are clearly distinguished from each other; while if he furnishes any of the capital, he adds to these a third capacity entitling him to the value of the product of his capital. As a manager he directly aids in producing goods, and he gets pay for so doing from his other self, the _entrepreneur_, who acquires the title to the goods; as a capitalist he has another legitimate claim upon himself as _entrepreneur_. _These Distinctions recognized in Practical Accounting._--That this is no bit of mere theoretical subtlety is proved by the fact that the bookkeeping of nearly all establishments distinguishes between these two incomes by actually putting an appraisal on the work the employer does and paying a salary for it. A man may be a large owner of stock in a corporation and yet receive a salary that is fixed by an estimate of what an equally useful man could be hired for. If personal influence secures more for him than this, the excess is taken from the pockets of the stockholders, and the amount of it is accounted for in a way that does not fall within the scope of pure economic law. _How "Natural" Prices exclude Entrepreneur's Profits._--The old and correct view is that the tendency of competition is to make things sell for enough to cover all costs, as we have defined them, and no more. Under a different phraseology this is what Ricardo and others have rightly claimed. They were unconsciously explaining what would happen in a static state, for if society were actually in this state, the goods that come out of the factory would be worth just enough to reimburse the owner for all the outlays that can be called costs. If they sell for more than this, there is to be had from the business an income that costs nothing. It is a net profit above all claims based on personal labor or on the aid furnished by capital, and it furnishes an incentive for enlarging the business, and labor and capital are therefore drawn into it. _Entrepreneurs_ bring them and for a time make a profit by this means; but as their presence increases the output of goods that are here made, it brings down the price till there is no inducement to move any more labor and capital in this direction. _The Significance of a Natural Adjustment of Different Industries._--The "natural" state of general industry is that in which each particular branch of it is in the no-profit state. It is as though laborers and capitalists in a shoe factory took all the shoes that it turns out, sold them in a market, paid for the raw material out of the proceeds, and kept the remainder, dividing it between themselves in proportions which corresponded with the amounts they had severally contributed toward the making of this product; and as though the laborers in cotton mills and iron foundries received the goods there made and dealt with them in a like manner. It is as though in every branch of business the whole product were turned over in kind to the furnishers of labor and capital. _The Entrepreneur a Passive Functionary under Static Conditions._--Purely passive is the function of the _entrepreneur_ under static conditions. In so far as any effect on his income is concerned he might as well reside in a foreign land as in the one where his business is located, provided always that the management were unaffected. When the same man is both _entrepreneur_ and manager, the absence of the first of these functionaries would mean the absence also of the second, and that would cause trouble; but the purely mercantile operation of getting a title to a product and then surrendering it can be carried on as well in one place as in another. The _entrepreneur_ in his capacity of buyer and seller does not even do the work which purchases and sales involve. That is commonly done by agents. Some of it, of course, may be done by the responsible manager himself, and if that person is also the _entrepreneur_, it follows that he does a part of the commercial labor of his business. In this, however, he goes beyond his function as _entrepreneur_. In that capacity he does, as we have said, no labor of any kind. Sales and purchases are made in his name, but he does none of the work that leads up to them.[1] [1] The holders of common stock in a corporation are always _entrepreneurs_, and they are also capitalists if the stock represents any real capital actually paid in. If the bonds and the preferred stock represent all the real capital that there is, any dividends that may be paid on the common stock are a pure _entrepreneur's_ profit. If, on the other hand, the stock all represents money actually put into the business, the dividends on it contain an element of net profit if they exceed simple interest on the capital and insurance against the risks that are not guarded against by actual insurance policies. If the rate of simple interest is four per cent, and the value of the unavoidable risk is one per cent, then a dividend of six per cent contains a pure _entrepreneur's_ profit of one per cent. In dynamic conditions such a return is often to be expected, and we shall soon study the conditions that afford it. In the present study we do not need to consider risks, inasmuch as the greater part of them arise from dynamic causes; that is, from the changes and disturbances to which the business world is subject. An invention promises greatly to cheapen the production of some article and, for a time, to insure large returns for the men who first utilize it. A capitalist may be willing to take a risk for the sake of sharing this gain; but in time both the risk and the gain will vanish. The capacity of the new appliances will have to be tested, a market for their output found, etc. A small remainder of risk is still entailed upon the capitalist if he leaves his money in this business. The death of the managing partner, the defaulting of payments for goods sold, the chances of unwise or dishonest conduct on the part of clerks or overseers, always impend over a business, but these dangers are at a minimum when the man who is at the head of the force of managers has capital of his own in the business. Risks are at a static level only when they are thus reduced; and for our present purpose it is best to consider that competition has eliminated the establishments where any recklessness has been shown in the management, and that the unavoidable remainder of risk resolves itself, nearly enough for practical purposes, into a _deduction from the product_ which the surviving establishments turn out in a long period of time. A small percentage of their annual gains, set aside for meeting unavoidable losses, will make good these losses as they occur and leave the businesses in a condition in which they can yield as a steady return to owners of stock, to lenders of further capital, and to laborers all of their real product. _How the Entrepreneur contributes to Production under Dynamic Conditions._--In a dynamic state the _entrepreneur_ emerges from this passive position. He makes the supreme decisions which now and again lead to changes in the business. "Shall we adopt this new machine?" "Shall we make this new product?" "Shall we enter this new market?" are questions which are referred to him, and on the decisions he reaches depends the prospects of profit for the business. This activity is not ordinary labor, but in a true sense it is a productive activity, since it results in placing labor and capital where they can produce more than they have done and more than they could do were it not for the enabling act of the _entrepreneur_ which places them on a vantage ground of superiority. This subject will be discussed in a later chapter and in connection with other phases of economic dynamics. _Values at a Static Level only when Entrepreneurs' Gains are Nil._--Any net profit on an _entrepreneur's_ part means that his product is selling for more than the elements of it have cost him. But this is a condition which, if labor and capital are as mobile as the static hypothesis requires that they should be, will cause this _entrepreneur_ and others to move labor and capital into his industry, thus increasing its output and lowering the selling price of its product. If there is no such action going on, it shows that the _entrepreneurs_ have no incentive for taking it. _Values at a Static Level only when the Gains of Labor in the Different Industries are Equalized._--If labor is creating more in one subgroup than in others, as it often is in a dynamic condition, that fact means that some _entrepreneurs_ are making a profit, and, according to the principle stated in the preceding paragraph, this means that values are not at their static or "natural" level. If, owing to new methods or to some other cause, a given amount of labor[2] in the subgroup that produced the A´´´ of our table creates an amount of that product which sells for more than the B´´´ or the C´´´ which labor of like quantity makes, then the manufacturers of A´´´ would obviously get a margin of profit. They would not be obliged to pay for labor any more than the market rate, and that, as we shall see, cannot exceed what labor produces in the groups B´´´ and C´´´. In A´´´ the labor creates more and the employer pockets the difference. In saying this we assume one fact which we undertake later to prove; namely, that there is a definite amount of each product which can be attributed to labor alone as its producer. Capital and labor work together, but each is, in effect, the creator of a certain fraction of their joint product. [2] In measuring labor we, of course, take account of the quality of the men who perform it, and the work of a skillful man is counted as more units of labor than that of an unskillful one. _Values Static only when the Gains of Capital in Different Industries are Equalized._--If capital is creating more in one industry than in another, there is a margin of profit for the _entrepreneurs_ in the exceptionally productive industry. They pay as interest on the capital they use only the market rate, which is what equal amounts of capital can produce and get elsewhere. If they produce more in the one group, the _entrepreneurs_ there can pocket the excess as they did in the case of the product of labor. We assume that there is everywhere a definite product that can be attributed to capital alone. _Values Normal when Moneys paid out by Entrepreneurs equal Moneys Received._--In the preceding paragraphs we have spoken of exchange values as being static under certain conditions, but we might have expressed the essential fact by saying that prices are static under these conditions since the money a product brings is a true expression of its value. If A´´´ sells for as many dollars as does B´´´, the two things exchange for each other. In like manner the product of labor and that of capital may be expressed in terms of money, since the quantities of goods which they respectively make sell for certain sums. Wages and interest are nearly always conceived in terms of money. The commercial mode of computing costs of production and returns from production is to translate them into moneys paid by _entrepreneurs_ and moneys received. _Costs of Production as related to Static Incomes._--What to an _entrepreneur_ are costs are to workmen and capitalists incomes. The one pays out wages and interest, and the others get them; and these two sums are normal when together they equal the prices received for goods produced. The _entrepreneur_ is the universal paymaster, and in a static condition all incomes come from his hand. CHAPTER VIII WAGES _The Equilibrium of Industrial Groups._--The different industrial groups are in equilibrium when they attract labor and capital equally, and that occurs when these agents produce as much per unit employed in one group as in another. Such equalized productivity is the bottom fact of a static condition, and equalized pay follows from it. Wages and interest tend to be uniform in all the groups. Efficient labor, of course, gets in any employment more than inefficient; but labor of a given grade gets in all the groups that make up industrial society a uniform rate of pay, and nothing is to be gained by any capitalist or by any laborer by moving from one employment to another. They all therefore stay where they are, not because they cannot move freely if they wish to do so, but because no inducement to move is offered to them. This is a condition of perfect mobility without motion--of atoms ready to move at a touch without the touch that would move them. The paradox indeed holds that it is the ideally perfect mobility which has existed in the past which positively excludes motion in the present. At some time in the past labor and capital have gone from group to group till they have brought about an adjustment in which they have no incentive for moving farther. The surface of a pool of water is kept tranquil, not because the water is not perfectly fluid, but because, in spite of the fact that it can flow with entire freedom in any direction if it is impelled more in that direction than in any other, each particle of it is impelled equally in all directions. It is the perfect equilibrium that keeps the particles from changing their places, and fluidity has caused the equilibrium. In like manner when labor and capital can create and get just as much in one place as in another, they are attracted as strongly in one direction as in another and therefore do not move. A young man of average capacity, who is deliberating upon the choice of an occupation, will find that he can do as well in a cotton mill as he can in a shoe factory, a machine shop, a lumber mill, a flouring mill, or any other industrial establishment requiring his particular grade of capacity. This is the picture of a perfectly static industrial condition. Economic science has to account for values, wages, and interest as they would be in such a condition, however impossible it is that society should ever reach exactly such a state. The values, wages, and interest in a real market are forever tending toward the rates that would be established if the static condition were realized. _The Sign of a Static State._--The sign of the existence of a static condition is, therefore, that labor and capital, though they are perfectly free to move from one employment to another and would actually do so on the slightest inducement, still do not move. They stay where they are because they cannot find places where they can produce the slightest amount in excess of what they now produce, and no employer will anywhere offer any excess above the prevailing rate of pay. _Profits and the Movements they induce the Sign of a Dynamic State._--_Entrepreneur's_ profits, when they exist, mean that this equilibrium is disturbed, and when it is so, mobility of labor and capital affords the guaranty that a new equilibrium will be established if no further disturbances follow. As we have said, profits attract labor and capital, increase the output of those goods which yield the profit, and reduce the prices of them to the no-profit level. Workmen and capitalists then get from the _entrepreneur_ as wages and interest all that he gets from the public as the price of his goods, except what he pays for raw materials.[1] In other words, the employer sells his goods at cost. [1] The _entrepreneur_ of A´ of our table must buy the A in order to impart to it that utility which is his own particular contribution. He pays as wages and interest all that he gets for this contribution. The true product of the _entrepreneur_ is not the entire price of the A´, but is the difference between that and the price of the A. The entire amount received for the A´ resolves itself into wages, interest, and cost of A; but as a rule the price of A resolves itself practically into wages and interest only, and when it does so, all that is paid for the A´ ultimately takes these forms. The same is then true of the finished product A´´´. The entire price of it is ultimately resolvable into wages and interest; and in speaking of the product of an entire group we do not need to make any reservation for raw materials. The case in which this statement requires qualification is that in which the material in its rawest state still has value, as is the case with ore and mineral oil contained in the earth but not a true part of land in the economic sense, since they are exhausted in the using. The price of a product into which these elements enter includes something that represents the value which they have _in situ_ and before any labor has been expended on them. It is true even in these cases that the value of the product is measured in terms of wages and interest, provided that the exhaustible elements such as ore, oil, etc., are capable of being replenished, or provided that an effective substitute for them is in process of production by means of labor and capital. The natural raw material is then worth what the artificial substitute costs in terms of capital and labor, and the finished product which contains some of the natural material sells for the amount which the finished product costs, which is made altogether by labor and capital applied to valueless elements in nature. _How Costs are Determined._--The early studies of "natural" values, or values which conform to costs of production, were unconscious and imperfect attempts to attain the laws of value in a static state. In such a state costs resolve themselves into wages and interest, and the conception of such a static state is therefore not complete unless we know how wages and interest themselves are determined. What we have already said implies that they fluctuate about certain standards, just as do the prices of goods, and that they would remain at these standards if society were reduced to a static condition. _Significance of Static Law in a Dynamic State._--An actual society is undergoing constant disturbances. It is very far from being static; and yet values of goods, on the one hand, and the earnings of labor and capital, on the other, hover within a certain distance of the standards which would be realized if the society became static. In spite of active dynamic movements the general returns of labor and capital can never range so far from these theoretical amounts that the distance from them cannot in some way be measured and accounted for. The sea, when gales are blowing and tides are rising and falling, is anything but a static object, and yet it keeps a general level in spite of storms and tides, and the surface of it as a whole is surprisingly near to the ideal mathematical surface that would be presented if all disturbances were to cease. In like manner there are certain influences that are disturbing the economic equilibrium just as storms and tidal waves disturb the equilibrium of the sea. We cannot actually stop these influences any more than we can stay the winds and the lunar attraction; but we can create an imaginary static state for scientific purposes, just as a physicist by a process of calculation can create a hypothetical static condition of the sea and discover the level from which heights and depths should be measured. No more than the economist can he actually bring the subject he is dealing with to a motionless condition. The economic ocean will defy any modern Canute who may try to stop its movements; but it is necessary to know what shape and level it would take if this were done. _Influences that disturb the Static Equilibrium._--The influences that disturb the economic equilibrium are, in general, five. The population of the world increases, and this is one influence which prevents values, wages, and interest from subsiding to perfectly "natural" standards. Capital is increasing, and this influence also acts as a disturbing factor. The methods of producing things change, and the changes have a very powerful effect in preventing the attainment of a static equilibrium. New modes of organizing different industries are coming into vogue, and this causes a further disturbance of the economic adjustment. The wants of men are by no means fixed; they change, multiply, and act on the economic condition of society in a way that affects the static adjustment. Even physical nature undergoes change, and the perishable part of the earth does so in a disquieting way. We are using up much of our natural inheritance. As the effect of this appears chiefly in forcing us to change our processes of production, we shall, for convenience, limit our study to the five changes here enumerated. _Movement Inevitable in the Dynamic State._--These influences reveal their presence by making labor and capital more productive in some places than they are in others, and by causing them ever and anon to move from places of less productiveness to places where gains are greater. As we have said, this moving of labor and capital to and fro is, like currents in the sea, a sign of a dynamic condition. As in the static state these agents would not thus move, however fluid and mobile they might be, so in a dynamic state they are bound to move, because their earning powers do not remain long exactly equal in any two employments, and they go now hither and now yon, as, in the changeful system, openings for increased gains present themselves. If commodities were everywhere selling at cost prices and if wages and interest were everywhere normal and uniform, labor and capital would not move to and fro, and this would be a proof that dynamic influences were absent. _How an Imaginary Static Society is Created._--If we wish to discover to what standard the values of goods, on the one hand, and the rewards of labor and capital, on the other, continually tend to conform, we must create an imaginary society in which population neither increases nor diminishes, in which capital is fixed in amount, in which the method of making goods does not change, in which the mode of organizing industry continues without alteration, and in which the wants of consumers never vary in number, in kind, or in intensity. _Costs of Production in a Static State._--We have said that in such a static state the prices of different products are just high enough to cover the wages and interest which are generally paid. There are uniform or all-around rates of pay for labor and for capital, and every man who hires workmen or gets loans from a bank has to pay them. In the real world, full as it is of disturbances, and given over as it is to forces of change and progress, we find that values, wages, and interest are in general surprisingly near to these standards. In a particular business products may for a time sell for enough to afford a large surplus above prevailing wages and interest, and business as a whole may, for a time, yield some such surplus; but in the absence of monopolistic privileges no one business yields a large surplus for a long time, and still less does business as a whole do so, though profits may always be found somewhere within the system. _The Final Productivity of Labor._--If we assume that the capital of society is a fixed amount, we may perform an imaginary experiment which will show how much labor really produces. We may set men at work, a few at a time, until they are all employed, and we may measure the product of each of the detachments. We should make the different sections of the working force as similar to each other as it is possible to make them and call each section a unit of labor. If there were ten such divisions and if the quantity of capital were sufficient to equip them all on the scale on which laborers are at present actually equipped, it is clear that this amount of capital, when it was lavished on one single section, must have supplied it with instruments of production in nearly inconceivable profusion. What we should to-day regard as a fair complement of capital for a thousand men would nearly glut the wants of a hundred, and yet it is thinkable that it should take such forms that they would be able to use it. _Productivity of the First Unit of Labor._--We will set at work one section which we have called one unit of labor and will put into the hands of its members the whole capital which is designed ultimately to equip the ten sections. It is very clear that the forms that this capital will take cannot be the same that it will have to take when the entire working force is using it. Indeed, we shall have to tax our ingenuity to devise ways in which one unit of labor can utilize the capital that will ultimately be used by ten. The tools and machines will have to be few in number but very costly and perfect. We shall have to resort to every device that will make a machine nearly automatic and cause it to exact very little attention from the person who tends it. The buildings will have to be of the most substantial and durable kind. We shall have to spend money without stint wherever the spending of it will make labor more productive than it would otherwise be. If we do this, however, the product of the labor and its equipment will be a very large one. The industry will succeed in turning out indefinitely more goods than a modern industry actually does, and the reason for it will be that the workmen have capital placed in their hands in unparalleled profusion. _The Product of the Second Unit of Labor._--We will now introduce a second unit of labor, by doubling the number of workers, without changing the amount of the capital. We must, of course, change the forms of the capital, or it cannot be advantageously used by the larger working force. The buildings will have to be larger, and if they are to be erected with about the same amount of capital as was formerly used, they must be built in a cheaper way. Tools of every sort must be more numerous, and this larger number of tools, if it is to represent the same investment of capital that the former number embodied, must also be simpler and cheaper. The whole equipment of _capital goods_ will have to undergo a complete transmutation; but the essential thing is that the amount of the capital should not be changed. _A Provisional Mode of Measuring Capital._--In measuring the amount of the capital we are obliged to use a unit of cost, and in the illustration we have assumed that the cost can be measured in dollars. The productive fund consisted at the outset of a certain number of dollars invested in productive operations. This is only a provisional mode of measuring it. The money spent really represents sacrifice incurred, and we shall find that the only kind of sacrifice that is available for measuring the cost of goods of any kind is that which is incurred by labor. Ultimate measurements of wealth in all its forms have to be made in terms of labor. Such measurements have presented difficulties, and the attempt to make them has led to serious fallacies. We shall see, in due time, how these fallacies can be avoided. _The Law of Diminishing Productivity._--Under these conditions the second unit of labor will add something to the amount that was produced by the first unit, but it will not cause the product to become double what it was. It could not do that unless the capital also were doubled. Each unit of labor is now coöperating with one half of the original capital, and the total product is less than it would have been if the new labor, on entering the field, had brought with it as full an equipment of productive instruments as was possessed by the labor that preceded it. Adding to the industry a second unit of labor without adding anything to the capital makes the total product somewhat larger, but falls short of doubling it. If we credit to this second unit of labor what it adds to the product that was created before it came into the field, we shall find that it is a certain positive amount, but obviously less than the total product which was realized by the first unit _and all the capital_. It is even less than a half of the product of the two units using all the capital. Perhaps the first unit of labor, when it used all the capital, created ten units of product; while the two units of labor, using this same original amount of capital, produce sixteen units of product. The clear addition to the original product which is caused by the added labor of the second squad of workmen is only six units, while a half of the total product after the addition to the labor has been made is eight. This figure represents the amount we may attribute to one unit of labor and a half of the total capital, while six represent what is _causally_ due to one unit of bare labor only. With all the capital and one unit of labor we get ten units of product, while the addition of one unit of bare labor brings the total amount up to sixteen. Six units find the cause of their existence in the presence of the second unit of labor, and the second unit therefore shows, as compared with the first, a diminished productivity. _Product of the Third Unit of Labor._--We will now introduce a third unit of labor, leaving the amount of capital still unchanged, but again altering the forms of it so as to adapt them to the needs of a still larger working force. We will make the buildings larger and therefore, of necessity, cheaper in their forms and materials. We will make the tools and machines more numerous and simple, and will do everything that is necessary in order to make the fixed amount of capital--the fund amounting to a given number of "dollars"--embody itself in the number and the kinds of capital goods that are requisite in order to supply three times the original number of workmen. The third unit of labor now adds something to the product realized by the first two, but the addition is smaller than it was in the case of the second unit. _Products of a Series of Units of Labor._--If we continue this process till we have ten units of labor, employing the same amount of capital as was formerly used by one, we shall find that each unit as it begins to work adds less to the previous product than did the unit which preceded it, and that the tenth unit adds the least of all. Care must be taken not to confound the addition that is made to the product in consequence of the additional working force with the amount which, after the enlargement of the force, is created by the last unit of labor _and its pro rata share of the capital_. When the tenth unit of labor is working, it is using a tenth of the capital and the two together create a tenth of the product. This is more than the amount which is _added_ to the product by the advent of the tenth unit of labor. That addition is merely the difference between the product of all the capital and nine units of labor and that of all the capital and ten units of labor. This extra product can be attributed entirely to the increment of labor. It is also carefully to be noted that when the units are all working together, their products are equal and the particular one which happened to arrive last is not less productive than the others. Each one of them is _now_ less productive than each one of the force of nine _was under the earlier conditions_. In like manner each unit of the nine is less productive than was, in the still earlier period, each unit of the force of eight. At any one period, all units produce the same amount. At any one period, then, what any one unit of labor produces by the aid of its _pro rata_ share of the capital is a larger amount than what each can be regarded as producing by itself. Though one of ten units creates, with the aid of a tenth of the capital, a tenth of the product, of itself it creates less; for we can only regard as its own product what it adds to the product that was creating before it arrived on the scene. It is the bare product of a unit of labor alone that we are seeking to distinguish from other elements in the general output of the industry, and that consists in the difference between what nine units of labor and all the capital can produce, and what ten units of labor and all the capital can produce. We will consider the amount of capital fixed and let the amount of labor increase along the line _AE_, and we will let the product of successive units of labor be measured by the vertical distance from the points on the line _AE_ to the descending curve _CD_. _AC_ is the product of the first unit of labor. The product of later units is measured by lines to the right of _AC_ and parallel with it, which grow shorter as the number of units increases. _ED_ is the product of the last unit. In each case we impute to an increment of labor whatever amount of product its presence adds to that which was created before. _Summary of Essential Facts._--The facts that are to be remembered then are: first, that the capital remains fixed in amount, though the forms of it change as the number of units of labor increases; secondly, that that which we call the product of a unit of labor is what that unit, coming into the field without any capital, can add to the product of the labor and capital that were there before; and thirdly, that this specific product of labor grows smaller as the amount of labor grows larger, rendering the product of the last unit the smallest of all. When the tenth and last unit is working, each one of the nine earlier units is, of itself, producing no more than does the final one, though it formerly produced more because of the larger quota of capital with which it was formerly supplied. [Illustration] _The Test of Final Productivity._--There are now at work ten units of capital and ten of labor, and we cannot go through the process of building up the working force from the beginning. How, then, do we measure the true product of a single unit of labor? By withdrawing that unit, letting the industry go on by the aid of all the capital and one unit of labor the less. Whatever one of the ten units of labor we take away we leave only nine working. If the forms of the capital change so as to allow the nine units to use it advantageously, the product will not be reduced to nine tenths of its former size, but it will still be reduced; and the amount of the diminution measures the amount of product that can be attributed to one unit of bare labor. Or we may add a certain number of workmen to a social force already at work, making no change in the amount of the capital,--though changing its forms,--and see how much additional product we get. That also is a test of final productivity. It gives the same measurement as does the experiment of taking away the little detachment of men and seeing how much the product shrinks. By either process we measure an amount that is attributable altogether to bare labor and not to capital. The whole area _BCD_ in the diagram is an amount of product that is attributable to capital and not to labor. It represents the total surplus produced by labor and capital over the amount that can be traced to the labor alone. The product of all the capital and all the labor minus ten times the product of a single unit of labor is the amount that is attributable to the productive fund only. The area _ABDE_ represents this amount. The last unit of labor creates the amount _DE_ and the number of units is represented by the amount _AE_. All of them are now equally productive and what all create, as apart from what capital creates, is the amount _ABDE_. _Only the Final Part of this Mode of gathering a Working Force practically resorted To._--The process of building up the working force from a single unit is imaginary. In practical life we see the process only in its final stage. _Entrepreneurs_ do continually have to test the effect of making their working forces a little larger or a little smaller, and in so doing they test the final productivity of labor; and this is all that is necessary. Tracing the process of building up the force of labor unit by unit reveals a law which is important, namely, that of the diminishing productivity of single units of labor as the number of units increases. If we crowd the world full of people but do not proportionately multiply working appliances of every kind, we shall make labor poorer. _Why a Detachment of Laborers rather than One Man is treated as a Unit of Labor._--In making up the force of workers we might have treated each individual as a unit; but we have preferred to call a detachment a unit in order that the symmetry of the force might be preserved. Even though we were studying only a single mill it would have its departments, and it would be desirable that, when we enlarge the force of men, we should be able without difficulty to give to each part of the mill its fair share of the new laborers. If it were a shoe factory, we should need to add lasters, welters, sewers of uppers, etc., in a certain proportionate way, in order that one part of the mill might not get ahead of another and pile up unfinished products faster than they could be taken and completed. In the last analysis the law applies to the industry of all society. The final unit in the case consists of shoemakers, cotton spinners, builders, foundrymen, miners, cultivators, etc., and of men of all subtrades included in the general callings. As the composite detachments come into the field, they apportion themselves among all the occupations that are represented, and that too in nicely adjusted proportions. We shall see in due time how this adjustment of the several shares of the social force of laborers is practically made. _The Law of Final Productivity Applicable to the Labor of Society._--The law of final productivity applies to every mill, shop, or mine separately considered. If its capital remains fixed in amount, units of labor produce less and less as they become more numerous. The product of any unit at any one time may be measured by taking it away and seeing how much the output of the establishment is reduced. The law, however, applies to all the mills, shops, mines, etc., considered as a social complex of working establishments. As the working society grows larger without growing richer in the aggregate, the power of labor to produce goods of all kinds grows less. At any one time this producing power is measured by taking away from every working establishment a number of its operatives and ascertaining how much less is produced after the withdrawal. Such a test on the social scale is never made consciously. Each employer can test in an approximate way the effect of reducing his own force, and the effect of gradually enlarging it, and there are influences at work which result in enlarging one industry when others are enlarged and in causing the final productivity of labor to be uniform in all. A shoe manufacturer can tell, in a general way, how much an extra man or two will be worth to him. It is possible to ascertain by experience about what number of shoes that additional labor will, in a year, add to the output of the shoe factory or the number of tons of steel it will add to the present annual output of a furnace. When these products vary in the case of different shops, the men are called to the points where the apparent additions are largest, and the constant tendency is toward a level of productive power. The building up of an imaginary force from the beginning presents, in a clear and emphatic way, the fact that the specific productivity of labor grows less as, other things remaining the same, workers become more numerous. We should know on _a priori_ grounds that this must be the fact; but we can verify it by observation and statistical inquiry. Where men are numerous and land and tools are scarce, labor is comparatively unproductive; and it is highly productive where land and tools are plentiful. There is no doubt that crowding the world full of people, without providing the world with capital in a proportionate way, would impoverish everybody whose income depends on labor. _The Law of Wages._--Even though labor creates the amount _ABDE_, it is not yet perfectly clear that it will be able to get that amount. For aught we now know the _entrepreneur_ may keep some of it, and for aught we know he may keep some of the quantity _BCD_ which is distinctly the product of capital. Let us see whether he can in reality withhold any part of _ABDE_, which is the product of labor. [Illustration] _Wages under Perfect Competition._--In the static state that we have assumed, competition works without let or hindrance. It does not work thus in the actual world, and we shall in due time take account of the obstacles it encounters; but what we are now studying is the standards to which such competition as there is--and it is in reality very active--is tending to make wages conform. We want to know what would happen in case this competition encountered no hindrance at all. This would require that a workman should be able to set employers bidding against each other for his services just as actively as an employer can make laborers bid against each other in selling their services. If this were the case, every unit of labor could get what it produces, no more and no less. Even a single man, offering himself to one employer after another, would virtually carry in his hands a potential product for sale. His coming to any man's mill would mean more goods turned out in a year by the mill; and if one employer would not pay him for them at their market value, another one would. The final unit of social labor can get, under perfectly free competition, the value of whatever things that labor, considered apart from capital, brings into existence. Moreover, each unit of labor by itself alone now produces, as we have seen, the same amount of commodity as the final unit, and can get the price of it. Now that they are all working together each one of them can place itself in the position of the final unit by leaving its present employment and offering its services elsewhere. _Wages regarded as Prices of Fractional Products adjusted by Perfect Competition._--Under the hypothesis of perfect competition, as the term has been used in our discussion, the venders of goods can get their market values. These values are fixed by the final utility law. Free competition means, then, not only that any average laborer who offers himself for hire virtually carries in his hands a potential but definite product for sale, but that he may confidently offer it at the price that is fixed by its final utility. Like other venders, the laborer can get the true value of his product and he can get no more. In an ideally perfect society organized on the competitive plan a man would be as dependent on his own productive power as he would be if he were alone in a wilderness. His pay would be his product; but that would be indefinitely larger than it could be in a wilderness or in any primitive state. The capital of other men and the organization that they maintain enable a worker to create and get far more than he could if he lived alone, even though, like Crusoe, he were monarch of his whole environment. It would be a losing bargain for the worker to surrender the product of mere labor in a state of civilization in exchange for what both labor and capital create in a state of savagery. CHAPTER IX THE LAW OF INTEREST The product of the final unit of labor--an amount which in practice is measured without any tracing of the previous growth of the working force--sets the standard of the rate of wages. We have now to see that the rate of interest has a similar basis; and yet it is worth while to build up, wholly in imagination, a fund of capital, just as we have made up the force of laborers, increment by increment. This will have the incidental effect of illustrating another way in which wages may be determined. _Interest as a Residual Amount._--The area _BCD_ in our former figure represents the difference between the total product of an industry and the wages paid to laborers. If there is no net profit accruing to the _entrepreneur_, this area must represent interest. It is what is left for the capitalist on the supposition that he and the laborer together get all that there is. If the goods sell for what they cost, this must be the fact, and the amount represented by _BCD_ has thus to go to capital, since, by a rule of exclusion, it cannot go to the _entrepreneur_ nor to the laborer. The mill and its contents earn for their operator nothing but simple interest on the money they have cost. Paying the laborers discharges the first claim on the product, and there then remains only enough of the product to pay the remaining claim, that of capital. The question still remains to be answered, how the capitalist, if he is a different person from the _entrepreneur_, or operator of the mill, can make this functionary pay over to him all that he has in his hands after paying the wages of labor. _The Importance of the Residuum._--The above reasoning does not satisfactorily show what influence the capitalist can use to make the _entrepreneur_ pay over to him the entire amount of the residuum. It shows that after paying wages the _entrepreneur_ will have a certain amount left, but it is not thus far clear how the capitalist can get it from him. The fact that the laborers get only the amount represented by _ABDE_ and that the whole amount is _ACDE_ does, however, at least show that the _entrepreneur_ has the amount _BCD_ left in his hands, and that he is _able_ to pay this amount to the capitalist if by any appeal to competition the capitalist is able to make him do it. _Interest not determined Residually._--The fact is that the interest on capital is fixed exactly as are the wages of labor. We will let another figure represent the entire product of the same amount of labor and the same amount of capital that were represented in the former case. We will assume that there is at the outset a complete force of laborers, and that no men are added to it or taken from it; but we will gradually introduce units of capital instead of units of labor as in the former case. The amount of capital is now represented by the line _A´E´_ and the product of the first unit of it by the line _A´C´_. The product of the successive units declines along the curve _C´D´_. The final unit of capital then brings into existence the amount of wealth represented by _E´D´_. As every other unit now produces the same amount, the capital as a whole creates the quantity represented by _A´B´D´E´_ and every unit of it makes its own separate contribution to that amount. In this we have simply applied to capital and its earnings the principle we formerly applied to labor and its earnings. [Illustration] _General Form of the Law of Final Productivity._--This principle is the law of final productivity, one of those universal principles which govern economic life in all its stages of evolution. Either one of the two agents of industry, used in increasing quantities in connection with a fixed amount of the other agent, is subject to a law of diminishing returns. The final unit of the increasing agent produces less than did the earlier units in the series. This does not mean that at any one time one unit produces less than another, for at any one time all are equally productive. It means that the tenth unit produces less than the ninth did _when there were only nine in use_, and that the ninth unit formerly produced less than the eighth did in that still earlier stage of the process _in which there were only eight in use, etc._ If the productive wealth of the United States were only five hundred dollars per capita instead of more than twice that amount, interest would be higher than it is, because the productive power of every dollar's worth of capital would be more than the productive power of each dollar's worth is now; and, on the other hand, if we continue to pile up fortunes, great and small, till there are in the country two thousand dollars for every man, woman, and child of the population, interest will fall, because the productive power of a dollar's worth will become less than it now is. _How Competition fixes Interest._--We can now see how it is that the capitalist can make the _entrepreneur_ pay over to him the amount left in his hands after paying wages. Every unit of capital that any one offers for hire has a productive power. It can call into existence a certain amount of goods. The offer of it to any _entrepreneur_ is virtually an offer of a fresh supply of the kinds of goods which he is making for sale. Loaning ten thousand dollars to a woolen manufacturer is really selling him the amount of cloth that ten thousand dollars put into his equipment will bring into existence. Loaning a hundred thousand dollars to the manufacturer of steel, so as to enable him in some way to perfect his equipment, is virtually selling him the number of additional tons of steel, ingots, or rails that he can make by virtue of this accession to his plant. _The Significance of Free Competition._--Now, the tender of capital may be made to any _entrepreneur_ in a particular industry, and the existence of free competition between these _entrepreneurs_ implies that a lender of capital can get from one or another of them the whole value of the product that this capital is able to create. A unit of capital in the steel business can produce _n_ tons of steel in a year, and if one employer will not pay the price of _n_ tons for the loan of it, another will. This, indeed, implies an absolutely free competition; but that is the condition of the problem we have first to solve. When we know what ideally active competition will do, we can measure the effects of the obstructions that, in practice, competition actually encounters. _Competition for Capital among Different Industries._--The capitalist can invoke the aid of competition outside of the limits of one particular business. He may offer his loan to steel makers, to woolen manufacturers, cotton spinners, silk weavers, shoemakers, etc. Within each one of these industries perfect competition between the different employers will give him the value of the product which, in that business, his capital is able to create. If, however, what in this way he offers to men in one occupation is worth more than what he offers to men in another line,--if capital is worth more to steel makers than it is to cotton spinners,--he will find a market for his capital in the former industry; and this process of seeking out the employment in which capital is the more productive and there bestowing the loans of capital, will go on until every such local excess of productive power is removed and capital can produce as much wealth in one business as it can in another. Everywhere capital will then be both producing and receiving the same amount, and general interest will everywhere be determined by the final productivity principle acting all through the business world. _When Interest as Directly Determined equals Interest as Residually Measured._--The area _BCD_ of the first figure measures what the _entrepreneur_ has left after paying wages. This amount and no more he can pay as interest, and he will pay it if he has to. The area _A´B´D´E´_ of the second figure represents what he must pay as interest; and we can now see that, if competition is perfectly free, this amount equals the amount _BCD_ of the first figure. If, after paying wages, there is any more left in the _entrepreneur's_ hands than competition compels him to pay out as interest, he is realizing a net profit; he is selling his goods for more than they cost him, and this, as we saw at the outset, is a condition that under perfect competition cannot continue. The natural price of goods is the cost price. If the market price of anything is in excess of cost, _entrepreneurs_ receive a profit, and in order to do more business and make a larger aggregate of such profit they bring new labor and capital into their industry. The increased output lowers prices, and the excess of gain is thus taken from the _entrepreneur_. If _BCD_ is smaller than _A´B´D´E´_, the _entrepreneur_ incurs a loss and will curtail his business and let some labor and capital go where they can produce more. Taking this remainder of income from the _entrepreneur_ by means of an addition to the output of goods and a reduction of the price of them does not annihilate the income, but bestows it on other recipients; for the reduction in price which destroys an employer's profit can come only in a way that benefits consumers. It means that enlarged production of which we have just spoken, which scatters more goods throughout the community and insures an addition to the real incomes of both laborers and permanent investors. _Effect of Perfect Mobility of Labor and Capital._--Perfect mobility of labor and capital insures that the residuum in the _entrepreneur's_ hands after wages are paid shall all be made over to the capitalist. We encounter here again the static law that, with competition working without let or hindrance, the _entrepreneur_ as such can keep nothing for himself; though if he is also a worker he will get wages, and if he is also a capitalist he will get interest. His business will pay wages on all kinds of labor, including that of management, and interest on all capital, including his own. A net gain above all this it will not afford, and whatever the _entrepreneur_ has left after paying wages he will have to use in paying interest, and _vice versa_. Laborers and owners of capital have, as it were, to take each others' leavings. Such is the situation in an ideally static condition, though we shall see how it is changed in actual and progressive society. The area _BCD_ of the first figure is, under static conditions, exactly equal to the area _A´B´D´E´_ of the second figure, because _ACDE_ represents the whole product, _BCD_ in the first figure represents all that is left of it after wages, measured by _ABDE_, are paid; and we know by evidence both theoretical and practical that the capitalist, whose share is directly expressed by _A´B´D´E´_ of the second figure, can claim and get the whole of this amount. _Wages as a Residuum._--It is clear that the same reasoning applies to wages. In the second figure they are represented as a residuum. The area _B´C´D´_ represents what the _entrepreneur_ has left after paying interest, and nobody can get this amount but the wage earner. The reason, however, why the wage earner can get it is that free competition will give him the amount _ABDE_ of the first figure, and this, under perfectly static conditions, must equal _B´C´D´_ of the second. Under perfect competition the _entrepreneur_ cannot have any of the amount _B´C´D´_ left in his hands after meeting the claims that the wage earner makes on him. On the other hand, he must have enough left to pay interest, since otherwise he would be incurring a loss, and that could not fail to force him and others who are in the same situation to contract their operations or go out of business. If the output of goods is reduced, either by the retirement of some employers or the curtailment of product by all, the price of what continues to be sold will be raised to the point at which wages and interest can be paid. _Wages and Interest both adjusted at Social Margins of Production._--It is to be noted that wages and interest are fixed at the social margin of production, which means that they equal what labor and capital respectively can produce by adding themselves to the forces already at work in the general field of employment. In making the supposition that, owing to some disturbing fact, a particular _entrepreneur_ has not enough after paying wages to pay interest, we assume that the rate of interest is fixed, in this way, in the general field and not merely in his establishment. If _B´C´D´_ were larger than _ABDE_, the _entrepreneur_ would be selling goods for more than cost and realizing a net profit, which he cannot do in a static state; but a pure profit is not only possible but actual in a dynamic state. In actual business total returns represented by _ACDE_ amount to more than the sum represented by _ABDE_ (wages) plus _A´B´D´E´_ (interest). There are conditions that in practical life are continually bringing this to pass in different lines of business, though not in all of them at once. The real world is dynamic and therefore the true net profit, or the share of the _entrepreneur_ in the strict sense of the term, is a positive quantity. This income is always determined residually. It is a remainder and nothing else. It is what is left when wages and interest are paid out of the general product. To the _entrepreneur_ comes the price of the products that an industry creates. Out of this he pays wages and interest, and very often he has something remaining. There is no way of determining this profit except as a remainder. The return from the sale of the product is a positive amount fixed by the final utility principle. Wages and interest are positive amounts, and each of them is fixed by the final productivity principle. The difference between the first amount and the sum of the two others is profit, and it is never determined in any other way than by subtracting outgoes from a gross income. It is the only share in distribution that is so determined. _Entrepreneur's_ profits and residual income are synonymous terms. In the static state no such residual income exists, but from a dynamic society it is never absent. Every _entrepreneur_ makes some profits or losses, and in society as a whole the profits greatly predominate. _Summary of Facts concerning a Static Adjustment of Wages._--We know then that in any industry wages and interest absorb the whole product, because any deviation from that rule in a particular group is corrected in the way above mentioned. Moreover, general wages and interest, as determined by the law of final productivity, must equal those incomes when they are determined residually. The area of the rectangular portion of one of the foregoing figures must equal the area of the three-sided part of the other. The question arises why all _entrepreneurs_ might not get a uniform profit at once. This would not lure any labor or capital from one group or subgroup to another. If, after paying wages and interest at market rates, the _entrepreneurs_ in each industry have anything left, the entire labor and capital are producing more than they get and there is an inducement to managers and capitalists to withdraw from their present employers and become _entrepreneurs_ on their own account. Such an _entrepreneur_ entering the field, drawing marginal labor and capital away from the _entrepreneurs_ who are already there and combining them in a new establishment, can make them produce more than he will have to pay them and pocket the difference. If such a condition were realized, there would be a gain in starting new enterprises, since luring away marginal agents and combining them in new establishments would always be profitable. When we introduce into the problem dynamic elements we shall see that centralization, which makes shops larger instead of smaller, makes industries more productive, and that what happens when net profits appear is more often the enlarging of one establishment than the creation of new ones. _Entrepreneurs_ in the large establishments can afford to resist the effort made by others to lure away any of the labor or capital which they are employing, and they will do this for the sake of retaining their profits. They can do it by bidding against each other, in case any of them are making additions to their mills or shops, and also by bidding against any new employers who may appear. Perfect competition requires that this bidding for labor and capital shall continue up to the profit-annihilating point. Here, as elsewhere in the purely static part of the discussion, we have to make assumptions that are rigorously theoretical and put out of view in a remorseless way disturbing elements which appear in real life. The static state requires that all _entrepreneurs_ who survive the sharp tests of competition should have equally productive establishments, which means that they should all be able to get the same amount of product from a given amount of labor and capital. The actual fact is that differences of productive power still survive. There are some small establishments which, within the little spheres in which they act, are as productive as large ones; but there are also some which are struggling hopelessly against large rivals in the general market and are destined erelong to give up the contest. In other words, the centralizing and leveling effects of competition are approximated but never completely realized in actual life. A fact that it is well to note is that the test of final productivity is inaccurately made when unduly large amounts of labor and capital are made the basis of the measurement. Take away, for instance, a quarter of the working force, estimate the reduction of the product which this withdrawal occasions, and attribute this loss entirely to the labor which has been taken away, and you estimate it too highly. With so large a section of the labor withdrawn the capital would work at a disadvantage, and a part of the reduction of the product would be due to this fact. If we should take away all the labor, the capital would be completely paralyzed, and the product would become _nil_. It would obviously be inaccurate to say that the whole product is attributable to the labor, on the ground that withdrawing the labor annihilates it all. With any large part of the labor treated as a single unit, the loss of product occasioned by a withdrawal of such a unit is more than can be accurately imputed to it as its specific product. The smaller the increments or units are made, the less important is this element of inaccuracy, and it becomes a wholly negligible quantity when they become very small. A study of the forms of the productivity curves will show that if we take as the increment of labor used in making the test only a tenth of the whole force, we exaggerate the product imputable to it by a very minute fraction, say by less than a one-hundredth part; and if we take a hundredth of the labor as a final unit, we exaggerate the product that is solely attributable to it by an amount so minute that it is of no consequence in practice or in any theory that tries to be applicable to practice. A question may be raised as to whether we are correct in saying that the _entrepreneur's_ profit is residual, in view of the fact that the entire product of a business is at the mercy of the management, so that a bad manager may reduce it or a good one may increase it. It may be further claimed that that part of the management of a business which consists in making the most far-reaching decisions cannot safely be intrusted to a salaried superintendent or other paid official and must get its returns, if at all, in the form of profits. Even in this case the gains are secured by making the gross return, which is the minuend in the case, large, leaving the two subtrahends, wages and interest, unchanged, and thus creating a remainder or residuum. We shall later see to what extent _entrepreneurs_ do in fact create the profits that come to them. The complete static conception of society requires that no _entrepreneur_ should be left in the field who cannot continue indefinitely to hold his own against the competition of his rivals, and this requires essential equality of productive power on the part of all of them. It is not necessary, however, that all should operate upon an equal scale of magnitude, for an interesting feature of modern life is the need of many small productive establishments that cater to local demands and to wants which, without being local, call for only a few articles of a kind. Repairs, small orders, and peculiar orders are executed more cheaply in small establishments, and they survive under the very rule of essential equality of productive power which static conditions require. For catering to the general market and producing staple goods the large establishment has a decisive advantage, and this insures the centralization which is the marked feature of recent industrial life. CHAPTER X RENT _The Term "Rent" as Historically Used._--The word _rent_ has a striking history. The science of political economy first took shape in a country in which direct employers of labor were not, as a rule, the owners of much land. Farmers, merchants, and many manufacturers hired land and furnished only the auxiliary capital which was necessary in order to utilize it. In a practical way the earnings of land were thus separated from those of capital in other forms, since they went to a different class of persons; and in the thought of the people the charges made for the use of mere ground came to constitute a unique kind of income. If, during the last century, the land in England had been a highly mercantile commodity, and if it had been the common practice of _entrepreneurs_ not to hire it but to buy and own it, as they bought and owned all other industrial instruments, there is little probability that land would have been considered, either in practical thought or in science, as a thing to be as broadly distinguished as it has been from all other capital goods. A business man would have measured his permanent fund of capital in pounds sterling and would have included in the amount whatever he had invested in land. As in America any representation of the capital of a corporation includes the sums invested in every productive way, and this includes the value of all land that the company holds, so in England, under a similar system of conducting business, any statement of the amount of a particular business capital would have included the whole of the productive wealth embarked in the enterprise; and in any statement of the forms of it there would have appeared, besides a list of all tools, buildings, unfinished goods, and the like, a schedule of the prices of land that the company owned and used. In "putting capital into his business" a man might buy land, in "withdrawing his capital" he might sell it; and the land in the interim would be the obvious embodiment of this part of his fund. The fact, then, that land was owned by one class of persons and let to another for hire, and that the lessees were the _entrepreneurs_ or users of it, caused practical thought and speech to put land in a class by itself. _The Origin of the Theory of Rent._--Scientific thought powerfully strengthened this tendency. At a very early date a formula was attained for measuring the rent of land, while no satisfactory formula was, then or for a long time afterward, discovered for measuring the amount of interest. Men contented themselves with saying that the rate of interest depends on demand and supply. In the case of the rent of land the same thing might have been said, but here such a statement was not mentally satisfying, and investigators tried to ascertain why demand and supply so act as to fix the income that land yields at a certain definable amount. _The Traditional Formula for Rent._--The formula which has long been accepted as measuring the rent of a piece of land, though it bears the name of Ricardo, grew into shape under the hands of several earlier writers. In its best form of statement this principle asserts that "the rent of a piece of land is the product that can be realized by applying labor and capital to it, minus the product that can be realized by applying the same amount of labor and capital to land of the poorest grade that is in cultivation at all." The quantity of the poorest land must be left indefinite, and all that the given amount of labor and capital can economically utilize must be left at their disposal. It would not do to say that the rent of _an acre_ of good land equals its product less that of _an acre_ of the poorest land in cultivation tilled with the same expenditure of labor and capital. If we should select a bit of wheat land in England tilled at a large outlay in the way of work, fertilizers, drains, etc., and try the experiment of putting the same amount of labor and capital on a piece of equal size in the remotest part of Canada, we should find that, so far from securing wheat enough to pay the bills that we should incur in the way of wages and interest, we should not have enough to help us greatly in the defraying of these costs, and the cultivation of this piece of land would be a losing venture. Instead of being no-rent land, yielding merely wages and interest for the labor and capital used in connection with it, it would be minus-rent land, deducting something from the earnings which the agents combined with it might elsewhere secure. In order to utilize such land at all, one must till it in what is termed an extensive rather than an intensive way, putting a small amount rather than a large amount of work and expenditure on it. By tilling ten acres of a remote and sterile farm with as much labor and other outlay as a very good acre of land in England receives, one can perhaps get enough to pay the required wages and interest. In general no-rent land is commonly utilized in an extensive way and very good land in an intensive way; and in stating the old formula for rent we need to be careful to make it mean that the rent of the good piece is its total product less the product that can be had by taking from the good piece the labor and capital it now absorbs and setting them at work on a piece of the poorest land which is enough larger than the good one to enable us to secure a crop which will be worth just the amount of wages and interest we must pay. The larger size of the poor piece of land is an essential condition. _Real Significance of Rent Formula._--It will be seen that this formula amounts to saying that the rent of land is what the land itself adds to the marginal product of labor and capital. Put a certain amount of labor and capital on a piece of land of good quality, and you get a certain amount of product. Withdraw the land from the combination, and you force the labor and capital to become marginal increments of these agents. They must go elsewhere and get what they can. One alternative that is open to them is that of seeking out land of a grade so poor that it has not been previously utilized and doing what they can to get a product out of it. Whatever they can make such land yield is, in an economic sense, wholly their own product. There is an indefinite quantity of this kind of land to be had, and wherever labor and capital utilize any part of it, they can have all that they produce. Now if we subtract what they there create from what was created when they were working on the good land, we have the rent of that land. _Rent as a Product Imputable to Land._--The difference between what the labor and capital produce at the margin of cultivation of land and what they can produce on good land, or land that lies within the margin, is clearly attributable to the qualities of the land itself. Given _X_ units of labor and _Y_ units of capital, combine with them no land except such as is too poor to have been previously utilized, and you get a certain product. It is the product of the labor and capital using something which is free to any one. Now put a piece of good land into the combination; to the _X_ units of labor and _Y_ units of capital add a piece of productive land and see what you can create. We do this by taking these units of labor and capital away from the worthless marginal land and setting them to tilling that which is of the better quality. The product is of course larger than they got before, and the difference measures what the land itself adds to the output of the other agents in the combination. The true conception of rent is that of the specific addition which land makes to the product of other agents used in connection with it. There are various ways of measuring this addition, but the method just used will at least show that the presence of the good land is the cause of the excess of product which given amounts of labor and capital secure over what they could create on land of the poorest quality. _Rent as a Differential Product._--In the early statements of the rent law it was not said that the rent of a piece of land is the product specifically attributable to it. If it had been, the chances are large that a much broader and more scientific use of the rent formula would have resulted. The law of rent, as it was actually stated, made it consist of a differential amount. It was what a given amount of labor and capital would produce under one set of conditions minus what they would produce under another. Since it is the presence or the absence of the productive land which makes the only difference between the two conditions, rent, even as it is thus defined, is really the amount of product specifically attributable to the land. It is what is created when the land is used in excess of what would be created if it were not used and if the coöperating agents did the best they could without it. We may use, as the most general formula for the rent of land, the contribution which land itself makes to the product of social industry. If we use the same method in measuring the rent of land which we used in measuring the wages of labor and the returns of capital, we shall represent the rent of a given piece of land as the sum of a series of differential amounts. In the accompanying figure the vertical belts bounded by lines rising from the letters _A_, _B_, _C_, etc., represent the products realized by applying successive increments of labor and capital to a given piece of land; and the horizontal lines running toward the left from _A´_, _B´_, _C´_, etc., separate the wages and interest from the amounts that are successively added to rent. When one composite unit of labor and capital is working, its product and its pay is measured by the belt between the line _AA´_ and the line _NN´_. A second composite unit produces the amount represented by the area between _AA´_ and _BB´_, and that is the amount which each unit separately considered will produce and get as its pay. This leaves the area between the horizontal line running from _B´_ and the section of the descending curve as the rent of the land. A third unit of labor and capital produces what is represented by the area between _BB´_ and _CC´_, and this becomes the standard of pay for all units, leaving the enlarged area above the horizontal line at _C´_ as rent. In the end there are ten units of labor and capital. Their total earnings are expressed by the area of the rectangle below the horizontal line running from _J´_, and the sum of all the areas above that line is rent. [Illustration] _The Intensive Margin of Cultivation._--The extensive margin of cultivation is the land that is adjacent to an imaginary boundary line separating the grades of land that are good enough to be used from those that are too poor to be used. There is, however, what may be called the intensive margin of cultivation. A given bit of land is said to be cultivated more and more intensively when more and more labor and capital are used on it. Land is subject to what is called the law of diminishing returns. _Law of Diminishing Returns._--The more labor and capital you employ on a given piece of land, the less you will get as a product for each unit of these agents. What the last unit of labor adds to the antecedent output is less than was added by any of the other units, and the same is true of the last unit of capital. As we continue the process of enlarging the working force and adding to the working appliances, we reach a point at which it is better to cease putting new men with their equipment at work on this piece of land and to set them working on a bit of land so poor that it was not formerly utilized at all. We may assume here that what a man needs, in the way of auxiliary capital, goes with him, whether he joins a force that is working on good land or migrates to a less productive region. He will go if it will pay him to do it. In this way we make a sort of dual unit of labor and capital and apply a series of such units to land. _Ground Capital and Auxiliary Capital Distinguished._--Land itself is a component part of the permanent fund of productive wealth to which we have given the generic name _capital_. It differs from other capital goods in that it does not wear out and require renewing. Working appliances, however, as they wear out and are replaced, constitute a permanent fund of auxiliary capital, and we shall apply this term to the abiding stock of such instruments except in connections in which the adjective is not needed, because it is clear that the land, or ground capital, cannot be referred to. In dynamic studies the distinction between land and auxiliary capital becomes very important. _How the Intensive Margin locates the Extensive One._--The labor and the auxiliary capital that betake themselves to new land of the inferior quality represent an overflow from the better land. As long as men can do as well by staying where they are as they can by migrating to new regions, where inferior lands are to be had, they will stay; but when they incur a loss by staying, they move. What a laborer can create by securing the use of an equipment and adding himself to the force that is at work on some good farm, can be approximately estimated; and if there is somewhere a piece of land not thus far used to which he can remove, and if, by going to work upon it, he can create any more than he created while working on the older farm and taking his products as his pay, he will till that poor piece. But neither he nor any one else will till a piece that is still less productive. If any one were to set himself working on land of still poorer quality, he would lose and not gain by the change, since there he would produce even less than he can when he is the last man set working on the good piece. _To what Extent the Movement of Labor and that of Capital are Interdependent._--The early statements of the law of rent did not usually define the intensive margin of cultivation in connection with labor and capital separately, but spoke of these two agents as employed together upon land in quantities increasing up to a limit beyond which both labor and capital would best be employed elsewhere. The supposition that labor and capital go thus together from one grade of land to another is only approximately accurate. If we consider one man and five hundred dollars' worth of productive wealth as a dual unit of labor and capital, and add such units, one after another, to the forces at work on a tract of good land, we shall reach a point at which it will not be profitable to increase the amount of one of the agents, while it will still be profitable to increase the amount of the other. It will perhaps not pay to use any more capital, but it may still pay to add to the number of workers. On land that is tilled more and more intensively, labor and capital are not tied together in fixed proportions in such a way that, when there is more of one of them used, there is _proportionately_ more of the other. Moreover, when a unit of one of them abandons a piece of land and goes elsewhere, there is no probability that exactly one unit of the other will do the same. There is, indeed, no such thing as a dual unit of labor and capital that can be thought of as moving to and fro among different employments till it finds the point at which, as a dual unit, it can create its largest product. These two agents so locate themselves that a final unit of each one, separately considered, produces as much where it is as it can produce anywhere else. It is, however, to be noted that the amount of labor that can profitably be employed on a piece of land grows larger the more capital there is employed in connection with it. An acre of land and a thousand dollars' worth of auxiliary funds can enable more men to get good returns than can an acre combined with a fund of five hundred dollars. Conversely, the more men there are working on the area, the more auxiliary capital it pays to use there. If there are five men working on a small field it may be that a thousand dollars may be well invested in aiding them, while with only one man it would not pay to use so large an amount. The capital and the labor, as it were, attract each other. Additional capital attracts further labor, and _vice versa_, till a condition is reached in which neither of them can so well be used on that particular piece of land as it can elsewhere. Each one has then been used on this area up to its own intensive-marginal limit. So also when one of these agents betakes itself to marginal land, it attracts the other agent thither. When there are ten men on the poorest piece of land in a locality, it is possible to make a considerable amount of capital at that point pay the return generally prevailing, whereas only a small amount would pay it if there were only five men working. With a thousand dollars invested on that land more laborers will be lured thither by the prospect of fair returns than would be lured thither if there were only half as much capital. The general apportionment of both agents tends to be such that a unit of either is as well off on one piece of land as on another, and each is as well off at the extensive margin of cultivation of land as it is on the intensive margin. _Labor and Capital combined in Varying Amounts._--The amount of capital that is combined with a unit of labor is not often the same on good land as it is on poor. The proportions in which labor and capital will be combined on the marginal field will be almost certain to vary from those in which they were combined in the better field from which they came. It may be that they leave industries in which an average man uses an equipment worth a thousand dollars. When they reach the margin of cultivation, capital may be so scarce that the thousand dollars will not stay in the hands of the one man but will divide itself among several. _The General Law of the Extension of the Margin of Cultivation._--Sometimes, when labor moves to new land that is now at the margin, it takes its new equipment with it; but such land is not always tilled by independent settlers. Employing farmers may set men working on it and pay them all that they produce; and the farmers may furnish the men with capital of their own or borrow capital for them to use. In either case a static condition requires the equalizing of the productivity of labor at the intensive margin with that of labor at the extensive margin; and it requires a similar leveling of the productivity of capital at the two margins. When this leveling has taken place in both cases, the all-around marginal product of labor fixes the rate of wages, and that of capital fixes the rate of interest. What a man creates on the good land and with the adequate capital, or on poor land with proportionate capital,--in any occupation on land of either grade,--determines the pay that he and other men can get. It constitutes in itself the wages of labor. In so far as the overflow of labor and capital into any one limited region of marginal land is concerned, the full statement is this: that the margin of utilization of land will be extended to the point at which a unit of labor, _using as much of the marginal land as it is economical to use, and such amount of auxiliary capital as is economical to combine with this unit of labor and the land it occupies, will create a product equal to the wages of the unit of labor as they are determined by the product it created when it was employed on the good land and in connection with the full equipment of auxiliary capital_. _The Rent of a Fund of Capital._--We saw that one unit of labor employed in connection with a given amount of capital produces more than does a second; that the second produces more than the third; and that, if we continue to supply units one at a time, the last unit in the series produces the least of all. Wages are fixed by the amount that one unit of labor produces when the working force is complete, and that is what is contributed to the general product by the unit of labor which comes last in the imaginary series by which the force is built up. Owing to the more favorable conditions under which, in their time, the earlier units worked, they were able to produce surpluses above the amount produced by the last one. When they entered the field they were supplied with excessive amounts of capital. The first one had the whole fund coöperating with it, till it had to share it with the second; and after that each had a half of it till they had to share evenly with a third, etc. We have seen that all the surpluses appearing in connection with the earlier units are attributable in reality to capital. The area _BCD_ (page 139) represents the amount by which the presence of an excess of capital increases the products attributable to the earlier units of labor. It represents the sum of all the differences between the products of the earlier units and the product of that final one which in the end sets the standard of productivity of labor. It might be called the rent of the fund of capital. It is composed of a sum of differences exactly like those which constitute the rent of a piece of land. _The Rent of a Permanent Force of Labor._--In the figure on page 148, the working force was supposed to be fixed in amount, the capital increasing by increments, or as some earlier economists would have said, by "doses" along the line _A´E´_. The last unit of capital produces the amount _D´E´_, and all the capital produces _A´B´D´E´_, while products of the earlier units of capital, as they come successively into the field and are used by an excessively large labor force, are represented by the area _B´C´D´_. Here this area represents what may be called the rent of the force of labor, since it is a sum of surpluses that, again, are entirely akin to those that constitute the rent of a piece of land. _A Question of Nomenclature._--It may be an open question, as a matter of mere nomenclature, whether these surpluses which are thus traceable to a permanent fund of capital, on the one hand, and to a permanent force of labor, on the other, can with advantage be called rents. In this treatise we do not think it best to employ that nomenclature. What is not uncertain is that these gains are measurable by the same formula that measures the rent of a piece of land. If the essential thing about rent were that it is a material product and consists of a sum of differential quantities, these incomes certainly would be rents. Popular thought, however, attaches another meaning to this term, and we therefore limit ourselves to saying that these differential incomes or surpluses may be determined in amount by the principle of rent. They can be described and measured exactly as the Ricardians described the income of landlords.[1] [1] The term _rent_ has even been applied to surpluses of a psychological kind. Certain gains that men get consist purely in pleasures or in reduced pains or sacrifices, and a few writers have applied to such subjective gains the term _rent_. If a man buys a barrel of flour for five dollars and gets out of it a service that is a hundred times as great as he could get from some other article which he buys for the same amount, this surplus of pleasure may be called, by a figure of speech, "consumers' rent"; and if the essence of rent were the fact that it can be made to take the form of a surplus or difference, the name would be well chosen, though there is danger that by this use of the term science may divorce itself from practical thought and life. If we take all the barrels of flour that a man uses in ten years, there is one which is marginal, because it is worth to the man only enough to offset the sacrifice he incurs in getting it. All the others are worth more. We can arrange them in a scale in the order of their importance, the most necessary one coming first and the least important one last; and we can compare the service which each one renders with that rendered by the last, and measure the surplus of good which each one does to the user. There is here in operation a law of diminishing subjective returns. Early units consumed afford more pleasure than do later ones. There results a series of surplus gains, and the sum of all these surpluses makes a total of net benefit,--is a gain that is not offset by a compensatory sacrifice. The last barrel of flour on the list is worth just what it costs, and all the others are worth more. They give the consumer a surplus of satisfaction for which he pays nothing. The sum of the excesses of service rendered by all the earlier barrels constitutes what has been called the consumers' rent, realized in this case from the entire supply of flour used by the man. In the manner in which it is conceived and measured this gain has a kinship to genuine rent. This surplus is an effect on a man himself. It is not anything outward or tangible. It exists only in the man's sensations, and is as far as possible from being a concrete income in material form traceable to some particular agent. It can be measured and described in ways that are quite akin to the manner in which the product of land is measured and described. Each consists of the sum of a series of surpluses or differential amounts, and each, moreover, represents a gain which is not offset by any corresponding subjective cost. The rent of land must be paid by an _entrepreneur_ and is a cost in the same sense in which wages and interest are so; but the owner of the land did not create it by personal effort or sacrifice. Analogies between the product of land, or rent, and the special gains of consumers from the more important parts of their consumption do exist, but they are overbalanced by essential differences; and it is better to use the term _rent_ only in describing the specific contribution to the material product of industry which a concrete and material agent makes. CHAPTER XI LAND AND ARTIFICIAL INSTRUMENTS One may hire many things besides land and pay what is commonly called rent for them. No one would think of calling by any other term the amount paid for the use of a building, a room in a building, or the furniture in the room. All these things yield rent to their owners; and if the intuitions which govern the common use of terms are to be trusted, the income derived from such things and that derived from land have some essential qualities in common. Every such income is paid for the use of some concrete instrument, and is measured, not by a percentage on the value of the instrument, but by a lump sum--a certain number of dollars per month or per year. _The Mode of Calculating the Rent of Concrete Instruments._--Now the rent of such instruments of production, whether artificial or not, can be measured in exactly the same way in which the rent of land is measured. We saw that there are two margins of utilization of land, an extensive and an intensive one, and that the product of labor and capital at either of these margins may be used as a basis for computing the surpluses which constitute the rent of the land. The landlord gets from a good field what it produces minus what the labor and capital that are used on this field would produce if they were used on the poorest land in cultivation; or, what is the same thing, he gets from the field what it produces minus what this labor and capital would produce if they were set working somewhere on the intensive margin of cultivation. Take the men out of this field, add them in small detachments to the men who are already cultivating other fields, in order that such fields may be tilled a little more intensively, and measure the product which the laborers create when they are so placed. Withdraw also the capital from the field, add it, in small amounts, to the capital that is working elsewhere, and measure its specific product. The sum of these two specific products is the same amount that is arrived at by using the former standard. This labor and capital, formerly used on the good field, scattered as they now are among the users of other good land, will create the same amount that they would have created if they had been employed on the poorest land in cultivation. This amount is, as it were, what they produce by their own unaided power; and whatever is produced in excess of this amount when a good field comes to their assistance is the rent of that field, for it is the contribution which the field makes to the joint production. Total product of land, labor and auxiliary capital minus the product created by the labor and auxiliary capital when these agents are put in marginal positions equals the rent of the land. _The Rent of an Instrument measured from the Intensive Margin._--We can measure the product of any instrument in this way. If it is a ship, it takes labor to sail it and requires a considerable amount of auxiliary capital. We must fill the bunkers with coal, stock the steward's department with provisions, furnish and light the staterooms and the saloons, and provide cordage and a wide variety of other ship stores. All this labor and all this capital we could take out of the ship and use elsewhere. We could convert them into marginal labor and capital. We could divide them among the owners of other ships where they would be used in a way that would make these other ships somewhat more efficient and cause each of them to earn a little more than it now earns. Whatever the labor and capital could, in this way, produce furnishes the basis for computing the rent of the ship. Subtract it from the total joint product of labor, capital, and ship, and you have what the vessel separately earns. _The Mode of Testing the Productive Power of a Ship._--Put the labor and capital into the ship and set it doing its proper work of carrying freight and passengers, and you cause a certain product to be created. The steamship company gets an aggregate amount for the service it renders by means of the labor, the auxiliary capital, and the ship. A certain smaller amount would be realized if the labor and the auxiliary capital were taken out of the ship, distributed, and used in the way we have just described. The difference between the two amounts is the rent of the ship, or its particular contribution to the general product. This gives us a formula for computing the rent, not only of land, but of buildings, tools, machines, vehicles, and every other concrete instrument of production. The formula, indeed, is so general that it enables us to compute the earnings of any agent whatsoever. _The rent of any such agent is what it adds to the marginal product of labor and capital used in connection with it._ _No-rent Instruments._--The majority of instruments that are in use add something to the marginal product of the labor and capital used in connection with them. Some add more and some add less, according to their several qualities. As a rule, any tool of trade produces most when it is new and less and less as it grows older. In the end it is discarded because it has so deteriorated that it no longer adds anything to the marginal product of the labor and capital that are used in connection with it. A wagon has become so rickety that it no longer pays to furnish a horse, a harness, and a driver for it. The capital and labor that these represent would earn as much if they were detached from the old vehicle and added to the equipment of some person who has a stock of good ones. The rent of this old wagon is nothing. As in the case of the poorest land in cultivation, it is a matter of indifference whether certain amounts of labor and capital are used in connection with it, or whether they are withdrawn and employed elsewhere. This poor vehicle, like the poor land, may be used without positive loss; but if it is so used, nobody gets any income from it. It has no power to enter in a really productive way into combination with labor and capital, for it cannot so combine with them as to add anything to those marginal products which the labor and capital could create if they remained detached from it. _The Universality of the Test of Rent._--This test, whether an instrument can or cannot add something to the marginal product of labor and capital, may be universally used. It may be applied to everything that is made as an aid to labor. There are no-rent buildings, locomotives, cars, tracks, ships, wagons, furnaces, engines, boilers, and, in short, instruments of every description that figure in production. Combine any one of them with labor and capital and see what you get out of the combination; then take the labor and capital away and see what they will produce as marginal labor and capital; and the difference between the two amounts, whatever it is, is the rent of the instrument. If the difference is _nil_, the instrument is at the point of being abandoned.[1] [1] Whether such an instrument should or should not be called a capital good is a question of mere nomenclature; but in this treatise we consider that every part of what we term capital produces an income, and therefore a no-rent instrument is not a capital-constituting good--otherwise termed a capital good. _True Capital rather than Capital Goods moved in Making such Tests of Productivity._--In applying these tests with scientific accuracy we should take away the true _capital_ used in connection with a rent-paying instrument and use it as marginal capital elsewhere, rather than take away the particular concrete thing in which that capital is now embodied. In the case of the ship the accurate test is made, not by taking stores, etc., bodily out of it and putting them into other ships, but by letting the stores first earn what they can where they are, converting the earnings into money, and, when the stores are completely used up, spending the money to procure marginal additions to the outfit provided for the other ships. _One Difference between Land and Artificial Capital Goods._--In the case of land a particular area is marginal or no-rent land, and, in a static state, it remains so. Any particular ship, wagon, engine, or other made tool begins its career as a rent payer and ends it as a no-rent instrument. If we watch the whole social stock of instruments of production, we shall see the no-rent points not fixed in location, but shifting from place to place. Now this machine, now another, and now still another reaches the unproductive state and is supplanted by instruments of similar kind that are new and efficient. _Original Elements in the Soil._--The real difference between the rent of a piece of land and that of a building, machine, vehicle, or any similar instrument arises from the fact that the land is not going to destruction and the artificial instrument is. There are elements in what is commonly called land that wear out as do the tools that are used in tilling it, but these elements are not land in the economic sense. Land, as Ricardo long ago said, consists in the "original and indestructible powers of the soil." He singles out certain constituent elements of every farm, forest, building site, or other piece of what is called land in ordinary usage, and gives to this new concept the name _land_ in an economic sense. These so-called "powers" are original elements because man does not make them; they are provided altogether by nature, and the only way in which man may be said to impart any productive power to them is by putting them into combinations in which they can produce. When men settle upon what has been vacant land, they bring the land into combination with labor, and when they break up the land for tillage and put buildings on it, they combine it with artificial capital. By means of these combinations land acquires productive power; but physically considered, it is altogether a natural product. _Indestructible Elements in the Soil._--Land in the economic sense is indestructible because the natural effect of use is not to destroy it. This does not mean that it is not physically possible to destroy land to the extent of making it forever impracticable to use it in the ways in which land is commonly utilized. Nature may do this by sinking it beneath the ocean, and man can, if he will, do something akin to this; but he does not naturally destroy what is truly land in the using. It is impossible to use a plow, a spade, or a reaping machine without injuring it and, in the end, wearing it out. It is also impossible to draw the nutritive constituents out of the superficial loam and convert them into crops without exhausting the supply of these sources of fertility and so spoiling that which is commonly called the land, though it is not so in the economic sense. What is really land in this sense is not affected. Nitrates and phosphoric acid that lie in the topmost stratum of the soil are among the destructible instruments of agriculture. The supply of them has to be renewed, if cultivation is continued, and they are therefore in the class with the plows, spades, and reaping machines which also wear out. But whatever there is in the soil that suffers no deterioration from any amount of use is the land with which political economy has to deal. _The Gross and the Net Rent of Land Identical._--As land does not wear out and require renewal, all that it adds to the products of the labor and capital that are used in connection with it may be taken by the landlord as an income without reducing the amount of his property. Whatever land produces at all is a net addition to the general income of society. _Net Rent of Artificial Instruments Smaller than Gross Rent._--It is not safe, on the other hand, for the owner of buildings, tools, or live stock to take for his own consumption all that these produce. If he were to use up their gross produce as he gets it, he would find, in due time, that a considerable part of his property had vanished. Such instruments wear out and become worthless, and if no part of what they produce is set aside as a sinking fund with which to purchase other instruments to take their places, one whole genus of capital must go altogether out of existence. _Artificial Instruments Self-replacing._--What actually happens is that these instruments create enough wealth to pay for their own successors, and that, too, besides paying a net return, which, regarded in one way, is interest. If you compute the whole product of one of these instruments by the Ricardian formula which we have examined, the amount of it will be whatever the instrument, during its entire career, adds to the product of the labor and of the capital that are used in connection with it; and that includes the fund for renewal that has just been described, the amount, namely, which the owners must set aside for repairing the instrument and finally purchasing another. As the instrument itself provides this sinking fund, it may be said to create, in an indirect way, its own successor. The ship earns, over and above the net income which is interest on its cost, enough to keep itself seaworthy so long as it sails and, in the end, to build another ship. The locomotive, the furnace, the loom, the sewing machine, the printing press, etc., all pay for and thus indirectly produce their own successors. _The Net Rent of a Permanent Series of Similar Instruments._--The first charge on the product of any instrument of this kind is the amount necessary for replenishing the waste of it and for providing a successor when this original instrument shall have been wholly worn out. In like manner, the first charge on the successor is providing a similar fund, and so on indefinitely. A part of the productive power of every one in an endless series of similar instruments is devoted to this type of reproduction. The series maintains itself and yields an income besides; and that remainder of its gross rent which is left after waste of tissue is repaired is available as a net income for the owner. This net remainder constitutes an interest on the owner's capital. He possesses a permanent fund of productive wealth embodied in the endless series of these perishable instruments, and _the series taken as a self-perpetuating whole_ yields nothing but this interest. Each instrument, separately considered, yields interest and a sinking fund; but the sinking fund is not available as an income, since it must take shape as another instrument which serves to keep the series intact. What the first instrument creates in addition to the sinking fund is its contribution to interest, and what each instrument creates above what is required for virtual self-perpetuation is also interest. _Interest and Net Rent Identical._--We may therefore reduce interest to the form of a net rent by calculating the gross rent afforded by each instrument in such a series and by ascertaining how much of this merely repairs waste and how much is true income. As interest is usually expressed in the form of a percentage, we may reduce the net rent to this form by comparing it with the cost of the first instrument, which is the amount originally invested. The series of instruments will yield a net return every year. We can compute the gross return of each instrument according to the Ricardian formula for measuring the product of the land. It will diminish from year to year and will ultimately vanish. We can add the several annual gross earnings of the instrument during its economic lifetime in the form of an absolute sum, which is the total rent of the instrument. From this we can deduct the cost of replacing this worn-out capital good, and the remainder will be the net rent of the instrument. We can, in a like way, get the net rent of all the following instruments in the series for a long period, add these net rents together, and get the true net earnings of the series for the time covered by the calculation. If this chances to be ten years we may compare a tenth of this total, or the earnings of the series for one average year, with the cost of the first instrument,--which is the capitalist's original investment,--and we shall thus get the fraction which represents the annual rate of interest on that investment. Perhaps in an average year the series has earned, above what is required to repair waste, five hundredths of what the first instrument cost. That is, then, the rate of interest that the series as a whole, or the permanent capital, is yielding. The whole procession of instruments in which permanent capital is invested creates every year this fraction of its own value, over and above the sum that is needed to offset the wear and tear of an average year's use.[2] [2] If the fund for replacing a costly capital good, such as a ship or a building, were allowed to accumulate for a term of years before being spent, the parts of it remaining on hand for some time would earn interest for their owner, and in his bookkeeping this would figure as reducing the amount he must save from the product of the ship or the building in order to replace it. This does not affect the general law of self-replacement, for the ship or building really produces what results from this compounding. _General Interest as Rent._--If you compute the net income of all tools, machines, and other like things in the world, add the amounts, and get the grand total of them all, you have the entire income from this part of the capital of the world in the form of net rent. If then you compute the value of all this class of instruments and see how large a part of this value the net rent is, you translate this total rent into the form of interest, and therefore net rent and interest are the same income regarded in two different ways.[3] [3] In computing both of these values for comparison one should use a labor-cost standard, and we shall later see under what limitations such a standard may legitimately be used. _Stocks of Made Instruments graded in Quality as is Land._--It is necessary to notice the fact that the permanent series of tools, buildings, and other active capital goods shows forever the same gradations of quality that are found in the case of land. There are always to be found some instruments which are producing a large amount--that is, they are adding a large amount to the product of the labor and the further capital that are combined with them in production. A given amount of labor and capital creates much more wealth when working with a machine of the highest class than it would if distributed in marginal positions; and this is equivalent to saying that such an instrument is itself highly productive. Other instruments are to be found which are creating less, and there is never wanting a grade of no-rent instruments which are adding nothing to the marginal product of the other agents. It would be as well for the labor that used them if it should drop them and add itself to the force which is working with good instruments. Any one manufactured instrument begins its career as a maximum-rent instrument and ends it as a no-rent one. The ship is at its best when it starts on its first voyage, and the mill is at its best in the first year of its running. Each instrument goes gradually downward in the scale till it reaches a stage in which it really produces nothing, since it adds nothing to what would be produced without it. The _permanent series_ of instruments never thus deteriorates. All the depreciation of particular things is made good by the repairing and the replenishing which go on. In the series as a whole there are forever present grade number one, grade number two, grade number three, etc., exactly as in the case of land. If we wish, we can reckon the income that is to be gotten from each part of the series according to the old-time formula that is familiarly used in the case of land, "What labor and capital create by the use of this piece of ground in excess of what they would create if they were applied to the poorest land in use." For a grade of land read a grade of the self-perpetuating series of artificial instruments, and it will appear that each grade above the poorest yields, with the labor and capital that are combined with it, a surplus above what this labor and this capital could create if they were combined with the poorest grade in the permanent series. _Different Modes of Destroying and Replenishing Stocks of Capital Goods of the Two General Classes._--The process of keeping up a stock of tools of trade is unlike the process of keeping intact a stock of materials and unfinished goods, because the modes in which the two kinds of capital goods deteriorate and perish are unlike. In the case of the raw materials that gradually ripen into articles for consumption and which we have called passive capital goods, the waste of tissues that takes place is quite unlike that which takes place in the case of active capital goods, the tools and implements that are used in the process. The raw material acquires value through the whole process, and in the end it gives itself, with all its acquired value, into the hands of the consumer. In a static state such goods embody the whole income of society, including the products of all labor and of all capital. _A´´´_ _A´´_ _A´_ _A_ The series of _A_'s represents the process of creating consumers' goods from the rawest material. The _A´´´_ as taken away for consumption represents, as it were, the wasting tissue of passive capital goods; and it contains in itself the wages of all the labor in this series of subgroups, the interest on all the capital there used, and, in addition to these, the sinking fund that is necessary in order to keep the active capital intact. Some of the articles of the kind _A´´´_ will have to be given over to the men who keep the tools, buildings, etc., in repair and replace them when they are worn out. The whole force of the industry of this group expends itself simply in making good the loss that the withdrawal of the _A´´´_ for use occasions. It does, in short, nothing but replace the perpetually wasting tissue of the _A_'s. All industry, except that of the makers of active instruments, may be considered in the light of an operation, the aim of which is to keep the stock of passive capital goods intact, or, what is the same thing, to keep the fund of circulating capital undiminished. Whoever puts anything into this fund enables it to overflow and to furnish an income without suffering any diminution. The sole purpose of such capital is to overflow, that is, to suffer, at one and the same time, a loss and a replenishment which neutralizes the loss. It exists for nothing else except to ripen into consumers' wealth. Nevertheless, though the ripened _A_'s are perpetually consumed, the _series_ of _A_'s is abiding capital, is entitled to its share of interest, and is certain to get it. A part of the perpetual flow of _A´´´_'s is this interest. As the whole income of the society consists in _A´´´_'s, a certain number of the _A´´´_'s that are withdrawn for consumption go to capitalists as interest on the permanent fund which is kept in existence in the form of _A_, _A´_, _A´´_, and _A´´´_. A certain other part of the outflow of _A´´´_'s goes also to capitalists as interest on that other permanent fund which is maintained in the form of tools, machines, and buildings, such as must everywhere be used in the series. A third part of the flow of _A´´´_'s is wages of labor in this group; and a final portion is what we have called the sinking fund, the amount that is given over as an income to the producers in another group, not here represented, who keep the stock of buildings, tools, etc., intact. These four withdrawals of income constitute the process by which the stock of passive goods is depleted, and the grand resultant of all industry is to atone for that depletion. _Labor and the Obtaining of its Product, in Static Industry, Synchronous._--One function of the permanent series of _A_'s is to enable labor everywhere to get its virtual product without waiting, and that too in the form in which it needs it for use. The labor that converts _A´´_ into _A´´´_ supplies the waste of tissue that takes place at that end of the line by withdrawal of an _A´´´_. The labor that turns _A´_ into _A´´_ replaces the waste that takes place at that point when an earlier _A´´_ becomes an _A´´´_. The labor at _A´_ replaces the waste at that point, and that at _A_ replaces the waste at still another point. They are all at work keeping the stock of _A_'s unimpaired, and one of them does as much toward keeping up the perpetual flow of _A´´´_'s as any other. If we pump water in at one end of a full reservoir, we instantly cause it to overflow at the other end; and every worker in such a series as we have described may be thought of as putting something into the permanent reservoir of capital and so causing a corresponding overflow. He gets his reward day by day as the work proceeds. Wherever a laborer may be in such a series, his work creates a ripened product as it goes on. He has not to wait for it. His work and its fruit are synchronous. _Differences between Land and Made Instruments Apparent in Dynamic Conditions._--A point that has great theoretical interest is the nature of the difference between land and other productive instruments. In a static society the difference would be comparatively unimportant, but it is brought into prominence by the changes which constitute a dynamic state. The static hypothesis requires that capital should not increase or diminish in quantity, and that it should not change its forms. The equipment of every mill and of every ship is kept unimpaired but not enlarged or improved. There is a fixed number of spindles in the cotton mill, of lathes in the machine shop, of sewing machines in the shoe factory, etc., and this fact removes the most striking difference which, in a dynamic society, actually distinguishes land from other things. Land, in the economic sense, does not increase in quantity, however changeful and progressive a society may be. The chief distinguishing mark of land--that of being fixed in amount--separates it from other things only in a dynamic state and because of the action of the forces which produce organic changes. These are subjects to be studied in the dynamic division of economic theory. _A Distinguishing Mark of Land which appears in a Static State of Industry._--In a static state there remains this difference between a piece of ground and a building, a tool, or any other instrument: the ground is not artificially made and does not perish in the using; while the building or the tool or other appliance is so made and does so perish. It must in wearing itself out create in the indirect way which we have described its own successor. The engine must, by a part of its product, pay the men who will make another engine and so perpetuate the series of engines. This makes it necessary for the owner of the engine to save some of its gross rent to pay for depreciation and renewal, while he can safely use the whole rent of land. _This Mark of Distinction not Applicable when Land is contrasted with a Permanent Stock of Capital Goods._--If we look, not at one particular instrument, but at an entire series of them,--if we take into view, not only the engine which is now driving the mill, but also the one that will succeed it, and again the one which will succeed that second engine, and so on forever,--this difference between land and the artificial instrumentality vanishes. _The series of engines, like land itself, yields only a net rent._ The remainder of its gross product is not a true rent at all, since any one of the engines creating it has to consume it on itself and cannot give it to the owner as an income. This remainder pays certain men for keeping the series of engines intact, and what is given to them as pay for their services cannot accrue to any one as an income from the series of instruments so maintained. It is the earnings of the corps of maintenance created by their own labor and capital. What the series of engines yields over and above what it expends in maintaining itself it gives to its owners as an income. This is their net return and they can use it without trenching on their property. The analogy between the returns from land and those from a self-perpetuating series of made capital goods is in this particular complete. _The Source of the Fund for Repairs and Renewals._--The fund for repairs and renewals must, of course, like the net income itself, be furnished by instruments that are above the no-rent grade. A machine will naturally be used as long as it pays anything whatever, and during the latter part of its career it usually produces less than mere interest on its cost. So long as the labor and the auxiliary capital that are combined with the instrument produce by its aid any more than they would produce if they were withdrawn from it and added, as marginal increments, to the labor and capital that are working in connection with good instruments, they will continue to use the machine and they will abandon it only when it ceases to pay anything whatever. Out of the total amount it produces before reaching this point of abandonment comes the amount that is needed as an offset for the cost of providing a new machine. _Incorrectness of a Common Statement concerning Rent and Price._--This brings into view a striking fallacy of what has been current economic theory. It has been customary to claim that the rent of land "is not an element in price," although the interest on capital is such an element. The rent of land is the net product of land; and if interest be kept distinct from it, this income is the net product of a permanent stock of capital goods. The relations of these two component parts of the constant output of goods to the prices of the goods are identical. _Proof of the Incorrectness of the Current Statement concerning Rent and Price._--The vague form of the current statement concerning rent and price is responsible for much confusion of thought on that subject. What the statement would mean is that the price of wheat is not affected by the great contributions to the supply of it which good lands are making. These contributions are the rent in its original form. The rent of wheat land is wheat, that of cotton land is cotton, that of mill sites is manufactured goods, etc. That money is used in payments made to landlords changes nothing that is essential. To say that such contributions to the supply of particular commodities are not an element in determining the prices of them, would be as unreasonable as to make the same assertion concerning other parts of the supply. Quite as logically might it be asserted that other components in the supply do not affect prices--that the amount of wheat which is attributable to harvesting machinery or the amount of calico which is imputable to looms has no influence in the market values of these articles. _Why the Produce due to Good Land prevents Prices from greatly Rising._--If the use of good wheat land were merely discontinued, the supply of wheat would of course be not only lessened, but reduced almost to nothing, and a famine price would at once result. If, now, an attempt were made to make good the shortage of the supply of this cereal by tilling lands which are now at the margin of cultivation, it would at once appear that not enough of such land exists to enable us to accomplish the purpose, and it would be necessary to push the margin outward and till poorer and poorer soils, at a greatly enlarging cost. We should grub out worse thickets, drain worse swamps, terrace more discouraging hillsides, irrigate more remote and barren deserts, etc. All this would mean a greater cost of production of wheat and a higher price for it in the market. It would also mean another thing. The extending of the margin of cultivation which makes it include poorer grades of land causes that part of the area now tilled which does not command any rent to yield one. After the margin should have been greatly extended and finally located in a region where getting anything out of the soil would require a struggle, it would appear that all of the lands newly annexed to the cultivated area except the last and poorest would command a rent. All but those on the new margin would add a definite quota to the supply of wheat, and this contribution would be their rent. Entering into the supply, it would of course count in the adjustment of price. _What can reasonably be conceded concerning Rent and Price._--There is another possible meaning of the phrase "Rent is not an element in price"; and, whether it was clearly in the minds of those early economists who made the assertion or not, it is what their argument proves. The _payment_ of rent by tenants to landlords has no effect on the market value of the produce. "Food would not become cheaper," says Professor Fawcett, "even if land were made rent free." There would be the same need of food stuffs as before, and the tillage of lands would be pushed to the present margin, where the yield is smallest. The cost, in labor and capital, of that marginal part of the supply of food which has come from these poorest lands would continue to be what it has been heretofore. The farmers would, of course, get from the good lands the same surplus that they get at present; but the fact that land had been made rent free would enable them to keep it. This surplus is, of course, rent, and transferring it from landlords to tenants does not affect prices. So much of the doctrine formerly current is true; and it would have forestalled much confused thought as well as much controversy if the statement concerning rent and price had made it clear that any rent in its original form is an element in the supply of produce, and the existence of it helps to determine prices, while the payments made by tenants to landlords do not affect them. If these payments should cease and the tenants should retain the rent, prices would continue to be what they now are.[4] [4] The claim that rent is not an element in price making might be made in the case of artificial instruments of production as reasonably as it can be made in the case of land. If it means that the _existence_ of the rent has no effect on price, it is wholly incorrect in both cases. The statement may be so changed as to tell what is true concerning the rent of land, and it will then also tell the truth about the product of the artificial instruments, which is interest in its original form. These statements may be made in parallel columns, and one will be as true as the other and no truer. A needed part of the supply A needed part of the supply of wheat is grown on marginal of woolen cloth is woven on land. marginal looms. The price of the wheat must The price of the cloth must pay for the labor and capital pay for the labor and capital used on this land. that, in the woolen manufacture, are combined with these looms. The price of wheat raised on The price of cloth woven good land is the same as that on good looms is the same as of wheat raised on the marginal that of equally good cloth zone, and it affords a surplus woven on marginal ones, and above wages and interest paid it affords a net surplus above by farmers for labor and the cost of maintaining the capital used in the tilling stock of looms and the of the good land. wages and interest paid by manufacturers for further capital used in connection with the good looms. The existence of this surplus The existence of this surplus in its original form, that in its original form, that of wheat, affects the supply of cloth, affects the supply and the price of that product. and the price of this product. The fact that farmers pay The fact that _entrepreneurs_ landlords for this surplus pay capitalists for this has no effect on the price surplus has no effect on the of wheat. price of cloth. The more important facts concerning rent have reference to the original form of it, namely, a product in kind. Whatever constitutes a part of the supply of anything affects the price of it. The surplus afforded by good looms is an element in the supply of cloth, and that afforded by good land is an element in the supply of wheat. They make these two supplies larger than they would otherwise be, and of course they are of cardinal importance in determining price. The rent of anything is an element in the supply of some kind of goods, and the annihilation of it would reduce the supply and raise the price of product in which, in its first estate, it consists. CHAPTER XII ECONOMIC DYNAMICS _The Efficiency of Static Forces in Dynamic Societies._--The static state which has thus far been kept in view is a hypothetical one, for there is no actual society which is not changing its form and the character of its activities. Five organic changes, which we shall soon study, are going on in every economic society; and yet the striking fact is that, in spite of this, a civilized society usually has, at each particular date, a shape that conforms in some degree to the one which, under the conditions existing at that date, the static forces acting alone would give to it. It is even true that, as long as competition is free, the most active societies conform most closely to their static models. If we could check the five radical changes that are going on in a society that is very full of energy,--if, as it were, we could stop such an organism midway in its career of rapid growth and let it lapse into a stationary condition,--the shape that it would take would be not radically unlike the one which it had when we interposed the check on its progress. Taking on the theoretically static form would not strikingly alter its actual shape. The actual form of a highly dynamic society hovers relatively near to its static model though it never conforms to it. In the case of sluggish societies this would not be true; for if in one of them we stopped the forces of growth and waited long enough to let the static influences produce their full effects, the shape to which they would bring the organism would be very different from the one which it actually had when its slow progress was brought to a stop. Most efficient in the most changeful societies are forces which, if they were acting by themselves alone, would produce a changeless state. The reasons for this will later appear. _Differences between Static Forms of Society at Different Dates._--A highly dynamic condition, then, is one in which the economic organism changes rapidly and yet, at any time in the course of its changes, is relatively near to a certain static model. It is clear, therefore, that it cannot, at different periods, conform even approximately to one single model. If the forces of change which in 1800 were impelling the industrial society of America to a forward movement had been suppressed, and if competition had been ideally free and active, that society would before long have settled into the shape then required by the forces which, in the preceding chapters, we have described. Some labor would have moved from certain occupations to others and gained by the change; and this movement of labor would have ended by making the productive power and the pay of a unit of this agent uniform in all the different subgroups of the system. Capital would have so apportioned itself as to level out inequalities in its earning power. The profits of _entrepreneurs_ would have been equalized by becoming in all cases _nil_, and the best available methods of production would everywhere be found surviving and bestowing their entire fruits on laborers and capitalists. All this is involved in saying that the static model, the form of which was determined by the conditions of 1800, would have been realized. This would have been brought about by suppressing at that date the forces which cause organic change and by giving to competition a perfectly unobstructed field. If we had done this in 1900, instead of at the earlier date, economic society would, in a like way, have conformed to the shape required by the conditions of 1900; and this would have been very different from the shape which the static forces would have given to society a century earlier. There is an ideal static shape for every period, and no two of these static shapes are alike. _Differences between the Actual Shape of Society and the Static One at Any One Time._--The actual shape of society at any one time is not the static model of that time; but it tends to conform to it, and in a very dynamic society is more nearly like it than it would be in one in which the forces of change are less active. With all the transforming influences to which American industrial society is subject, it to-day conforms more closely to a normal form than do the more conservative societies of Europe and far more closely than do the sluggish societies of Asia. A viscous liquid in a vessel may show a surface that is far from level; but a highly fluid substance will come nearly to a level, even though we shake the vessel containing it vigorously enough to create waves on the surface and currents throughout the whole mass. This is a fair representation of a society in a highly dynamic condition. Its very activities tend to bring it nearer to its static model than it would be if its constituent materials were not fluid and if it were never agitated. The static shape itself, though it is never completely copied in the actual shape of society, is for scientific purposes a reality. There are powerful influences tending to force the industrial organization at every point to conform to it. The level of the sea is a reality, though the motion of the waters never subsides sufficiently to make their surface accurately conform to it. As vigorously agitated, the water shows a surface that is nearer to the ideal level than would an ocean of mud, tar, or other sluggishly flowing stuff. The winds throw up waves a few feet high, but the fluidity keeps the general surface surprisingly level; and so civilized society, made as it is of fluid material kept in vigorous agitation, finds, as it were, its level easily. If in any year we could and should stop the dynamic disturbances, the economic society would assume the static shape which the conditions of that year called for as readily as the sea would find its normal level if winds and tides should completely cease. Static influences that draw society forever toward its natural form are always fundamental, and progress has no tendency to suppress them. _Competition a Cause of Rapid Changes in the Standard Shape of Society and of a Quick Conformity of the Actual Shape to the Standard One._--The competition which is active enough to change the standard shape of society rapidly--that, for example, which spurs on mechanical invention and causes a large profit to be realized in a particular subgroup--has also the effect of calling labor and capital quickly to the point at which the profit appears, and, in the absence of any monopoly, reduces this profit to _nil_ and restores, in so far as this cause of disturbance goes, the equilibrium of the groups. Under the influence of active competition a particular group frequently undergoes quick changes which call for more labor and capital, but it gets them quickly; and, as has just been said, the standard shape of a society which is in this highly fluid condition does not differ so much from the actual shape as does that of a society the movements of which are sluggish. The standard shape is like the hare that moves quickly and irregularly; while the actual shape is like the pursuing hound, which moves equally quickly, follows closely all turns of the course, and, if the game were to stop moving, would in short order close on it. _The Equalization of the Productive Power of Labor and of Capital in the Different Subgroups._--We have seen that in a static state labor and capital do not move from subgroup to subgroup in the system, and that this absence of flow in a fluid body is not brought about by monopoly or by any approach to it. That, indeed, would obstruct transfers of the producing agents from point to point; but monopoly is a thing most rigorously excluded by the static hypothesis. At every point we have assumed that the power to move is absolute, while only the motive is lacking. The equalization of the productive power of labor in the various subgroups precludes the migration of labor, and a like equalization precludes a migration of capital. _Equalization of Productive Powers within the Subgroups._--Not merely must each unit of labor or of capital be able to create as much wealth in one subgroup as in another, but within the subgroup--the specific industry--each unit must be able to create as much under one employer within the industry as under another. The different _entrepreneurs_ must compete with each other on terms of equality, and no one of them must be able to wrest from a rival any part of the rival's patronage. So long as one competitor has an advantage over another in his mode of creating a product, there is no equilibrium within the subgroup. The more efficient user of labor and capital is able to draw away labor and capital from the less efficient one, and the self-seeking impulse which is at the basis of competition impels him to do it. The producer who works at the greater advantage is foreordained to underbid and supplant the one who works under more unfavorable conditions. That a static state may exist and that the movements of labor and capital from point to point may be precluded, every competitor within a subgroup must be able to keep his business intact, hold his customers, and retain in his employment all the labor and the capital that he has. _Equality of Size of Productive Establishments not Necessary._--Size is, as we shall see, an element of efficiency, and the great establishment often sells goods for less than it would cost a small one to make them. The small manufacturer often finds that he would best become a mere merchant, buying some of the products of the great mill and selling them to his customers, rather than continue making similar goods. In the general market an approach to equality of size is usually necessary in order that competitors may be on even terms. This does not preclude the survival of many small establishments. The local retailers have an advantage over great department stores in the filling of small orders. When one has to buy what costs a dollar it does not pay to spend a dime in car-fares, and waste a dollar's worth of time in order to secure the thing for ninety cents. Weariness to customers is here the element that gives to the small producer his advantage and enables him to keep that part of the business which comes in the form of many small orders; but small producers often have other advantages than those which depend on location. In a shop which is more like that of a craftsman of three centuries ago than it is like the great furniture factory, a cabinetmaker can make a single chair of a special pattern more cheaply than the great manufacturer can afford to do it. The great shop requires that there should be many articles of a kind turned out by its elaborate machines in order that the owner should get the benefit of their rapid and unerring action. There will long be at work hand presses much like those used by Benjamin Franklin, besides the complicated automata which do the bulk of our printing, because for printing a dozen copies of anything the lever press is the cheaper. There will be shoemakers who not only mend shoes but occasionally make them for customers who want other than standard kinds; and local tailors are sure to survive. Only in the general market and in the making of standard goods is size essential to success. _A Considerable Number of Competitors Assumed._--The most striking phenomenon of our time is the consolidation of independent establishments by the forming of what are usually called trusts; and this and all the approaches to it are precluded by the static hypothesis. There is a question whether, after competition has reduced the establishments in one subgroup to a half dozen or less, they would not, even without forming a trust, act as a quasi-monopoly. This question we have at the proper point fully to discuss, but here it is necessary to assume that nothing which creates even a quasi-monopoly exists. We shall find that competition usually would, in fact, survive and be extremely effective among as few as five or six competitors, till they formed some sort of union with each other. To avoid all uncertainty we assume that in the static state in which values, wages, and interest are natural and in which each subgroup has its perfectly normal share of labor and capital, there are competitors enough in each occupation to preclude all question as to the continuance of an active rivalry. _Static Values and Prices._--The equilibrium referred to requires that all values should stand at their static levels, which means that the prices of goods should be the "cost prices" of the older economists. The _entrepreneur_ should make no net profit on the goods he is producing. The wages of labor must be productivity wages, since each man must get the amount of wealth that he brings into existence. Interest on capital needs, in like manner, to be productivity interest, and each unit of capital must get the amount it creates. Moreover, the prices of goods, as expressed in money, must be accurate representations of the comparative values of goods. All these features mark the static state; but the most obvious mark of distinction is the absence of movement from group to group. We shall see that values are ultimately measured in marginal labor, and as the value of money is measured in the same way, it follows that the price of each article, as expressed in money, is in a static state a correct expression of the comparative amount of labor that will make it. And the entire relation of commodities to each other and to labor can be expressed by the medium of currency. If a unit of labor produces gold enough to make an eagle, and if any commodity sells for ten dollars, it will be safe to infer that it is also produced by one unit of labor. If one commodity sells for ten dollars and another for five dollars, the former is the product of twice as many units of marginal labor as is the latter. This remains true only while currency continues to be in its normal state and all other static adjustments continue complete. _Influences that disturb the Static Equilibrium._--It might seem that the influences that disturb such a static equilibrium are too numerous to be described; and yet these changes may be classed under five general types:-- 1. _Growth of Population._--The supply of labor is increasing, and this fact of itself calls for continual readjustment of the group system. 2. _Increase of Capital._--The amount of capital is increasing, and this change also disturbs the static equilibrium and calls for a rearrangement. As far as wages and interest are concerned, the effect of this latter change is the opposite of that which follows an increase in the amount of labor. When people become more numerous, other things remaining equal, their individual earning capacity becomes smaller. The increase of capital reduces the earning power of each unit of the supply of it and depresses the rate of interest; but it raises the rate of wages, for it causes labor itself to act more efficiently. It is to be noted, indeed, that when new laborers enter society they become consumers as well as producers, and this affects the utility and the value of goods. When more people use a given amount of consumers' wealth, values, measured in ultimate units of utility or disutility, rise. An increase of capital does not directly neutralize this effect, since it does not change the number of consumers; but it multiplies commodities and brings down their utilities and their values. The rise of "subjective" values which follows an influx of laborers is an indication of diminished wealth per capita, and the reduction of values which follows an influx of capital is a sign of increased wealth per capita. 3. _Changes of Method._--Changes take place in the methods of production. New processes are devised, improved machines are invented, cheap motive powers are utilized, and cheap and available raw materials are discovered, and these changes continually disturb the static state. There are certain to be improvements on the older methods of production, for a law of the survival of the fittest insures this. Under competition the process that, with a given amount of labor and capital, turns out a larger product inevitably displaces one that turns out less. The employer who is using the better method undersells those who use inferior ones, and forces them either to improve their own methods or to go out of business. Working humanity as a whole is therefore making a constant gain in producing power, as man's appliances equip him more and more effectively for his conflict with nature and enable him to subjugate it more rapidly and thoroughly. It would seem that they ought to have only good effects on wages, and in the long run they invariably do have such effects. In the absence of improvements there would be little hope for the future of wage earners. The immediate effects of improvements upon individual workers, as we shall see, are not always unqualifiedly good, but the essential effect is the general and permanent one, and the character of this has been attested by past experience too fully to be in doubt. In improvements in production lies the hope of laboring humanity. Nearly the whole earning power of the labor of the present day is the result of improvements that have taken place in the past, though these gains have not been secured without causing local and temporary hardships. If in the future the wages of labor are doubled or quadrupled, as the result of a series of improvements beginning now and extending to a remote period, this progress cannot be secured for nothing. The costs will be less than those attending improvements of the past, but they will be real. The most important fact is that they tend to become fewer and smaller and that the gains immeasurably exceed them. 4. _Changes in Organization._--There are changes in the mode of organizing the establishments in which commodities are produced, and so far as these occur under a régime of active competition, they also are improvements and give added power of production. The mills and shops become larger and relatively fewer. There is a great centralizing movement going on, since the large shop undersells and suppresses the smaller one, and combinations unite many great shops under one management. The effect of this, when it takes place in a perfectly normal way, is akin to that of improvements of method. It benefits society as a whole somewhat at the cost of individual members of the body, and it causes wages to rise by adding continually to the wealth-creating power of the men who earn them. We shall see that when consolidations repress competition their effect is far from being thus wholly beneficial, and that not only are particular persons injured by them, but the community as a whole has a serious bill of charges to bring against them. The securing of the gains that come by consolidation without such evils is an end the realization of which will tax the statesmanship of the future. 5. _Changes in Consumers' Wants._--The wants of consumers are changing. They are growing more numerous as well as more refined and intellectual. This expansion of desires follows the general increase of productive power, since every one already wants some things that he cannot procure, and all society has a fringe of ungratified wants just beyond the limit of actual gratification. Even if all these wants that are now near the point of actual satisfaction were to be satisfied, the desires would at once project themselves farther. The mere increase in earning power without any special education enlarges the want scale, but intellectual and moral growth coöperates with it in that direction and calls latent wants into an active state. More and more eagerly do men seek things for which the desire was formerly dormant. Changes of this kind affect values, cause labor and capital to move from group to group, and thus cause society as a whole to produce less of some things and more of others. They sometimes cause wholly new groups to appear, and draw workers and equipment from the old ones. [Illustration] _Advantage of Diversity of Wants._--One very marked effect of the diversification of wants is to increase the aggregate utility of a mass of commodity produced with a given expenditure of labor. Measure the whole wealth available for consumption on the basis of the labor that it takes to create it, and it will appear that it has more utility and is worth more to society in consequence of this evolution that is going on in the nature of the individual consumer. A given amount of labor benefits most the men whose wants are of the most varied character. If _A_, _B_, and _C_ are three commodities, and if their several utilities decline, as successive units of them are given to a consumer, along the curves descending from the letters _A_, _B_, and _C_ of the diagram, it is clear that the man whose consumption is confined to the commodity A gets less benefit from three units of wealth than does the man who consumes _A_, _B_, and _C_. The utility of the first unit of _A_ is measured by the vertical line from _A_ to the line _DE_, that of the second by the line from _A´_ to _DE_, and that of the third by the line from _A´´_ to _DE_. The utility of the first unit of _B_ is measured by the distance from _B_ to the line _DE_ and exceeds that of the second unit of _A_ by the difference between the lengths of those lines. In like manner the utility of _C_ exceeds that of the third unit of _A_ by the difference between the length of the line descending from C and that of the one descending from _A´´_. The declining utility of the income of the man who satisfies three wants is represented by the slowly descending curve _ABC_, while the diminishing utility of the income of the man who satisfies only one want declines along the sharply descending curve _A_, _A´_, _A´´_.[1] [1] For studies of the effect of diversified wants, see S. N. Patten, "Consumption of Wealth." It will be seen that account must be taken first of the natural expansion of the want which comes from an increase of productive power, and second of the changes in the quality of the wants to be gratified, which sometimes go ahead of any change in the productive system and call for new kinds of commodities. _Changes in Static Standards._--The grand resultant of all the changes that are going on in the more highly civilized countries is a continual rise, not only in actual wages but in the theoretical standard of wages. The static or "natural" rate of pay for labor to-day is higher than it was fifty years ago and lower than it will naturally be fifty years hence. Removing all disturbing influences and letting society settle to-day into a perfectly static condition would reveal the theoretical standard of present wages. Doing the same thing after a lapse of fifty years would show what would then be the natural or standard rate; and this would be higher than the present one. Not only would the actual pay of labor have risen, but the standard to which it tends to conform would have become higher after every interval. The actual rate of wages at any one time varies from the standard; but as both rise from decade to decade, the actual rate hovers all the while within a certain distance of the standard one. _Effects on Values._--In the same way the values of goods measured in labor will in general be declining values. At no one time will actual market prices accurately express the amounts of marginal labor that are required for producing different articles, but they will approximately express this. Articles will sell in the market for about enough to pay for the labor that, when used as marginal labor, suffices to produce them; and as this amount of labor put into a given article grows less and less, the prices of the goods will actually pay for fewer and fewer days' labor. The standard price of anything will be the amount of money that is needed to pay for the labor of making it, provided always that we are careful to use only empty-handed labor in applying the test and that we put that labor in the marginal position, as described in Chapters IV and V, and so disentangle the product that is attributable to it from that which is imputable to capital. If wages, as paid in money, remain stationary, normal prices will decline and actual prices will hover about them in their downward course, so that goods will actually buy smaller and smaller amounts of labor, or, what is the same thing, labor will secure as its pay more and more goods.[2] [2] In measuring the cost of goods in labor, in Chapters IV and V, we disentangled from the amount of goods which is the joint product of labor and capital, the part which is attributable to labor only. The mode of doing this is there more fully stated. The old and crude method of using a labor standard of value--which assumes that the product of a unit of labor _aided by capital_ will always buy the product of another unit of labor _aided by capital_--we must take _all pains_ to avoid. In connection with the cost in labor of different articles it is to be remembered that in agriculture the effect of improvements of method may not always suffice to counteract the working of the so-called law of diminishing returns, which insures, with agricultural science in a given state of advancement, smaller products per capita when there are more men on a given area. That this influence should preponderate over that of improved processes requires that population should increase with a degree of rapidity which may or may not be maintained. CHAPTER XIII THE LIMITS OF AN ECONOMIC SOCIETY When we try to establish a standard to which wages generally tend to conform, the question arises how much of the earth we have in view. Is there a rate at which the pay of labor in Europe, Asia, Africa, Australia, and America tends to settle and remain? Is there a common rate of interest that is normal in all these grand divisions, and are there also general standards of value for goods which govern their prices in all the markets of the world? If there are no such standards having universal validity, are there any that are valid within single geographical divisions? On what principle can we divide the earth into sections for economic purposes? These are some of the questions which must be answered if a theory of distribution is to have any definiteness of meaning, and they arise whenever we try to establish a static standard of any kind. If we talk about natural wages, we must know in how much of the world they are natural. The questions become even more urgent when we try to solve dynamic problems. We shall have to determine the effects of an influx of labor into the economic society we are studying; but does this mean an increase of population in the world as a whole? Does an influx of capital have a similar comprehensive meaning, and does an improvement in the method of producing some commodity mean a change in the mode of making it in every part of the world where it is produced at all? We need to know how extensive the society is whose activities we are examining. _Characteristics of an Economic Society._--We have said that there are natural rates of wages, etc., within some area, which we have regarded as containing an economic society, and we have treated this social organism much as though it were as isolated and self-contained as would be an inaccessible island with its population. It has one general market where values are fixed. A farmer within the area covered by our studies produces wheat for the whole society, and in one way or another, every person within the area is a bidder for it. A shoemaker makes shoes and a weaver makes cloth to offer to everybody. Each part of the organism ministers to the whole and is ministered to by the whole. Competition is ideally free and in a sense is universal. The general system of groups made up of the A's, the B's, the C's, and the H's of our table illustrates the manner in which this complete and self-contained society is organized. In the static state there is one standard of wages for all these groups and their subdivisions and one equally general standard of interest. The price of a commodity, barring some allowance for cost of carrying it, is uniform everywhere. A reduced price for _A´´´M_ in any part of the area where this society dwells would set men bidding for it from every quarter of that area and would thus bring the local prices to uniformity. So a high rate of pay for labor in one part would at once lure men from every other part and reduce the high pay to the standard generally prevailing. The picture is that of a social body having a large geographical extension and yet intensely sensitive at every point to economic influences. Prices, wages, and interest everywhere respond at once to an influence that originates in any part of the extended area. In technical terms this means that there is perfect mobility of labor and capital within the group system represented by the table, and that this involves equally perfect mobility as between parts of the area that the groups inhabit. Men move from one section of the country to another in response to an economic inducement as readily as they do from the group _A_ to the group _B_. _Barriers which divide the World into Economic Sections._--Now it is clear that in the actual world changing one's place of abode is difficult, and even sending capital from place to place is somewhat so. Inequalities of earning power are not leveled out by a quick migration of laborers from China to Europe or to America. In their methods of production the different regions are not brought to a uniformity, for there is machine labor here and hand labor there; and it is vain to expect that machines will quickly become universal and that the practical arts in America, Africa, and Asia will be rendered uniform by such a quick adoption of the most efficient processes as economic law, in the absence of friction, requires. _Boundaries of the Society which is here Studied._--If we take the world as a whole into the circle covered by our studies, we find that labor, compared with other economic elements, decidedly lacks fluidity and does not easily move. So far from being like water, which flows readily and finds its level quickly, it is more like tar or other viscous stuff, which flows slowly and is long in leveling out local irregularities in its surface. In the world as a whole there are regions crowded with people and other regions nearly unpeopled, and long will it be before some of these differences will be much reduced. Many centuries, indeed, must pass before they are entirely removed. If, however, we take the most active part of the world,--western Europe, most of North America, Japan, and the more fully settled parts of Australia,--labor will show a degree of mobility that makes it more like the water of the illustration, and capital within this active center of industrial operations will be more fluid still. Prices here tend toward certain general standards, and processes of production and methods of organizing the forces which do the producing work tend strongly toward uniformity. The best processes and the best forms of organization tend generally to survive. There are imperative reasons for studying the economy of this highly civilized region, the center of the economic activities of the world, apart from that of the more undeveloped regions.[1] [1] This is far from implying that economic laws do not work in the excluded outer area or that no effects are produced within the central area by causes that originate in the outer zone. How these things take place we shall later see. _The Need of a Rule by which a Part of the World may be Treated as an Economic Society._--This involves finding a way by which we can treat a limited part of the world much as though it were, for our purposes, the whole of it. In essential ways the economic center that we have described does act somewhat as if it were an organism complete in itself. We must draw a boundary line about the area of active movement, of lively interchanges, and of general sensitiveness to economic influences, thus separating it from the broader zone of sluggish movement of capital and population, of slow response to economic stimuli, and of generally backward conditions. _Freedom of Movement as a Test._--In Europe, America, and the other advanced regions goods are carried from place to place so easily and quickly that there is a tendency toward uniform prices; and such local differences of price as exist in the case of any commodity do not much exceed the cost of getting it carried from one place to another, though in the cost of moving it there must often be reckoned the toll which a government takes at the customhouse. Capital moves freely, and there is a certain approach to a general level of interest, though here also local differences of course survive. The obstacle to the moving of capital from one place to another, if the owner does not go with it, is occasioned mainly by the risk it encounters and by a virtual bill for insurance. With allowance for this cost, rates of interest in the region we have described tend toward a general level. Though labor migrates more slowly than capital, it moves far more rapidly within the economic center than in the outer zones. Processes of production are not brought to a complete uniformity within the center, but they tend powerfully toward it; for while obstructions exist, they surely and not always slowly yield. With due regard for such differences of method as those existing between the European ways of making products and the American ways, we may say that the tendency toward the general survival of the best methods is too strong to allow any important differences to be permanent. Everywhere, in short, within the central area there is a strong tendency to conform to economic standards in the matter of prices, wages, interest, industrial processes, and forms of economic organization. The standards are what we have defined as the static ones. If we should stop progress and all disturbing influences and wait long enough, we should see values, wages, interest, etc., take a static level throughout the vast area. This, however, would require that migrations should go on till all inducement to move from place to place should have ceased to exist. Population would then have distributed itself over the land in the most advantageous way, and no body of people would be better off than any other by reason of the location of their abode. A long period would be needed to bring about this adjustment even within the circumscribed area where influences that make for change are very active and where obstacles are far smaller than they are in the uncivilized regions. _Essential Density of Population._--A perfectly static state requires, not a perfectly equal distribution of population, but such a distribution that there is no reason for further migrating. The power of the soil to feed its inhabitants varies with its fertility. Where the land is highly productive a dense population may live easily; whereas on a sterile soil even a sparse population may find natural resources too meager, and men may move to places which are more thickly peopled and yet may gain by the change. Moreover, such occupations as manufacturing and commerce require, of course, a far larger population on a given area than does any form of agriculture. Some regions are so undesirable as dwelling places that it takes an exceptional economic reward to induce men to live there. The static state is one in which, all these things being considered, there is no reason for changing the place of one's abode. This implies more nearly equal density per unit of natural resources than equal density per unit of mere area. Inequality of advantage due to location is what is leveled out, and doing this does not require nor permit that population should everywhere be equally dense per square mile or per acre. _Effect of Differences of Occupation._--Regions given over to agriculture naturally sustain more people than those devoted to grazing, and those which are devoted to manufacturing sustain more than either. In countries in which, as in Great Britain, manufacturing is so disproportionately developed that products must be largely exported, while food must be largely imported, given areas sustain more inhabitants than they do in any agricultural or grazing region and more than they do in any region where grazing and tillage, on the one hand, and manufacturing, on the other, are well balanced. In mills and shops auxiliary capital so abounds as to take the place of the abundant land that is available in the other cases for making labor fruitful, and in villages and cities labor does not overtax the resources of the soil any more than it does on farms. It has area enough to live and to work on and tools and materials enough to work with. In a generally crowded country, the resort to commerce and manufacturing relieves the pressure on the land, cities abound, and an abundance of capital averts the danger of a disastrous overcrowding. _An approximately Static Distribution of Population._--The apportionment of population among the different sections of a country may be nearly normal, while migration may still go on from that country as a whole to remote parts of the general area which we include in our present study. There may be small reason for moving from one part of Germany to another and large reason for going from Germany to America. This larger movement occupies a long time, while certain other adjustments may be made more quickly. Within Germany and within the United States labor may be well apportioned among the different occupations. There may be in each country about the right comparative numbers of cotton spinners, iron workers, gardeners, wheat raisers, etc.; or in other words, the distribution of labor among the industrial groups may be approximately normal both within the one country and within the other. It may further be true that the division of occupations between the two countries in their entirety is about what, in the conditions now prevailing, economic law calls for. There are certain industries which now have their habitats in Germany and certain others that have their habitats in the United States, and this arrangement is partly due to the comparative density of the two populations. Because there are so many persons per square mile of land in Germany there is there a certain preponderance of manufacturing, and there are in America less manufacturing and relatively more agriculture. In that remote time when the relative density of the two populations shall become static, America will have reason to increase the comparative amount of the manufacturing and thus put herself in this particular more nearly on a plane with Germany. This occupation has its normal abode in regions of comparatively dense population, and a gain in comparative density means an increase in the amount of productive energy devoted to it. The place for the mill is where the land is crowded, and the better place for the work of tillage is where it is not so.[2] [2] It will appear that manufacturing reacts on the density of population, first, by retarding emigration from the thickly populated country as a whole; and secondly, by causing local movements within the country, whereby cities and villages grow, and relieve what would otherwise be an excess of labor in agricultural regions. _How an Unnatural Distribution of Population may be Treated._--So long as the slow movement of population from country to country remains incomplete, the ultimate division of occupations between the countries can never be completely static. It is therefore with a division that is only approximately static that we have first to deal, and this is realized _when in view of the comparative density of population in the different regions which now exists_ occupations are naturally apportioned. The base line _AD_ of this figure stands for the part of the world in which economic law works rapidly and encounters comparatively few obstructions; and the extension of the line represents the lands outside of this region in which the laws are sluggish in their action. It is as though this base line were a section of a vast surface including both civilized and primitive states. _AB_ represents the smallest population per unit of land of a given quality within the central area, and _DC_ represents the largest, while the ascending line _BC_ shows the gradations of essential density in the peopling of different parts of it. At the point A the pressure of the population on the resources of the soil is least, while at the point _D_ it is at its greatest. At the point _A_ a man can get much out of the soil as the return for his own bare labor, while at _D_ he can get comparatively little; and at intervening points on the base a man gets more than he does at _D_ and less than he does at _A_. His gains measured in bushels of wheat, etc., vary inversely as the density of the population and so decrease from the left of the figure toward the right till the point _D_ is reached. The occupations of the different localities are determined by these facts. [Illustration] _How Occupations vary with Differences of Land Crowding._--Crowding the arable land causes labor to flow naturally to manufacturing occupations, since in these it is not so greatly handicapped in comparison with the labor of more sparsely peopled regions. In a cotton mill in Manchester a man may contribute as many yards per day toward the product of the mill as he would in a mill in Fall River; but on an English farm one man's labor does not create as much produce as it does on an American farm. The large amount of available land per man in America has a great effect on the amount that a man can produce by tilling it, but it has very little effect on the amount of the cotton goods that his presence and labor in the mill insure. In raising crops, therefore, the Englishman is at a more serious disadvantage in comparison with the American. The fact is expressed in a practical way by saying that the English labor is cheaper and is therefore more available for making things that are exported to the distant markets of the world than is labor of the same kind in America; but the reason for this cheapness is primarily the land crowding, which reduces the productive power of a final unit of labor in the former country. Because the man cannot get for himself many bushels of wheat per annum by working on land he can afford to work in a mill at a rate corresponding with the value of the produce he could secure as a cultivator.[3] [3] In this connection see the discussion of the principles of international trade in J. S. Mill's "Principles of Political Economy," Book III, Chapter XVI. _General Differences between the Condition of Densely Peopled Regions and that of Sparsely Peopled Ones._--In a very general way it may be said that the comparative amount of manufacturing should naturally vary directly with density of population, and that the comparative amount of agriculture should vary inversely to it. In computing density due regard must, as has been indicated, be paid to the quality of the land as well as the area, since a number of inhabitants which would unduly congest a sterile agricultural region can be well maintained on a fertile one. In the accompanying figure the line _AD_ inclosed by the vertical lines represents the part of the earth which we have called central, and the left side of it is the part of this area which has the sparsest population, while the right side is that which has the densest. The rising line _BC_ represents the varying density of the population in different parts of the broad area we regard as general economic society, the dotted line _EF_ may be taken as expressing the increase in the part of the labor and capital of the country devoted to manufacturing as population becomes denser, _AE_ measures the proportionate number of persons engaged in manufacturing in the region of sparsest population, and _DF_ measures the comparative number in the region most densely peopled. [Illustration] _AG_ and _DH_ represent the numbers engaged in agriculture in the two regions, and the descent of the line _GH_ represents the predominance of agriculture in the sparsely populated part and the subordination of it in the part that is densely populated. If we assume that capital in the different types of employment varies as does labor, the descent of this line toward the right means a decline in the fraction of the whole force of labor and of the whole fund of capital devoted to cultivating the soil; while the upward trend of _EF_ means the enlarging proportion of labor and capital devoted to manufacturing as we pass from a region of sparse population to regions more and more crowded. The wavy character of the two dotted lines is designed to express the fact that local conditions other than mere density of population favor the one type of occupation rather than the other; and moreover, nothing in the figure is intended to mean that the increase in manufacturing and the comparative decrease in tillage from the left of the diagram to the right are in any exact numerical proportion to the increase in the density of population. The figure as a whole rudely represents the fact that an approximation to the static distribution of population insures an approximation to a static apportionment of occupations within the described area and indicates the general nature of that apportionment. _How Cost of Production and Cost of Acquisition are Equalized._--The costs of moving goods from place to place--including in these costs commercial charges and duties imposed by governments--are the cause of most of the manufacturing that is done in the region represented by the left side of the diagram, except the production of such articles for immediate or local consumption as are necessarily made at or near the places where they are used.[4] Tailoring, blacksmithing, carpentering, general repairing, etc., would always be done in that region, but many kinds of staple goods capable of being transported would, in the absence of duties on imports, be made chiefly in the region of dense population and cheap labor. [4] There can be no large area from which manufacturing is excluded. The rural hamlet has its blacksmith, wheelwright, and carpenter, its sawmills and gristmills; and manufacturers of sashes, doors, furniture, and many implements abound where agriculture is the general industry. Special advantages for production insure the introduction of other industries, and the advantages of being near to customers is enough to maintain many of them. Repairing must, of course, be done everywhere, and in making some articles for local use it is best that the artisan should be where the customer can always reach him. A large cost of transportation favors local industries, a high degree of productivity in agriculture has an unfavorable influence, and a protective tariff on manufactures reduces the returns from agriculture and favors manufacturing industry. The general rule for determining whether a branch of manufacturing can survive in the area of abundant land and well-paid labor is as follows: it can do so if the cost of making the article which this branch of business is devoted to producing is as low as the cost of acquiring it by exchange. The cost may in both cases be reduced to bare labor and the rule will then stand thus: if ten days' labor will make the article and if nine will make something that can be exchanged for it--_i.e._ if all the costs of the exchange can be covered and the thing can be brought from abroad for a total expenditure of nine days' labor instead of ten--the manufacturing of that article will not survive. In a region of abundant land and well-paid labor it is chiefly the tolls which governments exact which make it as costly an operation to get the manufactured products by producing other things to barter for them as it is to make them directly. Density of population, overworking of land, meagerness of returns to agricultural labor--these are the conditions that primarily fix the habitat of most kinds of manufacturing. In the case of particular products these influences may be overcome by the presence in limited parts of the sparsely settled area of exceptional natural advantages for production. Natural gas, special ores, particular kinds of lumber, etc., may draw some branches of manufacturing to the region of fertile land and high wages; but as the comparison which we are making is the most general one which it is possible to make we are safe in our assertion that, in the main, manufacturing processes tend, in the absence of exceptional influences, to concentrate themselves in the region of dense population and of meager earning power of labor. _The Approximate Static Adjustment of Prices._--In the main, and with tariffs as they are, the price of raw products is somewhat lower at the left of the figure, while that of highly wrought merchandise is markedly lower at the right of it; and with the comparative density of population as it is and with no change of commercial policy on the part of governments, this condition may be expected to continue. It is an approximately static adjustment of prices. Purchasing manufactured goods in Europe will long be profitable if they can be passed duty free through the customhouse, while food will be somewhat cheaper in America. [Illustration] _Static Wages and Interest._--As has been said, the wages of labor are comparatively low at the right and high at the left of the figure, while interest varies in the two regions in the same way. It is lower in the crowded area. This is not because of the presence of many men, for this influence alone would tend to sustain the productive power of capital and the consequent rate of interest, and in fact the interest on capital in Europe would be lower than it is if the population there were sparser. The rate which prevails is fixed by the productive power of a very large fund of artificial capital utilized by a large population meagerly supplied with land. This last item is decisive in the case and is a primary cause of low interest. The full statement of these facts, made in graphic form, shows an ascending line of density of population, as we proceed from left to right, an ascending line of price for raw produce, a descending line of price for highly wrought merchandise, and descending lines for wages and interest. All these lines represent the facts in a broadly general way. They deal with averages and not with particular rates. The labor whose earning power descends along the line numbered 5 is of many kinds, and the produce of which the average values vary along the lines numbered 2 and 4 is of many varieties. The rate of ascent or descent of the lines has no especial quantitative significance, and it is therefore not implied in the figure that wages decline more rapidly than the other factors. Moreover, it is such large areas as those of England, Germany, France, or the Mississippi Valley, including both cities and rural lands, that we have in mind when we speak of the density of population as ascending along the line numbered 1. Anywhere we expect to find cities containing more persons to the acre than rural districts. The purpose of the figure is to enable us to take in at a glance five different adjustments that in the main are to be regarded as approximately static within the great region described as the economic center of the world.[5] [5] The law of the distribution of occupations over the area represented by the diagram would, if it were more fully developed, present an amplification of the law of International Trade stated in Mill's "Political Economy," according to which countries naturally produce, not only the things for the making of which they have the greatest absolute advantage, but those for which they have the greatest relative advantage. [Illustration] _Slow Change of the Foregoing Adjustments._--The line which represents the comparative density of population is of course slowly changing position as migration goes on from the older centers of population to more newly occupied regions. If the present distribution of population be represented by the line numbered 1, the distribution a hundred years hence may be represented by the dotted line numbered 2, and that which will exist after five hundred years shall have passed may be represented by the dotted line numbered 3. Even within the economic center the comparative density of population in different divisions is therefore not to be treated as strictly permanent, and it is not to be treated as in any sense permanent when we are forecasting effects that will be realized several centuries hence. For a problem involving a score or two of years the general conditions we have described may be treated as, in the main, abiding.[6] [6] The reason for confining attention to the central zone is partly, as we have stated, because here only do we get a quick response to an economic influence. Overproduction of any article quickly lowers the value of it throughout the area, and a mass of unemployed laborers affects wages throughout the area more speedily than it does in the great environing zone. This, however, is only one reason for this limitation of the scope of our immediate study. A serious fact is that, if we include the entire world, we cannot establish, in the way we have proposed, the natural standards toward which values, wages, and interest are tending. It will be recalled that in the static division of this treatise we have attained a "natural" standard of wages by assuming that all dynamic changes were to cease and that labor and capital were to move to and fro in the system of industrial groups till each of these agents produced as much in one subgroup as in another. A computation of this kind might, within a limited area, be made periodically, say once in ten years, and if this were done it would give a series of static standards of wages. Now these standards become higher as time advances. The static rate of pay for labor is, as a rule, higher at any one date than was the standard for a date ten years earlier, and lower than will be that for a date ten years later. The normal rate of pay about which actual wages fluctuate is a rising one. Now, if we introduce in imagination an absolutely static state for the world at large, we shall have to assume that growth of the general population and increase of the aggregate capital both cease, and that inventions and new coördinations are no longer made. We must then wait long enough to allow static distribution of industries to be made over the whole world and to let each industry find its absolute habitat. This would involve causing methods of producing any commodity to be unified the world over. Hand labor in the Orient would have to give way to machine production, as it has done in Western lands. For a strictly static adjustment indeed even the density of population in the different sections would have to be brought to a virtual equality. While this nearly interminable process was going on, it would be needful that such dynamic changes as inventions and discoveries bring in their train should be absolutely precluded. Stop making new kinds of machinery and wait for centuries to allow a static adjustment to be made over the whole earth--such would be the order. Now, such a test as this would show falling wages in the more favored parts of the earth, whereas the facts show rising wages. The influx of population from the East, unrelieved by a corresponding influx of new capital and by more fruitful methods of production, would cause the earnings of an American laborer to fall, and we should, on the basis of such a test, conclude that his wages in the long run are destined to become lower in consequence of the movement of the vast populations that now congest great Asiatic countries. We should have vitiated the problem by holding the growth of capital and the progress of invention in abeyance. This may be done within a limited area without giving a false result, because there adjustments are more rapid, and waiting for them does not involve the long-continued paralysis of the powers that make for greater wealth for laboring humanity. Apply the test of the static state to the economic center, and it will give a generally true result; but it will give a false one if it be applied to the world as a whole. The merely static adjustment of the world would take more centuries than we care to reckon, and no truth that we are seeking is revealed by assuming that for such a period the forces of progress are brought to a standstill. CHAPTER XIV EFFECTS OF DYNAMIC INFLUENCES WITHIN THE LIMITED ECONOMIC SOCIETY _How the General Unification of Methods of Production Calls at First for an Increased Exportation of Capital from the Central Area and Checks the Immigration of Laborers._--A study of the causes of the interchanges which take place between the economic center and its environment shows that the movement of goods, the diffusion of modern methods of making goods, and the movements of capital and labor across the border of the economic society we are studying are interdependent. Opening a field for a profitable export trade increases the productivity of labor at home and tends to attract immigration. On the other hand, establishing in the outer zone a market for the products of the center prepares the way for introducing modern manufactures into the more densely peopled parts of the outer area. The company that sells cotton goods to the Chinese or the Hindoos will find that there is more to be made by utilizing the cheap labor of those peoples for making the goods by efficient machinery. Commerce tends to diffuse a knowledge of the most economical processes of manufacturing, and this interposes a certain stay on migrations of labor toward the center. It will in time help to retain Chinamen in China and Hindoos in India. It does, however, cause a movement of capital from the center outward, followed in time by a creation of wealth in the outer zone for proprietors residing within the center. The Englishman draws dividends from investments in many lands not within the field covered by the present studies. In so far as he reinvests them, as capital, in those lands, they supply a need that, without them, would have to be supplied by a new exportation of capital from the home country, and they therefore tend to check such exportation. In so far as the dividends are brought home they directly neutralize a certain amount of exportation of capital. _Effects experienced within Economic Society from Interchanges with the Environing Area._--The introduction of improved methods of production within the central area usually calls for an expenditure of capital there, and this is largely furnished from the net profits from previous economies in production, and will, in its turn, furnish net profits that will convert themselves into the capital needed for applying future inventions. The study of the causes of an increase of capital, as well as of each of the generic changes that are going on within the center we defer for later chapters; but at present we need to know that the changes going on within what we define as economic society are affected by the intercourse which that society maintains with its environment. Immigration across the outer boundary of the general division enhances the rapidity of growth of the population within it, while emigration reduces it. Exporting capital in itself reduces the rate of accumulation at home, and importing increases it. Introducing into foreign regions economical methods in use at home, modifies the trade which goes on between the great areas, and there is a perpetual rivalry between the direct and the indirect process of obtaining goods at home. When a unit of labor can directly make more of _A´´´_ than it can procure by making _A_ and exchanging it abroad for _A´´´_, the manufacture of _A´´´_ is legitimate and profitable, but when the unit of labor can procure more of _A´´´_ by the indirect process in which an exchange with a foreign region intervenes, static law requires that this indirect process be resorted to. We should make _A_ and buy _A´´´_ in order to get the most of the latter commodity. This is the essence of the time-honored argument for freedom of trade, but the conclusion to which it leads is modified by a consideration of further dynamic influences which will, in due time, be presented. _How we may get Valid Results by Studying only a Part of the World._--It is entirely possible to study by themselves the activities of such a part of the world, and we will therefore draw a line of demarcation about the countries which constitute the economic center of it, and thus include an area within which economic causes produce speedy effects. Each part of this area quickly responds to influences that originate in any other part. If the steel mills in America make radical improvements in their machinery, this change should, in the absence of a strong monopoly, affect the price of rails in England, Germany, etc. Within the central region wages and interest tend toward uniformity, though, as we have seen, they do not attain it. Across the boundary which separates this center from the outer zone, economic influences act in a more feeble way and are unable to bring rates of wages and interest even to an approximate equality. Western Europe, America, and whatever regions are in very close connection with them, we treat as a society, with the remainder of the world as its environment. This center trades with the environing region, sends some capital and labor thither, and draws some of each thence to the home countries. Willingly or otherwise, it instructs the people of the outer region in modern methods of industry, and thus causes what we may regard as a slow annexation of a part of the outer zone to the economic center and a modification of the character of industries at home and abroad. The principal movement of labor is in an inward direction, and from our point of view it is immigration not into one country merely but into all economic society. The predominant movement of capital has been outward. _Mode of Studying Interchanges between Center and Environing Zone._--All these movements have to be recognized in a study of the economic life of the central society. How, for example, is commerce with undeveloped regions to be regarded if we have the center only in view? It is simply one of two possible ways of getting goods. The people of the center can make a commodity that they use, or they can make something to send into the outlying countries in exchange for it. In the latter case they acquire it indirectly rather than directly, but they acquire it by their own industry in the one case as well as in the other. _Natural Selection of Modes of procuring Usable Goods._--Under natural influences, as we have said, men select the most economical way to get what they use, or--what is the same thing--they select the mode of utilizing their own labor and capital that will give them the largest return in goods. There is competition between different methods of directly making goods, and the best method survives. The man with a good machine undersells the man with a poor one; this latter producer must improve his equipment, or fail, and appliances thus tend toward a maximum of efficiency. In like manner there is competition between the direct and the indirect mode of obtaining goods. The man who, by using a certain amount of labor for a week in making steel for exportation, can obtain in exchange fifteen yards of silk, can undersell and drive from the field the man who, by using the same amount of labor for a week in silk making, can produce ten yards of silk. The importer naturally supplants the manufacturer when, by bartering with foreigners the product of a given amount of labor, he can get from them more than can be produced at home by the same amount of labor. The manufacturers naturally survive when direct production gives the larger returns. In our studies of the economy of the society that is most advanced and central, we may treat whatever is imported as, in an indirect way, produced. In a sense the activities of that society are nearly self-contained since, by the direct or the indirect method, the people produce within their own boundaries the most of what they consume. In doing so they naturally use with a maximum of economy the forces at their command, and resort to traffic when that is profitable. _Mode of Treating the Exportation of Capital._--Capital is moving across the boundary mainly in an outward direction. This fact, standing alone, would be equivalent to a mere retarding of the rate of increase of capital within the economic center; but the exported capital, as it is used outside of the exporting society, produces an income for owners living within it. The income comes in kind, since it takes the form of goods which are an addition to those imported in the course of ordinary exchanges. This tribute paid to capitalists within the industrial center comes chiefly in the form of consumers' goods, the receiving of which does not entail the producing of something to send away in exchange for them. The material agent which creates the imported goods remains outside of the society, and sends its product into the society with no offset. The fact of such an income coming from beyond the pale of an economic society has compelled us to qualify the statement that the economy of the society is self-contained, for there is a small part of its income which is not created within its borders. This comes about by the exportation of capital and the importation of some of its products. _Effects of Drawing Interest from Investments beyond the Social Boundary._--Not all of these are consumers' goods. Some capital goods are imported and, moreover, many consumers' goods are passed over to the group called _HH´´´_ in our table,--the one that makes active instruments of production,--and in this indirect way the earnings of capital invested abroad add to the amount of capital at home. In the long run the exportation of funds for permanent investment may, by its other and more indirect effects, increase the supply of them at home. The literal fact in each year is that what is exported is itself a reduction of the amount that would otherwise be added to the home supply, but that the income accruing from what has been exported in earlier years makes an addition to what is in this year accumulated at home. Primarily, the exportation of capital is to be treated as causing a modification of the rate of accumulation of capital and, in a long term of years, an increase of the rate. _Movements of Labor._--Laborers cross the boundary in both directions, but inducements favor the inward movement. In the absence of positive obstacles the denser populations of Asia could overflow into America with a startling rapidity. Such a movement, on whatever scale it occurs, is to be treated as causing an acceleration of the rate of increase of the population within the center. Whatever results arise from growth of population within are emphasized by immigration. _The Assimilation of Economic Methods and Forms of Organization._--People without the center are borrowing from it the newer and more efficient methods of production. Already Asiatics are making some things by machinery, and when they shall do it more generally there will take place changes that will be very revolutionary in their own economic life and will react on the life of the center itself. Learning to use a thousand and one machines will rend China and disturb Europe and America. In general, better appliances and a more efficient organization will make it possible for Asia to create for herself, and ultimately export much that she now imports, and this will react on the character of the industries of America and Europe. We shall somewhat modify our industries in order to get the benefit of new openings for commerce, and some of the things which we now directly produce we may find it more profitable to get by exchange, which is indirect production. On the other hand, some foreign products which we now get with great economy of labor, because the goods we exchange for them are scarce and dear in the countries that receive them, we shall get on less favorable terms, because the goods we now send to the foreign lands will have become there more abundant and cheap. In general, we must regard the opening of a profitable avenue for trade as we should the invention of a new machine, the discovery of a better electrical transmitter, or the utilizing of a cheaper motive power. It gives us more goods as the fruit of a given expenditure of labor and capital and affords a profit which, as we shall see, comes first to _entrepreneurs_ and later to laborers and capitalists within the pale. Ultimately, those living beyond the pale will get a share of this gain. _Summary of Facts concerning the Economic Center._--We may, then, regard a certain limited part of the world as a society in itself. It is modified by its environment, but, in an important sense, it has a self-contained life. The economic changes which go on within it can be grouped under the five generic heads: increase in the amount of labor, increase in the quantity of capital, improvement of method, improvement in organization, and changes in the wants of the individual consumers. _The Geographical Boundaries of Society not Fixed._--The boundaries of this central area are not fixed. As relations between the center and the part of the outer zone which is nearest to it become more and more intimate, the adjacent region takes on the character of the center. It is, in an economic way, assimilated to it; and in this way the center may be regarded as annexing to itself belt after belt of the environing world. Ultimately it will doubtless annex the whole of it; and for this reason, even though we confine our studies to the center, we shall establish a system of economic laws which will apply, in the end, to all the world. This indeed is not the only way in which the economic life of the outer area comes into the economist's purview, for he can study it for itself. This zone has its peculiar life, which is a distant reflection of the life of the center. It is a type of economic activity in which all the primary forces work, but in which friction abounds and adjustments are made with extreme slowness. For the present, what interests us is the life of the center itself, and in studying this we take account of the influence of the environment. The effects of these influences are first seen in changes in the rate at which the five general dynamic movements go on within the center. The grand resultant is more rapid progress within the center. _What is involved in a Full Study of the Relative Density of Populations._--A full treatment of the subject of the comparative density of population in different places would include an extended study of the kinds of industry which find their natural homes in densely peopled countries and of those which flourish in sparsely peopled ones, and a much more detailed tracing than it is possible here to undertake of those changes in the character of industries everywhere which result from a leveling out of differences in population. Clearly, if all America were to become as crowded with inhabitants as are Holland and Belgium we should develop industries of a different type from those that we now have, and the change would be in the direction of producing relatively more form utilities and relatively less of the elementary utilities. Labor and capital would move from the subgroups which in our table we have called _A_, _B_, and _C_ toward _A´´´_, _B´´´_, and _C´´´_. We should spend more of our energy in making finished goods and less in getting raw materials. I shall note in a very general way the changes in social industry caused by increase of population without looking forward to that remote time when the density of population shall be equalized. _Why an Approximately Static Adjustment of Industries within the Central Area permits Unequal Density of Population in Different Parts of It._--We exclude from view the ultimate static adjustment of the whole world, and content ourselves with an approximate adjustment within society as we have defined it. Even within this limit there are inequalities in the density of population which it would require a very long time to remove, and a perfectly static state cannot be reached till they are leveled out. The selection of industries in Texas and in Belgium cannot be, in the ultimate sense, natural till population in these two regions is so adjusted that there is no longer an economic motive for migrating from the one to the other. If, in order to determine what an absolutely static condition for the central society would be, we were to apply the rule of imagining all new dynamic influences precluded and of allowing time enough to elapse to bring about a normal apportionment of population within that limited area, we should encounter a measure of the same difficulty which confronted us when we proposed to attain a similar static state for the entire world, though the trouble would be less serious in degree. In waiting long enough for population to distribute itself naturally, we cut off influences that, within that period, will affect production and distribution far more than the change in population will affect them. In so far as Texas or any newly occupied region is concerned, the changes thus precluded are those which would have tended to reverse the effect of the redistribution of population. Migrations from Belgium to Texas, if extensive and long continued, would reduce the productive power of labor in Texas; while the dynamic changes which will actually go on within any such period will increase the productive power of that labor, and it is not certain whether the one or the other influence will predominate. For the United States as a whole it is probable that progress in the useful arts will more than offset the influx of new laborers and give to wages a rising trend. If, however, we establish the natural standard of wages by cutting off such progress and letting the influx of labor continue, the test would give a standard lower than the present one,--a false, as well as a discouraging result. The resultant of all the changes we are about to study will probably give to the future pay of labor in America a rising trend. _How Industries adapt themselves to Unequal Density of Population._--In view of this fact it is necessary to recognize a proximate rather than an ultimate static state as that toward which the adjustments now going on are immediately tending. We will treat the unequal density of population within our economic society as something which will last, not forever, but so long that it will not be removed or appreciably affected within the period required for the other adjustments that we are studying. Given a population that is dense in Belgium and sparse in Texas, and competition will cause the industries to take on the types which they would have and retain if that difference in density were destined to be permanent. The type toward which the economic life of both regions is tending is thus a proximate rather than an ultimate one. Each region will, in the near future, be of the type toward which influences which do not involve an equalization of population are impelling it. We get the true direction of the change that is going on in the earning power of labor and in the shape of the industrial organism in both regions by recognizing the fact that the differences in the density of their populations will continue through the period which we are considering. [Illustration] If the line _BC_ represents the productive power of a unit of labor in a region which is sparsely peopled, and the line _B´C´_ represents the productive power of a unit of labor in a densely peopled region, we may assume that _AC_ and _A´C´_, which are equal to each other, represent the product of a unit in either locality when, general progress being precluded, the difference in the density of population should have been leveled out. Move people at once and in a wholesale manner till there is nothing to be gained by further moving them,--let pressure of population on the land be fully equalized,--and you may be supposed to create a condition of uniform productive power for laborers of a given grade in the entire region. The horizontal line _AA´_, which is everywhere the same distance above the line _CC´_, represents the universal level of the productivity of labor in such a theoretical condition. The line _BB´_ represents the actual and different levels of the natural earnings of labor in the different regions. Assuming that all other static adjustments are made, but that the equalization of population has not taken place, labor will earn the amount _BC_ in one place and the amount _B´C´_ in another. Somewhere it will earn an amount represented by the vertical line descending from _D_ and somewhere that expressed by the line descending from _F_, while there will be places where the earnings of labor are measured by the line descending from _E_, which is the amount that labor would everywhere create and get if the population could be quickly made normal in all regions. The standard of wages for the whole of the great region, largely European and American, which constitutes the economic center of the world, shows varying levels in different countries and parts of countries, and the actual rates in every place fluctuate about this proximately normal standard for that place, the standard rate in one locality being higher than that of another. The line _A´B´_ exceeds in length the line _AB_, and this expresses the fact that equalizing the pressure of population on the land in different regions adds more to the productivity of labor in the region now crowded than it deducts from that of labor in regions now sparsely peopled. The overcrowding does greater and greater harm the further it is carried, and therefore taking away a surplus of people from a region which has suffered greatly from overcrowding affords a relief which more than offsets what is lost in other places by a moderate increase of population. Moreover, the fact has to be recognized that at present there are ten square miles of sparse population for one that is very densely peopled, and reducing all to an equality would add only slightly to the number of inhabitants of the regions that now contain few of them.[1] [1] Exceptional local conditions may make an influx of population for a time a cause of greater productivity rather than of less. The general and permanent effects are otherwise, and it is on these that the present argument rests. [Illustration] If the line _BB´_ represents the unequal level of _natural_ wages in different localities, on the assumption that populations remain unequal, the undulating curve _DD´_ which crosses and recrosses the line _BB´_ represents actual local rates fluctuating about the standard ones. _How a Static Adjustment for the World is a Dynamic Influence within a Limited Part of It._--Commodities are, by traffic, crossing the social boundary in both directions, and with the goods there go and come influences that affect the economic life of the central society. Methods and modes of organizing business are taught by each region to the other, though most of the teaching is done by the people of the center and most of the learning by those of the environment. All this affects the center and falls within our study. It has dynamic effects within the center, though it is only a part of a static adjustment for the world as a whole. If the grand bank of Newfoundland were to subside to the level of the middle of the Atlantic, there would be a great rush of water toward the place that the banks now occupy, but this would be only what is required in bringing the general level of the sea to an equilibrium. It would be essentially a static phenomenon, but for the region of the banks it would be dynamic in the highest degree. A rush of population from China to America would be a change tending to establish an equilibrium of population in the world, but it would be a startling bit of dynamics for America. Teaching the Chinese all the mechanical arts that we know would be creating an equilibrium of another sort, in which methods would be similar in the two countries; but for China itself this acquiring of practical arts would be dynamics acting on a vast scale. What is a static adjustment for the world is a dynamic change for parts of the world, and all such changes that can occur within the area of economic society proper and within the period we can wisely include in our study we need to take into account. Changes in population, wealth, method, and organization must be studied, however they may originate. CHAPTER XV PERPETUAL CHANGE OF THE SOCIAL STRUCTURE _Perpetual Change of the Social Structure._--We confine ourselves to that economic society _par excellence_ which we have called the industrial center of the world. In this region economic influences are forever changing the very structure of the society itself. They move labor from place to place in the system and they transfer capital to and fro in the same way. If we think of our table of groups and subgroups as representing the whole of this great industrial world, we must think of labor and capital as in a perpetual flow from subgroup to subgroup, making some industries larger and others smaller by reason of every such movement. The great force of labor and the fund of capital are like restless seas whose currents carry the water composing them now hither and now yon as the direction and force of the moving influences change. _Movements of Labor within the Group System caused by Increasing Population._--If the population were to increase while the amount of capital and the mode of using it remained the same, the effect would be a downward movement of both labor and capital in the series of subgroups by which we represent industrial society. Labor and capital would tend to desert the subgroups _A´´´_, _B´´´_, and _C´´´_ in our table and to move to _A_, _B_, and _C_:-- _A´´´_ _B´´´_ _C´´´_ _A´´_ _B´´_ _C´´_ _A´_ _B´_ _C´_ _A_ _B_ _C_ _Causes of Downward Flow of Labor in the Group System._--A larger population means, of course, not merely an increase in the amount of labor performed, but also an increase in the number of consumers. It means more mouths to feed and more bodies to clothe. It entails also, according to principles that we have already studied, a lower earning power and a lower rate of pay for labor. This means that simple food, cheap clothing, inexpensive houses, furnishings, etc., constitute a larger element in the consumers' wealth of society than they have heretofore done. Society uses fewer luxuries and more necessaries, and the necessaries of life are products in which raw materials predominate and costly form utilities are wanting. This makes a heavier draft upon the land than does the production of highly wrought articles of the same value. Luxurious articles are fashioned with a great amount of artisan's or artist's labor and a relatively small amount of the labor of cultivators and miners. The subgroups _A_, _B_, and _C_ are the ones that furnish the rawest materials, and it is they, therefore, that receive the largest portions of the new labor that enters the field. _How Economic Friction works to the Disadvantage of Immigrants._--Unless capital grows more rapidly than population, there is a certain friction to be overcome in obtaining places for new laborers. If they come largely as immigrants, they are crowded at the points of disembarkation and are then scattered over a large territory. They may have to gain employment by offering to _entrepreneurs_ some inducement to take them. If capital has not increased, and the _entrepreneurs_ are in no special need of new men, they will take them only at a rate of pay which is low enough to afford of itself a slight margin of profit. If the capital has already grown larger and the new men are needed, the situation favors them, and their pay is likely to be as high as it was before, or higher. _The Effect of Increasing Capital._--The growth of capital has an opposite effect. It means a lower rate of interest, though it means more interest in the aggregate, since it insures a larger fund on which the interest is received. The rate does not decline as rapidly as the amount of the fund increases, and this insures a larger gross income from the fund; and it also insures larger individual incomes for many persons. There is, then, a large number of people who are in a position to make their consumption more luxurious, and this causes an upward movement of labor and capital in the group system. More workers will be needed in the subgroups _A´´´_, _B´´´_, and _C´´´_, where raw materials receive the finishing touches, and also in the other subgroups above the lowest tier. It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,--such is the order. _Effect of an Increase of Both Labor and Capital._--It is clear that a certain increase of capital might practically neutralize the increase of population, in so far as the movements thus far considered are concerned, and a greater increase of capital would reverse the original downward movement caused by the increase of labor and result in a permanent upward movement toward the subgroups _A´´´_, _B´´´_, and _C´´´_. In this case the men occupy themselves more and more in making the higher form utilities. They make finer clothing, costlier furniture, etc., and the new production requires proportionately less raw material than did the old. This is the supposition which corresponds to the actual facts. Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quantity. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. It moves toward cities and villages in order to get into the subgroups which have there their principal abodes. The growth of cities is the visible sign of an upward movement of labor in the subgroup series. _A Change in the Relative Size of General Groups._--If all the steady movements of labor and capital were stated, it would appear that a relative increase in the amount of labor, as compared with the amount of capital, would enlarge the three general groups, _AA´´´_, _BB´´´_, and _CC´´´_, and reduce the comparative size of the general group _HH´´´_, which maintains the fund of capital by making good the waste of active instruments. Gain in capital estimated per capita would cause relatively more of the labor and more of the fund of capital to betake itself to the group _HH´´´_. The movement toward the upper subgroups which is actually going on is attended by a drift toward this general group. An increase of luxurious consumption and an enlargement of the permanent stock of capital goods go together. _Regularity and Slowness of Movements caused by Changes in the Amounts of Labor and Capital._--The important fact about the movements thus far traced is that they are steady and slow. They do not often call for taking out of one part of the system mature men who have been trained to work there. They are movements of _labor_ which do not, in the main, involve any considerable moving of _laborers_ from group to group. The sons of the men in the subgroup A do not all succeed to their fathers' occupations, but many of them enter _A´_, _A´´_, and _A´´´_, so that labor moves from the lowest subgroup to higher ones. Such a transfer of labor entails few hardships for any one, and in general it is to be said that all the movements of labor and capital which are occasioned by quantitative changes in the supply of these agents are of this comparatively painless and frictionless kind. About changes caused by new methods of production there is a different story to tell. The transformation of the world does not go on without some disquieting results, however inspiring is the remote outlook which they afford. The irregularity of the general movement, the fact that it goes by forward impulses followed by partial halts, is a further serious fact. Hard times present their grave problems, and we need to know whether it is necessary that dynamics--the natural and forward movement of the industrial system--should produce them. This problem is for later consideration. _Movements caused by Changes in the Processes of Production._--Mechanical inventions are typical movers of labor and capital--constant disturbers of what would otherwise be a comparatively tranquil state. Dynamos for generating electricity and devices for conducting it to great distances from its sources have done much to rearrange the society of a score of years ago, as economical steam engines had done at an earlier date. Every device that "saves labor" calls for a _rearrangement of labor_ in the system of organized industry. In a perfectly static condition there would be, as we have seen, a standard shape for all society, which means a normal apportionment of labor and capital among the producing groups and subgroups and also among the local divisions of the general area. The elements would subside to a state of equilibrium and become motionless, as water finds its level and becomes still in a sheltered pool. The body of fluid takes its standard shape and retains it, so long as no disturbing force appears. Now, society would have such a standard shape and would require, in the absence of dynamic changes, a relatively short time in order to conform more or less closely to it, if it were not for the unnatural apportionment of population in different parts of the area that the society inhabits and the obstacles which wholesale migrations encounter. For the solution of problems of the present and the near future we must accept as a standard the quasi-static adjustment of the population and the consequent quasi-static selection of industries in the different local divisions of the broad area--the arrangement that we have described as locating an excess of manufacturing in the more densely peopled areas and an excess of agriculture in the more sparsely settled ones. With this qualification it may be said that there is a standard apportionment of labor and capital among the producing groups, and that these agents gravitate powerfully and even rapidly toward it. If there were a certain amount of labor and capital at _A_, a certain amount at _B_, and so throughout the system, this standard shape would be attained, and the elements would not move, except as a very slow movement would be caused by changes in the comparative density of population of different regions.[1] This standard shape would long remain nearly fixed if it were not for the appearance of the dynamic influences which are so active within the area we are studying. [1] It is obvious that capital as well as population is distributed with uneven density over the territory occupied by society; but the movement of capital is less obstructed than that of a great body of people, and moreover it is chiefly the fact that the people are not dispersed over the area in a natural way which creates the chief obstacle to the moving of capital. It goes easily when it accompanies a migration of laborers. _Alternations in the Direction of Movements caused by Improved Methods._--In a dynamic state this standard shape itself--the approximately static one--is forever changing. At one time, for example, conditions exist which call for a certain amount of labor at _A_, another amount at _B_, etc. A little later these respective quantities at _A_, _B_, etc., are no longer the natural or standard quantities; for something has occurred that calls for less labor at _A_, more at _B_, etc. If _A_ represents wheat farming, the amount of labor that it required when grain was gathered with sickles is more than is necessary when it is gathered with self-binding reapers, always provided that there has been no increase in population, which would require an increase in the food supply. The society therefore will not be in what has now become its standard shape till men have been moved from the wheat-raising subgroup to others. If the invention of the reaper were not followed by any others and if no other disturbing changes took place, labor would move from the one group, distribute itself among others, and bring the system to a new equilibrium; but it has not time to do this. It begins to move in the way that the new condition occasioned by the introduction of the reaping machine impels it to move; but before the transfer is at all complete there is a new invention somewhere else in the system that starts a movement in some other direction. Before the labor from _A_ is duly distributed in _B_, _C_, etc., there is an invention in _B_ which starts some of it toward other points. _Why Movements are Perpetual as well as Changeful._--Such improvements are perpetual, and the dynamic society is not for an instant at rest. If the disturbing causes would cease, the elements of the social body would find their abiding place; and the important fact is that at any one instant there is such a resting place for each laborer and each bit of capital in the whole system. As we have seen, the men and the productive funds would go to these points but for the fact that before they have time to reach them new disturbances occur that call them in new directions. Again and again the same thing occurs, and there is no opportunity for placing labor and capital at exactly the points to which recent changes call them before still further improvements begin to call them elsewhere. _Why Technical Changes are more disturbing than a General Influx or Efflux of Population._--When the moving of labor is gradual, it is effected, not so much by transferring particular men from one occupation to another, as by diverting the young men who are about entering the field of employment to the places where labor is most needed. When the son of a shoemaker, instead of learning his father's trade, becomes a carpenter, no _laborer_ has abandoned an accustomed occupation and betaken himself to another; but _labor_ has gone from the shoemaking trade to that of carpentering. A man often stays where he is to the end of his life, although during that life labor has moved freely out of his occupation to others. If we represent the facts by a diagram, they will stand thus:-- A B C D 50 40 70 100 Natural and actual apportionment of labor in 1850. 45 35>-->90 90 Natural apportionment after change of ----------^ ^---- method in 1850. 47 38 80 95 Apportionment in 1855 when the movement initiated in 1850 is partially completed. 52 41<---65 102 Natural apportionment in 1855, with ^---------- ----^ movements then initiated. _A_, _B_, _C_, and _D_ represent different occupations or subgroups in the table we have before used. At one date a static adjustment called for fifty units of labor at _A_, forty at _B_, seventy at _C_, and one hundred at _D_. A half decade later, after improvements had taken place at _A_, _B_, and _D_, static forces, if they were allowed to have their full effect, would leave only forty-five men at _A_, and thirty-five at _B_, but they would place ninety at _C_ and at _D_. The first movements that would tend to bring this about are in the direction indicated by the dotted lines. The transfers are made, not by forcing men from _A_, _B_, and _D_ to _C_, but chiefly by diverting to _C_ young laborers who would otherwise have gone to _A_, _B_, and _D_ to replace men who are leaving in these groups. Now, before the transfers are completed something happens that calls for a different movement. Let us say that only three units of labor have as yet gone from _A_ to _C_ instead of five, leaving forty-seven at _A_; only two have gone from _B_, leaving thirty-eight; and only five have gone from _D_, leaving ninety-five at that point. Eighty would then be at _C_, and the static adjustment would not have been perfectly attained. It is at this point that a new change of conditions occurs, which calls for fifty-two units at _A_, forty-one at _B_, sixty-five at _C_, and a hundred and two at _D_. _C_ now contributes something to _A_ and _B_, but it gives more to _D_; and the fluctuations go on forever. Particular men may, more often than otherwise, stay in their places, since the incoming stream of new labor, by going where it is needed, may suffice to make the adjustments, in so far as they are gradually made; but labor, in the sense of the quantum of energy embodied in a succession of generations of men, is never at rest. It is a veritable Wandering Jew for restlessness and in a perpetual quest of places where it can remain. Moreover, there are to be taken into account changes so sudden that they thrust particular workers from one group to another. _A Perpetual Effort to conform to a Standard Shape which is itself Changing._--We think, then, of society as striving toward an endless series of ideal shapes, never reaching any one of them and never holding for any length of time any one actual shape. One movement is not completed before another begins, and at no one time is the labor apportioned among the groups exactly in the proportions that static law calls for. Men are vitally interested to know what they have to hope for or to fear from this perpetual necessity that some labor should move from point to point. _Questions concerning the Effects of these Transformations._--These changes of shape involve costs as well as benefits. The gains are permanent and the costs are transient, but are not for that reason unimportant. They may fall on persons who do not get the full measure of the offsetting gains. What we wish to know about any economic change is how it will affect humanity, and especially working humanity. Will it make laboring men better off or worse off? If it benefits them in the end, will it impose on them an immediate hardship? Will it even make certain ones pay heavily for a gain that is shared by all classes? Are there some who are thus the especial martyrs of progress, suffering for the general good? _Natural Transformations of Society increase its Productive Power._--There is no doubt that the changes of shape through which the social organism is going cause it to grow in strength and efficiency. More and more power to produce is coming, as we have seen, in consequence of these transmutations. They always involve shifting _labor_ about within the organization and often involve shifting laborers, taking some of them out of the subgroups in which they are now working and putting them into others, something that cannot be done without cost. _Immediate Effects of Labor Saving._--Inventing a machine that can do the work of twenty men will cause some of the twenty to be discharged. They feel the burden of finding new places, and if they are skilled workmen and their trade is no longer worth practicing, they lose all the advantage they have enjoyed from special skill in their occupations. Do they themselves get any adequate offset for this, or does society as a whole divide the benefit in such a way that those who pay nearly the whole cost get only their minute part of the gain? Is there unfair dealing inherent in progress in the economic arts, and must we justify the movement only on the ground of utility, though knowing that a moralist would condemn it? These are some of the general questions that are to be decided by a study of this phase of economic dynamics. We need to know both what the movement will in the end do for humanity and what it will at once do for particular workmen.[2] In addition to ascertaining what the ultimate results of the movement will be, we need to trace, with as much accuracy as is possible, the effects of the disturbances that are involved in generally beneficent changes. [2] Our study may lead to a moral verdict without being itself an ethical study; we limit the inquiry to questions of fact, but perceive that some of the facts are of such a kind that they must lead a reader to condemn or approve the social economic system. CHAPTER XVI EFFECT OF IMPROVEMENTS IN METHODS OF PRODUCTION _Displacement of Labor and Capital by Inventions._--Inventions are "labor-saving." Employers are engaged in a race with each other in reducing the outlays involved in producing goods, and a common way of doing this is to devise machinery that will do what laborers have heretofore done. The same thing is accomplished by developing cheap sources of motive power or introducing new commodities which are good substitutes for dearer ones. Mechanical automata have at a thousand points taken labor out of human hands; electricity, which is "harnessing Niagara," may at some time harness waves and winds and make them turn the literal wheels of mechanical progress. Such things, by causing a given amount of labor to produce a larger amount of consumers' wealth, are product multipliers; but this is the same thing as saying that they yield a given product at the cost of less labor, and as we more commonly see their effect in this light, we call them labor savers. _Why Labor Saving is not always and everywhere Welcomed._--To an offhand view it would seem that product multiplying is the greatest blessing that, in an economic way, can come to humanity; and if general and permanent effects be considered, it is so. The solitary hunter who has to catch and club his game would get unqualified benefit from the possession of a bow and arrows; the fisherman would get the same benefit from a canoe, the cultivator of the soil from a spade, etc. Society in its entirety is an isolated being and derives similar gains from engines, looms, furnaces, steamships, railroads, telegraphs, etc. Yet there are persons within the great social organism to whom the benefit _from one special improvement_ may be small and the cost great. There are none who are not better off because of _all improvements_ past and present. _The General Demand for Labor not Lessened._--It is a matter of common experience that new machines are labor displacers. At its introduction an economical device often forces some men to seek new occupations, but it never reduces the general demand for labor. As progress closes one field of employment it opens others, and it has come about that after a century and a quarter of brilliant invention and of rapid and general substitution of machine work for hand work, there is no larger proportion of the laboring population in idleness now than there was at the beginning of the period. _A Voluntary Reduction of Toil Desirable and Probable._--A full study of the effects of technical progress will show that there is never a reduction of the general field for employment in consequence of it. There is an increase of pay, and this causes a certain unwillingness to work for as many hours as men formerly worked; and there is also a change in the nature of the operations that labor performs, which tends in the direction of more comfort and less painful toil. For the famous statement of J. S. Mill that "It is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being" we may safely substitute, "It is the natural tendency of useful inventions to lighten the toil of workers and to give them, withal, a greater reward for their work." Mechanical progress is the largest single ground for hope for the future of laboring humanity, and by its effects, direct and indirect, it has already insured a great alleviation of toil, with an increase in its rewards. It has helped to counteract the world crowding that for a century has gone on and the diminishing returns from agriculture which the crowding entails. Inventions may make disturbances, and their better effects may be temporarily and locally counteracted; but a society where competition rules is sure to secure the benefits in the end and does, in fact, secure them in greater and greater measure as the years go by. Such are some of the theses which research will justify. _Facts concerning Disturbances incidental to Progress._--We have first to take account of the disturbances. They are prominent in economic discussion and constitute the subject of one of the grave indictments brought against the system of competitive industry. They have actually caused great hardships in the past, as skilled handicraftsmen have seen machines come into use which, for rapidity and accuracy of work, excel the best results that long apprenticeships formerly gave. Now that machinery has possession of most of the field, there is no longer the former opportunity for displacing hand workers; but the remainder of hardships incidental to progress is not to be overlooked. This part of the dynamic movement involves present local sacrifices for the sake of future general gains. Here, therefore, there are developed antagonisms of interest which may hinder progress and, if they were extensive enough, might conceivably throw a doubt over the future of the working class. While there is no great disposition to question the ultimate benefit which mechanical progress insures, there is some uncertainty as to the process by which this benefit is extended to workers and there is a struggle to avoid the immediate cost. There is, in some quarters, a disposition to rate the cost so highly as to draw the inference that we need to adopt a socialistic plan of living for the sake of enabling workers to avoid the hardships and secure the benefits of "labor saving." It will appear, however, if we grasp the essential facts of what we may call the dynamics of method, that the tendency of it is to reduce the burdens which progress entails, and to diffuse a large share of the benefits of it among the working class. It will further appear that the socialistic plan of organizing industry would at least throw a doubt over the progress itself. Nothing, on the whole, puts the future of industry conducted on the competitive plan in a more optimistic light than the fact of the progress in productive methods which it insures. It is the strongest guaranty of a "good time coming," in which all humanity will rejoice when it comes and should rejoice by anticipation. _The Law that insures the Survival of Beneficial Processes Only._--It is self-evident that wherever there is a saving of labor needed to make a given amount and kind of product, there is an increase in the possible product that is created by the aid of a given amount of labor. If workers themselves get a share of the gains, this fact will show itself through that beneficent shortening of the working day to which we have alluded. The men will be unwilling to stand the weariness and the confinement of working through too many hours and will be inclined to take more holidays and vacations; all of which, when it comes about in a natural way, is an indication that the industrial organism as a whole has put its hand on a new and powerful lever and is enriching its members by means of it. It does, however, have to change the character of its work, and this means that some labor has to be transferred from one subgroup to another. The laborer displaced by an invention at a particular point continues to be wanted somewhere. When he and others have found their new employments, the good result appears,--the increase and improvement of goods produced,--and society as a whole then gets the benefit which would come to an isolated worker who, without remitting his labor, finds his appliances growing better and the fruits of his labor growing larger. The collective body gets a greater income than before, and the workers share in the gain. _Importance of the New Forms which the Social Income Takes._--This increasing income takes the form in which society now requires it, and it is this which brings about the readjustment of labor--or the changes in the amounts of labor used in particular subgroups--which have caused hardship in the past. _Nature of the Incidental Evils to be Dreaded._--The problem we have to face is a danger that labor may be displaced either (1) from the particular point within a productive establishment at which it is now working, or (2) from the productive establishment as a whole, or (3) from a subgroup, or (4) from the general group of which the subgroup is a part. Out of industrial society in its entirety it cannot thus be forced. There is a case in which the men whose crafts are supplanted by machines may all stay where they are and operate the machines; but that involves forcing other men to change their occupations. There are more cases in which these men may stay in the mill or shop that employs them, but not in the same department of it. There are still more cases in which they may stay in their original subgroups, and in a majority of cases they may stay in their general groups. In every instance there are places for them in the working society. _Local Expulsions of Labor._--When a single employer who is one of many competitors in an industry adopts an important labor-saving device, it may be possible for him to keep all his men employed and to let the improvement show itself wholly as a means of increasing the output. He may secure a machine which will do what twenty men formerly did. If it were possible to cut the uppers of a dozen shoes by the quick stroke of a single die, the machine that carried this armature would do the work of perhaps twelve knives handled by that number of skillful workmen. If the original number of men were retained in the cutting department, and if each of them were furnished with the new appliance, it would mean that twelve times as many uppers would be cut as were cut before the change was made. There would, of course, be no use in trying to do so much cutting of uppers for shoes, without doing twelve times as much sewing, welting, making soles and heels, etc., and to secure all this at once would require a twelve-fold enlargement of the manufacturer's plant. This is too much to secure at once. The manufacturer might perhaps double the output of his mill and nearly double the number of his employees, but that would require only two of the twelve cutters he formerly had. The new workers would be in parts of the mill other than the one where the great saving of labor was effected. Ten men would be removed from the cutting department, and the two left there would cut, by the aid of the new machines, twice as many uppers as the whole number cut before, and that would require the furnishing of a double number of all other parts of the shoes and a double working force to make them. The ten men liberated from the cutting department would be available for this purpose, and new ones would be brought in and set sewing, pegging, lasting, welting, etc. Within a single establishment, therefore, a radical saving of labor at one point usually involves some shifting of labor from that point to others, though it may increase the total number employed in the establishment which secures the economical device. _The Effect on a Subgroup of an Improvement by One Entrepreneur._--If an employer who has this experience is one of a hundred in the shoemaking industry and the only one who secures the cutting machine, the market will receive as large an increase of the product as would be involved by multiplying the output of his mill by two, without requiring that the price should be more than slightly reduced. An improvement which is monopolized for a time by a single _entrepreneur_ seldom renders it necessary to reduce the aggregate of the labor in his employment. Far more often it makes it for his interest to increase the number and to put new labor in every part of the plant where no improvement in method has been made. It is often the fact, however, that labor has to abandon other establishments in this subgroup, and enough of it may do so to cause the amount in the entire subgroup to become somewhat smaller by reason of an improvement. In the case of a single employer there is a bare possibility that no one should be moved, in consequence of an economical invention, even from one part of the mill to another. The manufacturer of our illustration might even keep his twelve cutters at work after the introduction of the machines referred to and do twelve times as much cutting, provided that he could quickly increase his output of finished shoes to twelvefold its former amount. There are practical reasons why he could almost never do this; but if he actually did it, he might, by some reduction in the price of shoes, find a market for this increased product. If the reduction of price were great, some competitors would probably go at once out of the business; but it is never the policy of a successful producer to make unnecessary haste in reducing prices, and, as a rule, the reduction is gradual. The increase of product from the very efficient mill must cause a certain reduction in the rate at which it sells its goods, and this is apt to force manufacturers who are particularly ill equipped and cannot keep pace with the rate of improvement which their enterprising competitor establishes to go out of business. They thus relieve the market of so much of the product as they have contributed and make a place for the increased output of the newly equipped mill. In such a case the total output from the subgroup is not very greatly increased, and the price of the product does not need to be greatly reduced. _Standard Prices fixed by Cost in the most Economical Establishment._--It is a vitally important fact, as we shall soon see, that the price of an article is, in a dynamic society, always tending toward the cost of making it, not in the most inefficient establishment, where it is produced "at the greatest disadvantage," but in the most efficient one of all. The ultimate effect of any great improvement is naturally to close the shops of _all employers who do not adopt it or get an equivalent advantage of some kind_. Ultimately the whole subgroup will be in the state of efficiency it would have reached if the improvement had been adopted by every _entrepreneur_ on its first appearance. _The Effect of an Improvement in Production which is quickly adopted by a Whole Subgroup._--When an improvement is immediately adopted, not by one employer merely, but by all employers in a subgroup, it is likely to cause a quicker displacement of labor from the subgroup as a whole. A very economical machine introduced by its inventor or manufacturer and quickly adopted by all employers at _A´´_ would nearly always force a certain number of laborers to leave that industry and find employment elsewhere, if it were not for one commercial fact, namely, the reduction in the price of the product and the consequent enlargement of the demand for it. _How Labor may be displaced from a General Group._--The amount of _A´_ that can be created depends on the amount of _A_ that can be furnished as material to be transformed into _A´_, and also on the amount of _A´_ that will be taken for conversion into _A´´_. This again depends on the amount of _A´´_ that will be accepted by employers at _A´´´_ and sold in this last form to the consuming public. If the market for _A´´´_ cannot be much increased by a moderate reduction of the price of it, some labor may have to go into the group of _B_'s or _C_'s; and in any case there must be new labor in _A_, _A´´_, and _A´´´_ if the product of _A´_ is increased. We can now measure the difference between the effect of the adoption of an improvement first by one employer and much later by others, and that of the quick adoption of it by all. In this latter case there is not much delay in increasing the output of the goods, and the market for them does not have time to grow larger because of the growth in the numbers and the wealth of the community. Unless the present market will take an enlarged quantity of the finished goods without requiring that the price should go below the new cost of making them, some labor will have to leave the general group. _How Patents may Cause an Increased Displacement of Laborers._--What we often see is the nearly simultaneous adoption of a labor-saving device by all leading employers in one industry. Something like this takes place when the makers of a valuable machine retain the patent on it in their own hands, and press the sale of it on all the producers who have use for it. In this case, however, the makers usually put the price of the machine at a figure that, while it affords an inducement to buy it, does not reduce the cost of the goods that it helps to make enough to cause a great increase in the demand for them. The owners of the patent on the new appliance charge for it "what the traffic will bear"; and until the patent runs out, the users of the machine have to sell their goods almost at as high prices as before. If the machine enables one man to do the work of a dozen, eleven men must find other things to do. They could find them in their own industry if the product of it were enlarged in consequence of the use of the machine; but if the high price of the patented machine prevents this, they must go elsewhere. When the patent runs out, there is likely to be a considerable enlargement of the industry, and how important this fact is we shall soon see. _How Improvements which call Labor to a Particular Establishment may displace Labor from a Group._--Another typical case is afforded when some one employer has for a time the exclusive use of a labor-saving device, and pushes his production to the utmost in order to get the full benefit from it. Here are seen the more characteristic effects of such an improvement. It _draws labor to_ the employer who for the time being monopolizes the new instrument of production, but it _turns labor from_ the subgroup of which this employer is a member. He enlarges his output and in time this reduces the price of the product. In the field there are marginal mills, or those so antiquated, ill situated, or badly run that, with their product selling at the former price, they could barely hold their own; and now that the price is reduced, they lose money by running. They have to cease operating, and this makes practicable a further enlargement of the product of the efficient mill. Much labor goes thither, but some part of that which leaves the abandoned mills betakes itself to other subgroups. Not often, indeed, does it have to go to other general groups. The cheap transformation of the material _A_ into _A´_ enlarges the market for _A´_ and calls for more labor at _A_, and it involves more at _A´´_ and _A´´´_. If the change of method had been gradual, the growth of the social demand for _A´´´_ would probably have precluded the need of sending any labor out of the entire group of _A_'s. Even a rapid change often sends labor out of one subgroup into other subgroups of that series rather than into other general groups. An improvement that should reduce the cost of converting leather into shoes would, by the sale of the shoes, call for more leather, more cattle, more appliances, more tanning, and larger buildings for shoe factories, furnished with more shoemaking machinery and greater motive power, even though the particular machines which were improved by the invention had become so much more efficient that no more of them were needed. This depends on the extent to which a certain reduction of cost of a product enlarges the market for it. _Principles Governing the Enlargement of the Effectual Demand for One Commodity._--In determining how much a reduction of the price of a single article will at once enlarge the market for it, there are two things to be considered, namely, the elasticity of the want itself to which the article caters, and the extent to which an article catering to a particular want may be substituted for other articles designed to satisfy the same one. The desire for jewels and other articles of personal adornment is very expansive, and a fall in the price of any one article of this kind causes a relatively large increase in the consumption of it. Since the want to which a costly ornament caters is thus elastic, the cheapening of all articles that cater to this want would enlarge the consumption of all of them. The cheapening of a particular one of these articles, if there were in the market many others of the same general kind, would cause that one to be extensively used in preference to the others. By an enlargement of the total amount of decorative articles used and by a relative favoring of a particular one of them at the cost of others, the sale of that one would be doubly increased. Cheaper diamonds might mean an increased use of them without any large reduction in the use of other gems; but if many other gems happened to be available for the purposes subserved by the diamonds the use of these others would be curtailed and that of diamonds would be disproportionately increased. _The Value of Goods as affected by the Existence of Castes._--One of the reasons why the market for jewels is thus elastic is the fact that they serve as badges of caste, as only something of large cost can do. If, therefore, all gems were to become much cheaper, two things would happen: (1) relatively poor people would buy some of them--partly in lieu of imitations and of cheaper real jewels; and (2) rich people would have to buy more and costlier ones than were formerly needed, in order to retain their positions in the social gradations. This principle affects the consumption of a wide range of articles, the possession of which seems, outwardly at least, to stamp the owners as belonging in a certain stratum of society. It increases the demand for fine clothing, furnishings, and equipage, multiplies social functions, and induces participation in all manner of costly diversions. The elasticity of the market for luxurious goods is, in general, greatly increased by the action of this motive. The cheapening of them causes them to be consumed by the lower classes and renders the use of greater quantities or higher qualities of them a social necessity for the higher classes.[1] [1] It is also true that an entire variety of gems or other things of this genus might, by mere cheapness, be branded as too common to be used by the very wealthy, except for new and inferior modes of adornment. We shall soon see that a reduction in the cost of any one article usually causes the use of it to trench on that of all manner of things which are on the margin of consumption and are not similarly cheapened. _Changes of Cost of Different Goods Never Uniform._--The cost of all articles is never reduced at the same time, and it is impossible that all of them should remain in the same order of desirability in the estimation of purchasers. Many things, however, are often cheapened at the same time, though in different degrees. Whatever furnishes a very common raw material at a lower cost than has prevailed, as did the invention of the Bessemer process of steel making, makes everything into which that material enters cheaper. By reducing the cost of railroads and engines, cars and steamships, the Bessemer process indirectly lowered the prices of goods that have to be carried, which means practically everything. A cheap motive power acts in the same way and lowers the costs of producing an unlimited number of goods. Even in the case of such general improvements as this the reductions of price are not uniform. Some goods are affected more than others. Cheap steel lessens the cost of bridges more than it does that of dwelling houses, and in the case of many improvements the effect is confined to a limited class of products, if not to a single one. _How the Disturbing Effect of a Single Improvement is Limited._--In the case of consumers' goods improvements are going on so nearly incessantly and at so many points that the effect is much the same as if every invention cheapened most of them at once. Harmful disturbances are reduced to minute dimensions by the multiplying of the changes, each of which, if it occurred alone, would produce a hurtful effect. Many inventions cancel one another's unfavorable effects in a way that we shall later examine. What we now have to do is to isolate a single productive change and see whether there are forces working to reduce its own independent power to create incidental disturbance. What limits the power of a single new and economical process to eject laborers from their accustomed places of employment? This question cannot here be answered in detail, but a brief statement will cover the general principles involved. Obviously the displacement varies inversely with the extent to which increased cheapness enlarges the consumption of the article affected. If by making one thousand men produce as much of the commodity as two thousand formerly produced, you so reduce costs as to double the consumption of the article, you keep all the men who formerly made it in their accustomed places of employment. The elasticity of the want itself to which the article caters is one of the two elements that determine the increase in the consumption of it; but when this increase is due to an extensive substitution of this article for others in the purchasing lists of the consuming public, the result is greatly to reduce the displacement of labor which the new and economical method of production entails. Such substitutions are very general and are a large factor in rescuing men from the hardship of being forced out of the employments they are used to. _On what an Enlarging Market for Tools and Raw Materials Depends._--The market for raw materials and tools depends on that for consumers' goods in their completed state. If _A_, the raw material, _enters only into A´´´_, it can be sold in increasing quantities only as _A´´´_ is thus sold. The chief fact about tools and materials is that they may contribute to a large number of completed goods, and the significance of this fact we shall soon see. The ultimate power to find a market for all products of the lower subgroups depends on finding one for the products of the uppermost ones--the _A´´´_, _B´´´_, and _C´´´_ of our table. The laws which govern the market for finished goods of declining cost have first to be studied. _The Effect of Substituting one Consumers' Good for Others._--Reducing the cost of everything would cause an absolute increase in the consumption of everything; but reducing the cost of a single thing always causes, as we have seen, a _relative_ increase in the consumption of that one product. While the demand for other articles may not grow absolutely less, it becomes relatively less because of the comparative cheapness of the one product.[2] [2] It is worth noticing (1) that uniformly reducing the cost of everything would cause _comparative_ changes in consumption. Anything which should take away a quarter of the cost of every article in the entire list of social products would increase the consumption of some articles more than it would increase that of others. There is an extremely theoretical case in which there might even be a lessening of the effectual demand for a few things because a uniform reduction of twenty-five per cent would cause other things to be extensively substituted for them. This thinkable possibility is not practically important. A detailed study would show (2) that a reduction in the cost of any single article in the entire list of social products causes an increase in the consumption of commodities in general. As an isolated man who has had to work hard for mere food and content himself with a few comforts and no luxuries will indulge in luxuries when food production becomes much easier, so society as an organic whole will increase its indulgences all along the line whenever the work of getting any one thing is reduced and some working time is thus liberated. A substitution of one article for another in the lists of goods used by the public is a universal phenomenon attending an improvement which affects the production of one article only. When the cost of _A´´´_ causes it to stand just outside of the purchase limit of a large class of persons, a moderate reduction in the cost of it will make it a more desirable subject of purchase than the articles which have stood just within that limit, and it will be bought instead of one or more of these things. The securing of new customers for a finished product by means of a fall in the price of it is largely brought about by such substitutions. When the new article is added to a consumer's list, the one which has stood as his marginal or least desirable purchase is taken off from it. It is the _relative_ desirability of buying one or the other of these articles that influences a buyer in his decision between them, and that cannot fail to be changed by anything that lowers the cost of one, leaving that of the other unchanged. If the cost of a unit of each of ten articles be represented by the lines falling from the letters _A_, _B_, _C_, etc., to the base of the figure, a considerable fall in the cost of _A_ would put it below the cost of each of the other articles represented. If in the case of a large class of persons who did not formerly buy any of the _A_ it is as desirable as any of these goods, it will take its place as the most desirable subject of purchase instead of the least desirable. Those whose available means enabled them to acquire all the articles from _J_ to _B_ inclusive, but did not suffice for _A_, will now take the _A_ and omit the _B_. Those whose acquisitions stopped with _C_ will substitute _A_ for that article, and in general every buyer of any of these things who has not heretofore acquired _A_ will now put this in the place of the one which it was least worth while to acquire. [Illustration] _Substitutions caused by a Cheapening of one Utility in an Article which is a Composite of Several._--When different goods cost unlike amounts but are objects of equally strong desires, only one of them is a marginal purchase, and the others afford a personal gain to the consumer which is not offset by a cost. We have seen that this rule applies to the different utilities in a single good. In the case of every article several grades of which are sold, there is one component element or one utility which is worth to the buyer exactly what it costs, while the others afford a consumers' surplus. If the letters in the diagram represent, not whole articles, but utilities in articles, as discussed in Chapter VI, it will accurately express the essential facts. In such cases, which are very numerous, it is only necessary to reduce the price of the one utility which is now just worth its cost in order to induce more consumers to buy the grade containing this utility, instead of a lower grade of the same thing. In doing this, they forego the purchase of something else altogether, or content themselves with a lower grade of that other commodity. If jeweled watch cases should become cheaper, some persons would substitute them for plain cases and would forego buying, say, pictures which were just within their purchase limit, or would content themselves with cheaper pictures. This taking of one thing within the margin of consumption and discarding others is far less frequently done than is the taking of a lower grade of one kind of goods for the sake of securing a higher grade of another. _Why Substitutions reduce the Displacements of Labor._--The question will, indeed, arise why the burden caused by the change may not be merely transferred to men in industries the products of which are displaced by the substitution. Something of this kind would occur if, in consequence of the cheapening of one article, any one other were generally discarded. The important fact is that it is not any one thing, but a wide range of things which are consumed in smaller quantities in consequence of the change; and the effect on the makers of any one of them is small. If a thousand men begin to buy the _A´´´_ of the table we have frequently used, some of them will forego _B´´´_, some _C´´´_, and so on through the list; and the market for no one of these things will be much affected. Moreover, the nearly universal fact is that a man who begins to buy one article that he never before used will save the price of it by contenting himself with a slightly cheaper quality of a number of others. He will give up a dozen utilities in as many entire commodities in order to be able to buy the one entire commodity that he adds to his purchasing list. The reduction of demand is so extensively subdivided that it causes relatively few displacements of labor. _Substitution a Prominent Cause of Varying Sales of Goods._--Substitution is, then, the general rule whenever the cheapening of a commodity wins new purchasers of it. This practice is not indeed universal in the case of those who formerly consumed these goods. Former purchasers of an article which has become cheaper may make no change except to buy more of it or a better quality of it for the same amount which they have been accustomed to spend for the inferior quality. They are not then obliged to economize in any other direction, and the change does not trench on their consumption of other goods. On the other hand, it is sometimes the case that they continue to use the original amount of the article that has become cheaper and use the liberated means of purchase--the "money," as it would ordinarily be termed--in buying other goods. The cheapening of _A´´´_ thus even enlarges the demand for _B´´´_, _C´´´_, etc. There are thus two cases in which a reduction in the cost of one thing would not decrease the use of other things. _Substitution More General in the Case of New Consumers._--The substitution of a cheapened article for others is the dominant fact in the case of new consumers of such an article, while an increased consumption of other things sometimes occurs in the case of old consumers. This does not have as large commercial effects as the other change. If we produce cheaper shoes, we make it easier to acquire good ones, and those who formerly contented themselves with an inferior kind take a better one. That means that they add to their purchase lists the higher utility which is present in the one grade and absent in the other. They buy a new element in goods rather than more of those goods, and while they may not always change their consumption of articles of other kinds they more frequently do so. Those who begin to use something which formerly they went without altogether usually give up the use of some good or some quality in it, or get on with a smaller quantity of it in order to make the new indulgence practicable. The man who, when bicycles became cheap, bought the first one he ever owned probably gave up some other gratification. _How the Sale of Goods which wear out in the Using increases as the Price Falls._--When goods deteriorate as they grow older, users have to buy new ones often if they are not willing to use those which are worn out and inferior. If we want always to wear clothes of good quality, we refrain from wearing a suit too long. We discard many things when they have somewhat deteriorated, and this forces us to buy, in a term of years, a larger number of them than we should otherwise do. We discard carpets and upholstery early when they are so cheap that we can afford to do so. We thus improve our goods qualitatively by adding to them quantitatively. _Substitutions a Protection for Labor against Undue Displacements._--Now, not only are the substitutions we have cited of commercial importance, but they act in the direction of retaining labor in a group where "labor saving" has been effected. They help to prevent this process from being equivalent to labor expelling in so far as either a general group or a subgroup is concerned, since they increase the social demand for the products of the group in question and cause a relative diminution of the demand for other things. Quite evidently there is, for these reasons, the more need for labor within this group and less need of it elsewhere. Cheap shoes may thus never mean fewer shoemakers and cheap watches may not ever mean fewer watchmakers. _Substitutions of One Capital Good for Others._--It is not merely in the realm of consumption that the demand for a particular good may increase greatly in consequence of cheapness. The same thing happens in the realm of production, but here the substitution of one thing for others is an even more prominent cause of the increased use of the particular commodity. Aluminum and copper are rivals as carriers of electrical power, with the advantage at present somewhat in favor of copper. As soon as the cost of making aluminum shall be reduced by a moderate fraction it will become the cheaper material for such uses and, unless there is a fall in the price of copper, will thrust itself into use for trolley wires and other conductors of electricity. The possession of an enormous market by the one or the other material depends on their relative costs, and these may easily so change as to transfer most of the demand from the one material to the other. A further fall in the cost of aluminum would make it available for sheathing the hulls of ships and would bring it into general use for many household implements, while a sufficient fall would make it a leading building material and give it a limitless market for the framing and finishing of substantial structures. In these various uses it would substitute itself, not only for copper, but for steel, stone, wood and other materials, and the change would be extensive enough to give it an enormous market without requiring a correspondingly great reduction in its cost. Lowering the cost of aluminum by a third might, by merely making it the favorite carrier of electricity, multiply the present use of it by ten, and lowering it by two thirds might multiply the present use of it by a hundred. If this should take place, saving labor would be anything rather than expelling it from its position in the aluminum-making group. When less labor came to be needed for making a ton of the metal, more labor would be used in the industry that makes it. So long as the substitution caused by the cheapening of aluminum affected copper only it might be a serious matter for the producers of copper; but when it came to replacing in some degree steel, stone, brick, wood, and other materials, the effect would be so diffused and subdivided as to create small disturbances in any one of these industries. _Effects of Reduced Cost of Materials which already enter into Many Finished Products._--In the case of aluminum the prospect of a greatly increased market brings with it the probability that it may come to be a component element of products into which it does not at present to a great extent enter. Such things as steel, stone, and wood already constitute important components of more articles than can be counted, and there is no great prospect that they will enter into a much greater variety of products. In the case of these materials there is a prospect that cheapness will show itself in reduced costs of the finished goods that are made of them, and that these finished goods will be used in greater quantities without substituting themselves for other things in so drastic a way as that which we have described in the case of aluminum. A reduction in the cost of steel would indeed bring about a substitution of that material for others at every point where the steel and something else are now on a plane in desirability. The type of building that now is made with plain brick walls and wooden floors, because that cheap mode of building enables it to earn a slightly larger interest on its cost, would often be made with a steel frame and concrete floors. At every such marginal point steel would gain somewhat on its rivals in the extent to which it would be used; but in addition to this enlargement of the market for it by substitution, one might count on an increase in the use of it because of an increase in the use of very many things that are already made of it. Some of these cater to highly elastic wants, and persons who use a quantity of them may be induced to use more without discarding anything else. Such an absolute enlargement of consumption is highly probable in the case of any material that enters into a vast number of products, and this, together with the enlargements that come by substitution, may suffice to create a great demand for the raw material and call for as much labor in the subgroup that makes it as was used before the improvement was made. In the case of the raw materials of industry the resources for gaining an increased market by substitution are:-- (1) The substitution of the material for others in uses different from those in which it is now employed; (2) The substitution of it for other materials in the marginal parts of its present field, where it is already nearly as available as other things; (3) The substitution of the finished consumers' goods made of it for other consumers' goods. In addition to all these there is the direct increase in the use of finished goods wholly or partly made of the material by persons who do not, for this reason, discard any other goods. This statement places the different influences in the order of their relative efficiency in the majority of cases in which they act. _Effects of cheapening Tools of Industry._--What is true of a raw material which enters into many completed products is true of the tools of industry which are used for many purposes. A turning lathe, a planing machine, or a circular saw helps to make a large number of products, and the assertions we have made concerning steel, stone, or wood apply to it. As it becomes cheaper it gains an enlargement of its market by a combination of the four influences just enumerated. It is brought into new uses, is employed more in its present marginal uses, and is required in greater quantity because its products are substituted for other things and are also required in greater amounts independently of these substitutions. _Cheap Motive Forces._--Motive power is so nearly universal in its applications that developing a cheap source of it is much like improving the method of producing everything and securing a universal increase of products. We shall see why such a general enlargement of the output of all the shops creates no displacements of labor which entail hardships. If the power is used more in the upper subgroups than in the lower ones,--if it is more frequently available for fashioning raw materials than for producing them through agriculture or mining,--the development of it checks in some degree the drift of labor from the lower subgroups toward the upper ones, which has been referred to in an earlier chapter. Utilizing the power of Niagara, that of Alpine torrents and other unused streams, that of the waves of the sea, and that which has long slumbered in the culm heaps of coal mines, will give increased facility for producing nearly everything; and though the amount of the enlargement of output will vary in different cases and some effect on the movements of labor will be produced, few serious hardships will result, and a majority of the persons who will suffer from these changes at all will get an offsetting benefit from the enlarging productiveness of industry. CHAPTER XVII FURTHER INFLUENCES WHICH REDUCE THE HARDSHIPS ENTAILED BY DYNAMIC CHANGES In the absence of an unusually great increase in the consumption of an article the improvement which reduces the cost of it tends to displace labor. The first thing that will occur to any one who looks for influences which mitigate this evil is the fact that economical changes are going on at nearly all points in the system, and that this cancels out most of the displacing influence. If something sends men from the group _A_ to groups _B_ and _C_, while something else sends them from the group _B_ to groups _A_ and _C_, and still another influence impels men from _C_ to _A_ and _B_, there is likely to be very little actual moving. A question will in such a case arise as to whether the three movements may not expel labor from all the groups and remand them to a state of idleness. History is clear in the answer it gives to this question; such a result has not occurred, and at the end of a century of brilliant mechanical progress the amount of enforced idleness is not greater than it was at the outset. It remains to show that economic law precludes a universal displacement and insures laborers for all time against being at the mercy of an industrial system which has nowhere any need of their services. Productive devices widely introduced mean great and general gains and comparatively little cost. They mean what on their face they ought to mean, more comforts and less toil for everybody. Before studying this influence--the reciprocal action of improvements scattered through the general economic system--we have to determine the action of one or two other influences which also lessen the disturbances which progress causes. One can see that the quick adoption of an economical device in every shop of a subgroup, at a time when all other industries are in a stationary state, would usually expel some labor from that one. If consumers should, on a large scale, substitute the product of this subgroup for that of others, it might save the situation; but the general fact is that the consumption of the cheapened product must increase in a ratio that is greater than the ratio representing the saving of labor used in making it, in order to prevent displacement of labor. If we get on with two thirds of the labor which the making of the commodity out of raw materials formerly required, we do not save two thirds of the total expense of making the finished article; and yet to retain all the labor that is now in the business we must sell one and a half times the former number of the goods produced.[1] [1] The mathematical problem stands thus: If all the subgroups of the _A_ series have the same amounts of labor and a machine enables a half of the force now in _A´´_ to do all that is required in transmuting the usual supply of _A´_ into the usual amount of _A´´_, then some of the labor in _A´´_ would in most cases betake itself to entirely different industries. The superfluous labor at _A´´_ would amount to an eighth of all the labor required for the complete creation of _A´´´_. If wages constituted the only cost which the _entrepreneur_ must defray, the price of _A´´´_ would be reduced to seven eighths of the former price, and this might, in the case of some goods, enlarge the demand to eight sevenths of its former amount and so keep all the labor in the general group. Since there are outlays to be met besides wages, this reducing of wages by an eighth would not usually reduce total cost by more than about a twelfth, and even if price quickly went down to eleven twelfths of its former amount, it would be too much to expect that the consumption of the _A´´´_ should increase by a seventh, except in cases in which this amount of reduction of price caused _A´´´_ to take the place of _B´´´_, _C´´´_, etc., in the purchase lists of many consumers. The enlargement of consumption would have to take place in a ratio greater than that which represents the saving in cost. Costing eleven twelfths as much as before, the article must sell eight sevenths as freely--which is possible only when it thrusts itself extensively into the place of other consumers' goods. Even then some labor would have to move from _A´´_ to other subgroups of the series. One half of the amount of labor formerly at _A´´_ does the whole work formerly done there, and to keep it all at work at that point would require that the output from the whole group be doubled. Saving one twelfth in cost could not well insure selling double the amount of goods. In this view improvements would have a threatening look, though their ultimate effect would still appear as beneficial as ever, were it not for the fact that the disturbances that result from them are made to be relatively small by the influences we are studying. _Counteracting Influences._--The importance of a gradual introduction of an improvement rather than a rapid one lies in the fact that it permits these influences to do their work and often to render the actual moving of laborers even from their subgroup unnecessary. Time is the salvation of the laborer menaced by an impending displacement from his field. When we see what is the grand resultant of all the dynamic influences we are studying, we shall see how this neutralizing and canceling of the labor-expelling force takes place. But for them one isolated change would tend to expel labor from its subgroup and would nearly always send it away from the point within an establishment where the new device is introduced. It usually attracts labor to this establishment and away from the inefficient or marginal ones. A gradual adoption of the improvement allows time not only for a general increase in the size and the wealth of the community, but for other influences which act more quickly and in practice make it nearly always unnecessary to reduce the total amount of labor in an industry which produces an article in permanent demand. Statistics may be confidently appealed to in support of this general statement. _The Dynamic Law of Price and its Effects._--We briefly noted in passing that the price of a product the making of which is subject to repeated improvements naturally tends toward the cost of it in the establishment having the latest method and the greatest facilities for production. The natural price at any time is the cost of that part of the supply which is created at the greatest advantage, and not the cost of the part produced at the greatest disadvantage, as an old formula expressed it. It is the mill that makes the goods most cheaply which is enlarging its product and bringing the price down toward its level of cost; as soon as other establishments get possession of the improvement they help forward the process, and as they get still better appliances they help in carrying the price to still newer and lower standards. _The Cause of the Coincidence of Maximum Cost and Price._--At any one moment, it is true, there are ill-located, ill-equipped, or ill-managed mills that are making nothing and are likely soon to be abandoned. They are the marginal mills we have spoken of, and the goods that they make cost all that purchasers will give for them. This insures a coincidence of the price of the goods with the cost of making them in such a mill, but this is merely an incident in the process of eliminating the inefficient establishments from the field. In the mill which happens at this date to be the one about to be crowded out the cost of the goods equals the selling price of them and will exceed it as soon as the price goes to a lower point. This cost happens transiently to coincide with the price, but does not _regulate_ it. It is the outlay that the best mill incurs that does that, since it sets the standard toward which the price is made to tend.[2] [2] IMPROVEMENTS AND PRICES UNDER COMPETITION The figure represents a subgroup in which five producers, _a_, _b_, _c_, _d_, and _e_, are operating. Later, a new establishment _f_, is introduced. The upper dark line represents the price of a unit of the product, and the lower dark line the cost of making a unit in the establishment which is for the time the most efficient. The dotted lines represent the respective costs of production in the different mills, ranging from _a_, the most efficient, to _e_, which can barely hold its own. What the figure represents as happening is as follows:-- _b_ first makes an improvement which lowers his cost of production, as shown by the descending dotted line. This enables him to increase his output, and so has its effect on the price, which descends. Now, producer _e_ was already selling goods at cost, but he is not at once driven out of the business. Instead, even though he cannot earn full interest on the original cost of his fixed establishment, he will continue to run as long as he can make his plant earn anything at all. The result is a virtual reduction of the capitalized value of the plant (the interest on which is an item of cost), and this is what is represented by the descent of the dotted line which represents _e_'s cost of production. The situation is now represented by the series of points,--_b´_, _a´_, _c´_, etc., representing at their second stage the differing levels of cost in the case of different producers. [Illustration] The next thing that happens is an improvement made by _a_, causing his cost of production to fall below that of _b_. The resulting fall in price now finally drives _e_ out of business; he can no longer earn anything at all on his fixed plant. We may assume that producers _a_, _b_, and _c_, who have been making profits, have enlarged their productive capacity enough to supply the market fully without _e_'s contribution. _d_ is now in the same position in which _e_ was at the preceding stage,--earning nothing on his fixed establishment and barely induced to remain in the business. The next occurrence represented is the opening of a new, large, and very efficient mill by _f_. The effect is like that of improvements, but more violent. The fall in price drives both _d_ and _c_ out of business. _b_ is now on the margin, but saves himself from loss by a second improvement, which makes him again the most efficient producer. And so the process goes on _ad infinitum_. This figure illustrates the fact that, while at any time the price of a good roughly equals the cost of it to the least efficient producers, still this cost does not _govern_ the price. The ruling factor is the cost in the most efficient mill, toward which the price tends; and all that the cost in the least efficient mill determines is how long that mill shall continue running. In order that the claim here made--that price equals cost in the establishment which is about to be crowded out of the field--may hold good it is necessary to define terms with some care. In a typical case an employer who is destined soon to close out his business has, perhaps, an antiquated mill, which itself pays nothing, but enables its owner to use circulating capital and labor in a way that affords interest on that capital and wages for the labor. No interest on the cost of the antiquated mill is chargeable to the business unless the site and the building can be sold for a new purpose. If they have completely lost all productive power, they are not, as we use terms, capital goods at all; and in that case the only interest which the _entrepreneur_ should reckon as a cost is that which accrues on other capital used in connection with the worthless mill. If the site and the building have some value for another purpose, and if the machinery has some value as junk, then whatever the owner can get by disposing of the plant constitutes a sum the interest on which constitutes a cost of producing goods in this mill. It is a sum which the plant owner foregoes as long as he refrains from selling the plant. He can afford to use it in production as long as the price of the product covers the cost as thus defined, but must stop when it ceases to do so. _The Importance of Delay in the Closing of Marginal Establishments._--Now, this process looks as if, by the closing of mills that are distanced in the race of improvement, labor must be forced out of the subgroup. So it would be if the reducing of the price to its new static level were an instantaneous operation and the inferior mills were, in the same instantaneous fashion, compelled to close their doors. These, however, are gradual operations, and before they can possibly produce their full effects, influences will have been set working which will counteract the expelling tendency. We have cited as such an influence the general growth of society in numbers, wealth, and consuming power, making it possible for a group, when an economical change has taken place, to produce and sell more goods than before and to keep its accustomed force of labor in order to do so. There are certain more specific influences which have a similar effect and render it as unnecessary as it is useless to attempt to resist the course of improvement. _Centralization of Business an Effect of Progress._--From the facts here cited it appears that conservatism of the kind that resists all changes condemns an _entrepreneur_ to destruction. He must keep in a moving procession in order to survive. As the essential thing which is changing is the price-making cost of goods, the _entrepreneur_ must see to it that in his establishment cost declines. While this does not necessarily mean that every such establishment needs forever to grow larger, since there are local conditions in which relatively small shops may be economical enough to survive, yet those which cater to the general market and directly encounter the competition of the great producing establishments must, as a general rule, have the advantages of great size in their favor, or sooner or later be crowded out of the field. Many of the smaller ones fall by the wayside, and the business they have done passes to their already large rivals. Wherein the advantages of the great shop lie and how one that is of less than a maximum size may survive in spite of them, are points for later consideration. _How Displaced Labor is Replaced._--When men are actually forced to leave an industry,--say the subgroup _A´_,--they find themselves, in the search for employment, in the same position as a body of newly arrived immigrants in quest of work. Men of either class must offer themselves at a rate that will induce employers to take them. If much new capital has lately been created, it is naturally possible for the men to get employment without having to overcome serious friction or to reduce their demands in the way of pay. In the absence of such additions to the capital, they might possibly have to offer some inducement to employers, in order to overcome their reluctance to make changes in their shops. We shall see in due time, however, that where improvements are well distributed through the industrial society and have their natural effect, they tend to increase the general demand for labor at the original rate of pay. _Effects of a Series of Improvements confined to One Industry contrasted with those of Improvements diffused through the Groups._--A continuous series of radical improvements, all originating at one point, would tend of themselves to cause a series of expulsions of labor from that point, and the mere increase of population and wealth might not so fully counteract this tendency as to prevent a positive exodus of labor from the occupation affected. A merely relative reduction of labor in this occupation would not cause much hardship, since it would only mean that other industries were attracting the greater number of young laborers entering the field and gradually getting a larger and larger part of the whole working population. If men actually in _A´_ can stay there, no one is injured; but too great a concentration of improvements at this point might drive some of them away. Such concentration is the opposite of the general rule. Improvements do not confine themselves to one point or to a few points, but originate at very many, and this fact neutralizes their labor-expelling tendency and might reduce it practically to _nil_. If labor could be made more efficient in every group of the whole system, the result would be to increase the quantity of every kind of goods. Making more of one's own product is acquiring power to buy more of the products of others; and enlarging the general output of goods tends thus to increase the demand for all kinds of goods as well as the supply. If you make clothes and I provide food, and we exchange products, but do not satisfy each other's wants to the point of repletion, it is well for both of us that you should become able to make more clothes and I to furnish more food. We can then go on with our original occupations and both live better. In this there is involved no displacement of labor at all; and neither would there need to be any disturbance caused by multiplying in well-adjusted proportions the output of each group and subgroup in the system of industry. Where formerly a unit of _A´´´_ was exchanged for one of _B´´´_ or _C´´´_, there are now two units of _A´´´_ given for two of either _B´´´_ or _C´´´_, and every one has more things to consume than he formerly had.[3] [3] It will be seen that the maintenance of the present exchange ratios between _A´´´_, _B´´´_, _C´´´_, etc., when costs of all of them are reducing, would require that these costs be reduced in exactly the same degree in each case, and that the quantities sold at the new cost prices should be increased in unequal degrees, so as to bring the different prices to cost levels. The demand for one article is more elastic than is the demand for another. A slight increase in the supply of _A´´´_ may cause a large reduction of the selling price, while it may require a great addition to the supply of _B´´´_ to produce this effect. There must, therefore, be some changes in the relative quantities of labor in the different subgroups, even though there has been an equal amount of "labor saving" or cost reducing in all of them. This change is so slight in amount as compared with what would be caused by improvements confined to one subgroup, that it is effected with relatively little hardship and mainly by disposing the constant inflow of new labor at the points where it is needed. _Labor attracted toward a Subgroup as a Result of Improvements which are made Elsewhere._--The fact that the demand of consumers for different goods is not uniformly elastic has to be taken into account. There are two distinct kinds of movements in the group system, brought about by improvements in method. Each improvement in and of itself has, as a rule, a labor-expelling effect, but this effect is partly neutralized by general growth in consumption and still more by improvements occurring elsewhere. Labor that is thrown out of the _A_ group would naturally go to group _B_, _C_, etc.; but if, as we have just seen, similar influences tend to expel labor from the _B_ group and the _C_ group, the labor may, for the most part, stay where it is, with the result that more of _A´´´_, _B´´´_, and _C´´´_ is offered to consumers. _The increased output of one group is itself a means of retaining labor in other groups_, even though, thanks to mere methods, that involves making more of every other kind of commodity. _The Supply of One Kind of Goods Equivalent to a Demand for Others._--There should be no difficulty in interpreting, in this connection, the traditional statement that "the supply of one kind of goods constitutes a demand for another." An increment of _A´´´_ and one of _B´´´_ coming into existence together supply wants common to their two sets of producers and both groups can gain by exchanging such portions of their respective products as they do not retain for their own use. If _A´´´_ and _B´´´_ were the only consumers' goods used, a part of the excess of each would be distributed among the members of the group producing it, and the remainder would be given in exchange for some of the other kind of goods, also for distribution among the members of the first-named group. This is what actually happens when a multitude of articles for consumption are produced in increasing quantities. _Effect of an Increase of Individual Incomes on the Character of Goods Consumed._--Such an increase of the productive power of a group means, of course, an increase of individual incomes, and it causes men, as we have seen, to consume better things rather than more of them. There is a certain merely quantitative enlargement of every one's consumption of goods of a given kind, every one using more of _A´´´_ than he used before; but the greatest change shows itself in the quality of what he uses. Every man buys and consumes better articles of the _A´´´_ kind, as well as of other kinds. His food, his clothing, etc., are all prepared in a more elaborate way, and he has more of what we call form utility which results from the fashioning of things, and relatively less of the elementary utility which inheres in the raw material. There is somewhat more of raw material and very much more form utility in the goods he demands for personal consumption. This requires that labor should move upward in the group system, and that more of it than before should betake itself to those subgroups where the fashioning of the raw material is done and where the finishing touches are applied to goods. The effect of the constant improvement of all processes of production, therefore, so far as the effect on labor is concerned, is akin to the effect of an addition to capital, in that it moves labor upward in the subgroup series. It puts more labor into mills and shops which make articles of comfort and luxury. _The Nature of the Movements actually caused by Improvements._--This upward movement cannot go on as smoothly and with as little disturbance as that which is caused by the increase of capital. Whenever a greater gain is made at one point than is made at another, an influence is set working which, of itself, tends to send labor from the one point to the other. The slowness with which the change of method proceeds affords the time that is necessary for the protection of labor in the first-named group, since little movement takes place before the effects of improvements made in the second group begin to be felt. If in 1906 an improvement is made which, in the course of five years, would cause some labor to move from the subgroup _A_´´´ to the subgroup _B_´´´, and in 1907 a corresponding improvement is made in the latter industry, the equilibrium is restored before enough disturbance has taken place to require any absolute reduction of labor in _A´´´_. The facts are (1) that new laborers as they enter the field are drawn more to the upper subgroups than to the lower ones,--to the _A´´´_ and the _B´´´_ rather than to the _A_ and the _B_ of the two series,--and that in moving upward they are drawn at first more strongly toward _B´´´_ and later more strongly toward _A´´´_. This is the nearly constant fact in industry and is the grand resultant of all the forces we have described--an upward flow that is continuous but does not follow strictly vertical lines. As young men--the sons of workers in _A_, _B_, _C_, and _D_, who might otherwise have remained in their fathers' occupation--move to the subgroups that stand higher in the several series, they first go in larger number toward _B´´´_ than toward _A´´´_, and later in larger number toward _A´´´_. There is a wavy movement toward the right and then toward the left in the steady flow of labor from the groups that create the raw material to those that impart to these materials the form utilities which they need to fit them for service. An actual lessening of the number of workers in an entire group in consequence of an improvement in the method of production is practically unknown, and even a positive lessening of the number in a subgroup is exceedingly rare. _Apparent Exceptions to the Rule._--Exceptions to this rule which are rather apparent than real will occur to every one. The discovery of a great supply of mineral oil put an end to the use of whale oil for illuminating purposes, though it allowed the whale fishery to survive on a reduced scale and produce oil for other purposes, in so far as the rawest material, the whales themselves, were not exterminated. The exhaustion of a supply of raw material was here a dominant fact, and the effects it produced may be again expected when mineral oil shall, in turn, become scarce. Men will move out of the subgroup producing the crude oil, as nature forces them to do so, but their movement cannot be referred merely to improvement in the mode of extracting the oil or transporting and refining it. The fact which illustrates the rule we have stated is that while mineral oil drove whale oil out of the field as an illuminant, this did not reduce the number of men in the general group which produces illuminating oil. More men were set working in the oil fields than ceased working on the whaling ships. A new raw material was used in creating a similar finished product, and as the general industry which made this product grew larger rather than smaller, the total demand for labor in oil production was not lessened. This does not prove that old sailors did not suffer from the change. Young sailors could go to the oil fields or elsewhere, but men who were not adaptable could not do so, and the hardship thus entailed is not to be overlooked. We are, however, forming a judgment of movements which pervade a vast industrial system, and we need most to know what is their grand resultant. If that were a general displacement of labor, causing increasing idleness and suffering, the system that involved this result would stand condemned. The general resultant is the opposite of this. _A Drift of Labor toward Certain General Groups._--We have just noticed that movements of labor in the group system, caused by improvements in method, consist mainly in an upward flow of labor, accompanied by irregular lateral movements, the labor drifting to the right or the left as it is more strongly attracted now to one point and now to another on the same horizontal plane. The general mass of it swerves now to the right and now to the left in its general ascending course, though none may be actually expelled. This description of the drift of labor is too general even to describe all the permanent currents. Some entire groups produce only or chiefly luxurious goods, and to those there is the same drift of labor as there is to the upper subgroups of the general series. If there be a group of _D_'s making an article which only the well-to-do can afford to use, it will swell in size and in the volume of its output from the same causes--improved methods and general enrichment--which cause _A´´´_, _B´´´_, and _C´´´_ to outgrow _A_, _B_, and _C_. _Displacements of Mature Laborers naturally tending to Diminish._--When an improvement is made in one of the upper subgroups while the general flow of labor is toward these groups, the effect is not usually to lessen the absolute number of workers in the upper subgroup where the improvement has been made, but merely to prevent it from getting a _pro rata_ share of the labor that is moving upward toward this tier of subgroups from the lower ones. The change in the apportionment of the social laboring force between the upper subgroups and the lower ones is made gradually, without violent transfers of particular men from point to point, and merely by directing to the upper subgroups a disproportionate number of young workers who are selecting their fields of employment. In general, _labor_ moves from point to point in the system without requiring many _particular laborers_ to do so. As actual loss of places by persons of mature age is the chief evil connected with changes in methods of production, it is a most welcome fact that the influence which we are studying tends naturally to reduce the extent of it. _The Discarding of Aged Laborers mainly caused by a Further Influence._--Quite apart from a demand for less labor at a particular point in the system, there may occur a discharging of men merely because of age and a substituting of younger men. In establishments where the pace is a rapid one men have thus to give place to young successors at an earlier age than the one at which men give place in other employments. The effect of some machinery is to improve the chances of old men, while that of other machinery is to reduce them. A lightening of toil and a shortening of the working day preserve men's powers and enable them to retain employment longer. _The Natural Tendency perverted by Monopoly._--When hardships come on a large scale in consequence of a discharging of workers, they are chiefly due to an abnormal influence which now shows itself in ugly and disquieting ways throughout the industrial system, that, namely, of monopoly. Reducing forces for the sake of curtailing production and raising prices is what does the mischief. This influence undoes at many points the beneficent effects of free competition and causes grave hardships to particular workers while affording no compensating gain to the consuming public. It portends evil for society as a whole as well as for the working classes, on which its hand may be heavily laid. In a perfectly natural system, in which competition would do all that pure theory at the outset of this study has assumed that it will do, the evil entailed by local improvements would be relatively small and the diffused benefits enormous. In proportion as the movement approaches steadiness and as gains are made, not by radical changes, now here, now there, and now elsewhere, with long intervals between them, but by smaller economies made nearly everywhere and in very quick succession, the cause of the hardship is reduced. There is less of violent expulsion of labor from its fields and more of a gradual drifting of _labor_ rather than particular laborers from the subgroups that create elementary products to those which fashion them into fine and costly shapes. There is small hardship in the natural selection by new laborers of the employments where they are most needed, and there is often little in a transfer of a person who has tended a machine of one kind to a machine of a different kind. Instances there still are of manual skill brought to naught by the invention of a mechanical automaton that does the work more rapidly and accurately than the hand of man can do it; and the worker who possesses this skill must usually, in such cases, content himself with an employment where his more general aptitudes may stand him in good stead and insure him at least an average rate of pay. The special aptitude which he had for performing one operation counts for nothing; and this happens when men who have worked in one department of a mill have to accept work in other departments of the same mill or in other employments. _A Workman's Specific Loss as compared with his Share of a Social Gain._--The test question in cases like these is whether the man is helped or harmed by the general effect of improvements, including not only the one which has caused him to change his occupation, but all others which have taken place since he began working. To this question there can be but one answer: in the course of a lifetime the balance is in favor of progress _even in the case of the average victim of the movement_, and it is overwhelmingly so in the case of others. What a man sacrifices when he is transferred from one machine to another is usually more than offset in a term of years by what he gains in consequence of the general increase in the producing power of labor. At the time of the displacement he suffers, but by its constant increase in wealth and productivity society more than atones for the injury. The goods that emerge from the mills are multiplied; the share falling to labor, as that share is determined by the test of final productivity, grows steadily larger; and the men who have never served a long apprenticeship at anything, but have learned their present trades quickly and can learn new ones as quickly, are producing and getting far more than they could possibly get under a régime of skilled manual labor or of inferior machinery, and far more also than their successors will get hereafter if, by any calamity, mechanical inventions shall cease to be introduced and other product multipliers shall be barred from the field. The hope of working humanity lies mainly in the continuance of the changes which give it a forever enlarging command over nature. Some classes might live comfortably without this, but for the worker it affords the main ground of hope for increasing comfort and a coming time of general abundance. CHAPTER XVIII CAPITAL AS AFFECTED BY CHANGES OF METHOD _Labor Saving and Capital Concentrating._--There is a common impression that whatever saves labor usually requires an increase of capital in the industry where the economy is secured, and this impression is justified by the experience of the century following the invention of the steam engine and the early textile machinery. Hand spinning and weaving require small amounts of fixed capital, while the mills in which spinning and weaving are done by steam or water power require a great deal. Fortunately in any long period this capital comes as abundantly as it is needed from the profits of the very business that calls for it and does not reduce the capital of other industries. The profit of one year furnishes the new instruments required in the next; but the immediate effect of substituting a costly machine for hand labor is to concentrate capital, or to call it from places to which it would otherwise go. _The Liberation of Capital by Invention._--For a long period it was the general rule that a mechanical invention at first called capital to the point at which it was applied, although it afterward created new capital and sent it away to make more than good the draft it originally made. This rule is no longer universally applicable. When an invention cheapens capital goods, it liberates capital. It is clear that a hundred and twenty-five years ago there was small chance that an invention would liberate very much capital by reducing the cost of making tools, buildings, rails, machinery, etc., since there were so few of them to cheapen. Now that machines are at hand in myriad forms the chance is large that an invention will substitute for many of them others of less costly construction. It will in these cases cause less capital to be required per machine than was formerly needed. _Simplifying the Forms of Machinery and Cheapening the Materials of It._--The history of invention shows that the early machines sometimes took cumbersome and expensive forms, for which simple and cheaper forms were later substituted. Much simplifying of mechanical appliances is all the while going on, and this, of course, liberates some capital. Making instruments of any kind out of cheaper materials has the same effect that anything has which reduces the cost of constructing the instruments. Bessemer steel has made rails, bridges, ships, buildings, steam boilers, and a vast number of mechanical tools and appliances less costly than they were, and so has liberated some of the capital which such things formerly embodied. After one of the machines of the costlier type has earned the fund on which its owner relies for replacing it as it is worn out, it appears that a part of this fund will suffice for procuring a perfectly good substitute for it, and the remainder may be used for procuring other appliances of production. _A´´´_ _B´´´_ _C´´´_ _H´´´_ _A´´_ _B´´_ _C´´_ _H´´_ _A´_ _B´_ _C´_ _H´_ _A_ _B_ _C_ _H_ _Cheapening the Process of Making Instruments._--If we recur to the table which represents the groups of the industrial system, we shall see that improvements of method in the general group _H-H´´´_ have the effect of liberating capital in the other groups and subgroups. _H´´´_ is the comprehensive symbol that represents active instruments of all kinds. It is engines and boilers, looms and spindles, lathes and planers, rails, cars, bridges, tunnels, canals, ships, buildings, and all the myriad instruments which actively aid man in making the things he wants for consumption. New methods at _H-H´´´_ make the supply of all these things cheaper, which means that the labor and capital of the group _H-H´´´_ which would have been required for replacing the instruments used in the other groups will more than suffice for that purpose, and a part of their time may be given to making machinery, etc., not formerly used. This amounts to liberating a part of the fixed capital in the three groups producing _A´´´_, _B´´´_, and _C´´´_, although the free capital that is thus gained may in part be used in furnishing additional appliances for use in these same groups. _Local Concentration of Capital which causes a General Liberation of It._--In such a case the new method used at _H´´´_ may, at its introduction, require more capital than was formerly used at that point in the system. Building Bessemer converters was a costly operation, though the output of cheap steel afterward saved far more capital than the converters required. The power canals of Niagara cost something, but the products created by means of them are cheapening many tools of industry; and like effects follow most applications of electricity for utilizing waterfalls and carrying to great distances the power which they generate. They follow on a considerable scale as the culm of coal mines is economically burned and made to generate steam and drive dynamos. All cheapening of transportation, besides making consumers' goods cheaper, has the same effect on producers' goods, and by this means liberates capital. It causes a single productive appliance to cost less than it otherwise would cost and renders available for other purposes a part of the outlay that was formerly required for replacing it at the end of its industrial career. _Effect of Speeding Machinery._--Increasing the speed of a machine is a capital-liberating operation, since it enables a certain number of machines to do the work of a larger number. Running spindles and looms rapidly, while it requires fewer laborers for a given amount of product, requires fewer spindles and looms also. _Cases in which Liberated Capital remains partly in the Same Industry in which it has been Used._--A distinction has carefully to be made between causing less capital to be used _per unit_ of physical product, and causing less to be used in a particular occupation without regard to the amount of the product. If we cheapen the operation of cloth making, we shall increase the consumption of cloth, and in this way we may draw new capital into this business, even though we can build and equip a mill of a given capacity more cheaply than before. In this case we have liberated capital in this business and at once reëmployed it at the same point. If we use as many looms as before, the more rapid running calls for more spindles to furnish yarn, and the new spindles require larger engines and boilers, or more water wheels, wheel pits, and reservoirs, to furnish power. Enlarging a business in this way usually calls for an enlarged general capital _in the industry_, though it calls for less capital for a given output; and the striking fact is that this effect may be realized by means of devices which actually save capital at particular points in the industry. If, after power looms were introduced, some inventive genius had made them cost only a quarter as much as on their first introduction they had cost, the profits of the business would have been increased and, in time, far more capital in the shape of spinning machinery, engines, etc., would have been required than had formerly been used in those forms. With general growth of population and wealth the increased consumption of cloth calls, in the end, for more capital in the form of the looms themselves. _General Consumption as affected by a Specific Increase of Productive Power._--Consumption in the generic--the use of consumers' goods of every kind--grows as the power to make the good increases; but a point that is of great importance is that any _specific_ increase of productive power brings about a _general_ increase of consumption. It brings about a greater all-round creating and using of commodity. If we can hereafter make the _A´´´_ of our table with the expenditure of half as much labor and capital as we have heretofore used in creating it, the liberated agents of production become available for making whatever is most needed, and they will, in fact, be used for increasing the supply of all three types of consumers' goods represented in the table. They will give us more of _A´´´_, _B´´´_, and _C´´´_ in quantities adjusted by the laws of value. The outcome of this is that an economy in making _A´´´_ actually gives us more of _A´´´_, _B´´´_, and _C´´´_. We become larger consumers of everything because of the cheapening of anything which enters into our list of articles for personal use. This presents a further aspect of the process of moving labor and capital from group to group, in which the possibility of hardship for particular persons inheres. The conclusion to which a fair weighing of the effects of mechanical progress has already led us is that there are very few, even of the workers who suffer displacements of this kind, who do not during their lives gain far more than they lose by general progress; and the effects of cheapening capital goods at one point, and so liberating capital for use at other points, increases this beneficent effect. The special costs of making the new kinds of machinery have been large in the earlier stages of the process, but have afterward grown smaller; and as machinery has come into general use the liberating of capital by the cheapening of the machines has become a more and more important factor. Some of the capital liberated at _A_ goes to assist labor in furnishing the additional amount of _B´´´_ and _C´´´_ which enlarged consumption requires. _Hardships entailed on Capitalists by Progress._--As the old handicrafts have now been largely supplanted by machinery, and the hardship that continuing progress entails on laborers is greatly reduced, there is involved in progress a new burden which falls altogether on the capitalist employer. The machine itself is often a hopeless specialist. It can do one minute thing and that only, and when a new and better device appears for doing that one thing, the machine has to go, and not to some new employment, but to the junk heap. There is thus taking place a considerable waste of capital in consequence of mechanical and other progress. As there have come into use marine boilers made of steel and capable of standing a very high pressure, the low-pressure boilers of former days have become useless. With the advent of triple expansion cylinders, twin screws, and better and larger hulls, ships of the old type lost their value; and similar things are occurring in every line of production. A new mill is built and equipped with the best machinery known at the date of its building; but before a year has gone by all the machines in one department are so antiquated that it is best to throw them out. Indeed, a quick throwing away of instruments which have barely begun to do their work is often a secret of the success of an enterprising manager; but it entails a destruction of capital. What is easily to be seen is (1) that a single change of that kind makes an immediate draft on the general fund of available social capital; and (2) that this draft, as a rule, is soon repaid with increase. Machinery that is nearly new is thrown away when it appears that another kind soon will earn enough to make good the waste thus entailed, and the paradox is in the fact that the _entrepreneur_ who quickly destroys capital really saves it, while he who, by using the old appliances, tries to hold on to the capital loses it, since he sacrifices profits from which more would have come. Running his antiquated engine, the unenterprising man has to content himself with small returns and, in the meanwhile, sees his actual productive fund dwindling by the deterioration of the old equipment. _The Offset for Capital destroyed by Changes of Method._--What has happened in such a case to the enterprising man is a loss of personal capital. What he has just paid for the supplanted instruments has gone for nothing. His financial status is improved rather than injured because of the prospective profits which the new appliances will earn. What has happened to the man who keeps the old machinery is a partial or total loss of whatever he has lately put into it, not offset by such profits. By keeping his capital goods he is losing his capital without having his rival's assured prospect of regaining it. Whether the gains made by those who promptly discard antiquated appliances offset the wastes suffered by those who hold on to them too long, is a question that requires more space than can here be allotted to it; but the following facts determine the answer:-- (1) Instruments naturally at any one date are of an average age equal to about half their working duration. (2) Discarding all of one kind at any one date would involve drawing on the fund of social capital for about one half of the amount needed to replace these instruments. (3) Very few are at once discarded on the invention of the improved types. (4) Nothing but a fall in the price of the product created by the aid of these old machines can prevent them from earning the remainder of the fund required for replacing them. If they do this, they prevent any positive destruction of capital which many inventions cause. (5) When only one _entrepreneur_ introduces the new appliance, his production is usually increased, but not to an extent that causes a quick fall in price. This affords to the users of old appliances whose plants are not already at the final point of inefficiency a chance to continue accumulating the fund for replacement. The profits of the user of the better appliance are meanwhile accruing. (6) When all _entrepreneurs_ introduce the new appliance at once they do so--provided that their act is intelligent--because the saving effected in the cost of production makes the change advantageous in spite of the waste entailed. They expect an all-round net profit during the period before the price of the product falls to its new level, and they expect that this will give them more than is required for interest, cost of future replacement of the superior instruments, and the deficit in the accounts caused by the early discarding of the superseded appliances. (7) Without treating this prospective profit inhering in the new appliance as capital, we must regard it as affording an assurance that new capital will soon appear. There are great gains to be made by using the new appliances, and some of these will add themselves to the permanent fund of productive wealth. (8) The cost of the new appliances may be defrayed by their owner's earlier accumulations or by loans. In either case they come out of a social fund that is created mainly by the appliances which in a preceding period have yielded special gains. The machine of to-day is paid for from the available surplus created by the machine of an earlier day, and a series of inventions enlarges the social fund of capital in spite of all wastes by which it is attended. [Illustration] The effect that a series of improvements has on the amount of social capital, if we measure the fund solely on the basis of the cost of the capital goods which embody it, may be represented thus:--The horizontal line measures time and is graduated in years from one to ten. The distance of the point above this base represents the amount of capital as estimated in units of cost, in the possession of the society at the time a particular improvement is made, and would remain unchanged if society were static. The level of the line _AB_ represents what, under such a condition, would be the capital of a decade. The curved line _AB´_, dipping below _AB_ and then rising above it, expresses the fact that a single important improvement first trenches on the amount of capital in use, and soon makes good the deduction and makes a positive addition. It raises the sum total of capital to the level of the latter part of the line _AB´_. The curved line _A´B´´_, first falling below _A´B´_ and then rising above it, expresses the fact that a second improvement, made a year or two after the first one, makes a reduction of the amount of capital as determined by the first improvement, and later adds more than enough to make good this reduction. A third improvement, at the end of two or three further years, has the effect expressed by the line _A´´B´´´_; that is, it first reduces the fund below the level at which at that time it would otherwise have stood,--but by no means to the level at which it stood when the series of improvements began,--and later carries it above the line expressing the highest level it would, without this improvement, have attained. In so far as these three improvements affect the level of the social capital for the ten-year period, it stands at the level indicated by the line _AA´A´´B´´´_, and no later improvement, even at the time of its introduction, does more than to make a small reduction of the increment of capital accruing from the products of the earlier improvements. A series of economical changes means a perpetual increase of the social capital as well as a perpetual improvement in the mode of applying labor. The increments of capital due to the earlier changes are far more than is required by the introduction of any later one. _The Impossibility of Reducing Capital by too Rapid Progress._--There is a theoretical question whether this series might be too rapid to permit this result. If the interval were a month instead of several years, and if the amount of capital put into the new appliances were the same that, in the figure, they are represented as requiring, the effect would be to make twelve deductions from the amount of the social capital in the course of a year, which would carry it some distance below its original level, _while in this one year_ there would have been no time for the profits to accrue in order to restore and add to the fund. In the next year and the following ones this would follow, and the effect, in the course of ten years, would be to carry the social capital to a still higher level than the one it reaches in consequence of the slower succession of economical changes. Increasing the rapidity of productive inventions only multiplies the additions made to the social capital. We may summarize the chief facts concerning technical progress as follows:-- (1) Progress may throw particular men out of their present employment, but cannot destroy the social demand for their labor. Somewhere in society there is a place for them. (2) If improvements were long confined to one subgroup, they might send labor into other subgroups and even into other general groups. Occurring as they do at nearly all parts of the system, they very seldom require an absolute diminution of the amount of labor in a subgroup, and practically never cause such a reduction in a general group. (3) The gradual introduction of an improvement is important, since it affords time for an increase in the social demand for the product which is thus cheapened and for introducing at many other points improvements which neutralize, in a large degree, the labor-expelling effect of the first improvement. (4) Technical gains are the largest source of additions to the total amount of the social capital. The constant influx of new capital facilitates the placing of laborers at the points where they are needed. (5) The fact that elementary utilities which are produced by agriculture cater to a less elastic demand than do the form utilities which are the product of manufacturing occupations, has caused labor to move slowly from the lowest subgroups of the various series to the upper ones, as the productive power of labor in agriculture has increased. (6) This movement is so gradual that it can be accomplished almost entirely by devoting to the industries constituting the upper subgroups an enlarged share of new laborers as they enter the field in quest of employment. Young men drift from the farm to the village and the city. (7) In addition to the upward flow of labor in the series of subgroups there are some lateral movements, or transfers from group to group, to be taken into account. The fact that improvements are widely diffused and that there is a succession of them at each point makes it possible to make these lateral movements of labor in the same way in which the movement within the groups is accomplished; namely, by putting the new men who are entering the field of employment in the places where they are most needed. (8) These facts do not always prevent particular men from losing the special benefit that skilled handicrafts have insured to them, since a machine, to the running of which they are compelled to betake themselves, may often be as well tended by persons who have never learned such a handicraft. (9) The loss thus entailed on craftsmen was very large during the original process of supplanting hand labor by machinery, but bids fair to be relatively small hereafter, since fewer men go through long and costly apprenticeships, and since the operator of one machine can usually learn to operate another with little waste of time. (10) Such injuries as particular men now suffer from the introduction of economical devices are, as a rule, more than atoned for even to these men by the greater productivity of social labor, as it is applied in new ways, and by the greater abundance of social capital. These gains are the result of improvements made in the earlier periods, and they benefit every one who labors. (11) The new capital created by productive inventions is an essential cause of the continuing gain of the working class. (12) While most inventions at first draw capital from the social fund to the point where they are applied, many of them soon liberate capital by cheapening particular appliances of production, and nearly all of them, by means of the profits they insure, ultimately add to the social capital. _The Vital Importance of Continued Improvement._--Intelligent study will make it clear to every one that any assertion that machinery is the enemy of labor is not merely erroneous, it is a contradiction of the most striking and important fact connected with general progress. The gains of labor during the past century, which have been partly due to the occupation of areas of new land, have been largely due to the mechanical inventions and technical discoveries which have put the forces of nature so largely at man's disposal. These forces have worked for all society, indeed, but they have worked largely for the men who labor, whether in the factory, in the shop, on the railroad, or on the farm. Their effects are all-pervasive, since they signify an increase in the productive power of that final unit of social labor on which wages generally depend. General riches have been and must continue to be generally beneficent. As an isolated man working, Crusoe-like, for himself alone, gains by every technical discovery he can make and by everything he can add to his stock of productive appliances, so society, the great and isolated organism which is the tenant of our planet, reaps a benefit by every improvement it can make, and the forces of distribution see to it that this benefit is carried through and through the system and made to improve the condition of the most humble members. Since the great areas of new land are no longer available as a future resource, the hope of labor during the coming centuries, under any form of industrial organization, whether it be competitive or socialistic, rests on the prospect of continued technical gains,--an unending succession of calls on the exhaustless serving power of nature. _The Effect of Changes in the Relative Amounts of Labor and Capital._--The law of wages, as stated in an early chapter of this work, makes it evident that an increase of population, while the social fund of capital remains the same, would reduce the product of marginal labor and therefore the rate of wages. In every establishment into which more workmen should come, while its capital remained the same in amount, the power of an individual worker to produce goods would be lessened. Moreover, any influx of laborers into the society as a whole would be attended by a diffusion of them among all the groups and subgroups, so that the power of an individual laborer to create any kind of goods would be reduced. This means that labor has lost some of its power to create _commodity_, which is the concrete name for general wealth, and its wages fall accordingly. An influx of capital without any change in the number of laborers would have the opposite effect. It would add to the productive power of marginal labor. As the new capital should diffuse itself through the producing organism it would enlarge the product of workers everywhere. The wages of labor depend in part on a numerical ratio between units of capital and units of labor, as they coöperate in production; and the change in the ratio which enlarging capital causes improves the condition of the working people. The capital also diffuses itself throughout the system, every subgroup gets a share of it, and labor everywhere responds to this influence and produces more than before. In a change in this ratio--in a gain of _per capita_ wealth in productive forms--lies one influence which has a great power over human destiny and is one main cause of weal or woe for coming generations. Method as it improves is related in two ways to this critical change in the ratio of capital to population. It is a prominent cause of the increase of capital. What men make by juggling with values and putting taxes on other men adds nothing to the aggregate wealth; but what they make by improved methods of production causes a net addition to it. The improvement in method also directly reënforces the influence of enlarging capital, by infusing productivity into labor and increasing its returns. _The Resultant of the Five Dynamic Changes acting Together._--So long as the increase of capital more than offsets the increase of population, the ultimate result of all five of the general changes which characterize a dynamic state is to increase the well-being of laborers. The movement of labor from point to point in the system of industrial groups is a necessary means of securing the largest gain for society as a whole and of diffusing the benefit among all members. It is wage earners who are most numerous and most needy, and the greatest benefit which can be credited to any economic influence is that which takes the shape of a rise in wages. Moreover, an upward trend in the rate of pay is of far greater importance than the level of the rate at any one time. A system that should afford high present wages would stand condemned if it precluded all chance of higher ones hereafter; while a system that should begin with a low rate and afford a guaranty that it should grow higher each year to the end of time would have the most important merit which any system could possess. The outlook it would afford for humanity would far outweigh a measure of hardship imposed on the present generation. A present purgatory with dynamic capabilities must in the end excel any earthly paradise which is held fast in a stationary state. We may represent the resultant of the actual growth of population and of capital by the following figure:-- [Illustration] Measuring time by decades along the horizontal base line and the rate of wages at the beginning of a century by the line _AB_, we represent the increase in the pay of labor which would be brought about by an increase of capital not counteracted by any other influence by the dotted line _BC_, and the reduction which would be caused by an increase of population by the dotted line _BE_. The line _BD_ describes the resultant effect of these two changes acting together, on the supposition that during the latter part of the century the growth of population is somewhat retarded and that the increase of capital is the predominating influence. We may further represent the change in the rate of wages which is caused by improvements in method and organization by lines rising above the one which expresses the trend of wages as it is affected only by an increase of capital and of population. [Illustration] _AF_ measures time as before and _AB_ the rate of pay at the beginning of the century. The dotted line _BE_ represents the rise in wages due to the increase of capital, as it more than counteracts the growth of population. The rise of the line _BD_ above _BC_ represents the additional increase in wages which is brought about by improvements of method, and finally, the rise of _BC_ above _BD_ expresses the further addition to the pay of labor which comes by reason of improved organization. The uppermost line _BC_ describes the resultant of all the dynamic changes on the supposition that they act in a natural way. It will be seen that _BC_ at first rises above _BD_ rapidly and later runs nearly parallel with it. This expresses the fact that while gains insured by organization may continue for a long period, the amount of them does not greatly increase after a fairly efficient type of organization has been secured. On the other hand, the fact that _BD_ rises above _BE_ by a wider and wider interval expresses the fact that gains which come from technical improvements may increase for an indefinitely long time. _The Rate of Interest contrasted with the Absolute Amount of it; this Amount Increasing._--The changes which make wages rise cause interest to fall and there would seem to be a partial offset for the general gain; but the chief cause of a declining _rate_ of interest is an increase of the _total amount_ of capital. The size of the income which comes to the capitalists as a class from their entire invested wealth grows larger wherever the amount of the fund increases more rapidly than the rate of interest falls. A million dollars yielding four per cent gives a larger income than a half million yielding five or six. It is a condition such as this which we have described in outline, and it enables the holders of investments to receive a constantly increasing total return, although the percentage yielded by a given amount invested grows continually smaller. _The Conditions of Increasing Future Well-being._--The realization of this resultant of all dynamic forces requires that the rate of growth of population should be subject to a natural check, that the increase of capital should not be unduly retarded, that technical improvements should go on, and that the organization which is effected should be of the kind which makes for efficiency but not for monopoly. Competition must be kept alive. In altered ways, indeed, the essential power of it must forever dominate the industrial system, as it will do if the state shall do its duty and not otherwise. A dynamic society requires a dynamic government whose enlarging functions are shaped by economic conditions. CHAPTER XIX THE LAW OF POPULATION Since the optimistic conclusion reached in the preceding chapter is contingent on an increase of wealth which is not neutralized by an increase of population, it remains to be seen whether the population tends to grow at a rate that gives reason to fear such a neutralizing. Does progress in method and in wealth tend to stimulate that enlarging of the number of working people which, in so far as they are concerned, would bring progress to an end? Is the dynamic movement self-retarding and will it necessarily halt? The answer to this question depends, in part, on the law of population. _The Malthusian Law._--We need first to know whether the growth of population is subject to a law, and if so, whether this law insures the maintenance of the present rate of increase or a retarding of it. The law of population formulated by Malthus at the beginning of the last century is the single extensive and important contribution to economic dynamics made by the early economists. It was based more upon statistics and less on _a priori_ reasoning than were most of the classical doctrines. Even now the statement as made by Malthus requires in form no extensive supplementing, and yet the change which is required is sufficient to reverse completely the original conclusion of the teaching. Malthusianism constituted the especially "dismal" element in the early political economy, and yet, as stated by its author, it revealed the possibility of a comfortable future for the working class. One might look with cheerfulness on every threatening influence it described if he could be sure that the so-called "standard of living" on which everything depends would rise. The difficulty lay in the fact that the teaching afforded no evidence that it would thus rise. The common impression of readers was that it was destined to remain stationary and that too at a low level. The workmen of Malthus's time were not accustomed to getting much more than the barest subsistence, and not many economists expected that they would get much more, even though the world generally should make gains. _The Popular Inference from the Malthusian Law._--If we state the conclusion which most people drew from the Malthusian law in its simple and dismal form it is this: Whenever wages rise, population quickly increases, and this increase carries the rate of pay down to its former level. The earnings of labor depend upon the number of laborers; a lessening of the number of workers raises their earnings and an increase depresses them; and therefore, if every rise in pay brings about a quick increase of population, labor can never hold its gains; every rise is the cause of a subsequent fall. _Malthus's Qualification of his Statement._--As we have said, Malthus so qualified his statement that he did not positively assert that this would describe the experience of the future; the fall in pay that should follow the increase of numbers might not always be as great as the original rise, and when a later rise should occur the fall following it might be less than this second rise. In some way workers might insist upon a higher standard of living after each one of their periodical gains. _Why this Qualification is not Sufficient._--The mere fact that the standard of living may conceivably rise does not do much to render the outlook cheerful, unless we can find some good ground for supposing that it will rise and that economic causes will make it do so. We should not depend too much on the slow changes that education may effect, or base our law on anything that presupposes an improvement in human nature. We need to see that in a purely economic way progress makes further progress easier and surer and that the gains of the working class are not self-annihilating but self-perpetuating. We may venture the assertion that such is the fact: that when workers make a gain in their rate of pay they are, as a rule, likely to make a further gain rather than loss. While there must be minor fluctuations of wages, the natural and probable effect of economic law is to make the general rate tend steadily upward, and nothing can stop the rise but perversion of the system. Monopoly may do it, or bad government, or extensive wars, or anarchy growing out of a struggle of classes; but every one of these things, not excepting monopoly, would naturally be temporary, and even in spite of them, the upward trend in the earning power of labor should assert itself. Instead of being hopelessly sunk by a weight that it cannot throw off, the labor of the future bids fair to be buoyed up by an influence that is irrepressible. _Refutations of Malthusianism._--The Malthusian law of population has been so frequently "refuted" as to prove its vitality. It is in the main as firmly impressed in the belief of scientific men as it ever was, and some of the arguments which have been relied upon to overthrow it require only to be stated in order to be discarded. One of these is the claim that the statement of the law is untrue because, during the century in which the American continent, Australia, parts of Africa, and great areas elsewhere were in process of occupation, mankind has not actually pressed on the limits of subsistence. No intelligent view regards that fact as constituting anything but an illustration of the Malthusian law. A vast addition to the available land of the world would, of course, defer the time of land crowding and the disastrous results which were expected from it, but with the steady growth of population the stay of the evil influence would be only temporary. _An Objection based on a Higher Standard of Living._--The second objection is also an illustration rather than a refutation of the Malthusian doctrine; it asserts that the standard of living is now higher than it was, and the population does not increase fast enough to force workers to lower it. Malthus's entire conclusion hung upon an _if_. The rate of pay conformed to a standard, and if that standard were low, wages would be so; while if it were higher, wages would be higher also. _The Real Issue concerning the Doctrine of Population._--There is a real incompleteness in all such statements. Does the standard of living itself tend to rise with the rise of wages and to remain above its former level? When men make gains can they hold them, or, at any rate, some part of them, or must they fall back to the level at which they started? And this amounts to asking whether, after a rise in pay, there is time enough before a fall might otherwise be expected to allow the force of habit to operate, to accustom the men to a better mode of living and forestall the conduct that would bring them down to their old position. The standard of living, of course, will affect wages only by controlling the number of laborers, and the discouragement due to Malthusianism lies in the fact that it seems to say that the number of workers is foreordained to increase so quickly, after a rise in wages, as to bring them to their old level. Whether it does or does not do this is a question of fact, and the answer is a very clear one. The higher standards actually have come from the higher pay, and they have had time to establish themselves. Subsistence wages have given place to wages that provided comforts, and these again to rates that provided greater comforts and modest luxuries; and the progress has continued so long that, if habit has any power whatever, there is afforded even by the Malthusian law itself a guarantee that earnings will not fall to their former level nor nearly to it. _A Radical Change in Theory._--Progress is self-perpetuating. Instead of insuring a retrogression, it causes further progress. The man who has advanced from the position in which he earned a bare subsistence to one in which he earns comforts is, for that very reason, likely to advance farther and to obtain the modest luxuries which appear on a well-paid workman's budget. "To him that hath shall be given," and that by the direct action of economic law. This is a radical departure from the Malthusian conclusion. _Three Possible Conditions for the Wage-earning Class._--Workers are in one of three possible conditions:-- (1) They may have a fixed standard and a very low one. Whenever they get more than this standard requires, they may marry early, rear large families, and see their children sink to their own original condition. (2) They may have a fixed standard, but a higher one. They may be unwilling to marry early on the least they can possibly live on, but may do so as soon as their pay affords a modicum of comfort. (3) They may have a progressive standard. There may be something dynamic in their psychology, and it may become a mental necessity for them to live better and better with advancing years, and to place their children in a higher status than they themselves ever obtained. _A Historical Fact._--The manner in which Malthus was actually interpreted was as much due to the condition of workers in his day as to anything which he himself said. It was small comfort to know that, under the law of population, wages might conceivably become higher and remain so because of a higher standard of living, provided the higher standard was never attained. Facts for a long time were discouraging. In due time they changed for the better. The opening of vast areas of new land made its influence felt. It raised the pay of labor faster than the growth of population was able to bring it down. This had the effect of establishing, not only a higher standard, but a rising standard, and as one generation succeeded another it became habituated to a better mode of living than had been possible before. It was the sheer force of the new land supplemented by new capital and new methods of industry that accomplished this. It pushed wages upward, in spite of everything that would in itself have pulled them down. _A Retarded Growth of Population._--If Malthusianism, as most people understood it, were true, population should increase most rapidly during this period of great prosperity, and should do its best to neutralize the effect of new lands, new capital, and new methods. In some places the increase has been abnormally rapid, and in a local way this has had its effect; but if we include in our view the whole of what we have defined as civilized industrial society, the rate of growth has not become more rapid, but has rather become slower during this period. In one prosperous country, namely, France, population has become practically stationary. Even in America, a country formerly of most rapid growth, the increase, apart from immigration, has been much slower than it was during the first half of the nineteenth century. The growth of population, then, may proceed more slowly or come to a halt, even while wealth and earning powers are increasing. If this is so, a further accumulation of capital and further improvements in method will not have to struggle against the effects of more rapidly growing numbers, and their effects will become more marked as the decades pass. There will be a weaker and weaker influence against these forces which fructify labor and they will go on indefinitely, endowing working humanity with more and more productive power and with greater accumulations of positive wealth. Home owning, savings bank deposits, invested capital, and comfortable living may be more and more common among men who depend for their income mainly upon the labor of their hands. Is this more than a possibility? Is there an economic law that in any way guarantees it? Can we even say that general wealth will, without much doubt, redound to the permanent well-being of the working class, and that the more there is of this prosperity, the less there is of danger that they will throw it away by any conduct of their own? The answer to these questions is to be found in a third historical fact. _The Birth Rate Small among the Upper Classes in Society._--In most countries it is the well-to-do classes that have small families and the poor that have large ones. It is from the interpretation of this fact that we can derive a most important modification of the Malthusian law. It is the voluntary conduct of different classes which determines whether the birth rate shall be large or small; and the fact is that in the case of the rich it is small, in the case of the poor it is comparatively large, while in the case of a certain middle class, composed of small employers, salaried men, professional men, and a multitude of highly paid workers, it is neither very large nor very small, but moderate. In a general way the birth rate varies inversely as the earning power of the classes in the case, though the amounts of the variations do not correspond to each other with any arithmetical exactness. If one class earns half as much per capita as another, it does not follow that the families belonging to this class will have twice as many children. They do, on the average, have more children. There is, then, at least an encouraging probability that promoting many men from the third class to the middle class would cause them to conform to the habit of the class they joined. This class is at present largely composed of persons who have risen from the lowest of the classes, and any future change by which the third class becomes smaller and the second larger would doubtless retard the average birth rate of the whole society. _Motives for the Conduct of the Different Classes._--History and present fact are again enlightening in that they reveal the chief motive that determines the rapidity of the increase of the population. When children become self-supporting from an early age, the burden resting on the father when he has a comparatively small number of them is as large as it ever will be. If they can earn all they cost when they reach the age of ten, the maintenance of the children will cost as much when the oldest child has reached that age as it will cost at any later time. Even though one were added to the family every year or two, one would graduate from the position of dependence every year or two, and the number constantly on the father's hands for support would probably not exceed five or six, however large the total number might become. The large number of children in families of early New England and the large number of them in French Canadian families at a recent date were due to the fact that land was abundant, expenses were small, and a boy of ten years working on the land could put into the family store as much as his maintenance took out of it. The food problem was not grave in those primitive places and times, and neither were the problems of clothing, housing, and educating. It is in this last item that the key to a change of the condition lay, for the time came when more educating was required, when the burden of maintaining children continued longer, and a condition of self-support was reached at no such early date as it had been in rural colonies. _The Effect of Endowing Children with Education and with Property._--When children need to be thoroughly educated, the burden of maintaining a family of course increases. An unduly large family means the lowering of the present standard of living for all and a lowering of the future standard for the children. With most workmen it is not possible either to endow many children with property or to educate them in an elaborate way. The fear, therefore, of losing present comforts for the family as a whole and the fear of losing caste by seeing the family drop, at a later date, into a lower social class, are arguments against large families. _Why Economic Progress perpetuates Itself._--The economic motive which causes progress to perpetuate itself and to bring about more and more progress is the determined resistence to a fall from a social status. The family must not lose caste. It must not sacrifice any of the absolute comforts to which it is accustomed, particularly when so doing entails a degradation. Such is human nature that the unwillingness to give up something to which one is accustomed is a far stronger spur to action than the ambition to get something to which one is not accustomed; and a social rank once attained is not surrendered without a struggle. A tenacious maintenance of status is the motive which figures most prominently in controlling the growth of population and the increase of capital. The rich maintain the status of the family by means of invested wealth, the poor do it by education, and members of the middle class do it by a combination of the two. _Status maintained by Education._--In case of wage earners the need of educating children and the advantages that flow from it overbalance the need of bequeathing to them property; and yet the need of bequeathing property of some kind is a powerful motive also. It is important to enable them to procure the tools of some handicraft, or to secure themselves against dangers from sickness or accident. Moreover, it is not altogether technical education which counts in this way. Culture in itself is a means, not only of direct enjoyment, but of maintaining a social rank. The well-informed person accomplishes directly what a well-to-do person accomplishes indirectly, in that he gets direct pleasures from life which other people cannot get, and he enjoys consideration of others and has influence with them as an uninformed person cannot. The need, therefore, of educating children for the sake of making them good producers and the need of doing it for the purpose of making them good consumers and of enabling them to make the most of what they produce works against too rapid an increase of numbers. _The Effect of Factory Legislation._--These motives are powerfully strengthened when they are reënforced by public opinion and positive law. The ambition of workers to secure laws which will forbid the employment of children under the age of sixteen is, in this view, a reasonable wish and one that if carried out would tend to promote the welfare of future generations. It is doubtless true that this is not the sole motive, and some weight must be accorded to the desire to reduce the amount of available labor, and to protect adults who tend machines from the competition of children who could do it as well or better. There is, however, an undefined feeling in the laborers' minds that when children all work from an early age the wages of the whole family somehow become low, and that it takes all of them to do for the family what the parents might do under a different condition. The Malthusian law shows how, in the long run, this is brought about. The increased strength of the demand for factory laws and compulsory education is a positive proof of the growth of the motives which put a check on population. _Absolute Status and Relative Status both Involved._--The absolute comfort a family may enjoy and its social position are both at stake, and we need not trouble ourselves by asking whether the comparative motive--the need of keeping pace with others in the march of improvement--will cease to act if a whole community advances together. We saw at the outset that this motive acts powerfully on a superior class, which has before its eyes a lower class into whose rank some of its members may possibly drop. The lowest class must always be present, however a community may advance, and a well-to-do worker will always dread falling into it. If it should grow smaller and smaller in number, and if the second of the three classes we are speaking of should grow larger, the dread of falling from the one to the other would not disappear. The relative status--that which appeals to caste feeling and the desire for the consideration of others--would continue to be influential, as well as the desire for positive comforts; and the motive that depends on comparisons might even be at its strongest when the lowest class should so dwindle that few would be left in it except cripples, the aged, or the feeble-minded. An efficient worker would struggle harder to keep his family out of such a class than to keep it out of one which would have upon it only the ordinary stigma of poverty. _Checks more Effective as Wealth Increases._--It is clear that the dominant motives which restrain the growth of population act more powerfully on the well-to-do classes than on the poor. The need of invested wealth, the need of education, the determination to adhere to a social standard of comfort and to avoid losing caste, are stronger in the members of the higher classes than in those of the lower ones, and become more dominant in the community as more and more of its members belong to the upper and the middle classes. _Immediate Causes of a Slow Increase of Population._--The economic motive for a slow growth of population can produce its effect only as it leads to some line of conduct which insures that result. Means must be adopted for attaining the end desired, and when one looks at some of the means which are actually resorted to, he is apt to get the impression that an indispensable economic result is in some danger of being attained by an intolerable moral delinquency. Must the society of the future purchase its comforts at the cost of its character? Clearly not if the _must_ in the case is interpreted literally. A low birth rate may be secured, not at the cost of virtue, but by a self-discipline that is quite in harmony with virtue and is certain to give to it a virile character which it loses when men put little restraint on their impulses. Late marriages for men stand as the legitimate effect of the desire to sustain a high standard of living and to transmit it to descendants; and late marriages for women stand first among the normal causes of a retarded growth of population. Moreover, the same moral strength which induces men to defer marriage dictates a considerate and prudent conduct after it, and prevents unduly large families without entailing the moral injury which reckless conduct involves. On the other hand, there may be an indefinite postponement of marriage by classes that lack moral stamina and readily lapse into vice. There are vicious measures, not here to be named in detail, which keep down the number of births or increase the number of deaths, mostly prenatal, though the infanticide of earlier times is not extinct. By strength and also by weakness, by virtue and also by vice, is the economic mandate which limits the rate of growth of population carried out. A limit of growth must be imposed if mankind is to make the most of itself or of the resources of its environment. There is no great doubt that it will be so imposed, and the great issue is between the two ways of doing it; namely, that which brutalizes men and depraves them morally and physically, and that which places them on a high moral level. _Moral Losses attending Civilization._--There is little doubt that vice has made gains which reduce in a disastrous way the otherwise favorable results of increasing wealth. The "hastening ills" that are said to attend accumulating wealth and decaying manhood have come in a disquieting degree and forced us to qualify the happy conclusions to which a study of purely economic tendencies leads. The evil is not confined to the realm of family relations, but pervades politics, "high finance," and a large part of the domain of social pleasures. The richer world is the more sybaritic--self-indulgent and intolerant of many moral restraints; and if one expects to preserve an unquestioning trust in the future, he must find a way in which the economic gains which he hopes for can be made without a casting away of the moral standards which are indispensable. The greatest possible achievement in this direction would be an abandonment of vicious restraints on population and a general increase of the forethought and the self-command which even now constitute the principal reliance for holding the birth rate within prudent limits. _The Working of Malthusianism in Short Periods as Contrasted with an Opposite Tendency in Long Ones._--There is little doubt that by a long course of technical improvement, increasing capital, and rising wages, the laboring class of the more prosperous countries have become accustomed to a standard of living that is generally well sustained and in most of these countries tends to rise. There is also little uncertainty that a retarded growth of population has contributed somewhat to this result. One of the facts which Malthus observed is consistent with this general tendency. Even though the trend of the line which represents the standard of living be steadily upward, the rise of actual wages may proceed unevenly, by quick forward movements and pauses or halts, as the general state of business is flourishing or depressed. In "booming" times wages rise and in hard times they fall, though the upward movements are greater than the downward ones and the total result is a gain. Now, such a quick rise in wages is followed by an increase in the number of marriages and a quick fall is followed by a reduction of the number. The birth rate is somewhat higher in the good times than it is in the bad times. Young men who have a standard of income which they need to attain before taking on themselves the care of wife and children find themselves suddenly in the receipt of such an income and marry accordingly. There is not time for the standard itself materially to change before this quick increase of marriages takes place, and the general result of this uneven advance of the general prosperity may be expressed by the following figure:-- [Illustration] The line _AC_ measures time in decades and indicates, by the figures ranging from 1 to 10, the passing of a century. _AB_ represents the rate of wages which, on the average, are needed for maintaining the standard of living at the beginning of the century; and _CD_ measures the amount that is necessary at the end. The dotted line which crosses and recrosses the line _BD_ describes the actual pay of labor, ranging now above the standard rate and now below it. Whenever wages rise above the standard, the birth rate is somewhat quickened, and whenever they fall below it, it is retarded; but the increase in the rate does not suffice to bring the pay actually down to its former level. The descent of the dotted line is not equal to the rise, and through the century the earnings of labor fluctuate about a standard which grows continually higher. The pessimistic conclusion afforded by the Malthusian law in its untenable form requires (1) that the standard of living should be stationary and low, and (2) that wages should fluctuate about this low standard. In this view the facts would be described by the following figure:-- [Illustration] _AC_ measures a century, as before, by decades, and the height of _BD_ above _BC_ measures the standard of living prevailing through this time. The dotted line crossing and recrossing _BD_ expresses the fact that wages sometimes rise above the fixed standard and are quickly carried to it and then below it by a rapid increase in the number of the laborers. _Members of the Upper Classes not Secure against the Action of the Malthusian Law if a Great Lower Class is Subject to It._--It is clear that if the workers are to be protected from the depressing effect which follows a too rapid increase of population, the Malthusian law in its drastic form must not operate in the case of the lowest of the three classes, so long as that is a numerous class. A restrained growth in the case of the upper two classes would not suffice to protect them if the lowest class greatly outnumbered them, and if it also showed a rapid increase in number whenever the pay of its members rose. The young workers belonging to this class would find their way in sufficient numbers into the second class to reduce the wages of its members to a level that would approximate the standard of the lowest class. Under proper conditions this does not happen; for the drastic action of the Malthusian law does not take place in the case of the third class as a whole, but only in the case of a small stratum within it. _Countries similarly exposed to Dangers from Other Countries._--Something of this kind is true of a number of countries which are in close communication with each other. If a rise of pay gave a great impetus to growth of population in Europe, and if this carried the pay down to its original level or a lower one, emigration would be quickened; and although the natural growth in America might be slower, the American worker might not be adequately protected. The influx of foreigners might more than offset the slowness of the natural growth of population in America itself. The most important illustration of this principle is afforded by the new connection which America is forming with the Asiatic nations across the Pacific. CHAPTER XX THE LAW OF ACCUMULATION OF CAPITAL Adam Smith and many others have noticed that the growth of capital varies with the intelligence and the foresight of a population. It should therefore increase in rapidity as intelligence increases. A high valuation of the future is a mark of intelligence, and there is no reason why an entirely rational being should value a benefit accruing to himself in the future any less than he does a benefit accruing at once. Perfectly rational estimates of present and future, if there are no influences affecting the choice except these mere differences in time, mean that the two stand at par. It was once supposed that the disposition to save from one's present income varies directly as the rate of interest of the capital which is thus accrued, and in the main this is still regarded as a nearly self-evident proposition. Abstinence imposes a present cost on anybody that practices it. Whosoever saves a dollar misses the gratification which that dollar might bring. He may regard that sacrifice as fixed. It causes him to go without his marginal gratification, whatever that may be. If interest for a year amounts to twenty-five cents, the man has at the end of the year one dollar and twenty-five cents, with which to do whatever he may choose. He may spend it, if he will, and get all the gratification that a dollar and a quarter can bring. If interest stands at five per cent per annum, his abstinence will bring him only one dollar and five cents a year, and that, or whatever he can get by means of it, is a smaller benefit than the one he could get for one dollar and a quarter. If it is barely worth while to go without something now in order to have a dollar and five cents in the future, it is more than worth while to do it in order to have a dollar and a quarter at the same future date. If a man is induced to save only a dollar, for the sake of having a dollar and five cents at the end of the year, why should he not save two dollars, in order to have two dollars and a half at that time? Why should not the amount of his present privation increase, when the surplus of benefit he can gain by it at a future date grows greater? Such is the reasoning, and it seems entirely plausible, if we assume that what the man loses is the gratification he might have by spending his dollar, and that what he gains is the benefit of spending it and its accumulation of interest at the end of the year. The assumption is that the man proposes at a certain future date to spend the principal or the capital which he acquires by saving in the present, together with whatever it may have earned as interest; that he measures the personal benefit which he can get by this spending, and finds the larger benefit better worth a fixed sacrifice in the present than a small one. _The Actual Purpose of Abstinence._--Most capital is saved with no expectation of ever spending the principal. The motive is a perpetual income, which the capital will earn. What the man appraises in his own mind is not the personal benefit he can get by spending a dollar and five cents at the end of the year; it is the benefit that will come from spending five cents at the end of the first year, another five cents at the end of a second, and a more or less similar amount at the end of every year that shall follow. It is a perpetual income, and as the man's life is limited, the greater part of it must accrue to others than himself. The satisfaction which he will get from it near the close of his own life comes altogether from the prospect of passing the principal unimpaired to others and in assuring to them and to their successors the perpetual income which the foundation yields. Even on this basis it might be supposed that a large perpetual income would offer a greater inducement to save than a small one, and therefore that the amount of saving would be greater when the rate of interest was higher. This would be true if the importance of the perpetual income could be estimated in this simple way by the mere amount of it. _Conditions affecting the Importance of a Future Income._--The importance of a future income may be large because of the prospective helplessness or poverty of the one who expects to enjoy it. A workman may save at a great present cost to himself in order to provide for old age or sickness, in which case the income from the savings, and often the savings themselves, would be the means of averting a great calamity. To make one's self secure against privation in the future is worth more than to add to one's comforts in the present. If a certain minimum amount were needed to avert starvation at the end of a man's life, he should secure that amount at all hazards, however much that may trench on his present comforts. Now, as the amount which he can have at the end of his life depends largely on the rate of interest which his savings will earn, during such time as they may remain in a productive shape, it will take more positive abstinence on his part to keep himself from starvation when the rate of interest is low than it will when the rate is high. If there were no interest at all, he would have to put by from his income his entire old-age fund. If the rate were a hundred per cent per annum, taking a very small part of the fund out of the income of his active years would suffice, since the fund itself would earn the remainder. Is the income which is provided for the future to be treated as a variable amount in addition to some other income, or is it to be regarded as a fixed amount, which is needed for some definite purpose? On the answer to this question depends the entire issue as to whether a low rate of interest or a high one affords the larger incentive for saving. _Future Incomes More or Less Fixed usually Needed._--Recent writers have called attention to the fact that in many cases saving has the providing of a definite future income in view. The owner of a landed estate, who intends to leave it to a son, may try to provide from his rents an endowment which will save from want or from an unhappy approach to want his daughters and his younger sons. He might accomplish this, indeed, without any present saving by putting rent charges or mortgages upon his land, but that would trench on the income which his heir can derive from it. It would reduce the establishment which the heir can maintain and cause him to fall out of the class to which his father has belonged. Rather than do this, the present owner will usually reduce the present standard of living of the entire family and try to make sure that its future standard shall not fall below the one thus established. It seems better to maintain the somewhat lower standard through a series of generations than to make the present mode of living more luxurious at the cost of unclassing one's self and one's heirs at a later date. _This Fact heretofore Underestimated._--To the writers who have cited this familiar fact it appears to require merely a partial amendment of the general proposition that a high rate of interest insures more saving than a low one, and the inference which one naturally draws from this supposed fact is that growing wealth, as is still supposed, reduces the incentive for the accumulation of more wealth. Such an accumulation is an essential part of general progress and is practically necessary for sustaining the rate of wages. Here, then, if this supposition is true, we might see an important influence tending to bring progress to a standstill. Great wealth as the result of progress, a reduced motive for acquiring still further wealth, a retarding of progress--such would be the sequence. Dynamics would thus be, in a very important respect, self-retarding if not self-halting. _Future Standards of Living the Important Element._--The actual fact, as we may venture to affirm, is that the standards of living which need to be maintained in the future are the all-important element in the case. To the laboring man it is necessary to avoid starvation or the workhouse; to the well-paid artisan it seems necessary to do this and to make for his children a provision which will keep them in the same class with himself. To the capitalist who by successful business has raised himself above the artisan class it seems necessary to keep his children above the rank from which he has lifted the family; and the same principle applies to all the wealthier classes. The tenacity with which a man holds to a station in life outweighs his desire to add to his own present luxuries, and his ambition to keep his children in a certain station far outweighs his desire to add to their present luxuries. _The Importance of Future Standards not affected by the Fact that Men differ in Altruism._--This does not at all raise the question how many people care as much for their children as they do for themselves. That is not the principle at issue. _In so far as men do care for their children_ the end they seek for them is to enable them to avoid what seems like a disaster, rather than to make positive gains in the way of comfortable living. Even in the case of those who have little altruism, such provision as they make for descendants is inspired by the desire to keep them within a certain class more than by any computation of how many comforts or luxuries a surplus income of any amount might give them. Whatever provision for children a selfish or dull person makes is dictated by the same motive that incites him to make provision for his own future, and in both cases it is chiefly the maintenance of a standard that he usually has in mind. _The Principle not invalidated by the Fact that Forethought is often Weak._--All the motives for saving may be unduly weak. The man may care far less for the future than he should do, and may make an unreasonably small provision for it. Incapacity to estimate the importance of this provision, as well as the degree of selfishness which excludes the exercise of self-denial for the benefit of others, are not the only reasons for this disregard of the future. There is an optimism which is natural; and a religious faith which bids one not to take unduly anxious thought for the morrow may occasionally be carried to the harmful length of justifying a neglect of coming years and their needs. An intelligent trust in Providence, however, incites a man to do his own full duty, and it is the better men who do the most to avert future evils from their families. The principle that we are maintaining applies as completely in the cases of those who make small provision for the future as it does in any others. In the majority of cases whatever they do save is set aside chiefly for the maintenance of some standard of living by those who get the benefit of it; and to maintain any standard whatever, whether high or low, requires a larger fortune when interest is low than it does when interest is high. _Forethought limited in the Length of Time it Covers._--There is little danger that we make any mistake in ascribing to the dread of falling below a standard of living more influence on the accumulation of capital than any other motive exerts. This will be clearer if we look at the actual manner in which present and future are estimated and compared. The fact is not that most people care unduly little for all future benefits as compared with present ones, as it is that they throw off responsibility for all the future beyond a limited period. The perspective does not reduce the size of remote objects unduly as often as it cuts off the view of them altogether. In looking through coming years a man is subject to a certain economic myopia. One might compare what he sees with what a man sees in a foggy atmosphere, if it were not for the fact that the view of comparatively near objects is clear. It is as though a circle of fog surrounded him and cut off somewhat abruptly the view of everything that was far away. For a short distance the man sees everything with comparative clearness, but the limitless spaces that lie beyond he sees not at all. We have seen that the amount of abstinence he will practice now for the sake of what he or others will gain later varies as he is rational or foolish, unselfish or selfish, and it is also true that the length of his outlook into the future varies in the same way. There are all gradations of far-sightedness among those who create capital; but even comparatively near-sighted ones usually provide for the maintenance of some standard or other during the period that falls within their range of vision, and this requires that they should save more when interest is low than they do when interest is high. _Marginal Capitalists._--In this connection, however, it is to be noted that economic myopia may go to the extreme length of making men nearly indifferent to all future standards. In this case they constitute an exception to the general rule, since whatever they save, if they save at all, is likely to be more when interest is high than when it is low. They are marginal capitalists, who are not influenced by any benefits except immediate ones and only inquire how much an investment will, from the day when it is made, add to their own incomes. The higher rate is then the greater lure. Moreover, other capitalists, who are influenced mainly by regard for future standards of living, are somewhat affected by the immediate benefit which marginal savers have exclusively in view. To the extent that they are so, the higher the rate of their immediate returns, the more strongly are they impelled to "abstain" and accumulate. The essential fact is that marginal capitalists are few numerically, and their savings count for little as they enter into the general fund, and that most capitalists, including nearly all who save great amounts, do it chiefly from a desire to maintain themselves and their descendants on an established level of living. In the main the social motives for saving are those we have described. _Enjoyment largely Teleological._--There is a special reason why a rational man, if offered an enjoyment now or later, at his option, is quite likely to take it later. Enjoyment is mainly teleological. It consists in a conscious approach to a desirable end. The knowledge that one's efforts to attain a desired goal are successful and that the good thing is really coming, sheds a light on the present. Indeed, it is anticipation and memory which prolong any enjoyment, and of these anticipation is the more effective. The knowledge that one is at a certain time to sail for a foreign tour confers before the sailing an enjoyment which is often more than a foretaste. It often rivals the pleasure that is consciously taken in the trip itself. A man may be happy for years in the prospect of a business success or a prospect of election to a public office, and many years of hard labor in scientific investigation may be illuminated by the expectation of the ultimate discovery and its consequences. There is a good reason why even an average man, as well as a wise one, will wish to distribute his expenditures over the different periods of his life, and to give a preference to the future whenever that is necessary in order to enable him to hold through his earlier years the comfortable assurance that his later ones are well provided for. [Illustration] If the line _AB_ represents by its distance above _CD_ a fixed standard of living during a period of ten years, the highly rational man will prefer to take something from the enjoyments of the first five and bestow them on the second five. The consciousness of improvement, of the fact that every year will bring a new enjoyment never before experienced, makes the whole life brighter than it could be with any other disposition of the available means of pleasure. The man's standard of living during the whole ten-year period will be represented by the rising dotted line _EF_. _The Effect of Robbing the Future._--If a man pursued the opposite course, of taking something from the future to add to the desirableness of the present, thus establishing a falling standard of living, he would have to relinquish every year something to which he was accustomed, which would cause him a keen pain. The very excessive gains of the present would thus become sources of unhappiness at a later period, while the anticipation of the later unhappinesses would throw a shadow over the present. The men who in spite of all this live recklessly and waste their present substance do so, not so much because they undervalue so much of the future as falls within their purview, as because they are so extremely short-sighted that over nearly all of the future they have practically no vision at all. _The Actual Conduct of a very Reasonable Man._--The real fact in the case of a reasonable man is represented by the following figure:-- [Illustration] Line _EF_ measures fifty years and line _FG_ another fifty. The heavy line _AB_, rising toward the right, represents the rising standard of living which the man's reason makes him maintain during the period over which his vision is clear, while the dotted line _BC_ represents the standard for which, in an imperfect way, he makes provision during the next fifty years. Over later periods his vision does not extend at all. It loses clearness after the point _B_ is passed, and in the same proportion it loses influence over the man's conduct. He therefore reconciles himself to whatever standard may prevail, even though it were a stationary one during the latter part of the time. Very seldom, however, would the man consciously lower the standard even during this later period. _The Effect of Limited Vision on the Valuation of a Perpetual Income._--This failure of vision, or economic myopia, accounts for the fact that the infinite series of payments of interest that a sum of invested capital will earn do not overbalance, in the man's estimate, the principal which he must refrain from spending in order to get them. If interest is at five per cent, abstaining from using a hundred dollars for present pleasure will put into the man's hands, in twenty years, a sum equal to the principal, in twenty years more another like sum, and so on _ad infinitum_. The man who considers whether he shall save a hundred dollars or spend it might be said to be comparing the importance of a hundred present dollars with that of an infinite number of future ones. In his consciousness the number is not infinite, because his vision does not extend over much of the future. The fact of most importance, as determining whether low interest causes small savings, is that in weighing the importance of the dollars which will be used during the period over which his vision ranges the average man is influenced by a desire to maintain some standard of living, which involves the more saving, the lower the rate of interest. _The Action of the Motive for Saving on Minds of Varying Degrees of Reasonableness._--Not only the man who looks a little way forward, but the man so constituted that he can content himself with a falling standard, is impelled to save more if interest is low than he is if interest is high, so long as he deems it necessary to maintain any standard at all; but much importance still attaches to the question whether the standard which the man hopes to maintain is a rising, a stationary, or a falling one. The average man, indeed, does hope to maintain at least a stationary standard during so much of the future as he cares much about. This mode of distributing pleasures appears in matters both small and great. In taking a walk for pleasure one is more likely to go up a rising grade first and descend afterward than he is to go down at first and afterward bear the fatigue of climbing. While there may be those who would rather play in the forenoon and work in the afternoon, when the choice is presented at the beginning of the day, there are certainly more among the classes that society depends on for capital who would put the work in the forenoon and the pleasure in the afternoon or evening. If a man were taking a canoeing trip on a swiftly flowing stream, he would paddle his boat up the stream and then come down with the current, rather than let it float down with the current and then paddle it back. If it be thought that this is true of only a specially rational mind, one may say that the capitalist class represents men who in this respect are more than ordinarily rational. They are generous, foresighted, and in their relation to descendants affectionate. The men who really do the saving for society have more to make them think and act in the intelligent way we have described than do ordinary men. The miser, the paragon of abstinence, can hardly be said to be the man who thinks too much of future enjoyments, for he contemplates no such enjoyments that call for spending money, for he never means to spend it. He is an abnormal type and fortunately a rare one. With him there is a standard of _possessions_ to be maintained, rather than one of enjoyments, and it is always a rising standard, since he cares for nothing so much as to see his possessions increasing. To make them increase at any given rate when the direct earnings of capital are small requires severer abstinence than it would if the capital yielded a larger return. _The Effect of an Increase in the Number of Persons who seek to maintain a Rising Standard of Living._--While it is true that even the half-evolved intellects that care little for coming years do, if they care for them at all, find themselves impelled to save more capital when interest is small than they do when it is large; it is also true that minds of a high order save more than minds of a low one. In order to live during one's latter years just out of danger of the workhouse, one does not need to trench deeply on the comforts and pleasures which he is able to enjoy during the greater part of his life; but if he is determined to live to the end of his days as well as he has done at any time and to help his children to do the same, he must practice a severer self-denial and accumulate a larger fund. Still sharper becomes the abstinence and still greater the accumulated fund where men provide for a future mode of living that shall surpass the present one. The importance of this fact lies in this: the condition which brings with it a low rate of interest does so because of the great number of men who do thus value a future standard of living that shall be at least stationary if not positively rising. The growing size of the social capital implies a more general appreciation of the importance of future well-being. Because men's economic psychology has become what it is and because it is still changing for the better there is a second reason for expecting that the accumulation of capital will not hereafter be retarded. We make here no extravagant claim as to the number of persons in a community who take the more rational views as to present and future. The number of each class is what it is; but facts show that the maintenance of some standard is the most efficient motive for saving in the case of each one of them, and that low interest therefore calls for large accumulations. They do show that the number who take the more rational views is a growing class, that they accumulate more than other classes, and that every addition to their relative number makes for more rapid accumulation within the society of which they are members. Two decisive reasons, then, exist for thinking that the growth of capital will never end or check further growth. There are still further facts, however, which have a bearing on this problem. _The Importance of the Character of the Increases which are the Largest Sources of Accumulation._--If one has a doubt whether the large sums which enter into the capital which is steadily accumulating are saved under the influence of a desire to maintain a standard, this doubt will be removed by a consideration of the source from which great accumulations come. They come most largely from the net profits of the _entrepreneur_. Next to that they come from the earnings of what must be classed as labor, though much of it is labor of a special and very superior sort. The salary which the head of a corporation receives, the fees that its lawyers get, the fees that come to eminent surgeons or engineers, are all payments for labor; and these, taken together with the earnings of well-paid artisans, successful farmers, and very many others, constitute the second contribution to accumulating capital. Savings from simple interest itself constitute the third contribution.[1] [1] Gains which come from holding land which rises in value more rapidly than the interest on the price of it accumulates, is to be rated as part of net _entrepreneur's_ profits. Now, of these sources of income, net profits and the wages of superior labor are transient, and the profits are particularly so. The man whose mill earns fifty per cent in a particular year would be foolish in the last degree if he used all that as income. That would mean brief and riotous enjoyment, followed by a most painful fall from the standard so established. He will naturally spend some part of the phenomenal dividend and lay aside enough of it to afford a guarantee that his future income will not fall below the present one. The man who during the best years of his working life enjoys a salary or professional fees amounting to a hundred thousand dollars a year would be almost equally foolish if he were to spend it all as he earns it, leaving his family unprovided for and his own later years exposed to the pains of sharp retrenchment. Transient incomes suggest to every one who has any degree of reason the need of establishing and maintaining some future standard of living, and of investing enough to accomplish this. This is more true, of course, when the rate of interest is low. _The Importance of the Need of Enlarging a Business._--There is a special reason why legitimate business profits are morally certain to be to a large extent laid aside for investment. The man would say that he "needs them in his business." They come at a time when there is an inducement to enlarge the scale of his profitable operations. The man who is getting a dividend of fifty per cent per annum must make hay while the sun shines, and he can do it by doubling the capacity of his mill. What he makes and what he can borrow he uses for an increase of his output, which it is important to secure during the profitable time. All this means a quick increase of the total capital in existence. The profits of a monopoly are not transient, but are likely to be both long-continued and large, and it might seem that they would constitute a larger source of addition to capital than those profits which come from technical improvement. There are several reasons why this is not the fact. In the first place, what we are discussing is the addition that profits make to the total capital of society, rather than to the capital of any one person or corporation. The monopoly makes its gains by taking something from the pockets of the general public, and in so far it reduces the power of the general public to save. It might be alleged, however, that since a monopoly reduces wages and interest, adds to profits, and creates enormous incomes for a few persons, it really diverts income from a myriad of persons who would save very little of it, and puts it into the pockets of a few persons who are likely to save a great deal of it. This might conceivably add to the capital of society were it not for the fact that the more secure and regular gains of monopolies are made the basis of large capitalization. A company that earns twenty-five per cent of its real capital per annum may have its stock diluted with four parts of water and pay only five per cent in dividends on its capitalization. This looks like interest and is apt to be treated as such by those who receive it. It is, therefore, not a more favorable income from which to make accumulations of capital than is the interest on real capital. The sudden gains which promoters and manipulators of consolidated companies make are, indeed, transient gains and may be largely added to capital. The introduction of a régime of monopoly may insure a period of much saving by the class that profits by it; but the later career of the monopoly is unfavorable to the growth of capital. _The Special Effect of a Prospective Fall in the Rate of Interest._--If interest which continues steadily at a low rate affords an especially strong incentive for saving, it follows that a falling rate, one that begins low and steadily becomes lower, affords a still stronger one. The average rate during the years of the future for which a prudent man makes provision is made, of course, lower than it would be if the rate were stationary. This influence is probably not as effective as it would be if the remote future were included in the view of those who are securing capital. On account of the near-sightedness to which attention has been called, a rate of interest that begins at four per cent and falls very slowly to three and a half presents to those who have this defective vision the same incentive to saving as one that begins at four per cent and remains steadily at that figure. What is true, however, is that a falling rate is to be expected, that this fact acts as a stimulus for saving in the case of the more far-sighted classes, and that the number of persons in these classes is increasing. In so far as the increase of capital is concerned society is secure against the danger of reaching a stationary state. Progress in wealth will not build a barrier against itself by stinting the resources on which hereafter labor must rely. When we examine the sources from which capital mainly comes, we shall further test the probability that the instrumentalities which add productive power to human effort will increase through the longest period that science needs to take account of.[2] [2] For a somewhat similar view of the effect of a fall of interest on the accumulation of capital, see Webb's "Industrial Democracy," Vol. II, pp. 610-632. CHAPTER XXI CONDITIONS INSURING PROGRESS IN METHOD AND ORGANIZATION _The Possibility of a Law of Technical Progress._--It might seem that inventions were not subject to any influence that can be described under the head of a law. Genius certainly follows its own devices, and inventive power that has in it any touch of genius may be supposed to do the same. It is, however, a fact of experience that some circumstances favor and increase the actual exercise of this faculty, while other influences deter it. Moreover, what is important is not merely the making of inventions, but the introduction of such of them as are valuable into the productive operations of the world. Some influences favor this and others oppose it, and it is entirely possible to recognize the conditions in which economies of production rapidly take place in the actual industry of different countries. Technical progress has been particularly rapid in the United States, though in this respect Germany has in recent years been a strong rival, and ever since the introduction of steam engines and textile machinery, England has continued to make a brilliant record. France, Belgium, and a number of other countries of Europe have developed an industry that is in a high degree dynamic, and Japan is now in the lists and giving promise of holding her own against the best of her competitors. The question arises whether it is something in the people, or something in their natural and commercial environment, which makes differences between their several rates of progress. _Inventive Abilities widely Diffused._--In so far as originating important changes is concerned, mental alertness and scientific training without doubt have a large effect. Some races have by nature more of the inventive quality than others, but within the circle of nations that we include in our purview no one has any approach to a monopoly of this quality. Any people that can make discoveries in physical science can make practical inventions, and will certainly do so if they are under a large incentive to do it. Moreover, alertness in discovering and duplicating the inventions of others is as important in actual business as originating new devices. At present it is a known fact that the Germans not only invent machinery, but quickly learn to make and to use machinery that originates elsewhere and demonstrates its value in reducing the cost of the production; and the remote Japanese have not only surpassed all others in the quick adoption of economic methods that have originated in Western countries, but have put their own touch upon them and revealed the existence of an inventive faculty that is likely to make them worthy rivals of Occidental races. _The Importance of Inducements to make and use Inventions._--Granted a wide diffusion of inventive ability, the actual amount of really useful inventing that is done must depend on the inducement that is offered. Will an economical device bring an adequate return to the man who discovers it and to the man who introduces it into productive operations? If it will, we may expect that a brilliant succession of such devices will come into use, and that the power of mankind to bend the elements of nature to its service will rapidly increase. _The Usefulness of a Temporary Monopoly of a New Device for Production._--If an invention became public property the moment that it was made, there would be small profit accruing to any one from the use of it and smaller ones from making it. Why should one _entrepreneur_ incur the cost and the risk of experimenting with a new machine if another can look on, ascertain whether the device works well or not, and duplicate it if it is successful? Under such conditions the man who watches others, avoids their losses, and shares their gains is the one who makes money; and the system which gave a man no control over the use of his inventions would result in a rivalry in waiting for others rather than an effort to distance others in originating improvements. This fact affords a justification for one variety of monopoly. The inventor in any civilized state is given an exclusive right to make and sell an economical appliance for a term of years that is long enough to pay him for perfecting it and to pay others for introducing it. Patents stimulate improvement, and the general practice of the nations indicates their recognition of this fact. They all give to the inventor a temporary monopoly of the new appliance he devises, but this monopoly differs from others in this essential fact: the man is allowed to have an exclusive control of something which otherwise might not and often would not have come into existence at all. If it would not,--if the patented article is something which society without a patent system would not have secured at all,--the inventor's monopoly hurts nobody. It is as though in some magical way he had caused springs of water to flow in the desert or loam to cover barren mountains or fertile islands to rise from the bottom of the sea. His gains consist in something which no one loses, even while he enjoys them, and at the expiration of his patent they are diffused freely throughout society. _Possible Abuses of the Patent System._--It is of course true that a patent may often be granted for something that would have been invented in any case, and patents which are granted are sometimes made too broad, and so cover a large number of appliances for accomplishing the same thing. In these cases the public is somewhat the loser; but for the reasons about to be given this loss is far more than offset by the gain which the system of patents brings with it. The gains of the inventor cannot extend much beyond the period covered by his patent, unless some further and less legitimate monopoly arises. If the use of an important machine builds up a great corporation which afterward, by virtue of its size, is able to club off competitors that would like to enter its field, the public pays more than it should for what it gets; and yet even in these cases it almost never pays more than it gets. The benefit it derives is simply less cheap than it ought to be. Much of the power of the telephone monopoly has been extended beyond the duration of its most important patent, and that patent was in its day broader than it should have been; and yet there never was a time when the use of the telephone in facilitating business, and in saving time and trouble in a myriad of ways, did not far outweigh the total cost which the users of telephones incurred. As we shall soon see, important inventions invariably confer some benefit on the public at the start. The owner of the new device must find a market for his products, and must offer them on terms which will make it for the interest of the public to use them largely. _The Effect of Competition in Causing Improvements to Multiply._--Competition insures a large number of inventors and offers to each of them a large inducement to use his gifts and opportunities. A great corporation may employ salaried inventors and, because of its great capital and large income, it may experiment with inventions with far less risk to itself than an inventor usually takes. When large corporations compete actively with one another, the employment of salaried inventors is very profitable to them; and improvements in production go on more rapidly than they are likely to do after these firms consolidate with each other and cease to feel the spur which the danger of being distanced in a race affords. It is a fact of observation, and not merely an inference, that monopolies are not as enterprising as competing companies. _Effects of Monopoly on the Spirit of Enterprise._--In monopolies, theoretically, there is the same inducement to adopt inventions as in the case of competing firms, excepting always the motive of self-preservation. The monopoly can make money by improvements as competing firms would do. A perfectly intelligent monopoly, with disinterested management, would adopt an improvement offered to it as promptly as any competing firm, if the sole motive were profit. There is no reason why an intelligent monopoly should hold on to antiquated machinery, when modern machinery would enable it to stand the cost of introduction and make a net improvement besides. A competing producer gains an advantage over his rivals by discarding old machinery and adopting new at exactly the right time, neither too late nor too early. The true point of abandonment of the old machine, as we have already seen, is reached when the labor and capital that now work in connection with it can make a shade more by casting it off and making a combination of a better kind; and this rule applies to monopolies as well as to competitors. At just the point where a competitor can gain an advantage over rivals by modernizing his appliances, the monopoly can make money by doing so. An important fact is that the monopoly has as a motive the making of profits for its stockholders. Not only is that a less powerful motive than self-preservation, but it appeals largely to persons who are not themselves in control of the business. Absentee ownership is the chief disability of the monopoly. Managers may have other interests than those of large dividend making, and in such cases a monopoly is apt to wait too long before changing its appliances. It needs to be in no hurry to buy a new invention, and it can make delay and tire out a patentee, in order to make good terms with him; and this practice affords little encouragement to the independent inventor. On the whole, a genuine and perfectly secure monopoly would mean a certain degree of stagnation where progress until now has been rapid. _Why the Public depends on Competition for Securing its Share of Benefit from Improvements._--Another question is whether the two systems, that of competition, on the one hand, and monopoly, on the other, confer equal benefits on the public by virtue of the improvements they make. Competition does this with the greatest rapidity. As we have seen, it transforms the net profits due to economies into increments of gain for capitalists and laborers throughout all society. The wages of to-day are chiefly the transformed profits of yesterday and of an indefinite series of earlier yesterdays. The man who is now making the profits is increasing his output, supplanting less efficient rivals, and giving consumers the benefit of his newly attained efficiency in the shape of lower prices of goods. In practice rivals take turns in leading the procession; now one has the most economical method, now another, and again another; and the great residual claimant, the public, very shortly gathers all gains into its capacious pouch and keeps them forever. Would a secure monopoly do something like this? Far from it. It would be governed at every step by the rule of maximum net profits for itself. Its output would not be carried beyond the point at which the fall in price begins really to be costly. The lowering of the price enlarges the market for the monopoly's product and up to a certain point increases its net gains. Beyond that point it lessens them. [Illustration] Now, even the interest of the monopoly itself would lead it to give the public some benefit from every economy that it makes. This is because the amount of output that will yield a maximum of profit at a certain cost of production is not the same that will yield the maximum of net profit when the cost is lower. Every fall in cost makes it for the interest of the monopoly to enlarge its output somewhat, but by no means as much as competing producers would enlarge theirs. It will always hold the price well above the level of cost. In the accompanying figure distance along the line _AK_ represents the amount of goods produced, while vertical distance above the line measures costs of production, as well as selling prices, and the descending curve _FJ_ represents the fall of prices which takes place as the output of the goods is increased. Now, when the cost of production stands at the level of the line _CI_, the amount of output that will yield the largest amount of net profit is the amount represented by the length of the line _AM_. That amount of product can be sold at the price represented by the line _MG_. The gross return from the sale will be expressed by the area of the rectangle _AEGM_, and the area _CEGN_, which falls above the line of cost, _CI_, is net profits. They are larger than they would be if the line _MG_ were moved either to the right or to the left, _i.e._, if the amount of production were made either larger or smaller. Now, if the cost of production falls to the level of the line _BJ_, it will be best to increase the output from _AM_ to _AL_. The whole return will then be represented by the rectangle _ADHL_, and the area _BDHO_ represents profits, with the cost at the new and lower level. These are somewhat larger than they would be if the output continued to be only the amount _AM_. Under free competition the price would fall to the line _BJ_, the net profits would disappear, and the public would have the full benefit of the improvement in production. _The Purpose of the System of Patents._--Patents are a legal device for promoting improvements, and they accomplish this by invoking the principle of monopoly which in itself is hostile to improvement. They do not as a rule create the exclusive privilege of producing a kind of consumers' goods, but they give to their holders exclusive use of some instrumentality or some process of making them. The patentee is not the only one who can reach a goal,--the production of a certain article,--but he is the only one who can reach it by a particular path. A patented machine for welting shoes stops no one from making shoes, but it forces every one who would make them, except the patentee or his assigns, to resort to a less economical process. _Patents Limited in Duration indispensable as Dynamic Agents._--If an inventor had no such protection, the advantage he could derive would be practically _nil_, and there would be no incentive whatever for making ventures except the pleasure of achievement or the honor that might accrue from it. In the case of poor inventors this would be cold comfort in view of the time and outlay which most inventions require. Not only on _a priori_ grounds, but on grounds of actual experience and universal practice, we may say that patents are an indispensable part of a dynamic system of industry. It is also important that the monopoly of method which the patent gives should be of limited duration. If the method is a good one and the profit from using it is large, the seventeen years during which in our own country a patent may run affords, not only an adequate reward for the inventor, but an incentive to a myriad of other inventors to emulate him and try to duplicate his success. Ingenious brains, which are everywhere at work, usually prevent the owners of a particular patent from keeping any decisive advantage over competitors during the whole period of seventeen years. Long before the expiration of that time some device of a different sort may enable a rival to create the same product with more than equal economy, and the leadership in production then passes to this rival, to remain with him till a still further device effects a still larger economy and carries the leadership elsewhere. That alternation in leadership which we have described and illustrated takes place largely in consequence of our system of patents; and yet every particular patent affords a quasi-monopoly to its holder. The endless succession of them insures a wide diffusion of advantages. At the expiration of each patent, even if it has not been supplanted by a later and more valuable one, the public gets the benefit of the full economy it insures, and wherever an unexpired patent is supplanted by a new one, the public gets this benefit much earlier. Cost of production tends rapidly downward, and the public is the permanent beneficiary. _Patents as a Means of Curtailing Monopolies._--While a patent may sometimes sustain a powerful monopoly it may also afford the best means of breaking one up. Often have small producers, by the use of patented machinery, trenched steadily on the business of great combinations, till they themselves became great producers, secure in the possession of a large field and abundant profit. Moreover, in the case of a patent which builds up a monopoly and continues for the full seventeen years of its duration unsupplanted by any rival device, the public is likely to get more benefit than the patentee, or even the company which uses his invention. In widening the market for its product the company must constantly cater to new circles of marginal consumers, and must give to all but the marginal ones an increasing benefit that is in excess of what it costs them. Probably few patents have been issued in America which illustrate the unfavorable features of the system more completely than did the Bell telephone patent, which gave to a single company during a long period a monopoly of the telephone business; and yet there are few men of affairs who do not perceive that, in the saving of time which the telephone effected and in the acceleration of business which it caused, they gained from the outset more than they lost in the shape of high fees. Something of the same kind is true of the users of domestic telephones; for though they may cost more than they should, they do their share toward placing those who use them on a higher level of comfort. _The Law of Survival of Efficient Organization._--In broad outlines we have depicted the conditions which favor technical progress. There is a law of survival which, when competition rules, eliminates poor methods and introduces better ones in endless succession. Under a régime of secure monopoly this law of survival scarcely operates, though desire for gain causes a progress which is less rapid and sure. The same may be said of changes in organization, in so far as that means a coördinating of the labor and the capital within an establishment. When the manager of a mill so marshals his forces as to get a much larger product per man and per dollar of invested capital than a rival can do, he has that rival at his mercy and can absorb his business and drive him from the field. In order to survive, any producer must keep pace with the aggressive and growing ones among his rivals in the march of improvement, whether it comes by improved tools of trade or improved generalship in the handling of men and tools. Quite as remorseless as the law of survival of good technical methods is the law of survival of efficient organization, and so long as the organization is limited to the forces under the control of single and competing _entrepreneurs_, what we have said about the advance in methods applies to it. It is a beneficent process for society, though its future scope is more restricted than is that of technical improvement, since the marshaling of forces in an establishment may be carried so near to perfection that there is a limit on further gains. Moreover organization, in the end, ceases to confine itself to the working forces of single _entrepreneurs_, but often continues till it brings rival producers into a union. _The Extension of Organization to Entire Subgroups._--Both of these modes of progress cause establishments to grow larger, and the ultimate effect of this is to give over the market for goods of any one kind to a few establishments which are enormously large and on something like a uniform plane of efficiency. Then the organizing tendency takes a baleful cast as the creator of "trusts" and the extinguisher of rivalries that have insured progress. When monster-like corporations once start a competitive strife with each other, it is very fierce and very costly for themselves; and this affords an inducement for taking that final step in organization which brings competition to an end. That is organization of a different kind, and the effects of it are very unlike those of the coördinating process which goes on within the several establishments. In this, its final stage, the organizing tendency brings a whole subgroup into union, and undoes much of the good it accomplished in its earlier stage, when it was perfecting the individual establishments within the subgroup. While the earlier process makes the supply of goods of a certain kind larger and cheaper, the final one makes it smaller and dearer; and while the earlier process scatters benefits among consumers, the final one imposes a tax on consumers in the shape of higher prices for merchandise. Yet the union that is formed between the shops is, in a way, the natural sequel to the preliminary organization which took place within them and helped to make them few and large. Trusts are a product of economic dynamics, and we shall study them in due time. The organization we have here in view is the earlier one which takes place within the several establishments. It obeys a law of survival in which competition is the impelling force, though it leads to a condition in which an effort is made to bring competition to an end. This earlier organization is most beneficent in its general and permanent effects; and what has been said of the results of progress in the technique of production may, with a change of terms, be said again of progress in the art of coördinating the agents employed. It is a source of temporary gain for _entrepreneurs_ and of permanent gains for laborers and capitalists. It adds to the grand total of the social product and leaves this to be distributed in accordance with the principle which, in the absence of untoward influences, would treat the producers fairly--that which tends to give to each producer a share more or less equivalent to his contribution. In its nature and in its results it is the opposite of that other type of organization which seeks to bring competitive rivalry to an end, and in so far as it succeeds divorces men's contributions to the social product from the shares that they draw from it. CHAPTER XXII INFLUENCES WHICH PERVERT THE FORCES OF PROGRESS Thus far we have been dealing with what we have called natural forces. The phenomena which we have studied have not been caused by any conscious and purposeful action of the people as a whole. They have not been brought about by the power of governments nor by anything which savors of what is called collectivism. Individuals have done what they would, seeking to promote their own interests under conditions of great freedom, and the effect has been a system of social industry which is highly productive, progressive, and generally honest. Production has constantly increased, and the product has been shared under the influence of a law which, if freedom were quite complete and competition perfect, would give to each producer what he contributes to the aggregate output of the great social workshop. We have claimed that, in the world as it is, influenced by a great number of disturbing forces, these fundamental laws still act and tend to bring about the condition of productiveness, progress, and honesty which is their natural result. If the actual condition falls short of this, the fact is mainly due to curtailments of freedom and interferences with the competition which is the result of freedom. _Influences which retard Static Adjustments._--Throughout the study we have paid due attention to those ordinary elements of "economic friction" which all theoretical writers have recognized and which practical writers have put quite in the foreground; and we have discovered that, while they are influences to be taken account of in any statement of principles, they in no wise invalidate principles themselves. For the most part they are influences which retard those movements which bring about static adjustments. An invention cheapens the production of some article and at once the natural or static standard of its price falls; but the actual price goes down more slowly, and in the interim the producer who has the efficient method gathers in the fruit of it as a profit. The retarding influence is a fact that should be as fully recognized in a statement of the law of profit as any other. The existence of it is an element in the theory of _entrepreneur's_ profit. Improvements which reduce the cost of goods enhance the product of labor, and this sets a higher standard for wages than the one that has thus far ruled; but a delay occurs before the pay of workmen rises to the new standard. Adjustments have to be made which require time, and these are as obviously elements that must be incorporated into an economic theory as any with which it has to deal. _Influences which resist Dynamic Movements._--If there is anything which, without impairing the motive powers of economic progress, puts an obstacle in the way of the movement, it has to be treated like one of these elements of friction to which we have just referred. In our discussion of the growth of population, the increase of wealth, the improvement of method, etc., we have paid attention to resisting forces as well as others, and have tried to determine what is the resultant of all of them. The forces of resistance have their place in a statement of dynamic laws. _An Influence that perverts the Forces of Progress._--We have to deal, not only with such retarding influences, but with a positive perversion of the force that makes for progress. Everywhere we have perceived that competition--the healthful rivalry in serving the public--is essential in order that the best methods and the most effective organization should be selected for survival, and that industry should show a perpetual increase in productive power. In our study of the question whether improved method and improved organization tend to promote or to check further improvement, we have found that these beneficent changes are naturally self-perpetuating, so long as the universal spring of progress, competition, continues. A proviso has perforce been inserted into our optimistic forecast as to the economic future of the world--if nothing suppresses competition, progress will continue forever. _Monopoly and Economic Progress._--The very antithesis of competition is monopoly, and it is this which, according to the common view, has already seated itself in the places of greatest economic power. "Competition is excellent, but dead," said a socialist in a recent discussion; and the statement expresses what many believe. There is in many quarters an impression that monopoly will dominate the economic life of the twentieth century as competition has dominated that of the nineteenth. If the impression is true, farewell to the progress which in the past century has been so rapid and inspiring. The dazzling visions of the future which technical gains have excited must be changed to an anticipation as dismal as anything ever suggested by the Political Economy of the classical days--that of a power of repression checking the upward movement of humanity and in the end forcing it downward. No description could exaggerate the evil which is in store for a society given hopelessly over to a régime of private monopoly. Under this comprehensive name we shall group the most important of the agencies which not merely resist, but positively vitiate, the action of natural economic law. Monopoly checks progress in production and infuses into distribution an element of robbery. It perverts the forces which tend to secure to individuals all that they produce. It makes prices and wages abnormal and distorts the form of the industrial mechanism. In the study of this perverting influence we shall include an inquiry as to the means of removing it and restoring industry to its normal condition. We shall find that this can be done--that competition can be liberated, though the liberation can be accomplished only by difficult action on the part of the state. _The comparatively Narrow Field of Present Action by the State._--Economic theory has always recognized the existence and the restraining action of the civil law, which has prohibited many things which the selfishness of individuals would have prompted them to do. Certain officers of the state constitute, as we saw in an early chapter, one generic class of laborers, one of whose functions it is to retain in a state of appropriation things on which other men have conferred utility--that is, to protect property, and so to coöperate in the creation of wealth. In a few directions they render services which private employers might render in a less effective way. The state, through its special servants, educates children and youth, guards the public health, encourages inventions, stimulates certain kinds of production, collects statistics, carries letters and parcels, provides currency, improves rivers and harbors, preserves forests, constructs reservoirs for irrigation, and digs canals and tunnels for transportation. In these ways and in others it enters the field of positive production; but in the main it leaves that field to be occupied by private employers of labor and capital. Business is still individualistic, since those who initiate enterprises and control them are either natural persons or those artificial and legal persons, the corporations. _The Growing Field of Action by Corporations._--Until recently there has been comparatively little production in the hands of corporations great enough to be exempt from the same economic laws which apply to a blacksmith, a carpenter, or a tailor. Individual enterprise and generally free competition have prevailed. The state has not checked them and the great aggregations of capital to which we give the name "trusts" have not, in this earlier period, been present in force enough to check them. The field for business enterprise has been open to individuals, partnerships, and corporations; they have entered it fearlessly, and a free-for-all competition has resulted. This free action is in process of being repressed by chartered bodies of capitalists, the great corporations, whom the law still treats somewhat as though in its collective entirety each one were an individual. They are building up a semi-public power--a quasi-state within the general state--and besides vitiating the action of economic laws, are perverting governments. They trench on the freedom on which economic laws are postulated and on civic freedom also. _How Corporations pervert the Action of Economic Laws._--Whatever interferes with individual enterprise interferes with the action of the laws of value, wages, and interest, and distorts the very structure of society. Prices do not conform to the standards of cost, wages do not conform to the standard of final productivity of labor, and interest does not conform to the marginal product of capital. The system of industrial groups and subgroups is thrown out of balance by putting too much labor and capital at certain points and too little at others. Profits become, not altogether a temporary premium for improvement,--the reward for giving to humanity a dynamic impulse,--but partly the spoils of men whose influence is hostile to progress. Under a régime of trusts the outlook for the future of labor is clouded, since the rate of technical progress is not what it would be under the spontaneous action of many competitors. The gain in productive power which the strenuous race for perfection insures is retarded, and may conceivably be brought to a standstill, by the advent of corporations largely exempt from such competition. There is threatened a blight on the future of labor, since the standard of wages, set by the productivity of labor, does not rise as it should, and the actual rate of wages lags behind the standard by an unnaturally long interval. There is too much difference between what labor produces and what it ought to produce, and there is an abnormally great difference between what it actually produces and what it gets. _The Fields for Monopolies of Different Kinds._--Monopoly is thus a general perverter of the industrial system; but there are two kinds of monopoly, of which only one stands condemned upon its face as the enemy of humanity. For a state monopoly there is always something to be said. Even socialism--the ownership of all capital, and the management of all industry by governments--is making in these days a plea for itself that wins many adherents, and the demand that a few particular industries be socialized appeals to many more. The municipal ownership of lighting plants, street railways and the like, and the ownership of railroads, telegraph lines, and some mines by the state are insistently demanded and may possibly be secured. We can fairly assume that, within the period of time that falls within the purview of this work, general socialism will not be introduced. In a few limited fields the people may accept governmental monopolies, but private monopolies are the thing we have chiefly to deal with; and it is to them, if they remain unchecked, that we shall have to attribute a disastrous change in that generally honest and progressive system of industry which has evolved under the spur of private enterprise. _Two Modes of Approaching a Monopolistic Condition._--The approach to monopoly may be extensive or intensive. A fairly complete monopoly may be established in some part of the industrial field, and the area of its operations may then be extended. Smelters of iron and steel, after attaining an exclusive possession of their original fields of production, may become carriers, producers of ore, makers of wire, plate, and structural steel, and builders of ships, bridges, etc. On the other hand, a great corporation may have, at the outset, but little monopolistic power, and it may then acquire more and more of it within the original field of its operations. It may at first make competition difficult and crush a few of its rivals, and then, as its power increases, it may make competition nearly impossible in the greater part of its field and drive away nearly all the rivals who remain. It is necessary to form a more accurate idea than the one which is commonly prevalent of what actual monopolies are, of what they really do, of what they would do if they were quite free to work their will, and of what they will do, on the other hand, if they are effectively controlled by the sovereign state. Regulation of monopolies we must have; that is not a debatable question. The sovereignty of the state will be preserved in industry and elsewhere, and it is perfectly safe to assert that only by new and untried modes of asserting that sovereignty can industry hereafter be in any sense natural, rewarding labor as it should, insuring progress, and holding before the eyes of all classes the prospect of a bright and assured future. We are dependent on action by the state for results and prospects which we formerly secured without it; but though we are forced to ride roughshod over _laissez-faire_ theories, we do so in order to gain the end which those theories had in view, namely, a system actuated by the vivifying power of competition, with all that that signifies of present and future good. _The Nature of a True Monopoly._--The exclusive privilege of making and selling a product is a monopoly in its completest form. This means, not only that there is only one establishment which is actually creating the product, but there is only one which is able to do so. This one can produce as much or as little as it pleases, and it can raise the price of what it sells without having in view any other consideration than its own interest. _The Possibility of the Form of Monopoly without the Power of It._--A business, however, may have the form of a monopoly, but not its genuine power. It may consolidate into one great corporation all the producers of an article who send their goods into a general market, and if no rivals of this corporation then appear, the public is forced to buy from it whatever it needs of the particular kind of goods which it makes. Consumers of _A´´´_ of our table may find that they can get none of it except from a single company. Yet the price may conceivably be a normal one. It may stand not much above the cost of production to the monopoly itself. If it does so, it is because a higher price would invite competition. The great company prefers to sell all the goods that are required at a moderate price rather than to invite rivals into its territory. This is a monopoly in form but not in fact, for it is shorn of its injurious power; and the thing that holds it firmly in check is _potential competition_. The fact that a rival _can_ appear and _will_ appear if the price goes above the reasonable level at which it stands, induces the corporation to produce goods enough to keep the price at that level. Under such a nearly ideal condition the public would get the full benefit of the economy which very large production gives, notwithstanding that no actual competition would go on. Prices would still hover near the low level of cost. The most economical state conceivable is one in which, in many lines of business, a single great corporation should produce all the goods and sell them at a price so slightly above their cost as to afford no incentive to any other producer to come into the field. Since the first trusts were formed the efficiency of potential competition has been so constantly displayed that there is no danger that this regulator of prices will ever be disregarded. Trusts have learned by experience that too great an increase in the prices of their products "builds mills." It causes new producers who were only potentially in the field actually to come into it and to begin to make goods. To forestall this, the trusts have learned to pursue a more conservative policy and to content themselves with smaller additions to the prices of their wares. If it were not for this regulative work of the potential competitor, we should have a régime of monopoly with its unendurable evils; and if, on the other hand, the regulator were as efficient as it should be, we should have a natural system in which complete freedom would rule. The limitless difference between these conditions measures the importance of potential competition.[1] [1] For an early statement of this principle the reader is referred to the chapter on "The Persistence of Competition," by Professor F. H. Giddings, in a work entitled "The Modern Distributive Process," written jointly by Professor Giddings and the present writer. This chapter first appeared as an article in the _Political Science Quarterly_ for 1887. _Cost of Production in Independent Mills a Standard of Price._--A consolidated company will ultimately have a real but small advantage over a rival in the cost of producing and selling its goods; but at present the advantage is often with the rival. His plant is often superior to many of those operated by the trust. When the combination brings its mills to a maximum of efficiency and then reaps _the further advantage which consolidation itself insures_, it will be able to make a small profit while selling goods at what they cost in the mills of its rival. This cost which a potential competitor will incur if he actually comes into the field sets the natural standard of price in the new régime of seeming monopoly; and it will be seen that if this natural price really ruled, the monopoly would have only a formal existence. It would be shorn of its power to tax the public. _Partial Monopolies now Common._--What we have is neither the complete monopoly nor the merely formal one, but one that has power enough to work injury and to be a menace to industry and politics. If it long perverts industry, it will be because it perverts politics--because it baffles the people in their effort to make and enforce laws which would keep the power of competition alive. In terms of our table the subgroups are coming to resemble single overgrown corporations. Each of them, where this movement is in progress, is tending toward a state where it will have a single _entrepreneur_--one of those overgrown corporations which resemble monopolies and are commonly termed so. Complete monopolies, as we have said, they are not; and yet, on the other hand, they are by no means without monopolistic power. They are held somewhat in check by the potential competition we have referred to, but the check works imperfectly. At some points it restrains the corporations quite closely and gives an approach to the ideal results, in which the consolidation is very productive but not at all oppressive; while elsewhere the check has very little power, oppression prevails, and if anything holds the exactions of the corporation within bounds, it is a respect for the ultimate power of the government and an inkling of what the people may do if they are provoked to drastic action. _Two Policies open to the State._--The alternatives which are open to us are, in this view, reduced to two. Consolidation itself is inevitable. If, in any great department of production, it creates a true monopoly which cannot be otherwise controlled, the demand that the business be taken over by the government and worked for the benefit of the public will become irresistible. If it does not become a true monopoly, the business may remain in private hands. Inevitable consolidation with a choice between governmental production and private production is offered to us. We are at liberty to select the latter only if potential competition shall be made to be a satisfactory regulator of the action of the great corporations. _The Future Dependent on Keeping the Field open for Competitors._--Potential competition, on which, as it would seem, most of what is good in the present economic system depends, has also the fate of the future in its hands. Existing evils will decrease or increase according as this regulator shall work well or ill. Yet it is equally true that the government has the future in its hands, for the potential competition will be weak if the government shall do nothing to strengthen it. It is, indeed, working now, and has been working during the score of years in which great trusts have grown up; but the effects of its work have been unequal in different cases, and it is safe to say that, in the field as a whole, its efficiency has, of late, somewhat declined. With a further decline, if it shall come, prices will further rise, wages will fall, and progress will be retarded. The natural character of the dynamic movement is at stake and the continuance of so much of it as now survives and the restoration of what has been lost depend on state action. _The Impossibility of a Laissez-faire Policy._--Great indeed is the contrast between the present condition and one in which the government had little to do but to let industry alone. Letting free competitors alone was once desirable, but leaving monopolies quite to themselves is not to be thought of. It would, indeed, lead straight to socialism, under which the government would lay hands on business in so radical a way as to remove the private _entrepreneurs_ altogether. If we should try to do nothing and persist too long in the attempt, we might find ourselves, in the end, forced to do everything. What is of the utmost importance is the kind of new work the government is called on to do. It is chiefly the work of a sovereign and not that of a producer. It is the work of a law-giving power, which declares what may and what may not be done in the field of business enterprise. It is also the work of a law-enforcing power, which makes sure that its decrees are something more than pious wishes or assertions of what is abstractly right. All of this is in harmony with the old conception of the state as the protector of property and the preserver of freedom. The people's interests, which the monopoly threatens, have to be guarded. The right of every private competitor of a trust to enter a field of business and to call on the law for protection whenever he is in danger of being unfairly clubbed out of it, is what the state has to preserve. It is only protecting property in more subtle and difficult ways than those in which the state has always protected it. The official who restrains the plundering monopoly, preserves honest wealth, and keeps open the field for independent enterprise does on a grand scale something that is akin to the work of the watchman who patrols the street to preserve order and arrest burglars. _A Possible Field for Production by the State._--There is a possibility that in a few lines of production the American government may so far follow the route marked out by European states as to own plants and even operate them, and may do so _in the interest of general competition_. It may construct a few canals, with the special view to controlling charges made by railroads. It may own coal mines and either operate them or control the mode of operating them, for the purpose of curbing the exactions of monopolistic owners and securing a continuous supply of fuel. It may even own some railroads for the sake of making its control of freight charges more complete. Such actions as these may be slightly anomalous, since they break away from the policy of always regulating and never owning; nevertheless, they are a part of a general policy of regulation and a means of escape from a policy of ownership. The selling of coal by the state may help to keep independent manufacturing alive, and carrying by the state may do so in a more marked way. If so, these measures have a generally anti-socialistic effect, since they obstruct that growth of private monopoly which is the leading cause of the growth of socialism. _Evils within the Modern Corporation._--The great corporation brings with it some internal evils which might exist even if it never obtained a monopoly of its field. In this class are the injuries done by officers of the corporation to the owners of it, the stockholders. A typical plundering director has even more to answer for by reason of what he does to his own shareholders than because of what he and the corporation may succeed in doing to the public. In the actual amount of evil done, the robbing of shareholders is less important than the taxing of consumers and the depressing of wages, which occur when the effort to establish a monopoly is successful; but in the amount of iniquity and essential meanness which it implies on the part of those who practice it, it takes the first rank, and its effect in perverting the economic system cannot be overlooked. The director who buys property to unload upon his own corporation at a great advance on its cost, or who alternately depresses the business of his corporation and then restores it, in order that he may profit by the fall and the rise of the stock, not only does that which ought to confine his future labors to such as he could perform in a penitentiary, but does much to vitiate the action of the economic law which, if it worked in perfection, would give to the private capitalist a return conformable to the marginal product of the capital he owns. A sound industry requires that the state should protect property where this duty is now grossly neglected. If more publicity will help to do this,--if lighting street lamps on a moral slum will end some of the more despicable acts committed by men who hold other men's property in trust,--sound economics will depend in part on this measure, but it depends in part on more positive ones. The investment of capital is discouraged and an important part of the dynamic movement is hindered wherever shareholders are made insecure; and therefore the entire relation of directors to those whose property they hold in trust needs to be supervised with far more strictness than has ever been attempted under American law. When invested capital shall be quite out of the range of buccaneers' actions, it will produce more, increase more rapidly, and the better do its part toward maintaining the wages of labor. _Perversions of the Economic System by the Action of Promoters._--The state will be carrying out its established policy if it shall effectively control the action of promoters in their relation to prospective investors. The man who is invited to become a stockholder has a right to know the facts on which the value of the property offered to him depends. How many plants does the consolidated corporation own? How much did they cost? What is their present state of efficiency? What have been their earnings during recent years? Concerning these things and others which go to make up a correct estimate of the value of what the promoter is selling, the purchaser needs full and trustworthy information, and an obvious function of the law is to see that he gets it. That such action would guard investors' personal rights is, of course, a reason for taking it; but the reason that here appeals to us is the fact that it would remove a second perversion of the economic system, accelerate the increase of capital, and help in securing a distribution of wealth which would be more nearly in accordance with natural law. _Perversions of the System caused by the Action of Corporations in their Entirety._--More directly within the domain of pure economics is the relation between the typical great corporation and the majority of the public which is wholly outside of it. In the common mind this relation also often appears as that of plunderers and plundered, and what it often has actually been, is a relation between corporations which have exacted a certain tribute and a body of consumers which has had to pay the tribute. Bound up with this general relation between the manufacturing corporation and the consuming public is one between it and producers of raw material which it buys and with laborers whom it hires. In this last relation what is endangered is the normal rate of pay, present and future. The type of measure which protects consumers protects the other parties who are affected by the great corporation's policy. Workers are safe and producers of raw materials are measurably so if the power of competition in the making and selling of the goods is kept alive. If we prevent the trust from taking tribute from the purchasing public, we shall by the same means prevent it from oppressing laborers and farmers. _Why the Business of a Monopoly should never be regarded as a Private Interest._--The people are already putting behind them and ought to put completely out of sight and mind the idea that the business of a monopoly is a private enterprise which its officers have a right to manage as they please. A corporation becomes a public functionary from the time when it puts so many of its rivals out of the field that the people are dependent on it. As well might the waiter who brings food to the table claim that the act is purely his own affair and that the customers and the manager have no right of interference, however well or ill the customers may be served, as a combination of packers might claim that any important detail of their business concerns them only. The illustration is a weak one; for in the case of a trust which controls a product that is needed by the public, it is the full majesty of the people as a whole which is in danger of being set at naught. Such a company is a public servant in all essential particulars, and although it is allowed to retain a certain autonomy in the exercise of its function, that autonomy does not go to the length of liberty to wrong the public or any part of it. The preservation of a sound industrial system requires that governments shall forestall injuries which the interests of the monopolistic corporation impels it to inflict. No discontinuance of essential services, no stinting of them, and no demand for extortionate returns for them can be tolerated without a perversion of the economic system. The natural laws we have presented will work imperfectly if, for example, the danger of a coal famine shall forever impend over the public or if this fuel shall be held at an extortionate price. Workmen, indeed, have a larger stake than have others in the maintenance of a fair field for competing producers and an open market for labor, but other classes feel the vitiating of the industrial system which occurs when the fair field and the open market are absent. _Why the Motive which once favored Non-interference in Industry by the State now favors Interference._--We have said that what is needed is vigorous action by the state in keeping alive the force on which the adherents of a _laissez-faire_ policy rested their hope of justice and prosperity. These fruits of a natural development have always depended on competition, and they still depend on it, though its power will have to be exerted in a new way. This requires a special action by the state; but in taking such action the government is conforming its policy to the essential part of the _laissez-faire_ doctrine. It lays hands on industry to-day for the very reason which yesterday compelled it to keep them off--the necessity of preserving a beneficent rivalry in the domain of production. _America the Birthplace of Consolidated Corporations._--Consolidations of the kind that require vigorous treatment by the state have their special home in America. They have taken on a number of forms, but are coming more and more into the most efficient form they have ever assumed, that of the corporation. The holding company is the successor of the former trust. The method of union by which stockholders in several corporations surrendered their certificates of stock to a body of trustees and received in return for them what were called trust certificates, has been abandoned, and the readiness with which this has been done has been due to the fact that there are better modes of accomplishing the purpose in view. A new corporation can be formed, and, thanks to those small states which thrive by issuing letters of marque, it can be endowed with very extensive powers. It can, of course, buy or lease mills, furnaces, etc., but what it can most easily do is to own a controlling portion of the common stock of the companies which own the plants. The holding company has a sinister perfection in its mode of giving to a minority of capital the control over a majority. It is possible that the actual capital of the original corporation may be mainly a borrowed fund and may be represented by an issue of bonds, while the stockholders may have contributed little to the cost of their plants and their working capital; and yet this common stock may confer on its owners the control of the entire business. The corporation that buys a bare majority of this common stock may have an absolute power over the producing plants and their operations. If the holding company should secure much of its own capital by an issue of bonds, the amount which its own stockholders would have to contribute would be only a minute fraction of the capital placed in their hands, and yet it might insure to them the control of a domain that is nothing less than an industrial empire, if indeed they are not themselves obliged to surrender the government of it to an innermost circle composed of directors. _Earlier Forms of Union._--There are forms of union which are less complete than this and have been widely adopted. There was the original compact among rival producers to maintain fixed prices for their goods. It was a promise which every party in the transaction was bound in honor to keep, but impelled by interest to break; and it was morally certain to be broken. There was this same contract to maintain prices strengthened by a corresponding contract to hold the output of every plant within definite limits. If this second promise were kept, the first would be so, since the motive for cutting the price agreed upon was always the securing of large sales, and this was impossible without a correspondingly large production; but security was needed for the fulfillment of the second promise. This security was in due time afforded, and there was perfected a form of union which was a favorite one, since it did not merge and extinguish the original corporations, but allowed them to conduct their business as before, though with a restricted output and with prices dictated by the combinations. As a rule each of the companies paid a fine into the treasury of the pool if it produced more than the amount allotted to it, and received a bonus or subsidy if it produced less. This form has more of kinship with the _Kartel_ of Germany than the other American forms, and it might have continued to prevail in our country if the law had treated it with toleration. It leaves the power of competition less impaired than does the consolidated corporation, of which the laws are more tolerant. By repressing those unions which can be easily defined and treated as monopolies we have called into being others which are far more monopolistic and dangerous. The economic principles on which the regulation of all such consolidations rests apply especially to the closer unions which take the corporate shape. To the extent that other forms of union have any monopolistic power the same principles apply also to them; but we shall see why it is that the pools which the law forbids have little of this power and the corporations have much of it. _The Condition which precludes True Monopoly._--A monopoly grows up when a company keeps such perfect guard over its economic field that new rivals cannot enter without exposing themselves to peril. As we have seen, it is not always necessary that the rival company should be formed. It is enough that it should be able to be formed and to enter the field with safety. In that case it will actually appear if an inducement is offered. Such an inducement is always afforded when the trust puts an unnaturally high price on its product--a price above that standard set by the cost of production which would rule in a normal market. _Specific Means of Repressing Competition._--In practice a condition is created in which the new competitors are reluctant to appear; for the consolidated company has dangerous weapons with which it can assail them. It can often secure specially low rates for the transportation of its products, and this is sometimes enough to make the competitor's prospect hopeless. Further, the "trust"--with or without the aid offered by the special and low freight charges--can enter the particular corner of the field where a small rival is operating, sell goods for less than they cost, and drive off the rival, while maintaining itself by the high prices it exacts everywhere else. Again, it may reduce the price of one variety of goods, which a particular competitor is making, and crush him, while it makes a profit on all other varieties of goods. Still again, it may resort to the "factor's agreement," by refusing to sell at the usual wholesalers' rate any of its own products to a merchant who handles products of its rivals. If some of its goods are of a kind that the merchant must have, this measure brings him to terms, causes him to refuse to handle independent products, and makes it difficult for the rival producer to reach the public with his tender of goods. The trust can organize special corporations for making war on competitors while itself evading responsibility. A bogus company which, in an aggravated case, is a rogue's alias for a parent corporation, may be formed for the purpose of more safely doing various kinds of predatory work. _The Economic Necessity of Doing what is legally Difficult._--From the point of view of an economic theorist it is enough to show that the practices which cut off the potential competitor from a safe entrance into the field of production so pervert the economic system as to hold in abeyance its most fundamental force, that of competition. They vitiate the action of every law which depends on competition. Value, wages, interest, profits, and the very structure of society feel the perverting effect of this repression of the force that under normal conditions serves to adjust them. From a practical point of view it is enough to show that the existence of such practices--if the monopolies that grow out of them shall continue and increase--present to the people the alternative of accepting an economic state which is unendurable, or accomplishing, in a legal way, what many already pronounce impossible. For the purpose of this treatise it suffices to point to the fact that few attempts worth mentioning have been made to suppress any of these practices except the first--that of favoritism in connection with freight charges--and that in the case of this practice only a beginning of serious effort has been made. While there is some excuse for abandoning a purpose when long and determined effort to execute it has failed, there is no possible excuse for concluding, _in advance of such effort_, that a systematic policy which gives a promise of saving us from an intolerable outcome is impracticable. All the props of monopoly should be taken away and not one merely, and before this shall be tried radical measures will not be in order. Socialism will not be fairly before the people's parliament till it shall come as the only escape from a condition of private monopoly. What economic law clearly shows is that monopoly will not come if the practices on which it depends shall be suppressed, and the people may be trusted to determine whether the suppression is or is not possible. That they may decide this question the issue that depends on it must be brought before them; and all that falls within the sphere of the economist is the stating of the effects of monopoly, the causes of its existence, and the public action that if taken will remove these causes. The preservation of a normal system of industry and a normal division of its products requires the suppression of all those practices of great corporations on which their monopolistic power depends. CHAPTER XXIII GENERAL ECONOMIC LAWS AFFECTING TRANSPORTATION Of all the various clubs used by trusts for attacking rivals and driving them from the field, the first in order is the one which depends on getting special rates for transportation. Railroads develop monopolies within their own sphere and also contribute greatly to the development of monopolies elsewhere. The second fact is the more important, but both require attention. By reason of its special connection with producers' monopolies does the function of the common carrier have much to do in deciding the question whether an economic revolution is or is not impending. It is safe to say that it is imminent as a possibility and will become probable if the favoritism shown by carriers to great shippers is not effectually repressed. _How the Consolidation of Railroads makes the Repression of Favoritism Easy._--It is also safe to say that such repression will be easy if the consolidation of railroads themselves shall actually go to the utmost possible length. With all lines under one central control and earnings entirely pooled, there would be no motive for granting special favors to any shipper except as it might come through a corrupt relation between the shipper and some officials of the railroads. To the carrying corporation the giving of a rebate would merely mean a surrendering of some possible profits. With railroads consolidated the threat of the great shipper to divert his freight from one line to another would lose all its effectiveness, and the interests of the stockholders in the general carrying company would demand high rates from all. The law forbidding rebates and all other forms of favoritism would assist the railroad company in carrying out its own policy, and would be obeyed with the readiness with which an order to pocket an increased gain is naturally complied with. _A Danger which becomes greater as Discriminations become Fewer._--This reveals the fact that the consolidation which makes the suppressing of discriminations easy will make an all-round advance of rates possible, in so far as merely economic influences are concerned. Nothing but the power of the state itself can prevent this; and while the consolidation that would be perfect enough to stop discriminations has not yet taken place, enough of consolidation has been secured to cause some advance in the general scale of freight charges and to threaten much more. It already rests with the government to avert this second evil. Monopolies extending throughout the field of production would mean a demand for socialism which could hardly be resisted; and even a few monopolies in industry assisted by a great one in transportation would mean much the same thing. _General Economic Principles governing Transportation._--With a view to determining the bearing which transportation has on the problem of economic freedom, and thus on the prospect of avoiding the alternative of state socialism, we need to state the essential principles in the theory of railway transportation. The fact that makes a vast amount of carrying necessary is that agriculture is subject to a law of diminishing returns, while manufacture obeys an opposite law. In tilling the soil labor and capital yield less and less as more and more of them are used in a given area; and therefore both of these agents need to extend themselves widely over the land in order to use it economically. In the production of staple crops which can be freely carried across sea and continent, the natural tendency is to scatter a rural population with some approach to evenness over all the land available for such crops. Market gardening requires less land per man and the areas devoted to it are much more densely peopled; but even within this department of agriculture the law holds true that too much labor and capital must not be bestowed upon an acre of ground. In a general way agriculture diffuses population, while manufacturing concentrates it. This latter work is done most economically in great establishments. _The Law of Diminishing Returns from Land not restricted to that used in Agriculture._--It is commonly said that manufacturing is unlike agriculture in that it is subject to a law of increasing returns; but this statement is true only when its terms are carefully interpreted. The diminishing returns from agriculture and the increasing returns from manufacturing are not two opposite effects from the same cause. There is, indeed, a logical anomaly in contrasting them with each other. In agriculture we get smaller and smaller results per unit of labor and capital when we overwork a piece of ground of a given size by putting more and more labor and capital on it. The trouble here is that land, on the one hand, and labor and capital, on the other, are not combined in advantageous proportions; and exactly the same effect is produced by the same cause in manufacturing. One can overtax a mill site by confining larger and larger amounts of capital within a given area. If the site is so small that the building has to be carried far into the air and supplied with walls strong enough to resist the jar of machinery on many floors, manufacturing becomes a far less economical operation than it would be if the site were larger and the mill lower. The gain from centralizing the manufacturing process comes in part from the increased size of the particular establishments; but that requires that every part of the plants, land included, should be increased. As the whole of an establishment becomes larger its product becomes cheaper; but, in the enlargement, there should be no undue stinting in the amount of land used. In both agriculture and manufacturing, then, there is a loss of productive power when areas of land are disproportionately small, as compared with amounts of labor and artificial capital; but in the realm of manufacturing large establishments under single _entrepreneurs combining the agents of production in the right proportion increase the productive power of men and instruments_ as they do not in agriculture. Great farms show no such economy as great mills. _Basis of the Law of Increasing Returns in Manufacturing._--There would be some increase of returns in manufacturing from making the establishments large even if the work were done by hand; but by far the greater part of the advantage is due to machinery. The invention of the steam engine was the beginning of it, and that of textile machinery afforded a quick continuation of the revolutionary change. In nearly all lines of production, outside of agriculture, machinery is far too elaborate to be used in household industry. One may say that the transformation of the world into one enormous farm dotted over with great workshops, with all the social and political changes which that involves, was brewing in the tea-kettle which the boy Watt is said to have watched, as the lid was raised by puffs of steam and the possibility of a steam engine suggested itself. The mechanical force of steam began at once to centralize manufacturing. That made increased transporting necessary, and it was not long before the same element, steam, provided the means of this extensive transportation. It is necessary, of course, to carry the products of the farm to the mill, and also to carry manufactured goods back to the farm; and neither of these things would have been required on any large scale under a system of household industry. The economy which leads to this lies altogether in the greater cheapness of the manufacturing. The difference between the cost of fashioning materials in the home and that of doing it in the mill is so large that it would have brought about the building of mills and the creation of manufacturing centers, with the carrying which it involves, if neither railroads nor steamboats had come into being. The growth of factory villages had made some headway at a time when no elaborate machinery existed; but if that condition had continued, manufacturing centers would have been smaller, more numerous, and more scattered than they have been. It is the cheapness of carrying by railroads and steamships which has made it possible to get the fullest benefit from the so-called law of increasing returns in manufacturing. _Mining as related to Transportation._--Mining is a process which has to be local, because ores and coal are furnished by nature in a local way; and one might mention this as a second cause of extensive transportation. A great part of the carrying so occasioned depends, indeed, on the growth of the manufacturing centers, since mills and furnaces need great quantities of fuel. A means of heating private dwellings, of cooking food, etc., might conceivably be supplied in a local way, by the growth of forests; but the fuel needed for the centers of manufacturing and commerce has to come from distant points. The law of increasing returns in manufacturing, then, and natural location of mines are the most generic causes of transportation. The system which has resulted gives to everybody more and better food, as well as more and better goods of every kind, than he could possibly have had if the primitive system of local manufacturing had continued. The cheapness with which form utility is created in the mill and place utility on the railroad are the two causes which are at work. _The Rivalry between Producers of Form Utility and Producers of Form and Place Utilities._--In the technical language of economics, there has been a contest in efficiency between that creating of form utility which is done when goods are made in households or in small villages, and that joint process of creating form and place utility which consists in making goods at central points and carrying them to the widely scattered homes of consumers. The latter process, involving as it does the necessity of creating two utilities instead of one, is now by far the cheaper. _The Ultimate Limit of Charges for Transportation._--Charges for transportation have as one extreme limit the difference between the cost of making goods at one point and the cost of making them at another. This rule is applicable, of course, only to those numerous cases in which it is physically possible to create the goods at both points. If they can be made at point A for ten dollars, by using five days' labor, and at point B for twenty dollars, by using ten days' labor, ten dollars would furnish the extreme limit of a possible charge for carrying them from A to B. In a certain number of cases the actual charge approximates this extreme limit. With a mill in A, working with much economy, and a number of household workshops in B producing with less economy, the product of the large mill may invade the territory supplied by the little workshops, and the carrier may receive in return for transportation about as much as the difference between the two costs of production. With a great mill at A and a small one at B, the same thing may happen. [Illustration: C | | COMPETITIVE | CARRYING BY | HIGHWAY v A------------------------>B ] _Narrower Limits usually Applicable._--In by far the larger number of cases such a difference between costs is more than the carrier can get. Usually there is some alternative mode of procuring goods at B which does not involve actually making them on the spot at a serious disadvantage. It may be possible to convey them to B from a third locality, C, where they are made in an advantageous way. If this carrying is done by some process in which competition rules,--if, for instance, C is not far from B, so that goods can be carried thither by drays,--the cost of making the goods in C plus the natural or competitive cost of conveying them to B will together make up the natural cost of procuring them in this latter locality. The difference between that and the cost of making them in the great center which we have called A will constitute the limit of the freight charge from that city to B; and even though between these two points the carrier has a monopoly of the traffic, he can get no more.[1] [1] For a case in which a railroad can get the entire difference between the cost of goods at the point from which it carries them and their cost at the place of delivery, but voluntarily refrains from doing so, see the note at the end of this chapter. _Other Applications of the Same Rule._--This rule applies even where goods made in C have to be carried great distances, provided the carrying is done in some competitive way, at a low rate based on cost. Consumers in B may have the option of bringing the goods by water, along the coast or across an ocean, at a rate that makes the cost of procuring them at B not much above the cost of making them at A. If so, this small difference of costs represents all that any carrier can get for moving them from A to B, and though this carrying may be done by a railroad which has a monopoly of its route, its service will command no higher rate than the one which is thus naturally set for it. The rate is governed by costs, though not by costs incurred by the railroad. Whenever competition rules, the returns for any productive function tend to conform to costs, and we here suppose that it does so rule (1) in the making of goods at A, and (2) in the procuring of the goods by some alternative method at B. The difference between these costs sets the maximum limit of the freight charge between A and B, and this may exceed the cost of this service and leave a profit for the carrier who uses this route. _Freight Charges and Value._--The return for a productive operation of any kind whatsoever is directly based on the value which it imparts to something; and in the case of carrying, the value is measured by the amount of "place utility" which the carrying creates. This is merely one application of a universal law. What the goods are worth where they are consumed, less what they are worth where they are made, equals what can be had for moving them from the one point to the other. Freight charges are gauged by the principle of "value of service," but so also are the charges for making the goods. When things are produced and used at the same place, the producer's returns equal the value of his product, and this is fixed by the principle of final utility. It is, however, a truism of economics that this value itself tends under competition to conform to the cost of creating it. In our illustration the manufacturing returns are fixed by the value of service and also by the cost of service, and so are the returns for transporting the goods from C to B; but the returns for carrying them from A to B, where monopoly prevails, are not governed by the cost of service but by costs elsewhere incurred. _Freight Charges and Cost._--The law of costs as well as the law of value holds good, in general, in connection with transportation. Competition in this department tends to bring values created to a certain equality per unit of cost and to reward the labor and capital which are used in carrying as well as they are rewarded elsewhere, and not better. If our table of industrial groups were elaborated, there would be between A and A´, as well as between A´ and A´´, and between adjacent subgroups throughout the chart, a symbol which should represent the work done by the carrier; and the fact would appear that naturally this work is neither favored nor injured in the apportionment of rewards. Free competition, if it existed in perfection everywhere, would be a perfectly undiscriminating distributor of earnings, and would apportion all returns according to costs. A´´´ A´´ A´ A _Variations of Freight Charges from Static Standards._--Place values are not an exception to the general rule of value; and yet freight charges actually remain at a greater distance from the standards furnished by the direct costs of carrying than do the returns for other services from corresponding standards. There is an approach to monopoly in this department, and, when direct competition exists, it is a more imperfect process here than it is elsewhere. Moreover, the costs which here figure as an element in the adjustment of freight charges are of a peculiar kind, which, although not unknown in other departments of production, have nowhere else so great influence and importance. The study of railroads and their charges is baffling, not because the economic forces do not here work at all, but because here they encounter a resistance which is exceptionally strong and persistent. The quasi-monopoly which elsewhere continues only briefly lasts long in this department of production; but it is subject to the same principles which everywhere rule. _The Modes of Approaching the Study of Freight Charges._--In studying freight charges we may, if we choose, start with the intricate tariffs of railroads, as they now stand, and try to find some principle which, if applied, would bring order out of the mass of capricious and inconsistent rates. Such a rule will ultimately be needed, but it can best be obtained by examining at the outset the transportation which is done by simple means and under active competition. It will be found (1) that basic principles apply to all transportation whether it be by railroad or by simpler means; (2) that in the early development of every system of common carrying the action of these principles is disturbed; (3) that in the case of the more primitive systems the disturbances are soon overcome, but that they continue longer and produce far greater effects in the case of railroads; (4) that one important influence of this kind tends naturally to disappear, while another continues and calls for regulation by the state; and (5) that this regulation needs to be based on natural tendencies and to conform to the laws which, when competition rules, govern the returns of all classes of producers. _A Typical Instance of Partial Monopoly in Transportation._--We may now trace the development out of a purely competitive condition of a simple instance of what is usually termed monopoly, though in a rigorous use of terms it can hardly be so called. It is a monopoly the power of which is limited. So long as goods made at A are carried to B by some primitive method which insures the presence of competing carriers, the returns for carrying will tend only to cover costs. By a normal adjustment the price of the goods at A only repays the costs of making them, and if these and the carrying charge amount to less than the costs of making the goods at C and transporting them to B, none of them will come to B in this latter way. Makers at A and carriers on the route from there to B will possess the market, and the place value which the goods acquire when taken to B will be fixed directly by the costs of carrying. It is when there is no effective competition on the route between A and B, while there is free competition in making the goods both at A and at C, and also in carrying them from C to B, that a typical case of a partial monopoly is presented. [Illustration: C | | COMPETITIVE | CARRYING | v A------------------------------->B MONOPOLISTIC CARRYING ] The price of the goods at A is a definite amount fixed by competition between producers, and the price at B is also a definite amount fixed by competition between different makers at C and between different carriers between C and B. The difference between these amounts sets the limit of the charge for carrying from A to B; but in that operation there is, for a brief period, no effective competition. For simplicity let us say that this carrying is at first done by a single wagon owned by its driver, and that his charge for the service he renders nearly equals the difference between the cost of making the goods at A and that of obtaining them at B from some alternative source. This lone and honest driver is thus illustrating the practice of the modern railroad, in that he is "charging what the traffic will bear." The goods he transports have one natural value at A and another at B. These two values are determined separately and in ways that are quite independent of the carrier and his policy. When he begins to do his work, he charges an amount which about equals the difference between the two values. _The Impossibility of Long-continued Profits in the Case of Primitive Carriers._--With the growth of traffic direct competition will soon appear. A second wagon will be put on the route and then more, and the strife for freight will bring down the charges to the level of cost. For a brief season a favored drayman was able to get nearly the entire difference between the value of the goods at the point where they are made and their value at the point where they are used, _as these two values were determined by independent causes with which he had nothing to do_. Now, he and his rivals can, indeed, get the difference between the value of the goods at the one point and their value at the other; but this difference is now directly determined by the carrying charge. That charge, again, is determined by the cost of rendering the service. There was a brief interval when the value of the service and the cost of it were different amounts; but now they coincide. We shall see that the essential difference between carrying by primitive means and carrying by railroad is in the fact that in the latter case the period when value and cost are different is greatly prolonged. _The Appearance of a More Efficient Competitor._--With the growth of traffic a sailing vessel comes into use on a route connecting A with B, and the cost of thus conveying goods is less than that of conveying them over the roadway. The charge made by the sailing vessel is lower than that made by the teamsters, and the goods are thus delivered at B cheaply enough both to attract to the water route all carrying from A and to put an end to all carrying from C. The former carriers between B and C lose their business, and the makers at C lose some part of theirs, in the same way that any producer loses the traffic when he is underbid by rivals. The public is the gainer to the extent of the reduction which takes place in the cost of the goods as delivered to consumers in the market at B; nevertheless, the situation still involves a limited monopoly. The sailing vessel now has no effective rival, and can charge "what the traffic will bear," and that is very nearly the cost of conveying the goods by wagons. The advent of the vessel has benefited the public; yet it is regarded as constituting a new monopoly, and the benefit which the public gets is less than it will get when a really effective competitor of the sailing craft makes its appearance. [Illustration: C | . ABANDONED | ROUTE . | . | v A - - - - - - - - - - - - - - ->B \ ABANDONED ROUTE / \ / \____ / \___ __________/ \____/ WATER ROUTE USED ] _A Principle governing Charges by Unequal Competitors._--The principle which, in this instance, governs the freight charges is one which is active in all departments of production. We have seen that a maker of goods who has just acquired a monopoly of a superior method may, for a time, charge what the goods cost as made by inferior processes. If the manufacturer has some patented machinery which effects a great economy, he is not at once obliged to govern his prices by what the goods cost in his own mill, but may charge about what they would cost if they were made by the inferior machinery which he formerly used. This is what they still cost in the mills of certain rivals, and it thus appears that competition of a sort fixes his price for the goods he creates, but it is the competition of less capable producers and fails to benefit the public as the rivalry of equals would do. If there is evil in such a monopoly as this, it is not because the public is injured by the advent of the cheaper method. The improvement usually begins to confer benefit on consumers at the moment of its arrival, through the effort of the efficient producer to secure traffic. It causes the prices to go down, though the fall is at first only a slight one, and the consumer's case against the monopoly of method is on the ground of his failure to receive a further benefit. He will get that further benefit whenever a producer who can compete on even terms with the one who now commands the field shall make his appearance. _Unequal Competition Typical of Carriers._--Our recent illustration represents a similar condition in carrying. The public gets a slight gain from the advent of a sailing vessel; but it fails to get the further benefit that the advent of a second vessel will ultimately bring. For a time the freight charge stands nearly at what teamsters have charged. For cheaper rates the public must wait for the advent of another vessel. _The Cause of the Partial Monopoly in Carrying._--There is nothing to prevent a second schooner from being put on this route, if the returns to be expected should warrant it. At the outset the new vessel would get only about a half of the amount of traffic enjoyed by the first, and the rates would probably be reduced by the competition between the two. Until the returns of the first vessel become large it has no rivalry to fear, but it is clear that its monopoly is held by a very precarious tenure. It is not likely long to enjoy the benefit of any charges which yield much profit. The growth of traffic will in due time bring the competing vessel, and the rule of returns that only cover costs will again assert itself. The owner of the first sailing craft has been able for a time to charge "the value of the service" he has rendered, as that value was determined independently of his own action; but now this value itself depends on his action and that of rival carriers using the same route, and it adjusts itself at the level of cost. _The Effect of partly Unused Vessels for Carrying._--The case illustrates another principle which is equally general. The _entrepreneur_ whose capacity for producing is only partially utilized may often take some orders at less than it costs to fill them, as cost is usually understood, and he will still be the gainer. In manufacturing as well as in carrying there are "fixed charges"; there are costs which stand at a definite amount which is independent of the volume of traffic, while other costs increase as the volume grows. These are the "variable costs," and they have to be further classified, since some of them do not increase as rapidly as the business grows, while others increase with the same rapidity as does the business. The makers of sewing machines, typewriters, reapers, and mowers, and indeed machinery generally, can usually increase their product without correspondingly increasing their outlay. They can make goods and sell them in a foreign market at rates which would injure and might even ruin them if they were applied to the sales made in their own country. This fact is most obvious when the manufacturer's machinery is not all kept running or when it all runs only a part of the time. Increasing the output is then a particularly cheap operation. When a carrier's facilities are partially unused--when a ship carries a cargo in one direction and returns in ballast, or when it sails on both trips with its hold only half full--it is ready to carry additional goods at a low rate provided that this policy will not demoralize its existing business. In our illustration we have assumed that some merchandise is made at A and consumed at B, but it may well be that goods of some sort are produced at B and consumed at A. There may be stone quarries at B and there may be need of stone for paving or building at A, and the vessel may carry a return cargo of this kind at any rate which does not greatly exceed the mere cost of loading and unloading it and be better off for so doing. If the entire difference between the cost of the stone at B and the cost of producing it at A from some other source is a very slight one, the amount of it still represents all that the ship can get for carrying the stone. The utmost that the traffic will bear is this difference in costs; and yet the business will be accepted, for the return exceeds the merely variable costs which it entails. The fixed charges, the interest on the cost of the vessel, and the outlay for maintaining it do not need to be paid in any part from the returns of this extra business. They are already provided for. If instead of returning from B with a hold quite empty, the vessel made both voyages with a hold only half full, the result would be similar. It would then be in a position to make a low bid for further freight in both directions. If this entails no cutting of the rates for carrying the original goods, the vessel can take further goods with advantage at any rate above the merely variable costs. _Production which is Advantageous though it does not repay all Costs._--There are two general conditions under which it is advantageous, both in making goods and in carrying them, to extend production, though the further returns which are in this way gained do not cover all costs. First, the producer must have an unused capacity for making or carrying goods. In such a case it is possible to make or carry an _increment_ of goods without entailing on himself an increment of cost that is proportionate to the amount carried. In his bookkeeping his original business is charged with costs amounting to a certain sum per unit of goods produced or carried. His further business is charged with a smaller outlay per unit. Secondly, it must be possible to demand separate and independent returns for the different increments of goods, so that cutting the rate charged for one part of the traffic does not entail cutting the rate charged for the other. In the case of a manufacturer this is secured, either by carrying some goods to a remote and entirely independent market, or by producing some new kind of goods the low price of which will have no effect on the sales or the prices of the other kinds. In the case of the carrier it is accomplished in a variety of similar ways. He can take return cargoes at a low rate. If he stops at different ports along his route he can charge less for goods landed at certain ports than for those landed at others. He can classify his freight and carry some of it at a rate at which he could not afford to carry the whole. With the growth of traffic, however, this condition tends to disappear. Its existence requires that the carrier should have facilities only partially used. As the ship acquires fuller and fuller cargoes, it ceases to be advantageous to fill the hold with goods which pay lower rates than others; just as a mill, which may have run for a time partly on goods that yield a large return and partly on those which yield a small one, gradually discards the making of the cheaper goods as the demand for the dearer kind increases. The vessel which can get full cargoes of profitable merchandise will cease to devote any space to what is less profitable. In the end the ship in our illustration will be transporting in both directions all the first-class freight it can take, and will accept neither the stone nor the merchandise consigned to ports to which it can be carried only at the cheap rates. _Result of Effective Competition throughout the Carrier's Route._--The condition just described--that of full cargoes of profitable goods--inevitably attracts a rival vessel, and the ordinary effects of competition then begin to show themselves. The vessels pursue the same route, cater to the same traffic, and if they try to get business from each other, bring down their charges. The warfare may even bring them to reduce the rates to the level at which only variable costs are covered--a policy that, if persisted in, would bankrupt them both; and here, as well as in the case of railroads, there is a powerful motive for combining and ending the war. It usually causes a merely tacit agreement to "live and let live"--a concurrent refraining from the fatal extreme of competition. The reductions, as made, have to be general and to apply to all parts of the traffic, and unless each part of the freight carried earns a _pro rata_ share of the fixed charges incurred in the business, the traffic is carried at a loss. On the supposition which we have made--that the special and comparatively unprofitable increment of carrying was discontinued as soon as the first vessel could use its entire cargo space in transporting goods of a high class--the arrival of the second vessel may cause the less profitable carrying to be resumed, since there will not be enough of the better sort to afford two full cargoes. Moreover, a normal kind of competition will stop short of the warfare which drives both rivals into bankruptcy, and will leave the rates at a level at which the receipts of each carrier cover all his outlays.[2] [2] A full discussion of the limits of freight charges would take account of the fact that "what the traffic will bear" is an elastic amount. An infant industry will bear less than a mature one; and moreover, a rate that it will bear without being taxed out of existence may be sufficient to stunt its growth. A railroad may be interested in hastening its growth. When goods have one cost at A and another at B, a railroad company may carry them from the one point to the other for less than the difference between the costs because it wishes the industry at A to grow and furnish freight. Farmers who are introducing a new crop in a section of country remote from a market may be encouraged by a rate for carrying which leaves them a margin of profit. It is when a branch of production has more nearly reached its natural dimensions that the charge for carrying its product tends to approach its highest limit. CHAPTER XXIV THE FOREGOING PRINCIPLES APPLIED TO THE RAILROAD PROBLEM _Simple Cases of Charging "What the Traffic will Bear."_--The value of a study of primitive carriers and their policy lies in the fact that it illustrates principles which apply to transportation by a complicated system of railroads, although in this latter case they are not easily discerned. Imperfect competition is what exists in the department of carrying. So long as a railroad is without any rival it may, in some cases, charge for moving goods from one point to another about as much as the cost of making them at the latter point exceeds the cost at the former. This is the simplest case of charging what the traffic will bear. Or, again, the situation may be dominated by producers at a third point who can make goods and get them carried to the place we may term the market for less than the cost of making them directly in this latter place. In such a case the road may demand nearly the amount by which the cost of making the goods at an accessible third point and moving them to the one which is their market exceeds the cost of making them in the place first named; and this is a slightly less simple case of charging what the traffic will bear. It is appropriating the difference between two natural values neither of which the railroad itself fixes. _Charges based on Various Kinds of Cost._--The charges of the railroad may be limited by the competition of inferior carriers who use its own route, such as teamsters whose wagons use a public highway running parallel to its own track. Here charges are based on costs, but not on those which the railroad incurs. They are the costs which the teamsters incur; and if the railroad has much business, its own costs are less and it makes a profit. The charges may be based on costs incurred by more economical carriers, like owners of ships, and in such a case the rate which the railroad can get may be less than its own costs, if these are figured in the simple way of dividing a total outlay by a total number of units of freight transported. The rate is based on the shipowners' costs, and these are so low as to bankrupt the railroad if it should reduce all its charges to such a level. It reduces them thus only on the particular route where competition by water is encountered, and keeps them elsewhere at the higher level. In the case of shipments by rail over such routes "what the traffic will bear" is determined by the low charges established by the ships; and this means that it is determined by a certain definite cost of carrying goods between the very points which the railroad connects. _The Exceptional Importance of Fixed Charges in the Case of Railroads._--The railroad, in the case just noticed, carries its rates below costs, as these are computed in a simple way, but keeps the lowest of them somewhat above the variable costs which we have defined; and there appears the important fact that the fixed costs incurred by the railroad form an unprecedentedly large part of its total expenses. The interest on the outlay it makes for roadbed, track, bridges, tunnels, terminals, etc., is something for which there is no fair parallel in the case of wagons or ships. This is the first unique fact concerning railroads and their policy; and the second is that they continue very long in that intermediate state which we have illustrated by the ship which had only a partial cargo and was impelled to take some traffic at a special and low rate. For many years the railroad only partially utilizes its plant; and so long as that is the case its natural policy is one of drastic discrimination between different portions of its business. A third great point of difference between the railroad and other carriers appears if, while its capacity is still only partially utilized, it encounters the direct rivalry of other railroads that are eager for business; competition then takes a shape which impels the participants irresistibly into some kind of combination. The union may be tacit or formal, and it may depend on personal relations or on some merging of corporations; but toward something that will make the rival lines act concurrently and with mutual toleration the situation impels them with unique force. The general features of railroad rates, then, are-- (1) Some charges based on the difference between the natural value of merchandise at the point of origin and its value at the point of delivery, as this latter value is determined by causes independent of the rates charged for transportation between the two points; (2) The adjustment of other charges according to costs incurred by independent carriers operating between the same points; (3) The exceptional importance of the railroad's "fixed costs" and the drastically discriminating rates to which this leads; (4) The irresistible motive for combination where direct competition appears between railroads connecting the same points. We speak of the condition of railroads as an intermediate state because it is one out of which a natural development takes other carriers when their capacity for service is fully utilized. The same cause--a complete utilization of the plants--would have a like effect in the case of railroads; but the cause is so slow in coming into full operation that few persons think of it as affecting the problem at all. The problem of freight charges on railroads is usually regarded as if the intermediate state were destined to be perpetual. It is, however, entirely true that a full utilization of the plants of railroads would tend to take them out of this state. If the increase of business came after a combination had been effected, it would tend to put a stop to the sharp discriminations to which the eager quest for traffic has led. Different shippers could more easily secure equally favorable treatment. Freight of a low grade would be less desired, since the space it would require might otherwise be available for business of a more profitable kind, and the rates on such freight would rise. The increased traffic would make it possible to earn large dividends without increasing charges on the lower grades of freight, and while greatly reducing the charges on the higher grades; but no economic force would be available for securing this adjustment. The state, by positive regulation, might secure it and might bring the earnings and the charges of the railroads more or less nearly to the normal standards which prevail where competition rules; but if competition were here to begin, it would result quite otherwise. It would restore the old condition of partially utilized cars, track, etc., and cause a new strife for traffic, which would cause some freight to be taken at very low rates, but would lead to inevitable consolidation and higher charges. In general industry competition tends so to adjust prices as to yield interest on capital, wages for all varieties of labor, including labor of management, and nothing more, and this is the outcome elsewhere demanded by a growth of business coupled with a theoretically normal and perfect action of competition; but the peculiarities of competition between railways do not bring about the evolution which would give this result. Combination is effected long before the returns from the total traffic are made normal and before the returns from different parts of it are brought into their legitimate relation to each other. After the union of rival companies, railroads continue to be in that intermediate state in which the effect of an unused capacity for carrying has its natural effect in charges which discriminate widely between different localities and between different kinds of freight. The railroad traffic does, indeed, begin to follow the course which we have illustrated in the case of transportation by water. It takes a few steps in that direction, but further progress is then stopped by combinations. The fundamental laws of economics still apply. The static standard of freight charges exists, and one can form some idea of what actual charges would be if the forces which elsewhere tend to bring prices to their theoretical standards could here operate unhindered. The hindrances, however, are such as definitely to preclude such a result. The rates do not become in a true sense normal. Even under such active competition as at times exists they do not become so, while without competition they never tend to become so. It would, however, be a gross mistake to assume that static standards have no application whatever to railway transportation. The whole subject is most easily understood when those standards are first defined and the baffling influences which prevent actual rates from conforming to them are then separately studied. There are influences which bring the various charges of railroads within a certain definable distance of normal standards. [Illustration: C | . ABANDONED | ROUTE . | . | RAILROAD v A------------------------------>B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] The situation of railroads we take as we find it--one of complete consolidation in case of many roads, and of harmonious action, or quasi-consolidation, in the case of others. In general their charges are fixed by the place value they create, as that value is established by influences other than the charges themselves. It might seem that the charge for carrying fixes the place value. Whatever a railroad demands for carrying goods from A to B measures the enhanced value which they get in the moving; but if they would have possessed at B the same value that they now have, even though the railroad had not existed at all, it is evident that it is this value minus the value of the goods at A which fixes the charges for carrying, rather than that these charges fix the place value. We have seen in very simple and general cases how this principle works, and have now very briefly to trace the working of it in the case of a system of railroads. The special method of reckoning costs to which we have referred is an important element in the process. _"Costing" comparatively Simple in the Bookkeeping of Competing Producers._--In the study of ordinary industries we have encountered conditions which render the bookkeeping of a producer simple and cause him to charge all his costs, in a _pro rata_ fashion, to his entire product. If his goods and those of his rivals are of one kind and are sold in a single market, a cut in the price of any one portion of the product involves a corresponding cut on the entire output. It is not possible to single out any particular increment for a reduction of price and leave the rate unchanged on the remainder. Where products are of different kinds it is possible to make a classification of them so as to get a large profit on some, a small one on others, and none at all on still others. When competition has not done its full work, something of this kind happens in many departments of business. A condition of unequal gain from different portions of an output lingers long after some effects of competition have been realized. In the end, however, it must yield if competition itself does its complete work, and whenever we adhere heroically to the hypothesis of the static state, we preclude this inequality of charges. Rivals who contend with each other for profitable business bring the prices of the goods which afford the most gain to such a level that a mill which makes this type of goods will pay no more in proportion to its capital than one which makes other types. The total cost of production, fixed and variable alike, would at that time, as we have seen, be barely covered, and might correctly be apportioned in a _pro rata_ manner among all parts of the product. _The Effect of Increasing Business on Comparative Charges._--Competition of this perfect kind does not exist in manufacturing and is far from existing in the department of carrying, and it is important to know whether with growing business and greatly tempered rivalry there is any tendency toward the equalization of charges and the simplifying of the mode of reckoning costs. When a mill has more orders than it can fill, those it wishes to be rid of are the ones which yield the smallest profit. They encumber the mill and prevent the filling of more profitable orders; and the natural mode of reducing the amount of this undesirable part of the output is to raise the charges on it. This comes about without much aid from competition, for when all producers find their capacity overtaxed, they have no motive for contending sharply for business. Underbidding has for its purpose attracting business from rivals and is an irrational operation when all have orders enough and to spare. Competition is largely in abeyance when the business any one can have is overabundant. _These Principles Applicable to Carrying._--What we here assert concerning goods manufactured by independent mills would be true of goods carried by independent vessels, if they plied between the same two ports with no intermediate stops. If their capacity should at any time be overtaxed, they would not reduce the charges on higher grades, but they would raise them on the lower grades, and the classification of freight would lose some of its significance. The lowering of the charges on the high grades of freight would come when the profits of the business should attract new carriers, who would naturally seek for the traffic that paid the best, till all kinds paid about alike. The mode of reckoning costs might then become simple--a _pro rata_ division of total outlays among all parts of the business. _The Condition of Uniform Costing never realized upon Railroads._--Not a single one of the essential conditions of equalized charges and uniform costing is now realized upon railroads, and there is only one of them that is approximated. Separate markets for different parts of the traffic are provided by the nature of the business. Every point to which goods are conveyed furnishes such a distinct market, and the service of carrying goods to it is paid for by a distinct set of customers. It follows, therefore, that some rates can be cut without affecting others, and they regularly are so. The second condition, that of bringing the carrying capacity of railroads into the fullest possible use, is attainable, but it is very remote. At times there is a congestion of freight and, in general, the capacity of existing plants is more nearly used than it heretofore has been; but by an addition to the rolling stock they could carry more than they do and the additional traffic would cost far less than the portion already carried. Moreover, with no addition to the rolling stock, very considerable enlargements of traffic could at many points be made. Thirdly, competition between railroads is not at present effective enough to bring about a reduction of the higher charges and make returns and costs simple. Combination takes place long before the discriminating charges are abandoned. Low-grade freight continues to be carried side by side with the high-grade which pays better. Charges to terminal points continue to be low, while charges to intermediate points are high. In a sense one may say that a tendency to discontinue these practices exists, but it is a tendency that is so effectually resisted that its natural results are only in small part realized. If a dam is built across a reservoir, holding the waters on one side ten feet above those on the other, one may say that the waters have a tendency to reach a uniform level, since the power of gravity is exercised in that direction; but the dam baffles the tendency. And so in railroad operations something interferes which checks the force of competition or removes it altogether, long before the discriminations in freight charges are removed or very much reduced. _An Intermediate State made relatively Permanent._--As we have said, the condition of traffic on railroads is analogous to what in the case of manufacturers and primitive carriers would be regarded as a transitional state soon to be left behind; but in the case of railroads it is relatively permanent. It is the condition in which certain natural economic forces are working vigorously, and, if they were not counteracted by other forces, would end by making natural adjustments and establishing normal rates for the carrier as well as the manufacturer. In this intermediate state the natural forces are counteracted and the adjustments are never made, and what we have to study is the degree in which they are approximated. [Illustration: C | | | HIGHWAY | | A--------------------------------B RAILROAD ] _A Simple Case of Special Costing Applied to Certain Traffic._--We will suppose A and B are connected by a railroad, while C and B are connected by a highway over which transportation proceeds by the primitive means of horses and wagons. It is like one of the cases we have already stated, with the exception of the fact that the carrier over the longer route is a railroad. The limit of what the railroad can get is the natural difference between the cost of making the goods at A and the combined costs of making them at C and carrying them to B. This definitely limits the railroad charges. Whatever difference of cost there is the railroad can get if it chooses, and barring any deduction it may make in order to induce production at A and make traffic for itself, it will get it. The rate which is fixed for the railroad may be sufficient to cover the total costs chargeable to this portion of its traffic on the simple and _pro rata_ plan of costing, or on the other hand, it may cover only a portion of the fixed costs or no portion at all. This means that the standard which is set by the differing values of the goods at A and at B may or may not yield a profit to the railroad. If it is so slight as not to cover even the variable costs of carrying the goods, the railroad will not carry them, and the supply will be allowed to come from C rather than from A. If it covers more than these variable costs, the road will accept and carry the goods. If the traffic affords any appreciable margin above the variable costs, it will be the policy of the railroad to make its charges low enough to attract the traffic, and this will slightly reduce the place value of the goods at B and bring it below the cost of procuring them from C. The railroad will thus secure the whole traffic to the exclusion of that which came from C. If the costs of making the goods at A and C are alike, then the charge for carrying from A to B will be just enough below the total costs of carrying in wagons from C to B to stop the carrying over this shorter route and appropriate the whole business; but this charge may not cover total costs of carrying from A. It may yield only a slight margin above the variable costs attaching to this part of the railroad's business. It thus appears that this carrier can with advantage accept the freight at a rate that by a perfectly normal bookkeeping is below cost, while the teamsters on the road from C cannot do this. [Illustration: C | | | RAILROAD | | A--------------------------------B RAILROAD ] _A Second Case in which Carrying is done for Any Amount above Variable Cost._--Let us now suppose there is a railroad from C to B as well as one from A to B. There is now competition between makers at A and carriers from A to B, on the one hand, and makers at C and carriers from C to B, on the other hand; and whichever of these quasi-partnerships delivers the goods at B at the cheaper rate gets the whole traffic. By the terms of our supposition the makers in both places are offering goods at cost, and any cutting of rates that is to be done must be done by the carriers. To reduce the prices of the goods at the mills in either locality would put some of them out of business. We will assume that there is no consolidation and no other means of concurrent action between the railroads, and that the whole traffic will thus go to the route over which the lower rates are made. For simplicity we will still adhere to the supposition of equal costs for manufacturing and of unequal costs for carrying. As the charge for carrying goes down, one or the other of the railroads will reach the point where the variable costs of this traffic are barely covered, while on the other line they are more than covered. Where rivalry is not tempered in any way whatever, the charge made by competing roads falls to a level at which returns only cover the variable costs incurred by one of the competitors, though it may return somewhat more in the case of the other. _How Fixed Costs are Met._--This implies, indeed, that the fixed charges of both roads must somehow be met by the returns from other traffic; and this supposition is in accordance with the facts. A freight war may temporarily carry rates to a level where some traffic does not cover variable costs and where total traffic falls short of covering total costs. Such a situation cannot long continue, and the natural adjustment, under active competition, is one at which rates on the traffic for which the two lines are contending are just below the variable costs incurred by one line but above those incurred by the other. There is nothing to prevent the stronger railroad from thus reducing its rates, attracting to itself the whole of the traffic, and putting an end to the rivalry of the other line. This would mean bankruptcy for that line unless it had other sources of income. _The Effects of Bankruptcy on Costs._--Bankruptcy means a scaling down of the fixed charges of the railroad to such a point that the total traffic can meet them; but it does not enable the company to reacquire business that will not yield enough to cover variable costs. Adhering to the supposition that there is no mutual understanding, no pool, and no other approach to consolidation between the rival lines, we may safely say that the general rule which elsewhere governs rates holds true here. Two roads actively competing for identically the same traffic tend to bring charges to a level at which the variable charges entailed by this traffic on the one route are not quite met and the traffic passes to the other line.[1] [1] If we wish to vary our supposition that the cost of making the goods at A and at C is the same, we have a modification of the case we have stated. If it is much cheaper to make them at A, the railroad that carries these goods from there to B may charge more for carrying than does the one that delivers the goods made at C. It is possible that the difference between the costs of making at the different points may tell decisively in favor of the longer route, and it may be the railroad from C to B that first reaches, in its charges, the level of variable costs and sees its traffic handed over to its rival. [Illustration: C | | | RAILROAD | | RAILROAD | A-------------------------------B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] _A Principle governing Competition between Railroads and Carriers by Sea._--In a third case there may be between A and B a railroad and a water route also, while between C and B there is a railroad only. On the supposition we have made,--that competition between carriers by water has done its full work,--the charge for carrying anything by water from A to B must be sufficient to cover a _pro rata_ part of the total costs. That may be sufficient to cover the merely variable costs entailed on the railroad, or it may not. If it does not, the railroad will not take any portion of the business except what it may take by reason of the greater speed with which it can transport the goods. If, however, the total costs of carrying by water exceed by a tolerable margin the merely variable costs of carrying by land, the railroad will be able to take the traffic. If this traffic goes to the water route, the charge made by the railroad from C to B is adjusted by a simple rule. This railroad can get the natural difference between the cost of the goods at C and the cost of similar ones made at A and carried by water to B. If the railroad gets the traffic between A and B, and the water route is abandoned, the case becomes the same as that which we have already considered,--the transporting is done at a rate which prevents one of the lines from covering its merely variable costs and secures all the traffic for the other line. The carrying from A to B goes by land or by water according as the variable costs, in the one case, or the _pro rata_ share of total costs, in the other, are the less; and nothing can be carried from C to B unless it can be delivered at B at a price as low as that of goods made at A and transported at the rate just described. If the costs of making at A and C are equal and there are the three carriers seeking traffic, as assumed, the result naturally is to give all the business to the one who will bid the lowest for it. Either railroad will bid as low as the variable costs which the traffic occasions; while the owners of ships will bid no lower than the rate which covers costs of both kinds.[2] [2] If carriers by water are in that intermediate state in which their capacity is only partially used, they also may offer to take some traffic for an amount which only covers variable costs; but this condition does not naturally become in their case semipermanent, as it does in the case of railroads. [Illustration: RAILROAD _____ __________________/ \ / \_ __/ \___ A __ __ B \ / \ / \____ / \___________________/ RAILROAD ] _The Case of Railroads having Common Terminal Points._--In the fourth case there are, besides the other carriers, two railroads between A and B which compete for the traffic at these terminal points, but not at intermediate ones. Their facilities for through traffic are alike. The local traffic on the different lines is unlike, since it is affected by the character of the regions through which the railroads pass; but the charges made for local traffic are governed by the comparatively simple principles which we first stated. In contending for freight to way stations we may say that the railroad has to compete with wagons upon the highway, but with nothing more efficient. The charges for local freight may therefore be extremely high, while, if the railroads are really competing as vigorously as pure theory requires, and if the normal results of competition are completely realized, the rate which can be maintained between A and B for any articles carried will be no higher than those which cover the variable costs entailed on the route which is the less economical of the two. The line to which this test assigns the traffic between A and B must then stand the further tests we have described--those involved in contending for business with carriers using respectively the water route and the railroad from C to B. _A Condition leading to a Reduction of Fixed Costs._--It is safe to assume that one of the two railroads from A to B has more local traffic than the other. It may be that even with this advantage its total returns of all kinds may fall short of covering its total outlays. In that case the total returns of any less favorable route must fall still further short of the amount necessary for covering all outlays; and if we adhere to the assumption that neither consolidation nor anything resembling it takes place, we have a case in which both railroads must undergo reorganization. The fixed charges of the better route must be scaled down and the creditors of this railroad must accept the loss, while on the other route the fixed charges must be reduced still more and the creditors must suffer a larger loss. It goes without saying that the prospect of such a calamity means consolidation. It is evident what alternative competitors face in cases in which heroic competition goes on to the bitter end. As a rule this is an unrealized alternative. The mere prospect of the calamity connected with it is bad enough to put an end to the independent action of the different railroads. With the facilities for combination which now exist a far smaller inducement suffices to bring this about. [Illustration: RAILROAD ___________________________________ A ___________________________________ B RAILROAD ] _The Case of Railroads whose Entire Routes are Parallel._--We have to consider only one more typical case in order to have before us a sufficient number to establish the general principles which govern the charges for the carrying of freight by railroads. Variations innumerable might be stated; and, indeed, the experience of the railroad system of this country affords the variations and reveals the results which follow from the conditions they create. The railroads may be strictly parallel lines, pursuing the same route and competing for local traffic as well as for through traffic. If the case we lately examined insures consolidation,--and indeed all of the cases we have stated impel the companies powerfully toward it,--this last case makes assurance doubly sure. Strictly parallel railroads competing for traffic over their entire routes and neither uniting nor showing any of the approaches to union would be an impossibility. Persistent competition would then mean reducing all charges to the level fixed by variable costs, which would leave no revenue whatever to cover fixed costs, and would send the companies into a bankruptcy from which even reorganizations could not relieve them, since they could not annihilate all the fixed costs. _A Case of Arrested Development._--It is clear that, in the entire policy of railroads, the fact that their capacity has never been fully used plays a highly important part. It makes the distinction between fixed costs and variable ones a leading element in the adjustment of charges. With the capacity of railroads completely used, as is that of a ship which carries a full cargo at every voyage, the distinction would lose most of its importance. More business would then require an addition to every part of the plant and would thus entail new fixed costs which would have to be charged against the new business. As the traffic of any railroad grows toward its maximum, the cost which each separate addition to it entails grows larger and larger. When cars are few and are only half filled, an increment of traffic entails a very small increment of expense. When the cars are filled and new freight requires the purchase of more of them, the cost of this addition to the traffic becomes greater. When further additions to the freight carried require additions to trackage, yard room, storage room, etc., they cost far more than the earlier additions; and new increments of freight come, in the end, to cost very nearly as much per unit as the general body of the previous traffic when all outlays were charged against it. The railroad approaches the condition of the full ships referred to, in which further cargoes require further ships, with all the outlays which this implies. The distinction between different kinds of costing is gradually obliterated, and railroads steadily draw nearer to that ultimate state which other carriers more quickly approach, in which each part of the freight carried must bear its share of the total costs entailed. Long before that state is reached, however, combination ensues, and the movement of freight charges toward their static standard is arrested. [Illustration: C | | | HIGHWAY | | RAILROAD | A-------------------------------B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] _The Standard of Freight Charges under a Régime of Monopoly._--A consolidation so complete that it would merge all rival lines under a single board of control and pool all their earnings would restore the early condition described in connection with one of our illustrations--that of the single railroad between A and B, having only sailing vessels and wagons as rivals. It is able to charge what the traffic will bear in a simple and literal sense. The consolidated lines can, if they choose, get for each bit of carrying the difference between the value of goods at the point where they are taken and their value at the point where they are delivered. These values are approximately what they would be if no railroad existed. The carrying done by the railroad itself does not enter into the making of them. The natural value of a commodity at A is what it costs to make it there, and the value at B is either the cost of making it at B, or that of making it at C and carrying it in wagons to B, or that of making it at A and carrying it by water to B. In any case there is a natural and simple process of fixing the costs both at A and at B, and the difference between them is the limit up to which the railroad can push its charges if it will. Where the business which furnishes the freight is not fully developed, the railroad may moderate its charges for the sake of letting it grow larger. The hope of increased traffic in the future may cause a reduction of demands in the present. We shall see what other influences may keep the charges below their possible level; but the natural difference between two local values of goods is the basis of the charge for carrying them from one point to the other. Consolidated lines, if they had as perfect a monopoly of carrying by railroad as has the single line in our illustration, would base their charges on this simple principle, though for a number of reasons they might not take all that the principle would allow. _How Imperfect Consolidation Works._--Imperfect consolidation, when it follows a period of sharp competition, has to deal with obstacles which prevent a complete carrying out of this policy. Many rates have become far lower than the rule of monopoly would make them, and there are difficulties in the way of raising them. A weak combination of parallel lines may keep its charges within bounds, partly from a fear that larger ones may afford too great an incentive to secret rate cutting and may so break up the union, and partly from a respect for what the people may do if the exactions of the railroads become too great. The more complete forms of consolidation have not the former of these dangers to fear; and if, without being restrained by the state, their charges continue moderate, it is mainly due to the fact that other lines less firmly consolidated are unable safely to make a radical advance of rates, and that this often prevents such a course in the case of lines which would otherwise be able to take it. _Limits on the Charges of a System of strongly Consolidated Lines._--This means that where a great system of railroads occupying the whole of a vast territory is so firmly consolidated as to have a complete monopoly of carrying by rail within the area, it is still affected in indirect ways by the possible rivalry of lines altogether outside of its territory. An excessive charge on freight from Chicago to New York might induce carrying by rail from Chicago to Norfolk and thence by water to New York. It might cause grain, flour, etc., to be shipped to Europe from Southern ports rather than from those on the Atlantic coast. These cases and others do not fall under principles essentially different from those already stated, but they call for the application of the same principles in complex conditions which our study is too brief to cover. There is a supposable case in which nearly all that could be secured by any railroad connecting Chicago with the Atlantic coast, even though every line in the territory between them were the property of one corporation, would be the variable cost of carrying goods over a line running to a port on the Gulf of Mexico. Reflection will easily show how the principles already stated apply to this case and others. _Effects of a General and Strong Consolidation._--With all the lines in this country and Canada in a strong consolidation, the advance of rates to, or well toward, the limit set by the principle of natural place value created would inevitably come unless the power of the state should in some way prevent it. The railroads would be able to get the difference between the cost of goods at A, in the illustrative case, and the cost of making or procuring them at B without using the connecting line of railroad. When the appeal to the state is only imminent,--when the power of the government is not yet exercised, but impends over every railroad that establishes unreasonable charges,--the rates may be held in a fair degree of restraint. A wholesome respect for the _possibilities_ of lawmaking here takes the place of actual statutes. A respect for the law appears in advance of its enactment and may amount to submitting rates in an imperfect and irregular way to the approval of the state. This effect, when it is realized, is to be credited in part to laws which will never be enacted. The merely potential law--that which the people will probably demand if they are greatly provoked, but not otherwise--may be a stronger deterrent than the prospect of more moderate legislation. In general a considerable part of the economic lawmaking of the future will undoubtedly be called out by demands for action that is too violent to be taken except under great provocation. The dread of the extreme penalty insures a cautious policy in increasing charges which have been established under a transient régime of competition. Partial monopolies adhering to rates many of which were established under the pressure of competition--such are the railroad systems of America. The existing condition shows some of the effects of competition which has ceased and of legislation which has not taken place. As the combinations shall become greater and stronger, the situation everywhere will become more and more akin to that which existed in a local way when a single line of railroad had no effective competition, and the charges which the traffic would bear were fixed in the way we have described and absorbed the place value which the carrying created. It is a method which exposes the public to an extortion which, though not unlimited, is unendurably great. Consolidation, therefore, means the control of rates by the state; but it is essential that this control be exercised with due regard for the economic principles which rule in this department of industry. Thus only can there be secured the results of a natural system unperverted by monopoly. The principles which a study of simple cases suffices to establish are as follows:-- 1. Freight charges are essentially a variety of price. They express the exchange value of place utility. 2. The static standards or norms toward which these prices tend are fixed in the same way as are other static standards of value,--by a rule of cost,--though in the case of railroads the working of this rule is exceptional. 3. When carrying is done by simple means and by competing carriers, the ultimate basis of charges is the cost of the carrying; and this is estimated in the simple way in which, under perfectly free competition, the cost of making commodities is estimated. The total outlay is charged against the total product. 4. A single railroad between one point and another, when it is not affected by the rivalry of any other railroad, can get for its service the difference between the cost of goods at the place where they are made and the cost at the point of delivery, on the supposition that they would either be made at this point or carried thither by more primitive means. Under such a partial monopoly the costs incurred by the railroad itself do not directly set the standard of its charges, but other costs do so. 5. In this case the so-called variable costs incurred by the railroad furnish a minimum limit below which its charges cannot go, but to which they tend to go in the case of traffic which cannot otherwise be secured. 6. This place value which the railroad can confer on the goods is small (1) when the cost of making the goods at their place of departure is not much less than that of making them at their place of destination, or (2) when it is not much less than the cost of obtaining them from a third point, or (3) when it is possible to carry them from the place of their origin to their destination by water or by any other cheap means of transportation. 7. Variable costs are positive additions to the total outlays previously incurred by a railroad, and they result from adding a definite amount to its previous traffic. They are less than proportionate parts of total costs, including interest, some part of operating expenses, cost of maintenance of roadway, etc. 8. The comparative smallness of the variable costs is chiefly due to the fact that the carrying capacity of railroads is only partially used. These costs become relatively larger as traffic increases, and would practically coincide with proportionate shares of total costs if the traffic should reach its absolute maximum. 9. If the place value above defined is large enough to cover the variable costs attaching to certain traffic and afford any surplus whatever, the railroad usually takes this traffic. 10. On the business which it gets the charges vary widely and, as it appears, capriciously, but they are at bottom governed by the economic principle stated--that of place value as established in ways in which the charges of the railroad itself do not figure. 11. Competing railroads tend to bring rates downward toward a minimum which is fixed by the merely variable costs of the carrying as done by one or more of the railroads themselves. 12. The competition between railroads is arrested while they are not using their full capacity, while the merely variable costs of an increment of traffic are still abnormally low, and while many rates are so. 13. Railroads which compete for freight between terminal points are strongly impelled toward consolidation; and those which compete along their entire lines are forced to resort to it. 14. Consolidation in its more imperfect forms tends to establish rates that are abnormally high, but this tendency is somewhat checked by the danger that the combination may be broken by a desire to foster business in a section of country and by the indirect influence of lines outside of the territory controlled by the consolidated roads. 15. In its stronger and more extended forms consolidation leaves the people with no adequate safeguard against extortionate charges except as this is furnished by the intervention of the state; and this needs to be effected with an intelligent regard for the natural forces which are at work amid the seemingly capricious irregularities in the present system of charges. _The Aim of Regulation by the State._--An aim of a government, in all of its economic policy, is to insure the best use of the national resources, and this can often be done by keeping alive free competition. Where the rivalry of producers is active, a law of survival guarantees that the more economical method of producing an article shall displace the inferior one. When the choice lies between using a quantity of free and disposable labor in making goods in a certain market and using it in making them elsewhere and carrying them to the market, the alternative which gives society the most that it can get by any use of its productive resources is the one that is spontaneously selected. _How an Extortionate Local Charge may sometimes be reduced without Injury to a Railroad._--A low charge for freight carried from A to B coupled with an extortionate one from A´ to B might preclude making the goods at A´, though they can be made there at excellent advantage and the interests of society will soon require that they be so. This situation can exist only so long as traffic is slight between A and A´ and greater between A´ and B. The growth of traffic over the former section of the route will make it desirable for the railroad to raise its rate over that portion. If, under compulsion or otherwise, it reduces the rate from A´ to B sufficiently to permit the production of the goods at A´, it will gain a profitable traffic between A´ and B at the cost of giving up a relatively unprofitable one between A and B. [Illustration: A---------------------------B A´ ] _Variable Costs a Proper Basis for Some Charges._--It makes for general economy to pay respect to the distinction between fixed and variable costs and let much freight be carried for anything it will yield above the variable ones. If ten units of labor are required for making an article at B and only five at A, and if a railroad between these points, whose capacity is not fully utilized, can carry the article from A to B with an expenditure of two additional units of labor, then society can best get the goods for use at B by spending these seven units in the making and carrying. It would take ten units to make them at B, and to society itself there is a saving of three units from making them at A and carrying them at a special rate to B. Till the railroad is more fully used for other purposes this source of economy will continue. Though the rates charged for this freight would bankrupt the railroad if they were applied to its entire traffic, it is best for the railroad to take this special bit of carrying at any rate exceeding the wages of the two units of labor; and for the time being this is the best way to use some of the social resources, since it gives at the point of delivery and use more goods for a given outlay than could have been had in any other way. _Why Consumers may suffer while Particular Producers may be Favored._--It will be seen that this principle affords an inducement for making a special classification of certain goods and carrying them for less than merchandise of a generally similar kind is carried for. It is a policy of "making traffic" which costs little and is worth more than it costs both to the carrier and to society. This incentive for reducing charges does not operate as strongly in the case of goods carried to consumers who are forced to live on the route. They are held there by the general causes mentioned at the beginning of the preceding chapter, and must pay the tax which the railroad imposes on them. The only limit on this tax is the possibility of otherwise procuring the goods or of moving out of the territory. The ultimate possibility that population may not grow under a régime of extortion and that both freight traffic and passenger traffic may be held within small limits imposes some check on the railroad's exactions. The company may find it worth while to foster to some extent the growth of population; and to favor producers of certain goods in order to induce them to locate their establishments on its line, and the result of this may be good for society; but there is no way of securing a general good from the heavy tax on the rest of the traffic unless this has been necessary to insure the existence of the railroad itself. In that case there may be a temporary necessity for it, which will disappear as traffic grows. _The Policy of the State in Dealing with Low Charges based on Variable Costs._--The interest of railroads which have a monopoly of their routes is to advance the rates on through traffic. We have noticed a possible case in which some equalization of charges by occasional reductions of local rates takes place. An increase of charges over long routes not made necessary by any pressure of business which overtaxes the railroad's carrying power would of course be injurious. Moreover, carrying full loads does not constitute such an overtaxing as calls for the higher rates. There are times when present supplies of cars and engines may not be able to move more freight than they do; but in that case more of them are called for. Only when the point is reached at which providing for this through traffic in addition to the local freight entails additions to the permanent plant and involves costs that exceed the return from the through business, is it justifiable, in the interest of social efficiency, to advance such charges. In preventing such an advance under other conditions a government helps to secure an approach to a natural economy and a maximum of production. _When, in the Interest of General Productivity, a Reduction of Local Charges is called for._--We saw that carriers of a primitive kind competing with each other would put every charge, local or otherwise, on a basis of its proportionate share of total costs. The traffic as a whole would return enough to cover all the outlays, and each part of it would yield its share. This is the ideal of effectiveness for railroads, as well as for ships and wagons. The attainment of the ideal without a regulation of charges by the state is never to be expected. One feature of this normal condition is that, where no special improvements have recently been made, total returns should just equal total costs, in the sense in which terms are used in static theory--that sense in which all interest charges and all expenses of management figure among the costs. No net profit for the _entrepreneur_, but full interest for the capitalist and full wages for all varieties of labor, is the rule that gives the static measure of normal returns. If a state shall slowly reduce the charges for local freight, while holding unchanged those for through traffic,--all the while allowing the total returns of the railroads to cover what we have defined as total costs,--it will do all it can toward securing an approximation to the condition which affords the largest product of social industry. It will help to make the resources of the people do their utmost in yielding an income. Total returns covering all costs, a reduction of those charges on local traffic which have prevented industries from springing up at intermediate points between favored centers, a gradual increase of local production without any positive repression of production elsewhere--such are some features of the general change which the future should bring and which only the power of the state can make it bring. _How the State may secure what Competition secures in Other Fields._--In general industry the rivalry of entrepreneurs carries prices to a level fixed by costs, but in transportation the rivalry has so largely disappeared as to prevent such an outcome. The state cannot restore much of the vanished rivalry and would cause an unnatural condition if it did so. We have seen toward what an abnormal level of costs a sharp "freight war" carries rates. What the state can do is something which an instinctive judgment of the people is impelling it to do; namely, to adjust rates directly and bring them gradually toward the standard to which competition, if it were working as it elsewhere works, would automatically bring them, namely, that at which wages and interest are fully covered. A surplus above these outlays could always be temporarily secured wherever a special economy had been effected, and the source of legitimate profit would be open to carriers as it is to producers generally. How much should be reckoned as interest depends on the question how the capital itself is estimated, and here again the instinct of the people has been correct. It will not accept as a measure of true capital the market value of all the stocks and bonds the railroad has issued. The quotations of the market make the total values of the stocks and bonds equal a capitalization of its total earnings, and these may include a profit due to monopoly. If a state were to figure the capital in this way, and then so adjust rates as to allow ordinary interest on the sum thus computed, it would merely leave total returns as they are. It might change comparative charges, but not the sum total of all of them. _How Capital should be Estimated._--In that static condition in which, as we have shown, capital is as productive in one subgroup as in another, the capital is first measured by the cost of the goods that, in the inception of the industry, embody it, and in static studies this cost is regarded as constant. Returns from different outlays are equalized, and a dollar invested in one kind of business then yields as much in a year as a dollar in any other. In a dynamic state the cost standard still prevails, and as the tools of production become cheaper, in terms of labor, it takes more of them to represent the same amount of capital that was originally invested. What it would at any time cost to duplicate every item in the equipment of a business measures the capital it uses. Nothing but a failure of competition in the case of railroads prevents the application of this standard to them. Monopoly makes earnings more or less independent of sums invested and causes purchasers to buy stock at rates that are independent of costs of plant and equipment and are fixed by earnings themselves. _The Process of Estimating Capital on the Basis of Cost._--If we undertake here to do by public authority what competition elsewhere tends to do, we shall have to restore the standard based, not on the original cost of the railroad's substantial property, but on the cost of getting another that would be equal to it in working efficiency. The plant is worth what it would naturally cost to duplicate it; and an average rate of interest on that sum is the natural return from it. There are ethical claims which are entitled to respect and which preclude any sudden reduction of the value of a railroad's properties; and, moreover, the end in view can be attained in a way that will not necessarily take anything from the absolute amount which they are now worth. If the amount of dividends remains fixed, the increase in the actual value of the plant itself will bring these dividends into the proper ratio to it. The land that the companies use is becoming more valuable. Measured by what it would cost to duplicate it, it represents a larger and larger amount on the companies' inventories. If the equipment also is enlarged as traffic grows, the entire sum on which interest and dividends are computed becomes continually larger. If the interest and dividends earned by the plants now in existence remain fixed in absolute amount, they will become a smaller and smaller percentage of the real capital of the companies. Merely letting railroads earn the amount that they do at present would bring the net incomes after some years to the same rate--the same percentage of invested capital--that the income from other capital represents. New plants and enlargements of old ones should be allowed to earn enough to furnish an incentive for providing them as fast as the needs of the public require it. _How Insuring a Fixed Amount of Total Earnings would affect the Rates charged for Freight._--It goes without saying that the general increase of traffic, while the freight charges remain the same, increases the net earnings of the carrying companies. Therefore the policy of keeping the net earnings at a fixed total amount would mean a reduction of rates for freight and passenger service. We do not here raise the question how much reduction will be required for the purpose in view--that of transferring to the people at large whatever now constitutes a genuine monopoly profit. In the case of some lines there is, it is safe to say, no such profit, and it will be impossible to tell how much of it elsewhere exists till some careful appraisal of plants and equipments, on the basis of the cost of duplicating them, shall have been made. What we need to know is that, by the aid of such an appraisal, the state can, if it will, secure in the department of carrying the result which is automatically secured elsewhere, namely, the prevalence of charges which afford normal returns on invested capital as well as wages for every kind of labor. _Elements of the Problem not included in a merely Economic Study._--It will not fail to occur to any reader that in making the present study of railroads a very general and purely economic one we leave out of account some facts of great importance. We take no account of corruption within the corporations which do the carrying, nor of corruption in the relation between them and the officials of the state. Stockholders within the corporation are likely to have their interests betrayed by those who are appointed to take charge of them, and citizens of the state are likely to have their greater interests betrayed, in a like manner, by their appointed custodians. We cannot here discuss the various plans by which directors plunder their own corporations, nor the ways in which public officials betray the people. All of these abuses are disturbing influences in the economic system; and all of them interfere with the adjustment which gives the highest productive efficiency, and contribute a full share toward putting the social order in danger. All are, however, so obviously criminal, if they are judged by the spirit of the law,--not to say by the letter of it,--that it is better to leave the discussion of the mode of suppressing them to legal and political science. _A Practical Mode of Insuring an Approach to Normal Rates for Transportation._--When competition rules, it enlarges the supply of a dear article till the price of it is normal, and it increases the capital in a profitable business till its earnings become so. In the case of railroads this does not automatically take place, but the result of it all--adequate service and normal charges for it--can be directly secured by the state. Charges that have been made reasonable by competition may be left as they are, and those that are disproportionately high may be gradually lowered. The growth of traffic may be trusted to keep the total earnings of the companies' present plants at the amount at which they now stand, in spite of these reductions of rates; and enlargements of the plants may be permitted to earn further sums which will attract capital and keep the service abreast of the public need. All this will require expert skill of a very high order. For the purpose of the present work it is enough to say that such a course as this is the only one which will insure in transportation the results which competition elsewhere yields. It will secure both rates and service which the civil law calls "reasonable" and economic law calls "natural." CHAPTER XXV ORGANIZATION OF LABOR What an economist wishes first to know concerning the organization of labor is whether it is a natural phenomenon which should be welcomed and left to itself. Does it help to establish wages on the basis of the productivity of labor, and does it do it without much reducing that productivity? We shall find that it works both well and ill in these particulars and needs close study and careful regulation. What laborers themselves ask concerning the organization of men of their class is simply what power it has to raise their own wages; and we shall shortly find that it has a certain power when it does not invoke the principle of monopoly and a much larger power when it does so. We shall find that the benefit from mere organization may be extended to the great majority of laborers, while that which depends on monopoly is confined to relatively few and involves an injury to the remainder. _The Static Standard of Wages of Unorganized Labor._--In that static state toward which society is always tending, and in which the normal standard of wages is completely realized, men are supposed to get all that they produce. The law of marginal productivity of labor works, as it were, _in vacuo_, and gives an ideally perfect result. Every unit of labor receives what a marginal unit produces. _Actual Pay of Unorganized Labor._--A static assumption excludes enforced idleness on the part of able-bodied men. The changes which throw such men out of employment are not taking place, and there is no reserve of efficient but idle labor. In the actual state, which is highly dynamic, such a supply of unemployed labor is always at hand, and it is neither possible nor normal that it should be altogether absent. The well-being of workers requires that progress should go on, and it cannot do so without causing some temporary displacements of laborers. Though no individual were long out of employment,--though a particular man were in this condition only briefly and during the period occupied by a transit from one occupation to another,--there would always be in the general market some unemployed men. If we throw out of account those who are idle because of personal disabilities, it will remain true that really efficient men can nearly always be had, if only a few are at one time needed. The presence of even a few men able to do good work and not able to get employment is often sufficient to make individual bargaining work unfairly to the laborer. When the employing of one man is in question, the employer has other alternatives, and the man may not have them. The employer may much more readily set men bidding against each other for a vacant place than any of the men can set employers bidding against each other for an idle man. This strategic inequality between the parties in the wage contract becomes greater as the supply of unemployed men becomes larger. At some times and places it may force the pay of many workmen downward toward a minimum set by what the unemployed will consent to take. _The Effect of Local Organization._--Organization means collective bargaining and tends to equalize the strategic positions of men and employers. Where an entire force of workers must be dealt with at a time, the employer has not the alternative ready to his hand which he would have if he had only to employ a single one. If his employees strike, he cannot at once secure another force large and efficient enough to meet his needs. If his men allow their places one by one to be filled, the strike will be disastrous to them, indeed, but it will also be a misfortune for the employer. His new force will be inferior to his old one, first, because many of the new men will be personally inferior to the old ones, and secondly, because as a body they lack effective training and will not work together as efficiently as did the old force. He can afford to pay for the disciplined workers the amount that the new force will produce with two plus marks attached--one representing the superior personal quality of the former employees and the other representing the value of discipline. In other words, he can afford to make two distinct additions to the amount that unemployed men are worth to him in order to retain his old employees. This is on the supposition that it is possible to gather from the force of idle men enough to operate a single establishment. Without organization and by means of individual bargaining, wages are drawn downward toward the level set by what idle men will accept, which may be less than they will produce after they receive employment and will surely be less than they will produce after they have developed their full efficiency. With organization which is local only, and with collective bargaining that goes only to the extent of adjusting the pay of men in one establishment, this pay comes nearer to the standard set by the productivity of labor than it would if bargains were individually made. The employer balances in his mind the value of a new and raw force and the value of a selected and disciplined force, measures the difference between these values, and will often pay a rate that is between the two amounts and under average conditions is likely to approach the larger of them. _Wages as adjusted by a General Organization of Labor in a Subgroup._--Where organization goes to the length of uniting all the employees in a particular industry or subgroup, the situation is unlike the foregoing in an important particular. No quick filling of the places which the men may vacate with altogether new workers is possible. The employers are not so situated that they can compare the old force with a new one, measure the difference in their values, and govern their conduct accordingly. The training of an entirely new force is indeed a remote possibility, if the business can wait for it, but it can seldom do this; and a strike that runs through a subgroup presents to employers the alternative of winning the workers by concessions or allowing their business to stop. If it stops, it becomes a question of endurance between the employer and the employees, in which the employer has the advantage so long as the public does not interfere. We shall recur to this condition when we study the effectiveness of strikes and boycotts under various conditions. Under all three of the conditions we have just described, the static standard of wages--the final productivity of social labor--still exists; and the actual pay of labor tends toward it, but differs from it by varying amounts, according as labor is unorganized, locally organized, or organized throughout a subgroup. In the first case the worker may get materially less than the standard amount; in the second case he may get something closely approaching it; and in the third case, for reasons to which we shall later give attention, he may be able to get the full amount and somewhat more. A particular employment which is strongly organized and which makes the utmost use of its organization is often able to carry the pay of its employees to a level that is distinctly above that set by the productive power of _marginal social_ labor. Nevertheless, the amount of this overplus which the favored worker gets is limited, and the standard fixed by marginal productivity is one on which the pay of these workers and of all others depends, though it may not coincide with it. _The Power of a Universal Organization of Labor._--In the days when the wages fund theory held sway it was believed that organization could not materially advance the interests of labor as a whole, since it could not add anything to the fund which was destined in any case to be divided among the laborers. Now that another theory of wages is generally held, it is still clear that what organization can do for the entire working class is limited. By no possibility can it insure a rate of pay that will permanently exceed the product of labor, since employers would then be interested in reducing the number of their workmen and so raising their product _per capita_ to the level of their pay. This would result in a large force of idle laborers, whose competition would have its depressing effect on the labor market. Up to the natural limit set by the specific product of labor a universal organization might successfully carry its demands. Moreover, this result would require no use of force--no "slugging" of non-unionists, since there would be none to be slugged. The mere fact of a universal organization maintaining discipline and preventing breaks within its own ranks would suffice for the end in view--the maintenance of pay that should conform to its natural standard. The supposition of a universal organization of labor has at present only a theoretical interest. What society has to deal with is an organization that includes a small minority of workers and is composed of separate unions which are endeavoring each to promote the interests of the men of its own craft. It is a type of organization which, instead of uniting all workers, makes the sharpest division between those in the unions and those outside of them, and creates a lesser opposition between the different unions themselves. _Organized Labor and Monopoly._--Actual trade unions do not always rely upon mere collective bargaining. They sometimes aim to secure a partial monopoly of their fields of labor; and as it is impossible to do this if unemployed men or men from other fields of employment are free to enter their territory, they must be kept out of it. They can only be kept out by some use of force, and coercion applied by the workers in a well-paid field to the men who seek to enter it during a strike is a part of the strategy of trade unions. _The Ground on which the Use of Force is Justified._--Organized laborers claim a right of tenure of their positions; they claim to own them much as a man, by right of prior occupation, owns a homestead. They claim the same right to repel intruders from their field of employment that a man has to drive interlopers from his grounds. "Thou shalt not take another man's job" is a recognized commandment on which they claim the right to act. _The Mode of Justifying the Use of the Force in Guarding Vacated Positions._--Coercion is a comprehensive term and does not always involve personal assault. What it inflicts on the recalcitrant may range all the way from social opprobrium and boycotting to literal striking, maiming, or killing. In every case it involves some injury and is contrary to the spirit of the law, unless the right of tenure can be fully established. If the employer has no right to turn off his men and take new ones, and if the new ones have no right to come at his invitation, there is a rude analogy between the effort of the non-union men to get the places and an effort to get away a man's farm. It is a matter of course that the employer may rightfully discharge men who prove worthless and fail to render the service which is contracted for. The question is whether he has the right to dismiss them when they will render the service only on what seem to him exorbitant terms. On this point the verdict of his own reason is extremely clear. To offer to render the service only on exorbitant terms has the same effect as to offer an inferior service on the original terms, and the right of tenure which the workingmen claim, if it exists at all, is contingent on the rendering of effective service on reasonable terms. On the supposition that they have owned their places at all they seem to their employer to have forfeited them when they have insisted on too high wages. On this point, however, the men's reason may give an opposite verdict, though it is based on the same principle. To them the terms they insist on may appear reasonable, and they then think that, because they are so, their ownership of their positions is valid and that other claimants are usurpers. Both parties in the dispute base their contentions on the supposed reasonableness of the terms they demand. _The Necessity for Knowing what Terms are Reasonable._--A momentous question both for society and for the working people is whether there is any way of ascertaining what terms are reasonable and securing conformity to them. What we shall find is that it is possible to keep in view the natural standard of wages, as in an early chapter we have defined it, and that it is possible, in the midst of the struggle of massed capital with massed labor, to secure a certain degree of conformity to this standard. It is possible so to shape the system that a wide difference between actual pay and standard pay will not exist, and that wages will everywhere tend toward their natural levels, as they did under that earlier régime before either the capital or the labor of a subgroup acted collectively. _The Attitude of the Community toward Striking Laborers._--So long as a local community sympathizes with the worker's dread of competition and tolerates his claim of ownership of his position, it does not utterly condemn and repress every use of force in asserting his claim. The local public is partly composed of friends or neighbors of the striking worker and is reluctant to interfere with the worker's effort to defend what he considers his property--that is, his right of employment in a business to which he is accustomed. The community sympathizes with his fear of the hardship which may result when employers freely utilize idle labor as a means of defeating strikes. On the other hand, even a local community realizes that much toleration of force means anarchy. If the violence is not resisted or repressed, the strikers acquire a monopoly that is not dependent on the justice of their claims. The whole question of reasonableness in the terms demanded is forcibly set aside, and the pay that is established becomes, not whatever a calm verdict of disinterested persons would approve, but what workers by brute force can get. Even a local public is unwilling to see the social order completely subverted and mob rule substituted, and it usually interferes when violence goes to that length; but in its unwillingness completely to repress disorder, on the one hand, or to leave it wholly unopposed, on the other, a local government pursues a wavering policy, now repressing anarchy and again leaving it to gather headway. It seldom affords full protection to the non-union men who work during a strike. Moreover, it is the habit of state governments not to interfere with local affairs until the public peace is endangered, and therefore not until the coercion of free laborers has gone to great lengths. The federal government only intervenes in great emergencies. Non-union men working during a strike are left largely in the hands of the local community, which often tolerates enough of violence to give to strikers a measure of monopolistic power. The wavering policy of the local community in regard to preserving the peace expresses a corresponding mental wavering. The public obeys no clear principle of action in this connection and merely allows some "slugging" when it sympathizes with strikers, but not, as a rule, when it does not. We have to see whether this rule has in it any germ of a legitimate policy. _The Sole Mode of Escape._--The sympathy in the case depends, as we have seen, on the off-hand impression of the people as to the reasonableness of the strikers' demands; and for such an impression there may or may not be an adequate ground. It is evident that no authoritative verdict has in these cases been pronounced. The only escape from the intolerable situation which is thus created is by testing the equity of the laborer's demands and adjudicating his claim to a tenure of his position. The possible method of doing this we will presently examine. It is clear in advance that what is to be done is to determine what pay is reasonable. The worker cannot rightfully retain the ownership of his job if he does not work properly; and he cannot so retain it if he works properly and claims exorbitant pay. Fair dealing between employer and employed must be attained if his tenure is even tacitly recognized. The worker who accepts a rate of pay that is pronounced reasonable may safely be confirmed in his place and protected from any persecution on the part of his employers. The worker who refuses a rate which some competent authority has pronounced reasonable thereby forfeits his right of tenure in a definitive way. His place is clearly the property of whoever will take it, and the state is bound so completely to preserve order as to make a new worker perfectly secure from injury. This means that it must do intelligently and thoroughly what a local community weakly tries to do when it lets strikers guard their positions if it sympathizes with their cause, and represses such attempts when it does not. The sympathy needs to be crystallized into a clear verdict as to the rightfulness or wrongfulness of the rate of pay demanded, and the local toleration of violence in cases where the men's demands appear just needs to become an open and frank assertion of their right to employment on the terms demanded; while the tardy repression of the violence in cases in which the demands seem unjust needs to become a prompt and complete repression of it. _The Preservation of the Mobility of Labor Indispensable._--Any use of force, anything, however slight, that deprives labor of its mobility, destroys the condition on which the law of wages is predicated. A perfectly free flow of labor from point to point in the industrial system is essential to a static state, and to any approximate conformity of actual wages to the static standard in a dynamic state. The plan which divides labor into sections and arrays one part of the force against another makes realization of natural wages impossible. While all differences of pay which correspond to differences of productive power are normal, those which are based on a monopolizing of fields of labor by some and the exclusion of others are abnormal. They cause the rich fields to be surrounded by impassable walls and force the bulk of the population to work on the outer and poorer areas. _The Wide Range of Difference between the Pay of Different Classes of Laborers under Trade Unions._--The possible range of the rise of pay which monopoly may insure for certain laborers is far greater than that which any action can secure for labor as a whole. Mere collective bargaining makes some difference, indeed, but where there is no attempt to exclude from a favored field workers of the poorly paid class, the range of difference is not great. To double the pay of laborers of every class would require more than the entire income of society, and yet it is possible for a few workers to make as large a gain as this. Some organizations without monopoly may keep the actual pay of labor somewhat near to its theoretical standard. With monopoly they may carry it far above the standard set by the marginal productivity of social labor. _The Differing Efficiency of Organization as used against Different Classes of Employers._--When employers are acting independently, a trade union which deals with them one at a time may very easily bring the pay of its members up to a certain average standard. A strike against a single producer may be very disastrous for him, since it may cause him to lose his customers. If the general state of business is good, he will pay all that he can rather than see business drift away from him, but what he can pay is somewhat strictly limited. He cannot safely give more than what is given by most of his competitors. Organization in such a case is a good equalizer of pay, and as its power is used against different employers successively, it suffices to raise general pay toward or to a standard set by the productivity of the labor. Moreover, as a rule, it can accomplish this without any appeal to violence. A modest and reasonable demand enforced by a wholly peaceable strike is likely to be conceded. _The Power of a Strike against All Entrepreneurs in a Subgroup._--A strike against employers in an entire subgroup may gain more for the workmen, but the more ambitious effort encounters stronger resistance. The employers, we assume, are competing still and have not the power which a monopoly would give them to raise the prices of their products. Nevertheless, they can concede somewhat more when they act together than one of them could concede separately. A concurrent raising of prices is entirely possible without any positive combination of the producers who follow such a course. Moreover, the strike itself, if it continues for any length of time, creates a scarcity of the products and a rise of prices. Though the employers in the end may concede what their workers demand, or some part of it, the settlement may not cost them anything, since the advance in prices may enable them to take all that they give their men out of the pockets of the public. The strike by a trade union against competing employers has as one ground of early success the employers' distrust of each other. The danger is that as soon as prices become at all firm, one or another of the employers may quickly make terms with his men in order to seize the opportunity for new business. For this very reason, however, the range of possible gains from a strike running through a whole subgroup is smaller than it would be if the employers were organized, so that all of them could safely wait for a larger rise of prices before making terms with their men. The possible increase of pay without a combination on the employers' side is distinctly larger than any which a strike against a single employer can usually secure. _The Power of a Strike against a Union of Employers._--Still keeping the supposition that there is no coercion invoked and that strikes are quite orderly, we find that they may gain more when employers are consolidated than when they are not so, but that they are likely to encounter still greater resistance. The demand--"Pay us more and charge it to the public"--may be conceded, and probably will be so if the employers dread the hostility of their own men and the action of the state in enforcing a resumption of business. If they have no such dread, their power to resist a strike is much greater by reason of consolidation. They can safely hold out long if the public will let them do it. No one of them is in any danger of seeing others take his customers. Their hold upon their constituency is secure, and their power to tax the constituency and make it pay for whatever a strike may cost is very great. A strike under such circumstances may win much for the men or it may win nothing whatever, and the difference between these results is mainly determined by the attitude of the people. If the government will hold its hands and let the producers work their will, they may (1) allow the strike to run for a time, concede something to their men, and raise prices enough to recoup themselves with a surplus; or else (2) they may let the strike run longer, till the men are tired out, take them back without concessions, and still put the same tax on the public as in the other case. _Effectiveness of Coercion as used against Non-union Men._--As a peaceful strike has different possibilities according as it is used against a single producer, a body of competing producers, or a consolidation of producers, so coercion employed against independent workers has correspondingly different effects in the three cases. When it is used in the case of a strike of the first class, it enables the men to carry their point more quickly, but does not materially increase the amount they can gain. If the independent producer is unable to run his mill till he makes terms with his original workers, he will be in greater haste to make terms, but the amount he can yield is limited almost as closely as before by the prevailing rate of pay. In the case of a strike of the second class which runs through a subgroup in which producers are still without union, coercion adds greatly to what the men may gain. It may fix and enforce a rate of pay which all employers must give, and circumstances will compel them to charge it to the public in whole or in part. The marginal producers who have no net profits must charge the whole advance to the public or go out of business, and the result may be that some of them may go out. The advance in the rate of pay conceded by others may come partly out of their own profits and partly out of consumers' pockets. With employers in a great consolidation the possible advance of wages is at its maximum. The employers are in a position to charge to the public all that they give to the men, and more. If the state allows them to do it, they may thrive by repeated strikes. Whether their men thrive or not depends on their power to bar other labor from their field and to live without work long enough to induce their employers to yield. The effect of coercion on the wages of non-union laborers means a lowering of their pay. It confines them to the less productive field which is open to them. ------- 1. _______ Wages of union labor which monopolizes its field and deals with competing employers. ------- 2. _________________ Wages obtainable by union without monopoly approximating the natural rate. 3. ----------------- Level of pay with no unions in the field. 4. _________ Wages of non-union labor excluded from the more productive fields. 5. _________________ Base from which wages are measured. The height of lines 1, 2, 3, and 4, above the base line 5, measures wages, and the length of the lines rudely indicates the numbers of workmen in different classes. The dotted lines above and below line 1 represent what union labor which maintains by force a monopoly of its field may be able to get from employers who are in a combination. It may be more than competing employers would give or it may be less. For men in strong unions who have _carte blanche_ to defend their fields, the policy of leaving other labor to its fate is overwhelmingly the more profitable. With a choice between gaining a hundred per cent in wages for ourselves or ten per cent for working humanity, self-interest speaks decisively in favor of the former alternative. In connection with the actual dealings of workmen with their employers the following are the principal facts:-- 1. When labor makes its bargain with employers without organization on its own side, the parties in the transaction are not on equal terms and wages are unduly depressed. The individual laborer offers what he is forced to sell, and the employer is not forced to buy. Delay may mean privation for the one party and no great inconvenience or loss for the other. If there are within reach a body of necessitous men out of employment and available for filling the positions for which individual laborers are applying, the applicants are at a fatal disadvantage. 2. Collective bargaining is a partial remedy for this disability and brings the pay of labor closer to its normal standard than, under individual bargaining, it could possibly be, but does not, of itself, enable one class of laborers to raise themselves to a position which is very much above that of a majority of the others. It gives to no class of workers any monopoly of their field or any power to tax the public or oppress men who are unorganized. It is a normal and democratic measure. 3. Many actual trade unions do not depend upon mere collective bargaining, but aim to secure a special gain through a partial monopoly of their several fields of labor. Their policy is exclusive in that it tries to limit the number of men who are admitted to the unions and to prevent non-union men from working at the craft. 4. In the establishing of such control of fields of labor some force is employed in order to bar from the fields men who would gladly enter them. "Slugging" is a frequent part of the strategy used when strikes are pending, and this elastic term covers a wide range of deterrent arguments. Whatever goes beyond a verbal demand or insult to the man or his family and involves any use of physical force is included in the meaning of the term, and the action ranges from small injuries to the clubbings which maim and kill. Moreover, social ostracism is to be rated as tantamount to force as a means of preventing a free movement of labor. 5. When the resort to force is defended, it is on the ground that the organized laborers have a right of tenure of their positions and that they may vacate them and still hold them as quasi-property. One man should not "take another man's job" even after the other man has left it. Acting on this claim, union laborers treat men who attempt to occupy the vacated places much as a man would treat intruders on his land or in his house. It is, as is claimed, a case in which a man must be his own policeman and protect his property. 6. The public sympathizes with the worker's dread of the competition which he encounters when unemployed men are gathered from near and far and set working in strikers' positions. It even tolerates, in a way, his claim of quasi-ownership of his position, and though it condemns the violence with which he enforces the claim, it does not summarily repress the violence. It is without a well-defined policy and often weakly permits disorders to grow into anarchy which only troops can quell. Local governments are often reluctant to lay vigorous hands on "sluggers," even when to do so would forestall the necessity for severer measures. This is due to an instinctive feeling that hardship and injustice may result from allowing employers to utilize a reserve of idle labor as a means of depressing their employees' wages and defeating strikes. 7. It is realized, on the other hand, that giving to violence a free rein means an amount of anarchy which no state can tolerate, that non-union laborers have, under the law, a claim to protection, and that allowing strikers to drive them from the field is permitting a monopoly to be established by crime. 8. The reluctance promptly to repress violence, on the one hand, or to leave it unopposed, on the other, expresses a mental wavering, since the state perceives and follows no clear principle in this connection. It has neither defined the nature and extent of laborers' rights nor provided for any orderly process for securing them. 9. The only escape from this situation is by arbitration. It is necessary to adjudicate the laborer's demand for wages and to legalize his tenure of place on condition that he shall accept a just rate of pay. The state is bound to ascertain and declare what rate is just, to confirm the workers in their positions when they accept it, and to cause them to forfeit their right of tenure if they refuse it. If the workers thus forfeit their claim, their positions are clearly open to whoever will take them, and the state is bound to protect the men who do this. Such appears to be the present situation, and an essential feature of it is the need of ascertaining on what principle a court of arbitration should proceed in determining what rate of pay is just. CHAPTER XXVI THE BASIS OF WAGES AS FIXED BY ARBITRATION The state needs an authoritative mode of determining what rate of pay is "reasonable." This duty is often imposed on boards of arbitration, for whose guidance no definite principle of justice has as yet been prescribed. Such a board has to depend on its own intuitions. It approaches its difficult work, having no legal rule for reaching a decision, and yet compelled, if possible, to reach one which will actually settle the dispute referred to it and enable production to go on. It must try, in the verdict it pronounces, to satisfy its own sense of equity. What such a tribunal has, in most cases, actually done has been to make compromises, and this has measurably accomplished both of these ends. A verdict that "splits the difference" between the men's demand and their employers' is most likely to cause work to be resumed; and on the ground that each party is probably claiming too much, and that justice lies between the claims, it insures a rude approach to fairness. This action has caused unfavorable criticism of the whole system of arbitration, on the ground that it abandons the effort to reach absolute justice and tries chiefly to end the quarrel on any terms, and also that by giving strikers a part of what they demand, it encourages them to strike again and secure more. We have to see whether a court can do better than this and whether such a crude procedure has tended at all toward putting wages on a normal basis. _Why a Court cannot reduce Wages in Favored Fields to the Rate prevailing at the Margin of Employment._--A tribunal of arbitration, which has to deal with consolidated capital and organized labor, acts in a field where both profits and wages are higher than they are in most departments of industry. Should a court then take as its standard of just wages what unorganized labor gets when it works for independent employers? That would usually level the pay of the class of laborers it is dealing with to the standard set by a much more poorly paid class. Should the court, on the other hand, take as the just rate the one that generally prevails where employers are organized in trusts and workmen in exclusive unions? That would be legalizing the result of monopoly. The court, in such a case, knows that the profits of the business are increased by the employers' monopoly and wages by the workmen's; and yet it will not pull down the rate of pay to the level prevailing where no combinations exist. On the other hand, to legalize any high rate of wages, which is made possible only by a double monopoly, would seem to be equally unjust. _The Power of Monopolistic Trade Unions under Different Conditions._--Arbitrators have to deal with trade unions which appeal to some kind of force in defending their right of possession of a field of labor. They make their own demands, strike, and compel rivals to stay out of the positions they vacate. When this policy is tolerated, they secure an exceptionally high rate of pay. We may represent the product of labor and its pay in the different occupations by the accompanying diagram. [Illustration] The heavy line _AA´_ represents, by its height at different points above the base line _EE´_, the product that is specifically imputable to labor in different employments. The part of the figure where the line is far above _EE´_ represents the condition where, on the employers' side, monopolies are established; while on the right of the figure, where the line has descended and is slowly approaching the base, the condition is represented in which employers are competing with each other, and many of them are selling their products at prices that only cover the cost of creating them. A unit of labor working for a monopoly creates as large a physical product as it does elsewhere. It turns out as many tons of steel or cases of cloth, etc., as though no monopoly existed, and the price of the goods is high because less labor is employed than would be employed under competition and fewer goods are produced. The actual product of the unit of labor, as measured in dollars, is enhanced by the employers' monopoly. _BB´_ represents, by its varying distance above _EE´_, what organized labor can get under the different conditions. On the left it forces the trusts to share gains with it, and gets a high rate of pay; while on the right, where employers are not in combination and there are no such great gains to draw on, it gets less, although at the extreme right it gets all that it produces. _DD´_ represents what unorganized labor can get under the different conditions, and it is usually somewhat more where trusts employ it than it is elsewhere. The dotted line _CC´_ represents the product of labor as it would be if it were equalized in the different fields. _The Parties interested in a Dispute in which Both Labor and Capital are Organized._--We can best deal with the problem of the adjustment of wages by arbitration if we approach it in a region where organization is strong, both on the side of labor and on that of capital, and disturbances of the natural system are greatest. The struggle that here goes on is, in a way, triangular. Organized labor contends against its own employers, on the one hand, and against unorganized labor, on the other; and the part which develops the greatest bitterness of feeling and the most violence is the strife between labor and labor--between the trade unionists who strike and the men who attempt to occupy their positions. The union is more tolerant of the employer's action in driving a hard bargain than it is of the "scab's" action in "taking another man's job." _The Public a Fourth Party in the Case._--The three parties just named--employers, organized employees, and applicants for places--are not the only parties whom the dispute affects. The public has a vital relation to it, and in a true sense its interest and rights are supreme. The public has a right to demand that production should not be interrupted, and that the supply of necessary articles should not be cut off; and it is in line with this demand that arbitrators seek first for an award that the contending parties will be willing to accept. _Two Issues needing Settlement._--In the immediate contest over the adjustment of pay, the three parties first named are the ones primarily involved. In discharging its duty as the preserver of justice, the court finds two issues which need to be settled rightly. The dispute between _entrepreneurs_ and workmen must be rightly adjusted, and the issue between the workmen and other labor must be so. The power of the state cannot properly be used (1) to force from employers more than they can afford to give, or (2) to exclude from any field of employment free laborers who are able and willing to do the required work. Arbitrators make their awards with an eye to conditions within the business and to the state of the labor market. Instinctively an arbitrator, in trying to satisfy his sense of justice, thinks first of the amount that the business yields. The men must not take the whole income from the business, leaving to the _entrepreneur_ nothing wherewith to meet the claim for interest. Without doing this, however, they may ask for much more than other laborers will accept, and the question arises whether this should be conceded to them. In merely putting the relation of workmen to employers on a proper footing, the tribunal may leave the relation of the strikers to other workmen as unsatisfactory as it has been. It appears that the tribunal of arbitration cannot by one act settle the two issues that are presented to it. If it gives to the men what seems like a fair share of the product of the business which employs them, it gives more than most workers get and more than the law of final productivity of labor would afford. Yet without a ruthless cutting down of the pay of favored laborers it cannot apply the standard of final social productivity of labor. If it applies this standard and cuts down the men's actual pay, they will refuse to abide by the decision; and if it tries to obtain a power of compulsion and make the men accept its decisions, they will try--probably successfully--to defeat the attempt. A system of compulsory arbitration that should go to the length of forcibly equalizing the wages paid to men of like ability in different occupations, would not be tolerated in a democratic community. _The Difficulty of Applying the Test of Final Productivity._--The law of final productivity works most efficiently when it works automatically, as it does when competing employers make the best bargains they can with locally organized laborers. The results, then, approach the theoretical standard, though they do not entirely coincide with it. The law, however, cannot be rigorously applied by a tribunal which is fixing a rate of pay by its own conscious act. How can the judges directly ascertain how much a final increment of social labor produces? Employers, indeed, do make such tests. An estimate of how much a few additional laborers would add to the product of a business often has, in some way, to be made, and employers manage to make it; but subsequent experience is necessary for verifying their judgment. A rule of pay, governed by marginal productivity, results from the action spontaneously taken by a myriad of employers, who enlarge their working forces when they find that they gain thereby, and reduce them when they lose. Of course no court could do anything of this kind. No department of industry will turn itself into a laboratory for testing the productive power of labor. It is clear that the procedure must be much simpler and cruder; and a vital question is whether a board of arbitration, proceeding as it must do, is under any influence that impels it to render decisions which, in any degree, conform to the theoretical standard of pay. Does the economic law of wages operate at all when civil law steps in to the extent of creating any tribunal of arbitration? We shall see. _The Necessity for Some Standard on which Arbitrators may base Awards._--When a board of arbitration tries to do anything more than to end a quarrel, it must seek for some principle of justice. If it is dealing with a favored class of laborers, it finds two extreme limits between which its awards must fall, namely (1) the product which the business yields in excess of simple interest on the capital, and (2) the wages that unorganized laborers may offer to accept. It is possible that the workmen may demand the former amount and the employers may offer the latter; and if so, compromising is a rule-of-thumb mode of doing justice. In the case of a strong union and a highly profitable business the employers may offer more than the minimum amount, and the award that is a compromise between the terms of the contending parties will then be well above that which is a fair mean between the possible extremes; yet it does not appear that it really conforms to any ethical principle. _Average Wages as a Standard._--Another possible basis of an award is the average rate of wages prevailing; but it has no claim as a standard of exact justice and is very far from being workable. Wages vary from a very high rate to a very low one; and the highest rate is that which prevails where a trade union which is strong enough to keep men out of its field of employment deals with a trust which is strong enough to keep rival producers out of its field of business. Under such conditions shall a court average this rate and a very low one, and reason that a mean thus arrived at is a legitimate standard of pay or one that would be realized if no monopolies existed? There is no evidence that this is the accurate fact, and there is every evidence that a verdict attained in this way would be rejected. It would cut down the pay that the favored workers have been getting, not to mention denying them the increase they are striking for. On the other hand, the lowest rates prevail where no permanent organizations exist; and if a strike should arise here, should the tribunal take an average rate of pay as its standard? That would greatly increase the rate that prevails in the region where it is acting, and would give the men more than most of their employers could afford. It would discard the necessary rule of keeping within the limit of what an industry can pay without seeing many of its shops and mills closed. Yet a court which refused to raise the pay of the lowest class at all would seem to accept the bad results of monopoly; for it would ratify the hard arrangements which workers who are excluded from the better fields are forced to accept. _A Court of Arbitration not the Agency for Rectifying General Evils due to Monopoly._--It will be seen that the difficulty we discover in the way of a wholly satisfactory action by the court is caused by a tacit demand that it shall undo the results of monopoly itself. We instinctively say to ourselves that the court must insist on doing ultimate justice, and that all rates perverted by monopoly are unjust. The arbitrators should pull down the high rates, raise the low ones, and create such an approach to uniformity as would be realized if labor were as perfectly mobile as a static assumption requires. To do this would give some laborers much less than their employers can afford to pay and less than they often do pay; while it would be giving to others more than their employers can pay without bankrupting themselves. If such levelling is to be done, it must be done by some other agency than a board of arbitration. _The Attitude of the Public toward a Strike by Employees of a Monopoly._--If we turn from a formal tribunal to the court of public opinion, we find a like state of affairs. There is no danger whatever that the public will justify cutting down the wages now received by men in the employment of a monopoly to a much lower level. That in itself would not right the wrongs of the poorly paid workers or those of the public itself. The employer would go on getting high prices for his products and would pocket the new gain which the reduction of wages gave him. If a great corporation is now taxing the public, even those who suffer would rather see the proceeds of the grab shared with the men than see it all held by the employing corporation. It is, indeed, true that if a tribunal were to give the men an _increased_ share of what the monopoly is getting, the employing company would try to recoup itself from the public by raising prices still higher; and, if it were to give a reduced share, the company might enlarge its business and make its prices a shade lower. Giving to the men a share of the grab made by their employer does indirectly cause a certain increase of the injury done to others, and withdrawing a share might slightly lessen the injury. The public would rather see the higher wages paid, and take some chance of this minor and indirect injury, than see the employing company pocket all that it exacts from the public. _Monopoly Prices as affected by an Increase of Wages._--Arbitration often authorizes a rate of pay based on the profits of an employers' monopoly; and yet a tribunal of this kind must not, and will not, make itself the accomplice of any monopoly by making its position more secure. The policy of every public institution must, and will, be designed to help make an end of every such outlaw that now has a foothold in the field of business. Yet any plan which would force a monopolistic employer to give to his men an increased share of the "grab" which he makes from the pockets of consumers tends to increase the amount of the grab if the employer is entirely secure in his position. A monopoly that is thus safe from interference tries to put the price of each of its products at the point where the largest net revenue is afforded. If distance along the line _AG_ measures the supply of a commodity and vertical distance from it measures price, _DF_ will be the price curve of a commodity, as it is offered in increasing amounts. _AD_ will be the price when one unit is offered, and _GF_ will be the price when the full amount represented by the line _AG_ is produced. The price will then stand at the cost of producing the article. When a monopoly is firmly established, it will seek to get the largest net profit that can be had, and a consistent execution of the plan would reduce the output from the amount measured by _AG_ to that measured by _AH_. The price would then become _HE_ and the net profit the amount of the area _EB_. If wages are so raised that the cost becomes _G´F´_, the net profit becomes _EB´_. This profit can be increased by further reducing the product to the amount _AH´_, putting the price at _H´E´_, and the net profit _E´B´_, which is larger than _EB´_. If an independent producer can employ non-union labor and create the goods at the cost _GF_, and market them without reducing the price much below the level indicated by _H´E´_, he can make on each unit of product a profit nearly equal to _I´E´_. This fact makes the monopoly cautious about raising its price to the level _H´E´_. A tribunal of arbitration may somewhat raise wages without fearing such an increase of prices. By a crude and instinctive judgment the court will hit upon some level of wages which falls well within the limit of what the monopoly can pay and is above the amount which marginal social labor gets. [Illustration] _The Probable Result of a Strike as a Standard for an Award._--Let us see what would happen if a board of arbitration should abandon all effort to level out the general inequalities in wages, and try chiefly to end quarrels and avert long-continued strikes. With this in view it might aim to give the men whatever they would be likely to gain by means of the strike. In a true sense this mode of procedure is more nearly scientific than either of the others. Any tribunal of voluntary arbitration will aim to content both parties sufficiently to prevent an interruption of business. The men may consent to take somewhat less than they hope to get by a successful strike; and the employers may be willing to pay somewhat more than they would at the end of a successful lockout. The probable outcome of the struggle may be differently estimated by the contending parties, and if so, an actual struggle will end by making employers pay more and the workmen take less than they had severally expected to do. If this amount can be awarded at the outset and the struggle precluded, all parties will be gainers by the continuance of business, unless the employers desire a strike for the sake of making their products scarce and dear. _When the Probable Results of a Strike afford an Unfair Standard of Wages._--Where monopolies exist and trade unions rely on violence in carrying their point, it would not be fair to establish a permanent rule of wages based on the amounts that strikes so conducted secure. Such strikes depend for success on the violent exclusion of non-union men; and actually to give permanence to rates so gained would be to fasten on the majority of workers the disabilities under which they now labor, and to perpetuate the gains of a twofold monopoly. On the other hand, if the court should make its award conform to the probable result of a strike which should be general in the trade, but should not resort to any violence, the procedure would be natural and would base itself, in an unconscious way, on the true standard of wages. Such a general strike, by its mere magnitude, would preclude the possibility of any immediate filling of the vacated places by men at the time out of employment; and yet the fact that non-union men were not forcibly kept out of the trade would be an all-important feature of the situation. If, when no strikes were pending, men could gain admission to this field, there would be no true monopoly on the men's side. The rule of giving, by arbitration, what a strike would secure would remove the chance of cutting down the rate to that which prevails in the more ill-paid employments, and would insure to the men the rate that marginal workers in actual employment get plus the two additional amounts spoken of at the beginning of the preceding chapter. The marginal product of labor plus an amount for personal superiority plus an amount for good organization would be the standard to which wages in favored employments would conform; and it is as nearly normal as any practicable standard would be. A free application of it would reduce the wages of unions that thrive by the use of force and would be opposed by such unions. If it were adopted, there is a prospect that the awards would be rejected by the men until hard experience should teach them to relinquish gains secured by violence. Yet a tribunal that should adopt this standard would allow workmen to retain every advantage that organization can afford without a violation of the criminal law. Its guide in making awards would be the pay which the best unions lawfully get in trades akin to the one in whose case they were acting. In dealing with a union which is not a true monopoly and does not depend on force, arbitrators may safely award what an actual strike would probably secure, and the simple plan of compromising gives an approximation to this amount. What the men will accept and the employers will give is about what a strike would extort. Where a monopoly of the field of labor exists and force is used to protect it, a compromise which anticipates the probable result of a strike concedes what could not otherwise be lawfully secured, and we have to see whether this is a plan that a board of arbitration can properly adopt. _Arbitration as affected by Employers' Monopolies._--We confine our attention, for the present, to arbitration that has no power of coercion behind it. A board may be formed which is compelled by statute to investigate quarrels and announce fair terms of settlement, but the contending parties may be allowed to do as they please about accepting the awards. The most difficult case with which such a tribunal would have to deal is that in which the employer has a monopoly of a department of production, and a trade union has an exclusive possession of its field of labor. The mere removal of the employer's monopoly would so greatly simplify the situation as to leave no ground for serious difficulty. With that out of the way,--with potential competition doing the perfect work that under good laws and good policing it ought to do,--the pay of laborers in other employments would be somewhat higher, and extortionate profits would be altogether absent. Profits based on special economy would exist, as they should, but those which are filched unjustly from any one's pocket would not exist. There would be likely to be, in most of the subgroups, independent employers efficient enough to hold their positions, but without any means of getting abnormal gains. These would be marginal employers in their several subgroups, and their returns would range about that static level at which the wages of labor and the interest on capital would absorb them all. An award based on what such employers could pay would express what other employers would naturally pay, and it would be all that the subgroup as a whole could concede without ruining some of its members, but it would allow others to make something by special economies in production. Productivity profits they would get and no others, and these it is in every way expedient that they should be allowed to enjoy. Suppressing employers' monopolies would remove much of the difficulty connected with arbitration, and putting an end to violence on the men's part would remove almost all the remainder. With monopolies in the field it is quite otherwise. Their gains are not of the kind that it is for the interest of the public to let them keep. The public claims these sums on grounds of equity and expediency. It is a perverted distribution that gives them to their present recipients; and this fact threatens to involve more and more the processes of production themselves. Centralization, without monopoly, increases the product of industry; but the monopolistic feature that often attends it partially paralyzes the producing forces, and must be gotten rid of before there can be a normal income to divide and a normal way of dividing it. _The court of arbitration itself cannot get rid of it_, and it would do harm if it should try to do so. Drastically to cut down wages that have been raised by the power of monopoly would injure some workmen without materially helping others, and it would benefit chiefly the monopolistic employers. Such a policy would bring the entire system of arbitration to an end; for it is partly a fear that arbitration would not leave to favorably situated unions as much as they can now get by strikes and boycotts that prevents the system from coming into vogue. The state can end the monopoly, but it must do it by other measures than installing courts of arbitration. In the interim--long or short, as the case may be--before these measures will have their effect, it is necessary to proceed on a plan of securing by awards something like what would result from actual trials of strength. The effects of adjudication will not, in this interim, be ideal, but it is necessary to accept this fact and struggle the harder to obtain conditions that will improve them. _Abnormal Conditions which Arbitrators must Accept._--Crude force of one sort or another would sometimes give to organized labor twice or thrice as much as free labor can earn at the social margin of production, and the public approaches the problem of adjustment while this condition exists. It may be that a trust has crushed competition, made large gains for itself, and made it possible to pay employees at a high rate; while, on the other hand, a trade union has made itself strong, put pressure on the employers, excluded free laborers, and secured a share of the monopolistic spoils. Arbitrators, then, whenever a strike is pending, may divide the spoils as a strike would do, between masters and men. This will leave a few workers in possession of a rich field and many hungry ones outside of it; and we have asserted that the board should confirm the workmen's tenure of place on the sole condition that they accept a rate of pay which it shall authorize. In this case the arbitrators authorize a high rate, while needy men stand ready to take a lower one. They confirm wages based on the profits of monopoly, but look to the state as the power which will get them out of their anomalous position, by making an end of monopoly. _Why Sharing a "Grab" already made is not an Aggravation of the Evil._--While plunder is to be had, it is at least by one point fairer that workers should have a share of it than that employers should have it all. We have said that the court of arbitration finds two issues needing settlement, namely, the relation of employers and employed within the business, and that of laborers outside of this department of industry to those within it. Only one of these issues is it capable of settling, and it is by a true instinct and not merely from expediency that arbitrators permit workmen to share in some degree the gains of the monopoly that employs them. This is legitimate, however, only on the condition that, by further measures, the gains of monopoly be reduced. _How Arbitration will be facilitated by the Suppression of Monopolies._--In studying monopolies we discovered that the prices of their goods do not entirely part company with their natural standards, even when governments do not at all interfere with them. Potential competition keeps these prices from rising above the standard of cost by more than a certain margin. We shall see that if governments do nothing in the way of controlling the contests over wages, the rates that these yield will not be wholly unnatural. They will be held within a certain distance from the standards. If too high wages are exacted, the barriers will be broken down and competing laborers will come into the favored fields. The potential competition of idle men hangs as a menace over the heads of the too exacting trade unionists, and enforces a measure of prudence in the wages demanded. If the unions ask too much and strike in order to get it, the competition which is now latent will become active, other men will take the vacated places, and the struggle of force will begin. Slugging may ensue and may go to the limit of a weak government's toleration. The more complete is the exclusion of free labor, the higher is the rate which organized labor secures; but this rate always falls within a certain distance of the normal one, as that is fixed by the final productivity of social labor. Even the pay secured by violent strikes is, as we have already shown, _governed by_ the law of final productivity, though it does not _coincide with_ that rate. Actual pay and standard pay are like a vessel and a tug attached to each other by a hawser, which allows one to drift far from the other but does not let them part company. In the long run the tug takes the tow with it. Even the wages which a trust gives to a fighting union--wages paid by a monopoly to a monopoly--are governed by the law of final productivity, since there is a limit on what the trust can extort from the public, and there is a limit on what the union can extort from the trust. Potential competition, by limiting both the producing corporation and the trade union, vindicates the natural law of wages, though its results are made inexact by monopoly. _How Potential Competition affects Organized Labor._--We have seen that potential competition keeps within limits the prices of goods made by trusts. If they become too high, new mills are built. In a like way potential competition puts a check on the wages a strong union can secure; for if these are too far above the level of non-union men's pay, such men will find their way into the business. Open shops will be established, either by the present employers or by new ones. There will be much to be gained by an independent shop manned by non-union labor, and the danger of this makes a trade union more conservative than it would otherwise be. The chief potentiality in the case is that of the new and independent shop, and if the way is open for this to appear, the range of difference between the pay of favored laborers and that of others is greatly reduced. The trade union may be able to carry its point and keep free labor from its field, so long as it has only its own employers to deal with; but if new employers will appear whenever there is an inducement to do so, the case is quite otherwise. The new mills make the greater gains if they are manned by non-union men. With the field open for all producers, the danger of free shops with free men will impend always over the union that demands too much for its members. This is now true even where consolidated companies exist, and it would be doubly true if there were no such companies. The rivalries which would then appear would keep wages, as well as prices, near to their natural standards. In the absence of monopolies on the part of employers, and of "slugging" on the part of workmen, arbitrators may accept as standards what the actual dealings of employers and employed yield. In most cases they will ratify no wrong by doing so. The court may act as it now does and announce a rate based on a mere compromise or on the probable result of a strike. If the men accept the award, let them keep their places; but if not, let the positions be open to whoever will take them, and let the state repress every form of violence that would interfere with their doing so. The sentiment of even a local community will sustain such a maintenance of order. _The Case of Trades not affected by the Potential Competition of Non-union Men with New Employers._--Building trades are peculiarly situated in that their products have to be made in the locality where they will stay, and no competition from labor living at a distance is to be feared. If the local unions can protect their field by force, they can establish a high rate of pay, even though the employers have no unions. Arbitration that merely gives what a strike will yield will here deviate greatly from the natural standard of wages. Labor in mining is somewhat similarly situated, and so is labor in transportation. In these, and in some other fields, new men do not weaken the position of strikers unless they are brought to the places where the strikers have been working; and that exposes them to assault. It is in the making of portable goods for a general market that the new and independent shop manned by non-union laborers is an important factor. It is easy to answer the question whether, in such fields, the board of arbitration should confirm the workmen's tenure of place while his pay is sustained by force. All slugging is inherently criminal and should be always and everywhere repressed. In the cases that we first examined, a safe course would be to hold it in repression, announce a rate of pay based on what a strike would then yield, and trust to other measures for destroying monopoly on the capitalist's side. The chief danger of violence begins when the men reject the award and others take their places, and at this point the fact of arbitration will make the duty of the state easier though hardly clearer. The case of such trades as building and mining differs from the others only in the fact that there is not present the check that is elsewhere afforded by the danger of new mills, and the pay secured by crude force is high. To announce a rate based on the result of a strike, _if slugging is to be permitted during the strike_, is to accept, for the moment, what violence will secure; and nothing will remove this feature of the adjudication but a manful assertion of sovereignty by the state and a complete ending of the tolerance now accorded to anarchy. By no means, however, does this deprive union men of the advantage that organization gives them. They may be secured in the possession of every advantage which collective bargaining, without violence, can secure. Great numbers enlisted in a union will give to it a prospect of success in enforcing any reasonable demand. Voluntary arbitration, that aims to preclude a strike, will have to respect this fact of organization and give the men about what a legitimate strike would yield. As a rule, this will result in compromises of opposing claims, and if violence is not in sight as a resource, the compromises will fall near to the natural standard of wages. _Why Conciliation is preferred to Arbitration._--Both among organized laborers and corporate employers there is a dread of state action for the positive adjustment of wages. There is a preference for conciliation over any kind of arbitration, and there is a preference for voluntary arbitration over that which has any trace of authority behind it. For tribunals which have full coercive power, most employers and strongly organized laborers have an insurmountable repugnance. If such tribunals were introduced, it would be against their strongest opposition, which is saying that a measure designed to secure industrial peace would have to be put into operation while the parties directly interested in it opposed it with might and main. The reasons for this attitude are not difficult to discover. Conciliation aims solely to secure internal peace in a department of industry. To avert strikes or reduce their duration is all that it can do and all that the parties directly interested wish to have it do. From the point of view of employers and employed in a highly profitable industry, the averting of strikes is enough to aim at, and even the public sometimes accepts this easy-going view and thinks that everything desirable is gained merely by averting strife or ending it when it occurs. Uninterrupted production--the saving of the great wastes that strikes entail--does, indeed, promote the public welfare. When conciliation does this, it indirectly does something for the public. The essential thing about conciliation, then, is that it does not consciously try to do anything but to make the two parties in the dispute over wages contented enough to go on producing. A board which aims only to do this is careful not to introduce any one who represents an outside interest. The procedure must be kept "within the family." As is often said, "those who understand the business" must settle disputes within it. What is really desired is that only those who are _interested in_ the business should have anything to say about it, and there is a dread of giving representation, either to the general public or to independent labor. Moreover, when the defects of conciliation are spoken of, what is mentioned is the uncertainty as to its working, the probability that in many cases it will not bring the disputants to an agreement and cause production to go on. There is no dread of the rates of pay that it yields. There is practically no dread on any one's part of what happens when employers and employed are contented because they jointly thrive at the expense of the public. Rather than have production stopped, the public is often willing to let a dispute be settled on almost any terms, though the result may be to let some men thrive at the expense of consumers and of other laborers. There is a monopolistic grab the sharing of which makes both parties better off than are men of their class elsewhere. Singular as it may seem, even this attitude of the public is justifiable. It is entirely right not only to welcome conciliation where it can be made to work, but to try it as often as possible before resorting to arbitration. _Rates resulting from Conciliation not Unlike those resulting from Strikes._--The results of collective bargaining, with conciliation in cases of dispute, come within a certain distance of those which would be gained by a perfectly natural adjustment of wages. All that we have said about the relation of wages adjusted by strikes to their natural standards applies here; potential competition generally keeps the actual rate within a certain distance of the natural one, though a monopoly may make the distance unduly great. If potential competition works feebly on the employers' side,--if independent producers are slow to appear even when the price of a product is very high,--there is a large profit in the industry for some one; and if potential competition works feebly on the side of labor,--if workmen can safely strike with little fear that independent laborers will dare to take their places,--the men can secure a fair-sized share of this profit. A strong trade union working for a strong monopoly gets wages that exceed the standard rate by the largest obtainable margin; and yet, as we have said, even this excess has limits, and adjusting disputes by conciliation does not alter those limits. The rates agreed upon are still governed by the standard rate to the same extent as under the régime of strikes. The strike and the lockout become potential, but they impend as possibilities and do their work. The board of conciliation knows that they will occur unless their probable results are anticipated and forestalled by the decision. The board cannot do otherwise, therefore, than to restrict the actual strikes. Wages then become the natural rate with a plus mark, and may be said to be adjusted in a way that at the bottom is natural, though it works under vitiating influences. _Why Voluntary Arbitration does more than Conciliation._--Voluntary arbitration is an advance over mere conciliation in point of effectiveness. It departs somewhat from the plan of confining the action to the family, since it introduces some other parties as arbitrators and thus invites some recognition of outside interests. Nevertheless its actual working involves little change in principle, and its results do not greatly vary from those attained by conciliation. When we speak of arbitration as voluntary, what we usually mean is that acceptance of the award is in no way enforced. Either party may accept it or refuse it, but it may be that both parties acting together cannot prevent the investigation; and the economic law of wages acts best when this is the case. How such voluntary arbitration is provided for,--whether it is established by free contract between employers and employed, or by statute,--is not in this connection of importance. The one thing that is important is that no compulsion is applied to either party to force him to accept the award. _A Moral Compulsion due to Voluntary Arbitration._--A certain moral force is, indeed, necessarily behind the award of such a tribunal. It informs the public what fair-minded men regard as a reasonable adjustment of the dispute, and forces any one who refuses to accept such a decision to go on record as claiming more than is presumably just. This tends to alienate public sympathy, and to forfeit the aid which sympathy insures. Moreover, where voluntary arbitration is established by a contract between parties,--where, for example, masters and men agree that during a term of years disputes that cannot otherwise be settled shall be referred to a tribunal constituted in some prescribed way,--the decision of the tribunal is made by the contract to be especially binding. _Why Mere Compromises lead to Fair Results._--A merely compromising policy, such as the one which has often been sharply criticised, involves an approximation to what strikes would yield; and this, as we have seen, gives results which, in a rude way, are controlled by economic law. A fact of the greatest importance is that the awards made by boards of arbitration with merely voluntary power are not compromises between mere demands of the two parties; they are between _genuine ultimata_. When the court is called in, the employer has offered a rate of pay and stands ready to close his mill if it is not accepted; and the men have offered to take a certain rate and are ready to strike if the rate is not given. The essential fact in the case is that neither of these rates usually varies by more than a certain amount from the natural level of wages. There is every difference between a demand put forward for strategic purposes and a real ultimatum. If workmen knew that a court would simply make an even division between their own demand and their employer's offer, then men who were getting two dollars a day might ask for four in the hope that the arbitrators might give them three. Even if no such expectations were entertained, it is certain that both parties would exaggerate their claims; workers would demand more and employers offer less than they expected in the end to agree upon. When, however, the demands are not made in this way for the sake of impressing the tribunal, but are known to be genuine ultimata, the case is quite different. The workers will actually go on a strike if their demands are not conceded, and they will certainly have to do this if they make their figures extravagant. The employer will close his mill if his offer is not accepted, and he will have to do it if his offer is absurdly low. Very much is involved in the fact that an actual severing of the relation between employers and employed impends over them as a possibility. _The Chief Advantage of Arbitration over Conciliation._--We are now in a position to measure the real difference between conciliation and voluntary arbitration. If a strike comes after nothing has been tried except conciliation, there is often nothing to prevent the strikers from resorting to all the devices which are available for guarding their tenure of place--in other words, for keeping "scabs" out of the field. The local community is in its usual position of uncertainty as to the equities of the case, and is likely to show its usual hesitancy in giving to the new laborers the complete protection which the laws enjoin. There is the customary dread of the effect of letting a strike-breaking force have full sway and the opportunity for disciplining the former workmen into submission. The chance that the resulting rate of pay may be too low to do justice to the laborers remains before the eyes of the local community, and has the effect to which we have earlier called attention--that of taking much of the vigor out of the official arm when violence occurs. How is it when a tribunal of arbitration has studied the case and announced a decision? Though the workmen may be as free to strike as ever, such an action would put them at a fatal disadvantage. The arbitration has given to the public a basis for a judgment as to the equities of the dispute. If the tribunal is one which commands respect, a refusal to abide by its decision puts the men _prima facie_ in the wrong. If they strike now, they reject a rate which is authoritatively pronounced just. Even this they have the privilege of doing if they so desire; but if they go farther and forcibly prevent other men from accepting the equitable rate and doing the work, they forfeit their right of tenure; and it would be a strangely constituted public which, under such circumstances, would let them use fists, missiles, or clubs in defending it. There may be an agreement between employers and employed to submit to impartial arbitration such disputes as are not otherwise settled; and when this has been actually done and a decision has been reached, it is made by the contract to be too binding to be lightly disregarded. If it is still disregarded and if violence is resorted to, the forfeiture of public sympathy is so complete that there is little danger that violence will be winked at. The action of such a tribunal may be nearly as effective as that of one which has full coercive power. _Why Compulsory Arbitration is less Certain to give a Just Award._--Arbitration by a court that has full compulsion behind it does not theoretically need to satisfy the contending parties. If it can fine or otherwise coerce the party that refuses to accept its mandate, and thus insure a forced compliance with its orders, it is conceivable that it might announce rates of pay entirely at variance with prevailing ones. It might announce arbitrary rates or make a bold effort to discover and introduce those which should coincide with the ultimate natural standards--which would mean a relentless reducing of some rates and a raising of others. In a democratic country, however, such a court would have to satisfy the contestants and the public or forfeit its existence, and the only mode of insuring its continuance would be a more conservative policy and a respecting of the _status quo_. It might appeal to the probable result of violent contests somewhat less than a purely voluntary tribunal might do, since it might venture to give offense to employers or to workmen, and trust to the support of the general public; but in the main it would have to let the existing rates of wages continue with no radical change. Even though it were able by some statistical test to discover the natural rates of wages, it could not be bold enough rigorously to apply them without forfeiting its existence. Under any system, then, whether it be crude contention, conciliation, voluntary arbitration, or compulsory arbitration, the rates fixed by the present half-savage process would be allowed to rule till the process itself should be freed from the perversion that monopoly causes. Inequalities of pay would be tempered in different degrees by the various tribunals, but the existing rates in each employment would continue to furnish a basis of adjustment. _The Most Available Plan of Arbitration._--Since there is little prospect that compulsory arbitration will give rates of wages which will differ materially from those secured by arbitration of the voluntary sort, the latter kind has the preference, so long as it is able actually to prevent the strikes and lockouts which, at present, are so wasteful and disorganizing. To accomplish this, there is available a kind of arbitration which is voluntary, but has behind it enough authority to make actual strikes very rare. By this plan the state recognizes for an interim the laborers' tenure of place, on condition that they continue working during the time occupied by the adjustment. If they stop working before a decision is announced, they forfeit their tenure of positions. When the tribunal announces a decision as to the terms on which labor shall go on, the force already working has the option of retaining the positions or abandoning them; but if they elect to leave them, it must be with the understanding that their departure is definitive and their right to tenure surrendered. The state then uses its utmost power in protecting men who may occupy the vacated places. The mere prospect of this outcome will be enough, and the shifting of the force will not have actually to be made, since the right of tenure is too valuable to be forfeited. The system requires that prompt action be had whenever a strike or a lockout is impending, but it enforces decisions only by imposing on workmen who choose to be recalcitrant the penalty of forfeiting the right of ownership of positions, the claim to which they esteem so highly that they are ready literally to fight in defense of it. _A Mode of Dealing with Rebellious Employers._--An employer might refuse to accept the result of an arbitration. In view of the strong pressure that public opinion would exert after the decision should have been rendered, frequent refusals are not probable. If, however, the employer should reject an award, the logic of the case would require that he lose his tenure of place as the men do for a like offense; and the only way to accomplish this is to throw him out of his business connections. The tenure which an _entrepreneur_ most values consists in his relation to his customers; and if the state should see to it that the goods he makes could always be had from some other source, the _entrepreneur_ would be unlikely to close his mills. How the state shall keep the sources of supply open will become an important question if it shall appear that producers do defy the public opinion and reject the court's awards.[1] [1] If the employer were a corporation possessing a monopoly of its department of production, it would be difficult quickly to open such new sources of supply as would be requisite; but a temporary reduction of import duties would often go far in this direction. And a measure which would insure the running of the plant under a temporary receivership would, of course, do it. _The Practical Working of the Arbitration Proposed._--Let us see how such a system of arbitration as is here described would work in the case in which, as we have supposed, a strong trade union is dealing with a monopolistic employer. At the outset all violence on the men's side is ruled out. No assaulting, maiming, or killing of so-called "scabs" is tolerated, and, moreover, the first temptation to this is removed by the act of the state in recognizing for an interval the men's tenure of place. There are no strike breakers to be attacked. While proceedings of arbitration are pending, the obnoxious class is out of sight, and all the places are transiently reserved for their original holders. The court has submitted to it two possible rates of pay, one demanded by the men and the other offered by the employers. It may confirm either of these rates or any rate that is intermediate between them, and it is likely to pursue the latter course. In any case, it announces a rate, the one which to it appears to be fair and is more likely to be so than the one claimed by either of the parties. "This is a just rate," declares the tribunal to the men; "you may take it or leave it, but if you leave it a certain thing will happen,--workmen who refuse it will forfeit all claim upon their positions." Workmen will not often refuse the award, and the pressure of public opinion makes it improbable that the employer will do so. Coupled with arbitration and an essential part of the system is a policy which shall remove the danger of monopoly. In its perfectly secure form monopoly as yet scarcely exists, but what does exist is a great number of partial monopolies able to handle competitors roughly and extort profits from the people. Directly connected with the adjustment of wages is the disarming of such monopolies. The preventing of strikes may often be accomplished without this, but the insuring of just wages requires it. With a solution of the problem of monopoly in view, all other needs of the situation might well be met by arbitration without compulsory power. We may now tabulate our conclusions. 1. In the making of the wages contract the individual laborer is at a disadvantage. He has something which he must sell and which his employer is not obliged to take, since he can reject single men with impunity. 2. A period of idleness may increase this disability to any extent. The vender of anything which must be sold at once is like a starving man pawning his coat--he must take whatever is offered. 3. Collective bargaining enables men to withhold, for a time, something which is of importance to an employer. He cannot let them all go with impunity. 4. A strike is a contest of endurance; and if it continues until the men are exhausted, they are collectively in the position of the hungry individual seller, who is at the buyer's mercy. The wages they then take may be far below the natural standard. 5. If their places are filled at once by men who are already thus necessitous, the resulting rate may be equally below the natural standard. 6. The power of the union often depends on its use of force in keeping the needy out of its field. 7. The rate of pay gained where compulsion is freely and successfully practiced is above the normal rate. 8. Conciliation does little in the way of changing the results which are realized without it, but it lessens the frequency of strikes. 9. Arbitration by a court, which must make a decision but cannot enforce it--by a court which confirms the workmen's tenure of place while action is pending and declares it forfeited if the men reject its decree,--such arbitration would secure a closer conformity to the normal standard of wages than any other action. It would establish rates which give the workmen the benefit of every legitimate advantage from collective bargaining. 10. Arbitration by a court which is compelled to act, and can enforce its decision, may deviate in a particular case from the rate of pay which strikes would yield; but if the deviation is frequent and great, it will induce a rebellion against the system of compulsory arbitration. The rate under this system cannot differ greatly from the result secured with no arbitration at all. The chief value of all the foregoing modes of settling disputes lies in their prevention of costly interruptions of business. They may reduce the number of strikes and prevent much waste and suffering. 11. A mode of procedure which aims chiefly to end strikes usually depends on making compromises between opposing claims. This secures an approach to a reasonable adjustment, as between employers and employed, but does not affect the differences between the wages of different classes of laborers. 12. In order that any mode of adjusting wages may give fair comparative rates, monopolies must be repressed; and this can only be accomplished by measures which are independent of tribunals of arbitration. CHAPTER XXVII BOYCOTTS AND THE LIMITING OF PRODUCTS When free from the taint of monopoly, trade unions, as has been shown, help rather than hinder the natural forces of distribution. Collective bargaining is normal, but barring men from a field of employment is not so. Connected with this undemocratic policy are certain practices which aim to benefit some laborers at the cost of others, and thus tend to pervert the distributive process. _Restrictions on the Number of Members in a Trade Union._--If a trade union were altogether a private organization, it might properly control the number of its own members. Before it is formed all members of the craft it represents are, of course, non-union workers, and the aim of the founders is to "unionize the trade"--that is, to enlist, in the membership of the body, as large a proportion as is possible of the men already working in the subgroup which the union represents. From that time on it can fix its own standard of admission, and allow its membership to increase slowly or rapidly as its interests may seem to dictate. _How a too Narrow Policy defeats its Own End._--Very narrow restrictions, while they keep men out of the union, attract them to the trade itself. An extreme scarcity of union labor and the high pay it signifies causes the establishment of new mills or shops run altogether by non-union men. If these mills and shops are successful, the union may later admit their employees to membership; and a series of successful efforts to produce goods by the aid of unorganized labor thus interferes with the exclusive policy of unions. The number of their members grows in spite of efforts to the contrary. _Free Admission to a Trade Equivalent to Free Admission to a Union._--We may recognize as one of the principles in the case that free admission to the craft itself involves free admission to the union. When once men are successfully practicing the trade, the union is eager to include them, though it enlarges its own membership by the process. _How a Government might prevent a Monopoly of Labor._--It is entirely possible that a government might require trade unions to incorporate themselves, and might include in the charter a clause requiring the free admission of qualified members, subject only to such dues as the reasonable needs of the union might require. That is not an immediate probability, but the end in view can be attained by making membership in the trade itself practically free--which means protecting from violence the men who practice it without joining the union. This is not difficult where a mill in an isolated place is run altogether by independent labor, and it is natural that the unions should endeavor, in other ways than the crudely illegal ones, to prevent the successful running of such mills. If they run with success, their employees will have to be attracted into the unions. A measure designed to impede the running of non-union mills is the boycott. It is a measure which does not involve force and which is yet of not a little value to workers. _The Nature and Varieties of the Boycott._--A boycott is a concurrent refusal to use or handle certain articles. In its original or negative form, the boycott enjoins upon workers that they shall let certain specified articles alone. If they are completed goods, they must not buy them for consumption; and if they are raw materials, or goods in the making, they must not do any work upon them or upon any product into which they enter. They may thus boycott the mantels of a dwelling house and refuse to put them in position, or, in case they have been put in position by other workmen, they may, as an extreme measure, refuse to do further work on the house until they are taken out. A producers' boycott, such as this, falls in quite a different category from the direct consumers' boycott, or the refusal to use a completed article. When a raw material is put under the ban, workers strike if an employer insists on using it. If the cause of the boycott is some disagreement between the maker of the raw material and his workmen, the measure amounts to the threat of a sympathetic strike in aid of the aggrieved workers. If the cause is the fact that the materials were made in a non-union shop, the men who thus made them have no grievance, but the union in the trade to which these men belong has one. It consists in the mere fact that the non-union men are working at the trade at all and that their employer is finding a market for their product. Workers in other trades are called on to aid this union by a sympathetic strike, either threatened or actually put into effect. Such a boycott as this may therefore be described as amounting to a potential or actual sympathetic strike somewhat strategically planned. If the strike actually comes, it may assist the men in whose cause it is undertaken; and the principles which govern such a boycott are those which govern strikes of the sympathetic kind. _Direct Consumers' Boycotts economically Legitimate._--The other type of boycott is a concurrent refusal to buy and use certain consumers' goods. Legally it has been treated as a conspiracy to injure a business, but the prohibition has lost its effectiveness, as legal requirements generally do when they are not in harmony with economic principles. Of late there has been little disposition to enforce the law against boycotting, and none whatever to enforce the law when the boycott carries its point by taking a positive instead of a negative form. The trade-label movement enjoins on men to bestow their patronage altogether on employers included within a certain list, and this involves withdrawing it from others; but the terms of the actual agreement between the workers involve the direct bestowing of a benefit and only inferentially the inflicting of an injury. The men do not, in terms, conspire to injure a particular person's business, but do band themselves together to help certain other persons' business. Economic theory has little use for this technical distinction. It is favorable rather than otherwise to every sort of direct consumers' boycott, and is particularly favorable to the trade-label movement. This movement may powerfully assist workers in obtaining normal rates of pay, and it will not help them to get much more. _The Ground of the Legitimacy of the Boycott._--An individual has a right to bestow his patronage where he pleases, and it is essential to the action of economic law that he should freely use this right. The whole fabric of economic society, the action of demand and supply, the laws of price, wages, etc., rest on this basis. Modern conditions require that large bodies of individuals should be able concurrently to exercise a similar right,--that organized labor should bestow its collective patronage where it wishes. This can be done, of course, only by controlling individual members, for the trade union does not buy consumers' goods collectively. If it can thus control its members, it can use in promoting its cause the extensive patronage at its disposal. _Unfavorable Features of the Indirect Boycott._--The boycott we have thus far had in view is a direct confining of union laborers' patronage to union-made goods. Why this is a thing to be encouraged we shall presently see. What we have said in favor of it does not apply to boycotting merchants on all their traffic because they deal in certain goods. If a brand of soap is proscribed, the workers are justified in concurrently refusing to use that variety; but it is not equally legitimate to prevent a merchant, whose function it is to serve the public, from selling this soap to the customers who want it. To refuse to buy anything whatsoever from a merchant because he keeps in his stock a prohibited article, and sells it to a different set of customers, is interfering, in an unwarranted way, with the freedom of the merchant and of the other customers. Indirect consumers' boycotts have little to commend them, but those of the direct kind have very much. _The Merits of the Trade-label Movement._--This appears most clearly in connection with the trade-label movement. As a result of this movement union laborers will, as is hoped, buy only union-made goods. The existence of such a movement in itself implies that there are goods of the same sort to be had which are not made by union labor. The shop that is run by the aid of independent labor is the cause of the existence of the union label. If all the labor in a group were organized, the label would have no significance. At present the trade unions offer to an employer a certain amount of patronage as a return for limiting himself to union men, and so long as the cost of making his goods is not much increased, the inducement may be sufficient to make him do it. _The Movement as affected by Extravagant Demands on Employers._--Unduly high wages mean, of course, unduly high prices. Without here taking account of the "ca'-canny" policy, which aims to make labor inefficient, extravagant wages for efficient labor increase the cost of goods. This opens the way, as we have seen, for the free shop and the labor which is willing to sell its product at a cheaper rate. If union labor then firmly resolves to buy only the goods with the label, it proposes a heroic measure of self-taxation. _Trade Labels and the Quality of Goods._--The experience of the trade-label movement thus far has been, that in some instances the label vouches for prices which are high, if quality be considered, or for a quality which is poor if the prices are the current ones. Instead of telling the purchaser that the shoes, hats, cigars, etc., which bear the label are surely the best that can be had for the money, the labels are more apt to tell him that the goods are poorer than others which can be had. In some instances this is not the case, and the union-made articles are as good and as cheap as others. When the label stands for a high price or a poor quality, the union fails to control its members and especially its members' wives. Having the meager pay of a week to invest, the wife needs to use it where it will do the most for the family. There is so strong an inducement to buy goods which are really cheap and good that the trade-label movement fails whenever loyalty to it means very much of self-taxation. _The Object Lesson of the Consumers' Boycott._--Organized labor gives itself a costly and impressive object lesson when it tries to force all men of its class to buy the dearer of two similar articles. What this shows is that the demands of unions must be limited, and that for the highest success they must be so limited that there shall be no decisive advantage given to an employer who has a non-union shop. A marked difference in costs of production will cause the free shop to grow and the union shop to shrink. A certain moderate difference in wages there may be, provided always that the union labor is highly efficient; but more than such a difference there cannot safely be. If the trade-label movement should be generally successful, that fact would prove that the demands of trade unions were kept within reasonable limits. _The Policy of Restricting the Product of Labor._--It is a part of the policy of trade unions to limit the intensity of labor. The term "ca'-canny" means working at an easy-going pace, which is one of the methods adopted in order to make work for an excessive number of men. For some of this the motive is to avoid an undue strain on the workers. If the employer selects "pacemakers," who have exceptional ability and endurance, and tries to bring other laborers to their standard, then the rule of the trade union, which forbids doing more than a certain amount of work in a day, becomes a remedy for a real evil--the excessive nervous wear of too strenuous labor. This, however, by no means proves that the policy as carried out is a good one. Beyond the relief that comes when undue speeding of machinery and driving of workers is repressed, it will be impossible to prove that in the long run there is any good whatsoever in it, and the evil in it is obvious and deplorable. _"Making Work" as related to Technical Progress._--The policy reverses the effects of progress. That which has caused the return to labor to grow steadily larger is labor saving or product multiplying, and labor making and product reducing are the antithesis of this. Enlarging the product of labor has caused the standard of pay to go steadily upward and the actual rate to follow it; and the prospect of a future and perpetual rise in the laborers' standard of living depends almost entirely on a continuance of this product-multiplying process. A single man maintaining himself in isolation would gain by everything that made his efforts fruitful, and society, as a whole, is like such an isolated man. It gains by means of every effective tool that is devised and by every bit of added efficiency in the hands that wield it. _Reversing the Effect of Progress._--It follows that undoing such an improvement and going back to earlier and less productive methods would reverse the effect of the improvement, which is higher pay for all; it is restoring the condition in which the product of labor and its pay were lower. The "ca'-canny" policy--the arbitrary limiting of what a man is allowed to do--has this effect. It aims to secure a reduction of output, not by enforcing the use of inferior tools, but by enforcing the inferior use of the customary tools. The effect, in the long run, is, and must be, to take something out of the laborers' pockets. _The Effect of the Work-making Policy under a Régime of Strong Trade Unions._--It is, of course, only a strong trade union that can enforce such a policy as this. Making one's own work worth but little offers a large inducement to an employer to hire some one else if he can. Within limits, the powerful union may prevent him from doing this, and if for the time being society is patient and tolerant of anarchy,--if it allows men who are willing to work well in a given field to be forcibly excluded from it by men who are determined to work ill,--the policy may be carried to disastrous lengths. _How Static Law thwarts the Work-making Policy._--Even strong unions, as we have seen, succeed in maintaining only a limited difference of pay between their trade and others. The effort to maintain an excessive premium on labor of any kind defeats itself by inducing free labor to break over the barrier that is erected against it. The same thing happens when we reduce the productive power of organized labor. If, at a time when the premium that union labor bears above the non-union kind is at a maximum, the policy of restricting products is introduced, it so increases the inducement to depend on an independent working force that there is no resisting it. The palisade which union labor has built about its field gives way, and other labor comes freely in. If the ca'-canny policy makes it necessary to pay ten men for doing five men's work, the union itself will have to give place to the independent men. No single good word can be said for the ultimate effect of the policy as carried beyond the moderate limit required by hygiene. Up to the point at which it will avert undue pressure upon workers, stop disastrous driving and the early disabling of men, the effect is so good as amply to justify the reduction of product and pay which the policy occasions. Beyond that there is nothing whatever to be said for it, and if it shall become a general and settled policy of trade unions, it will be a clog upon progress and mean a permanent loss for every class of laborers. Notwithstanding all this, it must be true that some motive which can appeal to reasonable beings impels workers to this policy. No plan of action, as general as this, can be sustained unless some one, at least transiently, gains by it. Workers have a tremendous stake in the success of any plan of action they adopt, and they have every motive for coming to a right conclusion concerning it. They are in the way of getting object lessons from every mistaken policy, as its pernicious effects become apparent, even though some local and transient good effects also become evident. It is not difficult to see what it has been that has appealed to so many laborers and induced them voluntarily to reduce the value of their labor. _A Common Argument against Product Restricting._--What is commonly said of the policy is that it is based on the idea that there is a definite amount of work of each kind to be done, and that if a man does half as much as he could do, twice as many men will be employed to do the whole amount. Nobody who thinks at all actually believes that the amount of work of a given kind is fixed, no matter how much is charged for it. If workers on buildings charged from five to ten dollars a day, there would be fewer houses erected than would be erected if they charged three dollars; and the same thing is true everywhere. The amount of labor to be done in any field of employment varies constantly with changes of cost, and making labor more costly in a particular department reduces the amount of its product that can be sold. A trade union often finds that there are too many workers in its field to be constantly employed at the rate of pay it establishes. The result is partially idle labor; the men work intermittently, and though the high wages they get for a part of their time may compensate them for idle days or weeks, the idleness which is the effect of the oversupply is inevitable. A given number of workers in the group which makes A´´´ when the wages are three dollars a day becomes an excessive number when the wages are five, and even if the high wages do not attract men from without and make the absolute number of workers greater than before, employment is not constant. The ca'-canny policy is a transient remedy for this. It is an effort to avoid the necessity for partial idleness and for the transferring of laborers to other occupations. All the labor may, for a time, remain in its present field if it will afflict itself with a partial paralysis. For a while the demand for the product of the labor will be sufficient to give more constant employment. Time is required for the full effect of the product-limiting policy to show itself in a falling off of the consumption of the goods whose cost is thus increased. When it comes the evil effect of the policy will appear. If a union were strong enough to keep a monopoly of its field, in spite of the greater efficiency of laborers that are free to work in a normal way, it would be strong enough to maintain much higher pay for its own members if it limited the number of them and encouraged them to work efficiently. The strongest conceivable union must lose by substituting the plan of paralyzing labor for that of restricting the number of laborers. The union may choose to take the benefit of its monopolistic power by keeping an unnecessarily large number of men in constant employment, rather than by getting high wages for efficient work; but in that case any union but one the strength of which is maintained in some unnatural way is likely to come to grief by the great preference it creates for non-union labor. The independent shop will get the better men at the lower rate of wages, and its products will occupy the market. The popularity of the plan of work making is the effect of looking for benefits which are transient rather than permanent. If it were carried in many trades as far as it already is in some, it would probably neutralize, even for those who resort to it, much of the benefit of organization, and work still greater injury to others.[1] [1] It will be seen that whether the policy is successful in giving employment to the partially idle or fails to do so depends on the amount of reduction in the sale of the goods which the increased cost of making them entails; and if the market is highly sensitive to increased cost, the policy may fail in securing even a transient increase of employment. _The Eight-hour Movement as a Work-making Policy._--The effort to reduce the hours of labor to eight per day has in it so much that is altogether beneficent that it is not to be put in the same category with the ca'-canny plan of working. And yet one leading argument in favor of this reducing of the number of hours of work is identical with that by which a reduction of the amount accomplished in an hour is defended. The purpose is to make work and secure the employment of more workers. What has been said of the other mode of work making applies here. Reducing the length of the working day cuts down the product that workers create and the amount that they get. In the main the loss of product is probably offset by the gain in rest and enjoyment; but the loss of product, taken by itself alone, is an evil, and nothing can make it otherwise. If the hours were further reduced, the loss would be more apparent and the gain from rest and leisure would be less. _One Sound Argument in Favor of the Greater Productivity of the Eight-hour Day._--There is one reason why the eight-hour day may in a series of generations prove more permanently productive than a longer one. It may preserve the laborers' physical vigor and enable them to keep their employment to a later period in life. The dead line of sixty might be obliterated. If what we wanted were to get the utmost we could out of a man in a single day, we should do it by making him work for twenty-four hours; after that, for another twenty-four hours, he would be worth very little. If we expected to make him work for a week, we should probably shorten the day to eighteen hours. If we expected to employ him for a month and then to throw him aside, we might possibly get a maximum product by making him work fourteen hours. If we wanted him for a year only, possibly a day of twelve hours would insure the utmost he could do. In a decade he could do more in a ten-hour day, and in a working lifetime he could probably do more in eight. Forty or fifty years of continuous work would tell less on his powers and on the amount and quality of his product. _The Connection between the Restriction of Products and the Trade-label Movement._--Very important is the bearing of these facts concerning the restriction of laborers' products and the trade-label movement. If that movement should become more general and effective, it would bring home to all who should take part in it the effects of the labor-paralyzing policy. The faithful trade unionist would find himself paying a full share of the bill which that policy entails on the public. Ordinary customers can avoid the product whose cost is enhanced by the trade-union rules; but the unionist must take it and must make himself and his class the chief subjects of the tax which enhanced prices impose. It may well be that the pernicious quality of the general work-making policy will become so evident in any case that it will be abandoned; and this would be made sure by a rule that should actually make union labor the chief purchaser of union goods. Ca'-canny would then mean self-taxation on a scale that no arguments could make popular. CHAPTER XXVIII PROTECTION AND MONOPOLY The more serious perversions of the economic system which we have encountered have all been traceable to some working of the principle of monopoly, and it is important to know whether any established policy of governments lends force to this evil influence. Import duties were established in America for the purpose of protecting industries as such, and a vital question now is whether they have now begun to protect monopolies within the industries. _A Supposed Conflict between Theory and Practice._--There was a time when theorists and practical men seemed to be in hopeless disagreement concerning the entire subject of protection. In the view of the practical man an economist was a person who, in his study, had reached certain conclusions which were equally unanswerable in themselves and irreconcilable with the facts. The expression most commonly heard in this connection was that "theory and practice do not agree." The doctrinarians were, in those days, unusually harmonious among themselves, for there were comparatively few who made a vigorous defense of protection on grounds of economic principle. The practical world was less harmonious, since the views of different parts of it were colored by differing interests; but the fact that science did not fall into self-contradiction was encouraging. It was possible for the uncompromising free-trader to think and to say that fundamental principles were all on his side, and that the protectionist had nothing in his favor except transient disturbances that interfered with the perfect working of the principles. _Static Theory in Favor of Free Trade._--Now, the business world conceded too much to the free-trader when it said that he had theory altogether in his favor. What he could truthfully claim, and what the world could safely admit, was that he had static theory in his favor. Static theory deals with a world which is free, not only from friction and disturbance, but also from those elements of change and progress which are the marked features of actual life. Stop all the changes that are taking place in the industrial life of the world; put an end to inventions and improvements in business organization; let there be no moving of population to and fro, and no increase of the aggregate population of the world; further, let there be no addition to the wealth of the world and no change in its forms,--and you will have the static state described in the early part of this treatise. Men would go on making things to the end of time, using identically the same methods that are now in vogue and getting identically the same results, and in such an imaginary world there would be no possibility of answering the contention of the general body of economists of a generation ago. Free trade would be the only rational policy, and it could be defended upon the simple ground on which division of labor in the case of individuals is defended. One man has an aptitude for making shoes, another for making watches, another for painting pictures, and so on; and each one of them can gain far more by devoting himself to his specialty and bartering off the product of it than he can by trying to make everything for himself. Nations have their special aptitudes and should follow them, and make all they can out of them; and the nation which has special facilities for producing cotton, or wheat, or petroleum, or gold and silver bullion should devote itself to its specialties, barter off the results, and get all manner of goods in return. _Wastes from Protection reduced by the Fact of Diversified Resources._--It is true, indeed, that a great nation like our own makes a much better jack-of-all-trades than an individual can make. It is far more probable that the nation as a whole can produce without much waste all the things it wants to use than that any individual can do so. If we have all climates from the tropical to the arctic, all soils, and a full list of mineral deposits, why should it pay us to confine ourselves to the making of only a few things in order to barter them off for others? Why should we not, with our wide range of resources, make everything? Undoubtedly we can make almost everything if we insist upon doing it; but there are still some things that other countries can make and sell to us on such terms that we can do better by buying them than by producing them ourselves. We can raise tea in the United States, but it pays us better to make something else and barter it off for tea. A day's labor spent in raising cotton to send away in exchange gives us more tea than a day's labor spent in producing the latter article directly. In a static condition we should have found in what fields it is most profitable to employ our energies. We should be directly making things that it would pay us best to make, and we should be indirectly making the other things; that is, we should be producing articles to send off in exchange for those other things. Wherever an indirect way of acquiring a thing had proved most profitable, we should have adopted that method, and we should always adhere to it. Anything that forced us to make directly something which we could secure in greater abundance by bestowing the labor that would make it on making something else, would turn our energies in a comparatively unproductive direction. It would inflict on us a waste and a loss--and there are such wastes and losses inherent in the operation of the principle of protection, and there is no contending against the argument that demonstrates their existence. Protection and a certain distortion of the productive system, a certain misdirection of energy, are synonymous. _The Argument for Protection Dynamic._--Now an intelligent argument in favor of protection begins at this point. It accepts the whole static argument in favor of free trade, and its own assertion begins with a "nevertheless." It claims that in spite of what is thus conceded, protection is justifiable, since, in the end, it will pay, notwithstanding the wastes that attend it. The argument for protection is entirely a dynamic one. It is based on the fact of progress and admits that it could make no case for itself under the conditions of a static state. If every country had certain special facilities for producing particular things, and if its state in this respect were destined to remain forever unchanged, it could, to the end of time, make itself richer by depending for many things on its neighbors than it could by depending for those things immediately on itself. The fact is, however, that a nation like our own abounds in undeveloped and even unknown resources which, when brought to the light, may take precedence of many of those which are known and utilized. If our country from end to end were like Cape Nome, and as rich in gold as the richest part of that remote region, and if it were certain that the deposits of gold would never be exhausted and would employ the whole energy of our people, it is clear that we should have one staple occupation and should depend upon the rest of the world for almost every sort of portable commodity. We should be stopped from manufacturing by the great productivity of labor in placer mining. So long as men could make ten dollars a day by washing out gold from the sands, there would be no use in setting them at work making two dollars a day as weavers or shoemakers or what not. By buying our cloth with gold dust we could get far more of it than we could if we took the men out of the mine and set them to making the stuff itself. But--and here is the proviso that makes the supposition correspond with the fact--if, besides the placers, we had deep mines of other metals than gold, if we had oil and lumber and loam of every variety, and if we had people with undeveloped mechanical aptitudes, it might be that we should do well to develop these latent energies even in a wasteful way. The condition that would fully establish the similarity between the supposed case and the actual one is that the placer deposits should be, as placers are, sure to be exhausted by continued working, and that producing other things than gold should tend to become, with time, a more and more fruitful process. We can justify the attitude of the country that taxes itself at an early date for the sake of testing and developing the latent aptitudes of its land and its people. At the outset it will thereby sustain a loss, because at the outset it can gain more goods by the indirect method of exchange than it can by production; but there may easily come a time when it can gain more by the direct method. If we learn to make things more economically than we could originally make them, if we hit upon cheap sources of motive power and of raw material, and especially if we devise machinery that works rapidly and accurately and greatly multiplies the product of a man's working day, we shall reach a condition in which, instead of a loss incidental to the early years of manufacturing, we shall have an increasing gain that will continue to the end of time. It may be, further, that without protection and the burdensome tax which it did undoubtedly impose upon us, we should have had to wait far too long for this gain to accrue and should have sacrificed the benefits that come from a long interval of diversified and fruitful industry. In short, the static argument for free trade is unanswerable and the dynamic argument for protection, when intelligently stated, is equally so. The two arguments do not meet and refute each other, but are mutually consistent. It is possible to ridicule the argument for protection under the name of the "infant industry" argument, and it is possible for the policy it upholds to continue long after this argument has ceased to be valid. The overgrown infant will have sacrificed his claim for coddling, but that will not prove that there was never a time when he needed it. _The Policy demanded in View of Facts Static and Dynamic._--Now, there is an argument for tariff reduction which accepts both the static argument for free trade and the dynamic argument for protection. In fact, it bases itself on the protectionist's modern and intelligent claim. To advance in any form the infant industry argument is to admit that the policy advocated is temporary. Protective duties are, in fact, self-testing. They reveal in their very working whether they were originally justifiable or not. The ground on which they were imposed is that they would develop latent resources--that they would enable labor to produce as much by making a class of articles formerly produced in foreign countries as it could produce by engaging in industries already established and exchanging their products for the former articles. If that time should come, the industry that had to grow up originally under the protection of a duty would become so fruitful that it could dispense with the duty. Taxes of this kind tend to become inoperative, provided always that the latent resources for economical production really exist. Some years ago a man who had retired from the business of making spool silk remarked that, in his judgment, a duty of three per cent on imported silk of this kind would enable the American mills to hold full possession of their own market. The difference between what it cost the foreigner to make the silk and what it cost the American to make it was, as he thought, not over three per cent. If he was right in his estimate, almost all of the actual duty might have been abolished without crushing the American manufacturer. Americans had developed a sufficient aptitude for making spool silk to be able to get nearly as much of it by turning their labor in that direction as they could by turning their labor in any other direction and exchanging the product for foreign silk. We must originally have lost much by forcing ourselves directly to make the silk, for, at the outset, we could not make it as economically as we could make an article which we could exchange for it. At the time of which we are speaking we could make it with almost no waste, and the case illustrates a general fact with regard to duties upon articles in the making of which we are originally at a disadvantage but are afterward at no disadvantage at all. When our original disadvantage has been quite overcome, the duty becomes inoperative. Whether we keep it or throw it off will make no difference to the American manufacturer or to the American consumer--_provided always that competition is free and active_. If it is not so, there is a very different story to tell. _Importance of Changes in the Relative Productivity of Different Industries._--Instead of getting from the soil gold dust to barter for merchandise, we have been getting a product that is not so greatly unlike it. For grains of gold read kernels of wheat, and the statement will tell what a large portion of our country has produced and exported. The productivity of wheat raising has made it uneconomical, in certain extensive regions, to engage in other occupations; but as the fertility of the wheat lands has declined, and as the productive power of labor in other directions has increased, we have reached a point at which it is just as natural to make things for which we formerly bartered wheat as it is to produce the grain itself. The decline in the fertility of agricultural lands and the increase in the productive power of labor devoted to making steel appear to have made the manufacturer of the latter article as independent as is the raiser of cereals. Originally it was necessary to protect iron and steel industries from competition in order to secure the establishment of them at an early day. Now it is apparently not necessary to continue the protection. Labor in making steel will give us as many tons of it in a year as the same labor would give us if spent in the raising of wheat to be exchanged for foreign steel. The duty on steel, if this is the case, has become inoperative, in the sense that it no longer acts to save from destruction the steel-making industry. It is perniciously operative in another direction, for it is an essential protector of a quasi-monopoly in the industry; and this illustrates what often happens in cases in which the infant industry argument proves to be well grounded. The argument predicts for the newly established industry a great future development and a time of ultimate independence. Protection undertakes to nurse it through its period of helplessness and dependence into a time when it can stand on its own feet and maintain itself against rivals. If that period comes,--and the history of the United States shows that in many cases it has come,--you can throw off the entire duty, if you will, and, unless the price of the article has been artificially sustained by something besides the duty, our manufacturers will not lose possession of their market. An essential condition of realizing the happy predictions of the protectionists is that competition among American producers should be unimpeded. If that were so, goods would, as they said, be sold, in the end, at prices fixed by the costs of production, including the normal rate of interest on the capital employed. Manufacturers may originally get large profits, as an offset for such risks as they take in doing pioneer work; but afterward they will get interest on their capital and a good personal return for directing their business, but nothing more. If they sell goods at prices which yield only such returns as this, they will, when the industry is on its feet, sell them as cheaply as the foreigner would do. The high duty, if it still continues, may make it doubly difficult for the foreigner to come into our market; but with goods selling at natural cost or cost prices he would not come into it in any case, and the duty might be abolished with entire impunity. There are, indeed, some questions which arise as to occasional unloading of extensive stocks in foreign markets, and protection has been called for to prevent the foreigner from making America his "dumping ground." This process works in both ways: the American can dump his surplus products into foreign territory as well as the foreigner can into American territory. Not much attention need be paid to this particular phase of the subject. Conservatism will probably suffice, for a long time, to retain in force a somewhat higher duty than is called for on general grounds. In the main the fact is as stated: if the protected infant has the capacity for growth that was attributed to him when the course of nursing, coddling, training, and patient waiting was entered upon, he will announce that fact after a term of years by showing his inherent strength and proving that these fostering practices are no longer necessary. They are then needed only to aid a _monopolistic power within the industry_. _The Protection of Industries distinguished from the Protection of Monopolies._--It appears, then, that duties have two distinct functions. One is to protect from foreign competition an industry as such--to shield every producer, whether he is working independently or in a pool or trust. The other function is to protect a trust in the industry--to enable a great combination working within the limits of the United States to keep that great field to itself and still charge abnormally high prices for its products. In fact, a distinguishable part of a duty usually performs the former of these functions, and another distinguishable part performs the latter. If the natural price of an article is based on the cost of making it in the United States, and if that is twenty per cent higher than the cost in a foreign country, a duty of twenty per cent will place the American product and the foreign product on an equality. The American maker will not be driven from his market until he begins to charge an abnormally high price. If he does that, the foreigner will come in. Suppose, then, that the duty is forty per cent. Twenty per cent may be needed to enable the American manufacturer to hold his own as against the foreigner. Provided he exacts from consumers of his goods only the natural returns which business yields, year in and year out, he can sell all that his mills produce with no danger that the foreigner will supplant him. The other twenty per cent of duty enables him to add a monopolistic profit to his prices. He can raise them by about that amount above what is natural before the foreigner will begin to make him trouble. We have seen what ways the trust has of stifling competition within the limits of our own country. There are the favors which it is able to get from the railroads, and there is the practice of selling its goods in some one locality at a cut-throat rate whenever a competitor appears in that locality. There is the so-called factors' agreement, which often forces merchants to buy goods of a certain class exclusively from the trust. By these means and others the trust makes it perilous to build a mill for the purpose of competing with it. If, indeed, it makes its prices very high, some bold adventurer will build such a mill and take the chances that this entails; but if the trust stops short of offering such a tempting lure in the way of high prices, it can keep the field to itself. If the extra duty of twenty per cent--the unnecessary portion of the whole duty of forty per cent--did not exist, nothing of this sort would be possible. The trust would have to sell at a normal price in order to keep out the foreigner, and so would its independent competitor. Both the combination and its rivals could make their goods and sell them in security. The industry, as such, is protected by the duty of twenty per cent, and it is the additional duty which is the protector of monopoly--the enabling cause of the grab which the trust can make from the pockets of the consuming public. In practice one would not try to make the figures quite as exact as is implied in the statement that just twenty per cent of duty is needed to protect the industry as such from the foreigner, and that just another twenty per cent acts as a maker of a monopolistic price. It would be impracticable to fix the duty in such a way as exactly to meet the need of protection. Owing to fluctuations in values, the duty might be made slightly higher than is necessary under normal conditions. All these things would have to be considered by a competent tariff commission. The figures we here use are illustrative only; but the principle is as clear as anything in economics. Protecting an industry, as such, is one thing; it means that Americans shall be enabled to hold possession of their market, provided they charge prices for their goods which yield a fair profit only. Protecting a monopoly in the industry is another thing; it means that foreign competition is to be cut off even when the American producer charges unnatural prices. It means that the trust shall be enabled to sell a portion of its goods abroad at one price and the remainder at home at a much higher price. It means that the trust is to be shielded from all competition, except that which may come from audacious rivals at home who are willing to brave the perils of entering the American field provided that the prices which here rule afford profit enough to justify the risk. _A Limit beyond which a Duty becomes a Supporter of Monopolies._--This line of cleavage runs through the greater part of the duties which this country now imposes on foreign articles; and the fact reveals the scientific rule for tariff reduction. Up to a certain point, according to the traditional American view, the duty may do good. It may be protecting an industry that is not quite an infant and yet has not grown to its full stature nor attained to its full competing power. Whatever may be claimed as to what ought to be done with this portion of the duty, there is no doubt what will be done; it will be retained, and the American people will wait with such patience as they may for the coming of the time when the industry will be independent of all such aid. Beyond this point a protective duty becomes a trust builder _par excellence_. _Most Duties Compounds of Good and Evil._--There are some industries which are fully matured. The duties which were imposed to shield them during their infancy are no longer necessary for that purpose. The amount of protection that in these cases is necessary to keep the American market for the American product is _nil_. The sole effect of duties on the products of such industries is to encourage monopoly. At the other extreme there are a few industries which have not gravitated into the control of monopolies and which need much of the protection that they have in order to hold their present fields. If they really are infants and not dwarfs,--if they have the capacity to grow to full stature and independence,--the policy of the people will undoubtedly be to let them keep, for a considerable time, all the protection that they now enjoy. The number of such industries as this is comparatively small. In the case of the great majority of our duties there is one part that protects the industry as such and another part that protects the monopoly within it. Throw off the whole duty, and you expose the independent rivals of the trust, as well as the trust itself, to a foreign competition which they are hardly able to bear; but if you throw off a part of the duty,--the part which serves to create the monopoly,--you do not destroy and probably do not hurt the independent producer. His position now is abnormal and perilous. He may be continuing solely by grace of a power that could crush him any day if it would, and its power to crush him is due to the great gains which its position as a monopoly affords. When it wishes to crush a local rival, it can enter his territory and, within that area, sell goods for less than it costs to make them; and, while pursuing this cut-throat policy, it can still make money, because it is getting high prices in the other parts of its extensive territory. With no such great general returns to draw on as a war fund, the trust would have to compete with its rivals on terms which would be at least more nearly even than they now are. It would still have weapons which it could employ against competitors, and its capacity for fighting unfairly would not be exhausted. Without further action on the part of lawmakers the position of a small rival of a trust might be unnaturally dangerous; but an essential point is that one means which the trust adopts in order to crush him depends on the existence of great profits in most of its territory; and these would not exist if it were not for the unnecessary and abnormal part of the duty. The trust wants its duty, and it wants the whole of it. It is the perennial defender of the policy which is termed "standing pat." It values the monopoly-making part according to the measure of the profits which that part brings into its coffers. The trust is powerful, as we do not need to be told, and it will find ways of thwarting tariff reduction as it does other anti-trust legislation. Drastic laws forced through legislatures or Congress during ebullitions of popular wrath--laws which demand so much in the way of trust breaking that they will never be enforced and never ought to be--have not, thus far, been prevented. Such "bulls against the comet" have been issued frequently enough, but serious legislation, based on sound principles, will encounter graver difficulties. There are difficulties before our people even where they see clearly what they want and are trying to get it; but where they do not see what they want, the case is hopeless. The trust-making part of protective duties has an effect about which there is no uncertainty, and if the American people discover this fact, they will not have reached their goal, but the laborious route that leads to it will at least lie distinctly before them. _The Policy demanded in the Interest of Progress._--The general facts which have here been cited call for the abolition of a certain part of the existing duties and the retention of another part, and they make the division between the two parts clear at least in principle. We want to keep one part of a duty whenever it protects an industry which is not yet mature but is on its way toward maturity. We want the industry because it is progressive in its wealth-creating power and will, one day, make an important addition to our national income. It is a dynamic agent--a factor in the progress we are making toward the unrealized goal of universal comfort. We do not want the other part of the duty, first, because we do not want monopoly. Any feature of our industrial system which is convicted of being simply a monopoly-building element is condemned by that fact to extinction, if the power of the people suffices to destroy it. Does this mean that the consolidations themselves are thus condemned? Do we not want great corporations with vast capitals? Assuredly we want them, for the sake of their economy and of their capacity for greater economy. With the element of monopoly taken out of them, they will become dynamic agents and contributors to general progress. The part of the protective tariff which we need to get rid of is the part that helps decisively to put the element of monopoly into them; and in that connection the worst charge that has to be brought against this part of the duties remains to be stated. _Protection and Progress._--Monopoly acts squarely against the continuance of that very progress which the tariff was designed to create. The entire defense of protection has rested on the dynamic argument, and the sole justification of the tax which protection originally imposed is the fact that it has given us industries which have, in themselves, the power to become more and more productive. It would be hard to deny that much of this increase in productive power, which the originators of the protective system anticipated, has been practically realized. The manufactures which have been carried through a period of weakness have actually developed competing strength. We have acquired the power to make things far more cheaply than any one could formerly make them, and the cheapening process still goes on. Our manufacturing centers are alive with machinery, much of which is of our own devising. Thanks to the progressive character of these industries, the waste which attended the introduction of them has been largely atoned for. On dynamic grounds, and solely on those grounds, has the policy of protection fairly well vindicated itself. And now we have come to the point where that saving element in the protective system is in danger of vanishing. Indeed, the excessive part of the protective tariff now acts positively to check the progress that it once initiated, for monopoly is hostile to that progress. The whole force of the argument based on mechanical invention and the development of latent aptitudes in our people now holds as against the monopoly-building part of the tariff. Keep that portion of a duty which is not needed to save an independent producer from foreign competition, which is needed only to enable the trust to charge an abnormal price and still keep the foreigner out of our markets, and you build up a monopoly which is unfavorable to continued improvement in the productive arts. Competition is the assured guarantee of all such progress. It causes a race of improvement in which eager rivals strive with each other to see who can get the best result from a day's labor. It puts the producer where he must be enterprising or drop out of the race. He must invent machines and processes, or adopt them as others discover them. He must organize, explore markets, and study consumers' wants. He must keep abreast of a rapidly moving procession if he expects to continue long to be a producer at all. _The Effect on Progress of Consolidation without Monopoly._--Does a monopoly live under any such forward pressure? Certainly not. It may make some improvements, for it can gain wealth by so doing; but it is not forced to make them or perish. Here we encounter a wide distinction that is in danger of being overlooked. A vast corporation that is not a true monopoly may be eminently progressive. If it still has to fear rivals, actual or potential, it is under the same kind of pressure that acts upon the independent producer--pressure to economize labor. It may be able to make even greater progress than a smaller corporation could make, for it may be able to hire ingenious men to devise new appliances, and it may be able to test them without greatly trenching on its income by such experiments. When it gets a successful machine, it may introduce it at once into many mills. Consolidation without monopoly is favorable to progress. With the element of monopoly infused into it, a great consolidation frees itself from the necessity for progress, and both experience and _a priori_ reasoning are against the conclusion that, under such a régime, actual progress will be rapid. The secure monopoly may stagnate with impunity, and the reason why many corporations which have looked like monopolies have not actually stagnated is that their positions have not been thus secure. They have had some actual rivals and many potential ones. The part of the protective system which tends to make them more secure in their monopolistic position strikes at the most vital part of the industrial system, the progress within it, the element which adds daily to man's power to create wealth and enables the world to sustain an increasing population in an increasing degree of comfort. True monopoly means stagnation, oppression, and what has been called a new feudalism, while consolidation without monopoly means progress, freedom, and a constant approach to industrial democracy. One of the essential means of securing this latter result is the retention of so much protection as is needed to keep American ingenuity and organizing power alive and active, while abolishing that excess of it which fosters monopoly and does away with the necessity for exercising these traits. There will be disagreement as to the point at which the dividing line should, in particular cases, be drawn; a protected interest will claim a duty of fifty per cent where twenty would amply suffice and where every excess above this would be pernicious. There should, however, be no serious disagreement as to what we want--progress and the repression of monopoly which bars progress; and there should be little disagreement as to the principle to be followed in making a protective system contribute to these ends. It must assuredly not bar out the foreigner when the American trust has put its prices at an extortionate level and is using its power to crush all rivalry at home. The good effect and the evil effect of an excessive duty are quite distinct in principle, and the task that is before us is to make them so in practice. It is to abolish the monopoly-building part of the protective system. The whole question of the relation of the tariff to monopoly presents debatable points, some of which cannot here be discussed. It is by no means claimed that an unnaturally high tariff is the sole means of sustaining monopolies, or that the reduction of it would leave nothing more to be done. A great corporation, as has already been said, possesses special means of waging a predatory war against local rivals, and its monopolistic power depends on these as well as on the tariff. With the foreigner forced off the field the trust can use with terrible effect these means of attack on local rivals. It is true, as we have seen, that its monopolistic power might be greatly reduced, without touching the tariff, by taking from it its command of freight rates and thus destroying its power to undersell rivals by means of the special rebates which it now receives; and its power for evil might be reduced still more by taking from it its privilege of cutting prices on its own goods in one locality while charging elsewhere the high prices which the exclusion of the foreigner enables it to get. Regulating trusts by these means only and without any change in the protective system would require, on the part of the people, a long and hard struggle. It would require heroic persistence in a course of difficult administration. Success will come more quickly and easily if, while keeping a normal amount of protection, we abolish the abnormal part of it. The other measures for controlling trusts harmonize with this one and will work more effectively if they are used in combination with it. Together with this one they remove a barrier against progress and set in action a force that promotes it. Without going into any intricacies one can see that, with the tariff at a normal level, the success of the trust in making money will depend on its efficiency as a producer; and the same will be true of its independent rivals. Again and again it will then happen that new rivals will appear, whose mills are far more efficient than many which the trust operates. They may even be more efficient than the best of the mills of the great combination. American producers and foreigners will be in eager rivalry with each other in seeking out means of reducing costs or--what is the same thing--increasing the product of a day's labor. Under the conditions here supposed, the trust will not be able to exterminate a really efficient competitor, and it will feel the stimulus of his rivalry in a way that will force it to be alert and enterprising in seeking and using new devices for economical production. The trust and its American competitor will alike feel the stimulus of the foreigner's efforts to surpass them both in methods of efficient production; and the outcome of it all will be a greater degree of progress--a more dynamic industrial world--than there is any hope of realizing while foreigners are excluded from our markets even when prices are there extortionate. Prices will be extortionate so long as the trusts are checked only by local rivals and are allowed to club these rivals into submissiveness. Keeping the foreigner away by competing fairly with him is what we should desire; but barring him forcibly out, even when prices mount to extravagant levels, helps to fasten on this country the various evils which are included under the ill-omened term _monopoly_; and among the worst of these evils are a weakening of dynamic energy and a reduction of progress. CHAPTER XXIX LEADING FACTS CONCERNING MONEY _Dynamic Qualities of Money._--The question concerning money which, for the purposes of the present treatise, it is most important to answer is whether general prosperity can be increased or impaired by manipulating the volume of it. Is money a dynamic agent, and can it be so regulated as to induce economic progress? These questions require careful answers. _Accepted Facts concerning Money._--We may accept without argument the conclusion that both theory and experience have reached concerning the superiority of gold and silver over other materials of which a currency can be made. They possess the universally recognized utility which makes them everywhere in demand. They have the "imperishability," the "portability," and the "divisibility" which are needed, and when made into coins, they have the "cognizability" by which they can, more readily than many other things, be identified and distinguished from cheap imitations. There remain to be settled the questions whether an expanding volume of currency is necessary for prosperity, and whether the expansion can better be secured by using two metals than it can by using one. _Effects of Free Coinage._--It is evident that when a government coins without charge all the gold and silver that are brought to it for that purpose, either metal will be worth about as much in the form of bullion as it is in the form of coin. If, for uses in the arts, an ounce of gold is worth more than the number of dollars that can be made of it, the coining of this metal will temporarily cease and some coins already made will be melted. Moreover, where both of the precious metals are used as money, neither of them can long be worth in a coin much more than is the bullion contained in the less valuable of the two. If a gold dollar will buy more silver than is needed to make a silver dollar, because of the higher value of the bullion in the former coin, silver will be bought and taken to the mint for coinage, while gold dollars will be melted. The gold will go farther in the way of paying debts when it is in this way exchanged for silver money. _The Effects of Inflation of Currency on Prices._--We are citing a further accepted fact when we say that, other things being equal, enlarging the volume of currency in use raises the prices of goods. By what particular mechanism this is brought about we do not here inquire. Not everything that is claimed under the head of a "quantity theory of money" is generally believed, but there will be little disposition anywhere to deny that, if no other dynamic movement should take place, adding fifty per cent to the volume of metallic money in circulation would make prices higher than they were before the addition. _Rising Prices and Business Profits._--If we assert, further, that permanently rising prices mean prosperity,--profits for the _entrepreneur_ and a brisk demand for labor and capital,--we assert what, in the practical world, is too generally accepted. Sound theory and current belief are at variance on this point, and the current opinion appears at first glance to have the facts on its side. Periods of rising prices have actually been periods of prosperity. It is considered hard for either a merchant or a manufacturer "to do business on a falling market," and easy to make money on a rising one. This impression is entirely correct in so far as it concerns those fluctuations of price which occur suddenly and continue only briefly. What it is of great importance to know is whether a steady rise of prices which should continue permanently would mean permanent profits for the _entrepreneur_; and it can be asserted without hesitation that it would not do so if the final productivity theory of interest is sound, that is, if capital commands in the market a rate of interest which corresponds to the amount that the marginal increment of it will actually produce. _The Rate of Expansion of Currency distinguished from the Absolute Amount of Increase._--The extent to which any currency is capable of raising prices by a continued expansion depends, not on the absolute amount of that expansion, but on the percentage of enlargement that takes place within a given time. Moreover, a given percentage of increase _per annum_ may be maintained as well by one metal as by two. If the gold and the silver money of the world were each increased by one per cent a year, prices would have the same trend under a currency made of one metal as under a currency made of both. If, on the other hand, all the currencies were based on gold only, a change to a bimetallic system would at once make a single great enlargement of the volume of money; but after this the rate of enlargement would be no greater than it was under the single standard. _In the transition_ from a gold to a bimetallic currency, we should get rapidly rising prices; after the change had been completed, we should have a currency expanding as before at the one per cent rate. If the volume of business were to increase at the rate of two per cent a year, while other influences affecting prices were to remain unchanged, the currency would not expand as rapidly as the demand for it, and prices would not only fall, but would fall at the same rate as if only one metal had been used. Use ten metals instead of two,--make coins of tin, platinum, copper, nickel, etc.,--and if the grand composite still insures the one per cent rate of general increase of metallic money, prices will vary as they would have varied with a currency of gold alone. Wholly transitional, under such circumstances, is the rise in prices secured by the adoption of bimetallism. It is gained by adding to the stock of gold now used for ultimate payments an existing stock of silver. _Why Metallic Currency of Any Kind gains, in the Long Run, in Purchasing Power._--In the long run, almost any metallic coin of a fixed weight will gain in its purchasing power. Silver would do this as well as gold; and so would a composite coinage made of ten metals. The law of diminishing returns applies to mining as well as to agriculture. The more silver you want, the deeper you must dig for it, and the more refractory ores you must smelt. The transmuting of a raw metal into finished articles becomes a cheaper and cheaper process; but the extracting of the metal itself becomes dearer. A larger and larger fraction of the labor that is spent in making wares of silver, of gold, of copper, or of tin must be spent in getting the crude material out of the earth. There are improvements in mining, as there are in other industries, and there are large improvements in smelting; but in spite of this the continual working of more difficult mines and of more difficult ores makes the getting of the crude material, in the long run, relatively costly. Since a coin consists chiefly of raw metal, we may therefore count on having before us a régime of falling prices, whatever metallic currency we adopt. The rate of the fall and the degree of steadiness in it will be greater with some metals than with others. The variations in the value of gold are, on the whole, comparatively steady. This metal fluctuates in amount and in cost, but the changes are less sudden than in the case of most others. _The Steadiness of the Change in the Purchasing Power of Money the Important Fact._--A second fact to be noted is that the best currency is one the purchasing power of which shall change, if at all, at a comparatively uniform rate. This fact is of paramount consequence, and the verification of it will repay any amount of study. It is not the rapidity with which gold gains in purchasing power, but the steadiness of the gain from year to year that determines whether it is the best money that can be had by the business world. A _change in the rate_ of increase in the purchasing power of the coinage metal has a really disturbing effect; a steady and calculable appreciation does not. There exists in some acute minds what I venture to call a delusion about the effect on business classes of an advance in the purchasing power of gold that proceeds for a long time at a uniform rate. Conceding the prospect of a decided gain in the value of this metal, we may deny absolutely that, if _it is steady_, it plays into the hands of creditors, burdens the _entrepreneur_, blights enterprise, or has any of the effects that certain men whom we are bound to respect have claimed for it. Irregular changes of value would, indeed, produce these results. Let gold gain three per cent in value this year, one per cent next year, and four per cent in the year following, and injurious things will happen; but let it gain even as much as three per cent each year for a century, and at the test points in business life there will ensue the essential effects that would have followed if it had not gained at all. This means that with a steadily appreciating currency the things will happen that make for prosperity. The debtor will get justice, enterprise will be safe, and wages will gain while industry gains. The _entrepreneur_, in whose behalf bad counsel has lately been given, will best do his strategic work, not with that currency which varies in value the least, but with that which varies most uniformly. If it appears that gold is likely to appreciate more than silver, and to appreciate more steadily, it is decidedly the better metal. It is not inflation on which the _entrepreneur_ permanently thrives, nor is it contraction through which, in the long run, he suffers; it is changes in the rate of inflation or of contraction that produce marked and damaging effects at the critical points of business life. _Loan Interest as related to the Increase of Real Capital._--How does a slow and steady appreciation of any metallic currency affect the relations of business classes? Does it rob borrowers and enrich lenders? Does it favor the consumers by giving falling prices, and hurt producers in the same degree? Does it tax enterprise and paralyze the nerves of business? The answer is an emphatic _No_. Steadiness in the rate of appreciation of money is the salvation of business. Not by one iota can such a slow and steady movement, in itself alone, rob the borrowing class. This is a sweeping claim; let us examine it. It has been shown that true interest is governed by the marginal productivity of capital. As the utility of the final increment of a commodity fixes the price that a seller can get for his whole supply, so the productive power of the final unit of capital expresses what the owner of capital can get by lending his entire supply. This earning capacity expresses itself in a percentage of the capital itself. If the final unit can create a twentieth of itself in a year, any unit can get for its owner about that amount. In assuming that capital earns a twentieth of itself in a year, we may use a commodity standard of measurement. A grocer's capital of twenty barrels of sugar may become twenty-one barrels, and his flour and his tea increase in a like proportion. In the simplest illustration that could be given of a capital earning five per cent a year, we should assume that each kind of productive instrument in a man's possession increases in quantity, during the year, by that amount. If he be a manufacturer, his mill becomes a hundred and five feet long, instead of a hundred feet. It contains twenty-one sets of woolen machinery, instead of twenty. The flow of water that furnishes power becomes by five per cent more copious; and the stock of goods, raw, unfinished, and finished, becomes larger by the same amount. Of course, such a symmetrical enlargement of all kinds of goods could never actually take place, for some things increase in quantity more than others. The illustration shows, however, what fixes the rate of interest: it is the self-increasing power of a miscellany of real capital. If the mill, the machinery, the stock, grow in quantity at the five per cent rate, that is the natural rate of interest on loans of real capital. The lender gives to the borrower twenty units of "commodity" and gets back twenty-one. If marginal social capital, consisting of commodity and measured in some way in units of kind, has the power to add to itself in a year one unit for every twenty, lenders will claim about that amount, and borrowers will pay it. _How the Increase of a Miscellany of Goods has to be Computed._--How does the real earning capacity of capital in concrete forms reveal itself? How does the grocer know that he can make five per cent with the final unit of capital that he borrows? Not by the fact that each lot of twenty barrels of sugar gains one barrel, that each lot of twenty pounds of tea gains one pound, and so on. If there were to be such a symmetrical all-around increase in the commodities in the man's possession, his shelves, counters, bins, tanks, would have to enlarge themselves in the same ratio. In the case of a manufacturer the mill would have to elongate itself by one foot for every twenty, as in the foregoing illustration, and the machinery and all the stock would have to grow in the same proportion. The land and the water power would have to enlarge themselves by the same constant fraction. Of course, such a thing does not take place. The general amount of capital goods of every kind enlarges; but the enlargement is in practice computed in monetary value, and in no other way. The whole outfit becomes worth more than it was. The increase in monetary value gauges the claims of the capitalist. If the stock of goods has grown generally larger, and if prices have fallen, the claim of the capitalist will fall short of equaling the actual increase of the merchandise. The increase in goods of different kinds is, of course, unsymmetrical. If the man is a manufacturer, his mill and his water power have probably not increased. He may have some more machinery, and he has more raw materials and more goods, finished or unfinished, than he had when he took his last inventory. If he has not more goods of these kinds, he has something that represents them; and the effect on his fortunes is as if the mill had stretched itself, and as if the machines and other capital had multiplied, all in the same ratio. The man figures his gains in real wealth by the use of money. At the end of the year he makes a list of all his goods, attaches prices to them, and sees what the value of the stock has become by the year's business. He compares the total value in money of the goods on hand in January, 1907, with that of the stock of January, 1906. If he has bought and sold for cash only, and if during the year he has drawn for his maintenance only what he has earned by labor, the excess of value on hand at the beginning of the year 1907 informs him what his capital has earned during the preceding twelve months. _The Effect of Changes of Price on the Claims of Capitalists._--If prices have remained stable, the earnings of the capital as expressed in money will accurately correspond with the earnings as computed in commodity. It is as if the five per cent increase of the sugar and the flour of our first illustration, or of the mill and the machinery of the second, had taken place. It could then, by a sale, be converted into a five per cent increase in money. By selling the stock at its market value the merchant could realize five per cent more than the original stock cost him. If money has gained one per cent in its purchasing power, or if prices at the end of the year are by so much lower, the inventory will show, in terms of money, only a four per cent gain. Now, the real increase of concrete capital is still five per cent, and that, by the law of interest, is what the capitalist can claim in commodities. This claim is met by an actual payment in money of four per cent. Give to the capitalist, in January, 1896, a dollar and four cents for every dollar he has loaned in January, 1895, and you enable him to command a hundred and five units of commodity for every one hundred that he commanded at the earlier date.[1] You give him by a reduced monetary payment what is equivalent to the real increase of capital. [1] There is a slight compounding here to be taken into account. If commodity has gained five per cent, while prices have lost one per cent, the capital as measured in money has increased by three and ninety-five one-hundredths per cent instead of exactly four. _Practical Differences between Real Interest and the Increase of Real Capital._--It is the increase of capital in kind that fixes the rate of loan interest. Care must be taken not to claim for this part of the adjustment any unerring accuracy; for the marginal productivity law does not work without friction. With real capital creating five and a half per cent, the lender might get only five. When, however, the play of forces that fixes real interest has had its way and has determined that, in commodity, capital shall secure for its owners five per cent a year, that amount is unerringly conveyed to them by the monetary payments that follow. If, by paying four per cent as interest, the merchant, in the illustrative case, makes over to the lender of capital that part of the increase of goods that by the law of interest falls to him, four per cent is the rate that the loan in money will bring. This is on the supposition that the change in the purchasing power of money is perfectly steady. If it is unsteady, effects will follow that are of much consequence. Changes in the purchasing power of a currency produce an effect on the rate of interest on loans of "money." If, with a currency of perfectly stable value, the interest on loans is five per cent, corresponding to the earnings of real capital, then a gain in the purchasing power of the currency of one per cent a year has the effect of reducing nominal interest practically to four per cent. The debtor then really pays and the creditor really gets the same percentage as before of the actual capital loaned. The borrower, the _entrepreneur_ in the case, finds at the end of the year that he has more commodities by five one-hundredths than he had. He must pay the equivalent of this to the lender. With money of stable purchasing power it takes five new dollars for every hundred to do it; but with money that gains in its power to buy goods at the rate of one per cent a year it takes only four. The rate of interest on loans is, in the long run, reduced by an amount that accurately corresponds with the appreciation of the monetary metal _wherever the appreciation is steady_. This law works with a precision that is unusual in the case of economic laws. Loan interest varies more or less from the marginal earnings of capital; but interest as paid in money accurately expresses interest as determined in kind by the play of economic forces. _Conscious Forecasts not necessary for Insuring the Adjustment of Loan Interest to Changing Prices._--It is possible that, where this subject has been considered, the impression may prevail that this reduction in the nominal rate of interest is the result of foresight on the part of borrower and lender. According to that view, both parties look forward to the time when the loan will be paid. The borrower sees that, although by means of his business he may have at the end of a year five per cent more of commodity in his possession, prices will probably have fallen so as to enable him to realize in money only four per cent. On the other hand, the creditor will see that with four per cent more in money he can, if he will, buy with his principal and interest five per cent more than he virtually loaned in commodity. He is satisfied with this increase; and, moreover, he is forced to adopt it, since the natural increase of real capital will not enable a borrower to pay more. The _entrepreneur_ will stop borrowing if more is demanded. The whole adjustment is supposed to rest on a forecast made by the contracting parties and a speculative calculation as to the trend of prices. Now, while men do indeed consider the future, the adjustment that is actually made does not call for foresight. No conscious forward glance is necessarily involved therein. It is made by a process that works more unerringly than any joint calculation about the coming conditions could possibly do. The interest on a loan that is to run through a period in the near future is based on the rate that capital is now producing. The evidence as to what that rate is must be furnished by the experience of the immediate past. It takes much experience, of course, accurately to determine how much the marginal unit of capital for the year 1895 has been worth to the men who have used it. This, however, has to be ascertained as best it can. It takes strategy on the part of both borrowers and lenders to make the loan rate correspond to the marginal earnings. Here there is a chance for economic friction and for variations from the theoretical standard, and the loan rate will sometimes exceed it; but in the long run the deviations will offset each other. In any case, the experience of 1906 fixes, with or without variations, the loan rate for 1907. The earnings revealed by the experience of 1906 may be theoretically computed either in money or in commodity. Let us say they have been five per cent in real wealth, but by reason of the fall in prices they have been only four per cent in money. That, then, is the rate for a loan that is to run through 1907. If prices continue to fall at the rate now prevailing, the loan rate in money will correspond to the marginal earnings of capital for the latter year as accurately as it does for the former year. Bargain-making strategy, the "higgling of the market," may yield an imperfect result, and the lender of real or commodity capital may or may not get the exact real earnings of marginal capital of the same kind. _In translating the earnings of real capital for the earlier or test year into terms of money, the appreciation of the coins has unerringly entered as an element._ If the same rate of appreciation is continued through the following year, no deviation of the loan rate from the earnings of capital can result from this cause. Whatever deviation there is results from the other causes just noted. In commercial terms a man borrows "money," and, by using it in his business, produces "money." He does this, however, by converting the currency into merchandise, and then reconverting this into currency. He gives to the lender approximately what the "marginal" part of the loan produces. If this adjustment is inexact, the lender will get less or more than the actual earnings of such capital. With money gaining in its purchasing power at a uniform rate, the adjustment is as exact as it would have been with money of stable value. The appreciation works unerringly in translating earnings measured in goods into smaller earnings measured in money. The loan rate approximates the earnings. _Effects of Changes in the Rate of Appreciation._--What happens if the rate of appreciation changes? What if gold gains two per cent in value, instead of one, during the second of the periods? The capitalist will then clearly be a gainer, and the _entrepreneur_ will be a loser. Getting five per cent in commodity as before, the business man, by reason of falling prices, will realize only about three per cent in money. His contract, based on the experience of an earlier year, makes him pay four per cent, and he loses one. Every acceleration of the rate of increase in the purchasing power of money plays into the hands of lenders. Every retarding of that rate plays into the hands of borrowers. If in 1907 the _entrepreneur_ gets a three per cent rate on what he borrows, as based on the experience of 1906, and if the fall in prices is reduced during that later year to one per cent, the borrower will make a clear gain of one per cent; and this will recoup him for his loss in the earlier period. Moreover, after a long period of steady prices, the beginnings of a downward trend do not instantly affect the loan rate of interest. A period must elapse sufficient to establish the fact of this downward trend, and to enable the struggles of lenders and borrowers to overcome habit in fixing a new rate that will correspond to the new earning power of monetary capital. These facts explain what at times looks like a failure of the loan market fully to take account of the fall of prices during a given interval. What that market really does is to base the interest paid in one interval on the business experience of another. _Opposite Reasons for Favoring Gold as a Basis of Currency._--What, then, is our practical conclusion? Gold has surprised the world by its increase and by the rise in prices by which this change has been attended. The interest on loans has risen as the conditions required that it should do; but the rise in interest has lagged somewhat behind the rise in prices. The enlarged output of the precious metal has been comparatively sudden, and it has been this fact which has played into the hands of _entrepreneurs_ and, for a brief interval, entailed some loss on lenders. When the adjustment of loan interest to the rising prices shall be fully made, neither of these parties will gain at the other's expense so long as the rise shall continue at the prevalent rate; but if the rise should cease as quickly as it began, it would be _entrepreneurs_ who would lose and lenders who would gain. Loans running at rates fixed when prices were rising would be paid by an amount of money which would buy more commodity than the business would afford. With a reduction of the output of gold there will come a demand for some measure of inflation in order that rising prices may forever continue. Adding silver to the currency would, as we have seen, accomplish this purpose only temporarily. In the long run this metal is bound to appreciate like gold. Using paper money would have a temporary effect and would be a more dangerous measure. Waiting for a short time for a new adjustment of loan interest to the trend of prices would be the only rational course. Will the further fall of prices rob the _entrepreneurs_? They must pay only the rate of interest that capital earns. If that is five per cent, five they must pay, so long as prices are stable. With prices falling by one per cent a year, they will have to pay only four. Will the fall check business and make men afraid to buy stocks of goods? They can carry stocks as cheaply with a four per cent rate of interest and declining prices as they can with a five per cent rate and stable prices. Will it blight enterprise by making men afraid to build mills, railroads, etc.? Here again the loan rate of interest comes to the rescue of the projectors. If they can float their bonds and notes at a lower rate, they can build with impunity. Steadiness is the vital quality in currency. Let its purchasing power be either unchanging or steadily changing in either direction, and justice will be done and business will thrive. If a metal fluctuates greatly in its rate of increase in value, it is a poor coinage metal, even though the average rate of gain be slow; if it gains slowly and steadily, it is almost an ideally good one. What would be the effect of any practical measure of inflation? If we use as money available for all debts the present stock of silver in the world, we make one large addition to the volume of money now available. We start an inflation that cannot continue by the use of silver alone. In the hope of perpetuating the rise in prices we may follow the silver with paper. By the action of the principle that we have stated we shall thus make the interest on loans higher, and every man who buys a farm or a house while the inflation continues will pay a high rate of interest on an enlarged purchase price. When we are forced to stop the paper issues, as in the end we must be, the price of the land, etc., will fall, and the rate of interest on new loans will fall also. The price of all produce will go down, and the purchasers of property will struggle again, as in the years following the Civil War men had to struggle, with a fixed debt, a fixed rate of interest, and falling prices. The early _post bellum_ days will be reproduced. Entering on a policy of inflation would therefore be inviting men again to suffer what those suffered whose hard experience is so frequently depicted in Populistic literature. Conceding all that is claimed as to the evil that comes from buying or mortgaging real property while the volume of money is increasing and paying the debt so incurred while that volume is relatively contracting, one must see that a policy of inflation would end by inflicting exactly that evil on new victims, unless a method can be invented by which the inflation can continue forever. Far better will it be to endure the transient evil which a slow change in the supply of gold will bring. Retaining gold through all its minor variations will mean all the prosperity and all the justice that any monetary system can insure. If we shall ever abandon this metal, experience will make us wise enough to return to it; but we shall have paid a high price for the wisdom. CHAPTER XXX SUMMARY OF CONCLUSIONS Perpetual change is the conspicuous fact of modern life. So revolutionary are the alterations which a few decades make in the industrial world as to raise the question whether there are economic laws which retain their validity for any length of time. If there are not, we have one economic science now, and shall have a different one ten years hence and a widely dissimilar one a century later. Of Descriptive Economics this is true, since it changes with the world it describes; but it is not true of Economic Theory. There are certain principles which are equally valid in all times and places. They were true in the beginnings of industry, are true now, and will remain so as long as men shall create and use wealth. They are not made antiquated either by technical progress or by social evolution. We have at the outset stated some of these truths. They have reference to man, to his natural environment, and to the interactions of the two, and they do not depend on the relations of man to man. We have also stated other economic truths which apply only to man in a social state. They are not universal, but are so general that they are exemplified in the economic life of every society, from the most primitive to the most highly civilized. They are the principles of Social Economic Statics, and in order to have them distinctly before us we have created in imagination a society which is changeless in size, in form, and in mode of economic action. In such a condition the wages of labor would remain fixed, as would also the interest on capital. Wages and interest would absorb the whole product of social industry; for the static condition, as we have thus created it, excludes profits of the _entrepreneur_. In broad outline this describes the condition toward which certain economic forces are continually impelling the actual world. There is at each period a standard shape and mode of action to which static laws acting by themselves would bring economic society. This social norm, however, is not the same at any two periods. The static laws remain unchanged, but they act in changing conditions, and if they were left alone and undisturbed, would give one result in 1907 and another in 2007. The changes which a century will bring should make society larger and richer, the mode of production more effective, and the returns for all classes greater. The laws which set the standard of wages and interest will remain the same, but if the tendencies now at work have their natural effect, all these incomes will be larger. It is as though great quantities of water were rushing into a lake and causing disturbances and upheavals of the surface. If the inflow should now stop, the surface would subside to a general level. If the inflow should recommence, go on for a hundred years, and then stop, the surface would again subside to a level, but it would be higher than the former one. Yet _the laws of equilibrium which produced the first static level would be identically the same as those which produced the second_. Social Economic Statics is a body of principles which act in every stage of civilization and draw society at every separate period toward a static norm, though they do not at any two periods draw it toward the same norm. They make actual society hover forever about a changing standard shape. The laws which govern progress--which cause the social norm to take a different character from decade to decade, and cause actual society to hover near it in its changes--are the subject of Social Economic Dynamics. We have made a study of the more general economic changes which affect the social structure, and they stand in this order:-- (1) Increase of population, involving increase in the supply of labor. (2) Increase in the stock of productive wealth. (3) Improvements in method. (4) Improvements in organization. All these things affect the productive power of society, and correlated with them and standing over against them is a fifth type of change, which affects consumers' wants and determines how productive power shall be used. We have examined each single change by itself and have then endeavored to combine them and get the grand resultant of all. Beginning with the increase of population, we have traced its effects on wages, on interest, and on the values of goods. We have made a similar study of the growth of capital, the progress of technical method, and the organization of industry. The variation of economic society from its static standard offers a problem for solution, and in this connection the type of change in which the most serious evils inhere is that which discards old technical methods and ushers in new ones. The question whether these evils are destined to increase or to diminish we have answered conditionally on the basis of past experience and present tendencies. If competition continues and labor retains its mobility, the evils will naturally grow less. The grand resultant of all the forces of progress is an upward movement in the standard of economic life gained, not without cost, but at a diminishing cost. A vital question is that of the continuance of the movements now in progress. Do any of them tend to bring themselves to a halt? Is any change on which we rely for the hopeful outlook we have taken self-terminating? We have found that the growth of population tends to go on more slowly as the world becomes crowded, while the motives for an increase of productive wealth grow stronger rather than weaker. Technical progress gives no hint of coming to an end, and improvements in organization may go on indefinitely, though they will naturally go on more slowly as the modes of marshaling the agents of production are brought nearer to perfection. Knowledge of the causes of economic change is at best incomplete, and enlarging it by the statistical method of study will be a chief work for the economists of the future. Analytical study points distinctly to a coming time of increased comfort for working humanity. Progress gives no sign of being self-terminating, so long as the force which has been the mainspring of it, namely, competition, shall continue to act. The suspicious element in the general dynamic movement is progress in organization. That which we have primarily studied is the marshaling of forces for mere production--the creation of efficient mills, shops, railroads, etc. This, however, carries with it a tendency to create large mills, shops, and railroad systems, and, in the end, to combine those which begin as rivals in a consolidation in which their rivalry with each other ceases. This means a danger of monopoly, and is the gravest menace which hangs over the future of economic society. If anything should definitely end competition, it would check invention, pervert distribution, and lead to evils from which only state socialism would offer a way of escape. Monopoly is not a mere bit of friction which interferes with the perfect working of economic laws. It is a definite perversion of the laws themselves. It is one thing to obstruct a force and another to supplant it and introduce a different one; and that is what monopoly would do. We have inquired whether it is necessary to let monopoly have its way, and have been able to answer the question with a decided _No_. It grows up in consequence of certain practices which an efficient government can stop. Favoritism in the charges for carrying goods is one of these practices. Railroads have become both monopolies and builders of other monopolies. Certain principles, which we have briefly outlined, govern their policy, and the natural outcome of their working is consolidation. This creates the necessity for a type of public action which is new in America--the regulation of freight charges. Akin to this is the necessity for keeping alive competition in the field of general industry by an effective prohibition of various measures by which the great corporations are able to destroy it. The dynamic element in economic life depends on competition, which at important points is vanishing, but can, by the power of the state, be restored and preserved, in a new form, indeed, but in all needed vigor. With that accomplished we can enjoy the full productive effect of consolidation without sacrificing the progress which the older type of industry insured. The organization of labor, its motives, its measures, and its tendencies,--including a tendency toward monopoly,--we have examined. Through all the wastes and disturbances which the struggle over wages occasions we have discovered a certain action of natural economic law, and have seen what type of measures, on the part of the state, will remove impediments in the way of that law and enable it to act in greater perfection. Connected with the dynamic movement on which the future of society depends are the policies of the government in connection with currency and with protective duties. Here, less action, rather than more, is demanded on the part of the state. While no renewal of a _laissez-faire_ policy is possible, a reduction of the duties which now play into the hands of monopoly is distinctly called for. In connection with currency a greater trust in nature and a smaller reliance on governments will give the best results. Our studies have included, not the activities of the whole world, but those of that central part of it which is highly sensitive to economic influences. The whole producing mechanism here responds comparatively quickly to any force which makes for change. This society _par excellence_ is extending its boundaries and annexing successive belts of outlying territory; and as this shall go on, it must bring the world as a whole more and more nearly into the shape of a single economic organism. The relations of the central society to the unannexed zones are attaining transcendent importance, and a fuller treatment of Economic Dynamics than is possible within the limits of the present work would give much space to such subjects as the transformation of Asia and the resulting changes in the economic life of Europe and America. Here again the conscious action of the people determines the economic outcome. In the main we can still leave the natural forces of industry to work automatically; but we have passed the point where we can safely leave to self-regulation the charges of the common carrier, the conduct of monopolistic corporations, or certain parts of the policy of organized labor. Foreign relations are, of course, a subject for public control, and they are coming to affect in a most intimate way our own economic life. Everywhere our future is put into our own hands and will develop the better the more we know of economic laws and the more energy we show in applying them. The surrendering of industries generally to the state may be avoided, and the essential features of the system of business which evolution has created may be preserved; but to keep this system free from unendurable evils will require, on the part of the people, a rare combination of intelligence and determination. It will require a public policy that shall neither be hampered by prejudice nor incited by ebullitions of popular feeling, but shall be guided through a course of difficult action by a knowledge of economic law. INDEX Abstinence, 339 _et seq._ Accumulation, the law of, Ch. XX. Altruism, 39. Arbitration, 469, Ch. XXVI; as affected by monopoly, 483 _et seq._; compulsory, 489-490, 497-498, 502; voluntary, 493 _et seq._ Birth rate, as affected by economic conditions, 328 _et seq._ Böhm-Bawerk, 17 note, 33. Boycott, Ch. XXVII. Ca'-canny, 509 _et seq._ Capital, 19, 24-26, 31-33; as affected by improvements in method, Ch. XVIII; as originating in profits, 230, 301; contrasted with capital goods, 28-34; exportation of, 230-235; ground and auxiliary, 166; mobility of, 37-38, 127-128, 151-152; primitive, 1-2; rent of, 170-171; sources of, 353 _et seq._; waste of, 307 _et seq._ Capital, accumulation of, Ch. XX; as affected by monopoly, 355-357; as affected by standards of living, 342 _et seq._ Capital, effects of increase of, 203-204; economic structure of society, 246-248; on interest, 319-320; on wages, 316 _et seq._ Capital goods, 16, 17, 19 note; active, 20 _et seq._; active and passive, 186-187; contrasted with capital, 28-34; passive, 20 _et seq._ Capitalist, 84-85, 117. Capitalization of railways, proper basis of, 445-449. Caste, effect on increase of population, 332; effect on values, 268. Centralization of production, 200-201, 289. Collective bargaining, 467 _et seq._ Combination, railway, 419 _et seq._, 433 _et seq._ Commerce, effect on diffusion of methods, 229; effect on emigration and immigration, 229-230. Competition, 67, 75-77, note; 143-150, 198 _et seq._; effect on inventions, 362 _et seq._; effect on labor organizations, 488-490; in transportation, 406, 419-420, 428 _et seq._; relation to progress, 533-534. Competition of markets, effect on railway charges, 403 _et seq._ Competition, potential, as a regulator of monopolies, 380 _et seq._ Conciliation, 490 _et seq._ Consolidation, 382-383, 390 _et seq._, 534 _et seq._, 558-559; effect on strikes, 464 _et seq._; of railways, 396-397, 419 _et seq._ Consumers' goods, 25-26, 34. Consumers' rent, 172 note, 173. Consumers' surplus, 105. Consumption, 24-25, note; as affected by improvements in methods, 273-274; by increased productive power, 305-306; by increase of individual incomes, 292; diversification of, 62-63, 206-207. Corporations, 376 _et seq._ Cost, 130; contrasted with utility, 43-44; elements of, 115-116; fixed and variable, 412 _et seq._; in static state, 132-133; law of increasing, 44-47; lowest, as determinant of standard price, 263-264; measurement of, 47-49, 209; relation to final utility, 53-54; relation to incomes, 126; relation to price, 114-115; specific, 45. Demand and supply, 93-94, 96. Demand, reciprocal, 292. Demand, relation to final utility, 97. Diminishing productivity, 148-149; of labor, 134 _et seq._ Diminishing returns, 56; in agriculture, 165-166, 398 _et seq._; in manufactures, 398-399. Diminishing utility, law of, 98. Distribution, 60; contrasted with production, Ch. V; functional and personal, 89-91; group, 92-93. Division of labor, 61 _et seq._ "Dumping," 526. Dynamic influences, 130-132, 195 _et seq._ Dynamics, Ch. XII. Economics, 1 _et seq._, 61. Education, effect on increase of population, 330-331. Effective utility, 8 note, 54 note. Eight-hour movement, 514-516. _Entrepreneur_, 83 _et seq._; 117 _et seq._; 153 _et seq._; in dynamic state, 123-124; in static state, 121-122. Exchange, 63-64. Factory legislation, effect on increase of population, 331-332. Final productivity, 139 _et seq._, 156-157. Final utility, 8 note, 51 note, 54 note, 98-99; relation to cost, 53-54; relation to demand, 97. Free coinage, 538-539. Free trade, arguments for, 231, 518-519. Friction, economic, 373. Future, undervaluation of, 345 _et seq._ Giddings, F. H., 381. Government ownership, 378, 383-385. Groups, economic, 64 _et seq._ Immigrants, disadvantages of, 245 _et seq._ Improvements in methods, 204, 212; as source of new capital, 230; effect on capital, Ch. XVIII; effect on labor, 312 _et seq._; effect on quality of goods, 273-274; in backward regions, 235-236. Increasing returns, 398-401. Inflation, effects of, 539 _et seq._ Interest, 85, Ch. IX; as affected by changes in the value of money, 543 _et seq._; as affected by increase of capital, 319-320; rate of, effect on the accumulation of capital, 339 _et seq._; real and loan, 547 _et seq._; relation to rent, 182-184; static, 224-225. Inventions, 204, Chs. XVI, XVII; as affected by competition, 362 _et seq._; as affected by monopoly, 362 _et seq._; conditions giving rise to, Ch. XXI; effect on capital, Ch. XVIII; on economic structure of society, 249 _et seq._; on labor, 254-255; effects of a series of, 290 _et seq._ Kartel, 392. Labor, 35; as a measure of cost, 209; as affected by improvements in method, 312 _et seq._; classification of, 13-15; definition of, 9-10, 82-85; diminishing productivity of, 134 _et seq._; division of, 61 _et seq._; managerial, 116-117; mobility of, 127-128, 133-134; monopoly, 471 _et seq._, 504; productivity of, 17-18, 133 _et seq._; protective, 10-11; rent of, 171-172. Labor organization, Ch. XXV. Labor-saving devices, Chs. XVI, XVII; effect on economic structure of society, 249 _et seq._; effect on labor, 254-255. _Laissez-faire_, 384-385, 390. Land, 9, 36-37, Ch. XI; contrasted with artificial capital goods, 178-179, 188-190. Machinery, 72-73. Malthus, 321 _et seq._ Margin of cultivation, 165 _et seq._ Marginal utility, 51 note. Market, 95 note. Market price, 93-94. Mill, J. S., 220 note, 257. Money, 29-30; Ch. XXIX. Monopoly, 201, 559-560; as affected by patents, 367-368; as limiting employment, 297-298; effect on accumulation, 355-357; on inventions, 362-363; on progress, Ch. XXII; on standard of living, 323; government ownership of, 378, 383-385; in transportation, 435 _et seq._; inventor's, 360 _et seq._; labor, 456, 462, 467, 471 _et seq._, 504; nature of, 380; public character of, 389; relation to arbitration, 483 _et seq._; relation to protection, 525 _et seq._; relation to railway discrimination, 396-397; restricted by potential competition, 380 _et seq._ Monopoly price, as affected by increase of wages, 479-480. Organization of industry, 205, 318-319, 368 _et seq._ Organization of labor, Ch. XXV. Paper Money, 552-554. Patents, 265-266; abuse of, 361; as a means of curbing monopolies, 367-368; justification, 360-361. Patten, S. N., 207 note. Political Economy, 3 note, 61. Pool, 392. Population, as affected by factory legislation, 331; as affected by increase of wealth, 333; as affected by rise of wages, 335 _et seq._; distribution of, 215 _et seq._; effect of increase of, 203, 244 _et seq._, 315 _et seq._; law of, Ch. XIX. Population, density of, 215-216; effect on industry, 237 _et seq._; effect on wages, 241-243. Population, increase of, as affected by caste, 332; by education, 330-331; by standard of living, 324 _et seq._ Price, 97; as affected by inflation, 539 _et seq._; determination of, 93-96; equalization of, 98-100; market, 93-94; monopoly, 479-480; normal, 114, 120-121; of complex goods, 100 _et seq._; relation to cost, 114; standard, determined by lowest cost, 263-264, 285-288; static, 202-203, 224. Production, contrasted with distribution, Ch. V; requisites of, 15-16. Productivity, 42-43; as basis for arbitration awards, 475 _et seq._; final, 139 _et seq._, 148-149, 157; measurement of, 55-60. Profit, 77 note, 85 _et seq._, 119-122 note, 129 note, 373; as affected by inflation, 539 _et seq._; as source of capital, 301, 354-355; in static state, 87. Protection, Ch. XXVIII, 560; argument for, 520 _et seq._; relation to monopoly, 525 _et seq._ Rae, John, 17 note. Railway capitalization, proper basis of, 446-450. Railway charges, Ch. XXIV; as affected by competition of markets, 403 _et seq._; limits of, 403 _et seq._; state regulation of, 439 _et seq._ Railway consolidation, 396-397, 419 _et seq._ Railway discriminations, as creating monopolies, 393-394, 396, 420 _et seq._ Rent, Ch. X; as differential product, 163-165; as product of land, 162-163; consumers', 172-173 note; gross and net, 180-183; of capital, 170-171; of concrete instruments, 174-177; of labor, 171-172; relation to interest, 182-184; relation to price, 191-194; traditional formula, 160-162; universality of principle, 177-178. Ricardo, 121, 160, 179. Risk, 122, 123 note, 214. Social Economics, 3 note, 61. Socialism, 378, 384-386, 395, 397. Socialistic state, group organization in, 71. Specific utility, 8 note. Standard of living, 322 et seq., 342 _et seq._ Static state, 132-133. Strike, sympathetic, 505. Strikes, effectiveness under varying conditions, 462 _et seq._ Substitution, 267 _et seq._ Supply and demand, 93-97. Supply, normal, 114. Surplus, consumers', 105. Tariff, relation to trusts, 528 _et seq._ Trade union, power of, under varying conditions, 462 _et seq._; restriction of membership, 503-504; restriction of output, 509 _et seq._ Transportation, Chs. XXIII, XXIV; as affected by diminishing returns in agriculture, 398 _et seq._; monopoly in, 435 _et seq._ Trusts, 201, 369-371, 391-392; as affected by railway discriminations, 393-394; methods of stifling competition, 394-395, 527-528; relation to tariff, 528 _et seq._ Tuttle, C. A., 34 note. Union label, 506 _et seq._ Utility, absolute, 54 note; contrasted with cost, 43-44; diminishing, 98; effective, 54 note; elementary, 11-12; final, 51 note, 54 note, 97-98; form, 12; marginal, 51 note; measurement of, 40 _et seq._; of producers' goods, 42-43; place, 12-13; varieties of, 7-8. Value, 40-42, 99-101; affected by caste, 268; in primitive conditions, 50-51; natural, 94-95; normal, Ch. VII; of complex goods, 100 _et seq._; static, 124-125, 202-203. Value of service principle, 405 _et seq._ Violence in labor disputes, 457 _et seq._ Wages, Ch. VIII, 85, 86; as affected by improved methods, 299-300; as affected by improved organization of industry, 318-319; as affected by increase of capital, 316 _et seq._; as affected by inferior bargaining power of labor, 452; as affected by organization of labor, Ch. XXV; increase of, effect on monopoly price, 479-480; law of, 143 _et seq._; rise of, effect on monopoly, 335 _et seq._; static, 224-225. "Waiting," 187-188. Wants, changes in, 206; elasticity of, relation to improvements in methods, 267 _et seq._ Wealth, 5-9; increase of, effect on population, 333. Webb, Sidney & Beatrice, 357. Printed in the United States of America. By JOHN BATES CLARK _Professor of Political Economy, Columbia University_ The Distribution of Wealth A Theory of Wages, Interest, and Profits _Cloth, 8vo, 445 pp., $3.00_ "It is not too much to say that the publication of Professor Clark's book marks an epoch in the history of economic thought in the United States. Its inspirations, its illustrations, even its independence of the opinions of others, are American; but its originality, the brilliancy of its reasoning, and its completeness deserve and will surely obtain for it a place in the world literature."--HENRY R. SEAGER, in the _Annals of the American Academy_. "Professor Clark's book deserves more attention from general readers than they are accustomed to bestow upon works on abstract economics. It is, indeed, a book written by an economist for economists, but its style, its clear and basic thought, illuminates a subject which the thinking public continually discusses."--_The Outlook_. The Control of Trusts An Argument in Favor of Curbing the Power of Monopoly by a Natural Method Published by the Columbia University Press _Cloth, 12mo, 60 cents_ "Not only has Professor Clark something to say, but he says it with such force and brevity that the busiest man or woman can find time to listen to him. Moreover, he understands the rare art of writing a preface. The straightaway manner in which he outlines the scope of his book reminds one of the famous first lines in Macaulay's 'History of England,' and promises much which this book fulfils."--_Boston Advertiser_. The Problem of Monopoly A Study of a Grave Danger and of the Natural Mode of Averting It Published by the Columbia University Press _Cloth, 12mo, $1.00_ A series of lectures first delivered at Cooper Union, New York, dealing with:--The Growth of Corporations; the Sources of the Corporations; Powers for Evil; Great Corporations and the _Law_; Organized Labor and Monopoly; Agriculture and Monopoly; Governmental Monopolies. "There is much valuable analysis in the book and its reading would give a better understanding of the trust problem."--_International Socialist Review_. THE MACMILLAN COMPANY 64-66 FIFTH AVENUE, NEW YORK AMONG OTHER VOLUMES IN THE CITIZENS' LIBRARY Of Economics, Politics, and Sociology Edited by RICHARD T. ELY, Ph.D., LL.D., _Director of the School of Economics and Political Science in the University of Wisconsin; Author of "Socialism and Social Reform," "Monopolies and Trusts," etc._ _(26 volumes) each volume in cloth, leather back, $ 1.25_ The Outlines of Economics By RICHARD T. ELY, Ph.D., LL.D., _University of Wisconsin_, _Editor of this Series_. Professor Treub, of the University of Amsterdam, selected this text-book, after comparison with others in English, French, and German, for translation into Dutch; a translation into Japanese has also been made. "The 'Outlines' contains splendid summaries of the subject-matter, questions, suggestive titles for essays, and a bibliography of the best writers of economics." --_Journal of Education._ An Introduction to the Study of Agricultural Economics By HENRY C. TAYLOR, M.S.Agr., Ph.D., _Assistant Professor of Political Economy in the University of Wisconsin_. The factors of agricultural production and their economic properties are first studied; then the forces and conditions which determine the prices of agricultural products, and the principles to be followed in estimating the value or proper rent-rate of land and equipments. The Economics of Distribution By JOHN A. HOBSON, _Author of "The War in South Africa: Its Causes and Effects."_ The _Political Science Quarterly_ declared this book a welcome addition to the literature of economic theory. "By its critical as well as by its constructive work it helps to force readers out of the deep rut in which Ricardian formulas have so long caused economic thought to run." Economic Crises By EDWARD D. JONES, Ph.D., _Junior Professor of Economics and Industry, University of Michigan_. _Send for a descriptive list of this series to_ THE MACMILLAN COMPANY 64-66 FIFTH AVENUE, NEW YORK By FRANKLIN HENRY GIDDINGS _Professor of Sociology, Columbia University_ Democracy and Empire With Studies of their Psychological, Economic, and Moral Foundations _Cloth, 8vo, $2.50_ "The work as a whole is the most profound and closely reasoned defence of territorial expansion that has yet appeared.... The volume is one of rare thoughtfulness and insight. It is a calm, penetrating study of the trend of civilization and of our part in it, as seen in the light of history and of evolutionary philosophy." --_The Chicago Tribune._ "The question which most interests both Professor Giddings and his readers is the application of his facts, his sociology, and his prophecy, to the future of the American Empire.... The reader will rise from it with a broader charity and with a more intelligent hope for the welfare of his country."--_The Independent._ The Principles of Sociology An Analysis of Phenomena of Association and of Social Organization _8vo, Cloth, $3.00_ "It is a treatise which will confirm the highest expectations of those who have expected much from this alert observer and virile thinker. Beyond a reasonable doubt, the volume is the ablest and most thoroughly satisfactory treatise on the subject in the English language."--_Literary World._ "The distinctive merit of the work is that it is neither economics nor history.... He has found a new field and devoted his energies to its exploration.... The chapters on Social Population and on Social Constitution are among the best in the book. It is here that the method of Professor Giddings shows itself to the best advantage. The problems of anthropology and ethnology are also fully and ably handled. Of the other parts I like best of all the discussion of tradition and of social choices; on these topics he shows the greatest originality. I have not the space to take up these or other doctrines in detail, nor would such work be of much value. A useful book must be read to be understood." --Professor SIMON N. PATTEN, in _Science_. The Elements of Sociology A Text-Book for Colleges and Schools _8vo, Cloth, $1.10_ "It is thoroughly intelligent, independent, suggestive, and manifests an unaffected enthusiasm for social progress, and on the whole a just and sober apprehension of the conditions and essential features of such progress." --Professor H. SIDGWICK, in _The Economic Journal_. "Of its extreme interest, its suggestiveness, its helpfulness to readers to whom social questions are important, but who have not time or inclination for special study, we can bear sincere and grateful testimony."--_New York Times._ "Professor Giddings impresses the reader equally by his independence of judgment and by his thorough mastery of every subject that comes into his view."--_The Churchman._ THE MACMILLAN COMPANY 64-66 FIFTH AVENUE, NEW YORK 
39949	----	images of public domain material from the Google Print project.) THE PLACE OF SCIENCE IN MODERN CIVILISATION BOOKS BY THORSTEIN VEBLEN THE THEORY OF THE LEISURE CLASS THE THEORY OF BUSINESS ENTERPRISE THE INSTINCT OF WORKMANSHIP IMPERIAL GERMANY AND THE INDUSTRIAL REVOLUTION THE NATURE OF PEACE AND THE TERMS OF ITS PERPETUATION THE HIGHER LEARNING IN AMERICA THE VESTED INTERESTS AND THE STATE OF THE INDUSTRIAL ARTS THE PLACE OF SCIENCE IN MODERN CIVILISATION THE PLACE OF SCIENCE IN MODERN CIVILISATION AND OTHER ESSAYS _by_ THORSTEIN VEBLEN _New York_ B. W. HUEBSCH _Mcmxix_ COPYRIGHT, 1919 BY B. W. HUEBSCH PRINTED IN THE UNITED STATES OF AMERICA PUBLISHER'S NOTE These essays are here reprinted from various periodicals, running over a period of about twenty years. The selection is due to Messrs. Leon Ardzrooni, Wesley C. Mitchell and Walter W. Stewart. It is unlikely that more than a few public libraries possess files so complete as to give access to all of these essays, and even if the magazines were readily obtainable at libraries they would almost certainly have to be read in those institutions. The nature of the material, its timeliness (Mr. Veblen deals with ideas in such a manner as to give the date of composition a secondary importance), and the fact that it would otherwise be lost to all save diligent excavators, explain its preservation in this form. The courtesy of the periodicals in which the papers first appeared, in permitting their reproduction, is gratefully acknowledged. CONTENTS PAGE THE PLACE OF SCIENCE IN MODERN CIVILISATION 1 THE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW 32 WHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE? 56 THE PRECONCEPTIONS OF ECONOMIC SCIENCE. I. 82 " " " " " II. 114 " " " " " III. 148 PROFESSOR CLARK'S ECONOMICS 180 THE LIMITATIONS OF MARGINAL UTILITY 231 GUSTAV SCHMOLLER'S ECONOMICS 252 INDUSTRIAL AND PECUNIARY EMPLOYMENTS 279 ON THE NATURE OF CAPITAL. I. 324 " " " " " II. 352 SOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM 387 THE SOCIALIST ECONOMICS OF KARL MARX. I. 409 " " " " " " II. 431 THE MUTATION THEORY AND THE BLOND RACE 457 THE BLOND RACE AND THE ARYAN CULTURE 477 AN EARLY EXPERIMENT IN TRUSTS 497 THE PLACE OF SCIENCE IN MODERN CIVILISATION[1] It is commonly held that modern Christendom is superior to any and all other systems of civilised life. Other ages and other cultural regions are by contrast spoken of as lower, or more archaic, or less mature. The claim is that the modern culture is superior on the whole, not that it is the best or highest in all respects and at every point. It has, in fact, not an all-around superiority, but a superiority within a closely limited range of intellectual activities, while outside this range many other civilisations surpass that of the modern occidental peoples. But the peculiar excellence of the modern culture is of such a nature as to give it a decisive practical advantage over all other cultural schemes that have gone before or that have come into competition with it. It has proved itself fit to survive in a struggle for existence as against those civilisations which differ from it in respect of its distinctive traits. Modern civilisation is peculiarly matter-of-fact. It contains many elements that are not of this character, but these other elements do not belong exclusively or characteristically to it. The modern civilised peoples are in a peculiar degree capable of an impersonal, dispassionate insight into the material facts with which mankind has to deal. The apex of cultural growth is at this point. Compared with this trait the rest of what is comprised in the cultural scheme is adventitious, or at the best it is a by-product of this hard-headed apprehension of facts. This quality may be a matter of habit or of racial endowment, or it may be an outcome of both; but whatever be the explanation of its prevalence, the immediate consequence is much the same for the growth of civilisation. A civilisation which is dominated by this matter-of-fact insight must prevail against any cultural scheme that lacks this element. This characteristic of western civilisation comes to a head in modern science, and it finds its highest material expression in the technology of the machine industry. In these things modern culture is creative and self-sufficient; and these being given, the rest of what may seem characteristic in western civilisation follows by easy consequence. The cultural structure clusters about this body of matter-of-fact knowledge as its substantial core. Whatever is not consonant with these opaque creations of science is an intrusive feature in the modern scheme, borrowed or standing over from the barbarian past. Other ages and other peoples excel in other things and are known by other virtues. In creative art, as well as in critical taste, the faltering talent of Christendom can at the best follow the lead of the ancient Greeks and the Chinese. In deft workmanship the handicraftsmen of the middle Orient, as well as of the Far East, stand on a level securely above the highest European achievement, old or new. In myth-making, folklore, and occult symbolism many of the lower barbarians have achieved things beyond what the latter-day priests and poets know how to propose. In metaphysical insight and dialectical versatility many orientals, as well as the Schoolmen of the Middle Ages, easily surpass the highest reaches of the New Thought and the Higher Criticism. In a shrewd sense of the religious verities, as well as in an unsparing faith in devout observances, the people of India or Thibet, or even the mediæval Christians, are past-masters in comparison even with the select of the faith of modern times. In political finesse, as well as in unreasoning, brute loyalty, more than one of the ancient peoples give evidence of a capacity to which no modern civilised nation may aspire. In warlike malevolence and abandon, the hosts of Islam, the Sioux Indian, and the "heathen of the northern sea" have set the mark above the reach of the most strenuous civilised warlord. To modern civilised men, especially in their intervals of sober reflection, all these things that distinguish the barbarian civilisations seem of dubious value and are required to show cause why they should not be slighted. It is not so with the knowledge of facts. The making of states and dynasties, the founding of families, the prosecution of feuds, the propagation of creeds and the creation of sects, the accumulation of fortunes, the consumption of superfluities--these have all in their time been felt to justify themselves as an end of endeavor; but in the eyes of modern civilised men all these things seem futile in comparison with the achievements of science. They dwindle in men's esteem as time passes, while the achievements of science are held higher as time passes. This is the one secure holding-ground of latter-day conviction, that "the increase and diffusion of knowledge among men" is indefeasibly right and good. When seen in such perspective as will clear it of the trivial perplexities of workday life, this proposition is not questioned within the horizon of the western culture, and no other cultural ideal holds a similar unquestioned place in the convictions of civilised mankind. On any large question which is to be disposed of for good and all the final appeal is by common consent taken to the scientist. The solution offered in the name of science is decisive so long as it is not set aside by a still more searching scientific inquiry. This state of things may not be altogether fortunate, but such is the fact. There are other, older grounds of finality that may conceivably be better, nobler, worthier, more profound, more beautiful. It might conceivably be preferable, as a matter of cultural ideals, to leave the last word with the lawyer, the duelist, the priest, the moralist, or the college of heraldry. In past times people have been content to leave their weightiest questions to the decision of some one or other of these tribunals, and, it cannot be denied, with very happy results in those respects that were then looked to with the greatest solicitude. But whatever the common-sense of earlier generations may have held in this respect, modern common-sense holds that the scientist's answer is the only ultimately true one. In the last resort enlightened common-sense sticks by the opaque truth and refuses to go behind the returns given by the tangible facts. _Quasi lignum vitae in paradiso Dei, et quasi lucerna fulgoris in domo Domini_, such is the place of science in modern civilisation. This latterday faith in matter-of-fact knowledge may be well grounded or it may not. It has come about that men assign it this high place, perhaps idolatrously, perhaps to the detriment of the best and most intimate interests of the race. There is room for much more than a vague doubt that this cult of science is not altogether a wholesome growth--that the unmitigated quest of knowledge, of this matter-of-fact kind, makes for race-deterioration and discomfort on the whole, both in its immediate effects upon the spiritual life of mankind, and in the material consequences that follow from a great advance in matter-of-fact knowledge. But we are not here concerned with the merits of the case. The question here is: How has this cult of science arisen? What are its cultural antecedents? How far is it in consonance with hereditary human nature? and, What is the nature of its hold on the convictions of civilised men? * * * * * In dealing with pedagogical problems and the theory of education, current psychology is nearly at one in saying that all learning is of a "pragmatic" character; that knowledge is inchoate action inchoately directed to an end; that all knowledge is "functional"; that it is of the nature of use. This, of course, is only a corollary under the main postulate of the latter-day psychologists, whose catchword is that The Idea is essentially active. There is no need of quarreling with this "pragmatic" school of psychologists. Their aphorism may not contain the whole truth, perhaps, but at least it goes nearer to the heart of the epistemological problem than any earlier formulation. It may confidently be said to do so because, for one thing, its argument meets the requirements of modern science. It is such a concept as matter-of-fact science can make effective use of; it is drawn in terms which are, in the last analysis, of an impersonal, not to say tropismatic, character; such as is demanded by science, with its insistence on opaque cause and effect. While knowledge is construed in teleological terms, in terms of personal interest and attention, this teleological aptitude is itself reducible to a product of unteleological natural selection. The teleological bent of intelligence is an hereditary trait settled upon the race by the selective action of forces that look to no end. The foundations of pragmatic intelligence are not pragmatic, nor even personal or sensible. This impersonal character of intelligence is, of course, most evident on the lower levels of life. If we follow Mr. Loeb, e.g., in his inquiries into the psychology of that life that lies below the threshold of intelligence, what we meet with is an aimless but unwavering motor response to stimulus.[2] The response is of the nature of motor impulse, and in so far it is "pragmatic," if that term may fairly be applied to so rudimentary a phase of sensibility. The responding organism may be called an "agent" in so far. It is only by a figure of speech that these terms are made to apply to tropismatic reactions. Higher in the scale of sensibility and nervous complication instincts work to a somewhat similar outcome. On the human plane, intelligence (the selective effect of inhibitive complication) may throw the response into the form of a reasoned line of conduct looking to an outcome that shall be expedient for the agent. This is naïve pragmatism of the developed kind. There is no longer a question but that the responding organism is an "agent" and that his intelligent response to stimulus is of a teleological character. But that is not all. The inhibitive nervous complication may also detach another chain of response to the given stimulus, which does not spend itself in a line of motor conduct and does not fall into a system of uses. Pragmatically speaking, this outlying chain of response is unintended and irrelevant. Except in urgent cases, such an idle response seems commonly to be present as a subsidiary phenomenon. If credence is given to the view that intelligence is, in its elements, of the nature of an inhibitive selection, it seems necessary to assume some such chain of idle and irrelevant response to account for the further course of the elements eliminated in giving the motor response the character of a reasoned line of conduct. So that associated with the pragmatic attention there is found more or less of an irrelevant attention, or idle curiosity. This is more particularly the case where a higher range of intelligence is present. This idle curiosity is, perhaps, closely related to the aptitude for play, observed both in man and in the lower animals.[3] The aptitude for play, as well as the functioning of idle curiosity, seems peculiarly lively in the young, whose aptitude for sustained pragmatism is at the same time relatively vague and unreliable. This idle curiosity formulates its response to stimulus, not in terms of an expedient line of conduct, nor even necessarily in a chain of motor activity, but in terms of the sequence of activities going on in the observed phenomena. The "interpretation" of the facts under the guidance of this idle curiosity may take the form of anthropomorphic or animistic explanations of the "conduct" of the objects observed. The interpretation of the facts takes a dramatic form. The facts are conceived in an animistic way, and a pragmatic animus is imputed to them. Their behavior is construed as a reasoned procedure on their part looking to the advantage of these animistically conceived objects, or looking to the achievement of some end which these objects are conceived to have at heart for reasons of their own. Among the savage and lower barbarian peoples there is commonly current a large body of knowledge organised in this way into myths and legends, which need have no pragmatic value for the learner of them and no intended bearing on his conduct of practical affairs. They may come to have a practical value imputed to them as a ground of superstitious observances, but they may also not.[4] All students of the lower cultures are aware of the dramatic character of the myths current among these peoples, and they are also aware that, particularly among the peaceable communities, the great body of mythical lore is of an idle kind, as having very little intended bearing on the practical conduct of those who believe in these myth-dramas. The myths on the one hand, and the workday knowledge of uses, materials, appliances, and expedients on the other hand, may be nearly independent of one another. Such is the case in an especial degree among those peoples who are prevailingly of a peaceable habit of life, among whom the myths have not in any great measure been canonised into precedents of divine malevolence. The lower barbarian's knowledge of the phenomena of nature, in so far as they are made the subject of deliberate speculation and are organised into a consistent body, is of the nature of life-histories. This body of knowledge is in the main organised under the guidance of an idle curiosity. In so far as it is systematised under the canons of curiosity rather than of expediency, the test of truth applied throughout this body of barbarian knowledge is the test of dramatic consistency. In addition to their dramatic cosmology and folk legends, it is needless to say, these peoples have also a considerable body of worldly wisdom in a more or less systematic form. In this the test of validity is usefulness.[5] The pragmatic knowledge of the early days differs scarcely at all in character from that of the maturest phases of culture. Its highest achievements in the direction of systematic formulation consist of didactic exhortations to thrift, prudence, equanimity, and shrewd management--a body of maxims of expedient conduct. In this field there is scarcely a degree of advance from Confucius to Samuel Smiles. Under the guidance of the idle curiosity, on the other hand, there has been a continued advance toward a more and more comprehensive system of knowledge. With the advance in intelligence and experience there come closer observation and more detailed analysis of facts.[6] The dramatisation of the sequence of phenomena may then fall into somewhat less personal, less anthropomorphic formulations of the processes observed; but at no stage of its growth--at least at no stage hitherto reached--does the output of this work of the idle curiosity lose its dramatic character. Comprehensive generalisations are made and cosmologies are built up, but always in dramatic form. General principles of explanation are settled on, which in the earlier days of theoretical speculation seem invariably to run back to the broad vital principle of generation. Procreation, birth, growth, and decay constitute the cycle of postulates within which the dramatised processes of natural phenomena run their course. Creation is procreation in these archaic theoretical systems, and causation is gestation and birth. The archaic cosmological schemes of Greece, India, Japan, China, Polynesia, and America, all run to the same general effect on this head.[7] The like seems true for the Elohistic elements in the Hebrew scriptures. Throughout this biological speculation there is present, obscurely in the background, the tacit recognition of a material causation, such as conditions the vulgar operations of workday life from hour to hour. But this causal relation between vulgar work and product is vaguely taken for granted and not made a principle for comprehensive generalisations. It is overlooked as a trivial matter of course. The higher generalisations take their color from the broader features of the current scheme of life. The habits of thought that rule in the working-out of a system of knowledge are such as are fostered by the more impressive affairs of life, by the institutional structure under which the community lives. So long as the ruling institutions are those of blood-relationship, descent, and clannish discrimination, so long the canons of knowledge are of the same complexion. When presently a transformation is made in the scheme of culture from peaceable life with sporadic predation to a settled scheme of predaceous life, involving mastery and servitude, gradations of privilege and honor, coercion and personal dependence, then the scheme of knowledge undergoes an analogous change. The predaceous, or higher barbarian, culture is, for the present purpose, peculiar in that it is ruled by an accentuated pragmatism. The institutions of this cultural phase are conventionalised relations of force and fraud. The questions of life are questions of expedient conduct as carried on under the current relations of mastery and subservience. The habitual distinctions are distinctions of personal force, advantage, precedence, and authority. A shrewd adaptation to this system of graded dignity and servitude becomes a matter of life and death, and men learn to think in these terms as ultimate and definitive. The system of knowledge, even in so far as its motives are of a dispassionate or idle kind, falls into the like terms, because such are the habits of thought and the standards of discrimination enforced by daily life.[8] The theoretical work of such a cultural era, as, for instance, the Middle Ages, still takes the general shape of dramatisation, but the postulates of the dramaturgic theories and the tests of theoretic validity are no longer the same as before the scheme of graded servitude came to occupy the field. The canons which guide the work of the idle curiosity are no longer those of generation, blood-relationship, and homely life, but rather those of graded dignity, authenticity, and dependence. The higher generalisations take on a new complexion, it may be without formally discarding the older articles of belief. The cosmologies of these higher barbarians are cast in terms of a feudalistic hierarchy of agents and elements, and the causal nexus between phenomena is conceived animistically after the manner of sympathetic magic. The laws that are sought to be discovered in the natural universe are sought in terms of authoritative enactment. The relation in which the deity, or deities, are conceived to stand to facts is no longer the relation of progenitor, so much as that of suzerainty. Natural laws are corollaries under the arbitrary rules of status imposed on the natural universe by an all-powerful Providence with a view to the maintenance of his own prestige. The science that grows in such a spiritual environment is of the class represented by alchemy and astrology, in which the imputed degree of nobility and prepotency of the objects and the symbolic force of their names are looked to for an explanation of what takes place. The theoretical output of the Schoolmen has necessarily an accentuated pragmatic complexion, since the whole cultural scheme under which they lived and worked was of a strenuously pragmatic character. The current concepts of things were then drawn in terms of expediency, personal force, exploit, prescriptive authority, and the like, and this range of concepts was by force of habit employed in the correlation of facts for purposes of knowledge even where no immediate practical use of the knowledge so gained was had in view. At the same time a very large proportion of the scholastic researches and speculations aimed directly at rules of expedient conduct, whether it took the form of a philosophy of life under temporal law and custom, or of a scheme of salvation under the decrees of an autocratic Providence. A naïve apprehension of the dictum that all knowledge is pragmatic would find more satisfactory corroboration in the intellectual output of scholasticism than in any system of knowledge of an older or a later date. With the advent of modern times a change comes over the nature of the inquiries and formulations worked out under the guidance of the idle curiosity--which from this epoch is often spoken of as the scientific spirit. The change in question is closely correlated with an analogous change in institutions and habits of life, particularly with the changes which the modern era brings in industry and in the economic organisation of society. It is doubtful whether the characteristic intellectual interests and teachings of the new era can properly be spoken of as less "pragmatic," as that term is sometimes understood, than those of the scholastic times; but they are of another kind, being conditioned by a different cultural and industrial situation.[9] In the life of the new era conceptions of authentic rank and differential dignity have grown weaker in practical affairs, and notions of preferential reality and authentic tradition similarly count for less in the new science. The forces at work in the external world are conceived in a less animistic manner, although anthropomorphism still prevails, at least to the degree required in order to give a dramatic interpretation of the sequence of phenomena. The changes in the cultural situation which seem to have had the most serious consequences for the methods and animus of scientific inquiry are those changes that took place in the field of industry. Industry in early modern times is a fact of relatively greater preponderance, more of a tone-giving factor, than it was under the régime of feudal status. It is the characteristic trait of the modern culture, very much as exploit and fealty were the characteristic cultural traits of the earlier time. This early-modern industry is, in an obvious and convincing degree, a matter of workmanship. The same has not been true in the same degree either before or since. The workman, more or less skilled and with more or less specialised efficiency, was the central figure in the cultural situation of the time; and so the concepts of the scientists came to be drawn in the image of the workman. The dramatisations of the sequence of external phenomena worked out under the impulse of the idle curiosity were then conceived in terms of workmanship. Workmanship gradually supplanted differential dignity as the authoritative canon of scientific truth, even on the higher levels of speculation and research. This, of course, amounts to saying in other words that the law of cause and effect was given the first place, as contrasted with dialectical consistency and authentic tradition. But this early-modern law of cause and effect--the law of efficient causes--is of an anthropomorphic kind. "Like causes produce like effects," in much the same sense as the skilled workman's product is like the workman; "nothing is found in the effect that was not contained in the cause," in much the same manner. These dicta are, of course, older than modern science, but it is only in the early days of modern science that they come to rule the field with an unquestioned sway and to push the higher grounds of dialectical validity to one side. They invade even the highest and most recondite fields of speculation, so that at the approach to the transition from the early-modern to the late-modern period, in the eighteenth century, they determine the outcome even in the counsels of the theologians. The deity, from having been in mediæval times primarily a suzerain concerned with the maintenance of his own prestige, becomes primarily a creator engaged in the workmanlike occupation of making things useful for man. His relation to man and the natural universe is no longer primarily that of a progenitor, as it is in the lower barbarian culture, but rather that of a talented mechanic. The "natural laws" which the scientists of that era make so much of are no longer decrees of a preternatural legislative authority, but rather details of the workshop specifications handed down by the master-craftsman for the guidance of handicraftsmen working out his designs. In the eighteenth-century science these natural laws are laws specifying the sequence of cause and effect, and will bear characterisation as a dramatic interpretation of the activity of the causes at work, and these causes are conceived in a quasi-personal manner. In later modern times the formulations of causal sequence grow more impersonal and more objective, more matter-of-fact; but the imputation of activity to the observed objects never ceases, and even in the latest and maturest formulations of scientific research the dramatic tone is not wholly lost. The causes at work are conceived in a highly impersonal way, but hitherto no science (except ostensibly mathematics) has been content to do its theoretical work in terms of inert magnitude alone. Activity continues to be imputed to the phenomena with which science deals; and activity is, of course, not a fact of observation, but is imputed to the phenomena by the observer.[10] This is, also of course, denied by those who insist on a purely mathematical formulation of scientific theories, but the denial is maintained only at the cost of consistency. Those eminent authorities who speak for a colorless mathematical formulation invariably and necessarily fall back on the (essentially metaphysical) preconception of causation as soon as they go into the actual work of scientific inquiry.[11] Since the machine technology has made great advances, during the nineteenth century, and has become a cultural force of wide-reaching consequence, the formulations of science have made another move in the direction of impersonal matter-of-fact. The machine process has displaced the workman as the archetype in whose image causation is conceived by the scientific investigators. The dramatic interpretation of natural phenomena has thereby become less anthropomorphic; it no longer constructs the life-history of a cause working to produce a given effect--after the manner of a skilled workman producing a piece of wrought goods--but it constructs the life-history of a process in which the distinction between cause and effect need scarcely be observed in an itemised and specific way, but in which the run of causation unfolds itself in an unbroken sequence of cumulative change. By contrast with the pragmatic formulations of worldly wisdom these latter-day theories of the scientists appear highly opaque, impersonal, and matter-of-fact; but taken by themselves they must be admitted still to show the constraint of the dramatic prepossessions that once guided the savage myth-makers. In so far as touches the aims and the animus of scientific inquiry, as seen from the point of view of the scientist, it is a wholly fortuitous and insubstantial coincidence that much of the knowledge gained under machine-made canons of research can be turned to practical account. Much of this knowledge is useful, or may be made so, by applying it to the control of the processes in which natural forces are engaged. This employment of scientific knowledge for useful ends is technology, in the broad sense in which the term includes, besides the machine industry proper, such branches of practice as engineering, agriculture, medicine, sanitation, and economic reforms. The reason why scientific theories can be turned to account for these practical ends is not that these ends are included in the scope of scientific inquiry. These useful purposes lie outside the scientist's interest. It is not that he aims, or can aim, at technological improvements. His inquiry is as "idle" as that of the Pueblo myth-maker. But the canons of validity under whose guidance he works are those imposed by the modern technology, through habituation to its requirements; and therefore his results are available for the technological purpose. His canons of validity are made for him by the cultural situation; they are habits of thought imposed on him by the scheme of life current in the community in which he lives; and under modern conditions this scheme of life is largely machine-made. In the modern culture, industry, industrial processes, and industrial products have progressively gained upon humanity, until these creations of man's ingenuity have latterly come to take the dominant place in the cultural scheme; and it is not too much to say that they have become the chief force in shaping men's daily life, and therefore the chief factor in shaping men's habits of thought. Hence men have learned to think in the terms in which the technological processes act. This is particularly true of those men who by virtue of a peculiarly strong susceptibility in this direction become addicted to that habit of matter-of-fact inquiry that constitutes scientific research. Modern technology makes use of the same range of concepts, thinks in the same terms, and applies the same tests of validity as modern science. In both, the terms of standardisation, validity, and finality are always terms of impersonal sequence, not terms of human nature or of preternatural agencies. Hence the easy copartnership between the two. Science and technology play into one another's hands. The processes of nature with which science deals and which technology turns to account, the sequence of changes in the external world, animate and inanimate, run in terms of brute causation, as do the theories of science. These processes take no thought of human expediency or inexpediency. To make use of them they must be taken as they are, opaque and unsympathetic. Technology, therefore, has come to proceed on an interpretation of these phenomena in mechanical terms, not in terms of imputed personality nor even of workmanship. Modern science, deriving its concepts from the same source, carries on its inquiries and states its conclusions in terms of the same objective character as those employed by the mechanical engineer. So it has come about, through the progressive change of the ruling habits of thought in the community, that the theories of science have progressively diverged from the formulations of pragmatism, ever since the modern era set in. From an organisation of knowledge on the basis of imputed personal or animistic propensity the theory has changed its base to an imputation of brute activity only, and this latter is conceived in an increasingly matter-of-fact manner; until, latterly, the pragmatic range of knowledge and the scientific are more widely out of touch than ever, differing not only in aim, but in matter as well. In both domains knowledge runs in terms of activity, but it is on the one hand knowledge of what had best be done, and on the other hand knowledge of what takes place; on the one hand knowledge of ways and means, on the other hand knowledge without any ulterior purpose. The latter range of knowledge may serve the ends of the former, but the converse does not hold true. These two divergent ranges of inquiry are to be found together in all phases of human culture. What distinguishes the present phase is that the discrepancy between the two is now wider than ever before. The present is nowise distinguished above other cultural eras by any exceptional urgency or acumen in the search for pragmatic expedients. Neither is it safe to assert that the present excels all other civilisations in the volume or the workmanship of that body of knowledge that is to be credited to the idle curiosity. What distinguishes the present in these premises is (1) that the primacy in the cultural scheme has passed from pragmatism to a disinterested inquiry whose motive is idle curiosity, and (2) that in the domain of the latter the making of myths and legends in terms of imputed personality, as well as the construction of dialectical systems in terms of differential reality, has yielded the first place to the making of theories in terms of matter-of-fact sequence.[12] Pragmatism creates nothing but maxims of expedient conduct. Science creates nothing but theories.[13] It knows nothing of policy or utility, of better or worse. None of all that is comprised in what is to-day accounted scientific knowledge. Wisdom and proficiency of the pragmatic sort does not contribute to the advance of a knowledge of fact. It has only an incidental bearing on scientific research, and its bearing is chiefly that of inhibition and misdirection. Wherever canons of expediency are intruded into or are attempted to be incorporated in the inquiry, the consequence is an unhappy one for science, however happy it may be for some other purpose extraneous to science. The mental attitude of worldly wisdom is at cross-purposes with the disinterested scientific spirit, and the pursuit of it induces an intellectual bias that is incompatible with scientific insight. Its intellectual output is a body of shrewd rules of conduct, in great part designed to take advantage of human infirmity. Its habitual terms of standardisation and validity are terms of human nature, of human preference, prejudice, aspiration, endeavor, and disability, and the habit of mind that goes with it is such as is consonant with these terms. No doubt, the all-pervading pragmatic animus of the older and non-European civilisations has had more than anything else to do with their relatively slight and slow advance in scientific knowledge. In the modern scheme of knowledge it holds true, in a similar manner and with analogous effect, that training in divinity, in law, and in the related branches of diplomacy, business tactics, military affairs, and political theory, is alien to the skeptical scientific spirit and subversive of it. The modern scheme of culture comprises a large body of worldly wisdom, as well as of science. This pragmatic lore stands over against science with something of a jealous reserve. The pragmatists value themselves somewhat on being useful as well as being efficient for good and evil. They feel the inherent antagonism between themselves and the scientists, and look with some doubt on the latter as being merely decorative triflers, although they sometimes borrow the prestige of the name of science--as is only good and well, since it is of the essence of worldly wisdom to borrow anything that can be turned to account. The reasoning in these fields turns about questions of personal advantage of one kind or another, and the merits of the claims canvassed in these discussions are decided on grounds of authenticity. Personal claims make up the subject of the inquiry, and these claims are construed and decided in terms of precedent and choice, use and wont, prescriptive authority, and the like. The higher reaches of generalisation in these pragmatic inquiries are of the nature of deductions from authentic tradition, and the training in this class of reasoning gives discrimination in respect of authenticity and expediency. The resulting habit of mind is a bias for substituting dialectical distinctions and decisions _de jure_ in the place of explanations _de facto_. The so-called "sciences" associated with these pragmatic disciplines, such as jurisprudence, political science, and the like, are a taxonomy of credenda. Of this character was the greater part of the "science" cultivated by the Schoolmen, and large remnants of the same kind of authentic convictions are, of course, still found among the tenets of the scientists, particularly in the social sciences, and no small solicitude is still given to their cultivation. Substantially the same value as that of the temporal pragmatic inquiries belongs also, of course, to the "science" of divinity. Here the questions to which an answer is sought, as well as the aim and method of inquiry, are of the same pragmatic character, although the argument runs on a higher plane of personality, and seeks a solution in terms of a remoter and more metaphysical expediency. * * * * * In the light of what has been said above, the questions recur: How far is the scientific quest of matter-of-fact knowledge consonant with the inherited intellectual aptitudes and propensities of the normal man? and, What foothold has science in the modern culture? The former is a question of the temperamental heritage of civilised mankind, and therefore it is in large part a question of the circumstances which have in the past selectively shaped the human nature of civilised mankind. Under the barbarian culture, as well as on the lower levels of what is currently called civilised life, the dominant note has been that of competitive expediency for the individual or the group, great or small, in an avowed struggle for the means of life. Such is still the ideal of the politician and business man, as well as of other classes whose habits of life lead them to cling to the inherited barbarian traditions. The upper-barbarian and lower-civilised culture, as has already been indicated, is pragmatic, with a thoroughness that nearly bars out any non-pragmatic ideal of life or of knowledge. Where this tradition is strong there is but a precarious chance for any consistent effort to formulate knowledge in other terms than those drawn from the prevalent relations of personal mastery and subservience and the ideals of personal gain. During the Dark and Middle Ages, for instance, it is true in the main that any movement of thought not controlled by considerations of expediency and conventions of status are to be found only in the obscure depths of vulgar life, among those neglected elements of the population that lived below the reach of the active class struggle. What there is surviving of this vulgar, non-pragmatic intellectual output takes the form of legends and folk-tales, often embroidered on the authentic documents of the Faith. These are less alien to the latest and highest culture of Christendom than are the dogmatic, dialectical, and chivalric productions that occupied the attention of the upper classes in mediæval times. It may seem a curious paradox that the latest and most perfect flower of the western civilisation is more nearly akin to the spiritual life of the serfs and villeins than it is to that of the grange or the abbey. The courtly life and the chivalric habits of thought of that past phase of culture have left as nearly no trace in the cultural scheme of later modern times as could well be. Even the romancers who ostensibly rehearse the phenomena of chivalry, unavoidably make their knights and ladies speak the language and the sentiments of the slums of that time, tempered with certain schematised modern reflections and speculations. The gallantries, the genteel inanities and devout imbecilities of mediæval high-life would be insufferable even to the meanest and most romantic modern intelligence. So that in a later, less barbarian age the precarious remnants of folklore that have come down through that vulgar channel--half savage and more than half pagan--are treasured as containing the largest spiritual gains which the barbarian ages of Europe have to offer. The sway of barbarian pragmatism has, everywhere in the western world, been relatively brief and relatively light; the only exceptions would be found in certain parts of the Mediterranean seaboard. But wherever the barbarian culture has been sufficiently long-lived and unmitigated to work out a thoroughly selective effect in the human material subjected to it, there the pragmatic animus may be expected to have become supreme and to inhibit all movement in the direction of scientific inquiry and eliminate all effective aptitude for other than worldly wisdom. What the selective consequences of such a protracted régime of pragmatism would be for the temper of the race may be seen in the human flotsam left by the great civilisations of antiquity, such as Egypt, India, and Persia. Science is not at home among these leavings of barbarism. In these instances of its long and unmitigated dominion the barbarian culture has selectively worked out a temperamental bias and a scheme of life from which objective, matter-of-fact knowledge is virtually excluded in favor of pragmatism, secular and religious. But for the greater part of the race, at least for the greater part of civilised mankind, the régime of the mature barbarian culture has been of relatively short duration, and has had a correspondingly superficial and transient selective effect. It has not had force and time to eliminate certain elements of human nature handed down from an earlier phase of life, which are not in full consonance with the barbarian animus or with the demands of the pragmatic scheme of thought. The barbarian-pragmatic habit of mind, therefore, is not properly speaking a temperamental trait of the civilised peoples, except possibly within certain class limits (as, _e.g._, the German nobility). It is rather a tradition, and it does not constitute so tenacious a bias as to make head against the strongly materialistic drift of modern conditions and set aside that increasingly urgent resort to matter-of-fact conceptions that makes for the primacy of science. Civilised mankind does not in any great measure take back atavistically to the upper-barbarian habit of mind. Barbarism covers too small a segment of the life-history of the race to have given an enduring temperamental result. The unmitigated discipline of the higher barbarism in Europe fell on a relatively small proportion of the population, and in the course of time this select element of the population was crossed and blended with the blood of the lower elements whose life always continued to run in the ruts of savagery rather than in those of the high-strung, finished barbarian culture that gave rise to the chivalric scheme of life. Of the several phases of human culture the most protracted, and the one which has counted for most in shaping the abiding traits of the race, is unquestionably that of savagery. With savagery, for the purpose in hand, is to be classed that lower, relatively peaceable barbarism that is not characterised by wide and sharp class discrepancies or by an unremitting endeavor of one individual or group to get the better of another. Even under the full-grown barbarian culture--as, for instance, during the Middle Ages--the habits of life and the spiritual interests of the great body of the population continue in large measure to bear the character of savagery. The savage phase of culture accounts for by far the greater portion of the life-history of mankind, particularly if the lower barbarism and the vulgar life of later barbarism be counted in with savagery, as in a measure they properly should. This is particularly true of those racial elements that have entered into the composition of the leading peoples of Christendom. The savage culture is characterised by the relative absence of pragmatism from the higher generalisations of its knowledge and beliefs. As has been noted above, its theoretical creations are chiefly of the nature of mythology shading off into folklore. This genial spinning of apocryphal yarns is, at its best, an amiably inefficient formulation of experiences and observations in terms of something like a life-history of the phenomena observed. It has, on the one hand, little value, and little purpose, in the way of pragmatic expediency, and so it is not closely akin to the pragmatic-barbarian scheme of life; while, on the other hand, it is also ineffectual as a systematic knowledge of matter-of-fact. It is a quest of knowledge, perhaps of systematic knowledge, and it is carried on under the incentive of the idle curiosity. In this respect it falls in the same class with the civilised man's science; but it seeks knowledge not in terms of opaque matter-of-fact, but in terms of some sort of spiritual life imputed to the facts. It is romantic and Hegelian rather than realistic and Darwinian. The logical necessities of its scheme of thought are necessities of spiritual consistency rather than of quantitative equivalence. It is like science in that it has no ulterior motive beyond the idle craving for a systematic correlation of data; but it is unlike science in that its standardisation and correlation of data run in terms of the free play of imputed personal initiative rather than in terms of the constraint of objective cause and effect. By force of the protracted selective discipline of this past phase of culture, the human nature of civilised mankind is still substantially the human nature of savage man. The ancient equipment of congenital aptitudes and propensities stands over substantially unchanged, though overlaid with barbarian traditions and conventionalities and readjusted by habituation to the exigencies of civilised life. In a measure, therefore, but by no means altogether, scientific inquiry is native to civilised man with his savage heritage, since scientific inquiry proceeds on the same general motive of idle curiosity as guided the savage myth-makers, though it makes use of concepts and standards in great measure alien to the myth-makers' habit of mind. The ancient human predilection for discovering a dramatic play of passion and intrigue in the phenomena of nature still asserts itself. In the most advanced communities, and even among the adepts of modern science, there comes up persistently the revulsion of the native savage against the inhumanly dispassionate sweep of the scientific quest, as well as against the inhumanly ruthless fabric of technological processes that have come out of this search for matter-of-fact knowledge. Very often the savage need of a spiritual interpretation (dramatisation) of phenomena breaks through the crust of acquired materialistic habits of thought, to find such refuge as may be had in articles of faith seized on and held by sheer force of instinctive conviction. Science and its creations are more or less uncanny, more or less alien, to that fashion of craving for knowledge that by ancient inheritance animates mankind. Furtively or by an overt breach of consistency, men still seek comfort in marvelous articles of savage-born lore, which contradict the truths of that modern science whose dominion they dare not question, but whose findings at the same time go beyond the breaking point of their jungle-fed spiritual sensibilities. The ancient ruts of savage thought and conviction are smooth and easy; but however sweet and indispensable the archaic ways of thinking may be to the civilised man's peace of mind, yet such is the binding force of matter-of-fact analysis and inference under modern conditions that the findings of science are not questioned on the whole. The name of science is after all a word to conjure with. So much so that the name and the mannerisms, at least, if nothing more of science, have invaded all fields of learning and have even overrun territory that belongs to the enemy. So there are "sciences" of theology, law, and medicine, as has already been noted above. And there are such things as Christian Science, and "scientific" astrology, palmistry, and the like. But within the field of learning proper there is a similar predilection for an air of scientific acumen and precision where science does not belong. So that even that large range of knowledge that has to do with general information rather than with theory--what is loosely termed scholarship--tends strongly to take on the name and forms of theoretical statement. However decided the contrast between these branches of knowledge on the one hand, and science properly so called on the other hand, yet even the classical learning, and the humanities generally, fall in with this predilection more and more with each succeeding generation of students. The students of literature, for instance, are more and more prone to substitute critical analysis and linguistic speculation, as the end of their endeavors, in the place of that discipline of taste and that cultivated sense of literary form and literary feeling that must always remain the chief end of literary training, as distinct from philology and the social sciences. There is, of course, no intention to question the legitimacy of a science of philology or of the analytical study of literature as a fact in cultural history, but these things do not constitute training in literary taste, nor can they take the place of it. The effect of this straining after scientific formulations in a field alien to the scientific spirit is as curious as it is wasteful. Scientifically speaking, these quasi-scientific inquiries necessarily begin nowhere and end in the same place; while in point of cultural gain they commonly come to nothing better than spiritual abnegation. But these blindfold endeavors to conform to the canons of science serve to show how wide and unmitigated the sway of science is in the modern community. Scholarship--that is to say an intimate and systematic familiarity with past cultural achievements--still holds its place in the scheme of learning, in spite of the unadvised efforts of the short-sighted to blend it with the work of science, for it affords play for the ancient genial propensities that ruled men's quest of knowledge before the coming of science or of the outspoken pragmatic barbarism. Its place may not be so large in proportion to the entire field of learning as it was before the scientific era got fully under way. But there is no intrinsic antagonism between science and scholarship, as there is between pragmatic training and scientific inquiry. Modern scholarship shares with modern science the quality of not being pragmatic in its aim. Like science it has no ulterior end. It may be difficult here and there to draw the line between science and scholarship, and it may even more be unnecessary to draw such a line; yet while the two ranges of discipline belong together in many ways, and while there are many points of contact and sympathy between the two; while the two together make up the modern scheme of learning; yet there is no need of confounding the one with the other, nor can the one do the work of the other. The scheme of learning has changed in such manner as to give science the more commanding place, but the scholar's domain has not thereby been invaded, nor has it suffered contraction at the hands of science, whatever may be said of the weak-kneed abnegation of some whose place, if they have one, is in the field of scholarship rather than of science. * * * * * All that has been said above has of course nothing to say as to the intrinsic merits of this quest of matter-of-fact knowledge. In point of fact, science gives its tone to modern culture. One may approve or one may deprecate the fact that this opaque, materialistic interpretation of things pervades modern thinking. That is a question of taste, about which there is no disputing. The prevalence of this matter-of-fact inquiry is a feature of modern culture, and the attitude which critics take toward this phenomenon is chiefly significant as indicating how far their own habit of mind coincides with the enlightened common-sense of civilised mankind. It shows in what degree they are abreast of the advance of culture. Those in whom the savage predilection or the barbarian tradition is stronger than their habituation to civilised life will find that this dominant factor of modern life is perverse, if not calamitous; those whose habits of thought have been fully shaped by the machine process and scientific inquiry are likely to find it good. The modern western culture, with its core of matter-of-fact knowledge, may be better or worse than some other cultural scheme, such as the classic Greek, the mediæval Christian, the Hindu, or the Pueblo Indian. Seen in certain lights, tested by certain standards, it is doubtless better; by other standards, worse. But the fact remains that the current cultural scheme, in its maturest growth, is of that complexion; its characteristic force lies in this matter-of-fact insight; its highest discipline and its maturest aspirations are these. In point of fact, the sober common-sense of civilised mankind accepts no other end of endeavor as self-sufficient and ultimate. That such is the case seems to be due chiefly to the ubiquitous presence of the machine technology and its creations in the life of modern communities. And so long as the machine process continues to hold its dominant place as a disciplinary factor in modern culture, so long must the spiritual and intellectual life of this cultural era maintain the character which the machine process gives it. But while the scientist's spirit and his achievements stir an unqualified admiration in modern men, and while his discoveries carry conviction as nothing else does, it does not follow that the manner of man which this quest of knowledge produces or requires comes near answering to the current ideal of manhood, or that his conclusions are felt to be as good and beautiful as they are true. The ideal man, and the ideal of human life, even in the apprehension of those who most rejoice in the advances of science, is neither the finikin skeptic in the laboratory nor the animated slide-rule. The quest of science is relatively new. It is a cultural factor not comprised, in anything like its modern force, among those circumstances whose selective action in the far past has given to the race the human nature which it now has. The race reached the human plane with little of this searching knowledge of facts; and throughout the greater part of its life-history on the human plane it has been accustomed to make its higher generalisations and to formulate its larger principles of life in other terms than those of passionless matter-of-fact. This manner of knowledge has occupied an increasing share of men's attention in the past, since it bears in a decisive way upon the minor affairs of workday life; but it has never until now been put in the first place, as the dominant note of human culture. The normal man, such as his inheritance has made him, has therefore good cause to be restive under its dominion. FOOTNOTES: [1] Reprinted by permission from _The American Journal of Sociology_, Vol. XI, March, 1906. [2] Jacques Loeb, _Heliotropismus der Thiere_, and _Comparative Psychology and Physiology of the Brain_. [3] Cf. Gross, _Spiele der Thiere_, chap. 2 (esp. pp. 65-76), and chap. 5; _The Play of Man_, Part III, sec. 3; Spencer, _Principles of Psychology_, secs. 533-35. [4] The myths and legendary lore of the Eskimo, the Pueblo Indians, and some tribes of the northwest coast afford good instances of such idle creations. Cf. various _Reports_ of the Bureau of American Ethnology; also, e.g., Tylor, _Primitive Culture_, esp. the chapters on "Mythology" and "Animism." [5] "Pragmatic" is here used in a more restricted sense than the distinctively pragmatic school of modern psychologists would commonly assign the term. "Pragmatic," "teleological," and the like terms have been extended to cover imputation of purpose as well as conversion to use. It is not intended to criticise this ambiguous use of terms, nor to correct it; but the terms are here used only in the latter sense, which alone belongs to them by force of early usage and etymology. "Pragmatic" knowledge, therefore, is such as is designed to serve an expedient end for the knower, and is here contrasted with the imputation of expedient conduct to the facts observed. The reason for preserving this distinction is simply the present need of a simple term by which to mark the distinction between worldly wisdom and idle learning. [6] Cf. Ward, _Pure Sociology_, esp. pp. 437-48. [7] Cf., e.g., Tylor, _Primitive Culture_, chap. 8. [8] Cf. James, _Psychology_, chap. 9, esp. sec. 5. [9] As currently employed, the term "pragmatic" is made to cover both conduct looking to the agent's preferential advantage, expedient conduct, and workmanship directed to the production of things that may or may not be of advantage to the agent. If the term be taken in the latter meaning, the culture of modern times is no less "pragmatic" than that of the Middle Ages. It is here intended to be used in the former sense. [10] Epistemologically speaking, activity is imputed to phenomena for the purpose of organising them into a dramatically consistent system. [11] Cf., e.g., Karl Pearson, _Grammar of Science_, and compare his ideal of inert magnitudes as set forth in his exposition with his actual work as shown in chaps. 9, 10, and 12, and more particularly in his discussions of "Mother Right" and related topics in _The Chances of Death_. [12] Cf. James, _Psychology_, Vol. II, chap. 28, pp. 633-71, esp. p. 640 note. [13] Cf. Ward, _Principles of Psychology_, pp. 439-43. THE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW[1] A discussion of the scientific point of view which avowedly proceeds from this point of view itself has necessarily the appearance of an argument in a circle; and such in great part is the character of what here follows. It is in large part an attempt to explain the scientific point of view in terms of itself, but not altogether. This inquiry does not presume to deal with the origin or the legitimation of the postulates of science, but only with the growth of the habitual use of these postulates, and the manner of using them. The point of inquiry is the changes which have taken place in the secondary postulates involved in the scientific point of view--in great part a question of the progressive redistribution of emphasis among the preconceptions under whose guidance successive generations of scientists have gone to their work. * * * * * The sciences which are in any peculiar sense modern take as an (unavowed) postulate the fact of consecutive change. Their inquiry always centers upon some manner of process. This notion of process about which the researches of modern science cluster, is a notion of a sequence, or complex, of consecutive change in which the _nexus_ of the sequence, that by virtue of which the change inquired into is consecutive, is the relation of cause and effect. The consecution, moreover, runs in terms of persistence of quantity or of force. In so far as the science is of a modern complexion, in so far as it is not of the nature of taxonomy simply, the inquiry converges upon a matter of process; and it comes to rest, provisionally, when it has disposed of its facts in terms of process. But modern scientific inquiry in any case comes to rest only provisionally; because its prime postulate is that of consecutive change, and consecutive change can, of course, not come to rest except provisionally. By its own nature the inquiry cannot reach a final term in any direction. So it is something of a homiletical commonplace to say that the outcome of any serious research can only be to make two questions grow where one question grew before. Such is necessarily the case because the postulate of the scientist is that things change consecutively. It is an unproven and unprovable postulate--that is to say, it is a metaphysical preconception--but it gives the outcome that every goal of research is necessarily a point of departure; every term is transitional.[2] A hundred years ago, or even fifty years ago, scientific men were not in the habit of looking at the matter in this way. At least it did not then seem a matter of course, lying in the nature of things, that scientific inquiry could not reach a final term in any direction. To-day it is a matter of course, and will be so avowed without argument. Stated in the broadest terms, this is the substantial outcome of that nineteenth-century movement in science with which the name of Darwin is associated as a catch-word. This use of Darwin's name does not imply that this epoch of science is mainly Darwin's work. What merit may belong to Darwin, specifically, in these premises, is a question which need not detain the argument. He may, by way of creative initiative, have had more or less to do with shaping the course of things scientific. Or, if you choose, his voice may even be taken as only one of the noises which the wheels of civilisation make when they go round. But by scientifically colloquial usage we have come to speak of pre-Darwinian and post-Darwinian science, and to appreciate that there is a significant difference in the point of view between the scientific era which preceded and that which followed the epoch to which his name belongs. Before that epoch the animus of a science was, on the whole, the animus of taxonomy; the consistent end of scientific inquiry was definition and classification,--as it still continues to be in such fields of science as have not been affected by the modern notion of consecutive change. The scientists of that era looked to a final term, a consummation of the changes which provoked their inquiry, as well as to a first beginning of the matters with which their researches were concerned. The questions of science were directed to the problem, essentially classificatory, of how things had been in the presumed primordial stable equilibrium out of which they, putatively, had come, and how they should be in the definitive state of settlement into which things were to fall as the outcome of the play of forces which intervened between this primordial and the definitive stable equilibrium. To the pre-Darwinian taxonomists the center of interest and attention, to which all scientific inquiry must legitimately converge, was the body of natural laws governing phenomena under the rule of causation. These natural laws were of the nature of rules of the game of causation. They formulated the immutable relations in which things "naturally" stood to one another before causal disturbance took place between them, the orderly unfolding of the complement of causes involved in the transition over this interval of transient activity, and the settled relations that would supervene when the disturbance had passed and the transition from cause to effect had been consummated,--the emphasis falling on the consummation. The characteristic feature by which post-Darwinian science is contrasted with what went before is a new distribution of emphasis, whereby the process of causation, the interval of instability and transition between initial cause and definitive effect, has come to take the first place in the inquiry; instead of that consummation in which causal effect was once presumed to come to rest. This change of the point of view was, of course, not abrupt or catastrophic. But it has latterly gone so far that modern science is becoming substantially a theory of the process of consecutive change, which is taken as a sequence of cumulative change, realized to be self-continuing or self-propagating and to have no final term. Questions of a primordial beginning and a definitive outcome have fallen into abeyance within the modern sciences, and such questions are in a fair way to lose all claim to consideration at the hands of the scientists. Modern science is ceasing to occupy itself with the natural laws--the codified rules of the game of causation--and is concerning itself wholly with what has taken place and what is taking place. * * * * * Rightly seen from this ultra-modern point of view, this modern science and this point of view which it affects are, of course, a feature of the current cultural situation,--of the process of life as it runs along under our eyes. So also, when seen from this scientific point of view, it is a matter of course that any marked cultural era will have its own characteristic attitude and animus toward matters of knowledge, will bring under inquiry such questions of knowledge as lie within its peculiar range of interest, and will seek answers to these questions only in terms that are consonant with the habits of thought current at the time. That is to say, science and the scientific point of view will vary characteristically in response to those variations in the prevalent habits of thought which constitute the sequence of cultural development; the current science and the current scientific point of view, the knowledge sought and the manner of seeking it, are a product of the cultural growth. Perhaps it would all be better characterised as a by-product of the cultured growth. * * * * * This question of a scientific point of view, of a particular attitude and animus in matters of knowledge, is a question of the formation of habits of thought; and habits of thought are an outcome of habits of life. A scientific point of view is a consensus of habits of thought current in the community, and the scientist is constrained to believe that this consensus is formed in response to a more or less consistent discipline of habituation to which the community is subjected, and that the consensus can extend only so far and maintain its force only so long as the discipline of habituation exercised by the circumstances of life enforces it and backs it up. The scheme of life, within which lies the scheme of knowledge, is a consensus of habits in the individuals which make up the community. The individual subjected to habituation is each a single individual agent, and whatever affects him in any one line of activity, therefore, necessarily affects him in some degree in all his various activities. The cultural scheme of any community is a complex of the habits of life and of thought prevalent among the members of the community. It makes up a more or less congruous and balanced whole, and carries within it a more or less consistent habitual attitude toward matters of knowledge--more or less consistent according as the community's cultural scheme is more or less congruous throughout the body of the population; and this in its turn is in the main a question of how nearly uniform or consonant are the circumstances of experience and tradition to which the several classes and members of the community are subject. So, then, the change which has come over the scientific point of view between pre-Darwinian and post-Darwinian times is to be explained, at least in great part, by the changing circumstances of life, and therefore of habituation, among the people of Christendom during the life-history of modern science. But the growth of a scientific point of view begins farther back than modern Christendom, and a record of its growth would be a record of the growth of human culture. Modern science demands a genetic account of the phenomena with which it deals, and a genetic inquiry into the scientific point of view necessarily will have to make up its account with the earlier phases of cultural growth. A life-history of human culture is a large topic, not to be attempted here even in the sketchiest outline. The most that can be attempted is a hasty review of certain scattered questions and salient points in this life-history. * * * * * In what manner and with what effect the idle curiosity of mankind first began to tame the facts thrown in its way, far back in the night of time, and to break them in under a scheme of habitual interpretation; what may have been the earliest norms of systematic knowledge, such as would serve the curiosity of the earliest generations of men in a way analogous to the service rendered the curiosity of later generations by scientific inquiry--all that is, of course, a matter of long-range conjecture, more or less wild, which cannot be gone into here. But among such peoples of the lower cultures as have been consistently observed, norms of knowledge and schemes for its systematization are always found. These norms and systems of knowledge are naïve and crude, perhaps, but there is fair ground for presuming that out of the like norms and systems in the remoter ages of our own antecedents have grown up the systems of knowledge cultivated by the peoples of history and by their representatives now living. It is not unusual to say that the primitive systems of knowledge are constructed on animistic lines; that animistic sequence is the rule to which the facts are broken in. This seems to be true, if "animism" be construed in a sufficiently naïve and inchoate sense. But this is not the whole case. In their higher generalisations, in what Powell calls their "sophiology," it appears that the primitive peoples are guided by animistic norms; they make up their cosmological schemes, and the like, in terms of personal or quasi-personal activity, and the whole is thrown into something of a dramatic form. Through the early cosmological lore runs a dramatic consistency which imputes something in the way of initiative and propensity to the phenomena that are to be accounted for. But this dramatisation of the facts, the accounting for phenomena in terms of spiritual or quasi-spiritual initiative, is by no means the whole case of primitive men's systematic knowledge of facts. Their theories are not all of the nature of dramatic legend, myth, or animistic life-history, although the broader and more picturesque generalisations may take that form. There always runs along by the side of these dramaturgic life-histories, and underlying them, an obscure system of generalisations in terms of matter-of-fact. The system of matter-of-fact generalisations, or theories, is obscurer than the dramatic generalisations only in the sense that it is left in the background as being less picturesque and of less vital interest, not in the sense of being less familiar, less adequately apprehended, or less secure. The peoples of the lower cultures "know" that the broad scheme of things is to be explained in terms of creation, perhaps of procreation, gestation, birth, growth, life and initiative; and these matters engross the attention and stimulate speculation. But they know equally well the matter of fact that water will run down hill, that two stones are heavier than one of them, that an edge-tool will cut softer substances, that two things may be tied together with a string, that a pointed stick may be stuck in the ground, and the like. There is no range of knowledge that is held more securely by any people than such matters of fact; and these are generalisations from experience; they are theoretical knowledge, and they are a matter of course. They underlie the dramatical generalisations of the broad scheme of things, and are so employed in the speculations of the myth-makers and the learned. It may be that the exceptional efficiency of a given edge-tool, _e.g._, will be accounted for on animistic or quasi-personal grounds,--grounds of magical efficacy; but it is the exceptional behavior of such a tool that calls for explanation on the higher ground of animistic potency, not its work-day performance of common work. So also if an edge-tool should fail to do what is expected of it as a matter of course, its failure may require an explanation in other terms than matter-of-fact. But all that only serves to bring into evidence the fact that a scheme of generalisations in terms of matter-of-fact is securely held and is made use of as a sufficient and ultimate explanation of the more familiar phenomena of experience. These commonplace matter-of-fact generalisations are not questioned and do not clash with the higher scheme of things. All this may seem like taking pains about trivialities. But the data with which any scientific inquiry has to do are trivialities in some other bearing than that one in which they are of account. In all succeeding phases of culture, developmentally subsequent to the primitive phase supposed above, there is found a similar or analogous division of knowledge between a higher range of theoretical explanations of phenomena, an ornate scheme of things, on the one hand, and such an obscure range of matter-of-fact generalisations as is here spoken of, on the other hand. And the evolution of the scientific point of view is a matter of the shifting fortunes which have in the course of cultural growth overtaken the one and the other of these two divergent methods of apprehending and systematising the facts of experience. The historians of human culture have, no doubt justly, commonly dealt with the mutations that have occurred on the higher levels of intellectual enterprise, in the more ambitious, more picturesque, and less secure of these two contrasted ranges of theoretical knowledge; while the lower range of generalisations, which has to do with work-day experience, has in great part been passed over with scant ceremony as lying outside the current of ideas, and as belonging rather among the things which engage the attention than among the modes, expedients and creations of this attention itself. There is good reason for this relative neglect of the work-day matters of fact. It is on the higher levels of speculative generalisation that the impressive mutations in the development of thought have taken place, and that the shifting of points of view and the clashing of convictions have drawn men into controversy and analysis of their ideas and have given rise to schools of thought. The matter-of-fact generalisations have met with relatively few adventures and have afforded little scope for intellectual initiative and profoundly picturesque speculation. On the higher levels speculation is freer, the creative spirit has some scope, because its excursions are not so immediately and harshly checked by material facts. In these speculative ranges of knowledge it is possible to form and to maintain habits of thought which shall be consistent with themselves and with the habit of mind and run of tradition prevalent in the community at the time, though not thereby consistent with the material actualities of life in the community. Yet this range of speculative generalisation, which makes up the higher learning of the barbarian culture, is also controlled, checked, and guided by the community's habits of life; it, too, is an integral part of the scheme of life and is an outcome of the habituation enforced by experience. But it does not rest immediately on men's dealings with the refractory phenomena of brute creation, nor is it guided, undisguised and directly, by the habitual material (industrial) occupations. The fabric of institutions intervenes between the material exigencies of life and the speculative scheme of things. The higher theoretical knowledge, that body of tenets which rises to the dignity of a philosophical or scientific system, in the early culture, is a complex of habits of thought which reflect the habits of life embodied in the institutional structure of society; while the lower, matter-of-fact generalisations of work-day efficiency--the trivial matters of course--reflect the workmanlike habits of life enforced by the commonplace material exigencies under which men live. The distinction is analogous, and indeed, closely related, to the distinction between "intangible" and "tangible" assets. And the institutions are more flexible, they involve or admit a larger margin of error, or of tolerance, than the material exigencies. The latter are systematised into what economists have called "the state of the industrial arts," which enforce a somewhat rigorous standardisation of whatever knowledge falls within their scope; whereas the institutional scheme is a matter of law and custom, politics and religion, taste and morals, on all of which matters men have opinions and convictions, and on which all men "have a right to their own opinions." The scheme of institutions is also not necessarily uniform throughout the several classes of society; and the same institution (as, _e.g._, slavery, ownership, or royalty) does not impinge with the same effect on all parties touched by it. The discipline of any institution of servitude, _e.g._, is not the same for the master as for the serf, etc. If there is a considerable institutional discrepancy between an upper and a lower class in the community, leading to divergent lines of habitual interest or discipline; if by force of the cultural scheme the institutions of society are chiefly in the keeping of one class, whose attention is then largely engrossed with the maintenance of the scheme of law and order; while the workmanlike activities are chiefly in the hands of another class, in whose apprehension the maintenance of law and order is at the best a wearisome tribulation, there is likely to be a similarly considerable divergence or discrepancy between the speculative knowledge, cultivated primarily by the upper class, and the work-day knowledge which is primarily in the keeping of the lower class. Such, in particular, will be the case if the community is organised on a coercive plan, with well-marked ruling and subject classes. The important and interesting institutions in such a case, those institutions which fill a large angle in men's vision and carry a great force of authenticity, are the institutions of coercive control, differential authority and subjection, personal dignity and consequence; and the speculative generalisations, the institutions of the realm of knowledge, are created in the image of these social institutions of status and personal force, and fall into a scheme drawn after the plan of the code of honor. The work-day generalisations, which emerge from the state of the industrial arts, concomitantly fall into a deeper obscurity, answering to the depth of indignity to which workmanlike efficiency sinks under such a cultural scheme; and they can touch and check the current speculative knowledge only remotely and incidentally. Under such a bifurcate scheme of culture, with its concomitant two-cleft systematisation of knowledge, "reality" is likely to be widely dissociated from fact--that is to say, the realities and verities which are accepted as authentic and convincing on the plane of speculative generalisation; while science has no show--that is to say, science in that modern sense of the term which implies a close contact, if not a coincidence, of reality with fact. Whereas, if the institutional fabric, the community's scheme of life, changes in such a manner as to throw the work-day experience into the foreground of attention and to center the habitual interest of the people on the immediate material relations of men to the brute actualities, then the interval between the speculative realm of knowledge, on the one hand, and the work-day generalisations of fact, on the other hand, is likely to lessen, and the two ranges of knowledge are likely to converge more or less effectually upon a common ground. When the growth of culture falls into such lines, these two methods and norms of theoretical formulation may presently come to further and fortify one another, and something in the way of science has at least a chance to arise. * * * * * On this view there is a degree of interdependence between the cultural situation and the state of theoretical inquiry. To illustrate this interdependence, or the concomitance between the cultural scheme and the character of theoretical speculation, it may be in place to call to mind certain concomitant variations of a general character which occur in the lower cultures between the scheme of life and the scheme of knowledge. In this tentative and fragmentary presentation of evidence there is nothing novel to be brought forward; still less is there anything to be offered which carries the weight of authority. On the lower levels of culture, even more decidedly than on the higher, the speculative systematisation of knowledge is prone to take the form of theology (mythology) and cosmology. This theological and cosmological lore serves the savage and barbaric peoples as a theoretical account of the scheme of things, and its characteristic traits vary in response to the variations of the institutional scheme under which the community lives. In a prevailingly peaceable agricultural community, such, _e.g._, as the more peaceable Pueblo Indians or the more settled Indians of the Middle West, there is little coercive authority, few and slight class distinctions involving superiority and inferiority; property rights are few, slight and unstable; relationship is likely to be counted in the female line. In such a culture the cosmological lore is likely to offer explanations of the scheme of things in terms of generation or germination and growth. Creation by fiat is not obtrusively or characteristically present. The laws of nature bear the character of an habitual behavior of things, rather than that of an authoritative code of ordinances imposed by an overruling providence. The theology is likely to be polytheistic in an extreme degree and in an extremely loose sense of the term, embodying relatively little of the suzerainty of God. The relation of the deities to mankind is likely to be that of consanguinity, and as if to emphasise the peaceable, non-coercive character of the divine order of things, the deities are, in the main, very apt to be females. The matters of interest dealt with in the cosmological theories are chiefly matters of the livelihood of the people, the growth and care of the crops, and the promotion of industrial ways and means. With these phenomena of the peaceable culture may be contrasted the order of things found among a predatory pastoral people--and pastoral peoples tend strongly to take on a predatory cultural scheme. Such a people will adopt male deities, in the main, and will impute to them a coercive, imperious, arbitrary animus and a degree of princely dignity. They will also tend strongly to a monotheistic, patriarchal scheme of divine government; to explain things in terms of creative fiat; and to a belief in the control of the natural universe by rules imposed by divine ordinance. The matters of prime consequence in this theology are matters of the servile relation of man to God, rather than the details of the quest of a livelihood. The emphasis falls on the glory of God rather than on the good of man. The Hebrew scriptures, particularly the Jahvistic elements, show such a scheme of pastoral cultural and predatory theoretical generalisations. The learning cultivated on the lower levels of culture might be gone into at some length if space and time permitted, but even what has been said may serve to show, in the most general way, what are the characteristic marks of this savage and barbarian lore. A similarly summary characterisation of a cultural situation nearer home will bear more directly on the immediate topic of inquiry. The learning of mediæval Christendom shows such a concomitance between the scheme of knowledge and the scheme of institutions, somewhat analogous to the barbaric Hebrew situation. The mediæval scheme of institutions was of a coercive, authoritative character, essentially a scheme of graded mastery and graded servitude, in which a code of honor and a bill of differential dignity held the most important place. The theology of that time was of a like character. It was a monotheistic, or rather a monarchical system, and of a despotic complexion. The cosmological scheme was drawn in terms of fiat; and the natural philosophy was occupied, in the main and in its most solemn endeavors, with the corollaries to be subsumed under the divine fiat. When the philosophical speculation dealt with facts it aimed to interpret them into systematic consistency with the glory of God and the divine purpose. The "realities" of the scholastic lore were spiritual, quasi-personal, intangible, and fell into a scale of differential dignity and prepotency. Matter-of-fact knowledge and work-day information were not then fit topics of dignified inquiry. The interval, or discrepancy, between reality and actuality was fairly wide. Throughout that era, of course, work-day knowledge also continually increased in volume and consistency; technological proficiency was gaining; the effective control of natural processes was growing larger and more secure; showing that matter-of-fact theories drawn from experience were being extended and were made increasing use of. But all this went on in the field of industry; the matter-of-fact theories were accepted as substantial and ultimate only for the purposes of industry, only as technological maxims, and were beneath the dignity of science. With the transition to modern times industry comes into the foreground in the west-European scheme of life, and the institutions of European civilisation fall into a more intimate relation with the exigencies of industry and technology. The technological range of habituation progressively counts for more in the cultural complex, and the discrepancy between the technological discipline and the discipline of law and order under the institutions then in force grows progressively less. The institutions of law and order take on a more impersonal, less coercive character. Differential dignity and invidious discriminations between classes gradually lose force. The industry which so comes into the foreground and so affects the scheme of institutions is peculiar in that its most obvious and characteristic trait is the workmanlike initiative and efficiency of the individual handicraftsman and the individual enterprise of the petty trader. The technology which embodies the theoretical substance of this industry is a technology of workmanship, in which the salient factors are personal skill, force and diligence. Such a technology, running as it does in great part on personal initiative, capacity, and application, approaches nearer to the commonplace features of the institutional fabric than many another technological system might; and its disciplinary effects in some considerable measure blend with those of the institutional discipline. The two lines of habituation, in the great era of handicraft and petty trade, even came to coalesce and fortify one another; as in the organisation of the craft gilds and of the industrial towns. Industrial life and usage came to intrude creatively into the cultural scheme on the one hand and into the scheme of authentic knowledge on the other hand. So the body of matter-of-fact knowledge, in modern times, is more and more drawn into the compass of theoretical inquiry; and theoretical inquiry takes on more and more of the animus and method of technological generalisation. But the matter-of-fact elements so drawn in are construed in terms of workmanlike initiative and efficiency, as required by the technological preconceptions of the era of handicraft. In this way, it may be conceived, modern science comes into the field under the cloak of technology and gradually encroaches on the domain of authentic theory previously held by other, higher, nobler, more profound, more spiritual, more intangible conceptions and systems of knowledge. In this early phase of modern science its central norm and universal solvent is the concept of workmanlike initiative and efficiency. This is the new organon. Whatever is to be explained must be reduced to this notation and explained in these terms; otherwise the inquiry does not come to rest. But when the requirements of this notation in terms of workmanship have been duly fulfilled the inquiry does come to rest. By the early decades of the nineteenth century, with a passable degree of thoroughness, other grounds of validity and other interpretations of phenomena, other vouchers for truth and reality, had been eliminated from the quest of authentic knowledge and from the terms in which theoretical results were conceived or expressed. The new organon had made good its pretensions. In this movement to establish the hegemony of workmanlike efficiency--under the style and title of the "law of causation," or of "efficient cause"--in the realm of knowledge, the English-speaking communities took the lead after the earlier scientific onset of the south-European communities had gone up in the smoke of war, politics and religion during the great era of state-making. The ground of this British lead in science is apparently the same as that of the British lead in technology which came to a head in the Industrial Revolution; and these two associated episodes of European civilisation are apparently both traceable to the relatively peaceable run of life, and so of habituation, in the English-speaking communities, as contrasted with the communities of the continent.[3] Along with the habits of thought peculiar to the technology of handicraft, modern science also took over and assimilated much of the institutional preconceptions of the era of handicraft and petty trade. The "natural laws," with the formulation of which this early modern science is occupied, are the rules governing natural "uniformities of sequence"; and they punctiliously formulate the due procedure of any given cause creatively working out the achievement of a given effect, very much as the craft rules sagaciously specified the due routine for turning out a staple article of merchantable goods. But these "natural laws" of science are also felt to have something of that integrity and prescriptive moral force that belongs to the principles of the system of "natural rights" which the era of handicraft has contributed to the institutional scheme of later times. The natural laws were not only held to be true to fact, but they were also felt to be right and good. They were looked upon as intrinsically meritorious and beneficent, and were held to carry a sanction of their own. This habit of uncritically imputing merit and equity to the "natural laws" of science continued in force through much of the nineteenth century; very much as the habitual acceptance of the principles of "natural rights" has held on by force of tradition long after the exigencies of experience out of which these "rights" sprang ceased to shape men's habits of life.[4] This traditional attitude of submissive approval toward the "natural laws" of science has not yet been wholly lost, even among the scientists of the passing generation, many of whom have uncritically invested these "laws" with a prescriptive rectitude and excellence; but so far, at least, has this animus progressed toward disuse that it is now chiefly a matter for expatiation in the pulpit, the accredited vent for the exudation of effete matter from the cultural organism. The traditions of the handicraft technology lasted over as a commonplace habit of thought in science long after that technology had ceased to be the decisive element in the industrial situation; while a new technology, with its inculcation of new habits of thought, new preconceptions, gradually made its way among the remnants of the old, altering them, blending with them, and little by little superseding them. The new technological departure, which made its first great epoch in the so-called industrial revolution, in the technological ascendancy of the machine-process, brought a new and characteristic discipline into the cultural situation. The beginnings of the machine-era lie far back, no doubt; but it is only of late, during the past century at the most, that the machine-process can be said to have come into the dominant place in the technological scheme; and it is only later still that its discipline has, even in great part, remodeled the current preconceptions as to the substantial nature of what goes on in the current of phenomena whose changes excite the scientific curiosity. It is only relatively very lately, whether in technological work or in scientific inquiry, that men have fallen into the habit of thinking in terms of process rather than in terms of the workmanlike efficiency of a given cause working to a given effect. These machine-made preconceptions of modern science, being habits of thought induced by the machine technology in industry and in daily life, have of course first and most consistently affected the character of those sciences whose subject matter lies nearest to the technological field of the machine-process; and in these material sciences the shifting to the machine-made point of view has been relatively very consistent, giving a highly impersonal interpretation of phenomena in terms of consecutive change, and leaving little of the ancient preconceptions of differential reality or creative causation. In such a science as physics or chemistry, _e.g._, we are threatened with the disappearance or dissipation of all stable and efficient substances; their place being supplied, or their phenomena being theoretically explained, by appeal to unremitting processes of inconceivably high-pitched consecutive change. In the sciences which lie farther afield from the technological domain, and which, therefore, in point of habituation, are remoter from the center of disturbance, the effect of the machine discipline may even yet be scarcely appreciable. In such lore as ethics, _e.g._, or political theory, or even economics, much of the norms of the régime of handicraft still stands over; and very much of the institutional preconceptions of natural rights, associated with the régime of handicraft in point of genesis, growth and content, is not only still intact in this field of inquiry, but it can scarcely even be claimed that there is ground for serious apprehension of its prospective obsolescence. Indeed, something even more ancient than handicraft and natural rights may be found surviving in good vigor in this "moral" field of inquiry, where tests of authenticity and reality are still sought and found by those who cultivate these lines of inquiry that lie beyond the immediate sweep of the machine's discipline. Even the evolutionary process of cumulative causation as conceived by the adepts of these sciences is infused with a preternatural, beneficent trend; so that "evolution" is conceived to mean amelioration or "improvement." The metaphysics of the machine technology has not yet wholly, perhaps not mainly, superseded the metaphysics of the code of honor in those lines of inquiry that have to do with human initiative and aspiration. Whether such a shifting of the point of view in these sciences shall ever be effected is still an open question. Here there still are spiritual verities which transcend the sweep of consecutive change. That is to say, there are still current habits of thought which definitively predispose their bearers to bring their inquiries to rest on grounds of differential reality and invidious merit. FOOTNOTES: [1] Read before the Kosmos Club, at the University of California, May 4, 1908. Reprinted by permission from the _University of California Chronicle_, Vol. X, No. 4. [2] It is by no means unusual for modern scientists to deny the truth of this characterization, so far as regards this alleged recourse to the concept of causation. They deny that such a concept--of efficiency, activity, and the like--enters, or can legitimately enter, into their work, whether as an instrument of research or as a means or guide to theoretical formulation. They even deny the substantial continuity of the sequence of changes that excite their scientific attention. This attitude seems particularly to commend itself to those who by preference attend to the mathematical formulations of theory and who are chiefly occupied with proving up and working out details of the system of theory which have previously been left unsettled or uncovered. The concept of causation is recognized to be a metaphysical postulate, a matter of imputation, not of observation; whereas it is claimed that scientific inquiry neither does nor can legitimately, nor, indeed, currently, make use of a postulate more metaphysical than the concept of an idle concomitance of variation, such as is adequately expressed in terms of mathematical function. The contention seems sound, to the extent that the materials--essentially statistical materials--with which scientific inquiry is occupied are of this non-committal character, and that the mathematical formulations of theory include no further element than that of idle variation. Such is necessarily the case because causation is a fact of imputation, not of observation, and so cannot be included among the data; and because nothing further than non-committal variation can be expressed in mathematical terms. A bare notation of quantity can convey nothing further. If it were the intention to claim only that the conclusions of the scientists are, or should be, as a matter of conservative caution, overtly stated in terms of function alone, then the contention might well be allowed. Causal sequence, efficiency or continuity is, of course, a matter of metaphysical imputation. It is not a fact of observation, and cannot be asserted of the facts of observation except as a trait imputed to them. It is so imputed, by scientists and others, as a matter of logical necessity, as a basis of a systematic knowledge of the facts of observation. Beyond this, in their exercise of scientific initiative, as well as in the norms which guide the systematisation of scientific results, the contention will not be made good--at least not for the current phase of scientific knowledge. The claim, indeed, carries its own refutation. In making such a claim, both in rejecting the imputation of metaphysical postulates and in defending their position against their critics, the arguments put forward by the scientists run in causal terms. For the polemical purposes, where their antagonists are to be scientifically confuted, the defenders of the non-committal postulate of concomitance find that postulate inadequate. They are not content, in this precarious conjuncture, simply to attest a relation of idle quantitative concomitance (mathematical function) between the allegations of their critics, on the one hand, and their own controversial exposition of these matters on the other hand. They argue that they do not "make use of" such a postulate as "efficiency," whereas they claim to "make use of" the concept of function. But "make use of" is not a notion of functional variation but of causal efficiency in a somewhat gross and highly anthropomorphic form. The relation between their own thinking and the "principles" which they "apply" or the experiments and calculations which they "institute" in their "search" for facts, is not held to be of this non-committal kind. It will not be claimed that the shrewd insight and the bold initiative of a man eminent in the empirical sciences bear no more efficient or consequential a relation than that of mathematical function to the ingenious experiments by which he tests his hypotheses and extends the secure bounds of human knowledge. Least of all is the masterly experimentalist himself in a position to deny that his intelligence counts for something more efficient than idle concomitance in such a case. The connection between his premises, hypotheses, and experiments, on the one hand, and his theoretical results, on the other hand, is not felt to be of the nature of mathematical function. Consistently adhered to, the principle of "function" or concomitant variation precludes recourse to experiment, hypotheses or inquiry--indeed, it precludes "recourse" to anything whatever. Its notation does not comprise anything so anthropomorphic. The case is illustrated by the latter-day history of theoretical physics. Of the sciences which affect a non-committal attitude in respect of the concept of efficiency and which claim to get along with the notion of mathematical function alone, physics is the most outspoken and the one in which the claim has the best _prima facie_ validity. At the same time, latter-day physicists, for a hundred years or more, have been much occupied with explaining how phenomena which to all appearance involve action at a distance do not involve action at a distance at all. The greater theoretical achievements of physics during the past century lie within the sweep of this (metaphysical) principle that action at a distance does not take place, that apparent action at a distance must be explained by effective contact, through a continuum, or by a material transference. But this principle is nothing better than an unreasoning repugnance on the part of the physicists to admitting action at a distance. The requirement of a continuum involves a gross form of the concept of efficient causation. The "functional" concept, concomitant variation, requires no contact and no continuum. Concomitance at a distance is quite as simple and convincing a notion as concomitance within contact or by the intervention of a continuum, if not more so. What stands in the way of its acceptance is the irrepressible anthropomorphism of the physicists. And yet the great achievements of physics are due to the initiative of men animated with this anthropomorphic repugnance to the notion of concomitant variation at a distance. All the generalisations on undulatory motion and translation belong here. The latter-day researches in light, electrical transmission, the theory of ions, together with what is known of the obscure and late-found radiations and emanations, are to be credited to the same metaphysical preconception, which is never absent in any "scientific" inquiry in the field of physical science. It is only the "occult" and "Christian" "Sciences" that can dispense with this metaphysical postulate and take recourse to "absent treatment." [3] A broad exception may perhaps be taken at this point, to the effect that this sketch of the growth of the scientific animus overlooks the science of the Ancients. The scientific achievements of classical antiquity are a less obscure topic to-day than ever before during modern times, and the more there is known of them the larger is the credit given them. But it is to be noted that, (_a_) the relatively large and free growth of scientific inquiry in classical antiquity is to be found in the relatively peaceable and industrial Greek communities (with an industrial culture of unknown pre-Hellenic antiquity), and (_b_) that the sciences best and chiefly cultivated were those which rest on a mathematical basis, if not mathematical sciences in the simpler sense of the term. Now, mathematics occupies a singular place among the sciences, in that it is, in its pure form, a logical discipline simply; its subject matter being the logic of quantity, and its researches being of the nature of an analysis of the intellect's modes of dealing with matters of quantity. Its generalisations are generalisations of logical procedure, which are tested and verified by immediate self-observation. Such a science is in a peculiar degree, but only in a peculiar degree, independent of the detail-discipline of daily life, whether technological or institutional; and, given the propensity--the intellectual enterprise, or "idle curiosity"--to go into speculation in such a field, the results can scarcely vary in a manner to make the variants inconsistent among themselves; nor need the state of institutions or the state of the industrial arts seriously color or distort such analytical work in such a field. Mathematics is peculiarly independent of cultural circumstances, since it deals analytically with mankind's native gifts of logic, not with the ephemeral traits acquired by habituation. [4] "Natural laws," which are held to be not only correct formulations of the sequence of cause and effect in a given situation but also meritoriously right and equitable rules governing the run of events, necessarily impute to the facts and events in question a tendency to a good and equitable, if not beneficent, consummation; since it is necessarily the consummation, the effect considered as an accomplished outcome, that is to be adjudged good and equitable, if anything. Hence these "natural laws," as traditionally conceived, are laws governing the accomplishment of an end--that is to say, laws as to how a sequence of cause and effect comes to rest in a final term. WHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE?[1] M. G. De Lapouge recently said, "Anthropology is destined to revolutionise the political and the social sciences as radically as bacteriology has revolutionised the science of medicine."[2] In so far as he speaks of economics, the eminent anthropologist is not alone in his conviction that the science stands in need of rehabilitation. His words convey a rebuke and an admonition, and in both respects he speaks the sense of many scientists in his own and related lines of inquiry. It may be taken as the consensus of those men who are doing the serious work of modern anthropology, ethnology, and psychology, as well as of those in the biological sciences proper, that economics is helplessly behind the times, and unable to handle its subject-matter in a way to entitle it to standing as a modern science. The other political and social sciences come in for their share of this obloquy, and perhaps on equally cogent grounds. Nor are the economists themselves buoyantly indifferent to the rebuke. Probably no economist to-day has either the hardihood or the inclination to say that the science has now reached a definitive formulation, either in the detail of results or as regards the fundamental features of theory. The nearest recent approach to such a position on the part of an economist of accredited standing is perhaps to be found in Professor Marshall's Cambridge address of a year and a half ago.[3] But these utterances are so far from the jaunty confidence shown by the classical economists of half a century ago that what most forcibly strikes the reader of Professor Marshall's address is the exceeding modesty and the uncalled-for humility of the spokesman for the "old generation." With the economists who are most attentively looked to for guidance, uncertainty as to the definitive value of what has been and is being done, and as to what we may, with effect, take to next, is so common as to suggest that indecision is a meritorious work. Even the Historical School, who made their innovation with so much home-grown applause some time back, have been unable to settle down contentedly to the pace which they set themselves. The men of the sciences that are proud to own themselves "modern" find fault with the economists for being still content to occupy themselves with repairing a structure and doctrines and maxims resting on natural rights, utilitarianism, and administrative expediency. This aspersion is not altogether merited, but is near enough to the mark to carry a sting. These modern sciences are evolutionary sciences, and their adepts contemplate that characteristic of their work with some complacency. Economics is not an evolutionary science--by the confession of its spokesmen; and the economists turn their eyes with something of envy and some sense of baffled emulation to these rivals that make broad their phylacteries with the legend, "Up to date." Precisely wherein the social and political sciences, including economics, fall short of being evolutionary sciences, is not so plain. At least, it has not been satisfactorily pointed out by their critics. Their successful rivals in this matter--the sciences that deal with human nature among the rest--claim as their substantial distinction that they are realistic: they deal with facts. But economics, too, is realistic in this sense: it deals with facts, often in the most painstaking way, and latterly with an increasingly strenuous insistence on the sole efficacy of data. But this "realism" does not make economics an evolutionary science. The insistence on data could scarcely be carried to a higher pitch than it was carried by the first generation of the Historical School; and yet no economics is farther from being an evolutionary science than the received economics of the Historical School. The whole broad range of erudition and research that engaged the energies of that school commonly falls short of being science, in that, when consistent, they have contented themselves with an enumeration of data and a narrative account of industrial development, and have not presumed to offer a theory of anything or to elaborate their results into a consistent body of knowledge. Any evolutionary science, on the other hand, is a close-knit body of theory. It is a theory of a process, of an unfolding sequence. But here, again, economics seems to meet the test in a fair measure, without satisfying its critics that its credentials are good. It must be admitted, _e.g._, that J. S. Mill's doctrines of production, distribution, and exchange, are a theory of certain economic processes, and that he deals in a consistent and effective fashion with the sequences of fact that make up his subject-matter. So, also, Cairnes's discussion of normal value, of the rate of wages, and of international trade, are excellent instances of a theoretical handling of economic processes of sequence and the orderly unfolding development of fact. But an attempt to cite Mill and Cairnes as exponents of an evolutionary economics will produce no better effect than perplexity, and not a great deal of that. Very much of monetary theory might be cited to the same purpose and with the like effect. Something similar is true even of late writers who have avowed some penchant for the evolutionary point of view; as, _e.g._, Professor Hadley,--to cite a work of unquestioned merit and unusual reach. Measurably, he keeps the word of promise to the ear; but any one who may cite his _Economics_ as having brought political economy into line as an evolutionary science will convince neither himself nor his interlocutor. Something to the like effect may fairly be said of the published work of that later English strain of economists represented by Professors Cunningham and Ashley, and Mr. Cannan, to name but a few of the more eminent figures in the group. Of the achievements of the classical economists, recent and living, the science may justly be proud; but they fall short of the evolutionist's standard of adequacy, not in failing to offer a theory of a process or of a developmental relation, but through conceiving their theory in terms alien to the evolutionist's habits of thought. The difference between the evolutionary and the pre-evolutionary sciences lies not in the insistence on facts. There was a great and fruitful activity in the natural sciences in collecting and collating facts before these sciences took on the character which marks them as evolutionary. Nor does the difference lie in the absence of efforts to formulate and explain schemes of process, sequence, growth, and development in the pre-evolutionary days. Efforts of this kind abounded, in number and diversity; and many schemes of development, of great subtlety and beauty, gained a vogue both as theories of organic and inorganic development and as schemes of the life history of nations and societies. It will not even hold true that our elders overlooked the presence of cause and effect in formulating their theories and reducing their data to a body of knowledge. But the terms which were accepted as the definitive terms of knowledge were in some degree different in the early days from what they are now. The terms of thought in which the investigators of some two or three generations back definitively formulated their knowledge of facts, in their last analyses, were different in kind from the terms in which the modern evolutionist is content to formulate his results. The analysis does not run back to the same ground, or appeal to the same standard of finality or adequacy, in the one case as in the other. The difference is a difference of spiritual attitude or point of view in the two contrasted generations of scientists. To put the matter in other words, it is a difference in the basis of valuation of the facts for the scientific purpose, or in the interest from which the facts are appreciated. With the earlier as with the later generation the basis of valuation of the facts handled is, in matters of detail, the causal relation which is apprehended to subsist between them. This is true to the greatest extent for the natural sciences. But in their handling of the more comprehensive schemes of sequence and relation--in their definitive formulation of the results--the two generations differ. The modern scientist is unwilling to depart from the test of causal relation or quantitative sequence. When he asks the question, Why? he insists on an answer in terms of cause and effect. He wants to reduce his solution of all problems to terms of the conservation of energy or the persistence of quantity. This is his last recourse. And this last recourse has in our time been made available for the handling of schemes of development and theories of a comprehensive process by the notion of a cumulative causation. The great deserts of the evolutionist leaders--if they have great deserts as leaders--lie, on the one hand, in their refusal to go back of the colorless sequence of phenomena and seek higher ground for their ultimate syntheses, and, on the other hand, in their having shown how this colorless impersonal sequence of cause and effect can be made use of for theory proper, by virtue of its cumulative character. For the earlier natural scientists, as for the classical economists, this ground of cause and effect is not definitive. Their sense of truth and substantiality is not satisfied with a formulation of mechanical sequence. The ultimate term in their systematisation of knowledge is a "natural law." This natural law is felt to exercise some sort of a coercive surveillance over the sequence of events, and to give a spiritual stability and consistence to the causal relation at any given juncture. To meet the high classical requirement, a sequence--and a developmental process especially--must be apprehended in terms of a consistent propensity tending to some spiritually legitimate end. When facts and events have been reduced to these terms of fundamental truth and have been made to square with the requirements of definitive normality, the investigator rests his case. Any causal sequence which is apprehended to traverse the imputed propensity in events is a "disturbing factor." Logical congruity with the apprehended propensity is, in this view, adequate ground of procedure in building up a scheme of knowledge or of development. The objective point of the efforts of the scientists working under the guidance of this classical tradition, is to formulate knowledge in terms of absolute truth; and this absolute truth is a spiritual fact. It means a coincidence of facts with the deliverances of an enlightened and deliberate common sense. The development and the attenuation of this preconception of normality or of a propensity in events might be traced in detail from primitive animism down through the elaborate discipline of faith and metaphysics, overruling Providence, order of nature, natural rights, natural law, underlying principles. But all that may be necessary here is to point out that, by descent and by psychological content, this constraining normality is of a spiritual kind. It is for the scientific purpose an imputation of spiritual coherence to the facts dealt with. The question of interest is how this preconception of normality has fared at the hands of modern science, and how it has come to be superseded in the intellectual primacy by the latter-day preconception of a non-spiritual sequence. This question is of interest because its answer may throw light on the question as to what chance there is for the indefinite persistence of this archaic habit of thought in the methods of economic science. * * * * * Under primitive conditions, men stand in immediate personal contact with the material facts of the environment; and the force and discretion of the individual in shaping the facts of the environment count obviously, and to all appearance solely, in working out the conditions of life. There is little of impersonal or mechanical sequence visible to primitive men in their every-day life; and what there is of this kind in the processes of brute nature about them is in large part inexplicable and passes for inscrutable. It is accepted as malignant or beneficent, and is construed in the terms of personality that are familiar to all men at first hand,--the terms known to all men by first-hand knowledge of their own acts. The inscrutable movements of the seasons and of the natural forces are apprehended as actions guided by discretion, will power, or propensity looking to an end, much as human actions are. The processes of inanimate nature are agencies whose habits of life are to be learned, and who are to be coerced, outwitted, circumvented, and turned to account, much as the beasts are. At the same time the community is small, and the human contact of the individual is not wide. Neither the industrial life nor the non-industrial social life forces upon men's attention the ruthless impersonal sweep of events that no man can withstand or deflect, such as becomes visible in the more complex and comprehensive life process of the larger community of a later day. There is nothing decisive to hinder men's knowledge of facts and events being formulated in terms of personality--in terms of habit and propensity and will power. As time goes on and as the situation departs from this archaic character,--where it does depart from it,--the circumstances which condition men's systematisation of facts change in such a way as to throw the impersonal character of the sequence of events more and more into the foreground. The penalties for failure to apprehend facts in dispassionate terms fall surer and swifter. The sweep of events is forced home more consistently on men's minds. The guiding hand of a spiritual agency or a propensity in events becomes less readily traceable as men's knowledge of things grows ampler and more searching. In modern times, and particularly in the industrial countries, this coercive guidance of men's habits of thought in the realistic direction has been especially pronounced; and the effect shows itself in a somewhat reluctant but cumulative departure from the archaic point of view. The departure is most visible and has gone farthest in those homely branches of knowledge that have to do immediately with modern mechanical processes, such as engineering designs and technological contrivances generally. Of the sciences, those have wandered farthest on this way (of integration or disintegration, according as one may choose to view it) that have to do with mechanical sequence and process; and those have best and longest retained the archaic point of view intact which--like the moral, social, or spiritual sciences--have to do with process and sequence that is less tangible, less traceable by the use of the senses, and that therefore less immediately forces upon the attention the phenomenon of sequence as contrasted with that of propensity. There is no abrupt transition from the pre-evolutionary to the post-evolutionary standpoint. Even in those natural sciences which deal with the processes of life and the evolutionary sequence of events the concept of dispassionate cumulative causation has often and effectively been helped out by the notion that there is in all this some sort of a meliorative trend that exercises a constraining guidance over the course of causes and effects. The faith in this meliorative trend as a concept useful to the science has gradually weakened, and it has repeatedly been disavowed; but it can scarcely be said to have yet disappeared from the field. The process of change in the point of view, or in the terms of definitive formulation of knowledge, is a gradual one; and all the sciences have shared, though in an unequal degree, in the change that is going forward. Economics is not an exception to the rule, but it still shows too many reminiscences of the "natural" and the "normal," of "verities" and "tendencies," of "controlling principles" and "disturbing causes" to be classed as an evolutionary science. This history of the science shows a long and devious course of disintegrating animism,--from the days of the scholastic writers, who discussed usury from the point of view of its relation to the divine suzerainty, to the Physiocrats, who rested their case on an "_ordre naturel_" and a "_loi naturelle_" that decides what is substantially true and, in a general way, guides the course of events by the constraint of logical congruence. There has been something of a change from Adam Smith, whose recourse in perplexity was to the guidance of "an unseen hand," to Mill and Cairnes, who formulated the laws of "natural" wages and "normal" value, and the former of whom was so well content with his work as to say, "Happily, there is nothing in the laws of Value which remains for the present or any future writer to clear up: the theory of the subject is complete."[4] But the difference between the earlier and the later point of view is a difference of degree rather than of kind. The standpoint of the classical economists, in their higher or definitive syntheses and generalisations, may not inaptly be called the standpoint of ceremonial adequacy. The ultimate laws and principles which they formulated were laws of the normal or the natural, according to a preconception regarding the ends to which, in the nature of things, all things tend. In effect, this preconception imputes to things a tendency to work out what the instructed common sense of the time accepts as the adequate or worthy end of human effort. It is a projection of the accepted ideal of conduct. This ideal of conduct is made to serve as a canon of truth, to the extent that the investigator contents himself with an appeal to its legitimation for premises that run back of the facts with which he is immediately dealing, for the "controlling principles" that are conceived intangibly to underlie the process discussed, and for the "tendencies" that run beyond the situation as it lies before him. As instances of the use of this ceremonial canon of knowledge may be cited the "conjectural history" that plays so large a part in the classical treatment of economic institutions, such as the normalized accounts of the beginnings of barter in the transactions of the putative hunter, fisherman, and boat-builder, or the man with the plane and the two planks, or the two men with the basket of apples and the basket of nuts.[5] Of a similar import is the characterisation of money as "the great wheel of circulation"[6] or as "the medium of exchange." Money is here discussed in terms of the end which, "in the normal case," it should work out according to the given writer's ideal of economic life, rather than in terms of causal relation. With later writers especially, this terminology is no doubt to be commonly taken as a convenient use of metaphor, in which the concept of normality and propensity to an end has reached an extreme attenuation. But it is precisely in this use of figurative terms for the formulation of theory that the classical normality still lives its attenuated life in modern economics; and it is this facile recourse to inscrutable figures of speech as the ultimate terms of theory that has saved the economists from being dragooned into the ranks of modern science. The metaphors are effective, both in their homiletical use and as a labor-saving device,--more effective than their user designs them to be. By their use the theorist is enabled serenely to enjoin himself from following out an elusive train of causal sequence. He is also enabled, without misgivings, to construct a theory of such an institution as money or wages or land-ownership without descending to a consideration of the living items concerned, except for convenient corroboration of his normalised scheme of symptoms. By this method the theory of an institution or a phase of life may be stated in conventionalised terms of the apparatus whereby life is carried on, the apparatus being invested with a tendency to an equilibrium at the normal, and the theory being a formulation of the conditions under which this putative equilibrium supervenes. In this way we have come into the usufruct of a cost-of-production theory of value which is pungently reminiscent of the time when Nature abhorred a vacuum. The ways and means and the mechanical structure of industry are formulated in a conventionalised nomenclature, and the observed motions of this mechanical apparatus are then reduced to a normalised scheme of relations. The scheme so arrived at is spiritually binding on the behavior of the phenomena contemplated. With this normalised scheme as a guide, the permutations of a given segment of the apparatus are worked out according to the values assigned the several items and features comprised in the calculation; and a ceremonially consistent formula is constructed to cover that much of the industrial field. This is the deductive method. The formula is then tested by comparison with observed permutations, by the polariscopic use of the "normal case"; and the results arrived at are thus authenticated by induction. Features of the process that do not lend themselves to interpretation in the terms of the formula are abnormal cases and are due to disturbing causes. In all this the agencies or forces causally at work in the economic life process are neatly avoided. The outcome of the method, at its best, is a body of logically consistent propositions concerning the normal relations of things--a system of economic taxonomy. At its worst, it is a body of maxims for the conduct of business and a polemical discussion of disputed points of policy. In all this, economic science is living over again in its turn the experiences which the natural sciences passed through some time back. In the natural sciences the work of the taxonomist was and continues to be of great value, but the scientists grew restless under the régime of symmetry and system-making. They took to asking why, and so shifted their inquiries from the structure of the coral reefs to the structure and habits of life of the polyp that lives in and by them. In the science of plants, systematic botany has not ceased to be of service; but the stress of investigation and discussion among the botanists to-day falls on the biological value of any given feature of structure, function, or tissue rather than on its taxonomic bearing. All the talk about cytoplasm, centrosomes, and karyokinetic process, means that the inquiry now looks consistently to the life process, and aims to explain it in terms of cumulative causation. What may be done in economic science of the taxonomic kind is shown at its best in Cairnes's work, where the method is well conceived and the results effectively formulated and applied. Cairnes handles the theory of the normal case in economic life with a master hand. In his discussion the metaphysics of propensity and tendencies no longer avowedly rules the formulation of theory, nor is the inscrutable meliorative trend of a harmony of interests confidently appealed to as an engine of definitive use in giving legitimacy to the economic situation at a given time. There is less of an exercise of faith in Cairnes's economic discussions than in those of the writers that went before him. The definitive terms of the formulation are still the terms of normality and natural law, but the metaphysics underlying this appeal to normality is so far removed from the ancient ground of the beneficent "order of nature" as to have become at least nominally impersonal and to proceed without a constant regard to the humanitarian bearing of the "tendencies" which it formulates. The metaphysics has been attenuated to something approaching in colorlessness the naturalist's conception of natural law. It is a natural law which, in the guise of "controlling principles," exercises a constraining surveillance over the trend of things; but it is no longer conceived to exercise its constraint in the interest of certain ulterior human purposes. The element of beneficence has been well-nigh eliminated, and the system is formulated in terms of the system itself. Economics as it left Cairnes's hand, so far as his theoretical work is concerned, comes near being taxonomy for taxonomy's sake. No equally capable writer has come as near making economics the ideal "dismal" science as Cairnes in his discussion of pure theory. In the days of the early classical writers economics had a vital interest for the laymen of the time, because it formulated the common sense metaphysics of the time in its application to a department of human life. But in the hands of the later classical writers the science lost much of its charm in this regard. It was no longer a definition and authentication of the deliverances of current common sense as to what ought to come to pass; and it, therefore, in large measure lost the support of the people out of doors, who were unable to take an interest in what did not concern them; and it was also out of touch with that realistic or evolutionary habit of mind which got under way about the middle of the century in the natural sciences. It was neither vitally metaphysical nor matter-of-fact, and it found comfort with very few outside of its own ranks. Only for those who by the fortunate accident of birth or education have been able to conserve the taxonomic animus has the science during the last third of a century continued to be of absorbing interest. The result has been that from the time when the taxonomic structure stood forth as a completed whole in its symmetry and stability the economists themselves, beginning with Cairnes, have been growing restive under its discipline of stability, and have made many efforts, more or less sustained, to galvanise it into movement. At the hands of the writers of the classical line these excursions have chiefly aimed at a more complete and comprehensive taxonomic scheme of permutations; while the historical departure threw away the taxonomic ideal without getting rid of the preconceptions on which it is based; and the later Austrian group struck out on a theory of process, but presently came to a full stop because the process about which they busied themselves was not, in their apprehension of it, a cumulative or unfolding sequence. * * * * * But what does all this signify? If we are getting restless under the taxonomy of a monocotyledonous wage doctrine and a cryptogamic theory of interest, with involute, loculicidal, tomentous and moniliform variants, what is the cytoplasm, centrosome, or karyokinetic process to which we may turn, and in which we may find surcease from the metaphysics of normality and controlling principles? What are we going to do about it? The question is rather, What are we doing about it? There is the economic life process still in great measure awaiting theoretical formulation. The active material in which the economic process goes on is the human material of the industrial community. For the purpose of economic science the process of cumulative change that is to be accounted for is the sequence of change in the methods of doing things,--the methods of dealing with the material means of life. What has been done in the way of inquiry into this economic life process? The ways and means of turning material objects and circumstances to account lie before the investigator at any given point of time in the form of mechanical contrivances and arrangements for compassing certain mechanical ends. It has therefore been easy to accept these ways and means as items of inert matter having a given mechanical structure and thereby serving the material ends of man. As such, they have been scheduled and graded by the economists under the head of capital, this capital being conceived as a mass of material objects serviceable for human use. This is well enough for the purposes of taxonomy; but it is not an effective method of conceiving the matter for the purpose of a theory of the developmental process. For the latter purpose, when taken as items in a process of cumulative change or as items in the scheme of life, these productive goods are facts of human knowledge, skill, and predilection; that is to say, they are, substantially, prevalent habits of thought, and it is as such that they enter into the process of industrial development. The physical properties of the materials accessible to man are constants: it is the human agent that changes,--his insight and his appreciation of what these things can be used for is what develops. The accumulation of goods already on hand conditions his handling and utilisation of the materials offered, but even on this side--the "limitation of industry by capital"--the limitation imposed is on what men can do and on the methods of doing it. The changes that take place in the mechanical contrivances are an expression of changes in the human factor. Changes in the material facts breed further change only through the human factor. It is in the human material that the continuity of development is to be looked for; and it is here, therefore, that the motor forces of the process of economic development must be studied if they are to be studied in action at all. Economic action must be the subject-matter of the science if the science is to fall into line as an evolutionary science. Nothing new has been said in all this. But the fact is all the more significant for being a familiar fact. It is a fact recognised by common consent throughout much of the later economic discussion, and this current recognition of the fact is a long step towards centering discussion and inquiry upon it. If economics is to follow the lead or the analogy of the other sciences that have to do with a life process, the way is plain so far as regards the general direction in which the move will be made. The economists of the classical trend have made no serious attempt to depart from the standpoint of taxonomy and make their science a genetic account of the economic life process. As has just been said, much the same is true for the Historical School. The latter have attempted an account of developmental sequence, but they have followed the lines of pre-Darwinian speculations on development rather than lines which modern science would recognise as evolutionary. They have given a narrative survey of phenomena, not a genetic account of an unfolding process. In this work they have, no doubt, achieved results of permanent value; but the results achieved are scarcely to be classed as economic theory. On the other hand, the Austrians and their precursors and their coadjutors in the value discussion have taken up a detached portion of economic theory, and have inquired with great nicety into the process by which the phenomena within their limited field are worked out. The entire discussion of marginal utility and subjective value as the outcome of a valuation process must be taken as a genetic study of this range of facts. But here, again, nothing further has come of the inquiry, so far as regards a rehabilitation of economic theory as a whole. Accepting Menger as their spokesman on this head, it must be said that the Austrians have on the whole showed themselves unable to break with the classical tradition that economics is a taxonomic science. The reason for the Austrian failure seems to lie in a faulty conception of human nature,--faulty for the present purpose, however adequate it may be for any other. In all the received formulations of economic theory, whether at the hands of English economists or those of the Continent, the human material with which the inquiry is concerned is conceived in hedonistic terms; that is to say, in terms of a passive and substantially inert and immutably given human nature. The psychological and anthropological preconceptions of the economists have been those which were accepted by the psychological and social sciences some generations ago. The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Spiritually, the hedonistic man is not a prime mover. He is not the seat of a process of living, except in the sense that he is subject to a series of permutations enforced upon him by circumstances external and alien to him. The later psychology, reënforced by modern anthropological research, gives a different conception of human nature. According to this conception, it is the characteristic of man to do something, not simply to suffer pleasures and pains through the impact of suitable forces. He is not simply a bundle of desires that are to be saturated by being placed in the path of the forces of the environment, but rather a coherent structure of propensities and habits which seeks realisation and expression in an unfolding activity. According to this view, human activity, and economic activity among the rest, is not apprehended as something incidental to the process of saturating given desires. The activity is itself the substantial fact of the process, and the desires under whose guidance the action takes place are circumstances of temperament which determine the specific direction in which the activity will unfold itself in the given case. These circumstances of temperament are ultimate and definitive for the individual who acts under them, so far as regards his attitude as agent in the particular action in which he is engaged. But, in the view of the science, they are elements of the existing frame of mind of the agent, and are the outcome of his antecedents and his life up to the point at which he stands. They are the products of his hereditary traits and his past experience, cumulatively wrought out under a given body of traditions, conventionalities, and material circumstances; and they afford the point of departure for the next step in the process. The economic life history of the individual is a cumulative process of adaptation of means to ends that cumulatively change as the process goes on, both the agent and his environment being at any point the outcome of the last process. His methods of life to-day are enforced upon him by his habits of life carried over from yesterday and by the circumstances left as the mechanical residue of the life of yesterday. What is true of the individual in this respect is true of the group in which he lives. All economic change is a change in the economic community,--a change in the community's methods of turning material things to account. The change is always in the last resort a change in habits of thought. This is true even of changes in the mechanical processes of industry. A given contrivance for effecting certain material ends becomes a circumstance which affects the further growth of habits of thought--habitual methods of procedure--and so becomes a point of departure for further development of the methods of compassing the ends sought and for the further variation of ends that are sought to be compassed. In all this flux there is no definitively adequate method of life and no definitive or absolutely worthy end of action, so far as concerns the science which sets out to formulate a theory of the process of economic life. What remains as a hard and fast residue is the fact of activity directed to an objective end. Economic action is teleological, in the sense that men always and everywhere seek to do something. What, in specific detail, they seek, is not to be answered except by a scrutiny of the details of their activity; but, so long as we have to do with their life as members of the economic community, there remains the generic fact that their life is an unfolding activity of a teleological kind. It may or may not be a teleological process in the sense that it tends or should tend to any end that is conceived to be worthy or adequate by the inquirer or by the consensus of inquirers. Whether it is or is not, is a question with which the present inquiry is not concerned; and it is also a question of which an evolutionary economics need take no account. The question of a tendency in events can evidently not come up except on the ground of some preconception or prepossession on the part of the person looking for the tendency. In order to search for a tendency, we must be possessed of some notion of a definitive end to be sought, or some notion as to what is the legitimate trend of events. The notion of a legitimate trend in a course of events is an extra-evolutionary preconception, and lies outside the scope of an inquiry into the causal sequence in any process. The evolutionary point of view, therefore, leaves no place for a formulation of natural laws in terms of definitive normality, whether in economics or in any other branch of inquiry. Neither does it leave room for that other question of normality, What should be the end of the developmental process under discussion? The economic life history of any community is its life history in so far as it is shaped by men's interest in the material means of life. This economic interest has counted for much in shaping the cultural growth of all communities. Primarily and most obviously, it has guided the formation, the cumulative growth, of that range of conventionalities and methods of life that are currently recognized as economic institutions; but the same interest has also pervaded the community's life and its cultural growth at points where the resulting structural features are not chiefly and most immediately of an economic bearing. The economic interest goes with men through life, and it goes with the race throughout its process of cultural development. It affects the cultural structure at all points, so that all institutions may be said to be in some measure economic institutions. This is necessarily the case, since the base of action--the point of departure--at any step in the process is the entire organic complex of habits of thought that have been shaped by the past process. The economic interest does not act in isolation, for it is but one of several vaguely isolable interests on which the complex of teleological activity carried out by the individual proceeds. The individual is but a single agent in each case; and he enters into each successive action as a whole, although the specific end sought in a given action may be sought avowedly on the basis of a particular interest; as _e.g._, the economic, æsthetic, sexual, humanitarian, devotional interests. Since each of these passably isolable interests is a propensity of the organic agent man, with his complex of habits of thought, the expression of each is affected by habits of life formed under the guidance of all the rest. There is, therefore, no neatly isolable range of cultural phenomena that can be rigorously set apart under the head of economic institutions, although a category of "economic institutions" may be of service as a convenient caption, comprising those institutions in which the economic interest most immediately and consistently finds expression, and which most immediately and with the least limitation are of an economic bearing. From what has been said it appears that an evolutionary economics must be the theory of a process of cultural growth as determined by the economic interest, a theory of a cumulative sequence of economic institutions stated in terms of the process itself. Except for the want of space to do here what should be done in some detail if it is done at all, many efforts by the later economists in this direction might be cited to show the trend of economic discussion in this direction. There is not a little evidence to this effect, and much of the work done must be rated as effective work for this purpose. Much of the work of the Historical School, for instance, and that of its later exponents especially, is too noteworthy to be passed over in silence, even with all due regard to the limitations of space. We are now ready to return to the question why economics is not an evolutionary science. It is necessarily the aim of such an economics to trace the cumulative working-out of the economic interest in the cultural sequence. It must be a theory of the economic life process of the race or the community. The economists have accepted the hedonistic preconceptions concerning human nature and human action, and the conception of the economic interest which a hedonistic psychology gives does not afford material for a theory of the development of human nature. Under hedonism the economic interest is not conceived in terms of action. It is therefore not readily apprehended or appreciated in terms of a cumulative growth of habits of thought, and does not provoke, even if it did lend itself to, treatment by the evolutionary method. At the same time the anthropological preconceptions current in that common-sense apprehension of human nature to which economists have habitually turned has not enforced the formulation of human nature in terms of a cumulative growth of habits of life. These received anthropological preconceptions are such as have made possible the normalized conjectural accounts of primitive barter with which all economic readers are familiar, and the no less normalized conventional derivation of landed property and its rent, or the sociologico-philosophical discussions of the "function" of this or that class in the life of society or of the nation. The premises and the point of view required for an evolutionary economics have been wanting. The economists have not had the materials for such a science ready to their hand, and the provocation to strike out in such a direction has been absent. Even if it has been possible at any time to turn to the evolutionary line of speculation in economics, the possibility of a departure is not enough to bring it about. So long as the habitual view taken of a given range of facts is of the taxonomic kind and the material lends itself to treatment by that method, the taxonomic method is the easiest, gives the most gratifying immediate results, and best fits into the accepted body of knowledge of the range of facts in question. This has been the situation in economics. The other sciences of its group have likewise been a body of taxonomic discipline, and departures from the accredited method have lain under the odium of being meretricious innovations. The well-worn paths are easy to follow and lead into good company. Advance along them visibly furthers the accredited work which the science has in hand. Divergence from the paths means tentative work, which is necessarily slow and fragmentary and of uncertain value. It is only when the methods of the science and the syntheses resulting from their use come to be out of line with habits of thought that prevail in other matters that the scientist grows restive under the guidance of the received methods and standpoints, and seeks a way out. Like other men, the economist is an individual with but one intelligence. He is a creature of habits and propensities given through the antecedents, hereditary and cultural, of which he is an outcome; and the habits of thought formed in any one line of experience affect his thinking in any other. Methods of observation and of handling facts that are familiar through habitual use in the general range of knowledge, gradually assert themselves in any given special range of knowledge. They may be accepted slowly and with reluctance where their acceptance involves innovation; but, if they have the continued backing of the general body of experience, it is only a question of time when they shall come into dominance in the special field. The intellectual attitude and the method of correlation enforced upon us in the apprehension and assimilation of facts in the more elementary ranges of knowledge that have to do with brute facts assert themselves also when the attention is directed to those phenomena of the life process with which economics has to do; and the range of facts which are habitually handled by other methods than that in traditional vogue in economics has now become so large and so insistently present at every turn that we are left restless, if the new body of facts cannot be handled according to the method of mental procedure which is in this way becoming habitual. In the general body of knowledge in modern times the facts are apprehended in terms of causal sequence. This is especially true of that knowledge of brute facts which is shaped by the exigencies of the modern mechanical industry. To men thoroughly imbued with this matter-of-fact habit of mind the laws and theorems of economics, and of the other sciences that treat of the normal course of things, have a character of "unreality" and futility that bars out any serious interest in their discussion. The laws and theorems are "unreal" to them because they are not to be apprehended in the terms which these men make use of in handling the facts with which they are perforce habitually occupied. The same matter-of-fact spiritual attitude and mode of procedure have now made their way well up into the higher levels of scientific knowledge, even in the sciences which deal in a more elementary way with the same human material that makes the subject-matter of economics, and the economists themselves are beginning to feel the unreality of their theorems about "normal" cases. Provided the practical exigencies of modern industrial life continue of the same character as they now are, and so continue to enforce the impersonal method of knowledge, it is only a question of time when that (substantially animistic) habit of mind which proceeds on the notion of a definitive normality shall be displaced in the field of economic inquiry by that (substantially materialistic) habit of mind which seeks a comprehension of facts in terms of a cumulative sequence. The later method of apprehending and assimilating facts and handling them for the purposes of knowledge may be better or worse, more or less worthy or adequate, than the earlier; it may be of greater or less ceremonial or æsthetic effect; we may be moved to regret the incursion of underbred habits of thought into the scholar's domain. But all that is beside the present point. Under the stress of modern technological exigencies, men's every-day habits of thought are falling into the lines that in the sciences constitute the evolutionary method; and knowledge which proceeds on a higher, more archaic plane is becoming alien and meaningless to them. The social and political sciences must follow the drift, for they are already caught in it. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, vol. xii, July, 1898. [2] "The Fundamental Laws of Anthropo-sociology," _Journal of Political Economy_, December, 1897, p. 54. The same paper, in substance, appears in the _Rivista Italiana di Sociologia_ for November, 1897. [3] "The Old Generation of Economists and the New," _Quarterly Journal of Economics_, January, 1897, p. 133. [4] _Political Economy_, Book III, chap. i. [5] Marshall, _Principles of Economics_ (2d ed.), Book V, chap. ii, p. 395, note. [6] Adam Smith, _Wealth of Nations_ (Bohn ed.), Book II, chap. ii, p. 289. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] I In an earlier paper[2] the view has been expressed that the economics handed down by the great writers of a past generation is substantially a taxonomic science. A view of much the same purport, so far as concerns the point here immediately in question, is presented in an admirably lucid and cogent way by Professor Clark in a recent number of this journal.[3] There is no wish hereby to burden Professor Clark with a putative sponsorship of any ungraceful or questionable generalisations reached in working outward from this main position, but expression may not be denied the comfort which his unintended authentication of the main position affords. It is true, Professor Clark does not speak of taxonomy, but employs the term "statics," which is perhaps better suited to his immediate purpose. Nevertheless, in spite of the high authority given the term "statics," in this connection, through its use by Professor Clark and by other writers eminent in the science, it is fairly to be questioned whether the term can legitimately be used to characterize the received economic theories. The word is borrowed from the jargon of physics, where it is used to designate the theory of bodies at rest or of forces in equilibrium. But there is much in the received economic theories to which the analogy of bodies at rest or of forces in equilibrium will not apply. It is perhaps not too much to say that those articles of economic theory that do not lend themselves to this analogy make up the major portion of the received doctrines. So, for instance, it seems scarcely to the point to speak of the statics of production, exchange, consumption, circulation. There are, no doubt, appreciable elements in the theory of these several processes that may fairly be characterized as statical features of the theory; but the doctrines handed down are after all, in the main, theories of the process discussed under each head, and the theory of a process does not belong in statics. The epithet "statical" would, for instance, have to be wrenched somewhat ungently to make it apply to Quesnay's classic _Tableau Économique_ or to the great body of Physiocratic speculations that take their rise from it The like is true for Books II. and III. of Adam Smith's _Wealth of Nations_, as also for considerable portions of Ricardo's work, or, to come down to the present generation, for much of Marshall's _Principles_, and for such a modern discussion as Smart's _Studies in Economics_, as well as for the fruitful activity of the Austrians and of the later representatives of the Historical School. But to return from this terminological digression. While economic science in the remoter past of its history has been mainly of a taxonomic character, later writers of all schools show something of a divergence from the taxonomic line and an inclination to make the science a genetic account of the economic life process, sometimes even without an ulterior view to the taxonomic value of the results obtained. This divergence from the ancient canons of theoretical formulation is to be taken as an episode of the movement that is going forward in latter-day science generally; and the progressive change which thus affects the ideals and the objective point of the modern sciences seems in its turn to be an expression of that matter-of-fact habit of mind which the prosy but exacting exigencies of life in a modern industrial community breed in men exposed to their unmitigated impact. In speaking of this matter-of-fact character of the modern sciences it has been broadly characterized as "evolutionary"; and the evolutionary method and the evolutionary ideals have been placed in antithesis to the taxonomic methods and ideals of pre-evolutionary days. But the characteristic attitude, aims, and ideals which are so designated here are by no means peculiar to the group of sciences that are professedly occupied with a process of development, taking that term in its most widely accepted meaning. The latter-day inorganic sciences are in this respect like the organic. They occupy themselves with "dynamic" relations and sequences. The question which they ask is always, What takes place next, and why? Given a situation wrought out by the forces under inquiry, what follows as the consequence of the situation so wrought out? or what follows upon the accession of a further element of force? Even in so non-evolutionary a science as inorganic chemistry the inquiry consistently runs on a process, an active sequence, and the value of the resulting situation as a point of departure for the next step in an interminable cumulative sequence. The last step in the chemist's experimental inquiry into any substance is, What comes of the substance determined? What will it do? What will it lead to, when it is made the point of departure in further chemical action? There is no ultimate term, and no definitive solution except in terms of further action. The theory worked out is always a theory of a genetic succession of phenomena, and the relations determined and elaborated into a body of doctrine are always genetic relations. In modern chemistry no cognisance is taken of the honorific bearing of reactions or molecular formulæ. The modern chemist, as contrasted with his ancient congener, knows nothing of the worth, elegance, or cogency of the relations that may subsist between the particles of matter with which he busies himself, for any other than the genetic purpose. The spiritual element and the elements of worth and propensity no longer count. Alchemic symbolism and the hierarchical glamour and virtue that once hedged about the nobler and more potent elements and reagents are almost altogether a departed glory of the science. Even the modest imputation of propensity involved in the construction of a scheme of coercive normality, for the putative guidance of reactions, finds little countenance with the later adepts of chemical science. The science has outlived that phase of its development at which the taxonomic feature was the dominant one. In the modern sciences, of which chemistry is one, there has been a gradual shifting of the point of view from which the phenomena which the science treats of are apprehended and passed upon; and to the historian of chemical science this shifting of the point of view must be a factor of great weight in the development of chemical knowledge. Something of a like nature is true for economic science; and it is the aim here to present, in outline, some of the successive phases that have passed over the spiritual attitude of the adepts of the science, and to point out the manner in which the transition from one point of view to the next has been made. * * * * * As has been suggested in the paper already referred to, the characteristic spiritual attitude or point of view of a given generation or group of economists is shown not so much in their detail work as in their higher syntheses--the terms of their definitive formulations--the grounds of their final valuation of the facts handled for purpose of theory. This line of recondite inquiry into the spiritual past and antecedents of the science has not often been pursued seriously or with singleness of purpose, perhaps because it is, after all, of but slight consequence to the practical efficiency of the present-day science. Still, not a little substantial work has been done towards this end by such writers as Hasbach, Oncken, Bonar, Cannan, and Marshall. And much that is to the purpose is also due to writers outside of economics, for the aims of economic speculation have never been insulated from the work going forward in other lines of inquiry. As would necessarily be the case, the point of view of economists has always been in large part the point of view of the enlightened common sense of their time. The spiritual attitude of a given generation of economists is therefore in good part a special outgrowth of the ideals and preconceptions current in the world about them. So, for instance, it is quite the conventional thing to say that the speculations of the Physiocrats were dominated and shaped by the preconception of Natural Rights. Account has been taken of the effect of natural-rights preconceptions upon the Physiocratic schemes of policy and economic reform as well as upon the details of their doctrines.[4] But little has been said of the significance of these preconceptions for the lower courses of the Physiocrats' theoretical structure. And yet that habit of mind to which the natural-rights view is wholesome and adequate is answerable both for the point of departure and for the objective point of the Physiocratic theories, both for the range of facts to which they turned and for the terms in which they were content to formulate their knowledge of the facts which they handled. The failure of their critics to place themselves at the Physiocratic point of view has led to much destructive criticism of their work; whereas, when seen through Physiocratic eyes, such doctrines as those of the net product and of the barrenness of the artisan class appear to be substantially true. The speculations of the Physiocrats are commonly accounted the first articulate and comprehensive presentation of economic theory that is in line with later theoretical work. The Physiocratic point of view may, therefore, well be taken as the point of departure in an attempt to trace that shifting of aims and norms of procedure that comes into view in the work of later economists when compared with earlier writers. Physiocratic economics is a theory of the working-out of the Law of Nature (_loi naturelle_) in its economic bearing, and this Law of Nature is a very simple matter. Les lois naturelles sont ou physiques ou morales. On entend ici, par loi physique, _le cours réglé de tout évènement physique de l'ordre naturel, évidemment le plus avantageux au genre humain_. On entend ici, par loi morale, _la règle de toute action humaine de l'ordre morale, conforme à l'ordre physique évidemment le plus avantageux au genre humain_. Ces lois forment ensemble ce qu'on appelle la _loi naturelle_. Tous les hommes et toutes les puissances humaines doivent être soumis à ces lois souveraines, instituées par l'Être-Suprême: elles sont immuables et irréfragables, et les meilleures lois possible.[5] The settled course of material facts tending beneficently to the highest welfare of the human race,--this is the final term in the Physiocratic speculations. This is the touchstone of substantiality. Conformity to these "immutable and unerring" laws of nature is the test of economic truth. The laws are immutable and unerring, but that does not mean that they rule the course of events with a blind fatality that admits of no exception and no divergence from the direct line. Human nature may, through infirmity or perversity, willfully break over the beneficent trend of the laws of nature; but to the Physiocrat's sense of the matter the laws are none the less immutable and irrefragable on that account. They are not empirical generalisations on the course of phenomena, like the law of falling bodies or of the angle of reflection; although many of the details of their action are to be determined only by observation and experience, helped out, of course, by interpretation of the facts of observation under the light of reason. So, for instance, Turgot, in his _Réflections_, empirically works out a doctrine of the reasonable course of development through which wealth is accumulated and reaches the existing state of unequal distribution; so also his doctrines of interest and of money. The immutable natural laws are rather of the nature of canons of conduct governing nature than generalisations of mechanical sequence, although in a general way the phenomena of mechanical sequence are details of the conduct of nature working according to these canons of conduct. The great law of the order of nature is of the character of a propensity working to an end, to the accomplishment of a purpose. The processes of nature working under the quasi-spiritual stress of this immanent propensity may be characterised as nature's habits of life. Not that nature is conscious of its travail, and knows and desires the worthy end of its endeavors; but for all that there is a quasi-spiritual nexus between antecedent and consequent in the scheme of operation in which nature is engaged. Nature is not uneasy about interruptions of its course or occasional deflections from the direct line through an untoward conjunction of mechanical causes, nor does the validity of the great overruling law suffer through such an episode. The introduction of a mere mechanically effective causal factor cannot thwart the course of Nature from reaching the goal to which she animistically tends. Nothing can thwart this teleological propensity of nature except counter-activity or divergent activity of a similarly teleological kind. Men can break over the law, and have short-sightedly and willfully done so; for men are also agents who guide their actions by an end to be achieved. Human conduct is activity of the same kind--on the same plane of spiritual reality or competency--as the course of Nature, and it may therefore traverse the latter. The remedy for this short-sighted traffic of misguided human nature is enlightenment,--"instruction publique et privée des lois de l'ordre naturel."[6] The nature in terms of which all knowledge of phenomena--for the present purpose economic phenomena--is to be finally synthesised is, therefore, substantially of a quasi-spiritual or animistic character. The laws of nature are in the last resort teleological: they are of the nature of a propensity. The substantial fact in all the sequences of nature is the end to which the sequence naturally tends, not the brute fact of mechanical compulsion or causally effective forces. Economic theory is accordingly the theory (1) of how the efficient causes of the _ordre naturel_ work in an orderly unfolding sequence, guided by the underlying natural laws--the propensity immanent in nature to establish the highest well-being of mankind, and (2) of the conditions imposed upon human conduct by these natural laws in order to reach the ordained goal of supreme human welfare. The conditions so imposed on human conduct are as definitive as the laws and the order by force of which they are imposed; and the theoretical conclusions reached, when these laws and this order are known, are therefore expressions of absolute economic truth. Such conclusions are an expression of reality, but not necessarily of fact. Now, the objective end of this propensity that determines the course of nature is human well-being. But economic speculation has to do with the workings of nature only so far as regards the _ordre physique_. And the laws of nature in the _ordre physique_, working through mechanical sequence, can only work out the physical well-being of man, not necessarily the spiritual. This propensity to the physical well-being of man is therefore the law of nature to which economic science must bring its generalisations, and this law of physical beneficence is the substantial ground of economic truth. Wanting this, all our speculations are vain; but having its authentication they are definitive. The great, typical function, to which all the other functioning of nature is incidental if not subsidiary, is accordingly that of the alimentation, nutrition of mankind. In so far, and only in so far as the physical processes contribute to human sustenance and fullness of life, can they, therefore, further the great work of nature. Whatever processes contribute to human sustenance by adding to the material available for human assimilation and nutrition, by increasing the substance disposable for human comfort, therefore count towards the substantial end. All other processes, however serviceable in other than this physiological respect, lack the substance of economic reality. Accordingly, human industry is productive, economically speaking, if it heightens the effectiveness of the natural processes out of which the material of human sustenance emerges; otherwise not. The test of productivity, of economic reality in material facts, is the increase of nutritive material. Whatever employment of time or effort does not afford an increase of such material is unproductive, however profitable it may be to the person employed, and however useful or indispensable it may be to the community. The type of such productive industry is the husbandman's employment, which yields a substantial (nutritive) gain. The artisan's work may be useful to the community and profitable to himself, but its economic effect does not extend beyond an alteration of the form in which the material afforded by nature already lies at hand. It is formally productive only, not really productive. It bears no part in the creative or generative work of nature; and therefore it lacks the character of economic substantiality. It does not enhance nature's output of vital force. The artisan's labors, therefore, yield no net product, whereas the husbandman's labors do. Whatever constitutes a material increment of this output of vital force is wealth, and nothing else is. The theory of value contained in this position has not to do with value according to men's appraisement of the valuable article. Given items of wealth may have assigned to them certain relative values at which they exchange, and these conventional values may differ more or less widely from the natural or intrinsic value of the goods in question; but all that is beside the substantial point. The point in question is not the degree of predilection shown by certain individuals or bodies of men for certain goods. That is a matter of caprice and convention, and it does not directly touch the substantial ground of the economic life. The question of value is a question of the extent to which the given item of wealth forwards the end of nature's unfolding process. It is valuable, intrinsically and really, in so far as it avails the great work which nature has in hand. Nature, then, is the final term in the Physiocratic speculations. Nature works by impulse and in an unfolding process, under the stress of a propensity to the accomplishment of a given end. This propensity, taken as the final cause that is operative in any situation, furnishes the basis on which to coördinate all our knowledge of those efficient causes through which Nature works to her ends. For the purpose of economic theory proper, this is the ultimate ground of reality to which our quest of economic truth must penetrate. But back of Nature and her works there is, in the Physiocratic scheme of the universe, the Creator, by whose all-wise and benevolent power the order of nature has been established in all the strength and beauty of its inviolate and immutable perfection. But the Physiocratic conception of the Creator is essentially a deistic one: he stands apart from the course of nature which he has established, and keeps his hands off. In the last resort, of course, "Dieu seul est producteur. Les hommes travaillent, receuillent, économisent, conservent; mais _économiser_ n'est pas _produire_."[7] But this last resort does not bring the Creator into economic theory as a fact to be counted with in formulating economic laws. He serves a homiletical purpose in the Physiocratic speculations rather than fills an office essential to the theory. He comes within the purview of the theory by way of authentication rather than as a subject of inquiry or a term in the formulation of economic knowledge. The Physiocratic God can scarcely be said to be an economic fact, but it is otherwise with that Nature whose ways and means constitute the subject-matter of the Physiocratic inquiry. When this natural system of the Physiocratic speculation is looked at from the side of the psychology of the investigators, or from that of the logical premises employed, it is immediately recognised as essentially animistic. It runs consistently on animistic ground; but it is animism of a high grade,--highly integrated and enlightened, but, after all, retaining very much of that primitive force and naïveté which characterise the animistic explanations of phenomena in vogue among the untroubled barbarians. It is not the disjected animism of the vulgar, who see a willful propensity--often a willful perversity--in given objects or situations to work towards a given outcome, good or bad. It is not the gambler's haphazard sense of fortuitous necessity or the housewife's belief in lucky days, numbers or phases of the moon. The Physiocrat's animism rests on a broader outlook, and does not proceed by such an immediately impulsive imputation of propensity. The teleological element--the element of propensity--is conceived in a large way, unified and harmonised, as a comprehensive order of nature as a whole. But it vindicates its standing as a true animism by never becoming fatalistic and never being confused or confounded with the sequence of cause and effect. It has reached the last stage of integration and definition, beyond which the way lies downward from the high, quasi-spiritual ground of animism to the tamer levels of normality and causal uniformities. There is already discernible a tone of dispassionate and colorless "tendency" about the Physiocratic animism, such as to suggest a wavering towards the side of normality. This is especially visible in such writers as the half-protestant Turgot. In his discussion of the development of farming, for instance, Turgot speaks almost entirely of human motives and the material conditions under which the growth takes place. There is little metaphysics in it, and that little does not express the law of nature in an adequate form. But, after all has been said, it remains true that the Physiocrat's sense of substantiality is not satisfied until he reaches the animistic ground; and it remains true also that the arguments of their opponents made little impression on the Physiocrats so long as they were directed to other than this animistic ground of their doctrine. This is true in great measure even of Turgot, as witness his controversy with Hume. Whatever criticism is directed against them on other grounds is met with impatience, as being inconsequential, if not disingenuous.[8] To an historian of economic theory the source and the line of derivation whereby this precise form of the order-of-nature preconception reached the Physiocrats are of first-rate importance; but it is scarcely a question to be taken up here,--in part because it is too large a question to be handled here, in part because it has met with adequate treatment at more competent hands,[9] and in part because it is somewhat beside the immediate point under discussion. This point is the logical, or perhaps better the psychological, value of the Physiocrats' preconception, as a factor in shaping their point of view and the terms of their definitive formulation of economic knowledge. For this purpose it may be sufficient to point out that the preconception in question belongs to the generation in which the Physiocrats lived, and that it is the guiding norm of all serious thought that found ready assimilation into the common-sense views of that time. It is the characteristic and controlling feature of what may be called the common-sense metaphysics of the eighteenth century, especially so far as concerns the enlightened French community. It is to be noted as a point bearing more immediately on the question in hand that this imputation of final causes to the course of phenomena expresses a spiritual attitude which has prevailed, one might almost say, always and everywhere, but which reached its finest, most effective development, and found its most finished expression, in the eighteenth-century metaphysics. It is nothing recondite; for it meets us at every turn, as a matter of course, in the vulgar thinking of to-day,--in the pulpit and in the market place,--although it is not so ingenuous, nor does it so unquestionedly hold the primacy in the thinking of any class to-day as it once did. It meets us likewise, with but little change of features, at all past stages of culture, late or early. Indeed, it is the most generic feature of human thinking, so far as regards a theoretical or speculative formulation of knowledge. Accordingly, it seems scarcely necessary to trace the lineage of this characteristic preconception of the era of enlightenment, through specific channels, back to the ancient philosophers or jurists of the empire. Some of the specific forms of its expression--as, for instance, the doctrine of Natural Rights--are no doubt traceable through mediæval channels to the teachings of the ancients; but there is no need of going over the brook for water, and tracing back to specific teachings the main features of that habit of mind or spiritual attitude of which the doctrines of Natural Rights and the Order of Nature are specific elaborations only. This dominant habit of mind came to the generation of the Physiocrats on the broad ground of group inheritance, not by lineal devolution from any one of the great thinkers of past ages who had thrown its deliverances into a similarly competent form for the use of his own generation. * * * * * In leaving the Physiocratic discipline and the immediate sphere of Physiocratic influence for British ground, we are met by the figure of Hume. Here, also, it will be impracticable to go into details as to the remoter line of derivation of the specific point of view that we come upon on making the transition, for reasons similar to those already given as excuse for passing over the similar question with regard to the Physiocratic point of view. Hume is, of course, not primarily an economist; but that placid unbeliever is none the less a large item in any inventory of eighteenth-century economic thought. Hume was not gifted with a facile acceptance of the group inheritance that made the habit of mind of his generation. Indeed, he was gifted with an alert, though somewhat histrionic, skepticism touching everything that was well received. It is his office to prove all things, though not necessarily to hold fast that which is good. Aside from the strain of affectation discernible in Hume's skepticism, he may be taken as an accentuated expression of that characteristic bent which distinguishes British thinking in his time from the thinking of the Continent, and more particularly of the French. There is in Hume, and in the British community, an insistence on the prosy, not to say the seamy, side of human affairs. He is not content with formulating his knowledge of things in terms of what ought to be or in terms of the objective point of the course of things. He is not even content with adding to the teleological account of phenomena a chain of empirical, narrative generalisations as to the usual course of things. He insists, in season and out of season, on an exhibition of the efficient causes engaged in any sequence of phenomena; and he is skeptical--irreverently skeptical--as to the need or the use of any formulation of knowledge that outruns the reach of his own matter-of-fact, step-by-step argument from cause to effect. In short, he is too modern to be wholly intelligible to those of his contemporaries who are most neatly abreast of their time. He out-Britishes the British; and, in his footsore quest for a perfectly tame explanation of things, he finds little comfort, and indeed scant courtesy, at the hands of his own generation. He is not in sufficiently naïve accord with the range of preconceptions then in vogue. But, while Hume may be an accentuated expression of a national characteristic, he is not therefore an untrue expression of this phase of British eighteenth-century thinking. The peculiarity of point of view and of method for which he stands has sometimes been called the critical attitude, sometimes the inductive method, sometimes the materialistic or mechanical, and again, though less aptly, the historical method. Its characteristic is an insistence on matter of fact. This matter-of-fact animus that meets any historian of economic doctrine on his introduction to British economics is a large, but not the largest, feature of the British scheme of early economic thought. It strikes the attention because it stands in contrast with the relative absence of this feature in the contemporary speculations of the Continent. The most potent, most formative habit of thought concerned in the early development of economic teaching on British ground is best seen in the broader generalisations of Adam Smith, and this more potent factor in Smith is a bent that is substantially identical with that which gives consistency to the speculations of the Physiocrats. In Adam Smith the two are happily combined, not to say blended; but the animistic habit still holds the primacy, with the matter-of-fact as a subsidiary though powerful factor. He is said to have combined deduction with induction. The relatively great prominence given the latter marks the line of divergence of British from French economics, not the line of coincidence; and on this account it may not be out of place to look more narrowly into the circumstances to which the emergence of this relatively greater penchant for a matter-of-fact explanation of things in the British community is due. To explain the characteristic animus for which Hume stands, on grounds that might appeal to Hume, we should have to inquire into the peculiar circumstances--ultimately material circumstances--that have gone to shape the habitual view of things within the British community, and that so have acted to differentiate the British preconceptions from the French, or from the general range of preconceptions prevalent on the Continent. These peculiar formative circumstances are no doubt to some extent racial peculiarities; but the racial complexion of the British community is not widely different from the French, and especially not widely different from certain other Continental communities which are for the present purpose roughly classed with the French. Race difference can therefore not wholly, nor indeed for the greater part, account for the cultural difference of which this difference in preconceptions is an outcome. Through its cumulative effect on institutions the race difference must be held to have had a considerable effect on the habit of mind of the community; but, if the race difference is in this way taken as the remoter ground of an institutional peculiarity, which in its turn has shaped prevalent habits of thought, then the attention may be directed to the proximate causes, the concrete circumstances, through which this race difference has acted, in conjunction with other ulterior circumstances, to work out the psychological phenomena observed. Race differences, it may be remarked, do not so nearly coincide with national lines of demarcation as differences in the point of view from which things are habitually apprehended or differences in the standards according to which facts are rated. If the element of race difference be not allowed definitive weight in discussing national peculiarities that underlie the deliverances of common sense, neither can these national peculiarities be confidently traced to a national difference in the transmitted learning that enters into the common-sense view of things. So far as concerns the concrete facts embodied in the learning of the various nations within the European culture, these nations make up but a single community. What divergence is visible does not touch the character of the positive information with which the learning of the various nations is occupied. Divergence is visible in the higher syntheses, the methods of handling the material of knowledge, the basis of valuation of the facts taken up, rather than in the material of knowledge. But this divergence must be set down to a cultural difference, a difference of point of view, not to a difference in inherited information. When a given body of information passes the national frontiers it acquires a new complexion, a new national, cultural physiognomy. It is this cultural physiognomy of learning that is here under inquiry, and a comparison of early French economics (the Physiocrats) with early British economics (Adam Smith) is here entered upon merely with a view to making out what significance this cultural physiognomy of the science has for the past progress of economic speculation. The broad features of economic speculation, as it stood at the period under consideration, may be briefly summed up, disregarding the element of policy, or expediency, which is common to both groups of economists, and attending to their theoretical work alone. With the Physiocrats, as with Adam Smith, there are two main points of view from which economic phenomena are treated: (_a_) the matter-of-fact point of view or preconception, which yields a discussion of causal sequences and correlations; and (_b_) what, for want of a more expressive word, is here called the animistic point of view or preconception, which yields a discussion of teleological sequences and correlations,--a discussion of the function of this and that "organ," of the legitimacy of this or the other range of facts. The former preconception is allowed a larger scope in the British than in the French economics: there is more of "induction" in the British. The latter preconception is present in both, and is the definitive element in both; but the animistic element is more colorless in the British, it is less constantly in evidence, and less able to stand alone without the support of arguments from cause to effect. Still, the animistic element is the controlling factor in the higher syntheses of both; and for both alike it affords the definitive ground on which the argument finally comes to rest. In neither group of thinkers is the sense of substantiality appeased until this quasi-spiritual ground, given by the natural propensity of the course of events, is reached. But the propensity in events, the natural or normal course of things, as appealed to by the British speculators, suggests less of an imputation of will-power, or personal force, to the propensity in question. It may be added, as has already been said in another place, that the tacit imputation of will-power or spiritual consistency to the natural or normal course of events has progressively weakened in the later course of economic speculation, so that in this respect, the British economists of the eighteenth century may be said to represent a later phase of economic inquiry than the Physiocrats. * * * * * Unfortunately, but unavoidably, if this question as to the cultural shifting of the point of view in economic science is taken up from the side of the causes to which the shifting is traceable, it will take the discussion back to ground on which an economist must at best feel himself to be but a raw layman, with all a layman's limitations and ineptitude, and with the certainty of doing badly what might be done well by more competent hands. But, with a reliance on charity where charity is most needed, it is necessary to recite summarily what seems to be the psychological bearing of certain cultural facts. A cursory acquaintance with any of the more archaic phases of human culture enforces the recognition of this fact,--that the habit of construing the phenomena of the inanimate world in animistic terms prevails pretty much universally on these lower levels. Inanimate phenomena are apprehended to work out a propensity to an end; the movements of the elements are construed in terms of quasi-personal force. So much is well authenticated by the observations on which anthropologists and ethnologists draw for their materials. This animistic habit, it may be said, seems to be more effectual and far-reaching among those primitive communities that lead a predatory life. But along with this feature of archaic methods of thought or of knowledge, the picturesqueness of which has drawn the attention of all observers, there goes a second feature, no less important for the purpose in hand, though less obtrusive. The latter is of less interest to the men who have to do with the theory of cultural development, because it is a matter of course. This second feature of archaic thought is the habit of also apprehending facts in non-animistic, or impersonal, terms. The imputation of propensity in no case extends to all the mechanical facts in the case. There is always a substratum of matter of fact, which is the outcome of an habitual imputation of causal sequence, or, perhaps better, an imputation of mechanical continuity, if a new term be permitted. The agent, thing, fact, event, or phenomenon, to which propensity, will-power, or purpose, is imputed, is always apprehended to act in an environment which is accepted as spiritually inert. There are always opaque facts as well as self-directing agents. Any agent acts through means which lend themselves to his use on other grounds than that of spiritual compulsion, although spiritual compulsion may be a large feature in any given case. The same features of human thinking, the same two complementary methods of correlating facts and handling them for the purposes of knowledge, are similarly in constant evidence in the daily life of men in our own community. The question is, in great part, which of the two bears the greater part in shaping human knowledge at any given time and within any given range of knowledge or of facts. Other features of the growth of knowledge, which are remoter from the point under inquiry, may be of no less consequence to a comprehensive theory of the development of culture and of thought; but it is of course out of the question here to go farther afield. The present inquiry will have enough to do with these two. No other features are correlative with these, and these merit discussion on account of their intimate bearing on the point of view of economics. The point of interest with respect to these two correlative and complementary habits of thought is the question of how they have fared under the changing exigencies of human culture; in what manner they come, under given cultural circumstances, to share the field of knowledge between them; what is the relative part of each in the composite point of view in which the two habits of thought express themselves at any given cultural stage. The animistic preconception enforces the apprehension of phenomena in terms generically identical with the terms of personality or individuality. As a certain modern group of psychologists would say, it imputes to objects and sequences an element of habit and attention similar in kind, though not necessarily in degree, to the like spiritual attitude present in the activities of a personal agent. The matter-of-fact preconception, on the other hand, enforces a handling of facts without imputation of personal force or attention, but with an imputation of mechanical continuity, substantially the preconception which has reached a formulation at the hands of scientists under the name of conservation of energy or persistence of quantity. Some appreciable resort to the latter method of knowledge is unavoidable at any cultural stage, for it is indispensable to all industrial efficiency. All technological processes and all mechanical contrivances rest, psychologically speaking, on this ground. This habit of thought is a selectively necessary consequence of industrial life, and, indeed, of all human experience in making use of the material means of life. It should therefore follow that, in a general way, the higher the culture, the greater the share of the mechanical preconception in shaping human thought and knowledge, since, in a general way, the stage of culture attained depends on the efficiency of industry. The rule, while it does not hold with anything like extreme generality, must be admitted to hold to a good extent; and to that extent it should hold also that, by a selective adaptation of men's habits of thought to the exigencies of those cultural phases that have actually supervened, the mechanical method of knowledge should have gained in scope and range. Something of the sort is borne out by observation. A further consideration enforces the like view. As the community increases in size, the range of observation of the individuals in the community also increases; and continually wider and more far-reaching sequences of a mechanical kind have to be taken account of. Men have to adapt their own motives to industrial processes that are not safely to be construed in terms of propensity, predilection, or passion. Life in an advanced industrial community does not tolerate a neglect of mechanical fact; for the mechanical sequences through which men, at an appreciable degree of culture, work out their livelihood, are no respecters of persons or of will-power. Still, on all but the higher industrial stages, the coercive discipline of industrial life, and of the scheme of life that inculcates regard for the mechanical facts of industry, is greatly mitigated by the largely haphazard character of industry, and by the great extent to which man continues to be the prime mover in industry. So long as industrial efficiency is chiefly a matter of the handicraftsman's skill, dexterity, and diligence, the attention of men in looking to the industrial process is met by the figure of the workman, as the chief and characteristic factor; and thereby it comes to run on the personal element in industry. But, with or without mitigation, the scheme of life which men perforce adopt under exigencies of an advanced industrial situation shapes their habits of thought on the side of their behavior, and thereby shapes their habits of thought to some extent for all purposes. Each individual is but a single complex of habits of thought, and the same psychical mechanism that expresses itself in one direction as conduct expresses itself in another direction as knowledge. The habits of thought formed in the one connection, in response to stimuli that call for a response in terms of conduct, must, therefore, have their effect when the same individual comes to respond to stimuli that call for a response in terms of knowledge. The scheme of thought or of knowledge is in good part a reverberation of the scheme of life. So that, after all has been said, it remains true that with the growth of industrial organization and efficiency there must, by selection and by adaptation, supervene a greater resort to the mechanical or dispassionate method of apprehending facts. But the industrial side of life is not the whole of it, nor does the scheme of life in vogue in any community or at any cultural stage comprise industrial conduct alone. The social, civic, military, and religious interests come in for their share of attention, and between them they commonly take up by far the larger share of it. Especially is this true so far as concerns those classes among whom we commonly look for a cultivation of knowledge for knowledge's sake. The discipline which these several interests exert does not commonly coincide with the training given by industry. So the religious interest, with its canons of truth and of right living, runs exclusively on personal relations and the adaptation of conduct to the predilections of a superior personal agent. The weight of its discipline, therefore, falls wholly on the animistic side. It acts to heighten our appreciation of the spiritual bearing of phenomena and to discountenance a matter-of-fact apprehension of things. The skeptic of the type of Hume has never been in good repute with those who stand closest to the accepted religious truths. The bearing of this side of our culture upon the development of economics is shown by what the mediæval scholars had to say on economic topics. The disciplinary effects of other phases of life, outside of the industrial and the religious, is not so simple a matter; but the discussion here approaches nearer to the point of immediate inquiry,--namely, the cultural situation in the eighteenth century, and its relation to economic speculation,--and this ground of interest in the question may help to relieve the topic of the tedium that of right belongs to it. In the remoter past of which we have records, and even in the more recent past, Occidental man, as well as man elsewhere, has eminently been a respecter of persons. Wherever the warlike activity has been a large feature of the community's life, much of human conduct in society has proceeded on a regard for personal force. The scheme of life has been a scheme of personal aggression and subservience, partly in the naïve form, partly conventionalised in a system of status. The discipline of social life for the present purpose, in so far as its canons of conduct rest on this element of personal force in the unconventionalised form, plainly tends to the formation of a habit of apprehending and coördinating facts from the animistic point of view. So far as we have to do with life under a system of status, the like remains true, but with a difference. The régime of status inculcates an unremitting and very nice discrimination and observance of distinctions of personal superiority and inferiority. To the criterion of personal force, or will-power, taken in its immediate bearing on conduct, is added the criterion of personal excellence-in-general, regardless of the first-hand potency of the given person as an agent. This criterion of conduct requires a constant and painstaking imputation of personal value, regardless of fact. The discrimination enjoined by the canons of status proceeds on an invidious comparison of persons in respect of worth, value, potency, virtue, which must, for the present purpose, be taken as putative. The greater or less personal value assigned a given individual or a given class under the canons of status is not assigned on the ground of visible efficiency, but on the ground of a dogmatic allegation accepted on the strength of an uncontradicted categorical affirmation simply. The canons of status hold their ground by force of preëmption. Where distinctions of status are based on a putative worth transmitted by descent from honorable antecedents, the sequence of transmission to which appeal is taken as the arbiter of honor is of a putative and animistic character rather than a visible mechanical continuity. The habit of accepting as final what is prescriptively right in the affairs of life has as its reflex in the affairs of knowledge the formula, _Quid ab omnibus, quid ubique creditur credendum est_. Even this meager account of the scheme of life that characterises a régime of status should serve to indicate what is its disciplinary effect in shaping habits of thought, and therefore in shaping the habitual criteria of knowledge and of reality. A culture whose institutions are a framework of invidious comparisons implies, or rather involves and comprises, a scheme of knowledge whose definitive standards of truth and substantiality are of an animistic character; and, the more undividedly the canons of status and ceremonial honor govern the conduct of the community, the greater the facility with which the sequence of cause and effect is made to yield before the higher claims of a spiritual sequence or guidance in the course of events. Men consistently trained to an unremitting discrimination of honor, worth, and personal force in their daily conduct, and to whom these criteria afford the definitive ground of sufficiency in coördinating facts for the purposes of life, will not be satisfied to fall short of the like definitive ground of sufficiency when they come to coördinate facts for the purposes of knowledge simply. The habits formed in unfolding his activity in one direction, under the impulse of a given interest, assert themselves when the individual comes to unfold his activity in any other direction, under the impulse of any other interest. If his last resort and highest criterion of truth in conduct is afforded by the element of personal force and invidious comparison, his sense of substantiality or truth in the quest of knowledge will be satisfied only when a like definitive ground of animistic force and invidious comparison is reached. But when such ground is reached he rests content and pushes the inquiry no farther. In his practical life he has acquired the habit of resting his case on an authentic deliverance as to what is absolutely right. This absolutely right and good final term in conduct has the character of finality only when conduct is construed in a ceremonial sense; that is to say, only when life is conceived as a scheme of conformity to a purpose outside and beyond the process of living. Under the régime of status this ceremonial finality is found in the concept of worth or honor. In the religious domain it is the concept of virtue, sanctity, or tabu. Merit lies in what one is, not in what one does. The habit of appeal to ceremonial finality, formed in the school of status, goes with the individual in his quest of knowledge, as a dependence upon a similarly authentic norm of absolute truth,--a similar seeking of a final term outside and beyond the range of knowledge. The discipline of social and civic life under a régime of status, then, reënforces the discipline of the religious life; and the outcome of the resulting habituation is that the canons of knowledge are cast in the animistic mold and converge to a ground of absolute truth, and this absolute truth is of a ceremonial nature. Its subject-matter is a reality regardless of fact. The outcome, for science, of the religious and social life of the civilisation of status, in Occidental culture, was a structure of quasi-spiritual appreciations and explanations, of which astrology, alchemy, and mediæval theology and metaphysics are competent, though somewhat one-sided, exponents. Throughout the range of this early learning the ground of correlation of phenomena is in part the supposed relative potency of the facts correlated; but it is also in part a scheme of status, in which facts are scheduled according to a hierarchical gradation of worth or merit, having only a ceremonial relation to the observed phenomena. Some elements (some metals, for instance) are noble, others base; some planets, on grounds of ceremonial efficacy, have a sinister influence, others a beneficent one; and it is a matter of serious consequence whether they are in the ascendant, and so on. The body of learning through which the discipline of animism and invidious comparison transmitted its effects to the science of economics was what is known as natural theology, natural rights, moral philosophy, and natural law. These several disciplines or bodies of knowledge had wandered far from the naïve animistic standpoint at the time when economic science emerged, and much the same is true as regards the time of the emergence of other modern sciences. But the discipline which makes for an animistic formulation of knowledge continued to hold the primacy in modern culture, although its dominion was never altogether undivided or unmitigated. Occidental culture has long been largely an industrial culture; and, as already pointed out, the discipline of industry, and of life in an industrial community, does not favor the animistic preconception. This is especially true as regards industry which makes large use of mechanical contrivances. The difference in these respects between Occidental industry and science, on the one hand, and the industry and science of other cultural regions, on the other hand, is worth noting in this connection. The result has been that the sciences, as that word is understood in later usage, have come forward gradually, and in a certain rough parallelism with the development of industrial processes and industrial organisation. It is possible to hold that both modern industry (of the mechanical sort) and modern science center about the region of the North Sea. It is still more palpably true that within this general area the sciences, in the recent past, show a family likeness to the civil and social institutions of the communities in which they have been cultivated, this being true to the greatest extent of the higher or speculative sciences; that is, in that range of knowledge in which the animistic preconception can chiefly and most effectively find application. There is, for instance, in the eighteenth century a perceptible parallelism between the divergent character of British and Continental culture and institutions, on the one hand, and the dissimilar aims of British and Continental speculation, on the other hand. Something has already been said of the difference in preconceptions between the French and the British economists of the eighteenth century. It remains to point out the correlative cultural difference between the two communities, to which it is conceived that the difference in scientific animus is in great measure due. It is, of course, only the general features, the general attitude of the speculators, that can be credited to the difference in culture. Differences of detail in the specific doctrines held could be explained only on a much more detailed analysis than can be entered on here, and after taking account of facts which cannot here be even allowed for in detail. Aside from the greater resort to mechanical contrivances and the larger scale of organisation in British industry, the further cultural peculiarities of the British community run in the same general direction. British religious life and beliefs had less of the element of fealty--personal or discretionary mastery and subservience--and more of a tone of fatalism. The civil institutions of the British had not the same rich personal content as those of the French. The British subject owned allegiance to an impersonal law rather than to the person of a superior. Relatively, it may be said that the sense of status, as a coercive factor, was in abeyance in the British community. Even in the warlike enterprise of the British community a similar characteristic is traceable. Warfare is, of course, a matter of personal assertion. Warlike communities and classes are necessarily given to construing facts in terms of personal force and personal ends. They are always superstitious. They are great sticklers for rank and precedent, and zealously cultivate those distinctions and ceremonial observances in which a system of status expresses itself. But, while warlike enterprise has by no means been absent from the British scheme of life, the geographical and strategic isolation of the British community has given a characteristic turn to their military relations. In recent times British warlike operations have been conducted abroad. The military class has consequently in great measure been segregated out from the body of the community, and the ideals and prejudices of the class have not been transfused through the general body with the same facility and effect that they might otherwise have had. The British community at home has seen the campaign in great part from the standpoint of the "sinews of war." The outcome of all these national peculiarities of circumstance and culture has been that a different scheme of life has been current in the British community from what has prevailed on the Continent. There has resulted the formation of a different body of habits of thought and a different animus in their handling of facts. The preconception of causal sequence has been allowed larger scope in the correlation of facts for purposes of knowledge; and, where the animistic preconception has been resorted to, as it always has in the profounder reaches of learning, it has commonly been an animism of a tamer kind. Taking Adam Smith as an exponent of this British attitude in theoretical knowledge, it is to be noted that, while he formulates his knowledge in terms of a propensity (natural laws) working teleologically to an end, the end or objective point which controls the formulation has not the same rich content of vital human interest or advantage as is met with in the Physiocratic speculations. There is perceptibly less of an imperious tone in Adam Smith's natural laws than in those of the contemporary French economists. It is true, he sums up the institutions with which he deals in terms of the ends which they should subserve, rather than in terms of the exigencies and habits of life out of which they have arisen; but he does not with the same tone of finality appeal to the end subserved as a final cause through whose coercive guidance the complex of phenomena is kept to its appointed task. Under his hands the restraining, compelling agency retires farther into the background, and appeal is taken to it neither so directly nor on so slight provocation. But Adam Smith is too large a figure to be disposed of in a couple of concluding paragraphs. At the same time his work and the bent which he gave to economic speculation are so intimately bound up with the aims and bias that characterise economics in its next stage of development that he is best dealt with as the point of departure for the Classical School rather than merely as a British counterpart of Physiocracy. Adam Smith will accordingly be considered in immediate connection with the bias of the classical school and the incursion of utilitarianism into economics. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, vol. xiii, Jan., 1899. [2] "Why is Economics not an Evolutionary Science?" _Quarterly Journal of Economics_, July, 1898. [3] "The Future of Economic Theory," _ibid._, October, 1898. [4] See, for instance, Hasbach, _Allgemeine philosophische Grundlagen der von François Quesnay und Adam Smith begründeten politischen Oekonomie_. [5] Quesnay, _Droit Naturel_, ch. v. (Ed. Daire, _Physiocrates_, pp. 52-53). [6] Quesnay, _Droit Naturel_, ch. v (Ed. Daire, _Physiocrates_, p. 53). [7] Dupont de Nemours, _Correspondance avec J.-B. Say_ (Ed. Daire, _Physiocrates_, première partie, p. 399). [8] See, for instance, the concluding chapters of La Rivière's _Ordre Naturel des Sociétés Politiques_. [9] E.g., Hasbach, _loc. cit._; Bonar, _Philosophy and Political Economy_, Book II; Ritchie, _Natural Rights_. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] II Adam Smith's animistic bent asserts itself more plainly and more effectually in the general trend and aim of his discussion than in the details of theory. "Adam Smith's _Wealth of Nations_ is, in fact, so far as it has one single purpose, a vindication of the unconscious law present in the separate actions of men when these actions are directed by a certain strong personal motive."[2] Both in the _Theory of the Moral Sentiments_ and in the _Wealth of Nations_ there are many passages that testify to his abiding conviction that there is a wholesome trend in the natural course of things, and the characteristically optimistic tone in which he speaks for natural liberty is but an expression of this conviction. An extreme resort to this animistic ground occurs in his plea for freedom of investment.[3] In the proposition that men are "led by an invisible hand," Smith does not fall back on a meddling Providence who is to set human affairs straight when they are in danger of going askew. He conceives the Creator to be very continent in the matter of interference with the natural course of things. The Creator has established the natural order to serve the ends of human welfare; and he has very nicely adjusted the efficient causes comprised in the natural order, including human aims and motives, to this work that they are to accomplish. The guidance of the invisible hand takes place not by way of interposition, but through a comprehensive scheme of contrivances established from the beginning. For the purpose of economic theory, man is conceived to be consistently self-seeking; but this economic man is a part of the mechanism of nature, and his self-seeking traffic is but a means whereby, in the natural course of things, the general welfare is worked out. The scheme as a whole is guided by the end to be reached, but the sequence of events through which the end is reached is a causal sequence which is not broken into episodically. The benevolent work of guidance was performed in first establishing an ingenious mechanism of forces and motives capable of accomplishing an ordained result, and nothing beyond the enduring constraint of an established trend remains to enforce the divine purpose in the resulting natural course of things. The sequence of events, including human motives and human conduct, is a causal sequence; but it is also something more, or, rather, there is also another element of continuity besides that of brute cause and effect, present even in the step-by-step process whereby the natural course of things reaches its final term. The presence of such a quasi-spiritual or non-causal element is evident from two (alleged) facts. (1) The course of things may be deflected from the direct line of approach to that consummate human welfare which is its legitimate end. The natural trend of things may be overborne by an untoward conjuncture of causes. There is a distinction, often distressingly actual and persistent, between the legitimate and the observed course of things. If "natural," in Adam Smith's use, meant necessary, in the sense of causally determined, no divergence of events from the natural or legitimate course of things would be possible. If the mechanism of nature, including man, were a mechanically competent contrivance for achieving the great artificer's design, there could be no such episodes of blundering and perverse departure from the direct path as Adam Smith finds in nearly all existing arrangements. Institutional facts would then be "natural."[4] (2) When things have gone wrong, they will right themselves if interference with the natural course ceases; whereas, in the case of a causal sequence simply, the mere cessation of interference will not leave the outcome the same as if no interference had taken place. This recuperative power of nature is of an extra-mechanical character. The continuity of sequence by force of which the natural course of things prevails is, therefore, not of the nature of cause and effect, since it bridges intervals and interruptions in the causal sequence.[5] Adam Smith's use of the term "real" in statements of theory--as, for example, "real value," "real price"[6]--is evidence to this effect. "Natural" commonly has the same meaning as "real" in this connection.[7] Both "natural" and "real" are placed in contrast with the actual; and, in Adam Smith's apprehension, both have a substantiality different from and superior to facts. The view involves a distinction between reality and fact, which survives in a weakened form in the theories of "normal" prices, wages, profits, costs, in Adam Smith's successors. This animistic prepossession seems to pervade the earlier of his two monumental works in a greater degree than the later. In the _Moral Sentiments_ recourse is had to the teleological ground of the natural order more freely and with perceptibly greater insistence. There seems to be reason for holding that the animistic preconception weakened or, at any rate, fell more into the background as his later work of speculation and investigation proceeded. The change shows itself also in some details of his economic theory, as first set forth in the _Lectures_, and afterwards more fully developed in the _Wealth of Nations_. So, for instance, in the earlier presentation of the matter, "the division of labor is the immediate cause of opulence"; and this division of labor, which is the chief condition of economic well-being, "flows from a direct propensity in human nature for one man to barter with another."[8] The "propensity" in question is here appealed to as a natural endowment immediately given to man with a view to the welfare of human society, and without any attempt at further explanation of how man has come by it. No causal explanation of its presence or character is offered. But the corresponding passage of the _Wealth of Nations_ handles the question more cautiously.[9] Other parallel passages might be compared, with much the same effect. The guiding hand has withdrawn farther from the range of human vision. However, these and other like filial expressions of a devout optimism need, perhaps, not be taken as integral features of Adam Smith's economic theory, or as seriously affecting the character of his work as an economist. They are the expression of his general philosophical and theological views, and are significant for the present purpose chiefly as evidences of an animistic and optimistic bent. They go to show what is Adam Smith's accepted ground of finality,--the ground to which all his speculations on human affairs converge; but they do not in any great degree show the teleological bias guiding his formulation of economic theory in detail. The effective working of the teleological bias is best seen in Smith's more detailed handling of economic phenomena--in his discussion of what may loosely be called economic institutions--and in the criteria and principles of procedure by which he is guided in incorporating these features of economic life into the general structure of his theory. A fair instance, though perhaps not the most telling one, is the discussion of the "real and nominal price," and of the "natural and market price" of commodities, already referred to above.[10] The "real" price of commodities is their value in terms of human life. At this point Smith differs from the Physiocrats, with whom the ultimate terms of value are afforded by human sustenance taken as a product of the functioning of brute nature; the cause of the difference being that the Physiocrats conceived the natural order which works towards the material well-being of man to comprise the non-human environment only, whereas Adam Smith includes man in this concept of the natural order, and, indeed, makes him the central figure in the process of production. With the Physiocrats, production is the work of nature: with Adam Smith, it is the work of man and nature, with man in the foreground. In Adam Smith, therefore, labor is the final term in valuation. This "real" value of commodities is the value imputed to them by the economist under the stress of his teleological preconception. It has little, if any, place in the course of economic events, and no bearing on human affairs, apart from the sentimental influence which such a preconception in favor of a "real value" in things may exert upon men's notions of what is the good and equitable course to pursue in their transactions. It is impossible to gauge this real value of goods; it cannot be measured or expressed in concrete terms. Still, if labor exchanges for a varying quantity of goods, "it is their value which varies, not that of the labor which purchases them."[11] The values which practically attach to goods in men's handling of them are conceived to be determined without regard to the real value which Adam Smith imputes to the goods; but, for all that, the substantial fact with respect to these market values is their presumed approximation to the real values teleologically imputed to the goods under the guidance of inviolate natural laws. The real, or natural, value of articles has no causal relation to the value at which they exchange. The discussion of how values are determined in practice runs on the motives of the buyers and sellers, and the relative advantage enjoyed by the parties to the transaction.[12] It is a discussion of a process of valuation, quite unrelated to the "real," or "natural," price of things, and quite unrelated to the grounds on which things are held to come by their real, or natural, price; and yet, when the complex process of valuation has been traced out in terms of human motives and the exigencies of the market, Adam Smith feels that he has only cleared the ground. He then turns to the serious business of accounting for value and price theoretically, and making the ascertained facts articulate with his teleological theory of economic life.[13] The occurrence of the words "ordinary" and "average" in this connection need not be taken too seriously. The context makes it plain that the equality which commonly subsists between the ordinary or average rates, and the natural rates, is a matter of coincidence, not of identity. Not only are there temporary deviations, but there may be a permanent divergence between the ordinary and the natural price of a commodity; as in case of a monopoly or of produce grown under peculiar circumstances of soil or climate.[14] The natural price coincides with the price fixed by competition, because competition means the unimpeded play of those efficient forces through which the nicely adjusted mechanism of nature works out the design to accomplish which it was contrived. The natural price is reached through the free interplay of the factors of production, and it is itself an outcome of production. Nature, including the human factor, works to turn out the goods; and the natural value of the goods is their appraisement from the standpoint of this productive process of nature. Natural value is a category of production: whereas, notoriously exchange value or market price is a category of distribution. And Adam Smith's theoretical handling of market price aims to show how the factors of human predilection and human wants at work in the higgling of the market bring about a result in passable consonance with the natural laws that are conceived to govern production. The natural price is a composite result of the blending of the three "component parts of the price of commodities,"--the natural wages of laborer, the natural profits of stock, and the natural rent of land; and each of these three components is in its turn the measure of the productive effect of the factor to which it pertains. The further discussion of these shares in distribution aims to account for the facts of distribution on the ground of the productivity of the factors which are held to share the product between them. That is to say, Adam Smith's preconception of a productive natural process as the basis of his economic theory dominates his aims and procedure, when he comes to deal with phenomena that cannot be stated in terms of production. The causal sequence in the process of distribution is, by Adam Smith's own showing, unrelated to the causal sequence in the process of production; but, since the latter is the substantial fact, as viewed from the standpoint of a teleological natural order, the former must be stated in terms of the latter before Adam Smith's sense of substantiality, or "reality," is satisfied. Something of the same kind is, of course, visible in the Physiocrats and in Cantillon. It amounts to an extension of the natural-rights preconception to economic theory. Adam Smith's discussion of distribution as a function of productivity might be traced in detail through his handling of Wages, Profits, and Rent; but, since the aim here is a brief characterisation only, and not an exposition, no farther pursuit of this point seems feasible. It may, however, be worth while to point out another line of influence along which the dominance of the teleological preconception shows itself in Adam Smith. This is the normalisation of data, in order to bring them into consonance with an orderly course of approach to the putative natural end of economic life and development. The result of this normalisation of data is, on the one hand, the use of what James Steuart calls "conjectural history" in dealing with past phases of economic life, and, on the other hand, a statement of present-day phenomena in terms of what legitimately ought to be according to the God-given end of life rather than in terms of unconstrued observation. Account is taken of the facts (supposed or observed) ostensibly in terms of causal sequence, but the imputed causal sequence is construed to run on lines of teleological legitimacy. A familiar instance of this "conjectural history," in a highly and effectively normalized form, is the account of "that early and rude state of society which precedes both the accumulation of stock and the appropriation of land."[15] It is needless at this day to point out that this "early and rude state," in which "the whole produce of labor belongs to the laborer," is altogether a figment. The whole narrative, from the putative origin down, is not only supposititious, but it is merely a schematic presentation of what should have been the course of past development, in order to lead up to that ideal economic situation which would satisfy Adam Smith's preconception.[16] As the narrative comes nearer the region of known latter-day facts, the normalisation of the data becomes more difficult and receives more detailed attention; but the change in method is a change of degree rather than of kind. In the "early and rude state" the coincidence of the "natural" and the actual course of events is immediate and undisturbed, there being no refractory data at hand; but in the later stages and in the present situation, where refractory facts abound, the coördination is difficult, and the coincidence can be shown only by a free abstraction from phenomena that are irrelevant to the teleological trend and by a laborious interpretation of the rest. The facts of modern life are intricate, and lend themselves to statement in the terms of the theory only after they have been subjected to a "higher criticism." The chapter "Of the Origin and Use of Money"[17] is an elegantly normalised account of the origin and nature of an economic institution, and Adam Smith's further discussion of money runs on the same lines. The origin of money is stated in terms of the purpose which money should legitimately serve in such a community as Adam Smith considered right and good, not in terms of the motives and exigencies which have resulted in the use of money and in the gradual rise of the existing method of payment and accounts. Money is "the great wheel of circulation," which effects the transfer of goods in process of production and the distribution of the finished goods to the consumers. It is an organ of the economic commonwealth rather than an expedient of accounting and a conventional repository of wealth. It is perhaps superfluous to remark that to the "plain man," who is not concerned with the "natural course of things" in a consummate _Geldwirtschaft_, the money that passes his hand is not a "great wheel of circulation." To the Samoyed, for instance, the reindeer which serves him as unit of value is wealth in the most concrete and tangible form. Much the same is true of coin, or even of bank-notes, in the apprehension of unsophisticated people among ourselves to-day. And yet it is in terms of the habits and conditions of life of these "plain people" that the development of money will have to be accounted for if it is to be stated in terms of cause and effect. * * * * * The few scattered passages already cited may serve to illustrate how Adam Smith's animistic or teleological bent shapes the general structure of his theory and gives it consistency. The principle of definitive formulation in Adam Smith's economic knowledge is afforded by a putative purpose that does not at any point enter causally into the economic life process which he seeks to know. This formative or normative purpose or end is not freely conceived to enter as an efficient agent in the events discussed, or to be in any way consciously present in the process. It can scarcely be taken as an animistic agency engaged in the process. It sanctions the course of things, and gives legitimacy and substance to the sequence of events, so far as this sequence may be made to square with the requirements of the imputed end. It has therefore a ceremonial or symbolical force only, and lends the discussion a ceremonial competency; although with economists who have been in passable agreement with Adam Smith as regards the legitimate end of economic life this ceremonial consistency, or consistency _de jure_ has for many purposes been accepted as the formulation of a causal continuity in the phenomena that have been interpreted in its terms. Elucidations of what normally ought to happen, as a matter of ceremonial necessity, have in this way come to pass for an account of matters of fact. But, as has already been pointed out, there is much more to Adam Smith's exposition of theory than a formulation of what ought to be. Much of the advance he achieved over his predecessors consists in a larger and more painstaking scrutiny of facts, and a more consistent tracing out of causal continuity in the facts handled. No doubt, his superiority over the Physiocrats, that characteristic of his work by virtue of which it superseded theirs in the farther growth of economic science, lies to some extent in his recourse to a different, more modern ground of normality,--a ground more in consonance with the body of preconceptions that have had the vogue in later generations. It is a shifting of the point of view from which the facts are handled; but it comes in great part to a substitution of a new body of preconceptions for the old, or a new adaptation of the old ground of finality, rather than an elimination of all metaphysical or animistic norms of valuation. With Adam Smith, as with the Physiocrats, the fundamental question, the answer to which affords the point of departure and the norm of procedure, is a question of substantiality or economic "reality." With both, the answer to this question is given naïvely, as a deliverance of common sense. Neither is disturbed by doubts as to this deliverance of common sense or by any need of scrutinising it. To the Physiocrats this substantial ground of economic reality is the nutritive process of Nature. To Adam Smith it is Labor. His reality has the advantage of being the deliverance of the common sense of a more modern community, and one that has maintained itself in force more widely and in better consonance with the facts of latter-day industry. The Physiocrats owe their preconception of the productiveness of nature to the habits of thought of a community in whose economic life the dominant phenomenon was the owner of agricultural land. Adam Smith owes his preconception in favor of labor to a community in which the obtrusive economic feature of the immediate past was handicraft and agriculture, with commerce as a scarcely secondary phenomenon. So far as Adam Smith's economic theories are a tracing out of the causal sequence in economic phenomena, they are worked out in terms given by these two main directions of activity,--human effort directed to the shaping of the material means of life, and human effort and discretion directed to a pecuniary gain. The former is the great, substantial productive force: the latter is not immediately, or proximately, productive.[18] Adam Smith still has too lively a sense of the nutritive purpose of the order of nature freely to extend the concept of productiveness to any activity that does not yield a material increase of the creature comforts. His instinctive appreciation of the substantial virtue of whatever effectually furthers nutrition, even leads him into the concession that "in agriculture nature labors along with man," although the general tenor of his argument is that the productive force with which the economist always has to count is human labor. This recognised substantiality of labor as productive is, as has already been remarked, accountable for his effort to reduce to terms of productive labor such a category of distribution as exchange value. With but slight qualification, it will hold that, in the causal sequence which Adam Smith traces out in his economic theories proper (contained in the first three books of the _Wealth of Nations_), the causally efficient factor is conceived to be human nature in these two relations,--of productive efficiency and pecuniary gain through exchange. Pecuniary gain--gain in the material means of life through barter--furnishes the motive force to the economic activity of the individual; although productive efficiency is the legitimate, normal end of the community's economic life. To such an extent does this concept of man's seeking his ends through "truck, barter, and exchange" pervade Adam Smith's treatment of economic processes that he even states production in its terms, and says that "labor was the first price, the original purchase-money, that was paid for all things."[19] The human nature engaged in this pecuniary traffic is conceived in somewhat hedonistic terms, and the motives and movements of men are normalised to fit the requirements of a hedonistically conceived order of nature. Men are very much alike in their native aptitudes and propensities;[20] and, so far as economic theory need take account of these aptitudes and propensities, they are aptitudes for the production of the "necessaries and conveniences of life," and propensities to secure as great a share of these creature comforts as may be. Adam Smith's conception of normal human nature--that is to say, the human factor which enters causally in the process which economic theory discusses--comes, on the whole, to this: Men exert their force and skill in a mechanical process of production, and their pecuniary sagacity in a competitive process of distribution, with a view to individual gain in the material means of life. These material means are sought in order to the satisfaction of men's natural wants through their consumption. It is true, much else enters into men's endeavors in the struggle for wealth, as Adam Smith points out; but this consumption comprises the legitimate range of incentives, and a theory which concerns itself with the natural course of things need take but incidental account of what does not come legitimately in the natural course. In point of fact, there are appreciable "actual," though scarcely "real," departures from this rule. They are spurious and insubstantial departures, and do not properly come within the purview of the stricter theory. And, since human nature is strikingly uniform, in Adam Smith's apprehension, both the efforts put forth and the consumptive effect accomplished may be put in quantitative terms and treated algebraically, with the result that the entire range of phenomena comprised under the head of consumption need be but incidentally considered; and the theory of production and distribution is complete when the goods or the values have been traced to their disappearance in the hands of their ultimate owners. The reflex effect of consumption upon production and distribution is, on the whole, quantitative only. Adam Smith's preconception of a normal teleological order of procedure in the natural course, therefore, affects not only those features of theory where he is avowedly concerned with building up a normal scheme of the economic process. Through his normalising the chief causal factor engaged in the process, it affects also his arguments from cause to effect.[21] What makes this latter feature worth particular attention is the fact that his successors carried this normalisation farther, and employed it with less frequent reference to the mitigating exceptions which Adam Smith notices by the way. The reason for that farther and more consistent normalisation of human nature which gives us the "economic man" at the hands of Adam Smith's successors lies, in great part, in the utilitarian philosophy that entered in force and in consummate form at about the turning of the century. Some credit in the work of normalisation is due also to the farther supersession of handicraft by the "capitalistic" industry that came in at the same time and in pretty close relation with the utilitarian views. * * * * * After Adam Smith's day, economics fell into profane hands. Apart from Malthus, who, of all the greater economists, stands nearest to Adam Smith on such metaphysical heads as have an immediate bearing upon the premises of economic science, the next generation do not approach their subject from the point of view of a divinely instituted order; nor do they discuss human interests with that gently optimistic spirit of submission that belongs to the economist who goes to his work with the fear of God before his eyes. Even with Malthus the recourse to the divinely sanctioned order of nature is somewhat sparing and temperate. But it is significant for the later course of economic theory that, while Malthus may well be accounted the truest continuer of Adam Smith, it was the undevout utilitarians that became the spokesmen of the science after Adam Smith's time. There is no wide breach between Adam Smith and the utilitarians, either in details of doctrine or in the concrete conclusions arrived at as regards questions of policy. On these heads Adam Smith might well be classed as a moderate utilitarian, particularly so far as regards his economic work. Malthus has still more of a utilitarian air,--so much so, indeed, that he is not infrequently spoken of as a utilitarian. This view, convincingly set forth by Mr. Bonar,[22] is no doubt well borne out by a detailed scrutiny of Malthus's economic doctrines. His humanitarian bias is evident throughout, and his weakness for considerations of expediency is the great blemish of his scientific work. But, for all that, in order to an appreciation of the change that came over classical economics with the rise of Benthamism, it is necessary to note that the agreement in this matter between Adam Smith and the disciples of Bentham, and less decidedly that between Malthus and the latter, is a coincidence of conclusions rather than an identity of preconceptions.[23] With Adam Smith the ultimate ground of economic reality is the design of God, the teleological order; and his utilitarian generalisations, as well as the hedonistic character of his economic man, are but methods of the working out of this natural order, not the substantial and self-legitimating ground. Shifty as Malthus's metaphysics are, much the same is to be said for him.[24] Of the utilitarians proper the converse is true, although here, again, there is by no means utter consistency. The substantial economic ground is pleasure and pain: the teleological order (even the design of God, where that is admitted) is the method of its working-out. It may be unnecessary here to go into the farther implications, psychological and ethical, which this preconception of the utilitarians involves. And even this much may seem a taking of excessive pains with a distinction that marks no tangible difference. But a reading of the classical doctrines, with something of this metaphysics of political economy in mind, will show how, and in great part why, the later economists of the classical line diverged from Adam Smith's tenets in the early years of the century, until it has been necessary to interpret Adam Smith somewhat shrewdly in order to save him from heresy. The post-Bentham economics is substantially a theory of value. This is altogether the dominant feature of the body of doctrines; the rest follows from, or is adapted to, this central discipline. The doctrine of value is of very great importance also in Adam Smith; but Adam Smith's economics is a theory of the production and apportionment of the material means of life.[25] With Adam Smith, value is discussed from the point of view of production. With the utilitarians, production is discussed from the point of view of value. The former makes value an outcome of the process of production: the latter make production the outcome of a valuation process. The point of departure with Adam Smith is the "productive power of labor."[26] With Ricardo it is a pecuniary problem concerned in the distribution of ownership;[27] but the classical writers are followers of Adam Smith, and improve upon and correct the results arrived at by him, and the difference of point of view, therefore, becomes evident in their divergence from him, and the different distribution of emphasis, rather than in a new and antagonistic departure. The reason for this shifting of the center of gravity from production to valuation lies, proximately, in Bentham's revision of the "principles" of morals. Bentham's philosophical position is, of course, not a self-explanatory phenomenon, nor does the effect of Benthamism extend only to those who are avowed followers of Bentham; for Bentham is the exponent of a cultural change that affects the habits of thought of the entire community. The immediate point of Bentham's work, as affecting the habits of thought of the educated community, is the substitution of hedonism (utility) in place of achievement of purpose, as a ground of legitimacy and a guide in the normalisation of knowledge. Its effect is most patent in speculations on morals, where it inculcates determinism. Its close connection with determinism in ethics points the way to what may be expected of its working in economics. In both cases the result is that human action is construed in terms of the causal forces of the environment, the human agent being, at the best, taken as a mechanism of commutation, through the workings of which the sensuous effects wrought by the impinging forces of the environment are, by an enforced process of valuation, transmuted without quantitative discrepancy into moral or economic conduct, as the case may be. In ethics and economics alike the subject-matter of the theory is this valuation process that expresses itself in conduct, resulting, in the case of economic conduct, in the pursuit of the greatest gain or least sacrifice. Metaphysically or cosmologically considered, the human nature into the motions of which hedonistic ethics and economics inquire is an intermediate term in a causal sequence, of which the initial and the terminal members are sensuous impressions and the details of conduct. This intermediate term conveys the sensuous impulse without loss of force to its eventuation in conduct. For the purpose of the valuation process through which the impulse is so conveyed, human nature may, therefore, be accepted as uniform; and the theory of the valuation process may be formulated quantitatively, in terms of the material forces affecting the human sensory and of their equivalents in the resulting activity. In the language of economics, the theory of value may be stated in terms of the consumable goods that afford the incentive to effort and the expenditure undergone in order to procure them. Between these two there subsists a necessary equality; but the magnitudes between which the equality subsists are hedonistic magnitudes, not magnitudes of kinetic energy nor of vital force, for the terms handled are sensuous terms. It is true, since human nature is substantially uniform, passive, and unalterable in respect of men's capacity for sensuous affection, there may also be presumed to subsist a substantial equality between the psychological effect to be wrought by the consumption of goods, on the one side, and the resulting expenditure of kinetic or vital force, on the other side; but such an equality is, after all, of the nature of a coincidence, although there should be a strong presumption in favor of its prevailing on an average and in the common run of cases. Hedonism, however, does not postulate uniformity between men except in the respect of sensuous cause and effect. The theory of value which hedonism gives is, therefore, a theory of cost in terms of discomfort. By virtue of the hedonistic equilibrium reached through the valuation process, the sacrifice or expenditure of sensuous reality involved in acquisition is the equivalent of the sensuous gain secured. An alternative statement might perhaps be made, to the effect that the measure of the value of goods is not the sacrifice or discomfort undergone, but the sensuous gain that accrues from the acquisition of the goods; but this is plainly only an alternative statement, and there are special reasons in the economic life of the time why the statement in terms of cost, rather than in terms of "utility," should commend itself to the earlier classical economists. On comparing the utilitarian doctrine of value with earlier theories, then, the case stands somewhat as follows. The Physiocrats and Adam Smith contemplate value as a measure of the productive force that realises itself in the valuable article. With the Physiocrats this productive force is the "anabolism" of Nature (to resort to a physiological term): with Adam Smith it is chiefly human labor directed to heightening the serviceability of the materials with which it is occupied. Production causes value in either case. The post-Bentham economics contemplates value as a measure of, or as measured by, the irksomeness of the effort involved in procuring the valuable goods. As Mr. E. C. K. Gonner has admirably pointed out,[28] Ricardo--and the like holds true of classical economics generally--makes cost the foundation of value, not its cause. This resting of value on cost takes place through a valuation. Any one who will read Adam Smith's theoretical exposition to as good purpose as Mr. Gonner has read Ricardo will scarcely fail to find that the converse is true in Adam Smith's case. But the causal relation of cost to value holds only as regards "natural" or "real" value in Adam Smith's doctrine. As regards market price, Adam Smith's theory does not differ greatly from that of Ricardo on this head. He does not overlook the valuation process by which market price is adjusted and the course of investment is guided, and his discussion of this process runs in terms that should be acceptable to any hedonist. * * * * * The shifting of the point of view that comes into economics with the acceptance of utilitarian ethics and its correlate, the associationist psychology, is in great part a shifting to the ground of causal sequence as contrasted with that of serviceability to a preconceived end. This is indicated even by the main fact already cited,--that the utilitarian economists make exchange value the central feature of their theories, rather than the conduciveness of industry to the community's material welfare. Hedonistic exchange value is the outcome of a valuation process enforced by the apprehended pleasure-giving capacities of the items valued. And in the utilitarian theories of production, arrived at from the standpoint so given by exchange value, the conduciveness to welfare is not the objective point of the argument. This objective point is rather the bearing of productive enterprise upon the individual fortunes of the agents engaged, or upon the fortunes of the several distinguishable classes of beneficiaries comprised in the industrial community; for the great immediate bearing of exchange values upon the life of the collectivity is their bearing upon the distribution of wealth. Value is a category of distribution. The result is that, as is well shown by Mr. Cannan's discussion,[29] the theories of production offered by the classical economists have been sensibly scant, and have been carried out with a constant view to the doctrines on distribution. An incidental but telling demonstration of the same facts is given, by Professor Bücher;[30] and in illustration may be cited Torrens's _Essay on the Production of Wealth_, which is to a good extent occupied with discussions of value and distribution. The classical theories of production have been theories of the production of "wealth"; and "wealth," in classical usage, consists of material things having exchange value. During the vogue of the classical economics the accepted characteristic by which "wealth" has been defined has been its amenability to ownership. Neither in Adam Smith nor in the Physiocrats is this amenability to ownership made so much of, nor is it in a similar degree accepted as a definite mark of the subject-matter of the science. As their hedonistic preconception would require, then, it is to the pecuniary side of life that the classical economists give their most serious attention, and it is the pecuniary bearing of any given phenomenon or of any institution that commonly shapes the issue of the argument. The causal sequence about which the discussion centers is a process of pecuniary valuation. It runs on distribution, ownership, acquisition, gain, investment, exchange.[31] In this way the doctrines on production come to take a pecuniary coloring; as is seen in a less degree also in Adam Smith, and even in the Physiocrats, although these earlier economists very rarely, if ever, lose touch with the concept of generic serviceability as the characteristic feature of production. The tradition derived from Adam Smith, which made productivity and serviceability the substantial features of economic life, was not abruptly put aside by his successors, though the emphasis was differently distributed by them in following out the line of investigation to which the tradition pointed the way. In the classical economics the ideas of production and of acquisition are not commonly held apart, and very much of what passes for a theory of production is occupied with phenomena of investment and acquisition. Torrens's _Essay_ is a case in point, though by no means an extreme case. This is as it should be; for to the consistent hedonist the sole motive force concerned in the industrial process is the self-regarding motive of pecuniary gain, and industrial activity is but an intermediate term between the expenditure or discomfort undergone and the pecuniary gain sought. Whether the end and outcome is an invidious gain for the individual (in contrast with or at the cost of his neighbors), or an enhancement of the facility of human life on the whole, is altogether a by-question in any discussion of the range of incentives by which men are prompted to their work or the direction which their efforts take. The serviceability of the given line of activity, for the life purposes of the community or for one's neighbors, "is not of the essence of this contract." These features of serviceability come into the account chiefly as affecting the vendibility of what the given individual has to offer in seeking gain through a bargain.[32] In hedonistic theory the substantial end of economic life is individual gain; and for this purpose production and acquisition may be taken as fairly coincident, if not identical. Moreover, society, in the utilitarian philosophy, is the algebraic sum of the individuals; and the interest of the society is the sum of the interests of the individuals. It follows by easy consequence, whether strictly true or not, that the sum of individual gains is the gain of the society, and that, in serving his own interest in the way of acquisition, the individual serves the collective interest of the community. Productivity or serviceability is, therefore, to be presumed of any occupation or enterprise that looks to a pecuniary gain; and so, by a roundabout path, we get back to the ancient conclusion of Adam Smith, that the remuneration of classes or persons engaged in industry coincides with their productive contribution to the output of services and consumable goods. A felicitous illustration of the working of this hedonistic norm in classical economic doctrine is afforded by the theory of the wages of superintendence,--an element in distribution which is not much more than suggested in Adam Smith, but which receives ampler and more painstaking attention as the classical body of doctrines reaches a fuller development. The "wages of superintendence" are the gains due to pecuniary management. They are the gains that come to the director of the "business,"--not those that go to the director of the mechanical process or to the foreman of the shop. The latter are wages simply. This distinction is not altogether clear in the earlier writers, but it is clearly enough contained in the fuller development of the theory. The undertaker's work is the management of investment. It is altogether of a pecuniary character, and its proximate aim is "the main chance." If it leads, indirectly, to an enhancement of serviceability or a heightened aggregate output of consumable goods, that is a fortuitous circumstance incident to that heightened vendibility on which the investor's gain depends. Yet the classical doctrine says frankly that the wages of superintendence are the remuneration of superior productivity,[33] and the classical theory of production is in good part a doctrine of investment in which the identity of production and pecuniary gain is taken for granted. The substitution of investment in the place of industry as the central and substantial fact in the process of production is due not to the acceptance of hedonism simply, but rather to the conjunction of hedonism with an economic situation of which the investment of capital and its management for gain was the most obvious feature. The situation which shaped the common-sense apprehension of economic facts at the time was what has since been called a capitalistic system, in which pecuniary enterprise and the phenomena of the market were the dominant and tone-giving facts. But this economic situation was also the chief ground for the vogue of hedonism in economics; so that hedonistic economics may be taken as an interpretation of human nature in terms of the market-place. The market and the "business world," to which the business man in his pursuit of gain was required to adapt his motives, had by this time grown so large that the course of business events was beyond the control of any one person; and at the same time those far-reaching organisations of invested wealth which have latterly come to prevail and to coerce the market were not then in the foreground. The course of market events took its passionless way without traceable relation or deference to any man's convenience and without traceable guidance towards an ulterior end. Man's part in this pecuniary world was to respond with alacrity to the situation, and so adapt his vendible effects to the shifting demand as to realise something in the outcome. What he gained in his traffic was gained without loss to those with whom he dealt, for they paid no more than the goods were worth to them. One man's gain need not be another's loss; and, if it is not, then it is net gain to the community. Among the striking remoter effects of the hedonistic preconception, and its working out in terms of pecuniary gain, is the classical failure to discriminate between capital as investment and capital as industrial appliances. This is, of course, closely related to the point already spoken of. The appliances of industry further the production of goods, therefore capital (invested wealth) is productive; and the rate of its average remuneration marks the degree of its productiveness.[34] The most obvious fact limiting the pecuniary gain secured by means of invested wealth is the sum invested. Therefore, capital limits the productiveness of industry; and the chief and indispensable condition to an advance in material well-being is the accumulation of invested wealth. In discussing the conditions of industrial improvement, it is usual to assume that "the state of the arts remains unchanged," which is, for all purposes but that of a doctrine of profits per cent., an exclusion of the main fact. Investments may, further, be transferred from one enterprise to another. Therefore, and in that degree, the means of production are "mobile." * * * * * Under the hands of the great utilitarian writers, therefore, political economy is developed into a science of wealth, taking that term in the pecuniary sense, as things amenable to ownership. The course of things in economic life is treated as a sequence of pecuniary events, and economic theory becomes a theory of what should happen in that consummate situation where the permutation of pecuniary magnitudes takes place without disturbance and without retardation. In this consummate situation the pecuniary motive has its perfect work, and guides all the acts of economic man in a guileless, colorless, unswerving quest of the greatest gain at the least sacrifice. Of course, this perfect competitive system, with its untainted "economic man," is a feat of the scientific imagination, and is not intended as a competent expression of fact. It is an expedient of abstract reasoning; and its avowed competency extends only to the abstract principles, the fundamental laws of the science, which hold only so far as the abstraction holds. But, as happens in such cases, having once been accepted and assimilated as real, though perhaps not as actual, it becomes an effective constituent in the inquirer's habits of thought, and goes to shape his knowledge of facts. It comes to serve as a norm of substantiality or legitimacy; and facts in some degree fall under its constraint, as is exemplified by many allegations regarding the "tendency" of things. To this consummation, which Senior speaks of as "the natural state of man,"[35] human development tends by force of the hedonistic character of human nature; and in terms of its approximation to this natural state, therefore, the immature actual situation had best be stated. The pure theory, the "hypothetical science" of Cairnes, "traces the phenomena of the production and distribution of wealth up to their causes, in the principles of human nature and the laws and events--physical, political, and social--of the external world."[36] But since the principles of human nature that give the outcome in men's economic conduct, so far as it touches the production and distribution of wealth, are but the simple and constant sequence of hedonistic cause and effect, the element of human nature may fairly be eliminated from the problem, with great gain in simplicity and expedition. Human nature being eliminated, as being a constant intermediate term, and all institutional features of the situation being also eliminated (as being similar constants under that natural or consummate pecuniary _régime_ with which the pure theory is concerned), the laws of the phenomena of wealth may be formulated in terms of the remaining factors. These factors are the vendible items that men handle in these processes of production and distribution; and economic laws come, therefore, to be expressions of the algebraic relations subsisting between the various elements of wealth and investment,--capital, labor, land, supply and demand of one and the other, profits, interest, wages. Even such items as credit and population become dissociated from the personal factor, and figure in the computation as elemental factors acting and reacting though a permutation of values over the heads of the good people whose welfare they are working out. * * * * * To sum up: the classical economics, having primarily to do with the pecuniary side of life, is a theory of a process of valuation. But since the human nature at whose hands and for whose behoof the valuation takes place is simple and constant in its reaction to pecuniary stimulus, and since no other feature of human nature is legitimately present in economic phenomena than this reaction to pecuniary stimulus, the valuer concerned in the matter is to be overlooked or eliminated; and the theory of the valuation process then becomes a theory of the pecuniary interaction of the facts valued. It is a theory of valuation with the element of valuation left out,--a theory of life stated in terms of the normal paraphernalia of life. In the preconceptions with which classical economics set out were comprised the remnants of natural rights and of the order of nature, infused with that peculiarly mechanical natural theology that made its way into popular vogue on British ground during the eighteenth century and was reduced to a neutral tone by the British penchant for the commonplace--stronger at this time than at any earlier period. The reason for this growing penchant for the commonplace, for the explanation of things in causal terms, lies partly in the growing resort to mechanical processes and mechanical prime movers in industry, partly in the (consequent) continued decline of the aristocracy and the priesthood, and partly in the growing density of population and the consequent greater specialisation and wider organisation of trade and business. The spread of the discipline of the natural sciences, largely incident to the mechanical industry, counts in the same direction; and obscurer factors in modern culture may have had their share. The animistic preconception was not lost, but it lost tone; and it partly fell into abeyance, particularly so far as regards its avowal. It is visible chiefly in the unavowed readiness of the classical writers to accept as imminent and definitive any possible outcome which the writer's habit or temperament inclined him to accept as right and good. Hence the visible inclination of classical economists to a doctrine of the harmony of interests, and their somewhat uncircumspect readiness to state their generalisations in terms of what ought to happen according to the ideal requirements of that consummate _Geldwirtschaft_ to which men "are impelled by the provisions of nature."[37] By virtue of their hedonistic preconceptions, their habituation to the ways of a pecuniary culture, and their unavowed animistic faith that nature is in the right, the classical economists knew that the consummation to which, in the nature of things, all things tend, is the frictionless and beneficent competitive system. This competitive ideal, therefore, affords the normal, and conformity to its requirements affords the test of absolute economic truth. The standpoint so gained selectively guides the attention of the classical writers in their observation and apprehension of facts, and they come to see evidence of conformity or approach to the normal in the most unlikely places. Their observation is, in great part, interpretative, as observation commonly is. What is peculiar to the classical economists in this respect is their particular norm of procedure in the work of interpretation. And, by virtue of having achieved a standpoint of absolute economic normality, they became a "deductive" school, so called, in spite of the patent fact that they were pretty consistently employed with an inquiry into the causal sequence of economic phenomena. The generalisation of observed facts becomes a normalisation of them, a statement of the phenomena in terms of their coincidence with, or divergence from, that normal tendency that makes for the actualisation of the absolute economic reality. This absolute or definitive ground of economic legitimacy lies beyond the causal sequence in which the observed phenomena are conceived to be interlinked. It is related to the concrete facts neither as cause nor as effect in any such way that the causal relation may be traced in a concrete instance. It has little causally to do either with the "mental" or with the "physical" data with which the classical economist is avowedly employed. Its relation to the process under discussion is that of an extraneous--that is to say, a ceremonial--legitimation. The body of knowledge gained by its help and under its guidance is, therefore, a taxonomic science. So, by way of a concluding illustration, it may be pointed out that money, for instance, is normalised in terms of the legitimate economic tendency. It becomes a measure of value and a medium of exchange. It has become primarily an instrument of pecuniary commutation, instead of being, as under the earlier normalisation of Adam Smith, primarily a great wheel of circulation for the diffusion of consumable goods. The terms in which the laws of money, as of the other phenomena of pecuniary life, are formulated, are terms which connote its normal function in the life history of objective values as they live and move and have their being in the consummate pecuniary situation of the "natural" state. To a similar work of normalisation we owe those creatures of the myth-maker, the quantity theory and the wages-fund. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XIII, July. 1899. [2] Bonar, _Philosophy and Political Economy_, pp. 177, 178. [3] "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.... By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." _Wealth of Nations_, Book IV, chap. ii. [4] The discrepancy between the actual, causally determined situation and the divinely intended consummation is the metaphysical ground of all that inculcation of morality and enlightened policy that makes up so large a part of Adam Smith's work. The like, of course, holds true for all moralists and reformers who proceed on the assumption of a providential order. [5] "In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man; in the same manner as it has done in the natural body, for remedying those of his sloth and intemperance." _Wealth of Nations_, Book IV, chap. ix. [6] _E.g._, "the real measure of the exchangeable value of all commodities." _Wealth of Nations_, Book I, chap, v, and repeatedly in the like connection. [7] _E.g._, Book I, chap. vii: "When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labor, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their _natural_ rates, the commodity is then sold for what may be called its _natural_ price." "The actual price at which any commodity is commonly sold is called its market price. It may be either above, or below or exactly the same with its natural price." [8] _Lectures of Adam Smith_ (Ed. Cannan, 1896), p. 169. [9] "This division of labor, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility,--the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of those original principles in human nature of which no further account can be given, or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquire." _Wealth of Nations_, Book I, chap. ii. [10] _Wealth of Nations_, Book I, chaps, v.-vii. [11] _Wealth of Nations_, Book I, chap. v. [12] As, _e.g._, the entire discussion of the determination of Wages, Profits and Rent, in Book I, chaps, viii.-xi. [13] "There is in every society or neighborhood an ordinary or average rate both of wages and profit in every different employment of labor and stock. This rate is naturally regulated, ... partly by the general circumstances of the society.... There is, likewise, in every society or neighborhood an ordinary or average rate of rent, which is regulated, too.... These ordinary or average rates may be called the natural rates of wages, profit, and rent, at the time and place in which they commonly prevail. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labor, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price." _Wealth of Nations_, Book I, chap. vii. [14] "Such commodities may continue for whole centuries together to be sold at this high price; and that part of it which resolves itself into the rent of land is, in this case, the part which is generally paid above its natural rate." Book I, chap. vii. [15] _Wealth of Nations_, Book I, chap, vi; also chap. viii. [16] For an instance of how these early phases of industrial development appear, when not seen in the light of Adam Smith's preconception, see, among others, Bücher, _Entstchung der Volkswirtschaft_. [17] Book I, chap. iv. [18] See _Wealth of Nations_, Book II, chap. v, "Of the Different Employment of Capitals." [19] _Wealth of Nations_, Book I, chap. v. See also the plea for free trade, Book IV, chap. ii: "But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or, rather, is precisely the same thing with that exchangeable value." [20] "The difference of natural talents in different men is in reality much less than we are aware of." _Wealth of Nations_, Book I, chap. ii. [21] "Mit diesen philosophischen Ueberzeugungen tritt nun Adam Smith an die Welt der Enfahrung heran, und es ergiebt sich ihm die Richtigkeit der Principien. Der Reiz der Smith'schen Schriften beruht zum grossen Teile darauf, dass Smith die Principien in so innige Verbindung mit dem Thatsächlichen gebracht. Hie und da werden dann auch die Principien, was durch diese Verbindung veranlasst wird, an ihren Spitzen etwas abgeschliffen, ihre allzuscharfe Ausprägung dadurch vermieden. Nichtsdestoweniger aber bleiben sie stets die leitenden Grundgedanken." Richard Zeyss, _Adam Smith und der Eigennutz_ (Tübingen, 1889), p. 110. [22] See, _e.g._, _Malthus and his Work_, especially Book III, as also the chapter on Malthus in _Philosophy and Political Economy_, Book III, Modern Philosophy: Utilitarian Economics, chap. i, "Malthus." [23] Ricardo is here taken as a utilitarian of the Benthamite color, although he cannot be classed as a disciple of Bentham. His hedonism is but the uncritically accepted metaphysics comprised in the common sense of his time, and his substantial coincidence with Bentham goes to show how well diffused the hedonist preconception was at the time. [24] _Cf._ Bonar, _Malthus and his Work_, pp. 323-336. [25] His work is an inquiry into "the Nature and Causes of the Wealth of Nations." [26] "The annual labor of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labor or in what is purchased with that produce from other nations." _Wealth of Nations_, "Introduction and Plan," opening paragraph. [27] "The produce of the earth--all that is derived from its surface by the united application of labor, machinery, and capital--is divided among three classes of the community.... To determine the laws which regulate this distribution, is the principal problem of political economy." _Political Economy_, Preface. [28] In the introductory essay to his edition of Ricardo's _Political Economy_. See, _e.g._, paragraphs 9 and 24. [29] _Theories of Production and Distribution_, 1776-1848. [30] _Entstehung der Volkswirtschaft_ (second edition). _Cf._ especially chaps. ii, iii, vi, and vii. [31] "Even if we put aside all questions which involve a consideration of the effects of industrial institutions in modifying the habits and character of the classes of the community, ... that enough still remains to constitute a separate science, the mere enumeration of the chief terms of economics--wealth, value, exchange, credit, money, capital, and commodity--will suffice to show." Shirres, _Analysis of the Ideas of Economics_ (London, 1893), pp. 8 and 9. [32] "If a commodity were in no way useful, ... it would be destitute of exchangeable value; ... (but), possessing utility, commodities derive their exchangeable value from two sources," etc. Ricardo, _Political Economy_, chap, i, sect. I. [33] _Cf._, for instance, Senior, _Political Economy_ (London, 1872), particularly pp. 88, 89, and 130-135, where the wages of superintendence are, somewhat reluctantly, classed under profits; and the work of superintendence is thereupon conceived as being, immediately or remotely, an exercise of "abstinence" and a productive work. The illustration of the bill-broker is particularly apt. The like view of the wages of superintendence is an article of theory with more than one of the later descendants of the classical line. [34] _Cf._ Böhm-Bawerk, _Capital and Interest_, Books II and IV, as well as the Introduction and chaps. iv and v of Book I. Böhm-Bawerk's discussion bears less immediately on the present point than the similarity of the terms employed would suggest. [35] _Political Economy_, p. 87. [36] _Character and Logical Method of Political Economy_ (New York, 1875), p. 71. Cairnes may not be altogether representative of the high tide of classicism, but his characterisation of the science is none the less to the point. [37] Senior, _Political Economy_, p. 87. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] III In what has already been said, it has appeared that the changes which have supervened in the preconceptions of the earlier economists constitute a somewhat orderly succession. The feature of chief interest in this development has been a gradual change in the received grounds of finality to which the successive generations of economists have brought their theoretical output, on which they have been content to rest their conclusions, and beyond which they have not been moved to push their analysis of events or their scrutiny of phenomena. There has been a fairly unbroken sequence of development in what may be called the canons of economic reality; or, to put it in other words, there has been a precession of the point of view from which facts have been handled and valued for the purpose of economic science. The notion which has in its time prevailed so widely, that there is in the sequence of events a consistent trend which it is the office of the science to ascertain and turn to account,--this notion may be well founded or not. But that there is something of such a consistent trend in the sequence of the canons of knowledge under whose guidance the scientist works is not only a generalisation from the past course of things, but lies in the nature of the case; for the canons of knowledge are of the nature of habits of thought, and habit does not break with the past, nor do the hereditary aptitudes that find expression in habit vary gratuitously with the mere lapse of time. What is true in this respect, for instance, in the domain of law and institutions is true, likewise, in the domain of science. What men have learned to accept as good and definitive for the guidance of conduct and of human relations remains true and definitive and unimpeachable until the exigencies of a later, altered situation enforce a variation from the norms and canons of the past, and so give rise to a modification of the habits of thought that decide what is, for the time, right in human conduct. So in science the ancient ground of finality remains a good and valid test of scientific truth until the altered exigencies of later life enforce habits of thought that are not wholly in consonance with the received notions as to what constitutes the ultimate, self-legitimating term--the substantial reality--to which knowledge in any given case must penetrate. This ultimate term or ground of knowledge is always of a metaphysical character. It is something in the way of a preconception, accepted uncritically, but applied in criticism and demonstration of all else with which the science is concerned. So soon as it comes to be criticised, it is in a way to be superseded by a new, more or less altered formulation; for criticism of it means that it is no longer fit to survive unaltered in the altered complex of habits of thought to which it is called upon to serve as fundamental principle. It is subject to natural selection and selective adaptation, as are other conventions. The underlying metaphysics of scientific research and purpose, therefore, changes gradually and, of course, incompletely, much as is the case with the metaphysics underlying the common law and the schedule of civil rights. As in the legal framework the now avowedly useless and meaningless preconceptions of status and caste and precedent are even yet at the most metamorphosed and obsolescent rather than overpassed,--witness the facts of inheritance, vested interests, the outlawry of debts through lapse of time, the competence of the State to coerce individuals into support of a given policy,--so in the science the living generation has not seen an abrupt and traceless disappearance of the metaphysics that fixed the point of view of the early classical political economy. This is true even for those groups of economists who have most incontinently protested against the absurdity of the classical doctrines and methods. In Professor Marshall's words, "There has been no real breach of continuity in the development of the science." But, while there has been no breach, there has none the less been change,--more far-reaching change than some of us are glad to recognise; for who would not be glad to read his own modern views into the convincing words of the great masters? Seen through modern eyes and without effort to turn past gains to modern account, the metaphysical or preconceptional furniture of political economy as it stood about the middle of this century may come to look quite curious. The two main canons of truth on which the science proceeded, and with which the inquiry is here concerned, were: (_a_) a hedonistic-associational psychology, and (_b_) an uncritical conviction that there is a meliorative trend in the course of events, apart from the conscious ends of the individual members of the community. This axiom of a meliorative developmental trend fell into shape as a belief in an organic or quasi-organic (physiological)[2] life process on the part of the economic community or of the nation; and this belief carried with it something of a constraining sense of self-realising cycles of growth, maturity and decay in the life history of nations or communities. Neglecting what may for the immediate purpose be negligible in this outline of fundamental tenets, it will bear the following construction. (_a_) On the ground of the hedonistic or associational psychology, all spiritual continuity and any consequent teleological trend is tacitly denied so far as regards individual conduct, where the later psychology, and the sciences which build on this later psychology, insist upon and find such a teleological trend at every turn. (_b_) Such a spiritual or quasi-spiritual continuity and teleological trend is uncritically affirmed as regards the non-human sequence or the sequence of events in the affairs of collective life, where the modern sciences diligently assert that nothing of the kind is discernible, or that, if it is discernible, its recognition is beside the point, so far as concerns the purposes of the science. This position, here outlined with as little qualification as may be admissible, embodies the general metaphysical ground of that classical political economy that affords the point of departure for Mill and Cairnes, and also for Jevons. And what is to be said of Mill and Cairnes in this connection will apply to the later course of the science, though with a gradually lessening force. By the middle of the century the psychological premises of the science are no longer so neat and succinct as they were in the days of Bentham and James Mill. At J. S. Mill's hands, for instance, the naïvely quantitative hedonism of Bentham is being supplanted by a sophisticated hedonism, which makes much of an assumed qualitative divergence between the different kinds of pleasures that afford the motives of conduct. This revision of hedonistic dogma, of course, means a departure from the strict hedonistic ground. Correlated with this advance more closely in the substance of the change than in the assignable dates, is a concomitant improvement--at least, set forth as an improvement--upon the received associational psychology, whereby "similarity" is brought in to supplement "contiguity" as a ground of connection between ideas. This change is well shown in the work of J. S. Mill and Bain. In spite of all the ingenuity spent in maintaining the associational legitimacy of this new article of theory, it remains a patent innovation and a departure from the ancient standpoint. As is true of the improved hedonism, so it is true of the new theory of association that it is no longer able to construe the process which it discusses as a purely mechanical process, a concatenation of items simply. Similarity of impressions implies a comparison of impressions by the mind in which the association takes place, and thereby it implies some degree of constructive work on the part of the perceiving subject. The perceiver is thereby construed to be an agent in the work of perception; therefore, he must be possessed of a point of view and an end dominating the perceptive process. To perceive the similarity, he must be guided by an interest in the outcome, and must "attend." The like applies to the introduction of qualitative distinctions into the hedonistic theory of conduct. Apperception in the one case and discretion in the other cease to be the mere registration of a simple and personally uncolored sequence of permutations enforced by the factors of the external world. There is implied a spiritual--that is to say, active--"teleological" continuity of process on the part of the perceiving or of the discretionary agent, as the case may be. It is on the ground of their departure from the stricter hedonistic premises that Mill and, after him, Cairnes are able, for instance, to offer their improvement upon the earlier doctrine of cost of production as determining value. Since it is conceived that the motives which guide men in their choice of employments and of domicile differ from man to man and from class to class, not only in degree, but in kind, and since varying antecedents, of heredity and of habit, variously influence men in their choice of a manner of life, therefore the mere quantitative pecuniary stimulus cannot be depended on to decide the outcome without recourse. There are determinable variations in the alacrity with which different classes or communities respond to the pecuniary stimulus; and in so far as this condition prevails, the classes or communities in question are non-competing. Between such non-competing groups the norm that determines values is not the unmitigated norm of cost of production taken absolutely, but only taken relatively. The formula of cost of production is therefore modified into a formula of reciprocal demand. This revision of the cost-of-production doctrine is extended only sparingly, and the emphasis is thrown on the pecuniary circumstances on which depend the formation and maintenance of non-competing groups. Consistency with the earlier teaching is carefully maintained, so far as may be; but extra-pecuniary factors are, after all, even if reluctantly, admitted into the body of the theory. So also, since there are higher and lower motives, higher and lower pleasures,--as well as motives differing in degree,--it follows that an unguided response even to the mere quantitative pecuniary stimuli may take different directions, and so may result in activities of widely differing outcome. Since activities set up in this way through appeal to higher and lower motives are no longer conceived to represent simply a mechanically adequate effect of the stimuli, working under the control of natural laws that tend to one beneficent consummation, therefore the outcome of activity set up even by the normal pecuniary stimuli may take a form that may or may not be serviceable to the community. Hence _laissez-faire_ ceases to be a sure remedy for the ills of society. Human interests are still conceived normally to be at one; but the detail of individual conduct need not, therefore, necessarily serve these generic human interests.[3] Therefore, other inducements than the unmitigated impact of pecuniary exigencies may be necessary to bring about a coincidence of class or individual endeavor with the interests of the community. It becomes incumbent on the advocate of _laissez-faire_ to "prove his minor premise." It is no longer self-evident that: "Interests left to themselves tend to harmonious combinations, and to the progressive preponderance of the general good."[4] The natural-rights preconception begins to fall away as soon as the hedonistic mechanics have been seriously tampered with. Fact and right cease to coincide, because the individual in whom the rights are conceived to inhere has come to be something more than the field of intersection of natural forces that work out in human conduct. The mechanics of natural liberty--that assumed constitution of things by force of which the free hedonistic play of the laws of nature across the open field of individual choice is sure to reach the right outcome--is the hedonistic psychology; and the passing of the doctrine of natural rights and natural liberty, whether as a premise or as a dogma, therefore coincides with the passing of that mechanics of conduct on the validity of which the theoretical acceptance of the dogma depends. It is, therefore, something more than a coincidence that the half-century which has seen the disintegration of the hedonistic faith and of the associational psychology has also seen the dissipation, in scientific speculations, of the concomitant faith in natural rights and in that benign order of nature of which the natural-rights dogma is a corollary. It is, of course, not hereby intended to say that the later psychological views and premises imply a less close dependence of conduct on environment than do the earlier ones. Indeed, the reverse may well be held to be true. The pervading characteristic of later thinking is the constant recourse to a detailed analysis of phenomena in causal terms. The modern catchword, in the present connection, is "response to stimulus"; but the manner in which this response is conceived has changed. The fact, and ultimately the amplitude, at least in great part, of the reaction to stimulus, is conditioned by the forces in impact; but the constitution of the organism, as well as its attitude at the moment of impact, in great part decides what will serve as a stimulus, as well as what the manner and direction of the response will be. The later psychology is biological, as contrasted with the metaphysical psychology of hedonism. It does not conceive the organism as a causal hiatus. The causal sequence in the "reflex arc" is, no doubt, continuous; but the continuity is not, as formerly, conceived in terms of spiritual substance transmitting a shock: it is conceived in terms of the life activity of the organism. Human conduct, taken as the reaction of such an organism under stimulus, may be stated in terms of tropism, involving, of course, a very close-knit causal sequence between the impact and the response, but at the same time imputing to the organism a habit of life and a self-directing and selective attention in meeting the complex of forces that make up its environment. The selective play of this tropismatic complex that constitutes the organism's habit of life under the impact of the forces of the environment counts as discretion. So far, therefore, as it is to be placed in contrast with the hedonistic phase of the older psychological doctrines, the characteristic feature of the newer conception is the recognition of a selectively self-directing life process in the agent. While hedonism seeks the causal determinant of conduct in the (probable) outcome of action, the later conception seeks this determinant in the complex of propensities that constitutes man a functioning agent, that is to say, a personality. Instead of pleasure ultimately determining what human conduct shall be, the tropismatic propensities that eventuate in conduct ultimately determine what shall be pleasurable. For the purpose in hand, the consequence of the transition to the altered conception of human nature and its relation to the environment is that the newer view formulates conduct in terms of personality, whereas the earlier view was content to formulate it in terms of its provocation and its by-product. Therefore, for the sake of brevity, the older preconceptions of the science are here spoken of as construing human nature in inert terms, as contrasted with the newer, which construes it in terms of functioning. It has already appeared above that the second great article of the metaphysics of classical political economy--the belief in a meliorative trend or a benign order of nature--is closely connected with the hedonistic conception of human nature; but this connection is more intimate and organic than appears from what has been said above. The two are so related as to stand or fall together, for the latter is but the obverse of the former. The doctrine of a trend in events imputes purpose to the sequence of events; that is, it invests this sequence with a discretionary, teleological character, which asserts itself in a constraint over all the steps in the sequence by which the supposed objective point is reached. But discretion touching a given end must be single, and must alone cover all the acts by which the end is to be reached. Therefore, no discretion resides in the intermediate terms through which the end is worked out. Therefore, man being such an intermediate term, discretion cannot be imputed to him without violating the supposition. Therefore, given an indefeasible meliorative trend in events, man is but a mechanical intermediary in the sequence. It is as such a mechanical intermediate term that the stricter hedonism construes human nature.[5] Accordingly, when more of teleological activity came to be imputed to man, less was thereby allowed to the complex of events. Or it may be put in the converse form: When less of a teleological continuity came to be imputed to the course of events, more was thereby imputed to man's life process. The latter form of statement probably suggests the direction in which the causal relation runs, more nearly than the former. The change whereby the two metaphysical premises in question have lost their earlier force and symmetry, therefore, amounts to a (partial) shifting of the seat of putative personality from inanimate phenomena to man. It may be mentioned in passing, as a detail lying perhaps afield, yet not devoid of significance for latter-day economic speculation, that this elimination of personality, and so of teleological content, from the sequence of events, and its increasing imputation to the conduct of the human agent, is incident to a growing resort to an apprehension of phenomena in terms of process rather than in terms of outcome, as was the habit in earlier schemes of knowledge. On this account the categories employed are, in a gradually increasing degree, categories of process,--"dynamic" categories. But categories of process applied to conduct, to discretionary action, are teleological categories: whereas categories of process applied in the case of a sequence where the members of the sequence are not conceived to be charged with discretion, are, by the force of this conception itself, non-teleological, quantitative categories. The continuity comprised in the concept of process as applied to conduct is consequently a spiritual, teleological continuity: whereas the concept of process under the second head, the non-teleological sequence, comprises a continuity of a quantitative, causal kind, substantially the conservation of energy. In its turn the growing resort to categories of process in the formulation of knowledge is probably due to the epistemological discipline of modern mechanical industry, the technological exigencies of which enforce a constant recourse to the apprehension of phenomena in terms of process, differing therein from the earlier forms of industry, which neither obtruded visible mechanical process so constantly upon the apprehension nor so imperatively demanded an articulate recognition of continuity in the processes actually involved. The contrast in this respect is still more pronounced between the discipline of modern life in an industrial community and the discipline of life under the conventions of status and exploit that formerly prevailed. To return to the benign order of nature, or the meliorative trend,--its passing, as an article of economic faith, was not due to criticism leveled against it by the later classical economists on grounds of its epistemological incongruity. It was tried on its merits, as an alleged account of facts; and the weight of evidence went against it. The belief in a self-realising trend had no sooner reached a competent and exhaustive statement--_e.g._, at Bastiat's hands, as a dogma of the harmony of interests specifically applicable to the details of economic life--than it began to lose ground. With his usual concision and incisiveness, Cairnes completed the destruction of Bastiat's special dogma, and put it forever beyond a rehearing. But Cairnes is not a destructive critic of the classical political economy, at least not in intention: he is an interpreter and continuer--perhaps altogether the clearest and truest continuer--of the classical teaching. While he confuted Bastiat and discredited Bastiat's peculiar dogma, he did not thereby put the order of nature bodily out of the science. He qualified and improved it, very much as Mill qualified and improved the tenets of the hedonistic psychology. As Mill and the ethical speculation of his generation threw more of personality into the hedonistic psychology, so Cairnes and the speculators on scientific method (such as Mill and Jevons) attenuated the imputation of personality or teleological content to the process of material cause and effect. The work is of course, by no means, an achievement of Cairnes alone; but he is, perhaps, the best exponent of this advance in economic theory. In Cairnes's redaction this foundation of the science became the concept of a colorless normality. It was in Cairnes's time the fashion for speculators in other fields than the physical sciences to look to those sciences for guidance in method and for legitimation of the ideals of scientific theory which they were at work to realize. More than that, the large and fruitful achievements of the physical sciences had so far taken men's attention captive as to give an almost instinctive predilection for the methods that had approved themselves in that field. The ways of thinking which had on this ground become familiar to all scholars occupied with any scientific inquiry, had permeated their thinking on any subject whatever. This is eminently true of British thinking. It had come to be a commonplace of the physical sciences that "natural laws" are of the nature of empirical generalisations simply, or even of the nature of arithmetical averages. Even the underlying preconception of the modern physical sciences--the law of the conservation of energy, or persistence of quantity--was claimed to be an empirical generalisation, arrived at inductively and verified by experiment. It is true the alleged proof of the law took the whole conclusion for granted at the start, and used it constantly as a tacit axiom at every step in the argument which was to establish its truth; but that fact serves rather to emphasise than to call in question the abiding faith which these empiricists had in the sole efficacy of empirical generalisation. Had they been able overtly to admit any other than an associational origin of knowledge, they would have seen the impossibility of accounting on the mechanical grounds of association for the premise on which all experience of mechanical fact rests. That any other than a mechanical origin should be assigned to experience, or that any other than a so-conceived empirical ground was to be admitted for any general principle, was incompatible with the prejudices of men trained in the school of the associational psychology, however widely they perforce departed from this ideal in practice. Nothing of the nature of a personal element was to be admitted into these fundamental empirical generalisations; and nothing, therefore, of the nature of a discretionary or teleological movement was to be comprised in the generalisations to be accepted as "natural laws." Natural laws must in no degree be imbued with personality, must say nothing of an ulterior end; but for all that they remained "laws" of the sequences subsumed under them. So far is the reduction to colorless terms carried by Mill, for instance, that he formulates the natural laws as empirically ascertained sequences simply, even excluding or avoiding all imputation of causal continuity, as that term is commonly understood by the unsophisticated. In Mill's ideal no more of organic connection or continuity between the members of a sequence is implied in subsuming them under a law of causal relationship than is given by the ampersand. He is busied with dynamic sequences, but he persistently confines himself to static terms. Under the guidance of the associational psychology, therefore, the extreme of discontinuity in the deliverances of inductive research is aimed at by those economists--Mill and Cairnes being taken as typical--whose names have been associated with deductive methods in modern science. With a fine sense of truth they saw that the notion of causal continuity, as a premise of scientific generalisation, is an essentially metaphysical postulate; and they avoided its treacherous ground by denying it, and construing causal sequence to mean a uniformity of coexistences and successions simply. But, since a strict uniformity is nowhere to be observed at first hand in the phenomena with which the investigator is occupied, it has to be found by a laborious interpretation of the phenomena and a diligent abstraction and allowance for disturbing circumstances, whatever may be the meaning of a disturbing circumstance where causal continuity is denied. In this work of interpretation and expurgation the investigator proceeds on a conviction of the orderliness of the natural sequence. "Natura non facit saltum": a maxim which has no meaning within the stricter limits of the associational theory of knowledge. Before anything can be said as to the orderliness of the sequence, a point of view must be chosen by the speculator, with respect to which the sequence in question does or does not fulfill this condition of orderliness; that is to say, with respect to which it is a sequence. The endeavor to avoid all metaphysical premises fails here as everywhere. The associationists, to whom economics owes its transition from the older classical phase to the modern or quasi-classical, chose as their guiding point of view the metaphysical postulate of congruity,--in substance, the "similarity" of the associationist theory of knowledge. This must be called their _proton pseudos_, if associationism pure and simple is to be accepted. The notion of congruity works out in laws of resemblance and equivalence, in both of which it is plain to the modern psychologist that a metaphysical ground of truth, antecedent to and controlling empirical data, is assumed. But the use of the postulate of congruence as a test of scientific truth has the merit of avoiding all open dealing with an imputed substantiality of the data handled, such as would be involved in the overt use of the concept of causation. The data are congruous among themselves, as items of knowledge; and they may therefore be handled in a logical synthesis and concatenation on the basis of this congruence alone, without committing the scientist to an imputation of a kinetic or motor relation between them. The metaphysics of process is thereby avoided, in appearance. The sequences are uniform or consistent with one another, taken as articles of theoretical synthesis simply; and so they become elements of a system or discipline of knowledge in which the test of theoretical truth is the congruence of the system with its premises. In all this there is a high-wrought appearance of matter-of-fact, and all metaphysical subreption of a non-empirical or non-mechanical standard of reality or substantiality is avoided in appearance. The generalisations which make up such a system of knowledge are, in this way, stated in terms of the system itself; and when a competent formulation of the alleged uniformities has been so made in terms of their congruity or equivalence with the prime postulates of the system, the work of theoretical inquiry is done. The concrete premises from which proceeds the systematic knowledge of this generation of economists are certain very concise assumptions concerning human nature, and certain slightly less concise generalisations of physical fact,[6] presumed to be mechanically empirical generalisations. These postulates afford the standard of normality. Whatever situation or course of events can be shown to express these postulates without mitigation is normal; and wherever a departure from this normal course of things occurs, it is due to disturbing causes,--that is to say, to causes not comprised in the main premises of the science,--and such departures are to be taken account of by way of qualification. Such departures and such qualification are constantly present in the facts to be handled by the science; but, being not congruous with the underlying postulates, they have no place in the body of the science. The laws of the science, that which makes up the economist's theoretical knowledge, are laws of the normal case. The normal case does not occur in concrete fact. These laws are, therefore, in Cairnes's terminology, "hypothetical" truths; and the science is a "hypothetical" science. They apply to concrete facts only as the facts are interpreted and abstracted from, in the light of the underlying postulates. The science is, therefore, a theory of the normal case, a discussion of the concrete facts of life in respect of their degree of approximation to the normal case. That is to say, it is a taxonomic science. Of course, in the work actually done by these economists this standpoint of rigorous normality is not consistently maintained; nor is the unsophisticated imputation of causality to the facts under discussion consistently avoided. The associationist postulate, that causal sequence means empirical uniformity simply, is in great measure forgotten when the subject-matter of the science is handled in detail. Especially is it true that in Mill the dry light of normality is greatly relieved by a strong common sense. But the great truths or laws of the science remain hypothetical laws; and the test of scientific reality is congruence with the hypothetical laws, not coincidence with matter-of-fact events. The earlier, more archaic metaphysics of the science, which saw in the orderly correlation and sequence of events a constraining guidance of an extra-causal, teleological kind, in this way becomes a metaphysics of normality which asserts no extra-causal constraint over events, but contents itself with establishing correlations, equivalencies, homologies, and theories concerning the conditions of an economic equilibrium. The movement, the process of economic life, is not overlooked, and it may even be said that it is not neglected; but the pure theory, in its final deliverances, deals not with the dynamics, but with the statics of the case. The concrete subject-matter of the science is, of course, the process of economic life,--that is unavoidably the case,--and in so far the discussion must be accepted as work bearing on the dynamics of the phenomena discussed; but even then it remains true that the aim of this work in dynamics is a determination and taxis of the outcome of the process under discussion rather than a theory of the process as such. The process is rated in terms of the equilibrium to which it tends or should tend, not conversely. The outcome of the process, taken in its relation of equivalence within the system, is the point at which the inquiry comes to rest. It is not primarily the point of departure for an inquiry into what may follow. The science treats of a balanced system rather than of a proliferation. In this lies its characteristic difference from the later evolutionary sciences. It is this characteristic bent of the science that leads its spokesman, Cairnes, to turn so kindly to chemistry rather than to the organic sciences, when he seeks an analogy to economics among the physical sciences.[7] What Cairnes has in mind in his appeal to chemistry is, of course, the received, extremely taxonomic (systematic) chemistry of his own time, not the tentatively genetic theories of a slightly later day. * * * * * It may seem that in the characterisation just offered of the standpoint of normality in economics there is too strong an implication of colorlessness and impartiality. The objection holds as regards much of the work of the modern economists of the classical line. It will hold true even as to much of Cairnes's work; but it cannot be admitted as regards Cairnes's ideal of scientific aim and methods. The economists whose theories Cairnes received and developed, assuredly did not pursue the discussion of the normal case with an utterly dispassionate animus. They had still enough of the older teleological metaphysics left to give color to the accusation brought against them that they were advocates of _laissez-faire_. The preconception of the utilitarians,--in substance the natural-rights preconception,--that unrestrained human conduct will result in the greatest human happiness, retains so much of its force in Cairnes's time as is implied in the then current assumption that what is normal is also right. The economists, and Cairnes among them, not only are concerned to find out what is normal and to determine what consummation answers to the normal, but they also are at pains to approve that consummation. It is this somewhat uncritical and often unavowed identification of the normal with the right that gives colorable ground for the widespread vulgar prejudice, to which Cairnes draws attention,[8] that political economy "sanctions" one social arrangement and "condemns" another. And it is against this uncritical identification of two essentially unrelated principles or categories that Cairnes's essay on "Political Economy and Laissez-faire," and in good part also that on Bastiat, are directed. But, while this is one of the many points at which Cairnes has substantially advanced the ideals of the science, his own concluding argument shows him to have been but half-way emancipated from the prejudice, even while most effectively combating it.[9] It is needless to point out that the like prejudice is still present in good vigor in many later economists who have had the full benefit of Cairnes's teachings on this head.[10] Considerable as Cairnes's achievement in this matter undoubtedly was, it effected a mitigation rather than an elimination of the untenable metaphysics against which he contended. The advance in the general point of view from animistic teleology to taxonomy is shown in a curiously succinct manner in a parenthetical clause of Cairnes's in the chapter on Normal Value.[11] With his acceptance of the later point of view involved in the use of the new term, Cairnes becomes the interpreter of the received theoretical results. The received positions are not subjected to a destructive criticism. The aim is to complete them where they fall short and to cut off what may be needless or what may run beyond the safe ground of scientific generalisation. In his work of redaction, Cairnes does not avow--probably he is not sensible of--any substantial shifting of the point of view or any change in the accepted ground of theoretic reality. But his advance to an unteleological taxonomy none the less changes the scope and aim of his theoretical discussion. The discussion of Normal Value may be taken in illustration. Cairnes is not content to find (with Adam Smith) that value will "naturally" coincide with or be measured by cost of production, or even (with Mill) that cost of production must, in the long run, "necessarily" determine value. "This ... is to take a much too limited view of the range of this phenomenon."[12] He is concerned to determine not only this general tendency of values to a normal, but all those characteristic circumstances as well which condition this tendency and which determine the normal to which values tend. His inquiry pursues the phenomena of value in a normal economic system rather than the manner and rate of approach of value relations to a teleologically or hedonistically defensible consummation. It therefore becomes an exhaustive but very discriminating analysis of the circumstances that bear upon market values, with a view to determine what circumstances are normally present; that is to say, what circumstances conditioning value are commonly effective and at the same time in consonance with the premises of economic theory. These effective conditions, in so far as they are not counted anomalous and, therefore, to be set aside in the theoretical discussion, are the circumstances under which a hedonistic valuation process in any modern industrial community is held perforce to take place,--the circumstances which are held to enforce a recognition and rating of the pleasure-bearing capacity of facts. They are not, as under the earlier cost-of-production doctrines, the circumstances which determine the magnitude of the forces spent in the production of the valuable article. Therefore, the normal (natural) value is no longer (as with Adam Smith, and even to some extent with his classical successors) the primary or initial fact in value theory, the substantial fact of which the market value is an approximate expression and by which the latter is controlled. The argument does not, as formerly, set out from that expenditure of personal force which was once conceived to constitute the substantial value of goods, and then construe market value to be an approximate and uncertain expression of this substantial fact. The direction in which the argument runs is rather the reverse of this. The point of departure is taken from the range of market values and the process of bargaining by which these values are determined. This latter is taken to be a process of discrimination between various kinds and degrees of discomfort, and the average or consistent outcome of such a process of bargaining constitutes normal value. It is only by virtue of a presumed equivalence between the discomfort undergone and the concomitant expenditure, whether of labor or of wealth, that the normal value so determined is conceived to be an expression of the productive force that goes into the creation of the valuable goods. Cost being only in uncertain equivalence with sacrifice or discomfort, as between different persons, the factor of cost falls into the background; and the process of bargaining, which is in the foreground, being a process of valuation, a balancing of individual demand and supply, it follows that a law of reciprocal demand comes in to supplant the law of cost. In all this the proximate causes at work in the determination of values are plainly taken account of more adequately than in earlier cost-of-production doctrines; but they are taken account of with a view to explaining the mutual adjustment and interrelation of elements in a system rather than to explain either a developmental sequence or the working out of a foreordained end. This revision of the cost-of-production doctrine, whereby it takes the form of a law of reciprocal demand, is in good part effected by a consistent reduction of cost to terms of sacrifice,--a reduction more consistently carried through by Cairnes than it had been by earlier hedonists, and extended by Cairnes's successors with even more far-reaching results. By this step the doctrine of cost is not only brought into closer accord with the neo-hedonistic premises, in that it in a greater degree throws the stress upon the factor of personal discrimination, but it also gives the doctrine a more general bearing upon economic conduct and increases its serviceability as a comprehensive principle for the classification of economic phenomena. In the further elaboration of the hedonistic theory of value at the hands of Jevons and the Austrians the same principle of sacrifice comes to serve as the chief ground of procedure. * * * * * Of the foundations of later theory, in so far as the postulates of later economists differ characteristically from those of Mill and Cairnes, little can be said in this place. Nothing but the very general features of the later development can be taken up; and even these general features of the existing theoretic situation can not be handled with the same confidence as the corresponding features of a past phase of speculation. With respect to writers of the present or the more recent past the work of natural selection, as between variants of scientific aim and animus and between more or less divergent points of view, has not yet taken effect; and it would be over-hazardous to attempt an anticipation of the results of the selection that lies in great part yet in the future. As regards the directions of theoretical work suggested by the names of Professor Marshall, Mr. Cannan, Professor Clark, Mr. Pierson, Professor Loria, Professor Schmoller, the Austrian group,--no off-hand decision is admissible as between these candidates for the honor, or, better, for the work, of continuing the main current of economic speculation and inquiry. No attempt will here be made even to pass a verdict on the relative claims of the recognised two or three main "schools" of theory, beyond the somewhat obvious finding that, for the purpose in hand, the so-called Austrian school is scarcely distinguishable from the neo-classical, unless it be in the different distribution of emphasis. The divergence between the modernised classical views, on the one hand, and the historical and Marxist schools, on the other hand, is wider,--so much so, indeed, as to bar out a consideration of the postulates of the latter under the same head of inquiry with the former. The inquiry, therefore, confines itself to the one line standing most obviously in unbroken continuity with that body of classical economics whose life history has been traced in outline above. And, even for this phase of modernised classical economics, it seems necessary to limit discussion, for the present, to a single strain, selected as standing peculiarly close to the classical source, at the same time that it shows unmistakable adaptation to the later habits of thought and methods of knowledge. For this later development in the classical line of political economy, Mr. Keynes's book may fairly be taken as the maturest exposition of the aims and ideals of the science; while Professor Marshall excellently exemplifies the best work that is being done under the guidance of the classical antecedents. As, after a lapse of a dozen or fifteen years from Cairnes's days of full conviction, Mr. Keynes interprets the aims of modern economic science, it has less of the "hypothetical" character assigned it by Cairnes; that is to say, it confines its inquiry less closely to the ascertainment of the normal case and the interpretative subsumption of facts under the normal. It takes fuller account of the genesis and developmental continuity of all features of modern economic life, gives more and closer attention to institutions and their history. This is, no doubt, due, in part at least, to impulse received from German economists; and in so far it also reflects the peculiarly vague and bewildered attitude of protest that characterises the earlier expositions of the historical school. To the same essentially extraneous source is traceable the theoretic blur embodied in Mr. Keynes's attitude of tolerance towards the conception of economics as a "normative" science having to do with "economic ideals," or an "applied economics" having to do with "economic precepts."[13] An inchoate departure from the consistent taxonomic ideals shows itself in the tentative resort to historical and genetic formulations, as well as in Mr. Keynes's pervading inclination to define the scope of the science, not by exclusion of what are conceived to be non-economic phenomena, but by disclosing a point of view from which all phenomena are seen to be economic facts. The science comes to be characterised not by the delimitation of a range of facts, as in Cairnes,[14] but as an inquiry into the bearing which all facts have upon men's economic activity. It is no longer that certain phenomena belong within the science, but rather that the science is concerned with any and all phenomena as seen from the point of view of the economic interest. Mr. Keynes does not go fully to the length which this last proposition indicates. He finds[15] that political economy "treats of the phenomena arising out of the economic activities of mankind in society"; but, while the discussion by which he leads up to this definition might be construed to say that all the activities of mankind in society have an economic bearing, and should therefore come within the view of the science, Mr. Keynes does not carry out his elucidation of the matter to that broad conclusion. Neither can it be said that modern political economy has, in practice, taken on the scope and character which this extreme position would assign it. The passage from which the above citation is taken is highly significant also in another and related bearing, and it is at the same time highly characteristic of the most effective modernised classical economics. The subject-matter of the science has come to be the "economic activities" of mankind, and the phenomena in which these activities manifest themselves. So Professor Marshall's work, for instance, is, in aim, even if not always in achievement, a theoretical handling of human activity in its economic bearing,--an inquiry into the multiform phases and ramifications of that process of valuation of the material means of life by virtue of which man is an economic agent. And still it remains an inquiry directed to the determination of the conditions of an equilibrium of activities and a quiescent normal situation. It is not in any eminent degree an inquiry into cultural or institutional development as affected by economic exigencies or by the economic interest of the men whose activities are analysed and portrayed. Any sympathetic reader of Professor Marshall's great work--and that must mean every reader--comes away with a sense of swift and smooth movement and interaction of parts; but it is the movement of a consummately conceived and self-balanced mechanism, not that of a cumulatively unfolding process or an institutional adaptation to cumulatively unfolding exigencies. The taxonomic bearing is, after all, the dominant feature. It is significant of the same point that even in his discussion of such vitally dynamic features of the economic process as the differential effectiveness of different laborers or of different industrial plants, as well as of the differential advantages of consumers, Professor Marshall resorts to an adaptation of so essentially taxonomic a category as the received concept of rent. Rent is a pecuniary category, a category of income, which is essentially a final term, not a category of the motor term, work or interest.[16] It is not a factor or a feature of the process of industrial life, but a phenomenon of the pecuniary situation which emerges from this process under given conventional circumstances. However far-reaching and various the employment of the rent concept in economic theory has been, it has through all permutations remained, what it was to begin with, a rubric in the classification of incomes. It is a pecuniary, not an industrial category. In so far as resort is had to the rent concept in the formulation of a theory of the industrial process,--as in Professor Marshall's work,--it comes to a statement of the process in terms of its residue. Let it not seem presumptuous to say that, great and permanent as is the value of Professor Marshall's exposition of quasi-rents and the like, the endeavor which it involves to present in terms of a concluded system what is of the nature of a fluent process has made the exposition unduly bulky, unwieldy, and inconsequent. There is a curious reminiscence of the perfect taxonomic day in Mr. Keynes's characterisation of political economy as a "positive science," "the sole province of which is to establish economic uniformities";[17] and, in this resort to the associationist expedient of defining a natural law as a "uniformity," Mr. Keynes is also borne out by Professor Marshall.[18] But this and other survivals of the taxonomic terminology, or even of the taxonomic canons of procedure, do not hinder the economists of the modern school from doing effective work of a character that must be rated as genetic rather than taxonomic. Professor Marshall's work in economics is not unlike that of Asa Gray in botany, who, while working in great part within the lines of "systematic botany" and adhering to its terminology, and on the whole also to its point of view, very materially furthered the advance of the science outside the scope of taxonomy. Professor Marshall shows an aspiration to treat economic life as a development; and, at least superficially, much of his work bears the appearance of being a discussion of this kind. In this endeavor his work is typical of what is aimed at by many of the later economists. The aim shows itself with a persistent recurrence in his _Principles_. His chosen maxim is, "Natura non facit saltum,"--a maxim that might well serve to designate the prevailing attitude of modern economists towards questions of economic development as well as towards questions of classification or of economic policy. His insistence on the continuity of development and of the economic structure of communities is a characteristic of the best work along the later line of classical political economy. All this gives an air of evolutionism to the work. Indeed, the work of the neo-classical economics might be compared, probably without offending any of its adepts, with that of the early generation of Darwinians, though such a comparison might somewhat shrewdly have to avoid any but superficial features. Economists of the present day are commonly evolutionists, in a general way. They commonly accept, as other men do, the general results of the evolutionary speculation in those directions in which the evolutionary method has made its way. But the habit of handling by evolutionist methods the facts with which their own science is concerned has made its way among the economists to but a very uncertain degree. The prime postulate of evolutionary science, the preconception constantly underlying the inquiry, is the notion of a cumulative causal sequence; and writers on economics are in the habit of recognising that the phenomena with which they are occupied are subject to such a law of development. Expressions of assent to this proposition abound. But the economists have not worked out or hit upon a method by which the inquiry in economics may consistently be conducted under the guidance of this postulate. Taking Professor Marshall as exponent, it appears that, while the formulations of economic theory are not conceived to be arrived at by way of an inquiry into the developmental variation of economic institutions and the like, the theorems arrived at are held, and no doubt legitimately, to apply to the past,[19] and with due reserve also to the future, phases of the development. But these theorems apply to the various phases of the development not as accounting for the developmental sequence, but as limiting the range of variation. They say little, if anything, as to the order of succession, as to the derivation and the outcome of any given phase, or as to the causal relation of one phase of any given economic convention or scheme of relations to any other. They indicate the conditions of survival to which any innovation is subject, supposing the innovation to have taken place, not the conditions of variational growth. The economic laws, the "statements of uniformity," are therefore, when construed in an evolutionary bearing, theorems concerning the superior or the inferior limit of persistent innovations, as the case may be.[20] It is only in this negative, selective bearing that the current economic laws are held to be laws of developmental continuity; and it should be added that they have hitherto found but relatively scant application at the hands of the economists, even for this purpose. Again, as applied to economic activities under a given situation, as laws governing activities in equilibrium, the economic laws are, in the main, laws of the limits within which economic action of a given purpose runs. They are theorems as to the limits which the economic (commonly the pecuniary) interest imposes upon the range of activities to which the other life interests of men incite, rather than theorems as to the manner and degree in which the economic interest creatively shapes the general scheme of life. In great part they formulate the normal inhibitory effect of economic exigencies rather than the cumulative modification and diversification of human activities through the economic interest, by initiating and guiding habits of life and of thought. This, of course, does not go to say that economists are at all slow to credit the economic exigencies with a large share in the growth of culture; but, while claims of this kind are large and recurrent, it remains true that the laws which make up the framework of economic doctrine are, when construed as generalisations of causal relation, laws of conservation and selection, not of genesis and proliferation. The truth of this, which is but a commonplace generalisation, might be shown in detail with respect to such fundamental theorems as the laws of rent, of profits, of wages, of the increasing or diminishing returns of industry, of population, of competitive prices, of cost of production. In consonance with this quasi-evolutionary tone of the neo-classical political economy, or as an expression of it, comes the further clarified sense that nowadays attaches to the terms "normal" and economic "laws." The laws have gained in colorlessness, until it can no longer be said that the concept of normality implies approval of the phenomena to which it is applied.[21] They are in an increasing degree laws of conduct, though they still continue to formulate conduct in hedonistic terms; that is to say, conduct is construed in terms of its sensuous effect, not in terms of its teleological content. The light of the science is a drier light than it was, but it continues to be shed upon the accessories of human action rather than upon the process itself. The categories employed for the purpose of knowing this economic conduct with which the scientists occupy themselves are not the categories under which the men at whose hands the action takes place themselves apprehend their own action at the instant of acting. Therefore, economic conduct still continues to be somewhat mysterious to the economists; and they are forced to content themselves with adumbrations whenever the discussion touches this central, substantial fact. All this, of course, is intended to convey no dispraise of the work done, nor in any way to disparage the theories which the passing generation of economists have elaborated, or the really great and admirable body of knowledge which they have brought under the hand of the science; but only to indicate the direction in which the inquiry in its later phases--not always with full consciousness--is shifting as regards its categories and its point of view. The discipline of life in a modern community, particularly the industrial life, strongly reënforced by the modern sciences, has divested our knowledge of non-human phenomena of that fullness of self-directing life that was once imputed to them, and has reduced this knowledge to terms of opaque causal sequence. It has thereby narrowed the range of discretionary, teleological action to the human agent alone; and so it is compelling our knowledge of human conduct, in so far as it is distinguished from the non-human, to fall into teleological terms. Foot-pounds, calories, geometrically progressive procreation, and doses of capital, have not been supplanted by the equally uncouth denominations of habits, propensities, aptitudes, and conventions, nor does there seem to be any probability that they will be; but the discussion which continues to run in terms of the former class of concepts is in an increasing degree seeking support in concepts of the latter class. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_. Vol. XIV, Feb., 1900. [2] So, _e.g._, Roscher, Comte, the early socialists, J. S. Mill, and later Spencer, Schaeffle, Wagner. [3] "Let us not confound the statement that _human_ interests are at one with the statement that _class_ interests are at one. The latter I believe to be as false as the former is true.... But accepting the major premises of the syllogism, that the interests of human beings are fundamentally the same, how as to the minor?--how as to the assumption that people know their interests in the sense in which they are identical with the interests of others, and that they spontaneously follow them _in this sense_?"--Cairnes, Essays in Political Economy (London, 1873), p. 245. This question cannot consistently be asked by an adherent of the stricter hedonism. [4] Bastiat, quoted by Cairnes, _Essays_, p. 319. [5] It may be remarked, by the way, that the use of the differential calculus and similar mathematical expedients in the discussion of marginal utility and the like, proceeds on this psychological ground, and that the theoretical results so arrived at are valid to the full extent only if this hedonistic psychology is accepted. [6] See, _e.g._, Cairnes, _Character and Logical Method_ (New York), p. 71. [7] _Character and Logical Method_, p. 62. [8] _Essays in Political Economy_, pp. 260-264. [9] See especially _Essays_, pp. 263, 264. [10] It may be interesting to point out that the like identification of the categories of normality and right gives the dominant note of Mr. Spencer's ethical and social philosophy, and that later economists of the classical line are prone to be Spencerians. [11] "Normal value (called by Adam Smith and Ricardo 'natural value,' and by Mill 'necessary value,' but best expressed, it seems to me, by the term which I have used)." _Leading Principles_ (New York), p. 45. [12] _Leading Principles_, p. 45. [13] _Scope and Method of Political Economy_ (London, 1891), chaps. i and ii. [14] _Character and Logical Method_; _e.g._, Lecture II, especially pp. 53, 54, and 71. [15] _Scope and Method of Political Economy_, chap. iii, particularly p. 97. [16] "Interest" is, of course, here used in the sense which it has in modern psychological discussion. [17] _Scope and Method of Political Economy_, p. 46. [18] _Principles of Economics_, Vol. I, Book I, chap, vi, sect. 6, especially p. 105 (3d edition). [19] See, _e.g._, Professor Marshall's "Reply" to Professor Cunningham in the _Economic Journal_ for 1892, pp. 508-113. [20] This is well illustrated by what Professor Marshall says of the Ricardian law of rent in his "Reply," cited above. [21] See, _e.g._, Marshall, _Principles_, Book I, chap, vi, sect. 6, pp. 105-108. The like dispassionateness is visible in most other modern writers on theory; as, _e.g._, Clark, Cannan, and the Austrians. PROFESSOR CLARK'S ECONOMICS[1] For some time past economists have been looking with lively anticipation for such a comprehensive statement of Mr. Clark's doctrines as is now offered. The leading purpose of the present volume[2] is "to offer a brief and provisional statement of the more general laws of progress"; although it also comprises a more abridged restatement of the laws of "Economic Statics" already set forth in fuller form in his _Distribution of Wealth_. Though brief, this treatise is to be taken as systematically complete, as including in due correlation all the "essentials" of Mr. Clark's theoretical system. As such, its publication is an event of unusual interest and consequence. Mr. Clark's position among this generation of economists is a notable and commanding one. No serious student of economic theory will, or can afford to, forego a pretty full acquaintance with his development of doctrines. Nor will any such student avoid being greatly influenced by the position which Mr. Clark takes on any point of theory on which he may speak, and many look confidently to him for guidance where it is most needed. Very few of those interested in modern theory are under no obligations to him. He has, at the same time, in a singular degree the gift of engaging the affections as well as the attention of students in his field. Yet the critic is required to speak impersonally of Mr. Clark's work as a phase of current economic theory. In more than one respect Mr. Clark's position among economists recalls the great figures in the science a hundred years ago. There is the same rigid grasp of the principles, the "essentials," out of which the broad theorems of the system follow in due sequence and correlation; and like the leaders of the classical era, while Mr. Clark is always a theoretician, never to be diverted into an inconsistent makeshift, he is moved by an alert and sympathetic interest in current practical problems. While his aim is a theoretical one, it is always with a view to the theory of current affairs; and his speculations are animated with a large sympathy and an aggressive interest in the amelioration of the lot of man. His relation to the ancient adepts of the science, however, is something more substantial than a resemblance only. He is, by spiritual consanguinity, a representative of that classical school of thought that dominated the science through the better part of the nineteenth century. This is peculiarly true of Mr. Clark, as contrasted with many of those contemporaries who have fought for the marginal-utility doctrines. Unlike these spokesmen of the Austrian wing, he has had the insight and courage to see the continuity between the classical position and his own, even where he advocates drastic changes in the classical body of doctrines. And although his system of theory embodies substantially all that the consensus of theorists approves in the Austrian contributions to the science, yet he has arrived at his position on these heads not under the guidance of the Austrian school, but, avowedly, by an unbroken development out of the position given by the older generation of economists.[3] Again, in the matter of the psychological postulates of the science, he accepts a hedonism as simple, unaffected, and uncritical as that of Jevons or of James Mill. In this respect his work is as true to the canons of the classical school as the best work of the theoreticians of the Austrian observance. There is the like unhesitating appeal to the calculus of pleasure and pain as the indefeasible ground of action and solvent of perplexities, and there is the like readiness to reduce all phenomena to terms of a "normal," or "natural," scheme of life constructed on the basis of this hedonistic calculus. Even in the ready recourse to "conjectural history," to use Steuart's phrase, Mr. Clark's work is at one with both the early classical and the late (Jevons-Austrian) marginal-utility school. It has the virtues of both, coupled with the graver shortcomings of both. But, as his view exceeds theirs in breadth and generosity, so his system of theory is a more competent expression of current economic science than what is offered by the spokesmen of the Jevons-Austrian wing. It is as such, as a competent and consistent system of current economic theory, that it is here intended to discuss Mr. Clark's work, not as a body of doctrines peculiar to Mr. Clark or divergent from the main current. * * * * * Since hedonism came to rule economic science, the science has been in the main a theory of distribution,--distribution of ownership and of income. This is true both of the classical school and of those theorists who have taken an attitude of ostensible antagonism to the classical school. The exceptions to the rule are late and comparatively few, and they are not found among the economists who accept the hedonistic postulate as their point of departure. And, consistently with the spirit of hedonism, this theory of distribution has centered about a doctrine of exchange value (or price) and has worked out its scheme of (normal) distribution in terms of (normal) price. The normal economic community, upon which theoretical interest has converged, is a business community, which centers about the market, and whose scheme of life is a scheme of profit and loss. Even when some considerable attention is ostensibly devoted to theories of consumption and production, in these systems of doctrine the theories are constructed in terms of ownership, price, and acquisition, and so reduce themselves in substance to doctrines of distributive acquisition.[4] In this respect Mr. Clark's work is true to the received canons. The "Essentials of Economic Theory" are the essentials of the hedonistic theory of distribution, with sundry reflections on related topics. The scope of Mr. Clark's economics, indeed, is even more closely limited by concepts of distribution than many others, since he persistently analyses production in terms of value, and value is a concept of distribution. * * * * * As Mr. Clark justly observes (p. 4), "The primitive and general facts concerning industry ... need to be known before the social facts can profitably be studied." In these early pages of the treatise, as in other works of its class, there is repeated reference to that more primitive and simple scheme of economic life out of which the modern complex scheme has developed, and it is repeatedly indicated that in order to an understanding of the play of forces in the more advanced stages of economic development and complication, it is necessary to apprehend these forces in their unsophisticated form as they work out in the simple scheme prevalent on the plane of primitive life. Indeed, to a reader not well acquainted with Mr. Clark's scope and method of economic theorising, these early pages would suggest that he is preparing for something in the way of a genetic study,--a study of economic institutions approached from the side of their origins. It looks as if the intended line of approach to the modern situation might be such as an evolutionist would choose, who would set out with showing what forces are at work in the primitive economic community, and then trace the cumulative growth and complication of these factors as they presently take form in the institutions of a later phase of the development. Such, however, is not Mr. Clark's intention. The effect of his recourse to "primitive life" is simply to throw into the foreground, in a highly unreal perspective, those features which lend themselves to interpretation in terms of the normalised competitive system. The best excuse that can be offered for these excursions into "primitive life" is that they have substantially nothing to do with the main argument of the book, being of the nature of harmless and graceful misinformation. In the primitive economic situation--that is to say, in savagery and the lower barbarism--there is, of course, no "solitary hunter," living either in a cave or otherwise, and there is no man who "makes by his own labor all the goods that he uses," etc. It is, in effect, a highly meretricious misrepresentation to speak in this connection of "the economy of a man who works only for himself," and say that "the inherent productive power of labor and capital is of vital concern to him," because such a presentation of the matter overlooks the main facts in the case in order to put the emphasis on a feature which is of negligible consequence. There is no reasonable doubt but that, at least since mankind reached the human plane, the economic unit has been not a "solitary hunter," but a community of some kind; in which, by the way, women seem in the early stages to have been the most consequential factor instead of the man who works for himself. The "capital" possessed by such a community--as, _e.g._, a band of California "Digger" Indians--was a negligible quantity, more valuable to a collector of curios than to any one else, and the loss of which to the "Digger" squaws would mean very little. What was of "vital concern" to them, indeed, what the life of the group depended on absolutely, was the accumulated wisdom of the squaws, the technology of their economic situation.[5] The loss of the basket, digging-stick, and mortar, simply as physical objects, would have signified little, but the conceivable loss of the squaw's knowledge of the soil and seasons, of food and fiber plants, and of mechanical expedients, would have meant the present dispersal and starvation of the community. This may seem like taking Mr. Clark to task for an inconsequential gap in his general information on Digger Indians, Eskimos, and palæolithic society at large. But the point raised is not of negligible consequence for economic theory, particularly not for any theory of "economic dynamics" that turns in great part about questions of capital and its uses at different stages of economic development. In the primitive culture the quantity and the value of mechanical appliances is relatively slight; and whether the group is actually possessed of more or less of such appliances at a given time is not a question of first-rate importance. The loss of these objects--tangible assets--would entail a transient inconvenience. But the accumulated, habitual knowledge of the ways and means involved in the production and use of these appliances is the outcome of long experience and experimentation; and, given this body of commonplace technological information, the acquisition and employment of the suitable apparatus is easily arranged. The great body of commonplace knowledge made use of in industry is the product and heritage of the group. In its essentials it is known by common notoriety, and the "capital goods" needed for putting this commonplace technological knowledge to use are a slight matter,--practically within the reach of every one. Under these circumstances the ownership of "capital-goods" has no great significance, and, as a practical fact, interest and wages are unknown, and the "earning power of capital" is not seen to be "governed by a specific power of productivity which resides in capital-goods." But the situation changes, presently, by what is called an advance "in the industrial arts." The "capital" required to put the commonplace knowledge to effect grows larger, and so its acquisition becomes an increasingly difficult matter. Through "difficulty of attainment" in adequate quantities, the apparatus and its ownership become a matter of consequence; increasingly so, until presently the equipment required for an effective pursuit of industry comes to be greater than the common man can hope to acquire in a lifetime. The commonplace knowledge of ways and means, the accumulated experience of mankind, is still transmitted in and by the body of the community at large; but, for practical purposes, the advanced "state of the industrial arts" has enabled the owners of goods to corner the wisdom of the ancients and the accumulated experience of the race. Hence "capital," as it stands at that phase of the institution's growth contemplated by Mr. Clark. The "natural" system of free competition, or, as it was once called, "the obvious and simple system of natural liberty," is accordingly a phase of the development of the institution of capital; and its claim to immutable dominion is evidently as good as the like claim of any other phase of cultural growth. The equity, or "natural justice," claimed for it is evidently just and equitable only in so far as the conventions of ownership on which it rests continue to be a secure integral part of the institutional furniture of the community; that is to say, so long as these conventions are part and parcel of the habits of thought of the community; that is to say, so long as these things are currently held to be just and equitable. This normalised present, or "natural," state of Mr. Clark, is, as near as may be, Senior's "Natural State of Man,"--the hypothetically perfect competitive system; and economic theory consists in the definition and classification of the phenomena of economic life in terms of this hypothetical competitive system. Taken by itself, Mr. Clark's dealing with the past development might be passed over with slight comment, except for its negative significance, since it has no theoretical connection with the present, or even with the "natural" state in which the phenomena of economic life are assumed to arrange themselves in a stable, normal scheme. But his dealings with the future, and with the present in so far as the present situation is conceived to comprise "dynamic" factors, is of substantially the same kind. With Senior's "natural state of man" as the base-line of normality in things economic, questions of present and future development are treated as questions of departure from the normal, aberrations and excesses which the theory does not aim even to account for. What is offered in place of theoretical inquiry when these "positive perversions of the natural forces themselves" are taken up (_e.g._, in chapters xxii.-xxix.) is an exposition of the corrections that must be made to bring the situation back to the normal static state, and solicitous advice as to what measures are to be taken with a view to this beneficent end. The problem presented to Mr. Clark by the current phenomena of economic development is: how can it be stopped? or, failing that, how can it be guided and minimised? Nowhere is there a sustained inquiry into the dynamic character of the changes that have brought the present (deplorable) situation to pass, nor into the nature and trend of the forces at work in the development that is going forward in this situation. None of this is covered by Mr. Clark's use of the word "dynamic." All that it covers in the way of theory (chapters xii.-xxi.) is a speculative inquiry as to how the equilibrium reëstablished itself when one or more of the quantities involved increases or decreases. Other than quantitive changes are not noticed, except as provocations to homiletic discourse. Not even the causes and the scope of the quantitive changes that may take place in the variables are allowed to fall within the scope of the theory of economic dynamics. So much of the volume, then, and of the system of doctrines of which the volume is an exposition, as is comprised in the later eight chapters (pp. 372-554), is an exposition of grievances and remedies, with only sporadic intrusions of theoretical matter, and does not properly constitute a part of the theory, whether static or dynamic. There is no intention here to take exception to Mr. Clark's outspoken attitude of disapproval toward certain features of the current business situation or to quarrel with the remedial measures which he thinks proper and necessary. This phase of his work is spoken of here rather to call attention to the temperate but uncompromising tone of Mr. Clark's writings as a spokesman for the competitive system, considered as an element in the Order of Nature, and to note the fact that this is not economic theory.[6] The theoretical section specifically scheduled as Economic Dynamics (chapters xii.-xxi.), on the other hand, is properly to be included under the caption of Statics. As already remarked above, it presents a theory of equilibrium between variables. Mr. Clark is, indeed, barred out by his premises from any but a statical development of theory. To realise the substantially statical character of his Dynamics, it is only necessary to turn to his chapter xii. (Economic Dynamics). "A highly dynamic condition, then, is one in which the economic organism changes rapidly and yet, at any time in the course of its changes, is relatively near to a certain static model" (p. 196). "The actual shape of society at any one time is not the static model of that time; but it tends to conform to it; and in a very dynamic society is more nearly like it than it would be in one in which the forces of change are less active" (p. 197). The more "dynamic" the society, the nearer it is to the static model; until in an ideally dynamic society, with a frictionless competitive system, to use Mr. Clark's figure, the static state would be attained, except for an increase in size,--that is to say, the ideally perfect "dynamic" state would coincide with the "static" state. Mr. Clark's conception of a dynamic state reduces itself to a conception of an imperfectly static state, but in such a sense that the more highly and truly "dynamic" condition is thereby the nearer to a static condition. Neither the static nor the dynamic state, in Mr. Clark's view, it should be remarked, is a state of quiescence. Both are states of more or less intense activity, the essential difference being that in the static state the activity goes on in perfection, without lag, leak, or friction; the movement of parts being so perfect as not to disturb the equilibrium. The static state is the more "dynamic" of the two. The "dynamic" condition is essentially a deranged static condition: whereas the static state is the absolute perfect, "natural" taxonomic norm of competitive life. This dynamic-static state may vary in respect of the magnitude of the several factors which hold one another in equilibrium, but these are none other than quantitive variations. The changes which Mr. Clark discusses under the head of dynamics are all of this character,--changes in absolute or relative magnitude of the several factors comprised in the equation. * * * * * But, not to quarrel with Mr. Clark's use of the terms "static" and "dynamic," it is in place to inquire into the merits of this class of economic science apart from any adventitious shortcomings. For such an inquiry Mr. Clark's work offers peculiar advantages. It is lucid, concise, and unequivocal, with no temporising euphemisms and no politic affectations of sentiment. Mr. Clark's premises, and therewith the aim of his inquiry, are the standard ones of the classical English school (including the Jevons-Austrian wing). This school of economics stands on the pre-evolutionary ground of normality and "natural law," which the great body of theoretical science occupied in the early nineteenth century. It is like the other theoretical sciences that grew out of the rationalistic and humanitarian conceptions of the eighteenth century in that its theoretical aim is taxonomy--definition and classification--with the purpose of subsuming its data under a rational scheme of categories which are presumed to make up the Order of Nature. This Order of Nature, or realm of Natural Law, is not the actual run of material facts, but the facts so interpreted as to meet the needs of the taxonomist in point of taste, logical consistency, and sense of justice. The question of the truth and adequacy of the categories is a question as to the consensus of taste and predilection among the taxonomists; _i.e._, they are an expression of trained human nature touching the matter of what ought to be. The facts so interpreted make up the "normal," or "natural," scheme of things, with which the theorist has to do. His task is to bring facts within the framework of this scheme of "natural" categories. Coupled with this scientific purpose of the taxonomic economist is the pragmatic purpose of finding and advocating the expedient course of policy. On this latter head, again, Mr. Clark is true to the animus of the school. The classical school, including Mr. Clark and his contemporary associates in the science, is hedonistic and utilitarian,--hedonistic in its theory and utilitarian in its pragmatic ideals and endeavors. The hedonistic postulates on which this line of economic theory is built up are of a statical scope and character, and nothing but statical theory (taxonomy) comes out of their development.[7] These postulates, and the theorems drawn from them, take account of none but quantitive variations, and quantitive variation alone does not give rise to cumulative change, which proceeds on changes in kind. Economics of the line represented at its best by Mr. Clark has never entered this field of cumulative change. It does not approach questions of the class which occupy the modern sciences,--that is to say, questions of genesis, growth, variation, process (in short, questions of a dynamic import),--but confines its interest to the definition and classification of a mechanically limited range of phenomena. Like other taxonomic sciences, hedonistic economics does not, and cannot, deal with phenomena of growth except so far as growth is taken in the quantitative sense of a variation in magnitude, bulk, mass, number, frequency. In its work of taxonomy this economics has consistently bound itself, as Mr. Clark does, by distinctions of a mechanical, statistical nature, and has drawn its categories of classification on those grounds. Concretely, it is confined, in substance, to the determination of and refinements upon the concepts of land, labor, and capital, as handed down by the great economists of the classical era, and the correlate concepts of rent, wages, interest and profits. Solicitously, with a painfully meticulous circumspection, the normal, mechanical metes and bounds of these several concepts are worked out, the touchstone of the absolute truth aimed at being the hedonistic calculus. The facts of use and wont are not of the essence of this mechanical refinement. These several categories are mutually exclusive categories, mechanically speaking. The circumstance that the phenomena covered by them are not mechanical facts is not allowed to disturb the pursuit of mechanical distinctions among them. They nowhere overlap, and at the same time between them they cover all the facts with which this economic taxonomy is concerned. Indeed, they are in logical consistency, required to cover them. They are hedonistically "natural" categories of such taxonomic force that their elemental lines of cleavage run through the facts of any given economic situation, regardless of use and wont, even where the situation does not permit these lines of cleavage to be seen by men and recognised by use and wont; so that, _e.g._, a gang of Aleutian Islanders slushing about in the wrack and surf with rakes and magical incantations for the capture of shell-fish are held, in point of taxonomic reality, to be engaged on a feat of hedonistic equilibration in rent, wages, and interest. And that is all there is to it. Indeed, for economic theory of this kind, that is all there is to any economic situation. The hedonistic magnitudes vary from one situation to another, but, except for variations in the arithmetical details of the hedonistic balance, all situations are, in point of economic theory, substantially alike.[8] Taking this unfaltering taxonomy on its own recognisances, let us follow the trail somewhat more into the arithmetical details, as it leads along the narrow ridge of rational calculation, above the tree-tops, on the levels of clear sunlight and moonshine. For the purpose in hand--to bring out the character of this current economic science as a working theory of current facts, and more particularly "as applied to modern problems of industry and public policy" (title-page)--the sequence to be observed in questioning the several sections into which the theoretical structure falls is not essential. The structure of classical theory is familiar to all students, and Mr. Clark's redaction offers no serious departure from the conventional lines. Such divergence from conventional lines as may occur is a matter of details, commonly of improvements in detail; and the revisions of detail do not stand in such an organic relation to one another, nor do they support and strengthen one another in such a manner, as to suggest anything like a revolutionary trend or a breaking away from the conventional lines. So as regards Mr. Clark's doctrine of Capital. It does not differ substantially from the doctrines which are gaining currency at the hands of such writers as Mr. Fisher or Mr. Fetter; although there are certain formal distinctions peculiar to Mr. Clark's exposition of the "Capital Concept." But these peculiarities are peculiarities of the method of arriving at the concept rather than peculiarities substantial to the concept itself. The main discussion of the nature of capital is contained in chapter ii. (Varieties of Economic Goods). The conception of capital here set forth is of fundamental consequence to the system, partly because of the important place assigned capital in this system of theory, partly because of the importance which the conception of capital must have in any theory that is to deal with problems of the current (capitalistic) situation. Several classes of capital-goods are enumerated, but it appears that in Mr. Clark's apprehension--at variance with Mr. Fisher's view--persons are not to be included among the items of capital. It is also clear from the run of the argument, though not explicitly stated, that only material, tangible, mechanically definable articles of wealth go to make up capital. In current usage, in the business community, "capital" is a pecuniary concept, of course, and is not definable in mechanical terms; but Mr. Clark, true to the hedonistic taxonomy, sticks by the test of mechanical demarcation and draws the lines of his category on physical grounds; whereby it happens that any pecuniary conception of capital is out of the question. Intangible assets, or immaterial wealth, have no place in the theory; and Mr. Clark is exceptionally subtle and consistent in avoiding such modern notions. One gets the impression that such a notion as intangible assets is conceived to be too chimerical to merit attention, even by way of protest or refutation. Here, as elsewhere in Mr. Clark's writings, much is made of the doctrine that the two facts of "capital" and "capital-goods" are conceptually distinct, though substantially identical. The two terms cover virtually the same facts as would be covered by the terms "pecuniary capital" and "industrial equipment." They are for all ordinary purposes coincident with Mr. Fisher's terms, "capital value" and "capital," although Mr. Clark might enter a technical protest against identifying his categories with those employed by Mr. Fisher.[9] "Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital-goods are the shifting component parts of this permanent aggregate" (p. 29). Mr. Clark admits (pp. 29-33) that capital is colloquially spoken and thought of in terms of value, but he insists that in point of substantial fact the working concept of capital is (should be) that of "a fund of productive goods," considered as an "abiding entity." The phrase itself, "a fund of productive goods," is a curiously confusing mixture of pecuniary and mechanical terms, though the pecuniary expression, "a fund," is probably to be taken in this connection as a permissible metaphor. This conception of capital, as a physically "abiding entity" constituted by the succession of productive goods that make up the industrial equipment, breaks down in Mr. Clark's own use of it when he comes (pp. 37-38) to speak of the mobility of capital; that is to say, so soon as he makes use of it. A single illustration of this will have to suffice, though there are several points in his argument where the frailty of the conception is patent enough. "The transfer of capital from one industry to another is a dynamic phenomenon which is later to be considered. What is here important is the fact that it is in the main accomplished without entailing transfers of capital-goods. An instrument wears itself out in one industry, and instead of being succeeded by a like instrument in the same industry, it is succeeded by one of a different kind which is used in a different branch of production" (p. 38),--illustrated on the preceding page by a shifting of investment from a whaling-ship to a cotton-mill. In all this it is plain that the "transfer of capital" contemplated is a shifting of investment, and that it is, as indeed Mr. Clark indicates, not a matter of the mechanical shifting of physical bodies from one industry to the other. To speak of a transfer of "capital" which does not involve a transfer of "capital-goods" is a contradiction of the main position, that "capital" is made up of "capital-goods." The continuum in which the "abiding entity" of capital resides is a continuity of ownership, not a physical fact. The continuity, in fact, is of an immaterial nature, a matter of legal rights, of contract, of purchase and sale. Just why this patent state of the case is overlooked, as it somewhat elaborately is, is not easily seen. But it is plain that, if the concept of capital were elaborated from observation of current business practice, it would be found that "capital" is a pecuniary fact, not a mechanical one; that it is an outcome of a valuation, depending immediately on the state of mind of the valuers; and that the specific marks of capital, by which it is distinguishable from other facts, are of an immaterial character. This would, of course, lead, directly, to the admission of intangible assets; and this, in turn, would upset the law of the "natural" remuneration of labor and capital to which Mr. Clark's argument looks forward from the start. It would also bring in the "unnatural" phenomena of monopoly as a normal outgrowth of business enterprise. There is a further logical discrepancy avoided by resorting to the alleged facts of primitive industry, when there was no capital, for the elements out of which to construct a capital concept, instead of going to the current business situation. In a hedonistic-utilitarian scheme of economic doctrine, such as Mr. Clark's, only physically productive agencies can be admitted as efficient factors in production or as legitimate claimants to a share in distribution. Hence capital, one of the prime factors in production and the central claimant in the current scheme of distribution, must be defined in physical terms and delimited by mechanical distinctions. This is necessary for reasons which appear in the succeeding chapter, on The Measure of Consumers' Wealth. On the same page (38), and elsewhere, it is remarked that "business disasters" destroy capital in part. The destruction in question is a matter of values; that is to say, a lowering of valuation, not in any appreciable degree a destruction of material goods. Taken as a physical aggregate, capital does not appreciably decrease through business disasters, but, taken as a fact of ownership and counted in standard units of value, it decreases; there is a destruction of values and a shifting of ownership, a loss of ownership perhaps; but these are pecuniary phenomena, of an immaterial character, and so do not directly affect the material aggregate of the industrial equipment. Similarly, the discussion (pp. 301-314) of how changes of method, as, _e.g._, labor-saving devices, "liberate capital," and at times "destroy" capital, is intelligible only on the admission that "capital" here is a matter of values owned by investors and is not employed as a synonym for industrial appliances. The appliances in question are neither liberated nor destroyed in the changes contemplated. And it will not do to say that the aggregate of "productive goods" suffers a diminution by a substitution of devices which increases its aggregate productiveness, as is implied, _e.g._, by the passage on page 307,[10] if Mr. Clark's definition of capital is strictly adhered to. This very singular passage (pp. 306-311, under the captions, Hardships entailed on Capitalists by Progress, and the Offset for Capital destroyed by Changes of Method) implies that the aggregate of appliances of production is decreased by a change which increases the aggregate of these articles in that respect (productivity) by virtue of which they are counted in the aggregate. The argument will hold good if "productive goods" are rated by bulk, weight, number, or some such irrelevant test, instead of by their productivity or by their consequent capitalised value. On such a showing it should be proper to say that the polishing of plowshares before they are sent out from the factory diminishes the amount of capital embodied in plowshares by as much as the weight or bulk of the waste material removed from the shares in polishing them. Several things may be said of the facts discussed in this passage. There is, presumably, a decrease, in bulk, weight, or number, of the appliances that make up the industrial equipment at the time when such a technological change as is contemplated takes place. This change, presumably, increases the productive efficiency of the equipment as a whole, and so may be said without hesitation to increase the equipment as a factor of production, while it may decrease it, considered as a mechanical magnitude. The owners of the obsolete or obsolescent appliances presumably suffer a diminution of their capital, whether they discard the obsolete appliances or not. The owners of the new appliances, or rather those who own and are able to capitalise the new technological expedients, presumably gain a corresponding advantage, which may take the form of an increase of the effective capitalisation of their outfit, as would then be shown by an increased market value of their plant. The largest theoretical outcome of the supposed changes, for an economist not bound by Mr. Clark's conception of capital, should be the generalisation that industrial capital--capital considered as a productive agent--is substantially a capitalisation of technological expedients, and that a given capital invested in industrial equipment is measured by the portion of technological expedients whose usufruct the investment appropriates. It would accordingly appear that the substantial core of all capital is immaterial wealth, and that the material objects which are formally the subject of the capitalist's ownership are, by comparison, a transient and adventitious matter. But if such a view were accepted, even with extreme reservations, Mr. Clark's scheme of the "natural" distribution of incomes between capital and labor would "go up in the air," as the colloquial phrase has it. It would be extremely difficult to determine what share of the value of the joint product of capital and labor should, under a rule of "natural" equity, go to the capitalist as an equitable return for his monopolisation of a given portion of the intangible assets of the community at large.[11] The returns actually accruing to him under competitive conditions would be a measure of the differential advantage held by him by virtue of his having become legally seized of the material contrivances by which the technological achievements of the community are put into effect. Yet, if in this way capital were apprehended as "an historical category," as Rodbertus would say, there is at least the comfort in it all that it should leave a free field for Mr. Clark's measures of repression as applied to the discretionary management of capital by the makers of trusts. And yet, again, this comforting reflection is coupled with the ugly accompaniment that by the same move the field would be left equally free of moral obstructions to the extreme proposals of the socialists. A safe and sane course for the quietist in these premises should apparently be to discard the equivocal doctrines of the passage (pp. 306-311) from which this train of questions arises, and hold fast to the received dogma, however unworkable, that "capital" is a congeries of physical objects with no ramifications or complications of an immaterial kind, and to avoid all recourse to the concept of value, or price, in discussing matters of modern business. * * * * * The center of interest and of theoretical force and validity in Mr. Clark's work is his law of "natural" distribution. Upon this law hangs very much of the rest, if not substantially the whole structure of theory. To this law of distribution the earlier portions of the theoretical development look forward, and this the succeeding portions of the treatise take as their point of departure. The law of "natural" distribution says that any productive agent "naturally" gets what it produces. Under ideally free competitive conditions--such as prevail in the "static" state, and to which the current situation approximates--each unit of each productive factor unavoidably gets the amount of wealth which it creates,--its "virtual product," as it is sometimes expressed. This law rests, for its theoretical validity, on the doctrine of "final productivity," set forth in full in the _Distribution of Wealth_, and more concisely in the _Essentials_[12]--"one of those universal principles which govern economic life in all its stages of evolution."[13] In combination with a given amount of capital, it is held, each succeeding unit of added labor adds a less than proportionate increment to the product. The total product created by the labor so engaged is at the same time the distributive share received by such labor as wages; and it equals the increment of product added by the "final" unit of labor, multiplied by the number of such units engaged. The law of "natural" interest is the same as this law of wages, with a change of terms. The product of each unit of labor or capital being measured by the product of the "final" unit, each gets the amount of its own product. In all of this the argument runs in terms of value; but it is Mr. Clark's view, backed by an elaborate exposition of the grounds of his contention,[14] that the use of these terms of value is merely a matter of convenience for the argument, and that the conclusions so reached--the equality so established between productivity and remuneration--may be converted to terms of goods, or "effective utility," without abating their validity. Without recourse to some such common denominator as value the outcome of the argument would, as Mr. Clark indicates, be something resembling the Ricardian law of differential rent instead of a law drawn in homogeneous terms of "final productivity"; and the law of "natural" distribution would then, at the best, fall short of a general formula. But the recourse to terms of value does not, as Mr. Clark recognises, dispose of the question without more ado. It smooths the way for the argument, but, unaided, it leaves it nugatory. According to Hudibras, "The value of a thing Is just as much as it will bring," and the later refinements on the theory of value have not set aside this dictum of the ancient authority. It answers no pertinent question of equity to say that the wages paid for labor are as much as it will bring. And Mr. Clark's chapter (xxiv.) on "The Unit for Measuring Industrial Agents and their Products" is designed to show how this tautological statement in terms of market value converts itself, under competitive conditions, into a competent formula of distributive justice. It does not conduce to intelligibility to say that the wages of labor are just and fair because they are all that is paid to labor as wages. What further value Mr. Clark's extended discussion of this matter may have will lie in his exposition of how competition converts the proposition that "the value of a thing is just as much as it will bring" into the proposition that "the market rate of wages (or interest) gives to labor (or capital) the full product of labor (or capital)." In following up the theory at this critical point, it is necessary to resort to the fuller statement of the _Distribution of Wealth_,[15] the point being not so adequately covered in the _Essentials_. Consistently hedonistic, Mr. Clark recognises that his law of natural justice must be reduced to elementary hedonistic terms, if it is to make good its claim to stand as a fundamental principle of theory. In hedonistic theory, production of course means the production of utilities, and utility is of course utility to the consumer.[16] A product is such by virtue of and to the amount of the utility which it has for a consumer. This utility of the goods is measured, as value, by the sacrifice (disutility) which the consumer is willing to undergo in order to get the utility which the consumption of the goods yields him. The unit and measure of productive labor is in the last analysis also a unit of disutility; but it is disutility to the productive laborer, not to the consumer. The balance which establishes itself under competitive conditions is a compound balance, being a balance between the utility of the goods to the consumer and the disutility (cost) which he is willing to undergo for it, on the one hand, and, on the other hand, a balance between the disutility of the unit of labor and the utility for which the laborer is willing to undergo this disutility. It is evident, and admitted, that there can be no balance, and no commensurability, between the laborer's disutility (pain) in producing the goods and the consumer's utility (pleasure) in consuming them, inasmuch as these two hedonistic phenomena lie each within the consciousness of a distinct person. There is, in fact, no continuity of nervous tissue over the interval between consumer and producer, and a direct comparison, equilibrium, equality, or discrepancy in respect of pleasure and pain can, of course, not be sought except within each self-balanced individual complex of nervous tissue.[17] The wages of labor (_i.e._, the utility of the goods received by the laborer) is not equal to the disutility undergone by him, except in the sense that he is competitively willing to accept it; nor are these wages equal to the utility got by the consumer of the goods, except in the sense that he is competitively willing to pay them. This point is covered by the current diagrammatic arguments of marginal-utility theory as to the determination of competitive prices. But, while the wages are not equal to or directly comparable with the disutility of the productive labor engaged, they are, in Mr. Clark's view, equal to the "productive efficiency" of that labor.[18] "Efficiency in a worker is, in reality, power to draw out labor on the part of society. It is capacity to offer that for which society will work in return." By the mediation of market price, under competitive conditions, it is held, the laborer gets, in his wages, a valid claim on the labor of other men (society) as large as they are competitively willing to allow him for the services for which he is paid his wages. The equitable balance between work and pay contemplated by the "natural" law is a balance between wages and "efficiency," as above defined; that is to say, between the wages of labor and the capacity of labor to get wages. So far, the whole matter might evidently have been left as Bastiat left it. It amounts to saying that the laborer gets what he is willing to accept and the consumers give what they are willing to pay. And this is true, of course, whether competition prevails or not. What makes this arrangement just and right under competitive conditions, in Mr. Clark's view, lies in his further doctrine that under such conditions of unobstructed competition the prices of goods, and therefore the wages of labor, are determined, within the scope of the given market, by a quasi-consensus of all the parties in interest. There is of course no formal consensus, but what there is of the kind is implied in the fact that bargains are made, and this is taken as an appraisement by "society" at large. The (quasi-) consensus of buyers is held to embody the righteous (quasi-) appraisement of society in the premises, and the resulting rate of wages is therefore a (quasi-) just return to the laborer.[19] "Each man accordingly is paid an amount that equals the total product that he personally creates."[20] If competitive conditions are in any degree disturbed, the equitable balance of prices and wages is disturbed by that much. All this holds true for the interest of capital, with a change of terms. The equity and binding force of this finding is evidently bound up with that common-sense presumption on which it rests; namely, that it is right and good that all men should get what they can without force or fraud and without disturbing existing property relations. It springs from this presumption, and, whether in point of equity or of expediency, it rises no higher than its source. It does not touch questions of equity beyond this, nor does it touch questions of the expediency or probable advent of any contemplated change in the existing conventions as to rights of ownership and initiative. It affords a basis for those who believe in the old order--without which belief this whole structure of opinions collapses--to argue questions of wages and profits in a manner convincing to themselves, and to confirm in the faith those who already believe in the old order. But it is not easy to see that some hundreds of pages of apparatus should be required to find one's way back to these time-worn commonplaces of Manchester. In effect, this law of "natural" distribution says that whatever men acquire without force or fraud under competitive conditions is their equitable due, no more and no less, assuming that the competitive system, with its underlying institution of ownership, is equitable and "natural." In point of economic theory the law appears on examination to be of slight consequence, but it merits further attention for the gravity of its purport. It is offered as a definitive law of equitable distribution comprised in a system of hedonistic economics which is in the main a theory of distributive acquisition only. It is worth while to compare the law with its setting, with a view to seeing how its broad declarations of economic justice shows up in contrast with the elements out of which it is constructed and among which it lies. Among the notable chapters of the _Essentials_ is one (vi.) on Value and its Relation to Different Incomes, which is not only a very substantial section of Mr. Clark's economic theory, but at the same time a type of the achievements of the latter-day hedonistic school. Certain features of this chapter alone can be taken up here. The rest may be equally worthy the student's attention, but it is the intention here not to go into the general substance of the theory of marginal utility and value, to which the chapter is devoted, but to confine attention to such elements of it as bear somewhat directly on the question of equitable distribution already spoken of. Among these latter is the doctrine of the "consumer's surplus,"--virtually the same as what is spoken of by other writers as "consumer's rent."[21] "Consumer's surplus" is the surplus of utility (pleasure) derived by the consumer of goods above the (pain) cost of the goods to him. This is held to be a very generally prevalent phenomenon. Indeed, it is held to be all but universally present in the field of consumption. It might, in fact, be effectively argued that even Mr. Clark's admitted exception[22] is very doubtfully to be allowed, on his own showing. Correlated with this element of utility on the consumer's side is a similar volume of disutility on the producer's side, which may be called "producer's abatement," or "producer's rent": it is the amount of disutility by which the disutility-cost of a given article to any given producer (laborer) falls short of (or conceivably exceeds) the disutility incurred by the marginal producer. Marginal buyers or consumers and marginal sellers or producers are relatively few: the great body on both sides come in for something in the way of a "surplus" of utility or disutility. All this bears on the law of "natural" wages and interest as follows, taking that law of just remuneration at Mr. Clark's rating of it. The law works out through the mediation of price. Price is determined, competitively, by marginal producers or sellers and marginal consumers or purchasers: the latter alone on the one side get the precise price-equivalent of the disutility incurred by them, and the latter alone on the other side pay the full price-equivalent of the utilities derived by them from the goods purchased.[23] Hence the competitive price--covering competitive wages and interest--does not reflect the consensus of all parties concerned as to the "effective utility" of the goods, on the one hand, or as to their effective (disutility) cost, on the other hand. It reflects instead, if anything of this kind, the valuations which the marginal unfortunates on each side concede under stress of competition; and it leaves on each side of the bargain relation an uncovered "surplus," which marks the (variable) interval by which price fails to cover "effective utility." The excess utility--and the conceivable excess cost--does not appear in the market transactions that mediate between consumer and producer.[24] In the balance, therefore, which establishes itself in terms of value between the social utility of the product and the remuneration of the producer's "efficiency," the margin of utility represented by the aggregate "consumer's surplus" and like elements is not accounted for. It follows, when the argument is in this way reduced to its hedonistic elements, that no man "is paid an amount that equals the amount of the total product that he personally creates." Supposing the marginal-utility (final-utility) theories of objective value to be true, there is no consensus, actual or constructive, as to the "effective utility" of the goods produced: there is no "social" decision in the case beyond what may be implied in the readiness of buyers to profit as much as may be by the necessities of the marginal buyer and seller. It appears that there is warrant, within these premises, for the formula: Remuneration <> than Product. Only by an infinitesimal chance would it hold true in any given case that, hedonistically, Remuneration = Product; and, if it should ever happen to be true, there would be no finding it out. The (hedonistic) discrepancy which so appears between remuneration and product affects both wages and interest in the same manner, but there is some (hedonistic) ground in Mr. Clark's doctrines for holding that the discrepancy does not strike both in the same degree. There is indeed no warrant for holding that there is anything like an equable distribution of this discrepancy among the several industries or the several industrial concerns; but there appears to be some warrant, on Mr. Clark's argument, for thinking that the discrepancy is perhaps slighter in those branches of industry which produce the prime necessaries of life.[25] This point of doctrine throws also a faint (metaphysical) light on a, possibly generic, discrepancy between the remuneration of capitalists and that of laborers: the latter are, relatively, more addicted to consuming the necessaries of life, and it may be that they thereby gain less in the way of a consumer's surplus. All the analysis and reasoning here set forth has an air of undue tenuity; but in extenuation of this fault it should be noted that this reasoning is made up of such matter as goes to make up the theory under review, and the fault, therefore, is not to be charged to the critic. The manner of argument required to meet this theory of the "natural law of final productivity" on its own ground is itself a sufficiently tedious proof of the futility of the whole matter in dispute. Yet it seems necessary to beg further indulgence for more of the same kind. As a needed excuse, it may be added that what immediately follows bears on Mr. Clark's application of the law of "natural distribution" to modern problems of industry and public policy, in the matter of curbing monopolies. * * * * * Accepting, again, Mr. Clark's general postulates--the postulates of current hedonistic economics--and applying the fundamental concepts, instead of their corollaries, to his scheme of final productivity, it can be shown to fail on grounds even more tenuous and hedonistically more fundamental than those already passed in review. In all final-utility (marginal-utility) theory it is of the essence of the scheme of things that successive increments of a "good" have progressively less than proportionate utility. In fact, the coefficient of decrease of utility is greater than the coefficient of increase of the stock of goods. The solitary "first loaf" is exorbitantly useful. As more loaves are successively added to the stock, the utility of each grows small by degrees and incontinently less, until, in the end, the state of the "marginal" or "final" loaf is, in respect of utility, shameful to relate. So, with a change of phrase, it fares with successive increments of a given productive factor--labor or capital--in Mr. Clark's scheme of final productivity. And so, of course, it also fares with the utility of successive increments of product created by successively adding unit after unit to the complement of a given productive factor engaged in the case. If we attend to this matter of final productivity in consistently hedonistic terms, a curious result appears. A larger complement of the productive agent, counted by weight and tale, will, it is commonly held, create a larger output of goods, counted by weight and tale;[26] but these are not hedonistic terms and should not be allowed to cloud the argument. In the hedonistic scheme the magnitude of goods, in all the dimensions to be taken account of, is measured in terms of utility, which is a different matter from weight and tale. It is by virtue of their utility that they are "goods," not by virtue of their physical dimensions, number and the like; and utility is a matter of the production of pleasure and the prevention of pain. Hedonistically speaking, the amount of the goods, the magnitude of the output, is the quantity of utility derivable from their consumption; and the utility per unit decreases faster than the number of units increases.[27] It follows that in the typical or undifferentiated case an increase of the number of units beyond a certain critical point entails a decrease of the "total effective utility" of the supply.[28] This critical point seems ordinarily to be very near the point of departure of the curve of declining utility, perhaps it frequently coincides with the latter. On the curve of declining final utility, at any point whose tangent cuts the axis of ordinates at an angle of less than 45 degrees, an increase of the number of units entails a decrease of the "total effective utility of the supply,"[29] so that a gain in physical productivity is a loss as counted in "total effective utility." Hedonistically, therefore, the productivity in such a case diminishes, not only relatively to the (physical) magnitude of the productive agents, but absolutely. This critical point, of maximum "total effective utility," is, if the practice of shrewd business men is at all significant, commonly somewhat short of the point of maximum physical productivity, at least in modern industry and in a modern community. The "total effective utility" may commonly be increased by decreasing the output of goods. The "total effective utility" of wages may often be increased by decreasing the amount (value) of the wages per man, particularly if such a decrease is accompanied by a rise in the price of articles to be bought with the wages. Hedonistically speaking, it is evident that the point of maximum net productivity is the point at which a perfectly shrewd business management of a perfect monopoly would limit the supply; and the point of maximum (hedonistic) remuneration (wages and interest) is the point which such a management would fix on in dealing with a wholly free, perfectly competitive supply of labor and capital. Such a monopolistic state of things, it is true, would not answer to Mr. Clark's ideal. Each man would not be "paid an amount that equals the amount of the total product that he personally creates," but he would commonly be paid an amount that (hedonistically, in point of "effective utility") exceeds what he personally creates, because of the high final utility of what he receives. This is easily proven. Under the monopolistic conditions supposed, the laborers would, it is safe to assume, not be fully employed all the time; that is to say, they would be willing to work some more in order to get some more articles of consumption; that is to say, the articles of consumption which their wages offer them have so high a utility as to afford them a consumer's surplus,--the articles are worth more than they cost:[30] Q. E. D. The initiated may fairly doubt the soundness of the chain of argument by which these heterodox theoretical results are derived from Mr. Clark's hedonistic postulates, more particularly since the adepts of the school, including Mr. Clark, are not accustomed to draw conclusions to this effect from these premises. Yet the argument proceeds according to the rules of marginal-utility permutations. In view of this scarcely avoidable doubt, it may be permitted, even at the risk of some tedium, to show how the facts of every-day life bear out this unexpected turn of the law of natural distribution, as briefly traced above. The principle involved is well and widely accepted. The familiar practical maxim of "charging what the traffic will bear" rests on a principle of this kind, and affords one of the readiest practical illustrations of the working of the hedonistic calculus. The principle involved is that a larger aggregate return (value) may be had by raising the return per unit to such a point as to somewhat curtail the demand. In practice it is recognised, in other words, that there is a critical point at which the value obtainable per unit, multiplied by the number of units that will be taken off at that price, will give the largest net aggregate result (in value to the seller) obtainable under the given conditions. A calculus involving the same principle is, of course, the guiding consideration in all monopolistic buying and selling; but a moment's reflection will show that it is, in fact, the ruling principle in all commercial transactions and, indeed, in all business. The maxim of "charging what the traffic will bear" is only a special formulation of the generic principle of business enterprise. Business initiative, the function of the entrepreneur (business man) is comprehended under this principle taken in its most general sense.[31] In business the buyer, it is held by the theorists, bids up to the point of greatest obtainable advantage to himself under the conditions prevailing, and the seller similarly bids down to the point of greatest obtainable net aggregate gain. For the trader (business man, entrepreneur) doing business in the open (competitive) market or for the business concern with a partial or limited monopoly, the critical point above referred to is, of course, reached at a lower point on the curve of price than would be the case under a perfect and unlimited monopoly, such as was supposed above; but the principle of charging what the traffic will bear remains intact, although the traffic will not bear the same in the one case as in the other. Now, in the theories based on marginal (or "final") utility, value is an expression or measure of "effective utility"--or whatever equivalent term may be preferred. In operating on values, therefore, under the rule of charging what the traffic will bear, the sellers of a monopolised supply, _e.g._, must operate through the valuations of the buyers; that is to say, they must influence the final utility of the goods or services to such effect that the "total effective utility" of the limited supply to the consumers will be greater than would be the "total effective utility" of a larger supply, which is the point in question. The emphasis falls still more strongly on this illustration of the hedonistic calculus, if it is called to mind that in the common run of such limitations of supply by a monopolistic business management the management would be able to increase the supply at a progressively declining cost beyond the critical point by virtue of the well-known principle of increasing returns from industry. It is also to be added that, since the monopolistic business gets its enhanced return from the margin by which the "total effective utility" of the limited supply exceeds that of a supply not so limited, and since there is to be deducted from this margin the costs of monopolistic management in addition to other costs, therefore the enhancement of the "total effective utility" of the goods to the consumer in the case must be appreciably larger than the resulting net gains to the monopoly. By a bold metaphor--a metaphor sufficiently bold to take it out of the region of legitimate figures of speech--the gains that come to enterprising business concerns by such monopolistic enhancement of the "total effective utility" of their products are spoken of as "robbery," "extortion," "plunder"; but the theoretical complexion of the case should not be overlooked by the hedonistic theorist in the heat of outraged sentiment. The monopolist is only pushing the principle of all business enterprise (free competition) to its logical conclusion; and, in point of hedonistic theory, such monopolistic gains are to be accounted the "natural" remuneration of the monopolist for his "productive" service to the community in enhancing their enjoyment per unit of consumable goods to such point as to swell their net aggregate enjoyment to a maximum. This intricate web of hedonistic calculations might be pursued further, with the result of showing that, while the consumers of the monopolised supply of goods are gainers by virtue of the enhanced "total effective utility" of the goods, the monopolists who bring about this result do so in great part at their own cost, counting cost in terms of a reduction of "total effective utility." By injudiciously increasing their own share of goods, they lower the marginal and effective utility of their wealth to such a point as, probably, to entail a considerable (hedonistic) privation in the shrinkage of their enjoyment per unit. But it is not the custom of economists, nor does Mr. Clark depart from this custom, to dwell on the hardships of the monopolists. This much may be added, however, that this hedonistically consistent exposition of the "natural law of final productivity" shows it to be "one of those universal principles which govern economic life in all its stages of evolution," even when that evolution enters the phase of monopolistic business enterprise,--granting always the sufficiency of the hedonistic postulates from which the law is derived. Further, the considerations reviewed above go to show that, on two counts, Mr. Clark's crusade against monopoly in the later portion of his treatise is out of touch with the larger theoretical speculations of the earlier portions: (_a_) it runs counter to the hedonistic law of "natural" distribution; and (_b_) the monopolistic business against which Mr. Clark speaks is but the higher and more perfect development of that competitive business enterprise which he wishes to reinstate,--competitive business, so called, being incipiently monopolistic enterprise. Apart from this theoretical bearing, the measures which Mr. Clark advocates for the repression of monopoly, under the head of applications "to modern problems of industry and public policy," may be good economic policy or they may not,--they are the expression of a sound common sense, an unvitiated solicitude for the welfare of mankind, and a wide information as to the facts of the situation. The merits of this policy of repression, as such, cannot be discussed here. On the other hand, the relation of this policy to the theoretical groundwork of the treatise needs also not be discussed here, inasmuch as it has substantially no relation to the theory. In this later portion of the volume Mr. Clark does not lean on doctrines of "final utility," "final productivity," or, indeed, on hedonistic economics at large. He speaks eloquently for the material and cultural interests of the community, and the references to his law of "natural distribution" might be cut bodily out of the discussion without lessening the cogency of his appeal or exposing any weakness in his position. Indeed, it is by no means certain that such an excision would not strengthen his appeal to men's sense of justice by eliminating irrelevant matter. Certain points in this later portion of the volume, however, where the argument is at variance with specific articles of theory professed by Mr. Clark, may be taken up, mainly to elucidate the weakness of his theoretical position at the points in question. He recognises with more than the current degree of freedom that the growth and practicability of monopolies under modern conditions is chiefly due to the negotiability of securities representing capital, coupled with the joint-stock character of modern business concerns.[32] These features of the modern (capitalistic) business situation enable a sufficiently few men to control a section of the community sufficiently large to make an effective monopoly. The most effective known form of organisation for purposes of monopoly, according to Mr. Clark, is that of the holding company, and the ordinary corporation follows it closely in effectiveness in this respect. The monopolistic control is effected by means of the vendible securities covering the capital engaged. To meet the specifications of Mr. Clark's theory of capital, these vendible securities--as _e.g._, the securities (common stock) of a holding company--should be simply the formal evidence of the ownership of certain productive goods and the like. Yet, by his own showing, the ownership of a share of productive goods proportionate to the face value, or the market value, of the securities is by no means the chief consequence of such an issue of securities.[33] One of the consequences, and for the purposes of Mr. Clark's argument the gravest consequence, of the employment of such securities, is the dissociation of ownership from the control of the industrial equipment, whereby the owners of certain securities, which stand in certain immaterial, technical relations to certain other securities, are enabled arbitrarily to control the use of the industrial equipment covered by the latter. These are facts of the modern organisation of capital, affecting the productivity of the industrial equipment and its serviceability both to its owners and to the community. They are facts, though not physically tangible objects; and they have an effect on the serviceability of industry no less decisive than the effect which any group of physically tangible objects of equal market value have. They are, moreover, facts which are bought and sold in the purchase and sale of these securities, as, _e.g._, the common stock of a holding company. They have a value, and therefore they have a "total effective utility." In short, these facts are intangible assets, which are the most consequential element in modern capital, but which have no existence in the theory of capital by which Mr. Clark aims to deal with "modern problems of industry." Yet, when he comes to deal with these problems, it is, of necessity, these intangible assets that immediately engage his attention. These intangible assets are an outgrowth of the freedom of contract under the conditions imposed by the machine industry; yet Mr. Clark proposes to suppress this category of intangible assets without prejudice to freedom of contract or to the machine industry, apparently without having taken thought of the lesson which he rehearses (pp. 390-391) from the introduction of the holding company, with its "sinister perfection," to take the place of the (less efficient) "trust" when the latter was dealt with somewhat as it is now proposed to deal with the holding company. One is tempted to remark that a more naïve apprehension of the facts of modern capital would have afforded a more competent realisation of the problems of monopoly. * * * * * It appears from what has just been said of Mr. Clark's "natural" distribution and of his dealing with the problems of modern industry that the logic of hedonism is of no avail for the theory of business affairs. Yet it is held, perhaps justly, that the hedonistic interpretation may be of great avail in analysing the industrial functions of the community, in their broad, generic character, even if it should not serve so well for the intricate details of the modern business situation. It may be at least a serviceable hypothesis for the outlines of economic theory, for the first approximations to the "economic laws" sought by taxonomists. To be serviceable for this purpose, the hypothesis need perhaps not be true to fact, at least not in the final details of the community's life or without material qualification;[34] but it must at least have that ghost of actuality that is implied in consistency with its own corollaries and ramifications. As has been suggested in an earlier paragraph, it is characteristic of hedonistic economics that the large and central element in its theoretical structure is the doctrine of distribution. Consumption being taken for granted as a quantitive matter simply,--essentially a matter of an insatiable appetite,--economics becomes a theory of acquisition; production is, theoretically, a process of acquisition, and distribution a process of distributive acquisition. The theory of production is drawn in terms of the gains to be acquired by production; and under competitive conditions this means necessarily the acquisition of a distributive share of what is available. The rest of what the facts of productive industry include, as, _e.g._, the facts of workmanship or the " state of the industrial arts," gets but a scant and perfunctory attention. Those matters are not of the theoretical essence of the scheme. Mr. Clark's general theory of production does not differ substantially from that commonly professed by the marginal-utility school. It is a theory of competitive acquisition. An inquiry into the principles of his doctrine, therefore, as they appear, _e.g._, in the early chapters of the _Essentials_, is, in effect, an inquiry into the competence of the main theorems of modern hedonistic economics. "All men seek to get as much net service from material wealth as they can." "Some of the benefit received is neutralised by the sacrifice incurred; but there is a net surplus of gains not thus canceled by sacrifices, and the generic motive which may properly be called economic is the desire to make this surplus large."[35] It is of the essence of the scheme that the acquisitive activities of mankind afford a net balance of pleasure. It is out of this net balance, presumably, that "the consumer's surpluses" arise, or it is in this that they merge. This optimistic conviction is a matter of presumption, of course; but it is universally held to be true by hedonistic economists, particularly by those who cultivate the doctrines of marginal utility. It is not questioned and not proven. It seems to be a surviving remnant of the eighteenth-century faith in a benevolent Order of Nature; that is to say, it is a rationalistic metaphysical postulate. It may be true or not, as matter of fact; but it is a postulate of the school, and its optimistic bias runs like a red thread through all the web of argument that envelops the "normal" competitive system. A surplus of gain is normal to the theoretical scheme. The next great theorem of this theory of acquisition is at cross-purposes with this one. Men get useful goods only at the cost of producing them, and production is irksome, painful, as has been recounted above. They go on producing utilities until, at the margin, the last increment of utility in the product is balanced by the concomitant increment of disutility in the way of irksome productive effort,--labor or abstinence. At the margin, pleasure-gain is balanced by pain-cost. But the "effective utility" of the total product is measured by that of the final unit; the effective utility of the whole is given by the number of units of product multiplied by the effective utility of the final unit; while the effective disutility (pain-cost) of the whole is similarly measured by the pain-cost of the final unit. The "total effective utility" of the producer's product equals the "total effective disutility" of his pains of acquisition. Hence there is no net surplus of utility in the outcome. The corrective objection is ready to hand,[36] that, while the balance of utility and disutility holds at the margin, it does not hold for the earlier units of the product, these earlier units having a larger utility and a lower cost, and so leaving a large net surplus of utility, which gradually declines as the margin is approached. But this attempted correction evades the hedonistic test. It shifts the ground from the calculus to the objects which provoke the calculation. Utility is a psychological matter, a matter of pleasurable appreciation, just as disutility, conversely, is a matter of painful appreciation. The individual who is held to count the costs and the gain in this hedonistic calculus is, by supposition, a highly reasonable person. He counts the cost to him as an individual against the gain to him as an individual. He looks before and after, and sizes the whole thing up in a reasonable course of conduct. The "absolute utility" would exceed the "effective utility" only on the supposition that the "producer" is an unreflecting sensory apparatus, such as the beasts of the field are supposed to be, devoid of that gift of appraisement and calculation which is the hypothetical hedonist's only human trait. There might on such a supposition--if the producer were an intelligent sensitive organism simply--emerge an excess of total pleasure over total pain, but there could then be no talk of utility or of disutility, since these terms imply intelligent reflection, and they are employed because they do so. The hedonistic producer looks to his own cost and gain, as an intelligent pleasure-seeker whose consciousness compasses the contrasted elements as wholes. He does not contrast the balance of pain and pleasure in the morning with the balance of pain and pleasure in the afternoon, and say that there is so much to the good because he was not so tired in the morning. Indeed, by hypothesis, the pleasure to be derived from the consumption of the product is a future, or expected, pleasure, and can be said to be present, at the point of time at which a given unit of pain-cost is incurred, only in anticipation; and it cannot be said that the anticipated pleasure attaching to a unit of product which emerges from the effort of the producer during the relatively painless first hour's work exceeds the anticipated pleasure attaching to a similar unit emerging from the second hour's work. Mr. Clark has, in effect, explained this matter in substantially the same way in another connection (_e.g._, p. 42), where he shows that the magnitude on which the question of utility and cost hinges is the "total effective utility," and that the "total absolute utility" is a matter not of what hedonistically is, in respect of utility as an outcome of production, but of what might have been under different circumstances. An equally unprofitable result may be reached from the same point of departure along a different line of argument. Granting that increments of product should be measured, in respect of utility, by comparison with the disutility of the concomitant increment of cost, then the diagrammatic arguments commonly employed are inadequate, in that the diagrams are necessarily drawn in two dimensions only,--length and breadth: whereas they should be drawn in three dimensions, so as to take account of the intensity of application as well as of its duration.[37] Apparently, the exigencies of graphic representation, fortified by the presumption that there always emerges a surplus of utility, have led marginal-utility theorists, in effect, to overlook this matter of intensity of application. When this element is brought in with the same freedom as the other two dimensions engaged, the argument will, in hedonistic consistency, run somewhat as follows,--the run of the facts being what it may. The producer, setting out on this irksome business, and beginning with the production of the exorbitantly useful initial unit of product, will, by hedonistic necessity, apply himself to the task with a correspondingly extravagant intensity, the irksomeness (disutility) of which necessarily rises to such a pitch as to leave no excess of utility in this initial unit of product above the concomitant disutility of the initial unit of productive effort.[38] As the utility of subsequent units of product progressively declines, so will the producer's intensity of irksome application concomitantly decline, maintaining a nice balance between utility and disutility throughout. There is, therefore, no excess of "absolute utility" above "effective utility" at any point on the curve, and no excess of "total absolute utility" above "total effective utility" of the product as a whole, nor above the "total absolute disutility" or the "total effective disutility" of the pain-cost. A transient evasion of this outcome may perhaps be sought by saying that the producer will act wisely, as a good hedonist should, and save his energies during the earlier moments of the productive period in order to get the best aggregate result from his day's labor, instead of spending himself in ill-advised excesses at the outset. Such seems to be the fact of the matter, so far as the facts wear a hedonistic complexion; but this correction simply throws the argument back on the previous position and concedes the force of what was there claimed. It amounts to saying that, instead of appreciating each successive unit of product in isolated contrast with its concomitant unit of irksome productive effort, the producer, being human, wisely looks forward to his total product and rates it by contrast with his total pain-cost. Whereupon, as before, no net surplus of utility emerges, under the rule which says that irksome production of utilities goes on until utility and disutility balance. But this revision of "final productivity" has further consequences for the optimistic doctrines of hedonism. Evidently, by a somewhat similar line of argument the "consumer's surplus" will be made to disappear, even as this that may be called the "producer's surplus" has disappeared. Production being acquisition, and the consumer's cost being cost of acquisition, the argument above should apply to the consumer's case without abatement. On considering this matter in terms of the hedonistically responsive individual concerned, with a view to determining whether there is, in his calculus of utilities and costs, any margin of uncovered utilities left over after he has incurred all the disutilities that are worth while to him,--instead of proceeding on a comparison between the pleasure-giving capacity of a given article and the market price of the article, all such alleged differential advantages within the scope of a single sensory are seen to be nothing better than an illusory diffractive effect due to a faulty instrument. But the trouble does not end here. The equality: pain-cost = pleasure-gain, is not a competent formula. It should be: pain-cost incurred = pleasure-gain anticipated. And between these two formulas lies the old adage, "there's many a slip 'twixt the cup and the lip." In an appreciable proportion of ventures, endeavors, and enterprises, men's expectations of pleasure-gain are in some degree disappointed,--through miscalculation, through disserviceable secondary effects of their productive efforts, by "the act of God," by "fire, flood, and pestilence." In the nature of things these discrepancies fall out on the side of loss more frequently than on that of gain. After all allowance has been made for what may be called serviceable errors, there remains a margin of disserviceable error, so that pain-cost > eventual pleasure-gain = anticipated pleasure-gain--_n._ Hence, in general, pain-cost > pleasure-gain. Hence it appears that, in the nature of things, men's pains of production are underpaid by that much; although it may, of course, be held that the nature of things at this point is not "natural" or "normal." To this it may be objected that the risk is discounted. Insurance is a practical discounting of risk; but insurance is resorted to only to cover risk that is appreciated by the person exposed to it, and it is such risks as are not appreciated by those who incur them that are chiefly in question here. And it may be added that insurance has hitherto not availed to equalise and distribute the chances of success and failure. Business gains--entrepreneur's gains, the rewards of initiative and enterprise--come out of this uncovered margin of adventure, and the losses of initiative and enterprise are to be set down to the same account. In some measure this element of initiative and enterprise enters into all economic endeavor. And it is not unusual for economists to remark that the volume of unsuccessful or only partly successful enterprise is very large. There are some lines of enterprise that are, as one might say, extra hazardous, in which the average falls out habitually on the wrong side of the account. Typical of this class is the production of the precious metals, particularly as conducted under that régime of free competition for which Mr. Clark speaks. It has been the opinion, quite advisedly, of such economists of the classic age of competition as J. S. Mill and Cairnes, _e.g._, that the world's supply of the precious metals has been got at an average or total cost exceeding their value by several fold. The producers, under free competition at least, are over-sanguine of results. But, in strict consistency, the hedonistic theory of human conduct does not allow men to be guided in their calculation of cost and gain, when they have to do with the precious metals, by different norms from those which rule their conduct in the general quest of gain. The visible difference in this respect between the production of the precious metals and production generally should be due to the larger proportions and greater notoriety of the risks in this field rather than to a difference in the manner of response to the stimulus of expected gain. The canons of hedonistic calculus permit none but a quantitative difference in the response. What happens in the production of the precious metals is typical of what happens in a measure and more obscurely throughout the field of productive effort. Instead of a surplus of utility of product above the disutility of acquisition, therefore, there emerges an average or aggregate net hedonistic deficit. On a consistent marginal-utility theory, all production is a losing game. The fact that Nature keeps the bank, it appears, does not take the hedonistic game of production out of the general category known of old to that class of sanguine hedonistic calculators whose day-dreams are filled with safe and sane schemes for breaking the bank. "Hope springs eternal in the human breast." Men are congenitally over-sanguine, it appears; and the production of utilities is, mathematically speaking, a function of the pig-headed optimism of mankind. It turns out that the laws of (human) nature malevolently grind out vexation for men instead of benevolently furthering the greatest happiness of the greatest number. The sooner the whole traffic ceases, the better,--the smaller will be the net balance of pain. The great hedonistic Law of Nature turns out to be simply the curse of Adam, backed by the even more sinister curse of Eve. * * * * * The remark was made in an earlier paragraph that Mr. Clark's theories have substantially no relation to his practical proposals. This broad declaration requires an equally broad qualification. While the positions reached in his theoretical development count for nothing in making or fortifying the positions taken on "problems of modern industry and public policy," the two phases of the discussion--the theoretical and the pragmatic--are the outgrowth of the same range of preconceptions and run back to the same metaphysical ground. The present canvass of items in the doctrinal system has already far overpassed reasonable limits, and it is out of the question here to pursue the exfoliation of ideas through Mr. Clark's discussion of public questions, even in the fragmentary fashion in which scattered items of the theoretical portion of his treatise have been passed in review. But a broad and rudely drawn characterisation may yet be permissible. This latter portion of the volume has the general complexion of a Bill of Rights. This is said, of course, with no intention of imputing a fault. It implies that the scope and method of the discussion is governed by the preconception that there is one right and beautiful definitive scheme of economic life, "to which the whole creation tends." Whenever and in so far as current phenomena depart or diverge from this definitive "natural" scheme or from the straight and narrow path that leads to its consummation, there is a grievance to be remedied by putting the wheels back into the rut. The future, such as it ought to be,--the only normally possible, natural future scheme of life,--is known by the light of this preconception; and men have an indefeasible right to the installation and maintenance of those specific economic relations, expedients, institutions, which this "natural" scheme comprises, and to no others. The consummation is presumed to dominate the course of things which is presumed to lead up to the consummation. The measures of redress whereby the economic Order of Nature is to renew its youth are simple, direct, and short-sighted, as becomes the proposals of pre-Darwinian hedonism, which is not troubled about the exuberant uncertainties of cumulative change. No doubt presents itself but that the community's code of right and equity in economic matters will remain unchanged under changing conditions of economic life. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXII, Feb., 1908. [2] _The Essentials of Economic Theory, as Applied to Modern Problems of Industry and Public Policy._ By John Bates Clark. New York: The Macmillan Company. 1907. [3] _Cf._, _e.g. The Distribution of Wealth_, p. 376, note. [4] See, _e.g._, J. S. Mill, _Political Economy_, Book I; Marshall, _Principles of Economics_, Vol. I, Books II-V. [5] _Cf._, _e.g._, such an account as Barrows, _Ethno-botany of the Coahuilla Indians_. [6] What would be the scientific rating of the work of a botanist who should spend his energy in devising ways and means to neutralize the ecological variability of plants, or of a physiologist who conceived it the end of his scientific endeavors to rehabilitate the vermiform appendix or the pineal eye, or to denounce and penalize the imitative coloring of the Viceroy butterfly? What scientific interest would attach to the matter if Mr. Loeb, _e.g._, should devote a few score pages to canvassing the moral responsibilities incurred by him in his parental relation to his parthenogenetically developed sea-urchin eggs? Those phenomena which Mr. Clark characterizes as "positive perversions" may be distasteful and troublesome, perhaps, but "the economic necessity of doing what is legally difficult" is not of the "essentials of theory." [7] It is a notable fact that even the genius of Herbert Spencer could extract nothing but taxonomy from his hedonistic postulates; _e.g._, _his Social Statics_. Spencer is both evolutionist and hedonist, but it is only by recourse to other factors, alien to the rational hedonistic scheme, such as habit, delusions, use and disuse, sporadic variation, environmental forces, that he is able to achieve anything in the way of genetic science, since it is only by this recourse that he is enabled to enter the field of cumulative change within which the modern post-Darwinian sciences live and move and have their being. [8] "The capital-goods have to be taken unit by unit if their value for productive purposes is to be rightly gauged. A part of a supply of potatoes is traceable to the hoes that dig them.... We endeavor simply to ascertain how badly the loss of one hoe would affect us or how much good the restoration of it would do us. This truth, like the foregoing ones, has a universal application in economics; for primitive men as well as civilized ones must estimate the specific productivity of the tools that they use," etc. Page 43. [9] _Cf._ a criticism of Mr. Fisher's conception in the _Political Science Quarterly_ for February, 1908. [10] "The machine itself is often a hopeless specialist. It can do one minute thing and that only, and when a new and better device appears for doing that one thing, the machine has to go, and not to some new employment, but to the junk heap. There is thus taking place a considerable waste of capital in consequence of mechanical and other progress." "Indeed, a quick throwing away of instruments which have barely begun to do their work is often the secret of the success of an enterprising manager, but it entails a destruction of capital." [11] The position of the laborer and his wages, in this light, would not be substantially different from that of the capitalist and his interest. Labor is no more possible, as a fact of industry, without the community's accumulated technological knowledge than is the use of "productive goods." [12] _Cf. Distribution of Wealth_, chaps, xii, xiii, vii, viii; _Essentials_, chaps, v-x. [13] _Essentials_, p. 158. [14] _Distribution_, chap. xxiv. [15] Chap. xxiv. [16] _Essentials_, p. 40. [17] Among modern economic hedonists, including Mr. Clark, there stands over from the better days of the order of nature a presumption, disavowed, but often decisive, that the sensational response to the like mechanical impact of the stimulating body is the same in different individuals. But, while this presumption stands ever in the background, and helps to many important conclusions, as in the case under discussion, few modern hedonists would question the statement in the text. [18] _Distribution_, p. 394. [19] In Mr. Clark's discussion, elsewhere, the "quasi"-character of the productive share of the laborer is indicated by saying that it is the product "imputed" or "imputable" to him. [20] _Essentials_, p. 92. Et si sensus deficit, ad firmandum cor sincerum sola fides sufficit. [21] See pp. 102-113; also p. 172, note. [22] "The cheapest and poorest grades of articles." Page 113. [23] See p. 113. [24] The disappearance, and the method of disappearance, of such elements of differential utility and disutility occupies a very important place in all marginal-utility ("final-utility") theories of market value, or "objective value." [25] "Only the simplest and cheapest things that are sold in the market at all bring just what they are worth to the buyers." Page 113. [26] It is, _e.g._, open to serious question whether Mr. Clark's curves of final productivity (pp. 139, 148), showing a declining output per unit in response to an increase of one of the complementary agents of production, will fit the common run of industry in case the output be counted by weight and tale. In many cases they will, no doubt; in many other cases they will not. But this is no criticism of the curves in question, since they do not, or at least should not, purport to represent the product in such terms, but in terms of utility. [27] To resort to an approximation after the manner of Malthus, if the supply of goods be supposed to increase by arithmetical progression, their final utility may be said concomitantly to decrease by geometrical progression. [28] _Cf. Essentials_, chap. iii, especially pp. 40-41. [29] The current marginal-utility diagrams are not of much use in this connection, because the angle of the tangent with the axis of ordinates, at any point, is largely a matter of the draftsman's taste. The abscissa and the ordinate do not measure commensurable units. The units on the abscissa are units of frequency, while those on the ordinate are units of amplitude; and the greater or less segment of line allowed per unit on either axis is a matter of independently arbitrary choice. Yet the proposition in the text remains true,--as true as hedonistic propositions commonly are. The magnitude of the angle of the tangent with the axis of ordinates decides whether the total (hedonistic) productivity at a given point in the curve increases or decreases with a (mechanical) increase of the productive agent,--no student at all familiar with marginal-utility arguments will question that patent fact. But the angle of the tangent depends on the fancy of the draftsman,--no one possessed of the elemental mathematical notions will question that equally patent fact. [30] A similar line of argument has been followed up by Mr. Clark for capital and interest, in a different connection. See _Essentials_, pp. 340-345, 356. [31] _Cf. Essentials_, pp. 83-90, 118-120. [32] _Cf._ chap. xxii, especially pp. 378-392. [33] _Cf._ p. 391. [34] _Cf. Essentials_, p. 39. [35] _Essentials_, p. 39. [36] _Cf. Essentials_, chap. iii, especially pp. 51-56. [37] This difficulty is recognized by the current marginal-utility arguments, and an allowance for intensity is made or presumed. But the allowance admitted is invariably insufficient. It might be said to be insufficient by hypothesis, since it is by hypothesis too small to offset the factor which it is admitted to modify. [38] The limit to which the intensity rises is a margin of the same kind as that which limits the duration. This supposition, that the intensity of application necessarily rises to such a pitch that its disutility overtakes and offsets the utility of the product, may be objected to as a bit of puerile absurdity; but it is a long time since puerility or absurdity has been a bar to any supposition in arguments on marginal utility. THE LIMITATIONS OF MARGINAL UTILITY[1] The limitations of the marginal-utility economics are sharp and characteristic. It is from first to last a doctrine of value, and in point of form and method it is a theory of valuation. The whole system, therefore, lies within the theoretical field of distribution, and it has but a secondary bearing on any other economic phenomena than those of distribution--the term being taken in its accepted sense of pecuniary distribution, or distribution in point of ownership. Now and again an attempt is made to extend the use of the principle of marginal utility beyond this range, so as to apply it to questions of production, but hitherto without sensible effect, and necessarily so. The most ingenious and the most promising of such attempts have been those of Mr. Clark, whose work marks the extreme range of endeavor and the extreme degree of success in so seeking to turn a postulate of distribution to account for a theory of production. But the outcome has been a doctrine of the production of values, and value, in Mr. Clark's as in other utility systems, is a matter of valuation; which throws the whole excursion back into the field of distribution. Similarly, as regards attempts to make use of this principle in an analysis of the phenomena of consumption, the best results arrived at are some formulation of the pecuniary distribution of consumption goods. Within this limited range marginal-utility theory is of a wholly statical character. It offers no theory of a movement of any kind, being occupied with the adjustment of values to a given situation. Of this, again, no more convincing illustration need be had than is afforded by the work of Mr. Clark, which is not excelled in point of earnestness, perseverance, or insight. For all their use of the term "dynamic," neither Mr. Clark nor any of his associates in this line of research have yet contributed anything at all appreciable to a theory of genesis, growth, sequence, change, process, or the like, in economic life. They have had something to say as to the bearing which given economic changes, accepted as premises, may have on valuation, and so on distribution; but as to the causes of change or the unfolding sequence of the phenomena of economic life they have had nothing to say hitherto; nor can they, since their theory is not drawn in causal terms but in terms of teleology. In all this the marginal-utility school is substantially at one with the classical economics of the nineteenth century, the difference between the two being that the former is confined within narrower limits and sticks more consistently to its teleological premises. Both are teleological, and neither can consistently admit arguments from cause to effect in the formulation of their main articles of theory. Neither can deal theoretically with phenomena of change, but at the most only with rational adjustment to change which may be supposed to have supervened. To the modern scientist the phenomena of growth and change are the most obtrusive and most consequential facts observable in economic life. For an understanding of modern economic life the technological advance of the past two centuries--_e.g._, the growth of the industrial arts--is of the first importance; but marginal-utility theory does not bear on this matter, nor does this matter bear on marginal-utility theory. As a means of theoretically accounting for this technological movement in the past or in the present, or even as a means of formally, technically stating it as an element in the current economic situation, that doctrine and all its works are altogether idle. The like is true for the sequence of change that is going forward in the pecuniary relations of modern life; the hedonistic postulate and its propositions of differential utility neither have served nor can serve an inquiry into these phenomena of growth, although the whole body of marginal-utility economics lies within the range of these pecuniary phenomena. It has nothing to say to the growth of business usages and expedients or to the concomitant changes in the principles of conduct which govern the pecuniary relations of men, which condition and are conditioned by these altered relations of business life or which bring them to pass. It is characteristic of the school that wherever an element of the cultural fabric, an institution or any institutional phenomenon, is involved in the facts with which the theory is occupied, such institutional facts are taken for granted, denied, or explained away. If it is a question of price, there is offered an explanation of how exchanges may take place with such effect as to leave money and price out of the account. If it is a question of credit, the effect of credit extension on business traffic is left on one side and there is an explanation of how the borrower and lender coöperate to smooth out their respective income streams of consumable goods or sensations of consumption. The failure of the school in this respect is consistent and comprehensive. And yet these economists are lacking neither in intelligence nor in information. They are, indeed, to be credited, commonly, with a wide range of information and an exact control of materials, as well as with a very alert interest in what is going on; and apart from their theoretical pronouncements the members of the school habitually profess the sanest and most intelligent views of current practical questions, even when these questions touch matters of institutional growth and decay. The infirmity of this theoretical scheme lies in its postulates, which confine the inquiry to generalisations of the teleological or "deductive" order. These postulates, together with the point of view and logical method that follow from them, the marginal-utility school shares with other economists of the classical line--for this school is but a branch or derivative of the English classical economists of the nineteenth century. The substantial difference between this school and the generality of classical economists lies mainly in the fact that in the marginal-utility economics the common postulates are more consistently adhered to at the same time that they are more neatly defined and their limitations are more adequately realized. Both the classical school in general and its specialized variant, the marginal-utility school, in particular, take as their common point of departure the traditional psychology of the early nineteenth-century hedonists, which is accepted as a matter of course or of common notoriety and is held quite uncritically. The central and well-defined tenet so held is that of the hedonistic calculus. Under the guidance of this tenet and of the other psychological conceptions associated and consonant with it, human conduct is conceived of and interpreted as a rational response to the exigencies of the situation in which mankind is placed; as regards economic conduct it is such a rational and unprejudiced response to the stimulus of anticipated pleasure and pain--being, typically and in the main, a response to the promptings of anticipated pleasure, for the hedonists of the nineteenth century and of the marginal-utility school are in the main of an optimistic temper.[2] Mankind is, on the whole and normally, (conceived to be) clearsighted and farsighted in its appreciation of future sensuous gains and losses, although there may be some (inconsiderable) difference between men in this respect. Men's activities differ, therefore, (inconsiderably) in respect of the alertness of the response and the nicety of adjustment of irksome pain-cost to apprehended future sensuous gain; but, on the whole, no other ground or line or guidance of conduct than this rationalistic calculus falls properly within the cognizance of the economic hedonists. Such a theory can take account of conduct only in so far as it is rational conduct, guided by deliberate and exhaustively intelligent choice--wise adaptation to the demands of the main chance. The external circumstances which condition conduct are variable, of course, and so they will have a varying effect upon conduct; but their variation is, in effect, construed to be of such a character only as to vary the degree of strain to which the human agent is subject by contact with these external circumstances. The cultural elements involved in the theoretical scheme, elements that are of the nature of institutions, human relations governed by use and wont in whatever kind and connection, are not subject to inquiry but are taken for granted as pre-existing in a finished, typical form and as making up a normal and definitive economic situation, under which and in terms of which human intercourse is necessarily carried on. This cultural situation comprises a few large and simple articles of institutional furniture, together with their logical implications or corollaries; but it includes nothing of the consequences or effects caused by these institutional elements. The cultural elements so tacitly postulated as immutable conditions precedent to economic life are ownership and free contract, together with such other features of the scheme of natural rights as are implied in the exercise of these. These cultural products are, for the purpose of the theory, conceived to be given a priori in unmitigated force. They are part of the nature of things; so that there is no need of accounting for them or inquiring into them, as to how they have come to be such as they are, or how and why they have changed and are changing, or what effect all this may have on the relations of men who live by or under this cultural situation. Evidently the acceptance of these immutable premises, tacitly, because uncritically and as a matter of course, by hedonistic economics gives the science a distinctive character and places it in contrast with other sciences whose premises are of a different order. As has already been indicated, the premises in question, so far as they are peculiar to the hedonistic economics, are (_a_) a certain institutional situation, the substantial feature of which is the natural right of ownership, and (_b_) the hedonistic calculus. The distinctive character given to this system of theory by these postulates and by the point of view resulting from their acceptance may be summed up broadly and concisely in saying that the theory is confined to the ground of sufficient reason instead of proceeding on the ground of efficient cause. The contrary is true of modern science, generally (except mathematics), particularly of such sciences as have to do with the phenomena of life and growth. The difference may seem trivial. It is serious only in its consequences. The two methods of inference--from sufficient reason and from efficient cause--are out of touch with one another and there is no transition from one to the other: no method of converting the procedure or the results of the one into those of the other. The immediate consequence is that the resulting economic theory is of a teleological character--"deductive" or "a priori" as it is often called--instead of being drawn in terms of cause and effect. The relation sought by this theory among the facts with which it is occupied is the control exercised by future (apprehended) events over present conduct. Current phenomena are dealt with as conditioned by their future consequences; and in strict marginal-utility theory they can be dealt with only in respect of their control of the present by consideration of the future. Such a (logical) relation of control or guidance between the future and the present of course involves an exercise of intelligence, a taking thought, and hence an intelligent agent through whose discriminating forethought the apprehended future may affect the current course of events; unless, indeed, one were to admit something in the way of a providential order of nature or some occult line of stress of the nature of sympathetic magic. Barring magical and providential elements, the relation of sufficient reason runs by way of the interested discrimination, the forethought, of an agent who takes thought of the future and guides his present activity by regard for this future. The relation of sufficient reason runs only from the (apprehended) future into the present, and it is solely of an intellectual, subjective, personal, teleological character and force; while the relation of cause and effect runs only in the contrary direction, and it is solely of an objective, impersonal, materialistic character and force. The modern scheme of knowledge, on the whole, rests, for its definitive ground, on the relation of cause and effect; the relation of sufficient reason being admitted only provisionally and as a proximate factor in the analysis, always with the unambiguous reservation that the analysis must ultimately come to rest in terms of cause and effect. The merits of this scientific animus, of course, do not concern the present argument. Now, it happens that the relation of sufficient reason enters very substantially into human conduct. It is this element of discriminating forethought that distinguishes human conduct from brute behavior. And since the economist's subject of inquiry is this human conduct, that relation necessarily comes in for a large share of his attention in any theoretical formulation of economic phenomena, whether hedonistic or otherwise. But while modern science at large has made the causal relation the sole ultimate ground of theoretical formulation; and while the other sciences that deal with human life admit the relation of sufficient reason as a proximate, supplementary, or intermediate ground, subsidiary, and subservient to the argument from cause to effect; economics has had the misfortune--as seen from the scientific point of view--to let the former supplant the latter. It is, of course, true that human conduct is distinguished from other natural phenomena by the human faculty for taking thought, and any science that has to do with human conduct must face the patent fact that the details of such conduct consequently fall into the teleological form; but it is the peculiarity of the hedonistic economics that by force of its postulates its attention is confined to this teleological bearing of conduct alone. It deals with this conduct only in so far as it may be construed in rationalistic, teleological terms of calculation and choice. But it is at the same time no less true that human conduct, economic or otherwise, is subject to the sequence of cause and effect, by force of such elements as habituation and conventional requirements. But facts of this order, which are to modern science of graver interest than the teleological details of conduct, necessarily fall outside the attention of the hedonistic economist, because they cannot be construed in terms of sufficient reason, such as his postulates demand, or be fitted into a scheme of teleological doctrines. There is, therefore, no call to impugn these premises of the marginal-utility economics within their field. They commend themselves to all serious and uncritical persons at the first glance. They are principles of action which underlie the current, business-like scheme of economic life, and as such, as practical grounds of conduct, they are not to be called in question without questioning the existing law and order. As a matter of course, men order their lives by these principles and, practically, entertain no question of their stability and finality. That is what is meant by calling them institutions; they are settled habits of thought common to the generality of men. But it would be mere absentmindedness in any student of civilization therefore to admit that these or any other human institutions have this stability which is currently imputed to them or that they are in this way intrinsic to the nature of things. The acceptance by the economists of these or other institutional elements as given and immutable limits their inquiry in a particular and decisive way. It shuts off the inquiry at the point where the modern scientific interest sets in. The institutions in question are no doubt good for their purpose as institutions, but they are not good as premises for a scientific inquiry into the nature, origin, growth, and effects of these institutions and of the mutations which they undergo and which they bring to pass in the community's scheme of life. To any modern scientist interested in economic phenomena, the chain of cause and effect in which any given phase of human culture is involved, as well as the cumulative changes wrought in the fabric of human conduct itself by the habitual activity of mankind, are matters of more engrossing and more abiding interest than the method of inference by which an individual is presumed invariably to balance pleasure and pain under given conditions that are presumed to be normal and invariable. The former are questions of the life-history of the race or the community, questions of cultural growth and of the fortunes of generations; while the latter is a question of individual casuistry in the face of a given situation that may arise in the course of this cultural growth. The former bear on the continuity and mutations of that scheme of conduct whereby mankind deals with its material means of life; the latter, if it is conceived in hedonistic terms, concerns a disconnected episode in the sensuous experience of an individual member of such a community. In so far as modern science inquires into the phenomena of life, whether inanimate, brute, or human, it is occupied about questions of genesis and cumulative change, and it converges upon a theoretical formulation in the shape of a life-history drawn in causal terms. In so far as it is a science in the current sense of the term, any science, such as economics, which has to do with human conduct, becomes a genetic inquiry into the human scheme of life; and where, as in economics, the subject of inquiry is the conduct of man in his dealings with the material means of life, the science is necessarily an inquiry into the life-history of material civilization, on a more or less extended or restricted plan. Not that the economist's inquiry isolates material civilization from all other phases and bearings of human culture, and so studies the motions of an abstractly conceived "economic man." On the contrary, no theoretical inquiry into this material civilization that shall be at all adequate to any scientific purpose can be carried out without taking this material civilization in its causal, that is to say, its genetic, relations to other phases and bearings of the cultural complex; without studying it as it is wrought upon by other lines of cultural growth and as working its effects in these other lines. But in so far as the inquiry is economic science, specifically, the attention will converge upon the scheme of material life and will take in other phases of civilization only in their correlation with the scheme of material civilization. Like all human culture this material civilization is a scheme of institutions--institutional fabric and institutional growth. But institutions are an outgrowth of habit. The growth of culture is a cumulative sequence of habituation, and the ways and means of it are the habitual response of human nature to exigencies that vary incontinently, cumulatively, but with something of a consistent sequence in the cumulative variations that so go forward,--incontinently, because each new move creates a new situation which induces a further new variation in the habitual manner of response; cumulatively, because each new situation is a variation of what has gone before it and embodies as causal factors all that has been effected by what went before; consistently, because the underlying traits of human nature (propensities, aptitudes, and what not) by force of which the response takes place, and on the ground of which the habituation takes effect, remain substantially unchanged. Evidently an economic inquiry which occupies itself exclusively with the movements of this consistent, elemental human nature under given, stable institutional conditions--such as is the case with the current hedonistic economics--can reach statical results alone; since it makes abstraction from those elements that make for anything but a statical result. On the other hand an adequate theory of economic conduct, even for statical purposes, cannot be drawn in terms of the individual simply--as is the case in the marginal-utility economics--because it cannot be drawn in terms of the underlying traits of human nature simply; since the response that goes to make up human conduct takes place under institutional norms and only under stimuli that have an institutional bearing; for the situation that provokes and inhibits action in any given case is itself in great part of institutional, cultural derivation. Then, too, the phenomena of human life occur only as phenomena of the life of a group or community: only under stimuli due to contact with the group and only under the (habitual) control exercised by canons of conduct imposed by the group's scheme of life. Not only is the individual's conduct hedged about and directed by his habitual relations to his fellows in the group, but these relations, being of an institutional character, vary as the institutional scheme varies. The wants and desires, the end and aim, the ways and means, the amplitude and drift of the individual's conduct are functions of an institutional variable that is of a highly complex and wholly unstable character. The growth and mutations of the institutional fabric are an outcome of the conduct of the individual members of the group, since it is out of the experience of the individuals, through the habituation of individuals, that institutions arise; and it is in this same experience that these institutions act to direct and define the aims and end of conduct. It is, of course, on individuals that the system of institutions imposes those conventional standards, ideals, and canons of conduct that make up the community's scheme of life. Scientific inquiry in this field, therefore, must deal with individual conduct and must formulate its theoretical results in terms of individual conduct. But such an inquiry can serve the purposes of a genetic theory only if and in so far as this individual conduct is attended to in those respects in which it counts toward habituation, and so toward change (or stability) of the institutional fabric, on the one hand, and in those respects in which it is prompted and guided by the received institutional conceptions and ideals on the other hand. The postulates of marginal utility, and the hedonistic preconceptions generally, fail at this point in that they confine the attention to such bearings of economic conduct as are conceived not to be conditioned by habitual standards and ideals and to have no effect in the way of habituation. They disregard or abstract from the causal sequence of propensity and habituation in economic life and exclude from theoretical inquiry all such interest in the facts of cultural growth, in order to attend to those features of the case that are conceived to be idle in this respect. All such facts of institutional force and growth are put on one side as not being germane to pure theory; they are to be taken account of, if at all, by afterthought, by a more or less vague and general allowance for inconsequential disturbances due to occasional human infirmity. Certain institutional phenomena, it is true, are comprised among the premises of the hedonists, as has been noted above; but they are included as postulates a priori. So the institution of ownership is taken into the inquiry not as a factor of growth or an element subject to change, but as one of the primordial and immutable facts of the order of nature, underlying the hedonistic calculus. Property, ownership, is presumed as the basis of hedonistic discrimination and it is conceived to be given in its finished (nineteenth-century) scope and force. There is no thought either of a conceivable growth of this definitive nineteenth-century institution out of a cruder past or of any conceivable cumulative change in the scope and force of ownership in the present or future. Nor is it conceived that the presence of this institutional element in men's economic relations in any degree affects or disguises the hedonistic calculus, or that its pecuniary conceptions and standards in any degree standardize, color, mitigate, or divert the hedonistic calculator from the direct and unhampered quest of the net sensuous gain. While the institution of property is included in this way among the postulates of the theory, and is even presumed to be ever-present in the economic situation, it is allowed to have no force in shaping economic conduct, which is conceived to run its course to its hedonistic outcome as if no such institutional factor intervened between the impulse and its realization. The institution of property, together with all the range of pecuniary conceptions that belong under it and that cluster about it, are presumed to give rise to no habitual or conventional canons of conduct or standards of valuation, no proximate ends, ideals, or aspirations. All pecuniary notions arising from ownership are treated simply as expedients of computation which mediate between the pain-cost and the pleasure-gain of hedonistic choice, without lag, leak, or friction; they are conceived simply as the immutably correct, God-given notation of the hedonistic calculus. The modern economic situation is a business situation, in that economic activity of all kinds is commonly controlled by business considerations. The exigencies of modern life are commonly pecuniary exigencies. That is to say they are exigencies of the ownership of property. Productive efficiency and distributive gain are both rated in terms of price. Business considerations are considerations of price, and pecuniary exigencies of whatever kind in the modern communities are exigencies of price. The current economic situation is a price system. Economic institutions in the modern civilized scheme of life are (prevailingly) institutions of the price system. The accountancy to which all phenomena of modern economic life are amenable is an accountancy in terms of price; and by the current convention there is no other recognized scheme of accountancy, no other rating, either in law or in fact, to which the facts of modern life are held amenable. Indeed, so great and pervading a force has this habit (institution) of pecuniary accountancy become that it extends, often as a matter of course, to many facts which properly have no pecuniary bearing and no pecuniary magnitude, as, _e.g._, works of art, science, scholarship, and religion. More or less freely and fully, the price system dominates the current commonsense in its appreciation and rating of these non-pecuniary ramifications of modern culture; and this in spite of the fact that, on reflection, all men of normal intelligence will freely admit that these matters lie outside the scope of pecuniary valuation. Current popular taste and the popular sense of merit and demerit are notoriously affected in some degree by pecuniary considerations. It is a matter of common notoriety, not to be denied or explained away, that pecuniary ("commercial ") tests and standards are habitually made use of outside of commercial interests proper. Precious stones, it is admitted, even by hedonistic economists, are more esteemed than they would be if they were more plentiful and cheaper. A wealthy person meets with more consideration and enjoys a larger measure of good repute than would fall to the share of the same person with the same habit of mind and body and the same record of good and evil deeds if he were poorer. It may well be that this current "commercialisation" of taste and appreciation has been overstated by superficial and hasty critics of contemporary life, but it will not be denied that there is a modicum of truth in the allegation. Whatever substance it has, much or little, is due to carrying over into other fields of interest the habitual conceptions induced by dealing with and thinking of pecuniary matters. These "commercial" conceptions of merit and demerit are derived from business experience. The pecuniary tests and standards so applied outside of business transactions and relations are not reducible to sensuous terms of pleasure and pain. Indeed, it may, _e.g._, be true, as is commonly believed, that the contemplation of a wealthy neighbor's pecuniary superiority yields painful rather than pleasurable sensations as an immediate result; but it is equally true that such a wealthy neighbor is, on the whole, more highly regarded and more considerately treated than another neighbor who differs from the former only in being less enviable in respect of wealth. It is the institution of property that gives rise to these habitual grounds of discrimination, and in modern times, when wealth is counted in terms of money, it is in terms of money value that these tests and standards of pecuniary excellence are applied. This much will be admitted. Pecuniary institutions induce pecuniary habits of thought which affect men's discrimination outside of pecuniary matters; but the hedonistic interpretation alleges that such pecuniary habits of thought do not affect men's discrimination in pecuniary matters. Although the institutional scheme of the price system visibly dominates the modern community's thinking in matters that lie outside the economic interest, the hedonistic economists insist, in effect, that this institutional scheme must be accounted of no effect within that range of activity to which it owes its genesis, growth, and persistence. The phenomena of business, which are peculiarly and uniformly phenomena of price, are in the scheme of the hedonistic theory reduced to non-pecuniary hedonistic terms and the theoretical formulation is carried out as if pecuniary conceptions had no force within the traffic in which such conceptions originate. It is admitted that preoccupation with commercial interests has "commercialised" the rest of modern life, but the "commercialisation" of commerce is not admitted. Business transactions and computations in pecuniary terms, such as loans, discounts, and capitalisation, are without hesitation or abatement converted into terms of hedonistic utility, and conversely. It may be needless to take exception to such conversion from pecuniary into sensuous terms, for the theoretical purpose for which it is habitually made; although, if need were, it might not be excessively difficult to show that the whole hedonistic basis of such a conversion is a psychological misconception. But it is to the remoter theoretical consequences of such a conversion that exception is to be taken. In making the conversion abstraction is made from whatever elements do not lend themselves to its terms; which amounts to abstracting from precisely those elements of business that have an institutional force and that therefore would lend themselves to scientific inquiry of the modern kind--those (institutional) elements whose analysis might contribute to an understanding of modern business and of the life of the modern business community as contrasted with the assumed primordial hedonistic calculus. The point may perhaps be made clearer. Money and the habitual resort to its use are conceived to be simply the ways and means by which consumable goods are acquired, and therefore simply a convenient method by which to procure the pleasurable sensations of consumption; these latter being in hedonistic theory the sole and overt end of all economic endeavor. Money values have therefore no other significance than that of purchasing power over consumable goods, and money is simply an expedient of computation. Investment, credit extensions, loans of all kinds and degrees, with payment of interest and the rest, are likewise taken simply as intermediate steps between the pleasurable sensations of consumption and the efforts induced by the anticipation of these sensations, other bearings of the case being disregarded. The balance being kept in terms of the hedonistic consumption, no disturbance arises in this pecuniary traffic so long as the extreme terms of this extended hedonistic equation--pain-cost and pleasure-gain--are not altered, what lies between these extreme terms being merely algebraic notation employed for convenience of accountancy. But such is not the run of the facts in modern business. Variations of capitalization, _e.g._, occur without its being practicable to refer them to visibly equivalent variations either in the state of the industrial arts or in the sensations of consumption. Credit extensions tend to inflation of credit, rising prices, overstocking of markets, etc., likewise without a visible or securely traceable correlation in the state of the industrial arts or in the pleasures of consumption; that is to say, without a visible basis in those material elements to which the hedonistic theory reduces all economic phenomena. Hence the run of the facts, in so far, must be thrown out of the theoretical formulation. The hedonistically presumed final purchase of consumable goods is habitually not contemplated in the pursuit of business enterprise. Business men habitually aspire to accumulate wealth in excess of the limits of practicable consumption, and the wealth so accumulated is not intended to be converted by a final transaction of purchase into consumable goods or sensations of consumption. Such commonplace facts as these, together with the endless web of business detail of a like pecuniary character, do not in hedonistic theory raise a question as to how these conventional aims, ideals, aspirations, and standards have come into force or how they affect the scheme of life in business or outside of it; they do not raise those questions because such questions cannot be answered in the terms which the hedonistic economists are content to use, or, indeed, which their premises permit them to use. The question which arises is how to explain the facts away: how theoretically to neutralize them so that they will not have to appear in the theory, which can then be drawn in direct and unambiguous terms of rational hedonistic calculation. They are explained away as being aberrations due to oversight or lapse of memory on the part of business men, or to some failure of logic or insight. Or they are construed and interpreted into the rationalistic terms of the hedonistic calculus by resort to an ambiguous use of the hedonistic concepts. So that the whole "money economy," with all the machinery of credit and the rest, disappears in a tissue of metaphors to reappear theoretically expurgated, sterilized, and simplified into a "refined system of barter," culminating in a net aggregate maximum of pleasurable sensations of consumption. But since it is in just this unhedonistic, unrationalistic pecuniary traffic that the tissue of business life consists; since it is this peculiar conventionalism of aims and standards that differentiates the life of the modern business community from any conceivable earlier or cruder phase of economic life; since it is in this tissue of pecuniary intercourse and pecuniary concepts, ideals, expedients, and aspirations that the conjunctures of business life arise and run their course of felicity and devastation; since it is here that those institutional changes take place which distinguish one phase or era of the business community's life from any other; since the growth and change of these habitual, conventional elements make the growth and character of any business era or business community; any theory of business which sets these elements aside or explains them away misses the main facts which it has gone out to seek. Life and its conjunctures and institutions being of this complexion, however much that state of the case may be deprecated, a theoretical account of the phenomena of this life must be drawn in these terms in which the phenomena occur. It is not simply that the hedonistic interpretation of modern economic phenomena is inadequate or misleading; if the phenomena are subjected to the hedonistic interpretation in the theoretical analysis they disappear from the theory; and if they would bear the interpretation in fact they would disappear in fact. If, in fact, all the conventional relations and principles of pecuniary intercourse were subject to such a perpetual rationalized, calculating revision, so that each article of usage, appreciation, or procedure must approve itself _de novo_ on hedonistic grounds of sensuous expediency to all concerned at every move, it is not conceivable that the institutional fabric would last over night. FOOTNOTES: [1] Reprinted by permission from the _Journal of Political Economy_, Vol. XVII, No. 9 November 1909. [2] The conduct of mankind differs from that of the brutes in being determined by anticipated sensations of pleasure and pain, instead of actual sensations. Hereby, in so far, human conduct is taken out of the sequence of cause and effect and falls instead under the rule of sufficient reason. By virtue of this rational faculty in man the connection between stimulus and response is teleological instead of causal. The reason for assigning the first and decisive place to pleasure, rather than to pain, in the determination of human conduct, appears to be the (tacit) acceptance of that optimistic doctrine of a beneficent order of nature which the nineteenth century inherited from the eighteenth. GUSTAV SCHMOLLER'S ECONOMICS[1] Professor Schmoller's _Grundriss_[2] is an event of the first importance in economic literature. It appears from later advices that the second and concluding volume of the work is hardly to be looked for at as early a date as the author's expressions in his preface had led us to anticipate. What lies before Professor Schmoller's readers, therefore, in this first volume of the _Outlines_ is but one-half of the compendious statement which he here purposes making of his theoretical position and of his views and exemplification of the scope and method of economic science. It may accordingly seem adventurous to attempt a characterisation of his economic system on the basis of this avowedly incomplete statement. And yet such an endeavor is not altogether gratuitous, nor need it in any great measure proceed on hypothetical grounds. The introduction comprised in the present volume sketches the author's aim in an outline sufficiently full to afford a convincing view of the "system" of science for which he speaks; and the two books by which the introduction is followed show Professor Schmoller's method of inquiry consistently carried out, as well as the reach and nature of the theoretical conclusions which he considers to lie within the competency of economic science. And with regard to an economist who is so much of an innovator,--not to say so much of an iconoclast,--and whose work touches the foundations of the science so intimately and profoundly, the interest of his critics and associates must, at least for the present, center chiefly about these questions as to the scope and nature assigned to the theory by his discussion, as to the range and character of the material of which he makes use, and as to the methods of inquiry which his sagacity and experience commend. So, therefore, while the _Outlines_ is yet incomplete, considered as a compendium of details of doctrine, the work in its unfinished state need not thereby be an inadequate expression of Professor Schmoller's relation to economic science. Herewith for the first time economic readers are put in possession of a fully advised deliverance on economic science at large as seen and cultivated by that modernised historical school of which Professor Schmoller is the authoritative exponent. Valuable and characteristic as his earlier discussions on the scope and method of the science are, they are but preliminary studies and tentative formulations as compared with this maturer work, which not only avows itself a definitive formulation, but has about it an air of finality perceptible at every turn. But this comes near saying that it embodies the sole comprehensive working-out of the scientific aims of the historical school. Discussions partially covering the field, monographs and sketches there are in great number, showing the manner of economic theory that was to be looked for as an outcome of the "historical diversion." Some of these, especially some of the later ones, are extremely valuable in the results they offer, as well as significant of the trend which the science is taking under the hands of the German students.[3] But a comprehensive work, aiming to formulate a body of economic theory on the basis afforded by the "historical method," has not hitherto been seriously attempted. To the broad statement just made exception might perhaps be taken in favor of Schaeffle's half-forgotten work of the seventies, together possibly with several other less notable and less consistent endeavors of a similar kind, dating back to the early decades of the school. Probably none of the younger generation of economists would be tempted to cite Roscher's work as invalidating such a statement as the one made above. Although time has been allowed for the acceptance and authentication of these endeavors of the earlier historical economists in the direction of a system of economic theory,--that is to say, of an economic science,--they have failed of authentication at the hands of the students of the science; and there seems no reason to regard this failure as less than definitive. During the last two decades the historical school has branched into two main directions of growth, somewhat divergent, so that broad general statements regarding the historical economists can be less confidently made to-day than perhaps at any earlier time. Now, as regards the more conservative branch, the historical economists of the stricter observance,--these modern continuers of what may be called the elder line of the historical school can scarcely be said to cultivate a science at all, their aim being not theoretical work. Assuredly, the work of this elder line, of which Professor Wagner is the unquestioned head, is by no means idle. It is work of a sufficiently important and valuable order, perhaps it is indispensable to the task which the science has in hand, but, broadly speaking, it need not be counted with in so far as it touches directly upon economic theory. This elder line of German economics, in its numerous modern representatives, shows both insight and impartiality; but as regards economic theory their work bears the character of eclecticism rather than that of a constructive advance. Frequent and peremptory as their utterances commonly are on points of doctrine, it is only very rarely that these utterances embody theoretical views arrived at or verified by the economists who make them or by such methods of inquiry as are characteristic of these economists. Where these expressions of doctrine are not of the nature of maxims of expediency, they are, as is well known, commonly borrowed somewhat uncritically from classical sources. Of constructive scientific work--that is to say, of theory--this elder line of German economics is innocent; nor does there seem to be any prospect of an eventual output of theory on the part of that branch of the historical school, unless they should unexpectedly take advice, and make the scope, and therefore the method, of their inquiry something more than historical in the sense in which that term is currently accepted. The historical economics of the conservative kind seems to be a barren field in the theoretical respect. So that whatever characteristic articles of general theory the historical school may enrich the science with are to be looked for at the hands of those men who, like Professor Schmoller, have departed from the strict observance of the historical method. A peculiar interest, therefore, attaches to his work as the best accepted and most authoritative spokesman of that branch of historical economics which professes to cultivate theoretical inquiry. It serves to show in what manner and degree this more scientific wing of the historical school have outgrown the original "historical" standpoint and range of conceptions, and how they have passed from a distrust of all economic theory to an eager quest of theoretical formulations that shall cover all phenomena of economic life to better purpose than the body of doctrine received from the classical writers and more in consonance with the canons of contemporary science at large. That this should have been the outcome of the half-century of development through which the school has now passed might well seem unexpected, if not incredible, to any who saw the beginning of that divergence within the school, a generation ago, out of which this modernised, theoretical historical economics has arisen. Professor Schmoller entered the field early, in the sixties, as a protestant against the aims and ideals then in vogue in economics. His protest ran not only against the methods and results of the classical writers, but also against the views professed by the leaders of the historical school, both as regards the scope of the science and as regards the character of the laws or generalisations sought by the science. His early work, in so far as he was at variance with his colleagues, was chiefly critical; and there is no good evidence that he then had a clear conception of the character of that constructive work to which it has been his persistent aim to turn the science. Hence he came to figure in common repute as an iconoclast and an extreme exponent of the historical school, in that he was held practically to deny the feasibility of a scientific treatment of economic matters and to aim at confining economics to narrative, statistics, and description. This iconoclastic or critical phase of his economic discussion is now past, and with it the uncertainty as to the trend and outcome of his scientific activity. To understand the significance of the diversion created by Professor Schmoller as regards the scope and method of economics, it is necessary, very briefly, to indicate the position occupied by that early generation of historical economists from which his teaching diverged, and more particularly those points of the older canon at which he has come to differ characteristically from the views previously in vogue. As regards the situation in which the historical school, as exemplified by its leaders, was then placed, it is, of course, something of a commonplace that by the end of its first twenty years of endeavor in the reform of economic science the school had, in point of systematic results, scarcely got beyond preliminaries. And even these preliminaries were not in all respects obviously to the purpose. A new and wider scope had been indicated for economic inquiry, as well as a new aim and method for theoretical discussion. But the new ideals of theoretical advance, as well as the ways and means indicated for their attainment, still had mainly a speculative interest. Nothing substantial had been done towards the realisation of the former or the _mise en oeuvre_ of the latter. The historical economists can scarcely be said at that time to have put their hand to the new engines which they professed to house in their workshop. Apart from polemics and speculation concerning ideals, the serious interest and endeavors of the school had up to that time been in the field of history rather than in that of economics, except so far as the adepts of the new school continued in a fragmentary way to inculcate and, in some slight and uncertain degree, to elaborate the dogmas of the classical writers whom they sought to discredit. The character of historical economics at the time when Professor Schmoller entered on his work of criticism and revision is fairly shown by Roscher's writings. Whatever may be thought to-day of Roscher's rank as an economist, in contrast with Knies and Hildebrand, it will scarcely be questioned that at the close of the first quarter-century of the life history of the historical school it was Roscher's conception of the scope and method of economics that found the widest acceptance and that best expressed the animus of that body of students who professed to cultivate economics by the historical method. For the purpose in hand Roscher's views may, therefore, be taken as typical, all the more readily since for the very general purpose here intended there are no serious discrepancies between Roscher and his two illustrious contemporaries. The chief difference is that Roscher is more naïve and more specific. He has also left a more considerable volume of results achieved by the professed use of his method. Roscher's professed method was what he calls the "historico-physiological" method. This he contrasts with the "philosophical" or "idealistic" method. But his air of depreciation as regards "philosophical" methods in economics must not be taken to mean that Roscher's own economic speculations were devoid of all philosophical or metaphysical basis. It only means that his philosophical postulates were different from those of the economists whom he discredits, and that they were regarded by him as self-evident. As must necessarily be the case with a writer who had neither a special aptitude for nor special training in philosophical inquiries, Roscher's metaphysical postulates are, of course, chiefly tacit. They are the common-sense, commonplace metaphysics afloat in educated German circles in the time of Roscher's youth,--during the period when his growth and education gave him his outlook on life and knowledge and laid the basis of his intellectual habits; which means that these postulates belong to what Höffding has called the "Romantic" school of thought, and are of a Hegelian complexion. Roscher being not a professed philosophical student, it is neither easy nor safe to particularise closely as regards his fundamental metaphysical tenets; but, as near as so specific an identification of his philosophical outlook is practicable, he must be classed with the Hegelian "Right." But since the Hegelian metaphysics had in Roscher's youth an unbroken vogue in reputable German circles, especially in those ultra-reputable circles within which lay the gentlemanly life and human contact of Roscher, the postulates afforded by the Hegelian metaphysics were accepted simply as a matter of course, and were not recognised as metaphysical at all. And in this his metaphysical affiliation Roscher is fairly typical of the early historical school of economics. The Hegelian metaphysics, in so far as bears upon the matter in hand, is a metaphysics of a self-realising life process. This life process, which is the central and substantial fact of the universe, is of a spiritual nature,--"spiritual," of course, being here not contrasted with "material." The life process is essentially active, self-determining, and unfolds by inner necessity,--by necessity of its own substantially active nature. The course of culture, in this view, is an unfolding (exfoliation) of the human spirit; and the task which economic science has in hand is to determine the laws of this cultural exfoliation in its economic aspect. But the laws of the cultural development with which the social sciences, in the Hegelian view, have to do are at one with the laws of the processes of the universe at large; and, more immediately, they are at one with the laws of the life process at large. For the universe at large is itself a self-unfolding life process, substantially of a spiritual character, of which the economic life process which occupies the interest of the economist is but a phase and an aspect. Now, the course of the processes of unfolding life in organic nature has been fairly well ascertained by the students of natural history and the like; and this, in the nature of the case, must afford a clew to the laws of cultural development, in its economic as well as in any other of its aspects or bearings,--the laws of life in the universe being all substantially spiritual and substantially at one. So we arrive at a physiological conception of culture after the analogy of the ascertained physiological processes seen in the biological domain. It is conceived to be physiological after the Hegelian manner of conceiving a physiological process, which is, however, not the same as the modern scientific conception of a physiological process.[4] Since this quasi-physiological process of cultural development is conceived to be an unfolding of the self-realising human spirit, whose life history it is, it is of the nature of the case that the cultural process should run through a certain sequence of phases--a certain life history prescribed by the nature of the active, unfolding spiritual substance. The sequence is determined on the whole, as regards the general features of the development, by the nature of life on the human plane. The history of cultural growth and decline necessarily repeats itself, since it is substantially the same human spirit that seeks to realise itself in every comprehensive sequence of cultural development, and since this human spirit is the only factor in the case that has substantial force. In its generic features the history of past cultural cycles is, therefore, the history of the future. Hence the importance, not to say the sole efficacy for economic science, of an historical scrutiny of culture. A well-authenticated sequence of cultural phenomena in the history of the past is conceived to have much the same binding force for the sequence of cultural phenomena in the future as a "natural law," as the term has been understood in physics or physiology, is conceived to have as regards the course of phenomena in the life history of the human body; for the onward cultural course of the human spirit, actively unfolding by inner necessity, is an organic process, following logically from the nature of this self-realising spirit. If the process is conceived to meet with obstacles or varying conditions, it adapts itself to the circumstances in any given case, and it then goes on along the line of its own logical bent until it eventuates in the consummation given by its own nature. The environment, in this view, if it is not to be conceived simply as a function of the spiritual force at work, is, at the most, of subsidiary and transient consequence only. Environmental conditions can at best give rise to minor perturbations; they do not initiate a cumulative sequence which can profoundly affect the outcome or the ulterior course of the cultural process. Hence the sole, or almost sole, importance of historical inquiry in determining the laws of cultural development, economic or other. The working conception which this romantic-historical school had of economic life, therefore, is, in its way, a conception of development, or evolution; but it is not to be confused with Darwinism or Spencerianism. Inquiry into the cultural development under the guidance of such preconceptions as these has led to generalisations, more or less arbitrary, regarding uniformities of sequence in phenomena, while the causes which determine the course of events, and which make the uniformity or variation of the sequence, have received but scant attention. The "natural laws" found by this means are necessarily of the nature of empiricism, colored by the bias or ideals of the investigator. The outcome is a body of aphoristic wisdom, perhaps beautiful and valuable after its kind, but quite fatuous when measured by the standards and aims of modern science. As is well known, no substantial theoretical gain was made along this romantic-historical line of inquiry and speculation, for the reason, apparently, that there are no cultural laws of the kind aimed at, beyond the unprecise generalities that are sufficiently familiar beforehand to all passably intelligent adults. * * * * * It has seemed necessary to offer this much in characterisation of that "historical" aim and method which afforded a point of departure for Professor Schmoller's work of revision. When he first raised his protest against the prevailing ideals and methods, as being ill-advised and not thorough-going, he does not seem himself to have been entirely free from this Romantic, or Hegelian, bias. There is evidence to the contrary in his early writings.[5] It cannot even be said that his later theoretical work does not show something of the same animus, as, _e.g._, when he assumes that there is a meliorative trend in the course of cultural events.[6] What has differentiated his work from that of the group of writers which has above been called the elder line of historical economics is the weakness or relative absence of this bias in his theoretical work. Particularly, he has refused to bring his researches in the field of theory definitely to rest on ground given by the Hegelian, or Romantic, school of thought. He was from the first unwilling to accept classificatory statements of uniformity or of normality as an adequate answer to questions of scientific theory. He does not commonly deny the truth or the importance of the empirical generalisations aimed at by the early historical economists. Indeed, he makes much of them and has been notoriously urgent for a full survey of historical data and a painstaking digestion of materials with a view to a comprehensive work of empirical generalisation. As is well known, in his earlier work of criticism and methodological controversy he was led to contend that for at least one generation economists must be content to spend their energies on descriptive work of this kind; and he thereby earned the reputation of aiming to reduce economics to a descriptive knowledge of details and to confine its method to the Baconian ground of generalisation by simple enumeration. But this exhaustive historical scrutiny and description of detail has always, in Professor Schmoller's view, been preliminary to an eventual theory of economic life. The survey of details and the empirical generalisations reached by its help are useful for the scientific purpose only as they serve the end of an eventual formulation of the laws of causation that work out in the process of economic life. The ulterior question, to which all else is subsidiary, is a question of the causes at work rather than a question of the historical uniformities observable in the sequence of phenomena. The scrutiny of historical details serves this end by defining the scope and character of the several factors causally at work in the growth of culture, and, what is of more immediate consequence, as they are at work in the shaping of the economic activities and the economic aims of men engaged in this unfolding cultural process as it lies before the investigator in the existing situation. In the preliminary work, then, of defining and characterising the causes or factors of economic life, historical investigation plays a large, if not the largest, part; but it is by no means the sole line of inquiry to which recourse is had for this purpose. Nor, it may be added, is this the sole use of historical inquiry. To the like end a comparative study of the climatic, geographical, and geological features of the community's environment is drawn into the inquiry; and more particularly there is a careful study of ethnographic parallels and a scrutiny of the psychological foundations of culture and the psychological factors involved in cultural change. Hence it appears that Professor Schmoller's work differs from that of the elder line of historical economics in respect of the scope and character of the preliminaries of economic theory no less than in the ulterior aim which he assigns the science. It is only by giving a very broad meaning to the term that this latest development of the science can be called an "historical" economics. It is Darwinian rather than Hegelian, although with the earmarks of Hegelian affiliation visible now and again; and it is "historical" only in a sense similar to that in which a Darwinian account of the evolution of economic institutions might be called historical. For the distinguishing characteristic of Professor Schmoller's work, that wherein it differs from the earlier work of the economists of his general class, is that it aims at a Darwinistic account of the origin, growth, persistence, and variation of institutions, in so far as these institutions have to do with the economic aspect of life either as cause or as effect. In much of what he has to say, he is at one with his contemporaries and predecessors within the historical school; and he shows at many points both the excellences and weaknesses due to his "historical" antecedents. But his striking and characteristic merits lie in the direction of a post-Darwinian, causal theory of the origin and growth of species in institutions. In this line of theoretical inquiry Professor Schmoller is not alone, nor does he, perhaps, go so far or with such singleness of purpose in this direction as some others do at given points; but the seniority belongs to him, and he is also in the lead as regards the comprehensiveness of his work. * * * * * But to return to the _Grundriss_, to which recourse must be had to substantiate the characterisation here offered. The entire work as projected comprises an Introduction and four Books, of which the introduction and the first two books are contained in the volume already published. The two books yet to be published, in a second volume, promise to be of a length corresponding to the first two. The present volume should accordingly contain approximately three-fifths of the whole, counted by bulk. The scheme of the work is as follows: An Introduction (pp. 1-124) treats of (1) the Concept of Economics, (2) the Psychical, Ethical (or Conventional, _sittliche_), and Legal Foundations of Economic Life and of Culture, and (3) the Literature and Method of the Science. This is followed by Book I. (pp. 125-228) on Land, Population, and the Industrial Arts, considered as collective phenomena and factors in economic life, and Book II. (pp. 229-457), on the Constitution of Economic Society, its chief organs and the causal factors to which they are due. Books III. and IV. are to deal with the Circulation of Goods and the Distribution of Income, and to give a genetic account of the Development of Economic Society. The course outlined differs noticeably from what has been customary in treatises on economics. The point of departure is a comprehensive general survey of the factors which enter into the growth of culture, with special reference to their economic bearing. This survey runs chiefly on psychological and ethnographic ground, historical inquiry in the stricter sense being relatively scant and obviously of secondary consequence. It is followed up with a more detailed and searching discussion of the factors engaged in the economic process in any given situation. The factors, or "collective phenomena," in question are not the time-honored Land, Labor, and Capital, but rather population, material environment, and technological conditions. Here, too, the discussion has to do with ethnographic rather than with properly historical material. The question of population concerns not the numerical force of laborers, but rather the diversity of race characteristics and the bearing of race endowment upon the growth of economic institutions. The discussion of the material environment, again, has relatively little to say of the fertility of the soil, and gives much attention to diversities of climate, geographical situation, and geological and biological conditions. And this first book closes with a survey of the growth of technological knowledge and the industrial arts. In all this the significant innovation lies not so much in the character of the details. They are for the most part commonplace enough as details of the sciences from which they are borrowed. They are shrewdly chosen and handled in such a way as to bring out their bearing upon the ulterior questions about which the economist's interest centers; but there is, as might be expected, little attempt to go back of the returns given by specialists in the several lines of research that are laid under contribution. But the significance of it all lies rather in the fact that material of this kind should have been drawn upon for a foundation for economic theory, and that it should have seemed necessary to Professor Schmoller to make this introductory survey so comprehensive and so painstaking as it is. Its meaning is that these features of human nature and these forces of nature and circumstances of environment are the agencies out of whose interaction the economic situation has arisen by a cumulative process of change, and that it is this cumulative process of development, and its complex and unstable outcome, that are to be the economist's subject-matter. The theoretical outcome for which such a foundation is prepared is necessarily of a genetic kind. It necessarily seeks to know and explain the structure and functions of economic society in terms of how and why they have come to be what they are, not, as so many economic writers have explained them, in terms of what they are good for and what they ought to be. It means, in other words, a deliberate attempt to substitute an inquiry into the efficient causes of economic life in the place of empirical generalisations, on the one hand, and speculations as to the eternal fitness of things, on the other hand. It follows from the nature of the case that an economics of this genetic character, working on grounds of the kind indicated, comprises nothing in the way of advice or admonition, no maxims of expediency, and no economic, political, or cultural creed. How nearly Professor Schmoller conforms to this canon of continence is another question. The above indicates the scope of such doctrines as are consistently derivable from the premises with which the work under review starts out, not the scope of its writer's speculations on economic matters. The second book, by the help of prehistoric and ethnographic material as well as history, deals with the evolution of the methods of social organisation,--the growth of institutions in so far as this growth shapes or is shaped by the exigencies of economic life. The "organs," or social-economic institutions, whose life history is passed in review are: the family; the methods of settlement and domicile, in town and country; the political units of control and administration; differentiation of functions between industrial and other classes and groups; ownership, its growth and distribution; social classes and associations; business enterprise, industrial organisations and corporations. As regards the singleness of purpose with which Professor Schmoller has carried out the scheme of economic theory for which he has sketched the outlines and pointed the way, it is not possible to speak with the same confidence as of his preliminary work. It goes without saying that this further work of elaboration is excellent after its kind; and this excellence, which was to be looked for at Professor Schmoller's hands, may easily divert the reader's attention from the shortcomings of the work in respect of kind rather than of quality. Now, while a broad generalisation on this head may be hazardous and is to be taken with a large margin, still, with due allowance, the following generalisation will probably stand, so far as regards this first volume. So long as the author is occupied with the life-history of institutions down to contemporary developments, so long his discussion proceeds by the dry light of the scientific interest, simply, as the term "scientific" is understood among the modern adepts of the natural sciences; but so soon as he comes to close quarters with the situation of to-day, and reaches the point where a dispassionate analysis and exposition of the causal complex at work in contemporary institutional changes should begin, so soon the scientific light breaks up into all the colors of the rainbow, and the author becomes an eager and eloquent counselor, and argues the question of what ought to be and what modern society must do to be saved. The argument at this point loses the character of a genetic explanation of phenomena, and takes on the character of appeal and admonition, urged on grounds of expediency, of morality, of good taste, of hygiene, of political ends, and even of religion. All this, of course, is what we are used to in the common run of writers of the historical school; but those students whose interest centers in the science rather than in the ways and means of maintaining the received cultural forms of German society have long fancied they had ground to hope for something more to the purpose when Professor Schmoller came to put forth his great systematic work. Brilliant and no doubt valuable in its way and for its end, this digression into homiletics and reformatory advice means that the argument is running into the sands just at the stage where the science can least afford it. It is precisely at this point, where men of less years and breadth and weight would find it difficult to hold tenaciously to the course of cause and effect through the maze of jarring interests and sentiments that make up the contemporary situation,--it is precisely at this point that a genetic theory of economic life most needs the guidance of the firm, trained, dispassionate hand of the master. And at this point his guidance all but fails us. What has just been said applies generally to Professor Schmoller's treatment of contemporary economic development, and it should be added that it applies at nearly all points with more or less of qualification. But the qualifications required are not large enough to belie the general characterisation just offered. It would be asking too large an indulgence to follow the point up in this place through all the discussions of the volume that fairly come under this criticism. The most that may be done is to point for illustration to the handling which two or three of the social-economic "organs" receive. So, for instance, Book II. opens with an account of the family and its place and function in the structure of economic society. The discussion proceeds along the beaten paths of ethnographic research, with repeated and well-directed recourse to the psychological knowledge that Professor Schmoller always has well in hand. Coming down into recent times, the discussion still proceeds to show how the large economic changes of late mediæval and early modern times acted to break down the patriarchal régime of the earlier culture; but at the same time there comes into sight (pp. 245-249) a bias in favor of the recent as against the earlier form of the household. The author is no longer content to show the exigencies which set the earlier patriarchal household aside in favor of the modified patriarchal household of more recent times. He also offers reasons why the later, modified form is intrinsically the more desirable; reasons, it should perhaps be said, which may be well taken, but which are beside the point so far as regards a scientific explanation of the changes under discussion. The closing paragraphs of the section (91) dwell with a kindly insistence on the many elements of strength and beauty possessed by the form of household organisation handed down from the past generation to the present. The facts herewith recited by the author are, no doubt, of weight, and must be duly taken account of by any economist who ventures on a genetic discussion of the present situation and the changing fortunes of the received household. But Professor Schmoller has failed even to point out in what manner these elements of strength and beauty have in the recent past or may in the present and immediate future causally affect the fortunes of the institution. The failure to turn the material in question to scientific account becomes almost culpable in Professor Schmoller, since there are few, if any, who are in so favorable a position to outline the argument which a theoretical account of the situation at this point must take. Plainly, as shown by Professor Schmoller's argument, economic exigencies are working an incessant cumulative change in the form of organisation of the modern household; but he has done little towards pointing out in what manner and with what effect these exigencies come into play. Neither has he gone at all into the converse question, equally grave as a question of economic theory, of how the persistence, even though qualified, of the patriarchal family has modified and is modifying economic structure and function at other points and qualifying or accentuating the very exigencies themselves to which the changes wrought in the institution are to be traced. Plainly, too, the strength and beauty of the traditionally received form of the household--that is to say, the habits of life and of complacency which are bound up with this household--are elements of importance in the modern situation as affects the degree of persistence and the direction of change which this institution shows under modern circumstances. They are psychological facts, facts of habit and propensity and spiritual fitness, the efficiency of which as live forces making for survival or variation is in this connection probably second to that of no other factors that could be named. We had, therefore, almost a right to expect that Professor Schmoller's profound and comprehensive erudition in the fields of psychology and cultural growth should turn these facts to better ends than a preachment concerning an intrinsically desirable consummation. Regarding the present visible disintegration of the family, and the closely related "woman question," Professor Schmoller's observations are of much the same texture. He notes the growing disinclination to the old-fashioned family life on the part of the working population, and shows that there are certain economic causes for this growth or deterioration of sentiment. What he has to offer is made up of the commonplaces of latter-day social-economic discussion, and is charged with a strong undertone of deprecation. What the trend of the causes at work to alter or fortify this body of sentiment may be, counts for very little in what he says on the present movement or on the immediate future of the institution. The best he has to offer on the "woman question" is an off-hand reference of the ground of sentiment on which it rests to a recrudescence of the eighteenth century spirit of _égalité_. This notion of the equality of the sexes he refutes in graceful and affecting terms, and he pleads for the unbroken preservation of woman's sphere and man's primacy; as if the matter of superiority or inferiority between the sexes could conceivably be anything more than a conventional outcome of the habits of life imposed upon the community by the circumstances under which they live. How it has come to pass that under the economic exigencies of the past the physical and temperamental diversity between the sexes has been conventionally construed into a superiority of the man and an inferiority of the woman,--on this head he has no more to say or to suggest than on the correlate question of why this conventional interpretation of the facts has latterly not been holding its ancient ground. The discussion of the family and of the relation of the sexes, in modern culture, is marked throughout by unwillingness or inability to penetrate behind the barrier of conventional finality. The discussion of the family just cited occupies the opening chapter of Book II. For a further instance of Professor Schmoller's handling of a modern economic problem, reference may be had to the closing chapter of Book I., on the "Development of Technological Expedients and its Economic Significance," but more particularly the sections (84-86) on the modern machine industry (pp. 211-228). In this discussion, also, the point of interest is the attention given to the latter-day phenomena of machine industry, and the author's method and animus in dealing with them. There is (pp. 211-218) a condensed and competent presentation of the main characteristics of the modern "machine age," followed (pp. 218-228) by a critical discussion of its cultural value. The customary eulogy, but with more than the customary discrimination, is given to the advantages of the régime of the machine in point of economy, creature comforts, and intellectual sweep; and it is pointed out how the régime of the machine has brought about a redistribution of wealth and of population and a reorganisation and redistribution of social and economic structures and functions. It is pointed out (p. 223) that the gravest social effect of the machine industry has been the creation of a large class of wage laborers. The material circumstances into which this class has been thrown, particularly in point of physical comfort, are dealt with in a sober and discriminating way; and it is shown (p. 224) that in the days of its fuller development the machine's régime has evolved a class of trained laborers who not only live in comfort, but are sound and strong in mind and body. But with the citation of these facts the pursuit of the chain of cause and effect in this modern machine situation comes to an end. The remainder of the space given to the subject is occupied with extremely sane and well-advised criticism, moral and æsthetic, and indications of what the proper ideals and ends of endeavor should be. Professor Schmoller misses the opportunity he here has of dealing with this material in a scientific spirit and with some valuable results for economic theory. He could, it is not too bold to assume, have sketched for us an effective method and line of research to be pursued, for instance, in following up the scientific question of what may be the cultural, spiritual effects of the machine's régime upon this large body of trained workmen, and what this body of trained workmen in its turn counts for as a factor in shaping the institutional growth of the present and the economic and cultural situation of to-morrow. Work of this kind, there is reason to believe, Professor Schmoller could have done with better effect than any of his colleagues in the science; for he is, as already noticed above, possessed of the necessary qualifications in the way of psychological training, broad knowledge of the play of cause and effect in cultural growth, and an ability to take a scientific point of view. Instead of this he harks back again to the dreary homiletical waste of the traditional _Historismus_. It seems as if a topic which he deals with as an objective matter so long as it lies outside the sphere of every-day humanitarian and social solicitude, becomes a matter to be passed upon by conventional standards of taste, dignity, morality, and the like, so soon as it comes within the sweep of latter-day German sentiment. This habit of treating a given problem from these various and shifting points of view at times gives a kaleidoscopic effect that is not without interest. So in the matter of the technically trained working population in the machine industry, to which reference has already been made, something of an odd confusion appears when expressions taken from diverse phases of the discussion are brought side by side. He speaks of this class at one point (p. 224) as "sound, strong, spiritually and morally advancing," superior in all these virtues to the working classes of other times and places. At another point (pp. 250-253) he speaks of the same popular element, under the designation of "socialists," as perverse, degenerate, and reactionary. This latter characterisation may be substantially correct, but it proceeds on grounds of taste and predilection, not on grounds of scientifically determinable cause and effect. And the two characterisations apply to the same elements of population; for the substantial core and tone-giving factor of the radical socialistic element in the German community is, notoriously, just this technically trained population of the industrial towns where the discipline of the machine industry has been at work with least mitigation. The only other fairly isolable element of a radical socialistic complexion is found among the students of modern science. Now, further, in his speculations on the relation of technological knowledge to the advance of culture, Professor Schmoller points out (_e.g._, p. 226) that a high degree of culture connotes, on the whole, a high degree of technological efficiency, and conversely. In this connection he makes use of the terms _Halbkulturvölker_ and _Ganskulturvölker_ to designate different degrees of cultural maturity. It is curious to reflect, in the light of what he has to say on these several heads, that if the socialistically affected, technically trained population of the industrial towns, together with the radical-socialistic men of science, were abstracted from the German population, leaving substantially the peasantry, the slums, and the aristocracy great and small, the resulting German community would unquestionably have to be classed as a _Halbkulturvölk_ in Professor Schmoller's scheme. Whereas the elements abstracted, if taken by themselves, would as unquestionably be classed among the _Ganskulturvölker_. In conclusion, one may turn to the concluding chapter (Book II., Chapter vii.) of the present volume for a final illustration of Professor Schmoller's method and animus in handling a modern economic problem. All the more so as this chapter on business enterprise better sustains that scientific attitude which the introductory outline leads the reader to look for throughout. It shows how modern business enterprise is in the main an outgrowth of commercial activity, as also that it has retained the commercial spirit down to the present. The motive force of business enterprise is the self-seeking quest of dividends; but Professor Schmoller shows, with more dispassionate insight than many economists, that this self-seeking motive is hemmed in and guided at all points in the course of its development by considerations and conventions that are not of a primarily self-seeking kind. He is not content to point to the beneficent working of a harmony of interests, but sketches the play of forces whereby a self-seeking business traffic has come to serve the interests of the community. Business enterprise has gradually emerged and come into its present central and dominant position in the community's industry as a concomitant of the growth of individual ownership and pecuniary discretion in modern life. It is therefore a phase of the modern cultural situation; and its survival and the direction of its further growth are therefore conditioned by the exigencies of the modern cultural situation. What this modern cultural situation is and what are the forces, essentially psychological, which shape the further growth of the situation, no one is better fitted to discuss than Professor Schmoller; and he has also given valuable indications (pp. 428-457) of what these factors are and how the inquiry into their working must be conducted. But even here, where a dispassionate tracing-out of the sequence of cause and effect should be easier to undertake, because less readily blurred with sentiment, than in the case, _e.g._, of the family, the work of tracing the developmental sequence tapers off into advice and admonition proceeding on the assumption that the stage now reached is, or at least should be, final. The attention in the later pages diverges from the process of growth and its conditioning circumstances, to the desirability of maintaining the good results attained and to the ways and means of holding fast that which is good in the outcome already achieved. The question to which an answer is sought in discussing the present phase of the development is not a question as to what is taking place as respects the institution of business enterprise, but rather a question as to what form should be given to an optimistic policy of fostering business enterprise and turning it to account for the common good. At this point, as elsewhere, though perhaps in a less degree than elsewhere, the existing form of the institution is accepted as a finality. All this is disappointing in view of the fact that at no other point do modern economic institutions bear less of an air of finality than in the forms and conventions of business organisations and relations. As Professor Schmoller remarks (p. 455), the scope and character of business undertakings necessarily conform to the circumstances of the time, not to any logical scheme of development from small to great or from simple to complex. So also, one might be tempted to say, the expediency and the chance of ultimate survival of business enterprise is itself an open question, to be answered by a scrutiny of the forces that make for its survival or alteration, not by advice as to the best method of sustaining and controlling it. * * * * * What has here been said in criticism of Professor Schmoller's work, particularly as regards his departure from the path of scientific research in dealing with present-day phenomena, may, of course, have to be qualified, if not entirely set aside, when his work is completed with the promised genetic survey of modern institutions to be set forth in the concluding fourth book. Perhaps it may even be said that there is fair hope, on general grounds, of such a consummation; but the present volume does not afford ground for a confident expectation of this kind. It is perhaps needless, perhaps gratuitous, to add that the strictures offered indicate, after all, but relatively slight shortcomings in a work of the first magnitude. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XVI, Nov., 1901. [2] _Grundriss der allgemeinen Volkswirtschaftslehre_. Erster Teil. Leipzig, 1900. [3] _E.g._, K. Bücher's _Entstehung der Volkswirtschaft_, and _Arbeit und Rythmus_; R. Hildebrand's _Recht und Sitte_; Knapp's _Grundherrschaft und Rittergut_; Ehrenberg's _Zeitalter der Fugger_; R. Mucke's various works. [4] A physiological conception of society, or of the community, had been employed before,--_e.g._, by the Physiocrats,--and such a concept was reached also by English speculators--_e.g._, Herbert Spencer--during Roscher's lifetime; but these physiological conceptions of society are reached by a different line of approach from that which led up to the late-Hegelian physiological or biological conception of human culture as a spiritual structure and process. The outcome is also a different one, both as regards the use made of the analogy and as regards the theoretical results reached by its aid. It may be remarked, by the way, that neo-Hegelianism, of the "Left," likewise gave rise to a theory of a self-determining cultural exfoliation; namely, the so-called "Materialistic Conception of History" of the Marxian socialists. This Marxian conception, too, had much of a physiological air; but Marx and his coadjutors had an advantage over Roscher and his following, in that they were to a greater extent schooled in the Hegelian philosophy, instead of being uncritical receptacles of the Romantic commonplaces left by Hegelianism as a residue in popular thought. They were therefore more fully conscious of the bearing of their postulates and less naïve in their assumptions of self-sufficiency. [5] _E.g._, in his controversy with Treitschke. See _Grundfragen der Socialpolitik und der Volkswirtschaftslehre_, particularly pp. 24, 25. [6] _E.g._, _Grundriss_, pp. 225, 409, 411. INDUSTRIAL AND PECUNIARY EMPLOYMENTS[1] For purposes of economic theory, the various activities of men and things about which economists busy themselves were classified by the early writers according to a scheme which has remained substantially unchanged, if not unquestioned, since their time. This scheme is the classical three-fold division of the factors of production under Land, Labor, and Capital. The theoretical aim of the economists in discussing these factors and the activities for which they stand has not remained the same throughout the course of economic discussion, and the three-fold division has not always lent itself with facility to new points of view and new purposes of theory, but the writers who have shaped later theory have, on the whole, not laid violent hands on the sacred formula. These facts must inspire the utmost reserve and circumspection in any one who is moved to propose even a subsidiary distinction of another kind between economic activities or agents. The terminology and the conceptual furniture of economics are complex and parti-colored enough without gratuitous innovation. It is accordingly not the aim of this paper to set aside the time-honored classification of factors, or even to formulate an iconoclastic amendment, but rather to indicate how and why this classification has proved inadequate for certain purposes of theory which were not contemplated by the men who elaborated it. To this end a bit of preface may be in place as regards the aims which led to its formulation and the uses which the three-fold classification originally served. * * * * * The economists of the late eighteenth and early nineteenth centuries were believers in a Providential order, or an order of Nature. How they came by this belief need not occupy us here; neither need we raise a question as to whether their conviction of its truth was well or ill grounded. The Providential order or order of Nature is conceived to work in an effective and just way toward the end to which it tends; and in the economic field this objective end is the material welfare of mankind. The science of that time set itself the task of interpreting the facts with which it dealt, in terms of this natural order. The material circumstances which condition men's life fall within the scope of this natural order of the universe, and as members of the universal scheme of things men fall under the constraining guidance of the laws of Nature, who does all things well. As regards their purely theoretical work, the early economists are occupied with bringing the facts of economic life under natural laws conceived somewhat after the manner indicated; and when the facts handled have been fully interpreted in the light of this fundamental postulate the theoretical work of the scientist is felt to have been successfully done. The economic laws aimed at and formulated under the guidance of this preconception are laws of what takes place "naturally" or "normally," and it is of the essence of things so conceived that in the natural or normal course there is no wasted or misdirected effort. The standpoint is given by the material interest of mankind, or, more concretely, of the community or "society" in which the economist is placed; the resulting economic theory is formulated as an analysis of the "natural" course of the life of the community, the ultimate theoretical postulate of which might, not unfairly, be stated as in some sort a law of the conservation of economic energy. When the course of things runs off naturally or normally, in accord with the exigencies of human welfare and the constraining laws of nature, economic income and outgo balance one another. The natural forces at play in the economic field may increase indefinitely through accretions brought in under man's dominion and through the natural increase of mankind, and, indeed, it is of the nature of things that an orderly progress of this kind should take place; but within the economic organism, as within the larger organism of the universe, there prevails an equivalence of expenditure and returns, an equilibrium of flux and reflux, which is not broken over in the normal course of things. So it is, by implication, assumed that the product which results from any given industrial process or operation is, in some sense or in some unspecified respect, the equivalent of the expenditure of forces, or of the effort, or what not, that has gone into the process out of which the product emerges. This theorem of equivalence is the postulate which lies at the root of the classical theory of distribution, but it manifestly does not admit of proof--or of disproof either, for that matter; since neither the economic forces which go into the process nor the product which emerges are, in the economic respect, of such a tangible character as to admit of quantitative determination. They are in fact incommensurable magnitudes. To this last remark the answer may conceivably present itself that the equivalence in question is an equivalence in utility or in exchange value, and that the quantitative determination of the various items in terms of exchange value or of utility is, theoretically, not impossible; but when it is called to mind that the forces or factors which go to the production of a given product take their utility or exchange value from that of the product, it will easily be seen that the expedient will not serve. The equivalence between the aggregate factors of production in any given case and their product remains a dogmatic postulate whose validity cannot be demonstrated in any terms that will not reduce the whole proposition to an aimless fatuity, or to metaphysical grounds which have now been given up. The point of view from which the early, and even the later classical, economists discussed economic life was that of "the society" taken as a collective whole and conceived as an organic unit. Economic theory sought out and formulated the laws of the normal life of the social organism, as it is conceived to work out in that natural course whereby the material welfare of society is attained. The details of economic life are construed, for purposes of general theory, in terms of their subservience to the aims imputed to the collective life process. Those features of detail which will bear construction as links in the process whereby the collective welfare is furthered, are magnified and brought into the foreground, while such features as will not bear this construction are treated as minor disturbances. Such a procedure is manifestly legitimate and expedient in a theoretical inquiry whose aim is to determine the laws of health of the social organism and the normal functions of this organism in a state of health. The social organism is, in this theory, handled as an individual endowed with a consistent life purpose and something of an intelligent apprehension of what means will serve the ends which it seeks. With these collective ends the interests of the individual members are conceived to be fundamentally at one; and, while men may not see that their own individual interests coincide with those of the social organism, yet, since men are members of the comprehensive organism of nature and consequently subject to beneficent natural law, the ulterior trend of unrestrained individual action is, on the whole, in the right direction. The details of individual economic conduct and its consequences are of interest to such a general theory chiefly as they further or disturb the beneficent "natural" course. But if the aims and methods of individual conduct were of minor importance in such an economic theory, that is not the case as regards individual rights. The early political economy was not simply a formulation of the natural course of economic phenomena, but it embodied an insistence on what is called "natural liberty." Whether this insistence on natural liberty is to be traced to utilitarianism or to a less specific faith in natural rights, the outcome for the purpose in hand is substantially the same. To avoid going too far afield, it may serve the turn to say that the law of economic equivalence, or conservation of economic energy, was, in early economics, backed by this second corollary of the order of nature, the closely related postulate of natural rights. The classical doctrine of distribution rests on both of these, and it is consequently not only a doctrine of what must normally take place as regards the course of life of society at large, but it also formulates what ought of right to take place as regards the remuneration for work and the distribution of wealth among men. Under the resulting natural-economic law of equivalence and equity, it is held that the several participants or factors in the economic process severally get the equivalent of the productive force which they expend. They severally get as much as they produce; and conversely, in the normal case they severally produce as much as they get. In the earlier formulations, as, for example, in the authoritative formulation of Adam Smith, there is no clear or consistent pronouncement as regards the terms in which this equivalence between production and remuneration runs. With the later, classical economists, who had the benefit of a developed utilitarian philosophy, it seems to be somewhat consistently conceived in terms of an ill-defined serviceability. With some later writers it is an equivalence of exchange values; but as this latter reduces itself to tautology, it need scarcely be taken seriously. When we are told in the later political economy that the several agents or factors in production normally earn what they get, it is perhaps fairly to be construed as a claim that the economic service rendered the community by any one of the agents in production equals the service received by the agent in return. In terms of serviceability, then, if not in terms of productive force,[2] the individual agent, or at least the class or group of agents to which the individual belongs, normally gets as much as he contributes and contributes as much as he gets. This applies to all those employments or occupations which are ordinarily carried on in any community, throughout the aggregate of men's dealings with the material means of life. All activity which touches industry comes in under this law of equivalence and equity. Now, to a theorist whose aim is to find the laws governing the economic life of a social organism, and who for this purpose conceives the economic community as a unit, the features of economic life which are of particular consequence are those which show the correlation of efforts and the solidarity of interests. For this purpose, such activities and such interests as do not fit into the scheme of solidarity contemplated are of minor importance, and are rather to be explained away or construed into subservience to the scheme of solidarity than to be incorporated at their face value into the theoretical structure. Of this nature are what are here to be spoken of under the term "pecuniary employments," and the fortune which these pecuniary employments have met at the hands of classical economic theory is such as is outlined in the last sentence. In a theory proceeding on the premise of economic solidarity, the important bearing of any activity that is taken up and accounted for, is its bearing upon the furtherance of the collective life process. Viewed from the standpoint of the collective interest, the economic process is rated primarily as a process for the provision of the aggregate material means of life. As a late representative of the classical school expresses it: "Production, in fact, embraces every economic operation except consumption."[3] It is this aggregate productivity, and the bearing of all details upon the aggregate productivity, that constantly occupies the attention of the classical economists. What partially diverts their attention from this central and ubiquitous interest, is their persistent lapse into natural-rights morality. The result is that acquisition is treated as a sub-head under production, and effort directed to acquisition is construed in terms of production. The pecuniary activities of men, efforts directed to acquisition and operations incident to the acquisition or tenure of wealth, are treated as incidental to the distribution to each of his particular proportion in the production of goods. Pecuniary activities, in short, are handled as incidental features of the process of social production and consumption, as details incident to the method whereby the social interests are served, instead of being dealt with as the controlling factor about which the modern economic process turns. Apart from the metaphysical tenets indicated above as influencing them, there are, of course, reasons of economic history for the procedure of the early economists in so relegating the pecuniary activities to the background of economic theory. In the days of Adam Smith, for instance, economic life still bore much of the character of what Professor Schmoller calls _Stadtwirtschaft_. This was the case to some extent in practice, but still more decidedly in tradition. To a greater extent than has since been the case, households produced goods for their own consumption, without the intervention of sale; and handicraftsmen still produced for consumption by their customers, without the intervention of a market. In a considerable measure, the conditions which the Austrian marginal-utility theory supposes, of a producing seller and a consuming buyer, actually prevailed. It may not be true that in Adam Smith's time the business operations, the bargain and sale of goods, were, in general, obviously subservient to their production and consumption, but it comes nearer being true at that time than at any time since then. And the tradition having once been put into form and authenticated by Adam Smith, that such was the place of pecuniary transactions in economic theory, this tradition has lasted on in the face of later and further changes. Under the shadow of this tradition the pecuniary employments are still dealt with as auxiliary to the process of production, and the gains from such employments are still explained as being due to a productive effect imputed to them. According to ancient prescription, then, all normal, legitimate economic activities carried on in a well regulated community serve a materially useful end, and so far as they are lucrative they are so by virtue of and in proportion to a productive effect imputed to them. But in the situation as it exists at any time there are activities and classes of persons which are indispensable to the community, or which are at least unavoidably present in modern economic life, and which draw some income from the aggregate product, at the same time that these activities are not patently productive of goods and can not well be classed as industrial, in any but a highly sophisticated sense. Some of these activities, which are concerned with economic matters but are not patently of an industrial character, are integral features of modern economic life, and must therefore be classed as normal; for the existing situation, apart from a few minor discrepancies, is particularly normal in the apprehension of present-day economists. Now, the law of economic equivalence and equity says that those who normally receive in income must perforce serve some productive end; and, since the existing organization of society is conceived to be eminently normal, it becomes imperative to find some ground on which to impute industrial productivity to those classes and employments which do not at first view appear to be industrial at all. Hence there is commonly visible in the classical political economy, ancient and modern, a strong inclination to make the schedule of industrially productive employments very comprehensive; so that a good deal of ingenuity has been spent in economically justifying their presence by specifying the productive effect of such non-industrial factors as the courts, the army, the police, the clergy, the schoolmaster, the physician, the opera singer. But these non-economic employments are not so much to the point in the present inquiry; the point being employments which are unmistakably economic, but not industrial in the naïve sense of the word industry, and which yield an income. Adam Smith analysed the process of industry in which he found the community of his time engaged, and found the three classes of agents or factors: Land, Labor, and Capital (stock). The productive factors engaged being thus determined, the norm of natural-economic equivalence and equity already referred to above, indicated what would be the natural sharers in the product. Later economists have shown great reserve about departing from this three-fold division of factors, with its correlated three-fold division of sharers of remuneration; apparently because they have retained an instinctive, indefeasible trust in the law of economic equivalence which underlies it. But circumstances have compelled the tentative intrusion of a fourth class of agent and income. The undertaker and his income presently came to be so large and ubiquitous figures in economic life that their presence could not be overlooked by the most normalising economist. The undertaker's activity has been interpolated in the scheme of productive factors, as a peculiar and fundamentally distinctive kind of labor, with the function of coördinating and directing industrial processes. Similarly, his income has been interpolated in the scheme of distribution, as a peculiar kind of wages, proportioned to the heightened productivity given the industrial process by his work.[4] His work is discussed in expositions of the theory of production. In discussions of his functions and his income the point of the argument is, how and in what degree does his activity increase the output of goods, or how and in what degree does it save wealth to the community. Beyond his effect in enhancing the effective volume of the aggregate wealth the undertaker receives but scant attention, apparently for the reason that so soon as that point has been disposed of the presence of the undertaker and his income has been reconciled with the tacitly accepted natural law of equivalence between productive service and remuneration. The normal balance has been established, and the undertaker's function has been justified and subsumed under the ancient law that Nature does all things well and equitably. This holds true of the political economy of our grandfathers. But this aim and method of handling the phenomena of life for theoretical ends, of course, did not go out of vogue abruptly in the days of our grandfathers.[5] There is a large sufficiency of the like aim and animus in the theoretical discussions of a later time; but specifically to cite and analyse the evidence of its presence would be laborious, nor would it conduce to the general peace of mind. Some motion towards a further revision of the scheme is to be seen in the attention which has latterly been given to the function and the profits of that peculiar class of undertakers whom we call speculators. But even on this head the argument is apt to turn on the question of how the services which the speculator is conceived to render the community are to be construed into an equivalent of his gains.[6] The difficulty of interpretation encountered at this point is considerable, partly because it is not quite plain whether the speculators as a class come out of their transactions with a net gain or with a net loss. A systematic net loss, or a no-profits balance, would, on the theory of equivalence, mean that the class which gets this loss or doubtful gain is of no service to the community; yet we are, out of the past, committed to the view that the speculator is useful--indeed economically indispensable--and shall therefore have his reward. In the discussions given to the speculator and his function some thought is commonly given to the question of the "legitimacy" of the speculator's traffic. The legitimate speculator is held to earn his gain by services of an economic kind rendered the community. The recourse to this epithet, "legitimate," is chiefly of interest as showing that the tacit postulate of a natural order is still in force. Legitimate are such speculative dealings as are, by the theorist, conceived to serve the ends of the community, while illegitimate speculation is that which is conceived to be disserviceable to the community. The theoretical difficulty about the speculator and his gains (or losses) is that the speculator _ex professo_ is quite without interest in or connection with any given industrial enterprise or any industrial plant. He is, industrially speaking, without visible means of support. He may stake his risks on the gain or on the loss of the community with equal chances of success, and he may shift from one side to the other without winking. The speculator may be treated as an extreme case of undertaker, who deals exclusively with the business side of economic life rather than with the industrial side. But he differs in this respect from the common run of business men in degree rather than in kind. His traffic is a pecuniary traffic, and it touches industry only remotely and uncertainly; while the business man as commonly conceived is more or less immediately interested in the successful operation of some concrete industrial plant. But since the undertaker first broke into economic theory, some change has also taken place as regards the immediacy of the relations of the common run of undertakers to the mechanical facts of the industries in which they are interested. Half a century ago it was still possible to construe the average business manager in industry as an agent occupied with the superintendence of the mechanical processes involved in the production of goods or services. But in the later development the connection between the business manager and the mechanical processes has, on an average, grown more remote; so much so, that his superintendence of the plant or of the processes is frequently visible only to the scientific imagination. That activity by virtue of which the undertaker is classed as such makes him a businessman, not a mechanic or foreman of the shop. His superintendence is a superintendence of the pecuniary affairs of the concern, rather than of the industrial plant; especially is this true in the higher development of the modern captain of industry. As regards the nature of the employment which characterises the undertaker, it is possible to distinguish him from the men who are mechanically engaged in the production of goods, and to say that his employment is of a business or pecuniary kind, while theirs is of an industrial or mechanical kind. It is not possible to draw a similar distinction between the undertaker who is in charge of a given industrial concern, and the business man who is in business but is not interested in the production of goods or services. As regards the character of employment, then, the line falls not between legitimate and illegitimate pecuniary transactions, but between business and industry. The distinction between business and industry has, of course, been possible from the beginning of economic theory, and, indeed, the distinction has from time to time temporarily been made in the contrast frequently pointed out between the proximate interest of the business man and the ulterior interest of society at large. What appears to have hindered the reception of the distinction into economic doctrine, is the constraining presence of a belief in an order of Nature and the habit of conceiving the economic community as an organism. The point of view given by these postulates has made such a distinction between employments not only useless, but even disserviceable for the ends to which theory has been directed. But the fact has come to be gradually more and more patent that there are constantly, normally present in modern economic life an important range of activities and classes of persons who work for an income but of whom it cannot be said that they, either proximately or remotely, apply themselves to the production of goods. Their services, proximate or remote, to society are often of quite a problematical character. They are ubiquitous, and it will scarcely do to say that they are anomalous, for they are of ancient prescription, they are within the law and within the pale of popular morals. Of these strictly economic activities that are lucrative without necessarily being serviceable to the community, the greater part are to be classed as "business." Perhaps the largest and most obvious illustration of these legitimate business employments is afforded by the speculators in securities. By way of further illustration may be mentioned the extensive and varied business of real-estate men (land-agents) engaged in the purchase and sale of property for speculative gain or for a commission; so, also, the closely related business of promoters and boomers of other than real-estate ventures; as also attorneys, brokers, bankers, and the like, although the work performed by these latter will more obviously bear interpretation in terms of social serviceability. The traffic of these business men shades off insensibly from that of the _bona fide_ speculator who has no ulterior end of industrial efficiency to serve, to that of the captain of industry or entrepreneur as conventionally set forth in the economic manuals. The characteristic in which these business employments resemble one another, and in which they differ from the mechanical occupations as well as from other non-economic employments, is that they are concerned primarily with the phenomena of value--with exchange or market values and with purchase and sale--and only indirectly and secondarily, if at all, with mechanical processes. What holds the interest and guides and shifts the attention of men within these employments is the main chance. These activities begin and end within what may broadly be called "the higgling of the market." Of the industrial employments, in the stricter sense, it may be said, on the other hand, that they begin and end outside the higgling of the market. Their proximate aim and effect is the shaping and guiding of material things and processes. Broadly, they may be said to be primarily occupied with the phenomena of material serviceability, rather than with those of exchange value. They are taken up with phenomena which make the subject matter of Physics and the other material sciences. The business man enters the economic life process from the pecuniary side, and so far as he works an effect in industry he works it through the pecuniary dispositions which he makes. He takes thought most immediately of men's convictions regarding market values; and his efforts as a business man are directed to the apprehension, and commonly also to the influencing of men's beliefs regarding market values. The objective point of business is the diversion of purchase and sale into some particular channel, commonly involving a diversion from other channels. The laborer and the man engaged in directing industrial processes, on the other hand, enter the economic process from the material side; in their characteristic work they take thought most immediately of mechanical effects, and their attention is directed to turning men and things to account for the compassing of some material end. The ulterior aim, and the ulterior effect, of these industrial employments may be some pecuniary result; work of this class commonly results in an enhancement, or at least an alteration, of market values. Conversely, business activity may, and in a majority of cases it perhaps does, effect an enhancement of the aggregate material wealth of the community, or the aggregate serviceability of the means at hand; but such an industrial outcome is by no means bound to follow from the nature of the business man's work. From what has just been said it appears that, if we retain the classical division of economic theory into Production, Distribution, and Consumption, the pecuniary employments do not properly fall under the first of these divisions, Production, if that term is to retain the meaning commonly assigned to it. In an earlier and less specialised organisation of economic life, particularly, the undertaker frequently performs the work of a foreman or a technological expert, as well as the work of business management. Hence in most discussions of his work and his theoretical relations his occupation is treated as a composite one. The technological side of his composite occupation has even given a name to his gains (wages of superintendence), as if the undertaker were primarily a master-workman. The distinction at this point has been drawn between classes of persons instead of between classes of employments; with the result that the evident necessity of discussing his technological employment under production has given countenance to the endeavor to dispose of the undertaker's business activity under the same head. This endeavor has, of course, not wholly succeeded. In the later development, the specialisation of work in the economic field has at this point progressed so far, and the undertaker now in many cases comes so near being occupied with business affairs alone, to the exclusion of technological direction and supervision, that, with this object lesson before us, we no longer have the same difficulty in drawing a distinction between business and industrial employments. And even in the earlier days of the doctrines, when the aim was to dispose of the undertaker's work under the theoretical head of Production, the business side of his work persistently obtruded itself for discussion in the books and chapters given to Distribution and Exchange. The course taken by the later theoretical discussion of the entrepreneur, leaves no question but that the characteristic fact about his work is that he is a business man, occupied with pecuniary affairs. Such pecuniary employments, of which the purely fiscal or financiering forms of business are typical, are nearly all and nearly throughout, conditioned by the institution of property or ownership--an institution which, as John Stuart Mill remarks, belongs entirely within the theoretical realm of Distribution. Ownership, no doubt, has its effect upon productive industry, and, indeed, its effect upon industry is very large, both in scope and range, even if we should not be prepared to go the length of saying that it fundamentally conditions all industry; but ownership is not itself primarily or immediately a contrivance for production. Ownership directly touches the results of industry, and only indirectly the methods and processes of industry. If the institution of property be compared with such another feature of our culture, for instance, as the domestication of plants or the smelting of iron, the meaning of what has just been said may seem clearer. So much then of the business man's activity as is conditioned by the institution of property, is not to be classed, in economic theory, as productive or industrial activity at all. Its objective point is an alteration of the distribution of wealth. His business is, essentially, to sell and buy--sell in order to buy cheaper, buy in order to sell dearer.[7] It may or may not, indirectly, and in a sense incidentally, result in enhanced production. The business man may be equally successful in his enterprise, and he may be equally well remunerated, whether his activity does or does not enrich the community. Immediately and directly, so long as it is confined to the pecuniary or business sphere, his activity is incapable of enriching or impoverishing the community as a whole except, after the fashion conceived by the mercantilists, through his dealings with men of other communities. The circulation and distribution of goods incidental to the business man's traffic is commonly, though not always or in the nature of the case, serviceable to the community; but the distribution of goods is a mechanical, not a pecuniary transaction, and it is not the objective point of business nor its invariable outcome. From the point of view of business, the distribution or circulation of goods is a means of gain, not an end sought. It is true, industry is closely conditioned by business. In a modern community, the business man finally decides what may be done in industry, or at least in the greater number and the more conspicuous branches of industry. This is particularly true of those branches that are currently thought of as peculiarly modern. Under existing circumstances of ownership, the discretion in economic matters, industrial or otherwise, ultimately rests in the hands of the business men. It is their business to have to do with property, and property means the discretionary control of wealth. In point of character, scope and growth, industrial processes and plants adapt themselves to the exigencies of the market, wherever there is a developed market, and the exigencies of the market are pecuniary exigencies. The business man, through his pecuniary dispositions, enforces his choice of what industrial processes shall be in use. He can, of course, not create or initiate methods or aims for industry; if he does so he steps out of the business sphere into the material domain of industry. But he can decide whether and which of the known processes and industrial arts shall be practiced, and to what extent. Industry must be conducted to suit the business man in his quest for gain; which is not the same as saying that it must be conducted to suit the needs or the convenience of the community at large. Ever since the institution of property was definitely installed, and in proportion as purchase and sale has been practiced, some approach has been made to a comprehensive system of control of industry by pecuniary transactions and for pecuniary ends, and the industrial organisation is nearer such a consummation now than it ever has been. For the great body of modern industry the final term of the sequence is not the production of the goods but their sale; the endeavor is not so much to fit the goods for use as for sale. It is well known that there are many lines of industry in which the cost of marketing the goods equals the cost of making and transporting them. Any industrial venture which falls short in meeting the pecuniary exigencies of the market declines and yields ground to others that meet them with better effect. Hence shrewd business management is a requisite to success in any industry that is carried on within the scope of the market. Pecuniary failure carries with it industrial failure, whatever may be the cause to which the pecuniary failure is due--whether it be inferiority of the goods produced, lack of salesmanlike tact, popular prejudice, scanty or ill-devised advertising, excessive truthfulness, or what not. In this way industrial results are closely dependent upon the presence of business ability; but the cause of this dependence of industry upon business in a given case is to be sought in the fact that other rival ventures have the backing of shrewd business management, rather than in any help which business management in the aggregate affords to the aggregate industry of the community. Shrewd and farsighted business management is a requisite of survival in the competitive pecuniary struggle in which the several industrial concerns are engaged, because shrewd and farsighted business management abounds and is employed by all the competitors. The ground of survival in the selective process is fitness for pecuniary gain, not fitness for serviceability at large. Pecuniary management is of an emulative character and gives, primarily, relative success only. If the change were equitably distributed, an increase or decrease of the aggregate or average business ability in the community need not immediately affect the industrial efficiency or the material welfare of the community. The like can not be said with respect to the aggregate or average industrial capacity of the men at work. The latter are, on the whole, occupied with production of goods; the business men, on the other hand, are occupied with the acquisition of them. Theoreticians who are given to looking beneath the facts and to contemplating the profounder philosophical meaning of life speak of the function of the undertaker as being the guidance and coördination of industrial processes with a view to economies of production. No doubt, the remoter effect of business transactions often is such coördination and economy, and, no doubt also, the undertaker has such economy in view and is stimulated to his maneuvers of combination by the knowledge that certain economies of this kind are feasible and will inure to his gain if the proper business arrangements can be effected. But it is practicable to class even this indirect furthering of industry by the undertaker as a permissive guidance only. The men in industry must first create the mechanical possibility of such new and more economical methods and arrangements, before the undertaker sees the chance, makes the necessary business arrangements, and gives directions that the more effective working arrangements be adopted. It is notorious, and it is a matter upon which men dilate, that the wide and comprehensive consolidations and coördinations of industry, which often add so greatly to its effectiveness, take place at the initiative of the business men who are in control. It should be added that the fact of their being in control precludes such coördination from being effected except by their advice and consent. And it should also be added, in order to a passably complete account of the undertaker's function, that he not only can and does effect economising coördinations of a large scope, but he also can and does at times inhibit the process of consolidation and coördination. It happens so frequently that it might fairly be said to be the common run that business interests and undertaker's maneuvers delay consolidation, combination, coördination, for some appreciable time after they have become patently advisable on industrial grounds. The industrial advisability or practicability is not the decisive point. Industrial advisability must wait on the eventual convergence of jarring pecuniary interests and on the strategical moves of business men playing for position. Which of these two offices of the business man in modern industry, the furthering or the inhibitory, has the more serious or more far-reaching consequences is, on the whole, somewhat problematical. The furtherance of coördination by the modern captain of industry bulks large in our vision, in great part because the process of widening coördination is of a cumulative character. After a given step in coördination and combination has been taken, the next step takes place on the basis of the resulting situation. Industry, that is to say the working force engaged in industry, has a chance to develop new and larger possibilities to be taken further advantage of. In this way each successive move in the enhancement of the efficiency of industrial processes, or in the widening of coördination in industrial processes, pushes the captain of industry to a further concession, making possible a still farther industrial growth. But as regards the undertaker's inhibitory dealings with industrial coördination the visible outcome is not so striking. The visible outcome is simply that nothing of the kind then takes place in the premises. The potential cumulative sequence is cut off at the start, and so it does not figure in our appraisement of the disadvantage incurred. The loss does not commonly take the more obtrusive form of an absolute retreat, but only that of a failure to advance where the industrial situation admits of an advance. It is, of course, impracticable to foot up and compare gain and loss in such a case, where the losses, being of the nature of inhibited growth, cannot be ascertained. But since the industrial serviceability of the captain of industry is, on the whole, of a problematical complexion, it should be advisable for a cautious economic theory not to rest its discussion of him on his serviceability.[8] It appears, then, as all economists are no doubt aware, that there is in modern society a considerable range of activities, which are not only normally present, but which constitute the vital core of our economic system; which are not directly concerned with production, but which are nevertheless lucrative. Indeed, the group comprises most of the highly remunerative employments in modern economic life. The gains from these employments must plainly be accounted for on other grounds than their productivity, since they need have no productivity. But it is not only as regards the pecuniary employments that productivity and remuneration are constitutionally out of touch. It seems plain, from what has already been said, that the like is true for the remuneration gained in the industrial employments. Most wages, particularly those paid in the industrial employments proper, as contrasted with those paid for domestic or personal service, are paid on account of pecuniary serviceability to the employer, not on grounds of material serviceability to mankind at large. The product is valued, sought and paid for on account of and in some proportion to its vendibility, not for more recondite reasons of ulterior human welfare at large. It results that there is no warrant, in general theory, for claiming that the work of highly paid persons (more particularly that of highly paid business men) is of greater substantial use to the community than that of the less highly paid. At the same time, the reverse could, of course, also not be claimed. Wages, resting on a pecuniary basis, afford no consistent indication of the relative productivity of the recipients, except in comparisons between persons or classes whose products are identical except in amount,--that is to say, where a resort to wages as an index of productivity would be of no use anyway.[9] * * * * * A result of the acceptance of the theoretical distinction here attempted between industrial and pecuniary employments and an effective recognition of the pecuniary basis of the modern economic organisation would be to dissociate the two ideas of productivity and remuneration. In mathematical language, remuneration could no longer be conceived and handled as a "function" of productivity,--unless productivity be taken to mean pecuniary serviceability to the person who pays the remuneration. In modern life remuneration is, in the last analysis, uniformly obtained by virtue of an agreement between individuals who commonly proceed on their own interest in point of pecuniary gain. The remuneration may, therefore, be said to be a "function" of the pecuniary service rendered the person who grants the remuneration; but what is pecuniarily serviceable to the individual who exercises the discretion in the matter need not be productive of material gain to the community as a whole. Nor does the algebraic sum of individual pecuniary gains measure the aggregate serviceability of the activities for which the gains are got. In a community organized, as modern communities are, on a pecuniary basis, the discretion in economic matters rests with the individuals, in severalty; and the aggregate of discrete individual interests nowise expresses the collective interest. Expressions constantly recur in economic discussions which imply that the transactions discussed are carried out for the sake of the collective good or at the initiative of the social organism, or that "society" rewards so and so for their services. Such expressions are commonly of the nature of figures of speech and are serviceable for homiletical rather than for scientific use. They serve to express their user's faith in a beneficent order of nature, rather than to convey or to formulate information in regard to facts. Of course, it is still possible consistently to hold that there is a natural equivalence between work and its reward, that remuneration is naturally, or normally, or in the long run, proportioned to the material service rendered the community by the recipient; but that proposition will hold true only if "natural" or "normal" be taken in such a sense as to admit of our saying that the natural does not coincide with the actual; and it must be recognised that such a doctrine of the "natural" apportionment of wealth or of income disregards the efficient facts of the case. Apart from effects of this kind in the way of equitable arrangements traceable to grounds of sentiment, the only recourse which modern science would afford the champion of a doctrine of natural distribution, in the sense indicated, would be a doctrine of natural selection; according to which all disserviceable or unproductive, wasteful employments would, perforce, be weeded out as being incompatible with the continued life of any community that tolerated them. But such a selective elimination of unserviceable or wasteful employments would presume the following two conditions, neither of which need prevail: (1) It must be assumed that the disposable margin between the aggregate productivity of industry and the aggregate necessary consumption is so narrow as to admit of no appreciable waste of energy or of goods; (2) it must be assumed that no deterioration of the condition of society in the economic respect does or can "naturally" take place. As to the former of these two assumptions, it is to be said that in a very poor community, and under exceptionally hard economic circumstances, the margin of production may be as narrow as the theory would require. Something approaching this state of things may be found, for instance, among some Eskimo tribes. But in a modern industrial community--where the margin of admissible waste probably always exceeds fifty per cent, of the output of goods--the facts make no approach to the hypothesis. The second assumed condition is, of course, the old-fashioned assumption of a beneficent, providential order or meliorative trend in human affairs. As such, it needs no argument at this day. Instances are not far to seek of communities in which economic deterioration has taken place while the system of distribution, both of income and of accumulated wealth, has remained on a pecuniary basis. * * * * * To return to the main drift of the argument. The pecuniary employments have to do with wealth in point of ownership, with market values, with transactions of exchange, purchase and sale, bargaining for the purpose of pecuniary gain. These employments make up the characteristic occupations of business men, and the gains of business are derived from successful endeavors of the pecuniary kind. These business employments are the characteristic activity (constitute the "function") of what are in theory called undertakers. The dispositions which undertakers, _qua_ business men, make are pecuniary dispositions--whatever industrial sequel they may or may not have--and are carried out with a view to pecuniary gain. The wealth of which they have the discretionary disposal may or may not be in the form of "production goods"; but in whatever form the wealth in question is conceived to exist, it is handled by the undertakers in terms of values and is disposed of by them in the pecuniary respect. When, as may happen, the undertaker steps down from the pecuniary plane and directs the mechanical handling and functioning of "production goods," he becomes for the time a foreman. The undertaker, if his business venture is of the industrial kind, of course takes cognizance of the aptness of a given industrial method or process for his purpose, and he has to choose between different industrial processes in which to invest his values; but his work as undertaker, simply, is the investment and shifting of the values under his hand from the less to the more gainful point of investment. When the investment takes the form of material means of industry, or industrial plant, the sequel of a given business transaction is commonly some particular use of such means; and when such industrial use follows, it commonly takes place at the hands of other men than the undertaker, although it takes place within limits imposed by the pecuniary exigencies of which the undertaker takes cognizance. Wealth turned to account in the way of investment or business management may or may not, in consequence, be turned to account, materially, for industrial effect. Wealth, values, so employed for pecuniary ends is capital in the business sense of the word.[10] Wealth, material means of industry, physically employed for industrial ends is capital in the industrial sense. Theory, therefore, would require that care be taken to distinguish between capital as a pecuniary category, and capital as an industrial category, if the term capital is retained to cover the two concepts.[11] The distinction here made substantially coincides with a distinction which many late writers have arrived at from a different point of approach and have, with varying success, made use of under different terms.[12] A further corollary touching capital may be pointed out. The gains derived from the handling of capital in the pecuniary respect have no immediate relation, stand in no necessary relation of proportion, to the productive effect compassed by the industrial use of the material means over which the undertaker may dispose; although the gains have a relation of dependence to the effects achieved in point of vendibility. But vendibility need not, even approximately, coincide with serviceability, except serviceability be construed in terms of marginal utility or some related conception, in which case the outcome is a tautology. Where, as in the case commonly assumed by economists as typical, the investing undertaker seeks his gain through the production and sale of some useful article, it is commonly also assumed that his effort is directed to the most economical production of as large and serviceable a product as may be, or at least it is assumed that such production is the outcome of his endeavors in the natural course of things. This account of the aim and outcome of business enterprise may be natural, but it does not describe the facts. The facts being, of course, that the undertaker in such a case seeks to produce economically as vendible a product as may be. In the common run vendibility depends in great part on the serviceability of the goods, but it depends also on several other circumstances; and to that highly variable, but nearly always considerable extent to which vendibility depends on other circumstances than the material serviceability of the goods, the pecuniary management of capital must be held not to serve the ends of production. Neither immediately, in his purely pecuniary traffic, nor indirectly, in the business guidance of industry through his pecuniary traffic, therefore, can the undertaker's dealings with his pecuniary capital be accounted a productive occupation, nor can the gains of capital be taken to mark or to measure the productivity due to the investment. The "cost of production" of goods in the case contemplated is to an appreciable, but indeterminable, extent a cost of production of vendibility--an outcome which is often of doubtful service to the body of consumers, and which often counts in the aggregate as waste. The material serviceability of the means employed in industry, that is to say the functioning of industrial capital in the service of the community at large, stands in no necessary or consistent relation to the gainfulness of capital in the pecuniary respect. Productivity can accordingly not be predicated of pecuniary capital. It follows that productivity theories of interest should be as difficult to maintain as productivity theories of the gains of the pecuniary employments, the two resting on the same grounds. It is, further, to be remarked that pecuniary capital and industrial capital do not coincide in respect of the concrete things comprised under each. From this and from the considerations already indicated above, it follows that the magnitude of pecuniary capital may vary independently of variations in the magnitude of industrial capital--not indefinitely, perhaps, but within a range which, in its nature, is indeterminate. Pecuniary capital is a matter of market values, while industrial capital is, in the last analysis, a matter of mechanical efficiency, or rather of mechanical effects not reducible to a common measure or a collective magnitude. So far as the latter may be spoken of as a homogenous aggregate--itself a doubtful point at best--the two categories of capital are disparate magnitudes, which can be mediated only through a process of valuation conditioned by other circumstances besides the mechanical efficiency of the material means valued. Market values being a psychological outcome, it follows that pecuniary capital, an aggregate of market values, may vary in magnitude with a freedom which gives the whole an air of caprice,--such as psychological phenomena, particularly the psychological phenomena of crowds, frequently present, and such as becomes strikingly noticeable in times of panic or of speculative inflation. On the other hand, industrial capital, being a matter of mechanical contrivances and adaptation, cannot similarly vary through a revision of valuations. If it is taken as an aggregate, it is a physical magnitude, and as such it does not alter its complexion or its mechanical efficiency in response to the greater or less degree of appreciation with which it is viewed. Capital pecuniarily considered rests on a basis of subjective value; capital industrially considered rests on material circumstances reducible to objective terms of mechanical, chemical and physiological effect. The point has frequently been noted that it is impossible to get at the aggregate social (industrial) capital by adding up the several items of individual (pecuniary) capital. A reason for this, apart from variations in the market values of given material means of production, is that pecuniary capital comprises not only material things but also conventional facts, psychological phenomena not related in any rigid way to material means of production,--as _e.g._, good will, fashions, customs, prestige, effrontery, personal credit. Whatever ownership touches, and whatever affords ground for pecuniary discretion, may be turned to account for pecuniary gain and may therefore be comprised in the aggregate of pecuniary capital. Ownership, the basis of pecuniary capital, being itself a conventional fact, that is to say a matter of habits of thought, it is intelligible that phenomena of convention and opinion should figure in an inventory of pecuniary capital; whereas, industrial capital being of a mechanical character, conventional circumstances do not affect it--except as the future production of material means to replace the existing outfit may be guided by convention--and items having but a conventional existence are, therefore, not comprised in its aggregate. The disparity between pecuniary and industrial capital, therefore, is something more than a matter of an arbitrarily chosen point of view, as some recent discussions of the capital concept would have us believe; just as the difference between the pecuniary and the industrial employments, which are occupied with the one or the other category of capital, means something more than the same thing under different aspects. * * * * * But the distinction here attempted has a farther bearing, beyond the possible correction of a given point in the theory of distribution. Modern economic science is to an increasing extent concerning itself with the question of what men do and how and why they do it, as contrasted with the older question of how Nature, working through human nature, maintains a favorable balance in the output of goods. Neither the practical questions of our generation, nor the pressing theoretical questions of the science, run on the adequacy or equity of the share that goes to any class in the normal case. The questions are rather such realistic ones as these: Why do we, now and again, have hard times and unemployment in the midst of excellent resources, high efficiency and plenty of unmet wants? Why is one-half our consumable product contrived for consumption that yields no material benefit? Why are large coördinations of industry, which greatly reduce cost of production, a cause of perplexity and alarm? Why is the family disintegrating among the industrial classes, at the same time that the wherewithal to maintain it is easier to compass? Why are large and increasing portions of the community penniless in spite of a scale of remuneration which is very appreciably above the subsistence minimum? Why is there a widespread disaffection among the intelligent workmen who ought to know better? These and the like questions, being questions of fact, are not to be answered on the grounds of normal equivalence. Perhaps it might better be said that they have so often been answered on those grounds, without any approach to disposing of them, that the outlook for help in that direction has ceased to have a serious meaning. These are, to borrow Professor Clark's phrase, questions to be answered on dynamic, not on static grounds. They are questions of conduct and sentiment, and so far as their solution is looked for at the hands of economists it must be looked for along the line of the bearing which economic life has upon the growth of sentiment and canons of conduct. That is to say, they are questions of the bearing of economic life upon the cultural changes that are going forward. For the present it is the vogue to hold that economic life, broadly, conditions the rest of social organization or the constitution of society. This vogue of the proposition will serve as excuse from going into an examination of the grounds on which it may be justified, as it is scarcely necessary to persuade any economist that it has substantial merits even if he may not accept it in an unqualified form. What the Marxists have named the "Materialistic Conception of History" is assented to with less and less qualification by those who make the growth of culture their subject of inquiry. This materialistic conception says that institutions are shaped by economic conditions; but, as it left the hands of the Marxists, and as it still functions in the hands of many who knew not Marx, it has very little to say regarding the efficient force, the channels, or the methods by which the economic situation is conceived to have its effect upon institutions. What answer the early Marxists gave to this question, of how the economic situation shapes institutions, was to the effect that the causal connection lies through a selfish, calculating class interest. But, while class interest may count for much in the outcome, this answer is plainly not a competent one, since, for one thing, institutions by no means change with the alacrity which the sole efficiency of a reasoned class interest would require. Without discrediting the claim that class interest counts for something in the shaping of institutions, and to avoid getting entangled in preliminaries, it may be said that institutions are of the nature of prevalent habits of thought, and that therefore the force which shapes institutions is the force or forces which shape the habits of thought prevalent in the community. But habits of thought are the outcome of habits of life. Whether it is intentionally directed to the education of the individual or not, the discipline of daily life acts to alter or reënforce the received habits of thought, and so acts to alter or fortify the received institutions under which men live. And the direction in which, on the whole, the alteration proceeds is conditioned by the trend of the discipline of daily life. The point here immediately at issue is the divergent trend of this discipline in those occupations which are prevailingly of an industrial character, as contrasted with those which are prevailingly of a pecuniary character. So far as regards the different cultural outcome to be looked for on the basis of the present economic situation as contrasted with the past, therefore, the question immediately in hand is as to the greater or less degree in which occupations are differentiated into industrial and pecuniary in the present as compared with the past. The characteristic feature which is currently held to differentiate the existing economic situation from that out of which the present has developed, or out of which it is emerging, is the prevalence of the machine industry with the consequent larger and more highly specialised organisation of the market and of the industrial force and plant. As has been pointed out above, and as is well enough known from the current discussions of the economists, industrial life is organised on a pecuniary basis and managed from the pecuniary side. This, of course, is true in a degree both of the present and of the nearer past, back at least as far as the Middle Ages. But the larger scope of organisations in modern industry means that the pecuniary management has been gradually passing into the hands of a relatively decreasing class, whose contact with the industrial classes proper grows continually less immediate. The distinction between employments above spoken of is in an increasing degree coming to coincide with a differentiation of occupations and of economic classes. Some degree of such specialisation and differentiation there has, of course, been, one might almost say, always. But in our time, in many branches of industry, the specialisation has been carried so far that large bodies of the working population have but an incidental contact with the business side of the enterprise, while a minority have little if any other concern with the enterprise than its pecuniary management. This was not true, _e.g._, at the time when the undertaker was still salesman, purchasing agent, business manager, foreman of the shop, and master workman. Still less was it true in the days of the self-sufficing manor or household, or in the days of the closed town industry. Neither is it true in our time of what we call the backward or old-fashioned industries. These latter have not been and are not organised on a large scale, with a consistent division of labor between the owners and business managers on the one side and the operative employees on the other. Our standing illustrations of this less highly organised class of industries are the surviving handicrafts and the common run of farming as carried on by relatively small proprietors. In that earlier phase of economic life, out of which the modern situation has gradually grown, all the men engaged had to be constantly on their guard, in a pecuniary sense, and were constantly disciplined in the husbanding of their means and in the driving of bargains,--as is still true, _e.g._, of the American farmer. The like was formerly true also of the consumer, in his purchases, to a greater extent than at present. A good share of the daily attention of those who were engaged in the handicrafts was still perforce given to the pecuniary or business side of their trade. But for that great body of industry which is conventionally recognised as eminently modern, specialisation of function has gone so far as, in great measure, to exempt the operative employees from taking thought of pecuniary matters. Now, as to the bearing of all this upon cultural changes that are in progress or in the outlook. Leaving the "backward," relatively unspecialised, industries on one side, as being of an equivocal character for the point in hand and as not differing characteristically from the corresponding industries in the past so far as regards their disciplinary value; modern occupations may, for the sake of the argument, be broadly distinguished, as economic employments have been distinguished above, into business and industrial. The modern industrial and the modern business occupations are fairly comparable as regards the degree of intelligence required in both, if it be borne in mind that the former occupations comprise the highly trained technological experts and engineers as well as the highly skilled mechanics. The two classes of occupations differ in that the men in the pecuniary occupations work within the lines and under the guidance of the great institution of ownership, with its ramifications of custom, prerogative, and legal right; whereas those in the industrial occupations are, in their work, relatively free from the constraint of this conventional norm of truth and validity. It is, of course, not true that the work of the latter class lies outside the reach of the institution of ownership; but it is true that, in the heat and strain of the work, when the agent's powers and attention are fully taken up with the work which he has in hand, that of which he has perforce to take cognisance is not conventional law, but the conditions impersonally imposed by the nature of material things. This is the meaning of the current commonplace that the required close and continuous application of the operative in mechanical industry bars him out of all chance for an all-around development of the cultural graces and amenities. It is the periods of close attention and hard work that seem to count for most in the formation of habits of thought. An _a priori_ argument as to what cultural effects should naturally follow from such a difference in discipline between occupations, past and present, would probably not be convincing, as _a priori_ arguments from half-authenticated premises commonly are not. And the experiments along this line which later economic developments have so far exhibited have been neither neat enough, comprehensive enough, nor long continued enough to give definite results. Still, there is something to be said under this latter head, even if this something may turn out to be somewhat familiar. It is, _e.g._ a commonplace of current vulgar discussions of existing economic questions, that the classes engaged in the modern mechanical or factory industries are improvident and apparently incompetent to take care of the pecuniary details of their own life. In this indictment may well be included not only factory hands, but the general class of highly skilled mechanics, inventors, technological experts. The rule does not hold in any hard and fast way, but there seems to be a substantial ground of truth in the indictment in this general form. This will be evident on comparison of the present factory population with the class of handicraftsmen of the older culture whom they have displaced, as also on comparison with the farming population of the present time, especially the small proprietors of this and other countries. The inferiority which is currently conceded to the modern industrial classes in this respect is not due to scantier opportunities for saving, whether they are compared with the earlier handicraftsmen or with the modern farmer or peasant. This phenomenon is commonly discussed in terms which impute to the improvident industrial classes something in the way of total depravity, and there is much preaching of thrift and steady habits. But the preaching of thrift and self-help, unremitting as it is, is not producing an appreciable effect. The trouble seems to run deeper than exhortation can reach. It seems to be of the nature of habit rather than of reasoned conviction. Other causes may be present and may be competent partially to explain the improvidence of these classes; but the inquiry is at least a pertinent one; how far the absence of property and thrift among them may be traceable to the relative absence of pecuniary training in the discipline of their daily life. If, as the general lie of the subject would indicate, this peculiar pecuniary situation of the industrial classes is in any degree due to comprehensive disciplinary causes, there is material in it for an interesting economic inquiry. The surmise that the trouble with the industrial class is something of this character is strengthened by another feature of modern vulgar life, to which attention is directed as a further, and, for the present, a concluding illustration of the character of the questions that are touched by the distinction here spoken for. The most insidious and most alarming malady, as well as the most perplexing and unprecedented, that threatens the modern social and political structure is what is vaguely called socialism. The point of danger to the social structure, and at the same time the substantial core of the socialistic disaffection, is a growing disloyalty to the institution of property, aided and abetted as it is by a similarly growing lack of deference and affection for other conventional features of social structure. The classes affected by socialistic vagaries are not consistently averse to a competent organisation and control of society, particularly not in the economic respect, but they are averse to organisation and control on conventional lines. The sense of solidarity does not seem to be either defective or in abeyance, but the ground of solidarity is new and unexpected. What their constructive ideals may be need not concern nor detain us; they are vague and inconsistent and for the most part negative. Their disaffection has been set down to discontent with their lot by comparison with others, and to a mistaken view of their own interests; and much and futile effort has been spent in showing them the error of their ways of thinking. But what the experience of the past suggests that we should expect under the guidance of such motives and reasoning as these would be a demand for a redistribution of property, a reconstitution of the conventions of ownership on such new lines as the apprehended interests of these classes would seem to dictate. But such is not the trend of socialistic thinking, which contemplates rather the elimination of the institution of property. To the socialists property or ownership does not seem inevitable or inherent in the nature of things; to those who criticise and admonish them it commonly does. Compare them in this respect with other classes who have been moved by hardship or discontent, whether well or ill advised, to put forth denunciations and demands for radical economic changes; as _e.g._, the American farmers in their several movements, of grangerism, populism, and the like. These have been loud enough in their denunciations and complaints, and they have been accused of being socialistic in their demand for a virtual redistribution of property. They have not felt the justice of the accusation, however, and it is to be noted that their demands have consistently run on a rehabilitation of property on some new basis of distribution, and have been uniformly put forth with the avowed purpose of bettering the claimants in point of ownership. Ownership, property "honestly" acquired, has been sacred to the rural malcontents, here and elsewhere; what they have aspired to do has been to remedy what they have conceived to be certain abuses under the institution, without questioning the institution itself. Not so with the socialists, either in this country or elsewhere. Now, the spread of socialistic sentiment shows a curious tendency to affect those classes particularly who are habitually employed in the specialised industrial occupations, and are thereby in great part exempt from the intellectual discipline of pecuniary management. Among these men, who by the circumstances of their daily life are brought to do their serious and habitual thinking in other than pecuniary terms, it looks as if the ownership preconception were becoming obsolescent through disuse. It is the industrial population, in the modern sense, and particularly the more intelligent and skilled men employed in the mechanical industries, that are most seriously and widely affected. With exceptions both ways, but with a generality that is not to be denied, the socialistic disaffection spreads through the industrial towns, chiefly and most potently among the better classes of operatives in the mechanical employments; whereas the relatively indigent and unintelligent regions and classes, which the differentiation between pecuniary and industrial occupations has not reached, are relatively free from it. In like manner the upper and middle classes, whose employments are of a pecuniary character, if any, are also not seriously affected; and when avowed socialistic sentiment is met with among these upper and middle classes it commonly turns out to be merely a humanitarian aspiration for a more "equitable" redistribution of wealth--a readjustment of ownership under some new and improved method of control--not a contemplation of the traceless disappearance of ownership. Socialism, in the sense in which the word connotes a subversion of the economic foundations of modern culture, appears to be found only sporadically and uncertainly outside the limits, in time and space, of the discipline exercised by the modern mechanical, non-pecuniary occupations. This state of the case need of course not be due solely to the disciplinary effects of the industrial employments, nor even solely to effects traceable to those employments whether in the way of disciplinary results, selective development, or what not. Other factors, particularly factors of an ethnic character, seem to coöperate to the result indicated; but, so far as evidence bearing on the point is yet in hand and has been analysed, it indicates that this differentiation of occupations is a necessary requisite to the growth of a consistent body of socialistic sentiment; and the indication is also that wherever this differentiation prevails in such a degree of accentuation and affects such considerable and compact bodies of people as to afford ground for a consistent growth of common sentiment, a result is some form of iconoclastic socialism. The differentiation may of course have a selective as well as a disciplinary effect upon the population affected, and an off-hand separation of these two modes of influence can of course not be made. In any case, the two modes of influence seem to converge to the outcome indicated; and, for the present purpose of illustration simply, the tracing out of the two strands of sequence in the case neither can nor need be undertaken. By force of this differentiation, in one way and another, the industrial classes are learning to think in terms of material cause and effect, to the neglect of prescription and conventional grounds of validity; just as, in a faintly incipient way, the economists are also learning to do in their discussion of the life of these classes. The resulting decay of the popular sense of conventional validity of course extends to other matters than the pecuniary conventions alone, with the outcome that the socialistically affected industrial classes are pretty uniformly affected with an effortless iconoclasm in other directions as well. For the discipline to which their work and habits of life subject them gives not so much a training away from the pecuniary conventions, specifically, as a positive and somewhat unmitigated training in methods of observation and inference proceeding on grounds alien to all conventional validity. But the practical experiment going on in the specialisation of discipline, in the respect contemplated, appears still to be near its beginning, and the growth of aberrant views and habits of thought due to the peculiar disciplinary trend of this late and unprecedented specialisation of occupations has not yet had time to work itself clear. The effects of the like one-sided discipline are similarly visible in the highly irregular, conventionally indefensible attitude of the industrial classes in the current labor and wage disputes, not of an avowedly socialistic aim. So also as regards the departure from the ancient norm in such non-economic, or secondarily economic matters as the family relation and responsibility, where the disintegration of conventionalities in the industrial towns is said to threaten the foundations of domestic life and morality; and again as regards the growing inability of men trained to materialistic, industrial habits of thought to appreciate, or even to apprehend, the meaning of religious appeals and consolations that proceed on the old-fashioned conventional or metaphysical grounds of validity. But these and other like directions in which the cultural effects of the modern specialisation of occupations, whether in industry or in business, may be traceable can not be followed up here. FOOTNOTES: [1] Reprinted by permission from _Publications of the American Economic Association_, series 3, Vol. II. [2] Some late writers, as, _e.g._, J. B. Clark, apparently must be held to conceive the equivalence in terms of productive force rather than of serviceability; or, perhaps, in terms of serviceability on one side of the equation and productive force on the other. [3] J. B. Clark, _The Distribution of Wealth_, p. 20. [4] The undertaker gets an income; therefore he must produce goods. But human activity directed to the production of goods is labor; therefore the undertaker is a particular kind of laborer. There is, of course, some dissent from this position. [5] The change which has supervened as regards the habitual resort to a natural law of equivalence is in large part a change with respect to the degree of immediacy and "reality" imputed to this law, and to a still greater extent a change in the degree of overtness with which it is avowed. [6] See, _e.g._, a paper by H. C. Emery in the _Papers and Proceedings of the Twelfth Annual Meeting_ of the American Economic Association, on "The Place of the Speculator in the Theory of Distribution," and more particularly the discussion following the paper. [7] _Cf. e.g._, Marx, _Capital_, especially bk. I, ch. IV. [8] It is not hereby intended to depreciate the services rendered the community by the captain of industry in his management of business. Such services are no doubt rendered and are also no doubt of substantial value. Still less is it the intention to decry the pecuniary incentive as a motive to thrift and diligence. It may well be that the pecuniary traffic which we call business is the most effective method of conducting the industrial policy of the community; not only the most effective that has been contrived, but perhaps the best that can be contrived. But that is a matter of surmise and opinion. In a matter of opinion on a point that can not be verified, a reasonable course is to say that the majority are presumably in the right. But all that is beside the point. However probable or reasonable such a view may be, it can find no lodgment in modern scientific theory, except as a corollary of secondary importance. Nor can scientific theory build upon the ground it may be conceived to afford. Policy may so build, but science can not. Scientific theory is a formulation of the laws of phenomena in terms of the efficient forces at work in the sequence of phenomena. So long as (under the old dispensation of the order of nature) the animistically conceived natural laws, with their God-given objective end, were considered to exercise a constraining guidance over the course of events whereof they were claimed to be laws, so long it was legitimate scientific procedure for economists to formulate their theory in terms of these laws of the natural course; because so long they were speaking in terms of what was, to them, the efficient forces at work. But so soon as these natural laws were reduced to the plane of colorless empirical generalization as to what commonly happens, while the efficient forces at work are conceived to be of quite another cast, so soon must theory abandon the ground of the natural course, sterile for modern scientific purposes, and shift to the ground of the causal sequence, where alone it will have to do with the forces at work as they are conceived in our time. The generalisations regarding the normal course, as "normal" has been defined in economics since J. S. Mill, are not of the nature of theory, but only rule-of-thumb. And the talk about the "function" of this and that factor of production, etc., in terms of the collective life purpose, goes to the same limbo; since the collective life purpose is no longer avowedly conceived to cut any figure in the every-day guidance of economic activities or the shaping of economic results. The doctrine of the social-economic function of the undertaker may for the present purpose be illustrated by a supposititious parallel from Physics. It is an easy generalisation, which will scarcely be questioned, that, in practice, pendulums commonly vibrate in a plane approximately parallel with the nearest wall of the clock-case in which they are placed. The normality of this parallelism is fortified by the further observation that the vibrations are also commonly in a plane parallel with the nearest wall of the room; and when it is further called to mind that the balance which serves the purpose of a pendulum in watches similarly vibrates in a plane parallel with the walls of its case, the absolute normality of the whole arrangement is placed beyond question. It is true, the parallelism is not claimed to be related to the working of the pendulum, except as a matter of fortuitous convenience; but it should be manifest from the generality of the occurrence that in the normal case, in the absence of disturbing causes, and in the long run, all pendulums will "naturally" tend to swing in a plane faultlessly parallel with the nearest wall. The use which has been made of the "organic concept," in economics and in social science at large, is fairly comparable with this supposititious argument concerning the pendulum. [9] Since the ground of payment of wages is the vendibility of the product, and since the ground of a difference in wages is the different vendibility of the product acquired through the purchase of the labor for which the wages are paid, it follows that wherever the difference in vendibility rests on a difference in the magnitude of the product alone, there wages should be somewhat in proportion to the magnitude of the product. [10] All wealth so used is capital, but it does not follow that all pecuniary capital is social wealth. [11] In current theory the term capital is used in these two senses; while in business usage it is employed pretty consistently in the former sense alone. The current ambiguity in the term capital has often been adverted to by economists, and there may be need of a revision of the terminology at this point; but this paper is not concerned with that question. [12] Professor Fetter, in a recent paper (_Quarterly Journal of Economics_, November, 1900) is, perhaps, the writer who has gone the farthest in this direction in the definition of the capital concept. Professor Fetter wishes to confine the term capital to pecuniary capital, or rather to such pecuniary capital as is based on the ownership of material goods. The wisdom of such a terminological expedient is, of course, not in question here. ON THE NATURE OF CAPITAL[1] I. THE PRODUCTIVITY OF CAPITAL GOODS It has been usual in expositions of economic theory to speak of capital as an array of "productive goods." What is immediately had in mind in this expression, as well as in the equivalent "capital goods," is the industrial equipment, primarily the mechanical appliances employed in the processes of industry. When the productive efficiency of these and of other subsidiary classes of capital goods is subjected to further analysis, it is not unusual to trace it back to the productive labor of the workmen, the labor of the individual workman being the ultimate productive factor in the commonly accepted systems of theory. The current theories of production, as also those of distribution, are drawn in individualistic terms, particularly when these theories are based on hedonistic premises, as they commonly are. Now, whatever may or may not be true for human conduct in some other bearing, in the economic respect man has never lived an isolated, self-sufficient life as an individual, either actually or potentially. Humanly speaking, such a thing is impossible. Neither an individual person nor a single household, nor a single line of descent, can maintain its life in isolation. Economically speaking, this is the characteristic trait of humanity that separates mankind from the other animals. The life-history of the race has been a life-history of human communities, of more or less considerable size, with more or less of group solidarity, and with more or less of cultural continuity over successive generations. The phenomena of human life occur only in this form. This continuity, congruity, or coherence of the group, is of an immaterial character. It is a matter of knowledge, usage, habits of life and habits of thought, not a matter of mechanical continuity or contact, or even of consanguinity. Wherever a human community is met with, as, _e.g._, among any of the peoples of the lower cultures, it is found in possession of something in the way of a body of technological knowledge,--knowledge serviceable and requisite to the quest of a livelihood, comprising at least such elementary acquirements as language, the use of fire, of a cutting edge, of a pointed stick, of some tool for piercing, of some form of cord, thong, or fiber, together with some skill in the making of knots and lashings. Coördinate with this knowledge of ways and means, there is also uniformly present some matter-of-fact knowledge of the physical behavior of the materials with which men have to deal in the quest of a livelihood, beyond what any one individual has learned or can learn by his own experience alone. This information and proficiency in the ways and means of life vests in the group at large; and, apart from accretions borrowed from other groups, it is the product of the given group, though not produced by any single generation. It may be called the immaterial equipment, or, by a license of speech, the intangible assets[2] of the community; and, in the early days at least, this is far and away the most important and consequential category of the community's assets or equipment. Without access to such a common stock of immaterial equipment no individual and no fraction of the community can make a living, much less make an advance. Such a stock of knowledge and practice is perhaps held loosely and informally; but it is held as a common stock, pervasively, by the group as a body, in its corporate capacity, as one might say; and it is transmitted and augmented in and by the group, however loose and haphazard the transmission may be conceived to be, not by individuals and in single lines of inheritance. The requisite knowledge and proficiency of ways and means is a product, perhaps a by-product, of the life of the community at large; and it can also be maintained and retained only by the community at large. Whatever may be true for the unsearchable prehistoric phases of the life-history of the race, it appears to be true for the most primitive human groups and phases of which there is available information that the mass of technological knowledge possessed by any community, and necessary to its maintenance and to the maintenance of each of its members or subgroups, is too large a burden for any one individual or any single line of descent to carry. This holds true, of course, all the more rigorously and consistently, the more advanced the "state of the industrial arts" may be. But it seems to hold true with a generality that is fairly startling, that whenever a given cultural community is broken up or suffers a serious diminution of numbers, its technological heritage deteriorates and dwindles, even though it may have been apparently meager enough before. On the other hand, it seems to hold true with a similar uniformity that, when an individual member or a fraction of a community on what we call a lower stage of economic development is drawn away and trained and instructed in the ways of a larger and more efficient technology, and is then thrown back into his home community, such an individual or fraction proves unable to make head against the technological bent of the community at large or even to create a serious diversion. Slight, perhaps transient, and gradually effective technological consequences may result from such an experiment; but they become effective by diffusion and assimilation through the body of the community, not in any marked degree in the way of an exceptional efficiency on the part of the individual or fraction which has been subjected to exceptional training. And inheritance in technological matters runs not in the channels of consanguinity, but in those of tradition and habituation, which are necessarily as wide as the scheme of life of the community. Even in a relatively small and primitive community the mass of detail comprised in its knowledge and practice of ways and means is large,--too large for any one individual or household to become competently expert in it all; and its ramifications are extensive and diverse, at the same time that all these ramifications bear, directly or indirectly, on the life and work of each member of the community. Neither the standard and routine of living nor the daily work of any individual in the community would remain the same after the introduction of an appreciable change, for good or ill, in any branch of the community's equipment of technological expedients. If the community grows larger, to the dimensions of a modern civilised people, and this immaterial equipment grows proportionately great and various, then it will become increasingly difficult to trace the connection between any given change in technological detail and the fortunes of any given obscure member of the community. But it is at least safe to say that an increase in the volume and complexity of the body of technological knowledge and practice does not progressively emancipate the life and work of the individual from its dominion. The complement of technological knowledge so held, used, and transmitted in the life of the community is, of course, made up out of the experience of individuals. Experience, experimentation, habit, knowledge, initiative, are phenomena of individual life, and it is necessarily from this source that the community's common stock is all derived. The possibility of its growth lies in the feasibility of accumulating knowledge gained by individual experience and initiative, and therefore it lies in the feasibility of one individual's learning from the experience of another. But the initiative and technological enterprise of individuals, such, _e.g._, as shows itself in inventions and discoveries of more and better ways and means, proceeds on and enlarges the accumulated wisdom of the past. Individual initiative has no chance except on the ground afforded by the common stock, and the achievements of such initiative are of no effect except as accretions to the common stock. And the invention or discovery so achieved always embodies so much of what is already given that the creative contribution of the inventor or discoverer is trivial by comparison. In any known phase of culture this common stock of intangible, technological equipment is relatively large and complex,--_i.e._, relatively to the capacity of any individual member to create or to use it; and the history of its growth and use is the history of the development of material civilisation. It is a knowledge of ways and means, and is embodied in the material contrivances and processes by means of which the members of the community make their living. Only by such means does technological efficiency go into effect. These "material contrivances" ("capital goods," material equipment) are such things as tools, vessels, vehicles, raw materials, buildings, ditches, and the like, including the land in use; but they include also, and through the greater part of the early development chiefly, the useful minerals, plants, and animals. To say that these minerals, plants, and animals are useful--in other words, that they are economic goods--means that they have been brought within the sweep of the community's knowledge of ways and means. In the relatively early stages of primitive culture the useful plants and minerals are, no doubt, made use of in a wild state, as, _e.g._, fish and timber have continued to be used. Yet in so far as they are useful they are unmistakably to be counted in among the material equipment ("tangible assets") of the community. The case is well illustrated by the relation of the Plains Indians to the buffalo, and by the northwest coast Indians to the salmon, on the one hand, and by the use of a wild flora by such communities as the Coahuilla Indians,[3] the Australian blacks, or the Andamanese, on the other hand. But with the current of time, experience, and initiative, domesticated (that is to say improved) plants and animals come to take the first place. We have then such "technological expedients" in the first rank as the many species and varieties of domestic animals, and more particularly still the various grains, fruits, root-crops, and the like, virtually all of which were created by man for human use; or perhaps a more scrupulously veracious account would say that they were in the main created by the women, through long ages of workmanlike selection and cultivation. These things, of course, are useful because men have learned their use, and their use, so far as it has been learned, has been learned by protracted and voluminous experience and experimentation, proceeding at each step on the accumulated achievements of the past. Other things, which may in time come to exceed these in usefulness are still useless, economically non-existent, on the early levels of culture, because of what men in that time have not yet learned. * * * * * While this immaterial equipment of industry, the intangible assets of the community, have apparently always been relatively very considerable and are always mainly in the keeping of the community at large, the material equipment, the tangible assets, on the other hand, have, in the early stages (say the earlier 90 per cent.) of the life-history of human culture, been relatively slight, and have apparently been held somewhat loosely by individuals or household groups. This material equipment is relatively very slight in the earlier phases of technological development, and the tenure by which it is held is apparently vague and uncertain. At a relatively primitive phase of the development, and under ordinary conditions of climate and surroundings, the possession of the concrete articles ("capital goods") needed to turn the commonplace knowledge of ways and means to account is a matter of slight consequence,--contrary to the view commonly spoken for by the economists of the classical line. Given the commonplace technological knowledge and the commonplace training,--and these are given by common notoriety and the habituation of daily life,--the acquisition, construction, or usufruct of the slender material equipment needed arranges itself almost as a matter of course, more particularly where this material equipment does not include a stock of domestic animals or a plantation of domesticated trees and vegetables. Under given circumstances a relatively primitive technological scheme may involve some large items of material equipment, as the buffalo pens (_piskun_) of the Blackfoot Indians or the salmon weirs of the river Indians of the northwest coast. Such items of material equipment are then likely to be held and worked collectively, either by the community at large or by subgroups of a considerable size. Under ordinary, more generally prevalent conditions, it appears that even after a relatively great advance has been made in the cultivation of crops the requisite industrial equipment is not a matter of serious concern, particularly so aside from the tilled ground and the cultivated trees, as is indicated by the singularly loose and inconsequential notions of ownership prevalent among peoples occupying such a stage of culture. A primitive stage of communism is not known. But as the common stock of technological knowledge increases in volume, range, and efficiency, the material equipment whereby this knowledge of ways and means is put into effect grows greater, more considerable relatively to the capacity of the individual. And so soon, or in so far, as the technological development falls into such shape as to require a relatively large unit of material equipment for the effective pursuit of industry, or such as otherwise to make the possession of the requisite material equipment a matter of consequence, so as seriously to handicap the individuals who are without these material means, and to place the current possessors of such equipment at a marked advantage, then the strong arm intervenes, property rights apparently begin to fall into definite shape, the principles of ownership gather force and consistency, and men begin to accumulate capital goods and take measures to make them secure. An appreciable advance in the industrial arts is commonly followed or accompanied by an increase of population. The difficulty of procuring a livelihood may be no greater after such an increase; it may even be less; but there results a relative curtailment of the available area and raw materials, and commonly also an increased accessibility of the several portions of the community. A wide-reaching control becomes easier. At the same time a larger unit of material equipment is needed for the effective pursuit of industry. As this situation develops, it becomes worth while--this is to say, it becomes feasible--for the individual with the strong arm to engross, or "corner," the usufruct of the commonplace knowledge of ways and means by taking over such of the requisite material as may be relatively scarce and relatively indispensable for procuring a livelihood under the current state of the industrial arts.[4] Circumstances of space and numbers prevent escape from the new technological situation. The commonplace knowledge of ways and means cannot be turned to account, under the new conditions, without a material equipment adapted to the then current state of the industrial arts; and such a suitable material equipment is no longer a slight matter, to be compassed by workmanlike initiative and application. _Beati possidentes._ The emphasis of the technological situation, as one might say, may fall now on one line of material items, now on another, according as the exigencies of climate, topography, flora and fauna, density of population, and the like, may decide. So also, under the rule of the same exigencies, the early growth of property rights and of the principles (habits of thought) of ownership may settle on one or another line of material items, according as one or another affords the strategic advantage for engrossing the current technological efficiency of the community. Should the technological situation, the state of the industrial arts, be such as to throw the strategic emphasis on manual labor, on workmanlike skill and application, and if at the same time the growth of population has made land relatively scarce, or hostile contact with other communities has made it impracticable for members of the community to range freely over outlying tracts, then it would be expected that the growth of ownership should take the direction primarily of slavery, or of some equivalent form of servitude, so effecting a naïve and direct monopolistic control of the current knowledge of ways and means.[5] Whereas if the development has taken such a turn, and the community is so placed as to make the quest of a livelihood a matter of the natural increase of flocks and herds, then it should reasonably be expected that these items of equipment will be the chief and primary subject of property rights. In point of fact, it appears that a pastoral culture commonly involves also some degree of servitude, along with the ownership of flocks and herds. Under different circumstances the mechanical appliances of industry, or the tillable land, might come into the position of strategic advantage, and might come in for the foremost place in men's consideration as objects of ownership. The evidence afforded by the known (relatively) primitive cultures and communities seems to indicate that slaves and cattle have in this way come into the primacy as objects of ownership at an earlier period in the growth of material civilisation than land or the mechanical appliances. And it seems similarly evident--more so, indeed--that land has on the whole preceded the mechanical equipment as the stronghold of ownership and the means of engrossing the community's industrial efficiency. It is not until a late period in the life-history of material civilisation that ownership of the industrial equipment, in the narrower sense in which that phrase is commonly employed, comes to be the dominant and typical method of engrossing the immaterial equipment. Indeed, it is a consummation which has been reached only a very few times even partially, and only once with such a degree of finality as to leave the fact indisputable. If it may be said, loosely, that mastery through the ownership of slaves, cattle, or land comes on in force only after the economic development has run through some nine-tenths of its course hitherto, then it may be said likewise that some ninety-nine one-hundredths of this course of development had been completed before the ownership of the mechanical equipment came into undisputed primacy as the basis of pecuniary dominion. So late an innovation, indeed, is this modern institution of "capitalism,"--the predominant ownership of industrial capital as we know it,--and yet so intimate a fact is it in our familiar scheme of life, that we have some difficulty in seeing it in perspective at all, and we find ourselves hesitating between denying its existence, on the one hand, and affirming it to be a fact of nature antecedent to all human institutions, on the other hand. In so speaking of the ownership of industrial equipment as being an institution for cornering the community's intangible assets, there is conveyed an unavoidably implied, though unintended, note of condemnation. Such an implication of merit or demerit is an untoward circumstance in any theoretical inquiry. Any sentimental bias, whether of approval or disapproval, aroused by such an implied censure, must unavoidably hamper the dispassionate pursuit of the argument. To mitigate the effect of this jarring note as far as may be, therefore, it will be expedient to turn back for a moment to other, more primitive and remoter forms of the institution,--as slavery and landed wealth,--and so reach the modern facts of industrial capital by a roundabout and gradual approach. These ancient institutions of ownership, slavery and landed wealth, are matters of history. Considered as dominant factors in the community's scheme of life, their record is completed; and it needs no argument to enforce the proposition that it is a record of economic dominion by the owners of the slaves or the land, as the case may be. The effect of slavery in its best day, and of landed wealth in mediæval and early modern times, was to make the community's industrial efficiency serve the needs of the slave-owners in the one case and of the land-owners in the other. The effect of these institutions in this respect is not questioned now, except in such sporadic and apologetical fashion as need not detain the argument. But the fact that such was the direct and immediate effect of these institutions of ownership in their time by no means involves the instant condemnation of the institutions in question. It is quite possible to argue that slavery and landed wealth, each in its due time and due cultural setting, have served the amelioration of the lot of man and the advance of human culture. What these arguments may be that aim to show the merits of slavery and landed wealth as a means of cultural advance does not concern the present inquiry, neither do the merits of the case in which the arguments are offered. The matter is referred to here to call to mind that any similar theoretical outcome of an analysis of the productivity of "capital goods" need not be admitted to touch the merits of the case in controversy between the socialistic critics of capitalism and the spokesmen of law and order. The nature of landed wealth, in point of economic theory, especially as regards its productivity, has been sifted with the most jealous precautions and the most tenacious logic during the past century; and any economic student can easily review the course of the argument whereby that line of economic theory has been run to earth. It is only necessary here to shift the point of view slightly to bring the whole argument concerning the rent of land to bear on the present question. Rent is of the nature of a differential gain, resting on a differential advantage in point of productivity of the industry employed upon or about it. This differential advantage attaching to a given parcel of land may be a differential as against another parcel or as against industry applied apart from land. The differential advantage attaching to agricultural land--_e.g._, as against industry at large--rests on certain broad peculiarities of the technological situation. Among them are such peculiarities as these: the human species, or the fraction of it concerned in the case, is numerous, relatively to the extent of its habitat; the methods of getting a living, as hitherto elaborated, the ways and means of life, make use of certain crop-plants and certain domestic animals. Apart from such conditions, taken for granted in arguments concerning agricultural rent, there could manifestly be no differential advantage attaching to land, and no production of rent. With increased command of methods of transportation, the agricultural lands of England, _e.g._, and of Europe at large, declined in value, not because these lands became less fertile, but because an equivalent result could more advantageously be got by a new method. So, again, the flint- and amber-bearing regions that are now Danish and Swedish territory about the waters at the entrance to the Baltic were in the neolithic culture of northern Europe the most favored and valuable lands within that cultural region. But, with the coming of the metals and the relative decline of the amber trade, they began to fall behind in the scale of productivity and preference. So also in later time, with the rise of "industry" and the growth of the technology of communication, urban property has gained, as contrasted with rural property, and land placed in an advantageous position relatively to shipping and railroads has acquired a value and a "productiveness" which could not be claimed for it apart from these modern technological expedients. The argument of the single-tax advocates and other economists as to the "unearned increment" is sufficiently familiar, but its ulterior implications have not commonly been recognised. The unearned increment, it is held, is produced by the growth of the community in numbers and in the industrial arts. The contention seems to be sound, and is commonly accepted; but it has commonly been overlooked that the argument involves the ulterior conclusion that all land values and land productivity, including the "original and indestructible powers of the soil," are a function of the "state of the industrial art." It is only within the given technological situation, the current scheme of ways and means, that any parcel of land has such productive powers as it has. It is, in other words, useful only because, and in so far, and in such manner, as men have learned to make use of it. This is what brings it into the category of "land," economically speaking. And the preferential position of the landlord as a claimant of the "net product" consists in his legal right to decide whether, how far, and on what terms men shall put this technological scheme into effect in those features of it which involve the use of his parcel of land. * * * * * All this argument concerning the unearned increment may be carried over, with scarcely a change of phrase, to the case of "capital goods." The Danish flint supply was of first-rate economic consequence, for a thousand years or so, during the stone age; and the polished-flint utensils of that time were then "capital goods" of inestimable importance to civilisation, and were possessed of a "productivity" so serious that the life of mankind in that world may be said to have been balanced on the fine-ground edge of those magnificent polished-flint axes. All that lasted through its technological era. The flint supply and the mechanical expedients and "capital goods," whereby it was turned to account, were valuable and productive then, but neither before nor after that time. Under a changed technological situation the capital goods of that time have become museum exhibits, and their place in human economy has been taken by technological expedients which embody another "state of the industrial arts," the outcome of later and different phases of human experience. Like the polished-flint ax, the metal utensils which gradually displaced it and its like in the economy of the Occidental culture were the product of long experience and the gradual learning of ways and means. The steel ax, as well as the flint ax, embodies the same ancient technological expedient of a cutting edge, as well as the use of a helve and the efficiency due to the weight of the tool. And in the case of the one or the other, when seen in historical perspective and looked at from the point of view of the community at large, the knowledge of ways and means embodied in the utensils was the serious and consequential matter. The construction or acquisition of the concrete "capital goods" was simply an easy consequence. It "cost nothing but labor," as Thomas Mun would say. Yet it might be argued that each concrete article of "capital goods" was the product of some one man's labor, and, as such, its productivity, when put to use, was but the indirect, ulterior, deferred productiveness of the maker's labor. But the maker's productivity in the case was but a function of the immaterial technological equipment at his command, and that in its turn was the slow spiritual distillate of the community's time-long experience and initiative. To the individual producer or owner, to whom the community's accumulated stock of immaterial equipment was open by common notoriety, the cost of the concrete material goods would be the effort involved in making or getting them and in making good his claim to them. To his neighbor who had made or acquired no such parcel of "productive goods," but to whom the resources of the community, material and immaterial, were open on the same easy terms, the matter would look very much the same. He would have no grievance, nor would he have occasion to seek one. Yet, as a resource in the maintenance of the community's life and a factor in the advance of material civilisation, the whole matter would have a different meaning. So long, or rather in so far, as the "capital goods" required to meet the technological demands of the time were slight enough to be compassed by the common man with reasonable diligence and proficiency, so long the draft upon the common stock of immaterial assets by any one would be no hindrance to any other, and no differential advantage or disadvantage would emerge. The economic situation would answer passably to the classical theory of a free competitive system,--"the obvious and simple system of natural liberty," which rests on the presumption of equal opportunity. In a roughly approximate way, such a situation supervened in the industrial life of western Europe on the transition from mediæval to modern times, when handicraft and "industrial" enterprise superseded landed wealth as the chief economic factor. Within the "industrial system," as distinct from the privileged non-industrial classes, a man with a modicum of diligence, initiative, and thrift might make his way in a tolerable fashion without special advantages in the way of prescriptive right or accumulated means. The principle of equal opportunity was, no doubt, met only in a very rough and dubious fashion; but so favorable became the conditions in this respect that men came to persuade themselves in the course of the eighteenth century that a substantially equitable allotment of opportunities would result from the abrogation of all prerogatives other than the ownership of goods. But so precarious and transient was this approximation to a technologically feasible system of equal opportunity that, while the liberal movement which converged upon this great economic reform was still gathering head, the technological situation was already outgrowing the possibility of such a scheme of reform. After the Industrial Revolution came on, it was no longer true, even in the roughly approximate way in which it might have been true some time earlier, that equality before the law, barring property rights, would mean equal opportunity. In the leading, aggressive industries which were beginning to set the pace for all that economic system that centered about the market, the unit of industrial equipment, as required by the new technological era, was larger than one man could compass by his own efforts with the free use of the commonplace knowledge of ways and means. And the growth of business enterprise progressively made the position of the small, old-fashioned producer more precarious. But the speculative theoreticians of that time still saw the phenomena of current economic life in the light of the handicraft traditions and of the preconceptions of natural rights associated with that system, and still looked to the ideal of "natural liberty" as the goal of economic development and the end of economic reform. They were ruled by the principles (habits of thought) which had arisen out of an earlier situation, so effectually as not to see that the rule of equal opportunity which they aimed to establish was already technologically obsolete.[6] During the hundred years and more of this ascendancy of the natural-rights theories in economic science, the growth of technological knowledge has unremittingly gone forward, and concomitantly the large-scale industry has grown great and progressively dominated the field. This large-scale industrial régime is what the socialists, and some others, call "capitalism." "Capitalism," as so used, is not a neat and rigid technical term, but it is definite enough to be useful for many purposes. On its technological side the characteristic trait of this capitalism is that the current pursuit of industry requires a larger unit of material equipment than one individual can compass by his own labor, and larger than one person can make use of alone. So soon as the capitalist régime, in this sense, comes in, it ceases to be true that the owner of the industrial equipment (or the controller of it) in any given case is or may be the producer of it, in any naïve sense of "production." He is under the necessity of acquiring its ownership or control by some other expedient than that of industrially productive work. The pursuit of industry requires an accumulation of wealth, and, barring force, fraud, and inheritance, the method of acquiring such an accumulation of wealth is necessarily some form of bargaining; that is to say, some form of business enterprise. Wealth is accumulated, within the industrial field, from the gains of business; that is to say, from the gains of advantageous bargaining.[7] Taking the situation by and large, looking to the body of business enterprise as a whole, the advantageous bargaining from which gains accrue and from which, therefore, accumulations of capital are derived, is necessarily, in the last analysis, a bargaining between those who own (or control) industrial wealth and those whose work turns this wealth to account in productive industry. This bargaining for hire--commonly a wage agreement--is conducted under the rule of free contract, and is concluded according to the play of demand and supply, as has been well set forth by many writers. On this technological view of capital, as here spoken for, the relations between the two parties to the bargain, the capitalist-employer and the working class, stand as follows. More or less rigorously, the technological situation enforces a certain scale and method in the various lines of industry.[8] The industry can, in effect, be carried on only by recourse to the technologically requisite scale and method, and this requires a material equipment of a certain (large) magnitude; while material equipment of this required magnitude is held exclusively by the capitalist-employer, and is _de facto_ beyond the reach of the common man. A corresponding body of immaterial equipment--knowledge and practice of ways and means--is likewise requisite, under the rule of the same technological exigencies. This immaterial equipment is in part drawn on in the making of the material equipment held by the capitalist-employers, in part in the use to be made of this material equipment in the further processes of industry. This body of immaterial equipment so drawn on in any line of industry is, relatively, still larger, being, on any exhaustive analysis, virtually the whole body of industrial experience accumulated by the community up to date. A free draft on this common stock of technological wisdom must be had both in the construction and in the subsequent use of the material equipment; although no one person can master, or himself employ, more than an inconsiderable fraction of the immaterial equipment so drawn on for the installation or operation of any given block of the material equipment. The owner of the material equipment, the capitalist-employer, is, in the typical case, not possessed of any appreciable fraction of the immaterial equipment necessarily drawn on in the construction and subsequent use of the material equipment owned (controlled) by him. His knowledge and training, so far as it enters into the question, is a knowledge of business, not of industry.[9] The slight technological proficiency which he has or needs for his business ends is of a general character, wholly superficial and impracticable in point of workmanlike efficiency; nor is it turned to account in actual workmanship. He therefore "needs in his business" the service of persons who have a competent working mastery of this immaterial technological equipment, and it is with such persons that his bargains for hire are made. By and large, the measure of their serviceability for his ends is the measure of their technological competency. No workman not possessed of some fractional mastery of the technological requirements is employed,--imbeciles are useless in proportion to their imbecility; and even unskilled and "unintelligent" workmen, so called, are of relatively little use, although they may be possessed of a proficiency in the commonplace industrial details such as would bulk large in absolute magnitude. The "common laborer" is, in fact, a highly trained and widely proficient workman when contrasted with the conceivable human blank supposed to have drawn on the community for nothing but his physique. In the hands of these workmen--the industrial community, the bearers of the immaterial, technological equipment--the capital goods owned by the capitalist become a "means of production." Without them, or in the hands of men who do not know their use, the goods in question would be simply raw materials, somewhat deranged and impaired through having been given the form which now makes them "capital goods." The more proficient the workmen in their mastery of the technological expedients involved, and the greater the facility with which they are able to put these expedients into effect, the more productive will be the processes in which the workmen turn the employer's capital goods to account. So, also, the more competent the work of "superintendence," the foreman-like oversight and correlation of the work in respect of kind, speed, volume, the more will it count in the aggregate of productive efficiency. But this work of correlation is a function of the foreman's mastery of the technological situation at large and his facility in proportioning one process of industry to the requirements and effects of another. Without this due and sagacious correlation of the processes of industry, and their current adaptation to the demands of the industrial situation at large, the material equipment engaged would have but slight efficiency and would count for but little in the way of capital goods. The efficiency of the control exercised by the master-workman, engineer, superintendent, or whatever term may be used to designate the technological expert who controls and correlates the productive processes,--this workmanlike efficiency determines how far the given material equipment is effectually to be rated as "capital goods." Through all this functioning of the workman and the foreman the capitalist's business ends are ever in the background, and the degree of success that attends his business endeavors depends, other things equal, on the efficiency with which these technologists carry on the processes of industry in which he has invested. His working arrangements with these workmen, the bearers of the immaterial equipment engaged, enables the capitalist to turn the processes for which his capital goods are adapted to account for his own profit, but at the cost of such a deduction from the aggregate product of these processes as the workmen may be able to demand in return for their work. The amount of this deduction is determined by the competitive bidding of other capitalists who may have use for the same lines of technological efficiency, in the manner set forth by writers on wages. With the conceivable consolidation of all material assets under one business management, so as to eliminate competitive bidding between employers, it is plain that the resulting business concern would command the undivided forces of the technological situation, with such deduction as is involved in the livelihood of the working population. This livelihood would in such a case be reduced to the most economical footing, as seen from the standpoint of the employer. And the employer (capitalist) would be the _de facto_ owner of the community's aggregate knowledge of ways and means, except so far as this body of immaterial equipment serves also the housekeeping routine of the working population. How nearly the current economic situation may approach to this finished state is a matter of opinion. There is also place for a broad question whether the conditions are more or less favorable to the working population under the existing business régime, involving competitive bidding between the several business concerns, than they would be in case a comprehensive business consolidation had eliminated competition and placed the ownership of the material assets on a footing of unqualified monopoly. Nothing but vague surmises can apparently be offered in answer to these questions. But as bearing on the question of monopoly and the use of the community's immaterial equipment it is to be kept in mind that the technological situation as it stands to-day does not admit of a complete monopolisation of the community's technological expedients, even if a complete monopolisation of the existing aggregate of material property were effected. There is still current a large body of industrial processes to which the large-scale methods do not apply and which do not presume such a large unit of material equipment or involve such rigorous correlation with the large-scale industry as to take them out of the range of discretionary use by persons not possessed of appreciable material wealth. Typical of such lines of work, hitherto not amenable to monopolisation, are the details of housekeeping routine alluded to above. It is, in fact, still possible for an appreciable fraction of the population to "pick up a living," more or less precarious, without recourse to the large-scale processes that are controlled by the owners of the material assets. This somewhat precarious margin of free recourse to the commonplace knowledge of ways and means appears to be what stands in the way of a neater adjustment of wages to the "minimum of subsistence" and the virtual ownership of the immaterial equipment by the owners of the material equipment. It follows from what has been said that all tangible[10] assets owe their productivity and their value to the immaterial industrial expedients which they embody or which their ownership enables their owner to engross. These immaterial industrial expedients are necessarily a product of the community, the immaterial residue of the community's experience, past and present; which has no existence apart from the community's life, and can be transmitted only in the keeping of the community at large. It may be objected by those who make much of the productivity of capital that tangible capital goods on hand are themselves of value and have a specific productive efficiency, if not apart from the industrial processes in which they serve, then at least as a prerequisite to these processes, and therefore a material condition-precedent standing in a causal relation to the industrial product. But these material goods are themselves a product of the past exercise of technological knowledge, and so back to the beginning. What there is involved in the material equipment, which is not of this immaterial, spiritual nature, and so what is not an immaterial residue of the community's experience, is the raw material out of which the industrial appliances are constructed, with the stress falling wholly on the "raw." The point is illustrated by what happens to a mechanical contrivance which goes out of date because of a technological advance and is displaced by a new contrivance embodying a new process. Such a contrivance "goes to the junk-heap," as the phrase has it. The specific technological expedient which it embodies ceases to be effective in industry, in competition with "improved methods." It ceases to be an immaterial asset. When it is in this way eliminated, the material repository of it ceases to have value as capital. It ceases to be a material asset. "The original and indestructible powers" of the material constituents of capital goods, to adapt Ricardo's phrase, do not make these constituents capital goods; nor, indeed, do these original and indestructible powers of themselves bring the objects in question into the category of economic goods at all. The raw materials--land, minerals, and the like--may, of course, be valuable property, and may be counted among the assets of a business. But the value which they so have is a function of the anticipated use to which they may be put, and that is a function of the technological situation under which it is anticipated that they will be useful. * * * * * All this may seem to undervalue or perhaps to overlook the physical facts of industry and the physical nature of commodities. There is, of course, no call to understate the importance of material goods or of manual labor. The goods about which this inquiry turns are the products of trained labor working on the available materials; but the labor has to be trained, in the large sense, in order to be labor, and the materials have to be available in order to be materials of industry. And both the trained efficiency of the labor and the availability of the material objects engaged are a function of the "state of the industrial arts." Yet the state of the industrial arts is dependent on the traits of human nature, physical, intellectual, and spiritual, and on the character of the material environment. It is out of these elements that the human technology is made up; and this technology is efficient only as it meets with the suitable material conditions and is worked out, practically, in the material forces required. The brute forces of the human animal are an indispensable factor in industry, as are likewise the physical characteristics of the material objects with which industry deals. And it seems bootless to ask how much of the products of industry or of its productivity is to be imputed to these brute forces, human and non-human, as contrasted with the specifically human factors that make technological efficiency. Nor is it necessary to go into questions of that import here, since the inquiry here turns on the productive relation of capital to industry; that is to say, the relation of the material equipment and its ownership to men's dealings with the physical environment in which the race is placed. The question of capital goods (including that of their ownership and therefore including the question of investment) is a question of how mankind as a species of intelligent animals deals with the brute forces at its disposal. It is a question of how the human agent deals with his means of life, not of how the forces of the environment deal with man. Questions of the latter class belong under the head of Ecology, a branch of the biological sciences dealing with the adaptive variability of plants and animals. Economic inquiry would belong under that category if the human response to the forces of the environment were instinctive and variational only, including nothing in the way of a technology. But in that case there would be no question of capital goods, or of capital, or of labor. Such questions do not arise in relation to the non-human animals. In an inquiry into the productivity of labor some perplexity might be met with as to the share or the place of the brute forces of the human organism in the theory of production; but in relation to capital that question does not arise, except so far as these forces are involved in the production of the capital goods. As a parenthesis, more or less germane to the present inquiry into capital, it may be remarked that an analysis of the productive powers of labor would apparently take account of the brute energies of mankind (nervous and muscular energies) as material forces placed at the disposal of man by circumstances largely beyond human control, and in great part not theoretically dissimilar to the like nervous and muscular forces afforded by the domestic animals. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXII, Aug., 1908. [2] "Assets" is, of course, not to be taken literally in this connection. The term properly covers a pecuniary concept, not an industrial (technological) one, and it connotes ownership as well as value; and it will be used in this literal sense when, in a later article, ownership and investment come into the discussion. In the present connection it is used figuratively, for want of a better term, to convey the connotation of value and serviceability without thereby implying ownership. [3] Barrows. [4] Motives of exploit and emulation, no doubt, play a serious part in bringing on the practice of ownership and in establishing the principles on which it rests; but this play of motives and the concomitant growth of institutions cannot be taken up here. _Cf._ _The Theory of the Leisure Class_, chaps. i, ii, iii. [5] _Cf._ H. Nieboer, _Slavery as an Industrial System_, chap. iv, sect. 12. [6] For a more extended discussion of this point see the _Quarterly Journal of Economics_, July, 1899, "The Preconceptions of Economic Science"; also _The Theory of Business Enterprise_, chap. iv, especially pp. 70-82. [7] Marx holds that the "primitive accumulation" from which capitalism takes its rise is a matter of force and fraud (_Capital_, Book I, chap. xxiv.). Sombart holds the source to have been landed wealth (_Moderne Kapitalismus_, Book II, Part II, especially chap. xii). Ehrenberg and other critics of Sombart incline to the view that the most important source was usury and the petty trade (_Zeitalter der Fugger_, chaps. i, ii). [8] The phrase "more or less" covers a certain margin of tolerance in respect of scale and method, which may be very appreciably wider in some lines of industry than in others, and which cannot be more adequately defined or described here within such space as could reasonably be allowed. The requirement of scale and method is enforced by competition. The force and reach of this competitive adjustment can also not be dealt with here, but the familiar current acceptance of the fact will dispense with details. [9] _Cf._ _Theory of Business Enterprise_, chap. iii. [10] "Tangible assets" is here taken to signify serviceable capital goods considered as valuable possessions yielding income to their owner. ON THE NATURE OF CAPITAL[1] II. INVESTMENT, INTANGIBLE ASSETS, AND THE PECUNIARY MAGNATE What has been said in the earlier section of this paper[2] applies to "capital goods," so called, and it is intended to apply to these in their character of "productive goods" rather than in their character of "capital"; that is to say, what is had in mind is the industrial, or technological, efficiency and subservience of the material means of production, rather than the pecuniary use and effect of invested wealth. The inquiry has dealt with the industrial equipment as "plant" rather than as "assets." In the course of this inquiry it has appeared that out of the profitable engrossing of the community's industrial efficiency through control of the material equipment there arises the practice of investment, which has further consequences that merit more detailed attention. Investment is a pecuniary transaction, and its aim is pecuniary gain,--gain in terms of value and ownership. Invested wealth is capital, a pecuniary magnitude, measured in terms of value and determined in respect of its magnitude by a valuation which proceeds on an appraisement of the gain expected from the ownership of this invested wealth. In modern business practice, capital is distinguished into two coördinate categories of assets, tangible and intangible. "Tangible assets" is here taken to designate pecuniarily serviceable capital goods, considered as a valuable possession yielding an income to their owner. Such goods, material items of wealth, are "assets" to the amount of their capitalisable value, which may be more or less closely related to their industrial serviceability as productive goods. "Intangible assets" are immaterial items of wealth, immaterial facts owned, valued, and capitalised on an appraisement of the gain to be derived from their possession. These are also assets to the amount of their capitalisable value, which has commonly little, if any, relation to the industrial serviceability of these items of wealth considered as factors of production. * * * * * Before going into the matter of intangible assets, it is necessary to speak further of the consequences which investment--and hence capitalisation--has for the use and serviceability of (material) capital goods. It has commonly been assumed by economists, without much scrutiny, that the gains which accrue from invested wealth are derived from and (roughly) measured by the productivity of the industrial process in which the items of wealth so invested are employed, productivity being counted in some terms of material serviceability to the community, conduciveness to the livelihood, comfort, or consumptive needs of the community. In the course of the present inquiry it has appeared that the gainfulness of such invested wealth (tangible assets) is due to a more or less extensive engrossing of the community's industrial efficiency. The aggregate gains of the aggregate material capital accrue from the community's industrial activity, and bear some relation to the productive capacity of the industrial traffic so engrossed. But it will be noted that there is no warrant in the analysis of these phenomena as here set forth for alleging that the gains of investment bear a relation of equality or proportion to the material serviceability of the capital goods, as rated in terms of effectual usefulness to the community. Given capital goods, tangible assets, may owe their pecuniary serviceability to their owner, and so their value, to other things than their serviceability to the community; although the gains of investment in the aggregate are drawn from the aggregate material productivity of the community's industry. The ownership of the material equipment gives the owner not only the right of use over the community's immaterial equipment, but also the right of abuse and of neglect or inhibition. This power of inhibition may be made to afford an income, as well as the power to serve; and whatever will yield an income may be capitalised and become an item of wealth to its possessor. Under modern conditions of investment it happens not infrequently that it becomes pecuniarily expedient for the owner of the material equipment to curtail or retard the processes of industry,--"restraint of trade." The motive in all such cases of retardation is the pecuniary expediency of the measure for the owner (controller) of capital,--expediency in terms of income from investment, not expediency in terms of serviceability to the community at large or to any fraction of the community except the owner (manager). Except for the exigencies of investment, _i.e._, exigencies of pecuniary gain to the investor, phenomena of this character would have no place in the industrial system. They invariably come of the endeavors of business men to secure a pecuniary gain or to avoid a pecuniary loss. More frequently, perhaps, manoeuvers of inhibition--advised idleness of plant--in industry aim to effect a saving or avoid a waste than to procure an increase of gain; but the saving to be effected and the waste to be avoided are always pecuniary saving to the owner and pecuniary waste in the matter of ownership, not a saving of goods to the community or a prevention of wasteful consumption or wasteful expenditure of effort and resources on the part of the community. Pecuniary--that is to say, differential--advantage to the capitalist-manager has, under the régime of investment, taken precedence of economic advantage to the community; or rather, the differential advantage of ownership is alone regarded in the conduct of industry under this system. Business practices which inhibit industrial efficiency and curtail the industrial output are too well known to need particular enumeration. Nor is it necessary to cite evidence to show that such inhibition and curtailment are resorted to from motives of pecuniary expediency. But an illustrative example or two will make the theoretical point clearer, and perhaps more plainly bring out the wholly pecuniary grounds of such business procedure. The most comprehensive principle involved in this class of business management is that of raising prices, and so increasing the net gains of business, by limiting the supply, or "charging what the traffic will bear." Of a similar effect, for the point here in question, are the obstructive tactics designed to hinder the full efficiency of a business rival. These phenomena lie along the line of division between tangible and intangible assets. Successful strategy of this kind may, by force of custom, legislation, or the "freezing-out" of rival concerns, pass into settled conditions of differential advantage for the given business concern, which so may be capitalised as an item of intangible assets and take their place in the business community as articles of invested wealth. But, aside from such capitalisation of inefficiency, it is at least an equally consequential fact that the processes of productive industry are governed in detail by the exigencies of investment, and therefore by the quest of gain as counted in terms of price, which leads to the dependence of production on the course of prices. So that, under the régime of capital, the community is unable to turn its knowledge of ways and means to account for a livelihood except at such seasons and in so far as the course of prices affords a differential advantage to the owners of the material equipment. The question of advantageous--which commonly means rising--prices for the owners (managers) of the capital goods is made to decide the question of livelihood for the rest of the community. The recurrence of hard times, unemployment, and the rest of that familiar range of phenomena, goes to show how effectual is the inhibition of industry exercised by the ownership of capital under the price system.[3] So also as regards the discretionary abuse of the community's industrial efficiency vested in the owner of the material equipment. Disserviceability may be capitalised as readily as serviceability, and the ownership of the capital goods affords a discretionary power of misdirecting the industrial processes and perverting[4] industrial efficiency, as well as of inhibiting or curtailing industrial processes and their output, while the outcome may still be profitable to the owner of the capital goods. There is a large volume of capital goods whose value lies in their turning the technological inheritance to the injury of mankind. Such are, _e.g._, naval and military establishments, together with the docks, arsenals, schools, and manufactories of arms, ammunition, and naval and military stores, that supplement and supply such establishments. These armaments and the like are, of course, public and quasi-public enterprises, under the current régime, with somewhat disputable relations to the system of current business enterprise. But it is no far-fetched interpretation to say that they are, in great part, a material equipment for the maintenance of law and order, and so enable the owners of capital goods with immunity to inhibit or pervert the industrial processes when the exigencies of business profits make it expedient; that they are, further, a means--more or less ineffectual, it is true--for extending and protecting trade, and so serve the differential advantage of business men at the cost of the community; and that they are also in large part a material equipment set apart for the diversion of a livelihood from the community at large to the military, naval, diplomatic, and other official classes. These establishments may in any case be taken as illustrating how items of material equipment may be devoted to and may be valued for the use of the technological expedients for the damage and discomfort of mankind, without sensible offset or abatement. Typical of a class of investments which derive profits from capital goods devoted to uses that are altogether dubious, with a large presumption of net detriment, are such establishments as race-tracks, saloons, gambling-houses, and houses of prostitution.[5] Some spokesmen of the "non-Christian tribes" might wish to include churches under the same category, but the consensus of opinion in modern communities inclines to look on churches as serviceable, on the whole; and it may be as well not to attempt to assign them a specific place in the scheme of serviceable and disserviceable use of invested wealth. There is, further, a large field of business, employing much capital goods and many technological processes, whose profits come from products in which serviceability and disserviceability are mingled with waste in the most varying proportions. Such are the production of goods of fashion, disingenuous proprietary articles, sophisticated household supplies, newspapers and advertising enterprise. In the degree in which business of this class draws its profits from wasteful practices, spurious goods, illusions and delusions, skilled mendacity, and the like, the capital goods engaged must be said to owe their capitalisable value to a perverse use of the technological expedients employed. These wasteful or disserviceable uses of capital goods have been cited, not as implying that the technological proficiency embodied in these goods or brought into effect in their use, intrinsically has a disserviceable bearing, nor that investment in these things, and business enterprise in the management of them, need aim at disserviceability, but only to bring out certain minor points of theory, obvious but commonly overlooked: (_a_) technological proficiency is not of itself and intrinsically serviceable or disserviceable to mankind,--it is only a means of efficiency for good or ill; (_b_) the enterprising use of capital goods by their businesslike owner aims not at serviceability to the community, but only at serviceability to the owner; (_c_) under the price system--under the rule of pecuniary standards and management--circumstances make it advisable for the business man at times to mismanage the processes of industry, in the sense that it is expedient for his pecuniary gain to inhibit, curtail, or misdirect industry, and so turn the community's technological proficiency to the community's detriment. These somewhat commonplace points of theory are of no great weight in themselves, but they are of consequence for any theory of business or of life under the rules of the price system, and they have an immediate bearing here on the question of intangible assets. * * * * * At the risk of some tedium it is necessary to the theory of intangible assets to pursue this analysis and piecing together of commonplaces somewhat farther. As has already been remarked, "assets" is a pecuniary concept, not a technological one; a concept of business, not of industry. Assets are capital, and tangible assets are items of material equipment and the like, considered as available for capitalisation. The tangibility of tangible assets is a matter of the materiality of the items of wealth of which they are made up, while they are assets to the amount of their value. Capital goods, which typically make up the category of tangible assets, are capital goods by virtue of their technological serviceability, but they are capital in the measure, not of their technological serviceability, but in the measure of the income which they may yield to their owner. The like is, of course, true of intangible assets, which are likewise capital, or assets, in the measure of their income-yielding capacity. Their intangibility is a matter of the immateriality of the items of wealth--objects of ownership--of which they are made up, but their character and magnitude as assets is a matter of the gainfulness to their owner of the processes which their ownership enables him to engross. The facts so engrossed, in the case of intangible assets, are not of a technological or industrial character; and herein lies the substantial disparity between tangible and intangible assets. Mankind has other dealings with the material means of life, besides those covered by the community's technological proficiency. These other dealings have to do with the use, distribution, and consumption of the goods procured by the employment of the community's technological proficiency, and are carried out under working arrangements of an institutional character,--use and wont, law and custom. The principles and practice of the distribution of wealth vary with the changes in technology and with the other cultural changes that are going forward; but it is probably safe to assume that the principles of apportionment,--that is to say, the consensus of habitual opinion as to what is right and good in the distribution of the product,--these principles and the concomitant methods of carrying them out in practice have always been such as to give one person or group or class something of a settled preference above another. Something of this kind, something in the way of a conventionally arranged differential advantage in the apportionment of the common livelihood, is to be found in all cultures and communities that have been observed at all carefully; and it is perhaps needless to remark that in the higher cultures such economic preferences, privileges, prerogatives, differential advantages and disadvantages, are numerous and varied, and that they make up an intricate fabric of economic institutions. Indeed, peculiarities of class difference in some such respect are among the most striking and decisive features that distinguish one cultural era from another. In all phases of material civilisation these preferential advantages are sought and valued. Classes or groups which are in a position to make good a claim to such differential advantages commonly come, in due course, to put forward such claims; as, _e.g._, the priesthood, the princely and ruling class, the men as contrasted with the women, the adults as against minors, the able-bodied as against the infirm. Principles (habits of thought) countenancing some form of class or personal preference in the distribution of income are to be found incorporated in the moral code of all known civilisations and embodied in some form of institution. Such items of immaterial wealth are of a differential character, in that the advantage of those who secure the preference is the disadvantage of those who do not; and it may be mentioned in passing, that such a differential advantage inuring to any one class or person commonly carries a more than equal disadvantage to some other class or person or to the community at large.[6] When property rights fall into definite shape and the price system comes in, and more particularly when the practice of investment arises and business enterprise comes into vogue, such differential advantages take on something of the character of intangible assets. They come to have a pecuniary value and rating, whether they are transferable or not; and if they are transferable, if they can be sold and delivered, they become assets in a fairly clear and full sense of that term. Such immaterial wealth, preferential benefits of the nature of intangible assets, may be a matter of usage simply, as the vogue of a given public house, or of a given tradesman, or of a given brand of consumable goods; or may be a matter of arrogation, as the King's Customs in early times, or the once notorious Sound Dues, or the closing of public highways by large land-owners; or of contractual concession, as the freedom of a city or a guild, or a franchise in the Hanseatic League or in the Associated Press; or of government concession, whether on the basis of a bargain or otherwise, as the many trade monopolies of early modern times, or a corporation charter, or a railway franchise, or letters of marque, or letters patent; or of statutory creation, as trade protection by import, export, or excise duties or navigation laws; or of conventionalised superstitious punctilio, as the creation of a demand for wax by the devoutly obligatory consumption of consecrated tapers, or the similar devout consumption of and demand for fish during Lent. Under the régime of investment and business enterprise these and the like differential benefits may turn to the business advantage of a given class, group, or concern, and in such an event the resulting differential business advantage in the pursuit of gain becomes an asset, capitalised on the basis of its income-yielding capacity, and possibly vendible under the cover of a corporation security (as, _e.g._, common stock), or even under the usual form of private sale (as, _e.g._, the appraised good-will of a business concern). But the régime of business enterprise has not only taken over various forms of institutional privileges and prerogatives out of the past: it also gives rise to new kinds of differential advantage and capitalises them into intangible assets. These are all (or virtually all) of one kind, in that their common aim and common basis of value and capitalisation is a preferentially advantageous sale. Naturally so, since the end of all business endeavor, in the last analysis, is an advantageous sale. The commonest and typical kind of such intangible assets is "good-will," so called,--a term which has come to cover a great variety of differential business advantages, but which in the original business usage of it meant the customary resort of a clientèle to the concern so possessed of the good-will. It seems originally to have implied a kindly sentiment of trust and esteem on the part of a customer, but as the term is now used it has lost this sentimental content. In the broad and loose sense in which it is now currently employed it is extended to cover such special advantages as inure to a monopoly or a combination of business concerns through its power to limit or engross the supply of a given line of goods or services. So long as such a special advantage is not specifically protected by special legislation or by a due legal instrument,--as in the case of a franchise or a patent right,--it is likely to be spoken of loosely as "good-will." The results of the analysis may be summed up to show the degree of coincidence and the distinctions between the two categories of assets: (_a_) the value (that is to say, the amount) of given assets, whether tangible or intangible, is the capitalised (or capitalisable) value of the given articles of wealth, rated on the basis of their income-yielding capacity to their owner; (_b_) in the case of tangible assets there is a presumption that the objects of wealth involved have some (at least potential) serviceability at large, since they serve a materially productive work, and there is therefore a presumption, more or less well founded, that their value represents, though it by no means measures, an item of serviceability at large; (_c_) in the case of intangible assets there is no presumption that the objects of wealth involved have any serviceability at large, since they serve no materially productive work, but only a differential advantage to the owner in the distribution of the industrial product;[7] (_d_) given tangible assets may be disserviceable to the community,--a given material equipment may owe its value as capital to a disserviceable use, though in the aggregate or on an average the body of tangible assets are (presumptively) serviceable; (_e_) given intangible assets may be indifferent in respect of serviceability at large, though in the aggregate, or on an average, intangible assets are (presumably) disserviceable to the community. On this showing it would appear that the substantial difference between tangible and intangible assets lies in the different character of the immaterial facts which are turned to pecuniary account in the one case and in the other. The former, in effect, capitalise such fraction of the technological proficiency of the community as the ownership of the capital goods involved enables the owner to engross. The latter capitalise such habits of life, of a non-technological character,--settled by usage, convention, arrogation, legislative action, or what not,--as will effect a differential advantage to the concern to which the assets in question appertain. The former owe their existence and magnitude to the usufruct of technological expedients involved in the industrial process proper; while the latter are in like manner due to the usufruct of what may be called the interstitial correlations and adjustments both within the industrial system and between industry proper and the market, in so far as these relations are of a pecuniary rather than a technological character. Much the same distinction may be put in other words, so as to bring the expression nearer the current popular apprehension of the matter, by saying that tangible assets, commonly so called, capitalise the processes of production, while intangible assets, so called, capitalise certain expedients and processes of acquisition, not productive of wealth, but affecting only its distribution. Formulated in either way, the distinction seems not to be an altogether hard-and-fast one, as will immediately appear if it is called to mind that intangible assets may be converted into tangible assets, and conversely, as the exigencies of business may decide. Yet, while the two categories of assets stand in such close relation to one another as this state of things presumes, it is still evident from the same state of things that they are not to be confounded with one another. Taking "good-will" as typical of the category of "intangible assets," as being the most widely prevalent and at the same time the farthest removed in its characteristics from the range of "tangible assets," some slight further discussion of it may serve to bring out the difference between the two categories of assets and at the same time to enforce their essential congruity as assets as well as the substantial connection between them. In the earlier days of the concept, in the period of growth to which it owes its name, when good-will was coming into recognition as a factor affecting assets, it was apparently looked on habitually as an adventitious differential advantage accruing spontaneously to the business concern to which it appertained; an immaterial by-product of the concern's conduct of business,--commonly presumed to be an adventitious blessing incident to an upright and humane course of business life. Poor Richard would express this sense of the matter in the saying that "honesty is the best policy." But presently, no doubt, some thought would be taken of the acquirement of good-will, and some effort would be expended by the wise business man in that behalf. Goods would be given a more elegant finish for the sake of a readier sale, beyond what would conduce to their brute serviceability simply; smooth-spoken and obsequious salesmen and solicitors, gifted with a tactful effrontery, have come to be preferred to others, who, without these merits, may be possessed of all the diligence, dexterity, and muscular force required in their trade; something is expended on convincing, not to say vain-glorious, show-windows that shall promise something more than one would like to commit one's self to in words; itinerant agents, and the like, are employed at some expense to secure a clientèle; much thought and substance is spent on advertising of many kinds. This last-named item may be taken as typical of the present stage of growth in the production or generation of good-will, and therefore in the creation of intangible assets. Advertising has come to be an important branch of business enterprise by itself, and it employs a large and varied array of material appliances and processes (tangible assets). Investment is made in certain material items (productive goods), such as printed matter, billboards, and the like, with a view to creating a certain body of good-will. The precise magnitude of the product may not be foreseen, but, if sagaciously made, such investment rarely fails of the effect aimed at--unless a business rival with even greater sagacity should out-manoeuver and offset these endeavors with a superior array of appliances (productive goods) and workmen for the generation of good-will. The product aimed at, commonly with effect, is good-will,--an intangible asset,--which may be considered to have been generated by converting certain tangible assets into this intangible; or it may be considered as an industrial product, the output of certain industrial processes in which the given items of material equipment are employed and give effect to the requisite technological proficiency. Whichever view be taken of the causal relation between the material equipment and processes employed, on the one hand, and the output of good-will, on the other hand, the result is substantially the same for the purpose in hand. The ulterior end of the advertising is, it may be said, the sale of an increased quantity of the advertised articles, at an increased net gain; which would mean an increased value of the material items offered for sale; which, in turn, is the same as saying an increase of tangible assets. It may be assumed without debate that the end of business endeavor is a gain in final terms of tangible values. But this ulterior end is, in the case of advertising enterprise, to be gained only by the intermediate step of a production of an immaterial item of good-will, an intangible asset. So the case in illustration shows not only the conversion of tangible assets (material capital goods, such as printed matter) into intangible wealth, or, if that formula be preferred, the production of immaterial wealth by the productive use of material wealth, but also, conversely, in the second step of the process, it shows the conversion of intangible assets into tangible wealth (enhanced value of vendible goods), or, if the expression seems preferable, the production of tangible assets by the use of intangible wealth. This creation of tangible wealth out of intangible assets is seen perhaps at its neatest in the enhancement of land values by the endeavors of interested parties. Real estate is, of course, a tangible asset of the most authentic tangibility, and it is an asset to the amount of its value, which is determined, say, by the figures at which the real estate in question is currently bought and sold. This is the current value of the real estate, and therefore its current actual magnitude as a tangible asset. The value of the real estate might also be computed by capitalising its rental value; but, where the current market value does not coincide with the capitalised rental value, the former must, according to business conceptions, be accepted as the actual value. In many parts of this country, perhaps in most, but particularly in the Western States and in the neighborhood of flourishing towns, these two methods of rating the pecuniary magnitude of real estate will habitually not coincide. Due allowance, often very considerable, being made, the capitalised rental value of the land may be taken as measuring its current serviceability as an item of material equipment; while the amount by which the market value of the land exceeds its capitalised rental value may be taken as the product, the tangible residue, of an intangible asset of the nature of good-will, turned to account, or "productively employed," in behalf of this parcel of land.[8] Some of the lands of California may be taken as a very good, though perhaps not an extreme, example of such a creation of real estate by spiritual instrumentalities. It is probably well within the mark to say that some of these lands owe not more than one-half their current market value to their current serviceability as an instrument of production or use. The excess may be attributable to illusions touching the chances of future sale, to anticipation of a prospective enhanced usefulness, and the like; but all these are immaterial factors, of the nature of good-will. Like other assets, these lands are capitalised on the basis of the anticipated income from them, part of which income is anticipated from profitable sales to persons who, it is hoped, will be persuaded to take a very sanguine view of the land situation, while part of it may be due to over-sanguine anticipations of usefulness generated by the advertising matter and the efforts of the land agents directed to what is called "developing the country." To any one preoccupied with the conceit that "capital" means "capital goods" such a conversion of intangible into tangible goods, or such a generation of intangible assets by the productive use of tangible assets, might be something of a puzzle. If "assets" were a physical concept, covering a range of physical things, instead of a pecuniary concept, such conversion of tangible into intangible assets, and conversely, would be a case of transubstantiation. But there is nothing miraculous in the matter. "Assets" are a pecuniary magnitude, and belong among the facts of investment. Except in relation to investment the items of wealth involved are not assets. In other words, assets are a matter of capitalisation, which is a special case of valuation; and the question of tangibility or intangibility as regards a given parcel of assets is a question of what article or class of articles the valuation shall attach to or be imputed to. If, _e.g._, the fact to which value is imputed in the valuation is the habitual demand for a given article of merchandise, or the habitual resort of a given group of customers to a particular shop or merchant, or a monopolistic control or limitation of price and supply, then the resulting item of assets will be "intangible," since the object to which the capitalised value in question is imputed is an immaterial object. If the fact which is by imputation made the bearer of the capitalised value is a material object, as, _e.g._, the merchantable goods of which the supply is arbitrarily limited or the price arbitrarily fixed, or if it is the material means of supplying such goods, then the capitalised value in question is a case of tangible assets. The value involved is, like all value, a matter of imputation, and as assets it is a matter of capitalisation; but capitalisation is an appraisement of a pecuniary "income-stream" in terms of the vendible objects to the ownership of which the income is assumed to inure. To what object the capitalised value of the "income-stream" shall be imputed is a question of what object of ownership secures to the owner an effectual claim on this "income-stream "; that is to say, it is a question of what object of ownership the strategic advantages is assumed to attach to, which is a question of the play of business exigencies in the given case. The "income-stream" in question is a pecuniary income-stream, and is in the last resort traceable to transactions of sale. Within the confines of business--and therefore within the scope of capital, investments, assets, and the like business concepts--transactions of purchase and sale are the final terms of any analysis. But beyond these confines, comprehending and conditioning the business system, lie the material facts of the community's work and livelihood. In the final transaction of sale the merchantable goods are valued by the consumer, not as assets, but as livelihood;[9] and in the last analysis and long run it is to some such transaction that all business imputations of value and capitalistic appraisement of assets must have regard and by which they must finally be checked. Dissociated from the facts of work and livelihood, therefore, assets cease to be assets; but this does not preclude their relation to these facts of work and livelihood being at times somewhat remote and loose. Without recourse, immediately or remotely, to certain material facts of industrial process and equipment, assets would not yield earnings; that is to say, wholly disjoined from these material facts, they would in effect not be assets. This is true for both tangible and intangible assets, although the relation of the assets to the material facts of industry is not the same in the two cases. The case of tangible assets needs no argument. Intangible assets, such as patent right or monopolistic control, are likewise of no effect except in effectual contact with industrial facts. The patent right becomes effective for the purpose only in the material working of the innovation covered by it; and monopolistic control is a source of gain only in so far as it effectually modifies or divides the supply of goods. In the light of these considerations it seems feasible to indicate both the congruence and the distinction between the two categories of assets a little more narrowly than was done above. Both are assets,--that is to say, both are values determined by a capitalisation of anticipated income-yielding capacity; both depend for their income-yielding capacity on the preferential use of certain immaterial factors; both depend for their efficiency on the use of certain material objects; both may increase or decrease, as assets, apart from any increase or decrease of the material objects involved. The tangible assets capitalise the preferential use of technological, industrial expedients,--expedients of production, dealing with the facts of brute nature under the laws of physical cause and effect,--this preferential use being secured by the ownership of material articles employed in the processes in which these expedients are put into effect. The intangible assets capitalise the preferential use of certain facts of human nature--habits, propensities, beliefs, aspirations, necessities--to be dealt with under the psychological laws of human motivation; this preferential use being secured by custom, as in the case of old-fashioned good-will, by legal assignment, as in patent or copyright, by ownership of the instruments of production, as in the case of industrial monopolies.[10] * * * * * Intangible assets are capital as well as tangible assets; that is to say, they are items of capitalised wealth. Both categories of assets, therefore, represent expected "income-streams" which are of such definite character as to admit of their being rated in set terms per cent. per time unit; although the expected income need not therefore be anticipated to come in an even flow or to be distributed in any equable manner over a period of time. The income-streams to be so rated and capitalised are associated in such a manner with some external fact (impersonal to their claimant), whether material or immaterial, as to permit their being traced or attributed to an income-yielding capacity on the part of this external fact, to which their valuation as a whole may be imputed and which may then be capitalised as an item of wealth yielding this income-stream. Income-streams which do not meet these requirements do not give rise to assets in the accepted sense of the term, and so do not swell the volume of capitalised wealth. There are income-streams which do not meet the necessary specifications of capitalisable wealth; and in modern business traffic, particularly, there are large and secure sources of income that are in this way not capitalisable and yet yield a legitimate business income. Such are, indeed, to be rated among the most consequential factors in the current business situation. Under the guidance of traditions carried over from a more primitive business situation, it has been usual to speak of income-streams derived in such a manner as "wages of superintendence," or "undertaker's wages," or "entrepreneur's profits," or, latterly, as "profits" simply and specifically. Such phenomena of this class as are of consequence in business are commonly accounted for, theoretically, under this head; and the effort so to account for them is to be taken as, at least, a laudable endeavor to avoid an undue multiplication of technical terms and categories.[11] Yet the most striking phenomena of this class, and the most consequential for modern business and industry, both in respect of their magnitude and in respect of the pecuniary dominion and discretion which they represent, cannot well be accounted undertaker's gains, in the ordinary sense of that term. The great gains of the great industrial financiers or of the great "interests," _e.g._, do not answer the description of undertaker's gains, in that they do not accrue to the captain of industry on the basis of his "managerial ability" alone, apart from his wealth or out of relation to his wealth; and yet it is not safe to say that such gains (which are over and above ordinary returns on his investments) accrue on the ground of the requisite amount of wealth alone, apart from the exercise of a large business direction on the part of the owner of such wealth, or on the part of his agent to whom discretion has been delegated. Administrative, or strategic, discretion and activity must necessarily be present in the case: otherwise, the income in question would rightly be rated as income from capital simply. The captain of industry, the pecuniary magnate, is normally in receipt of income in excess of the ordinary rate per cent. on investment; but apart from his large holdings he is not in a position to get these large gains. Dissociated from his large holdings, he is not a large captain of industry; but it is not the size of his holdings alone that determines what the gains of the pecuniary magnate in modern industry shall be. Gains of the kind and magnitude that currently come to this class of business men come only on condition that the owner (or his agent) shall exercise a similarly large discretion and control in the affairs of the business community; but the magnitude of the gains, as well as of the discretion and control exercised, is somewhat definitely conditioned by the magnitude of the wealth which gives effect to this discretion. The disposition of pecuniary forces in such matters may be well seen in the work and remuneration of any coalition of "interests," such as the modern business community has become familiar with. The "interests" in such a case are of a personal character,--they are "interested parties,"--and the sagacity, experience, and animus of these various interested parties counts in the outcome, both as regards the aggregate gains of the coalition and as regards the distribution of these gains among the several parties in interest; but the weight of any given "interest" in a coalition or "system" is more nearly proportioned to the wealth controlled by the given "interest," and to the strategic position of such wealth, than to any personal talents or proficiency of the "interested party." The talents and proficiency involved are not the main facts. Indeed, the movements of such a "system," and of the several component "interests," are largely a matter of artless routine, in which the greatest ingenuity and initiative engaged in the premises are commonly exercised by the legal counsel working for a fee. A dispassionate student of the current business traffic, who is not overawed by round numbers, will be more impressed by the ease and simplicity of the manoeuvers that lead to large pecuniary results in the higher business finance than by any evidence of preëminent sagacity and initiative among the pecuniary magnates. One need only call to mind the simple and obvious way in which the promoters of the Steel Corporation were magnificently checkmated by the financiers of the Carnegie "interest," when that great and reluctant corporation was floated, or the pettyfogging tactics of Standard Oil in its later career. In extenuation of their visible lack of initiative and insight it may not be ungraceful to call to mind that many of the discretionary heads of the great "interests" are men of advanced years, and that in the nature of the case the pecuniary magnates of the present generation must commonly be men of a somewhat advanced age; and it is only during the present generation that the existing situation has arisen, with its characteristic opportunities and demands. To take their present foremost rank in the new business finance which is here under inquiry, they have had to accumulate the great wealth on which alone their discretionary control of business affairs rests, and their best vigor has been spent in this work of preparation; so that they have commonly attained the requisite strategic position only after they had outlived their "years of discretion." But there is no intention here to depreciate the work of the pecuniary magnates or the spokesmen of the great "interests." The matter has been referred to only as it bears on this category of capitalistic income which accrues on other grounds than the "earning-capacity" of the assets involved, and which still cannot be imputed to the "earning-capacity" of these business men apart from these assets. The case is evidently not one of "wages of superintendence" or "undertaker's profits"; but it is as evidently not a case of the earning-capacity of the assets. The proof of the latter point is quite as easy as of the former. If the gains of the "system" or of its constituent "interests" and magnates were imputable to the earning-capacity of the assets involved,--in any accepted sense of "earnings,"--then it would immediately follow that these assets would be recapitalised on the basis of these extraordinary earnings, and that the income derived in this class of traffic should reappear as interest or dividends on the capital so increased to correspond with the increased earnings. But such recapitalisation takes place only to a relatively very limited extent, and the question then bears on the income which is not so accounted for in the recapitalisation. The gains of this class of traffic are, of course, themselves capitalised,--for the most part they accrue in the capitalised form, as issues of securities and the like; but the sources of this income are not capitalised as such. The (large) accumulated wealth, or assets, which gives weight to the movements of the "interests" and magnates in question, and which affords the ground for the discretionary control of business affairs exercised by them, are, for the most part at least, invested in ordinary business ventures, in the form of corporation securities and the like, and are there earning dividends or interest at current rates; and these assets are valued in the market (and thereby capitalised) on the basis of their current earnings in the various enterprises in which they are so invested. But their being so invested in profitable business enterprises does not in the least hinder their usefulness in the hands of the magnates as a basis or means of carrying on the large and highly profitable transactions of the higher industrial finance. To impute these gains to these assets as "earnings," therefore, would be to count the assets twice as capital, or rather to count them over and over. An additional perplexity in endeavoring to handle gains of this class theoretically as earnings, in the ordinary sense, arises from the fact that they stand in no definable time relation to their underlying assets. They have no definable "time-shape," as Mr. Fisher might put it.[12] Such gains are timeless, in the sense that the time relation does not count in any substantial manner or in any sensible degree in their determination.[13] * * * * * In a more painstaking statement of this point of theory it would be necessary to note that these gains are "timeless," in the sense indicated, in so far as the enterprise from which they accrue is dissociated from the technological circumstances and processes of industry, and only in so far. Technological (industrial) procedure, being of the nature of physical causation, is subject to the time relation under which causal sequence runs. This is the basis of such discussions of capital and interest as those of Böhm-Bawerk, and of Fisher. But business traffic, as distinguished from the processes of industry, being not immediately concerned with the technological process, is also not immediately or uniformly subject to the time relation involved in the causal sequence of the technological process. Business traffic is subject to the time relation because and in so far as it depends upon and follows up the processes of production. The commonplace or old-fashioned business enterprise, the competitive system of investment in industrial business simply, commonly rests pretty directly on the due sequence of the industrial processes in which the investments of such enterprise are placed. Such enterprise, as conceived by the current theories of capital, does business at first hand in the industrial efficiency of the community, which is conditioned by the time relation of the causal sequence, and which is, indeed, in great measure a function of the time consumed in the technological processes. Therefore, the gains, as well as the transactions, of such enterprise are also commonly somewhat closely conditioned by the like time relation, and they typically emerge under the form of a per-cent. per time unit; that is to say, as a function of the lapse of time. Yet the business transactions themselves are not a matter of the lapse of time. Time is not of the essence of the case. The magnitude of a pecuniary transaction is not a function of the time consumed in concluding it, nor are the gains which accrue from the transaction. In business enterprise on the higher plane, which is here under inquiry, the relation of the transactions, and of their gains, to the consecution of the technological processes remotely underlying them is distant, loose, and uncertain, so that the time element here does not obtrude itself: rather, it somewhat obviously falls into abeyance, marking the degree of its remoteness. Yet this phase of business enterprise, like any other, of course takes place in time; and, it is also to be remarked, the volume of the traffic and the gains derived from it are, no doubt, somewhat closely conditioned in the long run by the time relation which dominates that technological (industrial) efficiency on which this enterprise, too, ultimately and indirectly rests and from which in the last resort its gains are finally drawn, however remotely and indirectly. An analysis of these phenomena on lines similar to those which have been followed in the discussion of assets above is not without difficulty, nor can it fairly be expected to yield any but tentative and provisional results. The matter has received so little attention from economic theoreticians that even significant mistakes in this connection are of very rare occurrence.[14] The cause of this scant attention to these matters lies, no doubt, in the relative novelty of the facts in question. The facts may be roughly drawn together under the caption "Traffic in Vendible Capital"; although that term serves rather as a comprehensive designation of the class of business enterprise from which these gains accrue than as an adequate characterisation of the play of forces involved.[15] Traffic in vendible capital has not been unknown in the past, but it is only recently that it has come into the foreground as the most important line of business enterprise. Such it now is, in that it is in this traffic that the ultimate initiative and discretion in business are now to be found. It is at the same time the most gainful of business enterprise, not only in absolute terms, but relatively to the magnitude of the assets involved as well. One reason for this superior gainfulness is the fact that the assets involved in this traffic are at the same time engaged as assets to their full extent in ordinary business, so that the peculiar gains of this traffic are of the nature of a bonus above the earnings of the invested wealth. "It is like finding money." As was said above, the method, or the ways and means, characteristic of this superior business enterprise is a traffic in vendible capital. The wealth gained in this field is commonly in the capitalised form, and constitutes in each transaction, or "deal," a deduction or abstraction from the capitalised wealth of the business community in favor of the magnates or "interests" to whom the gains accrue. Its proximate aim is a transfer of capitalised wealth from other capitalists to those who so gain. This transfer or abstraction of capitalised wealth from the former owners is commonly effected by an augmentation of the nominal capital, based on a (transient) advantage inuring to the particular concerns whose capitalisation is so augmented.[16] Any such increase of the community's aggregate capitalisation, without a corresponding increase of the material wealth on which the capitalisation is based, involves, of course, in effect a redistribution of the aggregate capitalised wealth; and in this redistribution the great financiers are in a position to gain. The gains in question, it will be seen, come out of the business community, out of invested wealth, and only remotely and indirectly out of the community at large from which the business community draws its income. These gains, therefore, are a tax on commonplace business enterprise, in much the same manner and with much the like effects as the gains of commonplace business (ordinary profits and interest) are a tax on industry.[17] In a manner analogous to the old-fashioned capitalist-employer's engrossing of the industrial community's technological efficiency does the modern pecuniary magnate engross the business community's capitalistic efficiency. This capitalistic efficiency lies in the capitalist-employer's ability--by force of the ownership of the material equipment--to induce the industrial community, through suitable bargaining, to turn over to the owner of the material equipment the excess of the product above the industrial community's livelihood. The fortunes of the capitalist-employer are closely dependent on the run of the market,--the conjunctures of advantageous purchase and sale; and it is his constant endeavor to create or gain for himself some peculiar degree of advantage in the market, in the way of monopoly, good-will, legalised privilege, and the like,--something in the way of intangible assets. But the pecuniary magnate, in the measure in which he truly answers to the concept, is superior to the market on which the capitalist-employer depends, and can make or mar its conjunctures of advantageous purchase and sale of goods; that is to say, he is in a position to make or mar any peculiar advantage possessed by the given capitalist-employer who comes in his way. He does this by force of his large holdings of capital at large, the weight of which he can shift from one point of investment to another as the relative efficiency--earning-capacity--of one and another line of investment may make it expedient; and at each move of this kind, in so far as it is effective for his ends, he cuts into and assimilates a fraction of the invested wealth involved, in that he cuts into and sequesters a fraction of the capital's earning-capacity in the given line. That is to say, in the measure in which he is a pecuniary magnate, and not simply a capitalist-employer, he engrosses the capitalistic efficiency of invested wealth; he turns to his own account the capitalist-employer's effectual engrossing of the community's industrial efficiency. He engrosses the community's pecuniary initiative and proficiency. In the measure, therefore, in which this relatively new-found serviceability of extraordinarily large wealth is effective for its peculiar business function, the old-fashioned capitalist-employer loses his discretionary initiative and becomes a mediator, an instrumentality of extraction and transmission, a collector and conveyer of revenue from the community at large to the pecuniary magnate, who, in the ideal case, should leave him only such an allowance out of the gross earnings collected and transmitted as will induce him to continue in business. To the community at large, whose industrial efficiency is already virtually engrossed by the capitalist-employer's ownership and control of the material equipment, this later step in the evolution of the economic situation should apparently not be a matter of substantial consequence or a matter for sentimental disturbance. On the face of it, it should appear to have little more than a speculative interest for those classes of the community who do not derive an income from investments; particularly not for the working classes, who own nothing to speak of and whose only dependence is their technological efficiency, which has virtually ceased to be their own. But such is not the current state of sentiment. This inchoate new phase of capitalism, this business enterprise on the higher plane, is in fact viewed with the most lively apprehension. In a maze of consternation and solicitude the boldest, wisest, most public-spirited, most illustrious gentlemen of our time are spending their manhood in an endeavor to make the hen continue sitting on the nest after the chickens are out of the shell. The modern community is imbued with business principles--of the old dispensation. By precept and example, men have learned that the business interests (of the authentic superannuated scale and kind) are the palladium of our civilisation, as Mr. Dooley would say; and it is felt that any disturbance of the existing pecuniary dominion of the capitalist-employer--as contrasted with the pecuniary magnate--would involve the well-being of the community in one common agony of desolation. The merits of this perturbation, or of the remedies proposed for saving the pecuniary life of the old-fashioned capitalist-employer, of course do not concern the present inquiry; but the matter has been referred to here as evidence that the pecuniary magnate's work, and the dominion which his extraordinarily large wealth gives him, are, in effect, substantially a new phase of the economic development, and that these phenomena are distastefully unfamiliar and are felt to be consequential enough to threaten the received institutional structure. That is to say, it is felt to be a new phase of business enterprise,--distasteful to those who stand to lose by it. The basis of this business enterprise on the higher plane is capital-at-large, as distinguished from capital invested in a given line of industrial enterprise, and it becomes effective when wealth has accumulated in holdings sufficiently large to give the holder (or combination of holders, the "system") a controlling weight in any group or ramification of business interests into which he may throw his weight by judicious investment (or by underwriting and the like). The pecuniary magnate must be able effectually to engross the pecuniary initiative and the business opportunities on which such a section or ramification of the business community depends for its ordinary gains. How large a proportion of the business community's capital is needed for such an effectual engrossing of its capitalistic efficiency, in any given bearing, is a question that cannot be answered in anything like absolute terms, or even in relative terms of a satisfactorily definite kind. It is, of course, evident that a relatively large disposable body of capital is needed for such a purpose; and it is also evident, from the current facts of business, that the body of capital so disposed of need not amount to a majority, or anything near a majority, of the investments involved,--at least not at the present relatively inchoate phase of this larger business enterprise. The larger the holdings of the magnate, the more effectual and expeditious will be his work of absorbing the holdings of the smaller capitalist-employer, and the more precipitately will the latter yield his assets to the new claimant. Evidently, this work of the pecuniary magnate bears a great resemblance to the creation of intangible assets under the ordinary competitive system. This is, no doubt, the point of its nearest relation to the current capitalistic enterprise. But, as has already been indicated above, it cannot be said that the magnate's peculiar work is the creation of intangible, or other assets, although there is commonly some recapitalisation involved in his manoeuvers, and although his gains commonly come as assets, _i.e._, in the capitalised form. Nor can it, as has also been indicated above, be said that the wealth which serves him as the means of his peculiar enterprise stands in the relation of assets to this enterprise or to the gains in question, since this wealth already stands in an exhaustive relation as assets to some corporate enterprise in ordinary business and to the corresponding items of interest and dividends. It may, of course, be contended that the present state of things on this higher plane of enterprise is transient and transitional only, and that in the settled condition which may conceivably supervene, the magnate's relation to business at large will be capitalised in some form of intangible assets, after the manner in which the monopoly advantage of an ordinary "trust" is now capitalised. But this is at the best only a surmise, guided by inapplicable generalisations drawn from a past situation in which this higher enterprise has not engrossed the pecuniary initiative and played the ruling part. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXIII, Nov., 1908. [2] See this Journal for August, 1908. [3] For the connection between prices and prosperity, hard times, unemployment, etc., see _The Theory of Business Enterprise_, chap. vii (pp. 185-252, especially 196-212). [4] By "perversion" is here meant such disposition of the industrial forces as entails a net waste or detriment to the community's livelihood. [5] Should the connection at this point with the main argument of the paper as set forth in the earlier section seem doubtful or obscure, it may be called to mind that these dubious enterprises in dissipation are cases of investment for a profit, and that the "capital goods" engaged are invested wealth yielding an income, but that they yield an income only on the fulfillment of two conditions: (_a_) the possession and employment of these capital goods enables their holder to turn to account the common stock of technological proficiency, in those bearings in which it may be of use in his enterprise; and (_b_) the limited amount of wealth available for the purpose enables their holder to "engross" the usufruct of such a fraction of the common stock of technological proficiency, in the degree determined by this limitation of the amount available. In so far, these enterprises are like any other industrial enterprise; but beyond this they have the peculiarity that they do not, or need not, even ostensibly, turn the current knowledge and use of ways and means to "productive" account for the community at large, but simply take their stand on the (institutionally sacred) "accomplished fact" of invested wealth. They have less of the fog of apology about them than the common run of business enterprise. [6] This statement may not seem clear without indicating in a more concrete manner some terms in which to measure the relative differential advantage and disadvantage which so emerge in such a case of prerogative or privilege. Where, as in the earlier, non-pecuniary phases of culture, no price test is applicable, the statement in the text may be taken to mean that the differential disadvantage at the cost of which the differential benefit in question is gained is greater than the beneficiary would be willing to undergo in order to procure this benefit. [7] A doubt has been offered as to the applicability of this characterization to such intangible assets as a patent right and other items of the same class. The doubt seems to arise from a misapprehension of the analysis and of its intention. It should be remarked that there is no intention to condemn or disapprove any of the items here spoken of as intangible assets. The patent right may be justifiable or it may not: there is no call to discuss that question here. Other intangible assets are in the same case in this respect. Further, as to the character of a patent right considered as an asset. The invention or innovation covered by the patent right is a contribution to the common stock of technological proficiency. It may be (immediately) serviceable to the community at large, or it may not;--_e.g._, a cash register, a bank-check punch, a streetcar fare register; a burglar-proof safe, and the like are of no immediate service to the community at large, but serve only a pecuniary use to their users. But, whether the innovation is useful or not, the patent right, as an asset, has no (immediate) usefulness at large, since its essence is the restriction of the usufruct of the innovation to the patentee. Immediately and directly the patent right must be considered a detriment to the community at large, since its purport is to prevent the community from making use of the patented innovation, whatever may be its ulterior beneficial effects or its ethical justification. [8] Neither as a physical magnitude ("land") nor as a pecuniary magnitude ("real estate") is the capitalised land in question an item of "good-will"; but its value as real estate--_i.e._, its magnitude as an asset--is in part a product of the "good-will" (illusions and the like) worked up in its behalf and turned to account, by the land agent. The real estate is a tangible asset, an item of material wealth, while the "good-will" to which in part it owes its magnitude as an item of wealth is an intangible asset, an item of immaterial wealth. [9] "Livelihood" is, of course, here taken in a loose sense, not as denoting the means of subsistence simply or even the means of physical comfort, but as signifying that the purchases in question are made with a view to the consumptive use of the goods rather than with a view to their use for a profit. [10] The instruments of production so monopolised are, of course, tangible assets, but the ownership of such means of production in amount sufficient to enable the owner to monopolise or control the market, whether for purchase (as of materials or labor) or for sale (as of marketable goods or services), gives rise to a differential business advantage which is to be classed as intangible assets. [11] One writer even goes so far in the endeavor to bring the facts within the scope of the staple concepts of theory at this point as to rate the persons concerned in such a case as "capital," after having satisfied himself that such income-streams are traceable to a personal source.--See Fisher, _Nature of Capital and Income_, chap. v. [12] _Cf._ Fisher, _Rate of Interest_, chap. vi. [13] This conclusion is reached, _e.g._, by Mr. G. P. Watkins (_The Growth of Large Fortunes_, chap. iii, sec. 10), although through a curious etymological misapprehension he rejects the term "timeless" as not available. [14] Even Mr. Watkins (as cited above), _e.g._, is led by a superficial generalisation to class these gains as "speculative," and so to excuse himself from a closer acquaintance with their character and with the bearings of the class of business enterprise out of which they arise. [15] _Cf._ _Theory of Business Enterprise_, chap, v, pp. 119-130; chap. vi, pp. 162-174. [16] _Cf._ _Theory of Business Enterprise_, footnote on pp. 169-170. [17] As should be evident from the run of the argument in the earlier portions of this paper, the use of the words "tax," "deduction," "abstraction," in this connection, is not to be taken as implying approval or disapproval of the phenomena so characterised. The words are used for want of better terms to indicate the source of business gains, and objectively to characterise the relation of give-and-take between industry and ordinary capitalistic business, on the one hand, and between ordinary business and this business enterprise on the higher plane, on the other hand. SOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM[1] The immediate occasion for the writing of this paper was given by the publication of Mr. Spencer's essay, "From Freedom to Bondage";[2] although it is not altogether a criticism of that essay. It is not my purpose to controvert the position taken by Mr. Spencer as regards the present feasibility of any socialist scheme. The paper is mainly a suggestion, offered in the spirit of the disciple, with respect to a point not adequately covered by Mr. Spencer's discussion, and which has received but very scanty attention at the hands of any other writer on either side of the socialist controversy. This main point is as to an economic ground, as a matter of fact, for the existing unrest that finds expression in the demands of socialist agitators. I quote from Mr. Spencer's essay a sentence which does fair justice, so far as it goes, to the position taken by agitators: "In presence of obvious improvements, joined with that increase of longevity, which even alone yields conclusive proof of general amelioration, it is proclaimed, with increasing vehemence, that things are so bad that society must be pulled to pieces and reorganised on another plan." The most obtrusive feature of the change demanded by the advocates of socialism is governmental control of the industrial activities of society--the nationalisation of industry. There is also, just at present, a distinct movement in practice, towards a more extended control of industry by the government, as Mr. Spencer has pointed out. This movement strengthens the position of the advocates of a complete nationalisation of industry, by making it appear that the logic of events is on their side. In America at least, this movement in the direction of a broader assertion of the paramount claims of the community, and an extension of corporate action on part of the community in industrial matters, has not generally been connected with or based on an adherence to socialistic dogmas. This is perhaps truer of the recent past than of the immediate present. The motive of the movement has been, in large part, the expediency of each particular step taken. Municipal supervision, and, possibly, complete municipal control, has come to be a necessity in the case of such industries--mostly of recent growth--as elementary education, street-lighting, water-supply, etc. Opinions differ widely as to how far the community should take into its own hands such industries as concern the common welfare, but the growth of sentiment may fairly be said to favor a wider scope of governmental control. But the necessity of some supervision in the interest of the public extends to industries which are not simply of municipal importance. The modern development of industry and of the industrial organisation of society makes it increasingly necessary that certain industries--often spoken of as "natural monopolies"--should be treated as being of a semi-public character. And through the action of the same forces a constantly increasing number of occupations are developing into the form of "natural monopolies." The motive of the movement towards corporate action on the part of the community--State control of industry--has been largely that of industrial expediency. But another motive has gone with this one, and has grown more prominent as the popular demands in this direction have gathered wider support and taken more definite form. The injustice, the inequality, of the existing system, so far as concerns these natural monopolies especially, are made much of. There is a distinct unrest abroad, a discontent with things as they are, and the cry of injustice is the expression of this more or less widely prevalent discontent. This discontent is the truly socialistic element in the situation. It is easy to make too much of this popular unrest. The clamor of the agitators might be taken to indicate a wider prevalence and a greater acuteness of popular discontent than actually exists; but after all due allowance is made for exaggeration on the part of those interested in the agitation, there can still be no doubt of the presence of a chronic feeling of dissatisfaction with the working of the existing industrial system, and a growth of popular sentiment in favor of a leveling policy. The economic ground of this popular feeling must be found, if we wish to understand the significance, for our industrial system, of the movement to which it supplies the motive. If its causes shall appear to be of a transient character, there is little reason to apprehend a permanent or radical change of our industrial system as the outcome of the agitation; while if this popular sentiment is found to be the outgrowth of any of the essential features of the existing social system, the chances of its ultimately working a radical change in the system will be much greater. The explanation offered by Mr. Spencer, that the popular unrest is due essentially to a feeling of _ennui_--to a desire for a change of posture on part of the social body, is assuredly not to be summarily rejected; but the analogy will hardly serve to explain the sentiment away. This may be a cause, but it can hardly be accepted as a sufficient cause. Socialist agitators urge that the existing system is necessarily wasteful and industrially inefficient. That may be granted, but it does not serve to explain the popular discontent, because the popular opinion, in which the discontent resides, does notoriously not favor that view. They further urge that the existing system is unjust, in that it gives an advantage to one man over another. That contention may also be true, but it is in itself no explanation, for it is true only if it be granted that the institutions which make this advantage of one man over another possible are unjust, and that is begging the question. This last contention is, however, not so far out of line with popular sentiment. The advantage complained of lies, under modern conditions, in the possession of property, and there is a feeling abroad that the existing order of things affords an undue advantage to property, especially to owners of property whose possessions rise much above a certain rather indefinite average. This feeling of injured justice is not always distinguishable from envy; but it is, at any rate, a factor that works towards a leveling policy. With it goes a feeling of slighted manhood, which works in the same direction. Both these elements are to a great extent of a subjective origin. They express themselves in the general, objective form, but it is safe to say that on the average they spring from a consciousness of disadvantage and slight suffered by the person expressing them, and by persons whom he classes with himself. No flippancy is intended in saying that the rich are not so generally alive to the necessity of any leveling policy as are people of slender means. Any question as to the legitimacy of the dissatisfaction, on moral grounds, or even on grounds of expediency, is not very much to the point; the question is as to its scope and its chances of persistence. The modern industrial system is based on the institution of private property under free competition, and it cannot be claimed that these institutions have heretofore worked to the detriment of the material interests of the average member of society. The ground of discontent cannot lie in a disadvantageous comparison of the present with the past, so far as material interests are concerned. It is notorious, and, practically, none of the agitators deny, that the system of industrial competition, based on private property, has brought about, or has at least co-existed with, the most rapid advance in average wealth and industrial efficiency that the world has seen. Especially can it fairly be claimed that the result of the last few decades of our industrial development has been to increase greatly the creature comforts within the reach of the average human being. And, decidedly, the result has been an amelioration of the lot of the less favored in a relatively greater degree than that of those economically more fortunate. The claim that the system of competition has proved itself an engine for making the rich richer and the poor poorer has the fascination of epigram; but if its meaning is that the lot of the average, of the masses of humanity in civilised life, is worse to-day, as measured in the means of livelihood, than it was twenty, or fifty, or a hundred years ago, then it is farcical. The cause of discontent must be sought elsewhere than in any increased difficulty in obtaining the means of subsistence or of comfort. But there is a sense in which the aphorism is true, and in it lies at least a partial explanation of the unrest which our conservative people so greatly deprecate. The existing system has not made, and does not tend to make, the industrious poor poorer as measured absolutely in means of livelihood; but it does tend to make them relatively poorer, in their own eyes, as measured in terms of comparative economic importance, and, curious as it may seem at first sight, that is what seems to count. It is not the abjectly poor that are oftenest heard protesting; and when a protest is heard in their behalf it is through spokesmen who are from outside their own class, and who are not delegated to speak for them. They are not a negligible element in the situation, but the unrest which is ground for solicitude does not owe its importance to them. The protest comes from those who do not habitually, or of necessity, suffer physical privation. The qualification "of necessity," is to be noticed. There is a not inconsiderable amount of physical privation suffered by many people in this country, which is not physically necessary. The cause is very often that what might be the means of comfort is diverted to the purpose of maintaining a decent appearance, or even a show of luxury. Man as we find him to-day has much regard to his good fame--to his standing in the esteem of his fellowmen. This characteristic he always has had, and no doubt always will have. This regard for reputation may take the noble form of a striving after a good name; but the existing organisation of society does not in any way preëminently foster that line of development. Regard for one's reputation means, in the average of cases, emulation. It is a striving to be, and more immediately to be thought to be, better than one's neighbor. Now, modern society, the society in which competition without prescription is predominant, is preëminently an industrial, economic society, and it is industrial--economic--excellence that most readily attracts the approving regard of that society. Integrity and personal worth will, of course, count for something, now as always; but in the case of a person of moderate pretentions and opportunities, such as the average of us are, one's reputation for excellence in this direction does not penetrate far enough into the very wide environment to which a person is exposed in modern society to satisfy even a very modest craving for respectability. To sustain one's dignity--and to sustain one's self-respect--under the eyes of people who are not socially one's immediate neighbors, it is necessary to display the token of economic worth, which practically coincides pretty closely with economic success. A person may be well-born and virtuous, but those attributes will not bring respect to the bearer from people who are not aware of his possessing them, and these are ninety-nine out of every one hundred that one meets. Conversely, by the way, knavery and vulgarity in any person are not reprobated by people who know nothing of the person's shortcomings in those respects. In our fundamentally industrial society a person should be economically successful, if he would enjoy the esteem of his fellowmen. When we say that a man is "worth" so many dollars, the expression does not convey the idea that moral or other personal excellence is to be measured in terms of money, but it does very distinctly convey the idea that the fact of his possessing many dollars is very much to his credit. And, except in cases of extraordinary excellence, efficiency in any direction which is not immediately of industrial importance, and does not redound to a person's economic benefit, is not of great value as a means of respectability. Economic success is in our day the most widely accepted as well as the most readily ascertainable measure of esteem. All this will hold with still greater force of a generation which is born into a world already encrusted with this habit of a mind. But there is a further, secondary stage in the development of this economic emulation. It is not enough to possess the talisman of industrial success. In order that it may mend one's good fame efficiently, it is necessary to display it. One does not "make much of a showing" in the eyes of the large majority of the people whom one meets with, except by unremitting demonstration of ability to pay. That is practically the only means which the average of us have of impressing our respectability on the many to whom we are personally unknown, but whose transient good opinion we would so gladly enjoy. So it comes about that the appearance of success is very much to be desired, and is even in many cases preferred to the substance. We all know how nearly indispensable it is to afford whatever expenditure other people with whom we class ourselves can afford, and also that it is desirable to afford a little something more than others. This element of human nature has much to do with the "standard of living." And it is of a very elastic nature, capable of an indefinite extension. After making proper allowance for individual exceptions and for the action of prudential restraints, it may be said, in a general way, that this emulation in expenditure stands ever ready to absorb any margin of income that remains after ordinary physical wants and comforts have been provided for, and, further, that it presently becomes as hard to give up that part of one's habitual "standard of living" which is due to the struggle for respectability, as it is to give up many physical comforts. In a general way, the need of expenditure in this direction grows as fast as the means of satisfying it, and, in the long run, a large expenditure comes no nearer satisfying the desire than a smaller one. It comes about through the working of this principle that even the creature comforts, which are in themselves desirable, and, it may even be, requisite to a life on a passably satisfactory plane, acquire a value as a means of respectability quite independent of, and out of proportion to, their simple utility as a means of livelihood. As we are all aware, the chief element of value in many articles of apparel is not their efficiency for protecting the body, but for protecting the wearer's respectability; and that not only in the eyes of one's neighbors but even in one's own eyes. Indeed, it happens not very rarely that a person chooses to go ill-clad in order to be well dressed. Much more than half the value of what is worn by the American people may confidently be put down to the element of "dress," rather than to that of "clothing." And the chief motive of dress is emulation--"economic emulation." The like is true, though perhaps in a less degree, of what goes to food and shelter. This misdirection of effort through the cravings of human vanity is of course not anything new, nor is "economic emulation" a modern fact. The modern system of industry has not invented emulation, nor has even this particular form of emulation originated under that system. But the system of free competition has accentuated this form of emulation, both by exalting the industrial activity of man above the rank which it held under more primitive forms of social organisation, and by in great measure cutting off other forms of emulation from the chance of efficiently ministering to the craving for a good fame. Speaking generally and from the standpoint of the average man, the modern industrial organization of society has practically narrowed the scope of emulation to this one line; and at the same time it has made the means of sustenance and comfort so much easier to obtain as very materially to widen the margin of human exertion that can be devoted to purposes of emulation. Further, by increasing the freedom of movement of the individual and widening the environment to which the individual is exposed--increasing the number of persons before whose eyes each one carries on his life, and, _pari passu_, decreasing the chances which such persons have of awarding their esteem on any other basis than that of immediate appearances, it has increased the relative efficiency of the economic means of winning respect through a show of expenditure for personal comforts. It is not probable that further advance in the same direction will lead to a different result in the immediate future; and it is the _immediate_ future we have to deal with. A further advance in the efficiency of our industry, and a further widening of the human environment to which the individual is exposed, should logically render emulation in this direction more intense. There are, indeed, certain considerations to be set off against this tendency, but they are mostly factors of slow action, and are hardly of sufficient consequence to reverse the general rule. On the whole, other things remaining the same, it must be admitted that, within wide limits, the easier the conditions of physical life for modern civilised man become, and the wider the horizon of each and the extent of the personal contact of each with his fellowmen, and the greater the opportunity of each to compare notes with his fellows, the greater will be the preponderance of economic success as a means of emulation, and the greater the straining after economic respectability. Inasmuch as the aim of emulation is not any absolute degree of comfort or of excellence, no advance in the average well-being of the community can end the struggle or lessen the strain. A general amelioration cannot quiet the unrest whose source is the craving of everybody to compare favorably with his neighbor. Human nature being what it is, the struggle of each to possess more than his neighbor is inseparable from the institution of private property. And also, human nature being what it is, one who possesses less will, on the average, be jealous of the one who possesses more; and "more" means not more than the average share, but more than the share of the person who makes the comparison. The criterion of complacency is, largely, the _de facto_ possession or enjoyment; and the present growth of sentiment among the body of the people--who possess less--favors, in a vague way, a readjustment adverse to the interests of those who possess more, and adverse to the possibility of legitimately possessing or enjoying "more"; that is to say, the growth of sentiment favors a socialistic movement. The outcome of modern industrial development has been, so far as concerns the present purpose, to intensify emulation and the jealousy that goes with emulation, and to focus the emulation and the jealousy on the possession and enjoyment of material goods. The ground of the unrest with which we are concerned is, very largely, jealousy,--envy, if you choose; and the ground of this particular form of jealousy, that makes for socialism, is to be found in the institution of private property. With private property, under modern conditions, this jealousy and unrest are unavoidable. The corner-stone of the modern industrial system is the institution of private property. That institution is also the objective point of all attacks upon the existing system of competitive industry, whether open or covert, whether directed against the system as a whole or against any special feature of it. It is, moreover, the ultimate ground--and, under modern conditions, necessarily so--of the unrest and discontent whose proximate cause is the struggle for economic respectability. The inference seems to be that, human nature being what it is, there can be no peace from this--it must be admitted--ignoble form of emulation, or from the discontent that goes with it, this side of the abolition of private property. Whether a larger measure of peace is in store for us after that event shall have come to pass, is of course not a matter to be counted on, nor is the question immediately to the point. This economic emulation is of course not the sole motive, nor the most important feature, of modern industrial life; although it is in the foreground, and it pervades the structure of modern society more thoroughly perhaps than any other equally powerful moral factor. It would be rash to predict that socialism will be the inevitable outcome of a continued development of this emulation and the discontent which it fosters, and it is by no means the purpose of this paper to insist on such an inference. The most that can be claimed is that this emulation is one of the causes, if not the chief cause, of the existing unrest and dissatisfaction with things as they are; that this unrest is inseparable from the existing system of industrial organisation; and that the growth of popular sentiment under the influence of these conditions is necessarily adverse to the institution of private property, and therefore adverse to the existing industrial system of free competition. * * * * * The emulation to which attention has been called in the preceding section of this paper is not only a fact of importance to an understanding of the unrest that is urging us towards an untried path in social development, but it has also a bearing on the question of the practicability of any scheme for the complete nationalisation of industry. Modern industry has developed to such a degree of efficiency as to make the struggle of subsistence alone, under average conditions, relatively easy, as compared with the state of the case a few generations ago. As I have labored to show, the modern competitive system has at the same time given the spirit of emulation such a direction that the attainment of subsistence and comfort no longer fixes, even approximately, the limit of the required aggregate labor on the part of the community. Under modern conditions the struggle for existence has, in a very appreciable degree, been transformed into a struggle to keep up appearances. The ultimate ground of this struggle to keep up appearance by otherwise unnecessary expenditure, is the institution of private property. Under a régime which should allow no inequality of acquisition or of income, this form of emulation, which is due to the possibility of such inequality, would also tend to become obsolete. With the abolition of private property, the characteristic of human nature which now finds its exercise in this form of emulation, should logically find exercise in other, perhaps nobler and socially more serviceable, activities; it is at any rate not easy to imagine it running into any line of action more futile or less worthy of human effort. Supposing the standard of comfort of the community to remain approximately at its present average, the abolition of the struggle to keep up economic appearances would very considerably lessen the aggregate amount of labor required for the support of the community. How great a saving of labor might be effected is not easy to say. I believe it is within the mark to suppose that the struggle to keep up appearances is chargeable, directly and indirectly, with one-half the aggregate labor, and abstinence from labor--for the standard of respectability requires us to shun labor as well as to enjoy the fruits of it--on part of the American people. This does not mean that the same community, under a system not allowing private property, could make its way with half the labor we now put forth; but it means something more or less nearly approaching that. Any one who has not seen our modern social life from this point of view will find the claim absurdly extravagant, but the startling character of the proposition will wear off with longer and closer attention to this aspect of the facts of everyday life. But the question of the exact amount of waste due to this factor is immaterial. It will not be denied that is is a fact of considerable magnitude, and that is all that the argument requires. It is accordingly competent for the advocates of the nationalisation of industry and property to claim that even if their scheme of organisation should prove less effective for production of goods than the present, as measured absolutely in terms of the aggregate output of our industry, yet the community might readily be maintained at the present average standard of comfort. The required aggregate output of the nation's industry would be considerably less than at present, and there would therefore be less necessity for that close and strenuous industrial organisation and discipline of the members of society under the new régime, whose evils unfriendly critics are apt to magnify. The chances of practicability for the scheme should logically be considerably increased by this lessening of the necessity for severe application. The less irksome and exacting the new régime, the less chance of a reversion to the earlier system. Under such a social order, where common labor would no longer be a mark of peculiar economic necessity and consequent low economic rank on part of the laborer, it is even conceivable that labor might practically come to assume that character of nobility in the eyes of society at large, which it now sometimes assumes in the speculations of the well-to-do, in their complacent moods. Much has sometimes been made of this possibility by socialist speculators, but the inference has something of a utopian look, and no one, certainly, is entitled to build institutions for the coming social order on this dubious ground. What there seems to be ground for claiming is that a society which has reached our present degree of industrial efficiency would not go into the Socialist or Nationalist state with as many chances of failure as a community whose industrial development is still at the stage at which strenuous labor on the part of nearly all members is barely sufficient to make both ends meet. In Mr. Spencer's essay, in conformity with the line of argument of his "Principles of Sociology," it is pointed out that, as the result of constantly operative social forces, all social systems, as regards the form of organisation, fall into the one or the other of Sir Henry Maine's two classes--the system of status or the system of contract. In accordance with this generalisation it is concluded that whenever the modern system of contract or free competition shall be displaced, it will necessarily be replaced by the only other known system--that of status; the type of which is the military organisation, or, also, a hierarchy, or a bureaucracy. It is something after the fashion of the industrial organisation of ancient Peru that Mr. Spencer pictures as the inevitable sequel of the demise of the existing competitive system. Voluntary coöperation can be replaced only by compulsory coöperation, which is identified with the system of status and defined as the subjection of man to his fellow-man. Now, at least as a matter of speculation, this is not the only alternative. These two systems, of status, or prescription, and of contract, or competition, have divided the field of social organisation between them in some proportion or other in the past. Mr. Spencer has shown that, very generally, where human progress in its advanced stages has worked towards the amelioration of the lot of the average member of society, the movement has been away from the system of status and towards the system of contract. But there is at least one, if not more than one exception to the rule, as concerns the recent past. The latest development of the industrial organisation among civilised nations--perhaps in an especial degree in the case of the American people--has not been entirely a continuation of the approach to a régime of free contract. It is also, to say the least, very doubtful if the movement has been towards a régime of status, in the sense in which Sir Henry Maine uses the term. This is especially evident in the case of the great industries which we call "natural monopolies"; and it is to be added that the present tendency is for a continually increasing proportion of the industrial activities of the community to fall into the category of "natural monopolies." No revolution has been achieved; the system of competition has not been discarded, but the course of industrial development is not in the direction of an extension of that system at all points; nor does the principle of status always replace that of competition wherever the latter fails. The classification of methods of social organisation under the two heads of status or of contract, is not logically exhaustive. There is nothing in the meaning of the terms employed which will compel us to say that whenever man escapes from the control of his fellow man, under a system of status, he thereby falls into a system of free contract. There is a conceivable escape from the dilemma, and it is this conceivable, though perhaps impracticable, escape from both these systems that the socialist agitator wishes to effect. An acquaintance with the aims and position of the more advanced and consistent advocates of a new departure leaves no doubt but that the principles of contract and of status, both, are in substance familiar to their thoughts--though often in a vague and inadequate form--and that they distinctly repudiate both. This is perhaps less true of those who take the socialist position mainly on ethical grounds. As bearing on this point it may be remarked that while the industrial system, in the case of all communities with whose history we are acquainted, has always in the past been organised according to a scheme of status or of contract, or of the two combined in some proportion, yet the social organisation has not in all cases developed along the same lines, so far as concerns such social functions as are not primarily industrial. Especially is this true of the later stages in the development of those communities whose institutions we are accustomed to contemplate with the most complacency, _e.g._, the case of the English-speaking peoples. The whole system of modern constitutional government in its latest developed forms, in theory at least, and, in a measure, in practice, does not fall under the head of either contract or status. It is the analogy of modern constitutional government through an impersonal law and impersonal institutions, that comes nearest doing justice to the vague notions of our socialist propagandists. It is true, some of the most noted among them are fond of the analogy of the military organisation, as a striking illustration of one feature of the system they advocate, but that must after all be taken as an _obiter dictum_. Further, as to the manner of the evolution of existing institutions and their relation to the two systems spoken of. So far as concerns the communities which have figured largely in the civilised world, the political organisation has had its origin in a military system of government. So, also, has the industrial organisation. But while the development of industry, during its gradual escape from the military system of status, has been, at least until lately, in the direction of a system of free contract, the development of the political organisation, so far as it has escaped from the régime of status, has not been in that direction. The system of status is a system of subjection to personal authority,--of prescription and class distinctions, and privileges and immunities; the system of constitutional government, especially as seen at its best among a people of democratic traditions and habits of mind, is a system of subjection to the will of the social organism, as expressed in an impersonal law. This difference between the system of status and the "constitutional system" expresses a large part of the meaning of the boasted free institutions of the English-speaking people. Here, subjection is not to the person of the public functionary, but to the powers vested in him. This has, of course, something of the ring of latter-day popular rhetoric, but it is after all felt to be true, not only speculatively, but in some measure also in practice. The right of eminent domain and the power to tax, as interpreted under modern constitutional forms, indicate something of the direction of development of the political functions of society at a point where they touch the province of the industrial system. It is along the line indicated by these and kindred facts that the socialists are advancing; and it is along this line that the later developments made necessary by the exigencies of industry under modern conditions are also moving. The aim of the propagandists is to sink the industrial community in the political community; or perhaps better, to identify the two organisations; but always with insistence on the necessity of making the political organisation, in some further developed form, the ruling and only one in the outcome. Distinctly, the system of contract is to be done away with; and equally distinctly, no system of status is to take its place. All this is pretty vague, and of a negative character, but it would quickly pass the limits of legitimate inference from the accepted doctrines of the socialists if it should attempt to be anything more. It does not have much to say as to the practicability of any socialist scheme. As a matter of speculation, there seems to be an escape from the dilemma insisted on by Mr. Spencer. We may conceivably have nationalism without status and without contract. In theory, both principles are entirely obnoxious to that system. The practical question, as to whether modern society affords the materials out of which an industrial structure can be erected on a system different from either of these, is a problem of constructive social engineering which calls for a consideration of details far too comprehensive to be entered on here. Still, in view of the past course of development of character and institutions on the part of the people to which we belong, it is perhaps not extravagant to claim that no form of organisation which should necessarily eventuate in a thorough-going system of status could endure among us. The inference from this proposition may be, either that a near approach to nationalisation of industry would involve a régime of status, a bureaucracy, which would be unendurable, and which would therefore drive us back to the present system before it had been entirely abandoned; or that the nationalisation would be achieved with such a measure of success, in conformity with the requirements of our type of character, as would make it preferable to what we had left behind. In either case the ground for alarm does not seem so serious as is sometimes imagined. A reversion to the system of free competition, after it had been in large part discarded, would no doubt be a matter of great practical difficulty, and the experiment which should demonstrate the necessity of such a step might involve great waste and suffering, and might seriously retard the advance of the race toward something better than our present condition; but neither a permanent deterioration of human society, nor a huge catastrophe, is to be confidently counted on as the outcome of the movement toward nationalisation, even if it should prove necessary for society to retrace its steps. It is conceivable that the application of what may be called the "constitutional method" to the organisation of industry--for that is essentially what the advocates of Nationalisation demand--would result in a course of development analogous to what has taken place in the case of the political organisation under modern constitutional forms. Modern constitutional government--the system of modern free institutions--is by no means an unqualified success, in the sense of securing to each the rights and immunities which in theory are guaranteed to him. Our modern republics have hardly given us a foretaste of that political millennium whereof they proclaim the fruition. The average human nature is as yet by no means entirely fit for self-government according to the "constitutional method." Shortcomings are visible at every turn. These shortcomings are grave enough to furnish serious arguments against the practicability of our free institutions. On the continent of Europe the belief seems to be at present in the ascendant that man must yet, for a long time, remain under the tutelage of absolutism before he shall be fit to organise himself into an autonomous political body. The belief is not altogether irrational. Just how great must be the advance of society and just what must be the character of the advance, preliminary to its advantageously assuming the autonomous--republican--form of political organisation, must be admitted to be an open question. Whether we, or any people, have yet reached the required stage of the advance is also questioned by many. But the partial success which has attended the movement in this direction, among the English-speaking people for example, goes very far towards proving that the point in the development of human character at which the constitutional method may be advantageously adopted in the political field, lies far this side the point at which human nature shall have become completely adapted for that method. That is to say, it does not seem necessary, as regards the functions of society which we are accustomed to call political, to be entirely ready for nationalisation before entering upon it. How far the analogy of this will hold when applied to the industrial organisation of society is difficult to say, but some significance the analogy must be admitted to possess. Certainly, the fact that constitutional government--the nationalisation of political functions--seems to have been a move in the right direction is not to be taken as proof of the advisability of forthwith nationalising the industrial functions. At the same time this fact does afford ground for the claim that a movement in this direction may prove itself in some degree advantageous, even if it takes place at a stage in the development of human nature at which mankind is still far from being entirely fit for the duties which the new system shall impose. The question, therefore, is not whether we have reached the perfection of character which would be necessary in order to a perfect working of the scheme of nationalisation of industry, but whether we have reached such a degree of development as would make an imperfect working of the scheme possible. FOOTNOTES: [1] Reprinted by permission from the _Annals of American Academy of Political and Social Science_, Vol. II, 1892. [2] Introductory paper of _A Plea for Liberty_; edited by Thomas Mackay. THE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1] I. THE THEORIES OF KARL MARX The system of doctrines worked out by Marx is characterised by a certain boldness of conception and a great logical consistency. Taken in detail, the constituent elements of the system are neither novel nor iconoclastic, nor does Marx at any point claim to have discovered previously hidden facts or to have invented recondite formulations of facts already known; but the system as a whole has an air of originality and initiative such as is rarely met with among the sciences that deal with any phase of human culture. How much of this distinctive character the Marxian system owes to the personal traits of its creator is not easy to say, but what marks it off from all other systems of economic theory is not a matter of personal idiosyncrasy. It differs characteristically from all systems of theory that had preceded it, both in its premises and in its aims. The (hostile) critics of Marx have not sufficiently appreciated the radical character of his departure in both of these respects, and have, therefore, commonly lost themselves in a tangled scrutiny of supposedly abstruse details; whereas those writers who have been in sympathy with his teachings have too commonly been disciples bent on exegesis and on confirming their fellow-disciples in the faith. Except as a whole and except in the light of its postulates and aims, the Marxian system is not only not tenable, but it is not even intelligible. A discussion of a given isolated feature of the system (such as the theory of value) from the point of view of classical economics (such as that offered by Böhm-Bawerk) is as futile as a discussion of solids in terms of two dimensions. Neither as regards his postulates and preconceptions nor as regards the aim of his inquiry is Marx's position an altogether single-minded one. In neither respect does his position come of a single line of antecedents. He is of no single school of philosophy, nor are his ideals those of any single group of speculators living before his time. For this reason he takes his place as an originator of a school of thought as well as the leader of a movement looking to a practical end. As to the motives which drive him and the aspirations which guide him, in destructive criticism and in creative speculation alike, he is primarily a theoretician busied with the analysis of economic phenomena and their organisation into a consistent and faithful system of scientific knowledge; but he is, at the same time, consistently and tenaciously alert to the bearing which each step in the progress of his theoretical work has upon the propaganda. His work has, therefore, an air of bias, such as belongs to an advocate's argument; but it is not, therefore, to be assumed, nor indeed to be credited, that his propagandist aims have in any substantial way deflected his inquiry or his speculations from the faithful pursuit of scientific truth. His socialistic bias may color his polemics, but his logical grasp is too neat and firm to admit of any bias, other than that of his metaphysical preconceptions, affecting his theoretical work. There is no system of economic theory more logical than that of Marx. No member of the system, no single article of doctrine, is fairly to be understood, criticised, or defended except as an articulate member of the whole and in the light of the preconceptions and postulates which afford the point of departure and the controlling norm of the whole. As regards these preconceptions and postulates, Marx draws on two distinct lines of antecedents,--the Materialistic Hegelianism and the English system of Natural Rights. By his earlier training he is an adept in the Hegelian method of speculation and inoculated with the metaphysics of development underlying the Hegelian system. By his later training he is an expert in the system of Natural Rights and Natural Liberty, ingrained in his ideals of life and held inviolate throughout. He does not take a critical attitude toward the underlying principles of Natural Rights. Even his Hegelian preconceptions of development never carry him the length of questioning the fundamental principles of that system. He is only more ruthlessly consistent in working out their content than his natural-rights antagonists in the liberal-classical school. His polemics run against the specific tenets of the liberal school, but they run wholly on the ground afforded by the premises of that school. The ideals of his propaganda are natural-rights ideals, but his theory of the working out of these ideals in the course of history rests on the Hegelian metaphysics of development, and his method of speculation and construction of theory is given by the Hegelian dialectic. * * * * * What first and most vividly centered interest on Marx and his speculations was his relation to the revolutionary socialistic movement; and it is those features of his doctrines which bear immediately on the propaganda that still continue to hold the attention of the greater number of his critics. Chief among these doctrines, in the apprehension of his critics, is the theory of value, with its corollaries: (_a_) the doctrines of the exploitation of labor by capital; and (_b_) the laborer's claim to the whole product of his labor. Avowedly, Marx traces his doctrine of labor-value to Ricardo, and through him to the classical economists.[2] The laborer's claim to the whole product of labor, which is pretty constantly implied, though not frequently avowed by Marx, he has in all probability taken from English writers of the early nineteenth century,[3] more particularly from William Thompson. These doctrines are, on their face, nothing but a development of the conceptions of natural rights which then pervaded English speculation and afforded the metaphysical ground of the liberal movement. The more formidable critics of the Marxian socialism have made much of these doctrinal elements that further the propaganda, and have, by laying the stress on these, diverted attention from other elements that are of more vital consequence to the system as a body of theory. Their exclusive interest in this side of "scientific socialism" has even led them to deny the Marxian system all substantial originality, and make it a (doubtfully legitimate) offshoot of English Liberalism and natural rights.[4] But this is one-sided criticism. It may hold as against certain tenets of the so-called "scientific socialism," but it is not altogether to the point as regards the Marxian system of theory. Even the Marxian theory of value, surplus value, and exploitation, is not simply the doctrine of William Thompson, transcribed and sophisticated in a forbidding terminology, however great the superficial resemblance and however large Marx's unacknowledged debt to Thompson may be on these heads. For many details and for much of his animus Marx may be indebted to the Utilitarians; but, after all, his system of theory, taken as a whole, lies within the frontiers of neo-Hegelianism, and even the details are worked out in accord with the preconceptions of that school of thought and have taken on the complexion that would properly belong to them on that ground. It is, therefore, not by an itemised scrutiny of the details of doctrine and by tracing their pedigree in detail that a fair conception of Marx and his contribution to economics may be reached, but rather by following him from his own point of departure out into the ramifications of his theory, and so overlooking the whole in the prospective which the lapse of time now affords us, but which he could not himself attain, since he was too near to his own work to see why he went about it as he did. * * * * * The comprehensive system of Marxism is comprised within the scheme of the Materialistic Conception of History.[5] This materialistic conception is essentially Hegelian,[6] although it belongs with the Hegelian Left, and its immediate affiliation is with Feuerbach, not with the direct line of Hegelian orthodoxy. The chief point of interest here, in identifying the materialistic conception with Hegelianism, is that this identification throws it immediately and uncompromisingly into contrast with Darwinism and the post-Darwinian conceptions of evolution. Even if a plausible English pedigree should be worked out for this Materialistic Conception, or "Scientific Socialism," as has been attempted, it remains none the less true that the conception with which Marx went to his work was a transmuted framework of Hegelian dialectic.[7] Roughly, Hegelian materialism differs from Hegelian orthodoxy by inverting the main logical sequence, not by discarding the logic or resorting to new tests of truth or finality. One might say, though perhaps with excessive crudity, that, where Hegel pronounces his dictum, _Das Denken ist das Sein_, the materialists, particularly Marx and Engels, would say _Das Sein macht das Denken_. But in both cases some sort of a creative primacy is assigned to one or the other member of the complex, and in neither case is the relation between the two members a causal relation. In the materialistic conception man's spiritual life--what man thinks--is a reflex of what he is in the material respect, very much in the same fashion as the orthodox Hegelian would make the material world a reflex of the spirit. In both, the dominant norm of speculation and formulation of theory is the conception of movement, development, evolution, progress; and in both the movement is conceived necessarily to take place by the method of conflict or struggle. The movement is of the nature of progress,--gradual advance toward a goal, toward the realisation in explicit form of all that is implicit in the substantial activity involved in the movement. The movement is, further, self-conditioned and self-acting: it is an unfolding by inner necessity. The struggle which constitutes the method of movement or evolution is, in the Hegelian system proper, the struggle of the spirit for self-realisation by the process of the well-known three-phase dialectic. In the materialistic conception of history this dialectical movement becomes the class struggle of the Marxian system. The class struggle is conceived to be "material," but the term "material" is in this connection used in a metaphorical sense. It does not mean mechanical or physical, or even physiological, but economic. It is material in the sense that it is a struggle between classes for the material means of life. "The materialistic conception of history proceeds on the principle that production and, next to production, the exchange of its products is the groundwork of every social order."[8] The social order takes its form through the class struggle, and the character of the class struggle at any given phase of the unfolding development of society is determined by "the prevailing mode of economic production and exchange." The dialectic of the movement of social progress, therefore, moves on the spiritual plane of human desire and passion, not on the (literally) material plane of mechanical and physiological stress, on which the developmental process of brute creation unfolds itself. It is a sublimated materialism, sublimated by the dominating presence of the conscious human spirit; but it is conditioned by the material facts of the production of the means of life.[9] The ultimately active forces involved in the process of unfolding social life are (apparently) the material agencies engaged in the mechanics of production; but the dialectic of the process--the class struggle--runs its course only among and in terms of the secondary (epigenetic) forces of human consciousness engaged in the valuation of the material products of industry. A consistently materialistic conception, consistently adhering to a materialistic interpretation of the process of development as well as of the facts involved in the process, could scarcely avoid making its putative dialectic struggle a mere unconscious and irrelevant conflict of the brute material forces. This would have amounted to an interpretation in terms of opaque cause and effect, without recourse to the concept of a conscious class struggle, and it might have led to a concept of evolution similar to the unteleological Darwinian concept of natural selection. It could scarcely have led to the Marxian notion of a conscious class struggle as the one necessary method of social progress, though it might conceivably, by the aid of empirical generalisation, have led to a scheme of social process in which a class struggle would be included as an incidental though perhaps highly efficient factor.[10] It would have led, as Darwinism has, to a concept of a process of cumulative change in social structure and function; but this process, being essentially a cumulative sequence of causation, opaque and unteleological, could not, without an infusion of pious fancy by the speculator, be asserted to involve progress as distinct from retrogression or to tend to a "realisation" or "self-realisation" of the human spirit or of anything else. Neither could it conceivably be asserted to lead up to a final term, a goal to which all lines of the process should converge and beyond which the process would not go, such as the assumed goal of the Marxian process of class struggle, which is conceived to cease in the classless economic structure of the socialistic final term. In Darwinism there is no such final or perfect term, and no definitive equilibrium. The disparity between Marxism and Darwinism, as well as the disparity within the Marxian system between the range of material facts that are conceived to be the fundamental forces of the process, on the one hand, and the range of spiritual facts within which the dialectic movement proceeds,--this disparity is shown in the character assigned the class struggle by Marx and Engels. The struggle is asserted to be a conscious one, and proceeds on a recognition by the competing classes of their mutually incompatible interests with regard to the material means of life. The class struggle proceeds on motives of interest, and a recognition of class interest can, of course, be reached only by reflection on the facts of the case. There is, therefore, not even a direct causal connection between the material forces in the case and the choice of a given interested line of conduct. The attitude of the interested party does not result from the material forces so immediately as to place it within the relation of direct cause and effect, nor even with such a degree of intimacy as to admit of its being classed as a tropismatic, or even instinctive, response to the impact of the material force in question. The sequence of reflection, and the consequent choice of sides to a quarrel, run entirely alongside of a range of material facts concerned. A further characteristic of the doctrine of class struggle requires mention. While the concept is not Darwinian, it is also not legitimately Hegelian, whether of the Right or the Left. It is of a utilitarian origin and of English pedigree, and it belongs to Marx by virtue of his having borrowed its elements from the system of self-interest. It is in fact a piece of hedonism, and is related to Bentham rather than to Hegel. It proceeds on the grounds of the hedonistic calculus, which is equally foreign to the Hegelian notion of an unfolding process and to the post-Darwinian notions of cumulative causation. As regards the tenability of the doctrine, apart from the question of its derivation and its compatibility with the neo-Hegelian postulates, it is to be added that it is quite out of harmony with the later results of psychological inquiry,--just as is true of the use made of the hedonistic calculus by the classical (Austrian) economics. * * * * * Within the domain covered by the materialistic conception, that is to say within the domain of unfolding human culture, which is the field of Marxian speculation at large, Marx has more particularly devoted his efforts to an analysis and theoretical formulation of the present situation,--the current phase of the process, the capitalistic system. And, since the prevailing mode of the production of goods determines the institutional, intellectual, and spiritual life of the epoch, by determining the form and method of the current class struggle, the discussion necessarily begins with the theory of "capitalistic production," or production as carried on under the capitalistic system.[11] Under the capitalistic system, that is to say under the system of modern business traffic, production is a production of commodities, merchantable goods, with a view to the price to be obtained for them in the market. The great fact on which all industry under this system hinges is the price of marketable goods. Therefore it is at this point that Marx strikes into the system of capitalistic production, and therefore the theory of value becomes the dominant feature of his economics and the point of departure for the whole analysis, in all its voluminous ramifications.[12] It is scarcely worth while to question what serves as the beginning of wisdom in the current criticisms of Marx; namely, that he offers no adequate proof of his labor-value theory.[13] It is even safe to go farther, and say that he offers no proof of it. The feint which occupies the opening paragraphs of the _Kapital_ and the corresponding passages of _Zur Kritik_, etc., is not to be taken seriously as an attempt to prove his position on this head by the ordinary recourse to argument. It is rather a self-satisfied superior's playful mystification of those readers (critics) whose limited powers do not enable them to see that his proposition is self-evident. Taken on the Hegelian (neo-Hegelian) ground, and seen in the light of the general materialistic conception, the proposition that value = labor-cost is self-evident, not to say tautological. Seen in any other light, it has no particular force. In the Hegelian scheme of things the only substantial reality is the unfolding life of the spirit. In the neo-Hegelian scheme, as embodied in the materialistic conception, this reality is translated into terms of the unfolding (material) life of man in society.[14] In so far as the goods are products of industry, they are the output of this unfolding life of man, a material residue embodying a given fraction of this forceful life-process. In this life-process lies all substantial reality, and all finally valid relations of quantivalence between the products of this life-process must run in its terms. The life-process, which, when it takes the specific form of an expenditure of labor power, goes to produce goods, is a process of material forces, the spiritual or mental features of the life-process and of labor being only its insubstantial reflex. It is consequently only in the material changes wrought by this expenditure of labor power that the metaphysical substance of life--labor power--can be embodied; but in these changes of material fact it cannot but be embodied, since these are the end to which it is directed. This balance between goods in respect of their magnitude as output of human labor holds good indefeasibly, in point of the metaphysical reality of the life-process, whatever superficial (phenomenal) variations from this norm may occur in men's dealings with the goods under the stress of the strategy of self-interest. Such is the value of the goods in reality; they are equivalents of one another in the proportion in which they partake of this substantial quality, although their true ratio of equivalence may never come to an adequate expression in the transactions involved in the distribution of the goods. This real or true value of the goods is a fact of production, and holds true under all systems and methods of production, whereas the exchange value (the "phenomenal form" of the real value) is a fact of distribution, and expresses the real value more or less adequately according as the scheme of distribution in force at the given time conforms more or less closely to the equities given by production. If the output of industry were distributed to the productive agents strictly in proportion to their shares in production, the exchange value of the goods would be presumed to conform to their real value. But, under the current, capitalistic system, distribution is not in any sensible degree based on the equities of production, and the exchange value of goods under this system can therefore express their real value only with a very rough, and in the main fortuitous, approximation. Under a socialistic régime, where the laborer would get the full product of his labor, or where the whole system of ownership, and consequently the system of distribution, would lapse, values would reach a true expression, if any. Under the capitalistic system the determination of exchange value is a matter of competitive profit-making, and exchange values therefore depart erratically and incontinently from the proportions that would legitimately be given them by the real values whose only expression they are. Marx's critics commonly identify the concept of "value" with that of "exchange value,"[15] and show that the theory of "value" does not square with the run of the facts of price under the existing system of distribution, piously hoping thereby to have refuted the Marxian doctrine; whereas, of course, they have for the most part not touched it. The misapprehension of the critics may be due to a (possibly intentional) oracular obscurity on the part of Marx. Whether by his fault or their own, their refutations have hitherto been quite inconclusive. Marx's severest stricture on the iniquities of the capitalistic system is that contained by implication in his development of the manner in which actual exchange value of goods systematically diverges from their real (labor-cost) value. Herein, indeed, lies not only the inherent iniquity of the existing system, but also its fateful infirmity, according to Marx. The theory of value, then, is _contained in_ the main postulates of the Marxian system rather than derived from them. Marx identifies this doctrine, in its elements, with the labor-value theory of Ricardo,[16] but the relationship between the two is that of a superficial coincidence in their main propositions rather than a substantial identity of theoretic contents. In Ricardo's theory the source and measure of value is sought in the effort and sacrifice undergone by the producer, consistently, on the whole, with the Benthamite-utilitarian position to which Ricardo somewhat loosely and uncritically adhered. The decisive fact about labor, that quality by virtue of which it is assumed to be the final term in the theory of production, is its irksomeness. Such is of course not the case in the labor-value theory of Marx, to whom the question of the irksomeness of labor is quite irrelevant, so far as regards the relation between labor and production. The substantial diversity or incompatibility of the two theories shows itself directly when each is employed by its creator in the further analysis of economic phenomena. Since with Ricardo the crucial point is the degree of irksomeness of labor, which serves as a measure both of the labor expended and the value produced, and since in Ricardo's utilitarian philosophy there is no more vital fact underlying this irksomeness, therefore no surplus-value theory follows from the main position. The productiveness of labor is not cumulative, in its own working; and the Ricardian economics goes on to seek the cumulative productiveness of industry in the functioning of the products of labor when employed in further production and in the irksomeness of the capitalist's abstinence. From which duly follows the general position of classical economics on the theory of production. With Marx, on the other hand, the labor power expended in production being itself a product and having a substantial value corresponding to its own labor-cost, the value of the labor power expended and the value of the product created by its expenditure need not be the same. They are not the same, by supposition, as they would be in any hedonistic interpretation of the facts. Hence a discrepancy arises between the value of the labor power expended in production and the value of the product created, and this discrepancy is covered by the concept of surplus value. Under the capitalistic system, wages being the value (price) of the labor power consumed in industry, it follows that the surplus product of their labor cannot go to the laborers, but becomes the profits of capital and the source of its accumulation and increase. From the fact that wages are measured by the value of labor power rather than by the (greater) value of the product of labor, it follows also that the laborers are unable to buy the whole product of their labor, and so that the capitalists are unable to sell the whole product of industry continuously at its full value, whence arise difficulties of the gravest nature in the capitalistic system, in the way of overproduction and the like. But the gravest outcome of this systematic discrepancy between the value of labor power and the value of its product is the accumulation of capital out of unpaid labor, and the effect of this accumulation on the laboring population. The law of accumulation, with its corollary, the doctrine of the industrial reserve army, is the final term and the objective point of Marx's theory of capitalist production, just as the theory of labor value is his point of departure.[17] While the theory of value and surplus value are Marx's explanation of the possibility of existence of the capitalistic system, the law of the accumulation of capital is his exposition of the causes which must lead to the collapse of that system and of the manner in which the collapse will come. And since Marx is, always and everywhere, a socialist agitator as well as a theoretical economist, it may be said without hesitation that the law of accumulation is the climax of his great work, from whatever point of view it is looked at, whether as an economic theorem or as a tenet of socialistic doctrine. The law of capitalistic accumulation may be paraphrased as follows:[18] Wages being the (approximately exact) value of the labor power bought in the wage contract; the price of the product being the (similarly approximate) value of the goods produced; and since the value of the product exceeds that of the labor power by a given amount (surplus value), which by force of the wage contract passes into the possession of the capitalist and is by him in part laid by as savings and added to the capital already in hand, it follows (_a_) that, other things equal, the larger the surplus value, the more rapid the increase of capital; and, also (_b_), that the greater the increase of capital relatively to the labor force employed, the more productive the labor employed and the larger the surplus product available for accumulation. The process of accumulation, therefore, is evidently a cumulative one; and, also evidently, the increase added to capital is an unearned increment drawn from the unpaid surplus product of labor. But with an appreciable increase of the aggregate capital a change takes place in its technological composition, whereby the "constant" capital (equipment and raw materials) increases disproportionately as compared with the "variable" capital (wages fund). "Labor-saving devices" are used to a greater extent than before, and labor is saved. A larger proportion of the expenses of production goes for the purchase of equipment and raw materials, and a smaller proportion--though perhaps an absolutely increased amount--goes for the purchase of labor power. Less labor is needed relatively to the aggregate capital employed as well as relatively to the quantity of goods produced. Hence some portion of the increasing labor supply will not be wanted, and an "industrial reserve army," a "surplus labor population," an army of unemployed, comes into existence. This reserve grows relatively larger as the accumulation of capital proceeds and as technological improvements consequently gain ground; so that there result two divergent cumulative changes in the situation,--antagonistic, but due to the same set of forces and, therefore, inseparable: capital increases, and the number of unemployed laborers (relatively) increases also. This divergence between the amount of capital and output, on the one hand, and the amount received by laborers as wages, on the other hand, has an incidental consequence of some importance. The purchasing power of the laborers, represented by their wages, being the largest part of the demand for consumable goods, and being at the same time, in the nature of the case, progressively less adequate for the purchase of the product, represented by the price of the goods produced, it follows that the market is progressively more subject to glut from overproduction, and hence to commercial crises and depression. It has been argued, as if it were a direct inference from Marx's position, that this maladjustment between production and markets, due to the laborer not getting the full product of his labor, leads directly to the breakdown of the capitalistic system, and so by its own force will bring on the socialistic consummation. Such is not Marx's position, however, although crises and depression play an important part in the course of development that is to lead up to socialism. In Marx's theory, socialism is to come by way of a conscious class movement on the part of the propertyless laborers, who will act advisedly on their own interest and force the revolutionary movement for their own gain. But crises and depression will have a large share in bringing the laborers to a frame of mind suitable for such a move. Given a growing aggregate capital, as indicated above, and a concomitant reserve of unemployed laborers growing at a still higher rate, as is involved in Marx's position, this body of unemployed labor can be, and will be, used by the capitalists to depress wages, in order to increase profits. Logically, it follows that, the farther and faster capital accumulates, the larger will be the reserve of unemployed, both absolutely and relatively to the work to be done, and the more severe will be the pressure acting to reduce wages and lower the standard of living, and the deeper will be the degradation and misery of the working class and the more precipitately will their condition decline to a still lower depth. Every period of depression, with its increased body of unemployed labor seeking work, will act to hasten and accentuate the depression of wages, until there is no warrant even for holding that wages will, on an average, be kept up to the subsistence minimum.[19] Marx, indeed, is explicit to the effect that such will be the case,--that wages will decline below the subsistence minimum; and he cites English conditions of child labor, misery, and degeneration to substantiate his views.[20] When this has gone far enough, when capitalist production comes near enough to occupying the whole field of industry and has depressed the condition of its laborers sufficiently to make them an effective majority of the community with nothing to lose, then, having taken advice together, they will move, by legal or extra-legal means, by absorbing the state or by subverting it, to establish the social revolution. Socialism is to come through class antagonism due to the absence of all property interests from the laboring class, coupled with a generally prevalent misery so profound as to involve some degree of physical degeneration. This misery is to be brought about by the heightened productivity of labor due to an increased accumulation of capital and large improvements in the industrial arts; which in turn is caused by the fact that under a system of private enterprise with hired labor the laborer does not get the whole product of his labor; which, again, is only saying in other words that private ownership of capital goods enables the capitalist to appropriate and accumulate the surplus product of labor. As to what the régime is to be which the social revolution will bring in, Marx has nothing particular to say, beyond the general thesis that there will be no private ownership, at least not of the means of production. * * * * * Such are the outlines of the Marxian system of socialism. In all that has been said so far no recourse is had to the second and third volumes of _Kapital_. Nor is it necessary to resort to these two volumes for the general theory of socialism. They add nothing essential, although many of the details of the processes concerned in the working out of the capitalist scheme are treated with greater fullness, and the analysis is carried out with great consistency and with admirable results. For economic theory at large these further two volumes are important enough, but an inquiry into their contents in that connection is not called for here. Nothing much need be said as to the tenability of this theory. In its essentials, or at least in its characteristic elements, it has for the most part been given up by latter-day socialist writers. The number of those who hold to it without essential deviation is growing gradually smaller. Such is necessarily the case, and for more than one reason. The facts are not bearing it out on certain critical points, such as the doctrine of increasing misery; and the Hegelian philosophical postulates, without which the Marxism of Marx is groundless, are for the most part forgotten by the dogmatists of to-day. Darwinism has largely supplanted Hegelianism in their habits of thought. The particular point at which the theory is most fragile, considered simply as a theory of social growth, is its implied doctrine of population,--implied in the doctrine of a growing reserve of unemployed workmen. The doctrine of the reserve of unemployed labor involves as a postulate that population will increase anyway, without reference to current or prospective means of life. The empirical facts give at least a very persuasive apparent support to the view expressed by Marx, that misery is, or has hitherto been, no hindrance to the propagation of the race; but they afford no conclusive evidence in support of a thesis to the effect that the number of laborers must increase independently of an increase of the means of life. No one since Darwin would have the hardihood to say that the increase of the human species is not conditioned by the means of living. But all that does not really touch Marx's position. To Marx, the neo-Hegelian, history, including the economic development, is the life-history of the human species; and the main fact in this life-history, particularly in the economic aspect of it, is the growing volume of human life. This, in a manner of speaking, is the base-line of the whole analysis of the process of economic life, including the phase of capitalist production with the rest. The growth of population is the first principle, the most substantial, most material factor in this process of economic life, so long as it is a process of growth, of unfolding, of exfoliation, and not a phase of decrepitude and decay. Had Marx found that his analysis led him to a view adverse to this position, he would logically have held that the capitalist system is the mortal agony of the race and the manner of its taking off. Such a conclusion is precluded by his Hegelian point of departure, according to which the goal of the life-history of the race in a large way controls the course of that life-history in all its phases, including the phase of capitalism. This goal or end, which controls the process of human development, is the complete realisation of life in all its fullness, and the realisation is to be reached by a process analogous to the three-phase dialectic, of thesis, antithesis, and synthesis, into which scheme the capitalist system, with its overflowing measure of misery and degradation, fits as the last and most dreadful phase of antithesis. Marx, as a Hegelian,--that is to say, a romantic philosopher,--is necessarily an optimist, and the evil (antithetical element) in life is to him a logically necessary evil, as the antithesis is a necessary phase of the dialectic; and it is a means to the consummation, as the antithesis is a means to the synthesis. FOOTNOTES: [1] The substance of lectures before students in Harvard University in April, 1906. Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XX, Aug., 1906 [2] _Cf._ _Critique of Political Economy_, chap. i, "Notes on the History of the Theory of Commodities," pp. 56-73 (English translation, New York, 1904). [3] See Menger, _Right to the Whole Produce of Labor_, sections iii-v and viii-ix, and Foxwell's admirable Introduction to Menger. [4] See Menger and Foxwell, as above, and Schaeffle, _Quintessence of Socialism_, and _The Impossibility of Social Democracy_. [5] See Engels, _The Development of Socialism from Utopia to Science_, especially section ii and the opening paragraphs of section iii; also the preface of _Zur Kritik der politischen Oekonomie_. [6] See Engels, as above, and also his _Feuerbach: The Roots of Socialist Philosophy_ (translation, Chicago, Kerr & Co., 1903). [7] See _e.g._, Seligman, _The Economic Interpretation of History_, Part I. [8] Engels, _Development of Socialism_, beginning of section iii. [9] _Cf._, on this point, Max Adler, "Kausalität und Teleologie im Streite um die Wissenschaft" (included in _Marx-Studien_, edited by Adler and Hilfendirg, vol. i), particularly section xi; _cf._ also Ludwig Stein, _Die soziale Frage im Lichte der Philosophie_, whom Adler criticises and claims to have refuted. [10] _Cf._ Adler, as above. [11] It may be noted, by way of caution to readers familiar with the terms only as employed by the classical (English and Austrian) economists, that in Marxian usage "capitalistic production" means production of goods for the market by hired labor under the direction of employers who own (or control) the means of production and are engaged in industry for the sake of a profit. "Capital" is wealth (primarily funds) so employed. In these and other related points of terminological usage Marx is, of course, much more closely in touch with colloquial usage than those economists of the classical line who make capital signify "the products of past industry used as aids to further production." With Marx "Capitalism" implies certain relations of ownership, no less than the "productive use" which is alone insisted on by so many later economists in defining the term. [12] In the sense that the theory of value affords the point of departure and the fundamental concepts out of which the further theory of the workings of capitalism is constructed,--in this sense, and in this sense only, is the theory of value the central doctrine and the critical tenet of Marxism. It does not follow that the Marxist doctrine of an irresistible drift towards a socialistic consummation hangs on the defensibility of the labor-value theory, nor even that the general structure of the Marxist economics would collapse if translated into other terms than those of this doctrine of labor-value. _Cf_. Böhm-Bawerk, _Karl Marx and the Close of his System_; and, on the other hand, Franz Oppenheimer, _Das Grundgesetz der Marx'schen Gesellschaftslehre_; and Rudolf Goldscheid, _Verelendungs- oder Meliorationstheorie_. [13] _Cf._, _e.g._, Böhm-Bawerk, as above; Georg Adler, _Grundlagen der Karl Marx'schen Kritik_. [14] In much the same way, and with an analogous effect on their theoretical work, in the preconceptions of the classical (including the Austrian) economists, the balance of pleasure and pain is taken to be the ultimate reality in terms of which all economic theory must be stated and to terms of which all phenomena should finally be reduced in any definitive analysis of economic life. It is not the present purpose to inquire whether the one of these uncritical assumptions is in any degree more meritorious or more serviceable than the other. [15] Böhm-Bawerk, _Capital and Interest_, Book VI, chap, iii; also _Karl Marx and the Close of his System_, particularly chap. iv; Adler, _Grundlagen_, chaps. ii. and iii. [16] _Cf._ _Kapital_, vol. i, chap. xv, p. 486 (4th ed.). See also notes 9 and 16 to chap. i of the same volume, where Marx discusses the labor-value doctrines of Adam Smith and an earlier (anonymous) English writer, and compares them with his own. Similar comparisons with the early--classical--value theories recur from time to time in the later portions of _Kapital_. [17] Oppenheimer (_Das Grundgesetz der Marx'schen Gesellschaftslehre_) is right in making the theory of accumulation the central element in the doctrines of Marxist socialism, but it does not follow, as Oppenheimer contends, that this doctrine is the keystone of Marx's economic theories. It follows logically from the theory of surplus value, as indicated above, and rests on that theory in such a way that it would fail (in the form in which it is held by Marx) with the failure of the doctrine of surplus value. [18] See _Kapital_, vol. i, chap. xxiii. [19] The "subsistence minimum" is here taken in the sense used by Marx and the classical economists, as meaning what is necessary to keep up the supply of labor at its current rate of efficiency. [20] See _Kapital_, vol. i, chap, xxiii, sections 4 and 5. THE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1] II. THE LATER MARXISM Marx worked out his system of theory in the main during the third quarter of the nineteenth century. He came to the work from the standpoint given him by his early training in German thought, such as the most advanced and aggressive German thinking was through the middle period of the century, and he added to this German standpoint the further premises given him by an exceptionally close contact with and alert observation of the English situation. The result is that he brings to his theoretical work a twofold line of premises, or rather of preconceptions. By early training he is a neo-Hegelian, and from this German source he derives his peculiar formulation of the Materialistic Theory of History. By later experience he acquired the point of view of that Liberal-Utilitarian school which dominated English thought through the greater part of his active life. To this experience he owes (probably) the somewhat pronounced individualistic preconceptions on which the doctrines of the Full Product of Labor and the Exploitation of Labor are based. These two not altogether compatible lines of doctrine found their way together into the tenets of scientific[2] socialism, and gives its characteristic Marxian features to the body of socialist economics. The socialism that inspires hopes and fears to-day is of the school of Marx. No one is seriously apprehensive of any other so-called socialistic movement, and no one is seriously concerned to criticise or refute the doctrines set forth by any other school of "socialists." It may be that the socialists of the Marxist observance are not always or at all points in consonance with the best accepted body of Marxist doctrine. Those who make up the body of the movement may not always be familiar with the details--perhaps not even with the general features--of the Marxian scheme of economics; but with such consistency as may fairly be looked for in any popular movement, the socialists of all countries gravitate toward the theoretical position of the avowed Marxism. In proportion as the movement in any given community grows in mass, maturity, and conscious purpose, it unavoidably takes on a more consistently Marxian complexion. It is not the Marxism of Marx, but the materialism of Darwin, which the socialists of to-day have adopted. The Marxist socialists of Germany have the lead, and the socialists of other countries largely take their cue from the German leaders. The authentic spokesmen of the current international socialism are avowed Marxists. Exceptions to that rule are very few. On the whole, the substantial truth of the Marxist doctrines is not seriously questioned within the lines of the socialists, though there may be some appreciable divergence as to what the true Marxist position is on one point and another. Much and eager controversy circles about questions of that class. The keepers of the socialist doctrines are passably agreed as to the main position and the general principles. Indeed, so secure is this current agreement on the general principles that a very lively controversy on matters of detail may go on without risk of disturbing the general position. This general position is avowedly Marxism. But it is not precisely the position held by Karl Marx. It has been modernised, adapted, filled out, in response to exigencies of a later date than those which conditioned the original formulation of the theories. It is, of course, not admitted by the followers of Marx that any substantial change or departure from the original position has taken place. They are somewhat jealously orthodox, and are impatient of any suggested "improvements" on the Marxist position, as witness the heat engendered in the "revisionist" controversy of a few years back. But the jealous protests of the followers of Marx do not alter the fact that Marxism has undergone some substantial change since it left the hands of its creator. Now and then a more or less consistent disciple of Marx will avow a need of adapting the received doctrines to circumstances that have arisen later than the formulation of the doctrines; and amendments, qualifications, and extensions, with this need in view, have been offered from time to time. But more pervasive though unavowed changes have come in the teachings of Marxism by way of interpretation and an unintended shifting of the point of view. Virtually, the whole of the younger generation of socialist writers shows such a growth. A citation of personal instances would be quite futile. * * * * * It is the testimony of his friends as well as of his writings that the theoretical position of Marx, both as regards his standpoint and as regards his main tenets, fell into a definitive shape relatively early, and that his later work was substantially a working out of what was contained in the position taken at the outset of his career.[3] By the latter half of the forties, if not by the middle of the forties, Marx and Engels had found the outlook on human life which came to serve as the point of departure and the guide for their subsequent development of theory. Such is the view of the matter expressed by Engels during the later years of his life.[4] The position taken by the two great leaders, and held by them substantially intact, was a variant of neo-Hegelianism, as has been indicated in an earlier section of this paper.[5] But neo-Hegelianism was short-lived, particularly considered as a standpoint for scientific theory. The whole romantic school of thought, comprising neo-Hegelianism with the rest, began to go to pieces very soon after it had reached an approach to maturity, and its disintegration proceeded with exceptional speed, so that the close of the third quarter of the century saw the virtual end of it as a vital factor in the development of human knowledge. In the realm of theory, primarily of course in the material sciences, the new era belongs not to romantic philosophy, but to the evolutionists of the school of Darwin. Some few great figures, of course, stood over from the earlier days, but it turns out in the sequel that they have served mainly to mark the rate and degree in which the method of scientific knowledge has left them behind. Such were Virchow and Max Müller, and such, in economic science, were the great figures of the Historical School, and such, in a degree, were also Marx and Engels. The later generation of socialists, the spokesmen and adherents of Marxism during the closing quarter of the century, belong to the new generation, and see the phenomena of human life under the new light. The materialistic conception in their handling of it takes on the color of the time in which they lived, even while they retain the phraseology of the generation that went before them.[6] The difference between the romantic school of thought, to which Marx belonged, and the school of the evolutionists into whose hands the system has fallen,--or perhaps, better, is falling,--is great and pervading, though it may not show a staring superficial difference at any one point,--at least not yet. The discrepancy between the two is likely to appear more palpable and more sweeping when the new method of knowledge has been applied with fuller realisation of its reach and its requirement in that domain of knowledge that once belonged to the neo-Hegelian Marxism. The supplanting of the one by the other has been taking place slowly, gently, in large measure unavowedly, by a sort of precession of the point of view from which men size up the facts and reduce them to intelligible order. The neo-Hegelian, romantic, Marxian standpoint was wholly personal, whereas the evolutionistic--it may be called Darwinian--standpoint is wholly impersonal. The continuity sought in the facts of observation and imputed to them by the earlier school of theory was a continuity of a personal kind,--a continuity of reason and consequently of logic. The facts were construed to take such a course as could be established by an appeal to reason between intelligent and fair-minded men. They were supposed to fall into a sequence of logical consistency. The romantic (Marxian) sequence of theory is essentially an intellectual sequence, and it is therefore of a teleological character. The logical trend of it can be argued out. That is to say, it tends to a goal. On the other hand, in the Darwinian scheme of thought, the continuity sought in and imputed to the facts is a continuity of cause and effect. It is a scheme of blindly cumulative causation, in which there is no trend, no final term, no consummation. The sequence is controlled by nothing but the _vis a tergo_ of brute causation, and is essentially mechanical. The neo-Hegelian (Marxian) scheme of development is drawn in the image of the struggling ambitious human spirit: that of Darwinian evolution is of the nature of a mechanical process.[7] What difference, now, does it make if the materialistic conception is translated from the romantic concepts of Marx into the mechanical concepts of Darwinism? It distorts every feature of the system in some degree, and throws a shadow of doubt on every conclusion that once seemed secure.[8] The first principle of the Marxian scheme is the concept covered by the term "Materialistic," to the effect that the exigencies of the material means of life control the conduct of men in society throughout, and thereby indefeasibly guide the growth of institutions and shape every shifting trait of human culture. This control of the life of society by the material exigencies takes effect through men's taking thought of material (economic) advantages and disadvantages, and choosing that which will yield the fuller material measure of life. When the materialistic conception passes under the Darwinian norm, of cumulative causation, it happens, first, that this initial principle itself is reduced to the rank of a habit of thought induced in the speculator who depends on its light, by the circumstances of his life, in the way of hereditary bent, occupation, tradition, education, climate, food supply, and the like. But under the Darwinian norm the question of whether and how far material exigencies control human conduct and cultural growth becomes a question of the share which these material exigencies have in shaping men's habits of thought, _i.e._, their ideals and aspirations, their sense of the true, the beautiful, and the good. Whether and how far these traits of human culture and the institutional structure built out of them are the outgrowth of material (economic) exigencies becomes a question of what kind and degree of efficiency belongs to the economic exigencies among the complex of circumstances that conduce to the formation of habits. It is no longer a question of whether material exigencies rationally should guide men's conduct, but whether, as a matter of brute causation, they do induce such habits of thought in men as the economic interpretation presumes, and whether in the last analysis economic exigencies alone are, directly or indirectly, effective in shaping human habits of thought. Tentatively and by way of approximation some such formulation as that outlined in the last paragraph is apparently what Bernstein and others of the "revisionists" have been seeking in certain of their speculations,[9] and, sitting austere and sufficient on a dry shoal up stream, Kautsky has uncomprehendingly been addressing them advice and admonition which they do not understand.[10] The more intelligent and enterprising among the idealist wing--where intellectual enterprise is not a particularly obvious trait--have been struggling to speak for the view that the forces of the environment may effectually reach men's spiritual life through other avenues than the calculus of the main chance, and so may give rise to habitual ideals and aspirations independent of, and possibly alien to, that calculus.[11] So, again, as to the doctrine of the class struggle. In the Marxian scheme of dialectical evolution the development which is in this way held to be controlled by the material exigencies must, it is held, proceed by the method of the class struggle. This class struggle is held to be inevitable, and is held inevitably to lead at each revolutionary epoch to a more efficient adjustment of human industry to human uses, because, when a large proportion of the community find themselves ill served by the current economic arrangements, they take thought, band together, and enforce a readjustment more equitable and more advantageous to them. So long as differences of economic advantage prevail, there will be a divergence of interests between those more advantageously placed and those less advantageously placed. The members of society will take sides as this line of cleavage indicated by their several economic interests may decide. Class solidarity will arise on the basis of this class interest, and a struggle between the two classes so marked off against each other will set in,--a struggle which, in the logic of the situation, can end only when the previously less fortunate class gains the ascendancy,--and so must the class struggle proceed until it shall have put an end to that diversity of economic interest on which the class struggle rests. All this is logically consistent and convincing, but it proceeds on the ground of reasoned conduct, calculus of advantage, not on the ground of cause and effect. The class struggle so conceived should always and everywhere tend unremittingly toward the socialistic consummation, and should reach that consummation in the end, whatever obstructions or diversions might retard the sequence of development along the way. Such is the notion of it embodied in the system of Marx. Such, however, is not the showing of history. Not all nations or civilisations have advanced unremittingly toward a socialistic consummation, in which all divergence of economic interest has lapsed or would lapse. Those nations and civilisations which have decayed and failed, as nearly all known nations and civilisations have done, illustrate the point that, however reasonable and logical the advance by means of the class struggle may be, it is by no means inevitable. Under the Darwinian norm it must be held that men's reasoning is largely controlled by other than logical, intellectual forces; that the conclusion reached by public or class opinion is as much, or more, a matter of sentiment than of logical inference; and that the sentiment which animates men, singly or collectively, is as much, or more, an outcome of habit and native propensity as of calculated material interest. There is, for instance, no warrant in the Darwinian scheme of things for asserting _a priori_ that the class interest of the working class will bring them to take a stand against the propertied class. It may as well be that their training in subservience to their employers will bring them again to realise the equity and excellence of the established system of subjection and unequal distribution of wealth. Again, no one, for instance, can tell to-day what will be the outcome of the present situation in Europe and America. It may be that the working classes will go forward along the line of the socialistic ideals and enforce a new deal, in which there shall be no economic class discrepancies, no international animosity, no dynastic politics. But then it may also, so far as can be foreseen, equally well happen that the working class, with the rest of the community in Germany, England, or America, will be led by the habit of loyalty and by their sportsmanlike propensities to lend themselves enthusiastically to the game of dynastic politics, which alone their sportsmanlike rulers consider worth while. It is quite impossible on Darwinian ground to foretell whether the "proletariat" will go on to establish the socialistic revolution or turn aside again, and sink their force in the broad sands of patriotism. It is a question of habit and native propensity and of the range of stimuli to which the proletariat are exposed and are to be exposed, and what may be the outcome is not a matter of logical consistency, but of response to stimulus. So, then, since Darwinian concepts have begun to dominate the thinking of the Marxists, doubts have now and again come to assert themselves both as to the inevitableness of the irrepressible class struggle and to its sole efficacy. Anything like a violent class struggle, a seizure of power by force, is more and more consistently deprecated. For resort to force, it is felt, brings in its train coercive control with all its apparatus of prerogative, mastery, and subservience.[12] So, again, the Marxian doctrine of progressive proletarian distress, the so-called _Verelendungstheorie_, which stands pat on the romantic ground of the original Marxism, has fallen into abeyance, if not into disrepute, since the Darwinian conceptions have come to prevail. As a matter of reasoned procedure, on the ground of enlightened material interest alone, it should be a tenable position that increasing misery, increasing in degree and in volume, should be the outcome of the present system of ownership, and should at the same time result in a well-advised and well-consolidated working-class movement that would replace the present system by a scheme more advantageous to the majority. But so soon as the question is approached on the Darwinian ground of cause and effect, and is analysed in terms of habit and of response to stimulus, the doctrine that progressive misery must effect a socialistic revolution becomes dubious, and very shortly untenable. Experience, the experience of history, teaches that abject misery carries with it deterioration and abject subjection. The theory of progressive distress fits convincingly into the scheme of the Hegelian three-phase dialectic. It stands for the antithesis that is to be merged in the ulterior synthesis; but it has no particular force on the ground of an argument from cause to effect.[13] It fares not much better with the Marxian theory of value and its corollaries and dependent doctrines when Darwinian concepts are brought in to replace the romantic elements out of which it is built up. Its foundation is the metaphysical equality between the volume of human life force productively spent in the making of goods and the magnitude of these goods considered as human products. The question of such an equality has no meaning in terms of cause and effect, nor does it bear in any intelligible way upon the Darwinian question of the fitness of any given system of production or distribution. In any evolutionary system of economics the central question touching the efficiency and fitness of any given system of production is necessarily the question as to the excess of serviceability in the product over the cost of production.[14] It is in such an excess of serviceability over cost that the chance of survival lies for any system of production, in so far as the question of survival is a question of production, and this matter comes into the speculation of Marx only indirectly or incidentally, and leads to nothing in his argument. And, as bearing on the Marxian doctrines of exploitation, there is on Darwinian ground no place for a natural right to the full product of labor. What can be argued in that connection on the ground of cause and effect simply is the question as to what scheme of distribution will help or hinder the survival of a given people or a given civilisation.[15] But these questions of abstruse theory need not be pursued, since they count, after all, but relatively little among the working tenets of the movement. Little need be done by the Marxists to work out or to adapt the Marxian system of value theory, since it has but slight bearing on the main question,--the question of the trend towards socialism and of its chances of success. It is conceivable that a competent theory of value dealing with the excess of serviceability over cost, on the one hand, and with the discrepancy between price and serviceability, on the other hand, would have a substantial bearing upon the advisability of the present as against the socialistic régime, and would go far to clear up the notions of both socialists and conservatives as to the nature of the points in dispute between them. But the socialists have not moved in the direction of this problem, and they have the excuse that their critics have suggested neither a question nor a solution to a question along any such line. None of the value theorists have so far offered anything that could be called good, bad, or indifferent in this connection, and the socialists are as innocent as the rest. Economics, indeed, has not at this point yet begun to take on a modern tone, unless the current neglect of value theory by the socialists be taken as a negative symptom of advance, indicating that they at least recognise the futility of the received problems and solutions, even if they are not ready to make a positive move. * * * * * The shifting of the current point of view, from romantic philosophy to matter-of-fact, has affected the attitude of the Marxists towards the several articles of theory more than it has induced an avowed alteration or a substitution of new elements of theory for the old. It is always possible to make one's peace with a new standpoint by new interpretations and a shrewd use of figures of speech, so far as the theoretical formulation is concerned, and something of this kind has taken place in the case of Marxism; but when, as in the case of Marxism, the formulations of theory are drafted into practical use, substantial changes of appreciable magnitude are apt to show themselves in a changed attitude towards practical questions. The Marxists have had to face certain practical problems, especially problems of party tactics, and the substantial changes wrought in their theoretical outlook have come into evidence here. The real gravity of the changes that have overtaken Marxism would scarcely be seen by a scrutiny of the formal professions of the Marxists alone. But the exigencies of a changing situation have provoked readjustments of the received doctrinal position, and the shifting of the philosophical standpoint and postulates has come into evidence as marking the limits of change in their professions which the socialistic doctrinaires could allow themselves. The changes comprised in the cultural movement that lies between the middle and the close of the nineteenth century are great and grave, at least as seen from so near a standpoint as the present day, and it is safe to say that, in whatever historical perspective they may be seen, they must, in some respects, always assert themselves as unprecedented. So far as concerns the present topic, there are three main lines of change that have converged upon the Marxist system of doctrines, and have led to its latter-day modification and growth. One of these--the change in the postulates of knowledge, in the metaphysical foundations of theory--has been spoken of already, and its bearing on the growth of socialist theory has been indicated in certain of its general features. But, among the circumstances that have conditioned the growth of the system, the most obvious is the fact that since Marx's time his doctrines have come to serve as the platform of a political movement, and so have been exposed to the stress of practical party politics dealing with a new and changing situation. At the same time the industrial (economic) situation to which the doctrines are held to apply--of which they are the theoretical formulation--has also in important respects changed its character from what it was when Marx first formulated his views. These several lines of cultural change affecting the growth of Marxism cannot be held apart in so distinct a manner as to appraise the work of each separately. They belong inextricably together, as do the effects wrought by them in the system. In practical politics the Social Democrats have had to make up their account with the labor movement, the agricultural population, and the imperialistic policy. On each of these heads the preconceived programme of Marxism has come in conflict with the run of events, and on each head it has been necessary to deal shrewdly and adapt the principles to the facts of the time. The adaptation to circumstances has not been altogether of the nature of compromise, although here and there the spirit of compromise and conciliation is visible enough. A conciliatory party policy may, of course, impose an adaptation of form and color upon the party principles, without thereby seriously affecting the substance of the principles themselves; but the need of a conciliatory policy may, even more, provoke a substantial change of attitude toward practical questions in a case where a shifting of the theoretical point of view makes room for a substantial change. Apart from all merely tactical expedients, the experience of the past thirty years has led the German Marxists to see the facts of the labor situation in a new light, and has induced them to attach an altered meaning to the accepted formulations of doctrine. The facts have not freely lent themselves to the scheme of the Marxist system, but the scheme has taken on such a new meaning as would be consistent with the facts. The untroubled Marxian economics, such as it finds expression in the _Kapital_ and earlier documents of the theory, has no place and no use for a trade-union movement, or, indeed, for any similar non-political organisation among the working class, and the attitude of the Social-Democratic leaders of opinion in the early days of the party's history was accordingly hostile to any such movement,[16]--as much so, indeed, as the loyal adherents of the classical political economy. That was before the modern industrial era had got under way in Germany, and therefore before the German socialistic doctrinaires had learned by experience what the development of industry was to bring with it. It was also before the modern scientific postulates had begun to disintegrate the neo-Hegelian preconceptions as to the logical sequence in the development of institutions. In Germany, as elsewhere, the growth of the capitalistic system presently brought on trade-unionism; that is to say, it brought on an organised attempt on the part of the workmen to deal with the questions of capitalistic production and distribution by business methods, to settle the problems of working-class employment and livelihood by a system of non-political, businesslike bargains. But the great point of all socialist aspiration and endeavor is the abolition of all business and all bargaining, and, accordingly, the Social Democrats were heartily out of sympathy with the unions and their endeavors to make business terms with the capitalist system, and make life tolerable for the workmen under that system. But the union movement grew to be so serious a feature of the situation that the socialists found themselves obliged to deal with unions, since they could not deal with the workmen over the heads of the unions. The Social Democrats, and therefore the Marxian theorists, had to deal with a situation which included the union movement, and this movement was bent on improving the workman's conditions of life from day to day. Therefore it was necessary to figure out how the union movement could and must further the socialistic advance; to work into the body of doctrines a theory of how the unions belong in the course of economic development that leads up to socialism, and to reconcile the unionist efforts at improvement with the ends of Social Democracy. Not only were the unions seeking improvement by unsocialistic methods, but the level of comfort among the working classes was in some respects advancing, apparently as a result of these union efforts. Both the huckstering animus of the workmen in their unionist policy and the possible amelioration of working-class conditions had to be incorporated into the socialistic platform and into the Marxist theory of economic development. The Marxist theory of progressive misery and degradation has, accordingly, fallen into the background, and a large proportion of the Marxists have already come to see the whole question of working-class deterioration in some such apologetic light as is shed upon it by Goldscheid in his _Verelendungs-oder Meliorationstheorie_. It is now not an unusual thing for orthodox Marxists to hold that the improvement of the conditions of the working classes is a necessary condition to the advance of the socialistic cause, and that the unionist efforts at amelioration must be furthered as a means toward the socialistic consummation. It is recognised that the socialistic revolution must be carried through not by an anæmic working class under the pressure of abject privation, but by a body of full-blooded workingmen gradually gaining strength from improved conditions of life. Instead of the revolution being worked out by the leverage of desperate misery, every improvement in working-class conditions is to be counted as a gain for the revolutionary forces. This is a good Darwinism, but it does not belong in the neo-Hegelian Marxism. Perhaps the sorest experience of the Marxist doctrinaires has been with the agricultural population. Notoriously, the people of the open country have not taken kindly to socialism. No propaganda and no changes in the economic situation have won the sympathy of the peasant farmers for the socialistic revolution. Notoriously, too, the large-scale industry has not invaded the agricultural field, or expropriated the small proprietors, in anything like the degree expected by the Marxist doctrinaires of a generation ago. It is contained in the theoretical system of Marx that, as modern industrial and business methods gain ground, the small proprietor farmers will be reduced to the ranks of the wage-proletariat, and that, as this process of conversion goes on, in the course of time the class interest of the agricultural population will throw them into the movement side by side with the other wage-workmen.[17] But at this point the facts have hitherto not come out in consonance with the Marxist theory. And the efforts of the Social Democrats to convert the peasant population to socialism have been practically unrewarded. So it has come about that the political leaders and the keepers of the doctrines have, tardily and reluctantly, come to see the facts of the agrarian situation in a new light, and to give a new phrasing to the articles of Marxian theory that touch on the fortunes of the peasant farmer. It is no longer held that either the small properties of the peasant farmer must be absorbed into larger properties, and then taken over by the State, or that they must be taken over by the State directly, when the socialistic revolution is established. On the contrary, it is now coming to be held that the peasant proprietors will not be disturbed in their holdings by the great change. The great change is to deal with capitalistic enterprise, and the peasant farming is not properly "capitalistic." It is a system of production in which the producer normally gets only the product of his own labor. Indeed, under the current régime of markets and credit relations, the small agricultural producer, it is held, gets less than the product of his own labor, since the capitalistic business enterprises with which he has to deal are always able to take advantage of him. So it has become part of the overt doctrine of socialists that as regards the peasant farmer it will be the consistent aim of the movement to secure him in the untroubled enjoyment of his holding, and free him from the vexatious exactions of his creditors and the ruinous business traffic in which he is now perforce involved. According to the revised code, made possible by recourse to Darwinian concepts of evolution instead of the Hegelian three-phase dialectic, therefore, and contrary to the earlier prognostications of Marx, it is no longer held that agricultural industry must go through the capitalistic mill; and it is hoped that under the revised code it may be possible to enlist the interest and sympathy of this obstinately conservative element for the revolutionary cause. The change in the official socialist position on the agricultural question has come about only lately, and is scarcely yet complete, and there is no knowing what degree of success it may meet with either as a matter of party tactics or as a feature of the socialistic theory of economic development. All discussions of party policy, and of theory so far as bears on policy, take up the question; and nearly all authoritative spokesmen of socialism have modified their views in the course of time on this point. The socialism of Karl Marx is characteristically inclined to peaceable measures and disinclined to a coercive government and belligerent politics. It is, or at least it was, strongly averse to international jealousy and patriotic animosity, and has taken a stand against armaments, wars, and dynastic aggrandisement. At the time of the French-Prussian war the official organisation of Marxism, the International, went so far in its advocacy of peace as to urge the soldiery on both sides to refuse to fight. After the campaign had warmed the blood of the two nations, this advocacy of peace made the International odious in the eyes of both French and Germans. War begets patriotism, and the socialists fell under the reproach of not being sufficiently patriotic. After the conclusion of the war the Socialistic Workingmen's Party of Germany sinned against the German patriotic sentiment in a similar way and with similarly grave results. Since the foundation of the empire and of the Social-Democratic party, the socialists and their doctrines have passed through a further experience of a similar kind, but on a larger scale and more protracted. The government has gradually strengthened its autocratic position at home, increased its warlike equipment, and enlarged its pretensions in international politics, until what would have seemed absurdly impossible a generation ago is now submitted to by the German people, not only with a good grace, but with enthusiasm. During all this time that part of the population that has adhered to the socialist ideals has also grown gradually more patriotic and more loyal, and the leaders and keepers of socialist opinion have shared in the growth of chauvinism with the rest of the German people. But at no time have the socialists been able to keep abreast of the general upward movement in this respect. They have not attained the pitch of reckless loyalty that animates the conservative German patriots, although it is probably safe to say that the Social Democrats of to-day are as good and headlong patriots as the conservative Germans were a generation ago. During all this period of the new era of German political life the socialists have been freely accused of disloyalty to the national ambition, of placing their international aspirations above the ambition of imperial aggrandisement. The socialist spokesmen have been continually on the defensive. They set out with a round opposition to any considerable military establishment, and have more and more apologetically continued to oppose any "undue" extension of the warlike establishments and the warlike policy. But with the passage of time and the habituation to warlike politics and military discipline, the infection of jingoism has gradually permeated the body of Social Democrats, until they have now reached such a pitch of enthusiastic loyalty as they would not patiently hear a truthful characterisation of. The spokesmen now are concerned to show that, while they still stand for international socialism, consonant with their ancient position, they stand for national aggrandisement first and for international comity second. The relative importance of the national and the international ideals in German socialist professions has been reversed since the seventies.[18] The leaders are busy with interpretation of their earlier formulations. They have come to excite themselves over nebulous distinctions between patriotism and jingoism. The Social Democrats have come to be German patriots first and socialists second, which comes to saying that they are a political party working for the maintenance of the existing order, with modifications. They are no longer a party of revolution, but of reform, though the measure of reform which they demand greatly exceeds the Hohenzollern limit of tolerance. They are now as much, if not more, in touch with the ideas of English liberalism than with those of revolutionary Marxism. The material and tactical exigencies that have grown out of changes in the industrial system and in the political situation, then, have brought on far-reaching changes of adaptation in the position of the socialists. The change may not be extremely large at any one point, so far as regards the specific articles of the programme, but, taken as a whole, the resulting modification of the socialistic position is a very substantial one. The process of change is, of course, not yet completed,--whether or not it ever will be,--but it is already evident that what is taking place is not so much a change in amount or degree of conviction on certain given points as a change in kind,--a change in the current socialistic habit of mind. The factional discrepancies of theory that have occupied the socialists of Germany for some years past are evidence that the conclusion, even a provisional conclusion, of the shifting of their standpoint has not been reached. It is even hazardous to guess which way the drift is setting. It is only evident that the past standpoint, the standpoint of neo-Hegelian Marxism, cannot be regained,--it is a forgotten standpoint. For the immediate present the drift of sentiment, at least among the educated, seems to set toward a position resembling that of the National Socials and the Rev. Mr. Naumann; that is to say, imperialistic liberalism. Should the conditions, political, social, and economic, which to-day are chiefly effective in shaping the habits of thought among the German people, continue substantially unchanged and continue to be the chief determining causes, it need surprise no one to find German socialism gradually changing into a somewhat characterless imperialistic democracy. The imperial policy seems in a fair way to get the better of revolutionary socialism, not by repressing it, but by force of the discipline in imperialistic ways of thinking to which it subjects all classes of the population. How far a similar process of sterilisation is under way, or is likely to overtake the socialist movement in other countries, is an obscure question to which the German object-lesson affords no certain answer. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXI, Feb., 1907. [2] "Scientific" is here used in the half-technical sense which by usage it often has in this connection, designating the theories of Marx and his followers. [3] There is, indeed, a remarkable consistency, amounting substantially to an invariability of position, in Marx's writing, from the _Communist Manifesto_ to the last volume of the _Capital_. The only portion of the great _Manifesto_ which became antiquated, in the apprehension of its creators, is the polemics addressed to the "Philosophical" socialists of the forties and the illustrative material taken from contemporary politics. The main position and the more important articles of theory--the materialistic conception, the doctrine of class struggle, the theory of value and surplus value, of increasing distress, of the reserve army, of the capitalistic collapse--are to be found in the _Critique of Political Economy_ (1859), and much of them in the _Misery of Philosophy_ (1847), together with the masterful method of analysis and construction which he employed throughout his theoretical work. [4] _Cf._ Engels, _Feuerbach_ (English translation, Chicago, 1903), especially Part IV, and various papers published in the _Neue Zeit_; also the preface to the _Communist Manifesto_ written in 1888; also the preface to volume ii. of _Capital_, where Engels argues the question of Marx's priority in connection with the leading theoretical principles of his system. [5] _Cf._ _Feuerbach_, as above; _The Development of Socialism from Utopia to Science_, especially sections ii and iii. [6] Such a socialist as Anton Menger, _e.g._, comes into the neo-Marxian school from without, from the field of modern scientific inquiry, and shows, at least virtually, no Hegelian color, whether in the scope of his inquiry, in his method, or in the theoretical work which he puts forth. It should be added that his _Neue Staatslehre_, and _Neue Sittenlehre_ are the first socialistic constructive work of substantial value as a contribution to knowledge, outside of economic theory proper, that has appeared since Lassalle. The efforts of Engels (_Ursprung der Familie_) and Bebel (_Die Frau_) would scarcely be taken seriously as scientific monographs even by hot-headed socialists if it were not for the lack of anything better. Menger's work is not Marxism, whereas Engels's and Bebel's work of this class is practically without value or originality. The unfitness of the Marxian postulates and methods for the purposes of modern science shows itself in the sweeping barrenness of socialistic literature all along that line of inquiry into the evolution of institutions for the promotion of which the materialistic dialectic was invented. [7] This contrast holds between the original Marxism of Marx and the scope and method of modern science; but it does not, therefore, hold between the latter-day Marxists--who are largely imbued with post-Darwinian concepts--and the non-Marxian scientists. Even Engels, in his latter-day formulation of Marxism, is strongly affected with the notions of post-Darwinian science, and reads Darwinism into Hegel and Marx with a good deal of _naïveté_. (See his _Feuerbach_, especially pp. 93-98 of the English translation.) So, also, the serious but scarcely quite consistent qualifications of the materialistic conception offered by Engels in the letters printed in the _Sozialistische Akademiker_, 1895. [8] The fact that the theoretical structures of Marx collapse when their elements are converted into the terms of modern science should of itself be sufficient proof that those structures were not built by their maker out of such elements as modern science habitually makes use of. Marx was neither ignorant, imbecile, nor disingenuous, and his work must be construed from such a point of view and in terms of such elements as will enable his results to stand substantially sound and convincing. [9] Cf. _Voraussetzungen des Sozialismus_, especially the first two (critical) chapters. Bernstein's reverent attitude toward Marx and Engels, as well as his somewhat old-fashioned conception of the scope and method of science, gives his discussion an air of much greater consonance with the orthodox Marxism than it really has. In his later expressions this consonance and conciliatory animus show up more strongly rather than otherwise. (See _Socialism and Science_, including the special preface written for the French edition.) That which was to Marx and Engels the point of departure and the guiding norm--the Hegelian dialectic--is to Bernstein a mistake from which scientific socialism must free itself. He says, _e.g._ (_Voraussetzungen_, end of ch. iv.), "The great things achieved by Marx and Engels they have achieved not by the help of the Hegelian dialectic, but in spite of it." The number of the "revisionists" is very considerable, and they are plainly gaining ground as against the Marxists of the older line of orthodoxy. They are by no means agreed among themselves as to details, but they belong together by virtue of their endeavor to so construe (and amend) the Marxian system as to bring it into consonance with the current scientific point of view. One should rather say points of view, since the revisionists' endeavors are not all directed to bringing the received views in under a single point of view. There are two main directions of movement among the revisionists: (_a_) those who, like Bernstein, Conrad Schmidt, Tugan-Baranowski, Labriola, Ferri, aim to bring Marxism abreast of the standpoint of modern science, essentially Darwinists; and (_b_) those who aim to return to some footing on the level of the romantic philosophy. The best type and the strongest of the latter class are the neo-Kantians, embodying that spirit of revulsion to romantic norms of theory that makes up the philosophical side of the reactionary movement fostered by the discipline of German imperialism. (See K. Vorländer, _Die neukantische Bewegung im Sozialismus_.) Except that he is not officially inscribed in the socialist calendar, Sombart might be cited as a particularly effective revisionist, so far as concerns the point of modernising Marxism and putting the modernised materialistic conception to work. [10] _Cf._ the files of the _Neue Zeit_, particularly during the controversy with Bernstein, and _Bernstein und das Sozialdemokratische Programm_. [11] The "idealist" socialists are even more in evidence outside of Germany. They may fairly be said to be in the ascendant in France, and they are a very strong and free-spoken contingent of the socialist movement in America. They do not commonly speak the language either of science or of philosophy, but, so far as their contentions may be construed from the standpoint of modern science, their drift seems to be something of the kind indicated above. At the same time the spokesmen of this scattering and shifting group stand for a variety of opinions and aspirations that cannot be classified under Marxism, Darwinism, or any other system of theory. At the margin they shade off into theology and the creeds. [12] Throughout the revisionist literature in Germany there is a visible softening of the traits of the doctrine of the class struggle, and the like shows itself in the programmes of the party. Outside of Germany the doctrinaire insistence on this tenet is weakening even more decidedly. The opportunist politicians, with strong aspirations, but with relatively few and ill-defined theoretical preconceptions, are gaining ground. [13] _Cf._ Bernstein, _Die heutige Sozialdemokratie in Theorie und Praxis_, an answer to Brunhuber, _Die heutige Sozialdemokratie_, which should be consulted in the same connection: Goldscheid, _Verelendungs- oder Meliorationstheorie_; also Sombart, _Sozialismus und soziale Bewegung_, 5th edition, pp. 86-89. [14] Accordingly, in later Marxian handling of the questions of exploitation and accumulation, the attention is centered on the "surplus product" rather than on the "surplus value." It is also currently held that the doctrines and practical consequences which Marx derived from the theory of surplus value would remain substantially well founded, even if the theory of surplus value was given up. These secondary doctrines could be saved--at the cost of orthodoxy--by putting a theory of surplus product in the place of the theory of surplus value, as in effect is done by Bernstein (_Socialdemokratie in Theorie und Praxis_, sec. 5. Also various of the essays included in _Zur Geschichte und Theorie des Sozialismus_). [15] The "right to the full product of labor" and the Marxian theory of exploitation associated with that principle has fallen into the background, except as a campaign cry designed to stir the emotions of the working class. Even as a campaign cry it has not the prominence, nor apparently the efficacy, which it once had. The tenet is better preserved, in fact, among the "idealists", who draw for their antecedents on the French Revolution and the English philosophy of natural rights, than among the latter-day Marxists. [16] It is, of course, well known that even in the transactions and pronounciamentos of the International a good word is repeatedly said for the trade-unions, and both the Gotha and the Erfurt programmes speak in favor of labor organisations, and put forth demands designed to further the trade-union endeavors. But it is equally well known that these expressions were in good part perfunctory, and that the substantial motive behind them was the politic wish of the socialists to conciliate the unionists, and make use of the unions for the propaganda. The early expressions of sympathy with the unionist cause were made for an ulterior purpose. Later on, in the nineties, there comes a change in the attitude of the socialist leaders toward the unions. [17] _Cf._ _Kapital_, vol. i, ch. xiii, sect 10. [18] _Cf._ Kautsky, _Erfurter Programm_, ch. v, sect. 13; Bernstein, _Voraussetzungen_, ch. iv, sect. e. THE MUTATION THEORY AND THE BLOND RACE[1] The theories of racial development by mutation, associated with the name of Mendel, when they come to be freely applied to man, must greatly change the complexion of many currently debated questions of race--as to origins, migrations, dispersion, chronology, cultural derivation and sequence. In some respects the new theories should simplify current problems of ethnology, and they may even dispense with many analyses and speculations that have seemed of great moment in the past. The main postulate of the Mendelian theories--the stability of type--has already done much service in anthropological science, being commonly assumed as a matter of course in arguments dealing with the derivation and dispersion of races and peoples. It is only by force of this assumption that ethnologists are able to identify any given racial stock over intervals of space or time, and so to trace the racial affinities of any given people. Question has been entertained from time to time as to the racial fixity of given physical traits--as, _e.g._, stature, the cephalic indices, or hair and eye color--but on the whole these and other standard marks of race are still accepted as secure grounds of identification.[2] Indeed, without some such assumption any ethnological inquiry must degenerate into mere wool-gathering. But along with this, essentially Mendelian, postulate of the stability of types, ethnologists have at the same time habitually accepted the incompatible Darwinian doctrine that racial types vary incontinently after a progressive fashion, arising through insensible cumulative variations and passing into new specific forms by the same method, under the Darwinian rule of the selective survival of slight and unstable (non-typical) variations. The effect of these two incongruous premises has been to leave discussions of race derivation somewhat at loose ends wherever the two postulates cross one another. If it be assumed, or granted, that racial types are stable, it follows as a matter of course that these types or races have not arisen by the cumulative acquirement of unstable non-specific traits, but must have originated by mutation or by some analogous method, and this view must then find its way into anthropology as into the other biological sciences. When such a step is taken an extensive revision of questions of race will be unavoidable, and an appreciable divergence may then be looked for among speculations on the mutational affinities of the several races and cultures. Among matters so awaiting revision are certain broad questions of derivation and ethnography touching the blond race or races of Europe. Much attention, and indeed much sentiment, has been spent on this general topic. The questions involved are many and diverse, and many of them have been subject of animated controversy, without definitive conclusions. The mutation theories, of course, have immediately to do with the facts of biological derivation alone, but when the facts are reviewed in the light of these theories it will be found that questions of cultural origins and relationship are necessarily drawn into the inquiry. In particular, an inquiry into the derivation and distribution of the blond stock will so intimately involve questions of the Aryan speech and institutions as to be left incomplete without a somewhat detailed attention to this latter range of questions. So much so that an inquiry into the advent and early fortunes of the blond stock in Europe will fall, by convenience, under two distinct but closely related captions: The Origin of the Blond Type, and The Derivation of the Aryan Culture. * * * * * (a) It is held, on the one hand, that there is but a single blond race, type or stock (Keane, Lapouge, Sergi), and on the other hand that there are several such races or types, more or less distinct but presumably related (Deniker, Beddoe, and other, especially British, ethnologists). (b) There is no good body of evidence going to establish a great antiquity for the blond stock, and there are indications, though perhaps inconclusive, that the blond strain, including all the blond types, is of relatively late date--unless a Berber (Kabyle) blond race is to be accepted in a more unequivocal manner than hitherto. (c) Neither is there anything like convincing evidence that this blond strain has come from outside of Europe--except, again, for the equivocal Kabyle--or that any blond race has ever been widely or permanently distributed outside of its present European habitat, (d) The blond race is not found unmixed. In point of pedigree all individuals showing the blond traits are hybrids, and the greater number of them show their mixed blood in their physical traits. (e) There is no community, large or small, made up exclusively of blonds, or nearly so, and there is no good evidence available that such an all-blond or virtually all-blond community ever has existed, either in historic or prehistoric times. The race appears never to have lived in isolation. (f) It occurs in several (perhaps hybrid) variants--unless these variants are to be taken (with Deniker) as several distinct races, (g) Counting the dolicho-blond as the original type of the race, its nearest apparent relative among the races of mankind is the Mediterranean (of Sergi), at least in point of physical traits. At the same time the blond race, or at least the dolicho-blond type, has never since neolithic times, so far as known, extensively and permanently lived in contact with the Mediterranean. (h) The various (national) ramifications of the blond stock--or rather the various racial mixtures into which an appreciable blond element enters--are all, and to all appearance have always been, of Aryan ("Indo-European," "Indo-Germanic") speech--with the equivocal exception of the Kabyle. (i) Yet far the greater number and variety (national and linguistic) of men who use the Aryan speech are not prevailingly blond, or even appreciably mixed with blond. (j) The blond race, or the peoples with an appreciable blond admixture, and particularly the communities in which the dolicho-blond element prevails, show little or none of the peculiarly Aryan institutions--understanding by that phrase not the known institutions of the ancient Germanic peoples, but that range of institutions said by competent philologists to be reflected in the primitive Aryan speech. (k) These considerations raise the presumption that the blond race was not originally of Aryan speech or of Aryan culture, and they also suggest (l) that the Mediterranean, the nearest apparent relative of the dolicho-blond, was likewise not originally Aryan. * * * * * Accepting the mutation theory, then, for the purpose in hand, and leaving any questions of Aryanism on one side for the present, a canvass of the situation so outlined may be offered in such bold, crude and summary terms as should be admissible in an analysis which aims to be tentative and provisional only. It may be conceived that the dolichocephalic blond originated as a mutant of the Mediterranean type (which it greatly resembles in its scheme of biometric measurements[3]) probably some time after that race had effected a permanent lodgment on the continent of Europe. The Mediterranean stock may be held (Sergi and Keane) to have come into Europe from Africa,[4] whatever its remoter derivation may have been. It is, of course, not impossible that the mutation which gave rise to the dolicho-blond may have occurred before the parent stock left Africa, or rather before it was shut out of Africa by the submergence of the land connection across Sicily, but the probabilities seem to be against such a view. The conditions would appear to have been less favorable to a mutation of this kind in the African habitat of the parent stock than in Europe, and less favorable in Europe during earlier quaternary time than toward the close of the glacial period. The causes which give rise to a variation of type have always been sufficiently obscure, whether the origin of species be conceived after the Darwinian or the Mendelian fashion, and the mutation theories have hitherto afforded little light on that question. Yet the Mendelian postulate that the type is stable except for such a mutation as shall establish a new type raises at least the presumption that such a mutation will take place only under exceptional circumstances, that is to say, under circumstances so substantially different from what the type is best adapted to as to subject it to some degree of physiological strain. It is to be presumed that no mutation will supervene so long as the conditions of life do not vary materially from what they have been during the previous uneventful life-history of the type. Such is the presumption apparently involved in the theory and such is also the suggestion afforded by the few experimental cases of observed mutation, as, _e.g._, those studied by De Vries. A considerable climatic change, such as would seriously alter the conditions of life either directly or through its effect on the food supply, might be conceived to bring on a mutating state in the race; or the like effect might be induced by a profound cultural change, particularly any such change in the industrial arts as would radically affect the material conditions of life. These considerations, mainly speculative it is true, suggest that the dolicho-blond mutant could presumably have emerged only at a time when the parent stock was exposed to notably novel conditions of life, such as would be presumed (with De Vries) to tend to throw the stock into a specifically unstable (mutating) state; at the same time these novel conditions of life must also have been specifically of such a nature as to favor the survival and multiplication of this particular human type. The climatic tolerance of the dolicho-blond, _e.g._, is known to be exceptionally narrow. Now, it is not known, indeed there is no reason to presume, that the Mediterranean race was exposed to such variations of climate or of culture before it entered Europe as might be expected to induce a mutating state in the stock, and at the same time a mutant gifted with the peculiar climatic intolerance of the dolicho-blond would scarcely have survived under the conditions offered by northern Africa in late quaternary time. But the required conditions are had later on in Europe, after the Mediterranean was securely at home in that continent. The whole episode may be conceived to have run off somewhat in the following manner. The Mediterranean race is held to have entered Europe in force during quaternary time, presumably after the quaternary period was well advanced, most likely during the last genial, interglacial period. This race then brought the neolithic culture, but without the domestic animals (or plants?) that are a characteristic feature of the later neolithic age, and it encountered at least the remnants of an older, palaeolithic population. This older European population was made up of several racial stocks, some of which still persist as obscure and minor elements in the later peoples of Europe. The (geologic) date to be assigned this intrusion of the Mediterranean race into Europe is of course not, and can perhaps never be, determined with any degree of nicety or confidence. But there is a probability that it coincides with the recession of the ice-sheet, following one or another of the severer periods of glaciations, that occurred before the submergence of the land connection between Europe and Africa, over Gibraltar, Sicily, and perhaps Crete. How late in quaternary time the final submergence of the Mediterranean basin occurred is still a matter of surmise; the intrusion of the Mediterranean race into Europe appears, on archaeological evidence, to have occurred in late quaternary time, and in the end this archaeological evidence may help to decide the geologic date of the severance of Europe from Africa. The Mediterranean race seems to have spread easily over the habitable surface of Europe and shortly to have grown numerous and taken rank as the chief racial element in the neolithic population; which argues that no very considerable older population occupied the European continent at the time of the Mediterranean invasion; which in turn implies that the fairly large (Magdalenian) population of the close of the palaeolithic age was in great part destroyed or expelled by the climatic changes that coincided with or immediately preceded the advent of the Mediterranean race. The known characteristics of the Magdalenian culture indicate a technology, a situation and perhaps a race, somewhat closely paralleled by the Eskimo;[5] which argues that the climatic situation before which this Magdalenian race and culture gave way would have been that of a genial interglacial period rather than a period of glaciation. During this genial (perhaps sub-tropical) inter-glacial period immediately preceding the last great glaciation the Magdalenian stock would presumably find Europe climatically untenable, judging by analogy with the Eskimo; whereas the Mediterranean stock should have found it an eminently favorable habitat, for this race has always succeeded best in a warm-temperate climate. Both the extensive northward range of the early neolithic (Mediterranean) settlements and the total disappearance of the Magdalenian culture from the European continent point to a climatic situation in Europe more favorable to the former race and more unwholesome for the latter than the conditions known to have prevailed at any time since the last interglacial period, especially in the higher latitudes. The indications would seem to be that the whole of Europe, even the Baltic and Arctic seaboards, became climatically so fully impossible for the Magdalenian race during this interglacial period as to result in its extinction or definitive expulsion; for when, in recent times, climatically suitable conditions return, on the Arctic seaboard, the culture which takes the place that should have been occupied by the Magdalenian is the Finnic (Lapp)--a culture unrelated to the Magdalenian either in race or technology, although of much the same cultural level and dealing with a material environment of much the same character. And this genial interval that was fatal to the Magdalenian was, by just so much, favorable to the Mediterranean race. But glacial conditions presently returned, though with less severity than the next preceding glacial period; and roughly coincident with the close of the genial interval in Europe the land connection with Africa was cut off by submergence, shutting off retreat to the south. How far communication with Asia may have been interrupted during the subsequent cold period, by the local glaciation of the Caucasus, Elburz and Armenian highlands, is for the present apparently not to be determined, although it is to be presumed that the outlet to the east would at least be seriously obstructed during the glaciation. There would then be left available for occupation, mainly by the Mediterranean race, central and southern Europe together with the islands, notably Sicily and Crete, left over as remnants of the earlier continuous land between Europe and Africa. The southern extensions of the mainland, and more particularly the islands, would still afford a favorable place for the Mediterranean race and its cultural growth. So that the early phases of the great Cretan (Aegean) civilisation are presumably to be assigned to this period that is covered by the last advance of the ice in northern Europe. But the greater portion of the land area so left accessible to the Mediterranean race, in central or even in southern Europe, would have been under glacial or sub-glacial climatic conditions. For this race, essentially native to a warm climate, this situation on the European mainland would be sufficiently novel and trying, particularly throughout that ice-fringed range of country where they would be exposed to such cold and damp as this race has never easily tolerated. The situation so outlined would afford such a condition of physiological strain as might be conceived to throw the stock into a specifically unstable state and so bring on a phase of mutation. At the same time this situation, climatic and technological, would be notably favorable to the survival and propagation of a type gifted with all the peculiar capacities and limitations of the dolicho-blond; so that any mutant showing the traits characteristic of that type would then have had an eminently favorable chance of survival. Indeed, it is doubtful, in the present state of the available evidence, whether such a type of man could have survived in Europe from or over any period of quaternary time prior to the last period of glaciation. The last preceding interglacial period appears to have been of a sufficiently genial (perhaps sub-tropical) character throughout Europe to have definitively eliminated the Magdalenian race and culture, and a variation of climate in the genial sense sufficiently pronounced to make Europe absolutely untenable for the Magdalenian--presumed to be something of a counterpart to the Eskimo both in race and culture--should probably have reached the limit of tolerance for the dolicho-blond as well. The latter is doubtless not as intolerant of a genial--warm-temperate--climate as the former, but the dolicho-blond after all stands much nearer to the Eskimo in this matter of climatic tolerance than to either of the two chief European stocks with which it is associated. Apparently no racial stock with a climatic tolerance approximately like that of the Eskimo, the Magdalenian, or the current races of the Arctic seaboard, survived over the last inter-glacial period; and if the dolicho-blond is conceived to have lived through that period it would appear to have been by a precariously narrow margin. So that, on one ground and another, the mutation out of which the dolicho-blond has arisen is presumably to be assigned to the latest period of glaciation in Europe, and with some probability to the time when the latest glaciation was at its maximum, and to the region where glacial and seaboard influences combined to give that racial type a differential advantage over all others. This dolicho-blond mutation may, of course, have occurred only once, in a single individual, but it should seem more probable, in the light of De Vries' experiments, that the mutation will have been repeated in the same specific form in several individuals in the same general locality and in the same general period of time. Indeed, it would seem highly probable that several typically distinct mutations will have occurred, repeatedly, at roughly the same period and in the same region, giving rise to several new types, some of which, including the dolicho-blond, will have survived. Many, presumably the greater number, of these mutant types will have disappeared, selectively, being unfit to survive under those sub-glacial seaboard conditions that were eminently favorable to the dolicho-blond; while other mutants arising out of the same mutating period and adapted to climatic conditions of a more continental character, suitable to more of a continental habitat, less humid, at a higher altitude and with a wider seasonal variation of temperature, may have survived in the regions farther inland, particularly eastward of the selectively defined habitat of the dolicho-blond. These latter may have given rise to several blond races, such as are spoken for by Deniker[6] and certain British ethnologists. The same period of mutation may well have given rise also to one or more brunet types, some of which may have survived. But if any new brunet type has come up within a period so recent as this implies, the fact has not been noted or surmised hitherto--unless the brunet races spoken for by Deniker are to be accepted as typically distinct and referred to such an origin. The evidence for the brunet stocks has not been canvassed with a question of this kind in view. These stocks have not been subject of such eager controversy as the dolicho-blond, and the attention given them has been correspondingly less. The case of the blond is unique in respect of the attention spent on questions of its derivation and prehistory, and it is also singular in respect of the facility with which it can be isolated for the purposes of such an inquiry. This large and persistent attention, from all sorts of ethnologists, has brought the evidence bearing on the dolicho-blond into such shape as to permit more confident generalisations regarding that race than any other. In any case the number of mutant individuals, whether of one or of several specific types, will have been very few as compared with the numbers of the parent stock from which they diverged, even if they may have been somewhat numerous as counted absolutely, and the survivors whose offspring produced a permanent effect on the European peoples will have been fewer still. It results that these surviving mutants will not have been isolated from the parent stock, and so could not breed in isolation, but must forthwith be crossed on the parent stock and could therefore yield none but hybrid offspring. From the outset, therefore, the community or communities in which the blond mutants were propagated would be made up of a mixture of blond and brunet, with the brunet greatly preponderating. It may be added that in all probability there were also present in this community from the start one or more minor brunet elements besides the predominant Mediterranean, and that at least shortly after the close of the glacial period the new brachycephalic brunet (Alpine) race comes into the case; so that the chances favor an early and persistent crossing of the dolicho-blond with more than one brunet type, and hence they favor complications and confusion of types from the start. It follows that, in point of pedigree, according to this view there neither is nor ever has been a pure-bred dolicho-blond individual since the putative original mutant with which the type came in. But under the Mendelian rule of hybrids it is none the less to be expected that, in the course of time and of climatically selective breeding, individuals (perhaps in appreciable numbers) will have come up from time to time showing the type characters unmixed and unweakened, and effectively pure-bred in point of heredity. Indeed, such individuals, effectively pure-bred or tending to the establishment of a pure line, will probably have emerged somewhat frequently under conditions favorable to the pure type. The selective action of the conditions of life in the habitat most favorable to the propagation of the dolicho-blond has worked in a rough and uncertain way toward the establishment, in parts of the Baltic and North Sea region, of communities made up prevailingly of blonds. Yet none of these communities most favorably placed for a selective breeding in the direction of a pure dolicho-blond population have gone far enough in that direction to allow it safely to be said that the composite population of any such given locality is more than half blond. Placed as it is in a community of nations made up of a hybrid mixture of several racial stocks there is probably no way at present of reaching a convincing demonstration of the typical originality of this dolicho-blond mutant, as contrasted with the other blond types with which it is associated in the European population; but certain general considerations go decidedly, perhaps decisively, to enforce such a view: (a) This type shows such a pervasive resemblance to a single one of the known older and more widely distributed types of man (the Mediterranean) as to suggest descent by mutation from this one rather than derivation by crossing of any two or more known types. The like can not be said of the other blond types, all and several of which may plausibly be explained as hybrids of known types. They have the appearance of blends, or rather of biometrical compromises, between two or more existing varieties of man. Whereas it does not seem feasible to explain the dolicho-blond as such a blend or compromise between any known racial types. (b) The dolicho-blond occurs, in a way, centrally to the other blond types, giving them a suggestive look of being ramifications of the blond stock, by hybridisation, into regions not wholly suited to the typical blond. The like can scarcely be said for any of the other European types or races. The most plausible exception would be Deniker's East-European or Oriental race, Beddoe's Saxon, which stands in a somewhat analogous spacial relation to the other blond types. But this brachycephalic blond is not subject to the same sharp climatic limitations that hedge about the dolicho-blond; it occurs apparently with equally secure viability within the littoral home area of the dolicho-blond and in continental situations where conditions of altitude and genial climate would bar the latter from permanent settlement. The ancient and conventionally accepted center of diffusion of blondness in Europe lies within the seaboard region bordering on the south Baltic, the North Sea and the narrow waters of the Scandinavian peninsulas. Probably, if this broad central area of diffusion were to be narrowed down to a particular spot, the consensus of opinion as to where the narrower area of characteristic blondness is to be looked for, would converge on the lands immediately about the narrow Scandinavian waters. This would seem to hold true for historic and for prehistoric times alike. This region is at the same time, by common consent, the peculiar home of the dolicho-blond, rather than of any other blond type. (c) The well known but little discussed climatic limitation of the blond race applies particularly to the dolicho-blond, and only in a pronouncedly slighter degree to the other blond types. The dolicho-blond is subject to a strict regional limitation, the other blond types to a much less definite and wider limitation of the same kind. Hence these others are distributed somewhat widely, over regions often remote and climatically different from the home area of the dolicho-blond, giving them the appearance of being dispersed outward from this home area as hybrid extensions of the central and typical blond stock. A further and equally characteristic feature of this selective localisation of the dolicho-blond race is the fact that while this race does not succeed permanently outside the seaboard region of the south Baltic and North Sea, there is no similar selective bar against other races intruding into this region. Although the dolicho-blond perhaps succeeds better within its home area than any other competing stock or type, yet several other types of man succeed so well within the same region as to hold it, and apparently always to have held it, in joint tenancy with the dolicho-blond. A close relationship, amounting to varietal identity, of the Kabyle with the dolicho-blond has been spoken for by Keane and by other ethnologists. But the very different climatic tolerance of the two races should put such an identity out of the question. The Kabyle lives and thrives best, where his permanent home area has always been, in a high and dry country, sufficiently remote from the sea to make it a continental rather than a littoral habitat. The dolicho-blond, according to all available evidence, can live in the long run only in a seaboard habitat, damp and cool, at a high latitude and low altitude. There is no known instance of this race having gone out from its home area on the northern seaboard into such a region as that inhabited by the Kabyle and having survived for an appreciable number of generations. That this type of man should have come from Mauritania, where it could apparently not live under the conditions known to have prevailed there in the recent or the remoter past, would seem to be a biologic impossibility. Hitherto, when the dolicho-blond has migrated into such or a similar habitat it has not adapted itself to the new climatic requirements but has presently disappeared off the face of the land. Indeed, the experiment has been tried in Mauritanian territory. If the Kabyle blond is to be correlated with those of Europe, it will in all probability have to be assigned an independent origin, to be derived from an earlier mutation of the same Mediterranean stock to which the dolicho-blond is to be traced. Questions of race in Europe are greatly obscured by the prevalence of hybrid types having more or less fixity and being more or less distinctly localised. The existing European peoples are hybrid mixtures of two or more racial stocks. The further fact is sufficiently obvious, though it has received less critical attention than might be, that these several hybrid populations have in the course of time given rise to a number of distinct national and local types, differing characteristically from one another and having acquired a degree of permanence, such as to simulate racial characters and show well marked national and local traits in point of physiognomy and temperament. Presumably, these national and local types of physique and temperament are hybrid types that have been selectively bred into these characteristic forms in adaptation to the peculiar circumstances of environment and culture under which each particular local population is required to live, and that have been so fixed (provisionally) by selective breeding of the hybrid material subject to such locally uniform conditions--except so far as the local characters in question are of the nature of habits and are themselves therefore to be classed as an institutional element rather than as characteristics of race. It is evident that under the Mendelian law of hybridisation the range of favorable, or viable, variations in any hybrid population must be very large--much larger than the range of fluctuating (non-typical) variations obtainable under any circumstances in a pure-bred race. It also follows from these same laws of hybridisation that by virtue of the mutual exclusiveness of allelomorphic characters or groups of characters it is possible selectively to obtain an effectually "pure line" of hybrids combining characters drawn from each of the two or more parent stocks engaged, and that such a composite pure line may selectively be brought to a provisional fixity[7] in any such hybrid population. And under conditions favorable to a type endowed with any given hybrid combination of characters so worked out the given hybrid type (composite pure line) may function in the racial mixture in which it is so placed very much as an actual racial type would behave under analogous circumstances; so that, _e.g._, under continued intercrossing such a hybrid population would tend cumulatively to breed true to this provisionally stable hybrid type, rather than to the actual racial type represented by any one of the parent stocks of which the hybrid population is ultimately made up, unless the local conditions should selectively favor one or another of these ultimate racial types. Evidently, too, the number of such provisionally stable composite pure lines that may be drawn from any hybrid mixture of two or more parent stocks must be very considerable--indeed virtually unlimited; so that on this ground there should be room for any conceivable number of provisionally stable national or local types of physique and temperament, limited only by the number of characteristically distinguishable local environments or situations that might each selectively act to characterise and establish a locally characteristic composite pure line; each answering to the selective exigencies of the habitat and cultural environment in which it is placed, and each responding to these exigencies in much the same fashion as would an actual racial type--provided only that this provisionally stable composite pure line is not crossed on pure-bred individuals of either of the parent stocks from which it is drawn, pure-bred in respect of the allelomorphic characters which give the hybrid type its typical traits. When the hybrid type is so crossed back on one or other of its parent stocks it should be expected to break down; but in so slow-breeding a species as man, with so large a complement of unit characters (some 4000 it has been estimated), it will be difficult to decide empirically which of the two lines--the hybrid or the parent stock--proves itself in the offspring effectively to be a racial type; that is to say, which of the two (or more) proves to be an ultimately stable type arisen by a Mendelian mutation, and which is a provisionally stable composite pure line selectively derived from a cross. The inquiry at this point, therefore, will apparently have to content itself with arguments of probability drawn from the varying behavior of the existing hybrid types under diverse conditions of life. Such general consideration of the behavior of the blond types of Europe, other than the dolicho-blond, and more particularly consideration of their viability under divergent climatic conditions, should apparently incline to the view that they are hybrid types, of the nature of provisionally stable composite pure lines. So far, therefore, as the evidence has yet been canvassed, it seems probable on the whole that the dolicho-blond is the only survivor from among the several mutants that may have arisen out of this presumed mutating period; that the other existing blond types, as well as certain brunets, are derivatives of the hybrid offspring of the dolicho-blond crossed on the parent Mediterranean stock or on other brunet stocks with which the race has been in contact early or late; and that several of these hybrid lines have in the course of time selectively been established as provisionally stable types (composite pure lines), breakable only by a fresh cross with one or other of the parent types from which the hybrid line sprang, according to the Mendelian rule.[8] All these considerations may not be convincing, but they are at least suggestive to the effect that if originality is to be claimed for any one of the blond types or stocks it can best be claimed for the dolicho-blond, while the other blond types may better be accounted for as the outcome of the crossing of this stock on one or another of the brunet stocks of Europe. FOOTNOTES: [1] Reprinted by permission from _The Journal of Race Development_, Vol. III, No. 4. [2] _Cf._, however, W. Ridgeway, "The Application of Zoölogical Laws to Man," _Report, British Association for Advancement of Science_ (Dublin), 1908. [3] _Cf._ Sergi, _The Mediterranean Race_, ch. xi, xiii. [4] Sergi, _Arii e Italici_; Keane, _Man Past and Present_, ch. xii. [5] _Cf._ W. J. Sollas, "Palaeolithic Races and their Modern Representatives," _Science Progress_, vol. iv, 1909-1910. [6] _The Races of Mankind_; and "Les six races composant la population de l'Europe," _Journal Anth. Inst._, 1906. [7] Illustrated by the various pure breeds or "races" of domestic animals. [8] Mr. R. B. Bean's discussion of Deniker's "Six Races," _e.g._, goes far to show that such is probably the standing of the blond types, other than the dolicho-blond, among these six races of Europe; although such is not the conclusion to which Mr. Bean comes. _Philippine Journal of Science_, September, 1909. THE BLOND RACE AND THE ARYAN CULTURE[1] It has been argued in an earlier paper[2] that the blond type or types of man (presumably the dolichocephalic blond) arose by mutation from the Mediterranean stock during the last period of severe glaciation in Europe. This would place the emergence of this racial type roughly coincident with the beginning of the European neolithic; the evidence going presumptively to show that the neolithic technology came into Europe with the Mediterranean race, at or about the same time with that race, and that the mutation which gave rise to the dolicho-blond took place after the Mediterranean race was securely settled in Europe. Since this blond mutant made good its survival under the circumstances into which it so was thrown it should presumably be suited by native endowment to the industrial and climatic conditions that prevailed through the early phases of the neolithic age in Europe; that is to say, it would be a type of man selectively adapted to the technological situation characteristic of the early neolithic but lacking as yet the domestic animals (and crop-plants?) that presently give much of its character to that culture. Beginning, then, with the period of the last severe glaciation, and starting with this technological equipment, those portions of the European population that contained an appreciable and increasing admixture of the blond may be conceived to have ranged across the breadth of Europe, particularly in the lowlands, in the belt of damp and cool country that fringed the ice, and to have followed the receding ice-sheet northward when the general climate of Europe began to take on its present character with the returning warmth and dryness. By force of the strict climatic limitation to which this type is subject, the blond element, and more particularly the dolicho-blond, will presently have disappeared by selective elimination from the population of those regions from which the ice-sheet and its fringe of cool and humid climate had receded. The cool and humid belt suited to the propagation of the blond mutant (and its blond hybrids) would shift northward and shorten down to the seaboard as the glacial conditions in which it had originated presently ceased. So that presently, when Europe finally lost its ice-sheet, the blond race and its characteristic hybrids would be found confined nearly within the bounds which have marked its permanent extension in historic times. These limits have, no doubt, fluctuated somewhat in response to secular variations of climate; but on the whole they appear to have been singularly permanent and singularly rigid. Apparently after the dolicho-blond had come to occupy the restricted habitat which the stock has since continued to hold on the northern seaboard of Europe, toward the close of what is known in Danish chronology as the "older stone age," the early stock of domestic animals appear to have been introduced into Europe from Asia; the like statement will hold more doubtfully for the older staple crop plants, with the reservation that their introduction appears to antedate that of the domestic animals. At least some such date seems indicated by their first appearance in Denmark late in the period of the "kitchen middens." Virtually all of these essential elements of their material civilisation appear to have come to the blond-hybrid communities settled on the narrow Scandinavian waters, as to the rest of Europe, from Turkestan. This holds true at least for the domestic animals as a whole, the possible exceptions among the early introductions being not of great importance. Some of the early crop plants may well have come from what is now Mesopotamian or Persian territory, and may conceivably have reached western Europe appreciably earlier, without affecting the present argument. If the European horse had been domesticated in palæolithic times, as appears at least extremely probable, that technological gain appears to have been lost before the close of the palæolithic age; perhaps along with the extinction of the European horse. These new elements of technological equipment, the crop plants and animals, greatly affected the character of the neolithic culture in Europe; visibly so as regards the region presumably occupied by the dolicho-blond,--or the blond-hybrid peoples. On the material side of the community's life they would bring change direct and immediate, altering the whole scheme of ways and means and shifting the pursuit of a livelihood to new lines; and on the immaterial side their effect would be scarcely less important, in that the new ways and means and the new manner of life requisite and induced by their use would bring on certain new institutional features suitable to a system of mixed farming. Whatever may have been the manner of their introduction, whether they were transmitted peaceably by insensible diffusion from group to group or were carried in with a high hand by a new intrusive population that overran the country and imposed its own cultural scheme upon the Europeans along with the new ways and means of life,--in any case these new cultural elements will have spread over the face of Europe somewhat gradually and will have reached the blond-hybrid communities in their remote corner of the continent only after an appreciable lapse of time. Yet, it is to be noted, it is after all relatively early in neolithic times that certain of the domestic plants and animals first come into evidence in the Scandinavian region. The crop plants appear to have come in earlier than the domestic animals, being perhaps brought in by the peoples of the Mediterranean race at their first occupation of Europe in late quaternary time. With tillage necessarily goes a sedentary manner of life. So that at their first introduction the domestic animals were intruded into a system of husbandry carried on by a population living in settled communities, and drawing their livelihood in great part from the tilled ground but also in part from the sea and from the game-bearing forests that covered much of the country at that time. It was into such a situation that the domestic animals were intruded on their first coming into Europe,--particularly into the seaboard region of north Europe. On the open ranges of western and central Asia, from which these domestic animals came, and even in the hill country of that general region, the peoples that draw their livelihood from cattle and sheep are commonly of a nomadic habit of life, in the sense that the requirements of forage for their herds and flocks hold them to an unremitting round of seasonal migration. It results that, except in the broken hill country, these peoples habitually make use of movable habitations, live in camps rather than in settled, sedentary communities. Certain peculiar institutional arrangements also result from this nomadic manner of life associated with the care of flocks and herds on a large scale. But on their introduction into Europe the domestic animals appear on the whole not to have supplanted tillage and given rise to such a nomadic-pastoral scheme of life, exclusively given to cattle raising, but rather to have fallen into a system of mixed farming which combined tillage with a sedentary or quasi-sedentary grazing industry. Such particularly appears to have been the case in the seaboard region of the north, where there is no evidence of tillage having been displaced by a nomadic grazing industry. Indeed, the small-scale and broken topography of this European region has never admitted a large-scale cattle industry, such as has prevailed on the wide Asiatic ranges. An exception, at least partial and circumscribed, may perhaps be found in the large plains of the extreme Southeast and in the Danube valley; and it appears also that grazing, after the sedentary fashion, took precedence of tillage in prehistoric Ireland as well as here and there in the hilly countries of southern and central Europe. Such an introduction of tillage and grazing would mean a revolutionary change in the technology of the European stone age, and a technological revolution of this kind will unavoidably bring on something of a radical change in the scheme of institutions under which the community lives; primarily in the institutions governing the details of its economic life, but secondarily also in its domestic and civil relations. When such a change comes about through the intrusion of new material factors the presumption should be that the range of institutions already associated with these material factors in their earlier home will greatly influence the resulting new growth of institutions in the new situation, even if circumstances may not permit these alien institutions to be brought in and put into effect with the scope and force which they may have had in the culture out of which they have come. Some assimilation is to be looked for even if circumstances will not permit the adoption of the full scheme of institutions, and the institutions originally associated with the intrusive technology will be found surviving with least loss or qualification in those portions of the invaded territory where the invaders have settled in force, and particularly where conditions have permitted them to retain something of their earlier manner of life. The bringers of these new elements of culture, material and immaterial, had acquired what they brought with them on the open sheep and cattle ranges of the central-Asiatic plains and uplands,--as is held to be the unequivocal testimony of the Aryan speech, and as is borne out by the latest explorations in that region. These later explorations indicate west-central Turkestan as the probable center of the domestication and diffusion of the animals, if not also of the crop plants, that have stocked Europe. Of what race these bearers of the new technology and culture may have been, and just what they brought into Europe, is all a matter of inference and surmise. It was once usual to infer, as a ready matter of course, that these immigrant pastoral nomads from the Asiatic uplands were "Aryans," "Indo-Europeans," "Indo-Germans," of a predominantly blond physique. But what has been said above as well as in the earlier paper referred to comes near excluding the possibility of these invaders being blonds, or more specifically the dolicho-blond. It is, of course, conceivable, with Keane (if his speculations on this head are to be taken seriously), that a fragment of the alleged blond race from Mauretania may have wandered off into Turkestan by way of the Levant, and so may there have acquired the habits of a pastoral life, together with the Aryan speech and institutions, and may then presently have carried these cultural factors into Europe and imposed them on the European population, blond and brunet. But such speculations, which once were allowable though idle, have latterly been put out of all question, at least for the present, by the recent Pumpelly explorations in Turkestan. It is, for climatic reasons, extremely improbable that any blond stock should have inhabited any region of the central-Asiatic plains or uplands long enough to acquire the pastoral habits of life and the concomitant Aryan speech and institutions, and it is fairly certain that the dolicho-blond could not have survived for that length of time under the requisite conditions of climate and topography. It is similarly quite out of the question that the dolicho-blond, arising as a mutant type late in quaternary time, should have created the Aryan speech and culture in Europe, since neither the archæological evidence nor the known facts of climate and topography permit the hypothesis that a pastoral-nomadic culture of home growth has ever prevailed in Europe on a scale approaching that required for such a result. And there is but little more possibility that the bringers of the new (Aryan) culture should have been of the Mediterranean race; although the explorations referred to make it nearly certain that the communities which domesticated the pastoral animals (and perhaps the crop-plants) in Turkestan were of that race. The Mediterranean race originally is Hamitic, not Aryan, it is held by men competent to speak on that matter, and the known (presumably) Mediterranean prehistoric settlements in Turkestan, at Anau, are moreover obviously the settlements of a notably sedentary people following a characteristically peaceable mode of life. The population of these settlements might of course conceivably have presently acquired the nomadic and predatory habits reflected by the Aryan speech and institutions, but there is no evidence of such an episode at Anau, where the finds show an uninterrupted peaceable and sedentary occupation of the sites throughout the period that could come in question. The population of the settlements at Anau could scarcely have made such a cultural innovation, involving the adoption of an alien language, except under the pressure of conquest by an invading people; which would involve the subjection of the peaceable communities of Anau and the incorporation of their inhabitants as slaves or as a servile class in the predatory organisation of their masters. The Mediterranean people of Anau could accordingly have had a hand in carrying this pastoral-predatory (Aryan) culture into the West only as a subsidiary racial element in a migratory community made up primarily of another racial stock. This leaves the probability that an Asiatic stock, without previous settled sedentary habits of life, acquired the domesticated animals from the sedentary and peaceable communities of Anau, or from some similar village (pueblo) or villages of western Turkestan, and then through a (moderately) long experience of nomadic pastoral life acquired also the predatory habits and institutions that commonly go with a pastoral life on a large scale. These cultural traits they acquired in such a degree of elaboration and maturity as is implied by the primitive Aryan (or, better, proto-Aryan) speech, including a more or less well developed patriarchal system; so that they would presently become a militant and migratory community somewhat after the later-known Tatar fashion, and so made their way westward as a self-sufficient migratory host and carried the new material culture into Europe together with the alien Aryan speech. It is at the same time almost unavoidable that in such an event this migratory host would have carried with them into the West an appreciable servile contingent made up primarily of enslaved captives from the peaceable agricultural settlements of the Mediterranean race, which had originally supplied them with their stock of domestic animals. Along with these new technological elements and the changes of law and custom which their adoption would bring on, there will also have come in the new language that was designed to describe these new ways and means of life and was adapted to express the habits of thought which the new ways and means bred in the peoples that adopted them. The immigrant pastoral (proto-Aryan) language and the pastoral (patriarchal and predatory) law and custom will in some degree have been bound up with the technological ways and means out of which they arose, and they would be expected to have reached and affected the various communities of Europe in somewhat the same time and the same measure in which these material facts of the pastoral life made their way among these peoples. In the course of the diffusion of these cultural elements, material and immaterial, among the European communities the language and in a less degree the domestic and civil usages and ideals bred by the habits of the pastoral life might of course come to be dissociated from their material or technological basis and might so be adopted by remoter peoples who never acquired any large measure of the material culture of those pastoral nomads whose manner of life had once given rise to these immaterial features of Aryan civilisation. * * * * * Certain considerations going to support this far-flung line of conjectural history may be set out more in detail: (a) The Aryan civilisation is of the pastoral type, with such institutions, usages and preconceptions as a large-scale pastoral organisation commonly involves. Such is said by competent philologists to be the evidence of the primitive Aryan speech. It is substantially a servile organisation under patriarchal rule, or, if the expression be preferred, a militant or predatory organisation; these alternative phrases describe the same facts from different points of view. It is characterised by a well-defined system of property rights, a somewhat pronounced subjection of women and children, and a masterful religious system tending strongly to monotheism. A pastoral culture on the broad plains and uplands of a continental region, such as west-central Asia, will necessarily fall into some such shape, because of the necessity of an alert and mobile readiness for offense and defense and the consequent need of soldierly discipline. Insubordination, which is the substance of free institutions, is incompatible with a prosperous pastoral-nomadic mode of life. When worked out with any degree of maturity and consistency the pastoral-nomadic culture that has to do with sheep and cattle appears always to have been a predatory, and therefore a servile culture, particularly when drawn on the large scale imposed by the topography of the central-Asiatic plains, and reënforced with the use of the horse. (The reindeer nomads of the arctic seaboard may appear to be an exception, at least in a degree, but they are a special case, admitting a particular explanation, and their case does not affect the argument for the Aryan civilisation.) The characteristic and pervasive human relation in such a culture is that of master and servant, and the social (domestic and civil) structure is an organisation of graded servitude, in which no one is his own master but the overlord, even nominally. The family is patriarchal, women and children are in strict tutelage, and discretion vests in the male head alone. If the group grows large its civil institutions are of a like coercive character, it commonly shows a rigorous tribal organisation, and in the end, with the help of warlike experience, it almost unavoidably becomes a despotic monarchy. It has not been unusual to speak of the popular institutions of Germanic paganism--typified, _e.g._, by the Scandinavian usages of local self-government in pagan times--as being typically Aryan institutions, but that is a misnomer due to uncritical generalisation guided by a chauvinistic bias. These ancient north-European usages are plainly alien to the culture reflected by the primitive Aryan Speech, if we are to accept the consensus of the philological ethnologists to the effect that the people who used the primitive Aryan speech must have been a community of pastoral nomads inhabiting the plains and uplands of a continental region. That many of these philological ethnologists also hold to the view that these Aryans were north-European pagan blonds may raise a personal question of consistency but does not otherwise touch the present argument. (b) A racial stock that has ever been of first-rate consequence in the ethnology of Europe (the Alpine, brachycephalic brunet, the _homo alpinus_ of the Linnean scheme) comes into Europe at this general period, from Asia; and this race is held to have presently made itself at home, if not dominant, throughout middle Europe, where it has in historic times unquestionably been the dominant racial element. (c) The pastoral-nomadic institutions spoken of above appear to have best made their way in those regions of Europe where this brachycephalic brunet stock has been present in some force if not as a dominant racial factor. The evidence is perhaps not conclusive, but there is at least a strong line of suggestion afforded by the distribution of the patriarchal type of institutions within Europe, including the tribal and gentile organisation. There is a rough concomitance between the distribution of these cultural elements presumably derived from an Aryan source on the one hand, and the distribution past or present of the brachycephalic brunet type on the other hand. The regions where this line of institutions are known to have prevailed in early times are, in the main, regions in which the Alpine racial type is also known to have been present in force, as, _e.g._, in the classic Greek and Roman republics. At the same time a gentile organisation seems also to have been associated from the outset with the Mediterranean racial stock and may well have been comprised in the institutional furniture of that race as it stood before the advent of the Alpine stock; but the drift of later inquiry and speculation on this head appears to support the view that this Mediterranean gentile system was of a matrilinear character, such as is found in many extant agricultural communities of the lower barbarian culture, rather than of a patriarchal kind, such as characterises the pastoral nomads. The northern blond communities alone appear, on the available evidence, to have had no gentile or tribal institutions, whether matrilinear or patriarchal. The classic Greek and Roman communities appear originally to have been of the Mediterranean race and to have always retained a broad substratum of the Mediterranean stock as the largest racial element in their population, but the Alpine stock was also largely represented in these communities at the period when their tribal and gentile institutions are known to have counted for much, as, indeed, it has continued ever since. Apart from these communities of the Mediterranean seaboard, the peoples of the Keltic culture appear to have had the tribal and gentile system, together with the patriarchal family, in more fully developed form than it is to be found in Europe at large. The peoples of Keltic speech are currently believed by ethnologists to have originally been of a blond type, although opinions are not altogether at one on that head,--the tall, perhaps red-haired, brachycephalic blond, the "Saxon" of Beddoe, the "Oriental" of Deniker. But this blond type is perhaps best accounted for as a hybrid of the dolicho-blond crossed on the Alpine brachycephalic brunet. Some such view of its derivation is fortified by what is known of the prehistory and the peculiar features of the early Keltic culture. This culture differs in some respects radically from that of the dolicho-blond communities, and it bears more of a resemblance to the culture of such a brunet group of peoples as the early historic communities of upper and middle Italy. If the view is to be accepted which is coming into currency latterly, that the Keltic is to be affiliated with the culture of Hallstatt and La Tène, such affiliation will greatly increase the probability that it is to be counted as a culture strongly influenced if not dominated by the Alpine stock. The Hallstatt culture, lying in the valley of the Danube and its upper affluents, lay in the presumed westward path of immigration of the Alpine stock; its human remains are of a mixed character, showing a strong admixture of the brachycephalic brunet type; and it gives evidence of cultural gains due to outside influence in advance of the adjacent regions of Europe. This Keltic culture, then, as known to history and prehistory, runs broadly across middle Europe along the belt where blond and brunet elements meet and blend; and it has some of the features of that predatory-pastoral culture reflected by the primitive Aryan speech, in freer development, or in better preservation, than the adjacent cultural regions to the north; at the same time the peoples of this Keltic culture show more of affiliation to or admixture with the brachycephalic brunet than the other blond-hybrid peoples do. On the other hand the communities of dolicho-blond hybrids on the shores of the narrow Scandinavian waters, remote from the centers of the Alpine culture, show little of the institutions peculiar to a pastoral people. These dolicho-blond hybrids of the North come into history at a later date, but with a better preserved and more adequately recorded paganism than the other barbarians of Europe. The late-pagan Germanic-Scandinavian culture affords the best available instance of archaic dolicho-blond institutions, if not the sole instance; and it is to be noted that among these peoples the patriarchal system is weak and vague,--women are not in perpetual tutelage, the discretion of the male head of the household is not despotic nor even unquestioned, children are not held under paternal discretion beyond adult age, the patrimony is held to no clan liabilities and is readily divisible on inheritance, and so forth. Neither is there any serious evidence of a tribal or gentile system among these peoples, early or late, nor are any of them, excepting the late and special instance of the Icelandic colony, known ever to have been wholly or mainly of pastoral habits; indeed, they are known to have been without the pastoral animals until some time in the neolithic period. The only dissenting evidence on these heads is that of the Latin writers, substantially Cæsar and Tacitus, whose testimony is doubtless to be thrown out as incompetent in view of the fact that it is supported neither by circumstantial evidence nor by later and more authentic records. In speaking of "tribes" among the Germanic hordes these Latin writers are plainly construing Germanic facts in Roman terms, very much as the Spanish writers of a later day construed Mexican and Peruvian facts in mediæval-feudalistic terms,--to the lasting confusion of the historians; whereas in enlarging on the pastoral habits of the Germanic communities they go entirely on data taken from bodies of people on the move and organised for raiding, or recently and provisionally settled upon a subject population presumably of Keltic derivation or of other alien origin and inhabiting the broad lands of middle Europe remote from the permanent habitat of the dolicho-blond. Great freedom of assumption has been used and much ingenuity has been spent in imputing a tribal system to the early Germanic peoples, but apart from the sophisticated testimony of these classical writers there is no evidence for it. The nearest approach to a tribal or a gentile organisation within this culture is the "kin" which counts for something in early Germanic law and custom; but the kin is far from being a gens or clan, and it will be found to have more of the force of a clan organisation the farther it has strayed from the Scandinavian center of diffusion of the dolicho-blond and the more protracted the warlike discipline to which the wandering host has been exposed. All these properly Aryan institutions are weakest or most notably wanting where the blond is most indubitably in evidence. Taking early Europe as a whole, it will appear that among the European peoples at large institutions of the character reflected in the primitive Aryan speech and implied in the pastoral-nomadic life evidenced by the same speech are relatively weak, ill-defined or wanting, arguing that Europe was never fully Aryanised. And the peculiar geographical and ethnic distribution of this Aryanism of institutions argues further that the dolicho-blond culture of the Scandinavian region was less profoundly affected by the Aryan invasion than any other equally well known section of Europe. What is known of this primitive Aryan culture, material, domestic, civil and religious, through the Sanskrit and other early Asiatic sources, may convincingly be contrasted with what is found in early Europe. These Asiatic records, which are our sole dependence for a competent characterisation of the Aryan culture, shows it to have resembled the culture of the early Hebrews or that of the pastoral Turanians more closely than it resembles the early European culture at large, and greatly more than it resembles the known culture of the early communities of dolicho-blond hybrids. (d) Scarcely more conclusive, but equally suggestive, is the evidence from the religious institutions of the Aryanised Europeans. As would be expected in any predatory civilisation, such as the pastoral-nomadic cultures typically are, the Aryan religious system is said to have leaned strongly toward a despotic monarchical form, a hierarchically graded polytheism, culminating in a despotic monotheism. There is little of all this to be found in early pagan Europe. The nearest well-known approach to anything of the kind is the late-Greek scheme of Olympian divinities with Zeus as a doubtful suzerain,--known through latter-day investigations to have been superimposed on an earlier cult of a very different character. The Keltic (Druidical) system is little known, but it is perhaps not beyond legitimate conjecture, on the scant evidence available, that this system had rather more of the predatory, monarchical-despotic cast than the better known pagan cults of Europe. The Germanic paganism, as indicated by the late Scandinavian--which alone is known in any appreciable degree--was a lax polytheism which imputed little if any coercive power to the highest god, and which was not taken so very seriously anyway by the "worshipers,"--if Snorri's virtually exclusive account is to be accepted without sophistication. The evidence accorded by the religious cults of Europe yields little that is conclusive, beyond throwing the whole loose-jointed, proliferous European paganism out of touch with anything that can reasonably be called Aryan. And this in spite of the fact that all the available evidence is derived from the European cults as they stood after having been exposed to long centuries of Aryanisation. So that it may well be held that such systematisation of myths and observances as these European cults give evidence of, and going in the direction of a despotic monotheism, is to be traced to the influence of the intrusive culture of the Aryan or Aryanised invaders,--as is fairly plain in the instance of the Olympians. (e) That the languages of early Europe, so far as known, belong almost universally to the Aryan family may seem an insurmountable obstacle to the view here spoken for. But the difficulties of the case are not appreciably lessened by so varying the hypothesis as to impute the Aryan speech to the dolicho-blond, or to any blond stock, as its original bearer. Indeed, the difficulties are increased by such an hypothesis, since the Aryan-speaking peoples of early times, as of later times, have in the main been communities made up of brunets without evidence of a blond admixture, not to speak of an exclusively blond people. (There is no evidence of the existence of an all-blond people anywhere, early or late.) The early European situation, so far as known, offers no exceptional obstacles to the diffusion of an intrusive language. Certain mass movements of population, or rather mass movements of communities shifting their ground by secular progression, are known to have taken place, as, _e.g._, in the case of the Hallstatt-La Tène-Keltic culture moving westward on the whole as it gained ground and spread by shifting and ramification outward from its first-known seat in the upper Danube valley. All the while, as this secular movement of growth, ramification and advance was going on, the Hallstatt-La Tène-Keltic peoples continued to maintain extensive trade relations with the Mediterranean seaboard and the Ægean on the one side and reaching the North-Sea littoral on the other side. In all probability it is by trade relations of this kind--chiefly, no doubt, through trade carried on by itinerant merchants--that the new speech made its way among the barbarians of Europe; and it is no far-fetched inference that it made its way, in the North at least, as a trade jargon. All this accords with what is going on at present under analogous circumstances. The superior merit by force of which such a new speech would make its way need be nothing more substantial than a relatively crude syntax and phonetics--such as furthers the dissemination of English to-day in the form of Chinook jargon, Pidgin English, and Beach la Mar. Such traits, which might in some other light seem blemishes, facilitate the mutilation of such a language into a graceless but practicable trade jargon. With jargons as with coins the poorer (simpler) drives out the better (subtler and more complex). A second, and perhaps the chief, point of superiority by virtue of which a given language makes its way as the dominant factor in such a trade jargon, is the fact that it is the native language of the people who carry on the trade for whose behoof the jargon is contrived. The traders, coming in contact with many men, of varied speech, and carrying their varied stock of trade goods, will impose their own names for the articles bartered and so contribute that much to the jargon vocabulary,--and a jargon is at its inception little more than a vocabulary. The traders at the same time are likely to belong to the people possessed of the more efficient technology, since it is the superior technology that commonly affords them their opportunity for advantageous trade; hence the new or intrusive words, being the names of new or intrusive facts, will in so far find their way unhindered into current speech and further the displacement of the indigenous language by the jargon. Such a jargon at the outset is little else than a vocabulary comprising names for the most common objects and the most tangible relations. On this simple but practicable framework new varieties of speech will develop, diversified locally according to the kind and quantity of materials and linguistic tradition contributed by the various languages which it supplants or absorbs. In so putting forward the conjecture that the several forms of Aryan speech have arisen out of trade jargons that have run back to a common source in the language of an intrusive proto-Aryan people, and developing into widely diversified local and ethnic variants according as the mutilated proto-Aryan speech (vocabulary) fell into the hands of one or another of the indigenous barbarian peoples,--in this suggestion there is after all nothing substantially novel beyond giving a collective name to facts already well accepted by the philologists. Working backward analytically step by step from the mature results given in the known Aryan languages they have discovered and divulged--with what prolixity need not be alluded to here--that in their beginnings these several idioms were little else than crude vocabularies covering the commonest objects and most tangible relations, and that by time-long use and wont the uncouth strings of vocables whereby the beginners of these languages sought to express themselves have been worked down through a stupendously elaborate fabric of prefixes, infixes and suffixes, etc., etc., to the tactically and phonetically unexceptionable inflected languages of the Aryan family as they stood at their classical best. And what is true of the European languages should apparently hold with but slight modification for the Asiatic members of the family. These European idioms are commonly said to be, on the whole, less true to the pattern of the inferentially known primitive Aryan than are its best Asiatic representatives; as would be expected in case the latter were an outgrowth of jargons lying nearer the center of diffusion of the proto-Aryan speech and technology. As regards the special case of the early north-European communities of dolicho-blond hybrids, the trade between the Baltic and Danish waters on the one hand and the Danube valley, Adriatic and Ægean on the other hand is known to have been continued and voluminous during the neolithic and bronze ages,--as counted by the Scandinavian chronology. In the course of this traffic, extending over many centuries and complicated as it seems to have been with a large infiltration of the brachycephalic brunet type, much might come to pass in the way of linguistic substitution and growth. FOOTNOTES: [1] Reprinted by permission from _The University of Missouri Bulletin_, Science Series, vol. ii, No. 3. [2] "The Mutation Theory and the Blond Race," in _The Journal of Race Development_, April, 1913. AN EARLY EXPERIMENT IN TRUSTS[1] According to Much,[2] following in the main the views of Penka, Wilser, De Lapouge, Sophus Müller, Andreas Hansen, and other spokesmen of the later theories touching Aryan origins, the area of characterisation of the West-European culture, as well as of that dolicho-blond racial stock that bears this culture, is the region bordering on the North Sea and the Baltic, and its center of diffusion is to be sought on the southern shores of the Baltic. This region is in a manner, then, the primary focus of that culture of enterprise that has reshaped the scheme of life for mankind during the Christian era. Its spirit of enterprise and adventure has carried this race to a degree of material success that is without example in history, whether in point of the extent or of the scope of its achievements. Up to the present the culminating achievement of this enterprise is dominion in business, and its most finished instrument is the quasi-voluntary coalition of forces known as a Trust. In its method and outward form this enterprise of the Indo-germanic racial stock has varied with the passage of time and the change of circumstances; but in its spirit and objective end it has maintained a singularly consistent character through all the mutations of name and external circumstance that have passed over it in the course of history. In its earlier, more elemental expression this enterprise takes the form of raiding, by land and sea. A shrewd interpretation might, without particular violence to the facts, find a coalition of forces of the kind which is later known as a Trust in the Barbarian raids spoken of as the _Völkerwanderung_. Such an interpretation would seem remote, however, and not particularly apt. The beginnings of a _bona fide_ trust enterprise are of a more businesslike character and have left a record more amenable to the tests of accountancy. A trust, as that term is colloquially understood, is a business organisation. Now, the line of enterprise, of indigenous growth in the north-European cultural region, which first falls into settled shape as an orderly, organised business is the traffic of those seafaring men of the North known to fame as the Vikings. And it is in this traffic, so far as the records show, that a trust, with all essential features, is first organised. The term "viking" covers, somewhat euphemistically, two main facts: piracy and slave-trade. Without both of these lines of business the traffic could not be maintained in the long run; and both, but more particularly the latter, presume, as an indispensable condition to their successful prosecution, a regular market and an assured demand for the output. It is a traffic in which, in order to get the best results, a relatively large initial investment must be sunk, and the period of turnover--the "period of production"--is necessarily of some duration; the risk is also considerable. Further, certain technological prerequisites must be met, in the way particularly of shipbuilding, navigation, and the manufacture of weapons; an adequate accumulation of capital goods must be had, coupled with a sagacious spirit of adventure; there must also be an available supply of labor. There appears to have been a concurrence of all these circumstances, together with favorable market conditions, in the south-Baltic region from about the sixth century onward; the circumstances apparently growing gradually more favorable through the succeeding four centuries. The viking trade appears to have grown up gradually on the Baltic seaboard, as well as in the Sound country and throughout the fjord region of Norway, as a by-occupation of the farming population. Its beginnings are earlier than any records, so that the earliest traditions speak of it as an institution well understood and fully legitimate. The well-to-do freehold farmers, including some who laid claim to the rank of _jarl_, seem to have found it an agreeable and honorable diversion, as well as a lucrative employment for their surplus wealth and labor supply. From such sporadic and occasional beginnings it passed presently into an independently organised and self-sustaining line of business enterprise, and in the course of time it attained a settled business routine and a defined code of professional ethics. Syndication, of a loose form, had begun as early as the oldest accounts extant, but it is evident from the way in which the matter is spoken of that combination had not at that date--say, about the beginning of the ninth century--long been the common practice. It was not then a matter of course. The early combinations were relatively small and transient. They took the form of "gentlemen's agreements," pools, working arrangements, division of territory, etc., rather than hard and fast syndicates. In those early days a combine would be formed for a season between two or more capitalist-undertakers, for the most part employing their own capital only, without recourse to credit; although credit arrangements occur quite early, but are not very common in the earlier recorded phases of the trade. Such a loose combine, say about the middle of the ninth century, might comprise from two to a dozen boats. What may be called the normal unit in the trade at that time was a boat of perhaps thirty tons' burden, with an effective crew of some eighty men. Boats and crews gradually increase both in size and efficiency for a century and a half after that time. Syndication, of an increasingly close texture and increasingly permanent effect, appears to have rapidly grown in favor through the ninth and tenth centuries. The reasons for this movement of coalition are plain. The volume of the trade, as well as its territorial extension, increased uninterruptedly. The technique of the trade was gradually improved, and the equipment and management were improved and reduced to standard forms. The tonnage employed at any given time can, of course, not be ascertained with anything like a confident approximation; but its steady increase is unmistakable. Year by year the boats and crews increase in average size as well as in number, until by the middle of the tenth century the number of men and ships engaged, as well as the volume of capital invested in the trade, are probably larger than the corresponding figures for any other form of lucrative enterprise at that time. It is, at that time, altogether the best-organised line of enterprise in the West-European region in respect of its business management, and the most efficient and progressive in respect of its equipment and technology. At a conservative guess, the aggregate number of ships engaged about the middle of the tenth century must have appreciably exceeded six hundred, and may have reached one thousand; with crews which had also grown gradually larger until they may by this time have averaged 150 or 200 men. There was consequently what would in modern phrase be called an "overproduction" of piratical craft--overinvestment in the viking trade and consequent cut-throat competition. The various coalitions came into violent conflict, and many of them went under, with great resultant loss of capital, impoverishment of well-to-do families, hardship and demoralisation of the entire trade. Added to these untoward conditions within the trade was the open disfavor of the crown, in each of the three Scandinavian kingdoms. The traffic had long passed out of the stage at which it had offered a lucrative opening for farmers' sons who were tired of the farm and eager to find excitement, reputation, and creature comforts in that wider human contact and busier life for which the tedium of the farm had sharpened their appetites. The larger capitalists alone could succeed as organisers or directors of a viking concern under the changed conditions. The common run of well-to-do farmers had neither the tangible assets nor the "good-will" requisite to the successful promotion of a new company of freebooters. At the best, their sons could enter the business only as employees and with but a very uncertain outlook to speedy promotion to an executive position. On the other hand, as the trade became better organised in stronger hands, with a larger equipment, and as the competition within the trade grew more severe, the blackmail from which much of the profits of the trade was drawn grew more excessive and more uncertain, both as to its amount and as to the manner and incidents with which it was levied. As competition grew severe and the small vikings practically disappeared, and as the demoralisation that goes with cut-throat competition set in, the livelihood of the common people, at whose expense the vikings lived, grew progressively more precarious, and even their domestic peace and household industry grew insecure. Popular sentiment was running strongly against the whole traffic. So much so, indeed, as to threaten the tenure of courts and sovereigns if the popular hardship incident to the continuance of the trade were not abated. The politicians, therefore, made a strenuous show of effort to regulate, or even to repress, the viking organisations. Outright and indiscriminate repression was scarcely a feasible remedy, certainly not an agreeable one. The viking companies were a source of strength to the country, both in that they might be drawn on for support in case of war and in that they brought funds into the country. The remedy to which the politicians turned, by preference, therefore, was a regulation of the companies in such a manner as to let "the foreigners pay the tax," to adapt a modern phrase. If the freebooters of a given state could be induced, by stringent regulations, to prey upon the people of the neighboring states, and particularly if they worked at cross-purposes with similar companies of freebooters domiciled in such neighboring states, it was then plain to the sagacious politicians of those days that the companies might be more of a blessing than a curse. On trial it was found that this policy of control gave at the best but very dubious results, and consequently the repressive hand of the authorities perforce fell with increasingly rigorous pressure on the viking organisations, particularly on the smaller ones which were scarcely of national importance. The competition in the trade was too severe to admit of a consistent avoidance of excesses and irregularities on the part of the vikings, and these irregularities obliged the authorities to interfere. Under these circumstances it is plain that no viking combine could hope to prosper in the long run unless it were strong enough to take an international position and to maintain a practical monopoly of the trade. "International" in these premises means within the Scandinavian countries. In the days of its finest development the viking trade was domiciled in the Scandinavian countries, almost exclusively. This means the two Scandinavian peninsulas, with Iceland, the Faroes, Orkneys, Hebrides, and the Scandinavian portions of Scotland. To this, for completeness of statement, is to be added a stretch of Wendish seaboard on the south of the Baltic and a negligible patch of German territory. The trade, so far as regards its home offices, to use a modern phrase, gathered in the main about two chief centers: the Orkneys and the south end of the Baltic. Outlying regions, such as the Norwegian fjord country and the Hebrides, are by no means negligible, but the two regions named above are after all the chief seats of the traffic; and of these two centers the Baltic--chiefly Danish--region is in many respects the more notable. Its viking traffic is better, more regularly organised, is carried on with a more evident sense of a solidarity of interests and a more consistent view to a long-term prosperity. As one might say, looking at the matter from the modern standpoint, it has more of a look of stability and conservative management, such as belongs to an investment business, and has less of a speculative air, than the trade that centers in the western isles. Perhaps it is just on this account, because of its greater stability of interests and more conservative animus, that the traffic of this region responds with greater alacrity to the pressure of excessive competition and political interference, and so enters on a policy of larger and closer coalition. It may be added that many of the great captains of adventure in this region are men of good family and substantial standing in the community. As may often happen in a like conjuncture, when the irksomeness of this competitive situation in the Baltic was fast becoming intolerable, there arose a man of far-seeing sagacity and settled principles, of executive ability and businesslike integrity, who saw the needs of the hour and the available remedy, and who saw at the same glance his own opportunity of gain. This man was Pálnatoki, the descendant of an honorable line of country gentlemen in the island of Funen, whose family had from time immemorial borne an active and prudent part in the trade, and had been well seen at court and in society. He was a man of mature experience, with a large investment in the traffic, and with a body of "good-will" that gave him perhaps his most decisive advantage. During the reign of Harald Gormsson, about the middle of the tenth century, Pálnatoki seems to have cast about for a basis on which to promote an international coalition of vikings, such as would put an end to headlong competition in the trade and would at the same time be placed above the accidents of national politics. To this end it was necessary to find a neutral ground on which to establish the home office of the concern. Such a mediæval-Scandinavian New Jersey was the Wendish kingdom at the south of the Baltic. Jómsborg (on the island of Wollin, at the mouth of the Oder) seems to have been a resort of vikings before Pálnatoki organised his company there and strengthened the harbor, which may have been fortified by those who held it before him. Here the new company was incorporated under a special franchise from the Wendish crown, with the stipulation that it was to do business only outside the Wendish territories. The tangible assets of the corporation were the harbor and fortified town of Jómsborg, together with the ships and other equipment of such vikings as were admitted to fellowship; its intangible assets were its franchise and the good-will of the promoter and the underlying companies. Its by-laws were very strict, both as to the discipline of the personnel and as to the distribution of earnings. The promoter, who was the first president of the corporation, was given extreme powers for the enforcement of the by-laws, and throughout his long incumbency of office he exercised his powers with the greatest discretion and with a most salutary effect. This neutral, international corporation of piracy rapidly won a great prestige. In modern phrase, its intangible assets grew rapidly larger. Backed by the competitive pressure which the new corporation was able to bring upon the smaller companies and syndicates, this prestige of the Jómsvikings brought a steady run of applications for admission into the trust. The trust's policy was substantially the same as has since become familiar in other lines of enterprise, with the difference that in those early days the competitive struggle took a less sophisticated form. Outstanding syndicates and private firms were given the alternative of submission to the trust's terms or retirement from the traffic. There was great hardship among the outstanding concerns, especially among that large proportion of them that were unable to meet the scale of requirements imposed on applicants for admission into the trust. The qualifications both as to equipment and personnel were extremely strict, so that a large percentage of the applicants were excluded; and the unfortunates who failed of admission found themselves in a doubtful position that grew more precarious with every year that passed. Practically, such concerns were either frozen out of the business or forced into a liquidation which permanently wound up their affairs and terminated their corporate existence. The accounts extant are of course not reliable in minute details, being not strictly contemporary, nor are they cast in such modern terms as would give an easy comparison with present-day facts. The chief documents in the case are _Jómsvikingasaga_, _Saxo Grammaticus_, _Heimskringla_, and _Olafssaga Tryggvasonar_; but nearly the whole of the saga literature bears on the development of the viking trade, and characteristic references to the Jómsviking trust occur throughout. The evidence afforded by these accounts converges to the conclusion that toward the close of the tenth century the trust stood in a high state of prosperity and was in a position virtually to dictate the course of the traffic for all that portion of the viking trade that centered in the Baltic. Its prestige and influence were strong wherever the traffic extended, even in the region of the western isles and in the fjord country of Norway. It had even come to be a factor of first-rate consequence in international politics, and its power was feared and courted by those two sovereigns who established the Danish rule in England, as well as by their Swedish, Norwegian, and Russian contemporaries. It is probably not an overstatement to say that the Danish conquest of England would not have been practicable except for the alliance of the trust with Svend, which enabled him to turn his attention from the complications of Scandinavian politics to his English interests. The extent of the trust's material equipment at the height of its prosperity is a matter of surmise rather than of statistical information. Some notion of its strength may be gathered from the statement that the fortified harbor of Jómsborg included within its castellated sea-wall an inclosed basin capable of floating three hundred ships at anchor. In the great raid against the kingdom of Norway, whose failure inaugurated the disintegration of the trust, the number of ships sent out is variously given by different authorities. The _Jómsvikingasaga_ says that they numbered one long hundred. This fleet, however, was made up of craft selected from among the ships that were under the immediate command of four of the great captains of adventure. The fleet, as it lay in the Sound before the final selection, is said to have numbered 185, but the context shows that this fleet was but a fraction of the aggregate Jómsviking tonnage. Of this disastrous expedition but a fraction returned; yet various later expeditions of the Jómsvikings are mentioned in which some scores of their ships took part. The trust having become an international power, it undertook to shape the destiny of nations and dynasties, and it broke under the strain. It, or its directors, took a contract to bring Norway into subjection to the Danish crown. Partly through untoward accidents, partly through miscalculation and hurried preparations, it failed in this undertaking, which brought the affairs of the trust to a spectacular crisis. From this disaster it never recovered. With the opening of the eleventh century the viking trust fell into abeyance, and in a few years it disappeared from the field. There are several good reasons for its failure. On the death of its founder the management had passed into the hands of Sigvaldi, a man of less sagacity and less integrity as well as of more unprincipled personal ambition, and somewhat given to flighty ventures in the field of politics. It was Sigvaldi's overweening personal ambition that committed the corporation to the ill-advised expedition against Norway. The trust, moreover, being supreme within its field, the discipline grew lax and its exactions grew arbitrary, sometimes going to unprovoked excesses. As one might say, too little thought was given to "economies of production," and the charges were pushed beyond "what the traffic would bear." But for all that, in spite of its meddling in politics, and in spite of jobbery and corruption in its management, the trust still had a fair outlook for continued success, except that the bottom dropped out of the trade. For better or worse, the slave-trade in the north of Europe collapsed on the introduction of Christianity, at least so far as regards the trade in Christians; and without a slave market the viking enterprise had no chance of reasonable earnings. At the same time, the risk and hardships of the traffic--the "cost of production"--grew heavier as the countries to the south became better able to defend their shores. The passenger traffic failed almost entirely, and the goods traffic was in a disorganised and unprofitable state. The costs were fast becoming prohibitive, even to men so enterprising and necessitous as the Norwegian freebooters. The situation changed in such a way as to leave the trust out. Some show of corporate existence was still maintained for a short period after the trust's great crisis, but there was an end of discipline and authoritative control. The minor concerns and private establishments that had once formed part of the trust continued in the trade on an independent footing, but with decreasing regularity and with diminishing strength. As the equipment wore out it was not replaced, and the trade lapsed. The great captains of the industry, like Sigvaldi, Thorkel Haraldson, Sigurd Kápa, and Vagn Akason, turned their holdings to the service of the dynastic politics which were then engaging the attention of the northern countries. Much of this body of enterprise and wealth was exhausted in working out the imperialistic schemes of expansion of Svend and Knut the Great; and what was left over shared the fortunes of the other available forces of the Scandinavian countries, being dissipated in political dissensions, extortionate government organisations, and the establishment of a church and a nobility. FOOTNOTES: [1] Reprinted by permission from _The Journal of Political Economy_, Vol. XII, March, 1904. [2] MATTHAEUS MUCH, _Die Heimat der Indogermanen_. THE END 
833	----	THE THEORY OF THE LEISURE CLASS by Thorstein Veblen Chapter One ~~ Introductory The institution of a leisure class is found in its best development at the higher stages of the barbarian culture; as, for instance, in feudal Europe or feudal Japan. In such communities the distinction between classes is very rigorously observed; and the feature of most striking economic significance in these class differences is the distinction maintained between the employments proper to the several classes. The upper classes are by custom exempt or excluded from industrial occupations, and are reserved for certain employments to which a degree of honour attaches. Chief among the honourable employments in any feudal community is warfare; and priestly service is commonly second to warfare. If the barbarian community is not notably warlike, the priestly office may take the precedence, with that of the warrior second. But the rule holds with but slight exceptions that, whether warriors or priests, the upper classes are exempt from industrial employments, and this exemption is the economic expression of their superior rank. Brahmin India affords a fair illustration of the industrial exemption of both these classes. In the communities belonging to the higher barbarian culture there is a considerable differentiation of sub-classes within what may be comprehensively called the leisure class; and there is a corresponding differentiation of employments between these sub-classes. The leisure class as a whole comprises the noble and the priestly classes, together with much of their retinue. The occupations of the class are correspondingly diversified; but they have the common economic characteristic of being non-industrial. These non-industrial upper-class occupations may be roughly comprised under government, warfare, religious observances, and sports. At an earlier, but not the earliest, stage of barbarism, the leisure class is found in a less differentiated form. Neither the class distinctions nor the distinctions between leisure-class occupations are so minute and intricate. The Polynesian islanders generally show this stage of the development in good form, with the exception that, owing to the absence of large game, hunting does not hold the usual place of honour in their scheme of life. The Icelandic community in the time of the Sagas also affords a fair instance. In such a community there is a rigorous distinction between classes and between the occupations peculiar to each class. Manual labour, industry, whatever has to do directly with the everyday work of getting a livelihood, is the exclusive occupation of the inferior class. This inferior class includes slaves and other dependents, and ordinarily also all the women. If there are several grades of aristocracy, the women of high rank are commonly exempt from industrial employment, or at least from the more vulgar kinds of manual labour. The men of the upper classes are not only exempt, but by prescriptive custom they are debarred, from all industrial occupations. The range of employments open to them is rigidly defined. As on the higher plane already spoken of, these employments are government, warfare, religious observances, and sports. These four lines of activity govern the scheme of life of the upper classes, and for the highest rank--the kings or chieftains--these are the only kinds of activity that custom or the common sense of the community will allow. Indeed, where the scheme is well developed even sports are accounted doubtfully legitimate for the members of the highest rank. To the lower grades of the leisure class certain other employments are open, but they are employments that are subsidiary to one or another of these typical leisure-class occupations. Such are, for instance, the manufacture and care of arms and accoutrements and of war canoes, the dressing and handling of horses, dogs, and hawks, the preparation of sacred apparatus, etc. The lower classes are excluded from these secondary honourable employments, except from such as are plainly of an industrial character and are only remotely related to the typical leisure-class occupations. If we go a step back of this exemplary barbarian culture, into the lower stages of barbarism, we no longer find the leisure class in fully developed form. But this lower barbarism shows the usages, motives, and circumstances out of which the institution of a leisure class has arisen, and indicates the steps of its early growth. Nomadic hunting tribes in various parts of the world illustrate these more primitive phases of the differentiation. Any one of the North American hunting tribes may be taken as a convenient illustration. These tribes can scarcely be said to have a defined leisure class. There is a differentiation of function, and there is a distinction between classes on the basis of this difference of function, but the exemption of the superior class from work has not gone far enough to make the designation "leisure class" altogether applicable. The tribes belonging on this economic level have carried the economic differentiation to the point at which a marked distinction is made between the occupations of men and women, and this distinction is of an invidious character. In nearly all these tribes the women are, by prescriptive custom, held to those employments out of which the industrial occupations proper develop at the next advance. The men are exempt from these vulgar employments and are reserved for war, hunting, sports, and devout observances. A very nice discrimination is ordinarily shown in this matter. This division of labour coincides with the distinction between the working and the leisure class as it appears in the higher barbarian culture. As the diversification and specialisation of employments proceed, the line of demarcation so drawn comes to divide the industrial from the non-industrial employments. The man's occupation as it stands at the earlier barbarian stage is not the original out of which any appreciable portion of later industry has developed. In the later development it survives only in employments that are not classed as industrial,--war, politics, sports, learning, and the priestly office. The only notable exceptions are a portion of the fishery industry and certain slight employments that are doubtfully to be classed as industry; such as the manufacture of arms, toys, and sporting goods. Virtually the whole range of industrial employments is an outgrowth of what is classed as woman's work in the primitive barbarian community. The work of the men in the lower barbarian culture is no less indispensable to the life of the group than the work done by the women. It may even be that the men's work contributes as much to the food supply and the other necessary consumption of the group. Indeed, so obvious is this "productive" character of the men's work that in the conventional economic writings the hunter's work is taken as the type of primitive industry. But such is not the barbarian's sense of the matter. In his own eyes he is not a labourer, and he is not to be classed with the women in this respect; nor is his effort to be classed with the women's drudgery, as labour or industry, in such a sense as to admit of its being confounded with the latter. There is in all barbarian communities a profound sense of the disparity between man's and woman's work. His work may conduce to the maintenance of the group, but it is felt that it does so through an excellence and an efficacy of a kind that cannot without derogation be compared with the uneventful diligence of the women. At a farther step backward in the cultural scale--among savage groups--the differentiation of employments is still less elaborate and the invidious distinction between classes and employments is less consistent and less rigorous. Unequivocal instances of a primitive savage culture are hard to find. Few of these groups or communities that are classed as "savage" show no traces of regression from a more advanced cultural stage. But there are groups--some of them apparently not the result of retrogression--which show the traits of primitive savagery with some fidelity. Their culture differs from that of the barbarian communities in the absence of a leisure class and the absence, in great measure, of the animus or spiritual attitude on which the institution of a leisure class rests. These communities of primitive savages in which there is no hierarchy of economic classes make up but a small and inconspicuous fraction of the human race. As good an instance of this phase of culture as may be had is afforded by the tribes of the Andamans, or by the Todas of the Nilgiri Hills. The scheme of life of these groups at the time of their earliest contact with Europeans seems to have been nearly typical, so far as regards the absence of a leisure class. As a further instance might be cited the Ainu of Yezo, and, more doubtfully, also some Bushman and Eskimo groups. Some Pueblo communities are less confidently to be included in the same class. Most, if not all, of the communities here cited may well be cases of degeneration from a higher barbarism, rather than bearers of a culture that has never risen above its present level. If so, they are for the present purpose to be taken with the allowance, but they may serve none the less as evidence to the same effect as if they were really "primitive" populations. These communities that are without a defined leisure class resemble one another also in certain other features of their social structure and manner of life. They are small groups and of a simple (archaic) structure; they are commonly peaceable and sedentary; they are poor; and individual ownership is not a dominant feature of their economic system. At the same time it does not follow that these are the smallest of existing communities, or that their social structure is in all respects the least differentiated; nor does the class necessarily include all primitive communities which have no defined system of individual ownership. But it is to be noted that the class seems to include the most peaceable--perhaps all the characteristically peaceable--primitive groups of men. Indeed, the most notable trait common to members of such communities is a certain amiable inefficiency when confronted with force or fraud. The evidence afforded by the usages and cultural traits of communities at a low stage of development indicates that the institution of a leisure class has emerged gradually during the transition from primitive savagery to barbarism; or more precisely, during the transition from a peaceable to a consistently warlike habit of life. The conditions apparently necessary to its emergence in a consistent form are: (1) the community must be of a predatory habit of life (war or the hunting of large game or both); that is to say, the men, who constitute the inchoate leisure class in these cases, must be habituated to the infliction of injury by force and stratagem; (2) subsistence must be obtainable on sufficiently easy terms to admit of the exemption of a considerable portion of the community from steady application to a routine of labour. The institution of leisure class is the outgrowth of an early discrimination between employments, according to which some employments are worthy and others unworthy. Under this ancient distinction the worthy employments are those which may be classed as exploit; unworthy are those necessary everyday employments into which no appreciable element of exploit enters. This distinction has but little obvious significance in a modern industrial community, and it has, therefore, received but slight attention at the hands of economic writers. When viewed in the light of that modern common sense which has guided economic discussion, it seems formal and insubstantial. But it persists with great tenacity as a commonplace preconception even in modern life, as is shown, for instance, by our habitual aversion to menial employments. It is a distinction of a personal kind--of superiority and inferiority. In the earlier stages of culture, when the personal force of the individual counted more immediately and obviously in shaping the course of events, the element of exploit counted for more in the everyday scheme of life. Interest centred about this fact to a greater degree. Consequently a distinction proceeding on this ground seemed more imperative and more definitive then than is the case to-day. As a fact in the sequence of development, therefore, the distinction is a substantial one and rests on sufficiently valid and cogent grounds. The ground on which a discrimination between facts is habitually made changes as the interest from which the facts are habitually viewed changes. Those features of the facts at hand are salient and substantial upon which the dominant interest of the time throws its light. Any given ground of distinction will seem insubstantial to any one who habitually apprehends the facts in question from a different point of view and values them for a different purpose. The habit of distinguishing and classifying the various purposes and directions of activity prevails of necessity always and everywhere; for it is indispensable in reaching a working theory or scheme of life. The particular point of view, or the particular characteristic that is pitched upon as definitive in the classification of the facts of life depends upon the interest from which a discrimination of the facts is sought. The grounds of discrimination, and the norm of procedure in classifying the facts, therefore, progressively change as the growth of culture proceeds; for the end for which the facts of life are apprehended changes, and the point of view consequently changes also. So that what are recognised as the salient and decisive features of a class of activities or of a social class at one stage of culture will not retain the same relative importance for the purposes of classification at any subsequent stage. But the change of standards and points of view is gradual only, and it seldom results in the subversion or entire suppression of a standpoint once accepted. A distinction is still habitually made between industrial and non-industrial occupations; and this modern distinction is a transmuted form of the barbarian distinction between exploit and drudgery. Such employments as warfare, politics, public worship, and public merrymaking, are felt, in the popular apprehension, to differ intrinsically from the labour that has to do with elaborating the material means of life. The precise line of demarcation is not the same as it was in the early barbarian scheme, but the broad distinction has not fallen into disuse. The tacit, common-sense distinction to-day is, in effect, that any effort is to be accounted industrial only so far as its ultimate purpose is the utilisation of non-human things. The coercive utilisation of man by man is not felt to be an industrial function; but all effort directed to enhance human life by taking advantage of the non-human environment is classed together as industrial activity. By the economists who have best retained and adapted the classical tradition, man's "power over nature" is currently postulated as the characteristic fact of industrial productivity. This industrial power over nature is taken to include man's power over the life of the beasts and over all the elemental forces. A line is in this way drawn between mankind and brute creation. In other times and among men imbued with a different body of preconceptions this line is not drawn precisely as we draw it to-day. In the savage or the barbarian scheme of life it is drawn in a different place and in another way. In all communities under the barbarian culture there is an alert and pervading sense of antithesis between two comprehensive groups of phenomena, in one of which barbarian man includes himself, and in the other, his victual. There is a felt antithesis between economic and non-economic phenomena, but it is not conceived in the modern fashion; it lies not between man and brute creation, but between animate and inert things. It may be an excess of caution at this day to explain that the barbarian notion which it is here intended to convey by the term "animate" is not the same as would be conveyed by the word "living". The term does not cover all living things, and it does cover a great many others. Such a striking natural phenomenon as a storm, a disease, a waterfall, are recognised as "animate"; while fruits and herbs, and even inconspicuous animals, such as house-flies, maggots, lemmings, sheep, are not ordinarily apprehended as "animate" except when taken collectively. As here used the term does not necessarily imply an indwelling soul or spirit. The concept includes such things as in the apprehension of the animistic savage or barbarian are formidable by virtue of a real or imputed habit of initiating action. This category comprises a large number and range of natural objects and phenomena. Such a distinction between the inert and the active is still present in the habits of thought of unreflecting persons, and it still profoundly affects the prevalent theory of human life and of natural processes; but it does not pervade our daily life to the extent or with the far-reaching practical consequences that are apparent at earlier stages of culture and belief. To the mind of the barbarian, the elaboration and utilisation of what is afforded by inert nature is activity on quite a different plane from his dealings with "animate" things and forces. The line of demarcation may be vague and shifting, but the broad distinction is sufficiently real and cogent to influence the barbarian scheme of life. To the class of things apprehended as animate, the barbarian fancy imputes an unfolding of activity directed to some end. It is this teleological unfolding of activity that constitutes any object or phenomenon an "animate" fact. Wherever the unsophisticated savage or barbarian meets with activity that is at all obtrusive, he construes it in the only terms that are ready to hand--the terms immediately given in his consciousness of his own actions. Activity is, therefore, assimilated to human action, and active objects are in so far assimilated to the human agent. Phenomena of this character--especially those whose behaviour is notably formidable or baffling--have to be met in a different spirit and with proficiency of a different kind from what is required in dealing with inert things. To deal successfully with such phenomena is a work of exploit rather than of industry. It is an assertion of prowess, not of diligence. Under the guidance of this naive discrimination between the inert and the animate, the activities of the primitive social group tend to fall into two classes, which would in modern phrase be called exploit and industry. Industry is effort that goes to create a new thing, with a new purpose given it by the fashioning hand of its maker out of passive ("brute") material; while exploit, so far as it results in an outcome useful to the agent, is the conversion to his own ends of energies previously directed to some other end by an other agent. We still speak of "brute matter" with something of the barbarian's realisation of a profound significance in the term. The distinction between exploit and drudgery coincides with a difference between the sexes. The sexes differ, not only in stature and muscular force, but perhaps even more decisively in temperament, and this must early have given rise to a corresponding division of labour. The general range of activities that come under the head of exploit falls to the males as being the stouter, more massive, better capable of a sudden and violent strain, and more readily inclined to self assertion, active emulation, and aggression. The difference in mass, in physiological character, and in temperament may be slight among the members of the primitive group; it appears, in fact, to be relatively slight and inconsequential in some of the more archaic communities with which we are acquainted--as for instance the tribes of the Andamans. But so soon as a differentiation of function has well begun on the lines marked out by this difference in physique and animus, the original difference between the sexes will itself widen. A cumulative process of selective adaptation to the new distribution of employments will set in, especially if the habitat or the fauna with which the group is in contact is such as to call for a considerable exercise of the sturdier virtues. The habitual pursuit of large game requires more of the manly qualities of massiveness, agility, and ferocity, and it can therefore scarcely fail to hasten and widen the differentiation of functions between the sexes. And so soon as the group comes into hostile contact with other groups, the divergence of function will take on the developed form of a distinction between exploit and industry. In such a predatory group of hunters it comes to be the able-bodied men's office to fight and hunt. The women do what other work there is to do--other members who are unfit for man's work being for this purpose classed with women. But the men's hunting and fighting are both of the same general character. Both are of a predatory nature; the warrior and the hunter alike reap where they have not strewn. Their aggressive assertion of force and sagacity differs obviously from the women's assiduous and uneventful shaping of materials; it is not to be accounted productive labour but rather an acquisition of substance by seizure. Such being the barbarian man's work, in its best development and widest divergence from women's work, any effort that does not involve an assertion of prowess comes to be unworthy of the man. As the tradition gains consistency, the common sense of the community erects it into a canon of conduct; so that no employment and no acquisition is morally possible to the self respecting man at this cultural stage, except such as proceeds on the basis of prowess--force or fraud. When the predatory habit of life has been settled upon the group by long habituation, it becomes the able-bodied man's accredited office in the social economy to kill, to destroy such competitors in the struggle for existence as attempt to resist or elude him, to overcome and reduce to subservience those alien forces that assert themselves refractorily in the environment. So tenaciously and with such nicety is this theoretical distinction between exploit and drudgery adhered to that in many hunting tribes the man must not bring home the game which he has killed, but must send his woman to perform that baser office. As has already been indicated, the distinction between exploit and drudgery is an invidious distinction between employments. Those employments which are to be classed as exploit are worthy, honourable, noble; other employments, which do not contain this element of exploit, and especially those which imply subservience or submission, are unworthy, debasing, ignoble. The concept of dignity, worth, or honour, as applied either to persons or conduct, is of first-rate consequence in the development of classes and of class distinctions, and it is therefore necessary to say something of its derivation and meaning. Its psychological ground may be indicated in outline as follows. As a matter of selective necessity, man is an agent. He is, in his own apprehension, a centre of unfolding impulsive activity--"teleological" activity. He is an agent seeking in every act the accomplishment of some concrete, objective, impersonal end. By force of his being such an agent he is possessed of a taste for effective work, and a distaste for futile effort. He has a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity. This aptitude or propensity may be called the instinct of workmanship. Wherever the circumstances or traditions of life lead to an habitual comparison of one person with another in point of efficiency, the instinct of workmanship works out in an emulative or invidious comparison of persons. The extent to which this result follows depends in some considerable degree on the temperament of the population. In any community where such an invidious comparison of persons is habitually made, visible success becomes an end sought for its own utility as a basis of esteem. Esteem is gained and dispraise is avoided by putting one's efficiency in evidence. The result is that the instinct of workmanship works out in an emulative demonstration of force. During that primitive phase of social development, when the community is still habitually peaceable, perhaps sedentary, and without a developed system of individual ownership, the efficiency of the individual can be shown chiefly and most consistently in some employment that goes to further the life of the group. What emulation of an economic kind there is between the members of such a group will be chiefly emulation in industrial serviceability. At the same time the incentive to emulation is not strong, nor is the scope for emulation large. When the community passes from peaceable savagery to a predatory phase of life, the conditions of emulation change. The opportunity and the incentive to emulate increase greatly in scope and urgency. The activity of the men more and more takes on the character of exploit; and an invidious comparison of one hunter or warrior with another grows continually easier and more habitual. Tangible evidences of prowess--trophies--find a place in men's habits of thought as an essential feature of the paraphernalia of life. Booty, trophies of the chase or of the raid, come to be prized as evidence of pre-eminent force. Aggression becomes the accredited form of action, and booty serves as prima facie evidence of successful aggression. As accepted at this cultural stage, the accredited, worthy form of self-assertion is contest; and useful articles or services obtained by seizure or compulsion, serve as a conventional evidence of successful contest. Therefore, by contrast, the obtaining of goods by other methods than seizure comes to be accounted unworthy of man in his best estate. The performance of productive work, or employment in personal service, falls under the same odium for the same reason. An invidious distinction in this way arises between exploit and acquisition on the other hand. Labour acquires a character of irksomeness by virtue of the indignity imputed to it. With the primitive barbarian, before the simple content of the notion has been obscured by its own ramifications and by a secondary growth of cognate ideas, "honourable" seems to connote nothing else than assertion of superior force. "Honourable" is "formidable"; "worthy" is "prepotent". A honorific act is in the last analysis little if anything else than a recognised successful act of aggression; and where aggression means conflict with men and beasts, the activity which comes to be especially and primarily honourable is the assertion of the strong hand. The naive, archaic habit of construing all manifestations of force in terms of personality or "will power" greatly fortifies this conventional exaltation of the strong hand. Honorific epithets, in vogue among barbarian tribes as well as among peoples of a more advance culture, commonly bear the stamp of this unsophisticated sense of honour. Epithets and titles used in addressing chieftains, and in the propitiation of kings and gods, very commonly impute a propensity for overbearing violence and an irresistible devastating force to the person who is to be propitiated. This holds true to an extent also in the more civilised communities of the present day. The predilection shown in heraldic devices for the more rapacious beasts and birds of prey goes to enforce the same view. Under this common-sense barbarian appreciation of worth or honour, the taking of life--the killing of formidable competitors, whether brute or human--is honourable in the highest degree. And this high office of slaughter, as an expression of the slayer's prepotence, casts a glamour of worth over every act of slaughter and over all the tools and accessories of the act. Arms are honourable, and the use of them, even in seeking the life of the meanest creatures of the fields, becomes a honorific employment. At the same time, employment in industry becomes correspondingly odious, and, in the common-sense apprehension, the handling of the tools and implements of industry falls beneath the dignity of able-bodied men. Labour becomes irksome. It is here assumed that in the sequence of cultural evolution primitive groups of men have passed from an initial peaceable stage to a subsequent stage at which fighting is the avowed and characteristic employment of the group. But it is not implied that there has been an abrupt transition from unbroken peace and good-will to a later or higher phase of life in which the fact of combat occurs for the first time. Neither is it implied that all peaceful industry disappears on the transition to the predatory phase of culture. Some fighting, it is safe to say, would be met with at any early stage of social development. Fights would occur with more or less frequency through sexual competition. The known habits of primitive groups, as well as the habits of the anthropoid apes, argue to that effect, and the evidence from the well-known promptings of human nature enforces the same view. It may therefore be objected that there can have been no such initial stage of peaceable life as is here assumed. There is no point in cultural evolution prior to which fighting does not occur. But the point in question is not as to the occurrence of combat, occasional or sporadic, or even more or less frequent and habitual; it is a question as to the occurrence of an habitual; it is a question as to the occurrence of an habitual bellicose frame of mind--a prevalent habit of judging facts and events from the point of view of the fight. The predatory phase of culture is attained only when the predatory attitude has become the habitual and accredited spiritual attitude for the members of the group; when the fight has become the dominant note in the current theory of life; when the common-sense appreciation of men and things has come to be an appreciation with a view to combat. The substantial difference between the peaceable and the predatory phase of culture, therefore, is a spiritual difference, not a mechanical one. The change in spiritual attitude is the outgrowth of a change in the material facts of the life of the group, and it comes on gradually as the material circumstances favourable to a predatory attitude supervene. The inferior limit of the predatory culture is an industrial limit. Predation can not become the habitual, conventional resource of any group or any class until industrial methods have been developed to such a degree of efficiency as to leave a margin worth fighting for, above the subsistence of those engaged in getting a living. The transition from peace to predation therefore depends on the growth of technical knowledge and the use of tools. A predatory culture is similarly impracticable in early times, until weapons have been developed to such a point as to make man a formidable animal. The early development of tools and of weapons is of course the same fact seen from two different points of view. The life of a given group would be characterised as peaceable so long as habitual recourse to combat has not brought the fight into the foreground in men's every day thoughts, as a dominant feature of the life of man. A group may evidently attain such a predatory attitude with a greater or less degree of completeness, so that its scheme of life and canons of conduct may be controlled to a greater or less extent by the predatory animus. The predatory phase of culture is therefore conceived to come on gradually, through a cumulative growth of predatory aptitudes habits, and traditions this growth being due to a change in the circumstances of the group's life, of such a kind as to develop and conserve those traits of human nature and those traditions and norms of conduct that make for a predatory rather than a peaceable life. The evidence for the hypothesis that there has been such a peaceable stage of primitive culture is in great part drawn from psychology rather than from ethnology, and cannot be detailed here. It will be recited in part in a later chapter, in discussing the survival of archaic traits of human nature under the modern culture. Chapter Two ~~ Pecuniary Emulation In the sequence of cultural evolution the emergence of a leisure class coincides with the beginning of ownership. This is necessarily the case, for these two institutions result from the same set of economic forces. In the inchoate phase of their development they are but different aspects of the same general facts of social structure. It is as elements of social structure--conventional facts--that leisure and ownership are matters of interest for the purpose in hand. An habitual neglect of work does not constitute a leisure class; neither does the mechanical fact of use and consumption constitute ownership. The present inquiry, therefore, is not concerned with the beginning of indolence, nor with the beginning of the appropriation of useful articles to individual consumption. The point in question is the origin and nature of a conventional leisure class on the one hand and the beginnings of individual ownership as a conventional right or equitable claim on the other hand. The early differentiation out of which the distinction between a leisure and a working class arises is a division maintained between men's and women's work in the lower stages of barbarism. Likewise the earliest form of ownership is an ownership of the women by the able bodied men of the community. The facts may be expressed in more general terms, and truer to the import of the barbarian theory of life, by saying that it is an ownership of the woman by the man. There was undoubtedly some appropriation of useful articles before the custom of appropriating women arose. The usages of existing archaic communities in which there is no ownership of women is warrant for such a view. In all communities the members, both male and female, habitually appropriate to their individual use a variety of useful things; but these useful things are not thought of as owned by the person who appropriates and consumes them. The habitual appropriation and consumption of certain slight personal effects goes on without raising the question of ownership; that is to say, the question of a conventional, equitable claim to extraneous things. The ownership of women begins in the lower barbarian stages of culture, apparently with the seizure of female captives. The original reason for the seizure and appropriation of women seems to have been their usefulness as trophies. The practice of seizing women from the enemy as trophies, gave rise to a form of ownership-marriage, resulting in a household with a male head. This was followed by an extension of slavery to other captives and inferiors, besides women, and by an extension of ownership-marriage to other women than those seized from the enemy. The outcome of emulation under the circumstances of a predatory life, therefore, has been on the one hand a form of marriage resting on coercion, and on the other hand the custom of ownership. The two institutions are not distinguishable in the initial phase of their development; both arise from the desire of the successful men to put their prowess in evidence by exhibiting some durable result of their exploits. Both also minister to that propensity for mastery which pervades all predatory communities. From the ownership of women the concept of ownership extends itself to include the products of their industry, and so there arises the ownership of things as well as of persons. In this way a consistent system of property in goods is gradually installed. And although in the latest stages of the development, the serviceability of goods for consumption has come to be the most obtrusive element of their value, still, wealth has by no means yet lost its utility as a honorific evidence of the owner's prepotence. Wherever the institution of private property is found, even in a slightly developed form, the economic process bears the character of a struggle between men for the possession of goods. It has been customary in economic theory, and especially among those economists who adhere with least faltering to the body of modernised classical doctrines, to construe this struggle for wealth as being substantially a struggle for subsistence. Such is, no doubt, its character in large part during the earlier and less efficient phases of industry. Such is also its character in all cases where the "niggardliness of nature" is so strict as to afford but a scanty livelihood to the community in return for strenuous and unremitting application to the business of getting the means of subsistence. But in all progressing communities an advance is presently made beyond this early stage of technological development. Industrial efficiency is presently carried to such a pitch as to afford something appreciably more than a bare livelihood to those engaged in the industrial process. It has not been unusual for economic theory to speak of the further struggle for wealth on this new industrial basis as a competition for an increase of the comforts of life,--primarily for an increase of the physical comforts which the consumption of goods affords. The end of acquisition and accumulation is conventionally held to be the consumption of the goods accumulated--whether it is consumption directly by the owner of the goods or by the household attached to him and for this purpose identified with him in theory. This is at least felt to be the economically legitimate end of acquisition, which alone it is incumbent on the theory to take account of. Such consumption may of course be conceived to serve the consumer's physical wants--his physical comfort--or his so-called higher wants--spiritual, aesthetic, intellectual, or what not; the latter class of wants being served indirectly by an expenditure of goods, after the fashion familiar to all economic readers. But it is only when taken in a sense far removed from its naive meaning that consumption of goods can be said to afford the incentive from which accumulation invariably proceeds. The motive that lies at the root of ownership is emulation; and the same motive of emulation continues active in the further development of the institution to which it has given rise and in the development of all those features of the social structure which this institution of ownership touches. The possession of wealth confers honour; it is an invidious distinction. Nothing equally cogent can be said for the consumption of goods, nor for any other conceivable incentive to acquisition, and especially not for any incentive to accumulation of wealth. It is of course not to be overlooked that in a community where nearly all goods are private property the necessity of earning a livelihood is a powerful and ever present incentive for the poorer members of the community. The need of subsistence and of an increase of physical comfort may for a time be the dominant motive of acquisition for those classes who are habitually employed at manual labour, whose subsistence is on a precarious footing, who possess little and ordinarily accumulate little; but it will appear in the course of the discussion that even in the case of these impecunious classes the predominance of the motive of physical want is not so decided as has sometimes been assumed. On the other hand, so far as regards those members and classes of the community who are chiefly concerned in the accumulation of wealth, the incentive of subsistence or of physical comfort never plays a considerable part. Ownership began and grew into a human institution on grounds unrelated to the subsistence minimum. The dominant incentive was from the outset the invidious distinction attaching to wealth, and, save temporarily and by exception, no other motive has usurped the primacy at any later stage of the development. Property set out with being booty held as trophies of the successful raid. So long as the group had departed and so long as it still stood in close contact with other hostile groups, the utility of things or persons owned lay chiefly in an invidious comparison between their possessor and the enemy from whom they were taken. The habit of distinguishing between the interests of the individual and those of the group to which he belongs is apparently a later growth. Invidious comparison between the possessor of the honorific booty and his less successful neighbours within the group was no doubt present early as an element of the utility of the things possessed, though this was not at the outset the chief element of their value. The man's prowess was still primarily the group's prowess, and the possessor of the booty felt himself to be primarily the keeper of the honour of his group. This appreciation of exploit from the communal point of view is met with also at later stages of social growth, especially as regards the laurels of war. But as soon as the custom of individual ownership begins to gain consistency, the point of view taken in making the invidious comparison on which private property rests will begin to change. Indeed, the one change is but the reflex of the other. The initial phase of ownership, the phase of acquisition by naive seizure and conversion, begins to pass into the subsequent stage of an incipient organization of industry on the basis of private property (in slaves); the horde develops into a more or less self-sufficing industrial community; possessions then come to be valued not so much as evidence of successful foray, but rather as evidence of the prepotence of the possessor of these goods over other individuals within the community. The invidious comparison now becomes primarily a comparison of the owner with the other members of the group. Property is still of the nature of trophy, but, with the cultural advance, it becomes more and more a trophy of successes scored in the game of ownership carried on between the members of the group under the quasi-peaceable methods of nomadic life. Gradually, as industrial activity further displaced predatory activity in the community's everyday life and in men's habits of thought, accumulated property more and more replaces trophies of predatory exploit as the conventional exponent of prepotence and success. With the growth of settled industry, therefore, the possession of wealth gains in relative importance and effectiveness as a customary basis of repute and esteem. Not that esteem ceases to be awarded on the basis of other, more direct evidence of prowess; not that successful predatory aggression or warlike exploit ceases to call out the approval and admiration of the crowd, or to stir the envy of the less successful competitors; but the opportunities for gaining distinction by means of this direct manifestation of superior force grow less available both in scope and frequency. At the same time opportunities for industrial aggression, and for the accumulation of property, increase in scope and availability. And it is even more to the point that property now becomes the most easily recognised evidence of a reputable degree of success as distinguished from heroic or signal achievement. It therefore becomes the conventional basis of esteem. Its possession in some amount becomes necessary in order to any reputable standing in the community. It becomes indispensable to accumulate, to acquire property, in order to retain one's good name. When accumulated goods have in this way once become the accepted badge of efficiency, the possession of wealth presently assumes the character of an independent and definitive basis of esteem. The possession of goods, whether acquired aggressively by one's own exertion or passively by transmission through inheritance from others, becomes a conventional basis of reputability. The possession of wealth, which was at the outset valued simply as an evidence of efficiency, becomes, in popular apprehension, itself a meritorious act. Wealth is now itself intrinsically honourable and confers honour on its possessor. By a further refinement, wealth acquired passively by transmission from ancestors or other antecedents presently becomes even more honorific than wealth acquired by the possessor's own effort; but this distinction belongs at a later stage in the evolution of the pecuniary culture and will be spoken of in its place. Prowess and exploit may still remain the basis of award of the highest popular esteem, although the possession of wealth has become the basis of common place reputability and of a blameless social standing. The predatory instinct and the consequent approbation of predatory efficiency are deeply ingrained in the habits of thought of those peoples who have passed under the discipline of a protracted predatory culture. According to popular award, the highest honours within human reach may, even yet, be those gained by an unfolding of extraordinary predatory efficiency in war, or by a quasi-predatory efficiency in statecraft; but for the purposes of a commonplace decent standing in the community these means of repute have been replaced by the acquisition and accumulation of goods. In order to stand well in the eyes of the community, it is necessary to come up to a certain, somewhat indefinite, conventional standard of wealth; just as in the earlier predatory stage it is necessary for the barbarian man to come up to the tribe's standard of physical endurance, cunning, and skill at arms. A certain standard of wealth in the one case, and of prowess in the other, is a necessary condition of reputability, and anything in excess of this normal amount is meritorious. Those members of the community who fall short of this, somewhat indefinite, normal degree of prowess or of property suffer in the esteem of their fellow-men; and consequently they suffer also in their own esteem, since the usual basis of self-respect is the respect accorded by one's neighbours. Only individuals with an aberrant temperament can in the long run retain their self-esteem in the face of the disesteem of their fellows. Apparent exceptions to the rule are met with, especially among people with strong religious convictions. But these apparent exceptions are scarcely real exceptions, since such persons commonly fall back on the putative approbation of some supernatural witness of their deeds. So soon as the possession of property becomes the basis of popular esteem, therefore, it becomes also a requisite to the complacency which we call self-respect. In any community where goods are held in severalty it is necessary, in order to his own peace of mind, that an individual should possess as large a portion of goods as others with whom he is accustomed to class himself; and it is extremely gratifying to possess something more than others. But as fast as a person makes new acquisitions, and becomes accustomed to the resulting new standard of wealth, the new standard forthwith ceases to afford appreciably greater satisfaction than the earlier standard did. The tendency in any case is constantly to make the present pecuniary standard the point of departure for a fresh increase of wealth; and this in turn gives rise to a new standard of sufficiency and a new pecuniary classification of one's self as compared with one's neighbours. So far as concerns the present question, the end sought by accumulation is to rank high in comparison with the rest of the community in point of pecuniary strength. So long as the comparison is distinctly unfavourable to himself, the normal, average individual will live in chronic dissatisfaction with his present lot; and when he has reached what may be called the normal pecuniary standard of the community, or of his class in the community, this chronic dissatisfaction will give place to a restless straining to place a wider and ever-widening pecuniary interval between himself and this average standard. The invidious comparison can never become so favourable to the individual making it that he would not gladly rate himself still higher relatively to his competitors in the struggle for pecuniary reputability. In the nature of the case, the desire for wealth can scarcely be satiated in any individual instance, and evidently a satiation of the average or general desire for wealth is out of the question. However widely, or equally, or "fairly", it may be distributed, no general increase of the community's wealth can make any approach to satiating this need, the ground of which is the desire of every one to excel every one else in the accumulation of goods. If, as is sometimes assumed, the incentive to accumulation were the want of subsistence or of physical comfort, then the aggregate economic wants of a community might conceivably be satisfied at some point in the advance of industrial efficiency; but since the struggle is substantially a race for reputability on the basis of an invidious comparison, no approach to a definitive attainment is possible. What has just been said must not be taken to mean that there are no other incentives to acquisition and accumulation than this desire to excel in pecuniary standing and so gain the esteem and envy of one's fellow-men. The desire for added comfort and security from want is present as a motive at every stage of the process of accumulation in a modern industrial community; although the standard of sufficiency in these respects is in turn greatly affected by the habit of pecuniary emulation. To a great extent this emulation shapes the methods and selects the objects of expenditure for personal comfort and decent livelihood. Besides this, the power conferred by wealth also affords a motive to accumulation. That propensity for purposeful activity and that repugnance to all futility of effort which belong to man by virtue of his character as an agent do not desert him when he emerges from the naive communal culture where the dominant note of life is the unanalysed and undifferentiated solidarity of the individual with the group with which his life is bound up. When he enters upon the predatory stage, where self-seeking in the narrower sense becomes the dominant note, this propensity goes with him still, as the pervasive trait that shapes his scheme of life. The propensity for achievement and the repugnance to futility remain the underlying economic motive. The propensity changes only in the form of its expression and in the proximate objects to which it directs the man's activity. Under the regime of individual ownership the most available means of visibly achieving a purpose is that afforded by the acquisition and accumulation of goods; and as the self-regarding antithesis between man and man reaches fuller consciousness, the propensity for achievement--the instinct of workmanship--tends more and more to shape itself into a straining to excel others in pecuniary achievement. Relative success, tested by an invidious pecuniary comparison with other men, becomes the conventional end of action. The currently accepted legitimate end of effort becomes the achievement of a favourable comparison with other men; and therefore the repugnance to futility to a good extent coalesces with the incentive of emulation. It acts to accentuate the struggle for pecuniary reputability by visiting with a sharper disapproval all shortcoming and all evidence of shortcoming in point of pecuniary success. Purposeful effort comes to mean, primarily, effort directed to or resulting in a more creditable showing of accumulated wealth. Among the motives which lead men to accumulate wealth, the primacy, both in scope and intensity, therefore, continues to belong to this motive of pecuniary emulation. In making use of the term "invidious", it may perhaps be unnecessary to remark, there is no intention to extol or depreciate, or to commend or deplore any of the phenomena which the word is used to characterise. The term is used in a technical sense as describing a comparison of persons with a view to rating and grading them in respect of relative worth or value--in an aesthetic or moral sense--and so awarding and defining the relative degrees of complacency with which they may legitimately be contemplated by themselves and by others. An invidious comparison is a process of valuation of persons in respect of worth. Chapter Three ~~ Conspicuous Leisure If its working were not disturbed by other economic forces or other features of the emulative process, the immediate effect of such a pecuniary struggle as has just been described in outline would be to make men industrious and frugal. This result actually follows, in some measure, so far as regards the lower classes, whose ordinary means of acquiring goods is productive labour. This is more especially true of the labouring classes in a sedentary community which is at an agricultural stage of industry, in which there is a considerable subdivision of industry, and whose laws and customs secure to these classes a more or less definite share of the product of their industry. These lower classes can in any case not avoid labour, and the imputation of labour is therefore not greatly derogatory to them, at least not within their class. Rather, since labour is their recognised and accepted mode of life, they take some emulative pride in a reputation for efficiency in their work, this being often the only line of emulation that is open to them. For those for whom acquisition and emulation is possible only within the field of productive efficiency and thrift, the struggle for pecuniary reputability will in some measure work out in an increase of diligence and parsimony. But certain secondary features of the emulative process, yet to be spoken of, come in to very materially circumscribe and modify emulation in these directions among the pecuniary inferior classes as well as among the superior class. But it is otherwise with the superior pecuniary class, with which we are here immediately concerned. For this class also the incentive to diligence and thrift is not absent; but its action is so greatly qualified by the secondary demands of pecuniary emulation, that any inclination in this direction is practically overborne and any incentive to diligence tends to be of no effect. The most imperative of these secondary demands of emulation, as well as the one of widest scope, is the requirement of abstention from productive work. This is true in an especial degree for the barbarian stage of culture. During the predatory culture labour comes to be associated in men's habits of thought with weakness and subjection to a master. It is therefore a mark of inferiority, and therefore comes to be accounted unworthy of man in his best estate. By virtue of this tradition labour is felt to be debasing, and this tradition has never died out. On the contrary, with the advance of social differentiation it has acquired the axiomatic force due to ancient and unquestioned prescription. In order to gain and to hold the esteem of men it is not sufficient merely to possess wealth or power. The wealth or power must be put in evidence, for esteem is awarded only on evidence. And not only does the evidence of wealth serve to impress one's importance on others and to keep their sense of his importance alive and alert, but it is of scarcely less use in building up and preserving one's self-complacency. In all but the lowest stages of culture the normally constituted man is comforted and upheld in his self-respect by "decent surroundings" and by exemption from "menial offices". Enforced departure from his habitual standard of decency, either in the paraphernalia of life or in the kind and amount of his everyday activity, is felt to be a slight upon his human dignity, even apart from all conscious consideration of the approval or disapproval of his fellows. The archaic theoretical distinction between the base and the honourable in the manner of a man's life retains very much of its ancient force even today. So much so that there are few of the better class who are not possessed of an instinctive repugnance for the vulgar forms of labour. We have a realising sense of ceremonial uncleanness attaching in an especial degree to the occupations which are associated in our habits of thought with menial service. It is felt by all persons of refined taste that a spiritual contamination is inseparable from certain offices that are conventionally required of servants. Vulgar surroundings, mean (that is to say, inexpensive) habitations, and vulgarly productive occupations are unhesitatingly condemned and avoided. They are incompatible with life on a satisfactory spiritual plane __ with "high thinking". From the days of the Greek philosophers to the present, a degree of leisure and of exemption from contact with such industrial processes as serve the immediate everyday purposes of human life has ever been recognised by thoughtful men as a prerequisite to a worthy or beautiful, or even a blameless, human life. In itself and in its consequences the life of leisure is beautiful and ennobling in all civilised men's eyes. This direct, subjective value of leisure and of other evidences of wealth is no doubt in great part secondary and derivative. It is in part a reflex of the utility of leisure as a means of gaining the respect of others, and in part it is the result of a mental substitution. The performance of labour has been accepted as a conventional evidence of inferior force; therefore it comes itself, by a mental short-cut, to be regarded as intrinsically base. During the predatory stage proper, and especially during the earlier stages of the quasi-peaceable development of industry that follows the predatory stage, a life of leisure is the readiest and most conclusive evidence of pecuniary strength, and therefore of superior force; provided always that the gentleman of leisure can live in manifest ease and comfort. At this stage wealth consists chiefly of slaves, and the benefits accruing from the possession of riches and power take the form chiefly of personal service and the immediate products of personal service. Conspicuous abstention from labour therefore becomes the conventional mark of superior pecuniary achievement and the conventional index of reputability; and conversely, since application to productive labour is a mark of poverty and subjection, it becomes inconsistent with a reputable standing in the community. Habits of industry and thrift, therefore, are not uniformly furthered by a prevailing pecuniary emulation. On the contrary, this kind of emulation indirectly discountenances participation in productive labour. Labour would unavoidably become dishonourable, as being an evidence indecorous under the ancient tradition handed down from an earlier cultural stage. The ancient tradition of the predatory culture is that productive effort is to be shunned as being unworthy of able-bodied men, and this tradition is reinforced rather than set aside in the passage from the predatory to the quasi-peaceable manner of life. Even if the institution of a leisure class had not come in with the first emergence of individual ownership, by force of the dishonour attaching to productive employment, it would in any case have come in as one of the early consequences of ownership. And it is to be remarked that while the leisure class existed in theory from the beginning of predatory culture, the institution takes on a new and fuller meaning with the transition from the predatory to the next succeeding pecuniary stage of culture. It is from this time forth a "leisure class" in fact as well as in theory. From this point dates the institution of the leisure class in its consummate form. During the predatory stage proper the distinction between the leisure and the labouring class is in some degree a ceremonial distinction only. The able bodied men jealously stand aloof from whatever is in their apprehension, menial drudgery; but their activity in fact contributes appreciably to the sustenance of the group. The subsequent stage of quasi-peaceable industry is usually characterised by an established chattel slavery, herds of cattle, and a servile class of herdsmen and shepherds; industry has advanced so far that the community is no longer dependent for its livelihood on the chase or on any other form of activity that can fairly be classed as exploit. From this point on, the characteristic feature of leisure class life is a conspicuous exemption from all useful employment. The normal and characteristic occupations of the class in this mature phase of its life history are in form very much the same as in its earlier days. These occupations are government, war, sports, and devout observances. Persons unduly given to difficult theoretical niceties may hold that these occupations are still incidentally and indirectly "productive"; but it is to be noted as decisive of the question in hand that the ordinary and ostensible motive of the leisure class in engaging in these occupations is assuredly not an increase of wealth by productive effort. At this as at any other cultural stage, government and war are, at least in part, carried on for the pecuniary gain of those who engage in them; but it is gain obtained by the honourable method of seizure and conversion. These occupations are of the nature of predatory, not of productive, employment. Something similar may be said of the chase, but with a difference. As the community passes out of the hunting stage proper, hunting gradually becomes differentiated into two distinct employments. On the one hand it is a trade, carried on chiefly for gain; and from this the element of exploit is virtually absent, or it is at any rate not present in a sufficient degree to clear the pursuit of the imputation of gainful industry. On the other hand, the chase is also a sport--an exercise of the predatory impulse simply. As such it does not afford any appreciable pecuniary incentive, but it contains a more or less obvious element of exploit. It is this latter development of the chase--purged of all imputation of handicraft--that alone is meritorious and fairly belongs in the scheme of life of the developed leisure class. Abstention from labour is not only a honorific or meritorious act, but it presently comes to be a requisite of decency. The insistence on property as the basis of reputability is very naive and very imperious during the early stages of the accumulation of wealth. Abstention from labour is the convenient evidence of wealth and is therefore the conventional mark of social standing; and this insistence on the meritoriousness of wealth leads to a more strenuous insistence on leisure. Nota notae est nota rei ipsius. According to well established laws of human nature, prescription presently seizes upon this conventional evidence of wealth and fixes it in men's habits of thought as something that is in itself substantially meritorious and ennobling; while productive labour at the same time and by a like process becomes in a double sense intrinsically unworthy. Prescription ends by making labour not only disreputable in the eyes of the community, but morally impossible to the noble, freeborn man, and incompatible with a worthy life. This tabu on labour has a further consequence in the industrial differentiation of classes. As the population increases in density and the predatory group grows into a settled industrial community, the constituted authorities and the customs governing ownership gain in scope and consistency. It then presently becomes impracticable to accumulate wealth by simple seizure, and, in logical consistency, acquisition by industry is equally impossible for high minded and impecunious men. The alternative open to them is beggary or privation. Wherever the canon of conspicuous leisure has a chance undisturbed to work out its tendency, there will therefore emerge a secondary, and in a sense spurious, leisure class--abjectly poor and living in a precarious life of want and discomfort, but morally unable to stoop to gainful pursuits. The decayed gentleman and the lady who has seen better days are by no means unfamiliar phenomena even now. This pervading sense of the indignity of the slightest manual labour is familiar to all civilized peoples, as well as to peoples of a less advanced pecuniary culture. In persons of a delicate sensibility who have long been habituated to gentle manners, the sense of the shamefulness of manual labour may become so strong that, at a critical juncture, it will even set aside the instinct of self-preservation. So, for instance, we are told of certain Polynesian chiefs, who, under the stress of good form, preferred to starve rather than carry their food to their mouths with their own hands. It is true, this conduct may have been due, at least in part, to an excessive sanctity or tabu attaching to the chief's person. The tabu would have been communicated by the contact of his hands, and so would have made anything touched by him unfit for human food. But the tabu is itself a derivative of the unworthiness or moral incompatibility of labour; so that even when construed in this sense the conduct of the Polynesian chiefs is truer to the canon of honorific leisure than would at first appear. A better illustration, or at least a more unmistakable one, is afforded by a certain king of France, who is said to have lost his life through an excess of moral stamina in the observance of good form. In the absence of the functionary whose office it was to shift his master's seat, the king sat uncomplaining before the fire and suffered his royal person to be toasted beyond recovery. But in so doing he saved his Most Christian Majesty from menial contamination. Summum crede nefas animam praeferre pudori, Et propter vitam vivendi perdere causas. It has already been remarked that the term "leisure", as here used, does not connote indolence or quiescence. What it connotes is non-productive consumption of time. Time is consumed non-productively (1) from a sense of the unworthiness of productive work, and (2) as an evidence of pecuniary ability to afford a life of idleness. But the whole of the life of the gentleman of leisure is not spent before the eyes of the spectators who are to be impressed with that spectacle of honorific leisure which in the ideal scheme makes up his life. For some part of the time his life is perforce withdrawn from the public eye, and of this portion which is spent in private the gentleman of leisure should, for the sake of his good name, be able to give a convincing account. He should find some means of putting in evidence the leisure that is not spent in the sight of the spectators. This can be done only indirectly, through the exhibition of some tangible, lasting results of the leisure so spent--in a manner analogous to the familiar exhibition of tangible, lasting products of the labour performed for the gentleman of leisure by handicraftsmen and servants in his employ. The lasting evidence of productive labour is its material product--commonly some article of consumption. In the case of exploit it is similarly possible and usual to procure some tangible result that may serve for exhibition in the way of trophy or booty. At a later phase of the development it is customary to assume some badge of insignia of honour that will serve as a conventionally accepted mark of exploit, and which at the same time indicates the quantity or degree of exploit of which it is the symbol. As the population increases in density, and as human relations grow more complex and numerous, all the details of life undergo a process of elaboration and selection; and in this process of elaboration the use of trophies develops into a system of rank, titles, degrees and insignia, typical examples of which are heraldic devices, medals, and honorary decorations. As seen from the economic point of view, leisure, considered as an employment, is closely allied in kind with the life of exploit; and the achievements which characterise a life of leisure, and which remain as its decorous criteria, have much in common with the trophies of exploit. But leisure in the narrower sense, as distinct from exploit and from any ostensibly productive employment of effort on objects which are of no intrinsic use, does not commonly leave a material product. The criteria of a past performance of leisure therefore commonly take the form of "immaterial" goods. Such immaterial evidences of past leisure are quasi-scholarly or quasi-artistic accomplishments and a knowledge of processes and incidents which do not conduce directly to the furtherance of human life. So, for instance, in our time there is the knowledge of the dead languages and the occult sciences; of correct spelling; of syntax and prosody; of the various forms of domestic music and other household art; of the latest properties of dress, furniture, and equipage; of games, sports, and fancy-bred animals, such as dogs and race-horses. In all these branches of knowledge the initial motive from which their acquisition proceeded at the outset, and through which they first came into vogue, may have been something quite different from the wish to show that one's time had not been spent in industrial employment; but unless these accomplishments had approved themselves as serviceable evidence of an unproductive expenditure of time, they would not have survived and held their place as conventional accomplishments of the leisure class. These accomplishments may, in some sense, be classed as branches of learning. Beside and beyond these there is a further range of social facts which shade off from the region of learning into that of physical habit and dexterity. Such are what is known as manners and breeding, polite usage, decorum, and formal and ceremonial observances generally. This class of facts are even more immediately and obtrusively presented to the observation, and they therefore more widely and more imperatively insisted on as required evidences of a reputable degree of leisure. It is worth while to remark that all that class of ceremonial observances which are classed under the general head of manners hold a more important place in the esteem of men during the stage of culture at which conspicuous leisure has the greatest vogue as a mark of reputability, than at later stages of the cultural development. The barbarian of the quasi-peaceable stage of industry is notoriously a more high-bred gentleman, in all that concerns decorum, than any but the very exquisite among the men of a later age. Indeed, it is well known, or at least it is currently believed, that manners have progressively deteriorated as society has receded from the patriarchal stage. Many a gentleman of the old school has been provoked to remark regretfully upon the under-bred manners and bearing of even the better classes in the modern industrial communities; and the decay of the ceremonial code--or as it is otherwise called, the vulgarisation of life--among the industrial classes proper has become one of the chief enormities of latter-day civilisation in the eyes of all persons of delicate sensibilities. The decay which the code has suffered at the hands of a busy people testifies--all depreciation apart--to the fact that decorum is a product and an exponent of leisure class life and thrives in full measure only under a regime of status. The origin, or better the derivation, of manners is no doubt, to be sought elsewhere than in a conscious effort on the part of the well-mannered to show that much time has been spent in acquiring them. The proximate end of innovation and elaboration has been the higher effectiveness of the new departure in point of beauty or of expressiveness. In great part the ceremonial code of decorous usages owes its beginning and its growth to the desire to conciliate or to show good-will, as anthropologists and sociologists are in the habit of assuming, and this initial motive is rarely if ever absent from the conduct of well-mannered persons at any stage of the later development. Manners, we are told, are in part an elaboration of gesture, and in part they are symbolical and conventionalised survivals representing former acts of dominance or of personal service or of personal contact. In large part they are an expression of the relation of status,--a symbolic pantomime of mastery on the one hand and of subservience on the other. Wherever at the present time the predatory habit of mind, and the consequent attitude of mastery and of subservience, gives its character to the accredited scheme of life, there the importance of all punctilios of conduct is extreme, and the assiduity with which the ceremonial observance of rank and titles is attended to approaches closely to the ideal set by the barbarian of the quasi-peaceable nomadic culture. Some of the Continental countries afford good illustrations of this spiritual survival. In these communities the archaic ideal is similarly approached as regards the esteem accorded to manners as a fact of intrinsic worth. Decorum set out with being symbol and pantomime and with having utility only as an exponent of the facts and qualities symbolised; but it presently suffered the transmutation which commonly passes over symbolical facts in human intercourse. Manners presently came, in popular apprehension, to be possessed of a substantial utility in themselves; they acquired a sacramental character, in great measure independent of the facts which they originally prefigured. Deviations from the code of decorum have become intrinsically odious to all men, and good breeding is, in everyday apprehension, not simply an adventitious mark of human excellence, but an integral feature of the worthy human soul. There are few things that so touch us with instinctive revulsion as a breach of decorum; and so far have we progressed in the direction of imputing intrinsic utility to the ceremonial observances of etiquette that few of us, if any, can dissociate an offence against etiquette from a sense of the substantial unworthiness of the offender. A breach of faith may be condoned, but a breach of decorum can not. "Manners maketh man." None the less, while manners have this intrinsic utility, in the apprehension of the performer and the beholder alike, this sense of the intrinsic rightness of decorum is only the proximate ground of the vogue of manners and breeding. Their ulterior, economic ground is to be sought in the honorific character of that leisure or non-productive employment of time and effort without which good manners are not acquired. The knowledge and habit of good form come only by long-continued use. Refined tastes, manners, habits of life are a useful evidence of gentility, because good breeding requires time, application and expense, and can therefore not be compassed by those whose time and energy are taken up with work. A knowledge of good form is prima facie evidence that that portion of the well-bred person's life which is not spent under the observation of the spectator has been worthily spent in acquiring accomplishments that are of no lucrative effect. In the last analysis the value of manners lies in the fact that they are the voucher of a life of leisure. Therefore, conversely, since leisure is the conventional means of pecuniary repute, the acquisition of some proficiency in decorum is incumbent on all who aspire to a modicum of pecuniary decency. So much of the honourable life of leisure as is not spent in the sight of spectators can serve the purposes of reputability only in so far as it leaves a tangible, visible result that can be put in evidence and can be measured and compared with products of the same class exhibited by competing aspirants for repute. Some such effect, in the way of leisurely manners and carriage, etc., follows from simple persistent abstention from work, even where the subject does not take thought of the matter and studiously acquire an air of leisurely opulence and mastery. Especially does it seem to be true that a life of leisure in this way persisted in through several generations will leave a persistent, ascertainable effect in the conformation of the person, and still more in his habitual bearing and demeanour. But all the suggestions of a cumulative life of leisure, and all the proficiency in decorum that comes by the way of passive habituation, may be further improved upon by taking thought and assiduously acquiring the marks of honourable leisure, and then carrying the exhibition of these adventitious marks of exemption from employment out in a strenuous and systematic discipline. Plainly, this is a point at which a diligent application of effort and expenditure may materially further the attainment of a decent proficiency in the leisure-class properties. Conversely, the greater the degree of proficiency and the more patent the evidence of a high degree of habituation to observances which serve no lucrative or other directly useful purpose, the greater the consumption of time and substance impliedly involved in their acquisition, and the greater the resultant good repute. Hence under the competitive struggle for proficiency in good manners, it comes about that much pains in taken with the cultivation of habits of decorum; and hence the details of decorum develop into a comprehensive discipline, conformity to which is required of all who would be held blameless in point of repute. And hence, on the other hand, this conspicuous leisure of which decorum is a ramification grows gradually into a laborious drill in deportment and an education in taste and discrimination as to what articles of consumption are decorous and what are the decorous methods of consuming them. In this connection it is worthy of notice that the possibility of producing pathological and other idiosyncrasies of person and manner by shrewd mimicry and a systematic drill have been turned to account in the deliberate production of a cultured class--often with a very happy effect. In this way, by the process vulgarly known as snobbery, a syncopated evolution of gentle birth and breeding is achieved in the case of a goodly number of families and lines of descent. This syncopated gentle birth gives results which, in point of serviceability as a leisure-class factor in the population, are in no wise substantially inferior to others who may have had a longer but less arduous training in the pecuniary properties. There are, moreover, measureable degrees of conformity to the latest accredited code of the punctilios as regards decorous means and methods of consumption. Differences between one person and another in the degree of conformity to the ideal in these respects can be compared, and persons may be graded and scheduled with some accuracy and effect according to a progressive scale of manners and breeding. The award of reputability in this regard is commonly made in good faith, on the ground of conformity to accepted canons of taste in the matters concerned, and without conscious regard to the pecuniary standing or the degree of leisure practised by any given candidate for reputability; but the canons of taste according to which the award is made are constantly under the surveillance of the law of conspicuous leisure, and are indeed constantly undergoing change and revision to bring them into closer conformity with its requirements. So that while the proximate ground of discrimination may be of another kind, still the pervading principle and abiding test of good breeding is the requirement of a substantial and patent waste of time. There may be some considerable range of variation in detail within the scope of this principle, but they are variations of form and expression, not of substance. Much of the courtesy of everyday intercourse is of course a direct expression of consideration and kindly good-will, and this element of conduct has for the most part no need of being traced back to any underlying ground of reputability to explain either its presence or the approval with which it is regarded; but the same is not true of the code of properties. These latter are expressions of status. It is of course sufficiently plain, to any one who cares to see, that our bearing towards menials and other pecuniary dependent inferiors is the bearing of the superior member in a relation of status, though its manifestation is often greatly modified and softened from the original expression of crude dominance. Similarly, our bearing towards superiors, and in great measure towards equals, expresses a more or less conventionalised attitude of subservience. Witness the masterful presence of the high-minded gentleman or lady, which testifies to so much of dominance and independence of economic circumstances, and which at the same time appeals with such convincing force to our sense of what is right and gracious. It is among this highest leisure class, who have no superiors and few peers, that decorum finds its fullest and maturest expression; and it is this highest class also that gives decorum that definite formulation which serves as a canon of conduct for the classes beneath. And there also the code is most obviously a code of status and shows most plainly its incompatibility with all vulgarly productive work. A divine assurance and an imperious complaisance, as of one habituated to require subservience and to take no thought for the morrow, is the birthright and the criterion of the gentleman at his best; and it is in popular apprehension even more than that, for this demeanour is accepted as an intrinsic attribute of superior worth, before which the base-born commoner delights to stoop and yield. As has been indicated in an earlier chapter, there is reason to believe that the institution of ownership has begun with the ownership of persons, primarily women. The incentives to acquiring such property have apparently been: (1) a propensity for dominance and coercion; (2) the utility of these persons as evidence of the prowess of the owner; (3) the utility of their services. Personal service holds a peculiar place in the economic development. During the stage of quasi-peaceable industry, and especially during the earlier development of industry within the limits of this general stage, the utility of their services seems commonly to be the dominant motive to the acquisition of property in persons. Servants are valued for their services. But the dominance of this motive is not due to a decline in the absolute importance of the other two utilities possessed by servants. It is rather that the altered circumstance of life accentuate the utility of servants for this last-named purpose. Women and other slaves are highly valued, both as an evidence of wealth and as a means of accumulating wealth. Together with cattle, if the tribe is a pastoral one, they are the usual form of investment for a profit. To such an extent may female slavery give its character to the economic life under the quasi-peaceable culture that the women even comes to serve as a unit of value among peoples occupying this cultural stage--as for instance in Homeric times. Where this is the case there need be little question but that the basis of the industrial system is chattel slavery and that the women are commonly slaves. The great, pervading human relation in such a system is that of master and servant. The accepted evidence of wealth is the possession of many women, and presently also of other slaves engaged in attendance on their master's person and in producing goods for him. A division of labour presently sets in, whereby personal service and attendance on the master becomes the special office of a portion of the servants, while those who are wholly employed in industrial occupations proper are removed more and more from all immediate relation to the person of their owner. At the same time those servants whose office is personal service, including domestic duties, come gradually to be exempted from productive industry carried on for gain. This process of progressive exemption from the common run of industrial employment will commonly begin with the exemption of the wife, or the chief wife. After the community has advanced to settled habits of life, wife-capture from hostile tribes becomes impracticable as a customary source of supply. Where this cultural advance has been achieved, the chief wife is ordinarily of gentle blood, and the fact of her being so will hasten her exemption from vulgar employment. The manner in which the concept of gentle blood originates, as well as the place which it occupies in the development of marriage, cannot be discussed in this place. For the purpose in hand it will be sufficient to say that gentle blood is blood which has been ennobled by protracted contact with accumulated wealth or unbroken prerogative. The women with these antecedents is preferred in marriage, both for the sake of a resulting alliance with her powerful relatives and because a superior worth is felt to inhere in blood which has been associated with many goods and great power. She will still be her husband's chattel, as she was her father's chattel before her purchase, but she is at the same time of her father's gentle blood; and hence there is a moral incongruity in her occupying herself with the debasing employments of her fellow-servants. However completely she may be subject to her master, and however inferior to the male members of the social stratum in which her birth has placed her, the principle that gentility is transmissible will act to place her above the common slave; and so soon as this principle has acquired a prescriptive authority it will act to invest her in some measure with that prerogative of leisure which is the chief mark of gentility. Furthered by this principle of transmissible gentility the wife's exemption gains in scope, if the wealth of her owner permits it, until it includes exemption from debasing menial service as well as from handicraft. As the industrial development goes on and property becomes massed in relatively fewer hands, the conventional standard of wealth of the upper class rises. The same tendency to exemption from handicraft, and in the course of time from menial domestic employments, will then assert itself as regards the other wives, if such there are, and also as regards other servants in immediate attendance upon the person of their master. The exemption comes more tardily the remoter the relation in which the servant stands to the person of the master. If the pecuniary situation of the master permits it, the development of a special class of personal or body servants is also furthered by the very grave importance which comes to attach to this personal service. The master's person, being the embodiment of worth and honour, is of the most serious consequence. Both for his reputable standing in the community and for his self-respect, it is a matter of moment that he should have at his call efficient specialised servants, whose attendance upon his person is not diverted from this their chief office by any by-occupation. These specialised servants are useful more for show than for service actually performed. In so far as they are not kept for exhibition simply, they afford gratification to their master chiefly in allowing scope to his propensity for dominance. It is true, the care of the continually increasing household apparatus may require added labour; but since the apparatus is commonly increased in order to serve as a means of good repute rather than as a means of comfort, this qualification is not of great weight. All these lines of utility are better served by a larger number of more highly specialised servants. There results, therefore, a constantly increasing differentiation and multiplication of domestic and body servants, along with a concomitant progressive exemption of such servants from productive labour. By virtue of their serving as evidence of ability to pay, the office of such domestics regularly tends to include continually fewer duties, and their service tends in the end to become nominal only. This is especially true of those servants who are in most immediate and obvious attendance upon their master. So that the utility of these comes to consist, in great part, in their conspicuous exemption from productive labour and in the evidence which this exemption affords of their master's wealth and power. After some considerable advance has been made in the practice of employing a special corps of servants for the performance of a conspicuous leisure in this manner, men begin to be preferred above women for services that bring them obtrusively into view. Men, especially lusty, personable fellows, such as footmen and other menials should be, are obviously more powerful and more expensive than women. They are better fitted for this work, as showing a larger waste of time and of human energy. Hence it comes about that in the economy of the leisure class the busy housewife of the early patriarchal days, with her retinue of hard-working handmaidens, presently gives place to the lady and the lackey. In all grades and walks of life, and at any stage of the economic development, the leisure of the lady and of the lackey differs from the leisure of the gentleman in his own right in that it is an occupation of an ostensibly laborious kind. It takes the form, in large measure, of a painstaking attention to the service of the master, or to the maintenance and elaboration of the household paraphernalia; so that it is leisure only in the sense that little or no productive work is performed by this class, not in the sense that all appearance of labour is avoided by them. The duties performed by the lady, or by the household or domestic servants, are frequently arduous enough, and they are also frequently directed to ends which are considered extremely necessary to the comfort of the entire household. So far as these services conduce to the physical efficiency or comfort of the master or the rest of the household, they are to be accounted productive work. Only the residue of employment left after deduction of this effective work is to be classed as a performance of leisure. But much of the services classed as household cares in modern everyday life, and many of the "utilities" required for a comfortable existence by civilised man, are of a ceremonial character. They are, therefore, properly to be classed as a performance of leisure in the sense in which the term is here used. They may be none the less imperatively necessary from the point of view of decent existence: they may be none the less requisite for personal comfort even, although they may be chiefly or wholly of a ceremonial character. But in so far as they partake of this character they are imperative and requisite because we have been taught to require them under pain of ceremonial uncleanness or unworthiness. We feel discomfort in their absence, but not because their absence results directly in physical discomfort; nor would a taste not trained to discriminate between the conventionally good and the conventionally bad take offence at their omission. In so far as this is true the labour spent in these services is to be classed as leisure; and when performed by others than the economically free and self-directed head of the establishment, they are to be classed as vicarious leisure. The vicarious leisure performed by housewives and menials, under the head of household cares, may frequently develop into drudgery, especially where the competition for reputability is close and strenuous. This is frequently the case in modern life. Where this happens, the domestic service which comprises the duties of this servant class might aptly be designated as wasted effort, rather than as vicarious leisure. But the latter term has the advantage of indicating the line of derivation of these domestic offices, as well as of neatly suggesting the substantial economic ground of their utility; for these occupations are chiefly useful as a method of imputing pecuniary reputability to the master or to the household on the ground that a given amount of time and effort is conspicuously wasted in that behalf. In this way, then, there arises a subsidiary or derivative leisure class, whose office is the performance of a vicarious leisure for the behoof of the reputability of the primary or legitimate leisure class. This vicarious leisure class is distinguished from the leisure class proper by a characteristic feature of its habitual mode of life. The leisure of the master class is, at least ostensibly, an indulgence of a proclivity for the avoidance of labour and is presumed to enhance the master's own well-being and fulness of life; but the leisure of the servant class exempt from productive labour is in some sort a performance exacted from them, and is not normally or primarily directed to their own comfort. The leisure of the servant is not his own leisure. So far as he is a servant in the full sense, and not at the same time a member of a lower order of the leisure class proper, his leisure normally passes under the guise of specialised service directed to the furtherance of his master's fulness of life. Evidence of this relation of subservience is obviously present in the servant's carriage and manner of life. The like is often true of the wife throughout the protracted economic stage during which she is still primarily a servant--that is to say, so long as the household with a male head remains in force. In order to satisfy the requirements of the leisure class scheme of life, the servant should show not only an attitude of subservience, but also the effects of special training and practice in subservience. The servant or wife should not only perform certain offices and show a servile disposition, but it is quite as imperative that they should show an acquired facility in the tactics of subservience--a trained conformity to the canons of effectual and conspicuous subservience. Even today it is this aptitude and acquired skill in the formal manifestation of the servile relation that constitutes the chief element of utility in our highly paid servants, as well as one of the chief ornaments of the well-bred housewife. The first requisite of a good servant is that he should conspicuously know his place. It is not enough that he knows how to effect certain desired mechanical results; he must above all, know how to effect these results in due form. Domestic service might be said to be a spiritual rather than a mechanical function. Gradually there grows up an elaborate system of good form, specifically regulating the manner in which this vicarious leisure of the servant class is to be performed. Any departure from these canons of form is to be depreciated, not so much because it evinces a shortcoming in mechanical efficiency, or even that it shows an absence of the servile attitude and temperament, but because, in the last analysis, it shows the absence of special training. Special training in personal service costs time and effort, and where it is obviously present in a high degree, it argues that the servant who possesses it, neither is nor has been habitually engaged in any productive occupation. It is prima facie evidence of a vicarious leisure extending far back in the past. So that trained service has utility, not only as gratifying the master's instinctive liking for good and skilful workmanship and his propensity for conspicuous dominance over those whose lives are subservient to his own, but it has utility also as putting in evidence a much larger consumption of human service than would be shown by the mere present conspicuous leisure performed by an untrained person. It is a serious grievance if a gentleman's butler or footman performs his duties about his master's table or carriage in such unformed style as to suggest that his habitual occupation may be ploughing or sheepherding. Such bungling work would imply inability on the master's part to procure the service of specially trained servants; that is to say, it would imply inability to pay for the consumption of time, effort, and instruction required to fit a trained servant for special service under the exacting code of forms. If the performance of the servant argues lack of means on the part of his master, it defeats its chief substantial end; for the chief use of servants is the evidence they afford of the master's ability to pay. What has just been said might be taken to imply that the offence of an under-trained servant lies in a direct suggestion of inexpensiveness or of usefulness. Such, of course, is not the case. The connection is much less immediate. What happens here is what happens generally. Whatever approves itself to us on any ground at the outset, presently comes to appeal to us as a gratifying thing in itself; it comes to rest in our habits of though as substantially right. But in order that any specific canon of deportment shall maintain itself in favour, it must continue to have the support of, or at least not be incompatible with, the habit or aptitude which constitutes the norm of its development. The need of vicarious leisure, or conspicuous consumption of service, is a dominant incentive to the keeping of servants. So long as this remains true it may be set down without much discussion that any such departure from accepted usage as would suggest an abridged apprenticeship in service would presently be found insufferable. The requirement of an expensive vicarious leisure acts indirectly, selectively, by guiding the formation of our taste,--of our sense of what is right in these matters,--and so weeds out unconformable departures by withholding approval of them. As the standard of wealth recognized by common consent advances, the possession and exploitation of servants as a means of showing superfluity undergoes a refinement. The possession and maintenance of slaves employed in the production of goods argues wealth and prowess, but the maintenance of servants who produce nothing argues still higher wealth and position. Under this principle there arises a class of servants, the more numerous the better, whose sole office is fatuously to wait upon the person of their owner, and so to put in evidence his ability unproductively to consume a large amount of service. There supervenes a division of labour among the servants or dependents whose life is spent in maintaining the honour of the gentleman of leisure. So that, while one group produces goods for him, another group, usually headed by the wife, or chief, consumes for him in conspicuous leisure; thereby putting in evidence his ability to sustain large pecuniary damage without impairing his superior opulence. This somewhat idealized and diagrammatic outline of the development and nature of domestic service comes nearest being true for that cultural stage which was here been named the "quasi-peaceable" stage of industry. At this stage personal service first rises to the position of an economic institution, and it is at this stage that it occupies the largest place in the community's scheme of life. In the cultural sequence, the quasi-peaceable stage follows the predatory stage proper, the two being successive phases of barbarian life. Its characteristic feature is a formal observance of peace and order, at the same time that life at this stage still has too much of coercion and class antagonism to be called peaceable in the full sense of the word. For many purposes, and from another point of view than the economic one, it might as well be named the stage of status. The method of human relation during this stage, and the spiritual attitude of men at this level of culture, is well summed up under the term. But as a descriptive term to characterise the prevailing methods of industry, as well as to indicate the trend of industrial development at this point in economic evolution, the term "quasi-peaceable" seems preferable. So far as concerns the communities of the Western culture, this phase of economic development probably lies in the past; except for a numerically small though very conspicuous fraction of the community in whom the habits of thought peculiar to the barbarian culture have suffered but a relatively slight disintegration. Personal service is still an element of great economic importance, especially as regards the distribution and consumption of goods; but its relative importance even in this direction is no doubt less than it once was. The best development of this vicarious leisure lies in the past rather than in the present; and its best expression in the present is to be found in the scheme of life of the upper leisure class. To this class the modern culture owes much in the way of the conservation of traditions, usages, and habits of thought which belong on a more archaic cultural plane, so far as regards their widest acceptance and their most effective development. In the modern industrial communities the mechanical contrivances available for the comfort and convenience of everyday life are highly developed. So much so that body servants, or, indeed, domestic servants of any kind, would now scarcely be employed by anybody except on the ground of a canon of reputability carried over by tradition from earlier usage. The only exception would be servants employed to attend on the persons of the infirm and the feeble-minded. But such servants properly come under the head of trained nurses rather than under that of domestic servants, and they are, therefore, an apparent rather than a real exception to the rule. The proximate reason for keeping domestic servants, for instance, in the moderately well-to-do household of to-day, is (ostensibly) that the members of the household are unable without discomfort to compass the work required by such a modern establishment. And the reason for their being unable to accomplish it is (1) that they have too many "social duties", and (2) that the work to be done is too severe and that there is too much of it. These two reasons may be restated as follows: (1) Under the mandatory code of decency, the time and effort of the members of such a household are required to be ostensibly all spent in a performance of conspicuous leisure, in the way of calls, drives, clubs, sewing-circles, sports, charity organisations, and other like social functions. Those persons whose time and energy are employed in these matters privately avow that all these observances, as well as the incidental attention to dress and other conspicuous consumption, are very irksome but altogether unavoidable. (2) Under the requirement of conspicuous consumption of goods, the apparatus of living has grown so elaborate and cumbrous, in the way of dwellings, furniture, bric-a-brac, wardrobe and meals, that the consumers of these things cannot make way with them in the required manner without help. Personal contact with the hired persons whose aid is called in to fulfil the routine of decency is commonly distasteful to the occupants of the house, but their presence is endured and paid for, in order to delegate to them a share in this onerous consumption of household goods. The presence of domestic servants, and of the special class of body servants in an eminent degree, is a concession of physical comfort to the moral need of pecuniary decency. The largest manifestation of vicarious leisure in modern life is made up of what are called domestic duties. These duties are fast becoming a species of services performed, not so much for the individual behoof of the head of the household as for the reputability of the household taken as a corporate unit--a group of which the housewife is a member on a footing of ostensible equality. As fast as the household for which they are performed departs from its archaic basis of ownership-marriage, these household duties of course tend to fall out of the category of vicarious leisure in the original sense; except so far as they are performed by hired servants. That is to say, since vicarious leisure is possible only on a basis of status or of hired service, the disappearance of the relation of status from human intercourse at any point carries with it the disappearance of vicarious leisure so far as regards that much of life. But it is to be added, in qualification of this qualification, that so long as the household subsists, even with a divided head, this class of non-productive labour performed for the sake of the household reputability must still be classed as vicarious leisure, although in a slightly altered sense. It is now leisure performed for the quasi-personal corporate household, instead of, as formerly, for the proprietary head of the household. Chapter Four ~~ Conspicuous Consumption In what has been said of the evolution of the vicarious leisure class and its differentiation from the general body of the working classes, reference has been made to a further division of labour,--that between the different servant classes. One portion of the servant class, chiefly those persons whose occupation is vicarious leisure, come to undertake a new, subsidiary range of duties--the vicarious consumption of goods. The most obvious form in which this consumption occurs is seen in the wearing of liveries and the occupation of spacious servants' quarters. Another, scarcely less obtrusive or less effective form of vicarious consumption, and a much more widely prevalent one, is the consumption of food, clothing, dwelling, and furniture by the lady and the rest of the domestic establishment. But already at a point in economic evolution far antedating the emergence of the lady, specialised consumption of goods as an evidence of pecuniary strength had begun to work out in a more or less elaborate system. The beginning of a differentiation in consumption even antedates the appearance of anything that can fairly be called pecuniary strength. It is traceable back to the initial phase of predatory culture, and there is even a suggestion that an incipient differentiation in this respect lies back of the beginnings of the predatory life. This most primitive differentiation in the consumption of goods is like the later differentiation with which we are all so intimately familiar, in that it is largely of a ceremonial character, but unlike the latter it does not rest on a difference in accumulated wealth. The utility of consumption as an evidence of wealth is to be classed as a derivative growth. It is an adaption to a new end, by a selective process, of a distinction previously existing and well established in men's habits of thought. In the earlier phases of the predatory culture the only economic differentiation is a broad distinction between an honourable superior class made up of the able-bodied men on the one side, and a base inferior class of labouring women on the other. According to the ideal scheme of life in force at the time it is the office of the men to consume what the women produce. Such consumption as falls to the women is merely incidental to their work; it is a means to their continued labour, and not a consumption directed to their own comfort and fulness of life. Unproductive consumption of goods is honourable, primarily as a mark of prowess and a perquisite of human dignity; secondarily it becomes substantially honourable to itself, especially the consumption of the more desirable things. The consumption of choice articles of food, and frequently also of rare articles of adornment, becomes tabu to the women and children; and if there is a base (servile) class of men, the tabu holds also for them. With a further advance in culture this tabu may change into simple custom of a more or less rigorous character; but whatever be the theoretical basis of the distinction which is maintained, whether it be a tabu or a larger conventionality, the features of the conventional scheme of consumption do not change easily. When the quasi-peaceable stage of industry is reached, with its fundamental institution of chattel slavery, the general principle, more or less rigorously applied, is that the base, industrious class should consume only what may be necessary to their subsistence. In the nature of things, luxuries and the comforts of life belong to the leisure class. Under the tabu, certain victuals, and more particularly certain beverages, are strictly reserved for the use of the superior class. The ceremonial differentiation of the dietary is best seen in the use of intoxicating beverages and narcotics. If these articles of consumption are costly, they are felt to be noble and honorific. Therefore the base classes, primarily the women, practice an enforced continence with respect to these stimulants, except in countries where they are obtainable at a very low cost. From archaic times down through all the length of the patriarchal regime it has been the office of the women to prepare and administer these luxuries, and it has been the perquisite of the men of gentle birth and breeding to consume them. Drunkenness and the other pathological consequences of the free use of stimulants therefore tend in their turn to become honorific, as being a mark, at the second remove, of the superior status of those who are able to afford the indulgence. Infirmities induced by over-indulgence are among some peoples freely recognised as manly attributes. It has even happened that the name for certain diseased conditions of the body arising from such an origin has passed into everyday speech as a synonym for "noble" or "gentle". It is only at a relatively early stage of culture that the symptoms of expensive vice are conventionally accepted as marks of a superior status, and so tend to become virtues and command the deference of the community; but the reputability that attaches to certain expensive vices long retains so much of its force as to appreciably lesson the disapprobation visited upon the men of the wealthy or noble class for any excessive indulgence. The same invidious distinction adds force to the current disapproval of any indulgence of this kind on the part of women, minors, and inferiors. This invidious traditional distinction has not lost its force even among the more advanced peoples of today. Where the example set by the leisure class retains its imperative force in the regulation of the conventionalities, it is observable that the women still in great measure practise the same traditional continence with regard to stimulants. This characterisation of the greater continence in the use of stimulants practised by the women of the reputable classes may seem an excessive refinement of logic at the expense of common sense. But facts within easy reach of any one who cares to know them go to say that the greater abstinence of women is in some part due to an imperative conventionality; and this conventionality is, in a general way, strongest where the patriarchal tradition--the tradition that the woman is a chattel--has retained its hold in greatest vigour. In a sense which has been greatly qualified in scope and rigour, but which has by no means lost its meaning even yet, this tradition says that the woman, being a chattel, should consume only what is necessary to her sustenance,--except so far as her further consumption contributes to the comfort or the good repute of her master. The consumption of luxuries, in the true sense, is a consumption directed to the comfort of the consumer himself, and is, therefore, a mark of the master. Any such consumption by others can take place only on a basis of sufferance. In communities where the popular habits of thought have been profoundly shaped by the patriarchal tradition we may accordingly look for survivals of the tabu on luxuries at least to the extent of a conventional deprecation of their use by the unfree and dependent class. This is more particularly true as regards certain luxuries, the use of which by the dependent class would detract sensibly from the comfort or pleasure of their masters, or which are held to be of doubtful legitimacy on other grounds. In the apprehension of the great conservative middle class of Western civilisation the use of these various stimulants is obnoxious to at least one, if not both, of these objections; and it is a fact too significant to be passed over that it is precisely among these middle classes of the Germanic culture, with their strong surviving sense of the patriarchal proprieties, that the women are to the greatest extent subject to a qualified tabu on narcotics and alcoholic beverages. With many qualifications--with more qualifications as the patriarchal tradition has gradually weakened--the general rule is felt to be right and binding that women should consume only for the benefit of their masters. The objection of course presents itself that expenditure on women's dress and household paraphernalia is an obvious exception to this rule; but it will appear in the sequel that this exception is much more obvious than substantial. During the earlier stages of economic development, consumption of goods without stint, especially consumption of the better grades of goods,--ideally all consumption in excess of the subsistence minimum,--pertains normally to the leisure class. This restriction tends to disappear, at least formally, after the later peaceable stage has been reached, with private ownership of goods and an industrial system based on wage labour or on the petty household economy. But during the earlier quasi-peaceable stage, when so many of the traditions through which the institution of a leisure class has affected the economic life of later times were taking form and consistency, this principle has had the force of a conventional law. It has served as the norm to which consumption has tended to conform, and any appreciable departure from it is to be regarded as an aberrant form, sure to be eliminated sooner or later in the further course of development. The quasi-peaceable gentleman of leisure, then, not only consumes of the staff of life beyond the minimum required for subsistence and physical efficiency, but his consumption also undergoes a specialisation as regards the quality of the goods consumed. He consumes freely and of the best, in food, drink, narcotics, shelter, services, ornaments, apparel, weapons and accoutrements, amusements, amulets, and idols or divinities. In the process of gradual amelioration which takes place in the articles of his consumption, the motive principle and proximate aim of innovation is no doubt the higher efficiency of the improved and more elaborate products for personal comfort and well-being. But that does not remain the sole purpose of their consumption. The canon of reputability is at hand and seizes upon such innovations as are, according to its standard, fit to survive. Since the consumption of these more excellent goods is an evidence of wealth, it becomes honorific; and conversely, the failure to consume in due quantity and quality becomes a mark of inferiority and demerit. This growth of punctilious discrimination as to qualitative excellence in eating, drinking, etc. presently affects not only the manner of life, but also the training and intellectual activity of the gentleman of leisure. He is no longer simply the successful, aggressive male,--the man of strength, resource, and intrepidity. In order to avoid stultification he must also cultivate his tastes, for it now becomes incumbent on him to discriminate with some nicety between the noble and the ignoble in consumable goods. He becomes a connoisseur in creditable viands of various degrees of merit, in manly beverages and trinkets, in seemly apparel and architecture, in weapons, games, dancers, and the narcotics. This cultivation of aesthetic faculty requires time and application, and the demands made upon the gentleman in this direction therefore tend to change his life of leisure into a more or less arduous application to the business of learning how to live a life of ostensible leisure in a becoming way. Closely related to the requirement that the gentleman must consume freely and of the right kind of goods, there is the requirement that he must know how to consume them in a seemly manner. His life of leisure must be conducted in due form. Hence arise good manners in the way pointed out in an earlier chapter. High-bred manners and ways of living are items of conformity to the norm of conspicuous leisure and conspicuous consumption. Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure. As wealth accumulates on his hands, his own unaided effort will not avail to sufficiently put his opulence in evidence by this method. The aid of friends and competitors is therefore brought in by resorting to the giving of valuable presents and expensive feasts and entertainments. Presents and feasts had probably another origin than that of naive ostentation, but they required their utility for this purpose very early, and they have retained that character to the present; so that their utility in this respect has now long been the substantial ground on which these usages rest. Costly entertainments, such as the potlatch or the ball, are peculiarly adapted to serve this end. The competitor with whom the entertainer wishes to institute a comparison is, by this method, made to serve as a means to the end. He consumes vicariously for his host at the same time that he is witness to the consumption of that excess of good things which his host is unable to dispose of single-handed, and he is also made to witness his host's facility in etiquette. In the giving of costly entertainments other motives, of more genial kind, are of course also present. The custom of festive gatherings probably originated in motives of conviviality and religion; these motives are also present in the later development, but they do not continue to be the sole motives. The latter-day leisure-class festivities and entertainments may continue in some slight degree to serve the religious need and in a higher degree the needs of recreation and conviviality, but they also serve an invidious purpose; and they serve it none the less effectually for having a colorable non-invidious ground in these more avowable motives. But the economic effect of these social amenities is not therefore lessened, either in the vicarious consumption of goods or in the exhibition of difficult and costly achievements in etiquette. As wealth accumulates, the leisure class develops further in function and structure, and there arises a differentiation within the class. There is a more or less elaborate system of rank and grades. This differentiation is furthered by the inheritance of wealth and the consequent inheritance of gentility. With the inheritance of gentility goes the inheritance of obligatory leisure; and gentility of a sufficient potency to entail a life of leisure may be inherited without the complement of wealth required to maintain a dignified leisure. Gentle blood may be transmitted without goods enough to afford a reputably free consumption at one's ease. Hence results a class of impecunious gentlemen of leisure, incidentally referred to already. These half-caste gentlemen of leisure fall into a system of hierarchical gradations. Those who stand near the higher and the highest grades of the wealthy leisure class, in point of birth, or in point of wealth, or both, outrank the remoter-born and the pecuniarily weaker. These lower grades, especially the impecunious, or marginal, gentlemen of leisure, affiliate themselves by a system of dependence or fealty to the great ones; by so doing they gain an increment of repute, or of the means with which to lead a life of leisure, from their patron. They become his courtiers or retainers, servants; and being fed and countenanced by their patron they are indices of his rank and vicarious consumer of his superfluous wealth. Many of these affiliated gentlemen of leisure are at the same time lesser men of substance in their own right; so that some of them are scarcely at all, others only partially, to be rated as vicarious consumers. So many of them, however, as make up the retainer and hangers-on of the patron may be classed as vicarious consumer without qualification. Many of these again, and also many of the other aristocracy of less degree, have in turn attached to their persons a more or less comprehensive group of vicarious consumer in the persons of their wives and children, their servants, retainers, etc. Throughout this graduated scheme of vicarious leisure and vicarious consumption the rule holds that these offices must be performed in some such manner, or under some such circumstance or insignia, as shall point plainly to the master to whom this leisure or consumption pertains, and to whom therefore the resulting increment of good repute of right inures. The consumption and leisure executed by these persons for their master or patron represents an investment on his part with a view to an increase of good fame. As regards feasts and largesses this is obvious enough, and the imputation of repute to the host or patron here takes place immediately, on the ground of common notoriety. Where leisure and consumption is performed vicariously by henchmen and retainers, imputation of the resulting repute to the patron is effected by their residing near his person so that it may be plain to all men from what source they draw. As the group whose good esteem is to be secured in this way grows larger, more patent means are required to indicate the imputation of merit for the leisure performed, and to this end uniforms, badges, and liveries come into vogue. The wearing of uniforms or liveries implies a considerable degree of dependence, and may even be said to be a mark of servitude, real or ostensible. The wearers of uniforms and liveries may be roughly divided into two classes-the free and the servile, or the noble and the ignoble. The services performed by them are likewise divisible into noble and ignoble. Of course the distinction is not observed with strict consistency in practice; the less debasing of the base services and the less honorific of the noble functions are not infrequently merged in the same person. But the general distinction is not on that account to be overlooked. What may add some perplexity is the fact that this fundamental distinction between noble and ignoble, which rests on the nature of the ostensible service performed, is traversed by a secondary distinction into honorific and humiliating, resting on the rank of the person for whom the service is performed or whose livery is worn. So, those offices which are by right the proper employment of the leisure class are noble; such as government, fighting, hunting, the care of arms and accoutrements, and the like--in short, those which may be classed as ostensibly predatory employments. On the other hand, those employments which properly fall to the industrious class are ignoble; such as handicraft or other productive labor, menial services and the like. But a base service performed for a person of very high degree may become a very honorific office; as for instance the office of a Maid of Honor or of a Lady in Waiting to the Queen, or the King's Master of the Horse or his Keeper of the Hounds. The two offices last named suggest a principle of some general bearing. Whenever, as in these cases, the menial service in question has to do directly with the primary leisure employments of fighting and hunting, it easily acquires a reflected honorific character. In this way great honor may come to attach to an employment which in its own nature belongs to the baser sort. In the later development of peaceable industry, the usage of employing an idle corps of uniformed men-at-arms gradually lapses. Vicarious consumption by dependents bearing the insignia of their patron or master narrows down to a corps of liveried menials. In a heightened degree, therefore, the livery comes to be a badge of servitude, or rather servility. Something of a honorific character always attached to the livery of the armed retainer, but this honorific character disappears when the livery becomes the exclusive badge of the menial. The livery becomes obnoxious to nearly all who are required to wear it. We are yet so little removed from a state of effective slavery as still to be fully sensitive to the sting of any imputation of servility. This antipathy asserts itself even in the case of the liveries or uniforms which some corporations prescribe as the distinctive dress of their employees. In this country the aversion even goes the length of discrediting--in a mild and uncertain way--those government employments, military and civil, which require the wearing of a livery or uniform. With the disappearance of servitude, the number of vicarious consumers attached to any one gentleman tends, on the whole, to decrease. The like is of course true, and perhaps in a still higher degree, of the number of dependents who perform vicarious leisure for him. In a general way, though not wholly nor consistently, these two groups coincide. The dependent who was first delegated for these duties was the wife, or the chief wife; and, as would be expected, in the later development of the institution, when the number of persons by whom these duties are customarily performed gradually narrows, the wife remains the last. In the higher grades of society a large volume of both these kinds of service is required; and here the wife is of course still assisted in the work by a more or less numerous corps of menials. But as we descend the social scale, the point is presently reached where the duties of vicarious leisure and consumption devolve upon the wife alone. In the communities of the Western culture, this point is at present found among the lower middle class. And here occurs a curious inversion. It is a fact of common observance that in this lower middle class there is no pretense of leisure on the part of the head of the household. Through force of circumstances it has fallen into disuse. But the middle-class wife still carries on the business of vicarious leisure, for the good name of the household and its master. In descending the social scale in any modern industrial community, the primary fact-the conspicuous leisure of the master of the household-disappears at a relatively high point. The head of the middle-class household has been reduced by economic circumstances to turn his hand to gaining a livelihood by occupations which often partake largely of the character of industry, as in the case of the ordinary business man of today. But the derivative fact-the vicarious leisure and consumption rendered by the wife, and the auxiliary vicarious performance of leisure by menials-remains in vogue as a conventionality which the demands of reputability will not suffer to be slighted. It is by no means an uncommon spectacle to find a man applying himself to work with the utmost assiduity, in order that his wife may in due form render for him that degree of vicarious leisure which the common sense of the time demands. The leisure rendered by the wife in such cases is, of course, not a simple manifestation of idleness or indolence. It almost invariably occurs disguised under some form of work or household duties or social amenities, which prove on analysis to serve little or no ulterior end beyond showing that she does not occupy herself with anything that is gainful or that is of substantial use. As has already been noticed under the head of manners, the greater part of the customary round of domestic cares to which the middle-class housewife gives her time and effort is of this character. Not that the results of her attention to household matters, of a decorative and mundificatory character, are not pleasing to the sense of men trained in middle-class proprieties; but the taste to which these effects of household adornment and tidiness appeal is a taste which has been formed under the selective guidance of a canon of propriety that demands just these evidences of wasted effort. The effects are pleasing to us chiefly because we have been taught to find them pleasing. There goes into these domestic duties much solicitude for a proper combination of form and color, and for other ends that are to be classed as aesthetic in the proper sense of the term; and it is not denied that effects having some substantial aesthetic value are sometimes attained. Pretty much all that is here insisted on is that, as regards these amenities of life, the housewife's efforts are under the guidance of traditions that have been shaped by the law of conspicuously wasteful expenditure of time and substance. If beauty or comfort is achieved-and it is a more or less fortuitous circumstance if they are-they must be achieved by means and methods that commend themselves to the great economic law of wasted effort. The more reputable, "presentable" portion of middle-class household paraphernalia are, on the one hand, items of conspicuous consumption, and on the other hand, apparatus for putting in evidence the vicarious leisure rendered by the housewife. The requirement of vicarious consumption at the hands of the wife continues in force even at a lower point in the pecuniary scale than the requirement of vicarious leisure. At a point below which little if any pretense of wasted effort, in ceremonial cleanness and the like, is observable, and where there is assuredly no conscious attempt at ostensible leisure, decency still requires the wife to consume some goods conspicuously for the reputability of the household and its head. So that, as the latter-day outcome of this evolution of an archaic institution, the wife, who was at the outset the drudge and chattel of the man, both in fact and in theory--the producer of goods for him to consume--has become the ceremonial consumer of goods which he produces. But she still quite unmistakably remains his chattel in theory; for the habitual rendering of vicarious leisure and consumption is the abiding mark of the unfree servant. This vicarious consumption practiced by the household of the middle and lower classes can not be counted as a direct expression of the leisure-class scheme of life, since the household of this pecuniary grade does not belong within the leisure class. It is rather that the leisure-class scheme of life here comes to an expression at the second remove. The leisure class stands at the head of the social structure in point of reputability; and its manner of life and its standards of worth therefore afford the norm of reputability for the community. The observance of these standards, in some degree of approximation, becomes incumbent upon all classes lower in the scale. In modern civilized communities the lines of demarcation between social classes have grown vague and transient, and wherever this happens the norm of reputability imposed by the upper class extends its coercive influence with but slight hindrance down through the social structure to the lowest strata. The result is that the members of each stratum accept as their ideal of decency the scheme of life in vogue in the next higher stratum, and bend their energies to live up to that ideal. On pain of forfeiting their good name and their self-respect in case of failure, they must conform to the accepted code, at least in appearance. The basis on which good repute in any highly organized industrial community ultimately rests is pecuniary strength; and the means of showing pecuniary strength, and so of gaining or retaining a good name, are leisure and a conspicuous consumption of goods. Accordingly, both of these methods are in vogue as far down the scale as it remains possible; and in the lower strata in which the two methods are employed, both offices are in great part delegated to the wife and children of the household. Lower still, where any degree of leisure, even ostensible, has become impracticable for the wife, the conspicuous consumption of goods remains and is carried on by the wife and children. The man of the household also can do something in this direction, and indeed, he commonly does; but with a still lower descent into the levels of indigence--along the margin of the slums--the man, and presently also the children, virtually cease to consume valuable goods for appearances, and the woman remains virtually the sole exponent of the household's pecuniary decency. No class of society, not even the most abjectly poor, forgoes all customary conspicuous consumption. The last items of this category of consumption are not given up except under stress of the direst necessity. Very much of squalor and discomfort will be endured before the last trinket or the last pretense of pecuniary decency is put away. There is no class and no country that has yielded so abjectly before the pressure of physical want as to deny themselves all gratification of this higher or spiritual need. From the foregoing survey of the growth of conspicuous leisure and consumption, it appears that the utility of both alike for the purposes of reputability lies in the element of waste that is common to both. In the one case it is a waste of time and effort, in the other it is a waste of goods. Both are methods of demonstrating the possession of wealth, and the two are conventionally accepted as equivalents. The choice between them is a question of advertising expediency simply, except so far as it may be affected by other standards of propriety, springing from a different source. On grounds of expediency the preference may be given to the one or the other at different stages of the economic development. The question is, which of the two methods will most effectively reach the persons whose convictions it is desired to affect. Usage has answered this question in different ways under different circumstances. So long as the community or social group is small enough and compact enough to be effectually reached by common notoriety alone that is to say, so long as the human environment to which the individual is required to adapt himself in respect of reputability is comprised within his sphere of personal acquaintance and neighborhood gossip--so long the one method is about as effective as the other. Each will therefore serve about equally well during the earlier stages of social growth. But when the differentiation has gone farther and it becomes necessary to reach a wider human environment, consumption begins to hold over leisure as an ordinary means of decency. This is especially true during the later, peaceable economic stage. The means of communication and the mobility of the population now expose the individual to the observation of many persons who have no other means of judging of his reputability than the display of goods (and perhaps of breeding) which he is able to make while he is under their direct observation. The modern organization of industry works in the same direction also by another line. The exigencies of the modern industrial system frequently place individuals and households in juxtaposition between whom there is little contact in any other sense than that of juxtaposition. One's neighbors, mechanically speaking, often are socially not one's neighbors, or even acquaintances; and still their transient good opinion has a high degree of utility. The only practicable means of impressing one's pecuniary ability on these unsympathetic observers of one's everyday life is an unremitting demonstration of ability to pay. In the modern community there is also a more frequent attendance at large gatherings of people to whom one's everyday life is unknown; in such places as churches, theaters, ballrooms, hotels, parks, shops, and the like. In order to impress these transient observers, and to retain one's self-complacency under their observation, the signature of one's pecuniary strength should be written in characters which he who runs may read. It is evident, therefore, that the present trend of the development is in the direction of heightening the utility of conspicuous consumption as compared with leisure. It is also noticeable that the serviceability of consumption as a means of repute, as well as the insistence on it as an element of decency, is at its best in those portions of the community where the human contact of the individual is widest and the mobility of the population is greatest. Conspicuous consumption claims a relatively larger portion of the income of the urban than of the rural population, and the claim is also more imperative. The result is that, in order to keep up a decent appearance, the former habitually live hand-to-mouth to a greater extent than the latter. So it comes, for instance, that the American farmer and his wife and daughters are notoriously less modish in their dress, as well as less urbane in their manners, than the city artisan's family with an equal income. It is not that the city population is by nature much more eager for the peculiar complacency that comes of a conspicuous consumption, nor has the rural population less regard for pecuniary decency. But the provocation to this line of evidence, as well as its transient effectiveness, is more decided in the city. This method is therefore more readily resorted to, and in the struggle to outdo one another the city population push their normal standard of conspicuous consumption to a higher point, with the result that a relatively greater expenditure in this direction is required to indicate a given degree of pecuniary decency in the city. The requirement of conformity to this higher conventional standard becomes mandatory. The standard of decency is higher, class for class, and this requirement of decent appearance must be lived up to on pain of losing caste. Consumption becomes a larger element in the standard of living in the city than in the country. Among the country population its place is to some extent taken by savings and home comforts known through the medium of neighborhood gossip sufficiently to serve the like general purpose of Pecuniary repute. These home comforts and the leisure indulged in--where the indulgence is found--are of course also in great part to be classed as items of conspicuous consumption; and much the same is to be said of the savings. The smaller amount of the savings laid by by the artisan class is no doubt due, in some measure, to the fact that in the case of the artisan the savings are a less effective means of advertisement, relative to the environment in which he is placed, than are the savings of the people living on farms and in the small villages. Among the latter, everybody's affairs, especially everybody's pecuniary status, are known to everybody else. Considered by itself simply--taken in the first degree--this added provocation to which the artisan and the urban laboring classes are exposed may not very seriously decrease the amount of savings; but in its cumulative action, through raising the standard of decent expenditure, its deterrent effect on the tendency to save cannot but be very great. A felicitous illustration of the manner in which this canon of reputability works out its results is seen in the practice of dram-drinking, "treating," and smoking in public places, which is customary among the laborers and handicraftsmen of the towns, and among the lower middle class of the urban population generally Journeymen printers may be named as a class among whom this form of conspicuous consumption has a great vogue, and among whom it carries with it certain well-marked consequences that are often deprecated. The peculiar habits of the class in this respect are commonly set down to some kind of an ill-defined moral deficiency with which this class is credited, or to a morally deleterious influence which their occupation is supposed to exert, in some unascertainable way, upon the men employed in it. The state of the case for the men who work in the composition and press rooms of the common run of printing-houses may be summed up as follows. Skill acquired in any printing-house or any city is easily turned to account in almost any other house or city; that is to say, the inertia due to special training is slight. Also, this occupation requires more than the average of intelligence and general information, and the men employed in it are therefore ordinarily more ready than many others to take advantage of any slight variation in the demand for their labor from one place to another. The inertia due to the home feeling is consequently also slight. At the same time the wages in the trade are high enough to make movement from place to place relatively easy. The result is a great mobility of the labor employed in printing; perhaps greater than in any other equally well-defined and considerable body of workmen. These men are constantly thrown in contact with new groups of acquaintances, with whom the relations established are transient or ephemeral, but whose good opinion is valued none the less for the time being. The human proclivity to ostentation, reenforced by sentiments of good-fellowship, leads them to spend freely in those directions which will best serve these needs. Here as elsewhere prescription seizes upon the custom as soon as it gains a vogue, and incorporates it in the accredited standard of decency. The next step is to make this standard of decency the point of departure for a new move in advance in the same direction--for there is no merit in simple spiritless conformity to a standard of dissipation that is lived up to as a matter of course by everyone in the trade. The greater prevalence of dissipation among printers than among the average of workmen is accordingly attributable, at least in some measure, to the greater ease of movement and the more transient character of acquaintance and human contact in this trade. But the substantial ground of this high requirement in dissipation is in the last analysis no other than that same propensity for a manifestation of dominance and pecuniary decency which makes the French peasant-proprietor parsimonious and frugal, and induces the American millionaire to found colleges, hospitals and museums. If the canon of conspicuous consumption were not offset to a considerable extent by other features of human nature, alien to it, any saving should logically be impossible for a population situated as the artisan and laboring classes of the cities are at present, however high their wages or their income might be. But there are other standards of repute and other, more or less imperative, canons of conduct, besides wealth and its manifestation, and some of these come in to accentuate or to qualify the broad, fundamental canon of conspicuous waste. Under the simple test of effectiveness for advertising, we should expect to find leisure and the conspicuous consumption of goods dividing the field of pecuniary emulation pretty evenly between them at the outset. Leisure might then be expected gradually to yield ground and tend to obsolescence as the economic development goes forward, and the community increases in size; while the conspicuous consumption of goods should gradually gain in importance, both absolutely and relatively, until it had absorbed all the available product, leaving nothing over beyond a bare livelihood. But the actual course of development has been somewhat different from this ideal scheme. Leisure held the first place at the start, and came to hold a rank very much above wasteful consumption of goods, both as a direct exponent of wealth and as an element in the standard of decency, during the quasi-peaceable culture. From that point onward, consumption has gained ground, until, at present, it unquestionably holds the primacy, though it is still far from absorbing the entire margin of production above the subsistence minimum. The early ascendency of leisure as a means of reputability is traceable to the archaic distinction between noble and ignoble employments. Leisure is honorable and becomes imperative partly because it shows exemption from ignoble labor. The archaic differentiation into noble and ignoble classes is based on an invidious distinction between employments as honorific or debasing; and this traditional distinction grows into an imperative canon of decency during the early quasi-peaceable stage. Its ascendency is furthered by the fact that leisure is still fully as effective an evidence of wealth as consumption. Indeed, so effective is it in the relatively small and stable human environment to which the individual is exposed at that cultural stage, that, with the aid of the archaic tradition which deprecates all productive labor, it gives rise to a large impecunious leisure class, and it even tends to limit the production of the community's industry to the subsistence minimum. This extreme inhibition of industry is avoided because slave labor, working under a compulsion more vigorous than that of reputability, is forced to turn out a product in excess of the subsistence minimum of the working class. The subsequent relative decline in the use of conspicuous leisure as a basis of repute is due partly to an increasing relative effectiveness of consumption as an evidence of wealth; but in part it is traceable to another force, alien, and in some degree antagonistic, to the usage of conspicuous waste. This alien factor is the instinct of workmanship. Other circumstances permitting, that instinct disposes men to look with favor upon productive efficiency and on whatever is of human use. It disposes them to deprecate waste of substance or effort. The instinct of workmanship is present in all men, and asserts itself even under very adverse circumstances. So that however wasteful a given expenditure may be in reality, it must at least have some colorable excuse in the way of an ostensible purpose. The manner in which, under special circumstances, the instinct eventuates in a taste for exploit and an invidious discrimination between noble and ignoble classes has been indicated in an earlier chapter. In so far as it comes into conflict with the law of conspicuous waste, the instinct of workmanship expresses itself not so much in insistence on substantial usefulness as in an abiding sense of the odiousness and aesthetic impossibility of what is obviously futile. Being of the nature of an instinctive affection, its guidance touches chiefly and immediately the obvious and apparent violations of its requirements. It is only less promptly and with less constraining force that it reaches such substantial violations of its requirements as are appreciated only upon reflection. So long as all labor continues to be performed exclusively or usually by slaves, the baseness of all productive effort is too constantly and deterrently present in the mind of men to allow the instinct of workmanship seriously to take effect in the direction of industrial usefulness; but when the quasi-peaceable stage (with slavery and status) passes into the peaceable stage of industry (with wage labor and cash payment) the instinct comes more effectively into play. It then begins aggressively to shape men's views of what is meritorious, and asserts itself at least as an auxiliary canon of self-complacency. All extraneous considerations apart, those persons (adult) are but a vanishing minority today who harbor no inclination to the accomplishment of some end, or who are not impelled of their own motion to shape some object or fact or relation for human use. The propensity may in large measure be overborne by the more immediately constraining incentive to a reputable leisure and an avoidance of indecorous usefulness, and it may therefore work itself out in make-believe only; as for instance in "social duties," and in quasi-artistic or quasi-scholarly accomplishments, in the care and decoration of the house, in sewing-circle activity or dress reform, in proficiency at dress, cards, yachting, golf, and various sports. But the fact that it may under stress of circumstances eventuate in inanities no more disproves the presence of the instinct than the reality of the brooding instinct is disproved by inducing a hen to sit on a nestful of china eggs. This latter-day uneasy reaching-out for some form of purposeful activity that shall at the same time not be indecorously productive of either individual or collective gain marks a difference of attitude between the modern leisure class and that of the quasi-peaceable stage. At the earlier stage, as was said above, the all-dominating institution of slavery and status acted resistlessly to discountenance exertion directed to other than naively predatory ends. It was still possible to find some habitual employment for the inclination to action in the way of forcible aggression or repression directed against hostile groups or against the subject classes within the group; and this served to relieve the pressure and draw off the energy of the leisure class without a resort to actually useful, or even ostensibly useful employments. The practice of hunting also served the same purpose in some degree. When the community developed into a peaceful industrial organization, and when fuller occupation of the land had reduced the opportunities for the hunt to an inconsiderable residue, the pressure of energy seeking purposeful employment was left to find an outlet in some other direction. The ignominy which attaches to useful effort also entered upon a less acute phase with the disappearance of compulsory labor; and the instinct of workmanship then came to assert itself with more persistence and consistency. The line of least resistance has changed in some measure, and the energy which formerly found a vent in predatory activity, now in part takes the direction of some ostensibly useful end. Ostensibly purposeless leisure has come to be deprecated, especially among that large portion of the leisure class whose plebeian origin acts to set them at variance with the tradition of the otium cum dignitate. But that canon of reputability which discountenances all employment that is of the nature of productive effort is still at hand, and will permit nothing beyond the most transient vogue to any employment that is substantially useful or productive. The consequence is that a change has been wrought in the conspicuous leisure practiced by the leisure class; not so much in substance as in form. A reconciliation between the two conflicting requirements is effected by a resort to make-believe. Many and intricate polite observances and social duties of a ceremonial nature are developed; many organizations are founded, with some specious object of amelioration embodied in their official style and title; there is much coming and going, and a deal of talk, to the end that the talkers may not have occasion to reflect on what is the effectual economic value of their traffic. And along with the make-believe of purposeful employment, and woven inextricably into its texture, there is commonly, if not invariably, a more or less appreciable element of purposeful effort directed to some serious end. In the narrower sphere of vicarious leisure a similar change has gone forward. Instead of simply passing her time in visible idleness, as in the best days of the patriarchal regime, the housewife of the advanced peaceable stage applies herself assiduously to household cares. The salient features of this development of domestic service have already been indicated. Throughout the entire evolution of conspicuous expenditure, whether of goods or of services or human life, runs the obvious implication that in order to effectually mend the consumer's good fame it must be an expenditure of superfluities. In order to be reputable it must be wasteful. No merit would accrue from the consumption of the bare necessaries of life, except by comparison with the abjectly poor who fall short even of the subsistence minimum; and no standard of expenditure could result from such a comparison, except the most prosaic and unattractive level of decency. A standard of life would still be possible which should admit of invidious comparison in other respects than that of opulence; as, for instance, a comparison in various directions in the manifestation of moral, physical, intellectual, or aesthetic force. Comparison in all these directions is in vogue today; and the comparison made in these respects is commonly so inextricably bound up with the pecuniary comparison as to be scarcely distinguishable from the latter. This is especially true as regards the current rating of expressions of intellectual and aesthetic force or proficiency' so that we frequently interpret as aesthetic or intellectual a difference which in substance is pecuniary only. The use of the term "waste" is in one respect an unfortunate one. As used in the speech of everyday life the word carries an undertone of deprecation. It is here used for want of a better term that will adequately describe the same range of motives and of phenomena, and it is not to be taken in an odious sense, as implying an illegitimate expenditure of human products or of human life. In the view of economic theory the expenditure in question is no more and no less legitimate than any other expenditure. It is here called "waste" because this expenditure does not serve human life or human well-being on the whole, not because it is waste or misdirection of effort or expenditure as viewed from the standpoint of the individual consumer who chooses it. If he chooses it, that disposes of the question of its relative utility to him, as compared with other forms of consumption that would not be deprecated on account of their wastefulness. Whatever form of expenditure the consumer chooses, or whatever end he seeks in making his choice, has utility to him by virtue of his preference. As seen from the point of view of the individual consumer, the question of wastefulness does not arise within the scope of economic theory proper. The use of the word "waste" as a technical term, therefore, implies no deprecation of the motives or of the ends sought by the consumer under this canon of conspicuous waste. But it is, on other grounds, worth noting that the term "waste" in the language of everyday life implies deprecation of what is characterized as wasteful. This common-sense implication is itself an outcropping of the instinct of workmanship. The popular reprobation of waste goes to say that in order to be at peace with himself the common man must be able to see in any and all human effort and human enjoyment an enhancement of life and well-being on the whole. In order to meet with unqualified approval, any economic fact must approve itself under the test of impersonal usefulness--usefulness as seen from the point of view of the generically human. Relative or competitive advantage of one individual in comparison with another does not satisfy the economic conscience, and therefore competitive expenditure has not the approval of this conscience. In strict accuracy nothing should be included under the head of conspicuous waste but such expenditure as is incurred on the ground of an invidious pecuniary comparison. But in order to bring any given item or element in under this head it is not necessary that it should be recognized as waste in this sense by the person incurring the expenditure. It frequently happens that an element of the standard of living which set out with being primarily wasteful, ends with becoming, in the apprehension of the consumer, a necessary of life; and it may in this way become as indispensable as any other item of the consumer's habitual expenditure. As items which sometimes fall under this head, and are therefore available as illustrations of the manner in which this principle applies, may be cited carpets and tapestries, silver table service, waiter's services, silk hats, starched linen, many articles of jewelry and of dress. The indispensability of these things after the habit and the convention have been formed, however, has little to say in the classification of expenditures as waste or not waste in the technical meaning of the word. The test to which all expenditure must be brought in an attempt to decide that point is the question whether it serves directly to enhance human life on the whole-whether it furthers the life process taken impersonally. For this is the basis of award of the instinct of workmanship, and that instinct is the court of final appeal in any question of economic truth or adequacy. It is a question as to the award rendered by a dispassionate common sense. The question is, therefore, not whether, under the existing circumstances of individual habit and social custom, a given expenditure conduces to the particular consumer's gratification or peace of mind; but whether, aside from acquired tastes and from the canons of usage and conventional decency, its result is a net gain in comfort or in the fullness of life. Customary expenditure must be classed under the head of waste in so far as the custom on which it rests is traceable to the habit of making an invidious pecuniary comparison-in so far as it is conceived that it could not have become customary and prescriptive without the backing of this principle of pecuniary reputability or relative economic success. It is obviously not necessary that a given object of expenditure should be exclusively wasteful in order to come in under the category of conspicuous waste. An article may be useful and wasteful both, and its utility to the consumer may be made up of use and waste in the most varying proportions. Consumable goods, and even productive goods, generally show the two elements in combination, as constituents of their utility; although, in a general way, the element of waste tends to predominate in articles of consumption, while the contrary is true of articles designed for productive use. Even in articles which appear at first glance to serve for pure ostentation only, it is always possible to detect the presence of some, at least ostensible, useful purpose; and on the other hand, even in special machinery and tools contrived for some particular industrial process, as well as in the rudest appliances of human industry, the traces of conspicuous waste, or at least of the habit of ostentation, usually become evident on a close scrutiny. It would be hazardous to assert that a useful purpose is ever absent from the utility of any article or of any service, however obviously its prime purpose and chief element is conspicuous waste; and it would be only less hazardous to assert of any primarily useful product that the element of waste is in no way concerned in its value, immediately or remotely. Chapter Five ~~ The Pecuniary Standard of Living For the great body of the people in any modern community, the proximate ground of expenditure in excess of what is required for physical comfort is not a conscious effort to excel in the expensiveness of their visible consumption, so much as it is a desire to live up to the conventional standard of decency in the amount and grade of goods consumed. This desire is not guided by a rigidly invariable standard, which must be lived up to, and beyond which there is no incentive to go. The standard is flexible; and especially it is indefinitely extensible, if only time is allowed for habituation to any increase in pecuniary ability and for acquiring facility in the new and larger scale of expenditure that follows such an increase. It is much more difficult to recede from a scale of expenditure once adopted than it is to extend the accustomed scale in response to an accession of wealth. Many items of customary expenditure prove on analysis to be almost purely wasteful, and they are therefore honorific only, but after they have once been incorporated into the scale of decent consumption, and so have become an integral part of one's scheme of life, it is quite as hard to give up these as it is to give up many items that conduce directly to one's physical comfort, or even that may be necessary to life and health. That is to say, the conspicuously wasteful honorific expenditure that confers spiritual well-being may become more indispensable than much of that expenditure which ministers to the "lower" wants of physical well-being or sustenance only. It is notoriously just as difficult to recede from a "high" standard of living as it is to lower a standard which is already relatively low; although in the former case the difficulty is a moral one, while in the latter it may involve a material deduction from the physical comforts of life. But while retrogression is difficult, a fresh advance in conspicuous expenditure is relatively easy; indeed, it takes place almost as a matter of course. In the rare cases where it occurs, a failure to increase one's visible consumption when the means for an increase are at hand is felt in popular apprehension to call for explanation, and unworthy motives of miserliness are imputed to those who fall short in this respect. A prompt response to the stimulus, on the other hand, is accepted as the normal effect. This suggests that the standard of expenditure which commonly guides our efforts is not the average, ordinary expenditure already achieved; it is an ideal of consumption that lies just beyond our reach, or to reach which requires some strain. The motive is emulation--the stimulus of an invidious comparison which prompts us to outdo those with whom we are in the habit of classing ourselves. Substantially the same proposition is expressed in the commonplace remark that each class envies and emulates the class next above it in the social scale, while it rarely compares itself with those below or with those who are considerably in advance. That is to say, in other words, our standard of decency in expenditure, as in other ends of emulation, is set by the usage of those next above us in reputability; until, in this way, especially in any community where class distinctions are somewhat vague, all canons of reputability and decency, and all standards of consumption, are traced back by insensible gradations to the usages and habits of thought of the highest social and pecuniary class--the wealthy leisure class. It is for this class to determine, in general outline, what scheme of Life the community shall accept as decent or honorific; and it is their office by precept and example to set forth this scheme of social salvation in its highest, ideal form. But the higher leisure class can exercise this quasi-sacerdotal office only under certain material limitations. The class cannot at discretion effect a sudden revolution or reversal of the popular habits of thought with respect to any of these ceremonial requirements. It takes time for any change to permeate the mass and change the habitual attitude of the people; and especially it takes time to change the habits of those classes that are socially more remote from the radiant body. The process is slower where the mobility of the population is less or where the intervals between the several classes are wider and more abrupt. But if time be allowed, the scope of the discretion of the leisure class as regards questions of form and detail in the community's scheme of life is large; while as regards the substantial principles of reputability, the changes which it can effect lie within a narrow margin of tolerance. Its example and precept carries the force of prescription for all classes below it; but in working out the precepts which are handed down as governing the form and method of reputability--in shaping the usages and the spiritual attitude of the lower classes--this authoritative prescription constantly works under the selective guidance of the canon of conspicuous waste, tempered in varying degree by the instinct of workmanship. To those norms is to be added another broad principle of human nature--the predatory animus--which in point of generality and of psychological content lies between the two just named. The effect of the latter in shaping the accepted scheme of life is yet to be discussed. The canon of reputability, then, must adapt itself to the economic circumstances, the traditions, and the degree of spiritual maturity of the particular class whose scheme of life it is to regulate. It is especially to be noted that however high its authority and however true to the fundamental requirements of reputability it may have been at its inception, a specific formal observance can under no circumstances maintain itself in force if with the lapse of time or on its transmission to a lower pecuniary class it is found to run counter to the ultimate ground of decency among civilized peoples, namely, serviceability for the purpose of an invidious comparison in pecuniary success. It is evident that these canons of expenditure have much to say in determining the standard of living for any community and for any class. It is no less evident that the standard of living which prevails at any time or at any given social altitude will in its turn have much to say as to the forms which honorific expenditure will take, and as to the degree to which this "higher" need will dominate a people's consumption. In this respect the control exerted by the accepted standard of living is chiefly of a negative character; it acts almost solely to prevent recession from a scale of conspicuous expenditure that has once become habitual. A standard of living is of the nature of habit. It is an habitual scale and method of responding to given stimuli. The difficulty in the way of receding from an accustomed standard is the difficulty of breaking a habit that has once been formed. The relative facility with which an advance in the standard is made means that the life process is a process of unfolding activity and that it will readily unfold in a new direction whenever and wherever the resistance to self-expression decreases. But when the habit of expression along such a given line of low resistance has once been formed, the discharge will seek the accustomed outlet even after a change has taken place in the environment whereby the external resistance has appreciably risen. That heightened facility of expression in a given direction which is called habit may offset a considerable increase in the resistance offered by external circumstances to the unfolding of life in the given direction. As between the various habits, or habitual modes and directions of expression, which go to make up an individual's standard of living, there is an appreciable difference in point of persistence under counteracting circumstances and in point of the degree of imperativeness with which the discharge seeks a given direction. That is to say, in the language of current economic theory, while men are reluctant to retrench their expenditures in any direction, they are more reluctant to retrench in some directions than in others; so that while any accustomed consumption is reluctantly given up, there are certain lines of consumption which are given up with relatively extreme reluctance. The articles or forms of consumption to which the consumer clings with the greatest tenacity are commonly the so-called necessaries of life, or the subsistence minimum. The subsistence minimum is of course not a rigidly determined allowance of goods, definite and invariable in kind and quantity; but for the purpose in hand it may be taken to comprise a certain, more or less definite, aggregate of consumption required for the maintenance of life. This minimum, it may be assumed, is ordinarily given up last in case of a progressive retrenchment of expenditure. That is to say, in a general way, the most ancient and ingrained of the habits which govern the individual's life--those habits that touch his existence as an organism--are the most persistent and imperative. Beyond these come the higher wants--later-formed habits of the individual or the race--in a somewhat irregular and by no means invariable gradation. Some of these higher wants, as for instance the habitual use of certain stimulants, or the need of salvation (in the eschatological sense), or of good repute, may in some cases take precedence of the lower or more elementary wants. In general, the longer the habituation, the more unbroken the habit, and the more nearly it coincides with previous habitual forms of the life process, the more persistently will the given habit assert itself. The habit will be stronger if the particular traits of human nature which its action involves, or the particular aptitudes that find exercise in it, are traits or aptitudes that are already largely and profoundly concerned in the life process or that are intimately bound up with the life history of the particular racial stock. The varying degrees of ease with which different habits are formed by different persons, as well as the varying degrees of reluctance with which different habits are given up, goes to say that the formation of specific habits is not a matter of length of habituation simply. Inherited aptitudes and traits of temperament count for quite as much as length of habituation in deciding what range of habits will come to dominate any individual's scheme of life. And the prevalent type of transmitted aptitudes, or in other words the type of temperament belonging to the dominant ethnic element in any community, will go far to decide what will be the scope and form of expression of the community's habitual life process. How greatly the transmitted idiosyncrasies of aptitude may count in the way of a rapid and definitive formation of habit in individuals is illustrated by the extreme facility with which an all-dominating habit of alcoholism is sometimes formed; or in the similar facility and the similarly inevitable formation of a habit of devout observances in the case of persons gifted with a special aptitude in that direction. Much the same meaning attaches to that peculiar facility of habituation to a specific human environment that is called romantic love. Men differ in respect of transmitted aptitudes, or in respect of the relative facility with which they unfold their life activity in particular directions; and the habits which coincide with or proceed upon a relatively strong specific aptitude or a relatively great specific facility of expression become of great consequence to the man's well-being. The part played by this element of aptitude in determining the relative tenacity of the several habits which constitute the standard of living goes to explain the extreme reluctance with which men give up any habitual expenditure in the way of conspicuous consumption. The aptitudes or propensities to which a habit of this kind is to be referred as its ground are those aptitudes whose exercise is comprised in emulation; and the propensity for emulation--for invidious comparison--is of ancient growth and is a pervading trait of human nature. It is easily called into vigorous activity in any new form, and it asserts itself with great insistence under any form under which it has once found habitual expression. When the individual has once formed the habit of seeking expression in a given line of honorific expenditure--when a given set of stimuli have come to be habitually responded to in activity of a given kind and direction under the guidance of these alert and deep-reaching propensities of emulation--it is with extreme reluctance that such an habitual expenditure is given up. And on the other hand, whenever an accession of pecuniary strength puts the individual in a position to unfold his life process in larger scope and with additional reach, the ancient propensities of the race will assert themselves in determining the direction which the new unfolding of life is to take. And those propensities which are already actively in the field under some related form of expression, which are aided by the pointed suggestions afforded by a current accredited scheme of life, and for the exercise of which the material means and opportunities are readily available--these will especially have much to say in shaping the form and direction in which the new accession to the individual's aggregate force will assert itself. That is to say, in concrete terms, in any community where conspicuous consumption is an element of the scheme of life, an increase in an individual's ability to pay is likely to take the form of an expenditure for some accredited line of conspicuous consumption. With the exception of the instinct of self-preservation, the propensity for emulation is probably the strongest and most alert and persistent of the economic motives proper. In an industrial community this propensity for emulation expresses itself in pecuniary emulation; and this, so far as regards the Western civilized communities of the present, is virtually equivalent to saying that it expresses itself in some form of conspicuous waste. The need of conspicuous waste, therefore, stands ready to absorb any increase in the community's industrial efficiency or output of goods, after the most elementary physical wants have been provided for. Where this result does not follow, under modern conditions, the reason for the discrepancy is commonly to be sought in a rate of increase in the individual's wealth too rapid for the habit of expenditure to keep abreast of it; or it may be that the individual in question defers the conspicuous consumption of the increment to a later date--ordinarily with a view to heightening the spectacular effect of the aggregate expenditure contemplated. As increased industrial efficiency makes it possible to procure the means of livelihood with less labor, the energies of the industrious members of the community are bent to the compassing of a higher result in conspicuous expenditure, rather than slackened to a more comfortable pace. The strain is not lightened as industrial efficiency increases and makes a lighter strain possible, but the increment of output is turned to use to meet this want, which is indefinitely expansible, after the manner commonly imputed in economic theory to higher or spiritual wants. It is owing chiefly to the presence of this element in the standard of living that J. S. Mill was able to say that "hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being." The accepted standard of expenditure in the community or in the class to which a person belongs largely determines what his standard of living will be. It does this directly by commending itself to his common sense as right and good, through his habitually contemplating it and assimilating the scheme of life in which it belongs; but it does so also indirectly through popular insistence on conformity to the accepted scale of expenditure as a matter of propriety, under pain of disesteem and ostracism. To accept and practice the standard of living which is in vogue is both agreeable and expedient, commonly to the point of being indispensable to personal comfort and to success in life. The standard of living of any class, so far as concerns the element of conspicuous waste, is commonly as high as the earning capacity of the class will permit--with a constant tendency to go higher. The effect upon the serious activities of men is therefore to direct them with great singleness of purpose to the largest possible acquisition of wealth, and to discountenance work that brings no pecuniary gain. At the same time the effect on consumption is to concentrate it upon the lines which are most patent to the observers whose good opinion is sought; while the inclinations and aptitudes whose exercise does not involve a honorific expenditure of time or substance tend to fall into abeyance through disuse. Through this discrimination in favor of visible consumption it has come about that the domestic life of most classes is relatively shabby, as compared with the éclat of that overt portion of their life that is carried on before the eyes of observers. As a secondary consequence of the same discrimination, people habitually screen their private life from observation. So far as concerns that portion of their consumption that may without blame be carried on in secret, they withdraw from all contact with their neighbors, hence the exclusiveness of people, as regards their domestic life, in most of the industrially developed communities; and hence, by remoter derivation, the habit of privacy and reserve that is so large a feature in the code of proprieties of the better class in all communities. The low birthrate of the classes upon whom the requirements of reputable expenditure fall with great urgency is likewise traceable to the exigencies of a standard of living based on conspicuous waste. The conspicuous consumption, and the consequent increased expense, required in the reputable maintenance of a child is very considerable and acts as a powerful deterrent. It is probably the most effectual of the Malthusian prudential checks. The effect of this factor of the standard of living, both in the way of retrenchment in the obscurer elements of consumption that go to physical comfort and maintenance, and also in the paucity or absence of children, is perhaps seen at its best among the classes given to scholarly pursuits. Because of a presumed superiority and scarcity of the gifts and attainments that characterize their life, these classes are by convention subsumed under a higher social grade than their pecuniary grade should warrant. The scale of decent expenditure in their case is pitched correspondingly high, and it consequently leaves an exceptionally narrow margin disposable for the other ends of life. By force of circumstances, their habitual sense of what is good and right in these matters, as well as the expectations of the community in the way of pecuniary decency among the learned, are excessively high--as measured by the prevalent degree of opulence and earning capacity of the class, relatively to the non-scholarly classes whose social equals they nominally are. In any modern community where there is no priestly monopoly of these occupations, the people of scholarly pursuits are unavoidably thrown into contact with classes that are pecuniarily their superiors. The high standard of pecuniary decency in force among these superior classes is transfused among the scholarly classes with but little mitigation of its rigor; and as a consequence there is no class of the community that spends a larger proportion of its substance in conspicuous waste than these. Chapter Six ~~ Pecuniary Canons of Taste The caution has already been repeated more than once, that while the regulating norm of consumption is in large part the requirement of conspicuous waste, it must not be understood that the motive on which the consumer acts in any given case is this principle in its bald, unsophisticated form. Ordinarily his motive is a wish to conform to established usage, to avoid unfavorable notice and comment, to live up to the accepted canons of decency in the kind, amount, and grade of goods consumed, as well as in the decorous employment of his time and effort. In the common run of cases this sense of prescriptive usage is present in the motives of the consumer and exerts a direct constraining force, especially as regards consumption carried on under the eyes of observers. But a considerable element of prescriptive expensiveness is observable also in consumption that does not in any appreciable degree become known to outsiders--as, for instance, articles of underclothing, some articles of food, kitchen utensils, and other household apparatus designed for service rather than for evidence. In all such useful articles a close scrutiny will discover certain features which add to the cost and enhance the commercial value of the goods in question, but do not proportionately increase the serviceability of these articles for the material purposes which alone they ostensibly are designed to serve. Under the selective surveillance of the law of conspicuous waste there grows up a code of accredited canons of consumption, the effect of which is to hold the consumer up to a standard of expensiveness and wastefulness in his consumption of goods and in his employment of time and effort. This growth of prescriptive usage has an immediate effect upon economic life, but it has also an indirect and remoter effect upon conduct in other respects as well. Habits of thought with respect to the expression of life in any given direction unavoidably affect the habitual view of what is good and right in life in other directions also. In the organic complex of habits of thought which make up the substance of an individual's conscious life the economic interest does not lie isolated and distinct from all other interests. Something, for instance, has already been said of its relation to the canons of reputability. The principle of conspicuous waste guides the formation of habits of thought as to what is honest and reputable in life and in commodities. In so doing, this principle will traverse other norms of conduct which do not primarily have to do with the code of pecuniary honor, but which have, directly or incidentally, an economic significance of some magnitude. So the canon of honorific waste may, immediately or remotely, influence the sense of duty, the sense of beauty, the sense of utility, the sense of devotional or ritualistic fitness, and the scientific sense of truth. It is scarcely necessary to go into a discussion here of the particular points at which, or the particular manner in which, the canon of honorific expenditure habitually traverses the canons of moral conduct. The matter is one which has received large attention and illustration at the hands of those whose office it is to watch and admonish with respect to any departures from the accepted code of morals. In modern communities, where the dominant economic and legal feature of the community's life is the institution of private property, one of the salient features of the code of morals is the sacredness of property. There needs no insistence or illustration to gain assent to the proposition that the habit of holding private property inviolate is traversed by the other habit of seeking wealth for the sake of the good repute to be gained through its conspicuous consumption. Most offenses against property, especially offenses of an appreciable magnitude, come under this head. It is also a matter of common notoriety and byword that in offenses which result in a large accession of property to the offender he does not ordinarily incur the extreme penalty or the extreme obloquy with which his offenses would be visited on the ground of the naive moral code alone. The thief or swindler who has gained great wealth by his delinquency has a better chance than the small thief of escaping the rigorous penalty of the law and some good repute accrues to him from his increased wealth and from his spending the irregularly acquired possessions in a seemly manner. A well-bred expenditure of his booty especially appeals with great effect to persons of a cultivated sense of the proprieties, and goes far to mitigate the sense of moral turpitude with which his dereliction is viewed by them. It may be noted also--and it is more immediately to the point--that we are all inclined to condone an offense against property in the case of a man whose motive is the worthy one of providing the means of a "decent" manner of life for his wife and children. If it is added that the wife has been "nurtured in the lap of luxury," that is accepted as an additional extenuating circumstance. That is to say, we are prone to condone such an offense where its aim is the honorific one of enabling the offender's wife to perform for him such an amount of vicarious consumption of time and substance as is demanded by the standard of pecuniary decency. In such a case the habit of approving the accustomed degree of conspicuous waste traverses the habit of deprecating violations of ownership, to the extent even of sometimes leaving the award of praise or blame uncertain. This is peculiarly true where the dereliction involves an appreciable predatory or piratical element. This topic need scarcely be pursued further here; but the remark may not be out of place that all that considerable body of morals that clusters about the concept of an inviolable ownership is itself a psychological precipitate of the traditional meritoriousness of wealth. And it should be added that this wealth which is held sacred is valued primarily for the sake of the good repute to be got through its conspicuous consumption. The bearing of pecuniary decency upon the scientific spirit or the quest of knowledge will be taken up in some detail in a separate chapter. Also as regards the sense of devout or ritual merit and adequacy in this connection, little need be said in this place. That topic will also come up incidentally in a later chapter. Still, this usage of honorific expenditure has much to say in shaping popular tastes as to what is right and meritorious in sacred matters, and the bearing of the principle of conspicuous waste upon some of the commonplace devout observances and conceits may therefore be pointed out. Obviously, the canon of conspicuous waste is accountable for a great portion of what may be called devout consumption; as, e.g., the consumption of sacred edifices, vestments, and other goods of the same class. Even in those modern cults to whose divinities is imputed a predilection for temples not built with hands, the sacred buildings and the other properties of the cult are constructed and decorated with some view to a reputable degree of wasteful expenditure. And it needs but little either of observation or introspection--and either will serve the turn--to assure us that the expensive splendor of the house of worship has an appreciable uplifting and mellowing effect upon the worshipper's frame of mind. It will serve to enforce the same fact if we reflect upon the sense of abject shamefulness with which any evidence of indigence or squalor about the sacred place affects all beholders. The accessories of any devout observance should be pecuniarily above reproach. This requirement is imperative, whatever latitude may be allowed with regard to these accessories in point of aesthetic or other serviceability. It may also be in place to notice that in all communities, especially in neighborhoods where the standard of pecuniary decency for dwellings is not high, the local sanctuary is more ornate, more conspicuously wasteful in its architecture and decoration, than the dwelling houses of the congregation. This is true of nearly all denominations and cults, whether Christian or Pagan, but it is true in a peculiar degree of the older and maturer cults. At the same time the sanctuary commonly contributes little if anything to the physical comfort of the members. Indeed, the sacred structure not only serves the physical well-being of the members to but a slight extent, as compared with their humbler dwelling-houses; but it is felt by all men that a right and enlightened sense of the true, the beautiful, and the good demands that in all expenditure on the sanctuary anything that might serve the comfort of the worshipper should be conspicuously absent. If any element of comfort is admitted in the fittings of the sanctuary, it should be at least scrupulously screened and masked under an ostensible austerity. In the most reputable latter-day houses of worship, where no expense is spared, the principle of austerity is carried to the length of making the fittings of the place a means of mortifying the flesh, especially in appearance. There are few persons of delicate tastes, in the matter of devout consumption to whom this austerely wasteful discomfort does not appeal as intrinsically right and good. Devout consumption is of the nature of vicarious consumption. This canon of devout austerity is based on the pecuniary reputability of conspicuously wasteful consumption, backed by the principle that vicarious consumption should conspicuously not conduce to the comfort of the vicarious consumer. The sanctuary and its fittings have something of this austerity in all the cults in which the saint or divinity to whom the sanctuary pertains is not conceived to be present and make personal use of the property for the gratification of luxurious tastes imputed to him. The character of the sacred paraphernalia is somewhat different in this respect in those cults where the habits of life imputed to the divinity more nearly approach those of an earthly patriarchal potentate--where he is conceived to make use of these consumable goods in person. In the latter case the sanctuary and its fittings take on more of the fashion given to goods destined for the conspicuous consumption of a temporal master or owner. On the other hand, where the sacred apparatus is simply employed in the divinity's service, that is to say, where it is consumed vicariously on his account by his servants, there the sacred properties take the character suited to goods that are destined for vicarious consumption only. In the latter case the sanctuary and the sacred apparatus are so contrived as not to enhance the comfort or fullness of life of the vicarious consumer, or at any rate not to convey the impression that the end of their consumption is the consumer's comfort. For the end of vicarious consumption is to enhance, not the fullness of life of the consumer, but the pecuniary repute of the master for whose behoof the consumption takes place. Therefore priestly vestments are notoriously expensive, ornate, and inconvenient; and in the cults where the priestly servitor of the divinity is not conceived to serve him in the capacity of consort, they are of an austere, comfortless fashion. And such it is felt that they should be. It is not only in establishing a devout standard of decent expensiveness that the principle of waste invades the domain of the canons of ritual serviceability. It touches the ways as well as the means, and draws on vicarious leisure as well as on vicarious consumption. Priestly demeanor at its best is aloof, leisurely, perfunctory, and uncontaminated with suggestions of sensuous pleasure. This holds true, in different degrees of course, for the different cults and denominations; but in the priestly life of all anthropomorphic cults the marks of a vicarious consumption of time are visible. The same pervading canon of vicarious leisure is also visibly present in the exterior details of devout observances and need only be pointed out in order to become obvious to all beholders. All ritual has a notable tendency to reduce itself to a rehearsal of formulas. This development of formula is most noticeable in the maturer cults, which have at the same time a more austere, ornate, and severe priestly life and garb; but it is perceptible also in the forms and methods of worship of the newer and fresher sects, whose tastes in respect of priests, vestments, and sanctuaries are less exacting. The rehearsal of the service (the term "service" carries a suggestion significant for the point in question) grows more perfunctory as the cult gains in age and consistency, and this perfunctoriness of the rehearsal is very pleasing to the correct devout taste. And with a good reason, for the fact of its being perfunctory goes to say pointedly that the master for whom it is performed is exalted above the vulgar need of actually proficuous service on the part of his servants. They are unprofitable servants, and there is an honorific implication for their master in their remaining unprofitable. It is needless to point out the close analogy at this point between the priestly office and the office of the footman. It is pleasing to our sense of what is fitting in these matters, in either case, to recognize in the obvious perfunctoriness of the service that it is a pro forma execution only. There should be no show of agility or of dexterous manipulation in the execution of the priestly office, such as might suggest a capacity for turning off the work. In all this there is of course an obvious implication as to the temperament, tastes, propensities, and habits of life imputed to the divinity by worshippers who live under the tradition of these pecuniary canons of reputability. Through its pervading men's habits of thought, the principle of conspicuous waste has colored the worshippers' notions of the divinity and of the relation in which the human subject stands to him. It is of course in the more naive cults that this suffusion of pecuniary beauty is most patent, but it is visible throughout. All peoples, at whatever stage of culture or degree of enlightenment, are fain to eke out a sensibly scant degree of authentic formation regarding the personality and habitual surroundings of their divinities. In so calling in the aid of fancy to enrich and fill in their picture of the divinity's presence and manner of life they habitually impute to him such traits as go to make up their ideal of a worthy man. And in seeking communion with the divinity the ways and means of approach are assimilated as nearly as may be to the divine ideal that is in men's minds at the time. It is felt that the divine presence is entered with the best grace, and with the best effect, according to certain accepted methods and with the accompaniment of certain material circumstances which in popular apprehension are peculiarly consonant with the divine nature. This popularly accepted ideal of the bearing and paraphernalia adequate to such occasions of communion is, of course, to a good extent shaped by the popular apprehension of what is intrinsically worthy and beautiful in human carriage and surroundings on all occasions of dignified intercourse. It would on this account be misleading to attempt an analysis of devout demeanor by referring all evidences of the presence of a pecuniary standard of reputability back directly and baldly to the underlying norm of pecuniary emulation. So it would also be misleading to ascribe to the divinity, as popularly conceived, a jealous regard for his pecuniary standing and a habit of avoiding and condemning squalid situations and surroundings simply because they are under grade in the pecuniary respect. And still, after all allowance has been made, it appears that the canons of pecuniary reputability do, directly or indirectly, materially affect our notions of the attributes of divinity, as well as our notions of what are the fit and adequate manner and circumstances of divine communion. It is felt that the divinity must be of a peculiarly serene and leisurely habit of life. And whenever his local habitation is pictured in poetic imagery, for edification or in appeal to the devout fancy, the devout word-painter, as a matter of course, brings out before his auditors' imagination a throne with a profusion of the insignia of opulence and power, and surrounded by a great number of servitors. In the common run of such presentations of the celestial abodes, the office of this corps of servants is a vicarious leisure, their time and efforts being in great measure taken up with an industrially unproductive rehearsal of the meritorious characteristics and exploits of the divinity; while the background of the presentation is filled with the shimmer of the precious metals and of the more expensive varieties of precious stones. It is only in the crasser expressions of devout fancy that this intrusion of pecuniary canons into the devout ideals reaches such an extreme. An extreme case occurs in the devout imagery of the Negro population of the South. Their word-painters are unable to descend to anything cheaper than gold; so that in this case the insistence on pecuniary beauty gives a startling effect in yellow--such as would be unbearable to a soberer taste. Still, there is probably no cult in which ideals of pecuniary merit have not been called in to supplement the ideals of ceremonial adequacy that guide men's conception of what is right in the matter of sacred apparatus. Similarly it is felt--and the sentiment is acted upon--that the priestly servitors of the divinity should not engage in industrially productive work; that work of any kind--any employment which is of tangible human use--must not be carried on in the divine presence, or within the precincts of the sanctuary; that whoever comes into the presence should come cleansed of all profane industrial features in his apparel or person, and should come clad in garments of more than everyday expensiveness; that on holidays set apart in honor of or for communion with the divinity no work that is of human use should be performed by any one. Even the remoter, lay dependents should render a vicarious leisure to the extent of one day in seven. In all these deliverances of men's uninstructed sense of what is fit and proper in devout observance and in the relations of the divinity, the effectual presence of the canons of pecuniary reputability is obvious enough, whether these canons have had their effect on the devout judgment in this respect immediately or at the second remove. These canons of reputability have had a similar, but more far-reaching and more specifically determinable, effect upon the popular sense of beauty or serviceability in consumable goods. The requirements of pecuniary decency have, to a very appreciable extent, influenced the sense of beauty and of utility in articles of use or beauty. Articles are to an extent preferred for use on account of their being conspicuously wasteful; they are felt to be serviceable somewhat in proportion as they are wasteful and ill adapted to their ostensible use. The utility of articles valued for their beauty depends closely upon the expensiveness of the articles. A homely illustration will bring out this dependence. A hand-wrought silver spoon, of a commercial value of some ten to twenty dollars, is not ordinarily more serviceable--in the first sense of the word--than a machine-made spoon of the same material. It may not even be more serviceable than a machine-made spoon of some "base" metal, such as aluminum, the value of which may be no more than some ten to twenty cents. The former of the two utensils is, in fact, commonly a less effective contrivance for its ostensible purpose than the latter. The objection is of course ready to hand that, in taking this view of the matter, one of the chief uses, if not the chief use, of the costlier spoon is ignored; the hand-wrought spoon gratifies our taste, our sense of the beautiful, while that made by machinery out of the base metal has no useful office beyond a brute efficiency. The facts are no doubt as the objection states them, but it will be evident on rejection that the objection is after all more plausible than conclusive. It appears (1) that while the different materials of which the two spoons are made each possesses beauty and serviceability for the purpose for which it is used, the material of the hand-wrought spoon is some one hundred times more valuable than the baser metal, without very greatly excelling the latter in intrinsic beauty of grain or color, and without being in any appreciable degree superior in point of mechanical serviceability; (2) if a close inspection should show that the supposed hand-wrought spoon were in reality only a very clever citation of hand-wrought goods, but an imitation so cleverly wrought as to give the same impression of line and surface to any but a minute examination by a trained eye, the utility of the article, including the gratification which the user derives from its contemplation as an object of beauty, would immediately decline by some eighty or ninety per cent, or even more; (3) if the two spoons are, to a fairly close observer, so nearly identical in appearance that the lighter weight of the spurious article alone betrays it, this identity of form and color will scarcely add to the value of the machine-made spoon, nor appreciably enhance the gratification of the user's "sense of beauty" in contemplating it, so long as the cheaper spoon is not a novelty, ad so long as it can be procured at a nominal cost. The case of the spoons is typical. The superior gratification derived from the use and contemplation of costly and supposedly beautiful products is, commonly, in great measure a gratification of our sense of costliness masquerading under the name of beauty. Our higher appreciation of the superior article is an appreciation of its superior honorific character, much more frequently than it is an unsophisticated appreciation of its beauty. The requirement of conspicuous wastefulness is not commonly present, consciously, in our canons of taste, but it is none the less present as a constraining norm selectively shaping and sustaining our sense of what is beautiful, and guiding our discrimination with respect to what may legitimately be approved as beautiful and what may not. It is at this point, where the beautiful and the honorific meet and blend, that a discrimination between serviceability and wastefulness is most difficult in any concrete case. It frequently happens that an article which serves the honorific purpose of conspicuous waste is at the same time a beautiful object; and the same application of labor to which it owes its utility for the former purpose may, and often does, give beauty of form and color to the article. The question is further complicated by the fact that many objects, as, for instance, the precious stones and the metals and some other materials used for adornment and decoration, owe their utility as items of conspicuous waste to an antecedent utility as objects of beauty. Gold, for instance, has a high degree of sensuous beauty very many if not most of the highly prized works of art are intrinsically beautiful, though often with material qualification; the like is true of some stuffs used for clothing, of some landscapes, and of many other things in less degree. Except for this intrinsic beauty which they possess, these objects would scarcely have been coveted as they are, or have become monopolized objects of pride to their possessors and users. But the utility of these things to the possessor is commonly due less to their intrinsic beauty than to the honor which their possession and consumption confers, or to the obloquy which it wards off. Apart from their serviceability in other respects, these objects are beautiful and have a utility as such; they are valuable on this account if they can be appropriated or monopolized; they are, therefore, coveted as valuable possessions, and their exclusive enjoyment gratifies the possessor's sense of pecuniary superiority at the same time that their contemplation gratifies his sense of beauty. But their beauty, in the naive sense of the word, is the occasion rather than the ground of their monopolization or of their commercial value. "Great as is the sensuous beauty of gems, their rarity and price adds an expression of distinction to them, which they would never have if they were cheap." There is, indeed, in the common run of cases under this head, relatively little incentive to the exclusive possession and use of these beautiful things, except on the ground of their honorific character as items of conspicuous waste. Most objects of this general class, with the partial exception of articles of personal adornment, would serve all other purposes than the honorific one equally well, whether owned by the person viewing them or not; and even as regards personal ornaments it is to be added that their chief purpose is to lend éclat to the person of their wearer (or owner) by comparison with other persons who are compelled to do without. The aesthetic serviceability of objects of beauty is not greatly nor universally heightened by possession. The generalization for which the discussion so far affords ground is that any valuable object in order to appeal to our sense of beauty must conform to the requirements of beauty and of expensiveness both. But this is not all. Beyond this the canon of expensiveness also affects our tastes in such a way as to inextricably blend the marks of expensiveness, in our appreciation, with the beautiful features of the object, and to subsume the resultant effect under the head of an appreciation of beauty simply. The marks of expensiveness come to be accepted as beautiful features of the expensive articles. They are pleasing as being marks of honorific costliness, and the pleasure which they afford on this score blends with that afforded by the beautiful form and color of the object; so that we often declare that an article of apparel, for instance, is "perfectly lovely," when pretty much all that an analysis of the aesthetic value of the article would leave ground for is the declaration that it is pecuniarily honorific. This blending and confusion of the elements of expensiveness and of beauty is, perhaps, best exemplified in articles of dress and of household furniture. The code of reputability in matters of dress decides what shapes, colors, materials, and general effects in human apparel are for the time to be accepted as suitable; and departures from the code are offensive to our taste, supposedly as being departures from aesthetic truth. The approval with which we look upon fashionable attire is by no means to be accounted pure make-believe. We readily, and for the most part with utter sincerity, find those things pleasing that are in vogue. Shaggy dress-stuffs and pronounced color effects, for instance, offend us at times when the vogue is goods of a high, glossy finish and neutral colors. A fancy bonnet of this year's model unquestionably appeals to our sensibilities today much more forcibly than an equally fancy bonnet of the model of last year; although when viewed in the perspective of a quarter of a century, it would, I apprehend, be a matter of the utmost difficulty to award the palm for intrinsic beauty to the one rather than to the other of these structures. So, again, it may be remarked that, considered simply in their physical juxtaposition with the human form, the high gloss of a gentleman's hat or of a patent-leather shoe has no more of intrinsic beauty than a similarly high gloss on a threadbare sleeve; and yet there is no question but that all well-bred people (in the Occidental civilized communities) instinctively and unaffectedly cleave to the one as a phenomenon of great beauty, and eschew the other as offensive to every sense to which it can appeal. It is extremely doubtful if any one could be induced to wear such a contrivance as the high hat of civilized society, except for some urgent reason based on other than aesthetic grounds. By further habituation to an appreciative perception of the marks of expensiveness in goods, and by habitually identifying beauty with reputability, it comes about that a beautiful article which is not expensive is accounted not beautiful. In this way it has happened, for instance, that some beautiful flowers pass conventionally for offensive weeds; others that can be cultivated with relative ease are accepted and admired by the lower middle class, who can afford no more expensive luxuries of this kind; but these varieties are rejected as vulgar by those people who are better able to pay for expensive flowers and who are educated to a higher schedule of pecuniary beauty in the florist's products; while still other flowers, of no greater intrinsic beauty than these, are cultivated at great cost and call out much admiration from flower-lovers whose tastes have been matured under the critical guidance of a polite environment. The same variation in matters of taste, from one class of society to another, is visible also as regards many other kinds of consumable goods, as, for example, is the case with furniture, houses, parks, and gardens. This diversity of views as to what is beautiful in these various classes of goods is not a diversity of the norm according to which the unsophisticated sense of the beautiful works. It is not a constitutional difference of endowments in the aesthetic respect, but rather a difference in the code of reputability which specifies what objects properly lie within the scope of honorific consumption for the class to which the critic belongs. It is a difference in the traditions of propriety with respect to the kinds of things which may, without derogation to the consumer, be consumed under the head of objects of taste and art. With a certain allowance for variations to be accounted for on other grounds, these traditions are determined, more or less rigidly, by the pecuniary plane of life of the class. Everyday life affords many curious illustrations of the way in which the code of pecuniary beauty in articles of use varies from class to class, as well as of the way in which the conventional sense of beauty departs in its deliverances from the sense untutored by the requirements of pecuniary repute. Such a fact is the lawn, or the close-cropped yard or park, which appeals so unaffectedly to the taste of the Western peoples. It appears especially to appeal to the tastes of the well-to-do classes in those communities in which the dolicho-blond element predominates in an appreciable degree. The lawn unquestionably has an element of sensuous beauty, simply as an object of apperception, and as such no doubt it appeals pretty directly to the eye of nearly all races and all classes; but it is, perhaps, more unquestionably beautiful to the eye of the dolicho-blond than to most other varieties of men. This higher appreciation of a stretch of greensward in this ethnic element than in the other elements of the population, goes along with certain other features of the dolicho-blond temperament that indicate that this racial element had once been for a long time a pastoral people inhabiting a region with a humid climate. The close-cropped lawn is beautiful in the eyes of a people whose inherited bent it is to readily find pleasure in contemplating a well-preserved pasture or grazing land. For the aesthetic purpose the lawn is a cow pasture; and in some cases today--where the expensiveness of the attendant circumstances bars out any imputation of thrift--the idyl of the dolicho-blond is rehabilitated in the introduction of a cow into a lawn or private ground. In such cases the cow made use of is commonly of an expensive breed. The vulgar suggestion of thrift, which is nearly inseparable from the cow, is a standing objection to the decorative use of this animal. So that in all cases, except where luxurious surroundings negate this suggestion, the use of the cow as an object of taste must be avoided. Where the predilection for some grazing animal to fill out the suggestion of the pasture is too strong to be suppressed, the cow's place is often given to some more or less inadequate substitute, such as deer, antelopes, or some such exotic beast. These substitutes, although less beautiful to the pastoral eye of Western man than the cow, are in such cases preferred because of their superior expensiveness or futility, and their consequent repute. They are not vulgarly lucrative either in fact or in suggestion. Public parks of course fall in the same category with the lawn; they too, at their best, are imitations of the pasture. Such a park is of course best kept by grazing, and the cattle on the grass are themselves no mean addition to the beauty of the thing, as need scarcely be insisted on with anyone who has once seen a well-kept pasture. But it is worth noting, as an expression of the pecuniary element in popular taste, that such a method of keeping public grounds is seldom resorted to. The best that is done by skilled workmen under the supervision of a trained keeper is a more or less close imitation of a pasture, but the result invariably falls somewhat short of the artistic effect of grazing. But to the average popular apprehension a herd of cattle so pointedly suggests thrift and usefulness that their presence in the public pleasure ground would be intolerably cheap. This method of keeping grounds is comparatively inexpensive, therefore it is indecorous. Of the same general bearing is another feature of public grounds. There is a studious exhibition of expensiveness coupled with a make-believe of simplicity and crude serviceability. Private grounds also show the same physiognomy wherever they are in the management or ownership of persons whose tastes have been formed under middle-class habits of life or under the upper-class traditions of no later a date than the childhood of the generation that is now passing. Grounds which conform to the instructed tastes of the latter-day upper class do not show these features in so marked a degree. The reason for this difference in tastes between the past and the incoming generation of the well-bred lies in the changing economic situation. A similar difference is perceptible in other respects, as well as in the accepted ideals of pleasure grounds. In this country as in most others, until the last half century but a very small proportion of the population were possessed of such wealth as would exempt them from thrift. Owing to imperfect means of communication, this small fraction were scattered and out of effective touch with one another. There was therefore no basis for a growth of taste in disregard of expensiveness. The revolt of the well-bred taste against vulgar thrift was unchecked. Wherever the unsophisticated sense of beauty might show itself sporadically in an approval of inexpensive or thrifty surroundings, it would lack the "social confirmation" which nothing but a considerable body of like-minded people can give. There was, therefore, no effective upper-class opinion that would overlook evidences of possible inexpensiveness in the management of grounds; and there was consequently no appreciable divergence between the leisure-class and the lower middle-class ideal in the physiognomy of pleasure grounds. Both classes equally constructed their ideals with the fear of pecuniary disrepute before their eyes. Today a divergence in ideals is beginning to be apparent. The portion of the leisure class that has been consistently exempt from work and from pecuniary cares for a generation or more is now large enough to form and sustain opinion in matters of taste. Increased mobility of the members has also added to the facility with which a "social confirmation" can be attained within the class. Within this select class the exemption from thrift is a matter so commonplace as to have lost much of its utility as a basis of pecuniary decency. Therefore the latter-day upper-class canons of taste do not so consistently insist on an unremitting demonstration of expensiveness and a strict exclusion of the appearance of thrift. So, a predilection for the rustic and the "natural" in parks and grounds makes its appearance on these higher social and intellectual levels. This predilection is in large part an outcropping of the instinct of workmanship; and it works out its results with varying degrees of consistency. It is seldom altogether unaffected, and at times it shades off into something not widely different from that make-believe of rusticity which has been referred to above. A weakness for crudely serviceable contrivances that pointedly suggest immediate and wasteless use is present even in the middle-class tastes; but it is there kept well in hand under the unbroken dominance of the canon of reputable futility. Consequently it works out in a variety of ways and means for shamming serviceability--in such contrivances as rustic fences, bridges, bowers, pavilions, and the like decorative features. An expression of this affectation of serviceability, at what is perhaps its widest divergence from the first promptings of the sense of economic beauty, is afforded by the cast-iron rustic fence and trellis or by a circuitous drive laid across level ground. The select leisure class has outgrown the use of these pseudo-serviceable variants of pecuniary beauty, at least at some points. But the taste of the more recent accessions to the leisure class proper and of the middle and lower classes still requires a pecuniary beauty to supplement the aesthetic beauty, even in those objects which are primarily admired for the beauty that belongs to them as natural growths. The popular taste in these matters is to be seen in the prevalent high appreciation of topiary work and of the conventional flower-beds of public grounds. Perhaps as happy an illustration as may be had of this dominance of pecuniary beauty over aesthetic beauty in middle-class tastes is seen in the reconstruction of the grounds lately occupied by the Columbian Exposition. The evidence goes to show that the requirement of reputable expensiveness is still present in good vigor even where all ostensibly lavish display is avoided. The artistic effects actually wrought in this work of reconstruction diverge somewhat widely from the effect to which the same ground would have lent itself in hands not guided by pecuniary canons of taste. And even the better class of the city's population view the progress of the work with an unreserved approval which suggests that there is in this case little if any discrepancy between the tastes of the upper and the lower or middle classes of the city. The sense of beauty in the population of this representative city of the advanced pecuniary culture is very chary of any departure from its great cultural principle of conspicuous waste. The love of nature, perhaps itself borrowed from a higher-class code of taste, sometimes expresses itself in unexpected ways under the guidance of this canon of pecuniary beauty, and leads to results that may seem incongruous to an unreflecting beholder. The well-accepted practice of planting trees in the treeless areas of this country, for instance, has been carried over as an item of honorific expenditure into the heavily wooded areas; so that it is by no means unusual for a village or a farmer in the wooded country to clear the land of its native trees and immediately replant saplings of certain introduced varieties about the farmyard or along the streets. In this way a forest growth of oak, elm, beech, butternut, hemlock, basswood, and birch is cleared off to give room for saplings of soft maple, cottonwood, and brittle willow. It is felt that the inexpensiveness of leaving the forest trees standing would derogate from the dignity that should invest an article which is intended to serve a decorative and honorific end. The like pervading guidance of taste by pecuniary repute is traceable in the prevalent standards of beauty in animals. The part played by this canon of taste in assigning her place in the popular aesthetic scale to the cow has already been spokes of. Something to the same effect is true of the other domestic animals, so far as they are in an appreciable degree industrially useful to the community--as, for instance, barnyard fowl, hogs, cattle, sheep, goats, draught-horses. They are of the nature of productive goods, and serve a useful, often a lucrative end; therefore beauty is not readily imputed to them. The case is different with those domestic animals which ordinarily serve no industrial end; such as pigeons, parrots and other cage-birds, cats, dogs, and fast horses. These commonly are items of conspicuous consumption, and are therefore honorific in their nature and may legitimately be accounted beautiful. This class of animals are conventionally admired by the body of the upper classes, while the pecuniarily lower classes--and that select minority of the leisure class among whom the rigorous canon that abjures thrift is in a measure obsolescent--find beauty in one class of animals as in another, without drawing a hard and fast line of pecuniary demarcation between the beautiful and the ugly. In the case of those domestic animals which are honorific and are reputed beautiful, there is a subsidiary basis of merit that should be spokes of. Apart from the birds which belong in the honorific class of domestic animals, and which owe their place in this class to their non-lucrative character alone, the animals which merit particular attention are cats, dogs, and fast horses. The cat is less reputable than the other two just named, because she is less wasteful; she may even serve a useful end. At the same time the cat's temperament does not fit her for the honorific purpose. She lives with man on terms of equality, knows nothing of that relation of status which is the ancient basis of all distinctions of worth, honor, and repute, and she does not lend herself with facility to an invidious comparison between her owner and his neighbors. The exception to this last rule occurs in the case of such scarce and fanciful products as the Angora cat, which have some slight honorific value on the ground of expensiveness, and have, therefore, some special claim to beauty on pecuniary grounds. The dog has advantages in the way of uselessness as well as in special gifts of temperament. He is often spoken of, in an eminent sense, as the friend of man, and his intelligence and fidelity are praised. The meaning of this is that the dog is man's servant and that he has the gift of an unquestioning subservience and a slave's quickness in guessing his master's mood. Coupled with these traits, which fit him well for the relation of status--and which must for the present purpose be set down as serviceable traits--the dog has some characteristics which are of a more equivocal aesthetic value. He is the filthiest of the domestic animals in his person and the nastiest in his habits. For this he makes up is a servile, fawning attitude towards his master, and a readiness to inflict damage and discomfort on all else. The dog, then, commends himself to our favor by affording play to our propensity for mastery, and as he is also an item of expense, and commonly serves no industrial purpose, he holds a well-assured place in men's regard as a thing of good repute. The dog is at the same time associated in our imagination with the chase--a meritorious employment and an expression of the honorable predatory impulse. Standing on this vantage ground, whatever beauty of form and motion and whatever commendable mental traits he may possess are conventionally acknowledged and magnified. And even those varieties of the dog which have been bred into grotesque deformity by the dog-fancier are in good faith accounted beautiful by many. These varieties of dogs--and the like is true of other fancy-bred animals--are rated and graded in aesthetic value somewhat in proportion to the degree of grotesqueness and instability of the particular fashion which the deformity takes in the given case. For the purpose in hand, this differential utility on the ground of grotesqueness and instability of structure is reducible to terms of a greater scarcity and consequent expense. The commercial value of canine monstrosities, such as the prevailing styles of pet dogs both for men's and women's use, rests on their high cost of production, and their value to their owners lies chiefly in their utility as items of conspicuous consumption. Indirectly, through reflection upon their honorific expensiveness, a social worth is imputed to them; and so, by an easy substitution of words and ideas, they come to be admired and reputed beautiful. Since any attention bestowed upon these animals is in no sense gainful or useful, it is also reputable; and since the habit of giving them attention is consequently not deprecated, it may grow into an habitual attachment of great tenacity and of a most benevolent character. So that in the affection bestowed on pet animals the canon of expensiveness is present more or less remotely as a norm which guides and shapes the sentiment and the selection of its object. The like is true, as will be noticed presently, with respect to affection for persons also; although the manner in which the norm acts in that case is somewhat different. The case of the fast horse is much like that of the dog. He is on the whole expensive, or wasteful and useless--for the industrial purpose. What productive use he may possess, in the way of enhancing the well-being of the community or making the way of life easier for men, takes the form of exhibitions of force and facility of motion that gratify the popular aesthetic sense. This is of course a substantial serviceability. The horse is not endowed with the spiritual aptitude for servile dependence in the same measure as the dog; but he ministers effectually to his master's impulse to convert the "animate" forces of the environment to his own use and discretion and so express his own dominating individuality through them. The fast horse is at least potentially a race-horse, of high or low degree; and it is as such that he is peculiarly serviceable to his owner. The utility of the fast horse lies largely in his efficiency as a means of emulation; it gratifies the owner's sense of aggression and dominance to have his own horse outstrip his neighbor's. This use being not lucrative, but on the whole pretty consistently wasteful, and quite conspicuously so, it is honorific, and therefore gives the fast horse a strong presumptive position of reputability. Beyond this, the race-horse proper has also a similarly non-industrial but honorific use as a gambling instrument. The fast horse, then, is aesthetically fortunate, in that the canon of pecuniary good repute legitimates a free appreciation of whatever beauty or serviceability he may possess. His pretensions have the countenance of the principle of conspicuous waste and the backing of the predatory aptitude for dominance and emulation. The horse is, moreover, a beautiful animal, although the race-horse is so in no peculiar degree to the uninstructed taste of those persons who belong neither in the class of race-horse fanciers nor in the class whose sense of beauty is held in abeyance by the moral constraint of the horse fancier's award. To this untutored taste the most beautiful horse seems to be a form which has suffered less radical alteration than the race-horse under the breeder's selective development of the animal. Still, when a writer or speaker--especially of those whose eloquence is most consistently commonplace wants an illustration of animal grace and serviceability, for rhetorical use, he habitually turns to the horse; and he commonly makes it plain before he is done that what he has in mind is the race-horse. It should be noted that in the graduated appreciation of varieties of horses and of dogs, such as one meets with among people of even moderately cultivated tastes in these matters, there is also discernible another and more direct line of influence of the leisure-class canons of reputability. In this country, for instance, leisure-class tastes are to some extent shaped on usages and habits which prevail, or which are apprehended to prevail, among the leisure class of Great Britain. In dogs this is true to a less extent than in horses. In horses, more particularly in saddle horses--which at their best serve the purpose of wasteful display simply--it will hold true in a general way that a horse is more beautiful in proportion as he is more English; the English leisure class being, for purposes of reputable usage, the upper leisure class of this country, and so the exemplar for the lower grades. This mimicry in the methods of the apperception of beauty and in the forming of judgments of taste need not result in a spurious, or at any rate not a hypocritical or affected, predilection. The predilection is as serious and as substantial an award of taste when it rests on this basis as when it rests on any other, the difference is that this taste is and as substantial an award of taste when it rests on this basis as when it rests on any other; the difference is that this taste is a taste for the reputably correct, not for the aesthetically true. The mimicry, it should be said, extends further than to the sense of beauty in horseflesh simply. It includes trappings and horsemanship as well, so that the correct or reputably beautiful seat or posture is also decided by English usage, as well as the equestrian gait. To show how fortuitous may sometimes be the circumstances which decide what shall be becoming and what not under the pecuniary canon of beauty, it may be noted that this English seat, and the peculiarly distressing gait which has made an awkward seat necessary, are a survival from the time when the English roads were so bad with mire and mud as to be virtually impassable for a horse travelling at a more comfortable gait; so that a person of decorous tastes in horsemanship today rides a punch with docked tail, in an uncomfortable posture and at a distressing gait, because the English roads during a great part of the last century were impassable for a horse travelling at a more horse-like gait, or for an animal built for moving with ease over the firm and open country to which the horse is indigenous. It is not only with respect to consumable goods--including domestic animals--that the canons of taste have been colored by the canons of pecuniary reputability. Something to the like effect is to be said for beauty in persons. In order to avoid whatever may be matter of controversy, no weight will be given in this connection to such popular predilection as there may be for the dignified (leisurely) bearing and poly presence that are by vulgar tradition associated with opulence in mature men. These traits are in some measure accepted as elements of personal beauty. But there are certain elements of feminine beauty, on the other hand, which come in under this head, and which are of so concrete and specific a character as to admit of itemized appreciation. It is more or less a rule that in communities which are at the stage of economic development at which women are valued by the upper class for their service, the ideal of female beauty is a robust, large-limbed woman. The ground of appreciation is the physique, while the conformation of the face is of secondary weight only. A well-known instance of this ideal of the early predatory culture is that of the maidens of the Homeric poems. This ideal suffers a change in the succeeding development, when, in the conventional scheme, the office of the high-class wife comes to be a vicarious leisure simply. The ideal then includes the characteristics which are supposed to result from or to go with a life of leisure consistently enforced. The ideal accepted under these circumstances may be gathered from descriptions of beautiful women by poets and writers of the chivalric times. In the conventional scheme of those days ladies of high degree were conceived to be in perpetual tutelage, and to be scrupulously exempt from all useful work. The resulting chivalric or romantic ideal of beauty takes cognizance chiefly of the face, and dwells on its delicacy, and on the delicacy of the hands and feet, the slender figure, and especially the slender waist. In the pictured representations of the women of that time, and in modern romantic imitators of the chivalric thought and feeling, the waist is attenuated to a degree that implies extreme debility. The same ideal is still extant among a considerable portion of the population of modern industrial communities; but it is to be said that it has retained its hold most tenaciously in those modern communities which are least advanced in point of economic and civil development, and which show the most considerable survivals of status and of predatory institutions. That is to say, the chivalric ideal is best preserved in those existing communities which are substantially least modern. Survivals of this lackadaisical or romantic ideal occur freely in the tastes of the well-to-do classes of Continental countries. In modern communities which have reached the higher levels of industrial development, the upper leisure class has accumulated so great a mass of wealth as to place its women above all imputation of vulgarly productive labor. Here the status of women as vicarious consumers is beginning to lose its place in the sections of the body of the people; and as a consequence the ideal of feminine beauty is beginning to change back again from the infirmly delicate, translucent, and hazardously slender, to a woman of the archaic type that does not disown her hands and feet, nor, indeed, the other gross material facts of her person. In the course of economic development the ideal of beauty among the peoples of the Western culture has shifted from the woman of physical presence to the lady, and it is beginning to shift back again to the woman; and all in obedience to the changing conditions of pecuniary emulation. The exigencies of emulation at one time required lusty slaves; at another time they required a conspicuous performance of vicarious leisure and consequently an obvious disability; but the situation is now beginning to outgrow this last requirement, since, under the higher efficiency of modern industry, leisure in women is possible so far down the scale of reputability that it will no longer serve as a definitive mark of the highest pecuniary grade. Apart from this general control exercised by the norm of conspicuous waste over the ideal of feminine beauty, there are one or two details which merit specific mention as showing how it may exercise an extreme constraint in detail over men's sense of beauty in women. It has already been noticed that at the stages of economic evolution at which conspicuous leisure is much regarded as a means of good repute, the ideal requires delicate and diminutive hands and feet and a slender waist. These features, together with the other, related faults of structure that commonly go with them, go to show that the person so affected is incapable of useful effort and must therefore be supported in idleness by her owner. She is useless and expensive, and she is consequently valuable as evidence of pecuniary strength. It results that at this cultural stage women take thought to alter their persons, so as to conform more nearly to the requirements of the instructed taste of the time; and under the guidance of the canon of pecuniary decency, the men find the resulting artificially induced pathological features attractive. So, for instance, the constricted waist which has had so wide and persistent a vogue in the communities of the Western culture, and so also the deformed foot of the Chinese. Both of these are mutilations of unquestioned repulsiveness to the untrained sense. It requires habituation to become reconciled to them. Yet there is no room to question their attractiveness to men into whose scheme of life they fit as honorific items sanctioned by the requirements of pecuniary reputability. They are items of pecuniary and cultural beauty which have come to do duty as elements of the ideal of womanliness. The connection here indicated between the aesthetic value and the invidious pecuniary value of things is of course not present in the consciousness of the valuer. So far as a person, in forming a judgment of taste, takes thought and reflects that the object of beauty under consideration is wasteful and reputable, and therefore may legitimately be accounted beautiful; so far the judgment is not a bona fide judgment of taste and does not come up for consideration in this connection. The connection which is here insisted on between the reputability and the apprehended beauty of objects lies through the effect which the fact of reputability has upon the valuer's habits of thought. He is in the habit of forming judgments of value of various kinds-economic, moral, aesthetic, or reputable concerning the objects with which he has to do, and his attitude of commendation towards a given object on any other ground will affect the degree of his appreciation of the object when he comes to value it for the aesthetic purpose. This is more particularly true as regards valuation on grounds so closely related to the aesthetic ground as that of reputability. The valuation for the aesthetic purpose and for the purpose of repute are not held apart as distinctly as might be. Confusion is especially apt to arise between these two kinds of valuation, because the value of objects for repute is not habitually distinguished in speech by the use of a special descriptive term. The result is that the terms in familiar use to designate categories or elements of beauty are applied to cover this unnamed element of pecuniary merit, and the corresponding confusion of ideas follows by easy consequence. The demands of reputability in this way coalesce in the popular apprehension with the demands of the sense of beauty, and beauty which is not accompanied by the accredited marks of good repute is not accepted. But the requirements of pecuniary reputability and those of beauty in the naive sense do not in any appreciable degree coincide. The elimination from our surroundings of the pecuniarily unfit, therefore, results in a more or less thorough elimination of that considerable range of elements of beauty which do not happen to conform to the pecuniary requirement. The underlying norms of taste are of very ancient growth, probably far antedating the advent of the pecuniary institutions that are here under discussion. Consequently, by force of the past selective adaptation of men's habits of thought, it happens that the requirements of beauty, simply, are for the most part best satisfied by inexpensive contrivances and structures which in a straightforward manner suggest both the office which they are to perform and the method of serving their end. It may be in place to recall the modern psychological position. Beauty of form seems to be a question of facility of apperception. The proposition could perhaps safely be made broader than this. If abstraction is made from association, suggestion, and "expression," classed as elements of beauty, then beauty in any perceived object means that the mind readily unfolds its apperceptive activity in the directions which the object in question affords. But the directions in which activity readily unfolds or expresses itself are the directions to which long and close habituation has made the mind prone. So far as concerns the essential elements of beauty, this habituation is an habituation so close and long as to have induced not only a proclivity to the apperceptive form in question, but an adaptation of physiological structure and function as well. So far as the economic interest enters into the constitution of beauty, it enters as a suggestion or expression of adequacy to a purpose, a manifest and readily inferable subservience to the life process. This expression of economic facility or economic serviceability in any object--what may be called the economic beauty of the object-is best served by neat and unambiguous suggestion of its office and its efficiency for the material ends of life. On this ground, among objects of use the simple and unadorned article is aesthetically the best. But since the pecuniary canon of reputability rejects the inexpensive in articles appropriated to individual consumption, the satisfaction of our craving for beautiful things must be sought by way of compromise. The canons of beauty must be circumvented by some contrivance which will give evidence of a reputably wasteful expenditure, at the same time that it meets the demands of our critical sense of the useful and the beautiful, or at least meets the demand of some habit which has come to do duty in place of that sense. Such an auxiliary sense of taste is the sense of novelty; and this latter is helped out in its surrogateship by the curiosity with which men view ingenious and puzzling contrivances. Hence it comes that most objects alleged to be beautiful, and doing duty as such, show considerable ingenuity of design and are calculated to puzzle the beholder--to bewilder him with irrelevant suggestions and hints of the improbable--at the same time that they give evidence of an expenditure of labor in excess of what would give them their fullest efficency for their ostensible economic end. This may be shown by an illustration taken from outside the range of our everyday habits and everyday contact, and so outside the range of our bias. Such are the remarkable feather mantles of Hawaii, or the well-known cawed handles of the ceremonial adzes of several Polynesian islands. These are undeniably beautiful, both in the sense that they offer a pleasing composition of form, lines, and color, and in the sense that they evince great skill and ingenuity in design and construction. At the same time the articles are manifestly ill fitted to serve any other economic purpose. But it is not always that the evolution of ingenious and puzzling contrivances under the guidance of the canon of wasted effort works out so happy a result. The result is quite as often a virtually complete suppression of all elements that would bear scrutiny as expressions of beauty, or of serviceability, and the substitution of evidences of misspent ingenuity and labor, backed by a conspicuous ineptitude; until many of the objects with which we surround ourselves in everyday life, and even many articles of everyday dress and ornament, are such as would not be tolerated except under the stress of prescriptive tradition. Illustrations of this substitution of ingenuity and expense in place of beauty and serviceability are to be seen, for instance, in domestic architecture, in domestic art or fancy work, in various articles of apparel, especially of feminine and priestly apparel. The canon of beauty requires expression of the generic. The "novelty" due to the demands of conspicuous waste traverses this canon of beauty, in that it results in making the physiognomy of our objects of taste a congeries of idiosyncrasies; and the idiosyncrasies are, moreover, under the selective surveillance of the canon of expensiveness. This process of selective adaptation of designs to the end of conspicuous waste, and the substitution of pecuniary beauty for aesthetic beauty, has been especially effective in the development of architecture. It would be extremely difficult to find a modern civilized residence or public building which can claim anything better than relative inoffensiveness in the eyes of anyone who will dissociate the elements of beauty from those of honorific waste. The endless variety of fronts presented by the better class of tenements and apartment houses in our cities is an endless variety of architectural distress and of suggestions of expensive discomfort. Considered as objects of beauty, the dead walls of the sides and back of these structures, left untouched by the hands of the artist, are commonly the best feature of the building. What has been said of the influence of the law of conspicuous waste upon the canons of taste will hold true, with but a slight change of terms, of its influence upon our notions of the serviceability of goods for other ends than the aesthetic one. Goods are produced and consumed as a means to the fuller unfolding of human life; and their utility consists, in the first instance, in their efficiency as means to this end. The end is, in the first instance, the fullness of life of the individual, taken in absolute terms. But the human proclivity to emulation has seized upon the consumption of goods as a means to an invidious comparison, and has thereby invested consumable goods with a secondary utility as evidence of relative ability to pay. This indirect or secondary use of consumable goods lends an honorific character to consumption and presently also to the goods which best serve the emulative end of consumption. The consumption of expensive goods is meritorious, and the goods which contain an appreciable element of cost in excess of what goes to give them serviceability for their ostensible mechanical purpose are honorific. The marks of superfluous costliness in the goods are therefore marks of worth--of high efficency for the indirect, invidious end to be served by their consumption; and conversely, goods are humilific, and therefore unattractive, if they show too thrifty an adaptation to the mechanical end sought and do not include a margin of expensiveness on which to rest a complacent invidious comparison. This indirect utility gives much of their value to the "better" grades of goods. In order to appeal to the cultivated sense of utility, an article must contain a modicum of this indirect utility. While men may have set out with disapproving an inexpensive manner of living because it indicated inability to spend much, and so indicated a lack of pecuniary success, they end by falling into the habit of disapproving cheap things as being intrinsically dishonorable or unworthy because they are cheap. As time has gone on, each succeeding generation has received this tradition of meritorious expenditure from the generation before it, and has in its turn further elaborated and fortified the traditional canon of pecuniary reputability in goods consumed; until we have finally reached such a degree of conviction as to the unworthiness of all inexpensive things, that we have no longer any misgivings in formulating the maxim, "Cheap and nasty." So thoroughly has the habit of approving the expensive and disapproving the inexpensive been ingrained into our thinking that we instinctively insist upon at least some measure of wasteful expensiveness in all our consumption, even in the case of goods which are consumed in strict privacy and without the slightest thought of display. We all feel, sincerely and without misgiving, that we are the more lifted up in spirit for having, even in the privacy of our own household, eaten our daily meal by the help of hand-wrought silver utensils, from hand-painted china (often of dubious artistic value) laid on high-priced table linen. Any retrogression from the standard of living which we are accustomed to regard as worthy in this respect is felt to be a grievous violation of our human dignity. So, also, for the last dozen years candles have been a more pleasing source of light at dinner than any other. Candlelight is now softer, less distressing to well-bred eyes, than oil, gas, or electric light. The same could not have been said thirty years ago, when candles were, or recently had been, the cheapest available light for domestic use. Nor are candles even now found to give an acceptable or effective light for any other than a ceremonial illumination. A political sage still living has summed up the conclusion of this whole matter in the dictum: "A cheap coat makes a cheap man," and there is probably no one who does not feel the convincing force of the maxim. The habit of looking for the marks of superfluous expensiveness in goods, and of requiring that all goods should afford some utility of the indirect or invidious sort, leads to a change in the standards by which the utility of goods is gauged. The honorific element and the element of brute efficiency are not held apart in the consumer's appreciation of commodities, and the two together go to make up the unanalyzed aggregate serviceability of the goods. Under the resulting standard of serviceability, no article will pass muster on the strength of material sufficiency alone. In order to completeness and full acceptability to the consumer it must also show the honorific element. It results that the producers of articles of consumption direct their efforts to the production of goods that shall meet this demand for the honorific element. They will do this with all the more alacrity and effect, since they are themselves under the dominance of the same standard of worth in goods, and would be sincerely grieved at the sight of goods which lack the proper honorific finish. Hence it has come about that there are today no goods supplied in any trade which do not contain the honorific element in greater or less degree. Any consumer who might, Diogenes-like, insist on the elimination of all honorific or wasteful elements from his consumption, would be unable to supply his most trivial wants in the modern market. Indeed, even if he resorted to supplying his wants directly by his own efforts, he would find it difficult if not impossible to divest himself of the current habits of thought on this head; so that he could scarcely compass a supply of the necessaries of life for a day's consumption without instinctively and by oversight incorporating in his home-made product something of this honorific, quasi-decorative element of wasted labor. It is notorious that in their selection of serviceable goods in the retail market purchasers are guided more by the finish and workmanship of the goods than by any marks of substantial serviceability. Goods, in order to sell, must have some appreciable amount of labor spent in giving them the marks of decent expensiveness, in addition to what goes to give them efficiency for the material use which they are to serve. This habit of making obvious costliness a canon of serviceability of course acts to enhance the aggregate cost of articles of consumption. It puts us on our guard against cheapness by identifying merit in some degree with cost. There is ordinarily a consistent effort on the part of the consumer to obtain goods of the required serviceability at as advantageous a bargain as may be; but the conventional requirement of obvious costliness, as a voucher and a constituent of the serviceability of the goods, leads him to reject as under grade such goods as do not contain a large element of conspicuous waste. It is to be added that a large share of those features of consumable goods which figure in popular apprehension as marks of serviceability, and to which reference is here had as elements of conspicuous waste, commend themselves to the consumer also on other grounds than that of expensiveness alone. They usually give evidence of skill and effective workmanship, even if they do not contribute to the substantial serviceability of the goods; and it is no doubt largely on some such ground that any particular mark of honorific serviceability first comes into vogue and afterward maintains its footing as a normal constituent element of the worth of an article. A display of efficient workmanship is pleasing simply as such, even where its remoter, for the time unconsidered, outcome is futile. There is a gratification of the artistic sense in the contemplation of skillful work. But it is also to be added that no such evidence of skillful workmanship, or of ingenious and effective adaptation of means to an end, will, in the long run, enjoy the approbation of the modern civilized consumer unless it has the sanction of the Canon of conspicuous waste. The position here taken is enforced in a felicitous manner by the place assigned in the economy of consumption to machine products. The point of material difference between machine-made goods and the hand-wrought goods which serve the same purposes is, ordinarily, that the former serve their primary purpose more adequately. They are a more perfect product--show a more perfect adaptation of means to end. This does not save them from disesteem and deprecation, for they fall short under the test of honorific waste. Hand labor is a more wasteful method of production; hence the goods turned out by this method are more serviceable for the purpose of pecuniary reputability; hence the marks of hand labor come to be honorific, and the goods which exhibit these marks take rank as of higher grade than the corresponding machine product. Commonly, if not invariably, the honorific marks of hand labor are certain imperfections and irregularities in the lines of the hand-wrought article, showing where the workman has fallen short in the execution of the design. The ground of the superiority of hand-wrought goods, therefore, is a certain margin of crudeness. This margin must never be so wide as to show bungling workmanship, since that would be evidence of low cost, nor so narrow as to suggest the ideal precision attained only by the machine, for that would be evidence of low cost. The appreciation of those evidences of honorific crudeness to which hand-wrought goods owe their superior worth and charm in the eyes of well-bred people is a matter of nice discrimination. It requires training and the formation of right habits of thought with respect to what may be called the physiognomy of goods. Machine-made goods of daily use are often admired and preferred precisely on account of their excessive perfection by the vulgar and the underbred who have not given due thought to the punctilios of elegant consumption. The ceremonial inferiority of machine products goes to show that the perfection of skill and workmanship embodied in any costly innovations in the finish of goods is not sufficient of itself to secure them acceptance and permanent favor. The innovation must have the support of the canon of conspicuous waste. Any feature in the physiognomy of goods, however pleasing in itself, and however well it may approve itself to the taste for effective work, will not be tolerated if it proves obnoxious to this norm of pecuniary reputability. The ceremonial inferiority or uncleanness in consumable goods due to "commonness," or in other words to their slight cost of production, has been taken very seriously by many persons. The objection to machine products is often formulated as an objection to the commonness of such goods. What is common is within the (pecuniary) reach of many people. Its consumption is therefore not honorific, since it does not serve the purpose of a favorable invidious comparison with other consumers. Hence the consumption, or even the sight of such goods, is inseparable from an odious suggestion of the lower levels of human life, and one comes away from their contemplation with a pervading sense of meanness that is extremely distasteful and depressing to a person of sensibility. In persons whose tastes assert themselves imperiously, and who have not the gift, habit, or incentive to discriminate between the grounds of their various judgments of taste, the deliverances of the sense of the honorific coalesce with those of the sense of beauty and of the sense of serviceability--in the manner already spoken of; the resulting composite valuation serves as a judgment of the object's beauty or its serviceability, according as the valuer's bias or interest inclines him to apprehend the object in the one or the other of these aspects. It follows not infrequently that the marks of cheapness or commonness are accepted as definitive marks of artistic unfitness, and a code or schedule of aesthetic proprieties on the one hand, and of aesthetic abominations on the other, is constructed on this basis for guidance in questions of taste. As has already been pointed out, the cheap, and therefore indecorous, articles of daily consumption in modern industrial communities are commonly machine products; and the generic feature of the physiognomy of machine-made goods as compared with the hand-wrought article is their greater perfection in workmanship and greater accuracy in the detail execution of the design. Hence it comes about that the visible imperfections of the hand-wrought goods, being honorific, are accounted marks of superiority in point of beauty, or serviceability, or both. Hence has arisen that exaltation of the defective, of which John Ruskin and William Morris were such eager spokesmen in their time; and on this ground their propaganda of crudity and wasted effort has been taken up and carried forward since their time. And hence also the propaganda for a return to handicraft and household industry. So much of the work and speculations of this group of men as fairly comes under the characterization here given would have been impossible at a time when the visibly more perfect goods were not the cheaper. It is of course only as to the economic value of this school of aesthetic teaching that anything is intended to be said or can be said here. What is said is not to be taken in the sense of depreciation, but chiefly as a characterization of the tendency of this teaching in its effect on consumption and on the production of consumable goods. The manner in which the bias of this growth of taste has worked itself out in production is perhaps most cogently exemplified in the book manufacture with which Morris busied himself during the later years of his life; but what holds true of the work of the Kelmscott Press in an eminent degree, holds true with but slightly abated force when applied to latter-day artistic book-making generally--as to type, paper, illustration, binding materials, and binder's work. The claims to excellence put forward by the later products of the bookmaker's industry rest in some measure on the degree of its approximation to the crudities of the time when the work of book-making was a doubtful struggle with refractory materials carried on by means of insufficient appliances. These products, since they require hand labor, are more expensive; they are also less convenient for use than the books turned out with a view to serviceability alone; they therefore argue ability on the part of the purchaser to consume freely, as well as ability to waste time and effort. It is on this basis that the printers of today are returning to "old-style," and other more or less obsolete styles of type which are less legible and give a cruder appearance to the page than the "modern." Even a scientific periodical, with ostensibly no purpose but the most effective presentation of matter with which its science is concerned, will concede so much to the demands of this pecuniary beauty as to publish its scientific discussions in oldstyle type, on laid paper, and with uncut edges. But books which are not ostensibly concerned with the effective presentation of their contents alone, of course go farther in this direction. Here we have a somewhat cruder type, printed on hand-laid, deckel-edged paper, with excessive margins and uncut leaves, with bindings of a painstaking crudeness and elaborate ineptitude. The Kelmscott Press reduced the matter to an absurdity--as seen from the point of view of brute serviceability alone--by issuing books for modern use, edited with the obsolete spelling, printed in black-letter, and bound in limp vellum fitted with thongs. As a further characteristic feature which fixes the economic place of artistic book-making, there is the fact that these more elegant books are, at their best, printed in limited editions. A limited edition is in effect a guarantee--somewhat crude, it is true--that this book is scarce and that it therefore is costly and lends pecuniary distinction to its consumer. The special attractiveness of these book-products to the book-buyer of cultivated taste lies, of course, not in a conscious, naive recognition of their costliness and superior clumsiness. Here, as in the parallel case of the superiority of hand-wrought articles over machine products, the conscious ground of preference is an intrinsic excellence imputed to the costlier and more awkward article. The superior excellence imputed to the book which imitates the products of antique and obsolete processes is conceived to be chiefly a superior utility in the aesthetic respect; but it is not unusual to find a well-bred book-lover insisting that the clumsier product is also more serviceable as a vehicle of printed speech. So far as regards the superior aesthetic value of the decadent book, the chances are that the book-lover's contention has some ground. The book is designed with an eye single to its beauty, and the result is commonly some measure of success on the part of the designer. What is insisted on here, however, is that the canon of taste under which the designer works is a canon formed under the surveillance of the law of conspicuous waste, and that this law acts selectively to eliminate any canon of taste that does not conform to its demands. That is to say, while the decadent book may be beautiful, the limits within which the designer may work are fixed by requirements of a non-aesthetic kind. The product, if it is beautiful, must also at the same time be costly and ill adapted to its ostensible use. This mandatory canon of taste in the case of the book-designer, however, is not shaped entirely by the law of waste in its first form; the canon is to some extent shaped in conformity to that secondary expression of the predatory temperament, veneration for the archaic or obsolete, which in one of its special developments is called classicism. In aesthetic theory it might be extremely difficult, if not quite impracticable, to draw a line between the canon of classicism, or regard for the archaic, and the canon of beauty. For the aesthetic purpose such a distinction need scarcely be drawn, and indeed it need not exist. For a theory of taste the expression of an accepted ideal of archaism, on whatever basis it may have been accepted, is perhaps best rated as an element of beauty; there need be no question of its legitimation. But for the present purpose--for the purpose of determining what economic grounds are present in the accepted canons of taste and what is their significance for the distribution and consumption of goods--the distinction is not similarly beside the point. The position of machine products in the civilized scheme of consumption serves to point out the nature of the relation which subsists between the canon of conspicuous waste and the code of proprieties in consumption. Neither in matters of art and taste proper, nor as regards the current sense of the serviceability of goods, does this canon act as a principle of innovation or initiative. It does not go into the future as a creative principle which makes innovations and adds new items of consumption and new elements of cost. The principle in question is, in a certain sense, a negative rather than a positive law. It is a regulative rather than a creative principle. It very rarely initiates or originates any usage or custom directly. Its action is selective only. Conspicuous wastefulness does not directly afford ground for variation and growth, but conformity to its requirements is a condition to the survival of such innovations as may be made on other grounds. In whatever way usages and customs and methods of expenditure arise, they are all subject to the selective action of this norm of reputability; and the degree in which they conform to its requirements is a test of their fitness to survive in the competition with other similar usages and customs. Other thing being equal, the more obviously wasteful usage or method stands the better chance of survival under this law. The law of conspicuous waste does not account for the origin of variations, but only for the persistence of such forms as are fit to survive under its dominance. It acts to conserve the fit, not to originate the acceptable. Its office is to prove all things and to hold fast that which is good for its purpose. Chapter Seven ~~ Dress as an Expression of the Pecuniary Culture It will in place, by way of illustration, to show in some detail how the economic principles so far set forth apply to everyday facts in some one direction of the life process. For this purpose no line of consumption affords a more apt illustration than expenditure on dress. It is especially the rule of the conspicuous waste of goods that finds expression in dress, although the other, related principles of pecuniary repute are also exemplified in the same contrivances. Other methods of putting one's pecuniary standing in evidence serve their end effectually, and other methods are in vogue always and everywhere; but expenditure on dress has this advantage over most other methods, that our apparel is always in evidence and affords an indication of our pecuniary standing to all observers at the first glance. It is also true that admitted expenditure for display is more obviously present, and is, perhaps, more universally practiced in the matter of dress than in any other line of consumption. No one finds difficulty in assenting to the commonplace that the greater part of the expenditure incurred by all classes for apparel is incurred for the sake of a respectable appearance rather than for the protection of the person. And probably at no other point is the sense of shabbiness so keenly felt as it is if we fall short of the standard set by social usage in this matter of dress. It is true of dress in even a higher degree than of most other items of consumption, that people will undergo a very considerable degree of privation in the comforts or the necessaries of life in order to afford what is considered a decent amount of wasteful consumption; so that it is by no means an uncommon occurrence, in an inclement climate, for people to go ill clad in order to appear well dressed. And the commercial value of the goods used for clotting in any modern community is made up to a much larger extent of the fashionableness, the reputability of the goods than of the mechanical service which they render in clothing the person of the wearer. The need of dress is eminently a "higher" or spiritual need. This spiritual need of dress is not wholly, nor even chiefly, a naive propensity for display of expenditure. The law of conspicuous waste guides consumption in apparel, as in other things, chiefly at the second remove, by shaping the canons of taste and decency. In the common run of cases the conscious motive of the wearer or purchaser of conspicuously wasteful apparel is the need of conforming to established usage, and of living up to the accredited standard of taste and reputability. It is not only that one must be guided by the code of proprieties in dress in order to avoid the mortification that comes of unfavorable notice and comment, though that motive in itself counts for a great deal; but besides that, the requirement of expensiveness is so ingrained into our habits of thought in matters of dress that any other than expensive apparel is instinctively odious to us. Without reflection or analysis, we feel that what is inexpensive is unworthy. "A cheap coat makes a cheap man." "Cheap and nasty" is recognized to hold true in dress with even less mitigation than in other lines of consumption. On the ground both of taste and of serviceability, an inexpensive article of apparel is held to be inferior, under the maxim "cheap and nasty." We find things beautiful, as well as serviceable, somewhat in proportion as they are costly. With few and inconsequential exceptions, we all find a costly hand-wrought article of apparel much preferable, in point of beauty and of serviceability, to a less expensive imitation of it, however cleverly the spurious article may imitate the costly original; and what offends our sensibilities in the spurious article is not that it falls short in form or color, or, indeed, in visual effect in any way. The offensive object may be so close an imitation as to defy any but the closest scrutiny; and yet so soon as the counterfeit is detected, its aesthetic value, and its commercial value as well, declines precipitately. Not only that, but it may be asserted with but small risk of contradiction that the aesthetic value of a detected counterfeit in dress declines somewhat in the same proportion as the counterfeit is cheaper than its original. It loses caste aesthetically because it falls to a lower pecuniary grade. But the function of dress as an evidence of ability to pay does not end with simply showing that the wearer consumes valuable goods in excess of what is required for physical comfort. Simple conspicuous waste of goods is effective and gratifying as far as it goes; it is good prima facie evidence of pecuniary success, and consequently prima facie evidence of social worth. But dress has subtler and more far-reaching possibilities than this crude, first-hand evidence of wasteful consumption only. If, in addition to showing that the wearer can afford to consume freely and uneconomically, it can also be shown in the same stroke that he or she is not under the necessity of earning a livelihood, the evidence of social worth is enhanced in a very considerable degree. Our dress, therefore, in order to serve its purpose effectually, should not only he expensive, but it should also make plain to all observers that the wearer is not engaged in any kind of productive labor. In the evolutionary process by which our system of dress has been elaborated into its present admirably perfect adaptation to its purpose, this subsidiary line of evidence has received due attention. A detailed examination of what passes in popular apprehension for elegant apparel will show that it is contrived at every point to convey the impression that the wearer does not habitually put forth any useful effort. It goes without saying that no apparel can be considered elegant, or even decent, if it shows the effect of manual labor on the part of the wearer, in the way of soil or wear. The pleasing effect of neat and spotless garments is chiefly, if not altogether, due to their carrying the suggestion of leisure-exemption from personal contact with industrial processes of any kind. Much of the charm that invests the patent-leather shoe, the stainless linen, the lustrous cylindrical hat, and the walking-stick, which so greatly enhance the native dignity of a gentleman, comes of their pointedly suggesting that the wearer cannot when so attired bear a hand in any employment that is directly and immediately of any human use. Elegant dress serves its purpose of elegance not only in that it is expensive, but also because it is the insignia of leisure. It not only shows that the wearer is able to consume a relatively large value, but it argues at the same time that he consumes without producing. The dress of women goes even farther than that of men in the way of demonstrating the wearer's abstinence from productive employment. It needs no argument to enforce the generalization that the more elegant styles of feminine bonnets go even farther towards making work impossible than does the man's high hat. The woman's shoe adds the so-called French heel to the evidence of enforced leisure afforded by its polish; because this high heel obviously makes any, even the simplest and most necessary manual work extremely difficult. The like is true even in a higher degree of the skirt and the rest of the drapery which characterizes woman's dress. The substantial reason for our tenacious attachment to the skirt is just this; it is expensive and it hampers the wearer at every turn and incapacitates her for all useful exertion. The like is true of the feminine custom of wearing the hair excessively long. But the woman's apparel not only goes beyond that of the modern man in the degree in which it argues exemption from labor; it also adds a peculiar and highly characteristic feature which differs in kind from anything habitually practiced by the men. This feature is the class of contrivances of which the corset is the typical example. The corset is, in economic theory, substantially a mutilation, undergone for the purpose of lowering the subject's vitality and rendering her permanently and obviously unfit for work. It is true, the corset impairs the personal attractions of the wearer, but the loss suffered on that score is offset by the gain in reputability which comes of her visibly increased expensiveness and infirmity. It may broadly be set down that the womanliness of woman's apparel resolves itself, in point of substantial fact, into the more effective hindrance to useful exertion offered by the garments peculiar to women. This difference between masculine and feminine apparel is here simply pointed out as a characteristic feature. The ground of its occurrence will be discussed presently. So far, then, we have, as the great and dominant norm of dress, the broad principle of conspicuous waste. Subsidiary to this principle, and as a corollary under it, we get as a second norm the principle of conspicuous leisure. In dress construction this norm works out in the shape of divers contrivances going to show that the wearer does not and, as far as it may conveniently be shown, can not engage in productive labor. Beyond these two principles there is a third of scarcely less constraining force, which will occur to any one who reflects at all on the subject. Dress must not only be conspicuously expensive and inconvenient, it must at the same time be up to date. No explanation at all satisfactory has hitherto been offered of the phenomenon of changing fashions. The imperative requirement of dressing in the latest accredited manner, as well as the fact that this accredited fashion constantly changes from season to season, is sufficiently familiar to every one, but the theory of this flux and change has not been worked out. We may of course say, with perfect consistency and truthfulness, that this principle of novelty is another corollary under the law of conspicuous waste. Obviously, if each garment is permitted to serve for but a brief term, and if none of last season's apparel is carried over and made further use of during the present season, the wasteful expenditure on dress is greatly increased. This is good as far as it goes, but it is negative only. Pretty much all that this consideration warrants us in saying is that the norm of conspicuous waste exercises a controlling surveillance in all matters of dress, so that any change in the fashions must conspicuous waste exercises a controlling surveillance in all matters of dress, so that any change in the fashions must conform to the requirement of wastefulness; it leaves unanswered the question as to the motive for making and accepting a change in the prevailing styles, and it also fails to explain why conformity to a given style at a given time is so imperatively necessary as we know it to be. For a creative principle, capable of serving as motive to invention and innovation in fashions, we shall have to go back to the primitive, non-economic motive with which apparel originated--the motive of adornment. Without going into an extended discussion of how and why this motive asserts itself under the guidance of the law of expensiveness, it may be stated broadly that each successive innovation in the fashions is an effort to reach some form of display which shall be more acceptable to our sense of form and color or of effectiveness, than that which it displaces. The changing styles are the expression of a restless search for something which shall commend itself to our aesthetic sense; but as each innovation is subject to the selective action of the norm of conspicuous waste, the range within which innovation can take place is somewhat restricted. The innovation must not only be more beautiful, or perhaps oftener less offensive, than that which it displaces, but it must also come up to the accepted standard of expensiveness. It would seem at first sight that the result of such an unremitting struggle to attain the beautiful in dress should be a gradual approach to artistic perfection. We might naturally expect that the fashions should show a well-marked trend in the direction of some one or more types of apparel eminently becoming to the human form; and we might even feel that we have substantial ground for the hope that today, after all the ingenuity and effort which have been spent on dress these many years, the fashions should have achieved a relative perfection and a relative stability, closely approximating to a permanently tenable artistic ideal. But such is not the case. It would be very hazardous indeed to assert that the styles of today are intrinsically more becoming than those of ten years ago, or than those of twenty, or fifty, or one hundred years ago. On the other hand, the assertion freely goes uncontradicted that styles in vogue two thousand years ago are more becoming than the most elaborate and painstaking constructions of today. The explanation of the fashions just offered, then, does not fully explain, and we shall have to look farther. It is well known that certain relatively stable styles and types of costume have been worked out in various parts of the world; as, for instance, among the Japanese, Chinese, and other Oriental nations; likewise among the Greeks, Romans, and other Eastern peoples of antiquity so also, in later times, among the peasants of nearly every country of Europe. These national or popular costumes are in most cases adjudged by competent critics to be more becoming, more artistic, than the fluctuating styles of modern civilized apparel. At the same time they are also, at least usually, less obviously wasteful; that is to say, other elements than that of a display of expense are more readily detected in their structure. These relatively stable costumes are, commonly, pretty strictly and narrowly localized, and they vary by slight and systematic gradations from place to place. They have in every case been worked out by peoples or classes which are poorer than we, and especially they belong in countries and localities and times where the population, or at least the class to which the costume in question belongs, is relatively homogeneous, stable, and immobile. That is to say, stable costumes which will bear the test of time and perspective are worked out under circumstances where the norm of conspicuous waste asserts itself less imperatively than it does in the large modern civilized cities, whose relatively mobile wealthy population today sets the pace in matters of fashion. The countries and classes which have in this way worked out stable and artistic costumes have been so placed that the pecuniary emulation among them has taken the direction of a competition in conspicuous leisure rather than in conspicuous consumption of goods. So that it will hold true in a general way that fashions are least stable and least becoming in those communities where the principle of a conspicuous waste of goods asserts itself most imperatively, as among ourselves. All this points to an antagonism between expensiveness and artistic apparel. In point of practical fact, the norm of conspicuous waste is incompatible with the requirement that dress should be beautiful or becoming. And this antagonism offers an explanation of that restless change in fashion which neither the canon of expensiveness nor that of beauty alone can account for. The standard of reputability requires that dress should show wasteful expenditure; but all wastefulness is offensive to native taste. The psychological law has already been pointed out that all men--and women perhaps even in a higher degree abhor futility, whether of effort or of expenditure--much as Nature was once said to abhor a vacuum. But the principle of conspicuous waste requires an obviously futile expenditure; and the resulting conspicuous expensiveness of dress is therefore intrinsically ugly. Hence we find that in all innovations in dress, each added or altered detail strives to avoid condemnation by showing some ostensible purpose, at the same time that the requirement of conspicuous waste prevents the purposefulness of these innovations from becoming anything more than a somewhat transparent pretense. Even in its freest flights, fashion rarely if ever gets away from a simulation of some ostensible use. The ostensible usefulness of the fashionable details of dress, however, is always so transparent a make-believe, and their substantial futility presently forces itself so baldly upon our attention as to become unbearable, and then we take refuge in a new style. But the new style must conform to the requirement of reputable wastefulness and futility. Its futility presently becomes as odious as that of its predecessor; and the only remedy which the law of waste allows us is to seek relief in some new construction, equally futile and equally untenable. Hence the essential ugliness and the unceasing change of fashionable attire. Having so explained the phenomenon of shifting fashions, the next thing is to make the explanation tally with everyday facts. Among these everyday facts is the well-known liking which all men have for the styles that are in vogue at any given time. A new style comes into vogue and remains in favor for a season, and, at least so long as it is a novelty, people very generally find the new style attractive. The prevailing fashion is felt to be beautiful. This is due partly to the relief it affords in being different from what went before it, partly to its being reputable. As indicated in the last chapter, the canon of reputability to some extent shapes our tastes, so that under its guidance anything will be accepted as becoming until its novelty wears off, or until the warrant of reputability is transferred to a new and novel structure serving the same general purpose. That the alleged beauty, or "loveliness," of the styles in vogue at any given time is transient and spurious only is attested by the fact that none of the many shifting fashions will bear the test of time. When seen in the perspective of half-a-dozen years or more, the best of our fashions strike us as grotesque, if not unsightly. Our transient attachment to whatever happens to be the latest rests on other than aesthetic grounds, and lasts only until our abiding aesthetic sense has had time to assert itself and reject this latest indigestible contrivance. The process of developing an aesthetic nausea takes more or less time; the length of time required in any given case being inversely as the degree of intrinsic odiousness of the style in question. This time relation between odiousness and instability in fashions affords ground for the inference that the more rapidly the styles succeed and displace one another, the more offensive they are to sound taste. The presumption, therefore, is that the farther the community, especially the wealthy classes of the community, develop in wealth and mobility and in the range of their human contact, the more imperatively will the law of conspicuous waste assert itself in matters of dress, the more will the sense of beauty tend to fall into abeyance or be overborne by the canon of pecuniary reputability, the more rapidly will fashions shift and change, and the more grotesque and intolerable will be the varying styles that successively come into vogue. There remains at least one point in this theory of dress yet to be discussed. Most of what has been said applies to men's attire as well as to that of women; although in modern times it applies at nearly all points with greater force to that of women. But at one point the dress of women differs substantially from that of men. In woman's dress there is obviously greater insistence on such features as testify to the wearer's exemption from or incapacity for all vulgarly productive employment. This characteristic of woman's apparel is of interest, not only as completing the theory of dress, but also as confirming what has already been said of the economic status of women, both in the past and in the present. As has been seen in the discussion of woman's status under the heads of Vicarious Leisure and Vicarious Consumption, it has in the course of economic development become the office of the woman to consume vicariously for the head of the household; and her apparel is contrived with this object in view. It has come about that obviously productive labor is in a peculiar degree derogatory to respectable women, and therefore special pains should be taken in the construction of women's dress, to impress upon the beholder the fact (often indeed a fiction) that the wearer does not and can not habitually engage in useful work. Propriety requires respectable women to abstain more consistently from useful effort and to make more of a show of leisure than the men of the same social classes. It grates painfully on our nerves to contemplate the necessity of any well-bred woman's earning a livelihood by useful work. It is not "woman's sphere." Her sphere is within the household, which she should "beautify," and of which she should be the "chief ornament." The male head of the household is not currently spoken of as its ornament. This feature taken in conjunction with the other fact that propriety requires more unremitting attention to expensive display in the dress and other paraphernalia of women, goes to enforce the view already implied in what has gone before. By virtue of its descent from a patriarchal past, our social system makes it the woman's function in an especial degree to put in evidence her household's ability to pay. According to the modern civilized scheme of life, the good name of the household to which she belongs should be the special care of the woman; and the system of honorific expenditure and conspicuous leisure by which this good name is chiefly sustained is therefore the woman's sphere. In the ideal scheme, as it tends to realize itself in the life of the higher pecuniary classes, this attention to conspicuous waste of substance and effort should normally be the sole economic function of the woman. At the stage of economic development at which the women were still in the full sense the property of the men, the performance of conspicuous leisure and consumption came to be part of the services required of them. The women being not their own masters, obvious expenditure and leisure on their part would redound to the credit of their master rather than to their own credit; and therefore the more expensive and the more obviously unproductive the women of the household are, the more creditable and more effective for the purpose of reputability of the household or its head will their life be. So much so that the women have been required not only to afford evidence of a life of leisure, but even to disable themselves for useful activity. It is at this point that the dress of men falls short of that of women, and for sufficient reason. Conspicuous waste and conspicuous leisure are reputable because they are evidence of pecuniary strength; pecuniary strength is reputable or honorific because, in the last analysis, it argues success and superior force; therefore the evidence of waste and leisure put forth by any individual in his own behalf cannot consistently take such a form or be carried to such a pitch as to argue incapacity or marked discomfort on his part; as the exhibition would in that case show not superior force, but inferiority, and so defeat its own purpose. So, then, wherever wasteful expenditure and the show of abstention from effort is normally, or on an average, carried to the extent of showing obvious discomfort or voluntarily induced physical disability. There the immediate inference is that the individual in question does not perform this wasteful expenditure and undergo this disability for her own personal gain in pecuniary repute, but in behalf of some one else to whom she stands in a relation of economic dependence; a relation which in the last analysis must, in economic theory, reduce itself to a relation of servitude. To apply this generalization to women's dress, and put the matter in concrete terms: the high heel, the skirt, the impracticable bonnet, the corset, and the general disregard of the wearer's comfort which is an obvious feature of all civilized women's apparel, are so many items of evidence to the effect that in the modern civilized scheme of life the woman is still, in theory, the economic dependent of the man--that, perhaps in a highly idealized sense, she still is the man's chattel. The homely reason for all this conspicuous leisure and attire on the part of women lies in the fact that they are servants to whom, in the differentiation of economic functions, has been delegated the office of putting in evidence their master's ability to pay. There is a marked similarity in these respects between the apparel of women and that of domestic servants, especially liveried servants. In both there is a very elaborate show of unnecessary expensiveness, and in both cases there is also a notable disregard of the physical comfort of the wearer. But the attire of the lady goes farther in its elaborate insistence on the idleness, if not on the physical infirmity of the wearer, than does that of the domestic. And this is as it should be; for in theory, according to the ideal scheme of the pecuniary culture, the lady of the house is the chief menial of the household. Besides servants, currently recognized as such, there is at least one other class of persons whose garb assimilates them to the class of servants and shows many of the features that go to make up the womanliness of woman's dress. This is the priestly class. Priestly vestments show, in accentuated form, all the features that have been shown to be evidence of a servile status and a vicarious life. Even more strikingly than the everyday habit of the priest, the vestments, properly so called, are ornate, grotesque, inconvenient, and, at least ostensibly, comfortless to the point of distress. The priest is at the same time expected to refrain from useful effort and, when before the public eye, to present an impassively disconsolate countenance, very much after the manner of a well-trained domestic servant. The shaven face of the priest is a further item to the same effect. This assimilation of the priestly class to the class of body servants, in demeanor and apparel, is due to the similarity of the two classes as regards economic function. In economic theory, the priest is a body servant, constructively in attendance upon the person of the divinity whose livery he wears. His livery is of a very expensive character, as it should be in order to set forth in a beseeming manner the dignity of his exalted master; but it is contrived to show that the wearing of it contributes little or nothing to the physical comfort of the wearer, for it is an item of vicarious consumption, and the repute which accrues from its consumption is to be imputed to the absent master, not to the servant. The line of demarcation between the dress of women, priests, and servants, on the one hand, and of men, on the other hand, is not always consistently observed in practice, but it will scarcely be disputed that it is always present in a more or less definite way in the popular habits of thought. There are of course also free men, and not a few of them, who, in their blind zeal for faultless reputable attire, transgress the theoretical line between man's and woman's dress, to the extent of arraying themselves in apparel that is obviously designed to vex the mortal frame; but everyone recognizes without hesitation that such apparel for men is a departure from the normal. We are in the habit of saying that such dress is "effeminate"; and one sometimes hears the remark that such or such an exquisitely attired gentleman is as well dressed as a footman. Certain apparent discrepancies under this theory of dress merit a more detailed examination, especially as they mark a more or less evident trend in the later and maturer development of dress. The vogue of the corset offers an apparent exception from the rule of which it has here been cited as an illustration. A closer examination, however, will show that this apparent exception is really a verification of the rule that the vogue of any given element or feature in dress rests on its utility as an evidence of pecuniary standing. It is well known that in the industrially more advanced communities the corset is employed only within certain fairly well defined social strata. The women of the poorer classes, especially of the rural population, do not habitually use it, except as a holiday luxury. Among these classes the women have to work hard, and it avails them little in the way of a pretense of leisure to so crucify the flesh in everyday life. The holiday use of the contrivance is due to imitation of a higher-class canon of decency. Upwards from this low level of indigence and manual labor, the corset was until within a generation or two nearly indispensable to a socially blameless standing for all women, including the wealthiest and most reputable. This rule held so long as there still was no large class of people wealthy enough to be above the imputation of any necessity for manual labor and at the same time large enough to form a self-sufficient, isolated social body whose mass would afford a foundation for special rules of conduct within the class, enforced by the current opinion of the class alone. But now there has grown up a large enough leisure class possessed of such wealth that any aspersion on the score of enforced manual employment would be idle and harmless calumny; and the corset has therefore in large measure fallen into disuse within this class. The exceptions under this rule of exemption from the corset are more apparent than real. They are the wealthy classes of countries with a lower industrial structure--nearer the archaic, quasi-industrial type--together with the later accessions of the wealthy classes in the more advanced industrial communities. The latter have not yet had time to divest themselves of the plebeian canons of taste and of reputability carried over from their former, lower pecuniary grade. Such survival of the corset is not infrequent among the higher social classes of those American cities, for instance, which have recently and rapidly risen into opulence. If the word be used as a technical term, without any odious implication, it may be said that the corset persists in great measure through the period of snobbery--the interval of uncertainty and of transition from a lower to the upper levels of pecuniary culture. That is to say, in all countries which have inherited the corset it continues in use wherever and so long as it serves its purpose as an evidence of honorific leisure by arguing physical disability in the wearer. The same rule of course applies to other mutilations and contrivances for decreasing the visible efficiency of the individual. Something similar should hold true with respect to divers items of conspicuous consumption, and indeed something of the kind does seem to hold to a slight degree of sundry features of dress, especially if such features involve a marked discomfort or appearance of discomfort to the wearer. During the past one hundred years there is a tendency perceptible, in the development of men's dress especially, to discontinue methods of expenditure and the use of symbols of leisure which must have been irksome, which may have served a good purpose in their time, but the continuation of which among the upper classes today would be a work of supererogation; as, for instance, the use of powdered wigs and of gold lace, and the practice of constantly shaving the face. There has of late years been some slight recrudescence of the shaven face in polite society, but this is probably a transient and unadvised mimicry of the fashion imposed upon body servants, and it may fairly be expected to go the way of the powdered wig of our grandfathers. These indices and others which resemble them in point of the boldness with which they point out to all observers the habitual uselessness of those persons who employ them, have been replaced by other, more dedicate methods of expressing the same fact; methods which are no less evident to the trained eyes of that smaller, select circle whose good opinion is chiefly sought. The earlier and cruder method of advertisement held its ground so long as the public to which the exhibitor had to appeal comprised large portions of the community who were not trained to detect delicate variations in the evidences of wealth and leisure. The method of advertisement undergoes a refinement when a sufficiently large wealthy class has developed, who have the leisure for acquiring skill in interpreting the subtler signs of expenditure. "Loud" dress becomes offensive to people of taste, as evincing an undue desire to reach and impress the untrained sensibilities of the vulgar. To the individual of high breeding, it is only the more honorific esteem accorded by the cultivated sense of the members of his own high class that is of material consequence. Since the wealthy leisure class has grown so large, or the contact of the leisure-class individual with members of his own class has grown so wide, as to constitute a human environment sufficient for the honorific purpose, there arises a tendency to exclude the baser elements of the population from the scheme even as spectators whose applause or mortification should be sought. The result of all this is a refinement of methods, a resort to subtler contrivances, and a spiritualization of the scheme of symbolism in dress. And as this upper leisure class sets the pace in all matters of decency, the result for the rest of society also is a gradual amelioration of the scheme of dress. As the community advances in wealth and culture, the ability to pay is put in evidence by means which require a progressively nicer discrimination in the beholder. This nicer discrimination between advertising media is in fact a very large element of the higher pecuniary culture. Chapter Eight ~~ Industrial Exemption and Conservatism The life of man in society, just like the life of other species, is a struggle for existence, and therefore it is a process of selective adaptation. The evolution of social structure has been a process of natural selection of institutions. The progress which has been and is being made in human institutions and in human character may be set down, broadly, to a natural selection of the fittest habits of thought and to a process of enforced adaptation of individuals to an environment which has progressively changed with the growth of the community and with the changing institutions under which men have lived. Institutions are not only themselves the result of a selective and adaptive process which shapes the prevailing or dominant types of spiritual attitude and aptitudes; they are at the same time special methods of life and of human relations, and are therefore in their turn efficient factors of selection. So that the changing institutions in their turn make for a further selection of individuals endowed with the fittest temperament, and a further adaptation of individual temperament and habits to the changing environment through the formation of new institutions. The forces which have shaped the development of human life and of social structure are no doubt ultimately reducible to terms of living tissue and material environment; but proximately for the purpose in hand, these forces may best be stated in terms of an environment, partly human, partly non-human, and a human subject with a more or less definite physical and intellectual constitution. Taken in the aggregate or average, this human subject is more or less variable; chiefly, no doubt, under a rule of selective conservation of favorable variations. The selection of favorable variations is perhaps in great measure a selective conservation of ethnic types. In the life history of any community whose population is made up of a mixture of divers ethnic elements, one or another of several persistent and relatively stable types of body and of temperament rises into dominance at any given point. The situation, including the institutions in force at any given time, will favor the survival and dominance of one type of character in preference to another; and the type of man so selected to continue and to further elaborate the institutions handed down from the past will in some considerable measure shape these institutions in his own likeness. But apart from selection as between relatively stable types of character and habits of mind, there is no doubt simultaneously going on a process of selective adaptation of habits of thought within the general range of aptitudes which is characteristic of the dominant ethnic type or types. There may be a variation in the fundamental character of any population by selection between relatively stable types; but there is also a variation due to adaptation in detail within the range of the type, and to selection between specific habitual views regarding any given social relation or group of relations. For the present purpose, however, the question as to the nature of the adaptive process--whether it is chiefly a selection between stable types of temperament and character, or chiefly an adaptation of men's habits of thought to changing circumstances--is of less importance than the fact that, by one method or another, institutions change and develop. Institutions must change with changing circumstances, since they are of the nature of an habitual method of responding to the stimuli which these changing circumstances afford. The development of these institutions is the development of society. The institutions are, in substance, prevalent habits of thought with respect to particular relations and particular functions of the individual and of the community; and the scheme of life, which is made up of the aggregate of institutions in force at a given time or at a given point in the development of any society, may, on the psychological side, be broadly characterized as a prevalent spiritual attitude or a prevalent theory of life. As regards its generic features, this spiritual attitude or theory of life is in the last analysis reducible to terms of a prevalent type of character. The situation of today shapes the institutions of tomorrow through a selective, coercive process, by acting upon men's habitual view of things, and so altering or fortifying a point of view or a mental attitude handed down from the past. The institutions--that is to say the habits of thought--under the guidance of which men live are in this way received from an earlier time; more or less remotely earlier, but in any event they have been elaborated in and received from the past. Institutions are products of the past process, are adapted to past circumstances, and are therefore never in full accord with the requirements of the present. In the nature of the case, this process of selective adaptation can never catch up with the progressively changing situation in which the community finds itself at any given time; for the environment, the situation, the exigencies of life which enforce the adaptation and exercise the selection, change from day to day; and each successive situation of the community in its turn tends to obsolescence as soon as it has been established. When a step in the development has been taken, this step itself constitutes a change of situation which requires a new adaptation; it becomes the point of departure for a new step in the adjustment, and so on interminably. It is to be noted then, although it may be a tedious truism, that the institutions of today--the present accepted scheme of life--do not entirely fit the situation of today. At the same time, men's present habits of thought tend to persist indefinitely, except as circumstances enforce a change. These institutions which have thus been handed down, these habits of thought, points of view, mental attitudes and aptitudes, or what not, are therefore themselves a conservative factor. This is the factor of social inertia, psychological inertia, conservatism. Social structure changes, develops, adapts itself to an altered situation, only through a change in the habits of thought of the several classes of the community, or in the last analysis, through a change in the habits of thought of the individuals which make up the community. The evolution of society is substantially a process of mental adaptation on the part of individuals under the stress of circumstances which will no longer tolerate habits of thought formed under and conforming to a different set of circumstances in the past. For the immediate purpose it need not be a question of serious importance whether this adaptive process is a process of selection and survival of persistent ethnic types or a process of individual adaptation and an inheritance of acquired traits. Social advance, especially as seen from the point of view of economic theory, consists in a continued progressive approach to an approximately exact "adjustment of inner relations to outer relations", but this adjustment is never definitively established, since the "outer relations" are subject to constant change as a consequence of the progressive change going on in the "inner relations." But the degree of approximation may be greater or less, depending on the facility with which an adjustment is made. A readjustment of men's habits of thought to conform with the exigencies of an altered situation is in any case made only tardily and reluctantly, and only under the coercion exercised by a stipulation which has made the accredited views untenable. The readjustment of institutions and habitual views to an altered environment is made in response to pressure from without; it is of the nature of a response to stimulus. Freedom and facility of readjustment, that is to say capacity for growth in social structure, therefore depends in great measure on the degree of freedom with which the situation at any given time acts on the individual members of the community-the degree of exposure of the individual members to the constraining forces of the environment. If any portion or class of society is sheltered from the action of the environment in any essential respect, that portion of the community, or that class, will adapt its views and its scheme of life more tardily to the altered general situation; it will in so far tend to retard the process of social transformation. The wealthy leisure class is in such a sheltered position with respect to the economic forces that make for change and readjustment. And it may be said that the forces which make for a readjustment of institutions, especially in the case of a modern industrial community, are, in the last analysis, almost entirely of an economic nature. Any community may be viewed as an industrial or economic mechanism, the structure of which is made up of what is called its economic institutions. These institutions are habitual methods of carrying on the life process of the community in contact with the material environment in which it lives. When given methods of unfolding human activity in this given environment have been elaborated in this way, the life of the community will express itself with some facility in these habitual directions. The community will make use of the forces of the environment for the purposes of its life according to methods learned in the past and embodied in these institutions. But as population increases, and as men's knowledge and skill in directing the forces of nature widen, the habitual methods of relation between the members of the group, and the habitual method of carrying on the life process of the group as a whole, no longer give the same result as before; nor are the resulting conditions of life distributed and apportioned in the same manner or with the same effect among the various members as before. If the scheme according to which the life process of the group was carried on under the earlier conditions gave approximately the highest attainable result--under the circumstances--in the way of efficiency or facility of the life process of the group; then the same scheme of life unaltered will not yield the highest result attainable in this respect under the altered conditions. Under the altered conditions of population, skill, and knowledge, the facility of life as carried on according to the traditional scheme may not be lower than under the earlier conditions; but the chances are always that it is less than might be if the scheme were altered to suit the altered conditions. The group is made up of individuals, and the group's life is the life of individuals carried on in at least ostensible severalty. The group's accepted scheme of life is the consensus of views held by the body of these individuals as to what is right, good, expedient, and beautiful in the way of human life. In the redistribution of the conditions of life that comes of the altered method of dealing with the environment, the outcome is not an equable change in the facility of life throughout the group. The altered conditions may increase the facility of life for the group as a whole, but the redistribution will usually result in a decrease of facility or fullness of life for some members of the group. An advance in technical methods, in population, or in industrial organization will require at least some of the members of the community to change their habits of life, if they are to enter with facility and effect into the altered industrial methods; and in doing so they will be unable to live up to the received notions as to what are the right and beautiful habits of life. Any one who is required to change his habits of life and his habitual relations to his fellow men will feel the discrepancy between the method of life required of him by the newly arisen exigencies, and the traditional scheme of life to which he is accustomed. It is the individuals placed in this position who have the liveliest incentive to reconstruct the received scheme of life and are most readily persuaded to accept new standards; and it is through the need of the means of livelihood that men are placed in such a position. The pressure exerted by the environment upon the group, and making for a readjustment of the group's scheme of life, impinges upon the members of the group in the form of pecuniary exigencies; and it is owing to this fact--that external forces are in great part translated into the form of pecuniary or economic exigencies--it is owing to this fact that we can say that the forces which count toward a readjustment of institutions in any modern industrial community are chiefly economic forces; or more specifically, these forces take the form of pecuniary pressure. Such a readjustment as is here contemplated is substantially a change in men's views as to what is good and right, and the means through which a change is wrought in men's apprehension of what is good and right is in large part the pressure of pecuniary exigencies. Any change in men's views as to what is good and right in human life make its way but tardily at the best. Especially is this true of any change in the direction of what is called progress; that is to say, in the direction of divergence from the archaic position--from the position which may be accounted the point of departure at any step in the social evolution of the community. Retrogression, reapproach to a standpoint to which the race has been long habituated in the past, is easier. This is especially true in case the development away from this past standpoint has not been due chiefly to a substitution of an ethnic type whose temperament is alien to the earlier standpoint. The cultural stage which lies immediately back of the present in the life history of Western civilization is what has here been called the quasi-peaceable stage. At this quasi-peaceable stage the law of status is the dominant feature in the scheme of life. There is no need of pointing out how prone the men of today are to revert to the spiritual attitude of mastery and of personal subservience which characterizes that stage. It may rather be said to be held in an uncertain abeyance by the economic exigencies of today, than to have been definitely supplanted by a habit of mind that is in full accord with these later-developed exigencies. The predatory and quasi-peaceable stages of economic evolution seem to have been of long duration in life history of all the chief ethnic elements which go to make up the populations of the Western culture. The temperament and the propensities proper to those cultural stages have, therefore, attained such a persistence as to make a speedy reversion to the broad features of the corresponding psychological constitution inevitable in the case of any class or community which is removed from the action of those forces that make for a maintenance of the later-developed habits of thought. It is a matter of common notoriety that when individuals, or even considerable groups of men, are segregated from a higher industrial culture and exposed to a lower cultural environment, or to an economic situation of a more primitive character, they quickly show evidence of reversion toward the spiritual features which characterize the predatory type; and it seems probable that the dolicho-blond type of European man is possessed of a greater facility for such reversion to barbarism than the other ethnic elements with which that type is associated in the Western culture. Examples of such a reversion on a small scale abound in the later history of migration and colonization. Except for the fear of offending that chauvinistic patriotism which is so characteristic a feature of the predatory culture, and the presence of which is frequently the most striking mark of reversion in modern communities, the case of the American colonies might be cited as an example of such a reversion on an unusually large scale, though it was not a reversion of very large scope. The leisure class is in great measure sheltered from the stress of those economic exigencies which prevail in any modern, highly organized industrial community. The exigencies of the struggle for the means of life are less exacting for this class than for any other; and as a consequence of this privileged position we should expect to find it one of the least responsive of the classes of society to the demands which the situation makes for a further growth of institutions and a readjustment to an altered industrial situation. The leisure class is the conservative class. The exigencies of the general economic situation of the community do not freely or directly impinge upon the members of this class. They are not required under penalty of forfeiture to change their habits of life and their theoretical views of the external world to suit the demands of an altered industrial technique, since they are not in the full sense an organic part of the industrial community. Therefore these exigencies do not readily produce, in the members of this class, that degree of uneasiness with the existing order which alone can lead any body of men to give up views and methods of life that have become habitual to them. The office of the leisure class in social evolution is to retard the movement and to conserve what is obsolescent. This proposition is by no means novel; it has long been one of the commonplaces of popular opinion. The prevalent conviction that the wealthy class is by nature conservative has been popularly accepted without much aid from any theoretical view as to the place and relation of that class in the cultural development. When an explanation of this class conservatism is offered, it is commonly the invidious one that the wealthy class opposes innovation because it has a vested interest, of an unworthy sort, in maintaining the present conditions. The explanation here put forward imputes no unworthy motive. The opposition of the class to changes in the cultural scheme is instinctive, and does not rest primarily on an interested calculation of material advantages; it is an instinctive revulsion at any departure from the accepted way of doing and of looking at things--a revulsion common to all men and only to be overcome by stress of circumstances. All change in habits of life and of thought is irksome. The difference in this respect between the wealthy and the common run of mankind lies not so much in the motive which prompts to conservatism as in the degree of exposure to the economic forces that urge a change. The members of the wealthy class do not yield to the demand for innovation as readily as other men because they are not constrained to do so. This conservatism of the wealthy class is so obvious a feature that it has even come to be recognized as a mark of respectability. Since conservatism is a characteristic of the wealthier and therefore more reputable portion of the community, it has acquired a certain honorific or decorative value. It has become prescriptive to such an extent that an adherence to conservative views is comprised as a matter of course in our notions of respectability; and it is imperatively incumbent on all who would lead a blameless life in point of social repute. Conservatism, being an upper-class characteristic, is decorous; and conversely, innovation, being a lower-class phenomenon, is vulgar. The first and most unreflected element in that instinctive revulsion and reprobation with which we turn from all social innovators is this sense of the essential vulgarity of the thing. So that even in cases where one recognizes the substantial merits of the case for which the innovator is spokesman--as may easily happen if the evils which he seeks to remedy are sufficiently remote in point of time or space or personal contact--still one cannot but be sensible of the fact that the innovator is a person with whom it is at least distasteful to be associated, and from whose social contact one must shrink. Innovation is bad form. The fact that the usages, actions, and views of the well-to-do leisure class acquire the character of a prescriptive canon of conduct for the rest of society, gives added weight and reach to the conservative influence of that class. It makes it incumbent upon all reputable people to follow their lead. So that, by virtue of its high position as the avatar of good form, the wealthier class comes to exert a retarding influence upon social development far in excess of that which the simple numerical strength of the class would assign it. Its prescriptive example acts to greatly stiffen the resistance of all other classes against any innovation, and to fix men's affections upon the good institutions handed down from an earlier generation. There is a second way in which the influence of the leisure class acts in the same direction, so far as concerns hindrance to the adoption of a conventional scheme of life more in accord with the exigencies of the time. This second method of upper-class guidance is not in strict consistency to be brought under the same category as the instinctive conservatism and aversion to new modes of thought just spoken of; but it may as well be dealt with here, since it has at least this much in common with the conservative habit of mind that it acts to retard innovation and the growth of social structure. The code of proprieties, conventionalities, and usages in vogue at any given time and among any given people has more or less of the character of an organic whole; so that any appreciable change in one point of the scheme involves something of a change or readjustment at other points also, if not a reorganization all along the line. When a change is made which immediately touches only a minor point in the scheme, the consequent derangement of the structure of conventionalities may be inconspicuous; but even in such a case it is safe to say that some derangement of the general scheme, more or less far-reaching, will follow. On the other hand, when an attempted reform involves the suppression or thorough-going remodelling of an institution of first-rate importance in the conventional scheme, it is immediately felt that a serious derangement of the entire scheme would result; it is felt that a readjustment of the structure to the new form taken on by one of its chief elements would be a painful and tedious, if not a doubtful process. In order to realize the difficulty which such a radical change in any one feature of the conventional scheme of life would involve, it is only necessary to suggest the suppression of the monogamic family, or of the agnatic system of consanguinity, or of private property, or of the theistic faith, in any country of the Western civilization; or suppose the suppression of ancestor worship in China, or of the caste system in india, or of slavery in Africa, or the establishment of equality of the sexes in Mohammedan countries. It needs no argument to show that the derangement of the general structure of conventionalities in any of these cases would be very considerable. In order to effect such an innovation a very far-reaching alteration of men's habits of thought would be involved also at other points of the scheme than the one immediately in question. The aversion to any such innovation amounts to a shrinking from an essentially alien scheme of life. The revulsion felt by good people at any proposed departure from the accepted methods of life is a familiar fact of everyday experience. It is not unusual to hear those persons who dispense salutary advice and admonition to the community express themselves forcibly upon the far-reaching pernicious effects which the community would suffer from such relatively slight changes as the disestablishment of the Anglican Church, an increased facility of divorce, adoption of female suffrage, prohibition of the manufacture and sale of intoxicating beverages, abolition or restriction of inheritances, etc. Any one of these innovations would, we are told, "shake the social structure to its base," "reduce society to chaos," "subvert the foundations of morality," "make life intolerable," "confound the order of nature," etc. These various locutions are, no doubt, of the nature of hyperbole; but, at the same time, like all overstatement, they are evidence of a lively sense of the gravity of the consequences which they are intended to describe. The effect of these and like innovations in deranging the accepted scheme of life is felt to be of much graver consequence than the simple alteration of an isolated item in a series of contrivances for the convenience of men in society. What is true in so obvious a degree of innovations of first-rate importance is true in a less degree of changes of a smaller immediate importance. The aversion to change is in large part an aversion to the bother of making the readjustment which any given change will necessitate; and this solidarity of the system of institutions of any given culture or of any given people strengthens the instinctive resistance offered to any change in men's habits of thought, even in matters which, taken by themselves, are of minor importance. A consequence of this increased reluctance, due to the solidarity of human institutions, is that any innovation calls for a greater expenditure of nervous energy in making the necessary readjustment than would otherwise be the case. It is not only that a change in established habits of thought is distasteful. The process of readjustment of the accepted theory of life involves a degree of mental effort--a more or less protracted and laborious effort to find and to keep one's bearings under the altered circumstances. This process requires a certain expenditure of energy, and so presumes, for its successful accomplishment, some surplus of energy beyond that absorbed in the daily struggle for subsistence. Consequently it follows that progress is hindered by underfeeding and excessive physical hardship, no less effectually than by such a luxurious life as will shut out discontent by cutting off the occasion for it. The abjectly poor, and all those persons whose energies are entirely absorbed by the struggle for daily sustenance, are conservative because they cannot afford the effort of taking thought for the day after tomorrow; just as the highly prosperous are conservative because they have small occasion to be discontented with the situation as it stands today. From this proposition it follows that the institution of a leisure class acts to make the lower classes conservative by withdrawing from them as much as it may of the means of sustenance, and so reducing their consumption, and consequently their available energy, to such a point as to make them incapable of the effort required for the learning and adoption of new habits of thought. The accumulation of wealth at the upper end of the pecuniary scale implies privation at the lower end of the scale. It is a commonplace that, wherever it occurs, a considerable degree of privation among the body of the people is a serious obstacle to any innovation. This direct inhibitory effect of the unequal distribution of wealth is seconded by an indirect effect tending to the same result. As has already been seen, the imperative example set by the upper class in fixing the canons of reputability fosters the practice of conspicuous consumption. The prevalence of conspicuous consumption as one of the main elements in the standard of decency among all classes is of course not traceable wholly to the example of the wealthy leisure class, but the practice and the insistence on it are no doubt strengthened by the example of the leisure class. The requirements of decency in this matter are very considerable and very imperative; so that even among classes whose pecuniary position is sufficiently strong to admit a consumption of goods considerably in excess of the subsistence minimum, the disposable surplus left over after the more imperative physical needs are satisfied is not infrequently diverted to the purpose of a conspicuous decency, rather than to added physical comfort and fullness of life. Moreover, such surplus energy as is available is also likely to be expended in the acquisition of goods for conspicuous consumption or conspicuous boarding. The result is that the requirements of pecuniary reputability tend (1) to leave but a scanty subsistence minimum available for other than conspicuous consumption, and (2) to absorb any surplus energy which may be available after the bare physical necessities of life have been provided for. The outcome of the whole is a strengthening of the general conservative attitude of the community. The institution of a leisure class hinders cultural development immediately (1) by the inertia proper to the class itself, (2) through its prescriptive example of conspicuous waste and of conservatism, and (3) indirectly through that system of unequal distribution of wealth and sustenance on which the institution itself rests. To this is to be added that the leisure class has also a material interest in leaving things as they are. Under the circumstances prevailing at any given time this class is in a privileged position, and any departure from the existing order may be expected to work to the detriment of the class rather than the reverse. The attitude of the class, simply as influenced by its class interest, should therefore be to let well-enough alone. This interested motive comes in to supplement the strong instinctive bias of the class, and so to render it even more consistently conservative than it otherwise would be. All this, of course, has nothing to say in the way of eulogy or deprecation of the office of the leisure class as an exponent and vehicle of conservatism or reversion in social structure. The inhibition which it exercises may be salutary or the reverse. Wether it is the one or the other in any given case is a question of casuistry rather than of general theory. There may be truth in the view (as a question of policy) so often expressed by the spokesmen of the conservative element, that without some such substantial and consistent resistance to innovation as is offered by the conservative well-to-do classes, social innovation and experiment would hurry the community into untenable and intolerable situations; the only possible result of which would be discontent and disastrous reaction. All this, however, is beside the present argument. But apart from all deprecation, and aside from all question as to the indispensability of some such check on headlong innovation, the leisure class, in the nature of things, consistently acts to retard that adjustment to the environment which is called social advance or development. The characteristic attitude of the class may be summed up in the maxim: "Whatever is, is right" whereas the law of natural selection, as applied to human institutions, gives the axiom: "Whatever is, is wrong." Not that the institutions of today are wholly wrong for the purposes of the life of today, but they are, always and in the nature of things, wrong to some extent. They are the result of a more or less inadequate adjustment of the methods of living to a situation which prevailed at some point in the past development; and they are therefore wrong by something more than the interval which separates the present situation from that of the past. "Right" and "wrong" are of course here used without conveying any rejection as to what ought or ought not to be. They are applied simply from the (morally colorless) evolutionary standpoint, and are intended to designate compatibility or incompatibility with the effective evolutionary process. The institution of a leisure class, by force or class interest and instinct, and by precept and prescriptive example, makes for the perpetuation of the existing maladjustment of institutions, and even favors a reversion to a somewhat more archaic scheme of life; a scheme which would be still farther out of adjustment with the exigencies of life under the existing situation even than the accredited, obsolescent scheme that has come down from the immediate past. But after all has been said on the head of conservation of the good old ways, it remains true that institutions change and develop. There is a cumulative growth of customs and habits of thought; a selective adaptation of conventions and methods of life. Something is to be said of the office of the leisure class in guiding this growth as well as in retarding it; but little can be said here of its relation to institutional growth except as it touches the institutions that are primarily and immediately of an economic character. These institutions--the economic structure--may be roughly distinguished into two classes or categories, according as they serve one or the other of two divergent purposes of economic life. To adapt the classical terminology, they are institutions of acquisition or of production; or to revert to terms already employed in a different connection in earlier chapters, they are pecuniary or industrial institutions; or in still other terms, they are institutions serving either the invidious or the non-invidious economic interest. The former category have to do with "business," the latter with industry, taking the latter word in the mechanical sense. The latter class are not often recognized as institutions, in great part because they do not immediately concern the ruling class, and are, therefore, seldom the subject of legislation or of deliberate convention. When they do receive attention they are commonly approached from the pecuniary or business side; that being the side or phase of economic life that chiefly occupies men's deliberations in our time, especially the deliberations of the upper classes. These classes have little else than a business interest in things economic, and on them at the same time it is chiefly incumbent to deliberate upon the community's affairs. The relation of the leisure (that is, propertied non-industrial) class to the economic process is a pecuniary relation--a relation of acquisition, not of production; of exploitation, not of serviceability. Indirectly their economic office may, of course, be of the utmost importance to the economic life process; and it is by no means here intended to depreciate the economic function of the propertied class or of the captains of industry. The purpose is simply to point out what is the nature of the relation of these classes to the industrial process and to economic institutions. Their office is of a parasitic character, and their interest is to divert what substance they may to their own use, and to retain whatever is under their hand. The conventions of the business world have grown up under the selective surveillance of this principle of predation or parasitism. They are conventions of ownership; derivatives, more or less remote, of the ancient predatory culture. But these pecuniary institutions do not entirely fit the situation of today, for they have grown up under a past situation differing somewhat from the present. Even for effectiveness in the pecuniary way, therefore, they are not as apt as might be. The changed industrial life requires changed methods of acquisition; and the pecuniary classes have some interest in so adapting the pecuniary institutions as to give them the best effect for acquisition of private gain that is compatible with the continuance of the industrial process out of which this gain arises. Hence there is a more or less consistent trend in the leisure-class guidance of institutional growth, answering to the pecuniary ends which shape leisure-class economic life. The effect of the pecuniary interest and the pecuniary habit of mind upon the growth of institutions is seen in those enactments and conventions that make for security of property, enforcement of contracts, facility of pecuniary transactions, vested interests. Of such bearing are changes affecting bankruptcy and receiverships, limited liability, banking and currency, coalitions of laborers or employers, trusts and pools. The community's institutional furniture of this kind is of immediate consequence only to the propertied classes, and in proportion as they are propertied; that is to say, in proportion as they are to be ranked with the leisure class. But indirectly these conventions of business life are of the gravest consequence for the industrial process and for the life of the community. And in guiding the institutional growth in this respect, the pecuniary classes, therefore, serve a purpose of the most serious importance to the community, not only in the conservation of the accepted social scheme, but also in shaping the industrial process proper. The immediate end of this pecuniary institutional structure and of its amelioration is the greater facility of peaceable and orderly exploitation; but its remoter effects far outrun this immediate object. Not only does the more facile conduct of business permit industry and extra-industrial life to go on with less perturbation; but the resulting elimination of disturbances and complications calling for an exercise of astute discrimination in everyday affairs acts to make the pecuniary class itself superfluous. As fast as pecuniary transactions are reduced to routine, the captain of industry can be dispensed with. This consummation, it is needless to say, lies yet in the indefinite future. The ameliorations wrought in favor of the pecuniary interest in modern institutions tend, in another field, to substitute the "soulless" joint-stock corporation for the captain, and so they make also for the dispensability, of the great leisure-class function of ownership. Indirectly, therefore, the bent given to the growth of economic institutions by the leisure-class influence is of very considerable industrial consequence. Chapter Nine ~~ The Conservation of Archaic Traits The institution of a leisure class has an effect not only upon social structure but also upon the individual character of the members of society. So soon as a given proclivity or a given point of view has won acceptance as an authoritative standard or norm of life it will react upon the character of the members of the society which has accepted it as a norm. It will to some extent shape their habits of thought and will exercise a selective surveillance over the development of men's aptitudes and inclinations. This effect is wrought partly by a coercive, educational adaptation of the habits of all individuals, partly by a selective elimination of the unfit individuals and lines of descent. Such human material as does not lend itself to the methods of life imposed by the accepted scheme suffers more or less elimination as well as repression. The principles of pecuniary emulation and of industrial exemption have in this way been erected into canons of life, and have become coercive factors of some importance in the situation to which men have to adapt themselves. These two broad principles of conspicuous waste and industrial exemption affect the cultural development both by guiding men's habits of thought, and so controlling the growth of institutions, and by selectively conserving certain traits of human nature that conduce to facility of life under the leisure-class scheme, and so controlling the effective temper of the community. The proximate tendency of the institution of a leisure class in shaping human character runs in the direction of spiritual survival and reversion. Its effect upon the temper of a community is of the nature of an arrested spiritual development. In the later culture especially, the institution has, on the whole, a conservative trend. This proposition is familiar enough in substance, but it may to many have the appearance of novelty in its present application. Therefore a summary review of its logical grounds may not be uncalled for, even at the risk of some tedious repetition and formulation of commonplaces. Social evolution is a process of selective adaptation of temperament and habits of thought under the stress of the circumstances of associated life. The adaptation of habits of thought is the growth of institutions. But along with the growth of institutions has gone a change of a more substantial character. Not only have the habits of men changed with the changing exigencies of the situation, but these changing exigencies have also brought about a correlative change in human nature. The human material of society itself varies with the changing conditions of life. This variation of human nature is held by the later ethnologists to be a process of selection between several relatively stable and persistent ethnic types or ethnic elements. Men tend to revert or to breed true, more or less closely, to one or another of certain types of human nature that have in their main features been fixed in approximate conformity to a situation in the past which differed from the situation of today. There are several of these relatively stable ethnic types of mankind comprised in the populations of the Western culture. These ethnic types survive in the race inheritance today, not as rigid and invariable moulds, each of a single precise and specific pattern, but in the form of a greater or smaller number of variants. Some variation of the ethnic types has resulted under the protracted selective process to which the several types and their hybrids have been subjected during the prehistoric and historic growth of culture. This necessary variation of the types themselves, due to a selective process of considerable duration and of a consistent trend, has not been sufficiently noticed by the writers who have discussed ethnic survival. The argument is here concerned with two main divergent variants of human nature resulting from this, relatively late, selective adaptation of the ethnic types comprised in the Western culture; the point of interest being the probable effect of the situation of today in furthering variation along one or the other of these two divergent lines. The ethnological position may be briefly summed up; and in order to avoid any but the most indispensable detail the schedule of types and variants and the scheme of reversion and survival in which they are concerned are here presented with a diagrammatic meagerness and simplicity which would not be admissible for any other purpose. The man of our industrial communities tends to breed true to one or the other of three main ethic types; the dolichocephalic-blond, the brachycephalic-brunette, and the Mediterranean--disregarding minor and outlying elements of our culture. But within each of these main ethnic types the reversion tends to one or the other of at least two main directions of variation; the peaceable or antepredatory variant and the predatory variant. The former of these two characteristic variants is nearer to the generic type in each case, being the reversional representative of its type as it stood at the earliest stage of associated life of which there is available evidence, either archaeological or psychological. This variant is taken to represent the ancestors of existing civilized man at the peaceable, savage phase of life which preceded the predatory culture, the regime of status, and the growth of pecuniary emulation. The second or predatory variant of the types is taken to be a survival of a more recent modification of the main ethnic types and their hybrids--of these types as they were modified, mainly by a selective adaptation, under the discipline of the predatory culture and the latter emulative culture of the quasi-peaceable stage, or the pecuniary culture proper. Under the recognized laws of heredity there may be a survival from a more or less remote past phase. In the ordinary, average, or normal case, if the type has varied, the traits of the type are transmitted approximately as they have stood in the recent past--which may be called the hereditary present. For the purpose in hand this hereditary present is represented by the later predatory and the quasi-peaceable culture. It is to the variant of human nature which is characteristic of this recent--hereditarily still existing--predatory or quasi-predatory culture that the modern civilized man tends to breed true in the common run of cases. This proposition requires some qualification so far as concerns the descendants of the servile or repressed classes of barbarian times, but the qualification necessary is probably not so great as might at first thought appear. Taking the population as a whole, this predatory, emulative variant does not seem to have attained a high degree of consistency or stability. That is to say, the human nature inherited by modern Occidental man is not nearly uniform in respect of the range or the relative strength of the various aptitudes and propensities which go to make it up. The man of the hereditary present is slightly archaic as judged for the purposes of the latest exigencies of associated life. And the type to which the modern man chiefly tends to revert under the law of variation is a somewhat more archaic human nature. On the other hand, to judge by the reversional traits which show themselves in individuals that vary from the prevailing predatory style of temperament, the ante-predatory variant seems to have a greater stability and greater symmetry in the distribution or relative force of its temperamental elements. This divergence of inherited human nature, as between an earlier and a later variant of the ethnic type to which the individual tends to breed true, is traversed and obscured by a similar divergence between the two or three main ethnic types that go to make up the Occidental populations. The individuals in these communities are conceived to be, in virtually every instance, hybrids of the prevailing ethnic elements combined in the most varied proportions; with the result that they tend to take back to one or the other of the component ethnic types. These ethnic types differ in temperament in a way somewhat similar to the difference between the predatory and the antepredatory variants of the types; the dolicho-blond type showing more of the characteristics of the predatory temperament--or at least more of the violent disposition--than the brachycephalic-brunette type, and especially more than the Mediterranean. When the growth of institutions or of the effective sentiment of a given community shows a divergence from the predatory human nature, therefore, it is impossible to say with certainty that such a divergence indicates a reversion to the ante-predatory variant. It may be due to an increasing dominance of the one or the other of the "lower" ethnic elements in the population. Still, although the evidence is not as conclusive as might be desired, there are indications that the variations in the effective temperament of modern communities is not altogether due to a selection between stable ethnic types. It seems to be to some appreciable extent a selection between the predatory and the peaceable variants of the several types. This conception of contemporary human evolution is not indispensable to the discussion. The general conclusions reached by the use of these concepts of selective adaptation would remain substantially true if the earlier, Darwinian and Spencerian, terms and concepts were substituted. Under the circumstances, some latitude may be admissible in the use of terms. The word "type" is used loosely, to denote variations of temperament which the ethnologists would perhaps recognize only as trivial variants of the type rather than as distinct ethnic types. Wherever a closer discrimination seems essential to the argument, the effort to make such a closer discrimination will be evident from the context. The ethnic types of today, then, are variants of the primitive racial types. They have suffered some alteration, and have attained some degree of fixity in their altered form, under the discipline of the barbarian culture. The man of the hereditary present is the barbarian variant, servile or aristocratic, of the ethnic elements that constitute him. But this barbarian variant has not attained the highest degree of homogeneity or of stability. The barbarian culture--the predatory and quasi-peaceable cultural stages--though of great absolute duration, has been neither protracted enough nor invariable enough in character to give an extreme fixity of type. Variations from the barbarian human nature occur with some frequency, and these cases of variation are becoming more noticeable today, because the conditions of modern life no longer act consistently to repress departures from the barbarian normal. The predatory temperament does not lead itself to all the purposes of modern life, and more especially not to modern industry. Departures from the human nature of the hereditary present are most frequently of the nature of reversions to an earlier variant of the type. This earlier variant is represented by the temperament which characterizes the primitive phase of peaceable savagery. The circumstances of life and the ends of effort that prevailed before the advent of the barbarian culture, shaped human nature and fixed it as regards certain fundamental traits. And it is to these ancient, generic features that modern men are prone to take back in case of variation from the human nature of the hereditary present. The conditions under which men lived in the most primitive stages of associated life that can properly be called human, seem to have been of a peaceful kind; and the character--the temperament and spiritual attitude of men under these early conditions or environment and institutions seems to have been of a peaceful and unaggressive, not to say an indolent, cast. For the immediate purpose this peaceable cultural stage may be taken to mark the initial phase of social development. So far as concerns the present argument, the dominant spiritual feature of this presumptive initial phase of culture seems to have been an unreflecting, unformulated sense of group solidarity, largely expressing itself in a complacent, but by no means strenuous, sympathy with all facility of human life, and an uneasy revulsion against apprehended inhibition or futility of life. Through its ubiquitous presence in the habits of thought of the ante-predatory savage man, this pervading but uneager sense of the generically useful seems to have exercised an appreciable constraining force upon his life and upon the manner of his habitual contact with other members of the group. The traces of this initial, undifferentiated peaceable phase of culture seem faint and doubtful if we look merely to such categorical evidence of its existence as is afforded by usages and views in vogue within the historical present, whether in civilized or in rude communities; but less dubious evidence of its existence is to be found in psychological survivals, in the way of persistent and pervading traits of human character. These traits survive perhaps in an especial degree among those ethic elements which were crowded into the background during the predatory culture. Traits that were suited to the earlier habits of life then became relatively useless in the individual struggle for existence. And those elements of the population, or those ethnic groups, which were by temperament less fitted to the predatory life were repressed and pushed into the background. On the transition to the predatory culture the character of the struggle for existence changed in some degree from a struggle of the group against a non-human environment to a struggle against a human environment. This change was accompanied by an increasing antagonism and consciousness of antagonism between the individual members of the group. The conditions of success within the group, as well as the conditions of the survival of the group, changed in some measure; and the dominant spiritual attitude for the group gradually changed, and brought a different range of aptitudes and propensities into the position of legitimate dominance in the accepted scheme of life. Among these archaic traits that are to be regarded as survivals from the peaceable cultural phase, are that instinct of race solidarity which we call conscience, including the sense of truthfulness and equity, and the instinct of workmanship, in its naive, non-invidious expression. Under the guidance of the later biological and psychological science, human nature will have to be restated in terms of habit; and in the restatement, this, in outline, appears to be the only assignable place and ground of these traits. These habits of life are of too pervading a character to be ascribed to the influence of a late or brief discipline. The ease with which they are temporarily overborne by the special exigencies of recent and modern life argues that these habits are the surviving effects of a discipline of extremely ancient date, from the teachings of which men have frequently been constrained to depart in detail under the altered circumstances of a later time; and the almost ubiquitous fashion in which they assert themselves whenever the pressure of special exigencies is relieved, argues that the process by which the traits were fixed and incorporated into the spiritual make-up of the type must have lasted for a relatively very long time and without serious intermission. The point is not seriously affected by any question as to whether it was a process of habituation in the old-fashioned sense of the word or a process of selective adaptation of the race. The character and exigencies of life, under that regime of status and of individual and class antithesis which covers the entire interval from the beginning of predatory culture to the present, argue that the traits of temperament here under discussion could scarcely have arisen and acquired fixity during that interval. It is entirely probable that these traits have come down from an earlier method of life, and have survived through the interval of predatory and quasi-peaceable culture in a condition of incipient, or at least imminent, desuetude, rather than that they have been brought out and fixed by this later culture. They appear to be hereditary characteristics of the race, and to have persisted in spite of the altered requirements of success under the predatory and the later pecuniary stages of culture. They seem to have persisted by force of the tenacity of transmission that belongs to an hereditary trait that is present in some degree in every member of the species, and which therefore rests on a broad basis of race continuity. Such a generic feature is not readily eliminated, even under a process of selection so severe and protracted as that to which the traits here under discussion were subjected during the predatory and quasi-peaceable stages. These peaceable traits are in great part alien to the methods and the animus of barbarian life. The salient characteristic of the barbarian culture is an unremitting emulation and antagonism between classes and between individuals. This emulative discipline favors those individuals and lines of descent which possess the peaceable savage traits in a relatively slight degree. It therefore tends to eliminate these traits, and it has apparently weakened them, in an appreciable degree, in the populations that have been subject to it. Even where the extreme penalty for non-conformity to the barbarian type of temperament is not paid, there results at least a more or less consistent repression of the non-conforming individuals and lines of descent. Where life is largely a struggle between individuals within the group, the possession of the ancient peaceable traits in a marked degree would hamper an individual in the struggle for life. Under any known phase of culture, other or later than the presumptive initial phase here spoken of, the gifts of good-nature, equity, and indiscriminate sympathy do not appreciably further the life of the individual. Their possession may serve to protect the individual from hard usage at the hands of a majority that insists on a modicum of these ingredients in their ideal of a normal man; but apart from their indirect and negative effect in this way, the individual fares better under the regime of competition in proportion as he has less of these gifts. Freedom from scruple, from sympathy, honesty and regard for life, may, within fairly wide limits, be said to further the success of the individual in the pecuniary culture. The highly successful men of all times have commonly been of this type; except those whose success has not been scored in terms of either wealth or power. It is only within narrow limits, and then only in a Pickwickian sense, that honesty is the best policy. As seen from the point of view of life under modern civilized conditions in an enlightened community of the Western culture, the primitive, ante-predatory savage, whose character it has been attempted to trace in outline above, was not a great success. Even for the purposes of that hypothetical culture to which his type of human nature owes what stability it has--even for the ends of the peaceable savage group--this primitive man has quite as many and as conspicuous economic failings as he has economic virtues--as should be plain to any one whose sense of the case is not biased by leniency born of a fellow-feeling. At his best he is "a clever, good-for-nothing fellow." The shortcomings of this presumptively primitive type of character are weakness, inefficiency, lack of initiative and ingenuity, and a yielding and indolent amiability, together with a lively but inconsequential animistic sense. Along with these traits go certain others which have some value for the collective life process, in the sense that they further the facility of life in the group. These traits are truthfulness, peaceableness, good-will, and a non-emulative, non-invidious interest in men and things. With the advent of the predatory stage of life there comes a change in the requirements of the successful human character. Men's habits of life are required to adapt themselves to new exigencies under a new scheme of human relations. The same unfolding of energy, which had previously found expression in the traits of savage life recited above, is now required to find expression along a new line of action, in a new group of habitual responses to altered stimuli. The methods which, as counted in terms of facility of life, answered measurably under the earlier conditions, are no longer adequate under the new conditions. The earlier situation was characterized by a relative absence of antagonism or differentiation of interests, the later situation by an emulation constantly increasing in relative absence of antagonism or differentiation of interests, the later situation by an emulation constantly increasing in intensity and narrowing in scope. The traits which characterize the predatory and subsequent stages of culture, and which indicate the types of man best fitted to survive under the regime of status, are (in their primary expression) ferocity, self-seeking, clannishness, and disingenuousness--a free resort to force and fraud. Under the severe and protracted discipline of the regime of competition, the selection of ethnic types has acted to give a somewhat pronounced dominance to these traits of character, by favoring the survival of those ethnic elements which are most richly endowed in these respects. At the same time the earlier--acquired, more generic habits of the race have never ceased to have some usefulness for the purpose of the life of the collectivity and have never fallen into definitive abeyance. It may be worth while to point out that the dolicho-blond type of European man seems to owe much of its dominating influence and its masterful position in the recent culture to its possessing the characteristics of predatory man in an exceptional degree. These spiritual traits, together with a large endowment of physical energy--itself probably a result of selection between groups and between lines of descent--chiefly go to place any ethnic element in the position of a leisure or master class, especially during the earlier phases of the development of the institution of a leisure class. This need not mean that precisely the same complement of aptitudes in any individual would insure him an eminent personal success. Under the competitive regime, the conditions of success for the individual are not necessarily the same as those for a class. The success of a class or party presumes a strong element of clannishness, or loyalty to a chief, or adherence to a tenet; whereas the competitive individual can best achieve his ends if he combines the barbarian's energy, initiative, self-seeking and disingenuousness with the savage's lack of loyalty or clannishness. It may be remarked by the way, that the men who have scored a brilliant (Napoleonic) success on the basis of an impartial self-seeking and absence of scruple, have not uncommonly shown more of the physical characteristics of the brachycephalic-brunette than of the dolicho-blond. The greater proportion of moderately successful individuals, in a self-seeking way, however, seem, in physique, to belong to the last-named ethnic element. The temperament induced by the predatory habit of life makes for the survival and fullness of life of the individual under a regime of emulation; at the same time it makes for the survival and success of the group if the group's life as a collectivity is also predominantly a life of hostile competition with other groups. But the evolution of economic life in the industrially more mature communities has now begun to take such a turn that the interest of the community no longer coincides with the emulative interests of the individual. In their corporate capacity, these advanced industrial communities are ceasing to be competitors for the means of life or for the right to live--except in so far as the predatory propensities of their ruling classes keep up the tradition of war and rapine. These communities are no longer hostile to one another by force of circumstances, other than the circumstances of tradition and temperament. Their material interests--apart, possibly, from the interests of the collective good fame--are not only no longer incompatible, but the success of any one of the communities unquestionably furthers the fullness of life of any other community in the group, for the present and for an incalculable time to come. No one of them any longer has any material interest in getting the better of any other. The same is not true in the same degree as regards individuals and their relations to one another. The collective interests of any modern community center in industrial efficiency. The individual is serviceable for the ends of the community somewhat in proportion to his efficiency in the productive employments vulgarly so called. This collective interest is best served by honesty, diligence, peacefulness, good-will, an absence of self-seeking, and an habitual recognition and apprehension of causal sequence, without admixture of animistic belief and without a sense of dependence on any preternatural intervention in the course of events. Not much is to be said for the beauty, moral excellence, or general worthiness and reputability of such a prosy human nature as these traits imply; and there is little ground of enthusiasm for the manner of collective life that would result from the prevalence of these traits in unmitigated dominance. But that is beside the point. The successful working of a modern industrial community is best secured where these traits concur, and it is attained in the degree in which the human material is characterized by their possession. Their presence in some measure is required in order to have a tolerable adjustment to the circumstances of the modern industrial situation. The complex, comprehensive, essentially peaceable, and highly organized mechanism of the modern industrial community works to the best advantage when these traits, or most of them, are present in the highest practicable degree. These traits are present in a markedly less degree in the man of the predatory type than is useful for the purposes of the modern collective life. On the other hand, the immediate interest of the individual under the competitive regime is best served by shrewd trading and unscrupulous management. The characteristics named above as serving the interests of the community are disserviceable to the individual, rather than otherwise. The presence of these aptitudes in his make-up diverts his energies to other ends than those of pecuniary gain; and also in his pursuit of gain they lead him to seek gain by the indirect and ineffectual channels of industry, rather than by a free and unfaltering career of sharp practice. The industrial aptitudes are pretty consistently a hindrance to the individual. Under the regime of emulation the members of a modern industrial community are rivals, each of whom will best attain his individual and immediate advantage if, through an exceptional exemption from scruple, he is able serenely to overreach and injure his fellows when the chance offers. It has already been noticed that modern economic institutions fall into two roughly distinct categories--the pecuniary and the industrial. The like is true of employments. Under the former head are employments that have to do with ownership or acquisition; under the latter head, those that have to do with workmanship or production. As was found in speaking of the growth of institutions, so with regard to employments. The economic interests of the leisure class lie in the pecuniary employments; those of the working classes lie in both classes of employments, but chiefly in the industrial. Entrance to the leisure class lies through the pecuniary employments. These two classes of employment differ materially in respect of the aptitudes required for each; and the training which they give similarly follows two divergent lines. The discipline of the pecuniary employments acts to conserve and to cultivate certain of the predatory aptitudes and the predatory animus. It does this both by educating those individuals and classes who are occupied with these employments and by selectively repressing and eliminating those individuals and lines of descent that are unfit in this respect. So far as men's habits of thought are shaped by the competitive process of acquisition and tenure; so far as their economic functions are comprised within the range of ownership of wealth as conceived in terms of exchange value, and its management and financiering through a permutation of values; so far their experience in economic life favors the survival and accentuation of the predatory temperament and habits of thought. Under the modern, peaceable system, it is of course the peaceable range of predatory habits and aptitudes that is chiefly fostered by a life of acquisition. That is to say, the pecuniary employments give proficiency in the general line of practices comprised under fraud, rather than in those that belong under the more archaic method of forcible seizure. These pecuniary employments, tending to conserve the predatory temperament, are the employments which have to do with ownership--the immediate function of the leisure class proper--and the subsidiary functions concerned with acquisition and accumulation. These cover the class of persons and that range of duties in the economic process which have to do with the ownership of enterprises engaged in competitive industry; especially those fundamental lines of economic management which are classed as financiering operations. To these may be added the greater part of mercantile occupations. In their best and clearest development these duties make up the economic office of the "captain of industry." The captain of industry is an astute man rather than an ingenious one, and his captaincy is a pecuniary rather than an industrial captaincy. Such administration of industry as he exercises is commonly of a permissive kind. The mechanically effective details of production and of industrial organization are delegated to subordinates of a less "practical" turn of mind--men who are possessed of a gift for workmanship rather than administrative ability. So far as regards their tendency in shaping human nature by education and selection, the common run of non-economic employments are to be classed with the pecuniary employments. Such are politics and ecclesiastical and military employments. The pecuniary employments have also the sanction of reputability in a much higher degree than the industrial employments. In this way the leisure-class standards of good repute come in to sustain the prestige of those aptitudes that serve the invidious purpose; and the leisure-class scheme of decorous living, therefore, also furthers the survival and culture of the predatory traits. Employments fall into a hierarchical gradation of reputability. Those which have to do immediately with ownership on a large scale are the most reputable of economic employments proper. Next to these in good repute come those employments that are immediately subservient to ownership and financiering--such as banking and the law. Banking employments also carry a suggestion of large ownership, and this fact is doubtless accountable for a share of the prestige that attaches to the business. The profession of the law does not imply large ownership; but since no taint of usefulness, for other than the competitive purpose, attaches to the lawyer's trade, it grades high in the conventional scheme. The lawyer is exclusively occupied with the details of predatory fraud, either in achieving or in checkmating chicanery, and success in the profession is therefore accepted as marking a large endowment of that barbarian astuteness which has always commanded men's respect and fear. Mercantile pursuits are only half-way reputable, unless they involve a large element of ownership and a small element of usefulness. They grade high or low somewhat in proportion as they serve the higher or the lower needs; so that the business of retailing the vulgar necessaries of life descends to the level of the handicrafts and factory labor. Manual labor, or even the work of directing mechanical processes, is of course on a precarious footing as regards respectability. A qualification is necessary as regards the discipline given by the pecuniary employments. As the scale of industrial enterprise grows larger, pecuniary management comes to bear less of the character of chicanery and shrewd competition in detail. That is to say, for an ever-increasing proportion of the persons who come in contact with this phase of economic life, business reduces itself to a routine in which there is less immediate suggestion of overreaching or exploiting a competitor. The consequent exemption from predatory habits extends chiefly to subordinates employed in business. The duties of ownership and administration are virtually untouched by this qualification. The case is different as regards those individuals or classes who are immediately occupied with the technique and manual operations of production. Their daily life is not in the same degree a course of habituation to the emulative and invidious motives and maneuvers of the pecuniary side of industry. They are consistently held to the apprehension and coordination of mechanical facts and sequences, and to their appreciation and utilization for the purposes of human life. So far as concerns this portion of the population, the educative and selective action of the industrial process with which they are immediately in contact acts to adapt their habits of thought to the non-invidious purposes of the collective life. For them, therefore, it hastens the obsolescence of the distinctively predatory aptitudes and propensities carried over by heredity and tradition from the barbarian past of the race. The educative action of the economic life of the community, therefore, is not of a uniform kind throughout all its manifestations. That range of economic activities which is concerned immediately with pecuniary competition has a tendency to conserve certain predatory traits; while those industrial occupations which have to do immediately with the production of goods have in the main the contrary tendency. But with regard to the latter class of employments it is to be noticed in qualification that the persons engaged in them are nearly all to some extent also concerned with matters of pecuniary competition (as, for instance, in the competitive fixing of wages and salaries, in the purchase of goods for consumption, etc.). Therefore the distinction here made between classes of employments is by no means a hard and fast distinction between classes of persons. The employments of the leisure classes in modern industry are such as to keep alive certain of the predatory habits and aptitudes. So far as the members of those classes take part in the industrial process, their training tends to conserve in them the barbarian temperament. But there is something to be said on the other side. Individuals so placed as to be exempt from strain may survive and transmit their characteristics even if they differ widely from the average of the species both in physique and in spiritual make-up. The chances for a survival and transmission of atavistic traits are greatest in those classes that are most sheltered from the stress of circumstances. The leisure class is in some degree sheltered from the stress of the industrial situation, and should, therefore, afford an exceptionally great proportion of reversions to the peaceable or savage temperament. It should be possible for such aberrant or atavistic individuals to unfold their life activity on ante-predatory lines without suffering as prompt a repression or elimination as in the lower walks of life. Something of the sort seems to be true in fact. There is, for instance, an appreciable proportion of the upper classes whose inclinations lead them into philanthropic work, and there is a considerable body of sentiment in the class going to support efforts of reform and amelioration. And much of this philanthropic and reformatory effort, moreover, bears the marks of that amiable "cleverness" and incoherence that is characteristic of the primitive savage. But it may still be doubtful whether these facts are evidence of a larger proportion of reversions in the higher than in the lower strata, even if the same inclinations were present in the impecunious classes, it would not as easily find expression there; since those classes lack the means and the time and energy to give effect to their inclinations in this respect. The prima facie evidence of the facts can scarcely go unquestioned. In further qualification it is to be noted that the leisure class of today is recruited from those who have been successful in a pecuniary way, and who, therefore, are presumably endowed with more than an even complement of the predatory traits. Entrance into the leisure class lies through the pecuniary employments, and these employments, by selection and adaptation, act to admit to the upper levels only those lines of descent that are pecuniarily fit to survive under the predatory test. And so soon as a case of reversion to non-predatory human nature shows itself on these upper levels, it is commonly weeded out and thrown back to the lower pecuniary levels. In order to hold its place in the class, a stock must have the pecuniary temperament; otherwise its fortune would be dissipated and it would presently lose caste. Instances of this kind are sufficiently frequent. The constituency of the leisure class is kept up by a continual selective process, whereby the individuals and lines of descent that are eminently fitted for an aggressive pecuniary competition are withdrawn from the lower classes. In order to reach the upper levels the aspirant must have, not only a fair average complement of the pecuniary aptitudes, but he must have these gifts in such an eminent degree as to overcome very material difficulties that stand in the way of his ascent. Barring accidents, the nouveaux arrivés are a picked body. This process of selective admission has, of course, always been going on; ever since the fashion of pecuniary emulation set in--which is much the same as saying, ever since the institution of a leisure class was first installed. But the precise ground of selection has not always been the same, and the selective process has therefore not always given the same results. In the early barbarian, or predatory stage proper, the test of fitness was prowess, in the naive sense of the word. To gain entrance to the class, the candidate had to be gifted with clannishness, massiveness, ferocity, unscrupulousness, and tenacity of purpose. These were the qualities that counted toward the accumulation and continued tenure of wealth. The economic basis of the leisure class, then as later, was the possession of wealth; but the methods of accumulating wealth, and the gifts required for holding it, have changed in some degree since the early days of the predatory culture. In consequence of the selective process the dominant traits of the early barbarian leisure class were bold aggression, an alert sense of status, and a free resort to fraud. The members of the class held their place by tenure of prowess. In the later barbarian culture society attained settled methods of acquisition and possession under the quasi-peaceable regime of status. Simple aggression and unrestrained violence in great measure gave place to shrewd practice and chicanery, as the best approved method of accumulating wealth. A different range of aptitudes and propensities would then be conserved in the leisure class. Masterful aggression, and the correlative massiveness, together with a ruthlessly consistent sense of status, would still count among the most splendid traits of the class. These have remained in our traditions as the typical "aristocratic virtues." But with these were associated an increasing complement of the less obtrusive pecuniary virtues; such as providence, prudence, and chicanery. As time has gone on, and the modern peaceable stage of pecuniary culture has been approached, the last-named range of aptitudes and habits has gained in relative effectiveness for pecuniary ends, and they have counted for relatively more in the selective process under which admission is gained and place is held in the leisure class. The ground of selection has changed, until the aptitudes which now qualify for admission to the class are the pecuniary aptitudes only. What remains of the predatory barbarian traits is the tenacity of purpose or consistency of aim which distinguished the successful predatory barbarian from the peaceable savage whom he supplanted. But this trait can not be said characteristically to distinguish the pecuniarily successful upper-class man from the rank and file of the industrial classes. The training and the selection to which the latter are exposed in modern industrial life give a similarly decisive weight to this trait. Tenacity of purpose may rather be said to distinguish both these classes from two others; the shiftless ne'er do-well and the lower-class delinquent. In point of natural endowment the pecuniary man compares with the delinquent in much the same way as the industrial man compares with the good-natured shiftless dependent. The ideal pecuniary man is like the ideal delinquent in his unscrupulous conversion of goods and persons to his own ends, and in a callous disregard of the feelings and wishes of others and of the remoter effects of his actions; but he is unlike him in possessing a keener sense of status, and in working more consistently and farsightedly to a remoter end. The kinship of the two types of temperament is further shown in a proclivity to "sport" and gambling, and a relish of aimless emulation. The ideal pecuniary man also shows a curious kinship with the delinquent in one of the concomitant variations of the predatory human nature. The delinquent is very commonly of a superstitious habit of mind; he is a great believer in luck, spells, divination and destiny, and in omens and shamanistic ceremony. Where circumstances are favorable, this proclivity is apt to express itself in a certain servile devotional fervor and a punctilious attention to devout observances; it may perhaps be better characterized as devoutness than as religion. At this point the temperament of the delinquent has more in common with the pecuniary and leisure classes than with the industrial man or with the class of shiftless dependents. Life in a modern industrial community, or in other words life under the pecuniary culture, acts by a process of selection to develop and conserve a certain range of aptitudes and propensities. The present tendency of this selective process is not simply a reversion to a given, immutable ethnic type. It tends rather to a modification of human nature differing in some respects from any of the types or variants transmitted out of the past. The objective point of the evolution is not a single one. The temperament which the evolution acts to establish as normal differs from any one of the archaic variants of human nature in its greater stability of aim--greater singleness of purpose and greater persistence in effort. So far as concerns economic theory, the objective point of the selective process is on the whole single to this extent; although there are minor tendencies of considerable importance diverging from this line of development. But apart from this general trend the line of development is not single. As concerns economic theory, the development in other respects runs on two divergent lines. So far as regards the selective conservation of capacities or aptitudes in individuals, these two lines may be called the pecuniary and the industrial. As regards the conservation of propensities, spiritual attitude, or animus, the two may be called the invidious or self-regarding and the non-invidious or economical. As regards the intellectual or cognitive bent of the two directions of growth, the former may be characterized as the personal standpoint, of conation, qualitative relation, status, or worth; the latter as the impersonal standpoint, of sequence, quantitative relation, mechanical efficiency, or use. The pecuniary employments call into action chiefly the former of these two ranges of aptitudes and propensities, and act selectively to conserve them in the population. The industrial employments, on the other hand, chiefly exercise the latter range, and act to conserve them. An exhaustive psychological analysis will show that each of these two ranges of aptitudes and propensities is but the multiform expression of a given temperamental bent. By force of the unity or singleness of the individual, the aptitudes, animus, and interests comprised in the first-named range belong together as expressions of a given variant of human nature. The like is true of the latter range. The two may be conceived as alternative directions of human life, in such a way that a given individual inclines more or less consistently to the one or the other. The tendency of the pecuniary life is, in a general way, to conserve the barbarian temperament, but with the substitution of fraud and prudence, or administrative ability, in place of that predilection for physical damage that characterizes the early barbarian. This substitution of chicanery in place of devastation takes place only in an uncertain degree. Within the pecuniary employments the selective action runs pretty consistently in this direction, but the discipline of pecuniary life, outside the competition for gain, does not work consistently to the same effect. The discipline of modern life in the consumption of time and goods does not act unequivocally to eliminate the aristocratic virtues or to foster the bourgeois virtues. The conventional scheme of decent living calls for a considerable exercise of the earlier barbarian traits. Some details of this traditional scheme of life, bearing on this point, have been noticed in earlier chapters under the head of leisure, and further details will be shown in later chapters. From what has been said, it appears that the leisure-class life and the leisure-class scheme of life should further the conservation of the barbarian temperament; chiefly of the quasi-peaceable, or bourgeois, variant, but also in some measure of the predatory variant. In the absence of disturbing factors, therefore, it should be possible to trace a difference of temperament between the classes of society. The aristocratic and the bourgeois virtues--that is to say the destructive and pecuniary traits--should be found chiefly among the upper classes, and the industrial virtues--that is to say the peaceable traits--chiefly among the classes given to mechanical industry. In a general and uncertain way this holds true, but the test is not so readily applied nor so conclusive as might be wished. There are several assignable reasons for its partial failure. All classes are in a measure engaged in the pecuniary struggle, and in all classes the possession of the pecuniary traits counts towards the success and survival of the individual. Wherever the pecuniary culture prevails, the selective process by which men's habits of thought are shaped, and by which the survival of rival lines of descent is decided, proceeds proximately on the basis of fitness for acquisition. Consequently, if it were not for the fact that pecuniary efficiency is on the whole incompatible with industrial efficiency, the selective action of all occupations would tend to the unmitigated dominance of the pecuniary temperament. The result would be the installation of what has been known as the "economic man," as the normal and definitive type of human nature. But the "economic man," whose only interest is the self-regarding one and whose only human trait is prudence is useless for the purposes of modern industry. The modern industry requires an impersonal, non-invidious interest in the work in hand. Without this the elaborate processes of industry would be impossible, and would, indeed, never have been conceived. This interest in work differentiates the workman from the criminal on the one hand, and from the captain of industry on the other. Since work must be done in order to the continued life of the community, there results a qualified selection favoring the spiritual aptitude for work, within a certain range of occupations. This much, however, is to be conceded, that even within the industrial occupations the selective elimination of the pecuniary traits is an uncertain process, and that there is consequently an appreciable survival of the barbarian temperament even within these occupations. On this account there is at present no broad distinction in this respect between the leisure-class character and the character of the common run of the population. The whole question as to a class distinction in respect to spiritual make-up is also obscured by the presence, in all classes of society, of acquired habits of life that closely simulate inherited traits and at the same time act to develop in the entire body of the population the traits which they simulate. These acquired habits, or assumed traits of character, are most commonly of an aristocratic cast. The prescriptive position of the leisure class as the exemplar of reputability has imposed many features of the leisure-class theory of life upon the lower classes; with the result that there goes on, always and throughout society, a more or less persistent cultivation of these aristocratic traits. On this ground also these traits have a better chance of survival among the body of the people than would be the case if it were not for the precept and example of the leisure class. As one channel, and an important one, through which this transfusion of aristocratic views of life, and consequently more or less archaic traits of character goes on, may be mentioned the class of domestic servants. These have their notions of what is good and beautiful shaped by contact with the master class and carry the preconceptions so acquired back among their low-born equals, and so disseminate the higher ideals abroad through the community without the loss of time which this dissemination might otherwise suffer. The saying "Like master, like man," has a greater significance than is commonly appreciated for the rapid popular acceptance of many elements of upper-class culture. There is also a further range of facts that go to lessen class differences as regards the survival of the pecuniary virtues. The pecuniary struggle produces an underfed class, of large proportions. This underfeeding consists in a deficiency of the necessaries of life or of the necessaries of a decent expenditure. In either case the result is a closely enforced struggle for the means with which to meet the daily needs; whether it be the physical or the higher needs. The strain of self-assertion against odds takes up the whole energy of the individual; he bends his efforts to compass his own invidious ends alone, and becomes continually more narrowly self-seeking. The industrial traits in this way tend to obsolescence through disuse. Indirectly, therefore, by imposing a scheme of pecuniary decency and by withdrawing as much as may be of the means of life from the lower classes, the institution of a leisure class acts to conserve the pecuniary traits in the body of the population. The result is an assimilation of the lower classes to the type of human nature that belongs primarily to the upper classes only. It appears, therefore, that there is no wide difference in temperament between the upper and the lower classes; but it appears also that the absence of such a difference is in good part due to the prescriptive example of the leisure class and to the popular acceptance of those broad principles of conspicuous waste and pecuniary emulation on which the institution of a leisure class rests. The institution acts to lower the industrial efficiency of the community and retard the adaptation of human nature to the exigencies of modern industrial life. It affects the prevalent or effective human nature in a conservative direction, (1) by direct transmission of archaic traits, through inheritance within the class and wherever the leisure-class blood is transfused outside the class, and (2) by conserving and fortifying the traditions of the archaic regime, and so making the chances of survival of barbarian traits greater also outside the range of transfusion of leisure-class blood. But little if anything has been done towards collecting or digesting data that are of special significance for the question of survival or elimination of traits in the modern populations. Little of a tangible character can therefore be offered in support of the view here taken, beyond a discursive review of such everyday facts as lie ready to hand. Such a recital can scarcely avoid being commonplace and tedious, but for all that it seems necessary to the completeness of the argument, even in the meager outline in which it is here attempted. A degree of indulgence may therefore fairly be bespoken for the succeeding chapters, which offer a fragmentary recital of this kind. Chapter Ten ~~ Modern Survivals of Prowess The leisure class lives by the industrial community rather than in it. Its relations to industry are of a pecuniary rather than an industrial kind. Admission to the class is gained by exercise of the pecuniary aptitudes--aptitudes for acquisition rather than for serviceability. There is, therefore, a continued selective sifting of the human material that makes up the leisure class, and this selection proceeds on the ground of fitness for pecuniary pursuits. But the scheme of life of the class is in large part a heritage from the past, and embodies much of the habits and ideals of the earlier barbarian period. This archaic, barbarian scheme of life imposes itself also on the lower orders, with more or less mitigation. In its turn the scheme of life, of conventions, acts selectively and by education to shape the human material, and its action runs chiefly in the direction of conserving traits, habits, and ideals that belong to the early barbarian age--the age of prowess and predatory life. The most immediate and unequivocal expression of that archaic human nature which characterizes man in the predatory stage is the fighting propensity proper. In cases where the predatory activity is a collective one, this propensity is frequently called the martial spirit, or, latterly, patriotism. It needs no insistence to find assent to the proposition that in the countries of civilized Europe the hereditary leisure class is endowed with this martial spirit in a higher degree than the middle classes. Indeed, the leisure class claims the distinction as a matter of pride, and no doubt with some grounds. War is honorable, and warlike prowess is eminently honorific in the eyes of the generality of men; and this admiration of warlike prowess is itself the best voucher of a predatory temperament in the admirer of war. The enthusiasm for war, and the predatory temper of which it is the index, prevail in the largest measure among the upper classes, especially among the hereditary leisure class. Moreover, the ostensible serious occupation of the upper class is that of government, which, in point of origin and developmental content, is also a predatory occupation. The only class which could at all dispute with the hereditary leisure class the honor of an habitual bellicose frame of mind is that of the lower-class delinquents. In ordinary times, the large body of the industrial classes is relatively apathetic touching warlike interests. When unexcited, this body of the common people, which makes up the effective force of the industrial community, is rather averse to any other than a defensive fight; indeed, it responds a little tardily even to a provocation which makes for an attitude of defense. In the more civilized communities, or rather in the communities which have reached an advanced industrial development, the spirit of warlike aggression may be said to be obsolescent among the common people. This does not say that there is not an appreciable number of individuals among the industrial classes in whom the martial spirit asserts itself obtrusively. Nor does it say that the body of the people may not be fired with martial ardor for a time under the stimulus of some special provocation, such as is seen in operation today in more than one of the countries of Europe, and for the time in America. But except for such seasons of temporary exaltation, and except for those individuals who are endowed with an archaic temperament of the predatory type, together with the similarly endowed body of individuals among the higher and the lowest classes, the inertness of the mass of any modern civilized community in this respect is probably so great as would make war impracticable, except against actual invasion. The habits and aptitudes of the common run of men make for an unfolding of activity in other, less picturesque directions than that of war. This class difference in temperament may be due in part to a difference in the inheritance of acquired traits in the several classes, but it seems also, in some measure, to correspond with a difference in ethnic derivation. The class difference is in this respect visibly less in those countries whose population is relatively homogeneous, ethnically, than in the countries where there is a broader divergence between the ethnic elements that make up the several classes of the community. In the same connection it may be noted that the later accessions to the leisure class in the latter countries, in a general way, show less of the martial spirit than contemporary representatives of the aristocracy of the ancient line. These nouveaux arrivés have recently emerged from the commonplace body of the population and owe their emergence into the leisure class to the exercise of traits and propensities which are not to be classed as prowess in the ancient sense. Apart from warlike activity proper, the institution of the duel is also an expression of the same superior readiness for combat; and the duel is a leisure-class institution. The duel is in substance a more or less deliberate resort to a fight as a final settlement of a difference of opinion. In civilized communities it prevails as a normal phenomenon only where there is an hereditary leisure class, and almost exclusively among that class. The exceptions are (1) military and naval officers who are ordinarily members of the leisure class, and who are at the same time specially trained to predatory habits of mind and (2) the lower-class delinquents--who are by inheritance, or training, or both, of a similarly predatory disposition and habit. It is only the high-bred gentleman and the rowdy that normally resort to blows as the universal solvent of differences of opinion. The plain man will ordinarily fight only when excessive momentary irritation or alcoholic exaltation act to inhibit the more complex habits of response to the stimuli that make for provocation. He is then thrown back upon the simpler, less differentiated forms of the instinct of self-assertion; that is to say, he reverts temporarily and without reflection to an archaic habit of mind. This institution of the duel as a mode of finally settling disputes and serious questions of precedence shades off into the obligatory, unprovoked private fight, as a social obligation due to one's good repute. As a leisure-class usage of this kind we have, particularly, that bizarre survival of bellicose chivalry, the German student duel. In the lower or spurious leisure class of the delinquents there is in all countries a similar, though less formal, social obligation incumbent on the rowdy to assert his manhood in unprovoked combat with his fellows. And spreading through all grades of society, a similar usage prevails among the boys of the community. The boy usually knows to nicety, from day to day, how he and his associates grade in respect of relative fighting capacity; and in the community of boys there is ordinarily no secure basis of reputability for any one who, by exception, will not or can not fight on invitation. All this applies especially to boys above a certain somewhat vague limit of maturity. The child's temperament does not commonly answer to this description during infancy and the years of close tutelage, when the child still habitually seeks contact with its mother at every turn of its daily life. During this earlier period there is little aggression and little propensity for antagonism. The transition from this peaceable temper to the predaceous, and in extreme cases malignant, mischievousness of the boy is a gradual one, and it is accomplished with more completeness, covering a larger range of the individual's aptitudes, in some cases than in others. In the earlier stage of his growth, the child, whether boy or girl, shows less of initiative and aggressive self-assertion and less of an inclination to isolate himself and his interests from the domestic group in which he lives, and he shows more of sensitiveness to rebuke, bashfulness, timidity, and the need of friendly human contact. In the common run of cases this early temperament passes, by a gradual but somewhat rapid obsolescence of the infantile features, into the temperament of the boy proper; though there are also cases where the predaceous futures of boy life do not emerge at all, or at the most emerge in but a slight and obscure degree. In girls the transition to the predaceous stage is seldom accomplished with the same degree of completeness as in boys; and in a relatively large proportion of cases it is scarcely undergone at all. In such cases the transition from infancy to adolescence and maturity is a gradual and unbroken process of the shifting of interest from infantile purposes and aptitudes to the purposes, functions, and relations of adult life. In the girls there is a less general prevalence of a predaceous interval in the development; and in the cases where it occurs, the predaceous and isolating attitude during the interval is commonly less accentuated. In the male child the predaceous interval is ordinarily fairly well marked and lasts for some time, but it is commonly terminated (if at all) with the attainment of maturity. This last statement may need very material qualification. The cases are by no means rare in which the transition from the boyish to the adult temperament is not made, or is made only partially--understanding by the "adult" temperament the average temperament of those adult individuals in modern industrial life who have some serviceability for the purposes of the collective life process, and who may therefore be said to make up the effective average of the industrial community. The ethnic composition of the European populations varies. In some cases even the lower classes are in large measure made up of the peace-disturbing dolicho-blond; while in others this ethnic element is found chiefly among the hereditary leisure class. The fighting habit seems to prevail to a less extent among the working-class boys in the latter class of populations than among the boys of the upper classes or among those of the populations first named. If this generalization as to the temperament of the boy among the working classes should be found true on a fuller and closer scrutiny of the field, it would add force to the view that the bellicose temperament is in some appreciable degree a race characteristic; it appears to enter more largely into the make-up of the dominant, upper-class ethnic type--the dolicho-blond--of the European countries than into the subservient, lower-class types of man which are conceived to constitute the body of the population of the same communities. The case of the boy may seem not to bear seriously on the question of the relative endowment of prowess with which the several classes of society are gifted; but it is at least of some value as going to show that this fighting impulse belongs to a more archaic temperament than that possessed by the average adult man of the industrious classes. In this, as in many other features of child life, the child reproduces, temporarily and in miniature, some of the earlier phases of the development of adult man. Under this interpretation, the boy's predilection for exploit and for isolation of his own interest is to be taken as a transient reversion to the human nature that is normal to the early barbarian culture--the predatory culture proper. In this respect, as in much else, the leisure-class and the delinquent-class character shows a persistence into adult life of traits that are normal to childhood and youth, and that are likewise normal or habitual to the earlier stages of culture. Unless the difference is traceable entirely to a fundamental difference between persistent ethnic types, the traits that distinguish the swaggering delinquent and the punctilious gentleman of leisure from the common crowd are, in some measure, marks of an arrested spiritual development. They mark an immature phase, as compared with the stage of development attained by the average of the adults in the modern industrial community. And it will appear presently that the puerile spiritual make-up of these representatives of the upper and the lowest social strata shows itself also in the presence of other archaic traits than this proclivity to ferocious exploit and isolation. As if to leave no doubt about the essential immaturity of the fighting temperament, we have, bridging the interval between legitimate boyhood and adult manhood, the aimless and playful, but more or less systematic and elaborate, disturbances of the peace in vogue among schoolboys of a slightly higher age. In the common run of cases, these disturbances are confined to the period of adolescence. They recur with decreasing frequency and acuteness as youth merges into adult life, and so they reproduce, in a general way, in the life of the individual, the sequence by which the group has passed from the predatory to a more settled habit of life. In an appreciable number of cases the spiritual growth of the individual comes to a close before he emerges from this puerile phase; in these cases the fighting temper persists through life. Those individuals who in spiritual development eventually reach man's estate, therefore, ordinarily pass through a temporary archaic phase corresponding to the permanent spiritual level of the fighting and sporting men. Different individuals will, of course, achieve spiritual maturity and sobriety in this respect in different degrees; and those who fail of the average remain as an undissolved residue of crude humanity in the modern industrial community and as a foil for that selective process of adaptation which makes for a heightened industrial efficiency and the fullness of life of the collectivity. This arrested spiritual development may express itself not only in a direct participation by adults in youthful exploits of ferocity, but also indirectly in aiding and abetting disturbances of this kind on the part of younger persons. It thereby furthers the formation of habits of ferocity which may persist in the later life of the growing generation, and so retard any movement in the direction of a more peaceable effective temperament on the part of the community. If a person so endowed with a proclivity for exploits is in a position to guide the development of habits in the adolescent members of the community, the influence which he exerts in the direction of conservation and reversion to prowess may be very considerable. This is the significance, for instance, of the fostering care latterly bestowed by many clergymen and other pillars of society upon "boys' brigades" and similar pseudo-military organizations. The same is true of the encouragement given to the growth of "college spirit," college athletics, and the like, in the higher institutions of learning. These manifestations of the predatory temperament are all to be classed under the head of exploit. They are partly simple and unreflected expressions of an attitude of emulative ferocity, partly activities deliberately entered upon with a view to gaining repute for prowess. Sports of all kinds are of the same general character, including prize-fights, bull-fights, athletics, shooting, angling, yachting, and games of skill, even where the element of destructive physical efficiency is not an obtrusive feature. Sports shade off from the basis of hostile combat, through skill, to cunning and chicanery, without its being possible to draw a line at any point. The ground of an addiction to sports is an archaic spiritual constitution--the possession of the predatory emulative propensity in a relatively high potency, a strong proclivity to adventuresome exploit and to the infliction of damage is especially pronounced in those employments which are in colloquial usage specifically called sportsmanship. It is perhaps truer, or at least more evident, as regards sports than as regards the other expressions of predatory emulation already spoken of, that the temperament which inclines men to them is essentially a boyish temperament. The addiction to sports, therefore, in a peculiar degree marks an arrested development of the man's moral nature. This peculiar boyishness of temperament in sporting men immediately becomes apparent when attention is directed to the large element of make-believe that is present in all sporting activity. Sports share this character of make-believe with the games and exploits to which children, especially boys, are habitually inclined. Make-believe does not enter in the same proportion into all sports, but it is present in a very appreciable degree in all. It is apparently present in a larger measure in sportsmanship proper and in athletic contests than in set games of skill of a more sedentary character; although this rule may not be found to apply with any great uniformity. It is noticeable, for instance, that even very mild-mannered and matter-of-fact men who go out shooting are apt to carry an excess of arms and accoutrements in order to impress upon their own imagination the seriousness of their undertaking. These huntsmen are also prone to a histrionic, prancing gait and to an elaborate exaggeration of the motions, whether of stealth or of onslaught, involved in their deeds of exploit. Similarly in athletic sports there is almost invariably present a good share of rant and swagger and ostensible mystification--features which mark the histrionic nature of these employments. In all this, of course, the reminder of boyish make-believe is plain enough. The slang of athletics, by the way, is in great part made up of extremely sanguinary locutions borrowed from the terminology of warfare. Except where it is adopted as a necessary means of secret communication, the use of a special slang in any employment is probably to be accepted as evidence that the occupation in question is substantially make-believe. A further feature in which sports differ from the duel and similar disturbances of the peace is the peculiarity that they admit of other motives being assigned for them besides the impulses of exploit and ferocity. There is probably little if any other motive present in any given case, but the fact that other reasons for indulging in sports are frequently assigned goes to say that other grounds are sometimes present in a subsidiary way. Sportsmen--hunters and anglers--are more or less in the habit of assigning a love of nature, the need of recreation, and the like, as the incentives to their favorite pastime. These motives are no doubt frequently present and make up a part of the attractiveness of the sportsman's life; but these can not be the chief incentives. These ostensible needs could be more readily and fully satisfied without the accompaniment of a systematic effort to take the life of those creatures that make up an essential feature of that "nature" that is beloved by the sportsman. It is, indeed, the most noticeable effect of the sportsman's activity to keep nature in a state of chronic desolation by killing off all living thing whose destruction he can compass. Still, there is ground for the sportsman's claim that under the existing conventionalities his need of recreation and of contact with nature can best be satisfied by the course which he takes. Certain canons of good breeding have been imposed by the prescriptive example of a predatory leisure class in the past and have been somewhat painstakingly conserved by the usage of the latter-day representatives of that class; and these canons will not permit him, without blame, to seek contact with nature on other terms. From being an honorable employment handed down from the predatory culture as the highest form of everyday leisure, sports have come to be the only form of outdoor activity that has the full sanction of decorum. Among the proximate incentives to shooting and angling, then, may be the need of recreation and outdoor life. The remoter cause which imposes the necessity of seeking these objects under the cover of systematic slaughter is a prescription that can not be violated except at the risk of disrepute and consequent lesion to one's self-respect. The case of other kinds of sport is somewhat similar. Of these, athletic games are the best example. Prescriptive usage with respect to what forms of activity, exercise, and recreation are permissible under the code of reputable living is of course present here also. Those who are addicted to athletic sports, or who admire them, set up the claim that these afford the best available means of recreation and of "physical culture." And prescriptive usage gives countenance to the claim. The canons of reputable living exclude from the scheme of life of the leisure class all activity that can not be classed as conspicuous leisure. And consequently they tend by prescription to exclude it also from the scheme of life of the community generally. At the same time purposeless physical exertion is tedious and distasteful beyond tolerance. As has been noticed in another connection, recourse is in such a case had to some form of activity which shall at least afford a colorable pretense of purpose, even if the object assigned be only a make-believe. Sports satisfy these requirements of substantial futility together with a colorable make-believe of purpose. In addition to this they afford scope for emulation, and are attractive also on that account. In order to be decorous, an employment must conform to the leisure-class canon of reputable waste; at the same time all activity, in order to be persisted in as an habitual, even if only partial, expression of life, must conform to the generically human canon of efficiency for some serviceable objective end. The leisure-class canon demands strict and comprehensive futility, the instinct of workmanship demands purposeful action. The leisure-class canon of decorum acts slowly and pervasively, by a selective elimination of all substantially useful or purposeful modes of action from the accredited scheme of life; the instinct of workmanship acts impulsively and may be satisfied, provisionally, with a proximate purpose. It is only as the apprehended ulterior futility of a given line of action enters the reflective complex of consciousness as an element essentially alien to the normally purposeful trend of the life process that its disquieting and deterrent effect on the consciousness of the agent is wrought. The individual's habits of thought make an organic complex, the trend of which is necessarily in the direction of serviceability to the life process. When it is attempted to assimilate systematic waste or futility, as an end in life, into this organic complex, there presently supervenes a revulsion. But this revulsion of the organism may be avoided if the attention can be confined to the proximate, unreflected purpose of dexterous or emulative exertion. Sports--hunting, angling, athletic games, and the like--afford an exercise for dexterity and for the emulative ferocity and astuteness characteristic of predatory life. So long as the individual is but slightly gifted with reflection or with a sense of the ulterior trend of his actions so long as his life is substantially a life of naive impulsive action--so long the immediate and unreflected purposefulness of sports, in the way of an expression of dominance, will measurably satisfy his instinct of workmanship. This is especially true if his dominant impulses are the unreflecting emulative propensities of the predaceous temperament. At the same time the canons of decorum will commend sports to him as expressions of a pecuniarily blameless life. It is by meeting these two requirements, of ulterior wastefulness and proximate purposefulness, that any given employment holds its place as a traditional and habitual mode of decorous recreation. In the sense that other forms of recreation and exercise are morally impossible to persons of good breeding and delicate sensibilities, then, sports are the best available means of recreation under existing circumstances. But those members of respectable society who advocate athletic games commonly justify their attitude on this head to themselves and to their neighbors on the ground that these games serve as an invaluable means of development. They not only improve the contestant's physique, but it is commonly added that they also foster a manly spirit, both in the participants and in the spectators. Football is the particular game which will probably first occur to any one in this community when the question of the serviceability of athletic games is raised, as this form of athletic contest is at present uppermost in the mind of those who plead for or against games as a means of physical or moral salvation. This typical athletic sport may, therefore, serve to illustrate the bearing of athletics upon the development of the contestant's character and physique. It has been said, not inaptly, that the relation of football to physical culture is much the same as that of the bull-fight to agriculture. Serviceability for these lusory institutions requires sedulous training or breeding. The material used, whether brute or human, is subjected to careful selection and discipline, in order to secure and accentuate certain aptitudes and propensities which are characteristic of the ferine state, and which tend to obsolescence under domestication. This does not mean that the result in either case is an all around and consistent rehabilitation of the ferine or barbarian habit of mind and body. The result is rather a one-sided return to barbarism or to the feroe natura--a rehabilitation and accentuation of those ferine traits which make for damage and desolation, without a corresponding development of the traits which would serve the individual's self-preservation and fullness of life in a ferine environment. The culture bestowed in football gives a product of exotic ferocity and cunning. It is a rehabilitation of the early barbarian temperament, together with a suppression of those details of temperament, which, as seen from the standpoint of the social and economic exigencies, are the redeeming features of the savage character. The physical vigor acquired in the training for athletic games--so far as the training may be said to have this effect--is of advantage both to the individual and to the collectivity, in that, other things being equal, it conduces to economic serviceability. The spiritual traits which go with athletic sports are likewise economically advantageous to the individual, as contradistinguished from the interests of the collectivity. This holds true in any community where these traits are present in some degree in the population. Modern competition is in large part a process of self-assertion on the basis of these traits of predatory human nature. In the sophisticated form in which they enter into the modern, peaceable emulation, the possession of these traits in some measure is almost a necessary of life to the civilized man. But while they are indispensable to the competitive individual, they are not directly serviceable to the community. So far as regards the serviceability of the individual for the purposes of the collective life, emulative efficiency is of use only indirectly if at all. Ferocity and cunning are of no use to the community except in its hostile dealings with other communities; and they are useful to the individual only because there is so large a proportion of the same traits actively present in the human environment to which he is exposed. Any individual who enters the competitive struggle without the due endowment of these traits is at a disadvantage, somewhat as a hornless steer would find himself at a disadvantage in a drove of horned cattle. The possession and the cultivation of the predatory traits of character may, of course, be desirable on other than economic grounds. There is a prevalent aesthetic or ethical predilection for the barbarian aptitudes, and the traits in question minister so effectively to this predilection that their serviceability in the aesthetic or ethical respect probably offsets any economic unserviceability which they may give. But for the present purpose that is beside the point. Therefore nothing is said here as to the desirability or advisability of sports on the whole, or as to their value on other than economic grounds. In popular apprehension there is much that is admirable in the type of manhood which the life of sport fosters. There is self-reliance and good-fellowship, so termed in the somewhat loose colloquial use of the words. From a different point of view the qualities currently so characterized might be described as truculence and clannishness. The reason for the current approval and admiration of these manly qualities, as well as for their being called manly, is the same as the reason for their usefulness to the individual. The members of the community, and especially that class of the community which sets the pace in canons of taste, are endowed with this range of propensities in sufficient measure to make their absence in others felt as a shortcoming, and to make their possession in an exceptional degree appreciated as an attribute of superior merit. The traits of predatory man are by no means obsolete in the common run of modern populations. They are present and can be called out in bold relief at any time by any appeal to the sentiments in which they express themselves--unless this appeal should clash with the specific activities that make up our habitual occupations and comprise the general range of our everyday interests. The common run of the population of any industrial community is emancipated from these, economically considered, untoward propensities only in the sense that, through partial and temporary disuse, they have lapsed into the background of sub-conscious motives. With varying degrees of potency in different individuals, they remain available for the aggressive shaping of men's actions and sentiments whenever a stimulus of more than everyday intensity comes in to call them forth. And they assert themselves forcibly in any case where no occupation alien to the predatory culture has usurped the individual's everyday range of interest and sentiment. This is the case among the leisure class and among certain portions of the population which are ancillary to that class. Hence the facility with which any new accessions to the leisure class take to sports; and hence the rapid growth of sports and of the sporting sentient in any industrial community where wealth has accumulated sufficiently to exempt a considerable part of the population from work. A homely and familiar fact may serve to show that the predaceous impulse does not prevail in the same degree in all classes. Taken simply as a feature of modern life, the habit of carrying a walking-stick may seem at best a trivial detail; but the usage has a significance for the point in question. The classes among whom the habit most prevails--the classes with whom the walking-stick is associated in popular apprehension--are the men of the leisure class proper, sporting men, and the lower-class delinquents. To these might perhaps be added the men engaged in the pecuniary employments. The same is not true of the common run of men engaged in industry and it may be noted by the way that women do not carry a stick except in case of infirmity, where it has a use of a different kind. The practice is of course in great measure a matter of polite usage; but the basis of polite usage is, in turn, the proclivities of the class which sets the pace in polite usage. The walking-stick serves the purpose of an advertisement that the bearer's hands are employed otherwise than in useful effort, and it therefore has utility as an evidence of leisure. But it is also a weapon, and it meets a felt need of barbarian man on that ground. The handling of so tangible and primitive a means of offense is very comforting to any one who is gifted with even a moderate share of ferocity. The exigencies of the language make it impossible to avoid an apparent implication of disapproval of the aptitudes, propensities, and expressions of life here under discussion. It is, however, not intended to imply anything in the way of deprecation or commendation of any one of these phases of human character or of the life process. The various elements of the prevalent human nature are taken up from the point of view of economic theory, and the traits discussed are gauged and graded with regard to their immediate economic bearing on the facility of the collective life process. That is to say, these phenomena are here apprehended from the economic point of view and are valued with respect to their direct action in furtherance or hindrance of a more perfect adjustment of the human collectivity to the environment and to the institutional structure required by the economic situation of the collectivity for the present and for the immediate future. For these purposes the traits handed down from the predatory culture are less serviceable than might be. Although even in this connection it is not to be overlooked that the energetic aggressiveness and pertinacity of predatory man is a heritage of no mean value. The economic value--with some regard also to the social value in the narrower sense--of these aptitudes and propensities is attempted to be passed upon without reflecting on their value as seen from another point of view. When contrasted with the prosy mediocrity of the latter-day industrial scheme of life, and judged by the accredited standards of morality, and more especially by the standards of aesthetics and of poetry, these survivals from a more primitive type of manhood may have a very different value from that here assigned them. But all this being foreign to the purpose in hand, no expression of opinion on this latter head would be in place here. All that is admissible is to enter the caution that these standards of excellence, which are alien to the present purpose, must not be allowed to influence our economic appreciation of these traits of human character or of the activities which foster their growth. This applies both as regards those persons who actively participate in sports and those whose sporting experience consists in contemplation only. What is here said of the sporting propensity is likewise pertinent to sundry reflections presently to be made in this connection on what would colloquially be known as the religious life. The last paragraph incidentally touches upon the fact that everyday speech can scarcely be employed in discussing this class of aptitudes and activities without implying deprecation or apology. The fact is significant as showing the habitual attitude of the dispassionate common man toward the propensities which express themselves in sports and in exploit generally. And this is perhaps as convenient a place as any to discuss that undertone of deprecation which runs through all the voluminous discourse in defense or in laudation of athletic sports, as well as of other activities of a predominantly predatory character. The same apologetic frame of mind is at least beginning to be observable in the spokesmen of most other institutions handed down from the barbarian phase of life. Among these archaic institutions which are felt to need apology are comprised, with others, the entire existing system of the distribution of wealth, together with the resulting class distinction of status; all or nearly all forms of consumption that come under the head of conspicuous waste; the status of women under the patriarchal system; and many features of the traditional creeds and devout observances, especially the exoteric expressions of the creed and the naive apprehension of received observances. What is to be said in this connection of the apologetic attitude taken in commending sports and the sporting character will therefore apply, with a suitable change in phraseology, to the apologies offered in behalf of these other, related elements of our social heritage. There is a feeling--usually vague and not commonly avowed in so many words by the apologist himself, but ordinarily perceptible in the manner of his discourse--that these sports, as well as the general range of predaceous impulses and habits of thought which underlie the sporting character, do not altogether commend themselves to common sense. "As to the majority of murderers, they are very incorrect characters." This aphorism offers a valuation of the predaceous temperament, and of the disciplinary effects of its overt expression and exercise, as seen from the moralist's point of view. As such it affords an indication of what is the deliverance of the sober sense of mature men as to the degree of availability of the predatory habit of mind for the purposes of the collective life. It is felt that the presumption is against any activity which involves habituation to the predatory attitude, and that the burden of proof lies with those who speak for the rehabilitation of the predaceous temper and for the practices which strengthen it. There is a strong body of popular sentiment in favor of diversions and enterprises of the kind in question; but there is at the same time present in the community a pervading sense that this ground of sentiment wants legitimation. The required legitimation is ordinarily sought by showing that although sports are substantially of a predatory, socially disintegrating effect; although their proximate effect runs in the direction of reversion to propensities that are industrially disserviceable; yet indirectly and remotely--by some not readily comprehensible process of polar induction, or counter-irritation perhaps--sports are conceived to foster a habit of mind that is serviceable for the social or industrial purpose. That is to say, although sports are essentially of the nature of invidious exploit, it is presumed that by some remote and obscure effect they result in the growth of a temperament conducive to non-invidious work. It is commonly attempted to show all this empirically or it is rather assumed that this is the empirical generalization which must be obvious to any one who cares to see it. In conducting the proof of this thesis the treacherous ground of inference from cause to effect is somewhat shrewdly avoided, except so far as to show that the "manly virtues" spoken of above are fostered by sports. But since it is these manly virtues that are (economically) in need of legitimation, the chain of proof breaks off where it should begin. In the most general economic terms, these apologies are an effort to show that, in spite of the logic of the thing, sports do in fact further what may broadly be called workmanship. So long as he has not succeeded in persuading himself or others that this is their effect the thoughtful apologist for sports will not rest content, and commonly, it is to be admitted, he does not rest content. His discontent with his own vindication of the practice in question is ordinarily shown by his truculent tone and by the eagerness with which he heaps up asseverations in support of his position. But why are apologies needed? If there prevails a body of popular sentient in favor of sports, why is not that fact a sufficient legitimation? The protracted discipline of prowess to which the race has been subjected under the predatory and quasi-peaceable culture has transmitted to the men of today a temperament that finds gratification in these expressions of ferocity and cunning. So, why not accept these sports as legitimate expressions of a normal and wholesome human nature? What other norm is there that is to be lived up to than that given in the aggregate range of propensities that express themselves in the sentiments of this generation, including the hereditary strain of prowess? The ulterior norm to which appeal is taken is the instinct of workmanship, which is an instinct more fundamental, of more ancient prescription, than the propensity to predatory emulation. The latter is but a special development of the instinct of workmanship, a variant, relatively late and ephemeral in spite of its great absolute antiquity. The emulative predatory impulse--or the instinct of sportsmanship, as it might well be called--is essentially unstable in comparison with the primordial instinct of workmanship out of which it has been developed and differentiated. Tested by this ulterior norm of life, predatory emulation, and therefore the life of sports, falls short. The manner and the measure in which the institution of a leisure class conduces to the conservation of sports and invidious exploit can of course not be succinctly stated. From the evidence already recited it appears that, in sentient and inclinations, the leisure class is more favorable to a warlike attitude and animus than the industrial classes. Something similar seems to be true as regards sports. But it is chiefly in its indirect effects, though the canons of decorous living, that the institution has its influence on the prevalent sentiment with respect to the sporting life. This indirect effect goes almost unequivocally in the direction of furthering a survival of the predatory temperament and habits; and this is true even with respect to those variants of the sporting life which the higher leisure-class code of proprieties proscribes; as, e.g., prize-fighting, cock-fighting, and other like vulgar expressions of the sporting temper. Whatever the latest authenticated schedule of detail proprieties may say, the accredited canons of decency sanctioned by the institution say without equivocation that emulation and waste are good and their opposites are disreputable. In the crepuscular light of the social nether spaces the details of the code are not apprehended with all the facility that might be desired, and these broad underlying canons of decency are therefore applied somewhat unreflectingly, with little question as to the scope of their competence or the exceptions that have been sanctioned in detail. Addiction to athletic sports, not only in the way of direct participation, but also in the way of sentiment and moral support, is, in a more or less pronounced degree, a characteristic of the leisure class; and it is a trait which that class shares with the lower-class delinquents, and with such atavistic elements throughout the body of the community as are endowed with a dominant predaceous trend. Few individuals among the populations of Western civilized countries are so far devoid of the predaceous instinct as to find no diversion in contemplating athletic sports and games, but with the common run of individuals among the industrial classes the inclination to sports does not assert itself to the extent of constituting what may fairly be called a sporting habit. With these classes sports are an occasional diversion rather than a serious feature of life. This common body of the people can therefore not be said to cultivate the sporting propensity. Although it is not obsolete in the average of them, or even in any appreciable number of individuals, yet the predilection for sports in the commonplace industrial classes is of the nature of a reminiscence, more or less diverting as an occasional interest, rather than a vital and permanent interest that counts as a dominant factor in shaping the organic complex of habits of thought into which it enters. As it manifests itself in the sporting life of today, this propensity may not appear to be an economic factor of grave consequence. Taken simply by itself it does not count for a great deal in its direct effects on the industrial efficiency or the consumption of any given individual; but the prevalence and the growth of the type of human nature of which this propensity is a characteristic feature is a matter of some consequence. It affects the economic life of the collectivity both as regards the rate of economic development and as regards the character of the results attained by the development. For better or worse, the fact that the popular habits of thought are in any degree dominated by this type of character can not but greatly affect the scope, direction, standards, and ideals of the collective economic life, as well as the degree of adjustment of the collective life to the environment. Something to a like effect is to be said of other traits that go to make up the barbarian character. For the purposes of economic theory, these further barbarian traits may be taken as concomitant variations of that predaceous temper of which prowess is an expression. In great measure they are not primarily of an economic character, nor do they have much direct economic bearing. They serve to indicate the stage of economic evolution to which the individual possessed of them is adapted. They are of importance, therefore, as extraneous tests of the degree of adaptation of the character in which they are comprised to the economic exigencies of today, but they are also to some extent important as being aptitudes which themselves go to increase or diminish the economic serviceability of the individual. As it finds expression in the life of the barbarian, prowess manifests itself in two main directions--force and fraud. In varying degrees these two forms of expression are similarly present in modern warfare, in the pecuniary occupations, and in sports and games. Both lines of aptitudes are cultivated and strengthened by the life of sport as well as by the more serious forms of emulative life. Strategy or cunning is an element invariably present in games, as also in warlike pursuits and in the chase. In all of these employments strategy tends to develop into finesse and chicanery. Chicanery, falsehood, browbeating, hold a well-secured place in the method of procedure of any athletic contest and in games generally. The habitual employment of an umpire, and the minute technical regulations governing the limits and details of permissible fraud and strategic advantage, sufficiently attest the fact that fraudulent practices and attempts to overreach one's opponents are not adventitious features of the game. In the nature of the case habituation to sports should conduce to a fuller development of the aptitude for fraud; and the prevalence in the community of that predatory temperament which inclines men to sports connotes a prevalence of sharp practice and callous disregard of the interests of others, individually and collectively. Resort to fraud, in any guise and under any legitimation of law or custom, is an expression of a narrowly self-regarding habit of mind. It is needless to dwell at any length on the economic value of this feature of the sporting character. In this connection it is to be noted that the most obvious characteristic of the physiognomy affected by athletic and other sporting men is that of an extreme astuteness. The gifts and exploits of Ulysses are scarcely second to those of Achilles, either in their substantial furtherance of the game or in the éclat which they give the astute sporting man among his associates. The pantomime of astuteness is commonly the first step in that assimilation to the professional sporting man which a youth undergoes after matriculation in any reputable school, of the secondary or the higher education, as the case may be. And the physiognomy of astuteness, as a decorative feature, never ceases to receive the thoughtful attention of men whose serious interest lies in athletic games, races, or other contests of a similar emulative nature. As a further indication of their spiritual kinship, it may be pointed out that the members of the lower delinquent class usually show this physiognomy of astuteness in a marked degree, and that they very commonly show the same histrionic exaggeration of it that is often seen in the young candidate for athletic honors. This, by the way, is the most legible mark of what is vulgarly called "toughness" in youthful aspirants for a bad name. The astute man, it may be remarked, is of no economic value to the community--unless it be for the purpose of sharp practice in dealings with other communities. His functioning is not a furtherance of the generic life process. At its best, in its direct economic bearing, it is a conversion of the economic substance of the collectivity to a growth alien to the collective life process--very much after the analogy of what in medicine would be called a benign tumor, with some tendency to transgress the uncertain line that divides the benign from the malign growths. The two barbarian traits, ferocity and astuteness, go to make up the predaceous temper or spiritual attitude. They are the expressions of a narrowly self-regarding habit of mind. Both are highly serviceable for individual expediency in a life looking to invidious success. Both also have a high aesthetic value. Both are fostered by the pecuniary culture. But both alike are of no use for the purposes of the collective life. Chapter Eleven ~~ The Belief in Luck The gambling propensity is another subsidiary trait of the barbarian temperament. It is a concomitant variation of character of almost universal prevalence among sporting men and among men given to warlike and emulative activities generally. This trait also has a direct economic value. It is recognized to be a hindrance to the highest industrial efficiency of the aggregate in any community where it prevails in an appreciable degree. The gambling proclivity is doubtfully to be classed as a feature belonging exclusively to the predatory type of human nature. The chief factor in the gambling habit is the belief in luck; and this belief is apparently traceable, at least in its elements, to a stage in human evolution antedating the predatory culture. It may well have been under the predatory culture that the belief in luck was developed into the form in which it is present, as the chief element of the gambling proclivity, in the sporting temperament. It probably owes the specific form under which it occurs in the modern culture to the predatory discipline. But the belief in luck is in substance a habit of more ancient date than the predatory culture. It is one form of the artistic apprehension of things. The belief seems to be a trait carried over in substance from an earlier phase into the barbarian culture, and transmuted and transmitted through that culture to a later stage of human development under a specific form imposed by the predatory discipline. But in any case, it is to be taken as an archaic trait, inherited from a more or less remote past, more or less incompatible with the requirements of the modern industrial process, and more or less of a hindrance to the fullest efficiency of the collective economic life of the present. While the belief in luck is the basis of the gambling habit, it is not the only element that enters into the habit of betting. Betting on the issue of contests of strength and skill proceeds on a further motive, without which the belief in luck would scarcely come in as a prominent feature of sporting life. This further motive is the desire of the anticipated winner, or the partisan of the anticipated winning side, to heighten his side's ascendency at the cost of the loser. Not only does the stronger side score a more signal victory, and the losing side suffer a more painful and humiliating defeat, in proportion as the pecuniary gain and loss in the wager is large; although this alone is a consideration of material weight. But the wager is commonly laid also with a view, not avowed in words nor even recognized in set terms in petto, to enhancing the chances of success for the contestant on which it is laid. It is felt that substance and solicitude expended to this end can not go for naught in the issue. There is here a special manifestation of the instinct of workmanship, backed by an even more manifest sense that the animistic congruity of things must decide for a victorious outcome for the side in whose behalf the propensity inherent in events has been propitiated and fortified by so much of conative and kinetic urging. This incentive to the wager expresses itself freely under the form of backing one's favorite in any contest, and it is unmistakably a predatory feature. It is as ancillary to the predaceous impulse proper that the belief in luck expresses itself in a wager. So that it may be set down that in so far as the belief in luck comes to expression in the form of laying a wager, it is to be accounted an integral element of the predatory type of character. The belief is, in its elements, an archaic habit which belongs substantially to early, undifferentiated human nature; but when this belief is helped out by the predatory emulative impulse, and so is differentiated into the specific form of the gambling habit, it is, in this higher-developed and specific form, to be classed as a trait of the barbarian character. The belief in luck is a sense of fortuitous necessity in the sequence of phenomena. In its various mutations and expressions, it is of very serious importance for the economic efficiency of any community in which it prevails to an appreciable extent. So much so as to warrant a more detailed discussion of its origin and content and of the bearing of its various ramifications upon economic structure and function, as well as a discussion of the relation of the leisure class to its growth, differentiation, and persistence. In the developed, integrated form in which it is most readily observed in the barbarian of the predatory culture or in the sporting man of modern communities, the belief comprises at least two distinguishable elements--which are to be taken as two different phases of the same fundamental habit of thought, or as the same psychological factor in two successive phases of its evolution. The fact that these two elements are successive phases of the same general line of growth of belief does not hinder their coexisting in the habits of thought of any given individual. The more primitive form (or the more archaic phase) is an incipient animistic belief, or an animistic sense of relations and things, that imputes a quasi-personal character to facts. To the archaic man all the obtrusive and obviously consequential objects and facts in his environment have a quasi-personal individuality. They are conceived to be possessed of volition, or rather of propensities, which enter into the complex of causes and affect events in an inscrutable manner. The sporting man's sense of luck and chance, or of fortuitous necessity, is an inarticulate or inchoate animism. It applies to objects and situations, often in a very vague way; but it is usually so far defined as to imply the possibility of propitiating, or of deceiving and cajoling, or otherwise disturbing the holding of propensities resident in the objects which constitute the apparatus and accessories of any game of skill or chance. There are few sporting men who are not in the habit of wearing charms or talismans to which more or less of efficacy is felt to belong. And the proportion is not much less of those who instinctively dread the "hoodooing" of the contestants or the apparatus engaged in any contest on which they lay a wager; or who feel that the fact of their backing a given contestant or side in the game does and ought to strengthen that side; or to whom the "mascot" which they cultivate means something more than a jest. In its simple form the belief in luck is this instinctive sense of an inscrutable teleological propensity in objects or situations. Objects or events have a propensity to eventuate in a given end, whether this end or objective point of the sequence is conceived to be fortuitously given or deliberately sought. From this simple animism the belief shades off by insensible gradations into the second, derivative form or phase above referred to, which is a more or less articulate belief in an inscrutable preternatural agency. The preternatural agency works through the visible objects with which it is associated, but is not identified with these objects in point of individuality. The use of the term "preternatural agency" here carries no further implication as to the nature of the agency spoken of as preternatural. This is only a farther development of animistic belief. The preternatural agency is not necessarily conceived to be a personal agent in the full sense, but it is an agency which partakes of the attributes of personality to the extent of somewhat arbitrarily influencing the outcome of any enterprise, and especially of any contest. The pervading belief in the hamingia or gipta (gaefa, authna) which lends so much of color to the Icelandic sagas specifically, and to early Germanic folk-legends, is an illustration of this sense of an extra-physical propensity in the course of events. In this expression or form of the belief the propensity is scarcely personified although to a varying extent an individuality is imputed to it; and this individuated propensity is sometimes conceived to yield to circumstances, commonly to circumstances of a spiritual or preternatural character. A well-known and striking exemplification of the belief--in a fairly advanced stage of differentiation and involving an anthropomorphic personification of the preternatural agent appealed to--is afforded by the wager of battle. Here the preternatural agent was conceived to act on request as umpire, and to shape the outcome of the contest in accordance with some stipulated ground of decision, such as the equity or legality of the respective contestants' claims. The like sense of an inscrutable but spiritually necessary tendency in events is still traceable as an obscure element in current popular belief, as shown, for instance, by the well-accredited maxim, "Thrice is he armed who knows his quarrel just,"--a maxim which retains much of its significance for the average unreflecting person even in the civilized communities of today. The modern reminiscence of the belief in the hamingia, or in the guidance of an unseen hand, which is traceable in the acceptance of this maxim is faint and perhaps uncertain; and it seems in any case to be blended with other psychological moments that are not clearly of an animistic character. For the purpose in hand it is unnecessary to look more closely into the psychological process or the ethnological line of descent by which the later of these two animistic apprehensions of propensity is derived from the earlier. This question may be of the gravest importance to folk-psychology or to the theory of the evolution of creeds and cults. The same is true of the more fundamental question whether the two are related at all as successive phases in a sequence of development. Reference is here made to the existence of these questions only to remark that the interest of the present discussion does not lie in that direction. So far as concerns economic theory, these two elements or phases of the belief in luck, or in an extra-causal trend or propensity in things, are of substantially the same character. They have an economic significance as habits of thought which affect the individual's habitual view of the facts and sequences with which he comes in contact, and which thereby affect the individual's serviceability for the industrial purpose. Therefore, apart from all question of the beauty, worth, or beneficence of any animistic belief, there is place for a discussion of their economic bearing on the serviceability of the individual as an economic factor, and especially as an industrial agent. It has already been noted in an earlier connection, that in order to have the highest serviceability in the complex industrial processes of today, the individual must be endowed with the aptitude and the habit of readily apprehending and relating facts in terms of causal sequence. Both as a whole and in its details, the industrial process is a process of quantitative causation. The "intelligence" demanded of the workman, as well as of the director of an industrial process, is little else than a degree of facility in the apprehension of and adaptation to a quantitatively determined causal sequence. This facility of apprehension and adaptation is what is lacking in stupid workmen, and the growth of this facility is the end sought in their education--so far as their education aims to enhance their industrial efficiency. In so far as the individual's inherited aptitudes or his training incline him to account for facts and sequences in other terms than those of causation or matter-of-fact, they lower his productive efficiency or industrial usefulness. This lowering of efficiency through a penchant for animistic methods of apprehending facts is especially apparent when taken in the mass-when a given population with an animistic turn is viewed as a whole. The economic drawbacks of animism are more patent and its consequences are more far-reaching under the modern system of large industry than under any other. In the modern industrial communities, industry is, to a constantly increasing extent, being organized in a comprehensive system of organs and functions mutually conditioning one another; and therefore freedom from all bias in the causal apprehension of phenomena grows constantly more requisite to efficiency on the part of the men concerned in industry. Under a system of handicraft an advantage in dexterity, diligence, muscular force, or endurance may, in a very large measure, offset such a bias in the habits of thought of the workmen. Similarly in agricultural industry of the traditional kind, which closely resembles handicraft in the nature of the demands made upon the workman. In both, the workman is himself the prime mover chiefly depended upon, and the natural forces engaged are in large part apprehended as inscrutable and fortuitous agencies, whose working lies beyond the workman's control or discretion. In popular apprehension there is in these forms of industry relatively little of the industrial process left to the fateful swing of a comprehensive mechanical sequence which must be comprehended in terms of causation and to which the operations of industry and the movements of the workmen must be adapted. As industrial methods develop, the virtues of the handicraftsman count for less and less as an offset to scanty intelligence or a halting acceptance of the sequence of cause and effect. The industrial organization assumes more and more of the character of a mechanism, in which it is man's office to discriminate and select what natural forces shall work out their effects in his service. The workman's part in industry changes from that of a prime mover to that of discrimination and valuation of quantitative sequences and mechanical facts. The faculty of a ready apprehension and unbiased appreciation of causes in his environment grows in relative economic importance and any element in the complex of his habits of thought which intrudes a bias at variance with this ready appreciation of matter-of-fact sequence gains proportionately in importance as a disturbing element acting to lower his industrial usefulness. Through its cumulative effect upon the habitual attitude of the population, even a slight or inconspicuous bias towards accounting for everyday facts by recourse to other ground than that of quantitative causation may work an appreciable lowering of the collective industrial efficiency of a community. The animistic habit of mind may occur in the early, undifferentiated form of an inchoate animistic belief, or in the later and more highly integrated phase in which there is an anthropomorphic personification of the propensity imputed to facts. The industrial value of such a lively animistic sense, or of such recourse to a preternatural agency or the guidance of an unseen hand, is of course very much the same in either case. As affects the industrial serviceability of the individual, the effect is of the same kind in either case; but the extent to which this habit of thought dominates or shapes the complex of his habits of thought varies with the degree of immediacy, urgency, or exclusiveness with which the individual habitually applies the animistic or anthropomorphic formula in dealing with the facts of his environment. The animistic habit acts in all cases to blur the appreciation of causal sequence; but the earlier, less reflected, less defined animistic sense of propensity may be expected to affect the intellectual processes of the individual in a more pervasive way than the higher forms of anthropomorphism. Where the animistic habit is present in the naive form, its scope and range of application are not defined or limited. It will therefore palpably affect his thinking at every turn of the person's life--wherever he has to do with the material means of life. In the later, maturer development of animism, after it has been defined through the process of anthropomorphic elaboration, when its application has been limited in a somewhat consistent fashion to the remote and the invisible, it comes about that an increasing range of everyday facts are provisionally accounted for without recourse to the preternatural agency in which a cultivated animism expresses itself. A highly integrated, personified preternatural agency is not a convenient means of handling the trivial occurrences of life, and a habit is therefore easily fallen into of accounting for many trivial or vulgar phenomena in terms of sequence. The provisional explanation so arrived at is by neglect allowed to stand as definitive, for trivial purposes, until special provocation or perplexity recalls the individual to his allegiance. But when special exigencies arise, that is to say, when there is peculiar need of a full and free recourse to the law of cause and effect, then the individual commonly has recourse to the preternatural agency as a universal solvent, if he is possessed of an anthropomorphic belief. The extra-causal propensity or agent has a very high utility as a recourse in perplexity, but its utility is altogether of a non-economic kind. It is especially a refuge and a fund of comfort where it has attained the degree of consistency and specialization that belongs to an anthropomorphic divinity. It has much to commend it even on other grounds than that of affording the perplexed individual a means of escape from the difficulty of accounting for phenomena in terms of causal sequence. It would scarcely be in place here to dwell on the obvious and well-accepted merits of an anthropomorphic divinity, as seen from the point of view of the aesthetic, moral, or spiritual interest, or even as seen from the less remote standpoint of political, military, or social policy. The question here concerns the less picturesque and less urgent economic value of the belief in such a preternatural agency, taken as a habit of thought which affects the industrial serviceability of the believer. And even within this narrow, economic range, the inquiry is perforce confined to the immediate bearing of this habit of thought upon the believer's workmanlike serviceability, rather than extended to include its remoter economic effects. These remoter effects are very difficult to trace. The inquiry into them is so encumbered with current preconceptions as to the degree in which life is enhanced by spiritual contact with such a divinity, that any attempt to inquire into their economic value must for the present be fruitless. The immediate, direct effect of the animistic habit of thought upon the general frame of mind of the believer goes in the direction of lowering his effective intelligence in the respect in which intelligence is of especial consequence for modern industry. The effect follows, in varying degree, whether the preternatural agent or propensity believed in is of a higher or a lower cast. This holds true of the barbarian's and the sporting man's sense of luck and propensity, and likewise of the somewhat higher developed belief in an anthropomorphic divinity, such as is commonly possessed by the same class. It must be taken to hold true also--though with what relative degree of cogency is not easy to say--of the more adequately developed anthropomorphic cults, such as appeal to the devout civilized man. The industrial disability entailed by a popular adherence to one of the higher anthropomorphic cults may be relatively slight, but it is not to be overlooked. And even these high-class cults of the Western culture do not represent the last dissolving phase of this human sense of extra-causal propensity. Beyond these the same animistic sense shows itself also in such attenuations of anthropomorphism as the eighteenth-century appeal to an order of nature and natural rights, and in their modern representative, the ostensibly post-Darwinian concept of a meliorative trend in the process of evolution. This animistic explanation of phenomena is a form of the fallacy which the logicians knew by the name of ignava ratio. For the purposes of industry or of science it counts as a blunder in the apprehension and valuation of facts. Apart from its direct industrial consequences, the animistic habit has a certain significance for economic theory on other grounds. (1) It is a fairly reliable indication of the presence, and to some extent even of the degree of potency, of certain other archaic traits that accompany it and that are of substantial economic consequence; and (2) the material consequences of that code of devout proprieties to which the animistic habit gives rise in the development of an anthropomorphic cult are of importance both (a) as affecting the community's consumption of goods and the prevalent canons of taste, as already suggested in an earlier chapter, and (b) by inducing and conserving a certain habitual recognition of the relation to a superior, and so stiffening the current sense of status and allegiance. As regards the point last named (b), that body of habits of thought which makes up the character of any individual is in some sense an organic whole. A marked variation in a given direction at any one point carries with it, as its correlative, a concomitant variation in the habitual expression of life in other directions or other groups of activities. These various habits of thought, or habitual expressions of life, are all phases of the single life sequence of the individual; therefore a habit formed in response to a given stimulus will necessarily affect the character of the response made to other stimuli. A modification of human nature at any one point is a modification of human nature as a whole. On this ground, and perhaps to a still greater extent on obscurer grounds that can not be discussed here, there are these concomitant variations as between the different traits of human nature. So, for instance, barbarian peoples with a well-developed predatory scheme of life are commonly also possessed of a strong prevailing animistic habit, a well-formed anthropomorphic cult, and a lively sense of status. On the other hand, anthropomorphism and the realizing sense of an animistic propensity in material are less obtrusively present in the life of the peoples at the cultural stages which precede and which follow the barbarian culture. The sense of status is also feebler; on the whole, in peaceable communities. It is to be remarked that a lively, but slightly specialized, animistic belief is to be found in most if not all peoples living in the ante-predatory, savage stage of culture. The primitive savage takes his animism less seriously than the barbarian or the degenerate savage. With him it eventuates in fantastic myth-making, rather than in coercive superstition. The barbarian culture shows sportsmanship, status, and anthropomorphism. There is commonly observable a like concomitance of variations in the same respects in the individual temperament of men in the civilized communities of today. Those modern representatives of the predaceous barbarian temper that make up the sporting element are commonly believers in luck; at least they have a strong sense of an animistic propensity in things, by force of which they are given to gambling. So also as regards anthropomorphism in this class. Such of them as give in their adhesion to some creed commonly attach themselves to one of the naively and consistently anthropomorphic creeds; there are relatively few sporting men who seek spiritual comfort in the less anthropomorphic cults, such as the Unitarian or the Universalist. Closely bound up with this correlation of anthropomorphism and prowess is the fact that anthropomorphic cults act to conserve, if not to initiate, habits of mind favorable to a regime of status. As regards this point, it is quite impossible to say where the disciplinary effect of the cult ends and where the evidence of a concomitance of variations in inherited traits begins. In their finest development, the predatory temperament, the sense of status, and the anthropomorphic cult all together belong to the barbarian culture; and something of a mutual causal relation subsists between the three phenomena as they come into sight in communities on that cultural level. The way in which they recur in correlation in the habits and attitudes of individuals and classes today goes far to imply a like causal or organic relation between the same psychological phenomena considered as traits or habits of the individual. It has appeared at an earlier point in the discussion that the relation of status, as a feature of social structure, is a consequence of the predatory habit of life. As regards its line of derivation, it is substantially an elaborated expression of the predatory attitude. On the other hand, an anthropomorphic cult is a code of detailed relations of status superimposed upon the concept of a preternatural, inscrutable propensity in material things. So that, as regards the external facts of its derivation, the cult may be taken as an outgrowth of archaic man's pervading animistic sense, defined and in some degree transformed by the predatory habit of life, the result being a personified preternatural agency, which is by imputation endowed with a full complement of the habits of thought that characterize the man of the predatory culture. The grosser psychological features in the case, which have an immediate bearing on economic theory and are consequently to be taken account of here, are therefore: (a) as has appeared in an earlier chapter, the predatory, emulative habit of mind here called prowess is but the barbarian variant of the generically human instinct of workmanship, which has fallen into this specific form under the guidance of a habit of invidious comparison of persons; (b) the relation of status is a formal expression of such an invidious comparison duly gauged and graded according to a sanctioned schedule; (c) an anthropomorphic cult, in the days of its early vigor at least, is an institution the characteristic element of which is a relation of status between the human subject as inferior and the personified preternatural agency as superior. With this in mind, there should be no difficulty in recognizing the intimate relation which subsists between these three phenomena of human nature and of human life; the relation amounts to an identity in some of their substantial elements. On the one hand, the system of status and the predatory habit of life are an expression of the instinct of workmanship as it takes form under a custom of invidious comparison; on the other hand, the anthropomorphic cult and the habit of devout observances are an expression of men's animistic sense of a propensity in material things, elaborated under the guidance of substantially the same general habit of invidious comparison. The two categories--the emulative habit of life and the habit of devout observances--are therefore to be taken as complementary elements of the barbarian type of human nature and of its modern barbarian variants. They are expressions of much the same range of aptitudes, made in response to different sets of stimuli. Chapter Twelve ~~ Devout Observances A discoursive rehearsal of certain incidents of modern life will show the organic relation of the anthropomorphic cults to the barbarian culture and temperament. It will likewise serve to show how the survival and efficacy of the cults and he prevalence of their schedule of devout observances are related to the institution of a leisure class and to the springs of action underlying that institution. Without any intention to commend or to deprecate the practices to be spoken of under the head of devout observances, or the spiritual and intellectual traits of which these observances are the expression, the everyday phenomena of current anthropomorphic cults may be taken up from the point of view of the interest which they have for economic theory. What can properly be spoken of here are the tangible, external features of devout observances. The moral, as well as the devotional value of the life of faith lies outside of the scope of the present inquiry. Of course no question is here entertained as to the truth or beauty of the creeds on which the cults proceed. And even their remoter economic bearing can not be taken up here; the subject is too recondite and of too grave import to find a place in so slight a sketch. Something has been said in an earlier chapter as to the influence which pecuniary standards of value exert upon the processes of valuation carried out on other bases, not related to the pecuniary interest. The relation is not altogether one-sided. The economic standards or canons of valuation are in their turn influenced by extra-economic standards of value. Our judgments of the economic bearing of facts are to some extent shaped by the dominant presence of these weightier interests. There is a point of view, indeed, from which the economic interest is of weight only as being ancillary to these higher, non-economic interests. For the present purpose, therefore, some thought must be taken to isolate the economic interest or the economic hearing of these phenomena of anthropomorphic cults. It takes some effort to divest oneself of the more serious point of view, and to reach an economic appreciation of these facts, with as little as may be of the bias due to higher interests extraneous to economic theory. In the discussion of the sporting temperament, it has appeared that the sense of an animistic propensity in material things and events is what affords the spiritual basis of the sporting man's gambling habit. For the economic purpose, this sense of propensity is substantially the same psychological element as expresses itself, under a variety of forms, in animistic beliefs and anthropomorphic creeds. So far as concerns those tangible psychological features with which economic theory has to deal, the gambling spirit which pervades the sporting element shades off by insensible gradations into that frame of mind which finds gratification in devout observances. As seen from the point of view of economic theory, the sporting character shades off into the character of a religious devotee. Where the betting man's animistic sense is helped out by a somewhat consistent tradition, it has developed into a more or less articulate belief in a preternatural or hyperphysical agency, with something of an anthropomorphic content. And where this is the case, there is commonly a perceptible inclination to make terms with the preternatural agency by some approved method of approach and conciliation. This element of propitiation and cajoling has much in common with the crasser forms of worship--if not in historical derivation, at least in actual psychological content. It obviously shades off in unbroken continuity into what is recognized as superstitious practice and belief, and so asserts its claim to kinship with the grosser anthropomorphic cults. The sporting or gambling temperament, then, comprises some of the substantial psychological elements that go to make a believer in creeds and an observer of devout forms, the chief point of coincidence being the belief in an inscrutable propensity or a preternatural interposition in the sequence of events. For the purpose of the gambling practice the belief in preternatural agency may be, and ordinarily is, less closely formulated, especially as regards the habits of thought and the scheme of life imputed to the preternatural agent; or, in other words, as regards his moral character and his purposes in interfering in events. With respect to the individuality or personality of the agency whose presence as luck, or chance, or hoodoo, or mascot, etc., he feels and sometimes dreads and endeavors to evade, the sporting man's views are also less specific, less integrated and differentiated. The basis of his gambling activity is, in great measure, simply an instinctive sense of the presence of a pervasive extraphysical and arbitrary force or propensity in things or situations, which is scarcely recognized as a personal agent. The betting man is not infrequently both a believer in luck, in this naive sense, and at the same time a pretty staunch adherent of some form of accepted creed. He is especially prone to accept so much of the creed as concerts the inscrutable power and the arbitrary habits of the divinity which has won his confidence. In such a case he is possessed of two, or sometimes more than two, distinguishable phases of animism. Indeed, the complete series of successive phases of animistic belief is to be found unbroken in the spiritual furniture of any sporting community. Such a chain of animistic conceptions will comprise the most elementary form of an instinctive sense of luck and chance and fortuitous necessity at one end of the series, together with the perfectly developed anthropomorphic divinity at the other end, with all intervening stages of integration. Coupled with these beliefs in preternatural agency goes an instinctive shaping of conduct to conform with the surmised requirements of the lucky chance on the one hand, and a more or less devout submission to the inscrutable decrees of the divinity on the other hand. There is a relationship in this respect between the sporting temperament and the temperament of the delinquent classes; and the two are related to the temperament which inclines to an anthropomorphic cult. Both the delinquent and the sporting man are on the average more apt to be adherents of some accredited creed, and are also rather more inclined to devout observances, than the general average of the community. It is also noticeable that unbelieving members of these classes show more of a proclivity to become proselytes to some accredited faith than the average of unbelievers. This fact of observation is avowed by the spokesmen of sports, especially in apologizing for the more naively predatory athletic sports. Indeed, it is somewhat insistently claimed as a meritorious feature of sporting life that the habitual participants in athletic games are in some degree peculiarly given to devout practices. And it is observable that the cult to which sporting men and the predaceous delinquent classes adhere, or to which proselytes from these classes commonly attach themselves, is ordinarily not one of the so-called higher faiths, but a cult which has to do with a thoroughly anthropomorphic divinity. Archaic, predatory human nature is not satisfied with abstruse conceptions of a dissolving personality that shades off into the concept of quantitative causal sequence, such as the speculative, esoteric creeds of Christendom impute to the First Cause, Universal Intelligence, World Soul, or Spiritual Aspect. As an instance of a cult of the character which the habits of mind of the athlete and the delinquent require, may be cited that branch of the church militant known as the Salvation Army. This is to some extent recruited from the lower-class delinquents, and it appears to comprise also, among its officers especially, a larger proportion of men with a sporting record than the proportion of such men in the aggregate population of the community. College athletics afford a case in point. It is contended by exponents of the devout element in college life--and there seems to be no ground for disputing the claim--that the desirable athletic material afforded by any student body in this country is at the same time predominantly religious; or that it is at least given to devout observances to a greater degree than the average of those students whose interest in athletics and other college sports is less. This is what might be expected on theoretical grounds. It may be remarked, by the way, that from one point of view this is felt to reflect credit on the college sporting life, on athletic games, and on those persons who occupy themselves with these matters. It happens not frequently that college sporting men devote themselves to religious propaganda, either as a vocation or as a by-occupation; and it is observable that when this happens they are likely to become propagandists of some one of the more anthropomorphic cults. In their teaching they are apt to insist chiefly on the personal relation of status which subsists between an anthropomorphic divinity and the human subject. This intimate relation between athletics and devout observance among college men is a fact of sufficient notoriety; but it has a special feature to which attention has not been called, although it is obvious enough. The religious zeal which pervades much of the college sporting element is especially prone to express itself in an unquestioning devoutness and a naive and complacent submission to an inscrutable Providence. It therefore by preference seeks affiliation with some one of those lay religious organizations which occupy themselves with the spread of the exoteric forms of faith--as, e.g., the Young Men's Christian Association or the Young People's Society for Christian Endeavor. These lay bodies are organized to further "practical" religion; and as if to enforce the argument and firmly establish the close relationship between the sporting temperament and the archaic devoutness, these lay religious bodies commonly devote some appreciable portion of their energies to the furtherance of athletic contests and similar games of chance and skill. It might even be said that sports of this kind are apprehended to have some efficacy as a means of grace. They are apparently useful as a means of proselyting, and as a means of sustaining the devout attitude in converts once made. That is to say, the games which give exercise to the animistic sense and to the emulative propensity help to form and to conserve that habit of mind to which the more exoteric cults are congenial. Hence, in the hands of the lay organizations, these sporting activities come to do duty as a novitiate or a means of induction into that fuller unfolding of the life of spiritual status which is the privilege of the full communicant along. That the exercise of the emulative and lower animistic proclivities are substantially useful for the devout purpose seems to be placed beyond question by the fact that the priesthood of many denominations is following the lead of the lay organizations in this respect. Those ecclesiastical organizations especially which stand nearest the lay organizations in their insistence on practical religion have gone some way towards adopting these or analogous practices in connection with the traditional devout observances. So there are "boys' brigades," and other organizations, under clerical sanction, acting to develop the emulative proclivity and the sense of status in the youthful members of the congregation. These pseudo-military organizations tend to elaborate and accentuate the proclivity to emulation and invidious comparison, and so strengthen the native facility for discerning and approving the relation of personal mastery and subservience. And a believer is eminently a person who knows how to obey and accept chastisement with good grace. But the habits of thought which these practices foster and conserve make up but one half of the substance of the anthropomorphic cults. The other, complementary element of devout life--the animistic habit of mind--is recruited and conserved by a second range of practices organized under clerical sanction. These are the class of gambling practices of which the church bazaar or raffle may be taken as the type. As indicating the degree of legitimacy of these practices in connection with devout observances proper, it is to be remarked that these raffles, and the like trivial opportunities for gambling, seem to appeal with more effect to the common run of the members of religious organizations than they do to persons of a less devout habit of mind. All this seems to argue, on the one hand, that the same temperament inclines people to sports as inclines them to the anthropomorphic cults, and on the other hand that the habituation to sports, perhaps especially to athletic sports, acts to develop the propensities which find satisfaction in devout observances. Conversely; it also appears that habituation to these observances favors the growth of a proclivity for athletic sports and for all games that give play to the habit of invidious comparison and of the appeal to luck. Substantially the same range of propensities finds expression in both these directions of the spiritual life. That barbarian human nature in which the predatory instinct and the animistic standpoint predominate is normally prone to both. The predatory habit of mind involves an accentuated sense of personal dignity and of the relative standing of individuals. The social structure in which the predatory habit has been the dominant factor in the shaping of institutions is a structure based on status. The pervading norm in the predatory community's scheme of life is the relation of superior and inferior, noble and base, dominant and subservient persons and classes, master and slave. The anthropomorphic cults have come down from that stage of industrial development and have been shaped by the same scheme of economic differentiation--a differentiation into consumer and producer--and they are pervaded by the same dominant principle of mastery and subservience. The cults impute to their divinity the habits of thought answering to the stage of economic differentiation at which the cults took shape. The anthropomorphic divinity is conceived to be punctilious in all questions of precedence and is prone to an assertion of mastery and an arbitrary exercise of power--an habitual resort to force as the final arbiter. In the later and maturer formulations of the anthropomorphic creed this imputed habit of dominance on the part of a divinity of awful presence and inscrutable power is chastened into "the fatherhood of God." The spiritual attitude and the aptitudes imputed to the preternatural agent are still such as belong under the regime of status, but they now assume the patriarchal cast characteristic of the quasi-peaceable stage of culture. Still it is to be noted that even in this advanced phase of the cult the observances in which devoutness finds expression consistently aim to propitiate the divinity by extolling his greatness and glory and by professing subservience and fealty. The act of propitiation or of worship is designed to appeal to a sense of status imputed to the inscrutable power that is thus approached. The propitiatory formulas most in vogue are still such as carry or imply an invidious comparison. A loyal attachment to the person of an anthropomorphic divinity endowed with such an archaic human nature implies the like archaic propensities in the devotee. For the purposes of economic theory, the relation of fealty, whether to a physical or to an extraphysical person, is to be taken as a variant of that personal subservience which makes up so large a share of the predatory and the quasi-peaceable scheme of life. The barbarian conception of the divinity, as a warlike chieftain inclined to an overbearing manner of government, has been greatly softened through the milder manners and the soberer habits of life that characterize those cultural phases which lie between the early predatory stage and the present. But even after this chastening of the devout fancy, and the consequent mitigation of the harsher traits of conduct and character that are currently imputed to the divinity, there still remains in the popular apprehension of the divine nature and temperament a very substantial residue of the barbarian conception. So it comes about, for instance, that in characterizing the divinity and his relations to the process of human life, speakers and writers are still able to make effective use of similes borrowed from the vocabulary of war and of the predatory manner of life, as well as of locutions which involve an invidious comparison. Figures of speech of this import are used with good effect even in addressing the less warlike modern audiences, made up of adherents of the blander variants of the creed. This effective use of barbarian epithets and terms of comparison by popular speakers argues that the modern generation has retained a lively appreciation of the dignity and merit of the barbarian virtues; and it argues also that there is a degree of congruity between the devout attitude and the predatory habit of mind. It is only on second thought, if at all, that the devout fancy of modern worshippers revolts at the imputation of ferocious and vengeful emotions and actions to the object of their adoration. It is a matter of common observation that sanguinary epithets applied to the divinity have a high aesthetic and honorific value in the popular apprehension. That is to say, suggestions which these epithets carry are very acceptable to our unreflecting apprehension. Mine eyes have seen the glory of the coming of the Lord: He is trampling out the vintage where the grapes of wrath are stored; He hath loosed the fateful lightning of his terrible swift sword; His truth is marching on. The guiding habits of thought of a devout person move on the plane of an archaic scheme of life which has outlived much of its usefulness for the economic exigencies of the collective life of today. In so far as the economic organization fits the exigencies of the collective life of today, it has outlived the regime of status, and has no use and no place for a relation of personal subserviency. So far as concerns the economic efficiency of the community, the sentiment of personal fealty, and the general habit of mind of which that sentiment is an expression, are survivals which cumber the ground and hinder an adequate adjustment of human institutions to the existing situation. The habit of mind which best lends itself to the purposes of a peaceable, industrial community, is that matter-of-fact temper which recognizes the value of material facts simply as opaque items in the mechanical sequence. It is that frame of mind which does not instinctively impute an animistic propensity to things, nor resort to preternatural intervention as an explanation of perplexing phenomena, nor depend on an unseen hand to shape the course of events to human use. To meet the requirements of the highest economic efficiency under modern conditions, the world process must habitually be apprehended in terms of quantitative, dispassionate force and sequence. As seen from the point of view of the later economic exigencies, devoutness is, perhaps in all cases, to be looked upon as a survival from an earlier phase of associated life--a mark of arrested spiritual development. Of course it remains true that in a community where the economic structure is still substantially a system of status; where the attitude of the average of persons in the community is consequently shaped by and adapted to the relation of personal dominance and personal subservience; or where for any other reason--of tradition or of inherited aptitude--the population as a whole is strongly inclined to devout observances; there a devout habit of mind in any individual, not in excess of the average of the community, must be taken simply as a detail of the prevalent habit of life. In this light, a devout individual in a devout community can not be called a case of reversion, since he is abreast of the average of the community. But as seen from the point of view of the modern industrial situation, exceptional devoutness--devotional zeal that rises appreciably above the average pitch of devoutness in the community--may safely be set down as in all cases an atavistic trait. It is, of course, equally legitimate to consider these phenomena from a different point of view. They may be appreciated for a different purpose, and the characterization here offered may be turned about. In speaking from the point of view of the devotional interest, or the interest of devout taste, it may, with equal cogency, be said that the spiritual attitude bred in men by the modern industrial life is unfavorable to a free development of the life of faith. It might fairly be objected to the later development of the industrial process that its discipline tends to "materialism," to the elimination of filial piety. From the aesthetic point of view, again, something to a similar purport might be said. But, however legitimate and valuable these and the like reflections may be for their purpose, they would not be in place in the present inquiry, which is exclusively concerned with the valuation of these phenomena from the economic point of view. The grave economic significance of the anthropomorphic habit of mind and of the addiction to devout observances must serve as apology for speaking further on a topic which it can not but be distasteful to discuss at all as an economic phenomenon in a community so devout as ours. Devout observances are of economic importance as an index of a concomitant variation of temperament, accompanying the predatory habit of mind and so indicating the presence of industrially disserviceable traits. They indicate the presence of a mental attitude which has a certain economic value of its own by virtue of its influence upon the industrial serviceability of the individual. But they are also of importance more directly, in modifying the economic activities of the community, especially as regards the distribution and consumption of goods. The most obvious economic bearing of these observances is seen in the devout consumption of goods and services. The consumption of ceremonial paraphernalia required by any cult, in the way of shrines, temples, churches, vestments, sacrifices, sacraments, holiday attire, etc., serves no immediate material end. All this material apparatus may, therefore, without implying deprecation, be broadly characterized as items of conspicuous waste. The like is true in a general way of the personal service consumed under this head; such as priestly education, priestly service, pilgrimages, fasts, holidays, household devotions, and the like. At the same time the observances in the execution of which this consumption takes place serve to extend and protract the vogue of those habits of thought on which an anthropomorphic cult rests. That is to say, they further the habits of thought characteristic of the regime of status. They are in so far an obstruction to the most effective organization of industry under modern circumstances; and are, in the first instance, antagonistic to the development of economic institutions in the direction required by the situation of today. For the present purpose, the indirect as well as the direct effects of this consumption are of the nature of a curtailment of the community's economic efficiency. In economic theory, then, and considered in its proximate consequences, the consumption of goods and effort in the service of an anthropomorphic divinity means a lowering of the vitality of the community. What may be the remoter, indirect, moral effects of this class of consumption does not admit of a succinct answer, and it is a question which can not be taken up here. It will be to the point, however, to note the general economic character of devout consumption, in comparison with consumption for other purposes. An indication of the range of motives and purposes from which devout consumption of goods proceeds will help toward an appreciation of the value both of this consumption itself and of the general habit of mind to which it is congenial. There is a striking parallelism, if not rather a substantial identity of motive, between the consumption which goes to the service of an anthropomorphic divinity and that which goes to the service of a gentleman of leisure chieftain or patriarch--in the upper class of society during the barbarian culture. Both in the case of the chieftain and in that of the divinity there are expensive edifices set apart for the behoof of the person served. These edifices, as well as the properties which supplement them in the service, must not be common in kind or grade; they always show a large element of conspicuous waste. It may also be noted that the devout edifices are invariably of an archaic cast in their structure and fittings. So also the servants, both of the chieftain and of the divinity, must appear in the presence clothed in garments of a special, ornate character. The characteristic economic feature of this apparel is a more than ordinarily accentuated conspicuous waste, together with the secondary feature--more accentuated in the case of the priestly servants than in that of the servants or courtiers of the barbarian potentate--that this court dress must always be in some degree of an archaic fashion. Also the garments worn by the lay members of the community when they come into the presence, should be of a more expensive kind than their everyday apparel. Here, again, the parallelism between the usage of the chieftain's audience hall and that of the sanctuary is fairly well marked. In this respect there is required a certain ceremonial "cleanness" of attire, the essential feature of which, in the economic respect, is that the garments worn on these occasions should carry as little suggestion as may be of any industrial occupation or of any habitual addiction to such employments as are of material use. This requirement of conspicuous waste and of ceremonial cleanness from the traces of industry extends also to the apparel, and in a less degree to the food, which is consumed on sacred holidays; that is to say, on days set apart--tabu--for the divinity or for some member of the lower ranks of the preternatural leisure class. In economic theory, sacred holidays are obviously to be construed as a season of vicarious leisure performed for the divinity or saint in whose name the tabu is imposed and to whose good repute the abstention from useful effort on these days is conceived to inure. The characteristic feature of all such seasons of devout vicarious leisure is a more or less rigid tabu on all activity that is of human use. In the case of fast-days the conspicuous abstention from gainful occupations and from all pursuits that (materially) further human life is further accentuated by compulsory abstinence from such consumption as would conduce to the comfort or the fullness of life of the consumer. It may be remarked, parenthetically, that secular holidays are of the same origin, by slightly remoter derivation. They shade off by degrees from the genuinely sacred days, through an intermediate class of semi-sacred birthdays of kings and great men who have been in some measure canonized, to the deliberately invented holiday set apart to further the good repute of some notable event or some striking fact, to which it is intended to do honor, or the good fame of which is felt to be in need of repair. The remoter refinement in the employment of vicarious leisure as a means of augmenting the good repute of a phenomenon or datum is seen at its best in its very latest application. A day of vicarious leisure has in some communities been set apart as Labor Day. This observance is designed to augment the prestige of the fact of labor, by the archaic, predatory method of a compulsory abstention from useful effort. To this datum of labor-in-general is imputed the good repute attributable to the pecuniary strength put in evidence by abstaining from labor. Sacred holidays, and holidays generally, are of the nature of a tribute levied on the body of the people. The tribute is paid in vicarious leisure, and the honorific effect which emerges is imputed to the person or the fact for whose good repute the holiday has been instituted. Such a tithe of vicarious leisure is a perquisite of all members of the preternatural leisure class and is indispensable to their good fame. Un saint qu'on ne chôme pas is indeed a saint fallen on evil days. Besides this tithe of vicarious leisure levied on the laity, there are also special classes of persons--the various grades of priests and hierodules--whose time is wholly set apart for a similar service. It is not only incumbent on the priestly class to abstain from vulgar labor, especially so far as it is lucrative or is apprehended to contribute to the temporal well-being of mankind. The tabu in the case of the priestly class goes farther and adds a refinement in the form of an injunction against their seeking worldly gain even where it may be had without debasing application to industry. It is felt to be unworthy of the servant of the divinity, or rather unworthy the dignity of the divinity whose servant he is, that he should seek material gain or take thought for temporal matters. "Of all contemptible things a man who pretends to be a priest of God and is a priest to his own comforts and ambitions is the most contemptible." There is a line of discrimination, which a cultivated taste in matters of devout observance finds little difficulty in drawing, between such actions and conduct as conduce to the fullness of human life and such as conduce to the good fame of the anthropomorphic divinity; and the activity of the priestly class, in the ideal barbarian scheme, falls wholly on the hither side of this line. What falls within the range of economics falls below the proper level of solicitude of the priesthood in its best estate. Such apparent exceptions to this rule as are afforded, for instance, by some of the medieval orders of monks (the members of which actually labored to some useful end), scarcely impugn the rule. These outlying orders of the priestly class are not a sacerdotal element in the full sense of the term. And it is noticeable also that these doubtfully sacerdotal orders, which countenanced their members in earning a living, fell into disrepute through offending the sense of propriety in the communities where they existed. The priest should not put his hand to mechanically productive work; but he should consume in large measure. But even as regards his consumption it is to be noted that it should take such forms as do not obviously conduce to his own comfort or fullness of life; it should conform to the rules governing vicarious consumption, as explained under that head in an earlier chapter. It is not ordinarily in good form for the priestly class to appear well fed or in hilarious spirits. Indeed, in many of the more elaborate cults the injunction against other than vicarious consumption by this class frequently goes so far as to enjoin mortification of the flesh. And even in those modern denominations which have been organized under the latest formulations of the creed, in a modern industrial community, it is felt that all levity and avowed zest in the enjoyment of the good things of this world is alien to the true clerical decorum. Whatever suggests that these servants of an invisible master are living a life, not of devotion to their master's good fame, but of application to their own ends, jars harshly on our sensibilities as something fundamentally and eternally wrong. They are a servant class, although, being servants of a very exalted master, they rank high in the social scale by virtue of this borrowed light. Their consumption is vicarious consumption; and since, in the advanced cults, their master has no need of material gain, their occupation is vicarious leisure in the full sense. "Whether therefore ye eat, or drink, or whatsoever ye do, do all to the glory of God." It may be added that so far as the laity is assimilated to the priesthood in the respect that they are conceived to be servants of the divinity. So far this imputed vicarious character attaches also to the layman's life. The range of application of this corollary is somewhat wide. It applies especially to such movements for the reform or rehabilitation of the religious life as are of an austere, pietistic, ascetic cast--where the human subject is conceived to hold his life by a direct servile tenure from his spiritual sovereign. That is to say, where the institution of the priesthood lapses, or where there is an exceptionally lively sense of the immediate and masterful presence of the divinity in the affairs of life, there the layman is conceived to stand in an immediate servile relation to the divinity, and his life is construed to be a performance of vicarious leisure directed to the enhancement of his master's repute. In such cases of reversion there is a return to the unmediated relation of subservience, as the dominant fact of the devout attitude. The emphasis is thereby thrown on an austere and discomforting vicarious leisure, to the neglect of conspicuous consumption as a means of grace. A doubt will present itself as to the full legitimacy of this characterization of the sacerdotal scheme of life, on the ground that a considerable proportion of the modern priesthood departs from the scheme in many details. The scheme does not hold good for the clergy of those denominations which have in some measure diverged from the old established schedule of beliefs or observances. These take thought, at least ostensibly or permissively, for the temporal welfare of the laity, as well as for their own. Their manner of life, not only in the privacy of their own household, but often even before the public, does not differ in an extreme degree from that of secular-minded persons, either in its ostensible austerity or in the archaism of its apparatus. This is truest for those denominations that have wandered the farthest. To this objection it is to be said that we have here to do not with a discrepancy in the theory of sacerdotal life, but with an imperfect conformity to the scheme on the part of this body of clergy. They are but a partial and imperfect representative of the priesthood, and must not be taken as exhibiting the sacerdotal scheme of life in an authentic and competent manner. The clergy of the sects and denominations might be characterized as a half-caste priesthood, or a priesthood in process of becoming or of reconstitution. Such a priesthood may be expected to show the characteristics of the sacerdotal office only as blended and obscured with alien motives and traditions, due to the disturbing presence of other factors than those of animism and status in the purposes of the organizations to which this non-conforming fraction of the priesthood belongs. Appeal may be taken direct to the taste of any person with a discriminating and cultivated sense of the sacerdotal proprieties, or to the prevalent sense of what constitutes clerical decorum in any community at all accustomed to think or to pass criticism on what a clergyman may or may not do without blame. Even in the most extremely secularized denominations, there is some sense of a distinction that should be observed between the sacerdotal and the lay scheme of life. There is no person of sensibility but feels that where the members of this denominational or sectarian clergy depart from traditional usage, in the direction of a less austere or less archaic demeanor and apparel, they are departing from the ideal of priestly decorum. There is probably no community and no sect within the range of the Western culture in which the bounds of permissible indulgence are not drawn appreciably closer for the incumbent of the priestly office than for the common layman. If the priest's own sense of sacerdotal propriety does not effectually impose a limit, the prevalent sense of the proprieties on the part of the community will commonly assert itself so obtrusively as to lead to his conformity or his retirement from office. Few if any members of any body of clergy, it may be added, would avowedly seek an increase of salary for gain's sake; and if such avowal were openly made by a clergyman, it would be found obnoxious to the sense of propriety among his congregation. It may also be noted in this connection that no one but the scoffers and the very obtuse are not instinctively grieved inwardly at a jest from the pulpit; and that there are none whose respect for their pastor does not suffer through any mark of levity on his part in any conjuncture of life, except it be levity of a palpably histrionic kind--a constrained unbending of dignity. The diction proper to the sanctuary and to the priestly office should also carry little if any suggestion of effective everyday life, and should not draw upon the vocabulary of modern trade or industry. Likewise, one's sense of the proprieties is readily offended by too detailed and intimate a handling of industrial and other purely human questions at the hands of the clergy. There is a certain level of generality below which a cultivated sense of the proprieties in homiletical discourse will not permit a well-bred clergyman to decline in his discussion of temporal interests. These matters that are of human and secular consequence simply, should properly be handled with such a degree of generality and aloofness as may imply that the speaker represents a master whose interest in secular affairs goes only so far as to permissively countenance them. It is further to be noticed that the non-conforming sects and variants whose priesthood is here under discussion, vary among themselves in the degree of their conformity to the ideal scheme of sacerdotal life. In a general way it will be found that the divergence in this respect is widest in the case of the relatively young denominations, and especially in the case of such of the newer denominations as have chiefly a lower middle-class constituency. They commonly show a large admixture of humanitarian, philanthropic, or other motives which can not be classed as expressions of the devotional attitude; such as the desire of learning or of conviviality, which enter largely into the effective interest shown by members of these organizations. The non-conforming or sectarian movements have commonly proceeded from a mixture of motives, some of which are at variance with that sense of status on which the priestly office rests. Sometimes, indeed, the motive has been in good part a revulsion against a system of status. Where this is the case the institution of the priesthood has broken down in the transition, at least partially. The spokesman of such an organization is at the outset a servant and representative of the organization, rather than a member of a special priestly class and the spokesman of a divine master. And it is only by a process of gradual specialization that, in succeeding generations, this spokesman regains the position of priest, with a full investiture of sacerdotal authority, and with its accompanying austere, archaic and vicarious manner of life. The like is true of the breakdown and redintegration of devout ritual after such a revulsion. The priestly office, the scheme of sacerdotal life, and the schedule of devout observances are rehabilitated only gradually, insensibly, and with more or less variation in details, as a persistent human sense of devout propriety reasserts its primacy in questions touching the interest in the preternatural--and it may be added, as the organization increases in wealth, and so acquires more of the point of view and the habits of thought of a leisure class. Beyond the priestly class, and ranged in an ascending hierarchy, ordinarily comes a superhuman vicarious leisure class of saints, angels, etc.--or their equivalents in the ethnic cults. These rise in grade, one above another, according to elaborate system of status. The principle of status runs through the entire hierarchical system, both visible and invisible. The good fame of these several orders of the supernatural hierarchy also commonly requires a certain tribute of vicarious consumption and vicarious leisure. In many cases they accordingly have devoted to their service sub-orders of attendants or dependents who perform a vicarious leisure for them, after much the same fashion as was found in an earlier chapter to be true of the dependent leisure class under the patriarchal system. It may not appear without reflection how these devout observances and the peculiarity of temperament which they imply, or the consumption of goods and services which is comprised in the cult, stand related to the leisure class of a modern community, or to the economic motives of which that class is the exponent in the modern scheme of life to this end a summary review of certain facts bearing on this relation will be useful. It appears from an earlier passage in this discussion that for the purpose of the collective life of today, especially so far as concerns the industrial efficiency of the modern community, the characteristic traits of the devout temperament are a hindrance rather than a help. It should accordingly be found that the modern industrial life tends selectively to eliminate these traits of human nature from the spiritual constitution of the classes that are immediately engaged in the industrial process. It should hold true, approximately, that devoutness is declining or tending to obsolescence among the members of what may be called the effective industrial community. At the same time it should appear that this aptitude or habit survives in appreciably greater vigor among those classes which do not immediately or primarily enter into the community's life process as an industrial factor. It has already been pointed out that these latter classes, which live by, rather than in, the industrial process, are roughly comprised under two categories (1) the leisure class proper, which is shielded from the stress of the economic situation; and (2) the indigent classes, including the lower-class delinquents, which are unduly exposed to the stress. In the case of the former class an archaic habit of mind persists because no effectual economic pressure constrains this class to an adaptation of its habits of thought to the changing situation; while in the latter the reason for a failure to adjust their habits of thought to the altered requirements of industrial efficiency is innutrition, absence of such surplus of energy as is needed in order to make the adjustment with facility, together with a lack of opportunity to acquire and become habituated to the modern point of view. The trend of the selective process runs in much the same direction in both cases. From the point of view which the modern industrial life inculcates, phenomena are habitually subsumed under the quantitative relation of mechanical sequence. The indigent classes not only fall short of the modicum of leisure necessary in order to appropriate and assimilate the more recent generalizations of science which this point of view involves, but they also ordinarily stand in such a relation of personal dependence or subservience to their pecuniary superiors as materially to retard their emancipation from habits of thought proper to the regime of status. The result is that these classes in some measure retain that general habit of mind the chief expression of which is a strong sense of personal status, and of which devoutness is one feature. In the older communities of the European culture, the hereditary leisure class, together with the mass of the indigent population, are given to devout observances in an appreciably higher degree than the average of the industrious middle class, wherever a considerable class of the latter character exists. But in some of these countries, the two categories of conservative humanity named above comprise virtually the whole population. Where these two classes greatly preponderate, their bent shapes popular sentiment to such an extent as to bear down any possible divergent tendency in the inconsiderable middle class, and imposes a devout attitude upon the whole community. This must, of course, not be construed to say that such communities or such classes as are exceptionally prone to devout observances tend to conform in any exceptional degree to the specifications of any code of morals that we may be accustomed to associate with this or that confession of faith. A large measure of the devout habit of mind need not carry with it a strict observance of the injunctions of the Decalogue or of the common law. Indeed, it is becoming somewhat of a commonplace with observers of criminal life in European communities that the criminal and dissolute classes are, if anything, rather more devout, and more naively so, than the average of the population. It is among those who constitute the pecuniary middle class and the body of law-abiding citizens that a relative exemption from the devotional attitude is to be looked for. Those who best appreciate the merits of the higher creeds and observances would object to all this and say that the devoutness of the low-class delinquents is a spurious, or at the best a superstitious devoutness; and the point is no doubt well taken and goes directly and cogently to the purpose intended. But for the purpose of the present inquiry these extra-economic, extra-psychological distinctions must perforce be neglected, however valid and however decisive they may be for the purpose for which they are made. What has actually taken place with regard to class emancipation from the habit of devout observance is shown by the latter-day complaint of the clergy--that the churches are losing the sympathy of the artisan classes, and are losing their hold upon them. At the same time it is currently believed that the middle class, commonly so called, is also falling away in the cordiality of its support of the church, especially so far as regards the adult male portion of that class. These are currently recognized phenomena, and it might seem that a simple reference to these facts should sufficiently substantiate the general position outlined. Such an appeal to the general phenomena of popular church attendance and church membership may be sufficiently convincing for the proposition here advanced. But it will still be to the purpose to trace in some detail the course of events and the particular forces which have wrought this change in the spiritual attitude of the more advanced industrial communities of today. It will serve to illustrate the manner in which economic causes work towards a secularization of men's habits of thought. In this respect the American community should afford an exceptionally convincing illustration, since this community has been the least trammelled by external circumstances of any equally important industrial aggregate. After making due allowance for exceptions and sporadic departures from the normal, the situation here at the present time may be summarized quite briefly. As a general rule the classes that are low in economic efficiency, or in intelligence, or both, are peculiarly devout--as, for instance, the Negro population of the South, much of the lower-class foreign population, much of the rural population, especially in those sections which are backward in education, in the stage of development of their industry, or in respect of their industrial contact with the rest of the community. So also such fragments as we possess of a specialized or hereditary indigent class, or of a segregated criminal or dissolute class; although among these latter the devout habit of mind is apt to take the form of a naive animistic belief in luck and in the efficacy of shamanistic practices perhaps more frequently than it takes the form of a formal adherence to any accredited creed. The artisan class, on the other hand, is notoriously falling away from the accredited anthropomorphic creeds and from all devout observances. This class is in an especial degree exposed to the characteristic intellectual and spiritual stress of modern organized industry, which requires a constant recognition of the undisguised phenomena of impersonal, matter-of-fact sequence and an unreserved conformity to the law of cause and effect. This class is at the same time not underfed nor over-worked to such an extent as to leave no margin of energy for the work of adaptation. The case of the lower or doubtful leisure class in America--the middle class commonly so called--is somewhat peculiar. It differs in respect of its devotional life from its European counterpart, but it differs in degree and method rather than in substance. The churches still have the pecuniary support of this class; although the creeds to which the class adheres with the greatest facility are relatively poor in anthropomorphic content. At the same time the effective middle-class congregation tends, in many cases, more or less remotely perhaps, to become a congregation of women and minors. There is an appreciable lack of devotional fervor among the adult males of the middle class, although to a considerable extent there survives among them a certain complacent, reputable assent to the outlines of the accredited creed under which they were born. Their everyday life is carried on in a more or less close contact with the industrial process. This peculiar sexual differentiation, which tends to delegate devout observances to the women and their children, is due, at least in part, to the fact that the middle-class women are in great measure a (vicarious) leisure class. The same is true in a less degree of the women of the lower, artisan classes. They live under a regime of status handed down from an earlier stage of industrial development, and thereby they preserve a frame of mind and habits of thought which incline them to an archaic view of things generally. At the same time they stand in no such direct organic relation to the industrial process at large as would tend strongly to break down those habits of thought which, for the modern industrial purpose, are obsolete. That is to say, the peculiar devoutness of women is a particular expression of that conservatism which the women of civilized communities owe, in great measure, to their economic position. For the modern man the patriarchal relation of status is by no means the dominant feature of life; but for the women on the other hand, and for the upper middle-class women especially, confined as they are by prescription and by economic circumstances to their "domestic sphere," this relation is the most real and most formative factor of life. Hence a habit of mind favorable to devout observances and to the interpretation of the facts of life generally in terms of personal status. The logic, and the logical processes, of her everyday domestic life are carried over into the realm of the supernatural, and the woman finds herself at home and content in a range of ideas which to the man are in great measure alien and imbecile. Still the men of this class are also not devoid of piety, although it is commonly not piety of an aggressive or exuberant kind. The men of the upper middle class commonly take a more complacent attitude towards devout observances than the men of the artisan class. This may perhaps be explained in part by saying that what is true of the women of the class is true to a less extent also of the men. They are to an appreciable extent a sheltered class; and the patriarchal relation of status which still persists in their conjugal life and in their habitual use of servants, may also act to conserve an archaic habit of mind and may exercise a retarding influence upon the process of secularization which their habits of thought are undergoing. The relations of the American middle-class man to the economic community, however, are usually pretty close and exacting; although it may be remarked, by the way and in qualification, that their economic activity frequently also partakes in some degree of the patriarchal or quasi-predatory character. The occupations which are in good repute among this class and which have most to do with shaping the class habits of thought, are the pecuniary occupations which have been spoken of in a similar connection in an earlier chapter. There is a good deal of the relation of arbitrary command and submission, and not a little of shrewd practice, remotely akin to predatory fraud. All this belongs on the plane of life of the predatory barbarian, to whom a devotional attitude is habitual. And in addition to this, the devout observances also commend themselves to this class on the ground of reputability. But this latter incentive to piety deserves treatment by itself and will be spoken of presently. There is no hereditary leisure class of any consequence in the American community, except in the South. This Southern leisure class is somewhat given to devout observances; more so than any class of corresponding pecuniary standing in other parts of the country. It is also well known that the creeds of the South are of a more old-fashioned cast than their counterparts in the North. Corresponding to this more archaic devotional life of the South is the lower industrial development of that section. The industrial organization of the South is at present, and especially it has been until quite recently, of a more primitive character than that of the American community taken as a whole. It approaches nearer to handicraft, in the paucity and rudeness of its mechanical appliances, and there is more of the element of mastery and subservience. It may also be noted that, owing to the peculiar economic circumstances of this section, the greater devoutness of the Southern population, both white and black, is correlated with a scheme of life which in many ways recalls the barbarian stages of industrial development. Among this population offenses of an archaic character also are and have been relatively more prevalent and are less deprecated than they are elsewhere; as, for example, duels, brawls, feuds, drunkenness, horse-racing, cock-fighting, gambling, male sexual incontinence (evidenced by the considerable number of mulattoes). There is also a livelier sense of honor--an expression of sportsmanship and a derivative of predatory life. As regards the wealthier class of the North, the American leisure class in the best sense of the term, it is, to begin with, scarcely possible to speak of an hereditary devotional attitude. This class is of too recent growth to be possessed of a well-formed transmitted habit in this respect, or even of a special home-grown tradition. Still, it may be noted in passing that there is a perceptible tendency among this class to give in at least a nominal, and apparently something of a real, adherence to some one of the accredited creeds. Also, weddings, funerals, and the like honorific events among this class are pretty uniformly solemnized with some especial degree of religious circumstance. It is impossible to say how far this adherence to a creed is a bona fide reversion to a devout habit of mind, and how far it is to be classed as a case of protective mimicry assumed for the purpose of an outward assimilation to canons of reputability borrowed from foreign ideals. Something of a substantial devotional propensity seems to be present, to judge especially by the somewhat peculiar degree of ritualistic observance which is in process of development in the upper-class cults. There is a tendency perceptible among the upper-class worshippers to affiliate themselves with those cults which lay relatively great stress on ceremonial and on the spectacular accessories of worship; and in the churches in which an upper-class membership predominates, there is at the same time a tendency to accentuate the ritualistic, at the cost of the intellectual features in the service and in the apparatus of the devout observances. This holds true even where the church in question belongs to a denomination with a relatively slight general development of ritual and paraphernalia. This peculiar development of the ritualistic element is no doubt due in part to a predilection for conspicuously wasteful spectacles, but it probably also in part indicates something of the devotional attitude of the worshippers. So far as the latter is true, it indicates a relatively archaic form of the devotional habit. The predominance of spectacular effects in devout observances is noticeable in all devout communities at a relatively primitive stage of culture and with a slight intellectual development. It is especially characteristic of the barbarian culture. Here there is pretty uniformly present in the devout observances a direct appeal to the emotions through all the avenues of sense. And a tendency to return to this naive, sensational method of appeal is unmistakable in the upper-class churches of today. It is perceptible in a less degree in the cults which claim the allegiance of the lower leisure class and of the middle classes. There is a reversion to the use of colored lights and brilliant spectacles, a freer use of symbols, orchestral music and incense, and one may even detect in "processionals" and "recessionals" and in richly varied genuflexional evolutions, an incipient reversion to so antique an accessory of worship as the sacred dance. This reversion to spectacular observances is not confined to the upper-class cults, although it finds its best exemplification and its highest accentuation in the higher pecuniary and social altitudes. The cults of the lower-class devout portion of the community, such as the Southern Negroes and the backward foreign elements of the population, of course also show a strong inclination to ritual, symbolism, and spectacular effects; as might be expected from the antecedents and the cultural level of those classes. With these classes the prevalence of ritual and anthropomorphism are not so much a matter of reversion as of continued development out of the past. But the use of ritual and related features of devotion are also spreading in other directions. In the early days of the American community the prevailing denominations started out with a ritual and paraphernalia of an austere simplicity; but it is a matter familiar to every one that in the course of time these denominations have, in a varying degree, adopted much of the spectacular elements which they once renounced. In a general way, this development has gone hand in hand with the growth of the wealth and the ease of life of the worshippers and has reached its fullest expression among those classes which grade highest in wealth and repute. The causes to which this pecuniary stratification of devoutness is due have already been indicated in a general way in speaking of class differences in habits of thought. Class differences as regards devoutness are but a special expression of a generic fact. The lax allegiance of the lower middle class, or what may broadly be called the failure of filial piety among this class, is chiefly perceptible among the town populations engaged in the mechanical industries. In a general way, one does not, at the present time, look for a blameless filial piety among those classes whose employment approaches that of the engineer and the mechanician. These mechanical employments are in a degree a modern fact. The handicraftsmen of earlier times, who served an industrial end of a character similar to that now served by the mechanician, were not similarly refractory under the discipline of devoutness. The habitual activity of the men engaged in these branches of industry has greatly changed, as regards its intellectual discipline, since the modern industrial processes have come into vogue; and the discipline to which the mechanician is exposed in his daily employment affects the methods and standards of his thinking also on topics which lie outside his everyday work. Familiarity with the highly organized and highly impersonal industrial processes of the present acts to derange the animistic habits of thought. The workman's office is becoming more and more exclusively that of discretion and supervision in a process of mechanical, dispassionate sequences. So long as the individual is the chief and typical prime mover in the process; so long as the obtrusive feature of the industrial process is the dexterity and force of the individual handicraftsman; so long the habit of interpreting phenomena in terms of personal motive and propensity suffers no such considerable and consistent derangement through facts as to lead to its elimination. But under the later developed industrial processes, when the prime movers and the contrivances through which they work are of an impersonal, non-individual character, the grounds of generalization habitually present in the workman's mind and the point of view from which he habitually apprehends phenomena is an enforced cognizance of matter-of-fact sequence. The result, so far as concerts the workman's life of faith, is a proclivity to undevout scepticism. It appears, then, that the devout habit of mind attains its best development under a relatively archaic culture; the term "devout" being of course here used in its anthropological sense simply, and not as implying anything with respect to the spiritual attitude so characterized, beyond the fact of a proneness to devout observances. It appears also that this devout attitude marks a type of human nature which is more in consonance with the predatory mode of life than with the later-developed, more consistently and organically industrial life process of the community. It is in large measure an expression of the archaic habitual sense of personal status--the relation of mastery and subservience--and it therefore fits into the industrial scheme of the predatory and the quasi-peaceable culture, but does not fit into the industrial scheme of the present. It also appears that this habit persists with greatest tenacity among those classes in the modern communities whose everyday life is most remote from the mechanical processes of industry and which are the most conservative also in other respects; while for those classes that are habitually in immediate contact with modern industrial processes, and whose habits of thought are therefore exposed to the constraining force of technological necessities, that animistic interpretation of phenomena and that respect of persons on which devout observance proceeds are in process of obsolescence. And also--as bearing especially on the present discussion--it appears that the devout habit to some extent progressively gains in scope and elaboration among those classes in the modern communities to whom wealth and leisure accrue in the most pronounced degree. In this as in other relations, the institution of a leisure class acts to conserve, and even to rehabilitate, that archaic type of human nature and those elements of the archaic culture which the industrial evolution of society in its later stages acts to eliminate. Chapter Thirteen ~~ Survivals of the Non-Invidious Interests In an increasing proportion as time goes on, the anthropomorphic cult, with its code of devout observations, suffers a progressive disintegration through the stress of economic exigencies and the decay of the system of status. As this disintegration proceeds, there come to be associated and blended with the devout attitude certain other motives and impulses that are not always of an anthropomorphic origin, nor traceable to the habit of personal subservience. Not all of these subsidiary impulses that blend with the habit of devoutness in the later devotional life are altogether congruous with the devout attitude or with the anthropomorphic apprehension of the sequence of phenomena. The origin being not the same, their action upon the scheme of devout life is also not in the same direction. In many ways they traverse the underlying norm of subservience or vicarious life to which the code of devout observations and the ecclesiastical and sacerdotal institutions are to be traced as their substantial basis. Through the presence of these alien motives the social and industrial regime of status gradually disintegrates, and the canon of personal subservience loses the support derived from an unbroken tradition. Extraneous habits and proclivities encroach upon the field of action occupied by this canon, and it presently comes about that the ecclesiastical and sacerdotal structures are partially converted to other uses, in some measure alien to the purposes of the scheme of devout life as it stood in the days of the most vigorous and characteristic development of the priesthood. Among these alien motives which affect the devout scheme in its later growth, may be mentioned the motives of charity and of social good-fellowship, or conviviality; or, in more general terms, the various expressions of the sense of human solidarity and sympathy. It may be added that these extraneous uses of the ecclesiastical structure contribute materially to its survival in name and form even among people who may be ready to give up the substance of it. A still more characteristic and more pervasive alien element in the motives which have gone to formally uphold the scheme of devout life is that non-reverent sense of aesthetic congruity with the environment, which is left as a residue of the latter-day act of worship after elimination of its anthropomorphic content. This has done good service for the maintenance of the sacerdotal institution through blending with the motive of subservience. This sense of impulse of aesthetic congruity is not primarily of an economic character, but it has a considerable indirect effect in shaping the habit of mind of the individual for economic purposes in the later stages of industrial development; its most perceptible effect in this regard goes in the direction of mitigating the somewhat pronounced self-regarding bias that has been transmitted by tradition from the earlier, more competent phases of the regime of status. The economic bearing of this impulse is therefore seen to transverse that of the devout attitude; the former goes to qualify, if not eliminate, the self-regarding bias, through sublation of the antithesis or antagonism of self and not-self; while the latter, being and expression of the sense of personal subservience and mastery, goes to accentuate this antithesis and to insist upon the divergence between the self-regarding interest and the interests of the generically human life process. This non-invidious residue of the religious life--the sense of communion with the environment, or with the generic life process--as well as the impulse of charity or of sociability, act in a pervasive way to shape men's habits of thought for the economic purpose. But the action of all this class of proclivities is somewhat vague, and their effects are difficult to trace in detail. So much seems clear, however, as that the action of this entire class of motives or aptitudes tends in a direction contrary to the underlying principles of the institution of the leisure class as already formulated. The basis of that institution, as well as of the anthropomorphic cults associated with it in the cultural development, is the habit of invidious comparison; and this habit is incongruous with the exercise of the aptitudes now in question. The substantial canons of the leisure-class scheme of life are a conspicuous waste of time and substance and a withdrawal from the industrial process; while the particular aptitudes here in question assert themselves, on the economic side, in a deprecation of waste and of a futile manner of life, and in an impulse to participation in or identification with the life process, whether it be on the economic side or in any other of its phases or aspects. It is plain that these aptitudes and habits of life to which they give rise where circumstances favor their expression, or where they assert themselves in a dominant way, run counter to the leisure-class scheme of life; but it is not clear that life under the leisure-class scheme, as seen in the later stages of its development, tends consistently to the repression of these aptitudes or to exemption from the habits of thought in which they express themselves. The positive discipline of the leisure-class scheme of life goes pretty much all the other way. In its positive discipline, by prescription and by selective elimination, the leisure-class scheme favors the all-pervading and all-dominating primacy of the canons of waste and invidious comparison at every conjuncture of life. But in its negative effects the tendency of the leisure-class discipline is not so unequivocally true to the fundamental canons of the scheme. In its regulation of human activity for the purpose of pecuniary decency the leisure-class canon insists on withdrawal from the industrial process. That is to say, it inhibits activity in the directions in which the impecunious members of the community habitually put forth their efforts. Especially in the case of women, and more particularly as regards the upper-class and upper-middle-class women of advanced industrial communities, this inhibition goes so far as to insist on withdrawal even from the emulative process of accumulation by the quasi-predator methods of the pecuniary occupations. The pecuniary or the leisure-class culture, which set out as an emulative variant of the impulse of workmanship, is in its latest development beginning to neutralize its own ground, by eliminating the habit of invidious comparison in respect of efficiency, or even of pecuniary standing. On the other hand, the fact that members of the leisure class, both men and women, are to some extent exempt from the necessity of finding a livelihood in a competitive struggle with their fellows, makes it possible for members of this class not only to survive, but even, within bounds, to follow their bent in case they are not gifted with the aptitudes which make for success in the competitive struggle. That is to say, in the latest and fullest development of the institution, the livelihood of members of this class does not depend on the possession and the unremitting exercise of those aptitudes are therefore greater in the higher grades of the leisure class than in the general average of a population living under the competitive system. In an earlier chapter, in discussing the conditions of survival of archaic traits, it has appeared that the peculiar position of the leisure class affords exceptionally favorable chances for the survival of traits which characterize the type of human nature proper to an earlier and obsolete cultural stage. The class is sheltered from the stress of economic exigencies, and is in this sense withdrawn from the rude impact of forces which make for adaptation to the economic situation. The survival in the leisure class, and under the leisure-class scheme of life, of traits and types that are reminiscent of the predatory culture has already been discussed. These aptitudes and habits have an exceptionally favorable chance of survival under the leisure-class regime. Not only does the sheltered pecuniary position of the leisure class afford a situation favorable to the survival of such individuals as are not gifted with the complement of aptitudes required for serviceability in the modern industrial process; but the leisure-class canons of reputability at the same time enjoin the conspicuous exercise of certain predatory aptitudes. The employments in which the predatory aptitudes find exercise serve as an evidence of wealth, birth, and withdrawal from the industrial process. The survival of the predatory traits under the leisure-class culture is furthered both negatively, through the industrial exemption of the class, and positively, through the sanction of the leisure-class canons of decency. With respect to the survival of traits characteristic of the ante-predatory savage culture the case is in some degree different. The sheltered position of the leisure class favors the survival also of these traits; but the exercise of the aptitudes for peace and good-will does not have the affirmative sanction of the code of proprieties. Individuals gifted with a temperament that is reminiscent of the ante-predatory culture are placed at something of an advantage within the leisure class, as compared with similarly gifted individuals outside the class, in that they are not under a pecuniary necessity to thwart these aptitudes that make for a non-competitive life; but such individuals are still exposed to something of a moral constraint which urges them to disregard these inclinations, in that the code of proprieties enjoins upon them habits of life based on the predatory aptitudes. So long as the system of status remains intact, and so long as the leisure class has other lines of non-industrial activity to take to than obvious killing of time in aimless and wasteful fatigation, so long no considerable departure from the leisure-class scheme of reputable life is to be looked for. The occurrence of non-predatory temperament with the class at that stage is to be looked upon as a case of sporadic reversion. But the reputable non-industrial outlets for the human propensity to action presently fail, through the advance of economic development, the disappearance of large game, the decline of war, the obsolescence of proprietary government, and the decay of the priestly office. When this happens, the situation begins to change. Human life must seek expression in one direction if it may not in another; and if the predatory outlet fails, relief is sought elsewhere. As indicated above, the exemption from pecuniary stress has been carried farther in the case of the leisure-class women of the advanced industrial communities than in that of any other considerable group of persons. The women may therefore be expected to show a more pronounced reversion to a non-invidious temperament than the men. But there is also among men of the leisure class a perceptible increase in the range and scope of activities that proceed from aptitudes which are not to be classed as self-regarding, and the end of which is not an invidious distinction. So, for instance, the greater number of men who have to do with industry in the way of pecuniarily managing an enterprise take some interest and some pride in seeing that the work is well done and is industrially effective, and this even apart from the profit which may result from any improvement of this kind. The efforts of commercial clubs and manufacturers' organizations in this direction of non-invidious advancement of industrial efficiency are also well know. The tendency to some other than an invidious purpose in life has worked out in a multitude of organizations, the purpose of which is some work of charity or of social amelioration. These organizations are often of a quasi-religious or pseudo-religious character, and are participated in by both men and women. Examples will present themselves in abundance on reflection, but for the purpose of indicating the range of the propensities in question and of characterizing them, some of the more obvious concrete cases may be cited. Such, for instance, are the agitation for temperance and similar social reforms, for prison reform, for the spread of education, for the suppression of vice, and for the avoidance of war by arbitration, disarmament, or other means; such are, in some measure, university settlements, neighborhood guilds, the various organizations typified by the Young Men's Christian Association and Young People's Society for Christian Endeavor, sewing-clubs, art clubs, and even commercial clubs; such are also, in some slight measure, the pecuniary foundations of semi-public establishments for charity, education, or amusement, whether they are endowed by wealthy individuals or by contributions collected from persons of smaller means--in so far as these establishments are not of a religious character. It is of course not intended to say that these efforts proceed entirely from other motives than those of a self-regarding kind. What can be claimed is that other motives are present in the common run of cases, and that the perceptibly greater prevalence of effort of this kind under the circumstances of the modern industrial life than under the unbroken regime of the principle of status, indicates the presence in modern life of an effective scepticism with respect to the full legitimacy of an emulative scheme of life. It is a matter of sufficient notoriety to have become a commonplace jest that extraneous motives are commonly present among the incentives to this class of work--motives of a self-regarding kind, and especially the motive of an invidious distinction. To such an extent is this true, that many ostensible works of disinterested public spirit are no doubt initiated and carried on with a view primarily to the enhance repute or even to the pecuniary gain, of their promoters. In the case of some considerable groups of organizations or establishments of this kind the invidious motive is apparently the dominant motive both with the initiators of the work and with their supporters. This last remark would hold true especially with respect to such works as lend distinction to their doer through large and conspicuous expenditure; as, for example, the foundation of a university or of a public library or museum; but it is also, and perhaps equally, true of the more commonplace work of participation in such organizations. These serve to authenticate the pecuniary reputability of their members, as well as gratefully to keep them in mind of their superior status by pointing the contrast between themselves and the lower-lying humanity in whom the work of amelioration is to be wrought; as, for example, the university settlement, which now has some vogue. But after all allowances and deductions have been made, there is left some remainder of motives of a non-emulative kind. The fact itself that distinction or a decent good fame is sought by this method is evidence of a prevalent sense of the legitimacy, and of the presumptive effectual presence, of a non-emulative, non-invidious interest, as a consistent factor in the habits of thought of modern communities. In all this latter-day range of leisure-class activities that proceed on the basis of a non-invidious and non-religious interest, it is to be noted that the women participate more actively and more persistently than the men--except, of course, in the case of such works as require a large expenditure of means. The dependent pecuniary position of the women disables them for work requiring large expenditure. As regards the general range of ameliorative work, the members of the priesthood or clergy of the less naively devout sects, or the secularized denominations, are associated with the class of women. This is as the theory would have it. In other economic relations, also, this clergy stands in a somewhat equivocal position between the class of women and that of the men engaged in economic pursuits. By tradition and by the prevalent sense of the proprieties, both the clergy and the women of the well-to-do classes are placed in the position of a vicarious leisure class; with both classes the characteristic relation which goes to form the habits of thought of the class is a relation of subservience--that is to say, an economic relation conceived in personal terms; in both classes there is consequently perceptible a special proneness to construe phenomena in terms of personal relation rather than of causal sequence; both classes are so inhibited by the canons of decency from the ceremonially unclean processes of the lucrative or productive occupations as to make participation in the industrial life process of today a moral impossibility for them. The result of this ceremonial exclusion from productive effort of the vulgar sort is to draft a relatively large share of the energies of the modern feminine and priestly classes into the service of other interests than the self-regarding one. The code leaves no alternative direction in which the impulse to purposeful action may find expression. The effect of a consistent inhibition on industrially useful activity in the case of the leisure-class women shows itself in a restless assertion of the impulse to workmanship in other directions than that of business activity. As has been noticed already, the everyday life of the well-to-do women and the clergy contains a larger element of status than that of the average of the men, especially than that of the men engaged in the modern industrial occupations proper. Hence the devout attitude survives in a better state of preservation among these classes than among the common run of men in the modern communities. Hence an appreciable share of the energy which seeks expression in a non-lucrative employment among these members of the vicarious leisure classes may be expected to eventuate in devout observances and works of piety. Hence, in part, the excess of the devout proclivity in women, spoken of in the last chapter. But it is more to the present point to note the effect of this proclivity in shaping the action and coloring the purposes of the non-lucrative movements and organizations here under discussion. Where this devout coloring is present it lowers the immediate efficiency of the organizations for any economic end to which their efforts may be directed. Many organizations, charitable and ameliorative, divide their attention between the devotional and the secular well-being of the people whose interests they aim to further. It can scarcely be doubted that if they were to give an equally serious attention and effort undividedly to the secular interests of these people, the immediate economic value of their work should be appreciably higher than it is. It might of course similarly be said, if this were the place to say it, that the immediate efficiency of these works of amelioration for the devout might be greater if it were not hampered with the secular motives and aims which are usually present. Some deduction is to be made from the economic value of this class of non-invidious enterprise, on account of the intrusion of the devotional interest. But there are also deductions to be made on account of the presence of other alien motives which more or less broadly traverse the economic trend of this non-emulative expression of the instinct of workmanship. To such an extent is this seen to be true on a closer scrutiny, that, when all is told, it may even appear that this general class of enterprises is of an altogether dubious economic value--as measured in terms of the fullness or facility of life of the individuals or classes to whose amelioration the enterprise is directed. For instance, many of the efforts now in reputable vogue for the amelioration of the indigent population of large cities are of the nature, in great part, of a mission of culture. It is by this means sought to accelerate the rate of speed at which given elements of the upper-class culture find acceptance in the everyday scheme of life of the lower classes. The solicitude of "settlements," for example, is in part directed to enhance the industrial efficiency of the poor and to teach them the more adequate utilization of the means at hand; but it is also no less consistently directed to the inculcation, by precept and example, of certain punctilios of upper-class propriety in manners and customs. The economic substance of these proprieties will commonly be found on scrutiny to be a conspicuous waste of time and goods. Those good people who go out to humanize the poor are commonly, and advisedly, extremely scrupulous and silently insistent in matters of decorum and the decencies of life. They are commonly persons of an exemplary life and gifted with a tenacious insistence on ceremonial cleanness in the various items of their daily consumption. The cultural or civilizing efficacy of this inculcation of correct habits of thought with respect to the consumption of time and commodities is scarcely to be overrated; nor is its economic value to the individual who acquires these higher and more reputable ideals inconsiderable. Under the circumstances of the existing pecuniary culture, the reputability, and consequently the success, of the individual is in great measure dependent on his proficiency in demeanor and methods of consumption that argue habitual waste of time and goods. But as regards the ulterior economic bearing of this training in worthier methods of life, it is to be said that the effect wrought is in large part a substitution of costlier or less efficient methods of accomplishing the same material results, in relations where the material result is the fact of substantial economic value. The propaganda of culture is in great part an inculcation of new tastes, or rather of a new schedule of proprieties, which have been adapted to the upper-class scheme of life under the guidance of the leisure-class formulation of the principles of status and pecuniary decency. This new schedule of proprieties is intruded into the lower-class scheme of life from the code elaborated by an element of the population whose life lies outside the industrial process; and this intrusive schedule can scarcely be expected to fit the exigencies of life for these lower classes more adequately than the schedule already in vogue among them, and especially not more adequately than the schedule which they are themselves working out under the stress of modern industrial life. All this of course does not question the fact that the proprieties of the substituted schedule are more decorous than those which they displace. The doubt which presents itself is simply a doubt as to the economic expediency of this work of regeneration--that is to say, the economic expediency in that immediate and material bearing in which the effects of the change can be ascertained with some degree of confidence, and as viewed from the standpoint not of the individual but of the facility of life of the collectivity. For an appreciation of the economic expediency of these enterprises of amelioration, therefore, their effective work is scarcely to be taken at its face value, even where the aim of the enterprise is primarily an economic one and where the interest on which it proceeds is in no sense self-regarding or invidious. The economic reform wrought is largely of the nature of a permutation in the methods of conspicuous waste. But something further is to be said with respect to the character of the disinterested motives and canons of procedure in all work of this class that is affected by the habits of thought characteristic of the pecuniary culture; and this further consideration may lead to a further qualification of the conclusions already reached. As has been seen in an earlier chapter, the canons of reputability or decency under the pecuniary culture insist on habitual futility of effort as the mark of a pecuniarily blameless life. There results not only a habit of disesteem of useful occupations, but there results also what is of more decisive consequence in guiding the action of any organized body of people that lays claim to social good repute. There is a tradition which requires that one should not be vulgarly familiar with any of the processes or details that have to do with the material necessities of life. One may meritoriously show a quantitative interest in the well-being of the vulgar, through subscriptions or through work on managing committees and the like. One may, perhaps even more meritoriously, show solicitude in general and in detail for the cultural welfare of the vulgar, in the way of contrivances for elevating their tastes and affording them opportunities for spiritual amelioration. But one should not betray an intimate knowledge of the material circumstances of vulgar life, or of the habits of thought of the vulgar classes, such as would effectually direct the efforts of these organizations to a materially useful end. This reluctance to avow an unduly intimate knowledge of the lower-class conditions of life in detail of course prevails in very different degrees in different individuals; but there is commonly enough of it present collectively in any organization of the kind in question profoundly to influence its course of action. By its cumulative action in shaping the usage and precedents of any such body, this shrinking from an imputation of unseemly familiarity with vulgar life tends gradually to set aside the initial motives of the enterprise, in favor of certain guiding principles of good repute, ultimately reducible to terms of pecuniary merit. So that in an organization of long standing the initial motive of furthering the facility of life in these classes comes gradually to be an ostensible motive only, and the vulgarly effective work of the organization tends to obsolescence. What is true of the efficiency of organizations for non-invidious work in this respect is true also as regards the work of individuals proceeding on the same motives; though it perhaps holds true with more qualification for individuals than for organized enterprises. The habit of gauging merit by the leisure-class canons of wasteful expenditure and unfamiliarity with vulgar life, whether on the side of production or of consumption, is necessarily strong in the individuals who aspire to do some work of public utility. And if the individual should forget his station and turn his efforts to vulgar effectiveness, the common sense of the community-the sense of pecuniary decency--would presently reject his work and set him right. An example of this is seen in the administration of bequests made by public-spirited men for the single purpose (at least ostensibly) of furthering the facility of human life in some particular respect. The objects for which bequests of this class are most frequently made at present are are schools, libraries, hospitals, and asylums for the infirm or unfortunate. The avowed purpose of the donor in these cases is the amelioration of human life in the particular respect which is named in the bequest; but it will be found an invariable rule that in the execution of the work not a little of other motives, frequency incompatible with the initial motive, is present and determines the particular disposition eventually made of a good share of the means which have been set apart by the bequest. Certain funds, for instance, may have been set apart as a foundation for a foundling asylum or a retreat for invalids. The diversion of expenditure to honorific waste in such cases is not uncommon enough to cause surprise or even to raise a smile. An appreciable share of the funds is spent in the construction of an edifice faced with some aesthetically objectionable but expensive stone, covered with grotesque and incongruous details, and designed, in its battlemented walls and turrets and its massive portals and strategic approaches, to suggest certain barbaric methods of warfare. The interior of the structure shows the same pervasive guidance of the canons of conspicuous waste and predatory exploit. The windows, for instance, to go no farther into detail, are placed with a view to impress their pecuniary excellence upon the chance beholder from the outside, rather than with a view to effectiveness for their ostensible end in the convenience or comfort of the beneficiaries within; and the detail of interior arrangement is required to conform itself as best it may to this alien but imperious requirement of pecuniary beauty. In all this, of course, it is not to be presumed that the donor would have found fault, or that he would have done otherwise if he had taken control in person; it appears that in those cases where such a personal direction is exercised--where the enterprise is conducted by direct expenditure and superintendence instead of by bequest--the aims and methods of management are not different in this respect. Nor would the beneficiaries, or the outside observers whose ease or vanity are not immediately touched, be pleased with a different disposition of the funds. It would suit no one to have the enterprise conducted with a view directly to the most economical and effective use of the means at hand for the initial, material end of the foundation. All concerned, whether their interest is immediate and self-regarding, or contemplative only, agree that some considerable share of the expenditure should go to the higher or spiritual needs derived from the habit of an invidious comparison in predatory exploit and pecuniary waste. But this only goes to say that the canons of emulative and pecuniary reputability so far pervade the common sense of the community as to permit no escape or evasion, even in the case of an enterprise which ostensibly proceeds entirely on the basis of a non-invidious interest. It may even be that the enterprise owes its honorific virtue, as a means of enhancing the donor's good repute, to the imputed presence of this non-invidious motive; but that does not hinder the invidious interest from guiding the expenditure. The effectual presence of motives of an emulative or invidious origin in non-emulative works of this kind might be shown at length and with detail, in any one of the classes of enterprise spoken of above. Where these honorific details occur, in such cases, they commonly masquerade under designations that belong in the field of the aesthetic, ethical or economic interest. These special motives, derived from the standards and canons of the pecuniary culture, act surreptitiously to divert effort of a non-invidious kind from effective service, without disturbing the agent's sense of good intention or obtruding upon his consciousness the substantial futility of his work. Their effect might be traced through the entire range of that schedule of non-invidious, meliorative enterprise that is so considerable a feature, and especially so conspicuous a feature, in the overt scheme of life of the well-to-do. But the theoretical bearing is perhaps clear enough and may require no further illustration; especially as some detailed attention will be given to one of these lines of enterprise--the establishments for the higher learning--in another connection. Under the circumstances of the sheltered situation in which the leisure class is placed there seems, therefore, to be something of a reversion to the range of non-invidious impulses that characterizes the ante-predatory savage culture. The reversion comprises both the sense of workmanship and the proclivity to indolence and good-fellowship. But in the modern scheme of life canons of conduct based on pecuniary or invidious merit stand in the way of a free exercise of these impulses; and the dominant presence of these canons of conduct goes far to divert such efforts as are made on the basis of the non-invidious interest to the service of that invidious interest on which the pecuniary culture rests. The canons of pecuniary decency are reducible for the present purpose to the principles of waste, futility, and ferocity. The requirements of decency are imperiously present in meliorative enterprise as in other lines of conduct, and exercise a selective surveillance over the details of conduct and management in any enterprise. By guiding and adapting the method in detail, these canons of decency go far to make all non-invidious aspiration or effort nugatory. The pervasive, impersonal, un-eager principle of futility is at hand from day to day and works obstructively to hinder the effectual expression of so much of the surviving ante-predatory aptitudes as is to be classed under the instinct of workmanship; but its presence does not preclude the transmission of those aptitudes or the continued recurrence of an impulse to find expression for them. In the later and farther development of the pecuniary culture, the requirement of withdrawal from the industrial process in order to avoid social odium is carried so far as to comprise abstention from the emulative employments. At this advanced stage the pecuniary culture negatively favors the assertion of the non-invidious propensities by relaxing the stress laid on the merit of emulative, predatory, or pecuniary occupations, as compared with those of an industrial or productive kind. As was noticed above, the requirement of such withdrawal from all employment that is of human use applies more rigorously to the upper-class women than to any other class, unless the priesthood of certain cults might be cited as an exception, perhaps more apparent than real, to this rule. The reason for the more extreme insistence on a futile life for this class of women than for the men of the same pecuniary and social grade lies in their being not only an upper-grade leisure class but also at the same time a vicarious leisure class. There is in their case a double ground for a consistent withdrawal from useful effort. It has been well and repeatedly said by popular writers and speakers who reflect the common sense of intelligent people on questions of social structure and function that the position of woman in any community is the most striking index of the level of culture attained by the community, and it might be added, by any given class in the community. This remark is perhaps truer as regards the stage of economic development than as regards development in any other respect. At the same time the position assigned to the woman in the accepted scheme of life, in any community or under any culture, is in a very great degree an expression of traditions which have been shaped by the circumstances of an earlier phase of development, and which have been but partially adapted to the existing economic circumstances, or to the existing exigencies of temperament and habits of mind by which the women living under this modern economic situation are actuated. The fact has already been remarked upon incidentally in the course of the discussion of the growth of economic institutions generally, and in particular in speaking of vicarious leisure and of dress, that the position of women in the modern economic scheme is more widely and more consistently at variance with the promptings of the instinct of workmanship than is the position of the men of the same classes. It is also apparently true that the woman's temperament includes a larger share of this instinct that approves peace and disapproves futility. It is therefore not a fortuitous circumstance that the women of modern industrial communities show a livelier sense of the discrepancy between the accepted scheme of life and the exigencies of the economic situation. The several phases of the "woman question" have brought out in intelligible form the extent to which the life of women in modern society, and in the polite circles especially, is regulated by a body of common sense formulated under the economic circumstances of an earlier phase of development. It is still felt that woman's life, in its civil, economic, and social bearing, is essentially and normally a vicarious life, the merit or demerit of which is, in the nature of things, to be imputed to some other individual who stands in some relation of ownership or tutelage to the woman. So, for instance, any action on the part of a woman which traverses an injunction of the accepted schedule of proprieties is felt to reflect immediately upon the honor of the man whose woman she is. There may of course be some sense of incongruity in the mind of any one passing an opinion of this kind on the woman's frailty or perversity; but the common-sense judgment of the community in such matters is, after all, delivered without much hesitation, and few men would question the legitimacy of their sense of an outraged tutelage in any case that might arise. On the other hand, relatively little discredit attaches to a woman through the evil deeds of the man with whom her life is associated. The good and beautiful scheme of life, then--that is to say the scheme to which we are habituated--assigns to the woman a "sphere" ancillary to the activity of the man; and it is felt that any departure from the traditions of her assigned round of duties is unwomanly. If the question is as to civil rights or the suffrage, our common sense in the matter--that is to say the logical deliverance of our general scheme of life upon the point in question--says that the woman should be represented in the body politic and before the law, not immediately in her own person, but through the mediation of the head of the household to which she belongs. It is unfeminine in her to aspire to a self-directing, self-centered life; and our common sense tells us that her direct participation in the affairs of the community, civil or industrial, is a menace to that social order which expresses our habits of thought as they have been formed under the guidance of the traditions of the pecuniary culture. "All this fume and froth of 'emancipating woman from the slavery of man' and so on, is, to use the chaste and expressive language of Elizabeth Cady Stanton inversely, 'utter rot.' The social relations of the sexes are fixed by nature. Our entire civilization--that is whatever is good in it--is based on the home." The "home" is the household with a male head. This view, but commonly expressed even more chastely, is the prevailing view of the woman's status, not only among the common run of the men of civilized communities, but among the women as well. Women have a very alert sense of what the scheme of proprieties requires, and while it is true that many of them are ill at ease under the details which the code imposes, there are few who do not recognize that the existing moral order, of necessity and by the divine right of prescription, places the woman in a position ancillary to the man. In the last analysis, according to her own sense of what is good and beautiful, the woman's life is, and in theory must be, an expression of the man's life at the second remove. But in spite of this pervading sense of what is the good and natural place for the woman, there is also perceptible an incipient development of sentiment to the effect that this whole arrangement of tutelage and vicarious life and imputation of merit and demerit is somehow a mistake. Or, at least, that even if it may be a natural growth and a good arrangement in its time and place, and in spite of its patent aesthetic value, still it does not adequately serve the more everyday ends of life in a modern industrial community. Even that large and substantial body of well-bred, upper and middle-class women to whose dispassionate, matronly sense of the traditional proprieties this relation of status commends itself as fundamentally and eternally right-even these, whose attitude is conservative, commonly find some slight discrepancy in detail between things as they are and things as they should be in this respect. But that less manageable body of modern women who, by force of youth, education, or temperament, are in some degree out of touch with the traditions of status received from the barbarian culture, and in whom there is, perhaps, an undue reversion to the impulse of self-expression and workmanship--these are touched with a sense of grievance too vivid to leave them at rest. In this "New-Woman" movement--as these blind and incoherent efforts to rehabilitate the woman's pre-glacial standing have been named--there are at least two elements discernible, both of which are of an economic character. These two elements or motives are expressed by the double watchword, "Emancipation" and "Work." Each of these words is recognized to stand for something in the way of a wide-spread sense of grievance. The prevalence of the sentiment is recognized even by people who do not see that there is any real ground for a grievance in the situation as it stands today. It is among the women of the well-to-do classes, in the communities which are farthest advanced in industrial development, that this sense of a grievance to be redressed is most alive and finds most frequent expression. That is to say, in other words, there is a demand, more or less serious, for emancipation from all relation of status, tutelage, or vicarious life; and the revulsion asserts itself especially among the class of women upon whom the scheme of life handed down from the regime of status imposes with least litigation a vicarious life, and in those communities whose economic development has departed farthest from the circumstances to which this traditional scheme is adapted. The demand comes from that portion of womankind which is excluded by the canons of good repute from all effectual work, and which is closely reserved for a life of leisure and conspicuous consumption. More than one critic of this new-woman movement has misapprehended its motive. The case of the American "new woman" has lately been summed up with some warmth by a popular observer of social phenomena: "She is petted by her husband, the most devoted and hard-working of husbands in the world.... She is the superior of her husband in education, and in almost every respect. She is surrounded by the most numerous and delicate attentions. Yet she is not satisfied.... The Anglo-Saxon 'new woman' is the most ridiculous production of modern times, and destined to be the most ghastly failure of the century." Apart from the deprecation--perhaps well placed--which is contained in this presentment, it adds nothing but obscurity to the woman question. The grievance of the new woman is made up of those things which this typical characterization of the movement urges as reasons why she should be content. She is petted, and is permitted, or even required, to consume largely and conspicuously--vicariously for her husband or other natural guardian. She is exempted, or debarred, from vulgarly useful employment--in order to perform leisure vicariously for the good repute of her natural (pecuniary) guardian. These offices are the conventional marks of the un-free, at the same time that they are incompatible with the human impulse to purposeful activity. But the woman is endowed with her share-which there is reason to believe is more than an even share--of the instinct of workmanship, to which futility of life or of expenditure is obnoxious. She must unfold her life activity in response to the direct, unmediated stimuli of the economic environment with which she is in contact. The impulse is perhaps stronger upon the woman than upon the man to live her own life in her own way and to enter the industrial process of the community at something nearer than the second remove. So long as the woman's place is consistently that of a drudge, she is, in the average of cases, fairly contented with her lot. She not only has something tangible and purposeful to do, but she has also no time or thought to spare for a rebellious assertion of such human propensity to self-direction as she has inherited. And after the stage of universal female drudgery is passed, and a vicarious leisure without strenuous application becomes the accredited employment of the women of the well-to-do classes, the prescriptive force of the canon of pecuniary decency, which requires the observance of ceremonial futility on their part, will long preserve high-minded women from any sentimental leaning to self-direction and a "sphere of usefulness." This is especially true during the earlier phases of the pecuniary culture, while the leisure of the leisure class is still in great measure a predatory activity, an active assertion of mastery in which there is enough of tangible purpose of an invidious kind to admit of its being taken seriously as an employment to which one may without shame put one's hand. This condition of things has obviously lasted well down into the present in some communities. It continues to hold to a different extent for different individuals, varying with the vividness of the sense of status and with the feebleness of the impulse to workmanship with which the individual is endowed. But where the economic structure of the community has so far outgrown the scheme of life based on status that the relation of personal subservience is no longer felt to be the sole "natural" human relation; there the ancient habit of purposeful activity will begin to assert itself in the less conformable individuals against the more recent, relatively superficial, relatively ephemeral habits and views which the predatory and the pecuniary culture have contributed to our scheme of life. These habits and views begin to lose their coercive force for the community or the class in question so soon as the habit of mind and the views of life due to the predatory and the quasi-peaceable discipline cease to be in fairly close accord with the later-developed economic situation. This is evident in the case of the industrious classes of modern communities; for them the leisure-class scheme of life has lost much of its binding force, especially as regards the element of status. But it is also visibly being verified in the case of the upper classes, though not in the same manner. The habits derived from the predatory and quasi-peaceable culture are relatively ephemeral variants of certain underlying propensities and mental characteristics of the race; which it owes to the protracted discipline of the earlier, proto-anthropoid cultural stage of peaceable, relatively undifferentiated economic life carried on in contact with a relatively simple and invariable material environment. When the habits superinduced by the emulative method of life have ceased to enjoy the section of existing economic exigencies, a process of disintegration sets in whereby the habits of thought of more recent growth and of a less generic character to some extent yield the ground before the more ancient and more pervading spiritual characteristics of the race. In a sense, then, the new-woman movement marks a reversion to a more generic type of human character, or to a less differentiated expression of human nature. It is a type of human nature which is to be characterized as proto-anthropoid, and, as regards the substance if not the form of its dominant traits, it belongs to a cultural stage that may be classed as possibly sub-human. The particular movement or evolutional feature in question of course shares this characterization with the rest of the later social development, in so far as this social development shows evidence of a reversion to the spiritual attitude that characterizes the earlier, undifferentiated stage of economic revolution. Such evidence of a general tendency to reversion from the dominance of the invidious interest is not entirely wanting, although it is neither plentiful nor unquestionably convincing. The general decay of the sense of status in modern industrial communities goes some way as evidence in this direction; and the perceptible return to a disapproval of futility in human life, and a disapproval of such activities as serve only the individual gain at the cost of the collectivity or at the cost of other social groups, is evidence to a like effect. There is a perceptible tendency to deprecate the infliction of pain, as well as to discredit all marauding enterprises, even where these expressions of the invidious interest do not tangibly work to the material detriment of the community or of the individual who passes an opinion on them. It may even be said that in the modern industrial communities the average, dispassionate sense of men says that the ideal character is a character which makes for peace, good-will, and economic efficiency, rather than for a life of self-seeking, force, fraud, and mastery. The influence of the leisure class is not consistently for or against the rehabilitation of this proto-anthropoid human nature. So far as concerns the chance of survival of individuals endowed with an exceptionally large share of the primitive traits, the sheltered position of the class favors its members directly by withdrawing them from the pecuniary struggle; but indirectly, through the leisure-class canons of conspicuous waste of goods and effort, the institution of a leisure class lessens the chance of survival of such individuals in the entire body of the population. The decent requirements of waste absorb the surplus energy of the population in an invidious struggle and leave no margin for the non-invidious expression of life. The remoter, less tangible, spiritual effects of the discipline of decency go in the same direction and work perhaps more effectually to the same end. The canons of decent life are an elaboration of the principle of invidious comparison, and they accordingly act consistently to inhibit all non-invidious effort and to inculcate the self-regarding attitude. Chapter Fourteen ~~ The Higher Learning as an Expression of the Pecuniary Culture To the end that suitable habits of thought on certain heads may be conserved in the incoming generation, a scholastic discipline is sanctioned by the common sense of the community and incorporated into the accredited scheme of life. The habits of thought which are so formed under the guidance of teachers and scholastic traditions have an economic value--a value as affecting the serviceability of the individual--no less real than the similar economic value of the habits of thought formed without such guidance under the discipline of everyday life. Whatever characteristics of the accredited scholastic scheme and discipline are traceable to the predilections of the leisure class or to the guidance of the canons of pecuniary merit are to be set down to the account of that institution, and whatever economic value these features of the educational scheme possess are the expression in detail of the value of that institution. It will be in place, therefore, to point out any peculiar features of the educational system which are traceable to the leisure-class scheme of life, whether as regards the aim and method of the discipline, or as regards the compass and character of the body of knowledge inculcated. It is in learning proper, and more particularly in the higher learning, that the influence of leisure-class ideals is most patent; and since the purpose here is not to make an exhaustive collation of data showing the effect of the pecuniary culture upon education, but rather to illustrate the method and trend of the leisure-class influence in education, a survey of certain salient features of the higher learning, such as may serve this purpose, is all that will be attempted. In point of derivation and early development, learning is somewhat closely related to the devotional function of the community, particularly to the body of observances in which the service rendered the supernatural leisure class expresses itself. The service by which it is sought to conciliate supernatural agencies in the primitive cults is not an industrially profitable employment of the community's time and effort. It is, therefore, in great part, to be classed as a vicarious leisure performed for the supernatural powers with whom negotiations are carried on and whose good-will the service and the professions of subservience are conceived to procure. In great part, the early learning consisted in an acquisition of knowledge and facility in the service of a supernatural agent. It was therefore closely analogous in character to the training required for the domestic service of a temporal master. To a great extent, the knowledge acquired under the priestly teachers of the primitive community was knowledge of ritual and ceremonial; that is to say, a knowledge of the most proper, most effective, or most acceptable manner of approaching and of serving the preternatural agents. What was learned was how to make oneself indispensable to these powers, and so to put oneself in a position to ask, or even to require, their intercession in the course of events or their abstention from interference in any given enterprise. Propitiation was the end, and this end was sought, in great part, by acquiring facility in subservience. It appears to have been only gradually that other elements than those of efficient service of the master found their way into the stock of priestly or shamanistic instruction. The priestly servitor of the inscrutable powers that move in the external world came to stand in the position of a mediator between these powers and the common run of unrestricted humanity; for he was possessed of a knowledge of the supernatural etiquette which would admit him into the presence. And as commonly happens with mediators between the vulgar and their masters, whether the masters be natural or preternatural, he found it expedient to have the means at hand tangibly to impress upon the vulgar the fact that these inscrutable powers would do what he might ask of them. Hence, presently, a knowledge of certain natural processes which could be turned to account for spectacular effect, together with some sleight of hand, came to be an integral part of priestly lore. Knowledge of this kind passes for knowledge of the "unknowable", and it owes its serviceability for the sacerdotal purpose to its recondite character. It appears to have been from this source that learning, as an institution, arose, and its differentiation from this its parent stock of magic ritual and shamanistic fraud has been slow and tedious, and is scarcely yet complete even in the most advanced of the higher seminaries of learning. The recondite element in learning is still, as it has been in all ages, a very attractive and effective element for the purpose of impressing, or even imposing upon, the unlearned; and the standing of the savant in the mind of the altogether unlettered is in great measure rated in terms of intimacy with the occult forces. So, for instance, as a typical case, even so late as the middle of this century, the Norwegian peasants have instinctively formulated their sense of the superior erudition of such doctors of divinity as Luther, Malanchthon, Peder Dass, and even so late a scholar in divinity as Grundtvig, in terms of the Black Art. These, together with a very comprehensive list of minor celebrities, both living and dead, have been reputed masters in all magical arts; and a high position in the ecclesiastical personnel has carried with it, in the apprehension of these good people, an implication of profound familiarity with magical practice and the occult sciences. There is a parallel fact nearer home, similarly going to show the close relationship, in popular apprehension, between erudition and the unknowable; and it will at the same time serve to illustrate, in somewhat coarse outline, the bent which leisure-class life gives to the cognitive interest. While the belief is by no means confined to the leisure class, that class today comprises a disproportionately large number of believers in occult sciences of all kinds and shades. By those whose habits of thought are not shaped by contact with modern industry, the knowledge of the unknowable is still felt to the ultimate if not the only true knowledge. Learning, then, set out by being in some sense a by-product of the priestly vicarious leisure class; and, at least until a recent date, the higher learning has since remained in some sense a by-product or by-occupation of the priestly classes. As the body of systematized knowledge increased, there presently arose a distinction, traceable very far back in the history of education, between esoteric and exoteric knowledge, the former--so far as there is a substantial difference between the two--comprising such knowledge as is primarily of no economic or industrial effect, and the latter comprising chiefly knowledge of industrial processes and of natural phenomena which were habitually turned to account for the material purposes of life. This line of demarcation has in time become, at least in popular apprehension, the normal line between the higher learning and the lower. It is significant, not only as an evidence of their close affiliation with the priestly craft, but also as indicating that their activity to a good extent falls under that category of conspicuous leisure known as manners and breeding, that the learned class in all primitive communities are great sticklers for form, precedent, gradations of rank, ritual, ceremonial vestments, and learned paraphernalia generally. This is of course to be expected, and it goes to say that the higher learning, in its incipient phase, is a leisure-class occupation--more specifically an occupation of the vicarious leisure class employed in the service of the supernatural leisure class. But this predilection for the paraphernalia of learning goes also to indicate a further point of contact or of continuity between the priestly office and the office of the savant. In point of derivation, learning, as well as the priestly office, is largely an outgrowth of sympathetic magic; and this magical apparatus of form and ritual therefore finds its place with the learned class of the primitive community as a matter of course. The ritual and paraphernalia have an occult efficacy for the magical purpose; so that their presence as an integral factor in the earlier phases of the development of magic and science is a matter of expediency, quite as much as of affectionate regard for symbolism simply. This sense of the efficacy of symbolic ritual, and of sympathetic effect to be wrought through dexterous rehearsal of the traditional accessories of the act or end to be compassed, is of course present more obviously and in larger measure in magical practice than in the discipline of the sciences, even of the occult sciences. But there are, I apprehend, few persons with a cultivated sense of scholastic merit to whom the ritualistic accessories of science are altogether an idle matter. The very great tenacity with which these ritualistic paraphernalia persist through the later course of the development is evident to any one who will reflect on what has been the history of learning in our civilization. Even today there are such things in the usage of the learned community as the cap and gown, matriculation, initiation, and graduation ceremonies, and the conferring of scholastic degrees, dignities, and prerogatives in a way which suggests some sort of a scholarly apostolic succession. The usage of the priestly orders is no doubt the proximate source of all these features of learned ritual, vestments, sacramental initiation, the transmission of peculiar dignities and virtues by the imposition of hands, and the like; but their derivation is traceable back of this point, to the source from which the specialized priestly class proper came to be distinguished from the sorcerer on the one hand and from the menial servant of a temporal master on the other hand. So far as regards both their derivation and their psychological content, these usages and the conceptions on which they rest belong to a stage in cultural development no later than that of the angekok and the rain-maker. Their place in the later phases of devout observance, as well as in the higher educational system, is that of a survival from a very early animistic phase of the development of human nature. These ritualistic features of the educational system of the present and of the recent past, it is quite safe to say, have their place primarily in the higher, liberal, and classic institutions and grades of learning, rather than in the lower, technological, or practical grades, and branches of the system. So far as they possess them, the lower and less reputable branches of the educational scheme have evidently borrowed these things from the higher grades; and their continued persistence among the practical schools, without the sanction of the continued example of the higher and classic grades, would be highly improbable, to say the least. With the lower and practical schools and scholars, the adoption and cultivation of these usages is a case of mimicry--due to a desire to conform as far as may be to the standards of scholastic reputability maintained by the upper grades and classes, who have come by these accessory features legitimately, by the right of lineal devolution. The analysis may even be safely carried a step farther. Ritualistic survivals and reversions come out in fullest vigor and with the freest air of spontaneity among those seminaries of learning which have to do primarily with the education of the priestly and leisure classes. Accordingly it should appear, and it does pretty plainly appear, on a survey of recent developments in college and university life, that wherever schools founded for the instruction of the lower classes in the immediately useful branches of knowledge grow into institutions of the higher learning, the growth of ritualistic ceremonial and paraphernalia and of elaborate scholastic "functions" goes hand in hand with the transition of the schools in question from the field of homely practicality into the higher, classical sphere. The initial purpose of these schools, and the work with which they have chiefly had to do at the earlier of these two stages of their evolution, has been that of fitting the young of the industrious classes for work. On the higher, classical plane of learning to which they commonly tend, their dominant aim becomes the preparation of the youth of the priestly and the leisure classes--or of an incipient leisure class--for the consumption of goods, material and immaterial, according to a conventionally accepted, reputable scope and method. This happy issue has commonly been the fate of schools founded by "friends of the people" for the aid of struggling young men, and where this transition is made in good form there is commonly, if not invariably, a coincident change to a more ritualistic life in the schools. In the school life of today, learned ritual is in a general way best at home in schools whose chief end is the cultivation of the "humanities". This correlation is shown, perhaps more neatly than anywhere else, in the life-history of the American colleges and universities of recent growth. There may be many exceptions from the rule, especially among those schools which have been founded by the typically reputable and ritualistic churches, and which, therefore, started on the conservative and classical plane or reached the classical position by a short-cut; but the general rule as regards the colleges founded in the newer American communities during the present century has been that so long as the constituency from which the colleges have drawn their pupils has been dominated by habits of industry and thrift, so long the reminiscences of the medicine-man have found but a scant and precarious acceptance in the scheme of college life. But so soon as wealth begins appreciably to accumulate in the community, and so soon as a given school begins to lean on a leisure-class constituency, there comes also a perceptibly increased insistence on scholastic ritual and on conformity to the ancient forms as regards vestments and social and scholastic solemnities. So, for instance, there has been an approximate coincidence between the growth of wealth among the constituency which supports any given college of the Middle West and the date of acceptance--first into tolerance and then into imperative vogue--of evening dress for men and of the décolleté for women, as the scholarly vestments proper to occasions of learned solemnity or to the seasons of social amenity within the college circle. Apart from the mechanical difficulty of so large a task, it would scarcely be a difficult matter to trace this correlation. The like is true of the vogue of the cap and gown. Cap and gown have been adopted as learned insignia by many colleges of this section within the last few years; and it is safe to say that this could scarcely have occurred at a much earlier date, or until there had grown up a leisure-class sentiment of sufficient volume in the community to support a strong movement of reversion towards an archaic view as to the legitimate end of education. This particular item of learned ritual, it may be noted, would not only commend itself to the leisure-class sense of the fitness of things, as appealing to the archaic propensity for spectacular effect and the predilection for antique symbolism; but it at the same time fits into the leisure-class scheme of life as involving a notable element of conspicuous waste. The precise date at which the reversion to cap and gown took place, as well as the fact that it affected so large a number of schools at about the same time, seems to have been due in some measure to a wave of atavistic sense of conformity and reputability that passed over the community at that period. It may not be entirely beside the point to note that in point of time this curious reversion seems to coincide with the culmination of a certain vogue of atavistic sentiment and tradition in other directions also. The wave of reversion seems to have received its initial impulse in the psychologically disintegrating effects of the Civil War. Habituation to war entails a body of predatory habits of thought, whereby clannishness in some measure replaces the sense of solidarity, and a sense of invidious distinction supplants the impulse to equitable, everyday serviceability. As an outcome of the cumulative action of these factors, the generation which follows a season of war is apt to witness a rehabilitation of the element of status, both in its social life and in its scheme of devout observances and other symbolic or ceremonial forms. Throughout the eighties, and less plainly traceable through the seventies also, there was perceptible a gradually advancing wave of sentiment favoring quasi-predatory business habits, insistence on status, anthropomorphism, and conservatism generally. The more direct and unmediated of these expressions of the barbarian temperament, such as the recrudescence of outlawry and the spectacular quasi-predatory careers of fraud run by certain "captains of industry", came to a head earlier and were appreciably on the decline by the close of the seventies. The recrudescence of anthropomorphic sentiment also seems to have passed its most acute stage before the close of the eighties. But the learned ritual and paraphernalia here spoken of are a still remoter and more recondite expression of the barbarian animistic sense; and these, therefore, gained vogue and elaboration more slowly and reached their most effective development at a still later date. There is reason to believe that the culmination is now already past. Except for the new impetus given by a new war experience, and except for the support which the growth of a wealthy class affords to all ritual, and especially to whatever ceremonial is wasteful and pointedly suggests gradations of status, it is probable that the late improvements and augmentation of scholastic insignia and ceremonial would gradually decline. But while it may be true that the cap and gown, and the more strenuous observance of scholastic proprieties which came with them, were floated in on this post-bellum tidal wave of reversion to barbarism, it is also no doubt true that such a ritualistic reversion could not have been effected in the college scheme of life until the accumulation of wealth in the hands of a propertied class had gone far enough to afford the requisite pecuniary ground for a movement which should bring the colleges of the country up to the leisure-class requirements in the higher learning. The adoption of the cap and gown is one of the striking atavistic features of modern college life, and at the same time it marks the fact that these colleges have definitely become leisure-class establishments, either in actual achievement or in aspiration. As further evidence of the close relation between the educational system and the cultural standards of the community, it may be remarked that there is some tendency latterly to substitute the captain of industry in place of the priest, as the head of seminaries of the higher learning. The substitution is by no means complete or unequivocal. Those heads of institutions are best accepted who combine the sacerdotal office with a high degree of pecuniary efficiency. There is a similar but less pronounced tendency to intrust the work of instruction in the higher learning to men of some pecuniary qualification. Administrative ability and skill in advertising the enterprise count for rather more than they once did, as qualifications for the work of teaching. This applies especially in those sciences that have most to do with the everyday facts of life, and it is particularly true of schools in the economically single-minded communities. This partial substitution of pecuniary for sacerdotal efficiency is a concomitant of the modern transition from conspicuous leisure to conspicuous consumption, as the chief means of reputability. The correlation of the two facts is probably clear without further elaboration. The attitude of the schools and of the learned class towards the education of women serves to show in what manner and to what extent learning has departed from its ancient station of priestly and leisure-class prerogatives, and it indicates also what approach has been made by the truly learned to the modern, economic or industrial, matter-of-fact standpoint. The higher schools and the learned professions were until recently tabu to the women. These establishments were from the outset, and have in great measure continued to be, devoted to the education of the priestly and leisure classes. The women, as has been shown elsewhere, were the original subservient class, and to some extent, especially so far as regards their nominal or ceremonial position, they have remained in that relation down to the present. There has prevailed a strong sense that the admission of women to the privileges of the higher learning (as to the Eleusianin mysteries) would be derogatory to the dignity of the learned craft. It is therefore only very recently, and almost solely in the industrially most advanced communities, that the higher grades of schools have been freely opened to women. And even under the urgent circumstances prevailing in the modern industrial communities, the highest and most reputable universities show an extreme reluctance in making the move. The sense of class worthiness, that is to say of status, of a honorific differentiation of the sexes according to a distinction between superior and inferior intellectual dignity, survives in a vigorous form in these corporations of the aristocracy of learning. It is felt that the woman should, in all propriety, acquire only such knowledge as may be classed under one or the other of two heads: (1) such knowledge as conduces immediately to a better performance of domestic service--the domestic sphere; (2) such accomplishments and dexterity, quasi-scholarly and quasi-artistic, as plainly come in under the head of a performance of vicarious leisure. Knowledge is felt to be unfeminine if it is knowledge which expresses the unfolding of the learner's own life, the acquisition of which proceeds on the learner's own cognitive interest, without prompting from the canons of propriety, and without reference back to a master whose comfort or good repute is to be enhanced by the employment or the exhibition of it. So, also, all knowledge which is useful as evidence of leisure, other than vicarious leisure, is scarcely feminine. For an appreciation of the relation which these higher seminaries of learning bear to the economic life of the community, the phenomena which have been reviewed are of importance rather as indications of a general attitude than as being in themselves facts of first-rate economic consequence. They go to show what is the instinctive attitude and animus of the learned class towards the life process of an industrial community. They serve as an exponent of the stage of development, for the industrial purpose, attained by the higher learning and by the learned class, and so they afford an indication as to what may fairly be looked for from this class at points where the learning and the life of the class bear more immediately upon the economic life and efficiency of the community, and upon the adjustment of its scheme of life to the requirements of the time. What these ritualistic survivals go to indicate is a prevalence of conservatism, if not of reactionary sentiment, especially among the higher schools where the conventional learning is cultivated. To these indications of a conservative attitude is to be added another characteristic which goes in the same direction, but which is a symptom of graver consequence that this playful inclination to trivialities of form and ritual. By far the greater number of American colleges and universities, for instance, are affiliated to some religious denomination and are somewhat given to devout observances. Their putative familiarity with scientific methods and the scientific point of view should presumably exempt the faculties of these schools from animistic habits of thought; but there is still a considerable proportion of them who profess an attachment to the anthropomorphic beliefs and observances of an earlier culture. These professions of devotional zeal are, no doubt, to a good extent expedient and perfunctory, both on the part of the schools in their corporate capacity, and on the part of the individual members of the corps of instructors; but it can not be doubted that there is after all a very appreciable element of anthropomorphic sentiment present in the higher schools. So far as this is the case it must be set down as the expression of an archaic, animistic habit of mind. This habit of mind must necessarily assert itself to some extent in the instruction offered, and to this extent its influence in shaping the habits of thought of the student makes for conservatism and reversion; it acts to hinder his development in the direction of matter-of-fact knowledge, such as best serves the ends of industry. The college sports, which have so great a vogue in the reputable seminaries of learning today, tend in a similar direction; and, indeed, sports have much in common with the devout attitude of the colleges, both as regards their psychological basis and as regards their disciplinary effect. But this expression of the barbarian temperament is to be credited primarily to the body of students, rather than to the temper of the schools as such; except in so far as the colleges or the college officials--as sometimes happens--actively countenance and foster the growth of sports. The like is true of college fraternities as of college sports, but with a difference. The latter are chiefly an expression of the predatory impulse simply; the former are more specifically an expression of that heritage of clannishness which is so large a feature in the temperament of the predatory barbarian. It is also noticeable that a close relation subsists between the fraternities and the sporting activity of the schools. After what has already been said in an earlier chapter on the sporting and gambling habit, it is scarcely necessary further to discuss the economic value of this training in sports and in factional organization and activity. But all these features of the scheme of life of the learned class, and of the establishments dedicated to the conservation of the higher learning, are in a great measure incidental only. They are scarcely to be accounted organic elements of the professed work of research and instruction for the ostensible pursuit of which the schools exists. But these symptomatic indications go to establish a presumption as to the character of the work performed--as seen from the economic point of view--and as to the bent which the serious work carried on under their auspices gives to the youth who resort to the schools. The presumption raised by the considerations already offered is that in their work also, as well as in their ceremonial, the higher schools may be expected to take a conservative position; but this presumption must be checked by a comparison of the economic character of the work actually performed, and by something of a survey of the learning whose conservation is intrusted to the higher schools. On this head, it is well known that the accredited seminaries of learning have, until a recent date, held a conservative position. They have taken an attitude of depreciation towards all innovations. As a general rule a new point of view or a new formulation of knowledge have been countenanced and taken up within the schools only after these new things have made their way outside of the schools. As exceptions from this rule are chiefly to be mentioned innovations of an inconspicuous kind and departures which do not bear in any tangible way upon the conventional point of view or upon the conventional scheme of life; as, for instance, details of fact in the mathematico-physical sciences, and new readings and interpretations of the classics, especially such as have a philological or literary bearing only. Except within the domain of the "humanities", in the narrow sense, and except so far as the traditional point of view of the humanities has been left intact by the innovators, it has generally held true that the accredited learned class and the seminaries of the higher learning have looked askance at all innovation. New views, new departures in scientific theory, especially in new departures which touch the theory of human relations at any point, have found a place in the scheme of the university tardily and by a reluctant tolerance, rather than by a cordial welcome; and the men who have occupied themselves with such efforts to widen the scope of human knowledge have not commonly been well received by their learned contemporaries. The higher schools have not commonly given their countenance to a serious advance in the methods or the content of knowledge until the innovations have outlived their youth and much of their usefulness--after they have become commonplaces of the intellectual furniture of a new generation which has grown up under, and has had its habits of thought shaped by, the new, extra-scholastic body of knowledge and the new standpoint. This is true of the recent past. How far it may be true of the immediate present it would be hazardous to say, for it is impossible to see present-day facts in such perspective as to get a fair conception of their relative proportions. So far, nothing has been said of the Maecenas function of the well-to-do, which is habitually dwelt on at some length by writers and speakers who treat of the development of culture and of social structure. This leisure-class function is not without an important bearing on the higher and on the spread of knowledge and culture. The manner and the degree in which the class furthers learning through patronage of this kind is sufficiently familiar. It has been frequently presented in affectionate and effective terms by spokesmen whose familiarity with the topic fits them to bring home to their hearers the profound significance of this cultural factor. These spokesmen, however, have presented the matter from the point of view of the cultural interest, or of the interest of reputability, rather than from that of the economic interest. As apprehended from the economic point of view, and valued for the purpose of industrial serviceability, this function of the well-to-do, as well as the intellectual attitude of members of the well-to-do class, merits some attention and will bear illustration. By way of characterization of the Maecenas relation, it is to be noted that, considered externally, as an economic or industrial relation simply, it is a relation of status. The scholar under the patronage performs the duties of a learned life vicariously for his patron, to whom a certain repute inures after the manner of the good repute imputed to a master for whom any form of vicarious leisure is performed. It is also to be noted that, in point of historical fact, the furtherance of learning or the maintenance of scholarly activity through the Maecenas relation has most commonly been a furtherance of proficiency in classical lore or in the humanities. The knowledge tends to lower rather than to heighten the industrial efficiency of the community. Further, as regards the direct participation of the members of the leisure class in the furtherance of knowledge, the canons of reputable living act to throw such intellectual interest as seeks expression among the class on the side of classical and formal erudition, rather than on the side of the sciences that bear some relation to the community's industrial life. The most frequent excursions into other than classical fields of knowledge on the part of members of the leisure class are made into the discipline of law and the political, and more especially the administrative, sciences. These so-called sciences are substantially bodies of maxims of expediency for guidance in the leisure-class office of government, as conducted on a proprietary basis. The interest with which this discipline is approached is therefore not commonly the intellectual or cognitive interest simply. It is largely the practical interest of the exigencies of that relation of mastery in which the members of the class are placed. In point of derivation, the office of government is a predatory function, pertaining integrally to the archaic leisure-class scheme of life. It is an exercise of control and coercion over the population from which the class draws its sustenance. This discipline, as well as the incidents of practice which give it its content, therefore has some attraction for the class apart from all questions of cognition. All this holds true wherever and so long as the governmental office continues, in form or in substance, to be a proprietary office; and it holds true beyond that limit, in so far as the tradition of the more archaic phase of governmental evolution has lasted on into the later life of those modern communities for whom proprietary government by a leisure class is now beginning to pass away. For that field of learning within which the cognitive or intellectual interest is dominant--the sciences properly so called--the case is somewhat different, not only as regards the attitude of the leisure class, but as regards the whole drift of the pecuniary culture. Knowledge for its own sake, the exercise of the faculty of comprehensive without ulterior purpose, should, it might be expected, be sought by men whom no urgent material interest diverts from such a quest. The sheltered industrial position of the leisure class should give free play to the cognitive interest in members of this class, and we should consequently have, as many writers confidently find that we do have, a very large proportion of scholars, scientists, savants derived from this class and deriving their incentive to scientific investigation and speculation from the discipline of a life of leisure. Some such result is to be looked for, but there are features of the leisure-class scheme of life, already sufficiently dwelt upon, which go to divert the intellectual interest of this class to other subjects than that causal sequence in phenomena which makes the content of the sciences. The habits of thought which characterize the life of the class run on the personal relation of dominance, and on the derivative, invidious concepts of honor, worth, merit, character, and the like. The casual sequence which makes up the subject matter of science is not visible from this point of view. Neither does good repute attach to knowledge of facts that are vulgarly useful. Hence it should appear probable that the interest of the invidious comparison with respect to pecuniary or other honorific merit should occupy the attention of the leisure class, to the neglect of the cognitive interest. Where this latter interest asserts itself it should commonly be diverted to fields of speculation or investigation which are reputable and futile, rather than to the quest of scientific knowledge. Such indeed has been the history of priestly and leisure-class learning so long as no considerable body of systematized knowledge had been intruded into the scholastic discipline from an extra-scholastic source. But since the relation of mastery and subservience is ceasing to be the dominant and formative factor in the community's life process, other features of the life process and other points of view are forcing themselves upon the scholars. The true-bred gentleman of leisure should, and does, see the world from the point of view of the personal relation; and the cognitive interest, so far as it asserts itself in him, should seek to systematize phenomena on this basis. Such indeed is the case with the gentleman of the old school, in whom the leisure-class ideals have suffered no disintegration; and such is the attitude of his latter-day descendant, in so far as he has fallen heir to the full complement of upper-class virtues. But the ways of heredity are devious, and not every gentleman's son is to the manor born. Especially is the transmission of the habits of thought which characterize the predatory master somewhat precarious in the case of a line of descent in which but one or two of the latest steps have lain within the leisure-class discipline. The chances of occurrence of a strong congenital or acquired bent towards the exercise of the cognitive aptitudes are apparently best in those members of the leisure class who are of lower class or middle class antecedents--that is to say, those who have inherited the complement of aptitudes proper to the industrious classes, and who owe their place in the leisure class to the possession of qualities which count for more today than they did in the times when the leisure-class scheme of life took shape. But even outside the range of these later accessions to the leisure class there are an appreciable number of individuals in whom the invidious interest is not sufficiently dominant to shape their theoretical views, and in whom the proclivity to theory is sufficiently strong to lead them into the scientific quest. The higher learning owes the intrusion of the sciences in part to these aberrant scions of the leisure class, who have come under the dominant influence of the latter-day tradition of impersonal relation and who have inherited a complement of human aptitudes differing in certain salient features from the temperament which is characteristic of the regime of status. But it owes the presence of this alien body of scientific knowledge also in part, and in a higher degree, to members of the industrious classes who have been in sufficiently easy circumstances to turn their attention to other interests than that of finding daily sustenance, and whose inherited aptitudes and anthropomorphic point of view does not dominate their intellectual processes. As between these two groups, which approximately comprise the effective force of scientific progress, it is the latter that has contributed the most. And with respect to both it seems to be true that they are not so much the source as the vehicle, or at the most they are the instrument of commutation, by which the habits of thought enforced upon the community, through contact with its environment under the exigencies of modern associated life and the mechanical industries, are turned to account for theoretical knowledge. Science, in the sense of an articulate recognition of causal sequence in phenomena, whether physical or social, has been a feature of the Western culture only since the industrial process in the Western communities has come to be substantially a process of mechanical contrivances in which man's office is that of discrimination and valuation of material forces. Science has flourished somewhat in the same degree as the industrial life of the community has conformed to this pattern, and somewhat in the same degree as the industrial interest has dominated the community's life. And science, and scientific theory especially, has made headway in the several departments of human life and knowledge in proportion as each of these several departments has successively come into closer contact with the industrial process and the economic interest; or perhaps it is truer to say, in proportion as each of them has successively escaped from the dominance of the conceptions of personal relation or status, and of the derivative canons of anthropomorphic fitness and honorific worth. It is only as the exigencies of modern industrial life have enforced the recognition of causal sequence in the practical contact of mankind with their environment, that men have come to systematize the phenomena of this environment and the facts of their own contact with it in terms of causal sequence. So that while the higher learning in its best development, as the perfect flower of scholasticism and classicism, was a by-product of the priestly office and the life of leisure, so modern science may be said to be a by-product of the industrial process. Through these groups of men, then--investigators, savants, scientists, inventors, speculators--most of whom have done their most telling work outside the shelter of the schools, the habits of thought enforced by the modern industrial life have found coherent expression and elaboration as a body of theoretical science having to do with the causal sequence of phenomena. And from this extra-scholastic field of scientific speculation, changes of method and purpose have from time to time been intruded into the scholastic discipline. In this connection it is to be remarked that there is a very perceptible difference of substance and purpose between the instruction offered in the primary and secondary schools, on the one hand, and in the higher seminaries of learning, on the other hand. The difference in point of immediate practicality of the information imparted and of the proficiency acquired may be of some consequence and may merit the attention which it has from time to time received; but there is more substantial difference in the mental and spiritual bent which is favored by the one and the other discipline. This divergent trend in discipline between the higher and the lower learning is especially noticeable as regards the primary education in its latest development in the advanced industrial communities. Here the instruction is directed chiefly to proficiency or dexterity, intellectual and manual, in the apprehension and employment of impersonal facts, in their casual rather than in their honorific incidence. It is true, under the traditions of the earlier days, when the primary education was also predominantly a leisure-class commodity, a free use is still made of emulation as a spur to diligence in the common run of primary schools; but even this use of emulation as an expedient is visibly declining in the primary grades of instruction in communities where the lower education is not under the guidance of the ecclesiastical or military tradition. All this holds true in a peculiar degree, and more especially on the spiritual side, of such portions of the educational system as have been immediately affected by kindergarten methods and ideals. The peculiarly non-invidious trend of the kindergarten discipline, and the similar character of the kindergarten influence in primary education beyond the limits of the kindergarten proper, should be taken in connection with what has already been said of the peculiar spiritual attitude of leisure-class womankind under the circumstances of the modern economic situation. The kindergarten discipline is at its best--or at its farthest remove from ancient patriarchal and pedagogical ideals--in the advanced industrial communities, where there is a considerable body of intelligent and idle women, and where the system of status has somewhat abated in rigor under the disintegrating influence of industrial life and in the absence of a consistent body of military and ecclesiastical traditions. It is from these women in easy circumstances that it gets its moral support. The aims and methods of the kindergarten commend themselves with especial effect to this class of women who are ill at ease under the pecuniary code of reputable life. The kindergarten, and whatever the kindergarten spirit counts for in modern education, therefore, is to be set down, along with the "new-woman movement," to the account of that revulsion against futility and invidious comparison which the leisure-class life under modern circumstances induces in the women most immediately exposed to its discipline. In this way it appears that, by indirection, the institution of a leisure class here again favors the growth of a non-invidious attitude, which may, in the long run, prove a menace to the stability of the institution itself, and even to the institution of individual ownership on which it rests. During the recent past some tangible changes have taken place in the scope of college and university teaching. These changes have in the main consisted in a partial displacement of the humanities--those branches of learning which are conceived to make for the traditional "culture", character, tastes, and ideals--by those more matter-of-fact branches which make for civic and industrial efficiency. To put the same thing in other words, those branches of knowledge which make for efficiency (ultimately productive efficiency) have gradually been gaining ground against those branches which make for a heightened consumption or a lowered industrial efficiency and for a type of character suited to the regime of status. In this adaptation of the scheme of instruction the higher schools have commonly been found on the conservative side; each step which they have taken in advance has been to some extent of the nature of a concession. The sciences have been intruded into the scholar's discipline from without, not to say from below. It is noticeable that the humanities which have so reluctantly yielded ground to the sciences are pretty uniformly adapted to shape the character of the student in accordance with a traditional self-centred scheme of consumption; a scheme of contemplation and enjoyment of the true, the beautiful, and the good, according to a conventional standard of propriety and excellence, the salient feature of which is leisure--otium cum dignitate. In language veiled by their own habituation to the archaic, decorous point of view, the spokesmen of the humanities have insisted upon the ideal embodied in the maxim, fruges consumere nati. This attitude should occasion no surprise in the case of schools which are shaped by and rest upon a leisure-class culture. The professed grounds on which it has been sought, as far as might be, to maintain the received standards and methods of culture intact are likewise characteristic of the archaic temperament and of the leisure-class theory of life. The enjoyment and the bent derived from habitual contemplation of the life, ideals, speculations, and methods of consuming time and goods, in vogue among the leisure class of classical antiquity, for instance, is felt to be "higher", "nobler", "worthier", than what results in these respects from a like familiarity with the everyday life and the knowledge and aspirations of commonplace humanity in a modern community, that learning the content of which is an unmitigated knowledge of latter-day men and things is by comparison "lower", "base", "ignoble"--one even hears the epithet "sub-human" applied to this matter-of-fact knowledge of mankind and of everyday life. This contention of the leisure-class spokesmen of the humanities seems to be substantially sound. In point of substantial fact, the gratification and the culture, or the spiritual attitude or habit of mind, resulting from an habitual contemplation of the anthropomorphism, clannishness, and leisurely self-complacency of the gentleman of an early day, or from a familiarity with the animistic superstitions and the exuberant truculence of the Homeric heroes, for instance, is, aesthetically considered, more legitimate than the corresponding results derived from a matter-of-fact knowledge of things and a contemplation of latter-day civic or workmanlike efficiency. There can be but little question that the first-named habits have the advantage in respect of aesthetic or honorific value, and therefore in respect of the "worth" which is made the basis of award in the comparison. The content of the canons of taste, and more particularly of the canons of honor, is in the nature of things a resultant of the past life and circumstances of the race, transmitted to the later generation by inheritance or by tradition; and the fact that the protracted dominance of a predatory, leisure-class scheme of life has profoundly shaped the habit of mind and the point of view of the race in the past, is a sufficient basis for an aesthetically legitimate dominance of such a scheme of life in very much of what concerns matters of taste in the present. For the purpose in hand, canons of taste are race habits, acquired through a more or less protracted habituation to the approval or disapproval of the kind of things upon which a favorable or unfavorable judgment of taste is passed. Other things being equal, the longer and more unbroken the habituation, the more legitimate is the canon of taste in question. All this seems to be even truer of judgments regarding worth or honor than of judgments of taste generally. But whatever may be the aesthetic legitimacy of the derogatory judgment passed on the newer learning by the spokesmen of the humanities, and however substantial may be the merits of the contention that the classic lore is worthier and results in a more truly human culture and character, it does not concern the question in hand. The question in hand is as to how far these branches of learning, and the point of view for which they stand in the educational system, help or hinder an efficient collective life under modern industrial circumstances--how far they further a more facile adaptation to the economic situation of today. The question is an economic, not an aesthetic one; and the leisure-class standards of learning which find expression in the deprecatory attitude of the higher schools towards matter-of-fact knowledge are, for the present purpose, to be valued from this point of view only. For this purpose the use of such epithets as "noble", "base", "higher", "lower", etc., is significant only as showing the animus and the point of view of the disputants; whether they contend for the worthiness of the new or of the old. All these epithets are honorific or humilific terms; that is to say, they are terms of invidious comparison, which in the last analysis fall under the category of the reputable or the disreputable; that is, they belong within the range of ideas that characterizes the scheme of life of the regime of status; that is, they are in substance an expression of sportsmanship--of the predatory and animistic habit of mind; that is, they indicate an archaic point of view and theory of life, which may fit the predatory stage of culture and of economic organization from which they have sprung, but which are, from the point of view of economic efficiency in the broader sense, disserviceable anachronisms. The classics, and their position of prerogative in the scheme of education to which the higher seminaries of learning cling with such a fond predilection, serve to shape the intellectual attitude and lower the economic efficiency of the new learned generation. They do this not only by holding up an archaic ideal of manhood, but also by the discrimination which they inculcate with respect to the reputable and the disreputable in knowledge. This result is accomplished in two ways: (1) by inspiring an habitual aversion to what is merely useful, as contrasted with what is merely honorific in learning, and so shaping the tastes of the novice that he comes in good faith to find gratification of his tastes solely, or almost solely, in such exercise of the intellect as normally results in no industrial or social gain; and (2) by consuming the learner's time and effort in acquiring knowledge which is of no use except in so far as this learning has by convention become incorporated into the sum of learning required of the scholar, and has thereby affected the terminology and diction employed in the useful branches of knowledge. Except for this terminological difficulty--which is itself a consequence of the vogue of the classics of the past--a knowledge of the ancient languages, for instance, would have no practical bearing for any scientist or any scholar not engaged on work primarily of a linguistic character. Of course, all this has nothing to say as to the cultural value of the classics, nor is there any intention to disparage the discipline of the classics or the bent which their study gives to the student. That bent seems to be of an economically disserviceable kind, but this fact--somewhat notorious indeed--need disturb no one who has the good fortune to find comfort and strength in the classical lore. The fact that classical learning acts to derange the learner's workmanlike attitudes should fall lightly upon the apprehension of those who hold workmanship of small account in comparison with the cultivation of decorous ideals: Iam fides et pax et honos pudorque Priscus et neglecta redire virtus Audet. Owing to the circumstance that this knowledge has become part of the elementary requirements in our system of education, the ability to use and to understand certain of the dead languages of southern Europe is not only gratifying to the person who finds occasion to parade his accomplishments in this respect, but the evidence of such knowledge serves at the same time to recommend any savant to his audience, both lay and learned. It is currently expected that a certain number of years shall have been spent in acquiring this substantially useless information, and its absence creates a presumption of hasty and precarious learning, as well as of a vulgar practicality that is equally obnoxious to the conventional standards of sound scholarship and intellectual force. The case is analogous to what happens in the purchase of any article of consumption by a purchaser who is not an expert judge of materials or of workmanship. He makes his estimate of value of the article chiefly on the ground of the apparent expensiveness of the finish of those decorative parts and features which have no immediate relation to the intrinsic usefulness of the article; the presumption being that some sort of ill-defined proportion subsists between the substantial value of an article and the expense of adornment added in order to sell it. The presumption that there can ordinarily be no sound scholarship where a knowledge of the classics and humanities is wanting leads to a conspicuous waste of time and labor on the part of the general body of students in acquiring such knowledge. The conventional insistence on a modicum of conspicuous waste as an incident of all reputable scholarship has affected our canons of taste and of serviceability in matters of scholarship in much the same way as the same principle has influenced our judgment of the serviceability of manufactured goods. It is true, since conspicuous consumption has gained more and more on conspicuous leisure as a means of repute, the acquisition of the dead languages is no longer so imperative a requirement as it once was, and its talismanic virtue as a voucher of scholarship has suffered a concomitant impairment. But while this is true, it is also true that the classics have scarcely lost in absolute value as a voucher of scholastic respectability, since for this purpose it is only necessary that the scholar should be able to put in evidence some learning which is conventionally recognized as evidence of wasted time; and the classics lend themselves with great facility to this use. Indeed, there can be little doubt that it is their utility as evidence of wasted time and effort, and hence of the pecuniary strength necessary in order to afford this waste, that has secured to the classics their position of prerogative in the scheme of higher learning, and has led to their being esteemed the most honorific of all learning. They serve the decorative ends of leisure-class learning better than any other body of knowledge, and hence they are an effective means of reputability. In this respect the classics have until lately had scarcely a rival. They still have no dangerous rival on the continent of Europe, but lately, since college athletics have won their way into a recognized standing as an accredited field of scholarly accomplishment, this latter branch of learning--if athletics may be freely classed as learning--has become a rival of the classics for the primacy in leisure-class education in American and English schools. Athletics have an obvious advantage over the classics for the purpose of leisure-class learning, since success as an athlete presumes, not only waste of time, but also waste of money, as well as the possession of certain highly unindustrial archaic traits of character and temperament. In the German universities the place of athletics and Greek-letter fraternities, as a leisure-class scholarly occupation, has in some measure been supplied by a skilled and graded inebriety and a perfunctory duelling. The leisure class and its standard of virtue--archaism and waste--can scarcely have been concerned in the introduction of the classics into the scheme of the higher learning; but the tenacious retention of the classics by the higher schools, and the high degree of reputability which still attaches to them, are no doubt due to their conforming so closely to the requirements of archaism and waste. "Classic" always carries this connotation of wasteful and archaic, whether it is used to denote the dead languages or the obsolete or obsolescent forms of thought and diction in the living language, or to denote other items of scholarly activity or apparatus to which it is applied with less aptness. So the archaic idiom of the English language is spoken of as "classic" English. Its use is imperative in all speaking and writing upon serious topics, and a facile use of it lends dignity to even the most commonplace and trivial string of talk. The newest form of English diction is of course never written; the sense of that leisure-class propriety which requires archaism in speech is present even in the most illiterate or sensational writers in sufficient force to prevent such a lapse. On the other hand, the highest and most conventionalized style of archaic diction is--quite characteristically--properly employed only in communications between an anthropomorphic divinity and his subjects. Midway between these extremes lies the everyday speech of leisure-class conversation and literature. Elegant diction, whether in writing or speaking, is an effective means of reputability. It is of moment to know with some precision what is the degree of archaism conventionally required in speaking on any given topic. Usage differs appreciably from the pulpit to the market-place; the latter, as might be expected, admits the use of relatively new and effective words and turns of expression, even by fastidious persons. A discriminative avoidance of neologisms is honorific, not only because it argues that time has been wasted in acquiring the obsolescent habit of speech, but also as showing that the speaker has from infancy habitually associated with persons who have been familiar with the obsolescent idiom. It thereby goes to show his leisure-class antecedents. Great purity of speech is presumptive evidence of several lives spent in other than vulgarly useful occupations; although its evidence is by no means entirely conclusive to this point. As felicitous an instance of futile classicism as can well be found, outside of the Far East, is the conventional spelling of the English language. A breach of the proprieties in spelling is extremely annoying and will discredit any writer in the eyes of all persons who are possessed of a developed sense of the true and beautiful. English orthography satisfies all the requirements of the canons of reputability under the law of conspicuous waste. It is archaic, cumbrous, and ineffective; its acquisition consumes much time and effort; failure to acquire it is easy of detection. Therefore it is the first and readiest test of reputability in learning, and conformity to its ritual is indispensable to a blameless scholastic life. On this head of purity of speech, as at other points where a conventional usage rests on the canons of archaism and waste, the spokesmen for the usage instinctively take an apologetic attitude. It is contended, in substance, that a punctilious use of ancient and accredited locutions will serve to convey thought more adequately and more precisely than would be the straightforward use of the latest form of spoken English; whereas it is notorious that the ideas of today are effectively expressed in the slang of today. Classic speech has the honorific virtue of dignity; it commands attention and respect as being the accredited method of communication under the leisure-class scheme of life, because it carries a pointed suggestion of the industrial exemption of the speaker. The advantage of the accredited locutions lies in their reputability; they are reputable because they are cumbrous and out of date, and therefore argue waste of time and exemption from the use and the need of direct and forcible speech. 
41405	----	[Transcriber's notes: Inconsistent hyphenation and use of umlauts retained. Equations are surrounded by _ indicating that the variables are all italicised. If there are non-italicised alphabetic characters in the equation the variables are surrounded by _ separately. [sqrt] has been used to represent square root (radical) sign. A full list of errors that have been changed can be found at the end.] RARE MASTERPIECES OF PHILOSOPHY AND SCIENCE EDITED BY DR. W. STARK THE ACCUMULATION OF CAPITAL PUBLISHED ON THE LOUIS STERN MEMORIAL FUND THE ACCUMULATION OF CAPITAL by ROSA LUXEMBURG _translated from the German by AGNES SCHWARZSCHILD (doctor iuris)_ _With an Introduction by JOAN ROBINSON_ NEW HAVEN YALE UNIVERSITY PRESS 1951 THIS TRANSLATION FIRST PUBLISHED IN THE UNITED STATES BY YALE UNIVERSITY PRESS NEW HAVEN CONNECTICUT DESIGNED BY SEÁN JENNETT AND PRINTED IN GREAT BRITAIN BY BUTLER AND TANNER LTD LONDON AND FROME CONTENTS TRANSLATOR'S NOTE _page_ 7 A NOTE ON ROSA LUXEMBURG 9 INTRODUCTION 13 SECTION ONE THE PROBLEM OF REPRODUCTION I. THE OBJECT OF OUR INVESTIGATION _page_ 31 II. QUESNAY'S AND ADAM SMITH'S ANALYSES OF THE PROCESS OF REPRODUCTION 48 III. A CRITICISM OF SMITH'S ANALYSIS 64 IV. MARX'S SCHEME OF SIMPLE REPRODUCTION 76 V. THE CIRCULATION OF MONEY 93 VI. ENLARGED REPRODUCTION 107 VII. ANALYSIS OF MARX'S DIAGRAM OF ENLARGED REPRODUCTION 120 VIII. MARX'S ATTEMPT TO RESOLVE THE DIFFICULTY 139 IX. THE DIFFICULTY VIEWED FROM THE ANGLE OF THE PROCESS OF CIRCULATION 155 SECTION TWO HISTORICAL EXPOSITION OF THE PROBLEM FIRST ROUND Sismondi-Malthus _v._ Say-Ricardo, MacCulloch X. SISMONDI'S THEORY OF REPRODUCTION _page_ 173 XI. MACCULLOCH _v._ SISMONDI 191 XII. RICARDO _v._ SISMONDI 203 XIII. SAY _v._ SISMONDI 211 XIV. MALTHUS 219 SECOND ROUND The Controversy between Rodbertus and von Kirchmann XV. V. KIRCHMANN'S THEORY OF REPRODUCTION _page_ 227 XVI. RODBERTUS' CRITICISM OF THE CLASSICAL SCHOOL 238 XVII. RODBERTUS' ANALYSIS OF REPRODUCTION 252 THIRD ROUND Struve--Bulgakov--Tugan Baranovski v. Vorontsov--Nikolayon XVIII. A NEW VERSION OF THE PROBLEM _page_ 271 XIX. VORONTSOV AND HIS 'SURPLUS' 276 XX. NIKOLAYON 284 XXI. STRUVE'S 'THIRD PERSONS' AND 'THREE WORLD EMPIRES' 292 XXII. BULGAKOV AND HIS COMPLETION OF MARX'S ANALYSIS 298 XXIII. TUGAN BARANOVSKI AND HIS 'LACK OF PROPORTION' 311 XXIV. THE END OF RUSSIAN 'LEGALIST' MARXISM 324 SECTION THREE THE HISTORICAL CONDITIONS OF ACCUMULATION XXV. CONTRADICTIONS WITHIN THE DIAGRAM OF ENLARGED REPRODUCTION _page_ 329 XXVI. THE REPRODUCTION OF CAPITAL AND ITS SOCIAL SETTING 348 XXVII. THE STRUGGLE AGAINST NATURAL ECONOMY 368 XXVIII. THE INTRODUCTION OF COMMODITY ECONOMY 386 XXIX. THE STRUGGLE AGAINST PEASANT ECONOMY 395 XXX. INTERNATIONAL LOANS 419 XXXI. PROTECTIVE TARIFFS AND ACCUMULATION 446 XXXII. MILITARISM AS A PROVINCE OF ACCUMULATION 454 INDEX 469 TRANSLATOR'S NOTE This is an original translation not only of the main body of the work but also of a number of quotations from foreign authors. Page references thus usually indicate the original foreign sources. In so far as possible, however, I have availed myself of existing translations and have referred to the following standard works: Karl Marx: _Capital_, vol. i (transl. by Moore-Aveling, London, 1920); vol. ii (transl. by E. Untermann, Chicago, 1907); vol. iii (transl. by E. Untermann, Chicago, 1909) _The Poverty of Philosophy_ (translator's name not given, London, 1936). Sismondi's introduction to the second edition of _Nouveaux Principes_ is quoted from M. Mignet's translation of selected passages by Sismondi, entitled _Political Economy and the Philosophy of Government_, London, 1847. No English translation exists of Marx's _Theorien über den Mehrwert_. Unfortunately, not all the West European texts, and none of the Russian--except Engels' correspondence with Nikolayon--were accessible to me, and I regret having been unable to trace some quotations and check up on others. In such cases, the English version follows the German text and will at least bring out the point the author wanted to make. To save the reader grappling with unfamiliar concepts, I have converted foreign currencies and measures into their English equivalents, at the following rates: 20 _marks_--25 _francs_--$5--£1 (gold standard); 1 _hectare_--(roughly) 2·5 acres; 1 _kilometre_--5/8 mile. I am glad of this opportunity to express my gratitude to Dr. W. Stark and Mrs. J. Robinson for the helpful criticism and appreciation with which my work has met. AGNES SCHWARZSCHILD A NOTE ON ROSA LUXEMBURG Rosa Luxemburg was born on 5 March 1870, at Zamosc, a little town of Russian Poland, not far from the city of Lublin. She came from a fairly well-to-do family of Jewish merchants, and soon showed the two outstanding traits which were to characterise all her life and work: a high degree of intelligence, and a burning thirst for social justice which led her, while still a schoolgirl, into the revolutionary camp. Partly to escape the Russian police, partly to complete her education, she went to Zurich and studied there the sciences of law and economics. Her doctoral dissertation dealt with the industrial development of Poland and showed up the vital integration of Polish industry with the wider economic system of metropolitan Russia. It was a work not only of considerable promise, but already of solid and substantial achievement. Her doctorate won, Rosa Luxemburg looked around for a promising field of work and decided to go to Germany, whose working-class movement seemed destined to play a leading part in the future history of international socialism. She settled there in 1896, and two years later contracted a formal marriage with a German subject which secured her against the danger of forcible deportation to Russia. Now, at that moment the German Social-Democratic Party was in the throes of a serious crisis. In 1899, Eduard Bernstein published his well-known work _Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie_, which urged the party to drop its revolutionary jargon and to work henceforth for tangible social reforms within the given economic set-up, instead of trying to bring about its final and forcible overthrow. This 'reformism' or 'revisionism' seemed to Rosa Luxemburg a base as well as a foolish doctrine, and she published in the same year a pamphlet _Sozialreform oder Revolution?_ which dealt with Bernstein's ideas in no uncertain fashion. From this moment onward, she was and remained one of the acknowledged leaders of the left wing within the German working-class movement. The events of the year 1905 gave Rosa Luxemburg a welcome opportunity to demonstrate that revolution was to her more than a subject of purely academic interest. As soon as the Russian masses began to move, she hurried to Warsaw and threw herself into the fray. There followed a short span of feverish activity, half a year's imprisonment, and, finally, a return journey to Berlin. The experiences of the Warsaw rising are reflected in a book entitled _Massenstreik, Partei und Gewerkschaften_, which was published in 1906. It recommends the general strike as the most effective weapon in the struggle of the proletariat against the bourgeoisie. The International Socialist Congress which met at Stuttgart in 1907 prepared and foreshadowed the sorry history of Rosa Luxemburg's later life. On that occasion she drafted, together with Lenin, a resolution which demanded that the workers of the world should make any future war an opportunity for the destruction of the capitalist system. Unlike so many others, she stuck to her resolution when, seven years later, the time of testing came. The result was that she had to spend nearly the whole of the first World War in jail, either under punishment or in protective custody. But imprisonment did not mean inactivity. In 1916, there appeared in Switzerland her book _Die Krise der Sozialdemokratie_, which assailed the leaders of the German labour party for their patriotic attitude and called the masses to revolutionary action. The foundation of the Spartacus League in 1917, the germ cell out of which the Communist Party of Germany was soon to develop, was vitally connected with the dissemination of Rosa Luxemburg's aggressive sentiments. The collapse of the _Kaiserreich_ on 11 November 1918, gave Rosa Luxemburg her freedom and an undreamt-of range of opportunities. The two months that followed must have been more crowded and more colourful than all her previous life taken together. But the end of her career was imminent. The fatal Spartacus week, an abortive rising of the Berlin workers, led on 15 January 1919, to her arrest by a government composed of former party comrades. During her removal to prison she was attacked and severely beaten by soldiers belonging to the extreme right, a treatment which she did not survive. Her body was recovered days later from a canal. A type not unlike Trotsky, Rosa Luxemburg had her tender and sentimental side, which comes to the surface in her correspondence, especially in the _Briefe aus dem Gefaengnis_ printed in 1922. As a thinker she showed considerable honesty and independence of mind. _The Accumulation of Capital_, first published in 1913, which is undoubtedly her finest achievement, reveals her as that rarest of all rare phenomena--a Marxist critical of Karl Marx. W. STARK INTRODUCTION Academic economists have recently returned from the elaboration of static equilibrium to the classical search for a dynamic model of a developing economy. Rosa Luxemburg, neglected by Marxist and academic economists alike, offers a theory of the dynamic development of capitalism which is of the greatest interest. The book is one of considerable difficulty (apart from the vivid historical chapters), and to those accustomed only to academic analysis the difficulty is rendered well-nigh insurmountable by the Marxist terminology in which it is expressed. The purpose of this preface is to provide a glossary of terms, and to search for the main thread of the argument (leaving the historical illustrations to speak for themselves) and set it out in simpler language. The result is no doubt too simple. The reader must sample for himself the rich confusion in which the central core of analysis is imbedded, and must judge for himself whether the core has been mishandled in the process of digging it out.[1] Our author takes her departure from the numerical examples for simple reproduction (production with a constant stock of capital) and expanded reproduction (production with capital accumulating) set out in volume ii of Marx's _Capital_. As she points out,[2] Marx completed the model for simple reproduction, but the models for accumulation were left at his death in a chaos of notes, and they are not really fit to bear all the weight she puts on them (Heaven help us if posterity is to pore over all the backs of old envelopes on which economists have jotted down numerical examples in working out a piece of analysis). To follow her line of thought, however, it is necessary to examine her version of Marx's models closely, to see on what assumptions they are based (explicitly or unconsciously) and to search the assumptions for clues to the succeeding analysis. To begin at the beginning--gross national income (for a closed economy) for, say, a year, is written _c + v + s_; that is, constant capital, variable capital and surplus. Variable capital, _v_, is the annual wages bill. Surplus, _s_, is annual rent, interest, and net profit, so that _v + s_ represents net national income. (In this introduction surplus is used interchangeably with rent, interest and net profit.) Constant capital, _c_, represents at the same time the contribution which materials and capital equipment make to annual output, and the cost of maintaining the stock of physical capital in existence at the beginning of the year. When all commodities are selling at normal prices, these two quantities are equal (normal prices are tacitly assumed always to rule,[3] an assumption which is useful for long-period problems, though treacherous when we have to deal with slumps and crises). Gross receipts equal to _c + v + s_ pass through the hands of the capitalists during the year, of which they use an amount, _c_, to replace physical capital used up during the year, so that _c_ represents costs of raw materials and wear and tear and amortisation of plant. An amount, _v_, is paid to workers and is consumed by them (saving by workers is regarded as negligible[4]). The surplus, _s_, remains to the capitalists for their own consumption and for net saving. The professional classes (civil servants, priests, prostitutes, etc.) are treated as hangers-on of the capitalists, and their incomes do not appear, as they are not regarded as producing _value_.[5] Expenditure upon them tends to lessen the saving of capitalists, and their own expenditure and saving are treated as expenditure and saving out of surplus. In the model set out in chapter vi there is no technical progress (this is a drastic simplification made deliberately[6]) and the ratio of capital to labour is constant (as the stock of capital increases employment increases in proportion). Thus real output per worker employed is constant (hours of work per year do not vary) and real wages per man are constant. It follows that real surplus per man is also constant. So long as these assumptions are retained Marxian _value_ presents no problem. _Value_ is the product of labour-time. _Value_ created per man-year is constant because hours of work are constant. Real product per man year being constant, on the above assumptions, the _value_ of a unit of product is constant. For convenience we may assume money wages per man constant. Then, on these assumptions, both the money price of a unit of output and the _value_ of a unit of money are constant. This of course merely plasters over all the problems of measurement connected with the use of index numbers, but provided that the technique of production is unchanging, and normal prices are ruling, those problems are not serious, and we can conduct the analysis in terms of money values.[7] (Rosa Luxemburg regards it as a matter of indifference whether we calculate in money or in _value_.[8]) The assumption of constant real wages presents a difficulty which we may notice in passing. The operation of the capitalist system is presumed to depress the level of wages down to the limit set by the minimum subsistence of the worker and his family. But how large a family? It would be an extraordinary fluke if the average size of family supported by the given wage of a worker were such as to provide for a rate of growth of population exactly adjusted to the rate of accumulation of capital, and she certainly does not hold that this is the case.[9] There is a reserve army of labour standing by, ready to take employment when the capitalists offer it. While they are unemployed the workers have no source of income, but are kept alive by sharing in the consumption of the wages of friends and relations who are in work.[10] When an increase in the stock of capital takes place, more workers begin to earn wages, those formerly employed are relieved of the burden of supporting some unemployed relations, and their own consumption rises. Thus either they were living below the subsistence minimum before, or they are above it now. We may cut this knot by simply postulating that real wages per man are constant,[11] without asking why. The important point for the analysis which we are examining is that when employment increases the total consumption of the workers as a whole increases by the amount of the wages received by the additional workers.[12] We may now set out the model for simple reproduction--that is, annual national income for an economy in which the stock of capital is kept intact but not increased. All output is divided into two departments: I, producing capital equipment and raw materials, (producers' goods), and II, producing consumption goods. Then we have I: _c_{1} + v_{1} + s_{1} = c_{1} + c_{2}_ II: _c_{2} + v_{2} + s_{2} = v_{1} + v_{2} + s_{1} + s_{2}_ Thus _c_{2} = v_{1} + s_{1}_ This means that the net output of the producers' goods department is equal to the replacement of capital in the consumers' goods department. The whole surplus, as well as the whole of wages, is currently consumed. Before proceeding to the model for accumulation there is a difficulty which must be discussed. In the above model the stock of capital exists, so to speak, off stage. Rosa Luxemburg is perfectly well aware of the relationship between annual wear and tear of capital, which is part of _c_, and the stock of fixed capital,[13] but as soon as she (following Marx) discusses accumulation she equates the addition to the stock of capital made by saving out of surplus in one year to the wear and tear of capital in the next year. To make sense of this we must assume that all capital is consumed and made good once a year. She seems to slip into this assumption inadvertently at first, though later it is made explicit.[14] She also consciously postulates that _v_ represents the amount of capital which is paid out in wages in advance of receipts from sales of the commodities produced. (This, as she says, is the natural assumption to make for agricultural production, where workers this year are paid from the proceeds of last year's harvest.)[15] Thus _v_ represents at the same time the annual wages bill and the amount of capital locked up in the wages fund, while _c_ represents both the annual amortisation of capital and the total stock of capital (other than the wages fund). This is a simplification which is tiresome rather than helpful (it arises from Marx's ill-judged habit of writing _s/(c + v)_ for the rate of profit on capital), but it is no more than a simplification and does not invalidate the rest of the analysis. Another awkward assumption, which causes serious trouble later, is implicit in the argument. Savings out of the surplus accruing in each department (producers' and consumers' goods) are always invested in capital in the same department. There is no reason to imagine that one capitalist is linked to others in his own department more than to those in the other department, so the conception seems to be that each capitalist invests his savings in his own business. There is no lending by one capitalist to another and no capitalist ever shifts his sphere of operations from one department to another. This is a severe assumption to make even about the era before limited liability was introduced, and becomes absurd afterwards. Moreover it is incompatible with the postulate that the rate of profit on capital tends to equality throughout the economy,[16] for the mechanism which equalises profits is the flow of new investment, and the transfer of capital as amortisation funds are re-invested, into more profitable lines of production and away from less profitable lines.[17] The assumption that there is no lending by one capitalist to another puts limitation upon the model. Not only must the total rate of investment be equal to the total of planned saving, but investment in each department must be equal to saving in that department, and not only must the rate of increase of capital lead to an increase of total output compatible with total demand, but the increase in output of each department, dictated by the increase in capital in that department, must be divided between consumers' and producers' goods in proportions compatible with the demand for each, dictated by the consumption and the investment plans in each department. There is no difficulty, however, in choosing numbers which satisfy the requirements of the model. The numerical examples derived from Marx's jottings are cumbersome and confusing, but a clear and simple model can be constructed on the basis of the assumptions set out in chapter vii. In each department, constant capital is four times variable capital.[18] (Constant capital is the stock of raw materials which is turned over once a year; variable capital is the wages bill, which is equal to the capital represented by the wages fund.) Surplus is equal to variable capital (net income is divided equally between wages and surplus) and half of surplus is saved.[19] Savings are allotted between constant and variable capital in such a way as to preserve the 4 to 1 ratio. Thus four-fifths of savings represents a demand for producers' goods, and is added to constant capital each year, and one-fifth represents a demand for consumers' goods, and is added to the wages fund (variable capital). These ratios dictate the relationship between Department I (producers' goods) and Department II (consumers' goods).[20] It can easily be seen that the basic assumptions require that the output of Department I must stand in the ratio of 11 to 4 to the output of Department II.[21] We can now construct a much simpler model than those provided in the text. _c_ _v_ _s_ _Gross Output_ Department I 44 11 11 66 Department II 16 4 4 24 -- Total 90 In Department I, 5·5 units are saved (half of _s_) of which 4·4 are invested in constant capital and 1·1 in variable capital. In Department II 2 units are saved, 1·6 being added to constant and 0·4 to variable capital. The 66 units of producers' goods provide 44 + 4·4 constant capital for Department I and 16 + 1·6 constant capital for Department II and the 24 units of consumers' goods provide 11 + 4 wages of labour already employed, 5·5 + 2 for consumption out of surplus, and 1·1 + 0·4 addition to variable capital, which provide for an addition to employment. After the investment has been made, and the labour force increased in proportion to the wages bill, we have _c_ _v_ _s_ _Gross Output_ Department I 48·4 12·1 12·1 72·6 Department II 17·6 4·4 4·4 26·4 ----- Total 99 The two departments are now equipped to carry out another round of investment at the prescribed rate, and the process of accumulation continues. The ratios happen to have been chosen so that the total labour force, and total gross output, increase by 10 per cent per annum.[22] But all this, as Rosa Luxemburg remarks, is just arithmetic.[23] The only point of substance which she deduces from Marx's numerical examples is that it is always Department I which takes the initiative. She maintains that the capitalists in Department I decide how much producers' goods to produce, and that Department II has to arrange its affairs so as to absorb an amount of producers' goods which will fit in with their plans.[24] On the face of it, this is obviously absurd. The arithmetic is perfectly neutral between the two departments, and, as she herself shows, will serve equally well for the imagined case of a socialist society where investment is planned with a view to consumption.[25] But behind all this rigmarole lies the real problem which she is trying to formulate. Where does the demand come from which keeps accumulation going? She is not concerned with the problem, nowadays so familiar, of the balance between saving and investment. Marx himself was aware of that problem, as is seen in his analysis of disequilibrium under conditions of simple reproduction (zero net investment).[26] When new fixed capital comes into existence, part of gross receipts are set aside in amortisation funds without any actual outlay being made on renewals. Then total demand falls short of equilibrium output, and the system runs into a slump. Contrariwise, when a burst of renewals falls due, in excess of the current rate of amortisation, a boom sets in. For equilibrium it is necessary for the age composition of the stock of capital to be such that current renewals just absorb current amortisation funds. Similarly, when accumulation is taking place, current investment must absorb current net saving.[27] It is in connection with the problem of effective demand, in this sense, that Marx brings gold-mining into the analysis. When real output expands at constant money prices, the increasing total of money value of output requires an increase in the stock of money in circulation (unless the velocity of circulation rises appropriately). The capitalists therefore have to devote part of their savings to increasing their holdings of cash (for there is no borrowing). This causes a deficiency of effective demand. But the increase in the quantity of money in circulation comes from newly mined gold, and the expenditure of the gold mining industry upon the other departments just makes up the deficiency in demand.[28] Rosa Luxemburg garbles this argument considerably, and brushes it away as beside the point. And it _is_ beside the point that she is concerned with. She does not admit the savings and investment problem, for she takes it for granted that each individual act of saving out of surplus is accompanied by a corresponding amount of real investment, and that every piece of investment is financed by saving out of surplus of the same capitalist who makes it.[29] What she appears to be concerned with is rather the inducement to invest. What motive have the capitalists for enlarging their stock of real capital?[30] How do they know that there will be demand for the increased output of goods which the new capital will produce, so that they can 'capitalise' their surplus in a profitable form? (On the purely analytical plane her affinity seems to be with Hobson rather than Keynes.) Needless to say, our author does not formulate the problem of the inducement to invest in modern terminology, and the ambiguities and contradictions in her exposition have left ample scope for her critics to represent her theory as irredeemable nonsense.[31] But the most natural way to read it is also the clearest. Investment can take place in an ever-accumulating stock of capital only if the capitalists are assured of an ever-expanding market for the goods which the capital will produce. On this reading, the statement of the problem leads straightforwardly to the solution propounded in the third Section of this book. Marx has his own answer to the problem of inducement to invest, which she refers to in the first chapter.[32] The pressure of competition forces each individual capitalist to increase his capital in order to take advantage of economies of large-scale production, for if he does not his rivals will, and he will be undersold. Rosa Luxemburg does not discuss whether this mechanism provides an adequate drive to keep accumulation going, but looks for some prospective demand outside the circle of production. Here the numerical examples, as she shows, fail to help. And this is in the nature of the case, for (in modern jargon) the examples deal with _ex post_ quantities, while she is looking for _ex ante_ prospects of increased demand for commodities. If accumulation does take place, demand will absorb output, as the model shows, but what is it that makes accumulation take place? In Section II our author sets out to find what answers have been given to her problem. The analysis she has in mind is now broader than the strict confines of the arithmetical model. Technical progress is going on, and the output of an hour's labour rises as time goes by. (The concept of _value_ now becomes treacherous, for the _value_ of commodities is continuously falling.) Real wages tend to be constant in terms of commodities, thus the _value_ of labour power is falling, and the share of surplus in net income is rising (_s/v_, the rate of exploitation, is rising). The amount of saving in real terms is therefore rising (she suggests later that the proportion of surplus saved rises with surplus, in which case real savings increase all the more[33]). The problem is thus more formidable than appears in the model, for the equilibrium rate of accumulation of capital, in real terms, is greater than in the model, where the rate of exploitation is constant. At the same time the proportion of constant to variable capital is rising. She regards this not as something which is likely to happen for technical reasons, but as being necessarily bound up with the very nature of technical progress. As productivity increases, the amount of producers' goods handled per man-hour of labour increases; therefore, she says, the proportion of _c_ to _v_ must increase.[34] This is an error. It arises from thinking of constant capital in terms of goods, and contrasting it with variable capital in terms of _value_, that is, hours of labour. She forgets Marx's warning that, as progress takes place, the _value_ of the commodities making up constant capital also falls.[35] It is perfectly possible for productivity to increase without any increase in the _value_ of capital per man employed. This would occur if improvements in the productivity of labour in making producers' goods kept pace with the productivity of labour in using producers' goods to make consumers' goods (capital-saving inventions balance labour-saving inventions, so that technical progress is 'neutral'). However, we can easily get out of this difficulty by postulating that as a matter of fact technical progress is mainly labour-saving, or, a better term, capital-using, so that capital per man employed is rising through time. Rosa Luxemburg treats the authors whom she examines in Section II with a good deal of sarcasm, and dismisses them all as useless. To some of the points raised her answers seem scarcely adequate. For instance, Rodbertus sees the source of all the troubles of capitalism in the falling proportion of wages in national income.[36] He can be interpreted to refer to the proportion of wages in gross income. In that case, she is right (on the assumption of capital-using inventions) in arguing that a fall in the proportion of wages is bound up with technical progress, and that the proportion could be held constant only by stopping progress. He can also be taken to refer to the share of wages in net output, and this is the more natural reading. On this reading she argues that the fall in share of wages (or rise in rate of exploitation) is necessary to prevent a fall in the rate of profit on capital[37] (as capital per man employed rises, profit per man employed must rise if profit per unit of capital is constant). But she does not follow up the argument and inquire what rise in the rate of exploitation is necessary to keep capitalism going (actually, the statisticians tell us, the share of wages in net income has been fairly constant in modern industrial economies[38]). It is obvious that the less the rate of exploitation rises, the smaller is the rise in the rate of saving which the system has to digest, while the rise in real consumption by workers, which takes place when the rate of exploitation rises more slowly than productivity in the consumption good industries, creates an outlet for investment in productive capacity in those industries. The horrors of capitalism, and the difficulties which it creates for itself, are both exaggerated by the assumption of constant real-wage rates and, although it would be impossible to defend Rodbertus' position that a constant rate of exploitation is all that is needed to put everything right, he certainly makes a contribution to the argument which ought to be taken into account. Tugan-Baranovski also seems to be treated too lightly. His conception is that the rising proportion of constant capital in both departments (machines to make machines as well as machines to make consumers' goods) provides an outlet for accumulation, and that competition is the driving force which keeps capitalists accumulating. Rosa Luxemburg is no doubt correct in saying that his argument does not carry the analysis beyond the stage at which Marx left it,[39] but he certainly elaborates a point which she seems perversely to overlook. Her real objection to Tugan-Baranovski is that he shows how, in certain conditions, capitalist accumulation might be self-perpetuating, while she wishes to establish that the coming disintegration of the capitalist system is not merely probable on the evidence, but is a logical necessity.[40] The authors such as Sismondi, Malthus and Vorontsov, who are groping after the problem of equilibrium between saving and investment, are treated with even less sympathy (though she has a kindly feeling for Sismondi, to whom she considers that Marx gave too little recognition[41]) for she is either oblivious that there is such a problem, or regards it as trivial.[42] We leave the discussion, at the end of Section II, at the same point where we entered it, with the clue to the inducement to invest still to find. Section III is broader, more vigorous and in general more rewarding than the two preceding parts. It opens with a return to Marx's model for a capitalist system with accumulation going on. Our author then sets out a fresh model allowing for technical progress. The rate of exploitation (the ratio of surplus to wages) is rising, for real wages remain constant while output per man increases. In the model the proportion of surplus saved is assumed constant for simplicity, though in reality, she holds, it would tend to rise with the real income of the capitalists.[43] The ratio of constant to variable capital is rising for technical reasons. (The convention by which the annual wear and tear of capital is identified with the stock of capital now becomes a great impediment to clear thinking.) The arithmetical model shows the system running into an _impasse_ because the output of Department I falls short of the requirements of constant capital in the two departments taken together, while the output of Department II exceeds consumption.[44] The method of argument is by no means rigorous. Nothing follows from the fact that one particular numerical example fails to give a solution, and the example is troublesome to interpret as it is necessary to distinguish between discrepancies due to rounding off the figures from those which are intended to illustrate a point of principle.[45] But there is no need to paddle in the arithmetic to find where the difficulty lies. The model is over-determined because of the rule that the increment of capital within each department at the end of a year must equal the saving made within the same department during the year. If capitalists from Department II were permitted to lend part of their savings to Department I to be invested in its capital, a breakdown would no longer be inevitable. Suppose that total real wages are constant and that real consumption by capitalists increases slowly, so that the real output of Department II rises at a slower rate than productivity, then the amount of labour employed in it is shrinking. The ratio of capital to labour however is rising as a consequence of capital-using technical progress. The output of Department I, and its productive capacity, is growing through time. Capital invested in Department I is accumulating faster than the saving of the capitalists in Department I, and capitalists of Department II, who have no profitable outlet in their own industries for their savings, acquire titles to part of the capital in Department I by supplying the difference between investment in Department I and its own saving.[46] For any increase in the stock of capital of both departments taken together, required by technical progress and demand conditions, there is an appropriate amount of saving, and so long as the total accumulation required and total saving fit, there is no breakdown. But here we find the clue to the real contradiction. These quantities might conceivably fit, but there is no guarantee that they will. If the ratio of saving which the capitalists (taken together) choose to make exceeds the rate of accumulation dictated by technical progress, the excess savings can only be 'capitalised' if there is an outlet for investment outside the system. (The opposite case of deficient savings is also possible. Progress would then be slowed down below the technically possible maximum; but this case is not contemplated by our author, and it would be irrelevant to elaborate upon it.) Once more we can substitute for a supposed logical necessity a plausible hypothesis about the nature of the real case, and so rescue the succeeding argument. If in reality the distribution of income between workers and capitalists, and the propensity to save of capitalists, are such as to require a rate of accumulation which exceeds the rate of increase in the stock of capital appropriate to technical conditions, then there is a chronic excess of the potential supply of real capital over the demand for it and the system must fall into chronic depression. (This is the 'stagnation thesis' thrown out by Keynes and elaborated by modern American economists, notably Alvin Hansen). How then is it that capitalist expansion had not yet (in 1912) shown any sign of slackening? In chapter xxvi Rosa Luxemburg advances her central thesis--that it is the invasion of primitive economies by capitalism which keeps the system alive. There follows a scorching account of the manner in which the capitalist system, by trade, conquest and theft, swallowed up the pre-capitalist economies,--some reduced to colonies of capitalist nations, some remaining nominally independent--and fed itself upon their ruins. The thread of analysis running through the historical illustrations is not easy to pick up, but the main argument seems to be as follows: As soon as a primitive closed economy has been broken into, by force or guile, cheap mass-produced consumption goods displace the old hand production of the family or village communities, so that a market is provided for ever-increasing outputs from the industries of Department II in the old centres of capitalism, without the standard of life of the workers who consume these commodities being raised.[47] The ever-growing capacity of the export industries requires the products of Department I, thus maintaining investment at home. At the same time great capital works, such as railways, are undertaken in the new territories.[48] This investment is matched partly by savings from surplus extracted on the spot, but mainly by loans from the old capitalist countries. There is no difficulty here in accounting for the inducement to invest, for the new territories yield commodities unobtainable at home.[49] We might set out the essence of the argument as follows: Cloth from Lancashire pays for labour in America, which is used to produce wheat and cotton. These provide wages and raw materials to the Lancashire mills, while the profits acquired both on the plantations and in the mills are invested in steel rails and rolling stock, which open up fresh territories, so that the whole process is continuously expanding. Moreover, apart from profits earned on capital actually invested in the new territories, great capital gains are made simply by acquiring possession of land and other natural resources.[50] Labour to work the resources may be provided by the local dispossessed peasantry or by immigration from the centres of capitalism.[51] Investment in equipment for it to use is more profitable than in that operated by home labour, partly because the wretched condition of the colonial workers makes the rate of exploitation higher,[52] but mainly just because they are on the spot, and can turn the natural resources seized by the capitalists into means of production. No amount of investment in equipment for British labour would produce soil bearing cotton, rubber or copper. Thus investment is deflected abroad[53] and the promise of profit represented by the natural resources calls into existence, by fair means or foul, the labour and capital to make it come true. The process of building up this capital provides an outlet for the old industries and rescues them from the contradictions inherent in deficiency of demand. The analysis of militarism in the last chapter over-reaches itself by trying to prove too much. The argument is that armaments are built up out of taxes which fall entirely on wages.[54] This can be regarded as a kind of 'forced saving' imposed on the workers. These savings are extra to the saving out of surplus. They are invested in armaments, and that ends the story. On this basis the armaments, in themselves, cannot be held to provide an outlet for the investment of surplus (though the use of the armaments, as in the Opium War,[55] to break up primitive economies is a necessary condition for the colonial investment already described) and capital equipment to produce armaments is merely substituted for capital formerly producing consumers' goods. The analysis which best fits Rosa Luxemburg's own argument, and the facts, is that armaments provide an outlet for the investment of surplus (over and above any contribution there may be from forced saving out of wages), which, unlike other kinds of investment, creates no further problem by increasing productive capacity (not to mention the huge new investment opportunities created by reconstruction after the capitalist nations have turned their weapons against each other). All this is perhaps too neat an account of what our author is saying. The argument streams along bearing a welter of historical examples in its flood, and ideas emerge and disappear again bewilderingly. But something like the above seems to be intended. And something like it is now widely accepted as being true. Rosa Luxemburg, as we have seen, neglects the rise in real wages which takes place as capitalism develops, and denies the internal inducement to invest provided by technical progress, two factors which help to rescue capitalism from the difficulties which it creates for itself. She is left with only one influence (economic imperialism) to account for continuous capital accumulation, so that her analysis is incomplete. All the same, few would deny that the extension of capitalism into new territories was the mainspring of what an academic economist has called the 'vast secular boom' of the last two hundred years,[56] and many academic economists account for the uneasy condition of capitalism in the twentieth century largely by the 'closing of the frontier' all over the world.[57] But the academic economists are being wise after the event. For all its confusions and exaggerations, this book shows more prescience than any orthodox contemporary could claim. JOAN ROBINSON _Cambridge._ FOOTNOTES: [1] For a totally different interpretation see Sweezy; _The Theory of Capitalist Development_, chap. xi, Section 9. [2] See p. 166. [3] Cf. the quotation from _Capital_, vol. iii, p. 331. [4] See p. 132. [5] See p. 135. [6] See p. 130. [7] Exchanges between industries, however, must take place at 'prices of production' not at _values_. See below, p. 15, note. [8] See p. 113. [9] See p. 361. [10] See p. 134. [11] Later it is assumed that real wages can be depressed by taxation (p. 455). [12] See p. 116. [13] See p. 85. [14] See p. 355. [15] See p. 76, note 355. [16] See p. 79. [17] In the numerical example quoted in chap. vi. (p. 117) the rate of profit is much higher in Department II than in I. Marx has made the rate of exploitation equal in the two departments, and the ratio of constant to variable capital higher in Department I. This is evidently an oversight. The two departments must trade with each other at market prices, not in terms of _value_. Therefore _s_{1}_ must represent the profits accruing to Department I, not a proportion (half in the example) of the _value_ generated in Department I. _s_{1}/v_{1}_ should exceed _s_{2}/v_{2}_ to an extent corresponding to the higher organic composition of capital in Department I. The point is interesting, as it shows that when off guard Marx forgot that he could make prices proportional to _values_ only when the organic composition of capital is the same in all industries. [18] See p. 129. [19] See p. 130. [20] Since, in this model, the organic composition of capital is the same in the two departments, prices correspond to _values_. [21] Of total gross output, 2/3 is replacement of constant capital; surplus is 1/6 of gross output, and of surplus half is saved; thus savings are 1/12 of gross output; of saving 4/5 is added to constant capital; thus 1/15 of gross output is added to constant capital. The output of Department I is therefore 2/3 + 1/15 or 11/15 of total gross output. Similarly, the output of Department II is 4/15 of total gross output. [22] This model bears a strong family resemblance to Mr. Harrod's 'Warranted rate of growth'. _Towards a Dynamic Economics_, lecture III. [23] See p. 119. [24] See p. 125. [25] See p. 128. [26] See p. 91. [27] See p. 115. [28] See p. 102. The phrase '_zahlungsfähige nachfrage_', translated 'effective demand', is not the effective demand of Keynes (roughly, current expenditure) but appears often to mean demand for new capital, or, perhaps, prospective future demand for goods to be produced by new capital. [29] This assumption is made explicit later (p. 342). [30] See pp. 131 et seq. [31] See Sweezy, loc. cit. [32] See p. 40. [33] See p. 303. [34] See p. 258. [35] This point is, however, later admitted (p. 337). [36] See p. 252. [37] See p. 259. Marx himself failed to get this point clear. Cf. my _Essay on Marxian Economics_, chap. v. [38] Cf. Kalecki, _Essays in the Theory of Economic Fluctuations_, pp. 14 et seq. [39] See p. 323. [40] See p. 314. Marx did not find himself in this dilemma because he held that there is a fundamental 'contradiction' in capitalism which shows itself in a strong tendency for the rate of profit on capital to fall as technical progress takes place. But Rosa Luxemburg sees that the tendency to a falling rate of profit is automatically checked and may even be reversed if real-wage rates are constant (p. 338). [41] See p. 217, note. [42] One passage suggests that she sees the problem, but thinks it irrelevant to the real issue (p. 342). [43] See p. 338. [44] See p. 337. [45] In this model the rate of exploitation is different in the two departments. This means that the numbers represent money value, not _value_. [46] Rosa Luxemburg seems to regard this process as impossible, but for what reason is by no means clear (p. 341). [47] See p. 352. [48] See p. 352. [49] See p. 358. [50] See p. 370. [51] See p. 428. [52] See p. 435. [53] See p. 421. [54] See p. 455. [55] See p. 387. [56] Hicks, _Value and Capital_, p. 302, note. Mr. Hicks himself, however, regards the increase in population as the mainspring. [57] Cf. _A Survey of Contemporary Economics_ (ed. Ellis), p. 63. _SECTION ONE_ THE PROBLEM OF REPRODUCTION _CHAPTER I_ THE OBJECT OF OUR INVESTIGATION Karl Marx made a contribution of lasting service to the theory of economics when he drew attention to the problem of the reproduction of the entire social capital. It is significant that in the history of economics we find only two attempts at an exact exposition of this problem: one by Quesnay, the father of the Physiocrats, at its very inception; and in its final stage this attempt by Marx. In the interim, the problem was ever with bourgeois economics. Yet bourgeois economists have never been fully aware of this problem in its pure aspects, detached from related and intersecting minor problems; they have never been able to formulate it precisely, let alone solve it. Seeing that the problem is of paramount importance, their attempts may all the same help us to some understanding of the trend of scientific economics. What is it precisely that constitutes this problem of the reproduction of total capital? The literal meaning of the word 'reproduction' is repetition, renewal of the process of production. At first sight it may be difficult to see in what respect the idea of reproduction differs from that of repetition which we can all understand--why such a new and unfamiliar term should be required. But in the sort of repetition which we shall consider, in the continual recurrence of the process of production, there are certain distinctive features. First, the regular repetition of reproduction is the general _sine qua non_ of regular consumption which in its turn has been the precondition of human civilisation in every one of its historical forms. The concept of reproduction, viewed in this way, reflects an aspect of the history of civilisation. Production can never be resumed, there can be no reproduction, unless certain prerequisites such as tools, raw materials and labour have been established during the preceding period of production. However, at the most primitive level of man's civilisation, at the initial stage of man's power over nature; this possibility to re-engage in production depended more or less on chance. So long as hunting and fishing were the main foundations of social existence, frequent periods of general starvation interrupted the regular repetition of production. Some primitive peoples recognised at a very early stage that for reproduction as a regularly recurring process certain measures were essential; these they incorporated into ceremonies of a religious nature; and in this way they accepted such measures as traditional social commitments. Thus, as the thorough researches of Spencer and Gillen have taught us, the totem cult of the Australian negroes is fundamentally nothing but certain measures taken by social groups for the purpose of securing and preserving their animal and vegetable foodstuffs; these precautions had been taken year by year since time immemorial and thus they became fossilised into religious ceremonials. Yet the circle of consumption and production which forms the essence of reproduction became possible only with the invention of tillage with the hoe, with the taming of domestic animals, and with cattle-raising for the purpose of consumption. Reproduction is something more than mere repetition in so far as it presupposes a certain level of society's supremacy over nature, or, in economic terms, a certain standard of labour productivity. On the other hand, at all stages of social development, the process of production is based on the continuation of two different, though closely connected factors, the technical and social conditions--on the precise relationship between man and nature and that between men and men. Reproduction depends to the same degree on both these conditions. We have just seen how reproduction is bound up with the conditions of human working techniques, how far it is indeed solely the result of a certain level of labour productivity; but the social forms of production prevailing in each case are no less decisive. In a primitive communist agrarian community, reproduction as well as the whole plan of economic life is determined by the community of all workers and their democratic organs. The decision to re-engage in labour--the organisation of labour--the provision of raw materials, tools, and man-power as the essential preliminaries of labour--the arrangement of reproduction and the determination of its volume are all results of a planned co-operation in which everybody within the boundaries of the community takes his part. In an economic system based on slave labour or _corvée_, reproduction is enforced and regulated in all details by personal relations of domination. Here the volume of reproduction is determined by the right of disposal held by the ruling _élites_ over smaller or larger circles of other people's labour. In a society producing by capitalist methods, reproduction assumes a peculiar form, as a mere glance at certain striking phenomena will show us. In every other society known to history, reproduction recurs in a regular sequence as far as its preconditions, the existing means of production and labour power, make this possible. As a rule, only external influences such as a devastating war or a great pestilence, depopulating vast areas of former cultural life, and consequently destroying masses of labour power and of accumulated means of production, can result in a complete interruption of reproduction or in its contraction to any considerable extent for longer or shorter periods. A despotic organisation of the plan of production may on occasion lead to similar phenomena. When in ancient Egypt Pharaoh's will chained thousands of fellaheen for decades to the building of the pyramids; when in modern Egypt Ismail Pasha ordered 20,000 fellaheen to forced labour on the Suez Canal; or when, about two hundred years before Christ, the Emperor Shi Hoang Ti, founder of the Chin dynasty, allowed 400,000 people to perish of hunger and exhaustion and thus sacrificed a whole generation to his purpose of consolidating the Great Wall at China's northern frontier, the result was always that vast stretches of arable land were left fallow and that regular economic life was interrupted for long periods. In all these cases the causes of these interruptions of reproduction obviously lay in the one-sided determination of the plan of reproduction by those in power. Societies which produce according to capitalist methods present a different picture. We observe that in certain periods all the ingredients of reproduction may be available, both labour and means of production, and yet some vital needs of society for consumer goods may be left unfulfilled. We find that in spite of these resources reproduction may in part be completely suspended and in part curtailed. Here it is no despotic interference with the economic plan that is responsible for the difficulties in the process of production. Quite apart from all technical conditions, reproduction here depends on purely social considerations: only those goods are produced which can with certainty be expected to sell, and not merely to sell, but to sell at the customary profit. Thus profit becomes an end in itself, the decisive factor which determines not only production but also reproduction. Not only does it decide in each case what work is to be undertaken, how it is to be carried out, and how the products are to be distributed; what is more, profit decides, also, at the end of every working period, whether the labour process is to be resumed, and, if so, to what extent and in what direction it should be made to operate.[58] In capitalist society, therefore, the process of reproduction as a whole, constitutes a peculiar and most complicated problem, in consequence of these purely historical and social factors. There is, as we shall see, an external characteristic which shows clearly this specific historical peculiarity of the capitalist process of reproduction. Comprising not only production but also circulation (the process of exchange), it unites these two elements. Capitalist production is primarily production by innumerable private producers without any planned regulation. The only social link between these producers is the act of exchange. In taking account of social requirements reproduction has no clue to go on other than the experiences of the preceding labour period. These experiences, however, remain the private experiences of individual producers and are not integrated into a comprehensive and social form. Moreover, they do not always refer positively and directly to the needs of society. They are often rather indirect and negative, for it is only on the basis of price fluctuations that they indicate whether the aggregate of produced commodities falls short of the effective demand or exceeds it. Yet the individual private producers make recurrent use of these experiences of the preceding labour period when they re-engage in reproduction, so that glut or shortage are bound to occur again in the following period. Individual branches of production may develop independently, so that there may be a surplus in one branch and a deficiency in another. But as nearly all individual branches of production are interdependent technically, glut or shortage in some of the larger branches of production lead to the same phenomenon in most of the others. Thus the general supply of products may alternate periodically between shortage and surplus relative to the social demand. Herein lies the peculiar character of reproduction in a capitalist society, which differs from all other known forms of production. In the first place, every branch of production develops independently within certain limits, in a way that leads to periodical interruptions of production of shorter or longer duration. Secondly, the individual branches of reproduction show deviations from social requirements amounting to all-round disparity and thus resulting in a general interruption of reproduction. These features of capitalist reproduction are quite characteristic. In all other economic systems, reproduction runs its uninterrupted and regular course, apart from external disturbance by violence. Capitalist reproduction, however, to quote Sismondi's well-known dictum, can only be represented as a continuous sequence of individual spirals. Every such spiral starts with small loops which become increasingly larger and eventually very large indeed. Then they contract, and a new spiral starts again with small loops, repeating the figure up to the point of interruption. This periodical fluctuation between the largest volume of reproduction and its contraction to partial suspension, this cycle of slump, boom, and crisis, as it has been called, is the most striking peculiarity of capitalist reproduction. It is very important, however, to establish quite firmly and from the very outset that this cyclical movement of boom, slump, and crisis, does not represent the whole problem of capitalist reproduction, although it is an essential element of it. Periodical cycles and crises are specific phases of reproduction in a capitalist system of economy, but not the whole of this process. In order to demonstrate the pure implications of capitalist reproduction we must rather consider it quite apart from the periodical cycles and crises. Strange as this may appear, the method is quite rational; it is indeed the only method of inquiry that is scientifically tenable. In order to demonstrate and to solve the problem of pure value we must leave price fluctuations out of consideration. The approach of vulgar economics always attempts to solve the problem of value by reference to fluctuations in demand and supply. Classical economists, from Adam Smith to Karl Marx, attack the problem in the opposite way, pointing out that fluctuations in the mutual relation between demand and supply can explain only disparities between price and value, not value itself. In order to find the value of a commodity, we must start by assuming that demand and supply are in a state of equilibrium, that the price of a commodity and its value closely correspond to one another. Thus the scientific problem of value begins at the very point where the effect of demand and supply ceases to operate. In consequence of periodical cycles and crises capitalist reproduction fluctuates as a rule around the level of the effective total demand of society, sometimes rising above and sometimes falling below this level, contracting occasionally even to the point of almost complete interruption of reproduction. However, if we consider a longer period, a whole cycle with its alternating phases of prosperity and depression, of boom and slump, that is if we consider reproduction at its highest and lowest volume, including the stage of suspension, we can set off boom against slump and work out an average, a mean volume of reproduction for the whole cycle. This average is not only a theoretical figment of thought, it is also a real objective fact. For in spite of the sharp rises and falls in the course of a cycle, in spite of crises, the needs of society are always satisfied more or less, reproduction continues on its complicated course, and productive capacities develop progressively. How can this take place, leaving cycles and crises out of consideration? Here the real question begins. The attempt to solve the problem of reproduction in terms of the periodical character of crises is fundamentally a device of vulgar economics, just like the attempt to solve the problem of value in terms of fluctuations in demand and supply. Nevertheless, we shall see in the course of our observations that as soon as economic theory gets an inkling of the problem of reproduction, as soon as it has at least started guessing at the problem, it reveals a persistent tendency suddenly to transform the problem of reproduction into the problem of crises, thus barring its own way to the solution of the question. When we speak of capitalist reproduction in the following exposition, we shall always understand by this term a mean volume of productivity which is an average taken over the various phases of a cycle. Now, the total of capitalist reproduction is created by an unlimited and constantly changing number of private producers. They produce independently of one another; apart from the observation of price fluctuations there is no social control--no social link exists between the individual producers other than the exchange of commodities. The question arises how these innumerable disconnected operations can lead to the actual total of production. This general aspect of our problem indeed strikes us immediately as one of prime importance. But if we put it this way, we overlook the fact that such private producers are not simply producers of commodities but are essentially capitalist producers, that the total production of society is not simply production for the sake of satisfying social requirements, and equally not merely production of commodities, but essentially capitalist production. Let us examine our problem anew in the light of this fact. A producer who produces not only commodities but capital must above all create surplus value. The capitalist producer's final goal, his main incentive, is the production of surplus value. The proceeds from the commodities he has manufactured must not only recompense him for all his outlay, but in addition they must yield him a value which does not correspond with any expense on his part, and is pure gain. If we consider the process of production from the point of view of the creation of surplus value, we see that the capital advanced by the capitalist is divided into two parts: the first part represents his expenses on means of production such as premises, raw material, partly finished goods and machinery. The second part is spent on wages. This holds good, even if the capitalist producer does not know it himself, and in spite of the pious stuff about fixed and circulating capital with which he may delude himself and the world. Marx called this first part constant capital. Its value is not changed by its utilisation in the labour process--it is transferred _in toto_ to the finished product. The second part Marx calls the variable capital. This gives rise to an additional value, which materialises when the results of unpaid labour are appropriated. The various components which make up the value of every commodity produced by capitalist methods may be expressed by the formula: _c + v + s_. In this formula _c_ stands for the value of the constant capital laid out in inanimate means of production and transferred to the commodity, _v_ stands for the value of the variable capital advanced in form of wages, and _s_ stands for the surplus value, the additional value of the unpaid part of wage labour. Every type of goods shows these three components of value, whether we consider an individual commodity or the aggregate of commodities as a whole, whether we consider cotton textiles or ballet performances, cast-iron tubes or liberal newspapers. Thus for the capitalist producer the manufacture of commodities is not an end in itself, it is only a means to the appropriation of surplus value. This surplus value, however, can be of no use to the capitalist so long as it remains hidden in the commodity form of the product. Once the commodity has been produced, it must be realised, it must be converted into a form of pure value; that is, into money. All capital expenses incorporated in the commodity must shed their commodity-form and revert to the capitalist as money to make this conversion possible so that he can appropriate the surplus value in cash. The purpose of production is fulfilled only when this conversion has been successful, only when the aggregate of commodities has been sold according to its value. The proceeds of this sale of commodities, the money that has been received for them, contains the same components of value as the former aggregate of commodities and can be expressed by the same formula _c + v + s_. Part _c_ recompenses the capitalist for his advances on means of production that have been used up, part _v_ recompenses him for his advances on wages, and the last part, _s_, represents the expected surplus, the capitalist's clear profit in cash.[59] This conversion of capital from its original form, from the starting point of all capitalist production, into means of production, dead and living, such as raw materials, instruments, and labour; its further conversion into commodities by a living labour process; and its final reconversion into money, a greater amount of money indeed than at the initial stage--this transformation of capital is, however, required for more than the production and appropriation of surplus value. The aim and incentive of capitalist production is not a surplus value pure and simple, to be appropriated in any desired quantity, but a surplus value ever growing into larger quantities, surplus value _ad infinitum_. But to achieve this aim, the same magic means must be used over and over again, the means of capitalist production--the ever repeated appropriation of the proceeds of unpaid wage labour in the process of commodity manufacture, and the subsequent realisation of the commodities so produced. Thus quite a new incentive is given to constantly renewed production, to the process of reproduction as a regular phenomenon in capitalist society, an incentive unknown to any other system of production. In every other economic system known to history, reproduction is determined by the unceasing need of society for consumer goods, whether they are the needs of all the workers determined in a democratic manner as in an agrarian and communist market community, or the despotically determined needs of an antagonistic class society, as in an economy of slave labour or _corvée_ and the like. But in a capitalist system of production, it is not consideration of social needs which actuates the individual private producer who alone matters in this connection. His production is determined entirely by the effective demand, and even this is to him a mere means for the realisation of surplus value which for him is indispensable. Appropriation of surplus value is his real incentive, and production of consumer goods for the satisfaction of the effective demand is only a detour when we look to the real motive, that of appropriation of surplus value, although for the individual capitalist it is also a rule of necessity. This motive, to appropriate surplus value, also urges him to re-engage in reproduction over and over again. It is the production of surplus value which turns reproduction of social necessities into a _perpetuum mobile_. Reproduction, for its part, can obviously be only resumed when the products of the previous period, the commodities, have been realised; that is, converted into money; for capital in the form of money, in the form of pure value, must always be the starting point of reproduction in a capitalist system. The first condition of reproduction for the capitalist producer is thus seen to be a successful realisation of the commodities produced during the preceding period of production. Now we come to a second important point. Under a system of private economy, it is the individual producer who determines the volume of reproduction at his discretion. His main incentive is appropriation of surplus value, indeed an appropriation increasing as rapidly as possible. An accelerated appropriation of surplus value, however, necessitates an increased production of capital to generate this surplus value. Here a large-scale enterprise enjoys advantages over a small one in every respect. In fine, the capitalist method of production furnishes not only a permanent incentive to reproduction in general, but also a motive for its expansion, for reproduction on an ever larger scale. Nor is that all. Capitalist methods of production do more than awaken in the capitalist this thirst for surplus value whereby he is impelled to ceaseless expansion of reproduction. Expansion becomes in truth a coercive law, an economic condition of existence for the individual capitalist. Under the rule of competition, cheapness of commodities is the most important weapon of the individual capitalist in his struggle for a place in the market. Now all methods of reducing the cost of commodity production permanently amount in the end to an expansion of production; excepting those only which aim at a specific increase of the rate of surplus value by measures such as wage-cutting or lengthening the hours of work. As for these latter devices, they are as such likely to encounter many obstacles. In this respect, a large enterprise invariably enjoys advantages of every kind over a small or medium concern. They may range from a saving in premises or instruments, in the application of more efficient means of production, in extensive replacement of manual labour by machinery, down to a speedy exploitation of a favourable turn of the market so as to acquire raw materials cheaply. Within very wide limits, these advantages increase in direct proportion to the expansion of the enterprise. Thus, as soon as a few capitalist enterprises have been enlarged, competition itself forces all others to expand likewise. Expansion becomes a condition of existence. A growing tendency towards reproduction at a progressively increasing scale thus ensues, which spreads automatically like a tidal wave over ever larger surfaces of reproduction. Expanding reproduction is not a new discovery of capital. On the contrary, it had been the rule since time immemorial in every form of society that displayed economic and cultural progress. It is true, of course, that simple reproduction as a mere continuous repetition of the process of production on the same scale as before can be observed over long periods of social history. In the ancient agrarian and communist village communities, for instance, increase in population did not lead to a gradual expansion of production, but rather to the new generation being expelled and the subsequent founding of equally small and self-sufficient colonies. The old small handicraft units of India and China provide similar instances of a traditional repetition of production in the same forms and on the same scale, handed down from generation to generation. But simple reproduction is in all these cases the source and unmistakable sign of a general economic and cultural stagnation. No important forward step in production, no memorial of civilisation, such as the great waterworks of the East, the pyramids of Egypt, the military roads of Rome, the Arts and Sciences of Greece, or the development of craftsmanship and towns in the Middle Ages would have been possible without expanding reproduction; for the basis and also the social incentive for a decisive advancement of civilisation lies solely in the gradual expansion of production beyond immediate requirements, and in a continual growth of the population itself as well as of its demands. Exchange in particular, which brought about a class society, and its historical development into the capitalist form of economy, would have been unthinkable without expanding reproduction. In a capitalist society, moreover, expanding reproduction acquires certain characteristics. As we have already mentioned, it becomes right away a coercive law to the individual capitalist. Capitalist methods of production do not exclude simple or even retrogressive reproduction; indeed, this is responsible for the periodical phenomenon of crises following phases, likewise periodical, of overstrained expansion of reproduction in times of boom. But ignoring periodical fluctuations, the general trend of reproduction is ever towards expansion. For the individual capitalist, failure to keep abreast of this expansion means quitting the competitive struggle, economic death. Moreover, there are certain other aspects to be considered. The concept of expanding reproduction applies only to the quantity of products, to the aggregate of manufactured objects. So long as production rests solely or mainly upon a natural economy, consumption determines the extent and character of the individual labour process, as well as that of reproduction in general, as an end in itself: this applies to the agrarian and communist village communities of India, to the Roman _villa_ with its economy of slave labour, and to the medieval feudal farm based on _corvée_. But the picture is different in a capitalist economic system. Capitalist production is not production for the purpose of consumption, it is production for the purpose of creating value. The whole process of production as well as of reproduction is ruled by value relationships. Capitalist production is not the production of consumer goods, nor is it merely the production of commodities: it is pre-eminently the production of surplus value. Expanding reproduction, from a capitalist point of view, is expanding production of surplus value, though it takes place in the forms of commodity production and is thus in the last instance the production of consumer goods. Changes in the productivity of labour during the course of reproduction cause continual discrepancies between these two aspects. If productivity increases, the same amount of capital and surplus value may represent a progressively larger amount of consumer goods. Expanding production, understood as the creation of a greater amount of surplus value, need not therefore necessarily imply expanding reproduction in the capitalist meaning of the term. Conversely, capital may, within limits, yield a greater surplus value in consequence of a higher degree of exploitation such as is brought about by wage-cutting and the like, without actually producing a greater amount of goods. But in both cases the surplus value has a twofold aspect: it is a quantity of value as well as an aggregate of material products, and from a capitalist point of view, its elements in both instances are thus the same. As a rule, an increased production of surplus value results from an increase of capital brought about by addition of part of the appropriated surplus value to the original capital, no matter whether this capitalist surplus value is used for the expansion of an old enterprise or for founding a new one, an independent offshoot. Capitalist expanding reproduction thus acquires the specific characteristics of an increase in capital by means of a progressive capitalisation of surplus value, or, as Marx has put it, by the accumulation of capital. The general formula for enlarged reproduction under the rule of capital thus runs as follows: _c + v + s/x + s´_. Here _s/x_ stands for the capitalised part of the surplus value appropriated in an earlier period of production; _s´_ stands for the new surplus value created by the increased capital. Part of this new surplus value is capitalised again, and expanding reproduction is thus, from the capitalist point of view, a constantly flowing process of alternate appropriation and capitalisation of surplus value. So far, however, we have only arrived at a general and abstract formula for reproduction. Let us now consider more closely the concrete conditions which are necessary to apply this formula. The surplus value which has been appropriated, after it has successfully cast off its commodity-form in the market, appears as a given amount of money. This money-form is the form of its absolute value, the beginning of its career as capital. But as it is impossible to create surplus value with money, it cannot, in this form, advance beyond the threshold of its career. Capital must assume commodity-form, so that the particular portion of it which is earmarked for accumulation can be capitalised. For only in this form can it become productive capital; that is, capital begetting new surplus value. Therefore, like the original capital, it must again be divided into two parts; a constant part, comprising the inanimate means of production, and a variable part, the wages. Only then will our formula _c + v + s_ apply to it in the same way as it applied to the old capital. But the good intent of the capitalist to accumulate, his thrift and abstinence which make him use the greater part of his surplus value for production instead of squandering it on personal luxuries, is not sufficient for this purpose. On the contrary, it is essential that he should find on the commodity market the concrete forms which he intends to give his new surplus value. In the first place, he must secure the material means of production such as raw materials, machines etc. required for the branch of production he has chosen and planned, so that the particular part of the surplus value which corresponds to his constant capital may assume a productive form. Secondly, the other, variable part of his surplus value must also be convertible, and two essentials are necessary for this conversion: of first importance, the labour market must offer a sufficient quantity of additional labour, and secondly, as the workers cannot live on money alone, the commodity market, too, must offer an additional amount of provisions, which the workers newly to be employed may exchange against the variable part of the surplus value they will get from the capitalist. All these prerequisites found, the capitalist can set his capitalised surplus value to work and make it, as operating capital, beget new surplus value. But still his task is not completely done. Both the new capital and the surplus value produced still exist for the time being in the shape of an additional quantity of some commodity or other. In this form the new capital is but advanced, and the new surplus value created by it is still in a form in which it is of no use to the capitalist. The new capital as well as the surplus value which it has created must cast off their commodity-form, re-assume the form of pure value, and thus revert to the capitalist as money. Unless this process is successfully concluded, the new capital and surplus value will be wholly or partly lost, the capitalisation of surplus value will have miscarried, and there will have been no accumulation. It is absolutely essential to the accumulation of capital that a sufficient quantity of commodities created by the new capital should win a place for itself on the market and be realised. Thus we see that expanding reproduction as accumulation of capital in a capitalist system is bound up with a whole series of special conditions. Let us look at these more closely. The first condition is that production should create surplus value, for surplus value is the elementary form in which alone increased production is possible under capitalist conditions. The entire process of production must abide by this condition when determining the relations between capitalist and worker in the production of commodities. Once this first condition is given, the second is that surplus value must be realised, converted into the form of money, so that it can be appropriated for the purposes of expanding reproduction. This second condition thus leads us to the commodity market. Here, the hazards of exchange decide the further fate of the surplus value, and thus the future of reproduction. The third condition is as follows: provided that part of the realised surplus value has been added to capital for the purpose of accumulation, this new capital must first assume its productive form of labour and inanimate means of production. Moreover, that part of it which had been exchanged for labour must be converted into provisions for the workers. Thus we are led again to the markets of labour and commodities. If all these requirements have been met and enlarged reproduction of commodities has taken place, a fourth condition must be added: the additional quantity of commodities representing the new capital plus surplus value will have to be realised, that is, reconverted into money. Only if this conversion has been successful, can it be said that expanding capitalist reproduction has actually taken place. This last condition leads us back to the commodity market. Thus capitalist production and reproduction imply a constant shifting between the place of production and the commodity market, a shuttle movement from the private office and the factory where unauthorised persons are strictly excluded, where the sovereign will of the individual capitalist is the highest law, to the commodity market where nobody sets up any laws and where neither will nor reason assert themselves. But it is this very licence and anarchy of the commodity market which brings home to the individual capitalist that he is dependent upon society, upon the entirety of its producing and consuming members. The individual capitalist may need additional means of production, additional labour and provisions for these workers in order to expand reproduction, but whether he can get what he needs depends upon factors and events beyond his control, materialising, as it were, behind his back. In order to realise his increased aggregate of products, the individual capitalist requires a larger market for his goods, but he has no control whatever over the actual increase of demand in general, or of the particular demand for his special kind of good. The conditions we have enumerated here, which all give expression to the inherent contradiction between consumption and private production and their social interconnection, are nothing new, and it is not only at the stage of reproduction that they become apparent. These conditions express the general contradiction inherent in capitalist production. They involve, however, particular difficulties as regards the process of reproduction for the following reasons. With regard to reproduction, especially expanding reproduction, the capitalist method of production not only reveals its general fundamental character, but, what is more, it shows, in the various periods of production, a definite rhythm within a continuous progression--the characteristic interplay of individual wills. From this point of view, we must inquire in a general way how it is possible for every individual capitalist to find on the market the means of production and the labour he requires for the purpose of realising the commodities he has produced, although there exists no social control whatever, no plan to harmonize production and demand. This question may be answered by saying that the capitalist's greed for surplus value, enhanced by competition, and the automatic effects of capitalist exploitation, lead to the production of every kind of commodity, including means of production, and also that a growing class of proletarianised workers becomes generally available for the purposes of capital. On the other hand, the lack of a plan in this respect shows itself in the fact that the balance between demand and supply in all spheres can be achieved only by continuous deviations, by hourly fluctuations of prices, and by periodical crises and changes of the market situation. From the point of view of reproduction the question is a different one. How is it possible that the unplanned supply in the market for labour and means of production, and the unplanned and incalculable changes in demand nevertheless provide adequate quantities and qualities of means of production, labour and opportunities for selling which the individual capitalist needs in order to make a sale? How can it be assured that every one of these factors increases in the right proportion? Let us put the problem more precisely. According to our well-known formula, let the composition of the individual capitalist's production be expressed by the proportion _40c + 10v + 10s_. His constant capital is consequently four times as much as his variable capital, and the rate of exploitation is 100 per cent. The aggregate of commodities is thus represented by a value of 60. Let us now assume that the capitalist is in a position to capitalise and to add to the old capital of this given composition half of his surplus value. In this case, the formula _44c + 11v + 11s = 66_ would apply to the next period of production. Let us assume now that the capitalist can continue the annual capitalisation of half his surplus value for a number of years. For this purpose it is not sufficient that means of production, labour and markets in general should be forthcoming, but he must find these factors in a proportion that is strictly in keeping with his progress in accumulation. FOOTNOTES: [58] 'If production be capitalistic in form, so, too, will be reproduction' (_Capital_, vol. i, p. 578). [59] Surplus value in our exposition is identical with profit. This is true for production as a whole, which alone is of account in our further observations. For the time being, we shall not deal with the further division of surplus value into its component parts: profit of enterprise, interest, and rent, as this subdivision is immaterial to the problem of reproduction. _CHAPTER II_ QUESNAY'S AND ADAM SMITH'S ANALYSES OF THE PROCESS OF REPRODUCTION So far we have taken account only of the individual capitalist in our survey of reproduction; he is its typical representative, its agent, for reproduction is indeed brought about entirely by individual capitalist enterprises. This approach has already shown us that the problem involves difficulties enough. Yet these difficulties increase to an extraordinary degree and become even more complicated, when we turn our attention from the individual capitalist to the totality of capitalists. A superficial glance suffices to show that capitalist reproduction as a social whole must not be regarded simply as a mechanical summation of all the separate processes of individual capitalist reproduction. We have seen, for instance, that one of the fundamental conditions for enlarged reproduction by an individual capitalist is a corresponding increase of his opportunities to sell on the commodity market. But the individual capitalist may not always expand because of an absolute increase in the absorptive capacity of the market, but also as a result of the competitive struggle, at the cost of other individual capitalists. Thus one capitalist may win what another or many others who have been shouldered from the market must write off as a loss. This process will enable one capitalist to increase his reproduction by the amount that it compels others by losses to restrict their own. One capitalist will be able to engage in enlarged reproduction because others cannot even achieve simple reproduction. In the same way, one capitalist may enlarge his reproduction by using labour power and means of production which another's bankruptcy, that is his partial or complete retirement from reproduction, has set free. These commonplaces prove that reproduction of the social capital as a whole is not the same as the reproduction of the individual capitalist raised to the _n_th degree. They show that the reproductive activities of individual capitalists ceaselessly cut across one another and to a greater or smaller degree may cancel each other out. Therefore we must clarify our concept of reproduction of capital as a whole, before we examine the laws and mechanisms of capitalist total reproduction. We must raise the question whether it is even possible to deduce anything like total reproduction from the disorderly jumble of individual capitals in constant motion, changing from moment to moment according to uncontrollable and incalculable laws, partly running a parallel course, and partly intersecting and cancelling each other out. Can one actually talk of total social capital of society as an entity, and if so, what is the real meaning of this concept? That is the first question a scientific examination of the laws of reproduction has to consider. At the dawn of economic theory and bourgeois economics, Quesnay, the father of the Physiocrats, approached the problem with classical fearlessness and simplicity and took it for granted that total capital exists as a real and active entity. In his famous _Tableau Économique_, so intricate that no one before Marx could understand it, Quesnay demonstrated the phases of the reproduction of aggregate capital with a few figures, at the same time taking into account that it must also be considered from the aspect of commodity exchange, that is as a process of circulation.[60] Society as Quesnay sees it consists of three classes: the productive class of agriculturists; the sterile class containing all those who are active outside the sphere of agriculture--industry, commerce, and the liberal professions; and lastly the class of landowners, including the Sovereign and the collectors of tithes. The national aggregate product materialises in the hands of the productive class as an aggregate of provisions and raw materials to the value of some 5,000 million livres. Of this sum, 2,000 millions represent the annual working capital of agriculture, 1,000 millions represent the annual wear and tear of fixed capital, and 2,000 millions are the net revenue accruing to the landowners. Apart from this total produce, the agriculturists, here conceived quite in capitalist terms as tenant farmers, have 2,000 million livres cash in hand. Circulation now takes place in such a way that the tenant class pay the landowners 2,000 millions cash as rent (as the cost of the previous period of production). For this money the landowning class buy provisions from the tenants for 1,000 millions and industrial products from the sterile class for the remaining 1,000 millions. The tenants in their turn buy industrial products for the 1,000 millions handed back to them, whereupon the sterile class buy agricultural products for the 2,000 millions they have in hand: for 1,000 millions raw materials etc., to replace their annual working capital, and provisions for the remaining 1,000 millions. Thus the money has in the end returned to its starting point, the tenant class; the product is distributed among all classes so that consumption is ensured for everyone; at the same time the means of production of the sterile as well as of the productive class have been renewed and the landowning class has received its revenue. The prerequisites of reproduction are all present, the conditions of circulation have all been fulfilled, and reproduction can start again on its regular course.[61] We shall see later in the course of our investigation that this exposition, though showing flashes of genius, remains deficient and primitive. In any case, we must stress here that Quesnay, on the threshold of scientific economics, had not the slightest doubt as to the possibility of demonstrating total social capital and its reproduction. Adam Smith, on the other hand, while giving a more profound analysis of the relations of capital, laid out what seems like a maze when compared with the clear and sweeping outlines of the Physiocrat conception. By his wrong analysis of prices, Smith upset the whole foundation of the scientific demonstration of the capitalist process as a whole. This wrong analysis of prices ruled bourgeois economics for a long time; it is the theory which maintains that, although the value of a commodity represents the amount of labour spent in its production, yet the price consists of three elements only: the wage of labour, the profit of capital, and the rent. As this obviously must also apply to the aggregate of commodities, the national product, we are faced with the startling discovery that, although the value of the aggregate of commodities manufactured by capitalist methods represents all paid wages together with the profits of capital and the rents, that is the aggregate surplus value, and consequently can replace these, there is no component of value which corresponds to the constant capital used in production. According to Smith, _v + s_ is the formula expressing the value of the capitalist product as a whole. Demonstrating his view with the example of corn, Smith says as follows: These three parts (wages, profit, and rent) seem either immediately or ultimately to make up the whole price of corn. A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer who advances both the rent of this land and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, of labour and profit.'[62] Sending us in this manner 'from pillar to post', as Marx has put it, Smith again and again resolved constant capital into _v + s_. However, he had occasional doubts and from time to time relapsed into the contrary opinion. He says in the second book: 'It has been shown in the first Book, that the price of the greater part of commodities resolves itself into three parts, of which one pays the wages of the labour, another the profits of the stock, and a third the rent of the land which had been employed in producing and bringing them to market.... Since this is the case ... with regard to every particular commodity, taken separately; it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country, taken complexly. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land.'[63] Here Smith hesitates and immediately below explains: 'But though the whole value of the annual produce of the land and labour of every country is thus divided among and constitutes a revenue to its different inhabitants, yet as in the rent of a private estate we distinguish between the gross rent and the neat rent, so may we likewise in the revenue of all the inhabitants of a great country. 'The gross rent of a private estate comprehends whatever is paid by the farmer; the neat rent, what remains free to the landlord after deducting the expense of management, of repairs, and all other necessary charges; or what, without hurting his estate, he can afford to place in his stock reserved for immediate consumption, or to spend upon his table, equipage, the ornaments of his house and furniture, his private enjoyments and amusements. His real wealth is in proportion, not to his gross, but to his neat rent. 'The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them after deducting the expense of maintaining, first, their fixed, and secondly, their circulating capital, or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniences, and amusements. Their real wealth too is in proportion, not to their gross, but to their neat revenue.'[64] Here Smith introduces a portion of value which corresponds to constant capital, only to eliminate it the very next moment by resolving it into wages, profits, and rents. And in the end, the matter rests with this explanation: 'As the machines and instruments of trade, etc. which compose the fixed capital either of an individual or of a society, make no part either of the gross or the neat revenue of either, so money, by means of which the whole revenue of the society is regularly distributed among all its different members, makes itself no part of that revenue.'[65] Constant capital, the fixed capital of Adam Smith, is thus put on the same level as money and does not enter into the total produce of society, its gross revenue. It does not exist within this total product as an element of value. You cannot get blood out of a stone, and so circulation, the mutual exchange of the total product constituted in this manner, can only lead to realisation of the wages (_v_) and of the surplus value (_s_). However, as it cannot by any means replace the constant capital, continued reproduction evidently must become impossible. Smith indeed knew quite well, and did not dream of denying, that every individual capitalist requires constant capital in addition to his wages fund, his variable capital, in order to run his enterprise. Yet the above analysis of commodity prices, when it comes to take note of capitalist production as a whole, allows constant capital to disappear without a trace in a puzzling way. Thus the problem of the reproduction of capital is completely muddled up. It is plain that if the most elementary premise of the problem, the demonstration of social capital as a whole, were on the rocks, the whole analysis was bound to fail. Ricardo, Say, Sismondi and others took up this erroneous theory of Adam Smith, and they all stumbled in their observations on the problem of reproduction over this most elementary difficulty: the demonstration of social capital. Another difficulty is mixed up with the foregoing from the very outset of scientific analysis. What is the nature of the total capital of a society? As regards the individual producer, the position is clear: his capital consists of the expenses of his enterprise. Assuming capitalist methods of production, the value of his product yields him a surplus over and above his expenses, that surplus value which does not replace his capital but constitutes his net income, which he can consume completely without encroaching upon his capital and which is thus his fund of consumption. It is true that the capitalist may save part of this net income, not consuming it himself but adding it to his capital. But that is another matter, a new step, the formation of a new capital which again must be replaced by subsequent reproduction and must again yield him a surplus. In any case, the capital of an individual always consists of what he requires for production, together with his advances on the running of his enterprise, and his income is what he himself actually consumes or may consume, his fund of consumption. If we ask a capitalist: 'What are the wages you pay your workers?' his answer will be: 'They are obviously part of my working capital.' But if we ask: 'What are these wages for the workers who have received them?'--it is impossible that he should describe them as capital, for wages received are not capital for the workers but income, their fund of consumption. Let us now take another example. A manufacturer of machinery produces machines in his factory. The annual output is a certain number of machines. In its value, however, this annual output contains the capital advanced by the manufacturer as well as the net income that has been earned. Part of the manufactured machines thus represent income for the manufacturer and are destined to realise this income in the process of circulation and exchange. But the person who buys these machines from the manufacturer does not buy them as income but in order to use them as a means of production; for him they are capital. These examples make it seem plausible that an object which is capital for one person may be income for another and _vice versa_. How can it be possible under these circumstances to construct anything in the nature of a total capital of society? Indeed almost every scientific economist up to the time of Marx concluded that there is no social capital.[66] Smith was still doubtful, undecided, vacillating about this question; so was Ricardo. But already Say declared categorically: 'It is in this way, that the total value of products is distributed amongst the members of the community; I say, the _total_ value, because such part of the whole value produced, as does not go to one of the consuming producers, is received by the rest. The clothier buys wool of the farmer, pays his workmen in every department, and sells the cloth, the result of their united exertion, at a price that reimburses all his advances, and affords himself a profit. He never reckons as profit, or as the revenue of his own industry, anything more than the _net_ surplus, after deducting all charges and outgoings; but those outgoings are merely an advance of their respective revenues to the previous producers, which are refunded by the _gross_ value of the cloth. The price paid to the farmer for his wool is the compound of the several revenues of the cultivator, the shepherd and the landlord. Although the farmer reckons as _net_ produce only the surplus remaining after payment of his landlord and his servants in husbandry, yet to them these payments are items of revenue--rent to the one and wages to the other--to the one, the revenue of the land, to the other, the revenue of his industry. The aggregate of all these is defrayed out of the value of the cloth, the whole of which forms the revenue of some one or other, and is entirely absorbed in that way.--Whence it appears that the term _net_ produce applies only to the individual revenue of each separate producer or adventurer in industry, but that the aggregate of individual revenue, the total revenue of the community, is equal to the _gross_ produce of its land, capital and industry, which entirely subverts the system of the economists of the last century, who considered nothing but the net produce of the land as farming revenue, and therefore concluded, that this net produce was all that the community had to consume; instead of closing with the obvious inference, that the whole of what had been created, may also be consumed by mankind.'[67] Say proves his theory in his own peculiar fashion. Whereas Adam Smith tried to give a proof by referring each private capital unit to its place of production in order to resolve it into a mere product of labour, but conceived of every product of labour in strictly capitalist terms as a sum of paid and unpaid labour, as _v + s_, and thus came to resolve the total product of society into _v + s_; Say, of course, is cocksure enough to 'correct' these classical errors by inflating them into common vulgarities. His argument is based upon the fact that the entrepreneur at every stage of production pays other people, the representatives of previous stages of production, for the means of production which are capital for him, and that these people in their turn put part of this payment into their own pockets as their income and partly use it to recoup themselves for expenses advanced in order to provide yet another set of people with an income. Say converts Adam Smith's endless chain of labour processes into an equally unending chain of mutual advances on income and their repayment from the proceeds of sales. The worker appears here as the absolute equal of the entrepreneur. He has his income advanced in the form of wages, paying for it in turn by the labour he performs. Thus the final value of the aggregate social product appears as the sum of a large number of advanced incomes and is spent in the process of exchange on repayment of all these advances. It is characteristic of Say's superficiality that he illustrates the social connections of capitalist reproduction by the example of watch manufacture--a branch of production which at that time and partly even to-day is pure 'manufacture' where every worker is also an entrepreneur on a small scale and the process of production of surplus value is masked by a series of successive acts of exchange typical of simple commodity production. Thus Say gives an extremely crude expression to the confusion inaugurated by Adam Smith. The aggregate of annual social produce can be completely resolved as regards its value into a sequence of various incomes. Therefore it is completely consumed every year. It remains an enigma how production can be taken up again without capital and means of production, and capitalist reproduction appears to be an insoluble problem. If we compare the varying approaches to the problem from the time of the Physiocrats to that of Adam Smith, we cannot fail to recognise partial progress as well as partial regression. The main characteristic of the economic conception of the Physiocrats was their assumption that agriculture alone creates a surplus, that is surplus value, and that agricultural labour is the only kind of labour which is productive in the capitalist sense of the term. Consequently we see in the _Tableau Économique_ that the unproductive class of industrial workers creates value only to the extent of the same 2,000 million livres which it consumes as raw materials and foodstuffs. Consequently, too, in the process of exchange, the total of manufactured products is divided into two parts, one of which goes to the tenant class and the other to the landowning class, while the manufacturing class does not consume its own products. Thus in the value of its commodities, the manufacturing class reproduces, strictly speaking, only that circulating capital which has been consumed, and no income is created for the class of entrepreneurs. The only income of society that comes into circulation in excess of all capital advances, is created in agriculture and is consumed by the landowning class in the form of rents, while even the tenant class do no more than replace their capital: to wit, 1,000 million livres interest from the fixed capital and 2,000 million circulating capital, two-thirds being raw materials and foodstuffs, and one-third industrial products. Further it is striking that it is in agriculture alone that Quesnay assumes the existence of fixed capital which he calls _avances primitives_ as distinct from _avances annuelles_. Industry, as he sees it, apparently works without any fixed capital, only with circulating capital turned over each year, and consequently does not create in its annual output of commodities any element of value for making good the wear and tear of fixed capital (such as premises, tools, and so on).[68] In contrast with this obvious defect, the English classical school shows a decisive advance above all in proclaiming every kind of labour as productive, thus revealing the creation of surplus value in manufacture as well as in agriculture. We say: the English classical school, because on this point Adam Smith himself occasionally relapses quietly into the Physiocrat point of view. It is only Ricardo who develops the theory of the value of labour as highly and logically as it could advance within the limits of the bourgeois approach. The consequence is that we must assume all capital investment to produce annual surplus value, in the manufacturing part of social production as a whole no less than in agriculture.[69] On the other hand, the discovery of the productive, value-creating property of every kind of labour, alike in agriculture and in manufacture, suggested to Smith that agricultural labour, too, must produce, apart from the rent for the landowning class, a surplus for the tenant class over and above the total of their capital expenses. Thus, in addition to the replacement of capital, an annual income of the tenant class comes into being.[70] Lastly, by a systematic elaboration of the concepts of _avances primitives_ and _avances annuelles_ introduced by Quesnay, which he calls fixed and circulating capital, Smith has made clear, among other things, that the manufacturing side of social production requires a fixed as well as a circulating capital. Thus he was well on the way to restoring to order the concepts of capital and revenue of society, and to describing them in precise terms. The following exposition represents the highest level of clarity which he achieved in this respect: 'Though the whole annual produce of the land and labour of every country is, no doubt, ultimately destined for supplying the consumption of its inhabitants and for procuring a revenue to them, yet when it first comes either from the ground or from the hands of the productive labourer, it naturally divides itself into two parts. One of them, and frequently the largest, is, in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock, or to some other person, as the rent of his land.'[71] 'The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them after deducting the expense of maintaining, first, their fixed, and secondly, their circulating capital; or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniencies, and amusements. Their real wealth too is in proportion, not to their gross, but to their neat revenue.'[72] The concepts of total capital and income appear here in a more comprehensive and stricter form than in the _Tableau Économique_. The one-sided connection of social income with agriculture is severed and social income becomes a broader concept; and a broader concept of capital in its two forms, fixed and circulating capital, is made the basis of social production as a whole. Instead of the misleading differentiation of production into two departments, agriculture and industry, other categories of real importance are here brought to the fore: the distinction between capital and income and the distinction, further, between fixed and circulating capital. Now Smith proceeds to a further analysis of the mutual relations of these categories and of how they change in the course of the social process, in production and circulation--in the reproductive process of society. He emphasises here a radical distinction between fixed and circulating capital from the point of view of the society: 'The whole expense of maintaining the fixed capital must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, etc., nor the produce of the labour necessary for fashioning those materials into the proper form, can ever make any part of it. The price of that labour may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. But in other sorts of labour, both the price and the produce go to this stock, the price to that of the workmen, the produce to that of other people whose subsistence, convenience and amusements are augmented by the labour of those workmen.'[73] Here Smith comes up against the important distinction between workers who produce means of production and those who produce consumer goods. With regard to the former he remarks that they create the value--destined to replace their wages and to serve as their income--in the form of means of production such as raw materials and instruments which in their natural form cannot be consumed. With regard to the latter category of workers, Smith observes that conversely the total product, or better that part of value contained in it which replaces the wages, the income of the workers together with its other remaining value, appears here in the form of consumer goods. (The real meaning latent in this conclusion, though Smith does not say so explicitly, is that the part of the product which represents the fixed capital employed in its production appears likewise in this form.) In the further course of our investigation we shall see how close Smith has here come to the vantage point from which Marx tackled the problem. The general conclusion, however, maintained by Smith without any further examination of the fundamental question, is that, in any case, whatever is destined for the preservation and renewal of the fixed capital of society cannot be added to society's net income. The position is different with regard to circulating capital. 'But though the whole expenses of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed, money, provisions, materials and finished work, the three last, it has already been observed, are regularly withdrawn from it and placed either in the fixed capital of the society, or in their stock reserved for immediate consumption. Whatever portion of those consumable goods is not employed in maintaining the former, goes all to the latter, and makes a part of the neat revenue of the society, besides what is necessary for maintaining the fixed capital.'[74] We see that Smith here simply includes in this category of circulating capital everything but the fixed capital already employed, that is to say, foodstuffs and raw materials and in part commodities which, according to their natural form, belong to the replacement of fixed capital. Thus he has made the concept of circulating capital vague and ambiguous. But a further and most important distinction crops up and cuts right through this conception: 'The circulating capital of a society is in this respect different from that of an individual. That of an individual is totally excluded from making any part of his neat revenue, which must consist altogether in his profits. But though the circulating capital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenues.'[75] In the following illustration Smith expounds what he means: 'Though the whole goods in a merchant's shop must by no means be placed in his own stock reserved for immediate consumption, they may in that of other people, who, from a revenue derived from other funds, may regularly replace their value to him, together with its profits, without occasioning any diminution either of his capital or theirs.'[76] Here Smith has established fundamental categories with regard to the reproduction and movement of circulating social capital. Fixed and circulating capital, private and social capital, private and social revenue, means of production and consumer goods, are marked out as comprehensive categories, and their real, objective interrelation is partly indicated and partly drowned in the subjective and theoretical contradictions of Smith's analysis. The concise, strict, and classically clear scheme of the Physiocrat theory is dissolved here into a disorderly jumble of concepts and relations which at first glance appears an absolute chaos. But we may already perceive new connections within the social process of reproduction, understood by Smith in a deeper, more modern and vital way than was within Quesnay's grasp, though, like Michelangelo's slave in the unhewn block of marble, they are still inchoate. This is the only illustration Smith gives of this problem. But at the same time he attacks it from another angle--by an analysis of value. This very same theory which represents an advance beyond the Physiocrats--the theory that it is an essential quality of all labour to create value; the strictly capitalist distinction between paid labour replacing wages, and unpaid labour creating surplus value; and, finally, the strict division of surplus value into its two main categories, of profit and rent--all this progress from the analysis of the Physiocrats leads Smith to the strange proposition that the price of every commodity consists of wages, plus profits, plus rent, or, in Marx's shorthand, of _v + s_. In consequence, the commodities annually produced by society as a whole can be resolved completely, as to value, into the two components: wages and surplus value. Here the category of capital has disappeared all of a sudden; society produces nothing but income, nothing but consumer goods, which it also consumes completely. Reproduction without capital becomes a paradox, and the treatment of the problem as a whole has taken an immense backward step against that of the Physiocrats. The followers of Adam Smith have tackled this twofold theory from precisely the wrong approach. Before Marx nobody concerned himself with the important beginnings of an exact exposition of the problem in Smith's second book, while most of his followers jealously preserved Smith's radically wrong analysis of prices, accepting it, like Ricardo, without question, or else, like Say, elaborating it into a trite doctrine. Where Smith raised fruitful doubts and stimulating contradictions, Say flaunted the opinionated presumption of a commonplace mind. Smith's observation that the capital of one person may be the revenue of another induced Say to proclaim every distinction between capital and income on the social scale to be absurd. The absurdity, however, that income should completely absorb the total value of annual production which is thus consumed completely, assumes in Say's treatment the character of an absolutely valid dogma. If society annually consumes its own total product completely, social reproduction without any means of production whatever must become an annual repetition of the Miracle of the Creation. In this state the problem of reproduction remained up to the time of Karl Marx. FOOTNOTES: [60] 'Quesnay's _Tableau Économique_ shows ... how the result of national production in a certain year, amounting to some definite value, is distributed by means of the circulation in such a way, that ... reproduction can take place.... The innumerable individual acts of circulation are at once viewed in their characteristic social mass movement--the circulation between great social classes distinguished by their economic function' (_Capital_, vol. ii, p. 414). [61] Cf. _Analyse du Tableau Économique_, in _Journal de l'Agriculture, du Commerce et des Finances_, by Dupont (1766), pp. 305 ff. in Oncken's edition of _OEuvres de F. Quesnay_. Quesnay remarks explicitly that circulation as he describes it is based upon two conditions: unhampered trade, and a system of taxation applying only to rent: 'Yet these facts have indispensable conditions; that the freedom of commerce sustains the sale of products at a good price, ... and moreover, that the farmer need not pay any other direct or indirect charges but this income, part of which, say two sevenths, must form the revenue of the Sovereign' (op. cit., p. 311). [62] Adam Smith, _An Enquiry into the Nature and Causes of the Wealth of Nations_ (ed. MacCulloch, Edinburgh London, 1828), vol. i, pp. 86-8. [63] Op. cit., vol. ii, pp. 17-18. [64] Ibid., pp. 18-19. [65] Ibid., p. 23. [66] As to the concept of 'national capital' specific to Rodbertus, see below, Section II. [67] J. B. Say, _A Treatise on Political Economy_ (transl. by C. R. Prinsep, vol. ii, London, 1821); pp. 75-7. [68] Attention must be drawn to the fact that Mirabeau in his _Explications_ on the _Tableau Économique_ explicitly mentions the fixed capital of the unproductive class: 'The primary advances of this class, for the establishment of manufactures, for instruments, machines, mills, smithies (ironworks) and other factories ... (amount to) 2,000 million livres' (_Tableau Économique avec ses Explications_, 1760, p. 82). In his confusing sketch of the _Tableau_ itself, Mirabeau, too, fails to take this fixed capital of the sterile class into account. [69] Smith accordingly arrives at this general formulation: 'The value which the workmen add to the materials, therefore, resolves itself in this case into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced' (op. cit., vol. i, p. 83). Further, in Book II, chap. 8, on industrial labour in particular: 'The labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed' (op. cit., vol. ii, pp. 93-4). [70] 'The labourers ... therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profit, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord' (ibid., p. 149). [71] Ibid., pp. 97-8. Yet already in the following sentence Smith converts capital completely into wages, that is variable capital: 'That part of the annual produce of the land and labour of any country which replaces a capital, never is immediately employed to maintain any but productive hands. It pays the wages of productive labour only. That which is immediately destined for constituting a revenue, either as profit or as rent, may maintain indifferently either productive or unproductive hands' (ibid., p. 98). [72] Ibid., p. 19. [73] Smith, op. cit., vol. ii, pp. 19-20. [74] Ibid., vol. i, pp. 21-2. [75] Ibid., p. 22. [76] Ibid. _CHAPTER III_ A CRITICISM OF SMITH'S ANALYSIS Let us recapitulate the conclusions to which Smith's analysis has brought us: (1) There is a fixed capital of society, no part of which enters into its net revenue. This fixed capital consists in 'the materials necessary for supporting their useful machines and instruments of trade' and 'the produce of labour necessary for fashioning those materials into the proper form'.[77] By singling out the production of such fixed capital as of a special kind, and explicitly contrasting it with the production of consumer goods, Smith in effect transformed fixed capital into what Marx calls 'constant capital'--that part of capital which consists of all material means of production, as opposed to labour power. (2) There is a circulating capital of society. After eliminating the part of fixed, or constant, capital, there remains only the category of consumer goods; these are not capital for society but net revenue, a fund of consumption. (3) Capital and net revenue of an individual do not strictly correspond with capital and net revenue of society. What is nothing but fixed, or constant capital for society as a whole cannot be capital for the individual; it must be revenue, too, a fund of consumption, comprising as it does those parts of fixed capital which represent the workers' wages and the capitalists' profits. On the other hand, the circulating capital of the individuals cannot be capital for society but must be revenue, especially in so far as it takes the form of provisions. (4) As regards the value of the total annual social product, no trace of capital remains. It can be resolved completely into the three kinds of income: wages, profits of capital, and rents. If we tried from this haphazard collection of odd ideas to build up a picture of the annual reproduction of total social capital, and of its mechanism, we should soon despair of our task. Indeed, all these observations leave us infinitely remote from the solution of the problem how social capital is annually renewed, how everybody's consumption is ensured by his income, while the individuals can nevertheless adhere to their own points of view on capital and income. Yet if we wish to appreciate fully Marx's contribution to the elucidation of this problem, we must be fully aware of all this confusion of ideas, the mass of conflicting points of view. Let us begin with Adam Smith's last thesis which alone would suffice to wreck the treatment of the problem of reproduction in classical economics. Smith's basic principle is that the total produce of society, when we consider its value, resolves itself completely into wages, profits and rents: this conception is deeply rooted in his scientific theory that value is nothing but the product of labour. All labour performed, however, is wage labour. This identification of human labour with capitalist wage labour is indeed the classical element in Smith's doctrine. The value of the aggregate product of society comprises both the recompense for wages advanced and a surplus from unpaid labour appearing as profit for the capitalist and rent for the landowner. What holds good for the individual commodity must hold good equally for the aggregate of commodities. The whole mass of commodities produced by society--taken as a quantity of value--is nothing but a product of labour, of paid as well as unpaid labour, and thus it is also to be completely resolved into wages, profits, and rents. It is of course true that raw materials, instruments, and the like, must be taken into consideration in connection with all labour. Yet is it not true also that these raw materials and instruments in their turn are equally products of labour which again may have been paid or unpaid? We may go back as far as we choose, we may twist and turn the problem as much as we like, yet we shall find no element in the value of any commodity--and therefore none in the price--which cannot be resolved purely in terms of human labour. We can distinguish, however, two parts in all labour: one part repays the wages and the other accrues to the capitalist and landlord. There seems nothing left but wages and profits--and yet, there is capital, individual and social capital. How can we overcome this blatant contradiction? The fact that Marx himself stubbornly pursued this matter for a long time without getting anywhere at first as witness his _Theories of the Surplus Value_,[78] proves that this theoretical problem is indeed extremely hard to solve. Yet the solution he eventually hit on was strikingly successful, and it is based upon his theory of value. Adam Smith was perfectly right: nothing but labour constitutes the value of the individual commodity and of the aggregate of commodities. He was equally right in saying that from a capitalist point of view all labour is either paid labour which restores the wages, or unpaid labour which, as surplus value, accrues to the various classes owning the means of production. What he forgot, however, or rather overlooked, is the fact that, apart from being able to create new value, labour can also transfer to the new commodities the old values incorporated in the means of production employed. A baker's working day of ten hours is, from the capitalist point of view, divided into paid and unpaid hours, into _v + s_. But the commodity produced in these ten hours will represent a greater value than that of ten hours' labour, for it will also contain the value of the flour, of the oven which is used, of the premises, of the fuel and so on, in short the value of all the means of production necessary for baking. Under one condition alone could the value of any one commodity be strictly equal to _v + s_; if a man were to work in mid-air, without raw materials, without tools or workshop. But since all work on materials (material labour) presupposes means of production of some sort which themselves result from preceding labour, the value of this past labour is of necessity transferred to the new product. The process in question does not only take place in capitalist production; it is the general foundation of human labour, quite independent of the historical form of society. The handling of man-made tools is a fundamental characteristic of human civilisation. The concept of past labour which precedes all new labour and prepares its basis, expresses the nexus between man and nature evolved in the history of civilisation. This is the eternal chain of closely interwoven labouring efforts of human society, the beginnings of which are lost in the grey dawn of the socialisation of mankind, and the termination of which would imply the end of the whole of civilised mankind. Therefore we have to picture all human labour as performed with the help of tools which themselves are already products of antecedent labour. Every new product thus contains not only the new labour whereby it is given its final form, but also past labour which had supplied the materials for it, the instruments of labour and so forth. In the production of value, that is commodity production into which capitalist production also enters, this phenomenon is not suspended, it only receives a particular expression. Here the labour which produces commodities assumes a twofold characteristic: it is on the one hand useful concrete labour of some kind or other, creating the useful object, the value-in-use. On the other hand, it is abstract, general, socially necessary labour and as such creates value. In its first aspect it does what labour has always done: it transfers to the new product past labour, incorporated in the means of production employed, with this distinction only, that this past labour, too, now appears as value, as old value. In its second aspect, labour creates new value which, in capitalist terms, can be reduced to paid and unpaid labour, to _v + s_. Thus the value of every commodity must contain old value which has been transferred by labour _qua_ useful concrete labour from the means of production to the commodity, as well as the new value, created by the same labour _qua_ socially necessary labour merely as this labour is expended hour by hour. This distinction was beyond Smith: he did not differentiate the twofold character of value-creating labour. Marx once claimed to have discovered the ultimate source of Smith's strange dogma--that the aggregate of produced values can be completely resolved into _v + s_--in his fundamentally erroneous theory of value.[79] Failure to differentiate between the two aspects of commodity-producing labour as concrete and useful labour on the one hand, and abstract and socially necessary labour on the other, indeed forms one of the most important characteristics of the theory of value as conceived not only by Smith but by all members of the classical school. Disregarding all social consequences, classical economics recognised that human labour alone is the factor which creates value, and it worked out this theory to that degree of clarity which we meet in Ricardo's formulation. There is a fundamental distinction, however, between Marx's theory of value and Ricardo's, a distinction which has been misunderstood not only by bourgeois economists but also in most cases by the popularisers of Marx's doctrine: Ricardo, conceiving as he did, of bourgeois economy in terms of natural law, believed also that the creation of value, too, is a natural property of human labour, of the specific and concrete labour of the individual human being. This view is even more blatantly revealed in the writings of Adam Smith who for instance declares what he calls the 'propensity to exchange' to be a quality peculiar to human nature, having looked for it in vain in animals, particularly in dogs. And although he doubted the existence of the propensity to exchange in animals, Smith attributed to animal as well as human labour the faculty of creating value, especially when he occasionally relapses into the Physiocrat doctrine: 'No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Not only his labouring servants, but his labouring cattle, are productive labourers....'[80] 'The labourers and labouring cattle, therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord.'[81] Smith's belief that the creation of value is a direct physiological property of labour, a manifestation of the animal organism in man, finds its most vivid expression here. Just as the spider produces its web from its own body, so labouring man produces value--labouring man pure and simple, every man who produces useful objects--because labouring man is by birth a producer of commodities; in the same way human society is founded by nature on the exchange of commodities, and a commodity economy is the normal form of human economy. It was left to Marx to recognise that a given value covers a definite social relationship which develops under definite historical conditions. Thus he came to discriminate between the two aspects of commodity-producing labour: concrete individual labour and socially necessary labour. When this distinction is made, the solution of the money problem becomes clear also, as though a spotlight had been turned on it. Marx had to establish a dynamic distinction in the course of history between the commodity producer and the labouring man, in order to distinguish the twin aspects of labour which appear static in bourgeois economy. He had to discover that the production of commodities is a definite historical form of social production before he could decipher the hieroglyphics of capitalist economy. In a word, Marx had to approach the problem with methods of deduction diametrically opposed to those of the classical school, he had in his approach to renounce the latter's faith in the human and normal element in bourgeois production and to recognise their historical transience: he had to reverse the metaphysical deductions of the classics into their opposite, the dialectical. On this showing Smith could not possibly have arrived at a clear distinction between the two aspects of value-creating labour, which on the one hand transfers the old value incorporated in the means of production to the new product, and on the other hand creates new value at the same time. Moreover, there seems to be yet another source of his dogma that total value can be completely resolved into _v + s_. We should be wrong to assume that Smith lost sight of the fact that every commodity produced contains not only the value created by its production, but also the values incorporated in all the means of production that had been spent upon it in the process of manufacturing it. By the very fact that he continually refers us from one stage of production to a former one--sending us, as Marx complains, from pillar to post, in order to show the complete divisibility of the aggregate value into _v + s_--Smith proves himself well aware of the point. What is strange in this connection is that he again and again resolves the old value of the means of production, too, into _v + s_, so as finally to cover the whole value contained in the commodity. 'In the price of corn, for example, one part pays the rent of the landlord, another pays the wages of maintenance of the labourers and labouring cattle employed in producing it, and the third pays the profit of the farmer. These three parts (wages, profit, and rent) seem either immediately or ultimately to make up the whole price of corn. A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer who advances both the rent of this land and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, of labour, and profit.'[82] Apparently Smith's confusion arose from the following premises: first, that all labour is performed with the help of means of production of some kind or other--yet what are these means of production associated with any given labour (such as raw materials and tools) if not the product of previous labour? Flour is a means of production to which the baker adds new labour. Yet flour is the result of the miller's work, and in his hands it was not a means of production but the very product, in the same way as now the bread and pastries are the product of the baker. This product, flour, again presupposes grain as a means of production, and if we go one step further back, this corn is not a means of production in the hands of the farmer but the product. It is impossible to find any means of production in which value is embodied, without it being itself the product of some previous labour. Secondly, speaking in terms of capitalism, it follows further that all capital which has been completely used up in the manufacture of any commodity, can in the end be resolved into a certain quantity of performed labour. Thirdly, the total value of the commodity, including all capital advances, can readily be resolved in this manner into a certain quantity of labour. What is true for every commodity, must go also for the aggregate of commodities produced by a society in the course of a year; its aggregate value can similarly be resolved into a quantity of performed labour. Fourthly, all labour performed under capitalist conditions is divided into two parts: paid labour which restores the wages advanced, and unpaid labour which creates profit and rent, or surplus value. All labour carried out under capitalist conditions thus corresponds to our formula _v + s_.[83] All the arguments outlined above are perfectly correct and unassailable. Smith handled them in a manner which proves his scientific analysis consistent and undeviating, and his conceptions of value and surplus value a distinct advance on the Physiocrat approach. Only occasionally, in his third thesis, he went astray in his final conclusion, saying that the aggregate value of the annually produced aggregate of commodities can be resolved into the labour of that very year, although he himself had been acute enough to admit elsewhere that the value of the commodities a nation produces in the course of one year necessarily includes the labour of former years as well, that is the labour embodied in the means of production which have been handed down. But even if the four statements enumerated are perfectly correct in themselves, the conclusion Smith draws from them--that the total value of every commodity, and equally of the annual aggregate of commodities in a society, can be resolved entirely into _v + s_--is absolutely wrong. He has the right idea that the whole value of a commodity represents nothing but social labour, yet identifies it with a false principle, that all value is nothing but _v + s_. The formula _v + s_ expresses the function of living labour under capitalism, or rather its double function, first to restore the wages, or the variable capital, and secondly, to create surplus value for the capitalist. Wage labour fulfils this function whilst it is employed by the capitalists, in virtue of the fact that the value of the commodities is realised in cash. The capitalist takes back the variable capital he had advanced in form of wages, and he pockets the surplus value as well. _v + s_ therefore expresses the relation between wage labour and capitalist, a relationship that is terminated in every instance as soon as the process of commodity production is finished. Once the commodity is sold, and the relation _v + s_ is realised for the capitalist in cash, the whole relationship is wiped out and leaves no traces on the commodity. If we examine the commodity and its value, we cannot ascertain whether it has been produced by paid or by unpaid labour, nor in what proportion these have contributed. Only one fact is beyond doubt: the commodity contains a certain quantity of socially necessary labour which is expressed in its exchange. It is completely immaterial for the act of exchange as well as for the use of the commodity whether the labour which produced it could be resolved into _v + s_ or not. In the act of exchange all that matters is that the commodity represents value, and only its concrete qualities, its usefulness, are relevant to the use we make of it. Thus the formula _v + s_ only expresses, as it were, the intimate relationship between capital and labour, the social function of wage labour, and in the actual product this is completely wiped out. It is different with the constant capital which has been advanced and invested in means of production, because every activity of labour requires certain raw materials, tools, and buildings. The capitalist character of this state of affairs is expressed by the fact that these means of production appear as capital, as _c_, the property of a person other than the labourer, divorced from labour, the property of those who themselves do not work. Secondly, the constant capital _c_, a mere advance laid out for the purpose of creating surplus value, appears here only as the foundation of _v + s_. Yet the concept of constant capital involves more than this: it expresses the function of the means of production in the process of human labour, quite independently of all its historical or social forms. Everybody must have raw materials and working tools, the means of production, be it the South Sea Islander for making his family canoe, the communist peasant community in India for the cultivation of their communal land, the Egyptian fellah for tilling his village lands or for building Pharaoh's pyramids, the Greek slave in the small workshops of Athens, the feudal serf, the master craftsman of the medieval guild, or the modern wage labourer. They all require means of production which, having resulted from human labour, express the link between human labour and natural matter, and constitute the eternal and universal prerequisites of the human process of production. _c_ in the formula _c + v + s_ stands for a certain function of the means of production which is not wiped out in the succession of the labour process. Whereas it is completely immaterial, for both the exchange and the actual use made of a commodity, whether it has been produced by paid or by unpaid labour, by wage labour, slave labour, forced labour or any other kind of labour; on the other hand, it is of decisive importance, as for using it, whether the commodity is itself a means of production or a consumer good. Whether paid or unpaid labour has been employed in the production of a machine, matters to the machinery manufacturer and to his workers, but only to them; for society, when it acquires this machine by an act of exchange, only the quality of this machine as a means of production, only its function in the process of production is of importance. Just as every producing society, since time immemorial, has had to give due regard to the important function of the means of production by arranging, in each period of production, for the manufacture of the means of production requisite for the next period, so capitalist society, too, cannot achieve its annual production of value to accord with the formula _v + s_--which indicates the exploitation of wage labour--unless there exists, as the result of the preceding period, the quantity of means of production necessary to make up the constant capital. This specific connection of each past period of production with the period following forms the universal and eternal foundation of the social process of reproduction and consists in the fact that in every period parts of the produce are destined to become the means of production for the succeeding period: but this relation remained hidden from Smith's sight. He was not interested in means of production in respect of their specific function within the process to which they are applied; he was only concerned with them in so far as they are like any other commodity, themselves the product of wage labour that has been employed in a capitalist manner. The specifically capitalist function of wage labour in the productive process completely obscured for him the eternal and universal function of the means of production within the labour process. His narrow bourgeois approach overlooked completely the general relations between man and nature underneath the specific social relations between capital and wage labour. Here, it seems, is the real source of Adam Smith's strange dogma, that the total value of the annual social product can be resolved into _v + s_. He overlooked the fact that _c_ as the first link in the formula _c + v + s_ is the essential expression of the general social foundation of exploitation of wage labour by capital. We conclude that the value of every commodity must be expressed by the formula _c + v + s_. The question now arises how far this formula applies to the aggregate of commodities within a society. Let us turn to the doubts expressed by Smith on this point, the statement that an individual's fixed and circulating capital and his revenue do not strictly correspond to the same categories from the point of view of society. (Cf. above, p. 64, no. 3.) What is circulating capital for one person is not capital for another, but revenue, as for instance capital advances for wages. This statement is based upon an error. If the capitalist pays wages to the workers, he does not abandon his variable capital and let it stray into the workers' hands, to become their income. He only exchanges the value-form of his variable capital against its natural form, labour power. The variable capital remains always in the hand of the capitalist, first as money, and then as labour power, to revert to him later together with the surplus value as the cash proceeds from the commodities. The worker, on the other hand, never gains possession of the variable capital. His labour power is never capital to him, but it is his only asset, the power to work is the only thing he possesses. Again, if he has sold it and taken a money wage, this wage is for him not capital but the price of his commodity which he has sold. Finally, the fact that the worker buys provisions with the wages he has received, has no more connection with the function this money once fulfilled as variable capital in the hands of the capitalist, than has the private use a vendor of a commodity can make of the money he has obtained by a sale. It is not the capitalist's variable capital which becomes the workers' income, but the price of the worker's commodity 'labour power' which he has sold, while the variable capital, now as ever, remains in the hands of the capitalist and fulfils its specific function. Equally erroneous is the conception that the income of the capitalist (the surplus value) which is hidden in machines--in our example of a machinery manufacturer--which has not as yet been realised, is fixed capital for another person, the buyer of the machines. It is not the machines, or parts of them, which form the income of the machinery manufacturer, but the surplus value that is hidden in them--the unpaid labour of his wage labourers. After the machine has been sold, this income simply remains as before in the hand of the machinery manufacturer; it has only changed its outward shape: it has been changed from the 'machine-form' into the 'money-form'. Conversely, the buyer of this machine has not, by its purchase, newly obtained possession of his fixed capital, for he had this fixed capital in hand even before the purchase, in the form of a certain amount of cash. By buying this machine, he has only given to his capital the adequate material form for it to become productive. The income, or surplus value, remains in the hands of the machinery manufacturer before and after the sale of the machine, and the fixed capital remains in the hands of the other person, the capitalist buyer of the machine, just as the variable capital in the first example always remained in the hands of the capitalist and the income in the hands of the worker. Smith and his followers have caused confusion because, in their investigation of capitalist exchange, they mixed up the use-form of the commodities with their relations of value. Further, they did not distinguish the individual circulations of capitals and commodities which are ever interlacing. One and the same act of exchange can be circulation of capital, when seen from one aspect, and at the same time simple commodity exchange for the purpose of consumption. The fallacy that whatever is capital for one person must be income for another, and _vice versa_, must be translated thus into the correct statement that what is circulation of capital for one person, may be simple commodity exchange for another, and _vice versa_. This only expresses the capacity of capital to undergo transformations of its character, and the interconnections of various spheres of interest in the social process of exchange. The sharply outlined existence of capital in contrast with income still stands in both its clearly defined forms of constant and variable capital. Even so, Smith comes very close to the truth when he states that capital and income of the individual are not strictly identical with the same categories from the point of view of the community. Only a few further connecting links are lacking for a clear revelation of the true relationship. FOOTNOTES: [77] _An Enquiry into the Nature and Causes of the Wealth of Nations_, vol. i, p. 19. [78] _Theorien über den Mehrwert_ (Stuttgart, 1905), vol. i, pp. 179-252. [79] _Capital_, vol. ii, p. 435. [80] Smith, op. cit., vol. ii, p. 148. [81] Ibid., p. 149. [82] Op. cit., vol. i, pp. 86-7. [83] In this connection, we have disregarded the contrary conception which also runs through the work of Smith. According to that, the _price_ of the commodity cannot be resolved into _v + s_, though the _value_ of commodities consists in _v + s_. This distinction, however, is more important with regard to Smith's theory of value than in the present context where we are mainly interested in his formula _v + s_. _CHAPTER IV_ MARX'S SCHEME OF SIMPLE REPRODUCTION Let us now consider the formula _c + v + s_ as the expression of the social product as a whole. Is it only a theoretical abstraction, or does it convey any real meaning when applied to social life--has the formula any objective existence in relation to society as a whole? It was left to Marx to establish the fundamental importance of _c_, the constant capital, in economic theory. Yet Adam Smith before him, working exclusively with the categories of fixed and circulating capital, in effect transformed this fixed capital into constant capital, though he was not aware of having achieved this result. This constant capital comprises not only those means of production which wear out in the course of years, but also those which are completely absorbed by production in any one year. His very dogma that the total value is resolved into _v + s_ and his arguments on this point lead Smith to distinguish between the two categories of production--living labour and inanimate means of production. On the other hand, when he tries to construe the social process of reproduction on the basis of the capitals and incomes of individuals, the fixed capital he conceives of as existing apart from these, is, in fact, constant capital. Every individual capitalist uses for the production of his commodities certain material means of production such as premises, raw materials and instruments. In order to produce the aggregate of commodities in a given society, an aggregate of all material means of production used by the individual capitalists is an obvious requisite. The existence of these means of production within the society is a real fact, though they themselves exist in the form of purely private individual capitals. This is the universal absolute condition of social production in all its historical forms.[84] The specific capitalist form manifests itself in the fact that the material means of production function as _c_, as constant capital, the property of those who do not work; it is the opposite pole to proletarianised labour power, the counterpart of wage labour. The variable capital, _v_, is the aggregate of wages actually paid in the society in the course of a year's production. This fact, too, has real objective existence, although it manifests itself in an innumerable mass of individual wages. In every society the amount of labour power actually engaged in production and the annual maintenance of the workers is a question of decisive importance. Where this factor takes the specific capitalist form of _v_, the variable capital, it follows that the means of subsistence first come to the workers in form of a wage which is the price of the labour power they have sold to another person, the owner of the material means of production who does not work himself; under this aspect, it is the latter's capitalist property. Further, _v_ is an aggregate of money, that is to say it is the means of subsistence for the workers in a form of pure value. This concept of _v_ implies that the workers are free in a double sense--free in person and free of all means of production. It also expresses the fact that in a given society the universal form of production is commodity production. Finally, _s_, the surplus value, stands for the total of all surplus values gained by the individual capitalists. Every society performs surplus labour, and even a socialist society will have to do the same. It must perform surplus labour in a threefold sense: it has to provide a quantity of labour for the maintenance of non-workers (those who are unable to work, such as children, old people, invalids, and also civil servants and the so-called liberal professions who do not take an immediate part in the satisfaction of material[85] wants), it has to provide a fund of social insurance against elementary disasters which may threaten the annual produce, such as bad harvests, forest fires and floods; and lastly it must provide a fund for the purpose of increasing production, either because of an increase in the population, or because higher standards of civilisation lead to additional wants. It is in two respects that the capitalist character manifests itself: surplus labour comes into being (1) as surplus value, i.e. in commodity-form, realisable in cash, and (2) as the property of non-workers, of those who own the means of production. Similarly, if we consider _v + s_, these two amounts taken together, we see that they represent objective quantities of universal validity: the total of living labour that has been performed within a society in the course of one year. Every human society, whatever its historical form, must take note of this datum, with reference to both the results that have been achieved, and the existing and available labour power. The division into _v + s_ is a universal phenomenon, independent of the society's particular historical form. In its capitalist form, this division shows itself not only in the qualitative peculiarities of both _v_ and _s_ as already outlined, but also in their quantitative relationship: _v_ tends to become depressed to a minimum level, just sufficient for the physiological and social existence of the worker, and _s_ tends to increase continually at the cost of, and relative to, _v_. The predominant feature of capitalist production is expressed in this last circumstance: it is the fact that the creation and appropriation of surplus value is the real purpose of, and the incentive to, production. We have examined the relations upon which the capitalist formula of the aggregate product is based, and have found them universally valid. In every planned economy they are made the object of conscious regulation on the part of society; in a communist society by the community of workers and their democratic organs, and in a society based upon class-rule by the nucleus of owners and their despotic power. In a system of capitalist production there is no such planned regulation. The aggregate of the society's capitals and the aggregate of its commodities alike consist in reality of innumerable fragments of individual capitals and individual items of merchandise, taken together. Thus the question arises whether these sums themselves mean anything more in a capitalist society than a mere statistical enumeration which is, moreover, inexact and fluid. Applying the standards of society as a whole, we perceive that the completely independent and sovereign individual existence of private enterprises is only the historically conditioned form, whereas it is social interconnections that provide the foundation. Although individual capitals act in complete independence of one another, and a social regulation is completely lacking, the movement of capitals forms a homogeneous whole. This movement, too, appears in specifically capitalist forms. In every planned system of production it is, above all, the relation between all labour, past and present, and the means of production (between _v + s_ and _c_, according to our formula), or the relation between the aggregate of necessary consumer goods (again, in the terms of our formula, _v + s_) and _c_ which are subjected to regulation. Under capitalist conditions, on the other hand, all social labour necessary for the maintenance of the inanimate means of production and also of living labour power is treated as one entity, as capital, in contrast with the surplus labour that has been performed, i.e. with the surplus value _s_. The relation between these two quantities _c_ and (_v + s_) is a palpably real, objective relationship of capitalist society: it is the average rate of profit; every capital is in fact treated only as part of a common whole, the whole of social capital, and assigned the profit to which it is entitled, according to its size, out of the surplus value wrested from society, regardless of the quantity which this particular capital has actually created. Thus social capital and its counterpart, the whole of social surplus value, are not merely real quantities, having an objective existence, but, what is more, the relation between them, the average profit, guides and directs the whole process of exchange. This it does in three ways: (1) by the mechanism of the law of value which establishes the quantitative relations of exchange between the individual kinds of commodities independently of their specific value relationship; (2) by the social division of labour, the assignment of certain portions of capital and labour to the individual spheres of production; (3) by the development of labour productivity which on the one hand stimulates individual capitals to engage in pioneering work for the purpose of securing a higher profit than the average, and on the other hand extends the progress that has been achieved by individuals over the whole field of production. By means of the average rate of profit, in a word, the total capital of society completely governs the seemingly independent motions of individual capitals. The formula _c + v + s_ thus applies to the aggregate of commodities produced in a society under capitalism no less than to the value composition of every individual commodity. It is, however, only the value-composition for which this holds good--the analogy cannot be carried further. The formula is indeed perfectly exact if we regard the total product of a capitalistically producing society as the output of one year's labour, and wish to analyse it into its respective components. The quantity _c_ shows how much of the labour of former years has been taken over towards the product of the present year in the form of means of production. Quantities _v + s_ show the value components of the product created by new labour during the last year only; the relation between _v_ and _s_ finally shows us how the annual labour programme of society is apportioned to the two tasks of maintaining the workers and maintaining those who do not work. This analysis remains valid and correct also with regard to the reproduction of individual capital, no matter what may be the material form of the product this capital has created. All three, _c_, _v_, and _s_, appear alike to a capitalist of the machinery industry in the form of machinery and its parts; to the owner of a music hall they are represented by the charms of the dancers and the skill of the acrobats. So long as the product is left undifferentiated, _c_, _v_, and _s_ differ from one another only in so far as they are _aliquot_ components of value. This is quite sufficient for the reproduction of individual capital, as such reproduction begins with the value-form of capital, a certain amount of money that has been gained by the realisation of the manufactured product. The formula _c + v + s_ then is the given basis for the division of this amount of money; one part for the purchase of the material means of production, a second part for the purchase of labour power, and a third part--in the case of simple reproduction assumed in the first instance--for the capitalist's personal consumption. In the case of expanding reproduction part three is further subdivided, only a fraction of it being devoted to the capitalist's personal consumption, the remainder to increasing his capital. In order to reproduce his capital actually, the capitalist must, of course, turn again to the commodity market with the capital he has divided in this manner, so that he can acquire the material prerequisites of production such as raw materials, instruments, and so on. It seems a matter of course to the individual capitalist as well as to his scientific ideologist, the 'vulgar economist', that he should in fact find there just those means of production and labour power he needs for his business. The position is different as regards the total production of a society. From the point of view of society as a whole, the exchange of commodities can only effect a shifting around, whereby the individual parts of the total product change hands. The material composition of the product, however, cannot be changed by this process. After this change of places, as well as before it, there can be reproduction of total capital, if, and only if, there is in the total product of the preceding period: first, a sufficient quantity of means of production, secondly, adequate provisions to maintain the same amount of labour as hitherto, and, last but not least, the goods necessary to maintain the capitalist class and its hangers-on in a manner suitable to their station. This brings us to a new plane: we are now concerned with material points of view instead of pure relations of value. It is the use-form of the total social product that matters now. What the individual capitalist considers nobody else's business becomes a matter of grave concern for the totality of capitalists. Whereas it does not make the slightest difference to the individual capitalist whether he produces machinery, sugar, artificial manure or a progressive newspaper--provided only that he can find a buyer for his commodity so that he can get back his capital plus surplus value--it matters infinitely to the 'total capitalist' that his total product should have a definite use-form. By that we mean that it must provide three essentials: the means of production to renew the labour process, simple provisions for the maintenance of the workers, and provisions of higher quality and luxury goods for the preservation of the 'total capitalist' himself. His desire in this respect is not general and vague, but determined precisely and quantitatively. If we ask what quantities of all three categories are required by the 'total capitalist', the value-composition of last year's total product gives us a definite estimate, as long, that is, as we confine ourselves to simple reproduction, which we have taken for our starting point. Hitherto we have conceived of the formula _c + v + s_ as a merely quantitative division of the total value, applicable alike to total capital and to individual capital, and representing the quantity of labour contained in the annual product of society. Now we see that the formula is also the basis of the material composition of the product. Obviously the 'total capitalist', if he is to take up reproduction to the same extent as before, must find in his new total product as many means of production as correspond to the size of _c_, as many simple provisions for the workers as correspond to the sum of wages _v_, and as many provisions of better quality for himself and his hangers-on as correspond to _s_. In this way our analysis of the value of the society's aggregate product is translated into a general recipe for this product as follows: the total _c_ of society must be re-embodied in an equal quantity of means of production, the _v_ in provisions for the workers, and the _s_ in provisions for the capitalists, in order that simple reproduction may take place. Here we come up against palpable differences between the individual capitalist and the total capitalist. The manner in which the former always reproduces his constant and variable capital as well as his surplus value is such that all three parts are contained in the same material form within his homogeneous product, that this material form, moreover, is completely irrelevant and may have different qualities in the case of each individual capitalist. The 'total capitalist', for his part, reproduces every component of the value of his annual product in a different material form, _c_ as means of production, _v_ as provisions for the workers, and _s_ as provisions for the capitalists. In the case of the reproduction of individual capitals, there is no discrepancy between relations of value and material points of view. Besides, it is quite clear that individual capital may concentrate on aspects of value, accepting material conditions as a law from heaven, as self-evident phenomena of commodity-exchange, whereas the 'total capitalist' has to reckon with material points of view. If the total _c_ of society were not reproduced annually in the form of an equal amount of means of production, every individual capitalist would be doomed to search the commodity market in vain with his _c_ realised in cash, unable to find the requisite materials for his individual reproduction. From the point of view of reproducing the total capital, the formula _c + v + s_ is inadequate. This again is proof of the fact that the concept of total capital is something real and does not merely paraphrase the concept of production. We must, however, make general distinctions in our exposition of total capital: instead of showing it as a homogeneous whole, we must demonstrate its three main categories; and we shall not vitiate our theory if, for the sake of simplicity, we consider for the present only two departments of total capital: the production of producer goods, and that of consumer goods for workers and capitalists. We have to examine each department separately, adhering to the fundamental conditions of capitalist production in each case. At the same time, we must also emphasise the mutual connections between these two departments from the point of view of reproduction. For only if each is regarded in connection with the other, do they make up the basis of the social capital as a whole. We made a start by investigating individual capital. But we must approach the demonstration of total capital and its total product in a somewhat different manner. Quantitatively, as a quantity of value, the _c_ of society consists precisely in the total of individual constant capitals, and the same applies to the other amounts, _v_ and _s_. But the outward shape of each has changed--the _c_ of constant capitals re-emerges from the process of production as an element of value with infinitely varied facets, comprising a host of variegated objects for use, but in the total product it appears, as it were, contracted into a certain quantity of means of production. Similarly with _v_ and _s_, which in the case of the individual capitalist re-emerge as items in a most colourful jumble of commodities, being provisions in adequate quantities for the workers and capitalists. Adam Smith came very close to recognising this fact when he observed that the categories of fixed and circulating capital and of revenue in relation to the individual capitalist do not coincide with these categories in the case of society. We have come to the following conclusions: (1) The formula _c + v + s_ serves to express the production of society viewed as a whole, as well as the production of individual capitalists. (2) Social production is divided into two departments, engaged in the production of producer and consumer goods respectively. (3) Both departments work according to capitalist methods, that is to say they both aim at the production of surplus value, and thus the formula _c + v + s_ will apply to each of them. (4) The two departments are interdependent, and are therefore bound to display a certain quantitative relationship, namely the one department must produce all means of production, the other all provisions for the workers and capitalists of both departments. Proceeding from this point of view, Marx devised the following diagram of capitalist reproduction: I. _4,000c + 1,000v + 1,000s = 6,000_ means of production II. _2,000c + 500v + 500s = 3,000_ articles of consumption.[86] The figures in this diagram express quantities of value, amounts of money which are chosen arbitrarily, but their ratios are exact. Each department is characterised by the use-form of the commodities produced. Their mutual circulation takes place as follows: Department I supplies the means of production for the entire productive process, for itself as well as for Department II. From this alone it follows that for the undisturbed continuance of reproduction--for we still presume simple reproduction on the old scale--the total produce of Department I (I 6,000) must have the same value as the sum of constant capitals in both departments: (I 4,000_c_ + II 2,000_c_). Similarly, Department II supplies provisions for the whole of society, for its own workers and capitalists as well as for the workers and capitalists of Department I. Hence it follows that for the undisturbed course of consumption and production and its renewal on the old scale it is necessary that the total quantity of provisions supplied by Department II should equal in value all the incomes of the employed workers and capitalists of society [here II 3,000 = I(_1,000v + 1,000s_) + II(_500v + 500s_)]. Here we have indeed expressed relationships of value which are the foundation not only of capitalist reproduction but of reproduction in every society. In every producing society, whatever its social form, in the primitive small village community of the Bakairi of Brazil, in the _oikos_ of a Timon of Athens with its slaves, or in the imperial _corvée_ farm of Charlemagne, the labour power available for society must be distributed in such a way that means of production as well as provisions are produced in adequate quantities. The former must suffice for the immediate production of provisions as well as for the future renewal of the means of production themselves, and the provisions in their turn must suffice for the maintenance of the workers occupied in the production alike of these same provisions and of the means of production, and moreover for the maintenance of all those who do not work. In its broad outline, Marx's scheme corresponds with the universal and absolute foundation of social reproduction, with only the following specifications: socially necessary labour appears here as value, the means of production as constant capital, the labour necessary for the maintenance of the workers as variable capital and that necessary for the maintenance of those who do not work as surplus value. In capitalist society, however, the connections between these two great departments depend upon exchange of commodities, on the exchange of equivalents. The workers and capitalists of Department I can only obtain as many provisions from Department II as they can deliver of their own commodities, the means of production. The demand of Department II for means of production, on the other hand, is determined by the size of its constant capital. It follows therefore that the sum of the variable capital and of the surplus value in the production of producer goods [here I(_1,000v + 1,000s_)] must equal the constant capital in the production of provisions [here II(2,000_c_)]. An important proviso remains to be added to the above scheme. The constant capital which has been spent by the two departments is in reality only part of the constant capital used by society. This constant capital is divided into two parts; the first is fixed capital--premises, tools, labouring cattle--which functions in a number of periods of production, in every one of which, however, only part of its value is absorbed by the product, according to the amount of its wear and tear. The second is circulating capital such as raw materials, auxiliary semi-finished products, fuel and lighting--its whole value is completely absorbed by the new product in every period of production. Yet only that part of the means of production is relevant for reproduction which is actually absorbed by the production of value; without becoming less correct, an exact exposition of social circulation may disregard the remaining part of the fixed capital which has not been absorbed by the product, though it should not completely forget it. This is easy to prove. Let us assume that the constant capital, 6,000_c_, in the two departments, which is in fact absorbed by the annual product of these departments, consists of 1,500_c_ fixed and 4,500_c_ circulating capital, the 1,500_c_ of fixed capital representing here the annual wear and tear of the premises, machinery and labouring cattle. This annual wear and tear equals, say, 10 per cent of the total value of the fixed capital employed. Then the total social capital would really consist of _19,500c + 1,500v_, the constant capital in both departments being 1,500_c_ of fixed and 4,500_c_ of circulating capital. Since the term of life of the aggregate fixed capital, with a 10 per cent wear and tear, is ten years _ex hypothesi_, the fixed capital needs renewal only after the lapse of ten years. Meanwhile one-tenth of its value enters into social production in every year. If all the fixed capital of a society, with the same rate of wear and tear, were of equal durability, it would, on our assumption, need complete renewal once within ten years. This, however, is not the case. Some of the various use-forms which are part of the fixed capital may last longer and others shorter, wear and tear and duration of life are quite different in the different kinds and individual representations of fixed capital. In consequence, fixed capital need not be renewed--reproduced in its concrete use-form--all at once, but parts of it are continually renewed at various stages of social production, while other parts still function in their older form. Our assumption of a fixed capital of 15,000_c_ with a 10 per cent rate of wear and tear does not mean that this must be renewed all at once every ten years, but that an annual average renewal and replacement must be effected of a part of the total fixed social capital corresponding to one-tenth of its value; that is to say, Department I which has to satisfy the needs of society for means of production must reproduce, year by year not only all its raw and partly finished materials, etc., its circulating capital to the value of 4,500, but must also reproduce the use-forms of its fixed capital--premises, machinery, and the like--to the extent of 1,500, corresponding with the annual wear and tear of fixed capital. If Department I continues in this manner to renew one-tenth of the fixed capital in its use-form every year, the result will be that every ten years the total fixed capital of society will have been replaced throughout by new items; thus it follows that the reproduction of those parts disregarded so far is also completely accounted for in the above scheme. In practice, the procedure is that every capitalist sets aside from his annual production, from the realisation of his commodities, a certain amount for the redemption of his fixed capital. These individual annual deductions must amount to a certain quantity of capital, therefore the capitalist has in fact renewed his fixed capital, that is, he has replaced it by new and more efficient items. This alternating procedure of building up annual reserves of money for the renewal of fixed capital and of the periodical employment of the accumulated amounts for the actual renewal of fixed capital varies with the individual capitalist, so that some are accumulating reserves, while others have already started their renewals. Thus every year part of the fixed capital is actually renewed. The monetary procedure here only disguises the real process which characterises the reproduction of fixed capital. On closer observation we see that this is as it should be. The whole of the fixed capital takes part in the process of production, for physically the mass of usable objects, premises, machinery, labouring cattle, are completely employed. It is their peculiarity as fixed capital, on the other hand, that only part of the value is absorbed in the production of value, since in the process of reproduction (again postulating simple reproduction), all that matters is to replace in their natural form the values which have been actually used up as means of subsistence and production during a year's production. Therefore, fixed capital need only be reproduced to the extent that it has in fact been used up in the production of commodities. The remaining portion of value, embodied in the total use-form of fixed capital, is of decisive importance for production as a labour process, but does not exist for the annual reproduction of society as a process of value-formation. Besides, this process which is here expressed by relations of value applies equally to every society, even to a community which does not produce commodities. If once upon a time, for instance, say ten years' labour of 1,000 fellaheen was required for the construction of the famous Lake Moeris and the related Nile canals--that miraculous lake, which Herodotus tells us was made by hand--and if for the maintenance of this, the most magnificent drainage system of the world, the labour of a further 100 fellaheen was annually required (the figures, of course, are chosen at random), we might say that after every hundred years the Moeris dam and the canals were reproduced anew, although in fact the entire system was not constructed as a whole in every century. This is manifestly true. When, amid the stormy incidents of political history and alien conquests, the usual crude neglect of old monuments of culture set in--as displayed, e.g. by the English in India when the reproductional needs of ancient civilisations were understood no longer--then in the course of time the whole Lake Moeris, its water, dikes and canals, the two pyramids in its midst, the colossus upon it and other marvellous erections, disappeared without a trace, as though they had never been built. Only ten lines in Herodotus, a dot on Ptolemy's map of the world, traces of old cultures, and of villages and cities bear witness that at one time rich life sprang from this magnificent irrigation system, where to-day there are only stretches of arid desert in inner Lybia, and desolate swamps along the coast. There is only one point where Marx's scheme of simple reproduction may appear unsatisfactory or incomplete in relation to constant capital, and that is when we go back to that period of production, when the total fixed capital was first created. Indeed, society possesses transformed labour amounting to more than those parts of fixed capital which are absorbed into the value of the annual product and are in turn replaced by it. In the figures of our example the total social capital does not consist of _6,000c + 1,500v_, as in the diagram, but of _19,500c + 1,500v_. Though 1,500 of the fixed capital (which, on our assumption, amounts to 15,000) are annually reproduced in the form of appropriate means of production, an equal amount is also consumed by the same production each year, though the whole of the fixed capital as a use-form, an aggregate of objects, has been renewed. After ten years, society possesses in the eleventh, just as in any other year, a fixed capital of 15,000, whereas it has annually achieved only 1,500_c_; and its constant capital as a whole is 19,500, whereas it has created only 6,000. Obviously, since it must have created this surplus of 13,500 fixed capital by its labour, it possesses more accumulated past labour than our scheme of reproduction warrants. Even at this stage, the annual labour of society must be based on some previous annual labour that has been hoarded. This question of past labour, however, as the foundation of all present labour, brings us to the very first beginning which is as meaningless with regard to the economic development of mankind as it is for the natural development of matter. The scheme of reproduction grasps the social process as perpetually in motion, as a link in the endless chain of events, it neither wants to demonstrate its initial origin, nor should it do so. The social reproductive process is always based on past labour, we may trace it back as far as we like. Social labour has no beginning, just as it has no end. Like the historical origin of Herodotus' Lake Moeris, the beginnings of the reproductive process in the history of civilisation are lost in the twilight of legend. With the progress of techniques and with cultural development, the means of production change their form, crude paleoliths are replaced by sharpened tools, stone implements by elegant bronze and iron, the artisan's tool by steam-driven machinery. Yet, though the means of production and the social organisation of the productive process continually change their form, society already possesses for its labour process a certain amount of past labour serving as the basis for annual reproduction. Under capitalist methods of production past labour of society preserved in the means of production takes the form of capital, and the question of the origin of this past labour which forms the foundation of the reproductive process becomes the question of the genesis of capital. This is much less legendary, indeed it is writ in letters of blood in modern history. The very fact, however, that we cannot think of simple reproduction unless we assume a hoard of past labour, surpassing in volume the labour annually performed for the maintenance of society, touches the sore spot of simple reproduction; and it shows that simple reproduction is a fiction not only for capitalist production but also for the progress of civilisation in general. If we merely wish to understand this fiction properly, and to reduce it to a scheme, we must presume, as its _sine qua non_, results of a past productive process which cannot possibly be restricted to simple reproduction but inexorably points towards enlarged reproduction. By way of illustration, we might compare the aggregate fixed capital of society with a railway. The durability and consequently the annual wear and tear of its various parts is very different. Parts such as viaducts and tunnels may last for centuries, steam engines for decades, but other rolling stock will be used up in a short time, in some instances in a few months. Yet it is possible to work out an average rate of wear and tear, say thirty years, so that the value of the whole is annually depreciated by one thirtieth. This loss of value is now continually made good by partial reproduction of the railway (which may count as repairs), so that a coach is renewed to-day, part of the engine to-morrow, and a section of sleepers the day after. On our assumption then, the old railway is replaced by a new one after thirty years, a similar amount of labour being performed each year by the society so that simple reproduction takes place. But the railway can only be reproduced in this manner--it cannot be so produced. In order to make it fit for use and to make good its gradual wear and tear, the railway must have been completed in the first place. Though the railway can be repaired in parts, it cannot be made fit for use piecemeal, an axle to-day and a coach to-morrow. Indeed, the very essence of fixed capital is always to enter into the productive process in its entirety, as a material use-value. In order to get this use-form ready in the first place, society must apply a more concentrated amount of labour to its manufacture. In terms of our example, the labour of thirty years that is used for repairs, must be compressed into, say, two or three years. During this period of manufacture, society must therefore expend an amount of labour far greater than the average, that is to say it must have recourse to expanding reproduction; later, when the railway is finished, it may return to simple reproduction. Though we need not visualise the aggregate fixed capital as a single coherent use-object or a conglomeration of objects which must be produced all at once, the manufacture of all the more important means of production, such as buildings, transport facilities, and agricultural structures, requires a more concentrated application of labour, and this is true for the modern railway or steamship as much as it was for the rough stone-axe and the handmill. Therefore it is only in theory that simple reproduction can be conceived as alternating with enlarged reproduction; the latter is not only a general condition of a progressive civilisation and an expanding population, but also the _sine qua non_ for the economic form of fixed capital, or those means of production which in every society correspond to the fixed capital. Marx deals with this conflict between the formation of fixed capital and simple reproduction but indirectly, in connection with fluctuations in the wear and tear of the fixed capital, more rapid in some years than in others. Here he emphasises the need for perpetual 'over-production', i.e. enlarged reproduction, since a strict policy of simple reproduction would periodically lead to reproductive losses. In short, he regards enlarged reproduction under the aspect of an insurance fund for the fixed capital of the society, rather than in the light of the actual productive process.[87] In quite a different context Marx appears to endorse the opinion expressed above. In _Theories on the Surplus Value_, vol ii, part 2, analysing the conversion of revenue into capital, he speaks of the peculiar reproduction of the fixed capital, the replacement of which in itself already provides a fund for accumulation. He draws the following conclusion: 'The point we have in mind is as follows: even if the aggregate capital employed in machine manufacture were just large enough to make good the annual wear and tear of the machines, many more machines could be annually produced than are required, since the wear and tear is in parts merely _idealiter_ and must be made good _realiter_, _in natura_, only after a certain number of years. Capital so employed supplies each year a mass of machinery which becomes available for, and anticipates new, capital investments. Let us suppose, for instance, a machine manufacturer who starts production this year. During this year, he supplies machines for £12,000. If he were merely to reproduce the machines he has manufactured, he would have to produce, during the subsequent eleven years, machines for £1,000 only, and even then, a year's production would not be consumed within the year. Still less could it be consumed, if he were to employ the whole of his capital. To keep this capital working, to keep it reproducing itself every year, a new and continuous expansion of the branches of manufacture that require these machines, is indispensable. This applies even more, if the machine manufacturer himself accumulates. In consequence, even _if the capital invested in one particular branch of production is simply being reproduced_,[88] a continuous accumulation in the other branches of production must go with it.'[89] We might take the machine manufacturer of Marx's example as illustrating the production of fixed capital. Then the inference is that if society maintains simple reproduction in this sphere, employing each year a similar amount of labour for the production of fixed capital (a procedure which is, of course, impossible in practical life), then annual production in all other spheres must expand. But if here, too, simple reproduction is to be maintained, then, if the fixed capital once created is to be merely renewed, only a small part of the labour employed in its creation can be expended. Or, to put it the other way round: if society is to provide for investment in fixed capital on a large scale, it must, even assuming simple reproduction to prevail on the whole, resort periodically to enlarged reproduction. With the advance of civilisation, there are changes not only in the form of the means of production but also in the quantity of value they represent--or better, changes in the social labour stored up in them. Apart from the labour necessary for its immediate preservation, society has increasingly more labour time and labour power to spare, and it makes use of these for the manufacture of means of production on an ever increasing scale. How does this affect the process of reproduction? How, in terms of capitalism, does society create out of its annual labour a _greater_ amount of capital than it formerly possessed? This question touches upon enlarged reproduction, and it is not yet time to deal with it. FOOTNOTES: [84] For the sake of simplicity, we shall follow general usage and speak here and in the following of annual production, though this term, strictly speaking, applies in general to agriculture only. The periods of industrial production, or of the turnover of capitals, need not coincide with calendar years. [85] The distinction between intellectual and material labour need not involve special categories of the population in a planned society, based on common ownership of the means of production. It will always find expression in the existence of a certain number of spiritual leaders who must be materially maintained. The same individuals may exercise these various functions at different times. [86] _Capital_, vol. ii, p. 459. [87] _Capital_, vol. ii, pp. 544-7. Cf. also p. 202 on the necessity of enlarged reproduction under the aspect of a reserve fund. [88] Marx's italics. [89] _Theorien über den Mehrwert_, vol. ii, part 2, p. 248. _CHAPTER V_ THE CIRCULATION OF MONEY In our study of the reproductive process we have not so far considered the circulation of money. Here we do not refer to money as a measuring rod, an embodiment of value, because all relations of social labour have been expressed, assumed and measured in terms of money. What we have to do now is to test our diagram of simple reproduction under the aspect of money as a means of exchange. Quesnay already saw that we shall only understand the social reproductive process if we assume, side by side with the means of production and consumer goods, a certain quantity of money.[90] Two questions now arise: (1) by whom should the money be owned, and (2) how much of it should there be? The answer to the first question, no doubt, is that the workers receive their wages in the form of money with which they buy consumer goods. From the point of view of society, this means merely that the workers are allocated a certain share of the fund for consumption: every society, whatever its historical form of production, makes such allocations to its workers. It is, however, an essential characteristic of the capitalist form of production that the workers do not obtain their share directly in the form of goods but by way of commodity exchange, just as it is an essential feature of the capitalist mode of production that their labour power is not applied directly, as a result of a relation of personal domination, but again by way of commodity exchange: the workers selling their labour power to the owners of the means of production, and purchasing freely their consumer goods. Variable capital in its money form is the expression and medium of both these transactions. Money, then, comes first into circulation by the payment of wages. The capitalist class must therefore set a certain quantity of money circulating in the first place, and this must be equal to the amount they pay in wages. The capitalists of Department I need 1,000 units of money, and the capitalists of Department II need 500 to meet their wages bill. Thus, according to our diagram, two quantities of money are circulating: I(1,000_v_) and II(500_v_). The workers spend the total of 1,500 on consumer goods, i.e. on the products of Department II. In this way, labour power is maintained, that is to say the variable capital of society is reproduced in its natural form, as the foundation of all other reproductions of capital. At the same time, the capitalists of Department II dispose of their aggregate product (1,500) in the following manner: their own workers receive 500 and the workers of Department I receive 1,000. This exchange gives the capitalists of Department II possession of 1,500 money units: 500 are their own variable capital which has returned to them; these may start circulating again as variable capital but for the time being they have completed their course. The other 1,000 accrue to them year by year out of the realisation of one-third of their own products. The capitalists of Department II now buy means of production from the capitalists of Department I for these 1,000 money units in order to renew the part of their own constant capital that has been used up. By means of this purchase, Department II renews in its natural form half of the constant capital II_c_ it requires. Department I now has in return 1,000 money units which are nothing more than the money originally paid to its own workers. Now, after having changed hands twice, the money has returned to Department I, to become effective later as variable capital. This completes the circulation of this quantity of money for the moment, but the circulation within society has not yet come to an end. The capitalists of Department I have not yet realised their surplus value to buy consumer goods for themselves; it is still contained in their product in a form which is of no use to them. Moreover, the capitalists of Department II have not yet renewed the second half of their constant capital. These two acts of exchange are identical both in substance and in value, for the capitalists of Department I receive their goods from Department II in exchange for the I(1,000_c_) means of production needed by the capitalists of Department II. However, a new quantity of money is required to effect this exchange. It is true that the same money which has already completed its course, might be brought into circulation again for this purpose--in theory, there could be no objection to this. In practice, however, this solution is out of the question, for the needs of the capitalists, as consumers, must be satisfied just as constantly as the needs of the workers--they run parallel to the process of production and must be mediated by specific quantities of money. Hence it follows that the capitalists of both departments--that is to say all capitalists--must have a further cash reserve in hand, in addition to the money required as variable capital, in order to realise their own surplus value in the form of consumer goods. On the other hand, before the total product is realised and during the process of its production, certain parts of the constant capital must be bought continually. These are the circulating parts of the constant capital, such as raw and auxiliary materials, semi-finished goods, lighting and the like. Therefore, not only must the capitalists of Department I have certain quantities of money in hand to satisfy their needs as consumers, but the capitalists of Department II must also have money to meet the requirements of their constant capital. The exchange of 1,000s I (the surplus value of Department I contained in the means of production) against goods is thus effected by money which is advanced partly by the capitalists of Department I in order to satisfy their needs as consumers, and partly by the capitalists of Department II in order to satisfy their needs as producers.[91] Both lots of capitalists may each advance 500 units of the money necessary for the exchange, or possibly the two departments will contribute in different proportions. At any rate, two things are certain: (_a_) the money set aside for the purpose by both departments must suffice to effect the exchange between I(1,000_s_) and II(1,000_c_); (_b_) whatever the distribution of this money between the two departments may have been, the exchange transaction completed, each department of capitalist production must again possess the same amount of money it had earlier put into circulation. This latter maxim applies quite generally to social circulation as a whole: once the process of circulation is concluded, money will always have returned to its point of origin. Thus all capitalists, after universal exchange, have achieved a twofold result: first they have exchanged products which, in their natural form, were of no use to them, against other products which, in their natural form, the capitalists require either as means of production or for their own consumption. Secondly, they have regained possession of the money which they set in circulation so as to effect these acts of exchange. This phenomenon is unintelligible from the point of view of simple commodity circulation, where commodity and money continually change places--possession of the commodity excluding the possession of money, as money constantly usurps the place which the commodity has given up, and _vice versa_. Indeed, this is perfectly true with regard to every individual act of commodity exchange which is the form of social circulation. Yet this social circulation itself is more than mere exchange of commodities: it is the circulation of capital. It is, however, an essential and characteristic feature of this kind of circulation, that it does not only return to the capitalist the value of his original capital plus an increase, the surplus value, but that it also assists social reproduction by providing the means of production and labour power in the natural form of productive capital, and by ensuring the maintenance of those who do not work. Possessing both the means of production and the money needed, the capitalists start the total social process of circulation; as soon as the social capital has completed its circuit, everything is again in their hands, apportioned to each department according to the investments made by it. The workers have only temporary possession of money during which time they convert the variable capital from its money form into its natural form. The variable capital in the capitalists' hands is nothing but the outward shape of part of their capital, and for this reason it must always revert to them. So far, we have only considered circulation as it takes place between the two large departments of production. Yet 4,000 units of the first Department's produce remain there in the form of means of production to renew its constant capital of 4,000_c_. Moreover 500 of the consumer goods produced in Department II [corresponding to the surplus value II(500_s_)] also remain in this department in the form of consumer goods for the capitalist class. Since in both departments the mode of production is capitalistic, that is unplanned, private production, each department can distribute its own products--means of production in Department I and consumer goods in Department II--amongst its own capitalists only by way of commodity exchange, i.e. by a large number of individual sale transactions between capitalists of the same department. Therefore the capitalists of both departments must have a reserve of money with which to perform these exchange transactions--to renew both the means of production in Department I and the consumer goods for the capitalist class in Department II. This part of circulation does not present any features of specific interest, as it is merely simple commodity circulation. Vendor and purchaser alike belong to the same category of agents of production, and circulation is concerned only with money and commodity changing hands within the same class and department. All the same, the money needed for this circulation must from the outset be in the hands of the capitalist class: it is part of their capital. So far, the circulation of total social capital presents no peculiarities, even if we consider the circulation of money. From the very outset it is self-evident that society must possess a certain quantity of money to make this circulation possible, and this for two reasons: first, the general form of capitalist production is that of commodity production which implies the circulation of money; secondly, the circulation of capital is based upon the continuous alternation of the three forms of capital: money capital, productive capital, and commodity capital. And as it is this very money, finally, which operates as capital--our diagram referring to capitalist production exclusively--the capitalist class must have possession of this money, as it has possession of every other form of capital; it throws it into circulation in order to regain possession as soon as the process of circulation has been completed. At first glance, only one detail might strike us: if the capitalists themselves have set in motion all the money which circulates in society, they must also advance the money needed for the realisation of their own surplus value. Thus it seems that the capitalists as a class ought to buy their own surplus value with their own money. As the capitalist class has possession of this money resulting from previous periods of production, even prior to the realisation of the product of each working period, the appropriation of surplus value at first sight does not seem to be based upon the unpaid labour of the wage labourer--as it in fact is--but merely the result of an exchange of commodities against an equivalent quantity of money both supplied by the capitalist class itself. A little reflection, however, dispels this illusion. After the general completion of circulation, the capitalists, now as before, possess their money funds which either reverted to them or remained in their hands. Further, they acquired consumer goods for the same amount which they have consumed. (Note that we are still confining ourselves to simple reproduction as the prime condition of our diagram of reproduction: the renewal of production on the old scale and the use of all surplus value produced for the personal consumption of the capitalist class.) Moreover, the illusion vanishes completely if we do not confine ourselves to one period of production but observe a number of successive periods in their mutual interconnections. The value the capitalist puts into circulation to-day in the form of money for the purpose of realising his own surplus value, is in fact nothing but his surplus value resulting from the preceding period of production in form of money. The capitalist must advance money out of his own pocket in order to buy his goods for consumption. On the one hand, the surplus value which he produces each year either exists in a natural form which renders it unfit for consumption, or, if it takes a consumable form, it is temporarily in the hands of another person. On the other hand, he (the capitalist) has regained possession of the money, and he is now making his advances by realising his surplus value from the preceding period. As soon as he has realised his new surplus value, which is still embodied in the commodity-form, this money will return to him. Consequently, in the course of several periods of production, the capitalist class draws its consumer goods from the pool, as well as the other natural forms of its capital. The quantity of money originally in its possession, however, remains unaffected by this process. Investigation of the circulation of money in society shows that the individual capitalist can never invest the whole of his money capital in production but must always keep a certain money reserve to be employed as variable capital, i.e. as wages. Further, he must keep a capital reserve for the purchase of means of production at any given period, and in addition, he must have a cash reserve for his personal consumption. The process of reproducing the total social capital thus entails the necessity of producing and reproducing the substance of money. Money is also capital, for Marx's diagram which we have discussed before, conceives of no other than capitalist production. Thus the diagram seems incomplete. We ought to add a further department, that of production of the means of exchange, to the other two large departments of social production [those of means of production (I) and of consumer goods (II)]. It is, indeed, a characteristic feature of this third department that it serves neither the purposes of production nor those of consumption, merely representing social labour in an undifferentiated commodity that cannot be used. Though money and its production, like the exchange and production of commodities, are much older than the capitalist mode of production, it was only the latter which made the circulation of money a general form of social circulation, and thus the essential element of the social reproductive process. We can only obtain a comprehensive diagram of the essential points of capitalist production if we demonstrate the original relationship between the production and reproduction of money and the two other departments of social production. Here, however, we deviate from Marx. He included the production of gold (we have reduced the total production of money to the production of gold for the sake of simplicity) in the first department of social production. 'The production of gold, like that of metals generally, belongs to department I, which occupies itself with means of production.'[92] This is correct only in so far as the production of gold is the production of metal for industrial purposes (jewellery, dental stoppings, etc.). But gold in its capacity as money is not a metal but rather an embodiment of social labour _in abstracto_. Thus it is no more a means of production than it is a consumer good. Besides, a mere glance at the diagram of reproduction itself shows what inconsistencies must result from confusing means of exchange with means of production. If we add a diagrammatic representation of the annual production of gold as the substance of money to the two departments of social production, we get the following three sets of figures: I. _4,000c + 1,000v + 1,000s = 6,000_ means of production II. _2,000c + 500v + 500s = 3,000_ means of subsistence III. _20c + 5v + 5s = 30_ means of exchange This quantity of value of 30, chosen by Marx as an example, obviously does not represent the quantity of money which circulates annually in society; it only stands for that part which is annually reproduced, the annual wear and tear of the money substance which, on the average, remains constant so long as social reproduction remains on the same level. The turnover of capital goes on in a regular manner and the realisation of commodities proceeds at an equal pace. If we consider the third line as an integral part of the first one, as Marx wants us to do, the following difficulty arises: the constant capital of the third department consists of real and concrete means of production, premises, tools, auxiliary materials, vessels, and the like, just as it does in the two other departments. Its product, however, the 30_g_ which represent money, cannot operate in its natural form as constant capital in any process of production. If we therefore include this 30_g_ as an essential part of the product of Department I (6,000 means of production) the means of production will show a social deficit of this size which will prevent Departments I and II from resuming their reproduction on the old scale. According to the previous assumption--which forms the foundation of Marx's whole diagram--reproduction as a whole starts from the product of each department in its actual use-form. The proportions of the diagram are based upon this assumption; without it, they dissolve in chaos. Thus the first fundamental relation of value is based upon the equation: I(6,000) equals I(4,000_c_) + II(2,000_c_). This cannot apply to the product III(30_g_), since neither department can use gold as a means of production [say, in the proportion of I(20_c_) + II(10_c_)]. The second fundamental relation derived from this is based upon the equation I(1,000_v_) + I(1,000_s_) = II(2,000_c_). This would mean, with regard to the production of gold, that as many consumer goods are taken from Department II as there are means of production supplied to it. But this is equally untrue. Though the production of gold removes concrete means of production from the total social product and uses them as its constant capital, though it takes concrete consumer goods for the use of its workers and capitalists, corresponding to its variable capital and surplus value, the product it supplies yet cannot operate in any branch of production as a means of production, nor is it a consumer good, fit for human consumption. To include the production of money in the activities of Department I, therefore, is to run counter to all the general proportions which express the relations of value in Marx's diagram, and to diminish the diagram's validity. The attempt by Marx to find room for the production of gold within Department I (means of production) moreover leads to dubious results. The first act of circulation between this new sub-Department (called by Marx I_g_) and Department II (consumer goods) consists as usual in the workers' purchase of consumer goods from Department II with the money obtained as wages from the capitalists. This money is not yet a product of the new period of production. It has been reserved by the capitalists of Department I_g_ out of the money contained in their product of an earlier period. This, indeed, is the normal procedure. But now Marx allows the capitalists of Department II to buy gold from I_g_ with the money they have reserved, gold as a commodity material to the value of 2. This is a leap from the production of money into the industrial production of gold which is no more to do with the problem of the production of money than with the production of boot-polish. Yet out of the 5 I_g v_ that have been reserved, 3 still remain, and as the capitalist, unable to use them as constant capital, does not know what to do with them, Marx arranges for him to add them on to his own reserve of money. Marx further finds the following way out to avoid a deficit in the constant capital of II which must be exchanged completely against the means of production (I_v_ + I_s_): 'Therefore, this money must be entirely transferred from II_c_ to II_s_, no matter whether it exists in necessities of life or articles of luxury, and vice versa, a corresponding value of commodities must be transferred from II_s_ to II_c_. Result: A portion of the surplus-value is accumulated as a hoard of money.'[93] A strange result, in all conscience! We have achieved an increase in money, a surplus of the money substance, by simply confining ourselves to the annual wear and tear of the money fund. This surplus value comes into existence, for some unknown reason, at the expense of the capitalists in the consumer goods department. They practise abstinence, not because they may want to expand their production of surplus value, let us say, but in order to secure a sufficient quantity of consumer goods for the workers engaged in the production of gold. The capitalists of Department II, however, get poor reward for this Christian virtue. In spite of their abstinence, they are not only unable to expand their reproduction, but they are no longer even in the position to resume their production on its former scale. Even if the corresponding 'commodity value' is transferred from II_g_ to II_c_, it is not only the value but its actual and concrete form which matters. As the new part of the product of I now consists of money which cannot be used as a means of production, Department II, in spite of its abstinence, cannot renew its constant material capital on the old scale. As our diagram presupposes simple reproduction, its condition are thus violated in two directions: surplus value is being hoarded, and the constant capital shows a deficit. Marx's own results, then, prove that the production of gold cannot possibly find a place in either of the two departments of his diagram; the whole diagram is upset as soon as the first act of exchange between Departments I and II has been completed. As Engels remarks in his footnote, 'the analysis of the exchange of newly produced gold within the constant capital of Department I is not contained in the MS.'[94] Besides, the inconsistency would then only have been greater. The point of view we advocate is confirmed by Marx himself when he gives an exhaustive answer to the question, as striking as it is brief: 'Money in itself is not an element of actual reproduction.'[95] There is another important reason why we should put the production of money in a third and separate department of social production as a whole: Marx's diagram of simple reproduction is valid as the starting-point and foundation of the reproductive process not only for capitalism but also, _mutatis mutandis_, for every regulated and planned economic order, for instance a socialist one. However, the production of money, just like the commodity-form of the products, becomes obsolete when private ownership of the means of production is abolished. It constitutes the 'illegitimate' liabilities, the _faux frais_ of the anarchic economy under capitalism, a peculiar burden for a society based upon private enterprise, which implies the annual expenditure of a considerable amount of labour on the manufacture of products which are neither means of production nor yet consumer goods. This peculiar expenditure of labour by a society producing under capitalism will vanish in a socially planned economy. It is most adequately demonstrated by means of a separate department within the process of reproducing social capital. It is quite immaterial in this connection whether we picture a country which produces its own gold or a country which imports gold from abroad. The same expenditure of social labour which in the first case is necessary for the direct production of gold, is required in the second case to effect the exchange transactions. These observations show that the problem of the reproduction of total capital is not so crude as it often appears to those who approach it merely from the point of view of crises. The central problem might be formulated as follows: how is it possible that, in an unplanned economy, the aggregate production of innumerable individual capitalists can satisfy all the needs of society? One answer that suggests itself points to the continual fluctuations in the level of production in accordance with the fluctuating demand, i.e. the periodical changes in the market. This point of view, which regards the aggregate product of society as an undifferentiated mass of commodities, and treats social demand in an equally absurd way, overlooks the most important element, the _differentia specifica_ of the capitalist mode of production. We have seen that the problem of capitalist reproduction contains quite a number of precisely defined relations referring to specific capitalist categories and also, _mutatis mutandis_, to the general categories of human labour. The real problem consists in their inherent tendencies towards both conflict and harmony. Marx's diagram is the scientific formulation of the problem. Inquiry must now be made into the implications of this diagram analytic of the process of production. Has it any real bearing on the problems of actual life? According to the diagram, circulation absorbs the entire social product; all consumers' needs are satisfied, and reproduction takes place without friction. The circulation of money succeeds the circulation of commodities, completing the cycle of social capital. But what is the position in real life? The relations outlined in the diagram lay down a precise first principle for the division of social labour in a planned production--always providing a system of simple reproduction, i.e. no changes in the volume of production. But no such planned organisation of the total process exists in a capitalist economy, and things do not run smoothly, along a mathematical formula, as suggested by the diagram. On the contrary, the course of reproduction shows continual deviations from the proportions of the diagram which become manifest (_a_) in the fluctuations of prices from day to day; (_b_) in the continual fluctuations of profits; (_c_) in the ceaseless flow of capital from one branch of production to another, and finally in the periodical and cyclical swings of reproduction between over-production and crisis. And yet, apart from all these deviations, the diagram presents a socially necessary average level in which all these movements must centre, to which they are always striving to return, once they have left it. That is why the fluctuating movements of the individual capitalists do not degenerate into chaos but are reduced to a certain order which ensures the prolonged existence of society in spite of its lack of a plan. In comparison, the similarities and the profound discrepancies between Marx's diagram of reproduction and Quesnay's _Tableau Économique_ strike us at once. These two diagrams, the beginning and end of the period of classical economics, are the only attempts to describe an apparent chaos in precise terms, a chaos created by the interrelated movements of capitalist production and consumption, and by the disparity of innumerable private producers and consumers. Both writers reduce this chaotic jumble of individual capitals to a few broadly conceived rules which serve, as it were, as moorings for the development of capitalist society, in spite of its chaos. They both achieve a synthesis between the two aspects which are the basis of the whole movement of social capital: that circulation is at one and the same time a capitalist process of producing and appropriating surplus value, and also a social process of producing and consuming material goods necessary to civilised human existence. Both show the circulation of commodities to act as a mediator for the social process as a whole, and both conceive of the circulation of money as a subsidiary phenomenon, an external and superficial expression of the various stages within the circulation of commodities. It is socially necessary labour which creates value. This inspired fundamental law of Marx's theory of value which provided the solution of the money problem, amongst others, further led him first to distinguish and then to integrate those two aspects in the total reproductive process: the aspect of value and that of actual material connections. Secondly, Marx's diagram is based upon the precise distinction between constant and variable capital which alone reveals the internal mechanisms of the production of surplus value and brings it, as a value-relationship, into precise relation with the two material categories of production: that of producer and consumer goods. After Quesnay, some classical economists, Adam Smith and Ricardo in particular, came fairly close to this point of view. Ricardo's contribution, his precise elaboration of the theory of value, has even been frequently confused with that of Marx. On the basis of his own theory of value, Ricardo saw that Smith's method of resolving the price of all commodities into _v + s_--a theory which wrought so much havoc in the analysis of reproduction--is wrong; but he was not much interested in Smith's mistake, nor indeed very enthusiastic about the problem of reproduction as a whole. His analysis, in fact, represents a certain decline after that of Adam Smith, just as Smith had partly retrogressed as against the Physiocrats. If Ricardo expounded the fundamental value categories of bourgeois economy--wages, surplus value and capital--much more precisely and consistently than his predecessors, he also treated them more rigidly. Adam Smith had shown infinitely more understanding for the living connections, the broad movements of the whole. In consequence he did not mind giving two, or, as in the case of the problem of value, even three or four different answers to the same question. Though he contradicts himself quite cheerfully in the various parts of his analysis, these very contradictions are ever stimulating him to renewed effort, they make him approach the problem as a whole from an ever different point of view, and so to grasp its dynamics. Ultimately, it was the limitation of their bourgeois mentalities which doomed both Smith and Ricardo to failure. A proper understanding of the fundamental categories of capitalist production, of value and surplus value as living dynamics of the social process demands the understanding of this process in its historical development and of the categories themselves as historically conditioned forms of the general relations of labour. This means that only a socialist can really solve the problem of the reproduction of capital. Between the _Tableau Économique_ and the diagram of reproduction in the second volume of _Capital_ there lies the prosperity and decline of bourgeois economics, both in time and in substance. FOOTNOTES: [90] In his seventh note to the _Tableau Économique_, following up his arguments against the mercantilist theory of money as identical with wealth, Quesnay says: 'The bulk of money in a nation cannot increase unless this reproduction itself increases; otherwise, an increase in the bulk of money would inevitably be prejudicial to the annual production of wealth.... Therefore we must not judge the opulence of states on the basis of a greater or smaller quantity of money: thus a stock of money, equal to the income of the landowners, is deemed much more than enough for an agricultural nation where the circulation proceeds in a regular manner, and where commerce takes place in confidence and full liberty' (_Analyse du Tableau Économique_, ed. Oncken, pp. 324-5). [91] Marx (_Capital_, vol. ii, p. 482) takes the money spent directly by the capitalists of Department II as the starting point of this act of exchange. As Engels rightly says in his footnote, this does not affect the final result of circulation, but the assumption is not the correct condition of circulation within society. Marx himself has given a better exposition in _Capital_, vol. ii, pp. 461-2. [92] _Capital_, vol. ii, p. 548. [93] _Capital_, vol. ii, p. 550. [94] Ibid., p. 551. [95] Ibid., p. 572. _CHAPTER VI_ ENLARGED REPRODUCTION The shortcomings of the diagram of simple reproduction are obvious: it explains the laws of a form of reproduction which is possible only as an occasional exception in a capitalist economy. It is not simple but enlarged reproduction which is the rule in every capitalist economic system, even more so than in any other.[96] Nevertheless, this diagram is of real scientific importance in two respects. In practice, even under conditions of enlarged reproduction, the greater part of the social product can be looked on as simple reproduction, which forms the broad basis upon which production in every case expands beyond its former limits. In theory, the analysis of simple reproduction also provides the necessary starting point for all scientific exposition of enlarged reproduction. The diagram of simple reproduction of the aggregate social capital therefore inevitably introduces the further problem of the enlarged reproduction of the total capital. We already know the historical peculiarity of enlarged reproduction on a capitalist basis. It must represent itself as accumulation of capital, which is both its specific form and its specific condition. That is to say, social production as a whole--which on a capitalist basis is the production of surplus value--can in every case be expanded only in so far as the social capital that has been previously active is now augmented by surplus value of its own creation. This use of part of the surplus value (and in particular the use of an increasing part of it) for the purpose of production instead of personal consumption by the capitalist class, or else the increase of reserves, is the basis of enlarged reproduction under capitalist conditions of production. The characteristic feature of enlarged reproduction of the aggregate social capital--just as in our previous assumption of simple reproduction--is the reproduction of individual capitals, since production as a whole, whether regarded as simple or as enlarged production, can in fact only occur in the form of innumerable independent movements of reproduction performed by private individual capitals. The first comprehensive analysis of the accumulation of individual capitals is given in volume i of Marx's _Capital_, section 7, chapters 22, 23. Here Marx treats of (_a_) the division of the surplus value into capital and revenue; (_b_) the circumstances which determine the accumulation of capital apart from this division, such as the degree of exploitation of labour power and labour productivity; (_c_) the growth of fixed capital relative to the circulating capital as a factor of accumulation; and (_d_) the increasing development of an industrial reserve army which is at the same time both a consequence and a prerequisite of the process of accumulation. In the course of this discussion, Marx deals with two inspired notions of bourgeois economists with regard to accumulation: the 'theory of abstinence' as held by the more vulgar economists, who proclaim that the division of surplus value into capital, and thus accumulation itself, is an ethical and heroic act of the capitalists; and the fallacy of the classical economists, their doctrine that the entire capitalised part of the surplus value is used solely for consumption by the productive workers, that is to say spent altogether on wages for the workers employed year by year. This erroneous assumption, which completely overlooks the fact that every increase of production must manifest itself not only in the increased number of employed workers but also in the increase of the material means of production (premises, tools, and, certainly, raw materials) is obviously rooted in that 'dogma' of Adam Smith which we have already discussed. Moreover, the assumption that the expenditure of a greater amount of capital on wages is sufficient to expand production, also results from the mistaken idea that the prices of all commodities are completely resolved into wages and surplus value, so that the constant capital is disregarded altogether. Strangely enough, even Ricardo who was, at any rate occasionally, aware of this element of error in Smith's doctrine, subscribes most emphatically to its ultimate inferences, mistaken though they were: 'It must be understood, that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive, instead of unproductive labourers.'[97] If all the goods produced are thus swallowed up by human consumption, there can clearly be no room to spare in the total social product for such unconsumable means of production as tools and machinery, new materials and buildings, and consequently enlarged reproduction, too, will have to take a peculiar course. What happens--according to this odd conception--is simply that staple foodstuffs for new workers will be produced to the amount of the capitalised part of surplus value instead of the choice delicacies previously provided for the capitalist class. The classical theory of enlarged reproduction does not admit of any variations other than those connected with the production of consumer goods. After our previous observations it is not surprising that Marx could easily dispose of this elementary mistake of both Ricardo and Smith. Just as simple reproduction requires a regulated renewal of the constant capital, the material means of production, quite apart from the production of consumer goods in the necessary quantity for labourer and capitalist, equally so in the case of expanding production must part of the new additional capital be used to enlarge the constant capital, that is to add to the material means of production. Another law, Marx discovered, must also be applied here. The constant capital, continually overlooked by the classical economists, increases relative to the variable capital that is spent on wages. This is merely the capitalist expression of the general effects of increasing labour productivity. With technical progress, human labour is able to set in motion ever larger masses of means of production and to convert them into goods. In capitalist terms, this means a progressive decrease in expenses for living labour, in wages, relative to the expenses for inanimate means of production. Contrary to the assumption of Adam Smith and Ricardo, enlarged reproduction must not only start with the division of the capitalised part of the surplus value into constant and variable capital, but, as the technique of production advances, it is bound to allocate in this division ever increasing portions to the constant, and ever diminishing portions to the variable capital. This continuous qualitative change in the composition of capital is the specific manifestation of the accumulation of capital, that is to say of enlarged reproduction on the basis of capitalism.[98] The other side of this picture of continual changes in the relation between the portions of constant and variable capital is the formation of a relative surplus population, as Marx called it, that is to say that part of the working population which exceeds the average needs of capital, and thus becomes redundant. This reserve of unemployable industrial labour (taken here in a broader sense, and including a proletariat that is dominated by merchant capital) is always present. It forms a necessary prerequisite of the sudden expansion of production in times of boom, and is another specific condition of capitalist accumulation.[99] From the accumulation of individual capitals we can therefore deduce the following four characteristic phenomena of enlarged reproduction: (1) The volume of enlarged reproduction is independent, within certain limits, of the growth of capital, and can transcend it. The necessary methods for achieving this are: increased exploitation of labour and natural forces, and increased labour productivity (including increased efficiency of the fixed capital). (2) All real accumulation starts with that part of the surplus value which is intended for capitalisation being divided into constant and variable capital. (3) Accumulation as a social process is accompanied by continuous changes in the relation between constant and variable capital, whereby that portion of capital which is invested in inanimate means of production continually increases as compared with that expended on wages. (4) Concomitant with the accumulative process, and as a condition of the latter, there develops an industrial reserve army. These characteristics, derived from the reproductive process as it is performed by the individual capitals, represent an enormous step forward as compared with the analyses of bourgeois economists. Now, however, our problem is to demonstrate the accumulation of the aggregate capital which originates from these movements of individual capitals, and on the basis of the diagram of simple reproduction to establish the precise relations between the aspects of value prevalent in the production of surplus value and the material considerations in the production of consumer and producer goods, with a view to accumulation. The essential difference between enlarged reproduction and simple reproduction consists in the fact that in the latter the capitalist class and its hangers-on consume the entire surplus value, whereas in the former a part of the surplus value is set aside from the personal consumption of its owners, not for the purpose of hoarding, but in order to increase the active capital, i.e. for capitalisation. To make this possible, the new additional capital must also find the material prerequisites for its activity forthcoming. Here the concrete composition of the aggregate social product becomes important. Marx says already in volume i, when he considers the accumulation of individual capitals: 'The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus-product consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.--To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer, (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.'[100] Additional means of production, however, and additional consumer goods for the workers alone are not sufficient; to get enlarged reproduction really going, additional labour is also required. Marx now finds a specific difficulty in this last condition: 'For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete.'[101] This is the first solution which Marx gave to the problem of the accumulation of the aggregate capital. Having dwelt on this aspect of the question already in volume i of _Capital_, Marx returns to the problem at the end of the second volume of his main work whose concluding 21st chapter is devoted to accumulation and enlarged reproduction of the aggregate capital. Let us examine Marx's diagrammatic exposition of accumulation more closely. On the model of the diagram of simple reproduction with which we are already familiar, he devised a diagram for enlarged reproduction, the difference appearing most clearly if we compare the two. Assuming that society's annual aggregate product can be represented by an amount to the value of 9,000 (denoting millions of working hours, or, in capitalist monetary terms, any arbitrary amount of money), the aggregate product is to be distributed as follows: I. _4,000c + 1,000v + 1,000s = 6,000_ II. _2,000c + 500v + 500s = 3,000_ ----- Total: 9,000 Department I represents means of production, Department II consumer goods. One glance at the proportion of the figures shows that in this case simple reproduction alone is possible. The means of production made in Department I equal the total of the means of production actually used by the two departments. If these are merely renewed, production can be repeated only on its previous scale. On the other hand, the aggregate product of Department II equals the total of wages and surplus value in both departments. This shows that the consumer goods available permit only the employment of just as many workers as were previously employed, and that the entire surplus value is similarly spent on consumer goods, i.e. the personal consumption of the capitalist class. Now let us take the same aggregate product of 9,000 in the following equation: I. _4,000c + 1,000v + 1,000s = 6,000_ II. _1,500c + 750v + 750s = 3,000_ ----- Total: 9,000 Here a double disproportion confronts us: 6,000 means of production are created--more than those which are actually used by the society, i.e. _4,000c + 1,500c_, leaving a surplus of 500. Similarly, less consumer goods (3,000) are produced than the sum of what is paid out in wages (i.e. _1,000v + 750v_, the requirement of the workers), plus the aggregate of surplus value that has been produced (_1,000s + 750s_). This results in a deficit of 500. Since our premises do not allow us to decrease the number of workers employed, the consequence must be that the capitalist class cannot consume the entire surplus value it has pocketed. This proves fully consistent with the two material preconditions of enlarged reproduction on a capitalist basis: part of the appropriated surplus value is not to be consumed but is used for the purposes of production; and more means of production must be produced so as to ensure the use of the capitalised surplus value for the actual expansion of reproduction. In considering the diagram of simple reproduction, we saw that its fundamental social conditions are contained in the following equation: the aggregate of means of production (the product of Department I) must be equivalent to the constant capital of both departments, but the aggregate of consumer goods (the product of Department II) must equal the sum of variable capitals _and_ surplus values of the two departments. As regards enlarged reproduction, we must now infer a precise inverse double ratio. The general precondition of enlarged reproduction is that the product of Department I must be greater in value than the constant capital of both departments taken together, and that of Department II must be so much less than the sum total of both the variable capital and the surplus value in the two departments. This, however, by no means completes the analysis of enlarged reproduction; rather has it led us merely to the threshold of the question. Having deduced the proportions of the diagram, we must now pursue their further activities, the flow of circulation and the continuity of reproduction. Just as simple reproduction may be compared to an unchanging circle, to be repeated time and again, so enlarged reproduction, to quote Sismondi, is comparable to a spiral with ever expanding loops. Let us begin by examining the loops of this spiral. The first general question arising in this connection is how actual accumulation proceeds in the two departments under the conditions now known to us, i.e. how the capitalists may capitalise part of their surplus value, and at the same time acquire the material prerequisites necessary for enlarged reproduction. Marx expounds the question in the following way: Let us assume that half the surplus value of Department I is being accumulated. The capitalists, then, use 500 for their consumption but augment their capital by another 500. In order to become active, this additional capital of 500 must be divided, as we now know, into constant and variable capital. Assuming the ratio of 4 to 1 remains what it was for the original capital, the capitalists of Department I will divide their additional capital of 500 thus: they will buy new means of production for 400 and new labour for 100. This does not present any difficulties, since we know that Department I has already produced a surplus of 500 means of production. Yet the corresponding enlargement of the variable capital by 100 units of money is not enough, since the new additional labour power must also find adequate consumer goods which can only be supplied by Department II. Now the circulation between the two large departments is shifting. Formerly, under conditions of simple reproduction, Department I acquired 1,000 consumer goods for its own workers, and now it must find another 100 for its new workers. Department I therefore engages in enlarged reproduction as follows: _4,400c + 1,100v_. Department II, in turn, after selling these consumer goods to the value of 100, is now in a position to acquire additional means of production to the same amount from Department I. And in fact, Department I still has precisely one hundred of its surplus product left over which now find their way into Department II, enabling the latter to expand its own reproduction as well. Yet here, too, the additional means of production alone are not much use; to make them operate, additional labour power is needed. Assuming again that the previous composition of capital has been maintained, with a ratio of 2 to 1 as regards constant and variable capital, additional labour to the tune of 50 is required to work the additional 100 means of production. This additional labour, however, needs additional consumer goods to the amount of its wages, which are in fact supplied by Department II itself. This department must therefore produce, in addition to the 100 additional consumer goods for the new workers of Department I and the goods for the consumption of its own workers, a further amount of consumer goods to the tune of 50 as part of its aggregate product. Department II therefore starts on enlarged reproduction at a rate of _1,600c + 800v_. Now the aggregate product of Department I (6,000) has been absorbed completely. 5,500 were necessary for renewing the old and used-up means of production in both departments, and the remaining 500 for the expansion of production: 400 in Department I and 100 in Department II. As regards the aggregate product of Department II (3,000), 1,900 have been used for the increased labour force in the two departments, and the 1,100 consumer goods which remain serve the capitalists for their personal consumption, the consumption of their surplus value. 500 are consumed in Department I, and 600 in Department II where, out of a surplus value of 700, only 150 had been capitalised (100 being expended on means of production and 50 on wages). Enlarged reproduction can now proceed on its course. If we maintain our rate of exploitation at 100 per cent, as in the case of the original capital, the next period will give the following results: I. _4,400c + 1,100v + 1,100s = 6,600_ II. _1,600c + 800v + 800s = 3,200_ ----- Total: 9,800 The aggregate product of society has grown from 9,000 to 9,800, the surplus value of Department I from 1,000 to 1,100, and of Department II from 750 to 800. The object of the capitalist expansion of production, the increased production of surplus value, has been gained. At the same time, the material composition of the aggregate social product again shows a surplus of 600 as regards the means of production (6,600) over and above those which are actually needed (4,400 + 1,600), and also a deficit in consumer goods as against the sum total made up by the wages previously paid (_1,100v + 800v_) and the surplus value that has been created (_1,100s + 800s_). And thus we again have the material possibility as well as the necessity to use part of the surplus value, not for consumption by the capitalist class, but for a new expansion of production. The second enlargement of production, and increased production of surplus value, thus follows from the first as a matter of course and with mathematical precision. The accumulation of capital, once it has started, automatically leads farther and farther beyond itself. The circle has become a spiral which winds itself higher and higher as if compelled by a natural law in the guise of mathematical terms. Assuming that in the following years there is always capitalisation of half the surplus value, while the composition of the capital and the rate of exploitation remain unchanged, the reproduction of capital will result in the following progression: _2nd year:_ I. _4,840c + 1,210v + 1,210s = 7,260_ II. _1,760c + 880v + 880s = 3,520_ ------ Total: 10,780 _3rd year:_ I. _5,324c + 1,331v + 1,331s = 7,986_ II. _1,936c + 968v + 968s = 3,872_ ------ Total: 11,858 _4th year:_ I. _5,856c + 1,464v + 1,464s = 8,784_ II. _2,129c + 1,065v + 1,065s = 4,259_ ------ Total: 13,043 _5th year:_ I. _6,442c + 1,610v + 1,610s = 9,662_ II. _2,342c + 1,172v + 1,172s = 4,686_ ------ Total: 14,348 Thus, after five years of accumulation, the aggregate social product is found to have grown from 9,000 to 14,348, the social aggregate capital from (_5,500c + 1,750v = 7,250_) to (_8,784c + 2,782v = 11,566_) and the surplus value from (_1,000s + 500s = 1,500_) to (_1,464s + 1,065s = 2,529_), whereby the surplus value for personal consumption, being 1,500 at the beginning of accumulation, has grown to 732 + 958 = 1,690 in the last year.[102] The capitalist class, then, has capitalised more, it has practised greater abstinence, and yet it has been able to live better. Society, in a material respect, has become richer, richer in means of production, richer in consumer goods, and it has equally become richer in the capitalist sense of the term since it produces more surplus value. The social product circulates _in toto_ in society. Partly it serves to enlarge reproduction and partly it serves consumption. The requirements of capitalist accumulation correspond to the material composition of the aggregate social product. What Marx said in volume i of _Capital_ is true: the increased surplus value can be added on to capital because the social surplus product comes into the world from the very first in the material form of means of production, in a form incapable of utilisation except in the productive process. At the same time reproduction expands in strict conformity with the laws of circulation: the mutual supply of the two departments of production with additional means of production and consumer goods proceeds as an exchange of equivalents. It is an exchange of commodities in the course of which the very accumulation of one department is the condition of accumulation in the other and makes this possible. The complicated problem of accumulation is thus converted into a diagrammatic progression of surprising simplicity. We may continue the above chain of equations _ad infinitum_ so long as we observe this simple principle: that a certain increase in the constant capital of Department I always necessitates a certain increase in its variable capital, which predetermines beforehand the extent of the increase in Department II, with which again a corresponding increase in the variable capital must be co-ordinated. Finally, it depends on the extent of increase in the variable capital in both departments, how much of the total may remain for personal consumption by the capitalist class. The extent of this increase will also show that this amount of consumer goods which remains for private consumption by the capitalist is exactly equivalent to that part of the surplus value which has not been capitalised in either department. There are no limits to the continuation of this diagrammatic development of accumulation in accordance with the few easy rules we have demonstrated. But now it is time to take care lest we should only have achieved these surprisingly smooth results through simply working out certain fool-proof mathematical exercises in addition and subtraction, and we must further inquire whether it is not merely because mathematical equations are easily put on paper that accumulation will continue _ad infinitum_ without any friction. In other words: the time has come to look for the concrete social conditions of accumulation. FOOTNOTES: [96] 'The premise of simple reproduction, that I(_v + s_) is equal to II_c_, is irreconcilable with capitalist production, although this does not exclude the possibility that a certain year in an industrial cycle of ten or eleven years may not show a smaller total production than the preceding year, so that there would not have been even a simple reproduction, compared to the preceding year. Indeed, considering the natural growth of population per year, simple reproduction could take place only in so far as a correspondingly larger number of unproductive servants would partake of the 1,500 representing the aggregate surplus-product. But accumulation of capital, actual capitalist production, would be impossible under such circumstances' (_Capital_, vol. ii, p. 608). [97] Ricardo, _Principles_, chap. viii, 'On Taxes'. MacCulloch's edition of Ricardo's Works, p. 87, note. (Reference not given in original.) [98] 'The specifically capitalist mode of production, the development of the productive power of labour corresponding to it, and the change thence resulting in the organic composition of capital, do not merely keep pace with the advance of accumulation, or with the growth of social wealth. They develop at a much quicker rate, because mere accumulation, the absolute increase of the total social capital, is accompanied by the centralisation of the individual capitals of which that total is made up; and because the change in the technological composition of the additional capital goes hand in hand with a similar change in the technological composition of the original capital. With the advance of accumulation, therefore, the proportion of constant to variable capital changes. If it was originally say 1 : 1, it now becomes successively 2 : 1, 3 : 1, 4 : 1, 5 : 1, 7 : 1, etc., so that, as the capital increases, instead of 1/2 of its total value, only 1/3, 1/4, 1/5, 1/6, 1/8, etc., is transformed into labour-power, and, on the other hand, 2/3, 3/4, 4/5, 5/6, 7/8 into means of production. Since the demand for labour is determined not by the amount of capital as a whole, but by its variable constituent alone, that demand falls progressively with the increase of the total capital, instead of, as previously assumed, rising in proportion to it. It falls relatively to the magnitude of the total capital, and at an accelerated rate, as this magnitude increases. With the growth of the total capital, its variable constituent or the labour incorporated in it, also does increase, but in a constantly diminishing proportion. The intermediate pauses are shortened, in which accumulation works as simple extension of production, on a given technical basis. It is not merely that an accelerated accumulation of total capital, accelerated in a constantly growing progression, is needed to absorb an additional number of labourers, or even, on account of the constant metamorphosis of old capital, to keep employed those already functioning. In its turn, this increasing accumulation and centralisation becomes a source of new changes in the composition of capital, of a more accelerated diminution of its variable, as compared with its constant constituent' (_Capital_, vol. i, pp. 642-3). [99] 'The course characteristic of modern industry, viz., a decennial cycle (interrupted by smaller oscillations), of periods of average activity, production at high pressure, crisis and stagnation, depends on the constant formation, the greater or less absorption, and the re-formation of the industrial reserve army or surplus population. In their turn, the varying phases of the industrial cycle recruit the surplus population, and become one of the most energetic agents of its reproduction' (ibid., pp. 646-7). [100] _Capital_, vol. i. pp. 593-4. [101] Ibid., p. 594. [102] Op. cit., vol. ii, pp. 596-601. _CHAPTER VII_ ANALYSIS OF MARX'S DIAGRAM OF ENLARGED REPRODUCTION The first enlargement of reproduction gave the following picture: I. _4,400c + 1,100v + 1,100s = 6,600_ II. _1,600c + 800v + 800s = 3,200_ ----- Total: 9,800 This already clearly expresses the interdependence of the two departments--but it is a dependence of a peculiar kind. Accumulation here originates in Department I, and Department II merely follows suit. Thus it is Department I alone that determines the volume of accumulation. Marx effects accumulation here by allowing Department I to capitalise one-half of its surplus value; Department II, however, may capitalise only as much as is necessary to assure the production and accumulation of Department I. He makes the capitalists of Department II consume 600_s_ as against the consumption of only 500_s_ by the capitalists of Department I who have appropriated twice the amount of value and far more surplus value. In the next year, he assumes the capitalists of Department I again to capitalise half their surplus value, this time making the capitalists of Department II capitalise more than in the previous year--summarily fixing the amount to tally exactly with the needs of Department I. 500_s_ now remain for the consumption of the capitalists of Department II--less than the year before--surely a rather queer result of accumulation on any showing. Marx now describes the process as follows: 'Then let Department I continue accumulation at the same ratio, so that 550_s_ are spent as revenue, and 55_s_ accumulated. In that case, 1,100 I_v_ are first replaced by 1,100 I_c_, and 550 I_s_ must be realised in an equal amount of commodities of II, making a total of 1,650 I(_v + s_). But the constant capital of II, which is to be replaced, amounts only to 1,600, and the remaining 50 must be made up out of 800 II_s_. Leaving aside the money aspect of the matter, we have as a result of this transaction: 'I. _4,400c + 550s_ (to be capitalised); furthermore, realised in commodities of II for the fund for consumption of the capitalists and labourers of I, 1,650 (_v + s_). 'II. _1,650c + 825v + 725s_. 'In Department I, 550_s_ must be capitalised. If the former proportion is maintained, 440 of this amount form constant capital, and 110 variable capital. These 110 must be eventually taken out of 725 II_s_, that is to say, articles of consumption to the value of 110 are consumed by the labourers of I instead of the capitalists of II, so that the latter are compelled to capitalise these 110_s_ which they cannot consume. This leaves 615 II_s_ of the 725 II_s_. But if II thus converts these 110 into additional constant capital, it requires an additional variable capital of 55. This again must be taken out of its surplus value. Subtracting this amount from 615 II_s_, we find that only 560 II_s_ remain for the consumption of the capitalists of II, and we obtain the following values of capital after accomplishing all actual and potential transfers: I. _(4,400c+440c) + (1,100v+110v) = 4,840c + 1,210v = 6,050_ II. _(1,600c+50c+110c) + (800v+25v+55v) = 1,760c + 88v = 2,640_ ----- Total: 8,690'[103] This quotation is given at length since it shows very clearly how Marx here effects accumulation in Department I at the expense of Department II. In the years that follow, the capitalists of the provisions department get just as rough a deal. Following the same rules, Marx allows them in the third year to accumulate 264_s_--a larger amount this time than in the two preceding years. In the fourth year they are allowed to capitalise 290_s_ and to consume 678_s_, and in the fifth year they accumulate 320_s_ and consume 745_s_. Marx even says: 'If things are to proceed normally, accumulation in II must take place more rapidly than in I, because that portion of I(_v + s_) which must be converted into commodities of II_c_, would otherwise grow more rapidly than II_c_, for which it can alone be exchanged.'[104] Yet the figures we have quoted fail to show a quicker accumulation in Department II, and in fact show it to fluctuate. Here the principle seems to be as follows: Marx enables accumulation to continue by broadening the basis of production in Department I. Accumulation in Department II appears only as a condition and consequence of accumulation in Department I: absorbing, in the first place, the other's surplus means of production and supplying it, secondly, with the necessary surplus of consumer goods for its additional labour. Department I retains the initiative all the time, Department II being merely a passive follower. Thus the capitalists of Department II are only allowed to accumulate just as much as, and are made to consume no less than, is needed for the accumulation of Department I. While in Department I half the surplus value is capitalised every time, and the other half consumed, so that there is an orderly expansion both of production and of personal consumption by the capitalists, the twofold process in Department II takes the following erratic course: 1st year: 150 are capitalised, 600 consumed 2nd 240 660 3rd 254 626 4th 290 678 5th 320 745 Here there is no rule in evidence for accumulation and consumption to follow; both are wholly subservient to the requirements of accumulation in Department I. Needless to say, the absolute figures of the diagram are arbitrary in every equation, but that does not detract from their scientific value. It is the _quantitative ratios_ which are relevant, since they are supposed to express strictly determinate relationships. Those precise logical rules that lay down the relations of accumulation in Department I, seem to have been gained at the cost of any kind of principle in construing these relations for Department II; and this circumstance calls for a revision of the immanent connections revealed by the analysis. It might, however, be permissible to assume the defect to lie in a rather unhappy choice of example. Marx himself, dissatisfied with the diagram quoted above, proceeded forthwith to give a second example in order to elucidate the movements of accumulation, where the figures of the equation run in the following order: I. _5,000c + 1,000v + 1,000s = 7,000_ II. _1,430c + 285v + 285s = 2,000_ ----- Total: 9,000 In contrast to the previous example, the capital of both departments is here seen to have the same composition, i.e. constant and variable capital are in a ratio of 5 to 1. This already presupposes a considerable development of capitalist production, and accordingly of social labour productivity--a considerable preliminary expansion of the scale of production, and finally, a development of all the circumstances which bring about a relatively redundant surplus population in the working class. We are no longer introduced to enlarged reproduction, as in the first example, at the stage of the original transition from simple to enlarged reproduction--the only point of that is in any case for the sake of abstract theory. This time, we are brought face to face with the process of accumulation as it goes on at a definite and rather advanced stage of development. It is perfectly legitimate to assume these conditions, and they in no way distort the principles we must employ in order to work out the individual loops of the reproductive spiral. Here again Marx takes for a starting point the capitalisation of half the surplus value in Department I. 'Now take it that the capitalist class of I consumes one-half of the surplus-value, or 500, and accumulates the other half. In that case (_1,000v + 500s_) I, or 1,500, must be converted into 1,500 II_c_. Since II_c_ amounts to only 1,430, it is necessary to take 70 from the surplus-value. Subtracting this sum from 285_s_ leaves 215 II_s_. Then we have: 'I. _5,000c + 500s_ (to be capitalised) + 1,500(_v + s_) in the fund set aside for consumption by capitalists and labourers. 'II. _1,430c + 70s_ (to be capitalised) + _285v + 215s_. As 70 II_s_ are directly annexed by II_c_, a variable capital of 70 : 5, or 14, is required to set this additional constant capital in motion. These 14 must come out of the 215_s_, so that only 201 remain, and we have: 'II _(1,430) + 70c + (285v + 14v) + 201s_.'[105] After these preliminary arrangements, capitalisation can now proceed. This is done as follows: In Department I the 500_s_ which have been capitalised are divided into five-sixths (417_c_) + one-sixth (83_v_). These 83_v_ withdraw a corresponding amount from II_s_ which serves to buy units of constant capital and thus accrues to II_c_. An increase of II_c_ by 83 involves the necessity of an increase in II_v_ by 17 (one-fifth of 83). After the completion of this turnover we therefore have: I. _(5,000c + 417s) + (1,000v + 83s)v = 5,417c + 1,083v = 6,500_ II. _(1,500c + 83s) + (299v + 17s) = 1,538c + 316v = 1,899_ ----- Total: 8,399 The capital of Department I has grown from 6,000 to 6,500, i.e. by one-twelfth; in Department II it has grown from 1,715 to 1,899, i.e. by just over one-ninth. At the end of the next year, the results of reproduction on this basis are: I. _5,417c + 1,083v + 1,083s = 7,583_ II. _1,583c + 316v + 316s = 2,215_ ----- Total: 9,798 If the same ratio is maintained in the continuance of accumulation, the result at the end of the second year is as follows: I. _5,869c + 1,173v + 1,173s = 8,215_ II. _1,715c + 342v + 342s = 2,399_ ------ Total: 10,614 And at the end of the third year: I. _6,358c + 1,271v + 1,271s = 8,900_ II. _1,858c + 371v + 371s = 2,600_ ------ Total: 11,500 In the course of three years, the total social capital has increased from I.6,000 + II.1,715 = 7,715 to I.7,629 + II.2,229 = 9,858, and the total product from 9,000 to 11,500. Accumulation in both departments here proceeds uniformly, in marked difference from the first example. From the second year onwards, both departments capitalise half their surplus value and consume the other half. A bad choice of figures in the first example thus seems to be responsible for its arbitrary appearance. But we must check up to make sure that it is not only a mathematical manipulation with cleverly chosen figures which this time ensures the smooth progress of accumulation. In the first as well as in the second example, we are continually struck by a seemingly general rule of accumulation: to make any accumulation possible, Department II must always enlarge its constant capital by precisely the amount by which Department I increases (_a_) the proportion of surplus value for consumption and (_b_) its variable capital. If we take the example of the first year as an illustration, the constant capital of Department II must be increased by 70. And why? because this capital was only 1,430 before. But if the capitalists of Department I wish to accumulate half their surplus value (1,000) and to consume the other half, they need consumer goods for themselves and for their workers to the tune of 1,500 units which they can obtain only from Department II in exchange for their own products--means of production. Since Department II has already satisfied its own demand for producer goods to the extent of its own constant capital (1,430), this exchange is only possible if Department II decides to enlarge its own constant capital by 70. This means that it must enlarge its own production--and it can do so only by capitalising a corresponding part of its surplus value. If this surplus value amounts to 285 in Department II, 70 of it must be added to the constant capital. The first step towards expansion of production in Department II is thus demonstrated to be at the same time the condition for, and the consequence of, increased consumption by the capitalists of Department I. But to proceed. Hitherto, the capitalists of Department I could only spend one-half of their surplus value (500) on personal consumption. To capitalise the other half, they must redistribute these 500_s_ in such a way as to maintain at least the previous ratio of composition, i.e. they must increase the constant capital by 417 and the variable capital by 83. The first operation presents no difficulties: the surplus value of 500 belonging to the capitalists of Department I is contained in a natural form in their own product, the means of production, and is fit straightway to enter into the process of production; Department I can therefore enlarge its constant capital with the appropriate quantity of its own product. But the remaining 83 can only be used as variable capital if there is a corresponding quantity of consumer goods for the newly employed workers. Here it becomes evident for the second time that accumulation in Department I is dependent upon Department II: Department I must receive for its workers 83 more consumer goods than before from Department II. As this is again possible only by way of commodity exchange, Department I can satisfy its demands only on condition that Department II is prepared for its part to take up products of Department I, producer goods, to the tune of 83. Since Department II has no use for the means of production except to employ them in the process of production, it becomes not only possible but even necessary that Department II should increase its own constant capital by these very 83 which will now be used for capitalisation and are thus again withdrawn from the consumable surplus value of this department. The increase in the variable capital of Department I thus entails the second step in the enlargement of production in Department II. All material prerequisites of accumulation in Department I are now present and enlarged reproduction can proceed. Department II, however, has so far made only two increases in its constant capital. The result of this enlargement is that if the newly acquired means of production are indeed to be used, the quantity of labour power must be increased correspondingly. Maintaining the previous ratio, the new constant capital of 153 requires a new variable capital of 31. This implies the necessity to capitalise a corresponding further amount of the surplus value. Thus the fund for the capitalists' personal consumption in Department II comes to be what remains of the surplus value (285_s_) after deduction of the amounts used for twice enlarging the constant capital (70 + 83) and a commensurate increase in the variable capital (31)--a fund of 101, after deducting a total of 184. Similar operations in the second year of accumulation result for Department II in its surplus value being divided into 158 for capitalisation and 158 for the consumption of its capitalists, and in the third year, the figures become 172 and 170 respectively. We have studied this process so closely, tracing it step by step, because it shows clearly that the accumulation of Department II is completely determined and dominated by the accumulation of Department I. Though this dependence is no longer expressed, as in Marx's first example, by arbitrary changes in the distribution of the surplus value, it does not do away with the fact itself, even if now the surplus value is always neatly halved by each department, one-half for capitalisation and the other for personal consumption. Though there is nothing to choose between the capitalists of the two departments as far as the figures are concerned, it is quite obvious that Department I has taken the initiative and actively carries out the whole process of accumulation, while Department II is merely a passive appendage. This dependence is also expressed in the following precise rule: accumulation must proceed simultaneously in both departments, and it can do so only on condition that the provisions-department increases its constant capital by the precise amount by which the capitalists of the means-of-production-department increase both their variable capital and their fund for personal consumption. This equation (increase II_c_ = increase I_v_ + increase I_s.c_.)[106] is the mathematical cornerstone of Marx's diagram of accumulation, no matter what figures we may choose for its concrete application. But now we must see whether capitalist accumulation does in actual fact conform to this hard and fast rule. Let us first return to simple reproduction. Marx's diagram, it will be remembered, was as follows: I. _4,000c + 1,000v + 1,000s = 6,000_ means of production II. _2,000c + 500v + 500s = 3,000_ means of consumption ----- 9,000 total production Here, too, we established certain equations which form the foundation of simple reproduction; they were: (_a_) The product of Department I equals in value the sum of the two constant capitals in Departments I and II. (_b_) The constant capital of Department II equals the sum of variable capital and surplus value in Department I--a necessary consequence of (_a_). (_c_) The product of Department II equals the sum of variable capital and surplus value in both departments--a necessary consequence of (_a_) and (_b_). These equations correspond to the conditions of capitalist commodity production (at the restricted level of simple reproduction, however). Equation (_b_), for instance, is a result of the production of commodities, entailed by the fact, in other words, that the entrepreneurs of either department can only obtain the products of the other by an exchange of equivalents. Variable capital and surplus value in Department I together represent the demand of this department for consumer goods. The product of Department II must provide for the satisfaction of this demand, but consumer goods can only be obtained in exchange for an equivalent part of the product of Department I, the means of production. These equivalents, useless to Department II in their natural form if not employed as constant capital in the process of production, will thus determine how much constant capital there is to be in Department II. If this proportion were not adhered to, if, e.g., the constant capital of Department II (as a quantity of value) were larger than I(_v + s_), then it could not be completely transformed into means of production, since the demand of Department I for consumer goods would be too small; if the constant capital (II) were smaller than I(_v + s.c_), either the previous quantity of labour power could not be employed in this department, or the capitalists could not consume the whole of their surplus value. In all these cases, the premises of simple reproduction would be violated. These equations, however, are not just an exercise in mathematics, nor do they merely result from the system of commodity production. To convince us of this fact, there is a simple means at hand. Let us imagine for a moment that, instead of a capitalist method of production, we have a socialist, i.e. a planned society in which the social division of labour has come to replace exchange. This society also will divide its labour power into producers of means of production and producers of means of consumption. Let us further imagine the technical development of labour to be such that two-thirds of social labour are employed in the manufacture of producer goods and one-third in the manufacture of consumer goods. Suppose that under these conditions 1,500 units (reckoned on a daily, monthly, or yearly basis) suffice to maintain the whole working population of the society, one thousand of these being employed, according to our premise, in Department soc. I (making means of production), and five hundred in Department soc. II (making consumer goods), and that the means of production dating from previous labour periods and used up during one year's labour, represent 3,000 labour units. This labour programme, however, would not be adequate for the society, since considerably more labour will be needed to maintain all those of its members who do not work in the material, the productive sense of the term: the child, the old and sick, the civil servant, the artist and the scientist. Moreover, every society needs certain reserves against a rainy day, as a protection against natural calamities. Taking it that precisely the same quantity of labour and, similarly, of means of production as that required for the workers' own maintenance is needed to maintain all the non-workers and to build up the reserves, then, from the figures previously assumed, we should get the following diagram for a regulated production: I. _4,000c + 1,000v + 1,000s = 6,000_ means of production II. _2,000c + 500v + 500s = 3,000_ means of consumption Here _c_ stands for the material means of production that have been used, expressed in terms of social labour time; _v_ stands for the social labour time necessary to maintain the workers themselves and _s_ for that needed to maintain those who do not work and to build up the reserves. If we check up on the proportions of this diagram, we obtain the following result: there is neither commodity production nor exchange, but in truth a social division of labour. The products of Department I are assigned to the workers of Department II in the requisite quantities, and the products of Department II are apportioned to everyone, worker or no, in both departments, and also to the reserve-fund; all this being the outcome not of an exchange of equivalents but of a social organisation that plans and directs the process as a whole--because existing demands must be satisfied and production knows no other end but to satisfy the demands of society. Yet all that does not detract from the validity of the equations. The product of Department I must equal I_c_ + II_c_: this means simply that Department I must annually renew all the means of production which society has used up during one year's labour. The product of Department II must equal the sum of I(_v + s_) + II(_v + s_): this means that society must each year produce as many consumer goods as are required by all its members, whether they work or not, plus a quota for the reserve fund. The proportions of the diagram are as natural and as inevitable for a planned economy as they are for a capitalist economy based upon anarchy and the exchange of commodities. This proves the diagram to have objective social validity, even if, just because it concerns _simple_ reproduction, it has hardly more than theoretical interest for either a capitalist or a planned economy, finding practical application only in the rarest of cases. The same sort of scrutiny must now be turned on the diagram of enlarged reproduction. Taking Marx's second example as the basis for our test, let us again imagine a socialist society. From the point of view of a regulated society we shall, of course, have to start with Department II, not with Department I. Assuming this society to grow rapidly, the result will be an increasing demand for provisions by its members, whether they work or not. This demand is growing so quickly that a constantly increasing quantity of labour--disregarding for the moment the progress of labour productivity--will be needed for the production of consumer goods. The quantities required, expressed in terms of social labour incorporated in them, increase from year to year in a progression of, say, 2,000 : 2,215 : 2,399 : 2,600 and so on. Let us further assume that technical conditions demand an increasing amount of means of production for producing this growing quantity of provisions, which, again measured in terms of social labour, mounts from year to year in the following progression: 7,000 : 7,583 : 8,215 : 8,900 and so on. To achieve this enlargement of production, we must further have a growth in the labour performed _per annum_ according to the following progression: 2,570 : 2,798 : 3,030 : 3,284. [The figures correspond to the respective amounts of I(_v + s_) + II(_v + s_).] Finally, the labour performed annually must be so distributed that one-half is always used for maintaining the workers themselves, a quarter for maintaining those who do not work, and the last quarter for the purpose of enlarging production in the following year. Thus we obtain the proportions of Marx's second diagram of enlarged reproduction for a socialist society. In fact, three conditions are indispensable if production is to be enlarged in any society, even in a planned economy: (1) the society must have an increasing quantity of labour power at its disposal; (2) in every working period, the immediate needs of society must not claim the whole of its working time, so that part of the time can be devoted to making provision for the future and its growing demands; (3) means of production must be turned out year after year in sufficiently growing quantities--without which production cannot be enlarged on a rising scale. In respect of all these general points, Marx's diagram of enlarged reproduction has objective validity--_mutatis mutandis_--for a planned society. It remains to test whether it is also valid for a capitalist economy. Here we must ask first of all: what is the starting point of accumulation? That is the approach on which we have to investigate the mutual dependence of the accumulative process in the two departments of production. There can be no doubt that under capitalist conditions Department II is dependent upon Department I in so far as its accumulation is determined by the additional means of production available. Conversely, the accumulation in Department I depends upon a corresponding quantity of additional consumer goods being available for its additional labour power. It does not follow, however, that so long as both these conditions are observed, accumulation in both departments is bound, as Marx's diagram makes it appear, to go on automatically year after year. The conditions of accumulation we have enumerated are no more than those without which there can be no accumulation. There may even be a desire to accumulate in both departments, yet the desire to accumulate plus the technical prerequisites of accumulation is not enough in a capitalist economy of commodity production. A further condition is required to ensure that accumulation can in fact proceed and production expand: the effective demand for commodities must also increase. Where is this continually increasing demand to come from, which in Marx's diagram forms the basis of reproduction on an ever rising scale? It cannot possibly come from the capitalists of Departments I and II themselves--so much is certain right away--it cannot arise out of their personal consumption. On the contrary, it is the very essence of accumulation that the capitalists refrain from consuming a part of their surplus value which must be ever increasing--at least as far as absolute figures are concerned--that they use it instead to make goods for the use of other people. It is true that with accumulation the personal consumption of the capitalist class will grow and that there may even be an increase in the total value consumed; nevertheless it will still be no more than a part of the surplus value that is used for the capitalists' consumption. That indeed is the foundation of accumulation: the capitalists' abstention from consuming the whole of their surplus value. But what of the remaining surplus value, the part that is accumulated? For whom can it be destined? According to Marx's diagram, Department I has the initiative: the process starts with the production of producer goods. And who requires these additional means of production? The diagram answers that Department II needs them in order to produce means of consumption in increased quantities. Well then, who requires these additional consumer goods? Department I, of course--replies the diagram--because it now employs a greater number of workers. We are plainly running in circles. From the capitalist point of view it is absurd to produce more consumer goods merely in order to maintain more workers, and to turn out more means of production merely to keep this surplus of workers occupied. Admittedly, as far as the individual capitalist is concerned, the worker is just as good a consumer, i.e. purchaser of his commodity, as another capitalist or anyone else, provided that he can pay. Every individual capitalist realises his surplus value in the price of his commodity, whether he sells it to the worker or to some other buyer. But this does not hold true from the point of view of the capitalist class as a whole. The working class in general receives from the capitalist class no more than an assignment to a determinate part of the social product, precisely to the extent of the variable capital. The workers buying consumer goods therefore merely refund to the capitalist class the amount of the wages they have received, their assignment to the extent of the variable capital. They cannot return a groat more than that; and if they are in a position to save in order to make themselves independent as small entrepreneurs, they may even return less, though this is the exception. Part of the surplus value is consumed by the capitalist class itself in form of consumer goods, the money exchanged for these being retained in the capitalists' pockets. But who can buy the products incorporating the other, the capitalised part of the surplus value? Partly the capitalists themselves--the diagram answers--who need new means of production for the purpose of expanding production, and partly the new workers who will be needed to work these new means of production. But that implies a previous capitalist incentive to enlarge production; if new workers are set to work with new means of production, there must have been a new demand for the products which are to be turned out. Perhaps the answer is that the natural increase of the population creates this growing demand. In fact, the growth of the population and its needs provided the starting point for our examination of enlarged reproduction in an hypothetical socialist society. There the requirements of society could serve as an adequate basis, since the only purpose of production was the satisfaction of wants. In a capitalist society, however, the matter is rather different. What kind of people are we thinking of when we speak of an increase in the population? There are only two classes of the population according to Marx's diagram, the capitalists and the workers. The natural increase of the former is already catered for by that part of the surplus value which is consumed inasmuch as it increases in absolute quantity. In any case, it cannot be the capitalists who consume the remainder, since capitalist consumption of the entire surplus value would mean a reversion to simple reproduction. That leaves the workers, their class also growing by natural increase. Yet a capitalist economy is not interested in this increase for its own sake, as a starting point of growing needs. The production of consumer goods for I_v_ and II_v_ is not an end in itself, as it would be in a society where the economic system is shaped for the workers and the satisfaction of their wants. In a capitalist system, Department II does not produce means of consumption in large quantities simply to keep the workers of Departments I and II. Quite the contrary: a certain number of workers in Departments I and II can support themselves in every case because their labour power is useful under the obtaining conditions of supply and demand. This means that the starting point of capitalist production is not a given number of workers and their demands, but that these factors themselves are constantly fluctuating, 'dependent variables' of the capitalist expectations of profit. The question is therefore whether the natural increase of the working class also entails a growing effective demand over and above the variable capital. And that is quite impossible. The only source of money for the working class in our diagram is the variable capital which must therefore provide in advance for the natural increase of the workers. One way or the other: either the older generation must earn enough to keep their offspring--who cannot, then, count as additional consumers; or, failing that, the next generation, the young workers, must turn to work in order to obtain wages and means of subsistence for themselves--in which case the new working generation is already included in the number of workers employed. On this count, the process of accumulation in Marx's diagram cannot be explained by the natural increase of the population. But wait! Even under the sway of capitalism, society does not consist exclusively of capitalists and wage labourers. Apart from these two classes, there are a host of other people: the landowners, the salaried employees, the liberal professions such as doctors, lawyers, artists and scientists. Moreover, there is the Church and its servants, the Clergy, and finally the State with its officials and armed forces. All these strata of the population can be counted, strictly speaking, neither among the capitalist nor among the working class. Yet society has to feed and support them. Perhaps it is they, these strata apart from the capitalists and wage labourers, who call forth enlarged reproduction by their demand. But this seeming solution cannot stand up to a closer scrutiny. The landowners must as consumers of rent, i.e. of part of the surplus value, quite obviously be numbered among the capitalist class; since we are here concerned with the surplus value in its undivided, primary form, their consumption is already allowed for in the consumption of the capitalist class. The liberal professions in most cases obtain their money, i.e. the assignment to part of the social product, directly or indirectly from the capitalist class who pay them with bits of their own surplus value. And the same applies to the Clergy, with the difference only that its members also obtain their purchasing power in part from the workers, i.e. from wages. The upkeep of the State, lastly, with its officers and armed forces is borne by the rates and taxes, which are in their turn levied upon either the surplus value or the wages. Within the limits of Marx's diagram there are in fact only the two sources of income in a society: the labourers' wages and the surplus value. All the strata of the population we have mentioned as apart from the capitalists and the workers, are thus to be taken only for joint consumers of these two kinds of income. Marx himself rejects any suggestion that these 'third persons' are more than a subterfuge: 'All members of society not directly engaged in reproduction, with or without labour, can obtain their share of the annual produce of commodities--in other words, their articles of consumption ... only out of the hands of those classes who are the first to handle the product, that is to say, productive labourers, industrial capitalists, and real estate owners. To that extent their revenues are substantially derived from wages (of the productive labourers), profit and ground rent, and appear as indirect derivations when compared to these primary sources of revenue. But, on the other hand, the recipients of these revenues, thus indirectly derived, draw them by grace of their social functions, for instance that of a king, priest, professor, prostitute, soldier, etc., and they may regard these functions as the primary sources of their revenue.'[107] And about the consumers of interest and ground rent as buyers, Marx says: 'Now, if that portion of the surplus-value of commodities, which the industrial capitalist yields in the form of ground rent or interest to other shareholders in the surplus-value, cannot be in the long run converted into money by the sale of the commodities, then there is an end to the payment of rent and interest, and the landowners or recipients of interest can no longer serve in the role of miraculous interlopers, who convert aliquot portions of the annual reproduction into money by spending their revenue. The same is true of the expenditure of all so-called unproductive labourers, State officials, physicians, lawyers, etc., and others who serve economists as an excuse for explaining inexplicable things, in the role of the 'general public'.[108] Seeing that we cannot discover within capitalist society any buyers whatever for the commodities in which the accumulated part of the surplus value is embodied, only one thing is left: foreign trade. But there are a great many objections to a method that conceives of foreign trade as a convenient dumping ground for commodities which cannot be found any proper place in the reproductive process. Recourse to foreign trade really begs the question: the difficulties implicit in the analysis are simply shifted--quite unresolved--from one country to another. Yet if the analysis of the reproductive process actually intends not any single capitalist country but the capitalist world market, there can be no foreign trade: all countries are 'home'. This point is made by Marx already in the first volume of _Capital_, in connection with accumulation: 'We here take no account of export trade, by means of which a nation can change articles of luxury either into means of production or means of subsistence, and _vice versa_. In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation and assume that capitalist production is everywhere established and has possessed itself of every branch of industry.'[109] The same difficulty presents itself if we consider the matter from yet another aspect. In Marx's diagram of accumulation we assumed that the portion of the social surplus value intended for accumulation exists from the first in a natural form which demands it to be used for capitalisation. 'In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.'[110] In the figures of our diagram: I. _5,000c + 1,000v + 1,000s = 7,000_ means of production II. _1,430c + 285v + 285s = 2,000_ means of consumption Here, a surplus value of 570_s_ can be capitalised because from the very outset it consists in means of production. To this quantity of producer goods there correspond besides additional consumer goods to the amount of 114_s_ so that 684_s_ can be capitalised in all. But the process here assumed of simply transferring means of production to constant capital on the one hand, consumer goods to variable capital on the other, in commensurate quantities, is in contradiction with the very structure of capitalist commodity production. Whatever natural form the surplus value may have, there can be no immediate transfer to the place of production for the purpose of accumulation. It must first be realised, it must be turned into hard cash.[111] Of the surplus value in Department I, 500 are fit to be capitalised, but not until they have first been realised; the surplus value has to shed its natural form and assume the form of pure value before it can be added to productive capital. This is true for each individual capitalist and also for the 'aggregate capitalist' of society, it being a prime condition for capitalist production that the surplus value must be realised in the form of pure value. Accordingly, regarding reproduction from the point of view of society as a whole-- 'We must not follow the manner copied by Proudhon from bourgeois economy, which looks upon this matter as though a society with a capitalist mode of production would lose its specific historical and economic characteristics by being taken as a unit. Not at all. We have, in that case, to deal with the aggregate capitalist.'[112] The surplus value must therefore shed its form as surplus product before it can re-assume it for the purpose of accumulation; by some means or other it must first pass through the money stage. So the surplus product of Departments I and II must be bought--by whom? On the above showing, there will have to be an effective demand outside I and II, merely in order to realise the surplus value of the two departments, just so that the surplus product can be turned to cash. Even then, we should only have got to the stage where the surplus value has become money. If this realised surplus value is further to be employed in the process of enlarging reproduction, in accumulation, an even larger demand must be expected for the future, a demand which is again to come from outside the two departments. Either the demand for the surplus product will therefore have to increase annually in accordance with the rate of increase of the accumulated surplus value, or--_vice versa_--accumulation can only proceed precisely in so far as the demand outside I and II is rising. FOOTNOTES: [103] _Capital_, vol. ii, pp. 598-9. [104] Ibid., p. 599. [105] _Capital_, vol. ii, pp. 600-1. [106] Surplus consumption. [107] _Capital_, vol. ii, p. 429. [108] Ibid., pp. 531-2. [109] Op. cit., vol. i, p. 594, note 1. [110] Ibid., p. 594. [111] Here we can leave out of account instances of products capable in part of entering the process of production without any exchange, such as coal in the mines. Within capitalist production as a whole such cases are rare (cf. Marx, _Theorien_ ..., vol. ii, part 2, pp. 255 ff.). [112] _Capital_, vol. ii, p. 503. _CHAPTER VIII_ MARX'S ATTEMPT TO RESOLVE THE DIFFICULTY Complete abstraction from the circulation of money, though making the process of accumulation so smooth and simple in the diagram of enlarged reproduction, has great disadvantages of its own, we see. There was much to be said for this method in the analysis of simple reproduction, where consumption is the be-all and end-all of production. Money there had an ephemeral part, mediating the distribution of the social product among the various groups of consumers--the agent for the renewal of capital. In the process of accumulation, however, the money form has an essential function: it no longer serves as a mere agent in the circulation of commodities--here it has come to be a feature of capital itself, an element in the circulation of capital. Even if the transformation of the surplus value is not essential to real reproduction, it is the economic _sine qua non_ of capitalist accumulation. In the transition from production to reproduction, the surplus product is thus subjected to two metamorphoses: first it casts off its use-form and then it assumes a natural form which is fit for the purpose of accumulation. The point here is not that the different cycles of production are counted off in units of years. It would be just as well to take the month; for that matter, the successive transformation of individual portions of the surplus value in Departments I and II may even intersect in time. Series of years here do not mean units of time but really intend the sequence of economic transformations. What matters is that this sequence must be observed if accumulation is to keep its capitalist character, whether it extends over a longer or a shorter period of time. This brings us back to the old question: How, and by whom, is the accumulated surplus value to be realised? Marx was well aware that his seemingly water-tight scheme of accumulation did not cover this point adequately, and he himself kept reviewing the problem from various angles. What he says is this: 'It has been shown in volume i, how accumulation works in the case of the individual capitalist. By the conversion of the commodity-capital into money, the surplus-product, in which the surplus-value is incorporated, is also monetised. The capitalist reconverts the surplus-value thus monetised into additional natural elements of his productive capital. In the next cycle of production the increased capital furnishes an increased product. But what happens in the case of the individual capital, must also show in the annual reproduction of society as a whole, just as we have seen it does in the case of reproduction on a simple scale, where the successive precipitation of the depreciated elements of fixed capital in the form of money, accumulated as a hoard, also makes itself felt in the annual reproduction of society.'[113] He examines the mechanism of accumulation further from this very point of view, focusing on the fact that surplus value must pass through the money stage before it is accumulated. 'For instance, capitalist A, who sells during one year, or during a number of successive years, certain quantities of commodities produced by him, thereby converts that portion of the commodities, which bears surplus-value, the surplus-product, or, in other words, the surplus-value produced by himself, successively into money, accumulates it gradually, and thus makes for himself a new potential money-capital. It is potential money-capital on account of its capacity and destination of being converted into the elements of productive capital. But practically he merely accumulates a simple hoard, which is not an element of actual production. His activity for the time being consists only in withdrawing circulating money out of circulation. Of course, it is not impossible that the circulating money thus laid away by him was itself, before it entered into circulation, a portion of some other hoard.'[114] 'Money is withdrawn from circulation and accumulated as a hoard by the sale of commodities without a subsequent purchase. If this operation is conceived as one taking place universally, then it seems inexplicable where the buyers are to come from, since in that case everybody would want to sell in order to hoard, and no one would want to buy. And it must be so conceived, since every individual capital may be in process of accumulation. 'If we were to conceive of the process of circulation as one taking place in a straight line between the various divisions of annual reproduction--which would be incorrect as it consists with a few exceptions of mutually retroactive movements--then we should have to start out from the producer of gold (or silver) who buys without selling, and to assume that all others sell to him. In that case, the entire social surplus-product of the current year would pass into his hands, representing the entire surplus-value of the year, and all the other capitalists would distribute among themselves their relative shares in his surplus-product, which consists naturally of money, gold being the natural form of his surplus-value. For that portion of the product of the gold producer, which has to make good his active capital, is already tied up and disposed of. The surplus-value of the gold producer, in the form of gold, would then be the only fund from which all other capitalists would have to derive the material for the conversion of their annual surplus-product into gold. The magnitude of its value would then have to be equal to the entire annual surplus-value of society, which must first assume the guise of a hoard. Absurd as this assumption would be, it would accomplish nothing more than to explain the possibility of a universal formation of a hoard at the same period. It would not further reproduction itself, except on the part of the gold producer, by one single step. 'Before we solve this _seeming difficulty_, we must distinguish....'[115] The obstacle in the way of realising the surplus value which Marx here calls a 'seeming difficulty' nevertheless is important enough for the whole further discussion in _Capital_, volume ii, to be concentrated on overcoming it. As a first attempt, Marx proffers the solution of a hoard which, owing to the separation of the different individual constant capitals in the process of circulation, will inevitably be formed in a capitalist system of production. Inasmuch as different capital investments have different spans of life, and there is always an interval before the parts of a plant are due for renewal, at any given moment we may find that one individual capitalist is already busy renewing his plant, while another is still building up reserves from the proceeds yielded by the sale of his commodities against the day when he will have enough to renew his fixed capital. 'For instance, let A sell 600, representing _400c + 100v + 100s_ to B, who may represent more than one buyer. A sells 600 in commodities for 600 in money, of which 100 are surplus-value which he withdraws from circulation and hoards in the form of money. But these 100 in money are but the money-form of the surplus-product in which a value of 100 was incorporated.'[116] In order to comprehend the problem in complete purity, Marx here assumes the whole of the surplus value to be capitalised, for which reason he ignores altogether that part of the surplus value is used for the capitalists' personal consumption; in addition, A´, A´´ and A´´´ as well as B´, B´´ and B´´´ here belong to Department I. 'The formation of a hoard, then, is not a production, nor is it an increment of production. The action of the capitalist consists merely in withdrawing from circulation 100 obtained by the sale of his surplus-product, in holding and hoarding this amount. This operation is carried on, not alone on the part of A, but at numerous points of the periphery of circulation by other capitalists named A´, A´´, A´´´.... However, A accomplishes the formation of a hoard only to the extent that he acts as a seller, so far as his surplus-product is concerned, not as a buyer. His successive production of surplus-products, the bearers of his surplus-value convertible into money, is therefore a premise for the formation of his hoard. In the present case, where we are dealing only with the circulation within Department I, the natural form of the surplus-product, and of the total product of which it is a part, is that of an element of constant capital of I, that is to say it belongs to the category of a means of production creating means of production. We shall see presently what becomes of it, what function it performs, in the hands of the buyers such as B, B´, B´´, etc. 'It must particularly be noted at this point that A, while withdrawing money from circulation and hoarding it, on the other hand throws commodities into it without withdrawing other commodities in return. The capitalists, B, B´, B´´, etc., are thereby enabled to throw only money into it and withdraw only commodities from it. In the present case, these commodities, according to their natural form and destination, become a fixed or circulating element of the constant capital of B, B´, etc.'[117] There is nothing new about this whole process. Marx had already described it extensively in connection with simple reproduction, since it alone can explain how a society is able to renew constant capital under conditions of capitalist reproduction. How this process can lay the besetting problem of our analysis of enlarged reproduction is far from self-evident. The difficulty had been that for the purpose of accumulation, part of the surplus value is not consumed by the capitalists but added to capital in order to expand production, giving rise to the question of buyers for this additional product. The capitalists do not want to consume it and the workers are not able to do so, their entire consumption being covered in every case by the available variable capital. Whence the demand for the accumulated surplus value? or, as Marx would have it: Whence the money to pay for the accumulated surplus value? If, by way of answer, we are referred to the process of hoarding attendant upon the gradual renewal of the constant capital by the individual capitalists at various times, the connection between these two points remains obscure. As long as B, B´ and B´´, etc., buy producer goods from their colleagues A, A´ and A´´ in order to renew their constant capital that has in fact been used up, the limits of simple reproduction are not transcended, and the whole thing has nothing to do with our problem. The moment the producer goods purchased by B, B´, B´´, etc., serve to increase their constant capital, however, for purposes of accumulation, a number of new questions clamour for attention. First and foremost where do the B's get the cash to buy an additional product from the A's? The only way they could have made their money is by sale of their own surplus product. Before they can acquire new means of production for expanding their enterprises, before they appear as buyers, that is to say, of the surplus product that is to be accumulated, they must first have disposed of their own surplus product--in a word, B, B´, B´´, etc., must have been vendors themselves. But who could have bought their surplus product? It is obvious that the difficulty is simply shifted from the A's to the B's without having been mastered. At one stage of the analysis it really does seem for a time as if a solution were found at last. After a short digression, Marx returns to the main line of his investigation in the following words: 'In the present case, this surplus-product consists at the outset of means of production used in the creation of means of production. It is not until it reaches the hands of B, B´, B´´, etc., (I), that this surplus-product serves as an additional constant capital. But it is virtually that even in the hands of the accumulators of hoards, the capitalists A, A´, A´´, (I), before it is sold. If we consider merely the volume of values of the reproduction on the part of I, then we are still moving within the limits of simple reproduction, for no additional capital has been set in motion for the purpose of creating this virtual additional capital (the surplus-product), nor has any greater amount of surplus-labour been performed than that done on the basis of simple reproduction. The difference is here only one of the form of the surplus-labour performed, of the concrete nature of its particularly useful service. It is expended in means of production for Department I_c_ instead of II_c_, in means of production of means of production instead of means of production of articles of consumption. In the case of simple reproduction it had been assumed that the entire surplus-value was spent as revenue in the commodities of II. Hence it consisted only of such means of production as restore the constant capital of II_c_ in its natural form. In order that the transition from simple to expanded reproduction may take place, the production in Department I must be enabled to create fewer elements for the constant capital of II and more for that of I.... Considering the matter merely from the point of view of the volume of values, it follows, then, that the material requirements of expanded reproduction are produced within simple reproduction. It is simply a question of the expenditure of the surplus-labour of the working class of I for the production of means of production, the creation of virtual additional capital of I. The virtual additional money-capital, created on the part of A, A´, A´´, by the successive sale of their surplus-product, which was formed without any capitalist expenditure of money, is in this case simply the money-form of the additional means of production made by I.'[118] On this interpretation, the difficulty seems to dissolve into thin air at our touch. Accumulation requires no new sources of money at all. Before, when the capitalists themselves consumed their surplus value, they had to have a corresponding money reserve in hand, the analysis of simple reproduction already having proved that the capitalist class must itself put into circulation the money needed for the realisation of their surplus value. Now, instead of consumer goods, the capitalist class, or rather B, B´, and B´´, buy an equivalent amount of means of production in order to expand their production. In this way, money to the same value is accumulated in the hands of the other capitalist group, viz. A, A´, A´´, etc. 'This hoarding ... does not in any way imply an addition to the wealth in precious metals, but only a change of function on the part of money previously circulating. A while ago it served as a medium of circulation, now it serves as a hoard, as a virtual additional money-capital in process of formation.'[119] And that is that! Yet this way out of the difficulty is open to us only on one condition, and that is not far to seek: Marx here takes accumulation in its first rudiments, _in statu nascendi_, as it begins to evolve from simple reproduction. In respect of the amount of value, production is not yet enlarged, it has only been rearranged so that its material elements are grouped in a different way. That the sources of money also seem adequate is therefore not surprising. This solution, however, is only true for one specific moment, the period of transition from simple reproduction to enlarged reproduction--in short, a moment that has no reference to reality and can only be conceived speculatively. Once accumulation has been established for some time, when increasing amounts of value are thrown upon the market in every period of production, buyers for these additional values cannot fail to become a problem. And on this point the proffered solution breaks down. For that matter, it was never more than a seeming solution, _not a real one_. On closer scrutiny, it fails us even at the precise instant it appears to have smoothed the way for us. For if we take accumulation just at the very moment of its emergence from simple reproduction, the prime condition it demands is a decrease in the consumption of the capitalist class. No sooner have we discovered a way to expand reproduction with the means of circulation already at hand, than we find previous consumers trickling away at the same rate. What, then, is the good of expanding production; who is there able to buy from B, B´ and B´´ this increased amount of products which they could turn out only by denying themselves the money they need for buying new means of production from A, A´ and A´´? That solution, we see, was a mere illusion--the difficulty still persists. Marx himself at once re-opens the question where B, B´ and B´´ get the money to buy the surplus product of A, A´ and A´´. 'To the extent that the products created by B, B´, B´´, etc., (I) re-enter in their natural form into their own process, it goes without saying that a corresponding portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an element of additional constant capital. To the same extent they do not help to convert any surplus-product of A, A´, A´´ etc., (I) into money. Aside from this, where does the money come from? We know that they have formed their hoard in the same way as A, A´, etc., by the sale of their respective surplus-products. Now they have arrived at the point where their accumulated hoard of virtual money-capital is to enter effectually upon its function as additional money-capital. But this is merely turning around in a circle. The question still remains: Where does the money come from, which the various B's (I) withdrew from the circulation and accumulated?'[120] His prompt reply again seems surprisingly simple: 'Now we know from the analysis of simple reproduction, that the capitalists of I and II must have a certain amount of ready money in their hands, in order to be able to dispose of their surplus-products. In that case, the money which served only for the spending of revenue in articles of consumption returned to the capitalists in the same measure in which they advanced it for the purpose of disposing of their commodities. Here the same money reappears, but in a different function. The A's and B's supply one another alternately with the money for converting their surplus-product into virtual additional capital, and throw the newly formed money-capital alternately into circulation as a medium of purchase.'[121] That is harking back to simple reproduction all over again. It is quite true, of course, that the capitalists A and the capitalists B are constantly accumulating a hoard of money bit by bit so as to be able to renew their constant (fixed) capital from time to time, and in this way they really are assisting one another in realising their products. Yet this accumulating hoard does not drop from the clouds--it is simply a natural precipitation of the fixed capital that is (in terms of value) continually being transferred in instalments to the products which are then one by one realised in the process of sale. Owing to its very nature, the accumulated hoard can only cover the renewal of the old capital; there cannot possibly be enough to serve further for purchasing additional constant capital. That means that we are still within the limits of simple reproduction. Perhaps, though, that part of the medium of circulation which hitherto served the capitalists for their personal consumption, and is now to be capitalised, becomes a new source of additional money? For that to be true, however, we should have to be back at the unique and fleeting moment that has no more than theoretical existence--the period of transition from simple to enlarged reproduction. Beyond this gap accumulation cannot proceed--we are in truth going round in circles. So the capitalist hoarding will not do as a way out of our difficulties. This conclusion should not come as a surprise, since the very exposition of the difficulty was misleading. It is not the source of money that constitutes the problem of accumulation, but the source of the demand for the additional goods produced by the capitalised surplus value; not a technical hitch in the circulation of money but an economic problem pertaining to the reproduction of the total social capital. Quite apart from the question which had claimed Marx's entire attention so far, namely where B, B´, etc., (I), get the money to buy additional means of production from A, A´, etc., (I), successful accumulation will inevitably have to face a far more serious problem: to whom can B, B´, etc., now sell their increased surplus-product? Marx finally makes them sell their products to one another: 'It may be that the different B, B´, B´´, etc., (I), whose virtual new capital enters upon its active function, are compelled to buy from one another their product (portions of their surplus-product) or to sell it to one another. In that case, the money advanced by them for the circulation of their surplus-product flows back under normal conditions to the different B's in the same proportion in which they advanced it for the circulation of their respective commodities.'[122] 'In that case'--the problem simply has not been solved, for after all B, B´, and B´´ have not cut down on their consumption and expanded their production just so as to buy each other's increased product, i.e. means of production. Even that, incidentally, would only be possible to a very limited extent. Marx assumes a certain division of labour in Department I itself: the A's turn out means of production for making producer goods and the B's means of production for making consumer goods, which is as much as to say that, though the product of A, A´, etc., need never leave Department I, the product of B, B´, etc., is by its natural form predestined from the first for Department II. Already the accumulation of B, B´, etc., it follows, must lead us to circulation between Departments I and II. Thus Marx's analysis itself confirms that, if Department I is to accumulate, the department for means of consumption must, in the last resort, increase its immediate or mediate demand for means of production, and so it is to Department II and its capitalists that we must look for buyers for the additional product turned out by Department I. Sure enough, Marx's second attack on the problem takes up from there: the demand of capitalists in Department II for additional means of production. Such a demand inevitably implies that the constant capital II_c_ is in process of expanding. This is where the difficulty becomes truly formidable: 'Take it now that A(I) converts his surplus-product into gold by selling it to a capitalist B in Department II. This can be done only by the sale of means of production on the part of A(I) to B(II) without a subsequent purchase of articles of consumption, in other words, only by a one-sided sale on A's part. Now we have seen that II_c_ cannot be converted into the natural form of productive constant capital unless not only I_v_ but also at least a portion of I_s_, is exchanged for a portion of II_c_, which II_c_ exists in the form of articles of consumption. But now that A has converted his I_s_ into gold by making this exchange impossible and withdrawing the money obtained from II_c_ out of circulation, instead of spending it for articles of consumption of II_c_, there is indeed on the part of A(I) a formation of additional virtual money-capital, but on the other hand there is a corresponding portion of the value of the constant capital B(II) held in the form of commodity-capital, unable to transform itself into natural productive constant capital. In other words, a portion of the commodities of B(II), and at that a portion which must be sold if he wishes to reconvert his entire constant capital into its productive form, has become unsaleable. To that extent, there is an over-production which clogs reproduction, even on the same scale.'[123] Department I's efforts to accumulate by selling its additional product to Department II have met with an unlooked-for result: a deficit for the capitalists of Department II serious enough to prevent even simple reproduction on the old scale. Having got to this crucial point, Marx seeks to lay bare the root of the problem by a careful and detailed exposition: 'Let us now take a closer look at the accumulation in Department II. The first difficulty with reference to II_c_, that is to say the conversion of an element of the commodity-capital of II into the natural form of constant capital of II, concerns simple reproduction. Let us take the formula previously used. (_1,000v + 1,000s_) I are exchanged for 2,000 II_c_. Now, if one half of the surplus-product of I, or 500_s_, is reincorporated in Department I as constant capital, then this portion, being detained in Department I, cannot take the place of any portion of II_c_. Instead of being converted into articles of consumption, it is made to serve as an additional means of production in Department I itself.... It cannot perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption, and at the same time consume the surplus-product itself productively, by incorporating it in his productive capital. Instead of 2,000 I(_v + s_), only 1,500 are exchangeable for 2,000 II_c_, namely _1,000v + 500s_ of I. But 500 I_c_ cannot, be reconverted from the form of commodities into productive constant capital of II.'[124] By now, hardly anybody could fail to be convinced that the difficulty is real, but we have not taken a single step nearer a solution. This, incidentally, is where Marx has to do penance for his ill-advised continual recourse in an earlier over-simplification, to a fictitious moment of transition--in order in elucidate the problem of accumulation--from simple reproduction to enlarged reproduction, making his major premise accumulation at its very inception, in its feeble infancy instead its vigorous stride. There was something to be said, at least, for this fiction, so long as it was just a question of accumulation within Department I. The capitalists of Department I, who denied themselves part of what they had been wont to consume, at once had a new hoard of money in hand with which they could start capitalisation. But when it comes to Department II, the same fiction only piles on the difficulties. The 'abstinence' of the capitalists in Department I here finds expression in a painful loss of consumers for whose expected demand production had largely been calculated. Since the capitalists of Department II, on whom we tried the experiment whether they might not possibly be the long-sought buyers of the additional product of accumulation in Department I, are themselves in sore straits--not knowing as yet where to go with their own unsold product--they are even less likely to be of any help to us. There is no shutting our eyes to the fact that an attempt to make one group of capitalists accumulate at the expense of the other is bound to get involved in glaring inconsistencies. Yet another attempt to get round the difficulty is subsequently mentioned by Marx who at once rejects it as a subterfuge. The unmarketable surplus value in Department II that is the result of accumulation in Department I might be considered a reserve of commodities the society is going to need in the course of the following year. This interpretation Marx counters with his usual thoroughness: '(1) ... the forming of such supplies and the necessity for it applies to all capitalists, those of I as well as of II. Considering them in their capacity as sellers of commodities, they differ only by the fact that they sell different kinds of commodities. A supply of commodities of II implies a previous supply of commodities of I. If we neglect this supply on the one side, we must also do so on the other. But if we count them in on both sides, the problem is not altered in any way. (2) Just as this year closes on the side of II with a supply of commodities for the next year, so it was opened by a supply of commodities on the same side, taken over from last year. In the analysis of annual reproduction, reduced to its abstract form, we must therefore strike it out at both ends. By leaving this year in possession of its entire production, including the supply held for next year, we take from it the supply of commodities transferred from last year, and thus we have actually to deal with the aggregate product of an average year as the object of our analysis. (3) The simple circumstance that the difficulty which must be overcome did not show itself in the analysis of simple reproduction proves that it is a specific phenomenon due merely to the different arrangement of the elements of Department I with a view to reproduction, an arrangement without which reproduction on an expanded scale cannot take place at all.'[125] The last remark, be it noted, is equally damaging to his own earlier attempt at resolving the specific difficulties of accumulation by moments pertaining to simple reproduction, viz. the formation of a hoard consequent upon the gradual turnover of the fixed capital in the hands of the capitalists which was previously adduced as the explanation of accumulation in Department I. Marx then proceeds to set out enlarged reproduction in the form of diagrams. But no sooner does he begin to analyse his diagram, than the same difficulty crops up anew in a slightly different guise. Assuming that the capitalists of Department II must for their part convert 140_s_ into constant capital so as to make accumulation possible for the others, he asks: 'Therefore Department II must buy 140_s_ for cash without recovering this money by a subsequent sale of its commodities to I. And this is a process which is continually repeated in every new annual production, so far as it is reproduction on an enlarged scale. Where does II get the money for this?'[126] In the following, Marx tries out various approaches in order to discover this source. First the expenditure on variable capital by the capitalists in Department II is closely scrutinised. True, it exists in the form of money; but its proper function is the purchase of labour power, and it cannot possibly be withdrawn and made to serve, maybe, for purchasing additional means of production. 'This continually repeated departure from and return to the starting point, the pocket of the capitalist, does not add in any way to the money moving in this cycle. This, then, is not a source of the accumulation of money.'[127] Marx then considers all conceivable dodges, only to show them up as evading the issue. 'But stop!' he exclaims. 'Isn't there a chance to make a little profit?'[127] He considers whether the capitalists could not manage to save a little of the variable capital by depressing the wages of the workers below the normal average and thus to tap a new source of money for accumulation. A mere flick of his fingers, of course, disposes of this notion: 'But it must not be forgotten that the wages actually paid (which determine the magnitude of the variable capital under normal conditions) do not depend on the benevolence of the capitalists, but must be paid under certain conditions. This does away with this expedient as a source of additional money.'[127] He even explores what hidden methods there may be of 'saving' on the variable capital, such as the truck system, frauds, etc., only to comment finally: 'This is the same operation as under (1), only disguised and carried out by a detour. Therefore it must likewise be rejected as an explanation of the present problem.'[128] All efforts to make the variable capital yield a new source of money for the purpose of accumulation are thus unrewarded: 'In short, we cannot accomplish anything with 376 II_v_ for the solution of this question.'[128] Marx next turns to the cash reserves which the capitalists in Department II keep for the circulation of their own consumption and investigates whether none of this money can be diverted to the purposes of capitalisation. Yet this, he allows, is 'still more impossible'. 'Here the capitalists of the same department are standing face to face, heavily buying and selling their articles of consumption. The money required for these transactions serves only as a medium of circulation and must flow back to the interested parties in the normal course of things, to the extent that they have advanced it to the circulation, in order to pass again and again over the same course.'[129] The next attempt to follow belongs, as was to have been expected, to the category of those 'subterfuges' which Marx ruthlessly refutes: the attempt to explain that money-capital can be formed in the hands of one capitalist group in Department II by defrauding the other capitalists within the same department--viz. in the process of the mutual selling of consumer goods. No time need be wasted on this little effort. Then comes a more sober proposition: 'Or, a certain portion of II_s_, represented by necessities of life, might be directly converted into new variable capital of Department II.'[130] It is not quite clear how this can help us over the hurdle, help to get accumulation going. For one thing, the formation of additional variable capital in Department II is not much use if we have no additional constant capital for this department, being in fact engaged on the task of finding it. For another thing, our present concern is to see if we can find in Department II a source of money for the purchase of additional means of production from I, and Department II's problem how to place its own additional product in some way or other in the process of production is beside the point. Further, is the implication that the respective consumer goods should be used 'direct', i.e. without the mediation of money, in the production of Department II, so that the corresponding amount of money can be diverted from variable capital to the purpose of accumulation? If so, we could not accept the solution. Under normal conditions of capitalist production, the remuneration of the workers by consumer goods direct is precluded, one of the corner-stones of capitalist economy being the money-form of the variable capital, the independent transaction between the worker as buyer of commodities and producer of consumer goods. Marx himself stresses this point in another context: 'We know that the actual variable capital consists of labour-power, and therefore the additional must consist of the same thing. It is not the capitalist of I who among other things buys from II a supply of necessities of life for his labourers, or accumulates them for this purpose, as the slave holder had to do. It is the labourers themselves who trade with II.'[131] And that goes for the capitalists of Department II just as much as for those of Department I, thus disposing of Marx's last effort. Marx ends up by referring us to the last part of _Capital_, volume ii, chapter 21, the 'Concluding Remarks _sub iv_', as Engels has called them. Here we find the curt explanation: 'The original source for the money of II is _v + s_ of the gold producers in Department I, exchanged for a portion of II_c_. Only to the extent that the gold producer accumulates surplus-value or converts it into means of production of I, in other words, to the extent that he expands his production, does his _v + s_ stay out of Department II. On the other hand, to the extent that the accumulation of gold on the part of the gold producer himself leads ultimately to an expansion of production, a portion of the surplus-value of gold production not spent as revenue passes into Department II as additional variable capital of the gold producers, promotes the accumulation of new hoards in II and supplies it with means by which to buy from I without having to sell to it immediately.'[132] After the breakdown of all conceivable attempts at explaining accumulation, therefore, after chasing from pillar to post, from A I to B I, and from B I to A II, we are made to fall back in the end on the very gold producer, recourse to whom Marx had at the outset of his analysis branded as 'absurd'. The analysis of the reproductive process, and the second volume of _Capital_ finally comes to a close without having provided the long sought-for solution to our difficulty. FOOTNOTES: [113] _Capital_, vol. ii, p. 571. [114] Ibid., p. 572. [115] Ibid., pp. 573-4. [116] _Capital_, vol. ii, p. 375. [117] Ibid., pp. 575-6. [118] _Capital_, vol. ii, pp. 579-81. [119] Ibid., p. 581. [120] _Capital_, vol. ii, pp. 583-4. [121] Ibid., p. 584. [122] _Capital_, vol. ii, p. 585. [123] Ibid., pp. 586-7. [124] Ibid., pp. 588-9. [125] _Capital_, vol. ii, pp. 590-1. [126] Ibid., p. 593. [127] _Capital_, vol. ii, p. 594. [128] Ibid., p. 595. [129] Ibid., p. 595. [130] Ibid., p. 596. [131] Ibid., p. 601. [132] _Capital_, vol. ii, p. 610. _CHAPTER IX_ THE DIFFICULTY VIEWED FROM THE ANGLE OF THE PROCESS OF CIRCULATION The flaw in Marx's analysis is, in our opinion, the misguided formulation of the problem as a mere question of 'the sources of money', whereas the real issue is the effective demand, the use made of goods, not the source of the money which is paid for them. As to money as a means of circulation: when considering the reproductive process as a whole, we must assume that capitalist society must always dispose of money, or a substitute, in just that quantity that is needed for its process of circulation. What has to be explained is the great social transaction of exchange, caused by real economic needs. While it is important to remember that capitalist surplus value must invariably pass through the money stage before it can be accumulated, we must nevertheless try to track down the economic demand for the surplus product, quite apart from the puzzle where the money comes from. As Marx himself says in another passage: 'The money on one side in that case calls forth expanded reproduction on the other, because the possibility for it exists without the money. For money in itself is not an element of actual reproduction.'[133] And in a different context, Marx actually shows the question about the 'sources of money' to be a completely barren formulation of the problem of accumulation. In fact, he had come up against this difficulty once before when examining the process of circulation. Still dealing with simple reproduction, he had asked, in connection with the circulation of the surplus value: 'But the commodity capital must be monetised before its conversion into productive capital, or before the surplus-value contained in it can be spent. Where does the money for this purpose come from? This question seems difficult at the first glance, and neither Tooke nor anyone else has answered it so far.'[134] And he was then quite uncompromising about getting to the root of the matter: 'The circulating capital of 500 p.st. advanced in the form of money-capital, whatever may be its period of turn-over, may now stand for the total capital of society, that is to say, of the capitalist class. Let the surplus-value be 100 p.st. How can the entire capitalist class manage to draw continually 600 p.st. out of the circulation, when they continually throw only 500 p.st. into it?'[135] All that, mind you, refers to simple reproduction, where the entire surplus value is used for the personal consumption of the capitalist class. The question should therefore from the outset have been put more precisely in this form: how can the capitalists secure for themselves consumer goods to the amount of £100 surplus value on top of putting £500 into circulation for constant and variable capital? It is immediately obvious that those £500 which, in form of capital, always serve to buy means of production and to pay the workers, cannot simultaneously defray the expense of the capitalists' personal consumption. Where, then, does the additional money come from?--the £100 the capitalists need to realise their own surplus value? Thus all theoretical dodges one might devise for this point are summarily disposed of by Marx right away: 'It should not be attempted to avoid this difficulty by plausible subterfuges. 'For instance: So far as the constant circulating capital is concerned, it is obvious that not all invest it simultaneously. While the capitalist A sells his commodities so that his advanced capital assumes the form of money, there is on the other hand, the available money-capital of the buyer B which assumes the form of his means of production which A is just producing. The same transaction, which restores that of B to its productive form, transforms it from money into materials of production and labour-power; the same amount of money serves in the two-sided process as in every simple purchase C-M. On the other hand, when A reconverts his money into means of production, he buys from C, and this man pays B with it, etc., and thus the transaction would be explained. 'But none of the laws referring to the quantity of the circulating money, which have been analysed in the circulation of commodities (vol. i, chap, iii), are in any way changed by the capitalist character of the process of production. 'Hence, when we have said that the circulating capital of society, to be advanced in the form of money, amounts to 500 p.st., we have already accounted for the fact that this is on the one hand the sum simultaneously advanced, and that, on the other hand, it sets in motion more productive capital than 500 p.st., because it serves alternately as the money fund of different productive capitals. This mode of explanation, then, assumes that money as existing whose existence it is called upon to explain. 'It may be furthermore said: Capitalist A produces articles which capitalist B consumes unproductively, individually. The money of B therefore monetises the commodity-capital of A, and thus the same amount serves for the monetisation of the surplus-value of B and the circulating constant capital of A. But in that case, the solution of the question to be solved is still more directly assumed, the question: Whence does B get the money for the payment of his revenue? How does he himself monetise this surplus-portion of his product? 'It might also be answered that that portion of the circulating variable capital, which A continually advances to his labourers, flows back to him continually from the circulation, and only an alternating part stays continually tied up for the payment of wages. But a certain time elapses between the expenditure and the reflux, and meanwhile the money paid out for wages might, among other uses, serve for the monetisation of surplus-value. But we know, in the first place, that, the greater the time, the greater must be the supply of money which the capitalist A must keep continually in reserve. In the second place, the labourer spends the money, buys commodities for it, and thus monetises to that extent the surplus-value contained in them. Without penetrating any further into the question at this point, it is sufficient to say that the consumption of the entire capitalist class, and of the unproductive persons dependent upon it, keeps step with that of the labouring class; so that, simultaneously with the money thrown into circulation by the labouring class, the capitalists must throw money into it, in order to spend their surplus-value as revenue. Hence money must be withdrawn from circulation for it. This explanation would merely reduce the quantity of money required, but not do away with it. 'Finally it might be said: A large amount of money is continually thrown into circulation when fixed capital is first invested, and it is not recovered from the circulation until after the lapse of years, by him who threw it into circulation. May not this sum suffice to monetise the surplus-value? The answer to this is that the employment as fixed capital, if not by him who threw it into circulation, then by some one else, is probably implied in the sum of 500 p.st. (which includes the formation of a hoard for needed reserve funds). Besides, it is already assumed in the amount expended for the purchase of products serving as fixed capital, that the surplus-value contained in them is also paid, and the question is precisely, where the money for this purpose came from.'[136] This parting shot, by the way, is particularly noteworthy in that Marx here expressly repudiates the attempt to explain realisation of the surplus value, even in the case of simple reproduction, by means of a hoard formed for the periodical renewal of fixed capital. Later on, with a view to realising the surplus value under the much more difficult conditions of accumulation, he makes more than one tentative effort to substantiate an explanation of this type which he himself dismissed as a 'plausible subterfuge'. Then follows a solution which has a somewhat disconcerting ring: 'The general reply has already been given: When a mass of commodities valued at _x_ times 1,000 p.st. has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation, whether this mass of commodities contains any surplus-value or not, and whether this mass of commodities has been produced capitalistically or not. In other words, _the problem itself does not exist_. All other conditions being given, such as velocity of circulation of money, etc., a definite sum of money is required in order to circulate the value of commodities worth _x_ times 1,000 p.st., quite independently of the fact how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does all the money required for the circulation of the commodities of a certain country come from?'[137] The argument is quite sound. The answer to the general question about the origin of the money for putting a certain quantity of commodities into circulation within a country will also tell us where the money for circulating the surplus value comes from. The division of the bulk of value contained in these commodities into constant and variable capital, and surplus value, does not exist from the angle of the circulation of money--in this connection, it is quite meaningless. But it is only from the angle of the circulation of money, or of a simple commodity circulation, that the problem has no existence. Under the aspect of social reproduction as a whole, it is very real indeed; but it should not, of course, be put in that misleading form that brings us back to simple commodity circulation, where it has no meaning. We should not ask, accordingly: Where does the money required for realising the surplus value come from? but: Where are the consumers for this surplus value? It is they, for sure, who must have this money in hand in order to throw it into circulation. Thus, Marx himself, although he just now denied the problem to exist, keeps coming back to it time and again: 'Now, there are only two points of departure: The capitalist and the labourer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. The fact that the surplus-value does not all stay in the pocket of the industrial capitalist, but must be shared by him with other persons, has nothing to do with the present question. The question is: How does he maintain his surplus-value, not, how does he divide the money later after he has secured it? For the present case, the capitalist may as well be regarded as the sole owner of his surplus-value. As for the labourer it has already been said that he is but the secondary point of departure, while the capitalist is the primary starting point of the money thrown by the labourer into circulation. The money first advanced as variable capital is going through its second circulation, when the labourer spends it for the payment of means of subsistence. 'The capitalist class, then, remains the sole point of departure of the circulation of money. If they need 400 p.st. for the payment of means of production, and 100 p.st. for the payment of labour-power, they throw 500 p.st. into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value of 100 per cent, is equal to the value of 100 p.st. How can they continually draw 600 p.st. out of circulation, when they continually throw only 500 p.st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.'[138] Marx further explodes another device which might conceivably be thought adequate to the problem, i.e. a more rapid turnover of money enabling a larger amount of value to circulate by means of a smaller amount of money. The dodge will not work, of course, since the velocity of money in circulation is already taken into account by equating the aggregate bulk of commodities with a certain number of pounds sterling. But then at last we seem in sight of a proper solution: 'Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realisation of the surplus-value incorporated in the commodities. But, mark well, it is not thrown into circulation as advanced money, not as capital. The capitalist class spends it for their individual consumption. The money is not advanced by them, although they are the point of departure of its circulation.'[139] This lucid and comprehensive account is the best evidence that the problem is not just imaginary but very real. It provides a solution, not by disclosing a new 'source of money' for the realisation of the surplus value, but by pointing out at last the consumers of this surplus value. We are still, on Marx's assumption, within the bounds of simple reproduction; the capitalist class, that is to say, use the whole of their surplus value for personal consumption. Since the capitalists are the consumers of surplus value, it is not so much a paradox as a truism that they must, in the nature of things, possess the money for appropriating the objects of consumption, the natural form of this surplus value. The circulatory transaction of exchange is the necessary consequence of the fact that the individual capitalist cannot immediately consume his individual surplus value, and accordingly the individual surplus product, as could, for instance, the employer of slave labour. As a rule the natural material form of the surplus product tends to preclude such use. The aggregate surplus value of the capitalists in general is, however, contained in the total social product--as long as there is simple reproduction--as expressed by a corresponding quantity of consumer goods for the capitalist class, just as the sum total of variable capital has its corresponding equivalent in the quantity of consumer goods for the working class, and as the constant capital of all individual capitalists taken together is represented by material means of production in an equivalent quantity. In order to exchange the unconsumable individual surplus values for a corresponding amount of consumer goods, a double transaction of commodity exchange is needed: first, the sale of one's own surplus product and then the purchase of consumer goods out of the surplus product of society. These two transactions can only take place among members of the capitalist class, among individual capitalists, which means that their agent, the money, thereby merely changes hands as between one capitalist and another without ever being alienated from the capitalist class in general. Since simple reproduction inevitably implies the exchange of equivalents, one and the same amount of money can serve year by year for the circulation of the surplus value, and only an excess of zeal will inspire the further query: where does the money which mediates the capitalists' own consumption come from in the first place? This, question, however, reduces to a more general one: how did money capital initially come into the hands of the capitalists, that money capital of which they always retain a certain part for their personal consumption, apart from what they use for productive investment? Put in this way, however, the question belongs in the chapter of so-called 'primitive accumulation', i.e. the historical genesis of capital, going beyond the framework of an analysis of the process of circulation as well as of reproduction. Thus the fact is clear and unequivocal--so long as we remain within the bounds of simple reproduction. Here the problem is solved by the premises themselves; in fact, the solution is already anticipated by the very concept of simple reproduction which indeed is based on the entire surplus value being consumed by the capitalist class. This implies that it must also be the latter who buy it, that is to say, individual capitalists must buy it from each other. 'In the present case', Marx says himself, 'we had assumed, that the sum of money which the capitalist throws into circulation until the first surplus-value flows back to him, is exactly equal to the surplus-value which he is going to produce and monetise. This is obviously an arbitrary assumption, so far as, the individual capitalist is concerned. But it must be correct when applied to the entire capitalist class, when simple reproduction is assumed. It expresses the same thing that this assumption does, namely, that the entire surplus-value is consumed unproductively, but it only, not any portion of the original capital stock.'[140] But simple reproduction on a capitalist basis is after all an imaginary quantity in economic theory: no more and no less legitimate, and quite as unavoidable as [sqrt](-1) in mathematics. What is worse, it cannot offer any help at all with the problem of realising the surplus value in real life, i.e. with regard to enlarged reproduction or accumulation. Marx himself says so for a second time in the further development of his analysis. Where does the money for realising the surplus value come from if there is accumulation, i.e. not consumption but capitalisation of part of the surplus value? Marx's first answer is as follows: 'In the first place, the additional money-capital required for the function of the increasing productive capital is supplied by that portion of the realised surplus-value which is thrown into circulation by the capitalists as money-capital, not as the money form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.'[141] Our investigation of the reproductive process has already made us familiar with this explanation, and we are equally familiar with its defects; for one thing, the answer rests on the moment of the first transition from simple reproduction to accumulation. The capitalists only yesterday consumed their entire surplus value, and thus had in hand an appropriate amount of money for their circulation. To-day they decide to 'save' part of the surplus value and to invest it productively instead of squandering it. Provided that material means of production were manufactured instead of luxury goods, they need only put part of their personal money fund to a different use. But the transition from simple reproduction to expanded reproduction is no less a theoretical fiction than simple reproduction of capital itself, for which reason Marx immediately goes on to say: 'Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an additional money-capital, and therefore it flows back to the capitalist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realised?'[142] The problem could not be put more precisely. But instead of a solution, there follows the surprising conclusion: 'The general reply is again the same. The sum total of the prices of the commodities has been increased, not because the prices of a given quantity of commodities have risen, but because the mass of the commodities now circulating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of greater value must be secured, either by greater economy in the circulating quantity of money--whether by means of balancing payments, etc., or by some measure which accelerates the circulation of the same coins,--or by the transformation of money from the form of a hoard into that of a circulating medium.'[143] All this amounts to an exposition along these lines: under conditions of developing and growing accumulation, capitalist reproduction dumps ever larger masses of commodity values on the market. To put this commodity mass of a continually increasing value into circulation requires an ever larger amount of money. This increasing amount of money must be found somehow or other. All this is, no doubt, plausible and correct as far as it goes, but our problem is not solved, it is merely wished away. One thing or the other! Either we regard the aggregate social product in a capitalist economy simply as a mass, a conglomeration of commodities of a certain value, seeing under conditions of accumulation, a mere increase in this undifferentiated mass of commodities and in the bulk of its value. Then all we need say is that a corresponding quantity of money is required for circulating this bulk of value, that with an increasing bulk of value the quantity of money must also increase, unless this growth of value is offset by acceleration of, and economy in, the traffic. And the final question, where does all money originally come from, could then be answered on Marx's recipe: from the gold mines. This, of course, is one way of looking at things, that of simple commodity circulation. But in that case there is no need to drag in concepts such as constant and variable capital, or surplus value, which have no place in simple commodity circulation, belonging essentially to the circulation of capitals and to social reproduction; nor is there need to inquire for sources of money for the realisation of the social surplus value under conditions of first simple, and then enlarged, reproduction. Under the aspect of simple commodity circulation puzzles of this kind are without meaning or content. But once these questions have been raised, once the course has been set for an investigation into the circulation of capitals and social reproduction, there can be no appealing to the sphere of simple commodity circulation, where there is no such problem at all, and consequently no solution to it. There can be no looking for the answer there, and then saying triumphantly that the problem has long been solved and in fact never really existed. All this time, it appears, Marx has been tackling the problem from a wrong approach. No intelligent purpose can be served by asking for the source of the money needed to realise the surplus value. The question is rather where the demand can arise--to find an effective demand for the surplus value. If the problem had been put in this way at the start, no such long-winded detours would have been needed to show whether it can be solved or not. On the basis of simple reproduction, the matter is easy enough: since all surplus value is consumed by the capitalists, they themselves are the buyers and provide the full demand for the social surplus value, and by the same token they must also have the requisite cash in hand for circulation of the surplus value. But in this showing it is quite evident that under conditions of accumulation, i.e. of capitalisation of part of the surplus value, it cannot, _ex hypothesi_, be the capitalists themselves who buy the entire surplus value, that they cannot possibly realise it. True, if the capitalised surplus value is to be realised at all, money must be forthcoming in adequate quantities for its realisation. But it is quite impossible that this money should come from the purse of the capitalist class itself. Just because accumulation is postulated, the capitalists cannot buy their surplus value themselves, even though they might, _in abstracto_, have the money to do so. But who else could provide the demand for the commodities incorporating the capitalised surplus value? 'Apart from this class (the capitalists), there is, according to our assumption--the general and exclusive domination of capitalist production--no other class but the working class. All that the working class buys is equal to the sum total of its wages, equal to the sum total of the variable capital advanced by the entire capitalist class.'[144] The workers, then, are even less able than the capitalist class to realise the capitalised surplus value. Somebody must buy it, if the capitalists are still to be able to recover the capital they have accumulated and advanced; and yet--we cannot think of any buyers other than capitalists and workers. 'How can the entire capitalist class accumulate money under such circumstances?'[144] Realisation of the surplus value outside the only two existing classes of society appears as indispensable as it looks impossible. The accumulation of capital has been caught in a vicious circle. At any rate, the second volume of _Capital_ offers no way out. If we should now ask why Marx's _Capital_ affords no solution to this important problem of the accumulation of capital, we must bear in mind above all that this second volume is not a finished whole but a manuscript that stops short half way through. The external form of its last chapters in particular proves them to be in the nature of notes, intended to clear the author's own mind, rather than final conclusions ready for the reader's enlightenment. This fact is amply authenticated by the man best in the position to know: Friedrich Engels, who edited the second volume. In his introduction to the second volume he reports in detail on the conditions of the preliminary studies and the manuscripts Marx had left, which were to form the basis of this volume: 'The mere enumeration of the manuscripts left by Marx as a basis for Volume II proves the unparalleled conscientiousness and strict self-criticism which he practised in his endeavour to fully elaborate his great economic discoveries before he published them. This self-criticism rarely permitted him to adapt his presentation of the subject, in content as well as in form, to his ever widening horizon, which he enlarged by incessant study. 'The material ... consists of the following parts: First, a manuscript entitled "A contribution to the Critique of Political Economy", containing 1,472 quarto pages in 23 divisions, written in the time from August, 1861, to June, 1863. It is a continuation of the work of the same title, the first volume of which appeared in Berlin, in 1859.... This manuscript, valuable though it is, could not be used in the present edition of Volume II. 'The manuscript next following in the order of time is that of Volume III.... 'The period after the publication of Volume I, which is next in order, is represented by a collection of four manuscripts for Volume II, marked I-IV by Marx himself. Manuscript I (150 pages) presumably written in 1865 or 1867, is the first independent, but more or less fragmentary, elaboration of the questions now contained in Volume II. This manuscript is likewise unsuited for this edition. Manuscript III is partly a compilation of quotations and references to the manuscripts containing Marx's extracts and comments, most of them relating to the first section of Volume II, partly an elaboration of special points, particularly a critique of Adam Smith's statements as to fixed and circulating capital and the source of profits; furthermore, a discussion of the relations of the rate of surplus-value to the rate of profit, which belongs in Volume III. The references furnished little that was new, while the elaborations for Volumes II and III were rendered valueless through subsequent revisions and had to be ruled out for the greater part. Manuscript IV is an elaboration, ready for printing, of the first section and the first chapters of the second section of Volume II, and has been used in its proper place. Although it was found that this manuscript had been written earlier than Manuscript II, yet it was far more finished in form and could be used with advantage for the corresponding part of this volume. I had to add only a few supplementary parts of Manuscript II. This last manuscript is the only fairly completed elaboration of Volume II and dates from the year 1870. The notes for the final revision, which I shall mention immediately, say explicitly: "The second elaboration must be used as a basis." 'There is another interruption after 1870, due mainly to ill health. Marx employed this time in his customary way, that is to say he studied agronomics, agricultural conditions in America and especially Russia, the money market and banking institutions, and finally natural sciences, such as geology and physiology. Independent mathematical studies also form a large part of the numerous manuscripts of this period. In the beginning of 1877, Marx had recovered sufficiently to resume once more his chosen life's work. The beginning of 1877 is marked by references and notes from the above named four manuscripts intended for a new elaboration of Volume II, the beginning of which is represented by Manuscript V (56 pages in folio). It comprises the first four chapters and is not very fully worked out. Essential points are treated in footnotes. The material is rather collected than sifted, but it is the last complete presentation of this most important first section. A preliminary attempt to prepare this part for the printer was made in Manuscript VI (after October, 1877, and before July, 1878), embracing 17 quarto pages, the greater part of the first chapter. A second and last attempt was made in Manuscript VII, dated July 2, 1878, and consisting of 7 pages in folio. 'About this time Marx seems to have realised that he would never be able to complete the second and third volume in a manner satisfactory to himself, unless a complete revolution in his health took place. Manuscripts V-VIII show traces of hard struggles against depressing physical conditions far too frequently to be ignored. The most difficult part of the first section had been worked over in Manuscript V. The remainder of the first, and the entire second section, with the exception of Chapter 17, presented no great theoretical difficulties. But the third section, dealing with the reproduction and circulation of social capital, seemed to be very much in need of revision. Manuscript II, it must be pointed out, had first treated of this reproduction without regard to the circulation which is instrumental in effecting it, and then taken up the same question with regard to circulation. It was the intention of Marx to eliminate this section and to reconstruct it in such a way that it would conform to his wider grasp of the subject. This gave rise to Manuscript VIII, containing only 70 pages in quarto. A comparison with Section III, as printed after deducting the paragraphs inserted out of Manuscript II, shows the amount of matter compressed by Marx into this space. 'Manuscript VIII is likewise merely a preliminary presentation of the subject, and its main object was to ascertain and develop the new points of view not set forth in Manuscript II, while those points were ignored about which there was nothing new to say. An essential part of Chapter 17, Section II, which is more or less relevant to Section III, was at the same time drawn into this discussion and expanded. The logical sequence was frequently interrupted, the treatment of the subject was incomplete in various places, and especially the conclusion was very fragmentary. But Marx expressed as nearly as possible what he intended to say on the subject. 'This is the material for Volume II, out of which I was supposed "to make something", as Marx said to his daughter Eleanor shortly before his death.'[145] We cannot but admire this 'something' which Engels managed to 'make' from material of such a kind. As far as our present problem is concerned, however, this detailed report makes it clear that no more than the first two of the three sections that make up volume ii were anything like ready for print in the manuscripts Marx left: the section 'On the Circulation of Money and Commodity Capital' and on 'The Causes of Circulation and the Turnover of Capital'. The third section which treats of the reproduction of total capital is merely a collection of fragments which Marx himself considered to be 'very much in need of revision.' Yet it is the last part of this section, i.e. chapter 21, 'On Accumulation and Enlarged Reproduction', which is of primary importance in the present context, and of the whole book this is the most incomplete. It comprises thirty-five pages of print in all and breaks off right in the middle of the analysis. Besides this extraneous circumstance, we would suggest another point of great influence. Marx's investigation of the social reproductive process starts off, as we have seen, from the analysis of Adam Smith which came to grief, among other reasons, because of the erroneous doctrine that the price of all commodities is composed of _v + s_. Polemics against this dogma dominated Marx's entire analysis of the reproductive process. He devoted all his attention to proving that the total capital of society must serve, not only for consumption to the full amount of the various sources of revenue, but also for renewal of the constant capital. And inasmuch as the purest theoretical form for this line of reasoning is given, not by enlarged reproduction, but by simple reproduction, Marx tends to consider reproduction mainly from a point of view that is the very opposite of accumulation, from the assumption that the entire surplus value is consumed by the capitalists. How greatly these polemics influenced his analysis is proved by his returning time and again in the course of his work to the attack on Adam Smith from the most various angles. So already in volume i, the following pages are devoted to it: vol. i, sect. 7, chap. 24, (2), pp. 588-602, and in vol. ii, pp. 417-56, p. 473, pp. 504-8, and pp. 554 f. Marx again takes up the question of total reproduction in volume iii but from the start becomes once more involved with the problem set by Smith to which he devotes the whole of his 49th chapter and most of chapter 50 (pp. 968-92 and 992-1022). Finally, in _Theorien ueber den Mehrwert_, we again find detailed polemics against Smith's dogma: pp. 164-253 in vol. i, and pp. 92, 95, 126, 233, and 262 in vol. ii, part 2. Marx repeatedly stressed and emphasised the fact that he considered replacement of the constant capital from the aggregate social product the most difficult and important problem of reproduction.[146] The other problem, that of accumulation, i.e. realisation of the surplus value for the purpose of capitalisation, was thus pushed into the background, so that in the end Marx hardly touched upon it. This problem being of such paramount importance for capitalist economy, it is not surprising that bourgeois economists have dealt with it again and again. Attempts to grapple with this vital question for capitalist economy, with the question whether capital accumulation is possible in practice, come up time and again in the history of economic theory. To these historical attempts, before and after Marx, at solving this problem we shall now turn. FOOTNOTES: [133] _Capital_, vol. ii, p. 572. [134] _Capital_, vol. ii, pp. 380-1. [135] Ibid., p. 381. [136] _Capital_, vol. ii, pp. 381-3. [137] Ibid., p. 383. [138] _Capital_, vol. ii, pp. 384-5. [139] Ibid., p. 385. [140] _Capital_, vol. ii, p. 387. [141] Ibid., p. 397. [142] Ibid., p. 397. [143] Ibid., pp. 397-8. [144] _Capital_, vol. ii, p. 401. [145] _Capital_, vol. ii, pp. 8 ff. [146] Cf. e.g. _Capital_, vol. ii, pp. 430, 522, and 529. _SECTION TWO_ HISTORICAL EXPOSITION OF THE PROBLEM FIRST ROUND SISMONDI-MALTHUS _v._ SAY-RICARDO--MACCULLOCH _CHAPTER_ X SISMONDI'S THEORY OF REPRODUCTION The first grave doubts as to the divine character of the capitalist order came to bourgeois economists under the immediate impact of the first crises of 1815 and 1818-19 in England. Even then it had still been external circumstances which led up to these crises, and they appeared to be ephemeral. Napoleon's blockade of the Continent which for a time had cut off England from her European markets and had favoured a considerable development of home industries in some of the continental countries, was partly responsible; for the rest the material exhaustion of the Continent, owing to the long period of war, made for a smaller demand for English products than had been expected when the blockade was lifted. Still, these early crises were enough to reveal to the contemporary world the sinister aspects of this best of all social orders. Glutted markets, shops filled with goods nobody could buy, frequent bankruptcies--and on the other hand the glaring poverty of the toiling masses--for the first time all this starkly met the eyes of theorists who had preached the gospel of the beautiful harmonies of bourgeois _laissez-faire_ and had sung its praises in all keys. All contemporary trade reports, periodicals and travellers' notes told of the losses sustained by English merchants. In Italy, Germany, Russia, and Brazil, the English disposed of their commodity stocks at a loss of anything between 25 per cent and 33 1/3 per cent. People at the Cape of Good Hope in 1818 complained that all the shops were flooded with European goods offered at lower prices than in Europe and still unmarketable. From Calcutta there came similar complaints. From New Holland whole cargoes returned to England. In the United States, a contemporary traveller reports, 'there was no town nor hamlet from one end to the other of this immense and prosperous continent where the amount of commodities displayed for sale did not considerably exceed the means of the purchasers, although the vendors tried to attract custom by long-term credits, all sorts of facilities for payment, payment by instalments and acceptance of payment in kind'. At the same time, England was hearing the desperate outcry of her workers. The _Edinburgh Review_ of 1820[147] quotes an address by the Nottingham frame-work knitters which contained the following statements: 'After working from 14 to 16 hours a day, we only earn from 4_s._ to 7_s._ a week, to maintain our wives and families upon; and we farther state, that although we have substituted bread and water, or potatoes and salt, for that more wholesome food an Englishman's table used to abound with, we have repeatedly retired, after a heavy day's labour, and have been under the necessity of putting our children supperless to bed, to stifle the cries of hunger. We can most solemnly declare, that for the last eighteen months we have scarcely known what it was to be free from the pangs of hunger.'[148] Then Owen in England, and Sismondi in France, almost simultaneously raised their voices in a weighty indictment of capitalist society. Owen, as a hard-headed Englishman and citizen of the leading industrial state, constituted himself spokesman for a generous social reform, whereas the petty-bourgeois Swiss rather lost himself in sweeping denunciations of the imperfections of the existing social order and of classical economics. And yet, by so doing, Sismondi gave bourgeois economics a much harder nut to crack than Owen, whose fertile practical activities were directly applied to the proletariat. Sismondi explained in some detail that the impetus for his social criticism came from England, and especially her first crisis. In the second edition of his _Nouveaux Principes d'Économie Politique Ou De La Richesse Dans Ses Rapports Avec La Population_,[149] eight years after the publication of the first edition in 1819, he writes as follows: 'It was in England that I performed the task of preparing the new edition. England has given birth to the most celebrated Political Economists: the science is cultivated even at this time with increased ardour.... Universal competition or the effort always to produce more and always cheaper, has long been the system in England, a system which I have attacked as dangerous. This system has used production by manufacture to advance with gigantic steps, but it has from time to time precipitated the manufacturers into frightful distress. It was in presence of these convulsions of wealth that I thought I ought to place myself, to review my reasonings and compare them with facts.--The study of England has confirmed me in my "New Principles". In this astonishing country, which seems to be subject to a great experiment for the instruction of the rest of the world, I have seen production increasing, whilst enjoyments were diminishing. The mass of the nation here, no less than philosophers, seems to forget that the increase of wealth is not the end in political economy, but its instrument in procuring the happiness of all. I sought for this happiness in every class, and I could nowhere find it. The high English aristocracy has indeed arrived to a degree of wealth and luxury which surpasses all that can be seen in other nations; nevertheless it does not itself enjoy the opulence which it seems to have acquired at the expense of the other classes; security is wanting and in every family most of the individuals experience privation rather than abundance.... Below this titled and not titled aristocracy, I see commerce occupy a distinguished rank; its enterprises embrace the whole world, its agents brave the ices of the poles, and the heats of the equator, whilst every one of its leading men, meeting on Exchange, can dispose of thousands. At the same time, in the streets of London, and in those of the other great towns of England, the shops display goods sufficient for the consumption of the world.--But have riches secured to the English merchant the kind of happiness which they ought to secure him? No: in no country are failures so frequent, nowhere are those colossal fortunes, sufficient in themselves to supply a public loan to uphold an Empire, or a republic, overthrown with as much rapidity. All complain that business is scarce, difficult, not remunerative. Twice, within an interval of a few years, a terrible crisis has ruined part of the bankers, and spread desolation among all the English manufacturers. At the same time another crisis has ruined the farmers, and been felt in its rebound by retail dealers. On the other hand, commerce, in spite of its immense extent, has ceased to call for young men who have their fortunes to make; every place is occupied, in the superior ranks of society no less than in the inferior; the greater number offer their labour in vain, without being able to obtain remuneration.--Has, then, this national opulence, whose material progress strikes every eye, nevertheless tended to the advantage of the poor? Not so. The people of England are destitute of comfort now, and of security for the future. There are no longer yeomen, they have been obliged to become day labourers. In the towns there are scarcely any longer artisans, or independent heads of a small business, but only manufacturers. The operative, to employ a word which the system has created, does not know what it is to have a station; he only gains wages, and as these wages cannot suffice for all seasons, he is almost every year reduced to ask alms from the poor-rates.--This opulent nation has found it more economical to sell all the gold and silver which she possessed, to do without coin, and to depend entirely on a paper circulation; she has thus voluntarily deprived herself of the most valuable of all the advantages of coin: stability of value. The holders of the notes of the provincial banks run the risk every day of being ruined by frequent and, as it were, epidemic failures of the bankers; and the whole state is exposed to a convulsion in the fortune of every individual, if an invasion or a revolution should shake the credit of the national bank. The English nation has found it more economical to give up those modes of cultivation which require much hand-labour, and she has dismissed half the cultivators who lived in the fields. She has found it more economical to supersede workmen by steam-engines; she has dismissed ... the operatives in towns, and weavers giving place to power-looms, are now sinking under famine; she has found it more economical to reduce all working people to the lowest possible wages on which they can subsist, and these working people being no longer anything but a rabble, have not feared plunging into still deeper misery by the addition of an increasing family. She has found it more economical to feed the Irish with potatoes, and clothe them in rags; and now every packet brings legions of Irish, who, working for less than the English, drive them from every employment. What is the fruit of this immense accumulation of wealth? Have they had any other effect than to make every class partake of care, privation and the danger of complete ruin? Has not England, by forgetting men for things, sacrificed the end to the means?'[150] This mirror, held up to capitalist society almost a century before the time of writing, is clear and comprehensive enough in all conscience. Sismondi put his finger on every one of the sore spots of bourgeois economics: the ruin of small enterprise; the drift from the country; the proletarisation of the middle classes; the impoverishment of the workers; the displacement of the worker by the machine; unemployment; the dangers of the credit system; social antagonisms; the insecurity of existence; crises and anarchy. His harsh, emphatic scepticism struck a specially shrill discord with the complacent optimism, the idle worship of harmony as preached by vulgar economics which, in the person of MacCulloch in England and of Say in France, was becoming the fashion in both countries. It is easy to imagine what a deep and painful impression remarks like the following were bound to make: 'There can only be luxury if it is bought with another's labour; only those will work hard and untiringly who have to do so in order to get not the frills but the very necessities of life.'[151] 'Although the invention of the machine which increases man's capacity, is a blessing for mankind, it is made into a scourge for the poor by the unjust distribution we make of its benefits.'[152] 'The gain of an employer of labour is sometimes nothing if not despoiling the worker he employs; he does not benefit because his enterprise produces much more than it costs, but because he does not pay all the costs, because he does not accord the labourer a remuneration equal to his work. Such an industry is a social evil, for it reduces those who perform the work to utmost poverty, assuring to those who direct it but the ordinary profits on capital.'[153] 'Amongst those who share in the national income, one group acquires new rights each year by new labours, the other have previously acquired permanent rights by reason of a primary effort which makes a year's labour more advantageous.'[154] 'Nothing can prevent that every new discovery in applied mechanics should diminish the working population by that much. To this danger it is constantly exposed, and society provides no remedy for it.'[155] 'A time will come, no doubt, when our descendants will condemn us as barbarians because we have left the working classes without security, just as we already condemn, as they also will, as barbarian the nations who reduced those same classes to slavery.'[156] Sismondi's criticism thus goes right to the root of the matter; for him there can be no compromise or evasion which might try to gloss over the dark aspects of capitalist enrichment he exposed, as merely temporary shortcomings of a transition period. He concludes his investigation with the following rejoinder to Say: 'For seven years I have indicated this malady of the social organism, and for seven years it has continuously increased. I cannot regard such prolonged suffering as the mere frictions which always accompany a change. Going back to the origin of income, I believe to have shown the ills we experience to be the consequence of a flaw in our organisation, to have shown that they are not likely to come to an end.'[157] The disproportion between capitalist production and the distribution of incomes determined by the former appears to him the source of all evil. This is the point from which he comes to the problem of accumulation with which we are now concerned. The main thread of his criticism against classical economics is this: capitalist production is encouraged to expand indefinitely without any regard to consumption; consumption, however, is determined by income. 'All the modern economists, in fact, have allowed that the fortune of the public, being only the aggregation of private fortunes, has its origin, is augmented, distributed and destroyed by the same means as the fortune of each individual. They all know perfectly well, that in a private fortune, the most important fact to consider is the income, and that by the income must be regulated consumption or expenditure, or the capital will be destroyed. But as, in the fortune of the public, the capital of one becomes the income of another, they have been perplexed to decide what was capital, and what income, and they have therefore found it more simple to leave the latter entirely out of their calculations. By neglecting a quality so essential to be determined, Say and Ricardo have arrived at the conclusion, that consumption is an unlimited power, or at least having no limits but those of production, whilst it is in fact limited by income.... They announced that whatever abundance might be produced, it would always find consumers, and they have encouraged the producers to cause that glut in the markets, which at this time occasions the distress of the civilised world; whereas they should have forewarned the producers that they could only reckon on those consumers who possessed income.'[158] Sismondi thus grounds his views in a theory of income. What is income, and what is capital? He pays the greatest attention to this distinction which he calls 'the most abstract and difficult question of political economics'. The fourth chapter of his second book is devoted to this problem. As usual, Sismondi starts his investigation with Robinson Crusoe. For such a one, the distinction between capital and income was still 'confused'; it becomes 'essential' only in society. Yet in society, too, this distinction is very difficult, largely on account of the already familiar myth of bourgeois economics, according to which 'the capital of one becomes the income of another', and _vice versa_. Adam Smith was responsible for this confusion which was then elevated to an axiom by Say in justification of mental inertia and superficiality. It was loyally accepted by Sismondi. 'The nature of capital and of income are always confused by the mind; we see that what is income for one becomes capital for another, and the same object, in passing from hand to hand, successively acquires different denominations; the value which becomes detached from an object that has been consumed, appears as a metaphysical quantity which one expends and the other exchanges, which for one perishes together with the object itself and which for the other renews itself and lasts for the time of circulation.'[159] After this promising introduction, Sismondi dives right into the difficult problem and declares: all wealth is a product of labour; income is part of wealth, and must therefore have the same origin. However, it is 'customary' to recognise three kinds of income, called rent, profit and wage respectively, which spring from the three sources of 'land, accumulated capital and labour'. As to the first thesis, he is obviously on the wrong tack. As the wealth of a society, i.e. as the aggregate of useful objects, of use-values, wealth is not merely a product of labour but also of nature who both supplies raw materials and provides the means to support human labour. Income, on the other hand, is a concept of value. It indicates the amount to which an individual or individuals can dispose over part of the wealth of society or of the aggregate social product. In view of Sismondi's insistence that social income is part of social wealth, we might assume him to understand by social income the actual annual fund for consumption. The remaining part of wealth that has not been consumed, then, is the capital of society. Thus we obtain at least a vague outline of the required distinction between capital and income on a social basis. At the very next moment, however, Sismondi accepts the 'customary' distinction between three kinds of income, only one of which derives exclusively from 'accumulated capital' while in the other two 'land' or 'labour' are conjoined with capital. The concept of capital thus at once becomes hazy again. However, let us see what Sismondi has to say about the origin of these three kinds of income which betray a rift in the foundations of society. He is right to take a certain development of labour productivity as his point of departure. 'By reason of the advances both in industry and science, by which man has subjugated the forces of nature, every worker can produce more, far more, in a day than he needs to consume.'[160] Sismondi thus rightly stresses the fact that the productivity of labour is an indispensable condition for the historical foundation of exploitation. Yet he goes on to explain the actual origin of exploitation in a way typical of bourgeois economics: 'But even though his labour produces wealth, this wealth, if he is called upon to enjoy it, will make him less and less fit for work. Besides, wealth hardly ever remains in the possession of the man who must live by the work of his hands.'[160] Thus he makes exploitation and class antagonism the necessary spur to production, quite in accord with the followers of Ricardo and Malthus. But now he comes to the real cause of exploitation, the divorce of labour power from the means of production. 'The worker cannot, as a rule, keep the land as his own; land, however, has a productive capacity which human labour but directs to the uses of man. The master of the land on which labour is performed, reserves a share in the fruits of labour to which his land has contributed, as his remuneration for the benefits afforded by this productive capacity.'[161] This is called rent. And further: 'In our state of civilisation, the worker can no longer call his own an adequate fund of objects for his consumption, enough to live while he performs the labours he has undertaken--until he has found a buyer. He no longer owns the raw materials, often coming from far away, on which he must exercise his industry. Even less does he possess that complicated and costly machinery which facilitates his work and makes it infinitely more productive. The rich man who possesses his consumption goods, his raw materials and his machines, need not work himself, for by supplying the worker with all these, he becomes in a sense the master of his work. As reward for the advantages he has put at the worker's disposal, he takes outright the greater part of the fruits of his labour.'[162] This is called capital profits. What remains of wealth, after the cream has been taken off twice, by landlord and capitalist, is the wage of labour, the income of the worker. And Sismondi adds: 'He can consume it without reproduction.'[163] Thus, Sismondi makes the fact of non-reproduction the criterion of income as distinct from capital for wages as well as for rent. In this, however, he is only right with regard to rent and the consumed part of capital profits; as for the part of the social product which is consumed in form of wages, it certainly does reproduce itself; it becomes the labour power of the wage labourer, for him a commodity by whose sale he lives, which he can bring to market again and again; for society it becomes the material form of variable capital which must reappear time and again in the aggregate reproduction of a year, if there is to be no loss. So far so good. Hitherto we have only learned two facts: the productivity of labour permits of the exploitation of the workers by those who do not work themselves, and exploitation becomes the actual foundation of the distribution of income owing to the divorce of the worker from his means of production. But we still do not know what is capital and what income, and Sismondi proceeds to clarify this point, starting as usual with Robinson Crusoe: 'In the eyes of the individual all wealth was nothing but a provision prepared beforehand for the time of need. Even so, he already distinguished two elements in this provision ... one part which he budgets to have at hand for immediate or almost immediate use, and the other which he will not need until it is to afford him new production. Thus one part of his corn must feed him until the next harvest, another part, reserved for sowing, is to bear fruit the following year. The formation of society and the introduction of exchange, permit to increase this seed, this fertile part of accumulated wealth, almost indefinitely, and this is what is called capital.'[164] Balderdash would be a better name for all this. In using the analogy of seed, Sismondi here identifies means of production and capital, and this is wrong for two reasons. First, means of production are capital not intrinsically, but only under quite definite historical conditions; secondly, the concept of capital covers more than just the means of production. In capitalist society--with all the conditions Sismondi ignores--the means of production are only a part of capital, i.e. they are constant capital. Sismondi here lost his thread plainly because he tried to establish a connection between the capital concept and the material aspects of social reproduction. Earlier, so long as he was concerned with the individual capitalist, he listed means of subsistence for the workers together with means of production as component parts of capital--again a mistake in view of the material aspects of the reproduction of individual capitals. Yet as soon as he tries to focus the material foundations of social reproduction and sets out to make the correct distinction between consumer goods and means of production, the concept of capital dissolves in his hands. However, Sismondi well knows that the means of production are not the sole requisites for production and exploitation; indeed, he has the proper instinct that the core of the relation of exploitation is the very fact of exchange with living labour. Having just reduced capital to constant capital, he now immediately reduces it exclusively to variable capital: 'When the farmer has put in reserve all the corn he expects to need till the next harvest, he will find a good use for the surplus corn: he will feed what he has left over to other people who are going to work for him, till his land, spin and weave his hemp and wool, etc.... By this procedure, the farmer converts a part of his income into capital, and in fact, this is the way in which new capital is always formed.... The corn he has reaped over and above what he must eat while he is working, and over and above what he will have to sow in order to maintain the same level of exploitation, is wealth which he can give away, squander and consume in idleness without becoming any poorer; it was income, but as soon as he uses it to feed producers, as soon as he exchanges it for labour, or for the fruits to come from the work of his labourers, his weavers, his miners, it is a permanent value that multiplies and will no longer perish; it is capital.'[165] Here there is some grain mixed up with quite a lot of chaff. Constant capital seems still required to maintain production on the old scale, although it is strangely reduced to circulating capital, and although the reproduction of fixed capital is completely ignored. Circulating capital apparently is also superfluous for the expansion of reproduction, for accumulation: the whole capitalised part of the surplus value is converted into wages for new workers who evidently labour in mid-air, without material means of production. The same view is expressed even more clearly elsewhere: 'When the rich man cuts down his income in order to add to his capital, he is thus conferring a benefit on the poor, because he himself shares out the annual product; and whatever he calls income, he will keep for his own consumption; whatever he calls capital, he gives to the poor man to constitute an income for him.'[166] Yet at the same time Sismondi gives due weight to the 'secret of profit-making' and the origin of capital. Surplus value arises from the exchange of capital for labour, from variable capital, and capital arises from the accumulation of surplus value. With all this, however, we have not made much progress towards a distinction between capital and income. Sismondi now attempts to represent the various elements of production and income in terms of the appropriate parts of the aggregate social product. 'The employer of labour, as also the labourer, does not use all his productive wealth for the sowing; he devotes part of it to buildings, mills and tools which render the work easier and more productive, just as a share of the labourer's wealth had been devoted to the permanent work of making the soil more fertile. Thus we see how the different kinds of wealth successively come into being and become distinct. One part of the wealth accumulated by society is devoted by every one who possesses it to render labour more profitable by slow consumption, and make the blind forces of nature execute the work of man; this part is called _fixed capital_ and comprises reclaiming, irrigation, factories, the tools of trade, and mechanical contrivances of every description. A second part of wealth is destined for immediate consumption, to reproduce itself in the work it gets done, to change its form, though not its value, without cease. This part is called _circulating capital_ and it comprises seed, raw materials for manufacture, and wages. Finally, a third part of wealth becomes distinguishable from the second: it is the value by which the finished job exceeds the advances which had to be made: this part is called _income_ on capitals and is destined to be consumed without reproduction.'[167] After this laborious attempt to achieve a division of the aggregate social production according to incommensurable categories, fixed capital, circulating capital, and surplus value, Sismondi soon shows unmistakable signs that he means constant capital when he speaks of fixed capital, and variable capital when he speaks of circulating capital. For 'all that is created', is destined for human consumption, though fixed capital is consumed 'mediately' while the circulating capital 'passes into the consumption fund of the worker whose wage it forms'.[168] Thus we are a little nearer to the division of the social product into constant capital (means of production), variable capital (provisions for the workers) and surplus value (provisions for the capitalists). But so far Sismondi's explanations are not particularly illuminating on the subject which he himself describes as 'fundamental'. In this welter of confusion, at any rate, we cannot see any progress beyond Adam Smith's 'massive thought'. Sismondi feels this himself and would clarify the problem 'by the simplest of all methods', sighing that 'this movement of wealth is so abstract and requires such great power of concentration to grasp it properly'.[168] Thus again we put on blinkers with a focus on Robinson [Crusoe], who in the meantime has changed to the extent that he has produced a family and is now a pioneer of colonial policy: 'A solitary farmer in a distant colony on the border of the desert has reaped 100 sacks of corn this year; there is no market where to bring them; this corn, in any case, must be consumed within the year, else it will be of no value to the farmer; yet the farmer and his family eat only 30 sacks of it; this will be his expenditure, constituting the exchange of his income; it is not reproduced for anybody whatever. Then he will call for workers, he will make them clear woods, and drain swamps in his neighbourhood and put part of the desert under the plough. These workers will eat another 30 sacks of corn: this will be their expenditure; they will be in a position to afford this expenditure at the price of their revenue, that is to say their labour; for the farmer it will be an exchange: he will have converted his 30 sacks into fixed capital. In the end, he is left with 40 sacks. He will sow them that year, instead of the 20 he had sown the previous year; this constitutes his circulating capital which he will have doubled. Thus the 100 sacks will have been consumed, but of these 100 sacks 70 are a real investment for him, which will reappear with great increase, some of them at the very next harvest, and the others in all subsequent harvests.--The very isolation of the farmer we have just assumed gives us a better feeling for the limitations of such an operation. If he has only found consumers for 60 of the 100 sacks harvested in that year, who is going to eat the 200 sacks produced the following year by the increase in his sowing? His family, you might say, which will increase. No doubt; but human generations do not multiply as quickly as subsistence. If our farmer had hands available to repeat this assumed process each year, his corn harvest will be doubled every year, and his family could at the most be doubled once in 25 years.'[169] Though the example is naïve, the vital question stands out clearly in the end: where are the buyers for the surplus value that has been capitalised? The accumulation of capital can indefinitely increase the production of the society. But what about the consumption of society? This is determined by the various kinds of income. Sismondi explains this important subject in chapter v of book ii, 'The Distribution of the National Income Among the Various Classes of Citizens', in a resumed effort to describe the components of the social product. 'Under this aspect, the national income is composed of two parts and no more; the one consists in annual production ... the profit arising from wealth. The second is the capacity for work which springs from life. This time we understand by wealth both territorial possessions and capital, and by profit the net income accruing to the owners as well as the profit of the capitalist.'[170] Thus all the means of production are separated from the national income as 'wealth', and this income is divided into surplus value and labour power, or better, its equivalent, the variable capital. This, then, though still far too vague, is our division into constant capital, variable capital and surplus value. But 'national income', it soon transpires, means for Sismondi the annual aggregate product of society: 'Similarly, annual production, or the result of all the nation's work in the course of a year, is composed of two parts: one we have just discussed--the profit resulting from wealth; the other is the capacity for work, which is assumed to equal the part of wealth for which it is exchanged, or the subsistence of the workers.'[171] The aggregate social product is thus resolved, in terms of value, into two parts: variable capital and surplus value--constant capital has disappeared. We have arrived at Smith's dogma that the commodity price is resolved into _v + s_ (or is composed of _v + s_)--in other words, the aggregate product consists solely of consumer goods for workers and capitalists. Sismondi then goes on to the problem of realising the aggregate product. On the one hand, the sum total of incomes in a society consists of wages, capital profits and rents, and is thus represented by _v + s_; on the other hand, the aggregate social product, in terms of value, is equally resolved into _v + s_ 'so that national income and annual production balance each other (and appear as equal quantities)', i.e. so that they must be equal in value. 'Annual production is consumed altogether during the year, but in part by the workers who, by exchanging their labour for it, convert it into capital and reproduce it; in part by the capitalists who, exchanging their income for it, annihilate it. The whole of the annual income is destined to be exchanged for the whole of annual production.'[172] This is the basis on which, in the sixth chapter of book ii, 'On Reciprocal Determination of Production and Consumption', Sismondi finally sets up the following precise law of reproduction: 'It is the income of the past year which must pay for the production of the present year.'[173] If this is true, how can there be any accumulation of capital? If the aggregate product must be completely consumed by the workers and capitalists, we obviously remain within the bounds of simple reproduction, and there can be no solution to the problem of accumulation. Sismondi's theory in fact amounts to a denial of the possibility of accumulation. The aggregate social demand being the bulk of wages given to the workers and the previous consumption of the capitalists, who will be left to buy the surplus product if reproduction expands? On this count, Sismondi argues that accumulation is objectively impossible, as follows: 'What happens after all is always that we exchange the whole of production for the whole production of the previous year. Besides, if production gradually increases, the exchange, at the same time as it improves future conditions, must entail a small loss every year.'[174] In other words, when the aggregate product is realised, accumulation is bound each year to create a surplus that cannot be sold. Sismondi, however, is afraid of drawing this final conclusion, and prefers a 'middle course', necessitating a somewhat obscure subterfuge: 'If this loss is not heavy, and evenly distributed, everyone will bear with it without complaining about his income. This is what constitutes the national economy, and the series of such small sacrifices increases capital and common wealth.'[174] If, on the other hand, there is ruthless accumulation, this surplus residue becomes a public calamity, and the result is a crisis. Thus a petty-bourgeois subterfuge becomes the solution of Sismondi: putting the dampers on accumulation. He constantly polemises against the classical school which advocates unrestricted development of the productive forces and expansion of production; and his whole work is a warning against the fatal consequences of giving full rein to the desire to accumulate. Sismondi's exposition proves that he was unable to grasp the reproductive process as a whole. Quite apart from his unsuccessful attempt to distinguish between the categories of capital and income from the point of view of society, his theory of reproduction suffers from the fundamental error he took over from Adam Smith: the idea that personal consumption absorbs the entire annual product, without leaving any part of the value for the renewal of society's constant capital, and also, that accumulation consists merely of the transformation of capitalised surplus value into variable capital. Yet, if later critics of Sismondi, e.g. the Russian Marxist Ilyin,[175] think that pointing out this fundamental error in the analysis of the aggregate product can justify a cavalier dismissal of Sismondi's entire theory of accumulation as inadequate, as 'nonsense', they merely demonstrate their own obtuseness in respect of Sismondi's real concern, his ultimate problem. The analysis of Marx at a later date, showing up the crude mistakes of Adam Smith for the first time, is the best proof that the problem of accumulation is far from solved just by attending to the equivalent of the constant capital in the aggregate product. This is proved even more strikingly in the actual development of Sismondi's theory: his views involved him in bitter controversy with the exponents and popularisers of the classical school, with Ricardo, Say and MacCulloch. The two parties to the conflict represent diametrically opposed points of view: Sismondi stands for the sheer impossibility, the others for the unrestricted possibility, of accumulation. Sismondi and his opponents alike disregard constant capital in their exposition of reproduction, and it was Say in particular who presumed to perpetuate Adam Smith's confused concept of the aggregate product as _v + s_ as an unassailable dogma. The knowledge we owe to Marx that the aggregate product must, apart from consumer goods for the workers and capitalists (_v + s_), also contain means of production to renew what has been used, that accumulation accordingly consists not merely in the enlargement of variable but also of constant capital, is not enough, as amply demonstrated by this entertaining turn of events, to solve the problem of accumulation. Later we shall see how this stress on the share of constant capital in the reproductive process gave rise to new fallacies in the theory of accumulation. At present it will suffice to put on record that the deference to Smith's error about the reproduction of aggregate capital is not a weakness unique to Sismondi's position but is rather the common ground on which the first controversy about the problem of accumulation was fought out. Scientific research, not only in this sphere, proceeds in devious ways; it often tackles the upper storeys of the edifice, as it were, without making sure of the foundations; and so this conflict only resulted in that bourgeois economics took on the further complicated problem of accumulation without even having assimilated the elementary problem of simple reproduction. At all events, Sismondi, in his critique of accumulation, had indubitably given bourgeois economics a hard nut to crack--seeing that in spite of his transparently feeble and awkward deductions, Sismondi's opponents were still unable to get the better of him. FOOTNOTES: [147] In the review of an essay on _Observations on the injurious Consequences of the Restrictions upon Foreign Commerce, by a Member of the late Parliament, London, 1820_ (_Edinburgh Review_, vol. lxvi, pp. 331 ff.). This interesting document, from which the following extracts are taken, an essay with a Free Trade bias, paints the general position of the workers in England in the most dismal colours. It gives the facts as follows: 'The manufacturing classes in Great Britain ... have been suddenly reduced from affluence and prosperity to the extreme of poverty and misery. In one of the debates in the late Session of Parliament, it was stated that the wages of weavers of Glasgow and its vicinity which, when highest, had averaged about 25_s._ or 27_s._ a week, had been reduced in 1816 to 10_s._; and in 1819 to the wretched pittance of 5-6_s._ or 6_s._ They have not since been materially augmented.' In Lancashire, according to the same evidence, the direct weekly wage of the weavers was from 6_s._ to 12_s._ a week for 15 hours' labour a day, whilst half-starved children worked 12 to 16 hours a day for 2_s._ or 3_s._ a week. Distress in Yorkshire was, if possible, even greater. As to the address by the frame-work knitters of Nottingham, the author says that he himself investigated conditions and had come to the conclusion that the declarations of the workers 'were not in the slightest degree exaggerated'. [148] Ibid., p. 334. [149] Paris, 1827. [150] Preface to the second edition. Translation by M. Mignet, in _Political Economy and the Philosophy of Government_ (London, 1847), pp. 114 ff. [151] _Nouveaux Principes_ ... (2nd ed.), vol. i, p. 79. [152] _Nouveaux Principes_ ... (2nd ed.), vol. i, p. xv. [153] Ibid., p. 92. [154] Ibid., pp. 111-12. [155] Ibid., p. 335. [156] Op. cit., vol. ii, p. 435. [157] Ibid., p. 463. [158] Op. cit., vol. i, p. xiii (pp. 120-1 of Mignet's translation). [159] _Nouveaux Principes_ ... (2nd ed.), vol. i, p. 84. [160] Ibid., p. 85. [161] Ibid., p. 86. [162] Ibid., pp. 86-7. [163] _Nouveaux Principes_ ..., vol. i, p. 87. [164] Ibid., pp. 87-8. [165] Ibid., pp. 88-9. [166] _Nouveaux Principes_ ..., vol. i, pp. 108-9. [167] Ibid., pp. 93-4. [168] Ibid., p. 95. [169] _Nouveaux Principes_ ..., vol. i, pp. 95-6. [170] Ibid., pp. 104-5. [171] Ibid., p. 105. [172] Ibid., pp. 105-6. [173] Ibid., pp. 113, 120. [174] _Nouveaux Principes_ ..., vol. i, p. 121. [175] Vladimir Ilyich [Lenin], _Economic Studies and Essays_, _St. Petersburg_, 1899. _CHAPTER XI_ MACCULLOCH _v._ SISMONDI Sismondi's emphatic warnings against the ruthless ascendancy of capital in Europe called forth severe opposition on three sides: in England the school of Ricardo, in France J. B. Say, the commonplace vulgariser of Adam Smith, and the St. Simonians. While Owen in England, profoundly aware of the dark aspects of the industrial system and of the crises in particular, saw eye to eye with Sismondi in many respects, the school of that other great European, St. Simon, who had stressed the world-embracing conception of large industrial expansion, the unlimited unfolding of the productive forces of human labour, felt perturbed by Sismondi's alarms. Here, however, we are interested in the controversy between Sismondi and the Ricardians which proved the most fruitful from the theoretical point of view. In the name of Ricardo, and, it seemed, with Ricardo's personal approval, MacCulloch anonymously published a polemical article[176] against Sismondi in the _Edinburgh Review_ in October 1819, i.e. immediately after the publication of the _Nouveaux Principes_. In 1820, Sismondi replied in Rossi's _Annales de Jurisprudence_ with an essay entitled: 'Does the Power of Consuming Necessarily Increase with the Power to Produce? An Enquiry.'[177] In his reply Sismondi[178] himself states that his polemics were conceived under the impact of the commercial crisis: 'This truth we are both looking for, is of utmost importance under present conditions. It may be considered as fundamental for economics. Universal distress is in evidence in the trade, in industry and, in many countries certainly, even in agriculture. Such prolonged and extraordinary suffering has brought misfortune to countless families and insecurity and despondency to all, until it threatens the very bases of the social order. Two contrasting explanations have been advanced for the distress that has caused such a stir. Some say: we have produced too much, and others: we have not produced enough. "There will be no equilibrium," say the former, "no peace and no prosperity until we consume the entire commodity surplus which remains unsold on the market, until we organise production for the future in accordance with the buyers' demand."--"There will be a new equilibrium," say the latter, "if only we double our efforts to accumulate as well as to produce. It is a mistake to believe that there is a glut on the market; no more than half our warehouses are full; let us fill the other half, too, and the mutual exchange of these new riches will revive our trade."'[179] In this supremely lucid way, Sismondi sets out and underlines the real crux of the dispute. MacCulloch's whole position in truth stands or falls with the statement that exchange is actually an interchange of commodities; every commodity accordingly represents not only supply but demand. The dialogue then continues as follows: 'Demand and supply are truly correlative and convertible terms. The supply of one set of commodities constitutes the demand for another. Thus, there is a demand for a given quantity of agricultural produce, when a quantity of wrought goods equal thereto in productive cost is offered in exchange for it; and conversely, there is an effectual demand for this quantity of wrought goods, when the supply of agricultural produce which it required the same expense to raise, is presented as its equivalent.'[180] The Ricardian's dodge is obvious: he has chosen to ignore the circulation of money and to pretend that commodities are immediately bought and paid for by commodities. From the conditions of highly developed capitalist production, we are thus suddenly taken to a stage of primitive barter such as we might find still flourishing at present in Central Africa. There is a distant element of truth in this trick since money, in a simple circulation of commodities, plays merely the part of an agent. But of course, it is just the intervention of an agent which separates the two transactions of circulation, sale and purchase, and makes them independent of one another in respect of both time and place. That is why a further purchase need not follow hard upon a sale for one thing; and secondly, sale and purchase are by no means bound up with the same people: in fact, they will involve the same performers only in rare and exceptional cases. MacCulloch, however, makes just this baseless assumption by confronting, as buyer and seller, industry on the one hand and agriculture on the other. The universality of these categories, _qua_ total categories of exchange, obscures the actual splitting up of this social division of labour which results in innumerable private exchange transactions where the sale and purchase of two commodities rarely come to the same thing. MacCulloch's simplified conception of commodity exchange in general which immediately turns the commodity into money and pretends that it can be directly exchanged, makes it impossible to understand the economic significance of money, its historical appearance. Sismondi's answer to this is regrettably clumsy. In order to show that MacCulloch's explanation of commodity exchange has no application for capitalist production, he takes recourse to the Leipsic Book Fair.[181] 'At the Book Fair of Leipsic, booksellers from all over Germany arrive, each with four or five publications of his own in some 40 or 50 dozen copies; these are exchanged for others and every seller takes home 200 dozen books, just as he has brought 200 dozen, with the sole difference, that he brought four different works and takes home 200. This is the demand and the production which, according to M. Ricardo's disciple, are correlative and convertible; one buys the other, one pays for the other, one is the consequence of the other. But as far as we are concerned, for the bookseller and for the general public, demand and consumption have not even begun. For all that it has changed hands at Leipsic, a bad book will still be just as unsold (a bad mistake of Sismondi's, this!), it will still clutter up the merchants' shops, either because nobody wants it, or because everyone has a copy already. The books exchanged at Leipsic will only sell if the booksellers can find individuals who not only want them but are also prepared to make sacrifices in order to withdraw them from circulation. They alone constitute an effective demand.'[182] Although this example is rather crude, it shows clearly that Sismondi was not side-tracked by his opponent's trick, that he knows after all what he is talking about. MacCulloch then attempts to turn the examination from abstract commodity exchange to concrete social conditions: 'Supposing, for the sake of illustration, that a cultivator advanced food and clothing for 100 labourers, who raised for him _food_ for 200; while a master-manufacturer also advanced food and clothing for 100, who fabricated for him _clothing_ for 200. Then the farmer, besides replacing the food of his own labourers, would have food for 100 to dispose of; while the manufacturer, after replacing the clothing of his own labourers, would have clothing for 100 to bring to market. In this case, the two articles would be exchanged against each other, the supply of food constituting the demand for the clothing, and that of the clothing the demand for the food.'[183] What are we to admire more in this hypothesis: the absurdity of the set-up which reverses all actual relations, or the effrontery which simply takes for granted in the premises all that is later claimed proved? In order to prove that it is always possible to create an unlimited demand for all kinds of goods, MacCulloch chooses for his example two commodities which pertain to the most urgent and elementary wants of every human being: food and clothing. In order to prove that commodities may be exchanged at any time, and without regard to the needs of society, he chooses for his example two products in quantities which are right from the start in strict conformity with these needs, and which therefore contain no surplus as far as society is concerned. And yet he calls this quantity needed by society a surplus--_viz._ as measured against the producer's personal requirements for his own product, and is consequently able to demonstrate brilliantly that any amount of commodity 'surplus' can be exchanged for a corresponding 'surplus' of other commodities. Finally, in order to prove that different privately produced commodities can yet be exchanged, although their quantity, production costs and social importance must of course be different, he chooses for his example commodities whose quantity, production cost and general social necessity are precisely the same right from the start. In short, MacCulloch posits a planned, strictly regulated production without any over-production in order to prove that no crisis is possible in an unplanned private economy. The principal joke of canny Mac, however, lies elsewhere. What is at issue is the problem of accumulation. Sismondi was worried by, and worried Ricardo and his followers with, the following question: if part of the surplus value is capitalised, i.e. used to expand production over and above the income of society, instead of being privately consumed by the capitalists, where are we to find buyers for the commodity surplus? What will become of the capitalised surplus value? Who will buy the commodities in which it is hidden? Thus Sismondi. And the flower of Ricardo's school, its official representative on the Chair of London University, the authority for the then English Ministers of the Liberal Party and for the City of London, the great Mr. MacCulloch replies--by constructing an example in which no surplus value whatever is produced. His 'capitalists' slave away in agriculture and industry in the name of charity, and all the time the entire social product, including the 'surplus', is only enough for the needs of the workers, for the wages, while the 'farmer' and 'manufacturer' see to production and exchange without food and clothing. Sismondi, justly impatient, now exclaims: 'The moment we want to find out what is to constitute the surplus of production over consumption of the workers, it will not do to abstract from that surplus which forms the due profit of labour and the due share of the master.'[184] MacCulloch's only reaction is to multiply his silly argument by a thousand. He asks the reader to assume '1,000 farmers', and 'also 1,000 master-manufacturers' all acting as ingenuously as the individuals. The exchange, then, proceeds as smoothly as can be desired. Finally, he exactly doubles labour productivity 'in consequence of more skilful application of labour and of the introduction of machinery--thus that every one of the 1,000 farmers, by advancing food and clothing for 100 labourers, obtains a return consisting of ordinary food for 200 together with sugar, grapes and tobacco equal in production cost to that food', while every manufacturer obtains, by an analogous procedure, in addition to the previous quantity of clothing for all workers, 'ribbands, cambrics and lace, equal in productive cost, and therefore in exchangeable value, to that clothing'.[185] After such complete reversal of the chronological order, the assumption, that is, of first the existence of private property with wage labour, and then, at a later stage, such level of labour productivity as makes exploitation possible at all, he now assumes labour productivity to progress with equal speed in all spheres, the surplus product to contain precisely the same amount of value in all branches of industry, and to be divided among precisely the same number of people. When these various surplus products are then exchanged against one another, is it any wonder that the exchange proceeds smoothly and completely to everybody's satisfaction? It is only another of his many absurdities that MacCulloch makes the capitalists who had hitherto lived on air and exercised their profession in their birthday suits, now live exclusively on sugar, tobacco and wine, and array themselves only in ribbons, cambrics and lace. The most ridiculous performance, however, is the _volte-face_ by which he evades the real problem. The question had been what happens to the capitalist surplus, that surplus which is used not for the capitalist's own consumption but for the expansion of production. MacCulloch solves it on the one hand by ignoring the production of surplus value altogether, and on the other, by using all surplus value in the production of luxury goods. What buyers, then, does he advance for this new luxury production? The capitalists, evidently; the farmers and manufacturers, since, apart from these, there are only workers in MacCulloch's model. Thus the entire surplus value is consumed for the personal satisfaction of the capitalists, that is to say, simple reproduction takes place. The answer to the problem of the capitalisation of surplus value is, according to MacCulloch, either to ignore surplus value altogether, or to assume simple reproduction instead of accumulation as soon as surplus value comes into being. He still _pretends_ to speak of expanding reproduction, but again, as before when he pretended to deal with the 'surplus', he uses a trick, _viz._ first setting out an impossible species of capitalist production without any surplus value, and then persuading the reader that the subsequent _début_ of the surplus value constitutes an expansion of production. Sismondi is not quite up to these Scottish acrobatics. He had up to now succeeded in pinning his Mac down, proving him to be 'obviously absurd'. But now he himself becomes confused with regard to the crucial point at issue. On the above rantings of his opponent, he should have declared coldly: Sir, with all respect for the flexibility of your mind, you are dodging the issue. I keep on asking, who will buy the surplus product, if the capitalists use it for the purpose of accumulation, i.e. to expand production, instead of squandering it altogether? And you reply: Oh well, they will expand their production of luxury goods, which they will, of course, eat up themselves. But this is a conjuring trick, seeing that the capitalists consume the surplus value in so far as they spend it on their luxuries--they do not accumulate at all. My question is about the possibility of accumulation, not whether the personal luxuries of the capitalists are possible. Answer this clearly, if you can, or else go play with your wine and tobacco, or go to blazes for all I care. But Sismondi, instead of putting the screws on the vulgariser, suddenly begins to moralise with pathos and social conscience. He exclaims: 'Whose demand? Whose satisfaction? The masters or the workers in town or country? On this new conception [of Mac's] there is a surplus of products, an advantage from labour--to whom will it accrue?'[186] and gives his own answer in the following impassioned words: 'But we know full well, and the history of the commercial world teaches us all too thoroughly, that it is not the worker who profits from the increase in products and labour; his pay is not in the least swelled by it. M. Ricardo himself said formerly that it ought not to be, unless you want the social wealth to stop growing. On the contrary, sorry experience teaches us that wages nearly always contract by very reason of this increase. Where, then, does the accumulation of wealth make itself felt as a public benefit? Our author assumes 1,000 farmers who profit, while 100,000 workers toil; 1,000 entrepreneurs who wax rich, while 100,000 artisans are kept under their orders. Whatever good may result from the accumulation of the frivolous enjoyment of luxuries is only felt by a 100th part of the nation. And will this 100th part, called upon to consume the entire surplus product of the whole working class, be adequate to a production that may grow without let or hindrance, owing to progress of machinery and capitals? In the assumption made by the author, every time the national product is doubled, the master of the farm or of the factory must increase his consumption a hundredfold; if the national wealth to-day, thanks to the invention of so many machines, is a hundred times what it was when it only covered the cost of production, every employer would to-day have to consume enough products to support 10,000 workers.'[187] At this point Sismondi again believes himself to have a firm grasp on how crises begin to arise: 'We might imagine, if put to it, that a rich man can consume the goods manufactured by 10,000 workers, this being the fate of the ribbons, lace and cambrics whose origin the author has shown us. But a single individual would not know how to consume agricultural product to the same tune, the wines, sugar and spices which M. Ricardo [whom Sismondi evidently suspected of having written the article since he only got to know 'Anonymous' of the _Edinburgh Review_ at a later date] conjures up in exchange, are too much for the table of one man. They will not sell, or else the strict proportion between agricultural and industrial products, apparently the basis of his whole system, cannot be maintained.'[188] Sismondi, we see, has thus fallen into MacCulloch's trap. Instead of waiving an answer to the problem of accumulation which refers to the production of luxuries, he pursues his opponent into this field without noticing that the ground under his feet has shifted. Here he finds two causes for complaint. For one thing, he has moral objections to MacCulloch's allowing the capitalists instead of the workers to benefit by the surplus value, and is side-tracked into polemising against distribution under capitalism. From this digression, he unexpectedly reverts to the original problem which he now formulates as follows: the capitalists, then, consume the entire surplus value in luxuries. Let it be so. But could anyone increase his consumption as rapidly and indefinitely as the progress of labour productivity makes the surplus value increase? And in this second instance, Sismondi himself abandons his own problem. Instead of perceiving that it is the lack of consumers other than workers and capitalists which accounts for the difficulty in capitalist accumulation, he discovers a snag in simple reproduction because the capitalists' capacity to consume has physical limits. Since the absorptive capacity of the capitalists for luxuries cannot keep up with labour productivity, that is to say with the increase in surplus value, there must be crises and over-production. We have encountered this line of thought once before in the _Nouveaux Principes_--so Sismondi himself was manifestly not quite clear about the problem at all times. And that is hardly surprising, since one can really come to grips with the whole problem of accumulation only when one has fully grasped the problem of simple reproduction, and we have seen how much Sismondi was at fault in this respect. Yet in spite of all this, the first time that Sismondi crossed swords with the heirs of the classical school, he proved himself by no means the weaker party. On the contrary, in the end he routed his opponent. If Sismondi misunderstood the most elementary principles of social reproduction and ignored constant capital, quite in keeping with Adam Smith's dogma, he was in this respect no worse at any rate than his opponent. Constant capital does not exist for MacCulloch either, his farmers and manufacturers 'advance' merely food and clothing to their workers, and food and clothing between them make up the aggregate product of society. If there is, then, nothing to choose between the two as far as this elementary blunder is concerned, Sismondi towers heads above Mac because of his intuitive understanding of the contradictions in the capitalist mode of production. In the end, the Ricardian was at a loss to answer Sismondi's scepticism concerning the possibility of realising the surplus value. Sismondi also shows himself more penetrating in that he throws the Nottingham proletarians' cry of distress in the teeth of the apostles and apologists of harmony with their smug complacency, of those who deny 'any surplus of production over demand, any congestion of the market, any suffering', when he proves that the introduction of the machine must of necessity create a 'superabundant population', and particularly in the end, when he underlines the tendency of the capitalist world market in general with its inherent contradictions. MacCulloch denies outright that general over-production is possible. He has a specific for every partial over-production up his sleeve: 'It may be objected, perhaps, that on the principle that the demand for commodities increases in the same ratio as their supply, there is no accounting for the gluts and stagnation produced by overtrading. We answer very easily--A glut is an increase in the supply of a particular class of commodities, unaccompanied by a corresponding increase in the supply of those other commodities which should serve as their equivalents. While our 1,000 farmers and 1,000 master-manufacturers are exchanging their respective surplus products, and reciprocally affording a market to each other, if 1,000 new capitalists were to join their society, employing each 100 labourers in tillage, there would be an immediate glut in agricultural produce ... because in this case there would be no contemporaneous increase in the supply of the manufactured articles which should purchase it. But let one half of the new capitalists become manufacturers, and equivalents in the form of wrought goods will be created for the new produce raised by the other half: the equilibrium will be restored, and the 1,500 farmers and 1,500 master-manufacturers will exchange their respective surplus products with exactly the same facility with which the 1,000 farmers and 1,000 manufacturers formerly exchanged theirs.'[189] Sismondi answers this buffoonery which 'very easily' pokes about in a fog, by pointing to the real changes and revolutions which take place before his own eyes. 'It was possible to put barbarous countries under the plough, and political revolutions, changes in the financial system, and peace, at once brought cargoes to the ports of the old agricultural countries which almost equalled their entire harvest. The recent Russian conquest of the vast provinces on the Black Sea, the change in the system of government in Egypt, and the outlawing of piracy in High Barbary, have suddenly poured the granaries of Odessa, Alexandria and Tunis into the Italian ports and have put such an abundance of corn on the markets that all along the coasts the farmer's trade is fighting a losing battle. Nor is the remainder of Europe safe from a similar revolution, caused by the simultaneous ploughing under of immense expanses of new land on the banks of the Mississippi, which export all their agricultural produce. Even the influence of New Holland may one day be the ruin of English industry, if not in the price of foodstuffs, which are too expensive to transport, at least in respect of wool and other agricultural products which are easier to transport.'[190] What would MacCulloch have to advise in view of such an agrarian crisis in Southern Europe? That half the new farmers should turn manufacturer. Whereupon Sismondi counters: 'Such counsel cannot seriously apply to the Tartars of the Crimea or to the fellaheen of Egypt.' And he adds: 'The time is not yet ripe to set up new industries in the regions oversea or in New Holland.'[191] Sismondi's acuity recognised that industrialisation of the lands overseas was only a matter of time. He was equally aware of the fact that the expansion of the world market would not bring with it the solution to the difficulty but would only reproduce it in a higher degree, in yet more potent crises. His prediction for the expansive tendency of capitalism is that it will reveal an aspect of fiercer and fiercer competition, of mounting anarchy within production itself. Indeed, he puts his finger on the fundamental causes of crises in a passage where he states the trend of capitalist production precisely as surpassing all limits of the market. At the end of his reply to MacCulloch he says: 'Time and again it has been proclaimed that the equilibrium will re-establish itself, that work will start again, but a single demand each time provides an impetus in excess of the real needs of trade, and this new activity must soon be followed by a yet more painful glut.'[192] To such a profound grasp of the real contradictions in the movements of capital, the _vulgarus_ on the Chair of London University with his harmony cant and his country-dance of 1,000 beribboned farmers and 1,000 bibulous manufacturers could find no effective answer. FOOTNOTES: [176] The article in the _Edinburgh Review_ was really directed against Owen, sharply attacking on 24 pages of print the latter's four treatises: (1) 'A New View of Society, or Essays on the formation of Human Character', (2) 'Observations on the Effects of the Manufacturing System', (3) 'Two Memorials on Behalf of the Working Classes, Presented to the Governments of America and Europe', and finally (4) 'Three Tracts' and 'An Account of Public Proceedings relative to the Employment of the Poor'. 'Anonymous' here attempts a detailed proof that Owen's reformist ideas by no means get down to the real causes of the misery of the English proletariat, these causes being: the transition to the cultivation of barren land (Ricardo's theory of ground rent!), the corn laws and high taxation pressing upon farmer and manufacturer alike. Free trade and _laissez-faire_ thus is his alpha and omega. Given unrestricted accumulation, all increase in production will create for itself an increase in demand. Owen is accused of 'profound ignorance' as regards Say and James Mill.--'In his reasonings, as well as in his plans, Mr. Owen shows himself profoundly ignorant of all the laws which regulate the production and distribution of wealth.'--From Owen, the author proceeds to Sismondi and formulates the point of contention as follows: 'He [Owen] conceives that when competition is unchecked by any artificial regulations, and industry permitted to flow in its natural channels, the use of machinery may increase the supply of the several articles of wealth beyond the demand for them, and by creating an excess of all commodities, throw the working classes out of employment. This is the position which we hold to be fundamentally erroneous; and as it is strongly insisted on by the celebrated M. de Sismondi in his _Nouveaux Principes d'Économie Politique_, we must entreat the indulgence of our readers while we endeavour to point out its fallacy, and to demonstrate, that the power of consuming necessarily increases with every increase in the power of producing' (_Edinburgh Review_, Oct. 1819, p. 470). [177] The original title is: _Examen de cette question: Le pouvoir de consommer s'accroît-il toujours dans la société avec le pouvoir de produire?_ We have not been able to obtain a copy of Rossi's _Annales_, but the essay as a whole was incorporated by Sismondi in the second edition of his _Nouveaux Principes_. [178] At the time of writing, Sismondi was still in the dark as to the identity of 'Anonymous' in the _Edinburgh Review_. [179] Sismondi, op. cit., vol. ii, pp. 376-8. [180] MacCulloch, loc. cit., p. 470. [181] Incidentally, Sismondi's Leipsic Book Fair, as a microcosm of the capitalist world, has staged a come-back after 55 years--in Eugen Duehring's 'system'. Engels, in his devastating criticism of that unfortunate 'universal genius' adduces this idea as proof that Duehring, by attempting to elucidate a real industrial crisis by means of an imaginary one on the Leipsic Book Fair, a storm at sea by a storm in a teacup, has shown himself a 'real German _literatus_'. But, as in many other instances exposed by Engels, the great thinker has simply borrowed here from someone else on the sly. [182] Sismondi, op. cit., vol. ii, pp. 381-2. [183] MacCulloch, loc. cit., p. 470. [184] Sismondi, op. cit, vol. ii, p. 384. [185] MacCulloch, loc. cit., p. 471. [186] Sismondi, op. cit., vol. ii, pp. 394-5. [187] Ibid., pp. 396-7. [188] Ibid., pp. 397-8. [189] MacCulloch, loc. cit., pp. 471-2. [190] Sismondi, op. cit., vol. ii, pp. 400-1. [191] Sismondi, op. cit., vol. ii, p. 401. [192] Ibid., pp. 405-6. _CHAPTER XII_ RICARDO _v._ SISMONDI MacCulloch's reply to Sismondi's theoretical objections evidently did not settle the matter to Ricardo's own satisfaction. Unlike that shrewd 'Scottish arch-humbug', as Marx calls him, Ricardo really wanted to discover the truth and throughout retained the genuine modesty of a great mind.[193] That Sismondi's polemics against him and his pupil had made a deep impression is proved by Ricardo's revised approach to the question of the effects of the machine, that being the point on which Sismondi, to his eternal credit, had confronted the classical school of harmony with the sinister aspects of capitalism. Ricardo's followers had enlarged upon the doctrine that the machine can always create as many or even more opportunities for the wage labourers as it takes away by displacing living labour. This so-called theory of compensation was subjected to a stern attack by Sismondi in the chapter 'On the Division of Labour and Machinery'[194] and in another chapter significantly entitled: 'Machinery Creates a Surplus Population',[195] both published in the _Nouveaux Principes_ of 1819, two years later than Ricardo's main work. In 1821, after the MacCulloch-Sismondi controversy, Ricardo inserted a new chapter in the third edition of his _Principles_, where he frankly confesses to his error and says in the strain of Sismondi: 'That the opinion entertained by the labouring classes, that the employment of machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy.'[196] He, like Sismondi, had to defend himself against the suspicion that he is opposing technical progress, but, less ruthless, he compromises with the evasion that the evil emerges only gradually. 'To elucidate the principle, I have been supposing, that improved machinery is _suddenly_ discovered, and extensively used; but the truth is, that these discoveries are gradual, and rather operate in determining the employment of the capital which is saved and accumulated, than in diverting capital from its actual employment.'[197] Yet the problem of crises and accumulation continued to worry Ricardo also. In 1823, the last year of his life, he spent some days in Geneva in order to talk the problem over face to face with Sismondi. The result of these talks is Sismondi's essay 'On the Balance Between Consumption and Production', published in the _Revue Encyclopédique_ of May 1824.[198] In his _Principles_, Ricardo had at the crucial points completely accepted Say's trite doctrine of harmony in the relations between production and consumption. In chapter xxi he had declared: 'M. Say has, however, most satisfactorily shown, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person.'[199] To this conception of Ricardo's, Sismondi's _Nouveaux Principes_ were a powerful challenge, and the dispute as a whole turned also on this point. Ricardo could not deny the fact of crises which had but recently passed over England and other countries. What was at issue was the explanation for them. Right at the outset of their debate, Sismondi and Ricardo had agreed on a remarkably lucid and precise formulation of the problem, excluding the question of foreign commerce altogether. Sismondi grasped the significance and necessity of foreign trade for capitalist production, its need for expansion, well enough; in this line he was quite in step with Ricardo's Free Traders, whom he considerably excelled in his dialectical conception of the expansionist needs of capital. He fully admitted that industry 'is increasingly led to look for its vents on foreign markets where it is threatened by greater revolutions'.[200] He forecast, as we have seen, the rise of a dangerous competition for European industry in the overseas countries. This was after all a creditable achievement in the year 1820, and one which reveals Sismondi's deep insight into the relations of capitalist world economy. But even so, Sismondi was in fact far from conceiving the problem of realising the surplus value, the problem of accumulation, to depend on foreign commerce as its only means of salvation, a view attributed to him by later critics. On the contrary, Sismondi was quite explicit in the sixth chapter of volume i:[201] 'In order to make these calculations with greater certainty and to simplify these questions, we have hitherto made complete abstraction from foreign trade and supposed an isolated nation; this isolated nation is human society itself, and what is true for a nation without foreign commerce, is equally true for mankind.' In other words: in considering the entire world market as one society producing exclusively by capitalist methods, Sismondi grounds his problem in the same premises as Marx was to do after him. That was also the basis on which he came to terms with Ricardo. 'From the question that troubled us, we had each of us dismissed the instance of a nation that sold more abroad than it needed to buy there, that could command a growing external market for its growing internal production. In any case, it is not for us to decide whether fortunes of war or politics could perhaps bring forth new consumers for a nation--what is needed is proof that a nation can create these for itself simply by increasing its production.'[202] This is how Sismondi formulated the problem of realising the surplus value in all precision, just as it confronts us throughout the ensuing era in economics, in contrast with Ricardo who actually maintains along with Say, as we are already aware and shall show in further detail, that production creates its own demand. Ricardo's thesis in the controversy with Sismondi takes the following form: 'Supposing that 100 workers produce 1,000 sacks of corn, and 100 weavers 1,000 yards woollen fabric. Let us disregard all other products useful to man and all intermediaries between them, and consider them alone in the world. They exchange their 1,000 yards against the 1,000 sacks. Supposing that the productive power of labour has increased by a tenth owing to a successive progress of industry, the same people will exchange 1,100 yards against 1,100 sacks, and each will be better clothed and fed; new progress will make them exchange 1,200 yards for 1,200 sacks, and so on. The increase in products always only increases the enjoyment of those who produce.'[203] The great Ricardo's standards of reasoning, it must regretfully be stated, are if anything even lower than those of the Scottish arch-humbug, MacCulloch. Once again we are invited to witness a harmonious and graceful country-dance of sacks and yards--the very proportion which is to be proved, is again taken for granted. What is more, all relevant premises for the problem are simply left out. The real problem--you will recollect--the object of the controversy had been the question: who are the buyers and consumers of the surplus product that comes into being if the capitalists produce more goods than are needed for their own and their workers' consumption; if, that is to say, they capitalise part of their surplus value and use it to expand production, to increase their capital? Ricardo answers it by completely ignoring the capital increase. The picture he paints of the various stages of production is merely that of a gradually increasing productivity of labour. According to his assumptions, the same amount of labour first produces 1,000 sacks and 1,000 yards textiles, then 1,100 sacks and 1,100 yards, further 1,200 sacks and 1,200 yards, and so on, in a gracefully ascending curve. Not only that the image of a marshalled uniform progression on both sides, of conformity even in the number of objects brought to exchange, is wearisome, the expansion of capital is nowhere as much as mentioned in the model. Here we have no enlarged but simple reproduction with a greater bulk of use-values indeed, but without any increase in the value of the aggregate social product. Since only the amount of value, not the number of use-values is relevant to the exchange transaction, and this amount remains constant in the example, Ricardo makes no real advances, even though he seems to analyse the progressive expansion of production. Finally, he is quite oblivious of the relevant categories of reproduction. MacCulloch had begun by making the capitalists produce without any surplus value and live on air, but at least he recognised the existence of the workers, making provision for their consumption. Ricardo, however, does not even mention the workers; for him the distinction between variable capital and surplus value does not exist at all. Besides this major omission, it is of small account that he, just like his disciple, takes no notice of constant capital. He wants to solve the problem of realising the surplus value and expanding capital without positing more than the existence of a certain quantity of commodities which are mutually exchanged. Sismondi was blind to the fact that the venue has been changed altogether. Yet he tried faithfully to bring the fantasies of his famous guest and opponent down to earth and to analyse their invisible contradictions, plaintively saying that these assumptions, 'just like German metaphysics, abstract from time and space'.[204] He grafts Ricardo's hypothesis on to 'society in its real organisation, with unpropertied workers whose wage is fixed by competition and who can be dismissed the moment their master has no further need of their work ... for'--remarks Sismondi, as acute as he is modest--'it is just this social organisation to which our objection refers'.[205] He lays bare the many difficulties and conflicts bound up with the progress of labour productivity under capitalism, and shows that Ricardo's postulated changes in the technique of labour, from the point of view of society, lead to the following alternative: Either a number of workers corresponding to the increase in labour productivity will have to be dismissed outright--then there will be a surplus of products on the one hand, and on the other unemployment and misery--a faithful picture of present-day society. Or the surplus product will be used for the maintenance of the workers in a new field of production, the production of luxury goods. Here Sismondi undoubtedly proves himself superior: he suddenly remembers the existence of the constant capital, and now it is he who subjects the English classic to a frontal attack: 'For setting up a new industry for manufacturing luxuries, new capital is also needed; machines will have to be built, raw materials procured, and distant commerce brought into activity; for the wealthy are rarely content with enjoying what is immediately in front of them. Where, then, could we find this new capital which may perhaps be much more considerable than that required by agriculture?... Our luxury workers are still a long way from eating our labourers' grain, from wearing the clothes from our common factories; they are not yet made into workers, they may not even have been born yet, their trade does not exist, the materials on which they are to work have not arrived from India. All those among whom the former should distribute their bread, wait for it in vain.'[206] Sismondi now takes constant capital into account, not only in the production of luxuries, but also in agriculture, and further raises the following objection against Ricardo: 'We must abstract from time, if we make the assumption that the cultivator, whom a mechanical discovery or an invention of rural industry enables to treble the productive power of his workers, will also find sufficient capital to treble his exploitation, his agricultural implements, his equipment, his livestock, his granaries: to treble the circulating capital which must serve him while waiting for his harvest.'[207] In this way Sismondi breaks with the superstition of the classical school that with capital expanding all additional capital would be exclusively spent on wages, on the variable capital. He clearly dissents from Ricardo's doctrine--which did not, however, prevent his allowing all the errors arising out of this doctrine three years later again to creep into the second edition of his _Nouveaux Principes_. In opposition to Ricardo's facile doctrine of harmony, Sismondi underlines two decisive points: on the one hand, the objective difficulties of the process of enlarged reproduction which works by no means so smoothly in capitalist reality as it does in Ricardo's absurd hypothesis; on the other hand, the fact that all technical progress in social labour productivity is always achieved under capitalism at the expense of the working class, bought with their suffering. Sismondi shows himself superior to Ricardo in yet a third point: he represents the broad horizon of the dialectical approach as against Ricardo's blunt narrow-mindedness with its incapacity to conceive of any forms of society other than those of bourgeois economics: 'Our eyes,' he exclaims, 'are so accustomed to this new organisation of society, this universal competition, degenerating into hostility between the rich and the working class, that we no longer conceive of any mode of existence other than that whose ruins surround us on all sides. They believe to prove me absurd by confronting me with the vices of preceding systems. Indeed, as regards the organisation of the lower classes, two or three systems have succeeded one another; yet, since they are not to be regretted, since, after first doing some good, they then imposed terrible disasters on mankind, may we conclude from this that we have now entered the true one? May we conclude that we shall not discover the besetting vice of the system of wage labour as we have discovered that of slavery, of vassalage, and of the guilds? A time will come, no doubt, when our descendants will condemn us as barbarians because we have left the working classes without security, just as we already condemn, as they also will, as barbarian the nations who have reduced those same classes to slavery.'[208] Sismondi's statement, putting in a nutshell the vital differences between the parts played by the proletariat in a modern society and in the society of ancient Rome, shows his profound insight into historical connections. He shows no less discernment, in his polemics against Ricardo, when analysing the specific economic character of the slave-system and of feudal economy as well as their relative historical significance, and finally when emphasising, as the dominant universal tendency of bourgeois economy, 'that it severs completely all kind of property from every kind of labour'. The second round, no more than the first, between Sismondi and the classical school, brought little glory for Sismondi's opponents.[209] FOOTNOTES: [193] It is typical that on his election to Parliament in 1819, when he already enjoyed the highest reputation on account of his economic writings, Ricardo wrote to a friend: 'You will have seen that I have taken my seat in the House of Commons. I fear I shall be of little use there. I have twice attempted to speak but I proceeded in the most embarrassed manner, and I have no hope of conquering the alarm with which I am assailed the moment I hear the sound of my own voice' (_Letters of D. Ricardo to J. R. MacCulloch_, N.Y., 1895, pp. 23-4). Such diffidence was quite unknown to the gasbag MacCulloch. [194] _Nouveaux Principes_ ..., book iv, chap. vii. [195] Ibid., book vii, chap. vii. [196] D. Ricardo, _On the Principles of Political Economy and Taxation_ (3rd edition, London, 1821), p. 474. [197] Ibid., p. 478. [198] This essay, _Sur la Balance des Consommations avec les Productions_, is reprinted in the second edition of _Nouveaux Principes_, vol. ii, pp. 408 ff. Sismondi tells us about this discussion: 'M. Ricardo, whose recent death has been a profound bereavement not only to his friends and family but to all those whom he enlightened by his brilliance, all those whom he inspired by his lofty sentiments, stayed for some days in Geneva in the last year of his life. We discussed in two or three sessions this fundamental question on which we disagreed. To this enquiry he brought the urbanity, the good faith, the love of truth which distinguished him, and a clarity which his disciples themselves had not heard, accustomed as they were to the efforts of abstract thought he demanded in the lecture room.' [199] Ricardo, op. cit., p. 339. [200] Sismondi, op. cit., vol. ii, p. 361. [201] _Nouveaux Principes_ ..., book iv, chap, iv: 'Comment la Richesse commerciale suit l'Accroissement du Revenu' (vol. i, p. 115). [202] Sismondi, op. cit., vol. ii, p. 412. [203] Ibid., p. 416. [204] Ibid., p. 424. [205] Ibid., p. 417. [206] Sismondi, op. cit., vol. ii, pp. 425-6. [207] Ibid., p. 429. [208] Ibid., pp. 434-5. [209] Thus, if Tugan Baranovski, championing Say-Ricardo's views, tells us about the controversy between Sismondi and Ricardo (_Studies on the Theory and History of Commercial Crises in England_, p. 176), that Sismondi was compelled 'to acknowledge as correct the doctrine he had attacked and to concede his opponent all that is necessary'; that Sismondi himself 'had abandoned his own theory which still finds so many adherents', and that 'the victory in this controversy lies with Ricardo', this shows a lack of discrimination--to put it mildly--such as is practically unheard-of in a work of serious scientific pretensions. _CHAPTER XIII_ SAY _v_. SISMONDI Sismondi's essay against Ricardo in the _Revue Encyclopédique_ of May 1824, was the final challenge for J. B. Say, at that time the acknowledged 'prince of economic science' (_prince de la science économique_), the so-called representative, heir and populariser of the school of Adam Smith on the Continent. Say, who had already advanced some arguments against Sismondi in his letters to Malthus, countered the following July with an essay on 'The Balance Between Consumption and Production' in the _Revue Encyclopédique_, to which Sismondi in turn published a short reply. The chronology of Sismondi's polemical engagements was thus inverse to the sequence of the opposing theories, for it had been Say who first communicated his doctrine of a divinely established balance between production and consumption to Ricardo who had in turn handed it down to MacCulloch. In fact, as early as 1803, Say, in his _Traité d'Économie Politique_, book i, chapter xii, had coined the following peremptory statement: 'Products are paid for with other products. It follows that if a nation has too many goods of one kind, the means of selling them would be to create goods of a different kind.'[210] Here we meet again the all too familiar conjuring recipe which was accepted alike by Ricardo's school and by the 'vulgar economists' as the corner-stone of the doctrine of harmony.[211] Essentially, Sismondi's principal work constitutes a sustained polemic against this thesis. At this stage Say charges to the attack in the _Revue Encyclopédique_ with a complete _volte-face_, as follows: 'Objection may be made that, because of man's intelligence, because of the advantage he can draw from the means provided by nature and artifice, every human society can produce _all_ the things fit to satisfy its needs and increase its enjoyment in far larger quantities than it can itself consume. But there I would ask how it is possible that we know of no nation that is supplied with everything. Even in what rank as prospering nations seven-eighths of the population are lacking in a multitude of things considered necessities in ... I will not say a wealthy family, but in a modest establishment. The village I live in at present lies in one of the richest parts of France; yet in 19 out of 20 houses I enter here, I see but the coarsest fare and nothing that makes for the well-being of the people, none of the things the English call comforts.'[212] There is something to admire about the effrontery of the excellent Say. It was he who had maintained that in a capitalist economy there could be no difficulties, no surplus, no crises and no misery; since goods can be bought one for the other, we need only go on producing more and more and everything in the garden will be lovely. It was in Say's hands that this postulate had become a tenet of the doctrine of harmony, that doctrine so typical of vulgar economics, which had evoked a sharp protest from Sismondi who proved this view untenable. The latter had shown that goods cannot be sold in any quantity you like, but that a limit is set to the realisation of goods by the income of society in each case, by _v + s_; inasmuch as the wages of the workers are depressed to a mere subsistence level, and inasmuch as there is also a natural limit to the consumptive capacity of the capitalist class, an expansion of production, Sismondi says, must inevitably lead to slumps, crises and ever greater misery for the great masses. Say's come-back to this is masterly in its ingenuity: If you will insist that over-production is possible, how can it happen that there are so many people in our society who are naked, hungry and in want? Pray, explain this contradiction if you can. Say, whose own position excels by contriving blithely to shrug off the circulation of money altogether by operating with a system of barter, now censures his critic for speaking of an over-abundance of products in relation not only to purchasing power but to the real needs of society, and that although Sismondi had left no doubt at all about this very salient point of his deductions. 'Even if there is a very great number of badly fed, badly clothed and badly housed people in a society, the society can only sell what it buys, and, as we have seen, it can only buy with its income.'[213] A little further on, Say concedes this point but alleges that his opponent has made a new mistake: 'It is not consumers, then, in which the nation is lacking,' he says, 'but purchasing power. Sismondi believes that this will be more extensive, when the products are rare, when consequently they are dearer and their production procures ampler pay for the workers.'[214] That is how Say attempts to degrade, in his own trite method of thought, or better, method of canting, Sismondi's theory which attacked the very foundations of capitalist organisation and its mode of distribution. He burlesques the _Nouveaux Principes_, turning them into a plea for 'rare' goods and high prices, and holds up to them the mirror of an artfully flattered capitalist accumulation at its peak. If production becomes more vigorous, he argues, labour grows in numbers and the volume of production expands, the nations will be better and more universally provided for, and he extols the conditions in countries where industrial development is at its highest, as against the misery of the Middle Ages. Sismondi's maxims he declares subversive to capitalist society: 'Why does he call for an inquiry into the laws which might oblige the entrepreneur to guarantee a living for the worker he employs? Such an inquiry would paralyse the spirit of enterprise. Merely the fear that the authorities might interfere with private contracts is a scourge and harmful to the wealth of a nation.'[215] Not to be diverted from his purpose by this indiscriminate apologia of Say's, Sismondi once more turns the discussion on the fundamental issue: 'Surely I have never denied that since the time of Louis XIV France has been able to double her population and to quadruple her consumption, as he contends. I have only claimed that the increase of products is a good if it is desired, paid for and consumed; that, on the other hand, it is an evil if, there being no demand, the only hope of the producer is to entice the consumers of a rival industry's products. I have tried to show that the natural course of the nations is progressive increase of their property, an increase consequent upon their demand for new products and their means to pay for them, but that in consequence of our institutions, of our legislation having robbed the working class of all property and every security, they have also been spurred to a disorderly labour quite out of touch with the demand and with purchasing power, which accordingly only aggravates poverty.'[216] And he winds up the debate by inviting the preacher of harmony to reflect upon the circumstance that, though a nation may be rich, public misery no less than material wealth is constantly on the increase, the class which produces everything being daily brought nearer to a position where it may consume nothing. On this shrill discordant note of capitalist contradictions closes the first clash about the problem of accumulation. Summing up the general direction of this first battle of wits, we must note two points: (1) In spite of all the confusion in Sismondi's analysis, his superiority to both Ricardo and his followers and to the self-styled heir to the mantle of Adam Smith is quite unmistakable. Sismondi, in taking things from the angle of reproduction, looks for concepts of value (capital and income) and for factual elements (producer and consumer goods) as best he can, in order to grasp how they are interrelated within the total social process. In this he is nearest to Adam Smith, with the difference only that the contradictions there appearing as merely subjective and speculative, are deliberately stressed as the keynote of Sismondi's analysis where the problem of capital accumulation is treated as the crucial point and principal difficulty. Sismondi has therefore made obvious advances on Adam Smith, while Ricardo and his followers as well as Say throughout the debate think solely in terms of simple commodity production. They only see the formula C--M--C, even reducing everything to barter, and believe that such barren wisdom can cover all the problems specific to the process of reproduction and accumulation. This is a regress even on Smith, and over such myopic vision, Sismondi scores most decisively. He, the social critic, evinces much more understanding for the categories of bourgeois economics than their staunchest champions--just as, at a later date, the socialist Marx was to grasp infinitely more keenly than all bourgeois economists together the _differentia specifica_ of the mechanism of capitalist economy. If Sismondi exclaims in the face of Ricardo's doctrine: 'What, is wealth to be all, and man a mere nothing?'[217] it is indicative not only of the vulnerable moral strain in his petty-bourgeois approach compared to the stern, classical impartiality of Ricardo, but also of a critical perception, sharpened by social sensibilities for the living social connections of economy; an eye, that is, for intrinsic contradictions and difficulties as against the rigid, hidebound and abstract views of Ricardo and his school. The controversy had only shown up the fact that Ricardo, just like the followers of Adam Smith, was not even able to grasp, let alone solve the puzzle of accumulation put by Sismondi. (2) The clue to the problem, however, was already impossible of discovery, because the whole argument had been side-tracked and concentrated upon the problem of crises. It is only natural that the outbreak of the first crisis should dominate the discussion, but no less natural that this effectively prevented either side from recognising that crises are far from constituting _the_ problem of accumulation, being no more than its characteristic phenomenon: one element in the cyclical form of capitalist reproduction. Consequently, the debate could only result in a twofold _quid pro quo_: one party deducing from crises that accumulation is impossible, and the other from barter that crises are impossible. Subsequent developments of capitalism were to give the lie to both conclusions alike. And yet, Sismondi's criticism sounds the first alarm of economic theory at the domination of capital, and for this reason its historical importance is both great and lasting. It paves the way for the disintegration of a classical economics unable to cope with the problem of its own making. But for all Sismondi's terror of the consequences attendant upon capitalism triumphant, he was certainly no reactionary in the sense of yearning for pre-capitalistic conditions, even if on occasion he delights in extolling the patriarchal forms of production in agriculture and handicrafts in comparison with the domination of capital. He repeatedly and most vigorously protests against such an interpretation as e.g. in his polemic against Ricardo in the _Revue Encyclopédique_: 'I can already hear the outcry that I jib at improvements in agriculture and craftsmanship and at every progress man could make; that I doubtless prefer a state of barbarism to a state of civilisation, since the plough is a tool, the spade an even older one, and that, according to my system, man ought no doubt to work the soil with his bare hands. 'I never said anything of the kind, and I crave indulgence to protest once for all against all conclusions imputed to my system such as I myself have never drawn. Neither those who attack me nor those who defend me have really understood me, and more than once I have been put to shame by my allies as much as by my opponents.'--'I beg you to realise that it is not the machine, new discoveries and inventions, not civilisation to which I object, but the modern organisation of society, an organisation which despoils the man who works of all property other than his arms, and denies him the least security in a reckless over-bidding that makes for his harm and to which he is bound to fall a prey.'[218] There can be no question that the interests of the proletariat were at the core of Sismondi's criticism, and he is making no false claims when he formulates his main tendency as follows: 'I am only working for means to secure the fruits of labour to those who do the work, to make the machine benefit the man who puts it in motion.'[219] When pressed for a closer definition of the social organisation towards which he aspires, it is true he hedges and confesses himself unable to do so: 'But what remains to be done is of infinite difficulty, and I certainly do not intend to deal with it to-day. I should like to convince the economists as completely as I am convinced myself that their science is going off on a wrong tack. But I cannot trust myself to be able to show them the true course; it is a supreme effort--the most my mind will run to--to form a conception even of the actual organisation of society. Yet who would have the power to conceive of an organisation that does not even exist so far, to see the future, since we are already hard put to it to see the present?'[220] Surely it was no disgrace to admit oneself frankly powerless to envisage a future beyond capitalism in the year 1820--at a time when capitalism had only just begun to establish its domination over the big industries, and when the idea of socialism was only possible in a most Utopian form. But, as Sismondi could neither advance beyond capitalism nor go back to a previous stage, the only course open to his criticism was a petty-bourgeois compromise. Sceptical of the possibility of developing fully both capitalism and the productive forces, he found himself under necessity to clamour for some moderation of accumulation, for some slowing down of the triumphant march of capitalism. That is the reactionary aspect of his criticism.[221] FOOTNOTES: [210] 'L'argent ne remplit qu'un office passager dans ce double échange. Les échanges terminés, il se trouve qu'on a payé des produits avec des produits. En conséquence, quand une nation a trop de produits dans un genre, le moyen de les écouler est d'en créer d'un autre genre' (J. B. Say, _Traité d'Économie Politique_, Paris, 1803, vol. i, p. 154). [211] In fact, here again, Say's only achievement lies in having given a pompous and dogmatic form to an idea that others had expressed before him. As Bergmann points out, in his _Theory of Crises_ (Stuttgart, 1895), the work of Josiah Tucker (1752), Turgot's annotations to the French pamphlets, the writings of Quesnay, Dupont de Nemours, and of others contain quite similar observations on a natural balance, or even identity, between demand and supply. Yet the miserable Say, as Marx once called him, claims credit as the evangelist of harmony for the great discovery of the '_théorie des débouchés_', modestly comparing his own work to the discovery of the principles of thermo-dynamics, of the lever, and of the inclined plane. In the preface and table of contents, e.g. to the 6th edition of his _Traité_ (1841, pp. 51, 616) he says: 'The theory of exchange and of vents, such as it is developed in this work, will transform world politics.' The same point of view is also expounded by James Mill in his 'Commerce Defended' of 1808, and it is he whom Marx calls the real father of the doctrine of a natural equilibrium between production and demand. [212] Say in _Revue Encyclopédique_, vol. 23, July 1824, pp. 20 f. [213] _Nouveaux Principes_ ..., vol. i, p. 117. [214] Say, loc. cit., p. 21. [215] Say, loc. cit., p. 29. Say indicts Sismondi as the arch-enemy of bourgeois society in the following ranting peroration: 'It is against the modern organisation of society, an organisation which, by despoiling the working man of all property save his hands, gives him no security in the face of a competition directed towards his detriment. What! Society despoils the working man because it ensures to every kind of entrepreneur free disposition over his capital, that is to say his property! I repeat: there is nothing more dangerous than views conducive to a regulation of the employment of property' for 'hands and faculties ... are also property' (ibid., p. 30). [216] Sismondi, op. cit., pp. 462-3. [217] Ibid., p. 331. [218] Sismondi, op. cit., p. 432-3. [219] Ibid., p. 449. [220] Ibid., p. 448. [221] Marx, in his history of the opposition to Ricardo's school and its dissolution, makes only brief mention of Sismondi, explaining: 'I leave Sismondi out of this historical account, because the criticism of his views belongs to a part with which I can deal only after this treatise, the actual movement of capital (competition and credit)' (_Theorien über den Mehrwert_, vol. iii, p. 52). Later on, however, in connection with Malthus, he also deals with Sismondi in a passage that, on the whole, is comprehensive: 'Sismondi is profoundly aware of the self-contradiction of capitalist production; he feels that its forms, its productive conditions, spur on an untrammelled development of the productive forces and of wealth on the one hand, yet that these conditions, on the other, are only relative; that their contradictions of value-in-use and value-in-exchange, of commodity and money, of sale and purchase, of production and consumption, of capital and wage-labour, and so on, take on ever larger dimensions, along with the forward strides of the productive forces. In particular, he feels the fundamental conflict: here the untrammelled development of productive power and of a wealth which, at the same time, consists in commodities, must be monetised; and there the basis--restriction of the mass of producers to the necessary means of subsistence. He therefore does not, like Ricardo, conceive of the crises as merely incidental, but as essential, as eruptions of the immanent conflicts on ever grander scale and at determinate periods. Which faces him with the dilemma: is the state to put restrictions on the _productive forces_ to adapt them to the productive conditions, or upon the _productive conditions_ to adapt them to the _productive forces_? Frequently he has recourse to the past, becomes _laudator temporis acti_, and seeks to master the contradictions by a different regulation of income relative to capital, or of distribution relative to production, quite failing to grasp that the relations of distribution are nothing but the relations of production _sub alia specie_. He has a perfect picture of the contradictions immanent in bourgeois production, yet he does not understand them, and therefore fails also to understand the process of their disintegration. (And indeed, how could he, seeing this production was still in the making?--R.L.) And yet, his view is in fact grounded in the premonition that _new_ forms of appropriating wealth must answer to the productive forces, developed in the womb of capitalist production, to the material and social conditions of creating this wealth; that the bourgeois forms of appropriation are but transitory and contradictory, wealth existing always with contrary aspects and presenting itself at once as its opposite. Wealth is ever based on the premises of poverty, and can develop only by developing poverty' (ibid., p. 55). In _The Poverty of Philosophy_, Marx opposes Sismondi to Proudhon in sundry passages, yet about the man himself he only remarks tersely: 'Those, who, like Sismondi, wish to return to the true proportions of production, while preserving the present basis of society, are reactionary, since, to be consistent, they must also wish to bring back all the other conditions of industry of former times' (_The Poverty of Philosophy_, London, 1936, p. 57). Two short references to Sismondi are in _On the Critique of Political Economy_: once he is ranked, as the last classic of bourgeois economics in France, with Ricard in England; in another passage emphasis is laid on the fact that Sismondi, contrary to Ricardo, underlined the specifically social character of labour that creates value.--In the _Communist Manifesto_, finally, Sismondi is mentioned as the head of the petty-bourgeois school. _CHAPTER XIV_ MALTHUS At the same time as Sismondi, Malthus also waged war against some of the teachings of Ricardo. Sismondi, in the second edition of his work as well as in his polemics, repeatedly referred to Malthus as an authority on his side. Thus he formulated the common aims of his campaign against Ricardo in the _Revue Encyclopédique_: 'Mr. Malthus, on the other hand, has maintained in England, as I have tried to do on the Continent, that consumption is not the necessary consequence of production, that the needs and desires of man, though they are truly without limits, are only satisfied by consumption in so far as means of exchange go with them. We have affirmed that it is not enough to create these means of exchange, to make them circulate among those who have these desires and wants; that it can even happen frequently that the means of exchange increase in society together with a decrease in the demand for labour, or wages, so that the desires and wants of one part of the population cannot be satisfied and consumption also decreases. Finally, we have claimed that the unmistakable sign of prosperity in a society is not an increasing production of wealth, but an increasing demand for labour, or the offer of more and more wages in compensation for this labour. Messrs. Ricardo and Say, though not denying that an increasing demand for labour is a symptom of prosperity, maintained that it inevitably results from an increase of production. As for Mr. Malthus and myself, we regard these two increases as resulting from independent causes which may at times even be in opposition. According to our view, if the demand for labour has not preceded and determined production, the market will be flooded, and then new production becomes a cause of ruin, not of enjoyment.'[222] These remarks suggest far-reaching agreement, a brotherhood in arms of Sismondi and Malthus, at least in their opposition against Ricardo and his school. Marx considers the _Principles of Political Economy_, which Malthus published in 1820, an outright plagiarism of the _Nouveaux Principes_ which had been published the year before. Yet Sismondi and Malthus are frequently at odds regarding the problem with which we are here concerned. Sismondi is critical of capitalist production, he attacks it sharply, even denounces it, while Malthus stands for the defence. This does not mean that he denies its inherent contradictions, as Say or MacCulloch had done. On the contrary he raises them quite unmercifully to the status of a natural law and asserts their absolute sanctity. Sismondi's guiding principle is the interests of the workers. He aspires, though rather generally and vaguely, towards a thoroughgoing reform of distribution in favour of the proletariat. Malthus provides the ideology for those strata who are the parasites of capitalist exploitation, who live on ground rent and draw upon the common wealth, and advocates the allocation of the greatest possible portion of the surplus value to these 'unproductive consumers'. Sismondi's general approach is predominantly ethical, it is the approach of the social reformer. Improving upon the classics, he stresses, in opposition to them, that 'consumption is the only end of accumulation', and pleads for restricted accumulation. Malthus, on the contrary, bluntly declares that production has no other purpose than accumulation and advocates unlimited accumulation by the capitalists, to be supplemented and assured by the unlimited consumption of their parasites. Finally, Sismondi starts off with a critical analysis of the reproductive process, of the relation between capital and income from the point of view of society; while Malthus, opposing Ricardo, begins with an absurd theory of value from which he derives an equally absurd theory of surplus value, attempting to explain capitalist profits as an addition to the price over and above the value of commodities.[223] Malthus opposes the postulate that supply and demand are identical with a detailed critique in chapter vi of his _Definitions in Political Economy_.[224] In his _Elements of Political Economy_, James Mill had declared: 'What is it that is necessarily meant, when we say that the supply and the demand are accommodated to one another? It is this: that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour. Let this proposition be duly attended to, and all the rest is clear.--Thus, if a pair of shoes is produced with an equal quantity of labour as a hat, so long as a hat exchanges for a pair of shoes, so long the supply and demand are accommodated to one another. If it should so happen, that shoes fell in value, as compared with hats, which is the same thing as hats rising in value compared with shoes, this would simply imply that more shoes had been brought to market, as compared with hats. Shoes would then be in more than the due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason hats would be in less than the due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.'[225] Against such trite tautologies, Malthus marshals a twofold argument. He first draws Mill's attention to the fact that he is building without solid foundations. In fact, he argues, even without an alteration in the ratio of exchange between hats and shoes, there may yet be too great a quantity of _both_ in relation to the demand. This will result in both being sold at less than the cost of production plus an appropriate profit. 'But can it be said on this account', he asks, 'that the supply of hats is suited to the demand for hats, or the supply of shoes suited to the demand for shoes, when they are both so abundant that neither of them will exchange for what will fulfil the conditions of their continued supply?'[226] In other words, Malthus confronts Mill with the possibility of general over-production: '... when they are compared with the costs of production ... it is evident that ... they may all fall or rise at the same time'.[227] Secondly, he protests against the way in which Mill, Ricardo and company are wont to model their postulates on a system of barter: 'The hop planter who takes a hundred bags of hops to Weyhill fair, thinks little more about the supply of hats and shoes than he does about the spots in the sun. What does he think about, then? and what does he want to exchange his hops for? Mr. Mill seems to be of opinion that it would show great ignorance of political economy, to say that what he wants is money; yet, notwithstanding the probable imputation of this great ignorance, I have no hesitation in distinctly asserting, that it really is money which he wants....'[228] For the rest, Malthus is content to describe the machinery by which an excessive supply can depress prices below the cost of production and so automatically bring about a restriction of production, and _vice versa_. 'But this tendency, in the natural course of things, to cure a glut or a scarcity, is no ... proof that such evils have never existed.'[229] It is clear that in spite of his contrary views on the question of crises, Malthus thinks along the same lines as Ricardo, Mill, Say, and MacCulloch. For him, too, everything can be reduced to barter. The social reproductive process with its large categories and interrelations which claimed the whole of Sismondi's attention, is here completely ignored. In view of so many contradictions within the fundamental approach, the criticism of Sismondi and Malthus have only a few points in common: (1) Contrary to Say and the followers of Ricardo, they both deny the hypothesis of a pre-established balance of consumption and production. (2) They both maintain that not only partial but also universal crises are possible. But here their agreement ends. If Sismondi seeks the cause of crises in the low level of wages and the capitalists' limited capacity for consumption, Malthus, on the other hand, transforms the fact of low wages into a natural law of population movements; for the capitalists' limited capacity for consumption, however, he finds a substitute in the consumption of the parasites on surplus value such as the landed gentry and the clergy with their unlimited capacity for wealth and luxury. 'The church with a capacious maw is blest.' Both Malthus and Sismondi look for a category of consumers who buy without selling, in order to redeem capitalist accumulation and save it from a precarious position. But Sismondi needs them to get rid of the surplus product of society over and above the consumption of the workers and capitalists, that is to say, to get rid of the capitalised part of the surplus value. Malthus wants them as 'producers' of profit in general. It remains entirely his secret, of course, how the _rentiers_ and the incumbents of the state can assist the capitalists in appropriating their profits by buying commodities at an increased price, since they themselves obtain their purchasing power mainly from these capitalists. In view of these profound contrasts, the alliance between Malthus and Sismondi does not go very deep. And if Malthus, as Marx has it, distorts Sismondi's _Nouveaux Principes_ into a Malthusian caricature, Sismondi in turn stresses only what is common to them both and quotes Malthus in support, giving the latter's critique of Ricardo a somewhat Sismondian cast. On occasion, no doubt, Sismondi actually succumbs to the influence of Malthus; for instance, he takes over the latter's theory of reckless state expenditure as an emergency measure in aid of accumulation and so becomes involved in contradictions with his own initial assumptions. On the whole, Malthus neither rendered an original contribution to the problem of reproduction, nor even grasped it fully. In his controversy with the followers of Ricardo, he operated with the concepts of simple commodity circulation, just as they did in their controversy with Sismondi. His quarrel with that school turns on the 'unproductive consumption' by the parasites of the surplus value; it is not a quarrel about the social foundations of capitalist reproduction. Malthus' edifice tumbles to the ground as soon as the absurd mistakes in his theory of profits are uncovered. Sismondi's criticism remains valid, and his problems remain unsolved even if we accept Ricardo's theory of value with all its consequences. FOOTNOTES: [222] _Nouveaux Principes_ ..., vol. ii, p. 409. [223] Cf. Marx, _Theorien über den Mehrwert_, vol. iii, pp. 1-29, which gives a detailed analysis of Malthus' theory of value and profits. [224] Dedicated to James Mill and published in 1827. [225] James Mill, _Elements of Political Economy_ (3rd edition, London, 1826), pp. 239-40. [226] Malthus. _Definitions in Political Economy_ (London, 1827), p. 51. [227] Ibid., p. 64. [228] Malthus, _Definitions in Political Economy_ (London, 1827), pp. 53-4. [229] Ibid., pp. 62-3. _SECTION TWO_ HISTORICAL EXPOSITION OF THE PROBLEM SECOND ROUND THE CONTROVERSY BETWEEN RODBERTUS AND VON KIRCHMANN _CHAPTER XV_ v. KIRCHMANN'S THEORY OF REPRODUCTION The second theoretical polemics about the problem of accumulation was also started by current events. If the first English crisis and its attendant misery of the working class had stimulated Sismondi's opposition against the classical school, it was the revolutionary working-class movement arisen since which, almost twenty-five years later, provided the incentive for Rodbertus' critique of capitalist production. The risings of the Lyons silk weavers and the Chartist movement in England were vastly different from the shadowy spectres raised by the first crisis, and the ears of the bourgeoisie were made to ring with their criticism of the most wonderful of all forms of society. The first socio-economic work of Rodbertus, probably written for the _Augsburger Allgemeine Zeitung_ in the late thirties but not published by that paper, bears the significant title, _The Demands of the Working Classes_,[230] and begins as follows: 'What do the working classes want? Will the others be able to keep it from them? Will what they want be the grave of modern civilisation? Thoughtful people have long realised that a time must come when history would put this question with great urgency. Now, the man in the street has learned it too, from the Chartist meetings and the Birmingham scenes.' During the forties, the leaven of revolutionary ideas was most vigorously at work in France in the formation of the various secret societies and socialist schools of the followers of Proudhon, Blanqui, Cabet, Louis Blanc, etc. The February revolution and the June proclamation of the 'right to work' led to a first head-on clash between the two worlds of capitalist society--an epoch-making eruption of the contradictions latent in capitalism. As regards the other, visible form of those contradictions--the crises--the available data for observation at the time of the second controversy were far more comprehensive than in the early twenties of the century. The dispute between Rodbertus and v. Kirchmann took place under the immediate impact of the crises in 1837, 1839, 1847, and even of the first world crisis in 1857--Rodbertus writing his interesting pamphlet _On Commercial Crises and the Mortgage Problem of the Landowners_[231] in 1858. Thus the inherent contradictions of capitalist society meeting his eyes were in strident discord with the doctrine of harmony held by the English classics and their vulgarisers both in England and on the Continent, quite unlike any critique in the times when Sismondi had raised his voice in warning. Incidentally, a quotation from Sismondi in Rodbertus' first writing proves that the former's strictures immediately influenced Rodbertus. He was thus familiar with contemporary French writings against the classical school, though perhaps less so with the far more numerous English literature. There is no more than this flimsy support for the myth of the German professors about the so-called 'priority' of Rodbertus over Marx in the 'foundation of socialism'. Accordingly, Professor Diehl writes in his article on Rodbertus in _Handwörterbuch der Staatswissenschaften_: 'Rodbertus must be considered the real founder of scientific socialism in Germany, since in his writings between 1839 and 1842, even before Marx and Lassalle, he provided a comprehensive socialist system, a critique of Adam Smith's doctrine, new theoretical foundations and proposals for social reform.' This piece of god-fearing, pious righteousness comes from the second edition of 1901, after all that had been written by Engels, Kautsky and Mehring to destroy this learned legend, and in spite of it. Quite inevitably, of course, and proof against any evidence to the contrary, however weighty, it was only right in the eyes of all the learned German economists that the palm of 'priority' should be wrested from Marx, the revolutionary anarchist, by Rodbertus, the 'socialist' with monarchist, Prussian and nationalist leanings, the man who believed in communism five hundred years from now, but for the present supported a steady exploitation rate of 200 per cent. However, we are interested in another aspect of Rodbertus' analysis. The same Professor Diehl continues his eulogy as follows: 'Rodbertus was not only a pioneer of socialism; political economy as a whole owes much stimulation and furtherance to him; economic theory in particular is indebted to him for the critique of classical economics, for the new theory of the distribution of income, for the distinction between the logical and historical categories of capital, and so on.' Here we shall deal with these latter achievements of Rodbertus, especially with the 'and so on'. Rodbertus' decisive treatise, _Towards the Understanding of Our Politico-Economic Conditions_[232] of 1842, set the ball rolling. v. Kirchmann replied in _Demokratische Blätter_ with two essays--_On the Social Aspects of Ground Rent_[233] and _The Society of Barter_[234]--and Rodbertus parried in 1850 with his _Letters on Social Problems_.[235] Thus the discussion entered the same theoretical arena where Malthus-Sismondi and Say-Ricardo-MacCulloch had fought out their differences thirty years earlier. In his earliest writings, Rodbertus had already expressed the thought that the wages of labour present an ever diminishing part of the national product in modern society where the productivity of labour is increasing. He claimed this to be an original idea, and from that moment until his death thirty years later he did nothing but reiterate it and formulate it in various ways. This 'declining wage rate' is for him the root of all evils to be found in modern society, in particular of pauperism and the crises, whose combination he calls 'the social problem of our times'. v. Kirchmann does not agree with this explanation. He traces pauperism back to the effects of a rising ground rent; crises, on the other hand, to a lack of markets. About the latter especially he says: 'The greatest part of social ills is caused not by defects of production but by a lack of markets for the products ... the more a country can produce, the more means it has for satisfying every need, the more it is exposed to the danger of misery and want.'--The labour-problem is here included as well, for 'the notorious right to work ultimately reduces to the question of markets'. 'We see', he concludes, 'that the social problem is almost identical with the problem of markets. Even the ills of much-abused competition will vanish, once markets are secure; its advantages alone will remain. There will remain a spirit of rivalry to supply good and cheap commodities, but the life-and-death struggle will disappear which is caused only by insufficient markets.'[236] The difference between the points of view of Rodbertus and v. Kirchmann is evident. Rodbertus sees the root of the evil in a faulty distribution of the national product, and v. Kirchmann in the limitations of the markets for capitalist production. Notwithstanding all the confusion in his expositions, especially in his idealist vision of a capitalist competition content with a laudable rivalry for better and cheaper commodities, and also in his conception of the 'notorious right to work' as a problem of markets, v. Kirchmann up to a point still shows more understanding for the sore spot of capitalist production, i.e. the limitations of its market, than Rodbertus who clings to distribution. Thus it is v. Kirchmann who now takes up the problem which Sismondi had originally put on the agenda. Nevertheless, he by no means agrees with Sismondi's elucidation and solution of the problem, siding rather with the opponents of the latter. Not only does he accept Ricardo's theory of ground rent, and Adam Smith's dogma that 'the price of the commodity is composed of two parts only, of the interests on capital and the wages of labour' (v. Kirchmann transforms the surplus value into 'interest on capital'); he also subscribes to the thesis of Say and Ricardo that products are only bought with other products and that production creates its own demand, so that if one side appears to have produced too much, it only means there was not enough production on the other. v. Kirchmann, we see, faithfully follows the classics, if in a somewhat 'German edition'. He begins by arguing, e.g., that Say's law of a natural balance between production and demand 'still does not give a comprehensive picture of reality', and adds: 'Commerce involves yet further hidden laws which prevent this postulated order from obtaining in complete purity. They must be discovered if we are to explain the present flooding of the market, and their discovery might perhaps also show us the way to avoid this great evil. We believe that there are three relations in the modern system of society which cause these conflicts between Say's indubitable law and reality.' These relations are (1) 'too inequitable a distribution of the products'--here, as we see, v. Kirchmann somewhat approximates to Sismondi's point of view; (2) the difficulties which nature puts in the way of human labour engaged in production; and (3) finally, the defects of commerce as a mediator between production and consumption. Disregarding the last two obstacles to Say's law, we shall now consider v. Kirchmann's reasoning of his first point. 'The first relation', he explains, 'can be put more briefly as too low a wage of labour, which is thus the cause of a slump. Those who know that the price of commodities is composed of two parts only, of the interest on capital and the wage of labour, might consider this a startling statement; if the wage of labour is low, prices are low as well, and if one is high, so is the other.' (We see v. Kirchmann accepts Smith's dogma even in its most misleading form: the price is not _resolved_ into wage of labour and surplus value, but is _composed_ of them as a mere sum--a view in which Adam Smith strayed furthest from his own theory of the value of labour.) 'Wage and price thus are directly related, they balance each other. England only abolished her corn laws, her tariffs on meat and other victuals, in order to cause wages to fall and thus to enable her manufacturers to oust all other competitors from the world markets by means of still cheaper commodities. This, however, only holds good up to a point and does not affect the ratio in which the product is distributed among the workers and the capitalists. Too inequitable a distribution among these two is the primary and most important cause why Say's law is not fulfilled in real life, why the markets are flooded although there is production in all branches.' v. Kirchmann gives a detailed illustration of this statement. Using the classical method, he takes us, of course, to an imaginary isolated society which makes an unresisting, if thankless, object for the experiments of political economy. v. Kirchmann suggests we should imagine a place (_Ort_) which comprises 903 inhabitants, no more, no less, _viz._ three entrepreneurs with 300 workers each. _Ort_ is to be able to satisfy all needs by its own production--in three establishments, that is to say, one for clothing, a second for food, lighting, fuel and raw materials, and a third for housing, furniture and tools. In each of these three departments, the 'capital together with the raw materials' is to be provided by the entrepreneur, and the remuneration of the workers is to be so arranged that the workers obtain as their wage one half of the annual produce, the entrepreneur retaining the other half 'as interest on capital and profits of the enterprise'. Every business is to produce just enough to satisfy all the needs of the 903 inhabitants. _Ort_ accordingly has 'all the conditions necessary for general well-being', and everybody can therefore tackle his work with courage and vigour. After a few days, however, joy and delight turn into a universal misery and gnashing of teeth: something has happened on v. Kirchmann's Island of the Blessed which was no more to be expected than for the skies to fall: an industrial and commercial crisis according to all modern specifications has broken out! Only the most essential clothing, food and housing for the 900 workers has been produced, yet the warehouses of the three entrepreneurs are full of clothes and raw materials, and their houses stand empty: they complain of a lack of demand, while the workers in turn complain that their wants are not fully satisfied. What has gone wrong? Could it be that there is too much of one kind of produce and too little of another, as Say and Ricardo would have it? Not at all, answers v. Kirchmann. Everything available in _Ort_ in well-balanced quantities, just enough to satisfy all the wants of the community. What, then, has thrown a spanner into the works, why the crisis? The obstruction caused by distribution alone--but this must be savoured in v. Kirchmann's own words: 'The obstacle, why nevertheless no smooth exchange takes place, lies solely and exclusively in the distribution of these products. They are not distributed equitably among all, but the entrepreneurs retain half of them for themselves as interest and profit, and only give half to the workers. It is clear that the worker in the clothing department can exchange, against half of his product, only half of the food, lodging, etc., that has been produced, and it is clear that the entrepreneur cannot get rid of the other half since no worker has any more products to give in exchange. The entrepreneurs do not know what to do with their stocks, the workers do not know what to do for hunger and nakedness.' Nor does the reader, we might add, know what to do with v. Kirchmann's constructions. His model is so childish that every advance leads deeper into the maze. First of all, there seems to be no reason whatever why, and to what purpose, v. Kirchmann should devise this splitting-up of production into three parts. If analogous examples by Ricardo and MacCulloch usually confront tenant farmers and manufacturers, that is presumably only inspired by the antiquated Physiocrat conception of social reproduction which Ricardo had adopted, although his own theory of value as against the Physiocrats deprived it of all meaning, and although Adam Smith had already made a good start in considering the real material foundations of the social reproductive process. Still, we have seen that the tradition of distinguishing between agriculture and industry as the foundation of reproduction was kept up in economic theory until Marx introduced his epoch-making distinction of the two productive departments in society for producer and consumer goods. v. Kirchmann's three departments, however, have no real significance at all. Obviously, no material consideration of reproduction can have been responsible for this supremely arbitrary division which jumbles up tools and furniture, raw materials and food, but makes clothing a department in its own right. One might as well postulate one department for food, clothing and housing, another for medicines and a third for tooth brushes. v. Kirchmann's primary concern, no doubt, is with the social division of labour; hence the assumption of as nearly equal quantities of products as possible in the transactions of exchange. Yet this exchange, on which the argument turns, plays no part at all in v. Kirchmann's example since it is not the value which is distributed but the quantities of products, the bulk of use-values as such. In this intriguing _Ort_ of v. Kirchmann's imagining, again, the products are distributed first, and only afterwards, when the distribution is accomplished, is there to be universal exchange, whereas on the solid ground of capitalist production it is, as we know, the exchange which inaugurates the distribution of the product and serves as its agent. Besides, the queerest things happen in v. Kirchmann's distributive system: 'As we all know', the prices of the products, i.e. the price of the aggregate product of society, consist of _v + s_, of wage and capital interest alone--so that the aggregate product must be distributed entirely among workers and entrepreneurs; but then unhappily v. Kirchmann dimly remembers the fact that production needs things like raw materials and tools. So _Ort_ is provided with raw materials furtively introduced among the food, and with tools among the furniture. But now the question arises: who is to get these indigestible items in the course of general distribution? the workers as wages, or the capitalists as profits of enterprise? They could hardly expect a warm welcome from either. And on such feeble premises the star turn of the performance is to take place: the exchange between workers and entrepreneurs. The fundamental transaction of exchange in capitalist production, the exchange between workers and capitalists, is transformed by v. Kirchmann from an exchange between living labour and capital into an exchange of products. Not the first act, that of exchanging labour power for variable capital, but the second, the realisation of the wage received from the variable capital is put at the centre of the whole machinery, the entire commodity exchange of capitalist society being in turn reduced to this realisation of the labour-wage. And the crowning glory is that this exchange between workers and entrepreneurs, the king-pin of all economic life, dissolves into nothing on a closer scrutiny--it does not take place at all. For as soon as all workers have received their natural wages in the form of half their product, an exchange will be possible only among the workers themselves; every worker will only keep one-third of his wage consisting exclusively of either clothing, food or furniture, as the case may be, and realise the remainder to equal parts in the two other product-groups. The entrepreneurs no longer come into this at all; the three of them are left high and dry with their surplus value: half the clothing, furniture and food that has been produced by the society; and they have no idea what to do with the stuff. In this calamity of v. Kirchmann's creation, even the most generous distribution of the product would be of no use. On the contrary, if larger quantities of the social product were allotted to the workers, they would have even less to do with the entrepreneurs in this transaction: all that would happen is that the exchange of the workers among themselves would increase in volume. The surplus product which the entrepreneurs have on their hands would then contract, it is true, though not indeed because the exchange of the surplus product would be facilitated, but merely because there would be less surplus value altogether. Now as before, an exchange of the social product between workers and entrepreneurs is out of the question. One must confess that the puerile and absurd economics here crammed into comparatively little space exceed the bounds even of what might be put up with from a Prussian Public Prosecutor--such having been v. Kirchmann's profession, though he must be credited with having incurred disciplinary censure on two occasions. Nevertheless, after these unpromising preliminaries, v. Kirchmann goes right to the root of the matter. He admits that his assuming the surplus product in a concrete use-form is the reason why the surplus value cannot be usefully employed. As a remedy he now allows the entrepreneurs to devote half of the social labour appropriated as surplus value to the production not of common goods but of luxuries. The 'essence of luxury-goods being that they enable the consumer to use up more capital and labour power than in the case of ordinary goods', the three entrepreneurs manage to consume by themselves in the form of laces, fashionable carriages and the like, their entire half-share in all the labour performed by the society. Now nothing unsaleable is left, and the crisis is happily avoided; over-production is made impossible once and for all, capitalists and workers alike are safe; the name of v. Kirchmann's magic cure which has brought all these benefits to pass, and which re-establishes the balance between production and consumption, being: luxury. In other words, the capitalists who do not know what to do with their surplus value which they cannot realise, are advised by the dear fellow--to eat it up! As it happens, luxury is in fact an old familiar invention of capitalist society, and still there are recurrent crises. Why is this? v. Kirchmann enlightens us: 'The answer can only be that in real life sluggish markets are entirely due to the fact that there are still _not enough_ luxuries, or, in other words, that the capitalists, i.e. those who can afford to consume, still consume too little.' This misguided abstinence of the capitalists, however, results from a bad habit which political economists have been ill-advised to encourage: the desire to save for purposes of 'productive consumption'. In other words: crises are caused by accumulation. This is v. Kirchmann's principal thesis. He proves it again by means of a touchingly simple example: 'Let us assume conditions which economists praise as more favourable,' he says, 'where the entrepreneurs say: we do not want to spend our income to the last penny in splendour and luxury, but will re-invest it productively. What does this mean? Nothing but the setting-up of all sorts of productive enterprises for delivering new goods of such a kind that their sale can yield interest (v. Kirchmann means profits) on a capital saved and invested by the three entrepreneurs from their unconsumed revenues. Accordingly, the three entrepreneurs decide to consume only the produce of a hundred workers, that is to say to restrict their luxury considerably, and to employ the labour power of the remaining 350 workers together with the capital they use for setting up new productive enterprises. The question now arises in what kind of productive enterprises these funds are to be used.' Since, according to v. Kirchmann's assumption, constant capital is not reproduced, and the entire social product consists entirely of consumer goods, 'the three entrepreneurs can only choose again between enterprises for the manufacture of ordinary goods or for that of luxuries'. In this way, however, the three entrepreneurs will be faced with the already familiar dilemma: if they turn out 'common goods', there will be a crisis, since the workers lack means to purchase these additional provisions, having been bought off with half the value of their produce. If they go in for luxuries, they will have to consume them alone. There is no other possibility. The dilemma is not even affected by foreign trade which would 'only increase the range of commodities on the home market' or increase productivity. 'These foreign commodities are therefore either common goods--then the capitalist will not, and the worker, lacking the means, cannot buy them, or they are luxuries, in which case the worker, of course, is even less able to buy them, and the capitalist will not want them either because of his efforts to save.' This argument, however primitive, yet shows quite nicely and clearly the fundamental conception of v. Kirchmann and the nightmare of all economic theory: in a society consisting exclusively of workers and capitalists, accumulation will be impossible. v. Kirchmann is therefore frankly hostile to accumulation, 'saving', 'productive consumption' of the surplus value, and strongly attacks these errors advocated by classical economics. His gospel is increasing luxury together with the productivity of labour as the specific against crises. We see that v. Kirchmann, if he grotesquely aped Ricardo and Say in his theoretical assumptions, is a caricature of Sismondi in his final conclusions. Yet it is imperative to get v. Kirchmann's approach to the problem perfectly clear, if we are to understand the import of Rodbertus' criticism and the outcome of the whole controversy. FOOTNOTES: [230] _Die Forderungen der arbeitenden Klassen._ [231] _Die Handelskrisen und die Hypothekennot der Grundbesitzer._ [232] _Zur Erkenntnis unserer staatswirtschaftlichen Zustände._ [233] _Über die Grundrente in sozialer Beziehung._ [234] _Die Tauschgesellschaft._ [235] _Soziale Briefe._ [236] Rodbertus quotes v. Kirchmann's arguments explicitly and in great detail. But according to his editors, no complete copy of _Demokratische Blätter_ with the original essay is obtainable. _CHAPTER XVI_ RODBERTUS' CRITICISM OF THE CLASSICAL SCHOOL Rodbertus digs deeper than v. Kirchmann. He looks for the roots of evil in the very foundations of social organisation and declares bitter war on the predominant Free Trade school--not against a system of unrestricted commodity circulation or the freedom of trade which he fully accepts, but against the Manchester doctrine of _laissez-faire_ within the internal social relations of economy. At that time, after the period of storm and stress of classical economics, a system of unscrupulous apologetics was already in full sway which found its most perfect expression in the 'doctrine of harmony' of M. Frédéric Bastiat, the famous vulgarian and idol of all Philistines, and quite soon the various Schultzes were to flourish as commonplace, German imitations of the French prophet of harmony. Rodbertus' strictures are aimed at these unscrupulous 'peddlers of free trade'. In his first _Letter on Social Problems_[237] he exclaims: 'Because of their paltry incomes, five-sixths of the population are not only deprived of most of the benefits of civilisation, but are in constant danger of the most terrible outbreaks of real distress to which they sometimes succumb. Yet they are the creators of all the wealth of the society. Their labours begin at dawn and end at dusk, continuing even after night has fallen--but no exertion can change this fate; they cannot raise their income, and only lose that little leisure which ought to remain nowadays for the improvement of their minds. Hitherto it might have seemed as if all this suffering were necessary to the progress of civilisation, but now that a series of the most wonderful discoveries and inventions have increased human labour power more than a hundredfold, new prospects of changing these grim conditions are suddenly revealed. As a result, the wealth and assets of a nation increase at a growing rate as compared with the population. Could anything be more natural, I ask, or more justly demanded, than that this increase should also somehow benefit the creators of this old and new wealth? that their incomes should be raised or their working-hours shortened, or that they might join in increasing numbers the ranks of the lucky ones, privileged to reap the fruits of labour? Yet state economy, or better, national economy has only achieved the opposite result. Increasing poverty of these classes goes together with increasing wealth of the nation, there is even need of special legislation, lest the working day become longer, and finally, the working classes swell in number out of proportion with the others. Even that is not enough! The hundredfold increase of labour efficiency which was powerless to relieve five-sixths of the population, even threatens periodically the remaining sixth of the nation and thus society as a whole.' 'What contradictions in the economic sphere in particular! And what contradictions in the social sphere in general! The wealth of society is growing, and this growth is accompanied by a growth of poverty.--The creative efficiency of the means of production is increasing, and the consequence is that they are scrapped. Social conditions demand that the material position of the working classes should be raised to the level of their political status, and economic conditions, by way of answer, depress them further. Society needs the unrestricted growth of wealth, and contemporary leaders of production must create restrictions, in order to discourage poverty. In a single respect alone is there harmony: just as wrong as the conditions is the authoritative section of the society with its inclination to look for the root of the evil everywhere except in the right place. This egotism, which only too often dons the scholar's gown, also accuses the vices of the workers of being the cause of poverty. The responsibility for the crimes committed against them by all-powerful facts is ascribed to their alleged discontent and shiftlessness, and where even such egotism cannot close its eyes to their innocence, it makes an elaborate dogma of the "necessity of poverty". Unremittingly, it exhorts the workers only to work and to pray, impresses upon them the duty of abstinence and economy, and at best infringes upon their rights by the institution of compulsory saving, adding to the misery of the workers. It does not see that a blind force of commerce has transformed the prayer for work into the curse of enforced unemployment, that ... abstinence is impossible or cruel, and that, lastly, morals always remain ineffective if commended by those of whom the poet says that they drink wine in secret but preach water in public.'[238] Thirty years after Sismondi and Owen, twenty years after the indictment made by the English socialists, the followers of Ricardo, and last but not least, after the publication of the Communist Manifesto, such bold words alone cannot claim to break new ground. What matters above all now is the theoretical foundation of this indictment. Rodbertus here proposed a complete system which can be reduced to the following simple statements. Owing to the laws of an economy left to its own devices, the high level of labour productivity achieved by history, together with the institutions of positive law, that is to say the right of private ownership, a whole series of wrong and unethical phenomena had emerged: (1) In the place of 'normal', 'constituted' value we have exchange value, and accordingly coined money instead of a proper 'paper' or 'labour' currency which would genuinely correspond to the concept of money. The first principle is that all economic goods are products of labour, or, as we might put it, that labour alone is creative. This statement, however, does not imply that the value of the product must always equal the cost of labour, or that, in other words, value is even now measured in terms of labour. The truth is rather 'that this still has not become a _fact_, but is only an _idea_ of political economy'.[239] 'If the value could be constituted in accordance with the labour expended on the product, we might imagine a kind of money which would be, as it were, a leaf torn from the public account-book, a receipt written on the most rubbishy material, on rags, which everyone would receive for the value he has produced, and which he would realise as a voucher for an equivalent part of the national product subsequently under distribution.... If, however, for some reason or another, it is _impossible_ or _not yet possible_ to establish this value, money as such must still retain the value it is designed to liquidate; made of an intrinsically valuable commodity like gold or silver, it has to represent a pledge or pawn of the same value.'[240] 'As soon as capitalist commodity production has come into existence, everything is turned upside down: there can no longer be a constituted value, since it can only be exchange value',[241] and, 'since the value cannot be constituted, money cannot be _purely_ money, it cannot fully conform to its concept'.[242] In an equitable exchange, the exchange value of the products would have to equal the quantity of labour needed for producing them, and an exchange of products would always mean an exchange of equal quantities of labour. Even assuming, however, that everybody produced just those use-values which another person requires, yet, 'since we are here concerned with human discernment and human volition, there must always be for a start a correct calculation, adjustment and allocation of the labour quantities contained in the products for exchange, there must be a _law_ to which the facts will conform'.[243] It is well-known that Rodbertus, in his discovery of 'constituted value', laid great stress on his priority to Proudhon which we shall gladly concede him. Marx, in his _Poverty of Philosophy_, and Engels in his preface to it, have comprehensively shown that this 'concept' is a mere phantom, still used in theory but in practice buried already in England well before Rodbertus' time, that it is but a Utopian distortion of Ricardo's doctrine of value. We therefore need not deal further with this 'music of the future, performed on a toy trumpet'. (2) The 'economy of exchange' resulted in the 'degradation' of labour to a commodity, the labour wage being determined as an item of expenditure (_Eichmann's der Arbeit_) instead of representing a fixed rate of the national product. By a daring jump in history, Rodbertus derives his wages law indirectly from slavery and regards the specific traits which a capitalist production of commodities imposes on exploitation as no more than a lying deception against which he fulminates from a moral point of view. 'So long as the producers themselves remained the property of those who were not producing, so long as slavery was in existence, it was the advantage of the "masters" alone which unilaterally determined the volume of this share (of the workers). With the producers attaining full liberty of person, if nothing more as yet, both parties agree on the wage in advance. The wage, in modern terminology, is the object of a "free contract", that is to say, an object of competition. Labour is therefore as a matter of course subjected to the same laws of exchange as its products: labour itself acquires exchange value; the size of the wage depends on the effects of supply and demand.' Rodbertus, after having thus turned everything upside down, after deriving the exchange value of labour from competition, now immediately derives its value from its exchange value. 'Under the laws of exchange value, labour, like produced goods, comes to have a kind of "cost value" which exercises some magnetic effects upon its exchange value, the amount of the labour wage. It is that particular amount of payment which is necessary for the "maintenance" of labour, in other words, which enables labour to continue, if only in the persons of its progeny--it is the so-called "minimum of subsistence".' For Rodbertus, however, this is not a statement of objective economic laws, but merely an object for moral indignation. He calls the thesis of the classical school, that labour is worth no more than the wages it can command, a 'cynical' statement, and he is determined to expose the 'string of lies' leading to this 'crude and unethical' conclusion.[244] 'It was a degrading view to estimate the wages of labour in accordance with the "necessary subsistence", like so many machines to be kept in repair. Now that labour, the fountainhead of all commodities, has itself become a commodity of exchange, it is no less degrading to speak of its "natural price", of its "costs", just as we speak of the natural price and costs of its product, and to include this natural price, these costs, in the amount of goods that is necessary to call forth a continuous flow of labour on the market.' This commodity character of labour power, however, and the corresponding determination of its value, are nothing but a malicious misrepresentation of the Free Trade school. Like the good Prussian he was, Rodbertus put capitalist commodity production as a whole in the dock, as offending against the obtaining constitutional law, instead of pointing out its inherent contradiction, the conflict between determining the value of labour and determining the value _created by_ labour, as the English disciples of Ricardo had done. 'Stupid beyond words', he exclaims, 'is the dualist conception of those economists who would have the workers, as far as their legal status is concerned, join in deciding the fate of society, and would for all that, have these same workers from an economic point of view, always treated as mere commodities!'[245] Now it only remains to find out why the workers put up with such stupid and blatant injustice--an objection which Hermann for instance raised against Ricardo's theory of value. Rodbertus is ready with this answer: 'What were the workers to do after their emancipation other than to agree to these regulations? Imagine their position: when the workers were freed, they were naked or in rags, they had nothing but their labour power. The abolition of slavery or serfdom, moreover, rescinded the master's legal or moral obligation to feed them and care for their needs. Yet these needs remained, they still had to live. How, then, could their labour power provide them with a living? Were they simply to grab some of the capital existing in the society for their maintenance? The capital of society was already in the hands of other people, and the organs of the "law" would not have tolerated such a step. What, then, could the workers have done? Only these alternatives were before them: either to overthrow the law of society or to return, under roughly the same conditions as before, to their former masters, the owners of the land and of capital, and to receive as wages what was formerly doled out to them to keep them fed.'[246] It was fortunate for mankind and the Prussian state that the workers were 'wise' enough not to overthrow civilisation and preferred to submit to the 'base demands' of their 'former masters'. This, then, is the origin of the capitalist wage system, of the wages law as 'a kind of slavery' resulting from an abuse of power on the part of the capitalists, and from the precarious position and the meek acquiescence on the part of the proletariat--if we are to believe the highly original explanations of that very Rodbertus whose theories Marx is reputed to have 'plagiarised'. Let Rodbertus claim 'priority' in this particular theory of value without challenge, seeing that English socialists and other social critics had already given far less crude and primitive analyses of the wage-system. The singular point about it all is that Rodbertus' display of moral indignation about the origin and the economic laws of the wages system does not lead up to the demand for doing away with this abominable injustice, the 'dualism stupid beyond words'. Far from it! He frequently reassures his fellow-men that he does not really mean anything very serious by roaring--he is no lion fell, only one Snug the joiner. Indeed, an ethical theory of the wages law is necessary only to achieve a further conclusion: (3) Since the 'laws of exchange value' determine the wage, an advance in labour productivity must bring about an ever declining share in the product for the workers. Here we have arrived at the Archimedean fulcrum of Rodbertus' system. This 'declining wage rate' is his most important 'original' discovery on which he harps from his first writings on social problems (probably in 1839) until his death, and which he 'claims' as his very own. This conception, for all that, was but a simple corollary of Ricardo's theory of value and is contained implicit in the wages fund theory which dominated bourgeois economics up to the publication of Marx's _Capital_. Rodbertus nevertheless believed that this 'discovery' made him a kind of Galileo in economics, and he refers to his 'declining wage rate' as explaining every evil and contradiction in capitalist economy. Above all, he derives from the declining wage rate the phenomenon of pauperism which, together with the crises, in his opinion constitutes the social question. It would be as well to draw the attention of contemporaries, 'out for Marx's blood', to the fact that it was not Marx but Rodbertus, a man much nearer their own heart, who set up a whole theory of progressive poverty in a very crude form, and that he, unlike Marx, made it the very pivot, not just a symptom, of the entire social problem. Compare for instance his argument in his first _Letter on Social Problems_ to v. Kirchmann on the absolute impoverishment of the working class. The 'declining wage rate' must serve in addition to explain the other fundamental phenomena of the social problem--the crises. In this connection Rodbertus tackles the problem of balancing consumption with production, touching upon the whole lot of cognate controversial issues which had already been fought out between the schools of Sismondi and Ricardo. Rodbertus' knowledge of crises was of course based upon far more material evidence than that of Sismondi. In his first _Letter on Social Problems_ he already gives a detailed description of the four crises in 1818-19, 1825, 1837-9 and 1847. Since his observations covered a much longer period, Rodbertus could by and large gain a much deeper insight into the essential character of crises than his predecessors. As early as 1850 he formulated the periodical character of the crises which recur at ever shorter intervals and at the same time with ever increasing severity: 'Time after time, these crises have become more terrible in proportion with the increase in wealth, engulfing an ever greater number of victims. The crisis of 1818-19, although even this caused panic in commerce and inspired misgivings in economics, was of small importance compared to that of 1825-6. The first crisis had made such inroads on the capital assets of England that the most famous economists doubted whether complete recovery could ever be made. Yet it was eclipsed by the crisis of 1836-7. The crises of 1839-40 and 1846-7 wrought even greater havoc than previous ones.'--'According to recent experiences, however, the crises recur at ever shorter intervals. There was a lapse of 18 years between the first and the third crisis, of 14 years between the second and the fourth, and of only 12 years between the third and the fifth. Already the signs are multiplying that a new disaster is imminent, though no doubt the events of 1848 put off the catastrophe.'[247] Rodbertus remarks that an extraordinary boom in production and great progress in industrial technique always are the heralds of a crisis. 'Every one of them [of the crises] followed upon a period of outstanding industrial prosperity.'[248] From the crises in history he demonstrates that 'they occur only after a considerable increase of productivity'.[249] Rodbertus opposes what he terms the vulgar view which conceives of crises as mere disturbances in the monetary and credit system, and he criticises the whole of Peel's currency legislation as an error of judgment, arguing the point in detail in his essay _On Commercial Crises and the Mortgage Problem_. There he makes the following comment among others: 'We would therefore deceive ourselves if we were to regard commercial crises merely as crises of the monetary, banking, or credit system. This is only their outer semblance when they first emerge.'[250] Rodbertus also shows a remarkably acute grasp of the part played by foreign trade in the problem of crises. Just like Sismondi, he states the necessity of expansion for capitalist production, but he simultaneously emphasises the fact that the periodical crises are bound to grow in volume. 'Foreign trade', he says, 'is related to slumps only as charity is related to poverty. They ultimately only enhance one another.'[251] And further: 'The only possible means of warding off further outbreaks of crises is the application of the two-edged knife of expanding foreign markets. The violent urge towards such expansion is largely no more but a morbid irritation caused by a sickly organ. Since one factor on the home market, productivity, is ever increasing, and the other factor, purchasing power, remains constant for the overwhelming majority of the population, commerce must endeavour to conjure up a similarly unlimited amount of purchasing power on the foreign market.'[252] In this way, the irritation may be soothed to some extent so that at least there will not be a new outbreak of the calamity right away. Every foreign market opened defers the social problem in a like manner. Colonisation of primitive countries would have similar effects: Europe rears a market for herself in places where none had been before. Yet such a medicine would essentially do no more than appease the ill. As soon as the new markets are supplied, the problem will revert to its former state--a conflict between the two factors: limited purchasing power versus unlimited productivity. The new attack would be warded off the small market only to re-appear, in even wider dimensions and with even more violent incidents, on a larger one. And since the earth is finite and the acquisition of new markets must some time come to an end, the time will come when the question can no longer be simply adjourned. Sooner or later, a definite solution will have to be found.'[253] Rodbertus also recognises the anarchical character of capitalist private enterprise to be conducive to crises, but only as one factor among many, seeing it as the source of a particular type of crises, not as the real cause of crises in general. About the crises at v. Kirchmann's _Ort_, e.g., he says: 'I maintain that a slump of this kind does not occur in real life. The market of to-day is large, there are countless wants and many branches of production, productivity is considerable and the data of commerce are obscure and misleading. The individual entrepreneur does not know how much others are producing, and so it may easily happen that he over-estimates the demand for a certain commodity with which he will then overstock the market.' Rodbertus says outright that the only remedy for these crises is the 'complete reversal' of contemporary property-relations or a planned economy, concentrating all means of production 'in the hands of a single social authority'. To set troubled minds at rest, however, he is quick to add that he reserves judgment as to whether there can actually be such a state of affairs--'yet this would be the only possible way to prevent slumps of this kind'. Thus he expressly regards anarchy in the modern mode of production as responsible for only a specific and partial manifestation of crises. Rodbertus scornfully rejects Say-Ricardo's axiom of a natural equilibrium between consumption and production; just like Sismondi, he emphasises that everything turns on the purchasing power of society, and also takes it to be dependent upon the distribution of income. All the same, he does not endorse Sismondi's theory of crises and disagrees sharply with the conclusions drawn from it. If Sismondi saw the source of all evil in the unlimited expansion of production without regard to the limitations of incomes, and advocated a restriction of production, Rodbertus, quite on the contrary, champions the most powerful and unrestricted expansion of production, of wealth and of the productive forces, believing this to be a social necessity. Whoever rejects the wealth of society, rejects at the same time its power, its progress, and, with its progress, its virtues. Whoever stands in the way of growing wealth, stands in the way of all social progress whatever. Every increase in knowledge, resolve and capacity is conceived as bound up with an increase in wealth.[254] From this point of view, Rodbertus is strongly in favour of issuing houses which he regards as the indispensable foundations for a rapid and unrestricted expansion of company promoting. Both his essay of 1859 on the mortgage problem and the treatise on the _Financial Crisis in Prussia_[255] are devoted to this plea. He even polemises outright against the Sismondian type of _caveat_, as usual broaching the matter first from his peculiar Utopian ethics. 'The entrepreneurs', he holds forth, 'are essentially civil servants of economy. By the institution of property, they are once and for all entrusted with the nation's means of production. If they set them to work and strain all their energies in the process, they do but their duty, since capital--let me repeat--exists entirely for the sake of production.' And a further, factual argument: 'Or would you have them (the entrepreneurs) turn acute attacks of suffering into a chronic state by working persistently and from the first with fewer forces than are given by the means of production; are they to pay for a less severe form of the evil with its permanent duration? Even if we were silly enough to give them this advice, they would not be able to follow it. How could the entrepreneurs of the world recognise the limits beyond which the market would cease to be healthy? They engage in production without knowing the one of the other, they are producing in the most distant corners of the earth for a market hundreds of miles away, they produce with such vast forces that a month's production may already overstep the limit. How could production--so divided and yet so powerful--conceivably estimate in good time what will be enough? Where, for instance, are the organisations, the up-to-date statistical bureaux and the like to help them in this task? What is worse, the price alone, its rise and fall, indicates the position of the market, and this is not like a barometer which predicts the temperature of the market, but more like a thermometer which only registers it. If the price falls, the limit has been passed already, and the evil is with us.'[256] These thrusts, obviously aimed at Sismondi, exhibit quite fundamental differences between the two opponents. If Engels then says in his _Anti-Duehring_ that Sismondi first explained the crises as resulting from under-consumption, and that Rodbertus borrowed this view from him, he is not strictly accurate. All that Rodbertus and Sismondi have in common is their opposition against the classical school and the general explanation of crises as the result of the distribution of incomes. Even in this connection Rodbertus mounts his own particular hobby horse: over-production is not caused by the low level of working class incomes, nor yet, as Sismondi maintains, by the capitalists' limited capacity for consumption, but solely by the fact that with a growing productivity of labour, the workers' income, in terms of value, represents an ever smaller share of the product. Rodbertus takes pains to convince the opposition that it is not the small volume of the workers' share which causes the crises. 'Just imagine', he goes on to lecture v. Kirchmann, 'these shares to be so small as to ensure only a bare subsistence for those who are entitled to them. As long as you establish them as representing a proportion of the national product, you will have a constant "vessel for value" which can absorb ever increasing contents, and an ever increasing prosperity of the working classes as well.... And now imagine on the contrary as large a share for the working classes as you please, and let it become an ever smaller fraction of the national product that grows with increasing productivity. Then, provided it is not reduced to the present pittance, this share will still protect the workers from undue privations since the amount of products it represents will still be considerably greater than it is to-day. Once this share begins to decline, however, there will be spreading discontent, culminating in a commercial crisis for which the capitalists are not to blame inasmuch as they did no more than their duty in laying down the volume of production according to the given magnitude of these shares.' That is why the 'declining wage rate' is the real cause of crises. It can only be counteracted by legal measures to ensure that the workers' share represents a stable and unchanging rate of the national product. This grotesque notion takes some understanding if we are to do justice to its economic implications. FOOTNOTES: [237] To v. Kirchmann, in 1880. [238] Dr. Carl Rodbertus-Jagetzow, _Schriften_ (Berlin, 1899), vol. iii, pp. 172-4, 184. [239] Op. cit., vol. ii, pp. 104 f. [240] Op. cit., vol. i, p. 99. [241] Ibid., p. 173. [242] Ibid., p. 176. [243] Op. cit., vol. ii, p. 65. [244] _Schriften_, vol. i, pp. 182-4. [245] Ibid., pp. 182-4. [246] Ibid., p. 72. [247] _Schriften_, vol. iii, pp. 110-11. [248] Ibid., p. 108. [249] Op. cit., vol. i, p. 62. [250] _Schriften_, vol. iv, p. 226. [251] In _Towards the Understanding of Our Politico-Economic Conditions_, part ii, n. 1. [252] In _On Commercial Crises and the Mortgage Problem of the Landowners_, quoted above (op. cit., vol. iii, p. 186). [253] Op. cit., vol. iv, p. 233. It is interesting to note in this connection how Rodbertus appears in practice as an extremely sober and realistically-minded prophet of capitalist colonial policy, in the manner of the present-day 'Pan-Germans', his moral ranting about the unhappy fate of the working classes notwithstanding. In a footnote to the above quotation, he writes: 'We can go on to glance briefly at the importance of the opening up of Asia, in particular of China and Japan, the richest markets in the world, and also of the maintenance of English rule in India. It is to defer the solution of the social problem.' (The eloquent avenger of the exploited ingenuously discloses the means by which the profiteering exploiters can continue 'their stupid and criminal error', their 'flagrant injustice' for as long as possible.) 'For the solution of this problem, the present lacks in unselfishness and moral resolution no less than in intelligence.' (Rodbertus' philosophical resignation is unparalleled!) 'Economic advantage cannot, admittedly, constitute a legal title to intervention by force, but on the other hand, a strict application of modern natural and international law to all the nations of the world, whatever their state of civilisation, is quite impracticable.' (A comparison with Dorine's words in Molière's _Tartuffe_ is irresistible: 'Le ciel défend, de vraie, certains contentements, mais il y a avec lui des accommodements.')--'Our international law has grown from a civilisation of _Christian_ ethics, and since all law is based upon reciprocity, it can only provide the standard for relations between nations of the same civilisation. If it is applied beyond these limits, it is sentiment rather than natural and international law and the Indian atrocities should have cured us of it. Christian Europe should rather partake of the spirit which made the Greeks and the Romans regard all the other peoples of the world as barbarians. The younger European nations might then regain the drive for making world history which impelled the Ancients to spread their native civilisation over the countries of the globe. They would reconquer Asia for world history by _joint action_. Such common purpose and action would in turn stimulate the greatest social progress, a firm foundation of peace in Europe, a reduction of armies, a colonisation of Asia in the ancient Roman style--in other words, a genuine solidarity of interests in all walks of social life.' The vision of capitalist colonial expansion inspires the prophet of the exploited and oppressed to almost poetical flights, all the more remarkable for coming at a time when a civilisation of Christian ethics accomplished such glorious exploits as the Opium Wars against China and the Indian atrocities--that is to say, the atrocities committed by the British in their bloody suppression of the Indian Mutiny.--In his second _Letter on Social Problems_, in 1850, Rodbertus had expressed the conviction that if society lacks the 'moral resolution' necessary to solve the social question, in other words, to change the distribution of wealth, history would be forced to 'use the whip of revolution against it' (op. cit., vol. ii, p. 83). Eight years later, however, the stalwart Prussian prefers to crack the whip of a colonial policy of Christian ethics over the natives of the colonial countries. It is, of course, what one might expect of the 'original founder of scientific socialism in Germany' that he should also be a warm supporter of militarism, and his phrase about the 'reduction of armies' is but poetic licence in his verbal fireworks. In his essay _On the Understanding of the Social Question_ he explains that the 'entire national tax burden is perpetually gravitating towards the bottom, sometimes in form of higher prices for wage goods, and sometimes in form of lower money wages'. In this connection, he considers conscription 'under the aspect of a charge on the state', explaining that 'as far as the working classes are concerned, it is nothing like a tax but rather a confiscation of their entire income for many years'. He adds immediately: 'To avoid misunderstanding I would point out that I am a staunch supporter of our present military constitution (i.e. the military constitution of counter-revolutionary Prussia)--although it may be oppressive to the working classes and demand great financial sacrifices from the propertied classes' (op. cit., vol. iii, p. 34). That does not even sound like a lion's roar! [254] _Schriften_, vol. iii, p. 182. [255] Published already in 1845. [256] _Schriften_, vol. iv, p. 231. _CHAPTER XVII_ RODBERTUS' ANALYSIS OF REPRODUCTION To begin with, what does it mean that a decrease in the workers' share is bound immediately to engender over-production and commercial crises? Such a view can only make sense provided Rodbertus takes the 'national product' to consist of two parts, _vide_ the shares of the workers and of the capitalists, in short of _v + s_, one share being exchangeable for the other. And that is more or less what he actually seems to say on occasions, e.g. in his first _Letter on Social Problems_: 'The poverty of the working classes precludes their income from giving scope to increasing production. The additional amount of products from the entrepreneurs' point of view lowers the value of the aggregate product so far as to bar production on the former scale, leaving the workers at best to their accustomed straits, though, if it could be made available to the workers, it would not only improve their lot but would further act as a counterweight by increasing the value of what is retained by the capitalists (and so enable the latter to keep their enterprises at the same level).'[257] The 'counterweight' which in the hand of the workers increases the 'value' of 'what is retained' by the entrepreneurs, can in this context only be the demand. Once again, we have landed happily at the familiar _Ort_ of v. Kirchmann's where workers and capitalists exchange their incomes for the surplus product, and where the crises arise because variable capital is small and the surplus value large. This peculiar notion has already been dealt with above. There are other occasions, however, when Rodbertus advances a somewhat different conception. The interpretation of his theory in the fourth _Letter on Social Problems_ is that the continual shifts in the relations of demand, evident in the share of the working class and caused by the share of the capitalist class, must result in a chronic disproportion between production and consumption. 'What if the entrepreneurs endeavour to keep always within the limits of those shares, yet the shares themselves are all the time on the decline for the great majority of the society, the workers, decreasing gradually, unnoticeably, but with relentless force?--What if the share of these classes is continually decreasing to the same extent as their productivity is increasing?'--'Is it not really the fact that the capitalists of necessity organise production in accordance with the present volume of shares in order to make wealth universal, and that yet they always produce over and above this volume (of previous shares), thereby perpetuating dissatisfaction which culminates in this stagnation of trade?'[258] On this showing, the explanation of crises should be as follows: the national product consists of a number of 'common goods', as v. Kirchmann puts it, for the workers, and of superior goods for the capitalists. The wages represent the quantity of the former, and aggregate surplus value that of the latter. If the capitalists organise their production on this footing, and if at the same time there is progressive productivity, a lack of proportion will immediately ensue. For the share of the workers to-day is no longer that of yesterday, but less. If the demand for 'common goods' had involved, say, six-sevenths of the national product yesterday, then to-day it involves only five-sevenths, and the entrepreneurs, having provided for six-sevenths of 'common goods', will find to their painful surprise that they over-produced by one-seventh. Now, wiser by this experience, they try to organise to-morrow's output of 'common goods' to a mere five-sevenths of the total value of the national product, but they have a new disappointment coming to them, since the share of the national product falling to wages to-morrow is bound to be only four-sevenths, and so on. In this ingenious theory there are quite a few points to make us wonder. If our commercial crises are entirely due to the fact that the workers' 'wage rate', the variable capital, represents a constantly diminishing portion of the total value of the national product, then this unfortunate law brings with it the cure for the evil it has caused, since it must be an ever smaller part of the aggregate product for which there is over-production. Although Rodbertus delights in such terms as 'an overwhelming majority', 'the large popular masses' of consumers, it is not the number of heads that make up the demand, but the value they represent which is relevant. This value, if Rodbertus is to be believed, forms a more and more trifling part of the aggregate product. Crises are thus made to rest on an ever narrowing economic basis, and all that remains to discover is how in spite of it all it can still happen that the crises are universal and increasingly severe besides, as Rodbertus is fully aware. The purchasing power lost by the working classes should be gained by the capitalist class; if _v_ decreases, _s_ must grow larger to make up for it. On this crude scheme, the purchasing power of society as a whole cannot change, as Rodbertus says in so many words: 'I know very well that what is taken from the workers' share goes ultimately to swell that of the "rentiers" (rent and surplus value are used as synonyms, _R.L._), and that purchasing power remains constant on the whole and in the long run. But as far as the product on the market is concerned, the crisis always sets in before this increase can make itself felt.'[259] In short, the most it can amount to is that there is 'too much' of 'common goods' and 'too little' of superior goods for the capitalists. Quite unawares, and by devious ways, Rodbertus here falls in with the Say-Ricardian theory he so ardently contested, the theory that over-production on one side always corresponds to under-production on the other. Seeing that the ratio of the two shares is persistently shifting to the advantage of the capitalists, our commercial crises might be expected on the whole to take on increasingly the character of periodical under- instead of over-production! Enough of this exercise in logic. The upshot of it all is that Rodbertus conceives the national product in respect of its value as made up of two parts only, of _s_ and _v_, thus wholly subscribing to the views and traditions of the classical school he is fighting tooth and nail, and even adding his own flourish that the capitalists consume the entire surplus value. That is why he repeatedly says without mincing his words, as in the fourth _Letter on Social Problems_: 'Accordingly, we must abstract from the reasons which cause the division of rent in general into rent proper and capital rent, to find the basic principle underlying the division of rent (surplus value) in general, the principle underlying _the division of the labour product into wage and rent_.'[260] And, in the third _Letter_: 'Ground rent, capital profit and the wage of labour are, let me repeat, revenue. By this means landlords, capitalists and workers must live, must satisfy, that is to say, their immediate human necessities. They must therefore draw their income in the form of goods suitable for this purpose.'[261] The misrepresentation of capitalist economy has never been formulated more crudely, and there is no doubt that Rodbertus claims the palm of 'priority'--not so much over Marx as over all popular economists--with full justification. To leave the reader in no doubt about the utter muddle he has made, he goes on, in the same letter, to rank capitalist surplus value as an economic category on the same level as the revenue of the ancient slave-owner: 'The first state (that of slavery) goes with the most primitive natural economy: that portion of the labour product which is withheld from the income of workers or slaves and forms the master's or owner's property, will undividedly accrue to the one man who owns the land, the capital, the worker and the labour product; there is not even a distinction of thought between rent and capital profits.--The second state entails the most complicated money economy: that portion of the labour product, withheld from the income of the now emancipated workers, and accruing to the respective owners of land, and capital, will be further divided among the owners of the raw material and the manufactured product respectively; the one rent of the former state will be split up into ground rent and capital profits, and will have to be differentiated accordingly.'[262] Rodbertus regards the splitting-up of the surplus value 'withheld' from the workers' 'income' as the most striking difference between exploitation by slavery and modern capitalist exploitation. It is not the specific historical form of sharing out newly created value among labour and capital, but the distribution of the surplus value among the various people it benefits, which, irrelevant to the productive process, is yet the decisive fact in the capitalist mode of production. In all other respects, capitalist surplus value remains just the same as the old 'single rent' of the slave-owner: a private fund for the exploiter's own consumption! Yet Rodbertus again contradicts himself in other places, remembering all of a sudden the constant capital and the necessity for its renewal in the reproductive process. Thus, instead of bisecting the aggregate product into _v_ and _s_, he posits a triple division: _c_, _v_, and _s_. In his third _Letter on Social Problems_ he argues on the forms of reproduction in a slave-economy: 'Since the master will see to it that part of the slave labour is employed in maintaining or even improving the fields, herds, agricultural and manufacturing tools, there will be "capital replacement", to use a modern term, in which part of the national economic product is immediately used for the upkeep of the estate, without any mediation by exchange or even by exchange value.'[263] And, passing on to capitalist reproduction, he continues: 'Now, in terms of value, one portion of the labour product, is used or set aside for the maintenance of the estate, for "capital replacement", another, for the workers' subsistence as their money wage; and the owners of the land, of capital, and of the labour product retain the last as their revenue or rent.'[264] This, then, is an explicit expression of the triple division into constant capital, variable capital, and surplus value. Again, in this third _Letter_, he formulates the peculiarity of his 'new' theory with equal precision: 'On this theory, then, and under conditions of adequate labour productivity, the portion of the product which remains for wages after the replacement of capital, will be distributed among workers and owners as wages and rent, on the basis of the ownership in land and capital.'[265] It does seem now as if Rodbertus' analysis of the value of the aggregate product represents a distinct advance over the classical school. Even Adam Smith's 'dogma' is openly criticised a little further on, and it is really surprising that Rodbertus' learned admirers, Messrs. Wagner, Dietzel, Diehl & Co. failed to claim their white-headed boy's 'priority' over Marx on such an important point of economic theory. As a matter of fact, in this respect no less than in the general theory of value, Rodbertus' priority is of a somewhat dubious character. If he seems on occasion to gain true insight, it immediately turns out to be a misunderstanding, or at best a wrong approach. His criticism of Adam Smith's dogma affords a supreme example of his failure to cope with the triple division of the national product towards which he had groped his way. He says literally: 'You know that all economists since Adam Smith already divided the value of the product into wage of labour, rent, and capital profit, that it is therefore not a new idea to ground the incomes of the various classes, and especially the various items of the rent, in a division of the product. But the economists at once go off the track. All of them, not even excepting Ricardo's school, make the mistake, first, not to recognise that the aggregate product, the finished good, the national product as a whole, is an entity in which workers, landowners, and capitalists all share, but conceiving the division of the unfinished product to be of one kind shared among three partners, and that of the manufactured product as of another kind again, shared between only two partners. For these theories both the unfinished product and the manufactured product constitute as such separate items of revenue. Secondly,--though both Sismondi and Ricardo are free from this particular error--they regard the natural fact that labour cannot produce goods without material help, i.e. without the land, as an economic fact, and take the social fact for a primary datum that capital as understood to-day is required by the division of labour. Thus they set up the fiction of a fundamental economic relationship on which they base also for the shares of the various owners, ground rent springing from the contribution of the land lent by the owner to production, capital profits from the contribution of capital employed by the capitalist to this end, and the wages finally from labour's contribution, seeing that there are separate owners of land, capital, and labour in the society. Say's school, elaborating on this mistake with much ingenuity, even invented the concept of productive service of land, capital, and labour in conformity with the shares in the product of their respective owners, so as to explain these shares as the result of productive service.--Thirdly, they are caught up in the ultimate folly of deriving the wage of labour and the items of rent from the value of the product, the value of the product in turn being derived from the wage of labour and the items of rent, so that the one is made to depend on the other and _vice versa_. This absurdity is quite unmistakable when some of these authors attempt to expound "The Influence of Rent Upon Production Prices" and "The Influence of Production Prices Upon Rent" in two consecutive chapters.'[266] Yet for all these excellent critical comments--the last, particularly acute, actually does to some extent anticipate Marx's criticism of this point in _Capital_, volume ii--Rodbertus calmly falls in with the fundamental blunder of the classical school and its vulgar followers: to ignore altogether that part of the value of the aggregate product which is needed to replace the constant capital of the society. This way it was easier for him to keep up the singular fight against the 'declining wage rate'. Under capitalist forms of production, the value of the aggregate social product is divided into three parts: one corresponding to the value of the constant capital, the second to the wage total, i.e. the variable capital, and the third to the aggregate surplus value of the capitalist class. In this composition, the portion corresponding to the variable capital is relatively on the decline, and this for two reasons. To begin with, the relation of _c_ to (_v + s_) within _c + v + s_ changes all the time in the direction of a relative increase of _c_ and a relative decrease of _v + s_. This is the simple law for a progressive efficiency of human labour, valid for all societies of economic progress, independently of their historical forms, a formula which only states that living labour is increasingly able to convert more means of production into objects for use in an ever shorter time. And if (_v + s_) decreases as a whole, so must _v_, as its part, decrease in relation to the total value of the product. To kick against this, to try and stop the decrease, would be tantamount to contending against the general effects of a growing labour productivity. Further, there is within (_v + s_) as well a change in the direction of a relative decrease in _v_ and a relative increase in _s_, that is to say, an ever smaller part of the newly created value is spent on wages and an ever greater part is appropriated as surplus value. This is the specifically capitalist formula of progressive labour productivity which, under capitalist conditions of production, is no less valid than the general law. To use the power of the state to prevent a decrease of _v_ as against _s_ would mean that the fundamental commodity of labour power is debarred from this progress which decreases production costs for all commodities; it would mean the exemption of this one commodity from the economic effects of technical progress. More than that: the 'declining wage rate' is only another expression of the rising rate of surplus value which forms the most powerful and effective means of checking a decline of the profit rate, and which therefore represents the prime incentive for capitalist production in general, and for technical progress within this system of production in particular. Doing away with the 'declining wage rate' by way of legislation would be as much as to do away with the _raison d'être_ of capitalist society, to deal a crippling blow to its entire system. Let us face the facts: the individual capitalist, just like capitalist society as a whole, has no glimmering that the value of the product is made up from the sum total of labour necessary in the society, and this is actually beyond his grasp. Value, as the capitalist understands it, is the derivative form, reversed by competition as production costs. While in truth the value of the product is broken down into the values of its component fragments _c_, _v_ and _s_, the capitalist mind conceives of it as the summation of _c_, _v_ and _s_. These, in addition, also appear to him from a distorted perspective and in a secondary form, as (1) the wear and tear of his fixed capital, (2) his advances on circulating capital, including workers' wages, and (3) the current profits, i.e. the average rate of profit on his entire capital. How, then, is the capitalist to be compelled by a law, say of the kind envisaged by Rodbertus, to maintain a 'fixed wage rate' in the face of the aggregate value of the product? It would be quite as brilliant to stipulate by law for exactly one-third, no more, no less, of the total price of the product to be payable for the raw materials employed in the manufacture of any commodity. Obviously, Rodbertus' supreme notion, of which he was so proud, on which he built as if it were a new Archimedean discovery, which was to be the specific for all the ills of capitalist production, is arrant nonsense from all aspects of the capitalist mode of production. It could only result from the muddle in the theory of value which is brought to a head in Rodbertus' inimitable phrase: that 'now, in a capitalist society, the product must have value-in-exchange just as it had to have value-in-use in ancient economy'.[267] People in ancient society had to eat bread and meat in order to live, but we of to-day are already satisfied with knowing the price of bread and of meat. The most obvious inference from Rodbertus' monomania about a 'fixed wage rate' is that he is quite incapable of understanding capitalist accumulation. Previous quotations have already shown that Rodbertus thinks solely of simple commodity production, quite in keeping with his mistaken doctrine that the purpose of capitalist production is the manufacture of consumer goods for the satisfaction of 'human wants'. For he always talks of 'capital replacements', of the need to enable the capitalists to 'continue their enterprise on the previous scale'. His principal argument, however, is directly opposed to the accumulation of capital. To fix the rate of the surplus value, to prevent its growth, is tantamount to paralysing the accumulation of capital. Both Sismondi and v. Kirchmann had recognised the problem of balancing production and consumption to be indeed a problem of accumulation, that is to say of enlarged capitalist reproduction. Both traced the disturbances in the equilibrium of reproduction to accumulative tendencies denying the possibility of accumulation, with the only difference that the one recommended a damper on the productive forces as a remedy, while the other favoured their increasing employment to produce luxuries, the entire surplus value to be consumed. In this field, too, Rodbertus follows his own solitary path. The others might try with more or less success to comprehend the _fact_ of capitalist accumulation, but Rodbertus prefers to fight the very concept. 'Economists since Adam Smith have one after the other echoed the principle, setting it up as a universal and absolute truth, that capital could only come about by saving and accumulating.'[268] Rodbertus is up in arms against this 'deluded judgment'. Over sixty pages of print he sets out in detail that (_a_) it is not saving which is the source of capital but labour, that (_b_) the economists' 'delusion' about 'saving' hails from the extravagant view that capital is itself productive, and that (_c_) this delusion is ultimately due to another: the error that capital is--capital. v. Kirchmann for his part understood quite well what is at the bottom of capitalist 'savings'. He had the pretty argument: 'Everyone knows that the accumulation of capital is not a mere hoarding of reserves, an amassing of metal and monies to remain idle in the owners' vaults. Those who want to save do it for the sake of re-employing their savings either personally or through the agency of others as capital, in order to yield them revenue. That is only possible if these capitals are used in new enterprises which can produce so as to provide the required interest. One may build a ship, another a barn, a third may reclaim a desolate swamp, a fourth may order a new spinning frame, while a fifth, in order to enlarge his shoe-making business, would buy more leather and employ more hands--and so on. Only if the capital that has been saved is employed in this way, can it yield interest (meaning profit), and the latter is the ultimate object of all saving.'[269] That is how v. Kirchmann described somewhat clumsily, but on the whole correctly, what is in fact the capitalisation of surplus value, the process of capitalist accumulation, which constitutes the whole significance of saving, advocated by classical economists 'since Adam Smith' with unerring instinct. Declaring war on saving and accumulation was quite in keeping with v. Kirchmann's premises, considering that he, like Sismondi, saw the immediate cause of the crises in accumulation. Here, too, Rodbertus is more 'thorough'. Having learned from Ricardo's theory of value that labour is the source of all value, and consequently of capital, too, he is completely blinded by this elementary piece of knowledge to the entire complexity of capitalist production and capital movements. Since capital is generated by labour, both the accumulation of capital, i.e. 'saving', and the capitalisation of the surplus value are nothing but eyewash. In order to untangle this intricate network of errors by 'economists since Adam Smith', he takes, as we might expect, the example of the 'isolated husbandman' and proves all that he needs by a long-drawn vivisection of the unhappy creature. Here already he discovers 'capital', that is to say, of course, that famous 'original stick' with which 'economists since Adam Smith' have hooked the fruits of a theory of capital from the tree of knowledge. 'Would saving be able to produce this stick?' is his query. And since every normal person will understand that 'saving' cannot produce any stick, that Robinson [Crusoe] must have made it of wood, we have already proved that the 'savings' theory is quite mistaken. Presently, the 'isolated husbandman' hooks a fruit from the tree with the stick, and this fruit is his 'income'. 'If capital were the source of income, already this most elementary and primitive event would have to give evidence of this relation. Would it be true to say, then, without doing violence to facts and concepts, that the stick is a _source_ of income or of part of the income consisting in the fruit brought down? can we trace income, wholly or in part, back to the stick as its _cause_, may we consider it, wholly or in parts, as a _product_ of the stick?'[270] Surely not. And since the fruit is the product, not of the stick which brought it down, but of the tree which grew it, Rodbertus has already proved that all 'economists since Adam Smith' are grossly mistaken if they maintain that income derives from capital. After a clear exposition of all fundamental concepts of economics on the example of Robinson [Crusoe]'s 'economy', Rodbertus transfers the knowledge thus acquired first to a fictitious society 'without ownership in capital or land', that is to say to a society with a communist mode of possession, and then to a society 'with ownership in capital and land', that is to say contemporary society, and, lo and behold--all the laws of Robinson [Crusoe]'s economy apply point for point to these two forms of society as well. Rodbertus contrives here a theory of capital and income which is the very crown of his Utopian imagination. Since he has discovered that Robinson [Crusoe]'s 'capital' is the means of production pure and simple, he identifies capital with the means of production in capitalist economy as well. Thus reducing capital, with a wave of his hand, to constant capital, he protests in the name of justice and morality against the fact that the wages, the workers' means of subsistence, are also considered capital. He contends furiously against the _concept_ of variable capital, seeing in it the cause of every disaster. 'If only', he grieves, 'economists would pay attention to what I say, if only they would examine without prejudice whether they are right or I. This is the focal point of all errors about capital in the ruling system, this is the ultimate source of injustice against the working classes, in theory and practice alike.'[271] For 'justice' demands that the goods constituting the 'real wages' of the workers be counted, not as part of capital, but as belonging to the category of income. Though Rodbertus knows very well that the capitalist must regard the wages he has 'advanced' as part of his capital, just like the other part laid out on immediate means of production, yet in his opinion this applies only to individual capitals. As soon as it is a question of the social aggregate product, of reproduction as a whole, he declares the capitalist categories of production an illusion, a malicious lie and a 'wrong'. 'Capital _per se_ (properly so-called), the items which make up capital, capital from the nation's point of view, is something quite different from private capital, capital _assets_, capital _property_, all that "capital" in the modern use of the term usually stands for.'[272] An individual capitalist produces by capitalist methods, but society as a whole must produce like Robinson [Crusoe], as a collective owner employing communist methods. 'It makes no difference from this general and national point of view that greater or smaller parts of the aggregate national product are now owned in all the various phases of production by private persons who must not be numbered among the producers proper, and that the latter always manufacture this national aggregate product as servants--without sharing in the ownership of their own product--of these few owners.' Certain peculiarities of the relations within the society as a whole no doubt result from this, namely (1) the institution of 'exchange' as an intermediary, and (2) the inequality in the distribution of the product. 'Yet all these consequences do not affect the movements of national production and the shaping of the national product which are always the same, now as ever (under the rule of communism), no more than they alter in any respect, as far as the _national point of view_ is concerned, the contrast between capital and income so far established.' Sismondi had laboured in the sweat of his brow, as had Smith and many others, to disentangle the concepts of capital and income from the contradictions of capitalist production. Rodbertus has a simpler method and abstracts from the specific forms determined by capitalist production for society as a whole; he simply calls the means of production 'capital' and the article of consumption 'revenue' and leaves it at that. 'The essential influence of ownership in land and capital applies only to individuals having traffic with one another. If the nation is taken as a unit, the effects of such ownership upon the individuals completely disappear.'[273] We see that as soon as Rodbertus comes up against the real problem, the capitalist aggregate product and its movements, he exhibits the Utopian's characteristic obtuseness in respect of the historical peculiarities of production. Marx's comment on Proudhon, that 'speaking of society as a whole, he pretends that this society is no longer capitalist' therefore fits him like a glove. The case of Rodbertus again exemplifies how every economist before Marx had been at a loss when it came to harmonising the concrete aspects of the labour process with the perspective of capitalist production which regards everything in terms of value, to mediating between the forms of movement performed by individual capitals and the movement of social capital. Such efforts as a rule vacillate from one extreme to another: the shallow approach of Say and MacCulloch, recognising only the conceptions of individual capital, and the Utopian approach of Proudhon and Rodbertus who recognise only those of the process of labour. That is the context in which Marx's penetration appears in its true light. His diagram of simple reproduction illuminates the entire problem by gathering up all these perspectives in their harmony and their contradictions, and so resolves the hopeless obscurities of innumerable tomes into two rows of figures of striking simplicity. On the strength of such views on capital and income as these, capitalist appropriation is clearly quite impossible to understand. Indeed, Rodbertus simply brands it as 'robbery' and indicts it before the forum of the rights of property it so blatantly violates. 'This personal freedom of the workers which ought legally to involve ownership in the value of the labour product, leads in practice to their renunciation of the proprietary claims extorted under pressure of ownership in land and capital; but the owners do not admit to this great and universal wrong, almost as though they were instinctively afraid that history might follow its own stern and inexorable logic.'[274] Rodbertus' 'theory in all its details is therefore conclusive proof that those who praise present-day relations of ownership without being able at the same time to ground ownership in anything but labour, completely contradict their own principle. It proves that the property relations of to-day are in fact founded on a universal violation of this principle, that the great individual fortunes being amassed in society nowadays are the result of cumulative robbery mounting up in society with every new-born worker since time immemorial.'[275] Since surplus value is thus branded as 'robbery', an increasing rate of surplus value must appear 'as a strange error of present-day economic organisation'. Brissot's crude paradox with its revolutionary ring--'property is theft'--had been the starting point for Proudhon's first pamphlet, but Rodbertus' thesis is quite another matter, arguing that capital is theft perpetrated on property. It need only be set side by side with Marx's chapter on the transformation of the laws of ownership into the laws of capitalist appropriation--this triumph of historical dialectics in vol. i of Marx's _Capital_--in order to show up Rodbertus' 'priority'. By ranting against capitalist appropriation under the aspect of the 'right of property', Rodbertus closed his mind to capital as the source of surplus value just as effectively as he had previously been prevented by his tirades against 'saving' from seeing the surplus value as a source of capital. He is thus in an even worse position than v. Kirchmann, lacking all qualifications for understanding capitalist accumulation. What it amounts to is that Rodbertus wants unrestricted expansion of production without saving, that is to say without capitalist accumulation! He wants an unlimited growth of the productive forces, and at the same time a rate of surplus value stabilised by an act of law. In short, he shows himself quite unable to grasp the real foundations of capitalist production he wishes to reform, and to understand the most important results of the classical economics he criticises so adversely. It is no more than to be expected, therefore, that Prof. Diehl should declare Rodbertus a pioneer of economic theory on the strength of his 'new theory of income' and of the distinction between the logical and the historical categories of capital (capital properly so-called in contrast to individual capital), that Prof. Adolf Wagner should call him the 'Ricardo of economic socialism', proving himself ignorant at once of Ricardo, Rodbertus and socialism alike. Lexis even judges that Rodbertus is at least the equal of 'his British rival' in power of abstract thinking, and by far his superior in 'virtuosity to lay bare the phenomena in their ultimate connections', in 'imaginative vitality', and above all in his 'ethical approach to economic life'. Rodbertus' real achievements in economic theory however, other than his critique of Ricardo's ground rent, his at times quite clear-cut distinction between surplus value and profit, his treatment of the surplus value as a whole in deliberate contrast with its partial manifestations, his critique of Smith's dogma concerning the analysis of commodities in terms of value, his precise formulation of the periodical character of the crises and his analysis of their manifestations--all these attempts to carry the investigation beyond Smith, Ricardo and Say, promising as such, though doomed to failure because of the confused basic concepts, are rather above the heads of Rodbertus' official admirers. As Franz Mehring already pointed out, it was Rodbertus' strange fortune to be lauded to heaven for his alleged prowess in economics by the same people who called him to task for his real merits in politics. This contrast between economic and political achievements, however, does not concern us here: in the realm of economic theory, his admirers built him a grand memorial on the barren field he had dug with the hopeless zeal of the visionary, while the modest beds where he had sown a few fertile seeds, were allowed to be smothered with weeds and forgotten.[276] It cannot be said that the problem of accumulation had on the whole been much advanced beyond the first controversy by this Prusso-Pomeranian treatment. If in the interim the economic theory of harmony had dropped from the level of Ricardo to that of a Bastiat-Schultze, social criticism had correspondingly declined from Sismondi to Rodbertus. Sismondi's critique of 1819 had been an historical event, but Rodbertus' ideas of reform, even on their first appearance, were a miserable regression--still more so on their subsequent reiteration. In the controversy between Sismondi on the one hand and Say and Ricardo on the other, one party proved that accumulation was impossible because of the crises, and therefore warned against full development of the productive forces. The other party proved that crises were impossible and advocated an unlimited development of accumulation. Though all argued from wrong premises, each was logically consistent. v. Kirchmann and Rodbertus both started, were bound to start, from the fact of crises. Here the problem of enlarged reproduction of aggregate capital, the problem of accumulation, was completely identified with the problem of crises and side-tracked in an attempt to find a remedy for the crises, although the historical experience of fifty years had shown all too clearly that crises, as witnessed by their periodical recurrence, are a necessary phase in capitalist reproduction. One side now sees the remedy in the complete consumption of the surplus value by the capitalist, that is to say in refraining from accumulation, the other in stabilisation of the rate of surplus value by legislative measures which comes to the same thing, i.e. renouncing accumulation altogether. This special fad of Rodbertus' sprang from his fervent and explicit belief in an unlimited capitalist expansion of the productive forces and of wealth, without accumulation of capital. At a time when capitalist production was developed to a degree which was soon to enable Marx to make his fundamental analysis, the last attempt of bourgeois economics to cope with the problem of reproduction degenerated into absurd and puerile Utopianism. FOOTNOTES: [257] _Schriften_, vol. iii, p. 176. [258] Op. cit., vol. i, pp. 53, 57. [259] _Schriften_, vol. i, p. 206. [260] Ibid., vol. i, p. 19. [261] Op. cit., vol. ii, p. 110. [262] Ibid., p. 144. [263] _Schriften_, vol. ii, p. 146. [264] Ibid., p. 155. [265] Ibid., p. 223. [266] _Schriften_, vol. ii, p. 226. [267] Ibid., p. 156. [268] _Schriften_, vol. i, p. 40. [269] Op. cit., vol. ii, p. 25. [270] _Schriften_, vol. i, p. 250. [271] Ibid., p. 295. Rodbertus reiterates during a lifetime the ideas he had evolved as early as 1842 in his _Towards the Understanding of Our Politico-Economic Conditions_. 'Under present conditions, we have, however, gone so far as to consider not only the wage of labour part of the costs of the goods, but also rents and capital profits. We must therefore refute this opinion in detail. It has a twofold foundation: (_a_) a wrong conception of capital which counts the wage of labour as part of the capital just like materials and tools, while it is on the same level as rent and profit; (_b_) a confusion of the costs of the commodity and the advances of the entrepreneur or the costs of the enterprise' (_Towards the Understanding of Our Politico-Economic Conditions_, Neubrandenburg & Friedland, G. Barnovitz, 1842, p. 14). [272] _Schriften_, vol. i, p. 304. Just so already in _Towards the Understanding of Our Politico-Economic Conditions_, 'We must distinguish between capital in its narrow or proper sense, and the fund of enterprise, or capital in a wider sense. The former comprises the actual reserves in tools and materials, the latter the fund necessary for running an enterprise under present conditions of division of labour. The former is capital absolutely necessary to production, and the latter achieves such relative necessity only by force of present conditions. Hence only the former is capital in the strict and proper meaning of the term; this alone is completely congruent with the concept of national capital' (ibid., pp. 23-4). [273] _Schriften_, vol. i, p. 292. [274] Op. cit., vol. ii, p. 136. [275] Ibid., p. 225. [276] A memorial of the worst kind, by the way, was that of the editors who published his works after his death. These learned gentlemen, Messrs. Wagner, Kozak, Moritz Wuertz & Co., quarrelled in the prefaces to his posthumous writings like a rough crowd of ill-mannered servants in an antechamber, fighting out publicly their petty personal feuds and jealousies, and slanging one another. They did not even bother in common decency to establish the dates for the individual manuscripts they had found. To take an instance, it needed Mehring to observe that the oldest manuscript of Rodbertus that had been found was not published in 1837, as laid down autocratically by Prof. Wagner, but in 1839 at the earliest, since it refers in its opening paragraphs to historical events connected with the Chartist movement belonging, as a professor of economics really ought to know, in the year 1839. In Professor Wagner's introduction to Rodbertus we are constantly bored by his pomposity, his harping on the 'excessive demands on his time'; in any case Wagner addresses himself solely to his learned colleagues and talks above the heads of the common crowd; he passes over in silence, as befits a great man, Mehring's elegant correction before the assembled experts. Just as silently, Professor Diehl altered the date of 1837 to 1839 in the _Handwörterbuch der Staatswissenschaften_, without a word to say when and by whom he had been thus enlightened. But the final touch is provided by the 'popular', 'new and inexpensive' edition of Puttkamer and Muehlbrecht (1899). Some of the quarrelling editors collaborated on it but still continue their disputes in the introductions. Wagner's former vol. ii has become vol. i in this edition, yet Wagner still refers to vol. ii in the introduction to vol. i. The first _Letter on Social Problems_ is placed in vol. iii, the second and third in vol. ii and the fourth in vol. i. The order of the _Letters on Social Problems_, of the _Controversies_, of the parts of _Towards the Understanding_ ..., chronological and logical sequence, the dates of publication and of writing are hopelessly mixed up, making a chaos more impenetrable than the stratification of the soil after repeated volcanic eruptions. 1837 is maintained as the date of Rodbertus' earliest MS., probably out of respect to Professor Wagner--and this in 1899, although Mehring's rectification had been made in 1894. If we compare this with Marx's literary heritage in Mehring's and Kautsky's edition, published by Dietz, we see how such apparently superficial matters but reflect deeper connections: one kind of care for the scientific heritage of the authority of the class-conscious proletariat, and quite another in which the official experts of the bourgeoisie squander the heritage of a man who, in their own self-interested legends, had been a first-rate genius. _Suum cuique_--had this not been the motto of Rodbertus? _SECTION TWO_ HISTORICAL EXPOSITION OF THE PROBLEM THIRD ROUND STRUVE-BULGAKOV-TUGAN BARANOVSKI _v._ VORONTSOV-NIKOLAYON _CHAPTER XVIII_ A NEW VERSION OF THE PROBLEM The third controversy about capitalist accumulation takes place in an historical setting quite different from that of the two earlier ones. The time now is the period from the beginning of the eighties to the middle of the nineties, the scene Russia. In Western Europe, capitalism had already attained maturity. The rose-coloured classical view of Smith and Ricardo in a budding bourgeois economy had long since vanished ... the self-interested optimism of the vulgarian Manchester doctrine of harmony had been silenced by the devastating impact of the world collapse in the seventies, and under the heavy blows of a violent class struggle that blazed up in all capitalist countries after the sixties. Even that harmony patched up with social reformism which had its hey-day after the early eighties, especially in Germany, soon ended in a hangover. The trial of twelve years' special legislation against the Social Democratic Party had brought about bitter disillusionment, and ultimately destroyed all the veils of harmony, revealing the cruel capitalist contradictions in their naked reality. Since then, optimism had only been possible in the camp of the rising working class and its theorists. This was admittedly not optimism about a natural, or artificially established equilibrium of capitalist economy, or about the eternal duration of capitalism, but rather the conviction that capitalism, by mightily furthering the development of the productive forces, and in virtue of its inherent contradictions, would provide an excellent soil for the historical progress of society towards new economic and social forms. The negative, depressing tendency of the first stage of capitalism, at one time realised by Sismondi alone and still observed by Rodbertus as late as the forties and fifties, is compensated by a tendency towards elation: the hopeful and victorious striving of the workers for ascendancy in their trade-union movement and by political action. Such was the setting in Western Europe. In the Russia of that time, however, the picture was different indeed. Here, the seventies and eighties represent in every respect a period of transition, a period of internal crises with all its agonies. Big industry only now staged its real entry, fostered by the period of high protective tariffs. In particular, the introduction of a tariff on gold at the Western frontier in 1877 was a special landmark in the absolutist government's new policy of forcing the growth of capitalism. 'Primitive accumulation' of capital flourished splendidly in Russia, encouraged by all kinds of state subsidies, guarantees, premiums and government orders. It earned profits which would already seem legendary to the West. Yet the picture of internal conditions in contemporary Russia was anything but attractive and auspicious. On the plains, the decline and disintegration of rural economy under the pressure of exploitation by the Exchequer and the monetary system caused terrible conditions, periodical famines and peasant risings. In the towns, again, the factory proletariat had not yet been consolidated, either socially or mentally, into a modern working class. For the greater part, it was still closely connected with agriculture, and remained semi-rural, particularly in the large industrial parts of Moscow-Vladimir, the most important centre of the Russian textile industry. Accordingly, primitive forms of exploitation were countered by primitive measures of defence. Not until the early eighties did the spontaneous factory revolts in the Moscow district with their smashing up of machines provide the impetus for the first rudiments of factory legislation in the Czarist Empire. If the economic aspect of Russian public life showed at every step the harsh discords of a period of transition, there was a corresponding crisis in intellectual life. 'Populism', the indigenous brand of Russian socialism, theoretically grounded in the peculiarities of the Russian agrarian constitution, was politically finished with the failure of the terrorist party of 'Narodnaya Volya', its extreme revolutionary exponent. The first writings of George Plekhanov, on the other hand, which were to pave the way in Russia for Marxist trains of thought, had only been published in 1883 and 1885, and for about a decade they seemed to have little influence. During the eighties and up to the nineties the mental life of the Russian, and in particular of the socialist intelligentsia with their tendency towards opposition, was dominated by a peculiar mixture of 'indigenous' 'populist' remnants and random elements of theoretical Marxism. The most remarkable feature of this mixture was scepticism as to the possibility of capitalist development in Russia. At an early date, the Russian intelligentsia had been preoccupied with the question whether Russia should follow the example of Western Europe and embark on capitalist development. At first, they noticed only the bleak aspects of capitalism in the West, its disintegrating effects upon the traditional patriarchal forms of production and upon the prosperity and assured livelihood for the broad masses of the population. As against that, the Russian rural communal ownership in land, the famous _obshchina_, seemed to offer a short-cut to the blessed land of socialism, a lead direct to a higher social development of Russia, without the capitalist phase and its attendant misery as experienced in Western Europe. Would it be right to fling away this fortunate and exceptional position, this unique historical opportunity, and forcibly transplant capitalist production to Russia with the help of the state? Would it be right to destroy the system of rural holdings and production, and open the doors wide to proletarisation, to misery and insecurity of existence for the toiling masses? The Russian intelligentsia was preoccupied with this fundamental problem ever since the Agrarian Reform, and even earlier, since Hertzen, and especially since Chernishevski. This was the wholly unique world view of 'populism' in a nutshell. An enormous literature was created in Russia by this intellectual tendency ranging from the avowedly reactionary doctrines of the Slavophiles to the revolutionary theory of the terrorist party. On the one hand, it encouraged the collection of vast material by separate inquiries into the economic forms of Russian life, into 'national production' and its singular aspects, into agriculture as practised by the peasant communes, into the domestic industries of the peasants, the _artel_, and also into the mental life of the peasants, the sects and similar phenomena. On the other hand, a peculiar type of _belles lettres_ sprang up as the artistic reflection of the contradictory social conditions, the struggle between old and new ways which beset the mind at every step with difficult problems. Finally, in the seventies and eighties, a peculiarly stuffy philosophy of history sprang up from the same root and found its champions in Peter Lavrov, Nicolai Mikhailovski, Professor Kareyev and V. Vorontsov. It was the 'subjective method in sociology' which declared 'critical thought' to be the decisive factor in social development, or which, more precisely, sought to make a down-at-heel intelligentsia the agent of historical progress. Here we are interested only in one aspect of this wide field with its many ramifications, _viz_: the struggle of opinions regarding the chances of capitalist development, and even then only in so far as these were based upon general reflections on the social conditions of the capitalist mode of production, since these latter were also to play a big part in the Russian controversial literature of the eighties and nineties. The point at issue was to begin with Russian capitalism and its prospects, but this, of course, led further afield to the whole problem of capitalist development. The example and the experiences of the West were adduced as vital evidence in this debate. One fact was of decisive importance for the theoretical content of the discussion that followed: not only was Marx's analysis of capitalist production as laid down in the first volume of _Capital_ already common property of educated Russia, but the second volume, too, with its analysis of the reproduction of capital as a whole had already been published in 1885. This gave a fundamentally new twist to the discussion. No more did the problem of crises obscure the real crux of the problem: for the first time, the argument centred purely in the reproduction of capital as a whole, in accumulation. Nor was the analysis bogged any longer by an aimless fumbling for the concepts of income and of individual and aggregate capital. Marx's diagram of social reproduction had provided a firm foothold. Finally, the issue was no longer between _laissez-faire_ and social reform, but between two varieties of socialism. The petty-bourgeois and somewhat muddled 'populist' brand of Russian socialists stood for scepticism regarding the possibility of capitalist development, much in the spirit of Sismondi and, in part, of Rodbertus, though they themselves frequently cited Marx as their authority. Optimism, on the other hand, was represented by the Marxist school in Russia. Thus the setting of the stage had been shifted completely. One of the two champions of the 'populist' movement, Vorontsov, known in Russia mainly under the _nom de plume_ V. V., (his initials), was an odd customer. His economics were completely muddled, and as an expert on theory he cannot be taken seriously at all. The other, Nikolayon (Danielson), however, was a man of wide education, and thoroughly conversant with Marxism. He had edited the Russian translation of the first volume of _Capital_ and was a personal friend of Marx and Engels, with both of whom he kept up a lively correspondence (published in the Russian language in 1908). Nevertheless it was Vorontsov who influenced public opinion among the Russian intelligentsia in the eighties, and Marxists in Russia had to fight him above all. As for our problem: the general prospects of capitalist development, a new generation of Russian Marxists, who had learned from the historical experience and knowledge of Western Europe, joined forces with George Plekhanov in opposition to the above-mentioned two representatives of scepticism in the nineties. They were amongst others Professor Kablukov, Professor Manuilov, Professor Issayev, Professor Skvortsov, Vladimir Ilyin, Peter v. Struve, Bulgakov, and Professor Tugan Baranovski. In the further course of our investigation we shall, however, confine ourselves to the last three of these, since every one of them furnished a more or less finished critique of this theory on the point with which we are here concerned. This battle of wits, brilliant in parts, which kept the socialist intelligentsia spellbound in the nineties and was only brought to an end by the walkover of the Marxist school, officially inaugurated the infiltration into Russian thought of Marxism as an economico-historical theory. 'Legalist' Marxism at that time publicly took possession of the Universities, the Reviews and the economic book market in Russia--with all the disadvantages of such a position. Ten years later, when the revolutionary risings of the proletariat demonstrated in the streets the darker side of this optimism about capitalist development, none of this Pleïad of Marxist optimists, with but a single exception, was to be found in the camp of the proletariat. _CHAPTER XIX_ VORONTSOV AND HIS 'SURPLUS' The representatives of Russian 'populism' were convinced that capitalism had no future in Russia, and this conviction brought them to the problem of capitalist reproduction. V. V. laid down his theories on this point in a series of articles in the review _Patriotic Memoirs_ and in other periodicals which were collected and published in 1882 under the title _The Destiny of Capitalism in Russia_. He further dealt with the problem in 'The Commodity Surplus in the Supply of the Market',[277] 'Militarism and Capitalism',[278] _Our Trends_,[279] and finally in _Outlines of Economic Theory_.[280] It is not easy to determine Vorontsov's attitude towards capitalist development in Russia. He sided neither with the purely slavophil theory which deduced the perversity and perniciousness of capitalism for Russia from the 'peculiarities' of the Russian economic structure and a specifically Russian 'national character', nor with the Marxists who saw in capitalist development an unavoidable historical stage which is needed to clear the way towards social progress for Russian society, too. Vorontsov for his part simply asserts that denunciation and acclamation of capitalism are equally futile because, having no roots in Russia, capitalism is just impossible there and can have no future. The essential conditions of capitalist development are lacking in Russia, and love's labour's lost if the state tries to promote it artificially--one might as well spare these efforts together with the heavy sacrifices they entail. But if we look into the matter more closely, Vorontsov's thesis is not nearly so uncompromising. For if we pay attention to the fact that capitalism does not mean only the accumulation of capital wealth but also that the small producer is reduced to the proletarian level, that the labourer's livelihood is not assured and that there are periodical crises, then Vorontsov would by no means deny that all these phenomena exist in Russia. On the contrary, he explicitly says in his preface to _The Destiny of Capitalism in Russia_: 'Whilst I dispute the possibility of capitalism as a form of production in Russia, I do not intend to commit myself in any way as to its future as a form or degree of exploiting the national resources.' Vorontsov consequently is of the opinion that capitalism in Russia merely cannot attain the same degree of maturity as in the West, whereas the severance of the immediate producer from the means of production might well be expected under Russian conditions. Vorontsov goes even further: he does not dispute at all that a development of the capitalist mode of production is quite possible in various branches of production, and even allows for capitalist exports from Russia to foreign markets. Indeed he says in his essay on 'The Commodity Surplus in the Supply of the Market' that 'in several branches of industry, capitalist production develops very quickly'[281] [in the Russian meaning of the term, of course--R. L.]. 'It is most probable that Russia, just like any other country, enjoys certain natural advantages which enable her to act as a supplier of certain kinds of commodities on foreign markets. It is extremely possible that capital can profit by this fact and lay hands upon the branches of production concerned--that is to say the (inter)national division of labour will make it easy for our capitalists to gain a foothold in certain branches. This, however, is not the point. We do not speak of a merely incidental participation of capital in the industrial organisation of the country, but ask whether it is likely that the entire production of Russia can be put on a capitalist basis.'[282] Put in this form, Vorontsov's scepticism looks quite different from what might have been expected at first. He doubts whether the capitalist mode of production could ever gain possession of the entire production in Russia; but then, capitalism has not so far accomplished this feat in any country of the world, not even in England. Such a brand of scepticism as to the future of capitalism appears at a glance quite international in outlook. And indeed, Vorontsov's theory here amounts to a quite general reflection on the nature and the essential conditions of capitalism; it is based upon a general theoretical approach to the reproductive process of social capital as a whole. Vorontsov gives the following very clear formulation of the specific relations between the capitalist mode of production and the problem of markets: 'The (inter)national division of labour, the distribution of all branches of industry among the countries taking part in international commerce, is quite independent of capitalism. 'The market which thus comes into being, the demand for the products of different countries resulting from such a division of labour among the nations, has intrinsically nothing in common with the market required by the capitalist mode of production.... The products of capitalist industry come on the market for another purpose; the question whether all the needs of the country are satisfied is irrelevant to them, and the entrepreneur does not necessarily receive in their stead another material product which may be consumed. Their main purpose is to realise the surplus value they contain. What, then, is this surplus value that it should interest the capitalist for its own sake? From our point of view, it is the surplus of production over consumption inside the country. Every worker produces more than he himself can consume, and all these surplus items accumulate in a few hands; their owners themselves consume them, exchanging them for the purpose against the most variegated kinds of necessities and luxuries. Yet eat, drink and dance as much as they like--they will not be able to squander the whole of the surplus value: a considerable remnant will be left over, of which they have to dispose somehow even though they cannot exchange it for other products. They must convert it into money, since it would otherwise just go bad. Since there is no one inside the country on whom the capitalists could foist this remnant, it must be exported abroad, and that is why foreign markets are indispensable to countries embarking on the capitalist venture.'[283] The above is a literal translation, showing all the peculiarities of Vorontsov's diction, so that the reader may have a taste of this brilliant Russian theorist with whom one can spend moments of sheer delight. Later, in 1895, Vorontsov summarised the same views in his book _Outlines of Economic Theory_ now claiming our attention. Here he takes a stand against the views of Say and Ricardo, and in particular also against John Stuart Mill who denied the possibility of general over-production. In the course of his argument he discovers something no one had known before: he has laid bare the source of all errors the classical school made about the problem of crises. This mistake lies in a fallacious theory of the costs of production to which bourgeois economists are addicted. No doubt, from the aspect of the costs of production (which according to Vorontsov's equally unheard-of assumption do not comprise profits), both profit and crises are unthinkable and inexplicable. But we can only appreciate this original thought to the full in the author's own words: 'According to the doctrine of bourgeois economists, the value of a product is determined by the labour employed in its manufacture. Yet bourgeois economists, once they have given this determination of value, immediately forget it and base their subsequent explanation of the exchange phenomena upon a different theory which substitutes "costs of production" for labour. Thus two products are mutually exchanged in such quantities that the costs of production are equal on both sides. Such a view of the process of exchange indeed leaves no room for a commodity surplus inside the country. Any product of a worker's annual labour must, from this point of view, represent a certain quantity of material of which it is made, of tools which have been used in its manufacture, and of the products which served to maintain the workers during the period of production. It [presumably the product--R. L.] appears on the market in order to change its use-form, to reconvert itself into objects, into products for the workers and the value necessary for renewing the tools. As soon as it is split up into its component parts, the process of reassembling, the productive process, will begin, in the course of which all the values listed above will be consumed. In their stead, a new product will come into being which is the connecting link between past and future consumption.' From this perfectly unique attempt to demonstrate social reproduction as a continuous process in the light of the costs of production, the following conclusion is promptly drawn: Considering thus the aggregate bulk of a country's products, we shall find no commodity surplus at all over and above the demand of society; an unmarketable surplus is therefore impossible from the point of view of a bourgeois economic theory of value.' Yet, after having eliminated capitalist profit from the costs of production by an extremely autocratic manhandling of the bourgeois theory of value, Vorontsov immediately presents this deficiency as a great discovery: 'The above analysis, however, reveals yet another feature in the theory of value prevalent of late: it becomes evident that this theory leaves no room for capitalist profits.' The argument that follows is striking in its brevity and simplicity: 'Indeed, if I exchange my own product, representing a cost of production of 5 roubles, for another product of equal value, I receive only so much as will be sufficient to cover my expense, but for my abstinence [literally so--R. L.] I shall get nothing.' And now Vorontsov really comes to grips with the root of the problem: 'Thus it is proved on a strictly logical development of the ideas held by bourgeois economists that the destiny of the commodity surplus on the market and that of capitalist profit is identical. This circumstance justifies the conclusion that both phenomena are interdependent, that the existence of one is a condition of the other, and indeed, so long as there is no profit, there is no commodity surplus.... It is different if the profit comes into being inside the country. Such profit is not originally related to production; it is a phenomenon which is connected with the latter not by technical and natural conditions but by an extraneous social form. Production requires for its continuation ... only material, tools, and means of subsistence for the workers, therefore as such it consumes only the corresponding part of the products: other consumers must be found for the surplus which makes up the profit, and for which there is no room in the permanent structure of industrial life, in production--consumers, namely, who are not organically connected with production, who are fortuitous to a certain extent. The necessary number of such consumers may or may not be forthcoming, and in the latter case there will be a commodity surplus on the market.'[284] Well content with the 'simple' enlightenment, by which he has turned the surplus product into an invention of capital and the capitalist into a 'fortuitous' consumer who is 'not organically connected with capitalist production', Vorontsov now turns to the crises. On the basis of Marx's 'logical' theory of the value of labour which he claims to 'employ' in his later works, he expounds them as an immediate result of the surplus value, as follows: 'If the working part of the population consumes what enters into the costs of production in form of the wages for labour, the capitalists themselves must destroy [literally so--R. L.] the surplus value, excepting that part of it which the market requires for expansion. If the capitalists are in a position to do so and act accordingly, there can be no commodity surplus; if not, over-production, industrial crises, displacement of the workers from the factories and other evils will result.' According to Vorontsov, however, it is '_the inadequate elasticity of the human organism_ which cannot enlarge its capacity to consume as rapidly as the surplus value is increasing', which is in the end responsible for these evils. He repeatedly expresses this ingenious thought as follows: 'The Achilles heel of capitalist industrial organisation thus lies in the incapacity of the entrepreneurs to consume the whole of their income.' Having thus 'employed' Marx's 'logical' version of Ricardo's theory of value, Vorontsov arrives at Sismondi's theory of crises which he adopts in as crude and simplified a form as possible. He believes, of course, that he is adopting the views of Rodbertus in reproducing those of Sismondi. 'The inductive method of research', he declares triumphantly, 'has resulted in the very same theory of crises and of pauperism which had been objectively stated by Rodbertus.'[285] It is not quite clear what Vorontsov means by an 'inductive method of research' which he contrasts with the objective method--since all things are possible to Vorontsov, he may conceivably mean Marx's theory. Yet Rodbertus, too, was not to emerge unimproved from the hands of the original Russian thinker. Vorontsov corrects Rodbertus' theory merely in so far as he eliminates the stabilisation of the wage rate in accordance with the value of the aggregate product which, to Rodbertus, had been the pivot of his whole system. According to Vorontsov, this measure against crises is a mere palliative, since 'the immediate cause of the above phenomena (over-production, unemployment, etc.) is not that the working classes receive too small a share of the national income, but that the capitalist class cannot possibly consume all the products which every year fall to their share.'[286] Yet, as soon as he has refuted Rodbertus' reform of the distribution of incomes, Vorontsov, with that 'strictly logical' consistency so peculiar to him, ultimately arrives at the following forecast for the future destiny of capitalism: 'If industrial organisation which prevails in W. Europe is to prosper and flourish further still, it can only do so provided that some means will be found to destroy [_verbatim_--R. L.] that portion of the national income which falls to the capitalists' share over and above their capacity to consume. The simplest solution of this problem will be an appropriate change in the distribution of the aggregate income among those who take part in production. If the entrepreneurs would retain for themselves only so much of all increase of the national income as they need to satisfy all their whims and fancies, leaving the remainder to the working class, the mass of the people, then the régime of capitalism would be assured for a long time to come.'[287] The hash of Ricardo, Marx, Sismondi and Rodbertus thus is topped with the discovery that capitalist production could be radically cured of over-production, that it could 'prosper and flourish' in all eternity, if the capitalists would refrain from capitalising their surplus value and would make a free gift to the working class of the corresponding part of the surplus value. Meanwhile the capitalists, until they have become sensible enough to accept Vorontsov's good advice, employ other means for the annual destruction of a part of their surplus value. Modern militarism, amongst others, is one of these appropriate measures--and this precisely to the extent to which the bills of militarism are footed by the capitalists' income--for Vorontsov can be counted upon to turn things upside down--and not by the working masses. A primary remedy for capitalism, however, is foreign trade which again is a sore spot in Russian capitalism. As the last to arrive at the table of the world market, Russian capitalism fares worst in the competition with older capitalist countries and thus lacks both prospects as to foreign markets and the most vital conditions of existence. Russia remains the 'country of peasants', a country of 'populist' production. 'If all this is correct,' Vorontsov concludes his essay on 'The Commodity Surplus in the Supply of the Market', 'then capitalism can play only a limited part in Russia. It must resign from the direction of agriculture, and its development in the industrial sphere must not inflict too many injuries upon the domestic industries which under our economic conditions are indispensable to the welfare of the majority of the population. If the reader would comment that capitalism might not accept such a compromise, our answer will be: so much the worse for capitalism.' Thus Vorontsov ultimately washes his hands of the whole thing, declining for his part all responsibility for the further fortunes of economic development in Russia. FOOTNOTES: [277] An essay in _Patriotic Memoirs_, May 1883. [278] An essay in the review _Russian Thought_, September 1889. [279] A book published in 1893. [280] A book published in 1895. [281] _Patriotic Memoirs_, vol. v: 'A Contemporary Survey', p. 4. [282] Ibid., p. 10. [283] _Patriotic Memoirs_, vol. v: 'A Contemporary Survey', p. 14. [284] _Outlines of Economic Theory_ (St. Petersburg, 1895), pp. 157 ff. [285] 'Militarism and Capitalism' in _Russian Thought_ (1889), vol. ix, p. 78. [286] 'Militarism and Capitalism' in _Russian Thought_ (1889), vol. ix, p. 80. [287] Ibid., p. 83. Cf. _Outlines_, p. 196. _CHAPTER XX_ NIKOLAYON The second theorist of populist criticism, Nikolayon, brings quite a different economic training and knowledge to his work. One of the best-informed experts on Russian economic relations, he had already in 1880 attracted attention by his treatise on the capitalisation of agricultural incomes, which was published in the review _Slovo_. Thirteen years later, spurred on by the great Russian famine of 1891, he pursued his inquiries further in a book entitled _Outlines of Our Social Economy Since the Reform_. Here he gives a detailed exposition, fully documented by facts and figures, of how capitalism developed in Russia, and on this evidence proceeds to show that this development is the source of all evil, and so of the famine, also, so far as the Russian people are concerned. His views about the destiny of capitalism in Russia are grounded in a definite theory about the conditions of the development of capitalist production in general, and it is this with which we must now deal. Since the market is of decisive importance for the capitalist mode of economy, every capitalist nation tries to make sure of as large a market as possible. In the first place, of course, it relies on its home market. But at a certain level of development, the home market is no longer sufficient for a capitalist nation, and this for the following reasons: all that social labour newly produces in one year can be divided into two parts--the share received by the workers in the form of wages, and that which is appropriated by the capitalists. Of the first part, only so many means of subsistence as correspond, in value, to the sum total of the wages paid within the country can be withdrawn from circulation. Yet capitalist economy decidedly tends to depress this part more and more. Its methods are a longer working day, stepping up the intensity of labour, and increasing output by technical improvements which enable the substitution of female and juvenile for male labour and in some cases displace adult labour altogether. Even if the wages of the workers still employed are rising, such increase can never equal the savings of the capitalists resulting from these changes. The result of all this is that the working class must play an ever smaller part as buyers on the home market. At the same time, there is a further change: capitalist production gradually takes over even the trades which provided additional employment to an agricultural people; thus it deprives the peasants of their resources by degrees, so that the rural population can afford to buy fewer and fewer industrial products. This is a further reason for the continual contraction of the home market. As for the capitalist class, we see that this latter is also unable to realise the entire newly created product, though for the opposite reason. However large the requirements of this class, the capitalists will not be able to consume the entire surplus product in person. First, because part of it is needed to enlarge production, for technical improvements which, to the individual entrepreneur, will be a necessary condition of existence in a competitive society. Secondly, because an expanding capitalist production implies an expansion in those branches of industry which produce means of production (e.g. the mining industry, the machine industry and so forth) and whose products from the very beginning take a use-form that is incapable of personal consumption and can only function as capital. Thirdly and lastly, the higher labour productivity and capital savings that can be achieved by mass production of cheap commodities increasingly impel society towards mass production of commodities which cannot all be consumed by a mere handful of capitalists. Although one capitalist can realise his surplus value in the surplus product of another capitalist and _vice versa_, this is only true for products of a certain branch, for consumer goods. However, the incentive of capitalist production is not the satisfaction of personal wants, and this is further shown by the progressive decline in the production of consumer as compared to that of producer goods. 'Thus we see that the aggregate product of a capitalist nation must greatly exceed the requirements of the whole industrial population employed, in the same way as each individual factory produces vastly in excess of the requirements of both its workers and the entrepreneur, and this is entirely due to the fact that the nation is a capitalist nation, because the distribution of resources within the society does not aim to satisfy the real wants of the population but only the effective demand. Just as an individual factory-owner could not maintain himself as a capitalist even for a day if his market were confined to the requirements of his workers and his own, so the home market of a developed capitalist nation must also be insufficient.' At a certain level, capitalist development thus has the tendency to impede its own progress. These obstacles are ultimately due to the fact that progressive labour productivity, involving the severance of the immediate producer from the means of production, does not benefit society as a whole, but only the individual entrepreneur; and the mass of labour power and men-hours which has been 'set free' by this process becomes redundant and thus is not only lost to society but will become a burden to it. The real wants of the masses can only be satisfied more fully in so far as there can be an ascendancy of a 'populist' mode of production based upon the union between the producer and his means of production. It is the aim of capitalism, however, to gain possession of just these spheres of production, and to destroy in the process the main factor which makes for its own prosperity. The periodical famines in India, for instance, recurring at intervals of ten or eleven years, were thus among the causes of periodical industrial crises in England. Any nation that sets out on capitalist development will sooner or later come up against these contradictions inherent in this mode of production. And the later a nation embarks on the capitalist venture, the more strongly will these contradictions make themselves felt, since, once the home market has been saturated, no substitute can be found, the outside market having already been conquered by the older competing countries. The upshot of it all is that the limits of capitalism are set by the increasing poverty born of its own development, by the increasing number of redundant workers deficient in all purchasing power. Increasing labour productivity which can rapidly satisfy every effective demand of society corresponds to the increasing incapacity of ever broader masses of the population to satisfy their most vital needs; on the one hand, a glut of goods that cannot be sold--and on the other, large masses who lack the bare necessities. These are Nikolayon's general views.[288] He knows his Marx, we see, and has turned the two first volumes of _Capital_ to excellent use. And still, the whole trend of his argument is genuinely Sismondian. It is capitalism itself which brings about a shrinking home market since it impoverishes the masses; every calamity of modern society is due to the destruction of the 'populist' mode of production, that is to say the destruction of small-scale enterprise. That is his main theme. More openly even than Sismondi, Nikolayon sets the tenor of his critique by an apotheosis of small-scale enterprise, this sole approach to grace.[289] The aggregate capitalist product cannot, in the end, be realised within the society, this can only be done with recourse to outside markets. Nikolayon here comes to the same conclusion as Vorontsov, in spite of a quite different theoretical point of departure. Applied to Russia, it is the economic scientific ground for a sceptical attitude towards capitalism. Capitalist development in Russia has been without access to foreign markets from the first, it could only show its worst aspects--it has impoverished the masses of the people. In consequence, it was a 'fatal mistake' to promote capitalism in Russia. On this point, Nikolayon fulminates like a prophet of the Old Testament: 'Instead of keeping to the tradition of centuries, instead of developing our old inherited principle of a close connection between the immediate producer and his means of production, instead of usefully applying the scientific achievements of W. Europe to their forms of production based on the peasants' ownership of their means of production, instead of increasing their productivity by concentrating the means of production in their hands, instead of benefiting, not by the forms of production in W. Europe, but by its organisation, its powerful co-operation, its division of labour, its machinery, etc., etc.--instead of developing the fundamental principle of a landowning peasantry and applying it to the cultivation of the land by the peasants, instead of making science and its application widely accessible to the peasants--instead of all this, we have taken the opposite turning. We have failed to prevent the development of capitalist forms of production, although they are based on the expropriation of the peasants; on the contrary, we have promoted with all our might the upsetting of our entire economic life which resulted in the famine of 1891.' Though the evil is much advanced, it is not too late even now to retrace our steps. On the contrary, a complete reform of economic policy is just as urgently needed for Russia in view of the threatening proletarisation and collapse, as Alexander's reforms after the Crimean war were necessary in their time. Now a social reform as advocated by Nikolayon is completely Utopian. His attitude exhibits an even more blatant petty-bourgeois and reactionary bias than Sismondi's ever did, considering that the Russian 'populist' writes after a lapse of seventy years. For in his opinion, the old _obshchina_, the rural community founded on the communal ownership of the soil, is the raft to deliver Russia from the flood of capitalism. On it, the discoveries of modern big industry and scientific technique are to be grafted by measures which remain his own secret--so that it can serve as the basis of a 'socialised' higher form of production. Russia can choose no other alternative: either she turns her back upon capitalist development, or she must resign herself to death and decay.[290] After a crushing criticism of capitalism Nikolayon thus ends up with the same old 'populist' panacea which had as early as the fifties, though at that time with greater justification, been hailed as the 'peculiarly Russian' guarantee of a higher social development, although its reactionary character as a lifeless relic of ancient institutions had been exposed in Engels' _Fluechtlingsliteratur_ in _Volksstaat_ (1875). Engels wrote at the time: 'A further development of Russia on bourgeois lines would gradually destroy communal property there too, quite apart from any interference of the Russian government "with the knout and with bayonets" (as the revolutionary populists imagined). Under the pressure of taxes and usury, communal landownership is no longer a privilege, it becomes an irksome chain. The peasants frequently run away from it, either with or without their families, to seek their living as itinerant labourers, and leave the land behind. We see that communal ownership in Russia has long since passed its flower and there is every indication that its decay is approaching.' With these words, Engels hits right on the target of the _obshchina_ problem--eighteen years before the publication of Nikolayon's principal work. If Nikolayon subsequently with renewed courage again conjured up the ghost of the _obshchina_, it was a bad historical anachronism inasmuch as about a decade later the _obshchina_ was given an official burial by the state. The absolutist government which had for financial reasons tried during half a century artificially to keep the machinery of the rural community going was compelled to give up this thankless task on its own accord. The agrarian problem soon made it clear how far the old 'populist' delusion was lagging behind the actual course of economic events, and conversely, how powerfully capitalist development in Russia, mourned and cursed as still-born, could demonstrate with lightning and thunder its capacity to live and to multiply. Once again, and for the last time, this turn of events demonstrates in quite a different historical setting how a social critique of capitalism, which begins by doubting its capacity for development, must by a deadly logic lead to a reactionary Utopianism--both in the France of 1819 and in the Russia of 1893.[291] FOOTNOTES: [288] Cf. _Outlines of Our Social Economy_, in particular pp. 202-5, 338-41. [289] Vladimir Ilyich [Lenin] has given detailed proof of the striking similarity between the position of the Russian 'populists' and the views of Sismondi in his essay _On the Characteristics of Economic Romanticism_ (1897). [290] _Outlines of Our Social Economy_, p. 322. Friedrich Engels appraises the Russian situation differently. He repeatedly tries to convince Nikolayon that Russia cannot avoid a high industrial development, and that her sufferings are nothing but the typical capitalist contradictions. Thus he writes on September 22, 1892: 'I therefore hold that at present industrial production necessarily implies big industry, making use of steam power, electricity, mechanical looms and frames, and lastly the manufacture of the machines themselves by mechanical means. From the moment that railways are introduced in Russia, recourse to all these extremely modern means of production becomes inevitable. It is necessary that you should be able to mend and repair your engines, coaches, railways and the like, but to do this cheaply, you must also be in a position to make at home the things needing repair. As soon as the technique of war has become a branch of industry (armour-plated cruisers, modern artillery, machine guns, steel bullets, smokeless gun powder, etc.) a big industry that is indispensable for the production of such items has become a political necessity for you as well. All these items cannot be made without a highly developed metal industry which on its part cannot develop unless there is a corresponding development of all other branches of production, textiles in particular' (Marx-Engels to Nikolayon, St. Petersburg, 1908, p. 75). And further in the same letter: 'So long as Russian industry depends on the home market alone, it can only satisfy the internal demand. The latter, however, can grow but slowly, and it seems to me that under present conditions of life in Russia it is even bound to decrease, since it is one of the unavoidable consequences of high industrial development that it destroys its own home market by the same process which served to create it: by destroying the bases of the peasants' domestic industry. Yet peasants cannot live without such a domestic industry. They are ruined as peasants, their purchasing power is reduced to a minimum, and unless they grow new roots in new conditions of life, unless they become proletarians, they will only represent a very small market for the newly arising plants and factories. 'Capitalist production is a phase of economic transition, full of inherent contradictions which only develop and become visible to the extent that capitalist production develops. The tendency of simultaneously creating and destroying a market is just one of these contradictions. Another is the hopeless situation that will ensue, all the sooner in a country like Russia which lacks external markets than in countries more or less fit to compete in the open world market. These latter can find some means of relief in this seemingly hopeless situation by heroic measures of commercial policy, that is to say by forcibly opening up new markets. China is the most recent market to be opened up for English commerce, and it proved adequate for a temporary revival of prosperity. That is why English capital is so insistent on railroad building in China. Yet railways in China mean the destruction of the entire foundation of China's small rural enterprises and her domestic industry. In this case, there is not even a native big industry developed to compensate for this evil to some extent, and hundreds of millions will consequently find it impossible to make a living at all. The result will be mass emigration, such as the world has never yet seen, and America, Asia and Europe will be flooded with the detested Chinese. This new competitor on the labour market will compete with American, Australian and European labour at the level of what the Chinese consider a satisfactory standard of living, which is well known to be the lowest in the whole world. Well then, if the whole system of production in Europe has not been revolutionised by then, that will be the time to start this revolution' (ibid., p. 79). Engels, though he followed Russian developments with attention and keen interest, persistently refused to take an active part in the Russian dispute. In his letter of November 24, 1894, i.e. shortly before his death, he expressed himself as follows: 'My Russian friends almost daily and weekly bombard me with requests to come forward with my objections to Russian books and reviews which not only misinterpret but even misquote the sayings of our author (Marx). My friends assure me that my intervention would suffice to put matters right. Yet I invariably and firmly refuse all such proposals because I cannot afford to become involved with a dispute held in a foreign country, in a tongue which I, at least, cannot read as easily and freely as the more familiar W. European languages, and in a literature which is at best accessible to me only in fortuitous glimpses of some fragments, and which I cannot pursue anything like systematically enough in all its stages and details without neglecting my real and serious work. There are people everywhere who, once they have taken up a certain stand, are not ashamed to have recourse to misinterpreting the thoughts of others and to all kinds of dishonest manipulations for their own ends, and if that is what has happened to our author, I am afraid they will not deal more kindly with me, so that in the end I shall be compelled to interfere in the dispute, first to defend others, and then in my own defence' (ibid., p. 90). [291] We might mention that the surviving champions of 'populist' pessimism, and Vorontsov in particular, to the last remained loyal to their views, in spite of all that happened in Russia--a fact that does more credit to their character than to their intelligence. Referring to the 1900 and 1902 crises, Vorontsov wrote in 1902: 'The doctrinaire dogma of the Neo-Marxists rapidly loses its power over people's minds. That the newest successes of the individualists are ephemeral has obviously dawned even on their official advocates.... In the first decade of the twentieth century, we come back to the same views about economic development in Russia that had been the legacy of the 1870's' (Cf. the review _Political Economics_, October 1902, quoted by A. Finn Yenotayevski in _The Contemporary Economy of Russia 1890-1910_, St. Petersburg, 1911, p. 2.) Even to-day, then, this last of the 'populist' Mohicans deduces the 'ephemeral character', not of his own theory, but of economic reality. What of the saying of Barrère: 'Il n'y a que les morts qui ne reviennent pas'. _CHAPTER XXI_ STRUVE'S 'THIRD PERSONS' AND 'THREE WORLD EMPIRES' We now turn to the criticism of the above opinions as given by the Russian Marxists. In 1894, Peter v. Struve who had already given a detailed appraisal of Nikolayon's book in an essay 'On Capitalist Development in Russia',[292] published a book in Russian,[293] criticising the theories of 'populism' from various aspects. In respect of our present problem, however, he mainly confines himself to proving, against both Vorontsov and Nikolayon, that capitalism does not cause a contraction of the home market but, on the contrary, an expansion. There can be no doubt that Nikolayon has made a blunder--the same that Sismondi had made. They each describe only a single aspect of the destructive process, performed by capitalism on the traditional forms of production by small enterprise. They saw only the resulting depression of general welfare, the impoverishment of broad strata of the population, and failed to notice that economic aspect of the process which entails the abolition of natural economy and the substitution of a commodity economy in rural districts. And this is as much as to say that, by absorbing further and further sections of formerly independent and self-sufficient producers into its own sphere, capitalism continuously transforms into commodity buyers ever new strata of people who had not before bought its commodities. In fact, the course of capitalist development is just the opposite of that pictured by the 'populists' on the model of Sismondi. Capitalism, far from ruining the home market, really sets about creating it, precisely by means of a spreading money economy. Struve in particular refutes the theory that the surplus value cannot possibly be realised on the home market. He argues as follows: The conviction that a mature capitalist society consists exclusively of entrepreneurs and workers forms the basis of Vorontsov's theory, and Nikolayon himself operates with this concept throughout. From this point of view, of course, the realisation of the capitalist aggregate product seems incomprehensible. And Vorontsov's theory is correct in so far as it states the fact that neither the capitalists' nor the workers' consumption can realise the surplus value, so that the existence of 'third persons' must be presumed.[294] But then, is it not beyond any doubt that some such 'third persons' exist in every capitalist society? The idea of Vorontsov and Nikolayon is pure fiction 'which cannot advance our understanding of any historical process whatever by a hair's breadth'.[295] There is no actual capitalist society, however highly developed, composed exclusively of capitalists and workers. 'Even in England and Wales, out of a thousand self-supporting inhabitants, 543 are engaged in industry, 172 in commerce, 140 in agriculture, 81 in casual wage labour, and 62 in the Civil Service, the liberal professions and the like.' Even in England, then, there are large numbers of 'third persons', and it is they who, by their consumption, help to realise the surplus value in so far as it is not consumed by the capitalists. Struve leaves it open whether these 'third persons' consume enough to realise all surplus value--however that may be, 'the contrary would have to be proved'.[296] This cannot be done, he claims, for Russia, that vast country with an immense population. She, in fact, is in the fortunate position to be able to dispense with foreign markets. In this--and here Struve dips into the intellectual treasures of Professors Wagner, Schaeffle, and Schmoller--she enjoys the same privileges as the United States of America. 'If the example of the N. American Union stands for anything, it is proof of the fact that under certain circumstances capitalist industry can attain a very high level of development almost entirely on the basis of the home market.'[297] The negligible amount of industrial exports from the U.S.A. in 1882 is mentioned in support of this statement which Struve formulates as a general doctrine: 'The vaster the territory, and the larger the population of a country, the less does that country require foreign markets for its capitalist development.' He infers from this, in direct opposition to the 'populists', 'a more brilliant future (for Russia) than for the other countries'. On the basis of commodity production, the progressive development of agriculture is bound to create a market wide enough to support the development of Russian industrial capitalism. This market would be capable of unlimited expansion, in step with the economic and cultural progress of the country, and together with the substitution of a monetary for a natural economy. 'In this respect, capitalism enjoys more favourable conditions in Russia than in other countries.'[298] Struve paints a detailed and highly coloured picture of the new markets which, thanks to the Trans-Siberian Railway, are opening up in Siberia, Central Asia, Asia Minor, Persia and the Balkans. But his prophetic zeal blinds him to the fact that he is no longer talking about the 'indefinitely expanding' home market but about specific foreign markets. In later years, he was to throw in his lot, in politics too, with this optimistic Russian capitalism and its liberal programme of imperialist expansion, for which he had laid the theoretical foundations when still a 'Marxist'. Indeed, the tenor of Struve's argument is a fervent belief in the unlimited capacity for expansion of capitalist production, but the economic foundation of this optimism is rather weak. He is somewhat reticent as to what he means by the 'third persons' whom he considers the mainstay of accumulation, but his references to English occupational statistics indicate that he has in mind the various private and public servants, the liberal professions, in short the notorious _grand public_ so dear to bourgeois economists when they are completely at a loss. It is this 'great public' of which Marx said that it serves as the explanation for things which the economist cannot explain. It is obvious that, if we categorically refer to consumption by the capitalists and the workers, we do not speak of the entrepreneur as an individual, but of the capitalist class as a whole, including their hangers-on--employees, Civil Servants, liberal professions, and the like. All such 'third persons' who are certainly not lacking in any capitalist society are, as far as economics is concerned, joint consumers of the surplus value for the greater part, in so far, namely, as they are not also joint consumers of the wages of labour. These groups can only derive their purchasing power either from the wage of the proletariat or from the surplus value, if not from both; but on the whole, they are to be regarded as joint consumers of the surplus value. It follows that their consumption is already included in the consumption of the capitalist class, and if Struve tries to reintroduce them to the capitalists by sleight-of-hand as 'third persons' to save the situation and help to realise the surplus value, the shrewd profiteer will not be taken in. He will see at once that this great public is nothing but his old familiar retinue of parasites who buy his commodities with money of his own providing. No, no, indeed! Struve's 'third persons' will not do at all. Struve's theory of foreign markets and their significance for capitalist production is equally untenable. In this, he defers to the mechanist approach of the 'populists' who, along with the professors' textbooks, hold that a capitalist (European) country will first exploit the home market to the limit, and will only look to foreign markets when this is almost or completely exhausted. Then, following in the footsteps of Wagner, Schaeffle and Schmoller, Struve arrives at the absurd conclusion that a country with vast territories and a large population can make its capitalist production a 'self-contained whole' and rely indefinitely on the home market alone.[299] In actual fact, capitalist production is by nature production on a universal scale. Quite contrary to the bookish decrees issued by German scholars, it is producing for a world market already from the word _go_. The various pioneering branches of capitalist production in England, such as the textile, iron and coal industries, cast about for markets in all countries and continents, long before the process of destroying peasants' property, the decline of handicraft and of the old domestic industries within the country had come to an end. And again, is it likely that the German chemical or electrotechnical industries would be grateful for the sober advice not to work for five continents, as they have done from the beginning, but to confine themselves to the German home market which, being largely supplied from abroad, is evidently far from exhausted in respect of a whole lot of other German industries? Or that one should explain to the German machine industry, it should not venture yet upon foreign markets, since German import statistics are visible proof that a good deal of the demand in Germany for products of this branch is satisfied by foreign supplies? No, this schematic conception of 'foreign trade' does not help us at all to grasp the complexity of the world market with its uncounted ramifications and different shades in the division of labour. The industrial development of the U.S.A. who have already at the time of writing become a dangerous rival to Britain both on the world market and even in England herself, just as they have beaten German competition, e.g. in the sphere of electrotechnics, both in the world market and in Germany herself, has given the lie to Struve's inferences, already out-of-date when they were put on paper. Struve also shares the crude view of the Russian 'populists' who saw hardly more than a merchant's sordid concern for his market in the international connections of capitalist economy, and its historical tendency to create a homogeneous living organism based on social division of labour as well as the countless variety of natural wealth and productive conditions of the globe. Moreover he accepts the Three Empire fiction of Wagner and Schmoller (the self-contained Empires of Great Britain, Russia and the U.S.A.) which completely ignores or artificially minimises the vital part played by an unlimited supply of means of subsistence, of raw and auxiliary materials and of labour power which is just as necessary for a capitalist industry computed in terms of a world market as the demand for finished products. Alone the history of the English cotton industry, a reflection in miniature of the history of capitalism in general, spreading over five continents throughout the nineteenth century, makes a mockery of the professors' childish pretensions which have only one real significance: to provide the theoretical justification for the system of protective tariffs. FOOTNOTES: [292] Published in _Sozialdemokratisches Zentralblatt_, vol. iii, No. 1. [293] _Critical Comments on the Problem of Economic Development in Russia._ [294] Op. cit., p. 251. [295] Ibid., p. 255. [296] Ibid., p. 252. [297] Ibid., p. 260. 'There can be no doubt that Struve's attempt to refute what he calls the pessimist outlook on the analogy of the U.S.A. is fallacious. He says that Russia can overcome the evil consequences of the most recent capitalism just as easily as the U.S.A. But what he forgets is that the U.S.A. from the first represent a new bourgeois state, that they were founded by a petty bourgeoisie and by peasants who had fled from European feudalism to set up a purely bourgeois society. In Russia, on the other hand, we have a primitive communist foundation, a society of _gentes_, as it were, in the pre-civilised stage which, though it is already disintegrating, still serves as a material basis upon which the capitalist revolution (for it is in fact a social revolution) can take place and become effective. In America, a monetary economy had been stabilised more than a century ago, whereas a natural economy had until recently prevailed in Russia. It should be obvious therefore that this revolution in Russia is bound to be much more ruthless and violent, and accompanied by immensely more suffering than in America' (Engels to Nikolayon, October 17, 1893, _Letters_ ..., p. 85). [298] _Critical Comments_ ..., p. 284. [299] Professor Schmoller, amongst others, clearly reveals the reactionary aspect of the 'Three Empire Theory' (viz. Great Britain, Russia and the U.S.A.) evolved by the German professors. In his handbook of commercial policy (_Handelspolitische Säkularbetrachtung_), the venerable scholar dolefully frowns upon 'neo-mercantilism', that is to say upon the imperialist designs of the three arch-villains. 'In the interests of a higher intellectual, moral and aesthetic civilisation and social progress' he demands a strong German navy and a European Customs Union. 'Out of the economic tension of the world there arises the prime duty for Germany to create for herself a strong navy, so as to be prepared for battle in the case of need, and to be desirable as an ally to the World Powers'--which latter, however, Professor Schmoller says elsewhere, he does not wish to blame for again taking the path of large-scale colonial expansion. 'She neither can nor ought to pursue a policy of conquest like the Three World Powers, but she must be able, if necessary, to break a foreign blockade of the North Sea in order to protect her own colonies and her vast commerce, and she must be able to offer the same security to the states with whom she forms an alliance. It is the task of the Three-Partite Union (Germany, Austro-Hungary, and Italy) to co-operate with France towards imposing some restraint, desirable for the preservation of all other states, on the over-aggressive policy of the Three World Powers which constitutes a threat to all smaller states, and to ensure moderation in conquests, in colonial acquisitions, in the immoderate and unilateral policy of protective tariffs, in the exploitation and maltreatment of all weaker elements. The objectives of all higher intellectual, moral and aesthetic civilisation and of social progress depend on the fact that the globe should not be divided up among Three World Empires in the twentieth century, that these Three Empires should not establish a brutal neo-mercantilism' (_Die Wandlungen der Europäischen Handelspolitik des 19. Jahrhunderts_, 'Changes in the European Commercial Policy During the 19th Century', in _Jahrb. für Gesetzgebung, Verwaltung und Volkswirtschaft_, vol. xxiv, p. 381). _CHAPTER XXII_ BULGAKOV AND HIS COMPLETION OF MARX'S ANALYSIS The second critic of 'populist' scepticism, S. Bulgakov, is no respecter of Struve's 'third persons' and at once denies that they form the sheet-anchor for capitalist accumulation. 'The majority of economists before Marx', he declares, 'solved the problem by saying that some sort of "third person" is needed, as a _deus ex machina_, to cut the Gordian knot, i.e. to consume the surplus value. This part is played by luxury-loving landowners (as with Malthus), or by indulgent capitalists, or yet by militarism and the like. There can be no demand for the surplus value without some such extraordinary mediators; a deadlock will be reached on the markets and the result will be over-production and crises.'[300] 'Struve thus assumes that capitalist production in its development, too, may find its ultimate mainstay in the consumption of some fantastic sort of "third person". But if this great public is essentially characterised as consuming the surplus value, whence does it obtain the means to buy?'[301] For his part, Bulgakov centres the whole problem from the first in the analysis of the social aggregate product and its reproduction as given by Marx in the second volume of _Capital_. He has a thorough grasp of the fact that he must start with simple reproduction and must fully understand its working in order to solve the question of accumulation. In this context, he says, it is of particular importance to obtain a clear picture of the consumption of surplus value and wages in such branches of production as do not turn out goods for consumption, and further, to understand fully the circulation of that portion of the social aggregate product which represents used-up constant capital. This, he argues, is a completely new problem of which economists had not even been aware before Marx brought it up. 'In order to solve this problem, Marx divides all capitalistically produced commodities into two great and fundamentally different categories: the production of producer and consumer goods. There is more theoretical importance in this division than in all previous squabbles on the theory of markets.'[302] Bulgakov, we see, is an outspoken and enthusiastic supporter of Marx's theory. The object of his study, as he puts it, is thus a critique of the doctrine that capitalism cannot exist without external markets. 'For this purpose, the author has made use of the most valuable analysis of social reproduction given by Marx in volume ii of _Capital_ which for reasons unknown has scarcely been utilised in economic theory. Though this analysis cannot be taken as fully completed, we are yet of opinion that even in its present fragmentary shape it offers an adequate foundation for a solution of the market problem that differs from that adopted by Messrs. Nikolayon, V. V. and others, and which they claim to have found in Marx.'[303] Bulgakov gives the following formulation of his solution which he has deduced from Marx himself: 'In certain conditions, capitalism may exist solely by virtue of an internal market. It is not an inherent necessity peculiar to the capitalist mode of production that the outside market be able to absorb the surplus of capitalist production. The author has arrived at this conclusion in consequence of his study of the above-mentioned analysis of social reproduction.' And now we are eager to hear the arguments Bulgakov has based on the above thesis. At first sight, they prove surprisingly simple: Bulgakov faithfully reproduces Marx's well-known diagram of simple reproduction, adding comments which do credit to his insight. He further cites Marx's equally familiar diagram of enlarged reproduction--and this indeed is the proof we have been so anxious to find. 'Consequent upon what we have said, it will not be difficult now to determine the very essence of accumulation. The means-of-production department I must produce additional means of production necessary for enlarging both its own production and that of Department II. II, in its turn, will have to supply additional consumption goods to enlarge the variable capital in both departments. Disregarding the circulation of money, the expansion of production is reduced to an exchange of additional products of I needed by II against additional products of II needed by I.' Loyally following Marx's deductions, Bulgakov does not notice that so far his entire thesis is nothing but words. He believes that these mathematical _formulæ_ solve the problem of accumulation. No doubt we can easily imagine proportions such as those he has copied from Marx, and _if there is expanding production_, these _formulæ_ will apply. Yet Bulgakov overlooks the principal problem: who exactly is to profit by an expansion such as that whose mechanism he examines? Is it explained just because we can put the mathematical proportions of accumulation on paper? Hardly, because just as soon as Bulgakov has declared the matter settled and goes on to introduce the circulation of money into the analysis, he right away comes up against the question: where are I and II to get the money for the purchase of additional products? When we dealt with Marx, time and again the weak point in his analysis, the question really of consumers in enlarged reproduction, cropped up in a perverted form as the question of additional money sources. Here Bulgakov quite slavishly follows Marx's approach, accepting his misleading formulation of the problem without noticing that it is not straightforward, although he knows perfectly well that 'Marx himself did not answer this question in the drafts which were used to compile the second volume of _Capital_'. It should be all the more interesting to see what answer Marx's Russian pupil attempted to work out on his own. 'The following solution', Bulgakov says, 'seems to us to correspond best to Marx's doctrine as a whole: The new variable capital in money-form supplied by II for both departments has its commodity equivalent in surplus value II. With reference to simple reproduction, we have already seen that the capitalists themselves must throw money into circulation to realise their surplus value, money which ultimately reverts to the pocket of the very capitalist it came from. The quantity of money required for the circulation of the surplus value is determined in accordance with the general law of commodity circulation by the value of the commodities that contained it, divided by the average amount of money turnover. This same law must apply here; the capitalists of Department II must dispose of a certain amount of money for the circulation of their surplus value, and must consequently possess certain money reserves. These reserves must be ample enough for the circulation both of that portion of the surplus value which represents the consumption fund and of that which is to be accumulated as capital.' Bulgakov further argues that it is immaterial to the question how much money is required to circulate a certain amount of commodities inside a country, whether or not some of these commodities contain any surplus value. 'In answer to the general question as to money sources inside the country, however, our solution is that the money is supplied by the producer of gold.'[304] If a country requires more money consequent upon an 'expansion of production', the production of gold will have to be increased accordingly. So here we are again: the producer of gold is again the _deus ex machina_, just as he had been for Marx. In fact, Bulgakov has sadly disappointed us in the high hopes we had of his new solution. His 'solution' of the problem does not go a step beyond Marx's own analysis. It can be reduced to three extremely simple statements as follows: (1) Question: How much money do we need for the realisation of capitalised surplus value? Answer: Just as much as is required in accordance with the general law of commodity circulation. (2) Q.: Where do the capitalists get the money for the realisation of capitalised surplus value? A.: They are supposed to have it. (3) Q.: How did the money come into the country in the first place? A.: It is provided by the producer of gold. The extreme simplicity of this method of explanation is suspicious rather than attractive. We need not trouble, however, to refute this theory which makes the gold producer the _deus ex machina_ of capitalist accumulation. Bulgakov has done it himself quite adequately. Eighty pages on, he returns to the gold producer in quite a different context, in the course of a lengthy argument against the theory of the wages fund in which he got involved for some mysterious reason. Here he suddenly displays a keen grasp of the problem: 'We know already that there is a gold producer amongst other producers. Even under conditions of simple reproduction, he increases, on the one hand, the absolute quantity of money circulating inside the country, and on the other, he buys producer and consumer goods without, in his turn, selling commodities, paying with his own product, i.e. with the general exchange equivalent, for the goods he buys. The gold producer now might perhaps render the service of buying the whole accumulated surplus value from II and pay for it in gold which II can then use to buy means of production from I and to increase its variable capital needed to pay for additional labour power so that the gold producer now appears as the real external market. 'This assumption, however, is quite absurd. To accept it would mean to make the expansion of social production dependent upon the expansion of gold production. (Hear, hear!) This in turn presupposes an increase in gold production which is quite unreal. If the gold producer were obliged to buy all the accumulated surplus value from II for his own workers, his own variable capital would have to grow by the day and indeed by the hour. Yet his constant capital as well as his surplus value should also grow in proportion, and gold production as a whole would consequently have to take on immense dimensions. (Hear, hear!) Instead of submitting this sophistical presumption to statistical tests--which in any case would hardly be possible--a single fact can be adduced which would alone refute this presupposition: it is the development of the institution of credit which accompanies the development of capitalist economy. (Hear, hear!) Credit has the tendency to diminish the amount of money in circulation (this decrease being, of course, only relative, not absolute); it is the necessary complement of a developing economy of exchange which would otherwise soon find itself hampered by a lack of coined money. I think we need not give figures in this context to prove that the rôle of money in exchange-transactions is now very small. The hypothesis is thus proved in immediate and evident disagreement with the facts and must be confuted.'[305] Bravo! Bravissimo! This is really excellent! Bulgakov, however, thus 'confutes' also his former explanation of the question, in what way and by whom capitalised surplus value is realised. Moreover, in refuting his own statements, Bulgakov has only explained in somewhat greater detail what Marx expressed in a single word when he called the hypothesis of a gold producer swallowing up the entire surplus value of society--'absurd'. Admittedly, Bulgakov's real solution and that of Russian Marxists in general who deal extensively with the problem must be sought elsewhere. Just like Tugan Baranovski and Ilyin [Lenin], Bulgakov underlines the fact that the opposing sceptics made a capital error with respect to the possibility of accumulation in analysing the value of the aggregate product. They, especially Vorontsov, assumed that the aggregate social product consists in consumer goods, and they all started from the false premise that consumption is indeed the object of capitalist production. This, as the Marxists now explain, is the source of the entire misunderstanding--of all the imaginary difficulties connected with the realisation of the surplus value, with which the sceptics racked their brains. 'This school created non-existent difficulties because of this mistaken conception. Since the normal conditions of capitalist production presuppose that the capitalists' consumption fund is only a part of the surplus value, and the smaller part at that, the larger being set aside for the expansion of production, it is obvious that the difficulties imagined by this (the _populist_) school do not really exist.'[306] The unconcern with which Bulgakov here ignores the real problem is striking. Apparently it has not dawned on him that the question as to the ultimate beneficiaries, quite irrelevant so long as personal consumption of the entire surplus value is assumed, only becomes acute on the assumption of enlarged reproduction. All these 'imaginary difficulties' vanish, thanks to two discoveries of Marx's which his Russian pupils untiringly quote against their opponents. The first is the fact that, in terms of value, the social product is composed, not of _v + s_, but of _c + v + s_. Secondly, the ratio of _c_ to _v_ in this sum continually increases with the progress of capitalist production, and at the same time, the capitalised part of the surplus value as against that part of it that is consumed, is ever growing. On this basis, Bulgakov establishes a complete theory of the relations between production and consumption in a capitalist society. As this theory plays such an important part for the Russian Marxists in general, and Bulgakov in particular, it will be necessary to get better acquainted with it. 'Consumption,' Bulgakov says, 'the satisfaction of social needs, is but an incidental moment in the circulation of capital. The volume of production is determined by the volume of capital, and not by the amount of social requirements. Not alone that the development of production is unaccompanied by a growth in consumption--the two are mutually antagonistic. Capitalist production knows no other than effective consumption, but only such persons who draw either surplus value or labour wages can be effective consumers, and their purchasing power strictly corresponds to the amount of those revenues. Yet we have seen that the fundamental evolutionary laws of capitalist production tend, despite the absolute increase, to diminish the relative size of variable capital as well as of the capitalists' consumption fund. We can say, then, _that the development of production diminishes consumption_.[307] The conditions of production and of consumption are thus in conflict. Production cannot and does not expand to further consumption. Expansion, however, is an inherent fundamental law of capitalist production and confronts every individual capitalist in the form of a stern command to compete. This contradiction is negligible in view of the fact that expanding production as such represents a market for additional products. "Inherent contradictions are resolved by an extension of the outlying fields of production."'[308] (Bulgakov here quotes a saying of Marx which he has thoroughly misunderstood; we shall later have occasion to deal with it once more.) 'It has just been shown how this is possible.' (A reference to the analysis of the diagram of enlarged reproduction.) 'Evidently, the greater share of the expansion is apportioned to Department I, to the production, that is to say, of constant capital, and only a (relatively) smaller part to Department II which produces commodities for immediate consumption. This change in the relations of the two departments shows well enough what part is played by consumption in a capitalist society, and it indicates where we should expect to find the most important demand for capitalist commodities.'[309] 'Even within the narrow limits of the profit motive and the crises, even on this strait and narrow path, capitalist production is capable of unlimited expansion, irrespective of, and even despite, a decrease in consumption. The Russian literature frequently points out that in view of diminishing consumption a considerable increase of capitalist production is impossible without external markets, but this is due to a wrong evaluation of the part played by consumption in a capitalist society, the failure to appreciate that consumption is not the ultimate end of capitalist production. Capitalist production does not exist by the grace of an increase in consumption but because of an extension of the outlying fields of production which in fact constitute the market for capitalist products. A whole progression of Malthusian investigators, discontented with the superficial harmony doctrine of the school of Say and Ricardo, have slaved away at a solution of the hopeless undertaking: to find means of increasing consumption which the capitalist mode of production is bound to decrease. Marx was the only one to analyse the real connections: he has shown that the growth of consumption is fatally lagging behind that of production, and must do so whatever "third persons" one might invent. Consumption and its volume then should by no means be considered as establishing the immediate limits to the expansion of production. Capitalist production atones by the crises for deviating from the true purpose of production, but it is independent of consumption. The expansion of production is alone limited by, and dependent upon, the volume of capital.'[310] The theory of Bulgakov and Tugan Baranovski is here directly attributed to Marx. In the eyes of the Russian Marxists, it is on the whole the direct consequence of Marx's doctrine, of which it forms an organic part. On another occasion Bulgakov says even more clearly that it is a faithful interpretation of Marx's diagram of enlarged reproduction. Once a country has embraced capitalist production, its internal movement develops along the following lines: 'The production of constant capital makes up the Department I of social reproduction, thereby instituting an independent demand for consumption goods to the extent of both its own variable capital and the consumption fund of its capitalists. Department II in its turn starts the demand for the products of Department I. _Thus a closed circle is already formed at the initial stage of capitalist production, in which it depends on no external market but is self-sufficient and can grow, of itself, as it were, by means of accumulation._'[311] In the hands of the Russian Marxists this theory becomes the favourite stick with which to beat their opponents, the 'populist' sceptics, in the question of markets. We can only appreciate its daring to the full when we look at its amazing discrepancy with everyday practice, with all the known facts of capitalist economy. A thesis pronounced so triumphantly as the purest Marxist gospel is even more deserving of our admiration when we consider that it is grounded in an extremely simple confusion. We shall have further occasion to deal with this confusion when we come to the doctrine of Tugan Baranovski. Bulgakov further develops a completely erroneous theory of foreign commerce, based upon his misapprehension of the relations between consumption and production in capitalist economy. A picture of reproduction like the above in fact has no room for foreign commerce. If capitalism forms a 'closed circle' in every country from the very beginning, if, chasing its tail like a puppy and in complete 'self-sufficiency', it is able of itself to create an unlimited market for its products and can spur itself on to ever greater expansion, then every capitalist country as such must also be a closed and self-sufficient economic whole. In but a single respect would foreign commerce appear reasonable: to compensate, by imports from abroad, for certain deficiencies due to the soil and the climate, i.e. the import of raw materials or foodstuffs from sheer necessity. Completely upsetting the thesis of the 'populists', Bulgakov in fact advances a theory of international commerce among capitalist states which gives pride of place to the import of agricultural products, with industrial exports merely providing the requisite funds. International traffic in commodities does not here seem to flow from the character of the mode of production but from the natural conditions of the countries concerned. This theory at any rate has not been borrowed from Marx but from the economic experts of the German bourgeoisie. Just as Struve took over from Wagner and Schaeffle his Three Empire Theory, so Bulgakov adopts from the late List (_R.I.P._) the division of states on the basis of 'agriculture' and 'mixed agriculture and manufacture', or rather adapts it, in deference to the times, to the categories of 'manufacture' and 'mixed manufacture and agriculture'. Nature has afflicted the first category with a deficiency in raw materials and foodstuffs, making it thus dependent upon foreign commerce. The second category has been liberally endowed with all it needs; here foreign trade is of no account. The prototype of the first category is England, of the second--the U.S.A. The stoppage of foreign commerce would mean the economic death-blow to England, but only a temporary crisis in the U.S.A. with a guarantee of full recovery. 'Production there is capable of unlimited expansion on the basis of the internal market.'[312] This theory, a hoary relic of German economics even now, has obviously not the least grasp of the interrelations obtaining in an international capitalist economy. It conceives of modern international trade in terms that may have been appropriate to the times of the Phoenicians. Just listen to the lecture of Professor Buecher: 'Although the liberalist era has greatly facilitated international traffic, it would be a mistake to infer from this that the period of a national economy is nearing its end, to be replaced by a period of international economy.... Granted that we see in Europe to-day a number of small countries that are not independent nations in respect of their commodity supply, being compelled to import substantial amounts of their foodstuffs and luxuries, while their industrial productivity is in excess of the national needs and creates a permanent surplus for which employment must be found in alien spheres of consumption. Yet although countries of industrial production and those producing raw materials exist side by side and depend upon one another, such "international division of labour" should not be regarded as a sign that mankind is about to attain to a higher stage of development which it would be proper to contrast, under the label of world economy, with the ... previous stages. No stage of economic development has ever permanently guaranteed full autonomy in the satisfaction of wants. Every one of them has left certain gaps which had to be filled in by some means or other. So-called "international economy", on the other hand, has not, at any rate so far, engendered any phenomena which are essentially different from those of national economy, and we very much doubt that such phenomena will appear in the near future.'[313] As far as Bulgakov is concerned, this conception at any rate results in an unexpected conclusion: his theory of the unlimited capacity for development of capitalism is confined to certain countries with favourable natural conditions. Capitalism in England is foredoomed because the world market will be exhausted before long. In the U.S.A., India and Russia it can look forward to an unlimited development because these countries are 'self-sufficient'. Apart from these obvious peculiarities, Bulgakov's arguments about foreign commerce again imply a fundamental misconception. Against the sceptics, from Sismondi to Nikolayon, who believed that they had to take recourse to outside markets for the realisation of capitalist surplus value, he chiefly argues as follows: 'These experts obviously consider external commerce as a "bottomless pit" to swallow up in all eternity the surplus value which cannot be got rid of inside the country.' Bulgakov for his part triumphantly points out that foreign commerce is indeed not a pit and certainly not a bottomless one, but rather appears as a double-edged sword, that exports always belong with imports, and that the two usually counterbalance one another. Thus, whatever is pushed out over one border, will be brought back, in a changed use-form, over another. 'We must find room for the commodities that have been imported as an equivalent of those exported, within the bounds of the given market, and as this is impossible, _ex hypothesi_, it would only generate new difficulties to have recourse to an external demand.'[314] On another occasion he says that the way to realise the surplus value found by the Russian 'populists', viz. external markets, 'is much less favourable than that discovered by Malthus, v. Kirchmann and Vorontsov himself when he wrote the essay _On Militarism and Capitalism_'.[315] Although Bulgakov fervently copies Marx's diagram of reproduction, he here exhibits no grasp whatever of the real problem towards which the sceptics from Sismondi to Nikolayon were groping their way. He denies that foreign commerce solves the difficulty as pretended, since it again brings the surplus value that has been disposed of into the country, although in a 'changed form'. In conformity with the crude picture of v. Kirchmann and Vorontsov, he thus believes the problem to be that of destroying a certain quantity of the surplus value, of wiping it from the face of the earth. It simply does not occur to him that the real problem is the realisation of the surplus value, the metamorphosis of commodities, in fact the 'changed form' of the surplus value. Bulgakov thus finally arrives at the same goal as Struve, though by a different route. He preaches the self-sufficiency of capitalist accumulation which swallows up its own product as Kronos swallows up his children, and breeds ever more vigorously without help from outside. Now only one further step is needed for Marxism to revert to bourgeois economics, and this, as luck would have it, was taken by Tugan Baranovski. FOOTNOTES: [300] S. Bulgakov, _On the Markets of Capitalist Production. A Study in Theory_ (Moscow, 1897), p. 15. [301] Ibid., p. 32, footnote. [302] Ibid., p. 27. [303] Ibid., pp. 2-3. [304] _On the Markets of Capitalist Production_, pp. 50, 55. [305] _On the Markets of Capitalist Production_, p. 132 ff. [306] Ibid., p. 20. [307] Bulgakov's italics. [308] _Capital_, vol. iii, p. 387. [309] Bulgakov, op. cit., p. 161. [310] Ibid., p. 167. [311] Bulgakov, op. cit., p. 210 (our italics). [312] Ibid., p. 199. [313] K. Buecher; The Rise of National Economy (_Die Entstehung der Volkswirtschaft_), 5th edition, p. 147. Professor Sombart's theory is the most recent contribution in this field. He argues that we are not moving towards an international economy but rather farther and farther away from it. 'I maintain, on the contrary, that commercial relations to-day do not form a stronger but rather a weaker link between the civilised nations, in relation to their economy as a whole. Individual economy takes not more but rather less account of the world market than it did a hundred or fifty years ago. At least ... it would be wrong to assume that the relative importance of international relations with regard to modern political economy is increasing. The opposite is the case.' Sombart scornfully rejects the assumption of a progressive international division of labour, of a growing need for outside markets owing to an inelastic home demand. He in his turn is convinced that 'the individual national economies will develop into ever more perfect microcosms and that the importance of the home market will increasingly surpass that of the world market for all branches of industry' (_Die Deutsche Volkswirtschaft im 19. Jahrhundert_, 2nd edition, 1909, pp. 399-420). This devastating discovery admittedly hinges on a full acceptance of the Professor's peculiar conception which, for some reasons, only considers those as 'exporting countries' who pay for their imports with a surplus of agricultural products over and above their own needs, who pay 'with the soil'. In this scheme Russia, Rumania, the U.S.A. and the Argentine are, but Germany, England and Belgium are not, 'exporting countries'. Since capitalist development will sooner or later also claim the surplus of agricultural products for the home demand in Russia and the U.S.A., it is evident that there will be fewer and fewer 'exporting countries' in the world--international economy will vanish.--Another of Sombart's discoveries is that great capitalist 'non-exporting' countries increasingly obtain 'free' imports in form of interest on exported capital--but the capital exports as well as exports of industrial commodities are of absolutely no account to Professor Sombart. 'In the course of time we shall probably get to a point where we import without exporting' (p. 422). Modern, sensational, and precious! [314] Bulgakov, op. cit., p. 132. [315] Ibid., p. 236. A quite uncompromising version of the same view is given by V. Ilyin [Lenin]: 'The romanticists (as he calls the sceptics) argue as follows: the capitalists cannot consume the surplus value; therefore they must dispose of it abroad. I ask: Do the capitalists perhaps give away their products to foreigners for nothing, throw it into the sea, maybe? If they sell it, it means that they obtain an equivalent. If they export certain goods, it means that they import others' (_Economic Studies and Essays_, p. 2). As a matter of fact, his explanation of the part played by external commerce in capitalist production is far more correct than that of Struve and Bulgakov. _CHAPTER XXIII_ TUGAN BARANOVSKI AND HIS 'LACK OF PROPORTION' We have left this theorist to the end, although he already developed his views in Russian in 1894, i.e. before Struve and Bulgakov, partly because he only gave his theories their mature form in German at a later date,[316] and also because the conclusions he draws from the premises of the Marxist critics are the most far-reaching in their implications. Like Bulgakov, Tugan Baranovski starts from Marx's analysis of social reproduction which gave him the clue to this bewildering maze of problems. But while Bulgakov, the enthusiastic disciple of Marx, only sought to follow him faithfully and simply attributed his own conclusions to the master, Tugan Baranovski, on the other hand, lays down the law to Marx who, in his opinion, did not know how to turn his brilliant exposition of the reproductive process to good account. Tugan Baranovski's most important general conclusion from Marx's principles, the pivot of his whole theory, is that, contrary to the assumptions of the sceptics, capitalist accumulation is not only possible under the capitalist forms of revenue and consumption, but is, in fact, completely independent of both. It is not consumption, he says, but production itself which makes for the best market. Production and the market are therefore the same, and since the expansion of production is unlimited in itself, the market, the capacity to absorb its products, has no limits either. 'The diagram quoted', he says, 'was to prove conclusively a postulate which, though simple enough, might easily give rise to objections, unless the process be adequately understood--the postulate, namely, that capitalist production creates a market for itself. So long as it is possible to expand social production, if the productive forces are adequate for this purpose, the proportionate division of social production must also bring about a corresponding expansion of the demand inasmuch as under such conditions all newly produced goods represent a newly created purchasing power for the acquisition of other goods. Comparing simple reproduction of the social capital with its reproduction on a rising scale, we arrive at the most important conclusion that in capitalist economy the demand for commodities is in a sense independent of the total volume of social consumption. Absurd as it may seem to "common-sense", it is yet possible that the volume of social consumption as a whole goes down while at the same time the aggregate social demand for commodities grows.'[317] And again further on: 'Arising from the abstract analysis of the reproductive process of social capital we have formed the conclusion that nothing will be left over of the social product in view of the proportionate division of the social capital.'[318] Accordingly Tugan Baranovski subjects Marx's theory of crises to a revision which he claims to have developed from Sismondi's 'over-consumption'. 'Marx is in substantial agreement with the general view that the poverty of the workers, i.e. of the great majority of the population, makes it impossible to realise the products of an ever expanding capitalist production, since it causes a decline in demand. This opinion is definitely mistaken. We have seen that capitalist production creates its own market--consumption being only one of the moments of capitalist production. In a planned social production if the leaders of production were equipped with all _information_ about the demand and with the _power_ to transfer labour and capital freely from one branch of production to another, then, however low the level of social consumption, the supply of commodities would not exceed the demand.'[319] The only circumstance which periodically causes the market to be flooded is a lack of proportion in the enlargement of production. On this assumption, therefore, Tugan Baranovski describes the course of capitalist accumulation as follows: 'What would the workers ... produce if production were organised on proportionate lines? Obviously their own means of subsistence and production. With what object? To expand production in the second year. The production of what products? Again of means of production and subsistence for the workers--and so on _ad infinitum_.'[320] This game of question and answer, mind you, is not a form of self-mockery, it is meant in all seriousness. 'If the expansion of production has no practical limits, then we must assume that the expansion of markets is equally unlimited, for _if social production is proportionately organised, there is no limit to the expansion of the market other than the productive forces available_.'[321] Since production thus creates its own demand, foreign commerce of capitalist states is also assigned that peculiar mechanistic function we have already met in Bulgakov. A foreign market, for instance, is an absolute necessity for England. 'Does not this prove that capitalist production creates a surplus product for which there is no room on the internal market? Why, come to that, does England require an external market? The answer is not difficult: because a considerable part of England's purchasing power is expended on obtaining foreign commodities. The import of foreign commodities for the English home market also makes it essential to export English commodities abroad. Since England cannot manage without importing from abroad, exports are a vital condition for that country, since without them she would not be able to pay for her imports.'[322] Here again agricultural imports are described as a stimulating and decisive factor, quite in accordance with the scheme of the German professors. What, then, is the general line of reasoning on which Tugan Baranovski supports his daring solution of the problem of accumulation, the new revelation on the problem of crises and a whole lot of others? Hard to believe, but quite incontrovertible for all that, Tugan Baranovski's proof consists exclusively and entirely--in Marx's diagram of enlarged reproduction, no more no less. Although he repeatedly refers rather pompously to his 'abstract analysis of the reproductive process of social capital', to the 'conclusive logic' of his analysis, this entire analysis is nothing but a copy of Marx's diagram of enlarged reproduction, with a different set of figures. Nowhere in the entire works of Tugan Baranovski shall we find a trace of any other argument. In Marx's diagram, admittedly, accumulation, production, realisation and exchange run smoothly with clockwork precision, and no doubt this kind of 'accumulation' can continue _ad infinitum_, just as long, that is to say, as ink and paper do not run out. And it is this harmless written exercise with mathematical equations which Tugan Baranovski quite seriously considers a _demonstration_ of such a course in real events. 'The diagrams we have adduced are bound to prove conclusively that....' On another occasion he counters Hobson, who is convinced that accumulation is impossible, with the following words: 'Diagram No. 2 of the reproduction of social capital on a rising scale corresponds to the case of capital accumulation Hobson has in mind. But does this diagram show a surplus product to come into being? Far from it.'[323] Hobson is refuted and the matter settled because 'in the diagram' no surplus product comes into being. Admittedly, Tugan Baranovski knows quite well that in hard fact things do not work out so smoothly. There are continual fluctuations in the exchange relations and periodical crises. But these crises happen only because in the expansion of production the proper proportions are not maintained, because, that is to say, the proportions of 'diagram No. 2' are not observed in the first place. If they were, there would be no crisis, and capitalist production could get along as nicely as it does on paper, in every detail. Tugan Baranovski is committed to the view that we can ignore the crises if we consider the reproductive process as a continuous process. Although the 'proportion' may be upset at any moment, yet on average it will always be re-established by different deviations, by price-fluctuations from day to day, and in the long run by periodical crises. That on the whole this 'proportion' is more or less maintained is proved by the fact that capitalist economy is still going strong--otherwise it would long ago have ended in chaos and collapse. In the long run, then, Tugan Baranovski's 'proportion' is observed by and large, and we must conclude that reality obeys 'diagram No. 2'. And since this diagram can be indefinitely extended, it follows that capitalist accumulation can also proceed _ad infinitum_. What is striking in all this is not Tugan Baranovski's conclusion that the diagram corresponds to the actual course of events--as we have seen, Bulgakov also shared this belief; the really startling fact is that Tugan Baranovski sees no necessity for as much as _inquiring_ whether the diagram is correct, that, instead of proving the diagram, he considers this, the arithmetical exercise on paper, as proof of the actual state of affairs. Bulgakov honestly tried to project Marx's diagram on the real concrete relations of capitalist economy and of capitalist exchange; he endeavoured to overcome the difficulties resulting from it, though without success, it is true, remaining to the last involved with Marx's analysis, which he himself recognised to be incomplete and fragmentary. But Tugan Baranovski does not need any proof, he does not greatly exercise his brains: since the arithmetical sums come out satisfactorily, and may be continued _ad lib._, this is to him proof that capitalist accumulation can also proceed without let or hindrance--provided the said 'proportion' obtains, which it will have to do by hook or by crook, as he himself would not dream of denying. Tugan Baranovski, however, has one indirect proof that the diagram with its strange results corresponds to, and truly reflects, reality. This is the fact that capitalist production, quite in accordance with Marx's diagram, puts human consumption second to production, that it conceives of the former as a means and of the latter as an end in itself, just as it puts human labour, the 'worker', on a par with the machine. 'Technical progress is expressed by the fact that the means of labour, the machine, increases more and more in importance as compared to living labour, to the worker himself. Means of production play an ever growing part in the productive process and on the commodity market. Compared to the machine, the worker recedes further into the background and the demand resulting from the consumption of the workers is also put into the shade by that which results from productive consumption by the means of production. The entire workings of capitalist economy take on the character of a mechanism existing on its own, as it were, in which human consumption appears as a simple moment of the reproductive process and the circulation of capitals.'[324] Tugan Baranovski considers this discovery as a fundamental law of the capitalist mode of production, which is confirmed by a quite tangible phenomenon: with the progress of capitalist development Department I goes on growing relatively to, and at the expense of, Department II. It was Marx himself who, as we all know, set up this law in which he grounded the schematic exposition of reproduction, though in the further development of his diagram he ignored subsequent alterations for simplicity's sake. This, the automatic growth of the producer goods as compared with the consumer goods department affords Tugan Baranovski the only objective proof of his theory: that in capitalist society human consumption becomes increasingly unimportant, and production more and more an end in itself. This thesis forms the corner-stone of his entire theoretical edifice. 'In all the industrial countries', he proclaims, 'we are confronted with the same type of development--the development of national economy everywhere follows the same fundamental law. The mining industry which creates the means of production for modern industry comes more and more to the fore. The relative decrease in the export of immediately consumable manufactured goods from Britain is thus also an expression of the fundamental law governing capitalist development. The further technical progress advances, the more do consumer goods recede as compared with producer goods. Human consumption plays an ever decreasing part as against the productive consumption of the means of production.'[325] Although this 'fundamental law' like all his other 'fundamental' laws, in so far as they mean anything at all, is borrowed ready-made from Marx, Baranovski does not rest content with this and immediately proceeds to preach the Marxist gospel to Marx himself. Scrabbling about like a blind hen, Marx has turned up another pearl--Tugan will give him that--only he does not know what to do with it. It needed a Tugan Baranovski to know how to make it useful to science, and in his hand the newly discovered law suddenly throws a new light on the whole workings of capitalist economy. This law of the expansion in the department of producer goods at the cost of that of consumer goods reveals clearly, concisely, exactly, and in measurable terms, that capitalist society attaches progressively less importance to human consumption, putting man on the same level as the means of production, and that Marx was therefore completely wrong both in assuming that man alone, not the machine, too, can be the creator of surplus value, and in saying, further, that human consumption represents a limit for capitalist production which is bound to cause periodical crises in the present, and the collapse and terrible end of capitalist economy in the near future. In short, the 'fundamental law' governing the increase of producer as compared to consumer goods reflects the singular nature of capitalist society as a whole which Marx had not understood and which to interpret happily fell to the lot of Tugan Baranovski. We have seen above the decisive part played by the 'fundamental law' of capital in the controversy between the Russian Marxists and the sceptics. Bulgakov's remarks we already know; another Marxist already referred to, Vladimir Ilyin, expresses himself in similar terms in his polemics against the 'populists': 'It is well known that the law of capitalist production consists in the fact that the constant capital grows more rapidly than the variable capital, that is to say an ever increasing part of the newly formed capital falls to the department of social production which creates producer goods. In consequence, this department is absolutely bound to grow more rapidly than the department creating consumer goods, that is to say, the very thing happens which Sismondi declared to be "impossible", "dangerous", etc. In consequence, consumer goods make up a smaller and smaller share of the total bulk of capitalist production, and this is entirely in accordance with the historical "mission" of capitalism and its specific social structure: the former in fact consists in the development of the productive forces of society (production as an end in itself), and the latter prevents that the mass of the population should turn them to use.'[326] In this respect, of course, Tugan Baranovski goes even farther. With his love of paradox he actually permits himself the joke of submitting a mathematical proof that accumulation of capital and expansion of production are possible even if the absolute volume of production decreases. In this connection, Karl Kautsky has pointed out, he had recourse to a somewhat dubious scientific subterfuge, namely that he shaped his daring deductions exclusively for a specific moment: the transition from simple to enlarged reproduction--a moment which is exceptional even in theory, but certainly of no practical significance whatever.[327] As to Tugan Baranovski's 'fundamental law', Kautsky declares it to be a mere illusion due to the fact that Tugan Baranovski considered the organisation of production only in the old countries of capitalist big industry. 'It is correct', Kautsky says, 'that with a progressive division of labour, there will be comparatively fewer and fewer factories etc. for the production of goods direct for personal consumption, together with a relative increase in the number of those which supply both the former and one another with tools, machines, raw materials, transport facilities and so on. While in original peasant economy an enterprise that cultivated the flax also made the linen with its own tools and got it ready for human consumption, nowadays hundreds of enterprises may share in the manufacture of a single shirt, by producing raw cotton, iron rails, steam engines and railway trucks that bring it to port, and so on. With international division of labour it will happen that some countries--the old industrial countries--can only slowly expand their production for personal consumption, while making large strides in their production of producer goods which is much more decisive for the heartbeat of economic life than the production of consumer goods. From the point of view of the nation concerned, we might easily form the opinion that producer goods can be turned out on a constantly rising scale with a more rapid rate of increase than in the production of consumer goods, and that their production is not bound up with that of the latter.' The opinion, that producer goods can be produced independent of consumption, is of course a mirage of Tugan Baranovski's, typical of vulgar economics. Not so the fact cited in support of this fallacy: the quicker growth of Department I as compared with Department II is beyond dispute, not only in old industrial countries but wherever technical progress plays a decisive part in production. It is the foundation also of Marx's fundamental law that the rate of profit tends to fall. Yet in spite of it all, or rather precisely for this reason, it is a howler if Bulgakov, Ilyin and Tugan Baranovski imagine to have discovered in this law the essential nature of capitalist economy as an economic system in which production is an end in itself and human consumption merely incidental. The growth of the constant at the expense of the variable capital is only the capitalist expression of the general effects of increasing labour productivity. The formula _c_ greater than _v_ (_c > v_), translated from the language of capitalism into that of the social labour process, means only that the higher the productivity of human labour, the shorter the time needed to change a given quantity of means of production into finished products.[328] This is a universal law of human labour. It has been valid in all pre-capitalist forms of production and will also be valid in the future in a socialist order of society. In terms of the material use-form of society's aggregate product, this law must manifest itself by more and more social labour time being employed in the manufacture of producer than of consumer goods. In a planned and controlled social economy, organised on socialist lines, this transformation would in fact be more rapid even than it is in contemporary capitalist economy. In the first place, rational scientific techniques can only be applied on the largest scale when the barriers of private ownership in land are abolished. This will result in an immense revolution in vast provinces of production which will ultimately amount to a replacement of living labour by machine labour, and which will enable us to tackle technical jobs on a scale quite impossible under present day conditions. Secondly, the general use of machinery in the productive process will be put on a new economic basis. At present the machine does not compete with living labour but only with that part of it that is paid. The cost of the labour power which is replaced by the machine represents the lowest limit of the applicability of the machine. Which means that the capitalist becomes interested in a machine only when the costs of its production--assuming the same level of performance--amount to less than the wages of the workers it replaces. From the point of view of the social labour process which is the only one to matter in a socialist society, the machine competes not with the labour that is necessary to maintain the worker but with the labour he actually performs. In other words, in a society that is not governed by the profit motive but aims at saving human labour, the use of machinery is economically indicated just as soon as it can save more human labour than is necessary for making it, not to mention the many cases where the use of machinery is desirable even if it does not answer this economic minimum--for reasons of health and similar considerations, in the interest of the workers themselves. However that may be, the tension between the respective economic usefulness of the machine in (_a_) a capitalist, and (_b_) a socialist society is at least equal to the difference between labour and that part of it that is paid; it is, in other words, the precise equivalent of the whole capitalist surplus value. Consequently, if the capitalist profit motive is abolished and a social organisation of labour introduced, the marginal use of the machine will suddenly be increased by the whole extent of the capitalist surplus value, so that an enormous field, not to be gauged as yet, will be open to the triumphal march of the machine. This would be tangible proof that the capitalist mode of production, alleged to spur on to the optimum technical development, in fact sets large social limits to technical progress, in form of the profit motive on which it is based. It would show that as soon as these limits are abolished, technical progress will develop such a powerful drive that the technical marvels of capitalist production will be child's play in comparison. In terms of the composition of the social product, this technical transformation can only mean that, compared to the production of consumer goods, the production of producer goods--measured in units of labour time--must increase more rapidly in a socialist society than it does even to-day. Thus the relation between the two departments of social production which the Russian Marxists took to reveal typical capitalist baseness, the neglect of man's need to consume, rather proves to be the precise manifestation of the progressive subjection of nature to social labour, which will become even more striking when production is organised solely with a view to human needs. The only objective proof for Tugan Baranovski's 'fundamental law' thus collapses as a 'fundamental' confusion. His whole construction, including his 'new theory of crises', together with the 'lack of proportion', is reduced to its foundations on paper: a slavish copy of Marx's diagram of enlarged reproduction. FOOTNOTES: [316] _Studies on the Theory and History of Commercial Crises in England_ (Jena, 1901) and _Theoretical Foundations of Marxism_ (1905). [317] _Studies on the Theory and History_ ..., p. 23. [318] Ibid., p. 34. [319] Ibid., p. 333. [320] Ibid., p. 191. [321] Ibid., p. 231, italics in the original. [322] Ibid., p. 305. [323] _Studies on the Theory and History_ ..., p. 191 [324] Ibid., p. 27. [325] _Studies on the Theory and History_ ..., p. 58. [326] V. Ilyin [Lenin] 'Studies and Essays in Economics' (_Oekonomische Studien und Artikel. Zur Charakterisierung des ökonomischen Romantizismus_, St. Petersburg, 1899), p. 20.--Incidentally, the same author is responsible for the statement that enlarged reproduction begins only with capitalism. It quite escapes him that under conditions of simple reproduction, which he takes to be the rule for all pre-capitalist modes of production, we should probably never have advanced beyond the stage of the paleolithic scraper. [327] _Die Neue Zeit_, vol. xx, part 2, _Krisentheorien_, p. 116. Kautsky's mathematical demonstration to Tugan Baranovski that consumption is bound to grow, and 'in the precise ratio as the bulk of producer goods in terms of value', calls for two comments: first, like Marx, Kautsky paid no attention to the progress in the productivity of labour so that consumption appears to have a relatively larger volume than it would in fact have. Secondly, the increase in consumption to which Kautsky here refers is only a consequence, a result of enlarged reproduction, it is neither its basis nor its aim; it is mainly due to the growth of the variable capital, the continual employment of additional workers. The upkeep of these workers, however, neither is nor ought to be the object of the expansion of reproduction--no more, for that matter, than the increasing personal consumption of the capitalist class. Kautsky's argument no doubt refutes Tugan Baranovski's pet notion: the whimsy to construe enlarged reproduction with an absolute decrease in consumption. But for all that, he does not get anywhere near the fundamental problem, the relations between production and consumption under the aspect of the reproductive process, though we are told in another passage of the same work: 'With the capitalists growing richer, and the workers they exploit increasing in numbers, they constitute between them a market for the consumer goods produced by capitalist big industry which expands continually, yet it does not grow as rapidly as the accumulation of capital and the productivity of labour, and must therefore remain inadequate.' An additional market is required for these consumer goods, a market outside their own province, among those occupational groups and nations whose mode of production is not yet capitalistic. This market is found and also widens increasingly, but the expansion is again too slow, since the additional market is not nearly so elastic and capable of expansion as the capitalist productive process. As soon as capitalist production has developed to the big industry stage, as in England already in the first quarter of the nineteenth century, it is capable of expanding by leaps and bounds so as soon to out-distance all expansions of the market. Every period of prosperity subsequent to a considerable extension of the market is thus from the outset doomed to an early end--the inevitable crisis. This, in brief, is the theory of crises established by Marx, and, as far as we can see, generally accepted by the "orthodox" Marxists' (ibid., p. 80). Kautsky, however, is not interested in harmonising this conception of the realisation of the aggregate product with Marx's diagram of enlarged reproduction, perhaps because, as our quotation also shows, he deals with the problem solely from the aspect of crises, regarding, in other words, the social product as a more or less homogeneous bulk of goods and ignoring the fact that it is differentiated in the reproductive process. L. Bouding seems to come closer to the crucial point. In his brilliant review on Tugan Baranovski he gives the following formulation: 'With a single exception to be considered below, the existence of a surplus product in capitalist countries does not put a spoke in the wheel of production, not because production will be distributed more efficiently among the various spheres, or because the manufacture of machinery will replace that of cotton goods. The reason is rather that, capitalist development having begun sooner in some countries than in others, and because even to-day there are still some countries that have no developed capitalism, the capitalist countries in truth have at their disposal an outside market in which they can get rid of their products which they cannot consume themselves, no matter whether these are cotton or iron goods. We would by no means deny that it is significant if iron goods replace cotton goods as the main products of the principal capitalist countries. On the contrary, this change is of paramount importance, but its implications are rather different from those ascribed to it by Tugan Baranovski. It indicates the beginning of the end of capitalism. So long as the capitalist countries exported commodities for the purpose of consumption, there was still a hope for capitalism in these countries, and the question did not arise how much and how long the non-capitalist outside world would be able to absorb capitalist commodities. The growing share of machinery at the cost of consumer goods in what is exported from the main capitalist countries shows that areas which were formerly free of capitalism, and therefore served as a dumping-ground for its surplus products, are now drawn into the whirlpool of capitalism. It shows that, since they are developing a capitalism of their own, they can by themselves produce the consumer goods they need. At present they still require machinery produced by capitalist methods since they are only in the initial stages of capitalist development. But all too soon they will need them no longer. Just as they now make their own cotton and other consumer goods, they will in future produce their own iron ware. Then they will not only cease to absorb the surplus produce of the essentially capitalist countries, but they will themselves produce surplus products which they can place only with difficulty' (_Die Neue Zeit_, vol. xxv, part 1, _Mathematische Formeln gegen Karl Marx_, p. 604). Bouding here broaches an important aspect of the general relations pertaining to the development of international capitalism. Further, as a logical consequence, he comes to the question of imperialism but unfortunately he finally puts the wrong kind of edge on his acute analysis by considering the whole of militarist production together with the system of exporting international capital to non-capitalist countries under the heading of 'reckless expenditure'.--We must say in parenthesis that Bouding, just like Kautsky, holds that the law of a quicker growth in the means-of-production department relative to the means-of-subsistence department is a delusion of Tugan Baranovski's. [328] 'Apart from natural conditions, such as fertility of the soil, etc., and from the skill of independent and isolated producers (shown rather qualitatively in the genus than quantitatively in the mass of their products), the degree of productivity of labour, in a capitalist society, is expressed in the relative extent of the means of production that one labourer, during a given time, with the same tension of labour-power, turns into products. The mass of means of production which he thus transforms, increases with the productiveness of his labour. But those means of production play a double part. The increase of some is a consequence, that of the others a condition of the increasing productivity of labour. E.g., with the division of labour in manufacture, and with the use of machinery, more raw material is worked up in the same time and, therefore, a greater mass of raw material and auxiliary substances enter into the labour-process. That is the consequence of the increasing productivity of labour. On the other hand, the mass of machinery, beasts of burden, mineral manures, drainpipes, etc., is a condition of the increasing productivity of labour. So also is it with the means of production concentrated in buildings, furnaces, means of transport, etc. But whether condition or consequence, the growing extent of the means of production, as compared with the labour-power incorporated with them, is an expression of the growing productiveness of labour. The increase of the latter appears, therefore, in the diminution of the mass of labour in proportion to the mass of means of production moved by it, or in the diminution of the subjective factor of the labour-process as compared with the objective factor' (_Capital_, vol. i, pp. 635-6). And yet another passage: 'We have seen previously, that with the development of the productivity of labour, and therefore with the development of the capitalist mode of production, which develops the socially productive power of labour more than all previous modes of production, there is a steady increase of the mass of means of production, which are permanently embodied in the productive process as instruments of labour and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.); also, that this increase is at the same time the premise and result of the development of the productivity of social labour. It is especially capitalist production, which is characterised by relative as well as absolute growth of this sort of wealth' (_Capital_, vol. i, chap. xxiii, 2). 'The material forms of existence of constant capital, the means of production, do not consist merely of such instruments of labour, but also of raw material in various stages of finished and of auxiliary substances. With the enlargement of the scale of production and the increase in the productivity of labour by co-operation, division of labour, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise' (_Capital_, vol. ii, p. 160). _CHAPTER XXIV_ THE END OF RUSSIAN 'LEGALIST' MARXISM The Russian 'legalist' Marxists, and Tugan Baranovski above all, can claim the credit, in their struggle against the doubters of capitalist accumulation, of having enriched economic theory by an application of Marx's analysis of the social reproductive process and its schematic representation in the second volume of _Capital_. But in view of the fact that this same Tugan Baranovski quite wrongly regarded said diagram as the solution to the problem instead of its formulation, his conclusions were bound to reverse the basic order of Marx's doctrine. Tugan Baranovski's approach, according to which capitalist production can create unlimited markets and is independent of consumption, leads him straight on to the thesis of Say-Ricardo, i.e. a natural balance between production and consumption, between supply and demand. The difference is simply that those two only thought in terms of simple commodity circulation, whilst Tugan Baranovski applies the same doctrine to the circulation of capital. His theory of crises being caused by a 'lack of proportion' is in effect just a paraphrase of Say's old trite absurdity: the over-production of any one commodity only goes to show under-production of another; and Tugan Baranovski simply translates this nonsense into the terminology used in Marx's analysis of the reproductive process. Even though he declares that, Say notwithstanding, general over-production is quite possible in the light of the circulation of money which the former had entirely neglected, yet it is in fact this very same neglect, the besetting sin of Say and Ricardo in their dealings with the problem of crises which is the condition for his delightful manipulations with Marx's diagram. As soon as it is applied to the circulation of money, 'diagram No. 2' begins to bristle with spikes and barbs. Bulgakov was caught in these spikes when he attempted to follow up Marx's interrupted analysis to a logical conclusion. This compound of forms of thought borrowed from Marx with contents derived from Say and Ricardo is what Tugan Baranovski modestly calls his 'attempt at a synthesis between Marx's theory and classical economics'. After almost a century, the theory of optimism which holds, in the face of petty-bourgeois doubts, that capitalist production is capable of development, returns, by way of Marx's doctrine and its 'legalist' champions, to its point of departure, to Say and Ricardo. The three 'Marxists' join forces with the bourgeois 'harmonists' of the Golden Age shortly before the Fall when bourgeois economics was expelled from the Garden of Innocence--the circle is closed. There can be no doubt that the 'legalist' Russian Marxists achieved a victory over their opponents, the 'populists', but that victory was rather too thorough. In the heat of battle, all three--Struve, Bulgakov and Tugan Baranovski--overstated their case. The question was whether capitalism in general, and Russian capitalism in particular, is capable of development; these Marxists, however, proved this capacity to the extent of even offering theoretical proof that capitalism can go on for ever. Assuming the accumulation of capital to be without limits, one has obviously proved the unlimited capacity of capitalism to survive! Accumulation is the specifically capitalist method of expanding production, of furthering labour productivity, of developing the productive forces, of economic progress. If the capitalist mode of production can ensure boundless expansion of the productive forces, of economic progress, it is invincible indeed. The most important objective argument in support of socialist theory breaks down; socialist political action and the ideological import of the proletarian class struggle cease to reflect economic events, and socialism no longer appears an historical necessity. Setting out to show that capitalism is possible, this trend of reasoning ends up by showing that socialism is impossible. The three Russian Marxists were fully aware that in the course of the dispute they had made an about-turn, though Struve, in his enthusiasm for the cultural mission of capitalism, does not worry about giving up a useful warrant.[329] Bulgakov tried to stop the gaps now made in socialist theory with another fragment of the same theory as best he could: he hoped that capitalist society might yet perish, in spite of the immanent balance between production and consumption, because of the declining profit rate. But it was he himself who finally cut away the ground from under this somewhat precarious comfort. Forgetting the straw he had offered for the salvation of socialism, he turned on Tugan Baranovski with the teaching that, in the case of large capitals, the relative decline in the profit rate is compensated by the absolute growth of capital.[330] More consistent than the others, Tugan Baranovski finally with the crude joy of a barbarian destroys all objective economic arguments in support of socialism, thus building in his own spirit 'a more beautiful world' on an ethical foundation. 'The individual protests against an economic order which transforms the end (man) into a means (production) and the means (production) into an end.'[331] Our three Marxists demonstrated in person that the new foundations of socialism had been frail and jerry-built. They had hardly laid down the new basis for socialism before they turned their backs on it. When the masses of Russia were staking their lives in the fight for the ideals of a social order to come, which would put the end (man) before the means (production), the 'individual' went into retreat, to find philosophical and ethical solace with Kant. In actual fact, the 'legalist' bourgeois Marxists ended up just where we should expect them to from their theoretical position--in the camp of bourgeois harmonies. FOOTNOTES: [329] Struve says in the preface to the collection of his Russian essays (published in 1901): 'In 1894, when the author published his "Critical Comments on the Problem of Economic Development in Russia", he inclined in philosophy towards positivism, in sociology and economics towards outspoken, though by no means orthodox, Marxism. Since then, the author no longer sees the whole truth in positivism and Marxism which is grounded in it (!), they no longer fully determine his view of the world. Malignant dogmatism which not only browbeats those who think differently, but spies upon their morals and psychology, regards such work as a mere "Epicurean instability of mind". It cannot understand that criticism in its own right is to the living and thinking individual one of the most valuable rights. The author does not intend to renounce this right, though he might constantly be in danger of being indicted for "instability"' (_Miscellany_, St. Petersburg, 1901). [330] Bulgakov, op. cit., p. 252. [331] Tugan Baranovski, _Studies on the Theory and History_ ..., p. 229. _SECTION THREE_ THE HISTORICAL CONDITIONS OF ACCUMULATION _CHAPTER XXV_ CONTRADICTIONS WITHIN THE DIAGRAM OF ENLARGED REPRODUCTION In the first section, we ascertained that Marx's diagram of accumulation does not solve the question of who is to benefit in the end by enlarged reproduction. If we take the diagram literally as it is set out at the end of volume ii, it appears that capitalist production would itself realise its entire surplus value, and that it would use the capitalised surplus value exclusively for its own needs. This impression is confirmed by Marx's analysis of the diagram where he attempts to reduce the circulation within the diagram altogether to terms of money, that is to say to the effective demand of capitalists and workers--an attempt which in the end leads him to introduce the 'producer of money' as a _deus ex machina_. In addition, there is that most important passage in _Capital_, volume i, which must be interpreted to mean the same. 'The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus-value consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place. 'To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.'[332] The following conditions of accumulation are here laid down: (1) The surplus value to be capitalised first comes into being in the natural form of capital (as additional means of production and additional means of subsistence for the workers). (2) The expansion of capitalist production is achieved exclusively by means of capitalist products, i.e. its own means of production and subsistence. (3) The limits of this expansion are each time determined in advance by the amount of surplus value which is to be capitalised in any given case; they cannot be extended, since they depend on the amount of the means of production and subsistence which make up the surplus product; neither can they be reduced, since a part of the surplus value could not then be employed in its natural form. Deviations in either direction (above and below) may give rise to periodical fluctuations and crises--in this context, however, these may be ignored, because in general the surplus product to be capitalised must be equal to actual accumulation. (4) Since capitalist production buys up its entire surplus product, there is no limit to the accumulation of capital. Marx's diagram of enlarged reproduction adheres to these conditions. Accumulation here takes its course, but it is not in the least indicated who is to benefit by it, who are the new consumers for whose sake production is ever more enlarged. The diagram assumes, say, the following course of events: the coal industry is expanded in order to expand the iron industry in order to expand the machine industry in order to expand the production of consumer goods. This last, in turn, is expanded to maintain both its own workers and the growing army of coal, iron and machine operatives. And so on _ad infinitum_. We are running in circles, quite in accordance with the theory of Tugan Baranovski. Considered in isolation, Marx's diagram does indeed permit of such an interpretation since he himself explicitly states time and again that he aims at presenting the process of accumulation of the aggregate capital in a society consisting solely of capitalists and workers. Passages to this effect can be found in every volume of _Capital_. In volume i, in the very chapter on 'The Conversion of Surplus-Value into Capital', he says: 'In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation, and assume that capitalist production is everywhere established and has possessed itself of every branch of industry.'[333] In volume ii, the assumption repeatedly returns; thus in chapter 17 on 'The Circulation of Surplus-Value': 'Now, there are only two points of departure: The capitalist and the labourer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc.... The capitalist class, then, remains the sole point of departure of the circulation of money.'[334] Further, in the same chapter 'On the Circulation of Money in Particular under Assumption of Accumulation': 'But the difficulty arises when we assume, not a partial, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, there is, according to our assumption--the general and exclusive domination of capitalist production--no other class but the working class.'[335] And again in chapter 20: '... there are only two classes in this case, the working class disposing of their labour-power, and the capitalist class owning the social means of production and the money.'[336] In volume iii, Marx says quite explicitly, when demonstrating the process of capitalist production as a whole: 'Let us suppose that the whole society is composed only of industrial capitalists and wage workers. Let us furthermore make exceptions of fluctuations of prices which prevent large portions of the total capital from reproducing themselves under average conditions and which, owing to the general interrelations of the entire process of reproduction, such as are developed particularly by credit, must always call forth general stoppages of a transient nature. Let us also make abstraction of the bogus transactions and speculations, which the credit system favours. In that case, a crisis could be explained only by a disproportion of production in various branches, and by a disproportion of the consumption of the capitalists and the accumulation of their capitals. But as matters stand, the reproduction of the capitals invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the labourers is handicapped partly by the laws of wages, partly by the fact that it can be exerted only so long as the labourers can be employed at a profit for the capitalist class.'[337] This last quotation refers to the question of crises with which we are not here concerned. It can leave no doubt, however, that the movement of the total capital, 'as matters stand', depends in Marx's view on three categories of consumers only: the capitalists, the workers and the 'non-productive classes', i.e. the hangers-on of the capitalist class (king, parson, professor, prostitute, mercenary), of whom he quite rightly disposes in volume ii as the mere representatives of a derivative purchasing power, and thus the parasitic joint consumers of the surplus value or of the wage of labour. Finally, in _Theories of Surplus Value_,[338] Marx formulates his general presuppositions with regard to accumulation as follows: 'Here we have only to consider the forms through which capital passes during the various stages of its development. Thus we do not set out the actual conditions of the real process of production, but always assume that the commodity is sold for what it is worth. We ignore the competition of capitalists and the credit system; we also leave out of account the actual constitution of society which never consists exclusively of the classes of workers and industrial capitalists, and where there is accordingly no strict division between producers and consumers. The first category (of consumers, whose revenues are partly of a secondary, not a primitive nature, derived from profits and the wage of labour) is much wider than the second category (of producers). Therefore the manner in which it spends its income, and the extent of such income, effects very large modifications in the economic household, and especially so in the process of circulation and reproduction of capital.' Speaking of the 'actual constitution of society', Marx here also considers merely the parasitic joint consumers of surplus value and of the wage of labour, i.e. only the hangers-on of the principal categories of capitalist production. There can be no doubt, therefore, that Marx wanted to demonstrate the process of accumulation in a society consisting exclusively of workers and capitalists, under the universal and exclusive domination of the capitalist mode of production. On this assumption, however, his diagram does not permit of any other interpretation than that of production for production's sake. Let us recall the second example of Marx's diagram of enlarged reproduction: 1st year: I. _5,000c + 1,000v + 1,000s = 7,000_ means of production II. _1,430c + 285v + 285s = 2,000_ means of subsistence ----- 9,000 2nd year: I. _5,417c + 1,083v + 1,083s = 7,583_ means of production II. _1,583c + 316v + 316s = 2,215_ means of subsistence ----- 9,798 3rd year: I. _5,869c + 1,173v + 1,173s = 8,215_ means of production II. _1,715c + 342v + 342s = 2,399_ means of subsistence ------ 10,614 4th year: I. _6,358c + 1,271v + 1,271s = 8,900_ means of production II. _1,858c + 371v + 371s = 2,600_ means of subsistence ------ 11,500 Here accumulation continues year after year without interruption, the capitalists in each case consuming half of the surplus value they have gained and capitalising the other half. In the process of capitalisation, the same technical foundation, that is to say the same organic composition or division into constant and variable capital and also the same rate of exploitation (always amounting to 100 per cent) is consecutively maintained for the additional capital as it was for the original capital. In accordance with Marx's assumption in volume i of _Capital_, the capitalised part of the surplus value first comes into being as additional means of production and as means of subsistence for the workers, both serving the purpose of an ever expanding production in the two departments. It cannot be discovered from the assumptions of Marx's diagram for whose sake production is progressively expanded. Admittedly, production and consumption increase simultaneously in a society. The consumption of the capitalists increases (in terms of value, in the first year it amounts to 500 + 142, in the second year to 542 + 158, in the third year to 586 + 171, and in the fourth year to 635 + 185); the consumption of the workers increases as well; the variable capital increasing year after year in both departments precisely indicates this growth in terms of value. And yet, the growing consumption of the capitalists can certainly not be regarded as the ultimate purpose of accumulation; on the contrary, there is no accumulation inasmuch as this consumption takes place and increases; personal consumption of the capitalists must be regarded as simple reproduction. Rather, the question is: if, and in so far as, the capitalists do not themselves consume their products but 'practise abstinence', i.e. accumulate, for whose sake do they produce? Even less can the maintenance of an ever larger army of workers be the ultimate purpose of continuous accumulation of capital. From the capitalist's point of view, the consumption of the workers is a consequence of accumulation, it is never its object or its condition, unless the principles (foundations) of capitalist production are to be turned upside down. And in any case, the workers can only consume that part of the product which corresponds to the variable capital, not a jot more. Who, then, realises the permanently increasing surplus value? The diagram answers: the capitalists themselves and they alone.--And what do they do with this increasing surplus value?--The diagram replies: They use it for an ever greater expansion of their production. These capitalists are thus fanatical supporters of an expansion of production for production's sake. They see to it that ever more machines are built for the sake of building--with their help--ever more new machines. Yet the upshot of all this is not accumulation of capital but an increasing production of producer goods to no purpose whatever. Indeed, one must be as reckless as Tugan Baranovski, and rejoice as much in paradoxical statements, to assume that this untiring merry-go-round in thin air could be a faithful reflection in theory of capitalist reality, a true deduction from Marx's doctrine.[339] Besides the analysis of enlarged reproduction roughed out in _Capital_, volume ii, the whole of Marx's work, volume ii in particular, contains a most elaborate and lucid exposition of his general views regarding the typical course of capitalist accumulation. If we once fully understand this interpretation, the deficiencies of the diagram at the end of volume ii are immediately evident. If we examine critically the diagram of enlarged reproduction in the light of Marx's theory, we find various contradictions between the two. To begin with, the diagram completely disregards the increasing productivity of labour. For it assumes that the composition of capital is the same in every year, that is to say, the technical basis of the productive process is not affected by accumulation. This procedure would be quite permissible in itself in order to simplify the analysis, but when we come to examine the concrete conditions for the realisation of the aggregate product, and for reproduction, then at least we must take into account, and make allowance for, changes in technique which are bound up with the process of capital accumulation. Yet if we allow for improved productivity of labour, the material aggregate of the social product--both producer and consumer goods--will in consequence show a much more rapid increase in volume than is set forth in the diagram. This increase in the aggregate of use-values, moreover, indicates also a change in the value relationships. As Marx argues so convincingly, basing his whole theory on this axiom, the progressive development of labour productivity reacts on both the composition of accumulating capital and the rate of surplus value so that they cannot remain constant under conditions of increasing accumulation of capital, as was assumed by the diagram. Rather, if accumulation continues, _c_, the constant capital of both departments, must increase not only absolutely but also relatively to _v + c_ or the total new value (the social aspect of labour productivity); at the same time, constant capital and similarly the surplus value must increase relatively to the variable capital--in short, the rate of surplus value, i.e. the ratio between surplus value and variable capital, must similarly increase (the capitalist aspect of labour productivity). These changes need not, of course, occur annually, just as the terms of first, second and third year in Marx's diagram do not necessarily refer to calendar years but may stand for any given period. Finally, we may choose to assume that these alterations, both in the composition of capital and in the rate of surplus value, take place either in the first, third, fifth, seventh year, etc., or in the second, sixth and ninth year, etc. The important thing is only that they are allowed for somewhere and taken into account as periodical phenomena. If the diagram is amended accordingly, the result of this method of accumulation will be an increasing annual surplus in the consumer at the expense of producer goods. It is true that Tugan Baranovski conquers all difficulties on paper: he simply constructs a diagram with different proportions where year by year the variable capital decreases by 25 per cent. And since this arithmetical exercise is successful enough on paper, Tugan triumphantly claims to have 'proved' that accumulation runs smoothly like clockwork, even if the absolute volume of consumption decreases. Even he must admit in the end, however, that his assumption of such an absolute decrease of the variable capital is in striking contrast to reality. Variable capital is in point of fact a growing quantity in all capitalist countries; only in relation to the even more rapid growth of constant capital can it be said to decrease. On the basis of what is actually happening, namely a greater yearly increase of constant capital as against that of variable capital, as well as a growing rate of surplus value, discrepancies must arise between the material composition of the social product and the composition of capital in terms of value. If, instead of the unchanging proportion of 5 to 1 between constant and variable capital, proposed by Marx's diagram, we assume for instance that this increase of capital is accompanied by a progressive readjustment of its composition, the proportion between constant and variable in the second year being 6 to 1, in the third year 7 to 1, and in the fourth year 8 to 1--if we further assume that the rate of surplus value also increases progressively in accordance with the higher productivity of labour so that, in each case, we have the same amounts as those of the diagram, although, because of the relatively decreasing variable capital, the rate of surplus value does not remain constant at the original 100 per cent--and if finally we assume that one-half of the appropriated surplus value is capitalised in each case (excepting Department II where capitalisation exceeds 50 per cent, 184 out of 285 being capitalised during the first year), the result will be as follows: 1st year: I. _5,000c + 1,000v + 1,000s = 7,000_ means of production II. _1,430c + 285v + 285s = 2,000_ means of subsistence 2nd year: I. _(5,428 4/7)c + (1,071 3/7)v + 1,083s = 7,583_ means of production II. _(1,587 5/7)c + (311 2/7)v + 316s = 2,215_ means of subsistence 3rd year: I. _5,903c + 1,139v + 1,173s = 8,215_ means of production II. _1,726c + 331v + 342s = 2,399_ means of subsistence 4th year: I. _6,424c + 1,205v + 1,271s = 8,900_ means of production II. _1,879c + 350v + 371s = 2,600_ means of subsistence If this were a true picture of the accumulative process, the means of production (constant capital) would show a deficit of 16 in the second year, of 45 in the third year and of 88 in the fourth year; similarly, the means of subsistence would show a surplus of 16 in the second year, of 45 in the third year and of 88 in the fourth year. This negative balance for the means of production may be only imaginary in part. The increasing productivity of labour ensures that the means of production grow faster in bulk than in value, in other words: means of production become cheaper. As it is use value, i.e. the material elements of capital, which is relevant for technical improvements of production, we may assume that the quantity of means of production, in spite of their lower value, will suffice for progressive accumulation up to a certain point. This phenomenon amongst others also checks the actual decline of the rate of profit and modifies it to a mere tendency, though our example shows that the decline of the profit rate would not only be retarded but rather completely arrested. On the other hand, the same fact indicates a much larger surplus of unsaleable means of subsistence than is suggested by the amount of this surplus in terms of value. In that case, we should have to compel the capitalists of Department II to consume this surplus themselves, which Marx makes them do on other occasions; in which case, and in so far as those capitalists are concerned, there would again be no accumulation but rather simple reproduction. Alternatively, we should have to pronounce this whole surplus unsaleable. Yet would it not be very easy to make good this loss in means of production which results from our example? We need only assume that the capitalists of Department I capitalise their surplus value to a greater extent. Indeed, there is no valid reason to suppose, as Marx did, that the capitalists in each case add only half their surplus value to their capital. Advances in labour productivity may well lead to progressively increasing capitalisation of surplus value. This assumption is the more permissible in that the cheapening of consumer goods for the capitalist class, too, is one of the consequences of technological progress. The relative decrease in the value of consumable income (as compared with the capitalised part) may then permit of the same or even a higher standard of living for this class. We might for instance make good the deficit in producer goods by transferring a corresponding part of surplus value I to the constant capital of this department, a part which would otherwise be consumed, since this surplus value, like all other products of the department, originally takes the form of producer goods; 11 4/7 would then be transferred in the second year, 34 in the third year and 66 in the fourth year.[340] The solution of one difficulty, however, only adds to another. It goes without saying that if the capitalists of Department I relatively restrict their consumption for purposes of accumulation, there will be a proportionately greater unsaleable residue of consumer goods in Department II; and thus it becomes more and more impossible to enlarge the constant capital even on its previous technological basis. If the capitalists in Department I relatively restrict their consumption, the capitalists of Department II must relatively expand their personal consumption in proportion. The assumption of accelerated accumulation in Department I would then have to be supplemented by that of retarded accumulation in Department II, technical progress in one department by regression in the other. These results are not due to mere chance. The adjustments we have tried out on Marx's diagram are merely meant to illustrate that technical progress, as he himself admits, must be accompanied by a relative growth of constant as against variable capital. Hence the necessity for a continuous revision of the ratio in which capitalised surplus value should be allotted to _c_ and _v_ respectively. In Marx's diagram, however, the capitalists are in no position to make these allocations at will, since the material form of their surplus value predetermines the forms of capitalisation. Since, according to Marx's assumption, all expansion of production proceeds exclusively by means of its own, capitalistically produced means of production and subsistence,--since there are here no other places and forms of production and equally no other consumers than the two departments with their capitalists and workers,--and since, on the other hand, the smooth working of the accumulative process depends on that circulation should wholly absorb the aggregate product of both departments, the technological shape of enlarged reproduction is in consequence strictly prescribed by the material form of the surplus product. In other words: according to Marx's diagram, the technical organisation of expanded production can and must be such as to make use of the aggregate surplus value produced in Departments I and II. In this connection we must bear in mind also that both departments can obtain their respective elements of production only by means of mutual exchange. Thus the allocation to constant or variable capital of the surplus value earmarked for capitalisation, as well as the allotment of the additional means of production and subsistence (for the workers) to Departments I and II is given in advance and determined by the relations between the two departments of the diagram--both in material and in terms of value. These relations themselves, however, reflect a quite determinate technical organisation of production. This implies that, on the assumptions of Marx's diagram, the techniques of production given in each case predetermine the techniques of the subsequent periods of enlarged reproduction, if accumulation continues. Assuming, that is to say, in accordance with Marx's diagram, that the expansion of capitalist production is always performed by means of the surplus value originally produced in form of capital, and further--or rather, conversely--that accumulation in one department is strictly dependent on accumulation in the other, then no change in the technical organisation of production can be possible in so far as the relation of _c_ to _v_ is concerned. We may put our point in yet another way: it is clear that a quicker growth of constant as compared with variable capital, i.e. the progressive metamorphosis of the organic composition of capital, must take the material form of faster expansion of production in Department I as against production in Department II. Yet Marx's diagram, where strict conformity of the two departments is axiomatic, precludes any such fluctuations in the rate of accumulation in either department. It is quite legitimate to suppose that under the technical conditions of progressive accumulation, society would invest ever increasing portions of the surplus value earmarked for accumulation in Department I rather than in Department II. Both departments being only branches of the same social production--supplementary enterprises, if you like, of the 'aggregate capitalist',--such a progressive transfer, for technical reasons, from one department to the other of a part of the accumulated surplus value would be wholly feasible, especially as it corresponds to the actual practice of capital. Yet this assumption is possible only so long as we envisage the surplus value earmarked for capitalisation purely in terms of value. The diagram, however, implies that this part of the surplus value appears in a definite material form which prescribes its capitalisation. Thus the surplus value of Department II exists as means of subsistence, and since it is as such to be only realised by Department I, this intended transfer of part of the capitalised surplus value from Department II to Department I is ruled out, first because the material form of this surplus value is obviously useless to Department I, and secondly because of the relations of exchange between the two departments which would in turn necessitate an equivalent transfer of the products of Department I into Department II. It is therefore downright impossible to achieve a faster expansion of Department I as against Department II within the limits of Marx's diagram. However we may regard the technological alterations of the mode of production in the course of accumulation, they cannot be accomplished without upsetting the fundamental relations of Marx's diagram. And further: according to Marx's diagram, the capitalised surplus value is in each case immediately and completely absorbed by the productive process of the following period, for, apart from the portion earmarked for consumption, it has a natural form which allows of only one particular kind of employment. The diagram precludes the cashing and hoarding of surplus value in monetary form, as capital waiting to be invested. The free monetary forms of private capital, in Marx's view, are first the money deposited gradually against the wear and tear of the fixed capital, for its eventual renewal; and secondly those amounts of money which represent realised surplus value but are still too small for investment. From the point of view of the aggregate capital, both these sources of free money capital are negligible. For if we assume that even a portion of the social surplus value is realised in monetary form for purposes of future investment, then at once the question arises: who has bought the material items of this surplus value, and who has provided the money? If the answer is: other capitalists, of course,--then, seeing that the capitalist class is represented in the diagram by the two departments, this portion of the surplus value must also be regarded as invested _de facto_, as employed in the productive process. And so we are back at immediate and complete investment of the surplus value. Or does the freezing of one part of the surplus value in monetary form in the hands of certain capitalists mean that other capitalists will be left with a corresponding part of that surplus product in its material form? does the hoarding of realised surplus value by some imply that others are no longer able to realise their surplus value, since the capitalists are the only buyers of surplus value? This would mean, however, that the smooth course of reproduction and similarly of accumulation as described in the diagram would be interrupted. The result would be a crisis, due not to over-production but to a mere intention to accumulate, the kind of crisis envisaged by Sismondi. In one passage of his _Theories_,[341] Marx explains in so many words that he 'is not at all concerned in this connection with an accumulation of capital greater than can be used in the productive process and might lie idle in the banks in monetary form, with the consequence of lending abroad'. Marx refers these phenomena to the section on competition. Yet it is important to establish that his diagram veritably precludes the formation of such additional capital. Competition, however wide we may make the concept, obviously cannot create values, nor can it create capitals which are not themselves the result of the reproductive process. The diagram thus precludes the expansion of production by leaps and bounds. It only allows of a gradual expansion which keeps strictly in step with the formation of the surplus value and is based upon the identity between realisation and capitalisation of the surplus value. For the same reason, the diagram presumes an accumulation which affects both departments equally and therefore all branches of capitalist production. It precludes expansion of the demand by leaps and bounds just as much as it prevents a one-sided or precocious development of individual branches of capitalist production. Thus the diagram assumes a movement of the aggregate capital which flies in the face of the actual course of capitalist development. At first sight, two facts are typical for the history of the capitalist mode of production: on the one hand the periodical expansion of the whole field of production by leaps and bounds, and on the other an extremely unequal development of the different branches of production. The history of the English cotton industry from the first quarter of the eighteenth to the seventies of the nineteenth century, the most characteristic chapter in the history of the capitalist mode of production, appears quite inexplicable from the point of view of Marx's diagram. Finally, the diagram contradicts the conception of the capitalist total process and its course as laid down by Marx in _Capital_, volume iii. This conception is based on the inherent contradiction between the unlimited expansive capacity of the productive forces and the limited expansive capacity of social consumption under conditions of capitalist distribution. Let us see how Marx describes this contradiction in detail in chapter 15 on 'Unravelling the Internal Contradictions of the Law' (of the declining profit rate): 'The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the labouring population, when the rate of surplus-value, that is, the intensity of exploitation, is given; and no other limit but the intensity of exploitation, when the labouring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-product, which is that aliquot portion of the produced commodities, in which unpaid labour is materialised. It must never be forgotten, that the production of this surplus-value--and the re-conversion of a portion of it into capital, or accumulation, forms an indispensable part of this production of surplus-value--is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoyment for the capitalists. (And, of course, even less for the worker. R. L.) This would be overlooking the specific character of capitalist production, which reveals itself in its innermost essence. The creation of this surplus-value is the object of the direct process of production, and this process has no other limits than those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplus-value has been produced. But this production of surplus-value is but the first act of the capitalist process of production, it merely terminates the act of direct production. Capital has absorbed so much unpaid labour. With the development of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. Now comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are below the prices of production, the labourer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital. The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power or by the absolute consuming power, but by the consuming power based on antagonistic conditions of distribution, which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus-value on an enlarged scale. This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This eternal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the conditions of consumption rest. On this self-contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.'[342] If we compare this description with the diagram of enlarged reproduction, the two are by no means in conformity. According to the diagram, there is no inherent contradiction between the production of the surplus value and its realisation, rather, the two are identical. The surplus value here from the very beginning comes into being in a natural form exclusively designed for the requirements of accumulation. In fact it leaves the place of production in the very form of additional capital, that is to say it is capable of realisation in the capitalist process of accumulation. The capitalists, as a class, see to it in advance that the surplus value they appropriate is produced entirely in that material form which will permit and ensure its employment for purposes of further accumulation. Realisation and accumulation of the surplus value here are both aspects of the same process, they are logically identical. Therefore according to the presentation of the reproductive process in the diagram, society's capacity to consume does not put a limit to production. Here production automatically expands year by year, although the capacity of society for consumption has not gone beyond its 'antagonistic conditions of distribution'. This automatic continuation of expansion, of accumulation, truly is the 'law of capitalist production ... on penalty of failure'. Yet according to the analysis in volume iii, 'the market must, therefore, be continually extended', 'the market' obviously transcending the consumption of capitalists and workers. And if Tugan Baranovski interprets the following passage 'this eternal contradiction seeks to balance itself by an expansion of the outlying fields of production' as if Marx had meant production itself by 'outlying fields of production', he violates not only the spirit of the language but also Marx's clear train of thought. The 'outlying fields of production' are clearly and unequivocally not production itself but consumption which 'must be continually extended'. The following passage in _Theorien über den Mehrwert_, amongst others, sufficiently shows that Marx had this in mind and nothing else: 'Ricardo therefore consistently denies the necessity for an _expansion of the market_ to accompany the expansion of production and the growth of capital. The entire capital existing within a country can also be profitably used in that country. He therefore argues against Adam Smith who had set up his (Ricardo's) opinion on the one hand but also contradicted it with his usual sure instinct.'[343] In yet another passage, Marx clearly shows that Tugan Baranovski's notion of production for production's sake is wholly alien to him: 'Besides, we have seen in volume ii part iii that a continuous circulation takes place between constant capital and constant capital (even without considering any accelerated accumulation), which is in so far independent of individual consumption, as it never enters into such consumption, but which is nevertheless definitely limited by it, because the production of constant capital never takes place for its own sake, but solely because more of this capital is needed in those spheres of production whose products pass into individual consumption.'[344] Admittedly, in the diagram in volume ii, Tugan Baranovski's sole support, market and production coincide--they are one and the same. Expansion of the market here means extended production, since production is said to be its own exclusive market--the consumption of the workers being an element of production, i.e. the reproduction of variable capital. Therefore the limit for both the expansion of production and the extension of the market is one and the same: it is given by the volume of the social capital, or the stage of accumulation already attained. The greater the quantity of surplus value that has been extracted in the natural form of capital, the more can be accumulated; and the greater the volume of accumulation, the more surplus value can be invested in its material form of capital, i.e. the more can be realised. Thus the diagram does not admit the contradiction outlined in the analysis of volume iii. In the process described by the diagram there is no need for a continual extension of the market beyond the consumption of capitalists and workers, nor is the limited social capacity for consumption an obstacle to the smooth course of production and its unlimited capacity for expansion. The diagram does indeed permit of crises but only because of a lack of proportion within production, because of a defective social control over the productive process. It precludes, however, the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market. FOOTNOTES: [332] _Capital_, vol. i, pp. 593-4. [333] Ibid., p. 594, note 1. [334] Op. cit., vol. ii, p. 384. [335] Ibid., pp. 400-1. [336] Ibid., p. 488. [337] _Capital_, vol. iii, p. 568. [338] _Theorien_ ..., vol. ii, part 2, 'The Accumulation of Capital and Crises', p. 263. [339] 'It is never the original thinkers who draw the absurd conclusions. They leave that to the Says and MacCullochs' (_Capital_, vol. ii, p. 451).--And--we might add--to the Tugan Baranovskis. [340] The figures result from the difference between the amounts of constant capital in Department I under conditions of technical progress, and under Marx's stable conditions. [341] _Theorien über den Mehrwert_, vol. ii, part 2, p. 252. [342] _Capital_, vol. iii, p. 285 ff. [343] _Theorien_ ..., vol. ii, part 2, p. 305. [344] _Capital_, vol. iii, p. 359. _CHAPTER XXVI_ THE REPRODUCTION OF CAPITAL AND ITS SOCIAL SETTING Marx's diagram of enlarged reproduction cannot explain the actual and historical process of accumulation. And why? Because of the very premises of the diagram. The diagram sets out to describe the accumulative process on the assumption that the capitalists and workers are the sole agents of capitalist consumption. We have seen that Marx consistently and deliberately assumes the universal and exclusive domination of the capitalist mode of production as a theoretical premise of his analysis in all three volumes of _Capital_. Under these conditions, there can admittedly be no other classes of society than capitalists and workers; as the diagram has it, all 'third persons' of capitalist society--civil servants, the liberal professions, the clergy, etc.--must, as consumers, be counted in with these two classes, and preferably with the capitalist class. This axiom, however, is a theoretical contrivance--real life has never known a self-sufficient capitalist society under the exclusive domination of the capitalist mode of production. This theoretical device is perfectly admissible so long as it merely helps to demonstrate the problem in its integrity and does not interfere with its very conditions. A case in point is the analysis of simple reproduction of the aggregate social capital, where the problem itself rests upon a fiction: in a society producing by capitalist methods, i.e. a society which creates surplus value, the whole of the latter is taken to be consumed by the capitalists who appropriate it. The object is to present the forms of social production and reproduction under these given conditions. Here the very formulation of the problem implies that production knows no other consumers than capitalists and workers and thus strictly conforms to Marx's premise: universal and exclusive domination of the capitalist mode of production. The implications of both fictions are the same. Similarly, it is quite legitimate to postulate absolute dominance of capital in an analysis of the accumulation of individual capitals, such as is given in _Capital_, volume i. The reproduction of individual capitals is an element in total social reproduction but one which follows an independent course, contrary to the movements of the other elements. In consequence it will not do simply to take together the individual movements of the respective capitals in order to arrive at the total movement of social capital, since the latter is essentially different. The natural conditions of reproducing individual capitals therefore neither conform with one another, nor do they conform to the relations of the total capital. Under normal conditions of circulation, every individual capital engages in the process of circulation and of accumulation entirely on its own account, depending upon others only in so far, of course, as it is compelled to find a market for its product and must find available the means of production it requires for its specific activities. Whether the strata who afford this market and provide the necessary means of production are themselves capitalist producers or not is completely immaterial for the individual capital, although, in theory, the most favourable premise for analysing the accumulation of individual capital is the assumption that capitalist production has attained universal and exclusive domination and is the sole setting of this process.[345] Now, however, the question arises whether the assumptions which were decisive in the case of individual capital, are also legitimate for the consideration of aggregate capital. 'We must now put the problem in this form: _given universal accumulation_, that is to say provided that in all branches of production there is greater or less accumulation of capital--which in fact is a condition of capitalist production, and which is just as natural to the capitalist _qua_ capitalist as it is natural to the miser to amass money (but which is also necessary for the perpetuation of capitalist production)--what are the _conditions_ of this universal accumulation, to what elements can it be reduced?' And the answer: '_The conditions for the accumulation of capital are precisely those which rule its original production and reproduction in general_: these conditions being that one part of the money buys labour and the other commodities (raw materials, machinery, etc.) ... Accumulation of new capital can only proceed therefore under the same conditions under which already existing capital is reproduced.'[346] In real life the actual conditions for the accumulation of the aggregate capital are quite different from those prevailing for individual capitals and for simple reproduction. The problem amounts to this: If an increasing part of the surplus value is not consumed by the capitalists but employed in the expansion of production, what, then, are the forms of social reproduction? What is left of the social product after deductions for the replacement of the constant capital cannot, _ex hypothesi_, be absorbed by the consumption of the workers and capitalists--this being the main aspect of the problem--nor can the workers and capitalists themselves realise the aggregate product. They can always only realise the variable capital, that part of the constant capital which will be used up, and the part of the surplus value which will be consumed, but in this way they merely ensure that production can be renewed on its previous scale. The workers and capitalists themselves cannot possibly realise that part of the surplus value which is to be capitalised. Therefore, the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists. Strangely enough, all theorists who analysed the problem of accumulation, from Ricardo and Sismondi to Marx, started with the very assumption which makes their problem insoluble. A sure instinct that realisation of the surplus value requires 'third persons', that is to say consumers other than the immediate agents of capitalist production (i.e. workers and capitalists) led to all kinds of subterfuges: 'unproductive consumption' as presented by Malthus in the person of the feudal landowner, by Vorontsov in militarism, by Struve in the 'liberal professions' and other hangers-on of the capitalist class; or else foreign trade is brought into play which proved a useful safety valve to all those who regarded accumulation with scepticism, from Sismondi to Nicolayon. Because of these insoluble difficulties, others like v. Kirchmann and Rodbertus tried to do without accumulation altogether, or, like Sismondi and his Russian 'populist' followers, stressed the need for at least putting the dampers on accumulation as much as possible. The salient feature of the problem of accumulation, and the vulnerable point of earlier attempts to solve it, has only been shown up by Marx's more profound analysis, his precise diagrammatic demonstration of the total reproductive process, and especially his inspired exposition of the problem of simple reproduction. Yet he could not supply immediately a finished solution either, partly because he broke off his analysis almost as soon as he had begun it, and partly because he was then preoccupied, as we have shown, with denouncing the analysis of Adam Smith and thus rather lost sight of the main problem. In fact, he made the solution even more difficult by assuming the capitalist mode of production to prevail universally. Nevertheless, a solution of the problem of accumulation, in harmony both with other parts of Marx's doctrine and with the historical experience and daily practice of capitalism, is implied in Marx's complete analysis of simple reproduction and his characterisation of the capitalist process as a whole which shows up its immanent contradictions and their development (in _Capital_, vol. iii). In the light of this, the deficiencies of the diagram can be corrected. All the relations being, as it were, incomplete, a closer study of the diagram of enlarged reproduction will reveal that it points to some sort of organisation more advanced than purely capitalist production and accumulation. Up to now we have only considered one aspect of enlarged reproduction, the problem of realising the surplus value, whose difficulties hitherto had claimed the sceptics' whole attention. Realisation of the surplus value is doubtless a vital question of capitalist accumulation. It requires as its prime condition--ignoring, for simplicity's sake, the capitalists' fund of consumption altogether--that there should be strata of buyers outside capitalist society. Buyers, it should be noted, not consumers, since the material form of the surplus value is quite irrelevant to its realisation. The decisive fact is that the surplus value cannot be realised by sale either to workers or to capitalists, but only if it is sold to such social organisations or strata whose own mode of production is not capitalistic. Here we can conceive of two different cases: (1) Capitalist production supplies consumer goods over and above its own requirements, the demand of its workers and capitalists, which are bought by non-capitalist strata and countries. The English cotton industry, for instance, during the first two-thirds of the nineteenth century, and to some extent even now, has been supplying cotton textiles to the peasants and petty-bourgeois townspeople of the European continent, and to the peasants of India, America, Africa and so on. The enormous expansion of the English cotton industry was thus founded on consumption by non-capitalist strata and countries.[347] In England herself, this flourishing cotton industry called forth large-scale development in the production of industrial machinery (bobbins and weaving-looms), and further in the metal and coal industries and so on. In this instance, Department II realised its products to an increasing extent by sale to non-capitalist social strata, and by its own accumulation it created on its part an increasing demand for the home produce of Department I, thus helping the latter to realise its surplus value and to increase its own accumulation. (2) Conversely, capitalist production supplies means of production in excess of its own demand and finds buyers in non-capitalist countries. English industry, for instance, in the first half of the nineteenth century supplied materials for the construction of railroads in the American and Australian states. (The building of railways cannot in itself be taken as evidence for the domination of capitalist production in a country. As a matter of fact, the railways in this case provided only one of the first conditions for the inauguration of capitalist production.) Another example would be the German chemical industry which supplies means of production such as dyes in great quantities to Asiatic, African and other countries whose own production is not capitalistic.[348] Here Department I realises its products in extra-capitalist circles. The resulting progressive expansion of Department I gives rise to a corresponding expansion of Department II in the same (capitalistically producing) country in order to supply the means of subsistence for the growing army of workers in Department I. Each of these cases differs from Marx's diagram. In one case, the product of Department II exceeds the needs of both departments, measured by the variable capital and the consumed part of the surplus value. In the second case, the product of Department I exceeds the volume of constant capital in both departments, enlarged though it is for the purpose of expanding production. In both cases, the surplus value does not come into being in that natural form which would make its capitalisation in either department possible and necessary. These two prototypes continually overlap in real life, supplement each other and merge. In this contest, one point seems still obscure. The surplus of consumer goods, say cotton fabrics, which is sold to non-capitalist countries, does not exclusively represent surplus value, but, as a capitalist commodity, it embodies also constant and variable capital. It seems quite arbitrary to assume that just those commodities which are sold outside the capitalist strata of society should represent nothing but surplus value. On the other hand, Department I clearly can in this case not only realise its surplus value but also accumulate, and that without requiring another market for its product than the two departments of capitalist production. Yet both these objections are only apparent. All we need remember is that each component of the aggregate product represents a proportion of the total value, that under conditions of capitalist production not only the aggregate product but every single commodity contains surplus value; which consideration does not prevent the individual capitalist, however, from computing that the sale of his specific commodities must first reimburse him for his outlay on constant capital and secondly replace his variable capital (or, rather loosely, but in accordance with actual practice: it must first replace his fixed, and then his circulating capital); what then remains will go down as profit. Similarly, we can divide the aggregate social product into three proportionate parts which, in terms of value, correspond to (1) the constant capital that has been used up in society, (2) the variable capital, and (3) the extracted surplus value. In the case of simple reproduction these proportions are also reflected in the material shape of the aggregate product: the constant capital materialises as means of production, the variable capital as means of subsistence for the workers, and the surplus value as means of subsistence for the capitalist. Yet as we know, the concept of simple reproduction with consumption of the entire surplus value by the capitalists is a mere fiction. As for enlarged reproduction or accumulation, in Marx's diagram the composition of the social product in terms of value is also strictly in proportion to its material form: the surplus value, or rather that part of it which is earmarked for capitalisation, has from the very beginning the form of material means of production and means of subsistence for the workers in a ratio appropriate to the expansion of production on a given technical basis. As we have seen, this conception, which is based upon the self-sufficiency and isolation of capitalist production, falls down as soon as we consider the realisation of the surplus value. If we assume, however, that the surplus value is realised outside the sphere of capitalist production, then its material form is independent of the requirements of capitalist production itself. Its material form conforms to the requirements of those non-capitalist circles who help to realise it, that is to say, capitalist surplus value can take the form of consumer goods, e.g. cotton fabrics, or of means of production, e.g. materials for railway construction, as the case may be. If one department realises its surplus value by exporting its products, and with the ensuing expansion of production helps the other department to realise its surplus value on the home market, then the fact still remains that the _social_ surplus value must yet be taken as realised outside the two departments, either mediately or immediately. Similar considerations enable the individual capitalist to realise his surplus value, even if the whole of his commodities can only replace either the variable or the constant capital of another capitalist. Nor is the realisation of the surplus value the only vital aspect of reproduction. Given that Department I has disposed of its surplus value outside, thereby starting the process of accumulation, and further, that it can expect a new increase in the demand in non-capitalist circles, these two conditions add up to only half of what is required for accumulation. There is many a slip 'twixt the cup and the lip. The second requirement of accumulation is access to material elements necessary for expanding reproduction. Seeing that we have just turned the surplus product of Department I into money by getting rid of the surplus means of production to non-capitalist circles, from where are these material elements then to come? The transaction which is the portal for realising the surplus value is also, as it were, a backdoor out of which flies all possibility of converting this realised surplus value into productive capital--one leads to the nether regions and the other to the deep sea. Let us take a closer look. Here we use _c_ in both Departments I and II as if it were the entire constant capital in production. Yet this we know is wrong. Only for the sake of simplifying the diagram have we disregarded that the _c_ which figures in Departments I and II of the diagram is only part of the aggregate constant capital of society, that is to say that part which, circulating during one year, is used up and embodied in the products of one period of production. Yet it would be perfectly absurd if capitalist production--or any other--would use up its entire constant capital and create it anew in every period of production. On the contrary, we assume that the whole mass of means of production, for the periodical total renewal of which the diagram provides in annual instalments--renewal of the used-up part--lies at the back of production as presented in the diagram. With progressing labour productivity and an expanding volume of production, this mass increases not only absolutely but also relatively to the part which is consumed in production in every case, together with a corresponding increase in the efficiency of the constant capital. It is the more intensive exploitation of this part of the constant capital, irrespective of its increase in value, which is of paramount importance for the expansion of production. 'In the extractive industries, mines, etc., the raw materials form no part of the capital advanced. The subject of labour is in this case not a product of previous labour, but is furnished by Nature gratis, as in the case of metals, minerals, coal, stone, etc. In these cases the constant capital consists almost exclusively of instruments of labour, which can very well absorb an increased quantity of labour (day and night shifts of labourers, e.g.). All other things being equal, the mass and value of the product will rise in direct proportion to the labour expended. As on the first day of production, the original produce-formers, now turned into the creators of the material elements of capital--man and Nature--still work together. Thanks to the elasticity of labour-power, the domain of accumulation has extended without any previous enlargement of constant capital.--In agriculture the land under cultivation cannot be increased without the advance of more seed and manure. But this advance once made, the purely mechanical working of the soil itself produces a marvellous effect on the amount of the product. A greater quantity of labour, done by the same number of labourers as before, thus increases the fertility, without requiring any new advance in the instruments of labour. It is once again the direct action of man on Nature which becomes an immediate source of greater accumulation, without the intervention of any new capital. Finally, in what is called manufacturing industry, every additional expenditure of labour presupposes a corresponding additional expenditure of raw materials, but not necessarily of instruments of labour. And as extractive industry and agriculture supply manufacturing industry with its raw materials and those of its instruments of labour, the additional product the former have created without additional advance of capital, tells also in favour of the latter.--General result: by incorporating with itself the two primary creators of wealth, labour-power and the land, capital acquires a power of expansion that permits it to augment the elements of its accumulation beyond the limits apparently fixed by its own magnitude, or by the value and the mass of the means of production, already produced, in which it has its being.'[349] In addition, there is no obvious reason why means of production and consumer goods should be produced by capitalist methods alone. This assumption, for all Marx used it as the corner-stone of his thesis, is in conformity neither with the daily practice, and the history, of capital, nor with the specific character of this mode of production. In the first half of the nineteenth century, a great part of the surplus value in England was produced in form of cotton fabrics. Yet the material elements for the capitalisation of this surplus value, although they certainly represented a surplus product, still were by no means all capitalist surplus value, to mention only raw cotton from the slave states of the American Union, or grain (a means of subsistence for the English workers) from the fields of serf-owning Russia. How much capitalist accumulation depends upon means of production which are not produced by capitalist methods is shown for example by the cotton crisis in England during the American War of Secession, when the cultivation of the plantations came to a standstill, or by the crisis of European linen-weaving during the war in the East, when flax could not be imported from serf-owning Russia. We need only recall that imports of corn raised by peasants--i.e. not produced by capitalist methods--played a vital part in the feeding of industrial labour, as an element, that is to say, of variable capital, for a further illustration of the close ties between non-capitalist strata and the material elements necessary to the accumulation of capital. Moreover, capitalist production, by its very nature, cannot be restricted to such means of production as are produced by capitalist methods. Cheap elements of constant capital are essential to the individual capitalist who strives to increase his rate of profit. In addition, the very condition of continuous improvements in labour productivity as the most important method of increasing the rate of surplus value, is unrestricted utilisation of all substances and facilities afforded by nature and soil. To tolerate any restriction in this respect would be contrary to the very essence of capital, its whole mode of existence. After many centuries of development, the capitalist mode of production still constitutes only a fragment of total world production. Even in the small Continent of Europe, where it now chiefly prevails, it has not yet succeeded in dominating entire branches of production, such as peasant agriculture and the independent handicrafts; the same holds true, further, for large parts of North America and for a number of regions in the other continents. In general, capitalist production has hitherto been confined mainly to the countries in the temperate zone, whilst it made comparatively little progress in the East, for instance, and the South. Thus, if it were dependent exclusively on elements of production obtainable within such narrow limits, its present level and indeed its development in general would have been impossible. From the very beginning, the forms and laws of capitalist production aim to comprise the entire globe as a store of productive forces. Capital, impelled to appropriate productive forces for purposes of exploitation, ransacks the whole world, it procures its means of production from all corners of the earth, seizing them, if necessary by force, from all levels of civilisation and from all forms of society. The problem of the material elements of capitalist accumulation, far from being solved by the material form of the surplus value that has been produced, takes on quite a different aspect. It becomes necessary for capital progressively to dispose ever more fully of the whole globe, to acquire an unlimited choice of means of production, with regard to both quality and quantity, so as to find productive employment for the surplus value it has realised. The process of accumulation, elastic and spasmodic as it is, requires inevitably free access to ever new areas of raw materials in case of need, both when imports from old sources fail or when social demand suddenly increases. When the War of Secession interfered with the import of American cotton, causing the notorious 'cotton famine' in the Lancashire district, new and immense cotton plantations sprang up in Egypt almost at once, as if by magic. Here it was Oriental despotism, combined with an ancient system of bondage, which had created a sphere of activity for European capital. Only capital with its technical resources can effect such a miraculous change in so short a time--but only on the pre-capitalist soil of more primitive social conditions can it develop the ascendancy necessary to achieve such miracles. Another example of the same kind is the enormous increase in the world consumption of rubber which at present (1912) necessitates a supply of latex to the value of £50,000,000 _per annum_. The economic basis for the production of raw materials is a primitive system of exploitation practised by European capital in the African colonies and in America, where the institutions of slavery and bondage are combined in various forms.[350] Between the production of surplus value, then, and the subsequent period of accumulation, two separate transactions take place--that of realising the surplus value, i.e. of converting it into pure value, and that of transforming this pure value into productive capital. They are both dealings between capitalist production and the surrounding non-capitalist world. From the aspect both of realising the surplus value and of procuring the material elements of constant capital, international trade is a prime necessity for the historical existence of capitalism--an international trade which under actual conditions is essentially an exchange between capitalistic and non-capitalistic modes of production. Hitherto we have considered accumulation solely with regard to surplus value and constant capital. The third element of accumulation is variable capital which increases with progressive accumulation. In Marx's diagram, the social product contains ever more means of subsistence for the workers as the material form proper to this variable capital. The variable capital, however, is not really the means of subsistence for the workers but is in fact living labour for whose reproduction these means of subsistence are necessary. One of the fundamental conditions of accumulation is therefore a supply of living labour which can be mobilised by capital to meet its demands. This supply can be increased under favourable conditions--but only up to a certain point--by longer hours and more intensive work. Both these methods of increasing the supply, however, do not enlarge the variable capital, or do so only to a small extent (e.g. payment for overtime). Moreover, they are confined to definite and rather narrow limits which they cannot exceed owing to both natural and social causes. The increasing growth of variable capital which accompanies accumulation must therefore become manifest in ever greater numbers of employed labour. Where can this additional labour be found? In his analysis of the accumulation of individual capital, Marx gives the following answer: 'Now in order to allow of these elements actually functioning as capital, the capitalist class requires additional labour. If the exploitation of the labourers already employed does not increase, either extensively or intensively, then additional labour-power must be found. For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete.'[351] Thus the increase in the variable capital is directly and exclusively attributed to the natural physical increase of a working class already dominated by capital. This is in strict conformity with the diagram of enlarged reproduction which recognises only the social classes of capitalists and workers, and regards the capitalist mode of production as exclusive and absolute. On these assumptions, the natural increase of the working class is the only source of extending the labour supply commanded by capital. This view, however, is contrary to the laws governing the process of accumulation. The natural propagation of the workers and the requirements of accumulating capital are not correlative in respect of time or quantity. Marx himself has most brilliantly shown that natural propagation cannot keep up with the sudden expansive needs of capital. If natural propagation were the only foundation for the development of capital, accumulation, in its periodical swings from overstrain to exhaustion, could not continue, nor could the productive sphere expand by leaps and bounds, and accumulation itself would become impossible. The latter requires an unlimited freedom of movement in respect of the growth of variable capital equal to that which it enjoys with regard to the elements of constant capital--that is to say it must needs dispose over the supply of labour power without restriction. Marx considers that this can be achieved by an 'industrial reserve army of workers'. His diagram of simple reproduction admittedly does not recognise such an army, nor could it have room for it, since the natural propagation of the capitalist wage proletariat cannot provide an industrial reserve army. Labour for this army is recruited from social reservoirs outside the dominion of capital--it is drawn into the wage proletariat only if need arises. Only the existence of non-capitalist groups and countries can guarantee such a supply of additional labour power for capitalist production. Yet in his analysis of the industrial reserve army[352] Marx only allows for (_a_) the displacement of older workers by machinery, (_b_) an influx of rural workers into the towns in consequence of the ascendancy of capitalist production in agriculture, (_c_) occasional labour that has dropped out of industry, and (_d_) finally the lowest residue of relative over-population, the paupers. All these categories are cast off by the capitalist system of production in some form or other, they constitute a wage proletariat that is worn out and made redundant one way or another. Marx, obviously influenced by English conditions involving a high level of capitalist development, held that the rural workers who continually migrate to the towns belong to the wage proletariat, since they were formerly dominated by agricultural capital and now become subject to industrial capital. He ignores, however, the problem which is of paramount importance for conditions on the continent of Europe, namely the sources from which this urban and rural proletariat is recruited: the continual process by which the rural and urban middle strata become proletarian with the decay of peasant economy and of small artisan enterprises, the very process, that is to say, of incessant transition from non-capitalist to capitalist conditions of a labour power that is cast off by pre-capitalist, not capitalist, modes of production in their progressive breakdown and disintegration. Besides the decay of European peasants and artisans we must here also mention the disintegration of the most varied primitive forms of production and of social organisation in non-European countries. Since capitalist production can develop fully only with complete access to all territories and climes, it can no more confine itself to the natural resources and productive forces of the temperate zone than it can manage with white labour alone. Capital needs other races to exploit territories where the white man cannot work. It must be able to mobilise world labour power without restriction in order to utilise all productive forces of the globe--up to the limits imposed by a system of producing surplus value. This labour power, however, is in most cases rigidly bound by the traditional pre-capitalist organisation of production. It must first be 'set free' in order to be enrolled in the active army of capital. The emancipation of labour power from primitive social conditions and its absorption by the capitalist wage system is one of the indispensable historical bases of capitalism. For the first genuinely capitalist branch of production, the English cotton industry, not only the cotton of the Southern states of the American Union was essential, but also the millions of African Negroes who were shipped to America to provide the labour power for the plantations, and who later, as a free proletariat, were incorporated in the class of wage labourers in a capitalist system.[353] Obtaining the necessary labour power from non-capitalist societies, the so-called 'labour-problem', is ever more important for capital in the colonies. All possible methods of 'gentle compulsion' are applied to solving this problem, to transfer labour from former social systems to the command of capital. This endeavour leads to the most peculiar combinations between the modern wage system and primitive authority in the colonial countries.[354] This is a concrete example of the fact that capitalist production cannot manage without labour power from other social organisations. Admittedly, Marx dealt in detail with the process of appropriating non-capitalist means of production as well as with the transformation of the peasants into a capitalist proletariat. Chapter xxiv of _Capital_, vol. i, is devoted to describing the origin of the English proletariat, of the capitalistic agricultural tenant class and of industrial capital, with particular emphasis on the looting of colonial countries by European capital. Yet we must bear in mind that all this is treated solely with a view to so-called primitive accumulation. For Marx, these processes are incidental, illustrating merely the genesis of capital, its first appearance in the world; they are, as it were, travails by which the capitalist mode of production emerges from a feudal society. As soon as he comes to analyse the capitalist process of production and circulation, he reaffirms the universal and exclusive domination of capitalist production. Yet, as we have seen, capitalism in its full maturity also depends in all respects on non-capitalist strata and social organisations existing side by side with it. It is not merely a question of a market for the additional product, as Sismondi and the later critics and doubters of capitalist accumulation would have it. The interrelations of accumulating capital and non-capitalist forms of production extend over values as well as over material conditions, for constant capital, variable capital and surplus value alike. The non-capitalist mode of production is the given historical setting for this process. Since the accumulation of capital becomes impossible in all points without non-capitalist surroundings, we cannot gain a true picture of it by assuming the exclusive and absolute domination of the capitalist mode of production. Sismondi and his school, when they attributed their difficulties entirely to the problem of realising the surplus value, indeed revealed a proper sense for the conditions vital to accumulation. Yet the conditions for augmenting the material elements of constant and variable capital are quite a different matter from those which govern the realisation of surplus value. Capital needs the means of production and the labour power of the whole globe for untrammelled accumulation; it cannot manage without the natural resources and the labour power of all territories. Seeing that the overwhelming majority of resources and labour power is in fact still in the orbit of pre-capitalist production--this being the historical _milieu_ of accumulation--capital must go all out to obtain ascendancy over these territories and social organisations. There is no _a priori_ reason why rubber plantations, say, run on capitalist lines, such as have been laid out in India, might not serve the ends of capitalist production just as well. Yet if the countries of those branches of production are predominantly non-capitalist, capital will endeavour to establish domination over these countries and societies. And in fact, primitive conditions allow of a greater drive and of far more ruthless measures than could be tolerated under purely capitalist social conditions. It is quite different with the realisation of the surplus value. Here outside consumers _qua_ other-than-capitalist are really essential. Thus the immediate and vital conditions for capital and its accumulation is the existence of non-capitalist buyers of the surplus value, which is decisive to this extent for the problem of capitalist accumulation. Whatever the theoretical aspects, the accumulation of capital, as an historical process, depends in every respect upon non-capitalist social strata and forms of social organisation. The solution to this problem which for almost a century has been the bone of contention in economic theory thus lies between the two extremes of the petty-bourgeois scepticism preached by Sismondi, v. Kirchmann, Vorontsov and Nicolayon, who flatly denied accumulation, and the crude optimism advocated by Ricardo, Say and Tugan Baranovski who believed in capital's unlimited capacity for parthenogenesis, with the logical corollary of capitalism-in-perpetuity. The solution envisaged by Marx lies in the dialectical conflict that capitalism needs non-capitalist social organisations as the setting for its development, that it proceeds by assimilating the very conditions which alone can ensure its own existence. At this point we should revise the conceptions of internal and external markets which were so important in the controversy about accumulation. They are both vital to capitalist development and yet fundamentally different, though they must be conceived in terms of social economy rather than of political geography. In this light, the internal market is the capitalist market, production itself buying its own products and supplying its own elements of production. The external market is the non-capitalist social environment which absorbs the products of capitalism and supplies producer goods and labour power for capitalist production. Thus, from the point of view of economics, Germany and England traffic in commodities chiefly on an internal, capitalist market, whilst the give and take between German industry and German peasants is transacted on an external market as far as German capital is concerned. These concepts are strict and precise, as can be seen from the diagram of reproduction. Internal capitalist trade can at best realise only certain quantities of value contained in the social product: the constant capital that has been used up, the variable capital, and the consumed part of the surplus value. That part of the surplus value, however, which is earmarked for capitalisation, must be realised elsewhere. If capitalisation of surplus value is the real motive force and aim of production, it must yet proceed within the limits given by the renewal of constant and variable capital (and also of the consumed part of the surplus value). Further, with the international development of capitalism the capitalisation of surplus value becomes ever more urgent and precarious, and the substratum of constant and variable capital becomes an ever-growing mass--both absolutely and in relation to the surplus value. Hence the contradictory phenomena that the old capitalist countries provide ever larger markets for, and become increasingly dependent upon, one another, yet on the other hand compete ever more ruthlessly for trade relations with non-capitalist countries.[355] The conditions for the capitalisation of surplus value clash increasingly with the conditions for the renewal of the aggregate capital--a conflict which, incidentally, is merely a counterpart of the contradictions implied in the law of a declining profit rate. FOOTNOTES: [345] 'If capital and the productivity of labour advance and the standard of capitalist production in general is on a higher level of development, then there is a correspondingly greater mass of commodities passing through the market from production to individual and industrial consumption, greater certainty that each particular capital will find the conditions for its reproduction available in the market' (_Theorien_ ..., vol. ii, part 2, p. 251). [346] _Theorien_ ..., vol. ii, part 2, p. 250: _Akkumulation von Kapital und Krisen_. (The Accumulation of Capital and the Crises.) Marx's italics. [347] The following figures plainly show the importance of the cotton industry for English exports: In 1893, cotton exports to the amount of £64,000,000 made up 23 per cent, and iron and other metal exports not quite 17 per cent, of the total export of manufactured goods, amounting to £277,000,000 in all. In 1898, cotton exports to the amount of £65,000,000 made up 28 per cent, and metal exports 22 per cent, of the total export of manufactured goods, amounting to £233,400,000 in all. In comparison, the figures for the German Empire show the following result: In 1898, cotton exports to the amount of £11,595,000 made up 5·75 per cent of the total exports, amounting to £200,500,000. 5,250,000,000 yards of cotton bales were exported in 1898, 2,250,000,000 of them to India (E. Jaffé: _Die englische Baumwollindustrie und die Organisation des Exporthandels_. Schmoller's Jahrbücher, vol. xxiv, p. 1033). In 1908, British exports of cotton yarn alone amounted to £13,100,000 (_Statist. Jahrb. für das Deutsche Reich_, 1910). [348] One-fifth of German aniline dyes, and one-half of her indigo, goes to countries such as China, Japan, British India, Egypt, Asiatic Turkey, Brazil, and Mexico. [349] _Capital_, vol. i, pp. 615-16. [350] The English Blue Book on the practices of the Peruvian Amazon Company, Ltd., in Putumayo, has recently revealed that in the free republic of Peru and without the political form of colonial supremacy, international capital can, to all intents and purposes, enslave the natives, so that it may appropriate the means of production of the primitive countries by exploitation on the greatest scale. Since 1900, this company, financed by English and foreign capitalists, has thrown upon the London market approximately 4,000 tons of Putumayo rubber. During this time, 30,000 natives were killed and most of the 10,000 survivors were crippled by beatings. [351] _Capital_, vol. i, p. 594. Similarly in another passage: 'One part of the surplus value, of the surplus means of subsistence produced, must then be converted into variable capital for the purpose of purchasing new labour. This can only be done if the number of workers grows or if their working time is prolonged.... This, however, cannot be considered a ready measure for accumulation. The working population can increase if formerly unproductive workers are transformed into productive ones, or if parts of the population who previously performed no work, such as women, children and paupers, are drawn into the process of production. Here, however, we shall ignore this aspect. Lastly, the working population can increase through an absolute increase in population. If accumulation is to proceed steadily and continuously, it must be grounded in an absolute growth of the population, though this may decline in comparison with the capital employed. An expanding population appears as the basis of accumulation conceived as a steady process. An indispensable condition for this is an average wage which is adequate not only to the reproduction of the working population but permits its continual increase' (_Theorien über den Mehrwert_, vol. ii, part 2, in the chapter on 'Transformation of Revenue Into Capital' (_Verwandlung von Revenue in Kapital_), p. 243). [352] _Capital_, vol. i, pp. 642 ff. [353] A table published in the United States shortly before the War of Secession contained the following data about the value of the annual production of the Slave States and the number of slaves employed--for the greatest part on cotton plantations: _Year_ _Cotton: _Slaves_ Dollars_ 1800 5,200,000 893,041 1810 15,000,000 1,191,364 1820 26,300,000 1,543,688 1830 34,100,000 2,009,053 1840 74,600,000 2,487,255 1850 101,800,000 3,197,509 1851 137,300,000 3,200,000 (Simons, 'Class Struggles in American History'. Supplement to _Neue Zeit_ (_Klassenkämpfe in der Geschichte Amerikas._ _Ergänzungsheft der 'Neuen Zeit'_), Nr. 7, p. 39.) [354] Bryce, a former English Minister, describes a model pattern of such hybrid forms in the South African diamond mines: 'The most striking sight at Kimberley, and one unique in the world, is furnished by the two so-called "compounds" in which the natives who work in the mines are housed and confined. They are huge inclosures, unroofed, but covered with a wire netting to prevent anything from being thrown out of them over the walls, and with a subterranean entrance to the adjoining mine. The mine is worked on the system of three eight-hour shifts, so that the workman is never more than eight hours together underground. Round the interior of the wall are built sheds or huts in which the natives live and sleep when not working. A hospital is also provided within the inclosure, as well as a school where the work-people can spend their leisure in learning to read and write. No spirits are sold.... Every entrance is strictly guarded, and no visitors, white or native, are permitted, all supplies being obtained from the store within, kept by the company. The De Beers mine compound contained at the time of my visit 2,600 natives, belonging to a great variety of tribes, so that here one could see specimens of the different native types from Natal and Pondoland, in the south, to the shores of Lake Tanganyika in the far north. They come from every quarter, attracted by the high wages, usually eighteen to thirty shillings a week, and remain for three months or more, and occasionally even for longer periods.... In the vast oblong compound one sees Zulus from Natal, Fingos, Pondos, Tembus, Basutos, Bechuanas, Gungunhana's subjects from the Portuguese territories, some few Matabili and Makalaka; and plenty of Zambesi boys from the tribes on both sides of that great river, a living ethnological collection such as can be examined nowhere else in South Africa. Even Bushmen, or at least natives with some Bushman blood in them, are not wanting. They live peaceably together, and amuse themselves in their several ways during their leisure hours. Besides games of chance, we saw a game resembling "fox and geese" played with pebbles on a board; and music was being discoursed on two rude native instruments, the so-called "Kaffir piano" made of pieces of iron of unequal length fastened side by side in a frame, and a still ruder contrivance of hard bits of wood, also of unequal size, which when struck by a stick emit different notes, the first beginning of a tune. A very few were reading or writing letters, the rest busy with their cooking or talking to one another. Some tribes are incessant talkers, and in this strange mixing-pot of black men one may hear a dozen languages spoken as one passes from group to group' (James Bryce, _Impressions of South Africa_, London, 1897, pp. 242 ff.). After several months of work, the negro as a rule leaves the mine with the wages he has saved up. He returns to his tribe, buying a wife with his money, and lives again his traditional life. Cf. also in the same book the most lively description of the methods used in South Africa to solve the 'labour-problem'. Here we are told that the negroes are compelled to work in the mines and plantations of Kimberley, Witwatersrand, Natal, Matabeleland, by stripping them of all land and cattle, i.e. depriving them of their means of existence, by making them into proletarians and also demoralising them with alcohol. (Later, when they are already within the 'enclosure' of capital, spirits, to which they have just been accustomed, are strictly prohibited--the object of exploitation must be kept fit for use.) Finally, they are simply pressed into the wage system of capital by force, by imprisonment, and flogging. [355] The relations between Germany and England provide a typical example. _CHAPTER XXVII_ THE STRUGGLE AGAINST NATURAL ECONOMY Capitalism arises and develops historically amidst a non-capitalist society. In Western Europe it is found at first in a feudal environment from which it in fact sprang--the system of bondage in rural areas and the guild system in the towns--and later, after having swallowed up the feudal system, it exists mainly in an environment of peasants and artisans, that is to say in a system of simple commodity production both in agriculture and trade. European capitalism is further surrounded by vast territories of non-European civilisation ranging over all levels of development, from the primitive communist hordes of nomad herdsmen, hunters and gatherers to commodity production by peasants and artisans. This is the setting for the accumulation of capital. We must distinguish three phases: the struggle of capital against natural economy, the struggle against commodity economy, and the competitive struggle of capital on the international stage for the remaining conditions of accumulation. The existence and development of capitalism requires an environment of non-capitalist forms of production, but not every one of these forms will serve its ends. Capitalism needs non-capitalist social strata as a market for its surplus value, as a source of supply for its means of production and as a reservoir of labour power for its wage system. For all these purposes, forms of production based upon a natural economy are of no use to capital. In all social organisations where natural economy prevails, where there are primitive peasant communities with common ownership of the land, a feudal system of bondage or anything of this nature, economic organisation is essentially in response to the internal demand; and therefore there is no demand, or very little, for foreign goods, and also, as a rule, no surplus production, or at least no urgent need to dispose of surplus products. What is most important, however, is that, in any natural economy, production only goes on because both means of production and labour power are bound in one form or another. The communist peasant community no less than the feudal _corvée_ farm and similar institutions maintain their economic organisation by subjecting the labour power, and the most important means of production, the land, to the rule of law and custom. A natural economy thus confronts the requirements of capitalism at every turn with rigid barriers. Capitalism must therefore always and everywhere fight a battle of annihilation against every historical form of natural economy that it encounters, whether this is slave economy, feudalism, primitive communism, or patriarchal peasant economy. The principal methods in this struggle are political force (revolution, war), oppressive taxation by the state, and cheap goods; they are partly applied simultaneously, and partly they succeed and complement one another. In Europe, force assumed revolutionary forms in the fight against feudalism (this is the ultimate explanation of the bourgeois revolutions in the seventeenth, eighteenth and nineteenth centuries); in the non-European countries, where it fights more primitive social organisations, it assumes the forms of colonial policy. These methods, together with the systems of taxation applied in such cases, and commercial relations also, particularly with primitive communities, form an alliance in which political power and economic factors go hand in hand. In detail, capital in its struggle against societies with a natural economy pursues the following ends: (1) To gain immediate possession of important sources of productive forces such as land, game in primeval forests, minerals, precious stones and ores, products of exotic flora such as rubber, etc. (2) To 'liberate' labour power and to coerce it into service. (3) To introduce a commodity economy. (4) To separate trade and agriculture. At the time of primitive accumulation, i.e. at the end of the Middle Ages, when the history of capitalism in Europe began, and right into the nineteenth century, dispossessing the peasants in England and on the Continent was the most striking weapon in the large-scale transformation of means of production and labour power into capital. Yet capital in power performs the same task even to-day, and on an even more important scale--by modern colonial policy. It is an illusion to hope that capitalism will ever be content with the means of production which it can acquire by way of commodity exchange. In this respect already, capital is faced with difficulties because vast tracts of the globe's surface are in the possession of social organisations that have no desire for commodity exchange or cannot, because of the entire social structure and the forms of ownership, offer for sale the productive forces in which capital is primarily interested. The most important of these productive forces is of course the land, its hidden mineral treasure, and its meadows, woods and water, and further the flocks of the primitive shepherd tribes. If capital were here to rely on the process of slow internal disintegration, it might take centuries. To wait patiently until the most important means of production could be alienated by trading in consequence of this process were tantamount to renouncing the productive forces of those territories altogether. Hence derives the vital necessity for capitalism in its relations with colonial countries to appropriate the most important means of production. Since the primitive associations of the natives are the strongest protection for their social organisations and for their material bases of existence, capital must begin by planning for the systematic destruction and annihilation of all the non-capitalist social units which obstruct its development. With that we have passed beyond the stage of primitive accumulation; this process is still going on. Each new colonial expansion is accompanied, as a matter of course, by a relentless battle of capital against the social and economic ties of the natives, who are also forcibly robbed of their means of production and labour power. Any hope to restrict the accumulation of capital exclusively to 'peaceful competition', i.e. to regular commodity exchange such as takes place between capitalist producer-countries, rests on the pious belief that capital can accumulate without mediation of the productive forces and without the demand of more primitive organisations, and that it can rely upon the slow internal process of a disintegrating natural economy. Accumulation, with its spasmodic expansion, can no more wait for, and be content with, a natural internal disintegration of non-capitalist formations and their transition to commodity economy, than it can wait for, and be content with, the natural increase of the working population. Force is the only solution open to capital; the accumulation of capital, seen as an historical process, employs force as a permanent weapon, not only at its genesis, but further on down to the present day. From the point of view of the primitive societies involved, it is a matter of life or death; for them there can be no other attitude than opposition and fight to the finish--complete exhaustion and extinction. Hence permanent occupation of the colonies by the military, native risings and punitive expeditions are the order of the day for any colonial regime. The method of violence, then, is the immediate consequence of the clash between capitalism and the organisations of a natural economy which would restrict accumulation. Their means of production and their labour power no less than their demand for surplus products is necessary to capitalism. Yet the latter is fully determined to undermine their independence as social units, in order to gain possession of their means of production and labour power and to convert them into commodity buyers. This method is the most profitable and gets the quickest results, and so it is also the most expedient for capital. In fact, it is invariably accompanied by a growing militarism whose importance for accumulation will be demonstrated below in another connection. British policy in India and French policy in Algeria are the classical examples of the application of these methods by capitalism. The ancient economic organisations of the Indians--the communist village community--had been preserved in their various forms throughout thousands of years, in spite of all the political disturbances during their long history. In the sixth century B.C. the Persians invaded the Indus basin and subjected part of the country. Two centuries later the Greeks entered and left behind them colonies, founded by Alexander on the pattern of a completely alien civilisation. Then the savage Scythians invaded the country, and for centuries India remained under Arab rule. Later, the Afghans swooped down from the Iran mountains, until they, too, were expelled by the ruthless onslaught of Tartar hordes. The Mongols' path was marked by terror and destruction, by the massacre of entire villages--the peaceful countryside with the tender shoots of rice made crimson with blood. And still the Indian village community survived. For none of the successive Mahometan conquerors had ultimately violated the internal social life of the peasant masses and its traditional structure. They only set up their own governors in the provinces to supervise military organisation and to collect taxes from the population. All conquerors pursued the aim of dominating and exploiting the country, but none was interested in robbing the people of their productive forces and in destroying their social organisation. In the Moghul Empire, the peasant had to pay his annual tribute in kind to the foreign ruler, but he could live undisturbed in his village and could cultivate his rice on his _sholgura_ as his father had done before him. Then came the British--and the blight of capitalist civilisation succeeded in disrupting the entire social organisation of the people; it achieved in a short time what thousands of years, what the sword of the Nogaians, had failed to accomplish. The ultimate purpose of British capital was to possess itself of the very basis of existence of the Indian community: the land. This end was served above all by the fiction, always popular with European colonisers, that all the land of a colony belongs to the political ruler. In retrospect, the British endowed the Moghul and his governors with private ownership of the whole of India, in order to 'legalise' their succession. Economic experts of the highest repute, such as James Mill, duly supported this fiction with 'scientific' arguments, so in particular with the famous conclusion given below.[356] As early as 1793, the British in Bengal gave landed property to all the _zemindars_ (Mahometan tax collectors) or hereditary market superintendents they had found in their district so as to win native support for the campaign against the peasant masses. Later they adopted the same policy for their new conquests in the Agram province, in Oudh, and in the Central Provinces. Turbulent peasant risings followed in their wake, in the course of which tax collectors were frequently driven out. In the resulting confusion and anarchy British capitalists successfully appropriated a considerable portion of the land. The burden of taxation, moreover, was so ruthlessly increased that it swallowed up nearly all the fruits of the people's labour. This went to such an extreme in the Delhi and Allahabad districts that, according to the official evidence of the British tax authorities in 1854, the peasants found it convenient to lease or pledge their shares in land for the bare amount of the tax levied. Under the auspices of this taxation, usury came to the Indian village, to stay and eat up the social organisation from within like a canker.[357] In order to accelerate this process, the British passed a law that flew in the face of every tradition and justice known to the village community: compulsory alienation of village land for tax arrears. In vain did the old family associations try to protect themselves by options on their hereditary land and that of their kindred. There was no stopping the rot. Every day another plot of land fell under the hammer; individual members withdrew from the family unit, and the peasants got into debt and lost their land. The British, with their wonted colonial stratagems, tried to make it appear as if their power policy, which had in fact undermined the traditional forms of landownership and brought about the collapse of the Hindu peasant economy, had been dictated by the need to protect the peasants against native oppression and exploitation and served to safeguard their own interests.[358] Britain artificially created a landed aristocracy at the expense of the ancient property-rights of the peasant communities, and then proceeded to 'protect' the peasants against these alleged oppressors, and to bring this illegally usurped land into the possession of British capitalists. Thus large estates developed in India in a short time, while over large areas the peasants in their masses were turned into impoverished small tenants with a short-term lease. Lastly, one more striking fact shows the typically capitalist method of colonisation. The British were the first conquerors of India who showed gross indifference to public utilities. Arabs, Afghans and Mongols had organised and maintained magnificent works of canalisation in India, they had given the country a network of roads, spanned the rivers with bridges and seen to the sinking of wells. Timur or Tamerlane, the founder of the Mongol dynasty in India, had a care for the cultivation of the soil, for irrigation, for the safety of the roads and the provision of food for travellers.[359] The primitive Indian Rajahs, the Afghan or Mongol conquerors, at any rate, in spite of occasional cruelty against individuals, made their mark with the marvellous constructions we can find to-day at every step and which seem to be the work of a giant race. 'The (East India) Company which ruled India until 1858 did not make one spring accessible, did not sink a single well, nor build a bridge for the benefit of the Indians.'[360] Another witness, the Englishman James Wilson, says: 'In the Madras Province, no-one can help being impressed by the magnificent ancient irrigation systems, traces of which have been preserved until our time. Locks and weirs dam the rivers into great lakes, from which canals distribute the water for an area of 60 or 70 miles around. On the large rivers, there are 30 to 40 of such weirs.... The rain water from the mountains was collected in artificial ponds, many of which still remain and boast circumferences of between 15 and 25 miles. Nearly all these gigantic constructions were completed before the year 1750. During the war between the Company and the Mongol rulers--and, be it said, _during the entire period of our rule in India_--they have sadly decayed.'[361] No wonder! British capital had no object in giving the Indian communities economic support or helping them to survive. Quite the reverse, it aimed to destroy them and to deprive them of their productive forces. The unbridled greed, the acquisitive instinct of accumulation must by its very nature take every advantage of the 'conditions of the market' and can have no thought for the morrow. It is incapable of seeing far enough to recognise the value of the economic monuments of an older civilisation. (Recently British engineers in Egypt feverishly tried to discover traces of an ancient irrigation system rather like the one a stupid lack of vision had allowed to decay in India, when they were charged with damming the Nile on a grand scale in furtherance of capitalist enterprise.) Not until 1867 was England able to appreciate the results of her noble efforts in this respect. In the terrible famine of that year a million people were killed in the Orissa district alone; and Parliament was shocked into investigating the causes of the emergency. The British government has now introduced administrative measures in an attempt to save the peasant from usury. The Punjab Alienation Act of 1900 made it illegal to sell or mortgage peasant lands to persons other than of the peasant caste, though exceptions can be made in individual cases, subject to the tax collector's approval.[362] Having deliberately disrupted the protecting ties of the ancient Hindu social associations, after having nurtured a system of usury where nothing is thought of a 15 per cent charge of interest, the British now entrust the ruined Indian peasant to the tender care of the Exchequer and its officials, under the 'protection', that is to say, of those draining him of his livelihood. Next to tormented British India, Algeria under French rule claims pride of place in the annals of capitalist colonisation. When the French conquered Algeria, ancient social and economic institutions prevailed among the Arab-Kabyle population. These had been preserved until the nineteenth century, and in spite of the long and turbulent history of the country they survive in part even to the present day. Private property may have existed no doubt in the towns, among the Moors and Jews, among merchants, artisans and usurers. Large rural areas may have been seized by the State under Turkish suzerainty--yet nearly half of the productive land is jointly held by Arab and Kabyle tribes who still keep up the ancient patriarchal customs. Many Arab families led the same kind of nomad life in the nineteenth century as they had done since time immemorial, an existence that appears restless and irregular only to the superficial observer, but one that is in fact strictly regulated and extremely monotonous. In summer they were wont, man, woman and child, to take their herds and tents and migrate to the sea-swept shores of the Tell district; and in the winter they would move back again to the protective warmth of the desert. They travelled along definite routes, and the summer and winter stations were fixed for every tribe and family. The fields of those Arabs who had settled on the land were in most cases the joint property of the clans, and the great Kabyle family associations also lived according to old traditional rules under the patriarchal guidance of their elected heads. The women would take turns for household duties; a matriarch, again elected by the family, being in complete charge of the clan's domestic affairs, or else the women taking turns of duty. This organisation of the Kabyle clans on the fringe of the African desert bears a startling resemblance to that of the famous Southern Slavonic _Zadruga_--not only the fields but all the tools, weapons and monies, all that the members acquire or need for their work, are communal property of the clan. Personal property is confined to one suit of clothing, and in the case of a woman to the dresses and ornaments of her dowry. More valuable attire and jewels, however, are considered common property, and individuals were allowed to use them only if the whole family approved. If the clan was not too numerous, meals were taken at a common table; the women took it in turns to cook, but the eldest were entrusted with the dishing out. If a family circle was too large, the head of the family would each month ration out strictly proportionate quantities of uncooked food to the individual families who then prepared them. These communities were bound together by close ties of kinship, mutual assistance and equality, and a patriarch would implore his sons on his deathbed to remain faithful to the family.[363] These social relations were already seriously impaired by the rule of the Turks, established in Algeria in the sixteenth century. Yet the Turkish exchequer had by no means confiscated all the land. That is a legend invented by the French at a much later date. Indeed, only a European mind is capable of such a flight of fancy which is contrary to the entire economic foundation of Islam both in theory and practice. In truth, the facts were quite different. The Turks did not touch the communal fields of the village communities. They merely confiscated a great part of uncultivated land from the clans and converted it into crownland under Turkish local administrators (_Beyliks_). The state worked these lands in part with native labour, and in part they were leased out on rent or against payment in kind. Further the Turks took advantage of every revolt of the subjected families and of every disturbance in the country to add to their possessions by large-scale confiscation of land, either for military establishments or for public auction, when most of it went to Turkish or other usurers. To escape from the burden of taxation and confiscation, many peasants placed themselves under the protection of the Church, just as they had done in medieval Germany. Hence considerable areas became Church-property. All these changes finally resulted in the following distribution of Algerian land at the time of the French conquest: crownlands occupied nearly 3,750,000 acres, and a further 7,500,000 acres of uncultivated land as common property of All the Faithful (_Bled-el-Islam_). 7,500,000 acres had been privately owned by the Berbers since Roman times, and under Turkish rule a further 3,750,000 acres had come into private ownership, a mere 12,500,000 acres remaining communal property of individual Arab clans. In the Sahara, some of the 7,500,000 acres fertile land near the Sahara Oases was communally owned by the clans and some belonged to private owners. The remaining 57,000,000 acres were mainly waste land. With their conquest of Algeria, the French made a great ado about their work of civilisation, since the country, having shaken off the Turkish yoke at the beginning of the eighteenth century, was harbouring the pirates who infested the Mediterranean and trafficked in Christian slaves. Spain and the North American Union in particular, themselves at that time slave traders on no mean scale, declared relentless war on this Moslem iniquity. France, in the very throes of the Great Revolution, proclaimed a crusade against Algerian anarchy. Her subjection of that country was carried through under the slogans of 'combating slavery' and 'instituting orderly and civilised conditions'. Yet practice was soon to show what was at the bottom of it all. It is common knowledge that in the forty years following the subjection of Algeria, no European state suffered so many changes in its political system as France: the restoration of the monarchy was followed by the July Revolution and the reign of the 'Citizen King', and this was succeeded by the February Revolution, the Second Republic, the Second Empire, and finally, after the disaster of 1870, by the Third Republic. In turn, the aristocracy, high finance, petty bourgeoisie and the large middle classes in general gained political ascendancy. Yet French policy in Algeria remained undeflected by this succession of events; it pursued a single aim from beginning to end; at the fringe of the African desert, it demonstrated plainly that all the political revolutions in nineteenth-century France centred in a single basic interest: the rule of a capitalist bourgeoisie and its institutions of ownership. 'The bill submitted for your consideration', said Deputy Humbert on June 30, 1873, in the Session of the French National Assembly as spokesman for the Commission for Regulating Agrarian Conditions in Algeria, 'is but the crowning touch to an edifice well-founded on a whole series of ordinances, edicts, laws and decrees of the Senate which together and severally have as the same object: the establishment of private property among the Arabs.' In spite of the ups and downs of internal French politics French colonial policy persevered for fifty years in its systematic and deliberate efforts to destroy and disrupt communal property. It served two distinct purposes: The break-up of communal property was primarily intended to smash the social power of the Arab family associations and to quell their stubborn resistance against the French yoke, in the course of which there were innumerable risings so that, in spite of France's military superiority, the country was in a continual state of war.[364] Secondly, communal property had to be disrupted in order to gain the economic assets of the conquered country; the Arabs, that is to say, had to be deprived of the land they had owned for a thousand years, so that French capitalists could get it. Once again the fiction we know so well, that under Moslem law all land belongs to the ruler, was brought into play. Just as the English had done in British India, so Louis Philippe's governors in Algeria declared the existence of communal property owned by the clan to be 'impossible'. This fiction served as an excuse to claim for the state most of the uncultivated areas, and especially the commons, woods and meadows, and to use them for purposes of colonisation. A complete system of settlement developed, the so-called _cantonments_ which settled French colonists on the clan land and herded the tribes into a small area. Under the decrees of 1830, 1831, 1840, 1844, 1845 and 1846 these thefts of Arab family land were legalised. Yet this system of settlement did not actually further colonisation; it only bred wild speculation and usury. In most instances the Arabs managed to buy back the land that had been taken from them, although they were thus incurring heavy debts. French methods of oppressive taxation had the same tendency, in particular the law of June 16, 1851, proclaiming all forests to be state property, which robbed the natives of 6,000,000 acres of pasture and brushwood, and took away the prime essential for animal husbandry. This spate of laws, ordinances and regulations wrought havoc with the ownership of land in the country. Under the prevailing condition of feverish speculation in land, many natives sold their estates to the French in the hope of ultimately recovering them. Quite often they sold the same plot to two or three buyers at a time, and what is more, it was quite often inalienable family land and did not even belong to them. A company of speculators from Rouen, e.g., believed that they had bought 50,000 acres, but in fact they had only acquired a disputed title to 3,425 acres. There followed an infinite number of lawsuits in which the French courts supported on principle all partitions and claims of the buyers. In these uncertain conditions, speculation, usury and anarchy were rife. But although the introduction of French colonists in large numbers among the Arab population had aimed at securing support for the French government, this scheme failed miserably. Thus, under the Second Empire, French policy tried another tack. The government, with its European lack of vision, had stubbornly denied the existence of communal property for thirty years, but it had learned better at last. By a single stroke of the pen, joint family property was officially recognised and condemned to be broken up. This is the double significance of the decree of the Senate dated April 22, 1864. General Allard declared in the Senate: 'The government does not lose sight of the fact that the general aim of its policy is to weaken the influence of the tribal chieftains and to dissolve the family associations. By this means, it will sweep away the last remnants of feudalism [_sic!_] defended by the opponents of the government bill.... The surest method of accelerating the process of dissolving the family associations will be to institute private property and to settle European colonists among the Arab families.'[365] The law of 1863 created special Commissions for cutting up the landed estates, consisting of the Chairman, either a Brigadier-General or Colonel, one _sous-préfet_, one representative of the Arab military authorities and an official bailiff. These natural experts on African economics and social conditions were faced with the threefold task, first of determining the precise boundaries of the great family estates, secondly to distribute the estates of each clan among its various branches, and finally to break up this family land into separate private allotments. This expedition of the Brigadiers into the interior of Africa duly took place. The Commissions proceeded to their destinations. They were to combine the office of judge in all land disputes with that of surveyor and land distributor, the final decision resting with the Governor-General of Algeria. Ten years' valiant efforts by the Commissions yielded the following result: between 1863 and 1873, of 700 hereditary estates, 400 were shared out among the branches of each clan, and the foundations for future inequalities between great landed estates and small allotments were thus laid. One family, in fact, might receive between 2·5 and 10 acres, while another might get as much as 250 or even 450 acres, depending on the size of the estate and the number of collaterals within the clan. Partition, however, stopped at that point. Arab customs presented unsurmountable difficulties to a further division of family land. In spite of Colonels and Brigadiers, French policy had again failed in its object to create private property for transfer to the French. But the Third Republic, an undisguised regime of the bourgeoisie, had the courage and the cynicism to go straight for its goal and to attack the problem from the other end, disdaining the preliminaries of the Second Empire. In 1873, the National Assembly worked out a law with the avowed intention immediately to split up the entire estates of all the 700 Arab clans, and forcibly to institute private property in the shortest possible time. Desperate conditions in the colony were the pretext for this measure. It had taken the great Indian famine of 1866 to awaken the British public to the marvellous exploits of British colonial policy and to call for a parliamentary investigation; and similarly, Europe was alarmed at the end of the sixties by the crying needs of Algeria where more than forty years of French rule culminated in wide-spread famine and a disastrous mortality rate among the Arabs. A commission of inquiry was set up to recommend new legislation with which to bless the Arabs: it was unanimously resolved that there was only one life-buoy for them--the institution of private property; that alone could save the Arab from destitution, since he would then always be able to sell or mortgage his land. It was decided therefore, that the only means of alleviating the distress of the Arabs, deeply involved in debts as they were because of the French land robberies and oppressive taxation, was to deliver them completely into the hands of the usurers. This farce was expounded in all seriousness before the National Assembly and was accepted with equal gravity by that worthy body. The 'victors' of the Paris Commune flaunted their brazenness. In the National Assembly, two arguments in particular served to support the new law: those in favour of the bill emphasised over and over again that the Arabs themselves urgently desired the introduction of private property. And so they did, or rather the Algerian land speculators and usurers did, since they were vitally interested in 'liberating' their victims from the protection of the family ties. As long as Moslem law prevailed in Algeria, hereditary clan and family lands were inalienable, which laid insuperable difficulties in the way of anyone who wished to mortgage his land. The law of 1863 had merely made a breach in these obstacles, and the issue now at stake was their complete abolition so as to give a free hand to the usurers. The second argument was 'scientific', part of the same intellectual equipment from which that worthy, James Mill, had drawn for his abstruse conclusions regarding Indian relations of ownership: English classical economics. Thoroughly versed in their masters' teachings, the disciples of Smith and Ricardo impressively declaimed that private property is indispensable for the prevention of famines in Algeria, for more intensive and better cultivation of the land, since obviously no one would be prepared to invest capital or intensive labour in a piece of land which does not belong to him and whose produce is not his own to enjoy. But the facts spoke a different language. They proved that the French speculators employed the private property they had created in Algeria for anything but the more intensive and improved cultivation of the soil. In 1873, 1,000,000 acres were French property. But the capitalist companies, the Algerian and Setif Company which owned 300,000 acres, did not cultivate the land at all but leased it to the natives who tilled it in the traditional manner, nor were 25 per cent of the other French owners engaged in agriculture. It was simply impossible to conjure up capitalist investments and intensive agriculture overnight, just as capitalist conditions in general could not be created out of nothing. They existed only in the imagination of profit-seeking French speculators, and in the benighted doctrinaire visions of their scientific economists. The essential point, shorn of all pretexts and flourishes which seem to justify the law of 1873, was simply the desire to deprive the Arabs of their land, their livelihood. And although these arguments had worn threadbare and were evidently insincere, this law which was to put paid to the Algerian population and their material prosperity, was passed unanimously on July 26, 1873. But even this master-stroke soon proved a failure. The policy of the Third Republic miscarried because of the difficulties in substituting at one stroke bourgeois private property for the ancient clan communism, just as the policy of the Second Empire had come to grief over the same issue. In 1890, when the law of July 26, 1873, supplemented by a second law on April 28, 1887, had been in force for seventeen years, 14,000,000 francs had been spent on dealing with 40,000,000 acres. It was estimated that the process would not be completed before 1950 and would require a further 60,000,000 francs. And still abolition of clan communism, the ultimate purpose, had not been accomplished. What had really been attained was all too evident: reckless speculation in land, thriving usury and the economic ruin of the natives. Since it had been impossible to institute private property by force, a new experiment was undertaken. The laws of 1873 and 1887 had been condemned by a commission appointed for their revision by the Algerian government in 1890. It was another seven years before the legislators on the Seine made the effort to consider reforms for the ruined country. The new decree of the Senate refrained in principle from instituting private property by compulsion or administrative measures. The laws of February 2, 1897, and the edict of the Governor-General of Algeria (March 3, 1898) both provided chiefly for the introduction of private property following a voluntary application by the prospective purchaser or owner.[366] But there were clauses to permit a single owner, without the consent of the others, to claim private property; further, such a 'voluntary' application can be extorted at any convenient moment if the owner is in debt and the usurer exerts pressure. And so the new law left the doors wide open for French and native capitalists further to disrupt and exploit the hereditary and clan lands. Of recent years, this mutilation of Algeria which had been going on for eight decades meets with even less opposition, since the Arabs, surrounded as they are by French capital following the subjection of Tunisia (1881) and the recent conquest of Morocco, have been rendered more and more helpless. The latest result of the French regime in Algeria is an Arab exodus into Turkey.[367] FOOTNOTES: [356] Mill, in his _History of British India_, substantiates the thesis that under primitive conditions the land belongs always and everywhere to the sovereign, on evidence collected at random and quite indiscriminately from the most varied sources (Mungo Park, Herodotus, Volney, Acosta, Garcilasso de la Vega, Abbé Grosier, Barrow, Diodorus, Strabo and others). Applying this thesis to India, he goes on to say: 'From these facts only one conclusion can be drawn, that the property of the soil resided in the sovereign; for if it did not reside in him, it will be impossible to show to whom it belonged' (James Mill, _History of British India_ (4th edition, 1840), vol. i, p. 311). Mill's editor, H. H. Wilson who, as Professor of Sanskrit at Oxford University, was thoroughly versed in the legal relations of Ancient India, gives an interesting commentary to this classical deduction. Already in his preface he characterises the author as a partisan who has juggled with the whole history of British India in order to justify the theories of Mr. Bentham and who, with this end, has used the most dubious means for his portrait of the Hindus which in no way resembles the original and almost outrages humanity. He appends the following footnote to our quotation: 'The greater part of the text and of the notes here is wholly irrelevant. The illustrations drawn from the Mahometan practice, supposing them to be correct, have nothing to do with the laws and rights of the Hindus. They are not, however, even accurate and Mr. Mill's guides have misled him.' Wilson then contests outright the theory of the sovereign's right of ownership in land, especially with reference to India. (Ibid., p. 305, footnote.) Henry Maine, too, is of the opinion that the British attempted to derive their claim to Indian land from the Mahometans in the first place, and he recognises this claim to be completely unjustified. 'The assumption which the English first made was one which they inherited from their Mahometan predecessors. It was that all the soil belonged in absolute property to the sovereign,--and that all private property in land existed by his sufferance. The Mahometan theory and the corresponding Mahometan practice had put out of sight the ancient view of the sovereign's rights which, though it assigned to him a far larger share of the produce of the land than any Western ruler has ever claimed, yet in nowise denied the existence of private property in land' (_Village Communities in the East and West_ (5th edition, vol. 2, 1890), p. 104). Maxim Kovalevski, on the other hand, has proved thoroughly that this alleged 'Mahometan theory and practice' is an exclusively British legend. (Cf. his excellent study, written in Russian, _On the Causes, the Development and the Consequences of the Disintegration of Communal Ownership of Land_ (Moscow, 1879), part i.) Incidentally, British experts and their French colleagues at the time of writing maintain an analogous legend about China, for example, asserting that all the land there had been the Emperor's property. (Cf. the refutation of this legend by Dr. O. Franke, _Die Rechtsverhältnisse am Grundeigentum in China_, 1903.) [357] 'The partitions of inheritances and execution for debt levied on land are destroying the communities--this is the formula heard nowadays everywhere in India' (Henry Maine, op. cit., p. 113). [358] This view of British colonial policy, expounded e.g. by Lord Roberts of Kandahar (for many years a representative of British power in India) is typical. He can give no other explanation for the Sepoy Mutiny than mere 'misunderstandings' of the paternal intentions of the British rulers. '... the alleged unfairness of what was known in India as the land settlement, under which system the right and title of each landholder to his property was examined, and the amount of revenue to be paid by him to the paramount Power, as owner of the soil, was regulated ... as peace and order were established, the system of land revenue, which had been enforced in an extremely oppressive and corrupt manner under successive Native Rulers and dynasties, had to be investigated and revised. With this object in view, surveys were made, and inquiries instituted into the rights of ownership and occupancy, the result being that in many cases it was found that families of position and influence had either appropriated the property of their humbler neighbours, or evaded an assessment proportionate to the value of their estates. Although these inquiries were carried out with the best intentions, they were extremely distasteful to the higher classes, while they failed to conciliate the masses. The ruling families deeply resented our endeavours to introduce an equitable determination of rights and assessment of land revenue.... On the other hand, although the agricultural population greatly benefited by our rule, they could not realise the benevolent intentions of a Government which tried to elevate their position and improve their prospects' (_Forty One Years in India_, London, 1901, p. 233). [359] In his _Maxims on Government_ (translated from the Persian into English in 1783), Timur says: 'And I commanded that they should build places of worship, and monasteries in every city; and that they should erect structures for the reception of travellers on the high roads, and that they should make bridges across the rivers. 'And I commanded that the ruined bridges should be repaired; and that bridges should be constructed over the rivulets, and over the rivers; and that on the roads, at the distance of one stage from each other, Kauruwansarai should be erected; and that guards and watchmen should be stationed on the road, and that in every Kauruwansarai people should be appointed to reside.... 'And I ordained, whoever undertook the cultivation of waste lands, or built an aqueduct, or made a canal, or planted a grove, or restored to culture a deserted district, that in the first year nothing should be taken from him, and that in the second year, whatever the subject voluntarily offered should be received, and that in the third year, duties should be collected according to the regulation' (James Mill, op. cit., vol. ii, pp. 493, 498). [360] Count Warren, _De l'État moral de la population indigène_. Quoted by Kovalevski, op. cit., p. 164. [361] _Historical and Descriptive Account of British India_ from the most remote period to the conclusion of the Afghan war by Hugh Murray, James Wilson, Greville, Professor Jameson, William Wallace and Captain Dalrymple (Edinburgh, 4th edition, 1843), vol. ii, p. 427. Quoted by Kovalevski, op. cit. [362] Victor v. Leyden, _Agrarverfassung und Grundsteuer in Britisch Ostindien. Jahrb. f. Ges., Verw. u. Volksw._, vol. xxxvi, no. 4, p. 1855. [363] 'When dying, the father of the family nearly always advises his children to live in unity, according to the example of their elders. This is his last exhortation, his dearest wish' (A. Hanotaux et A. Letournaux, _La Kabylie et les Coûtumes Kabyles_, vol. ii, 1873, 'Droit Civil', pp. 468-73). The authors, by the way, appraised this impressive description of communism in the clan with this peculiar sentence: 'Within the industrious fold of the family association, all are united in a common purpose, all work for the general interest--but no one gives up his freedom or renounces his hereditary rights. In no other nation does the organisation approach so closely to equality, being yet so far removed from communism.' [364] 'We must lose no time in dissolving the family associations, since they are the lever of all opposition against our rule' (Deputy Didier in the National Assembly of 1851). [365] Quoted by Kovalevski, op. cit., p. 217. Since the Great Revolution, of course, it had become the fashion in France to dub all opposition to the government an open or covert defence of feudalism. [366] G. Anton, _Neuere Agrarpolitik in Algerien und Tunesien. Jahrb. f. Gesetzgebung, Verwaltung und Volkswirtschaft_ (1900), pp. 1341 ff. [367] On June 20, 1912, M. Albin Rozet, on behalf of the Commission for the Reform of the 'Indigenat' (Administrative Justice) in Algeria, stated in his speech to the French Chamber of Deputies that thousands of Algerians were migrating from the Setif district, and that 1,200 natives had emigrated from Tlemcen during the last year, their destination being Syria. One immigrant wrote from his new home: 'I have now settled in Damascus and am perfectly happy. There are many Algerians here in Syria who, like me, have emigrated. The government has given us land and facilities to cultivate it.' The Algerian government combats this exodus--by denying passports to prospective emigrants. (Cf. _Journal Officiel_, June 21, 1912, pp. 1594 ff.) _CHAPTER XXVIII_ THE INTRODUCTION OF COMMODITY ECONOMY The second condition of importance for acquiring means of production and realising the surplus value is that commodity exchange and commodity economy should be introduced in societies based on natural economy as soon as their independence has been abrogated, or rather in the course of this disruptive process. Capital requires to buy the products of, and sell its commodities to, all non-capitalist strata and societies. Here at last we seem to find the beginnings of that 'peace' and 'equality', the _do ut des_, mutual interest, 'peaceful competition' and the 'influences of civilisation'. For capital can indeed deprive alien social associations of their means of production by force, it can compel the workers to submit to capitalist exploitation, but it cannot force them to buy its commodities or to realise its surplus value. In districts where natural economy formerly prevailed, the introduction of means of transport--railways, navigation, canals--is vital for the spreading of commodity economy, a further hopeful sign. The triumphant march of commodity economy thus begins in most cases with magnificent constructions of modern transport, such as railway lines which cross primeval forests and tunnel through the mountains, telegraph wires which bridge the deserts, and ocean liners which call at the most outlying ports. But it is a mere illusion that these are peaceful changes. Under the standard of commerce, the relations between the East India Company and the spice-producing countries were quite as piratical, extortionate and blatantly fraudulent as present-day relations between American capitalists and the Red Indians of Canada whose furs they buy, or between German merchants and the Negroes of Africa. Modern China presents a classical example of the 'gentle', 'peace-loving' practices of commodity exchange with backward countries. Throughout the nineteenth century, beginning with the early forties, her history has been punctuated by wars with the object of opening her up to trade by brute force. Missionaries provoked persecutions of Christians, Europeans instigated risings, and in periodical massacres a completely helpless and peaceful agrarian population was forced to match arms with the most modern capitalist military technique of all the Great Powers of Europe. Heavy war contributions necessitated a public debt, China taking up European loans, resulting in European control over her finances and occupation of her fortifications; the opening of free ports was enforced, railway concessions to European capitalists extorted. By all these measures commodity exchange was fostered in China, from the early thirties of the last century until the beginning of the Chinese revolution. European civilisation, that is to say commodity exchange with European capital, made its first impact on China with the Opium Wars when she was compelled to buy the drug from Indian plantations in order to make money for British capitalists. In the seventeenth century, the East India Company had introduced the cultivation of poppies in Bengal; the use of the drug was disseminated in China by its Canton branch. At the beginning of the nineteenth century, opium fell so considerably in price that it rapidly became the 'luxury of the people'. In 1821, 4,628 chests of opium were imported to China at an average price of £265; then the price fell by 50 per cent, and Chinese imports rose to 9,621 chests in 1825, and to 26,670 chests in 1830.[368] The deadly effects of the drug, especially of the cheaper kinds used by the poorer population, became a public calamity and made it necessary for China to lay an embargo on imports, as an emergency measure. Already in 1828, the viceroy of Canton had prohibited imports of opium, only to deflect the trade to other ports. One of the Peking censors commanded to investigate the question gave the following report: 'I have learnt that people who smoke opium have developed such a craving for this noxious drug that they make every effort to obtain this gratification. If they do not get their opium at the usual hour, their limbs begin to tremble, they break out in sweat, and they cannot perform the slightest tasks. But as soon as they are given the pipe, they inhale a few puffs and are cured immediately. 'Opium has therefore become a necessity for all who smoke it, and it is not surprising that under cross-examination by the local authorities they will submit to every punishment rather than reveal the names of their suppliers. Local authorities are also in some cases given presents to tolerate the evil or to delay any investigation already under way. Most merchants who bring goods for sale into Canton also deal in smuggled opium. 'I am of the opinion that opium is by far a greater evil than gambling, and that opium smokers should therefore be punished no less than gamblers.' The censor suggested that every convicted opium smoker should be sentenced to eighty strokes of the bamboo, and anybody refusing to give the name of his supplier to a hundred strokes and three years of exile. The pigtailed Cato of Peking concludes his report with a frankness staggering to any European official: 'Apparently opium is mostly introduced from abroad by dishonest officials in connivance with profit-seeking merchants who transport it into the interior of the country. Then the first to indulge are people of good family, wealthy private persons and merchants, but ultimately the drug habit spreads among the common people. I have learnt that in all provinces opium is smoked not only in the civil service but also in the army. The officials of the various districts indeed enjoin the legal prohibition of sale by special edicts. But at the same time, their parents, families, dependants and servants simply go on smoking opium, and the merchants profit from the ban by increased prices. Even the police have been won over; they buy the stuff instead of helping to suppress it, and this is an additional reason for the disregard in which all prohibitions and ordinances are held.'[369] Consequently, a stricter law was passed in 1833 which made every opium smoker liable to a hundred strokes and two months in the stocks, and provincial governors were ordered to report annually on their progress in the battle against opium. But there were two sequels to this campaign: on the one hand large-scale poppy plantations sprang up in the interior, particularly in the Honan, Setchuan, and Kueitchan provinces, and on the other, England declared war on China to get her to lift the embargo. These were the splendid beginnings of 'opening China' to European civilisation--by the opium pipe. Canton was the first objective. The fortifications of the town at the main arm of the Perl estuary could not have been more primitive. Every day at sunset a barrier of iron chains was attached to wooden rafts anchored at various distances, and this was the main defence. Moreover, the Chinese guns could only fire at a certain angle and were therefore completely ineffectual. With such primitive defences, just adequate to prevent a few merchant ships from landing, did the Chinese meet the British attack. A couple of British cruisers, then, sufficed to effect an entry on September 7, 1839. The sixteen battle-junks and thirteen fire-ships which the Chinese put up for resistance were shot up or dispersed in a matter of forty-five minutes. After this initial victory, the British renewed the attack in the beginning of 1841 with a considerably reinforced fleet. This time the fleet, consisting in a number of battle-junks, and the forts were attacked simultaneously. The first incendiary rocket that was fired penetrated through the armour casing of a junk into the powder chamber and blew the ship with the entire crew sky-high. In a short time eleven junks, including the flag-ship, were destroyed, and the remainder precipitately made for safety. The action on land took a little longer. Since the Chinese guns were quite useless, the British walked right through the fortifications, climbed to a strategic position--which was not even guarded--and proceeded to slaughter the helpless Chinese from above. The casualty list of the battle was: for the Chinese 600 dead, and for the British, 1 dead and 30 wounded, more than half of the latter having been injured by the accidental explosion of a powder magazine. A few weeks later, there followed another British exploit. The forts of Anung-Hoy and North Wantong were to be taken. No less than twelve fully equipped cruisers were available for this task. What is more, the Chinese, once again forgetful of the most important thing, had omitted to fortify the island of South Wantong. Thus the British calmly landed a battery of howitzers to bombard the fort from one side, the cruisers shelling it from the other. After that, the Chinese were driven from the forts in a matter of minutes, and the landing met with no resistance. The ensuing display of inhumanity--an English report says--will be for ever deeply deplored by the British staff. The Chinese, trying to escape from the barricades, had fallen into a moat which was soon literally filled to the brim with helpless soldiers begging for mercy. Into this mass of prostrate human bodies, the sepoys--acting against orders, it is claimed--fired again and again. This is the way in which Canton was made receptive to commodity exchange. Nor did the other ports fare better. On July 4, 1841, three British cruisers with 120 cannon appeared off the islands in the entrance to the town of Ningpo. More cruisers arrived the following day. In the evening the British admiral sent a message to the Chinese governor, demanding the capitulation of the island. The governor explained that he had no power to resist but could not surrender without orders from Peking. He therefore asked for a delay. This was refused, and at half-past two in the morning the British stormed the defenceless island. Within eight minutes, the fort and the houses on the shore were reduced to smouldering rubble. Having landed on the deserted coast littered with broken spears, sabres, shields, rifles and a few dead bodies, the troops advanced on the walls of the island town of Tinghai. With daybreak, reinforced by the crews of other ships which had meanwhile arrived, they proceeded to put scaling-ladders to the scarcely defended ramparts. A few more minutes gave them mastery of the town. This splendid victory was announced with becoming modesty in an Order of the Day: 'Fate has decreed that the morning of July 5, 1841, should be the historic date on which Her Majesty's flag was first raised over the most beautiful island of the Celestial Empire, the first European flag to fly triumphantly above this lovely countryside.'[370] On August 25, 1841, the British approached the town of Amoy, whose forts were armed with a hundred of the heaviest Chinese guns. These guns being almost useless, and the commanders lacking in resource, the capture of the harbour was child's play. Under cover of a heavy barrage, British ships drew near the walls of Kulangau, landed their marines, and after a short stand the Chinese troops were driven out. The twenty-six battle-junks with 128 guns in the harbour were also captured, their crews having fled. One battery, manned by Tartars, heroically held out against the combined fire of three British ships, but a British landing was effected in their rear and the post wiped out. This was the finale of the notorious Opium War. By the peace treaty of August 27, 1842, the island of Hongkong was ceded to Britain. In addition, the towns of Canton, Amoy, Futchou, Ningpo and Shanghai were to open their ports to foreign commerce. But within fifteen years, there was a further war against China. This time, Britain had joined forces with the French. In 1857, the allied navies captured Canton with a heroism equal to that of the first war. By the peace of Tientsin (1858), the opium traffic, European commerce and Christian missions were admitted into the interior. Already in 1859, however, the British resumed hostilities and attempted to destroy the Chinese fortifications on the Peiho river, but were driven off after a fierce battle in which 464 people were wounded or killed.[371] After that, Britain and France again joined forces. At the end of August 1860, 12,600 English and 7,500 French troops under General Cousin-Montauban first captured the Taku forts without a single shot having been fired. Then they proceeded towards Tientsin and on towards Peking. A bloody battle was joined at Palikao, and Peking fell to the European Powers. Entering the almost depopulated and completely undefended city, the victors began by pillaging the Imperial Palace, manfully helped by General Cousin himself, who was later to become field marshal and Count of Palikao. Then the Palace went up in flames, fired on Lord Elgin's order as an imposed penance.[372] The European Powers now obtained concessions to set up embassies in Peking, and to start trading with Tientsin and other towns. The Tchi-fu Convention of 1876 guaranteed full facilities for importing opium into China--at a time when the Anti-Opium League in England agitated against the spreading of the drug habit in London, Manchester and other industrial districts, when a parliamentary commission declared the consumption of opium to be harmful in the extreme. By all treaties made at that time between China and the Great Powers any European, whether merchant or missionary, was guaranteed the right to acquire land, to which end the legitimate arguments were ably supported by deliberate fraud. First and foremost the ambiguity of the treaty texts made a convenient excuse for European capital to encroach beyond the Treaty Ports. It used every loophole in the wording of the treaties to begin with, and subsequently blackmailed the Chinese government into permitting the missions to acquire land not alone in the Treaty Ports but in all the provinces of the realm. Their claim was based upon the notorious bare-faced distortion of the Chinese original in Abbé Delamarre's official translation of the supplementary convention with France. French diplomacy, and the Protestant missions in particular, unanimously condemned the crafty swindle of the Catholic padre, but nevertheless they were firm that the rights of French missions obtained by this fraud should be explicitly extended to the Protestant missions as well.[373] China's entry into commodity exchange, having begun with the Opium Wars, was finally accomplished with a series of 'leases' and the China campaign of 1900, when the commercial interests of European capital sank to a brazen international dogfight over Chinese land. The description of the Dowager Empress, who wrote to Queen Victoria after the capture of the Taku forts, subtly underlines this contrast between the initial theory and the ultimate practice of the 'agents of European civilisation': 'To your Majesty, greeting!--In all the dealings of England with the Empire of China, since first relations were established between us, there has never been any idea of territorial aggrandisement on the part of Great Britain, but only a keen desire to promote the interests of her trade. Reflecting upon the fact that our country is now plunged into a dreadful condition of warfare, we bear in mind that a large proportion of China's trade, seventy or eighty per cent, is done with England; moreover, your Customs duties are the lightest in the world, and few restrictions are made at your sea-ports in the matter of foreign importations; for these reasons our amiable relations with British merchants at our Treaty Ports have continued unbroken for the last half century, to our mutual benefit.--But a sudden change has now occurred and general suspicion has been created against us. We would therefore ask you now to consider that if, by any conceivable combination of circumstances, the independence of our Empire should be lost, and the Powers unite to carry out their long-plotted schemes to possess themselves of our territory'--(in a simultaneous message to the Emperor of Japan, the impulsive Tzu Hsi openly refers to 'The earth-hungry Powers of the West, whose tigerish eyes of greed are fixed in our direction'[374])--'the results to your country's interests would be disastrous and fatal to your trade. At this moment our Empire is striving to the utmost to raise an army and funds sufficient for its protection; in the meanwhile we rely on your good services to act as mediator, and now anxiously await your decision.'[375] Both during the wars and in the interim periods, European civilisation was busy looting and thieving on a grand scale in the Chinese Imperial Palaces, in the public buildings and in the monuments of ancient civilisation, not only in 1860, when the French pillaged the Emperor's Palace with its legendary treasures, or in 1900, 'when all the nations vied with each other to steal public and private property'. Every European advance was marked not only with the progress of commodity exchange, but by the smouldering ruins of the largest and most venerable towns, by the decay of agriculture over large rural areas, and by intolerably oppressive taxation for war contributions. There are more than 40 Chinese Treaty Ports--and every one of them has been paid for with streams of blood, with massacre and ruin. FOOTNOTES: [368] 77,379 chests were imported in 1854. Later, the imports somewhat declined, owing to increased home production. Nevertheless, China remained the chief buyer. India produced just under 6,400,000 tons of opium in 1873/4, of which 6,100,000 tons were sold to the Chinese. To-day [1912] India still exports 4,800,000 tons, value £7,500,000,000, almost exclusively to China and the Malay Archipelago. [369] Quoted by J. Scheibert, _Der Krieg in China_ (1903), vol. 2, p. 179. [370] Scheibert, op. cit., p. 207. [371] An Imperial Edict issued on the third day of the eighth moon in the tenth year of Hsien-Feng (6/9/1860) said amongst other things: 'We have never forbidden England and France to trade with China, and for long years there has been peace between them and us. But three years ago the English, for no good cause, invaded our city of Canton, and carried off our officials into captivity. We refrained at that time from taking any retaliatory measures, because we were compelled to recognise that the obstinacy of the Viceroy Yeh had been in some measure a cause of the hostilities. Two years ago, the barbarian Commander Elgin came north and we then commanded the Viceroy of Chihli, T'an Ting-hsiang, to look into matters preparatory to negotiations. But the barbarian took advantage of our unreadiness, attacking the Taku forts and pressing on to Tientsin. Being anxious to spare our people the horrors of war, we again refrained from retaliation and ordered Kuei Liang to discuss terms of peace. Notwithstanding the outrageous nature of the barbarians' demands we subsequently ordered Kuei Liang to proceed to Shanghai in connection with the proposed Treaty of Commerce and even permitted its ratification as earnest of our good faith. 'In spite of all this, the barbarian leader Bruce again displayed intractability of the most unreasonable kind, and once more appeared off Taku with a squadron of warships in the eighth Moon. Seng Ko Lin Ch'in thereupon attacked him fiercely and compelled him to make a rapid retreat. From all these facts it is clear that China has committed no breach of faith and that the barbarians have been in the wrong. During the present year the barbarian leaders Elgin and Gros have again appeared off our coasts, but China, unwilling to resort to extreme measures, agreed to their landing and permitted them to come to Peking for the ratification of the Treaty. 'Who could have believed that all this time the barbarians have been darkly plotting, and that they had brought with them an army of soldiers and artillery with which they attacked the Taku forts from the rear, and, having driven out our forces, advanced upon Tientsin!' (I. O. Bland and E. T. Blackhouse, _China under the Empress Dowager_ (London, 1910), pp. 24-5. Cf. also in this work the entire chapter, 'The Flight to Yehol'.) [372] These European exploits to make China receptive to commodity exchange, provide the setting for a charming episode of China's internal history: Straight from looting the Manchu Emperor's Summer Palace, the 'Gordon of China' went on a campaign against the rebels of Taiping. In 1863 he even took over command of the Imperial fighting forces. In fact, the suppression of the revolt was the work of the British army. But while a considerable number of Europeans, among them a French admiral, gave their lives to preserve China for the Manchu dynasty, the representatives of European commerce were eagerly grasping this opportunity to make capital out of these fights, supplying arms both to their own champions and to the rebels who went to war against them. 'Moreover, the worthy merchant was tempted, by the opportunity for making some money, to supply both armies with arms and munitions, and since the rebels had greater difficulties in obtaining supplies than the Emperor's men and were therefore compelled and prepared to pay higher prices, they were given priority and could thus resist not only the troops of their own government, but also those of England and France' (M. v. Brandt, _33 Jahre in Ostasien, 1911, vol. iii, China_, p. 11). [373] Dr. O. Franke, _Die Rechtsverhältnisse am Grundeigentum in China_ (Leipzig, 1903), p. 82. [374] Bland and Blackhouse, op. cit., p. 338. [375] Ibid., p. 337. _CHAPTER XXIX_ THE STRUGGLE AGAINST PEASANT ECONOMY An important final phase in the campaign against natural economy is to separate industry from agriculture, to eradicate rural industries altogether from peasant economy. Handicraft in its historical beginnings was a subsidiary occupation, a mere appendage to agriculture in civilised and settled societies. In medieval Europe it became gradually independent of the _corvée_ farm and agriculture, it developed into specialised occupations, i.e. production of commodities by urban guilds. In industrial districts, production had progressed from home craft by way of primitive manufacture to the capitalist factory of the staple industries, but in the rural areas, under peasant economy, home crafts persisted as an intrinsic part of agriculture. Every hour that could be spared from cultivating the soil was devoted to handicrafts which, as an auxiliary domestic industry, played an important part in providing for personal needs.[376] It is a recurrent phenomenon in the development of capitalist production that one branch of industry after the other is singled out, isolated from agriculture and concentrated in factories for mass production. The textile industry provides the textbook example, but the same thing has happened, though less obviously, in the case of other rural industries. Capital must get the peasants to buy its commodities and will therefore begin by restricting peasant economy to a single sphere--that of agriculture--which will not immediately and, under European conditions of ownership, only with great difficulty submit to capitalist domination.[377] To all outward appearance, this process is quite peaceful. It is scarcely noticeable and seemingly caused by purely economic factors. There can be no doubt that mass production in the factories is technically superior to primitive peasant industry, owing to a higher degree of specialisation, scientific analysis and management of the productive process, improved machinery and access to international resources of raw materials. In reality, however, the process of separating agriculture and industry is determined by factors such as oppressive taxation, war, or squandering and monopolisation of the nation's land, and thus belongs to the spheres of political power and criminal law no less than with economics. Nowhere has this process been brought to such perfection as in the United States. In the wake of the railways, financed by European and in particular British capital, the American farmer crossed the Union from East to West and in his progress over vast areas killed off the Red Indians with fire-arms and blood-hounds, liquor and venereal disease, pushing the survivors to the West, in order to appropriate the land they had 'vacated', to clear it and bring it under the plough. The American farmer, the 'backwoodsman' of the good old times before the War of Secession, was very different indeed from his modern counterpart. There was hardly anything he could not do, and he led a practically self-sufficient life on his isolated farm. In the beginning of the nineties, one of the leaders of the Farmers' Alliance, Senator Peffer, wrote as follows: 'The American farmer of to-day is altogether a different sort of man from his ancestor of fifty or a hundred years ago. A great many men and women now living remember when farmers were largely manufacturers; that is to say, they made a great many implements for their own use. Every farmer had an assortment of tools with which he made wooden implements, as forks and rakes, handles for his hoes and ploughs, spokes for his wagon, and various other implements made wholly out of wood. Then the farmer produced flax and hemp and wool and cotton. These fibres were prepared upon the farm; they were spun into yarn, woven into cloth, made into garments, and worn at home. Every farm had upon it a little shop for wood and iron work, and in the dwelling were cards and looms; carpets were woven, bed-clothing of different sorts was prepared; upon every farm geese were kept, their feathers used for supplying the home demand with beds and pillows, the surplus being disposed of at the nearest market town. During the winter season wheat and flour and corn meal were carried in large wagons drawn by teams of six to eight horses a hundred or two hundred miles to market, and traded for farm supplies for the next year--groceries and dry goods. Besides this, mechanics were scattered among the farmers. The farm wagon was in process of building a year or two; the material was found near the shop; the character of the timber to be used was stated in the contract; it had to be procured in a certain season and kept in the drying process a length of time specified, so that when the material was brought together in proper form and the wagon made, both parties to the contract knew where every stick of it came from, and how long it had been in seasoning. During winter time the neighbourhood carpenter prepared sashes and blinds and doors and moulding and cornices for the next season's building. When the frosts of autumn came the shoemaker repaired to the dwellings of the farmers and there, in a corner set apart to him, he made up shoes for the family during the winter. All these things were done among the farmers, and a large part of the expense was paid with products of the farm. When winter approached, the butchering season was at hand; meat for family use during the next year was prepared and preserved in the smoke house. The orchards supplied fruit for cider, for apple butter, and for preserves of different kinds, amply sufficient to supply the wants of the family during the year, with some to spare. Wheat was threshed, a little at a time, just enough to supply the needs of the family for ready money, and not enough to make it necessary to waste one stalk of straw. Everything was saved and put to use. One of the results of that sort of economy was that comparatively a very small amount of money was required to conduct the business of farming. A hundred dollars average probably was as much as the largest farmers of that day needed in the way of cash to meet the demands of their farm work, paying for hired help, repairs of tools, and all other incidental expenses.'[378] This Arcadian life was to come to a sudden end after the War of Secession. The war had burdened the Union with an enormous National Debt, amounting to £1,200,000, and in consequence the taxes were considerably increased. On the other hand, a feverish development of modern traffic and industry, machine-building in particular, was encouraged by the imposition of higher protective tariffs. The railway companies were endowed with public lands on an imposing scale, in order to promote railroad construction and farm-settlements: in 1867 alone, they were given more than 192,500,000 acres, and so the permanent way grew at an unprecedented rate. In 1860 it amounted to less than 31,000 miles, in 1870 it had grown to more than 53,000 miles and in 1880 to more than 93,000 miles. (During the same period--1870-1880--the permanent way in Europe had grown from 80,000 miles to 100,000 miles.) The railways and speculations in land made for mass emigration from Europe to the United States, and more than 4 1/2 million people immigrated in the twenty-three years from 1869 to 1892. In this way, the Union gradually became emancipated from European, and in particular from British, industry; factories were set up in the States and home industries developed for the production of textiles, iron, steel and machinery. The process of revolutionary transformation was most rapid in agriculture. The emancipation of the slaves had compelled the Southern planters to introduce the steam plough shortly after the Civil War, and new farms had sprung up in the West in the wake of the railways, which from the very beginning employed the most modern machinery and technique. 'The improvements are rapidly revolutionising the agriculture of the West, and reducing to the lowest minimum ever attained, the proportion of manual labour employed in its operations.... Coincident with this application of mechanics to agriculture, systematic and enlarged business aptitudes have also sought alliance with this noble art. Farms of thousands of acres have been managed with greater skill, a more economical adaptation of means to ends, and with a larger margin of real profit than many others of 80 acres.'[379] During this time, direct and indirect taxation had increased enormously. On June 30, 1864, during the Civil War, a new finance bill was passed which is the basis of the present system of taxation, and which raised taxes on consumption and income to a staggering degree. This heavy war levy served as a pretext for a real orgy of protective tariffs in order to offset the tax on home production by customs duties.[380] Messrs. Morrill, Stevens and the other gentlemen who advanced the war as a lever for enforcing their protectionist programme, initiated the practice of wielding the implement of a customs policy quite openly and cynically to further private profiteering interests of all descriptions. Any home producer who appeared before the legislative assembly with a request for any kind of special tariff to fill his own pocket saw his demands readily granted, and the tariff rates were made as high as any interested party might wish. 'The war', writes the American Taussig, 'had in many ways a bracing and ennobling influence on our national life; but its immediate effect on business affairs, and on all legislation affecting moneyed interests, was demoralising. The line between public duty and private interests was often lost sight of by legislators. Great fortunes were made by changes in legislation urged and brought about by those who were benefited by them, and the country has seen with sorrow that the honour and honesty of public men did not remain undefiled.'[381] This customs bill which completely revolutionised the country's economic life, and remained in force unchanged for twenty years, was literally pushed through Congress in three days, and through the Senate in two, without criticism, without debate, without any opposition whatever.[382] Down to the present day it forms the basis of U.S. customs legislation. This shift in U.S. fiscal policy ushered in an era of the most brazen parliamentary log-rolling and of undisguised and unrestrained corruption of elections, of the legislature and the press to satisfy the greed of Big Business. '_Enrichissez-vous_' became the catchword of public life after the 'noble war' to liberate mankind from the 'blot of slavery'. On the stock exchange, the Yankee negro-liberator sought his fortunes in orgies of speculation; in Congress, he endowed himself with public lands, enriched himself by customs and taxes, by monopolies, fraudulent shares and theft of public funds. Industry prospered. Gone were the times when the small or medium farmer required hardly any money, when he could thresh and turn into cash his wheat reserves as the need arose. Now he was chronically in need of money, a lot of money, to pay his taxes. Soon he was forced to sell all his produce and to buy his requirements from the manufacturers in the form of ready-made goods. As Peffer puts it: 'Coming from that time to the present, we find that everything nearly has been changed. All over the West particularly the farmer threshes his wheat all at one time, he disposes of it all at one time, and in a great many instances the straw is wasted. He sells his hogs, and buys bacon and pork; he sells his cattle, and buys fresh beef and canned beef or corned beef, as the case may be; he sells his fruit, and buys it back in cans. If he raises flax at all, instead of putting it into yarn and making gowns for his children, as he did fifty years or more ago, he threshes his flax, sells the seed, and burns the straw. Not more than one farmer in fifty now keeps sheep at all; he relies upon the large sheep farmer for the wool, which is put into cloth or clothing ready for his use. Instead of having clothing made up on the farm in his own house or by a neighbour woman or country tailor a mile away, he either purchases his clothing ready made at the nearest town, or he buys the cloth and has a city tailor make it up for him. Instead of making implements which he uses about the farm--forks, rakes, etc.--he goes to town to purchase even a handle for his axe or his mallet; he purchases twine and rope and all sorts of needed material made of fibres; he buys his cloth and his clothing; he buys his canned fruit and preserved fruit; he buys hams and shoulders and mess pork and mess beef; indeed, he buys nearly everything now that he produced at one time himself, and these things all cost money. Besides all this, and what seems stranger than anything else, whereas in the earlier time the American home was a free home, unencumbered, not one case in a thousand where a home was mortgaged to secure the payment of borrowed money, and whereas but a small amount of money was then needed for actual use in conducting the business of farming, there was always enough of it among the farmers to supply the demand. Now, when at least ten times as much is needed, there is little or none to be obtained, nearly half the farms are mortgaged for as much as they are worth, and interest rates are exorbitant. As to the cause of such wonderful changes ... the manufacturer came with his woollen mill, his carding mill, his broom factory, his rope factory, his wooden-ware factory, his cotton factory, his pork-packing establishment, his canning factory and fruit preserving houses; the little shop on the farm has given place to the large shop in town; the wagon-maker's shop in the neighbourhood has given way to the large establishment in the city where ... a hundred or two hundred wagons are made in a week; the shoemaker's shop has given way to large establishments in the cities where most of the work is done by machines.'[383] Finally, the agricultural labour of the farmer himself has become machine work: 'He ploughs and sows and reaps with machines. A machine cuts his wheat and puts it in a sheaf, and steam drives his threshers. He may read the morning paper while he ploughs and sit under an awning while he reaps.'[384] Sering estimated in the middle eighties that the necessary cash 'for a very modest beginning' of the smallest farm in the North West is £240 to £280.[385] This revolution of American agriculture after the 'Great War' was not the end. It was only the beginning of the whirlpool in which the farmer was caught. His history brings us automatically to the second phase of the development of capitalist accumulation of which it is an excellent illustration.--Natural economy, the production for personal needs and the close connection between industry and agriculture must be ousted and a simple commodity economy substituted for them. Capitalism needs the medium of commodity production for its development, as a market for its surplus value. But as soon as simple commodity production has superseded natural economy, capital must turn against it. No sooner has capital called it to life, than the two must compete for means of production, labour power, and markets. The first aim of capitalism is to isolate the producer, to sever the community ties which protect him, and the next task is to take the means of production away from the small manufacturer. In the American Union, as we have seen, the 'Great War' inaugurated an era of large-scale seizure of public lands by monopolist capitalist companies and individual speculators. Feverish railroad building and ever more speculation in railway shares led to a mad gamble in land, where individual soldiers of fortune and companies netted immense fortunes and even entire counties. In addition a veritable swarm of agents lured the vast flow of emigrants from Europe to the U.S.A. by blatant and unscrupulous advertising, deceptions and pretences of every description. These immigrants first settled in the Eastern States along the Atlantic seaboard, and, with the growth of industry in these states, agriculture was driven westward. The 'wheat centre' which had been near Columbus, Ohio, in 1850, in the course of the subsequent fifty years shifted to a position 99 miles further North and 680 miles further West. Whereas in 1850 51·4 per cent of the total wheat crop had been supplied by the Eastern States, in 1880 they produced only 13·6 per cent, 71·7 per cent being supplied by the Northern Central and 9 per cent by the Western States. In 1825, the Congress of the Union under Monroe had decided to transplant the Red Indians from the East to the West of the Mississippi. The redskins put up a desperate resistance; but all who survived the slaughter of forty Red Indian campaigns were swept away like so much rubbish and driven like cattle to the West to be folded in reservations like so many sheep. The Red Indian had been forced to make room for the farmer--and now the farmer in his turn was driven beyond the Mississippi to make way for capital. Following the railway tracks, the American farmer moved West and North-West into the land of promise which the great land speculators' agents had painted for him in glowing colours. Yet the most fertile and most favourably situated lands were retained by the companies who farmed them extensively on completely capitalistic lines. All around the farmer who had been exiled into the wilderness, a dangerous competitor and deadly enemy sprang up--the 'bonanza farms', the great capitalist agricultural concerns which neither the Old World nor the New had known before. Here surplus value was produced with the application of all the resources known to modern science and technology. 'As the foremost representative of financial agriculture we may consider Oliver Dalrymple, whose name is to-day known on both sides of the Atlantic. Since 1874 he has simultaneously managed a line of steamers on the Red River and six farms owned by a company of financiers and comprising some 75,000 acres. Each one is divided into departments of 2,000 acres, and every department is again subdivided into three sections of 667 acres which are run by foremen and gangleaders. Barracks to shelter 50 men and stable as many horses and mules, are built on each section, and similarly kitchens, machine sheds and workshops for blacksmiths and locksmiths. Each section is completely equipped with 20 pairs of horses, 8 double ploughs, 12 horse-drawn drill-ploughs, 12 steel-toothed harrows, 12 cutters and binders, 2 threshers and 16 wagons. Everything is done to ensure that the machines and the living labour (men, horses and mules) are in good condition and able to do the greatest possible amount of work. There is a telephone line connecting all sections and the central management. 'The six farms of 75,000 acres are cultivated by an army of 600 workers, organised on military lines. During the harvest, the management hires another 500 to 600 auxiliary workers, assigning them to the various sections. After the work is completed in the fall, the workers are dismissed with the exception of the foreman and 10 men per section. In some farms in Dakota and Minnesota, horses and mules do not spend the winter at the place of work. As soon as the stubble has been ploughed in, they are driven in teams of a hundred or two hundred pairs 900 miles to the South, to return only the following spring. 'Mechanics on horseback follow the ploughing, sowing and harvesting machines when they are at work. If anything goes wrong, they gallop to the machine in question, repair it and get it moving again without delay. The harvested corn is carried to the threshing machines which work day and night without interruption. They are stoked with bundles of straw fed into the stokehold through pipes of sheet-iron. The corn is threshed, winnowed, weighed and filled into sacks by machinery, then it is put into railway trucks which run alongside the farm, and goes to Duluth or Buffalo. Every year, Dalrymple increases his land under seed by 5,800 acres. In 1880 it amounted to 25,000 acres.[386] In the late seventies, there were already individual capitalists and companies who owned 35,000-45,000 acres of wheat land. Since the time of Lafargue's writing, extensive capitalist agriculture in America has made great strides in technique and the employment of machinery.[387] The American farmer could not successfully compete with such capitalist enterprises. At a time when the general revolution in the conditions of finance, production and transport compelled him to give up production for personal needs and to produce exclusively for the market, the great spreading of agriculture caused a heavy fall in the prices of agricultural products. And at the precise moment when farming became dependent on the market, the agricultural market of the Union was suddenly turned from a local one into a world market, and became a prey to the wild speculations of a few capitalist mammoth concerns. In 1879, a notable year for the history of agricultural conditions in Europe as well as in America, there began the mass export of wheat from the U.S.A. to Europe.[388] Big Business was of course the only one to profit from this expanding market. The small farmer was crushed by the competition of an increasing number of extensive farms and became the prey of speculators who bought up his corn to exert pressure on the world market. Helpless in the face of the immense capitalist powers, the farmer got into debt--a phenomenon typical for a declining peasant economy. In 1890, Secretary Rusk of the U.S. Department of Agriculture sent out a circular letter with reference to the desperate position of the farmers, saying: 'The burden of mortgages upon farms, homes, and land, is unquestionably discouraging in the extreme, and while in some cases no doubt this load may have been too readily assumed, still in the majority of cases the mortgage has been the result of necessity.... These mortgages ... drawing high rates of interest ... have to-day, in the face of continued depression of the prices of staple products, become very irksome, and in many cases threaten the farmer with loss of home and land. It is a question of grave difficulty to all those who seek to remedy the ills from which our farmers are suffering. At present prices the farmer finds that it takes more of his products to get a dollar wherewith to buy back the dollar which he borrowed than it did when he borrowed it. The interest accumulates, while the payment of the principal seems utterly hopeless, and the very depression which we are discussing makes the renewal of the mortgage most difficult.'[389] According to the census of May 29, 1891, 2·5 million farms were deep in debt; two-thirds of them were managed by the owners whose obligations amounted to nearly £440,000. 'The situation is this: farmers are passing through the "valley and shadow of death"; farming as a business is profitless; values of farm products have fallen 50 per cent since the great war, and farm values have depreciated 25 to 50 per cent during the last ten years; farmers are overwhelmed with debts secured by mortgages on their homes, unable in many instances to pay even the interest as it falls due, and unable to renew the loans because securities are weakening by reason of the general depression; many farmers are losing their homes under this dreadful blight, and the mortgage mill still grinds. We are in the hands of a merciless power; the people's homes are at stake.'[390] Encumbered with debts and close to ruin, the farmer had no option but to supplement his earnings by working for a wage, or else to abandon his farm altogether. Provided it had not yet fallen into the clutches of his creditors like so many thousands of farms, he could shake from off his feet the dust of the 'land of promise' that had become an inferno for him. In the middle eighties, abandoned and decaying farms could be seen everywhere. In 1887, Sering wrote: 'If the farmer cannot pay his debts to date, the interest he has to pay is increased to 12, 15 or even 20 per cent. He is pressed by the banker, the machine salesman and the grocer who rob him of the fruits of his hard work.... He can either remain on the farm as a tenant or move further West, to try his fortunes elsewhere. Nowhere in North America have I found so many indebted, disappointed and depressed farmers as in the wheat regions of the North Western prairies. I have not spoken to a single farmer in Dakota who would not have been prepared to sell his farm.[391] 'The Commissioner of Agriculture of Vermont in 1889 reported a wide-spread desertion of farm-lands of that state. He wrote: "... there appears to be no doubt about there being in this state large tracts of tillable unoccupied lands, which can be bought at a price approximating the price of Western lands, situated near school and church, and not far from railroad facilities. The Commissioner has not visited all of the counties in the State where these lands are reported, but he has visited enough to satisfy him that, while much of the unoccupied and formerly cultivated land is now practically worthless for cultivation, yet very much of it can be made to yield a liberal reward to intelligent labour."'[392] The Commissioner of the State of New Hampshire issued a pamphlet in 1890, devoting 67 pages to the description of farms for sale at the lowest figures. He describes 1442 farms with tenantable buildings, abandoned only recently. The same has happened in other districts. Thousands of acres once raising corn and wheat are left untilled and run to brush and wood. In order to resettle the deserted land, speculators engaged in advertising campaigns and attracted crowds of new immigrants--new victims who were to suffer their predecessors' fate even more speedily. A private letter says: 'In the neighbourhood of railroads and markets, there remains no common land. It is all in the hands of the speculators. A settler takes over vacant land and counts for a farmer; but the management of his farm hardly assures his livelihood, and he cannot possibly compete with the big farmer. He tills as much of his land as the law compels him to do, but to make a comfortable living, he must look for additional sources of income outside agriculture. In Oregon, for instance, I have met a settler who owned 160 acres for five years, but every summer, until the end of July, he worked twelve hours a day for a dollar a day at road-making. This man, of course, also counts as one of the five million farmers in the 1890 census. Again, in the County of Eldorado, I saw many farmers who cultivated their land only to feed their cattle and themselves. There would have been no profit in producing for the market, and their chief income derives from gold-digging, the felling and selling of timber, etc. These people are prosperous, but it is not agriculture which makes them so. Two years ago, we worked in Long Cañon, Eldorado County, living in a cabin on an allotment. The owner of this allotment came home only once a year for a couple of days, and worked the rest of the time on the railway in Sacramento. Some years ago, a small part of the allotment was cultivated, to comply with the law, but now it is left completely untilled. A few acres are fenced off with wire, and there is a log cabin and a shed. But during the last years all this stands empty; a neighbour has the key and he made us free of the hut. In the course of our journey, we saw many deserted allotments, where attempts at farming had been made. Three years ago I was offered a farm with dwelling house for a hundred dollars, but in a short time the unoccupied house collapsed under the snow. In Oregon, we saw many derelict farms with small dwelling houses and vegetable gardens. One we visited was beautifully made: a sturdy block house, fashioned by a master-builder, and some equipment; but the farmer had abandoned it all. You were welcome to take it all without charge.'[393] Where could the ruined American farmer turn? He set out on a pilgrimage to follow the wheat centre and the railways. The former had shifted in the main to Canada, the Saskatchewan and the Mackenzie River where wheat can still thrive on the 62nd parallel. A number of American farmers followed--and after some time in Canada, they suffered the old fate.[394] During recent years, Canada has entered the world market as a wheat-exporting country, but her agriculture is dominated to an even greater extent by big capital than elsewhere.[395] In Canada, public lands were lavished upon private capitalist companies on an even more monstrous scale than in the United States. Under the Charter of the Canadian Pacific Railway Company with its grant of land, private capital perpetrated an unprecedented act of robbing the public. Not only that the company was guaranteed a twenty years' monopoly of railway-building, not only that it got a building site of about 713 miles free of charge, not only that it got a 100 years' state guarantee of the 3 per cent interest on the share capital of £m. 20--to crown it all, the company was given the choice of 25 million acres out of the most fertile and favourably situated lands, not necessarily in the immediate vicinity of the permanent way, as a free gift. All future settlers on this vast area were thus at the mercy of railway capital from the very outset. The railway company, in its turn, immediately proceeded to sell off 5 million acres for ready cash to the North-West Land Company, an association of British capitalists under the chairmanship of the Duke of Manchester. The second group of capitalists which was liberally endowed with public lands was the Hudson Bay Company, which was given a title to no less than one-twentieth of all the lands between Lake Winnipeg, the U.S. border, the Rocky Mountains, and Northern Saskatchewan, for renouncing their privileges in the North-West. Between them, these two capitalist groups had gained possession of five-ninths of all the land that could be settled. A considerable part of the other lands was assigned by the State to 26 capitalist 'colonising companies'.[396] Thus the Canadian farmer was practically everywhere ensnared by capital and capitalist speculation. And still mass immigration continued--not only from Europe, but also from the United States! These are the characteristics of capitalist domination on an international scale. Having evicted the peasant from his soil, it drives him from England to the East of the United States, and from there to the West, and on the ruins of the Red Indians' economy it transforms him back into a small commodity producer. Then, when he is ruined once more, he is driven from the West to the North. With the railways in the van, and ruin in the rear--capital leads the way, its passage is marked with universal destruction. The great fall of prices in the nineties is again succeeded by higher prices for agricultural products, but this is of no more avail to the small American farmer than to the European peasant. Yet the numbers of farmers are constantly swelling. In the last decade of the nineteenth century they had grown from 4,600,000 to 5,700,000, and the following ten years still saw an absolute increase. The aggregate value of farms had during the same period risen from £150,240,000 to £330,360,000.[397] We might have expected the general increase in the price of farm produce to have helped the farmer to come into his own. But that is not so; we see that the growing numbers of tenant farmers outstrip the increase in the farming population as a whole. In 1880, the proportion of tenant farmers amounted to 25·5 per cent of the total number of farmers in the Union, in 1890 it was 28·4 per cent, in 1900 35·3 per cent, and in 1910 37·2 per cent. Though prices for farm produce were rising, the tenant farmer was more and more rapidly stepping into the shoes of the independent farmer. And although much more than one-third of all farmers in the Union are now tenant farmers, their social status in the United States is that of the agricultural labourer in Europe. Constantly fluctuating, they are indeed wage-slaves of capital; they work very hard to create wealth for capital, getting nothing in return but a miserable and precarious existence. In quite a different historical setting, in South Africa, the same process shows up even more clearly the 'peaceful methods' by which capital competes with the small commodity producer. In the Cape Colony and the Boer Republics, pure peasant economy prevailed until the sixties of the last century. For a long time the Boers had led the life of animal-tending nomads; they had killed off or driven out the Hottentots and Kaffirs with a will in order to deprive them of their most valuable pastures. In the eighteenth century they were given invaluable assistance by the plague, imported by ships of the East India Company, which frequently did away with entire Hottentot tribes whose lands then fell to the Dutch immigrants. When the Boers spread further East, they came in conflict with the Bantu tribes and initiated the long period of the terrible Kaffir wars. These god-fearing Dutchmen regarded themselves as the Chosen People and took no small pride in their old-fashioned Puritan morals and their intimate knowledge of the Old Testament; yet, not content with robbing the natives of their land, they built their peasant economy like parasites on the backs of the Negroes, compelling them to do slave-labour for them and corrupting and enervating them deliberately and systematically. Liquor played such an important part in this process, that the prohibition of spirits in the Cape Colony could not be carried through by the English government because of Puritan opposition. There were no railways until 1859, and Boer economy in general and on the whole remained patriarchal and based on natural economy until the sixties. But their patriarchal attitude did not deter the Boers from extreme brutality and harshness. It is well known that Livingstone complained much more about the Boers than about the Kaffirs. The Boers considered the Negroes an object, destined by God and Nature to slave for them, and as such an indispensable foundation of their peasant economy. So much so that their answer to the abolition of slavery in the English colonies in 1836 was the 'Great Trek', although there the owners had been compensated with £3,000,000. By way of the Orange River and Vaal, the Boers emigrated from the Cape Colony, and in the process they drove the Matabele to the North, across the Limpopo, setting them against the Makalakas. Just as the American farmer had driven the Red Indian West before him under the impact of capitalist economy, so the Boer drove the Negro to the North. The 'Free Republics' between the Orange River and the Limpopo thus were created as a protest against the designs of the English bourgeoisie on the sacred right of slavery. The tiny peasant republics were in constant guerilla warfare against the Bantu Negroes. And it was on the backs of the Negroes that the battle between the Boers and the English government, which went on for decades, was fought. The Negro question, i.e. the emancipation of the Negroes, ostensibly aimed at by the English bourgeoisie, served as a pretext for the conflict between England and the republics. In fact, peasant economy and great capitalist colonial policy were here competing for the Hottentots and Kaffirs, that is to say for their land and their labour power. Both competitors had precisely the same aim: to subject, expel or destroy the coloured peoples, to appropriate their land and press them into service by the abolition of their social organisations. Only their methods of exploitation were fundamentally different. While the Boers stood for out-dated slavery on a petty scale, on which their patriarchal peasant economy was founded, the British bourgeoisie represented modern large-scale capitalist exploitation of the land and the natives. The Constitution of the Transvaal (South African) Republic declared with crude prejudice: 'The People shall not permit any equality of coloured persons with white inhabitants, neither in the Church nor in the State.'[398] In the Orange Free State and in the Transvaal no Negro was allowed to own land, to travel without papers or to walk abroad after sunset. Bryce tells us of a case where a farmer, an Englishman as it happened, in the Eastern Cape Colony had flogged his Kaffir slave to death. When he was acquitted in open court, his neighbours escorted him home to the strains of music. The white man frequently maltreated his free native labourers after they had done their work--to such an extent that they would take to flight, thus saving the master their wages. The British government employed precisely the opposite tactics. For a long time it appeared as protector of the natives; flattering the chieftains in particular, it supported their authority and tried to make them claim a right of disposal over their land. Wherever it was possible, it gave them ownership of tribal land, according to well-tried methods, although this flew in the face of tradition and of the actual social organisation of the Negroes. All tribes in fact held their land communally, and even the most cruel and despotic rulers such as the Matabele Chieftain Lobengula merely had the right as well as the duty to allot every family a piece of land which they could only retain so long as they cultivated it. The ultimate purpose of the British government was clear: long in advance it was preparing for land robbery on a grand scale, using the native chieftains themselves as tools. But in the beginning it was content with the 'pacification' of the Negroes by extensive military actions. Up to 1879 were fought 9 bloody Kaffir wars to break the resistance of the Bantus. British capital revealed its real intentions only after two important events had taken place: the discovery of the Kimberley diamond fields in 1869-70, and the discovery of the gold mines in the Transvaal in 1882-5, which initiated a new epoch in the history of South Africa. Then the British South Africa Company, that is to say Cecil Rhodes, went into action. Public opinion in England rapidly swung over, and the greed for the treasures of South Africa urged the British government on to drastic measures. South Africa was suddenly flooded with immigrants who had hitherto only appeared in small numbers--immigration having been deflected to the United States. But with the discovery of the diamond and gold fields, the numbers of white people in the South African colonies grew by leaps and bounds: between 1885 and 1895, 100,000 British had immigrated into Witwatersrand alone. The modest peasant economy was forthwith pushed into the background--the mines, and thus the mining capital, coming to the fore. The policy of the British government veered round abruptly. Great Britain had recognised the Boer Republics by the Sand River Agreement and the Treaty of Bloemfontein in the fifties. Now her political might advanced upon the tiny republics from every side, occupying all neighbouring districts and cutting off all possibility of expansion. At the same time the Negroes, no longer protected favourites, were sacrificed. British capital was steadily forging ahead. In 1868, Britain took over the rule of Basutoland--only, of course, because the natives had 'repeatedly implored' her to do so.[399] In 1871, the Witwatersrand diamond fields, or West Griqualand, were seized from the Orange Free State and turned into a Crown Colony. In 1879, Zululand was subjected, later to become part of the Natal Colony; in 1885 followed the subjection of Bechuanaland, to be joined to the Cape Colony. In 1888 Britain took over Matabele and Mashonaland, and in 1889 the British South Africa Company was given a Charter for both these districts, again, of course, only to oblige the natives and at their request.[400] Between 1884 and 1887, Britain annexed St. Lucia Bay and the entire East Coast as far as the Portuguese possessions. In 1894, she subjected Tongaland. With their last strength, the Matabele and Mashona fought one more desperate battle, but the Company, with Rhodes at the head, first liquidated the rising in blood and at once proceeded to the well-tried measure for civilising and pacifying the natives: two large railways were built in the rebellious district. The Boer Republics were feeling increasingly uncomfortable in this sudden stranglehold, and their internal affairs as well were becoming completely disorganised. The overwhelming influx of immigrants and the rising tides of the frenzied new capitalist economy now threatened to burst the barriers of the small peasant states. There was indeed a blatant conflict between agricultural and political peasant economy on the one hand, and the demands and requirements of the accumulation of capital on the other. In all respects, the republics were quite unable to cope with these new problems. The constant danger from the Kaffirs, no doubt regarded favourably by the British, the unwieldy, primitive administration, the gradual corruption of the _volksraad_ in which the great capitalists got their way by bribery, lack of a police force to keep the undisciplined crowds of adventurers in some semblance of order, the absence of labour legislation for regulating and securing the exploitation of the Negroes in the mines, lack of water supplies and transport to provide for the colony of 100,000 immigrants that had suddenly sprung up, high protective tariffs which increased the cost of labour for the capitalists, and high freights for coal--all these factors combined towards the sudden and stunning bankruptcy of the peasant republics. They tried, obstinately and unimaginatively, to defend themselves against the sudden eruption of capitalism which engulfed them, with an incredibly crude measure, such as only a stubborn and hide-bound peasant brain could have devised: they denied all civic rights to the _uitlanders_ who outnumbered them by far and who stood for capital, power, and the trend of the time. In those critical times it was an ill-omened trick. The mismanagement of the peasant republics caused a considerable reduction of dividends, on no account to be put up with. Mining capital had come to the end of its tether. The British South Africa Company built railroads, put down the Kaffirs, organised revolts of the _uitlanders_ and finally provoked the Boer War. The bell had tolled for peasant economy. In the United States, the economic revolution had begun with a war, in South Africa war put the period to this chapter. Yet in both instances, the outcome was the same: capital triumphed over the small peasant economy which had in its turn come into being on the ruins of natural economy, represented by the natives' primitive organisations. The domination of capital was a foregone conclusion, and it was just as hopeless for the Boer Republics to resist as it had been for the American farmer. Capital officially took over the reins in the new South African Union which replaced the small peasant republics by a great modern state, as envisaged by Cecil Rhodes' imperialist programme. The new conflict between capital and labour had superseded the old one between British and Dutch. One million white exploiters of both nations sealed their touching fraternal alliance within the Union with the civil and political disfranchisement of five million coloured workers. Not only the Negroes of the Boer Republics came away empty-handed, but the natives of the Cape Colony, whom the British government had at one time granted political equality, were also deprived of some of their rights. And this noble work, culminating under the imperialist policy of the Conservatives in open oppression, was actually to be finished by the Liberal Party itself, amid frenzied applause from the 'liberal cretins of Europe' who with sentimental pride took as proof of the still continuing creative vigour and greatness of English liberalism the fact that Britain had granted complete self-government and freedom to a handful of whites in South Africa. The ruin of independent craftsmanship by capitalist competition, no less painful for being soft-pedalled, deserves by rights a chapter to itself. The most sinister part of such a chapter would be out-work under capitalism;--but we need not dwell on these phenomena here. The general result of the struggle between capitalism and simple commodity production is this: after substituting commodity economy for natural economy, capital takes the place of simple commodity economy. Non-capitalist organisations provide a fertile soil for capitalism; more strictly: capital feeds on the ruins of such organisations, and although this non-capitalist _milieu_ is indispensable for accumulation, the latter proceeds at the cost of this medium nevertheless, by eating it up. Historically, the accumulation of capital is a kind of metabolism between capitalist economy and those pre-capitalist methods of production without which it cannot go on and which, in this light, it corrodes and assimilates. Thus capital cannot accumulate without the aid of non-capitalist organisations, nor, on the other hand, can it tolerate their continued existence side by side with itself. Only the continuous and progressive disintegration of non-capitalist organisations makes accumulation of capital possible. The premises which are postulated in Marx's diagram of accumulation accordingly represent no more than the historical tendency of the movement of accumulation and its logical conclusion. The accumulative process endeavours everywhere to substitute simple commodity economy for natural economy. Its ultimate aim, that is to say, is to establish the exclusive and universal domination of capitalist production in all countries and for all branches of industry. Yet this argument does not lead anywhere. As soon as this final result is achieved--in theory, of course, because it can never actually happen--accumulation must come to a stop. The realisation and capitalisation of surplus value become impossible to accomplish. Just as soon as reality begins to correspond to Marx's diagram of enlarged reproduction, the end of accumulation is in sight, it has reached its limits, and capitalist production is _in extremis_. For capital, the standstill of accumulation means that the development of the productive forces is arrested, and the collapse of capitalism follows inevitably, as an objective historical necessity. This is the reason for the contradictory behaviour of capitalism in the final stage of its historical career: imperialism. Marx's diagram of enlarged reproduction thus does not conform to the conditions of an accumulation in actual progress. Progressive accumulation cannot be reduced to static interrelations and interdependence between the two great departments of social production (the departments of producer and consumer goods), as the diagram would have it. Accumulation is more than an internal relationship between the branches of capitalist economy; it is primarily a relationship between capital and a non-capitalist environment, where the two great departments of production sometimes perform the accumulative process on their own, independently of each other, but even then at every step the movements overlap and intersect. From this we get most complicated relations, divergencies in the speed and direction of accumulation for the two departments, different relations with non-capitalist modes of production as regards both material elements and elements of value, which we cannot possibly lay down in rigid formulæ. Marx's diagram of accumulation is only the theoretical reflection of the precise moment when the domination of capital has reached its limits, and thus it is no less a fiction than his diagram of simple reproduction, which gives the theoretical formulation for the point of departure of capitalist accumulation. The precise definition of capitalist accumulation and its laws lies somewhere in between these two fictions. FOOTNOTES: [376] Until recently, in China the domestic industries were widely practised even by the bourgeoisie and in such large and ancient towns as Ningpo with its 300,000 inhabitants. 'Only a generation ago, the family's shoes, hats, shirts, etc., were made by the women themselves. At that time, it was practically unheard-of for a young woman to buy from a merchant what she could have made with the labour of her own hands' (Dr. Nyok-Ching Tsur, 'Forms of Industry in the Town of Ningpo' (_Die gewerblichen Betriebsformen der Stadt Ningpo_), Tuebingen, 1909, p. 51). [377] Admittedly, this relation is reversed in the last stages of the history of peasant economy when capitalist production has made its full impact. Once the small peasants are ruined, the entire work of farming frequently devolves on the women, old people and children, while the men are made to work for their living for capitalist entrepreneurs in the domestic industries or as wage-slaves in the factories. A typical instance is the small peasant in Wuerttemberg. [378] W. A. Peffer, _The Farmer's Side. His Troubles and Their Remedy_ (New York, 1891), Part ii, 'How We Got Here', chap. i, 'Changed Conditions of the Farmer', pp. 56-7. Cf. also A. M. Simmons, _The American Farmer_ (2nd edition, Chicago, 1906), pp. 74 ff. [379] Report of the U.S.A. Commissioner of Agriculture for the year 1867 (Washington, 1868). Quoted by Lafargue: _Getreidebau und Getreidehandel in den Vereinigten Staaten_ in _Die Neue Zeit_ (1885), p. 344. This essay on grain cultivation and the grain trade in the U.S.A. was first published in a Russian periodical in 1883. [380] 'The three Revenue Acts of June 30, 1864, practically formed one measure, and that probably the greatest measure of taxation which the world has seen.... The Internal Revenue Act was arranged, as Mr. David A. Wells has said, on the principle of the Irishman at Donnybrook Fair: "whenever you see a head, hit it, whenever you see a commodity, tax it"' (F. W. Taussig, _The Tariff History of the United States_ (New York-London, 1888), pp. 163-4). [381] Ibid., pp. 166-7. [382] 'The necessity of the situation, the critical state of the country, the urgent need of revenue, may have justified this haste, which, it is safe to say, is unexampled in the history of civilised countries' (Taussig, op. cit., p. 168). [383] Peffer, op. cit., pp. 58 ff. [384] Ibid., p. 6. [385] 'Agricultural Competition in North America' (_Die landwirtschaftliche Konkurrenz Nordamerikas_) Leipzig, 1887, p. 431. [386] Lafargue, op. cit., p. 345. [387] The Thirteenth Annual Report of the Commissioner of Labour (Washington, 1899) tables the advantages of machinery methods over hand methods so far achieved as follows: ---------------------------------------------------------------- | _Labour time per unit_ |--------------------------- _Type of work_ | _Machine_ | _Hand_ |-------------+------------- |_hrs._|_min._|_hrs._|_min._ ------------------------------------+------+------+------+------ Planting small corn | -- | 32·7 | 10 | 55 Harvesting and threshing small corn | 1 | -- | 46 | 40 Planting corn | -- | 37·5 | 6 | 15 Cutting corn | 3 | 4·5 | 5 | -- Shelling corn | -- | 3·6 | 66 | 40 Planting cotton | 1 | 3 | 8 | 48 Cultivating cotton | 12 | 5 | 60 | -- Mowing grass (scythe _v._ mower) | 1 | 0·6 | 7 | 20 Harvesting and baling hay | 11 | 3·4 | 35 | 30 anting potatoes | 1 | 2·5 | 15 | -- anting tomatoes | 1 | 4 | 10 | -- Cultivating and harvesting tomatoes | 134 | 5·2 | 324 | 20 ---------------------------------------------------------------- [388] Wheat exports from the Union to Europe: _Year_ _Million bushels_ _Year_ _Million bushels_ 1868-9 17·9 1885-6 57·7 1874-5 71·8 1890-1 55·1 1879-80 153·2 1899-1900 101·9 (Juraschek's _Uebersichten der Weltwirtschaft_, vol. vii, part i, p. 32). Simultaneously, the price per bushel wheat _loco_ farm (in cents) declined as follows: 1870-9 105 1896 73 1880-9 83 1897 81 1895 51 1898 58 Since 1899, when it had reached the low level of 58 cents per bushel, the price is moving up again: 1900 62 1903 78 1901 62 1904 92 1902 63 (Ibid., p. 18). According to the 'Monthly Returns on External Trade' (_Monatliche Nachweise über den Auswärtigen Handel_), the price (in marks) per 1,000 _kg._, was in June 1912: Berlin 227·82 London 170·96 New York 178·08 Odessa 173·94 Mannheim 247·93 Paris 243·69 [389] Peffer, op. cit., part i, 'Where We Are', chap, ii, 'Progress of Agriculture', pp. 30-1. [390] Ibid., p. 4. [391] Sering, op. cit., p. 433. [392] Peffer, op. cit., pp. 34 f. [393] Quoted by Nikolayon, op. cit., p. 224. [394] 49,199 people immigrated to Canada in 1902. In 1912, the number of immigrants was more than 400,000--138,000 of them British, and 134,000 American. According to a report from Montreal, the influx of American farmers continued into the spring of the present year [1912]. [395] 'Travelling in the West of Canada, I have visited only one farm of less than a thousand acres. According to the census of the Dominion of Canada, in 1881, when the census was taken, no more than 9,077 farmers occupied 2,384,337 acres of land between them; accordingly, the share of an individual (farmer) amounted to no less than 2,047 acres--in no state of the Union is the average anywhere near that' (Sering, op. cit., p. 376). In the early eighties, farming on a large scale was admittedly not very widely spread in Canada. But already in 1887, Sering describes the 'Bell Farm', owned by a limited company, which comprised no fewer than 56,700 acres, and was obviously modelled on the pattern of the Dalrymple farm. In the eighties, Sering, who regarded the prospects of Canadian competition with some scepticism, put the 'fertile belt' of Western Canada at three-fifths of the entire acreage of Germany, and estimated that actually only 38,400,000 acres of this were arable land, and no more than 15,000,000 acres at best were prospective wheat land (Sering, op. cit., pp. 337-8). The _Manitoba Free Press_ in June 1912, worked out that in summer, 1912, 11,200,000 acres were sown with spring wheat in Canada, as against 19,200,000 acres under spring wheat in the United States. (Cf. _Berliner Tageblatt, Handelszeitung_, No. 305, June 18, 1912.) [396] Sering, op. cit., pp. 361 ff. [397] Ernst Schultze, '_Das Wirtschaftsleben der Vereinigten Staaten_', _Jahrb. f. Gesetzg., Verw. u. Volkswirtschaft 1912_, no. 17, p. 1724. [398] Article 9. [399] 'Moshesh, the great Basuto leader, to whose courage and statesmanship the Basutos owed their very existence as a people, was still alive at the time, but constant war with the Boers of the Orange Free State had brought him and his followers to the last stage of distress. Two thousand Basuto warriors had been killed, cattle had been carried off, native homes had been broken up and crops destroyed. The tribe was reduced to the position of starving refugees, and nothing could save them but the protection of the British government which they had repeatedly implored' (C. P. Lucas, _A Historical Geography of the British Colonies_, part ii, vol. iv (Geography of South and East Africa), Oxford, 1904, p. 39). [400] 'The Eastern section of the territory is Mashonaland where, with the permission of King Lobengula, who claimed it, the British South Africa Company first established themselves' (ibid., p. 72). _CHAPTER XXX_ INTERNATIONAL LOANS The imperialist phase of capitalist accumulation which implies universal competition comprises the industrialisation and capitalist emancipation of the _hinterland_ where capital formerly realised its surplus value. Characteristic of this phase are: lending abroad, railroad constructions, revolutions, and wars. The last decade, from 1900 to 1910, shows in particular the world-wide movement of capital, especially in Asia and neighbouring Europe: in Russia, Turkey, Persia, India, Japan, China, and also in North Africa. Just as the substitution of commodity economy for a natural economy and that of capitalist production for a simple commodity production was achieved by wars, social crises and the destruction of entire social systems, so at present the achievement of capitalist autonomy in the _hinterland_ and backward colonies is attained amidst wars and revolutions. Revolution is an essential for the process of capitalist emancipation. The backward communities must shed their obsolete political organisations, relics of natural and simple commodity economy, and create a modern state machinery adapted to the purposes of capitalist production. The revolutions in Turkey, Russia, and China fall under this heading. The last two, in particular, do not exclusively serve the immediate political requirements of capitalism; to some extent they carry over outmoded pre-capitalist claims while on the other hand they already embody new conflicts which run counter to the domination of capital. These factors account for their immense drive, but at the same time impede and delay the ultimate victory of the revolutionary forces. A young state will usually sever the leading strings of older capitalist states by wars, which temper and test the modern state's capitalist independence in a baptism by fire. That is why military together with financial reforms invariably herald the bid for economic independence. The forward-thrusts of capital are approximately reflected in the development of the railway network. The permanent way grew most quickly in Europe during the forties, in America in the fifties, in Asia in the sixties, in Australia during the seventies and eighties, and during the nineties in Africa.[401] Public loans for railroad building and armaments accompany all stages of the accumulation of capital: the introduction of commodity economy, industrialisation of countries, capitalist revolutionisation of agriculture as well as the emancipation of young capitalist states. For the accumulation of capital, the loan has various functions: (_a_) it serves to convert the money of non-capitalist groups into capital, i.e. money both as a commodity equivalent (lower middle-class savings) and as fund of consumption for the hangers-on of the capitalist class; (_b_) it serves to transform money capital into productive capital by means of state enterprise--railroad building and military supplies; (_c_) it serves to divert accumulated capital from the old capitalist countries to young ones. In the sixteenth and seventeenth centuries, the loan transferred capital from the Italian cities to England, in the eighteenth century from Holland to England, in the nineteenth century from England to the American Republics and Australia, from France, Germany and Belgium to Russia, and at the present time [1912] from Germany to Turkey, from England, Germany and France to China, and, via Russia, to Persia. In the Imperialist Era, the foreign loan played an outstanding part as a means for young capitalist states to acquire independence. The contradictions inherent in the modern system of foreign loans are the concrete expression of those which characterise the imperialist phase. Though foreign loans are indispensable for the emancipation of the rising capitalist states, they are yet the surest ties by which the old capitalist states maintain their influence, exercise financial control and exert pressure on the customs, foreign and commercial policy of the young capitalist states. Pre-eminently channels for the investment in new spheres of capital accumulated in the old countries, such loans widen the scope for the accumulation of capital; but at the same time they restrict it by creating new competition for the investing countries. These inherent conflicts of the international loan system are a classic example of spatio-temporal divergencies between the conditions for the realisation of surplus value and the capitalisation thereof. While realisation of the surplus value requires only the general spreading of commodity production, its capitalisation demands the progressive supercession of simple commodity production by capitalist economy, with the corollary that the limits to both the realisation and the capitalisation of surplus value keep contracting ever more. Employment of international capital in the construction of the international railway network reflects this disparity. Between the thirties and the sixties of the nineteenth century, railway building and the loans necessary for it mainly served to oust natural economy, and to spread commodity economy--as in the case of the Russian railway loans in the sixties, or in that of the American railways which were built with European capital. Railway construction in Africa and Asia during the last twenty years, on the other hand, almost exclusively served the purposes of an imperialist policy, of economic monopolisation and economic subjugation of the backward communities. As regards Russia's railroad construction in Eastern Asia, for instance, it is common knowledge that Russia had paved the way for the military occupation of Manchuria by sending troops to protect her engineers working on the Manchurian railway. With the same object in view, Russia obtained railway concessions in Persia, Germany in Asia Minor and Mesopotamia, and Britain and Germany in Africa. In this connection, we must deal with a misunderstanding concerning the capital investments in foreign countries and the demand of these countries for capital imports. Already in the early twenties of the last century, the export of British capital to America played an important part, being largely responsible for the first genuine industrial and commercial crises in England in 1825. Since 1824, the London stock exchange had been flooded with South American stocks and shares. During the following year, the newly created states of South and Central America raised loans in London alone for more than £20,000,000, and in addition, enormous quantities of South American industrial shares and similar bonds were sold. This sudden prosperity and the opening up of the South American markets in their turn called forth greatly increased exports of British commodities to the Latin Americas. British commodity exports to these countries amounted to £2,900,000 in 1821 which had risen to £6,400,000 by 1825. Cotton textiles formed the most important item of these exports; this powerful demand was the impetus for a rapid expansion of British cotton production, and many new factories were opened. In 1821, raw cotton to the value of £m. 129 was made up in England, and in 1826 the amount had risen to £m. 167. The situation was thus fraught with the elements of a crisis. Tugan Baranovski raises the question: 'But from where did the South American countries take the means to buy twice as many commodities in 1825 as in 1821? The British themselves supplied these means. The loans floated on the London stock exchange served as payment for imported goods. Deceived by the demand they had themselves created, the British factory-owners were soon brought to realise by their own experience that their high expectations had been unfounded.'[402] He thus characterises as 'deceptive', as an unhealthy, abnormal economic phenomenon the fact that the South American demand for English goods had been brought about by British capital. Thus uncritically he took over the doctrine of an expert with whose other theories he wished to have nothing in common. The opinion had been advanced already during the English crisis of 1825 that it could be explained by the 'singular' development of the relations between British capital and South American demand. None other than Sismondi had raised the same question as Tugan Baranovski and given a most accurate description of events in the second edition of his _Nouveaux Principes_: 'The opening up of the immense market afforded by Spanish America to industrial producers seemed to offer a good opportunity to relieve British manufacture. The British government were of that opinion, and in the seven years following the crisis of 1818, displayed unheard-of activity to carry English commerce to penetrate the remotest districts of Mexico, Columbia, Brazil, Rio de la Plata, Chile and Peru. Before the government decided to recognise these new states, it had to protect English commerce by frequent calls of battleships whose captains had a diplomatic rather than a military mission. In consequence, it had defied the clamours of the Holy Alliance and recognised the new republics at a moment when the whole of Europe, on the contrary, was plotting their ruin. But however big the demand afforded by free America, yet it would not have been enough to absorb all the goods England had produced over and above the needs of consumption, had not their means for buying English merchandise been suddenly increased beyond all bounds by the loans to the new republics. Every American state borrowed from England an amount sufficient to consolidate its government. Although they were capital loans, they were immediately spent in the course of the year like income, that is to say they were used up entirely to buy English goods on behalf of the treasury, or to pay for those which had been dispatched on private orders. At the same time, numerous companies with immense capitals were formed to exploit all the American mines, but all the money they spent found its way back to England, either to pay for the machinery which they immediately used, or else for the goods sent to the localities where they were to work. As long as this singular commerce lasted, in which the English only asked the Americans to be kind enough to buy English merchandise with English capital, and to consume them for their sake, the prosperity of English manufacture appeared dazzling. It was no more income but rather English capital which was used to push on consumption: the English themselves bought and paid for their own goods which they sent to America, and thereby merely forwent the pleasure of using these goods.'[403] From this Sismondi drew the characteristic conclusion that the real limits to the capitalist market are set by income, i.e. by personal consumption alone, and he used this example as one more warning against accumulation. Down to the present day, the events which preceded the crisis of 1825 have remained typical for a period of boom and expansion of capital, and such 'singular commerce' is in fact one of the most important foundations of the accumulation of capital. Particularly in the history of British capital, it occurs regularly before every crisis, as Tugan Baranovski himself showed by the following facts and figures: the immediate cause of the 1836 crisis was the flooding of the American market with British goods, again financed by British money. In 1834, U.S. commodity imports exceeded exports by £m. 1·2 but at the same time their imports of precious metal exceeded exports by nearly £m. 3·2. Even in 1836, the year of the crisis itself, their surplus of imported commodities amounted to £m. 10·4, and still the excess of bullion imported was £m. 1. This influx of money, no less than the stream of goods, came chiefly from England, where U.S. railway shares were bought in bulk. 1835/6 saw the opening in the United States of sixty-one new banks with a capital of £m. 10·4, predominantly British. Again, the English paid for their exports themselves. The unprecedented industrial boom in the Northern States of the Union, eventually leading to the Civil War, was likewise financed by British capital, which again created an expanding market for British industry in the United States. And not only British capital--other European capitals also made every possible effort to take part in this 'singular commerce'. To quote Schaeffle, in the five years between 1849 and 1854, at least £m. 100 were invested in American shares on the various stock exchanges of Europe. The simultaneous revival of world industry attained such dimensions that it culminated in the world crash of 1857.--In the sixties, British capital lost no time in creating similar conditions in Asia as well as the United States. An unending stream was diverted to Asia Minor and East India, where it financed the most magnificent railroad projects. The permanent way of British India amounted in 1860 to 844 miles, in 1870 to 4,802 miles, in 1880 to 9,361 miles and in 1890 to 16,875 miles. This at once increased the demand for British commodities. No sooner had the War of Secession come to a close, than British capital again flowed into the United States. It again paid for the greater part of the enormous railroad constructions in the Union during the sixties and seventies, the permanent way amounting in 1850 to 8,844 miles, in 1860 to 30,807 miles, in 1870 to 53,212 miles, in 1880 to 94,198 miles, and in 1890 to 179,005 miles. Materials for these railways were also being supplied by England--one of the main causes for the rapid development of the British coal and iron industries and the reasons why these industries were so seriously affected by the American crises of 1866, 1873 and 1884. What Sismondi considered sheer lunacy was in this instance literally true: the British with their own materials, their own iron etc., had built railroads in the United States, they had paid for the railways with their own capital and only forwent their 'use'. In spite of all periodical crises, however, European capital had acquired such a taste for this madness, that the London stock exchange was seized by a veritable epidemic of foreign loans in the middle of the seventies. Between 1870 and 1875, loans of this kind, amounting to £m. 260, were raised in London. The immediate consequence was a rapid increase in the overseas export of British merchandise. Although the foreign countries concerned went periodically bankrupt, masses of capital continued to flow in. Turkey, Egypt, Greece, Bolivia, Costa Rica, Ecuador, Honduras, Mexico, Paraguay, Peru, St. Domingo, Uruguay, and Venezuela completely or partially suspended their payments of interest in the late seventies. Yet undeterred by this, the fever for exotic state loans burst out again at the end of the eighties--the South American states and South African colonies were lent immense quantities of European capital. In 1874, for instance, the Argentine Republic borrowed as much as £m. 10 and the loan had risen to £m. 59 by 1890. England built railways with her own iron and coal in all these countries as well, paying for them with her own capital. In 1885, the Argentine permanent way had been 1,952 miles, in 1893 it was 8,557 miles. Exports from England were rising accordingly: ---------------------------- | 1886 | 1890 ----------+--------+-------- | £m. | £m. Iron | 21·8 | 31·6 Machinery | 10 | 16·4 Coal | 9 | 19 ---------------------------- British total exports (mainly to the Argentine) amounted to £m. 4·7 in 1885 and to £m. 10·7 a mere four years later. At the same time, British capital flowed into Australia in the form of state loans. At the end of the eighties the loans to the three colonies Victoria, New South Wales and Tasmania amounted to £m. 112, £m. 81 of which were invested in railway construction. The permanent way of Australia extended over 4,900 miles in 1880, and over 15,600 miles in 1895. Britain, supplying capital and materials for these railways, was also embroiled in the crises of 1890 in the Argentine, Transvaal, Mexico, Uruguay, and in that of 1893 in Australia. The following two decades made a difference only in so far as German, French and Belgian capital largely participated with British capital in foreign investments, while railway construction in Asia Minor had been financed entirely by British capital from the fifties to the late eighties. From then on, German capital took over and put into execution the tremendous project of the Anatolian railway. German capital investments in Turkey gave rise to an increased export of German goods to that country. In 1896, German exports to Turkey amounted to £m. 1·4, in 1911 to £m. 5·65. To Asiatic Turkey, in particular, goods were exported in 1901 to the value of £m. 0·6 and in 1911 to the value of £m. 1·85. In this case, German capital was used to a considerable extent to pay for German goods, the Germans forgoing, to use Sismondi's term, only the pleasure of using their own products. Let us examine the position more closely: Realised surplus value, which cannot be capitalised and lies idle in England or Germany, is invested in railway construction, water works, etc. in the Argentine, Australia, the Cape Colony or Mesopotamia. Machinery, materials and the like are supplied by the country where the capital has originated, and the same capital pays for them. Actually, this process characterises capitalist conditions everywhere, even at home. Capital must purchase the elements of production and thus become productive capital before it can operate. Admittedly, the products are then used within the country, while in the former case they are used by foreigners. But then capitalist production does not aim at its products being enjoyed, but at the accumulation of surplus value. There had been no demand for the surplus product within the country, so capital had lain idle without the possibility of accumulating. But abroad, where capitalist production has not yet developed, there has come about, voluntarily or by force, a new demand of the non-capitalist strata. The consumption of the capitalist and working classes at home is irrelevant for the purposes of accumulation, and what matters to capital is the very fact that its products are 'used' by _others_. The new consumers must indeed realise the products, pay for their use, and for this they need money. They can obtain some of it by the exchange of commodities which begins at this point, a brisk traffic in goods following hard on the heels of railway construction and mining (gold mines, etc.). Thus the capital advanced for railroad building and mining, together with an additional surplus value, is gradually realised. It is immaterial to the situation as a whole whether this exported capital becomes share capital in new independent enterprises, or whether, as a government loan, it uses the mediation of a foreign state to find new scope for operation in industry and traffic, nor does it matter if in the first case some of the companies are fraudulent and fail in due course, or if in the second case the borrowing state finally goes bankrupt, i.e. if the owners sometimes lose part of their capital in one way or another. Even the country of origin is not immune, and individual capitals frequently get lost in crises. The important point is that capital accumulated in the old country should find elsewhere new opportunities to beget and realise surplus value, so that accumulation can proceed. In the new countries, large regions of natural economy are open to conversion into commodity economy, or existing commodity economy can be ousted by capital. Railroad construction and mining, gold mining in particular, are typical for the investment of capitals from old capitalist countries in new ones. They are pre-eminently qualified to stimulate a brisk traffic in goods under conditions hitherto determined by natural economy and both are significant in economic history as mile-stones along the route of rapid dissolution of old economic organisations, of social crises and of the development of modern conditions, that is to say of the development of commodity economy to begin with, and further of the production of capital. For this reason, the part played by lending abroad as well as by capital investments in foreign railway and mining shares is a fine sample of the deficiencies in Marx's diagram of accumulation. In these instances, enlarged reproduction of capital capitalises a surplus value that has already been realised (in so far as the loans or foreign investments are not financed by the savings of the petty bourgeoisie or the semi-proletariat). It is quite irrelevant to the present field of accumulation, when, where and how the capital of the old countries has been realised so that it may flow into the new country. British capital which finds an outlet in Argentine railway construction might well in the past have been realised in China in the form of Indian opium. Further, the British capital which builds railways in the Argentine, is of English origin not only in its pure value-form, as money capital, but also in its material form, as iron, coal and machinery; the use-form of the surplus value, that is to say, has also come into being from the very beginning in the use-form suitable for the purposes of accumulation. The actual use-form of the variable capital, however, labour power, is mainly foreign: it is the native labour of the new countries which is made a new object of exploitation by the capital of the old countries. If we want to keep our investigation all on one plane, we may even assume that the labour power, too, has the same country of origin as the capital. In point of fact new discoveries, of gold mines for instance, tend to call forth mass emigration from the old countries, especially in the first stages, and are largely worked by labour from those countries. It might well be, then, that in a new country capital, labour power and means of production all come from the same capitalist country, say England. So it is really in England that all the material conditions for accumulation exist--a realised surplus value as money capital, a surplus product in productive form, and lastly labour reserves. Yet accumulation cannot proceed here: England and her old buyers require neither railways nor an expanded industry. Enlarged reproduction, i.e. accumulation, is possible only if new districts with a non-capitalist civilisation, extending over large areas, appear on the scene and augment the number of consumers. But then, who are these new consumers actually; who is it that realises the surplus value of capitalist enterprises which are started with foreign loans; and who, in the final analysis, pays for these loans? The international loans in Egypt provide a classical answer. The internal history of Egypt in the second half of the nineteenth century is characterised by the interplay of three phenomena: large-scale capitalist enterprise, a rapidly growing public debt, and the collapse of peasant economy. Until quite recently, _corvée_ prevailed in Egypt, and the Wali and later the Khedive freely pursued their own power policy with regard to the condition of landownership. These primitive conditions precisely offered an incomparably fertile soil for the operations of European capital. Economically speaking, the conditions for a monetary economy had to be established to begin with, and the state created them by direct compulsion. Until the thirties, Mehemet Ali, the founder of Modern Egypt, here applied a method of patriarchal simplicity: every year, he 'bought up' the fellaheen's entire harvest for the public exchequer, and allowed them to buy back, at a higher price, a minimum for subsistence and seed. In addition he imported cotton from East India, sugar cane from America, indigo and pepper, and issued the fellaheen with official directions what to plant and how much of it. The government again claimed the monopoly for cotton and indigo, reserving to itself the exclusive right of buying and selling these goods. By such methods was commodity exchange introduced in Egypt. Admittedly, Mehemet Ali also did something towards raising labour productivity. He arranged for dredging of the ancient canalisation, and above all he started the work of the great Kaliub Nile dams which initiated the series of great capitalist enterprises in Egypt. These were to comprise four great fields: (1) irrigation systems, in which the Kaliub works built between 1845 and 1853 take first place--quite apart from unpaid forced labour, they swallowed up £m. 2·5 and incidentally proved quite useless at first; (2) routes for traffic--the most important construction which proved ultimately detrimental to Egypt being the Suez Canal; (3) the cultivation of cotton, and (4) the production of sugar cane. With the building of the Suez Canal, Egypt became caught up in the web of European capitalism, never again to get free of it. French capital led the way with British capital hard on its heels. In the twenty years that followed, the internal disturbances in Egypt were coloured by the competitive struggle between these two capitals. French capital was perhaps the most peculiar exponent of the European methods of capital accumulation at the expense of primitive conditions. Its operations were responsible for the useless Nile dams as well as for the Suez Canal. Egypt first contracted to supply the labour of 20,000 serfs free of charge for a number of years, and secondly to take up shares in the Suez Company to the tune of £m. 3·5, i.e. 40 per cent of the company's total capital. All this for the sake of breaking through a canal which would deflect the entire trade between Europe and Asia from Egypt and would painfully affect her part in this trade. These £m. 3·5 formed the nucleus for Egypt's immense national debt which was to bring about her military occupation by Britain twenty years later. In the irrigation system, sudden transformations were initiated: the ancient _sakias_, i.e. bullock-driven water-wheels, of which 50,000 had been busy for 7 months in the year in the Nile delta alone, were partially replaced by steam pumps. Modern steamers now plied on the Nile between Cairo and Assuan. But the most profound change in the economic conditions of Egypt was brought about by the cultivation of cotton. This became almost epidemic in Egypt when, owing to the American War of Secession and the English cotton famine, the price per short ton rose from something between £30 and £40 to £200-£250. Everybody was planting cotton, and foremost among all, the Viceroy and his family. His estates grew fat, what with large-scale land robbery, confiscations, forced 'sale' or plain theft. He suddenly appropriated villages by the score though without any legal excuse. Within an incredibly short time, this vast demesne was brought under cotton, with the result that the entire technique of Egyptian traditional agriculture was revolutionised. Dams were thrown up everywhere to protect the cotton fields from the seasonal flooding of the Nile, and a comprehensive system of artificial irrigation was introduced. These waterworks together with continuous deep ploughing--a novel departure for the fellah who had until then merely scratched his soil with a plough dating back to the Pharaohs--and finally the intensive labours of the harvest made between them enormous demands on Egypt's labour power. This was throughout the same forced peasant labour over which the state claimed to have an unrestricted right of disposal; and thousands had already been employed on the Kaliub dams and the Suez Canal and now the irrigation and plantation work to be done on the viceregal estates clamoured for this forced labour. The 20,000 serfs who had been put at the disposal of the Suez Canal Company were now required by the Khedive himself, and this brought about the first clash with French capital. The company was adjudged a compensation of £m. 3·35 by the arbitration of Napoleon III, a settlement to which the Khedive could all the more readily agree, since the very fellaheen whose labour power was the bone of contention were ultimately to be mulcted of this sum. The work of irrigation was immediately put in hand. Centrifugal machines, steam and traction engines were therefore ordered from England and France. In their hundreds, they were carried by steamers from England to Alexandria and then further. Steam ploughs were needed for cultivating the soil, especially since the rinderpest of 1864 had killed off all the cattle, England again being the chief supplier of these machines. The Fowler works were expanded enormously of a sudden to meet the requirements of the Viceroy for which Egypt had to pay.[404] But now Egypt required yet a third type of machine, cotton gins and presses for packing. Dozens of these gins were set up in the Delta towns. Like English industrial towns, Sagasis, Tanta, Samanud and other towns were covered by palls of smoke and great fortunes circulated in the banks of Alexandria and Cairo. But already in the year that followed, this cotton speculation collapsed with the cotton prices which fell in a couple of days from 27_d._ per pound to 15_d._, 12_d._, and finally 6_d._ after the cessation of hostilities in the American Union. The following year, Ismail Pasha ventured on a new speculation, the production of cane sugar. The forced labour of the fellaheen was to compete with the Southern States of the Union where slavery had been abolished. For the second time, Egyptian agriculture was turned upside down. French and British capitalists found a new field for rapid accumulation. 18 giant sugar factories were put on order in 1868-9 with an estimated daily output of 200 short tons of sugar, that is to say four times as much as that of the greatest then existing plant. Six of them were ordered from England, and twelve from France, but England eventually delivered the lion's share, because of the Franco-German war. These factories were to be built along the Nile at intervals of 6·2 miles (10 _km._), as centres of cane plantations of an area comprising 10 sq. _km._ Working to full capacity, each factory required a daily supply of 2,000 tons of sugar cane. Fellaheen were driven to forced labour on the sugar plantations in their thousands, while further thousands of their number built the Ibrahimya Canal. The stick and _kourbash_ were unstintingly applied. Transport soon became a problem. A railway network had to be built round every factory to haul the masses of cane inside, rolling stock, funiculars, etc., had to be obtained as quickly as possible. Again these enormous orders were placed with English capital. The first giant factory was opened in 1872, 4,000 camels providing makeshift transport. But it proved to be simply impossible to supply cane in the quantities required by the undertaking. The working staff was completely inadequate, since the fellah, accustomed to forced labour on the land, could not be transformed overnight into a modern industrial worker by the lash of the whip. The venture collapsed, even before many of the imported machines had been installed. This sugar speculation concluded the period of gigantic capitalist enterprise in Egypt in 1873. What had provided the capital for these enterprises? International loans. One year before his death in 1863, Said Pasha had raised the first loan at a nominal value of £m. 3·3 which came to £m. 2·5 in cash after deduction of commissions, discounts, etc. He left to Ismail Pasha the legacy of this debt and the contract with the Suez Canal Company, which was to burden Egypt with a debt of £m. 17. Ismail Pasha in turn raised his first loan in 1864 with a nominal value of £m. 5·7 at 7 per cent and a cash value of £m. 4·85 at 8 1/4 per cent. What remained of it, after £m. 3·35 had been paid to the Suez Canal Company as compensation, was spent within the year, swallowed up for the greater part by the cotton gamble. In 1865, the first so-called Daira-loan was floated by the Anglo-Egyptian Bank, on the security of the Khedive's private estates. The nominal value of this loan was £m. 3·4 at 9 per cent, and its real value £m. 2·5 at 12 per cent. In 1866, _Fruehling & Goschen_ floated a new loan at a nominal value of £m. 3 and a cash value of £m. 2. The Ottoman Bank floated another in 1867 of nominally £m. 2, really £m. 1·7. The floating debt at that time amounted to £m. 30. The Banking House _Oppenheim & Neffen_ floated a great loan in 1868 to consolidate part of this debt. Its nominal value was £m. 11·9 at 7 per cent, though Ismail could actually lay hands only on £m. 7·1 at 13 1/2 per cent. This money made it possible, however, to pay for the pompous celebrations on the opening of the Suez Canal, in presence of the leading figures in the Courts of Europe, in finance and in the _demi-monde_, for a madly lavish display, and further, to grease the palm of the Turkish Overlord, the Sultan, with a new baksheesh of £m. 1. The sugar gamble necessitated another loan in 1870. Floated by the firm of _Bischoffsheim & Goldschmidt_, it had a nominal value of £m. 7·1 at 7 per cent, and its cash value was £m. 5. In 1872/3 _Oppenheim's_ floated two further loans, a modest one amounting to £m. 4 at 14 per cent and a large one of £m. 32 at 8 per cent which reduced the floating debt by one-half, but which actually came only to £m. 11 in cash, since the European banking houses paid it in part by bills of exchange they had discounted. In 1874, a further attempt was made to raise a national loan of £m. 50 at an annual charge of 9 per cent, but it yielded no more than £m. 3·4. Egyptian securities were quoted at 54 per cent of their face value. Within the thirteen years after Said Pasha's death, Egypt's total public debt had grown from £m. 3·293 to £m. 94·110,[405] and collapse was imminent. These operations of capital, at first sight, seem to reach the height of madness. One loan followed hard on the other, the interest on old loans was defrayed by new loans, and capital borrowed from the British and French paid for the large orders placed with British and French industrial capital. While the whole of Europe sighed and shrugged its shoulders at Ismail's crazy economy, European capital was in fact doing business in Egypt on a unique and fantastic scale--an incredible modern version of the biblical legend about the fat kine which remains unparalleled in capitalist history. In the first place, there was an element of usury in every loan, anything between one-fifth and one-third of the money ostensibly lent sticking to the fingers of the European bankers. Ultimately, the exorbitant interest had to be paid somehow, but how--where were the means to come from? Egypt herself was to supply them; their source was the Egyptian fellah--peasant economy providing in the final analysis all the most important elements for large-scale capitalist enterprise. He provided the land since the so-called private estates of the Khedive were quickly growing to vast dimensions by robbery and blackmail of innumerable villages; and these estates were the foundations of the irrigation projects and the speculation in cotton and sugar cane. As forced labour, the fellah also provided the labour power and, what is more, he was exploited without payment and even had to provide his own means of subsistence while he was at work. The marvels of technique which European engineers and European machines performed in the sphere of Egyptian irrigation, transport, agriculture and industry were due to this peasant economy with its fellaheen serfs. On the Kaliub Nile dams and on the Suez Canal, in the cotton plantations and in the sugar plants, untold masses of peasants were put to work; they were switched over from one job to the next as the need arose, and they were exploited to the limit of endurance and beyond. Although it became evident at every step that there were technical limits to the employment of forced labour for the purposes of modern capital, yet this was amply compensated by capital's unrestricted power of command over the pool of labour power, how long and under what conditions men were to work, live and be exploited. But not alone that it supplied land and labour power, peasant economy also provided the money. Under the influence of capitalist economy, the screws were put on the fellaheen by taxation. The tax on peasant holdings was persistently increased. In the late sixties, it amounted to £2 5_s._ per _hectare_, but not a farthing was levied on the enormous private estates of the royal family. In addition, ever more special rates were devised. Contributions of 2_s._ 6_d._ per _hectare_ had to be paid for the maintenance of the irrigation system which almost exclusively benefited the royal estates, and the fellah had to pay 1_s._ 4_d._ for every date tree felled, 9_d._ for every clay hovel in which he lived. In addition, every male over 10 years of age was liable to a head tax of 6_s._ 6_d._ The total paid by the fellaheen was £m. 2·5 under Mehemet Ali, £m. 5 under Said Pasha, and £m. 8·15 under Ismail Pasha. The greater the debt to European capital became, the more had to be extorted from the peasants.[406] In 1869 all taxes were put up by 10 per cent and the taxes for the coming year collected in advance. In 1870, a supplementary land tax of 8_s._ per _hectare_ was levied. All over Upper Egypt people were leaving the villages, demolished their dwellings and no longer tilled their land--only to avoid payment of taxes. In 1876, the tax on date palms was increased by 6_d._ Whole villages went out to fell their date palms and had to be prevented by rifle volleys. North of Siut, 10,000 fellaheen are said to have starved in 1879 because they could no longer raise the irrigation tax for their fields and had killed their cattle to avoid paying tax on it.[407] Now the fellah had been drained of his last drop of blood. Used as a leech by European capital, the Egyptian state had accomplished its function and was no longer needed. Ismail, the Khedive, was given his _congé_; capital could begin winding up operations. Egypt had still to pay 394,000 Egyptian pounds as interest on the Suez Canal shares for £m. 4 which England had bought in 1875. Now British commissions to 'regulate' the finances of Egypt went into action. Strangely enough, European capital was not at all deterred by the desperate state of the insolvent country and offered again and again to grant immense loans for the salvation of Egypt. Cowe and Stokes proposed a loan of £m. 76 at 9 per cent for the conversion of the total debt, Rivers Wilson thought no less than £m. 103 would be necessary. The _Crédit Foncier_ bought up floating bills of exchange by the million, attempting, though without success, to consolidate the total debt by a loan of £m. 91. With the financial position growing hopelessly desperate, the time drew near when the country and all her productive forces was to become the prey of European capital. October 1878 saw the representatives of the European creditors landing in Alexandria. British and French capital established dual control of finances and devised new taxes; the peasants were beaten and oppressed, so that payment of interest, temporarily suspended in 1876, could be resumed in 1877.[408] Now the claims of European capital became the pivot of economic life and the sole consideration of the financial system. In 1878, a new commission and ministry were set up, both with a staff in which Europeans made up one half. In 1879, the finances of Egypt were brought under permanent control of European capital, exercised by the _Commission de la Dette Publique Égyptienne_ in Cairo. In 1878, the Tshifliks, estates of the viceregal family, which comprised 431,100 acres, were converted into crown land and pledged to the European capitalists as collateral for the public debt, and the same happened to the Daira lands, the private estates of the Khedive, comprising 485,131 acres, mainly in Upper Egypt; this was, at a later date, sold to a syndicate. The other estates for the greatest part fell to capitalist companies, the Suez Canal Company in particular. To cover the cost of occupation, England requisitioned ecclesiastical lands of the mosques and schools. An opportune pretext for the final blow was provided by a mutiny in the Egyptian army, starved under European financial control while European officials were drawing excellent salaries, and by a revolt engineered among the Alexandrian masses who had been bled white. The British military occupied Egypt in 1882, as a result of twenty years' operations of Big Business, never to leave again. This was the ultimate and final step in the process of liquidating peasant economy in Egypt by and for European capital.[409] It should now be clear that the transactions between European loan capital and European industrial capital are based upon relations which are extremely rational and 'sound' for the accumulation of capital, although they appear absurd to the casual observer because this loan capital pays for the orders from Egypt and the interest on one loan is paid out of a new loan. Stripped of all obscuring connecting links, these relations consist in the simple fact that European capital has largely swallowed up the Egyptian peasant economy. Enormous tracts of land, labour, and labour products without number, accruing to the state as taxes, have ultimately been converted into European capital and have been accumulated. Evidently, only by use of the _kourbash_ could the historical development which would normally take centuries be compressed into two or three decades, and it was just the primitive nature of Egyptian conditions which proved such fertile soil for the accumulation of capital. As against the fantastic increase of capital on the one hand, the other economic result is the ruin of peasant economy together with the growth of commodity exchange which is rooted in the supreme exertion of the country's productive forces. Under Ismail's rule, the arable and reclaimed land of Egypt grew from 5 to 6·75 million acres, the canal system from 45,625 to 54,375 miles and the permanent way from 256·25 to 1,638 miles. Docks were built in Siut and Alexandria, magnificent dockyards in Alexandria, a steamer-service for pilgrims to Mecca was introduced on the Red Sea and along the coast of Syria and Asia Minor. Egypt's exports which in 1861 had amounted to £4,450,000 rose to £m. 14·4 in 1864; her imports which under Said Pasha amounted to £m 1·2 rose under Ismail to between £m. 5 and £m. 5·5. Trade which recovered only in the eighties from the opening up of the Suez Canal amounted to £m. 8·15 worth of imports and £m. 12·45 worth of exports in 1890, but in 1900 the figures were £m. 144 for imports and £m. 12·25 for exports, and in 1911--£m. 27·85 for imports and £m. 26·85 for exports. Thanks to this development of commodity economy which expanded by leaps and bounds with the assistance of European capital, Egypt herself had fallen a prey to the latter. The case of Egypt, just as that of China and, more recently, Morocco, shows militarism as the executor of the accumulation of capital, lurking behind international loans, railroad building, irrigation systems, and similar works of civilisation. The Oriental states cannot develop from natural to commodity economy and further to capitalist economy fast enough and are swallowed up by international capital, since they cannot perform these transformations without selling their souls to capital. Their feverish metamorphoses are tantamount to their absorption by international capital. Another good recent example is the deal made by German capital in Asiatic Turkey. European capital, British capital in particular, had already at an early date attempted to gain possession of this area which marches with the ancient trade route between Europe and Asia.[410] In the fifties and sixties, British capital built the railway lines Smyrna-Aydin-Diner and Smyrna-Kassaba-Alasehir, obtained the concession to extend the line to Afyon Karahisar and also leased the first tract for the Anatolian railway Ada-Bazar-Izmid. French capital gradually came to acquire influence over part of the railway building during this time. In 1888, German capital appeared on the scene. It took up 60 per cent of the shares in the new merger of international interests, negotiated principally with the French capitalist group represented by the _Banque Ottomane_. International capital took up the remaining 40 per cent.[411] The Anatolian Railway Company, a Turkish company, was founded on the 14th Redsheb of the year 1306 (March 4, 1889) with the _Deutsche Bank_ for principal backer, to take over the railway lines between Ada-Bazar and Izmid, running since the early seventies, as also the concession for the Izmid-Eskisehir-Angora line (525 miles). It was further entitled to complete the Ada-Bazar-Scutari line and branch lines to Brussa, in addition to building the supplementary network Eskisehir-Konya (278 miles) on the basis of the 1893 concession, and finally to run a service from Angora to Kaisari (264 miles). The Turkish government gave the company a state guarantee of annual gross earnings amounting to £412 per km. on the Ada-Bazar line and of £600 per km. on the Izmid-Angora lines. For this purpose it wrote over to the _Administration de la Dette Publique Ottomane_ the revenue from tithes in the _sandshaks_ of Izmid, Ertoghrul, Kutalia and Angora, with which to make up the gross earnings guaranteed by the government. For the Angora-Kaisari line the government guaranteed annual gross earnings of 775 Turkish pounds, i.e. £712 per km., and 604 Turkish pounds, i.e. approximately £550, provided, in the latter case, that the supplementary grant per km. did not exceed 219 Turkish pounds (£200 a year). The government was to receive a quarter of the eventual surplus of gross earnings over the guaranteed amount. The _Administration de la Dette Publique Ottomane_ as executor of the government guarantee collected the tithes of the _sandshaks_ Trebizonde and Gumuchhane direct and paid the railway company out of a common fund which was formed of all the tithes set aside for this purpose. In 1898, the Eskisehir-Konya maximum grant was raised from 218 to 296 Turkish pounds. In 1899, the company obtained concessions to build and run a dockyard at Ada-Bazar, to issue writs, to build corn-elevators and storerooms for goods of every description, further the right to employ its own staff for loading and unloading and, finally, in the sphere of customs policy, the creation of a kind of free port. In 1901, the company acquired a concession for the Baghdad railway Konya-Baghdad-Bazra-Gulf of Persia (1,500 miles) which connects with the Anatolian line by the Konya-Aregli-Bulgurlu line. For taking up this concession, a new limited company was founded which placed the order of constructing the line, at first to Bulgurlu, with a Building Company registered in Frankfort-on-the-Main. Between 1893 and 1910, the Turkish government gave additional grants--£1,948,000 for the Ada-Bazar-Angora line and 1,800,000 Turkish pounds for the Eskisehir-Konya line--a total of £3,632,000.[412] Finally, by the concession of 1907, the company was empowered to drain the Karavirar Lake and to irrigate the Konya plain, these works to be executed within six years at government expense. In this instance, the company advanced the government the necessary capital up to £780,000 at 5 per cent interest, repayable within thirty-six years. In return the Turkish government pledged as securities: (1) an annual sum of 25,000 Turkish pounds, payable from the surplus of the tithes' fund assigned to the _Administration de la Dette Publique Ottomane_ to cover the railway grants and other obligations; (2) the residual tithes over the last 5 years in the newly irrigated regions; (3) the net proceeds from the working of the irrigation systems, and (4) the price of all reclaimed or irrigated land that was sold. For the execution of this work, the Frankfort company had formed a subsidiary company 'for the irrigation of the Konya plain' with a capital of £m. 5·4 to take this work in hand. In 1908 the company obtained the concession for extending the Konya railway as far as Baghdad and the Gulf of Persia, again with inclusion of a guaranteed revenue. To pay for this railway grant, a German Baghdad railway loan was taken up in three instalments of £m. 2·16, £m. 4·32 and £m. 4·76 respectively, on the security of the aggregate tithes for the _vilayets_ Aydin, Baghdad, Mossul, Diarbekir, Ursa and Aleppo, and the sheep-tax in the _vilayets_ Konya, Adana, Aleppo, etc.[413] The foundation of accumulation here becomes quite clear. German capital builds railways, ports and irrigation works in Asiatic Turkey; in all these enterprises it extorts new surplus value from the Asiatics whom it employs as labour power. But this surplus value must be realised together with the means of production from Germany (railway materials, machinery, etc.). How is it done? In part by commodity exchange which is brought about by the railways, the dockyards, etc., and nurtured in Asia Minor under conditions of natural economy. In part, i.e. in so far as commodity exchange does not grow quickly enough for the needs of capital, by using force, the machinery of the state, to convert the national real income into commodities; these are turned into cash in order to realise capital plus surplus value. That is the true object of the revenue grants for independent enterprises run by foreign capital, and of the collateral in the case of loans. In both instances so-called tithes (_ueshur_), pledged in different ways, are paid in kind by the Turkish peasant and these were gradually increased from about 12 to 12 1/2 per cent. The peasant in the Asiatic _vilayet_ must pay up or else his tithe would simply be confiscated by the police and the central and local authorities. These tithes, themselves a manifestation of ancient Asiatic despotism based on natural economy, are not collected by the Turkish government direct, but by tax-farmers not unlike the tax-collectors of the _ancien régime_; that is to say the expected returns from the levy in each _vilayet_ are separately auctioned by the state to tax-farmers. They are bought by individual speculators or syndicates who sell the tithes of each _sandshak_ (district) to other speculators and these resell their shares to a whole number of smaller agents. All these middlemen want to cover their expenses and make the greatest possible profit, and thus, by the time they are actually collected, the peasants' contributions have swollen to enormous dimensions. The tax-farmer will try to recoup himself for any mistake in his calculations at the expense of the peasant, and the latter, nearly always in debt, is impatient for the moment when he can sell his harvest. But often, after cutting his corn, he cannot start threshing for weeks, until indeed the tax-farmer deigns to take his due. His entire harvest is about to rot in the fields, and the tax-farmer, usually a grain merchant himself, takes advantage of this fact and compels him to sell at a low price. These tax-collectors know how to enlist the support of the officials, especially the Muktars, the local headmen, against complaining malcontents.[414] Along with the taxes on salt, tobacco, spirits, the excise on silk, the fishing dues, etc., the tithes are pledged with the _Conseil de l'Administration de la Dette Publique Ottomane_ to serve as security for the railway grant and the loans. In every case the _Conseil_ reserves to itself the right to vet the tax-farmers' contracts and stipulates for the proceeds of the tithe to be paid directly into the coffers of its regional offices. If no tax-farmer can be found, the tithes are stored in kind by the Turkish government; the warehouse keys are deposited with the _Conseil_ which then can sell the tithes on its own account. Thus the economic metabolism between the peasants of Asia Minor, Syria and Mesopotamia on the one hand and German capital on the other proceeds in the following way: in the _vilayets_ Konya, Baghdad, Bazra, etc., the grain comes into being as a simple use-product of primitive peasant economy. It immediately falls to the tithe-farmer as a state levy. Only then, in the hands of this latter, does it become a commodity, and, as such, money which falls to the state. This money is nothing but converted peasant grain; it was not even produced as a commodity. But now, as a state guarantee, it serves towards paying for the construction and operation of railways, i.e. to realise both the value of the means of production and the surplus value extorted from the Asiatic peasants and proletariat in the building and running of the railway. In this process further means of production of German origin are used, and so the peasant grain of Asia, converted into money, also serves to turn into cash the surplus value that has been extorted from the German workers. In the performance of these functions, the money rolls from the hands of the Turkish government into the coffers of the _Deutsche Bank_, and here it accumulates, as capitalist surplus value, in the form of promoters' profits, royalties, dividends and interests in the accounts of Messrs. Gwinner, Siemens, Stinnes and their fellow directors, of the shareholders and clients of the _Deutsche Bank_ and the whole intricate system of its subsidiary companies. If there is no tax-farmer, as provided in the concessions, then the complicated metamorphoses are reduced to their most simple and obvious terms: the peasant grain passes immediately to the _Administration de la Dette Publique Ottomane_, i.e. to the representatives of European capital, and becomes already in its natural form a revenue for German and other foreign capital: it realises capitalist surplus value even before it has shed its use-form for the Asiatic peasant, even before it has become a commodity and its own value has been realised. This is a coarse and straightforward metabolism between European capital and Asiatic peasant economy, with the Turkish state reduced to its real rôle, that of a political machinery for exploiting peasant economy for capitalist purposes,--the real function, this, of all Oriental states in the period of capitalist imperialism. This business of paying for German goods with German capital in Asia is not the absurd circle it seems at first, with the kind Germans allowing the shrewd Turks merely the 'use' of their great works of civilisation--it is at bottom an exchange between German capital and Asiatic peasant economy, an exchange performed under state compulsion. On the one hand it makes for progressive accumulation and expanding 'spheres of interest' as a pretext for further political and economic expansion of German capital in Turkey. Railroad building and commodity exchange, on the other hand, are fostered by the state on the basis of a rapid disintegration, ruin and exploitation of Asiatic peasant economy in the course of which the Turkish state becomes more and more dependent on European capital, politically as well as financially.[415] FOOTNOTES: [401] The Permanent Way (in kilometres). ---------------------------------------------------------------------- _Year_ | _Europe_ | _America_ | _Asia_ | _Africa_ |_Australia_ ----------+-----------+-----------+-----------+-----------+----------- 1840 | 2,925 | 4,754 | -- | -- | -- 1850 | 23,405 | 16,064 | -- | -- | -- 1860 | 51,862 | 53,955 | 1,393 | 455 | 376 1870 | 104,914 | 93,193 | 8,185 | 1,786 | 1,765 1880 | 168,983 | 174,666 | 16,287 | 4,646 | 7,847 1890 | 223,869 | 331,417 | 33,724 | 9,386 | 18,889 1900 | 283,878 | 402,171 | 60,301 | 20,114 | 24,014 1910 | 333,848 | 526,382 | 101,916 | 36,854 | 31,014 ---------------------------------------------------------------------- Accordingly, the increase was as follows: ---------------------------------------------------------------------- | % | % | % | % | % 1840/50 | 710 | 215 | -- | -- | -- 1860/70 | 102 | 73 | 486 | 350 | 350 1870/80 | 61 | 88 | 99 | 156 | 333 1880/90 | 32 | 89 | 107 | 104 | 142 1890/1900 | 27 | 21 | 79 | 114 | 27 ---------------------------------------------------------------------- [402] Tugan Baranovski, _Studies on the Theory and History of Commercial Crises in England_, p. 74. [403] Sismondi, _Nouveaux Principes_ ..., vol. i, book iv, chap. iv: 'Commercial Wealth Follows the Growth of Income', pp. 368-70. [404] Engineer Eyth, a representative of Fowler's, tells us: 'Now there was a feverish exchange of telegrams between Cairo, London and Leeds.--"When can Fowler's deliver 150 steam ploughs?"--Answer: "Working to capacity, within one year."--"Not good enough. Expect unloading Alexandria by spring 150 steam ploughs."--A.: "Impossible."--The works at that time were barely big enough to turn out 3 steam ploughs per week. N.B. a machine of this type costs £2,500 so that the order involved £m. 3·75. Ismail Pasha's next wire: "Quote cost immediate factory expansion. Viceroy willing foot bill."--You can imagine that Leeds made hay while the sun shone. And in addition, other factories in England and France as well were made to supply steam ploughs. The Alexandria warehouses, where goods destined for the vice-regal estates were unloaded, were crammed to the roof with boilers, wheels, drums, wire-rope and all sorts of chests and boxes. The second-rate hostelries of Cairo swarmed with newly qualified steam ploughmen, promoted in a hurry from anvil or share-plough, young hopefuls, fit for anything and nothing, since every steam plough must be manned by at least one expert pioneer of civilisation. Wagonloads of this assorted cargo were sent into the interior, just so that the next ship could unload. You cannot imagine in what condition they arrived at their destination, or rather anywhere but their destination. Ten boilers were lying on the banks of the Nile, and the machine to which they belonged was ten miles further. Here was a little heap of wire-rope, but you had to travel another 20 hours to find the appropriate pulleys. In one place an Englishman who was to set up the machines squatted desolate and hungry on a pile of French crates, and in another place his mate had taken to native liquor in his despair. Effendis and Katibs, invoking the help of Allah, rushed to and fro between Siut and Alexandria and compiled endless lists of items the names of which they did not even know. And yet, in the end, some of this apparatus was set in motion. In Upper Egypt, the ploughs belched steam--civilisation and progress had made another step forward' (_Lebendige Kräfte, 7 Vorträge aus dem Gebiete der Technik_, Berlin, 1908, p. 21). [405] Cf. Evelyn Baring, Earl of Cromer, _Egypt Today_ (London, 1908), vol. i, p. 11. [406] Incidentally, the money wrested from the Egyptian fellah further fell, by way of Turkey, to European capital. The Turkish loans of 1854, 1855, 1871, 1877 and 1886 were based on the contributions from Egypt which were increased several times and paid direct into the Bank of England. [407] 'It is stated by residents in the Delta', reports _The Times_ of March 31, 1879, 'that the third quarter of the year's taxation is now collected, and the old methods of collection applied. This sounds strangely by the side of the news that people are starving by the roadside, that great tracts of country are uncultivated, because of the physical burdens, and that the farmers have sold their cattle, the women their finery, and that the usurers are filling the mortgage offices with their bonds, and the courts with their suits of foreclosure' (quoted by Th. Rothstein, _Egypt's Ruin_, 1910, pp. 69-70). [408] 'This produce', wrote the correspondent of _The Times_ from Alexandria, 'consists wholly of taxes paid by the peasants in kind, and when one thinks of the poverty-stricken, overdriven, under-paid fellaheen in their miserable hovels, working late and early to fill the pockets of the creditors, the punctual payment of the coupon ceases to be wholly a subject of gratification' (quoted by Rothstein, op. cit., p. 49). [409] Eyth, an outstanding exponent of capitalist civilisation in the primitive countries, characteristically concludes his masterly sketch on Egypt, from which we have taken the main data, with the following imperialist articles of faith: 'What we have learnt from the past also holds true for the future. Europe must and will lay firm hands upon those countries which can no longer keep up with modern conditions on their own, though this will not be possible without all kinds of struggle, when the difference between right and wrong will become blurred, when political and historical justice will often enough mean disaster for millions and their salvation depend upon what is politically wrong. All the world over, the strongest hand will make an end to confusion, and so it will even on the banks of the Nile' (op. cit., p. 247). Rothstein has made it clear enough what kind of 'order' the British created 'on the banks of the Nile'. [410] Already in the early twenties of the last century, the Anglo-Indian government commissioned Colonel Chesney to investigate the navigability of the River Euphrates in order to establish the shortest possible connection between the Mediterranean and the Persian Gulf, resp. India. After detailed preparations and a preliminary reconnaissance in winter 1831, the expedition proper set out in 1835/7. In due course, British staff and officials investigated and surveyed a wider area in Eastern Mesopotamia. These efforts dragged on until 1866 without any useful results for the British government. But at a later date Great Britain returned to the plan of connecting the Mediterranean with India by way of the Gulf of Persia, though in a different form, i.e. the Tigris railway project. In 1879, Cameron travelled through Mesopotamia for the British government to study the lie of the land for the projected railway (Max Freiherr v. Oppenheim, _Vom Mittelmeer zum Persischen Golf durch den Hauran, die Syrische Wüste und Mesopotamien_, vol. ii, pp. 5 and 36). [411] S. Schneider, _Die Deutsche Bagdadbahn_ (1900), p. 3. [412] Saling, _Börsenjahrbuch 1911/12_, p. 2211. [413] Saling, op. cit., pp. 360-1. Engineer Pressel of Wuerttemberg, who as assistant to Baron v. Hirsch was actively engaged in these transactions in European Turkey, neatly accounts for the total grants towards railway-building in Turkey which European capital wrested from the Turkish government: ---------------------------------------------------------------------- | _Length | _Paid guarantee | in km._ | in francs_ -------------------------------------------+---------+---------------- 3 lines in European Turkey | 1888·8 | 33,099,352 | | Turkish permanent way in Asia completed | | before 1900 | 2313·2 | 53,811,538 | | Commissions and other costs connected with | | the guaranteed railway grants paid to the | | A.D.P.O. | | 9,351,209 -------------------------------------------+---------+---------------- Total | | 96,262,099 ---------------------------------------------------------------------- All this refers only to the period before 1899; not until that date were the revenue grants paid in part. The tithes of no less than 28 out of the 74 _sandshaks_ in Asiatic Turkey had been pledged for the revenue grants, and with these grants, between 1856 and 1900, a grand total of 1,576 miles of rails had been laid down in Asiatic Turkey. Pressel, the expert, by the way gives an instance of the underhand methods employed by the railway company at Turkish expense; he states that under the 1893 agreement the Anatolian company promised to run the railway to Baghdad via Angora, but later decided that this plan of theirs would not work and, having qualified for the guarantee, left the line to its fate and got busy with another route via Konya. 'No sooner have the companies succeeded in acquiring the Smyrna-Aydin-Diner line, than they will demand the extension of this line to Konya, and the moment these branch lines are completed, the companies will move heaven and earth to force the goods traffic to use these new routes for which there are no guarantees, and which, more important still, need never share their takings, whereas the other lines must pay part of their surplus to the government, once their gross revenue exceeds a certain amount. In consequence, the government will gain nothing by the Aydin line, and the companies will make millions. The government will foot the bill for practically the entire revenue guarantee for the Kassaba-Angora line, and can never hope to profit by its contracted 25 per cent share in the surplus above £600 gross takings' (W. V. Pressel, _Les Chemins de Fer en Turquie d'Asie_ (Zurich, 1900), p. 7). [414] Charles Moravitz, _Die Türkei im Spiegel ihrer Finanzen_ (1903), p. 84. [415] 'Incidentally, in this country everything is difficult and complicated. If the government wishes to create a monopoly in cigarette paper or playing cards, France and Austro-Hungary immediately are on the spot to veto the project in the interest of their trade. If the issue is oil, Russia will raise objections, and even the Powers who are least concerned will make their agreement dependent on some other agreement. Turkey's fate is that of Sancho Panza and his dinner: as soon as the minister of finance wishes to do anything, some diplomat gets up, interrupts him and throws a veto in his teeth' (Moravitz, op. cit., p. 70). _CHAPTER XXXI_ PROTECTIVE TARIFFS AND ACCUMULATION Imperialism is the political expression of the accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment. Still the largest part of the world in terms of geography, this remaining field for the expansion of capital is yet insignificant as against the high level of development already attained by the productive forces of capital; witness the immense masses of capital accumulated in the old countries which seek an outlet for their surplus product and strive to capitalise their surplus value, and the rapid change-over to capitalism of the pre-capitalist civilisations. On the international stage, then, capital must take appropriate measures. With the high development of the capitalist countries and their increasingly severe competition in acquiring non-capitalist areas, imperialism grows in lawlessness and violence, both in aggression against the non-capitalist world and in ever more serious conflicts among the competing capitalist countries. But the more violently, ruthlessly and thoroughly imperialism brings about the decline of non-capitalist civilisations, the more rapidly it cuts the very ground from under the feet of capitalist accumulation. Though imperialism is the historical method for prolonging the career of capitalism, it is also a sure means of bringing it to a swift conclusion. This is not to say that capitalist development must be actually driven to this extreme: the mere tendency towards imperialism of itself takes forms which make the final phase of capitalism a period of catastrophe. Classical economics, in its period of storm and stress, had had high hopes of a peaceful development of the accumulation of capital and of a trade and industry which can only prosper in times of peace, evolving the orthodox Manchester ideology of the harmony of interests among the world's commercial nations on the one hand, and between capital and labour on the other. These hopes were apparently justified in Europe by the short period of Free Trade in the sixties and seventies, which was based upon the mistaken doctrine of the English Free Traders that the only theoretical and practical condition for the accumulation of capital is commodity exchange, that the two are identical. As we have seen, Ricardo and his whole school identified accumulation and its reproductive conditions with simple commodity production and the conditions of simple commodity circulation. This was soon to become even more obvious in the practices of the common Free Trader. The special interests of the exporting Lancashire cotton manufacturers in Manchester determined the entire line of argument of the Cobden League. Their principal object was to get markets, and it became an article of faith: 'Buy from foreign countries and thus in turn sell our industrial product, our cotton goods, on the new markets.' Cobden and Bright demanded Free Trade and cheaper foodstuffs in particular in the interest of consumption; but the consumer was not the worker who eats the bread, but the capitalist who consumes labour power. This teaching never expressed the interests of capitalist accumulation as a whole. In England herself it was given the lie already in the forties, when the harmony of interests of the commercial nations in the East were proclaimed to the sound of gunfire in the Opium Wars which ultimately, by the annexation of Hongkong, brought about the very opposite of such harmony, a system of 'spheres of interest'.[416] On the European Continent, Free Trade in the sixties did not represent the interests of industrial capital, because the foremost Free Trade countries of the Continent were still predominantly agrarian with a comparatively feeble development of industry. Rather, the policy of Free Trade was implemented as a means for the political reconstruction of the Central European states. In Germany, under Bismarck and Manteuffel, it was a peculiarly Prussian lever for ousting Austria from the _Bund_ and the _Zollverein_ and to set up the new German Empire under Prussian leadership. Economically speaking, the mainstays of Free Trade were in this case the interests both of commercial capital, especially in the Hansa towns to whom international trade was vital, and of agrarian consumers; among industry proper, it was otherwise. The iron industry was won over only with difficulty and in exchange for the abolition of the Rhine tolls. But the cotton industry in Southern Germany remained irreconcilable and clung to protective tariffs. In France, 'most favoured nations' clause' agreements, the basis of the Free Trade system all over Europe, were concluded by Napoleon III without the consent, and even against the will, of parliament, industrialists and agrarians, who constituted an absolute majority, being in favour of protective tariffs. The government of the Second Empire only took the course of commercial treaties as an emergency measure--Britain accepted it as such--in order to get round political opposition in France and to establish Free Trade behind the back of the legislature by international action. The first principal treaty between England and France simply rode rough-shod over public opinion in France.[417] Two imperial decrees abolished the old system of French protective tariffs which had been in force from 1853 to 1862. With scant observance of the formalities they were 'ratified' in 1863. In Italy, Free Trade was a prop of Cavour's policy, depending as it did on French support. Under pressure of public opinion, an inquiry was made in 1870 which revealed that those most intimately concerned were hostile to the policy of Free Trade. In Russia, finally, the tendency towards Free Trade in the sixties was but the first step towards creating a broad basis for commodity economy and industry on a large scale, coming at the same time as the abolition of serfdom and the construction of a railway network.[418] Thus the very inception of an international system of Free Trade shows it to be just a passing phase in the history of capitalist accumulation, and it shows up the fallacy of attributing the general reversion to protective tariffs after the seventies simply to a defensive reaction against English Free Trade.[419] Such an explanation is vitiated by the fact that both in Germany and France the leaders in the reversion to protective tariffs were the agrarian interests, that the measures were directed not against British but against American competition, and that not England but Germany constituted the chief danger to the rising home industry in Russia, and France to that in Italy. Nor was Britain's monopoly the cause for the world-wide depression which prevailed since the seventies and induced the desire for protective tariffs. We must look deeper for the reasons responsible for the change of front on the question of protective tariffs. The doctrine of Free Trade with its delusion about the harmony of interests on the world market corresponded with an outlook which conceived of everything in terms of commodity exchange. It was abandoned just as soon as big industrial capital had become sufficiently established in the principal countries of the European Continent to look to the conditions for its accumulation. As against the mutual interests of capitalist countries, these latter bring to the fore the antagonism engendered by the competitive struggle for the non-capitalist environment. When the Free Trade era opened, Eastern Asia was only just being made accessible by the Chinese wars, and European capital had but begun to make headway in Egypt. In the eighties the policy of expansion became ever stronger, together with a policy of protective tariffs. There was an uninterrupted succession of events during the eighties: the British occupation of Egypt, Germany's colonial conquests in Africa, the French occupation of Tunisia together with the Tonkin expedition, Italy's advances in Assab and Massawa, the Abyssinian war and the creation of a separate Eritrea, and the English conquests in South Africa. The clash between Italy and France over the Tunisian sphere of interest was the characteristic prelude to the Franco-Italian tariff war seven years later, by which drastic epilogue an end was made to the Free Trade harmony of interests on the European Continent. To monopolise the non-capitalist areas at home and abroad became the war-cry of capital, while the free-trade policy of the 'open door' specifically represented the peculiar helplessness of non-capitalist countries in the face of international capital and the natural equilibrium which was aimed at by its competition in the preliminary stage of the partial or total occupation of these areas as colonies or spheres of interest. As the oldest capitalist Empire, England alone could so far remain loyal to Free Trade, primarily because she had long had immense possessions of non-capitalist areas as a basis for operations which afforded her almost unlimited opportunities for capitalist accumulation. Until recently, she had thus in fact been beyond the competition of other capitalist countries. These, in turn, universally strove to become self-sufficient behind a barrier of protective tariffs; yet they buy one another's commodities and come to depend ever more one upon another for replenishing their material conditions of reproduction. Indeed, protective tariffs have by now completely lost their use for technical development of the productive forces, all too often being the instrument for the artificial conservation of obsolete productive methods. The inherent contradictions of an international policy of protective tariffs, exactly like the dual character of the international loan system, are just a reflection of the historical antagonism which has developed between the dual interests of accumulation: expansion, the realisation and capitalisation of surplus value on the one hand, and, on the other, an outlook which conceives of everything purely in terms of commodity exchange. This fact is evidenced particularly in that the modern system of high protective tariffs, required by colonial expansion and the increasing inner tension of the capitalist medium, was also instituted with a view to increasing armaments. The reversion to protective tariffs was carried through in Germany as well as in France, Italy, and Russia, together with, and in the interests of, an expansion of the armed services, as the basis for the European competition in armaments which was developing at that time, first on land, and then also at sea. European Free Trade, with its attendant continental system of infantry, had been superseded by protective tariffs as the foundation and supplement of an imperialist system with a strong bias towards naval power. Thus capitalist accumulation as a whole, as an actual historical process, has two different aspects. One concerns the commodity market and the place where surplus value is produced--the factory, the mine, the agricultural estate. Regarded in this light, accumulation is a purely economic process, with its most important phase a transaction between the capitalist and wage labourer. In both its phases, however, it is confined to the exchange of equivalents and remains within the limits of commodity exchange. Here, in form at any rate, peace, property and equality prevail, and the keen dialectics of scientific analysis were required to reveal how the right of ownership changes in the course of accumulation into appropriation of other people's property, how commodity exchange turns into exploitation and equality becomes class-rule. The other aspect of the accumulation of capital concerns the relations between capitalism and the non-capitalist modes of production which start making their appearance on the international stage. Its predominant methods are colonial policy, an international loan system--a policy of spheres of interest--and war. Force, fraud, oppression, looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process. Bourgeois liberal theory takes into account only the former aspect: the realm of 'peaceful competition', the marvels of technology and pure commodity exchange; it separates it strictly from the other aspect: the realm of capital's blustering violence which is regarded as more or less incidental to foreign policy and quite independent of the economic sphere of capital. In reality, political power is nothing but a vehicle for the economic process. The conditions for the reproduction of capital provide the organic link between these two aspects of the accumulation of capital. The historical career of capitalism can only be appreciated by taking them together. 'Sweating blood and filth with every pore from head to toe' characterises not only the birth of capital but also its progress in the world at every step, and thus capitalism prepares its own downfall under ever more violent contortions and convulsions. FOOTNOTES: [416] And not only in England. 'Even in 1859, a pamphlet, ascribed to Diergardt of Viersen, a factory owner, was disseminated all over Germany, urging that country to make sure of the East-Asiatic markets in good time. It advocated the display of military force as the only means for getting commercial advantages from the Japanese and the Eastern Asiatic nations in general. A German fleet, built with the people's small savings, had been a youthful dream, long since brought under the hammer by Hannibal Fischer. Though Prussia had a few ships, her naval power was not impressive. But in order to enter into commercial negotiations with Eastern Asia, it was decided to equip a ship. Graf zu Eulenburg, one of the ablest and most prudent Prussian statesmen, was appointed chief of this mission which also had scientific objects. Under most difficult conditions he carried out his commission with great skill, and though the plan for simultaneous negotiations with the Hawaiian islands had to be given up, the mission was otherwise successful. Though the Berlin press of that time knew better, declaring whenever a new difficulty was reported, that it was only to be expected, and denouncing all expenditure on naval demonstrations as a waste of the taxpayers' money, the ministry of the new era remained steadfast, and the harvest of success was reaped by the ministry that followed' (W. Lotz, _Die Ideen der deutschen Handelspolitik_, p. 80). [417] Following on the preliminary discussion between Michel Chevalier and Richard Cobden on behalf of the French and English governments, 'official negotiations were shortly entered upon and were conducted with the greatest secrecy. On January 1, 1860, Napoleon III announced his intentions in a memorandum addressed to M. Fould, the Minister of State. This declaration came like a bolt from the blue. After the events of the past year, the general belief was that no attempt would be made to modify the tariff system before 1861. Feelings ran high, but all the same the treaty was signed on January 23' (Auguste Devers, _La politique commerciale de la France depuis 1860. Schriften des Vereins für Sozialpolitik_, vol. 51, p. 136). [418] Between 1857 and 1868, the revision along liberal lines of the Russian tariffs and the ultimate writing-off of the insane system of _kantrin_ with regard to protective tariffs were a manifestation and corollary of the progressive reforms which the disastrous Crimean wars had made inevitable. But the reduction of customs duties reflected the concern of the landowning gentry who, both as consumers of foreign goods and as producers of grain for export, were interested in unrestricted commerce between Russia and Western Europe. The champion of agrarian interests, the 'Free Economic Association' stated: 'During the last sixty years, between 1822 and 1882, agriculture, Russia's largest producer, was brought to a precarious position owing to four great setbacks. These could in every case be directly attributed to excessive tariffs. On the other hand, the thirty-two years between 1845 and 1877 when tariffs were moderate went by without any such emergency, in spite of three foreign wars and one civil war [meaning the Polish insurrection of 1863--_R. L._], every one of which proved a greater or less strain on the financial resources of the state' (_Memorandum of the Imperial Free Economic Association on Revising Russian Tariffs_ (St. Petersburg, 1890), p. 148). As late as the nineties, then, the scientific spokesman of the Free Trade Movement, the said 'Free Economic Association', had to agitate against protective tariffs as a 'contrivance to transplant' capitalist industry to Russia. In a reactionary 'populist' spirit, it denounced capitalism as a breeding ground for the modern proletariat, 'those masses of shiftless people without home or property who have nothing to lose and have long been in ill repute' (p. 191). This is proof enough that until most recent times the Russian champions of Free Trade, or at least of moderate tariffs, did not to any appreciable extent represent the interests of industrial capital. Cf. also K. Lodyshenski: _The History of the Russian Tariffs_ (St. Petersburg, 1886), pp. 239-58. [419] This is also the opinion of F. Engels. In one of his letters to Nikolayon, on June 18, 1892, he writes: 'English authors, blinded by their patriotic interests, completely fail to grasp why the whole world so stubbornly rejects England's example of free trade and adopts in its place the principle of protective tariffs. Of course, they simply dare not admit even to themselves that the system of protective tariffs, by now almost universal, is merely a defensive measure against English free trade which was instrumental in perfecting England's industrial monopoly. Such a defence policy may be more or less reasonable--in some cases it is downright stupid, as for instance in Germany who under the system of free trade had become a great industrial power and now imposes protective tariffs on agricultural products and raw materials, thus increasing the cost of her industrial production. In my view this universal reversion to protective tariffs is not a mere accident but the reaction against England's intolerable industrial monopoly. The form which this reaction takes, as I said before, may be wrong, inadequate and even worse, but its historical necessity seems to me quite clear and obvious' (_Letters_ of Karl Marx and Frederick Engels to Nikolayon (St. Petersburg, 1908), p. 71). _CHAPTER XXXII_ MILITARISM AS A PROVINCE OF ACCUMULATION Militarism fulfils a quite definite function in the history of capital, accompanying as it does every historical phase of accumulation. It plays a decisive part in the first stages of European capitalism, in the period of the so-called 'primitive accumulation', as a means of conquering the New World and the spice-producing countries of India. Later, it is employed to subject the modern colonies, to destroy the social organisations of primitive societies so that their means of production may be appropriated, forcibly to introduce commodity trade in countries where the social structure had been unfavourable to it, and to turn the natives into a proletariat by compelling them to work for wages in the colonies. It is responsible for the creation and expansion of spheres of interest for European capital in non-European regions, for extorting railway concessions in backward countries, and for enforcing the claims of European capital as international lender. Finally, militarism is a weapon in the competitive struggle between capitalist countries for areas of non-capitalist civilisation. In addition, militarism has yet another important function. From the purely economic point of view, it is a pre-eminent means for the realisation of surplus value; it is in itself a province of accumulation. In examining the question who should count as a buyer for the mass of products containing the capitalised surplus value, we have again and again refused to consider the state and its organs as consumers. Since their income is derivative, they were all taken to belong to the special category of those who live on the surplus value (or partly on the wage of labour), together with the liberal professions and the various parasites of present-day society ('king, professor, prostitute, mercenary'). But this interpretation will only do on two assumptions: first, if we take it, in accordance with Marx's diagram, that the state has no other sources of taxation than capitalist surplus value and wages,[420] and secondly, if we regard the state and its organs as consumers pure and simple. If the issue turns on the personal consumption of the state organs (as also of the 'mercenary') the point is that consumption is partly transferred from the working class to the hangers-on of the capitalist class, in so far as the workers foot the bill. Let us assume for a moment that the indirect taxes extorted from the workers, which mean a curtailment of their consumption, are used entirely to pay the salaries of the state officials and to provision the regular army. There will then be no change in the reproduction of social capital as a whole. Both Departments II and I remain constant because society as a whole still demands the same kind of products and in the same quantities. Only _v_ as the commodity of 'labour power' has changed in value in relation to the products of Department II, i.e. in relation to the means of subsistence. This _v_, the same amount of money representing labour power, is now exchanged for a smaller amount of means of subsistence. What happens to the products of Department II which are then left over? Instead of the workers, the state officials and the regular army now receive them. The organs of the capitalist state take over the workers' consumption on the same scale exactly. Although the conditions of reproduction have remained stable, there has been a redistribution of the total product. Part of the products of Department II, originally intended entirely for the consumption of the workers as equivalent for _v_, is now allocated to the hangers-on of the capitalist class for consumption. From the point of view of social reproduction, it is as if the relative surplus value had in the first place been larger by a certain amount which is added on to the consumption of the capitalist class and its hangers-on. So far the crude exploitation, by the mechanism of indirect taxation, of the working class for the support of the capitalist state's officials amounts merely to an increase of the surplus value, of that part of it, that is to say, which is consumed. The difference is that this further splitting off of surplus value from variable capital only comes later, after the exchange between capital and labour has been accomplished. But the consumption by the organs of the capitalist state has no bearing on the realisation of _capitalised_ surplus value, because the additional surplus value for this consumption--even though it comes about at the workers' expense--is created afterwards. On the other hand, if the workers did not pay for the greater part of the state officials' upkeep, the capitalists themselves would have to bear the entire cost of it. A corresponding portion of their surplus value would have to be assigned directly to keeping the organs of their class-rule, either at the expense of production which would have to be curtailed accordingly, or, which is more probable, it would come from the surplus value intended for their consumption. The capitalists would have to capitalise on a smaller scale because of having to contribute more towards the immediate preservation of their own class. In so far as they shift onto the working class (and also the representatives of simple commodity production, such as peasants and artisans) the principal charge of their hangers-on, the capitalists have a larger portion of surplus value available for capitalisation. But as yet _no opportunities for such capitalisation_ have come into being, no new market, that is to say, for the surplus value that has become available, in which it could produce and realise new commodities. But when the monies concentrated in the exchequer by taxation are used for the production of armaments, the picture is changed. With indirect taxation and high protective tariffs, the bill of militarism is footed mainly by the working class and the peasants. The two kinds of taxation must be considered separately. From an economic point of view, it amounts to the following, as far as the working class is concerned: provided that wages are not raised to make up for the higher price of foodstuffs--which is at present the fate of the greatest part of the working class, including even the minority that is organised in trade unions, owing to the pressure of cartels and employers' organisations[421]--indirect taxation means that part of the purchasing power of the working class is transferred to the state. Now as before the variable capital, as a fixed amount of money, will put in motion an appropriate quantity of living labour, that is to say it serves to employ the appropriate quantity of constant capital in production and to produce the corresponding amount of surplus value. As soon as capital has completed this cycle, it is divided between the working class and the state: the workers surrender the state part of the money they received as wages. Capital has wholly appropriated the former variable capital in its material form, as labour power, but the working class retains only part of the variable capital in the form of money, the state claiming the rest. And this invariably happens after capital has run its cycle between capitalist and worker; it takes place, as it were, behind the back of capital, at no point impinging direct on the vital stages of the circulation of capital and the production of surplus value, so that it is no immediate concern of the latter. But all the same it does affect the conditions for the reproduction of capital as a whole. The transfer of some of the purchasing power from the working class to the state entails a proportionate decrease in the consumption of means of subsistence by the working class. For capital as a whole, it means producing a smaller quantity of consumer goods for the working class, provided that both variable capital (in the form of money and as labour power) and the mass of appropriated surplus value remain constant, so that the workers get a smaller share of the aggregate product. In the process of reproduction of the entire capital, then, means of subsistence will be produced in amounts smaller than the value of the variable capital, because of the shift in the ratio between the value of the variable capital and the quantity of means of subsistence in which it is realised, with the money wages of labour remaining constant, according to our premise, or at any rate not rising sufficiently to offset the increase in the price of foodstuffs. This increase represents the level of indirect taxation. How will the material relations of reproduction be adjusted? When fewer means of subsistence are needed for the renewal of labour power, a corresponding amount of constant capital and living labour becomes available which can now be used for producing other commodities in response to a new effective demand arising within society. It arises from the side of the state which has appropriated, by way of tax legislation, the part wanting of the workers' purchasing power. This time, however, the state does not demand means of subsistence (after all that has already been said under the heading of 'third persons', we shall here ignore the demand for means of subsistence for state officials which is also satisfied out of taxes) but it requires a special kind of product, namely the militarist weapons of war on land and at sea. Again we take Marx's second diagram of accumulation as the basis for investigating the ensuing changes in social reproduction: I. _5,000c + 1,000v + 1,000s = 7,000_ means of production II. _1,430c + 285v + 285s = 2,000_ means of subsistence Now let us suppose that, owing to indirect taxation and the consequent increase in the price of means of subsistence, the working class as a whole reduces consumption by, say, a 100 value units of the real wages. As before, the workers receive _1,000v + 285v = 1,285v_ in money, but for this money they only get means of subsistence to the value of 1185. The 100 units which represent the tax increase in the price of foodstuffs go to the state which receives in addition military taxes from the peasants, etc., to the value of 150 units, bringing the total up to 250. This total constitutes a new demand--the demand for armaments. At present, however, we are only interested in the 100 units taken from the workers' wages. This demand for armaments to the value of 100 must be satisfied by the creation of an appropriate branch of production which requires a constant capital of 71·5 and a variable capital of 14·25, assuming the average organic composition outlined in Marx's diagram. _71·5c + 14·25v + 14·25s = 100_ weapons of war This new branch of production further requires that 71·5 means of production be produced and about 13 means of subsistence, because, of course, the real wages of the workers are also less by about one-thirteenth. You could counter by saying that the profit accruing to capital from this new expansion of demand is merely on paper, because the cut in the actual consumption of the working class will inevitably result in a corresponding curtailment of the means of subsistence produced. It will take the following form for Department II: _71·5c + 14·25v + 14·25s = 100_ In addition, Department I will also have to contract accordingly, so that, owing to the decreasing consumption of the working class, the equations for both departments will be: I. _4,949c + 989·75v + 989·75s = 6,928·5_ II. _1,358·5c + 270·75v + 270·75s = 1,900_ If, by the mediation of the state, the same 100 units now call forth armament production of an equal volume with a corresponding fillip to the production of producer goods, this is at first sight only an extraneous change in the material forms of social production: instead of a quantity of means of subsistence a quantity of armaments is now being produced. Capital has won with the left hand only what it has lost with the right. Or we might say that the large number of capitalists producing means of subsistence have lost the effective demand in favour of a small group of big armament manufacturers. But this picture is only valid for individual capital. Here it makes no difference indeed whether production engages in one sphere of activity or another. As far as the individual capitalist is concerned, there are no departments of total production such as the diagram distinguishes. There are only commodities and buyers, and it is completely immaterial to him whether he produces instruments of life or instruments of death, corned beef or armour plating. Opponents of militarism frequently appeal to this point of view to show that military supplies as an economic investment for capital merely put profit taken from one capitalist into the pocket of another.[422] On the other hand, capital and its advocates try to overpersuade the working class to this point of view by talking them into the belief that indirect taxes and the demand of the state would only bring about a change in the material form of reproduction; instead of other commodities cruisers and guns would be produced which would give the workers as good a living, if not a better one. One glance at the diagram shows how little truth there is in this argument as far as the workers are concerned. To make comparison easier, we will suppose the armament factories to employ just as many workers as were employed before in the production of means of subsistence for the working class. 1,285 units will then be paid out as wages, but now they will only buy 1,185's worth of means of subsistence. All this looks different from the perspective of capital as a whole. For this the 100 at the disposal of the state, which represent the demand for armaments, constitute a new market. Originally this money was variable capital and as such it has done its job, it has been exchanged for living labour which produced the surplus value. But then the circulation of the variable capital was stopped short, this money was split off, and it now appears as a new purchasing power in the possession of the state. It has been created by sleight of hand, as it were, but still it has the same effects as a newly opened market. Of course for the time being capital is debarred from selling 100 units of consumer goods for the working class, and the individual capitalist considers the worker just as good a consumer and buyer of commodities as anyone else, another capitalist, the state, the peasant, foreign countries, etc. But let us not forget that for capital as a whole the upkeep of the working class is only a necessary evil, only a means towards the real end of production: the creation and realisation of surplus value. If it were possible to extort surplus value without giving labour an equal measure of means of subsistence, it would be all the better for business. To begin with indirect taxation has the same effects as if--the price of foodstuffs remaining constant--the capitalists had succeeded in depressing wages by a hundred units without detracting from the work performed, seeing that a lower output of consumer goods is equally the inevitable result of continuous wage cuts. If wages are cut heavily, capital does not worry about having to produce fewer means of subsistence for the workers, in fact it delights in this practice at every opportunity; similarly, capital as a whole does not mind if the effective demand of the working class for means of subsistence is curtailed because of indirect taxation which is not compensated by a rise in wages. This may seem strange because in the latter case the balance of the variable capital goes to the exchequer, while with a direct wage cut it remains in the capitalists' pockets and--commodity prices remaining equal--increases the relative surplus value. But a continuous and universal reduction of money wages can only be carried through on rare occasions, especially if trade union organisation is highly developed. There are strong social and political barriers to this fond aspiration of capital. Depression of the real wage by means of indirect taxation, on the other hand, can be carried through promptly, smoothly and universally, and it usually takes time for protests to be heard; and besides, the opposition is confined to the political field and has no immediate economic repercussions. The subsequent restriction in the production of means of subsistence does not represent a loss of markets for capital as a whole but rather a saving in the costs of producing surplus value. Surplus value is never realised by producing means of subsistence for the workers--however necessary this may be, as the reproduction of living labour, for the production of surplus value. But to come back to our example: I. _5,000c + 1,000v + 1,000s = 7,000_ means of production II. _1,430c + 285v + 285s = 2,000_ means of subsistence At first it looks as if Department II were also creating and realising surplus value in the process of producing means of subsistence for the workers, and Department I by producing the requisite means of production. But if we take the social product as a whole, the illusion disappears. The equation is in that case: _6,430c + 1,285v + 1,285s = 9,000_ Now, if the means of subsistence for the workers are cut by 100 units, the corresponding contraction of both departments will give us the following equations: I. _4,949c + 989·75v + 989·75s = 6,928·5_ II. _1,358·5c + 270·75v + 270·75s = 1,900_ and for the social product as a whole: _6,307·5c + 1,260·5v + 1,260·5s = 8,828·5_ This looks like a general decrease in both the total volume of production and in the production of surplus value--but only if we contemplate just the abstract quantities of value in the composition of the total product; it does not hold good for the material composition thereof. Looking closer, we find that nothing but the upkeep of labour is in effect decreased. Fewer means of subsistence and production are now being made, no doubt, but then, they had had no other function save to maintain workers. The social product is smaller and less capital is now employed--but then, the object of capitalist production is not simply to employ as much capital as possible, but to produce as much surplus value as possible. Capital has only decreased because a smaller amount is sufficient for maintaining the workers. If the total cost of maintaining the workers employed in the society came to 1,285 units in the first instance, the present decrease of the social product by 171·5--the difference of (9,000-8,828·5)--comes off this maintenance charge, and there is a consequent change in the composition of the social product: _6,430c + 1,113·5v + 1,285s = 8,828·5_ Constant capital and surplus value remain unchanged, and only the variable capital, paid labour, has diminished. Or--in case there are doubts about constant capital being unaffected--we may further allow for the event that, as would happen in actual practice, concomitant with the decrease in means of subsistence for the workers there will be a corresponding cut in the constant capital. The equation for the social product as a whole would then be: _6,307·5c + 1,236v + 1,285s = 8,828·5_ In spite of the smaller social product, there is no change in the surplus value in either case, and it is only the cost of maintaining the workers that has fallen. Put it this way: the value of the aggregate social product may be defined as consisting of three parts, the total constant capital of the society, its total variable capital, and its total surplus value, of which the first set of products contains no additional labour, and the second and third no means of production. As regards their material form, all these products come into being in the given period of production--though in point of value the constant capital had been produced in a previous period and is merely being transferred to new products. On this basis, we can also divide all the workers employed into three mutually exclusive categories: those who produce the aggregate constant capital of the society, those who provide the upkeep for all the workers, and finally those who create the entire surplus value for the capitalist class. If, then, the workers' consumption is curtailed, only workers in the second category will lose their jobs. _Ex hypothesi_, these workers had never created surplus value for capital, and in consequence their dismissal is therefore no loss from the capitalist's point of view but a gain, since it decreases the cost of producing surplus value. The demand of the state which arises at the same time has the lure of a new and attractive sphere for realising the surplus value. Some of the money circulating as variable capital breaks free of this cycle and in the state treasury it represents a new demand. For the technique of taxation, of course, the order of events is rather different, since the amount of the indirect taxes is actually advanced to the state by capital and is merely being refunded to the capitalists by the sale of their commodities, as part of their price. But economically speaking, it makes no difference. The crucial point is that the quantity of money with the function of variable capital should first mediate the exchange between capital and labour power. Later, when there is an exchange between workers and capitalists as buyers and sellers of commodities respectively, this money will change hands and accrue to the state as taxes. This money, which capital has set circulating, first fulfils its primary function in the exchange with labour power, but subsequently, by mediation of the state, it begins an entirely new career. As a new purchasing power, belonging with neither labour nor capital, it becomes interested in new products, in a special branch of production which does not cater for either the capitalists or the working class, and thus it offers capital new opportunities for creating and realising surplus value. When we were formerly taking it for granted that the indirect taxes extorted from the workers are used for paying the officials and for provisioning the army, we found the 'saving' in the consumption of the working class to mean that the workers rather than the capitalists were made to pay for the personal consumption of the hangers-on of the capitalist class and the tools of their class-rule. This charge devolved from the surplus value to the variable capital, and a corresponding amount of the surplus value became available for purposes of capitalisation. Now we see how the taxes extorted from the workers afford capital a new opportunity for accumulation when they are used for armament manufacture. On the basis of indirect taxation, militarism in practice works both ways. By lowering the normal standard of living for the working class, it ensures both that capital should be able to maintain a regular army, the organ of capitalist rule, and that it may tap an impressive field for further accumulation.[423] We have still to examine the second source of the state's purchasing power referred to in our example, the 150 units out of the total 250 invested in armaments. They differ essentially from the hundred units considered above in that they are not supplied by the workers but by the petty bourgeoisie, i.e. the artisans and peasants. (In this connection, we can ignore the comparatively small tax-contribution of the capitalist class itself.) The money accruing to the state as taxes from the peasant masses--as our generic term for all non-proletarian consumers--was not originally advanced by capital and has not split off from capital in circulation. In the hand of the peasant it is the equivalent of goods that have been realised, the exchange value of simple commodity production. The state now gets part of the purchasing power of the non-capitalist consumers, purchasing power, that is to say, which is already free to realise the surplus value for capitalist accumulation. Now the question arises, whether economic changes will result for capital, and if so, of what nature, from diverting the purchasing power of such strata to the state for militarist purposes. It almost looks as if we had come up against yet another shift in the material form of reproduction. Capital will now produce an equivalent of war materials for the state instead of producing large quantities of means of production and subsistence for peasant consumers. But in fact the changes go deeper. First and foremost, the state can use the mechanism of taxation to mobilise much larger amounts of purchasing power from the non-capitalist consumers than they would ordinarily spend on their own consumption. Indeed the modern system of taxation itself is largely responsible for forcing commodity economy on the peasants. Under pressure of taxes, the peasant must turn more and more of his produce into commodities, and at the same time he must buy more and more. Taxation presses the produce of peasant economy into circulation and compels the peasants to become buyers of capitalist products. Finally, on a basis of commodity production in the peasant style, the system of taxation lures more purchasing power from peasant economy than would otherwise become active. What would normally have been hoarded by the peasants and the lower middle classes until it has grown big enough to invest in savings banks and other banks is now set free to constitute an effective demand and an opportunity for investment. Further the multitude of individual and insignificant demands for a whole range of commodities, which will become effective at different times and which might often be met just as well by simple commodity production, is now replaced by a comprehensive and homogeneous demand of the state. And the satisfaction of this demand presupposes a big industry of the highest order. It requires the most favourable conditions for the production of surplus value and for accumulation. In the form of government contracts for army supplies the scattered purchasing power of the consumers is concentrated in large quantities and, free of the vagaries and subjective fluctuations of personal consumption, it achieves an almost automatic regularity and rhythmic growth. Capital itself ultimately controls this automatic and rhythmic movement of militarist production through the legislature and a press whose function is to mould so-called 'public opinion'. That is why this particular province of capitalist accumulation at first seems capable of infinite expansion. All other attempts to expand markets and set up operational bases for capital largely depend on historical, social and political factors beyond the control of capital, whereas production for militarism represents a province whose regular and progressive expansion seems primarily determined by capital itself. In this way capital turns historical necessity into a virtue: the ever fiercer competition in the capitalist world itself provides a field for accumulation of the first magnitude. Capital increasingly employs militarism for implementing a foreign and colonial policy to get hold of the means of production and labour power of non-capitalist countries and societies. This same militarism works in a like manner in the capitalist countries to divert purchasing power away from the non-capitalist strata. The representatives of simple commodity production and the working class are affected alike in this way. At their expense, the accumulation of capital is raised to the highest power, by robbing the one of their productive forces and by depressing the other's standard of living. Needless to say, after a certain stage the conditions for the accumulation of capital both at home and abroad turn into their very opposite--they become conditions for the decline of capitalism. The more ruthlessly capital sets about the destruction of non-capitalist strata at home and in the outside world, the more it lowers the standard of living for the workers as a whole, the greater also is the change in the day-to-day history of capital. It becomes a string of political and social disasters and convulsions, and under these conditions, punctuated by periodical economic catastrophes or crises, accumulation can go on no longer. But even before this natural economic impasse of capital's own creating is properly reached it becomes a necessity for the international working class to revolt against the rule of capital. Capitalism is the first mode of economy with the weapon of propaganda, a mode which tends to engulf the entire globe and to stamp out all other economies, tolerating no rival at its side. Yet at the same time it is also the first mode of economy which is unable to exist by itself, which needs other economic systems as a medium and soil. Although it strives to become universal, and, indeed, on account of this its tendency, it must break down--because it is immanently incapable of becoming a universal form of production. In its living history it is a contradiction in itself, and its movement of accumulation provides a solution to the conflict and aggravates it at the same time. At a certain stage of development there will be no other way out than the application of socialist principles. The aim of socialism is not accumulation but the satisfaction of toiling humanity's wants by developing the productive forces of the entire globe. And so we find that socialism is by its very nature an harmonious and universal system of economy. FOOTNOTES: [420] Dr. Renner indeed makes this assumption the basis of his treatise on taxation. 'Every particle of value created in the course of one year is made up of these four parts: profit, interest, rent, and wages; and annual taxation, then, can only be levied upon these' (_Das arbeitende Volk und die Steuern_, Vienna, 1909). Though Renner immediately goes on to mention peasants, he cursorily dismisses them in a single sentence: 'A peasant e.g. is simultaneously entrepreneur, worker, and landowner, his agricultural proceeds yield him wage, profit, and rent, _all in one_.' Obviously, it is an empty abstraction to apply simultaneously all the categories of capitalist production to the peasantry, to conceive of the peasant as entrepreneur, wage labourer and landlord all in one person. If, like Renner, we want to put the peasant into a single category, his peculiarity for economics lies in the very fact that he belongs neither to the class of capitalist entrepreneurs nor to that of the wage proletariat, that he is not a representative of capitalism at all but of simple commodity production. [421] It would go beyond the scope of the present treatise to deal with cartels and trusts as specific phenomena of the imperialist phase. They are due to the internal competitive struggle between individual capitalist groups for a monopoly of the existing spheres for accumulation and for the distribution of profits. [422] In a reply to Vorontsov, Professor Manuilov, for example, wrote what was then greatly praised by the Russian Marxists: 'In this context, we must distinguish strictly between a group of entrepreneurs producing weapons of war and the capitalist class as a whole. For the manufacturers of guns, rifles and other war materials, the existence of militarism is no doubt profitable and indispensable. It is indeed quite possible that the abolition of the system of armed peace would spell ruin for Krupp. The point at issue, however, is not a special group of entrepreneurs but the capitalists as a class, capitalist production as a whole.' In this connection, however, it should be noted that 'if the burden of taxation falls chiefly on the working population, every increase of this burden diminishes the purchasing power of the population and hence the demand for commodities'. This fact is taken as proof that militarism, under the aspect of armament production, does indeed 'enrich one group of capitalists, but at the same time it injures all others, spelling gain on the one hand but loss on the other' (_Vesnik Prava_, Journal of the Law Society (St. Petersburg, 1890), no. 1, 'Militarism and Capitalism'). [423] Ultimately, the deterioration of the normal conditions under which labour power is renewed will bring about a deterioration of labour itself, it will diminish the average efficiency and productivity of labour, and thus jeopardise the conditions for the production of surplus value. But capital will not feel these results for a long time, and so they do not immediately enter into its economic calculations, except in so far as they bring about more drastic defensive measures of the wage labourers in general. INDEX Abstinence, 43, 102, 108, 118, 150, 235, 240, 280, 334 Accumulation, its impossibility respective unrestricted possibility _23_, 188f., 198ff., 216, 237, 268, 303, 311, 325 -- primitive, 161, 272, 364, 369f., 454 Africa, 352, 363f., 382, 386; South, 411ff., 420, 451 Algeria, under French rule, 371, 377ff.; under Turkish rule, 378 Allard, General, 381 America, 290, 352, 420, 422, 428; United States of, 173, 293ff., 297, 307f., 357f., 362f., 379, 396, 398, 402, 404f., 409ff., 424ff., 432; States of South, 420, 422ff. American Civil War (War of Secession), 357f., 363, 396, 398f., 402, 424f., 430 Anton, G., 385 Arabs, 377, 380, 382ff. Asia, 247, 290, 420ff., 443ff., 450 Australia, 420, 426f. Baring, E., Earl of Cromer, 434 Barter, 213, 215f., 222, 229 Bastiat-Schultze, F., 238, 268 Bentham, J., 372 Bergmann, 211 Bismarck, 448 Blackhouse, E. T., 392, 394 Blanc, L., 227 Bland, L. O., 392, 394 Blanqui, 227 Boer Republics, 411, 414ff. -- War, 415 Bouding, 319f. Brandt, M. V., 392 Bright, 447 Brissot, 265 Bruce, General, 391 Bryce, J., 363, 412 Buecher, Prof., 307f. Bulgakov, 275, 298-310, 311, 313, 315, 317, 320, 324ff. Cabet, 227 Cameron, 439 Canada, 408f. Capital and income (Marx), 108; (Rodbertus), 262ff.; (Say), 56; (Sismondi), 179ff., 215, 423; (Adam Smith), 53f., 58ff., 74ff., 83 -- circulating, 37, 57ff., 64, 74ff., 83, 85f., 156f., 166, 183ff., 259, 354 -- constant, _13_f., _18_f., _22_f., 38, 44, 51, 53, 64, 72f., 83, 85f., 88, 94f., 97, 100ff., 109ff., 123ff., 137, 141, 143, 147, 149, 153, 156ff., 187ff., 200, 208, 236, 256, 258, 298f., 302, 304f., 336f., 339, 344, 354ff., 359, 361, 365f., 458, 463 -- -- definition of, 37, 72, 76f. -- fixed, _19_, 50, 53, 57ff., 74ff., 83, 85ff., 111, 140, 147, 158, 166, 184ff., 259, 341, 354 -- national (_per se_), 54, 263 -- productive, 43f., 97, 140, 148f., 157, 163, 420 -- total social, 31, 49f., 53f., 59, 65, 79, 83, 86, 88, 96f., 101, 103, 107f., 110, 118, 147, 156, 169, 180, 341, 349f. -- variable, _14_, _18_f., _22_, 38, 44, 74f., 85, 94ff., 99, 101, 105, 109ff., 114ff., 123, 125ff., 134, 137, 151ff., 156, 159, 161, 182f., 185ff., 207, 209, 234, 253, 256, 258, 302, 306, 334, 336, 344, 346, 350, 354f., 357, 359ff., 365f., 428, 457f., 460, 463f.; definition, 37, 77; in relation to surplus value, 252, 258, 337; in relation to constant capital, 111, 303, 317, 321, 337, 339f. Cavour, 449 Chartist movement, 227, 267 Chernishevski, 273 Chesney, Colonel, 439 Chevalier, M., 448 China, 41, 247, 289, 353, 373, 386ff., 419, 428; Dowager Empress of, 392ff. Class antagonism, 181 -- rule, 78, 452, 456, 464 -- society, 41 Cobden, R., 447f. Colonial policy, 185, 247, 363f., 369ff., 419, 425, 451f., 454, 466 -- -- English in India, 88, 247, 371, 374f., 383 -- -- French in North Africa, 371, 380, 382 Commodity economy, _see_ Economy -- Exchange, 81f., 85, 93f., 97ff., 118, 129f., 193f., 233, 270, 386, 428, 438, 443, 452, 454 -- surplus, 195ff., 276-83 Communism, 263, 369, 378, 384 Compensation, theory of, 203 Competition, _21_, _23_, 40, 46, 48, 191, 202, 205, 207, 209, 230, 242, 259, 283, 297, 332, 342, 344, 368, 416, 419, 446, 450, 457, 466; 'peaceful --', 386, 452 Contradictions latent in capitalism, 202, 218, 227f., 239, 271, 286ff. Corn Laws, 231 _Corvée_, 33, 39, 42, 84, 369, 395 Crises, _14_, 35f., 41, 46, 103f., 173, 176f., 191, 194, 199, 201ff., 211, 213, 216, 218, 222, 227f., 232, 235ff., 244ff., 261, 268, 272, 274, 281f., 286, 298, 305, 312ff., 318f., 323f., 332, 342, 346f., 419, 422, 424, 426, 428, 467 Crusoe, Robinson, 179, 182, 185, 261ff. Dalrymple, Oliver, 403f., 409 Declining wage rate, _20_f., 229, 241, 244, 250f., 253, 258f. Delamarre, Abbé, 393 Demand and supply (production), 36, 46, 133, 192f., 195, 200, 206, 212, 220ff., 230f., 242, 248, 324 -- effective, _20_, 34, 39, 131, 134, 155, 164f., 193f., 286, 329, 458, 461, 465f. Devers, A., 448 Dialectical approach, 69, 205, 209, 265, 366 Diehl, Prof., 228f., 256, 266f. Division of Labour, 79, 104, 128f., 148, 193, 233, 278, 297, 307f., 319, 321f. Duehring, 194 East India Company, 375f., 386f., 411 Economics, bourgeois, 31, 49, 51, 68f., 106, 108, 112, 137, 170, 173f., 177, 179, 181, 189f., 209, 215, 218, 244, 268, 271, 279f., 295, 310, 325f.; classical, 35, 57, 65, 67ff., 105, 108f., 179, 188f., 200, 203, 208, 210, 216, 227ff., 237, 238-252, 254, 256, 258, 266, 279, 325, 383, 446; vulgar, 35f., 81, 108, 177, 211f., 320 Economy, commodity, 368ff., 386-394, 402, 417, 419f., 427f., 449, 465 -- natural, 42, 255, 293, 368-385, 386, 402, 415, 417, 419, 427, 443 -- peasant, handicrafts and domestic industries, 41, 289, 296, 358, 369, 374, 395-418, 435, 438, 444f., 465 -- rural, 272 Egypt, 41, 201f., 353, 358, 425, 429ff., 450f. Elgin, Lord, 391f. Engels, Friedrich, 95, 102, 154, 166, 168, 194, 228, 241, 250, 275, 288ff., 294, 449f. England, 173ff., 191, 218f., 227ff., 241, 245, 277, 286, 293, 297, 307f., 313, 316, 318, 352, 357, 366f., 391, 393, 410, 412, 420ff., 447ff. English cotton industry, 297, 342, 352, 357f., 362, 422 Exploitation, _17_, _21_ff., 46, 73f., 108, 116, 181ff., 196, 220, 228, 241, 247, 255, 334, 343f., 358ff., 364, 374, 386, 428, 445, 451, 456 Eyth, Engineer, 431, 437 Family Associations, 374, 377, 380f. Feudal system, 210, 293, 365, 368f., 381f. Foreign trade, 136, 205f., 236, 246, 282, 297, 306, 309, 313, 350; _see also_ market Fowler's Works, 431 France, 174, 177, 191, 214, 218, 227, 291, 296, 379, 391, 393, 420f., 431f., 445, 448ff. Franke, O., 373, 393 Free Trade, 205, 238, 242, 447ff. General public (_grand public_), 135, 295, 298 Germany, 173, 271, 296f., 308, 366f., 420ff., 427, 442, 448ff. Gold, production of, 99ff., 141, 154, 301f. Great Britain, _see_ England Gros, 392 Hangers-on of the capitalist class, cf. also Third persons, _14_, 81f., 112, 134f., 222f., 295, 332f., 350, 420, 454ff., 464 Hanotaux, A., 378 Hansen, _26_ Harmony, doctrine of, 173, 177, 200, 203f., 211ff., 228f., 238, 271, 305, 325f., 446f. Harrod, _19_ Hermann, 243 Herodotus, 88f., 372 Hertzen, 273 Hicks, _28_ Hobson, _21_, 314 Ilyin, V., 189, 275, 287, 303, 309, 317, 320 Imperialism, _28_, 320, 368, 416ff., 421, 445f., 452 India, 41f., 72, 88, 247, 286, 308, 352f., 365, 371ff., 380, 387, 425, 428, 454 Indian famine, 376, 382 -- mutiny, 247, 374 Industrial reserve army, _15_, 108, 111, 361 Intelligentsia, 273ff. Ismail Pasha, 33, 431ff., 438 Issayev, Prof., 275 Italy, 173, 449ff. Japan, 247, 353 Kablukov, Prof., 275 Kaffir, 411ff. -- Wars, 411, 413 Kalecki, _23_ Kant, I., 326 Kareyev, 274 Kautsky, K., 228, 267, 318ff. Keynes, Lord, _20_f., _26_ Kirchmann, v., 227-37, 238, 244, 248, 250, 252f., 260f., 266, 268, 309f., 351, 366 Kovalevski, M., 373, 375f., 384 Labour, abstract and concrete, 67ff., 72, 105 -- intellectual and material, 77 -- paid and unpaid, 37ff., 55, 62, 65ff., 71, 73, 75, 98, 322f., 343 -- past and present, 66f., 70, 75, 80, 88f. -- problem, 363f. Labour, progressive productivity of, its capitalist and general social expression, 258, 321f., 335f., 349, 357 Lafargue, 399, 404 _Laissez-faire_, 173, 238, 274 Lassalle, F., 228 Lavrov, P., 274 Lenin, Vladimir Ilyich, _see_ Ilyin Letournaux, A., 378 Lexis, 266 Leyden, V. v., 377 List, F., 307 Livingstone, Dr., 411 Loans, international, 387, 419-45, 451f. Lodyshenski, K., 449 Lotz, W., 448 Lucas, C. P., 414 Luxury goods, 81, 102, 163, 197ff., 208, 235ff., 260, 277 MacCulloch, J. R., 177, 189, 191-202, 203, 206f., 211, 220, 222, 229, 233, 264, 335 Maine, Sir Henry, 373f. Malthus, _24_, 181, 211, 217, 219-23, 229, 298, 305, 309, 350 Manuilov, Prof., 275, 460 Market, internal and external, 236, 246, 277f., 283ff., 292, 294f., 299, 306ff., 316 -- concept revised, 366 -- problem of, 229f., 235, 277, 284, 289, 312ff., 345ff. Marx, K., _13_f., _16_ff., 31, 36f., 43, 49, 51, 54, 60, 62ff., 76-92, 95, 99ff., 120-38, 139-54, 155ff., 189, 203, 205, 212, 215, 217f., 220, 223, 228, 233, 241, 243f., 255f., 258, 264, 268, 274f., 281f., 287, 295, 298-310, 311f., 316ff., 320, 324f., 329ff., 348, 350f., 357, 359ff., 417; his diagram of capitalist reproduction, 84, 97, 99ff., 104, 113, 118f., 127, 274, 298-310, 311, 417, 428, 455; his diagram of enlarged reproduction, 120-138, 304f., 313ff., 318, 323f., 329-47, 348, 353f., 359, 361, 417, 458ff.; his diagram of simple reproduction, 76, 92, 103, 107, 112, 114, 173, 264, 299, 351, 361, 418 Marxism, 272ff., 310, 326; 'legalist', 275, 292, 294, 303, 305f., 317, 323, 324-6, 460; 'orthodox', 318 Mehemet Ali, 429, 435 Mehring, F., 228, 266f. Mikhailovski, Prof., 274 Militarism, _27_, 248, 276, 282, 298, 309, 350, 371, 439, 454-67 Mill, James, 191, 212, 220ff., 372f., 375, 383 Mill, John Stuart, 279 Money, as form of pure value, 38f., 43f., 76, 140 -- circulation, _20_, 50, 93-106, 139ff., 148, 193, 213, 300ff., 324 -- sources, 144ff., 151ff., 156, 158ff., 300ff. Monroe, President, 402 Moravitz, C., 443, 445 Most Favoured Nations Clause, 448 Napoleon Bonaparte, 173 Napoleon III, 431, 448 Negroes, 362ff., 411ff. Neo-Marxists, 291 Neo-Mercantilism, 296 Nikolayon, 275, 284-91, 292f., 299, 309, 351, 366, 408 Non-capitalist strata necessary for accumulation, 319f., 351ff., 357, 359, 361ff., 368, 386, 416, 427, 429, 446, 450, 452, 466 Nyok Ching Tsur, Dr., 395 _Obshchina_, 273, 288, 290 Opium Wars, _27_, 247, 387, 391, 393, 447 Oppenheim, M. v., 439 _Ort_, 231f., 248, 252 Over-production, 91, 104, 149, 195, 199f., 213, 221, 235, 250, 252, 254, 279, 281f., 298, 324, 342 Owen, Robert, 174f., 191, 240 Palikao, Count, 392 Pan-Germans, 247 Peasantry, _27_; their expropriation, 288, 296, 362, 364, 369, 374f. Peel, Sir Robert, 245 Peffer, Senator, 396, 398, 400f., 406f. Physiocrats, 31, 49, 51, 56f., 62, 68, 71, 106, 233 Planned economy, 78f., 103f., 128ff., 195, 248, 312, 323 Plekhanov, Prof., 272, 275 Population increase, _15_, 41, 78, 91, 107, 133f., 239, 360f., 371 Populism, 272ff., 283, 286ff., 303, 306, 309, 317, 325, 351 Positivism, 326 Pressel, Engineer, 441f. Primitive social organisations, 32, 39, 41f., 72, 362, 368ff., 377, 415, 428, 454 Private enterprise, 79, 103, 248 Production, and consumption, 45f., 204, 211, 218, 244, 253, 260, 304f., 324, 326, 343, 349 -- for social requirements, 37, 42, 129, 133, 139, 220, 260, 285, 304f., 316 -- its two departments, _16_, _18_f., _23_, _25_, 83ff., 95ff., 99, 102, 114ff., 123ff., 127ff., 137, 233, 299, 323, 334, 336, 339ff., 353, 355, 417, 434 -- capitalist, as creation of surplus value, 37ff., 42, 78, 84, 107, 343, 367, 427 -- -- as end in itself, 311, 316f., 320, 333, 346 -- -- its universal domination, 216f., 331, 333, 348, 351, 353, 361, 365, 410, 417, 467 Productive consumption, 236f., 316 Profit, of enterprise, 38, 232, 234 -- motive, 34, 305, 322f. Profit, rate, _17_, _23_f., 79f., 167; (declining) 259, 320, 326, 338, 343f., 367 Progress, _28_, 79, 89, 130f., 204, 216, 245, 249, 258f., 274, 296, 320, 323, 339 Property, ownership, 214, 248f., 265, 380f., 413 -- communal, 77, 248, 289, 379, 381 -- in land, 256, 262, 264f., 370 -- -- vested in Sovereign, 372f., 380f. -- private, 196, 240, 322, 378, 380, 382ff. Proudhon, 137, 227, 241, 264f. Punjab Alienation Act, 376 Quesnay, 31, 48ff., 57, 62, 104f., 211 Railway construction, 289, 353, 398, 402, 409, 419ff., 425ff., 439, 445 Renner, K., 455 Rent, 38, 50ff., 57ff., 64, 68, 135, 181, 254f., 257, 266 _Rentier_, 223, 254 Reproduction, enlarged, _13_, 40ff., 80, 89ff., 102, 107-19, 151, 155, 169, 184, 197, 209, 268, 300, 303, 312, 317f., 329, 335, 339f., 351, 353, 355, 429 -- simple, _13_, _15_, _19_, 41, 48, 98, 102, 104, 107f., 112f., 115, 127f., 130, 139, 143ff., 155f., 160ff., 165, 169, 187, 190, 197, 199f., 298, 300, 302, 312, 317, 329, 334, 338, 348, 351, 354 -- transition from simple to enlarged, 123, 144f., 147, 150, 162f., 318; _see also_ Marx Rhodes, Cecil, 413f., 416 Ricardo, D., 53f., 57, 62, 67f., 105f., 109f., 179, 181, 189, 191, 194ff., 203-10, 211, 215ff., 229f., 232f., 237, 240f., 243ff., 248, 254, 257, 261, 266, 268, 271, 279ff., 305, 324f., 345f., 350, 366, 383, 447 'Right to Work', 227, 229f. Roberts of Kandahar, Lord, 374 Rodbertus, _22_f., 54, 227ff., 237, 238-51, 252-68, 271, 274, 281f., 351 Rothstein, Th., 436ff. Rozet, A., 385 Rusk, Secretary, 406 Russia, 167, 173, 271f., 275ff., 283f., 287ff., 297, 308, 326, 357, 419ff., 445, 449f., 452 St. Simon, 191 Said Pasha, 433ff. Saling, 441 Saving, _17_f., _20_ff., _22_f., _27_, 163, 236f., 239, 260f., 265f. Say, J. B., 53ff., 62f., 177ff., 189, 191, 204, 206, 210, 211-18, 219f., 222, 229ff., 237, 248, 254, 257, 264, 266, 268, 279, 305, 324f., 335, 366 Schaeffle, Prof., 293, 295, 307, 424 Scheibert, J., 388, 390 Schmoller, Prof., 293, 295ff. Schneider, S., 440 Schultze, E., 410 Sering, 401, 407, 409f. Severance of labour power from the means of production, 181, 210, 402 -- of agriculture and trade (industry), 369, 395f. Simmons, A. M., 398 Simons, 363 Sismondi, _24_, 35, 53, 115, 173-90, 191-202, 203-10, 211-18, 219f., 222f., 227ff., 237, 240, 245, 248ff., 256, 260, 264, 268, 271, 274, 281f., 287f., 292, 309, 312, 317, 342, 350ff., 365f., 423ff. Skvortsov, Prof., 275 Slavery, 33, 39, 72f., 84, 161, 209f., 241, 243, 255f., 359, 363, 369, 379, 400, 412, 432 Slavophiles, 273, 276 Smith, Adam, 36, 48, 50ff., 83, 105f., 108ff., 166, 169, 180, 185, 187ff., 191, 210f., 215, 228, 230f., 233, 256f., 260ff., 264, 266, 271, 346, 351, 383 Socialism, 228f., 266, 274, 325f., 467; English, 244; Utopian, 217; and Marx's analysis, 131 Sombart, Prof., 308 Spheres of interest, 445, 447, 452 State as consumer, 223, 454ff., 458, 460, 463, 466 Struve, Peter v., 275, 292-97, 298, 307, 309ff., 325f., 350 Suez Canal, 33, 430f., 433, 435ff. Surplus value, _14_, _18_f., 38, 62, 78, 109ff., 128, 135, 139, 141, 185ff., 199, 207, 220, 234f., 253, 255ff., 265ff., 298, 301f., 310, 317, 332ff., 342f., 350, 353f., 357f., 365ff., 454, 456, 463, 466; its capitalisation, 108, 112ff., 132, 136, 140, 142, 146f., 151f., 163, 165, 170, 184, 188, 196, 198, 237, 330f., 338, 340f., 345, 355, 357, 359f., 367, 417, 421, 428, 446, 451, 456, 464; its consumption, 159ff., 169, 197, 254, 298, 303, 348, 354; 'destruction', 281f., 310, 344; definition, 37f., 77; realisation, 98ff., 132, 139, 142, 155ff., 165, 170, 200, 205ff., 278, 292f., 300, 303, 309f., 329, 341f., 346, 351, 355, 359, 365, 386, 417, 419, 421, 426, 428f., 442, 444, 451, 454, 461f.; contradiction between its production and realisation, 345, 365 Sweezy, _13_, 21 Tariffs, protective, 231, 297, 399, 446-53, 456 Taussig, 399f. Taxation, 369, 373f., 379, 381, 383, 394, 396, 399, 435ff., 443, 455, 458, 464f.; indirect, 455ff., 460f., 463f. Tax collector, 372f., 443f. 'Third Persons', 135, 159, 292-7, 298, 305, 348, 350, 458 'Three World Empires', 292-7 Timur (Tamerlane), 375 Tooke, 156 Trade Unions, 271, 461 Tucker, Josiah, 211 Tugan Baranovski, Prof., _23_, 210, 275, 303, 305f., 310, 311-23, 324ff., 330, 335f., 346, 366, 422ff. Turkey, 353, 385, 419, 425f., 436, 439, 442, 445 Unemployment, 177, 208, 240, 282 Usury, 373, 377, 381, 383f. Utopianism, 249, 262, 264, 268, 288, 291 Value, problem of pure, 35f. -- Marx's theory of, 66, 68, 105, 281 -- Ricardo's theory of, 68, 105 -- Rodbertus' theory of, 240ff., 256, 259 Value, Adam Smith's theory of, 62, 64ff., 105f. -- relationships and material points of view, 81f., 105, 112, 264, 336, 354, 417 Victoria, Queen, 393 Violence, 371, 446, 452 Vorontsov, V., _24_, 274f., 276-83, 287, 291ff., 299, 303, 309f., 350, 366, 460 Wagner, Prof., 256, 266f., 293, 295, 297, 307 Warren, Count, 375 Wilson, H. H., 372f. Wilson, James, 376 World (international) Commerce, 205, 307f., 359 World Market, 200, 202, 205, 296f., 308 _Zadruga_, 378 [Transcriber's notes: List of errors: Page 20 "stook" changed to "stock" ("requires an increase in the stock") Page 31 "Quesney" changed to "Quesnay" ("of this problem: one by Quesney,") Page 121 missing "(" added ("(_800v + 25v + 55v_)") Pages 175 and 192 "E" replaced with "É" ("_Nouveaux Principes d'Économie Politique_") Page 220 Footnote reference to 224 altered from original 9, assumed to be 2 Page 227 "simulated" changed to "stimulated" ("the working class had stimulated Sismondi's opposition") Page 255 "irelevant" changed to "irrelevant" ("irrelevant to the productive process,") Page 275 "." changed to "," ("One of the two champions of the 'populist' movement,") Page 275 second "." added as in "V. V." ("Vorontsov, known in Russia mainly under the _nom de plume_ V. V.,") Page 293 "'" added ("open whether these 'third persons'") Page 293 """ changed to "'" ("entirely on the basis of the home market.'") Page 300 Two instances of "formulae" changed to "formulæ" Page 340 space added to betweenthe ("determined by the relations between the two departments") Page 354 "producduction" changed to "production" ("the sphere of capitalist production,") page 379 "57,500,000,000 acres" changed to "57,000,000 acres" [based on the German text "23.000.000 Hektar" converted to acres and rounded] Page 381 "assocations" changed to "associations" ("of accelerating the process of dissolving the family associations") Page 434 "." removed after "per cent" ("an annual charge of 9 per cent") Page 441 "Alleppo" changed to "Aleppo" ("_vilayets_ Aydin, Baghdad, Mossul, Diarbekir, Ursa and Aleppo") Page 474 "," changed to ";" ("443, 455, 458, 464f.;") Footnote 180 missing "." added to "470." ("MacCulloch, loc. cit., p. 470.") Footnote 213 "Noveaux" changed to "Nouveaux" ("_Nouveaux Principes_ ..., vol. i, p. 117.") Footnote 233 "socialer" changed to "sozialer" ("_Über die Grundrente in sozialer Beziehung._") Footnote 239 "f," changed to "f." ("Op. cit., vol. ii, pp. 104 f.") Footnote 260 missing "." added to "Ibid.," ("Ibid., vol. i, p. 19.")] 
360	----	WHAT IS PROPERTY? AN INQUIRY INTO THE PRINCIPLE OF RIGHT AND OF GOVERNMENT By P. J. Proudhon CONTENTS. P. J. PROUDHON: HIS LIFE AND HIS WORKS PREFACE FIRST MEMOIR CHAPTER I. METHOD PURSUED IN THIS WORK.--THE IDEA OF A REVOLUTION CHAPTER II. PROPERTY CONSIDERED AS A NATURAL RIGHT.--OCCUPATION AND CIVIL LAW AS EFFICIENT BASES OF PROPERTY.--DEFINITIONS % 1. Property as a Natural Right. % 2. Occupation as the Title to Property. % 3. Civil Law as the Foundation and Sanction of Property. CHAPTER III. LABOR AS THE EFFICIENT CAUSE OF THE DOMAIN OF PROPERTY % 1. The Land cannot be appropriated. % 2. Universal Consent no Justification of Property. % 3. Prescription gives no Title to Property. % 4. Labor.--That Labor has no Inherent Power to appropriate Natural Wealth. % 5. That Labor leads to Equality of Property. % 6. That in Society all Wages are Equal. % 7. That Inequality of Powers is the Necessary Condition of Equality of Fortunes. % 8. That, from the stand-point of Justice, Labor destroys Property. CHAPTER IV. THAT PROPERTY IS IMPOSSIBLE DEMONSTRATION. AXIOM. Property is the Right of Increase claimed by the Proprietor over any thing which he has stamped as his own. FIRST PROPOSITION. Property is Impossible, because it demands Something for Nothing. SECOND PROPOSITION. Property is Impossible, because, wherever it exists, Production costs more than it is worth. THIRD PROPOSITION. Property is Impossible, because, with a given Capital, Production is proportional to Labor, not to Property. FOURTH PROPOSITION. Property is Impossible, because it is Homicide. FIFTH PROPOSITION. Property is Impossible, because, if it exists, Society devours itself. Appendix to the Fifth Proposition. SIXTH PROPOSITION. Property is Impossible, because it is the Mother of Tyranny. SEVENTH PROPOSITION. Property is Impossible, because, in consuming its Receipts, it loses them; in hoarding them, it nullifies them; and, in using them as Capital, it turns them against Production. EIGHTH PROPOSITION. Property is Impossible, because its Power of Accumulation is infinite, and is exercised only over Finite Quantities. NINTH PROPOSITION Property is Impossible, because it is powerless against Property. TENTH PROPOSITION. Property is Impossible, because it is the Negation of Equality. CHAPTER V. PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE AND IN JUSTICE, AND A DETERMINATION OF THE PRINCIPLE OF GOVERNMENT AND OF RIGHT. PART 1. % 1. Of the Moral Sense in Man and the Animals. % 2. Of the First and Second Degrees of Sociability. % 3. Of the Third Degree of Sociability. PART I 1. % 1. Of the Causes of our Mistakes. The Origin of Property. % 2. Characteristics of Communism and of Property. % 3. Determination of the Third Form of Society. Conclusion. SECOND MEMOIR LETTER TO M. BLANQUI ON PROPERTY P. J. PROUDHON: HIS LIFE AND HIS WORKS. The correspondence [1] of P. J. Proudhon, the first volumes of which we publish to-day, has been collected since his death by the faithful and intelligent labors of his daughter, aided by a few friends. It was incomplete when submitted to Sainte Beuve, but the portion with which the illustrious academician became acquainted was sufficient to allow him to estimate it as a whole with that soundness of judgment which characterized him as a literary critic. He would, however, caution readers against accepting the biographer's interpretation of the author's views as in any sense authoritative; advising them, rather, to await the publication of the remainder of Proudhon's writings, that they may form an opinion for themselves.--Translator. In an important work, which his habitual readers certainly have not forgotten, although death did not allow him to finish it, Sainte Beuve thus judges the correspondence of the great publicist:-- "The letters of Proudhon, even outside the circle of his particular friends, will always be of value; we can always learn something from them, and here is the proper place to determine the general character of his correspondence. "It has always been large, especially since he became so celebrated; and, to tell the truth, I am persuaded that, in the future, the correspondence of Proudhon will be his principal, vital work, and that most of his books will be only accessory to and corroborative of this. At any rate, his books can be well understood only by the aid of his letters and the continual explanations which he makes to those who consult him in their doubt, and request him to define more clearly his position. "There are, among celebrated people, many methods of correspondence. There are those to whom letter-writing is a bore, and who, assailed with questions and compliments, reply in the greatest haste, solely that the job may be over with, and who return politeness for politeness, mingling it with more or less wit. This kind of correspondence, though coming from celebrated people, is insignificant and unworthy of collection and classification. "After those who write letters in performance of a disagreeable duty, and almost side by side with them in point of insignificance, I should put those who write in a manner wholly external, wholly superficial, devoted only to flattery, lavishing praise like gold, without counting it; and those also who weigh every word, who reply formally and pompously, with a view to fine phrases and effects. They exchange words only, and choose them solely for their brilliancy and show. You think it is you, individually, to whom they speak; but they are addressing themselves in your person to the four corners of Europe. Such letters are empty, and teach as nothing but theatrical execution and the favorite pose of their writers. "I will not class among the latter the more prudent and sagacious authors who, when writing to individuals, keep one eye on posterity. We know that many who pursue this method have written long, finished, charming, flattering, and tolerably natural letters. Beranger furnishes us with the best example of this class. "Proudhon, however, is a man of entirely different nature and habits. In writing, he thinks of nothing but his idea and the person whom he addresses: ad rem et ad hominem. A man of conviction and doctrine, to write does not weary him; to be questioned does not annoy him. When approached, he cares only to know that your motive is not one of futile curiosity, but the love of truth; he assumes you to be serious, he replies, he examines your objections, sometimes verbally, sometimes in writing; for, as he remarks, 'if there be some points which correspondence can never settle, but which can be made clear by conversation in two minutes, at other times just the opposite is the case: an objection clearly stated in writing, a doubt well expressed, which elicits a direct and positive reply, helps things along more than ten hours of oral intercourse!' In writing to you he does not hesitate to treat the subject anew; he unfolds to you the foundation and superstructure of his thought: rarely does he confess himself defeated--it is not his way; he holds to his position, but admits the breaks, the variations, in short, the EVOLUTION of his mind. The history of his mind is in his letters; there it must be sought. "Proudhon, whoever addresses him, is always ready; he quits the page of the book on which he is at work to answer you with the same pen, and that without losing patience, without getting confused, without sparing or complaining of his ink; he is a public man, devoted to the propagation of his idea by all methods, and the best method, with him, is always the present one, the latest one. His very handwriting, bold, uniform, legible, even in the most tiresome passages, betrays no haste, no hurry to finish. Each line is accurate: nothing is left to chance; the punctuation, very correct and a little emphatic and decided, indicates with precision and delicate distinction all the links in the chain of his argument. He is devoted entirely to you, to his business and yours, while writing to you, and never to anything else. All the letters of his which I have seen are serious: not one is commonplace. "But at the same time he is not at all artistic or affected; he does not CONSTRUCT his letters, he does not revise them, he spends no time in reading them over; we have a first draught, excellent and clear, a jet from the fountain-head, but that is all. The new arguments, which he discovers in support of his ideas and which opposition suggests to him, are an agreeable surprise, and shed a light which we should vainly search for even in his works. His correspondence differs essentially from his books, in that it gives you no uneasiness; it places you in the very heart of the man, explains him to you, and leaves you with an impression of moral esteem and almost of intellectual security. We feel his sincerity. I know of no one to whom he can be more fitly compared in this respect than George Sand, whose correspondence is large, and at the same time full of sincerity. His role and his nature correspond. If he is writing to a young man who unbosoms himself to him in sceptical anxiety, to a young woman who asks him to decide delicate questions of conduct for her, his letter takes the form of a short moral essay, of a father-confessor's advice. Has he perchance attended the theatre (a rare thing for him) to witness one of Ponsart's comedies, or a drama of Charles Edmond's, he feels bound to give an account of his impressions to the friend to whom he is indebted for this pleasure, and his letter becomes a literary and philosophical criticism, full of sense, and like no other. His familiarity is suited to his correspondent; he affects no rudeness. The terms of civility or affection which he employs towards his correspondents are sober, measured, appropriate to each, and honest in their simplicity and cordiality. When he speaks of morals and the family, he seems at times like the patriarchs of the Bible. His command of language is complete, and he never fails to avail himself of it. Now and then a coarse word, a few personalities, too bitter and quite unjust or injurious, will have to be suppressed in printing; time, however, as it passes away, permits many things and renders them inoffensive. Am I right in saying that Proudhon's correspondence, always substantial, will one day be the most accessible and attractive portion of his works?" Almost the whole of Proudhon's real biography is included in his correspondence. Up to 1837, the date of the first letter which we have been able to collect, his life, narrated by Sainte Beuve, from whom we make numerous extracts, may be summed up in a few pages. Pierre Joseph Proudhon was born on the 15th of January, 1809, in a suburb of Besancon, called Mouillere. His father and mother were employed in the great brewery belonging to M. Renaud. His father, though a cousin of the jurist Proudhon, the celebrated professor in the faculty of Dijon, was a journeyman brewer. His mother, a genuine peasant, was a common servant. She was an orderly person of great good sense; and, as they who knew her say, a superior woman of HEROIC character,--to use the expression of the venerable M. Weiss, the librarian at Besancon. She it was especially that Proudhon resembled: she and his grandfather Tournesi, the soldier peasant of whom his mother told him, and whose courageous deeds he has described in his work on "Justice." Proudhon, who always felt a great veneration for his mother Catharine, gave her name to the elder of his daughters. In 1814, when Besancon was blockaded, Mouillere, which stood in front of the walls of the town, was destroyed in the defence of the place; and Proudhon's father established a cooper's shop in a suburb of Battant, called Vignerons. Very honest, but simple-minded and short-sighted, this cooper, the father of five children, of whom Pierre Joseph was the eldest, passed his life in poverty. At eight years of age, Proudhon either made himself useful in the house, or tended the cattle out of doors. No one should fail to read that beautiful and precious page of his work on "Justice," in which he describes the rural sports which he enjoyed when a neatherd. At the age of twelve, he was a cellar-boy in an inn. This, however, did not prevent him from studying. His mother was greatly aided by M. Renaud, the former owner of the brewery, who had at that time retired from business, and was engaged in the education of his children. Proudhon entered school as a day-scholar in the sixth class. He was necessarily irregular in his attendance; domestic cares and restraints sometimes kept him from his classes. He succeeded nevertheless in his studies; he showed great perseverance. His family were so poor that they could not afford to furnish him with books; he was obliged to borrow them from his comrades, and copy the text of his lessons. He has himself told us that he was obliged to leave his wooden shoes outside the door, that he might not disturb the classes with his noise; and that, having no hat, he went to school bareheaded. One day, towards the close of his studies, on returning from the distribution of the prizes, loaded with crowns, he found nothing to eat in the house. "In his eagerness for labor and his thirst for knowledge, Proudhon," says Sainte Beuve, "was not content with the instruction of his teachers. From his twelfth to his fourteenth year, he was a constant frequenter of the town library. One curiosity led to another, and he called for book after book, sometimes eight or ten at one sitting. The learned librarian, the friend and almost the brother of Charles Nodier, M. Weiss, approached him one day, and said, smiling, 'But, my little friend, what do you wish to do with all these books?' The child raised his head, eyed his questioner, and replied: 'What's that to you?' And the good M. Weiss remembers it to this day." Forced to earn his living, Proudhon could not continue his studies. He entered a printing-office in Besancon as a proof-reader. Becoming, soon after, a compositor, he made a tour of France in this capacity. At Toulon, where he found himself without money and without work, he had a scene with the mayor, which he describes in his work on "Justice." Sainte Beuve says that, after his tour of France, his service book being filled with good certificates, Proudhon was promoted to the position of foreman. But he does not tell us, for the reason that he had no knowledge of a letter written by Fallot, of which we never heard until six months since, that the printer at that time contemplated quitting his trade in order to become a teacher. Towards 1829, Fallot, who was a little older than Proudhon, and who, after having obtained the Suard pension in 1832, died in his twenty-ninth year, while filling the position of assistant librarian at the Institute, was charged, Protestant though he was, with the revisal of a "Life of the Saints," which was published at Besancon. The book was in Latin, and Fallot added some notes which also were in Latin. "But," says Sainte Beuve, "it happened that some errors escaped his attention, which Proudhon, then proof-reader in the printing office, did not fail to point out to him. Surprised at finding so good a Latin scholar in a workshop, he desired to make his acquaintance; and soon there sprung up between them a most earnest and intimate friendship: a friendship of the intellect and of the heart." Addressed to a printer between twenty-two and twenty-three years of age, and predicting in formal terms his future fame, Fallot's letter seems to us so interesting that we do not hesitate to reproduce it entire. "PARIS, December 5, 1831. "MY DEAR PROUDHON,--YOU have a right to be surprised at, and even dissatisfied with, my long delay in replying to your kind letter; I will tell you the cause of it. It became necessary to forward an account of your ideas to M. J. de Gray; to hear his objections, to reply to them, and to await his definitive response, which reached me but a short time ago; for M. J. is a sort of financial king, who takes no pains to be punctual in dealing with poor devils like ourselves. I, too, am careless in matters of business; I sometimes push my negligence even to disorder, and the metaphysical musings which continually occupy my mind, added to the amusements of Paris, render me the most incapable man in the world for conducting a negotiation with despatch. "I have M. Jobard's decision; here it is: In his judgment, you are too learned and clever for his children; he fears that you could not accommodate your mind and character to the childish notions common to their age and station. In short, he is what the world calls a good father; that is, he wants to spoil his children, and, in order to do this easily, he thinks fit to retain his present instructor, who is not very learned, but who takes part in their games and joyous sports with wonderful facility, who points out the letters of the alphabet to the little girl, who takes the little boys to mass, and who, no less obliging than the worthy Abbe P. of our acquaintance, would readily dance for Madame's amusement. Such a profession would not suit you, you who have a free, proud, and manly soul: you are refused; let us dismiss the matter from our minds. Perhaps another time my solicitude will be less unfortunate. I can only ask your pardon for having thought of thus disposing of you almost without consulting you. I find my excuse in the motives which guided me; I had in view your well-being and advancement in the ways of this world. "I see in your letter, my comrade, through its brilliant witticisms and beneath the frank and artless gayety with which you have sprinkled it, a tinge of sadness and despondency which pains me. You are unhappy, my friend: your present situation does not suit you; you cannot remain in it, it was not made for you, it is beneath you; you ought, by all means, to leave it, before its injurious influence begins to affect your faculties, and before you become settled, as they say, in the ways of your profession, were it possible that such a thing could ever happen, which I flatly deny. You are unhappy; you have not yet entered upon the path which Nature has marked out for you. But, faint-hearted soul, is that a cause for despondency? Ought you to feel discouraged? Struggle, morbleu, struggle persistently, and you will triumph. J. J. Rousseau groped about for forty years before his genius was revealed to him. You are not J. J Rousseau; but listen: I know not whether I should have divined the author of "Emile" when he was twenty years of age, supposing that I had been his contemporary, and had enjoyed the honor of his acquaintance. But I have known you, I have loved you, I have divined your future, if I may venture to say so; for the first time in my life, I am going to risk a prophecy. Keep this letter, read it again fifteen or twenty years hence, perhaps twenty-five, and if at that time the prediction which I am about to make has not been fulfilled, burn it as a piece of folly out of charity and respect for my memory. This is my prediction: you will be, Proudhon, in spite of yourself, inevitably, by the fact of your destiny, a writer, an author; you will be a philosopher; you will be one of the lights of the century, and your name will occupy a place in the annals of the nineteenth century, like those of Gassendi, Descartes, Malebranche, and Bacon in the seventeenth, and those of Diderot, Montesquieu, Helvetius. Locke, Hume, and Holbach in the eighteenth. Such will be your lot! Do now what you will, set type in a printing-office, bring up children, bury yourself in deep seclusion, seek obscure and lonely villages, it is all one to me; you cannot escape your destiny; you cannot divest yourself of your noblest feature, that active, strong, and inquiring mind, with which you are endowed; your place in the world has been appointed, and it cannot remain empty. Go where you please, I expect you in Paris, talking philosophy and the doctrines of Plato; you will have to come, whether you want to or not. I, who say this to you, must feel very sure of it in order to be willing to put it upon paper, since, without reward for my prophetic skill,--to which, I assure you, I make not the slightest claim,--I run the risk of passing for a hare-brained fellow, in case I prove to be mistaken: he plays a bold game who risks his good sense upon his cards, in return for the very trifling and insignificant merit of having divined a young man's future. "When I say that I expect you in Paris, I use only a proverbial phrase which you must not allow to mislead you as to my projects and plans. To reside in Paris is disagreeable to me, very much so; and when this fine-art fever which possesses me has left me, I shall abandon the place without regret to seek a more peaceful residence in a provincial town, provided always the town shall afford me the means of living, bread, a bed, books, rest, and solitude. How I miss, my good Proudhon, that dark, obscure, smoky chamber in which I dwelt in Besancon, and where we spent so many pleasant hours in the discussion of philosophy! Do you remember it? But that is now far away. Will that happy time ever return? Shall we one day meet again? Here my life is restless, uncertain, precarious, and, what is worse, indolent, illiterate, and vagrant. I do no work, I live in idleness, I ramble about; I do not read, I no longer study; my books are forsaken; now and then I glance over a few metaphysical works, and after a days walk through dirty, filthy, crowded streets. I lie down with empty head and tired body, to repeat the performance on the following day. What is the object of these walks, you will ask. I make visits, my friend; I hold interviews with stupid people. Then a fit of curiosity seizes me, the least inquisitive of beings: there are museums, libraries, assemblies, churches, palaces, gardens, and theatres to visit. I am fond of pictures, fond of music, fond of sculpture; all these are beautiful and good, but they cannot appease hunger, nor take the place of my pleasant readings of Bailly, Hume, and Tennemann, which I used to enjoy by my fireside when I was able to read. "But enough of complaints. Do not allow this letter to affect you too much, and do not think that I give way to dejection or despondency; no, I am a fatalist, and I believe in my star. I do not know yet what my calling is, nor for what branch of polite literature I am best fitted; I do not even know whether I am, or ever shall be, fitted for any: but what matters it? I suffer, I labor, I dream, I enjoy, I think; and, in a word, when my last hour strikes, I shall have lived. "Proudhon, I love you, I esteem you; and, believe me, these are not mere phrases. What interest could I have in flattering and praising a poor printer? Are you rich, that you may pay for courtiers? Have you a sumptuous table, a dashing wife, and gold to scatter, in order to attract them to your suite? Have you the glory, honors, credit, which would render your acquaintance pleasing to their vanity and pride? No; you are poor, obscure, abandoned; but, poor, obscure, and abandoned, you have a friend, and a friend who knows all the obligations which that word imposes upon honorable people, when they venture to assume it. That friend is myself: put me to the test. "GUSTAVE FALLOT." It appears from this letter that if, at this period, Proudhon had already exhibited to the eyes of a clairvoyant friend his genius for research and investigation, it was in the direction of philosophical, rather than of economical and social, questions. Having become foreman in the house of Gauthier & Co., who carried on a large printing establishment at Besancon, he corrected the proofs of ecclesiastical writers, the Fathers of the Church. As they were printing a Bible, a Vulgate, he was led to compare the Latin with the original Hebrew. "In this way," says Sainte Beuve, "he learned Hebrew by himself, and, as everything was connected in his mind, he was led to the study of comparative philology. As the house of Gauthier published many works on Church history and theology, he came also to acquire, through this desire of his to investigate everything, an extensive knowledge of theology, which afterwards caused misinformed persons to think that he had been in an ecclesiastical seminary." Towards 1836, Proudhon left the house of Gauthier, and, in company with an associate, established a small printing-office in Besancon. His contribution to the partnership consisted, not so much in capital, as in his knowledge of the trade. His partner committing suicide in 1838, Proudhon was obliged to wind up the business, an operation which he did not accomplish as quickly and as easily as he hoped. He was then urged by his friends to enter the ranks of the competitors for the Suard pension. This pension consisted of an income of fifteen hundred francs bequeathed to the Academy of Besancon by Madame Suard, the widow of the academician, to be given once in three years to the young man residing in the department of Doubs, a bachelor of letters or of science, and not possessing a fortune, whom the Academy of Besancon SHOULD DEEM BEST FITTED FOR A LITERARY OR SCIENTIFIC CAREER, OR FOR THE STUDY OF LAW OR OF MEDICINE. The first to win the Suard pension was Gustave Fallot. Mauvais, who was a distinguished astronomer in the Academy of Sciences, was the second. Proudhon aspired to be the third. To qualify himself, he had to be received as a bachelor of letters, and was obliged to write a letter to the Academy of Besancon. In a phrase of this letter, the terms of which he had to modify, though he absolutely refused to change its spirit, Proudhon expressed his firm resolve to labor for the amelioration of the condition of his brothers, the working-men. The only thing which he had then published was an "Essay on General Grammar," which appeared without the author's signature. While reprinting, at Besancon, the "Primitive Elements of Languages, Discovered by the Comparison of Hebrew roots with those of the Latin and French," by the Abbe Bergier, Proudhon had enlarged the edition of his "Essay on General Grammar." The date of the edition, 1837, proves that he did not at that time think of competing for the Suard pension. In this work, which continued and completed that of the Abbe Bergier, Proudhon adopted the same point of view, that of Moses and of Biblical tradition. Two years later, in February, 1839, being already in possession of the Suard pension, he addressed to the Institute, as a competitor for the Volney prize, a memoir entitled: "Studies in Grammatical Classification and the Derivation of some French words." It was his first work, revised and presented in another form. Four memoirs only were sent to the Institute, none of which gained the prize. Two honorable mentions were granted, one of them to memoir No. 4; that is, to P. J. Proudhon, printer at Besancon. The judges were MM. Amedde Jaubert, Reinaud, and Burnouf. "The committee," said the report presented at the annual meeting of the five academies on Thursday, May 2, 1839, "has paid especial attention to manuscripts No. 1 and No. 4. Still, it does not feel able to grant the prize to either of these works, because they do not appear to be sufficiently elaborated. The committee, which finds in No. 4 some ingenious analyses, particularly in regard to the mechanism of the Hebrew language, regrets that the author has resorted to hazardous conjectures, and has sometimes forgotten the special recommendation of the committee to pursue the experimental and comparative method." Proudhon remembered this. He attended the lectures of Eugene Burnouf, and, as soon as he became acquainted with the labors and discoveries of Bopp and his successors, he definitively abandoned an hypothesis which had been condemned by the Academy of Inscriptions and Belles-lettres. He then sold, for the value of the paper, the remaining copies of the "Essay" published by him in 1837. In 1850, they were still lying in a grocer's back-shop. A neighboring publisher then placed the edition on the market, with the attractive name of Proudhon upon it. A lawsuit ensued, in which the author was beaten. His enemies, and at that time there were many of them, would have been glad to have proved him a renegade and a recanter. Proudhon, in his work on "Justice," gives some interesting details of this lawsuit. In possession of the Suard pension, Proudhon took part in the contest proposed by the Academy of Besancon on the question of the utility of the celebration of Sunday. His memoir obtained honorable mention, together with a medal which was awarded him, in open session, on the 24th of August, 1839. The reporter of the committee, the Abbe Doney, since made Bishop of Montauban, called attention to the unquestionable superiority of his talent. "But," says Sainte Beuve, "he reproached him with having adopted dangerous theories, and with having touched upon questions of practical politics and social organization, where upright intentions and zeal for the public welfare cannot justify rash solutions." Was it policy, we mean prudence, which induced Proudhon to screen his ideas of equality behind the Mosaic law? Sainte Beuve, like many others, seems to think so. But we remember perfectly well that, having asked Proudhon, in August, 1848, if he did not consider himself indebted in some respects to his fellow-countryman, Charles Fourier, we received from him the following reply: "I have certainly read Fourier, and have spoken of him more than once in my works; but, upon the whole, I do not think that I owe anything to him. My real masters, those who have caused fertile ideas to spring up in my mind, are three in number: first, the Bible; next, Adam Smith; and last, Hegel." Freely confessed in the "Celebration of Sunday," the influence of the Bible on Proudhon is no less manifest in his first memoir on property. Proudhon undoubtedly brought to this work many ideas of his own; but is not the very foundation of ancient Jewish law to be found in its condemnation of usurious interest and its denial of the right of personal appropriation of land? The first memoir on property appeared in 1840, under the title, "What is Property? or an Inquiry into the Principle of Right and of Government." Proudhon dedicated it, in a letter which served as the preface, to the Academy of Besancon. The latter, finding itself brought to trial by its pensioner, took the affair to heart, and evoked it, says Sainte Beuve, with all possible haste. The pension narrowly escaped being immediately withdrawn from the bold defender of the principle of equality of conditions. M. Vivien, then Minister of Justice, who was earnestly solicited to prosecute the author, wished first to obtain the opinion of the economist, Blanqui, a member of the Academy of Moral and Political Sciences. Proudhon having presented to this academy a copy of his book, M. Blanqui was appointed to review it. This review, though it opposed Proudhon's views, shielded him. Treated as a savant by M. Blanqui, the author was not prosecuted. He was always grateful to MM. Blanqui and Vivien for their handsome conduct in the matter. M. Blanqui's review, which was partially reproduced by "Le Moniteur," on the 7th of September, 1840, naturally led Proudhon to address to him, in the form of a letter, his second memoir on property, which appeared in April, 1841. Proudhon had endeavored, in his first memoir, to demonstrate that the pursuit of equality of conditions is the true principle of right and of government. In the "Letter to M. Blanqui," he passes in review the numerous and varied methods by which this principle gradually becomes realized in all societies, especially in modern society. In 1842, a third memoir appeared, entitled, "A Notice to Proprietors, or a Letter to M. Victor Considerant, Editor of 'La Phalange,' in Reply to a Defence of Property." Here the influence of Adam Smith manifested itself, and was frankly admitted. Did not Adam Smith find, in the principle of equality, the first of all the laws which govern wages? There are other laws, undoubtedly; but Proudhon considers them all as springing from the principle of property, as he defined it in his first memoir. Thus, in humanity, there are two principles,--one which leads us to equality, another which separates us from it. By the former, we treat each other as associates; by the latter, as strangers, not to say enemies. This distinction, which is constantly met with throughout the three memoirs, contained already, in germ, the idea which gave birth to the "System of Economical Contradictions," which appeared in 1846, the idea of antinomy or contre-loi. The "Notice to Proprietors" was seized by the magistrates of Besancon; and Proudhon was summoned to appear before the assizes of Doubs within a week. He read his written defence to the jurors in person, and was acquitted. The jury, like M. Blanqui, viewed him only as a philosopher, an inquirer, a savant. In 1843, Proudhon published the "Creation of Order in Humanity," a large volume, which does not deal exclusively with questions of social economy. Religion, philosophy, method, certainty, logic, and dialectics are treated at considerable length. Released from his printing-office on the 1st of March of the same year, Proudhon had to look for a chance to earn his living. Messrs. Gauthier Bros., carriers by water between Mulhouse and Lyons, the eldest of whom was Proudhon's companion in childhood, conceived the happy thought of employing him, of utilizing his ability in their business, and in settling the numerous points of difficulty which daily arose. Besides the large number of accounts which his new duties required him to make out, and which retarded the publication of the "System of Economical Contradictions," until October, 1846, we ought to mention a work, which, before it appeared in pamphlet form, was published in the "Revue des Economistes,"--"Competition between Railroads and Navigable Ways." "Le Miserere, or the Repentance of a King," which he published in March, 1845, in the "Revue Independante," during that Lenten season when Lacordaire was preaching in Lyons, proves that, though devoting himself with ardor to the study of economical problems, Proudhon had not lost his interest in questions of religious history. Among his writings on these questions, which he was unfortunately obliged to leave unfinished, we may mention a nearly completed history of the early Christian heresies, and of the struggle of Christianity against Caesarism. We have said that, in 1848, Proudhon recognized three masters. Having no knowledge of the German language, he could not have read the works of Hegel, which at that time had not been translated into French. It was Charles Grun, a German, who had come to France to study the various philosophical and socialistic systems, who gave him the substance of the Hegelian ideas. During the winter of 1844-45, Charles Grun had some long conversations with Proudhon, which determined, very decisively, not the ideas, which belonged exclusively to the bisontin thinker, but the form of the important work on which he labored after 1843, and which was published in 1846 by Guillaumin. Hegel's great idea, which Proudhon appropriated, and which he demonstrates with wonderful ability in the "System of Economical Contradictions," is as follows: Antinomy, that is, the existence of two laws or tendencies which are opposed to each other, is possible, not only with two different things, but with one and the same thing. Considered in their thesis, that is, in the law or tendency which created them, all the economical categories are rational,--competition, monopoly, the balance of trade, and property, as well as the division of labor, machinery, taxation, and credit. But, like communism and population, all these categories are antinomical; all are opposed, not only to each other, but to themselves. All is opposition, and disorder is born of this system of opposition. Hence, the sub-title of the work,--"Philosophy of Misery." No category can be suppressed; the opposition, antinomy, or contre-tendance, which exists in each of them, cannot be suppressed. Where, then, lies the solution of the social problem? Influenced by the Hegelian ideas, Proudhon began to look for it in a superior synthesis, which should reconcile the thesis and antithesis. Afterwards, while at work upon his book on "Justice," he saw that the antinomical terms do not cancel each other, any more than the opposite poles of an electric pile destroy each other; that they are the procreative cause of motion, life, and progress; that the problem is to discover, not their fusion, which would be death, but their equilibrium,--an equilibrium for ever unstable, varying with the development of society. On the cover of the "System of Economical Contradictions," Proudhon announced, as soon to appear, his "Solution of the Social Problem." This work, upon which he was engaged when the Revolution of 1848 broke out, had to be cut up into pamphlets and newspaper articles. The two pamphlets, which he published in March, 1848, before he became editor of "Le Representant du Peuple," bear the same title,--"Solution of the Social Problem." The first, which is mainly a criticism of the early acts of the provisional government, is notable from the fact that in it Proudhon, in advance of all others, energetically opposed the establishment of national workshops. The second, "Organization of Credit and Circulation," sums up in a few pages his idea of economical progress: a gradual reduction of interest, profit, rent, taxes, and wages. All progress hitherto has been made in this manner; in this manner it must continue to be made. Those workingmen who favor a nominal increase of wages are, unconsciously following a back-track, opposed to all their interests. After having published in "Le Representant du Peuple," the statutes of the Bank of Exchange,--a bank which was to make no profits, since it was to have no stockholders, and which, consequently, was to discount commercial paper with out interest, charging only a commission sufficient to defray its running expenses,--Proudhon endeavored, in a number of articles, to explain its mechanism and necessity. These articles have been collected in one volume, under the double title, "Resume of the Social Question; Bank of Exchange." His other articles, those which up to December, 1848, were inspired by the progress of events, have been collected in another volume,--"Revolutionary Ideas." Almost unknown in March, 1848, and struck off in April from the list of candidates for the Constituent Assembly by the delegation of workingmen which sat at the Luxembourg, Proudhon had but a very small number of votes at the general elections of April. At the complementary elections, which were held in the early days of June, he was elected in Paris by seventy-seven thousand votes. After the fatal days of June, he published an article on le terme, which caused the first suspension of "Le Representant du Peuple." It was at that time that he introduced a bill into the Assembly, which, being referred to the Committee on the Finances, drew forth, first, the report of M. Thiers, and then the speech which Proudhon delivered, on the 31st of July, in reply to this report. "Le Representant du Peuple," reappearing a few days later, he wrote, a propos of the law requiring journals to give bonds, his famous article on "The Malthusians" (August 10, 1848). Ten days afterwards, "Le Representant du Peuple," again suspended, definitively ceased to appear. "Le Peuple," of which he was the editor-in-chief, and the first number of which was issued in the early part of September, appeared weekly at first, for want of sufficient bonds; it afterwards appeared daily, with a double number once a week. Before "Le Peuple" had obtained its first bond, Proudhon published a remarkable pamphlet on the "Right to Labor,"--a right which he denied in the form in which it was then affirmed. It was during the same period that he proposed, at the Poissonniere banquet, his Toast to the Revolution. Proudhon, who had been asked to preside at the banquet, refused, and proposed in his stead, first, Ledru-Rollin, and then, in view of the reluctance of the organizers of the banquet, the illustrious president of the party of the Mountain, Lamennais. It was evidently his intention to induce the representatives of the Extreme Left to proclaim at last with him the Democratic and Social Republic. Lamennais being accepted by the organizers, the Mountain promised to be present at the banquet. The night before, all seemed right, when General Cavaignac replaced Minister Senart by Minister Dufaure-Vivien. The Mountain, questioning the government, proposed a vote of confidence in the old minister, and, tacitly, of want of confidence in the new. Proudhon abstained from voting on this proposition. The Mountain declared that it would not attend the banquet, if Proudhon was to be present. Five Montagnards, Mathieu of Drome at their head, went to the temporary office of "Le Peuple" to notify him of this. "Citizen Proudhon," said they to the organizers in his presence, "in abstaining from voting to-day on the proposition of the Mountain, has betrayed the Republican cause." Proudhon, vehemently questioned, began his defence by recalling, on the one hand, the treatment which he had received from the dismissed minister; and, on the other, the impartial conduct displayed towards him in 1840 by M. Vivien, the new minister. He then attacked the Mountain by telling its delegates that it sought only a pretext, and that really, in spite of its professions of Socialism in private conversation, whether with him or with the organizers of the banquet, it had not the courage to publicly declare itself Socialist. On the following day, in his Toast to the Revolution, a toast which was filled with allusions to the exciting scene of the night before, Proudhon commenced his struggle against the Mountain. His duel with Felix Pyat was one of the episodes of this struggle, which became less bitter on Proudhon's side after the Mountain finally decided to publicly proclaim the Democratic and Social Republic. The campaign for the election of a President of the Republic had just begun. Proudhon made a very sharp attack on the candidacy of Louis Bonaparte in a pamphlet which is regarded as one of his literary chefs-d'oeuvre: the "Pamphlet on the Presidency." An opponent of this institution, against which he had voted in the Constituent Assembly, he at first decided to take no part in the campaign. But soon seeing that he was thus increasing the chances of Louis Bonaparte, and that if, as was not at all probable, the latter should not obtain an absolute majority of the votes, the Assembly would not fail to elect General Cavaignac, he espoused, for the sake of form, the candidacy of Raspail, who was supported by his friends in the Socialist Committee. Charles Delescluze, the editor-in-chief of "La Revolution Democratique et Sociale," who could not forgive him for having preferred Raspail to Ledru-Rollin, the candidate of the Mountain, attacked him on the day after the election with a violence which overstepped all bounds. At first, Proudhon had the wisdom to refrain from answering him. At length, driven to an extremity, he became aggressive himself, and Delescluze sent him his seconds. This time, Proudhon positively refused to fight; he would not have fought with Felix Pyat, had not his courage been called in question. On the 25th of January, 1849, Proudhon, rising from a sick bed, saw that the existence of the Constituent Assembly was endangered by the coalition of the monarchical parties with Louis Bonaparte, who was already planning his coup d'Etat. He did not hesitate to openly attack the man who had just received five millions of votes. He wanted to break the idol; he succeeded only in getting prosecuted and condemned himself. The prosecution demanded against him was authorized by a majority of the Constituent Assembly, in spite of the speech which he delivered on that occasion. Declared guilty by the jury, he was sentenced, in March, 1849, to three years' imprisonment and the payment of a fine of ten thousand francs. Proudhon had not abandoned for a single moment his project of a Bank of Exchange, which was to operate without capital with a sufficient number of merchants and manufacturers for adherents. This bank, which he then called the Bank of the People, and around which he wished to gather the numerous working-people's associations which had been formed since the 24th of February, 1848, had already obtained a certain number of subscribers and adherents, the latter to the number of thirty-seven thousand. It was about to commence operations, when Proudhon's sentence forced him to choose between imprisonment and exile. He did not hesitate to abandon his project and return the money to the subscribers. He explained the motives which led him to this decision in an article in "Le Peuple." Having fled to Belgium, he remained there but a few days, going thence to Paris, under an assumed name, to conceal himself in a house in the Rue de Chabrol. From his hiding-place he sent articles almost every day, signed and unsigned, to "Le Peuple." In the evening, dressed in a blouse, he went to some secluded spot to take the air. Soon, emboldened by habit, he risked an evening promenade upon the Boulevards, and afterwards carried his imprudence so far as to take a stroll by daylight in the neighborhood of the Gare du Nord. It was not long before he was recognized by the police, who arrested him on the 6th of June, 1849, in the Rue du Faubourg-Poissonniere. Taken to the office of the prefect of police, then to Sainte-Pelagie, he was in the Conciergerie on the day of the 13th of June, 1849, which ended with the violent suppression of "Le Peuple." He then began to write the "Confessions of a Revolutionist," published towards the end of the year. He had been again transferred to Sainte-Pelagie, when he married, in December, 1849, Mlle. Euphrasie Piegard, a young working girl whose hand he had requested in 1847. Madame Proudhon bore him four daughters, of whom but two, Catherine and Stephanie, survived their father. Stephanie died in 1873. In October, 1849, "Le Peuple" was replaced by a new journal, "La Voix du Peuple," which Proudhon edited from his prison cell. In it were published his discussions with Pierre Leroux and Bastiat. The political articles which he sent to "La Voix du Peuple" so displeased the government finally, that it transferred him to Doullens, where he was secretly confined for some time. Afterwards taken back to Paris, to appear before the assizes of the Seine in reference to an article in "La Voix du Peuple," he was defended by M. Cremieux and acquitted. From the Conciergerie he went again to Sainte-Pelagie, where he ended his three years in prison on the 6th of June, 1852. "La Voix du Peuple," suppressed before the promulgation of the law of the 31st of May, had been replaced by a weekly sheet, "Le Peuple" of 1850. Established by the aid of the principal members of the Mountain, this journal soon met with the fate of its predecessors. In 1851, several months before the coup d'Etat, Proudhon published the "General Idea of the Revolution of the Nineteenth Century," in which, after having shown the logical series of unitary governments,--from monarchy, which is the first term, to the direct government of the people, which is the last,--he opposes the ideal of an-archy or self-government to the communistic or governmental ideal. At this period, the Socialist party, discouraged by the elections of 1849, which resulted in a greater conservative triumph than those of 1848, and justly angry with the national representative body which had just passed the law of the 31st of May, 1850, demanded direct legislation and direct government. Proudhon, who did not want, at any price, the plebiscitary system which he had good reason to regard as destructive of liberty, did not hesitate to point out, to those of his friends who expected every thing from direct legislation, one of the antinomies of universal suffrage. In so far as it is an institution intended to achieve, for the benefit of the greatest number, the social reforms to which landed suffrage is opposed, universal suffrage is powerless; especially if it pretends to legislate or govern directly. For, until the social reforms are accomplished, the greatest number is of necessity the least enlightened, and consequently the least capable of understanding and effecting reforms. In regard to the antinomy, pointed out by him, of liberty and government,--whether the latter be monarchic, aristocratic, or democratic in form,--Proudhon, whose chief desire was to preserve liberty, naturally sought the solution in the free contract. But though the free contract may be a practical solution of purely economical questions, it cannot be made use of in politics. Proudhon recognized this ten years later, when his beautiful study on "War and Peace" led him to find in the FEDERATIVE PRINCIPLE the exact equilibrium of liberty and government. "The Social Revolution Demonstrated by the Coup d' Etat" appeared in 1852, a few months after his release from prison. At that time, terror prevailed to such an extent that no one was willing to publish his book without express permission from the government. He succeeded in obtaining this permission by writing to Louis Bonaparte a letter which he published at the same time with the work. The latter being offered for sale, Proudhon was warned that he would not be allowed to publish any more books of the same character. At that time he entertained the idea of writing a universal history entitled "Chronos." This project was never fulfilled. Already the father of two children, and about to be presented with a third, Proudhon was obliged to devise some immediate means of gaining a living; he resumed his labors, and published, at first anonymously, the "Manual of a Speculator in the Stock-Exchange." Later, in 1857, after having completed the work, he did not hesitate to sign it, acknowledging in the preface his indebtedness to his collaborator, G. Duchene. Meantime, he vainly sought permission to establish a journal, or review. This permission was steadily refused him. The imperial government always suspected him after the publication of the "Social Revolution Demonstrated by the Coup d'Etat." Towards the end of 1853, Proudhon issued in Belgium a pamphlet entitled "The Philosophy of Progress." Entirely inoffensive as it was, this pamphlet, which he endeavored to send into France, was seized on the frontier. Proudhon's complaints were of no avail. The empire gave grants after grants to large companies. A financial society, having asked for the grant of a railroad in the east of France, employed Proudhon to write several memoirs in support of this demand. The grant was given to another company. The author was offered an indemnity as compensation, to be paid (as was customary in such cases) by the company which received the grant. It is needless to say that Proudhon would accept nothing. Then, wishing to explain to the public, as well as to the government, the end which he had in view, he published the work entitled "Reforms to be Effected in the Management of Railroads." Towards the end of 1854, Proudhon had already begun his book on "Justice," when he had a violent attack of cholera, from which he recovered with great difficulty. Ever afterwards his health was delicate. At last, on the 22d of April, 1858, he published, in three large volumes, the important work upon which he had labored since 1854. This work had two titles: the first, "Justice in the Revolution and in the Church;" the second, "New Principles of Practical Philosophy, addressed to His Highness Monseigneur Mathieu, Cardinal-Archbishop of Besancon." On the 27th of April, when there had scarcely been time to read the work, an order was issued by the magistrate for its seizure; on the 28th the seizure was effected. To this first act of the magistracy, the author of the incriminated book replied on the 11th of May in a strongly-motived petition, demanding a revision of the concordat of 1802; or, in other words, a new adjustment of the relations between Church and State. At bottom, this petition was but the logical consequence of the work itself. An edition of a thousand copies being published on the 17th of May, the "Petition to the Senate" was regarded by the public prosecutor as an aggravation of the offence or offences discovered in the body of the work to which it was an appendix, and was seized in its turn on the 23d. On the first of June, the author appealed to the Senate in a second "Petition," which was deposited with the first in the office of the Secretary of the Assembly, the guardian and guarantee, according to the constitution of 1852, of the principles of '89. On the 2d of June, the two processes being united, Proudhon appeared at the bar with his publisher, the printer of the book, and the printer of the petition, to receive the sentence of the police magistrate, which condemned him to three years' imprisonment, a fine of four thousand francs, and the suppression of his work. It is needless to say that the publisher and printers were also condemned by the sixth chamber. Proudhon lodged an appeal; he wrote a memoir which the law of 1819, in the absence of which he would have been liable to a new prosecution, gave him the power to publish previous to the hearing. Having decided to make use of the means which the law permitted, he urged in vain the printers who were prosecuted with him to lend him their aid. He then demanded of Attorney-General Chaix d'Est Ange a statement to the effect that the twenty-third article of the law of the 17th of May, 1819, allows a written defence, and that a printer runs no risk in printing it. The attorney-general flatly refused. Proudhon then started for Belgium, where he printed his defence, which could not, of course, cross the French frontier. This memoir is entitled to rank with the best of Beaumarchais's; it is entitled: "Justice prosecuted by the Church; An Appeal from the Sentence passed upon P. J. Proudhon by the Police Magistrate of the Seine, on the 2d of June, 1858." A very close discussion of the grounds of the judgment of the sixth chamber, it was at the same time an excellent resume of his great work. Once in Belgium, Proudhon did not fail to remain there. In 1859, after the general amnesty which followed the Italian war, he at first thought himself included in it. But the imperial government, consulted by his friends, notified him that, in its opinion, and in spite of the contrary advice of M. Faustin Helie, his condemnation was not of a political character. Proudhon, thus classed by the government with the authors of immoral works, thought it beneath his dignity to protest, and waited patiently for the advent of 1863 to allow him to return to France. In Belgium, where he was not slow in forming new friendships, he published in 1859-60, in separate parts, a new edition of his great work on "Justice." Each number contained, in addition to the original text carefully reviewed and corrected, numerous explanatory notes and some "Tidings of the Revolution." In these tidings, which form a sort of review of the progress of ideas in Europe, Proudhon sorrowfully asserts that, after having for a long time marched at the head of the progressive nations, France has become, without appearing to suspect it, the most retrogressive of nations; and he considers her more than once as seriously threatened with moral death. The Italian war led him to write a new work, which he published in 1861, entitled "War and Peace." This work, in which, running counter to a multitude of ideas accepted until then without examination, he pronounced for the first time against the restoration of an aristocratic and priestly Poland, and against the establishment of a unitary government in Italy, created for him a multitude of enemies. Most of his friends, disconcerted by his categorical affirmation of a right of force, notified him that they decidedly disapproved of his new publication. "You see," triumphantly cried those whom he had always combated, "this man is only a sophist." Led by his previous studies to test every thing by the question of right, Proudhon asks, in his "War and Peace," whether there is a real right of which war is the vindication, and victory the demonstration. This right, which he roughly calls the right of the strongest or the right of force, and which is, after all, only the right of the most worthy to the preference in certain definite cases, exists, says Proudhon, independently of war. It cannot be legitimately vindicated except where necessity clearly demands the subordination of one will to another, and within the limits in which it exists; that is, without ever involving the enslavement of one by the other. Among nations, the right of the majority, which is only a corollary of the right of force, is as unacceptable as universal monarchy. Hence, until equilibrium is established and recognized between States or national forces, there must be war. War, says Proudhon, is not always necessary to determine which side is the strongest; and he has no trouble in proving this by examples drawn from the family, the workshop, and elsewhere. Passing then to the study of war, he proves that it by no means corresponds in practice to that which it ought to be according to his theory of the right of force. The systematic horrors of war naturally lead him to seek a cause for it other than the vindication of this right; and then only does the economist take it upon himself to denounce this cause to those who, like himself, want peace. The necessity of finding abroad a compensation for the misery resulting in every nation from the absence of economical equilibrium, is, according to Proudhon, the ever real, though ever concealed, cause of war. The pages devoted to this demonstration and to his theory of poverty, which he clearly distinguishes from misery and pauperism, shed entirely new light upon the philosophy of history. As for the author's conclusion, it is a very simple one. Since the treaty of Westphalia, and especially since the treaties of 1815, equilibrium has been the international law of Europe. It remains now, not to destroy it, but, while maintaining it, to labor peacefully, in every nation protected by it, for the equilibrium of economical forces. The last line of the book, evidently written to check imperial ambition, is: "Humanity wants no more war." In 1861, after Garibaldi's expedition and the battle of Castelfidardo, Proudhon immediately saw that the establishment of Italian unity would be a severe blow to European equilibrium. It was chiefly in order to maintain this equilibrium that he pronounced so energetically in favor of Italian federation, even though it should be at first only a federation of monarchs. In vain was it objected that, in being established by France, Italian unity would break European equilibrium in our favor. Proudhon, appealing to history, showed that every State which breaks the equilibrium in its own favor only causes the other States to combine against it, and thereby diminishes its influence and power. He added that, nations being essentially selfish, Italy would not fail, when opportunity offered, to place her interest above her gratitude. To maintain European equilibrium by diminishing great States and multiplying small ones; to unite the latter in organized federations, not for attack, but for defence; and with these federations, which, if they were not republican already, would quickly become so, to hold in check the great military monarchies,--such, in the beginning of 1861, was the political programme of Proudhon. The object of the federations, he said, will be to guarantee, as far as possible, the beneficent reign of peace; and they will have the further effect of securing in every nation the triumph of liberty over despotism. Where the largest unitary State is, there liberty is in the greatest danger; further, if this State be democratic, despotism without the counterpoise of majorities is to be feared. With the federation, it is not so. The universal suffrage of the federal State is checked by the universal suffrage of the federated States; and the latter is offset in its turn by PROPERTY, the stronghold of liberty, which it tends, not to destroy, but to balance with the institutions of MUTUALISM. All these ideas, and many others which were only hinted at in his work on "War and Peace," were developed by Proudhon in his subsequent publications, one of which has for its motto, "Reforms always, Utopias never." The thinker had evidently finished his evolution. The Council of State of the canton of Vaud having offered prizes for essays on the question of taxation, previously discussed at a congress held at Lausanne, Proudhon entered the ranks and carried off the first prize. His memoir was published in 1861 under the title of "The Theory of Taxation." About the same time, he wrote at Brussels, in "L'Office de Publicite," some remarkable articles on the question of literary property, which was discussed at a congress held in Belgium, These articles must not be confounded with "Literary Majorats," a more complete work on the same subject, which was published in 1863, soon after his return to France. Arbitrarily excepted from the amnesty in 1859, Proudhon was pardoned two years later by a special act. He did not wish to take advantage of this favor, and seemed resolved to remain in Belgium until the 2d of June, 1863, the time when he was to acquire the privilege of prescription, when an absurd and ridiculous riot, excited in Brussels by an article published by him on federation and unity in Italy, induced him to hasten his return to France. Stones were thrown against the house in which he lived, in the Faubourg d'Ixelles. After having placed his wife and daughters in safety among his friends at Brussels, he arrived in Paris in September, 1862, and published there, "Federation and Italian Unity," a pamphlet which naturally commences with the article which served as a pretext for the rioters in Brussels. Among the works begun by Proudhon while in Belgium, which death did not allow him to finish, we ought to mention a "History of Poland," which will be published later; and, "The Theory of Property," which appeared in 1865, before "The Gospels Annotated," and after the volume entitled "The Principle of Art and its Social Destiny." The publications of Proudhon, in 1863, were: 1. "Literary Majorats: An Examination of a Bill having for its object the Creation of a Perpetual Monopoly for the Benefit of Authors, Inventors, and Artists;" 2. "The Federative Principle and the Necessity of Re-establishing the Revolutionary party;" 3. "The Sworn Democrats and the Refractories;" 4. "Whether the Treaties of 1815 have ceased to exist? Acts of the Future Congress." The disease which was destined to kill him grew worse and worse; but Proudhon labored constantly!... A series of articles, published in 1864 in "Le Messager de Paris," have been collected in a pamphlet under the title of "New Observations on Italian Unity." He hoped to publish during the same year his work on "The Political Capacity of the Working Classes," but was unable to write the last chapter.... He grew weaker continually. His doctor prescribed rest. In the month of August he went to Franche-Comte, where he spent a month. Having returned to Paris, he resumed his labor with difficulty.... From the month of December onwards, the heart disease made rapid progress; the oppression became insupportable, his legs were swollen, and he could not sleep.... On the 19th of January, 1865, he died, towards two o'clock in the morning, in the arms of his wife, his sister-in-law, and the friend who writes these lines.... The publication of his correspondence, to which his daughter Catherine is faithfully devoted, will tend, no doubt, to increase his reputation as a thinker, as a writer, and as an honest man. J. A. LANGLOIS. PREFACE. The following letter served as a preface to the first edition of this memoir:-- "To the Members of the Academy of Besancon "PARIS, June 30, 1840. "GENTLEMEN,--In the course of your debate of the 9th of May, 1833, in regard to the triennial pension established by Madame Suard, you expressed the following wish:-- "'The Academy requests the titulary to present it annually, during the first fortnight in July, with a succinct and logical statement of the various studies which he has pursued during the year which has just expired.' "I now propose, gentlemen, to discharge this duty. "When I solicited your votes, I boldly avowed my intention to bend my efforts to the discovery of some means of AMELIORATING THE PHYSICAL, MORAL, AND INTELLECTUAL CONDITION OF THE MERE NUMEROUS AND POORER CLASSES. This idea, foreign as it may have seemed to the object of my candidacy, you received favorably; and, by the precious distinction with which it has been your pleasure to honor me, you changed this formal offer into an inviolable and sacred obligation. Thenceforth I understood with how worthy and honorable a society I had to deal: my regard for its enlightenment, my recognition of its benefits, my enthusiasm for its glory, were unbounded. "Convinced at once that, in order to break loose from the beaten paths of opinions and systems, it was necessary to proceed in my study of man and society by scientific methods, and in a rigorous manner, I devoted one year to philology and grammar; linguistics, or the natural history of speech, being, of all the sciences, that which was best suited to the character of my mind, seemed to bear the closest relation to the researches which I was about to commence. A treatise, written at this period upon one of the most interesting questions of comparative grammar,[2] if it did not reveal the astonishing success, at least bore witness to the thoroughness, of my labors. "Since that time, metaphysics and moral science have been my only studies; my perception of the fact that these sciences, though badly defined as to their object and not confined to their sphere, are, like the natural sciences, susceptible of demonstration and certainty, has already rewarded my efforts. "But, gentlemen, of all the masters whom I have followed, to none do I owe so much as to you. Your co-operation, your programmes, your instructions, in agreement with my secret wishes and most cherished hopes, have at no time failed to enlighten me and to point out my road; this memoir on property is the child of your thought. "In 1838, the Academy of Besancon proposed the following question: TO WHAT CAUSES MUST WE ATTRIBUTE THE CONTINUALLY INCREASING NUMBER OF SUICIDES, AND WHAT ARE THE PROPER MEANS FOR ARRESTING THE EFFECTS OF THIS MORAL CONTAGION? "Thereby it asked, in less general terms, what was the cause of the social evil, and what was its remedy? You admitted that yourselves, gentlemen when your committee reported that the competitors had enumerated with exactness the immediate and particular causes of suicide, as well as the means of preventing each of them; but that from this enumeration, chronicled with more or less skill, no positive information had been gained, either as to the primary cause of the evil, or as to its remedy. "In 1839, your programme, always original and varied in its academical expression, became more exact. The investigations of 1838 had pointed out, as the causes or rather as the symptoms of the social malady, the neglect of the principles of religion and morality, the desire for wealth, the passion for enjoyment, and political disturbances. All these data were embodied by you in a single proposition: _THE UTILITY OF THE CELEBRATION OF SUNDAY AS REGARDS HYGIENE, MORALITY, AND SOCIAL AND POLITICAL RELATION_. "In a Christian tongue you asked, gentlemen, what was the true system of society. A competitor [3] dared to maintain, and believed that he had proved, that the institution of a day of rest at weekly intervals is inseparably bound up with a political system based on the equality of conditions; that without equality this institution is an anomaly and an impossibility: that equality alone can revive this ancient and mysterious keeping of the seventh day. This argument did not meet with your approbation, since, without denying the relation pointed out by the competitor, you judged, and rightly gentlemen, that the principle of equality of conditions not being demonstrated, the ideas of the author were nothing more than hypotheses. "Finally, gentlemen, this fundamental principle of equality you presented for competition in the following terms: THE ECONOMICAL AND MORAL CONSEQUENCES IN FRANCE UP TO THE PRESENT TIME, AND THOSE WHICH SEEM LIKELY TO APPEAR IN FUTURE, OF THE LAW CONCERNING THE EQUAL DIVISION OF HEREDITARY PROPERTY BETWEEN THE CHILDREN. "Instead of confining one to common places without breadth or significance, it seems to me that your question should be developed as follows:-- "If the law has been able to render the right of heredity common to all the children of one father, can it not render it equal for all his grandchildren and great-grandchildren? "If the law no longer heeds the age of any member of the family, can it not, by the right of heredity, cease to heed it in the race, in the tribe, in the nation? "Can equality, by the right of succession, be preserved between citizens, as well as between cousins and brothers? In a word, can the principle of succession become a principle of equality? "To sum up all these ideas in one inclusive question: What is the principle of heredity? What are the foundations of inequality? What is property? "Such, gentlemen, is the object of the memoir that I offer you to day. "If I have rightly grasped the object of your thought; if I succeed in bringing to light a truth which is indisputable, but, from causes which I am bold enough to claim to have explained, has always been misunderstood; if by an infallible method of investigation, I establish the dogma of equality of conditions; if I determine the principle of civil law, the essence of justice, and the form of society; if I annihilate property forever,--to you, gentlemen, will redound all the glory, for it is to your aid and your inspiration that I owe it. "My purpose in this work is the application of method to the problems of philosophy; every other intention is foreign to and even abusive of it. "I have spoken lightly of jurisprudence: I had the right; but I should be unjust did I not distinguish between this pretended science and the men who practise it. Devoted to studies both laborious and severe, entitled in all respects to the esteem of their fellow-citizens by their knowledge and eloquence our legists deserve but one reproach, that of an excessive deference to arbitrary laws. "I have been pitiless in my criticism of the economists: for them I confess that, in general, I have no liking. The arrogance and the emptiness of their writings, their impertinent pride and their unwarranted blunders, have disgusted me. Whoever, knowing them, pardons them, may read them. "I have severely blamed the learned Christian Church: it was my duty. This blame results from the facts which I call attention to: why has the Church decreed concerning things which it does not understand? The Church has erred in dogma and in morals; physics and mathematics testify against her. It may be wrong for me to say it, but surely it is unfortunate for Christianity that it is true. To restore religion, gentlemen, it is necessary to condemn the Church. "Perhaps you will regret, gentlemen, that, in giving all my attention to method and evidence, I have too much neglected form and style: in vain should I have tried to do better. Literary hope and faith I have none. The nineteenth century is, in my eyes, a genesic era, in which new principles are elaborated, but in which nothing that is written shall endure. That is the reason, in my opinion, why, among so many men of talent, France to-day counts not one great writer. In a society like ours, to seek for literary glory seems to me an anachronism. Of what use is it to invoke an ancient sibyl when a muse is on the eve of birth? Pitiable actors in a tragedy nearing its end, that which it behooves us to do is to precipitate the catastrophe. The most deserving among us is he who plays best this part. Well, I no longer aspire to this sad success! "Why should I not confess it, gentlemen? I have aspired to your suffrages and sought the title of your pensioner, hating all which exists and full of projects for its destruction; I shall finish this investigation in a spirit of calm and philosophical resignation. I have derived more peace from the knowledge of the truth, than anger from the feeling of oppression; and the most precious fruit that I could wish to gather from this memoir would be the inspiration of my readers with that tranquillity of soul which arises from the clear perception of evil and its cause, and which is much more powerful than passion and enthusiasm. My hatred of privilege and human authority was unbounded; perhaps at times I have been guilty, in my indignation, of confounding persons and things; at present I can only despise and complain; to cease to hate I only needed to know. "It is for you now, gentlemen, whose mission and character are the proclamation of the truth, it is for you to instruct the people, and to tell them for what they ought to hope and what they ought to fear. The people, incapable as yet of sound judgment as to what is best for them, applaud indiscriminately the most opposite ideas, provided that in them they get a taste of flattery: to them the laws of thought are like the confines of the possible; to-day they can no more distinguish between a savant and a sophist, than formerly they could tell a physician from a sorcerer. 'Inconsiderately accepting, gathering together, and accumulating everything that is new, regarding all reports as true and indubitable, at the breath or ring of novelty they assemble like bees at the sound of a basin.' [4] "May you, gentlemen, desire equality as I myself desire it; may you, for the eternal happiness of our country, become its propagators and its heralds; may I be the last of your pensioners! Of all the wishes that I can frame, that, gentlemen, is the most worthy of you and the most honorable for me. "I am, with the profoundest respect and the most earnest gratitude, "Your pensioner, "P. J. PROUDHON." Two months after the receipt of this letter, the Academy, in its debate of August 24th, replied to the address of its pensioner by a note, the text of which I give below:-- "A member calls the attention of the Academy to a pamphlet, published last June by the titulary of the Suard pension, entitled, "What is property?" and dedicated by the author to the Academy. He is of the opinion that the society owes it to justice, to example, and to its own dignity, to publicly disavow all responsibility for the anti-social doctrines contained in this publication. In consequence he demands: "1. That the Academy disavow and condemn, in the most formal manner, the work of the Suard pensioner, as having been published without its assent, and as attributing to it opinions diametrically opposed to the principles of each of its members; "2. That the pensioner be charged, in case he should publish a second edition of his book, to omit the dedication; "3. That this judgment of the Academy be placed upon the records. "These three propositions, put to vote, are adopted." After this ludicrous decree, which its authors thought to render powerful by giving it the form of a contradiction, I can only beg the reader not to measure the intelligence of my compatriots by that of our Academy. While my patrons in the social and political sciences were fulminating anathemas against my brochure, a man, who was a stranger to Franche-Comte, who did not know me, who might even have regarded himself as personally attacked by the too sharp judgment which I had passed upon the economists, a publicist as learned as he was modest, loved by the people whose sorrows he felt, honored by the power which he sought to enlighten without flattering or disgracing it, M. Blanqui--member of the Institute, professor of political economy, defender of property--took up my defence before his associates and before the ministry, and saved me from the blows of a justice which is always blind, because it is always ignorant. It seems to me that the reader will peruse with pleasure the letter which M. Blanqui did me the honor to write to me upon the publication of my second memoir, a letter as honorable to its author as it is flattering to him to whom it is addressed. "PARIS, May 1, 1841. "MONSIEUR,--I hasten to thank you for forwarding to me your second memoir upon property. I have read it with all the interest that an acquaintance with the first would naturally inspire. I am very glad that you have modified somewhat the rudeness of form which gave to a work of such gravity the manner and appearance of a pamphlet; for you quite frightened me, sir, and your talent was needed to reassure me in regard to your intentions. One does not expend so much real knowledge with the purpose of inflaming his country. This proposition, now coming into notice--PROPERTY IS ROBBERY!--was of a nature to repel from your book even those serious minds who do not judge by appearances, had you persisted in maintaining it in its rude simplicity. But if you have softened the form, you are none the less faithful to the ground-work of your doctrines; and although you have done me the honor to give me a share in this perilous teaching, I cannot accept a partnership which, as far as talent goes, would surely be a credit to me, but which would compromise me in all other respects. "I agree with you in one thing only; namely, that all kinds of property get too frequently abused in this world. But I do not reason from the abuse to the abolition,--an heroic remedy too much like death, which cures all evils. I will go farther: I will confess that, of all abuses, the most hateful to me are those of property; but once more, there is a remedy for this evil without violating it, all the more without destroying it. If the present laws allow abuse, we can reconstruct them. Our civil code is not the Koran; it is not wrong to examine it. Change, then, the laws which govern the use of property, but be sparing of anathemas; for, logically, where is the honest man whose hands are entirely clean? Do you think that one can be a robber without knowing it, without wishing it, without suspecting it? Do you not admit that society in its present state, like every man, has in its constitution all kinds of virtues and vices inherited from our ancestors? Is property, then, in your eyes a thing so simple and so abstract that you can re-knead and equalize it, if I may so speak, in your metaphysical mill? One who has said as many excellent and practical things as occur in these two beautiful and paradoxical improvisations of yours cannot be a pure and unwavering utopist. You are too well acquainted with the economical and academical phraseology to play with the hard words of revolutions. I believe, then, that you have handled property as Rousseau, eighty years ago, handled letters, with a magnificent and poetical display of wit and knowledge. Such, at least, is my opinion. "That is what I said to the Institute at the time when I presented my report upon your book. I knew that they wished to proceed against you in the courts; you perhaps do not know by how narrow a chance I succeeded in preventing them. [5] What chagrin I should always have felt, if the king's counsel, that is to say, the intellectual executioner, had followed in my very tracks to attack your book and annoy your person! I actually passed two terrible nights, and I succeeded in restraining the secular arm only by showing that your book was an academical dissertation, and not the manifesto of an incendiary. Your style is too lofty ever to be of service to the madmen who in discussing the gravest questions of our social order, use paving-stones as their weapons. But see to it, sir, that ere long they do not come, in spite of you, to seek for ammunition in this formidable arsenal, and that your vigorous metaphysics falls not into the hands of some sophist of the market-place, who might discuss the question in the presence of a starving audience: we should have pillage for conclusion and peroration. "I feel as deeply as you, sir, the abuses which you point out; but I have so great an affection for order,--not that common and strait-laced order with which the police are satisfied, but the majestic and imposing order of human societies,--that I sometimes find myself embarrassed in attacking certain abuses. I like to rebuild with one hand when I am compelled to destroy with the other. In pruning an old tree, we guard against destruction of the buds and fruit. You know that as well as any one. You are a wise and learned man; you have a thoughtful mind. The terms by which you characterize the fanatics of our day are strong enough to reassure the most suspicious imaginations as to your intentions; but you conclude in favor of the abolition of property! You wish to abolish the most powerful motor of the human mind; you attack the paternal sentiment in its sweetest illusions; with one word you arrest the formation of capital, and we build henceforth upon the sand instead of on a rock. That I cannot agree to; and for that reason I have criticised your book, so full of beautiful pages, so brilliant with knowledge and fervor! "I wish, sir, that my impaired health would permit me to examine with you, page by page, the memoir which you have done me the honor to address to me publicly and personally; I think I could offer some important criticisms. For the moment, I must content myself with thanking you for the kind words in which you have seen fit to speak of me. We each possess the merit of sincerity; I desire also the merit of prudence. You know how deep-seated is the disease under which the working-people are suffering; I know how many noble hearts beat under those rude garments, and I feel an irresistible and fraternal sympathy with the thousands of brave people who rise early in the morning to labor, to pay their taxes, and to make our country strong. I try to serve and enlighten them, whereas some endeavor to mislead them. You have not written directly for them. You have issued two magnificent manifestoes, the second more guarded than the first; issue a third more guarded than the second, and you will take high rank in science, whose first precept is calmness and impartiality. "Farewell, sir! No man's esteem for another can exceed mine for you. "BLANQUI." I should certainly take some exceptions to this noble and eloquent letter; but I confess that I am more inclined to realize the prediction with which it terminates than to augment needlessly the number of my antagonists. So much controversy fatigues and wearies me. The intelligence expended in the warfare of words is like that employed in battle: it is intelligence wasted. M. Blanqui acknowledges that property is abused in many harmful ways; I call PROPERTY the sum these abuses exclusively. To each of us property seems a polygon whose angles need knocking off; but, the operation performed, M. Blanqui maintains that the figure will still be a polygon (an hypothesis admitted in mathematics, although not proven), while I consider that this figure will be a circle. Honest people can at least understand one another. For the rest, I allow that, in the present state of the question, the mind may legitimately hesitate before deciding in favor of the abolition of property. To gain the victory for one's cause, it does not suffice simply to overthrow a principle generally recognized, which has the indisputable merit of systematically recapitulating our political theories; it is also necessary to establish the opposite principle, and to formulate the system which must proceed from it. Still further, it is necessary to show the method by which the new system will satisfy all the moral and political needs which induced the establishment of the first. On the following conditions, then, of subsequent evidence, depends the correctness of my preceding arguments:-- The discovery of a system of absolute equality in which all existing institutions, save property, or the sum of the abuses of property, not only may find a place, but may themselves serve as instruments of equality: individual liberty, the division of power, the public ministry, the jury system, administrative and judicial organization, the unity and completeness of instruction, marriage, the family, heredity in direct and collateral succession, the right of sale and exchange, the right to make a will, and even birthright,--a system which, better than property, guarantees the formation of capital and keeps up the courage of all; which, from a superior point of view, explains, corrects, and completes the theories of association hitherto proposed, from Plato and Pythagoras to Babeuf, Saint Simon, and Fourier; a system, finally, which, serving as a means of transition, is immediately applicable. A work so vast requires, I am aware, the united efforts of twenty Montesquieus; nevertheless, if it is not given to a single man to finish, a single one can commence, the enterprise. The road that he shall traverse will suffice to show the end and assure the result. WHAT IS PROPERTY? OR, AN INQUIRY INTO THE PRINCIPLE OF RIGHT AND OF GOVERNMENT. FIRST MEMOIR. _Adversus hostem aeterna auctertas esto._ Against the enemy, revendication is eternal. LAW OF THE TWELVE TABLES. CHAPTER I. METHOD PURSUED IN THIS WORK.--THE IDEA OF A REVOLUTION. If I were asked to answer the following question: WHAT IS SLAVERY? and I should answer in one word, IT IS MURDER, my meaning would be understood at once. No extended argument would be required to show that the power to take from a man his thought, his will, his personality, is a power of life and death; and that to enslave a man is to kill him. Why, then, to this other question: WHAT IS PROPERTY! may I not likewise answer, IT IS ROBBERY, without the certainty of being misunderstood; the second proposition being no other than a transformation of the first? I undertake to discuss the vital principle of our government and our institutions, property: I am in my right. I may be mistaken in the conclusion which shall result from my investigations: I am in my right. I think best to place the last thought of my book first: still am I in my right. Such an author teaches that property is a civil right, born of occupation and sanctioned by law; another maintains that it is a natural right, originating in labor,--and both of these doctrines, totally opposed as they may seem, are encouraged and applauded. I contend that neither labor, nor occupation, nor law, can create property; that it is an effect without a cause: am I censurable? But murmurs arise! PROPERTY IS ROBBERY! That is the war-cry of '93! That is the signal of revolutions! Reader, calm yourself: I am no agent of discord, no firebrand of sedition. I anticipate history by a few days; I disclose a truth whose development we may try in vain to arrest; I write the preamble of our future constitution. This proposition which seems to you blasphemous--PROPERTY IS ROBBERY--would, if our prejudices allowed us to consider it, be recognized as the lightning-rod to shield us from the coming thunderbolt; but too many interests stand in the way!... Alas! philosophy will not change the course of events: destiny will fulfill itself regardless of prophecy. Besides, must not justice be done and our education be finished? PROPERTY IS ROBBERY!... What a revolution in human ideas! PROPRIETOR and ROBBER have been at all times expressions as contradictory as the beings whom they designate are hostile; all languages have perpetuated this opposition. On what authority, then, do you venture to attack universal consent, and give the lie to the human race? Who are you, that you should question the judgment of the nations and the ages? Of what consequence to you, reader, is my obscure individuality? I live, like you, in a century in which reason submits only to fact and to evidence. My name, like yours, is TRUTH-SEEKER. [6] My mission is written in these words of the law: SPEAK WITHOUT HATRED AND WITHOUT FEAR; TELL THAT WHICH THOU KNOWEST! The work of our race is to build the temple of science, and this science includes man and Nature. Now, truth reveals itself to all; to-day to Newton and Pascal, tomorrow to the herdsman in the valley and the journeyman in the shop. Each one contributes his stone to the edifice; and, his task accomplished, disappears. Eternity precedes us, eternity follows us: between two infinites, of what account is one poor mortal that the century should inquire about him? Disregard then, reader, my title and my character, and attend only to my arguments. It is in accordance with universal consent that I undertake to correct universal error; from the OPINION of the human race I appeal to its FAITH. Have the courage to follow me; and, if your will is untrammelled, if your conscience is free, if your mind can unite two propositions and deduce a third therefrom, my ideas will inevitably become yours. In beginning by giving you my last word, it was my purpose to warn you, not to defy you; for I am certain that, if you read me, you will be compelled to assent. The things of which I am to speak are so simple and clear that you will be astonished at not having perceived them before, and you will say: "I have neglected to think." Others offer you the spectacle of genius wresting Nature's secrets from her, and unfolding before you her sublime messages; you will find here only a series of experiments upon JUSTICE and RIGHT a sort of verification of the weights and measures of your conscience. The operations shall be conducted under your very eyes; and you shall weigh the result. Nevertheless, I build no system. I ask an end to privilege, the abolition of slavery, equality of rights, and the reign of law. Justice, nothing else; that is the alpha and omega of my argument: to others I leave the business of governing the world. One day I asked myself: Why is there so much sorrow and misery in society? Must man always be wretched? And not satisfied with the explanations given by the reformers,--these attributing the general distress to governmental cowardice and incapacity, those to conspirators and emeutes, still others to ignorance and general corruption,--and weary of the interminable quarrels of the tribune and the press, I sought to fathom the matter myself. I have consulted the masters of science; I have read a hundred volumes of philosophy, law, political economy, and history: would to God that I had lived in a century in which so much reading had been useless! I have made every effort to obtain exact information, comparing doctrines, replying to objections, continually constructing equations and reductions from arguments, and weighing thousands of syllogisms in the scales of the most rigorous logic. In this laborious work, I have collected many interesting facts which I shall share with my friends and the public as soon as I have leisure. But I must say that I recognized at once that we had never understood the meaning of these words, so common and yet so sacred: JUSTICE, EQUITY, LIBERTY; that concerning each of these principles our ideas have been utterly obscure; and, in fact, that this ignorance was the sole cause, both of the poverty that devours us, and of all the calamities that have ever afflicted the human race. My mind was frightened by this strange result: I doubted my reason. What! said I, that which eye has not seen, nor ear heard, nor insight penetrated, you have discovered! Wretch, mistake not the visions of your diseased brain for the truths of science! Do you not know (great philosophers have said so) that in points of practical morality universal error is a contradiction? I resolved then to test my arguments; and in entering upon this new labor I sought an answer to the following questions: Is it possible that humanity can have been so long and so universally mistaken in the application of moral principles? How and why could it be mistaken? How can its error, being universal, be capable of correction? These questions, on the solution of which depended the certainty of my conclusions, offered no lengthy resistance to analysis. It will be seen, in chapter V. of this work, that in morals, as in all other branches of knowledge, the gravest errors are the dogmas of science; that, even in works of justice, to be mistaken is a privilege which ennobles man; and that whatever philosophical merit may attach to me is infinitely small. To name a thing is easy: the difficulty is to discern it before its appearance. In giving expression to the last stage of an idea,--an idea which permeates all minds, which to-morrow will be proclaimed by another if I fail to announce it to-day,--I can claim no merit save that of priority of utterance. Do we eulogize the man who first perceives the dawn? Yes: all men believe and repeat that equality of conditions is identical with equality of rights; that PROPERTY and ROBBERY are synonymous terms; that every social advantage accorded, or rather usurped, in the name of superior talent or service, is iniquity and extortion. All men in their hearts, I say, bear witness to these truths; they need only to be made to understand it. Before entering directly upon the question before me, I must say a word of the road that I shall traverse. When Pascal approached a geometrical problem, he invented a method of solution; to solve a problem in philosophy a method is equally necessary. Well, by how much do the problems of which philosophy treats surpass in the gravity of their results those discussed by geometry! How much more imperatively, then, do they demand for their solution a profound and rigorous analysis! It is a fact placed for ever beyond doubt, say the modern psychologists, that every perception received by the mind is determined by certain general laws which govern the mind; is moulded, so to speak, in certain types pre-existing in our understanding, and which constitutes its original condition. Hence, say they, if the mind has no innate IDEAS, it has at least innate FORMS. Thus, for example, every phenomenon is of necessity conceived by us as happening in TIME and SPACE,--that compels us to infer a CAUSE of its occurrence; every thing which exists implies the ideas of SUBSTANCE, MODE, RELATION, NUMBER, &C.; in a word, we form no idea which is not related to some one of the general principles of reason, independent of which nothing exists. These axioms of the understanding, add the psychologists, these fundamental types, by which all our judgments and ideas are inevitably shaped, and which our sensations serve only to illuminate, are known in the schools as CATEGORIES. Their primordial existence in the mind is to-day demonstrated; they need only to be systematized and catalogued. Aristotle recognized ten; Kant increased the number to fifteen; M. Cousin has reduced it to three, to two, to one; and the indisputable glory of this professor will be due to the fact that, if he has not discovered the true theory of categories, he has, at least, seen more clearly than any one else the vast importance of this question,--the greatest and perhaps the only one with which metaphysics has to deal. I confess that I disbelieve in the innateness, not only of IDEAS, but also of FORMS or LAWS of our understanding; and I hold the metaphysics of Reid and Kant to be still farther removed from the truth than that of Aristotle. However, as I do not wish to enter here into a discussion of the mind, a task which would demand much labor and be of no interest to the public, I shall admit the hypothesis that our most general and most necessary ideas--such as time, space, substance, and cause--exist originally in the mind; or, at least, are derived immediately from its constitution. But it is a psychological fact none the less true, and one to which the philosophers have paid too little attention, that habit, like a second nature, has the power of fixing in the mind new categorical forms derived from the appearances which impress us, and by them usually stripped of objective reality, but whose influence over our judgments is no less predetermining than that of the original categories. Hence we reason by the ETERNAL and ABSOLUTE laws of our mind, and at the same time by the secondary rules, ordinarily faulty, which are suggested to us by imperfect observation. This is the most fecund source of false prejudices, and the permanent and often invincible cause of a multitude of errors. The bias resulting from these prejudices is so strong that often, even when we are fighting against a principle which our mind thinks false, which is repugnant to our reason, and which our conscience disapproves, we defend it without knowing it, we reason in accordance with it, and we obey it while attacking it. Enclosed within a circle, our mind revolves about itself, until a new observation, creating within us new ideas, brings to view an external principle which delivers us from the phantom by which our imagination is possessed. Thus, we know to-day that, by the laws of a universal magnetism whose cause is still unknown, two bodies (no obstacle intervening) tend to unite by an accelerated impelling force which we call GRAVITATION. It is gravitation which causes unsupported bodies to fall to the ground, which gives them weight, and which fastens us to the earth on which we live. Ignorance of this cause was the sole obstacle which prevented the ancients from believing in the antipodes. "Can you not see," said St. Augustine after Lactantius, "that, if there were men under our feet, their heads would point downward, and that they would fall into the sky?" The bishop of Hippo, who thought the earth flat because it appeared so to the eye, supposed in consequence that, if we should connect by straight lines the zenith with the nadir in different places, these lines would be parallel with each other; and in the direction of these lines he traced every movement from above to below. Thence he naturally concluded that the stars were rolling torches set in the vault of the sky; that, if left to themselves, they would fall to the earth in a shower of fire; that the earth was one vast plain, forming the lower portion of the world, &c. If he had been asked by what the world itself was sustained, he would have answered that he did not know, but that to God nothing is impossible. Such were the ideas of St. Augustine in regard to space and movement, ideas fixed within him by a prejudice derived from an appearance, and which had become with him a general and categorical rule of judgment. Of the reason why bodies fall his mind knew nothing; he could only say that a body falls because it falls. With us the idea of a fall is more complex: to the general ideas of space and movement which it implies, we add that of attraction or direction towards a centre, which gives us the higher idea of cause. But if physics has fully corrected our judgment in this respect, we still make use of the prejudice of St. Augustine; and when we say that a thing has FALLEN, we do not mean simply and in general that there has been an effect of gravitation, but specially and in particular that it is towards the earth, and FROM ABOVE TO BELOW, that this movement has taken place. Our mind is enlightened in vain; the imagination prevails, and our language remains forever incorrigible. To DESCEND FROM HEAVEN is as incorrect an expression as to MOUNT TO HEAVEN; and yet this expression will live as long as men use language. All these phrases--FROM ABOVE TO BELOW; TO DESCEND FROM HEAVEN; TO FALL FROM THE CLOUDS, &C.--are henceforth harmless, because we know how to rectify them in practice; but let us deign to consider for a moment how much they have retarded the progress of science. If, indeed, it be a matter of little importance to statistics, mechanics, hydrodynamics, and ballistics, that the true cause of the fall of bodies should be known, and that our ideas of the general movements in space should be exact, it is quite otherwise when we undertake to explain the system of the universe, the cause of tides, the shape of the earth, and its position in the heavens: to understand these things we must leave the circle of appearances. In all ages there have been ingenious mechanicians, excellent architects, skilful artillerymen: any error, into which it was possible for them to fall in regard to the rotundity of the earth and gravitation, in no wise retarded the development of their art; the solidity of their buildings and accuracy of their aim was not affected by it. But sooner or later they were forced to grapple with phenomena, which the supposed parallelism of all perpendiculars erected from the earth's surface rendered inexplicable: then also commenced a struggle between the prejudices, which for centuries had sufficed in daily practice, and the unprecedented opinions which the testimony of the eyes seemed to contradict. Thus, on the one hand, the falsest judgments, whether based on isolated facts or only on appearances, always embrace some truths whose sphere, whether large or small, affords room for a certain number of inferences, beyond which we fall into absurdity. The ideas of St. Augustine, for example, contained the following truths: that bodies fall towards the earth, that they fall in a straight line, that either the sun or the earth moves, that either the sky or the earth turns, &c. These general facts always have been true; our science has added nothing to them. But, on the other hand, it being necessary to account for every thing, we are obliged to seek for principles more and more comprehensive: that is why we have had to abandon successively, first the opinion that the world was flat, then the theory which regards it as the stationary centre of the universe, &c. If we pass now from physical nature to the moral world, we still find ourselves subject to the same deceptions of appearance, to the same influences of spontaneity and habit. But the distinguishing feature of this second division of our knowledge is, on the one hand, the good or the evil which we derive from our opinions; and, on the other, the obstinacy with which we defend the prejudice which is tormenting and killing us. Whatever theory we embrace in regard to the shape of the earth and the cause of its weight, the physics of the globe does not suffer; and, as for us, our social economy can derive therefrom neither profit nor damage. But it is in us and through us that the laws of our moral nature work; now, these laws cannot be executed without our deliberate aid, and, consequently, unless we know them. If, then, our science of moral laws is false, it is evident that, while desiring our own good, we are accomplishing our own evil; if it is only incomplete, it may suffice for a time for our social progress, but in the long run it will lead us into a wrong road, and will finally precipitate us into an abyss of calamities. Then it is that we need to exercise our highest judgments; and, be it said to our glory, they are never found wanting: but then also commences a furious struggle between old prejudices and new ideas. Days of conflagration and anguish! We are told of the time when, with the same beliefs, with the same institutions, all the world seemed happy: why complain of these beliefs; why banish these institutions? We are slow to admit that that happy age served the precise purpose of developing the principle of evil which lay dormant in society; we accuse men and gods, the powers of earth and the forces of Nature. Instead of seeking the cause of the evil in his mind and heart, man blames his masters, his rivals, his neighbors, and himself; nations arm themselves, and slay and exterminate each other, until equilibrium is restored by the vast depopulation, and peace again arises from the ashes of the combatants. So loath is humanity to touch the customs of its ancestors, and to change the laws framed by the founders of communities, and confirmed by the faithful observance of the ages. _Nihil motum ex antiquo probabile est_: Distrust all innovations, wrote Titus Livius. Undoubtedly it would be better were man not compelled to change: but what! because he is born ignorant, because he exists only on condition of gradual self-instruction, must he abjure the light, abdicate his reason, and abandon himself to fortune? Perfect health is better than convalescence: should the sick man, therefore, refuse to be cured? Reform, reform! cried, ages since, John the Baptist and Jesus Christ. Reform, reform! cried our fathers, fifty years ago; and for a long time to come we shall shout, Reform, reform! Seeing the misery of my age, I said to myself: Among the principles that support society, there is one which it does not understand, which its ignorance has vitiated, and which causes all the evil that exists. This principle is the most ancient of all; for it is a characteristic of revolutions to tear down the most modern principles, and to respect those of long-standing. Now the evil by which we suffer is anterior to all revolutions. This principle, impaired by our ignorance, is honored and cherished; for if it were not cherished it would harm nobody, it would be without influence. But this principle, right in its purpose, but misunderstood: this principle, as old as humanity, what is it? Can it be religion? All men believe in God: this dogma belongs at once to their conscience and their mind. To humanity God is a fact as primitive, an idea as inevitable, a principle as necessary as are the categorical ideas of cause, substance, time, and space to our understanding. God is proven to us by the conscience prior to any inference of the mind; just as the sun is proven to us by the testimony of the senses prior to all the arguments of physics. We discover phenomena and laws by observation and experience; only this deeper sense reveals to us existence. Humanity believes that God is; but, in believing in God, what does it believe? In a word, what is God? The nature of this notion of Divinity,--this primitive, universal notion, born in the race,--the human mind has not yet fathomed. At each step that we take in our investigation of Nature and of causes, the idea of God is extended and exalted; the farther science advances, the more God seems to grow and broaden. Anthropomorphism and idolatry constituted of necessity the faith of the mind in its youth, the theology of infancy and poesy. A harmless error, if they had not endeavored to make it a rule of conduct, and if they had been wise enough to respect the liberty of thought. But having made God in his own image, man wished to appropriate him still farther; not satisfied with disfiguring the Almighty, he treated him as his patrimony, his goods, his possessions. God, pictured in monstrous forms, became throughout the world the property of man and of the State. Such was the origin of the corruption of morals by religion, and the source of pious feuds and holy wars. Thank Heaven! we have learned to allow every one his own beliefs; we seek for moral laws outside the pale of religion. Instead of legislating as to the nature and attributes of God, the dogmas of theology, and the destiny of our souls, we wisely wait for science to tell us what to reject and what to accept. God, soul, religion,--eternal objects of our unwearied thought and our most fatal aberrations, terrible problems whose solution, for ever attempted, for ever remains unaccomplished,--concerning all these questions we may still be mistaken, but at least our error is harmless. With liberty in religion, and the separation of the spiritual from the temporal power, the influence of religious ideas upon the progress of society is purely negative; no law, no political or civil institution being founded on religion. Neglect of duties imposed by religion may increase the general corruption, but it is not the primary cause; it is only an auxiliary or result. It is universally admitted, and especially in the matter which now engages our attention, that the cause of the inequality of conditions among men--of pauperism, of universal misery, and of governmental embarrassments--can no longer be traced to religion: we must go farther back, and dig still deeper. But what is there in man older and deeper than the religious sentiment? There is man himself; that is, volition and conscience, free-will and law, eternally antagonistic. Man is at war with himself: why? "Man," say the theologians, "transgressed in the beginning; our race is guilty of an ancient offence. For this transgression humanity has fallen; error and ignorance have become its sustenance. Read history, you will find universal proof of this necessity for evil in the permanent misery of nations. Man suffers and always will suffer; his disease is hereditary and constitutional. Use palliatives, employ emollients; there is no remedy." Nor is this argument peculiar to the theologians; we find it expressed in equivalent language in the philosophical writings of the materialists, believers in infinite perfectibility. Destutt de Tracy teaches formally that poverty, crime, and war are the inevitable conditions of our social state; necessary evils, against which it would be folly to revolt. So, call it NECESSITY OF EVIL or ORIGINAL DEPRAVITY, it is at bottom the same philosophy. "The first man transgressed." If the votaries of the Bible interpreted it faithfully, they would say: MAN ORIGINALLY TRANSGRESSED, that is, made a mistake; for TO TRANSGRESS, TO FAIL, TO MAKE A MISTAKE, all mean the same thing. "The consequences of Adam's transgression are inherited by the race; the first is ignorance." Truly, the race, like the individual, is born ignorant; but, in regard to a multitude of questions, even in the moral and political spheres, this ignorance of the race has been dispelled: who says that it will not depart altogether? Mankind makes continual progress toward truth, and light ever triumphs over darkness. Our disease is not, then, absolutely incurable, and the theory of the theologians is worse than inadequate; it is ridiculous, since it is reducible to this tautology: "Man errs, because he errs." While the true statement is this: "Man errs, because he learns." Now, if man arrives at a knowledge of all that he needs to know, it is reasonable to believe that, ceasing to err, he will cease to suffer. But if we question the doctors as to this law, said to be engraved upon the heart of man, we shall immediately see that they dispute about a matter of which they know nothing; that, concerning the most important questions, there are almost as many opinions as authors; that we find no two agreeing as to the best form of government, the principle of authority, and the nature of right; that all sail hap-hazard upon a shoreless and bottomless sea, abandoned to the guidance of their private opinions which they modestly take to be right reason. And, in view of this medley of contradictory opinions, we say: "The object of our investigations is the law, the determination of the social principle. Now, the politicians, that is, the social scientists, do not understand each other; then the error lies in themselves; and, as every error has a reality for its object, we must look in their books to find the truth which they have unconsciously deposited there." Now, of what do the lawyers and the publicists treat? Of JUSTICE, EQUITY, LIBERTY, NATURAL LAW, CIVIL LAWS, &c. But what is justice? What is its principle, its character, its formula? To this question our doctors evidently have no reply; for otherwise their science, starting with a principle clear and well defined, would quit the region of probabilities, and all disputes would end. What is justice? The theologians answer: "All justice comes from God." That is true; but we know no more than before. The philosophers ought to be better informed: they have argued so much about justice and injustice! Unhappily, an examination proves that their knowledge amounts to nothing, and that with them--as with the savages whose every prayer to the sun is simply _O! O!_--it is a cry of admiration, love, and enthusiasm; but who does not know that the sun attaches little meaning to the interjection O! That is exactly our position toward the philosophers in regard to justice. Justice, they say, is a DAUGHTER OF HEAVEN; A LIGHT WHICH ILLUMINES EVERY MAN THAT COMES INTO THE WORLD; THE MOST BEAUTIFUL PREROGATIVE OF OUR NATURE; THAT WHICH DISTINGUISHES US FROM THE BEASTS AND LIKENS US TO GOD--and a thousand other similar things. What, I ask, does this pious litany amount to? To the prayer of the savages: O! All the most reasonable teachings of human wisdom concerning justice are summed up in that famous adage: DO UNTO OTHERS THAT WHICH YOU WOULD THAT OTHERS SHOULD DO UNTO YOU; DO NOT UNTO OTHERS THAT WHICH YOU WOULD NOT THAT OTHERS SHOULD DO UNTO YOU. But this rule of moral practice is unscientific: what have I a right to wish that others should do or not do to me? It is of no use to tell me that my duty is equal to my right, unless I am told at the same time what my right is. Let us try to arrive at something more precise and positive. Justice is the central star which governs societies, the pole around which the political world revolves, the principle and the regulator of all transactions. Nothing takes place between men save in the name of RIGHT; nothing without the invocation of justice. Justice is not the work of the law: on the contrary, the law is only a declaration and application of JUSTICE in all circumstances where men are liable to come in contact. If, then, the idea that we form of justice and right were ill-defined, if it were imperfect or even false, it is clear that all our legislative applications would be wrong, our institutions vicious, our politics erroneous: consequently there would be disorder and social chaos. This hypothesis of the perversion of justice in our minds, and, as a necessary result, in our acts, becomes a demonstrated fact when it is shown that the opinions of men have not borne a constant relation to the notion of justice and its applications; that at different periods they have undergone modifications: in a word, that there has been progress in ideas. Now, that is what history proves by the most overwhelming testimony. Eighteen Hundred years ago, the world, under the rule of the Caesars, exhausted itself in slavery, superstition, and voluptuousness. The people--intoxicated and, as it were, stupefied by their long-continued orgies--had lost the very notion of right and duty: war and dissipation by turns swept them away; usury and the labor of machines (that is of slaves), by depriving them of the means of subsistence, hindered them from continuing the species. Barbarism sprang up again, in a hideous form, from this mass of corruption, and spread like a devouring leprosy over the depopulated provinces. The wise foresaw the downfall of the empire, but could devise no remedy. What could they think indeed? To save this old society it would have been necessary to change the objects of public esteem and veneration, and to abolish the rights affirmed by a justice purely secular; they said: "Rome has conquered through her politics and her gods; any change in theology and public opinion would be folly and sacrilege. Rome, merciful toward conquered nations, though binding them in chains, spared their lives; slaves are the most fertile source of her wealth; freedom of the nations would be the negation of her rights and the ruin of her finances. Rome, in fact, enveloped in the pleasures and gorged with the spoils of the universe, is kept alive by victory and government; her luxury and her pleasures are the price of her conquests: she can neither abdicate nor dispossess herself." Thus Rome had the facts and the law on her side. Her pretensions were justified by universal custom and the law of nations. Her institutions were based upon idolatry in religion, slavery in the State, and epicurism in private life; to touch those was to shake society to its foundations, and, to use our modern expression, to open the abyss of revolutions. So the idea occurred to no one; and yet humanity was dying in blood and luxury. All at once a man appeared, calling himself The Word of God. It is not known to this day who he was, whence he came, nor what suggested to him his ideas. He went about proclaiming everywhere that the end of the existing society was at hand, that the world was about to experience a new birth; that the priests were vipers, the lawyers ignoramuses, and the philosophers hypocrites and liars; that master and slave were equals, that usury and every thing akin to it was robbery, that proprietors and idlers would one day burn, while the poor and pure in heart would find a haven of peace. This man--The Word of God--was denounced and arrested as a public enemy by the priests and the lawyers, who well understood how to induce the people to demand his death. But this judicial murder, though it put the finishing stroke to their crimes, did not destroy the doctrinal seeds which The Word of God had sown. After his death, his original disciples travelled about in all directions, preaching what they called the GOOD NEWS, creating in their turn millions of missionaries; and, when their task seemed to be accomplished, dying by the sword of Roman justice. This persistent agitation, the war of the executioners and martyrs, lasted nearly three centuries, ending in the conversion of the world. Idolatry was destroyed, slavery abolished, dissolution made room for a more austere morality, and the contempt for wealth was sometimes pushed almost to privation. Society was saved by the negation of its own principles, by a revolution in its religion, and by violation of its most sacred rights. In this revolution, the idea of justice spread to an extent that had not before been dreamed of, never to return to its original limits. Heretofore justice had existed only for the masters; [7] it then commenced to exist for the slaves. Nevertheless, the new religion at that time had borne by no means all its fruits. There was a perceptible improvement of the public morals, and a partial release from oppression; but, other than that, the SEEDS SOWN BY THE SON OF MAN, having fallen into idolatrous hearts, had produced nothing save innumerable discords and a quasi-poetical mythology. Instead of developing into their practical consequences the principles of morality and government taught by The Word of God, his followers busied themselves in speculations as to his birth, his origin, his person, and his actions; they discussed his parables, and from the conflict of the most extravagant opinions upon unanswerable questions and texts which no one understood, was born THEOLOGY,--which may be defined as the SCIENCE OF THE INFINITELY ABSURD. The truth of CHRISTIANITY did not survive the age of the apostles; the GOSPEL, commented upon and symbolized by the Greeks and Latins, loaded with pagan fables, became literally a mass of contradictions; and to this day the reign of the INFALLIBLE CHURCH has been a long era of darkness. It is said that the GATES OF HELL will not always prevail, that THE WORD OF GOD will return, and that one day men will know truth and justice; but that will be the death of Greek and Roman Catholicism, just as in the light of science disappeared the caprices of opinion. The monsters which the successors of the apostles were bent on destroying, frightened for a moment, reappeared gradually, thanks to the crazy fanaticism, and sometimes the deliberate connivance, of priests and theologians. The history of the enfranchisement of the French communes offers constantly the spectacle of the ideas of justice and liberty spreading among the people, in spite of the combined efforts of kings, nobles, and clergy. In the year 1789 of the Christian era, the French nation, divided by caste, poor and oppressed, struggled in the triple net of royal absolutism, the tyranny of nobles and parliaments, and priestly intolerance. There was the right of the king and the right of the priest, the right of the patrician and the right of the plebeian; there were the privileges of birth, province, communes, corporations, and trades; and, at the bottom of all, violence, immorality, and misery. For some time they talked of reformation; those who apparently desired it most favoring it only for their own profit, and the people who were to be the gainers expecting little and saying nothing. For a long time these poor people, either from distrust, incredulity, or despair, hesitated to ask for their rights: it is said that the habit of serving had taken the courage away from those old communes, which in the middle ages were so bold. Finally a book appeared, summing up the whole matter in these two propositions: WHAT IS THE THIRD ESTATE?--NOTHING. WHAT OUGHT IT TO BE?--EVERY THING. Some one added by way of comment: WHAT IS THE KING?--THE SERVANT OF THE PEOPLE. This was a sudden revelation: the veil was torn aside, a thick bandage fell from all eyes. The people commenced to reason thus:-- If the king is our servant, he ought to report to us; If he ought to report to us, he is subject to control; If he can be controlled, he is responsible; If he is responsible, he is punishable; If he is punishable, he ought to be punished according to his merits; If he ought to be punished according to his merits, he can be punished with death. Five years after the publication of the brochure of Sieyes, the third estate was every thing; the king, the nobility, the clergy, were no more. In 1793, the nation, without stopping at the constitutional fiction of the inviolability of the sovereign, conducted Louis XVI. to the scaffold; in 1830, it accompanied Charles X. to Cherbourg. In each case, it may have erred, in fact, in its judgment of the offence; but, in right, the logic which led to its action was irreproachable. The people, in punishing their sovereign, did precisely that which the government of July was so severely censured for failing to do when it refused to execute Louis Bonaparte after the affair of Strasburg: they struck the true culprit. It was an application of the common law, a solemn decree of justice enforcing the penal laws. [8] The spirit which gave rise to the movement of '89 was a spirit of negation; that, of itself, proves that the order of things which was substituted for the old system was not methodical or well-considered; that, born of anger and hatred, it could not have the effect of a science based on observation and study; that its foundations, in a word, were not derived from a profound knowledge of the laws of Nature and society. Thus the people found that the republic, among the so-called new institutions, was acting on the very principles against which they had fought, and was swayed by all the prejudices which they had intended to destroy. We congratulate ourselves, with inconsiderate enthusiasm, on the glorious French Revolution, the regeneration of 1789, the great changes that have been effected, and the reversion of institutions: a delusion, a delusion! When our ideas on any subject, material, intellectual, or social, undergo a thorough change in consequence of new observations, I call that movement of the mind REVOLUTION. If the ideas are simply extended or modified, there is only PROGRESS. Thus the system of Ptolemy was a step in astronomical progress, that of Copernicus was a revolution. So, in 1789, there was struggle and progress; revolution there was none. An examination of the reforms which were attempted proves this. The nation, so long a victim of monarchical selfishness, thought to deliver itself for ever by declaring that it alone was sovereign. But what was monarchy? The sovereignty of one man. What is democracy? The sovereignty of the nation, or, rather, of the national majority. But it is, in both cases, the sovereignty of man instead of the sovereignty of the law, the sovereignty of the will instead of the sovereignty of the reason; in one word, the passions instead of justice. Undoubtedly, when a nation passes from the monarchical to the democratic state, there is progress, because in multiplying the sovereigns we increase the opportunities of the reason to substitute itself for the will; but in reality there is no revolution in the government, since the principle remains the same. Now, we have the proof to-day that, with the most perfect democracy, we cannot be free. [9] Nor is that all. The nation-king cannot exercise its sovereignty itself; it is obliged to delegate it to agents: this is constantly reiterated by those who seek to win its favor. Be these agents five, ten, one hundred, or a thousand, of what consequence is the number; and what matters the name? It is always the government of man, the rule of will and caprice. I ask what this pretended revolution has revolutionized? We know, too, how this sovereignty was exercised; first by the Convention, then by the Directory, afterwards confiscated by the Consul. As for the Emperor, the strong man so much adored and mourned by the nation, he never wanted to be dependent on it; but, as if intending to set its sovereignty at defiance, he dared to demand its suffrage: that is, its abdication, the abdication of this inalienable sovereignty; and he obtained it. But what is sovereignty? It is, they say, the POWER TO MAKE LAW. [10] Another absurdity, a relic of despotism. The nation had long seen kings issuing their commands in this form: FOR SUCH IS OUR PLEASURE; it wished to taste in its turn the pleasure of making laws. For fifty years it has brought them forth by myriads; always, be it understood, through the agency of representatives. The play is far from ended. The definition of sovereignty was derived from the definition of the law. The law, they said, is THE EXPRESSION OF THE WILL OF THE SOVEREIGN: then, under a monarchy, the law is the expression of the will of the king; in a republic, the law is the expression of the will of the people. Aside from the difference in the number of wills, the two systems are exactly identical: both share the same error, namely, that the law is the expression of a will; it ought to be the expression of a fact. Moreover they followed good leaders: they took the citizen of Geneva for their prophet, and the contrat social for their Koran. Bias and prejudice are apparent in all the phrases of the new legislators. The nation had suffered from a multitude of exclusions and privileges; its representatives issued the following declaration: ALL MEN ARE EQUAL BY NATURE AND BEFORE THE LAW; an ambiguous and redundant declaration. MEN ARE EQUAL BY NATURE: does that mean that they are equal in size, beauty, talents, and virtue? No; they meant, then, political and civil equality. Then it would have been sufficient to have said: ALL MEN ARE EQUAL BEFORE THE LAW. But what is equality before the law? Neither the constitution of 1790, nor that of '93, nor the granted charter, nor the accepted charter, have defined it accurately. All imply an inequality in fortune and station incompatible with even a shadow of equality in rights. In this respect it may be said that all our constitutions have been faithful expressions of the popular will: I am going, to prove it. Formerly the people were excluded from civil and military offices; it was considered a wonder when the following high-sounding article was inserted in the Declaration of Rights: "All citizens are equally eligible to office; free nations know no qualifications in their choice of officers save virtues and talents." They certainly ought to have admired so beautiful an idea: they admired a piece of nonsense. Why! the sovereign people, legislators, and reformers, see in public offices, to speak plainly, only opportunities for pecuniary advancement. And, because it regards them as a source of profit, it decrees the eligibility of citizens. For of what use would this precaution be, if there were nothing to gain by it? No one would think of ordaining that none but astronomers and geographers should be pilots, nor of prohibiting stutterers from acting at the theatre and the opera. The nation was still aping the kings: like them it wished to award the lucrative positions to its friends and flatterers. Unfortunately, and this last feature completes the resemblance, the nation did not control the list of livings; that was in the hands of its agents and representatives. They, on the other hand, took care not to thwart the will of their gracious sovereign. This edifying article of the Declaration of Rights, retained in the charters of 1814 and 1830, implies several kinds of civil inequality; that is, of inequality before the law: inequality of station, since the public functions are sought only for the consideration and emoluments which they bring; inequality of wealth, since, if it had been desired to equalize fortunes, public service would have been regarded as a duty, not as a reward; inequality of privilege, the law not stating what it means by TALENTS and VIRTUES. Under the empire, virtue and talent consisted simply in military bravery and devotion to the emperor; that was shown when Napoleon created his nobility, and attempted to connect it with the ancients. To-day, the man who pays taxes to the amount of two hundred francs is virtuous; the talented man is the honest pickpocket: such truths as these are accounted trivial. The people finally legalized property. God forgive them, for they knew not what they did! For fifty years they have suffered for their miserable folly. But how came the people, whose voice, they tell us, is the voice of God, and whose conscience is infallible,--how came the people to err? How happens it that, when seeking liberty and equality, they fell back into privilege and slavery? Always through copying the ancient regime. Formerly, the nobility and the clergy contributed towards the expenses of the State only by voluntary aid and gratuitous gift; their property could not be seized even for debt,--while the plebeian, overwhelmed by taxes and statute-labor, was continually tormented, now by the king's tax-gatherers, now by those of the nobles and clergy. He whose possessions were subject to mortmain could neither bequeath nor inherit property; he was treated like the animals, whose services and offspring belong to their master by right of accession. The people wanted the conditions of OWNERSHIP to be alike for all; they thought that every one should ENJOY AND FREELY DISPOSE OF HIS POSSESSIONS HIS INCOME AND THE FRUIT OF HIS LABOR AND INDUSTRY. The people did not invent property; but as they had not the same privileges in regard to it, which the nobles and clergy possessed, they decreed that the right should be exercised by all under the same conditions. The more obnoxious forms of property--statute-labor, mortmain, maitrise, and exclusion from public office--have disappeared; the conditions of its enjoyment have been modified: the principle still remains the same. There has been progress in the regulation of the right; there has been no revolution. These, then, are the three fundamental principles of modern society, established one after another by the movements of 1789 and 1830: 1. SOVEREIGNTY OF THE HUMAN WILL; in short, DESPOTISM. 2. INEQUALITY OF WEALTH AND RANK. 3. PROPERTY--above JUSTICE, always invoked as the guardian angel of sovereigns, nobles, and proprietors; JUSTICE, the general, primitive, categorical law of all society. We must ascertain whether the ideas of DESPOTISM, CIVIL INEQUALITY and PROPERTY, are in harmony with the primitive notion of JUSTICE, and necessarily follow from it,--assuming various forms according to the condition, position, and relation of persons; or whether they are not rather the illegitimate result of a confusion of different things, a fatal association of ideas. And since justice deals especially with the questions of government, the condition of persons, and the possession of things, we must ascertain under what conditions, judging by universal opinion and the progress of the human mind, government is just, the condition of citizens is just, and the possession of things is just; then, striking out every thing which fails to meet these conditions, the result will at once tell us what legitimate government is, what the legitimate condition of citizens is, and what the legitimate possession of things is; and finally, as the last result of the analysis, what JUSTICE is. Is the authority of man over man just? Everybody answers, "No; the authority of man is only the authority of the law, which ought to be justice and truth." The private will counts for nothing in government, which consists, first, in discovering truth and justice in order to make the law; and, second, in superintending the execution of this law. I do not now inquire whether our constitutional form of government satisfies these conditions; whether, for example, the will of the ministry never influences the declaration and interpretation of the law; or whether our deputies, in their debates, are more intent on conquering by argument than by force of numbers: it is enough for me that my definition of a good government is allowed to be correct. This idea is exact. Yet we see that nothing seems more just to the Oriental nations than the despotism of their sovereigns; that, with the ancients and in the opinion of the philosophers themselves, slavery was just; that in the middle ages the nobles, the priests, and the bishops felt justified in holding slaves; that Louis XIV. thought that he was right when he said, "The State! I am the State;" and that Napoleon deemed it a crime for the State to oppose his will. The idea of justice, then, applied to sovereignty and government, has not always been what it is to-day; it has gone on developing and shaping itself by degrees, until it has arrived at its present state. But has it reached its last phase? I think not: only, as the last obstacle to be overcome arises from the institution of property which we have kept intact, in order to finish the reform in government and consummate the revolution, this very institution we must attack. Is political and civil inequality just? Some say yes; others no. To the first I would reply that, when the people abolished all privileges of birth and caste, they did it, in all probability, because it was for their advantage; why then do they favor the privileges of fortune more than those of rank and race? Because, say they, political inequality is a result of property; and without property society is impossible: thus the question just raised becomes a question of property. To the second I content myself with this remark: If you wish to enjoy political equality, abolish property; otherwise, why do you complain? Is property just? Everybody answers without hesitation, "Yes, property is just." I say everybody, for up to the present time no one who thoroughly understood the meaning of his words has answered no. For it is no easy thing to reply understandingly to such a question; only time and experience can furnish an answer. Now, this answer is given; it is for us to understand it. I undertake to prove it. We are to proceed with the demonstration in the following order:-- I. We dispute not at all, we refute nobody, we deny nothing; we accept as sound all the arguments alleged in favor of property, and confine ourselves to a search for its principle, in order that we may then ascertain whether this principle is faithfully expressed by property. In fact, property being defensible on no ground save that of justice, the idea, or at least the intention, of justice must of necessity underlie all the arguments that have been made in defence of property; and, as on the other hand the right of property is only exercised over those things which can be appreciated by the senses, justice, secretly objectifying itself, so to speak, must take the shape of an algebraic formula. By this method of investigation, we soon see that every argument which has been invented in behalf of property, WHATEVER IT MAY BE, always and of necessity leads to equality; that is, to the negation of property. The first part covers two chapters: one treating of occupation, the foundation of our right; the other, of labor and talent, considered as causes of property and social inequality. The first of these chapters will prove that the right of occupation OBSTRUCTS property; the second that the right of labor DESTROYS it. II. Property, then, being of necessity conceived as existing only in connection with equality, it remains to find out why, in spite of this necessity of logic, equality does not exist. This new investigation also covers two chapters: in the first, considering the fact of property in itself, we inquire whether this fact is real, whether it exists, whether it is possible; for it would imply a contradiction, were these two opposite forms of society, equality and inequality, both possible. Then we discover, singularly enough, that property may indeed manifest itself accidentally; but that, as an institution and principle, it is mathematically impossible. So that the axiom of the school--ab actu ad posse valet consecutio: from the actual to the possible the inference is good--is given the lie as far as property is concerned. Finally, in the last chapter, calling psychology to our aid, and probing man's nature to the bottom, we shall disclose the principle of JUSTICE--its formula and character; we shall state with precision the organic law of society; we shall explain the origin of property, the causes of its establishment, its long life, and its approaching death; we shall definitively establish its identity with robbery. And, after having shown that these three prejudices--THE SOVEREIGNTY OF MAN, THE INEQUALITY OF CONDITIONS, AND PROPERTY--are one and the same; that they may be taken for each other, and are reciprocally convertible,--we shall have no trouble in inferring therefrom, by the principle of contradiction, the basis of government and right. There our investigations will end, reserving the right to continue them in future works. The importance of the subject which engages our attention is recognized by all minds. "Property," says M. Hennequin, "is the creative and conservative principle of civil society. Property is one of those basic institutions, new theories concerning which cannot be presented too soon; for it must not be forgotten, and the publicist and statesman must know, that on the answer to the question whether property is the principle or the result of social order, whether it is to be considered as a cause or an effect, depends all morality, and, consequently, all the authority of human institutions." These words are a challenge to all men of hope and faith; but, although the cause of equality is a noble one, no one has yet picked up the gauntlet thrown down by the advocates of property; no one has been courageous enough to enter upon the struggle. The spurious learning of haughty jurisprudence, and the absurd aphorisms of a political economy controlled by property have puzzled the most generous minds; it is a sort of password among the most influential friends of liberty and the interests of the people that EQUALITY IS A CHIMERA! So many false theories and meaningless analogies influence minds otherwise keen, but which are unconsciously controlled by popular prejudice. Equality advances every day--fit aequalitas. Soldiers of liberty, shall we desert our flag in the hour of triumph? A defender of equality, I shall speak without bitterness and without anger; with the independence becoming a philosopher, with the courage and firmness of a free man. May I, in this momentous struggle, carry into all hearts the light with which I am filled; and show, by the success of my argument, that equality failed to conquer by the sword only that it might conquer by the pen! CHAPTER II. PROPERTY CONSIDERED AS A NATURAL RIGHT PROPERTY CONSIDERED AS A NATURAL RIGHT.--OCCUPATION AND CIVIL LAW AS EFFICIENT BASES OF PROPERTY. DEFINITIONS. The Roman law defined property as the right to use and abuse one's own within the limits of the law--jus utendi et abutendi re sua, quatenus juris ratio patitur. A justification of the word ABUSE has been attempted, on the ground that it signifies, not senseless and immoral abuse, but only absolute domain. Vain distinction! invented as an excuse for property, and powerless against the frenzy of possession, which it neither prevents nor represses. The proprietor may, if he chooses, allow his crops to rot under foot; sow his field with salt; milk his cows on the sand; change his vineyard into a desert, and use his vegetable-garden as a park: do these things constitute abuse, or not? In the matter of property, use and abuse are necessarily indistinguishable. According to the Declaration of Rights, published as a preface to the Constitution of '93, property is "the right to enjoy and dispose at will of one's goods, one's income, and the fruit of one's labor and industry." Code Napoleon, article 544: "Property is the right to enjoy and dispose of things in the most absolute manner, provided we do not overstep the limits prescribed by the laws and regulations." These two definitions do not differ from that of the Roman law: all give the proprietor an absolute right over a thing; and as for the restriction imposed by the code,--PROVIDED WE DO NOT OVERSTEP THE LIMITS PRESCRIBED BY THE LAWS AND REGULATIONS,--its object is not to limit property, but to prevent the domain of one proprietor from interfering with that of another. That is a confirmation of the principle, not a limitation of it. There are different kinds of property: 1. Property pure and simple, the dominant and seigniorial power over a thing; or, as they term it, NAKED PROPERTY. 2. POSSESSION. "Possession," says Duranton, "is a matter of fact, not of right." Toullier: "Property is a right, a legal power; possession is a fact." The tenant, the farmer, the commandite, the usufructuary, are possessors; the owner who lets and lends for use, the heir who is to come into possession on the death of a usufructuary, are proprietors. If I may venture the comparison: a lover is a possessor, a husband is a proprietor. This double definition of property--domain and possession--is of the highest importance; and it must be clearly understood, in order to comprehend what is to follow. From the distinction between possession and property arise two sorts of rights: the jus in re, the right in a thing, the right by which I may reclaim the property which I have acquired, in whatever hands I find it; and the jus ad rem, the right TO a thing, which gives me a claim to become a proprietor. Thus the right of the partners to a marriage over each other's person is the jus in re; that of two who are betrothed is only the jus ad rem. In the first, possession and property are united; the second includes only naked property. With me who, as a laborer, have a right to the possession of the products of Nature and my own industry,--and who, as a proletaire, enjoy none of them,--it is by virtue of the jus ad rem that I demand admittance to the jus in re. This distinction between the jus in re and the jus ad rem is the basis of the famous distinction between possessoire and petitoire,--actual categories of jurisprudence, the whole of which is included within their vast boundaries. Petitoire refers to every thing relating to property; possessoire to that relating to possession. In writing this memoir against property, I bring against universal society an action petitoire: I prove that those who do not possess to-day are proprietors by the same title as those who do possess; but, instead of inferring therefrom that property should be shared by all, I demand, in the name of general security, its entire abolition. If I fail to win my case, there is nothing left for us (the proletarian class and myself) but to cut our throats: we can ask nothing more from the justice of nations; for, as the code of procedure (art 26) tells us in its energetic style, THE PLAINTIFF WHO HAS BEEN NON-SUITED IN AN ACTION PETITOIRE, IS DEBARRED THEREBY FROM BRINGING AN ACTION POSSESSOIRE. If, on the contrary, I gain the case, we must then commence an action possessoire, that we may be reinstated in the enjoyment of the wealth of which we are deprived by property. I hope that we shall not be forced to that extremity; but these two actions cannot be prosecuted at once, such a course being prohibited by the same code of procedure. Before going to the heart of the question, it will not be useless to offer a few preliminary remarks. % 1.--Property as a Natural Right. The Declaration of Rights has placed property in its list of the natural and inalienable rights of man, four in all: LIBERTY, EQUALITY, PROPERTY, SECURITY. What rule did the legislators of '93 follow in compiling this list? None. They laid down principles, just as they discussed sovereignty and the laws; from a general point of view, and according to their own opinion. They did every thing in their own blind way. If we can believe Toullier: "The absolute rights can be reduced to three: SECURITY, LIBERTY, PROPERTY." Equality is eliminated by the Rennes professor; why? Is it because LIBERTY implies it, or because property prohibits it? On this point the author of "Droit Civil Explique" is silent: it has not even occurred to him that the matter is under discussion. Nevertheless, if we compare these three or four rights with each other, we find that property bears no resemblance whatever to the others; that for the majority of citizens it exists only potentially, and as a dormant faculty without exercise; that for the others, who do enjoy it, it is susceptible of certain transactions and modifications which do not harmonize with the idea of a natural right; that, in practice, governments, tribunals, and laws do not respect it; and finally that everybody, spontaneously and with one voice, regards it as chimerical. Liberty is inviolable. I can neither sell nor alienate my liberty; every contract, every condition of a contract, which has in view the alienation or suspension of liberty, is null: the slave, when he plants his foot upon the soil of liberty, at that moment becomes a free man. When society seizes a malefactor and deprives him of his liberty, it is a case of legitimate defence: whoever violates the social compact by the commission of a crime declares himself a public enemy; in attacking the liberty of others, he compels them to take away his own. Liberty is the original condition of man; to renounce liberty is to renounce the nature of man: after that, how could we perform the acts of man? Likewise, equality before the law suffers neither restriction nor exception. All Frenchmen are equally eligible to office: consequently, in the presence of this equality, condition and family have, in many cases, no influence upon choice. The poorest citizen can obtain judgment in the courts against one occupying the most exalted station. Let the millionaire, Ahab, build a chateau upon the vineyard of Naboth: the court will have the power, according to the circumstances, to order the destruction of the chateau, though it has cost millions; and to force the trespasser to restore the vineyard to its original state, and pay the damages. The law wishes all property, that has been legitimately acquired, to be kept inviolate without regard to value, and without respect for persons. The charter demands, it is true, for the exercise of certain political rights, certain conditions of fortune and capacity; but all publicists know that the legislator's intention was not to establish a privilege, but to take security. Provided the conditions fixed by law are complied with, every citizen may be an elector, and every elector eligible. The right, once acquired, is the same for all; the law compares neither persons nor votes. I do not ask now whether this system is the best; it is enough that, in the opinion of the charter and in the eyes of every one, equality before the law is absolute, and, like liberty, admits of no compromise. It is the same with the right of security. Society promises its members no half-way protection, no sham defence; it binds itself to them as they bind themselves to it. It does not say to them, "I will shield you, provided it costs me nothing; I will protect you, if I run no risks thereby." It says, "I will defend you against everybody; I will save and avenge you, or perish myself." The whole strength of the State is at the service of each citizen; the obligation which binds them together is absolute. How different with property! Worshipped by all, it is acknowledged by none: laws, morals, customs, public and private conscience, all plot its death and ruin. To meet the expenses of government, which has armies to support, tasks to perform, and officers to pay, taxes are needed. Let all contribute to these expenses: nothing more just. But why should the rich pay more than the poor? That is just, they say, because they possess more. I confess that such justice is beyond my comprehension. Why are taxes paid? To protect all in the exercise of their natural rights--liberty, equality, security, and property; to maintain order in the State; to furnish the public with useful and pleasant conveniences. Now, does it cost more to defend the rich man's life and liberty than the poor man's? Who, in time of invasion, famine, or plague, causes more trouble,--the large proprietor who escapes the evil without the assistance of the State, or the laborer who sits in his cottage unprotected from danger? Is public order endangered more by the worthy citizen, or by the artisan and journeyman? Why, the police have more to fear from a few hundred laborers, out of work, than from two hundred thousand electors! Does the man of large income appreciate more keenly than the poor man national festivities, clean streets, and beautiful monuments? Why, he prefers his country-seat to all the popular pleasures; and when he wants to enjoy himself, he does not wait for the greased pole! One of two things is true: either the proportional tax affords greater security to the larger tax-payers, or else it is a wrong. Because, if property is a natural right, as the Declaration of '93 declares, all that belongs to me by virtue of this right is as sacred as my person; it is my blood, my life, myself: whoever touches it offends the apple of my eye. My income of one hundred thousand francs is as inviolable as the grisette's daily wage of seventy-five centimes; her attic is no more sacred than my suite of apartments. The tax is not levied in proportion to strength, size, or skill: no more should it be levied in proportion to property. If, then, the State takes more from me, let it give me more in return, or cease to talk of equality of rights; for otherwise, society is established, not to defend property, but to destroy it. The State, through the proportional tax, becomes the chief of robbers; the State sets the example of systematic pillage: the State should be brought to the bar of justice at the head of those hideous brigands, that execrable mob which it now kills from motives of professional jealousy. But, they say, the courts and the police force are established to restrain this mob; government is a company, not exactly for insurance, for it does not insure, but for vengeance and repression. The premium which this company exacts, the tax, is divided in proportion to property; that is, in proportion to the trouble which each piece of property occasions the avengers and repressers paid by the government. This is any thing but the absolute and inalienable right of property. Under this system the poor and the rich distrust, and make war upon, each other. But what is the object of the war? Property. So that property is necessarily accompanied by war upon property. The liberty and security of the rich do not suffer from the liberty and security of the poor; far from that, they mutually strengthen and sustain each other. The rich man's right of property, on the contrary, has to be continually defended against the poor man's desire for property. What a contradiction! In England they have a poor-rate: they wish me to pay this tax. But what relation exists between my natural and inalienable right of property and the hunger from which ten million wretched people are suffering? When religion commands us to assist our fellows, it speaks in the name of charity, not in the name of law. The obligation of benevolence, imposed upon me by Christian morality, cannot be imposed upon me as a political tax for the benefit of any person or poor-house. I will give alms when I see fit to do so, when the sufferings of others excite in me that sympathy of which philosophers talk, and in which I do not believe: I will not be forced to bestow them. No one is obliged to do more than comply with this injunction: IN THE EXERCISE OF YOUR OWN RIGHTS DO NOT ENCROACH UPON THE RIGHTS OF ANOTHER; an injunction which is the exact definition of liberty. Now, my possessions are my own; no one has a claim upon them: I object to the placing of the third theological virtue in the order of the day. Everybody, in France, demands the conversion of the five per cent. bonds; they demand thereby the complete sacrifice of one species of property. They have the right to do it, if public necessity requires it; but where is the just indemnity promised by the charter? Not only does none exist, but this indemnity is not even possible; for, if the indemnity were equal to the property sacrificed, the conversion would be useless. The State occupies the same position to-day toward the bondholders that the city of Calais did, when besieged by Edward III, toward its notables. The English conqueror consented to spare its inhabitants, provided it would surrender to him its most distinguished citizens to do with as he pleased. Eustache and several others offered themselves; it was noble in them, and our ministers should recommend their example to the bondholders. But had the city the right to surrender them? Assuredly not. The right to security is absolute; the country can require no one to sacrifice himself. The soldier standing guard within the enemy's range is no exception to this rule. Wherever a citizen stands guard, the country stands guard with him: to-day it is the turn of the one, to-morrow of the other. When danger and devotion are common, flight is parricide. No one has the right to flee from danger; no one can serve as a scapegoat. The maxim of Caiaphas--IT IS RIGHT THAT A MAN SHOULD DIE FOR HIS NATION--is that of the populace and of tyrants; the two extremes of social degradation. It is said that all perpetual annuities are essentially redeemable. This maxim of civil law, applied to the State, is good for those who wish to return to the natural equality of labor and wealth; but, from the point of view of the proprietor, and in the mouth of conversionists, it is the language of bankrupts. The State is not only a borrower, it is an insurer and guardian of property; granting the best of security, it assures the most inviolable possession. How, then, can it force open the hands of its creditors, who have confidence in it, and then talk to them of public order and security of property? The State, in such an operation, is not a debtor who discharges his debt; it is a stock-company which allures its stockholders into a trap, and there, contrary to its authentic promise, exacts from them twenty, thirty, or forty per cent. of the interest on their capital. That is not all. The State is a university of citizens joined together under a common law by an act of society. This act secures all in the possession of their property; guarantees to one his field, to another his vineyard, to a third his rents, and to the bondholder, who might have bought real estate but who preferred to come to the assistance of the treasury, his bonds. The State cannot demand, without offering an equivalent, the sacrifice of an acre of the field or a corner of the vineyard; still less can it lower rents: why should it have the right to diminish the interest on bonds? This right could not justly exist, unless the bondholder could invest his funds elsewhere to equal advantage; but being confined to the State, where can he find a place to invest them, since the cause of conversion, that is, the power to borrow to better advantage, lies in the State? That is why a government, based on the principle of property, cannot redeem its annuities without the consent of their holders. The money deposited with the republic is property which it has no right to touch while other kinds of property are respected; to force their redemption is to violate the social contract, and outlaw the bondholders. The whole controversy as to the conversion of bonds finally reduces itself to this:-- QUESTION. Is it just to reduce to misery forty-five thousand families who derive an income from their bonds of one hundred francs or less? ANSWER. Is it just to compel seven or eight millions of tax-payers to pay a tax of five francs, when they should pay only three? It is clear, in the first place, that the reply is in reality no reply; but, to make the wrong more apparent, let us change it thus: Is it just to endanger the lives of one hundred thousand men, when we can save them by surrendering one hundred heads to the enemy? Reader, decide! All this is clearly understood by the defenders of the present system. Yet, nevertheless, sooner or later, the conversion will be effected and property be violated, because no other course is possible; because property, regarded as a right, and not being a right, must of right perish; because the force of events, the laws of conscience, and physical and mathematical necessity must, in the end, destroy this illusion of our minds. To sum up: liberty is an absolute right, because it is to man what impenetrability is to matter,--a sine qua non of existence; equality is an absolute right, because without equality there is no society; security is an absolute right, because in the eyes of every man his own liberty and life are as precious as another's. These three rights are absolute; that is, susceptible of neither increase nor diminution; because in society each associate receives as much as he gives,--liberty for liberty, equality for equality, security for security, body for body, soul for soul, in life and in death. But property, in its derivative sense, and by the definitions of law, is a right outside of society; for it is clear that, if the wealth of each was social wealth, the conditions would be equal for all, and it would be a contradiction to say: PROPERTY IS A MAN'S RIGHT TO DISPOSE AT WILL OF SOCIAL PROPERTY. Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a NATURAL right, this natural right is not SOCIAL, but ANTI-SOCIAL. Property and society are utterly irreconcilable institutions. It is as impossible to associate two proprietors as to join two magnets by their opposite poles. Either society must perish, or it must destroy property. If property is a natural, absolute, imprescriptible, and inalienable right, why, in all ages, has there been so much speculation as to its origin?--for this is one of its distinguishing characteristics. The origin of a natural right! Good God! who ever inquired into the origin of the rights of liberty, security, or equality? They exist by the same right that we exist; they are born with us, they live and die with us. With property it is very different, indeed. By law, property can exist without a proprietor, like a quality without a subject. It exists for the human being who as yet is not, and for the octogenarian who is no more. And yet, in spite of these wonderful prerogatives which savor of the eternal and the infinite, they have never found the origin of property; the doctors still disagree. On one point only are they in harmony: namely, that the validity of the right of property depends upon the authenticity of its origin. But this harmony is their condemnation. Why have they acknowledged the right before settling the question of origin? Certain classes do not relish investigation into the pretended titles to property, and its fabulous and perhaps scandalous history. They wish to hold to this proposition: that property is a fact; that it always has been, and always will be. With that proposition the savant Proudhon [11] commenced his "Treatise on the Right of Usufruct," regarding the origin of property as a useless question. Perhaps I would subscribe to this doctrine, believing it inspired by a commendable love of peace, were all my fellow-citizens in comfortable circumstances; but, no! I will not subscribe to it. The titles on which they pretend to base the right of property are two in number: OCCUPATION and LABOR. I shall examine them successively, under all their aspects and in detail; and I remind the reader that, to whatever authority we appeal, I shall prove beyond a doubt that property, to be just and possible, must necessarily have equality for its condition. % 2.--Occupation, as the Title to Property. It is remarkable that, at those meetings of the State Council at which the Code was discussed, no controversy arose as to the origin and principle of property. All the articles of Vol. II., Book 2, concerning property and the right of accession, were passed without opposition or amendment. Bonaparte, who on other questions had given his legists so much trouble, had nothing to say about property. Be not surprised at it: in the eyes of that man, the most selfish and wilful person that ever lived, property was the first of rights, just as submission to authority was the most holy of duties. The right of OCCUPATION, or of the FIRST OCCUPANT, is that which results from the actual, physical, real possession of a thing. I occupy a piece of land; the presumption is, that I am the proprietor, until the contrary is proved. We know that originally such a right cannot be legitimate unless it is reciprocal; the jurists say as much. Cicero compares the earth to a vast theatre: _Quemadmodum theatrum cum commune sit, recte tamen dici potest ejus esse eum locum quem quisque occuparit_. This passage is all that ancient philosophy has to say about the origin of property. The theatre, says Cicero, is common to all; nevertheless, the place that each one occupies is called HIS OWN; that is, it is a place POSSESSED, not a place APPROPRIATED. This comparison annihilates property; moreover, it implies equality. Can I, in a theatre, occupy at the same time one place in the pit, another in the boxes, and a third in the gallery? Not unless I have three bodies, like Geryon, or can exist in different places at the same time, as is related of the magician Apollonius. According to Cicero, no one has a right to more than he needs: such is the true interpretation of his famous axiom--_suum quidque cujusque sit_, to each one that which belongs to him--an axiom that has been strangely applied. That which belongs to each is not that which each MAY possess, but that which each HAS A RIGHT to possess. Now, what have we a right to possess? That which is required for our labor and consumption; Cicero's comparison of the earth to a theatre proves it. According to that, each one may take what place he will, may beautify and adorn it, if he can; it is allowable: but he must never allow himself to overstep the limit which separates him from another. The doctrine of Cicero leads directly to equality; for, occupation being pure toleration, if the toleration is mutual (and it cannot be otherwise) the possessions are equal. Grotius rushes into history; but what kind of reasoning is that which seeks the origin of a right, said to be natural, elsewhere than in Nature? This is the method of the ancients: the fact exists, then it is necessary, then it is just, then its antecedents are just also. Nevertheless, let us look into it. "Originally, all things were common and undivided; they were the property of all." Let us go no farther. Grotius tells us how this original communism came to an end through ambition and cupidity; how the age of gold was followed by the age of iron, &c. So that property rested first on war and conquest, then on treaties and agreements. But either these treaties and agreements distributed wealth equally, as did the original communism (the only method of distribution with which the barbarians were acquainted, and the only form of justice of which they could conceive; and then the question of origin assumes this form: how did equality afterwards disappear?)--or else these treaties and agreements were forced by the strong upon the weak, and in that case they are null; the tacit consent of posterity does not make them valid, and we live in a permanent condition of iniquity and fraud. We never can conceive how the equality of conditions, having once existed, could afterwards have passed away. What was the cause of such degeneration? The instincts of the animals are unchangeable, as well as the differences of species; to suppose original equality in human society is to admit by implication that the present inequality is a degeneration from the nature of this society,--a thing which the defenders of property cannot explain. But I infer therefrom that, if Providence placed the first human beings in a condition of equality, it was an indication of its desires, a model that it wished them to realize in other forms; just as the religious sentiment, which it planted in their hearts, has developed and manifested itself in various ways. Man has but one nature, constant and unalterable: he pursues it through instinct, he wanders from it through reflection, he returns to it through judgment; who shall say that we are not returning now? According to Grotius, man has abandoned equality; according to me, he will yet return to it. How came he to abandon it? Why will he return to it? These are questions for future consideration. Reid writes as follows:-- "The right of property is not innate, but acquired. It is not grounded upon the constitution of man, but upon his actions. Writers on jurisprudence have explained its origin in a manner that may satisfy every man of common understanding. "The earth is given to men in common for the purposes of life, by the bounty of Heaven. But to divide it, and appropriate one part of its produce to one, another part to another, must be the work of men who have power and understanding given them, by which every man may accommodate himself, WITHOUT HURT TO ANY OTHER. "This common right of every man to what the earth produces, before it be occupied and appropriated by others, was, by ancient moralists, very properly compared to the right which every citizen had to the public theatre, where every man that came might occupy an empty seat, and thereby acquire a right to it while the entertainment lasted; but no man had a right to dispossess another. "The earth is a great theatre, furnished by the Almighty, with perfect wisdom and goodness, for the entertainment and employment of all mankind. Here every man has a right to accommodate himself as a spectator, and to perform his part as an actor; but without hurt to others." Consequences of Reid's doctrine. 1. That the portion which each one appropriates may wrong no one, it must be equal to the quotient of the total amount of property to be shared, divided by the number of those who are to share it; 2. The number of places being of necessity equal at all times to that of the spectators, no spectator can occupy two places, nor can any actor play several parts; 3. Whenever a spectator comes in or goes out, the places of all contract or enlarge correspondingly: for, says Reid, "THE RIGHT OF PROPERTY IS NOT INNATE, BUT ACQUIRED;" consequently, it is not absolute; consequently, the occupancy on which it is based, being a conditional fact, cannot endow this right with a stability which it does not possess itself. This seems to have been the thought of the Edinburgh professor when he added:-- "A right to life implies a right to the necessary means of life; and that justice, which forbids the taking away the life of an innocent man, forbids no less the taking from him the necessary means of life. He has the same right to defend the one as the other. To hinder another man's innocent labor, or to deprive him of the fruit of it, is an injustice of the same kind, and has the same effect as to put him in fetters or in prison, and is equally a just object of resentment." Thus the chief of the Scotch school, without considering at all the inequality of skill or labor, posits a priori the equality of the means of labor, abandoning thereafter to each laborer the care of his own person, after the eternal axiom: WHOSO DOES WELL, SHALL FARE WELL. The philosopher Reid is lacking, not in knowledge of the principle, but in courage to pursue it to its ultimate. If the right of life is equal, the right of labor is equal, and so is the right of occupancy. Would it not be criminal, were some islanders to repulse, in the name of property, the unfortunate victims of a shipwreck struggling to reach the shore? The very idea of such cruelty sickens the imagination. The proprietor, like Robinson Crusoe on his island, wards off with pike and musket the proletaire washed overboard by the wave of civilization, and seeking to gain a foothold upon the rocks of property. "Give me work!" cries he with all his might to the proprietor: "don't drive me away, I will work for you at any price." "I do not need your services," replies the proprietor, showing the end of his pike or the barrel of his gun. "Lower my rent at least." "I need my income to live upon." "How can I pay you, when I can get no work?" "That is your business." Then the unfortunate proletaire abandons himself to the waves; or, if he attempts to land upon the shore of property, the proprietor takes aim, and kills him. We have just listened to a spiritualist; we will now question a materialist, then an eclectic: and having completed the circle of philosophy, we will turn next to law. According to Destutt de Tracy, property is a necessity of our nature. That this necessity involves unpleasant consequences, it would be folly to deny. But these consequences are necessary evils which do not invalidate the principle; so that it is as unreasonable to rebel against property on account of the abuses which it generates, as to complain of life because it is sure to end in death. This brutal and pitiless philosophy promises at least frank and close reasoning. Let us see if it keeps its promise. "We talk very gravely about the conditions of property,... as if it was our province to decide what constitutes property.... It would seem, to hear certain philosophers and legislators, that at a certain moment, spontaneously and without cause, people began to use the words THINE and MINE; and that they might have, or ought to have, dispensed with them. But THINE and MINE were never invented." A philosopher yourself, you are too realistic. THINE and MINE do not necessarily refer to self, as they do when I say your philosophy, and my equality; for your philosophy is you philosophizing, and my equality is I professing equality. THINE and MINE oftener indicate a relation,--YOUR country, YOUR parish, YOUR tailor, YOUR milkmaid; MY chamber, MY seat at the theatre, MY company and MY battalion in the National Guard. In the former sense, we may sometimes say MY labor, MY skill, MY virtue; never MY grandeur nor MY majesty: in the latter sense only, MY field, MY house, MY vineyard, MY capital,--precisely as the banker's clerk says MY cash-box. In short, THINE and MINE are signs and expressions of personal, but equal, rights; applied to things outside of us, they indicate possession, function, use, not property. It does not seem possible, but, nevertheless, I shall prove, by quotations, that the whole theory of our author is based upon this paltry equivocation. "Prior to all covenants, men are, not exactly, as Hobbes says, in a state of HOSTILITY, but of ESTRANGEMENT. In this state, justice and injustice are unknown; the rights of one bear no relation to the rights of another. All have as many rights as needs, and all feel it their duty to satisfy those needs by any means at their command." Grant it; whether true or false, it matters not. Destutt de Tracy cannot escape equality. On this theory, men, while in a state of ESTRANGEMENT, are under no obligations to each other; they all have the right to satisfy their needs without regard to the needs of others, and consequently the right to exercise their power over Nature, each according to his strength and ability. That involves the greatest inequality of wealth. Inequality of conditions, then, is the characteristic feature of estrangement or barbarism: the exact opposite of Rousseau's idea. But let us look farther:-- "Restrictions of these rights and this duty commence at the time when covenants, either implied or expressed, are agreed upon. Then appears for the first time justice and injustice; that is, the balance between the rights of one and the rights of another, which up to that time were necessarily equal." Listen: RIGHTS WERE EQUAL; that means that each individual had the right to SATISFY HIS NEEDS WITHOUT REFERENCE TO THE NEEDS OF OTHERS. In other words, that all had the right to injure each other; that there was no right save force and cunning. They injured each other, not only by war and pillage, but also by usurpation and appropriation. Now, in order to abolish this equal right to use force and stratagem,--this equal right to do evil, the sole source of the inequality of benefits and injuries,--they commenced to make COVENANTS EITHER IMPLIED OR EXPRESSED, and established a balance. Then these agreements and this balance were intended to secure to all equal comfort; then, by the law of contradictions, if isolation is the principle of inequality, society must produce equality. The social balance is the equalization of the strong and the weak; for, while they are not equals, they are strangers; they can form no associations,--they live as enemies. Then, if inequality of conditions is a necessary evil, so is isolation, for society and inequality are incompatible with each other. Then, if society is the true condition of man's existence, so is equality also. This conclusion cannot be avoided. This being so, how is it that, ever since the establishment of this balance, inequality has been on the increase? How is it that justice and isolation always accompany each other? Destutt de Tracy shall reply:-- "NEEDS and MEANS, RIGHTS and DUTIES, are products of the will. If man willed nothing, these would not exist. But to have needs and means, rights and duties, is to HAVE, to POSSESS, something. They are so many kinds of property, using the word in its most general sense: they are things which belong to us." Shameful equivocation, not justified by the necessity for generalization! The word PROPERTY has two meanings: 1. It designates the quality which makes a thing what it is; the attribute which is peculiar to it, and especially distinguishes it. We use it in this sense when we say THE PROPERTIES OF THE TRIANGLE or of NUMBERS; THE PROPERTY OF THE MAGNET, &c. 2. It expresses the right of absolute control over a thing by a free and intelligent being. It is used in this sense by writers on jurisprudence. Thus, in the phrase, IRON ACQUIRES THE PROPERTY OF A MAGNET, the word PROPERTY does not convey the same idea that it does in this one: _I HAVE ACQUIRED THIS MAGNET AS MY PROPERTY_. To tell a poor man that he HAS property because he HAS arms and legs,--that the hunger from which he suffers, and his power to sleep in the open air are his property,--is to play upon words, and to add insult to injury. "The sole basis of the idea of property is the idea of personality. As soon as property is born at all, it is born, of necessity, in all its fulness. As soon as an individual knows HIMSELF,--his moral personality, his capacities of enjoyment, suffering, and action,--he necessarily sees also that this SELF is exclusive proprietor of the body in which it dwells, its organs, their powers, faculties, &c.... Inasmuch as artificial and conventional property exists, there must be natural property also; for nothing can exist in art without its counterpart in Nature." We ought to admire the honesty and judgment of philosophers! Man has properties; that is, in the first acceptation of the term, faculties. He has property; that is, in its second acceptation, the right of domain. He has, then, the property of the property of being proprietor. How ashamed I should be to notice such foolishness, were I here considering only the authority of Destutt de Tracy! But the entire human race, since the origination of society and language, when metaphysics and dialectics were first born, has been guilty of this puerile confusion of thought. All which man could call his own was identified in his mind with his person. He considered it as his property, his wealth; a part of himself, a member of his body, a faculty of his mind. The possession of things was likened to property in the powers of the body and mind; and on this false analogy was based the right of property,--THE IMITATION OF NATURE BY ART, as Destutt de Tracy so elegantly puts it. But why did not this ideologist perceive that man is not proprietor even of his own faculties? Man has powers, attributes, capacities; they are given him by Nature that he may live, learn, and love: he does not own them, but has only the use of them; and he can make no use of them that does not harmonize with Nature's laws. If he had absolute mastery over his faculties, he could avoid hunger and cold; he could eat unstintedly, and walk through fire; he could move mountains, walk a hundred leagues in a minute, cure without medicines and by the sole force of his will, and could make himself immortal. He could say, "I wish to produce," and his tasks would be finished with the words; he could say. "I wish to know," and he would know; "I love," and he would enjoy. What then? Man is not master of himself, but may be of his surroundings. Let him use the wealth of Nature, since he can live only by its use; but let him abandon his pretensions to the title of proprietor, and remember that he is called so only metaphorically. To sum up: Destutt de Tracy classes together the external PRODUCTIONS of nature and art, and the POWERS or FACULTIES of man, making both of them species of property; and upon this equivocation he hopes to establish, so firmly that it can never be disturbed, the right of property. But of these different kinds of property some are INNATE, as memory, imagination, strength, and beauty; while others are ACQUIRED, as land, water, and forests. In the state of Nature or isolation, the strongest and most skilful (that is, those best provided with innate property) stand the best chance of obtaining acquired property. Now, it is to prevent this encroachment and the war which results therefrom, that a balance (justice) has been employed, and covenants (implied or expressed) agreed upon: it is to correct, as far as possible, inequality of innate property by equality of acquired property. As long as the division remains unequal, so long the partners remain enemies; and it is the purpose of the covenants to reform this state of things. Thus we have, on the one hand, isolation, inequality, enmity, war, robbery, murder; on the other, society, equality, fraternity, peace, and love. Choose between them! M. Joseph Dutens--a physician, engineer, and geometrician, but a very poor legist, and no philosopher at all--is the author of a "Philosophy of Political Economy," in which he felt it his duty to break lances in behalf of property. His reasoning seems to be borrowed from Destutt de Tracy. He commences with this definition of property, worthy of Sganarelle: "Property is the right by which a thing is one's own." Literally translated: Property is the right of property. After getting entangled a few times on the subjects of will, liberty, and personality; after having distinguished between IMMATERIAL-NATURAL property, and MATERIAL-NATURAL property, a distinction similar to Destutt de Tracy's of innate and acquired property,--M. Joseph Dutens concludes with these two general propositions: 1. Property is a natural and inalienable right of every man; 2. Inequality of property is a necessary result of Nature,--which propositions are convertible into a simpler one: All men have an equal right of unequal property. He rebukes M. de Sismondi for having taught that landed property has no other basis than law and conventionality; and he says himself, speaking of the respect which people feel for property, that "their good sense reveals to them the nature of the ORIGINAL CONTRACT made between society and proprietors." He confounds property with possession, communism with equality, the just with the natural, and the natural with the possible. Now he takes these different ideas to be equivalents; now he seems to distinguish between them, so much so that it would be infinitely easier to refute him than to understand him. Attracted first by the title of the work, "Philosophy of Political Economy," I have found, among the author's obscurities, only the most ordinary ideas. For that reason I will not speak of him. M. Cousin, in his "Moral Philosophy," page 15, teaches that all morality, all laws, all rights are given to man with this injunction: "FREE BEING, REMAIN FREE." Bravo! master; I wish to remain free if I can. He continues:-- "Our principle is true; it is good, it is social. Do not fear to push it to its ultimate. "1. If the human person is sacred, its whole nature is sacred; and particularly its interior actions, its feelings, its thoughts, its voluntary decisions. This accounts for the respect due to philosophy, religion, the arts industry, commerce, and to all the results of liberty. I say respect, not simply toleration; for we do not tolerate a right, we respect it." I bow my head before this philosophy. "2. My liberty, which is sacred, needs for its objective action an instrument which we call the body: the body participates then in the sacredness of liberty; it is then inviolable. This is the basis of the principle of individual liberty. "3. My liberty needs, for its objective action, material to work upon; in other words, property or a thing. This thing or property naturally participates then in the inviolability of my person. For instance, I take possession of an object which has become necessary and useful in the outward manifestation of my liberty. I say, 'This object is mine since it belongs to no one else; consequently, I possess it legitimately.' So the legitimacy of possession rests on two conditions. First, I possess only as a free being. Suppress free activity, you destroy my power to labor. Now it is only by labor that I can use this property or thing, and it is only by using it that I possess it. Free activity is then the principle of the right of property. But that alone does not legitimate possession. All men are free; all can use property by labor. Does that mean that all men have a right to all property? Not at all. To possess legitimately, I must not only labor and produce in my capacity of a free being, but I must also be the first to occupy the property. In short, if labor and production are the principle of the right of property, the fact of first occupancy is its indispensable condition. "4. I possess legitimately: then I have the right to use my property as I see fit. I have also the right to give it away. I have also the right to bequeath it; for if I decide to make a donation, my decision is as valid after my death as during my life." In fact, to become a proprietor, in M. Cousin's opinion, one must take possession by occupation and labor. I maintain that the element of time must be considered also; for if the first occupants have occupied every thing, what are the new comers to do? What will become of them, having an instrument with which to work, but no material to work upon? Must they devour each other? A terrible extremity, unforeseen by philosophical prudence; for the reason that great geniuses neglect little things. Notice also that M. Cousin says that neither occupation nor labor, taken separately, can legitimate the right of property; and that it is born only from the union of the two. This is one of M. Cousin's eclectic turns, which he, more than any one else, should take pains to avoid. Instead of proceeding by the method of analysis, comparison, elimination, and reduction (the only means of discovering the truth amid the various forms of thought and whimsical opinions), he jumbles all systems together, and then, declaring each both right and wrong, exclaims: "There you have the truth." But, adhering to my promise, I will not refute him. I will only prove, by all the arguments with which he justifies the right of property, the principle of equality which kills it. As I have already said, my sole intent is this: to show at the bottom of all these positions that inevitable major, EQUALITY; hoping hereafter to show that the principle of property vitiates the very elements of economical, moral, and governmental science, thus leading it in the wrong direction. Well, is it not true, from M. Cousin's point of view, that, if the liberty of man is sacred, it is equally sacred in all individuals; that, if it needs property for its objective action, that is, for its life, the appropriation of material is equally necessary for all; that, if I wish to be respected in my right of appropriation, I must respect others in theirs; and, consequently, that though, in the sphere of the infinite, a person's power of appropriation is limited only by himself, in the sphere of the finite this same power is limited by the mathematical relation between the number of persons and the space which they occupy? Does it not follow that if one individual cannot prevent another--his fellow-man--from appropriating an amount of material equal to his own, no more can he prevent individuals yet to come; because, while individuality passes away, universality persists, and eternal laws cannot be determined by a partial view of their manifestations? Must we not conclude, therefore, that whenever a person is born, the others must crowd closer together; and, by reciprocity of obligation, that if the new comer is afterwards to become an heir, the right of succession does not give him the right of accumulation, but only the right of choice? I have followed M. Cousin so far as to imitate his style, and I am ashamed of it. Do we need such high-sounding terms, such sonorous phrases, to say such simple things? Man needs to labor in order to live; consequently, he needs tools to work with and materials to work upon. His need to produce constitutes his right to produce. Now, this right is guaranteed him by his fellows, with whom he makes an agreement to that effect. One hundred thousand men settle in a large country like France with no inhabitants: each man has a right to 1/100,000 of the land. If the number of possessors increases, each one's portion diminishes in consequence; so that, if the number of inhabitants rises to thirty-four millions, each one will have a right only to 1/34,000,000. Now, so regulate the police system and the government, labor, exchange, inheritance, &c., that the means of labor shall be shared by all equally, and that each individual shall be free; and then society will be perfect. Of all the defenders of property, M. Cousin has gone the farthest. He has maintained against the economists that labor does not establish the right of property unless preceded by occupation, and against the jurists that the civil law can determine and apply a natural right, but cannot create it. In fact, it is not sufficient to say, "The right of property is demonstrated by the existence of property; the function of the civil law is purely declaratory." To say that, is to confess that there is no reply to those who question the legitimacy of the fact itself. Every right must be justifiable in itself, or by some antecedent right; property is no exception. For this reason, M. Cousin has sought to base it upon the SANCTITY of the human personality, and the act by which the will assimilates a thing. "Once touched by man," says one of M. Cousin's disciples, "things receive from him a character which transforms and humanizes them." I confess, for my part, that I have no faith in this magic, and that I know of nothing less holy than the will of man. But this theory, fragile as it seems to psychology as well as jurisprudence, is nevertheless more philosophical and profound than those theories which are based upon labor or the authority of the law. Now, we have just seen to what this theory of which we are speaking leads,--to the equality implied in the terms of its statement. But perhaps philosophy views things from too lofty a standpoint, and is not sufficiently practical; perhaps from the exalted summit of speculation men seem so small to the metaphysician that he cannot distinguish between them; perhaps, indeed, the equality of conditions is one of those principles which are very true and sublime as generalities, but which it would be ridiculous and even dangerous to attempt to rigorously apply to the customs of life and to social transactions. Undoubtedly, this is a case which calls for imitation of the wise reserve of moralists and jurists, who warn us against carrying things to extremes, and who advise us to suspect every definition; because there is not one, they say, which cannot be utterly destroyed by developing its disastrous results--_Omnis definitio in jure civili periculosa est: parum est enim ut non subverti possit_. Equality of conditions,--a terrible dogma in the ears of the proprietor, a consoling truth at the poor-man's sick-bed, a frightful reality under the knife of the anatomist,--equality of conditions, established in the political, civil, and industrial spheres, is only an alluring impossibility, an inviting bait, a satanic delusion. It is never my intention to surprise my reader. I detest, as I do death, the man who employs subterfuge in his words and conduct. From the first page of this book, I have expressed myself so plainly and decidedly that all can see the tendency of my thought and hopes; and they will do me the justice to say, that it would be difficult to exhibit more frankness and more boldness at the same time. I do not hesitate to declare that the time is not far distant when this reserve, now so much admired in philosophers--this happy medium so strongly recommended by professors of moral and political science--will be regarded as the disgraceful feature of a science without principle, and as the seal of its reprobation. In legislation and morals, as well as in geometry, axioms are absolute, definitions are certain; and all the results of a principle are to be accepted, provided they are logically deduced. Deplorable pride! We know nothing of our nature, and we charge our blunders to it; and, in a fit of unaffected ignorance, cry out, "The truth is in doubt, the best definition defines nothing!" We shall know some time whether this distressing uncertainty of jurisprudence arises from the nature of its investigations, or from our prejudices; whether, to explain social phenomena, it is not enough to change our hypothesis, as did Copernicus when he reversed the system of Ptolemy. But what will be said when I show, as I soon shall, that this same jurisprudence continually tries to base property upon equality? What reply can be made? % 3.--Civil Law as the Foundation and Sanction of Property. Pothier seems to think that property, like royalty, exists by divine right. He traces back its origin to God himself--ab Jove principium. He begins in this way:-- "God is the absolute ruler of the universe and all that it contains: _Domini est terra et plenitudo ejus, orbis et universi qui habitant in eo_. For the human race he has created the earth and all its creatures, and has given it a control over them subordinate only to his own. 'Thou madest him to have dominion over the works of thy hands; thou hast put all things under his feet,' says the Psalmist. God accompanied this gift with these words, addressed to our first parents after the creation: 'Be fruitful, and multiply and replenish the earth,'" &c. After this magnificent introduction, who would refuse to believe the human race to be an immense family living in brotherly union, and under the protection of a venerable father? But, heavens! are brothers enemies? Are fathers unnatural, and children prodigal? GOD GAVE THE EARTH TO THE HUMAN RACE: why then have I received none? HE HAS PUT ALL THINGS UNDER MY FEET,--and I have not where to lay my head! MULTIPLY, he tells us through his interpreter, Pothier. Ah, learned Pothier! that is as easy to do as to say; but you must give moss to the bird for its nest. "The human race having multiplied, men divided among themselves the earth and most of the things upon it; that which fell to each, from that time exclusively belonged to him. That was the origin of the right of property." Say, rather, the right of possession. Men lived in a state of communism; whether positive or negative it matters little. Then there was no property, not even private possession. The genesis and growth of possession gradually forcing people to labor for their support, they agreed either formally or tacitly,--it makes no difference which,--that the laborer should be sole proprietor of the fruit of his labor; that is, they simply declared the fact that thereafter none could live without working. It necessarily followed that, to obtain equality of products, there must be equality of labor; and that, to obtain equality of labor, there must be equality of facilities for labor. Whoever without labor got possession, by force or by strategy, of another's means of subsistence, destroyed equality, and placed himself above or outside of the law. Whoever monopolized the means of production on the ground of greater industry, also destroyed equality. Equality being then the expression of right, whoever violated it was UNJUST. Thus, labor gives birth to private possession; the right in a thing--jus in re. But in what thing? Evidently IN THE PRODUCT, not IN THE SOIL. So the Arabs have always understood it; and so, according to Caesar and Tacitus, the Germans formerly held. "The Arabs," says M. de Sismondi, "who admit a man's property in the flocks which he has raised, do not refuse the crop to him who planted the seed; but they do not see why another, his equal, should not have a right to plant in his turn. The inequality which results from the pretended right of the first occupant seems to them to be based on no principle of justice; and when all the land falls into the hands of a certain number of inhabitants, there results a monopoly in their favor against the rest of the nation, to which they do not wish to submit." Well, they have shared the land. I admit that therefrom results a more powerful organization of labor; and that this method of distribution, fixed and durable, is advantageous to production: but how could this division give to each a transferable right of property in a thing to which all had an inalienable right of possession? In the terms of jurisprudence, this metamorphosis from possessor to proprietor is legally impossible; it implies in the jurisdiction of the courts the union of possessoire and petitoire; and the mutual concessions of those who share the land are nothing less than traffic in natural rights. The original cultivators of the land, who were also the original makers of the law, were not as learned as our legislators, I admit; and had they been, they could not have done worse: they did not foresee the consequences of the transformation of the right of private possession into the right of absolute property. But why have not those, who in later times have established the distinction between jus in re and jus ad rem, applied it to the principle of property itself? Let me call the attention of the writers on jurisprudence to their own maxims. The right of property, provided it can have a cause, can have but one--_Dominium non potest nisi ex una causa contingere_. I can possess by several titles; I can become proprietor by only one--_Non ut ex pluribus causis idem nobis deberi potest, ita ex pluribus causis idem potest nostrum esse_. The field which I have cleared, which I cultivate, on which I have built my house, which supports myself, my family, and my livestock, I can possess: 1st. As the original occupant; 2d. As a laborer; 3d. By virtue of the social contract which assigns it to me as my share. But none of these titles confer upon me the right of property. For, if I attempt to base it upon occupancy, society can reply, "I am the original occupant." If I appeal to my labor, it will say, "It is only on that condition that you possess." If I speak of agreements, it will respond, "These agreements establish only your right of use." Such, however, are the only titles which proprietors advance. They never have been able to discover any others. Indeed, every right--it is Pothier who says it--supposes a producing cause in the person who enjoys it; but in man who lives and dies, in this son of earth who passes away like a shadow, there exists, with respect to external things, only titles of possession, not one title of property. Why, then, has society recognized a right injurious to itself, where there is no producing cause? Why, in according possession, has it also conceded property? Why has the law sanctioned this abuse of power? The German Ancillon replies thus:-- "Some philosophers pretend that man, in employing his forces upon a natural object,--say a field or a tree,--acquires a right only to the improvements which he makes, to the form which he gives to the object, not to the object itself. Useless distinction! If the form could be separated from the object, perhaps there would be room for question; but as this is almost always impossible, the application of man's strength to the different parts of the visible world is the foundation of the right of property, the primary origin of riches." Vain pretext! If the form cannot be separated from the object, nor property from possession, possession must be shared; in any case, society reserves the right to fix the conditions of property. Let us suppose that an appropriated farm yields a gross income of ten thousand francs; and, as very seldom happens, that this farm cannot be divided. Let us suppose farther that, by economical calculation, the annual expenses of a family are three thousand francs: the possessor of this farm should be obliged to guard his reputation as a good father of a family, by paying to society ten thousand francs,--less the total costs of cultivation, and the three thousand francs required for the maintenance of his family. This payment is not rent, it is an indemnity. What sort of justice is it, then, which makes such laws as this:-- "Whereas, since labor so changes the form of a thing that the form and substance cannot be separated without destroying the thing itself, either society must be disinherited, or the laborer must lose the fruit of his labor; and "Whereas, in every other case, property in raw material would give a title to added improvements, minus their cost; and whereas, in this instance, property in improvements ought to give a title to the principal; "Therefore, the right of appropriation by labor shall never be admitted against individuals, but only against society." In such a way do legislators always reason in regard to property. The law is intended to protect men's mutual rights,--that is, the rights of each against each, and each against all; and, as if a proportion could exist with less than four terms, the law-makers always disregard the latter. As long as man is opposed to man, property offsets property, and the two forces balance each other; as soon as man is isolated, that is, opposed to the society which he himself represents, jurisprudence is at fault: Themis has lost one scale of her balance. Listen to the professor of Rennes, the learned Toullier:-- "How could this claim, made valid by occupation, become stable and permanent property, which might continue to stand, and which might be reclaimed after the first occupant had relinquished possession? "Agriculture was a natural consequence of the multiplication of the human race, and agriculture, in its turn, favors population, and necessitates the establishment of permanent property; for who would take the trouble to plough and sow, if he were not certain that he would reap?" To satisfy the husbandman, it was sufficient to guarantee him possession of his crop; admit even that he should have been protected in his right of occupation of land, as long as he remained its cultivator. That was all that he had a right to expect; that was all that the advance of civilization demanded. But property, property! the right of escheat over lands which one neither occupies nor cultivates,--who had authority to grant it? who pretended to have it? "Agriculture alone was not sufficient to establish permanent property; positive laws were needed, and magistrates to execute them; in a word, the civil State was needed. "The multiplication of the human race had rendered agriculture necessary; the need of securing to the cultivator the fruit of his labor made permanent property necessary, and also laws for its protection. So we are indebted to property for the creation of the civil State." Yes, of our civil State, as you have made it; a State which, at first, was despotism, then monarchy, then aristocracy, today democracy, and always tyranny. "Without the ties of property it never would have been possible to subordinate men to the wholesome yoke of the law; and without permanent property the earth would have remained a vast forest. Let us admit, then, with the most careful writers, that if transient property, or the right of preference resulting from occupation, existed prior to the establishment of civil society, permanent property, as we know it to-day, is the work of civil law. It is the civil law which holds that, when once acquired, property can be lost only by the action of the proprietor, and that it exists even after the proprietor has relinquished possession of the thing, and it has fallen into the hands of a third party. "Thus property and possession, which originally were confounded, became through the civil law two distinct and independent things; two things which, in the language of the law, have nothing whatever in common. In this we see what a wonderful change has been effected in property, and to what an extent Nature has been altered by the civil laws." Thus the law, in establishing property, has not been the expression of a psychological fact, the development of a natural law, the application of a moral principle. It has literally CREATED a right outside of its own province. It has realized an abstraction, a metaphor, a fiction; and that without deigning to look at the consequences, without considering the disadvantages, without inquiring whether it was right or wrong. It has sanctioned selfishness; it has indorsed monstrous pretensions; it has received with favor impious vows, as if it were able to fill up a bottomless pit, and to satiate hell! Blind law; the law of the ignorant man; a law which is not a law; the voice of discord, deceit, and blood! This it is which, continually revived, reinstated, rejuvenated, restored, re-enforced--as the palladium of society--has troubled the consciences of the people, has obscured the minds of the masters, and has induced all the catastrophes which have befallen nations. This it is which Christianity has condemned, but which its ignorant ministers deify; who have as little desire to study Nature and man, as ability to read their Scriptures. But, indeed, what guide did the law follow in creating the domain of property? What principle directed it? What was its standard? Would you believe it? It was equality. Agriculture was the foundation of territorial possession, and the original cause of property. It was of no use to secure to the farmer the fruit of his labor, unless the means of production were at the same time secured to him. To fortify the weak against the invasion of the strong, to suppress spoliation and fraud, the necessity was felt of establishing between possessors permanent lines of division, insuperable obstacles. Every year saw the people multiply, and the cupidity of the husbandman increase: it was thought best to put a bridle on ambition by setting boundaries which ambition would in vain attempt to overstep. Thus the soil came to be appropriated through need of the equality which is essential to public security and peaceable possession. Undoubtedly the division was never geographically equal; a multitude of rights, some founded in Nature, but wrongly interpreted and still more wrongly applied, inheritance, gift, and exchange; others, like the privileges of birth and position, the illegitimate creations of ignorance and brute force,--all operated to prevent absolute equality. But, nevertheless, the principle remained the same: equality had sanctioned possession; equality sanctioned property. The husbandman needed each year a field to sow; what more convenient and simple arrangement for the barbarians,--instead of indulging in annual quarrels and fights, instead of continually moving their houses, furniture, and families from spot to spot,--than to assign to each individual a fixed and inalienable estate? It was not right that the soldier, on returning from an expedition, should find himself dispossessed on account of the services which he had just rendered to his country; his estate ought to be restored to him. It became, therefore, customary to retain property by intent alone--_nudo animo;_ it could be sacrificed only with the consent and by the action of the proprietor. It was necessary that the equality in the division should be kept up from one generation to another, without a new distribution of the land upon the death of each family; it appeared therefore natural and just that children and parents, according to the degree of relationship which they bore to the deceased, should be the heirs of their ancestors. Thence came, in the first place, the feudal and patriarchal custom of recognizing only one heir; then, by a quite contrary application of the principle of equality, the admission of all the children to a share in their father's estate, and, very recently also among us, the definitive abolition of the right of primogeniture. But what is there in common between these rude outlines of instinctive organization and the true social science? How could these men, who never had the faintest idea of statistics, valuation, or political economy, furnish us with principles of legislation? "The law," says a modern writer on jurisprudence, "is the expression of a social want, the declaration of a fact: the legislator does not make it, he declares it. 'This definition is not exact. The law is a method by which social wants must be satisfied; the people do not vote it, the legislator does not express it: the savant discovers and formulates it." But in fact, the law, according to M. Ch. Comte, who has devoted half a volume to its definition, was in the beginning only the EXPRESSION OF A WANT, and the indication of the means of supplying it; and up to this time it has been nothing else. The legists--with mechanical fidelity, full of obstinacy, enemies of philosophy, buried in literalities--have always mistaken for the last word of science that which was only the inconsiderate aspiration of men who, to be sure, were well-meaning, but wanting in foresight. They did not foresee, these old founders of the domain of property, that the perpetual and absolute right to retain one's estate,--a right which seemed to them equitable, because it was common,--involves the right to transfer, sell, give, gain, and lose it; that it tends, consequently, to nothing less than the destruction of that equality which they established it to maintain. And though they should have foreseen it, they disregarded it; the present want occupied their whole attention, and, as ordinarily happens in such cases, the disadvantages were at first scarcely perceptible, and they passed unnoticed. They did not foresee, these ingenuous legislators, that if property is retainable by intent alone--_nudo animo_--it carries with it the right to let, to lease, to loan at interest, to profit by exchange, to settle annuities, and to levy a tax on a field which intent reserves, while the body is busy elsewhere. They did not foresee, these fathers of our jurisprudence, that, if the right of inheritance is any thing other than Nature's method of preserving equality of wealth, families will soon become victims of the most disastrous exclusions; and society, pierced to the heart by one of its most sacred principles, will come to its death through opulence and misery. [12] Under whatever form of government we live, it can always be said that _le mort saisit le vif;_ that is, that inheritance and succession will last for ever, whoever may be the recognized heir. But the St. Simonians wish the heir to be designated by the magistrate; others wish him to be chosen by the deceased, or assumed by the law to be so chosen: the essential point is that Nature's wish be satisfied, so far as the law of equality allows. To-day the real controller of inheritance is chance or caprice; now, in matters of legislation, chance and caprice cannot be accepted as guides. It is for the purpose of avoiding the manifold disturbances which follow in the wake of chance that Nature, after having created us equal, suggests to us the principle of heredity; which serves as a voice by which society asks us to choose, from among all our brothers, him whom we judge best fitted to complete our unfinished work. They did not foresee.... But why need I go farther? The consequences are plain enough, and this is not the time to criticise the whole Code. The history of property among the ancient nations is, then, simply a matter of research and curiosity. It is a rule of jurisprudence that the fact does not substantiate the right. Now, property is no exception to this rule: then the universal recognition of the right of property does not legitimate the right of property. Man is mistaken as to the constitution of society, the nature of right, and the application of justice; just as he was mistaken regarding the cause of meteors and the movement of the heavenly bodies. His old opinions cannot be taken for articles of faith. Of what consequence is it to us that the Indian race was divided into four classes; that, on the banks of the Nile and the Ganges, blood and position formerly determined the distribution of the land; that the Greeks and Romans placed property under the protection of the gods; that they accompanied with religious ceremonies the work of partitioning the land and appraising their goods? The variety of the forms of privilege does not sanction injustice. The faith of Jupiter, the proprietor, [13] proves no more against the equality of citizens, than do the mysteries of Venus, the wanton, against conjugal chastity. The authority of the human race is of no effect as evidence in favor of the right of property, because this right, resting of necessity upon equality, contradicts its principle; the decision of the religions which have sanctioned it is of no effect, because in all ages the priest has submitted to the prince, and the gods have always spoken as the politicians desired; the social advantages, attributed to property, cannot be cited in its behalf, because they all spring from the principle of equality of possession. What means, then, this dithyramb upon property? "The right of property is the most important of human institutions."... Yes; as monarchy is the most glorious. "The original cause of man's prosperity upon earth." Because justice was supposed to be its principle. "Property became the legitimate end of his ambition, the hope of his existence, the shelter of his family; in a word, the corner-stone of the domestic dwelling, of communities, and of the political State." Possession alone produced all that. "Eternal principle,--" Property is eternal, like every negation,-- "Of all social and civil institutions." For that reason, every institution and every law based on property will perish. "It is a boon as precious as liberty." For the rich proprietor. "In fact, the cause of the cultivation of the habitable earth." If the cultivator ceased to be a tenant, would the land be worse cared for? "The guarantee and the morality of labor." Under the regime of property, labor is not a condition, but a privilege. "The application of justice." What is justice without equality of fortunes? A balance with false weights. "All morality,--" A famished stomach knows no morality,-- "All public order,--" Certainly, the preservation of property,-- "Rest on the right of property." [14] Corner-stone of all which is, stumbling-block of all which ought to be,--such is property. To sum up and conclude:-- Not only does occupation lead to equality, it PREVENTS property. For, since every man, from the fact of his existence, has the right of occupation, and, in order to live, must have material for cultivation on which he may labor; and since, on the other hand, the number of occupants varies continually with the births and deaths,--it follows that the quantity of material which each laborer may claim varies with the number of occupants; consequently, that occupation is always subordinate to population. Finally, that, inasmuch as possession, in right, can never remain fixed, it is impossible, in fact, that it can ever become property. Every occupant is, then, necessarily a possessor or usufructuary,--a function which excludes proprietorship. Now, this is the right of the usufructuary: he is responsible for the thing entrusted to him; he must use it in conformity with general utility, with a view to its preservation and development; he has no power to transform it, to diminish it, or to change its nature; he cannot so divide the usufruct that another shall perform the labor while he receives the product. In a word, the usufructuary is under the supervision of society, submitted to the condition of labor and the law of equality. Thus is annihilated the Roman definition of property--THE RIGHT OF USE AND ABUSE--an immorality born of violence, the most monstrous pretension that the civil laws ever sanctioned. Man receives his usufruct from the hands of society, which alone is the permanent possessor. The individual passes away, society is deathless. What a profound disgust fills my soul while discussing such simple truths! Do we doubt these things to-day? Will it be necessary to again take arms for their triumph? And can force, in default of reason, alone introduce them into our laws? ALL HAVE AN EQUAL RIGHT OF OCCUPANCY. THE AMOUNT OCCUPIED BEING MEASURED, NOT BY THE WILL, BUT BY THE VARIABLE CONDITIONS OF SPACE AND NUMBER, PROPERTY CANNOT EXIST. This no code has ever expressed; this no constitution can admit! These are axioms which the civil law and the law of nations deny!..... But I hear the exclamations of the partisans of another system: "Labor, labor! that is the basis of property!" Reader, do not be deceived. This new basis of property is worse than the first, and I shall soon have to ask your pardon for having demonstrated things clearer, and refuted pretensions more unjust, than any which we have yet considered. CHAPTER III. LABOR AS THE EFFICIENT CAUSE OF THE DOMAIN OF PROPERTY. Nearly all the modern writers on jurisprudence, taking their cue from the economists, have abandoned the theory of first occupancy as a too dangerous one, and have adopted that which regards property as born of labor. In this they are deluded; they reason in a circle. To labor it is necessary to occupy, says M. Cousin. Consequently, I have added in my turn, all having an equal right of occupancy, to labor it is necessary to submit to equality. "The rich," exclaims Jean Jacques, "have the arrogance to say, 'I built this wall; I earned this land by my labor.' Who set you the tasks? we may reply, and by what right do you demand payment from us for labor which we did not impose upon you?" All sophistry falls to the ground in the presence of this argument. But the partisans of labor do not see that their system is an absolute contradiction of the Code, all the articles and provisions of which suppose property to be based upon the fact of first occupancy. If labor, through the appropriation which results from it, alone gives birth to property, the Civil Code lies, the charter is a falsehood, our whole social system is a violation of right. To this conclusion shall we come, at the end of the discussion which is to occupy our attention in this chapter and the following one, both as to the right of labor and the fact of property. We shall see, on the one hand, our legislation in opposition to itself; and, on the other hand, our new jurisprudence in opposition both to its own principle and to our legislation. I have asserted that the system which bases property upon labor implies, no less than that which bases it upon occupation, the equality of fortunes; and the reader must be impatient to learn how I propose to deduce this law of equality from the inequality of skill and faculties: directly his curiosity shall be satisfied. But it is proper that I should call his attention for a moment to this remarkable feature of the process; to wit, the substitution of labor for occupation as the principle of property; and that I should pass rapidly in review some of the prejudices to which proprietors are accustomed to appeal, which legislation has sanctioned, and which the system of labor completely overthrows. Reader, were you ever present at the examination of a criminal? Have you watched his tricks, his turns, his evasions, his distinctions, his equivocations? Beaten, all his assertions overthrown, pursued like a fallow deer by the in exorable judge, tracked from hypothesis to hypothesis,--he makes a statement, he corrects it, retracts it, contradicts it, he exhausts all the tricks of dialectics, more subtle, more ingenious a thousand times than he who invented the seventy-two forms of the syllogism. So acts the proprietor when called upon to defend his right. At first he refuses to reply, he exclaims, he threatens, he defies; then, forced to accept the discussion, he arms himself with chicanery, he surrounds himself with formidable artillery,--crossing his fire, opposing one by one and all together occupation, possession, limitation, covenants, immemorial custom, and universal consent. Conquered on this ground, the proprietor, like a wounded boar, turns on his pursuers. "I have done more than occupy," he cries with terrible emotion; "I have labored, produced, improved, transformed, CREATED. This house, these fields, these trees are the work of my hands; I changed these brambles into a vineyard, and this bush into a fig-tree; and to-day I reap the harvest of my labors. I have enriched the soil with my sweat; I have paid those men who, had they not had the work which I gave them, would have died of hunger. No one shared with me the trouble and expense; no one shall share with me the benefits." You have labored, proprietor! why then do you speak of original occupancy? What, were you not sure of your right, or did you hope to deceive men, and make justice an illusion? Make haste, then, to acquaint us with your mode of defence, for the judgment will be final; and you know it to be a question of restitution. You have labored! but what is there in common between the labor which duty compels you to perform, and the appropriation of things in which there is a common interest? Do you not know that domain over the soil, like that over air and light, cannot be lost by prescription? You have labored! have you never made others labor? Why, then, have they lost in laboring for you what you have gained in not laboring for them? You have labored! very well; but let us see the results of your labor. We will count, weigh, and measure them. It will be the judgment of Balthasar; for I swear by balance, level, and square, that if you have appropriated another's labor in any way whatsoever, you shall restore it every stroke. Thus, the principle of occupation is abandoned; no longer is it said, "The land belongs to him who first gets possession of it." Property, forced into its first intrenchment, repudiates its old adage; justice, ashamed, retracts her maxims, and sorrow lowers her bandage over her blushing cheeks. And it was but yesterday that this progress in social philosophy began: fifty centuries required for the extirpation of a lie! During this lamentable period, how many usurpations have been sanctioned, how many invasions glorified, how many conquests celebrated! The absent dispossessed, the poor banished, the hungry excluded by wealth, which is so ready and bold in action! Jealousies and wars, incendiarism and bloodshed, among the nations! But henceforth, thanks to the age and its spirit, it is to be admitted that the earth is not a prize to be won in a race; in the absence of any other obstacle, there is a place for everybody under the sun. Each one may harness his goat to the bearn, drive his cattle to pasture, sow a corner of a field, and bake his bread by his own fireside. But, no; each one cannot do these things. I hear it proclaimed on all sides, "Glory to labor and industry! to each according to his capacity; to each capacity according to its results!" And I see three-fourths of the human race again despoiled, the labor of a few being a scourge to the labor of the rest. "The problem is solved," exclaims M. Hennequin. "Property, the daughter of labor, can be enjoyed at present and in the future only under the protection of the laws. It has its origin in natural law; it derives its power from civil law; and from the union of these two ideas, LABOR and PROTECTION, positive legislation results."... Ah! THE PROBLEM IS SOLVED! PROPERTY IS THE DAUGHTER OF LABOR! What, then, is the right of accession, and the right of succession, and the right of donation, &c., if not the right to become a proprietor by simple occupancy? What are your laws concerning the age of majority, emancipation, guardianship, and interdiction, if not the various conditions by which he who is already a laborer gains or loses the right of occupancy; that is, property? Being unable, at this time, to enter upon a detailed discussion of the Code, I shall content myself with examining the three arguments oftenest resorted to in support of property. 1. APPROPRIATION, or the formation of property by possession; 2. THE CONSENT OF MANKIND; 3. PRESCRIPTION. I shall then inquire into the effects of labor upon the relative condition of the laborers and upon property. % 1.--The Land cannot be Appropriated. "It would seem that lands capable of cultivation ought to be regarded as natural wealth, since they are not of human creation, but Nature's gratuitous gift to man; but inasmuch as this wealth is not fugitive, like the air and water,--inasmuch as a field is a fixed and limited space which certain men have been able to appropriate, to the exclusion of all others who in their turn have consented to this appropriation,--the land, which was a natural and gratuitous gift, has become social wealth, for the use of which we ought to pay."--SAY: POLITICAL ECONOMY. Was I wrong in saying, at the beginning of this chapter, that the economists are the very worst authorities in matters of legislation and philosophy? It is the FATHER of this class of men who clearly states the question, How can the supplies of Nature, the wealth created by Providence, become private property? and who replies by so gross an equivocation that we scarcely know which the author lacks, sense or honesty. What, I ask, has the fixed and solid nature of the earth to do with the right of appropriation? I can understand that a thing LIMITED and STATIONARY, like the land, offers greater chances for appropriation than the water or the sunshine; that it is easier to exercise the right of domain over the soil than over the atmosphere: but we are not dealing with the difficulty of the thing, and Say confounds the right with the possibility. We do not ask why the earth has been appropriated to a greater extent than the sea and the air; we want to know by what right man has appropriated wealth WHICH HE DID NOT CREATE, AND WHICH NATURE GAVE TO HIM GRATUITOUSLY. Say, then, did not solve the question which he asked. But if he had solved it, if the explanation which he has given us were as satisfactory as it is illogical, we should know no better than before who has a right to exact payment for the use of the soil, of this wealth which is not man's handiwork. Who is entitled to the rent of the land? The producer of the land, without doubt. Who made the land? God. Then, proprietor, retire! But the creator of the land does not sell it: he gives it; and, in giving it, he is no respecter of persons. Why, then, are some of his children regarded as legitimate, while others are treated as bastards? If the equality of shares was an original right, why is the inequality of conditions a posthumous right? Say gives us to understand that if the air and the water were not of a FUGITIVE nature, they would have been appropriated. Let me observe in passing that this is more than an hypothesis; it is a reality. Men have appropriated the air and the water, I will not say as often as they could, but as often as they have been allowed to. The Portuguese, having discovered the route to India by the Cape of Good Hope, pretended to have the sole right to that route; and Grotius, consulted in regard to this matter by the Dutch who refused to recognize this right, wrote expressly for this occasion his treatise on the "Freedom of the Seas," to prove that the sea is not liable to appropriation. The right to hunt and fish used always to be confined to lords and proprietors; to-day it is leased by the government and communes to whoever can pay the license-fee and the rent. To regulate hunting and fishing is an excellent idea, but to make it a subject of sale is to create a monopoly of air and water. What is a passport? A universal recommendation of the traveller's person; a certificate of security for himself and his property. The treasury, whose nature it is to spoil the best things, has made the passport a means of espionage and a tax. Is not this a sale of the right to travel? Finally, it is permissible neither to draw water from a spring situated in another's grounds without the permission of the proprietor, because by the right of accession the spring belongs to the possessor of the soil, if there is no other claim; nor to pass a day on his premises without paying a tax; nor to look at a court, a garden, or an orchard, without the consent of the proprietor; nor to stroll in a park or an enclosure against the owner's will: every one is allowed to shut himself up and to fence himself in. All these prohibitions are so many positive interdictions, not only of the land, but of the air and water. We who belong to the proletaire class: property excommunicates us! _Terra, et aqua, et aere, et igne interdicti sumus_. Men could not appropriate the most fixed of all the elements without appropriating the three others; since, by French and Roman law, property in the surface carries with it property from zenith to nadir--_Cujus est solum, ejus est usque ad caelum_. Now, if the use of water, air, and fire excludes property, so does the use of the soil. This chain of reasoning seems to have been presented by M. Ch. Comte, in his "Treatise on Property," chap. 5. "If a man should be deprived of air for a few moments only, he would cease to exist, and a partial deprivation would cause him severe suffering; a partial or complete deprivation of food would produce like effects upon him though less suddenly; it would be the same, at least in certain climates! were he deprived of all clothing and shelter.... To sustain life, then, man needs continually to appropriate many different things. But these things do not exist in like proportions. Some, such as the light of the stars, the atmosphere of the earth, the water composing the seas and oceans, exist in such large quantities that men cannot perceive any sensible increase or diminution; each one can appropriate as much as his needs require without detracting from the enjoyment of others, without causing them the least harm. Things of this sort are, so to speak, the common property of the human race; the only duty imposed upon each individual in this regard is that of infringing not at all upon the rights of others." Let us complete the argument of M. Ch. Comte. A man who should be prohibited from walking in the highways, from resting in the fields, from taking shelter in caves, from lighting fires, from picking berries, from gathering herbs and boiling them in a bit of baked clay,--such a man could not live. Consequently the earth--like water, air, and light--is a primary object of necessity which each has a right to use freely, without infringing another's right. Why, then, is the earth appropriated? M. Ch. Comte's reply is a curious one. Say pretends that it is because it is not FUGITIVE; M. Ch. Comte assures us that it is because it is not INFINITE. The land is limited in amount. Then, according to M. Ch. Comte, it ought to be appropriated. It would seem, on the contrary, that he ought to say, Then it ought not to be appropriated. Because, no matter how large a quantity of air or light any one appropriates, no one is damaged thereby; there always remains enough for all. With the soil, it is very different. Lay hold who will, or who can, of the sun's rays, the passing breeze, or the sea's billows; he has my consent, and my pardon for his bad intentions. But let any living man dare to change his right of territorial possession into the right of property, and I will declare war upon him, and wage it to the death! M. Ch. Comte's argument disproves his position. "Among the things necessary to the preservation of life," he says, "there are some which exist in such large quantities that they are inexhaustible; others which exist in lesser quantities, and can satisfy the wants of only a certain number of persons. The former are called COMMON, the latter PRIVATE." This reasoning is not strictly logical. Water, air, and light are COMMON things, not because they are INEXHAUSTIBLE, but because they are INDISPENSABLE; and so indispensable that for that very reason Nature has created them in quantities almost infinite, in order that their plentifulness might prevent their appropriation. Likewise the land is indispensable to our existence,--consequently a common thing, consequently insusceptible of appropriation; but land is much scarcer than the other elements, therefore its use must be regulated, not for the profit of a few, but in the interest and for the security of all. In a word, equality of rights is proved by equality of needs. Now, equality of rights, in the case of a commodity which is limited in amount, can be realized only by equality of possession. An agrarian law underlies M. Ch. Comte's arguments. From whatever point we view this question of property--provided we go to the bottom of it--we reach equality. I will not insist farther on the distinction between things which can, and things which cannot, be appropriated. On this point, economists and legists talk worse than nonsense. The Civil Code, after having defined property, says nothing about susceptibility of appropriation; and if it speaks of things which are in THE MARKET, it always does so without enumerating or describing them. However, light is not wanting. There are some few maxims such as these: _Ad reges potestas omnium pertinet, ad singulos proprietas; Omnia rex imperio possidet, singula dominio_. Social sovereignty opposed to private property!--might not that be called a prophecy of equality, a republican oracle? Examples crowd upon us: once the possessions of the church, the estates of the crown, the fiefs of the nobility were inalienable and imprescriptible. If, instead of abolishing this privilege, the Constituent had extended it to every individual; if it had declared that the right of labor, like liberty, can never be forfeited,--at that moment the revolution would have been consummated, and we could now devote ourselves to improvement in other directions. % 2.--Universal Consent no Justification of Property. In the extract from Say, quoted above, it is not clear whether the author means to base the right of property on the stationary character of the soil, or on the consent which he thinks all men have granted to this appropriation. His language is such that it may mean either of these things, or both at once; which entitles us to assume that the author intended to say, "The right of property resulting originally from the exercise of the will, the stability of the soil permitted it to be applied to the land, and universal consent has since sanctioned this application." However that may be, can men legitimate property by mutual consent? I say, no. Such a contract, though drafted by Grotius, Montesquieu, and J. J. Rousseau, though signed by the whole human race, would be null in the eyes of justice, and an act to enforce it would be illegal. Man can no more give up labor than liberty. Now, to recognize the right of territorial property is to give up labor, since it is to relinquish the means of labor; it is to traffic in a natural right, and divest ourselves of manhood. But I wish that this consent, of which so much is made, had been given, either tacitly or formally. What would have been the result? Evidently, the surrenders would have been reciprocal; no right would have been abandoned without the receipt of an equivalent in exchange. We thus come back to equality again,--the sine qua non of appropriation; so that, after having justified property by universal consent, that is, by equality, we are obliged to justify the inequality of conditions by property. Never shall we extricate ourselves from this dilemma. Indeed, if, in the terms of the social compact, property has equality for its condition, at the moment when equality ceases to exist, the compact is broken and all property becomes usurpation. We gain nothing, then, by this pretended consent of mankind. % 3.--Prescription Gives No Title to Property. The right of property was the origin of evil on the earth, the first link in the long chain of crimes and misfortunes which the human race has endured since its birth. The delusion of prescription is the fatal charm thrown over the intellect, the death sentence breathed into the conscience, to arrest man's progress towards truth, and bolster up the worship of error. The Code defines prescription thus: "The process of gaining and losing through the lapse of time." In applying this definition to ideas and beliefs, we may use the word PRESCRIPTION to denote the everlasting prejudice in favor of old superstitions, whatever be their object; the opposition, often furious and bloody, with which new light has always been received, and which makes the sage a martyr. Not a principle, not a discovery, not a generous thought but has met, at its entrance into the world, with a formidable barrier of preconceived opinions, seeming like a conspiracy of all old prejudices. Prescriptions against reason, prescriptions against facts, prescriptions against every truth hitherto unknown,--that is the sum and substance of the _statu quo_ philosophy, the watchword of conservatives throughout the centuries. When the evangelical reform was broached to the world, there was prescription in favor of violence, debauchery, and selfishness; when Galileo, Descartes, Pascal, and their disciples reconstructed philosophy and the sciences, there was prescription in favor of the Aristotelian philosophy; when our fathers of '89 demanded liberty and equality, there was prescription in favor of tyranny and privilege. "There always have been proprietors and there always will be:" it is with this profound utterance, the final effort of selfishness dying in its last ditch, that the friends of social inequality hope to repel the attacks of their adversaries; thinking undoubtedly that ideas, like property, can be lost by prescription. Enlightened to-day by the triumphal march of science, taught by the most glorious successes to question our own opinions, we receive with favor and applause the observer of Nature, who, by a thousand experiments based upon the most profound analysis, pursues a new principle, a law hitherto undiscovered. We take care to repel no idea, no fact, under the pretext that abler men than ourselves lived in former days, who did not notice the same phenomena, nor grasp the same analogies. Why do we not preserve a like attitude towards political and philosophical questions? Why this ridiculous mania for affirming that every thing has been said, which means that we know all about mental and moral science? Why is the proverb, THERE IS NOTHING NEW UNDER THE SUN, applied exclusively to metaphysical investigations? Because we still study philosophy with the imagination, instead of by observation and method; because fancy and will are universally regarded as judges, in the place of arguments and facts,--it has been impossible to this day to distinguish the charlatan from the philosopher, the savant from the impostor. Since the days of Solomon and Pythagoras, imagination has been exhausted in guessing out social and psychological laws; all systems have been proposed. Looked at in this light, it is probably true that EVERY THING HAS BEEN SAID; but it is no less true that EVERY THING REMAINS TO BE PROVED. In politics (to take only this branch of philosophy), in politics every one is governed in his choice of party by his passion and his interests; the mind is submitted to the impositions of the will,--there is no knowledge, there is not even a shadow of certainty. In this way, general ignorance produces general tyranny; and while liberty of thought is written in the charter, slavery of thought, under the name of MAJORITY RULE, is decreed by the charter. In order to confine myself to the civil prescription of which the Code speaks, I shall refrain from beginning a discussion upon this worn-out objection brought forward by proprietors; it would be too tiresome and declamatory. Everybody knows that there are rights which cannot be prescribed; and, as for those things which can be gained through the lapse of time, no one is ignorant of the fact that prescription requires certain conditions, the omission of one of which renders it null. If it is true, for example, that the proprietor's possession has been CIVIL, PUBLIC, PEACEABLE, and UNINTERRUPTED, it is none the less true that it is not based on a just title; since the only titles which it can show--occupation and labor--prove as much for the proletaire who demands, as for the proprietor who defends. Further, this possession is DISHONEST, since it is founded on a violation of right, which prevents prescription, according to the saying of St. Paul--_Nunquam in usucapionibus juris error possessori prodest_. The violation of right lies either in the fact that the holder possesses as proprietor, while he should possess only as usufructuary; or in the fact that he has purchased a thing which no one had a right to transfer or sell. Another reason why prescription cannot be adduced in favor of property (a reason borrowed from jurisprudence) is that the right to possess real estate is a part of a universal right which has never been totally destroyed even at the most critical periods; and the proletaire, in order to regain the power to exercise it fully, has only to prove that he has always exercised it in part. He, for example, who has the universal right to possess, give, exchange, loan, let, sell, transform, or destroy a thing, preserves the integrity of this right by the sole act of loaning, though he has never shown his authority in any other manner. Likewise we shall see that EQUALITY OF POSSESSIONS, EQUALITY OF RIGHTS, LIBERTY, WILL, PERSONALITY, are so many identical expressions of one and the same idea,--the RIGHT OF PRESERVATION and DEVELOPMENT; in a word, the right of life, against which there can be no prescription until the human race has vanished from the face of the earth. Finally, as to the time required for prescription, it would be superfluous to show that the right of property in general cannot be acquired by simple possession for ten, twenty, a hundred, a thousand, or one hundred thousand years; and that, so long as there exists a human head capable of understanding and combating the right of property, this right will never be prescribed. For principles of jurisprudence and axioms of reason are different from accidental and contingent facts. One man's possession can prescribe against another man's possession; but just as the possessor cannot prescribe against himself, so reason has always the faculty of change and reformation. Past error is not binding on the future. Reason is always the same eternal force. The institution of property, the work of ignorant reason, may be abrogated by a more enlightened reason. Consequently, property cannot be established by prescription. This is so certain and so true, that on it rests the maxim that in the matter of prescription a violation of right goes for nothing. But I should be recreant to my method, and the reader would have the right to accuse me of charlatanism and bad faith, if I had nothing further to advance concerning prescription. I showed, in the first place, that appropriation of land is illegal; and that, supposing it to be legal, it must be accompanied by equality of property. I have shown, in the second place, that universal consent proves nothing in favor of property; and that, if it proves any thing, it proves equality of property. I have yet to show that prescription, if admissible at all, presupposes equality of property. This demonstration will be neither long nor difficult. I need only to call attention to the reasons why prescription was introduced. "Prescription," says Dunod, "seems repugnant to natural equity, which permits no one either to deprive another of his possessions without his knowledge and consent, or to enrich himself at another's expense. But as it might often happen, in the absence of prescription, that one who had honestly earned would be ousted after long possession; and even that he who had received a thing from its rightful owner, or who had been legitimately relieved from all obligations, would, on losing his title, be liable to be dispossessed or subjected again,--the public welfare demanded that a term should be fixed, after the expiration of which no one should be allowed to disturb actual possessors, or reassert rights too long neglected.... The civil law, in regulating prescription, has aimed, then, only to perfect natural law, and to supplement the law of nations; and as it is founded on the public good, which should always be considered before individual welfare,--_bono publico usucapio introducta est_,--it should be regarded with favor, provided the conditions required by the law are fulfilled." Toullier, in his "Civil Law," says: "In order that the question of proprietorship may not remain too long unsettled, and thereby injure the public welfare, disturbing the peace of families and the stability of social transactions, the law has fixed a time when all claims shall be cancelled, and possession shall regain its ancient prerogative through its transformation into property." Cassiodorus said of property, that it was the only safe harbor in which to seek shelter from the tempests of chicanery and the gales of avarice--_Hic unus inter humanas pro cellas portus, quem si homines fervida voluntate praeterierint; in undosis semper jurgiis errabunt_. Thus, in the opinion of the authors, prescription is a means of preserving public order; a restoration in certain cases of the original mode of acquiring property; a fiction of the civil law which derives all its force from the necessity of settling differences which otherwise would never end. For, as Grotius says, time has no power to produce effects; all things happen in time, but nothing is done by time. Prescription, or the right of acquisition through the lapse of time, is, therefore, a fiction of the law, conventionally adopted. But all property necessarily originated in prescription, or, as the Latins say, in _usucapion;_ that is, in continued possession. I ask, then, in the first place, how possession can become property by the lapse of time? Continue possession as long as you wish, continue it for years and for centuries, you never can give duration--which of itself creates nothing, changes nothing, modifies nothing--the power to change the usufructuary into a proprietor. Let the civil law secure against chance-comers the honest possessor who has held his position for many years,--that only confirms a right already respected; and prescription, applied in this way, simply means that possession which has continued for twenty, thirty, or a hundred years shall be retained by the occupant. But when the law declares that the lapse of time changes possessor into proprietor, it supposes that a right can be created without a producing cause; it unwarrantably alters the character of the subject; it legislates on a matter not open to legislation; it exceeds its own powers. Public order and private security ask only that possession shall be protected. Why has the law created property? Prescription was simply security for the future; why has the law made it a matter of privilege? Thus the origin of prescription is identical with that of property itself; and since the latter can legitimate itself only when accompanied by equality, prescription is but another of the thousand forms which the necessity of maintaining this precious equality has taken. And this is no vain induction, no far-fetched inference. The proof is written in all the codes. And, indeed, if all nations, through their instinct of justice and their conservative nature, have recognized the utility and the necessity of prescription; and if their design has been to guard thereby the interests of the possessor,--could they not do something for the absent citizen, separated from his family and his country by commerce, war, or captivity, and in no position to exercise his right of possession? No. Also, at the same time that prescription was introduced into the laws, it was admitted that property is preserved by intent alone,--_nudo animo_. Now, if property is preserved by intent alone, if it can be lost only by the action of the proprietor, what can be the use of prescription? How does the law dare to presume that the proprietor, who preserves by intent alone, intended to abandon that which he has allowed to be prescribed? What lapse of time can warrant such a conjecture; and by what right does the law punish the absence of the proprietor by depriving him of his goods? What then! we found but a moment since that prescription and property were identical; and now we find that they are mutually destructive! Grotius, who perceived this difficulty, replied so singularly that his words deserve to be quoted: _Bene sperandum de hominibus, ac propterea non putandum eos hoc esse animo ut, rei caducae causa, hominem alterum velint in perpetuo peccato versari, quo d evitari saepe non poterit sine tali derelictione_. "Where is the man," he says, "with so unchristian a soul that, for a trifle, he would perpetuate the trespass of a possessor, which would inevitably be the result if he did not consent to abandon his right?" By the Eternal! I am that man. Though a million proprietors should burn for it in hell, I lay the blame on them for depriving me of my portion of this world's goods. To this powerful consideration Grotius rejoins, that it is better to abandon a disputed right than to go to law, disturb the peace of nations, and stir up the flames of civil war. I accept, if you wish it, this argument, provided you indemnify me. But if this indemnity is refused me, what do I, a proletaire, care for the tranquillity and security of the rich? I care as little for PUBLIC ORDER as for the proprietor's safety. I ask to live a laborer; otherwise I will die a warrior. Whichever way we turn, we shall come to the conclusion that prescription is a contradiction of property; or rather that prescription and property are two forms of the same principle, but two forms which serve to correct each other; and ancient and modern jurisprudence did not make the least of its blunders in pretending to reconcile them. Indeed, if we see in the institution of property only a desire to secure to each individual his share of the soil and his right to labor; in the distinction between naked property and possession only an asylum for absentees, orphans, and all who do not know, or cannot maintain, their rights; in prescription only a means, either of defence against unjust pretensions and encroachments, or of settlement of the differences caused by the removal of possessors,--we shall recognize in these various forms of human justice the spontaneous efforts of the mind to come to the aid of the social instinct; we shall see in this protection of all rights the sentiment of equality, a constant levelling tendency. And, looking deeper, we shall find in the very exaggeration of these principles the confirmation of our doctrine; because, if equality of conditions and universal association are not soon realized, it will be owing to the obstacle thrown for the time in the way of the common sense of the people by the stupidity of legislators and judges; and also to the fact that, while society in its original state was illuminated with a flash of truth, the early speculations of its leaders could bring forth nothing but darkness. After the first covenants, after the first draughts of laws and constitutions, which were the expression of man's primary needs, the legislator's duty was to reform the errors of legislation; to complete that which was defective; to harmonize, by superior definitions, those things which seemed to conflict. Instead of that, they halted at the literal meaning of the laws, content to play the subordinate part of commentators and scholiasts. Taking the inspirations of the human mind, at that time necessarily weak and faulty, for axioms of eternal and unquestionable truth,--influenced by public opinion, enslaved by the popular religion,--they have invariably started with the principle (following in this respect the example of the theologians) that that is infallibly true which has been admitted by all persons, in all places, and at all times--_quod ab omnibus, quod ubique, quod semper;_ as if a general but spontaneous opinion was any thing more than an indication of the truth. Let us not be deceived: the opinion of all nations may serve to authenticate the perception of a fact, the vague sentiment of a law; it can teach us nothing about either fact or law. The consent of mankind is an indication of Nature; not, as Cicero says, a law of Nature. Under the indication is hidden the truth, which faith can believe, but only thought can know. Such has been the constant progress of the human mind in regard to physical phenomena and the creations of genius: how can it be otherwise with the facts of conscience and the rules of human conduct? % 4.--Labor--That Labor Has No Inherent Power to Appropriate Natural Wealth. We shall show by the maxims of political economy and law, that is, by the authorities recognized by property,-- 1. That labor has no inherent power to appropriate natural wealth. 2. That, if we admit that labor has this power, we are led directly to equality of property,--whatever the kind of labor, however scarce the product, or unequal the ability of the laborers. 3. That, in the order of justice, labor DESTROYS property. Following the example of our opponents, and that we may leave no obstacles in the path, let us examine the question in the strongest possible light. M. Ch. Comte says, in his "Treatise on Property:"-- "France, considered as a nation, has a territory which is her own." France, as an individuality, possesses a territory which she cultivates; it is not her property. Nations are related to each other as individuals are: they are commoners and workers; it is an abuse of language to call them proprietors. The right of use and abuse belongs no more to nations than to men; and the time will come when a war waged for the purpose of checking a nation in its abuse of the soil will be regarded as a holy war. Thus, M. Ch. Comte--who undertakes to explain how property comes into existence, and who starts with the supposition that a nation is a proprietor--falls into that error known as BEGGING THE QUESTION; a mistake which vitiates his whole argument. If the reader thinks it is pushing logic too far to question a nation's right of property in the territory which it possesses, I will simply remind him of the fact that at all ages the results of the fictitious right of national property have been pretensions to suzerainty, tributes, monarchical privileges, statute-labor, quotas of men and money, supplies of merchandise, &c.; ending finally in refusals to pay taxes, insurrections, wars, and depopulations. "Scattered through this territory are extended tracts of land, which have not been converted into individual property. These lands, which consist mainly of forests, belong to the whole population, and the government, which receives the revenues, uses or ought to use them in the interest of all." OUGHT TO USE is well said: a lie is avoided thereby. "Let them be offered for sale...." Why offered for sale? Who has a right to sell them? Even were the nation proprietor, can the generation of to-day dispossess the generation of to-morrow? The nation, in its function of usufructuary, possesses them; the government rules, superintends, and protects them. If it also granted lands, it could grant only their use; it has no right to sell them or transfer them in any way whatever. Not being a proprietor, how can it transmit property? "Suppose some industrious man buys a portion, a large swamp for example. This would be no usurpation, since the public would receive the exact value through the hands of the government, and would be as rich after the sale as before." How ridiculous! What! because a prodigal, imprudent, incompetent official sells the State's possessions, while I, a ward of the State,--I who have neither an advisory nor a deliberative voice in the State councils,--while I am allowed to make no opposition to the sale, this sale is right and legal! The guardians of the nation waste its substance, and it has no redress! I have received, you tell me, through the hands of the government my share of the proceeds of the sale: but, in the first place, I did not wish to sell; and, had I wished to, I could not have sold. I had not the right. And then I do not see that I am benefited by the sale. My guardians have dressed up some soldiers, repaired an old fortress, erected in their pride some costly but worthless monument,--then they have exploded some fireworks and set up a greased pole! What does all that amount to in comparison with my loss? The purchaser draws boundaries, fences himself in, and says, "This is mine; each one by himself, each one for himself." Here, then, is a piece of land upon which, henceforth, no one has a right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these sales multiply, and soon the people--who have been neither able nor willing to sell, and who have received none of the proceeds of the sale--will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor's door, on the edge of that property which was their birthright; and the proprietor, watching them die, will exclaim, "So perish idlers and vagrants!" To reconcile us to the proprietor's usurpation, M. Ch. Comte assumes the lands to be of little value at the time of sale. "The importance of these usurpations should not be exaggerated: they should be measured by the number of men which the occupied land would support, and by the means which it would furnish them. "It is evident, for instance, that if a piece of land which is worth to-day one thousand francs was worth only five centimes when it was usurped, we really lose only the value of five centimes. A square league of earth would be hardly sufficient to support a savage in distress; to-day it supplies one thousand persons with the means of existence. Nine hundred and ninety-nine parts of this land is the legitimate property of the possessors; only one-thousandth of the value has been usurped." A peasant admitted one day, at confession, that he had destroyed a document which declared him a debtor to the amount of three hundred francs. Said the father confessor, "You must return these three hundred francs." "No," replied the peasant, "I will return a penny to pay for the paper." M. Ch. Comte's logic resembles this peasant's honesty. The soil has not only an integrant and actual value, it has also a potential value,--a value of the future,--which depends on our ability to make it valuable, and to employ it in our work. Destroy a bill of exchange, a promissory note, an annuity deed,--as a paper you destroy almost no value at all; but with this paper you destroy your title, and, in losing your title, you deprive yourself of your goods. Destroy the land, or, what is the same thing, sell it,--you not only transfer one, two, or several crops, but you annihilate all the products that you could derive from it; you and your children and your children's children. When M. Ch. Comte, the apostle of property and the eulogist of labor, supposes an alienation of the soil on the part of the government, we must not think that he does so without reason and for no purpose; it is a necessary part of his position. As he rejected the theory of occupancy, and as he knew, moreover, that labor could not constitute the right in the absence of a previous permission to occupy, he was obliged to connect this permission with the authority of the government, which means that property is based upon the sovereignty of the people; in other words, upon universal consent. This theory we have already considered. To say that property is the daughter of labor, and then to give labor material on which to exercise itself, is, if I am not mistaken, to reason in a circle. Contradictions will result from it. "A piece of land of a certain size produces food enough to supply a man for one day. If the possessor, through his labor, discovers some method of making it produce enough for two days, he doubles its value. This new value is his work, his creation: it is taken from nobody; it is his property." I maintain that the possessor is paid for his trouble and industry in his doubled crop, but that he acquires no right to the land. "Let the laborer have the fruits of his labor." Very good; but I do not understand that property in products carries with it property in raw material. Does the skill of the fisherman, who on the same coast can catch more fish than his fellows, make him proprietor of the fishing-grounds? Can the expertness of a hunter ever be regarded as a property-title to a game-forest? The analogy is perfect,--the industrious cultivator finds the reward of his industry in the abundancy and superiority of his crop. If he has made improvements in the soil, he has the possessor's right of preference. Never, under any circumstances, can he be allowed to claim a property-title to the soil which he cultivates, on the ground of his skill as a cultivator. To change possession into property, something is needed besides labor, without which a man would cease to be proprietor as soon as he ceased to be a laborer. Now, the law bases property upon immemorial, unquestionable possession; that is, prescription. Labor is only the sensible sign, the physical act, by which occupation is manifested. If, then, the cultivator remains proprietor after he has ceased to labor and produce; if his possession, first conceded, then tolerated, finally becomes inalienable,--it happens by permission of the civil law, and by virtue of the principle of occupancy. So true is this, that there is not a bill of sale, not a farm lease, not an annuity, but implies it. I will quote only one example. How do we measure the value of land? By its product. If a piece of land yields one thousand francs, we say that at five per cent. it is worth twenty thousand francs; at four per cent. twenty-five thousand francs, &c.; which means, in other words, that in twenty or twenty-five years' time the purchaser would recover in full the amount originally paid for the land. If, then, after a certain length of time, the price of a piece of land has been wholly recovered, why does the purchaser continue to be proprietor? Because of the right of occupancy, in the absence of which every sale would be a redemption. The theory of appropriation by labor is, then, a contradiction of the Code; and when the partisans of this theory pretend to explain the laws thereby, they contradict themselves. "If men succeed in fertilizing land hitherto unproductive, or even death-producing, like certain swamps, they create thereby property in all its completeness." What good does it do to magnify an expression, and play with equivocations, as if we expected to change the reality thereby? THEY CREATE PROPERTY IN ALL ITS COMPLETENESS. You mean that they create a productive capacity which formerly did not exist; but this capacity cannot be created without material to support it. The substance of the soil remains the same; only its qualities and modifications are changed. Man has created every thing--every thing save the material itself. Now, I maintain that this material he can only possess and use, on condition of permanent labor,--granting, for the time being, his right of property in things which he has produced. This, then, is the first point settled: property in product, if we grant so much, does not carry with it property in the means of production; that seems to me to need no further demonstration. There is no difference between the soldier who possesses his arms, the mason who possesses the materials committed to his care, the fisherman who possesses the water, the hunter who possesses the fields and forests, and the cultivator who possesses the lands: all, if you say so, are proprietors of their products--not one is proprietor of the means of production. The right to product is exclusive--jus in re; the right to means is common--jus ad rem. % 5.--That Labor leads to Equality of Property. Admit, however, that labor gives a right of property in material. Why is not this principle universal? Why is the benefit of this pretended law confined to a few and denied to the mass of laborers? A philosopher, arguing that all animals sprang up formerly out of the earth warmed by the rays of the sun, almost like mushrooms, on being asked why the earth no longer yielded crops of that nature, replied: "Because it is old, and has lost its fertility." Has labor, once so fecund, likewise become sterile? Why does the tenant no longer acquire through his labor the land which was formerly acquired by the labor of the proprietor? "Because," they say, "it is already appropriated." That is no answer. A farm yields fifty bushels per hectare; the skill and labor of the tenant double this product: the increase is created by the tenant. Suppose the owner, in a spirit of moderation rarely met with, does not go to the extent of absorbing this product by raising the rent, but allows the cultivator to enjoy the results of his labor; even then justice is not satisfied. The tenant, by improving the land, has imparted a new value to the property; he, therefore, has a right to a part of the property. If the farm was originally worth one hundred thousand francs, and if by the labor of the tenant its value has risen to one hundred and fifty thousand francs, the tenant, who produced this extra value, is the legitimate proprietor of one-third of the farm. M. Ch. Comte could not have pronounced this doctrine false, for it was he who said:-- "Men who increase the fertility of the earth are no less useful to their fellow-men, than if they should create new land." Why, then, is not this rule applicable to the man who improves the land, as well as to him who clears it? The labor of the former makes the land worth one; that of the latter makes it worth two: both create equal values. Why not accord to both equal property? I defy any one to refute this argument, without again falling back on the right of first occupancy. "But," it will be said, "even if your wish should be granted, property would not be distributed much more evenly than now. Land does not go on increasing in value for ever; after two or three seasons it attains its maximum fertility. That which is added by the agricultural art results rather from the progress of science and the diffusion of knowledge, than from the skill of the cultivator. Consequently, the addition of a few laborers to the mass of proprietors would be no argument against property." This discussion would, indeed, prove a well-nigh useless one, if our labors culminated in simply extending land-privilege and industrial monopoly; in emancipating only a few hundred laborers out of the millions of proletaires. But this also is a misconception of our real thought, and does but prove the general lack of intelligence and logic. If the laborer, who adds to the value of a thing, has a right of property in it, he who maintains this value acquires the same right. For what is maintenance? It is incessant addition,--continuous creation. What is it to cultivate? It is to give the soil its value every year; it is, by annually renewed creation, to prevent the diminution or destruction of the value of a piece of land. Admitting, then, that property is rational and legitimate,--admitting that rent is equitable and just,--I say that he who cultivates acquires property by as good a title as he who clears, or he who improves; and that every time a tenant pays his rent, he obtains a fraction of property in the land entrusted to his care, the denominator of which is equal to the proportion of rent paid. Unless you admit this, you fall into absolutism and tyranny; you recognize class privileges; you sanction slavery. Whoever labors becomes a proprietor--this is an inevitable deduction from the acknowledged principles of political economy and jurisprudence. And when I say proprietor, I do not mean simply (as do our hypocritical economists) proprietor of his allowance, his salary, his wages,--I mean proprietor of the value which he creates, and by which the master alone profits. As all this relates to the theory of wages and of the distribution of products,--and as this matter never has been even partially cleared up,--I ask permission to insist on it: this discussion will not be useless to the work in hand. Many persons talk of admitting working-people to a share in the products and profits; but in their minds this participation is pure benevolence: they have never shown--perhaps never suspected--that it was a natural, necessary right, inherent in labor, and inseparable from the function of producer, even in the lowest forms of his work. This is my proposition: THE LABORER RETAINS, EVEN AFTER HE HAS RECEIVED HIS WAGES, A NATURAL RIGHT OF PROPERTY IN THE THING WHICH HE HAS PRODUCED. I again quote M. Ch. Comte:-- "Some laborers are employed in draining marshes, in cutting down trees and brushwood,--in a word, in cleaning up the soil. They increase the value, they make the amount of property larger; they are paid for the value which they add in the form of food and daily wages: it then becomes the property of the capitalist." The price is not sufficient: the labor of the workers has created a value; now this value is their property. But they have neither sold nor exchanged it; and you, capitalist, you have not earned it. That you should have a partial right to the whole, in return for the materials that you have furnished and the provisions that you have supplied, is perfectly just. You contributed to the production, you ought to share in the enjoyment. But your right does not annihilate that of the laborers, who, in spite of you, have been your colleagues in the work of production. Why do you talk of wages? The money with which you pay the wages of the laborers remunerates them for only a few years of the perpetual possession which they have abandoned to you. Wages is the cost of the daily maintenance and refreshment of the laborer. You are wrong in calling it the price of a sale. The workingman has sold nothing; he knows neither his right, nor the extent of the concession which he has made to you, nor the meaning of the contract which you pretend to have made with him. On his side, utter ignorance; on yours, error and surprise, not to say deceit and fraud. Let us make this clearer by another and more striking example. No one is ignorant of the difficulties that are met with in the conversion of untilled land into arable and productive land. These difficulties are so great, that usually an isolated man would perish before he could put the soil in a condition to yield him even the most meagre living. To that end are needed the united and combined efforts of society, and all the resources of industry. M. Ch. Comte quotes on this subject numerous and well-authenticated facts, little thinking that he is amassing testimony against his own system. Let us suppose that a colony of twenty or thirty families establishes itself in a wild district, covered with underbrush and forests; and from which, by agreement, the natives consent to withdraw. Each one of these families possesses a moderate but sufficient amount of capital, of such a nature as a colonist would be apt to choose,--animals, seeds, tools, and a little money and food. The land having been divided, each one settles himself as comfortably as possible, and begins to clear away the portion allotted to him. But after a few weeks of fatigue, such as they never before have known, of inconceivable suffering, of ruinous and almost useless labor, our colonists begin to complain of their trade; their condition seems hard to them; they curse their sad existence. Suddenly, one of the shrewdest among them kills a pig, cures a part of the meat; and, resolved to sacrifice the rest of his provisions, goes to find his companions in misery. "Friends," he begins in a very benevolent tone, "how much trouble it costs you to do a little work and live uncomfortably! A fortnight of labor has reduced you to your last extremity!... Let us make an arrangement by which you shall all profit. I offer you provisions and wine: you shall get so much every day; we will work together, and, zounds! my friends, we will be happy and contented!" Would it be possible for empty stomachs to resist such an invitation? The hungriest of them follow the treacherous tempter. They go to work; the charm of society, emulation, joy, and mutual assistance double their strength; the work can be seen to advance. Singing and laughing, they subdue Nature. In a short time, the soil is thoroughly changed; the mellowed earth waits only for the seed. That done, the proprietor pays his laborers, who, on going away, return him their thanks, and grieve that the happy days which they have spent with him are over. Others follow this example, always with the same success. Then, these installed, the rest disperse,--each one returns to his grubbing. But, while grubbing, it is necessary to live. While they have been clearing away for their neighbor, they have done no clearing for themselves. One year's seed-time and harvest is already gone. They had calculated that in lending their labor they could not but gain, since they would save their own provisions; and, while living better, would get still more money. False calculation! they have created for another the means wherewith to produce, and have created nothing for themselves. The difficulties of clearing remain the same; their clothing wears out, their provisions give out; soon their purse becomes empty for the profit of the individual for whom they have worked, and who alone can furnish the provisions which they need, since he alone is in a position to produce them. Then, when the poor grubber has exhausted his resources, the man with the provisions (like the wolf in the fable, who scents his victim from afar) again comes forward. One he offers to employ again by the day; from another he offers to buy at a favorable price a piece of his bad land, which is not, and never can be, of any use to him: that is, he uses the labor of one man to cultivate the field of another for his own benefit. So that at the end of twenty years, of thirty individuals originally equal in point of wealth, five or six have become proprietors of the whole district, while the rest have been philanthropically dispossessed! In this century of bourgeoisie morality, in which I have had the honor to be born, the moral sense is so debased that I should not be at all surprised if I were asked, by many a worthy proprietor, what I see in this that is unjust and illegitimate? Debased creature! galvanized corpse! how can I expect to convince you, if you cannot tell robbery when I show it to you? A man, by soft and insinuating words, discovers the secret of taxing others that he may establish himself; then, once enriched by their united efforts, he refuses, on the very conditions which he himself dictated, to advance the well-being of those who made his fortune for him: and you ask how such conduct is fraudulent! Under the pretext that he has paid his laborers, that he owes them nothing more, that he has nothing to gain by putting himself at the service of others, while his own occupations claim his attention,--he refuses, I say, to aid others in getting a foothold, as he was aided in getting his own; and when, in the impotence of their isolation, these poor laborers are compelled to sell their birthright, he--this ungrateful proprietor, this knavish upstart--stands ready to put the finishing touch to their deprivation and their ruin. And you think that just? Take care! I read in your startled countenance the reproach of a guilty conscience, much more clearly than the innocent astonishment of involuntary ignorance. "The capitalist," they say, "has paid the laborers their DAILY WAGES." To be accurate, it must be said that the capitalist has paid as many times one day's wage as he has employed laborers each day,--which is not at all the same thing. For he has paid nothing for that immense power which results from the union and harmony of laborers, and the convergence and simultaneousness of their efforts. Two hundred grenadiers stood the obelisk of Luxor upon its base in a few hours; do you suppose that one man could have accomplished the same task in two hundred days? Nevertheless, on the books of the capitalist, the amount of wages paid would have been the same. Well, a desert to prepare for cultivation, a house to build, a factory to run,--all these are obelisks to erect, mountains to move. The smallest fortune, the most insignificant establishment, the setting in motion of the lowest industry, demand the concurrence of so many different kinds of labor and skill, that one man could not possibly execute the whole of them. It is astonishing that the economists never have called attention to this fact. Strike a balance, then, between the capitalist's receipts and his payments. The laborer needs a salary which will enable him to live while he works; for unless he consumes, he cannot produce. Whoever employs a man owes him maintenance and support, or wages enough to procure the same. That is the first thing to be done in all production. I admit, for the moment, that in this respect the capitalist has discharged his duty. It is necessary that the laborer should find in his production, in addition to his present support, a guarantee of his future support; otherwise the source of production would dry up, and his productive capacity would become exhausted: in other words, the labor accomplished must give birth perpetually to new labor--such is the universal law of reproduction. In this way, the proprietor of a farm finds: 1. In his crops, means, not only of supporting himself and his family, but of maintaining and improving his capital, of feeding his live-stock--in a word, means of new labor and continual reproduction; 2. In his ownership of a productive agency, a permanent basis of cultivation and labor. But he who lends his services,--what is his basis of cultivation? The proprietor's presumed need of him, and the unwarranted supposition that he wishes to employ him. Just as the commoner once held his land by the munificence and condescension of the lord, so to-day the working-man holds his labor by the condescension and necessities of the master and proprietor: that is what is called possession by a precarious [15] title. But this precarious condition is an injustice, for it implies an inequality in the bargain. The laborer's wages exceed but little his running expenses, and do not assure him wages for to-morrow; while the capitalist finds in the instrument produced by the laborer a pledge of independence and security for the future. Now, this reproductive leaven--this eternal germ of life, this preparation of the land and manufacture of implements for production--constitutes the debt of the capitalist to the producer, which he never pays; and it is this fraudulent denial which causes the poverty of the laborer, the luxury of idleness, and the inequality of conditions. This it is, above all other things, which has been so fitly named the exploitation of man by man. One of three things must be done. Either the laborer must be given a portion of the product in addition to his wages; or the employer must render the laborer an equivalent in productive service; or else he must pledge himself to employ him for ever. Division of the product, reciprocity of service, or guarantee of perpetual labor,--from the adoption of one of these courses the capitalist cannot escape. But it is evident that he cannot satisfy the second and third of these conditions--he can neither put himself at the service of the thousands of working-men, who, directly or indirectly, have aided him in establishing himself, nor employ them all for ever. He has no other course left him, then, but a division of the property. But if the property is divided, all conditions will be equal--there will be no more large capitalists or large proprietors. Consequently, when M. Ch. Comte--following out his hypothesis--shows us his capitalist acquiring one after another the products of his employees' labor, he sinks deeper and deeper into the mire; and, as his argument does not change, our reply of course remains the same. "Other laborers are employed in building: some quarry the stone, others transport it, others cut it, and still others put it in place. Each of them adds a certain value to the material which passes through his hands; and this value, the product of his labor, is his property. He sells it, as fast as he creates it, to the proprietor of the building, who pays him for it in food and wages." _Divide et impera_--divide, and you shall command; divide, and you shall grow rich; divide, and you shall deceive men, you shall daze their minds, you shall mock at justice! Separate laborers from each other, perhaps each one's daily wage exceeds the value of each individual's product; but that is not the question under consideration. A force of one thousand men working twenty days has been paid the same wages that one would be paid for working fifty-five years; but this force of one thousand has done in twenty days what a single man could not have accomplished, though he had labored for a million centuries. Is the exchange an equitable one? Once more, no; when you have paid all the individual forces, the collective force still remains to be paid. Consequently, there remains always a right of collective property which you have not acquired, and which you enjoy unjustly. Admit that twenty days' wages suffice to feed, lodge, and clothe this multitude for twenty days: thrown out of employment at the end of that time, what will become of them, if, as fast as they create, they abandon their creations to the proprietors who will soon discharge them? While the proprietor, firm in his position (thanks to the aid of all the laborers), dwells in security, and fears no lack of labor or bread, the laborer's only dependence is upon the benevolence of this same proprietor, to whom he has sold and surrendered his liberty. If, then, the proprietor, shielding himself behind his comfort and his rights, refuses to employ the laborer, how can the laborer live? He has ploughed an excellent field, and cannot sow it; he has built an elegant and commodious house, and cannot live in it; he has produced all, and can enjoy nothing. Labor leads us to equality. Every step that we take brings us nearer to it; and if laborers had equal strength, diligence, and industry, clearly their fortunes would be equal also. Indeed, if, as is pretended,--and as we have admitted,--the laborer is proprietor of the value which he creates, it follows:-- 1. That the laborer acquires at the expense of the idle proprietor; 2. That all production being necessarily collective, the laborer is entitled to a share of the products and profits commensurate with his labor; 3. That all accumulated capital being social property, no one can be its exclusive proprietor. These inferences are unavoidable; these alone would suffice to revolutionize our whole economical system, and change our institutions and our laws. Why do the very persons, who laid down this principle, now refuse to be guided by it? Why do the Says, the Comtes, the Hennequins, and others--after having said that property is born of labor--seek to fix it by occupation and prescription? But let us leave these sophists to their contradictions and blindness. The good sense of the people will do justice to their equivocations. Let us make haste to enlighten it, and show it the true path. Equality approaches; already between it and us but a short distance intervenes: to-morrow even this distance will have been traversed. % 6.--That in Society all Wages are Equal. When the St. Simonians, the Fourierists, and, in general, all who in our day are connected with social economy and reform, inscribe upon their banner,-- "TO EACH ACCORDING TO HIS CAPACITY, TO EACH CAPACITY ACCORDING TO ITS RESULTS" (St. Simon); "TO EACH ACCORDING TO HIS CAPITAL, HIS LABOR, AND HIS SKILL" (Fourier),-- they mean--although they do not say so in so many words--that the products of Nature procured by labor and industry are a reward, a palm, a crown offered to all kinds of preeminence and superiority. They regard the land as an immense arena in which prizes are contended for,--no longer, it is true, with lances and swords, by force and by treachery; but by acquired wealth, by knowledge, talent, and by virtue itself. In a word, they mean--and everybody agrees with them--that the greatest capacity is entitled to the greatest reward; and, to use the mercantile phraseology,--which has, at least, the merit of being straightforward,--that salaries must be governed by capacity and its results. The disciples of these two self-styled reformers cannot deny that such is their thought; for, in doing so, they would contradict their official interpretations, and would destroy the unity of their systems. Furthermore, such a denial on their part is not to be feared. The two sects glory in laying down as a principle inequality of conditions,--reasoning from Nature, who, they say, intended the inequality of capacities. They boast only of one thing; namely, that their political system is so perfect, that the social inequalities always correspond with the natural inequalities. They no more trouble themselves to inquire whether inequality of conditions--I mean of salaries--is possible, than they do to fix a measure of capacity.[1] [1] In St. Simon's system, the St.-Simonian priest determines the capacity of each by virtue of his pontifical infallibility, in imitation of the Roman Church: in Fourier's, the ranks and merits are decided by vote, in imitation of the constitutional regime. Clearly, the great man is an object of ridicule to the reader; he did not mean to tell his secret. "To each according to his capacity, to each capacity according to its results." "To each according to his capital, his labor, and his skill." Since the death of St. Simon and Fourier, not one among their numerous disciples has attempted to give to the public a scientific demonstration of this grand maxim; and I would wager a hundred to one that no Fourierist even suspects that this biform aphorism is susceptible of two interpretations. "To each according to his capacity, to each capacity according to its results." "To each according to his capital, his labor, and his skill." This proposition, taken, as they say, _in sensu obvio_--in the sense usually attributed to it--is false, absurd, unjust, contradictory, hostile to liberty, friendly to tyranny, anti-social, and was unluckily framed under the express influence of the property idea. And, first, CAPITAL must be crossed off the list of elements which are entitled to a reward. The Fourierists--as far as I have been able to learn from a few of their pamphlets--deny the right of occupancy, and recognize no basis of property save labor. Starting with a like premise, they would have seen--had they reasoned upon the matter--that capital is a source of production to its proprietor only by virtue of the right of occupancy, and that this production is therefore illegitimate. Indeed, if labor is the sole basis of property, I cease to be proprietor of my field as soon as I receive rent for it from another. This we have shown beyond all cavil. It is the same with all capital; so that to put capital in an enterprise, is, by the law's decision, to exchange it for an equivalent sum in products. I will not enter again upon this now useless discussion, since I propose, in the following chapter, to exhaust the subject of PRODUCTION BY CAPITAL. Thus, capital can be exchanged, but cannot be a source of income. LABOR and SKILL remain; or, as St. Simon puts it, RESULTS and CAPACITIES. I will examine them successively. Should wages be governed by labor? In other words, is it just that he who does the most should get the most? I beg the reader to pay the closest attention to this point. To solve the problem with one stroke, we have only to ask ourselves the following question: "Is labor a CONDITION or a STRUGGLE?" The reply seems plain. God said to man, "In the sweat of thy face shalt thou eat bread,"--that is, thou shalt produce thy own bread: with more or less ease, according to thy skill in directing and combining thy efforts, thou shalt labor. God did not say, "Thou shalt quarrel with thy neighbor for thy bread;" but, "Thou shalt labor by the side of thy neighbor, and ye shall dwell together in harmony." Let us develop the meaning of this law, the extreme simplicity of which renders it liable to misconstruction. In labor, two things must be noticed and distinguished: ASSOCIATION and AVAILABLE MATERIAL. In so far as laborers are associated, they are equal; and it involves a contradiction to say that one should be paid more than another. For, as the product of one laborer can be paid for only in the product of another laborer, if the two products are unequal, the remainder--or the difference between the greater and the smaller--will not be acquired by society; and, therefore, not being exchanged, will not affect the equality of wages. There will result, it is true, in favor of the stronger laborer a natural inequality, but not a social inequality; no one having suffered by his strength and productive energy. In a word, society exchanges only equal products--that is, rewards no labor save that performed for her benefit; consequently, she pays all laborers equally: with what they produce outside of her sphere she has no more to do, than with the difference in their voices and their hair. I seem to be positing the principle of inequality: the reverse of this is the truth. The total amount of labor which can be performed for society (that is, of labor susceptible of exchange), being, within a given space, as much greater as the laborers are more numerous, and as the task assigned to each is less in magnitude,--it follows that natural inequality neutralizes itself in proportion as association extends, and as the quantity of consumable values produced thereby increases. So that in society the only thing which could bring back the inequality of labor would be the right of occupancy,--the right of property. Now, suppose that this daily social task consists in the ploughing, hoeing, or reaping of two square decameters, and that the average time required to accomplish it is seven hours: one laborer will finish it in six hours, another will require eight; the majority, however, will work seven. But provided each one furnishes the quantity of labor demanded of him, whatever be the time he employs, they are entitled to equal wages. Shall the laborer who is capable of finishing his task in six hours have the right, on the ground of superior strength and activity, to usurp the task of the less skilful laborer, and thus rob him of his labor and bread? Who dares maintain such a proposition? He who finishes before the others may rest, if he chooses; he may devote himself to useful exercise and labors for the maintenance of his strength, and the culture of his mind, and the pleasure of his life. This he can do without injury to any one: but let him confine himself to services which affect him solely. Vigor, genius, diligence, and all the personal advantages which result therefrom, are the work of Nature and, to a certain extent, of the individual; society awards them the esteem which they merit: but the wages which it pays them is measured, not by their power, but by their production. Now, the product of each is limited by the right of all. If the soil were infinite in extent, and the amount of available material were exhaustless, even then we could not accept this maxim,--TO EACH ACCORDING TO HIS LABOR. And why? Because society, I repeat, whatever be the number of its subjects, is forced to pay them all the same wages, since she pays them only in their own products. Only, on the hypothesis just made, inasmuch as the strong cannot be prevented from using all their advantages, the inconveniences of natural inequality would reappear in the very bosom of social equality. But the land, considering the productive power of its inhabitants and their ability to multiply, is very limited; further, by the immense variety of products and the extreme division of labor, the social task is made easy of accomplishment. Now, through this limitation of things producible, and through the ease of producing them, the law of absolute equality takes effect. Yes, life is a struggle. But this struggle is not between man and man--it is between man and Nature; and it is each one's duty to take his share in it. If, in the struggle, the strong come to the aid of the weak, their kindness deserves praise and love; but their aid must be accepted as a free gift,--not imposed by force, nor offered at a price. All have the same career before them, neither too long nor too difficult; whoever finishes it finds his reward at the end: it is not necessary to get there first. In printing-offices, where the laborers usually work by the job, the compositor receives so much per thousand letters set; the pressman so much per thousand sheets printed. There, as elsewhere, inequalities of talent and skill are to be found. When there is no prospect of dull times (for printing and typesetting, like all other trades, sometimes come to a stand-still), every one is free to work his hardest, and exert his faculties to the utmost: he who does more gets more; he who does less gets less. When business slackens, compositors and pressmen divide up their labor; all monopolists are detested as no better than robbers or traitors. There is a philosophy in the action of these printers, to which neither economists nor legists have ever risen. If our legislators had introduced into their codes the principle of distributive justice which governs printing-offices; if they had observed the popular instincts,--not for the sake of servile imitation, but in order to reform and generalize them,--long ere this liberty and equality would have been established on an immovable basis, and we should not now be disputing about the right of property and the necessity of social distinctions. It has been calculated that if labor were equally shared by the whole number of able-bodied individuals, the average working-day of each individual, in France, would not exceed five hours. This being so, how can we presume to talk of the inequality of laborers? It is the LABOR of Robert Macaire that causes inequality. The principle, TO EACH ACCORDING TO HIS LABOR, interpreted to mean, WHO WORKS MOST SHOULD RECEIVE MOST, is based, therefore, on two palpable errors: one, an error in economy, that in the labor of society tasks must necessarily be unequal; the other, an error in physics, that there is no limit to the amount of producible things. "But," it will be said, "suppose there are some people who wish to perform only half of their task?"... Is that very embarrassing? Probably they are satisfied with half of their salary. Paid according to the labor that they had performed, of what could they complain? and what injury would they do to others? In this sense, it is fair to apply the maxim,--TO EACH ACCORDING TO HIS RESULTS. It is the law of equality itself. Further, numerous difficulties, relative to the police system and the organization of industry, might be raised here. I will reply to them all with this one sentence,--that they must all be solved by the principle of equality. Thus, some one might observe, "Here is a task which cannot be postponed without detriment to production. Ought society to suffer from the negligence of a few? and will she not venture--out of respect for the right of labor--to assure with her own hands the product which they refuse her? In such a case, to whom will the salary belong?" To society; who will be allowed to perform the labor, either herself, or through her representatives, but always in such a way that the general equality shall never be violated, and that only the idler shall be punished for his idleness. Further, if society may not use excessive severity towards her lazy members, she has a right, in self-defence, to guard against abuses. But every industry needs--they will add--leaders, instructors, superintendents, &c. Will these be engaged in the general task? No; since their task is to lead, instruct, and superintend. But they must be chosen from the laborers by the laborers themselves, and must fulfil the conditions of eligibility. It is the same with all public functions, whether of administration or instruction. Then, article first of the universal constitution will be:-- "The limited quantity of available material proves the necessity of dividing the labor among the whole number of laborers. The capacity, given to all, of accomplishing a social task,--that is, an equal task,--and the impossibility of paying one laborer save in the products of another, justify the equality of wages." % 7.--That Inequality of Powers is the Necessary Condition of Equality of Fortunes. It is objected,--and this objection constitutes the second part of the St. Simonian, and the third part of the Fourierstic, maxims,-- "That all kinds of labor cannot be executed with equal ease. Some require great superiority of skill and intelligence; and on this superiority is based the price. The artist, the savant, the poet, the statesman, are esteemed only because of their excellence; and this excellence destroys all similitude between them and other men: in the presence of these heights of science and genius the law of equality disappears. Now, if equality is not absolute, there is no equality. From the poet we descend to the novelist; from the sculptor to the stonecutter; from the architect to the mason; from the chemist to the cook, &c. Capacities are classified and subdivided into orders, genera, and species. The extremes of talent are connected by intermediate talents. Humanity is a vast hierarchy, in which the individual estimates himself by comparison, and fixes his price by the value placed upon his product by the public." This objection always has seemed a formidable one. It is the stumbling-block of the economists, as well as of the defenders of equality. It has led the former into egregious blunders, and has caused the latter to utter incredible platitudes. Gracchus Babeuf wished all superiority to be STRINGENTLY REPRESSED, and even PERSECUTED AS A SOCIAL CALAMITY. To establish his communistic edifice, he lowered all citizens to the stature of the smallest. Ignorant eclectics have been known to object to the inequality of knowledge, and I should not be surprised if some one should yet rebel against the inequality of virtue. Aristotle was banished, Socrates drank the hemlock, Epaminondas was called to account, for having proved superior in intelligence and virtue to some dissolute and foolish demagogues. Such follies will be re-enacted, so long as the inequality of fortunes justifies a populace, blinded and oppressed by the wealthy, in fearing the elevation of new tyrants to power. Nothing seems more unnatural than that which we examine too closely, and often nothing seems less like the truth than the truth itself. On the other hand, according to J. J. Rousseau, "it takes a great deal of philosophy to enable us to observe once what we see every day;" and, according to d'Alembert, "the ordinary truths of life make but little impression on men, unless their attention is especially called to them." The father of the school of economists (Say), from whom I borrow these two quotations, might have profited by them; but he who laughs at the blind should wear spectacles, and he who notices him is near-sighted. Strange! that which has frightened so many minds is not, after all, an objection to equality--it is the very condition on which equality exists!... Natural inequality the condition of equality of fortunes!... What a paradox!... I repeat my assertion, that no one may think I have blundered--inequality of powers is the sine qua non of equality of fortunes. There are two things to be considered in society--FUNCTIONS and RELATIONS. I. FUNCTIONS. Every laborer is supposed to be capable of performing the task assigned to him; or, to use a common expression, "every workman must know his trade." The workman equal to his work,--there is an equation between functionary and function. In society, functions are not alike; there must be, then, different capacities. Further,--certain functions demand greater intelligence and powers; then there are people of superior mind and talent. For the performance of work necessarily involves a workman: from the need springs the idea, and the idea makes the producer. We only know what our senses long for and our intelligence demands; we have no keen desire for things of which we cannot conceive, and the greater our powers of conception, the greater our capabilities of production. Thus, functions arising from needs, needs from desires, and desires from spontaneous perception and imagination, the same intelligence which imagines can also produce; consequently, no labor is superior to the laborer. In a word, if the function calls out the functionary, it is because the functionary exists before the function. Let us admire Nature's economy. With regard to these various needs which she has given us, and which the isolated man cannot satisfy unaided, Nature has granted to the race a power refused to the individual. This gives rise to the principle of the DIVISION OF LABOR,--a principle founded on the SPECIALITY OF VOCATIONS. The satisfaction of some needs demands of man continual creation; while others can, by the labor of a single individual, be satisfied for millions of men through thousands of centuries. For example, the need of clothing and food requires perpetual reproduction; while a knowledge of the system of the universe may be acquired for ever by two or three highly-gifted men. The perpetual current of rivers supports our commerce, and runs our machinery; but the sun, alone in the midst of space, gives light to the whole world. Nature, who might create Platos and Virgils, Newtons and Cuviers, as she creates husbandmen and shepherds, does not see fit to do so; choosing rather to proportion the rarity of genius to the duration of its products, and to balance the number of capacities by the competency of each one of them. I do not inquire here whether the distance which separates one man from another, in point of talent and intelligence, arises from the deplorable condition of civilization, nor whether that which is now called the INEQUALITY OF POWERS would be in an ideal society any thing more than a DIVERSITY OF POWERS. I take the worst view of the matter; and, that I may not be accused of tergiversation and evasion of difficulties, I acknowledge all the inequalities that any one can desire. [16] Certain philosophers, in love with the levelling idea, maintain that all minds are equal, and that all differences are the result of education. I am no believer, I confess, in this doctrine; which, even if it were true, would lead to a result directly opposite to that desired. For, if capacities are equal, whatever be the degree of their power (as no one can be coerced), there are functions deemed coarse, low, and degrading, which deserve higher pay,--a result no less repugnant to equality than to the principle, TO EACH CAPACITY ACCORDING TO ITS RESULTS. Give me, on the contrary, a society in which every kind of talent bears a proper numerical relation to the needs of the society, and which demands from each producer only that which his special function requires him to produce; and, without impairing in the least the hierarchy of functions, I will deduce the equality of fortunes. This is my second point. II. RELATIONS. In considering the element of labor, I have shown that in the same class of productive services, the capacity to perform a social task being possessed by all, no inequality of reward can be based upon an inequality of individual powers. However, it is but fair to say that certain capacities seem quite incapable of certain services; so that, if human industry were entirely confined to one class of products, numerous incapacities would arise, and, consequently, the greatest social inequality. But every body sees, without any hint from me, that the variety of industries avoids this difficulty; so clear is this that I shall not stop to discuss it. We have only to prove, then, that functions are equal to each other; just as laborers, who perform the same function, are equal to each other. Property makes man a eunuch, and then reproaches him for being nothing but dry wood, a decaying tree. Are you astonished that I refuse to genius, to knowledge, to courage,--in a word, to all the excellences admired by the world,--the homage of dignities, the distinctions of power and wealth? It is not I who refuse it: it is economy, it is justice, it is liberty. Liberty! for the first time in this discussion I appeal to her. Let her rise in her own defence, and achieve her victory. Every transaction ending in an exchange of products or services may be designated as a COMMERCIAL OPERATION. Whoever says commerce, says exchange of equal values; for, if the values are not equal, and the injured party perceives it, he will not consent to the exchange, and there will be no commerce. Commerce exists only among free men. Transactions may be effected between other people by violence or fraud, but there is no commerce. A free man is one who enjoys the use of his reason and his faculties; who is neither blinded by passion, nor hindered or driven by oppression, nor deceived by erroneous opinions. So, in every exchange, there is a moral obligation that neither of the contracting parties shall gain at the expense of the other; that is, that, to be legitimate and true, commerce must be exempt from all inequality. This is the first condition of commerce. Its second condition is, that it be voluntary; that is, that the parties act freely and openly. I define, then, commerce or exchange as an act of society. The negro who sells his wife for a knife, his children for some bits of glass, and finally himself for a bottle of brandy, is not free. The dealer in human flesh, with whom he negotiates, is not his associate; he is his enemy. The civilized laborer who bakes a loaf that he may eat a slice of bread, who builds a palace that he may sleep in a stable, who weaves rich fabrics that he may dress in rags, who produces every thing that he may dispense with every thing,--is not free. His employer, not becoming his associate in the exchange of salaries or services which takes place between them, is his enemy. The soldier who serves his country through fear instead of through love is not free; his comrades and his officers, the ministers or organs of military justice, are all his enemies. The peasant who hires land, the manufacturer who borrows capital, the tax-payer who pays tolls, duties, patent and license fees, personal and property taxes, &c., and the deputy who votes for them,--all act neither intelligently nor freely. Their enemies are the proprietors, the capitalists, the government. Give men liberty, enlighten their minds that they may know the meaning of their contracts, and you will see the most perfect equality in exchanges without regard to superiority of talent and knowledge; and you will admit that in commercial affairs, that is, in the sphere of society, the word superiority is void of sense. Let Homer sing his verse. I listen to this sublime genius in comparison with whom I, a simple herdsman, an humble farmer, am as nothing. What, indeed,--if product is to be compared with product,--are my cheeses and my beans in the presence of his "Iliad"? But, if Homer wishes to take from me all that I possess, and make me his slave in return for his inimitable poem, I will give up the pleasure of his lays, and dismiss him. I can do without his "Iliad," and wait, if necessary, for the "AEneid." Homer cannot live twenty-four hours without my products. Let him accept, then, the little that I have to offer; and then his muse may instruct, encourage, and console me. "What! do you say that such should be the condition of one who sings of gods and men? Alms, with the humiliation and suffering which they bring with them!--what barbarous generosity!"... Do not get excited, I beg of you. Property makes of a poet either a Croesus or a beggar; only equality knows how to honor and to praise him. What is its duty? To regulate the right of the singer and the duty of the listener. Now, notice this point, which is a very important one in the solution of this question: both are free, the one to sell, the other to buy. Henceforth their respective pretensions go for nothing; and the estimate, whether fair or unfair, that they place, the one upon his verse, the other upon his liberality, can have no influence upon the conditions of the contract. We must no longer, in making our bargains, weigh talent; we must consider products only. In order that the bard of Achilles may get his due reward, he must first make himself wanted: that done, the exchange of his verse for a fee of any kind, being a free act, must be at the same time a just act; that is, the poet's fee must be equal to his product. Now, what is the value of this product? Let us suppose, in the first place, that this "Iliad"--this chef-d' oeuvre that is to be equitably rewarded--is really above price, that we do not know how to appraise it. If the public, who are free to purchase it, refuse to do so, it is clear that, the poem being unexchangeable, its intrinsic value will not be diminished; but that its exchangeable value, or its productive utility, will be reduced to zero, will be nothing at all. Then we must seek the amount of wages to be paid between infinity on the one hand and nothing on the other, at an equal distance from each, since all rights and liberties are entitled to equal respect; in other words, it is not the intrinsic value, but the relative value, of the thing sold that needs to be fixed. The question grows simpler: what is this relative value? To what reward does a poem like the "Iliad" entitle its author? The first business of political economy, after fixing its definitions, was the solution of this problem; now, not only has it not been solved, but it has been declared insoluble. According to the economists, the relative or exchangeable value of things cannot be absolutely determined; it necessarily varies. "The value of a thing," says Say, "is a positive quantity, but only for a given moment. It is its nature to perpetually vary, to change from one point to another. Nothing can fix it absolutely, because it is based on needs and means of production which vary with every moment. These variations complicate economical phenomena, and often render them very difficult of observation and solution. I know no remedy for this; it is not in our power to change the nature of things." Elsewhere Say says, and repeats, that value being based on utility, and utility depending entirely on our needs, whims, customs, &c., value is as variable as opinion. Now, political economy being the science of values, of their production, distribution, exchange, and consumption,--if exchangeable value cannot be absolutely determined, how is political economy possible? How can it be a science? How can two economists look each other in the face without laughing? How dare they insult metaphysicians and psychologists? What! that fool of a Descartes imagined that philosophy needed an immovable base--an _aliquid inconcussum_--on which the edifice of science might be built, and he was simple enough to search for it! And the Hermes of economy, Trismegistus Say, devoting half a volume to the amplification of that solemn text, _political economy is a science_, has the courage to affirm immediately afterwards that this science cannot determine its object,--which is equivalent to saying that it is without a principle or foundation! He does not know, then, the illustrious Say, the nature of a science; or rather, he knows nothing of the subject which he discusses. Say's example has borne its fruits. Political economy, as it exists at present, resembles ontology: discussing effects and causes, it knows nothing, explains nothing, decides nothing. The ideas honored with the name of economic laws are nothing more than a few trifling generalities, to which the economists thought to give an appearance of depth by clothing them in high-sounding words. As for the attempts that have been made by the economists to solve social problems, all that can be said of them is, that, if a glimmer of sense occasionally appears in their lucubrations, they immediately fall back into absurdity. For twenty-five years political economy, like a heavy fog, has weighed upon France, checking the efforts of the mind, and setting limits to liberty. Has every creation of industry a venal, absolute, unchangeable, and consequently legitimate and true value?--Yes. Can every product of man be exchanged for some other product of man?--Yes, again. How many nails is a pair of shoes worth? If we can solve this appalling problem, we shall have the key of the social system for which humanity has been searching for six thousand years. In the presence of this problem, the economist recoils confused; the peasant who can neither read nor write replies without hesitation: "As many as can be made in the same time, and with the same expense." The absolute value of a thing, then, is its cost in time and expense. How much is a diamond worth which costs only the labor of picking it up?--Nothing; it is not a product of man. How much will it be worth when cut and mounted?--The time and expense which it has cost the laborer. Why, then, is it sold at so high a price?--Because men are not free. Society must regulate the exchange and distribution of the rarest things, as it does that of the most common ones, in such a way that each may share in the enjoyment of them. What, then, is that value which is based upon opinion?--Delusion, injustice, and robbery. By this rule, it is easy to reconcile every body. If the mean term, which we are searching for, between an infinite value and no value at all is expressed in the case of every product, by the amount of time and expense which the product cost, a poem which has cost its author thirty years of labor and an outlay of ten thousand francs in journeys, books, &c., must be paid for by the ordinary wages received by a laborer during thirty years, PLUS ten thousand francs indemnity for expense incurred. Suppose the whole amount to be fifty thousand francs; if the society which gets the benefit of the production include a million of men, my share of the debt is five centimes. This gives rise to a few observations. 1. The same product, at different times and in different places, may cost more or less of time and outlay; in this view, it is true that value is a variable quantity. But this variation is not that of the economists, who place in their list of the causes of the variation of values, not only the means of production, but taste, caprice, fashion, and opinion. In short, the true value of a thing is invariable in its algebraic expression, although it may vary in its monetary expression. 2. The price of every product in demand should be its cost in time and outlay--neither more nor less: every product not in demand is a loss to the producer--a commercial non-value. 3. The ignorance of the principle of evaluation, and the difficulty under many circumstances of applying it, is the source of commercial fraud, and one of the most potent causes of the inequality of fortunes. 4. To reward certain industries and pay for certain products, a society is needed which corresponds in size with the rarity of talents, the costliness of the products, and the variety of the arts and sciences. If, for example, a society of fifty farmers can support a schoolmaster, it requires one hundred for a shoemaker, one hundred and fifty for a blacksmith, two hundred for a tailor, &c. If the number of farmers rises to one thousand, ten thousand, one hundred thousand, &c., as fast as their number increases, that of the functionaries which are earliest required must increase in the same proportion; so that the highest functions become possible only in the most powerful societies. [17] That is the peculiar feature of capacities; the character of genius, the seal of its glory, cannot arise and develop itself, except in the bosom of a great nation. But this physiological condition, necessary to the existence of genius, adds nothing to its social rights: far from that,--the delay in its appearance proves that, in economical and civil affairs, the loftiest intelligence must submit to the equality of possessions; an equality which is anterior to it, and of which it constitutes the crown. This is severe on our pride, but it is an inexorable truth. And here psychology comes to the aid of social economy, giving us to understand that talent and material recompense have no common measure; that, in this respect, the condition of all producers is equal: consequently, that all comparison between them, and all distinction in fortunes, is impossible. _ _In fact, every work coming from the hands of man--compared with the raw material of which it is composed--is beyond price. In this respect, the distance is as great between a pair of wooden shoes and the trunk of a walnut-tree, as between a statue by Scopas and a block of marble. The genius of the simplest mechanic exerts as much influence over the materials which he uses, as does the mind of a Newton over the inert spheres whose distances, volumes, and revolutions he calculates. You ask for talent and genius a corresponding degree of honor and reward. Fix for me the value of a wood-cutter's talent, and I will fix that of Homer. If any thing can reward intelligence, it is intelligence itself. That is what happens, when various classes of producers pay to each other a reciprocal tribute of admiration and praise. But if they contemplate an exchange of products with a view to satisfying mutual needs, this exchange must be effected in accordance with a system of economy which is indifferent to considerations of talent and genius, and whose laws are deduced, not from vague and meaningless admiration, but from a just balance between DEBIT and CREDIT; in short, from commercial accounts. Now, that no one may imagine that the liberty of buying and selling is the sole basis of the equality of wages, and that society's sole protection against superiority of talent lies in a certain force of inertia which has nothing in common with right, I shall proceed to explain why all capacities are entitled to the same reward, and why a corresponding difference in wages would be an injustice. I shall prove that the obligation to stoop to the social level is inherent in talent; and on this very superiority of genius I will found the equality of fortunes. I have just given the negative argument in favor of rewarding all capacities alike; I will now give the direct and positive argument. Listen, first, to the economist: it is always pleasant to see how he reasons, and how he understands justice. Without him, moreover, without his amusing blunders and his wonderful arguments, we should learn nothing. Equality, so odious to the economist, owes every thing to political economy. "When the parents of a physician [the text says a lawyer, which is not so good an example] have expended on his education forty thousand francs, this sum may be regarded as so much capital invested in his head. It is therefore permissible to consider it as yielding an annual income of four thousand francs. If the physician earns thirty thousand, there remains an income of twenty-six thousand francs due to the personal talents given him by Nature. This natural capital, then, if we assume ten per cent. as the rate of interest, amounts to two hundred and sixty thousand francs; and the capital given him by his parents, in defraying the expenses of his education, to forty thousand francs. The union of these two kinds of capital constitutes his fortune."--Say: Complete Course, &c. Say divides the fortune of the physician into two parts: one is composed of the capital which went to pay for his education, the other represents his personal talents. This division is just; it is in conformity with the nature of things; it is universally admitted; it serves as the major premise of that grand argument which establishes the inequality of capacities. I accept this premise without qualification; let us look at the consequences. 1. Say CREDITS the physician with forty thousand francs,--the cost of his education. This amount should be entered upon the DEBIT side of the account. For, although this expense was incurred for him, it was not incurred by him. Then, instead of appropriating these forty thousand francs, the physician should add them to the price of his product, and repay them to those who are entitled to them. Notice, further, that Say speaks of INCOME instead of REIMBURSEMENT; reasoning on the false principle of the productivity of capital. The expense of educating a talent is a debt contracted by this talent. From the very fact of its existence, it becomes a debtor to an amount equal to the cost of its production. This is so true and simple that, if the education of some one child in a family has cost double or triple that of its brothers, the latter are entitled to a proportional amount of the property previous to its division. There is no difficulty about this in the case of guardianship, when the estate is administered in the name of the minors. 2. That which I have just said of the obligation incurred by talent of repaying the cost of its education does not embarrass the economist. The man of talent, he says, inheriting from his family, inherits among other things a claim to the forty thousand francs which his education costs; and he becomes, in consequence, its proprietor. But this is to abandon the right of talent, and to fall back upon the right of occupancy; which again calls up all the questions asked in Chapter II. What is the right of occupancy? what is inheritance? Is the right of succession a right of accumulation or only a right of choice? how did the physician's father get his fortune? was he a proprietor, or only a usufructuary? If he was rich, let him account for his wealth; if he was poor, how could he incur so large an expense? If he received aid, what right had he to use that aid to the disadvantage of his benefactors, &c.? 3. "There remains an income of twenty-six thousand francs due to the personal talents given him by Nature." (Say,--as above quoted.) Reasoning from this premise, Say concludes that our physician's talent is equivalent to a capital of two hundred and sixty thousand francs. This skilful calculator mistakes a consequence for a principle. The talent must not be measured by the gain, but rather the gain by the talent; for it may happen, that, notwithstanding his merit, the physician in question will gain nothing at all, in which case will it be necessary to conclude that his talent or fortune is equivalent to zero? To such a result, however, would Say's reasoning lead; a result which is clearly absurd. Now, it is impossible to place a money value on any talent whatsoever, since talent and money have no common measure. On what plausible ground can it be maintained that a physician should be paid two, three, or a hundred times as much as a peasant? An unavoidable difficulty, which has never been solved save by avarice, necessity, and oppression. It is not thus that the right of talent should be determined. But how is it to be determined? 4. I say, first, that the physician must be treated with as much favor as any other producer, that he must not be placed below the level of others. This I will not stop to prove. But I add that neither must he be lifted above that level; because his talent is collective property for which he did not pay, and for which he is ever in debt. Just as the creation of every instrument of production is the result of collective force, so also are a man's talent and knowledge the product of universal intelligence and of general knowledge slowly accumulated by a number of masters, and through the aid of many inferior industries. When the physician has paid for his teachers, his books, his diplomas, and all the other items of his educational expenses, he has no more paid for his talent than the capitalist pays for his house and land when he gives his employees their wages. The man of talent has contributed to the production in himself of a useful instrument. He has, then, a share in its possession; he is not its proprietor. There exist side by side in him a free laborer and an accumulated social capital. As a laborer, he is charged with the use of an instrument, with the superintendence of a machine; namely, his capacity. As capital, he is not his own master; he uses himself, not for his own benefit, but for that of others. Even if talent did not find in its own excellence a reward for the sacrifices which it costs, still would it be easier to find reasons for lowering its reward than for raising it above the common level. Every producer receives an education; every laborer is a talent, a capacity,--that is, a piece of collective property. But all talents are not equally costly. It takes but few teachers, but few years, and but little study, to make a farmer or a mechanic: the generative effort and--if I may venture to use such language--the period of social gestation are proportional to the loftiness of the capacity. But while the physician, the poet, the artist, and the savant produce but little, and that slowly, the productions of the farmer are much less uncertain, and do not require so long a time. Whatever be then the capacity of a man,--when this capacity is once created,--it does not belong to him. Like the material fashioned by an industrious hand, it had the power of BECOMING, and society has given it BEING. Shall the vase say to the potter, "I am that I am, and I owe you nothing"? The artist, the savant, and the poet find their just recompense in the permission that society gives them to devote themselves exclusively to science and to art: so that in reality they do not labor for themselves, but for society, which creates them, and requires of them no other duty. Society can, if need be, do without prose and verse, music and painting, and the knowledge of the movements of the moon and stars; but it cannot live a single day without food and shelter. Undoubtedly, man does not live by bread alone; he must, also (according to the Gospel), LIVE BY THE WORD OF GOD; that is, he must love the good and do it, know and admire the beautiful, and study the marvels of Nature. But in order to cultivate his mind, he must first take care of his body,--the latter duty is as necessary as the former is noble. If it is glorious to charm and instruct men, it is honorable as well to feed them. When, then, society--faithful to the principle of the division of labor--intrusts a work of art or of science to one of its members, allowing him to abandon ordinary labor, it owes him an indemnity for all which it prevents him from producing industrially; but it owes him nothing more. If he should demand more, society should, by refusing his services, annihilate his pretensions. Forced, then, in order to live, to devote himself to labor repugnant to his nature, the man of genius would feel his weakness, and would live the most distasteful of lives. They tell of a celebrated singer who demanded of the Empress of Russia (Catherine II) twenty thousand roubles for his services: "That is more than I give my field-marshals," said Catherine. "Your majesty," replied the other, "has only to make singers of her field-marshals." If France (more powerful than Catherine II) should say to Mademoiselle Rachel, "You must act for one hundred louis, or else spin cotton;" to M. Duprez, "You must sing for two thousand four hundred francs, or else work in the vineyard,"--do you think that the actress Rachel, and the singer Duprez, would abandon the stage? If they did, they would be the first to repent it. Mademoiselle Rachel receives, they say, sixty thousand francs annually from the Comedie-Francaise. For a talent like hers, it is a slight fee. Why not one hundred thousand francs, two hundred thousand francs? Why! not a civil list? What meanness! Are we really guilty of chaffering with an artist like Mademoiselle Rachel? It is said, in reply, that the managers of the theatre cannot give more without incurring a loss; that they admit the superior talent of their young associate; but that, in fixing her salary, they have been compelled to take the account of the company's receipts and expenses into consideration also. That is just, but it only confirms what I have said; namely, that an artist's talent may be infinite, but that its mercenary claims are necessarily limited,--on the one hand, by its usefulness to the society which rewards it; on the other, by the resources of this society: in other words, that the demand of the seller is balanced by the right of the buyer. Mademoiselle Rachel, they say, brings to the treasury of the Theatre-Francais more than sixty thousand francs. I admit it; but then I blame the theatre. From whom does the Theatre-Francais take this money? From some curious people who are perfectly free. Yes; but the workingmen, the lessees, the tenants, those who borrow by pawning their possessions, from whom these curious people recover all that they pay to the theatre,--are they free? And when the better part of their products are consumed by others at the play, do you assure me that their families are not in want? Until the French people, reflecting on the salaries paid to all artists, savants, and public functionaries, have plainly expressed their wish and judgment as to the matter, the salaries of Mademoiselle Rachel and all her fellow-artists will be a compulsory tax extorted by violence, to reward pride, and support libertinism. It is because we are neither free nor sufficiently enlightened, that we submit to be cheated in our bargains; that the laborer pays the duties levied by the prestige of power and the selfishness of talent upon the curiosity of the idle, and that we are perpetually scandalized by these monstrous inequalities which are encouraged and applauded by public opinion. The whole nation, and the nation only, pays its authors, its savants, its artists, its officials, whatever be the hands through which their salaries pass. On what basis should it pay them? On the basis of equality. I have proved it by estimating the value of talent. I shall confirm it in the following chapter, by proving the impossibility of all social inequality. What have we shown so far? Things so simple that really they seem silly:-- That, as the traveller does not appropriate the route which he traverses, so the farmer does not appropriate the field which he sows; That if, nevertheless, by reason of his industry, a laborer may appropriate the material which he employs, every employer of material becomes, by the same title, a proprietor; That all capital, whether material or mental, being the result of collective labor, is, in consequence, collective property; That the strong have no right to encroach upon the labor of the weak, nor the shrewd to take advantage of the credulity of the simple; Finally, that no one can be forced to buy that which he does not want, still less to pay for that which he has not bought; and, consequently, that the exchangeable value of a product, being measured neither by the opinion of the buyer nor that of the seller, but by the amount of time and outlay which it has cost, the property of each always remains the same. Are not these very simple truths? Well, as simple as they seem to you, reader, you shall yet see others which surpass them in dullness and simplicity. For our course is the reverse of that of the geometricians: with them, the farther they advance, the more difficult their problems become; we, on the contrary, after having commenced with the most abstruse propositions, shall end with the axioms. But I must close this chapter with an exposition of one of those startling truths which never have been dreamed of by legists or economists. % 8.--That, from the Stand-point of Justice, Labor destroys Property. This proposition is the logical result of the two preceding sections, which we have just summed up. The isolated man can supply but a very small portion of his wants; all his power lies in association, and in the intelligent combination of universal effort. The division and co-operation of labor multiply the quantity and the variety of products; the individuality of functions improves their quality. There is not a man, then, but lives upon the products of several thousand different industries; not a laborer but receives from society at large the things which he consumes, and, with these, the power to reproduce. Who, indeed, would venture the assertion, "I produce, by my own effort, all that I consume; I need the aid of no one else"? The farmer, whom the early economists regarded as the only real producer--the farmer, housed, furnished, clothed, fed, and assisted by the mason, the carpenter, the tailor, the miller, the baker, the butcher, the grocer, the blacksmith, &c.,--the farmer, I say, can he boast that he produces by his own unaided effort? The various articles of consumption are given to each by all; consequently, the production of each involves the production of all. One product cannot exist without another; an isolated industry is an impossible thing. What would be the harvest of the farmer, if others did not manufacture for him barns, wagons, ploughs, clothes, &c.? Where would be the savant without the publisher; the printer without the typecaster and the machinist; and these, in their turn, without a multitude of other industries?... Let us not prolong this catalogue--so easy to extend--lest we be accused of uttering commonplaces. All industries are united by mutual relations in a single group; all productions do reciprocal service as means and end; all varieties of talent are but a series of changes from the inferior to the superior. Now, this undisputed and indisputable fact of the general participation in every species of product makes all individual productions common; so that every product, coming from the hands of the producer, is mortgaged in advance by society. The producer himself is entitled to only that portion of his product, which is expressed by a fraction whose denominator is equal to the number of individuals of which society is composed. It is true that in return this same producer has a share in all the products of others, so that he has a claim upon all, just as all have a claim upon him; but is it not clear that this reciprocity of mortgages, far from authorizing property, destroys even possession? The laborer is not even possessor of his product; scarcely has he finished it, when society claims it. "But," it will be answered, "even if that is so--even if the product does not belong to the producer--still society gives each laborer an equivalent for his product; and this equivalent, this salary, this reward, this allowance, becomes his property. Do you deny that this property is legitimate? And if the laborer, instead of consuming his entire wages, chooses to economize,--who dare question his right to do so?" The laborer is not even proprietor of the price of his labor, and cannot absolutely control its disposition. Let us not be blinded by a spurious justice. That which is given the laborer in exchange for his product is not given him as a reward for past labor, but to provide for and secure future labor. We consume before we produce. The laborer may say at the end of the day, "I have paid yesterday's expenses; to-morrow I shall pay those of today." At every moment of his life, the member of society is in debt; he dies with the debt unpaid:--how is it possible for him to accumulate? They talk of economy--it is the proprietor's hobby. Under a system of equality, all economy which does not aim at subsequent reproduction or enjoyment is impossible--why? Because the thing saved, since it cannot be converted into capital, has no object, and is without a FINAL CAUSE. This will be explained more fully in the next chapter. To conclude:-- The laborer, in his relation to society, is a debtor who of necessity dies insolvent. The proprietor is an unfaithful guardian who denies the receipt of the deposit committed to his care, and wishes to be paid for his guardianship down to the last day. Lest the principles just set forth may appear to certain readers too metaphysical, I shall reproduce them in a more concrete form, intelligible to the dullest brains, and pregnant with the most important consequences. Hitherto, I have considered property as a power of EXCLUSION; hereafter, I shall examine it as a power of INVASION. CHAPTER IV. THAT PROPERTY IS IMPOSSIBLE. The last resort of proprietors,--the overwhelming argument whose invincible potency reassures them,--is that, in their opinion, equality of conditions is impossible. "Equality of conditions is a chimera," they cry with a knowing air; "distribute wealth equally to-day--to-morrow this equality will have vanished." To this hackneyed objection, which they repeat everywhere with the most marvellous assurance, they never fail to add the following comment, as a sort of GLORY BE TO THE FATHER: "If all men were equal, nobody would work." This anthem is sung with variations. "If all were masters, nobody would obey." "If nobody were rich, who would employ the poor?" And, "If nobody were poor, who would labor for the rich?" But let us have done with invective--we have better arguments at our command. If I show that property itself is impossible--that it is property which is a contradiction, a chimera, a utopia; and if I show it no longer by metaphysics and jurisprudence, but by figures, equations, and calculations,--imagine the fright of the astounded proprietor! And you, reader; what do you think of the retort? Numbers govern the world--mundum regunt numeri. This proverb applies as aptly to the moral and political, as to the sidereal and molecular, world. The elements of justice are identical with those of algebra; legislation and government are simply the arts of classifying and balancing powers; all jurisprudence falls within the rules of arithmetic. This chapter and the next will serve to lay the foundations of this extraordinary doctrine. Then will be unfolded to the reader's vision an immense and novel career; then shall we commence to see in numerical relations the synthetic unity of philosophy and the sciences; and, filled with admiration and enthusiasm for this profound and majestic simplicity of Nature, we shall shout with the apostle: "Yes, the Eternal has made all things by number, weight, and measure!" We shall understand not only that equality of conditions is possible, but that all else is impossible; that this seeming impossibility which we charge upon it arises from the fact that we always think of it in connection either with the proprietary or the communistic regime,--political systems equally irreconcilable with human nature. We shall see finally that equality is constantly being realized without our knowledge, even at the very moment when we are pronouncing it incapable of realization; that the time draws near when, without any effort or even wish of ours, we shall have it universally established; that with it, in it, and by it, the natural and true political order must make itself manifest. It has been said, in speaking of the blindness and obstinacy of the passions, that, if man had any thing to gain by denying the truths of arithmetic, he would find some means of unsettling their certainty: here is an opportunity to try this curious experiment. I attack property, no longer with its own maxims, but with arithmetic. Let the proprietors prepare to verify my figures; for, if unfortunately for them the figures prove accurate, the proprietors are lost. In proving the impossibility of property, I complete the proof of its injustice. In fact,-- That which is JUST must be USEFUL; That which is useful must be TRUE; That which is true must be POSSIBLE; Therefore, every thing which is impossible is untrue, useless, unjust. Then,--a priori,--we may judge of the justice of any thing by its possibility; so that if the thing were absolutely impossible, it would be absolutely unjust. PROPERTY IS PHYSICALLY AND MATHEMATICALLY IMPOSSIBLE. DEMONSTRATION. AXIOM.--Property is the Right of Increase claimed by the Proprietor over any thing which he has stamped as his own. This proposition is purely an axiom, because,-- 1. It is not a definition, since it does not express all that is included in the right of property--the right of sale, of exchange, of gift; the right to transform, to alter, to consume, to destroy, to use and abuse, &c. All these rights are so many different powers of property, which we may consider separately; but which we disregard here, that we may devote all our attention to this single one,--the right of increase. 2. It is universally admitted. No one can deny it without denying the facts, without being instantly belied by universal custom. 3. It is self-evident, since property is always accompanied (either actually or potentially) by the fact which this axiom expresses; and through this fact, mainly, property manifests, establishes, and asserts itself. 4. Finally, its negation involves a contradiction. The right of increase is really an inherent right, so essential a part of property, that, in its absence, property is null and void. OBSERVATIONS.--Increase receives different names according to the thing by which it is yielded: if by land, FARM-RENT; if by houses and furniture, RENT; if by life-investments, REVENUE; if by money, INTEREST; if by exchange, ADVANTAGE, GAIN, PROFIT (three things which must not be confounded with the wages or legitimate price of labor). Increase--a sort of royal prerogative, of tangible and consumable homage--is due to the proprietor on account of his nominal and metaphysical occupancy. His seal is set upon the thing; that is enough to prevent any one else from occupying it without HIS permission. This permission to use his things the proprietor may, if he chooses, freely grant. Commonly he sells it. This sale is really a stellionate and an extortion; but by the legal fiction of the right of property, this same sale, severely punished, we know not why, in other cases, is a source of profit and value to the proprietor. The amount demanded by the proprietor, in payment for this permission, is expressed in monetary terms by the dividend which the supposed product yields in nature. So that, by the right of increase, the proprietor reaps and does not plough; gleans and does not till; consumes and does not produce; enjoys and does not labor. Very different from the idols of the Psalmist are the gods of property: the former had hands and felt not; the latter, on the contrary, _manus habent et palpabunt_. _ _The right of increase is conferred in a very mysterious and supernatural manner. The inauguration of a proprietor is accompanied by the awful ceremonies of an ancient initiation. First, comes the CONSECRATION of the article; a consecration which makes known to all that they must offer up a suitable sacrifice to the proprietor, whenever they wish, by his permission obtained and signed, to use his article. Second, comes the ANATHEMA, which prohibits--except on the conditions aforesaid--all persons from touching the article, even in the proprietor's absence; and pronounces every violator of property sacrilegious, infamous, amenable to the secular power, and deserving of being handed over to it. Finally, the DEDICATION, which enables the proprietor or patron saint--the god chosen to watch over the article--to inhabit it mentally, like a divinity in his sanctuary. By means of this dedication, the substance of the article--so to speak--becomes converted into the person of the proprietor, who is regarded as ever present in its form. This is exactly the doctrine of the writers on jurisprudence. "Property," says Toullier, "is a MORAL QUALITY inherent in a thing; AN ACTUAL BOND which fastens it to the proprietor, and which cannot be broken save by his act." Locke humbly doubted whether God could make matter INTELLIGENT. Toullier asserts that the proprietor renders it MORAL. How much does he lack of being a God? These are by no means exaggerations. PROPERTY IS THE RIGHT OF INCREASE; that is, the power to produce without labor. Now, to produce without labor is to make something from nothing; in short, to create. Surely it is no more difficult to do this than to moralize matter. The jurists are right, then, in applying to proprietors this passage from the Scriptures,--_Ego dixi: Dii estis et filii Excelsi omnes_,--"I have said, Ye are gods; and all of you are children of the Most High." PROPERTY IS THE RIGHT OF INCREASE. To us this axiom shall be like the name of the beast in the Apocalypse,--a name in which is hidden the complete explanation of the whole mystery of this beast. It was known that he who should solve the mystery of this name would obtain a knowledge of the whole prophecy, and would succeed in mastering the beast. Well! by the most careful interpretation of our axiom we shall kill the sphinx of property. Starting from this eminently characteristic fact--the RIGHT OF INCREASE--we shall pursue the old serpent through his coils; we shall count the murderous entwinings of this frightful taenia, whose head, with its thousand suckers, is always hidden from the sword of its most violent enemies, though abandoning to them immense fragments of its body. It requires something more than courage to subdue this monster. It was written that it should not die until a proletaire, armed with a magic wand, had fought with it. COROLLARIES.--1. THE AMOUNT OF INCREASE IS PROPORTIONAL TO THE THING INCREASED. Whatever be the rate of interest,--whether it rise to three, five, or ten per cent., or fall to one-half, one-fourth, one-tenth,--it does not matter; the law of increase remains the same. The law is as follows:-- All capital--the cash value of which can be estimated--may be considered as a term in an arithmetical series which progresses in the ratio of one hundred, and the revenue yielded by this capital as the corresponding term of another arithmetical series which progresses in a ratio equal to the rate of interest. Thus, a capital of five hundred francs being the fifth term of the arithmetical progression whose ratio is one hundred, its revenue at three per cent. will be indicated by the fifth term of the arithmetical progression whose ratio is three:-- 100 . 200 . 300 . 400 . 500. 3 . 6 . 9 . 12 . 15. An acquaintance with this sort of LOGARITHMS--tables of which, calculated to a very high degree, are possessed by proprietors--will give us the key to the most puzzling problems, and cause us to experience a series of surprises. By this LOGARITHMIC theory of the right of increase, a piece of property, together with its income, may be defined as A NUMBER WHOSE LOGARITHM IS EQUAL TO THE SUM OF ITS UNITS DIVIDED BY ONE HUNDRED, AND MULTIPLIED BY THE RATE OF INTEREST. For instance; a house valued at one hundred thousand francs, and leased at five per cent., yields a revenue of five thousand francs, according to the formula 100,000 x 5 / 100 = five thousand. Vice versa, a piece of land which yields, at two and a half per cent., a revenue of three thousand francs is worth one hundred and twenty thousand francs, according to this other formula; 3,000 x 100/ 2 1/2 = one hundred and twenty thousand. In the first case, the ratio of the progression which marks the increase of interest is five; in the second, it is two and a half. OBSERVATION.--The forms of increase known as farm-rent, income, and interest are paid annually; rent is paid by the week, the month, or the year; profits and gains are paid at the time of exchange. Thus, the amount of increase is proportional both to the thing increased, and the time during which it increases; in other words, usury grows like a cancer--_foenus serpit sicut cancer_. 2. THE INCREASE PAID TO THE PROPRIETOR BY THE OCCUPANT IS A DEAD LOSS TO THE LATTER. For if the proprietor owed, in exchange for the increase which he receives, some thing more than the permission which he grants, his right of property would not be perfect--he would not possess _jure optimo, jure perfecto;_ that is, he would not be in reality a proprietor. Then, all which passes from the hands of the occupant into those of the proprietor in the name of increase, and as the price of the permission to occupy, is a permanent gain for the latter, and a dead loss and annihilation for the former; to whom none of it will return, save in the forms of gift, alms, wages paid for his services, or the price of merchandise which he has delivered. In a word, increase perishes so far as the borrower is concerned; or to use the more energetic Latin phrase,--_res perit solventi_. 3. THE RIGHT OF INCREASE OPPRESSES THE PROPRIETOR AS WELL AS THE STRANGER. The master of a thing, as its proprietor, levies a tax for the use of his property upon himself as its possessor, equal to that which he would receive from a third party; so that capital bears interest in the hands of the capitalist, as well as in those of the borrower and the commandite. If, indeed, rather than accept a rent of five hundred francs for my apartment, I prefer to occupy and enjoy it, it is clear that I shall become my own debtor for a rent equal to that which I deny myself. This principle is universally practised in business, and is regarded as an axiom by the economists. Manufacturers, also, who have the advantage of being proprietors of their floating capital, although they owe no interest to any one, in calculating their profits subtract from them, not only their running expenses and the wages of their employees, but also the interest on their capital. For the same reason, money-lenders retain in their own possession as little money as possible; for, since all capital necessarily bears interest, if this interest is supplied by no one, it comes out of the capital, which is to that extent diminished. Thus, by the right of increase, capital eats itself up. This is, doubtless, the idea that Papinius intended to convey in the phrase, as elegant as it is forcible--_Foenus mordet solidam_. I beg pardon for using Latin so frequently in discussing this subject; it is an homage which I pay to the most usurious nation that ever existed. FIRST PROPOSITION. Property is impossible, because it demands Something for Nothing. The discussion of this proposition covers the same ground as that of the origin of farm-rent, which is so much debated by the economists. When I read the writings of the greater part of these men, I cannot avoid a feeling of contempt mingled with anger, in view of this mass of nonsense, in which the detestable vies with the absurd. It would be a repetition of the story of the elephant in the moon, were it not for the atrocity of the consequences. To seek a rational and legitimate origin of that which is, and ever must be, only robbery, extortion, and plunder--that must be the height of the proprietor's folly; the last degree of bedevilment into which minds, otherwise judicious, can be thrown by the perversity of selfishness. "A farmer," says Say, "is a wheat manufacturer who, among other tools which serve him in modifying the material from which he makes the wheat, employs one large tool, which we call a field. If he is not the proprietor of the field, if he is only a tenant, he pays the proprietor for the productive service of this tool. The tenant is reimbursed by the purchaser, the latter by another, until the product reaches the consumer; who redeems the first payment, PLUS all the others, by means of which the product has at last come into his hands." Let us lay aside the subsequent payments by which the product reaches the consumer, and, for the present, pay attention only to the first one of all,--the rent paid to the proprietor by the tenant. On what ground, we ask, is the proprietor entitled to this rent? According to Ricardo, MacCulloch, and Mill, farm-rent, properly speaking, is simply the EXCESS OF THE PRODUCT OF THE MOST FERTILE LAND OVER THAT OF LANDS OF AN INFERIOR QUALITY; so that farm-rent is not demanded for the former until the increase of population renders necessary the cultivation of the latter. It is difficult to see any sense in this. How can a right to the land be based upon a difference in the quality of the land? How can varieties of soil engender a principle of legislation and politics? This reasoning is either so subtle, or so stupid, that the more I think of it, the more bewildered I become. Suppose two pieces of land of equal area; the one, A, capable of supporting ten thousand inhabitants; the other, B, capable of supporting nine thousand only: when, owing to an increase in their number, the inhabitants of A shall be forced to cultivate B, the landed proprietors of A will exact from their tenants in A a rent proportional to the difference between ten and nine. So say, I think, Ricardo, MacCulloch, and Mill. But if A supports as many inhabitants as it can contain,--that is, if the inhabitants of A, by our hypothesis, have only just enough land to keep them alive,--how can they pay farm-rent? If they had gone no farther than to say that the difference in land has OCCASIONED farm-rent, instead of CAUSED it, this observation would have taught us a valuable lesson; namely, that farm-rent grew out of a desire for equality. Indeed, if all men have an equal right to the possession of good land, no one can be forced to cultivate bad land without indemnification. Farm-rent--according to Ricardo, MacCulloch, and Mill--would then have been a compensation for loss and hardship. This system of practical equality is a bad one, no doubt; but it sprang from good intentions. What argument can Ricardo, MacCulloch, and Mill develop therefrom in favor of property? Their theory turns against themselves, and strangles them. Malthus thinks that farm-rent has its source in the power possessed by land of producing more than is necessary to supply the wants of the men who cultivate it. I would ask Malthus why successful labor should entitle the idle to a portion of the products? But the worthy Malthus is mistaken in regard to the fact. Yes; land has the power of producing more than is needed by those who cultivate it, if by CULTIVATORS is meant tenants only. The tailor also makes more clothes than he wears, and the cabinet-maker more furniture than he uses. But, since the various professions imply and sustain one another, not only the farmer, but the followers of all arts and trades--even to the doctor and the school-teacher--are, and ought to be, regarded as CULTIVATORS OF THE LAND. Malthus bases farm-rent upon the principle of commerce. Now, the fundamental law of commerce being equivalence of the products exchanged, any thing which destroys this equivalence violates the law. There is an error in the estimate which needs to be corrected. Buchanan--a commentator on Smith--regarded farm-rent as the result of a monopoly, and maintained that labor alone is productive. Consequently, he thought that, without this monopoly, products would rise in price; and he found no basis for farm-rent save in the civil law. This opinion is a corollary of that which makes the civil law the basis of property. But why has the civil law--which ought to be the written expression of justice--authorized this monopoly? Whoever says monopoly, necessarily excludes justice. Now, to say that farm-rent is a monopoly sanctioned by the law, is to say that injustice is based on justice,--a contradiction in terms. Say answers Buchanan, that the proprietor is not a monopolist, because a monopolist "is one who does not increase the utility of the merchandise which passes through his hands." How much does the proprietor increase the utility of his tenant's products? Has he ploughed, sowed, reaped, mowed, winnowed, weeded? These are the processes by which the tenant and his employees increase the utility of the material which they consume for the purpose of reproduction. "The landed proprietor increases the utility of products by means of his implement, the land. This implement receives in one state, and returns in another the materials of which wheat is composed. The action of the land is a chemical process, which so modifies the material that it multiplies it by destroying it. The soil is then a producer of utility; and when it [the soil?] asks its pay in the form of profit, or farm rent, for its proprietor, it at the same time gives something to the consumer in exchange for the amount which the consumer pays it. It gives him a produced utility; and it is the production of this utility which warrants us in calling land productive, as well as labor." Let us clear up this matter. The blacksmith who manufactures for the farmer implements of husbandry, the wheelwright who makes him a cart, the mason who builds his barn, the carpenter, the basket-maker, &c.,--all of whom contribute to agricultural production by the tools which they provide,--are producers of utility; consequently, they are entitled to a part of the products. "Undoubtedly," says Say; "but the land also is an implement whose service must be paid for, then...." I admit that the land is an implement; but who made it? Did the proprietor? Did he--by the efficacious virtue of the right of property, by this MORAL QUALITY infused into the soil--endow it with vigor and fertility? Exactly there lies the monopoly of the proprietor; in the fact that, though he did not make the implement, he asks pay for its use. When the Creator shall present himself and claim farm-rent, we will consider the matter with him; or even when the proprietor--his pretended representative--shall exhibit his power-of-attorney. "The proprietor's service," adds Say, "is easy, I admit." It is a frank confession. "But we cannot disregard it. Without property, one farmer would contend with another for the possession of a field without a proprietor, and the field would remain uncultivated...." Then the proprietor's business is to reconcile farmers by robbing them. O logic! O justice! O the marvellous wisdom of economists! The proprietor, if they are right, is like Perrin-Dandin who, when summoned by two travellers to settle a dispute about an oyster, opened it, gobbled it, and said to them:-- "The Court awards you each a shell." Could any thing worse be said of property? Will Say tell us why the same farmers, who, if there were no proprietors, would contend with each other for possession of the soil, do not contend to-day with the proprietors for this possession? Obviously, because they think them legitimate possessors, and because their respect for even an imaginary right exceeds their avarice. I proved, in Chapter II., that possession is sufficient, without property, to maintain social order. Would it be more difficult, then, to reconcile possessors without masters than tenants controlled by proprietors? Would laboring men, who respect--much to their own detriment--the pretended rights of the idler, violate the natural rights of the producer and the manufacturer? What! if the husbandman forfeited his right to the land as soon as he ceased to occupy it, would he become more covetous? And would the impossibility of demanding increase, of taxing another's labor, be a source of quarrels and law-suits? The economists use singular logic. But we are not yet through. Admit that the proprietor is the legitimate master of the land. "The land is an instrument of production," they say. That is true. But when, changing the noun into an adjective, they alter the phrase, thus, "The land is a productive instrument," they make a wicked blunder. According to Quesnay and the early economists, all production comes from the land. Smith, Ricardo, and de Tracy, on the contrary, say that labor is the sole agent of production. Say, and most of his successors, teach that BOTH land AND labor AND capital are productive. The latter constitute the eclectic school of political economy. The truth is, that NEITHER land NOR labor NOR capital is productive. Production results from the co-operation of these three equally necessary elements, which, taken separately, are equally sterile. Political economy, indeed, treats of the production, distribution, and consumption of wealth or values. But of what values? Of the values produced by human industry; that is, of the changes made in matter by man, that he may appropriate it to his own use, and not at all of Nature's spontaneous productions. Man's labor consists in a simple laying on of hands. When he has taken that trouble, he has produced a value. Until then, the salt of the sea, the water of the springs, the grass of the fields, and the trees of the forests are to him as if they were not. The sea, without the fisherman and his line, supplies no fish. The forest, without the wood-cutter and his axe, furnishes neither fuel nor timber. The meadow, without the mower, yields neither hay nor aftermath. Nature is a vast mass of material to be cultivated and converted into products; but Nature produces nothing for herself: in the economical sense, her products, in their relation to man, are not yet products. Capital, tools, and machinery are likewise unproductive. The hammer and the anvil, without the blacksmith and the iron, do not forge. The mill, without the miller and the grain, does not grind, &c. Bring tools and raw material together; place a plough and some seed on fertile soil; enter a smithy, light the fire, and shut up the shop,--you will produce nothing. The following remark was made by an economist who possessed more good sense than most of his fellows: "Say credits capital with an active part unwarranted by its nature; left to itself, it is an idle tool." (J. Droz: Political Economy.) Finally, labor and capital together, when unfortunately combined, produce nothing. Plough a sandy desert, beat the water of the rivers, pass type through a sieve,--you will get neither wheat, nor fish, nor books. Your trouble will be as fruitless as was the immense labor of the army of Xerxes; who, as Herodotus says, with his three million soldiers, scourged the Hellespont for twenty-four hours, as a punishment for having broken and scattered the pontoon bridge which the great king had thrown across it. Tools and capital, land and labor, considered individually and abstractly, are not, literally speaking, productive. The proprietor who asks to be rewarded for the use of a tool, or the productive power of his land, takes for granted, then, that which is radically false; namely, that capital produces by its own effort,--and, in taking pay for this imaginary product, he literally receives something for nothing. OBJECTION.--But if the blacksmith, the wheelwright, all manufacturers in short, have a right to the products in return for the implements which they furnish; and if land is an implement of production,--why does not this implement entitle its proprietor, be his claim real or imaginary, to a portion of the products; as in the case of the manufacturers of ploughs and wagons? REPLY.--Here we touch the heart of the question, the mystery of property; which we must clear up, if we would understand any thing of the strange effects of the right of increase. He who manufactures or repairs the farmer's tools receives the price ONCE, either at the time of delivery, or in several payments; and when this price is once paid to the manufacturer, the tools which he has delivered belong to him no more. Never does he claim double payment for the same tool, or the same job of repairs. If he annually shares in the products of the farmer, it is owing to the fact that he annually makes something for the farmer. The proprietor, on the contrary, does not yield his implement; eternally he is paid for it, eternally he keeps it. In fact, the rent received by the proprietor is not intended to defray the expense of maintaining and repairing the implement; this expense is charged to the borrower, and does not concern the proprietor except as he is interested in the preservation of the article. If he takes it upon himself to attend to the repairs, he takes care that the money which he expends for this purpose is repaid. This rent does not represent the product of the implement, since of itself the implement produces nothing; we have just proved this, and we shall prove it more clearly still by its consequences. Finally, this rent does not represent the participation of the proprietor in the production; since this participation could consist, like that of the blacksmith and the wheelwright, only in the surrender of the whole or a part of his implement, in which case he would cease to be its proprietor, which would involve a contradiction of the idea of property. Then, between the proprietor and his tenant there is no exchange either of values or services; then, as our axiom says, farm-rent is real increase,--an extortion based solely upon fraud and violence on the one hand, and weakness and ignorance upon the other. PRODUCTS say the economists, ARE BOUGHT ONLY BY PRODUCTS. This maxim is property's condemnation. The proprietor, producing neither by his own labor nor by his implement, and receiving products in exchange for nothing, is either a parasite or a thief. Then, if property can exist only as a right, property is impossible. COROLLARIES.--1. The republican constitution of 1793, which defined property as "the right to enjoy the fruit of one's labor," was grossly mistaken. It should have said, "Property is the right to enjoy and dispose at will of another's goods,--the fruit of another's industry and labor." 2. Every possessor of lands, houses, furniture, machinery, tools, money, &c., who lends a thing for a price exceeding the cost of repairs (the repairs being charged to the lender, and representing products which he exchanges for other products), is guilty of swindling and extortion. In short, all rent received (nominally as damages, but really as payment for a loan) is an act of property,--a robbery. HISTORICAL COMMENT.--The tax which a victorious nation levies upon a conquered nation is genuine farm-rent. The seigniorial rights abolished by the Revolution of 1789,--tithes, mortmain, statute-labor, &c.,--were different forms of the rights of property; and they who under the titles of nobles, seigneurs, prebendaries, &c. enjoyed these rights, were neither more nor less than proprietors. To defend property to-day is to condemn the Revolution. SECOND PROPOSITION. Property is impossible because wherever it exists Production costs more than it is worth. The preceding proposition was legislative in its nature; this one is economical. It serves to prove that property, which originates in violence, results in waste. "Production," says Say, "is exchange on a large scale. To render the exchange productive the value of the whole amount of service must be balanced by the value of the product. If this condition is not complied with, the exchange is unequal; the producer gives more than he receives." Now, value being necessarily based upon utility, it follows that every useless product is necessarily valueless,--that it cannot be exchanged; and, consequently, that it cannot be given in payment for productive services. Then, though production may equal consumption, it never can exceed it; for there is no real production save where there is a production of utility, and there is no utility save where there is a possibility of consumption. Thus, so much of every product as is rendered by excessive abundance inconsumable, becomes useless, valueless, unexchangeable,--consequently, unfit to be given in payment for any thing whatever, and is no longer a product. Consumption, on the other hand, to be legitimate,--to be true consumption,--must be reproductive of utility; for, if it is unproductive, the products which it destroys are cancelled values--things produced at a pure loss; a state of things which causes products to depreciate in value. Man has the power to destroy, but he consumes only that which he reproduces. Under a right system of economy, there is then an equation between production and consumption. These points established, let us suppose a community of one thousand families, enclosed in a territory of a given circumference, and deprived of foreign intercourse. Let this community represent the human race, which, scattered over the face of the earth, is really isolated. In fact, the difference between a community and the human race being only a numerical one, the economical results will be absolutely the same in each case. Suppose, then, that these thousand families, devoting themselves exclusively to wheat-culture, are obliged to pay to one hundred individuals, chosen from the mass, an annual revenue of ten per cent. on their product. It is clear that, in such a case, the right of increase is equivalent to a tax levied in advance upon social production. Of what use is this tax? It cannot be levied to supply the community with provisions, for between that and farm-rent there is nothing in common; nor to pay for services and products,--for the proprietors, laboring like the others, have labored only for themselves. Finally, this tax is of no use to its recipients who, having harvested wheat enough for their own consumption, and not being able in a society without commerce and manufactures to procure any thing else in exchange for it, thereby lose the advantage of their income. In such a society, one-tenth of the product being inconsumable, one-tenth of the labor goes unpaid--production costs more than it is worth. Now, change three hundred of our wheat-producers into artisans of all kinds: one hundred gardeners and wine-growers, sixty shoemakers and tailors, fifty carpenters and blacksmiths, eighty of various professions, and, that nothing may be lacking, seven school-masters, one mayor, one judge, and one priest; each industry furnishes the whole community with its special product. Now, the total production being one thousand, each laborer's consumption is one; namely, wheat, meat, and grain, 0.7; wine and vegetables, 0.1; shoes and clothing, 0.06; iron-work and furniture, 0.05; sundries, 0.08; instruction, 0.007; administration, 0.002; mass, 0.001, Total 1. But the community owes a revenue of ten per cent.; and it matters little whether the farmers alone pay it, or all the laborers are responsible for it,--the result is the same. The farmer raises the price of his products in proportion to his share of the debt; the other laborers follow his example. Then, after some fluctuations, equilibrium is established, and all pay nearly the same amount of the revenue. It would be a grave error to assume that in a nation none but farmers pay farm-rent--the whole nation pays it. I say, then, that by this tax of ten per cent. each laborer's consumption is reduced as follows: wheat, 0.63; wine and vegetables, 0.09; clothing and shoes, 0.054; furniture and iron-work, 0.045; other products, 0.072; schooling, 0.0063; administration, 0.0018; mass, 0.0009. Total 0.9. The laborer has produced 1; he consumes only 0.9. He loses, then, one-tenth of the price of his labor; his production still costs more than it is worth. On the other hand, the tenth received by the proprietors is no less a waste; for, being laborers themselves, they, like the others, possess in the nine-tenths of their product the wherewithal to live: they want for nothing. Why should they wish their proportion of bread, wine, meat, clothes, shelter, &c., to be doubled, if they can neither consume nor exchange them? Then farm-rent, with them as with the rest of the laborers, is a waste, and perishes in their hands. Extend the hypothesis, increase the number and variety of the products, you still have the same result. Hitherto, we have considered the proprietor as taking part in the production, not only (as Say says) by the use of his instrument, but in an effective manner and by the labor of his hands. Now, it is easy to see that, under such circumstances, property will never exist. What happens? The proprietor--an essentially libidinous animal, without virtue or shame--is not satisfied with an orderly and disciplined life. He loves property, because it enables him to do at leisure what he pleases and when he pleases. Having obtained the means of life, he gives himself up to trivialities and indolence; he enjoys, he fritters away his time, he goes in quest of curiosities and novel sensations. Property--to enjoy itself--has to abandon ordinary life, and busy itself in luxurious occupations and unclean enjoyments. Instead of giving up a farm-rent, which is perishing in their hands, and thus lightening the labor of the community, our hundred proprietors prefer to rest. In consequence of this withdrawal,--the absolute production being diminished by one hundred, while the consumption remains the same,--production and consumption seem to balance. But, in the first place, since the proprietors no longer labor, their consumption is, according to economical principles, unproductive; consequently, the previous condition of the community--when the labor of one hundred was rewarded by no products--is superseded by one in which the products of one hundred are consumed without labor. The deficit is always the same, whichever the column of the account in which it is expressed. Either the maxims of political economy are false, or else property, which contradicts them, is impossible. The economists--regarding all unproductive consumption as an evil, as a robbery of the human race--never fail to exhort proprietors to moderation, labor, and economy; they preach to them the necessity of making themselves useful, of remunerating production for that which they receive from it; they launch the most terrible curses against luxury and laziness. Very beautiful morality, surely; it is a pity that it lacks common sense. The proprietor who labors, or, as the economists say, WHO MAKES HIMSELF USEFUL, is paid for this labor and utility; is he, therefore, any the less idle as concerns the property which he does not use, and from which he receives an income? His condition, whatever he may do, is an unproductive and FELONIOUS one; he cannot cease to waste and destroy without ceasing to be a proprietor. But this is only the least of the evils which property engenders. Society has to maintain some idle people, whether or no. It will always have the blind, the maimed, the insane, and the idiotic. It can easily support a few sluggards. At this point, the impossibilities thicken and become complicated. THIRD PROPOSITION. Property is impossible, because, with a given capital, Production is proportional to labor, not to property. To pay a farm-rent of one hundred at the rate of ten per cent. of the product, the product must be one thousand; that the product may be one thousand, a force of one thousand laborers is needed. It follows, that in granting a furlough, as we have just done, to our one hundred laborer-proprietors, all of whom had an equal right to lead the life of men of income,--we have placed ourselves in a position where we are unable to pay their revenues. In fact, the productive power, which at first was one thousand, being now but nine hundred, the production is also reduced to nine hundred, one-tenth of which is ninety. Either, then, ten proprietors out of the one hundred cannot be paid,--provided the remaining ninety are to get the whole amount of their farm-rent,--or else all must consent to a decrease of ten per cent. For it is not for the laborer, who has been wanting in no particular, who has produced as in the past, to suffer by the withdrawal of the proprietor. The latter must take the consequences of his own idleness. But, then, the proprietor becomes poorer for the very reason that he wishes to enjoy; by exercising his right, he loses it; so that property seems to decrease and vanish in proportion as we try to lay hold of it,--the more we pursue it, the more it eludes our grasp. What sort of a right is that which is governed by numerical relations, and which an arithmetical calculation can destroy? The laborer-proprietor received, first, as laborer, 0.9 in wages; second, as proprietor, 1 in farm-rent. He said to himself, "My farm-rent is sufficient; I have enough and to spare without my labor." And thus it is that the income upon which he calculated gets diminished by one-tenth,--he at the same time not even suspecting the cause of this diminution. By taking part in the production, he was himself the creator of this tenth which has vanished; and while he thought to labor only for himself, he unwittingly suffered a loss in exchanging his products, by which he was made to pay to himself one-tenth of his own farm-rent. Like every one else, he produced 1, and received but 0.9 If, instead of nine hundred laborers, there had been but five hundred, the whole amount of farm-rent would have been reduced to fifty; if there had been but one hundred, it would have fallen to ten. We may posit, then, the following axiom as a law of proprietary economy: INCREASE MUST DIMINISH AS THE NUMBER OF IDLERS AUGMENTS. _ _This first result will lead us to another more surprising still. Its effect is to deliver us at one blow from all the evils of property, without abolishing it, without wronging proprietors, and by a highly conservative process. We have just proved that, if the farm-rent in a community of one thousand laborers is one hundred, that of nine hundred would be ninety, that of eight hundred, eighty, that of one hundred, ten, &c. So that, in a community where there was but one laborer, the farm-rent would be but 0.1; no matter how great the extent and value of the land appropriated. Therefore, WITH A GIVEN LANDED CAPITAL, PRODUCTION IS PROPORTIONAL TO LABOR, NOT TO PROPERTY. Guided by this principle, let us try to ascertain the maximum increase of all property whatever. What is, essentially, a farm-lease? It is a contract by which the proprietor yields to a tenant possession of his land, in consideration of a portion of that which it yields him, the proprietor. If, in consequence of an increase in his household, the tenant becomes ten times as strong as the proprietor, he will produce ten times as much. Would the proprietor in such a case be justified in raising the farm-rent tenfold? His right is not, The more you produce, the more I demand. It is, The more I sacrifice, the more I demand. The increase in the tenant's household, the number of hands at his disposal, the resources of his industry,--all these serve to increase production, but bear no relation to the proprietor. His claims are to be measured by his own productive capacity, not that of others. Property is the right of increase, not a poll-tax. How could a man, hardly capable of cultivating even a few acres by himself, demand of a community, on the ground of its use of ten thousand acres of his property, ten thousand times as much as he is incapable of producing from one acre? Why should the price of a loan be governed by the skill and strength of the borrower, rather than by the utility sacrificed by the proprietor? We must recognize, then, this second economical law: INCREASE IS MEASURED BY A FRACTION OF THE PROPRIETORS PRODUCTION. Now, this production, what is it? In other words, What can the lord and master of a piece of land justly claim to have sacrificed in lending it to a tenant? The productive capacity of a proprietor, like that of any laborer, being one, the product which he sacrifices in surrendering his land is also one. If, then, the rate of increase is ten per cent., the maximum increase is 0.1. But we have seen that, whenever a proprietor withdraws from production, the amount of products is lessened by 1. Then the increase which accrues to him, being equal to 0.1 while he remains among the laborers, will be equal after his withdrawal, by the law of the decrease of farm-rent, to 0.09. Thus we are led to this final formula: THE MAXIMUM INCOME OF A PROPRIETOR IS EQUAL TO THE SQUARE ROOT OF THE PRODUCT OF ONE LABORER (some number being agreed upon to express this product). THE DIMINUTION WHICH THIS INCOME SUFFERS, IF THE PROPRIETOR IS IDLE, IS EQUAL TO A FRACTION WHOSE NUMERATOR IS 1, AND WHOSE DENOMINATOR IS THE NUMBER WHICH EXPRESSES THE PRODUCT. Thus the maximum income of an idle proprietor, or of one who labors in his own behalf outside of the community, figured at ten per cent. on an average production of one thousand francs per laborer, would be ninety francs. If, then, there are in France one million proprietors with an income of one thousand francs each, which they consume unproductively, instead of the one thousand millions which are paid them annually, they are entitled in strict justice, and by the most accurate calculation, to ninety millions only. It is something of a reduction, to take nine hundred and ten millions from the burdens which weigh so heavily upon the laboring class! Nevertheless, the account is not finished, and the laborer is still ignorant of the full extent of his rights. What is the right of increase when confined within just limits? A recognition of the right of occupancy. But since all have an equal right of occupancy, every man is by the same title a proprietor. Every man has a right to an income equal to a fraction of his product. If, then, the laborer is obliged by the right of property to pay a rent to the proprietor, the proprietor is obliged by the same right to pay the same amount of rent to the laborer; and, since their rights balance each other, the difference between them is zero. _Scholium_.--If farm-rent is only a fraction of the supposed product of the proprietor, whatever the amount and value of the property, the same is true in the case of a large number of small and distinct proprietors. For, although one man may use the property of each separately, he cannot use the property of all at the same time. To sum up. The right of increase, which can exist only within very narrow limits, defined by the laws of production, is annihilated by the right of occupancy. Now, without the right of increase, there is no property. Then property is impossible. FOURTH PROPOSITION. Property is impossible, because it is Homicide. If the right of increase could be subjected to the laws of reason and justice, it would be reduced to an indemnity or reward whose MAXIMUM never could exceed, for a single laborer, a certain fraction of that which he is capable of producing. This we have just shown. But why should the right of increase--let us not fear to call it by its right name, the right of robbery--be governed by reason, with which it has nothing in common? The proprietor is not content with the increase allotted him by good sense and the nature of things: he demands ten times, a hundred times, a thousand times, a million times as much. By his own labor, his property would yield him a product equal only to one; and he demands of society, no longer a right proportional to his productive capacity, but a per capita tax. He taxes his fellows in proportion to their strength, their number, and their industry. A son is born to a farmer. "Good!" says the proprietor; "one more chance for increase!" By what process has farm-rent been thus changed into a poll-tax? Why have our jurists and our theologians failed, with all their shrewdness, to check the extension of the right of increase? The proprietor, having estimated from his own productive capacity the number of laborers which his property will accommodate, divides it into as many portions, and says: "Each one shall yield me revenue." To increase his income, he has only to divide his property. Instead of reckoning the interest due him on his labor, he reckons it on his capital; and, by this substitution, the same property, which in the hands of its owner is capable of yielding only one, is worth to him ten, a hundred, a thousand, a million. Consequently, he has only to hold himself in readiness to register the names of the laborers who apply to him--his task consists in drafting leases and receipts. Not satisfied with the lightness of his duties, the proprietor does not intend to bear even the deficit resulting from his idleness; he throws it upon the shoulders of the producer, of whom he always demands the same reward. When the farm-rent of a piece of land is once raised to its highest point, the proprietor never lowers it; high prices, the scarcity of labor, the disadvantages of the season, even pestilence itself, have no effect upon him--why should he suffer from hard times when he does not labor? Here commences a new series of phenomena. Say--who reasons with marvellous clearness whenever he assails taxation, but who is blind to the fact that the proprietor, as well as the tax-gatherer, steals from the tenant, and in the same manner--says in his second letter to Malthus:-- "If the collector of taxes and those who employ him consume one-sixth of the products, they thereby compel the producers to feed, clothe, and support themselves on five-sixths of what they produce. They admit this, but say at the same time that it is possible for each one to live on five-sixths of what he produces. "I admit that, if they insist upon it; but I ask if they believe that the producer would live as well, in case they demanded of him, instead of one-sixth, two-sixths, or one-third, of their products? No; but he would still live. Then I ask whether he would still live, in case they should rob him of two-thirds,... then three-quarters? But I hear no reply." If the master of the French economists had been less blinded by his proprietary prejudices, he would have seen that farm-rent has precisely the same effect. Take a family of peasants composed of six persons,--father, mother, and four children,--living in the country, and cultivating a small piece of ground. Let us suppose that by hard labor they manage, as the saying is, to make both ends meet; that, having lodged, warmed, clothed, and fed themselves, they are clear of debt, but have laid up nothing. Taking the years together, they contrive to live. If the year is prosperous, the father drinks a little more wine, the daughters buy themselves a dress, the sons a hat; they eat a little cheese, and, occasionally, some meat. I say that these people are on the road to wreck and ruin. For, by the third corollary of our axiom, they owe to themselves the interest on their own capital. Estimating this capital at only eight thousand francs at two and a half per cent., there is an annual interest of two hundred francs to be paid. If, then, these two hundred francs, instead of being subtracted from the gross product to be saved and capitalized, are consumed, there is an annual deficit of two hundred francs in the family assets; so that at the end of forty years these good people, without suspecting it, will have eaten up their property and become bankrupt! This result seems ridiculous--it is a sad reality. The conscription comes. What is the conscription? An act of property exercised over families by the government without warning--a robbery of men and money. The peasants do not like to part with their sons,--in that I do not think them wrong. It is hard for a young man of twenty to gain any thing by life in the barracks; unless he is depraved, he detests it. You can generally judge of a soldier's morality by his hatred of his uniform. Unfortunate wretches or worthless scamps,--such is the make-up of the French army. This ought not to be the case,--but so it is. Question a hundred thousand men, and not one will contradict my assertion. Our peasant, in redeeming his two conscripted sons, expends four thousand francs, which he borrows for that purpose; the interest on this, at five per cent., is two hundred francs;--a sum equal to that referred to above. If, up to this time, the production of the family, constantly balanced by its consumption, has been one thousand two hundred francs, or two hundred francs per persons--in order to pay this interest, either the six laborers must produce as much as seven, or must consume as little as five. Curtail consumption they cannot--how can they curtail necessity? To produce more is impossible; they can work neither harder nor longer. Shall they take a middle course, and consume five and a half while producing six and a half? They would soon find that with the stomach there is no compromise--that beyond a certain degree of abstinence it is impossible to go--that strict necessity can be curtailed but little without injury to the health; and, as for increasing the product,--there comes a storm, a drought, an epizootic, and all the hopes of the farmer are dashed. In short, the rent will not be paid, the interest will accumulate, the farm will be seized, and the possessor ejected. Thus a family, which lived in prosperity while it abstained from exercising the right of property, falls into misery as soon as the exercise of this right becomes a necessity. Property requires of the husbandman the double power of enlarging his land, and fertilizing it by a simple command. While a man is simply possessor of the land, he finds in it means of subsistence; as soon as he pretends to proprietorship, it suffices him no longer. Being able to produce only that which he consumes, the fruit of his labor is his recompense for his trouble--nothing is left for the instrument. Required to pay what he cannot produce,--such is the condition of the tenant after the proprietor has retired from social production in order to speculate upon the labor of others by new methods. Let us now return to our first hypothesis. The nine hundred laborers, sure that their future production will equal that of the past, are quite surprised, after paying their farm-rent, to find themselves poorer by one-tenth than they were the previous year. In fact, this tenth--which was formerly produced and paid by the proprietor-laborer who then took part in the production, and paid part of the--public expenses--now has not been produced, and has been paid. It must then have been taken from the producer's consumption. To choke this inexplicable deficit, the laborer borrows, confident of his intention and ability to return,--a confidence which is shaken the following year by a new loan, PLUS the interest on the first. From whom does he borrow? From the proprietor. The proprietor lends his surplus to the laborer; and this surplus, which he ought to return, becomes--being lent at interest--a new source of profit to him. Then debts increase indefinitely; the proprietor makes advances to the producer who never returns them; and the latter, constantly robbed and constantly borrowing from the robbers, ends in bankruptcy, defrauded of all that he had. Suppose that the proprietor--who needs his tenant to furnish him with an income--then releases him from his debts. He will thus do a very benevolent deed, which will procure for him a recommendation in the curate's prayers; while the poor tenant, overwhelmed by this unstinted charity, and taught by his catechism to pray for his benefactors, will promise to redouble his energy, and suffer new hardships that he may discharge his debt to so kind a master. This time he takes precautionary measures; he raises the price of grains. The manufacturer does the same with his products. The reaction comes, and, after some fluctuation, the farm-rent--which the tenant thought to put upon the manufacturer's shoulders--becomes nearly balanced. So that, while he is congratulating himself upon his success, he finds himself again impoverished, but to an extent somewhat smaller than before. For the rise having been general, the proprietor suffers with the rest; so that the laborers, instead of being poorer by one-tenth, lose only nine-hundredths. But always it is a debt which necessitates a loan, the payment of interest, economy, and fasting. Fasting for the nine-hundredths which ought not to be paid, and are paid; fasting for the redemption of debts; fasting to pay the interest on them. Let the crop fail, and the fasting becomes starvation. They say, "IT IS NECESSARY TO WORK MORE." That means, obviously, that IT IS NECESSARY TO PRODUCE MORE. By what conditions is production effected? By the combined action of labor, capital, and land. As for the labor, the tenant undertakes to furnish it; but capital is formed only by economy. Now, if the tenant could accumulate any thing, he would pay his debts. But granting that he has plenty of capital, of what use would it be to him if the extent of the land which he cultivates always remained the same? He needs to enlarge his farm. Will it be said, finally, that he must work harder and to better advantage? But, in our estimation of farm-rent, we have assumed the highest possible average of production. Were it not the highest, the proprietor would increase the farm-rent. Is not this the way in which the large landed proprietors have gradually raised their rents, as fast as they have ascertained by the increase in population and the development of industry how much society can produce from their property? The proprietor is a foreigner to society; but, like the vulture, his eyes fixed upon his prey, he holds himself ready to pounce upon and devour it. The facts to which we have called attention, in a community of one thousand persons, are reproduced on a large scale in every nation and wherever human beings live, but with infinite variations and in innumerable forms, which it is no part of my intention to describe. In fine, property--after having robbed the laborer by usury--murders him slowly by starvation. Now, without robbery and murder, property cannot exist; with robbery and murder, it soon dies for want of support. Therefore it is impossible. FIFTH PROPOSITION. Property is impossible, because, if it exists, Society devours itself. When the ass is too heavily loaded, he lies down; man always moves on. Upon this indomitable courage, the proprietor--well knowing that it exists--bases his hopes of speculation. The free laborer produces ten; for me, thinks the proprietor, he will produce twelve. Indeed,--before consenting to the confiscation of his fields, before bidding farewell to the paternal roof,--the peasant, whose story we have just told, makes a desperate effort; he leases new land; he will sow one-third more; and, taking half of this new product for himself, he will harvest an additional sixth, and thereby pay his rent. What an evil! To add one-sixth to his production, the farmer must add, not one-sixth, but two-sixths to his labor. At such a price, he pays a farm-rent which in God's eyes he does not owe. The tenant's example is followed by the manufacturer. The former tills more land, and dispossesses his neighbors; the latter lowers the price of his merchandise, and endeavors to monopolize its manufacture and sale, and to crush out his competitors. To satisfy property, the laborer must first produce beyond his needs. Then, he must produce beyond his strength; for, by the withdrawal of laborers who become proprietors, the one always follows from the other. But to produce beyond his strength and needs, he must invade the production of another, and consequently diminish the number of producers. Thus the proprietor--after having lessened production by stepping outside--lessens it still further by encouraging the monopoly of labor. Let us calculate it. The laborer's deficit, after paying his rent, being, as we have seen, one-tenth, he tries to increase his production by this amount. He sees no way of accomplishing this save by increasing his labor: this also he does. The discontent of the proprietors who have not received the full amount of their rent; the advantageous offers and promises made them by other farmers, whom they suppose more diligent, more industrious, and more reliable; the secret plots and intrigues,--all these give rise to a movement for the re-division of labor, and the elimination of a certain number of producers. Out of nine hundred, ninety will be ejected, that the production of the others may be increased one-tenth. But will the total product be increased? Not in the least: there will be eight hundred and ten laborers producing as nine hundred, while, to accomplish their purpose, they would have to produce as one thousand. Now, it having been proved that farm-rent is proportional to the landed capital instead of to labor, and that it never diminishes, the debts must continue as in the past, while the labor has increased. Here, then, we have a society which is continually decimating itself, and which would destroy itself, did not the periodical occurrence of failures, bankruptcies, and political and economical catastrophes re-establish equilibrium, and distract attention from the real causes of the universal distress. The monopoly of land and capital is followed by economical processes which also result in throwing laborers out of employment. Interest being a constant burden upon the shoulders of the farmer and the manufacturer, they exclaim, each speaking for himself, "I should have the means wherewith to pay my rent and interest, had I not to pay so many hands." Then those admirable inventions, intended to assure the easy and speedy performance of labor, become so many infernal machines which kill laborers by thousands. "A few years ago, the Countess of Strafford ejected fifteen thousand persons from her estate, who, as tenants, added to its value. This act of private administration was repeated in 1820, by another large Scotch proprietor, towards six hundred tenants and their families."--Tissot: on Suicide and Revolt. _ _The author whom I quote, and who has written eloquent words concerning the revolutionary spirit which prevails in modern society, does not say whether he would have disapproved of a revolt on the part of these exiles. For myself, I avow boldly that in my eyes it would have been the first of rights, and the holiest of duties; and all that I desire to-day is that my profession of faith be understood. Society devours itself,--1. By the violent and periodical sacrifice of laborers: this we have just seen, and shall see again; 2. By the stoppage of the producer's consumption caused by property. These two modes of suicide are at first simultaneous; but soon the first is given additional force by the second, famine uniting with usury to render labor at once more necessary and more scarce. By the principles of commerce and political economy, that an industrial enterprise may be successful, its product must furnish,--1. The interest on the capital employed; 2. Means for the preservation of this capital; 3. The wages of all the employees and contractors. Further, as large a profit as possible must be realized. The financial shrewdness and rapacity of property is worthy of admiration. Each different name which increase takes affords the proprietor an opportunity to receive it,--1. In the form of interest; 2. In the form of profit. For, it says, a part of the income derived from manufactures consists of interest on the capital employed. If one hundred thousand francs have been invested in a manufacturing enterprise, and in a year's time five thousand francs have been received therefrom in addition to the expenses, there has been no profit, but only interest on the capital. Now, the proprietor is not a man to labor for nothing. Like the lion in the fable, he gets paid in each of his capacities; so that, after he has been served, nothing is left for his associates. _Ego primam tollo, nominor quia leo. Secundam quia sum fortis tribuctis mihi. Tum quia plus valeo, me sequetur tertia. Malo adficietur, si quis quartam tetigerit._ I know nothing prettier than this fable. "I am the contractor. I take the first share. I am the laborer, I take the second. I am the capitalist, I take the third. I am the proprietor, I take the whole." In four lines, Phaedrus has summed up all the forms of property. I say that this interest, all the more then this profit, is impossible. What are laborers in relation to each other? So many members of a large industrial society, to each of whom is assigned a certain portion of the general production, by the principle of the division of labor and functions. Suppose, first, that this society is composed of but three individuals,--a cattle-raiser, a tanner, and a shoemaker. The social industry, then, is that of shoemaking. If I should ask what ought to be each producer's share of the social product, the first schoolboy whom I should meet would answer, by a rule of commerce and association, that it should be one-third. But it is not our duty here to balance the rights of laborers conventionally associated: we have to prove that, whether associated or not, our three workers are obliged to act as if they were; that, whether they will or no, they are associated by the force of things, by mathematical necessity. Three processes are required in the manufacture of shoes,--the rearing of cattle, the preparation of their hides, and the cutting and sewing. If the hide, on leaving the farmer's stable, is worth one, it is worth two on leaving the tanner's pit, and three on leaving the shoemaker's shop. Each laborer has produced a portion of the utility; so that, by adding all these portions together, we get the value of the article. To obtain any quantity whatever of this article, each producer must pay, then, first for his own labor, and second for the labor of the other producers. Thus, to obtain as many shoes as can be made from ten hides, the farmer will give thirty raw hides, and the tanner twenty tanned hides. For, the shoes that are made from ten hides are worth thirty raw hides, in consequence of the extra labor bestowed upon them; just as twenty tanned hides are worth thirty raw hides, on account of the tanner's labor. But if the shoemaker demands thirty-three in the farmer's product, or twenty-two in the tanner's, for ten in his own, there will be no exchange; for, if there were, the farmer and the tanner, after having paid the shoemaker ten for his labor, would have to pay eleven for that which they had themselves sold for ten,--which, of course, would be impossible. [18] Well, this is precisely what happens whenever an emolument of any kind is received; be it called revenue, farm-rent, interest, or profit. In the little community of which we are speaking, if the shoemaker--in order to procure tools, buy a stock of leather, and support himself until he receives something from his investment--borrows money at interest, it is clear that to pay this interest he will have to make a profit off the tanner and the farmer. But as this profit is impossible unless fraud is used, the interest will fall back upon the shoulders of the unfortunate shoemaker, and ruin him. I have imagined a case of unnatural simplicity. There is no human society but sustains more than three vocations. The most uncivilized society supports numerous industries; to-day, the number of industrial functions (I mean by industrial functions all useful functions) exceeds, perhaps, a thousand. However numerous the occupations, the economic law remains the same,--THAT THE PRODUCER MAY LIVE, HIS WAGES MUST REPURCHASE HIS PRODUCT. _ _The economists cannot be ignorant of this rudimentary principle of their pretended science: why, then, do they so obstinately defend property, and inequality of wages, and the legitimacy of usury, and the honesty of profit,--all of which contradict the economic law, and make exchange impossible? A contractor pays one hundred thousand francs for raw material, fifty thousand francs in wages, and then expects to receive a product of two hundred thousand francs,--that is, expects to make a profit on the material and on the labor of his employees; but if the laborers and the purveyor of the material cannot, with their combined wages, repurchase that which they have produced for the contractor, how can they live? I will develop my question. Here details become necessary. If the workingman receives for his labor an average of three francs per day, his employer (in order to gain any thing beyond his own salary, if only interest on his capital) must sell the day's labor of his employee, in the form of merchandise, for more than three francs. The workingman cannot, then, repurchase that which he has produced for his master. It is thus with all trades whatsoever. The tailor, the hatter, the cabinet-maker, the blacksmith, the tanner, the mason, the jeweller, the printer, the clerk, &c., even to the farmer and wine-grower, cannot repurchase their products; since, producing for a master who in one form or another makes a profit, they are obliged to pay more for their own labor than they get for it. In France, twenty millions of laborers, engaged in all the branches of science, art, and industry, produce every thing which is useful to man. Their annual wages amount, it is estimated to twenty thousand millions; but, in consequence of the right of property, and the multifarious forms of increase, premiums, tithes, interests, fines, profits, farm-rents, house-rents, revenues, emoluments of every nature and description, their products are estimated by the proprietors and employers at twenty-five thousand millions. What does that signify? That the laborers, who are obliged to repurchase these products in order to live, must either pay five for that which they produced for four, or fast one day in five. If there is an economist in France able to show that this calculation is false, I summon him to appear; and I promise to retract all that I have wrongfully and wickedly uttered in my attacks upon property. Let us now look at the results of this profit. If the wages of the workingmen were the same in all pursuits, the deficit caused by the proprietor's tax would be felt equally everywhere; but also the cause of the evil would be so apparent, that it would soon be discovered and suppressed. But, as there is the same inequality of wages (from that of the scavenger up to that of the minister of state) as of property, robbery continually rebounds from the stronger to the weaker; so that, since the laborer finds his hardships increase as he descends in the social scale, the lowest class of people are literally stripped naked and eaten alive by the others. The laboring people can buy neither the cloth which they weave, nor the furniture which they manufacture, nor the metal which they forge, nor the jewels which they cut, nor the prints which they engrave. They can procure neither the wheat which they plant, nor the wine which they grow, nor the flesh of the animals which they raise. They are allowed neither to dwell in the houses which they build, nor to attend the plays which their labor supports, nor to enjoy the rest which their body requires. And why? Because the right of increase does not permit these things to be sold at the cost-price, which is all that laborers can afford to pay. On the signs of those magnificent warehouses which he in his poverty admires, the laborer reads in large letters: "This is thy work, and thou shalt not have it." _Sic vos non vobis_! Every manufacturer who employs one thousand laborers, and gains from them daily one sou each, is slowly pushing them into a state of misery. Every man who makes a profit has entered into a conspiracy with famine. But the whole nation has not even this labor, by means of which property starves it. And why? Because the workers are forced by the insufficiency of their wages to monopolize labor; and because, before being destroyed by dearth, they destroy each other by competition. Let us pursue this truth no further. If the laborer's wages will not purchase his product, it follows that the product is not made for the producer. For whom, then, is it intended? For the richer consumer; that is, for only a fraction of society. But when the whole society labors, it produces for the whole society. If, then, only a part of society consumes, sooner or later a part of society will be idle. Now, idleness is death, as well for the laborer as for the proprietor. This conclusion is inevitable. The most distressing spectacle imaginable is the sight of producers resisting and struggling against this mathematical necessity, this power of figures to which their prejudices blind them. If one hundred thousand printers can furnish reading-matter enough for thirty-four millions of men, and if the price of books is so high that only one-third of that number can afford to buy them, it is clear that these one hundred thousand printers will produce three times as much as the booksellers can sell. That the products of the laborers may never exceed the demands of the consumers, the laborers must either rest two days out of three, or, separating into three groups, relieve each other three times a week, month, or quarter; that is, during two-thirds of their life they must not live. But industry, under the influence of property, does not proceed with such regularity. It endeavors to produce a great deal in a short time, because the greater the amount of products, and the shorter the time of production, the less each product costs. As soon as a demand begins to be felt, the factories fill up, and everybody goes to work. Then business is lively, and both governors and governed rejoice. But the more they work to-day, the more idle will they be hereafter; the more they laugh, the more they shall weep. Under the rule of property, the flowers of industry are woven into none but funeral wreaths. The laborer digs his own grave. If the factory stops running, the manufacturer has to pay interest on his capital the same as before. He naturally tries, then, to continue production by lessening expenses. Then comes the lowering of wages; the introduction of machinery; the employment of women and children to do the work of men; bad workmen, and wretched work. They still produce, because the decreased cost creates a larger market; but they do not produce long, because, the cheapness being due to the quantity and rapidity of production, the productive power tends more than ever to outstrip consumption. It is when laborers, whose wages are scarcely sufficient to support them from one day to another, are thrown out of work, that the consequences of the principle of property become most frightful. They have not been able to economize, they have made no savings, they have accumulated no capital whatever to support them even one day more. Today the factory is closed. To-morrow the people starve in the streets. Day after tomorrow they will either die in the hospital, or eat in the jail. And still new misfortunes come to complicate this terrible situation. In consequence of the cessation of business, and the extreme cheapness of merchandise, the manufacturer finds it impossible to pay the interest on his borrowed capital; whereupon his frightened creditors hasten to withdraw their funds. Production is suspended, and labor comes to a standstill. Then people are astonished to see capital desert commerce, and throw itself upon the Stock Exchange; and I once heard M. Blanqui bitterly lamenting the blind ignorance of capitalists. The cause of this movement of capital is very simple; but for that very reason an economist could not understand it, or rather must not explain it. The cause lies solely in COMPETITION. I mean by competition, not only the rivalry between two parties engaged in the same business, but the general and simultaneous effort of all kinds of business to get ahead of each other. This effort is to-day so strong, that the price of merchandise scarcely covers the cost of production and distribution; so that, the wages of all laborers being lessened, nothing remains, not even interest for the capitalists. The primary cause of commercial and industrial stagnations is, then, interest on capital,--that interest which the ancients with one accord branded with the name of usury, whenever it was paid for the use of money, but which they did not dare to condemn in the forms of house-rent, farm-rent, or profit: as if the nature of the thing lent could ever warrant a charge for the lending; that is, robbery. In proportion to the increase received by the capitalist will be the frequency and intensity of commercial crises,--the first being given, we always can determine the two others; and vice versa. Do you wish to know the regulator of a society? Ascertain the amount of active capital; that is, the capital bearing interest, and the legal rate of this interest. The course of events will be a series of overturns, whose number and violence will be proportional to the activity of capital. In 1839, the number of failures in Paris alone was one thousand and sixty-four. This proportion was kept up in the early months of 1840; and, as I write these lines, the crisis is not yet ended. It is said, further, that the number of houses which have wound up their business is greater than the number of declared failures. By this flood, we may judge of the waterspout's power of suction. The decimation of society is now imperceptible and permanent, now periodical and violent; it depends upon the course which property takes. In a country where the property is pretty evenly distributed, and where little business is done,--the rights and claims of each being balanced by those of others,--the power of invasion is destroyed. There--it may be truly said--property does not exist, since the right of increase is scarcely exercised at all. The condition of the laborers--as regards security of life--is almost the same as if absolute equality prevailed among them. They are deprived of all the advantages of full and free association, but their existence is not endangered in the least. With the exception of a few isolated victims of the right of property--of this misfortune whose primary cause no one perceives--the society appears to rest calmly in the bosom of this sort of equality. But have a care; it is balanced on the edge of a sword: at the slightest shock, it will fall and meet with death! Ordinarily, the whirlpool of property localizes itself. On the one hand, farm-rent stops at a certain point; on the other, in consequence of competition and over-production, the price of manufactured goods does not rise,--so that the condition of the peasant varies but little, and depends mainly on the seasons. The devouring action of property bears, then, principally upon business. We commonly say COMMERCIAL CRISES, not AGRICULTURAL CRISES; because, while the farmer is eaten up slowly by the right of increase, the manufacturer is swallowed at a single mouthful. This leads to the cessation of business, the destruction of fortunes, and the inactivity of the working people; who die one after another on the highways, and in the hospitals, prisons, and galleys. To sum up this proposition:-- Property sells products to the laborer for more than it pays him for them; therefore it is impossible. APPENDIX TO THE FIFTH PROPOSITION. I. Certain reformers, and even the most of the publicists--who, though belonging to no particular school, busy themselves in devising means for the amelioration of the lot of the poorer and more numerous class--lay much stress now-a-days on a better organization of labor. The disciples of Fourier, especially, never stop shouting, "ON TO THE PHALANX!" declaiming in the same breath against the foolishness and absurdity of other sects. They consist of half-a-dozen incomparable geniuses who have discovered that FIVE AND FOUR MAKE NINE; TAKE TWO AWAY, AND NINE REMAIN,--and who weep over the blindness of France, who refuses to believe in this astonishing arithmetic.[1] [1] Fourier, having to multiply a whole number by a fraction, never failed, they say, to obtain a product much greater than the multiplicand. He affirmed that under his system of harmony the mercury would solidify when the temperature was above zero. He might as well have said that the Harmonians would make burning ice. I once asked an intelligent phalansterian what he thought of such physics. "I do not know," he answered; "but I believe." And yet the same man disbelieved in the doctrine of the Real Presence. In fact, the Fourierists proclaim themselves, on the one hand, defenders of property, of the right of increase, which they have thus formulated: TO EACH ACCORDING TO HIS CAPITAL, HIS LABOR, AND HIS SKILL. On the other hand, they wish the workingman to come into the enjoyment of all the wealth of society; that is,--abridging the expression,--into the undivided enjoyment of his own product. Is not this like saying to the workingman, "Labor, you shall have three francs per day; you shall live on fifty-five sous; you shall give the rest to the proprietor, and thus you will consume three francs"? If the above speech is not an exact epitome of Charles Fourier's system, I will subscribe to the whole phalansterian folly with a pen dipped in my own blood. Of what use is it to reform industry and agriculture,--of what use, indeed, to labor at all,--if property is maintained, and labor can never meet its expenses? Without the abolition of property, the organization of labor is neither more nor less than a delusion. If production should be quadrupled,--a thing which does not seem to me at all impossible,--it would be labor lost: if the additional product was not consumed, it would be of no value, and the proprietor would decline to receive it as interest; if it was consumed, all the disadvantages of property would reappear. It must be confessed that the theory of passional attraction is gravely at fault in this particular, and that Fourier, when he tried to harmonize the PASSION for property,--a bad passion, whatever he may say to the contrary,--blocked his own chariot-wheels. The absurdity of the phalansterian economy is so gross, that many people suspect Fourier, in spite of all the homage paid by him to proprietors, of having been a secret enemy of property. This opinion might be supported by plausible arguments; still it is not mine. Charlatanism was too important a part for such a man to play, and sincerity too insignificant a one. I would rather think Fourier ignorant (which is generally admitted) than disingenuous. As for his disciples, before they can formulate any opinion of their own, they must declare once for all, unequivocally and with no mental reservation, whether they mean to maintain property or not, and what they mean by their famous motto,--"To each according to his capital, his labor, and his skill." II. But, some half-converted proprietor will observe, "Would it not be possible, by suppressing the bank, incomes, farm-rent, house-rent, usury of all kinds, and finally property itself, to proportion products to capacities? That was St. Simon's idea; it was also Fourier's; it is the desire of the human conscience; and no decent person would dare maintain that a minister of state should live no better than a peasant." O Midas! your ears are long! What! will you never understand that disparity of wages and the right of increase are one and the same? Certainly, St. Simon, Fourier, and their respective flocks committed a serious blunder in attempting to unite, the one, inequality and communism; the other, inequality and property: but you, a man of figures, a man of economy,--you, who know by heart your LOGARITHMIC tables,--how can you make so stupid a mistake? Does not political economy itself teach you that the product of a man, whatever be his individual capacity, is never worth more than his labor, and that a man's labor is worth no more than his consumption? You remind me of that great constitution-framer, poor Pinheiro-Ferreira, the Sieyes of the nineteenth century, who, dividing the citizens of a nation into twelve classes,--or, if you prefer, into twelve grades,--assigned to some a salary of one hundred thousand francs each; to others, eighty thousand; then twenty-five thousand, fifteen thousand, ten thousand, &c., down to one thousand five hundred, and one thousand francs, the minimum allowance of a citizen. Pinheiro loved distinctions, and could no more conceive of a State without great dignitaries than of an army without drum-majors; and as he also loved, or thought he loved, liberty, equality, and fraternity, he combined the good and the evil of our old society in an eclectic philosophy which he embodied in a constitution. Excellent Pinheiro! Liberty even to passive submission, fraternity even to identity of language, equality even in the jury-box and at the guillotine,--such was his ideal republic. Unappreciated genius, of whom the present century was unworthy, but whom the future will avenge! Listen, proprietor. Inequality of talent exists in fact; in right it is not admissible, it goes for nothing, it is not thought of. One Newton in a century is equal to thirty millions of men; the psychologist admires the rarity of so fine a genius, the legislator sees only the rarity of the function. Now, rarity of function bestows no privilege upon the functionary; and that for several reasons, all equally forcible. 1. Rarity of genius was not, in the Creator's design, a motive to compel society to go down on its knees before the man of superior talents, but a providential means for the performance of all functions to the greatest advantage of all. 2. Talent is a creation of society rather than a gift of Nature; it is an accumulated capital, of which the receiver is only the guardian. Without society,--without the education and powerful assistance which it furnishes,--the finest nature would be inferior to the most ordinary capacities in the very respect in which it ought to shine. The more extensive a man's knowledge, the more luxuriant his imagination, the more versatile his talent,--the more costly has his education been, the more remarkable and numerous were his teachers and his models, and the greater is his debt. The farmer produces from the time that he leaves his cradle until he enters his grave: the fruits of art and science are late and scarce; frequently the tree dies before the fruit ripens. Society, in cultivating talent, makes a sacrifice to hope. 3. Capacities have no common standard of comparison: the conditions of development being equal, inequality of talent is simply speciality of talent. 4. Inequality of wages, like the right of increase, is economically impossible. Take the most favorable case,--that where each laborer has furnished his maximum production; that there may be an equitable distribution of products, the share of each must be equal to the quotient of the total production divided by the number of laborers. This done, what remains wherewith to pay the higher wages? Nothing whatever. Will it be said that all laborers should be taxed? But, then, their consumption will not be equal to their production, their wages will not pay for their productive service, they will not be able to repurchase their product, and we shall once more be afflicted with all the calamities of property. I do not speak of the injustice done to the defrauded laborer, of rivalry, of excited ambition, and burning hatred,--these may all be important considerations, but they do not hit the point. On the one hand, each laborer's task being short and easy, and the means for its successful accomplishment being equal in all cases, how could there be large and small producers? On the other hand, all functions being equal, either on account of the actual equivalence of talents and capacities, or on account of social co-operation, how could a functionary claim a salary proportional to the worth of his genius? But, what do I say? In equality wages are always proportional to talents. What is the economical meaning of wages? The reproductive consumption of the laborer. The very act by which the laborer produces constitutes, then, this consumption, exactly equal to his production, of which we are speaking. When the astronomer produces observations, the poet verses, or the savant experiments, they consume instruments, books, travels, &c., &c.; now, if society supplies this consumption, what more can the astronomer, the savant, or the poet demand? We must conclude, then, that in equality, and only in equality, St. Simon's adage--TO EACH ACCORDING TO HIS CAPACITY TO EACH CAPACITY ACCORDING TO ITS RESULTS--finds its full and complete application. III. The great evil--the horrible and ever-present evil--arising from property, is that, while property exists, population, however reduced, is, and always must be, over-abundant. Complaints have been made in all ages of the excess of population; in all ages property has been embarrassed by the presence of pauperism, not perceiving that it caused it. Further,--nothing is more curious than the diversity of the plans proposed for its extermination. Their atrocity is equalled only by their absurdity. The ancients made a practice of abandoning their children. The wholesale and retail slaughter of slaves, civil and foreign wars, also lent their aid. In Rome (where property held full sway), these three means were employed so effectively, and for so long a time, that finally the empire found itself without inhabitants. When the barbarians arrived, nobody was to be found; the fields were no longer cultivated; grass grew in the streets of the Italian cities. In China, from time immemorial, upon famine alone has devolved the task of sweeping away the poor. The people living almost exclusively upon rice, if an accident causes the crop to fail, in a few days hunger kills the inhabitants by myriads; and the Chinese historian records in the annals of the empire, that in such a year of such an emperor twenty, thirty, fifty, one hundred thousand inhabitants died of starvation. Then they bury the dead, and recommence the production of children until another famine leads to the same result. Such appears to have been, in all ages, the Confucian economy. I borrow the following facts from a modern economist:-- "Since the fourteenth and fifteenth centuries, England has been preyed upon by pauperism. At that time beggars were punished by law." Nevertheless, she had not one-fourth as large a population as she has to-day. "Edward prohibits alms-giving, on pain of imprisonment.... The laws of 1547 and 1656 prescribe a like punishment, in case of a second offence. Elizabeth orders that each parish shall support its own paupers. But what is a pauper? Charles II. decides that an UNDISPUTED residence of forty days constitutes a settlement in a parish; but, if disputed, the new-comer is forced to pack off. James II. modifies this decision, which is again modified by William. In the midst of trials, reports, and modifications, pauperism increases, and the workingman languishes and dies. "The poor-tax in 1774 exceeded forty millions of francs; in 1783-4-5, it averaged fifty-three millions; 1813, more than a hundred and eighty-seven millions five hundred thousand francs; 1816, two hundred and fifty millions; in 1817, it is estimated at three hundred and seventeen millions. "In 1821, the number of paupers enrolled upon the parish lists was estimated at four millions, nearly one-third of the population. "FRANCE. In 1544, Francis I. establishes a compulsory tax in behalf of the poor. In 1566 and 1586, the same principle is applied to the whole kingdom. "Under Louis XIV., forty thousand paupers infested the capital [as many in proportion as to-day]. Mendicity was punished severely. In 1740, the Parliament of Paris re-establishes within its own jurisdiction the compulsory assessment. "The Constituent Assembly, frightened at the extent of the evil and the difficulty of curing it, ordains the _statu quo_. "The Convention proclaims assistance of the poor to be a NATIONAL DEBT. Its law remains unexecuted. "Napoleon also wishes to remedy the evil: his idea is imprisonment. 'In that way,' said he, 'I shall protect the rich from the importunity of beggars, and shall relieve them of the disgusting sight of abject poverty.'" O wonderful man! From these facts, which I might multiply still farther, two things are to be inferred,--the one, that pauperism is independent of population; the other, that all attempts hitherto made at its extermination have proved abortive. Catholicism founds hospitals and convents, and commands charity; that is, she encourages mendicity. That is the extent of her insight as voiced by her priests. The secular power of Christian nations now orders taxes on the rich, now banishment and imprisonment for the poor; that is, on the one hand, violation of the right of property, and, on the other, civil death and murder. The modern economists--thinking that pauperism is caused by the excess of population, exclusively--have devoted themselves to devising checks. Some wish to prohibit the poor from marrying; thus,--having denounced religious celibacy,--they propose compulsory celibacy, which will inevitably become licentious celibacy. Others do not approve this method, which they deem too violent; and which, they say, deprives the poor man of THE ONLY PLEASURE WHICH HE KNOWS IN THIS WORLD. They would simply recommend him to be PRUDENT. This opinion is held by Malthus, Sismondi, Say, Droz, Duchatel, &c. But if the poor are to be PRUDENT, the rich must set the example. Why should the marriageable age of the latter be fixed at eighteen years, while that of the former is postponed until thirty? Again, they would do well to explain clearly what they mean by this matrimonial prudence which they so urgently recommend to the laborer; for here equivocation is especially dangerous, and I suspect that the economists are not thoroughly understood. "Some half-enlightened ecclesiastics are alarmed when they hear prudence in marriage advised; they fear that the divine injunction--INCREASE AND MULTIPLY--is to be set aside. To be logical, they must anathematize bachelors." (J. Droz: Political Economy.) M. Droz is too honest a man, and too little of a theologian, to see why these casuists are so alarmed; and this chaste ignorance is the very best evidence of the purity of his heart. Religion never has encouraged early marriages; and the kind of PRUDENCE which it condemns is that described in this Latin sentence from Sanchez,--_An licet ob metum liberorum semen extra vas ejicere_? Destutt de Tracy seems to dislike prudence in either form. He says: "I confess that I no more share the desire of the moralists to diminish and restrain our pleasures, than that of the politicians to increase our procreative powers, and accelerate reproduction." He believes, then, that we should love and marry when and as we please. Widespread misery results from love and marriage, but this our philosopher does not heed. True to the dogma of the necessity of evil, to evil he looks for the solution of all problems. He adds: "The multiplication of men continuing in all classes of society, the surplus members of the upper classes are supported by the lower classes, and those of the latter are destroyed by poverty." This philosophy has few avowed partisans; but it has over every other the indisputable advantage of demonstration in practice. Not long since France heard it advocated in the Chamber of Deputies, in the course of the discussion on the electoral reform,--POVERTY WILL ALWAYS EXIST. That is the political aphorism with which the minister of state ground to powder the arguments of M. Arago. POVERTY WILL ALWAYS EXIST! Yes, so long as property does. The Fourierists--INVENTORS of so many marvellous contrivances--could not, in this field, belie their character. They invented four methods of checking increase of population at will. 1. THE VIGOR OF WOMEN. On this point they are contradicted by experience; for, although vigorous women may be less likely to conceive, nevertheless they give birth to the healthiest children; so that the advantage of maternity is on their side. 2. INTEGRAL EXERCISE, or the equal development of all the physical powers. If this development is equal, how is the power of reproduction lessened? 3. THE GASTRONOMIC REGIME; or, in plain English, the philosophy of the belly. The Fourierists say, that abundance of rich food renders women sterile; just as too much sap--while enhancing the beauty of flowers--destroys their reproductive capacity. But the analogy is a false one. Flowers become sterile when the stamens--or male organs--are changed into petals, as may be seen by inspecting a rose; and when through excessive dampness the pollen loses its fertilizing power. Then,--in order that the gastronomic regime may produce the results claimed for it,--not only must the females be fattened, but the males must be rendered impotent. 4. PHANEROGAMIC MORALITY, or public concubinage. I know not why the phalansterians use Greek words to convey ideas which can be expressed so clearly in French. This method--like the preceding one--is copied from civilized customs. Fourier, himself, cites the example of prostitutes as a proof. Now we have no certain knowledge yet of the facts which he quotes. So states Parent Duchatelet in his work on "Prostitution." From all the information which I have been able to gather, I find that all the remedies for pauperism and fecundity--sanctioned by universal practice, philosophy, political economy, and the latest reformers--may be summed up in the following list: masturbation, onanism, [19] sodomy, tribadie, polyandry, [20] prostitution, castration, continence, abortion, and infanticide. [21] All these methods being proved inadequate, there remains proscription. Unfortunately, proscription, while decreasing the number of the poor, increases their proportion. If the interest charged by the proprietor upon the product is equal only to one-twentieth of the product (by law it is equal to one-twentieth of the capital), it follows that twenty laborers produce for nineteen only; because there is one among them, called proprietor, who eats the share of two. Suppose that the twentieth laborer--the poor one--is killed: the production of the following year will be diminished one-twentieth; consequently the nineteenth will have to yield his portion, and perish. For, since it is not one-twentieth of the product of nineteen which must be paid to the proprietor, but one-twentieth of the product of twenty (see third proposition), each surviving laborer must sacrifice one-twentieth PLUS one four-hundredth of his product; in other words, one man out of nineteen must be killed. Therefore, while property exists, the more poor people we kill, the more there are born in proportion. Malthus, who proved so clearly that population increases in geometrical progression, while production increases only in arithmetical progression, did not notice this PAUPERIZING power of property. Had he observed this, he would have understood that, before trying to check reproduction, the right of increase should be abolished; because, wherever that right is tolerated, there are always too many inhabitants, whatever the extent or fertility of the soil. It will be asked, perhaps, how I would maintain a balance between population and production; for sooner or later this problem must be solved. The reader will pardon me, if I do not give my method here. For, in my opinion, it is useless to say a thing unless we prove it. Now, to explain my method fully would require no less than a formal treatise. It is a thing so simple and so vast, so common and so extraordinary, so true and so misunderstood, so sacred and so profane, that to name it without developing and proving it would serve only to excite contempt and incredulity. One thing at a time. Let us establish equality, and this remedy will soon appear; for truths follow each other, just as crimes and errors do. SIXTH PROPOSITION. Property is impossible, because it is the Mother of Tyranny. What is government? Government is public economy, the supreme administrative power over public works and national possessions. Now, the nation is like a vast society in which all the citizens are stockholders. Each one has a deliberative voice in the assembly; and, if the shares are equal, has one vote at his disposal. But, under the regime of property, there is great inequality between the shares of the stockholders; therefore, one may have several hundred votes, while another has only one. If, for example, I enjoy an income of one million; that is, if I am the proprietor of a fortune of thirty or forty millions well invested, and if this fortune constitutes 1/30000 of the national capital,--it is clear that the public administration of my property would form 1/30000 of the duties of the government; and, if the nation had a population of thirty-four millions, that I should have as many votes as one thousand one hundred and thirty-three simple stockholders. Thus, when M. Arago demands the right of suffrage for all members of the National Guard, he is perfectly right; since every citizen is enrolled for at least one national share, which entitles him to one vote. But the illustrious orator ought at the same time to demand that each elector shall have as many votes as he has shares; as is the case in commercial associations. For to do otherwise is to pretend that the nation has a right to dispose of the property of individuals without consulting them; which is contrary to the right of property. In a country where property exists, equality of electoral rights is a violation of property. Now, if each citizen's sovereignty must and ought to be proportional to his property, it follows that the small stock holders are at the mercy of the larger ones; who will, as soon as they choose, make slaves of the former, marry them at pleasure, take from them their wives, castrate their sons, prostitute their daughters, throw the aged to the sharks,--and finally will be forced to serve themselves in the same way, unless they prefer to tax themselves for the support of their servants. In such a condition is Great Britain to-day. John Bull--caring little for liberty, equality, or dignity--prefers to serve and beg. But you, bonhomme Jacques? Property is incompatible with political and civil equality; then property is impossible. HISTORICAL COMMENTS.--1. When the vote of the third estate was doubled by the States-General of 1789, property was grossly violated. The nobility and the clergy possessed three-fourths of the soil of France; they should have controlled three-fourths of the votes in the national representation. To double the vote of the third estate was just, it is said, since the people paid nearly all the taxes. This argument would be sound, if there were nothing to be voted upon but taxes. But it was a question at that time of reforming the government and the constitution; consequently, the doubling of the vote of the third estate was a usurpation, and an attack on property. 2. If the present representatives of the radical opposition should come into power, they would work a reform by which every National Guard should be an elector, and every elector eligible for office,--an attack on property. They would lower the rate of interest on public funds,--an attack on property. They would, in the interest of the public, pass laws to regulate the exportation of cattle and wheat,--an attack on property. They would alter the assessment of taxes,--an attack on property. They would educate the people gratuitously,--a conspiracy against property. They would organize labor; that is, they would guarantee labor to the workingman, and give him a share in the profits,--the abolition of property. Now, these same radicals are zealous defenders of property,--a radical proof that they know not what they do, nor what they wish. 3. Since property is the grand cause of privilege and despotism, the form of the republican oath should be changed. Instead of, "I swear hatred to royalty," henceforth the new member of a secret society should say, "I swear hatred to property." SEVENTH PROPOSITION. _Property is impossible, because, in consuming its Receipts, it loses them; in hoarding them, it nullifies them; and in using them as Capital, it turns them against Production_. I. If, with the economists, we consider the laborer as a living machine, we must regard the wages paid to him as the amount necessary to support this machine, and keep it in repair. The head of a manufacturing establishment--who employs laborers at three, five, ten, and fifteen francs per day, and who charges twenty francs for his superintendence--does not regard his disbursements as losses, because he knows they will return to him in the form of products. Consequently, LABOR and REPRODUCTIVE CONSUMPTION are identical. What is the proprietor? He is a machine which does not work; or, which working for its own pleasure, and only when it sees fit, produces nothing. What is it to consume as a proprietor? It is to consume without working, to consume without reproducing. For, once more, that which the proprietor consumes as a laborer comes back to him; he does not give his labor in exchange for his property, since, if he did, he would thereby cease to be a proprietor. In consuming as a laborer, the proprietor gains, or at least does not lose, since he recovers that which he consumes; in consuming as a proprietor, he impoverishes himself. To enjoy property, then, it is necessary to destroy it; to be a real proprietor, one must cease to be a proprietor. The laborer who consumes his wages is a machine which destroys and reproduces; the proprietor who consumes his income is a bottomless gulf,--sand which we water, a stone which we sow. So true is this, that the proprietor--neither wishing nor knowing how to produce, and perceiving that as fast as he uses his property he destroys it for ever--has taken the precaution to make some one produce in his place. That is what political economy, speaking in the name of eternal justice, calls PRODUCING BY HIS CAPITAL,--PRODUCING BY HIS TOOLS. And that is what ought to be called PRODUCING BY A SLAVE--PRODUCING AS A THIEF AND AS A TYRANT. He, the proprietor, produce!... The robber might say, as well: "I produce." The consumption of the proprietor has been styled luxury, in opposition to USEFUL consumption. From what has just been said, we see that great luxury can prevail in a nation which is not rich,--that poverty even increases with luxury, and vice versa. The economists (so much credit must be given them, at least) have caused such a horror of luxury, that to-day a very large number of proprietors--not to say almost all--ashamed of their idleness--labor, economize, and capitalize. They have jumped from the frying-pan into the fire. I cannot repeat it too often: the proprietor who thinks to deserve his income by working, and who receives wages for his labor, is a functionary who gets paid twice; that is the only difference between an idle proprietor and a laboring proprietor. By his labor, the proprietor produces his wages only--not his income. And since his condition enables him to engage in the most lucrative pursuits, it may be said that the proprietor's labor harms society more than it helps it. Whatever the proprietor does, the consumption of his income is an actual loss, which his salaried functions neither repair nor justify; and which would annihilate property, were it not continually replenished by outside production. II. Then, the proprietor who consumes annihilates the product: he does much worse if he lays it up. The things which he lays by pass into another world; nothing more is seen of them, not even the _caput mortuum_,--the smoke. If we had some means of transportation by which to travel to the moon, and if the proprietors should be seized with a sudden fancy to carry their savings thither, at the end of a certain time our terraqueous planet would be transported by them to its satellite! The proprietor who lays up products will neither allow others to enjoy them, nor enjoy them himself; for him there is neither possession nor property. Like the miser, he broods over his treasures: he does not use them. He may feast his eyes upon them; he may lie down with them; he may sleep with them in his arms: all very fine, but coins do not breed coins. No real property without enjoyment; no enjoyment without consumption; no consumption without loss of property,--such is the inflexible necessity to which God's judgment compels the proprietor to bend. A curse upon property! III. The proprietor who, instead of consuming his income, uses it as capital, turns it against production, and thereby makes it impossible for him to exercise his right. For the more he increases the amount of interest to be paid upon it, the more he is compelled to diminish wages. Now, the more he diminishes wages,--that is, the less he devotes to the maintenance and repair of the machines,--the more he diminishes the quantity of labor; and with the quantity of labor the quantity of product, and with the quantity of product the very source of his income. This is clearly shown by the following example:-- Take an estate consisting of arable land, meadows, and vineyards, containing the dwellings of the owner and the tenant; and worth, together with the farming implements, one hundred thousand francs, the rate of increase being three per cent. If, instead of consuming his revenue, the proprietor uses it, not in enlarging but in beautifying his estate, can he annually demand of his tenant an additional ninety francs on account of the three thousand francs which he has thus added to his capital? Certainly not; for on such conditions the tenant, though producing no more than before, would soon be obliged to labor for nothing,--what do I say? to actually suffer loss in order to hold his lease. In fact, revenue can increase only as productive soil increases: it is useless to build walls of marble, and work with plows of gold. But, since it is impossible to go on acquiring for ever, to add estate to estate, to CONTINUE ONE'S POSSESSIONS, as the Latins said; and since, moreover, the proprietor always has means wherewith to capitalize,--it follows that the exercise of his right finally becomes impossible. Well, in spite of this impossibility, property capitalizes, and in capitalizing increases its revenue; and, without stopping to look at the particular cases which occur in commerce, manufacturing operations, and banking, I will cite a graver fact,--one which directly affects all citizens. I mean the indefinite increase of the budget. The taxes increase every year. It would be difficult to tell in which department of the government the expenses increase; for who can boast of any knowledge as to the budget? On this point, the ablest financiers continually disagree. What is to be thought, I ask, of the science of government, when its professors cannot understand one another's figures? Whatever be the immediate causes of this growth of the budget, it is certain that taxation increases at a rate which causes everybody to despair. Everybody sees it, everybody acknowledges it; but nobody seems to understand the primary cause.[1] Now, I say that it cannot be otherwise,--that it is necessary and inevitable. [1] "The financial situation of the English government was shown up in the House of Lords during the session of January 23. It is not an encouraging one. For several years the expenses have exceeded the receipts, and the Minister has been able to re-establish the balance only by loans renewed annually. The combined deficits of the years 1838 and 1839 amount to forty-seven million five hundred thousand francs. In 1840, the excess of expenses over receipts is expected to be twenty-two million five hundred thousand francs. Attention was called to these figures by Lord Ripon. Lord Melbourne replied: 'The noble earl unhappily was right in declaring that the public expenses continually increase, and with him I must say that there is no room for hope that they can be diminished or met in any way.'"--National: January 26, 1840. A nation is the tenant of a rich proprietor called the GOVERNMENT, to whom it pays, for the use of the soil, a farm-rent called a tax. Whenever the government makes war, loses or gains a battle, changes the outfit of its army, erects a monu-ment, digs a canal, opens a road, or builds a railway, it borrows money, on which the tax-payers pay interest; that is, the government, without adding to its productive capacity, increases its active capital,--in a word, capitalizes after the manner of the proprietor of whom I have just spoken. Now, when a governmental loan is once contracted, and the interest is once stipulated, the budget cannot be reduced. For, to accomplish that, either the capitalists must relinquish their interest, which would involve an abandonment of property; or the government must go into bankruptcy, which would be a fraudulent denial of the political principle; or it must pay the debt, which would require another loan; or it must reduce expenses, which is impossible, since the loan was contracted for the sole reason that the ordinary receipts were insufficient; or the money expended by the government must be reproductive, which requires an increase of productive capacity,--a condition excluded by our hypothesis; or, finally, the tax-payers must submit to a new tax in order to pay the debt,--an impossible thing. For, if this new tax were levied upon all citizens alike, half, or even more, of the citizens would be unable to pay it; if the rich had to bear the whole, it would be a forced contribution,--an invasion of property. Long financial experience has shown that the method of loans, though exceedingly dangerous, is much surer, more convenient, and less costly than any other method; consequently the government borrows,--that is, goes on capitalizing,--and increases the budget. Then, a budget, instead of ever diminishing, must necessarily and continually increase. It is astonishing that the economists, with all their learning, have failed to perceive a fact so simple and so evident. If they have perceived it, why have they neglected to condemn it? HISTORICAL COMMENT.--Much interest is felt at present in a financial operation which is expected to result in a reduction of the budget. It is proposed to change the present rate of increase, five per cent. Laying aside the politico-legal question to deal only with the financial question,--is it not true that, when five per cent. is changed to four per cent., it will then be necessary, for the same reasons, to change four to three; then three to two, then two to one, and finally to sweep away increase altogether? But that would be the advent of equality of conditions and the abolition of property. Now it seems to me, that an intelligent nation should voluntarily meet an inevitable revolution half way, instead of suffering itself to be dragged after the car of inflexible necessity. EIGHTH PROPOSITION. Property is impossible, because its power of Accumulation is infinite, and is exercised only over finite quantities. If men, living in equality, should grant to one of their number the exclusive right of property; and this sole proprietor should lend one hundred francs to the human race at compound interest, payable to his descendants twenty-four generations hence,--at the end of six hundred years this sum of one hundred francs, at five per cent., would amount to 107,854,010,777,600 francs; two thousand six hundred and ninety-six and one-third times the capital of France (supposing her capital to be 40,000,000,000), or more than twenty times the value of the terrestrial globe! Suppose that a man, in the reign of St. Louis, had borrowed one hundred francs, and had refused,--he and his heirs after him,--to return it. Even though it were known that the said heirs were not the rightful possessors, and that prescription had been interrupted always at the right moment,--nevertheless, by our laws, the last heir would be obliged to return the one hundred francs with interest, and interest on the interest; which in all would amount, as we have seen, to nearly one hundred and eight thousand billions. Every day, fortunes are growing in our midst much more rapidly than this. The preceding example supposed the interest equal to one-twentieth of the capital,--it often equals one-tenth, one-fifth, one-half of the capital; and sometimes the capital itself. The Fourierists--irreconcilable enemies of equality, whose partisans they regard as SHARKS--intend, by quadrupling production, to satisfy all the demands of capital, labor, and skill. But, should production be multiplied by four, ten, or even one hundred, property would soon absorb, by its power of accumulation and the effects of its capitalization, both products and capital, and the land, and even the laborers. Is the phalanstery to be prohibited from capitalizing and lending at interest? Let it explain, then, what it means by property. I will carry these calculations no farther. They are capable of infinite variation, upon which it would be puerile for me to insist. I only ask by what standard judges, called upon to decide a suit for possession, fix the interest? And, developing the question, I ask,-- Did the legislator, in introducing into the Republic the principle of property, weigh all the consequences? Did he know the law of the possible? If he knew it, why is it not in the Code? Why is so much latitude allowed to the proprietor in accumulating property and charging interest,--to the judge in recognizing and fixing the domain of property,--to the State in its power to levy new taxes continually? At what point is the nation justified in repudiating the budget, the tenant his farm-rent, and the manufacturer the interest on his capital? How far may the idler take advantage of the laborer? Where does the right of spoliation begin, and where does it end? When may the producer say to the proprietor, "I owe you nothing more"? When is property satisfied? When must it cease to steal? If the legislator did know the law of the possible, and disregarded it, what must be thought of his justice? If he did not know it, what must be thought of his wisdom? Either wicked or foolish, how can we recognize his authority? If our charters and our codes are based upon an absurd hypothesis, what is taught in the law-schools? What does a judgment of the Court of Appeal amount to? About what do our Chambers deliberate? What is POLITICS? What is our definition of a STATESMAN? What is the meaning of JURISPRUDENCE? Should we not rather say JURISIGNORANCE? If all our institutions are based upon an error in calculation, does it not follow that these institutions are so many shams? And if the entire social structure is built upon this absolute impossibility of property, is it not true that the government under which we live is a chimera, and our present society a utopia? NINTH PROPOSITION. Property is impossible, because it is powerless against Property. I. By the third corollary of our axiom, interest tells against the proprietor as well as the stranger. This economical principle is universally admitted. Nothing simpler at first blush; yet, nothing more absurd, more contradictory in terms, or more absolutely impossible. The manufacturer, it is said, pays himself the rent on his house and capital. HE PAYS HIMSELF; that is, he gets paid by the public who buy his products. For, suppose the manufacturer, who seems to make this profit on his property, wishes also to make it on his merchandise, can he then pay himself one franc for that which cost him ninety centimes, and make money by the operation? No: such a transaction would transfer the merchant's money from his right hand to his left, but without any profit whatever. Now, that which is true of a single individual trading with himself is true also of the whole business world. Form a chain of ten, fifteen, twenty producers; as many as you wish. If the producer A makes a profit out of the producer B. B's loss must, according to economical principles, be made up by C, C's by D; and so on through to Z. But by whom will Z be paid for the loss caused him by the profit charged by A in the beginning? BY THE CONSUMER, replies Say. Contemptible equivocation! Is this consumer any other, then, than A, B. C, D, &c., or Z? By whom will Z be paid? If he is paid by A, no one makes a profit; consequently, there is no property. If, on the contrary, Z bears the burden himself, he ceases to be a member of society; since it refuses him the right of property and profit, which it grants to the other associates. Since, then, a nation, like universal humanity, is a vast industrial association which cannot act outside of itself, it is clear that no man can enrich himself without impoverishing another. For, in order that the right of property, the right of increase, may be respected in the case of A, it must be denied to Z; thus we see how equality of rights, separated from equality of conditions, may be a truth. The iniquity of political economy in this respect is flagrant. "When I, a manufacturer, purchase the labor of a workingman, I do not include his wages in the net product of my business; on the contrary, I deduct them. But the workingman includes them in his net product.... "(Say: Political Economy.) That means that all which the workingman gains is NET PRODUCT; but that only that part of the manufacturer's gains is NET PRODUCT, which remains after deducting his wages. But why is the right of profit confined to the manufacturer? Why is this right, which is at bottom the right of property itself, denied to the workingman? In the terms of economical science, the workingman is capital. Now, all capital, beyond the cost of its maintenance and repair, must bear interest. This the proprietor takes care to get, both for his capital and for himself. Why is the workingman prohibited from charging a like interest for his capital, which is himself? Property, then, is inequality of rights; for, if it were not inequality of rights, it would be equality of goods,--in other words, it would not exist. Now, the charter guarantees to all equality of rights. Then, by the charter, property is impossible. II. Is A, the proprietor of an estate, entitled by the fact of his proprietorship to take possession of the field belonging to B. his neighbor? "No," reply the proprietors; "but what has that to do with the right of property?" That I shall show you by a series of similar propositions. Has C, a hatter, the right to force D, his neighbor and also a hatter, to close his shop, and cease his business? Not the least in the world. But C wishes to make a profit of one franc on every hat, while D is content with fifty centimes. It is evident that D's moderation is injurious to C's extravagant claims. Has the latter a right to prevent D from selling? Certainly not. Since D is at liberty to sell his hats fifty centimes cheaper than C if he chooses, C in his turn is free to reduce his price one franc. Now, D is poor, while C is rich; so that at the end of two or three years D is ruined by this intolerable competition, and C has complete control of the market. Can the proprietor D get any redress from the proprietor C? Can he bring a suit against him to recover his business and property? No; for D could have done the same thing, had he been the richer of the two. On the same ground, the large proprietor A may say to the small proprietor B: "Sell me your field, otherwise you shall not sell your wheat,"--and that without doing him the least wrong, or giving him ground for complaint. So that A can devour B if he likes, for the very reason that A is stronger than B. Consequently, it is not the right of property which enables A and C to rob B and D, but the right of might. By the right of property, neither the two neighbors A and B, nor the two merchants C and D, could harm each other. They could neither dispossess nor destroy one another, nor gain at one another's expense. The power of invasion lies in superior strength. But it is superior strength also which enables the manufacturer to reduce the wages of his employees, and the rich merchant and well-stocked proprietor to sell their products for what they please. The manufacturer says to the laborer, "You are as free to go elsewhere with your services as I am to receive them. I offer you so much." The merchant says to the customer, "Take it or leave it; you are master of your money, as I am of my goods. I want so much." Who will yield? The weaker. Therefore, without force, property is powerless against property, since without force it has no power to increase; therefore, without force, property is null and void. HISTORICAL COMMENT.--The struggle between colonial and native sugars furnishes us a striking example of this impossibility of property. Leave these two industries to themselves, and the native manufacturer will be ruined by the colonist. To maintain the beet-root, the cane must be taxed: to protect the property of the one, it is necessary to injure the property of the other. The most remarkable feature of this business is precisely that to which the least attention is paid; namely, that, in one way or another, property has to be violated. Impose on each industry a proportional tax, so as to preserve a balance in the market, and you create a MAXIMUM PRICE,--you attack property in two ways. On the one hand, your tax interferes with the liberty of trade; on the other, it does not recognize equality of proprietors. Indemnify the beet-root, you violate the property of the tax-payer. Cultivate the two varieties of sugar at the nation's expense, just as different varieties of tobacco are cultivated,--you abolish one species of property. This last course would be the simpler and better one; but, to induce the nations to adopt it, requires such a co-operation of able minds and generous hearts as is at present out of the question. Competition, sometimes called liberty of trade,--in a word, property in exchange,--will be for a long time the basis of our commercial legislation; which, from the economical point of view, embraces all civil laws and all government. Now, what is competition? A duel in a closed field, where arms are the test of right. "Who is the liar,--the accused or the accuser?" said our barbarous ancestors. "Let them fight it out," replied the still more barbarous judge; "the stronger is right." Which of us two shall sell spices to our neighbor? "Let each offer them for sale," cries the economist; "the sharper, or the more cunning, is the more honest man, and the better merchant." Such is the exact spirit of the Code Napoleon. TENTH PROPOSITION. Property is impossible, because it is the Negation of equality. The development of this proposition will be the resume of the preceding ones. 1. It is a principle of economical justice, that PRODUCTS ARE BOUGHT ONLY BY PRODUCTS. Property, being capable of defence only on the ground that it produces utility, is, since it produces nothing, for ever condemned. 2. It is an economical law, that LABOR MUST BE BALANCED BY PRODUCT. It is a fact that, with property, production costs more than it is worth. 3. Another economical law: THE CAPITAL BEING GIVEN, PRODUCTION IS MEASURED, NOT BY THE AMOUNT OF CAPITAL, BUT BY PRODUCTIVE CAPACITY. Property, requiring income to be always proportional to capital without regard to labor, does not recognize this relation of equality between effect and cause. 4 and 5. Like the insect which spins its silk, the laborer never produces for himself alone. Property, demanding a double product and unable to obtain it, robs the laborer, and kills him. 6. Nature has given to every man but one mind, one heart, one will. Property, granting to one individual a plurality of votes, supposes him to have a plurality of minds. 7. All consumption which is not reproductive of utility is destruction. Property, whether it consumes or hoards or capitalizes, is productive of INUTILITY,--the cause of sterility and death. 8. The satisfaction of a natural right always gives rise to an equation; in other words, the right to a thing is necessarily balanced by the possession of the thing. Thus, between the right to liberty and the condition of a free man there is a balance, an equation; between the right to be a father and paternity, an equation; between the right to security and the social guarantee, an equation. But between the right of increase and the receipt of this increase there is never an equation; for every new increase carries with it the right to another, the latter to a third, and so on for ever. Property, never being able to accomplish its object, is a right against Nature and against reason. 9. Finally, property is not self-existent. An extraneous cause--either FORCE or FRAUD--is necessary to its life and action. In other words, property is not equal to property: it is a negation--a delusion--NOTHING. CHAPTER V. PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE AND INJUSTICE, AND A DETERMINATION OF THE PRINCIPLE OF GOVERNMENT AND OF RIGHT. Property is impossible; equality does not exist. We hate the former, and yet wish to possess it; the latter rules all our thoughts, yet we know not how to reach it. Who will explain this profound antagonism between our conscience and our will? Who will point out the causes of this pernicious error, which has become the most sacred principle of justice and society? I am bold enough to undertake the task, and I hope to succeed. But before explaining why man has violated justice, it is necessary to determine what justice is. PART FIRST. % 1.--Of the Moral Sense in Man and the Animals. The philosophers have endeavored often to locate the line which separates man's intelligence from that of the brutes; and, according to their general custom, they gave utterance to much foolishness before resolving upon the only course possible for them to take,--observation. It was reserved for an unpretending savant--who perhaps did not pride himself on his philosophy--to put an end to the interminable controversy by a simple distinction; but one of those luminous distinctions which are worth more than systems. Frederic Cuvier separated INSTINCT from INTELLIGENCE. But, as yet, no one has proposed this question:-- IS THE DIFFERENCE BETWEEN MAN'S MORAL SENSE AND THAT OF THE BRUTE A DIFFERENCE IN KIND OR ONLY IN DEGREE? If, hitherto, any one had dared to maintain the latter alternative, his arguments would have seemed scandalous, blasphemous, and offensive to morality and religion. The ecclesiastical and secular tribunals would have condemned him with one voice. And, mark the style in which they would have branded the immoral paradox! "Conscience,"--they would have cried,--"conscience, man's chief glory, was given to him exclusively; the notion of justice and injustice, of merit and demerit, is his noble privilege; to man, alone,--the lord of creation,--belongs the sublime power to resist his worldly propensities, to choose between good and evil, and to bring himself more and more into the resemblance of God through liberty and justice.... No; the holy image of virtue was never graven save on the heart of man." Words full of feeling, but void of sense. Man is a rational and social animal--{GREEK ' c g}--said Aristotle. This definition is worth more than all which have been given since. I do not except even M. de Bonald's celebrated definition,--MAN IS AN INTELLECT SERVED BY ORGANS--a definition which has the double fault of explaining the known by the unknown; that is, the living being by the intellect; and of neglecting man's essential quality,--animality. Man, then, is an animal living in society. Society means the sum total of relationships; in short, system. Now, all systems exist only on certain conditions. What, then, are the conditions, the LAWS, of human society? What are the RIGHTS of men with respect to each other; what is JUSTICE? It amounts to nothing to say,--with the philosophers of various schools,--"It is a divine instinct, an immortal and heavenly voice, a guide given us by Nature, a light revealed unto every man on coming into the world, a law engraved upon our hearts; it is the voice of conscience, the dictum of reason, the inspiration of sentiment, the penchant of feeling; it is the love of self in others; it is enlightened self-interest; or else it is an innate idea, the imperative command of applied reason, which has its source in the concepts of pure reason; it is a passional attraction," &c., &c. This may be as true as it seems beautiful; but it is utterly meaningless. Though we should prolong this litany through ten pages (it has been filtered through a thousand volumes), we should be no nearer to the solution of the question. "Justice is public utility," says Aristotle. That is true, but it is a tautology. "The principle that the public welfare ought to be the object of the legislator"--says M. Ch. Comte in his "Treatise on Legislation"--"cannot be overthrown. But legislation is advanced no farther by its announcement and demonstration, than is medicine when it is said that it is the business of physicians to cure the sick." Let us take another course. RUGHT is the sum total of the principles which govern society. Justice, in man, is the respect and observation of those principles. To practise justice is to obey the social instinct; to do an act of justice is to do a social act. If, then, we watch the conduct of men towards each other under different circumstances, it will be easy for us to distinguish between the presence and absence of society; from the result we may inductively infer the law. Let us commence with the simplest and least doubtful cases. The mother, who protects her son at the peril of her life, and sacrifices every thing to his support, is in society with him--she is a good mother. She, on the contrary, who abandons her child, is unfaithful to the social instinct,--maternal love being one of its many features; she is an unnatural mother. If I plunge into the water to rescue a drowning man, I am his brother, his associate; if, instead of aiding him, I sink him, I am his enemy, his murderer. Whoever bestows alms treats the poor man as his associate; not thoroughly, it is true, but only in respect to the amount which he shares with him. Whoever takes by force or stratagem that which is not the product of his labor, destroys his social character--he is a brigand. The Samaritan who relieves the traveller lying by the wayside, dresses his wounds, comforts him, and supplies him with money, thereby declares himself his associate--his neighbor; the priest, who passes by on the other side, remains unassociated, and is his enemy. In all these cases, man is moved by an internal attraction towards his fellow, by a secret sympathy which causes him to love, congratulate, and condole; so that, to resist this attraction, his will must struggle against his nature. But in these respects there is no decided difference between man and the animals. With them, as long as the weakness of their young endears them to their mothers,--in a word, associates them with their mothers,--the latter protect the former, at the peril of their lives, with a courage which reminds us of our heroes dying for their country. Certain species unite for hunting purposes, seek each other, call each other (a poet would say invite each other), to share their prey; in danger they aid, protect, and warn each other. The elephant knows how to help his companion out of the ditch into which the latter has fallen. Cows form a circle, with their horns outward and their calves in the centre, in order to repel the attacks of wolves. Horses and pigs, on hearing a cry of distress from one of their number, rush to the spot whence it comes. What descriptions I might give of their marriages, the tenderness of the males towards the females, and the fidelity of their loves! Let us add, however,--to be entirely just--that these touching demonstrations of society, fraternity, and love of neighbor, do not prevent the animals from quarrelling, fighting, and outrageously abusing one another while gaining their livelihood and showing their gallantry; the resemblance between them and ourselves is perfect. The social instinct, in man and beast, exists to a greater or less degree--its nature is the same. Man has the greater need of association, and employs it more; the animal seems better able to endure isolation. In man, social needs are more imperative and complex; in the beast, they seem less intense, less diversified, less regretted. Society, in a word, aims, in the case of man, at the preservation of the race and the individual; with the animals, its object is more exclusively the preservation of the race. As yet, we have met with no claim which man can make for himself alone. The social instinct and the moral sense he shares with the brutes; and when he thinks to become god-like by a few acts of charity, justice, and devotion, he does not perceive that in so acting he simply obeys an instinct wholly animal in its nature. As we are good, loving, tender, just, so we are passionate, greedy, lewd, and vindictive; that is, we are like the beasts. Our highest virtues appear, in the last analysis, as blind, impulsive instincts. What subjects for canonization and apotheosis! There is, however, a difference between us two-handed bipeds and other living creatures--what is it? A student of philosophy would hasten to reply: "This difference lies in the fact that we are conscious of our social faculty, while the animals are unconscious of theirs--in the fact that while we reflect and reason upon the operation of our social instinct, the animals do nothing of the kind." I will go farther. It is by our reflective and reasoning powers, with which we seem to be exclusively endowed, that we know that it is injurious, first to others and then to ourselves, to resist the social instinct which governs us, and which we call JUSTICE. It is our reason which teaches us that the selfish man, the robber, the murderer--in a word, the traitor to society--sins against Nature, and is guilty with respect to others and himself, when he does wrong wilfully. Finally, it is our social sentiment on the one hand, and our reason on the other, which cause us to think that beings such as we should take the responsibility of their acts. Such is the principle of remorse, revenge, and penal justice. But this proves only an intellectual diversity between the animals and man, not at all an affectional one; for, although we reason upon our relations with our fellows, we likewise reason upon our most trivial actions,--such as drinking, eating, choosing a wife, or selecting a dwelling-place. We reason upon things earthly and things heavenly; there is nothing to which our reasoning powers are not applicable. Now, just as the knowledge of external phenomena, which we acquire, has no influence upon their causes and laws, so reflection, by illuminating our instinct, enlightens us as to our sentient nature, but does not alter its character; it tells us what our morality is, but neither changes nor modifies it. Our dissatisfaction with ourselves after doing wrong, the indignation which we feel at the sight of injustice, the idea of deserved punishment and due remuneration, are effects of reflection, and not immediate effects of instinct and emotion. Our appreciation (I do not say exclusive appreciation, for the animals also realize that they have done wrong, and are indignant when one of their number is attacked, but), our infinitely superior appreciation of our social duties, our knowledge of good and evil, does not establish, as regards morality, any vital difference between man and the beasts. % 2.--Of the first and second degrees of Sociability. I insist upon the fact, which I have just pointed out, as one of the most important facts of anthropology. The sympathetic attraction, which causes us to associate, is, by reason of its blind, unruly nature, always governed by temporary impulse, without regard to higher rights, and without distinction of merit or priority. The bastard dog follows indifferently all who call it; the suckling child regards every man as its father and every woman as its nurse; every living creature, when deprived of the society of animals of its species, seeks companionship in its solitude. This fundamental characteristic of the social instinct renders intolerable and even hateful the friendship of frivolous persons, liable to be infatuated with every new face, accommodating to all whether good or bad, and ready to sacrifice, for a passing liaison, the oldest and most honorable affections. The fault of such beings is not in the heart--it is in the judgment. Sociability, in this degree, is a sort of magnetism awakened in us by the contemplation of a being similar to ourselves, but which never goes beyond the person who feels it; it may be reciprocated, but not communicated. Love, benevolence, pity, sympathy, call it what you will, there is nothing in it which deserves esteem,--nothing which lifts man above the beast. The second degree of sociability is justice, which may be defined as the RECOGNITION OF THE EQUALITY BETWEEN ANOTHER'S PERSONALITY AND OUR OWN. The sentiment of justice we share with the animals; we alone can form an exact idea of it; but our idea, as has been said already, does not change its nature. We shall soon see how man rises to a third degree of sociability which the animals are incapable of reaching. But I must first prove by metaphysics that SOCIETY, JUSTICE, and EQUALITY, are three equivalent terms,--three expressions meaning the same thing,--whose mutual conversion is always allowable. If, amid the confusion of a shipwreck, having escaped in a boat with some provisions, I see a man struggling with the waves, am I bound to go to his assistance? Yes, I am bound under penalty of being adjudged guilty of murder and treason against society. But am I also bound to share with him my provisions? To settle this question, we must change the phraseology. If society is binding on the boat, is it also binding on the provisions? Undoubtedly. The duty of an associate is absolute. Man's occupancy succeeds his social nature, and is subordinate to it; possession can become exclusive only when permission to occupy is granted to all alike. That which in this instance obscures our duty is our power of foresight, which, causing us to fear an eventual danger, impels us to usurpation, and makes us robbers and murderers. Animals do not calculate the duty of instinct any more than the disadvantages resulting to those who exercise it; it would be strange if the intellect of man--the most sociable of animals--should lead him to disobey the law. He betrays society who attempts to use it only for his own advantage; better that God should deprive us of prudence, if it is to serve as the tool of our selfishness. "What!" you will say, "must I share my bread, the bread which I have earned and which belongs to me, with the stranger whom I do not know; whom I may never see again, and who, perhaps, will reward me with ingratitude? If we had earned this bread together, if this man had done something to obtain it, he might demand his share, since his co-operation would entitle him to it; but as it is, what claim has he on me? We have not produced together--we shall not eat together." The fallacy in this argument lies in the false supposition, that each producer is not necessarily associated with every other producer. When two or more individuals have regularly organized a society,--when the contracts have been agreed upon, drafted, and signed,--there is no difficulty about the future. Everybody knows that when two men associate--for instance--in order to fish, if one of them catches no fish, he is none the less entitled to those caught by his associate. If two merchants form a partnership, while the partnership lasts, the profits and losses are divided between them; since each produces, not for himself, but for the society: when the time of distribution arrives, it is not the producer who is considered, but the associate. That is why the slave, to whom the planter gives straw and rice; and the civilized laborer, to whom the capitalist pays a salary which is always too small,--not being associated with their employers, although producing with them,--are disregarded when the product is divided. Thus, the horse who draws our coaches, and the ox who draws our carts produce with us, but are not associated with us; we take their product, but do not share it with them. The animals and laborers whom we employ hold the same relation to us. Whatever we do for them, we do, not from a sense of justice, but out of pure benevolence. [22] But is it possible that we are not all associated? Let us call to mind what was said in the last two chapters, That even though we do not want to be associated, the force of things, the necessity of consumption, the laws of production, and the mathematical principle of exchange combine to associate us. There is but a single exception to this rule,--that of the proprietor, who, producing by his right of increase, is not associated with any one, and consequently is not obliged to share his product with any one; just as no one else is bound to share with him. With the exception of the proprietor, we labor for each other; we can do nothing by ourselves unaided by others, and we continually exchange products and services with each other. If these are not social acts, what are they? Now, neither a commercial, nor an industrial, nor an agricultural association can be conceived of in the absence of equality; equality is its sine qua non. So that, in all matters which concern this association, to violate society is to violate justice and equality. Apply this principle to humanity at large. After what has been said, I assume that the reader has sufficient insight to enable him to dispense with any aid of mine. By this principle, the man who takes possession of a field, and says, "This field is mine," will not be unjust so long as every one else has an equal right of possession; nor will he be unjust, if, wishing to change his location, he exchanges this field for an equivalent. But if, putting another in his place, he says to him, "Work for me while I rest," he then becomes unjust, unassociated, UNEQUAL. He is a proprietor. Reciprocally, the sluggard, or the rake, who, without performing any social task, enjoys like others--and often more than others--the products of society, should be proceeded against as a thief and a parasite. We owe it to ourselves to give him nothing; but, since he must live, to put him under supervision, and compel him to labor. Sociability is the attraction felt by sentient beings for each other. Justice is this same attraction, accompanied by thought and knowledge. But under what general concept, in what category of the understanding, is justice placed? In the category of equal quantities. Hence, the ancient definition of justice--_Justum aequale est, injustum inaequale_. What is it, then, to practise justice? It is to give equal wealth to each, on condition of equal labor. It is to act socially. Our selfishness may complain; there is no escape from evidence and necessity. What is the right of occupancy? It is a natural method of dividing the earth, by reducing each laborer's share as fast as new laborers present themselves. This right disappears if the public interest requires it; which, being the social interest, is also that of the occupant. What is the right of labor? It is the right to obtain one's share of wealth by fulfilling the required conditions. It is the right of society, the right of equality. Justice, which is the product of the combination of an idea and an instinct, manifests itself in man as soon as he is capable of feeling, and of forming ideas. Consequently, it has been regarded as an innate and original sentiment; but this opinion is logically and chronologically false. But justice, by its composition hybrid--if I may use the term,--justice, born of emotion and intellect combined, seems to me one of the strongest proofs of the unity and simplicity of the ego; the organism being no more capable of producing such a mixture by itself, than are the combined senses of hearing and sight of forming a binary sense, half auditory and half visual. This double nature of justice gives us the definitive basis of all the demonstrations in Chapters II., III., and IV. On the one hand, the idea of JUSTICE being identical with that of society, and society necessarily implying equality, equality must underlie all the sophisms invented in defence of property; for, since property can be defended only as a just and social institution, and property being inequality, in order to prove that property is in harmony with society, it must be shown that injustice is justice, and that inequality is equality,--a contradiction in terms. On the other hand, since the idea of equality--the second element of justice--has its source in the mathematical proportions of things; and since property, or the unequal distribution of wealth among laborers, destroys the necessary balance between labor, production, and consumption,--property must be impossible. All men, then, are associated; all are entitled to the same justice; all are equal. Does it follow that the preferences of love and friendship are unjust? This requires explanation. I have already supposed the case of a man in peril, I being in a position to help him. Now, I suppose myself appealed to at the same time by two men exposed to danger. Am I not allowed--am I not commanded even--to rush first to the aid of him who is endeared to me by ties of blood, friendship, acquaintance, or esteem, at the risk of leaving the other to perish? Yes. And why? Because within universal society there exist for each of us as many special societies as there are individuals; and we are bound, by the principle of sociability itself, to fulfil the obligations which these impose upon us, according to the intimacy of our relations with them. Therefore we must give our father, mother, children, friends, relatives, &c., the preference over all others. But in what consists this preference? A judge has a case to decide, in which one of the parties is his friend, and the other his enemy. Should he, in this instance, prefer his INTIMATE ASSOCIATE to his DISTANT ASSOCIATE; and decide the case in favor of his friend, in spite of evidence to the contrary? No: for, if he should favor his friend's injustice, he would become his accomplice in his violation of the social compact; he would form with him a sort of conspiracy against the social body. Preference should be shown only in personal matters, such as love, esteem, confidence, or intimacy, when all cannot be considered at once. Thus, in case of fire, a father would save his own child before thinking of his neighbor's; but the recognition of a right not being an optional matter with a judge, he is not at liberty to favor one person to the detriment of another. The theory of these special societies--which are formed concentrically, so to speak, by each of us inside of the main body--gives the key to all the problems which arise from the opposition and conflict of the different varieties of social duty,--problems upon which the ancient tragedies are based. The justice practised among animals is, in a certain degree, negative. With the exception of protecting their young, hunting and plundering in troops, uniting for common defence and sometimes for individual assistance, it consists more in prevention than in action. A sick animal who cannot arise from the ground, or an imprudent one who has fallen over a precipice, receives neither medicine nor nourishment. If he cannot cure himself, nor relieve himself of his trouble, his life is in danger: he will neither be cared for in bed, nor fed in a prison. Their neglect of their fellows arises as much from the weakness of their intellect as from their lack of resources. Still, the degrees of intimacy common among men are not unknown to the animals. They have friendships of habit and of choice; friendships neighborly, and friendships parental. In comparison with us, they have feeble memories, sluggish feelings, and are almost destitute of intelligence; but the identity of these faculties is preserved to some extent, and our superiority in this respect arises entirely from our understanding. It is our strength of memory and penetration of judgment which enable us to multiply and combine the acts which our social instinct impels us to perform, and which teaches us how to render them more effective, and how to distribute them justly. The beasts who live in society practise justice, but are ignorant of its nature, and do not reason upon it; they obey their instinct without thought or philosophy. They know not how to unite the social sentiment with the idea of equality, which they do not possess; this idea being an abstract one. We, on the contrary, starting with the principle that society implies equality, can, by our reasoning faculty, understand and agree with each other in settling our rights; we have even used our judgment to a great extent. But in all this our conscience plays a small part, as is proved by the fact that the idea of RIGHT--of which we catch a glimpse in certain animals who approach nearer than any others to our standard of intelligence--seems to grow, from the low level at which it stands in savages, to the lofty height which it reaches in a Plato or a Franklin. If we trace the development of the moral sense in individuals, and the progress of laws in nations, we shall be convinced that the ideas of justice and legislative perfection are always proportional to intelligence. The notion of justice--which has been regarded by some philosophers as simple--is then, in reality, complex. It springs from the social instinct on the one hand, and the idea of equality on the other; just as the notion of guilt arises from the feeling that justice has been violated, and from the idea of free-will. In conclusion, instinct is not modified by acquaintance with its nature; and the facts of society, which we have thus far observed, occur among beasts as well as men. We know the meaning of justice; in other words, of sociability viewed from the standpoint of equality. We have met with nothing which separates us from the animals. % 3.--Of the third degree of Sociability. The reader, perhaps, has not forgotten what was said in the third chapter concerning the division of labor and the speciality of talents. The sum total of the talents and capacities of the race is always the same, and their nature is always similar. We are all born poets, mathematicians, philosophers, artists, artisans, or farmers, but we are not born equally endowed; and between one man and another in society, or between one faculty and another in the same individual, there is an infinite difference. This difference of degree in the same faculties, this predominance of talent in certain directions, is, we have said, the very foundation of our society. Intelligence and natural genius have been distributed by Nature so economically, and yet so liberally, that in society there is no danger of either a surplus or a scarcity of special talents; and that each laborer, by devoting himself to his function, may always attain to the degree of proficiency necessary to enable him to benefit by the labors and discoveries of his fellows. Owing to this simple and wise precaution of Nature, the laborer is not isolated by his task. He communicates with his fellows through the mind, before he is united with them in heart; so that with him love is born of intelligence. It is not so with societies of animals. In every species, the aptitudes of all the individuals--though very limited--are equal in number and (when they are not the result of instinct) in intensity. Each one does as well as all the others what all the others do; provides his food, avoids the enemy, burrows in the earth, builds a nest, &c. No animal, when free and healthy, expects or requires the aid of his neighbor; who, in his turn, is equally independent. Associated animals live side by side without any intellectual intercourse or intimate communication,--all doing the same things, having nothing to learn or to remember; they see, feel, and come in contact with each other, but never penetrate each other. Man continually exchanges with man ideas and feelings, products and services. Every discovery and act in society is necessary to him. But of this immense quantity of products and ideas, that which each one has to produce and acquire for himself is but an atom in the sun. Man would not be man were it not for society, and society is supported by the balance and harmony of the powers which compose it. Society, among the animals, is SIMPLE; with man it is COMPLEX. Man is associated with man by the same instinct which associates animal with animal; but man is associated differently from the animal, and it is this difference in association which constitutes the difference in morality. I have proved,--at too great length, perhaps,--both by the spirit of the laws which regard property as the basis of society, and by political economy, that inequality of conditions is justified neither by priority of occupation nor superiority of talent, service, industry, and capacity. But, although equality of conditions is a necessary consequence of natural right, of liberty, of the laws of production, of the capacity of physical nature, and of the principle of society itself,--it does not prevent the social sentiment from stepping over the boundaries of DEBT and CREDIT. The fields of benevolence and love extend far beyond; and when economy has adjusted its balance, the mind begins to benefit by its own justice, and the heart expands in the boundlessness of its affection. The social sentiment then takes on a new character, which varies with different persons. In the strong, it becomes the pleasure of generosity; among equals, frank and cordial friendship; in the weak, the pleasure of admiration and gratitude. The man who is superior in strength, skill, or courage, knows that he owes all that he is to society, without which he could not exist. He knows that, in treating him precisely as it does the lowest of its members, society discharges its whole duty towards him. But he does not underrate his faculties; he is no less conscious of his power and greatness; and it is this voluntary reverence which he pays to humanity, this avowal that he is but an instrument of Nature,--who is alone worthy of glory and worship,--it is, I say, this simultaneous confession of the heart and the mind, this genuine adoration of the Great Being, that distinguishes and elevates man, and lifts him to a degree of social morality to which the beast is powerless to attain. Hercules destroying the monsters and punishing brigands for the safety of Greece, Orpheus teaching the rough and wild Pelasgians,--neither of them putting a price upon their services,--there we see the noblest creations of poetry, the loftiest expression of justice and virtue. The joys of self-sacrifice are ineffable. If I were to compare human society to the old Greek tragedies, I should say that the phalanx of noble minds and lofty souls dances the strophe, and the humble multitude the antistrophe. Burdened with painful and disagreeable tasks, but rendered omnipotent by their number and the harmonic arrangement of their functions, the latter execute what the others plan. Guided by them, they owe them nothing; they honor them, however, and lavish upon them praise and approbation. Gratitude fills people with adoration and enthusiasm. But equality delights my heart. Benevolence degenerates into tyranny, and admiration into servility. Friendship is the daughter of equality. O my friends! may I live in your midst without emulation, and without glory; let equality bring us together, and fate assign us our places. May I die without knowing to whom among you I owe the most esteem! Friendship is precious to the hearts of the children of men. Generosity, gratitude (I mean here only that gratitude which is born of admiration of a superior power), and friendship are three distinct shades of a single sentiment which I will call equite, or SOCIAL PROPORTIONALITY. [23] Equite does not change justice: but, always taking equite for the base, it superadds esteem, and thereby forms in man a third degree of sociability. Equite makes it at once our duty and our pleasure to aid the weak who have need of us, and to make them our equals; to pay to the strong a just tribute of gratitude and honor, without enslaving ourselves to them; to cherish our neighbors, friends, and equals, for that which we receive from them, even by right of exchange. Equite is sociability raised to its ideal by reason and justice; its commonest manifestation is URBANITY or POLITENESS, which, among certain nations, sums up in a single word nearly all the social duties. It is the just distribution of social sympathy and universal love. Now, this feeling is unknown among the beasts, who love and cling to each other, and show their preferences, but who cannot conceive of esteem, and who are incapable of generosity, admiration, or politeness. This feeling does not spring from intelligence, which calculates, computes, and balances, but does not love; which sees, but does not feel. As justice is the product of social instinct and reflection combined, so equite is a product of justice and taste combined--that is, of our powers of judging and of idealizing. This product--the third and last degree of human sociability--is determined by our complex mode of association; in which inequality, or rather the divergence of faculties, and the speciality of functions--tending of themselves to isolate laborers--demand a more active sociability. That is why the force which oppresses while protecting is execrable; why the silly ignorance which views with the same eye the marvels of art, and the products of the rudest industry, excites unutterable contempt; why proud mediocrity, which glories in saying, "I have paid you--I owe you nothing," is especially odious. SOCIABILITY, JUSTICE, EQUITE--such, in its triplicity, is the exact definition of the instinctive faculty which leads us into communication with our fellows, and whose physical manifestation is expressed by the formula: EQUALITY IN NATURAL WEALTH, AND THE PRODUCTS OF LABOR. These three degrees of sociability support and imply each other. Equite cannot exist without justice; society without justice is a solecism. If, in order to reward talent, I take from one to give to another, in unjustly stripping the first, I do not esteem his talent as I ought; if, in society, I award more to myself than to my associate, we are not really associated. Justice is sociability as manifested in the division of material things, susceptible of weight and measure; equite is justice accompanied by admiration and esteem,--things which cannot be measured. From this several inferences may be drawn. 1. Though we are free to grant our esteem to one more than to another, and in all possible degrees, yet we should give no one more than his proportion of the common wealth; because the duty of justice, being imposed upon us before that of equite, must always take precedence of it. The woman honored by the ancients, who, when forced by a tyrant to choose between the death of her brother and that of her husband, sacrificed the latter on the ground that she could find another husband but not another brother,--that woman, I say, in obeying her sense of equite, failed in point of justice, and did a bad deed, because conjugal association is a closer relation than fraternal association, and because the life of our neighbor is not our property. By the same principle, inequality of wages cannot be admitted by law on the ground of inequality of talents; because the just distribution of wealth is the function of economy,--not of enthusiasm. Finally, as regards donations, wills, and inheritance, society, careful both of the personal affections and its own rights, must never permit love and partiality to destroy justice. And, though it is pleasant to think that the son, who has been long associated with his father in business, is more capable than any one else of carrying it on; and that the citizen, who is surprised in the midst of his task by death, is best fitted, in consequence of his natural taste for his occupation, to designate his successor; and though the heir should be allowed the right of choice in case of more than one inheritance,--nevertheless, society can tolerate no concentration of capital and industry for the benefit of a single man, no monopoly of labor, no encroachment. [24] "Suppose that some spoils, taken from the enemy, and equal to twelve, are to be divided between Achilles and Ajax. If the two persons were equal, their respective shares would be arithmetically equal: Achilles would have six, Ajax six. And if we should carry out this arithmetical equality, Thersites would be entitled to as much as Achilles, which would be unjust in the extreme. To avoid this injustice, the worth of the persons should be estimated, and the spoils divided accordingly. Suppose that the worth of Achilles is double that of Ajax: the former's share is eight, the latter four. There is no arithmetical equality, but a proportional equality. It is this comparison of merits, rationum, that Aristotle calls distributive justice. It is a geometrical proportion."--Toullier: French Law according to the Code. Are Achilles and Ajax associated, or are they not? Settle that, and you settle the whole question. If Achilles and Ajax, instead of being associated, are themselves in the service of Agamemnon who pays them, there is no objection to Aristotle's method. The slave-owner, who controls his slaves, may give a double allowance of brandy to him who does double work. That is the law of despotism; the right of slavery. But if Achilles and Ajax are associated, they are equals. What matters it that Achilles has a strength of four, while that of Ajax is only two? The latter may always answer that he is free; that if Achilles has a strength of four, five could kill him; finally, that in doing personal service he incurs as great a risk as Achilles. The same argument applies to Thersites. If he is unable to fight, let him be cook, purveyor, or butler. If he is good for nothing, put him in the hospital. In no case wrong him, or impose upon him laws. Man must live in one of two states: either in society, or out of it. In society, conditions are necessarily equal, except in the degree of esteem and consideration which each one may receive. Out of society, man is so much raw material, a capitalized tool, and often an incommodious and useless piece of furniture. 2. Equite, justice, and society, can exist only between individuals of the same species. They form no part of the relations of different races to each other,--for instance, of the wolf to the goat, of the goat to man, of man to God, much less of God to man. The attribution of justice, equity, and love to the Supreme Being is pure anthropomorphism; and the adjectives just, merciful, pitiful, and the like, should be stricken from our litanies. God can be regarded as just, equitable, and good, only to another God. Now, God has no associate; consequently, he cannot experience social affections,--such as goodness, equite, and justice. Is the shepherd said to be just to his sheep and his dogs? No: and if he saw fit to shear as much wool from a lamb six months old, as from a ram of two years; or, if he required as much work from a young dog as from an old one,--they would say, not that he was unjust, but that he was foolish. Between man and beast there is no society, though there may be affection. Man loves the animals as THINGS,--as SENTIENT THINGS, if you will,--but not as PERSONS. Philosophy, after having eliminated from the idea of God the passions ascribed to him by superstition, will then be obliged to eliminate also the virtues which our liberal piety awards to him. [25] The rights of woman and her relations with man are yet to be determined Matrimonial legislation, like civil legislation, is a matter for the future to settle. If God should come down to earth, and dwell among us, we could not love him unless he became like us; nor give him any thing unless he produced something; nor listen to him unless he proved us mistaken; nor worship him unless he manifested his power. All the laws of our nature, affectional, economical, and intellectual, would prevent us from treating him as we treat our fellow-men,--that is, according to reason, justice, and equite. I infer from this that, if God should wish ever to put himself into immediate communication with man, he would have to become a man. Now, if kings are images of God, and executors of his will, they cannot receive love, wealth, obedience, and glory from us, unless they consent to labor and associate with us--produce as much as they consume, reason with their subjects, and do wonderful things. Still more; if, as some pretend, kings are public functionaries, the love which is due them is measured by their personal amiability; our obligation to obey them, by the wisdom of their commands; and their civil list, by the total social production divided by the number of citizens. Thus, jurisprudence, political economy, and psychology agree in admitting the law of equality. Right and duty--the due reward of talent and labor--the outbursts of love and enthusiasm,--all are regulated in advance by an invariable standard; all depend upon number and balance. Equality of conditions is the law of society, and universal solidarity is the ratification of this law. Equality of conditions has never been realized, thanks to our passions and our ignorance; but our opposition to this law has made it all the more a necessity. To that fact history bears perpetual testimony, and the course of events reveals it to us. Society advances from equation to equation. To the eyes of the economist, the revolutions of empires seem now like the reduction of algebraical quantities, which are inter-deducible; now like the discovery of unknown quantities, induced by the inevitable influence of time. Figures are the providence of history. Undoubtedly there are other elements in human progress; but in the multitude of hidden causes which agitate nations, there is none more powerful or constant, none less obscure, than the periodical explosions of the proletariat against property. Property, acting by exclusion and encroachment, while population was increasing, has been the life-principle and definitive cause of all revolutions. Religious wars, and wars of conquest, when they have stopped short of the extermination of races, have been only accidental disturbances, soon repaired by the mathematical progression of the life of nations. The downfall and death of societies are due to the power of accumulation possessed by property. In the middle ages, take Florence,--a republic of merchants and brokers, always rent by its well-known factions, the Guelphs and Ghibellines, who were, after all, only the people and the proprietors fighting against each other,--Florence, ruled by bankers, and borne down at last by the weight of her debts; [26] in ancient times, take Rome, preyed upon from its birth by usury, flourishing, nevertheless, as long as the known world furnished its terrible proletaires with LABOR stained with blood by civil war at every interval of rest, and dying of exhaustion when the people lost, together with their former energy, their last spark of moral sense; Carthage, a commercial and financial city, continually divided by internal competition; Tyre, Sidon, Jerusalem, Nineveh, Babylon, ruined, in turn, by commercial rivalry and, as we now express it, by panics in the market,--do not these famous examples show clearly enough the fate which awaits modern nations, unless the people, unless France, with a sudden burst of her powerful voice, proclaims in thunder-tones the abolition of the regime of property? Here my task should end. I have proved the right of the poor; I have shown the usurpation of the rich. I demand justice; it is not my business to execute the sentence. If it should be argued--in order to prolong for a few years an illegitimate privilege--that it is not enough to demonstrate equality, that it is necessary also to organize it, and above all to establish it peacefully, I might reply: The welfare of the oppressed is of more importance than official composure. Equality of conditions is a natural law upon which public economy and jurisprudence are based. The right to labor, and the principle of equal distribution of wealth, cannot give way to the anxieties of power. It is not for the proletaire to reconcile the contradictions of the codes, still less to suffer for the errors of the government. On the contrary, it is the duty of the civil and administrative power to reconstruct itself on the basis of political equality. An evil, when known, should be condemned and destroyed. The legislator cannot plead ignorance as an excuse for upholding a glaring iniquity. Restitution should not be delayed. Justice, justice! recognition of right! reinstatement of the proletaire!--when these results are accomplished, then, judges and consuls, you may attend to your police, and provide a government for the Republic! For the rest, I do not think that a single one of my readers accuses me of knowing how to destroy, but of not knowing how to construct. In demonstrating the principle of equality, I have laid the foundation of the social structure I have done more. I have given an example of the true method of solving political and legislative problems. Of the science itself, I confess that I know nothing more than its principle; and I know of no one at present who can boast of having penetrated deeper. Many people cry, "Come to me, and I will teach you the truth!" These people mistake for the truth their cherished opinion and ardent conviction, which is usually any thing but the truth. The science of society--like all human sciences--will be for ever incomplete. The depth and variety of the questions which it embraces are infinite. We hardly know the A B C of this science, as is proved by the fact that we have not yet emerged from the period of systems, and have not ceased to put the authority of the majority in the place of facts. A certain philological society decided linguistic questions by a plurality of votes. Our parliamentary debates--were their results less pernicious--would be even more ridiculous. The task of the true publicist, in the age in which we live, is to close the mouths of quacks and charlatans, and to teach the public to demand demonstrations, instead of being contented with symbols and programmes. Before talking of the science itself, it is necessary to ascertain its object, and discover its method and principle. The ground must be cleared of the prejudices which encumber it. Such is the mission of the nineteenth century. For my part, I have sworn fidelity to my work of demolition, and I will not cease to pursue the truth through the ruins and rubbish. I hate to see a thing half done; and it will be believed without any assurance of mine, that, having dared to raise my hand against the Holy Ark, I shall not rest contented with the removal of the cover. The mysteries of the sanctuary of iniquity must be unveiled, the tables of the old alliance broken, and all the objects of the ancient faith thrown in a heap to the swine. A charter has been given to us,--a resume of political science, the monument of twenty legislatures. A code has been written,--the pride of a conqueror, and the summary of ancient wisdom. Well! of this charter and this code not one article shall be left standing upon another! The time has come for the wise to choose their course, and prepare for reconstruction. But, since a destroyed error necessarily implies a counter-truth, I will not finish this treatise without solving the first problem of political science,--that which receives the attention of all minds. WHEN PROPERTY IS ABOLISHED, WHAT WILL BE THE FORM OF SOCIETY! WILL IT BE COMMUNISM? PART SECOND. % 1.--Of the Causes of our Mistakes. The Origin of Property. The true form of human society cannot be determined until the following question has been solved:-- Property not being our natural condition, how did it gain a foothold? Why has the social instinct, so trustworthy among the animals, erred in the case of man? Why is man, who was born for society, not yet associated? I have said that human society is COMPLEX in its nature. Though this expression is inaccurate, the fact to which it refers is none the less true; namely, the classification of talents and capacities. But who does not see that these talents and capacities, owing to their infinite variety, give rise to an infinite variety of wills, and that the character, the inclinations, and--if I may venture to use the expression--the form of the ego, are necessarily changed; so that in the order of liberty, as in the order of intelligence, there are as many types as individuals, as many characters as heads, whose tastes, fancies, and propensities, being modified by dissimilar ideas, must necessarily conflict? Man, by his nature and his instinct, is predestined to society; but his personality, ever varying, is adverse to it. In societies of animals, all the members do exactly the same things. The same genius directs them; the same will animates them. A society of beasts is a collection of atoms, round, hooked, cubical, or triangular, but always perfectly identical. These personalities do not vary, and we might say that a single ego governs them all. The labors which animals perform, whether alone or in society, are exact reproductions of their character. Just as the swarm of bees is composed of individual bees, alike in nature and equal in value, so the honeycomb is formed of individual cells, constantly and invariably repeated. But man's intelligence, fitted for his social destiny and his personal needs, is of a very different composition, and therefore gives rise to a wonderful variety of human wills. In the bee, the will is constant and uniform, because the instinct which guides it is invariable, and constitutes the animal's whole life and nature. In man, talent varies, and the mind wavers; consequently, his will is multiform and vague. He seeks society, but dislikes constraint and monotony; he is an imitator, but fond of his own ideas, and passionately in love with his works. If, like the bees, every man were born possessed of talent, perfect knowledge of certain kinds, and, in a word, an innate acquaintance with the functions he has to perform, but destitute of reflective and reasoning faculties, society would organize itself. We should see one man plowing a field, another building houses; this one forging metals, that one cutting clothes; and still others storing the products, and superintending their distribution. Each one, without inquiring as to the object of his labor, and without troubling himself about the extent of his task, would obey orders, bring his product, receive his salary, and would then rest for a time; keeping meanwhile no accounts, envious of nobody, and satisfied with the distributor, who never would be unjust to any one. Kings would govern, but would not reign; for to reign is to be a _proprietor a l'engrais_, as Bonaparte said: and having no commands to give, since all would be at their posts, they would serve rather as rallying centres than as authorities or counsellors. It would be a state of ordered communism, but not a society entered into deliberately and freely. But man acquires skill only by observation and experiment. He reflects, then, since to observe and experiment is to reflect; he reasons, since he cannot help reasoning. In reflecting, he becomes deluded; in reasoning, he makes mistakes, and, thinking himself right, persists in them. He is wedded to his opinions; he esteems himself, and despises others. Consequently, he isolates himself; for he could not submit to the majority without renouncing his will and his reason,--that is, without disowning himself, which is impossible. And this isolation, this intellectual egotism, this individuality of opinion, lasts until the truth is demonstrated to him by observation and experience. A final illustration will make these facts still clearer. If to the blind but convergent and harmonious instincts of a swarm of bees should be suddenly added reflection and judgment, the little society could not long exist. In the first place, the bees would not fail to try some new industrial process; for instance, that of making their cells round or square. All sorts of systems and inventions would be tried, until long experience, aided by geometry, should show them that the hexagonal shape is the best. Then insurrections would occur. The drones would be told to provide for themselves, and the queens to labor; jealousy would spread among the laborers; discords would burst forth; soon each one would want to produce on his own account; and finally the hive would be abandoned, and the bees would perish. Evil would be introduced into the honey-producing republic by the power of reflection,--the very faculty which ought to constitute its glory. Thus, moral evil, or, in this case, disorder in society, is naturally explained by our power of reflection. The mother of poverty, crime, insurrection, and war was inequality of conditions; which was the daughter of property, which was born of selfishness, which was engendered by private opinion, which descended in a direct line from the autocracy of reason. Man, in his infancy, is neither criminal nor barbarous, but ignorant and inexperienced. Endowed with imperious instincts which are under the control of his reasoning faculty, at first he reflects but little, and reasons inaccurately; then, benefiting by his mistakes, he rectifies his ideas, and perfects his reason. In the first place, it is the savage sacrificing all his possessions for a trinket, and then repenting and weeping; it is Esau selling his birthright for a mess of pottage, and afterwards wishing to cancel the bargain; it is the civilized workman laboring in insecurity, and continually demanding that his wages be increased, neither he nor his employer understanding that, in the absence of equality, any salary, however large, is always insufficient. Then it is Naboth dying to defend his inheritance; Cato tearing out his entrails that he might not be enslaved; Socrates drinking the fatal cup in defence of liberty of thought; it is the third estate of '89 reclaiming its liberty: soon it will be the people demanding equality of wages and an equal division of the means of production. Man is born a social being,--that is, he seeks equality and justice in all his relations, but he loves independence and praise. The difficulty of satisfying these various desires at the same time is the primary cause of the despotism of the will, and the appropriation which results from it. On the other hand, man always needs a market for his products; unable to compare values of different kinds, he is satisfied to judge approximately, according to his passion and caprice; and he engages in dishonest commerce, which always results in wealth and poverty. Thus, the greatest evils which man suffers arise from the misuse of his social nature, of this same justice of which he is so proud, and which he applies with such deplorable ignorance. The practice of justice is a science which, when once discovered and diffused, will sooner or later put an end to social disorder, by teaching us our rights and duties. This progressive and painful education of our instinct, this slow and imperceptible transformation of our spontaneous perceptions into deliberate knowledge, does not take place among the animals, whose instincts remain fixed, and never become enlightened. "According to Frederic Cuvier, who has so clearly distinguished between instinct and intelligence in animals, 'instinct is a natural and inherent faculty, like feeling, irritability, or intelligence. The wolf and the fox who recognize the traps in which they have been caught, and who avoid them; the dog and the horse, who understand the meaning of several of our words, and who obey us,--thereby show _intelligence_. The dog who hides the remains of his dinner, the bee who constructs his cell, the bird who builds his nest, act only from _instinct_. Even man has instincts: it is a special instinct which leads the new-born child to suck. But, in man, almost every thing is accomplished by intelligence; and intelligence supplements instinct. The opposite is true of animals: their instinct is given them as a supplement to their intelligence.'"--Flourens: Analytical Summary of the Observations of F. Cuvier. "We can form a clear idea of instinct only by admitting that animals have in their _sensorium_, images or innate and constant sensations, which influence their actions in the same manner that ordinary and accidental sensations commonly do. It is a sort of dream, or vision, which always follows them and in all which relates to instinct they may be regarded as somnambulists."--F. Cuvier: Introduction to the Animal Kingdom. Intelligence and instinct being common, then, though in different degrees, to animals and man, what is the distinguishing characteristic of the latter? According to F. Cuvier, it is REFLECTION OR THE POWER OF INTELLECTUALLY CONSIDERING OUR OWN MODIFICATIONS BY A SURVEY OF OURSELVES. This lacks clearness, and requires an explanation. If we grant intelligence to animals, we must also grant them, in some degree, reflection; for, the first cannot exist without the second, as F. Cuvier himself has proved by numerous examples. But notice that the learned observer defines the kind of reflection which distinguishes us from the animals as the POWER OF CONSIDERING OUR OWN MODIFICATIONS. This I shall endeavour to interpret, by developing to the best of my ability the laconism of the philosophical naturalist. The intelligence acquired by animals never modifies the operations which they perform by instinct: it is given them only as a provision against unexpected accidents which might disturb these operations. In man, on the contrary, instinctive action is constantly changing into deliberate action. Thus, man is social by instinct, and is every day becoming social by reflection and choice. At first, he formed his words by instinct;[1] he was a poet by inspiration: to-day, he makes grammar a science, and poetry an art. His conception of God and a future life is spontaneous and instinctive, and his expressions of this conception have been, by turns, monstrous, eccentric, beautiful, comforting, and terrible. All these different creeds, at which the frivolous irreligion of the eighteenth century mocked, are modes of expression of the religious sentiment. Some day, man will explain to himself the character of the God whom he believes in, and the nature of that other world to which his soul aspires. [1] "The problem of the origin of language is solved by the distinction made by Frederic Cuvier between instinct and intelligence. Language is not a premeditated, arbitrary, or conventional device; nor is it communicated or revealed to us by God. Language is an instinctive and unpremeditated creation of man, as the hive is of the bee. In this sense, it may be said that language is not the work of man, since it is not the work of his mind. Further, the mechanism of language seems more wonderful and ingenious when it is not regarded as the result of reflection. This fact is one of the most curious and indisputable which philology has observed. See, among other works, a Latin essay by F. G. Bergmann (Strasbourg, 1839), in which the learned author explains how the phonetic germ is born of sensation; how language passes through three successive stages of development; why man, endowed at birth with the instinctive faculty of creating a language, loses this faculty as fast as his mind develops; and that the study of languages is real natural history,--in fact, a science. France possesses to-day several philologists of the first rank, endowed with rare talents and deep philosophic insight,--modest savants developing a science almost without the knowledge of the public; devoting themselves to studies which are scornfully looked down upon, and seeming to shun applause as much as others seek it." All that he does from instinct man despises; or, if he admires it, it is as Nature's work, not as his own. This explains the obscurity which surrounds the names of early inventors; it explains also our indifference to religious matters, and the ridicule heaped upon religious customs. Man esteems only the products of reflection and of reason. The most wonderful works of instinct are, in his eyes, only lucky GOD-SENDS; he reserves the name DISCOVERY--I had almost said creation--for the works of intelligence. Instinct is the source of passion and enthusiasm; it is intelligence which causes crime and virtue. In developing his intelligence, man makes use of not only his own observations, but also those of others. He keeps an account of his experience, and preserves the record; so that the race, as well as the individual, becomes more and more intelligent. The animals do not transmit their knowledge; that which each individual accumulates dies with him. It is not enough, then, to say that we are distinguished from the animals by reflection, unless we mean thereby the CONSTANT TENDENCY OF OUR INSTINCT TO BECOME INTELLIGENCE. While man is governed by instinct, he is unconscious of his acts. He never would deceive himself, and never would be troubled by errors, evils, and disorder, if, like the animals, instinct were his only guide. But the Creator has endowed us with reflection, to the end that our instinct might become intelligence; and since this reflection and resulting knowledge pass through various stages, it happens that in the beginning our instinct is opposed, rather than guided, by reflection; consequently, that our power of thought leads us to act in opposition to our nature and our end; that, deceiving ourselves, we do and suffer evil, until instinct which points us towards good, and reflection which makes us stumble into evil, are replaced by the science of good and evil, which invariably causes us to seek the one and avoid the other. Thus, evil--or error and its consequences--is the firstborn son of the union of two opposing faculties, instinct and reflection; good, or truth, must inevitably be the second child. Or, to again employ the figure, evil is the product of incest between adverse powers; good will sooner or later be the legitimate child of their holy and mysterious union. Property, born of the reasoning faculty, intrenches itself behind comparisons. But, just as reflection and reason are subsequent to spontaneity, observation to sensation, and experience to instinct, so property is subsequent to communism. Communism--or association in a simple form--is the necessary object and original aspiration of the social nature, the spontaneous movement by which it manifests and establishes itself. It is the first phase of human civilization. In this state of society,--which the jurists have called NEGATIVE COMMUNISM--man draws near to man, and shares with him the fruits of the field and the milk and flesh of animals. Little by little this communism--negative as long as man does not produce--tends to become positive and organic through the development of labor and industry. But it is then that the sovereignty of thought, and the terrible faculty of reasoning logically or illogically, teach man that, if equality is the sine qua non of society, communism is the first species of slavery. To express this idea by an Hegelian formula, I will say: Communism--the first expression of the social nature--is the first term of social development,--the THESIS; property, the reverse of communism, is the second term,--the ANTITHESIS. When we have discovered the third term, the SYNTHESIS, we shall have the required solution. Now, this synthesis necessarily results from the correction of the thesis by the antithesis. Therefore it is necessary, by a final examination of their characteristics, to eliminate those features which are hostile to sociability. The union of the two remainders will give us the true form of human association. % 2.--Characteristics of Communism and of Property. I. I ought not to conceal the fact that property and communism have been considered always the only possible forms of society. This deplorable error has been the life of property. The disadvantages of communism are so obvious that its critics never have needed to employ much eloquence to thoroughly disgust men with it. The irreparability of the injustice which it causes, the violence which it does to attractions and repulsions, the yoke of iron which it fastens upon the will, the moral torture to which it subjects the conscience, the debilitating effect which it has upon society; and, to sum it all up, the pious and stupid uniformity which it enforces upon the free, active, reasoning, unsubmissive personality of man, have shocked common sense, and condemned communism by an irrevocable decree. The authorities and examples cited in its favor disprove it. The communistic republic of Plato involved slavery; that of Lycurgus employed Helots, whose duty it was to produce for their masters, thus enabling the latter to devote themselves exclusively to athletic sports and to war. Even J. J. Rousseau--confounding communism and equality--has said somewhere that, without slavery, he did not think equality of conditions possible. The communities of the early Church did not last the first century out, and soon degenerated into monasteries. In those of the Jesuits of Paraguay, the condition of the blacks is said by all travellers to be as miserable as that of slaves; and it is a fact that the good Fathers were obliged to surround themselves with ditches and walls to prevent their new converts from escaping. The followers of Baboeuf--guided by a lofty horror of property rather than by any definite belief--were ruined by exaggeration of their principles; the St. Simonians, lumping communism and inequality, passed away like a masquerade. The greatest danger to which society is exposed to-day is that of another shipwreck on this rock. Singularly enough, systematic communism--the deliberate negation of property--is conceived under the direct influence of the proprietary prejudice; and property is the basis of all communistic theories. The members of a community, it is true, have no private property; but the community is proprietor, and proprietor not only of the goods, but of the persons and wills. In consequence of this principle of absolute property, labor, which should be only a condition imposed upon man by Nature, becomes in all communities a human commandment, and therefore odious. Passive obedience, irreconcilable with a reflecting will, is strictly enforced. Fidelity to regulations, which are always defective, however wise they may be thought, allows of no complaint. Life, talent, and all the human faculties are the property of the State, which has the right to use them as it pleases for the common good. Private associations are sternly prohibited, in spite of the likes and dislikes of different natures, because to tolerate them would be to introduce small communities within the large one, and consequently private property; the strong work for the weak, although this ought to be left to benevolence, and not enforced, advised, or enjoined; the industrious work for the lazy, although this is unjust; the clever work for the foolish, although this is absurd; and, finally, man--casting aside his personality, his spontaneity, his genius, and his affections--humbly annihilates himself at the feet of the majestic and inflexible Commune! Communism is inequality, but not as property is. Property is the exploitation of the weak by the strong. Communism is the exploitation of the strong by the weak. In property, inequality of conditions is the result of force, under whatever name it be disguised: physical and mental force; force of events, chance, FORTUNE; force of accumulated property, &c. In communism, inequality springs from placing mediocrity on a level with excellence. This damaging equation is repellent to the conscience, and causes merit to complain; for, although it may be the duty of the strong to aid the weak, they prefer to do it out of generosity,--they never will endure a comparison. Give them equal opportunities of labor, and equal wages, but never allow their jealousy to be awakened by mutual suspicion of unfaithfulness in the performance of the common task. Communism is oppression and slavery. Man is very willing to obey the law of duty, serve his country, and oblige his friends; but he wishes to labor when he pleases, where he pleases, and as much as he pleases. He wishes to dispose of his own time, to be governed only by necessity, to choose his friendships, his recreation, and his discipline; to act from judgment, not by command; to sacrifice himself through selfishness, not through servile obligation. Communism is essentially opposed to the free exercise of our faculties, to our noblest desires, to our deepest feelings. Any plan which could be devised for reconciling it with the demands of the individual reason and will would end only in changing the thing while preserving the name. Now, if we are honest truth-seekers, we shall avoid disputes about words. Thus, communism violates the sovereignty of the conscience, and equality: the first, by restricting spontaneity of mind and heart, and freedom of thought and action; the second, by placing labor and laziness, skill and stupidity, and even vice and virtue on an equality in point of comfort. For the rest, if property is impossible on account of the desire to accumulate, communism would soon become so through the desire to shirk. II. Property, in its turn, violates equality by the rights of exclusion and increase, and freedom by despotism. The former effect of property having been sufficiently developed in the last three chapters, I will content myself here with establishing by a final comparison, its perfect identity with robbery. The Latin words for robber are _fur_ and _latro;_ the former taken from the Greek {GREEK m }, from {GREEK m }, Latin _fero_, I carry away; the latter from {GREEK 'i }, I play the part of a brigand, which is derived from {GREEK i }, Latin _lateo_, I conceal myself. The Greeks have also {GREEK ncg }, from {GREEK ncg }, I filch, whose radical consonants are the same as those of {GREEK ' cg }, I cover, I conceal. Thus, in these languages, the idea of a robber is that of a man who conceals, carries away, or diverts, in any manner whatever, a thing which does not belong to him. The Hebrews expressed the same idea by the word _gannab_,--robber,--from the verb _ganab_, which means to put away, to turn aside: _lo thi-gnob (Decalogue: Eighth Commandment_), thou shalt not steal,--that is, thou shalt not hold back, thou shalt not put away any thing for thyself. That is the act of a man who, on entering into a society into which he agrees to bring all that he has, secretly reserves a portion, as did the celebrated disciple Ananias. The etymology of the French verb _voler_ is still more significant. _Voler_, or _faire la vole_ (from the Latin _vola_, palm of the hand), means to take all the tricks in a game of ombre; so that _le voleur_, the robber, is the capitalist who takes all, who gets the lion's share. Probably this verb _voler_ had its origin in the professional slang of thieves, whence it has passed into common use, and, consequently into the phraseology of the law. Robbery is committed in a variety of ways, which have been very cleverly distinguished and classified by legislators according to their heinousness or merit, to the end that some robbers may be honored, while others are punished. We rob,--1. By murder on the highway; 2. Alone, or in a band; 3. By breaking into buildings, or scaling walls; 4. By abstraction; 5. By fraudulent bankruptcy; 6. By forgery of the handwriting of public officials or private individuals; 7. By manufacture of counterfeit money. This species includes all robbers who practise their profession with no other aid than force and open fraud. Bandits, brigands, pirates, rovers by land and sea,--these names were gloried in by the ancient heroes, who thought their profession as noble as it was lucrative. Nimrod, Theseus, Jason and his Argonauts; Jephthah, David, Cacus, Romulus, Clovis and all his Merovingian descendants; Robert Guiscard, Tancred de Hauteville, Bohemond, and most of the Norman heroes,--were brigands and robbers. The heroic character of the robber is expressed in this line from Horace, in reference to Achilles,-- _"Jura neget sibi nata, nihil non arroget armis_," [27] and by this sentence from the dying words of Jacob (Gen. xlviii.), which the Jews apply to David, and the Christians to their Christ: _Manus ejus contra omnes_. In our day, the robber--the warrior of the ancients--is pursued with the utmost vigor. His profession, in the language of the code, entails ignominious and corporal penalties, from imprisonment to the scaffold. A sad change in opinions here below! We rob,--8. By cheating; 9. By swindling; 10. By abuse of trust; 11. By games and lotteries. This second species was encouraged by the laws of Lycurgus, in order to sharpen the wits of the young. It is the kind practised by Ulysses, Solon, and Sinon; by the ancient and modern Jews, from Jacob down to Deutz; and by the Bohemians, the Arabs, and all savage tribes. Under Louis XIII. and Louis XIV., it was not considered dishonorable to cheat at play. To do so was a part of the game; and many worthy people did not scruple to correct the caprice of Fortune by dexterous jugglery. To-day even, and in all countries, it is thought a mark of merit among peasants, merchants, and shopkeepers to KNOW HOW TO MAKE A BARGAIN,--that is, to deceive one's man. This is so universally accepted, that the cheated party takes no offence. It is known with what reluctance our government resolved upon the abolition of lotteries. It felt that it was dealing a stab thereby at property. The pickpocket, the blackleg, and the charlatan make especial use of their dexterity of hand, their subtlety of mind, the magic power of their eloquence, and their great fertility of invention. Sometimes they offer bait to cupidity. Therefore the penal code--which much prefers intelligence to muscular vigor--has made, of the four varieties mentioned above, a second category, liable only to correctional, not to Ignominious, punishments. Let them now accuse the law of being materialistic and atheistic. We rob,--12. By usury. This species of robbery, so odious and so severely punished since the publication of the Gospel, is the connecting link between forbidden and authorized robbery. Owing to its ambiguous nature, it has given rise to a multitude of contradictions in the laws and in morals,--contradictions which have been very cleverly turned to account by lawyers, financiers, and merchants. Thus the usurer, who lends on mortgage at ten, twelve, and fifteen per cent., is heavily fined when detected; while the banker, who receives the same interest (not, it is true, upon a loan, but in the way of exchange or discount,--that is, of sale), is protected by royal privilege. But the distinction between the banker and the usurer is a purely nominal one. Like the usurer, who lends on property, real or personal, the banker lends on business paper; like the usurer, he takes his interest in advance; like the usurer, he can recover from the borrower if the property is destroyed (that is, if the note is not redeemed),--a circumstance which makes him a money-lender, not a money-seller. But the banker lends for a short time only, while the usurer's loan may be for one, two, three, or more years. Now, a difference in the duration of the loan, or the form of the act, does not alter the nature of the transaction. As for the capitalists who invest their money, either with the State or in commercial operations, at three, four, and five per cent.,--that is, who lend on usury at a little lower rate than the bankers and usurers,--they are the flower of society, the cream of honesty! Moderation in robbery is the height of virtue! [28] But what, then, is usury? Nothing is more amusing than to see these INSTRUCTORS OF NATIONS hesitate between the authority of the Gospel, which, they say, NEVER CAN HAVE SPOKEN IN VAIN, and the authority of economical demonstrations. Nothing, to my mind, is more creditable to the Gospel than this old infidelity of its pretended teachers. Salmasius, having assimilated interest to rent, was REFUTED by Grotius, Pufendorf, Burlamaqui, Wolf, and Heineccius; and, what is more curious still, Salmasius ADMITTED HIS ERROR. Instead of inferring from this doctrine of Salmasius that all increase is illegitimate, and proceeding straight on to the demonstration of Gospel equality, they arrived at just the opposite conclusion; namely, that since everybody acknowledges that rent is permissible, if we allow that interest does not differ from rent, there is nothing left which can be called usury, and, consequently, that the commandment of Jesus Christ is an ILLUSION, and amounts to NOTHING, which is an impious conclusion. If this memoir had appeared in the time of Bossuet, that great theologian would have PROVED by scripture, the fathers, traditions, councils, and popes, that property exists by Divine right, while usury is an invention of the devil; and the heretical work would have been burned, and the author imprisoned. We rob,--13. By farm-rent, house-rent, and leases of all kinds. The author of the "Provincial Letters" entertained the honest Christians of the seventeenth century at the expense of Escobar, the Jesuit, and the contract Mohatra. "The contract Mohatra," said Escobar, "is a contract by which goods are bought, at a high price and on credit, to be again sold at the same moment to the same person, cash down, and at a lower price." Escobar found a way to justify this kind of usury. Pascal and all the Jansenists laughed at him. But what would the satirical Pascal, the learned Nicole, and the invincible Arnaud have said, if Father Antoine Escobar de Valladolid had answered them thus: "A lease is a contract by which real estate is bought, at a high price and on credit, to be again sold, at the expiration of a certain time, to the same person, at a lower price; only, to simplify the transaction, the buyer is content to pay the difference between the first sale and the second. Either deny the identity of the lease and the contract Mohatra, and then I will annihilate you in a moment; or, if you admit the similarity, admit also the soundness of my doctrine: otherwise you proscribe both interest and rent at one blow"? In reply to this overwhelming argument of the Jesuit, the sire of Montalte would have sounded the tocsin, and would have shouted that society was in peril,--that the Jesuits were sapping its very foundations. We rob,--14. By commerce, when the profit of the merchant exceeds his legitimate salary. Everybody knows the definition of commerce--THE ART OF BUYING FOR THREE FRANCS THAT WHICH IS WORTH SIX, AND OF SELLING FOR SIX THAT WHICH IS WORTH THREE. Between commerce thus defined and _vol a l'americaine_, the only difference is in the relative proportion of the values exchanged,--in short, in the amount of the profit. We rob,--15. By making profit on our product, by accepting sinecures, and by exacting exorbitant wages. The farmer, who sells a certain amount of corn to the consumer, and who during the measurement thrusts his hand into the bushel and takes out a handful of grains, robs; the professor, whose lectures are paid for by the State, and who through the intervention of a bookseller sells them to the public a second time, robs; the sinecurist, who receives an enormous product in exchange for his vanity, robs; the functionary, the laborer, whatever he may be, who produces only one and gets paid four, one hundred, or one thousand, robs; the publisher of this book, and I, its author,--we rob, by charging for it twice as much as it is worth. In recapitulation:-- Justice, after passing through the state of negative communism, called by the ancient poets the AGE OF GOLD, commences as the right of the strongest. In a society which is trying to organize itself, inequality of faculties calls up the idea of merit; equite suggests the plan of proportioning not only esteem, but also material comforts, to personal merit; and since the highest and almost the only merit then recognized is physical strength, the strongest, {GREEK ' eg }, and consequently the best, {GREEK ' eg }, is entitled to the largest share; and if it is refused him, he very naturally takes it by force. From this to the assumption of the right of property in all things, it is but one step. Such was justice in the heroic age, preserved, at least by tradition, among the Greeks and Romans down to the last days of their republics. Plato, in the "Gorgias," introduces a character named Callicles, who spiritedly defends the right of the strongest, which Socrates, the advocate of equality, {GREEK g e }, seriously refutes. It is related of the great Pompey, that he blushed easily, and, nevertheless, these words once escaped his lips: "Why should I respect the laws, when I have arms in my hand?" This shows him to have been a man in whom the moral sense and ambition were struggling for the mastery, and who sought to justify his violence by the motto of the hero and the brigand. From the right of the strongest springs the exploitation of man by man, or bondage; usury, or the tribute levied upon the conquered by the conqueror; and the whole numerous family of taxes, duties, monarchical prerogatives, house-rents, farm-rents, &c.; in one word,--property. Force was followed by artifice, the second manifestation of justice, which was detested by the ancient heroes, who, not excelling in that direction, were heavy losers by it. Force was still employed, but mental force instead of physical. Skill in deceiving an enemy by treacherous propositions seemed deserving of reward; nevertheless, the strong always prided themselves upon their honesty. In those days, oaths were observed and promises kept according to the letter rather than the spirit: _Uti lingua nuncupassit, ita jus esto_,--"As the tongue has spoken, so must the right be," says the law of the Twelve Tables. Artifice, or rather perfidy, was the main element in the politics of ancient Rome. Among other examples, Vico cites the following, also quoted by Montesquieu: The Romans had guaranteed to the Carthaginians the preservation of their goods and their CITY,--intentionally using the word civitas, that is, the society, the State; the Carthaginians, on the contrary, understood them to mean the material city, urbs, and accordingly began to rebuild their walls. They were immediately attacked on account of their violation of the treaty, by the Romans, who, acting upon the old heroic idea of right, did not imagine that, in taking advantage of an equivocation to surprise their enemies, they were waging unjust war. From artifice sprang the profits of manufactures, commerce, and banking, mercantile frauds, and pretensions which are honored with the beautiful names of TALENT and GENIUS, but which ought to be regarded as the last degree of knavery and deception; and, finally, all sorts of social inequalities. In those forms of robbery which are prohibited by law, force and artifice are employed alone and undisguised; in the authorized forms, they conceal themselves within a useful product, which they use as a tool to plunder their victim. The direct use of violence and stratagem was early and universally condemned; but no nation has yet got rid of that kind of robbery which acts through talent, labor, and possession, and which is the source of all the dilemmas of casuistry and the innumerable contradictions of jurisprudence. The right of force and the right of artifice--glorified by the rhapsodists in the poems of the "Iliad" and the "Odyssey"--inspired the legislation of the Greeks and Romans, from which they passed into our morals and codes. Christianity has not changed at all. The Gospel should not be blamed, because the priests, as stupid as the legists, have been unable either to expound or to understand it. The ignorance of councils and popes upon all questions of morality is equal to that of the market-place and the money-changers; and it is this utter ignorance of right, justice, and society, which is killing the Church, and discrediting its teachings for ever. The infidelity of the Roman church and other Christian churches is flagrant; all have disregarded the precept of Jesus; all have erred in moral and doctrinal points; all are guilty of teaching false and absurd dogmas, which lead straight to wickedness and murder. Let it ask pardon of God and men,--this church which called itself infallible, and which has grown so corrupt in morals; let its reformed sisters humble themselves,... and the people, undeceived, but still religious and merciful, will begin to think. [29] One of the main causes of Ireland's poverty to-day is the immense revenues of the English clergy. So heretics and orthodox--Protestants and Papists--cannot reproach each other. All have strayed from the path of justice; all have disobeyed the eighth commandment of the Decalogue: "Thou shalt not steal." The development of right has followed the same order, in its various expressions, that property has in its forms. Every where we see justice driving robbery before it and confining it within narrower and narrower limits. Hitherto the victories of justice over injustice, and of equality over inequality, have been won by instinct and the simple force of things; but the final triumph of our social nature will be due to our reason, or else we shall fall back into feudal chaos. Either this glorious height is reserved for our intelligence, or this miserable depth for our baseness. The second effect of property is despotism. Now, since despotism is inseparably connected with the idea of legitimate authority, in explaining the natural causes of the first, the principle of the second will appear. What is to be the form of government in the future? hear some of my younger readers reply: "Why, how can you ask such a question? "You are a republican." "A republican! Yes; but that word specifies nothing. _Res publica;_ that is, the public thing. Now, whoever is interested in public affairs--no matter under what form of government--may call himself a republican. Even kings are republicans."-- "Well! you are a democrat?"--"No."--"What! you would have a monarchy."--"No."--"A constitutionalist?"--"God forbid!"--"You are then an aristocrat?"--"Not at all."--"You want a mixed government?"--"Still less."--"What are you, then?"--"I am an anarchist." "Oh! I understand you; you speak satirically. This is a hit at the government."--"By no means. I have just given you my serious and well-considered profession of faith. Although a firm friend of order, I am (in the full force of the term) an anarchist. Listen to me." In all species of sociable animals, "the weakness of the young is the principle of their obedience to the old," who are strong; and from habit, which is a kind of conscience with them, the power remains with the oldest, although he finally becomes the weakest. Whenever the society is under the control of a chief, this chief is almost always the oldest of the troop. I say almost always, because the established order may be disturbed by violent outbreaks. Then the authority passes to another; and, having been re-established by force, it is again maintained by habit. Wild horses go in herds: they have a chief who marches at their head, whom they confidently follow, and who gives the signal for flight or battle. "The sheep which we have raised follows us, but it follows in company with the flock in the midst of which it was born. It regards man AS THE CHIEF OF ITS FLOCK.... Man is regarded by domestic animals as a member of their society. All that he has to do is to get himself accepted by them as an associate: he soon becomes their chief, in consequence of his superior intelligence. He does not, then, change the NATURAL CONDITION of these animals, as Buffon has said. On the contrary, he uses this natural condition to his own advantage; in other words, he finds SOCIABLE animals, and renders them DOMESTIC by becoming their associate and chief. Thus, the DOMESTICITY of animals is only a special condition, a simple modification, a definitive consequence of their SOCIABILITY. All domestic animals are by nature sociable animals."...--Flourens: Summary of the Observations of F. Cuvier. Sociable animals follow their chief by INSTINCT; but take notice of the fact (which F. Cuvier omitted to state), that the function of the chief is altogether one of INTELLIGENCE. The chief does not teach the others to associate, to unite under his lead, to reproduce their kind, to take to flight, or to defend themselves. Concerning each of these particulars, his subordinates are as well informed as he. But it is the chief who, by his accumulated experience, provides against accidents; he it is whose private intelligence supplements, in difficult situations, the general instinct; he it is who deliberates, decides, and leads; he it is, in short, whose enlightened prudence regulates the public routine for the greatest good of all. Man (naturally a sociable being) naturally follows a chief. Originally, the chief is the father, the patriarch, the elder; in other words, the good and wise man, whose functions, consequently, are exclusively of a reflective and intellectual nature. The human race--like all other races of sociable animals--has its instincts, its innate faculties, its general ideas, and its categories of sentiment and reason. Its chiefs, legislators, or kings have devised nothing, supposed nothing, imagined nothing. They have only guided society by their accumulated experience, always however in conformity with opinions and beliefs. Those philosophers who (carrying into morals and into history their gloomy and factious whims) affirm that the human race had originally neither chiefs nor kings, know nothing of the nature of man. Royalty, and absolute royalty, is--as truly and more truly than democracy--a primitive form of government. Perceiving that, in the remotest ages, crowns and kingships were worn by heroes, brigands, and knight-errants, they confound the two things,--royalty and despotism. But royalty dates from the creation of man; it existed in the age of negative communism. Ancient heroism (and the despotism which it engendered) commenced only with the first manifestation of the idea of justice; that is, with the reign of force. As soon as the strongest, in the comparison of merits, was decided to be the best, the oldest had to abandon his position, and royalty became despotic. The spontaneous, instinctive, and--so to speak--physiological origin of royalty gives it, in the beginning, a superhuman character. The nations connected it with the gods, from whom they said the first kings descended. This notion was the origin of the divine genealogies of royal families, the incarnations of gods, and the messianic fables. From it sprang the doctrine of divine right, which is still championed by a few singular characters. Royalty was at first elective, because--at a time when man produced but little and possessed nothing--property was too weak to establish the principle of heredity, and secure to the son the throne of his father; but as soon as fields were cleared, and cities built, each function was, like every thing else, appropriated, and hereditary kingships and priesthoods were the result. The principle of heredity was carried into even the most ordinary professions,--a circumstance which led to class distinctions, pride of station, and abjection of the common people, and which confirms my assertion, concerning the principle of patrimonial succession, that it is a method suggested by Nature of filling vacancies in business, and completing unfinished tasks. From time to time, ambition caused usurpers, or SUPPLANTERS of kings, to start up; and, in consequence, some were called kings by right, or legitimate kings, and others TYRANTS. But we must not let these names deceive us. There have been execrable kings, and very tolerable tyrants. Royalty may always be good, when it is the only possible form of government; legitimate it is never. Neither heredity, nor election, nor universal suffrage, nor the excellence of the sovereign, nor the consecration of religion and of time, can make royalty legitimate. Whatever form it takes,--monarchic, oligarchic, or democratic,--royalty, or the government of man by man, is illegitimate and absurd. Man, in order to procure as speedily as possible the most thorough satisfaction of his wants, seeks RULE. In the beginning, this rule is to him living, visible, and tangible. It is his father, his master, his king. The more ignorant man is, the more obedient he is, and the more absolute is his confidence in his guide. But, it being a law of man's nature to conform to rule,--that is, to discover it by his powers of reflection and reason,--man reasons upon the commands of his chiefs. Now, such reasoning as that is a protest against authority,--a beginning of disobedience. At the moment that man inquires into the motives which govern the will of his sovereign,--at that moment man revolts. If he obeys no longer because the king commands, but because the king demonstrates the wisdom of his commands, it may be said that henceforth he will recognize no authority, and that he has become his own king. Unhappy he who shall dare to command him, and shall offer, as his authority, only the vote of the majority; for, sooner or later, the minority will become the majority, and this imprudent despot will be overthrown, and all his laws annihilated. In proportion as society becomes enlightened, royal authority diminishes. That is a fact to which all history bears witness. At the birth of nations, men reflect and reason in vain. Without methods, without principles, not knowing how to use their reason, they cannot judge of the justice of their conclusions. Then the authority of kings is immense, no knowledge having been acquired with which to contradict it. But, little by little, experience produces habits, which develop into customs; then the customs are formulated in maxims, laid down as principles,--in short, transformed into laws, to which the king, the living law, has to bow. There comes a time when customs and laws are so numerous that the will of the prince is, so to speak, entwined by the public will; and that, on taking the crown, he is obliged to swear that he will govern in conformity with established customs and usages; and that he is but the executive power of a society whose laws are made independently of him. Up to this point, all is done instinctively, and, as it were, unconsciously; but see where this movement must end. By means of self-instruction and the acquisition of ideas, man finally acquires the idea of SCIENCE,--that is, of a system of knowledge in harmony with the reality of things, and inferred from observation. He searches for the science, or the system, of inanimate bodies,--the system of organic bodies, the system of the human mind, and the system of the universe: why should he not also search for the system of society? But, having reached this height, he comprehends that political truth, or the science of politics, exists quite independently of the will of sovereigns, the opinion of majorities, and popular beliefs,--that kings, ministers, magistrates, and nations, as wills, have no connection with the science, and are worthy of no consideration. He comprehends, at the same time, that, if man is born a sociable being, the authority of his father over him ceases on the day when, his mind being formed and his education finished, he becomes the associate of his father; that his true chief and his king is the demonstrated truth; that politics is a science, not a stratagem; and that the function of the legislator is reduced, in the last analysis, to the methodical search for truth. Thus, in a given society, the authority of man over man is inversely proportional to the stage of intellectual development which that society has reached; and the probable duration of that authority can be calculated from the more or less general desire for a true government,--that is, for a scientific government. And just as the right of force and the right of artifice retreat before the steady advance of justice, and must finally be extinguished in equality, so the sovereignty of the will yields to the sovereignty of the reason, and must at last be lost in scientific socialism. Property and royalty have been crumbling to pieces ever since the world began. As man seeks justice in equality, so society seeks order in anarchy. ANARCHY,--the absence of a master, of a sovereign, [30]--such is the form of government to which we are every day approximating, and which our accustomed habit of taking man for our rule, and his will for law, leads us to regard as the height of disorder and the expression of chaos. The story is told, that a citizen of Paris in the seventeenth century having heard it said that in Venice there was no king, the good man could not recover from his astonishment, and nearly died from laughter at the mere mention of so ridiculous a thing. So strong is our prejudice. As long as we live, we want a chief or chiefs; and at this very moment I hold in my hand a brochure, whose author--a zealous communist--dreams, like a second Marat, of the dictatorship. The most advanced among us are those who wish the greatest possible number of sovereigns,--their most ardent wish is for the royalty of the National Guard. Soon, undoubtedly, some one, jealous of the citizen militia, will say, "Everybody is king." But, when he has spoken, I will say, in my turn, "Nobody is king; we are, whether we will or no, associated." Every question of domestic politics must be decided by departmental statistics; every question of foreign politics is an affair of international statistics. The science of government rightly belongs to one of the sections of the Academy of Sciences, whose permanent secretary is necessarily prime minister; and, since every citizen may address a memoir to the Academy, every citizen is a legislator. But, as the opinion of no one is of any value until its truth has been proven, no one can substitute his will for reason,--nobody is king. All questions of legislation and politics are matters of science, not of opinion. The legislative power belongs only to the reason, methodically recognized and demonstrated. To attribute to any power whatever the right of veto or of sanction, is the last degree of tyranny. Justice and legality are two things as independent of our approval as is mathematical truth. To compel, they need only to be known; to be known, they need only to be considered and studied. What, then, is the nation, if it is not the sovereign,--if it is not the source of the legislative power? The nation is the guardian of the law--the nation is the EXECUTIVE POWER. Every citizen may assert: "This is true; that is just;" but his opinion controls no one but himself. That the truth which he proclaims may become a law, it must be recognized. Now, what is it to recognize a law? It is to verify a mathematical or a metaphysical calculation; it is to repeat an experiment, to observe a phenomenon, to establish a fact. Only the nation has the right to say, "Be it known and decreed." I confess that this is an overturning of received ideas, and that I seem to be attempting to revolutionize our political system; but I beg the reader to consider that, having begun with a paradox, I must, if I reason correctly, meet with paradoxes at every step, and must end with paradoxes. For the rest, I do not see how the liberty of citizens would be endangered by entrusting to their hands, instead of the pen of the legislator, the sword of the law. The executive power, belonging properly to the will, cannot be confided to too many proxies. That is the true sovereignty of the nation. [31] The proprietor, the robber, the hero, the sovereign--for all these titles are synonymous--imposes his will as law, and suffers neither contradiction nor control; that is, he pretends to be the legislative and the executive power at once. Accordingly, the substitution of the scientific and true law for the royal will is accomplished only by a terrible struggle; and this constant substitution is, after property, the most potent element in history, the most prolific source of political disturbances. Examples are too numerous and too striking to require enumeration. Now, property necessarily engenders despotism,--the government of caprice, the reign of libidinous pleasure. That is so clearly the essence of property that, to be convinced of it, one need but remember what it is, and observe what happens around him. Property is the right to USE and ABUSE. If, then, government is economy,--if its object is production and consumption, and the distribution of labor and products,--how is government possible while property exists? And if goods are property, why should not the proprietors be kings, and despotic kings--kings in proportion to their _facultes bonitaires_? And if each proprietor is sovereign lord within the sphere of his property, absolute king throughout his own domain, how could a government of proprietors be any thing but chaos and confusion? % 3.--Determination of the third form of Society. Conclusion. Then, no government, no public economy, no administration, is possible, which is based upon property. Communism seeks EQUALITY and LAW. Property, born of the sovereignty of the reason, and the sense of personal merit, wishes above all things INDEPENDENCE and PROPORTIONALITY. But communism, mistaking uniformity for law, and levelism for equality, becomes tyrannical and unjust. Property, by its despotism and encroachments, soon proves itself oppressive and anti-social. The objects of communism and property are good--their results are bad. And why? Because both are exclusive, and each disregards two elements of society. Communism rejects independence and proportionality; property does not satisfy equality and law. Now, if we imagine a society based upon these four principles,--equality, law, independence, and proportionality,--we find:-- 1. That EQUALITY, consisting only in EQUALITY OF CONDITIONS, that is, OF MEANS, and not in EQUALITY OF COMFORT,--which it is the business of the laborers to achieve for themselves, when provided with equal means,--in no way violates justice and equite. 2. That LAW, resulting from the knowledge of facts, and consequently based upon necessity itself, never clashes with independence. 3. That individual INDEPENDENCE, or the autonomy of the private reason, originating in the difference in talents and capacities, can exist without danger within the limits of the law. 4. That PROPORTIONALITY, being admitted only in the sphere of intelligence and sentiment, and not as regards material objects, may be observed without violating justice or social equality. This third form of society, the synthesis of communism and property, we will call LIBERTY. [32] In determining the nature of liberty, we do not unite communism and property indiscriminately; such a process would be absurd eclecticism. We search by analysis for those elements in each which are true, and in harmony with the laws of Nature and society, disregarding the rest altogether; and the result gives us an adequate expression of the natural form of human society,--in one word, liberty. Liberty is equality, because liberty exists only in society; and in the absence of equality there is no society. Liberty is anarchy, because it does not admit the government of the will, but only the authority of the law; that is, of necessity. Liberty is infinite variety, because it respects all wills within the limits of the law. Liberty is proportionality, because it allows the utmost latitude to the ambition for merit, and the emulation of glory. We can now say, in the words of M. Cousin: "Our principle is true; it is good, it is social; let us not fear to push it to its ultimate." Man's social nature becoming JUSTICE through reflection, EQUITE through the classification of capacities, and having LIBERTY for its formula, is the true basis of morality,--the principle and regulator of all our actions. This is the universal motor, which philosophy is searching for, which religion strengthens, which egotism supplants, and whose place pure reason never can fill. DUTY and RIGHT are born of NEED, which, when considered in connection with others, is a RIGHT, and when considered in connection with ourselves, a DUTY. We need to eat and sleep. It is our right to procure those things which are necessary to rest and nourishment. It is our duty to use them when Nature requires it. We need to labor in order to live. To do so is both our right and our duty. We need to love our wives and children. It is our duty to protect and support them. It is our right to be loved in preference to all others. Conjugal fidelity is justice. Adultery is high treason against society. We need to exchange our products for other products. It is our right that this exchange should be one of equivalents; and since we consume before we produce, it would be our duty, if we could control the matter, to see to it that our last product shall follow our last consumption. Suicide is fraudulent bankruptcy. We need to live our lives according to the dictates of our reason. It is our right to maintain our freedom. It is our duty to respect that of others. We need to be appreciated by our fellows. It is our duty to deserve their praise. It is our right to be judged by our works. Liberty is not opposed to the rights of succession and bequest. It contents itself with preventing violations of equality. "Choose," it tells us, "between two legacies, but do not take them both." All our legislation concerning transmissions, entailments, adoptions, and, if I may venture to use such a word, COADJUTORERIES, requires remodelling. Liberty favors emulation, instead of destroying it. In social equality, emulation consists in accomplishing under like conditions; it is its own reward. No one suffers by the victory. Liberty applauds self-sacrifice, and honors it with its votes, but it can dispense with it. Justice alone suffices to maintain the social equilibrium. Self-sacrifice is an act of supererogation. Happy, however, the man who can say, "I sacrifice myself." [33] Liberty is essentially an organizing force. To insure equality between men and peace among nations, agriculture and industry, and the centres of education, business, and storage, must be distributed according to the climate and the geographical position of the country, the nature of the products, the character and natural talents of the inhabitants, &c., in proportions so just, so wise, so harmonious, that in no place shall there ever be either an excess or a lack of population, consumption, and products. There commences the science of public and private right, the true political economy. It is for the writers on jurisprudence, henceforth unembarrassed by the false principle of property, to describe the new laws, and bring peace upon earth. Knowledge and genius they do not lack; the foundation is now laid for them. [34] I have accomplished my task; property is conquered, never again to arise. Wherever this work is read and discussed, there will be deposited the germ of death to property; there, sooner or later, privilege and servitude will disappear, and the despotism of will will give place to the reign of reason. What sophisms, indeed, what prejudices (however obstinate) can stand before the simplicity of the following propositions:-- I. Individual POSSESSION [35] is the condition of social life; five thousand years of property demonstrate it. PROPERTY is the suicide of society. Possession is a right; property is against right. Suppress property while maintaining possession, and, by this simple modification of the principle, you will revolutionize law, government, economy, and institutions; you will drive evil from the face of the earth. II. All having an equal right of occupancy, possession varies with the number of possessors; property cannot establish itself. III. The effect of labor being the same for all, property is lost in the common prosperity. IV. All human labor being the result of collective force, all property becomes, in consequence, collective and unitary. To speak more exactly, labor destroys property. V. Every capacity for labor being, like every instrument of labor, an accumulated capital, and a collective property, inequality of wages and fortunes (on the ground of inequality of capacities) is, therefore, injustice and robbery. VI. The necessary conditions of commerce are the liberty of the contracting parties and the equivalence of the products exchanged. Now, value being expressed by the amount of time and outlay which each product costs, and liberty being inviolable, the wages of laborers (like their rights and duties) should be equal. VII. Products are bought only by products. Now, the condition of all exchange being equivalence of products, profit is impossible and unjust. Observe this elementary principle of economy, and pauperism, luxury, oppression, vice, crime, and hunger will disappear from our midst. VIII. Men are associated by the physical and mathematical law of production, before they are voluntarily associated by choice. Therefore, equality of conditions is demanded by justice; that is, by strict social law: esteem, friendship, gratitude, admiration, all fall within the domain of EQUITABLE or PROPORTIONAL law only. IX. Free association, liberty--whose sole function is to maintain equality in the means of production and equivalence in exchanges--is the only possible, the only just, the only true form of society. X. Politics is the science of liberty. The government of man by man (under whatever name it be disguised) is oppression. Society finds its highest perfection in the union of order with anarchy. The old civilization has run its race; a new sun is rising, and will soon renew the face of the earth. Let the present generation perish, let the old prevaricators die in the desert! the holy earth shall not cover their bones. Young man, exasperated by the corruption of the age, and absorbed in your zeal for justice!--if your country is dear to you, and if you have the interests of humanity at heart, have the courage to espouse the cause of liberty! Cast off your old selfishness, and plunge into the rising flood of popular equality! There your regenerate soul will acquire new life and vigor; your enervated genius will recover unconquerable energy; and your heart, perhaps already withered, will be rejuvenated! Every thing will wear a different look to your illuminated vision; new sentiments will engender new ideas within you; religion, morality, poetry, art, language will appear before you in nobler and fairer forms; and thenceforth, sure of your faith, and thoughtfully enthusiastic, you will hail the dawn of universal regeneration! And you, sad victims of an odious law!--you, whom a jesting world despoils and outrages!--you, whose labor has always been fruitless, and whose rest has been without hope,--take courage! your tears are numbered! The fathers have sown in affliction, the children shall reap in rejoicings! O God of liberty! God of equality! Thou who didst place in my heart the sentiment of justice, before my reason could comprehend it, hear my ardent prayer! Thou hast dictated all that I have written; Thou hast shaped my thought; Thou hast directed my studies; Thou hast weaned my mind from curiosity and my heart from attachment, that I might publish Thy truth to the master and the slave. I have spoken with what force and talent Thou hast given me: it is Thine to finish the work. Thou knowest whether I seek my welfare or Thy glory, O God of liberty! Ah! perish my memory, and let humanity be free! Let me see from my obscurity the people at last instructed; let noble teachers enlighten them; let generous spirits guide them! Abridge, if possible, the time of our trial; stifle pride and avarice in equality; annihilate this love of glory which enslaves us; teach these poor children that in the bosom of liberty there are neither heroes nor great men! Inspire the powerful man, the rich man, him whose name my lips shall never pronounce in Thy presence, with a horror of his crimes; let him be the first to apply for admission to the redeemed society; let the promptness of his repentance be the ground of his forgiveness! Then, great and small, wise and foolish, rich and poor, will unite in an ineffable fraternity; and, singing in unison a new hymn, will rebuild Thy altar, O God of liberty and equality! END OF FIRST MEMOIR. WHAT IS PROPERTY? SECOND MEMOIR A LETTER TO M. BLANQUI. SECOND MEMOIR. PARIS, April 1, 1841. MONSIEUR,-- Before resuming my "Inquiries into Government and Property," it is fitting, for the satisfaction of some worthy people, and also in the interest of order, that I should make to you a plain, straightforward explanation. In a much-governed State, no one would be allowed to attack the external form of the society, and the groundwork of its institutions, until he had established his right to do so,--first, by his morality; second, by his capacity; and, third, by the purity of his intentions. Any one who, wishing to publish a treatise upon the constitution of the country, could not satisfy this threefold condition, would be obliged to procure the endorsement of a responsible patron possessing the requisite qualifications. But we Frenchmen have the liberty of the press. This grand right--the sword of thought, which elevates the virtuous citizen to the rank of legislator, and makes the malicious citizen an agent of discord--frees us from all preliminary responsibility to the law; but it does not release us from our internal obligation to render a public account of our sentiments and thoughts. I have used, in all its fulness, and concerning an important question, the right which the charter grants us. I come to-day, sir, to submit my conscience to your judgment, and my feeble insight to your discriminating reason. You have criticised in a kindly spirit--I had almost said with partiality for the writer--a work which teaches a doctrine that you thought it your duty to condemn. "The Academy of Moral and Political Sciences," said you in your report, "can accept the conclusions of the author only as far as it likes." I venture to hope, sir, that, after you have read this letter, if your prudence still restrains you, your fairness will induce you to do me justice. MEN, EQUAL IN THE DIGNITY OF THEIR PERSONS AND EQUAL BEFORE THE LAW, SHOULD BE EQUAL IN THEIR CONDITIONS,--such is the thesis which I maintained and developed in a memoir bearing the title, "What is Property? or, An Inquiry into the Principle of Right and of Government." The idea of social equality, even in individual fortunes, has in all ages besieged, like a vague presentiment, the human imagination. Poets have sung of it in their hymns; philosophers have dreamed of it in their Utopias; priests teach it, but only for the spiritual world. The people, governed by it, never have had faith in it; and the civil power is never more disturbed than by the fables of the age of gold and the reign of Astrea. A year ago, however, this idea received a scientific demonstration, which has not yet been satisfactorily answered, and, permit me to add, never will be. This demonstration, owing to its slightly impassioned style, its method of reasoning,--which was so at variance with that employed by the generally recognized authorities,--and the importance and novelty of its conclusions, was of a nature to cause some alarm; and might have been dangerous, had it not been--as you, sir, so well said--a sealed letter, so far as the general public was concerned, addressed only to men of intelligence. I was glad to see that through its metaphysical dress you recognized the wise foresight of the author; and I thank you for it. May God grant that my intentions, which are wholly peaceful, may never be charged upon me as treasonable! Like a stone thrown into a mass of serpents, the First Memoir on Property excited intense animosity, and aroused the passions of many. But, while some wished the author and his work to be publicly denounced, others found in them simply the solution of the fundamental problems of society; a few even basing evil speculations upon the new light which they had obtained. It was not to be expected that a system of inductions abstractly gathered together, and still more abstractly expressed, would be understood with equal accuracy in its ensemble and in each of its parts. To find the law of equality, no longer in charity and self-sacrifice (which are not binding in their nature), but in justice; to base equality of functions upon equality of persons; to determine the absolute principle of exchange; to neutralize the inequality of individual faculties by collective force; to establish an equation between property and robbery; to change the law of succession without destroying the principle; to maintain the human personality in a system of absolute association, and to save liberty from the chains of communism; to synthetize the monarchical and democratic forms of government; to reverse the division of powers; to give the executive power to the nation, and to make legislation a positive, fixed, and absolute science,--what a series of paradoxes! what a string of delusions! if I may not say, what a chain of truths! But it is not my purpose here to pass upon the theory of the right of possession. I discuss no dogmas. My only object is to justify my views, and to show that, in writing as I did, I not only exercised a right, but performed a duty. Yes, I have attacked property, and shall attack it again; but, sir, before demanding that I shall make the amende honorable for having obeyed my conscience and spoken the exact truth, condescend, I beg of you, to cast a glance at the events which are happening around us; look at our deputies, our magistrates, our philosophers, our ministers, our professors, and our publicists; examine their methods of dealing with the matter of property; count up with me the restrictions placed upon it every day in the name of the public welfare; measure the breaches already made; estimate those which society thinks of making hereafter; add the ideas concerning property held by all theories in common; interrogate history, and then tell me what will be left, half a century hence, of this old right of property; and, thus perceiving that I have so many accomplices, you will immediately declare me innocent. What is the law of expropriation on the ground of public utility, which everybody favors, and which is even thought too lenient? [36] A flagrant violation of the right of property. Society indemnifies, it is said, the dispossessed proprietor; but does it return to him the traditional associations, the poetic charm, and the family pride which accompany property? Naboth, and the miller of Sans-Souci, would have protested against French law, as they protested against the caprice of their kings. "It is the field of our fathers," they would have cried, "and we will not sell it!" Among the ancients, the refusal of the individual limited the powers of the State. The Roman law bowed to the will of the citizen, and an emperor--Commodus, if I remember rightly--abandoned the project of enlarging the forum out of respect for the rights of the occupants who refused to abdicate. Property is a real right, _jus_ _in re_,--a right inherent in the thing, and whose principle lies in the external manifestation of man's will. Man leaves his imprint, stamps his character, upon the objects of his handiwork. This plastic force of man, as the modern jurists say, is the seal which, set upon matter, makes it holy. Whoever lays hands upon it, against the proprietor's will, does violence to the latter's personality. And yet, when an administrative committee saw fit to declare that public utility required it, property had to give way to the general will. Soon, in the name of public utility, methods of cultivation and conditions of enjoyment will be prescribed; inspectors of agriculture and manufactures will be appointed; property will be taken away from unskilful hands, and entrusted to laborers who are more deserving of it; and a general superintendence of production will be established. It is not two years since I saw a proprietor destroy a forest more than five hundred acres in extent. If public utility had interfered, that forest--the only one for miles around--would still be standing. But, it is said, expropriation on the ground of public utility is only an exception which confirms the principle, and bears testimony in favor of the right. Very well; but from this exception we will pass to another, from that to a third, and so on from exceptions to exceptions, until we have reduced the rule to a pure abstraction. How many supporters do you think, sir, can be claimed for the project of the conversion of the public funds? I venture to say that everybody favors it, except the fund-holders. Now, this so-called conversion is an extensive expropriation, and in this case with no indemnity whatever. The public funds are so much real estate, the income from which the proprietor counts upon with perfect safety, and which owes its value to the tacit promise of the government to pay interest upon it at the established rate, until the fund-holder applies for redemption. For, if the income is liable to diminution, it is less profitable than house-rent or farm-rent, whose rates may rise or fall according to the fluctuations in the market; and in that case, what inducement has the capitalist to invest his money in the State? When, then, you force the fund-holder to submit to a diminution of interest, you make him bankrupt to the extent of the diminution; and since, in consequence of the conversion, an equally profitable investment becomes impossible, you depreciate his property. That such a measure may be justly executed, it must be generalized; that is, the law which provides for it must decree also that interest on sums lent on deposit or on mortgage throughout the realm, as well as house and farm-rents, shall be reduced to three per cent. This simultaneous reduction of all kinds of income would be not a whit more difficult to accomplish than the proposed conversion; and, further, it would offer the advantage of forestalling at one blow all objections to it, at the same time that it would insure a just assessment of the land-tax. See! If at the moment of conversion a piece of real estate yields an income of one thousand francs, after the new law takes effect it will yield only six hundred francs. Now, allowing the tax to be an aliquot part--one-fourth for example--of the income derived from each piece of property, it is clear on the one hand that the proprietor would not, in order to lighten his share of the tax, underestimate the value of his property; since, house and farm-rents being fixed by the value of the capital, and the latter being measured by the tax, to depreciate his real estate would be to reduce his revenue. On the other hand, it is equally evident that the same proprietors could not overestimate the value of their property, in order to increase their incomes beyond the limits of the law, since the tenants and farmers, with their old leases in their hands, would enter a protest. Such, sir, must be the result sooner or later of the conversion which has been so long demanded; otherwise, the financial operation of which we are speaking would be a crying injustice, unless intended as a stepping-stone. This last motive seems the most plausible one; for in spite of the clamors of interested parties, and the flagrant violation of certain rights, the public conscience is bound to fulfil its desire, and is no more affected when charged with attacking property, than when listening to the complaints of the bondholders. In this case, instinctive justice belies legal justice. Who has not heard of the inextricable confusion into which the Chamber of Deputies was thrown last year, while discussing the question of colonial and native sugars? Did they leave these two industries to themselves? The native manufacturer was ruined by the colonist. To maintain the beet-root, the cane had to be taxed. To protect the property of the one, it became necessary to violate the property of the other. The most remarkable feature of this business was precisely that to which the least attention was paid; namely, that, in one way or another, property had to be violated. Did they impose on each industry a proportional tax, so as to preserve a balance in the market? They created a maximum PRICE for each variety of sugar; and, as this maximum PRICE was not the same, they attacked property in two ways,--on the one hand, interfering with the liberty of trade; on the other, disregarding the equality of proprietors. Did they suppress the beet-root by granting an indemnity to the manufacturer? They sacrificed the property of the tax-payer. Finally, did they prefer to cultivate the two varieties of sugar at the nation's expense, just as different varieties of tobacco are cultivated? They abolished, so far as the sugar industry was concerned, the right of property. This last course, being the most social, would have been certainly the best; but, if property is the necessary basis of civilization, how is this deep-seated antagonism to be explained? [37] Not satisfied with the power of dispossessing a citizen on the ground of public utility, they want also to dispossess him on the ground of PRIVATE UTILITY. For a long time, a revision of the law concerning mortgages was clamored for; a process was demanded, in behalf of all kinds of credit and in the interest of even the debtors themselves, which would render the expropriation of real estate as prompt, as easy, and as effective as that which follows a commercial protest. The Chamber of Deputies, in the early part of this year, 1841, discussed this project, and the law was passed almost unanimously. There is nothing more just, nothing more reasonable, nothing more philosophical apparently, than the motives which gave rise to this reform. I. Formerly, the small proprietor whose obligation had arrived at maturity, and who found himself unable to meet it, had to employ all that he had left, after being released from his debt, in defraying the legal costs. Henceforth, the promptness of expropriation will save him from total ruin. 2. The difficulties in the way of payment arrested credit, and prevented the employment of capital in agricultural enterprises. This cause of distrust no longer existing, capitalists will find new markets, agriculture will rapidly develop, and farmers will be the first to enjoy the benefit of the new law. 3. Finally, it was iniquitous and absurd, that, on account of a protested note, a poor manufacturer should see in twenty-four hours his business arrested, his labor suspended, his merchandise seized, his machinery sold at auction, and finally himself led off to prison, while two years were sometimes necessary to expropriate the most miserable piece of real estate. These arguments, and others besides, you clearly stated, sir, in your first lectures of this academic year. But, when stating these excellent arguments, did you ask yourself, sir, whither would tend such a transformation of our system of mortgages?... To monetize, if I may say so, landed property; to accumulate it within portfolios; to separate the laborer from the soil, man from Nature; to make him a wanderer over the face of the earth; to eradicate from his heart every trace of family feeling, national pride, and love of country; to isolate him more and more; to render him indifferent to all around him; to concentrate his love upon one object,--money; and, finally, by the dishonest practices of usury, to monopolize the land to the profit of a financial aristocracy,--a worthy auxiliary of that industrial feudality whose pernicious influence we begin to feel so bitterly. Thus, little by little, the subordination of the laborer to the idler, the restoration of abolished castes, and the distinction between patrician and plebeian, would be effected; thus, thanks to the new privileges granted to the property of the capitalists, that of the small and intermediate proprietors would gradually disappear, and with it the whole class of free and honest laborers. This certainly is not my plan for the abolition of property. Far from mobilizing the soil, I would, if possible, immobilize even the functions of pure intelligence, so that society might be the fulfilment of the intentions of Nature, who gave us our first possession, the land. For, if the instrument or capital of production is the mark of the laborer, it is also his pedestal, his support, his country, and, as the Psalmist says, THE PLACE OF HIS ACTIVITY AND HIS REST. [38] Let us examine more closely still the inevitable and approaching result of the last law concerning judicial sales and mortgages. Under the system of competition which is killing us, and whose necessary expression is a plundering and tyrannical government, the farmer will need always capital in order to repair his losses, and will be forced to contract loans. Always depending upon the future for the payment of his debts, he will be deceived in his hope, and surprised by maturity. For what is there more prompt, more unexpected, more abbreviatory of space and time, than the maturity of an obligation? I address this question to all whom this pitiless Nemesis pursues, and even troubles in their dreams. Now, under the new law, the expropriation of a debtor will be effected a hundred times more rapidly; then, also, spoliation will be a hundred times surer, and the free laborer will pass a hundred times sooner from his present condition to that of a serf attached to the soil. Formerly, the length of time required to effect the seizure curbed the usurer's avidity, gave the borrower an opportunity to recover himself, and gave rise to a transaction between him and his creditor which might result finally in a complete release. Now, the debtor's sentence is irrevocable: he has but a few days of grace. And what advantages are promised by this law as an offset to this sword of Damocles, suspended by a single hair over the head of the unfortunate husbandman? The expenses of seizure will be much less, it is said; but will the interest on the borrowed capital be less exorbitant? For, after all, it is interest which impoverishes the peasant and leads to his expropriation. That the law may be in harmony with its principle, that it may be truly inspired by that spirit of justice for which it is commended, it must--while facilitating expropriation--lower the legal price of money. Otherwise, the reform concerning mortgages is but a trap set for small proprietors,--a legislative trick. Lower interest on money! But, as we have just seen, that is to limit property. Here, sir, you shall make your own defence. More than once, in your learned lectures, I have heard you deplore the precipitancy of the Chambers, who, without previous study and without profound knowledge of the subject, voted almost unanimously to maintain the statutes and privileges of the Bank. Now these privileges, these statutes, this vote of the Chambers, mean simply this,--that the market price of specie, at five or six per cent., is not too high, and that the conditions of exchange, discount, and circulation, which generally double this interest, are none too severe. So the government thinks. M. Blanqui--a professor of political economy, paid by the State--maintains the contrary, and pretends to demonstrate, by decisive arguments, the necessity of a reform. Who, then, best understands the interests of property,--the State, or M. Blanqui? If specie could be borrowed at half the present rate, the revenues from all sorts of property would soon be reduced one-half also. For example: when it costs less to build a house than to hire one, when it is cheaper to clear a field than to procure one already cleared, competition inevitably leads to a reduction of house and farm-rents, since the surest way to depreciate active capital is to increase its amount. But it is a law of political economy that an increase of production augments the mass of available capital, consequently tends to raise wages, and finally to annihilate interest. Then, proprietors are interested in maintaining the statutes and privileges of the Bank; then, a reform in this matter would compromise the right of increase; then, the peers and deputies are better informed than Professor Blanqui. But these same deputies,--so jealous of their privileges whenever the equalizing effects of a reform are within their intellectual horizon,--what did they do a few days before they passed the law concerning judicial sales? They formed a conspiracy against property! Their law to regulate the labor of children in factories will, without doubt, prevent the manufacturer from compelling a child to labor more than so many hours a day; but it will not force him to increase the pay of the child, nor that of its father. To-day, in the interest of health, we diminish the subsistence of the poor; to-morrow it will be necessary to protect them by fixing their MINIMUM wages. But to fix their minimum wages is to compel the proprietor, is to force the master to accept his workman as an associate, which interferes with freedom and makes mutual insurance obligatory. Once entered upon this path, we never shall stop. Little by little the government will become manufacturer, commission-merchant, and retail dealer. It will be the sole proprietor. Why, at all epochs, have the ministers of State been so reluctant to meddle with the question of wages? Why have they always refused to interfere between the master and the workman? Because they knew the touchy and jealous nature of property, and, regarding it as the principle of all civilization, felt that to meddle with it would be to unsettle the very foundations of society. Sad condition of the proprietary regime,--one of inability to exercise charity without violating justice! [39] And, sir, this fatal consequence which necessity forces upon the State is no mere imagination. Even now the legislative power is asked, no longer simply to regulate the government of factories, but to create factories itself. Listen to the millions of voices shouting on all hands for THE ORGANISATION OF LABOR, THE CREATION OF NATIONAL WORKSHOPS! The whole laboring class is agitated: it has its journals, organs, and representatives. To guarantee labor to the workingman, to balance production with sale, to harmonize industrial proprietors, it advocates to-day--as a sovereign remedy--one sole head, one national wardenship, one huge manufacturing company. For, sir, all this is included in the idea of national workshops. On this subject I wish to quote, as proof, the views of an illustrious economist, a brilliant mind, a progressive intellect, an enthusiastic soul, a true patriot, and yet an official defender of the right of property. [40] The honorable professor of the Conservatory proposes then,-- 1. TO CHECK THE CONTINUAL EMIGRATION OF LABORERS FROM THE COUNTRY INTO THE CITIES. But, to keep the peasant in his village, his residence there must be made endurable: to be just to all, the proletaire of the country must be treated as well as the proletaire of the city. Reform is needed, then, on farms as well as in factories; and, when the government enters the workshop, the government must seize the plough! What becomes, during this progressive invasion, of independent cultivation, exclusive domain, property? 2. TO FIX FOR EACH PROFESSION A MODERATE SALARY, VARYING WITH TIME AND PLACE AND BASED UPON CERTAIN DATA. The object of this measure would be to secure to laborers their subsistence, and to proprietors their profits, while obliging the latter to sacrifice from motives of prudence, if for no other reason, a portion of their income. Now, I say, that this portion, in the long run, would swell until at last there would be an equality of enjoyment between the proletaire and the proprietor. For, as we have had occasion to remark several times already, the interest of the capitalist--in other words the increase of the idler--tends, on account of the power of labor, the multiplication of products and exchanges, to continually diminish, and, by constant reduction, to disappear. So that, in the society proposed by M. Blanqui, equality would not be realized at first, but would exist potentially; since property, though outwardly seeming to be industrial feudality, being no longer a principle of exclusion and encroachment, but only a privilege of division, would not be slow, thanks to the intellectual and political emancipation of the proletariat, in passing into absolute equality,--as absolute at least as any thing can be on this earth. I omit, for the sake of brevity, the numerous considerations which the professor adduces in support of what he calls, too modestly in my opinion, his Utopia. They would serve only to prove beyond all question that, of all the charlatans of radicalism who fatigue the public ear, no one approaches, for depth and clearness of thought, the audacious M. Blanqui. 3. NATIONAL WORKSHOPS SHOULD BE IN OPERATION ONLY DURING PERIODS OF STAGNATION IN ORDINARY INDUSTRIES; AT SUCH TIMES THEY SHOULD BE OPENED AS VAST OUTLETS TO THE FLOOD OF THE LABORING POPULATION. But, sir, the stoppage of private industry is the result of over-production, and insufficient markets. If, then, production continues in the national workshops, how will the crisis be terminated? Undoubtedly, by the general depreciation of merchandise, and, in the last analysis, by the conversion of private workshops into national workshops. On the other hand, the government will need capital with which to pay its workmen; now, how will this capital be obtained? By taxation. And upon what will the tax be levied? Upon property. Then you will have proprietary industry sustaining against itself, and at its own expense, another industry with which it cannot compete. What, think you, will become, in this fatal circle, of the possibility of profit,--in a word, of property? Thank Heaven! equality of conditions is taught in the public schools; let us fear revolutions no longer. The most implacable enemy of property could not, if he wished to destroy it, go to work in a wiser and more effective way. Courage, then, ministers, deputies, economists! make haste to seize this glorious initiative; let the watchwords of equality, uttered from the heights of science and power, be repeated in the midst of the people; let them thrill the breasts of the proletaires, and carry dismay into the ranks of the last representatives of privilege! The tendency of society in favor of compelling proprietors to support national workshops and public manufactories is so strong that for several years, under the name of ELECTORAL REFORM, it has been exclusively the question of the day. What is, after all, this electoral reform which the people grasp at, as if it were a bait, and which so many ambitious persons either call for or denounce? It is the acknowledgment of the right of the masses to a voice in the assessment of taxes, and the making of the laws; which laws, aiming always at the protection of material interests, affect, in a greater or less degree, all questions of taxation or wages. Now the people, instructed long since by their journals, their dramas, [41] and their songs, [42] know to-day that taxation, to be equitably divided, must be graduated, and must be borne mainly by the rich,--that it must be levied upon luxuries, &c. And be sure that the people, once in the majority in the Chamber, will not fail to apply these lessons. Already we have a minister of public works. National workshops will follow; and soon, as a consequence, the excess of the proprietor's revenue over the workingman's wages will be swallowed up in the coffers of the laborers of the State. Do you not see that in this way property is gradually reduced, as nobility was formerly, to a nominal title, to a distinction purely honorary in its nature? Either the electoral reform will fail to accomplish that which is hoped from it, and will disappoint its innumerable partisans, or else it will inevitably result in a transformation of the absolute right under which we live into a right of possession; that is, that while, at present, property makes the elector, after this reform is accomplished, the citizen, the producer will be the possessor. [43] Consequently, the radicals are right in saying that the electoral reform is in their eyes only a means; but, when they are silent as to the end, they show either profound ignorance, or useless dissimulation. There should be no secrets or reservations from peoples and powers. He disgraces himself and fails in respect for his fellows, who, in publishing his opinions, employs evasion and cunning. Before the people act, they need to know the whole truth. Unhappy he who shall dare to trifle with them! For the people are credulous, but they are strong. Let us tell them, then, that this reform which is proposed is only a means,--a means often tried, and hitherto without effect,--but that the logical object of the electoral reform is equality of fortunes; and that this equality itself is only a new means having in view the superior and definitive object of the salvation of society, the restoration of morals and religion, and the revival of poetry and art. This assertion of M. Rossi is not borne out by history. Property is the cause of the electoral right, not as a PRESUMPTION OF CAPACITY,--an idea which never prevailed until lately, and which is extremely absurd,--but as a GUARANTEE OF DEVOTION TO THE ESTABLISHED ORDER. The electoral body is a league of those interested in the maintenance of property, against those not interested. There are thousands of documents, even official documents, to prove this, if necessary. For the rest, the present system is only a continuation of the municipal system, which, in the middle ages, sprang up in connection with feudalism,--an oppressive, mischief-making system, full of petty passions and base intrigues. It would be an abuse of the reader's patience to insist further upon the tendency of our time towards equality. There are, moreover, so many people who denounce the present age, that nothing is gained by exposing to their view the popular, scientific, and representative tendencies of the nation. Prompt to recognize the accuracy of the inferences drawn from observation, they confine themselves to a general censure of the facts, and an absolute denial of their legitimacy. "What wonder," they say, "that this atmosphere of equality intoxicates us, considering all that has been said and done during the past ten years!... Do you not see that society is dissolving, that a spirit of infatuation is carrying us away? All these hopes of regeneration are but forebodings of death; your songs of triumph are like the prayers of the departing, your trumpet peals announce the baptism of a dying man. Civilization is falling in ruin: _Imus, imus, praecipites_!" Such people deny God. I might content myself with the reply that the spirit of 1830 was the result of the maintenance of the violated charter; that this charter arose from the Revolution of '89; that '89 implies the States-General's right of remonstrance, and the enfranchisement of the communes; that the communes suppose feudalism, which in its turn supposes invasion, Roman law, Christianity, &c. But it is necessary to look further. We must penetrate to the very heart of ancient institutions, plunge into the social depths, and uncover this indestructible leaven of equality which the God of justice breathed into our souls, and which manifests itself in all our works. Labor is man's contemporary; it is a duty, since it is a condition of existence: "In the sweat of thy face shalt thou eat bread." It is more than a duty, it is a mission: "God put the man into the garden to dress it." I add that labor is the cause and means of equality. Cast away upon a desert island two men: one large, strong, and active; the other weak, timid, and domestic. The latter will die of hunger; while the other, a skilful hunter, an expert fisherman, and an indefatigable husbandman, will overstock himself with provisions. What greater inequality, in this state of Nature so dear to the heart of Jean Jacques, could be imagined! But let these two men meet and associate themselves: the second immediately attends to the cooking, takes charge of the household affairs, and sees to the provisions, beds, and clothes; provided the stronger does not abuse his superiority by enslaving and ill-treating his companion, their social condition will be perfectly equal. Thus, through exchange of services, the inequalities of Nature neutralize each other, talents associate, and forces balance. Violence and inertia are found only among the poor and the aristocratic. And in that lies the philosophy of political economy, the mystery of human brotherhood. _Hic est sapientia_. Let us pass from the hypothetical state of pure Nature into civilization. The proprietor of the soil, who produces, I will suppose with the economists, by lending his instrument, receives at the foundation of a society so many bushels of grain for each acre of arable land. As long as labor is weak, and the variety of its products small, the proprietor is powerful in comparison with the laborers; he has ten times, one hundred times, the portion of an honest man. But let labor, by multiplying its inventions, multiply its enjoyments and wants, and the proprietor, if he wishes to enjoy the new products, will be obliged to reduce his income every day; and since the first products tend rather to depreciate than to rise in value,--in consequence of the continual addition of the new ones, which may be regarded as supplements of the first ones,--it follows that the idle proprietor grows poor as fast as public prosperity increases. "Incomes" (I like to quote you, sir, because it is impossible to give too good an authority for these elementary principles of economy, and because I cannot express them better myself), "incomes," you have said, "tend to disappear as capital increases. He who possesses to-day an income of twenty thousand pounds is not nearly as rich as he who possessed the same amount fifty years ago. The time is coming when all property will be a burden to the idle, and will necessarily pass into the hands of the able and industrious. [44]..." In order to live as a proprietor, or to consume without producing, it is necessary, then, to live upon the labor of another; in other words, it is necessary to kill the laborer. It is upon this principle that proprietors of those varieties of capital which are of primary necessity increase their farm-rents as fast as industry develops, much more careful of their privileges in that respect, than those economists who, in order to strengthen property, advocate a reduction of interest. But the crime is unavailing: labor and production increase; soon the proprietor will be forced to labor, and then property is lost. The proprietor is a man who, having absolute control of an instrument of production, claims the right to enjoy the product of the instrument without using it himself. To this end he lends it; and we have just seen that from this loan the laborer derives a power of exchange, which sooner or later will destroy the right of increase. In the first place, the proprietor is obliged to allow the laborer a portion of the product, for without it the laborer could not live. Soon the latter, through the development of his industry, finds a means of regaining the greater portion of that which he gives to the proprietor; so that at last, the objects of enjoyment increasing continually, while the income of the idler remains the same, the proprietor, having exhausted his resources, begins to think of going to work himself. Then the victory of the producer is certain. Labor commences to tip the balance towards its own side, and commerce leads to equilibrium. Man's instinct cannot err; as, in liberty, exchange of functions leads inevitably to equality among men, so commerce--or exchange of products, which is identical with exchange of functions--is a new cause of equality. As long as the proprietor does not labor, however small his income, he enjoys a privilege; the laborer's welfare may be equal to his, but equality of conditions does not exist. But as soon as the proprietor becomes a producer,--since he can exchange his special product only with his tenant or his _commandite_,--sooner or later this tenant, this _exploited_ man, if violence is not done him, will make a profit out of the proprietor, and will oblige him to restore--in the exchange of their respective products--the interest on his capital. So that, balancing one injustice by another, the contracting parties will be equal. Labor and exchange, when liberty prevails, lead, then, to equality of fortunes; mutuality of services neutralizes privilege. That is why despots in all ages and countries have assumed control of commerce; they wished to prevent the labor of their subjects from becoming an obstacle to the rapacity of tyrants. Up to this point, all takes place in the natural order; there is no premeditation, no artifice. The whole proceeding is governed by the laws of necessity alone. Proprietors and laborers act only in obedience to their wants. Thus, the exercise of the right of increase, the art of robbing the producer, depends--during this first period of civilization--upon physical violence, murder, and war. But at this point a gigantic and complicated conspiracy is hatched against the capitalists. The weapon of the EXPLOITERS is met by the EXPLOITED with the instrument of commerce,--a marvellous invention, denounced at its origin by the moralists who favored property, but inspired without doubt by the genius of labor, by the Minerva of the proletaires. The principal cause of the evil lay in the accumulation and immobility of capital of all sorts,--an immobility which prevented labor, enslaved and subalternized by haughty idleness, from ever acquiring it. The necessity was felt of dividing and mobilizing wealth, of rendering it portable, of making it pass from the hands of the possessor into those of the worker. Labor invented MONEY. Afterwards, this invention was revived and developed by the BILL OF EXCHANGE and the BANK. For all these things are substantially the same, and proceed from the same mind. The first man who conceived the idea of representing a value by a shell, a precious stone, or a certain weight of metal, was the real inventor of the Bank. What is a piece of money, in fact? It is a bill of exchange written upon solid and durable material, and carrying with it its own redemption. By this means, oppressed equality was enabled to laugh at the efforts of the proprietors, and the balance of justice was adjusted for the first time in the tradesman's shop. The trap was cunningly set, and accomplished its purpose so thoroughly that in idle hands money became only dissolving wealth, a false symbol, a shadow of riches. An excellent economist and profound philosopher was that miser who took as his motto, "WHEN A GUINEA IS EXCHANGED, IT EVAPORATES." So it may be said, "When real estate is converted into money, it is lost." This explains the constant fact of history, that the nobles--the unproductive proprietors of the soil--have every where been dispossessed by industrial and commercial plebeians. Such was especially the case in the formation of the Italian republics, born, during the middle ages, of the impoverishment of the seigniors. I will not pursue the interesting considerations which this matter suggests; I could only repeat the testimony of historians, and present economical demonstrations in an altered form. The greatest enemy of the landed and industrial aristocracy to-day, the incessant promoter of equality of fortunes, is the BANKER. Through him immense plains are divided, mountains change their positions, forests are grown upon the public squares, one hemisphere produces for another, and every corner of the globe has its usufructuaries. By means of the Bank new wealth is continually created, the use of which (soon becoming indispensable to selfishness) wrests the dormant capital from the hands of the jealous proprietor. The banker is at once the most potent creator of wealth, and the main distributor of the products of art and Nature. And yet, by the strangest antinomy, this same banker is the most relentless collector of profits, increase, and usury ever inspired by the demon of property. The importance of the services which he renders leads us to endure, though not without complaint, the taxes which he imposes. Nevertheless, since nothing can avoid its providential mission, since nothing which exists can escape the end for which it exists the banker (the modern Croesus) must some day become the restorer of equality. And following in your footsteps, sir, I have already given the reason; namely, that profit decreases as capital multiplies, since an increase of capital--calling for more laborers, without whom it remains unproductive--always causes an increase of wages. Whence it follows that the Bank, to-day the suction-pump of wealth, is destined to become the steward of the human race. The phrase EQUALITY OF FORTUNES chafes people, as if it referred to a condition of the other world, unknown here below. There are some persons, radicals as well as moderates, whom the very mention of this idea fills with indignation. Let, then, these silly aristocrats abolish mercantile societies and insurance companies, which are founded by prudence for mutual assistance. For all these social facts, so spontaneous and free from all levelling intentions, are the legitimate fruits of the instinct of equality. When the legislator makes a law, properly speaking he does not MAKE it,--he does not CREATE it: he DESCRIBES it. In legislating upon the moral, civil, and political relations of citizens, he does not express an arbitrary notion: he states the general idea,--the higher principle which governs the matter which he is considering; in a word, he is the proclaimer, not the inventor, of the law. So, when two or more men form among themselves, by synallagmatic contract, an industrial or an insurance association, they recognize that their interests, formerly isolated by a false spirit of selfishness and independence, are firmly connected by their inner natures, and by the mutuality of their relations. They do not really bind themselves by an act of their private will: they swear to conform henceforth to a previously existing social law hitherto disregarded by them. And this is proved by the fact that these same men, could they avoid association, would not associate. Before they can be induced to unite their interests, they must acquire full knowledge of the dangers of competition and isolation; hence the experience of evil is the only thing which leads them into society. Now I say that, to establish equality among men, it is only necessary to generalize the principle upon which insurance, agricultural, and commercial associations are based. I say that competition, isolation of interests, monopoly, privilege, accumulation of capital, exclusive enjoyment, subordination of functions, individual production, the right of profit or increase, the exploitation of man by man, and, to sum up all these species under one head, that PROPERTY is the principal cause of misery and crime. And, for having arrived at this offensive and anti-proprietary conclusion, I am an abhorred monster; radicals and conservatives alike point me out as a fit subject for prosecution; the academies shower their censures upon me; the most worthy people regard me as mad; and those are excessively tolerant who content themselves with the assertion that I am a fool. Oh, unhappy the writer who publishes the truth otherwise than as a performance of a duty! If he has counted upon the applause of the crowd; if he has supposed that avarice and self-interest would forget themselves in admiration of him; if he has neglected to encase himself within three thicknesses of brass,--he will fail, as he ought, in his selfish undertaking. The unjust criticisms, the sad disappointments, the despair of his mistaken ambition, will kill him. But, if I am no longer permitted to express my own personal opinion concerning this interesting question of social equilibrium, let me, at least, make known the thought of my masters, and develop the doctrines advocated in the name of the government. It never has been my intention, sir, in spite of the vigorous censure which you, in behalf of your academy, have pronounced upon the doctrine of equality of fortunes, to contradict and cope with you. In listening to you, I have felt my inferiority too keenly to permit me to enter upon such a discussion. And then,--if it must be said,--however different your language is from mine, we believe in the same principles; you share all my opinions. I do not mean to insinuate thereby, sir, that you have (to use the phraseology of the schools) an ESOTERIC and an EXOTERIC doctrine,--that, secretly believing in equality, you defend property only from motives of prudence and by command. I am not rash enough to regard you as my colleague in my revolutionary projects; and I esteem you too highly, moreover, to suspect you of dissimulation. I only mean that the truths which methodical investigation and laborious metaphysical speculation have painfully demonstrated to me, a profound acquaintance with political economy and a long experience reveal to you. While I have reached my belief in equality by long reflection, and almost in spite of my desires, you hold yours, sir, with all the zeal of faith,--with all the spontaneity of genius. That is why your course of lectures at the Conservatory is a perpetual war upon property and inequality of fortunes; that is why your most learned investigations, your most ingenious analyses, and your innumerable observations always conclude in a formula of progress and equality; that is why, finally, you are never more admired and applauded than at those moments of inspiration when, borne upon the wings of science, you ascend to those lofty truths which cause plebeian hearts to beat with enthusiasm, and which chill with horror men whose intentions are evil. How many times, from the place where I eagerly drank in your eloquent words, have I inwardly thanked Heaven for exempting you from the judgment passed by St. Paul upon the philosophers of his time,--"They have known the truth, and have not made it known"! How many times have I rejoiced at finding my own justification in each of your discourses! No, no; I neither wish nor ask for any thing which you do not teach yourself. I appeal to your numerous audience; let it belie me if, in commenting upon you, I pervert your meaning. A disciple of Say, what in your eyes is more anti-social than the custom-houses; or, as you correctly call them, the barriers erected by monopoly between nations? What is more annoying, more unjust, or more absurd, than this prohibitory system which compels us to pay forty sous in France for that which in England or Belgium would bring us but fifteen? It is the custom-house, you once said, [45] which arrests the development of civilization by preventing the specialization of industries; it is the custom-house which enriches a hundred monopolists by impoverishing millions of citizens; it is the custom-house which produces famine in the midst of abundance, which makes labor sterile by prohibiting exchange, and which stifles production in a mortal embrace. It is the custom-house which renders nations jealous of, and hostile to, each other; four-fifths of the wars of all ages were caused originally by the custom-house. And then, at the highest pitch of your enthusiasm, you shouted: "Yes, if to put an end to this hateful system, it should become necessary for me to shed the last drop of my blood, I would joyfully spring into the gap, asking only time enough to give thanks to God for having judged me worthy of martyrdom!" And, at that solemn moment, I said to myself: "Place in every department of France such a professor as that, and the revolution is avoided." But, sir, by this magnificent theory of liberty of commerce you render military glory impossible,--you leave nothing for diplomacy to do; you even take away the desire for conquest, while abolishing profit altogether. What matters it, indeed, who restores Constantinople, Alexandria, and Saint Jean d'Acre, if the Syrians, Egyptians, and Turks are free to choose their masters; free to exchange their products with whom they please? Why should Europe get into such a turmoil over this petty Sultan and his old Pasha, if it is only a question whether we or the English shall civilize the Orient,--shall instruct Egypt and Syria in the European arts, and shall teach them to construct machines, dig canals, and build railroads? For, if to national independence free trade is added, the foreign influence of these two countries is thereafter exerted only through a voluntary relationship of producer to producer, or apprentice to journeyman. Alone among European powers, France cheerfully accepted the task of civilizing the Orient, and began an invasion which was quite apostolic in its character,--so joyful and high-minded do noble thoughts render our nation! But diplomatic rivalry, national selfishness, English avarice, and Russian ambition stood in her way. To consummate a long-meditated usurpation, it was necessary to crush a too generous ally: the robbers of the Holy Alliance formed a league against dauntless and blameless France. Consequently, at the news of this famous treaty, there arose among us a chorus of curses upon the principle of property, which at that time was acting under the hypocritical formulas of the old political system. The last hour of property seemed to have struck by the side of Syria; from the Alps to the ocean, from the Rhine to the Pyrenees, the popular conscience was aroused. All France sang songs of war, and the coalition turned pale at the sound of these shuddering cries: "War upon the autocrat, who wishes to be proprietor of the old world! War upon the English perjurer, the devourer of India, the poisoner of China, the tyrant of Ireland, and the eternal enemy of France! War upon the allies who have conspired against liberty and equality! War! war! war upon property!" By the counsel of Providence the emancipation of the nations is postponed. France is to conquer, not by arms, but by example. Universal reason does not yet understand this grand equation, which, commencing with the abolition of slavery, and advancing over the ruins of aristocracies and thrones, must end in equality of rights and fortunes; but the day is not far off when the knowledge of this truth will be as common as that of equality of origin. Already it seems to be understood that the Oriental question is only a question of custom-houses. Is it, then, so difficult for public opinion to generalize this idea, and to comprehend, finally, that if the suppression of custom-houses involves the abolition of national property, it involves also, as a consequence, the abolition of individual property? In fact, if we suppress the custom-houses, the alliance of the nations is declared by that very act; their solidarity is recognized, and their equality proclaimed. If we suppress the custom-houses, the principle of association will not be slow in reaching from the State to the province, from the province to the city, and from the city to the workshop. But, then, what becomes of the privileges of authors and artists? Of what use are the patents for invention, imagination, amelioration, and improvement? When our deputies write a law of literary property by the side of a law which opens a large breach in the custom-house they contradict themselves, indeed, and pull down with one hand what they build up with the other. Without the custom-house, literary property does not exist, and the hopes of our starving authors are frustrated. For, certainly you do not expect, with the good man Fourier, that literary property will exercise itself in China to the profit of a French writer; and that an ode of Lamartine, sold by privilege all over the world, will bring in millions to its author! The poet's work is peculiar to the climate in which he lives; every where else the reproduction of his works, having no market value, should be frank and free. But what! will it be necessary for nations to put themselves under mutual surveillance for the sake of verses, statues, and elixirs? We shall always have, then, an excise, a city-toll, rights of entrance and transit, custom-houses finally; and then, as a reaction against privilege, smuggling. Smuggling! That word reminds me of one of the most horrible forms of property. "Smuggling," you have said, sir, [46] "is an offence of political creation; it is the exercise of natural liberty, defined as a crime in certain cases by the will of the sovereign. The smuggler is a gallant man,--a man of spirit, who gaily busies himself in procuring for his neighbor, at a very low price, a jewel, a shawl, or any other object of necessity or luxury, which domestic monopoly renders excessively dear." Then, to a very poetical monograph of the smuggler, you add this dismal conclusion,--that the smuggler belongs to the family of Mandrin, and that the galleys should be his home! But, sir, you have not called attention to the horrible exploitation which is carried on in this way in the name of property. It is said,--and I give this report only as an hypothesis and an illustration, for I do not believe it,--it is said that the present minister of finances owes his fortune to smuggling. M. Humann, of Strasbourg, sent out of France, it is said, enormous quantities of sugar, for which he received the bounty on exportation promised by the State; then, smuggling this sugar back again, he exported it anew, receiving the bounty on exportation a second time, and so on. Notice, sir, that I do not state this as a fact; I give it only as it is told, not endorsing or even believing it. My sole design is to fix the idea in the mind by an example. If I believed that a minister had committed such a crime, that is, if I had personal and authentic knowledge that he had, I would denounce M. Humann, the minister of finances, to the Chamber of Deputies, and would loudly demand his expulsion from the ministry. But that which is undoubtedly false of M. Humann is true of many others, as rich and no less honorable than he. Smuggling, organized on a large scale by the eaters of human flesh, is carried on to the profit of a few pashas at the risk and peril of their imprudent victims. The inactive proprietor offers his merchandise for sale; the actual smuggler risks his liberty, his honor, and his life. If success crowns the enterprise, the courageous servant gets paid for his journey; the profit goes to the coward. If fortune or treachery delivers the instrument of this execrable traffic into the hands of the custom-house officer, the master-smuggler suffers a loss which a more fortunate voyage will soon repair. The agent, pronounced a scoundrel, is thrown into prison in company with robbers; while his glorious patron, a juror, elector, deputy, or minister, makes laws concerning expropriation, monopoly, and custom-houses! I promised, at the beginning of this letter, that no attack on property should escape my pen, my only object being to justify myself before the public by a general recrimination. But I could not refrain from branding so odious a mode of exploitation, and I trust that this short digression will be pardoned. Property does not avenge, I hope, the injuries which smuggling suffers. The conspiracy against property is general; it is flagrant; it takes possession of all minds, and inspires all our laws; it lies at the bottom of all theories. Here the proletaire pursues property in the street, there the legislator lays an interdict upon it; now, a professor of political economy or of industrial legislation, [47] paid to defend it, undermines it with redoubled blows; at another--time, an academy calls it in question, [48] or inquires as to the progress of its demolition. [49] To-day there is not an idea, not an opinion, not a sect, which does not dream of muzzling property. None confess it, because none are yet conscious of it; there are too few minds capable of grasping spontaneously this ensemble of causes and effects, of principles and consequences, by which I try to demonstrate the approaching disappearance of property; on the other hand, the ideas that are generally formed of this right are too divergent and too loosely determined to allow an admission, so soon, of the contrary theory. Thus, in the middle and lower ranks of literature and philosophy, no less than among the common people, it is thought that, when property is abolished, no one will be able to enjoy the fruit of his labor; that no one will have any thing peculiar to himself, and that tyrannical communism will be established on the ruins of family and liberty!--chimeras, which are to support for a little while longer the cause of privilege. But, before determining precisely the idea of property, before seeking amid the contradictions of systems for the common element which must form the basis of the new right, let us cast a rapid glance at the changes which, at the various periods of history, property has undergone. The political forms of nations are the expression of their beliefs. The mobility of these forms, their modification and their destruction, are solemn experiences which show us the value of ideas, and gradually eliminate from the infinite variety of customs the absolute, eternal, and immutable truth. Now, we shall see that every political institution tends, necessarily, and on pain of death, to equalize conditions; that every where and always equality of fortunes (like equality of rights) has been the social aim, whether the plebeian classes have endeavored to rise to political power by means of property, or whether--rulers already--they have used political power to overthrow property. We shall see, in short, by the progress of society, that the consummation of justice lies in the extinction of individual domain. For the sake of brevity, I will disregard the testimony of ecclesiastical history and Christian theology: this subject deserves a separate treatise, and I propose hereafter to return to it. Moses and Jesus Christ proscribed, under the names of usury and inequality, [50] all sorts of profit and increase. The church itself, in its purest teachings, has always condemned property; and when I attacked, not only the authority of the church, but also its infidelity to justice, I did it to the glory of religion. I wanted to provoke a peremptory reply, and to pave the way for Christianity's triumph, in spite of the innumerable attacks of which it is at present the object. I hoped that an apologist would arise forthwith, and, taking his stand upon the Scriptures, the Fathers, the canons, and the councils and constitutions of the Popes, would demonstrate that the church always has maintained the doctrine of equality, and would attribute to temporary necessity the contradictions of its discipline. Such a labor would serve the cause of religion as well as that of equality. We must know, sooner or later, whether Christianity is to be regenerated in the church or out of it, and whether this church accepts the reproaches cast upon it of hatred to liberty and antipathy to progress. Until then we will suspend judgment, and content ourselves with placing before the clergy the teachings of history. When Lycurgus undertook to make laws for Sparta, in what condition did he find this republic? On this point all historians agree. The people and the nobles were at war. The city was in a confused state, and divided by two parties,--the party of the poor, and the party of the rich. Hardly escaped from the barbarism of the heroic ages, society was rapidly declining. The proletariat made war upon property, which, in its turn, oppressed the proletariat. What did Lycurgus do? His first measure was one of general security, at the very idea of which our legislators would tremble. He abolished all debts; then, employing by turns persuasion and force, he induced the nobles to renounce their privileges, and re-established equality. Lycurgus, in a word, hunted property out of Lacedaemon, seeing no other way to harmonize liberty, equality, and law. I certainly should not wish France to follow the example of Sparta; but it is remarkable that the most ancient of Greek legislators, thoroughly acquainted with the nature and needs of the people, more capable than any one else of appreciating the legitimacy of the obligations which he, in the exercise of his absolute authority, cancelled; who had compared the legislative systems of his time, and whose wisdom an oracle had proclaimed,--it is remarkable, I say, that Lycurgus should have judged the right of property incompatible with free institutions, and should have thought it his duty to preface his legislation by a coup d'etat which destroyed all distinctions of fortune. Lycurgus understood perfectly that the luxury, the love of enjoyments, and the inequality of fortunes, which property engenders, are the bane of society; unfortunately the means which he employed to preserve his republic were suggested to him by false notions of political economy, and by a superficial knowledge of the human heart. Accordingly, property, which this legislator wrongly confounded with wealth, reentered the city together with the swarm of evils which he was endeavoring to banish; and this time Sparta was hopelessly corrupted. "The introduction of wealth," says M. Pastoret, "was one of the principal causes of the misfortunes which they experienced. Against these, however, the laws had taken extraordinary precautions, the best among which was the inculcation of morals which tended to suppress desire." The best of all precautions would have been the anticipation of desire by satisfaction. Possession is the sovereign remedy for cupidity, a remedy which would have been the less perilous to Sparta because fortunes there were almost equal, and conditions were nearly alike. As a general thing, fasting and abstinence are bad teachers of moderation. "There was a law," says M. Pastoret again, "to prohibit the rich from wearing better clothing than the poor, from eating more delicate food, and from owning elegant furniture, vases, carpets, fine houses," &c. Lycurgus hoped, then, to maintain equality by rendering wealth useless. How much wiser he would have been if, in accordance with his military discipline, he had organized industry and taught the people to procure by their own labor the things which he tried in vain to deprive them of. In that case, enjoying happy thoughts and pleasant feelings, the citizen would have known no other desire than that with which the legislator endeavored to inspire him,--love of honor and glory, the triumphs of talent and virtue. "Gold and all kinds of ornaments were forbidden the women." Absurd. After the death of Lycurgus, his institutions became corrupted; and four centuries before the Christian era not a vestige remained of the former simplicity. Luxury and the thirst for gold were early developed among the Spartans in a degree as intense as might have been expected from their enforced poverty and their inexperience in the arts. Historians have accused Pausanias, Lysander, Agesilaus, and others of having corrupted the morals of their country by the introduction of wealth obtained in war. It is a slander. The morals of the Spartans necessarily grew corrupt as soon as the Lacedaemonian poverty came in contact with Persian luxury and Athenian elegance. Lycurgus, then, made a fatal mistake in attempting to inspire generosity and modesty by enforcing vain and proud simplicity. "Lycurgus was not frightened at idleness! A Lacedemonian, happening to be in Athens (where idleness was forbidden) during the punishment of a citizen who had been found guilty, asked to see the Athenian thus condemned for having exercised the rights of a free man.... It was one of the principles of Lycurguss, acted upon for several centuries, that free men should not follow lucrative professions.... The women disdained domestic labor; they did not spin their wool themselves, as did the other Greeks [they did not, then, read Homer!]; they left their slaves to make their clothing for them."--Pastoret: History of Legislation. Could any thing be more contradictory? Lycurgus proscribed property among the citizens, and founded the means of subsistence on the worst form of property,--on property obtained by force. What wonder, after that, that a lazy city, where no industry was carried on, became a den of avarice? The Spartans succumbed the more easily to the allurements of luxury and Asiatic voluptuousness, being placed entirely at their mercy by their own coarseness. The same thing happened to the Romans, when military success took them out of Italy,--a thing which the author of the prosopopoeia of Fabricius could not explain. It is not the cultivation of the arts which corrupts morals, but their degradation, induced by inactive and luxurious opulence. The instinct of property is to make the industry of Daedalus, as well as the talent of Phidias, subservient to its own fantastic whims and disgraceful pleasures. Property, not wealth, ruined the Spartans. When Solon appeared, the anarchy caused by property was at its height in the Athenian republic. "The inhabitants of Attica were divided among themselves as to the form of government. Those who lived on the mountains (the poor) preferred the popular form; those of the plain (the middle class), the oligarchs; those by the sea coast, a mixture of oligarchy and democracy. Other dissensions were arising from the inequality of fortunes. The mutual antagonism of the rich and poor had become so violent, that the one-man power seemed the only safe-guard against the revolution with which the republic was threatened." (Pastoret: History of Legislation.) Quarrels between the rich and the poor, which seldom occur in monarchies, because a well established power suppresses dissensions, seem to be the life of popular governments. Aristotle had noticed this. The oppression of wealth submitted to agrarian laws, or to excessive taxation; the hatred of the lower classes for the upper class, which is exposed always to libellous charges made in hopes of confiscation,--these were the features of the Athenian government which were especially revolting to Aristotle, and which caused him to favor a limited monarchy. Aristotle, if he had lived in our day, would have supported the constitutional government. But, with all deference to the Stagirite, a government which sacrifices the life of the proletaire to that of the proprietor is quite as irrational as one which supports the former by robbing the latter; neither of them deserve the support of a free man, much less of a philosopher. Solon followed the example of Lycurgus. He celebrated his legislative inauguration by the abolition of debts,--that is, by bankruptcy. In other words, Solon wound up the governmental machine for a longer or shorter time depending upon the rate of interest. Consequently, when the spring relaxed and the chain became unwound, the republic had either to perish, or to recover itself by a second bankruptcy. This singular policy was pursued by all the ancients. After the captivity of Babylon, Nehemiah, the chief of the Jewish nation, abolished debts; Lycurgus abolished debts; Solon abolished debts; the Roman people, after the expulsion of the kings until the accession of the Caesars, struggled with the Senate for the abolition of debts. Afterwards, towards the end of the republic, and long after the establishment of the empire, agriculture being abandoned, and the provinces becoming depopulated in consequence of the excessive rates of interest, the emperors freely granted the lands to whoever would cultivate them,--that is, they abolished debts. No one, except Lycurgus, who went to the other extreme, ever perceived that the great point was, not to release debtors by a coup d'etat, but to prevent the contraction of debts in future. On the contrary, the most democratic governments were always exclusively based upon individual property; so that the social element of all these republics was war between the citizens. Solon decreed that a census should be taken of all fortunes, regulated political rights by the result, granted to the larger proprietors more influence, established the balance of powers,--in a word, inserted in the constitution the most active leaven of discord; as if, instead of a legislator chosen by the people, he had been their greatest enemy. Is it not, indeed, the height of imprudence to grant equality of political rights to men of unequal conditions? If a manufacturer, uniting all his workmen in a joint-stock company, should give to each of them a consultative and deliberative voice,--that is, should make all of them masters,--would this equality of mastership secure continued inequality of wages? That is the whole political system of Solon, reduced to its simplest expression. "In giving property a just preponderance," says M. Pastoret, "Solon repaired, as far as he was able, his first official act,--the abolition of debts.... He thought he owed it to public peace to make this great sacrifice of acquired rights and natural equity. But the violation of individual property and written contracts is a bad preface to a public code." In fact, such violations are always cruelly punished. In '89 and '93, the possessions of the nobility and the clergy were confiscated, the clever proletaires were enriched; and to-day the latter, having become aristocrats, are making us pay dearly for our fathers' robbery. What, therefore, is to be done now? It is not for us to violate right, but to restore it. Now, it would be a violation of justice to dispossess some and endow others, and then stop there. We must gradually lower the rate of interest, organize industry, associate laborers and their functions, and take a census of the large fortunes, not for the purpose of granting privileges, but that we may effect their redemption by settling a life-annuity upon their proprietors. We must apply on a large scale the principle of collective production, give the State eminent domain over all capital! make each producer responsible, abolish the custom-house, and transform every profession and trade into a public function. Thereby large fortunes will vanish without confiscation or violence; individual possession will establish itself, without communism, under the inspection of the republic; and equality of conditions will no longer depend simply on the will of citizens. Of the authors who have written upon the Romans, Bossuet and Montesquieu occupy prominent positions in the first rank; the first being generally regarded as the father of the philosophy of history, and the second as the most profound writer upon law and politics. Nevertheless, it could be shown that these two great writers, each of them imbued with the prejudices of their century and their cloth, have left the question of the causes of the rise and fall of the Romans precisely where they found it. Bossuet is admirable as long as he confines himself to description: witness, among other passages, the picture which he has given us of Greece before the Persian War, and which seems to have inspired "Telemachus;" the parallel between Athens and Sparta, drawn twenty times since Bossuet; the description of the character and morals of the ancient Romans; and, finally, the sublime peroration which ends the "Discourse on Universal History." But when the famous historian deals with causes, his philosophy is at fault. "The tribunes always favored the division of captured lands, or the proceeds of their sale, among the citizens. The Senate steadfastly opposed those laws which were damaging to the State, and wanted the price of lands to be awarded to the public treasury." Thus, according to Bossuet, the first and greatest wrong of civil wars was inflicted upon the people, who, dying of hunger, demanded that the lands, which they had shed their blood to conquer, should be given to them for cultivation. The patricians, who bought them to deliver to their slaves, had more regard for justice and the public interests. How little affects the opinions of men! If the roles of Cicero and the Gracchi had been inverted, Bossuet, whose sympathies were aroused by the eloquence of the great orator more than by the clamors of the tribunes, would have viewed the agrarian laws in quite a different light. He then would have understood that the interest of the treasury was only a pretext; that, when the captured lands were put up at auction, the patricians hastened to buy them, in order to profit by the revenues from them,--certain, moreover, that the price paid would come back to them sooner or later, in exchange either for supplies furnished by them to the republic, or for the subsistence of the multitude, who could buy only of them, and whose services at one time, and poverty at another, were rewarded by the State. For a State does not hoard; on the contrary, the public funds always return to the people. If, then, a certain number of men are the sole dealers in articles of primary necessity, it follows that the public treasury, in passing and repassing through their hands, deposits and accumulates real property there. When Menenius related to the people his fable of the limbs and the stomach, if any one had remarked to this story-teller that the stomach freely gives to the limbs the nourishment which it freely receives, but that the patricians gave to the plebeians only for cash, and lent to them only at usury, he undoubtedly would have silenced the wily senator, and saved the people from a great imposition. The Conscript Fathers were fathers only of their own line. As for the common people, they were regarded as an impure race, exploitable, taxable, and workable at the discretion and mercy of their masters. As a general thing, Bossuet shows little regard for the people. His monarchical and theological instincts know nothing but authority, obedience, and alms-giving, under the name of charity. This unfortunate disposition constantly leads him to mistake symptoms for causes; and his depth, which is so much admired, is borrowed from his authors, and amounts to very little, after all. When he says, for instance, that "the dissensions in the republic, and finally its fall, were caused by the jealousies of its citizens, and their love of liberty carried to an extreme and intolerable extent," are we not tempted to ask him what caused those JEALOUSIES?--what inspired the people with that LOVE OF LIBERTY, EXTREME AND INTOLERABLE? It would be useless to reply, The corruption of morals; the disregard for the ancient poverty; the debaucheries, luxury, and class jealousies; the seditious character of the Gracchi, &c. Why did the morals become corrupt, and whence arose those eternal dissensions between the patricians and the plebeians? In Rome, as in all other places, the dissension between the rich and the poor was not caused directly by the desire for wealth (people, as a general thing, do not covet that which they deem it illegitimate to acquire), but by a natural instinct of the plebeians, which led them to seek the cause of their adversity in the constitution of the republic. So we are doing to-day; instead of altering our public economy, we demand an electoral reform. The Roman people wished to return to the social compact; they asked for reforms, and demanded a revision of the laws, and a creation of new magistracies. The patricians, who had nothing to complain of, opposed every innovation. Wealth always has been conservative. Nevertheless, the people overcame the resistance of the Senate; the electoral right was greatly extended; the privileges of the plebeians were increased,--they had their representatives, their tribunes, and their consuls; but, notwithstanding these reforms, the republic could not be saved. When all political expedients had been exhausted, when civil war had depleted the population, when the Caesars had thrown their bloody mantle over the cancer which was consuming the empire,--inasmuch as accumulated property always was respected, and since the fire never stopped, the nation had to perish in the flames. The imperial power was a compromise which protected the property of the rich, and nourished the proletaires with wheat from Africa and Sicily: a double error, which destroyed the aristocrats by plethora and the commoners by famine. At last there was but one real proprietor left,--the emperor,--whose dependent, flatterer, parasite, or slave, each citizen became; and when this proprietor was ruined, those who gathered the crumbs from under his table, and laughed when he cracked his jokes, perished also. Montesquieu succeeded no better than Bossuet in fathoming the causes of the Roman decline; indeed, it may be said that the president has only developed the ideas of the bishop. If the Romans had been more moderate in their conquests, more just to their allies, more humane to the vanquished; if the nobles had been less covetous, the emperors less lawless, the people less violent, and all classes less corrupt; if... &c.,--perhaps the dignity of the empire might have been preserved, and Rome might have retained the sceptre of the world! That is all that can be gathered from the teachings of Montesquieu. But the truth of history does not lie there; the destinies of the world are not dependent upon such trivial causes. The passions of men, like the contingencies of time and the varieties of climate, serve to maintain the forces which move humanity and produce all historical changes; but they do not explain them. The grain of sand of which Pascal speaks would have caused the death of one man only, had not prior action ordered the events of which this death was the precursor. Montesquieu has read extensively; he knows Roman history thoroughly, is perfectly well acquainted with the people of whom he speaks, and sees very clearly why they were able to conquer their rivals and govern the world. While reading him we admire the Romans, but we do not like them; we witness their triumphs without pleasure, and we watch their fall without sorrow. Montesquieu's work, like the works of all French writers, is skilfully composed,--spirited, witty, and filled with wise observations. He pleases, interests, instructs, but leads to little reflection; he does not conquer by depth of thought; he does not exalt the mind by elevated reason or earnest feeling. In vain should we search his writings for knowledge of antiquity, the character of primitive society, or a description of the heroic ages, whose morals and prejudices lived until the last days of the republic. Vico, painting the Romans with their horrible traits, represents them as excusable, because he shows that all their conduct was governed by preexisting ideas and customs, and that they were informed, so to speak, by a superior genius of which they were unconscious; in Montesquieu, the Roman atrocity revolts, but is not explained. Therefore, as a writer, Montesquieu brings greater credit upon French literature; as a philosopher, Vico bears away the palm. Originally, property in Rome was national, not private. Numa was the first to establish individual property by distributing the lands captured by Romulus. What was the dividend of this distribution effected by Numa? What conditions were imposed upon individuals, what powers reserved to the State? None whatever. Inequality of fortunes, absolute abdication by the republic of its right of eminent domain over the property of citizens,--such were the first results of the division of Numa, who justly may be regarded as the originator of Roman revolutions. He it was who instituted the worship of the god Terminus,--the guardian of private possession, and one of the most ancient gods of Italy. It was Numa who placed property under the protection of Jupiter; who, in imitation of the Etrurians, wished to make priests of the land-surveyors; who invented a liturgy for cadastral operations, and ceremonies of consecration for the marking of boundaries,--who, in short, made a religion of property. [51] All these fancies would have been more beneficial than dangerous, if the holy king had not forgotten one essential thing; namely, to fix the amount that each citizen could possess, and on what conditions he could possess it. For, since it is the essence of property to continually increase by accession and profit, and since the lender will take advantage of every opportunity to apply this principle inherent in property, it follows that properties tend, by means of their natural energy and the religious respect which protects them, to absorb each other, and fortunes to increase or diminish to an indefinite extent,--a process which necessarily results in the ruin of the people, and the fall of the republic. Roman history is but the development of this law. Scarcely had the Tarquins been banished from Rome and the monarchy abolished, when quarrels commenced between the orders. In the year 494 B.C., the secession of the commonalty to the Mons Sacer led to the establishment of the tribunate. Of what did the plebeians complain? That they were poor, exhausted by the interest which they paid to the proprietors,--_foeneratoribus;_ that the republic, administered for the benefit of the nobles, did nothing for the people; that, delivered over to the mercy of their creditors, who could sell them and their children, and having neither hearth nor home, they were refused the means of subsistence, while the rate of interest was kept at its highest point, &c. For five centuries, the sole policy of the Senate was to evade these just complaints; and, notwithstanding the energy of the tribunes, notwithstanding the eloquence of the Gracchi, the violence of Marius, and the triumph of Caesar, this execrable policy succeeded only too well. The Senate always temporized; the measures proposed by the tribunes might be good, but they were inopportune. It admitted that something should be done; but first it was necessary that the people should resume the performance of their duties, because the Senate could not yield to violence, and force must be employed only by the law. If the people--out of respect for legality--took this beautiful advice, the Senate conjured up a difficulty; the reform was postponed, and that was the end of it. On the contrary, if the demands of the proletaires became too pressing, it declared a foreign war, and neighboring nations were deprived of their liberty, to maintain the Roman aristocracy. But the toils of war were only a halt for the plebeians in their onward march towards pauperism. The lands confiscated from the conquered nations were immediately added to the domain of the State, to the ager publicus; and, as such, cultivated for the benefit of the treasury; or, as was more often the case, they were sold at auction. None of them were granted to the proletaires, who, unlike the patricians and knights, were not supplied by the victory with the means of buying them. War never enriched the soldier; the extensive plundering has been done always by the generals. The vans of Augereau, and of twenty others, are famous in our armies; but no one ever heard of a private getting rich. Nothing was more common in Rome than charges of peculation, extortion, embezzlement, and brigandage, carried on in the provinces at the head of armies, and in other public capacities. All these charges were quieted by intrigue, bribery of the judges, or desistance of the accuser. The culprit was allowed always in the end to enjoy his spoils in peace; his son was only the more respected on account of his father's crimes. And, in fact, it could not be otherwise. What would become of us, if every deputy, peer, or public functionary should be called upon to show his title to his fortune! "The patricians arrogated the exclusive enjoyment of the ager publicus; and, like the feudal seigniors, granted some portions of their lands to their dependants,--a wholly precarious concession, revocable at the will of the grantor. The plebeians, on the contrary, were entitled to the enjoyment of only a little pasture-land left to them in common: an utterly unjust state of things, since, in consequence of it, taxation--_census_--weighed more heavily upon the poor than upon the rich. The patrician, in fact, always exempted himself from the tithe which he owed as the price and as the acknowledgment of the concession of domain; and, on the other hand, paid no taxes on his POSSESSIONS, if, as there is good reason to believe, only citizens' property was taxed."--Laboulaye: History of Property. In order thoroughly to understand the preceding quotation, we must know that the estates of CITIZENS--that is, estates independent of the public domain, whether they were obtained in the division of Numa, or had since been sold by the questors--were alone regarded as PROPERTY; upon these a tax, or _cense_, was imposed. On the contrary, the estates obtained by concessions of the public domain, of the ager publicus (for which a light rent was paid), were called POSSESSIONS. Thus, among the Romans, there was a RIGHT OF PROPERTY and a RIGHT OF POSSESSION regulating the administration of all estates. Now, what did the proletaires wish? That the jus possessionis--the simple right of possession--should be extended to them at the expense, as is evident, not of private property, but of the public domain,--agri publici. The proletaires, in short, demanded that they should be tenants of the land which they had conquered. This demand, the patricians in their avarice never would accede to. Buying as much of this land as they could, they afterwards found means of obtaining the rest as POSSESSIONS. Upon this land they employed their slaves. The people, who could not buy, on account of the competition of the rich, nor hire, because--cultivating with their own hands--they could not promise a rent equal to the revenue which the land would yield when cultivated by slaves, were always deprived of possession and property. Civil wars relieved, to some extent, the sufferings of the multitude. "The people enrolled themselves under the banners of the ambitious, in order to obtain by force that which the law refused them,--property. A colony was the reward of a victorious legion. But it was no longer the ager publicus only; it was all Italy that lay at the mercy of the legions. The ager publicus disappeared almost entirely,... but the cause of the evil--accumulated property--became more potent than ever." (Laboulaye: History of Property.) The author whom I quote does not tell us why this division of territory which followed civil wars did not arrest the encroachments of accumulated property; the omission is easily supplied. Land is not the only requisite for cultivation; a working-stock is also necessary,--animals, tools, harnesses, a house, an advance, &c. Where did the colonists, discharged by the dictator who rewarded them, obtain these things? From the purse of the usurers; that is, of the patricians, to whom all these lands finally returned, in consequence of the rapid increase of usury, and the seizure of estates. Sallust, in his account of the conspiracy of Catiline, tells us of this fact. The conspirators were old soldiers of Sylla, who, as a reward for their services, had received from him lands in Cisalpine Gaul, Tuscany, and other parts of the peninsula Less than twenty years had elapsed since these colonists, free of debt, had left the service and commenced farming; and already they were crippled by usury, and almost ruined. The poverty caused by the exactions of creditors was the life of this conspiracy which well-nigh inflamed all Italy, and which, with a worthier chief and fairer means, possibly would have succeeded. In Rome, the mass of the people were favorable to the conspirators--_cuncta plebes Catilinae incepta probabat;_ the allies were weary of the patricians' robberies; deputies from the Allobroges (the Savoyards) had come to Rome to appeal to the Senate in behalf of their fellow-citizens involved in debt; in short, the complaint against the large proprietors was universal. "We call men and gods to witness," said the soldiers of Catiline, who were Roman citizens with not a slave among them, "that we have taken arms neither against the country, nor to attack any one, but in defence of our lives and liberties. Wretched, poor, most of us deprived of country, all of us of fame and fortune, by the violence and cruelty of usurers, we have no rights, no property, no liberty." [52] The bad reputation of Catiline, and his atrocious designs, the imprudence of his accomplices, the treason of several, the strategy of Cicero, the angry outbursts of Cato, and the terror of the Senate, baffled this enterprise, which, in furnishing a precedent for expeditions against the rich, would perhaps have saved the republic, and given peace to the world. But Rome could not evade her destiny; the end of her expiations had not come. A nation never was known to anticipate its punishment by a sudden and unexpected conversion. Now, the long-continued crimes of the Eternal City could not be atoned for by the massacre of a few hundred patricians. Catiline came to stay divine vengeance; therefore his conspiracy failed. The encroachment of large proprietors upon small proprietors, by the aid of usury, farm-rent, and profits of all sorts, was common throughout the empire. The most honest citizens invested their money at high rates of interest. [53] Cato, Cicero, Brutus, all the stoics so noted for their frugality, _viri frugi_,--Seneca, the teacher of virtue,--levied enormous taxes in the provinces, under the name of usury; and it is something remarkable, that the last defenders of the republic, the proud Pompeys, were all usurious aristocrats, and oppressors of the poor. But the battle of Pharsalus, having killed men only, without touching institutions, the encroachments of the large domains became every day more active. Ever since the birth of Christianity, the Fathers have opposed this invasion with all their might. Their writings are filled with burning curses upon this crime of usury, of which Christians are not always innocent. St. Cyprian complains of certain bishops of his time, who, absorbed in disgraceful stock-jobbing operations, abandoned their churches, and went about the provinces appropriating lands by artifice and fraud, while lending money and piling up interests upon interests. [54] Why, in the midst of this passion for accumulation, did not the possession of the public land, like private property, become concentrated in a few hands? By law, the domain of the State was inalienable, and consequently possession was always revocable; but the edict of the praetor continued it indefinitely, so that finally the possessions of the patricians were transformed into absolute property, though the name, possessions, was still applied to them. This conversion, instigated by senatorial avarice; owed its accomplishment to the most deplorable and indiscreet policy. If, in the time of Tiberius Gracchus, who wished to limit each citizen's possession of the ager publicus to five hundred acres, the amount of this possession had been fixed at as much as one family could cultivate, and granted on the express condition that the possessor should cultivate it himself, and should lease it to no one, the empire never would have been desolated by large estates; and possession, instead of increasing property, would have absorbed it. On what, then, depended the establishment and maintenance of equality in conditions and fortunes? On a more equitable division of the ager publicus, a wiser distribution of the right of possession. I insist upon this point, which is of the utmost importance, because it gives us an opportunity to examine the history of this individual possession, of which I said so much in my first memoir, and which so few of my readers seem to have understood. The Roman republic--having, as it did, the power to dispose absolutely of its territory, and to impose conditions upon possessors--was nearer to liberty and equality than any nation has been since. If the Senate had been intelligent and just,--if, at the time of the retreat to the Mons Sacer, instead of the ridiculous farce enacted by Menenius Agrippa, a solemn renunciation of the right to acquire had been made by each citizen on attaining his share of possessions,--the republic, based upon equality of possessions and the duty of labor, would not, in attaining its wealth, have degenerated in morals; Fabricius would have enjoyed the arts without controlling artists; and the conquests of the ancient Romans would have been the means of spreading civilization, instead of the series of murders and robberies that they were. But property, having unlimited power to amass and to lease, was daily increased by the addition of new possessions. From the time of Nero, six individuals were the sole proprietors of one-half of Roman Africa. In the fifth century, the wealthy families had incomes of no less than two millions: some possessed as many as twenty thousand slaves. All the authors who have written upon the causes of the fall of the Roman republic concur. M. Giraud of Aix [55] quotes the testimony of Cicero, Seneca, Plutarch, Olympiodorus, and Photius. Under Vespasian and Titus, Pliny, the naturalist, exclaimed: "Large estates have ruined Italy, and are ruining the provinces." But it never has been understood that the extension of property was effected then, as it is to-day, under the aegis of the law, and by virtue of the constitution. When the Senate sold captured lands at auction, it was in the interest of the treasury and of public welfare. When the patricians bought up possessions and property, they realized the purpose of the Senate's decrees; when they lent at high rates of interest, they took advantage of a legal privilege. "Property," said the lender, "is the right to enjoy even to the extent of abuse, _jus utendi et abutendi_; that is, the right to lend at interest,--to lease, to acquire, and then to lease and lend again." But property is also the right to exchange, to transfer, and to sell. If, then, the social condition is such that the proprietor, ruined by usury, may be compelled to sell his possession, the means of his subsistence, he will sell it; and, thanks to the law, accumulated property--devouring and anthropophagous property--will be established.[56] The immediate and secondary cause of the decline of the Romans was, then, the internal dissensions between the two orders of the republic,--the patricians and the plebeians,--dissensions which gave rise to civil wars, proscriptions, and loss of liberty, and finally led to the empire; but the primary and mediate cause of their decline was the establishment by Numa of the institution of property. I end with an extract from a work which I have quoted several times already, and which has recently received a prize from the Academy of Moral and Political Sciences:-- "The concentration of property," says M. Laboulaye, "while causing extreme poverty, forced the emperors to feed and amuse the people, that they might forget their misery. _Panem et circenses:_ that was the Roman law in regard to the poor; a dire and perhaps a necessary evil wherever a landed aristocracy exists. "To feed these hungry mouths, grain was brought from Africa and the provinces, and distributed gratuitously among the needy. In the time of Caesar, three hundred and twenty thousand people were thus fed. Augustus saw that such a measure led directly to the destruction of husbandry; but to abolish these distributions was to put a weapon within the reach of the first aspirant for power. "The emperor shrank at the thought. "While grain was gratuitous, agriculture was impossible. Tillage gave way to pasturage, another cause of depopulation, even among slaves. "Finally, luxury, carried further and further every day, covered the soil of Italy with elegant villas, which occupied whole cantons. Gardens and groves replaced the fields, and the free population fled to the towns. Husbandry disappeared almost entirely, and with husbandry the husbandman. Africa furnished the wheat, and Greece the wine. Tiberius complained bitterly of this evil, which placed the lives of the Roman people at the mercy of the winds and waves: that was his anxiety. One day later, and three hundred thousand starving men walked the streets of Rome: that was a revolution. "This decline of Italy and the provinces did not stop. After the reign of Nero, depopulation commenced in towns as noted as Antium and Tarentum. Under the reign of Pertinax, there was so much desert land that the emperor abandoned it, even that which belonged to the treasury, to whoever would cultivate it, besides exempting the farmers from taxation for a period of ten years. Senators were compelled to invest one-third of their fortunes in real estate in Italy; but this measure served only to increase the evil which they wished to cure. To force the rich to possess in Italy was to increase the large estates which had ruined the country. And must I say, finally, that Aurelian wished to send the captives into the desert lands of Etruria, and that Valentinian was forced to settle the Alamanni on the fertile banks of the Po?" If the reader, in running through this book, should complain of meeting with nothing but quotations from other works, extracts from journals and public lectures, comments upon laws, and interpretations of them, I would remind him that the very object of this memoir is to establish the conformity of my opinion concerning property with that universally held; that, far from aiming at a paradox, it has been my main study to follow the advice of the world; and, finally, that my sole pretension is to clearly formulate the general belief. I cannot repeat it too often,--and I confess it with pride,--I teach absolutely nothing that is new; and I should regard the doctrine which I advocate as radically erroneous, if a single witness should testify against it. Let us now trace the revolutions in property among the Barbarians. As long as the German tribes dwelt in their forests, it did not occur to them to divide and appropriate the soil. The land was held in common: each individual could plow, sow, and reap. But, when the empire was once invaded, they bethought themselves of sharing the land, just as they shared spoils after a victory. "Hence," says M. Laboulaye, "the expressions _sortes Burgundiorum Gothorum_ and {GREEK, ' k }; hence the German words _allod_, allodium, and _loos_, lot, which are used in all modern languages to designate the gifts of chance." Allodial property, at least with the mass of coparceners, was originally held, then, in equal shares; for all of the prizes were equal, or, at least, equivalent. This property, like that of the Romans, was wholly individual, independent, exclusive, transferable, and consequently susceptible of accumulation and invasion. But, instead of its being, as was the case among the Romans, the large estate which, through increase and usury, subordinated and absorbed the small one, among the Barbarians--fonder of war than of wealth, more eager to dispose of persons than to appropriate things--it was the warrior who, through superiority of arms, enslaved his adversary. The Roman wanted matter; the Barbarian wanted man. Consequently, in the feudal ages, rents were almost nothing,--simply a hare, a partridge, a pie, a few pints of wine brought by a little girl, or a Maypole set up within the suzerain's reach. In return, the vassal or incumbent had to follow the seignior to battle (a thing which happened almost every day), and equip and feed himself at his own expense. "This spirit of the German tribes--this spirit of companionship and association--governed the territory as it governed individuals. The lands, like the men, were secured to a chief or seignior by a bond of mutual protection and fidelity. This subjection was the labor of the German epoch which gave birth to feudalism. By fair means or foul, every proprietor who could not be a chief was forced to be a vassal." (Laboulaye: History of Property.) By fair means or foul, every mechanic who cannot be a master has to be a journeyman; every proprietor who is not an invader will be invaded; every producer who cannot, by the exploitation of other men, furnish products at less than their proper value, will lose his labor. Corporations and masterships, which are hated so bitterly, but which will reappear if we are not careful, are the necessary results of the principle of competition which is inherent in property; their organization was patterned formerly after that of the feudal hierarchy, which was the result of the subordination of men and possessions. The times which paved the way for the advent of feudalism and the reappearance of large proprietors were times of carnage and the most frightful anarchy. Never before had murder and violence made such havoc with the human race. The tenth century, among others, if my memory serves me rightly, was called the CENTURY OF IRON. His property, his life, and the honor of his wife and children always in danger the small proprietor made haste to do homage to his seignior, and to bestow something on the church of his freehold, that he might receive protection and security. "Both facts and laws bear witness that from the sixth to the tenth century the proprietors of small freeholds were gradually plundered, or reduced by the encroachments of large proprietors and counts to the condition of either vassals or tributaries. The Capitularies are full of repressive provisions; but the incessant reiteration of these threats only shows the perseverance of the evil and the impotency of the government. Oppression, moreover, varies but little in its methods. The complaints of the free proprietors, and the groans of the plebeians at the time of the Gracchi, were one and the same. It is said that, whenever a poor man refused to give his estate to the bishop, the curate, the count, the judge, or the centurion, these immediately sought an opportunity to ruin him. They made him serve in the army until, completely ruined, he was induced, by fair means or foul, to give up his freehold."--Laboulaye: History of Property. How many small proprietors and manufacturers have not been ruined by large ones through chicanery, law-suits, and competition? Strategy, violence, and usury,--such are the proprietor's methods of plundering the laborer. Thus we see property, at all ages and in all its forms, oscillating by virtue of its principle between two opposite terms,--extreme division and extreme accumulation. Property, at its first term, is almost null. Reduced to personal exploitation, it is property only potentially. At its second term, it exists in its perfection; then it is truly property. When property is widely distributed, society thrives, progresses, grows, and rises quickly to the zenith of its power. Thus, the Jews, after leaving Babylon with Esdras and Nehemiah, soon became richer and more powerful than they had been under their kings. Sparta was in a strong and prosperous condition during the two or three centuries which followed the death of Lycurgus. The best days of Athens were those of the Persian war; Rome, whose inhabitants were divided from the beginning into two classes,--the exploiters and the exploited,--knew no such thing as peace. When property is concentrated, society, abusing itself, polluted, so to speak, grows corrupt, wears itself out--how shall I express this horrible idea?--plunges into long-continued and fatal luxury. When feudalism was established, society had to die of the same disease which killed it under the Caesars,--I mean accumulated property. But humanity, created for an immortal destiny, is deathless; the revolutions which disturb it are purifying crises, invariably followed by more vigorous health. In the fifth century, the invasion of the Barbarians partially restored the world to a state of natural equality. In the twelfth century, a new spirit pervading all society gave the slave his rights, and through justice breathed new life into the heart of nations. It has been said, and often repeated, that Christianity regenerated the world. That is true; but it seems to me that there is a mistake in the date. Christianity had no influence upon Roman society; when the Barbarians came, that society had disappeared. For such is God's curse upon property; every political organization based upon the exploitation of man, shall perish: slave-labor is death to the race of tyrants. The patrician families became extinct, as the feudal families did, and as all aristocracies must. It was in the middle ages, when a reactionary movement was beginning to secretly undermine accumulated property, that the influence of Christianity was first exercised to its full extent. The destruction of feudalism, the conversion of the serf into the commoner, the emancipation of the communes, and the admission of the Third Estate to political power, were deeds accomplished by Christianity exclusively. I say Christianity, not ecclesiasticism; for the priests and bishops were themselves large proprietors, and as such often persecuted the villeins. Without the Christianity of the middle ages, the existence of modern society could not be explained, and would not be possible. The truth of this assertion is shown by the very facts which M. Laboulaye quotes, although this author inclines to the opposite opinion. [57] Now, we did not commence to love God and to think of our salvation until after the promulgation of the Gospel. 1. Slavery among the Romans.--"The Roman slave was, in the eyes of the law, only a thing,--no more than an ox or a horse. He had neither property, family, nor personality; he was defenceless against his master's cruelty, folly, or cupidity. 'Sell your oxen that are past use,' said Cato, 'sell your calves, your lambs, your wool, your hides, your old ploughs, your old iron, your old slave, and your sick slave, and all that is of no use to you.' When no market could be found for the slaves that were worn out by sickness or old age, they were abandoned to starvation. Claudius was the first defender of this shameful practice." "Discharge your old workman," says the economist of the proprietary school; "turn off that sick domestic, that toothless and worn-out servant. Put away the unserviceable beauty; to the hospital with the useless mouths!" "The condition of these wretched beings improved but little under the emperors; and the best that can be said of the goodness of Antoninus is that he prohibited intolerable cruelty, as an ABUSE OF PROPERTY. _Expedit enim reipublicae ne quis re re sua male utatur_, says Gaius. "As soon as the Church met in council, it launched an anathema against the masters who had exercised over their slaves this terrible right of life and death. Were not the slaves, thanks to the right of sanctuary and to their poverty, the dearest proteges of religion? Constantine, who embodied in the laws the grand ideas of Christianity, valued the life of a slave as highly as that of a freeman, and declared the master, who had intentionally brought death upon his slave, guilty of murder. Between this law and that of Antoninus there is a complete revolution in moral ideas: the slave was a thing; religion has made him a man." Note the last words: "Between the law of the Gospel and that of Antoninus there is a complete revolution in moral ideas: the slave was a thing; religion has made him a man." The moral revolution which transformed the slave into a citizen was effected, then, by Christianity before the Barbarians set foot upon the soil of the empire. We have only to trace the progress of this MORAL revolution in the PERSONNEL of society. "But," M. Laboulaye rightly says, "it did not change the condition of men in a moment, any more than that of things; between slavery and liberty there was an abyss which could not be filled in a day; the transitional step was servitude." Now, what was servitude? In what did it differ from Roman slavery, and whence came this difference? Let the same author answer. 2. Of servitude.--"I see, in the lord's manor, slaves charged with domestic duties. Some are employed in the personal service of the master; others are charged with household cares. The women spin the wool; the men grind the grain, make the bread, or practise, in the interest of the seignior, what little they know of the industrial arts. The master punishes them when he chooses, kills them with impunity, and sells them and theirs like so many cattle. The slave has no personality, and consequently no _wehrgeld_ [59] peculiar to himself: he is a thing. The _wehrgeld_ belongs to the master as a compensation for the loss of his property. Whether the slave is killed or stolen, the indemnity does not change, for the injury is the same; but the indemnity increases or diminishes according to the value of the serf. In all these particulars Germanic slavery and Roman servitude are alike." This similarity is worthy of notice. Slavery is always the same, whether in a Roman villa or on a Barbarian farm. The man, like the ox and the ass, is a part of the live-stock; a price is set upon his head; he is a tool without a conscience, a chattel without personality, an impeccable, irresponsible being, who has neither rights nor duties. Why did his condition improve? "In good season..." [when?] "the serf began to be regarded as a man; and, as such, the law of the Visigoths, under the influence of Christian ideas, punished with fine or banishment any one who maimed or killed him." Always Christianity, always religion, though we should like to speak of the laws only. Did the philanthropy of the Visigoths make its first appearance before or after the preaching of the Gospel? This point must be cleared up. "After the conquest, the serfs were scattered over the large estates of the Barbarians, each having his house, his lot, and his peculium, in return for which he paid rent and performed service. They were rarely separated from their homes when their land was sold; they and all that they had became the property of the purchaser. The law favored this realization of the serf, in not allowing him to be sold out of the country." What inspired this law, destructive not only of slavery, but of property itself? For, if the master cannot drive from his domain the slave whom he has once established there, it follows that the slave is proprietor, as well as the master. "The Barbarians," again says M. Laboulaye, "were the first to recognize the slave's rights of family and property,--two rights which are incompatible with slavery." But was this recognition the necessary result of the mode of servitude in vogue among the Germanic nations previous to their conversion to Christianity, or was it the immediate effect of that spirit of justice infused with religion, by which the seignior was forced to respect in the serf a soul equal to his own, a brother in Jesus Christ, purified by the same baptism, and redeemed by the same sacrifice of the Son of God in the form of man? For we must not close our eyes to the fact that, though the Barbarian morals and the ignorance and carelessness of the seigniors, who busied themselves mainly with wars and battles, paying little or no attention to agriculture, may have been great aids in the emancipation of the serfs, still the vital principle of this emancipation was essentially Christian. Suppose that the Barbarians had remained Pagans in the midst of a Pagan world. As they did not change the Gospel, so they would not have changed the polytheistic customs; slavery would have remained what it was; they would have continued to kill the slaves who were desirous of liberty, family, and property; whole nations would have been reduced to the condition of Helots; nothing would have changed upon the terrestrial stage, except the actors. The Barbarians were less selfish, less imperious, less dissolute, and less cruel than the Romans. Such was the nature upon which, after the fall of the empire and the renovation of society, Christianity was to act. But this nature, grounded as in former times upon slavery and war, would, by its own energy, have produced nothing but war and slavery. "GRADUALLY the serfs obtained the privilege of being judged by the same standard as their masters...." When, how, and by what title did they obtain this privilege? "GRADUALLY their duties were regulated." Whence came the regulations? Who had the authority to introduce them? "The master took a part of the labor of the serf,--three days, for instance,--and left the rest to him. As for Sunday, that belonged to God." And what established Sunday, if not religion? Whence I infer, that the same power which took it upon itself to suspend hostilities and to lighten the duties of the serf was also that which regulated the judiciary and created a sort of law for the slave. But this law itself, on what did it bear?--what was its principle?--what was the philosophy of the councils and popes with reference to this matter? The reply to all these questions, coming from me alone, would be distrusted. The authority of M. Laboulaye shall give credence to my words. This holy philosophy, to which the slaves were indebted for every thing, this invocation of the Gospel, was an anathema against property. The proprietors of small freeholds, that is, the freemen of the middle class, had fallen, in consequence of the tyranny of the nobles, into a worse condition than that of the tenants and serfs. "The expenses of war weighed less heavily upon the serf than upon the freeman; and, as for legal protection, the seigniorial court, where the serf was judged by his peers, was far preferable to the cantonal assembly. It was better to have a noble for a seignior than for a judge." So it is better to-day to have a man of large capital for an associate than for a rival. The honest tenant--the laborer who earns weekly a moderate but constant salary--is more to be envied than the independent but small farmer, or the poor licensed mechanic. At that time, all were either seigniors or serfs, oppressors or oppressed. "Then, under the protection of convents, or of the seigniorial turret, new societies were formed, which silently spread over the soil made fertile by their hands, and which derived their power from the annihilation of the free classes whom they enlisted in their behalf. As tenants, these men acquired, from generation to generation, sacred rights over the soil which they cultivated in the interest of lazy and pillaging masters. As fast as the social tempest abated, it became necessary to respect the union and heritage of these villeins, who by their labor had truly prescribed the soil for their own profit." I ask how prescription could take effect where a contrary title and possession already existed? M. Laboulaye is a lawyer. Where, then, did he ever see the labor of the slave and the cultivation by the tenant prescribe the soil for their own profit, to the detriment of a recognized master daily acting as a proprietor? Let us not disguise matters. As fast as the tenants and the serfs grew rich, they wished to be independent and free; they commenced to associate, unfurl their municipal banners, raise belfries, fortify their towns, and refuse to pay their seigniorial dues. In doing these things they were perfectly right; for, in fact, their condition was intolerable. But in law--I mean in Roman and Napoleonic law--their refusal to obey and pay tribute to their masters was illegitimate. Now, this imperceptible usurpation of property by the commonalty was inspired by religion. The seignior had attached the serf to the soil; religion granted the serf rights over the soil. The seignior imposed duties upon the serf; religion fixed their limits. The seignior could kill the serf with impunity, could deprive him of his wife, violate his daughter, pillage his house, and rob him of his savings; religion checked his invasions: it excommunicated the seignior. Religion was the real cause of the ruin of feudal property. Why should it not be bold enough to-day to resolutely condemn capitalistic property? Since the middle ages, there has been no change in social economy except in its forms; its relations remain unaltered. The only result of the emancipation of the serfs was that property changed hands; or, rather, that new proprietors were created. Sooner or later the extension of privilege, far from curing the evil, was to operate to the disadvantage of the plebeians. Nevertheless, the new social organization did not meet with the same end in all places. In Lombardy, for example, where the people rapidly growing rich through commerce and industry soon conquered the authorities, even to the exclusion of the nobles,--first, the nobility became poor and degraded, and were forced, in order to live and maintain their credit, to gain admission to the guilds; then, the ordinary subalternization of property leading to inequality of fortunes, to wealth and poverty, to jealousies and hatreds, the cities passed rapidly from the rankest democracy under the yoke of a few ambitious leaders. Such was the fate of most of the Lombardic cities,--Genoa, Florence, Bologna, Milan, Pisa, &c,.--which afterwards changed rulers frequently, but which have never since risen in favor of liberty. The people can easily escape from the tyranny of despots, but they do not know how to throw off the effects of their own despotism; just as we avoid the assassin's steel, while we succumb to a constitutional malady. As soon as a nation becomes proprietor, either it must perish, or a foreign invasion must force it again to begin its evolutionary round. [59] "The communes once organized, the kings treated them as superior vassals. Now, just as the under vassal had no communication with the king except through the direct vassal, so also the commoners could enter no complaints except through the commune. "Like causes produce like effects. Each commune became a small and separate State, governed by a few citizens, who sought to extend their authority over the others; who, in their turn, revenged themselves upon the unfortunate inhabitants who had not the right of citizenship. Feudalism in unemancipated countries, and oligarchy in the communes, made nearly the same ravages. There were sub-associations, fraternities, tradesmen's associations in the communes, and colleges in the universities. The oppression was so great, that it was no rare thing to see the inhabitants of a commune demanding its suppression...."--Meyer: Judicial Institutions of Europe. In France, the Revolution was much more gradual. The communes, in taking refuge under the protection of the kings, had found them masters rather than protectors. Their liberty had long since been lost, or, rather, their emancipation had been suspended, when feudalism received its death-blow at the hand of Richelieu. Then liberty halted; the prince of the feudatories held sole and undivided sway. The nobles, the clergy, the commoners, the parliaments, every thing in short except a few seeming privileges, were controlled by the king; who, like his early predecessors, consumed regularly, and nearly always in advance, the revenues of his domain,--and that domain was France. Finally, '89 arrived; liberty resumed its march; a century and a half had been required to wear out the last form of feudal property,--monarchy. The French Revolution may be defined as _the substitution of real right for personal right;_ that is to say, in the days of feudalism, the value of property depended upon the standing of the proprietor, while, after the Revolution, the regard for the man was proportional to his property. Now, we have seen from what has been said in the preceding pages, that this recognition of the right of laborers had been the constant aim of the serfs and communes, the secret motive of their efforts. The movement of '89 was only the last stage of that long insurrection. But it seems to me that we have not paid sufficient attention to the fact that the Revolution of 1789, instigated by the same causes, animated by the same spirit, triumphing by the same struggles, was consummated in Italy four centuries ago. Italy was the first to sound the signal of war against feudalism; France has followed; Spain and England are beginning to move; the rest still sleep. If a grand example should be given to the world, the day of trial would be much abridged. Note the following summary of the revolutions of property, from the days of the Roman Empire down to the present time:-- 1. Fifth century.--Barbarian invasions; division of the lands of the empire into independent portions or freeholds. 2. From the fifth to the eighth century.--Gradual concentration of freeholds, or transformation of the small freeholds into fiefs, feuds, tenures, &c. Large properties, small possessions. Charlemagne (771-814) decrees that all freeholds are dependent upon the king of France. 3. From the eighth to the tenth century.--The relation between the crown and the superior dependents is broken; the latter becoming freeholders, while the smaller dependents cease to recognize the king, and adhere to the nearest suzerain. Feudal system. 4. Twelfth century.--Movement of the serfs towards liberty; emancipation of the communes. 5. Thirteenth century.--Abolition of personal right, and of the feudal system in Italy. Italian Republics. 6. Seventeenth century.--Abolition of feudalism in France during Richelieu's ministry. Despotism. 7. 1789.--Abolition of all privileges of birth, caste, provinces, and corporations; equality of persons and of rights. French democracy. 8. 1830.--The principle of concentration inherent in individual property is REMARKED. Development of the idea of association. The more we reflect upon this series of transformations and changes, the more clearly we see that they were necessary in their principle, in their manifestations, and in their result. It was necessary that inexperienced conquerors, eager for liberty, should divide the Roman Empire into a multitude of estates, as free and independent as themselves. It was necessary that these men, who liked war even better than liberty, should submit to their leaders; and, as the freehold represented the man, that property should violate property. It was necessary that, under the rule of a nobility always idle when not fighting, there should grow up a body of laborers, who, by the power of production, and by the division and circulation of wealth, would gradually gain control over commerce, industry, and a portion of the land, and who, having become rich, would aspire to power and authority also. It was necessary, finally, that liberty and equality of rights having been achieved, and individual property still existing, attended by robbery, poverty, social inequality, and oppression, there should be an inquiry into the cause of this evil, and an idea of universal association formed, whereby, on condition of labor, all interests should be protected and consolidated. "Evil, when carried too far," says a learned jurist, "cures itself; and the political innovation which aims to increase the power of the State, finally succumbs to the effects of its own work. The Germans, to secure their independence, chose chiefs; and soon they were oppressed by their kings and noblemen. The monarchs surrounded themselves with volunteers, in order to control the freemen; and they found themselves dependent upon their proud vassals. The _missi dominici_ were sent into the provinces to maintain the power of the emperors, and to protect the people from the oppressions of the noblemen; and not only did they usurp the imperial power to a great extent, but they dealt more severely with the inhabitants. The freemen became vassals, in order to get rid of military service and court duty; and they were immediately involved in all the personal quarrels of their seigniors, and compelled to do jury duty in their courts.... The kings protected the cities and the communes, in the hope of freeing them from the yoke of the grand vassals, and of rendering their own power more absolute; and those same communes have, in several European countries, procured the establishment of a constitutional power, are now holding royalty in check, and are giving rise to a universal desire for political reform."--Meyer: Judicial Institutions of Europe. In recapitulation. What was feudalism? A confederation of the grand seign iors against the villeins, and against the king. [60] What is constitutional government? A confederation of the bourgeoisie against the laborers, and against the king. [61] How did feudalism end? In the union of the communes and the royal authority. How will the bourgeoisie aristocracy end? In the union of the proletariat and the sovereign power. What was the immediate result of the struggle of the communes and the king against the seigniors? The monarchical unity of Louis XIV. What will be the result of the struggle of the proletariat and the sovereign power combined against the bourgeoisie? The absolute unity of the nation and the government. It remains to be seen whether the nation, one and supreme, will be represented in its executive and central power by ONE, by FIVE, by ONE HUNDRED, or ONE THOUSAND; that is, it remains to be seen, whether the royalty of the barricades intends to maintain itself by the people, or without the people, and whether Louis Philippe wishes his reign to be the most famous in all history. I have made this statement as brief, but at the same time as accurate as I could, neglecting facts and details, that I might give the more attention to the economical relations of society. For the study of history is like the study of the human organism; just as the latter has its system, its organs, and its functions, which can be treated separately, so the former has its ensemble, its instruments, and its causes. Of course I do not pretend that the principle of property is a complete resume of all the social forces; but, as in that wonderful machine which we call our body, the harmony of the whole allows us to draw a general conclusion from the consideration of a single function or organ, so, in discussing historical causes, I have been able to reason with absolute accuracy from a single order of facts, certain as I was of the perfect correlation which exists between this special order and universal history. As is the property of a nation, so is its family, its marriage, its religion, its civil and military organization, and its legislative and judicial institutions. History, viewed from this standpoint, is a grand and sublime psychological study. Well, sir, in writing against property, have I done more than quote the language of history? I have said to modern society,--the daughter and heiress of all preceding societies,--_Age guod agis:_ complete the task which for six thousand years you have been executing under the inspiration and by the command of God; hasten to finish your journey; turn neither to the right nor the left, but follow the road which lies before you. You seek reason, law, unity, and discipline; but hereafter you can find them only by stripping off the veils of your infancy, and ceasing to follow instinct as a guide. Awaken your sleeping conscience; open your eyes to the pure light of reflection and science; behold the phantom which troubled your dreams, and so long kept you in a state of unutterable anguish. Know thyself, O long-deluded society[1] know thy enemy!... And I have denounced property. We often hear the defenders of the right of domain quote in defence of their views the testimony of nations and ages. We can judge, from what has just been said, how far this historical argument conforms to the real facts and the conclusions of science. To complete this apology, I must examine the various theories. Neither politics, nor legislation, nor history, can be explained and understood, without a positive theory which defines their elements, and discovers their laws; in short, without a philosophy. Now, the two principal schools, which to this day divide the attention of the world, do not satisfy this condition. The first, essentially PRACTICAL in its character, confined to a statement of facts, and buried in learning, cares very little by what laws humanity develops itself. To it these laws are the secret of the Almighty, which no one can fathom without a commission from on high. In applying the facts of history to government, this school does not reason; it does not anticipate; it makes no comparison of the past with the present, in order to predict the future. In its opinion, the lessons of experience teach us only to repeat old errors, and its whole philosophy consists in perpetually retracing the tracks of antiquity, instead of going straight ahead forever in the direction in which they point. The second school may be called either FATALISTIC or PANTHEISTIC. To it the movements of empires and the revolutions of humanity are the manifestations, the incarnations, of the Almighty. The human race, identified with the divine essence, wheels in a circle of appearances, informations, and destructions, which necessarily excludes the idea of absolute truth, and destroys providence and liberty. Corresponding to these two schools of history, there are two schools of jurisprudence, similarly opposed, and possessed of the same peculiarities. 1. The practical and conventional school, to which the law is always a creation of the legislator, an expression of his will, a privilege which he condescends to grant,--in short, a gratuitous affirmation to be regarded as judicious and legitimate, no matter what it declares. 2. The fatalistic and pantheistic school, sometimes called the historical school, which opposes the despotism of the first, and maintains that law, like literature and religion, is always the expression of society,--its manifestation, its form, the external realization of its mobile spirit and its ever-changing inspirations. Each of these schools, denying the absolute, rejects thereby all positive and a priori philosophy. Now, it is evident that the theories of these two schools, whatever view we take of them, are utterly unsatisfactory: for, opposed, they form no dilemma,--that is, if one is false, it does not follow that the other is true; and, united, they do not constitute the truth, since they disregard the absolute, without which there is no truth. They are respectively a THESIS and an ANTITHESIS. There remains to be found, then, a SYNTHESIS, which, predicating the absolute, justifies the will of the legislator, explains the variations of the law, annihilates the theory of the circular movement of humanity, and demonstrates its progress. The legists, by the very nature of their studies and in spite of their obstinate prejudices, have been led irresistibly to suspect that the absolute in the science of law is not as chimerical as is commonly supposed; and this suspicion arose from their comparison of the various relations which legislators have been called upon to regulate. M. Laboulaye, the laureate of the Institute, begins his "History of Property" with these words:-- "While the law of contract, which regulates only the mutual interests of men, has not varied for centuries (except in certain forms which relate more to the proof than to the character of the obligation), the civil law of property, which regulates the mutual relations of citizens, has undergone several radical changes, and has kept pace in its variations with all the vicissitudes of society. The law of contract, which holds essentially to those principles of eternal justice which are engraven upon the depths of the human heart, is the immutable element of jurisprudence, and, in a certain sense, its philosophy. Property, on the contrary, is the variable element of jurisprudence, its history, its policy." Marvellous! There is in law, and consequently in politics, something variable and something invariable. The invariable element is obligation, the bond of justice, duty; the variable element is property,--that is, the external form of law, the subject-matter of the contract. Whence it follows that the law can modify, change, reform, and judge property. Reconcile that, if you can, with the idea of an eternal, absolute, permanent, and indefectible right. However, M. Laboulaye is in perfect accord with himself when he adds, "Possession of the soil rests solely upon force until society takes it in hand, and espouses the cause of the possessor;" [62] and, a little farther, "The right of property is not natural, but social. The laws not only protect property: they give it birth," &c. Now, that which the law has made the law can unmake; especially since, according to M. Laboulaye,--an avowed partisan of the historical or pantheistic school,--the law is not absolute, is not an idea, but a form. But why is it that property is variable, and, unlike obligation, incapable of definition and settlement? Before affirming, somewhat boldly without doubt, that in right there are no absolute principles (the most dangerous, most immoral, most tyrannical--in a word, most anti-social--assertion imaginable), it was proper that the right of property should be subjected to a thorough examination, in order to put in evidence its variable, arbitrary, and contingent elements, and those which are eternal, legitimate, and absolute; then, this operation performed, it became easy to account for the laws, and to correct all the codes. Now, this examination of property I claim to have made, and in the fullest detail; but, either from the public's lack of interest in an unrecommended and unattractive pamphlet, or--which is more probable--from the weakness of exposition and want of genius which characterize the work, the First Memoir on Property passed unnoticed; scarcely would a few communists, having turned its leaves, deign to brand it with their disapprobation. You alone, sir, in spite of the disfavor which I showed for your economical predecessors in too severe a criticism of them,--you alone have judged me justly; and although I cannot accept, at least literally, your first judgment, yet it is to you alone that I appeal from a decision too equivocal to be regarded as final. It not being my intention to enter at present into a discussion of principles, I shall content myself with estimating, from the point of view of this simple and intelligible absolute, the theories of property which our generation has produced. The most exact idea of property is given us by the Roman law, faithfully followed in this particular by the ancient legists. It is the absolute, exclusive, autocratic domain of a man over a thing,--a domain which begins by USUCAPTION, is maintained by POSSESSION, and finally, by the aid of PRESCRIPTION, finds its sanction in the civil law; a domain which so identifies the man with the thing, that the proprietor can say, "He who uses my field, virtually compels me to labor for him; therefore he owes me compensation." I pass in silence the secondary modes by which property can be acquired,--_tradition, sale, exchange, inheritance_, &c.,--which have nothing in common with the origin of property. Accordingly, Pothier said THE DOMAIN OF PROPERTY, and not simply PROPERTY. And the most learned writers on jurisprudence--in imitation of the Roman praetor who recognized a RIGHT OF PROPERTY and a RIGHT OF POSSESSION--have carefully distinguished between the DOMAIN and the right of USUFRUCT, USE, and HABITATION, which, reduced to its natural limits, is the very expression of justice; and which is, in my opinion, to supplant domanial property, and finally form the basis of all jurisprudence. But, sir, admire the clumsiness of systems, or rather the fatality of logic! While the Roman law and all the savants inspired by it teach that property in its origin is the right of first occupancy sanctioned by law, the modern legists, dissatisfied with this brutal definition, claim that property is based upon LABOR. Immediately they infer that he who no longer labors, but makes another labor in his stead, loses his right to the earnings of the latter. It is by virtue of this principle that the serfs of the middle ages claimed a legal right to property, and consequently to the enjoyment of political rights; that the clergy were despoiled in '89 of their immense estates, and were granted a pension in exchange; that at the restoration the liberal deputies opposed the indemnity of one billion francs. "The nation," said they, "has acquired by twenty-five years of labor and possession the property which the emigrants forfeited by abandonment and long idleness: why should the nobles be treated with more favor than the priests?" [63] This position is quite in harmony with my principles, and I heartily applaud the indignation of M. Lerminier; but I do not know that a proprietor was ever deprived of his property because UNWORTHY; and as reasonable, social, and even useful as the thing may seem, it is quite contrary to the uses and customs of property. All usurpations, not born of war, have been caused and supported by labor. All modern history proves this, from the end of the Roman empire down to the present day. And as if to give a sort of legal sanction to these usurpations, the doctrine of labor, subversive of property, is professed at great length in the Roman law under the name of PRESCRIPTION. The man who cultivates, it has been said, makes the land his own; consequently, no more property. This was clearly seen by the old jurists, who have not failed to denounce this novelty; while on the other hand the young school hoots at the absurdity of the first-occupant theory. Others have presented themselves, pretending to reconcile the two opinions by uniting them. They have failed, like all the _juste-milieux_ of the world, and are laughed at for their eclecticism. At present, the alarm is in the camp of the old doctrine; from all sides pour IN DEFENCES OF PROPERTY, STUDIES REGARDING PROPERTY, THEORIES OF PROPERTY, each one of which, giving the lie to the rest, inflicts a fresh wound upon property. Consider, indeed, the inextricable embarrassments, the contradictions, the absurdities, the incredible nonsense, in which the bold defenders of property so lightly involve themselves. I choose the eclectics, because, those killed, the others cannot survive. M. Troplong, jurist, passes for a philosopher in the eyes of the editors of "Le Droit." I tell the gentlemen of "Le Droit" that, in the judgment of philosophers, M. Troplong is only an advocate; and I prove my assertion. M. Troplong is a defender of progress. "The words of the code," says he, "are fruitful sap with which the classic works of the eighteenth century overflow. To wish to suppress them... is to violate the law of progress, and to forget that a science which moves is a science which grows." [64] Now, the only mutable and progressive portion of law, as we have already seen, is that which concerns property. If, then, you ask what reforms are to be introduced into the right of property? M. Troplong makes no reply; what progress is to be hoped for? no reply; what is to be the destiny of property in case of universal association? no reply; what is the absolute and what the contingent, what the true and what the false, in property? no reply. M. Troplong favors quiescence and _in statu quo_ in regard to property. What could be more unphilosophical in a progressive philosopher? Nevertheless, M. Troplong has thought about these things. "There are," he says, "many weak points and antiquated ideas in the doctrines of modern authors concerning property: witness the works of MM. Toullier and Duranton." The doctrine of M. Troplong promises, then, strong points, advanced and progressive ideas. Let us see; let us examine:-- "Man, placed in the presence of matter, is conscious of a power over it, which has been given to him to satisfy the needs of his being. King of inanimate or unintelligent nature, he feels that he has a right to modify it, govern it, and fit it for his use. There it is, the subject of property, which is legitimate only when exercised over things, never when over persons." M. Troplong is so little of a philosopher, that he does not even know the import of the philosophical terms which he makes a show of using. He says of matter that it is the SUBJECT of property; he should have said the OBJECT. M. Troplong uses the language of the anatomists, who apply the term SUBJECT to the human matter used in their experiments. This error of our author is repeated farther on: "Liberty, which overcomes matter, the subject of property, &c." The SUBJECT of property is man; its OBJECT is matter. But even this is but a slight mortification; directly we shall have some crucifixions. Thus, according to the passage just quoted, it is in the conscience and personality of man that the principle of property must be sought. Is there any thing new in this doctrine? Apparently it never has occurred to those who, since the days of Cicero and Aristotle, and earlier, have maintained that THINGS BELONG TO THE FIRST OCCUPANT, that occupation may be exercised by beings devoid of conscience and personality. The human personality, though it may be the principle or the subject of property, as matter is the object, is not the CONDITION. Now, it is this condition which we most need to know. So far, M. Troplong tells us no more than his masters, and the figures with which he adorns his style add nothing to the old idea. Property, then, implies three terms: The subject, the object, and the condition. There is no difficulty in regard to the first two terms. As to the third, the condition of property down to this day, for the Greek as for the Barbarian, has been that of first occupancy. What now would you have it, progressive doctor? "When man lays hands for the first time upon an object without a master, he performs an act which, among individuals, is of the greatest importance. The thing thus seized and occupied participates, so to speak, in the personality of him who holds it. It becomes sacred, like himself. It is impossible to take it without doing violence to his liberty, or to remove it without rashly invading his person. Diogenes did but express this truth of intuition, when he said: 'Stand out of my light!'" Very good! but would the prince of cynics, the very personal and very haughty Diogenes, have had the right to charge another cynic, as rent for this same place in the sunshine, a bone for twenty-four hours of possession? It is that which constitutes the proprietor; it is that which you fail to justify. In reasoning from the human personality and individuality to the right of property, you unconsciously construct a syllogism in which the conclusion includes more than the premises, contrary to the rules laid down by Aristotle. The individuality of the human person proves INDIVIDUAL POSSESSION, originally called _proprietas_, in opposition to collective possession, _communio_. It gives birth to the distinction between THINE and MINE, true signs of equality, not, by any means, of subordination. "From equivocation to equivocation," says M. Michelet, [65] "property would crawl to the end of the world; man could not limit it, were not he himself its limit. Where they clash, there will be its frontier." In short, individuality of being destroys the hypothesis of communism, but it does not for that reason give birth to domain,--that domain by virtue of which the holder of a thing exercises over the person who takes his place a right of prestation and suzerainty, that has always been identified with property itself. Further, that he whose legitimately acquired possession injures nobody cannot be nonsuited without flagrant injustice, is a truth, not of INTUITION, as M. Troplong says, but of INWARD SENSATION, [66] which has nothing to do with property. M. Troplong admits, then, occupancy as a condition of property. In that, he is in accord with the Roman law, in accord with MM. Toullier and Duranton; but in his opinion this condition is not the only one, and it is in this particular that his doctrine goes beyond theirs. "But, however exclusive the right arising from sole occupancy, does it not become still more so, when man has moulded matter by his labor; when he has deposited in it a portion of himself, re-creating it by his industry, and setting upon it the seal of his intelligence and activity? Of all conquests, that is the most legitimate, for it is the price of labor. "He who should deprive a man of the thing thus remodelled, thus humanized, would invade the man himself, and would inflict the deepest wounds upon his liberty." I pass over the very beautiful explanations in which M. Troplong, discussing labor and industry, displays the whole wealth of his eloquence. M. Troplong is not only a philosopher, he is an orator, an artist. HE ABOUNDS WITH APPEALS TO THE CONSCIENCE AND THE PASSIONS. I might make sad work of his rhetoric, should I undertake to dissect it; but I confine myself for the present to his philosophy. If M. Troplong had only known how to think and reflect, before abandoning the original fact of occupancy and plunging into the theory of labor, he would have asked himself: "What is it to occupy?" And he would have discovered that OCCUPANCY is only a generic term by which all modes of possession are expressed,--seizure, station, immanence, habitation, cultivation, use, consumption, &c.; that labor, consequently, is but one of a thousand forms of occupancy. He would have understood, finally, that the right of possession which is born of labor is governed by the same general laws as that which results from the simple seizure of things. What kind of a legist is he who declaims when he ought to reason, who continually mistakes his metaphors for legal axioms, and who does not so much as know how to obtain a universal by induction, and form a category? If labor is identical with occupancy, the only benefit which it secures to the laborer is the right of individual possession of the object of his labor; if it differs from occupancy, it gives birth to a right equal only to itself,--that is, a right which begins, continues, and ends, with the labor of the occupant. It is for this reason, in the words of the law, that one cannot acquire a just title to a thing by labor alone. He must also hold it for a year and a day, in order to be regarded as its possessor; and possess it twenty or thirty years, in order to become its proprietor. These preliminaries established, M. Troplong's whole structure falls of its own weight, and the inferences, which he attempts to draw, vanish. "Property once acquired by occupation and labor, it naturally preserves itself, not only by the same means, but also by the refusal of the holder to abdicate; for from the very fact that it has risen to the height of a right, it is its nature to perpetuate itself and to last for an indefinite period.... Rights, considered from an ideal point of view, are imperishable and eternal; and time, which affects only the contingent, can no more disturb them than it can injure God himself." It is astonishing that our author, in speaking of the IDEAL, TIME, and ETERNITY, did not work into his sentence the DIVINE WINGS of Plato,--so fashionable to-day in philosophical works. With the exception of falsehood, I hate nonsense more than any thing else in the world. PROPERTY ONCE ACQUIRED! Good, if it is acquired; but, as it is not acquired, it cannot be preserved. RIGHTS ARE ETERNAL! Yes, in the sight of God, like the archetypal ideas of the Platonists. But, on the earth, rights exist only in the presence of a subject, an object, and a condition. Take away one of these three things, and rights no longer exist. Thus, individual possession ceases at the death of the subject, upon the destruction of the object, or in case of exchange or abandonment. Let us admit, however, with M. Troplong, that property is an absolute and eternal right, which cannot be destroyed save by the deed and at the will of the proprietor. What are the consequences which immediately follow from this position? To show the justice and utility of prescription, M. Troplong supposes the case of a bona fide possessor whom a proprietor, long since forgotten or even unknown, is attempting to eject from his possession. "At the start, the error of the possessor was excusable but not irreparable. Pursuing its course and growing old by degrees, it has so completely clothed itself in the colors of truth, it has spoken so loudly the language of right, it has involved so many confiding interests, that it fairly may be asked whether it would not cause greater confusion to go back to the reality than to sanction the fictions which it (an error, without doubt) has sown on its way? Well, yes; it must be confessed, without hesitation, that the remedy would prove worse than the disease, and that its application would lead to the most outrageous injustice." How long since utility became a principle of law? When the Athenians, by the advice of Aristides, rejected a proposition eminently advantageous to their republic, but also utterly unjust, they showed finer moral perception and greater clearness of intellect than M. Troplong. Property is an eternal right, independent of time, indestructible except by the act and at the will of the proprietor; and here this right is taken from the proprietor, and on what ground? Good God! on the ground of ABSENCE! Is it not true that legists are governed by caprice in giving and taking away rights? When it pleases these gentlemen, idleness, unworthiness, or absence can invalidate a right which, under quite similar circumstances, labor, residence, and virtue are inadequate to obtain. Do not be astonished that legists reject the absolute. Their good pleasure is law, and their disordered imaginations are the real cause of the EVOLUTIONS in jurisprudence. "If the nominal proprietor should plead ignorance, his claim would be none the more valid. Indeed, his ignorance might arise from inexcusable carelessness, etc." What! in order to legitimate dispossession through prescription, you suppose faults in the proprietor! You blame his absence,--which may have been involuntary; his neglect,--not knowing what caused it; his carelessness,--a gratuitous supposition of your own! It is absurd. One very simple observation suffices to annihilate this theory. Society, which, they tell us, makes an exception in the interest of order in favor of the possessor as against the old proprietor, owes the latter an indemnity; since the privilege of prescription is nothing but expropriation for the sake of public utility. But here is something stronger:-- "In society a place cannot remain vacant with impunity. A new man arises in place of the old one who disappears or goes away; he brings here his existence, becomes entirely absorbed, and devotes himself to this post which he finds abandoned. Shall the deserter, then, dispute the honor of the victory with the soldier who fights with the sweat standing on his brow, and bears the burden of the day, in behalf of a cause which he deems just?" When the tongue of an advocate once gets in motion, who can tell where it will stop? M. Troplong admits and justifies usurpation in case of the ABSENCE of the proprietor, and on a mere presumption of his CARELESSNESS. But when the neglect is authenticated; when the abandonment is solemnly and voluntarily set forth in a contract in the presence of a magistrate; when the proprietor dares to say, "I cease to labor, but I still claim a share of the product,"--then the absentee's right of property is protected; the usurpation of the possessor would be criminal; farm-rent is the reward of idleness. Where is, I do not say the consistency, but, the honesty of this law? Prescription is a result of the civil law, a creation of the legislator. Why has not the legislator fixed the conditions differently?--why, instead of twenty and thirty years, is not a single year sufficient to prescribe?--why are not voluntary absence and confessed idleness as good grounds for dispossession as involuntary absence, ignorance, or apathy? But in vain should we ask M. Troplong, the philosopher, to tell us the ground of prescription. Concerning the code, M. Troplong does not reason. "The interpreter," he says, "must take things as they are, society as it exists, laws as they are made: that is the only sensible starting-point." Well, then, write no more books; cease to reproach your predecessors--who, like you, have aimed only at interpretation of the law--for having remained in the rear; talk no more of philosophy and progress, for the lie sticks in your throat. M. Troplong denies the reality of the right of possession; he denies that possession has ever existed as a principle of society; and he quotes M. de Savigny, who holds precisely the opposite position, and whom he is content to leave unanswered. At one time, M. Troplong asserts that possession and property are CONTEMPORANEOUS, and that they exist AT THE SAME TIME, which implies that the RIGHT of property is based on the FACT of possession,--a conclusion which is evidently absurd; at another, he denies that possession HAD ANY HISTORICAL EXISTENCE PRIOR TO PROPERTY,--an assertion which is contradicted by the customs of many nations which cultivate the land without appropriating it; by the Roman law, which distinguished so clearly between POSSESSION and PROPERTY; and by our code itself, which makes possession for twenty or thirty years the condition of property. Finally, M. Troplong goes so far as to maintain that the Roman maxim, _Nihil comune habet proprietas cum possessione_--which contains so striking an allusion to the possession of the _ager publicus_, and which, sooner or later, will be again accepted without qualification--expresses in French law only a judicial axiom, a simple rule forbidding the union of an _action possessoire_ with an _action petitoire_,--an opinion as retrogressive as it is unphilosophical. In treating of _actions possessoires_, M. Troplong is so unfortunate or awkward that he mutilates economy through failure to grasp its meaning "Just as property," he writes, "gave rise to the action for revendication, so possession--the _jus possessionis_--was the cause of possessory interdicts.... There were two kinds of interdicts,--the interdict _recuperandae possessionis_, and the interdict _retinendae possessionis_,--which correspond to our _complainte en cas de saisine et nouvelete_. There is also a third,--_adipiscendae possessionis_,--of which the Roman law-books speak in connection with the two others. But, in reality, this interdict is not possessory: for he who wishes to acquire possession by this means does not possess, and has not possessed; and yet acquired possession is the condition of possessory interdicts." Why is not an action to acquire possession equally conceivable with an action to be reinstated in possession? When the Roman plebeians demanded a division of the conquered territory; when the proletaires of Lyons took for their motto, _Vivre en travaillant, ou mourir en combattant_ (to live working, or die fighting); when the most enlightened of the modern economists claim for every man the right to labor and to live,--they only propose this interdict, _adipiscendae possessionis_, which embarrasses M. Troplong so seriously. And what is my object in pleading against property, if not to obtain possession? How is it that M. Troplong--the legist, the orator, the philosopher--does not see that logically this interdict must be admitted, since it is the necessary complement of the two others, and the three united form an indivisible trinity,--to RECOVER, to MAINTAIN, to ACQUIRE? To break this series is to create a blank, destroy the natural synthesis of things, and follow the example of the geometrician who tried to conceive of a solid with only two dimensions. But it is not astonishing that M. Troplong rejects the third class of _actions possessoires_, when we consider that he rejects possession itself. He is so completely controlled by his prejudices in this respect, that he is unconsciously led, not to unite (that would be horrible in his eyes), but to identify the _action possessoire_ with the _action petitoire_. This could be easily proved, were it not too tedious to plunge into these metaphysical obscurities. As an interpreter of the law, M. Troplong is no more successful than as a philosopher. One specimen of his skill in this direction, and I am done with him:-- Code of Civil Procedure, Art. 23: "_Actions possessoires_ are only when commenced within the year of trouble by those who have held possession for at least a year by an irrevocable title." M. Troplong's comments:-- "Ought we to maintain--as Duparc, Poullain, and Lanjuinais would have us--the rule _spoliatus ante omnia restituendus_, when an individual, who is neither proprietor nor annual possessor, is expelled by a third party, who has no right to the estate? I think not. Art. 23 of the Code is general: it absolutely requires that the plaintiff in _actions possessoires_ shall have been in peaceable possession for a year at least. That is the invariable principle: it can in no case be modified. And why should it be set aside? The plaintiff had no seisin; he had no privileged possession; he had only a temporary occupancy, insufficient to warrant in his favor the presumption of property, which renders the annual possession so valuable. Well! this _ae facto_ occupancy he has lost; another is invested with it: possession is in the hands of this new-comer. Now, is not this a case for the application of the principle, _In_ _pari causa possesser potior habetur_? Should not the actual possessor be preferred to the evicted possessor? Can he not meet the complaint of his adversary by saying to him: 'Prove that you were an annual possessor before me, for you are the plaintiff. As far as I am concerned, it is not for me to tell you how I possess, nor how long I have possessed. _Possideo quia possideo_. I have no other reply, no other defence. When you have shown that your action is admissible, then we will see whether you are entitled to lift the veil which hides the origin of my possession.'" And this is what is honored with the name of jurisprudence and philosophy,--the restoration of force. What! when I have "moulded matter by my labor" [I quote M. Troplong]; when I have "deposited in it a portion of myself" [M. Troplong]; when I have "re-created it by my industry, and set upon it the seal of my intelligence" [M. Troplong],--on the ground that I have not possessed it for a year, a stranger may dispossess me, and the law offers me no protection! And if M. Troplong is my judge, M. Troplong will condemn me! And if I resist my adversary,--if, for this bit of mud which I may call MY FIELD, and of which they wish to rob me, a war breaks out between the two competitors,--the legislator will gravely wait until the stronger, having killed the other, has had possession for a year! No, no, Monsieur Troplong! you do not understand the words of the law; for I prefer to call in question your intelligence rather than the justice of the legislator. You are mistaken in your application of the principle, _In pari causa possessor potior habetur:_ the actuality of possession here refers to him who possessed at the time when the difficulty arose, not to him who possesses at the time of the complaint. And when the code prohibits the reception of _actions possessoires_, in cases where the possession is not of a year's duration, it simply means that if, before a year has elapsed, the holder relinquishes possession, and ceases actually to occupy _in propria persona_, he cannot avail himself of an _action possessoire_ against his successor. In a word, the code treats possession of less than a year as it ought to treat all possession, however long it has existed,--that is, the condition of property ought to be, not merely seisin for a year, but perpetual seisin. I will not pursue this analysis farther. When an author bases two volumes of quibbles on foundations so uncertain, it may be boldly declared that his work, whatever the amount of learning displayed in it, is a mess of nonsense unworthy a critic's attention. At this point, sir, I seem to hear you reproaching me for this conceited dogmatism, this lawless arrogance, which respects nothing, claims a monopoly of justice and good sense, and assumes to put in the pillory any one who dares to maintain an opinion contrary to its own. This fault, they tell me, more odious than any other in an author, was too prominent a characteristic of my First Memoir, and I should do well to correct it. It is important to the success of my defence, that I should vindicate myself from this reproach; and since, while perceiving in myself other faults of a different character, I still adhere in this particular to my disputatious style, it is right that I should give my reasons for my conduct. I act, not from inclination, but from necessity. I say, then, that I treat my authors as I do for two reasons: a REASON OF RIGHT, and a REASON OF INTENTION; both peremptory. 1. Reason of right. When I preach equality of fortunes, I do not advance an opinion more or less probable, a utopia more or less ingenious, an idea conceived within my brain by means of imagination only. I lay down an absolute truth, concerning which hesitation is impossible, modesty superfluous, and doubt ridiculous. But, do you ask, what assures me that that which I utter is true? What assures me, sir? The logical and metaphysical processes which I use, the correctness of which I have demonstrated by a priori reasoning; the fact that I possess an infallible method of investigation and verification with which my authors are unacquainted; and finally, the fact that for all matters relating to property and justice I have found a formula which explains all legislative variations, and furnishes a key for all problems. Now, is there so much as a shadow of method in M. Toullier, M. Troplong, and this swarm of insipid commentators, almost as devoid of reason and moral sense as the code itself? Do you give the name of method to an alphabetical, chronological, analogical, or merely nominal classification of subjects? Do you give the name of method to these lists of paragraphs gathered under an arbitrary head, these sophistical vagaries, this mass of contradictory quotations and opinions, this nauseous style, this spasmodic rhetoric, models of which are so common at the bar, though seldom found elsewhere? Do you take for philosophy this twaddle, this intolerable pettifoggery adorned with a few scholastic trimmings? No, no! a writer who respects himself, never will consent to enter the balance with these manipulators of law, misnamed JURISTS; and for my part I object to a comparison. 2. Reason of intention. As far as I am permitted to divulge this secret, I am a conspirator in an immense revolution, terrible to charlatans and despots, to all exploiters of the poor and credulous, to all salaried idlers, dealers in political panaceas and parables, tyrants in a word of thought and of opinion. I labor to stir up the reason of individuals to insurrection against the reason of authorities. According to the laws of the society of which I am a member, all the evils which afflict humanity arise from faith in external teachings and submission to authority. And not to go outside of our own century, is it not true, for instance, that France is plundered, scoffed at, and tyrannized over, because she speaks in masses, and not by heads? The French people are penned up in three or four flocks, receiving their signal from a chief, responding to the voice of a leader, and thinking just as he says. A certain journal, it is said, has fifty thousand subscribers; assuming six readers to every subscriber, we have three hundred thousand sheep browsing and bleating at the same cratch. Apply this calculation to the whole periodical press, and you find that, in our free and intelligent France, there are two millions of creatures receiving every morning from the journals spiritual pasturage. Two millions! In other words, the entire nation allows a score of little fellows to lead it by the nose. By no means, sir, do I deny to journalists talent, science, love of truth, patriotism, and what you please. They are very worthy and intelligent people, whom I undoubtedly should wish to resemble, had I the honor to know them. That of which I complain, and that which has made me a conspirator, is that, instead of enlightening us, these gentlemen command us, impose upon us articles of faith, and that without demonstration or verification. When, for example, I ask why these fortifications of Paris, which, in former times, under the influence of certain prejudices, and by means of a concurrence of extraordinary circumstances supposed for the sake of the argument to have existed, may perhaps have served to protect us, but which it is doubtful whether our descendants will ever use,--when I ask, I say, on what grounds they assimilate the future to a hypothetical past, they reply that M. Thiers, who has a great mind, has written upon this subject a report of admirable elegance and marvellous clearness. At this I become angry, and reply that M. Thiers does not know what he is talking about. Why, having wanted no detached forts seven years ago, do we want them to-day? "Oh! damn it," they say, "the difference is great; the first forts were too near to us; with these we cannot be bombarded." You cannot be bombarded; but you can be blockaded, and will be, if you stir. What! to obtain blockade forts from the Parisians, it has sufficed to prejudice them against bombardment forts! And they thought to outwit the government! Oh, the sovereignty of the people!... "Damn it! M. Thiers, who is wiser than you, says that it would be absurd to suppose a government making war upon citizens, and maintaining itself by force and in spite of the will of the people. That would be absurd!" Perhaps so: such a thing has happened more than once, and may happen again. Besides, when despotism is strong, it appears almost legitimate. However that may be, they lied in 1833, and they lie again in 1841,--those who threaten us with the bomb-shell. And then, if M. Thiers is so well assured of the intentions of the government, why does he not wish the forts to be built before the circuit is extended? Why this air of suspicion of the government, unless an intrigue has been planned between the government and M. Thiers? "Damn it! we do not wish to be again invaded. If Paris had been fortified in 1815, Napoleon would not have been conquered!" But I tell you that Napoleon was not conquered, but sold; and that if, in 1815, Paris had had fortifications, it would have been with them as with the thirty thousand men of Grouchy, who were misled during the battle. It is still easier to surrender forts than to lead soldiers. Would the selfish and the cowardly ever lack reasons for yielding to the enemy? "But do you not see that the absolutist courts are provoked at our fortifications?--a proof that they do not think as you do." You believe that; and, for my part, I believe that in reality they are quite at ease about the matter; and, if they appear to tease our ministers, they do so only to give the latter an opportunity to decline. The absolutist courts are always on better terms with our constitutional monarchy, than our monarchy with us. Does not M. Guizot say that France needs to be defended within as well as without? Within! against whom? Against France. O Parisians! it is but six months since you demanded war, and now you want only barricades. Why should the allies fear your doctrines, when you cannot even control yourselves?... How could you sustain a siege, when you weep over the absence of an actress? "But, finally, do you not understand that, by the rules of modern warfare, the capital of a country is always the objective point of its assailants? Suppose our army defeated on the Rhine, France invaded, and defenceless Paris falling into the hands of the enemy. It would be the death of the administrative power; without a head it could not live. The capital taken, the nation must submit. What do you say to that?" The reply is very simple. Why is society constituted in such a way that the destiny of the country depends upon the safety of the capital? Why, in case our territory be invaded and Paris besieged, cannot the legislative, executive, and military powers act outside of Paris? Why this localization of all the vital forces of France?... Do not cry out upon decentralization. This hackneyed reproach would discredit only your own intelligence and sincerity. It is not a question of decentralization; it is your political fetichism which I attack. Why should the national unity be attached to a certain place, to certain functionaries, to certain bayonets? Why should the Place Maubert and the Palace of the Tuileries be the palladium of France? Now let me make an hypothesis. Suppose it were written in the charter, "In case the country be again invaded, and Paris forced to surrender, the government being annihilated and the national assembly dissolved, the electoral colleges shall reassemble spontaneously and without other official notice, for the purpose of appointing new deputies, who shall organize a provisional government at Orleans. "If Orleans succumbs, the government shall reconstruct itself in the same way at Lyons; then at Bordeaux, then at Bayonne, until all France be captured or the enemy driven from the land. For the government may perish, but the nation never dies. The king, the peers, and the deputies massacred, VIVE LA FRANCE!" Do you not think that such an addition to the charter would be a better safeguard for the liberty and integrity of the country than walls and bastions around Paris? Well, then! do henceforth for administration, industry, science, literature, and art that which the charter ought to prescribe for the central government and common defence. Instead of endeavoring to render Paris impregnable, try rather to render the loss of Paris an insignificant matter. Instead of accumulating about one point academies, faculties, schools, and political, administrative, and judicial centres; instead of arresting intellectual development and weakening public spirit in the provinces by this fatal agglomeration,--can you not, without destroying unity, distribute social functions among places as well as among persons? Such a system--in allowing each province to participate in political power and action, and in balancing industry, intelligence, and strength in all parts of the country--would equally secure, against enemies at home and enemies abroad, the liberty of the people and the stability of the government. Discriminate, then, between the centralization of functions and the concentration of organs; between political unity and its material symbol. "Oh! that is plausible; but it is impossible!"--which means that the city of Paris does not intend to surrender its privileges, and that there it is still a question of property. Idle talk! The country, in a state of panic which has been cleverly worked upon, has asked for fortifications. I dare to affirm that it has abdicated its sovereignty. All parties are to blame for this suicide,--the conservatives, by their acquiescence in the plans of the government; the friends of the dynasty, because they wish no opposition to that which pleases them, and because a popular revolution would annihilate them; the democrats, because they hope to rule in their turn. [67] That which all rejoice at having obtained is a means of future repression. As for the defence of the country, they are not troubled about that. The idea of tyranny dwells in the minds of all, and brings together into one conspiracy all forms of selfishness. We wish the regeneration of society, but we subordinate this desire to our ideas and convenience. That our approaching marriage may take place, that our business may succeed, that our opinions may triumph, we postpone reform. Intolerance and selfishness lead us to put fetters upon liberty; and, because we cannot wish all that God wishes, we would, if it rested with us, stay the course of destiny rather than sacrifice our own interests and self-love. Is not this an instance where the words of Solomon apply,--"_L'iniquite a menti a elle-meme_"? It is said that on this question of the fortification of Paris the staff of "Le National" are not agreed. This would prove, if proof were needed, that a journal may blunder and falsify, without entitling any one to accuse its editors. A journal is a metaphysical being, for which no one is really responsible, and which owes its existence solely to mutual concessions. This idea ought to frighten those worthy citizens who, because they borrow their opinions from a journal, imagine that they belong to a political party, and who have not the faintest suspicion that they are really without a head. For this reason, sir, I have enlisted in a desperate war against every form of authority over the multitude. Advance sentinel of the proletariat, I cross bayonets with the celebrities of the day, as well as with spies and charlatans. Well, when I am fighting with an illustrious adversary, must I stop at the end of every phrase, like an orator in the tribune, to say "the learned author," "the eloquent writer," "the profound publicist," and a hundred other platitudes with which it is fashionable to mock people? These civilities seem to me no less insulting to the man attacked than dishonorable to the aggressor. But when, rebuking an author, I say to him, "Citizen, your doctrine is absurd, and, if to prove my assertion is an offence against you, I am guilty of it," immediately the listener opens his ears; he is all attention; and, if I do not succeed in convincing him, at least I give his thought an impulse, and set him the wholesome example of doubt and free examination. Then do not think, sir, that, in tripping up the philosophy of your very learned and very estimable confrere, M. Troplong, I fail to appreciate his talent as a writer (in my opinion, he has too much for a jurist); nor his knowledge, though it is too closely confined to the letter of the law, and the reading of old books. In these particulars, M. Troplong offends on the side of excess rather than deficiency. Further, do not believe that I am actuated by any personal animosity towards him, or that I have the slightest desire to wound his self-love. I know M. Troplong only by his "Treatise on Prescription," which I wish he had not written; and as for my critics, neither M. Troplong, nor any of those whose opinion I value, will ever read me. Once more, my only object is to prove, as far as I am able, to this unhappy French nation, that those who make the laws, as well as those who interpret them, are not infallible organs of general, impersonal, and absolute reason. I had resolved to submit to a systematic criticism the semi-official defence of the right of property recently put forth by M. Wolowski, your colleague at the Conservatory. With this view, I had commenced to collect the documents necessary for each of his lectures, but, soon perceiving that the ideas of the professor were incoherent, that his arguments contradicted each other, that one affirmation was sure to be overthrown by another, and that in M. Wolowski's lucubrations the good was always mingled with the bad, and being by nature a little suspicious, it suddenly occurred to me that M. Wolowski was an advocate of equality in disguise, thrown in spite of himself into the position in which the patriarch Jacob pictures one of his sons,--_inter duas clitellas_, between two stools, as the proverb says. In more parliamentary language, I saw clearly that M. Wolowski was placed between his profound convictions on the one hand and his official duties on the other, and that, in order to maintain his position, he had to assume a certain slant. Then I experienced great pain at seeing the reserve, the circumlocution, the figures, and the irony to which a professor of legislation, whose duty it is to teach dogmas with clearness and precision, was forced to resort; and I fell to cursing the society in which an honest man is not allowed to say frankly what he thinks. Never, sir, have you conceived of such torture: I seemed to be witnessing the martyrdom of a mind. I am going to give you an idea of these astonishing meetings, or rather of these scenes of sorrow. Monday, Nov. 20, 1840.--The professor declares, in brief,--1. That the right of property is not founded upon occupation, but upon the impress of man; 2. That every man has a natural and inalienable right to the use of matter. Now, if matter can be appropriated, and if, notwithstanding, all men retain an inalienable right to the use of this matter, what is property?--and if matter can be appropriated only by labor, how long is this appropriation to continue?--questions that will confuse and confound all jurists whatsoever. Then M. Wolowski cites his authorities. Great God! what witnesses he brings forward! First, M. Troplong, the great metaphysician, whom we have discussed; then, M. Louis Blanc, editor of the "Revue du Progres," who came near being tried by jury for publishing his "Organization of Labor," and who escaped from the clutches of the public prosecutor only by a juggler's trick; [68] Corinne,--I mean Madame de Stael,--who, in an ode, making a poetical comparison of the land with the waves, of the furrow of a plough with the wake of a vessel, says "that property exists only where man has left his trace," which makes property dependent upon the solidity of the elements; Rousseau, the apostle of liberty and equality, but who, according to M. Wolowski, attacked property only AS A JOKE, and in order to point a paradox; Robespierre, who prohibited a division of the land, because he regarded such a measure as a rejuvenescence of property, and who, while awaiting the definitive organization of the republic, placed all property in the care?? of the people,--that is, transferred the right of eminent domain from the individual to society; Babeuf, who wanted property for the nation, and communism for the citizens; M. Considerant, who favors a division of landed property into shares,--that is, who wishes to render property nominal and fictitious: the whole being intermingled with jokes and witticisms (intended undoubtedly to lead people away from the HORNETS' NESTS) at the expense of the adversaries of the right of property! November 26.--M. Wolowski supposes this objection: Land, like water, air, and light, is necessary to life, therefore it cannot be appropriated; and he replies: The importance of landed property diminishes as the power of industry increases. Good! this importance DIMINISHES, but it does not DISAPPEAR; and this, of itself, shows landed property to be illegitimate. Here M. Wolowski pretends to think that the opponents of property refer only to property in land, while they merely take it as a term of comparison; and, in showing with wonderful clearness the absurdity of the position in which he places them, he finds a way of drawing the attention of his hearers to another subject without being false to the truth which it is his office to contradict. "Property," says M. Wolowski, "is that which distinguishes man from the animals." That may be; but are we to regard this as a compliment or a satire? "Mahomet," says M. Wolowski, "decreed property." And so did Genghis Khan, and Tamerlane, and all the ravagers of nations. What sort of legislators were they? "Property has been in existence ever since the origin of the human race." Yes, and so has slavery, and despotism also; and likewise polygamy and idolatry. But what does this antiquity show? The members of the Council of the State--M. Portalis at their head--did not raise, in their discussion of the Code, the question of the legitimacy of property. "Their silence," says M. Wolowski, "is a precedent in favor of this right." I may regard this reply as personally addressed to me, since the observation belongs to me. I reply, "As long as an opinion is universally admitted, the universality of belief serves of itself as argument and proof. When this same opinion is attacked, the former faith proves nothing; we must resort to reason. Ignorance, however old and pardonable it may be, never outweighs reason." Property has its abuses, M. Wolowski confesses. "But," he says, "these abuses gradually disappear. To-day their cause is known. They all arise from a false theory of property. In principle, property is inviolable, but it can and must be checked and disciplined." Such are the conclusions of the professor. When one thus remains in the clouds, he need not fear to equivocate. Nevertheless, I would like him to define these ABUSES of property, to show their cause, to explain this true theory from which no abuse is to spring; in short, to tell me how, without destroying property, it can be governed for the greatest good of all. "Our civil code," says M. Wolowski, in speaking of this subject, "leaves much to be desired." I think it leaves every thing undone. Finally, M. Wolowski opposes, on the one hand, the concentration of capital, and the absorption which results therefrom; and, on the other, he objects to the extreme division of the land. Now I think that I have demonstrated in my First Memoir, that large accumulation and minute division are the first two terms of an economical trinity,--a THESIS and an ANTITHESIS. But, while M. Wolowski says nothing of the third term, the SYNTHESIS, and thus leaves the inference in suspense, I have shown that this third term is ASSOCIATION, which is the annihilation of property. November 30.--LITERARY PROPERTY. M. Wolowski grants that it is just to recognize the rights of talent (which is not in the least hostile to equality); but he seriously objects to perpetual and absolute property in the works of genius, to the profit of the authors' heirs. His main argument is, that society has a right of collective production over every creation of the mind. Now, it is precisely this principle of collective power that I developed in my "Inquiries into Property and Government," and on which I have established the complete edifice of a new social organization. M. Wolowski is, as far as I know, the first jurist who has made a legislative application of this economical law. Only, while I have extended the principle of collective power to every sort of product, M. Wolowski, more prudent than it is my nature to be, confines it to neutral ground. So, that that which I am bold enough to say of the whole, he is contented to affirm of a part, leaving the intelligent hearer to fill up the void for himself. However, his arguments are keen and close. One feels that the professor, finding himself more at ease with one aspect of property, has given the rein to his intellect, and is rushing on towards liberty. 1. Absolute literary property would hinder the activity of other men, and obstruct the development of humanity. It would be the death of progress; it would be suicide. What would have happened if the first inventions,--the plough, the level, the saw, &c.,--had been appropriated? Such is the first proposition of M. Wolowski. I reply: Absolute property in land and tools hinders human activity, and obstructs progress and the free development of man. What happened in Rome, and in all the ancient nations? What occurred in the middle ages? What do we see to-day in England, in consequence of absolute property in the sources of production? The suicide of humanity. 2. Real and personal property is in harmony with the social interest. In consequence of literary property, social and individual interests are perpetually in conflict. The statement of this proposition contains a rhetorical figure, common with those who do not enjoy full and complete liberty of speech. This figure is the _anti-phrasis_ or _contre-verite_. It consists, according to Dumarsais and the best humanists, in saying one thing while meaning another. M. Wolowski's proposition, naturally expressed, would read as follows: "Just as real and personal property is essentially hostile to society, so, in consequence of literary property, social and individual interests are perpetually in conflict." 3. M. de Montalembert, in the Chamber of Peers, vehemently protested against the assimilation of authors to inventors of machinery; an assimilation which he claimed to be injurious to the former. M. Wolowski replies, that the rights of authors, without machinery, would be nil; that, without paper-mills, type foundries, and printing-offices, there could be no sale of verse and prose; that many a mechanical invention,--the compass, for instance, the telescope, or the steam-engine,--is quite as valuable as a book. Prior to M. Montalembert, M. Charles Comte had laughed at the inference in favor of mechanical inventions, which logical minds never fail to draw from the privileges granted to authors. "He," says M. Comte, "who first conceived and executed the idea of transforming a piece of wood into a pair of sabots, or an animal's hide into a pair of sandals, would thereby have acquired an exclusive right to make shoes for the human race!" Undoubtedly, under the system of property. For, in fact, this pair of sabots, over which you make so merry, is the creation of the shoemaker, the work of his genius, the expression of his thought; to him it is his poem, quite as much as "Le Roi s'amuse," is M. Victor Hugo's drama. Justice for all alike. If you refuse a patent to a perfecter of boots, refuse also a privilege to a maker of rhymes. 4. That which gives importance to a book is a fact external to the author and his work. Without the intelligence of society, without its development, and a certain community of ideas, passions, and interests between it and the authors, the works of the latter would be worth nothing. The exchangeable value of a book is due even more to the SOCIAL CONDITION than to the talent displayed in it. Indeed, it seems as if I were copying my own words. This proposition of M. Wolowski contains a special expression of a general and absolute idea, one of the strongest and most conclusive against the right of property. Why do artists, like mechanics, find the means to live? Because society has made the fine arts, like the rudest industries, objects of consumption and exchange, governed consequently by all the laws of commerce and political economy. Now, the first of these laws is the equipoise of functions; that is, the equality of associates. 5. M. Wolowski indulges in sarcasm against the petitioners for literary property. "There are authors," he says, "who crave the privileges of authors, and who for that purpose point out the power of the melodrama. They speak of the niece of Corneille, begging at the door of a theatre which the works of her uncle had enriched.... To satisfy the avarice of literary people, it would be necessary to create literary majorats, and make a whole code of exceptions." I like this virtuous irony. But M. Wolowski has by no means exhausted the difficulties which the question involves. And first, is it just that MM. Cousin, Guizot, Villemain, Damiron, and company, paid by the State for delivering lectures, should be paid a second time through the booksellers?--that I, who have the right to report their lectures, should not have the right to print them? Is it just that MM. Noel and Chapsal, overseers of the University, should use their influence in selling their selections from literature to the youth whose studies they are instructed to superintend in consideration of a salary? And, if that is not just, is it not proper to refuse literary property to every author holding public offices, and receiving pensions or sinecures? Again, shall the privilege of the author extend to irreligious and immoral works, calculated only to corrupt the heart, and obscure the understanding? To grant this privilege is to sanction immorality by law; to refuse it is to censure the author. And since it is impossible, in the present imperfect state of society, to prevent all violations of the moral law, it will be necessary to open a license-office for books as well as morals. But, then, three-fourths of our literary people will be obliged to register; and, recognized thenceforth on their own declaration as PROSTITUTES, they will necessarily belong to the public. We pay toll to the prostitute; we do not endow her. Finally, shall plagiarism be classed with forgery? If you reply "Yes," you appropriate in advance all the subjects of which books treat; if you say "No," you leave the whole matter to the decision of the judge. Except in the case of a clandestine reprint, how will he distinguish forgery from quotation, imitation, plagiarism, or even coincidence? A savant spends two years in calculating a table of logarithms to nine or ten decimals. He prints it. A fortnight after his book is selling at half-price; it is impossible to tell whether this result is due to forgery or competition. What shall the court do? In case of doubt, shall it award the property to the first occupant? As well decide the question by lot. These, however, are trifling considerations; but do we see that, in granting a perpetual privilege to authors and their heirs, we really strike a fatal blow at their interests? We think to make booksellers dependent upon authors,--a delusion. The booksellers will unite against works, and their proprietors. Against works, by refusing to push their sale, by replacing them with poor imitations, by reproducing them in a hundred indirect ways; and no one knows how far the science of plagiarism, and skilful imitation may be carried. Against proprietors. Are we ignorant of the fact, that a demand for a dozen copies enables a bookseller to sell a thousand; that with an edition of five hundred he can supply a kingdom for thirty years? What will the poor authors do in the presence of this omnipotent union of booksellers? I will tell them what they will do. They will enter the employ of those whom they now treat as pirates; and, to secure an advantage, they will become wage laborers. A fit reward for ignoble avarice, and insatiable pride. [69] Contradictions of contradictions! "Genius is the great leveller of the world," cries M. de Lamartine; "then genius should be a proprietor. Literary property is the fortune of democracy." This unfortunate poet thinks himself profound when he is only puffed up. His eloquence consists solely in coupling ideas which clash with each other: ROUND SQUARE, DARK SUN, FALLEN ANGEL, PRIEST and LOVE, THOUGHT and POETRY, GUNIUS {???}, and FORTUNE, LEVELING and PROPERTY. Let us tell him, in reply, that his mind is a dark luminary; that each of his discourses is a disordered harmony; and that all his successes, whether in verse or prose, are due to the use of the extraordinary in the treatment of the most ordinary subjects. "Le National," in reply to the report of M. Lamartine, endeavors to prove that literary property is of quite a different nature from landed property; as if the nature of the right of property depended on the object to which it is applied, and not on the mode of its exercise and the condition of its existence. But the main object of "Le National" is to please a class of proprietors whom an extension of the right of property vexes: that is why "Le National" opposes literary property. Will it tell us, once for all, whether it is for equality or against it? 6. OBJECTION.--Property in occupied land passes to the heirs of the occupant. "Why," say the authors, "should not the work of genius pass in like manner to the heirs of the man of genius?" M. Wolowski's reply: "Because the labor of the first occupant is continued by his heirs, while the heirs of an author neither change nor add to his works. In landed property, the continuance of labor explains the continuance of the right." Yes, when the labor is continued; but if the labor is not continued, the right ceases. Thus is the right of possession, founded on personal labor, recognized by M. Wolowski. M. Wolowski decides in favor of granting to authors property in their works for a certain number of years, dating from the day of their first publication. The succeeding lectures on patents on inventions were no less instructive, although intermingled with shocking contradictions inserted with a view to make the useful truths more palatable. The necessity for brevity compels me to terminate this examination here, not without regret. Thus, of two eclectic jurists, who attempt a defence of property, one is entangled in a set of dogmas without principle or method, and is constantly talking nonsense; and the other designedly abandons the cause of property, in order to present under the same name the theory of individual possession. Was I wrong in claiming that confusion reigned among legists, and ought I to be legally prosecuted for having said that their science henceforth stood convicted of falsehood, its glory eclipsed? The ordinary resources of the law no longer sufficing, philosophy, political economy, and the framers of systems have been consulted. All the oracles appealed to have been discouraging. The philosophers are no clearer to-day than at the time of the eclectic efflorescence; nevertheless, through their mystical apothegms, we can distinguish the words PROGRESS, UNITY, ASSOCIATION, SOLIDARITY, FRATERNITY, which are certainly not reassuring to proprietors. One of these philosophers, M. Pierre Leroux, has written two large books, in which he claims to show by all religious, legislative, and philosophical systems that, since men are responsible to each other, equality of conditions is the final law of society. It is true that this philosopher admits a kind of property; but as he leaves us to imagine what property would become in presence of equality, we may boldly class him with the opponents of the right of increase. I must here declare freely--in order that I may not be suspected of secret connivance, which is foreign to my nature--that M. Leroux has my full sympathy. Not that I am a believer in his quasi-Pythagorean philosophy (upon this subject I should have more than one observation to submit to him, provided a veteran covered with stripes would not despise the remarks of a conscript); not that I feel bound to this author by any special consideration for his opposition to property. In my opinion, M. Leroux could, and even ought to, state his position more explicitly and logically. But I like, I admire, in M. Leroux, the antagonist of our philosophical demigods, the demolisher of usurped reputations, the pitiless critic of every thing that is respected because of its antiquity. Such is the reason for my high esteem of M. Leroux; such would be the principle of the only literary association which, in this century of coteries, I should care to form. We need men who, like M. Leroux, call in question social principles,--not to diffuse doubt concerning them, but to make them doubly sure; men who excite the mind by bold negations, and make the conscience tremble by doctrines of annihilation. Where is the man who does not shudder on hearing M. Leroux exclaim, "There is neither a paradise nor a hell; the wicked will not be punished, nor the good rewarded. Mortals! cease to hope and fear; you revolve in a circle of appearances; humanity is an immortal tree, whose branches, withering one after another, feed with their debris the root which is always young!" Where is the man who, on hearing this desolate confession of faith, does not demand with terror, "Is it then true that I am only an aggregate of elements organized by an unknown force, an idea realized for a few moments, a form which passes and disappears? Is it true that my mind is only a harmony, and my soul a vortex? What is the ego? what is God? what is the sanction of society?" In former times, M. Leroux would have been regarded as a great culprit, worthy only (like Vanini) of death and universal execration. To-day, M. Leroux is fulfilling a mission of salvation, for which, whatever he may say, he will be rewarded. Like those gloomy invalids who are always talking of their approaching death, and who faint when the doctor's opinion confirms their pretence, our materialistic society is agitated and loses countenance while listening to this startling decree of the philosopher, "Thou shalt die!" Honor then to M. Leroux, who has revealed to us the cowardice of the Epicureans; to M. Leroux, who renders new philosophical solutions necessary! Honor to the anti-eclectic, to the apostle of equality! In his work on "Humanity," M. Leroux commences by positing the necessity of property: "You wish to abolish property; but do you not see that thereby you would annihilate man and even the name of man?... You wish to abolish property; but could you live without a body? I will not tell you that it is necessary to support this body;... I will tell you that this body is itself a species of property." In order clearly to understand the doctrine of M. Leroux, it must be borne in mind that there are three necessary and primitive forms of society,--communism, property, and that which to-day we properly call association. M. Leroux rejects in the first place communism, and combats it with all his might. Man is a personal and free being, and therefore needs a sphere of independence and individual activity. M. Leroux emphasizes this in adding: "You wish neither family, nor country, nor property; therefore no more fathers, no more sons, no more brothers. Here you are, related to no being in time, and therefore without a name; here you are, alone in the midst of a billion of men who to-day inhabit the earth. How do you expect me to distinguish you in space in the midst of this multitude?" If man is indistinguishable, he is nothing. Now, he can be distinguished, individualized, only through a devotion of certain things to his use,--such as his body, his faculties, and the tools which he uses. "Hence," says M. Leroux, "the necessity of appropriation;" in short, property. But property on what condition? Here M. Leroux, after having condemned communism, denounces in its turn the right of domain. His whole doctrine can be summed up in this single proposition,--_Man may be made by property a slave or a despot by turns_. That posited, if we ask M. Leroux to tell us under what system of property man will be neither a slave nor a despot, but free, just, and a citizen, M. Leroux replies in the third volume of his work on "Humanity:"-- "There are three ways of destroying man's communion with his fellows and with the universe:... 1. By separating man in time; 2. by separating him in space; 3. by dividing the land, or, in general terms, the instruments of production; by attaching men to things, by subordinating man to property, by making man a proprietor." This language, it must be confessed, savors a little too strongly of the metaphysical heights which the author frequents, and of the school of M. Cousin. Nevertheless, it can be seen, clearly enough it seems to me, that M. Leroux opposes the exclusive appropriation of the instruments of production; only he calls this non-appropriation of the instruments of production a NEW METHOD of establishing property, while I, in accordance with all precedent, call it a destruction of property. In fact, without the appropriation of instruments, property is nothing. "Hitherto, we have confined ourselves to pointing out and combating the despotic features of property, by considering property alone. We have failed to see that the despotism of property is a correlative of the division of the human race;... that property, instead of being organized in such a way as to facilitate the unlimited communion of man with his fellows and with the universe, has been, on the contrary, turned against this communion." Let us translate this into commercial phraseology. In order to destroy despotism and the inequality of conditions, men must cease from competition and must associate their interests. Let employer and employed (now enemies and rivals) become associates. Now, ask any manufacturer, merchant, or capitalist, whether he would consider himself a proprietor if he were to share his revenue and profits with this mass of wage-laborers whom it is proposed to make his associates. "Family, property, and country are finite things, which ought to be organized with a view to the infinite. For man is a finite being, who aspires to the infinite. To him, absolute finiteness is evil. The infinite is his aim, the indefinite his right." Few of my readers would understand these hierophantic words, were I to leave them unexplained. M. Leroux means, by this magnificent formula, that humanity is a single immense society, which, in its collective unity, represents the infinite; that every nation, every tribe, every commune, and every citizen are, in different degrees, fragments or finite members of the infinite society, the evil in which results solely from individualism and privilege,--in other words, from the subordination of the infinite to the finite; finally, that, to attain humanity's end and aim, each part has a right to an indefinitely progressive development. "All the evils which afflict the human race arise from caste. The family is a blessing; the family caste (the nobility) is an evil. Country is a blessing; the country caste (supreme, domineering, conquering) is an evil; property (individual possession) is a blessing; the property caste (the domain of property of Pothier, Toullier, Troplong, &c.) is an evil." Thus, according to M. Leroux, there is property and property,--the one good, the other bad. Now, as it is proper to call different things by different names, if we keep the name "property" for the former, we must call the latter robbery, rapine, brigandage. If, on the contrary, we reserve the name "property" for the latter, we must designate the former by the term POSSESSION, or some other equivalent; otherwise we should be troubled with an unpleasant synonymy. What a blessing it would be if philosophers, daring for once to say all that they think, would speak the language of ordinary mortals! Nations and rulers would derive much greater profit from their lectures, and, applying the same names to the same ideas, would come, perhaps, to understand each other. I boldly declare that, in regard to property, I hold no other opinion than that of M. Leroux; but, if I should adopt the style of the philosopher, and repeat after him, "Property is a blessing, but the property caste--the _statu quo_ of property--is an evil," I should be extolled as a genius by all the bachelors who write for the reviews. [70] If, on the contrary, I prefer the classic language of Rome and the civil code, and say accordingly, "Possession is a blessing, but property is robbery," immediately the aforesaid bachelors raise a hue and cry against the monster, and the judge threatens me. Oh, the power of language! "Le National," on the other hand, has laughed at M. Leroux and his ideas on property, charging him with TAUTOLOGY and CHILDISHNESS. "Le National" does not wish to understand. Is it necessary to remind this journal that it has no right to deride a dogmatic philosopher, because it is without a doctrine itself? From its foundation, "Le National" has been a nursery of intriguers and renegades. From time to time it takes care to warn its readers. Instead of lamenting over all its defections, the democratic sheet would do better to lay the blame on itself, and confess the shallowness of its theories. When will this organ of popular interests and the electoral reform cease to hire sceptics and spread doubt? I will wager, without going further, that M. Leon Durocher, the critic of M. Leroux, is an anonymous or pseudonymous editor of some bourgeois, or even aristocratic, journal. The economists, questioned in their turn, propose to associate capital and labor. You know, sir, what that means. If we follow out the doctrine, we soon find that it ends in an absorption of property, not by the community, but by a general and indissoluble commandite, so that the condition of the proprietor would differ from that of the workingman only in receiving larger wages. This system, with some peculiar additions and embellishments, is the idea of the phalanstery. But it is clear that, if inequality of conditions is one of the attributes of property, it is not the whole of property. That which makes property a DELIGHTFUL THING, as some philosopher (I know not who) has said, is the power to dispose at will, not only of one's own goods, but of their specific nature; to use them at pleasure; to confine and enclose them; to excommunicate mankind, as M. Pierre Leroux says; in short, to make such use of them as passion, interest, or even caprice, may suggest. What is the possession of money, a share in an agricultural or industrial enterprise, or a government-bond coupon, in comparison with the infinite charm of being master of one's house and grounds, under one's vine and fig-tree? "_Beati possidentes_!" says an author quoted by M. Troplong. Seriously, can that be applied to a man of income, who has no other possession under the sun than the market, and in his pocket his money? As well maintain that a trough is a coward. A nice method of reform! They never cease to condemn the thirst for gold, and the growing individualism of the century; and yet, most inconceivable of contradictions, they prepare to turn all kinds of property into one,--property in coin. I must say something further of a theory of property lately put forth with some ado: I mean the theory of M. Considerant. The Fourierists are not men who examine a doctrine in order to ascertain whether it conflicts with their system. On the contrary, it is their custom to exult and sing songs of triumph whenever an adversary passes without perceiving or noticing them. These gentlemen want direct refutations, in order that, if they are beaten, they may have, at least, the selfish consolation of having been spoken of. Well, let their wish be gratified. M. Considerant makes the most lofty pretensions to logic. His method of procedure is always that of MAJOR, MINOR, AND CONCLUSION. He would willingly write upon his hat, "_Argumentator in barbara_." But M. Considerant is too intelligent and quick-witted to be a good logician, as is proved by the fact that he appears to have taken the syllogism for logic. The syllogism, as everybody knows who is interested in philosophical curiosities, is the first and perpetual sophism of the human mind,--the favorite tool of falsehood, the stumbling-block of science, the advocate of crime. The syllogism has produced all the evils which the fabulist so eloquently condemned, and has done nothing good or useful: it is as devoid of truth as of justice. We might apply to it these words of Scripture: "_Celui qui met en lui sa confiance, perira_." Consequently, the best philosophers long since condemned it; so that now none but the enemies of reason wish to make the syllogism its weapon. M. Considerant, then, has built his theory of property upon a syllogism. Would he be disposed to stake the system of Fourier upon his arguments, as I am ready to risk the whole doctrine of equality upon my refutation of that system? Such a duel would be quite in keeping with the warlike and chivalric tastes of M. Considerant, and the public would profit by it; for, one of the two adversaries falling, no more would be said about him, and there would be one grumbler less in the world. The theory of M. Considerant has this remarkable feature, that, in attempting to satisfy at the same time the claims of both laborers and proprietors, it infringes alike upon the rights of the former and the privileges of the latter. In the first place, the author lays it down as a principle: "1. That the use of the land belongs to each member of the race; that it is a natural and imprescriptible right, similar in all respects to the right to the air and the sunshine. 2. That the right to labor is equally fundamental, natural, and imprescriptible." I have shown that the recognition of this double right would be the death of property. I denounce M. Considerant to the proprietors! But M. Considerant maintains that the right to labor creates the right of property, and this is the way he reasons:-- Major Premise.--"Every man legitimately possesses the thing which his labor, his skill,--or, in more general terms, his action,--has created." To which M. Considerant adds, by way of comment: "Indeed, the land not having been created by man, it follows from the fundamental principle of property, that the land, being given to the race in common, can in no wise be the exclusive and legitimate property of such and such individuals, who were not the creators of this value." If I am not mistaken, there is no one to whom this proposition, at first sight and in its entirety, does not seem utterly irrefutable. Reader, distrust the syllogism. First, I observe that the words LEGITIMATELY POSSESSES signify to the author's mind is _LEGITIMATE PROPRIETOR;_ otherwise the argument, being intended to prove the legitimacy of property, would have no meaning. I might here raise the question of the difference between property and possession, and call upon M. Considerant, before going further, to define the one and the other; but I pass on. This first proposition is doubly false. 1. In that it asserts the act of CREATION to be the only basis of property. 2. In that it regards this act as sufficient in all cases to authorize the right of property. And, in the first place, if man may be proprietor of the game which he does not create, but which he KILLS; of the fruits which he does not create, but which he GATHERS; of the vegetables which he does not create, but which he PLANTS; of the animals which he does not create, but which he REARS,--it is conceivable that men may in like manner become proprietors of the land which they do not create, but which they clear and fertilize. The act of creation, then, is not NECESSARY to the acquisition of the right of property. I say further, that this act alone is not always sufficient, and I prove it by the second premise of M. Considerant:-- Minor Premise.--"Suppose that on an isolated island, on the soil of a nation, or over the whole face of the earth (the extent of the scene of action does not affect our judgment of the facts), a generation of human beings devotes itself for the first time to industry, agriculture, manufactures, &c. This generation, by its labor, intelligence, and activity, creates products, develops values which did not exist on the uncultivated land. Is it not perfectly clear that the property of this industrious generation will stand on a basis of right, if the value or wealth produced by the activity of all be distributed among the producers, according to each one's assistance in the creation of the general wealth? That is unquestionable." That is quite questionable. For this value or wealth, PRODUCED BY THE ACTIVITY OF ALL, is by the very fact of its creation COLLECTIVE wealth, the use of which, like that of the land, may be divided, but which as property remains UNDIVIDED. And why this undivided ownership? Because the society which creates is itself indivisible,--a permanent unit, incapable of reduction to fractions. And it is this unity of society which makes the land common property, and which, as M. Considerant says, renders its use imprescriptible in the case of every individual. Suppose, indeed, that at a given time the soil should be equally divided; the very next moment this division, if it allowed the right of property, would become illegitimate. Should there be the slightest irregularity in the method of transfer, men, members of society, imprescriptible possessors of the land, might be deprived at one blow of property, possession, and the means of production. In short, property in capital is indivisible, and consequently inalienable, not necessarily when the capital is UNCREATED, but when it is COMMON or COLLECTIVE. I confirm this theory against M. Considerant, by the third term of his syllogism:-- Conclusion.--"The results of the labor performed by this generation are divisible into two classes, between which it is important clearly to distinguish. The first class includes the products of the soil which belong to this first generation in its usufructuary capacity, augmented, improved and refined by its labor and industry. These products consist either of objects of consumption or instruments of labor. It is clear that these products are the legitimate property of those who have created them by their activity.... Second class.--Not only has this generation created the products just mentioned (objects of consumption and instruments of labor), but it has also added to the original value of the soil by cultivation, by the erection of buildings, by all the labor producing permanent results, which it has performed. This additional value evidently constitutes a product--a value created by the activity of the first generation; and if, BY ANY MEANS WHATEVER, the ownership of this value be distributed among the members of society equitably,--that is, in proportion to the labor which each has performed,--each will legitimately possess the portion which he receives. He may then dispose of this legitimate and private property as he sees fit,--exchange it, give it away, or transfer it; and no other individual, or collection of other individuals,--that is, society,--can lay any claim to these values." Thus, by the distribution of collective capital, to the use of which each associate, either in his own right or in right of his authors, has an imprescriptible and undivided title, there will be in the phalanstery, as in the France of 1841, the poor and the rich; some men who, to live in luxury, have only, as Figaro says, to take the trouble to be born, and others for whom the fortune of life is but an opportunity for long-continued poverty; idlers with large incomes, and workers whose fortune is always in the future; some privileged by birth and caste, and others pariahs whose sole civil and political rights are THE RIGHT TO LABOR, AND THE RIGHT TO LAND. For we must not be deceived; in the phalanstery every thing will be as it is to-day, an object of property,--machines, inventions, thought, books, the products of art, of agriculture, and of industry; animals, houses, fences, vineyards, pastures, forests, fields,--every thing, in short, except the UNCULTIVATED LAND. Now, would you like to know what uncultivated land is worth, according to the advocates of property? "A square league hardly suffices for the support of a savage," says M. Charles Comte. Estimating the wretched subsistence of this savage at three hundred francs per year, we find that the square league necessary to his life is, relatively to him, faithfully represented by a rent of fifteen francs. In France there are twenty-eight thousand square leagues, the total rent of which, by this estimate, would be four hundred and twenty thousand francs, which, when divided among nearly thirty-four millions of people, would give each an INCOME OF A CENTIME AND A QUARTER. That is the new right which the great genius of Fourier has invented IN BEHALF OF THE FRENCH PEOPLE, and with which his first disciple hopes to reform the world. I denounce M. Considerant to the proletariat! If the theory of M. Considerant would at least really guarantee this property which he cherishes so jealously, I might pardon him the flaws in his syllogism, certainly the best one he ever made in his life. But, no: that which M. Considerant takes for property is only a privilege of extra pay. In Fourier's system, neither the created capital nor the increased value of the soil are divided and appropriated in any effective manner: the instruments of labor, whether created or not, remain in the hands of the phalanx; the pretended proprietor can touch only the income. He is permitted neither to realize his share of the stock, nor to possess it exclusively, nor to administer it, whatever it be. The cashier throws him his dividend; and then, proprietor, eat the whole if you can! The system of Fourier would not suit the proprietors, since it takes away the most delightful feature of property,--the free disposition of one's goods. It would please the communists no better, since it involves unequal conditions. It is repugnant to the friends of free association and equality, in consequence of its tendency to wipe out human character and individuality by suppressing possession, family, and country,--the threefold expression of the human personality. Of all our active publicists, none seem to me more fertile in resources, richer in imagination, more luxuriant and varied in style, than M. Considerant. Nevertheless, I doubt if he will undertake to reestablish his theory of property. If he has this courage, this is what I would say to him: "Before writing your reply, consider well your plan of action; do not scour the country; have recourse to none of your ordinary expedients; no complaints of civilization; no sarcasms upon equality; no glorification of the phalanstery. Leave Fourier and the departed in peace, and endeavor only to re-adjust the pieces of your syllogism. To this end, you ought, first, to analyze closely each proposition of your adversary; second, to show the error, either by a direct refutation, or by proving the converse; third, to oppose argument to argument, so that, objection and reply meeting face to face, the stronger may break down the weaker, and shiver it to atoms. By that method only can you boast of having conquered, and compel me to regard you as an honest reasoner, and a good artillery-man." I should have no excuse for tarrying longer with these phalansterian crotchets, if the obligation which I have imposed upon myself of making a clean sweep, and the necessity of vindicating my dignity as a writer, did not prevent me from passing in silence the reproach uttered against me by a correspondent of "La Phalange." "We have seen but lately," says this journalist, [71] "that M. Proudhon, enthusiast as he has been for the science created by Fourier, is, or will be, an enthusiast for any thing else whatsoever." If ever sectarians had the right to reproach another for changes in his beliefs, this right certainly does not belong to the disciples of Fourier, who are always so eager to administer the phalansterian baptism to the deserters of all parties. But why regard it as a crime, if they are sincere? Of what consequence is the constancy or inconstancy of an individual to the truth which is always the same? It is better to enlighten men's minds than to teach them to be obstinate in their prejudices. Do we not know that man is frail and fickle, that his heart is full of delusions, and that his lips are a distillery of falsehood? _Omnis homo meudax_. Whether we will or no, we all serve for a time as instruments of this truth, whose kingdom comes every day. God alone is immutable, because he is eternal. That is the reply which, as a general rule, an honest man is entitled always to make, and which I ought perhaps to be content to offer as an excuse; for I am no better than my fathers. But, in a century of doubt and apostasy like ours, when it is of importance to set the small and the weak an example of strength and honesty of utterance, I must not suffer my character as a public assailant of property to be dishonored. I must render an account of my old opinions. Examining myself, therefore, upon this charge of Fourierism, and endeavoring to refresh my memory, I find that, having been connected with the Fourierists in my studies and my friendships, it is possible that, without knowing it, I have been one of Fourier's partisans. Jerome Lalande placed Napoleon and Jesus Christ in his catalogue of atheists. The Fourierists resemble this astronomer: if a man happens to find fault with the existing civilization, and to admit the truth of a few of their criticisms, they straightway enlist him, willy-nilly, in their school. Nevertheless, I do not deny that I have been a Fourierist; for, since they say it, of course it may be so. But, sir, that of which my ex-associates are ignorant, and which doubtless will astonish you, is that I have been many other things,--in religion, by turns a Protestant, a Papist, an Arian and Semi-Arian, a Manichean, a Gnostic, an Adamite even and a Pre-Adamite, a Sceptic, a Pelagian, a Socinian, an Anti-Trinitarian, and a Neo-Christian; [72] in philosophy and politics, an Idealist, a Pantheist, a Platonist, a Cartesian, an Eclectic (that is, a sort of _juste-milieu_), a Monarchist, an Aristocrat, a Constitutionalist, a follower of Babeuf, and a Communist. I have wandered through a whole encyclopaedia of systems. Do you think it surprising, sir, that, among them all, I was for a short time a Fourierist? For my part, I am not at all surprised, although at present I have no recollection of it. One thing is sure,--that my superstition and credulity reached their height at the very period of my life which my critics reproachfully assign as the date of my Fourieristic beliefs. Now I hold quite other views. My mind no longer admits that which is demonstrated by syllogisms, analogies, or metaphors, which are the methods of the phalanstery, but demands a process of generalization and induction which excludes error. Of my past OPINIONSS I retain absolutely none. I have acquired some KNOWLEDGE. I no longer BELIEVE. I either KNOW, or am IGNORANT. In a word, in seeking for the reason of things, I saw that I was a RATIONALIST. Undoubtedly, it would have been simpler to begin where I have ended. But then, if such is the law of the human mind; if all society, for six thousand years, has done nothing but fall into error; if all mankind are still buried in the darkness of faith, deceived by their prejudices and passions, guided only by the instinct of their leaders; if my accusers, themselves, are not free from sectarianism (for they call themselves FOURIERISTS),--am I alone inexcusable for having, in my inner self, at the secret tribunal of my conscience, begun anew the journey of our poor humanity? I would by no means, then, deny my errors; but, sir, that which distinguishes me from those who rush into print is the fact that, though my thoughts have varied much, my writings do not vary. To-day, even, and on a multitude of questions, I am beset by a thousand extravagant and contradictory opinions; but my opinions I do not print, for the public has nothing to do with them. Before addressing my fellow-men, I wait until light breaks in upon the chaos of my ideas, in order that what I may say may be, not the whole truth (no man can know that), but nothing but the truth. This singular disposition of my mind to first identify itself with a system in order to better understand it, and then to reflect upon it in order to test its legitimacy, is the very thing which disgusted me with Fourier, and ruined in my esteem the societary school. To be a faithful Fourierist, in fact, one must abandon his reason and accept every thing from a master,--doctrine, interpretation, and application. M. Considerant, whose excessive intolerance anathematizes all who do not abide by his sovereign decisions, has no other conception of Fourierism. Has he not been appointed Fourier's vicar on earth and pope of a Church which, unfortunately for its apostles, will never be of this world? Passive belief is the theological virtue of all sectarians, especially of the Fourierists. Now, this is what happened to me. While trying to demonstrate by argument the religion of which I had become a follower in studying Fourier, I suddenly perceived that by reasoning I was becoming incredulous; that on each article of the creed my reason and my faith were at variance, and that my six weeks' labor was wholly lost. I saw that the Fourierists--in spite of their inexhaustible gabble, and their extravagant pretension to decide in all things--were neither savants, nor logicians, nor even believers; that they were SCIENTIFIC QUACKS, who were led more by their self-love than their conscience to labor for the triumph of their sect, and to whom all means were good that would reach that end. I then understood why to the Epicureans they promised women, wine, music, and a sea of luxury; to the rigorists, maintenance of marriage, purity of morals, and temperance; to laborers, high wages; to proprietors, large incomes; to philosophers, solutions the secret of which Fourier alone possessed; to priests, a costly religion and magnificent festivals; to savants, knowledge of an unimaginable nature; to each, indeed, that which he most desired. In the beginning, this seemed to me droll; in the end, I regarded it as the height of impudence. No, sir; no one yet knows of the foolishness and infamy which the phalansterian system contains. That is a subject which I mean to treat as soon as I have balanced my accounts with property. [73] It is rumored that the Fourierists think of leaving France and going to the new world to found a phalanstery. When a house threatens to fall, the rats scamper away; that is because they are rats. Men do better; they rebuild it. Not long since, the St. Simonians, despairing of their country which paid no heed to them, proudly shook the dust from their feet, and started for the Orient to fight the battle of free woman. Pride, wilfulness, mad selfishness! True charity, like true faith, does not worry, never despairs; it seeks neither its own glory, nor its interest, nor empire; it does every thing for all, speaks with indulgence to the reason and the will, and desires to conquer only by persuasion and sacrifice. Remain in France, Fourierists, if the progress of humanity is the only thing which you have at heart! There is more to do here than in the new world. Otherwise, go! you are nothing but liars and hypocrites! The foregoing statement by no means embraces all the political elements, all the opinions and tendencies, which threaten the future of property; but it ought to satisfy any one who knows how to classify facts, and to deduce their law or the idea which governs them. Existing society seems abandoned to the demon of falsehood and discord; and it is this sad sight which grieves so deeply many distinguished minds who lived too long in a former age to be able to understand ours. Now, while the short-sighted spectator begins to despair of humanity, and, distracted and cursing that of which he is ignorant, plunges into scepticism and fatalism, the true observer, certain of the spirit which governs the world, seeks to comprehend and fathom Providence. The memoir on "Property," published last year by the pensioner of the Academy of Besancon, is simply a study of this nature. The time has come for me to relate the history of this unlucky treatise, which has already caused me so much chagrin, and made me so unpopular; but which was on my part so involuntary and unpremeditated, that I would dare to affirm that there is not an economist, not a philosopher, not a jurist, who is not a hundred times guiltier than I. There is something so singular in the way in which I was led to attack property, that if, on hearing my sad story, you persist, sir, in your blame, I hope at least you will be forced to pity me. I never have pretended to be a great politician; far from that, I always have felt for controversies of a political nature the greatest aversion; and if, in my "Essay on Property," I have sometimes ridiculed our politicians, believe, sir, that I was governed much less by my pride in the little that I know, than by my vivid consciousness of their ignorance and excessive vanity. Relying more on Providence than on men; not suspecting at first that politics, like every other science, contained an absolute truth; agreeing equally well with Bossuet and Jean Jacques,--I accepted with resignation my share of human misery, and contented myself with praying to God for good deputies, upright ministers, and an honest king. By taste as well as by discretion and lack of confidence in my powers, I was slowly pursuing some commonplace studies in philology, mingled with a little metaphysics, when I suddenly fell upon the greatest problem that ever has occupied philosophical minds: I mean the criterion of certainty. Those of my readers who are unacquainted with the philosophical terminology will be glad to be told in a few words what this criterion is, which plays so great a part in my work. The criterion of certainty, according to the philosophers, will be, when discovered, an infallible method of establishing the truth of an opinion, a judgment, a theory, or a system, in nearly the same way as gold is recognized by the touchstone, as iron approaches the magnet, or, better still, as we verify a mathematical operation by applying the PROOF. TIME has hitherto served as a sort of criterion for society. Thus, the primitive men--having observed that they were not all equal in strength, beauty, and labor--judged, and rightly, that certain ones among them were called by nature to the performance of simple and common functions; but they concluded, and this is where their error lay, that these same individuals of duller intellect, more restricted genius, and weaker personality, were predestined to SERVE the others; that is, to labor while the latter rested, and to have no other will than theirs: and from this idea of a natural subordination among men sprang domesticity, which, voluntarily accepted at first, was imperceptibly converted into horrible slavery. Time, making this error more palpable, has brought about justice. Nations have learned at their own cost that the subjection of man to man is a false idea, an erroneous theory, pernicious alike to master and to slave. And yet such a social system has stood several thousand years, and has been defended by celebrated philosophers; even to-day, under somewhat mitigated forms, sophists of every description uphold and extol it. But experience is bringing it to an end. Time, then, is the criterion of societies; thus looked at, history is the demonstration of the errors of humanity by the argument _reductio ad absurdum_. Now, the criterion sought for by metaphysicians would have the advantage of discriminating at once between the true and the false in every opinion; so that in politics, religion, and morals, for example, the true and the useful being immediately recognized, we should no longer need to await the sorrowful experience of time. Evidently such a secret would be death to the sophists,--that cursed brood, who, under different names, excite the curiosity of nations, and, owing to the difficulty of separating the truth from the error in their artistically woven theories, lead them into fatal ventures, disturb their peace, and fill them with such extraordinary prejudice. Up to this day, the criterion of certainty remains a mystery; this is owing to the multitude of criteria that have been successively proposed. Some have taken for an absolute and definite criterion the testimony of the senses; others intuition; these evidence; those argument. M. Lamennais affirms that there is no other criterion than universal reason. Before him, M. de Bonald thought he had discovered it in language. Quite recently, M. Buchez has proposed morality; and, to harmonize them all, the eclectics have said that it was absurd to seek for an absolute criterion, since there were as many criteria as special orders of knowledge. Of all these hypotheses it may be observed, That the testimony of the senses is not a criterion, because the senses, relating us only to phenomena, furnish us with no ideas; that intuition needs external confirmation or objective certainty; that evidence requires proof, and argument verification; that universal reason has been wrong many a time; that language serves equally well to express the true or the false; that morality, like all the rest, needs demonstration and rule; and finally, that the eclectic idea is the least reasonable of all, since it is of no use to say that there are several criteria if we cannot point out one. I very much fear that it will be with the criterion as with the philosopher's stone; that it will finally be abandoned, not only as insolvable, but as chimerical. Consequently, I entertain no hopes of having found it; nevertheless, I am not sure that some one more skilful will not discover it. Be it as it may with regard to a criterion or criteria, there are methods of demonstration which, when applied to certain subjects, may lead to the discovery of unknown truths, bring to light relations hitherto unsuspected, and lift a paradox to the highest degree of certainty. In such a case, it is not by its novelty, nor even by its content, that a system should be judged, but by its method. The critic, then, should follow the example of the Supreme Court, which, in the cases which come before it, never examines the facts, but only the form of procedure. Now, what is the form of procedure? A method. I then looked to see what philosophy, in the absence of a criterion, had accomplished by the aid of special methods, and I must say that I could not discover--in spite of the loudly-proclaimed pretensions of some--that it had produced any thing of real value; and, at last, wearied with the philosophical twaddle, I resolved to make a new search for the criterion. I confess it, to my shame, this folly lasted for two years, and I am not yet entirely rid of it. It was like seeking a needle in a haystack. I might have learned Chinese or Arabic in the time that I have lost in considering and reconsidering syllogisms, in rising to the summit of an induction as to the top of a ladder, in inserting a proposition between the horns of a dilemma, in decomposing, distinguishing, separating, denying, affirming, admitting, as if I could pass abstractions through a sieve. I selected justice as the subject-matter of my experiments. Finally, after a thousand decompositions, recompositions, and double compositions, I found at the bottom of my analytical crucible, not the criterion of certainty, but a metaphysico-economico-political treatise, whose conclusions were such that I did not care to present them in a more artistic or, if you will, more intelligible form. The effect which this work produced upon all classes of minds gave me an idea of the spirit of our age, and did not cause me to regret the prudent and scientific obscurity of my style. How happens it that to-day I am obliged to defend my intentions, when my conduct bears the evident impress of such lofty morality? You have read my work, sir, and you know the gist of my tedious and scholastic lucubrations. Considering the revolutions of humanity, the vicissitudes of empires, the transformations of property, and the innumerable forms of justice and of right, I asked, "Are the evils which afflict us inherent in our condition as men, or do they arise only from an error? This inequality of fortunes which all admit to be the cause of society's embarrassments, is it, as some assert, the effect of Nature; or, in the division of the products of labor and the soil, may there not have been some error in calculation? Does each laborer receive all that is due him, and only that which is due him? In short, in the present conditions of labor, wages, and exchange, is no one wronged?--are the accounts well kept?--is the social balance accurate?" Then I commenced a most laborious investigation. It was necessary to arrange informal notes, to discuss contradictory titles, to reply to captious allegations, to refute absurd pretensions, and to describe fictitious debts, dishonest transactions, and fraudulent accounts. In order to triumph over quibblers, I had to deny the authority of custom, to examine the arguments of legislators, and to oppose science with science itself. Finally, all these operations completed, I had to give a judicial decision. I therefore declared, my hand upon my heart, before God and men, that the causes of social inequality are three in number: 1. GRATUITOUS APPROPRIATION OF COLLECTIVE WEALTH; 2. INEQUALITY IN EXCHANGE; 3. THE RIGHT OF PROFIT OR INCREASE. And since this threefold method of extortion is the very essence of the domain of property, I denied the legitimacy of property, and proclaimed its identity with robbery. That is my only offence. I have reasoned upon property; I have searched for the criterion of justice; I have demonstrated, not the possibility, but the necessity, of equality of fortunes; I have allowed myself no attack upon persons, no assault upon the government, of which I, more than any one else, am a provisional adherent. If I have sometimes used the word PROPRIETOR, I have used it as the abstract name of a metaphysical being, whose reality breathes in every individual,--not alone in a privileged few. Nevertheless, I acknowledge--for I wish my confession to be sincere--that the general tone of my book has been bitterly censured. They complain of an atmosphere of passion and invective unworthy of an honest man, and quite out of place in the treatment of so grave a subject. If this reproach is well founded (which it is impossible for me either to deny or admit, because in my own cause I cannot be judge),--if, I say, I deserve this charge, I can only humble myself and acknowledge myself guilty of an involuntary wrong; the only excuse that I could offer being of such a nature that it ought not to be communicated to the public. All that I can say is, that I understand better than any one how the anger which injustice causes may render an author harsh and violent in his criticisms. When, after twenty years of labor, a man still finds himself on the brink of starvation, and then suddenly discovers in an equivocation, an error in calculation, the cause of the evil which torments him in common with so many millions of his fellows, he can scarcely restrain a cry of sorrow and dismay. But, sir, though pride be offended by my rudeness, it is not to pride that I apologize, but to the proletaires, to the simple-minded, whom I perhaps have scandalized. My angry dialectics may have produced a bad effect on some peaceable minds. Some poor workingman--more affected by my sarcasm than by the strength of my arguments--may, perhaps, have concluded that property is the result of a perpetual Machiavelianism on the part of the governors against the governed,--a deplorable error of which my book itself is the best refutation. I devoted two chapters to showing how property springs from human personality and the comparison of individuals. Then I explained its perpetual limitation; and, following out the same idea, I predicted its approaching disappearance. How, then, could the editors of the "Revue Democratique," after having borrowed from me nearly the whole substance of their economical articles, dare to say: "The holders of the soil, and other productive capital, are more or less wilful accomplices in a vast robbery, they being the exclusive receivers and sharers of the stolen goods"? The proprietors WILFULLY guilty of the crime of robbery! Never did that homicidal phrase escape my pen; never did my heart conceive the frightful thought. Thank Heaven! I know not how to calumniate my kind; and I have too strong a desire to seek for the reason of things to be willing to believe in criminal conspiracies. The millionnaire is no more tainted by property than the journeyman who works for thirty sous per day. On both sides the error is equal, as well as the intention. The effect is also the same, though positive in the former, and negative in the latter. I accused property; I did not denounce the proprietors, which would have been absurd: and I am sorry that there are among us wills so perverse and minds so shattered that they care for only so much of the truth as will aid them in their evil designs. Such is the only regret which I feel on account of my indignation, which, though expressed perhaps too bitterly, was at least honest, and legitimate in its source. However, what did I do in this essay which I voluntarily submitted to the Academy of Moral Sciences? Seeking a fixed axiom amid social uncertainties, I traced back to one fundamental question all the secondary questions over which, at present, so keen and diversified a conflict is raging This question was the right of property. Then, comparing all existing theories with each other, and extracting from them that which is common to them all, I endeavored to discover that element in the idea of property which is necessary, immutable, and absolute; and asserted, after authentic verification, that this idea is reducible to that of INDIVIDUAL AND TRANSMISSIBLE POSSESSION; SUSCEPTIBLE OF EXCHANGE, BUT NOT OF ALIENATION; FOUNDED ON LABOR, AND NOT ON FICTITIOUS OCCUPANCY, OR IDLE CAPRICE. I said, further, that this idea was the result of our revolutionary movements,--the culminating point towards which all opinions, gradually divesting themselves of their contradictory elements, converge. And I tried to demonstrate this by the spirit of the laws, by political economy, by psychology and history. A Father of the Church, finishing a learned exposition of the Catholic doctrine, cried, in the enthusiasm of his faith, _"Domine, si error est, a te decepti sumus_ (if my religion is false, God is to blame)." I, as well as this theologian, can say, "If equality is a fable, God, through whom we act and think and are; God, who governs society by eternal laws, who rewards just nations, and punishes proprietors,--God alone is the author of evil; God has lied. The fault lies not with me." But, if I am mistaken in my inferences, I should be shown my error, and led out of it. It is surely worth the trouble, and I think I deserve this honor. There is no ground for proscription. For, in the words of that member of the Convention who did not like the guillotine, _to kill is not to reply_. Until then, I persist in regarding my work as useful, social, full of instruction for public officials,--worthy, in short, of reward and encouragement. For there is one truth of which I am profoundly convinced,--nations live by absolute ideas, not by approximate and partial conceptions; therefore, men are needed who define principles, or at least test them in the fire of controversy. Such is the law,--the idea first, the pure idea, the understanding of the laws of God, the theory: practice follows with slow steps, cautious, attentive to the succession of events; sure to seize, towards this eternal meridian, the indications of supreme reason. The co-operation of theory and practice produces in humanity the realization of order,--the absolute truth. [74] All of us, as long as we live, are called, each in proportion to his strength, to this sublime work. The only duty which it imposes upon us is to refrain from appropriating the truth to ourselves, either by concealing it, or by accommodating it to the temper of the century, or by using it for our own interests. This principle of conscience, so grand and so simple, has always been present in my thought. Consider, in fact, sir, that which I might have done, but did not wish to do. I reason on the most honorable hypothesis. What hindered me from concealing, for some years to come, the abstract theory of the equality of fortunes, and, at the same time, from criticising constitutions and codes; from showing the absolute and the contingent, the immutable and the ephemeral, the eternal and the transitory, in laws present and past; from constructing a new system of legislation, and establishing on a solid foundation this social edifice, ever destroyed and as often rebuilt? Might I not, taking up the definitions of casuists, have clearly shown the cause of their contradictions and uncertainties, and supplied, at the same time, the inadequacies of their conclusions? Might I not have confirmed this labor by a vast historical exposition, in which the principle of exclusion, and of the accumulation of property, the appropriation of collective wealth, and the radical vice in exchanges, would have figured as the constant causes of tyranny, war, and revolution? "It should have been done," you say. Do not doubt, sir, that such a task would have required more patience than genius. With the principles of social economy which I have analyzed, I would have had only to break the ground, and follow the furrow. The critic of laws finds nothing more difficult than to determine justice: the labor alone would have been longer. Oh, if I had pursued this glittering prospect, and, like the man of the burning bush, with inspired countenance and deep and solemn voice, had presented myself some day with new tables, there would have been found fools to admire, boobies to applaud, and cowards to offer me the dictatorship; for, in the way of popular infatuations, nothing is impossible. But, sir, after this monument of insolence and pride, what should I have deserved in your opinion, at the tribunal of God, and in the judgment of free men? Death, sir, and eternal reprobation! I therefore spoke the truth as soon as I saw it, waiting only long enough to give it proper expression. I pointed out error in order that each might reform himself, and render his labors more useful. I announced the existence of a new political element, in order that my associates in reform, developing it in concert, might arrive more promptly at that unity of principles which alone can assure to society a better day. I expected to receive, if not for my book, at least for my commendable conduct, a small republican ovation. And, behold! journalists denounce me, academicians curse me, political adventurers (great God!) think to make themselves tolerable by protesting that they are not like me! I give the formula by which the whole social edifice may be scientifically reconstructed, and the strongest minds reproach me for being able only to destroy. The rest despise me, because I am unknown. When the "Essay on Property" fell into the reformatory camp, some asked: "Who has spoken? Is it Arago? Is it Lamennais? Michel de Bourges or Garnier-Pages?" And when they heard the name of a new man: "We do not know him," they would reply. Thus, the monopoly of thought, property in reason, oppresses the proletariat as well as the _bourgeoisie_. The worship of the infamous prevails even on the steps of the tabernacle. But what am I saying? May evil befall me, if I blame the poor creatures! Oh! let us not despise those generous souls, who in the excitement of their patriotism are always prompt to identify the voice of their chiefs with the truth. Let us encourage rather their simple credulity, enlighten complacently and tenderly their precious sincerity, and reserve our shafts for those vain-glorious spirits who are always admiring their genius, and, in different tongues, caressing the people in order to govern them. These considerations alone oblige me to reply to the strange and superficial conclusions of the "Journal du Peuple" (issue of Oct. 11, 1840), on the question of property. I leave, therefore, the journalist to address myself only to his readers. I hope that the self-love of the writer will not be offended, if, in the presence of the masses, I ignore an individual. You say, proletaires of the "Peuple," "For the very reason that men and things exist, there always will be men who will possess things; nothing, therefore, can destroy property." In speaking thus, you unconsciously argue exactly after the manner of M. Cousin, who always reasons from _possession_ to PROPERTY. This coincidence, however, does not surprise me. M. Cousin is a philosopher of much mind, and you, proletaires, have still more. Certainly it is honorable, even for a philosopher, to be your companion in error. Originally, the word PROPERTY was synonymous with PROPER or INDIVIDUAL POSSESSION. It designated each individual's special right to the use of a thing. But when this right of use, inert (if I may say so) as it was with regard to the other usufructuaries, became active and paramount,--that is, when the usufructuary converted his right to personally use the thing into the right to use it by his neighbor's labor,--then property changed its nature, and its idea became complex. The legists knew this very well, but instead of opposing, as they ought, this accumulation of profits, they accepted and sanctioned the whole. And as the right of farm-rent necessarily implies the right of use,--in other words, as the right to cultivate land by the labor of a slave supposes one's power to cultivate it himself, according to the principle that the greater includes the less,--the name property was reserved to designate this double right, and that of possession was adopted to designate the right of use. Whence property came to be called the perfect right, the right of domain, the eminent right, the heroic or _quiritaire_ right,--in Latin, _jus perfectum, jus optimum, jus quiritarium, jus dominii_,--while possession became assimilated to farm-rent. Now, that individual possession exists of right, or, better, from natural necessity, all philosophers admit, and can easily e demonstrated; but when, in imitation of M. Cousin, we assume it to be the basis of the domain of property, we fall into the sophism called _sophisma amphiboliae vel ambiguitatis_, which consists in changing the meaning by a verbal equivocation. People often think themselves very profound, because, by the aid of expressions of extreme generality, they appear to rise to the height of absolute ideas, and thus deceive inexperienced minds; and, what is worse, this is commonly called EXAMINING ABSTRACTIONS. But the abstraction formed by the comparison of identical facts is one thing, while that which is deduced from different acceptations of the same term is quite another. The first gives the universal idea, the axiom, the law; the second indicates the order of generation of ideas. All our errors arise from the constant confusion of these two kinds of abstractions. In this particular, languages and philosophies are alike deficient. The less common an idiom is, and the more obscure its terms, the more prolific is it as a source of error: a philosopher is sophistical in proportion to his ignorance of any method of neutralizing this imperfection in language. If the art of correcting the errors of speech by scientific methods is ever discovered, then philosophy will have found its criterion of certainty. Now, then, the difference between property and possession being well established, and it being settled that the former, for the reasons which I have just given, must necessarily disappear, is it best, for the slight advantage of restoring an etymology, to retain the word PROPERTY? My opinion is that it would be very unwise to do so, and I will tell why. I quote from the "Journal du Peuple:"-- "To the legislative power belongs the right to regulate property, to prescribe the conditions of acquiring, possessing, and transmitting it... It cannot be denied that inheritance, assessment, commerce, industry, labor, and wages require the most important modifications." You wish, proletaires, to REGULATE PROPERTY; that is, you wish to destroy it and reduce it to the right of possession. For to regulate property without the consent of the proprietors is to deny the right OF DOMAIN; to associate employees with proprietors is to destroy the EMINENT right; to suppress or even reduce farm-rent, house-rent, revenue, and increase generally, is to annihilate PERFECT property. Why, then, while laboring with such laudable enthusiasm for the establishment of equality, should you retain an expression whose equivocal meaning will always be an obstacle in the way of your success? There you have the first reason--a wholly philosophical one--for rejecting not only the thing, but the name, property. Here now is the political, the highest reason. Every social revolution--M. Cousin will tell you--is effected only by the realization of an idea, either political, moral, or religious. When Alexander conquered Asia, his idea was to avenge Greek liberty against the insults of Oriental despotism; when Marius and Caesar overthrew the Roman patricians, their idea was to give bread to the people; when Christianity revolutionized the world, its idea was to emancipate mankind, and to substitute the worship of one God for the deities of Epicurus and Homer; when France rose in '89, her idea was liberty and equality before the law. There has been no true revolution, says M. Cousin, with out its idea; so that where an idea does not exist, or even fails of a formal expression, revolution is impossible. There are mobs, conspirators, rioters, regicides. There are no revolutionists. Society, devoid of ideas, twists and tosses about, and dies in the midst of its fruitless labor. Nevertheless, you all feel that a revolution is to come, and that you alone can accomplish it. What, then, is the idea which governs you, proletaires of the nineteenth century?--for really I cannot call you revolutionists. What do you think?--what do you believe?--what do you want? Be guarded in your reply. I have read faithfully your favorite journals, your most esteemed authors. I find everywhere only vain and puerile _entites_; nowhere do I discover an idea. I will explain the meaning of this word _entite_,--new, without doubt, to most of you. By _entite_ is generally understood a substance which the imagination grasps, but which is incognizable by the senses and the reason. Thus the SOPORIFIC POWER of opium, of which Sganarelle speaks, and the PECCANT HUMORS of ancient medicine, are _entites_. The _entite_ is the support of those who do not wish to confess their ignorance. It is incomprehensible; or, as St. Paul says, the _argumentum non apparentium_. In philosophy, the _entite_ is often only a repetition of words which add nothing to the thought. For example, when M. Pierre Leroux--who says so many excellent things, but who is too fond, in my opinion, of his Platonic formulas--assures us that the evils of humanity are due to our IGNORANCE OF LIFE, M. Pierre Leroux utters an _entite;_ for it is evident that if we are evil it is because we do not know how to live; but the knowledge of this fact is of no value to us. When M. Edgar Quinet declares that France suffers and declines because there is an ANTAGONISM of men and of interests, he declares an _entite;_ for the problem is to discover the cause of this antagonism. When M. Lamennais, in thunder tones, preaches self-sacrifice and love, he proclaims two _entites_; for we need to know on what conditions self-sacrifice and love can spring up and exist. So also, proletaires, when you talk of LIBERTY, PROGRESS, and THE SOVEREIGNTY OF THE PEOPLE, you make of these naturally intelligible things so many _entites_ in space: for, on the one hand, we need a new definition of liberty, since that of '89 no longer suffices; and, on the other, we must know in what direction society should proceed in order to be in progress. As for the sovereignty of the people, that is a grosser _entite_ than the sovereignty of reason; it is the _entite_ of _entites_. In fact, since sovereignty can no more be conceived of outside of the people than outside of reason, it remains to be ascertained who, among the people, shall exercise the sovereignty; and, among so many minds, which shall be the sovereigns. To say that the people should elect their representatives is to say that the people should recognize their sovereigns, which does not remove the difficulty at all. But suppose that, equal by birth, equal before the law, equal in personality, equal in social functions, you wish also to be equal in conditions. Suppose that, perceiving all the mutual relations of men, whether they produce or exchange or consume, to be relations of commutative justice,--in a word, social relations; suppose, I say, that, perceiving this, you wish to give this natural society a legal existence, and to establish the fact by law,-- I say that then you need a clear, positive, and exact expression of your whole idea,--that is, an expression which states at once the principle, the means, and the end; and I add that that expression is ASSOCIATION. And since the association of the human race dates, at least rightfully, from the beginning of the world, and has gradually established and perfected itself by successively divesting itself of its negative elements, slavery, nobility, despotism, aristocracy, and feudalism,--I say that, to eliminate the last negation of society, to formulate the last revolutionary idea, you must change your old rallying-cries, NO MORE ABSOLUTISM, NO MORE NOBILITY, NO MORE SLAVES! into that of NO MORE PROPERTY!... But I know what astonishes you, poor souls, blasted by the wind of poverty, and crushed by your patrons' pride: it is EQUALITY, whose consequences frighten you. How, you have said in your journal,--how can we "dream of a level which, being unnatural, is therefore unjust? How shall we pay the day's labor of a Cormenin or a Lamennais?" Plebeians, listen! When, after the battle of Salamis, the Athenians assembled to award the prizes for courage, after the ballots had been collected, it was found that each combatant had one vote for the first prize, and Themistocles all the votes for the second. The people of Minerva were crowned by their own hands. Truly heroic souls! all were worthy of the olive-branch, since all had ventured to claim it for themselves. Antiquity praised this sublime spirit. Learn, proletaires, to esteem yourselves, and to respect your dignity. You wish to be free, and you know not how to be citizens. Now, whoever says "citizens" necessarily says equals. If I should call myself Lamennais or Cormenin, and some journal, speaking of me, should burst forth with these hyperboles, INCOMPARABLE GENIUS, SUPERIOR MIND, CONSUMMATE VIRTUE, NOBLE CHARACTER, I should not like it, and should complain,--first, because such eulogies are never deserved; and, second, because they furnish a bad example. But I wish, in order to reconcile you to equality, to measure for you the greatest literary personage of our century. Do not accuse me of envy, proletaires, if I, a defender of equality, estimate at their proper value talents which are universally admired, and which I, better than any one, know how to recognize. A dwarf can always measure a giant: all that he needs is a yardstick. You have seen the pretentious announcements of "L'Esquisse d'une Philosophie," and you have admired the work on trust; for either you have not read it, or, if you have, you are incapable of judging it. Acquaint yourselves, then, with this speculation more brilliant than sound; and, while admiring the enthusiasm of the author, cease to pity those useful labors which only habit and the great number of the persons engaged in them render contemptible. I shall be brief; for, notwithstanding the importance of the subject and the genius of the author, what I have to say is of but little moment. M. Lamennais starts with the existence of God. How does he demonstrate it? By Cicero's argument,--that is, by the consent of the human race. There is nothing new in that. We have still to find out whether the belief of the human race is legitimate; or, as Kant says, whether our subjective certainty of the existence of God corresponds with the objective truth. This, however, does not trouble M. Lamennais. He says that, if the human race believes, it is because it has a reason for believing. Then, having pronounced the name of God, M. Lamennais sings a hymn; and that is his demonstration! This first hypothesis admitted, M. Lamennais follows it with a second; namely, that there are three persons in God. But, while Christianity teaches the dogma of the Trinity only on the authority of revelation, M. Lamennais pretends to arrive at it by the sole force of argument; and he does not perceive that his pretended demonstration is, from beginning to end, anthropomorphism,--that is, an ascription of the faculties of the human mind and the powers of nature to the Divine substance. New songs, new hymns! God and the Trinity thus DEMONSTRATED, the philosopher passes to the creation,--a third hypothesis, in which M. Lamennais, always eloquent, varied, and sublime, DEMONSTRATES that God made the world neither of nothing, nor of something, nor of himself; that he was free in creating, but that nevertheless he could not but create; that there is in matter a matter which is not matter; that the archetypal ideas of the world are separated from each other, in the Divine mind, by a division which is obscure and unintelligible, and yet substantial and real, which involves intelligibility, &c. We meet with like contradictions concerning the origin of evil. To explain this problem,--one of the profoundest in philosophy,--M. Lamennais at one time denies evil, at another makes God the author of evil, and at still another seeks outside of God a first cause which is not God,--an amalgam of _entites_ more or less incoherent, borrowed from Plato, Proclus, Spinoza, I might say even from all philosophers. Having thus established his trinity of hypotheses, M. Lamennais deduces therefrom, by a badly connected chain of analogies, his whole philosophy. And it is here especially that we notice the syncretism which is peculiar to him. The theory of M. Lamennais embraces all systems, and supports all opinions. Are you a materialist? Suppress, as useless _entites_, the three persons in God; then, starting directly from heat, light, and electro-magnetism,--which, according to the author, are the three original fluids, the three primary external manifestations of Will, Intelligence, and Love,--you have a materialistic and atheistic cosmogony. On the contrary, are you wedded to spiritualism? With the theory of the immateriality of the body, you are able to see everywhere nothing but spirits. Finally, if you incline to pantheism, you will be satisfied by M. Lamennais, who formally teaches that the world is not an EMANATION from Divinity,--which is pure pantheism,--but a FLOW of Divinity. I do not pretend, however, to deny that "L'Esquisse" contains some excellent things; but, by the author's declaration, these things are not original with him; it is the system which is his. That is undoubtedly the reason why M. Lamennais speaks so contemptuously of his predecessors in philosophy, and disdains to quote his originals. He thinks that, since "L'Esquisse" contains all true philosophy, the world will lose nothing when the names and works of the old philosophers perish. M. Lamennais, who renders glory to God in beautiful songs, does not know how as well to render justice to his fellows. His fatal fault is this appropriation of knowledge, which the theologians call the PHILOSOPHICAL SIN, or the SIN AGAINST THE HOLY GHOST--a sin which will not damn you, proletaires, nor me either. In short, "L'Esquisse," judged as a system, and divested of all which its author borrows from previous systems, is a commonplace work, whose method consists in constantly explaining the known by the unknown, and in giving entites for abstractions, and tautologies for proofs. Its whole theodicy is a work not of genius but of imagination, a patching up of neo-Platonic ideas. The psychological portion amounts to nothing, M. Lamennais openly ridiculing labors of this character, without which, however, metaphysics is impossible. The book, which treats of logic and its methods, is weak, vague, and shallow. Finally, we find in the physical and physiological speculations which M. Lamennais deduces from his trinitarian cosmogony grave errors, the preconceived design of accommodating facts to theory, and the substitution in almost every case of hypothesis for reality. The third volume on industry and art is the most interesting to read, and the best. It is true that M. Lamennais can boast of nothing but his style. As a philosopher, he has added not a single idea to those which existed before him. Why, then, this excessive mediocrity of M. Lamennais considered as a thinker, a mediocrity which disclosed itself at the time of the publication of the "Essai sur l'Indifference!"? It is because (remember this well, proletaires!) Nature makes no man truly complete, and because the development of certain faculties almost always excludes an equal development of the opposite faculties; it is because M. Lamennais is preeminently a poet, a man of feeling and sentiment. Look at his style,--exuberant, sonorous, picturesque, vehement, full of exaggeration and invective,--and hold it for certain that no man possessed of such a style was ever a true metaphysician. This wealth of expression and illustration, which everybody admires, becomes in M Lamennais the incurable cause of his philosophical impotence. His flow of language, and his sensitive nature misleading his imagination, he thinks that he is reasoning when he is only repeating himself, and readily takes a description for a logical deduction. Hence his horror of positive ideas, his feeble powers of analysis, his pronounced taste for indefinite analogies, verbal abstractions, hypothetical generalities, in short, all sorts of entites. Further, the entire life of M. Lamennais is conclusive proof of his anti-philosophical genius. Devout even to mysticism, an ardent ultramontane, an intolerant theocrat, he at first feels the double influence of the religious reaction and the literary theories which marked the beginning of this century, and falls back to the middle ages and Gregory VII.; then, suddenly becoming a progressive Christian and a democrat, he gradually leans towards rationalism, and finally falls into deism. At present, everybody waits at the trap-door. As for me, though I would not swear to it, I am inclined to think that M. Lamennais, already taken with scepticism, will die in a state of indifference. He owes to individual reason and methodical doubt this expiation of his early essays. It has been pretended that M. Lamennais, preaching now a theocracy, now universal democracy, has been always consistent; that, under different names, he has sought invariably one and the same thing,--unity. Pitiful excuse for an author surprised in the very act of contradiction! What would be thought of a man who, by turns a servant of despotism under Louis XVI, a demagogue with Robespierre, a courtier of the Emperor, a bigot during fifteen years of the Restoration, a conservative since 1830, should dare to say that he ever had wished for but one thing,--public order? Would he be regarded as any the less a renegade from all parties? Public order, unity, the world's welfare, social harmony, the union of the nations,--concerning each of these things there is no possible difference of opinion. Everybody wishes them; the character of the publicist depends only upon the means by which he proposes to arrive at them. But why look to M. Lamennais for a steadfastness of opinion, which he himself repudiates? Has he not said, "The mind has no law; that which I believe to-day, I did not believe yesterday; I do not know that I shall believe it to-morrow"? No; there is no real superiority among men, since all talents and capacities are combined never in one individual. This man has the power of thought, that one imagination and style, still another industrial and commercial capacity. By our very nature and education, we possess only special aptitudes which are limited and confined, and which become consequently more necessary as they gain in depth and strength. Capacities are to each other as functions and persons; who would dare to classify them in ranks? The finest genius is, by the laws of his existence and development, the most dependent upon the society which creates him. Who would dare to make a god of the glorious child? "It is not strength which makes the man," said a Hercules of the market-place to the admiring crowd; "it is character." That man, who had only his muscles, held force in contempt. The lesson is a good one, proletaires; we should profit by it. It is not talent (which is also a force), it is not knowledge, it is not beauty which makes the man. It is heart, courage, will, virtue. Now, if we are equal in that which makes us men, how can the accidental distribution of secondary faculties detract from our manhood? Remember that privilege is naturally and inevitably the lot of the weak; and do not be misled by the fame which accompanies certain talents whose greatest merit consists in their rarity, and a long and toilsome apprenticeship. It is easier for M. Lamennais to recite a philippic, or sing a humanitarian ode after the Platonic fashion, than to discover a single useful truth; it is easier for an economist to apply the laws of production and distribution than to write ten lines in the style of M. Lamennais; it is easier for both to speak than to act. You, then, who put your hands to the work, who alone truly create, why do you wish me to admit your inferiority? But, what am I saying? Yes, you are inferior, for you lack virtue and will! Ready for labor and for battle, you have, when liberty and equality are in question, neither courage nor character! In the preface to his pamphlet on "Le Pays et le Gouvernement," as well as in his defence before the jury, M. Lamennais frankly declared himself an advocate of property. Out of regard for the author and his misfortune, I shall abstain from characterizing this declaration, and from examining these two sorrowful performances. M. Lamennais seems to be only the tool of a quasi-radical party, which flatters him in order to use him, without respect for a glorious, but hence forth powerless, old age. What means this profession of faith? From the first number of "L'Avenir" to "L'Esquisse d'une Philosophie," M. Lamennais always favors equality, association, and even a sort of vague and indefinite communism. M. Lamennais, in recognizing the right of property, gives the lie to his past career, and renounces his most generous tendencies. Can it, then, be true that in this man, who has been too roughly treated, but who is also too easily flattered, strength of talent has already outlived strength of will? It is said that M. Lamennais has rejected the offers of several of his friends to try to procure for him a commutation of his sentence. M. Lamennais prefers to serve out his time. May not this affectation of a false stoicism come from the same source as his recognition of the right of property? The Huron, when taken prisoner, hurls insults and threats at his conqueror,--that is the heroism of the savage; the martyr prays for his executioners, and is willing to receive from them his life,--that is the heroism of the Christian. Why has the apostle of love become an apostle of anger and revenge? Has, then, the translator of "L'Imitation" forgotten that he who offends charity cannot honor virtue? Galileo, retracting on his knees before the tribunal of the inquisition his heresy in regard to the movement of the earth, and recovering at that price his liberty, seems to me a hundred times grander than M. Lamennais. What! if we suffer for truth and justice, must we, in retaliation, thrust our persecutors outside the pale of human society; and, when sentenced to an unjust punishment, must we decline exemption if it is offered to us, because it pleases a few base satellites to call it a pardon? Such is not the wisdom of Christianity. But I forgot that in the presence of M. Lamennais this name is no longer pronounced. May the prophet of "L'Avenir" be soon restored to liberty and his friends; but, above all, may he henceforth derive his inspiration only from his genius and his heart! O proletaires, proletaires! how long are you to be victimized by this spirit of revenge and implacable hatred which your false friends kindle, and which, perhaps, has done more harm to the development of reformatory ideas than the corruption, ignorance, and malice of the government? Believe me, at the present time everybody is to blame. In fact, in intention, or in example, all are found wanting; and you have no right to accuse any one. The king himself (God forgive me! I do not like to justify a king),--the king himself is, like his predecessors, only the personification of an idea, and an idea, proletaires, which possesses you yet. His greatest wrong consists in wishing for its complete realization, while you wish it realized only partially,--consequently, in being logical in his government; while you, in your complaints, are not at all so. You clamor for a second regicide. He that is without sin among you,--let him cast at the prince of property the first stone! How successful you would have been if, in order to influence men, you had appealed to the self-love of men,--if, in order to alter the constitution and the law, you had placed yourselves within the constitution and the law! Fifty thousand laws, they say, make up our political and civil codes. Of these fifty thousand laws, twenty-five thousand are for you, twenty-five thousand against you. Is it not clear that your duty is to oppose the former to the latter, and thus, by the argument of contradiction, drive privilege into its last ditch? This method of action is henceforth the only useful one, being the only moral and rational one. For my part, if I had the ear of this nation, to which I am attached by birth and predilection, with no intention of playing the leading part in the future republic, I would instruct the laboring masses to conquer property through institutions and judicial pleadings; to seek auxiliaries and accomplices in the highest ranks of society, and to ruin all privileged classes by taking advantage of their common desire for power and popularity. The petition for the electoral reform has already received two hundred thousand signatures, and the illustrious Arago threatens us with a million. Surely, that will be well done; but from this million of citizens, who are as willing to vote for an emperor as for equality, could we not select ten thousand signatures--I mean bona fide signatures--whose authors can read, write, cipher, and even think a little, and whom we could invite, after due perusal and verbal explanation, to sign such a petition as the following:-- "TO HIS EXCELLENCY THE MINISTER OF THE INTERIOR:-- "MONSIEUR LE MINISTRE,--On the day when a royal ordinance, decreeing the establishment of model national workshops, shall appear in the 'Moniteur,' the undersigned, to the number of TEN THOUSAND, will repair to the Palace of the Tuileries, and there, with all the power of their lungs, will shout, 'Long live Louis Philippe!' "On the day when the 'Moniteur' shall inform the public that this petition is refused, the undersigned, to the number of TEN THOUSAND, will say secretly in their hearts, 'Down with Louis Philippe!'" If I am not mistaken, such a petition would have some effect. [75] The pleasure of a popular ovation would be well worth the sacrifice of a few millions. They sow so much to reap unpopularity! Then, if the nation, its hopes of 1830 restored, should feel it its duty to keep its promise,--and it would keep it, for the word of the nation is, like that of God, sacred,--if, I say, the nation, reconciled by this act with the public-spirited monarchy, should bear to the foot of the throne its cheers and its vows, and should at that solemn moment choose me to speak in its name, the following would be the substance of my speech:-- "SIRE,--This is what the nation wishes to say to your Majesty:-- "O King! you see what it costs to gain the applause of the citizens. Would you like us henceforth to take for our motto: 'Let us help the King, the King will help us'? Do you wish the people to cry: 'THE KING AND THE FRENCH NATION'? Then abandon these grasping bankers, these quarrelsome lawyers, these miserable bourgeois, these infamous writers, these dishonored men. All these, Sire, hate you, and continue to support you only because they fear us. Finish the work of our kings; wipe out aristocracy and privilege; consult with these faithful proletaires, with the nation, which alone can honor a sovereign and sincerely shout, 'Long live the king!'" The rest of what I have to say, sir, is for you alone; others would not understand me. You are, I perceive, a republican as well as an economist, and your patriotism revolts at the very idea of addressing to the authorities a petition in which the government of Louis Philippe should be tacitly recognized. "National workshops! it were well to have such institutions established," you think; "but patriotic hearts never will accept them from an aristocratic ministry, nor by the courtesy of a king." Already, undoubtedly, your old prejudices have returned, and you now regard me only as a sophist, as ready to flatter the powers that be as to dishonor, by pushing them to an extreme, the principles of equality and universal fraternity. What shall I say to you?... That I should so lightly compromise the future of my theories, either this clever sophistry which is attributed to me must be at bottom a very trifling affair, or else my convictions must be so firm that they deprive me of free-will. But, not to insist further on the necessity of a compromise between the executive power and the people, it seems to me, sir, that, in doubting my patriotism, you reason very capriciously, and that your judgments are exceedingly rash. You, sir, ostensibly defending government and property, are allowed to be a republican, reformer, phalansterian, any thing you wish; I, on the contrary, demanding distinctly enough a slight reform in public economy, am foreordained a conservative, and likewise a friend of the dynasty. I cannot explain myself more clearly. So firm a believer am I in the philosophy of accomplished facts and the _statu quo_ of governmental forms that, instead of destroying that which exists and beginning over again the past, I prefer to render every thing legitimate by correcting it. It is true that the corrections which I propose, though respecting the form, tend to finally change the nature of the things corrected. Who denies it? But it is precisely that which constitutes my system of _statu quo_. I make no war upon symbols, figures, or phantoms. I respect scarecrows, and bow before bugbears. I ask, on the one hand, that property be left as it is, but that interest on all kinds of capital be gradually lowered and finally abolished; on the other hand, that the charter be maintained in its present shape, but that method be introduced into administration and politics. That is all. Nevertheless, submitting to all that is, though not satisfied with it, I endeavor to conform to the established order, and to render unto Caesar the things that are Caesar's. Is it thought, for instance, that I love property?... Very well; I am myself a proprietor and do homage to the right of increase, as is proved by the fact that I have creditors to whom I faithfully pay, every year, a large amount of interest. The same with politics. Since we are a monarchy, I would cry, "LONG LIVE THE KING," rather than suffer death; which does not prevent me, however, from demanding that the irremovable, inviolable, and hereditary representative of the nation shall act with the proletaires against the privileged classes; in a word, that the king shall become the leader of the radical party. Thereby we proletaires would gain every thing; and I am sure that, at this price, Louis Philippe might secure to his family the perpetual presidency of the republic. And this is why I think so. If there existed in France but one great functional inequality, the duty of the functionary being, from one end of the year to the other, to hold full court of savants, artists, soldiers, deputies, inspectors, &c., it is evident that the expenses of the presidency then would be the national expenses; and that, through the reversion of the civil list to the mass of consumers, the great inequality of which I speak would form an exact equation with the whole nation. Of this no economist needs a demonstration. Consequently, there would be no more fear of cliques, courtiers, and appanages, since no new inequality could be established. The king, as king, would have friends (unheard-of thing), but no family. His relatives or kinsmen,--_agnats et cognats_,--if they were fools, would be nothing to him; and in no case, with the exception of the heir apparent, would they have, even in court, more privileges than others. No more nepotism, no more favor, no more baseness. No one would go to court save when duty required, or when called by an honorable distinction; and as all conditions would be equal and all functions equally honored, there would be no other emulation than that of merit and virtue. I wish the king of the French could say without shame, "My brother the gardener, my sister-in-law the milk-maid, my son the prince-royal, and my son the blacksmith." His daughter might well be an artist. That would be beautiful, sir; that would be royal; no one but a buffoon could fail to understand it. In this way, I have come to think that the forms of royalty may be made to harmonize with the requirements of equality, and have given a monarchical form to my republican spirit. I have seen that France contains by no means as many democrats as is generally supposed, and I have compromised with the monarchy. I do not say, however, that, if France wanted a republic, I could not accommodate myself equally well, and perhaps better. By nature, I hate all signs of distinction, crosses of honor, gold lace, liveries, costumes, honorary titles, &c., and, above all, parades. If I had my way, no general should be distinguished from a soldier, nor a peer of France from a peasant. Why have I never taken part in a review? for I am happy to say, sir, that I am a national guard; I have nothing else in the world but that. Because the review is always held at a place which I do not like, and because they have fools for officers whom I am compelled to obey. You see,--and this is not the best of my history,--that, in spite of my conservative opinions, my life is a perpetual sacrifice to the republic. Nevertheless, I doubt if such simplicity would be agreeable to French vanity, to that inordinate love of distinction and flattery which makes our nation the most frivolous in the world. M. Lamartine, in his grand "Meditation on Bonaparte," calls the French A NATION OF BRUTUSES. We are merely a nation of Narcissuses. Previous to '89, we had the aristocracy of blood; then every bourgeois looked down upon the commonalty, and wished to be a nobleman. Afterwards, distinction was based on wealth, and the bourgeoisie jealous of the nobility, and proud of their money, used 1830 to promote, not liberty by any means, but the aristocracy of wealth. When, through the force of events, and the natural laws of society, for the development of which France offers such free play, equality shall be established in functions and fortunes, then the beaux and the belles, the savants and the artists, will form new classes. There is a universal and innate desire in this Gallic country for fame and glory. We must have distinctions, be they what they may,--nobility, wealth, talent, beauty, or dress. I suspect MM. Arage and Garnier-Pages of having aristocratic manners, and I picture to myself our great journalists, in their columns so friendly to the people, administering rough kicks to the compositors in their printing offices. "This man," once said "Le National" in speaking of Carrel, "whom we had proclaimed FIRST CONSUL!... Is it not true that the monarchical principle still lives in the hearts of our democrats, and that they want universal suffrage in order to make themselves kings? Since "Le National" prides itself on holding more fixed opinions than "Le Journal des Debats," I presume that, Armand Carrel being dead, M. Armand Marrast is now first consul, and M. Garnier-Pages second consul. In every thing the deputy must give way to the journalist. I do not speak of M. Arago, whom I believe to be, in spite of calumny, too learned for the consulship. Be it so. Though we have consuls, our position is not much altered. I am ready to yield my share of sovereignty to MM. Armand Marrast and Garnier-Pages, the appointed consuls, provided they will swear on entering upon the duties of their office, to abolish property and not be haughty. Forever promises! Forever oaths! Why should the people trust in tribunes, when kings perjure themselves? Alas! truth and honesty are no longer, as in the days of King John, in the mouth of princes. A whole senate has been convicted of felony, and, the interest of the governors always being, for some mysterious reason, opposed to the interest of the governed, parliaments follow each other while the nation dies of hunger. No, no! No more protectors, no more emperors, no more consuls. Better manage our affairs ourselves than through agents. Better associate our industries than beg from monopolies; and, since the republic cannot dispense with virtues, we should labor for our reform. This, therefore, is my line of conduct. I preach emancipation to the proletaires; association to the laborers; equality to the wealthy. I push forward the revolution by all means in my power,--the tongue, the pen, the press, by action, and example. My life is a continual apostleship. Yes, I am a reformer; I say it as I think it, in good faith, and that I may be no longer reproached for my vanity. I wish to convert the world. Very likely this fancy springs from an enthusiastic pride which may have turned to delirium; but it will be admitted at least that I have plenty of company, and that my madness is not monomania. At the present day, everybody wishes to be reckoned among the lunatics of Beranger. To say nothing of the Babeufs, the Marats, and the Robespierres, who swarm in our streets and workshops, all the great reformers of antiquity live again in the most illustrious personages of our time. One is Jesus Christ, another Moses, a third Mahomet; this is Orpheus, that Plato, or Pythagoras. Gregory VII., himself, has risen from the grave together with the evangelists and the apostles; and it may turn out that even I am that slave who, having escaped from his master's house, was forthwith made a bishop and a reformer by St. Paul. As for the virgins and holy women, they are expected daily; at present, we have only Aspasias and courtesans. Now, as in all diseases, the diagnostic varies according to the temperament, so my madness has its peculiar aspects and distinguishing characteristic. Reformers, as a general thing, are jealous of their role; they suffer no rivals, they want no partners; they have disciples, but no co-laborers. It is my desire, on the contrary, to communicate my enthusiasm, and to make it, as far as I can, epidemic. I wish that all were, like myself, reformers, in order that there might be no more sects; and that Christs, Anti-Christs, and false Christs might be forced to understand and agree with each other. Again, every reformer is a magician, or at least desires to become one. Thus Moses, Jesus Christ, and the apostles, proved their mission by miracles. Mahomet ridiculed miracles after having endeavored to perform them. Fourier, more cunning, promises us wonders when the globe shall be covered with phalansteries. For myself, I have as great a horror of miracles as of authorities, and aim only at logic. That is why I continually search after the criterion of certainty. I work for the reformation of ideas. Little matters it that they find me dry and austere. I mean to conquer by a bold struggle, or die in the attempt; and whoever shall come to the defence of property, I swear that I will force him to argue like M. Considerant, or philosophize like M. Troplong. Finally,--and it is here that I differ most from my compeers,--I do not believe it necessary, in order to reach equality, to turn every thing topsy-turvy. To maintain that nothing but an overturn can lead to reform is, in my judgment, to construct a syllogism, and to look for the truth in the regions of the unknown. Now, I am for generalization, induction, and progress. I regard general disappropriation as impossible: attacked from that point, the problem of universal association seems to me insolvable. Property is like the dragon which Hercules killed: to destroy it, it must be taken, not by the head, but by the tail,--that is, by profit and interest. I stop. I have said enough to satisfy any one who can read and understand. The surest way by which the government can baffle intrigues and break up parties is to take possession of science, and point out to the nation, at an already appreciable distance, the rising oriflamme of equality; to say to those politicians of the tribune and the press, for whose fruitless quarrels we pay so dearly, "You are rushing forward, blind as you are, to the abolition of property; but the government marches with its eyes open. You hasten the future by unprincipled and insincere controversy; but the government, which knows this future, leads you thither by a happy and peaceful transition. The present generation will not pass away before France, the guide and model of civilized nations, has regained her rank and legitimate influence." But, alas! the government itself,--who shall enlighten it? Who can induce it to accept this doctrine of equality, whose terrible but decisive formula the most generous minds hardly dare to acknowledge?... I feel my whole being tremble when I think that the testimony of three men--yes, of three men who make it their business to teach and define--would suffice to give full play to public opinion, to change beliefs, and to fix destinies. Will not the three men be found?... May we hope, or not? What must we think of those who govern us? In the world of sorrow in which the proletaire moves, and where nothing is known of the intentions of power, it must be said that despair prevails. But you, sir,--you, who by function belong to the official world; you, in whom the people recognize one of their noblest friends, and property its most prudent adversary,--what say you of our deputies, our ministers, our king? Do you believe that the authorities are friendly to us? Then let the government declare its position; let it print its profession of faith in equality, and I am dumb. Otherwise, I shall continue the war; and the more obstinacy and malice is shown, the oftener will I redouble my energy and audacity. I have said before, and I repeat it,--I have sworn, not on the dagger and the death's-head, amid the horrors of a catacomb, and in the presence of men besmeared with blood; but I have sworn on my conscience to pursue property, to grant it neither peace nor truce, until I see it everywhere execrated. I have not yet published half the things that I have to say concerning the right of domain, nor the best things. Let the knights of property, if there are any who fight otherwise than by retreating, be prepared every day for a new demonstration and accusation; let them enter the arena armed with reason and knowledge, not wrapped up in sophisms, for justice will be done. "To become enlightened, we must have liberty. That alone suffices; but it must be the liberty to use the reason in regard to all public matters. "And yet we hear on every hand authorities of all kinds and degrees crying: 'Do not reason!' "If a distinction is wanted, here is one:-- "The PUBLIC use of the reason always should be free, but the PRIVATE use ought always to be rigidly restricted. By public use, I mean the scientific, literary use; by private, that which may be taken advantage of by civil officials and public functionaries. Since the governmental machinery must be kept in motion, in order to preserve unity and attain our object, we must not reason; we must obey. But the same individual who is bound, from this point of view, to passive obedience, has the right to speak in his capacity of citizen and scholar. He can make an appeal to the public, submit to it his observations on events which occur around him and in the ranks above him, taking care, however, to avoid offences which are punishable. "Reason, then, as much as you like; only, obey."--Kant: Fragment on the Liberty of Thought and of the Press. Tissot's Translation. These words of the great philosopher outline for me my duty. I have delayed the reprint of the work entitled "What is Property?" in order that I might lift the discussion to the philosophical height from which ridiculous clamor has dragged it down; and that, by a new presentation of the question, I might dissipate the fears of good citizens. I now reenter upon the public use of my reason, and give truth full swing. The second edition of the First Memoir on Property will immediately follow the publication of this letter. Before issuing any thing further, I shall await the observations of my critics, and the co-operation of the friends of the people and of equality. Hitherto, I have spoken in my own name, and on my own personal responsibility. It was my duty. I was endeavoring to call attention to principles which antiquity could not discover, because it knew nothing of the science which reveals them,--political economy. I have, then, testified as to FACTS; in short, I have been a WITNESS. Now my role changes. It remains for me to deduce the practical consequences of the facts proclaimed. The position of PUBLIC PROSECUTOR is the only one which I am henceforth fitted to fill, and I shall sum up the case in the name of the PEOPLE. I am, sir, with all the consideration that I owe to your talent and your character, Your very humble and most obedient servant, P. J. PROUDHON, Pensioner of the Academy of Besancon. P.S. During the session of April 2, the Chamber of Deputies rejected, by a very large majority, the literary-property bill, BECAUSE IT DID NOT UNDERSTAND IT. Nevertheless, literary property is only a special form of the right of property, which everybody claims to understand. Let us hope that this legislative precedent will not be fruitless for the cause of equality. The consequence of the vote of the Chamber is the abolition of capitalistic property,--property incomprehensible, contradictory, impossible, and absurd. FOOTNOTES: [Footnote 1: In the French edition of Proudhon's works, the above sketch of his life is prefixed to the first volume of his correspondence, but the translator prefers to insert it here as the best method of introducing the author to the American public.] [Footnote 2: "An Inquiry into Grammatical Classifications." By P. J. Proudhon. A treatise which received honorable mention from the Academy of Inscriptions, May 4, 1839. Out of print.] [Footnote 3: "The Utility of the Celebration of Sunday," &c. By P. J. Proudhon. Besancon, 1839, 12mo; 2d edition, Paris, 1841, 18mo.] [Footnote 4: Charron, on "Wisdom," Chapter xviii.] [Footnote 5: M. Vivien, Minister of Justice, before commencing proceedings against the "Memoir upon Property," asked the opinion of M. Blanqui; and it was on the strength of the observations of this honorable academician that he spared a book which had already excited the indignation of the magistrates. M. Vivien is not the only official to whom I have been indebted, since my first publication, for assistance and protection; but such generosity in the political arena is so rare that one may acknowledge it graciously and freely. I have always thought, for my part, that bad institutions made bad magistrates; just as the cowardice and hypocrisy of certain bodies results solely from the spirit which governs them. Why, for instance, in spite of the virtues and talents for which they are so noted, are the academies generally centres of intellectual repression, stupidity, and base intrigue? That question ought to be proposed by an academy: there would be no lack of competitors.] [Footnote 6: In Greek, {GREEK e ncg } examiner; a philosopher whose business is to seek the truth.] [Footnote 7: Religion, laws, marriage, were the privileges of freemen, and, in the beginning, of nobles only. Dii majorum gentium--gods of the patrician families; jus gentium--right of nations; that is, of families or nobles. The slave and the plebeian had no families; their children were treated as the offspring of animals. BEASTS they were born, BEASTS they must live.] [Footnote 8: If the chief of the executive power is responsible, so must the deputies be also. It is astonishing that this idea has never occurred to any one; it might be made the subject of an interesting essay. But I declare that I would not, for all the world, maintain it; the people are yet much too logical for me to furnish them with arguments.] [Footnote 9: See De Tocqueville, "Democracy in the United States;" and Michel Chevalier, "Letters on North America." Plutarch tells us, "Life of Pericles," that in Athens honest people were obliged to conceal themselves while studying, fearing they would be regarded as aspirants for office.] [Footnote 10: "Sovereignty," according to Toullier, "is human omnipotence." A materialistic definition: if sovereignty is any thing, it is a RIGHT not a FORCE or a faculty. And what is human omnipotence?] [Footnote 11: The Proudhon here referred to is J. B. V. Proudhon; a distinguished French jurist, and distant relative of the Translator.] [Footnote 12: Here, especially, the simplicity of our ancestors appears in all its rudeness. After having made first cousins heirs, where there were no legitimate children, they could not so divide the property between two different branches as to prevent the simultaneous existence of extreme wealth and extreme poverty in the same family. For example:-- James, dying, leaves two sons, Peter and John, heirs of his fortune: James's property is divided equally between them. But Peter has only one daughter, while John, his brother, leaves six sons. It is clear that, to be true to the principle of equality, and at the same time to that of heredity, the two estates must be divided in seven equal portions among the children of Peter and John; for otherwise a stranger might marry Peter's daughter, and by this alliance half of the property of James, the grandfather, would be transferred to another family, which is contrary to the principle of heredity. Furthermore, John's children would be poor on account of their number, while their cousin, being an only child, would be rich, which is contrary to the principle of equality. If we extend this combined application of two principles apparently opposed to each other, we shall become convinced that the right of succession, which is assailed with so little wisdom in our day, is no obstacle to the maintenance of equality.] [Footnote 13: _Zeus klesios_.] [Footnote 14: Giraud, "Investigations into the Right of Property among the Romans."] [Footnote 15: Precarious, from precor, "I pray;" because the act of concession expressly signified that the lord, in answer to the prayers of his men or slaves, had granted them permission to labor.] [Footnote 16: I cannot conceive how any one dares to justify the inequality of conditions, by pointing to the base inclinations and propensities of certain men. Whence comes this shameful degradation of heart and mind to which so many fall victims, if not from the misery and abjection into which property plunges them?] [Footnote 17: How many citizens are needed to support a professor of philosophy?--Thirty-five millions. How many for an economist?--Two billions. And for a literary man, who is neither a savant, nor an artist, nor a philosopher, nor an economist, and who writes newspaper novels?--None.] [Footnote 18: There is an error in the author's calculation here; but the translator, feeling sure that the reader will understand Proudhon's meaning, prefers not to alter his figures.--Translator.] [Footnote 19: _Hoc inter se differunt onanismus et manuspratio, nempe quod haec a solitario exercetur, ille autem a duobus reciprocatur, masculo scilicet et faemina. Porro foedam hanc onanismi venerem ludentes uxoria mariti habent nunc omnigm suavissimam_] [Footnote 20: Polyandry,--plurality of husbands.] [Footnote 21: Infanticide has just been publicly advocated in England, in a pamphlet written by a disciple of Malthus. He proposes an ANNUAL MASSACRE OF THE INNOCENTS in all families containing more children than the law allows; and he asks that a magnificent cemetery, adorned with statues, groves, fountains, and flowers, be set apart as a special burying-place for the superfluous children. Mothers would resort to this delightful spot to dream of the happiness of these little angels, and would return, quite comforted, to give birth to others, to be buried in their turn.] [Footnote 22: To perform an act of benevolence towards one's neighbor is called, in Hebrew, to do justice; in Greek, to take compassion or pity ({GREEK n n f e },from which is derived the French _aumone_); in Latin, to perform an act of love or charity; in French, give alms. We can trace the degradation of this principle through these various expressions: the first signifies duty; the second only sympathy; the third, affection, a matter of choice, not an obligation; the fourth, caprice.] [Footnote 23: I mean here by equite what the Latins called humanitas,-- that is, the kind of sociability which is peculiar to man. Humanity, gentle and courteous to all, knows how to distinguish ranks, virtues, and capacities without injury to any.] [Footnote 24: Justice and equite never have been understood.] [Footnote 25: Between woman and man there may exist love, passion, ties of custom, and the like; but there is no real society. Man and woman are not companions. The difference of the sexes places a barrier between them, like that placed between animals by a difference of race. Consequently, far from advocating what is now called the emancipation of woman, I should incline, rather, if there were no other alternative, to exclude her from society.] [Footnote 26: "The strong-box of Cosmo de Medici was the grave of Florentine liberty," said M. Michelet to the College of France.] [Footnote 27: "My right is my lance and my buckler." General de Brossard said, like Achilles: "I get wine, gold, and women with my lance and my buckler."] [Footnote 28: It would be interesting and profitable to review the authors who have written on usury, or, to use the gentler expression which some prefer, lendingat interest. The theologians always have opposed usury; but, since they have admitted always the legitimacy of rent, and since rent is evidently identical with interest, they have lost themselves in a labyrinth of subtle distinctions, and have finally reached a pass where they do not know what to think of usury. The Church--the teacher of morality, so jealous and so proud of the purity of her doctrine--has always been ignorant of the real nature of property and usury. She even has proclaimed through her pontiffs the most deplorable errors. _Non potest mutuum_, said Benedict XIV., _locationi ullo pacto comparari_. "Rent," says Bossuet, "is as far from usury as heaven is from the earth." How, on{sic} such a doctrine, condemn lending at interest? how justify the Gospel, which expressly forbids usury? The difficulty of theologians is a very serious one. Unable to refute the economical demonstrations, which rightly assimilate interest to rent, they no longer dare to condemn interest, and they can say only that there must be such a thing as usury, since the Gospel forbids it.] [Footnote 29: "I preach the Gospel, I live by the Gospel," said the Apostle; meaning thereby that he lived by his labor. The Catholic clergy prefer to live by property. The struggles in the communes of the middle ages between the priests and bishops and the large proprietors and seigneurs are famous. The papal excommunications fulminated in defence of ecclesiastical revenues are no less so. Even to-day, the official organs of the Gallican clergy still maintain that the pay received by the clergy is not a salary, but an indemnity for goods of which they were once proprietors, and which were taken from them in '89 by the Third Estate. The clergy prefer to live by the right of increase rather than by labor.] [Footnote 30: The meaning ordinarily attached to the word "anarchy" is absence of principle, absence of rule; consequently, it has been regarded as synonymous with "disorder."] [Footnote 31: If such ideas are ever forced into the minds of the people, it will be by representative government and the tyranny of talkers. Once science, thought, and speech were characterized by the same expression. To designate a thoughtful and a learned man, they said, "a man quick to speak and powerful in discourse." For a long time, speech has been abstractly distinguished from science and reason. Gradually, this abstraction is becoming realized, as the logicians say, in society; so that we have to-day savants of many kinds who talk but little, and TALKERS who are not even savants in the science of speech. Thus a philosopher is no longer a savant: he is a talker. Legislators and poets were once profound and sublime characters: now they are talkers. A talker is a sonorous bell, whom the least shock suffices to set in perpetual motion. With the talker, the flow of speech is always directly proportional to the poverty of thought. Talkers govern the world; they stun us, they bore us, they worry us, they suck our blood, and laugh at us. As for the savants, they keep silence: if they wish to say a word, they are cut short. Let them write.] [Footnote 32: _libertas, librare, libratio, libra_,--liberty, to liberate, libration, balance (pound),--words which have a common derivation. Liberty is the balance of rights and duties. To make a man free is to balance him with others,--that is, to put him or their level.] [Footnote 33: In a monthly publication, the first number of which has just appeared under the name of "L'Egalitaire," self-sacrifice is laid down as a principle of equality. This is a confusion of ideas. Self- sacrifice, taken alone, is the last degree of inequality. To seek equality in self-sacrifice is to confess that equality is against nature. Equality must be based upon justice, upon strict right, upon the principles invoked by the proprietor himself; otherwise it will never exist. Self-sacrifice is superior to justice; but it cannot be imposed as law, because it is of such a nature as to admit of no reward. It is, indeed, desirable that everybody shall recognize the necessity of self- sacrifice, and the idea of "L'Egalitaire" is an excellent example. Unfortunately, it can have no effect. What would you reply, indeed, to a man who should say to you, "I do not want to sacrifice myself"? Is he to be compelled to do so? When self-sacrifice is forced, it becomes oppression, slavery, the exploitation of man by man. Thus have the proletaires sacrificed themselves to property.] [Footnote 34: The disciples of Fourier have long seemed to me the most advanced of all modern socialists, and almost the only ones worthy of the name. If they had understood the nature of their task, spoken to the people, awakened their sympathies, and kept silence when they did not understand; if they had made less extravagant pretensions, and had shown more respect for public intelligence,--perhaps the reform would now, thanks to them, be in progress. But why are these earnest reformers continually bowing to power and wealth,--that is, to all that is anti- reformatory? How, in a thinking age, can they fail to see that the world must be converted by DEMONSTRATION, not by myths and allegories? Why do they, the deadly enemies of civilization, borrow from it, nevertheless, its most pernicious fruits,--property, inequality of fortune and rank, gluttony, concubinage, prostitution, what do I know? theurgy, magic, and sorcery? Why these endless denunciations of morality, metaphysics, and psychology, when the abuse of these sciences, which they do not understand, constitutes their whole system? Why this mania for deifying a man whose principal merit consisted in talking nonsense about things whose names, even, he did not know, in the strongest language ever put upon paper? Whoever admits the infallibility of a man becomes thereby incapable of instructing others. Whoever denies his own reason will soon proscribe free thought. The phalansterians would not fail to do it if they had the power. Let them condescend to reason, let them proceed systematically, let them give us demonstrations instead of revelations, and we will listen willingly. Then let them organize manufactures, agriculture, and commerce; let them make labor attractive, and the most humble functions honorable, and our praise shall be theirs. Above all, let them throw off that Illuminism which gives them the appearance of impostors or dupes, rather than believers and apostles.] [Footnote 35: Individual possession is no obstacle to extensive cultivation and unity of exploitation. If I have not spoken of the drawbacks arising from small estates, it is because I thought it useless to repeat what so many others have said, and what by this time all the world must know. But I am surprised that the economists, who have so clearly shown the disadvantages of spade-husbandry, have failed to see that it is caused entirely by property; above all, that they have not perceived that their plan for mobilizing the soil is a first step towards the abolition of property.] [Footnote 36: In the Chamber of Deputies, during the session of the fifth of January, 1841, M. Dufaure moved to renew the expropriation bill, on the ground of public utility.] [Footnote 37: "What is Property?" Chap. IV., Ninth Proposition.] [Footnote 38: _Tu cognovisti sessionem meam et resurrectionem meam_. Psalm 139.] [Footnote 39: The emperor Nicholas has just compelled all the manufacturers in his empire to maintain, at their own expense, within their establishments, small hospitals for the reception of sick workmen,--the number of beds in each being proportional to the number of laborers in the factory. "You profit by man's labor," the Czar could have said to his proprietors; "you shall be responsible for man's life." M. Blanqui has said that such a measure could not succeed in France. It would be an attack upon property,--a thing hardly conceivable even in Russia, Scythia, or among the Cossacks; but among us, the oldest sons of civilization!... I fear very much that this quality of age may prove in the end a mark of decrepitude.] [Footnote 40: Course of M. Blanqui. Lecture of Nov. 27,1840.] [Footnote 41: In "Mazaniello," the Neapolitan fisherman demands, amid the applause of the galleries, that a tax be levied upon luxuries.] [Footnote 42: _Seme le champ, proletaire; C'est l l'oisif qui recoltera_.] [Footnote 43: "In some countries, the enjoyment of certain political rights depends upon the amount of property. But, in these same countries, property is expressive, rather than attributive, of the qualifications necessary to the exercise of these rights. It is rather a conjectural proof than the cause of these qualifications."--Rossi: Treatise on Penal Law.] [Footnote 44: Lecture of December 22.] [Footnote 45: Lecture of Jan. 15, 1841.] [Footnote 46: Lecture of Jan. 15, 1841.] [Footnote 47: MM. Blanqui and Wolowski.] [Footnote 48: Subject proposed by the Fourth Class of the Institute, the Academy of Moral and Political Sciences: "What would be the effect upon the working-class of the organization of labor, according to the modern ideas of association?"] [Footnote 49: Subject proposed by the Academy of Besancon: "The economical and moral consequences in France, up to the present time, and those which seem likely to appear in future, of the law concerning the equal division of hereditary property between the children."] [Footnote 50: {GREEK, ?n n '},--greater property. The Vulgate translates it avaritia.] [Footnote 51: Similar or analogous customs have existed among all nations. Consult, among other works, "Origin of French Law," by M. Michelet; and "Antiquities of German Law," by Grimm.] [Footnote 52: _Dees hominesque testamur, nos arma neque contra patriam cepisse neque quo periculum aliis faceremus, sed uti corpora nostra ab injuria tuta forent, qui miseri, egentes, violentia atque crudelitate foeneraterum, plerique patriae, sed omncsfarna atque fortunis expertes sumus; neque cuiquam nostrum licuit, more majorum, lege uti, neque, amisso patrimonio, libferum corpus habere._--Sallus: Bellum Catilinarium.] [Footnote 53: Fifty, sixty, and eighty per cent.--Course of M. Blanqui.] [Footnote 54: _Episcopi plurimi, quos et hortamento esse oportet caeteris et exemplo, divina prouratione contempta, procuratores rerum saeularium fieri, derelicta cathedra, plebe leserta, per alienas provincias oberrantes, negotiationis quaestuosae nundinas au uucu-, pari, esurientibus in ecclesia fratribus habere argentum largitur velle, fundos insidi.sis fraudibus rapere, usuris multiplicantibus faenus augere._--Cyprian: De Lapsis. {--NOTE: what does this refer to? This is at bottom of pg 341 in MS} In this passage, St. Cyprian alludes to lending on mortgages and to compound interest.] [Footnote 55: "Inquiries concerning Property among the Romans."] [Footnote 56: "Its acquisitive nature works rapidly in the sleep of the law. It is ready, at the word, to absorb every thing. Witness the famous equivocation about the ox-hide which, when cut up into thongs, was large enough to enclose the site of Carthage.... The legend has reappeared several times since Dido.... Such is the love of man for the land. Limited by tombs, measured by the members of the human body, by the thumb, the foot, and the arm, it harmonizes, as far as possible, with the very proportions of man. Nor is he satisfied yet: he calls Heaven to witness that it is his; he tries to or his land, to give it the form of heaven.... In his titanic intoxication, he describes property in the very terms which he employs in describing the Almighty--_fundus_ _optimus maximus_.... He shall make it his couch, and they shall be separated no more,--{GREEK, ' nf g h g g."}--Michelet:Origin of French Law.] [Footnote 57: M. Guizot denies that Christianity alone is entitled to the glory of the abolition of slavery. "To this end," he says, "many causes were necessary,--the evolution of other ideas and other principles of civilization." So general an assertion cannot be refuted. Some of these ideas and causes should have been pointed out, that we might judge whether their source was not wholly Christian, or whether at least the Christian spirit had not penetrated and thus fructified them. Most of the emancipation charters begin with these words: "For the love of God and the salvation of my soul."] [Footnote 58: _Weregild_,--the fine paid for the murder of a man. So much for a count, so much for a baron, so much for a freeman, so much for a priest; for a slave, nothing. His value was restored to the proprietor.] [Footnote 59: The spirit of despotism and monopoly which animated the communes has not escaped the attention of historians. "The formation of the commoners' associations," says Meyer, "did not spring from the true spirit of liberty, but from the desire for exemption from the charges of the seigniors, from individual interests, and jealousy of the welfare of others.... Each commune or corporation opposed the creation of every other; and this spirit increased to such an extent that the King of England, Henry V., having established a university at Caen, in 1432, the city and university of Paris opposed the registration of the edict."] [Footnote 60: Feudalism was, in spirit and in its providential destiny, a long protest of the human personality against the monkish communism with which Europe, in the middle ages, was overrun. After the orgies of Pagan selfishness, society--carried to the opposite extreme by the Christian religion--risked its life by unlimited self-denial and absolute indifference to the pleasures of the world. Feudalism was the balance-weight which saved Europe from the combined influence of the religious communities and the Manlchean sects which had sprung up since the fourth century under different names and in different countries. Modern civilization is indebted to feudalism for the definitive establishment of the person, of marriage, of the family, and of country. (See, on this subject, Guizot, "History of Civilization in Europe.")] [Footnote 61: This was made evident in July, 1830, and the years which followed it, when the electoral bourgeoisie effected a revolution in order to get control over the king, and suppressed the emeutes in order to restrain the people. The bourgeoisie, through the jury, the magistracy, its position in the army, and its municipal despotism, governs both royalty and the people. It is the bourgeoisie which, more than any other class, is conservative and retrogressive. It is the bourgeoisie which makes and unmakes ministries. It is the bourgeoisie which has destroyed the influence of the Upper Chamber, and which will dethrone the King whenever he shall become unsatisfactory to it. It is to please the bourgeoisie that royalty makes itself unpopular. It is the bourgeoisie which is troubled at the hopes of the people, and which hinders reform. The journals of the bourgeoisie are the ones which preach morality and religion to us, while reserving scepticism and indifference for themselves; which attack personal government, and favor the denial of the electoral privilege to those who have no property. The bourgeoisie will accept any thing rather than the emancipation of the proletariat. As soon as it thinks its privileges threatened, it will unite with royalty; and who does not know that at this very moment these two antagonists have suspended their quarrels?... It has been a question of property.] [Footnote 62: The same opinion was recently expressed from the tribune by one of our most honorable Deputies, M. Gauguier. "Nature," said he, "has not endowed man with landed property." Changing the adjective LANDED, which designates only a species into CAPITALISTIC, which denotes the genus,--M. Gauguier made an egalitaire profession of faith.] [Footnote 63: A professor of comparative legislation, M. Lerminier, has gone still farther. He has dared to say that the nation took from the clergy all their possessions, not because of IDLENESS, but because of UNWORTHINESS. "You have civilized the world," cries this apostle of equality, speaking to the priests; "and for that reason your possessions were given you. In your hands they were at once an instrument and a reward. But you do not now deserve them, for you long since ceased to civilize any thing whatever...."] [Footnote 64: "Treatise on Prescription."] [Footnote 65: "Origin of French Law."] [Footnote 66: To honor one's parents, to be grateful to one's benefactors, to neither kill nor steal,--truths of inward sensation. To obey God rather than men, to render to each that which is his; the whole is greater than a part, a straight line is the shortest road from one point to another,--truths of intuition. All are a priori but the first are felt by the conscience, and imply only a simple act of the soul; the second are perceived by the reason, and imply comparison and relation. In short, the former are sentiments, the latter are ideas.] [Footnote 67: Armand Carrel would have favored the fortification of the capital. "Le National" has said, again and again, placing the name of its old editor by the side of the names of Napoleon and Vauban. What signifies this exhumation of an anti-popular politician? It signifies that Armand Carrel wished to make government an individual and irremovable, but elective, property, and that he wished this property to be elected, not by the people, but by the army. The political system of Carrel was simply a reorganization of the pretorian guards. Carrel also hated the _pequins_. That which he deplored in the revolution of July was not, they say, the insurrection of the people, but the victory of the people over the soldiers. That is the reason why Carrel, after 1830, would never support the patriots. "Do you answer me with a few regiments?" he asked. Armand Carrel regarded the army--the military power--as the basis of law and government. This man undoubtedly had a moral sense within him, but he surely had no sense of justice. Were he still in this world, I declare it boldly, liberty would have no greater enemy than Carrel.] [Footnote 68: In a very short article, which was read by M. Wolowski, M. Louis Blanc declares, in substance, that he is not a communist (which I easily believe); that one must be a fool to attack property (but he does not say why); and that it is very necessary to guard against confounding property with its abuses. When Voltaire overthrew Christianity, he repeatedly avowed that he had no spite against religion, but only against its abuses.] [Footnote 69: The property fever is at its height among writers and artists, and it is curious to see the complacency with which our legislators and men of letters cherish this devouring passion. An artist sells a picture, and then, the merchandise delivered, assumes to prevent the purchaser from selling engravings, under the pretext that he, the painter, in selling the original, has not sold his DESIGN. A dispute arises between the amateur and the artist in regard to both the fact and the law. M. Villemain, the Minister of Public Instruction, being consulted as to this particular case, finds that the painter is right; only the property in the design should have been specially reserved in the contract: so that, in reality, M. Villemain recognizes in the artist a power to surrender his work and prevent its communication; thus contradicting the legal axiom, One CANNOT GIVE AND KEEP AT THE SAME TIME. A strange reasoner is M. Villemain! An ambiguous principle leads to a false conclusion. Instead of rejecting the principle, M. Villemain hastens to admit the conclusion. With him the _reductio ad absurdum_ is a convincing argument. Thus he is made official defender of literary property, sure of being understood and sustained by a set of loafers, the disgrace of literature and the plague of public morals. Why, then, does M. Villemain feel so strong an interest in setting himself up as the chief of the literary classes, in playing for their benefit the role of Trissotin in the councils of the State, and in becoming the accomplice and associate of a band of profligates,--_soi-disant_ men of letters,--who for more than ten years have labored with such deplorable success to ruin public spirit, and corrupt the heart by warping the mind?] [Footnote 70: M. Leroux has been highly praised in a review for having defended property. I do not know whether the industrious encyclopedist is pleased with the praise, but I know very well that in his place I should mourn for reason and for truth.] [Footnote 71: "Impartial," of Besancon.] [Footnote 72: The Arians deny the divinity of Christ. The Semi-Arians differ from the Arians only by a few subtle distinctions. M. Pierre Leroux, who regards Jesus as a man, but claims that the Spirit of God was infused into him, is a true Semi-Arian. The Manicheans admit two co-existent and eternal principles,--God and matter, spirit and flesh, light and darkness, good and evil; but, unlike the Phalansterians, who pretend to reconcile the two, the Manicheans make war upon matter, and labor with all their might for the destruction of the flesh, by condemning marriage and forbidding reproduction,--which does not prevent them, however, from indulging in all the carnal pleasures which the intensest lust can conceive of. In this last particular, the tendency of the Fourieristic morality is quite Manichean. The Gnostics do not differ from the early Christians. As their name indicates, they regarded themselves as inspired. Fourier, who held peculiar ideas concerning the visions of somnambulists, and who believed in the possibility of developing the magnetic power to such an extent as to enable us to commune with invisible beings, might, if he were living, pass also for a Gnostic. The Adamites attend mass entirely naked, from motives of chastity. Jean Jacques Rousseau, who took the sleep of the senses for chastity, and who saw in modesty only a refinement of pleasure, inclined towards Adamism. I know such a sect, whose members usually celebrate their mysteries in the costume of Venus coming from the bath. The Pre-Adamites believe that men existed before the first man. I once met a Pre-Adamite. True, he was deaf and a Fourierist. The Pelagians deny grace, and attribute all the merit of good works to liberty. The Fourierists, who teach that man's nature and passions are good, are reversed Pelagians; they give all to grace, and nothing to liberty. The Socinians, deists in all other respects, admit an original revelation. Many people are Socinians to-day, who do not suspect it, and who regard their opinions as new. The Neo-Christians are those simpletons who admire Christianity because it has produced bells and cathedrals. Base in soul, corrupt in heart, dissolute in mind and senses, the Neo-Christians seek especially after the external form, and admire religion, as they love women, for its physical beauty. They believe in a coming revelation, as well as a transfiguration of Catholicism. They will sing masses at the grand spectacle in the phalanstery.] [Footnote 73: It should be understood that the above refers only to the moral and political doctrines of Fourier,--doctrines which, like all philosophical and religious systems, have their root and _raison d'existence_ in society itself, and for this reason deserve to be examined. The peculiar speculations of Fourier and his sect concerning cosmogony, geology, natural history, physiology, and psychology, I leave to the attention of those who would think it their duty to seriously refute the fables of Blue Beard and the Ass's Skin.] [Footnote 74: A writer for the radical press, M. Louis Raybaud, said, in the preface to his "Studies of Contemporary Reformers:" "Who does not know that morality is relative? Aside from a few grand sentiments which are strikingly instinctive, the measure of human acts varies with nations and climates, and only civilization--the progressive education of the race--can lead to a universal morality.... The absolute escapes our contingent and finite nature; the absolute is the secret of God." God keep from evil M. Louis Raybaud! But I cannot help remarking that all political apostates begin by the negation of the absolute, which is really the negation of truth. What can a writer, who professes scepticism, have in common with radical views? What has he to say to his readers? What judgment is he entitled to pass upon contemporary reformers? M. Raybaud thought it would seem wise to repeat an old impertinence of the legist, and that may serve him for an excuse. We all have these weaknesses. But I am surprised that a man of so much intelligence as M. Raybaud, who STUDIES SYSTEMS, fails to see the very thing he ought first to recognize,--namely, that systems are the progress of the mind towards the absolute.] [Footnote 75: The electoral reform, it is continually asserted, is not an END, but a MEANS. Undoubtedly; but what, then, is the end? Why not furnish an unequivocal explanation of its object? How can the people choose their representatives, unless they know in advance the purpose for which they choose them, and the object of the commission which they entrust to them? But, it is said, the very business of those chosen by the people is to find out the object of the reform. That is a quibble. What is to hinder these persons, who are to be elected in future, from first seeking for this object, and then, when they have found it, from communicating it to the people? The reformers have well said, that, while the object of the electoral reform remains in the least indefinite, it will be only a means of transferring power from the hands of petty tyrants to the hands of other tyrants. We know already how a nation may be oppressed by being led to believe that it is obeying only its own laws. The history of universal suffrage, among all nations, is the history of the restrictions of liberty by and in the name of the multitude. Still, if the electoral reform, in its present shape, were rational, practical, acceptable to clean consciences and upright minds, perhaps one might be excused, though ignorant of its object, for supporting it. But, no; the text of the petition determines nothing, makes no distinctions, requires no conditions, no guarantee; it establishes the right without the duty. "Every Frenchman is a voter, and eligible to office." As well say: "Every bayonet is intelligent, every savage is civilized, every slave is free." In its vague generality, the reformatory petition is the weakest of abstractions, or the highest form of political treason. Consequently, the enlightened patriots distrust and despise each other. The most radical writer of the time,--he whose economical and social theories are, without comparison, the most advanced,--M. Leroux, has taken a bold stand against universal suffrage and democratic government, and has written an exceedingly keen criticism of J. J. Rousseau. That is undoubtedly the reason why M. Leroux is no longer the philosopher of "Le National." That journal, like Napoleon, does not like men of ideas. Nevertheless, "Le National" ought to know that he who fights against ideas will perish by ideas.] 
41936	----	Transcriber's note: Text enclosed by underscores is in italics (_italics_). Text enclosed by tilde characters is transliteration of Greek (~dragma~). PRINCIPLES OF POLITICAL ECONOMY. * * * * * PROFESSOR PERRY'S WORKS ON POLITICAL ECONOMY. 1. INTRODUCTION TO POLITICAL ECONOMY. Fifth Edition. 12mo. 357 pp. Price, $1.50. 2. PRINCIPLES OF POLITICAL ECONOMY. 8vo. 585 pp. Price, $2.00. 3. POLITICAL ECONOMY. Twenty-First Edition. Crown 8vo. 600 pp. Price, $2.50. * * * * * PRINCIPLES OF POLITICAL ECONOMY by ARTHUR LATHAM PERRY, LL.D. Orrin Sage Professor of History and Political Economy in Williams College _"No task is ill where Hand and Brain And Skill and Strength have equal gain, And each shall each in honor hold, And simple manhood outweigh gold."_ WHITTIER. New York Charles Scribner's Sons 1891 Copyright, 1890, by Arthur Latham Perry. Dedication. TO MY PERSONAL FRIEND OF LONG STANDING J. STERLING MORTON OF NEBRASKA A FRIEND OF THE PEOPLE ALSO FOUNDER OF ARBOR DAY PREFACE. It is now exactly twenty-five years since was published my first book upon the large topics at present in hand. It was but as a bow drawn at a venture, and was very properly entitled "Elements of Political Economy." At that time I had been teaching for about a dozen years in this Institution the closely cognate subjects of History and Political Economy; cognate indeed, since Hermann Lotze, a distinguished German philosopher of our day, makes prominent among its only _five_ most general phases, the "industrial" element in all human history; and since Goldwin Smith, an able English scholar, resolves the elements of human progress, and thus of universal history, into only _three_, namely, "the moral, the intellectual, and the productive." During these studious and observant years of teaching, I had slowly come to a settled conviction that I could say something of my own and something of consequence about Political Economy, especially at two points; and these two proved in the sequel to be more radical and transforming points than was even thought of at the first. For one thing, I had satisfied myself, that the word "Wealth," as at once a strangely indefinite and grossly misleading term, was worse than useless in the nomenclature of the Science, and would have to be utterly dislodged from it, before a scientific content and defensible form could by any possibility be given to what had long been called in all the modern languages the "Science of Wealth." Accordingly, so far as has appeared in the long interval of time since 1865, these "Elements" were the very first attempt to undertake an orderly construction of Economics from beginning to end without once using or having occasion to use the obnoxious word. A scientific substitute for it was of course required, which, with the help of Bastiat, himself however still clinging to the technical term "Richesse," was discerned and appropriated in the word "Value"; a good word indeed, that can be simply and perfectly defined in a scientific sense of its own; and, what is more important still, that precisely covers in that sense all the three sorts of things which are ever bought and sold, the three only Valuables in short, namely, material Commodities, personal Services, commercial Credits. It is of course involved in this simple-looking but far-reaching change from "Wealth" to "Value," that Economics become at once and throughout a science of Persons buying and selling, and no longer as before a science of Things howsoever manipulated for and in their market. For another thing, before beginning to write out the first word of that book, I believed myself to have made sure, by repeated and multiform inductions, of this deepest truth in the whole Science, which was a little after embodied (I hope I may even say _embalmed_) in a phrase taking its proper place in the book itself,--_A market for Products is products in Market_. The fundamental thus tersely expressed may be formulated more at length in this way: One cannot Sell without at the same instant and in the same act Buying, nor Buy anything without simultaneously Selling something else; because in Buying one pays for what he buys, which is Selling, and in Selling one must take pay for what is sold, which is Buying. As these universal actions among men are always voluntary, there must be also an universal motive leading up to them; this motive on the part of both parties to each and every Sale can be no other than the mutual satisfaction derivable to both; the inference, accordingly, is easy and invincible, that governmental restrictions on Sales, or prohibitions of them, must lessen the satisfactions and retard the progress of mankind. Organizing strictly all the matter of my book along these two lines of Personality and Reciprocity, notwithstanding much in it that was crude and more that was redundant and something that was ill-reasoned and unsound, the book made on account of this original mode of treatment an immediate impression upon the public, particularly upon teachers and pupils; new streaks of light could not but be cast from these new points of view, upon such topics especially as Land and Money and Foreign Trade; and nothing is likely ever to rob the author of the satisfaction, which he is willing to share with the public, of having contributed something of importance both in substance and in feature to the permanent up-building of that Science, which comes closer, it may be, to the homes and happiness and progress of the People, than any other science. And let it be said in passing, that there is one consideration well-fitted to stimulate and to reward each patient and competent scientific inquirer, no matter what that science may be in which he labors, namely, this: Any just generalization, made and fortified inductively, is put thereby beyond hazard of essential change for all time; for this best of reasons, that God has constructed the World and Men on everlasting lines of Order. As successive editions of this first book were called for, and as its many defects were brought out into the light through teaching my own classes from it year after year, occasion was taken to revise it and amend it and in large parts to rewrite it again and again; until, in 1883, and for the eighteenth edition, it was recast from bottom up for wholly new plates, and a riper title was ventured upon,--"Political Economy,"--instead of the original more tentative "Elements." Since then have been weeded out the slight typographical and other minute errors, and the book stands now in its ultimate shape. My excellent publishers, who have always been keenly and wisely alive to my interests as an author, suggested several times after the success of the first book was reasonably assured, that a second and smaller one should be written out, with an especial eye to the needs of high schools and academies and colleges for a text-book within moderate limits, yet soundly based and covering in full outline the whole subject. This is the origin of the "Introduction to Political Economy," first published in 1877, twelve years after the other. Its success as a text-book and as a book of reading for young people has already justified, and will doubtless continue to justify in the future, the forethought of its promoters. It has found a place in many popular libraries, and in courses of prescribed reading. Twice it has been carefully corrected and somewhat enlarged, and is now in its final form. In the preface to the later editions of the "Introduction" may be found the following sentence, which expresses a feeling not likely to undergo any change in the time to come:--"I have long been, and am still, ambitious that these books of mine may become the horn-books of my countrymen in the study of this fascinating Science." Why, then, should I have undertaken of my own motion a new and third book on Political Economy, and attempted to mark the completion of the third cycle of a dozen years each of teaching it, by offering to the public the present volume? One reason is implied in the title, "_Principles of Political Economy_." There are three extended historical chapters in the earlier book, occupying more than one-quarter of its entire space, which were indeed novel, which cost me wide research and very great labor, and which have also proven useful and largely illustrative of almost every phase of Economics; but I wanted to leave behind me one book of about the same size as that, devoted exclusively to the Principles of the Science, and using History only incidentally to illustrate in passing each topic as it came under review. For a college text-book as this is designed to become, and for a book of reading and reference for technical purposes, it seems better that all the space should be taken up by purely scientific discussion and illustration. This does not mean, however, that great pains have not been taken in every part to make this book also easily intelligible, and as readable and interesting as such careful discussions can be made. A second reason is, to provide for myself a fresh text-book to teach from. My mind has become quite too thoroughly familiarized with the other, even down to the very words, by so long a course of instructing from it, for the best results in the class-room. Accordingly, a new plan of construction has been adopted. Instead of the fourteen chapters there, there are but seven chapters here. Not a page nor a paragraph as such has been copied from either of the preceding books. Single sentences, and sometimes several of them together, when they exactly fitted the purposes of the new context, have been incorporated here and there, in what is throughout both in form and style a new book, neither an enlargement nor an abridgment nor a recasting of any other. I anticipate great pleasure in the years immediately to come from the handling with my classes, who have always been of much assistance to me from the first in studying Political Economy, a fresh book written expressly for them and for others like-circumstanced; in which every principle is drawn from the facts of every-day life by way of induction, and also stands in vital touch with such facts (past or present) by way of illustration. The third and only other reason needful to be mentioned here is, that in recent years the legislation of my country in the matter of cheap Money and of artificial restrictions on Trade has run so directly counter to sound Economics in their very core, that I felt it a debt due to my countrymen to use once more the best and ripest results of my life-long studies, in the most cogent and persuasive way possible within strictly scientific limits, to help them see and act for themselves in the way of escape from false counsels and impoverishing statutes. Wantonly and enormously heavy lies the hand of the national Government upon the masses of the people at present. But the People are sovereign, and not their transient agents in the government; and the signs are now cheering indeed, that they have not forgotten their native word of command, nor that government is instituted for the sole benefit of the governed and governing people, nor that the greatest good of the greatest number is the true aim and guide of Legislation. I am grateful for the proofs that appear on every hand, that former labors in these directions and under these motives have proven themselves to have been both opportune and effective; and I am sanguine almost to certainty, that this reiterated effort undertaken for the sake of my fellow-citizens as a whole, will slowly bear abundant fruit also, as towards their liberty of action as individuals, and in their harmonious co-operation together as entire classes to the end of popular comforts and universal progress. A. L. PERRY. WILLIAMS COLLEGE, November 25, 1890. TABLE OF CONTENTS PAGE CHAPTER I. VALUE 1 CHAPTER II. MATERIAL COMMODITIES 80 CHAPTER III. PERSONAL SERVICES 181 CHAPTER IV. COMMERCIAL CREDITS 271 CHAPTER V. MONEY 361 CHAPTER VI. FOREIGN TRADE 451 CHAPTER VII. TAXATION 540 INDEX 587 PRINCIPLES OF POLITICAL ECONOMY. CHAPTER I. VALUE. The first question that confronts the beginner in this science, and the one also that controls the whole scope of his inquiries to the very end, is: What is the precise subject of Political Economy? Within what exact field do its investigations lie? There is indeed a short and broad and full answer at hand to this fundamental and comprehensive question; and yet it is every way better for all concerned to reach this answer by a route somewhat delayed and circuitous, just as it is better in ascending a mountain summit for the sake of a strong and complete view to circle up leisurely on foot or on horseback, rather than to dash straight up to the top by a cog-wheel railway and take all of a sudden what might prove to be a less impressive or a more confusing view. The preliminary questions are: What sort of facts has Political Economy to deal with, to inquire into, to classify, to make a science of? Are these facts easily separable in the mind and in reality from other kinds of facts perhaps liable to be confounded with them? Are they facts of vast importance to the welfare of mankind? And are the activities of men everywhere greatly and increasingly occupied with just those things, with which this science has exclusively to do? Let us see if we cannot come little by little by a route of our own to clear and true answers for all these questions. If one should take his stand for an hour upon London Bridge, perhaps the busiest bit of street in the world, and cast his eyes around intelligently to see what he can see, and begin also to classify the things coming under his vision, what might he report to himself and to others? Below the bridge in what is called the "Pool," which was dredged out for that very purpose by the ancient Romans, there lie at anchor or move coming and going many merchant-ships of all nations, carrying out and bringing in to an immense amount in the whole aggregate tangible articles of all kinds to and from the remote as well as the near nations of the earth. All this movement of visible goods, home and foreign, is in the interest and under the impulse of Buying and Selling. The foreign goods come in simply to buy, that is, to pay for, the domestic goods taken away; and these latter go out in effect even if not in appearance to buy, that is, to pay for, the foreign goods coming in. At the same hour the bridge itself is covered with land-vehicles of every sort moving in both directions, loaded with salable articles of every description; artisans of every name are coming and going; merchants of many nationalities step within the field of view; and porters and servants and errand-boys are running to and fro, all in some direct relation to the sale or purchase of those visible and tangible things called in Political Economy _Commodities_. Moreover, vast warehouses built in the sole interest of trade on both sides the river above and below the bridge, built to receive and to store for a time till their ultimate consumers are found, some of these thousand things bought and sold among men, lift their roofs towards heaven in plain sight. Doubtless some few persons, like our observer himself, may be on the spot for pleasure or instruction, but for the most part, all that he can see, the persons, the things, the buildings, even the bridge itself, are where they are in the interest of _Sales_ of some sort, mostly of Commodities. What is thus true of a single point in London is true in a degree of every other part of London, of every part of Paris and of Berlin, and in its measure of every other city and village and hamlet in the whole world. Wherever there is a street there is some exchange of commodities upon it, and wherever there is a market there are buyers and sellers of commodities. If the curiosity of our supposed observer be whetted by what he saw on London Bridge, and if the natural impulse to generalize from particulars be deepened in his mind, he may perhaps on his return to America take an opportunity to see what he can see and learn what he can learn within and around one of the mammoth cotton mills in Lowell or Fall River or Cohoes. Should he take his stand for this purpose at one of these points, say Lowell, he will be struck at once by some of the differences between what he saw on the bridge and what he now sees in the mill. He will indeed see as before some commodities brought in and carried out, such as the raw cotton and new machinery and the finished product ready for sale, but in general no other commodities than the cotton in its various stages of manufacture, and those like the machinery and means of transportation directly connected with transforming the cotton into cloth and taking it to market. But he sees a host of persons both within and without the mill, all busy here and there, and all evidently bound to the establishment by a strong unseen tie of some sort; he sees varying degrees of authority and subordination in these persons from the Treasurer, the apparent head of the manufactory, down to the teamsters in the yard and the common laborers within and without; he will not find the owners of the property present in any capacity, for they are scattered capitalists of Boston and elsewhere, who have combined through an act of incorporation their distinct capitals into a "Company" for manufacturing cotton; besides their Treasurer present, whose act is their act and whose contracts their contracts, he will see an Agent also who acts under the Treasurer and directly upon the Overseers and their assistants in the spinning and weaving and coloring and finishing rooms, and under these Operatives of every grade as skilled and unskilled; and lastly he will observe, that the direct representatives of the owners and all other persons present from highest to lowest are conspiring with a will towards the common end of getting the cotton cloth all made and marketed. What is it that binds all these persons together? A little tarrying in the Treasurer's office will answer this question for our observer and for us. He will find it to be the second kind of Buying and Selling. At stated times the Treasurer pays the salary of the Agent, and his own. He pays the wages of the Overseers and the wages of all the Operatives and Laborers,--men and women and children. Here he finds a buying and selling on a great scale not of material commodities as before, but of personal services of all the various kinds. Every man and woman and child connected with the factory and doing its work sells an intangible personal service to the "Company" and takes his pay therefor, which last is a simple buying on the part of the unseen employers. Here, then, in this mill is a single specimen of this buying and selling of personal services, which is going on to an immense extent and in every possible direction in each civilized country of the world, and everywhere to an immensely increased volume year by year. Clergymen and lawyers and physicians and teachers and legislators and judges and musicians and actors and artisans of every name and laborers of every grade sell their intangible services to Society, and take their pay back at the market-rate. The aggregate value of all these services sold in every advanced country is probably greater than the aggregate value of the tangible commodities sold there. At any rate, both classes alike, commodities and services, are bought and sold under substantially the same economic principles. The inductive appetite in intelligent persons, that is to say, their desire to classify facts and to generalize from particulars, almost always grows by what it feeds on; and our supposed observer will scarcely rest contented until he has taken up at least one more stand-point, from which to observe men's Buying and Selling. Suppose now he enter for this purpose on any business-day morning the New York Clearing-House. He will see about 125 persons present, nearly one half of these bank clerks sitting behind desks, and the other half standing before these desks or moving in cue from one to the next. The room is perfectly still. Not a word is spoken. The Manager of the Clearing with his assistant sits or stands on a raised platform at one end of the room, and gives the signal to begin the Exchange. No commodities of any name or nature are within the field of view. The manager indeed and his assistant and two clerks of the establishment who sit near him are in receipt of salaries for their personal services, and all the other clerks present receive wages for their services from their respective banks, but the exchange about to commence is no sale of personal services any more than it is a sale of tangible commodities. It is however a striking instance of the buying and selling of some valuables of the third and final class of valuable things. At a given signal from the manager the (say) 60 bank messengers, each standing in front of the desk of his own bank and each having in hand before him 59 small parcels of papers, the parcels arranged in the same definite order as the desks around the room, step forward to the next desk and deliver each his parcel to the clerk sitting behind it, and so on till the circuit of the room is made. It takes but ten minutes. Each parcel is made up of cheques or credit-claims, the _property_ of the bank that brings it and the _debts_ of the bank to which it is delivered. Accordingly each bank of the circle receives through its sitting clerk its own _debits_ to all the rest of the banks, and delivers to all through its standing messenger its own _credits_ as off-set. In other words, each bank buys of the rest what it owes to each with what each owes to it. It is at bottom a mutual buying and selling of debts. There is of course a daily balance on one side or the other between every two of these banks, which must be settled in money, because it would never happen in practice that each should owe the other precisely the same sum on any one day; but substantially and almost exclusively the exchange at the Clearing-House is a simple trade in credit-claims. Each bank pays its debts by credits. A merchant is a dealer in commodities, a laborer is a dealer in services, and a banker is a dealer in credits. Each of the three is a buyer and seller alike, and the difference is only in the kind of valuables specially dealt in by each. In all cases alike, however, there is no buying without selling and no selling without buying; because, when one buys he must always pay for what he buys and that is selling, and when one sells he must always take his pay for what he sells and that is buying. This is just as true when one credit is bought or sold against a commodity or a service, and when two or more credits are bought and sold as against each other, as it is when two commodities or two services are exchanged one for the other. But the Clearing-House is not by any means the only place where credits or debts (they are the same thing) are bought and sold. Every bank is such a place. Every broker's office is such a place. Every place is an establishment of the same kind where commercial rights, that is, claims to be realized in future time and for which a consideration is paid, are offered for sale and sold. The amount of transactions in Credits in every commercial country undoubtedly surpasses the amount in Commodities or that in Services. Now our supposed observer and classifier, having noted on London Bridge the sale of material commodities, and in the Lowell Mill the sale of personal services, and within the New York Clearing-House the sale of credit-claims, has seen in substance everything that ever was or ever will be exhibited in the world of trade. He may rest. There is no other class of salable things than these three. Keen eyes and minds skilled in induction have been busy for two millenniums and a half more or less to find another class of things bought and sold among men, and have not yet found it or any trace of it. This work has been perfectly and scientifically done. The generalization is completed for all time. The _genus_, then, with which Political Economy deals from beginning to end, has been discovered, can be described, and is easily and completely separable for its own purposes of science from all other kinds and classes and _genera_ of things, namely, Salable things or (what means precisely the same) Valuable things or (what is exactly equivalent) Exchangeable things. In other words, the sole and single class of things, with which the Science of Political Economy has to do, is Valuables, whose origin and nature and extent and importance it is the purpose of the present chapter to unfold. We have fully seen already that this Genus, Valuables, is sub-divided into three _species_, and three only, namely, Commodities, Services, Credits. A little table here may help at once the eye and the mind:-- ECONOMICS. _The Genus_ _Valuables_ { _Commodities_ _The Species_ { _Services_ { _Credits_ If only these three species of things are ever bought and sold, then it certainly follows that only six kinds of commercial exchanges are possible to be found in the world, namely these:-- 1. _A commodity for a commodity._ 2. _A commodity for a personal service._ 3. _A commodity for a credit-claim._ 4. _A personal service for another service._ 5. _A personal service for a credit-claim._ 6. _One credit-claim for another._ Though the kinds of possible exchanges are thus very few, the exchanges themselves in one or other of these six forms and in all of them are innumerable on every business day in every civilized country of the globe. And this point is to be particularly noted, that while buying and selling in these forms has been going on everywhere since the dawn of authentic History, it has gone on all the while in ever-increasing volume, it is increasing now more rapidly and variously than ever, and moreover all signs foretell that it will play a larger and still larger part in the affairs of men and nations as this old world gains in age and unity. Damascus is one of the very oldest cities of the world, and its very name means a "_seat of trade_." We are told in the Scriptures, that Abraham about 2000 years before Christ went up out of Egypt "very rich in cattle, in silver, and in gold," and the only possible way he could have acquired these possessions was by buying and selling. He afterwards purchased the cave and the field in Hebron for a family burial-place, and "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." We may notice here, that there were then "merchants" as a class, that silver by weight passed as "money" from hand to hand, and that in the lack of written deeds to land, as we have them, sales were "made sure" before the faces of living men, who would tell the truth and pass on the word. Abraham indeed seems to have given the pitch for the song of trade sung by his descendants, the Jews, from that day to this; for Jacob, his grandson, was a skilled trafficker, not to say a secret trickster, in his bargains; and wherever in the Old World or the New the Jews have been, _there_ have been in fact and in fame busy buyers and sellers. But the Jews have had no special privileges in the realm of trade; on the contrary, they have always been under special disabilities both legal and social. Even in England, the most liberal country in Europe, they were exiled for long periods, maltreated at all points of contact with other people, more or less put under the ban of the Common and the Statute law, often outrageously taxed on their goods and persons, and studiously kept out of the paths of highest public employment even down to a time within the memory of living men.[1] Yet so natural is the impulse to trade, so universally diffused, so imperative also if progress is in any direction to be attained, that the English and all other peoples were as glad to borrow money, that is, buy the use of it, of the persecuted Jews, as the latter were to get money by buying and selling other things, and then to loan it, that is, sell the use of it, under the best securities (never very good) for its return with interest, that they could obtain. Happily, the mutual gains that always wait on the Exchanges even when their conditions are curtailed, of course attended the mutilated exchanges between Jews and Christians: otherwise, they would not continue to take place. Christianity, however, as the perfected Judaism, gradually brought in the better conditions, the higher impulses, and the more certain rewards, of Trade, all which, we may be sure, were designed in the divine Plan of the world. What is called the Progress of Civilization has been marked and conditioned at every step by an extension of the opportunities, a greater facility in the use of the means, a more eager searching for proper expedients, and a higher certainty in the securing of the returns, of mutual exchanges among men. There have been indeed, and there still are, vast obstacles lying across the pathway of this Progress in the unawakened desires and reluctant industry and short-sighted selfishness of individuals, as well as in the ignorant prejudices and mistaken legislation of nations; but all the while Christianity has been indirectly tugging away at these obstacles, and Civilization has been able to rejoice over the partial or complete removal of some of them; while also Christianity directly works out in human character those chief qualities, on which the highest success of commercial intercourse among men will always depend, namely, Foresight, Diligence, Integrity, and mutual Trust; so that, what we call Civilization is to a large extent only the result of a better development of these human qualities in domestic and foreign commerce. Contrary to a common conception in the premises, the sacred books of both Jews and Christians display no bias at all against buying and selling, but rather extol such action as praiseworthy, and also those qualities of mind and habits of life that lead up to it and tend too to increase its amount, and they constantly illustrate by means of language derived from traffic the higher truths and more spiritual life, which are the main object of these inspired writers. It is indeed true that the chosen people of God were forbidden to take Usury of each other, though they were permitted to take it freely of strangers, and that they were forbidden to buy horses and other products out of Egypt, for fear they would be religiously corrupted by such commercial intercourse with idolaters; but there is nothing of this sort in the law of Moses that cannot be easily explained from the grand purpose to found an agricultural commonwealth for religious ends, in which commonwealth no family could permanently alienate its land, and in which it was a great object to preserve the independence and equality of the tribes and families. Throughout the Old Testament there is no word or precept that implies that trade in itself is not helpful and wholesome; there were sharp and effective provisions for the recovery of debts; there were any number of exhortations to diligence in business, such as, "_In the morning sow thy seed, and at evening withhold not thy hand_"; King Solomon himself made a gigantic exchange in preparation for the temple with King Hiram of Tyre, by which the cedars of Lebanon were to be paid for by the grain and oil of the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a graphic description of the commerce of the ancient world as it centered in the market of Tyre, a description carried out into detail both as to the nations that frequented that market and as to the products that were exchanged in it,--"_silver, iron, tin, lead, persons of men, vessels of brass, horses, horsemen, mules, horns of ivory, ebony-wood, carbuncles, purple work, fine linen, corals, rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool, thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats, precious spices, precious stones, splendid apparel, mantles of blue, embroidered work, chests of damask, and gold_"; and chapter xxxi of Proverbs describes the model housewife in terms like these,-- "_The heart of her husband trusteth in her, And he is in no want of gain. She seeketh wool and flax, And worketh willingly with her hands. She is like the merchants' ships; She bringeth her food from afar. She riseth while it is yet night, And giveth food to her family, And a task to her maidens. She layeth a plan for a field and buyeth it; With the fruit of her hands she planteth a vineyard. She perceiveth how pleasant is her gain, And her lamp is not extinguished in the night. She putteth forth her hands to the distaff, And her hands take hold of the spindle. She maketh for herself coverlets; Her clothing is of fine linen and purple. She maketh linen garments and selleth them, And delivereth girdles to the merchants._" Still more explicit and instructive are the words and spirit of the New Testament. There cannot be the least doubt that the whole influence of Christianity is favorable to the freest commercial exchanges at home and abroad, because these depend largely on mutual confidence between man and man, of which confidence Christianity is the greatest promoter. It may be conceded at once that our Lord "_overthrew the tables of the money-changers and the seats of them that sold doves_" within the sacred precincts of the temple, but this, not because it is wrong to change money or sell doves, but because that was not the _place_ for such merchandising; so He himself explained his own action in the sequel; provincial worshippers coming up to Jerusalem must needs have their coins changed into the money of the Capital, and must needs buy somewhere the animal victims for sacrifice; but the whip of small cords had significance only as to the _place_, and not at all as to the _propriety_, of such trading. One of our Lord's parables, the parable of the Talents, sets forth in several striking lights the privilege and duty and reward of diligent trading. "_Then he that had received the five talents went and traded with the same, and made them other five talents._" And when this servant came to the reckoning, and brought as the result of his free and busy traffic "_five talents more_," the prompt and hearty approval of his lord--"well done, thou good and faithful servant"--becomes the testimony of the New Testament to the merit and the profit and the benefit of a vigorous buying and selling. For this servant could not have been authoritatively pronounced good and faithful if the results of his action commended had been in any way prejudicial to others. The truth is, as we shall abundantly see by and by with the reasons of it, that any man who buys and sells under the free and natural conditions of trade, benefits the man he trades with just as much as he benefits himself. But the parable has a still stronger word in favor of exchanges. There was another servant also entrusted with capital by his lord at the same time, when the latter was about to travel "_into a far country_." We are expressly told that distribution was made "_to every man according to his several ability_," and thus this servant was only entrusted with a single talent, the size of the capital given to him being in just proportion to the size of the man,--the smallest share falling of course to the smallest man. But he had the same opportunity as the two others. The world was open to him. Capital was in demand, if not in those parts then in some other, to which, like his lord, he might straightway take his journey. But when his time of reckoning came, and he had nothing to show for the use of his capital, he upbraided his lord as a hard man for expecting any increase, and brought out his bare talent wrapped in a napkin, saying, "_I was afraid, and I went and hid thy talent in the earth_." His wise lord at once denounced this servant as "_wicked and slothful_," insisted that his money ought to have been "_put to the exchangers_," and said finally in a just anger "_cast ye the unprofitable servant into outer darkness_." It is moreover in incidental passages of the Scriptures, in which the methods of business are commended to the searchers after higher things, that we see their high estimate of those methods and gains. "_Buy the truth, and sell it not; buy wisdom and understanding_" (Prov. xxiii, 23). "_Buying up for yourselves opportunities_" (Col. iv, 5). "_I counsel thee to buy of me gold refined by fire, that thou mayest be rich; and white garments, that thou mayest be clothed; and eye-salve to anoint thine eyes, that thou mayest see_" (Rev. iii, 18). "_But rather let him labor, working with his hands at that which is good, that he may have to give to him that is in need_" (Eph. iv, 28). "_But if any one provideth not for his own, and especially for those of his own house, he hath denied the faith, and is worse than an unbeliever_" (1 Tim. v, 8). Now, the universal test and proof of any truth is its harmony with some other truths. Does an alleged truth fall in with and fill out well some other demonstrated and accepted proposition, or a number of such other propositions? If so, then that truth is _proved_. Human reason can no further go. The mind rests with relish and content in a new acquisition. To apply this to the case in hand,--if men were designed of their Maker to buy and sell to their own mutual benefit and advancement, if mankind have always been buying and selling as towards that end and with that obvious result, and if the Future promises to increase and reduplicate the buying and selling of the Present in every direction without end, and all in the interest of a broad civilization and a true and lasting progress; and if, in harmony with these truths, the written revelation of God in every part of it assumes that buying and selling in its inmost substance and essential forms be good and righteous and progressive, and suitable in all its ends and methods to illustrate and enforce ends and methods in the higher kingdom of spiritual and eternal Life;--then these coördinate truths will logically and certainly follow, (1) that Trade is natural and essential and beneficial to mankind; (2) that it constitutes in an important sense a realm of human thought and action by itself, separate from the neighboring realm of Giving, and equally from the hostile realm of Stealing; and (3) that a careful analysis of what buying and selling in its own peculiar nature is, a thorough ascertainment and a consequent clear statement of its fundamental laws, and a faithful exposure of what in individual selfishness and in subtle or open Legislation makes against these laws, _must be of large consequence to the welfare of mankind_. Accordingly, let us now attempt such Analysis and Ascertainment and Exposure. This is precisely the task that lies before us in this book--just this, and nothing more. The term, "Political Economy," has long been and is still an elastic title over the zealous work of many men in many lands; but in the hands of the present writer during a life now no longer short, the term has always had a definite meaning, the work has covered an easily circumscribed field, and so the present undertaking concerns only Buying and Selling and what is essentially involved in that. This gives scope and verge enough for the studies of a life-time. This has the advantage of a complete sphere of its own. Terms may thus be made as definite as the nature of language will ever allow; definitions will thus cover things of one kind only; and generalizations, although they may be delicate and difficult, will deal with no incongruous and obstinate material. 1. The grandfather of the writer, an illiterate but long-headed farmer, was able to give good points to his three college-bred sons, by insisting that they look "_into the natur on't_." What, then, are the ultimate elements of Buying and Selling? What are the invariable conditions that precede, accompany, and follow, any and every act of Trade? Of course we are investigating now and throughout this treatise the deliberative acts of reasonably intelligent human beings, in one great department of their common foresight and rational action. We have consequently nothing to do here with Fraud or Theft or Mania or Gift. Acts put forth under the impulse of these are direct opposites of, or at best antagonistic to, acts of Trade. They tend to kill trade, and therefore they are no part of trade. These, then, and such as these, aside, we will now analyze a single Act of Exchange at one time and place,--which will serve in substance for all acts of exchange in all times and places, and just find out for ourselves what are the Fundamentals and Essentials of that matter, with which alone we have to do in this science of Political Economy. Incidental reference was had a little way back to an Exchange once made between King Solomon of Jerusalem and King Hiram of Tyre. Let that be our typical instance. (a) _There were two persons_, Solomon and Hiram. Those two, and no more, stood face to face, as it were, to make a commercial bargain. They made it, and it was afterwards executed. The execution indeed concerned a great many persons on both sides, and occupied a long period of time; but the bargain itself, the trade, the exchange, the covenant, concerned only two persons, and occupied but a moment of time. It made no difference with the bargain as such, with the binding nature of it, with the terms of it, with the mutual gains of it, that each person represented a host of others, subordinates and subjects, who would have to coöperate in the carrying of it out, because each king had the right to speak for his subjects as well as for himself, for commercial purposes each was an agent as well as a monarch, the word of each concluded the consent and the action of others as well as his own. Nor did it make any, the least, difference with this exchange or the advantages of it, that each party to it belonged to, was even the head of, independent and sometimes hostile Peoples. Commerce is one thing, and nationality a totally different thing. The present point is, in the words of the old proverb,--"It takes two to make a bargain." And it takes _only_ two to make a bargain. When corporations and even nations speak in trade, they speak, and speak finally, through one accredited agent. We reach, then, as the first bit of our analysis of Trade, the fact, that there are always two parties to it, "the party of the first part and the party of the second part." (b) _There were two desires_, Solomon's desire for cedar-timbers to build the temple with, and Hiram's desire for wheat and oil with which to support the people of his sterile kingdom. "_So Hiram gave Solomon cedar-trees and fir-trees according to all his desire: and Solomon gave Hiram twenty thousand measures of wheat for food to his household, and twenty measures of pure oil._" The desire of each party was personal and peculiar, known at first only to himself, but upon occasion became directed towards something in the possession of the other, and each at length became aware of the desire of the other, and also of his own ability to satisfy the want of the other. If Solomon could have satisfied his desire for timber by his own or his subjects' efforts directly, this trade would never have taken place; if Hiram or his subjects could have gotten the wheat and oil directly out of their narrow and sandy strips of sea-coast, this trade would not have taken place; and so there must be in every case of trade not only two desires each springing from a separate person, but also each person must have in his possession something fitted to gratify the desire of the other person, and each be willing to yield that something into the possession of the other for the sake of receiving from him that which will satisfy his own desire, and so both desires be satisfied indirectly. Here is the deep and perennial source of exchanges. Men's desires are so many and various, and so constantly becoming more numerous and miscellaneous, and so extremely few of his own wants can ever be met by any one man directly, that the foundation of exchanges, and of a perpetually increasing volume of exchanges, is laid in the deep places of human hearts, namely, in Desires ever welling up to the surface and demanding their satisfaction through an easy and natural interaction with the ever swelling Desires of other men. Here too is a firm foundation (a chief foundation) of human Society. Reciprocal wants, which can only be met through exchanges, draw men together locally and bind them together socially, in hamlets and towns and cities and States and Nations, and also knit ties scarcely less strong and beneficent between the separate and remotest nationalities of the earth. It is certain that an inland commercial route connected the East of Asia with the West of Europe centuries before Christ, and that a traffic was maintained on the frontier of China between the Sina and the Scythians, in the manner still followed by the Chinese and the Russians at _Kiachta_. The Sina had an independent position in Western China as early as the eighth century before Christ, and five centuries later established their sway under the dynasty of Tsin (whence our word "China") over the whole of the empire. The prophet Isaiah exclaims (xlix, 12), "Behold! these shall come from far; and behold! these from the North and from the West; _and these from the land of Sinim_." The second bit of our analysis leads to Desires as an essential and fundamental element in every commercial transaction. (c) _There were two efforts_, those of the Tyrians as represented by King Hiram and those of the Israelites as represented by King Solomon. It was no holiday task that was implied in the proposition of Solomon to the party of the other part,--"_Send me now cedar-trees, fir-trees, and algum-trees out of Lebanon; for I know that thy servants are skilful to cut timber in Lebanon; even to prepare me timber in abundance, for the house which I am about to build shall be wonderfully great._" On the other hand, the efforts insolved on the part of the people of Israel in paying for these timbers, and for their transportation by sea from Lebanon to Joppa, were equally gigantic. Solomon's offer in return for the proposed service of the Tyrian king was in these words,--"_And behold, I will give to thy servants, the hewers that cut timber, twenty thousand measures of beaten wheat, and twenty thousand measures of barley, and twenty thousand baths of wine, and twenty thousand baths of oil._" The reason why two efforts are always an element in every act of traffic, however small or however large the transaction may be, is the obvious reason, that the things rendered in exchange, whether they be Commodities, Services, or Credits, invariably cost efforts of some kind to get them ready to sell and to sell them, and no person can have a just claim to render them in exchange, who has not either put forth these efforts himself or become proprietor in some way of the result of such efforts. Efforts accordingly are central in all trade. Every trade in its inmost nature is and must be either an exchange of two Efforts directly, as when one of two farmers personally helps his neighbor in haying for the sake of securing that neighbor's personal help in his own harvesting, or an exchange of two things each of which is the result of previous Efforts of somebody, as when a man gives a silver dollar for a bushel of wheat. The third bit of the present analysis brings us to Efforts, perhaps the most important factor in the whole list. (d) _There were also two reciprocal estimates_, the estimate of King Hiram of all the efforts requisite to cut and hew and float the timber, as compared with the aggregate of efforts needed to obtain the necessary wheat and barley and wine and oil in any other possible way; and the estimate of King Solomon of all the labors required to grow and market these agricultural products, as compared with what would otherwise be involved in getting the much-wished-for timbers. Such estimates invariably precede every rational exchange of products. It is not in human nature to render a greater effort or the result of it, when a lesser effort or the result of it will as well procure the satisfaction of a desire. Efforts are naturally irksome. No more of them will ever be put forth than is necessary to meet the want that calls them forth. No man in his senses will ever put more labor on anything, with which to buy something else, than is necessary to get that something else by direct effort or through some other exchange. Here we are on ground as solid as the very substance of truth can make it. The Jews of Solomon's time were too shrewd and sparing of irksome labor to devote themselves for years to the toils of the field and of the vat to get by traffic the materials for their temple, if they could have gotten those materials by a less expenditure of toil in any other way. Those Phoenicians of Tyre and Sidon, the born merchants of the East, the founders of commercial Carthage in the West, if they could have extorted from the reluctant sands of their coast the cereals and the vines and olives requisite for their own support with only so much of exertion as was needed to get that to market with which to buy them, would never have taken the indirect in preference to the direct method. They took the indirect, because it was the easier, and therefore the better. It may, accordingly, be laid down as a maxim, that men never buy and sell to satisfy their wants but when that is the easiest and best way to satisfy them. It saves effort. It saves time. It saves trouble. It divides labor. It induces skill. It propels progress. But in order to determine which may be the easier way, requires constant _estimates_ on the part of each party to a possible trade. Shall I shave myself or go to the barber? Before I decide, I estimate the direct effort in the light of the effort to get that with which to pay the barber for his service. If I trade with him, it is because I deem it easier, cheaper in effort, more convenient in time. Trade means comparisons in every case--comparisons by both parties--and in the more recondite and complicated cases, elaborate comparisons and often comprehensive calculations involving future time. Now these estimates inseparable from exchanges, and these calculations which are a factor in all the far-reaching exchanges, are mental activities. They quicken and strengthen the _minds_ of men. Trade is usually, if not always, the initial step in the mental development of individuals and nations. Desires stir early in the minds of all children; efforts more or less earnest are the speedy outcome of natural desires; direct efforts, however, to satisfy these soon reach their limits; it is now but a step over to simple exchanges, by which the desires are met indirectly; exchanges once commenced tend to multiply in all directions, and the estimates that must precede and accompany these are mental states,--the more of them, the greater the mental development, the higher the education; consequently, commerce domestic and foreign is a grand agency in civilization, a constant and broadening impulse towards progress in all its forms; and Christianity, as we have already seen, is friendly to commerce in its every breath. Those, therefore, who talk and preach about Trade as tending to _materialism_, do not know what they are talking about. Because Commodities are material things, and because a portion of the trade of the world concerns itself with commodities, these shallow thinkers jump to the conclusion that trade is materialistic. _It is just the reverse._ Let us hear no more from Professor Pulpit or Platform that buying and selling is antagonistic to men's higher intellectual and spiritual culture, because the present careful analysis has brought us indubitably to mental Estimates and prolonged comparisons, which are activities of Mind, as the fourth and a leading factor among the radical elements of Sale. (e) _There were two renderings_, King Hiram's rendering at Joppa the desired cedars from the mountains of Lebanon, and King Solomon's rendering in return at Tyre the food products grown in his fertile country. These renderings were visible to all men. Unlike the desires and the estimates, which were subjective and invisible; the actual exchange of the products, the culmination of the previous efforts, the stipulated renderings by and to each party, were outward and objective--"known and read of all men." This is the reason why public attention is always strongly drawn to this particular link of the chain of events which we are now unlocking and taking apart, while other links of the series, that are just as essential, almost wholly escape observation. The ports and the markets are apt to be noisy and conspicuous, when the desires and the estimates and the satisfactions, without which in their place there would be no market-places, work in silence, and leave no records except the indirect one of the renderings themselves. It is of great moment to note here, that each of the two parties to an exchange always has an advantage over the other, either absolute or relative, in the rendering his own product, whatever it may be, as compared with his present ability to get directly or through any other exchange the product he receives in return. Take the example in hand. Cedars and sandal-wood were natural to Mount Lebanon; there were no other workmen in those regions of country that could "_skill to hew timber like unto the Sidonians_"; the Mediterranean afforded a level and free and easy highway from its northern coast to the Judean seaport at Joppa; and all these natural and acquired facilities put King Hiram into a posture of advantage in the rendering of timber, not only over the Jews, but also over all the other peoples in the basin of the midland sea. Still this advantage, great as it was, could only be made a real and palpable gain to themselves, the proprietors of the timber, by means of some exchange with somebody else, by which some wants of their own greater than their present want of timber, could be supplied by means of the timber. They had more of that commodity, and more skill to fashion and transport it, than their present and immediately prospective needs could make use of; and the only way in which they could practically avail themselves of their advantages, was, to sell their surplus timber and buy with it something that they needed more. Otherwise their very advantage perished with them. God has scattered such a diversity of blessings and capacities and opportunities over the earth on purpose, that, through traffic, on which his special benediction rests, the good of each part and people may become the portion of other parts and peoples. So, on the other hand, of the southern neighbors of the Tyrians. There the earth brought forth by handfuls. There was an abundance of corn in the land, even to the tops of the mountains. Its fruit did indeed shake like Lebanon. But there were no cedars there, no fir-trees, no sandal-woods. How short-sighted, then, and futile, would it have been for the Jews, to try to hang on in their own behoof to all the natural advantages that God had given to them, and to say, We will not part with the direct results of any of them, we will build treasure-cities as they did in Egypt, we will store up all the fruits of these fat years against the possible coming of some famine years in the time to come. That is anything in ordinary times but the divine plan. It is anything but the letter and spirit of the divine injunction: "_Him that keepeth back corn the people curse; but blessing shall be upon the head of him that selleth it_" (Prov. xii, 26). Had they talked and acted thus, no temple could then have been built in Jerusalem, and the people of that generation would have lost the moral and religious impulse and uplifting of their service and sacrifice. Their grain would have become worthless from its very abundance, and would have decayed on their hands. They would have missed a great gain for themselves, and would have snatched away from their neighbors to the northward a providential opportunity for an equal gain. The general truth must not be lost sight of here, even in passing, that all trade whatsoever is based upon a Diversity of relative Advantage as between the parties exchanging products. If, for example, the Hills of Judah and the Mountains of Israel had been covered with timber suitable for building the temple, and the coasts of Tyre and Sidon and the foot-hills of Lebanon had been fertile stretches of arable land, this particular trade would never have been thought of and could never have been realized. There would have been no gain in it for either party, and unless there be a valid gain for both parties at least in prospect, no trade will ever spring into being, because there would be no motive, no impulse, no reason, in it. Unless the Jews could get the timber easier by raising grain to pay for it, and the Tyrians get the oil and wheat and barley easier by cutting and floating timber to pay for them,--no trade; but the greater easiness to each actually came about, because each had an Advantage both natural and acquired over the other in his own rendering, and the mutual gain of the trade was wholly owing to that circumstance. So far as that matter went, the Tyrians had no cause to envy their neighbors the superior soil of the south, for they reaped indirectly but effectively a part of those harvests for themselves; and the Jews had no reason to be jealous of their northern neighbors on account of the noble forests crowning their mountains, because through trade they secured easily to themselves a share of that vast natural advantage. Diversity of Advantage both natural and acquired is the sole ground of Trade both domestic and foreign; and consequently by means of trade the peculiar advantages of each are fully shared in by all. It is perhaps less obvious but surely equally true, that the greater the relative diversity of advantage as between two exchangers, the more profitable does the exchange become to each. If the Vale of Sharon had been twice as fertile as it was, and the cedars of Lebanon twice as large and lofty as they were, the easier and better would Israel have gotten its timber, and the more secure and abundant would have become the food of Tyre and Sidon; and, therefore, the more unreasonable, or rather the more absurd and wicked, would have been any envy or jealousy of either of the superior advantages at any point or points of the other. So universally. By the divine Purpose as expressed in the constitution of Nature, in the structure of Man, and in the laws of Society, Trade in good measure and degree imparts to each the bounties of all, arms each with the power of all, and impels each by the progress of all. One other important matter is closely connected with these two Renderings, which is the fifth bit in succession of our present analysis, namely this, that traffic renderings always make necessary new and better routes of travel and transportation. It is mainly for this reason, that persons and things have to be carried to distances less or greater in order to consummate these Renderings of home and foreign commerce, that roads by land and routes by sea have been sought for and found, made and made shorter, improved as to method and facilitated as to force, from the dawn of History until the present hour. It was to get the goods of India, and so find a market for the goods of Europe, that the earliest land routes between the two were tried and maintained. The ground-thought of Columbus, meditated on for years, was to discover a new commercial way to India; Magellan with the same intent sailed westward through the Straits that wear his name, and so circumnavigated the globe; repeated searches mainly with the mercantile view, never long intermitted, have attempted ever since the North-West or the North-East passage to India; Vasco da Gama in 1497 boldly accomplished the East passage, and thus changed for all the Continents the channels of trade; the West now trades with all the East through the Suez Canal, dug for that express purpose; and the words, "Panama" and "Nicaragua" are upon everybody's lips, simply because through Central America is the shortest and safest route for men and goods to and from all the Oceans. Quite recently Dr. W. Heyd has announced through the Berlin Geographical Society the discovery of two commercial routes from India to the West not hitherto described. Trebizond (on the Black Sea) and Tana (at the mouth of the Don) were the chief distributing points. Through Tana passed westward the pepper and ginger and nutmeg and cloves; and the price of spices is said to have doubled in Italy, when the Italians were for a time shut out of Tana in 1343. The chief overland route from India to Tana ran through Cabul to Khiva by the Oxus, and then by land through Astrakhan. The other route to Trebizond passed through Persia, and came out by Tabriz to the Black Sea. It may perhaps be pardoned, if a far homelier, more modern, and even local, illustration be given of the present point, that trade makes roads. The western wall of Williamstown is the mountain range of the Taconics, whose general height is about 2000 feet above tide water at Albany. Within the limits of this town are four natural depressions or passes over this range, which is also the watershed between the Hoosac River on the east and the Little Hoosac on the west. About the beginning of this century, the population was quite sparse in both these valleys, while the impulse to travel and traffic over the barrier was sufficient to build (wholly at local expense) wagon roads over each of the four passes, one of which soon after became a turnpike between Northampton and Albany; and another was built mainly to accommodate the medical practice on the west side of the mountain of Dr. Samuel Porter--a Williamstown surgeon of local eminence. So soon as railroads were constructed to run down these parallel valleys (railroads themselves are perhaps the best illustration of the point in hand), the mountain roads were relatively deserted, and only two of them are now open to transient travel.[2] Lastly, (f) _There were two satisfactions_, the satisfaction of the southern king in actually obtaining the excellent timbers, without which the cherished national temple could not have gone up; and the satisfaction by the northern king in the easy receiving of the abundant food products for the daily maintenance of his court and kingdom. The simple story of these commercial transactions between Jew and Tyrian indicates clearly enough, what might have been anticipated and what always happens in such circumstances, not only a mutual satisfaction at the completion of each specific exchange, but also a general relation of contentment and peace in consequence of advantageous commercial intercourse. "_And Hiram, king of Tyre, sent his servants unto Solomon; for he had heard, that they had anointed him king in the room of his father; because Hiram was ever a lover of David. And it came to pass, when Hiram heard the words of Solomon, that he rejoiced greatly, and said, Blessed be the Lord this day, which hath given unto David a wise son over this great people; and there was peace between Hiram and Solomon; and they two made a league together._" It is plain to reason and to all experience, that mutual Satisfactions are the ultimate thing in exchanges. Our present analysis can go no further, for the reason, that we have now reached in Satisfactions the end, for the sake of which all the previous processes have been gone through with. Persons do not engage in buying and selling for the mere pleasure of it, but always for the sake of some satisfactions derivable to both parties from the issue of it. Ordinary self-inspection and foresight and industry being presupposed, the issue of exchanges is just what was expected by the two persons, the satisfaction of each follows as a matter of course, and stimulates to new exchanges in ever-widening circles. Since the desires of all men, which the efforts of other men can satisfy through exchange, are indefinite in number and unlimited in degree, there is no end of human Satisfactions to be reached along this road of reciprocal trade; and since the very object of all trade and the actual result of all trade (the exceptions are infinitesimal) is to multiply and reduplicate continually mutual Satisfactions among men; we can see right here what a loss and wrong it is, what a wanton destruction of possible human happiness it is, what a bar to progress among men in comforts and powers it is, for nations to impede and to prohibit commerce by legislation! As we shall see more fully in a later chapter, Governments can have no moral or constitutional right to restrict the trade of their people, except in the sole interest of revenue or health or morals. Such is the constitution of the universe, that a really good thing is usually cognate with and inseparable from a good many other good things. Buying and selling, as we have now clearly seen, springs right out of the nature of men in the circumstances in which they are providentially placed on the earth, and ends in the satisfaction of innumerable wants common to all men. This makes trade a thoroughly good thing in itself; and consequently it is intimately associated with many other good things. The scriptural instance, that we have been examining, gives a neat illustration of this: "_and there was peace between Hiram and Solomon; and they two made a league together_." The mutually profitable exchange of commodities led to a feeling of amity between the two neighboring kings; the feeling of amity led to a treaty of Peace between the two adjacent nations; and the "_league_" so ratified not only kept out war from their borders, but also permitted the unhindered continuance of profitable exchanges between them. So it is always. Peace waits on Commerce. Good-will among the nations is strengthened by the ties of interest and profit among their citizens. The mercantile classes as such are always averse to war, because war is the natural enemy of exchanges. Thus traffic leads to peace and tends to maintain it, and peace preludes increased prosperity, and commercial prosperity under freedom is wholly friendly to mental and moral progress, and Christianity walks before and all along this line of individual and national blessing. The commercial treaty of 1860 between France and England has tended powerfully, perhaps more powerfully than any other single cause, to keep those formerly inter-belligerent nationalities in peace and amity ever since. We will now put into a little table the final results of the present analysis of Buying and Selling. The ultimate elements seem to be these: 1. _Two Persons._ 4. _Two Estimates._ 2. _Two Desires._ 5. _Two Renderings._ 3. _Two Efforts._ 6. _Two Satisfactions._ The thoughtful reader will note in this table the fact, that three of these elements are objective, that is, outward and visible; and the other three are subjective, that is, inward and invisible. Persons, Efforts, Renderings, are seen and known of all men; Desires, Estimates, Satisfactions, can be directly known only to the persons who feel and make them. This is a peculiarity of Political Economy, that has been far too little observed even when it has been observed at all. Objective and subjective elements in it meet and mingle in each transaction. Indeed, they alternate, as is shown in the table above: first a Seen, and then an Unseen, Element throughout. It is this commingling of outward and inward, visible and invisible, that makes all the difficulty and gives all the fascination in Political Economy. Whatever carries us into the steady though billowy play of universal human nature is at once difficult and fascinating. Quite contrary, however, to a common impression, the _certainty_ both of action and prediction in all the other Sciences as well as in Economics lies rather in the unseen elements than in those that are seen. Take for an example the calculation of an eclipse: it is not so much from what is visible in the heavens and on the earth that the astronomer infers and predicts to the instant the shadow of one orb thrown upon another, as it is from the wholly hidden but ever-enduring forces of gravitation constantly relating these orbs one to the other. So it is of the Sciences generally; progress is made in them and certainties are reached in connection with them, "_while we look not at the things which are seen, but at the things which are not seen; for the things which are seen are but for a time; but the things which are not seen are everlasting_." Invisible Desires and Satisfactions felt in connection with Exchanges are among the most constant elements of human nature; they, as it were, give birth to the relatively more transient (though visible) data of Efforts and Renderings; while inferences and conclusions and even predictions may be securely drawn from all of these, giving a solid ground for Political Economy to stand on,--almost as solid as the ground of the chief Physical Sciences. 2. We will next examine the inmost nature and the outward manifestations of _Value_. "Value" is by much the most important word in the Science of Economics; and we must, therefore, comprehend it thoroughly, root and branch. Nearly all the writers in English have used in place of this the word "Wealth" and those in other languages some equivalent and equally concrete word; but the present writer fully satisfied himself some twenty-five years ago, that it is impossible to use that word to any advantage in economical discussions, owing to its inherent ambiguities and concrete associations in the minds of men. He utterly discarded the word at that time, and has found not the least occasion to pick it up again since, and believes now that his substitution of the word "Value" in place of it will ultimately be seen to have been his greatest contribution to that Science, to which he devoted his life. Even professed and excellent logicians, like John Stuart Mill, found the word "Wealth" an insoluble element in the science of Economics; he commenced his great work by writing, that it was not really needful to _define_ the word which nevertheless he laid at the foundation of his discussions, that "every one has a notion sufficiently correct for common purposes of what is meant by Wealth"; he goes on, however, to give at least a half-dozen definitions of the word, no two of which are at all consistent with each other, only one of which embodies a clear and scientific conception, and even to this one he himself does by no means coherently adhere throughout his treatise. No wonder, that this great man died thoroughly dissatisfied with his own work in Economics, and wishing for longer life in which to recast and improve it! No wonder, too, that the crowd of writers both English and American, many of them able and thoughtful and otherwise logical, who have been content to continue to use this irreducible and utterly unscientific word at the bottom, have made a mess of it! In dropping the word, "Wealth," accordingly, Political Economy has dropped a clog, and its movements are now relatively free and certain; and it is all the more incumbent on the Science for that very reason to define the good word that it substitutes for a bad one with absolute clearness, to explain it through and through until it become quite transparent, and then always to use it in its defined and economical sense, and none other, even though the same word be properly enough used in other senses in common speech and in other than scientific relations. Exactly that is what we are now going to attempt to do in a simple and consecutive order. (a) Perhaps it will help us to find out precisely what Value _is_ by seeing as clearly as possible at the outset what it is _not_. It is not _easy_, and never can be made so, to teach and to learn distinctly what Value is in its ultimate nature and constant changes. Here is the one unavoidable difficulty that lies at the very threshold of Political Economy; and this difficulty, which is not found as in the case of "Wealth" in the meaning of the word but in the complex character of that which the word describes, once overmastered, and one walks thereafter with ease and pleasure throughout the economic domain. It would be wrong and cruel to deny that just here is one hard place in the road for teacher and pupils to get over. It arises wholly from the nature of the subject, as we shall soon see, and not at all from the insufficiency of the word, Value. We have already seen fully, that Buying and Selling in each and every transaction is complex and relative, involving twelve elements every time; that Desires and Estimates and Renderings are especially relative,--each party to a trade desires something in possession of the other, estimates that something relatively to something in his own possession, and finally renders to the other his own something for the sake of receiving the other's something. Now everybody is used to all this and practically understands it perfectly, but it is complicated and reciprocal nevertheless, and Value, which is the single birth of the two Renderings, though perfectly intelligible to him that takes pains, is not a thing to be seized once for all at a passing trot. Value, then, is _not_ a quality of single things, belonging to them as if by nature, as hardness is a quality of a rock or gravity is an attribute of gold; because all physical qualities in physical things, all that which makes or helps to make anything such as it is, may be learned by a study of the things themselves by themselves; a careful examination and analysis of the mechanical and chemical properties of any physical thing will discover all its distinguishing characteristics, all that makes it that particular thing in distinction from all other things; but it is plain already, that the _Value_ of anything (if it have value) cannot be found out by studying that particular thing by itself alone; the questioning of the senses however minute, the test of the laboratory however delicate, can never determine how much anything is _worth_, because that always implies a comparison between _two_ things, or more strictly a comparison between two Renderings in exchange. Value is not an attribute of single things: not even if the things be physical and tangible. Now two other kinds of things are bought and sold besides physical and tangible things, namely, personal services and commercial credits; and it is very plain, that Value cannot be a quality of any one personal service rendered, as looked at by itself, such as the service of a physician towards a fever patient, because the service in and of itself might be the same whether rendered to his own child or the child of one of his patrons, while in the former case there would be no value, and in the latter there would be; and so too the very name "commercial credit" implies an exchange of two Renderings, out of which Value always emerges, and not at all an attribute of one credit considered by itself. Value is no more a characteristic of single intangible services and claims than it is of single intangible commodities rendered. And what makes all this still more certain is, that Value even in physical things, and perhaps still more in services and claims, is all the while changing under demand and supply, now rising and then falling, while the physical properties of things, that make them what they are, are fixed and unchangeable. A gold eagle, for example, has certain primary qualities as gold, without which it would not be gold; it is hard and heavy and colored: gold is gold the world over and in all ages: Value is not one of these primary qualities, nor even a secondary quality, nor any quality at all, of gold as such; because circumstances are readily conceived and have often occurred, in which gold has no Value even in exchange; for instance, among a crew abandoned at sea, a bag of gold belonging to one of the sailors might not buy even a biscuit belonging to another; all the natural qualities of the gold are present,--it is still yellow and weighty and solid,--but its Value has escaped altogether. Gold is always 19 times heavier than water: specific gravity is a _quality_ and is constant in all physical things: Value is not a quality in this sense at all, inasmuch as it is something that is constantly changing, rising or falling, and not infrequently disappearing altogether, leaving no sign. Ignorance of this vastly important truth has pecuniarily ruined thousands upon thousands of the people of this country during the last 20 years. They have gone into the mining of metals, gold and silver and copper, sometimes as individuals and more often as companies gathering in the driblets of investors, under the notion that if they could only get these metals out of the ground their Value would be just as secure and fixed as their physical qualities. They found out their mistake in bitterness of spirit. For example, the Value of an ounce of silver has gone down and down and down as the quantity of silver excavated has increased under zealous digging, in accordance with the universal and pitiless law of Supply and Demand. So of copper. And both these great monetary interests went to Congress and secured the passage of laws designed to lift artificially the Values that were sinking naturally under increased Supply, the silver men by a law requiring the United States to buy and mint at least $2,000,000 in silver each month whether the silver dollars were needed or not, and the copper men by a law imposing a tariff-tax on foreign copper that has actually lifted the price two cents a pound on the average of the whole 20 years above the average price of copper in the markets of the world. Take another illustration of disappearing Values, this time in lands, long supposed to be the most stable in value of all human possessions. Whole tiers of farms in the writer's native town in New Hampshire, and for that matter all over New England as well, that in his boyhood supported large families, and when sold usually brought a fair price, are now abandoned of their owners as wholly or comparatively worthless, and are allowed to grow up into forest again, without a sign of present human habitation upon them. Value is something that needs to be studied carefully, if it is to be fully understood. (b) Perhaps the origin of the word, "Value," will throw some light upon its nature and changes. Etymology can never be safely despised in scientific discussions, although words are perpetually changing their meaning in the mouths of men. No science can afford to build upon the transient meaning of a word; and yet it is clearly possible so to use words as to reach and describe ultimate and unchanging facts in science; and some knowledge of the original meaning of words is always a help in getting at those definitions and analyses of facts that are permanent in science. Let us hold fast to the cheering truth exemplified on all sides of every science, that a just analysis and exact description of ultimate facts in any department of knowledge are for all time, in spite of the transient meaning of current words. The present word is derived from the Latin VALERE, _to pass for, to be worth_. There is a strong hint of a _comparison_ in the original meaning of the word, and the current use of it both in Latin and English develops the hint into a certainty. In common language, when the Value of anything is asked for, the answer always comes in the terms of something else. If the question be, How much is it worth? the answer is, So many dollars or cents. Now the cents or dollars are very different things from those whose value is thus inquired after; and so we see again from another point of view that Value is a relative matter, since it clearly implies a comparison between two distinct things; and, if so, it is clearly enough not a quality of any one thing, and of course it would be useless to try to ascertain the Value of anything by a study of that thing alone. Etymology thus easily brings us up to our present vital question, and will assist us to solve it completely. (c) _What is Value?_ Plainly it is the result of a comparison instituted between two things, using the word, "things," here in its broadest sense. But who institutes the comparison? And who is competent to announce the result of it in Value? A comparison is required in order to ascertain the length of a stick of timber in feet and inches, and a carpenter's square is the instrument by which the comparison is made, and it makes no difference in the result whose the square is or whose the stick of timber is, since the square and the stick have in common the physical quality of length, and a simple comparison of square with stick determines the length of the latter, and one man in this case may determine the result by himself alone, and it is not needful that he be the _owner_ of either of the things compared. But it is a different kind of comparison from this that issues in Value. Let us suppose an exchange of a bushel of wheat for a mason's trowel: there is no common physical quality, as length, between the wheat and the trowel; and it is evident, that no _one_ man can measure in any form one of these two commodities by means of the other. It is a peculiar kind of comparison that is involved in any and every trade; and the first peculiarity of it is, as we have already seen in another connection, that it always requires "two persons" to make it; and each of the two persons must always be the virtual _owner_ of one of the two things exchanged. A thief may indeed go through the motions of selling a stolen horse, but as he is not the owner of the horse there can be no sale, and the actual owner may take his horse wherever he finds it even in the hands of an innocent third party. In other words, there must ever be "two efforts" also, two legitimate efforts giving a valid claim of ownership to each of the two parties in the exchange. And there is a second distinctive peculiarity in that comparison that ends in Value, namely, the two things to be exchanged are not compared directly with each other at all, as square and stick are compared, but in the light of the "two desires" with which we are already familiar, and in that of the "two estimates" resulting therefrom. The owner of the wheat desires a trowel, and the owner of the trowel desires a bushel of wheat; the former estimates the effort it has already cost him to procure the wheat in a sort of comparison with the effort that it would otherwise cost him to procure the trowel, and he does not trade unless the trowel seem more and better to him than does the wheat; the latter estimates the effort it has cost him to procure the trowel in a sort of comparison with the effort it would cost him to procure otherwise the wheat that he wants, and he does not trade unless the wheat then and there seem more desirable than the trowel, which he already has; and these two relative estimates of the two owners must _coincide_, that is, the owner of the wheat must think more of the trowel than of the wheat, and the owner of the trowel must think more of the wheat than of the trowel, before these two parties can ever trade. So of all traffic whatsoever. Now the third and last distinctive peculiarity of that kind of comparison out of which Value emerges is this,--an _action_ is necessary in order to complete the comparison. Desires and estimates may have been never so busy, but no Value can ever be born until an outward action takes place in the "two renderings" of our former analysis. Then first we come out upon plain and solid ground. We leave the play of the subjective elements, which yet are essential in the premises, and touch firmly objective realities. _The trowel-maker passes over his tool in the sight of men to the wheat-grower in firm possession and ownership, and takes in return for it from him the grain, which the latter passes over to the former for the sake of receiving the trowel._ The two "satisfactions" follow as a matter of course, and that whole transaction as a commercial exchange and as the sole subject of Political Economy is ended. _But where is the "Value," of which we have been in search?_ The answer is easy and certain and unevadible. _The Value is in the Renderings, and nowhere else._ The value of the trowel is the wheat, that is actually given in exchange for it; and the value of the wheat is equally the trowel, for the sake of getting which the wheat was rendered. What was the Value of King Hiram's cedar-timbers? The oil and wheat actually returned in pay for them. What was the Value of the oil and wheat sent northward by King Solomon? The timbers rendered in direct exchange for the same. This is not merely the only possible answer to the question, _What is Value?_ but it is also a perfectly complete and satisfactory answer. Common language here corresponds exactly with scientific language. "How much did the horse cost?" "One hundred dollars." The dollars have nothing whatever in common with the horse, except that they express his Value at the time; the horse has nothing in common with the dollars, except that it expresses the Value of the dollars at the time. It is just as exact to say, it means precisely the same thing to say, the dollars are worth the horse, as to say, the horse is worth the dollars. In general terms, the Value of anything is something else received in return for it, when each owner renders the one _for the sake of_ getting the other. This is the whole of it, so far as any specific valuable thing is concerned. We shall indeed need after a little, and shall have no trouble in finding, an abstract and universal definition of "_Value_," as an abstract and scientific term perfectly circumscribing the field of Economics. Here and now we are dealing with the simpler concrete question, What is the value of any specific valuable thing? The unvarying answer is, Some other specific valuable thing already exchanged for the first! There may be expected value, estimated value, but actual value there is none, until a real exchange has settled how much the value is. The value of anything is something else already exchanged for it. Value is not simply a relation subsisting between two things, the result of a careful comparison between them, but rather an actual fact established in connection with them. The universal formula of Value is _quid pro quo_, in which formula _quid_ stands for one of the valuables and _quo_ for the other, and _pro_ unfolds the motive of each owner for the reciprocal receiving and rendering. Here a caution is needful. Because nobody can tell what the value of anything is until something else has been put over against it in order to get it and actually received therefor, and because the only possible way to express the value of either is in the terms of the other,--the trowel is worth the wheat and the wheat is worth the trowel,--one must not therefore jump to the conclusion that the value of either is settled for all time or even for any future time. It is only settled for _this_ time. In Economics as in Christianity, Now is the accepted time. There is nothing fixed in Values, and never can be from the nature of the case, because Desires are personal to individuals, and Efforts fluctuate with times and persons, and Estimates that wait on these vary from necessity, and the Renderings of to-day may not be the chosen renderings of other persons in the same articles to-morrow. Value is not a quality at all, still less is it a permanent quality, of anything; it is a relation established between two things when these are in the hands of two given persons; but now when these are in the hands of two different persons, whose views are pretty sure to differ from the former, and a new relation is sought to be established between these in the old way of Estimates, is it strange that a new balance is struck, and Value is expressed in quite different terms? One of the chief charms of Political Economy is the open secret, that it deals not with rigidities and inflexible qualities and mathematical quantities and the unchanging laws of matter, but with the billowy play of desires and estimates and purposes and satisfactions, all of which are mental states, and all of which are subject in the general to ascertainable laws, though laws of a quite different kind from those of Mechanics. Values come and they go. Within certain limits and under certain conditions they may be anticipated and even predicted, but never with the precision of an eclipse or the result of a known chemical combination. There is a useful and fascinating Science of Value, as we shall see indubitably by and by in the present chapter; but it is a science that deals primarily with _persons_ and only secondarily with _things_, with mind and not with matter, with the general undulations of the sea and not with the crests of the waves. And all this is so, because Values are relative, because the announcements in the market-place to-day may stand listed differently to-morrow and very differently next year, and because old values may disappear altogether and many new ones come in, all in accordance with the incessant changes in the wants and labors and fashions and projects of men. We are now in a good place to see once for all the sharp distinction there is between Utility and Value. These two are often confounded to the deep detriment of our Science; and no clear thinking is possible in Economics without drawing this line sharp, and then holding it fast; for the hazard of this confusion is all the greater, because Utility is always connected with Value, although it is a totally different thing from Value. We will see. Utility is the simple capacity of anything to gratify the desire of anybody. This is at once the etymological as well as the popular signification of the word. It is derived from the Latin _utor_, to make use of, a word that is often conjoined in Latin with _fruor_, to enjoy; so much so, that the two verbs are often put together, _utor et fruor_, and also often without the conjunctive, _utor fruor_. Utility, then, is a quality of innumerable things. Anything that is _good for_ anything, anything _useful_, anything that has the power to still _the desires_ of any person, has Utility. But multitudes of things that have this capacity to gratify human desires are never bought and sold, and therefore can have no Value, since nobody will give anything for them. The air we breathe, the water we refresh ourselves with from spring or brook, the light of the sun and moon and stars, the fragrance of the flowers, the mountain prospect that delights the eye,--all these, and thousands more, possess the highest utility, but no value whatsoever. They are free. They are the bounty of God. They are never bought and sold. They are a vast class of things by themselves, with which Political Economy as such has nothing to do. Nevertheless the element of Utility comes into every case of Value, because the element of Desire comes into every case of Value, and whatever merely satisfies the Desire of any person is Utility, whether that capacity be the direct gift of God or whether the Efforts of men have been employed to bring it about. It is just here that we see the precise function of our "two efforts" in each case of Value, in distinction from mere Utility in all cases: much of utility is absolutely free, no effort of men having been put forth to secure it, for example, the fragrance of the wild rose; much more of utility is the commingled bounty of Nature and the gratuitous effort of men, for example, the fragrance of the domestic rose brought by the householder himself into his own yard for the gratification of his own family; while by much the most of utility is commingled free gift of God and the compensated efforts of men, for example, the fragrance of the bank of roses cultivated and cared for by the hired gardener. It is important for our purposes to discriminate carefully the three kinds of Utility: (1) what is wholly disconnected from the efforts of men, and comes freely from the hand of God; (2) what is mingled with the unpaid efforts of men, so that the satisfaction of the desire comes partly from Nature and partly from unbought effort; and (3) the compound utility that is partly free gift and partly the result of compensated labor. The last is the only kind of Utility that stands in any connection with Value. And even this is very different from Value. Utility in all three of its forms--now free, now onerous, now partly bought--is always a quality of one thing by itself, going straight to the satisfaction of some desire, and there an end. It is simplicity itself compared with Value, which is always a resultant of several things, and is specifically a relation of mutual purchase established between two "renderings," each of which expresses the value of the other, in each of which is embodied an "effort" made by each of the two "persons" rendering, and each of which excites a "desire" and an "estimate" before being passed over in ownership to another, and a "satisfaction" afterwards. The utility in every valuable rendering comes partly from free Nature and partly from compensated effort, but it is remarkable, that a principle, with which we are to become very familiar later on, namely, Competition, eliminates for the most part from all influence upon Value that portion of the Utility that is the free gift of God. The great Father never takes pay for anything, and never authorizes anybody to take pay in his behalf; and, moreover, has arranged things so, that it is exceedingly difficult for any person to extort anything from another person on the strength of anything that God has made, and man has not improved. Take, for example, ten horses of any general grade, brought into the same market by their ten owners for sale. These men did not make these horses, but they have cared for and trained them, or at least have become proprietors by purchase or otherwise of the results of such care and training. The Utility in each horse is compound, consisting partly of what God has done for him and partly of what man has done for him,--the two parts inextricably interwoven,--and all ten are offered now for sale. Each of the owners would indeed be glad to get something for his horse on the ground of what God has done to make him sound and strong and fleet, in addition to a fair compensation for what he (and his predecessors) has done in raising and breaking him; but the cupidity of all is likely to be thwarted by the ultimate willingness of some to sell their horses for a price covering the element of human "efforts" involved, and the action of these tends to fix a general rate for the whole ten, and thus the gratuitous element is eliminated from influence on Value. Even if the ten owners should combine for a higher price, there are doubtless a plenty of horses of that general grade elsewhere, some of whose owners are content to get back an equivalent for their own and others' "efforts" expended on their horses; and so the action of these tends to fix the general price for horses of that kind for that time and place at a point not above a fair estimate of the onerous human elements involved; thus throwing out by the action of competition all effect of natural Utility upon the Value of horses then and there. So of all other products of that kind. It is true, that in certain unique cases, in which competition has little or no play, because there is only one or a very few owners of such unique products, one cannot certainly say that free Utility may _not_ influence the Value to lift it above the gauge of human efforts involved; but such cases are rare, and relatively unimportant; and the tendency is immensely strong, under the natural and beneficial condition of things, for Values to graduate themselves through the reciprocal estimates and renderings of commerce, down to the actual and onerous contribution of _men_ to that Utility that underlies Value. Thus we are brought again and again from differing points of view to the "two renderings" as central and determinative in Value, and also more specifically to the "two efforts" of persons rather than any free contribution of Nature as constituting that portion of the compound Utility, whose function it is to gratify the "two desires" that precede the realization of Value,--that portion of the utility in any rendering that must be _compensated for_ by the other rendering. Now in order to reach in a moment more our final definition of "Value," a definition, it is believed, that will cover all the cases and take the life out of endless disputes, we need a scientific term to carry easily and exactly the meaning of any economic _rendering_. Let that word be SERVICE. We must have it in its generalized meaning, to cover the renderings of all the three kinds, in distinction from the term "personal services," which we have already used and shall continue to use to designate one class only of things exchanged, in contradistinction to "commodities" and to "credits," the other two classes. VALUE IS THE RELATION OF MUTUAL PURCHASE ESTABLISHED BETWEEN TWO SERVICES BY THEIR EXCHANGE. We offer this definition of "Value" to our readers in much confidence, that they will find it exact and adequate and altogether trustworthy. No one of them, however, is precluded from attempts to improve it in breadth and brevity and beauty; and all are invited to pick logical flaws in it, whether of ambiguity or superfluity or deficiency. Many minds and many hands in many lands have left their impress on parts of this definition, for example, Aristotle in Greece and Bastiat in France and Macleod in Great Britain; the present writer thinks, that he has bettered the definition of Bastiat, namely, "_Value is the relation of two services exchanged_," by precisely _defining_ the relation as one of mutual purchase; and he is sure, that he has improved the definition of Macleod, namely, "_The value of any economic quantity is any other economic quantity for which it can be exchanged_," by making his definition at once more abstract and more general and more definite, and also by escaping the slight implication in the word, "quantity," that only material things are exchanged in economics. The immense importance of securing _first_ a clear and correct Definition of "Value," which is the foundation-word and the circumference-word of Political Economy, and _then_ of using that term and all other scientific terms in the Science in their defined senses only, will certainly be appreciated by those who have wandered in the wide wilderness of the discussions on the undefinable word, "Wealth," and especially by those who have reflected most upon the vast and illimitable significance of economic Exchanges on the welfare of mankind. Associate Justice Miller of the Supreme Court of the United States, not an Economist in the technical sense, referred in 1888, in words that are worth remembering, to "_the philosophical maxim of modern times, that of all the agencies of civilization and progress of the human race commerce is the most efficient_." In August of that year John Sherman of Ohio, a man far enough from being a technical Economist, said in the Senate of the United States, that "_it is almost a crime against civilization_" to maintain commercial barriers between Canada and the United States. There were tokens a plenty in the year of Grace just referred to, that the Science of Value in all the lands of the civilized world, and particularly in the United States, was drawing to itself a new and more popular esteem. It was seen more clearly and felt more deeply than ever before, that this science has a weighty word for every man and woman and child in the world; that there are certain Rights in every one inherent and inalienable to buy and sell for his own advantage; that most if not all of the Governments, under the lead of comparatively few selfish and powerful men, were infringing upon these Rights, and robbing under the forms of Law the masses of their citizens to immense amounts for the special benefit of these very men; that the only sure defences of the people against these abuses of all kinds were in the maintenance and diffusion of the scientific and consequently disinterested principles and maxims of a sound Political Economy; that such a science was only friendly to the broadest rights, to universal gains, to illimitable increase in human comforts and powers, to international fellowship, to peace on earth and good-will among men; that, accordingly, a science of such scope and tendencies must be encouraged and cultivated and improved; that what had been crude in it, and narrow, and merely national, must be sloughed off; that the English and insular and special speculations of a century ago, which regarded "Wealth" as consisting of material things only, excepting however considerable portions of Adam Smith's immortal book, were antiquated and unusable; that the Science had really moved into a broader and still a well-circumscribed field, new and more permanent foundations were being laid, and fresh contributions from all countries should be welcomed; and that the time had fully come, when the accepted truths of this Science, like those of the other developed sciences, should be practically and steadily applied to the betterment of mankind. Under these broadening and inspiriting and uplifting conditions Political Economy, as never before, thanked God and took courage. 3. Having now a satisfactory definition of Value, and knowing accordingly just what Valuables are in clear distinction from all other things in the world, we must examine with some care two or three of the most general facts and laws and limits of Value, before we pass in the next following chapters to study in detail each of the three kinds of Valuables, namely, material Commodities, personal Services, commercial Credits. (a) Since Value in general is the relation of mutual purchase between two Services, and consequently the specific value of either can only be expressed by the other,--one Valuable being always measured by the Valuable exchanged against it,--it follows as a matter of course that such a thing as a general Rise or Fall of Valuables is an impossibility. The rise of one valuable involves of necessity a fall in the other, as the fall of one implies the rise of the other. If the articles exchanged be bushels of wheat and dollars of silver, and if a bushel buys a dollar to-day, then wheat is worth a dollar a bushel; but if wheat rises next week, so that a dollar will not buy a full bushel, that is precisely the same thing as saying, that the dollar has fallen in its purchasing-power as compared with the wheat. Such specific changes in the purchasing-power of one Valuable over another are incessant throughout the commercial world, and a merchant's sagacity consists in anticipating these so far as possible and in availing himself of them alertly and prudently; but each one of us must needs see clearly and hold firmly in mind, that each fall in the purchasing-power of a Valuable means a corresponding rise of power in the other Valuable,--if the first buys more of the second than before, then the second must buy less than before of the first; and, consequently, a general rise of Valuables is a contradiction in terms, and so of course is a general fall of Valuables. This brings us to _Price_. Price is Value reckoned in money; and this is the only difference in the meaning of the two terms. When one valuable is sold against another, even when one of the two is money, each is the _Value_ of the other: Value is the general and universal term in Economics. When any other valuable is sold against money, the amount of money it buys is called its _Price_: Price is a specific and restricted term in Economics. Since we shall study Money thoroughly in a later chapter, and there explain the origin and extent of its functions throughout, it is only in order to remark here, that it is for convenience' sake, that is, to make easy the comparison of valuables one with another, that Value in commerce is commonly reduced to Price. Money becomes a sort of measure, by means of which to compare all other valuables with each other. In order to ascertain the Price of a Valuable, it only needs to be sold once against money; but in order to ascertain the Value of a Valuable, it would need to be sold once against all other valuables whatsoever. This last is clearly impracticable; and so Value for practical purposes is reduced to Price. The General is made Particular for convenience. Hence we have "Prices current," but never Values current. Now it will be plain to all, how there may easily be and often is a general rise or fall of Prices while a rise or fall of Values is impossible. Price is a relative word as much as Value is, but it does not relate to so many things. Price is specific, and Value universal. Both equally involve buying and selling, but one sale of a single valuable against money leads to Price, while ten thousand sales of the same valuable against other than money would not conduct to complete Value. That would require a sale of this valuable against all other valuables in the world, and a complete statement of the comparative results. General, or at least universal, changes of Prices in rise or fall in any given country are due to general and great changes in the Money current there. Subordinate changes in other valuables, money being supposed to remain uniform, will of course vary their Prices; but it is impossible that such changes should affect equally or even generally all the various and numberless valuables of a whole country; while some are coming easier, others are coming harder, while some are more desired than formerly others are less desired, and this will bring in of course altered prices, some higher and some lower; but a general rise of all prices, or a general fall in the same, can only come about by great changes of some kind in the circulating medium, that is, the money, of the country. For example, in the United States, between 1862 and 1878 inclusive, a government paper promise, called _greenbacks_, was the current money of the country; owing to its excessive issue, and to some doubt in the minds of the people whether the paper would ever be redeemed in gold, it soon became depreciated as compared with gold, the premium on which over the paper money varied at different times from 1 to 185 _per centum_; as all other valuables were then sold against greenback money, which had declined, their prices naturally rose in some sort of proportion as the medium fell; general _values_ remained much as before, but general _prices_ were much enhanced; and when, after the resumption of specie payments in January, 1879, gold became again the standard medium, general prices declined in full accordance with the same universal principle reversed. (b) Prices, as we have now seen, are only a subordinate form of Values: the universal law that regulates all the variations of them both, within certain fixed limits to be examined shortly, is called the LAW OF SUPPLY AND DEMAND. This is perhaps the most comprehensive and beautiful law in Political Economy. We shall look at it now only in outline: the filling in will be the pastime and profit of all that is to come. "Demand" is a technical term in Economics, and accordingly needs to be defined, and then always used in its defined sense. So is "Supply." _Demand is the "desire" of a "person" for something in the hands of another person, coupled with the possession of something else capable of buying that something._ Mere desire has no function in Political Economy: hungry and penniless children passing by the stalls of a great market, have no influence on the prices or values of the viands, on which they cast their eager glances: only desires accompanied by "efforts" competent to excite the desires and to pay for the efforts of another are a Demand. Supply is the same thing as Demand looked at from the other side. Supply is the correlative of Demand. The Supplyer is a person, who has in his possession something desired by the Demander, and who in turn desires something in the hands of the Demander, when both are willing to exchange their "renderings." There is no economical difference in the position of the Demander and the Supplyer. Each is equally a Demand and a Supply with reference to the other. It is the old and ever-recurring case of Value, the propositions being here stated in their most universal terms. For simplicity's sake, however, and for convenience, without altering the substance of the definitions a particle, the valuables when looked at as a Demand are practically reduced in all markets to their equivalent in Money, so that Money offered or ready to be offered against any other exchangeable thing constitutes what is called in commercial language a Demand; and this is sufficiently accurate as well as current, although it must always be remembered that each valuable in any market in reality constitutes a Demand for another, and is equally a Supply in reference to that other. _Supply is any exchangeable thing offered for sale against any other exchangeable thing._ For example, corn in any market is at bottom a Demand and a Supply at once for every valuable offered in that market at that time, say, ploughs for one thing; but in the talk of the market, the presence of corn there, or its being ready to be immediately brought there and offered in exchange for money, constitutes what is called a Supply of corn; money offered, or ready to be offered, in exchange for corn, constitutes what is called a Demand. On this account Money seems to play a much more important part in trade than it actually does play; the corn is sold in the terms of money, that is, for dollars and cents as denominations of Value; convenience dictates such a reduction of general Value to this particular form of it, because this is found to make easier the ultimate exchange; but there is not one chance in a hundred, as trade runs nowadays in the larger markets, that this seller of corn will take his pay for it in actual money whether metallic or paper; money is never an ultimate product, but only an intermediate one; this seller of corn wants perhaps a plough or some other farming implement, and ten to one he will take for his corn a bill or order in some form on the seller of ploughs, and it will be corn for a plough, each becoming a Demand and a Supply for the other, though money or rather its denominations has acted as an agent in bringing about the final trade; the details of all this in manner and result will be as plain as day when we come to study "Money" and "Credits" in following chapters; while the essential point to be noted here is, that all Valuables are a Demand and Supply as towards one another. In other words, the world over, A MARKET FOR PRODUCTS IS PRODUCTS IN MARKET. What, then, is Market-Value returned in the terms of Money? And what is the universal Law of it? Market-value is the present rate of exchange between dollars and cents and any other valuable, that can be fairly graded in a class made up of valuables similar to itself; and the law of market-value is the equation of Supply and Demand, that is, the current rate is adjusted when money enough is offered to take off within the usual times the valuables on hand and offered for sale. If Demand for any reason become quickened, and the Supply be not increased, there is competition among buyers for the stock in market, and the market-rate rises or tends to rise. If, on the other hand, Demand become sluggish, the Supply remaining the same, there is a like competition among the sellers to dispose of their stock, and market-value sinks or tends to sink. So far it is the simple action on Value of the element of one "desire" expressing itself through a money-demand, the elements of "desire" and of "efforts" expressing themselves through Supply being supposed to remain stable, and the pulsations in the market-rate follow accordingly. How far can this simple action go? Demand increasing, Supply remaining as before, market-rate rises: how far can it rise from this cause? Here we must remember that Demand not only acts upon Value, but also Value reacts upon Demand. As Value rises, the number of those whose means or inclinations enable them to purchase at the new rate is constantly diminished: there are ten persons who may wish an article at one dollar, of whom not over four will wish it at two dollars, and perhaps only one at three dollars. Every rise in market-rate then, under the impulse of enlarged Demand, tends to cut off a part of that Demand, that is, to lessen the number of those who will purchase at the increased price; and the rate consequently can only rise to that point, whatever it be, where an equalization takes place between the Supply and Demand, between the quantity of flour, for example, offered at the enhanced rate, and the quantity of money in the hands of those willing to exchange it for flour at the higher rate. Just so in the reverse way, when Demand is slackened, Supply continuing as before, the market-rate is sure to decline; but declining rates tend strongly in turn to increase the demand by bringing the article within the range of a larger number of purchasers; Society is like a pyramid, each lower stratum is broader than the one above; and so the decline of rates under a weaker Demand is arrested by a stronger Demand coming from a wider circle of buyers, and a new market-rate is determined at the point of equalization between the new Demand and the old Supply. Thus every rise or fall of Demand tends to check itself, and will check itself in all the great classes of valuables, even without any variations in the Supply; everything oscillates under the variations of Demand; while the point of stable equilibrium, if we may use the expression of anything so unstable as Market-value, is always the equation of Supply and Demand. But all considerable variations of market-rate are commonly checked at an earlier point than the one just indicated by variations in the Supply. A sharper Demand carries up the market-rate, and a higher market-rate commonly acts upon Supply to enlarge it, and an increased Supply too checks the rise of market-rate. _Per contra_, a slacker Demand lowers market-rates, and lowered rates often lessen the Supply by the action of holders and speculators,--holders withdrawing their stock for a better market, and speculators buying now when the article is cheap to store away until it shall be dearer. Thus rise of market-rate from Demand growing stronger is checked doubly; first, by curtailing the number of would-be buyers, and second, by enlarging the Supply: the fall of market-rate from Demand growing weaker is checked doubly; first, by increasing the number of consumers of a now cheaper article, and second, by a diminution of Supply by the action of holders and speculators. This double and harmonious working of the law of the Equalization of Demand and Supply is one of the most comprehensive and beautiful laws in Political Economy. Besides this, we must note the effect on Value of conditions in Supply only, Demand being supposed to continue steady. There are three classes of valuables in respect to the law of their Supply. (1) When the Supply is scant, and cannot be increased at all, as is the case with choice antiques and certain gems and paintings by the old masters, their value may rise to any point under the action of Demand, there is and can be in such cases no market-rate, and the individual value will be struck at the point of equalization of the demand then existing with the supply there offered. For instance, the French Government paid, in 1852, 615,300 francs for a painting by Murillo, which had belonged to Marshal Soult. The genuine Murillos are comparatively few, and their number cannot be increased, and their merit causes a strong "desire" to possess them, and their value rises in connection with the limitation of Supply to a point beyond which no one purchaser can be found. When this painting was offered in Paris for sale, many "persons" of course were anxious to buy it, there was but one painting, there could be but one purchaser, value rose under the influence of a sharp Demand, the rise could not be checked by any duplication of the Supply, and the equation was complete and the value for that sale determined when one party distanced all other competitors and offered a sum greater than any one else would give. The same principle controls all sales of this sort, and is practically the principle of the _Auction_, whose very name indicates its nature in this regard, that Demand becomes restricted to one party, and that the highest bidder. (2) When the Supply, instead of being absolutely limited, can only be increased with difficulty or after the lapse of time, similar but less extreme results will be observed. Let us suppose, that pianos are selling in some rural community at $300 each, that there are twenty persons in the place who want a piano immediately, that there are but fifteen pianos on hand, and that the number cannot be increased for half a year. The market-rate will certainly rise above $300. How much above? To that point, at which only fifteen of the twenty will be willing to purchase at the new rate. The equation of Supply and Demand will be reached by a rising rate which cuts off five competitors. This is the principle, working only roughly in practice through the estimates and good judgment of dealers and purchasers. A better illustration of this second class of cases is, perhaps, the Grains and other agricultural products. When these have been gathered, there is no more home supply for a year; and any deficiency in the crops will raise their market-rate, not at all in the ratio of the deficiency, but according to the relations of the diminished Supply to a new Demand. Since the abolition of the Corn-Laws in England in 1846, and the resulting ease of grain-imports from abroad, a deficiency of home crops has no such effect on the price of cereals as it had before that time; when, according to Tooke's History of Prices, an expected falling-off of one third in the crops often doubled and sometimes quadrupled the usual prices; which shows that the world ought to become one country in respect to all food supplies, as indeed happily it is now for the most part, each country allowing them to be distributed freely everywhere in accordance with this law of Demand and Supply. Speculation is more busy in grain, in cotton, and in such things generally, because a new Supply can only be had once a year; early information is eagerly sought at the trade centres in regard to the prospects of the growing crops, and has its influence one way or the other on current prices; but the world is so wide and all the parts of it now so closely connected together by steamship and telegraph, that the prices of the great food staples are remarkably uniform over the earth, and Speculation has not the chance it once had to count and "corner." (3) In the only remaining and by far most comprehensive class of cases, in which the Supply of Commodities and Services and Credits can be readily and indefinitely increased to meet enhanced Demand, and easily withdrawn from market and stored when Demand declines, each rise and fall of market-rate tends to be speedily checked through the mere action of Supply; and the doubly and harmoniously working Law but just now referred to keeps Value in this class of cases comparatively steady all over the world. (c) It only remains in this branch of the general discussion on Value, to indicate the Limits, within which all oscillations of Value are contained. These extreme limits are specially to be found in the element of Value which we have called "Efforts." We have clearly seen already, that "efforts" (or Labor) are not, as has been often asserted, the cause of Value, but only one of several constituent causes; if Labor be asserted to be the sole cause of Value, the inquiry becomes instantly pertinent, what is the cause of the value of Labor; yet we know, that "efforts" always stand in preconnection with value, and, the mutual "desires" being presupposed, there must always be Limitations of Value lying partly in the efforts made by the person serving and partly in the efforts saved to the person served. In every valuable transaction, each of the parties is reciprocally serving and served, and it is clear, that the two would not exchange "renderings" unless the service which each renders to the other is less onerous than the "efforts" which each would have to make if each served himself directly. For example, it takes a certain effort for me to bring water from the spring for the use of my family; I am willing to pay a neighbor for bringing it for me, but I should not be willing to make a greater effort for him in return than the effort is to bring it myself; neither should I be willing to make an effort for him in return which I regarded just as onerous as the bringing the water myself; and unless there is some service which he will accept less onerous to me than that, I shall continue to bring the water. On the other hand, he will surely not render the service to me of bringing the water, unless it be less onerous to him to do so than the doing that for himself which I am ready to do for him. This principle, applicable to all exchanges whatsoever, draws on the one side the outermost line, beyond which Value never can pass. It may be asserted with confidence, that no person will ever knowingly make a greater effort to satisfy a desire through exchange, than the effort needful to satisfy it without an exchange. Therefore, it follows, that all exchanges lessen onerous efforts among men relatively to the satisfaction of their desires, and tend to lessen these more and more as exchanges multiply in number and variety, otherwise the exchanges would not take place. Moreover, within this outermost Limit of Value, which is made by the comparative onerousness of the respective "efforts," there is a second limitation of a similar kind to be found specially in the element which we have called "estimates." The estimate of each exchanger is based at once on his own effort about to be rendered and on his desire for the return service offered: the element of effort in the case of both being considered for the time as fixed, Value will vary according to the varying desire of each for the return service of the other, affecting of course the "estimate" of each, and furnishing also a secondary Limit of Value. To pursue the same illustration, suppose I regard the effort required to bring the water myself as 10; that there are several persons, who would be glad to do that service for me at a return service which I consider as 8; that there are two persons, who are willing to do it for something which I estimate at 6; and that there is only one person, who will do it for a return service which I regard as 5. It is evident, that the extreme limits of that service to me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot sink. But why have I before me three possible classes of renderers? Because the persons in each class, while estimating their own efforts alike in the proposed rendering to me, have varying "desires" as towards a possible rendering from me to them, and consequently put differing "estimates" upon the possible transactions. The man who will bring the water for 5 has for some reason (no matter what) a stronger desire for the return than anybody else, and I should of course employ him so long as he would serve me on those terms; if he decline the exchange, I fall back on one of the two persons in the class above him, and Value rises now from 5 to 6, and will be steadier there than it was before; if each of these in turn should give out, I should fall back upon the larger class ready to serve me at 8, and Value would be very steady at that rate, because there are numerous competitors; and by no possibility could it rise above 10. Between 10 and 5 the value may fluctuate, but it cannot overpass these Limits in either direction under existing circumstances. Therefore we may conclude, that the _maximum_ Value of any Service in exchange will be struck at the point where the recipient will prefer to serve himself, or go without the satisfaction, rather than make the exchange; and the _minimum_ Value of any Service in exchange is struck at the point below which the recipient cannot get himself served even by him who most highly estimates the return service offered. (4) We come now to the last and most important Inquiry in this initial chapter, namely this, _Can there be, and is there, a strict Science of Buying and Selling? Is there a Science by itself, clear and certain, that covers and controls Valuables?_ Here we must go slowly, if we would go surely. We must first find out exactly what a Science is in general, and then ascertain in particular whether Political Economy bears all the marks and stands all the tests of the other genuine Sciences. What is a Science? _A Science is the body of exact definitions and sound principles educed from and applied to a single class of facts or phenomena._ The very first condition, accordingly, of any science is, that there be a single class of facts, objective or subjective, that can be separated from all other classes of facts, in the mind by a generalization and in words by a definition, and that such generalization and definition be clearly made and held; the second condition is, that the class of facts so circumscribed and defined be open to some or all of the logical processes of construction, of which the most important are Induction and Deduction; the third condition is, that the subordinate definitions and working principles within the inchoate Science be all educed from and applied to these circumscribed facts in strict accordance with these well-known logical processes; and the last condition is, that these definitions and principles have gradually become "_a body_," in which there is an organic arrangement of parts, all being placed in a just order and mutual interdependence. There is no old Science, and there can be no new Science, in which these four conditions do not meet and become blended; and the beauty of it is, that this Definition applies to any Science in all stages of its growth. No one of all the Sciences is as yet completed; but just so soon as any correct definitions and principles are drawn from and applied to any _class_ of things clearly circumscribed as such, and these definitions and principles are orderly arranged in a _body_, there is an incipient Science; and its progress towards perfection will proceed in precisely the same manner in which its foundations have been laid; new facts and principles and definitions will gradually be discovered, and these when reapplied to the class of things out of which they have sprung, will lead to corrections and adjustments and enlargements of the Science; and no matter how far these logical processes may be carried, the general Definition with which we start will also be found ample at the end of the journey. All of the Sciences without exception have been developed into their present position in just this manner; and they fall easily into three great classes, namely, the Exact, the Physical, and the Moral Sciences. The ground of this triple classification is partly the distinct subject-matter in the three classes of Sciences, and partly the distinctive prominence of one or more of the logical processes of construction in each. Thus, the class of the Exact Sciences consists only of the formal Logic, and pure Mathematics. These two are distinct from all other sciences, because their logical method of procedure is wholly Deductive. Deduction is the process of the mind, by which we pass from a _general_ truth to a _particular_ case under it, that is to say, from _more_ to _less_ inclusive propositions. Stuart Mill argues at much length in his book on Logic, that even the axioms of pure Mathematics are originally gained by Induction, while others claim that the truth of these axioms is perceived _intuitively_, but no matter how this point is decided, the construction process of the Pure Mathematics is from the General to the Particular. So it is also with the Aristotelian logic, whose Major Premise, whether only _supposed_ to be true or intuitively _perceived_ or inductively _proved_ is always General in its terms. This is the form of Aristotle's Syllogism:--All sinners deserve to be punished; John is a sinner; and therefore, John deserves punishment. Physical Sciences are those concerned with the classifications and laws of action belonging to material substances. There are a great circle of these, of which Astronomy, Botany, and Chemistry, may serve as examples. They have been mostly developed since the time, and in accordance with the methods, of Lord Bacon; who, in strong reaction against the Deductive logic of Aristotle, exalted Induction or the mode of generalizing from _particulars_, as the true way of building up Sciences; and, as the subject-matter of each of the physical sciences is well open to observation and experiment, to Induction and Deduction, and to corrective verifications, both inductive and deductive, the new method proved remarkably pregnant and successful. Each of these sciences has a distinct _Class_ of objects or phenomena to which its attention is directed; the class is circumscribed by the scientific Conception and Definition; its devotees as a rule are skilled in using the Baconian tools; and consequently, its conclusions receive the confidence and control the action of men. All of the Physical Sciences are constantly enlarging "the body of exact definitions and sound principles" connected with their several classes "of facts or phenomena." Moral Sciences are those concerned with the classifications and laws of action belonging to beings having Thoughts and Desires and Will. The most developed of these sciences at present are Metaphysics, Ethics, and Economics. Each of these is concerned with a single class of phenomena, which may be exactly conceived of and defined, and is open to the logical processes by which alone Sciences can be built up. But Induction cannot march up with quite so sure a stride, nor Deduction descend with so large degrees of certainty, in relation to _persons_ endowed with free-will, as in relation to physical substances held firm in the grip of unvaried law. Still, the doubt always attaches far more to the actions of an _individual_ than to the actions of the _masses_ of men. It is much easier to know human nature in general, than one man in particular, because many Inductions guided by observation and History make it almost certain how masses of men will act under a given set of conditions, while any one _may_ act in a contrary way. Deduction, accordingly, cannot hold quite the same place in the Moral Sciences so far as individuals are concerned, as it holds in the Physical and Exact Sciences; but this lack is perhaps more than made up by other advantages. _Experience_ in the moral sciences corresponds to _Experiments_ in the physical sciences. Then there is the great advantage of _Introspection_; since each man has within himself the means of interpreting and testing the inductions of Metaphysics, Ethics, and Economics. Then also there is the great resource of _Feigned Cases_, which, provided only they be cases possible to occur, open up to Reasoning a new means of proving and correcting. Besides these, which it enjoys in common with them, Economics, as we shall soon see, possesses one other great advantage over and above the rest of the Moral Sciences. Since, then, Political Economy deals primarily with Persons, and only quite secondarily with Things, it is, under the definition and on every ground, a "moral science"; yet it must not be confounded in the least with what is sometimes called the science of Morals, or Ethics. There is one word that marks and circumscribes the field of Ethics, and that word is _Ought_; there is one word also that marks and circumscribes the field of Economics, and that word is _Value_. Now, the idea of _obligation_, on which ethical science is founded, and the idea of _gainful exchange_, on which economical science is founded, are totally distinct ideas. The imperatives of ethical obligation rest upon the consciences of men, and Duty is to be done at all hazards; guilt is incurred if it be neglected; while pecuniary gains and losses, however large, do not, or at least ought not, weigh a feather against an intuition of Right and Wrong. Economics, on the other hand, does not aspire to place its feet upon this lofty ethical ground; no man is ever under any moral obligation to make a trade; he properly makes it or not, according to his present sense of its gainfulness to himself; and so economic science finds a solid and adequate footing upon the expedient and the useful. Ethics appeals only to an enlightened conscience, and certain conduct is approved because it is Right, and for no other reason; Economics appeals only to an enlightened self-interest, and exchanges are made because they are mutually Advantageous, and for no other reason; each of the two Sciences, therefore, has a basis and sphere of its own, and the grounds of the two are not only independent, but also incommensurable. We will now apply _seriatim_ to Political Economy the four fundamental conditions belonging to all recognized Sciences, and so determine for ourselves whether it be not a strict science, and thus worthy in its leading propositions of all acceptation. (a) Every science must have to begin with a definite Class of facts, which lie in an easily circumscribable field, and which are not likely to be confounded with other facts of a differing nature. Economy has such a class of facts, that lie in such a field, and that cut themselves off by sharp lines from all other things. _Valuables_ is its class of things. It has nothing to do with any other class of things. Its field is Value, or Sales, or Exchanges. This field is perfectly definite. Sales are never confounded with gifts, and are never confounded with thefts. They have a distinctive character of their own. They have always been in the world, will always be in the world in ever-multiplying volume, and no one ever mistakes their main features for anything else. Anything whatsoever that is salable, or is about to be made so, comes within the view of Economics, and scientifically it cares for nothing else. While it finds its field definite, it also finds it broad. It has no wish to encroach on other sciences, nor will it tolerate any encroachments on its own. Before anything is sold, or is being made ready to sell, it cares nothing what other science employs itself upon that thing; after the thing is sold, Economy loses its interest in it, and other sciences may take it up if they choose. Valuableness is the one quality that constitutes the Class of things with which the Science is conversant, and it claims complete jurisdiction over all things just so far forth as they have this one quality, and no farther. Now there _is_ in the actual world such a Class of things; its exterior boundaries have been exactly ascertained by a long series of Inductions and Deductions, tentative, corrective, and confirmatory; and accordingly, Political Economy has now in full possession the first grand condition of a Science. (b) This great class of facts, thus reached by logical Generalization and grasped and held by a mental Conception and fixed by an adequate verbal Definition, is remarkably open to all the logical processes of reasoning, by which alone sciences are constructed, and thus possesses in full measure the second grand condition of the Sciences. Not one logical resource is denied to the economists: all the tools of the scientific workshop are at their hands. Let us now catalogue these in their order. (1) _Induction._ This is the logical and universal process, by which the mind naturally passes up from a certain number of observed cases, in which a certain quality appears, to a Generalization, which is a conception of the mind followed by a statement in words to the effect, that _all possible cases_ of that kind will exhibit the quality already observed in _the few cases_. It has as its basis a confidence in the resemblances and uniformities of Nature; it proceeds upon the axiom that Nature throughout is consistent with herself; and this confidence has been ten thousand times justified in the issue, when it is found that Nature preordained the Sciences by causing grand analogies to run through each department of her works, including man and his works. The structure of the human mind corresponds with these objective resemblances; it seizes upon them, and delights in them, and naturally and joyfully infers and concludes that what has been observed of _a part_ may be safely affirmed of _the whole_ of that kind; accordingly, the world over, when certain things are found to be true in a considerable number of cases, the mind leaps over space and time to a whole class, and frames for itself a general rule or principle, which binds all the cases into one bundle, and thereafter confidently affirms what is known to be true of some to be probably true of all. This is inductive Generalization; and the strength and the joy of it is well expressed by Descartes: "_I have thought that I could take as a just generalization that which I very clearly and vividly conceived to be true._" Experience in Economics corresponds to Experiment in the Physical Sciences, and furnishes to Induction all the fuel it can ask for to feed its logical furnace and to forge the chains that bind the Cases to the Classes. Personal experience in buying and selling, local experience in buying and selling, and national experience in buying and selling, with all that belongs to these, the records of which are full to overflowing, afford to the inductive inquirer in Economics an inexhaustible supply of material. Instances abound. Particulars may be gathered up one by one on every hand and linked into the inductive chain. If any doubt be felt about the strength of any one of these chains, another one may at once be linked in terms drawn from another field of Experience with a view to test the strength of the first. Most fortunate from this point of view is the United States, because here there are States with substantive powers of control over most matters of trade within their borders, as well as a Nation with sovereign powers of control over some points of trade within the country as a whole. This feature has given birth to commercial experiments as well as commercial experience of all kinds; and Induction rejoices in all these abundant materials for generalization thus furnished free of cost to Science, though unfortunately not free of cost to the People. (2) _Deduction._ This is a logical process exactly the reverse of the first, in that it descends from a generalized statement reached by the inductive process to some particular, or subordinate class of particulars, ostensibly covered by the general maxim. Induction examines a number of particulars, and then makes a leap, it may be a long leap, over all intervening particulars, to its Generalization clamping them. The main use of Deduction is to make sure of any one of these overleaped particulars, which may come into importance, and thus confirm the generalization, or correct it. It is not strictly true, what is often alleged against deductive reasoning, that there is nothing _new_ in its result, that the Induction had already passed through that particular in rising to its Generalization, and therefore to descend to any particular link to examine that, is something useless. The exact truth is, that it _is_ useless to examine again deductively the very particulars that were carefully studied inductively, but on the other hand there is always much actually untraversed territory between these already examined particulars and the inductive generalization, and Deduction is often very useful in carrying us down to questionable points in this territory. Even Lord Bacon, who scorned the syllogism, admits this: "_Axioms duly and orderly formed from particulars easily discover the way to new particulars, and thus render sciences active._" We will illustrate this by a reference to Franklin's famous induction to prove the identity of lightning with electricity. Only one experiment, and that a very rude one, was needful in this case; although usually many experiments, or the careful observation of many particulars, are necessary in inductions; but the generalization having been gained, Deduction had a chance to try its hand; it had long been observed that electricity could be conducted from point to point, and if electricity and lightning be identical, then lightning can be so conducted; therefore, deduced Franklin, a pointed iron rod elevated above buildings will harmlessly conduct lightning from the clouds into the ground. Deduction gave mankind the lightning-rod, and so made one point of science "_active_," as Bacon phrased it; and it is noticeable, that Turgot's felicitous epigram turns on the deductive rather than the inductive side of Franklin's experiment: _Eripuit coelo fulmen sceptrumque tyrannis._ Let us catch up another illustration from the science of Botany, to show how Deduction may strengthen and sharpen an inductive result. The botanists say, that apple-tree blossoms are always five-petaled, because blossoms from a large number of apple-trees in various localities have been observed to have just five petals to the blossom; so far, they affirm inductively, and indeed securely; but they have also reached by means of another induction a much broader law of plant-life, namely, that outside-growers, when they have petaled flowers at all, always have them five-fold; now apple-trees are outside-growers; and therefore, deductively also, and conclusively beyond shadow of question, apple-tree blossoms are five-petaled. Political Economy is just as open to Deduction as it is to Induction, and the two continually are reaching each other the hands of economical reasoning, not always indeed pursuing each a separate and distinct path to the end, as in the botanical instance just adduced; because in practice the two processes mingle constantly, and neither is carried out in full and due form, since premises used by the mind are often dropped in the statement, and shortened forms of expression take the place of long-drawn-out formulas. But all good reasoning in Economics, as in all other sciences, is analyzable into one or other of these two processes, both based alike on the uniformities of Nature and the structure of the human mind. Deduction has not quite the same scope and certainty in Economics as in the Physical Sciences, because any one _may_ act contrary to the vastly probable action of many individuals; still, it is a safe and potent process in economics, since it may descend securely from the larger masses to the smaller, even though perchance the individual escape, because of the simplicity and universality and certainty of the impulses that lead men to exchange. John Bascom gives the reason well, why both Induction and Deduction have so firm a grasp upon this science: "_Between one dollar and two dollars a man has no choice, he must take the greater; between one day and two days of labor he must take the less; between the present and the future he must take the present. This is not a sphere of caprice, nor scarcely even of liberty; the actions themselves present no alternative, and, if an alternative giving an opportunity for choice does arise, it arises from some partial or individual impulse, from some one of those transitory and foreign influences, which, while rippling the surface, neither belong to nor affect the current of the stream._" (3) _Introspection._ Everybody buys and sells, and almost everybody watches the action of his own mind enough to see what are his _motives_ in buying and selling, and soon comes to know also that the other party has corresponding motives. Even the child knows perfectly, that it takes two to make a bargain, that each party renders something to the other, that each is glad to part with something for the sake of receiving something from the other, and that this higher esteem put by each on what is taken from the other makes for each the gain of the trade. A very little introspection tells anybody, that were this higher esteem wanting in the minds of either of the two, the trade would not take place at all. Everybody within the pale of _compos mentis_ knows, that, were his own desire for the rendering of another to increase, he himself would offer more of his own rendering rather than forego the trade; and he rightly infers, that what is true of himself is true of all other men; and so, every seller rightly tries to display his wares in such a way as to increase the desire of buyers for them; knowing full well from his own experience in buying that, other things being equal, they will be willing to render him more for them in consequence. The phrase above, "rightly infers," is based upon the truth, that all men are remarkably alike in certain great departments of action; and that, in no department are they so nearly alike as in this of buying and selling. Introspection, therefore, an easy self-knowledge open to all persons alike, and a personal experience in these matters that everybody gains, give most trustworthy answers to Inductive inquiry along these lines. Trade is natural and gainful, as any person can see, who stops to ask himself why he has made, or is about to make, a given trade; and if natural and gainful to _him_, equally so for precisely the same reasons to the party of the other part; hence no law or encouragement is needed to induce any persons to enter upon traffic; and any law, or artificial obstacle, that hinders any two persons from trading, who would otherwise trade, not only interferes with an inalienable right that belongs to both, but also destroys an inevitable gain that would otherwise accrue to both. Political economy is very fortunate, accordingly, in being able to make its appeal to the common sense of all men, giving sound starting-points through self-knowledge possessed by all men, guiding to safe steps by means of Induction all who like to generalize and prove, and especially breaking up current fallacies by asking the potent question, "How would you like it yourself?" (4) _Feigned Cases._ There are two kinds of these, namely, those which might be realized in actual fact, and those which never can be so realized. The acute mind of the Greeks marked in their flexible language a decided difference between the class of suppositions that might possibly become facts, and another class of suppositions impossible to become facts, by developing a distinct form of expression for each. This distinction must always be borne in mind by those who use or note in economical discussions the expedient of Feigned Cases. Reasoning is always legitimate and often pregnant from suppositions, whenever these are such as might readily become facts of experience, because in that case the argument proceeds upon recognized and inductive resemblances; but otherwise, no inference at all can be drawn from them, because it is an universal truth in Nature and in Logic, _ex nihilo nihil fit_, out of nothing nothing can come. In plausible suppositions impossible to become facts is a nest of logical fallacies, that need to be watched. A good illustration may be found in the Monetary Conference at Paris in 1881. Delegates were there from all the nations of Europe, from the United States, and even the distant India. Some of these in their eagerness for a factitious ratio of value between gold and silver forgot the important distinction now in hand, and argued of the good results to flow from the realization of a supposition, _which in fact never could be realized_. Mr. Evarts voiced the French and American delegates in this declaration: "_Any ratio now or of late in use by any commercial nation, if adopted by an important group of states, could be maintained; but the adoption of a ratio of 15-1/2 silver to 1 of gold would accomplish the principal object with less disturbance in the monetary systems to be affected by it than any other ratio._" The fallacy in this passage is in the words, "could be maintained," which are a supposition, and what is much worse, a supposition contrary to fact, from which all arguing is nugatory. Why it is contrary to fact will be seen at length in the following chapter on Money. On the other hand, a supposition that may clearly become a fact is a substantive thing, and logical inferences may be drawn from it, just as geometrical inferences may be drawn from a _supposed_ circle: the circle on the page is not a _perfect_ circle--no such circle was ever drawn--but _suppose_ it perfect, as it might possibly be, and argument becomes at once valid. Let us take another Monetary Conference at Paris in 1867 as an illustration: its judgment as voiced by Mr. Ruggles of New York was taken with logical propriety, when the great benefits of an international coinage of gold alone were argued and announced, because, while that was then a mere conjectural project, it was possible any day by mutual agreement among the nations to become a reality. An international coinage of gold is a simple question of equivalence of _weights_ in the coins of different countries: an equivalence of _values_ as between gold and silver coins for any great length of time is neither simple nor possible. (5) _Results measurable in numbers._ The four preceding logical processes of proof and construction Political Economy is glad to share with the other Moral Sciences, but this fifth and last one it has to itself alone, and this is its chief scientific advantage over them, and is consequently the main reason why it is already more advanced and more symmetrically developed than any of them. In common with them it has important subjective elements, such as Desires, Estimates, and Satisfactions; in marked advantage over them it has also objective elements, that can be weighed and measured and even hardened into statistics. Economics has an ever ready objective test, which mere mental and ethical and other moral processes never can have from their very nature. The _result_ of each and of all economic transactions may be measured by money, and put down in a ledger, and published to the world in the form of statistics. An economic blunder, whether in legislation or in private action, pretty soon proves itself to be such by the lessened gains of somebody, and these losses can be stated arithmetically; and similarly, an economic improvement evidences itself at once by increased gains coming to somebody; while it may take years and years to work out the results of an ethical mistake, and even then their amount can only be guessed at. Theories in metaphysics can only be tested by the _Reason_ of men, and reasonable men without apparent bias of motive take opposite views of Sensations and Intuitions and Volitions; while theories in economics, which can be even better tested by the _Reason_, have an additional and almost immediate and constantly recurring test through men's pockets and the tables of the Census. The people indeed sometimes deceive themselves, and are also too often deceived by others, in these matters of buying and selling; but it is none the less of the utmost consequence to this Science, that all the results of good and bad practice in Economics work themselves at last into a definite shape, into facts and figures that cannot lie. It is not, as in Ethics and Metaphysics, that tendencies and potencies only are ascertained, but everything speedily drifts into results measurable in numbers, which stand out like landmarks against the sky. It is just for this reason, as both the schools of the Roman lawyers admitted, namely, that we have in all cases the Return-Service as the outward expression and measure of the Desire and Effort of him who renders the service, and because it makes no difference which of two services exchanged be regarded as the return-service, that our Science is reared on the firm ground of objective realities, notwithstanding the strong subjective elements that have a constant part in it. (c) The third condition of a recognized Science is, that the logical processes appropriate to its class of facts have been already carefully applied to them and a certain number of "exact definitions and sound principles" have been already "educed from and applied to" them. We do not hesitate a moment to claim, that this condition also is fairly and fully met by Political Economy, and that this is a "Science" under the definition from every point of view, and particularly from this third point of view; and a few examples will now be given as a specimen merely of the logical work already achieved in Economics. First, Induction more or less busy for two thousand years has given at last an exact and acceptable definition of the Science, and impliedly an exact description of the class of facts with which it is conversant, namely, the Science of Sales, or what is exactly equivalent, the Science of Value; and Deduction at all points along this slow road has helped to correct and to broaden successive imperfect inductions, which an inquisitive and tentative and cautious spirit--the mainspring of Constructive Science--has instituted from time to time. Second, precisely the same processes often repeated have ascertained beyond question, that there are only three classes of Valuables and the exact differences between them, and that, consequently, only six cases of Value are possible to happen. Third, so many nations at different times in all ages have lowered the standard of their Money under a misapprehension of its nature and in a vain hope of profit, and a general scale of rising prices following each attempt of this kind having been several times observed and no instance to the contrary, Economists came by Induction to assert the proposition, that falling Moneys cause rising Prices; the proposition stood secure on inductive grounds alone; but so soon as a perfect definition of Money, namely, a Measure of Services, had at last been reached both inductively and deductively, it became at once a safe Deduction from the definition, that rising Prices must succeed a falling Measure. Thus assurance became doubly sure. Fourth, Introspection gives each buyer and seller such firm possession of _his own motive_ in buying and selling, that he naturally and inductively concludes on the ground that men are substantially alike, that the _motive is similar_ in the party of the other part; each further step of experience in traffic assures him of this beyond a doubt,--each wants to get and does get something from the other of more consequence to him than what he gives; every attempted deviation from rectitude in trade so far forth throws the trader out from opportunity to trade; opportunity to trade is nothing in the world but _a market_; a market is nothing in the world but men with products in their hands, desiring to buy other products with these; the more men anywhere with the more products in their hands of all sorts to buy with, the better market everywhere for other men (the more the better) with other products of all kinds to buy with; all the appropriate logical processes in action and reaction, all the commercial experience of all men everywhere, and all the true statistics of traffic ever gathered, do but assure the inductive assent to one of the best and broadest of all the Generalizations in Economics, namely this: _A market for products is products in market._ (d) Are the definitions and principles already logically educed from and applied to the great class of Valuables orderly arranged in "_a body_"? This is the only inquiry that remains, in order to determine whether Political Economy is already a "Science" in the strictest sense of that term. It is admitted, that a jumble of even just definitions and principles do not constitute a science, but only these when placed in a just order and interdependence. A "body" implies an organic arrangement of parts. It has been well said of the human body, that all its parts are reciprocally means and ends; the same may be said of every living organic body, whether vegetable or animal; and the same may be said in the way of analogy of every developed and recognized Science. All the definitions and propositions and illustrations in any science should be so arranged, as to show the mutual relations and reciprocal dependence of all the parts, and as to display the whole in harmony and symmetry. It is as certain as anything in the future can be in science, that new principles will be discovered in Economics as Time and Inquiry go on, and that these will find their place little by little in a fuller and more rounded "body" than is at present possible; while it is also as certain as anything in the future of science can be, that the Outline of economics is already perfectly drawn, that the great class of Valuables will never be enlarged nor be better described, that the category of Commodities, Services, Credits, is completed for all time, and that the analysis of each act of trade into two Desires and two Efforts and two Estimates and two Renderings and two Satisfactions will never yield additional elements. Political Economy is already a body of exact definitions and sound principles educed from and applied to a single class of facts. This body will indeed be enlarged by a future and finer scientific construction, the arrangement and interdependence of its parts will be better exhibited, the form and filling up of the Science within the outline already determined is sure to become more compact, more robust, and more beautiful, as the decades and centuries go by; while, as in the human body throughout all the changes of its growth and mature life, that future body of economic science in all its stages towards perfection will be but the continuation and fuller development of the present "body" of Political Economy. FOOTNOTES: [1] Green's Short History of the English People, p. 591. [2] See on this general topic, Mommsen's Provinces of the Roman Empire, _passim._ CHAPTER II. MATERIAL COMMODITIES. Valuables fall naturally and exactly into three classes, Commodities, Services, and Credits. The reasons are obvious at first glance, why articles falling in the first class occupied the thoughts and the efforts of men almost exclusively for the first thousand years of recorded history. Commodities appealed to the senses of men: they are visible, tangible, weighable. Some form of personal slavery existed everywhere, and largely withdrew attention from personal services bought and sold; and there was not apparently sufficient personal confidence between man and man in the earlier ages to allow much development of credits, whose ground is personal trust and whose sphere is future time. Commodities, on the other hand, fitted by the efforts of some men to satisfy the immediate wants of other men, all ready for delivery, to be exchanged against other commodities similarly fitted and at hand, took the field apparently in the earliest ages of recorded Time, gradually became very large in volume, opened new routes of travel and transportation, and served to connect in a rough and ready way neighboring tribes and even neighboring nations. _Commodities are the class of Valuables comprising material things, organic and inorganic, fitted by human efforts to satisfy human desires._ Cattle were probably among the first things to become valuable, that is, salable; and it is certain, that they became very early in many quarters of the world a sort of Money or standard of comparison among other things exchangeable, and indeed they continue to be such in some quarters to this day. Near the middle of the sixth book of the Iliad occur these lines:-- "Then did the son of Saturn take away The judging mind of Glaucus, when he gave His arms of gold away for arms of brass Worn by Tydides Diomed,--_the worth Of fivescore oxen for the worth of nine_." Gold and silver also became valuable in the ordinary way in very early times, and later became Money or a medium in exchanging other things; and much later other metals came into use as commodities and then too as money; for the Latin word for money, _pecunia_, derived from _pecus_, cattle, seems to imply some original equivalence in value between the bronze stamped with the image of cattle and the cattle themselves. Parcels of land subdued and improved by human hands were probably bought and sold in some portions of the world as early as anything was,--at any rate very early. Land-parcels are a commodity under the definition. Another passage from Homer, towards the end of the seventh book of the Iliad, displays some of the commodities in common use during the heroic age in Greece:-- "But the long-haired Greeks Bought for themselves their wines; some gave their brass, And others shining steel; some bought with hides, And some with steers, and some with slaves, and thus Prepared an ample banquet." The earliest detailed record of a commercial transaction in commodities, is the purchase by Abraham of the field and cave in Hebron, more than 2000 years before Christ. It is narrated at length in Genesis xxiii. Long before this purchase, however, it is said of Abraham that he "went up out of Egypt very rich in cattle, in silver, and in gold." This formal sale to him in Hebron of the field and cave of Machpelah is in all its parts instructive to us, and full of signs of the drift of those times. It was "_in the audience of the sons of Heth, before all that went in at the gate of his city, that the field and the cave were made sure unto him for a possession. And Abraham weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant._" In the lack of written and recorded deeds to land-parcels, as we have them now, the sale of them was "_made sure_" before the faces of living men, who would tell the truth and pass on the word. The market-place in those days was "_at the gate of the city_," where the judges also used to hold their courts, the place most frequented of all, and sales were made "_before all that went in_" thither; "_in the audience of the sons of Heth_" was the silver weighed out, and the field made sure in exchange. Then there were "merchants" as a class; silver passed by weight rather than by tale, although it had already passed beyond a mere commodity and had become money, "_current money with the merchant_"; and even at this day the Bank of England takes in and pays out gold and silver by balance rather than by count, though they be in coined money: it is the more accurate method. The author of the book of Job, believed to be of great antiquity, and certainly true to nature and to fact in its essential parts, knew very well the modes in which the ancient mines were wrought, and the worth of the commodities extracted:-- "Truly there is a vein for silver, And a place for gold, which men refine. Iron is obtained from earth, And stone is melted into copper. Man putteth an end to darkness; He searcheth to the lowest depths For the stone of darkness and the shadow of death. From the place where they dwell they open a shaft; Forgotten by the feet, They hang down, they swing away from men. The earth, out of which cometh bread, Is torn up underneath, as it were by fire. Her stones are the place of sapphires, And she hath clods of gold for man. The path thereto no bird knoweth, And the vulture's eye hath not seen it; The fierce wild beast hath not trodden it; The lion hath not passed over it. Man layeth his hand upon the rock; He upturneth mountains from their roots; He cleaveth out streams in the rocks, And his eye seeth every precious thing; He bindeth up the streams, that they trickle not, And bringeth hidden things to light." The prophet Ezekiel, who wrote in the sixth century before Christ, incidentally described in his chapter xxvii the commerce in commodities, that then centered in the city of Tyre on the eastern Mediterranean. "_All the ships of the sea with their mariners were in thee to traffic in thy merchandise: many islands were at hand to thee for trade: with silver, iron, tin, and lead, they traded in thy fairs: they brought thee for payment horns of ivory and ebony-wood._" Among the commodities besides these exchanged in that market, are mentioned by the prophet horses and mules and lambs and rams and goats, wine of Helbon and white wool, fine linen and embroidered work, and riding cloths and mantles of blue and chests of damask and thread, wheat and pastry and syrup and oil and balm, precious spices and cassia and sweet reed, and gold and carbuncles and corals and rubies. These old Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in commodities to the West, going overland into the heart of Africa for dates and salt and gold-dust and slaves, and by sea through the Pillars of Hercules northward to the British Isles for the sake of the trade in tin. The amount of transactions in commodities, the first class of Valuables, has been constantly increasing, under natural impulses which we shall have shortly to describe, from the dawn of authentic History down to the present moment; and figures are baffled in expressing to our minds the sum of these transactions even in a single country, still more their aggregate in the commercial world. The foreign trade of every country is almost exclusively in commodities, and is only a small fraction of its domestic trade in the same; and so, when we remember that the foreign trade of the United States, for example, under a commercial system designed and adapted to curtail such trade, amounted in 1889 to about $1,600,000,000, and the foreign trade by Great Britain the same year to about 4,000,000,000, we gain a glimpse, we touch as it were the hem of the garment, of the gigantic traffic of the world in commodities alone. _The Production of Commodities is the getting them ready to sell and the selling them._ 1. We must look first at the REQUISITES of such production. They are three, _Natural Agents_, _Human Efforts_, _Reserved Capital_. The following lines of Whittier touch incidentally on these three requisites, and may serve us as a general introduction to them:-- "Speed on the ship!--But let her bear No merchandise of sin, No groaning cargo of despair Her roomy hold within. "No Lethean drug for Eastern lands, No poison-draught for ours: But honest fruits of toiling hands, And Nature's sun and showers!" Natural Agents include not only "Nature's sun and showers," but also all the forces and fertilities and materials of free Nature, that men may and do avail themselves of in preparing commodities to exchange with the commodities of other men. Of higher rank in Production than these natural agencies are the Efforts of men in molding them so as to answer other men's Desires, of which efforts the "toiling hands" of the poet are a symbol. They include also the inventive brains and eloquent tongues and the skilful manipulations of every name. The poet's "ship" is an instance of capital, which is always a result of previous toil reserved to help on some future sales. These three elements, Nature, Labor, Capital, conspire in all production of commodities. Nature comes first with her free forces and materials; and then present toil aided by the results of past toil in the form of capital does all the rest in getting commodities ready to sell and selling them. Let us now note each of these three a little more closely. (a) Natural Agents. The most important point about these is, that they are the free gifts of God, and continue so throughout the complications and transformations wrought on them and through them by Labor and Capital, until the material commodity of whatever kind is finally sold, and so passes out of the purview of our Science. Many of the gifts of God, like the air we breathe and the light in which we recreate ourselves and the water of refreshment drunk from spring or brook, do not connect themselves in any way with commodities bought and sold, and nobody ever thinks of them as salable at all; but it has seemed and still seems to many, as if the natural fertility in a land-parcel, the water-fall along the course of river or stream, the timber-growth which the hand of man planted not, the deposit of gold or coal in the bowels of the earth, and other such-like cases in which natural gifts _do_ connect themselves with human services and then are sold, lifted the Value of the things sold above the point to which the mere human efforts, whether past or present, would raise it. In point of fact, this seeming is not a reality, as will fully appear in the sequel. God is a Giver, and never a Seller; and he has arranged it so in his great world of gifts, that, however much shrewd men may try to monopolize these gifts and then dole them out to other men for pay, they are always practically thwarted in the attempt. God himself never takes pay for anything, and has never authorized anybody to take pay in his behalf; and when this role of Seller of free gifts, which have cost him nothing and which he has not improved, is taken up by any one, he is shortly crowded off the stage in shame by other actors true to Nature. This is the place for a grand induction. When we study in detail the free gifts of God to this world and its inhabitants, we find they come and keep coming _in great classes_. This is one of the uniformities of Nature, on whose solid ground men tread and stride in safe inductive reasoning. Can a farmer get pay in the price of his grain for the original fertility of his field, which neither he nor his fathers nor his neighbors have bettered or made more available? Doubtless he would be _glad_ to do so, doubtless he _would_ do so, were it not for the primary fact, that such fertilities as his are in a _class_ of fields, that other men in more or less proximity to him raise grain on other fields, whose original fertility is equal to that in his field; and some of these other men in common competition with the rest as sellers will be willing to part with _their_ grain for a price which will be a fair equivalent for the onerous human services rendered in getting their grain ready to sell and selling it; and the free action of _these_ men as sellers will tend to fix a general market-rate for grain then and there, at which rate _all_ must sell whether they will or nill; and where now is the effect on price of God's free gift? It is still free. Here is a fine water-fall on the bounding river, the banks are low at this point, just the place for mill and factory, the weight of God's free water will turn the wheels, a hamlet will grow up around them--perhaps a city,--can the riparian owner charge a fancy price for site of dam and mill? He might under some circumstances; but the same river doubtless, above, below, rolling over similar geological strata, leaps and falls at other points also; there are other owners of mill-privileges within hail; besides, there are other streams and tributaries in the region round about; and water has a knack of dropping to the lower levels. God's gifts are broad in classes; competition naturally has free play; natural agents are an essential factor in commodities; so and more so are human efforts; but Values tend perpetually and powerfully under natural competition between men as sellers to proportion themselves to the onerous human efforts involved, and to eliminate completely from all influence on themselves the broad and bountiful gifts of Providence. What has been observed to be true in respect to two or three or more of the classes of God's free gifts _to_ men, or _in_ men, may almost certainly be inferred to be true of all such classes. Therefore, inductively, _such free gifts have no effect on Values to lift them, their influence being eliminated by human competition_. Of course, if there be unique cases of remarkable gifts, falling in no class, subject consequently to no competition, one cannot say confidently that the free element in conjunction with the onerous element may not make the return-service greater than it would be otherwise. It may, or it may not, make it greater. There is no living principle at work in such cases, that makes it certain, that the return-service will _not_ be greater. Still, unique cases, if they exist, are of little or no consequence in Economics. They are most remarkably few, at all events. Where come in the solitary gifts, that may later be connected with Valuables, on the round earth as God fashioned it? Gold, silver, diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and all such things, have been scattered too widely and liberally for individuals to monopolize them, or even combinations of men unless they be assisted by law. Where even are the unique cases of God-given talent or genius in men themselves, such as may become connected with Valuables of the second class? Daniel Webster had his competitors in the Court-room and in the Senate, Ben Jonson did not let Shakspeare have it all his own way on the stage, and even "Milton's starry splendor" did not make Paradise Lost sell well. We must just note here in passing the supreme importance in an economical point of view of untrammelled competition in the sale of commodities. It is the divinely-appointed means, and the only possible means, of preventing wide-spread injustice through Monopoly. Nothing else in the world can be made effective to estop men from robbing their fellow-men through exchanges artificially restricted; from charging more in the market for their wares than a just compensation for their own efforts; from enriching themselves by impoverishing their neighbors; from worsening the quality of their wares offered for sale; and from relying upon the artificial restrictions put on their competitors, rather than on their own skill and enterprise and the goodness of their goods, for a market. The Common Law of England holds monopolies to be illegal, and the reasons given (11 Coke, 84) are, first, because the price of the commodity will be raised; second, because the quality of the commodity will not be so good and merchantable as it was before; and third, because they are apt to throw many working people out of employment. It is nothing less than a crime against Civilization, than a sin against the clear ordinance of God, than an artificial obstruction to individual and national Progress, to put up bars and barriers by law for the purpose of cutting off competition, whether domestic or foreign, either by putting disabilities in the path of any or through monopoly tariff-taxes, in the buying and selling of useful commodities anywhere. (b) Human Efforts. Every way unlike the free forces and materials of Nature, indispensable as these are in the production of commodities, is the second requisite in such productions, namely, the onerous efforts of men. Persons are very different from things, from powers, from lifeless materials. Persons act from motives only. Minds lie back of bodily exertions, impelling and guiding them. Such efforts as are needful to mold materials into commodities are only put forth in view of, and for the sake of, a remunerative return; and only rational beings, acting under motives whose goal is in the future, capable of foresight and of adapting means to ends, can put forth such efforts. No degree of training can make even the most intelligent animals capable in any degree of that kind of exertion, which we call _Labor_; and there is no improvement whatever in the methods of animals in reaching their instinctive ends,--the beaver builds his dam and the bee gathers and deposits the honey exactly as bees and beavers did ages ago. In the strictest sense, accordingly, there is no such thing as physical labor, because the mental must coöperate with the physical even in the lowest forms of human exertion; and in the same sense there can be no such thing as exclusively mental labor, for the bodily powers conspire more or less in the highest intellectual efforts that are ever sold. Nevertheless, both the phrases, physical labor and mental labor, are convenient and not harmful, whenever on the one side the bodily powers seem to be predominant in the effort, and on the other the intellectual. It is now to be noticed, that all that men can do, when they labor physically, is _to move something_. When a man works with his hands or his feet or his whole body, all that he does or can do, is to begin a series of motions or resistances to motion, for this good reason, human muscles in their very structure are capable only of starting motion and stopping motion. All the marvellous results of physical effort in all the world have flowed from so simple a matter as the contraction and expansion of muscle; and the world of materials is so cunningly constructed, that, when these are moved into right position by human hands, or by some form of capital itself the result of previous human handling, the free powers of Nature do all the rest, and valuable commodities are the good outcome. For one example, when the woodman fells a tree for sale, he brings a series of motions (_labor_) to bear upon the trunk, by means of his sharp axe (_capital_), and then the power of gravitation (_nature_) seizes the tree and brings it crashing to the earth. For a second illustration, wool and cotton have by nature a certain tenacity of fibre, and what is more to the point, a certain _kinkiness_ of fibre easily interlinking one with another indefinitely in length; men move these separate fibres in certain relations to each other by an instrument (_capital_) called a spindle, and the result is thread; then other men move these threads into relations with each other by means of an implement (_capital_) called a shuttle, and the outcome is a web of cloth; lastly, the tailor moves his shears through the cloth, and then his needles, and the issue is a coat, a commodity, the valuable for which all these processes were gone through with, and by the sale of which all the onerous factors therein are compensated. Now, since human muscles are soon wearied in action, and since motion is the only thing required of men in the production of commodities, they naturally look around for outside help in this matter; and the first help they lighted on for moving things was the domestic animals, the ox and ass and horse, doubtless domesticated in the very beginnings of society; and as these can be used in so many different places, and for such a variety of purposes, and are so cheaply reared, they are exceedingly useful as a motive power, and will probably never be superseded as such. Inanimate auxiliaries in moving things into right position for the production of commodities, such as the water-wheel and wind-mill, were undoubtedly brought into use much later; and much later still, steam and electricity and other more subtle and recondite natural agents. All of these helps, whether animate or inanimate, do but cause simple motions of the same kind as those caused by the human hand. The most ponderous engine merely reduplicates that which the arm of a child is capable of; while in point of delicacy and firmness of touch, perhaps no machinery can subdivide and apply this motion so skilfully as the human fingers can. It is said that some of the lace made wholly by hand is finer and more delicate than any yet woven by machinery, although the introduction of machinery into lace-making has cheapened lace products in general to a small fraction of their former cost. What we commonly call "_Power_," then, by whatever instrumentality furnished, is simple auxiliary motion, additional to that of physical human Labor. Commodities are produced in unlimited quantity and variety by such labor, assisted by the free forces of nature applied by means of animals and implements, which are capital. But such labor is irksome as well as wearisome, and is never expended except in view of a reward, which is secured only from the sale of the finished commodity. (c) Reserved Capital. We must examine the nature of Capital with care, and follow its varied forms without confusion, because it is the only other factor besides labor in the production of commodities, that has to be paid for out of their sale. Simplest cases are always the best in economical discussions. Let us take for illustration a recently observed case from the gold hills of North Carolina. All the methods are strongly primitive, but all the elements of production are present. A negro woman is the laborer, the bits of gold scattered in the soil are the free gift of nature, a bored log to divert the water from the mountain stream, and a tin pan in which to gather and wash the sand and gravel, are two crude forms of capital; free gravitation also brings the water through the log, and free gravity carries down the particles of gold to the bottom of the washing-pan, and many other agencies of free nature coöperate in this very simple case of production; and besides the log and the pan, there are doubtless some other forms of capital, at least the whittled plug to stop at need the flow of water through the log. The chief factor in these processes of production is still the laborer, the motions of her hands in stirring the sand and picking out the precious bits at the bottom of the pan are the chief motions, the labor is both physical and mental,--no animal could be trained to adopt means to ends like this negro woman. It is her capital that now engages our attention. _Any Valuable outside of man himself reserved to assist in the production of further valuables is Capital._ The idea of growth and increase inheres in the very word, which is derived from the Latin noun, _caput_, a head, a source, and gives intimation in its etymology of its scientific meaning. The word, _caput_, is often used in classical Latin for a sum of money put out at interest, and its derivative, _capitale_, is also used in the same sense, at least in mediæval Latin; and from this form of the word have come into English not only _Capital_, but also by corruption _Cattle_ and _Chattels_. Flocks and herds were at one time the principal riches of our Saxon ancestors, and also the principal means of _increasing_ their riches, and in process of time the same root-word came to be spelled differently as applied to animate or inanimate things of value; while the notion implied in the Latin _caput_, and in the English _source_, came along in all three of these words; and hence the careful definition of Capital above given. It makes no difference whether the colored woman bored her own log by means of an item of capital already existing, namely, an auger, or hired another person to bore it for her, or bought the log already perforated, it is an article of Capital, a valuable kept to increase future valuables; she might doubtless sell it for something to a new-comer wishing to operate other sand in the neighborhood, but she keeps it to help herself gather more gold for ultimate sale, she practises what we call in Economics _abstinence_ and must have her reward for this in the form of _profits_ from the ultimate sale of her commodity, gold, as well as a reward for her labor in the form of _wages_ from the same source. As one person furnishes both the labor and capital in this case, there is no actual division of the gross return into wages and profits, as there always must be when separate parties furnish the two essential factors, both of which must be remunerated by the sale of the commodity. What is thus true of the log, is equally true of the tin-pan, and even of the plug also, if it be capable of repeated use and cost something of labor and the help of a previous item of capital, namely, the jack-knife. Our negro woman of the South is a small capitalist as well as a rude laborer, and practises _abstinence_ as well as puts forth _exertion_, and consequently is entitled to receive _profits_ as well as _wages_ in the return she gets for her gold-dust when she sells it. We are now beginning to see what the nature of Capital is, and what the motives are for employing it. In the production of commodities Capital is always something that makes easier to the producers the getting ready to sell and the selling of future commodities. The capital always spares more or less of onerous and irksome human exertion. It always mediates between some free force of Nature and some otherwise more onerous effort of men. The sole motive to employ capital in any one or in all of its multitudinous forms from the simplest to the most complex is to throw off upon the ever-willing shoulders of Nature some part of the irksome effort that would otherwise come to the easily-wearied muscles of men. Nature is "good," to use a commercial term, for all she can be made to carry of men's work, through implements devised and machinery contrived to apply, to commodities in every stage of their transformation and transportation till the last, the ever-present potencies of this physical world. These potencies cost nothing. The implements and machinery cost much in present labor and previously created capital. The ultimate sale of commodities must make return for all the forms of capital employed in their production, in the shape of Profits, the reward of _abstinence_; and for all the forms of direct labor employed in their production, in the shape of Wages, the reward of personal _effort_. The beaver gnaws down the tree with his teeth from generation to generation in precisely the same manner; but man is a being more nobly endowed than the beaver, and no sooner had he occasion to fell trees, than something of the nature of an axe suggested itself to his ingenuity. It is true, that his earliest attempts at axe-making were probably of the rudest sort, but just as soon as anything was devised, whether of flint or shell or metal, that rendered easier the felling of a tree, Capital made a beginning along that line of obstacles. Our chief interest in studying the implements of the successive so-called Ages of Stone and Bronze and Iron, is to witness the increasing degrees of ingenuity displayed by those pre-historic men. Among the more gifted races, progress in this direction was perhaps more rapid than we are wont to think it was, since Tubal-Cain, the first artificer of record, is said to have "_hammered all kinds of implements out of copper and iron_" (Gen. iv, 22). Lucretius, writing in the century before the Christian era, put down the following lines in vigorous Latin, as translated by Mason Good:-- "Man's earliest arms were fingers, teeth, and nails, And stones, and fragments from the branching woods; Then copper next; and last, as later traced, The tyrant iron." We are at no loss, then, to explain the origin of Capital and its motives. Tools are invented and employed for no other reason than this, that, by means of their help, the human efforts are lessened relatively to the given satisfactions. Since it requires tools to make tools, the progress of this branch of capital must have been relatively slow at first; but, since every advance in mechanical contrivance makes still further advances easier, there is a natural tendency, which facts abundantly exemplify, to a more and more rapid progression in the number and perfection of all implements of production. The same motive that impelled to the first invention, has impelled to the whole series of inventions since, and will constantly impel to further inventions till the end of time. Every step of this progress gives birth to a larger and still larger proportion of satisfactions relatively to efforts; marks an increasing control on the part of man over the powers of Nature; and gives promise for the time to come of greater advantages still in both of these directions. The powers of Nature, such as those which make the grain grow, bring the tree down, turn the water-wheel, impel the locomotive, and send the message round the world, all stand ready to slave in the service of man; but in order to make their aid available for human purposes, there must be a plough, an axe, a wheel, an engine, an electric machine; and it is because capital brings gratuitous natural forces into service, and the more so as capital progresses, that the Value of those commodities produced by the aid of capital tends constantly to decline as compared with those commodities, in the production of which capital conspires less. It is already plain, that the class, Capital, is a smaller and a peculiar sub-class under the great class, Valuables; nothing can become Capital until it first become a Valuable, and then be _capitalized_ by a distinct act or intention on the part of the owner to reserve it in his own hands as an aid in further production, or transfer it to other hands to be so used, he meanwhile receiving profits as the reward of his abstinence; only a _transferable_ valuable, accordingly, can become Capital in any case, that is to say, it must be either a Commodity or a Credit, since personal services, though they may be sold, cannot be put over into the hands of another to be used in production, and therefore cannot become Capital in any case; and the chief peculiarity of this sub-class, Capital, is, unlike the three great classes of Valuables, each of which is utterly distinct from the other two, so that a Commodity can never become a Credit or a personal Service either of the others, that Capital as a class has extremely flexible limits, and consequently certain Commodities and Credits may easily enough be Capital to-day, and fall back to-morrow into their respective classes of mere Valuables and the next day come out from the class Non-Capital into the class Capital again. The same commodities and credits may be capital at one time, and non-capital at another, though they must be valuable all the time, or cease to be commodities and credits. When it is said that a young man's talents and skill are his "capital," the word of course is used in a metaphorical sense, and the meaning is, that skill and talents are _like_ capital in some respects. Popular language is not scientific. Cicero wrote long ago: "Optimum et in privatis familiis et in republica vectigal est parsimonia." _Abstinence is the best means of revenue as well in private families as in the State._ The source of Capital in a distinct act of will saving or sparing from present use (_parsimonia_) a valuable commodity or credit, and the quick nature of Capital as adding to itself (_vectigal_) in profits, are both brought out in this Latin maxim, which is rather an expression of an old and ingrained Roman sentiment than anything original with Cicero. It is the very nature as well as the very name of "Capital" to increase itself by rapid increments. It is as well the Stream as the Source. For example, any sum of money soon doubles itself when put out at compound interest, because the original sum increases day and night until it be repaid. It is of the essence of every form of Capital _to make growth_, because its sole purpose as such is to become an aid to future and further production. A trowel in the hands of a mason, which is capital, pays for itself every day he works with it, and perhaps every hour of the day, in the increased production wrought by means of it. The wheel, which free water turns, though a costly implement, repays that cost a hundred fold in the additional bushels of wheat turned into flour through its aid as capital. So of all implements. So of all machinery. So of all means of transportation: ships, canals, railroads. There was a strange prejudice in ancient and mediæval times against this natural increase of capital out of its own bowels, as it were, owing probably to this dictum of Aristotle: "_For usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended._" In 1360, a French bishop, Nicole Oresme, repeats the error of Aristotle under the same rhetorical image: "_It is monstrous and contrary to Nature that a barren stock should give birth, that a thing sterile in its whole being should fructify and be multiplied from itself, and such a thing is money._" Even Shakspeare catches up the old figure: "_Is your gold and silver ewes and rams?_" Shylock answers: "_I cannot tell; I make it breed as fast._" In the light of the three requisites of Production, in the light of the purpose and wisdom of God in arranging the active forces of this world, the prejudice in question disappears, and intelligence rejoices in the ever-increasing use of Capital as the handmaid of Labor, in the quick and sure reward of him who practises abstinence, in the production of commodities constantly made easier and cheaper in all directions, in a scale of comforts for the masses of men assuredly rising, in a divinely appointed force lifting like Christianity itself upon the otherwise sagging condition of mankind. Capital assumes but two economical forms, namely, Circulating Capital and Fixed Capital. _Circulating Capital is all those capitalized products, whether commodities or credits, the returns for the sale or use of which are derived at once and once for all._ All circulating capital will be found in one or other of the following sub-forms: (1) raw materials; (2) wages paid out in view of an ultimate profit; (3) completed products on hand for sale; and (4) products bought and held for the sake of resale. The crucial test of circulating capital is the question, Are the returns to be secured by the single use or single transfer of that particular product? Tools, for example, in the hands of him who has manufactured them for sale is circulating capital. _Fixed Capital is all those capitalized products, which are purchased or held with a view of deriving an income from their delayed and repeated use._ All fixed capital will probably be found in one or other of the sub-forms following: (1) tools and machinery in use; (2) buildings used for productive purposes; (3) permanent improvements in land parcels; (4) investments in aid of locomotion and transportation; (5) products rented or retained for that purpose; and (6) the national money considered as a whole. 2. We will next look at the essential CONDITIONS of the production of Commodities. These are also three, as are the Requisites, namely, _Association_, _Invention_, _Freedom_. More or less will men make and sell to one another commodities in any state of society, in which there is permitted any considerable degree of association of men with men locally or commercially, in which is encouraged in any way the universal spirit of invention or the desire to get hard things done easier, and in which some degree of liberty of action and security of property and equality of privileges is guaranteed; but it is very plain, that the production of commodities will increase in all directions and become the greatest in that age and country when and where are allowed the closest ties of human association both in place and in commerce, the freest scope and largest rewards of inventive genius, and the highest possible degree of liberty and security and equality of rights. Let us illustrate from a state of things in the southern half of the United States during the first half of the nineteenth century. For the most part the land owners lived on isolated plantations widely separate from one another, these plantations were cultivated by gangs of slaves, a system that tends to bring all manual labor into contempt, the poor whites scattered in hamlets felt themselves above the slaves and beneath the masters, intercourse between the three classes was little, opportunity to better essentially their condition was denied to all three alike, there were but few cities sprinkled over the vast territory and these relatively small, the only commodity produced on a large scale was raw cotton, the simple device for ginning this had been invented in the decade preceding by a college boy from Connecticut, the agricultural implements were of the rudest kind, even the coarse shoes for the slaves were bought at the North;--in short, the degree of association and invention and freedom was each so low, that the production of commodities was exceedingly small, even as compared with what that production became in one quarter of a century after the abolition of slavery. (a) Association. If we may continue for purpose of illustration our childhood trust in the story of De Foe, Robinson Crusoe came to lead a very tolerable life upon his desolate island by means of his own industry directed so as to satisfy his own wants by his own efforts. He did everything for himself, and had no opportunity to buy anything or sell anything. The whole course of such an isolated life could never develop the idea of Value, would require no such word as Commodities or suggest their production, and such a man while solitary upon his island could not possess Property in the true sense of that word. Association is the first main condition of Production, because of the natural obstacles interposed between the isolated man and the supply of his various wants. If any one man try to surmount a considerable number of these natural obstacles, he must miserably fail, because his powers are not adequate to the task; and hence it follows, that, in a state of isolation, _men's wants exceed their powers_; but now let the same man devote himself to overcome a single class of obstacles, for instance, those in the way of procuring suitable clothing, and his powers are adequate to this, he soon acquires skill in it, he learns to avail himself of the free help of Nature and the facilitating processes of art, he is able to realize large products along his line, and is now ready to offer his surplus in exchange with other men, who meanwhile have been giving themselves each to another class of obstacles, have concentrated efforts and skill upon them, have succeeded by the help of Nature and art in surmounting them, and are now ready to offer their surplus commodities in exchange for others; and, the exchanges beginning to be made in all directions, men find that they thus obtain vastly greater satisfactions for their various desires than they could possibly get by direct efforts: so that we may even say, that, in a state of society through association, _men's powers tend to overtake their wants_. Without association with his fellow-men, there is no creature so helpless, so unable to reach his true end, as is man; and therefore it is, that the impulse to association is one of the strongest of our natural impulses. Men come together, as it were by instinct, into society; and, thus associating themselves together, it is soon discovered, not only that there are various desires in the different members of the community, which are now readily met by coöperation and mutual exchange, but also that there are very different powers in the different individuals in relation to those obstacles which are to be surmounted. The tastes and aptitudes of different men are very diverse. There is a great diversity in natural gifts. One man has physical strength, another mechanical ingenuity, a third a philosophical turn, and a fourth a bent and genius for traffic. Now, then, Nature speaks in as loud a voice as she can utter, in favor of such a degree of association and exchange as shall allow a free development of these varying capacities, while they work upon the obstacles to the gratification of men's wants, which lie appropriately opposite to them. Men must come together either locally or commercially, must learn each other's wants, must compare with each other powers and tastes and opportunities, must come to have some confidence in each other, and then they will begin by rendering mutual services back and forth to experience the better satisfactions and the new strength that exchanges bring. Whatever improves the character of men, and thus leads to greater confidence among them, will enlarge their commerce, and knit closer and wider ties of association and production. Neighborhood associations and productions soon create a surplus to be exchanged for something else with other neighborhoods; parts of single nations however remote from each other find a relative diversity of advantage and an increasing profit in connecting themselves by the ties of trade; and the separate nations learn, though late, that they are only one great family for the grand ends of production and progress. Even within the single nation, there is a strong tendency for particular trades to localize themselves in one spot, as for instance, the manufacture of skin gloves has centered itself for the United States in Gloversville, N. Y.; and so in the great cities that are centres of distribution, for example, the wholesale grocers of St. Paul are on one street, the dry goods houses of Boston are in close proximity, and the booksellers of New York are tending towards each other in place. Now, this broad association as between persons and nations, instead of detracting at all from the individuality and power of each, is the very thing that brings out the individuality and intensifies the power of each; because it is only thus that full scope is given to the exercise and development of each peculiar power whether of the individual or the nation. Hence the strong tendency everywhere visible in the world of commerce towards Specialties: the old single trades and vocations and professions are constantly breaking themselves up into parts, and each man is taking up that for which he is naturally best fitted and has specially trained himself, and all to the great advantage of individuality and personal power and progress. Mr. Carey is certainly right in his principle (much insisted on in all his books), that the degree of individuality depends on the degree of association, each advancing hand in hand with the other; and he is as certainly wrong in lacking confidence in the natural forces at work tending to the highest degree of association and consequently to the highest degree of individuality. These forces are immensely strong. Men come together as it were by instinct, being conscious of individual feebleness; personal interest is soon seen to follow the bent of social attraction; a just sense of personal dignity and importance in being a substantive part in the ongoings of society enormously strengthens the impulse to association and individuality; the progress of each and all in achievement and elevation still further knits the ties of union; and lastly, a strong feeling of social justice, of what is _due_ to others as well as to one's self,--that every man has an inalienable right to his full _opportunity_ and all that that implies, to buy and sell and get gain, to life and liberty and the pursuit of happiness. When motives and powers and potencies such as these, proven to be universal by broad and constant inductions, fail as economical forces to secure association and individuality, then it will be time to look around with Mr. Carey for some inferior and factitious force. (b) Invention. This is the second main condition in the production of commodities; because production is processes, getting something ready to sell and selling it; and Nature stands ever ready with her free agencies to facilitate these processes, just so far as the inventive brain of man can contrive to unite the two. Invention is the marriage of a gratuitous force to an onerous process, and the fruit of that union is an easier way and multiplied utilities. There are some in every considerable community, and more in every community enlarged by the natural association but just now described, who have the knack of contrivance, who find their joy in finding a new power in Nature or some new application of an old power; were it not for unhindered association and free exchange, the individuality of these would be effectually repressed, and they would have to drudge for their daily bread; but the importance of inventors is well understood in every progressive community, and under advanced exchanges their livelihood is guaranteed by those who hope to profit by its results while their work is maturing; and Production rejoices and grows strong and throws out unnumbered hands to make instant use of the new power and the easier processes, in order to multiply commodities in number and variety. As an illustration of all this, the reader will be interested in a brief account of the series of Inventions made in Great Britain during the last third of the eighteenth century, in consequence of which the Cotton Industry was established in that country in such preëminence as has to this day baffled the attempts of all other countries even to approximate it. We catch our first glimpse of Cotton in the pages of Herodotus, who wrote more than 400 years B.C. in relation to India as follows: "_There are trees, which grow wild there, the fruit whereof is a wool exceeding in beauty and goodness that of sheep. The natives make their clothes of this tree-wool._" This passage is interesting, as showing that the first comparison of cotton with wool exhibited their resemblance in whiteness and in _kinkiness_, which latter quality enables them both to be spun into yarn; as showing also, that the Hindoos very early both spun and wove cotton, and then made it into clothes; and as showing lastly, the appropriateness of the original name given to cotton in Europe, namely, "tree-wool," a name by which the Germans still designate it (Baumwolle). If the extreme East furnishes the first notice of cotton, the extreme West follows it next in order. When the Spaniards discovered Central and Southern America in the first quarter of the sixteenth century, they reported that they found the Mexicans clothed in cotton cloth. But wool was the staple of England. Parliament and people were jealous of cotton, lest it might prove a rival to wool, and actually prohibited the introduction of printed calicoes (so called from Calicut in India whence they were exported). The taste, however, for calicoes increased in spite of the prohibition, which was afterwards intermitted for a revenue duty on plain cotton, which was then rudely printed on blocks in London, Manchester, and elsewhere; but the prohibition of Parliament against wearing printed calicoes was first repealed in 1736. Fifteen years later the United Kingdom imported only 2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton goods; in one century the import of cotton became 500 times larger than that, and the export of cottons 1300 times larger than that; and this prodigious result was due mainly to three or four inventions occurring within short times of each other, by means of which the free forces of nature took the place of the onerous efforts of men. John Hargreaves, a poor weaver in the neighborhood of Blackburn in Lancashire, was returning home from a long walk, in which he had been purchasing a further supply of yarn for his own loom. Spinning at that time only admitted of one thread spun at a time by one pair of hands, one of which turned the wheel and thus made the single spindle rapidly revolve, and the other hand pulled gently upon the "roving" attached to the spindle and thus drew it out to the requisite tenuity twisted into yarn. The "carding," then effected by rude instruments called hand-cards, by means of which the fibres of the cotton were disentangled and straightened and laid parallel with each other; and the "roving," a process by which the short fleecy rolls stripped off the hand-cards were applied to the spindle and made into thick threads only slightly twisted, were the two preparatory operations for the spinning. All these operations were slow and clumsy, and the consequent expensiveness of the yarn formed a great obstacle to the establishment of the cotton manufacture in England. The improvements made in the loom of that period by Kay, father and son, had shortly before doubled the power of each weaver, and the spinners could not keep up in furnishing material to the weavers. As Hargreaves entered his cottage from this excursion to get yarn to keep his loom agoing, his wife, Jenny, accidentally upset the spindle, which, as was her wont, she was diligently using. Her husband noticed that the spindle, which was now thrown into an upright position, continued to revolve just as when horizontal, and that the thread was still spinning in his wife's hands. The idea immediately occurred to him, that it might be possible to connect a considerable number of upright spindles with the revolutions of one wheel, and thus multiply the power of each spinster. "_He contrived a frame in one part of which he placed eight rovings in a row, and in another part a row of eight spindles. The rovings, when extended to the spindles, passed between two horizontal bars of wood, forming a clasp which opened and shut somewhat like a parallel ruler. When pressed together this clasp held the threads fast; a certain portion of roving being extended from the spindles to the wooden clasp, the clasp was closed, and was then drawn along the horizontal frame to a considerable distance from the spindles, by which the threads were lengthened out and reduced to the proper tenuity; this was done with the spinner's left hand, and his right hand at the same time turned a wheel which caused the spindles to revolve rapidly, and thus the roving was spun into yarn. By returning the clasp to its first situation and letting down a piercer wire the yarn was wound upon the spindle._" The powers of Hargreaves' machine soon became known among his ignorant neighbors, notwithstanding his strenuous efforts to keep his admirable invention a secret, and these neighbors naturally enough concluded that a contrivance, which enabled one spinster to do the work of eight, would throw many people out of employment. A mob broke into his house and destroyed his machine. Hargreaves retired in disgust to Nottingham, where by means of the friendly assistance of one other person he was enabled to take out a patent for his invention, which he called in compliment to his industrious wife the "_Spinning-Jenny_." This invention gave a new impulse to the cotton manufacture, but had it been unaccompanied by other improvements, no purely cotton goods could have been made in England; because the yarn spun by the new jenny, like that previously spun by hand, was not fine enough nor hard enough to be used as warp, and linen or woollen threads had consequently to be employed for that purpose. In the very year, however, in which John Hargreaves, the poor weaver, migrated to Nottingham, Richard Arkwright, a poor barber's assistant, took out a patent for his still more celebrated machine for spinning by rollers. In one respect Arkwright was much worse off than Hargreaves: the latter had a helpmate meet for him, the former had a wife who is said to have destroyed the models her husband had made and to have opposed him in every step of his career. But Arkwright was not deterred from his life pursuit by the poverty of his circumstances or the scandalous conduct of his wife. After many years of intense and opposed devotion to the possible application of a simple principle he had conceived in his mind, namely, that of spinning by means of rollers revolving at varying rates of rapidity, he succeeded in contriving and patenting his memorable machine, which, more than any other one invention, localized and concentrated in England the gigantic cotton-industry of the world. Arkwright's idea and achievement was to pass the coarse thread drawn out from the rovings over two pairs of rollers in succession, the first of which revolving slowly fined the thread down evenly and gradually, and then this thread was passed over a second pair of rollers turning with a high velocity and drawing out the line into any requisite tenuity. Thus a cotton thread was spun capable of being used as warp. Cotton cloth as such could now be manufactured in England. From the circumstance that the mill, at which Arkwright's machinery was first erected, was driven by water power, the machine received the inappropriate name of the "water-frame"; and the thread spun on these rollers was commonly called the "water-twist." The old mode of carding the cotton by hand now furnished the "rovings" too slowly to meet the wants of the new spinning-jenny and the new water-frame; and these great inventions would consequently have proven comparatively useless, had not a more efficient and rapid process of carding the cotton superseded just at the right time the old system of hand-carding. Lewis Paul introduced revolving cylinders for carding the raw cotton into rovings preparatory to spinning, in partial imitation perhaps of Arkwright's principle of spinning the rovings by the rotatory motion of rollers. Paul's machine consisted "_of a horizontal cylinder, covered in its whole circumference with parallel rows of cards with intervening spaces, and turned by a handle. Under the cylinder was a concave frame, lined internally with cards exactly fitting the lower half of the cylinder, so that when the handle was turned, the cards of the cylinder and of the concave frame worked against each other and carded the wool. The cardings were of course only of the length of the cylinder, but an ingenious apparatus was attached for making them into a perpetual carding. Each length was placed on a flat broad riband, which was extended between two short cylinders, and which wound upon one cylinder as it unwound from the other._" While the foregoing series of inventions placed an almost unlimited supply of cotton yarn at the disposal of the weaver, the machinery as yet introduced was still incapable of providing yarn fit for the finest grades of cotton cloth. The "water-frame" indeed spun abundant twist for warps, but it could not furnish the finest qualities of yarn, because these were too tenuous to bear safely the pull of the rollers while they wound themselves on the bobbin. Samuel Crompton, a young weaver living near Bolton, possessed the ingenuity needful to remove this difficulty. He succeeded in combining in one machine, which from its nature is happily called the "mule," the several excellences of Hargreaves' spinning-jenny and Arkwright's water-frame. Copying after the latter, the mule has a system of rollers to reduce the roving; copying after the former it has spindles without bobbins to give the twist; and the thread is stretched and spun at the same time by the spindles after the rollers have ceased to give out the rove. "_The distinguishing feature of the mule is that the spindles, instead of being stationary, as in both the other machines, are placed on a movable carriage which is wheeled out to the distance of fifty-four or fifty-six inches from the roller beam, in order to stretch and twist the thread, and wheeled in again to wind it on the spindles. In the jenny, the clasp which held the rovings was drawn back by the hand from the spindles; in the mule, on the contrary, the spindles recede from the clasp, or from the roller-beam which acts as a clasp. The rollers of the mule draw out the roving much less than those of the water-frame, and they act like the clasp of the jenny by stopping and holding fast the rove, after a certain quantity has been given out, whilst the spindles continue to recede for a short distance farther, so that the draught of the thread is in part made by the receding of the spindles. By this arrangement, comprising the advantages both of the roller and the spindles, the thread is stretched now gently and equably, and a much finer quality of yarn can therefore be produced._" The ingenuity of Hargreaves, Arkwright, and Crompton had been exercised to provide the weaver with yarn, and had now indeed provided him with more yarn than he could use; the spinster had beaten the weaver, just as the weaver had previously beaten the spinster; and the making of cotton cloth seemed likely to continue sluggish, because the yarn could not be woven any faster than a skilled workman could weave it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish clergyman named Edmund Cartwright, being in conversation with some Manchester gentlemen, one of whom observed that, "as soon as Arkwright's patent expired so many mills would be erected and so much cotton spun that hands would never be found to weave it," replied, "Arkwright must then set his wits to work to invent a weaving-mill." Notwithstanding the unanimous opinion expressed by the Manchester gentlemen, that such a weaving-machine was wholly impracticable, the clergyman himself within three years had invented and brought into successful operation the "_power-loom_." Subsequent inventors improved the idea which Cartwright originated, and before 1834 there were not less than 100,000 power-looms at work in Great Britain alone.[3] Substantially the same machinery invented for carding and spinning and weaving cotton was very shortly and successfully applied to the carding and spinning and weaving of wool, because the wisdom of Nature imparted to them both the same sort of tenacity of fibre, the same capacity in that fibre to be spun into a thread of indefinite length by means of the little loops or kinks easily interlocking contiguous fibres into a single thread, which two obvious resemblances gave an identical name to the animal and vegetable products otherwise so different from each other. The spirit of Invention, one of the chief conditions in the production of material commodities, thus simply illustrated along the line of a single manufacture, may serve us for a sample of similar improvements taken and taking place in scores upon scores of other lines of effort and production. The principle is the same in all cases past and present and still to come, namely this, to throw the strain from the mind and muscles of men upon the forces and agencies of free Nature, with which the world around us is crowded in our behalf, and which are waiting to slave in the service of mankind without rest and without fatigue,--without money and without price. (c) Freedom. By far the most important of all the conditions, under which the production of material commodities goes broadly forward, is liberty of action on the part of the individual; because, wherever such liberty is conceded, association and invention and all other needful conditions follow right along by laws of natural sequence. By liberty of individual action is meant the practical right of every man to employ his own efforts for the satisfaction of his own wants in his own way, whether directly or through exchange. Each man's right of individual freedom is limited of course by every other man's right to equal freedom, which the first man is not at liberty to infringe; and also, in certain few and limited respects, by what is sometimes called the "general good," the judge of the application of which must be the government under which the man lives. With these limitations, which are few in number and never serious in degree when rightly applied, and which limit in common all other rights whatsoever, the right of every man to buy and sell and get gain is just as fully a right as the right of breathing. It stands on the same impregnable ground. It is a natural and self-evident and inalienable right, with which each man has been endowed by his Creator, to put forth efforts for his own well-being and for those dependent upon him, either directly or by means of efforts exchanged with other men equally free; and he is a slave in spirit and position, who tamely submits to have his own rights of buying and selling curtailed, or to stand by and see the rights of his fellow-citizens similarly curtailed, unless such act of interference and curtailment on the part of his Government be justified by a solid proof that some other public or private rights, which are at least as well based as his own, would be endangered by the exercise of his own. In what cases may a Government properly step in to regulate or prohibit the buying and selling of its citizens? Hundreds of inductions extending through hundreds of years have been carefully and logically conducted in order to reach a just and comprehensive answer to this question; and in all probability the cases have been inductively ascertained for all time, and they are these: _such buying and selling may be controlled and prohibited, as are proven to be contrary_ (1) _to the public Morals_, (2) _to the public Health_, (3) _to the public Revenue_. All other buying and selling may be safely assumed to be both profitable to the parties to it, and also useful to the Commonwealth in general; and any interference with it by public authority is a high-handed infringement of natural rights, a blow aimed at the life and source of property. These wrongful strokes at private rights, this restriction on the freedom of individuals to exchange products for their own welfare, is now mostly confined in civilized countries to the region of Taxation. Within this region the wrongs are still frightful. Judge Cooley, in his "Principles of Constitutional Law," states the matter as follows: "_Constitutionally a tax can have no other basis than the raising of revenue for public purposes; and whatever governmental action has not this basis is tyrannical and unlawful. A tax on imports, therefore, the purpose of which is not to raise a revenue, but to discourage and indirectly prohibit some particular import for the sake of some home manufacturer, may well be questioned as being merely colorable, and therefore not warranted by constitutional principle._" Formerly, governments interfered almost beyond belief with the freedom of their people in all industrial and commercial action; dictating what should and what should not be grown and manufactured, what should and what should not be exported and imported; decreeing by proclamation or enacting by statute, the number of apprentices each artisan might employ, and the years during which these must serve as such, and the conditions under which they might then work as journeymen; the materials to be used in woven fabrics, and even the widths and other minor features of such fabrics, were prescribed in the foremost of the European nations; in the reign of St. Louis of France, a "Book of Trades" was issued under royal authority and is still extant, which organizes minutely and subjects to cumbersome rules more than one hundred separate industries as then practised; England was the country of the great trading "Companies," and of all of these the same may be said as Adam Smith said of the Turkey Company formed in 1579, namely, it was "a strict and oppressive monopoly"; among others there were the African Company established in 1530, the Russia Company beginning its operations in 1553, the East India Company chartered on the very last day of the seventeenth century and going out of existence in our own time, and the Hudson's Bay Company, chartered in 1670 and so having the sole control in trade of a region forty times larger than all England; while the colonial system prevailing for two centuries in all the countries of Western Europe regulated the commerce and controlled the manufactures in the colonies with a single eye to the benefits of the mother country, as those were conceived of under the wretched Mercantile system. Happily, since governments have become more enlightened than formerly, they are perceiving for the most part that they have not the least right to interfere in those ways or in any ways with the natural right of their people to make and grow freely all material commodities, and to buy and sell these freely in the best markets wherever these markets are to be found; and they are also perceiving, that by such interference incalculable losses of property and indefinite retardations of progress are caused to their people, as well as weakness to themselves as governments through a more difficult gathering of taxes and a harder maintenance of prestige and power. The only motive to a mutual exchange of services, whether in one or in all of their three kinds, that is to say, to a free production of commodities and services and credits, is always and everywhere the mutual benefit of the two parties exchanging. After all the processes have been gone through with and the exchanges are consummated, all the parties are richer than before, that is, they have more _satisfactions_, otherwise the processes and exchanges would instantly cease. Therefore, a universally free production benefits everybody, and harms nobody. Moreover, under a system of free production, every man is allowed under the stimulus of self-interest to work away at those obstacles to the gratification of human desires which he feels himself best able to overcome, to follow the bent of his own mind, and to avail himself of all those free helps in his peculiar work which Nature offers to him. Under these circumstances, obstacles give way in all directions; the amount of material products produced is vastly augmented, the number and variety and excellence of personal services proffered are indefinitely increased, and credits compelling the Future to pay tribute to production are multiplied; the diversified and rapidly increasing desires of all persons in such a community are readily met through profitable exchanges; while all peculiar facilities natural and acquired are taken immediate advantage of, the diversities of relative advantage in production become marked in all directions, and a new day of industrial and commercial prosperity is ushered in. Because under freedom all men are sure to dispose of their industrial efforts to the best advantage, they have the strongest possible motives to put them forth; since they can purchase with them what they will and when they will, and where they will. Thus freedom leads to extended association, and also to the invention of machinery and all labor-saving appliances. 3. We are now in position to understand thoroughly the ultimate GROUNDS of the production of material commodities. We have seen, that these commodities have been multiplying in number and variety and excellence ever since the beginnings of history, that they are everywhere multiplying now at a rate hitherto unprecedented and undreamed of, and that improved and improving methods of transportation by land and sea are now carrying these back and forth to the ends of the earth. What is the _principle_, under which these things have been done, are now being done, and are certain to be done in the time to come? The physical and moral obstacles, that Nature has interposed to the gratification of the multitudinous and constantly increasing desires of men, are so great in all directions, that the powers of the individual man are utterly unable to surmount any considerable number of them; while at the same time, the physical and moral powers, adapted under sufficient motives to overcome these obstacles, are very diverse in the different individuals of mankind. Not only is there a surprising diversity in original gifts, but also the powers acquired by gradual concentration of personal effort upon one set of obstacles become exceedingly diverse, as does moreover familiarity in the use of the gratuitous forces of nature which lend their aid towards overcoming these particular obstacles. As the result of one or two or all of these, one man naturally comes to have a vast advantage over others in his particular branch of business, whatever that may be; each of these others by precisely the same means comes to have a legitimate advantage over the first in his own branch of effort, whatever that may be; and if, as always happens practically, the first has desires which the varied efforts of the others can satisfy, and they too desires which his efforts can satisfy, nothing more is necessary to profitable exchanges between them than this diversity of relative advantage at different points. It is solely because a given effort irksome in itself put forth for another person, in view of and for the sake of a return-service from him, realizes more of satisfaction to both parties than when put forth for one's self directly, that commercial exchanges ever take place among men. The sole ground of these, the principle underlying them everywhere, is DIVERSITY OF ADVANTAGE BETWEEN DIFFERENT MEN AND BETWEEN DIFFERENT NATIONS IN DIFFERENT RESPECTS. All exchanges whatsoever depend on diversity of relative advantage in the production of commodities or services or credits as between the persons exchanging; and this diversity of relative advantage exists by God's appointment primarily among individual men as such, and only secondarily on the ground of the varied soil and climate and position and natural gifts of different parts of the earth. Reserving these secondary considerations, which are quite secondary in importance also, to a later detailed discussion, it is very clear and of central consequence in our science that a diversity of relative advantage in different things displays itself as between the individuals of every community and country large and small. There is no hamlet in any land in which one man has not an advantage over his neighbors in the making of clothes, another in the making and setting of horse-shoes, a third in the building of houses, a fourth in the curing of diseases, and another in the keeping a school; while each of those neighbors has undoubtedly some advantage or other over each of these in some trade or means of livelihood. As a natural result of this diversity any two of these villagers may profitably exchange their respective efforts with each other, provided of course each has a desire for the product of the other, to the manifest lessening of the effort of each relatively to the satisfaction of each, and the more so as the relative superiority of each to the other in his own trade is the greater. This point will repay some pains in minute illustration. If the blacksmith can make and set horse-shoes only a trifle better than the tailor could do this if he tried, and the tailor can make coats only a little better than the blacksmith could make one if he chose, there will be but a slight benefit to each in their changing works with one another. For the sake of definiteness, let us say, that the tailor's capacity for making coats is 6, and his capacity in making and setting horse-shoes is 5; and also that the blacksmith's capacity for shoeing horses is 6, and his ability in making coats is 5. Each has a relative superiority to the other of 1 in his own trade; and if they exchange efforts, as they probably would under these circumstances, there is only an advantage of 2 to be divided between them. Now let us suppose (what might easily become a fact), that the tailor by exclusive and augmented attention to the conditions of his own craft carries up his capacity for making coats to 15, the blacksmith's efficiency in both the trades remaining the same as before. There will now be an increased motive to both the artisans for exchanging products with one another, and a larger gain to each than before as the result of such exchange. The diversity of relative advantage as between the two has now gone up from 2 to 11. The tailor can now make a coat much better and quicker than before; and though the blacksmith owing to his inertness can neither make nor set horse-shoes any better than before, still less make coats any better, he will after all by still trading with the tailor reap a part of the benefit of the latter's increased efficiency in making coats; the new coat is at once better and costs less than the previous one; the tailor is still less inclined than before to leave his new and greater advantage over the blacksmith to set himself to shoeing his own horse; even on the old terms the blacksmith can do that 1 better than he himself can, and rather than forego the trade he will naturally offer the blacksmith somewhat better terms than before, or in other words will feel impelled to share with the blacksmith a part of the proceeds and rewards of his own now superior skill and diligence. The trade began on the sole basis of a relative diversity of advantage as between the two mechanics, each in his own craft; this relative diversity, without which no exchange ever takes place between any two persons, has now gone up as between these two from 2 units of advantage to 11 units of advantage; how will these 11 units be divided in this case? Nobody can tell exactly how they will be divided. Two things about it, however, are _certain_ at least in their tendencies and potencies. The blacksmith is sure to get some part of the extra fruit of his neighbor's new push and spirit, while the tailor is sure to get as his own reward by much the larger part of the whole blessed 11. We must by no means omit to notice the logical inference from this instance, nor fail to make the proper inductive generalization from a sufficient number of similar instances. It is this: no man can make any essential improvement in any of the methods of producing material commodities, without at the same time benefiting other people as well as himself. Under natural law, which is no respecter of persons, he can by no possibility selfishly take to himself the entire fruits of his own growing skill and vigor. The only way in which he can gather in at all the fruits of these is to sell their proceeds in the open market. To broaden his own market for now better and more abundant goods he must offer them to everybody on somewhat better terms than formerly--and the better the terms the broader the market--and he can well afford to do this, because the goods now cost him less of irksome human effort. Every improvement in the production of commodities is precisely of that complexion. The issue of every invention, of every improved process of every kind, is, so far forth, a cheaper product. And this public gain follows, must follow, individual enterprise at single points, even when the great mass of exchangers remain at the old stage of sluggishness. Whatever increases at one point even, and _a fortiori_ at two points, the diversity of relative advantage as between any two exchangers, is of benefit to them both, and the greater this relative diversity becomes the greater the benefit to both. Now let us see how the matter stands, when tailor and blacksmith at the same time feel and obey the impulses to a more skilled and vigorous artisan life. Suppose the blacksmith too carries up his efficiency in his own trade to 15, just as the tailor has done, the potency of each in the trick of the other remaining as before at 5; under these circumstances when the two come to trade with each other, each has a relative superiority over the other of 10, and there is an advantage of 20 points to be divided between the two; the trade is now ten times more profitable to each than it was at the outset, when there was only an aggregate of 2 units for the division between two parties; and accordingly the motive to an exchange and the gain of an exchange as between tailor and blacksmith are ten times greater than they were before. Therefore we lay down the principle, as inductively ascertained and as universally applicable to all exchanges, that the greater the relative superiority at different points as between the parties exchanging, the more beneficial and profitable do the exchanges become to all the participators in them. If this principle be just, and we may well flatter ourselves that it will be found to be just, it follows, that every man who has anything to buy or sell, is directly interested in the highest success of his fellow-exchangers, that every trade finds its own advantage in the success of all other trades, and that all discoveries and inventions by which Nature is made to pay tribute to art is, restrictions apart, so much clear gain to the world at large. In the light of sound and broad principles, what David Hume called the "Jealousy of Trade" is simply silly. The mainspring that impels all buyers and sellers to quicken their movements and to improve their methods and thus and otherwise to cheapen their costs of production, is the natural press of _competition_. Somebody else is offering this product, or will offer it, for less than we are now selling it for, and we must contrive some way by shortened times or cheaper processes or a quicker zeal not to be beaten in this market-race, is the silent argument ever making itself felt on the mind and hand of the producer. Such natural action always increases the general diversity of relative advantage as among buyers and sellers. But, on the other hand, whatever lessens or threatens to lessen this natural and most beneficial stress of competition among producers of similar commodities at home or abroad, necessarily lessens the motive on the part of these producers to excellence of quality in their goods and to cheapness of their cost, because it makes less the diversity of relative advantage as between these producers and those producers of other commodities against which the first exchange. The units of advantage that would otherwise be divided between the exchangers are diminished; the motives to trade and the rewards of trade are thus lessened to each pair of parties subject to such diminution of competition, and consequently to the community, or nation, or family of nations, as a whole; and accordingly this is the precise place for us to look into the nature and effects of _Monopoly_, so called, and to perceive once for all, that Monopoly is the enemy of mankind. Monopoly is a word derived from two Greek words, which mean when combined _selling alone_, that is, the privilege of selling one's commodity free from the competition to which it is naturally subject by other sellers than the privileged one. Monopoly is thus artificial restraint imposed on some buyers and sellers for the supposed benefit of other buyers and sellers. It is wholly unnatural. It is usually enjoyed under the forms of law. Its beneficiaries commonly cajole or extort from Government by hook or by crook the exclusive privilege of selling certain commodities in a designated market. Their motive is purely selfish: it is simply and solely to get for themselves a return-service artificially enhanced by selling commodities in a legally restricted market. The effect in the first instance usually corresponds to their expectations. The public are at their mercy so far as the designated commodities are concerned. The general story of monopolies is a dreary stretch of record of human greed and wrong on the one hand, and of wide-spread poverty and suffering and slowly-gathering resistance on the other. We will look at only two instances at present in the long account, premising that, the motives of greed and grab are the same in all instances, and the results of wrong and hate on the part of those oppressed by them are the same also in all instances. Let Macaulay (I, 40) tell us something of the first instance selected for illustration. "_But at length the Queen took upon herself to grant patents of monopoly by scores. There was scarcely a family in the realm which did not feel itself aggrieved by the oppression and extortion which this abuse naturally caused. Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins, leather, glass, could be bought only at exorbitant prices. The House of Commons met in an angry mood. It was in vain that a courtly minority blamed the Speaker for suffering the acts of the Queen's Highness to be called in question. The language of the discontented party was high and menacing, and was echoed by the voice of the whole nation. The coach of the chief Minister of the Crown was surrounded by an indignant populace, who cursed the monopolies, and exclaimed that the prerogative should not be suffered to touch the old liberties of England. There seemed for a moment to be some danger that the long and glorious reign of Elisabeth would have a shameful and disastrous end. She, however, with admirable judgment and temper, declined the contest, put herself at the head of the reforming party, redressed the grievance, thanked the Commons in touching and dignified language for their tender care of the general weal, brought back to herself the hearts of the people, and left to her successors a memorable example of the way in which it behooves a ruler to deal with public movements which he has not the means of resisting._" Perhaps some one of my readers may suggest, that these are the words of a Whig-Liberal, and may thus exaggerate the cause of the people as against the monopolists. Well, then, let us hear the words of a high Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the same monopolies. "_The active reign of Elizabeth had enabled many persons to distinguish themselves in civil and military employments; and the Queen, who was not able from her revenue to give them any rewards proportioned to their services, had made use of an expedient which had been employed by her predecessors, but which had never been carried to such an extreme as under her administration. She granted her servants and courtiers patents for monopolies; and those patents they sold to others, who were thereby enabled to raise commodities to what price they pleased, and who put invincible restraints upon all commerce, industry, and emulation in the arts. It is astonishing to consider the number and the importance of those commodities which were thus assigned over to patentees. Currants, salt, iron, powder, cards, calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ, brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine stone, oil of blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, transportation of iron ordnance, of beer, of horn, of leather, importation of Spanish wool, of Irish yarn; these are but a part of the commodities which had been appropriated to monopolists. These monopolists were so exorbitant in their demands, that in some places they raised the price of salt from sixteen pence a bushel to fourteen or fifteen shillings. Such high profits naturally begat intruders upon their commerce; and in order to secure themselves against encroachments, the patentees were armed with high and arbitrary powers from the Council, by which they were enabled to oppress the people at pleasure, and to exact money from such as they thought proper to accuse of interfering with their patent. The patentees of saltpetre, having the power of entering into every house, and of committing what havoc they pleased in stables, cellars, or wherever they expected saltpetre might be gathered, commonly extorted money from those who desired to free themselves from this damage or trouble. And while all domestic intercourse was restrained, lest any scope should remain for industry, almost every species of foreign commerce was confined to exclusive Companies, who bought and sold at any price that they themselves thought proper to offer or exact._" "_The Government of England during that age, however different in other particulars, bore in this respect some resemblance to that of Turkey at present: the Sovereign possessed every power, except that of imposing taxes; and in both countries, this limitation, unsupported by other privileges, appears rather prejudicial to the people. In Turkey, it obliges the Sultan to permit the extortion of the pashas and governors of provinces, from whom he afterwards squeezes presents and takes forfeitures: in England, it engaged the Queen to erect monopolies, and grant patents for exclusive trade; an invention so pernicious, that had she gone on during a tract of years at her own rate, England, the seat of riches, and arts, and commerce, would have contained at present as little industry as Morocco or the coast of Barbary._" But, some one will say, Hume and Macaulay are historians, writing long after these events took place, and may likely have been too favorable in their judgment to freedom of trade domestic and foreign. It is indeed true, that both of them were firmly convinced that freedom of trade is an inalienable right as well as an unspeakable blessing to all men everywhere. So, then, let us go back to contemporaries. Let us hear the eye and ear witnesses of the grievances complained of in 1601. Robert Cecil was then prime minister of Queen Elizabeth. He and his father had had more to do in granting the monopolies than any other persons in the realm except the Queen. Said he from his place in the Commons on the 25th of November: "_I say, therefore, there shall be a proclamation general throughout the realm, to notify Her Majesty's resolution in this behalf. And because you may eat your meat more savory than you have done, every man shall have salt as good and cheap as he can buy it or make, freely without danger of that patent which shall be presently revoked. The same benefit shall they have which have cold stomachs, both for aqua vitæ and aqua composita and the like. And they that have weak stomachs, for their satisfaction, shall have vinegar and alegar, and the like, set at liberty. Train oil shall go the same way; oil of blubber shall march in equal rank; brushes and bottles endure the like judgment. Those that desire to go sprucely in their ruffs, may at less charge than accustomed obtain their wish; for the patent for starch, which hath so much been prosecuted, shall now be repealed. The patents for calf-skins and felts, for leather, for cards, for glass, shall also be suspended, and left to the law._" Five days later one hundred and forty members of the House were formally received by Elizabeth in person, the Speaker having been instructed to convey their thanks to her majesty; and, after the Speaker's address, he with the rest knelt down, and the Queen gave her answer as follows: "_Mr. Speaker, you give me thanks, but I doubt me, I have more cause to thank you all, than you me: for had I not received a knowledge from you, I might have fallen into the lap of an error, only for lack of true information. Since I was queen, yet never did I put my pen to any grant, but that upon pretext and semblance made unto me that it was both good and beneficial to the subjects in general, though a private profit to some of my ancient servants who had deserved well; but the contrary being found by experience, I am exceeding beholding to such subjects as would move the same at first. I have ever used to set the last judgment-day before mine eyes, and so to rule as I shall be judged to answer before a higher judge. To whose judgment-seat I do appeal, that never thought was cherished in my heart that tended not to my people's good. And now if my kingly bounty hath been abused, and my grants turned to the hurt of my people, contrary to my will and meaning; or if any in authority under me have neglected or prevented what I have committed to them, I hope God will not lay their culps and offences to my charge. Though you have had, and may have, many princes more mighty and wise, sitting in this seat, yet you never had, or shall have, any that will be more careful and loving._"[4] These were the last words of Elizabeth to the Commons of England. She died in a little more than a year. In a little less than a year before the death of her successor, the famous Act of Parliament of 1624 declares, that all monopolies, grants, letters patent for the sole buying, selling, and making of goods and manufactures, shall be thereafter wholly null and void. Though this Act, and many others, was violated more or less in the next reign, it effectually secured in the long run the freedom of industry in England; and in the opinion of excellent authorities, has done more to excite the spirit of invention and industry, and to accelerate the progress of commerce in that country, than any other law on the statute book. Our second instance of Monopolies shall be drawn from the state of things in the United States in this year of Grace, 1890. The monopolies of to-day are secured by means of an instrument called a Tariff, which, later on in these pages, will be fully discussed in its history, inmost nature, and invariable effects. Here it will suffice to say, that a tariff is nothing in the world but a combination of Taxes, which taxes the people of the country, on which the tariff is imposed, are obliged to pay in one form or another. The only word ever uttered by a tariff, the only word a tariff from its own nature can utter, is, _Thou shalt pay_! The ostensible reason for levying these taxes is the constitutional one of getting money into the national Treasury,--"_to pay the debts and provide for the common defence and general welfare of the United States_"; but the real purpose of laying these tariff-taxes at present is only secondarily and remotely the ostensible and constitutional one; because, on the authority of Professor Taussig of Harvard University, there is not a single one of over 4000 items of taxes in this tariff, that is designed primarily to get money into the treasury from the pockets of the people, but every one of them is designed more or less and more rather than less to raise the price of domestic goods to our own people artificially by keeping out of the country by means of these taxes on them the foreign goods, which would otherwise come into a profit. In other words, there is no purely revenue-tax in our immense tariff at present, but every item in the enormous list is a so-called and mis-called "protective"-tax. By this shutting off from domestic goods the natural competition of corresponding foreign goods by means of such tariff-taxes, a monopoly is created at the instance and for the sole benefit of certain classes of privileged home-producers. They can sell alone (monopoly) just so far as other sellers are kept out by these heavy taxes. The goal of all their striving is to get an artificially-enhanced price for their own products at the cost of their countrymen by means of a market restricted to themselves through obstacles excluding foreign sellers. The end proposed by these shrewd manipulators is realized in fact. Domestic prices are lifted on so-called "protected" goods. This is the first effect of the monopoly. It has often been alleged, and with great vehemence by the late Horace Greely, that competition among the domestic producers of such wares will lower their price again to the natural point; but if this is so, what _motive_ have the individual producers to work so assiduously in elections and lobbyings to get on and keep on these tariff-taxes? Again, Mr. Greely, and all others of like association, forgets the admirable generalization of Robert Stephenson,--"_Where combination is possible, competition is impossible._" Combination among producers to keep up prices is always possible in a market restricted by law. This has been proven on a large scale in the United States during each of the past thirty years: combinations among coal operators to keep up the prices of "protected" coal by restricting the annual output of their collieries; combinations among carpet and other woollen manufacturers to maintain high prices of their fabrics by restricting their workmen to certain hours per day or to certain months per year; have been among the commonest of industrial events in all this interval. Within a very few years past there has come into almost universal vogue among these monopolists a new kind of combination called "_Trusts_,"--again abusing a good word by making it cover an abominable purpose,--which are probably illegal at Common Law, which only become possible under monstrously unjust tariff laws, and which work wide-spread wrong among the masses of the people. A second effect of this monopoly (as of all monopolies) is to worsen the quality of the goods sold in an artificially restricted market. The historian Gibbon noticed this fact more than a century ago, and said: "_The spirit of monopolists is narrow, lazy and oppressive. Their work is more costly and less productive than that of independent artists; and the new improvements so eagerly grasped by the competition of freedom, are admitted by them with slow and sullen reluctance._" Alfred Lapoint, United States consul in Peru, warned the State Department at Washington in 1883 of this poor quality of our manufactures, which were then trying to find a South American market. He wrote: "_It is my duty to indicate that great carelessness prevails with our manufacturers; for instance, I was called upon to purchase in the United States a steam pump and boiler, which I ordered from one of the most famed manufacturers, and when it arrived, not alone was the boiler inadequate for the pump, but actually after two months' work the upper tube sheet split in three parts, a proof of its bad quality and construction._" As men are, a natural competition among buyers and sellers is just as needful to keep up the quality of goods as to keep down their price. Good quality always costs more of effort and skill and capital than bad quality: why should producers continue to furnish good quality to a market from which a free competition in good qualities is excluded by law? Every tendency of human nature, as well as every relevant fact in history, attests, that poor wares at high rates invariably attends upon tariff-monopolies. Shoddy takes the place of wool. Cheaper crowds out better material. Skilled workmanship is displaced by unskilled. Processes of manufacture are hastened in time, and left incomplete to the damage of the goods in order to save capital. Monopoly is always and everywhere the foe of excellence. A third effect of tariff-monopoly is to prevent the sale abroad of domestic goods to the same extent and amount as foreign wares are kept out by these monopoly-taxes. This vital and fundamental result is almost always overlooked. If a man or a nation refuse to _buy_ of a proffered customer, they cannot by any possibility _sell_ to him; because buying and selling are reciprocal and synchronous; because it takes two to make a bargain; because material commodities, for the most part, ultimately, exchange against each other; and because the only motive a foreigner ever has to bring his goods _hither_, is to take in exchange for them our domestic goods at a profit, and carry these _hence_. To forbid entrance to foreign goods is to forbid exit to domestic goods. Monopoly-tariff-taxes, therefore, so far forth, destroy the market for home products, without creating or tending to create, any other market for them. Such taxes, accordingly, cause a dead loss all around,--to the foreign producer who wants to buy our products with his own, to the home producer who wants to sell his own products against those, and even to the government also as a tax-collector, which can get no revenue on foreign goods excluded by monopoly-taxes. There is a final and deeper point of view, from which all such monopolies are wholly condemnable. _They lessen of necessity,--from their own nature and inexorable operation_,--THE DIVERSITY OF RELATIVE ADVANTAGE AS BETWEEN EXCHANGERS, on which diversity, as we have now seen, the whole fact and gain of exchanges depend. Taxes on raw materials, for example, whether actually paid on them or used to enhance the price of other corresponding materials as in the tariff-taxes, increase the costs of all products into which such taxed materials enter, and so restrict the market of the home-producer by lessening his relative advantage as compared with the relative advantage of the foreigner over him. He cannot sell so well, perhaps cannot sell at all, his cost-enhanced products. Monopoly-taxes on industrial processes of any kind, on the means of transportation, have similar effects on the cost of products; and of course, similar effects in lessening Diversity, in restricting markets, and in destroying the life of Trade. Before quitting this subject, it may be well for us briefly to classify Monopolies. (a) Patent Rights. In the great parliamentary Statute of 21 James I, which declared the exclusive privileges to use any and to sell any merchandise to be contrary to the ancient and fundamental laws of the realm, and all grants and dispensations for such monopolies to be of none effect, two exceptions had been made; the first, in favor of Patents for fourteen years to the true and first inventors of new manufactures within the realm; and the second, in favor of the grants by Act of Parliament to any Company for the enlargement of foreign Trade, of which the East India Company chartered on the last day of the last year of the sixteenth century became the most famous and the longest-lived. Open letters or letters _patent_, as they were called, giving to inventors exclusive authority to vend for a limited time any chattel or article of commerce, of which a _model_ could be made showing the point and application of what was claimed to be _new_; and Copyrights, which grant an exclusive property also for a limited time to authors and discoverers of something new and useful, of which a model cannot be made, or, as it is phrased in the Constitution of the United States, "_the exclusive right to their respective writings and discoveries_"; are a part of the results among all English-speaking peoples of the two exceptions in this famous and beneficent Act of Parliament. In the United States a patent lasts for 17 years, and is not reissued except by a special act of Congress; a copyright lasts for 28 years, and may be renewed by the author, his widow, or children, for 14 years longer. In the constitution of the new German Empire of 1871, this protection of intellectual property (_der Schutz des geistigen Eigenthums_) is expressly included in the matters which are to be dealt with by the _Reichstag_ or imperial parliament. Now while patents and copyrights are a monopoly under the definition, they are quite distinct in their purpose and spirit from the monopolies already described. On the whole, Society does well in trying to protect, by law, inventors and thinkers in the sole use and benefit of their respective products for a brief and specified time. There are large difficulties in the way of reaching this end practically, as is proven by the endless and expensive lawsuits in such cases, but the postulate on which it is attempted is sound, namely, that otherwise citizens would have less motive to think and to invent; since in that case only the public-spirited and the rich could or would devote themselves to an important branch of the public progress. A patent or copyright is merely a return service which Society renders for a service received. It violates no man's right of property, as an ordinary monopoly does, but on the other hand is a provision to protect for a time a new right of property created by the thought and efforts of a deserving class of men. The phrase, "intellectual property," used above in translating from the German, is not well chosen, since we have amply learned that anything is property that can be bought and sold, that simple rights of many kinds are constantly on sale in the market, and consequently that patents and copyrights are at once proper and property because they are a technical return-service for other services ready to be rendered to the community. (b) Revenue Rights. Once at a court ball, Napoleon the First noticed a lady very richly dressed and wearing splendid diamonds, and on asking for her name, ascertained that she was the wife of a tobacco manufacturer of Paris; whereupon it occurred immediately to the quick mind of the French ruler, that the State might just as well have those great profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly in the interest of taxation, and so it has continued to this day, and yields now about 400,000,000 francs a year. Other nations have adopted to some small extent this mode of indirect taxation of their people. By legally cutting off the competition of all private dealers in the taxed article, and by preventing to the utmost of their power its being smuggled into the country, Governments are enabled to sell the article at a price enhanced artificially by the monopoly; but all that the people are made to pay _extra_ under the monopoly, saving the costs of maintaining it, goes directly into the treasury of the State; and, so far forth, becomes an unobjectionable mode of taxation. Under all forms of taxation, the aim should clearly be, that the Treasury receive all that the People are made to pay, except the cost of an economical collection. (c) Tariff Monopolies. The United States has never undertaken, like France and Germany, to vend directly and exclusively an article taxed by themselves for the sole purpose of revenue; but unfortunately they have undertaken and still maintain (1890) monopolies a thousand times more unjust and objectionable than any such revenue-monopoly can be; they have laid distinct tariff-taxes upon thousands of foreign articles, not with the design of getting revenue from them, but with an avowed and realized design of _preventing_ revenue by means of these taxes, since they have made the taxes so high and onerous as to be in many cases absolutely prohibitory of the entry of the goods, and in all cases more or less prohibitory of such entry. Revenue can only be gotten on goods that come in, while the very intent and result of these taxes is to shut the foreign goods out on which they are levied, so as to give certain domestic producers (who have themselves secured this legislation) the monopoly of the home market in these goods. This is the very core of public wrong-doing. This is the worst form of monopoly that ever existed in a civilized country. Queen Elizabeth's monopolies, which so roused the ire of the Parliament of 1601, were nothing in enormity as compared with these tariff-taxes. Civilization long ago sloughed off such direct grants of personal privilege as were forbidden forever by the Act of 1624, and accordingly there is no need of mentioning these in the present classification. Tariff-taxes for other ends than pure revenue are the worst monopolies in existence, because (1) they compel the people to pay under ostensible taxes many times more than the Treasury gets from them in actual revenue; (2) they are wholly deceptive in their terms, and their operation is clothed in disguises difficult to strip off; (3) they are always put on at the instance and under the pressure of the man (or men) who expects thereby to raise the price of his own wares at the expense of his countrymen; (4) they create under legal forms however unconstitutional privileged classes in the community; (5) their first effect is invariably to make the rich richer and the poor poorer; (6) their ultimate effect is to impoverish the privileged classes themselves by taking away from them the natural spur of competition and self-dependence, in consequence of which their own goods become poor, and their zeal flags, and they come to lean still more heavily on monopoly-supports; (7) they destroy the market for domestic goods to precisely the same extent as they cut off the market for foreign goods, and (8) their whole retinue of evils is wrapped up in the great fact, that the _Diversity of Relative Advantage_ is thereby diminished both as among domestic producers of commodities and as between foreign and domestic producers. The expression, "natural monopoly," is sometimes used of those, who, under freedom, and using to the utmost their natural gifts and acquired skill, have distanced all local competitors, and may be said to control the market in their own interest, furnishing the best goods at the cheapest rates. This is in no proper sense of the term a "monopoly." Production has no complaint to make of any such pre-eminence in excellence and opportunity. It harms nobody and benefits everybody. Exchange rejoices over every man and woman and child, who so puts his head and heart and hand into his own peculiar product as to outstrip all others in that one line in point of ease and excellence, and so be able to offer a service at once better and cheaper than any one else can offer it then and there; and when all men and women and children, so far as they are employed commercially, come to possess a "natural monopoly" each in his own specialty, then Exchanges become as profitable and progressive as possible then and there, because the ever-blessed diversity of relative advantage has its utmost limit. 4. We come now to consider the natural LIMITS, if any such there be, to the Production of material commodities. This point has been much discussed. For example, Dr. Chalmers, a Scotch clergyman of great intelligence, profoundly moved by the condition of the poor in Glasgow, published in 1822 an interesting but not over-sound treatise entitled "Political Economy," in which the proposition is maintained, that the universal market is strictly limited, and therefore that, were it not for the unproductive consumption of the rich and luxurious, and the equally unproductive consumption of national wars, there would soon be a general glut of material commodities, and consequently Production would have to cease for the lack of a vent for its products. Pretty soon we shall be able to detect the enormous fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste Say, a very competent French economist, in chapter xv of his well-known treatise, fully developed this very important proposition, if true, namely, _that production may go on indefinitely in all directions without ever a fear of reaching a general glut of products_. What is a market? What is a limited market? What is an illimitable market? A market, as we have already seen in substance, is nothing in the world but certain _persons_ somewhere with return-services in their hands desirous to part with these in order to get, that is, to buy, some other services offered in exchange. Each set of services is equally a market in relation to the other set. _A market is always persons having something in their hands to sell._ Buyers and sellers are equally a market in relation to each other. Whenever anybody goes forth to buy, he must of course take with him something with which to pay for what he wants to buy, that is to say, he must become a seller the very instant he becomes a buyer; and whenever anybody wants to sell something, he must of course want something already in the hands of somebody else, in which to take his pay, that is, he becomes a buyer the moment he becomes a seller. This helps us to see perfectly what a market is. Defined in the terms of persons, _a market is two men, each glad to get the product of the other, and to render in return his own product_; defined in the terms of things, _a market for products is products in market_. Now, what can limit the universal market for material products? Clearly, it can only be limited either in the element of _Desires_ or in the element of _Return-Services_. But the desires of all men, even of one man, which the efforts of other men may satisfy, have never yet come to a stand-still. Who ever heard of even one man, who was in possession of all the products of all kinds, that he wanted? Even if there were one such man somewhere, there are millions upon millions of other men, whose desires for products such as the efforts of other men can furnish are unlimited in number and infinite in degree. It is not possible, therefore, that there should be a lack of human desires anywhere, that could put any bound to the production of commodities or hinder in the least its ever-swelling march. If only two things can limit the universal market, and if there never has been and never can be any lack on the part of some men of Desires which the efforts of other men can satisfy through exchange, can there ever be any lack in the second element of a market, namely, in Return-services? It is not meant to be asserted, that there are not definite limitations at any one time or place, or in the whole world at any given period, in the capacities of men then and there to produce material commodities, with their knowledge of things and powers of invention; but what _is_ meant to be asserted is this, that wherever Production is most busy and universal in response to the desires of some men somewhere, _there_ will be the greatest plenty of return-services, with which to pay for the services of these "some men somewhere" offered in response to the desires of the first set of producers. Therefore, no general glut of products is possible to occur. The more and the more _kinds_ of commodities produced anywhere, the better market _that_ for the more and the more kinds of commodities produced somewhere else. The nearer Industry may seem to be about to come to the goal of a limit, the farther off from that goal it is in reality. The aggregate of human industrial powers has indeed a potential limit at any one moment, but the knowledge of things and the power of invention and the means of transportation are enlarging every moment of time; so that, that potential limit never can become an actual limitation. Human industry will go on enlarging and diversifying itself so long as the world shall stand. Let us put this vastly important argument in other and briefer words: the Desires of men which the Efforts of other men can satisfy through exchange are unlimited in number and indefinite in degree; and therefore, mutual industrial efforts can continue to be put forth in exchange, until these unlimited and indefinite desires of all men are all met,--a goal which clearly never can be reached. This proposition demolishes at a stroke the fallacy, that pervades Dr. Chalmers' book but just now alluded to; and, what is more to the present point, demolishes equally fallacies current and prevalent in the United States at this hour. What our national industries need and all they need, what they always needed and all they ever will need, is a quick market for their products; products in market is the only market for products; but the United States for 30 years past has been putting vast obstacles in the shape of formidable taxation in the way of the presence of products from abroad in our domestic market, and consequently and inexorably the market for domestic products has been lost in foreign countries, to the immense and irreparable damage of domestic producers as well as to the foreign producers themselves. No general glut of exchangeable products is possible to take place in this world under natural liberty and just law, because under these the diversity of relative advantage and consequently the profitableness of commercial exchanges is all the time widening everywhere, tending to bring the whole earth into a commercial and blessed union. On the other hand, while a general glut of products is impossible to occur under a decent freedom, a partial glut in respect to certain commodities in certain places is very common. Through want of foresight as to a prospective demand, or miscalculation as to its probable amount, particular services are sometimes offered in too great abundance or of a kind not now adapted to the chosen market, and in respect to these the market may truly be said to be glutted. This frequently happens with editions of books; more copies are printed than can be sold at paying prices. Also, when the fashion changes, which is after all less capricious than is commonly supposed, the goods that were fashionable but are so no longer, are very apt to be somewhere in excess of the demand for them. Nothing can then hinder a partial or total loss in their value in the hands of their last holders. Precautions, however, may well be taken to avoid losses of this character, through the cultivation of foresight, and by studying as accurately as possible the nature of human desires and the not altogether irregular changes that have been observed to take place in them. This constitutes the art of mercantile sagacity; and the most successful producers in all the departments of exchange are those who best develop this attainable sagacity, who adapt their particular services closest to the existing and to the coming demands; who, to excellence in the substance of their products, add taste and attractiveness to their form; and who, as the result of this, tend rather to lead the fashions of the many than to follow in their wake. It cannot be wrong to repeat here in substance, what has indeed been said already in another connection, that Production as a general rule is no dead level of monotonous exertion,--no going forth and coming back on precisely the same track,--since its sphere is Life with all its wants and Man with all his desires; since there is scope and verge enough for the development of ingenious minds in almost all of its departments; and since its ultimate goal is beyond the ken of man. 5. We must now study with considerable pains the ultimate facts and the essential functions of LANDS in connection with the Production of material commodities. This has always been the most vexed question in our Science; but it is approaching, even if it has not already reached, a satisfactory and final solution. The present writer believes that his own studies and researches have thrown some original and important light upon the perplexing problem of the Value of lands and of their produce. His present readers are surely entitled to his clearest possible presentation of all the facts and principles of this radical question. The French "physiocrats" of a hundred years ago, founders of the first School in Political Economy, excellent men for the most part as well as good economists in general, thought, that lands were property in a peculiar and eminent sense, that they were the ultimate source of all values but their own, and that consequently lands should bear the weight of the national taxes. English economists, constituting with their followers in other countries the second School in our Science, while not going to the length of the physiocrats, still maintained that the value of lands and of the produce of lands were distinct in important respects from all other values whatever. In our own time and country, Henry George, though belonging for the most part to the third economic School, is a great stickler for a single tax on lands in lieu of all other taxes. We must, then, concentrate all the lights we can gather on these points of dispute and difficulty. (a) _The presumption in science is always against the existence of a few outlying cases, whenever the induction has been long and carefully conducted by many persons, and the generalization appears on all other grounds to be sound and comprehensive._ All induction proceeds upon the premise, that Nature is _uniform_ in those essential resemblances that constitute a _class_ of things in science. Nature has so often justified confidence in her essential resemblances even under the greatest differences in external circumstance and apparent diversity, that the presumption becomes immensely strong in her favor, whenever a generalization patiently gathered from many particulars seems to cover the whole ground concerned except a few obstinate-looking items, that have not yet been closely studied. Two to one these items also will presently fall into their predestined place. We have already seen abundant grounds for believing, that Values arise from human services rendered and received: is it at all likely, considering the nature of scientific generalization and the history of all the more advanced sciences, that in Political Economy, lands and their produce should be found to constitute an outlying exception to the law of all other valuable things? (b) There is one vital distinction to be made at the outset and held to throughout the discussion, namely, that, between all lands as a _physical thing_, which God made and gave to all men in common without any effort of their own, and some lands now as a _valuable thing_, in all probability made such through the action of human desires and human efforts brought to bear upon what _was_ merely physical but what has now _become_ valuable. The failure to distinguish between _lands_ as such and _valuable lands_ as such, has always wrought confusion and mischief in the land problem. The two things are utterly different and incommensurable. There are vast stretches of lands on the surface of the earth, to which no _value_ ever attached or ever will attach. They are lands, and that is all. Political Economy has nothing to say of them, and nothing to do with them. Because they are never bought or sold, because they never give birth to "produce," they lie wholly outside the field of Value. Then there are immense areas of lands now valuable, that were once as valueless as the first class. With these Political Economy has a great deal to do, and also with the way in which they passed from valueless to valuable. Then there is a third class of lands, that have not yet been studied as they ought and till recently have not been studied at all, namely, those known to have been valuable at one time, but which have now lost their value either wholly or in large measure. There are such lands as these in every State of our Union, and in every civilized country beneath the sun; and Political Economy has already learned something, and is destined to learn much more, about the processes by which lands pass from out the first great class into the second, and from the second into the third. Valueless, Valuable, Unvalued,--these three words describe to the economist all the lands of the world. (c) If we may trust the simple record in Genesis, the whole earth was given of God to the whole race, under the direction that they "_replenish and subdue it_." All the lands were then certainly valueless, although some of them were doubtless possessed of Utility, that is, a capacity to gratify human desires through a direct appropriation, which is a very different thing from Value, which last is the rendering and receiving of equivalents as between two persons. It seems very plain, that under this word, "Subdue," and under the human services implied in that, came in the first idea of ownership in land. When a family or tribe commenced the work of subjugation upon a piece of land, when they enclosed it, settled on it, tilled it, in any way whatever improved it by their own toil, then _could_ first the idea of ownership dawn upon their minds, then first began that land to be capable of value, since now that family might reasonably say to another, If you want this field, you must give us an equivalent for what we have expended on it to improve it. If the transfer took place, what was it that was sold? What was it that was paid for by the party of the second part? It could not be the inherent quality of the soil, it could not be anything that the first family had gratuitously entered upon, because similar free land with all its inherent qualities lay open to occupation on every hand, and the second family would surely say, For as much effort as you have put upon your land to better it, we can make other free land as good as yours, consequently we can give you no more at the most than a fair equivalent for your efforts already expended. If the parcel were sold, therefore, the _value_ of it must have been determined, not by the _gratuitous_ elements involved but the _onerous_ elements involved. The physical thing, land, which cost nothing, has now become the valuable thing, land, through a series of human efforts expended of such kind as call out human desires for the results reached, and justify the rendering of return-services for them; and that which the buyer pays for is never the free _old_ but always the onerous _new_; new utilities, that cost something, have been added to and intermixed with old utilities, that cost nothing; and solely in consequence of this expenditure of efforts on the part of some men, answering to the desires and calling out the efforts of other men, do parcels of land pass out from the first great class into the second great class. So far as it can be gathered from the nature of the case, and from the known steps of past experience, this is the simple and rational process by which valueless lands become valuable, and _less_ valuable become _more_ valuable lands. (d) This line of proof, strong in itself, is strengthened by observing how land-parcels gradually and practically pass out from the second into the third class of lands,--from the Valuable into the Unvalued. As it is only human Efforts wisely bestowed upon valueless lands or in some connection with them, that ever make these valuable, so it is, that these Efforts intermitted for a time, or less wisely bestowed, or reckoned less in harmony with the present and prospective desires of other men, invariably cause a loss of value in valuable lands; and, if such neglect or unwisdom of effort continue long enough, nothing is more certain, than that lands so treated will lose their value altogether, nobody will give anything for them, they will drop out from the second class into the third by the same path (only in inverse order), by which they crept at first from valueless to valuable. Under the writer's own observation in different parts of New England, whole tiers of farms once valuable and productive have lost that character either wholly or for the most part, taxes can no longer be collected from them, nobody will really give anything for them in exchange, they are abandoned of their former owners, they are left to lie waste or to grow up into forest again. It follows from all this beyond a doubt, and the logical issue is one of vast consequence to mankind, that Value is no attribute of matter, no inherent quality of lands as such wherever situated, but it comes and goes, it is a relation of mutual purchase between human services rendered and received. (e) Land-parcels becoming valuable in the way but just now indicated, and so long as they continue valuable, that is, salable, are technically _Commodities_, according to our triple division of all Valuables. They belong in this grand division, that we are specially studying in this chapter, for the same reason as a horse does or a steam-engine does. Men did not originally make the land as a congeries of matter, neither do men make horses, nor do they make the iron ore out of which most parts of the steam-engine is made; but men do modify bits of the land as God made it, they subdue it, they improve it in manifold ways, they make it _desirable_ in the eyes of other men, and thus or otherwise they come into possession of it, gain for themselves a right to sell it, prepare it to be sold and sell it, on the same principle as men raise and break and train horses and prepare them to be sold and sell them, and just as men by many processes transform the iron ore into a steam-engine and sell that. Ricardo, in his famous doctrine of Rent, says a good deal about "the original and indestructible powers of the soil"; but as a matter of fact, _there are no such powers_, since the elements and properties that constitute land are all the time changing under chemical and other action; and even if there were such powers, it would still be impossible to separate what God did for the land from what men have done in order to fit it to be sold; and what men have ever been authorized to take pay from other men for what God did in the creation of the world? The simple truth is, that Value is never of God's creation but only of men's exertion. There never was any land anywhere fit for cultivation and sale without more or less expenditure of human labor and reserved capital upon it; and the "powers" of the land, whatever they are, instead of being "indestructible," are in a constant process of wearing out, and require a constant application of labor and capital to keep up their fertility. Valuable pieces of land, accordingly, like all other commodities, derive their _utility_ partly from the free contribution of Nature, and partly from the onerous contribution of men; but, on the other hand, they derive their _value_, whether the value be then increasing or diminishing, wholly from human desires and corresponding efforts. (f) It is but a step from this impregnable position to another, namely, that Henry George is wholly wrong in his view, that there is Value in lands as God made them and gave them to men in common; and consequently, wholly wrong in his doctrine, that a single tax on land values would be just and equal to land owners, and might well be made to take the place of all other taxes on all other persons. He says: "_If we are all here by the equal permission of the Creator, we are all here with an equal title to the enjoyments of his bounty._" What bounty? If he means the original utility which God put into all lands in common, and which certain men have done nothing to better, there is nobody to dispute his proposition. But he does not mean that, because there is nothing of any significance that could come out of that. What he means is, that it is God and not man who makes lands valuable. He makes no distinction between Utility and Value in lands. He lumps the two together in one, and calls the aggregate the Creator's "bounty." He goes on to say: "_There is on earth no power which can rightfully make a grant of exclusive ownership in land._" Well! Is there any power on earth which can rightfully deny to any man or family the proprietorship of his own exclusive _efforts_, nobody's else rights being infringed thereby? Or can deny to him or them the _results_ of such efforts, however embodied? When valueless lands are made valuable by human efforts expended to that end, does not the "value" belong to those who made it? When valuable lands have been made more valuable than they were by the efforts and foresight of their owners, the rights of others untouched, does not the "increment" belong to those who have created it? The truth is, if Henry George's powers of radical analysis had been at all equal to his remarkable power of rhetorical presentation, the world would never have been treated to his popular and imposing land-fallacies. Prudhon's "Property is theft," and George's "Single tax on land," rest on the same basis of socialism. (g) All valuable land-parcels are material Commodities, made to be such by onerous human efforts of some sort expended upon or in some connection with the free Utilities furnished by Nature; the utilities are one thing in origin and function, and the values are a very different thing both in origin and function; and the present point is, that nearly all valuable lands everywhere are Capital also, that is to say, products reserved to aid in a further and future production. Capital is a relatively small class under the immensely large class Values. Capital is by no means coincident with Commodities, since vast lines of the latter are consumed with no reference to a further production by means of their use. But capital is always either commodities or claims, and valuable bits of land are always commodities and nearly always capital; because all tillage and pasture lands, all forests grown for wood and timber, and lands of all sorts rented or held for resale at a higher price, are capital under the definition, are "_products reserved as an aid to further production_." The peculiarity of all farming lands is this, they are themselves commodities, in whose creation God's free gifts and men's onerous labors have conspired; and they are held in reserve by their owners as capital, for the sake of producing by their means with the help of more of God's free gifts further valuable commodities, such as grain, and fruit and timber. Farms in their highest reach of previous culture still need for crops the sun and the rain. Indeed the sun is the most useful and powerful force in the world. Oh! how it warms and lifts and quickens! Give it and the rain and the dew but a fair chance on lands properly prepared for them, and endless fields blossom like the rose and are white to the harvest! Agriculture always has been and always will be the vocation of the masses of mankind. Under a fair freedom, and a decent law, and a reasonable industry, Agriculture is always profitable; because it is natural, that is, designed by God for the welfare of mankind; because it lies at the basis of all other industries,--most of the food of mankind, most of the raw material of all manufactures, most of the subject-matter of all national and international commerce,--come out of the farms of the world; because it has been ordered so in the nature of things, that, under a tolerable freedom, a given amount of agricultural products tends constantly to buy, that is, to pay for, more and more of almost all kinds of manufactured products, for a reason to be explained shortly, thus tending strongly to uplift the farming masses in a scale of comforts; and because there is no other main line of human activities so constantly and so prodigiously and so gratuitously assisted by Natural Agents as is Agriculture. As Milton has profoundly expressed it in the "Hymn to the Nativity," the Sun is indeed to Mother Earth "_her lusty paramour_." But at this very time of writing a wail is coming up in ever deepening tones from Italy and France and Germany and Russia and especially the United States, that a colossal blunder in legislation common to all these countries now, say rather a colossal crime of the powerful few against the humble many, in the shape of tariff-monopolies, neutralizes in large part these natural advantages of agriculture, makes farming unprofitable and farmers unable to pay their taxes, diverts young men in increasing numbers from the farms to the towns, plasters the lands over with mortgages, shuts out from their natural markets the products of the land, thus depressing their price, and shuts off from farmers by outrageous taxes their natural supplies, thus augmenting their price. Farmers in all these countries are revolving between the upper and the nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy from that city, has just made a speech in the Italian Parliament, which sets forth in strong terms the great depression in Agriculture, and the critical condition of the public finances, brought about by the new policy of protectionism there. He says: "_The Utopian idea of creating an industrial Italy on the ruins of an agricultural Italy, has been a colossal error big with disastrous results. We have preferred the shop to the land; we have preferred the coal we do not possess to our Italian sun; we have preferred the motive force of steam to the most powerful motive force in the universe, the sun; and we are naturally suffering the sad consequences._" Exports increased in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the Count quotes the cry coming up from one end of the Peninsula to the other: "_Give us the means of selling our products, and we will pay the taxes._" England is the only considerable country in the world, whose customs-revenue increased in the fiscal year 1888-89 over the year before; this English increase was over 5 _per centum_, which means an increase both in imports and exports, whose movements are almost absolutely free so far as England is concerned; while in all the countries mentioned above, which are under a different system in that respect, there was a _deficit_ of revenue from tariff-taxes as compared with the year before, and a _decrease_ in both exports and imports. (h) If nearly all bits of valuable lands be capital, as we have just seen strong grounds for believing, then it follows of course, _that the Rent of leased lands whether for buildings or harvests is the same in nature with the Interest on money loaned, and is the measure of the service rendered by the owners to the actual users of the Capital_. This proposition, seen in its radical proofs and in its logical corollaries, takes the very life out of Henry George's land-theories, and out of the popular remedies thereto annexed. The writer firmly believes also, that this proposition in the grounds of it and in the inferences from it might have been used by Mr. Gladstone and his followers with telling effect in the animated discussions of the Irish land-question in the British Parliament during the decade 1880-90. In the debates on the Irish Land Bill passed in 1881, the representatives of the land-owners in Ireland held to their right to take all the rent they could extort by the help of the law; on the other hand the representatives of the Irish rent-payers held to their right as cultivators and maintainers to withhold rent in large part or altogether; and Mr. Gladstone, as representative of the nation, while insisting on the right of the owners to certain rents, insisted equally on the right of the cultivators to certain important privileges in the soil. Our present proposition with those that spring out of it, though it was not used by Gladstone, as it might well have been to smooth his pathway through the roughness of that legislation, yet justifies at one and the same time the discontent of the Irish rent-payer, the claim of the Irish land-holder to an assured rent of some sort, and the fundamental principle of the Irish Land Bill of 1881. That bill gives a certain modified ownership and control to the actual cultivators and maintainers of the soil. That is right. The principle of land-values herewith enunciated, their uprise and increase and frequent decay also in all land-parcels, justifies completely the concessions to tenants in that bill; while the old and still commonly accepted English principles of land, and the false yet famous doctrine of Rent promulgated by Ricardo at the beginning of the century, are wholly against Gladstone and his concessions in that bill. Let us now see whither simple analysis and logical processes will quickly bring us in this whole matter. Valuable land was once valueless, and always remained so, until, by virtue of human efforts expended upon it or in some direct connection with it, coupled with the desires of certain other men for that land or its produce, accompanied with a readiness on the part of these men to render some equivalent for it or its use, first imparted value to that particular patch; moreover, it has been found in practice ten thousand times, just as one would expect, knowing the origin of value in general, that, unless human efforts are further and constantly expended on or in connection with that piece, and unless desires of other men continue to turn towards it in the way of exchange, its value will silently and inevitably escape from it; therefore, whoever has come into possession of that valuable piece of land by purchase or inheritance, and foregoes the use of it in favor of another as a tenant, is morally and commercially entitled to the stipulated return for that use, _which is rent_; but also, if that other, aside from the current use which is always a wearing-out process, contributes in any way to the continuance and increase of the value and fertility of the land, then and so far he gains rights in the land and becomes a sort of joint owner of it, since what he has done in the way of maintenance and improvement is inextricably mingled with what the other owners or users have done, and is of the same nature with that; and, therefore, the modified ownership of certain tenants recognized in Gladstone's bill is in strict accordance with ultimate justice, as it is also in strict accord with right, that the legal owner should continue to receive a return in the shape of rent for all the fertility and opportunity actually contributed by him, and no more. The discontent of the Irish peasantry has largely come from an instinct or intelligence more unerring than the economics of the land-owners, namely, that they are called on to pay rent for what they themselves have _contributed_ in addition to the rent for what they have _received_. The true origin of value in land, and the only way in which value in land is kept up, seems to have penetrated deeper into the minds of Irish tenants than into the minds of many British statesmen. (i) If the bulk of all valuable land-parcels be capital, as it is, then one might expect beforehand to find _a law of diminishing returns_ from such lands, agricultural labor and skill remaining the same; because, all capital is tools made such by the expenditure of human efforts on changeable material, and then by the practice of _abstinence_, and tools from their very nature are always wearing out. Increase of efforts in connection with any form of capital unimproved by new inventions and uninvigorated by fresh skill, though they may indeed increase the aggregate return, cannot, for the reason just given, _secure an increase proportioned to the increase of the efforts_. The English writers generally, and Mr. Ricardo in particular, justly lay much stress on this proposition, although they have not taken lands to be capital, and have proven the law of diminishing returns in a different way from ours, and consequently have not set the propositions of land in their best and most ultimate relations. Their method of proving the law, however, is short and conclusive: If by doubling the efforts upon a piece of land, double the produce could be secured, and by quadrupling it, quadruple, and so on, there would be no reason why any man should ever cultivate more than a square acre, or even a square rod. He has a strong motive to confine his culture to a small space, just so long as the amount of produce is in the ratio of the efforts expended, because there is less locomotion of tools and fertilizers and crops. The fact that he extends his culture from one acre to another, and then to distant acres, notwithstanding the inconvenience and expense of transportation, is an irrefragable proof of the proposition in question. Increase of agricultural efforts and expenditures on a given space of land will secure a larger amount of produce, but as a general law, _the increased amount will not be proportioned to the increased expenditure_. It is through this law of diminishing returns, that the Creator has secured the gradual occupation, by men, of almost the whole earth. There is a strong and natural tendency to leave the old acres to advance upon new, the old countries to emigrate to new, whenever the returns begin to bear a more unfavorable ratio to the labors bestowed. The farmer will advance from the first to the second acre as soon as he thinks that more produce can be obtained from it by a given amount of efforts than can be gotten by a like expenditure of additional efforts upon the first acre, allowance being made for the increased inconvenience; and so, cultivation has gradually extended itself and men have become dispersed over the whole earth. Other principles leading to dispersion have undoubtedly co-operated, but this is the fundamental one, operative at all times, changing the course of population, and consequently of empire. (j) It follows from the points already made, _that all permanent improvements in agriculture retard the operation of the law of diminishing returns_. The recent introduction of the silo, for example, upon the long-used and wearing-out farms of New England promises, if the public law would quit throwing in obstacles, to help restore the fertility of many of them. The discovery of new and more available fertilizers, the invention of better agricultural implements, the light thrown by chemistry upon agriculture, the consequent adoption of better methods of culture and rotation of crops, the more perfect adaptation to the various soils of the kinds of produce sought to be raised from them,--all these and similar improvements tend to increase the ratio of produce to the labor, and to disguise the law just established. The lands that are now under cultivation may be made, under more skilful modes of culture to yield indefinitely more than at present, and the vast still uncultivated lands of the world may come to render an incalculable quantity of food to the world's population; but yet, as improvements are naturally less continuous in this than in most other departments of production, as invention has much less play, as there is less opportunity for the division and co-operation of laborers, _as nothing can materially shorten the time during which the fruits of the earth must ripen_, it is certain that possible improvements will never override the law of diminishing returns; and, consequently, _that the value of agricultural produce tends constantly to rise relatively to manufactured products generally_. (k) The last point to be made under the general topic we are now discussing, is, _that the best tenure of lands in the interest of the production of material commodities is the fee simple in the hands of the actual cultivators_. This is the old Teutonic holding; but special circumstances in the British Islands have gradually changed these small holdings once cultivated by the hands of their free owners into large estates, the parts of which are leased out at will or for a term of years to tenants or "farmers" as they are there called, who, in turn, being small capitalists, as the land-owners are large capitalists, furnish the stock and hire the laborers and thus become the actual cultivators, and even often sublet parts of their own leased holdings to tenants of the next degree below, who can furnish less stock and can hire fewer laborers. The word "farmer" as used in the United States has a quite different meaning from that it bears in Great Britain; it means here a man cultivating his own fields with his own funds in his own way, and it means there a man cultivating another's fields with his own funds in a way and on terms made a matter of contract between the two; and these two modes of culture are so distinct that they are not likely to lie alongside of each other to any great extent for a very long time in the same country. Since her great Revolution, and under the action of the law requiring the equal partition of every man's landed estate among all his children, France has had for the most part the small holding tilled by the owner's own hands, instead of the great estates of the old _régime_, the average being about 14 acres to each owner, and nearly one fourth of the entire population being proprietors of land either in town or country; in the United States the plough is guided almost wholly by the man who owns the soil he tills; while in Great Britain the original peasant proprietor has almost entirely disappeared. Each system has its advocates and arguments. The question at bottom is, whether capital in the form of tillable land is more _effective_ when held in large masses and loaned out to men, who possess small capitals in another form than land, and are willing to apply these for a return upon that land, or when held in small masses and used as capital by the owners themselves, who also own some capital in another form than land and are willing to apply this to their own profit upon their land. We hold, that the latter method is better than the former, both for the maintenance and improvement of the land itself as capital and also for the current production of commodities from it, because, (1) when one owns the farm he works, from the very nature of permanent ownership he takes a greater interest in it, perhaps he has inherited it from his fathers, perhaps he has bought it and paid for it at the hardest, at any rate it is his own, and as all men work from _motives_ and the energy of the work is proportioned to the constant press of the motives, then must the owner of the capital, whose abstinence _makes_ it capital, be under the strongest possible motive at once to improve his capital and also to make the current produce from it as great as possible, since the capital itself and all it yields is his own; moreover, (2) ownership improves the moral _character_ of the cultivators, it tends to make them industrious, thrifty, frugal, independent, hopeful of the future, anxious to give their children better privileges than they themselves had, and it would seem as if the masses of men are educated by nothing so much, at least by nothing more, as and than by the _ownership_ of land, wherever such tenure is possible and easy to the masses; and (3) the outward testimony is abundant from many lands, that the peasant proprietor _is_ a happier and more virtuous man, a more productive and progressive one, than the mere tenant and farm-laborer, while there is much perhaps less conclusive testimony that leased lands are inferior in point of improvements and productiveness to the same lands when cultivated by their owners and to contiguous or at least similar lands still so cultivated. It is a cognate point yet worthy of separate mention, that a general division of lands into farms only moderately large and approximately equal is most favorable to the largest aggregate production. Such a division takes place of itself wherever the lands are held in fee simple, and the cost of land-transfers is slight, and there are no such obstacles as slavery or primogeniture, as has happened practically in New England and in the Middle and Western States, and as is now happening of its own accord more or less at the South. The Greek writer, Aristotle, quoted some centuries before Christ from "the African," probably some Carthaginian writer on agriculture, the now familiar saying, "_the best manure for the land is the foot of the owner_." This homely word long attributed to Dr. Franklin, who stole it for his "Poor Richard's Almanack" more than a century ago, is based on the sound principle, that personal supervision to be most effective must be limited in its sphere, and that the best agricultural skill becomes weak when it attempts to exhibit itself on too broad a surface. Because a man can cultivate 100 acres better than any of his neighbors, it does not prove that he will cultivate 50 acres additional to them better than a neighbor of inferior skill, who is the owner of these 50 and no more. When the freeholds are small and nearly equal a wide competition among the farmers comes naturally into play, success is seen to depend upon personal efforts of intelligence and will, and interest and hope become the motives to the most productive cultivation. There is a high pleasure in possession and in self-guided exertion, and an impulse is broadly felt over the whole region to get as much as possible out of the land and at the same time to keep good and ever improve its condition. To protect and advance his own interests, to attend upon the seasons, to watch and wait, to foresee and plan and labor,--all this develops the farmer, and gives him energy and independence; and wherever there is a broad basis of such independent yeomanry to lean back upon, when heavy taxes are to be raised and strong blows of battle are to be struck, the national safety and position are assured. 6. We come now in the last place to consider the _Costs of Production_ of material commodities of all sorts. Valuable patches of land, all prepared for Production in its several kinds, are the most important Commodities in the world, and the largest also in volume of Value. What did it cost "_to subdue_" the present tillable lands of this country? How much did it cost to get ready for grazing the broad pastures? To make accessible the forests that yield the timber? To open up the mines also and bring them into "touch" with the population? These questions are of great consequence, not that the actual past cost of any class of these more permanent "commodities" in the commercial world will be any safe guide to their present value, since cheaper and cheaper means of subduing the rugged forms of Nature are all the while coming into play, and all things that did cost more once tend pitilessly to fall to what similar things cost now; and since also it is never "efforts" alone that determine the value of anything, but efforts in conjunction with the "desires" of other men. Still, the _amount_ of efforts expended at any given time upon these more stable commodities to make them productive, that is, their cost of production, is always gauged in general by an _estimate_ of what the "desires" for them will be when completed; and this makes their cost of production a sort of loose measure of their value at the time. The main reason, however, why the cost of production of these primal commodities, namely, valuable land-patches, whatever may be expected to be produced from them afterwards, is so important, is, that as a general rule, the less the cost of any commodity meeting a universal want _the wider and surer is its market_. The larger the circle of the buyers of anything the more certain its sale; because, the world over, the men of small incomes are manifold larger in number than the men of large incomes. Society is like a pyramid: the lowest course of masonry is the longest and widest,--has the most stones or bricks in it,--and ever fewer towards the top. If we reckon valuable lands as the _primary_ commodities, then the _secondary_ commodities will be of two classes, namely, (1) the _produce_ of these valuable lands, whether animal or vegetable or mineral, such as cattle and cereals and coal; and (2) vendible material products obtained by human efforts from non-valuable land and sea, such as furs and fish. This division of material commodities into primary and secondary, and the distinction among secondary commodities according as their source is costly and costless, has never before been drawn in Political Economy; and it is fully believed, that the thoughtful reader and student will pretty soon perceive its advantages in helping clear up one of the most confused and perplexing sections of our Science, namely, that which relates to the causes and measures of _Rent_. We are now to inquire into the elements of the _cost of production_ of each of these three classes of commodities; and we may find ourselves surprised at the simplicity and certainty of these elements. _1._ We will now look into the Cost of Production of valuable land-patches themselves, the first and most important class of commodities. Here, as everywhere else in Valuables, we discover certain free gifts of Nature, without whose presence indeed the value could never come into being, but which are not _constituents_ of the value, because they are gratuitous, given of God, and because the natural competition among buyers and sellers inevitably flings out from all effect on value of the otherwise possible action of these free and bountiful gifts, as have been already fully illustrated in chapter first. No piece of land ever yet had one particle of Value until human efforts of some sort had been expended on it or in some connection with it, for two excellent reasons, first, no man would ever even _think_ of saying to another in reference to such a piece of land "Give me something for it and I will pass it over to you," and second, even if he did think of such an absurdity the other would reply "Why should I give you anything for something to which you have not the least claim, especially as I can take for nothing just such pieces all around here?" It must be remembered, not only that God gave the whole earth to all mankind without distinction, but also that his bountiful hand scattered all peculiar kinds of patches in great number upon each of the Continents. There is a plenty of Utility (gratuitous) in land-parcels just as God made them, but no possibility of Value (onerous) till other hands than His have touched and benefited them. What, then, are the onerous elements that enter into the value of land-parcels and constitute their Cost of Production? There are only two such elements, namely, _Cost of Labor and Cost of Capital_. To find out exactly what "Labor" is, and what there is in it entitling and assuring its reward in "Wages," will be the task and perhaps also the pleasure of the next chapter; but it will suffice for the present discussion to say, that Labor is human exertion put forth for the sake of a commercial return. Lands can by no possibility be brought out of a state of nature into a state of value without the expenditure of Labor; and the actual or estimated cost of this labor, accordingly, is the first constituent of the Cost of Production of valuable lands considered as Commodities. Labor, however, can not apply itself to free lands in order to make them valuable without the co-operation of another onerous element, namely, Capital, in some of its many forms. For example, if forest lands are to be made tillable, the trees must first be cut down, and this will require besides the muscular exertion of the laborer something in the way of an axe, which is capital, the result of previous labor reserved to assist in further production: if native prairie is to be subdued to a valuable commodity, something of the nature of a plough must be employed in the process, and horses or a steam engine to propel it, and a plough and horses are capital, and still require fresh labor to make them useful in production. But capital always costs something; and, therefore, the cost of the Capital enters in as a second constituent into the cost of production of Land-Commodities. But these two costs are all. We shall search in vain for any other onerous element in the cost of producing commodities. There are two variables only in the Cost of Production, which itself is the sum of the two subordinate costs. (a) And now let us analyze first the Cost of Labor in this connection, and then second the Cost of Capital, and we shall soon reach radical and unchangeable ground, and find in the sum of these two an aggregate Cost of Production, and also all of the variables that can ever enter into such Cost. It is plain to reason, that only by Labor non-valuable land-pieces ever did or ever can become valuable. Captain John Smith understood this in 1607 at Jamestown as well as anybody understands it now: there were 48 gentlemen, and only 12 tillers of the soil, among the 105 colonists, who originally landed there: "_nothing is to be expected hence_," he wrote of the new country, _but by_ "_labor_:" new supplies of laborers, aided by a wise allotment of land-parcels to each colonist, secured after five years of struggle the lasting fortunes of Virginia: "_men fell to building houses and planting corn_": the very streets of Jamestown were sown with tobacco; and in fifteen years the colony numbered 5000 souls. Now the cost of Labor is analyzable into three variables only, namely, (1) the _efficiency_ of the labor; (2) the _rate_ of nominal wages paid; (3) the cost to the employer of _that valuable_, in which the wages are paid. Let us see: what an employer wants _is to get things done_; consequently, if an employer hire two men to work for him at the same rate of wages, and if one be twice as efficient a laborer as the other, the _cost_ of the labor of the first is only one half the cost of the labor of the second: therefore, a _high rate of wages_ does not mean _a high cost of labor_ whenever and wherever the laborers are very efficient. As a rule, it is found, that the cost of labor in reference to a given product is _the least_ in those countries, like the United States and Great Britain, in which the rates of nominal wages are _the highest_; because, it is found also, that a high _efficiency_ of laborers accompanies both as a cause and as an effect high rates of wages. Secondly, there are striking differences in the rates of nominal wages paid for a day's work in the same general employment in different parts of the same country, and especially in different countries. The agricultural laborer in the west of England, say in Wiltshire, gets about 10_s._ per week, while in the north of England, say Nottinghamshire, laborers at the same general work get about 16_s._ per week. Walker in his Wages-Question gathers from the best authorities many such statements as these: "On the Grand Trunk Railway in Canada the French-Canadian laborers received 3_s._ 6_d._ a day, while the Englishmen received from 5_s._ to 6_s._ a day, but it was found that the English did the greatest amount of work for the money." "In the quarry at Bonnieres, in which Frenchmen, Irishmen, and Englishmen were employed side by side, the Frenchmen received 3, the Irishmen 4, and the Englishmen 6, francs a day; and at those different rates the Englishman was found to be the most advantageous workman of the three." "The statistics of the iron industry in France show, that on the average 42 men are employed to do the same work in smelting pig iron as is done by 25 men on the Tees." "In India, although the cost of daily labor ranges from 4-1/2_d._ to 6_d._ a day, mile for mile, the cost of railway work is about the same as in England." Thus it is plain, that a _high rate of wages_ does not import a _high cost of labor_, but rather the reverse. A vast mass of current fallacies are disposed of in a moment by this truth seen in its grounds. The United States have shown in the past the highest rates of nominal wages in the world, and at the same time have shown the lowest costs of labor to the employers, because as a rule the laborers here have been more efficient than elsewhere. England has the highest rates of wages and the lowest costs of labor in Europe for the same reason. The degree of _efficiency_ shown by different laborers is the second variable in a cost of labor. Thirdly, if that valuable, whether money or other, in which wages are paid, varies in cost to the employer, then the cost of the labor paid for by that valuable, efficiency of the laborers, and nominal rate of pay remaining the same, will of course be varied thereby. We shall learn hereafter in the chapter under that title, that the value of "Money" is by no means invariable even in one country, just as we have already learned the variable nature of all other values; and, too, wages are not always paid in money, though they are commonly reckoned in the terms of money; and accordingly, the third and last variable in a cost of labor is the cost to the employer of that valuable, whatever it be, in which the wages are paid. Assuming, as we may, that given wages are paid in money, then any country that has for any reason a more abundant money than another may clearly pay higher rates of nominal wages than that other without making its costs of labor any higher than in that. The United States, for example, has usually had a very abundant money (not always of the best kind), which of course has tended to make higher the current prices of all commodities, and this has enabled capitalist-employers to pay higher nominal rates of wages, without at all enhancing relatively the costs of labor, and also without really benefiting the laborers. (b) We will now analyze second the Cost of Capital in this connection, as the only other element of cost in the Cost of Production of Commodities in general, and particularly now in the cost of making worthless land-pieces valuable so as to be used in further production. Here too we find three variables, no one of which can be safely neglected any more than the other three in the reckoning that has for its object a prospective cost of production. These are, first, _the current rate per centum_; second, _the time for which the capital is advanced_; and third, _the liability of that form of capital to slow or rapid wearing out_. For instance, under the first variable, the rate per centum of capital, if the rate at Amsterdam be 3 and that at New York be 7, if the cost of labor be equal in the two cities, if the time of advance be one year, and if there be no liability of the capital to wear out; then any commodity made at Amsterdam with an outlay of $100 may be sold at a profit for $103, while a similar commodity made at New York with the same outlay cannot be sold for less than $107. All other things being equal, a _low rate per centum_ of capital in any country gives that country an advantage in the markets of the world for selling its commodities over other countries offering similar commodities where the rate is higher, because its cost of their production is less. Of course also such a country can subjugate its wild lands and make them valuable at less cost than the other countries. To illustrate the operation of the second variable, the time for which the capital is advanced, let the same suppositions be continued, except that the _time of advance_ at New York be extended to four years. Then the commodity may be sold at and from Amsterdam, as before, at $103, but the corresponding commodity at and from New York for not less than $131, so far as mere cost of production determines the prices. This point is also well shown up in the case of wine, which, to reach its perfection, requires to be kept a number of years, for, if it be genuine and ripe, its cost of production has been by so much enhanced by its delay in reaching the market. If the time of advance be long, and the rate _per centum_ high at the same time, the cost of capital from the two causes combined multiplies the cost of the product; and consequently, only countries in which the _rates_ are low can successfully engage in enterprises requiring a large capital to be invested for _long periods_ before returns are realized. One million of Dutch capital at 3% a year, expecting to realize returns only after 20 years, may be remunerated by products selling for $1,806,111; but American capital under like circumstances, except that the rate here is 7%, must have a return of $3,869,685, or lose by the operation. To illustrate the action of the third and last variable, we must observe, that all forms of capital wear out, but some forms much faster than others, and that this makes a difference in the sinking-funds that must be reserved out of the gross profits of the capital in order to replace the principal whole. This difference will at once affect the cost of capital, and so of production, and so indirectly the ultimate value of the product. Suppose there are two commodities, which we will call A and B, produced in two different establishments, in each of which is invested a capital of $11,000, in one of which is used a machine that costs $1000 and is wholly worn out by one year's use, and in the other a machine costing the same sum, which will last, however, for ten years. Suppose further, that the rate _per centum_ of profit be 10, and the time consumed in completing each of the two products be one year. Now there is a marked difference in the Cost of Capital in the two establishments, and this difference will indirectly but immediately appear in the Value of the respective products. For, to A must be charged not only $1100, the interest on the whole capital at the current rate, but also another $1000, wherewith to replace the machine already worn out by a single year's use. A, accordingly, cannot be sold without loss for less than $2100. B, however, will cost less and can be sold for less at the usual profit. Because, to it must be charged, as before, $1100, current rate of profit on the capital invested, and only $100 (really less than that for an obvious reason) to replace the durable machine after ten years' use. The capitalist, therefore, can sell B for $1200, and make something over the current rate of profit. Since the cost of capital invariably resolves itself into these three variables, every capitalist in order to become successful as such must give strict attention to all three of these points. To any one who projects the making of valueless into valuable land, or valuable into more valuable land, by the expenditure of capital upon them for that purpose, it becomes a matter of prime importance for him to inquire how long a time the whole process will take, how much he must allow _per annum_ for the cost of all the implements employed, and especially how complete in action and duration are these costly implements. The _durability of machinery_, whatever the name it bear and whatsoever the work it do, is at once the most significant and the most neglected point in the actual and prospective Production of our time and country; and no condemnation can be too severe upon a policy of public law, such as now prevails, whose whole tendency and actual effect is to worsen the quality and lessen the durability of all commercial implements whatsoever, from the needle to the locomotive. The same abominable public policy increases the cost and decreases the durability of all agricultural implements, like the axe and the plough, designed and adapted to transform valueless and non-productive into valuable and food-producing lands. _2._ Now, having fully seen the elements of the cost of reducing land itself from a natural into a valuable and productive form, what next are the elements of the cost of production of those material commodities produced for sale _by the aid_ of these subdued and now productive lands? Commodities so produced constitute the second class in the law of their Cost of Production. And a vastly important class it is. The food of the world, so far as that food is purchased as the product, whether animal or vegetable, of valuable lands; the fuel of the world, so far as that fuel is bought from owned and accessible forests and mines; the clothing of the world, so far as the fabrics come from the cultivated cotton and flax and wool and skins offered for sale; the shelter of the world, so far as the wood and brick and stones and lime are drawn from valuable lands and quarries; and the warehouses and the temples and the theatres of the world, built, as they are, out of the products of costly and rentful lands: these all, and many more like these, constitute a class of commodities immense in their volume, whose cost of production has in it an element peculiar and additional to that of the first class already analyzed, and to that of the third class also soon to be considered. This peculiar and additional element in the cost of production of these things, class second of commodities, is called RENT. Interminable have been and still are, especially in the British Islands, the definitions and discussions upon Rent: they have boxed the compass of economical nomenclature: they have run up and down the entire gamut of possible expression on such a theme. David Ricardo, the Anglo-Jewish Banker, formerly announced, near the beginning of this century, that "_Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil._" Two objections lie with fatal weight against this definition and all that is involved in it: first, there _are_ no "indestructible powers of the soil," either "original" or acquired, since the universal verdict of all agriculture has been and still is, that the "powers" of all soils are continually wearing out, and need to be constantly renovated by fertilizers and manipulations of all sorts; and second, even if there were such "original and indestructible powers," it would be impossible to separate them from the additional "powers" acquired by means of the capital expended to bring that land from the state of nature to its present state, and the landlord has had nothing to do with any "powers" of the land except those conferred by his own labor and capital upon it, and can by no possibility put himself into a position where he can _enforce_ any claim of his own for a return from any "original powers" of any land-parcel whatever. The simple truth is, and it illumines the whole subject of agriculture and its products, that the value of land-parcels and also the value of the transient use of them, or _Rent_, hang wholly on the onerous human efforts involved in them, and not at all on original and gratuitous utilities. Science has only to unfold the plan of God and its actual and beneficent workings. "_In the sweat of thy face shalt thou eat bread._" All that God furnishes to men in order to get a living and in order even to get rich is Opportunity. The opportunity is ample. The call to a partnership in Effort as between God and men is loud and constant. The world with all its powers, free lands with all their utilities, the change of seasons, the blessed sun and the blessed dew and rain, the constant disintegration of rocks beneath the soil and the gradual clothing with lichens and moss and verdure of the rocks above in preparation for a new soil, and the wonderful chemistry of the vast laboratory of Nature, all work night and day without fee or reward in the service of mankind. But men themselves must not intermit their labor. All values are of _their_ creation and maintenance. If they cease or relax their labor upon land-pieces so only made valuable and rentful, then will the value and the rent begin to slip away inexorably, and no prayers and no regrets will avail to call them back. Now, then, since commodities of the second class in the cost of their production must respond not only to the _current_ cost of Labor and Capital in bringing them to market, but also something additional in the way of Rent to the _past_ cost of the implement, the land-parcel, without whose contributing agency present results could not be gained; _Rent is the Rendering for the present use of a Valuable made such by past Labor and Capital._ Land-parcels leased for agriculture; mines and the access to them leased for the production of metals and minerals; and forests whose growth has been permitted by the past _abstinence_ of their owners; all properly yield a rent; because these forms of capital, whose existence is due to past labor and capital, are present contributors to products, whose sale must compensate not only present labor and the use of current capital, but also the use of these more permanent forms of capital long ago created. A competent authority estimated in 1881, that the land-parcels of the United Kingdom of Great Britain were worth £3,000,000,000; and there were at the same time 6,000,000 of inhabited houses, excluding factories and business premises and tenements renting for £20 and under. Most of these lands and houses are rented by their owners to the actual occupiers on the just principle explained above, inasmuch as the lease-system is the prevailing one in that country. According to the Census of 1880, there were 4,008,907 so-called farms in the United States in that year. Most of these are held in fee simple, and are tilled by their owners; but just so far as land-patches and forests and mines are leased in this country, their products must provide in their price of sale for current rents, as well as current costs of present production. This is just as it should be, and just as it must be, if Capital is to take this form of assisting the processes of future production. But this form of Capital, as well as all other forms of the same, is perpetually wearing out, that is to say, is gradually losing its power to contribute as at first to the present and future processes of production. This loss is in the very nature of things,--in the very nature of all Capital. The great Father never intended that His children should cease from work. He has ordered all things so, that they cannot cease from work, and continue to live in any comfort and progress. Value, as we have already thoroughly learned, is not a quality that can be put into anything _to stay there_: it is a recurring relation of mutual services between man and man; and each of these services of the three kinds involves recurring Efforts. Capital is a form of Value; and, consequently, it cannot possibly take on a shape not subject to the _law of diminishing returns_. This is deductive proof. And precisely the same result is reached by Induction. Men have noticed and recorded the fact at all times, and have made provision for it in their pecuniary calculations, that tools and machinery need to be repaired and then replaced, that the current interest on moneyed capital tends to decline from generation to generation in all progressive countries, and also that lands and other forms of real estate so lose their productive and rental power unless cared for in renovation that men migrate and emigrate in consequence. How much Rent shall the tenant pay to the landlord for the present use of the latter's old lands? Or in other words, how much shall be added to the going price of the product on account of the diminishing return due for the use of the old landed capital? This is a hard question to answer: probably the hardest question that is ever asked in practical Economics. Mr. Gladstone wrestled with it as complicated with a larger political question in passing the Irish Land Bill of 1881. Another honest athlete, Mr. Parnell, wrestled with it upon the same parliamentary arena. Scores of able and practical statesmen in Great Britain, and elsewhere, have struggled to reach a practical answer to this question; and scores of able and theoretical economists in all countries have striven to reach a theoretical answer to it. Most of these answers have been inharmonious, and many of them contradictory, with each other. The Land Bill of 1881 created a parliamentary Commission, whose duty and authority it was, to visit the Irish counties in person, to gain information in detail, to take sworn testimony of all the parties concerned, and then to lift or lower rents according to their discretion. The discontent of the Irish tenants in general was considerably mollified by the action of this Commission; while the debates and wrangles of the parliamentary session of 1889, and the persistent agitations for Home Rule (an agitation at once political and economical), show that the results of the work of that Commission were not wholly satisfactory. (a) It is easy enough to see why the solution of this general problem is so extremely difficult. The new is mixed in with the old. The result of the old labor and capital is a productive piece of land; the current labor and capital is expended upon the same piece to make it more productive; the same sort of thing is done now that was done then, and the results of the two are now thoroughly intermixed; there were original free utilities in soil and growths and deposits, but these had and have no value and can never yield rent; the old labor and capital improved the soil by clearing and drainage and fertilizers, and made the growths and deposits more valuable and accessible, so that even the old onerous was more or less transformed into the original gratuitous; and now the new onerous, the fresh cultivation and fertilization and betterments generally, in soils and roads and buildings, are inextricably commingled with former betterments of the same general kind and with the original free gifts of Nature. No wonder the Commission of 1881 found difficulty in determining what was what and which was which! No wonder that Irish tenants on long leases quarrel with their landlords about the betterments, how much is new, how much is old! It is clear, that when the lease is ended, the landlord ought to compensate the tenant for all that portion of the latter's betterments, which is not already worn out; it is equally clear, that the tenant ought to be willing to pay a fair rent for the use of the unexpended betterments of the landlord and his predecessors; while there is room and verge enough for endless disputes between them as to the respective amounts of these, and consequently as to the amounts of rent and of its remissions. These difficulties and intricacies do not belong to the _principles_ of the Science of buying and selling, which are in the main clear and certain in their action, but are incidents of determining in certain cases _what that is_, which is bought and sold. Parties in interest in all kinds of buying and selling are sometimes compelled to go to the courts in order to have the Law decide what their respective rights are as buyers and sellers; but this is no fault of Political Economy as a science, or of trading as an art; two men in all cases make their own bargain, according to their own estimate of the respective rendering and receiving of each; if the uncertainties of language, the misconception on the part of one or both of the terms agreed upon, and the misapprehension of some of the circumstances of the case, breed confusion and litigation, all this cannot be justly charged to the science of Political Economy. Nevertheless, it is into these incidental intricacies and uncertainties, that Henry George's now famous theory of landed rents and the taxation of them, strikes its roots. Instead of building his structure upon firm and open ground, so that thoughtful men can see that his basis is solid and scientific, Mr. George dashes at once into a thicket and lays his foundations with quickness and assurance where all is dark and doubtful, or at best where all is rather incidental than fundamental and demonstrable, and pretty soon displays a superstructure that appears attractive both without and within, through whose airy halls he knows how to conduct to their delight the credulous and discontented, and on whose walls hang plausible pictures calculated to invite and hold the attention of the masses. Let the perfect integrity and rhetorical ability of Mr. George be freely conceded; let it be freely conceded also, that he teaches in his books and lectures a great deal of vastly important industrial truth in a popular way so as to accomplish great good, such, for example, as the imperative need of greater simplicity in taxation, and the indisputable right of the people to their liberty in buying and selling; yet it must at the same time be owned, that he has never yet found out exactly what _Value_ is in general, consequently what are the causes of value in lands, and what are the nature and grounds of Rent. Something more of patient and radical analysis at the outset, and of logical and scientific unfolding afterwards, would have made Henry George one of the chief benefactors of his age. (b) It is also very easy to see, that the current price of produce, that is, what is gotten in return for the sale of what is gotten out of the land-parcels, must have a dominant influence upon what can be paid as rent for the use of the parcels. Unless the return from the produce be sufficient to reward at current rates the present labor and capital employed upon the parcel, the parcel will not continue to be cultivated at all, otherwise men would act without a motive for action, which they never do; unless, therefore, the price of produce be more than high enough to repay current wages and profits, there will be nothing left for Rent; and, consequently, the amount of the rent that can continue to be paid for lands will be _the difference between the going price of what is produced from them and the current expenses of cultivating them_. Here, as everywhere else within the domain of Exchange, Competition exerts its beneficent action. If one dealer, or ten, endeavors to put a price upon the produce more than enough to pay current wages and profits with a fair margin for the diminishing rate of rent, there are a plenty of others, dealers in the same grade of produce, who will be content with a fair return for present and past expenditure of labor and capital; and the action of these will effectually debar the others from exorbitant rates. The price of produce, accordingly, under free competition, is the divinely appointed regulator of landed rents. It regulates also, though more indirectly, the current rates of wages and profits in agriculture. Very different from this is Ricardo's doctrine of Rent. He makes everything turn on the Cost of Production of the Produce, which is Effort, ignoring the ever-varying demands for the produce, which is Desire. His doctrine, too famous and too long received for us to pass by in this connection, though now superannuated, was for substance, this: there are some lands in every country whose produce just repays the expenses of cultivation, and consequently yields no margin for rent; and the cost of production on these rentless and poorest lands under cultivation, will determine the price of the produce; and as there can be but one price in the same market, the produce raised on more fertile land will be sold for the same price, and this price, besides paying the cost of cultivation, will yield a rent rising higher according as the land is more fertile; so that the rent paid on any land is always a measure of the excess of productiveness of that land over the least productive land under paying cultivation; and therefore, an increased demand for food in consequence of increased population, and the higher price resulting, will force cultivation down upon still poorer soils, or compel a higher culture for less remunerative returns on the old soils, according to the law of diminishing returns, which in either case will raise the rents on all the soils above that grade that just repays the expenses of cultivation; so that it is the sole interest of landlords, as such, that population should be dense and food high, their interest being directly antagonistic to that of the other classes of the community. (c) Finally, in this connection, it is easy enough to see, what were the motives on the part of the landlords, and what were the results on the part of the masses, of Great Britain, in putting on and keeping on the infamous Corn Laws, so-called, which were repealed forever in 1846. The Corn Laws forbade the importation of foreign cereals under heavy pecuniary penalties. The simple purpose of the landlords then governing England was to raise the price of their grain by shutting off Competition of foreigners by means of these prohibitory tariff-taxes. It was Protectionism pure and simple. It was designed to raise the price of bread to the masses of their countrymen, and often did raise it to the point of their starvation. But we have just seen, that the higher the price of the produce, the wider the margin for Rent for the lands that produce it. The Corn Laws of England enriched the landlords at the expense of all other classes and to the starvation of many of the poor. As has been well said, this was the most successful of all the many expedients that have been tried, "_to fertilize the rich man's land by the sweat of the poor man's brow_." The words of Daniel O'Connell, spoken Sept. 28, 1843, in his parliamentary fight against the high-tariff Corn Laws, were surfeited with truth and righteousness: "_But what is the meaning of 'Protection'? It means an additional sixpence for each loaf; that is the Irish of it. If the landlord had not the protection, the loaf would sell for a shilling, but if he has protection, it will sell for one and sixpence. Protection is the English for sixpence; and what is more, it is the English for an extorted sixpence. The real meaning of 'Protection,' therefore, is robbery,--robbery of the poor by the rich._" At the present moment and for twenty-five years past, the public laws of the United States ostensibly relating to Taxes, have had an immense influence upon the value and rents of the agricultural lands of the country to depress them; because these laws have put up nearly or wholly impassable barriers to the coming in of those foreign goods, against which the farmers would naturally and profitably and inevitably have sold their surplus agricultural produce; by destroying the foreign market for farm products, these laws do in effect destroy a large part of the value of the farms of the country, and of what would otherwise be the rentals of a part of them; the Constitution of the country expressly forbids any taxation whatever of Exports, but these laws have precisely the same effect on the value of farm products if they were themselves forbidden to be exported, because those goods for which these would be otherwise exchanged for a profit are forbidden to be imported. _A market for products is products in market._ Thus these wretched laws lower the price of farm products, and consequently the value of farms and of their rents, and impoverish the farmers who are nearly one-half of the entire population of the country. While these paragraphs are being written, comes the intelligence of the formation of the "North American Salt Company," whose purpose is in their own language "_to unify and systematize the salt interests of the United States and Canada_," and to this end "_arrangements have been completed for the purchase and control of nearly all the existing salt properties of the North American continent_." As this is a fair instance out of some thousands, in which a tariff-tax has the designed effect to lift or lower values which deeply concern the people, let us look at it for a moment. On the average of the past twenty-five years the tariff-tax on salt has in general doubled the cost of that necessary of life to the whole people of the United States. When Canada had no such tax, American makers of it sold salt sometimes to the Canadians 40% less than they would sell it to their own countrymen. On the basis of this United States tariff-tax (it would never have been dreamed of without it) this new company comes forward with a scheme of international monopoly to control in their own interest the price of a prime necessity of life. They propose to issue stock and bonds to the amount of $15,000,000, with which to buy up "the existing salt properties"; and they frankly avow in the prospectus from which we are quoting, that profits of $2,000,000 a year on their capital are justified by the present outlook. Whence are these immense profits to come? Out of the pockets of the masses of the American people bound hand and foot in the meshes of a legal monopoly, which they themselves allow themselves to be ensnared in! In a similar but more outrageous way, are bound up at the present moment in the secret so-called "Trusts" about forty more of the necessaries of life; each one of which, unless it be the "Standard Oil Trust," has its footing in a so-called "protective" tariff-tax, and would collapse instantly on the repeal of that! It was necessary in order to complete our study of the second class of material commodities, namely, those produced from valuable and rentful lands, to glance in passing at the frequently disturbing effect on these, aside from their cost of production, of sinister laws plausibly imposed upon an unsuspicious people in the interest and at the instance of a privileged few. _3._ It only remains in this chapter, devoted to the discussion of material Commodities in their three economic classes, to conclude with a glance at the third class, namely, those material valuables that are obtained from free and unowned sources, such as masts cut in the wilds of America on both oceans two and three hundred years ago, and fish caught on the Banks of Newfoundland, and furs gathered to such profit in the north by the Hudson's Bay Company, and salt evaporated in the tropics by a free sun from old ocean's brine. These, and all such things as these, have a cost of production determined only by the cost of present labor and capital, and consequently a grade of value determined only by present Demand and Supply, unentangled for the most part by questions of rent and prior claim and taxation and nationality. All these things, accordingly, are relatively cheap, except as the element of Scarcity, and on that account of strong Desire, may sometimes come in to enhance the value. No man can tell the time exactly when French fishermen from the coasts of Brittany ventured over to the Banks of Newfoundland in their frail barks for the abundant cod in those waters, and went back home again at the close of the season freighted with plenty of a free and cheap food for their families and countrymen; or when it was that rude men calling themselves English followed these in their western track for the same general purposes, to become thereby hardy seamen on deeper seas, such as those who gained long afterwards the naval victories of Nelson; and we have all read in the fascinating pages of Irving the ventures and adventures of John Jacob Astor, the attraction of free furs in the Northwest of America, the hazards and the history incident to obtaining them, and the immense profits gained by their sale in the markets of the old world. FOOTNOTES: [3] Baines' History of the Cotton Manufacture, as condensed and quoted in Walpole's History of England, Vol. I. [4] Charles Knight's History of England, III. 292 _et seq._ CHAPTER III. PERSONAL SERVICES. There are three kinds of things only ever bought and sold in this good world of ours. In the preceding chapter we have conned carefully the first kind, material commodities, in their three subdivisions of land-parcels and products of such parcels and products of free land and sea. In the present chapter we come to study the second kind of valuable things, personal services, which we shall also find subdivisible into three classes. We have treated of Commodities first, because their value in its grounds and changes is more easily understood than that of the other two kinds, while in point of _time_ Services might well enough have been considered first, since it is these that manipulate into value the originally rude forms of Nature. The main difference between the two is this: in Commodities the attention is naturally drawn to tangible _things_ offered for sale, such as lands and wheat and fish; while in Services the attention is strongly drawn to _persons_ offering them for sale, such as the common laborer and the skilled artisan and the professional artist. This distinction, though obvious and useful as between commodities and services, is not after all radical; because Economics is a science of Persons from beginning to end; inasmuch as the services precede and are merged in the commodities, and inasmuch as the Desires (personal) of some men for the renderings of other men antedate and underlie all exchanges whatsoever. Personal Services are technically named _Labor_ in the science of Political Economy. This nomenclature is old and familiar, and will probably always persist on that account, but it is not of itself of the happiest, and it gives birth to some ambiguities and many fallacies. Let us look at these for a moment, before we pass to the definition and discussion of what is commonly called Labor, but what is better described by the term, Personal Services. Contrast will help us a little here. Commodities can always be measured by some _Standard_ outside of themselves: for example, land-parcels are measured into acres and fractions thereof by a surveyor's compass and chain; metals and cereals are weighed into centners and parts thereof by scales of some sort; and sugar is not only weighed at the custom-house, but tested as to other qualities by the polariscope. Now land, wheat, sugar, and all other commodities, have an existence separate from the standards that measure them, and whether they are bought or not they continue for a time essentially the same. They exist _per se_. They were indeed brought into existence on purpose to be sold, and if they cannot be sold, similar things additional will not then and there be brought into the market, but these things themselves are there separate from the seller and separate from the buyer. Not so with personal services. They do not exist _per se_. They are not separate from the seller, and they cannot come into existence without a buyer. _Skill_ is something the artisan cannot part with, nor can he sell the service to which the skill gives rise till the buyer be present with the return-service in his hands. The Laborer of any class cannot put his "service" on exhibition, and then wait for a buyer, as the commercial drummer sells goods by sample. The doctor, for example, must have his _patient_ before he can show his skill. The buying and selling of personal services, accordingly, is more intimate and ultimate than the buying and selling of commodities: it brings people more closely together: it depends much more on traits of _character_ and on acquired _skill_. Right here we may see clearly the main objection to the term, "Labor," as commonly used, and the bad fallacy to which it gives birth. "Labor" is indeed in form and origin an _abstract_ term as much as "service" is, with this difference, that the word "service" radically implies the person serving and another person served at the same instant; but the term "Labor" has long been taking on itself in the mouths of men a _concrete_ meaning, as if it might be something separate from the laborers, as in the common phrase "Labor and Capital," which has already done a world of mischief and is likely to do a good deal more, because it seems to imply, that the two are alike in independent self-existence, and that they stand over against each other on equal terms for a fair bargain or for a free fight. This is not the case, as we shall see more fully later; since capital is something separable from the capitalist, always a commodity or a claim, always transferable, always valuable or else it will not be "Capital." Some of the German economists, and particularly John Conrad of Halle, have avoided this difficulty by a clean nomenclature. They say "_Labor-givers_" and "_Labor-takers_," instead of Laborers and Capitalists, and especially instead of "Labor and Capital," thus emphasizing the personal element in both terms, and also leaving themselves free to define and use the term "Capital" as distinct from any particular capitalist, while the term "Labor" cannot be defined and used as distinct from any given laborer. This precise point, though probably new, is of very considerable consequence in the true doctrine of Wages. We are compelled by the exigencies of the English language and the still stronger fetters of economical custom to continue to use the terms "Labor" and "Laborers" in their technical sense, and in connection with the scientific terms "Capital" and "Capitalist"; but we shall always use each of these words in the same meaning, and free them as far as possible from the fungous accretions that have fastened upon them in the course of time. _Personal effort of any kind put forth for another in view of a return-service and for the sake of it is labor._ _Laborers are persons rendering their peculiar services to other persons for a commercial reward._ _The valuable received by a laborer for his service rendered is Wages._ These definitions exclude from our circle of view all Efforts of anybody put forth for other than commercial reasons; and they include all Efforts of everybody, from the President to the scrub, put forth under the inducement of a return-service or Wages. No good end seems to be reached by trying to distinguish, as Francis Walker does in his "Wages-Question," between the "Wages-class" and the "Salary-class," because there appears to be no scientific or other economical difference between Wages and Salary. Each is a return-service for another service rendered, and that is all there is to it. The whole class of Laborers, accordingly, in any civilized and progressive country, is immensely large and becoming constantly larger. Excluding, of course, from this class all persons in so far as they render so-called moral services to others, which are in their very nature _free_, such as those that spring from duty and courtesy and benevolence, and these happily are also an immense and fast-augmenting class, though our Science has nothing to do with them directly, the number of those persons in every community and in every rank of every community, who sell personal services of some sort in distinction from commodities and credits, is pretty nearly as large as the _per capita_ population of adults and competents within that circuit. It must be borne in mind, that the same persons whose primary business it may be to sell commodities or credits, often sell services also in some subordinate or incidental way; and also, that the same persons, who are dispensing on the one hand their gifts and moral renderings freely, are frequently of the busiest in selling on the other hand their personal services for pay. In other words, the sellers of Services cannot be discriminated _as to their persons_ from other sellers, or even from downright _givers_; but the _action_ itself, and the law of it, is quite distinct in the three cases of selling, and utterly diverse in the one case of giving. Now, can we sub-classify within this vast class of service-sellers, so as to help us understand better the class as a whole, and so especially as to help us understand better the Law of Wages within the entire class? We have just criticised Walker in a friendly spirit for attempting to draw lines of demarcation within this wide field: can we draw any useful ones ourselves less open to criticism than his, and such as rest back upon fair differences in nature and form? Walker makes his distinctions turn on certain peculiarities in the return-services: can we make ours turn better and clearer on certain peculiarities in the services themselves? We can at least try. Hard and fast lines cannot be drawn here, we admit. The exterior lines around Commodities and around Services and around Credits are each sharp and firm; and so is the deep-fixed circle that includes all three of these alike as Valuables; but _within_ the smaller circles the lines of needful division are somewhat more shadowy, though we leave with confidence to competent Economists the triple lines but just now drawn within the sphere of material Commodities. A rude classification among "Laborers," then, yet one useful and indeed indispensable, may be made into (1) Common Laborers, (2) Skilled Laborers, and (3) Professional Laborers. Common Laborers are those, whose services may be acceptably rendered by an ordinarily competent person after a little patient practice and instruction, without anything corresponding to an _apprenticeship_ as a preliminary to their selling their service. Farm hands, teamsters, porters, waiters, miners, 'longshoremen, railroad laborers, and many more belong to this first class. Owing to the ease with which this class can be recruited at any time from growing boys and emigrating foreigners and from those who may have essayed the class above and fallen back, the Supply here is kept constantly large relatively to the Demand for such services, and consequently Wages are always the lowest and steadiest in this lowest class of Laborers. Skilled Laborers are those, who have had to pass through something equivalent to an apprenticeship in order to be able to offer their services for sale. These, as a class, present some considerable points of difference from common laborers. Their numbers are fewer, for the reason, that relatively few parents can afford to give their children the time and money needful for them to learn a trade, or to become skilful in any art requiring prolonged education; as a result of this lessened press of competition among themselves, and because being intelligent and consequently mobile they are able to insist better on their claims and distribute themselves to points where their services are in more demand; and because they are likely to be subject to a stronger Demand than common laborers, on account of the close connection of their services with special accumulations of Capital; the Wages of skilled laborers will infallibly rule higher than those of common laborers. Artisans in general constitute this second class of laborers. Professional Laborers are those, who have received a technical education,--something more than an apprenticeship,--expressly to fit them to render difficult and delicate services to their fellow-men for pay, and who possess besides the requisite character and talents and genius to enable them to succeed. Clergymen, physicians, lawyers, literary men, artists, actors, and many more, render professional services loosely so-called. The obstacles at the entrance of this path occasioned by the lack (1) of appropriate natural gifts, or (2) of the requisite industry and character, or (3) of the means of suitable education and training, practically exclude so many persons, that the competition in the higher walks of professional life is not such as to prevent a very large remuneration for services rendered. The demand for these is often peculiarly intense, as well as the supply peculiarly limited. When great interests of property, of reputation, of life, are at stake, it is felt that the best men to secure these must be had at almost any price. Fees and rewards for services of great delicacy, of great difficulty, of great danger, are paid by individuals and corporations and nations without grudging. Comparatively few men reach the highest points of excellence in their respective professions, and they have in consequence a natural monopoly in these fields of effort, and receive for their labor a very high rate of Wages. For example, Daniel Webster often took a fee of $1000 for a single plea in court; Paganini, a like sum for an hour's playing on a violin; and Jenny Lind, at least as much for an evening's singing in a concert, because there was in each case a strong demand for a peculiar service and only one person in the world who could render that service in the circumstances to the same perfection. But the objections which lie with such force against artificial monopolies, cannot be urged at all against a natural monopoly; for, if the road to excellence be open to all, and no artificial obstructions thrown in the way of any, there is no blame but rather praise for him who distances all competitors, and asks and receives for services of peculiar excellence a large remuneration. Exchange rejoices in all diversities of advantage that are the birth of freedom, but reprobates with all her force advantage that is gained by artificial restrictions, because artificial restrictions always infringe on somebody's right to render services for a return; and the right to render services for a return is the fundamental conception in the Right of Property. Is it open for us, to gain a somewhat deeper and clearer sense of _what that is exactly_ that is rendered in these three classes of personal Services, before we pass to the considerations which determine in all cases their Value? It is plain, that what common Laborers sell for the most part, if not exclusively, is _muscular exertion_ of some kind, guided by the mind as trained in habit, and aided by appropriate implements, all designed to meet the desire and so call forth the return-service of the purchaser; it is equally plain, that skilled Laborers with scarcely any more exceptions than before sell the same sort of physical exertions, or motions, this time guided by mental action of a higher grade and wider scope, and aided also by more elaborate tools working towards the desires and consequent returns of a set of buyers more scrupulous and exacting than the first set; and it is plain enough, that some of the highest professional services, for instance the surgeon's, though not by any means the mass of such services, are essentially of the same kind as the two former, namely, muscular motions, guided by the most intimate and exact knowledge of things, and aided too by instruments the most scientific and expensive. In many of the professional services the physical element sinks to a minimum, while the intellectual and moral factors come to the front and take up the chief attention; it will be found, however, that the physical factor is always present in some degree, as, for example, in the counsel's plea before the court, and in the physician's visit on his patient; and in almost all cases, if not in all, some implement or other plays its part in the process of professional service before it ends, as Cicero used a pitch-pipe or tuning-fork to gauge his voice in his great pleas for Roman clients. Precisely what is rendered, then, in all cases of Personal Services in each of their three loose kinds, is _muscular motion conjoined with mental effort and both these assisted by habit and by some form of what we call Capital_. The Services are therefore _Personal_ in the highest sense. The Mind and Body of the Laborer conspire to render them. The most sagacious animal can never be trained to render one of them. They are wholly _human_. Nevertheless the muscular part in the rendering--motion and resistance to motion--is just what tools and machinery can be made to take the place of in large measure but never in whole measure, because tools may not be taught _to think_. It may seem sometimes as if machinery were about to take the place of human hands in some classes of Production; but it will be found in the ultimate issue, as it has been found in every stage of the process, that human hands and human minds in action are absolutely essential at every point of the Exchanges among men. Men are so made and Society is so organized, that they need increasingly for their comfort and progress the personal services of their fellow-men, and can render their own in exchange for these; and consequently, there never can fail (under freedom) a MARKET for Personal Services of the three kinds. Having now seen as closely as possible what that is which is rendered in personal services, let us pass to the principles which determine their remuneration. That is, we will now inquire carefully into the Value of personal services. We have learned already, that Demand and Supply in their action and reaction upon each other determine in all cases the value of Commodities for the time being; and we shall find it to be equally the dictate of all reason, and the outcome of all experience, that Demand and Supply decide too in all cases on the value of all Services and all Credits then and there. Shall we look first at the considerations that issue in the Demand for personal services, and then at those other considerations that limit the Supply of them? 1. Demand is never the mere desire for anything, but desire coupled with the ability to pay for it at rates satisfactory to the present holder. The Demand for Services, therefore, is made by the prospective purchasers of them; and the purchasers, of course, are those who desire them and are willing to pay for them at current rates. It will be easiest and surest for us to study the Demand for Services in each of the three classes of them in succession. (1) The Demand for Common Laborers has several points of difference from that for Skilled, and from that for Professional, Laborers. It is scarcely ever intense. It is mostly disconnected from large accumulations of Capital. The desire is usually for immediate gratification, without any other end in view. It is frequently for such a service, as, if a renderer may not be conveniently and cheaply found, one is inclined to do for himself. For instances: if the barber be not accessible and reasonable and tolerably skilful, a man will certainly shave himself, provided he have not yet attained the independence and the luxury of wearing a full beard; and the ordinary housewife, if the cleanly and tractable domestic does not come into sight, will do her own work with casual assistance. It is this important fact, that common services among men and women in common life may in many cases be dispensed with altogether, and in many other cases substitutes be found for them, in connection with the other important fact, that common laborers learn their art quickly and easily, and consequently are present everywhere in large numbers, that makes the Wages of such laborers uniformly low. The Demand is moderate and the Supply is large. (2) The Demand for Skilled Laborers is steadier and stronger than for Common, because in general the desire for these is not for immediate gratification, but for an ultimate satisfaction to arise from the commercial coöperation of these laborers with their employers, who are capitalists, in connection with accumulations of capital, the end in view being the production of commodities for sale at a profit. Here comes in a new motive on the part of capitalists to buy the personal services of laborers. The motive is simple and intelligible and commendable, but its nature and operation is popularly and grossly misapprehended. Capital is the result of Abstinence from the present use of a Valuable in gratification, for the sake of a future increase of it through Production. But Abstinence is always irksome in itself. It must have its prospective reward in an increase, a profit, or it will never transform itself from a mere valuable into a capitalized product. Now, the owner of the valuable, having transformed it into capital from this motive, is under a commercial necessity to hire laborers, in order by their help to make his capital yield a profit. Capital lying idle decreases in _value_ even, to say nothing of its yielding no increase to itself; and the motive of the capital-owner, accordingly, is strong and constant to buy the services of laborers, to marry these services with his own capitalized products, and thus to produce commodities for sale, whose value shall be greater than the present value of the capital and the services combined. Here we reach in the minds and motives of a large class of men an ultimate Demand for laborers, and specially for skilled laborers, which is as true and constant to its legitimate end of Profit as the needle is true and constant to the pole. At this point it is very evident, that, if the fair expectation of the capitalists be realized in a steady profit, and the larger the circle of capitalists and the more of capitalized products to each the better for all concerned, the Demand for laborers will become steady, and will be likely to steadily increase, because there will then be a constant motive on the part of all capitalists as such to put back a part or all of their yearly profits into capitalized products, and thus the Demand for laborers will become more intense, and the rates of Wages so far forth must be enhanced. The steady Demand for the services of the laborers hinges upon the steady Profits of the capitalists, and there is no antagonism between the interests of these two classes of buyers and sellers, but rather a complete identity of interest between them. We are looking now solely at what constitutes the Demand for laborers of the second class. As always, so here, there is Desire first and then a ready Return-service. The Desire of employers of this class is for a Profit on their capital, and the return-service for the laborers is present as a part of these capitalized products. This part of the capital we call Wages-Portion. It is already in hand or provided to be in hand when the wages fall due. Of course it is expected, that the current wages will ultimately come out of the current joint-production of the laborers upon the capitalized products set apart for that purpose by the capitalist. But if the profits fail to the capitalists at the end of that industrial-cycle, whether it be two months or twenty-four, then Desire will fail or be weakened to hire laborers for the next cycle, and the return-services or Wages-Portion with which to pay them for another cycle will be lessened of necessity. Both elements in Demand are curtailed by the falling-off of Profits. There is at the same instant less desire to buy services and less ability to pay for them. It is of the very nature of capitalized products to wear out in the process of production; if there be not net profits at the end of the cycle for the capitalists, it shall go hard but there will be less wages for the laborers during the next cycle. This is not a matter of sentiment or of philanthropy, but of eternal law, which God has ordained and the devices of men cannot frustrate. Capitalists and laborers are joint partners in the same concern. Under industrial and commercial freedom their interests are identical. Both are buyers and sellers to each other at the same instant; and, as always when both parties are alike benefited and satisfied with a trade, both will cheerfully and profitably continue the connection. The Demand of each class for the product of the other will continue unabated. Profits and wages reciprocally beget each other. But still it is not altogether true, what has sometimes been stated by economists, that capitalists are under the same sort of pressure to buy their services as the laborers are to sell them. Capital is a Valuable already created by the mutual desires and efforts of two persons, and is now the exclusive property of one of them, and has also been set apart by him through an act of will to be thereafter an aid to some future production under the motive of a new value to accrue thereby. The capital has now become secondary to and separated from the person who owns it. He very seldom understands the real nature and operation of it. He commonly imparts to it in his imagination a more substantive and persistent existence than it actually possesses. He is frequently more or less stuck up as towards his neighbors and employees in consequence of his possession of it. The very fact that he has capitalized it for future operations shows that he is independent of it as a means of present livelihood. The personal services of the laborers, on the other hand, stand in very different relations to _them_. Their personal services may indeed be _valuable_, but they cannot be _capitalized_. As laborers they have nothing else to sell. Unless they sell their services now, these have no existence even, still less can they have any value. It is only by a mischievous figure of speech, that the skill of laborers is sometimes spoken of as their "Capital." Therefore, the laborers are under a certain remote yet inherent disadvantage as sellers of their personal services, when compared with the capitalists as buyers of them. This disadvantage, however, though apparent in the nature of things, and under certain circumstances disastrous to the laborers, may disappear practically under another and natural state of things; and it is every way to be desired by both classes alike that it should disappear in practice. Whenever there is a broad and constant and profitable market for all the commodities the capitalists and the laborers can jointly produce,--that is to say, whenever profits are steady and remunerative and wages are high and growing in their purchasing-power,--the Demand for skilled laborers must always be such as puts the laborers on a footing of equality as over against the capitalists, because under such circumstances the purchasers of services are many and eager, two bosses will be likely to be bidding for one skilled laborer, and then wages are always growing in dollars and each dollar growing in effective purchasing-power. It is of the last importance in this connection to notice, that everything in Profits and Wages turns in the last resort upon the breadth and freedom of MARKETS. It is out of the return-service received from the _sale_ of the commodities produced jointly by the capitalists and laborers, that both wages and profits must ultimately be paid. There is no other possible source of them. When the Market fails, everything fails that leads up to a market. Particularly fails the Demand for laborers for the next industrial cycle, and of course drops also the prospective wages for that cycle. The public folly and universal loss of shutting off foreign markets for our own commodities by lofty tariff-barriers, as has been conspicuously done by the United States for thirty years past, follows of course from this radical truth; and the Wages of laborers, instead of being lifted by tariff-taxes, as has been so often falsely and wickedly asserted, are inevitably _depressed_ by them, because they effectually forbid to capitalists and laborers their best and freely chosen _markets_ for the sale of their joint products. Another vastly important matter, constantly affecting the Demand for laborers of the second class, is the Competency or otherwise of the practical managers of the Capital invested in industrial enterprises. Capital cannot manage itself. It is of itself wholly inert. It is always either a Commodity or a Credit. Conscious of their inability to handle wisely their own bits of Capital, or else taught it through a bitter experience, by far the larger number of individual owners of it loan it to others to manage; they invest it in some industrial corporation, in a bank or a mill or a railroad. Some one person, or at least a small body of persons, must practically manage now all specific accumulations of capital. It is they in their capacity of manipulating-capitalists, who constitute in large measure the Demand for laborers. But such managers, who are at once skilful and long-headed and honest, do not grow upon a chance bush. They are rare. Most of them in this country at least have been those, who started in a small way in the control of their own earned or small-inherited properties, and rose through practice and knowledge and conscience to the ability to handle profitably to all concerned large masses of Capital. In the hands of such men, given a tolerable chance by public law and private circumstances, both Profits and Wages are sure to come in satisfactorily. They are Captains of Industry. They are an honor to human nature. They are a blessing to the whole community. They have no need and no will to ask to be bolstered up in their business by unjust taxes enforced upon a whole people. Such men sometimes have sons or _protégés_, who possess similar capacities and similar integrity, and these by experience become able to carry on the business to similar successful issues. This is happy, but it is unusual. More commonly, in the second, and pretty certainly in the third, generation, the line of royal succession fails. There comes in a lieutenant rather than a captain of Industry. Likely enough he mistakes the nature of capital, and thinks that it will go along of itself without that eternal vigilance that is the one price of its maintenance and increase; likely enough he lacks the touch and rule of men, and his laborers become demoralized and refractory; more likely still he thinks he sees other operators around him getting quicker rich by speculating in enterprises outside the legitimate business, and takes some of his own and of what is not his own and throws it out of its proper channels; and, as the result of one or all of these, things soon go wrong, profits and wages fall off, poor work is done and finds slow sale, and Demand for laborers (which is their life-blood) slackens or goes out in that establishment. No wonder the Paper-makers in their annual gathering at Saratoga of 1889, resolved as the main outcome of their meeting, that they would bring up their sons (or somebody's sons) to succeed them in their business by a thorough practical training in the paper-mill itself, beginning early and continuing long. Industrial higher education in this or some other form is the secondary hope of manufacturing business in the United States, the primary hope being in a decent commercial liberty to buy their supplies and to sell their products in the best markets wherever these are to be found. There is one other important item that bears directly upon the Demand for laborers of the second class, and consequently upon their Wages, namely, the constant introduction of more and better Machinery. At first blush it would seem, and it has often been stated so, that the use of machinery takes just so much work from human hands, reduces by so much the Demand for laborers, and tends to lessen by so much their wages. All this is the opposite of the truth; but before we explain _why_ it is the opposite of the truth, let us attend carefully to the truth itself, as stated in 1889 by the highest living authority on these special points, Sir Edwin Chadwick, the octogenarian pioneer in sanitary and economic reforms. Fifty-six years ago Chadwick joined with his colleagues of the English Factory Inspection Board in recommending reduced hours of labor and other improvements which have now become general in England. In a paper recently read before the Political Economy Club, he calls attention to the greatly increased production which follows improved machinery and shortened hours. He says: "_Spinning machines which formerly turned 8000 in a minute, now turn 11,000; and in Lancashire not more than half the hands are now employed to produce the same amount with new machinery as were employed on the machinery of 1833. As an example of the extent of the reduction of hands by these improvements, it may be mentioned that one large family of cotton spinners in Manchester, which 40 years ago employed 11,000 hands, could not now muster one half that number._ YET THE MILL POPULATION HAS INCREASED, AS WELL AS THE GENERAL POPULATION, THE HANDS DISCHARGED BEING ABSORBED IN OTHER EMPLOYMENTS. _At the beginning of the century the cost of spinning a pound of yarn was a shilling. The pound of that same yarn is now spun for a half-penny by hands earning double wages for their increased energetic attention and skill. It is now found, however, that the strain of the increased responsible attention cannot be so long sustained as the slow, semi-automatic pace by the old working of the old mills with the long hours. Hence there is a tendency to a further voluntary reduction of the working hours in the best mills, first to nine hours. In one mill, in which 2000 men are employed a voluntary reduction has been effected to about eight hours with a more equable production; and I have heard of other examples. As showing the cost of working with inferior hands and loose regulations, a recent report from the Manchester Chamber of Commerce states that 20s. worth of bundled yarn may be produced at a cost of from 2d. to 3d. per pound less in Manchester than in Bombay, notwithstanding the hours of working are 80 hours per week, while in Manchester they are only 50. At the present time Lancashire, with its short hours, will meet Germany or any other country, in neutral markets, in the world. In Germany the spinners and weavers still work 13 hours a day as they once did in England; France has only come down to 12 hours; whereas the English rate has long been 10 hours, and may soon be 9 or even 8. And this reduction improves the health of the wage-workers, while the reduced cost of production allows them higher wages; yet Germany with its long hours and high tariff maintains a system_ OF LOW PAY, DEAR PRODUCTION, HIGH COST OF DISTRIBUTION, AND LIMITED SALES." The accuracy of these important statements of fact is confirmed on every hand. Committees of British spinners and weavers have repeatedly visited the United States, and then reported to their fellows at home, that wages, all things considered, were equal for spinners and weavers in Great Britain and the United States, and in some cases and respects higher in the former. Many times before his late lamented death, John Bright publicly testified that wages in England during his parliamentary life had risen in general 50%, and in some of the manufacturing lines 100%. A few months before these statements of Chadwick were made, Sir Richard Temple reported to his section of the British Association, "_That the average earnings per head in the United Kingdom, taking the whole population without division into classes, is £35, 4s., and exceeds the average of the United States, which is £27, 4s., and of Canada, which is £26, 18s., and of the Continent, which is £18, 1s.; while it falls below that of Australia, which is £43, 4s. per head._" According to this, the average earnings in Great Britain per head of the population are 30% higher than in the United States, and 81% higher than on the Continent of Europe. Truly, Britain is a prosperous and profitable country so far as average earnings of the whole people by the year is concerned. Sir Richard goes on in the same statistical paper to show, that the average annual profit on British Capital is 14%, and that Capital yields about the same rate for the United States. Now, can we easily give the grounds on which the introduction of more and better machinery, instead of displacing laborers, tends to lift and actually does lift the wages of those concerned, who continue to work with their hands and heads? We will try it. (a) It takes the hands and heads of laborers to invent and construct and keep in repair the machinery itself, that is often supposed to displace laborers, and so far forth opens a vent for the more profitable employment of some of the laborers, who before performed the cruder and more repetitive and automatic parts of the processes, which parts alone machinery can be made to perform. (b) Machinery always lessens the cost of a given amount of production, otherwise there would be no motive for its introduction. But, other things being equal, the lessened cost of a commodity broadens the market for its sale. The cheaper a useful commodity is offered, the more the buyers of it the world over. The more and the better the machinery brought in, the more and the cheaper the commodities produced and the broader and better the markets to be supplied; and, therefore, the more and the more skilful the hands needed to tend the machinery and to market the products. (c) The more commodities thus created by men and machines, and the wider the markets found for them over the earth, the more laborers are required to extract and prepare and transport the raw materials for the now augmenting commodities, and also to ship and distribute the finished products. As Chadwick says, notwithstanding the strictly _factory_ hands have diminished one half in one place, "yet the _mill_ population has increased, as well as the general population, the hands discharged being absorbed in other employments." (d) These improvements in machinery, and the consequent refinements in the skill of the laborers, cheapen also of course the commodities consumed by the laborers themselves, and therefore a given rate of wages, to say nothing of a rate sure to enlarge under these circumstances, now secures for the laborers a higher grade of comforts. More and better and more durable machinery, consequently, so far forth, tends at once to enhance the rate of laborers' wages and increase the purchasing power of the unit in which wages are paid. To return now to the main line of discussion under the present head, we have shown by proof positive that there is nothing either in new machinery introduced, or in higher wages paid in connection with such machinery, or in shortened hours made possible by these two, to lessen the Demand of Capitalists for the personal services of Laborers; because, there is nothing in all these, commercial and industrial freedom being presupposed, to lessen the Profits of the Capitalists, which profits are the sole motive actuating them as such. That high wages and short hours are rather an advantage to Profits in connection with skilled laborers and fine machinery, than a disadvantage when compared with long hours and low pay and poor implements, is clearly shown by Chadwick in the passage quoted comparing England with English Bombay, where the working hours are 60% more and the wages greatly less and the cost of the machinery very little; "twenty shillings' worth of bundled yarn may be produced at a cost of from 2_d._ to 3_d._ less in Manchester than in Bombay"; call it 2-1/2_d._ less; that is, it costs the Bombay spinner more than 1% per pound of yarn more to spin it than it costs the Manchester spinner! For truth and decency's sake, then, let us have done with the gabble in this country about the advantages of "pauper labor" over skilled, of low wages over high, of cheap machinery over dear! The penetrating reader will perceive, that the root of this whole matter lies in the breadth and quickness of the _Markets_, in which the commodities produced by the laborers and capitalists may be sold against other commodities, and against Services and Credits; if the markets of the world are free to all to buy in and to sell in, which seemingly two things are precisely one and the same thing, then the Demand of Capitalists for the services of laborers to create and market salable commodities wherever these may be wanted, can apparently never slacken on the whole; because, the desires of men which the efforts of other men may satisfy commercially, are indefinite in number and unlimited in degree; and, therefore, the Wages of the skilled laborers, the commercial freedom of the nations being presupposed, are likely to be on the whole on a steady rise throughout the world; and the amount and excellence of the machinery on a similar rise, since Capitalists can always under these circumstances see their Profits looming up ahead of them,--the profits of an endlessly diversified and marketable Production. The chief reason at any rate, and almost the only reason in common sight, why little England has surpassed in commercial prosperity of every sort every other nation on the globe during the past forty years, as evidenced by these statistics of Sir Richard Temple and other abounding proofs on sea and land, is in the fact, that her statesmen of the last generation came to perceive clearly, and then helped the people to see, that a market for products is products in market; that her traditional tariff-barriers to keep foreign goods out kept in equally domestic goods that wanted to get out for a profit, and so down went the tariff-barriers little by little, accursed alike by God and Englishmen, never to be set up again around the shores of the land of Cobden and Bright and Elliott; and to-day we read, that the average annual Earnings per head of the entire population of the United Kingdom, men and women and children, English and Irish and Scotch, are $176, while the annual average Profits of Capital within the three kingdoms is 14%. (3) In the last place here, we must now look at the Demand for the personal services of Professional laborers. These are persons, who have done something more with reference to their life-work than serve an apprenticeship to a trade, or acquire some mechanical skill in connection with some kind of machinery. An Education rather than an Apprenticeship is implied in Professional laborers. Knowledge of the bodies and of the minds of men; acquaintance with some one section at least of the general laws that pervade the universe; some confidence (the more the better) in God, who created and governs the world; are all requisite to a reasonable success on the part of Professional laborers. The Demand for their services, and of course also the Return made to them for such services, will largely depend on such superior knowledge and confidence acquired by such persons, and involved in their services. Clergymen, physicians, lawyers, statesmen, literators, actors, teachers, and scientific experts, may serve as our chief examples of Professional laborers. (a) "All that a man hath will he give for his life." When men fall sick, or those fall sick who are dear to them, they send for the doctor. Scarcely any trait of human nature is more universal than this. And the trait puts honor on human nature, because it implies a relatively high estimate of the worth of life in the mind of the patient, and also a relatively high confidence in a certain class of one's fellow-men. As Society progresses, and as Christianity deepens the sense of the worth of the individual life, and knits a stronger tie of confidence between man and man, a change is slowly coming over the relations between physicians and their patients; people do not wait to fall sick before they send for the doctor, so much as they formerly did; some individuals and families are establishing connections with a medical adviser, who studies their constitutions and habits of life beforehand, guides them in general sanitation, and thus both he and they are better ready for curatives in times of illness. Gladstone has long had such an attendant, with the best of results as he thinks, and strongly commended such action to John Bright, but too late to save the latter from what was thought to be premature death in consequence of imprudent and ill-advised handling of his health. In a few cases in England and the United States an annual salary is paid a physician for general care of the family's health, whether sickness befall or not, instead of the more usual fees on consultation and attendance. Dr. Munn of New York receives such an annual salary from Mr. Jay Gould. But in whatever way medical services are paid for, the Demand for them is constant and intense. The motive to buy them is immediate and personal, not mediate and remote, as in the case of capitalists and laborers of the second class. It is to be noticed further in respect to physicians, and indeed in respect to all professional laborers much more than in respect to other laborers, that much knowledge has been gained by them for its own sake, out of pure love for it, rather than for the sake of merely selling their services as laborers; while this does not diminish in the least the commercial character of their services, it tends to beget on the part of the buyers of them a stronger confidence in the men who render them, so that the Demand for such services and consequently the pay for them is enhanced by the trust reposed in the laborers on the ground of something acquired by them for other than selling purposes, and which indeed _cannot be sold_; and superior _character_ also, as well as superior knowledge, which is wholly _moral_ in its basis and not mercantile at all, affects the Demand for the services of the possessor of it to increase it, on the ground of a naturally stronger trust in him as a professional laborer, and at the same time tends to increase his Wages by limiting the circle of those who can offer in competition such services on the background of such superior knowledge and character. (b) Lawyers do not meet such a universal Demand in the nature of things as do physicians. Said Jonathan Smith of Lanesborough in the Massachusetts Convention of 1788: "We have no lawyer in our town, and we do well enough without." Still, one hundred years after that time there were about 70,000 lawyers in the United States, and Lanesborough itself had had in the meantime at least three distinguished ones. The interests of property and of reputation, and the constitutional rights of individuals as over against the claims of Government, so far as these may be conserved through the agency of lawyers, are by no means so constant and imperative as are the interests of life and health. Yet lawyers are in legitimate request in all civilized countries. A Latin legal maxim announces the obvious truth: _It is the interest of the Commonwealth that there should be an end of disputes and litigations._ Beyond question courts and counsel are wholesome on the whole for the individual and for the commonwealth. But the extremely complicated and unsatisfactory condition of American Law at present, owing to the fact that we have a none too simple United States Law with its three grades of courts and judges, and considerably divergent bodies of Law in each of 42 States, and owing also to the fact that our law in general is drawn almost at random from two pretty distinct Sources, the Common Law of England and the Civil Law of Rome, multiplies the number of lawyers relatively to the population out of all proportion to such ratio in other countries, and tends to make the lawyers as a class too conservative of old and drawn-out processes to the extent of opposing obvious betterments and simplifications. Said David Dudley Field, President of the American Bar Association, in August, 1889, at Chicago: "_So far as I am aware, there is no other country calling itself civilized where it takes so long to punish a criminal, and so many years to get a final decision between man and man. Truly we may say, that Justice passes through the land on leaden sandals. One of our most trustworthy journalists asserts that more murderers are hung by mobs every year than are executed in course of law. And yet we have, it is computed, nearly 70,000 lawyers in the country. The proportion of the legal element is, in France, 1:4762; in Germany, 1:6423; in the United States, 1:909. Now turn from the performers to the performance. It appears that the average length of a lawsuit varies very much in the different States; the greatest being about 6 years, and the least 1-1/2. Very few States finish a litigation in this shorter period. Taking all these figures together, is it any wonder that a cynic should say that we American lawyers talk more and speed less than any other equal number of men known to history?_" Mr. Field then repeated his well-known argument for Codification, ascribing the law's delays to the chaotic condition of the law, and maintaining that it is the first duty of a government to bring the laws to the knowledge of the People. "_You must, of course, be true to your clients and the courts, but you must also give speedy justice to your fellow-citizens, more speedy than you have yet given, and you must give them a chance to know their laws._" Owing to the immense difficulties in the way of any one person mastering the various branches of the law in this country, it is falling more and more into specialties, and lawyers are devoting themselves to some one of its many branches, the main division line being between "Law" and "Equity" technically so-called; and whenever one becomes eminent along any line, his compensation is apt to be very large owing at once to a large Demand and to a small Supply at that point, while the average compensation of the lawyers as a whole class is meagre enough, because there are too many of them, and the people have become very suspicious of the law's meshes and delays. (c) The grounds for the unabating Demand in Christian countries for religious teachers and preachers, let us rather say, for spiritual guides, lie deep down in the nature of man. If there be one proposition about men more incontestable than another, it may be this, that men are made in the image of God, and that there is among men in general an irrepressible striving to maintain and deepen this image. The touch between man and man and between man and God is such at this point, that men can help each other in this striving, and that they _feel_ that they can help each other. This is the chief reason why some men are constantly consecrating themselves to the Christian ministry, and other men as constantly soliciting these to become their pastors and teachers. Those more enlightened in divine things and more spiritually minded offer themselves, as it were, not commercially but morally, to the unenlightened and less advanced as guides and helpers. It is, as it was with Wolfe and his men at the Heights of Abraham: those who got first to the top tarried a little to help those up who came after. And the most striking thing about it is, that the masses of men at bottom are as desirous to be uplifted as the choicer spirits among them are desirous to help the work forward. Ministers are still, and always will be (human nature is unchangeable), eagerly called; chapels and churches and cathedrals are still going up all over the earth; worship and petition and aspiration are ever ascending on the great world's altar stairs towards heaven, guided and inflamed by the chosen and choosing men of God,--"_when priests on grand cathedral altars praise_!"[5] It is a monstrous perversion of language to maintain, that a clergyman in rendering such services as these is selling his religion. It is true, that he is selling under Demand services to the appropriate rendering of which his own personal piety contributes one large element, and thorough confidence in him on the part of his people as a good and earnest man contributes another large element; but the piety and the spiritual power and the worthy example are not nourished for the sake of selling the services, but for their own sake in personal worth and worthiness, and these things must not be confounded with the services that are sold. Accordingly, while the clergyman's vocation is sacred, and belongs to the sphere of religion, his salary belongs to the sphere of exchange, and its determination, in harmony of course with the higher impulses, is a business transaction. This distinction ought to be better understood than it is; and both clergymen and people need to be reminded that the spiritual things belong to one sphere, and the temporal things to another. The amount of a minister's salary, and the time and mode of its payment, are matters of pure business; and the minister himself is to be blamed if he does not attend to them, and insist on them, on business principles. In the professions generally, and particularly in the ministerial profession, while, if we confine our attention to those persons who both have the requisite gifts of Nature and have been also thoroughly trained, we shall find a high rate of compensation on the two grounds of a strong Demand and a limited Supply, we must bear in mind too the counter-working influences which tend to increase the competition and thus decrease the compensation, namely, the respectability which attends them, the desire of knowledge for its own sake which is gained in connection with them, the instruction wholly or in part gratuitously offered to those in course of preparation for them, and the desire to do good without regard to pecuniary reward which actuates many who enter upon them. (d) Physicians and lawyers and clergymen serve primarily individuals, or at most relatively small groups of individuals, and of course look for their pay to those whom they have served. It is different with Statesmen, the fourth class of professional laborers that we need to look at in an economic view. Statesmen worthy of the name serve at least a whole nation, and to the nation as such must they turn for their pecuniary rewards. And such men have never turned in vain to those whom they have benefited as a whole. Bismarck is the best modern instance of a Statesman, who has received from a grateful country immense money-measured remunerations for immense political services rendered. The Demand for the services of Statesmen rests in the deep consciousness of men organized politically into a Nation, that they need, especially in trying times, a Man of the highest natural gifts, and of the broadest attainments and of the loftiest political integrity to plan and act for them in emergencies, as they are conscious that they cannot plan and act for themselves organically. This does not mean, that the one ever knows essentials better than the many: he does not. This does not mean, that the true objective of a nation's march is ever discerned more clearly, or rather _felt after_ more eagerly, by one man than by the many men concerned: it is not. Still less does it mean "_a man on horseback_." But it does mean this: a Nation (as the very name implies) is made up of the thoughts and hopes and throbbings and dim forecastings and half-formed purposes of multitudes constituting a unit (born together for one destiny on earth); and the true Statesman is one of themselves, sharing with them at once the traditions of the past and the perspectives of the future; one, with the instinct and the intellect to gather up and embody the general feeling and the general will; one, who has gained in some way the confidence of the masses who are willing for the time being to entrust to him the guidance of their affairs, and to empower him to plan and act for them as their champion and deliverer; and one, who (because he _is_ one) can better seize the propitious moments for declaration and negotiation and public action, yet who never forgets that he is nothing but an _agent_ for others, and is as ready to lay down responsibility at the public will as to assume it at the public will. Washington was such a statesman, and Lincoln. Even Bismarck, under monarchical and later imperial environment, disclaims anything substantive and original in his own action: he did what he could not help doing: he followed the instincts of Prussia, and his own; and became the means of fulfilling as they gradually ripened the longings of the other German people for unity and order. Such a statesman was Chatham in England, and Cavour in Italy. Now, such services as these, done for a whole people, always deserve and usually receive, though not expressly bargained for beforehand, yet implied in the public devotion of one party and the general _consensus_ of the other, extraordinary honors and emoluments. This is right, even on purely Economic principles. The services of great statesmen to their country in great epochs and emergencies are at once a gift and a sale, they are both patriotic and economic, there is equally a national Demand for them and a grateful recognition of them, the Supply is always exceedingly rare and the reward often exceedingly great; and it is to be put down to the lasting credit of the science of Economics, that its peculiar motives and results may mingle in and harmonize with the motives and results of the higher moral impulses, such as those of Patriotism and Religion, as in the cases of the Soldier and Statesman and Clergyman. There was no rational ground for the hesitation of Garibaldi to receive from the Parliament of Italy in 1875 an annual pension of 50,000 lire. (e) There is a single class more of Professional laborers, loosely so-named, which should be noted before we dismiss the subject of Demand for laborers to pass to consider the Supply of them, namely, Literators and Artists and Actors of the highest rank. Statesmen primarily serve the individual nation that selects and rewards them, though their influence may indirectly uplift other nations also; but the great Writers and Painters and Actors, whatever may be their local habitation and name at first, soon come to belong to the world at large and to derive their revenue from many lands, because the highest Art is cosmopolitan in its own nature, and the best characterization of men as such cannot but be the property of Mankind. Shakspeare is no longer English, nor Angelo Italian, nor Mozart German, nor even Bernhardt French. Deep as are the scars and the sea that separate nation from nation, there is something deeper still in the innate recognition by man of man as depicted by the great Masters in immortal lines. There is, accordingly, a sort of Demand in the inmost soul of Humanity as such for these living and lofty touches and delineations of itself, whencesoever they may come. There is not indeed nor can there be, as in most other cases of sale, a bargain made beforehand between these preordained sellers of the rarest services and their silent yet waiting purchasers, yet there is after all an antecedent and an assured understanding between them. They are in touch even across the sea. The master strikes his chord, and the audience, fit, though few and scattered, listens and applauds _and makes return_. Is the principle of "International Copyright," so-called, correct? Let us look narrowly before we pronounce. At present this good country of ours makes itself a mocking and a by-word even to its own intelligent and art-loving citizens by putting a tariff-tax of 30% on paintings and statuary by foreign artists, not at all to get revenue thereby, but to "protect" domestic artists in their inferior work by artificially lifting the price of their wares. So far is carried this jealousy of foreign works of art, that when the artists generously loan them for exhibition on our national occasions, they are put under bonds _not to sell them on this side_ without previously paying the tariff-tax, which is graciously intermitted during the Exposition. This is Restriction. This is Protectionism pure and simple. This is legally excluding the Better in order to give a forced currency to the Worse. Now, domestic Copyright restricts the sale of any book to one publisher in his interest and in that of the author. The book now in the reader's hand is thus copyrighted. This legal arrangement between authors and publishers and their public may be perhaps logically defended, it may even be for the public weal on the whole, though in many cases it doubtless raises the price of good books, which would have been published without any such artificial encouragement. The copyright, however, like all patent-rights also, soon expires by limitation of time, and the public thereafter have the unrestricted use of what is really their own. For what is sometimes called "literary property" is not property in the strict sense of the word. A book is not like a plough or a house. Its contents even when most original have been but colored, as it were, and rearranged and reinforced by the author's individual mind. Its substance always comes out of the common stock. It cannot be the author's own, as the bushel of wheat is the farmer's, who sowed the seed on his own land and threshed it in his own barn and carried it to market in his own wagon. The rights of the individual and the rights of the Community commingle more or less in private property of every kind, at least to the extent that the latter may tax the property if needful for the common wellbeing, as it is bound also legally to secure it to the owner when threatened by others; it is no part of the purpose of the present book to draw the wavering line in general between the rights of individuals and the rights of their Government as towards them; but the distinction between common property and copyrighted property is plain enough to everybody, and the Law puts emphasis on the distinction by making the one quickly terminable and the other continual. So then, when the Government under which the author resides, has given him a limited copyright within its own jurisdiction, it would seem as if the individual right in the premises had been sufficiently recognized alongside of the undoubted right of the Whole to the ultimate use of the labors of their own citizen. When, however, it comes to International Copyright, which is an attempt to secure to authors of one country artificial privileges under restriction in selling their wares in all other countries, the argument breaks down. Even for the one country, in which the author lives and is taxable, the argument is not very strong, and hardly binds advanced public opinion either as to the grounds of it or even the practical benefits of it on the whole. By the attempted extension of it to all countries, its reasonableness disappears. Taxation cannot extend beyond the jurisdiction of the country taxing; and it certainly seems as if a legal privilege, beyond common law privileges, ought not by extension through the formal action of other countries to exempt from taxation (in case it were needful) the results of the original privilege. The purpose of International Copyright is not the blessed one as announced to the world by James Smithson, "_the increase and diffusion of knowledge among mankind_," but directly and artificially by means of legal restrictions the "increase" of the prices of books and of other "knowledge" to the masses of "mankind," and the "diffusion" of these extra prices as between authors and publishers. Protectionism does not seem to be one whit more respectable in this form than in the form of tariff-taxes on foreign works of art. 2. We have already seen in our first chapter the proofs of the proposition, that the Value of anything whatsoever bought and sold is determined by the Demand for it and the Supply of it then and there present. Also we have now seen at considerable length the main phases and grounds of the Demand for each of the three classes of Personal services bought and sold among men. The next topic in order is the Supply of personal services in the various markets. Here it will not be necessary to distinguish particularly the three classes of Services, inasmuch as the circumstances governing the Supply in each are substantially similar. In Economics generally we have to deal chiefly with Persons, and only subordinately with Things; when we come to the Supply of personal services, answering to the Demand for them on the part of other persons, this point becomes conspicuous; and it is here, if anywhere, within the realm of our science, that we need to devote a word to a singular doctrine, that has been famous for nearly a century under the term of _Malthusianism_. Thomas Robert Malthus, 1766-1836, was an English clergyman and teacher, a wide traveller and keen observer of men, one who divided his time during a long life between cure and chair and the libraries of the Universities, published in 1798 his "_Essay on the Principles of Population as it affects the Future Improvement of Society_"; in this and in subsequent editions enlarged and enriched, he brought out with its proofs the core of his startling pronouncement, that the human race is found to increase in numbers in something like geometrical progression, while the means of subsistence for them on any given area of agriculture can only increase in something like arithmetical proportion; the United States was then doubling its population in 25 years, and he calculated that, at this rate, the inhabitants of any country in five centuries would increase to above a million times their present number, which would give England in that time more than twenty million millions of people, or more than could even get standing-room there; for this natural tendency of the law of human fecundity to outstrip the results of the law of returns from land, he saw no remedy except in checks to population, which he divided into _the positive_ and _the preventive_, the first of which, such as war and famine and disease, increase the annual number of deaths; and the second of which, such as prudence in contracting marriage and temperance after marriage, diminish the number of births; and Malthus and his followers, among whom the famous Thomas Chalmers was prominent, were at great pains to inculcate upon the laboring classes the duty of later marriages and fewer children, as an indispensable condition of their rise in comforts, and of "the future improvement of Society." These discussions have attracted great attention almost to the present day, and have been supposed to be very pertinent to the subject of wages, and thus to be an important part of Political Economy; but when one looks more closely, the force of that spring of population which the Creator has coiled up in the nature of man, as contrasted with the weakness of that power by which the earth brings forth sustenance for man, is seen to be a topic in Physiology and not in Political Economy at all. Political Economy presupposes the existence of Persons able and willing to make exchanges with each other, before it even begins its inquiries and generalizations. How they come into existence, the rate of their natural increase, and the ratio of this increase to the increase of food, however interesting as physiological questions, have clearly nothing to do with our Science. Each adult human being is as much constituted by Nature to receive personal services as to render them, in Economics each without exception receives when and because he renders, and all alike are naturally able to become capitalists also; economical laws present no obstacles, that we can see, to all men becoming _rich_, as we use that term; the town or city in which many people are growing rich simultaneously, is the best place in the world for other people to go to get rich in, and not at all towns in which other people are getting poorer; most men are unwilling, some perhaps may be unable, to fulfil the moral conditions of growing rich; while, we may depend upon it, the famines of the world have been caused more by the indolence and want of foresight of individuals, and especially by the monstrous maladministrations of Governments, than by any law of the increase of population. Experience too has shown, that the strong impulse in mankind towards procreation is not too strong for the purpose intended by the Creator; that HE who is the author of the impulses is author also of natural counterworkings of them; that, as men under moral and religious training come more and more under the influence of reason and affection, the preventive checks to population come silently and effectually into operation; and that, taking the world at large, food and comforts have more than kept pace with the stride of population, since its inhabitants as a whole were plainly never so well fed and clothed and housed as now. The abstract antagonism of the law of the increase of population with the law of the increase of food, or what we prefer to call the law of diminishing returns from Land, may be admitted, if one chooses to insist on it; but any practical _tendency_ of these to come into collision, as the world is and is to be, is confidently denied. When Malthus wrote, and long afterwards, England was under the dominance of Protectionism; the wretched Corn-laws forbidding the importations of foreign grain, in order that the domestic growers might sell to their countrymen at artificial prices, and thus grow the richer as bread became the dearer, were only repealed in 1846; and the demonstrated ability of Great Britain under free trade to draw on the fertility of the whole world for the steadily and increasingly cheap maintenance of her people, demonstrates the irrelevancy of Malthusianism to the Science of Economics. The Supply of personal services at any time or place in answer to the Demand for them, is affected by several important circumstances, which we shall now proceed to consider in their order. (a) The _agreeableness_ or disagreeableness of rendering a given set of services will affect the Supply of laborers at that point, and help to determine the rate of Wages paid to them; because the more agreeable employment will attract the larger number of laborers, will experience in consequence the press of competition, and the rate of wages then and there will be lessened thereby. The more disagreeable employment will feel less the pressure of numbers, and will secure, other things being equal, a higher rate of remuneration in consequence. Among the elements which, in spite of diversity of tastes, make any employment agreeable or disagreeable to the laborers, are (1) the less or greater exertion of physical strength required, (2) the healthfulness or unhealthfulness of the service, (3) its cleanliness or dirtiness, (4) the degree of liberty or confinement in it, (5) the safety or hazard of the employment, (6) the esteem or disrepute of it in public opinion. To illustrate each of these in order, the stone-mason, the glass-blower, the scavenger, the factory operative, the worker in a powder-mill, the smuggler, will each receive a larger compensation owing to the peculiar element of disagreeableness involved in his own personal service; and he will be able to demand and secure the higher rate through the action of this disagreeableness upon the Supply of such laborers. Of all these elements, public opinion is perhaps the most operative; and if this be favorable to an employment, and some social consideration be attached to it, and only common qualifications be required for it, the wages in it will infallibly be low. This is doubtless the main reason why so many young women prefer to teach, rather than be employed in mills or shops or offices, and why the wages of female teachers have been so remarkably low; although each of the elements of agreeableness specified above may also contribute something towards the same result. If a business be decidedly opposed to public opinion, it must hold out the inducement of a large reward, or nobody will engage in it. This explains the abnormal gains of the slave-trade, the liquor-business, of gambling-houses, and of lotteries. (b) The _easiness_ or difficulty of learning to render acceptably a given set of personal services, will have a quick and constant influence on the Supply of these services, and of course also on the rate of the return paid for them. The elements of this Difficulty in general are time, expense, lack of natural gifts, want of foresight on the part of those concerned, and lack of push and persistency on the part of the learner himself. To put a boy apprentice to a trade, for example, requires on the part of the parents a foresight, an ability to get on without his immediate help, and sometimes also an amount of money for his board and clothes which all parents do not possess; many boys too, who must acquire their skill to sell personal services when they are young, if at all, find on trial that they do not like the trade, or have not the requisite gifts, or fail in the appropriate patience and propulsion; and the consequence is, that the Supply of laborers along that particular line is lessened, and the right to demand and the ability to secure a higher rate of wages than is accorded to common laborers accompany the small supply, through the reduction of numbers which these obstacles at the entrance occasion and the consequent weakness of competition. This is one principal ground of the difference in the wages of skilled and unskilled laborers; the other being, as we have seen, the stronger and more constant Demand for the former, owing to the impulse imparted by Capital. All these points of difficulty at the outset apply still more strongly in the case of professional laborers, serving more effectually to thin out the ranks of these, and pushing upward still higher the gauge of compensation for the successful competitors. (c) The _constancy_ or inconstancy of prospective employment in a given business, is a consideration that affects the Supply within it, and then the wages. If the services be of such a character, that they can only be carried on during nine months of the year, the wages of the renderers will be greater by the day or the month than they would be, provided the services were in order during all the twelve months. The laborer is apt to look at the aggregate earnings of the year, and will hardly take up a trade which affords employment but a part of the time, unless some compensation can be found in the higher wages for that time. This is the chief reason why the wages of the mason and house-painter, in this climate at least, are higher than those of the blacksmith and carpenter. The coachman, also, may stand by his horses half the day or night with no call for his services, and must have, therefore, a proportionably higher fare from those whom he does transport. In general, it is found that men prefer a constant rendering with a lower rate of pay, than an inconstant one with a prospect of larger wages for the particular jobs actually done; and because the many prefer that, those who take up with the other are able to secure a higher relative rate of pay in their less eligible vocation. It must be noticed, however, as counterworking this, that some men have desire for intervals of leisure in their business, and for opportunity to make these intervals subservient to some avocation or other means of livelihood. (d) The _probability of success_ or the opposite in any line of personal services, is a circumstance that has some influence on the rate of wages paid in it, through the action of this probability on the numbers of those who enter upon it. If ultimate success be doubtful, fewer persons will naturally engage in such a business, and those who dare in it and succeed, will probably reap a very high reward. So, also, those who take jobs by the contract, and therein assume more or less of risk, are commonly paid at a higher rate for their services than those who do similar work by the day. It is true, that this is owing partly to the fact that the contractor usually puts in his own capital more or less, and must therefore be paid profits as well as wages, and also that the wages of superintendence are due to him in addition to ordinary wages; still, there is a residuum of difference, which can only be accounted for by the risk he runs of a successful issue of his contract. The general variation in Supply and wages from this fourth cause, would certainly be greater than it is, were it not for the overweening confidence which men in all generations seem to have in their own good luck. This excess of worldly faith is always seen in the rush which is made for newly discovered mining regions. It was seen to perfection in 1889 in the uncontrollable advance of thousands _into_, and their almost immediate exit _out of_, the then just opened territory of Oklahoma. The facility with which lottery tickets are sold even yet in many countries proves the prevalence of this over-confidence. It is demonstrable beforehand on the doctrine of Chances, that no person can rationally buy _any_ lottery ticket at its advertised price, because if that person should buy all the tickets advertised he would certainly lose money, since the sum of the prizes is always less than the sum of the prices. Otherwise the projectors of the lottery would always lose money. (e) The _mobility_ or immobility of laborers as a class acts powerfully upon the Supply of them at any one time and place, and consequently upon the rates of wages then and there. In some countries, notably in the United States, laborers as a class move from place to place with considerable facility under the action of Demand for personal services. According to the Census of 1870, 7,500,000 of the native population dwelt in other States than those in which they were born. Many of these, doubtless, had left their native region to obtain more fertile land, and many also to obtain more remunerative employment as laborers. The native American, more than most other persons, is not only willing to move from place to place in the hope of bettering his condition, but is also willing to change his occupation from time to time in the same hope. There is more freedom of movement locally, and less fixedness of occupation on the part of laborers and others, in this country than in any other industrial country. Even foreign immigrants here,--factory operatives, miners, and other laborers,--seem to catch after a while the spirit of the country in both these respects. There is one considerable advantage in all this, namely, competition becomes more uniform in all places, an unusual demand for laborers at any one point is easily met, and wages neither rise so high nor fall so low at special points as they otherwise would. But there are considerable disadvantages in all this too, chiefly these, the services of laborers floating locally or changing the kind of their labor can never become so excellent as service more _steady_ in place and time; and, especially, thorough apprenticeships, or whatever may be equivalent to these, are held in too little esteem by public opinion, and are too little requisite in order to obtain transient employment. To meet the obvious pressure of these disadvantages, an admirable device is now being hit on, namely, to introduce into our public schools something in the way of "manual training" for the various trades. Public institutions also, some of them on a great scale, as the Cooper Union in New York and a more recent munificent foundation in Philadelphia, have been established on purpose to train boys and girls both in eye and hand to render skilfully those artisan services of the various kinds which will always be in demand among men, and which have certainly deteriorated among us owing in part to the disuse of the old apprenticeship-system. In Europe, on the other hand, the laborers as a class are far less mobile than here; and in Asia still less so. There is said to be no country in Europe in which the proportion of foreigners to the native population exceeds _three per centum_. In England, which is a small country, the difference in Wages between the northern and southern counties is very remarkable. Professor Fawcett is authority for the statement, that an ordinary agricultural laborer in Yorkshire during the winter months earns 13 shillings a week, while a Wiltshire or Dorsetshire laborer doing similar work during the same number of hours earns but 9 shillings. The contrast in general between the Wages of English agricultural laborers and those paid in mills and mines and furnaces is still more striking. And so more or less, in respect to the Value of Commodities: competition is yet by no means perfect in distributing these so as to make their price uniform in the same country or even in the same county; but the immobility of laborers for an obvious reason is much greater than the immobility of goods. While laborers should certainly be free to go wherever their services may be in greater Demand, the natural reluctance of most men to leave their native haunts, enables each of the nations to work out its freely chosen ends without wholesale interference from abroad. If China should precipitate itself upon the United States, or India upon England, as the mere _economical_ impulse might indicate, it would be disastrous to the western nations; but men are everywhere under other influences besides the economical one, although this is strong and distinct and pervasive; Political Economy deals with men as they _are_ all things considered, and with Buying and Selling as this actually takes place over the world, or rather as it would take place if factitious economical restraints were removed; and Providence has other great ends in view besides commercial prosperity, vital as that is to all other progress, and often holds one impulse in check by a stronger one. (f) _Custom_, with its cognates Prejudice and Fashion, has still a good deal to do with the Supply of laborers in certain departments of effort, and of course with the rates of wages in them. In former times in this country and in the older countries particularly, Custom and decree were dominant in determining, for example, the current fees of lawyers and doctors, competition coming in to decide how many such fees a professional laborer should get, rather than the amount of each particular fee. The shares of the produce going respectively to the agricultural tenant and to the landowner, were specially under the dominion of Custom; as the mode (now decadent) of taking farms "_at the halves_," once universally prevalent in New England, sufficiently shows. In certain other matters relating to land and trade, Custom has long been gradually hardening into express law, as, for instance, the famous "Ulster Right" in Ireland. Prejudice, which is only another name for Custom, has some voice still in adjusting rates of wages, as may be seen in women's wages crowded down apparently to a point unreasonably low as compared with the wages of men; and also in the rate of John Chinaman's wages in those parts of the United States where he ventures to offer his services in the teeth of public opinion and hostile legislation. It may be spoken with general truth and satisfaction, that competition seems now to be breaking down mere custom and prejudice in all directions, and may perhaps in the good time coming reign supreme over the economic field; while Fashion, which bears indeed on one side of its shield the motto "custom," carries too on the other the bold word "competition," and this second side is likely to be presented to the public mostly in the future, because, they who lead the styles in any department whatsoever will always offer their services to Society at an advantage to themselves, that being one form of competition, and their rate of compensation will be legitimately higher than the average rate of their fellows, of which a good instance was the marked worldly prosperity during the decade of the Eighties of Worth, the man-dressmaker of Paris. (g) _Legal Restrictions_ are another cause acting on wages, by acting directly on the Supply of laborers. Laws inhibiting or promoting immigration; laws appointing the fees and salaries of officials; tariff-taxes, whether prohibitory or only restrictive; laws creating privileged classes of any kind, which is only another designation for laws restricting the rights of the masses; unequal modes of taxation, whether adopted in ignorance or by design; all have a direct and powerful agency upon the distribution of laborers, upon the supply of them at given points, and upon the rates of their wages. Governments are coming, however, much more freely than formerly, but never through their natural choice and drift as governments, only by the gradual and oft-disappointed compulsion of their citizens, to leave all these matters Economical except the wages of their own servants and those commodities which they choose to tax, to the simple and safe action of Supply and Demand. (h) _Voluntary Associations_ for that avowed purpose were a mediæval, and have come to be again a modern, agency in adjusting the Supply of laborers to their respective markets, and in regulating the wages of various classes of them. The Guilds of the Middle Ages, and particularly the old guilds of London, had a remarkable history, upon which we can not here even touch. Their local importance is sufficiently attested by the fact, that the City Hall of London is to this day the "Guildhall." King Edward III. humored the civic feeling of his time by becoming himself a member of the Guild of Armorers. "A seven years' apprenticeship formed the necessary prelude to full membership of any trade-guild. Their regulations were of the minutest character; the quality and value of work was rigidly prescribed, the hours of toil fixed from daybreak to curfew, and strict provision made against competition in labor. At each meeting of these guilds their members gathered round the Craft-box, which contained the rules of their Society, and stood with bared heads as it was opened. The warden and a quorum of guild-brothers formed a court which enforced the ordinances of the guild, inspected all work done by its members, confiscated unlawful tools or unworthy goods; and disobedience to their orders was punished by fines, or in the last resort by expulsion, which involved the loss of right to trade. A common fund was raised by contributions among the members, which not only provided for the trade objects of the guild, but sufficed to found chantries and masses, and set up painted windows in the church of their patron saint. Even at the present day the arms of the craft-guild may often be seen blazoned in cathedrals, side by side with those of prelates and kings."[6] The Trades-Unions and Brotherhoods of the present day cannot plead the provocations and justifications of their mediæval predecessors. It cannot be denied, however, that they have some provocations and justifications in the bad example set before them by the various combinations (implied or explicit) of the Wages-payers as a class. If the Wages-payers combine, then the Wages-takers would seem to have no resource but in combination. Both alike are wrong in this. Both alike oppose in this the spirit of Political Economy, which is ever the spirit of Freedom, and is ever against such factitious associations for such purposes, because they tend to destroy the independence of personal action on the part of both payers and takers of wages, and tend also to bring all the workmen of any one general grade down to one level of effort and reward. (i) Lastly, we must note the influence of _Casual Events_ upon wages, as these events affect the Supply of laborers. For example, in 1348, a terrible plague, called the Black Death, invaded England and swept away more than one-half of its population. "Even when the first burst of panic was over, the sudden rise of wages consequent on the enormous diminution in the supply of free labor, though accompanied by a corresponding rise in the price of food, rudely disturbed the course of industrial employments; harvests rotted on the ground, and fields were left untilled, not merely from scarcity of hands, but from the strife which now for the first time revealed itself between Capital and Labor" (Green). The landowners of the country districts, and the craftsmen of the towns, not understanding the law of Wages as an invariable resultant of the Demand and Supply of laborers, were scandalized by what seemed to them the extravagant demands of the new labor-class. Parliament equally ignorant with the People of the natural economic law, enacted as follows: "_Every man or woman of whatsoever condition, free or bond, able in body, and within the age of threescore years, and not having of his own whereof he may live, nor land of his own about the tillage of which he may occupy himself, and not serving any other, shall be bound to serve the employer who shall require him to do so, and shall take only the wages which were accustomed to be taken in the neighborhood where he is bound to serve two years before the plague began._" Afterwards, the runaway laborer was ordered by Parliamentary enactment to be branded in the forehead by a hot iron, and the harboring of the country serfs in the towns, in which under their civic rules a serf keeping himself a year and a day was thereafter free, was rigorously forbidden. These acts of Parliament, and many more of the same kind, were powerless to keep down wages to the old standard, but were powerful to keep up ill-blood and social discontent. They prepared the way for agitators like John Ball, for the poet-agitator Piers Ploughman, and for the great Peasant Revolt of 1381. John Ball's famous rhyme condensed the scorn for the nobles, the longing for just rule, and the resentment at oppression, of the peasants of that time and of all times:-- "When Adam delved and Eve span, Who was then the gentleman?" A hundred years after the Black Death the wages of a common English laborer--we have the highest authority for the statement--commanded twice the amount of the necessaries of life which could have been obtained for the wages paid under Edward III. 3. Having now seen fully the varied action of Supply and Demand upon the Value of personal services in their three kinds, we come at length to the most important general point in this chapter, namely, that in the second class of Services, those purchased in connection with the use of _Capital_, WAGES ARE ALL THE TIME ENLARGING RELATIVELY TO PROFITS. We have seen clearly already, that Cost of Labor and Cost of Capital are the only onerous elements in the cost of Commodities; because, while Natural Agents are all the time assisting and assisting more and more effectively in such production, they work without weariness or decay and without fee or reward. The reward of laborers is Wages, and the reward of capitalists is Profits; and we are now to demonstrate, that the part of their joint products falling to laborers as wages is all the while increasing as compared with the remaining part falling to capitalists as profits. This truth is of the deepest significance, and of the most cheering character; because men are more important in the universe than things; and because the number of men who sell their services as laborers is vastly greater than the number of men who sell their services as capitalists. It is another indisputable and exhilarating truth for the masses of mankind, that the Value of each item or article of those products created by the joint action of laborers and capitalists is ever becoming less and less as measured by any relatively fixed standard as Money; so that, while wages as thus measured becomes a larger and larger aggregate as compared with the aggregate of profits, and is shared of course by a much larger number of people, those commodities looked at as a collection of items for which the wages of these many is usually expended for their own comforts, are becoming all the time cheaper and cheaper to everybody, owing to the ever-enlarging and wholly gratuitous action of natural forces. For the sake of simplicity in the argument on this great point, we will first look at what the facts are through recent illustrations gathered by other parties for a wholly different purpose, and then give in detail the economical grounds for these patent and universal facts. Take for example, from Poor's Railroad Manual for 1889 a table showing in a graphic way the steady reduction in freight charges per ton per mile from 1865 to 1888 of seven representative Eastern trunk railroad lines, namely, the Pennsylvania, Fort Wayne and Chicago, New York Central, Michigan Central, Lake Shore, Boston and Albany, and Lake Erie and Western; and of six leading Western roads, namely, the Illinois Central, St. Paul, Burlington and Quincy, Chicago and Northwestern, Rock Island, and Chicago and Alton. The following are the figures:-- RATE CHARGES PER TON PER MILE (IN CENTS). +------+----------+----------++------+----------+----------+ | Year.| Eastern. | Western. || Year.| Eastern. | Western. | +------+----------+----------++------+----------+----------+ | 1865 | 2.900 | 3.642 || 1877 | .971 | 1.664 | | 1866 | 2.503 | 3.459 || 1878 | .898 | 1.476 | | 1867 | 2.305 | 3.175 || 1879 | .764 | 1.279 | | 1868 | 2.132 | 3.151 || 1880 | .869 | 1.389 | | 1869 | 1.860 | 3.026 || 1881 | .763 | 1.405 | | 1870 | 1.593 | 2.423 || 1882 | .756 | 1.364 | | 1871 | 1.478 | 2.509 || 1883 | .829 | 1.310 | | 1872 | 1.504 | 2.324 || 1884 | .740 | 1.220 | | 1873 | 1.476 | 2.188 || 1885 | .636 | 1.158 | | 1874 | 1.332 | 2.160 || 1886 | .711 | 1.111 | | 1875 | 1.161 | 1.979 || 1887 | .718 | 1.014 | | 1876 | .985 | 1.877 || 1888 | .609 | .934 | +------+----------+----------++------+----------+----------+ This reduction of rates in the case of the group of Eastern roads has amounted to 79 _per centum_, and in the Western group to 73 _per centum_, in the twenty-four years. Not less remarkable than the extent of this decline in freight charges per mile is its uniformity. Both groups show a wonderful steadiness in the progress of rate reductions. Starting at quite different points as to territorial development, they have yet travelled at a nearly equal pace in the same direction. This shows the operation of causes at once steady and universal. Statistics can never of themselves yield us _causes_; but they guide the way to them; at any rate, they prevent any radical misinterpretation of them. The great and overshadowing cause here of the cheaper freights per ton, as everywhere else of cheaper rates at the junction of efforts by capitalists and laborers, is of course the perpetual and augmenting and ever-gratuitous assistance of natural forces at every point. While the rates of freight per ton have decreased more than three-quarters in less than one-quarter of a century in the case of these 13 railroads on the whole average, the entire cost of the operation of these roads in this interval of time has not been diminished to any appreciable extent, as also stated by the same Manual. The main item in all the operation-expenses of railroads is the wages paid to the laborers of all grades; and the laborers are quite as well paid now on these 13 roads as they were in 1865, proper allowances being made for the changed and changing standards in the national Money. If, on a broad view, railroad employees of all grades have lost nothing as such in their wages in this interval; and the general public, including these laborers and also the capitalists concerned, have greatly gained, how can we account for the immensely lessened freight-charges while the whole operation-expenses continue substantially as before? There is only one rational account to be given of this. And it is trustworthy. All known facts jump with it, and nothing substantial can be urged against it. The gains to the masses including the capitalists and the laborers _have come out of the capitalists as such_. This is apparent as well as real. Cost of Labor and Cost of Capital is the whole cost. If the whole cost of moving one ton of freight from Boston to Chicago is 3/4 less than it was 1/4 of a century ago, the cost of the labor being the same at the two points of time, then the conclusion is inevitable, that the _cost of the capital_ at the second point is less than it was at the first point. With this conclusion all facts agree. All the laborers connected with a railroad from highest to lowest must be paid at any rate, or else the trains will certainly cease to move, whether the stockholders receive any dividend or not on their capital invested. The original _stock_--the capital that built the roads--of many if not of most the railroads in the country, has been annihilated, a new indebtedness in another form called _bonds_ having taken the place of it. Even the nominal dividends of dividend-paying roads have declined in the interval from 10 or 8 to 5 or 4 _per centum_ in the general, that is, 50 _per centum_. It is perfectly evident on every hand, that there is something in the nature and progress of things, that makes for wages as contrasted with profits: wages hold on and relatively enlarge, profits decline or go out altogether. Fortunately we are not left to generalities here, however plain and certain these may be. One of the 13 railroads specified above, the Illinois Central, made a remarkable exhibit in its own annual Report of 1887, showing the cost of its locomotive service for each year of the thirty years preceding. This cost per mile run had fallen from 26.52 cents in 1857 to 13.93 cents in 1886. This reduction had been effected wholly on the _Capital_ side of the account, by inventions and improvements of all sorts in the _machinery_ of locomotion; while the wages of the engineers and firemen had risen in the period from 4.51 cents to 5.52 cents per mile run. The cost of the labor had risen both relatively and absolutely while the cost of the capital had declined both absolutely and relatively. In 1857 the engineers and firemen had received as wages 17% of the entire cost of the locomotive service, but in 1886 they had received 39% of that total cost. The table is as follows:-- I. C. R. R. CO. PERFORMANCE OF LOCOMOTIVES. RELATION OF WAGES TO TOTAL COST PER MILE RUN. ------------------------------------------------------------------------ | Cost of wages | Total cost|| | Cost of wages |Total cost Years.| of engineers | per ||Years.| of engineers | per |and firemen per | mile run. || | and firemen per |mile run. | mile run. | || | mile run. | ------+----------------+-----------++------+-----------------+---------- | Cents. | Cents. || | Cents. | Cents. 1857 |Gold. { 4.51 | 26.22 || 1872 |Currency. { 5.77 | 21.76 1858 | { 3.97 | 19.81 || 1873 | { 5.84 | 21.10 1859 | { 3.81 | 20.78 || 1874 | { 6.02 | 19.57 1860 | { 3.96 | 20.17 || 1875 | { 6.03 | 19.57 1861 | { 3.84 | 18.92 || 1876 | { 5.79 | 18.81 1862 |Currency.{ 3.85 | 17.42 || 1877 | { 5.54 | 17.21 1863 | { 3.93 | 22.28 || 1878 | { 5.46 | 15.29 1864 | { 5.56 | 33.52 || 1879 |Gold. { 5.41 | 14.15 1865 | { 5.65 | 37.44 || 1880 | { 5.41 | 14.95 1866 | { 5.78 | 32.67 || 1881 | { 5.54 | 16.58 1867 | { 6.18 | 29.62 || 1882 | { 5.09 | 15.82 1868 | { 6.11 | 27.57 || 1883 | { 5.35 | 15.57 1869 | { 5.88 | 25.49 || 1884 | { 5.28 | 14.45 1870 | { 5.95 | 25.15 || 1885 | { 5.49 | 15.02 1871 | { 5.72 | 21.50 || 1886 | { 5.52 | 13.93 ----------------------------------------------------------------------- In 1857 the engineers and firemen received 17-201/1000 per cent. of total cost. In 1865 the engineers and firemen received 15-91/1000 per cent. of total cost. In 1867 the engineers and firemen received 20-865/1000 per cent. of total cost. In 1886 the engineers and firemen received 39-627/1000 per cent. of total cost. These illustrations from the railroads are plainly indicative of a general truth of the utmost importance in Political Economy, namely, _that all increase of Capital and all inventions and improvements in its practical application, while it redounds to the benefit of capitalists as a class, redounds in a still higher degree to the benefit of laborers as a class_. Let us now attend for a moment to the convincing Proof of this truth in two phases of such proof, and also to a cheering conclusion that follows it. (a) As any country grows older in time and richer through abstinence, and as the whole world thus grows older and richer, the tendency there and everywhere towards a general decline in the rate _per centum_ for the use of capital becomes patent and universal. The rate of interest on money loaned, and the rate of profits on capital used, tend all the while to go down as and because capital accumulates. No one will dispute this as a simple fact of history. And no economist will dispute, that this is just what we might expect beforehand as a corollary from the admitted proposition, that, other things being equal, an increased Supply of anything means a lessened Value for any specific part of it. Three centuries ago in England the legal rate of interest was 10%, while now the current rate is about 4% in that country, and has been considerably lower than that in Holland, although in both countries and everywhere else there are temporary interruptions and reactions in the constant tendency now being considered. During the first years of mining operations in California, from 8% to 15% per month with security of real estate was paid for the use of money, which enormous rates long ago declined to rates not much higher than those paid in the States along the Mississippi River, and in these also the rates are all the while approximating those current in the older Eastern States, whose own rates too are slowly declining. But, while there is a less rate of profit or interest on each 100 invested, there are many more hundreds capitalized; consequently, there is an absolute gain to capitalists as a class, at once in the aggregate amount of the capital and in the aggregate sum of the profits from it, since no capitalist would have a motive to capitalize further under the smaller rates of profit, unless the aggregate of profits under the new conditions were greater than under the old condition of higher rates; and, as much of this accumulating capital in order to become productive must now be offered to laborers in the form of wages, we might almost pronounce beforehand, that it would prove both an absolute and also a _relative_ gain to laborers as a class. And so it is. (b) Let us take to figures. An hypothesis or supposed case, whenever it may easily become an overt fact, may be reasoned from just as logically and securely as the overt fact itself. Let $100,000,000, while the rate of profit is 6%, and $500,000,000, when the rate has fallen to 4%, be expended in payment of simple wages. So far forth as that one element of cost goes, the value of the products to be divided yearly between capitalists and laborers will become respectively $106,000,000 and $520,000,000. In the first case, $6,000,000 is profits and $100,000,000 is wages; in the second case, $20,000,000 is profits and $500,000,000 is wages. Here is an absolute gain to the capitalists, since profits have gone up from $6,000,000 to $20,000,000, and so are more than _three_ times as great as before. But wages have gone up both absolutely and relatively to the rise of profits. They have risen from $100,000,000 to $500,000,000, and are _five_ times as great as before. Profits have risen as in the ratio 1:3+, but wages in the ratio of 1:5. This arithmetical example is put for the sake of illustration merely, but the principle of it holds good in every case, in which the rate _per centum_ goes down in consequence of the increase of capital in business; and, therefore, the advantages of ever-enlarging Capital are even greater to laborers as a class than to the capitalists themselves. Most assuredly, if the capitalists take less out of each hundred of the swelling hundreds now than before, the laborers must take more out of each hundred than before. Profits and Wages are reciprocally the _leavings_ of each other, because the aggregate products created by the joint agency of Capitalist and Laborer are wholly to be divided between the two. There can be no other _claimant_ even. (c) This demonstration is extremely important in Political Economy, and consequently in Social Life; for it proves beyond the possibility of a cavil, the Value of personal services tends constantly to rise, not only as compared with the Value of the material commodities which by the aid of capital they help to create (a truth we have seen before), but also as compared with the Value of the use of its co-partner capital itself; and therefore, that there is inwrought into the very substance of things in this world a tendency towards an equality of economical condition among men. God has ordered it, and men cannot radically alter it. Self-interest is indeed the mainspring of movement in the economic world; but the beauty of it and the wonder of it is, that no man can labor intelligently and productively under the influence of self-interest without at the same time benefiting the masses of men. His fair exchanges benefit the parties of the other part as much as they benefit himself. His very savings productively employed are poor men's livings. Only under the blessed freedom of universal Buying and Selling, subject only to the taxation of a good Government for public purposes purely, can these broad benefits designed by a wise Providence be fully realized in action; and the power of individual greed and corporate privilege and governmental perversion to thwart the beneficent though complicated workings of these laws of Capital and Labor towards the common weal and universal progress of mankind is shortlived and soon punished. 4. How comes it about, then, if these laws of mutual inter-dependence between capitalists and laborers are so well-placed and Providentially balanced, that there always have been and are still so many misunderstandings and ill-feelings and actual collisions between employers and skilled laborers, whose interests are at bottom one and whose relations ought to be so cordial? This is the last topic in our Chapter on Personal Services. Here we must look around narrowly and tread carefully. But there is a path. We can find it if we will. It leads through many short-comings in men's characters and through much ignorance of plain economical truths and past unreasoning jealousies and aggregated action on the part of both classes, and over the needful distinctions between impulsive selfishness and a true self-interest back to the same old laws of God laid down at once in the constitution of things and in the constitution of men. Labor-troubles are almost as old as Civilization. The Greek poet Euripides in his play of the "Supplicants" both indicates facts as they were then, and points out a future hope in which we may share, that these middle classes by a better harmony preordained and mutually beneficial may yet "save the State":-- "In each State Are marked three classes: of the public good The rich are listless, all their thoughts to more Aspiring; they that struggle with their wants, Short of the means of life, are clamorous, rude, To envy much addicted, 'gainst the rich Aiming their bitter shafts, and led away By the false glosses of their wily leaders. 'Twixt these extremes there are who save the State, Guardians of order, and their country's laws." At Rome and in the Roman Empire, instead of the usual voluntary union of capitalists and laborers for the mutual advantage of each other, the laborer was owned by the capitalist, and the true relations between the two were thoroughly disguised and wretchedly distorted. Business in all its branches came to be carried on by means of slaves; the lands were tilled by slaves; slaves became the artisans of the country; the money-lenders and bankers of the centre scattered branch-banks in the towns under the direction of their slaves and freedmen; the Company that leased on speculation the Customs-Taxes from the State had their slaves and freedmen levy these taxes at each custom-house; the contractor for buildings bought architect-slaves; and the merchant imported his goods in ships of his own manned by his slaves or freedmen, and then sold the same at wholesale or retail by the same means. In this way a gigantic system of unnatural traffic was built up and extended. In this way the very name "laborer" became tainted by the vile system of slavery of which he was a part, and the distinction itself between capitalist and laborer was obliterated. "Roman mercantile transactions fully kept pace with the contemporary development of political power, and were no less grand of their kind." "The Roman _denarius_ followed up closely the Roman legions." "It is very possible that, compared with the suffering of the Roman slaves, the sum of all negro suffering is but a drop" (Mommsen). We want now to examine critically the CAUSES of these constantly recurring labor-troubles, the true economical REMEDIES for them, and in connection with these the futility of the remedies popularly recommended for low Wages and the disputes between employers and employed of the second class. (1) There is an extremely common misapprehension on the part of both labor-givers and labor-takers as to the real _nature_ of the transaction between them. Both parties forget, or rather neither party is ever fully instructed, that it is a case of pure Buying and Selling. There is never any _obligation_ of the moral sort between buyers and sellers. The relation itself is purely economical. Moral considerations indeed cover this relation from above, just as they cover all other relations between man and man in human Society; and any two individuals standing over against one another as buyer and seller, also stand over against each other in higher and broader relations as man and man; but it works confusion and mischief as between both, whenever relations differing in their nature and operation and reward are not separated from each other in the mind of each relator, and whenever each does not act in the particular relation according to the nature and rules of that relation alone. When A hires B to work in his factory, this new relation is economical not moral; there were moral relations between the two before this relation was knit, and will be again after this has been broken, and indeed are while this continues; but the economical relation is one thing, and the others a very different thing; they are so different, that they cannot be blended in mind or motive to any advantage to either individual or to either set of relations; and any degree of confusion as between the relations has always wrought mischief as between the individuals, because instead of seeing either set of relations in its own clear light, they now see both in a commingled twilight. What is the economical relation? This. A desires the personal service of B in his factory purely for his pecuniary benefit, and assumes his own ability to make all the calculations requisite for determining how much he can (profitably to himself) offer B for his service; and B, who knows all about his own skill, how it was acquired and how much it has cost, wants to sell his service to A for the sake of the pecuniary return or wages. There is no obligation resting upon either. Man to man, each in his own right. There is no benevolence in the heart of either, so far as this matter goes. Benevolence is now an impertinence. It is a question of honest gain in broad daylight. Benevolence is blessed in its own sphere, but there is no call for it here and now. If it comes in an unbidden guest, it comes in to mar and to distort. It is an incongruity. "_I never knew a Jew converted but it spoilt him_," was the word of one deeply versed in human nature and in Christian experience. Conversion is good, and its field is broad; but the Jew _as such_ is incongruous with it. Good is benevolence and wide its field, but Buying and Selling does not need it. Its own motives are independent of it, and sufficient without it. A clouded understanding of this vital distinction has always played its part in Labor-troubles. Buyers and Sellers of personal services are always on a plane of perfect equality as such exchangers, and no one can be more independent than either of them except the hermit in his cell. Which must look out for the interest of the other beyond the terms implied in the trade itself? Which is the superior party? Which should take off his hat, the other remaining covered? The truth is, and all experience and all analysis brings us up abreast of it, that the two parties to a trade of any kind stand on a footing of absolute equality towards each other then and there in the economical relation about to be knit, and any conception in the mind of either that he has the other "at his mercy" in either the good or bad sense of that phrase, disturbs and destroys the proper conditions and balances of the exchange in hand; and, what is more to the point, it implies that each party has _not_ all he can do to fulfil in the letter and in the spirit what is always implied in the terms of a trade deliberately entered upon by two parties. When B agrees to work for A at skilled labor in his factory for a year at $15 per week, he makes a good deal of a contract; and virtually pledges to A not only the motions of his hands for that period of time, but also the vigorous attention of his mind to that service and to the general interests of his employer so far as these come under his own eye and supervision. Nor is this all: he virtually pledges himself to B to coöperate with the least possible friction in all plans for betterment in his division of the work, and to cordially coalesce with all other employees for the general ends of the business without too much of self-assertion and without too little of courtesy to others. To fulfil this contract in all its spirit rounds up the circle of B's economical obligations to A. He will practically have all he can do, so far as A is concerned, and in consistency with all his various duties to others, to make good to him at all points his simple business pledges. Benevolence, the interests of a common citizenship, and the reciprocal ties of religion, lie wholly outside. A will practically have all he can do, so far as B is concerned, to fulfil in the letter and in the spirit his economical obligations to him, without troubling himself to see whether B is going to vote the same party ticket that he himself votes, and without confounding either B's poverty or prosperity with his own obligation to be polite to him at all times and to pay him promptly his weekly stipend. So long as B renders in letter and in spirit what he has agreed to render, and A returns in the same way what he has promised to return, the less either thinks and talks and acts about the other in all the other relations of life, the better hope of good success to both in this relation. Church relations and social relations and political relations are all of consequence in themselves; but when any of these begin to get mixed up with labor-relations, there is soon a muss and a mess. Incongruous things, things no way vitally connected with that, often come in to disturb and destroy a simple matter of mutual renderings. (a) The first practical remedy for difficulties arising under this first head, is a clearer separation in the mind of both parties to a trade of what really belongs to Buying and Selling from what belongs to all other departments of activity. More common sense is needed at this point, more simple analysis, more daylight, more personal independence, more introspection as to motives, more power in making distinctions, and a more practical separation of what is clear and fixed from what is complex and obscure in human relations. Metaphysics may yet lie in cloud-land, Ethics may not yet have drawn its outer and interior lines so strong and deep as it will, Sociology also is a vast field of complexities, but truth to tell Economics has no mysteries to speak of. I buy and sell for my own advantage, which proves in the nature of things to be for the equal advantage of my compeer. It is my business and my compeer's business and every other man's business who buys and sells, to pick that action out in its motive and result from the great mass of dubious actions, and to set it up in its own light, to rejoice in it as the clearest thing in social action, to claim it as God's own plan so far forth for our comfort and progress, and then to see to it that no preposterous hand mixes it up with perplexities or theologies or other abominations--muddying with a tentative pole the stream of our clear brook! In this country at least, in its ignorance of common things and common science, the pulpit often fulminates against the gains of exchange as "materialism," and mixes up buying and selling with "worldliness," and only half permits its deluded hearers the privileges of the market, and illustrates again in modern times such teaching as is denounced to St. Timothy,--"_some swerving turned aside to vain babbling, desiring to be teachers of the Law, understanding neither what they say, nor whereof they affirm_." "Let every shoemaker stick to his last." Those who have looked into it with any care have found, that Exchange in all its natural outgoings is not answerable to these pulpit charges, nor is contrary to the letter or spirit of the biblical precepts, but on the other hand is in full harmony with the claims of Conscience and with all the inbreathings and aspirations of Christianity. (b) The second practical remedy for the labor-difficulties arising from the want of thorough understanding by both parties of the real nature of hired renderings of the second class, is fair _common honesty_. More of an easily accessible intelligence, more of penetration and separation as to social relations in general, meets the first point; but quite as needful as this simple intellectual process, is the still simpler moral habit of doing just what one has agreed to do, without evasions and without diminutions. Labor difficulties take their origin more often, perhaps, in some clouded moral action of one of the parties, than in a clouded mental apprehension. Men are too conscious as men of their own temptations, to be lax in their pledged renderings and of their own shortcomings at this point, not to be suspicious of each other as buyers and sellers, for fear the party of the other part is about to withdraw something either in quantity or quality of what he has promised to render; there is almost always something or other to give color to such a suspicion, and it grows by what it feeds on; frank explanations are not had at the outset, and a good understanding is not come to, as it doubtless might be in nine cases out of ten; and the little cloud, at first no bigger than a man's hand, by and by becomes black and threatening, and bursts at last in a strike or lock-out of large proportions. An open honesty that is such and seems such, that is not beyond the aim and reach of common men, that is taught in scores of forms in "Poor Richard's Almanack," and that each man ever likes to meet with and so ought ever to put forth, is in fact a preventive of conflicts between laborers and employers, and would if properly manifested have prevented multitudes of such actual conflicts. Here is the main, almost the sole, point of contact between strict Ethics and the Economics. What buyers and sellers, that is to say, the whole practical world, needs, is not disquisitions on Morals from Press or Pulpit, but an inner ear to hear the true click of Conscience, and the quick and open answer in honest action. (2) A second general cause of the Labor-troubles of the past and present has been a strong tendency to neglect the special _preparation_ for their peculiar functions by both capitalists and laborers. A successful employer of laborers year in and year out to their advantage and his own is always one who has been _trained_ to that function by special preparations. He is a living man with all the limitations of living men: he has to deal with many living men with all their imperfections: he has to deal also, and constantly, with what is in its own nature dead, namely, Capital, always either a commodity or a claim: to animate and invigorate these dead forms of value, to put them into vital connection with living men who shall enhance their value, and thus to become a leader to living men as towards swelling interests, demands unusual native gifts and a special long-continued training. When one looks from without upon such an establishment as this in full action, it seems automatic, it seems as if almost anybody with a clear head could continue to direct it; and when this "captain of industry" departs this life, perhaps his son or some previous subordinate, without the proper gifts and at least without the peculiar training, assumes the post of direction. For a little everything seems to go on as before. As sure as fate, however, a friction will soon develop here, and a misunderstanding there, there will be whisperings among the men, some breath of suspicion will be likely to cloud the borrowing-power, opening difficulties of any kind such as loss of credit or a weakening of the usual markets are apt to throw a new operator more or less off his base, and gathering labor-troubles of any sort commonly find such a man unprepared for lack of suitable training and experience to ward them off or to make timely concessions to the men or to minimize the evil results when these become inevitable. Also labor-troubles are quite as likely to arise from the want of character and training and considerateness of the employees towards the capitalists. The relations are reciprocal and they are also in their very nature delicate. One poor workman however good his disposition, one unfaithful overseer no matter how great his possible skill, may mar the current product in such a way as to lose it the market and cost the establishment the present profit. The strength of a chain is the strength of its weakest link. It is a matter of immense difficulty at any time, and emphatically so at the present time to organize a working force in factory from top to bottom so as to have it go forward as a unit as towards the marketing of the product, without bad workmanship at some point and unskilful supervision at another; because the laborers as a rule have not given themselves time to learn thoroughly their special parts, because they are not content to remain steady at one thing and at one place, and because they do not practically recognize even if they perceive it that their own permanent interests are exactly coincident with the permanent interests of their employers. Just now in this country the public Law robs the manufacturers (at their own behest) of their best markets at home and abroad, makes it difficult or impossible for them through wanton taxation of their raw materials to create a good quality of goods for any market, and so multiplies frictions and failures and losses along the whole line of production. The lack of what may be called Apprenticeship on the part of skilled laborers, the consequent difficulty of rising from one gradation of effort to a higher and better-paid one, the restlessness of native laborers under such disabilities, the rapid admixture of foreigners, the lack of coherence throughout in point of intelligence and apparent identity of interests, together with the instability and haphazardness of the resources and personal training of the employers as a class, gives birth to Labor-troubles which are at the same time Capital-troubles, to read the daily record of which makes one sick at heart. (a) The only possible and practicable remedy for this state of things, so far as the employers are concerned, is in a more conservative attitude of capitalists as a class about passing over their resources to the hands of men who have not proven their ability to handle them wisely by a full course of training in the management of practical affairs. By a wretched policy in this country at present Capital is prohibited from building and from buying ships, with which to navigate the oceans; from selling domestic manufactures in foreign markets; and also from a profitable agriculture, which may sell its products abroad and take its pay back. Consequently Capital, eager in its own nature to be invested to a profit somehow somewhere, has rushed without due circumspection into the hands of domestic operators, who have not been half fitted for their task, who have knitted relations with laborers without being able to secure their permanent respect or to control their services, and who have lost to their owners in multitudes of cases the entire capital intrusted to them. If capitalists had had during the last quarter of a century one-half of their natural and proper chance to invest their money to a profit, there would not have been such a reckless investment through incompetent hands in building mills and foundries in this interval of time, and such wholesale losses in connection with them. When capital comes to be at liberty to turn right or left according to its own will in view of a prospective profit, factory companies and projectors cannot draw resources from the public for their operations, without demonstrating to the owners the trained and tried capacity of the practical operators, who will buy the materials and hire the laborers and market the products. (b) The practical remedy for the inexperience and instability and unskilfulness of laborers as tending towards labor-troubles of all kinds and degrees, is only to be found in a want of market for such services. In a natural and wholesome state of things, such as would exist in the United States were it not for national laws tampering with Trade and with Money, the questions asked an applicant for skilled work by any labor-taker would be, "_What have you learned to do? How long and for what pay do you want to do it? What do you want to reach next, when the present job is done?_" When employment turns on good answers to such questions as these, and when the questions themselves are put in good faith, there will be an end of Strikes and Lockouts. Untrained and restless hands will get nothing to do in mills and factories. Apprenticeship in its various forms will come back into vogue, and will probably be made a part of the course in public schools. The division and gradation of laborers will be carried out further than it ever yet has been. Laborers will then be _organized_ in the best sense of that word, and to the best advantage of capitalists. The permanent Supply of skilled laborers will be constantly adjusting itself to a permanent and increasing Demand for them. And it requires no millennium for such a state of things to come in. It requires nothing but an ordinary and enlightened and beneficent selfishness on the part of capitalists to adjust itself to the ordinary selfishness of laborers sure to become enlightened and beneficent to the best and ever-growing interests of both parties. This is not the spoken word of Morality, still less is it the divine word of Religion, it is only the common programme of a common-sense Political Economy. (3) The third and last general cause of misunderstandings and embittered disputes as between laborers and capitalists is partly economical and partly moral, and consequently the remedy for it is partly moral and partly economical. The Past projects itself down into the Present partly with blessings and partly with curses. In the old times under Slavery and Feudalism the laborer always came forward to his task with a taint upon him. Sometimes the taint attached to his birth, and at all times it attached to his calling. Slavery in all its forms always makes manual labor degrading. The courtly Cicero _apologizes_ in a letter to his friend for his open sorrow over the death of his favorite slave; and in several passages of his treatise on Morals he follows his Greek teachers, Plato and Aristotle, and declaims in a pitiful way against the noble rights of laborers. "_All artisans are engaged in a degrading profession._" Again, "_there can be nothing ingenuous in a workshop_." When trade and commerce are carried on on a small scale, "_they are to be regarded as disgraceful_"; when on a large scale, "_they must not be greatly condemned--non admodum vituperanda_!" (I, 42.) Serfdom once existed in England, and threw its shade over free laborers there long after itself had disappeared. A class of indented servants pervaded all the New England Colonies, and a clause of the New England Confederation of 1643 provided for their forced rendition from Colony to Colony, and passed over almost verbally into the Constitution of the United States of 1787 as applicable to the slaves of the South. In this way in all parts of this country manual laborers came to be more or less off color, and this has continued in a continually lessened degree till this time. When those who work with their hands are looked down upon by those who do not, two sets of feelings are apt to be engendered equally unfortunate to the two classes that entertain them. The non-manual workers, the employers, are more or less puffed up with pride and a sense of superiority (there are beautiful exceptions) as towards their laborers, and the latter in their turn are apt to develop alongside an unmanly servility and an apparent deference, a sort of secret breasting up of hostility and defiance, which is sure to manifest itself when labor troubles come on even when it has not helped to brood these troubles into life. The parties then are not well placed as towards each other to negotiate and to compromise and to coalesce in a future harmony. The party of the first part is too proud to yield to their inferiors, and the party of the second part is too bitter to be sweetened. Who is sufficient for these things? And what is the remedy for them? (a) So far as employers are concerned, their natural though unreasonable and provoking arrogance may well be reduced by the economical reflection, that the laborers are exactly as necessary to production as the capitalists are, that the two stand on a precise level so far as the product goes, that each is one blade of the shears and the other the other and that it takes both blades to cut anything, that while the laborers are sellers in the open market the capitalists are likewise sellers and that the same ultimate purchaser furnishes the market for both sets of sellers, that as sellers they are only equal in position, that buying and selling is a levelling as well as an uplifting process the world over, and that as such co-equal partners in one indivisible operation all haughtiness on one side and all undue humility on the other is nothing but obstacle as towards the common end; and also by the moral and social reflection, that their laborers are just such men as themselves in motive and action, that the two are very likely to exchange places with each other before very long, that riches are extremely liable to take to themselves wings and fly away, that Christianity is no respecter of persons, that humanity deems nothing human alien from itself, that morality puts the golden rule upon the fore-front of its precepts, and that whatever may unite any body of men in a legitimate purpose of achievement along any line of human action multiplies the power of each individual and exalts his standing and responsibility as such individual and thus reduplicates the reward of his individual action. (b) So far as the employees are concerned, in any temporary sense of dependence or even of injustice, there is open to them the economical reflection (and it will do them good to bring it home) that their best route to the respect and favor and feeling of equality of their employers is through the excellence of the service they render them and the courtesy (not servility) with which they render it, that as every capitalist becomes such by means of abstinence they may themselves by saving become capitalists, that there is nothing in the nature of their work or its relations to capital to cause them to hang down their heads, that handsome is that handsome does, that the opportune offer of the present capital to work on gives them a chance to exhibit their skill and to earn a living, that the capitalists are just as dependent on them as they upon those, and that as single sellers of a valuable personal service they daily confront on a footing of equality the sellers of a valuable product so created; and there is open to them also the moral and social reflection fortified by constant observation and experience, that no matter where a man begins it is the end that crowns his work, that life to all is a series of stepping-stones, that manly qualities are appreciated everywhere, that character tells in the lowest position however high and low are reckoned, that the poor gain and hold friends quite as well as the rich, that there was a certain poor wise man that saved the city by his wisdom and gained a lasting record in consequence, that the poor and the rich are constantly changing places in this world, and that there is no respect of persons with God. We may see now what we are to think of some popular remedies constantly recommended for low Wages. A brief discussion of what is false will give us a stronger hold of what is true. The chapter will close with relevant reference to three current remedies. 1. It is being dinned into the ears of the present generation, that Government has large functions in the ongoings of business, that it ought sometimes to interfere to better the rate of Wages, at least to designate a minimum below which they shall not go, and that Government should hold itself ready to undertake directly to carry on certain branches of business under certain circumstances. This scheme goes under the high-sounding name of _Nationalism_. Richard T. Ely, Professor of Political Economy in Johns Hopkins University, is one of the most prominent representatives at present of this school of thought. In his Introduction to Political Economy just published (1889), he lays down this principle: "_When for any class of business it becomes necessary to abandon the principle of freedom in the establishment of enterprises, this business should be entirely turned over to Government, either local, state, or federal, according to the nature of the undertaking._" He begins his book by attempting to hammer in the "lesson" that as Civilization improves, coöperation takes the place of individualism. The golden age of individualism, he says, is among the wild tribes of Australia. They never coöperate with each other in their economic efforts, or in anything else. No one expects anything from his neighbor, and every one does unto others as he thinks they would do to him. The life there is one prolonged scene of selfishness and fear. But as civilization comes in, he says, individualism goes out, and coöperation takes its place. The fine old Bentham principle of _laissez faire_, which most English thinkers for a century past have regarded as established forever in the nature of man and in God's plans of providence and government, is gently tossed by Dr. Ely into the wilds of Australian barbarism. There are some propositions that are _certainly_ true, and one of them is, that no man can write like that, who ever analyzed into their elements either Economics or Politics, who ever gained a clear conception of the sphere of either science in its relation to the other, or who ever saw distinctly the relations of either to the nature of Man. The sole motive in Buying and Selling is the gain of the individual, each for and by himself. That always was the motive, is now, and always will be. No complications of modern business, no complexities of credit, no combinations of capitalists or laborers, ever altered or ever can alter one particle the motives of men in buying and selling. In a natural and progressive state of things, Individualism, instead of going out, comes more and more into play, through the Division of Labor and the falling of all sorts of services more and more into specialties. To talk glibly, as Professor Ely does, about Government taking up easily and carrying on in a better way and to better ends branches of pure business as they are dropped or forced from the hands of Individuals, is ignorance at once and alike of the real nature of Government and of Business. Let us look at a few of the native incongruities and logical fallacies of this nationalistic position. (1) What is human Government? Is there anything substantive and continuous in its _personnel_ and purposes, as there is in the government of God? Is government anything more, can it be anything more, than a transient Committee of the citizens charged and changed to do in certain few particulars the changing will of a Majority? Government is indeed a necessity, as men are, to restrain the lawless, and to shape the ends of the law-abiding; but it has to be administered, if at all, by precisely the same kind of men as the rest are, chosen for brief periods, their duties sharply prescribed by constitution or custom, and impeachments or other punishments provided for them when they transgress. One President of the United States and one Judge of its Supreme Court have already been solemnly impeached by the sovereign people themselves. Government, then, is an _Agent_, and nothing more. Even nationalists will not contend for the divine right of kings. And the duties of every decent government on earth are _political_ in their character. The agents are chosen and dismissed with a direct reference to that kind of action. Politics has a sphere wholly distinct from Economics. The true and only end of politics is the greatest good of the greatest number, so far as that end can be mediated by governmental agents of the people. Individualism as such does indeed sink out of sight under a true Politics, and the inalienable rights of one are maintained for the sake of and in consistency with the greater rights of all. But Economics is all individuals from beginning to end. "_It takes two to make a bargain._" Only two. Each of the two has his own motive, estimates for himself, gives and takes for himself, and enjoys alone his own gain. All this is involved in the very idea of _Property_, which is derived from _proprius_, and which means _one's own_. How illogical, then, and incongruous, to suppose, that a set of limited human agents briefly trained to purely _political_ action, and liable to be turned out of office by every change in party administration, can be competent at the same time and in addition to perform _economical_ functions for the people! Notice, too, that governmental agents in all good countries are already _overburdened_ with their mere political duties. Work is behindhand in every portfolio, on every court calendar, and in every legislative body, in Christendom. How absurd it is, therefore, to talk about throwing upon shoulders, already overburdened, additional loads of a different kind, for which shoulders and heads are wholly unfitted! Why not, then, inquires our nationalist innovator, organize new bureaus to undertake in their behalf the buying and selling of the people? Ah! Who pays the taxes needful for the support of the present _political_ bureaus? And who would have to pay the taxes needful for the support of the new _economical_ bureaus? Besides not having any substantive existence of its own Government has not one cent of money, except what the people voluntarily pay in taxes out of their own personal gains, in order to maintain their own agents to do certain political things for them, which they cannot do as well for themselves directly; and when it comes to the cold question for the people themselves to answer, whether they will organize a new set of hired men to do their trading for them, and pay them for doing this out of aggregate gains certainly to be vastly diminished by the process, our nationalistic leaders will perhaps find out that the people have common sense, whether the said leaders have it or not. But the damning difficulty with this governmental business association is, after all, in the inevitable _lack of motive_ on the part of the hired men doing the buying and selling. It is an honor to human nature, that hired men never have and never can have the zeal and enterprise of principals and owners to forecast and to perform and to lay up; because it shows that man is a rational animal, made in the image of his Maker, always acting under the pressure of personal motives, and always estimating what is his own more highly than what belongs to another. Business motives act in their fulness only on the individual, whose is the effort and whose is the return. Any policy whatever on the part of Government, which lessens the number and the eagerness of individual operators in favor of great artificial combinations resting in the shadow of the Law, lessens of necessity the gains of exchanges, and the progress of the nation, because it lessens of necessity the press of motive on the many to work and save. Government, accordingly, is quite too far off in every respect from the business, that is to say, from the buying and selling of the people, to undertake any branch of it when "it becomes necessary to abandon the principle of freedom in the establishment of enterprises." It will then be high time to "abandon" the "enterprises" themselves. If the "principle of freedom" cannot compass the "establishment of enterprises," is it likely that the "principle" of secondary and irresponsible agents can do it? To show the people how to make their bargains, how to buy and sell and save and spend, is a function government is not fitted for, was not established to perform, and never undertook without making a botch of it. In the Preamble of the Constitution of the United States there is a careful and complete and elegant enumeration of the purposes, which the body of the instrument was designed to attain. These purposes are six. No one of them contains even a hint of any purpose to enter upon the "establishment of enterprises," still less of any necessity "to abandon the principle of freedom." The last of these six purposes is phrased: "AND TO SECURE THE BLESSINGS OF LIBERTY TO OURSELVES AND OUR POSTERITY." The liberty to buy and sell freely was precisely that "liberty" of the Colonies which was most threatened and infringed by the British Government, to vindicate that special "liberty" was the chief cause of the American Revolution, and "to secure the blessings" of that and other forms of similar "liberty" was the final purpose of the Constitution of the United States. It is true indeed that the Constitution empowers Congress, a creature of the People, "_to establish Post Offices and Post Roads_"; but the purpose of this was _political_, and not pecuniary; it was to bind all the States together in one Union of intelligence and intercourse; it was to keep the outlying and distant parts in touch with the central and seaboard; it is not in any sense a "business" enterprise; the department of the mails is not now and never has been, for any length of time, self-supporting; and it illustrates through and through in its "Star route frauds" and other contracts, in its appointment and removal of postmasters, and in the sickening dependence of primal Service of the people on partisan and corrupting impulses, many of them inherent evils of the much-vaunted Nationalism. But besides all these vital and political objections to the assumption on the part of government of any direct industrial functions whatever, there remains two other fundamental objections, of which the first is, that our national government has received no powers to any such end, and is emphatically prohibited in the Constitution itself from exercising them:--"THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES RESPECTIVELY OR TO THE PEOPLE." (2) The second remaining objection is, that such proposed action of government could have no tendency at all either to enlarge the Wages-portion, or to increase the industrial efficiency of the laborers, or to diminish the number of competitors at any one point of the wages-scale. As a matter of fact, such governmental action would have precisely the opposite effect at each of these three vital points of wages: employers would have less motive to swell the wages-portion, laborers less motive to improve their capacity, and more motive to congregate locally. Suppose, that at some given point in the scale of wages, free and intelligent competition has been had on both sides, and that the average rate of wages as thus determined proves one dollar per day for each laborer. Suppose further, that everybody outside the employers thinks this is quite too little, and that government accordingly issues a decree that wages at that point must be thereafter one dollar and a half per day. That decree can have no tendency at all to enlarge the _wages-portion_ of those particular employers, because _that_ has already been determined for the next industrial cycle by the general productiveness of the cycle last past, and by the last division under free competition between wages and profits; if, therefore, the decree were carried out, as it never practically could be, the result would be that only two-thirds of the laborers previously employed could be employed then at all, and the remaining third would certainly be worse off than before; and besides the Division of Labor being necessarily lessened, production would be less profitable to the employers, and the next wages-portion would certainly be less than the one before, and thus the outcome of the _remedy_ would be worse than the _disease_. Now let alone the artificial interference of government, and all natural accessions to Capital at that point, all investment of profits in an enlarged business, all saving from expenditure for the sake of further production, tend strongly of their own accord to enlarge the wages-portion, and thus, the number and intelligence of the laborers continuing as before, are sure to raise the rate of wages. Or, if there be no accessions to Capital, or other influence swelling the wages-portion, and the number of laborers be diminished at that point, as by migration to new fields of effort or enlistment in armies, the competition of wages-givers for laborers will be quickened, and the rate of wages will rise. Reversed conditions will of course give reversed results. 2. A second popular remedy for low Wages, not only proposed, but also for a long time brought into practical action, is Labor-Unions in their various forms and with their manifold methods of operation upon employers. It is important to note here and to remember, that the Guilds of the mediæval times, from which the modern Trades-Unions have borrowed something of form and much of nomenclature, were in substance extremely different from their modern imitators. Those were combinations of Masters with their journeymen and apprentices and dependents in order to control the entire manufacture and sale of a certain class of products, from the name of which the Guild usually took its own name, as "Cloth-workers' guild," "Shoemakers' guild," and so on. Whittier, himself a shoemaker in his boyhood, apostrophizes the latter guild in words which more or less describe them all:-- "Ho! workers of the old time styled The gentle Craft of Leather! Young brothers of the ancient guild, Stand forth once more together! Call out again your long array, In the olden merry manner! Once more on gay St. Crispin's day, Fling out your blazoned banner!" These masters thus organized with their laborers were the capitalists of their time, and in this vital matter differed from the Unions of to-day, which are made up of laborers as such organized to confront, and if need be, to antagonize, capitalists. A royal charter was indispensable to the legal existence of those craftsmen. It took money for them to start their guilds, and in progress of time most of them became very rich. "A common fund was raised by contributions among the members, which not only provided for the trade objects of the guild; but sufficed to found chantries and masses, and set up painted windows in the church of their patron saint. Even at the present day the arms of the craft-guild may often be seen blazoned in cathedrals side by side with those of prelates and kings." This radical difference between the two must always be borne in mind in all arguments and inferences drawn over from the mediæval "unions" to those of the present day. Two points may be freely conceded to these labor-organizations before we pass to the economic objections to them. In the first place, the employers _set the example_ for the employees in a tacit if not open combination as against the employees in their own interest and emolument. The so-called "protective" tariff, for instance, is nothing in the world but a strongly-linked combination of certain rich capitalists to extort from the masses (their own laborers included) artificially lifted prices for the necessaries of life; and the certain result of shutting out imports by tariff-taxes is the shutting in of would-be exports, to the certain lowering of general wages in a country, because there is a lessened demand for laborers in consequence. For a second good instance of combinations as against employees on the part of employers, take the well-known understanding among manufacturers of the same sort of goods in the same general locality, that laborers discharged from one establishment shall not be hired in any of the rest; and that if the general voice call for a "shut down," or for three-fourths time or less, all in that line of goods shall comply. How can laborers be blamed for organizations in their own behalf when they find themselves confronted as individuals with an organization of employers? Then, too, it must be acknowledged, that, had it not been for united action of some sort on the part of the laborers, the unreasonable hours of fifty years ago in mills and factories would probably not have been shortened to this day. Capitalists as a class are conservative of methods, as well as of ends. The cotton and woollen manufacturers of Berkshire County, for example, who may doubtless be taken as a fair sample of the manufacturers of New England, stiffly refused the demands of their work-people that the hours might be reduced from an average of 14 throughout the year to an average of 11. When the late Civil War was going on, and the manufacturing became extremely profitable, and the mills were more or less depleted by enlistment, and the remaining hands felt more independent from the consequent rise of wages, the combined demand in one mill for fewer hours was reinforced by simultaneous demands for the same in other mills in the neighborhood (the time and manner having been agreed upon beforehand), and visits in force by the work-people from mill to mill completed the desired reform. The mill-owners were sullen and indignant, and submitted of necessity. The work-men were right. The reform was imperative. Credit must be given to them for the good they have done acting as a body on this and other occasions. On the other hand, all this is not _business_. All this is contrary to the very old, and the very good adage, that it takes _two_ to make a bargain. If we express this adage in the language of our science, it will take some such form as this: When two men have mutual services to exchange, let them come to a fair agreement as to the terms on which they will exchange. Certainly, let each make the best terms he can, but let the bargain always be free. If one party, who happens to have the power to do it, uses anything like compulsion upon the other, it ceases so far forth to be a bargain at all, and becomes a sort of robbery, of which in some cases courts will take cognizance. Now, workmen bring a certain valuable service to the market, just such a service as the capitalist wants, and he has to offer just such a service as they want, namely, wages: let the two parties come to a free and fair agreement on the terms of their exchange; let each workman by all means make the very best terms he can, insisting to the last penny on all he can get elsewhere, for the value of his service is determined, as other values are determined, by what it will bring: let the employer do just the same on his side, and so let a fair bargain for the time present be struck. This is a very good kind of _striking_, and the more intelligence and skill and self-respect a workman has, the better prepared he is to strike the bargain and secure his just due by and for himself alone; and this gives a good chance for every man who has any peculiar gift, who may have surpassed his fellows in diligence and skill, to secure a proportionate reward now and to go on higher in future; all this gives opportunity for _diversity of relative advantage_, which, as we have seen, lies at the basis of all exchange, which itself starts in individualism and naturally proceeds in a still higher individualism to the end. This is the only way for a laborer of talent and diligence to secure fully what belongs to _him_ as a man and a workman. If he cannot get from a given employer what he thinks he ought to get, what he thinks the service is worth in another market, let him exercise his perfect right to quit and go elsewhere. All this is fair and aboveboard and individual and progressive. Everybody knows that there is a kind of _striking_ now in vogue wholly different from this, in that it brings a sort of compulsion into play. _A fair bargain should be broken, if at all, just as it was made, with the two parties face to face, and everybody else aloof; and a new bargain should be made, just as the old one was, with the two parties face to face, and everybody else aloof._ But a combination among workmen to leave an employer in the lurch, and especially a combination which forces into its ranks by cajoling or menaces those who are unwilling to join it, as is so commonly the case in Strikes, is not only contrary to the inmost nature of a bargain, but is also of itself a sort of confession of the injustice of the claim. If the claim be just so far as _all_ the individuals are concerned, there is no occasion to extort it. If the value of the service rendered by each be equal to the sum demanded, and especially if this can be obtained elsewhere, which is the only gauge of the value of any service anywhere, there is no need of conference and combination and conspiracy. Of course, this radical argument against Strikes implies that employers of that grade have not entered into a combination not to hire dissatisfied laborers from other establishments; if they have, then the agreement can be turned with equal force against the employers themselves, for _they_ are resorting to means outside the nature of a bargain, means of the same nature as a Strike. Let, then, each workman tell his employer the present facts just as they are, and if this appeal prove ineffective to secure his commercial right, let him go quickly where he can get the most for his service. That this is not done, that means of the nature of a threat are brought to bear upon the employer, that the justice of the claim is not relied on in a case where more than anywhere else justice can enforce itself, that free and full explanations are not had, that no notice is given, that great damage is expected by their action to accrue to the employer,--all this seems to forget that the transaction between employers and employed is a case of pure exchange, a simple bargain of one service against another service. The above is the universal and fundamental objection to Strikes. _The remedy for economical evils, real or supposed, must ever be found in economical considerations._ The strong but foolish tendency of the times is to mix up things that are quite distinct; to try to apply to the evils of Trade the rules of Morals, which is a useless task; to appeal to Politics in matters of pure Bargain; and to resort to Force to cure the evils that flow from the wholly voluntary action of individuals. This is like the doctor who would cure bodily ailments by mental and spiritual recipes. It has all the absurdities of the late famous "Mind-cure." The mind is indeed higher than the body, but bodily maladies must be treated as such, or the patient will die; the imperatives of Ethics are certainly superior to the profitables of Economics, but the latter are well able to take care of themselves on their own ground; Religion is loftier than Morals, but it becomes a very poor substitute for morals in the daily routine of life. _Similia similibus curantur._ Economical evils can only be removed by a better Economics better applied. Strikes are an outside and irrelevant remedy for low Wages. A bad principle works badly in practice of course; the principle that underlies strikes is so opposed to the fundamental nature of exchange, that we might know beforehand that it would work badly; and as a matter of fact, it does work badly enough both upon employers and employed, because strikes are certain to embitter the relations between the two classes, which ought always to be cordial and free, and especially, because strikes must work on the minds of the capitalist to lessen the Wages-Portion for the next industrial cycle. Fortunately, we possess authentic statistics gathered about Strikes by the Massachusetts Bureau of Statistics of Labor, and published in detail in the Report of December, 1888. The information given is exact in relation to five principal States, and approximate in relation to the other parts of the United States. We will copy first the table exhibiting the Losses in six years on account of Strikes of both Employers and Employees, and the outside assistance received by the latter:-- EMPLOYEES' LOSS AND ASSISTANCE AND EMPLOYERS' LOSS IN THE FIVE PRINCIPAL STATES ON ACCOUNT OF STRIKES AND LOCK-OUTS FOR 1881-1886. +------------------------+-------------+------------+-------------+ | STATES. | Employees' | Employees' | Employers' | | | Loss. |Assistance. | Loss. | +------------------------+-------------+------------+-------------+ | _Strikes._ | | | | | Illinois, | $6,636,208 | $238,452 | $5,251,829 | | Massachusetts, | 4,200,489 | 266,708 | 1,970,881 | | New York, | 8,581,784 | 726,696 | 5,966,421 | | Ohio, | 6,378,757 | 415,568 | 2,793,427 | | Pennsylvania, | 12,890,346 | 781,338 | 3,897,757 | | Other parts of the | | | | | United States, | 13,127,139 | 895,795 | 10,821,238 | | +-------------+------------+-------------+ | THE UNITED STATES, | $51,814,723 | $3,324,557 | $30,701,553 | +------------------------+-------------+------------+-------------+ The large percentage of establishments represented in this table, in which the strikes were ordered by labor-organizations, is particularly noticeable. In New York 94.26% of the establishments had strikes which were ordered, in Illinois 83.96%, in Massachusetts 81.91%, and in the United States 82.24%. The "walking-delegate" so-called became the principal personage in all these strikes; he brought the orders to the men from the "central-union" of their special organization, and became in most cases the sole means of communication between the two. "_You are the strike_," exclaimed the Lord Mayor of London the other day to Mr. Burns, the walking delegate of the dock-laborers now on strike in that city. That the daily bread and home comforts of tens of thousands of men depend on the secret and irresponsible decision of a little knot of agitators, sending out their verbal and often ambiguous written orders by a walking-delegate or two, is one of the monstrosities of Strikes often witnessed in the United States. The laborers sometimes do not know even the causes of the strike. There has been great want and suffering for three months past among the striking coal-miners in the State of Illinois; and a brief editorial in the "Springfield Republican" of Aug. 24, 1889, describes the state of things so justly, that we quote it:-- "Ex-Congressman William L. Scott, who owns coal mines at Spring Valley, Ill., has offered to pay 75 cents a ton for mining to the strikers who in their destitution have been subsisting for some time on public charity. This is 2-1/2 cents a ton more than the miners have asked for, but it is coupled with the condition that each man must seek work individually and not through some outside union committee. Although the men have been reduced to a state of abject want it is said the conditions imposed will prevent a settlement. In that case we may conclude that a few well-fed walking delegates are acting for the men and not they for themselves. It is a strange time to quibble over such a matter. The worst and most oppressive enemy of labor is the parasite who lives upon its distresses." A strike is a state of war, and like war, there are two parties to it, and it cannot be expected that the party of the other part should not strike back. The "_lock-out_" is the counter-stroke of the capitalist to the "_strike_" of the laborer. Lock-outs, however, are comparatively infrequent. Capitalists, as a rule, are conservative and forbearing. Massachusetts took the statistics of lock-outs as carefully as those of strikes, and the following is the table:-- +------------------------+------------+------------+------------+ | STATES. | Employees' | Employees' | Employers' | | | Loss. |Assistance. | Loss. | +------------------------+------------+------------+------------+ | _Lock-outs._ | | | | | Illinois, | $533,497 | $5,374 | $347,065 | | Massachusetts, | 952,310 | 136,626 | 550,675 | | New York, | 3,150,123 | 392,316 | 845,262 | | Ohio, | 848,829 | 231,870 | 493,100 | | Pennsylvania, | 712,956 | 77,038 | 237,735 | | Other parts of the | | | | | United States, | 1,960,002 | 262,814 | 988,424 | | +------------+------------+------------+ | THE UNITED STATES, | $8,157,717 | $1,106,038 | $3,462,261 | +------------------------+------------+------------+------------+ Like war too, strikes and lock-outs are wasteful and demoralizing to both parties. Why should there be a resort to force to settle an industrial dispute any more than to settle any other private dispute? Will such a resort be long tolerated by public opinion in civilized countries? The Legislature of Massachusetts in 1886 provided for a State Board of Arbitration for the settlement of differences between employers and employees. The statute was crude in some respects, and the basis of it not very firmly fixed in the nature of things, but the Bureau of Labor reports that it has been justified by the results in its practical application during the short time of its operation. The broad truth is, that the value of Commodities and the value of Credits is now left to the safe action of Demand and Supply under free competition in every country in Christendom: why should not the value of Services be left to the same safe and inexorable action? Governments gave up long ago all idea of regulating directly or indirectly the prices of merchandise and the prices of commercial claims of all kinds: will they not shortly give up also all idea of regulating directly or indirectly the rates of Wages? They will. The three kinds of things bought and sold are on an exact level in the nature of things, so far as Government is concerned. Wages are abundantly able to take care of themselves in the ordinary way, as goods do, and stocks and bonds; and an enlightened Public Opinion is fast coming to see, that a man's personal service rendered needs no more the oversight of the State in its sale than his horse, or note of hand at interest. Strikes, and lock-outs, and all extraordinary courts or boards to settle quarrels between a labor-giver and a labor-taker as such, since it is a case of ordinary buying and selling, are foredoomed to pass out in the good time coming. Towards this good end works strongly the common _futility_ of strikes and lock-outs. Carroll D. Wright, chief of the Bureau of Labor in Massachusetts, now the head of the National Bureau of Labor, in his State Report for 1880, gave a succinct account of all strikes in that State from their beginning in 1830. They were 159 in all, of which 109 were unsuccessful, 18 apparently successful, 16 compromised, 6 partly successful, and 10 "result unknown." In Great Britain during the year 1878, there occurred 277 strikes, of which 256 were failures, 17 were compromised, and only 4 were successful. The following table taken from the Massachusetts Report of 1888, gives on a broad scale the results of Strikes in the United States for six years:-- GENERAL SUMMARY OF STRIKES IN FIVE PRINCIPAL STATES FOR 1881-1886. _Percentages._ +--------------+-------+---------+-------+-----+--------+-------+-------+ | CLASSIFI- | Illi- |Massa- | New |Ohio.|Pennsyl-|Other |THE | | CATIONS. | nois. |chusetts.| York. | |vania. |Parts |UNITED | | | | | | | |of the |STATES.| | | | | | | |United | | | | | | | | |States.| | +--------------+-------+---------+-------+-----+--------+-------+-------| | _Strikes._ | | | | | | | | |Ordered by | | | | | | | | | labor organ- | | | | | | | | | izations, | 83.96 | 81.91 | 94.26 |71.21| 61.59 | 73.06 | 82.24 | |Establish- | | | | | | | | | ments closed | 70.70 | 79.10 | 51.01 |81.21| 70.11 | 57.57 | 60.13 | | | | | | | | | | |Causes: | | | | | | | | |Against | | | | | | | | | reduction of | | | | | | | | | wages, | 5.35 | 6.23 | 2.50 |20.73| 22.65 | 8.61 | 7.77 | |For change of | | | | | | | | | hour of | | | | | | | | | beginning | | | | | | | | | work, | - | - | 3.86 | - | - | 0.05 | 1.61 | |For increase | | | | | | | | | of wages, | 41.54 | 35.28 | 39.09 |52.42| 46.97 | 45.01 | 42.32 | |For increase | | | | | | | | | of wages and | | | | | | | | | reduction of | | | | | | | | | hours, | 17.85 | 0.50 | 9.37 | 1.85| 1.06 | 4.96 | 7.59 | |For reduction | | | | | | | | | of hours, | 18.35 | 42.71 | 24.31 | 5.32| 5.32 | 17.23 | 19.48 | |For reduction | | | | | | | | | of hours and | | | | | | | | | against being| | | | | | | | | compelled to | | | | | | | | | board with | | | | | | | | | employer, | - | - | 7.32 | - | - | 2.19 | 3.59 | |Other causes, | 16.91 | 15.28 | 13.55 |19.68| 24.00 | 21.95 | 17.64 | | | | | | | | | | |Results: | | | | | | | | |Succeeded, | 54.16 | 35.28 | *51.05|49.44| 32.60 | 42.69 | *46.52| |Succeeded | | | | | | | | | partly, | 10.33 | 45.93 | *8.14| 8.87| 17.57 | 17.27 | *13.47| |Failed, | 35.51 | 18.79 | *40.65|41.69| 49.83 | 40.04 | *39.95| +--------------+-------+---------+-------+-----+--------+-------+-------+ * In 15 establishments the results were not ascertained. 3. The third popular remedy for low Wages, which has at least the merit of being in the line of economical considerations, as the other two are not, is "Co-operation." The interest in this proposed remedy is much less both in Europe and in the United States than formerly, owing to the failures that have mostly attended the attempts to put the scheme into practice, although there have been some remarkable successes also, particularly in England. The idea of Co-operation is this, namely, that certain laborers within given classes combine of their own accord, (1) _either to purchase their necessaries in common and at wholesale, hence at cheaper rates because avoiding all profits of the middlemen_; or (2), _more especially to engage in the joint production of the commodities they are familiar with, the laborers furnishing the capital also from their little hoards or borrowing it on the strength of their individual or associated credit, managing the business themselves, all being co-partners, and of course all sharing pro rata the entire profits of the concern_. All this is well; and in countries where laborers have been under traditional disabilities, it may be in some cases very promotive of their self-respect, activity, frugality, and general welfare; but any one can see that no new economic principle is involved in the plan. As in all other production, so here, there must be (1) capital from some source, (2) steady and skilful labor, and (3) superintendence or management of the business. It is at the third point that schemes of co-operation have mostly broken down. The faculty of good management is rare; the organizing and executive ability needful to carry through any scheme of co-operation will not come upon call; if any of the co-operators chance to possess it, the scheme may succeed, although he who is conscious of having it will prefer to use it for his own gain in his own way, to say nothing of the practical impossibility of any man's working with the same spirit when the gain or loss is to be largely another's as when it is to be wholly his own; moreover, it has been well said, "it is impossible _to hire_ commercial genius or the instincts of a skilful trader"; so that, while there is no trouble about the workmen uniting the character of capitalist and laborer in their own persons, and no doubt that they will work harder and more skilfully while sharing profits as well as receiving wages, it is still true, that the difficulty of securing a real "captain of industry," and thus a perfect organization and management of the whole business, puts the scheme of co-operation out of the question as a means of raising wages, or promoting the general welfare of laborers. In this country, where there is nothing to hinder any laborer from becoming a capitalist, where the savings-banks are open to the smallest gains, where nothing is more common than for two or more workmen to organize a firm to carry on some branch of business, where most of the present capitalists proper were formerly laborers proper, and where the shares of most of the joint-stock companies are open to everybody who has the means to buy them, there is only one consideration that seems to justify any special jealousy of laborers as such towards capitalists as such; and that is the fact, that Legislation, every now and then, sometimes on a small scale and then on a gigantic one, now by means of corporate charters and then by other means more indirect and effective, _does confer certain extraordinary privileges upon capitalists_. So long as capitalists and laborers rest upon their natural rights and positions, neither can get any undue advantage of the other; and just so far as each recognizes their identity of economic interest and the consequent reciprocity of obligation and effort, the prosperity of each will help build up the other; but, on the other hand, so far forth as any advantages are given to capitalists by special laws, either of State or Nation, these become necessarily unjust to laborers, and ultimately also injurious to capitalists; and in this case, the laborers, seeing just what it is that hurts them, _ought to combine together and to strike, not capital (their best friend), but a piece of perverted legislation (their worst enemy)_. FOOTNOTES: [5] O'Reilly's Poem, at Plymouth, 1889. [6] Green's Short History of the English People, p. 144. CHAPTER IV. COMMERCIAL CREDITS. Political Economy is the Science of Sales; and because it _is_ the science of sales, its definitions and principles must cover equally all cases of sales actually occurring or possible to occur. We have seen repeatedly, that only three kinds of things are ever bought and sold, or ever will be, and these are Commodities and Services and Claims. The first two kinds have been fully elucidated already in the two preceding chapters, and it belongs to the present chapter to explain and illustrate clearly the peculiarities of the third kind of things salable. Ours is the only science that has to do with the motives and facts and economic results of all sales as such. The discussions of the present chapter will proceed orderly through the following topics:-- _The Nature of Credit._ _The Forms of Credit._ _The Advantages of Credit._ _The Disadvantages of Credit._ 1. Certain things are essential in every sale of anything, and of course are common to all sales of everything, such as two persons and two desires and two estimates and two renderings; while there are certain _peculiarities_ in the sale of things belonging to each of the three special classes of things salable; for example, in the sale of a commodity there is a rendering of a tangible object that has been prepared for sale in past time, and in the sale of a service a rendering of an intangible something wholly in the present time; while in the sale of a credit there are likewise two peculiarities, one of them relating to future time and the other to a special trust felt in a person by some other person. We must now study these two peculiarities with care; and, mastering these, we shall be master of the Nature of Credit. a. Some sales are consummated at once, the things exchanged and the ownership in them are mutually passed over then and there, the reciprocal satisfactions are entered upon immediately, and there is at once an economical end. For example, one neighbor sells another a peck of green peas and takes in pay a peck of new potatoes, both vegetables may be cooked for dinner in the respective families the same day, and the commercial transaction is all over. But there are other exchanges, an immense class of them, different from these in this respect, that though the transaction considered as a mere case of value created and measured is then and there ended, yet considered as to the nature of that preliminary exchange which implies and requires another future exchange to consummate it, it is not then and there ultimately closed, but one (or both) of the parties then exchanging relies on the good faith of some one else to fulfil in the future a pledge expressly or impliedly made in the prior exchange. Commonly some external evidence of the pledge is created and passed at the time, but this is not essential to the validity of the pledge itself. For example, A buys 50 bushels of wheat of B, and B takes in pay for it A's note of hand at six months for $75. The note is not the pledge, but it is a legal and convenient proof of it. As a case in Value, the wheat is sold for the pledge and the pledge is the equivalent of the wheat. Each party rendered the other then and there satisfactory equivalents. All our definitions apply here perfectly. Still a further and future exchange was contemplated by both parties at the time of making this exchange, and as a silent part of it. A takes what is now his own wheat, and B takes as an equivalent for what was his wheat a right to demand of A in six months an equivalent for the present equivalent (the pledge) for the sake of which B rendered the wheat. The note of hand is the evidence of this pledge, and it belongs absolutely to B. It is his property. He may keep it till maturity and then sell it to A for its face, or he may sell it at once to a bank for its face less the discount for six months. Discount is the difference between the face and the present price of a note of hand. The first peculiarity, then, of Credit is, that it always involves the element of future time. But it involves this secondarily, and not primarily. In other words, a present equivalent is always rendered by both parties in every commercial transaction; but the present equivalent in the case of a credit transaction is the right to demand something of somebody sometime in the future. This distinction is very important, as we shall see clearly when we come to treat of Banking, though it is generally ill-understood at present. Valuables, when they exchange at all, exchange once for all. But there is one kind of valuables, namely, claims, which, when subject to exchange, imply and require another and a future exchange, not necessarily between the parties to the first exchange, but between _some_ two parties; and not, speaking strictly, to _consummate_ the first exchange, because that took and gave its own satisfactory equivalents; but, as involving both time and trust, the credit sale must in the nature of things be followed by another sale of one of the three kinds. We see, accordingly, that in Credit our science of Economics takes partial possession of future time for certain purposes of its own. Exchange sets its throne and reigns pre-eminently in present time; but its sceptre extends also over past time, so far as all capital is concerned, and so far as all material commodities (the result of past work) are exposed for sale in the present; and its right hand of rule goes forth also to grasp the future, under limitations indeed both as to the stretch of time covered and as to the character of the persons concerned, but still there is there a fair domain and a broad domain, and a realm on the whole winning a wider and wider circuit. It is one of the proud boasts of Political Economy as a science, as it is too one of the exalted traits of human nature, that the lordly impulse to buy and sell does not confine itself to what the Past offers in all its accumulated valuables, nor to what the Present unfolds in the unlimited desires and efforts of congregated men, but reaches out also into the Future, and makes that pay tribute more and more into the vast treasury of its Gains. And this too is legitimate. Man is at once and all the time actor and historian and prophet. The future is not wholly unknown. Given the one assumption, that Earth and Men go on as heretofore, Exchange knows well enough, and better and better, whom of the coming men to trust and for how long a time. The doctrine of averages and of probabilities comes along to guide and to enhearten the investor. Any thoroughly established government of to-day can borrow all the money that it wants on its public pledge to repay the principal fifty years hence. England has borrowed millions of pounds sterling, giving no day certain in the future for its repayment. These funds are called "Consolidated Annuities": the interest on them is paid on a day nominated in the bond: the principal is to be paid when the borrower chooses, or never. b. The other and final peculiarity of Credit is, that it always involves on the part of one person a commercial confidence in some person _as such_. The term, Credit, is derived from the Latin CREDO, _I believe_, and the corresponding term, Debt, from DEBEO, _I owe_. Thus the personal element and the future element are wrapt up in the very origin of the words. There is no credit without debt, and no debt without credit. The very words imply a _belief_ of one of the two parties in a commercial promise made by the other, and also an _obligation_ acknowledged by this party as due to the first. There is a basis for credit in human nature. Faith in each other to a certain extent is natural to men. Whatever enlarges the intellectual foresight, and especially the moral character of men, opens a broader and surer field for Credits. Civilization, so-called, and Christianity certainly, deepens and broadens the natural trust of man in man. Despite all the instances of broken faith, and they are too many; despite the shocks and cautions that come every now and then to every man who trusts much in his fellow-men; experience itself justifies and rewards an ever-growing commercial trust. It is one of the noble things in international commerce, as we shall see, that men trust each other across the oceans, and lay millions of value upon the faith of a single firm. As the core of the Christian religion is confidence in a _Person_, so the very substance of credits is a natural and in general well-grounded faith in _persons as such_. A Credit, then, may be defined to be _a Right to demand something of somebody_; and a Debt to be _an Obligation to pay something to somebody_. What always lies, accordingly, between creditors and debtors, are Rights coupled with Obligations; and these are _Property_, just as much as anything is and for the same reason, since they always may be, and usually are, bought and sold by other parties as well as the original parties. In these Rights or Claims, therefore, arises a commerce, domestic and foreign, immense in extent and amount, and the Rights themselves take their undisputed place on an equality with tangible Commodities and personal Services. Having thus reached an ultimate and satisfactory definition of Credit, we must still pursue a little further our present object, namely, to obtain a clear conception of the _nature_ of this great class of Valuables, by drawing two or three distinctions between Credit-Rights and some other rights very apt to be confounded with them. (1) The distinction between credit-rights and other rights is well rooted in the Latin language and in the Roman law, while the corresponding English terms are quite ambiguous and need to be used with great caution. In Latin, a true debt is called a _Mutuum_, because it lies between two persons, a creditor, and a debtor, and is a credit-right independent of the question of fact whether the debtor has now the thing rendered to him or not, indeed whether he has anything at all to pay with or not; on the other hand, a thing merely lent, when the very thing lent is to be returned to its owner, who has not in the meantime parted with his property to the other, is called in Latin a _Commodatum_. The English tongue has but the one word, _Loan_, for the two very distinct operations: for the loan of a book, for instance, which is to be returned after use, and which may be legally reclaimed by the owner if he chance to find it anywhere, that is, the Latin _commodatum_; and for the loan of money, or other such measurable thing, which is to be returned _in kind_ only, and which may _not_ legally be reclaimed except through some action of the borrower, since the ownership of that thing rendered has passed over to him completely, that is, the Latin _mutuum_. The same ambiguity of course inheres in the corresponding English word, _Borrow_. The English language is relatively poor in words expressing nice legal distinctions. Now, as a true debt is a claim on a _person_ and never on a _thing_, the Roman Law is true to the nature of things and to the vital distinctions of our science, when it names the right to which a _mutuum_ gives birth as a _jus in personam_, that is to say, a right against the person; while it names the legal obligation arising out of a _commodatum_ as a _jus in re_, that is to say, a right to the very thing. So strongly is this doctrine, namely, that the security of a true debt lies against persons and not against things, intrenched in the Roman Law, that debts or credits are even termed "_nomina_," _names_, in that law, as when Ulpian says, "_Nomina eorum qui sub conditione vel in diem debent et emere et vendere solemus_": We are accustomed to buy and sell DEBTS payable on a certain day and at a certain event. The fundamental law of the present national banks of the United States explicitly recognizes this old and good distinction by requiring the banks to loan money on _personal_ security only, that is to say, no tangible things, not even real estate, may be taken as _original_ security for any loan. (2) Henry Dunning Macleod, who has cast fresh light on the nature of Credit, draws another distinction that lies on the threshold of the subject, namely, that between paper documents conveying titles to _specific things_, such as a bill of lading, for example, and those conveying _credit-rights_, such as a bank-note, for example. Bills of lading describe the goods, go out with the goods, are a title to the goods, and have no value separate from the goods; bank-notes have nothing to do with any specific pieces of property anywhere, are in no proper sense a title to anything whatever, but a general _claim_ for something upon some person somewhere that awaits his action for its validity and realization. For instance, a grain-dealer in Chicago sells 1,000 bushels of No. 2 wheat to a party in New York, and ships the grain to that point by rail: two kinds of paper documents arise in connection with this transaction, which are quite diverse in their nature and course of operation: one is a _bill of lading_, that goes along with the wheat, and gives the person named in the bill a complete title to 1,000 bushels of wheat of a certain description, and the holder of the bill takes the wheat and asks no favors of anybody; and the other is a _bill of exchange_, drawn by the grain-dealer in Chicago on the consignee of the wheat in New York, which bill of exchange is sold at once by the creditor in Chicago to a banker there, provided the banker has commercial confidence in the two names on the bill and a sufficient motive in the shape of a discount for buying it: thus the bill of lading has in it neither element of Credit, neither Time nor Trust, while the bill of exchange has both of these elements in it. (3) Attention should be called to a third distinction of the same general nature, as between relations very different in themselves and yet extremely liable to be confounded with each other. Let us take a common instance: a customer of a bank takes a package of valuables of any kind to his banker, such as bonds and bills payable and jewels and plate, and asks him to take care of it for the present in his vault, subject of course to a return to him or any one else to his order at any time: no property in these valuables passes over to the banker, it is not a deposit in the ordinary banking sense, the relation of debtor and creditor does not arise as between banker and depositor, the banker becomes Trustee or Bailee of the package, and is bound to exercise common vigilance in the care of it, but if it be burned or stolen extraordinarily the loss is the customer's and not the banker's. But now, on the other hand, when a customer deposits in the banking sense money or bills payable with his banker, the property in the money and bills passes over to the banker instantly, the relation of debtor and creditor arises, the depositor receives a credit on the banker's books in return for the money and bills rendered, the exchange as a mere case of value is consummated to the profit of both parties, but the return-service to the depositor is _the right to demand equivalents of the banker at some future time_. In other words, it is a case in Credit. (4) As this general distinction is vital, we shall lose nothing in the end if we make even a fourth exemplification of it. The United States Treasury receives silver dollars of its own minting from any person who chooses to place them there, and gives out in token what are called "Silver certificates" to the same amount, entitling the bearer to take out the dollars again at will, and thus the certificates being more convenient than the dollars and just as valuable become a part of the money of the country. The Treasury is bound to exercise due care in the keeping of these silver coins, and to return them to the holders of certificates on demand, just as the elevator and railroad companies are under legal obligations to show diligence in keeping and transporting the wheat of our former example; but the United States is not _debtor_ to the holders of these certificates any more than the elevator company is _debtor_ to the wheat shipper, and consequently there is no element of Credit in these certificates. Just so of the later gold certificate. On the other hand, the so-called greenbacks issued by the United States are also a part of the money of the country, but they are _credit_-money, inasmuch as they are a _promise_ to pay to the bearer some time in the future so many dollars. The Treasury has never kept up any special fund of gold and silver, with which to redeem the greenbacks. They rest back for their value on the good faith of the country. The United States is _debtor_ to the bearers, and these in turn are _creditors_, and the legal-tender quality of the greenbacks does not alter their character as a form of pure credit. Both the elements of good faith and future time inhere in the greenbacks, as they do also in the bonds of the United States, while in the certificates neither of these elements appears. However, circumstances easily conceivable and which were actually realized in the case of the famous Bank of Amsterdam, founded in 1609, might make the United States a debtor and the holders of the silver certificates creditors in the commercial sense of those terms. The Directors of the Bank of Amsterdam, towards the close of the second century of its beneficent existence, loaned out to the Dutch East India Company and to the City of Amsterdam large parts of the bullion, on which its certificates ("bank money") were based, unknown to the public, which felt unlimited confidence in the bank, and the result was in 1795, when the French invaded Holland and the facts became known, that bank money which had previously borne a premium of 5% fell at once to a discount of 16%, although the bullion that remained and the debts due the Bank were fully equal to redeem the certificates and were used for that purpose. So, if the United States should use, clandestinely or otherwise, the silver dollars for other purposes than to redeem the certificates on demand, the latter would undoubtedly both in law and fact be transformed from mere token-money (as now) into credit-money valid as against the United States as debtor, like the greenbacks at present. Have we now compassed our first object? Do we fully understand, from the foregoing descriptions and distinctions, the _Nature_ of Credit? If so, we are prepared to look narrowly into its _Forms_. 2. Credit-rights are commonly, but not always, recorded upon paper; but it is important to observe, that the paper-document is the mere evidence of the right, and not the right itself, which lies back of the paper as substance to shadow, and persists intact even were the paper lost or destroyed. These paper instruments of Credit are commonly contemplated as of two kinds, Promises to pay and Orders to pay, but there is not at bottom any radical difference between these, the Right as between two persons is not affected by this superficial difference, as we shall see, and the present enumeration of credit-forms will proceed independently of it. _a._ Book Accounts. A charge in a trader's books is both a current and a legal evidence that the person charged has received a certain service, and has virtually promised to render the sum charged as a return-service. Book accounts are the most common of the forms of credit; and if the person charged fails of his own accord to complete the exchange thus commenced, the law, in the absence of any proof to make the charge suspicious, collects it, if possible, and forcibly completes the exchange. The convenience of this form of credit is so great, that it is not likely ever to be disused; and as between people who deal much with each other is very useful, inasmuch as their respective book accounts are set against each other in settlement, and only balances are required to be cancelled in money. It is for the benefit of both creditors and debtors, however, even when the same parties are both creditor and debtor, that such credits should be short in time and such settlements frequent, since in book accounts there is no interest on charges however long they run, and since in this way only can the creditor realize the full gain of the exchange, and the debtor keep fair his mercantile name. If it be difficult or impossible to follow strictly the excellent financial maxim, "Pay as you go," the next best thing to that is, "Go and pay." The gains of an exchange are lessened, or its terms become more onerous, just in proportion as delay in its completion is experienced or expected. Book accounts are subject also to this disadvantage as compared with other forms of credit, that their number and amount as against any person are less likely to become publicly known, and therefore he is more likely to be trusted in this form by others beyond the point of his solvency and their safety. _b._ Promissory Notes. These differ from Book accounts in that they are always either expressly or virtually on interest, and are consequently negotiable. They are issued by individuals, corporations, and Nations. If the principal be deemed secure, that is, if there be a thorough trust on the part of the holder in the maker of the note, the time of the payment of the principal becomes a matter of comparative indifference, because the interest is compensation for delay, and is often the motive on the part of the holder for rendering that service of which the note is evidence. Indeed a long obligation, other things being equal, is commonly preferred to a short one, and bears a higher price. When a note is sold (negotiated) by the original holder it becomes payable to the purchaser, or to each subsequent purchaser in turn, and thus may run a devious round, may play a part in many commercial transactions, may be set off by the transient holder against a debt owed by him and thus cancel that, and when itself is cancelled by ultimate set-off or by any other mode of payment the last holder takes the return for the service originally rendered by the first holder. The promissory notes of individuals are frequently discounted by Banks in a manner to be presently explained. These are always for short times, and are debts bought by banks on the personal security of the names upon the notes. The notes are founded on the relation of debtor and creditor, which is always a personal relation, and so differ in their nature from a _mortgage_, which is a qualified _title_ to a specific piece of property, usually real estate. A note secured by a mortgage is, as it were, absorbed into the mortgage, and becomes another thing from a common promissory note, or _commercial paper_, as it is called. A mortgage rests therefore on other grounds than a commercial trust in the good faith of a _person_. Corporations also issue promissory notes, and as such issuers become in a sense _moral persons_ entitled to confidence according to the character and purposes of the individual corporators and the financial means and methods of the corporation itself. It is an old saying, that "corporations have no souls"; economists as such have no need to pronounce on that proposition; the fact is enough for them, that the short notes of corporations are often discounted by bankers on the same ground as the notes of individuals are discounted; and that their long-time obligations, commonly called _Bonds_, are all the time bought and sold in the market like commodities. Many of the Railroad bonds, of which immense quantities are in the markets of the world, rest back also for their security upon _Mortgages_ of the real estate of the corporations made over to Trustees to hold for the assurance of the holders of the bonds. The personal obligation of the corporators is thus reinforced, much as a common mortgage reinforces the note or bond, to secure which the mortgage is executed. Whenever _all_ the real estate of a railroad company becomes subject to a mortgage, when there are previous partial mortgages or liens, these latter take precedence in due order of any subsequent pledges or bonds secured by what is properly called the _consolidated mortgage_. Such a mortgage has recently been executed by the Northern Pacific Railroad Company for $160,000,000. Railroad Bonds so fortified in proper and legal terms possess the highest possible credit-security to their holders. When no such consolidated or "blanket" mortgage has been put on the property, first and second and third mortgages sometimes support bonds of primary and secondary and tertiary validity; and sometimes so-called _Income-bonds_ are issued, with or without mortgages behind them, for the payment of the interest on which bonds the net earnings of the corporations are specifically pledged. Frequently also simple long-time bonds resting on corporation security only are negotiated without difficulty. It must be constantly borne in mind, that certificates of Stock in railroad and all other similar corporations are not credit-documents at all, but are mere evidences of so much proportional _ownership_ in the corporate property. They are not interest-bearing documents at all, although they may draw interest or rather dividends, if the property be prosperous. They are somewhat like deeds to land, in which no element of credit inheres. Nations too are moral persons in the same loose though binding sense as corporations, and as such often issue promissory notes on interest, commonly called in this country Bonds, in Great Britain Funds, and in some countries Stocks. These are always pure credit. Nations give no mortgages. Yet they often borrow at a less rate of interest than the most solvent individuals or corporations can, as is seen by the fact, that British consols carry but 3%, and yet bear a premium in the present market. The term, "consols," is a popular contraction of "consolidated annuities," the Act to create which at 3%, out of a then confused mass of public debts at various rates of interest passed Parliament in 1757. The maximum of the British debt was $4,500,000,000 in 1815, and has now decreased to $3,467,787,960. The United States also sold its bonds at 3% for a small premium in 1882. It had borrowed of its own citizens in 1862-65, both inclusive, about $2,500,000,000 on its bonds at different rates of interest and at different times of repayment: some of these bore gold interest at 6% annually, Government reserving the right to pay the principal in five years and pledging itself to pay it twenty years from date, and so these bonds were called "Five-twenties"; others bore gold interest at 5%, becoming payable at ten and demandable at forty years, and so were called "Ten-forties"; and still others bore greenback interest at 7-30/100%, the principal payable in greenbacks at three years, or fundable in gold sixes, at the option of the holders, and these were named "Seven-thirties." Over $90,000,000 of this last kind of bonds were subscribed for by the American people in the course of a single week in the spring of 1865. The whole of our national debt issued prior to 1865 was made payable on a day certain; the so-called "consols" of 1865 and 1867 and 1868 were payable _not more_ than forty years from date; while all the bonds authorized from 1870 to 1882 were Consols proper, whose peculiarity is, that they never fall due so as to become a claim for the principal against the Government, but after a day fixed or on a condition fixed are payable "at the pleasure of the United States."[7] The separate States of our Union, as sovereign in their own sphere quite as much as the national Government is sovereign in its sphere, have unlimited power to contract debts for State purposes through their regularly constituted authorities; and consequently to issue promissory notes or bonds to liquidate such debts. New York commenced in this way in 1817 the magnificent enterprise of the Erie Canal, to connect the great Lakes with the city of New York by an inland water-way for commerce, and the completion of this in 1825 made the State the "Empire State," and the city the undisputed commercial metropolis of the Union. In a similar way Massachusetts undertook in 1862 the completion of the Hoosac Tunnel for a railway lengthwise of the State; and although the process became unduly expensive, and great abuses sprang up in connection with it, no one now questions that the pecuniary and moral resources of the State have been augmented, on the whole, by contracting the debt and providing by taxation for the liquidation of both interest and principal. The credit of Massachusetts, that is, the ability to borrow money at low rates of interest, has been at times greater than that of the United States; mainly because the State in 1862 and onwards refused to avail itself of a depreciated national paper-money (greenbacks) made legal tender for all debts, with which to pay the interest on its then existing State debt, but persisted throughout (alone of the States) to pay that interest so soon as due in gold coin. On the other hand, several of the States of the Union at different times, and under more or less of provocation and justification, have made a partial or entire repudiation of certain portions of their public debts, justly damaging to their individual credit, and even to the good name abroad of the whole people of the United States. Counties and cities and towns may also issue interest-bearing bonds for public improvements, which have a _quasi_ governmental character, but only under conditions and to a maximum amount prescribed by a law of the State. _c._ Bank Bills. These are a form of promissory notes not on interest, and thus differ from the notes of ordinary corporations, and from the bonds of nations and states and municipalities; but the issuing Bank offers, as a sort of compensation for the privilege of circulating notes not on interest, to convert them into coin, that is, to pay them instantly on the demand of any holder. It is this proffered and immediate convertibility into coin that enables the promissory notes of a bank to circulate as money, while the notes of other corporations and individuals equally solid and solvent do not circulate as money. It must be borne in mind, however, that this offer to convert them into the legal and ultimate coin-money does not essentially alter the nature of Bank Bills; they are a form of commercial credit; and although they are commonly issued against another form of such credit, namely, against the interest-bearing promissory notes of individuals and corporations who resort to the bank for discount, this only complicates the exchange without changing its nature. It is a common instance of exchanging one form of credit for another form which happens to have a greater currency or validity than the first, and for this superiority of the bank credit the individual credit pays an interest, in other words, is discounted; and such exchanges of one form of paper credit for another, with or without a premium, may go on indefinitely; especially as _credit-money_ in the form of bank bills, such paper may serve as a medium in many exchanges; but ultimately, and before the entire series of transactions is closed, such bank bills are to be redeemed in coin, or taken in by the banker in payment of some debt due to him, in both which cases they are extinguished as an instrument of Credit. The Bank of England keeps out in circulation on the average £25,000,000 in bank bills. It has been computed, that the average length of life of a Bank of England bill between its issue and redemption is about three days; and no bill once redeemed or received back over the counters of the Bank is ever issued again. It is then placed on file for record only. The joint-stock and private banks of England and Wales circulate on the average rather more than £4,000,000 of bank bills of their own; and no bank bill of any kind is legal in England and Wales of a less denomination than £5. The ten Scotch banks and their branches keep out in bills about £5,000,000; six out of the nine Irish banks and their branches issue on the average not far from £10,000,000; but both the Scotch and Irish banks are allowed to put out £1 bills. Bank bills, as a form of paper credit not on interest, but ostensibly redeemable in coin on demand of the holder, have been issued in the United States by more parties and to a larger extent and with more recklessness as to redemption than in any other country. Omitting all reference to Colonial issues, and confining the outlook to the first century under the Constitution, let us note, that when the present national government went into operation in 1789, the "Bank of North America" in Philadelphia and the "Bank of New York" in New York and the "Bank of Massachusetts" in Boston had been opened for business, and all three were State banks issuing bills convertible into coin, though each confined its business mostly to the city in which it was located. Two years later under the auspices of Alexander Hamilton, then Secretary of the Treasury, the first "United States Bank" went into operation at Philadelphia under a charter from Congress that was to run twenty years with a capital stock of $10,000,000. At first no bills were issued by this bank of a less denomination than $10; the money was popular and was converted on demand; the Bank was prosperous, and paid dividends to stockholders never falling below 8% and frequently rising to 10% annually; as the time approached for the charter to expire, the stockholders were anxious for a renewal of their privileges; but the opposition to them in Congress was now strong, owing mainly to the increase in the number of State banks from 3 to 88; and accordingly the recharter was defeated in the House by one vote, and in the Senate also, by the casting vote of the Vice-President, and the Bank was obliged to wind up its affairs in 1811. Then came in a sort of mania for the creation of new State banks, under the hope that these, now there was no National Bank, might obtain the Custody and temporary use of the national funds, and especially might furnish the country with paper money in the shape of State bank bills. The number of banks went up to 246 in 1816. So many bank bills were put out, and became so much distrusted, and so many were presented for redemption, that the banks could not respond in coin, and in the fall of 1814, there was a general stoppage of specie payment in all the banks of the Country excepting those in New England. General resumption of specie payment by the banks did not take place till 1819. New York bank bills went down to 90%, those of Philadelphia to 82%, those of Baltimore to 80%, and those of Pittsburg to 75%. Under these circumstances the Second Bank of the United States went into operation in January, 1817, also with a charter to run twenty years, with a capital stock of $35,000,000, of which the national Government subscribed one-fifth. The new Bank helped indeed the State banks to resume specie payments, as was a part of the purpose, but it pushed its own bills into circulation with such eagerness, that it is thought $100,000,000 of them were in the hands of the people, before the first year was out. In this way the Bank fell into difficulties. Its bills were distrusted. Coin came to bear a premium over them of 10%. President Jackson began his famous contest with the Bank seven years before its charter was to expire, and took care that it went out of being the same year that he went out of office, in 1837, namely. The next year the State banks increased in number to 675, and continued to increase till 1862, when there were over 1500 of them, and when the issue of the "Greenbacks" by the national Government interfered with what had been their exclusive issuing of the paper money after 1837. In 1857, before the commercial panic of that year, the aggregate of their bills stood at $214,000,000, the largest it ever reached. These bills were nominally convertible into coin at the will of the holders, but they were never actually so convertible for any great length of time. The ratio of their volume to the specie reserved to redeem it was always a very high ratio. For instance, the average for the whole country in January, 1863, was 4:1; in Rhode Island 12:1; and in Vermont 28:1. Such a paper money can be called convertible only by a stretch of courtesy. It was wisely determined by the People to abandon this loose form of paper money, and in 1863 went into operation the present national banking system, under which originally $300,000,000 of bank bills were authorized to be issued in the aggregate, but this limit was extended in 1870 to $354,000,000, and the Act of 1875 removed all restrictions on the total amount, while there have always been restrictions on the amount that can be issued by any _one_ bank in the system. By the law of 1882, national banks may withdraw their bills by depositing lawful money in the Treasury to take them up, and then take back the proportionate amount of the bonds held for the security of the bills. There were outstanding Dec. 26, 1883, $341,320,256 of these national bank bills, but their volume declined under the law of 1882 to $151,702,809 on Oct. 4, 1888. These bills were from the first redeemable in greenbacks, which were themselves, however, irredeemable in gold and silver till New Year's, 1879, since which time till the present all the paper money of the United States of both kinds has been convertible into coin at the will of the holder. _d._ Bank Deposits. We are studying in order the forms of commercial Credits, and we have now come to that one which is central in the operations of Banking, and accordingly this is the place for us to understand clearly what a Bank is, who a Banker is, and what are the motives actuating at once the Banker and his Customers. A BANK IS AN INSTITUTION FOR THE CREATION, MANAGEMENT, AND EXTINCTION OF CREDITS. Money of any kind plays a very subordinate part in the general operations of banks, which live and move and have their being in the sphere of pure Credits. _Bankers are buyers and sellers of credits._ As merchants are dealers in commodities, so bankers are dealers in credits, buying (1) some credits with other credits, (2) some credits with money, and (3) money also with credits. Before unfolding these three operations of bankers in their motives and profits, a glance backward to the origin of banks would be a help to us in grasping their nature and benefits. The word "bank" meant originally a mass or pile or ridge of earth, as we still say, a _sand-bank_, and the _banks_ of a river. When first applied to commercial transactions, the word had a different meaning from what it has at present, although the idea of _credit_ has inhered in it from the first: in 1171, the Republic of Venice, being at war, ordered a forced loan from its citizens, and promised to pay interest on it at 5%; and certificates were issued for the sums paid in, and public commissioners were appointed to manage the payment of the interest and the transfers of the certificates, which were made negotiable. The Italian word applied to such a public loan is _monte_, but as the Germans were then strong in Italy, the German equivalent word, _bank_, came to be used alongside of it and instead of it. It meant this common contribution of the citizens to the wants of the State, represented by the mass of the certificates, and came to be applied also to the _place_ where the commissioners paid the interest and transferred the shares. Two other such loans were contracted there afterwards, and an English writer, in 1646, quoted by Macleod, speaks of the "_three bankes of Venice_," meaning these three public debts, including the evidences of them and the place where they were managed. The Bank of England also was in its origin in 1694 an incorporation of those persons willing to subscribe to a public loan in time of stress, as "The Governer and Company of the Bank of England." The subscribers to a loan of £1,200,000 became an association, or bank, on the condition that the Government should pay interest to the lenders at 8% annually, and also £4000 a year in addition for the management of the bank, that is, of this debt of £1,200,000 which was the sole capital stock of the new Company, which was authorized to issue an equivalent amount of bank bills to circulate as money. The capital stock was of no use, so far as redeeming these bills was concerned, the stockholders must furnish other money for that purpose besides what they have loaned to the State, but the ownership of so much of the public debt divided among the shareholders, made the Bank respectable, and tended to give public credit to its bills, which at first were paid promptly in coin on demand, and thus the Bank, by increasing the volume of money and by showing confidence in the stability of the State, strengthened the revolutionary position of William and Mary, and consequently the Whigs were the friends and the Jacobites the enemies of the Bank. This function of issuing bills or promissory notes designed to circulate as money, thus begun and still continued by the Bank of England, is much less important in modern banking than the other two functions of receiving Deposits and making Discounts, but it was the function on which the turn began to be made from the older to the newer modes of Banking. All that is needful to be said on this tertiary or money-issuing function of Banks has been already urged under the last head. The two Banks of the United States in succession, as they were more or less modelled after the Bank of England, gave the same prominence to the function of issuing paper money, under the belief that government bonds afford the best security for the redemption of bank bills, an idea that underlies our present system of National Banks also; and, moreover, those two great banks began to teach the people of the United States something of the mysteries of _Deposit-banking_, the point that we have now in hand. One-fifth of the capital stock of the first Bank, $2,000,000 out of $10,000,000, was subscribed by the national Government; and besides, the proceeds of the national taxes as they were paid in were passed over to the Bank as _Deposits_, that is to say, the Bank bought this money of the Government, paying for it with a Credit; and then properly used the money as its own in paying expenses and in discounting paper. Bank deposits do not belong to the depositors, but to the bank; which has thus bought money with credit; and when Andrew Jackson suddenly removed from the second Bank of the United States the national moneys deposited there, and placed them "in the custody," as he expressed it, of certain selected State banks, these amounted at the moment to $10,000,000, and the discount line resting in part on these deposits was at the time over $60,000,000, he removed them under a strong misapprehension _of the nature of such deposits_; and their _removal_ affected credit, and disarranged business to a remarkable degree, and caused intense excitement all over the Union. Depositing those national moneys with the Bank was a _trade_ between the Government and the Bank for the time being. The Government took in return for the moneys a Right to demand of the Bank in future by cheque or otherwise sums at its convenience to the aggregate of the sums deposited; the moneys became the property of the Bank to be used at its discretion in its ordinary business; the Government took its return-service for the moneys in a Credit, that is, a right to draw out at its convenience in the future corresponding sums; there was a commercial understanding in that case between the Government and the Bank underlying the buying and selling involved in the Deposit, as there always is between depositors and their banks; the banks are always bound to order their business in such a way as to be able to respond to every depositor's call for money, when it comes; but banks in general find practically that a cash reserve of one-third of their Deposits is ample to answer the current demands of their depositors, and the remaining two-thirds may be safely used in discounting short-time commercial paper to their own profit; Deposits, accordingly, are not placed "in the custody" of the banks receiving them; they are really bought by the banks of their customers, who receive in return certain privileges and credits that they prefer to the "custody" of their own moneys; and under these general motives on both sides, there has grown up in all commercial countries an immense line of Bank Deposits so-called, and perhaps we may say that the principal function of banks at present is to buy these deposits with their Credit, and then to handle them in further operations to the convenience of their customers and to their own gain. Under our present national banking system the Government is still a depositor of public moneys in some of the banks designated as "depositaries." At the close of the fiscal year, 1888, there were 290 of such depositary national banks, and the Treasurer held United States bonds of the face value of $56,128,000 and the market value of $68,668,182 in trust for these banks to secure public moneys lodged with them. This system of national deposit with the banks began in 1864. The total held by the banks June 30, 1888, was $58,712,511, an increase during the year of $35,395,633. But our concern is especially with the Bank Deposits of individuals, with their motives in making these, and with the motives and the methods of the bankers in handling them. In order to draw the confidence of the people in its locality, a bank must not only be, but also _seem_ to be, well-to-do and prosperous. Most bankers find it to their account to become known owners of public stocks; and in many cases, as in the present national banks of this country, are required by law to own such stocks, and this gives them a kind of credit and public standing scarcely to be reached by the ownership of ordinary property. Thus the Bank of England held at the outset £1,200,000, and now holds £15,000,000 of securities, mostly of the public debt of England. As merchants begin by laying in stocks of goods of the kinds they purpose to deal in and offering them for sale, so bankers begin by bringing together money and credits of their own in order to attract to themselves in the way of buying and selling the money and credits of other people. In order to deal successfully in credits the banker must have _credit_, that is, he must have the reputation of having property of his own, and of being an honest and careful manager of his own affairs and of the affairs of others so far as they are intrusted to him. Each of our present national banks, now (1890) 3150 in number, must have by law a paid-up capital of not less than $100,000, and in cities of 50,000 people their capital must not be less than $200,000 each, except that in places having less than 6000 inhabitants banks with not less than $50,000 capital _may be_ organized at the discretion of the Secretary of the Treasury. The main purpose of all this is to secure strong financial organizations fitted to draw the confidence of the communities in which they are placed, and in this manner and by means also of constant national supervision to attract the Deposits of the people to the banks. Now, as was said a little while ago, perhaps the central function in banking is for the banker to receive his customer's money and also his credits falling due, and to render to him in return for these _a credit_, that is, a right to demand from himself an equal sum at a future time or times. The evidence of this right is entered on the banker's books, and usually too on the customer's passbook, and thus becomes what is called a DEPOSIT. The ownership of the money and of the credits deposited passes over completely from the customer to the banker. It is a complete case of buying and selling to the mutual profit of the parties. The banker has the right to do just what he pleases with his deposits, and the customer has a right to draw cheques on his credit as and when he pleases; only the banker's entry of the transaction on his books is a virtual and a legal _promise_ to pay that amount to his customer, and therefore he must be ready to respond to his customer's call, whenever the latter demands, not his own money, but so much of his banker's money. _A deposit, accordingly, is not the very thing deposited, but a credit._ It is the banker's promise and the depositor's property. It is in this way that a banker buys ready money with a credit. The motive, then, that leads the depositor to intrust his money to the banker is the desire, not to have that specific money kept safely for him, for he lost possession of it absolutely when it passed the counter, he _sold_ it and took his pay in something else, but rather to have the unquestioned right to call on the banker for such sums (not to exceed the deposit in the aggregate) and at such times as may suit his own convenience. He has such confidence in the integrity and solvency of the banker, finds it so practically convenient to have dealings with him, and comes to have certain minor privileges at the bank in other relations over non-depositors, that he quite prefers a credit on the banker to the possession of the money itself. The corresponding motive of the banker to receive his customer's funds on these terms is that he finds by experience (his own and others'), that he can safely use a large portion of these moneys deposited in other operations in credit profitable to himself, and at the same time be practically sure of meeting all his customer's calls for money as they are made. Every good banker finds out, that many of his customers wish always to leave a balance in his hands; that while some of them are constantly drawing cheques on him for cash, others of them are as constantly depositing with him in cash; and that consequently he can properly and safely use a large part of the money he has purchased with his credit to purchase other credits with. Deposit-banking, therefore, is not only convenient and profitable for the depositor, but also excellent and profitable for the banker. Besides these two parties benefited, there is a gain, too, for the community at large in deposit-banking; inasmuch as a new capital as such has been thereby created, a series of new values, which would not otherwise have existed at all. Were there no deposit-bank in that locality, every man now a customer of it would of course keep his own reserves for himself for prospective contingencies: now, all these little reserves are aggregated in the bank, the convenience of them for each customer's contingencies is just as great as if he kept his own in his own safe or wallet, but the banker finds that he can use, say two-thirds of the whole, and still answer each customer's call. Here is a new capital. Here are scattered valuables brought together to be loaned out to a profit, which were otherwise barren and useless for the time being. Industry is quickened in a wide circle, products are created and brought to market, wages are paid and profits are gained, in direct consequence of bringing together under favorable auspices for safe loaning the little hoards and driblets of many individuals, which were practically useless in isolated hands. It may easily be objected at this point, that it is entirely possible that any banker might be called upon to pay off all his deposit-liabilities at once in money, which, if it happened, would break him of course; so it is abstractly possible that all the lives insured in a Life Insurance Company might terminate in one day, in which case no Company in the world could meet its obligations; and so it is abstractly possible that all the houses insured in a Fire Insurance Company might be burned up in a single night, which, if it happened, would cause the collapse of the soundest company; but in all these cases of possibility there is a _certainty_ that the possibility will not become a fact. _Ex nihilo nihil fit._ A supposition practically impossible to become a fact can yield no logical inference whatever. The Greek language has a special grammatical form for a hypothesis impossible to be realized in fact: would that the English had also such a form of speech! It would save us a mess of bad reasoning. If, however, any banker may have misjudged for his locality at any time the proper ratio of reserves kept to deposits received, and be crowded in consequence, he must sell some of the securities bought with the excess, or borrow money on them. Surprisingly large is the amount of bank deposits in all the leading commercial nations of the world. The average public and private deposits of the Bank of England, on which no current interest is paid by the Bank, amounts to about £40,000,000 all the time. The ten joint-stock banks of London carry about £80,000,000 in private deposits, of which those to remain some time _draw_ an interest, but those lodged on current accounts and on call _draw_ none. Scotland has carried deposit-banking further and to greater advantage than any other country in the world. There are now no private banks in Scotland, but the ten joint-stock banks with their numerous branches scattered to every village in the land hold constantly about £70,000,000 as individual deposits, on which current interest is allowed, and so the habit of keeping one's account with a banker has become universal with the people. No one thinks of keeping money to any amount in his house or about his person, and consequently house-breaking and highway robbery have almost ceased. Bankers even attend all the great fairs in the country to receive deposits and to pay off cheques. Credit in this form and in another form soon to be described treads its utmost verge in Scotland. Although in the United States the custom of keeping deposits with bankers and drawing cheques against them has not gone nearly so far as in Scotland, and not nearly so far as it will go in the immediate future, yet the aggregate of individual deposits in the national banks alone, Oct. 4, 1888, was $1,350,320,861, an increase in just seven years of 26%. _e._ Bank Discounts. The credits that are discounted by bankers may be either the promissory notes of individuals and corporations already characterized, or the Bills of Exchange soon to be characterized, but the entire function of discount is so peculiar, that the paper subjected to it ought to be enumerated in a classification of the instruments of Credit. The discounting of commercial paper is the second essential function of banking, as the buying and handling of deposits is the first; and it is more in accordance with genuine _banking_ to pass the price of the paper discounted to the seller's credit in the form of a deposit, that is, to buy one credit by creating another, than to pay the money over the counter at once, and thus to buy credits with money. Those who do the latter are called _bill-discounters_ rather than bankers, but most of our bankers do both, though there is a tendency towards the separation of the two in this country also. Manufacturers and wholesale merchants usually sell their goods _on time_, as it is called, say three or six months. Debts are thus created, or to say the same thing in other words, Credits are thus given. The manufacturer or wholesaler is creditor and the jobber or retailer is debtor. But a debt is property; and the creditor in this case wishes to avail himself of his property at once for further production; so he either takes a Promissory Note from his debtor, or draws a Bill of Exchange upon him, and this piece of property is ready for sale. Neither piece mentions _interest_ expressly, but the face sum virtually covers it as contemplating discount. Banks have been organized for the express purpose of buying for their own profit and for the convenience of business such pieces of property; some banker, accordingly, buys this particular piece, that is to say, this creditor passes over to this banker the commercial right to demand payment from this debtor at the end of three months, and receives in return from the banker either money direct or so much of the banker's credit, that is, a deposit in favor of the creditor on the banker's books. For furnishing this creditor either with ready money or a more available credit in lieu of his mercantile paper, the banker charges of course _a percentage_. This is _Discount_. _Discount is the difference between the face and the price of the paper._ This percentage called discount is the chief source of profit in ordinary banking. It is virtually compound interest on the sum advanced till the maturity of the paper, when the banker realizes from the debtor its full face. The following is a common form of a bankable note:-- $1,000 WILLIAMSTOWN, Mass., Nov. 10, 1889. Three months after date I promise to pay to the order of JOSHUA SWAN, one thousand dollars, payable at the Williamstown National Bank, value received. Due Feb. 10/13. LEANDER ALLEN. When Swan has put his name on the back of this note, that is in bank phrase, has _indorsed_ it, in token that he thereby at once sells and guarantees it to the bank, it is then discounted on the strength of the two _names_, Allen and Swan. As Allen technically takes the advance from the bank for his own benefit, he is technically expected to take up the note when it matures, and if he do not, the bank falls back on Swan, who is equally bound with Allen to see that it is paid at the proper time. Two names are nearly always, not always, requisite to a note acceptable for discount at a bank; and more names merely strengthen the note, since it is discounted on the combined validity of all the names upon it. One obvious advantage of discount is, that it tends to make all capital active and thus productive. It enables the banks to sell their credit and make a gain, to use a part of their money deposits to buy mercantile paper with, and so get a bank interest on them; it enables dealers in commodities to realize in cash _minus_ the discount the sum of what they have sold _on time_; and by means of _accommodation_ notes or bills, which only differ from the others in that there is no _actual_ debt between the parties, business men may swell the volume of their business temporarily, and non-business people may borrow small sums for convenience or emergencies. Bankers have not always credit enough or money enough from their depositors to buy in either mode all the good paper that is offered to them, in which case, they raise the rate of discount unless the law forbids, or by easy evasions even when the law forbids; or else accommodate regular customers and large depositors first, or buy of all that are "good" a certain proportion only. The discount line of 3140 national banks reporting Oct. 4, 1888, was $1,674,886,285.29. It is thus through the purchase of discountable notes for money, that banks derive their partial character as money-lenders. Also, such reserve sums as they do not wish to invest in negotiable paper, on account of the time involved before such paper matures, banks frequently loan _on call_ to those customers who have good collateral securities to pledge for the repayment of such loans. The terms of such a contract give the bank full authority to sell such collateral "_at the Brokers' Board or at public or private sale, or otherwise at said bank's option, on the non-performance of this promise, and without notice_." So far forth banks become direct money-lenders. It ought also to be added, that promissory notes with a single name (or more) are often discounted by banks partly on the strength of collateral securities deposited to fortify the names upon the notes. _f._ Bills of Exchange. A Bill of Exchange is a written instrument designed to secure the payment of a distant debt without the transmission of money, being in effect a setting-off or exchange of one debt against another. It is in form and in several technicalities different from a promissory note, inasmuch as it is an _order to pay_ instead of a _promise to pay_, and inasmuch as the maker of a note is always _debtor_ and the drawer of a bill of exchange is always _creditor_; but all this makes practically very little difference between the two as instruments of Credit, since nearly all bills of exchange come into banks in the way of ordinary business, either for discount or collection, and as the banks care nothing except for _names_, the _form_ of the purchasable paper is a matter of indifference to them. The following is the essential form of an inland bill of exchange:-- $3,000 PITTSFIELD, Mass., Oct. 16, 1889. Four months after date pay to the order of JOHN KENT three thousand dollars, value received, and charge the same to account of To ELI TRIPP, Boston, Mass. DAN STORRS. In the case of this bill, which may serve as a sample of thousands, Storrs is the _drawer_, who is creditor in relation to Tripp, and Tripp is _drawee_, but Storrs is debtor in relation to Kent, who is the _payee_. A bill of exchange is the sale of a debt, in such a way that two debts are so far forth set off against each other, and both transactions are closed without sending any money at all. Tripp owes Storrs, and Storrs owes Kent, and so Storrs pays Kent by an order on Tripp. As this is a bill at four months, Kent will doubtless send it to Tripp for his _acceptance_, as it is called, that is, his acknowledgment that he owes Storrs to that amount, and that he will pay the sum to the holder of the bill when it becomes due. An acceptance is written on the _face_ of a bill, and an indorsement upon the _back_ of the note: the initials are sufficient for the name of an acceptor, but the full business name is usual for an indorser. Thus a bill of exchange is the formal sale of a debt, in order to liquidate thereby another debt, when the parties to the transaction live in different and distant places. Storrs does business in Pittsfield, and Tripp in Boston, and it is a matter of comparative indifference where Kent lives, unless there is trouble at the time of collection, for he will perhaps negotiate this bill again, that is, make use of it to pay some debt that he himself owes. It is not often that the same person, as Tripp, happens to owe another person in a distant town, as Storrs, the same amount as Storrs owes another person somewhere, as Kent; but by two bills of exchange, one drawn by each creditor on his own debtor, and then each set off against the other, through the simple and beautiful expedient of bank balances, substantially the same advantages are reached as if it always happened so. Many bills of exchange are drawn _at sight_, as it is called, in which case the payee presents it for payment to the drawee, there is no acceptance and no discount, and a bill of this kind becomes the same as a cheque. Time bills, however, are usually discounted: the payee indorses his claim over to a fourth party by name, or, by what is called an indorsement _in blank_, that is, by merely writing his own name on the back of the bill, makes it payable to bearer: when banks buy these bills for discount, it is on the joint credit of acceptor and drawer and payee, and in that order of validity and precedence: a promissory note may be protested by a bank without notice to the maker, but a bill of exchange cannot be without notice to the drawer: a promissory note has two parties to it, a debtor and a creditor; while a bill of exchange has three parties to it, two creditors and a debtor. Inland bills of exchange, both time bills and sight bills, are very convenient in settling debts between distant places without the costly, and more or less hazardous, transmission of money back and forth; besides this, time bills possess the very useful function of enabling a debt due from one person to avail the creditor as a means of obtaining credit from a third party in discount; and in addition to these two points of benefit, it is plain, that the common use of bills of exchange in all their forms releases from use large amounts of money that would else be needful in trade. The less money in use in any country beyond a certain point, the better, because, if coin, it costs much to mint and maintain it, and if paper, it is difficult to make and sustain it of full value. Bankers sometimes change what they call "exchange" for settling debts between distant places in the same country; in some cases there may be a sound reason for this, in other cases there is none, but in all cases it adds a little to the profits of the banks for handling the bills of exchange; the principle of charging an "exchange" is this,--when one place as Chicago draws more bills on another place as New York than suffice to cancel the bills drawn at that time by New York on Chicago, the point _at_ which the larger indebtedness lies is the point for sending drafts _to_ which banks naturally charge a percentage; perhaps the idea, which is actually realized in foreign exchange, that money may have to be sent to liquidate such a balance, may have brought in the custom of charging "exchange" in such cases; and there are instances aside from such a supposed balance, in which there may be an extra cost of collection in some form to the bank, that may justify an "exchange" charge; but there is another principle counterworking and often neutralizing entirely this alleged doctrine of a "balance" of debt as between two distant places, namely, that the chief settling place and commercial centre of a country, such as New York is, draws towards itself from the whole circuit with such force, everybody wanting a balance there and having occasion to send funds thither, that drafts on such a place are apt to bear a premium without any reference to its comparative indebtedness at the time. Very similar to these inland bills in their nature and course and usefulness are Foreign Bills of Exchange, which, as a vastly important topic, especially in its relations with Foreign Trade, we must now study minutely and completely. Commercial relations between two countries, let us say, for instance, France and England, always give rise to a mutual indebtedness of their merchants; if these reciprocal debts were all to be paid by the actual sending of money to and from, there would have to be a constant and expensive and more or less hazardous outward and inward flow of the precious metals in respect to each country; all which necessity is neatly obviated by the use of reciprocal bills of exchange, and coin is only transmitted to settle the balances on whichever side there may happen an excess of debt at the time. French dealers are always sending goods to England, and English dealers goods to France; and for what they send to England the French merchants draw bills of exchange on the parties to whom the goods are consigned, and the English merchants draw similar bills on their debtors in France; then these bills are bought up by bankers or brokers in either country, and virtually exposed again for sale through new bills drawn against them to any parties who may have debts to pay in the other country. Thus bills on London, in other words, on English debtors, are always for sale in France; and bills on France, that is, on French debtors, are always for sale in London; the reciprocal debtors of the two countries, therefore, instead of sending coin to cancel their debts, buy and transmit these bills. Let us take a sample instance. Pierre & Co. of Paris send a cargo of wine worth £1000 in English money to John Barclay of London. Barclay thus becomes indebted to the Paris firm to that amount, and Pierre & Co. draw at once, so soon as the cargo is despatched, a bill in francs to the equivalent of £1000. If they themselves have no debt to pay in London, they will sell this bill immediately to a Paris banker or broker (if the exchange be then at par) for its full face _minus_ interest for the time it has to run, say two months; this broker is now ready to sell this bill again, or what is the same, his own bill drawn on the strength of it, to anybody in Paris who may have a debt to pay in London; and the party in London who receives it in liquidation of a French debt to him, presents it at maturity to John Barclay for payment. Thus one bill of exchange serves the ends of two creditors and one debtor: Pierre & Co. get their pay for the wine, the London party gets his pay for goods, and Barclay pays his debt, by means of it. A bill drawn in London for a cargo of hardware sent to Paris is similarly negotiated with a London broker or banker, and finds its way similarly to France in payment of some English debt owed there, and ends its course when it reaches the French firm on which it was originally drawn. We are now in position to understand clearly what is meant by the _par of Exchange_ in its commercial (not coinage) import. The merchants in Paris, who have debts due to them from London, draw bills of exchange for the amount of these debts; and, through the agency of middlemen, go into the market to sell these bills to other Paris dealers who have debts to pay in London. If the former class have a larger amount to sell than the latter have occasion to buy, in other words, if there be a larger amount of debts due from London to Paris than from Paris to London, then the natural competition of the sellers in Paris of the bills on London will lower their price somewhat in that market (Paris), in order, as usual, that the Supply and Demand may be equalized there. In this case the par of exchange is disturbed, a bill on London for £100 in francs may not sell for over £99, and the exchange is then said to be 1% _against_ London, or, which is the same thing, 1% _in favor_ of Paris. The _par of Exchange_, accordingly, between two countries, depends on the substantial equality of their commercial debts. In the above example, if the exchange as against London in favor of Paris continue long, and especially if the premium of 1% on bills drawn in London on Paris be sufficient to cover the expense of the transmission of specie from London to Paris, gold will begin to flow from London to Paris, because the debtors there may find it cheaper for themselves to buy and send gold than to pay the high premium on bills; and thus the equilibrium of payments and the commercial par may be restored. Also, this par tends to restore itself, without any sending of specie, in this other perfectly natural and effectual way: if bills on Paris are at a premium in London, for the same reason that they are so will bills on London be at a discount in Paris; therefore, there will be a direct encouragement to the extent of the premium for _exportation_ of goods from England to France, because on every cargo thus sent bills can be drawn and sold in London for a premium; while the more bills on Paris thus offered in London, the more the premium disappears of course, and the par will be restored so soon as the bills on Paris substantially equal the bills on London offered in Paris; and at the same time, so long as the discount on London bills continues in Paris, there is a direct _discouragement_ to further exportations from France to England, because the bills drawn in virtue of such cargoes can only be sold below par, and this too tends to _restore_ the par in the commercial sense of the term. Here is another instance of a magnificently comprehensive law, by which Nature vindicates her right to reign in the domain of Exchange. It is through this natural and beneficent law of automatic compensations, stimulating exportations on the one side and slackening them on the other, that most of the casual disturbances of the commercial par as between two countries are easily and perfectly rectified. While this great law is in full possession of our minds, let us note in passing how artificial restrictions by one country on the importation of goods from another, commonly called "Protectionism," affects this commercial par as between those two countries. Besides stopping absolutely a mass of otherwise profitable exportations and importations for both countries, it makes less profitable to the country imposing the restrictions whatever foreign trade _does take place_ between them in spite of the restrictions. Suppose England, as is the fact, opens her ports freely to the commodities of France, while France puts restrictions in the shape of heavy taxes upon importations from England; more French goods are likely under these circumstances to seek English ports than English goods to seek French ports, because they are more welcome; consequently, more bills of exchange drawn on London will naturally be offered in Paris than bills on Paris in London, and will so far forth be sold at a discount, while the London bills drawn on Paris will be sold at a premium; in other words, the comparatively few goods that do get out of a "protected" country, realize less to their owners than the natural value, because the bills drawn on them are extremely apt to be sold below par! With this course of things all known facts agree. Since the United States became conspicuously a "protected" country a quarter of a century ago, it has been at rare intervals and for short periods that bills drawn here on London have been at par. They have been usually much below par. The equivalent of £1 sterling in United States money is $4.8665; and when bills on London sell for less per pound sterling than $4.86, they are at a discount in New York or Boston; and exporters here are direct losers to the extent of the discount. If, however, notwithstanding the beautiful action of this great law of commerce, the disturbance in the commercial par as between two countries continues obstinate, it indicates one of several things as true of the country, whose bills of exchange drawn on another persist in a considerable discount; (1) it has come to be a pretty steady debtor country as towards the other, by sending thither its national or State or corporation bonds, whose interest and ultimately principal also must sooner or later be remitted in exports _extra_ to the exports needed to pay for the current imports of goods; (2) it has either naturally or by persistence in a bad public policy little or no shipping of its own, so that freights both ways have to be paid to foreigners in the form of exported goods _extra_ to those exported to pay for those imported in transient trade, which of course increases the number and face of the bills drawn _in_ the luckless country _on_ the lucky country or countries; (3) it has made the vast and fatal mistake of excluding by legal barriers of taxes put on for that purpose the goods of foreigners, whose only motive in coming is to take off corresponding goods of the deluded country's own to the profit of both, and so these last-mentioned goods must seek a foreign market (if at all) at reduced rates, their natural market having been destroyed by national law; and (4) it may have made the national money in which the bills drawn on it are liable to be paid an inferior money, either transiently by mere abundance or permanently by worsened quality, which is well illustrated in the instance of Amsterdam as cited in a preceding chapter, and which can only be remedied by raising the standard of the money to the level of the best. Very little, if anything, can be inferred as to the prosperity of a country or even as to the real condition of its "exchanges" in this technical sense of the term, by the transient movements of gold to and from the commercial countries, in their present complex relations as gold-producing and non-gold-producing countries and as debt-settling and non-debt-settling centres. Gold moves back and forth in obedience to several other impulses than to settle the balances in an international trade of Commodities. Gold-producing countries of course export gold just as they would any other native product. If for any reason gold becomes relatively more abundant in one country than in other commercial countries around it, general prices will rise in that country in consequence; which means, that gold is then and there the cheapest article that the people of that country can export to pay their commercial debts with. Also, the imports which a nation pays for in gold, or in bills of exchange bought above par, are often bought with a high profit. Creditor nations, nations that have managed to make themselves settling-places for the world's commercial debts, and nations that welcome imports without impediment from every quarter of the earth (and England may serve as a sample for all these three), will largely pay for imports in gold or in bills bearing a premium. It is a thousand pities, that technical terms which are quite misleading unless one remembers their origin and exact significance, have come to be intrenched in commercial language too strongly to be dislodged at this late day, as the common terms to express the state of the "exchanges" as between two countries. These terms are "_against_" and "_in favor of_." The old Mercantile system, which has left other unsavory progeny behind it besides this, in order to keep and heap gold and silver in a country, encouraged exports in every way and discouraged imports, in order that the "_balance of trade_," as the phrase ran, that is, the difference in volume between exports and imports, might come back to the country in gold and silver; and this foolish and now thoroughly exploded notion gave rise to the terms in question; exchanges were then said to be "against" a country when the record seemed to show more imports than exports, as if that implied that the imports were too great for a "balance" in gold and silver; and were said to be "in favor of" a country when its export-line was greater than the line of imports, as implying a favorable balance to be met by a specie-import in future. The false "System" is gone forever, but the "terms" still abide in commercial language, and confuse the minds more or less (more rather than less) of everybody who tries to make these terms a vehicle of thought. We have now described the causes and courses of international bills of exchange without resorting to these technicalities, which imply movements of gold and silver which do not actually take place under the conditions supposed; for example, the exchanges were "in favor" of the United States in 1874-77, there being an apparent trade balance of $164,000,000 in 1877 and a still larger in 1876 and a larger one in the two years preceding, but the import of specie was small in all those years, averaging about $25,000,000 a year, and the rest of the excess of exports went to pay interest due to foreigners, freights on the cargoes both ways, and so on. It is difficult to use without abusing the terms "against" and "in favor of" in this connection, and the reader is cautioned not to employ them; although "discount" and "premium" on international bills of exchange are matters extremely important to observe and to know the grounds of. Were there no counterworking principle, bills of exchange drawn _on_ capitalist and creditor countries, like Great Britain, whose imports are apt to be strongly in excess of the exports, and whose public policy is wise enough to put no obstacles in the way of the free receipt of imports, would be at a _discount_ in countries sending exports thither. This counterworking principle, already illustrated as to inland exchange in the case of New York, is best seen internationally in connection with London, which is the settling-place of the world's commerce. When the Romans dredged the Thames and made "the pool" just below London Bridge, they took the first steps towards making that town a commercial centre; since a market for products is products in market, the busy exchange of commodities there has quickened in every age the accumulation of capital and the increase of population; previous to the Dock Laborers' Strike in 1889, about 100 vessels entered the port of London every day, which received about one-half of the total customs revenue of the United Kingdom, and sent out about one-fourth of its exports; the business of out-of-the-way and semi-civilized countries has somehow (and it would not be hard to tell why) centered in London, as well as the business of originally British Colonies everywhere and of all other commercial countries; accordingly, debtors and creditors abound there, bills of exchange concentre there, and debts due from everywhere are payable _there_; and therefore, because bills on London are good all over the world, the Demand for them counterworks the natural cheapness of the bills drawn on exports _thither_ as compared with the natural dearness of the bills drawn there on exports _thence_. Another thing must be borne in mind in comparing the merchandise accounts of any country, namely, that whenever the "exchange" is sufficient to cover the cost and risk of the transmission of gold, gold itself is likely to go freely from the country, in which bills drawn on exports are at a premium, or to use for once the old hazardous phrase, "_against_" which the exchanges have turned, and bills will be drawn on that gold, as upon common merchandise, and sold of course for the sake of the premium; or, if a decidedly higher rate of discount prevail in a neighboring country, gold will naturally go thither from the lower-rate lands, because lenders in the latter will desire to realize the higher rate of current interest on money, and bills will be drawn on this gold as well, which will tend to lower the premium on bills there; unless, then, the premium _and_ the difference in interest abroad will justify the speculation, the gold will not stir; although, if the difference in interest abroad were very considerable and promised to continue for some time, the bills on the gold might sell at a discount and still leave a profit to the senders; but the home bankers can always stop a drain of gold of this kind by raising their own rates of discount. This casual mention of bankers leads on to the weighty point, that the whole business of foreign exchange is falling more and more into the hands of the bankers, because bills drawn _by_ and _upon_ well-known bankers naturally have a better credit than ordinary commercial bills, the names upon which are less widely and favorably known. Accordingly, persons sending cargoes of cotton, say, or of any other valuables, from New York to Liverpool, arrange with their bankers in New York to have the proceeds of the cargoes put to the _bankers'_ credit in London, and then these bankers draw bills on the London bankers, which will bring a higher price in New York than a common commercial bill, because many remitters and most travellers prefer bankers' bills, which, though they cost more, pay better and buy better abroad. Commercial bills are still bought and sold in every commercial town, but bankers' bills are more and more taking their place; and the quotations usually give the current price of each. London is so prominent as the settling-place of the world's transactions by means of bills drawn on and by London bankers, partly on account of the commercial predominance of England, partly from excellent banking customs there, and mainly because an immense mass of cheap loanable capital exists there, which even foreigners may borrow at London rates, provided only that they can get credit there, that is, leave to draw on a London banker, to whom of course remittances must be made as fast as he accepts their bills. Besides, the Bank of England, as the principal bank in Great Britain, and as closely connected with the Government, acts as a bank of support to the public and private Credit of that country. It does a regular business as a bank of deposits and discounts, but it means to keep its rate of discount somewhat above the rate demanded by the other bankers in London, so as not to come into competition with them much in their ordinary business, and be able to act as a bank of support to them and all others in times of pressure. All banks have about so much credit to sell, _and no more_; most banks sell in ordinary times about all the credit they have, because their profits depend on that; but if the Bank of England did this, it would become useless in periods of panic. In point of fact, that Bank just begins to sell its reserve credit, when the credit of the bankers below is exhausted. When they are at the _end_ of their rope, there is generally an abundance of slack rope still in the great Institution above. Now, as gold can be drawn out of the Bank of England by the cheques of depositors as well as by the presentation of its own notes for redemption, the Rate of Discount becomes a matter of prime importance in the management of the Bank. The whole line of deposits is a line of liabilities to pay out gold, if the depositors demand it; and, as deposits come largely through discounts, whenever there is a strong tendency to draw out gold so as to weaken the reserves of the Bank, the directors have an effectual remedy by raising the rate of discount. The higher the _price_ the Bank charges for its credit, the fewer, so far forth, will be its customers, and the smaller its line of deposits, and the less likely a continuous drain of gold from its vaults. The Bank of England is managed throughout by so simple a manner as the turning back and forth of this magic screw of Discount. Besides the use of the term "Par of Exchange" in the broad commercial sense in which we have now been examining it, as indicating the substantial equality of international debts as between two countries by the current prices of bills of exchange, there is another and subordinate sense in which the phrase is employed, namely, as denoting the _relative value_ of the coins of one nation in the coins of another. Thus, our present gold dollar contains 23.22 grains of pure gold; the English pound sterling contains 113.001 grains; consequently, there are $4.8665 to the English pound; and this is the "par of exchange" (in the secondary sense) between the United States and Great Britain. Between the United States and France the "par" is $1 to 5.18 francs, since the franc is 19.29 of our cents. An English shilling equals 24.33 of our cents, the new German "mark" is 23.82 cents, and the new Scandinavian "crown" equals 26.78 cents. _g._ Bank Cheques. In substance indeed and even in form, Cheques are Bills of Exchange, but the two have such differing legal incidents, and run so different a course towards extinguishment, that for our purposes in this treatise they should be put under a separate discussion. Bills of exchange are expressly drawn "at sight" or for a day certain, when they become payable by the drawee: cheques _say_ nothing about "sight" or any future date, though they are _really_ drawn at sight, and are payable to bearer on demand: they must, therefore, be presented for payment within the shortest reasonable time (all things considered), in order that the holder may legally claim against the drawer should the banker fail meantime: a cheque is held as the payment of a debt until it be dishonored on presentation: the banker bears the risk of the forgery of the drawer's name, unless his mistake be made easier by the drawer's carelessness in drawing: a cheque is not payable after the drawer's death. The parties to cheques are the Drawer, who is a depositor with some banker; that banker thus becomes the Drawee; and the person named in the cheque is the Payee, who can indorse his own right over to another person by name or in blank to bearer. When a cheque is drawn in this way by one _banker_ upon another, it is usually called in this country a _Draft_. Formerly in England, and in other countries as well, each considerable dealer kept his own strong box, and when he had occasion to make payments, told down the solid cash upon his own counter. Afterwards, the goldsmiths of London solicited the honor of keeping in their vaults the spare cash of the merchants, and these in their payments among each other came to employ orders or cheques drawn on the goldsmiths, and at the shops of the latter the principal payments in coin were effected. The later introduction of Banks brought along with it the custom, now continually widening in commercial countries among all classes of the people, of keeping one's funds with some banker, and making payments by written orders or cheques upon him. When the person making the payment and the person receiving it keep their money with the same banker, there is no need of any money at all passing in the premises, the sum being merely transferred in the banker's books from the credit of the payer to the credit of the receiver. The banker is quite willing usually to do this business for nothing, and even sometimes to allow the depositors a low rate of interest on all balances remaining in his hands, in consideration of the privilege involved of loaning such proportion of the aggregate of these sums as he deems safe to other parties at a higher rate of interest. In the larger cities, by an arrangement called the "Clearing-house," substantially the same benefits are secured as if all the depositors of the city kept their cash at the same bank; inasmuch as all the cheques drawn on each of the different banks, and passing in the course of the business day into other banks, are assorted before evening at all the banks, and adjusted the next morning through the clearing-house, and the credits and debits of each bank are set off as far as possible against each other, leaving only small balances to be settled in money. The London Bankers' Clearing-house was established in 1775; in 1864, the Bank of England was admitted to it; and since then, the Clearing-house itself, and all the bankers and firms using it, keep accounts with the Bank of England, and the balances, formerly settled by money, are now adjusted by simple transfers of account on the books of that great Bank. This carries out the grand principle of the Clearing further than it has yet been carried in this Country, although the United States Sub-Treasury not very long ago joined the New York Clearing-house, while the practical details of the Clearing are simpler and better in New York than in London. The average clearings in the London house (and there are besides many other clearing-houses in the United Kingdom) were £5,218,000,000 a year for 1875-80, and the amounts cleared frequently rose to £20,000,000 a day; which, if paid in gold coin, would weigh about 157 tons and require about 80 horses to carry it; and if paid in silver coin would weigh more than 2500 tons and require 1275 horses. This is stated on the excellent authority of the late Professor Jevons. The total business of the 23 clearing-houses of the United States in 1880 was over $50,000,000,000; the New York Clearing-house did 65% of that business for that year; and the average daily clearings there for the fiscal year 1879 were $76,167,983. We will now describe mainly from personal observation the New York Clearing-house, which was established in 1853, premising that the principle is the same, though the details may be different, in all other clearing-houses wherever located. Business men in New York, as elsewhere, usually pass in to their bankers as a deposit all the cheques and current credits received in the course of a business day. It is the custom for everybody to draw his own cheque _on_ his banker to make payments with, and to pass in _to_ his banker the cheques he receives from others. Say there are sixty clearing-banks in New York City. Each of these banks sorts out after business hours every day all the cheques it has received that day drawn on each of the other banks into separate parcels ready for the clearing the next morning. Each bank has, then, fifty-nine parcels _to deliver_, which represent the property of that bank, and are a _claim_ upon the other banks; and also _to receive_ fifty-nine parcels, which represent the property of the other banks, and are a claim upon _itself_. Before ten o'clock in the morning sixty messengers, each having fifty-nine parcels to deliver, appear at the clearing-house, each reporting to the manager at once for record the amount of "exchange" he has brought, which is entered of course as _credit_ to his bank; and then all take their positions in order in front of the sixty desks, which occupy the floor of the house, behind which sit sixty clerks, each representing one of the banks. Each messenger stands opposite the desk of his own bank, with his fifty-nine parcels already arranged in the exact order of the bank-desks before him. Of course no messenger has anything to deliver to the clerk of his own bank. Each clerk inside his desk has a sheet of paper containing the names of all the other banks arranged in the same order as the desks, with the amounts carried out upon it which his messenger has just brought to each. All these are entered in his credit column. Each messenger carries also a slip of paper ready to be delivered with each parcel to each clerk, on which is entered the amount of the cheques he now brings to each bank. Of course the amount delivered _to_ each bank is _debit_ to that bank, just as the amount brought _by_ each is _credit_ to that bank. A signal from the manager, who stands on a raised platform at one end of the room with his two or more clerks before him, and each messenger steps forward to the next desk in front of him, delivers his parcel and also the slip that goes with it, which latter the clerk signs with his initials and hands back to the messenger as his voucher for the delivery; and then each messenger advances to the next desk,--the whole _cue_ moving in order,--at which precisely the same things take place as before, and so on, until the circuit of the room is made, and each comes opposite again the desk of his own bank, having passed to each its "exchange" and taken a receipt for each delivery. This process takes about ten minutes; when each clerk, who had on his sheet to start with the _credit_ due to his bank, has now the _data_ (fifty-nine items) by which to calculate the _debit_ of his bank. The difference between the aggregate of cheques _received_ and _brought_ by his bank is the balance due _to_ or _from_ the clearing-house as to that bank. All the clerks report to the manager the amounts _received_ by each, and as his proof-sheets hold already the amounts _brought_, if the two columns add up alike, no mistake has been made, and the general clearing is over. Thirty-five minutes are allowed the clerks to enter, report, and prove their work. Fines are imposed for errors discovered after that time. The Clearing-house gives tickets of debit or credit to all the banks, and the debit ones must pay in lawful money before half-past one, and the credit ones will get their due from the manager immediately after. The largest sum ever cleared in New York in one day was $206,034,920.51 on Nov. 17, 1868, and the smallest $8,357,394.82 on Oct. 30 of the panic year, 1857. _h._ Crossed Cheques. About twenty years ago there was instituted in London what is called the Cheque-Bank, which is designed to bring the benefits of the credit-system in the form of cheques more easily to all classes of the people. The cheques issued by this institution are so different in character and in course from common bank-cheques, and are in some respects so new in principle, that we must give to them a separate heading and a full explanation. The Cheque-Bank is a stock company in London under that style, which has entered into relations with nearly all the banks and bankers of the United Kingdom, and with many Colonial and foreign banks also, by which Cheque-Books are furnished for sale by the Cheque-Bank through these associated banks, which also agree to cash the cheques, every cheque in which books indicates by printed and indelible perforated notices upon the forms what the utmost sum is against which that cheque can be drawn; the aggregate of these perforated sums is the price for which each book is sold less 1-1/5 penny for each cheque in it, of which the penny is for the Government stamp required and the one-fifth for the profits of the Cheque-Bank; and all these cheques in books of different sizes and amounts are drawn in form _on_ the Cheque-Bank, and _Crossed_, that is, _only made payable through a banker_. It is one security against fraud that each cheque bears on its face the utmost sum for which it can be used, and another is that it can only be taken up by a banker and thus settled ultimately through the clearing-house. The Crossed Cheques Act of Parliament in 1876 makes any obliteration of the crossing or essential alteration of a cheque _felony_ at law. Cheque-crossing is of two kinds, _special_ and _general_; when any particular banker's name is written between two transverse lines, in which form alone crossed cheques differ from ordinary ones, that makes that cheque payable by him only; when the words "_and Company_" or "_and Co._" are written between these lines, that makes the cheque payable only through _some_ banker, that is, the cheque is crossed _generally_; and when two parallel transverse lines simply are drawn across the face of a cheque, with or without the words "not negotiable," that cheque is legally deemed to be _crossed_ and crossed _generally_. When a cheque is uncrossed, the lawful holder may cross it either generally or specially; when it is crossed generally, he may at his option cross it specially; and whether crossed generally or specially he may add the words "not negotiable." All this facilitates greatly the _collection_ of cheques by set-off through the clearing; and has a direct bearing on the fortunes of the Cheque-Bank. The Cheque-Bank publicly guarantees the payment of all the cheques in all its cheque-books to the maximum amount for which each cheque may be drawn; and it may well do this, for no cheque-book is sold except for money, and the money is ready in the hands of some banker to pay every cheque when presented; any banker or other person will give cash for them, or take them in payment for goods or other services, or if they are drawn for a sum larger than the debt due will give back the charge to the bearer; and if the cheques be actually drawn for less than the maximum perforated on them, the Bank itself will give additional cheques for the balance. The ultimate payment, then, of these cheques is as sure as anything in the future can be; the buyer of a cheque-book knows, that the money is already in deposit to pay them, and that the government-stamps on them have already been paid for, while the receiver of an ordinary cheque cannot know beforehand that the drawer has money in deposit against it. Moreover, the holder of an ordinary cheque must use due diligence in presenting it for payment as soon as possible, or delay it at his own risk, while the holder of these has no motive whatever for haste,--time does not deteriorate them. All money received for cheque-books is left in the hands of the bankers who sell them, or transferred to other bankers in order to meet the cheques presented elsewhere, and accordingly an interest is paid by the bankers to the Cheque-Bank, on the balance of deposits thus held, and this interest, together with the one-fifth of a penny for each cheque, is the only source of profit to the Cheque-Bank. Of course, the longer these cheques remain out before presentation, the more profitable to the Cheque-Bank; and their average length of life has been heretofore not far from ten days. Since these cheques are crossed _generally_ (not specially) with the words "and Co.," that is to say, since they can ultimately be taken up only by some banker, they have a more _generalized_ character than common bank-cheques, they are safer to carry and keep than so much money would be, there is no difficulty in shopping or paying wages by means of them, they are very much the same in their nature as bank bills are, and might easily in certain circumstances become _money_ just as bank bills in some circumstances are money. Each of the associated banks keeps an account of course with the Cheque-Bank, but is not obliged to keep a separate account with the purchasers of cheque-books, which is a great relief to the banks. In this way the Cheque-Bank extends the use of cheques in the lieu of money to a great multitude of small transactions, and relieves the other banks from what would otherwise be a great deal of troublesome accounting and collection. The ingenuity and the utility of this comparatively new form of Credit cannot be questioned for one moment; the promoters of the Bank intended that their cheques should be received by the people as a substitute for cash and for Post Office orders, and such has been the effect, many railway and other companies having long ago agreed to receive them as cash, and the people generally regard them as cheaper and more convenient than postal orders and even for many purposes than cash. _i._ Cash Credits. As the Cheque-Bank in the sense as just explained has been thus far in the history of Credit peculiar to England, so we have now to look to Scotland only for an exemplification of a form of Credit hitherto confined to that country. It is a national characteristic of the Scotch to be "canny," that is, they _can_, a word from the old Teutonic _können, to be able_; and, as a consequence, Scotch Banking has long been famous the world over; and the one peculiarity of it, with which we are now concerned, goes back certainly to 1729, as we happen to know from a minute of the Directors of the Bank of Scotland under that date. That bank was chartered by the old Scotch Parliament in 1695, one year after the chartering by the English Parliament of the Bank of England, and under substantially the same title as that, namely, "The Governor and Company of the Bank of Scotland." It began to establish branches in different towns of the realm in 1696, and began to issue bank notes for £1 (a privilege denied to the Bank of England) in 1704; and it began also at a very early period to exhibit the two main peculiarities of Scotch banking, namely, (1) to receive deposits _on interest_ and (2) _to grant credit on cash accounts_, or, as they have come to be called less properly, Cash Credits. This second peculiarity, which has proved extremely beneficial to Scotland, is for substance this, to create a drawing account in favor of a deserving customer, who has made as yet no deposits in the bank, but who draws out money and pays it in from time to time just like an ordinary depositor, and instead of receiving interest on the daily balance to his _credit_ (old Scotch fashion), he pays interest on the daily balance to his _debit_. These accounts are called Cash Credits. They are not intended to be dead loans, but quick accounts; and they are not granted except to persons in business, or to those who are frequently drawing out and paying in money. The individual who has obtained such a credit is enabled to draw the whole sum, or any part of it, when he pleases, replacing it, or portions of it, when he pleases, according as he finds it convenient, interest being charged only upon such part as he draws out. David Hume in his Essay of the Balance of Trade, published in 1752, makes this nice point in favor of Cash Credits: "If a man borrows £5000 from a private hand, besides that it is not always to be found when required, he pays interest for it whether he be using it or not. On the other hand, his Cash Credit costs him nothing, except during the moment it is of service to him; and this circumstance is of equal advantage as if he had borrowed money at a much lower rate of interest." The Cash Credit is always for a limited sum, seldom under £100, given upon the customer's own security, and that in addition of two or three individuals approved by the bank, who become sureties for its payment. Of course, only those banks can furnish such credits which possess a surplus of credit more than they can sell in the ordinary way, and these credits are safe and useful only in small communities, in which men are well known to each other. Some friends of the parties thus accommodated always guarantee the bank against loss; but the losses have proved to be insignificant, the gains to be marvellous; and this form of credit issued on the basis of no previous transaction in the way of deposits illustrates better than any other the radical principle, that Credit is Capital. The Report of a Committee of the House of Lords made in 1826 on Scotch and Irish banking describes very clearly and fully the system of Cash Credits: "There is also one part of their system, which is stated by all the witnesses to have had the best effects upon the people of Scotland, and particularly upon the middling and poorer classes of society, in producing and encouraging habits of frugality and industry. The practice referred to is that of Cash Credits. Any person who applies to a bank for a Cash Credit is called upon to produce two or more competent sureties, who are jointly bound; and after a full inquiry into the character of the applicant, the nature of his business, and the sufficiency of his securities, he is allowed to open a credit, and to draw upon the bank for the whole of its amount, or for such part of it as his daily transactions may require. To the credit of the account he pays in such sums as he may not have occasion to use, and interest is charged or credited upon the daily balance, as the case may be. From the facility which these Cash Credits give to all the small transactions of the country, and from the opportunities which they afford to persons who begin business with little or no capital but their character to employ profitably the minutest products of their industry, it cannot be doubted that the most important advantages are derived to the whole community. The advantage to the banks that give these Cash Credits arises from the call which they continually produce for the issue of their paper, and from the opportunity which they afford for the profitable employment of part of their deposits. The banks are indeed so sensible that, in order to make this part of their business advantageous and secure, it is necessary that their Cash Credits should be operated upon, that they refuse to continue them unless this implied condition be fulfilled. The total amount of their Cash Credits is stated by one witness to be £5,000,000, of which the average amount advanced by the banks may be one-third." There are only ten Banks doing business in Scotland, and the Bank of Scotland, the oldest of these, had 86 branches in 1875, and the average number of branches of the other nine is very nearly the same with that. _j._ Circular Credits. These are a device of bankers to enable travellers and merchants of one country to obtain credit and cash in foreign countries in sums to suit their convenience, not to exceed in the aggregate the limit mentioned in the credits drawn. These credits assume different forms and are called by different names, but they are all at bottom foreign Bills of Exchange. They are Orders to pay. They are drawn by Bankers at home upon Bankers abroad. They are bought by travellers and others, because they are safer to carry than so much money would be, and much more convenient. In nearly all of those forms the credits are available for no one else than the payee, whose name is upon the form as well as the names of the bankers who are the drawees, and so the credits are not liable to be stolen, although they may be temporarily (not ultimately) lost. Purchasers of such credits can obtain money on them in all of the principal cities of the world in just such sums as they need. They have ultimately to pay for no more credit than they actually use, because the drawer will pay back to the payee, in case he has bought and paid for the entire credit drawn, the cash difference; while on the other hand, arrangements can always be made beforehand, by which money need not be deposited with the banker at home any faster than it is actually called for abroad; and while also a good customer of the bank drawing the credit, one who keeps ordinarily a good line of deposits, may pay for whatever credit he has used when he returns from his trip. There is one kind of these foreign credits that deserves separate mention, since it has come of late years into quite general use, namely, "Circular Notes," as they are called. These are sight bills of exchange, each drawn for a relatively small amount, say £10, and multiplied in number to the requirements of the buyer, and drawn by one domestic banking-house, say Kountze Brothers of New York, on one foreign banking-house, say Union Bank of London, the names of drawer and drawee only being upon the "notes," the payee or buyer being expected to indorse each note in the presence of the Correspondent making the payment. The notes, therefore, are not negotiable except by the signature of the payee himself from time to time as he needs the proceeds. This makes them safer than so much money to carry: if stolen, they could do the thief no possible good. At the same time the drawer of the notes furnishes the payee a circular letter addressed to his banking correspondents all over the world, just as in an ordinary Letter of Credit, containing the name and also the personal signature of the payee, but unlike the ordinary Letter making no reference to the amounts of credit furnished, and there are no indorsements of any kind by the correspondents on this circular letter, which the payee is cautioned in print on the back _to keep separate_ from the Circular Notes covered by it. One of these letters runs as follows, the name of the payee being entered in manuscript and also in autograph:-- "TO OUR CORRESPONDENTS, GENTLEMEN, THIS LETTER WILL BE PRESENTED TO YOU BY GRACE PERRY, WHO IS RECOMMENDED TO YOUR KIND ATTENTION, AND IS SUPPLIED WITH OUR CIRCULAR NOTES, THE VALUE OF WHICH PLEASE FURNISH AT THE CURRENT RATE FOR SIGHT BILLS ON LONDON, WITHOUT ANY EXPENSE TO US. AFTER YOU HAVE EXAMINED THIS LETTER, PLEASE RETURN IT TO THE BEARER, IN WHOSE HANDS IT WILL REMAIN UNTIL THE EXPIRATION OF THE CIRCULAR NOTES." These Circular Notes approximate in certain respects in kind towards the cheques of the Cheque-Bank of London: both are bought at the outset and paid for in full on the spot; and both are drawn _upon one Bank_, which is the ultimate Drawee and Payer. In two essential respects, however, the notes differ from the cheques: the cheques are payable to Bearer without any indorsement by anybody, and so have a much more _generalized_ purchasing-power than the notes, which have to be indorsed by the payee (not named indeed in the notes but in the letter accompanying them), as they are negotiated in a way preliminary to their ultimate payment by the single bank on which they are drawn; and also the notes, like all other foreign bills of exchange, are subject in their value to the fluctuations of International Exchange, while the cheques in their value are independent of commercial exchanges "in favor" or "against" any country, and entitle the bearer to so many pounds sterling in value according to English coinage without any possible discount or premium. These London Cheques, accordingly, approach much nearer to the character of Money than any other form of Credit yet devised, except Bank bills undoubtedly convertible; and already take their place as one of the _media_ in the international trade, and are sold in New York by authorized agents of the Cheque-Bank, as they have long been by such agents in all English and Colonial and in many foreign cities. These _Ten_ are the principle instruments in Credit-Exchanges throughout the world; and we pass now, as proposed, to the next section of our subject, namely, the Advantages of Credit. 3. As introducing these advantages and also as illustrating them, we call attention first to the antiquity of many of the forms of Credit, a point upon which much fresh light has been cast by recent discoveries in, and ability to decipher the cuneiform writing of, the ancient Assyria and Babylonia. It is to the credit of Credit, that the earliest of civilized men seem to have perceived its nature, to have seized upon its powers, and to have realized for themselves some of its advantages. Credit is natural and legitimate. The moderns have invented new forms of it, and have tested its capacities to the utmost, but the ancients know it well in several of its instruments, and vindicate their own insight into the recesses of Exchanges by tablets and documents now known and read of all men. In an earthenware jar found some years ago in the neighborhood of Hillah, a few miles from Babylon, were discovered many clay tablets inscribed with records relating to banking, and, what is more, to banking as carried on for generations by a single family or firm, which the cuneiform archæologists have translated as "Egibi & Co." These tablets are now deposited in the British Museum. Those who can read them say, that the founder of this banking-house, Egibi, probably lived in the reign of Sennacherib, about 700 B.C. This family has been traced in banking transactions during a century and a half, and through five generations down to the reign of Darius. They were the Rothschilds in the region of the Euphrates: they acted in a sort as the national bank of Babylon. The Tigris is always associated with the Euphrates and forever will be. Nineveh on the former river, like Babylon on the latter, has yielded from its tablet-records information as to the use of credit in the more northern capital of Assyria. "Within the palace of Asshur-bani-pal, the Sardanapalus of the Greeks, who reigned at Nineveh from 668 B.C., Layard discovered what is known as the Royal Library. There were two chambers, the floors of which were heaped with books, like the Chaldean tablets already described. The number of books in the collection has been estimated at ten thousand. The writing upon some of the tablets is so minute that it cannot be read without the aid of a magnifying-glass. We learn from the inscriptions that a librarian had charge of the collection. Catalogues of the books have been found, made out on clay tablets. The library was open to the public, for an inscription of Asshur-bani-pal says, "_I wrote upon the tablets_; _I place them in my palace for the instruction of my people._" The Assyrian tablets embrace a great variety of subjects; the larger part, however, are lexicons and treatises on grammar, and various other works intended as text-books for scholars. Perhaps the most curious of the tablets yet found are notes issued by the Government, and made redeemable in gold and silver on presentation at the King's treasury. Tablets of this character have been found bearing date as early as 625 B.C. It would seem from this that the Assyrians had very correct notions of the promise-character of paper (tablet) money" (Myers). In the Metropolitan Museum of Art in New York are Babylonian tablets bearing distinct records of credit transactions that took place in the reign of Nebuchadnezzar. The earliest tablet is of the year 601 B.C. On it are memoranda of loans of silver made by Kurdurru as follows: "1 mina of silver to Suta, 1 mina to Balludh, 1/2 mina to Buluepus, 5 shekels to Nabu-basa-napsate, and 5 shekels to Nergal-dann;--total, 3 minas, 5 shekels of silver." There are more than 50 similar tablets in this collection; the latest dated, "Babylon, 18th day of 14th year of Darius," that is, B.C. 505. M. Lenormant, who can read them, divides these credit documents into five principal types. 1. Simple obligations; 2. Obligations with a penal clause in case of non-fulfilment; 3. Obligations with the guarantee to a third party; 4. Obligations payable to a third person; and 5. Drafts drawn upon one place, payable in another. These last are letters of Credit. They contain the names of several witnesses. They are evidently negotiable, but from the nature of things could not pass by indorsement, because when the clay was once baked nothing new could be added, and under these circumstances the name of the payee was often omitted. It seems to follow from this peculiarity, that the drawee must have been regularly advised by the drawer. One of the credits in this most interesting collection had 79 days to run. The main elements of their civilization came to the Greeks, and especially to the Greek cities in Asia Minor demonstrably from the Eastward; the Greek West proved itself quick to catch up the thoughts and the modes of the East; accordingly, Isocrates in his plea against the banker, Pasion, describes a formal bill of Exchange bought by Stratocles in Athens, payable in Pontus, and guaranteed principal and interest by Pasion; the practical Romans were pupils of the Greeks in all such matters, and so it came about in course of time, that Cicero wrote as follows in a letter to Atticus,--"Let me know, if the money my son needs at Athens can be sent him _by way of exchange_, or if it be necessary for it to be taken to him,--_permutarine possit an ipsi ferendum sit_"; and after that the Jews and the Lombards carried the Letter of Credit all over the world. It goes without saying, when the most civilized and advanced people of the world were the first to adopt and have been since the quickest to expand the use of Credit, that there must be pretty obvious and very solid advantages from such use and expansion; and we must now note and weigh a few of these advantages. (1) There are young men in every advanced community in the world who have integrity and industry and skill, but little or no _Capital_; and when such men are enabled to borrow money, as by the Scotch system of "cash accounts" or otherwise, to start themselves in business or to enlarge a business already in successful operation, the general interests of Production as well as their own personal interests, are greatly subserved by such credit; because in all probability much capital thus passes out of hands which are _less_ into hands which are _more_ able to use it _productively_. Those who are best able to make capital _tell_ by increase are generally those who are most desirous to obtain it, and frequently those who can offer the best security for its replacement. Nothing, therefore, is to be said against, but everything in favor of, such a loaning of capital as shall bring it under safe conditions from the hands of the idle and the aged, from those indisposed or incompetent to use it productively, into other hands at once competent and honest. Such credits as these are a benefit and only a benefit to all the parties concerned, and to Society at large. The active operators retain something of profit after replacing the capital with current interest upon it; the lenders receive more than if their capital remained idle, or they employed it themselves; and Society is benefited by a more complete development, and rapid circulation, of Services. Despite all the instances of broken faith, it is still an honor to human nature, that men do so gain by good character the confidence of their fellows, that they are and ought to be trusted with capital on their simple word or note; and it is the glory of free political institutions, that under their influence more than elsewhere, young men do rise by the help of so slight a stepping-stone as this, in crowds, to the high places of opulence. In the important point of view, that thus all of the available capital of a community is brought out into productive activity, too much can scarcely be said of Savings-Banks, which take the surplus earnings of the poor, and not only keep them safely, but pay a fair interest on each deposit, and loan the aggregate at a higher rate on choice securities, thus stimulating frugality in a wide circle of depositors, and at the same time aiding Production by opportune loans to the best class of borrowers. In the year 1881, there were $443,000,000 invested in savings-banks in the State of New York, and $230,000,000 in the small State of Massachusetts. In this first category of the advantages of Credit, come also the ordinary bank discounts, made for short periods only, holding the debtor to the strictest rules of payment, only professing and only enabled to help customers over the transient hard places in their business, and _not_ to furnish the funds on which the business is mainly conducted. Loans drawn from the banks on interest should never be put into the form of fixed capital, and should only be a _part_ of the quick or circulating capital, since only the passing necessities of a business having an independent basis and movement of its own, can safely be met by bank discounts. The cash credits of Scotland are quite different both in what they are and in what they imply from the short and sharp discounts of the banks of our own country. So far as the capital stock of banks is made up, as it usually is, of a large number of comparatively small subscriptions, there is the great advantage just spoken of, of calling a multitude of otherwise idle sums into activity in production; and so far as no undue privileges, unjust to other corporations and individuals, are accorded to banks by law, there is no branch of industry more legitimate and beneficial than banking. It is no essential part of the functions of a bank, that it manufacture and issue paper money; that feature is always rather a source of weakness than a ground of strength; the money the bank circulates should always be the national money; and if that too, unfortunately, should be credit-money, the element of credit in the _money_ should be sharply discriminated in the public mind from that other and quite different element of credit by which the bank _loans_ it to its customers. (2) There is another class of advantages in Credit, which do not depend so much on the transfer of Capital from less to more productive hands, as on the facilities which credit affords in economizing the general operations of Exchange. Here the advantages are derived from the convenience of _settling accounts_ arising out of exchanges, rather than from the _character_ of the exchanges themselves. Look a moment, for example, at foreign Bills of Exchange. They serve to settle up the accounts arising from the Commerce of two or six Continents, with but little transmission of money from any, and with but very little loss of time. Commercial bills drawn in New York on London have been usually payable at sixty days' sight; the New York merchant despatching a ship is able to realize at once the value of her cargo, minus interest for the time his bill has to run; since bankers' bills have so largely taken the place of "commercial" bills, the time is much shortened thereby, and this is one reason why bankers' bills bear a higher price in the market; the merchant or sender is indeed still liable in part to see that his bill is ultimately paid by the drawee; but the commercial integrity of the leading houses and leading banks in all countries is with justice so firmly believed in and acted on, that on the whole but little anxiety springs from this source. It is one of the noble things in international commerce, that men trust each other across the oceans, and lay millions of value on the faith of a single firm. Inland bills of exchange equally facilitate settlements within the country itself; and cheques, which are of the same essential nature as inland bills, contribute to the same end even more simply and surely, passing readily in payments wherever the parties are known, and through credit and set-off doing the work of money more conveniently and economically than, and within certain limits just as safely as, money itself could do it. The face of a cheque drawn to the amount of his deposit in favor of another depositor in the same bank is transferred in the banker's books from the credit of the drawer to that of the payee by the stroke of a pen, no money at all passes in the premises, while the banker is released from one debt by creating another of equal amount, the drawer is released from one debt by another to be transferred to the payee, and the payee is paid by the drawer by the former's receipt of another debt more acceptable to him. (3) Besides the two essential functions of all banks, namely, the receiving of deposits and the discounting of bills, most of them perform a variety of other legitimate operations in Credit, which must be classed among the advantages of Credit. They buy and sell debts of all sorts. They make collection of debts for their customers. They sell their own drafts on distant places. Since 1863, our national banks have done an immense business in handling the debt of the United States: they were instrumental in diffusing the national bonds among all classes of the people: they collect for their customers the coupons at maturity: they have been and still are the factors of the government in exchanging, for those who desire it, one species of bond for another; and the entire debt of the United States has been several times changed, mainly through the agency of the banks, from bonds at high rates of interest and for short times of maturity to bonds at lower rates and for longer times. (4) The fourth, and probably the chief, advantage of Credit is the fact, that a new purchasing-power is created by means of it, a new Valuable, something additional to all existing before in the world of Values. One can buy other things with Credit, as well as with material Commodities and personal Services. Credit, therefore, becomes a Salable under the two peculiar limitations already explained, those of future Time and personal Confidence, just as Commodities become a Salable under the peculiar limitations belonging to _them_; and, what is more to the present purpose, just as some Commodities (all of them salable) become Capital under the action of the abstinence of their owners, so some Credits (all of them salable) become Capital under the action of the Abstinence of their owners. Some commodities and some credits are expended, that is, sold, for the immediate gratification of their owners, without ever a thought of a future increase to accrue; but also, some commodities and credits are reserved by their owners for use in further production, that is, for future buying and selling; and the motive in all such cases is the same that creates all Capital everywhere, namely, the increase to accrue as the result of such abstinence; and, consequently, we lay down the postulate with all confidence, and enumerate it as one of the main advantages of Credit, that some Credits are CAPITAL, with all the powers in production of that potent agent already exemplified. It is only fair to apprise the reader right here, that almost all Economists deny that any new capital is created through Credit. These deny _in toto_ that the relation of debtor and creditor involves anything more than the exchange between the two parties of certain _titles to tangible goods_. Let the reader now hear, and then judge for himself. Bonamy Price of Oxford University, a professed Economist and a teacher of acknowledged ability, writes as follows:[8] "_Omitting the capital which a joint stock company puts into a bank, the banker possesses no capital, except his premises and any coin that may be in them, however much commercial and monetary literature may ascribe capital to banks. Lines and names in ledgers, cheques at the Clearing-house, debts due to depositors, debts due upon bills by borrowers, are neither wealth nor capital. They are words and nothing more. Incorporeal property, under which these kinds of written words are summed up, is not wealth; it is merely a collection of title-deeds, but from which the reality is absent. The corpus is not in those deeds, but the right to acquire that property, even before possession is obtained, is itself a property. If a title-deed or a mortgage is declared to be actual wealth by Political Economy, then the sooner it is consigned to the waste-basket, the better._" This passage shows how the word, "wealth," tangles men up inextricably, who, by discarding it utterly, might have become clear thinkers and useful expositors. It also shows, that Professor Price never analyzed Valuables into their three kinds, never thoroughly mastered in a preliminary way the Idea that underlies Economics, never precisely understood what Money is, and certainly never found out the radical nature of Credit. Nevertheless, the passage just quoted really concedes the whole matter in the present dispute,--"the right to acquire that property, even before possession is obtained, is itself a property,"--that is all that we claim, namely, that rights are property, and that new rights (which are property) are created by Credit, and that some of these new property-rights thus created may become and do become a new Capital. These new rights, however, this new and acknowledged "property," are not "_titles_" to any specific valuables whatever, as Price supposed; "_a title-deed or a mortgage_" is a totally different thing from a Credit, since the one always describes and gives a qualified title to _some specific and tangible thing_, while a credit-right is always a claim against _a person_; the Roman law drew this distinction perfectly, a credit-right was a _jus in personam_, while a title-right was a _jus in re_; the common Latin language as spoken and written marked the difference by separate words, a credit-right or true debt was a _Mutuum_, while a title-right or thing loaned was a _Commodatum_; and the Law of our present national banks explicitly recognizes this universal and fundamental distinction, by requiring the banks to loan money _on personal security only_, that is to say, no tangible things whatever, not even real estate, are allowed to be taken as _original_ security for any loan. Banks deal only in true debts,--_mutua_,--and when they keep custody of concrete valuables--_commodata_--for their customers, it is as trustees or bailees and not at all as debtors. Our late Oxford friend was far too well informed in general to contend, that a cheque, for example, is "the right to acquire possession" of any _specific_ property anywhere; the drawer has indeed deposited money with the banker on whom the cheque is drawn, but that money became the banker's money the moment it was deposited and no longer his own; the cheque, accordingly, is a general claim on the banker, and not at all on any special fund in the banker's hands; it follows, therefore, that the excess of the banker's average deposits over his average reserves to secure them, is a new creation of Credit, a new resource of Production, a new Purchasing-power now available to the banker not previously and practically available to anybody, a new Valuable which he proposes to use and does use for the sake of profits accruing, consequently a new Capital. Now let us listen to the objections to this view by a practical banker, J. H. Walker, of Worcester, Mass., in a little book of his on Banking published in 1882: "_A man always borrows something of intrinsic value. What he borrows is not a piece of paper, whatever may be on it, but a farm, a house, a factory, or a part of them; a store, a mine, or goods. No man can borrow or lend anything else. The borrower gets from the lender what puts him in possession of the things he seeks, and it must be some one of these things. So of all money (except coin). It has no value in itself. It adds nothing to the capital of the world. It purports to be and is only a title to property, a convenient device for transferring the ownership of property._" This author is led astray by the worse than useless adjective "intrinsic," having never yet learned that there is only one kind of value in the world of Economics, namely, purchasing-power; he sees men as trees walking through the haze cast over paper-money by John Law in the last century, as if paper-money must be "_based_" on something tangible and specific; he makes a narrow and false assumption that the only objects ever bought or borrowed are corporeal "things," denying that the debts in which alone he deals as a banker are _realities_ as much as any "thing" can be; and it all comes in his case, as in the case of hundreds of others, from a totally inadequate analysis of Valuables into their three separate and virtually independent kinds, namely, Commodities and Services and Promises. Mr. Walker, although he writes a book on purpose to do this, can not explain at all under his view the Deposits and Discounts of his own bank, and would be as dumb as an oyster when confronted with the "Cash Credits" of Scotland. (5) The fifth advantage of the use of Credit, and the last one to be mentioned in this connection, is, that it dispenses with the use and wear of large amounts of expensive Money. It is perfectly certain that Credit answers many of the purposes of Money. Suppose A has bought of B $100 worth of goods, and B has bought of A $125 worth of goods. Three ways are open to close up these transactions. A may pay B and B may pay A _in money_. This would take $225. A may pay B in money, and B may send that back with $25 more. This would take $125. Or A and B may mutually balance their credit-books, and B pay the difference in account. This would take but $25. It is clear then, that, as one or other of these general methods prevails in practice, the quantity of expensive money required to do the business of a country is very different. Just so in international trade. Foreign bills of exchange lessen enormously the quantity of metallic money that would otherwise have to be transported. It is not strange that some thinkers and writers, seeing these unquestionable benefits of Credit even within the peculiar sphere of Money itself, have come, like Herbert Spencer and many more, to think and teach that Credit might answer _all_ the purposes of money. Credit _does_ take the place of money in part. Can it take the place of money entirely? Let us see. We have defined Credit as _a right to demand something of somebody_, and Debt as _an obligation to render something to somebody_; the denominations of Money are certainly needful in order _to measure_ this right or obligation; and how can the denominations of money be established or maintained at all separate from the use of _some_ money itself as a circulating medium? Moreover, great as is the undoubted power of Credit, vast as are these five advantages from its current use, still, each particular piece or form of Credit waits for something beyond itself; it waits for its own _extinction_ in future time; which can only come about in one of three ways, (a) by _set-off_ against another debt with or without a balance, (b) by _renewal_ which creates a new debt and extinguishes the old, (c) by its _payment_ in money; and now how can these extinctions come about without the current use of some money, at least to settle the balances at the clearing-house? Furthermore, there have always been heretofore in all commercial countries longer or shorter periods, called "crises" or "panics," during which there was a popular reluctance to accept in exchange the ordinary instruments of Credit. Money, and much of it, was then found to be indispensable. Indeed the very advantages of Credit itself, which have now been explained at length, are dependent on this, that there be alongside of it to sustain and limit it, _a current and legal measure of Services in metallic form_, in whose denominations Values may be reckoned, in whose coins the balances of Credit may be struck, and whose presence secured everywhere by natural laws alone may enable _fulfilment_ to join hand in hand with _promise_. If ever Credit should try to usurp the whole domain of Money, a tolerable standard of Value or measure of Services would be no longer possible, Credit itself would lose its foothold, and the vast balloon of Promise, sailing for awhile through the blue, the joy of projectors and the wonder of credulous spectators, would of a sudden descend to the earth collapsed and ruined. 4. There are too some disadvantages inhering in Credit. This admitted fact makes no valid argument against the use and extension of it; because there are disadvantages connected with all human devices whatever,--with all means contrived to reach earthly ends--and even a child may discover many of these; some objections lie against everything, and against everybody, and the practical question always is, Which preponderates, the good or the evil? In respect to Credit there can be no doubt, that the good outweighs the evil many fold; still, in accordance with the purpose in this book of both writer and readers to look on both sides of each significant point in Economics, we will now give attention to the chief disadvantages inhering in the nature of Credit. (1) In the first place, when credit is much given by dealers to ordinary retail buyers, the reverse results take place from those but just now characterized as happening under bank credits, namely, capital passes out from the hands of productive operators into hands less able and less willing to use it in further production. Indeed, in most such cases it ceases to be capital, and is expended in immediate gratification. It is much easier for the average man of fair character within the present customs of Society to "get trusted" than to pay "as he goes." Such a man is even called "easy-going." He almost always over-estimates his resources for the future, and under-estimates his obligations at the present. It is always a disadvantage in the long outlook for both parties when such men easily and largely "get trusted." Let us take a sample case: when an industrious artisan or efficient merchant has given credit for six months or a year to dilatory customers, it is so much withdrawn for so long a time from his active capital; and in order to make up his consequent loss of profit to the average and expected rate, there must be an addition to the prices of his wares sold to other parties; and, besides, some bad debts belong to such a system, and there must be additional prices somewhere to compensate for this; and thus the customers who pay promptly bear a part of the burden of the delinquents, who at least do not wholly escape, inasmuch as they ultimately (if they pay at all) pay a price enhanced by their own delay. Thus, if the current and expected profit on his capital be 12%, and the artisan or merchant sells and gets returns four times a year on the average, something less than 3% profit may be charged to each article on the average; while if he only gets returns at the end of the year, at best 12% must be put on everything at the average, and in reality considerably more, because of the bad debts that stick like a burr to that way of doing business. Hence the excellent maxim, "Quick sales and small profits." (2) There is a greater inherent _uncertainty_ in values connected with credits than in those connected with commodities, or than with those connected with personal services. We have already seen repeatedly that Value has its sphere of operations in the Past, in the Present, and in the Future. There is some uncertainty connected with what _has been done_ in reference to value, since the market may prove to have been miscalculated, and the commodities to have become unsuitable; there is perhaps more uncertainty connected with what _is now being done_ in reference to value, because the services bargained and being paid for may prove to be less steady and skilful than was supposed; but in the very nature of the case there is still greater uncertainty connected with what _is to be done_ in relation to its value, because in the first two cases some at least of the conditions are already fixed, while in the last one all of them are at least open to hazard. There is sufficient certainty in all three of the grand divisions of Time to justify, and probably to reward, operations in each in reference to value under the peculiar limitations and conditions of each, but credits are naturally more sensitive in the law of their value than either commodities or services. (3) Largely in consequence of what has just been expressed under the last head, credit-exchanges are more likely than commodities-exchanges or than services-exchanges to become unduly multiplied and consequently to fail of ultimate realization. The majority of men are sanguine in relation to the future. Unless they are in actual contact with their limitations, they are apt to belittle the rigidity and inevitableness of such limitations. As the outcome of this, promises are apt to overpass the powers of fulfilment. No more bales of cotton of any one year's crop can be actually delivered to buyers, than have been actually grown and marketed; the services of no more men in any capacity can be contracted for and rendered, than there are men able and willing to work; here are impassable limits; but the field of the future is buoyant with possibilities; and hence credits, whose sphere is the future, though legitimate and potent under the proper conditions, lie in a field whose limits are invisible, and within which _Hope_ is ever a tempter to overdoing. Is speculation proper? Certainly; if by the word "speculation" is meant the buying of anything with an expectation based on rational probabilities of being able to sell it again under different conditions at a higher price. Speculation in this sense is both proper and beneficial to the immediate parties to it, and to the general public as well, because the values of things thus bought and sold neither fall so low nor rise so high as they otherwise would do, which is a public gain. Speculators as a rule buy on a falling market, _which tends to lift it_, and sell on a rising market, _which tends to lower it_. It is better for all concerned, that the necessaries and conveniencies of life should bear as steady a market as is possible in the nature of things, summer and winter, year in and year out; and the ports of every nation should be open with the slightest possible hindrance in the way of tax to the corresponding necessaries and conveniencies from abroad, whenever combinations and "corners" attempt to lift their prices beyond the level determined by a natural and free Supply in contact with the current Demand. Credits occupy the field of Probabilities; that is to say, probabilities seeming to be such to men of sharp insight and cultivated forecast. When such men _on such grounds_ buy and sell "futures" in cotton or corn; when they buy and sell stocks either "short" or "long"; when they seem to themselves to perceive a sound reason for lurching over from the "bulls" to the "bears," or _vice versa_; and when they really think that what they are wont to deal in has touched bottom in price, and they buy now in view of a rise, Economics has nothing to say in blame of any or all of these operations, for they are the same in substance and motive as all other buying and selling; but nevertheless, it has this to say, that all these operations in credit-futures lie adjoining to and in dangerous proximity with another field, for operations within which it has nothing _but_ blame to utter. Gambling occupies the field of Chance. There is a great difference between chances and probabilities. Political Economy has no trouble in drawing a fast and hard line between them. But practically the operators in credit-futures experience an immense difficulty in keeping within this line of rational probabilities. The coolest heads are apt to become heated, and to lose sight of distinctions, in the close air of the Stock Exchange and the offices circumjacent. Some operators openly confess they know nothing which way the index of reason points, by buying "straddles," as they are significantly called. A friend and old-time pupil, who has for years been accustomed to these excitements in New York, said recently to the writer,--"_The Stock Exchange is a great gambling hell, and that's all there is of it!_" In buying and selling of all kinds, both sides gain: in gambling of all kinds, what one side gains the other side loses: therefore, under a sound money, healthful public opinion, and good law, gambling never can become formidable. In every lottery scheme, no matter how honestly managed, the sum of the _prices_ of the tickets is greater than the sum of the _prizes_ offered, otherwise nothing would be left for the profits of the managers; therefore, he would be a very foolish man, who should buy all the tickets of a given lottery with the certainty of drawing all the prizes; and _he_ is a still more foolish man, who should take his _chance_ of drawing all the prizes by buying two or ten tickets. (4) Another and a principal Disadvantage of Credit is seen in its usual action on _prices_ through increased Demand, and its consequent tendency to bring about Commercial Crises. Any man's whole purchasing-power is made up of three items: first, the property in his possession; secondly, the values that are owed to him; and thirdly, his credit. He can buy services of the three kinds with these three valuables; and the sum of his power to buy is exactly measured by the aggregate of these three valuables under his control. But while the first two, his property and debts due, are limited and ascertainable, the third (his credit) is indefinite and undeterminable beforehand. Being based upon _confidence_, which is itself sensitive and variable, a man's credit at one time may be vastly greater than at another, compared with his other two means of purchase; and if he have the reputation of doing a safe and regular business, and is favored by circumstances, he will find himself able sometimes to buy on credit to an extent out of all expected proportion to his other capital. When, therefore, credit is offered and received for commodities, it has the same influence upon their prices as when money is offered and received for them. It follows, consequently, that there is likely to be a general rise of prices whenever there is an extension of credit for the purpose of purchasing; indeed, when money only is used to buy with, there can not be a _general_ rise of prices, because while more money may be spent on some things, and they rise in price, there would be less money for other things, and _they_ would rather fall in price; but when credit is used freely in addition, and increased purchases go on in all departments at once, there is apt to be a rise of prices as to all commodities and a universal spirit of speculation. At such times, and while prices are still rising, men _seem_ to be making great gains; everybody wishes to extend his operations by means of all his money and all his credit; and forms of indebtedness are multiplied on every hand. By and by it begins to be perceived in certain quarters that the matter has been overdone; speculative purchases cease; banks become particular whose paper they discount; men find it difficult to sell their debts due in order to provide for their debts owed; they fall back on the sale of their commodities, but when holders are anxious to sell, prices always fall; a panic now sets in, more irrational, if possible, than the previous overconfidence; their inflated credits and commodities collapse in the hands of their holders; sales at great sacrifices are inadequate to meet the mass of maturing debts contracted when confidence was high; men fail, and must fail; the banks cannot help them, or think they cannot; and so wide-spread commercial disaster comes in. Such commercial crises swept over the United States in 1837, 1857, and 1873; and will doubtless recur in the time to come. They always arise from disordered credits, and though not necessarily connected with credit-money, are much more likely to come in connection with that. The more strong and conservative the Banks maintain their ordinary condition, the more powerfully can they operate to prevent or abate a panic. They ought always to be on the shore and never in the stream. From the very nature of banks and of the motives that create and operate them, they are apt to sell for a profit in ordinary times about all of the credit they safely can; unless, then, they foresee a stringency some time ahead, and curtail their loans, and otherwise keep their position strong in reserves and deposits, they will be powerless to help even their most deserving customers when the panic sets in; even then by a special association with other banks in the same city for reciprocal support during a crisis, as was happily brought about in New York some years ago, something may be done for their common constituency and good customers to help them out of trouble by discounts continued to them; especially as it is not money so much that is needed to allay a panic, nor even credit actually given, as it is a general knowledge that abundant credit can and will be given either by some pre-eminent bank, like the Bank of England in London, or by an association of banks for that special purpose, like the agreement just referred to as entered into temporarily by the banks of New York city. As a panic becomes imminent anywhere, some Bank or banks there ought to be in a position to extend their discounts freely, at a high rate of interest indeed, so as to discriminate between customers urgent for and deserving of discounts, and another class whose need of accommodation is not so sore, and a third class who are sure to fail if the Panic stalks forward. A permission given of the Government to the Bank of England to overpass under these circumstances the Discount-limits laid down by the Bank Act of 1844, has on three several occasions acted like a charm to still the ragings of a commercial storm. On each of these occasions, 1847, 1857, and 1866, the Bank was forbidden by the Privy Council to discount for less than 10%. As the inclined plane of rising prices is slowly ascended before a Crisis, so the fall of general prices afterwards seems to be rather gradual also till the lowest point of them is reached, from which another ascent is apt to commence. The following table taken from the _New York Public_ of the first week of November, 1881, is instructive on both these points. Taking the prices in 1860 of 43 articles of prime necessity, which constituted then and afterwards about 3/4 of the commerce of the country, as the normal standard or 100, the table gives the comparative gold prices of the same for four years previous to 1873 and for seven years subsequent, as follows:-- 1869 116 1870 118 1871 120 1872 122 1873 113 1874 115 1875 107 1876 100 1878 81 1879 98 1880 103 1881 111 (5) A penultimate Disadvantage of Credit may be noted in the facility which it offers for contracting great national Debts. There are certain aspects, under which a Nation may be properly regarded as a moral person, and as such person may pledge the public faith for the present and the future, becoming a debtor to its own people or to foreigners, and thus a public debt may be made a sort of mortgage on the national property and income. Now, it cannot be fairly denied, that incidental advantages may spring up in connection with such a national debt: for example, the bonds, which are its evidences, may open up to the people a convenient form of investment for presently inactive capital, and for trust funds of all kinds; there can be little doubt that certain classes of persons holding these national obligations are won thereby to a stronger patriotism and become better friends to stability in government, although this consideration applies mainly to new governments and to those temporarily endangered; both England and the United States now make a portion of their public debt the basis of a national system of Banking, but it is perhaps questionable whether this can be justly put among the incidental benefits of the Debts; and again "a moderate debt adds to the credit of a Nation, and its ability to raise money in an emergency, for bankers and capitalists are more ready to take such securities as they are in the habit of dealing in" (Sidney Homer). On the other hand, the burdens of a National Debt are very apparent: for example, the annual _interest_ charge to the Union at the close of our late civil war was $150,000,000, which gradually declined by the lowering of the interest-rate and by the paying off of principal to $61,368,912 for the fiscal year ending June 30, 1881; between March, 1869, and August, 1873, the United States paid $378,015,065 on the principal of its public debt; the collection of the Internal Revenue alone of the national government cost for the fiscal year 1867, $7,712,089; and in each of the two years, 1870 and 1881, a little over $101,500,000 was paid out to reduce the principal of the Debt. All those vast sums came out of the industry and income of individuals; and taxation to any degree as all this implies is a mighty disturbance to industry, and gives rise to an army of officials who eat out a considerable percentage of all they collect. Moreover, the various expedients of taxation, which are always practically unequal in their operation, are apt to give rise to irritation and political agitation, and even sometimes to threats of repudiation, especially when the occasion has gone by under which the debt was contracted, and another generation is called upon to pay off a debt it had no agency in creating. Here the vexed question arises, how far has one generation _the right_ to throw upon succeeding ones the burdens of a National Debt? The true answer to this question is, _it has a very limited right indeed_. The opposite doctrine implies tacitly when not openly, that the succeeding generations will have no occasion for extraordinary expenses of their own, and, therefore, may rightfully be made to contribute to the extraordinary expenditures of this generation. But it is pure assumption to take for granted, that the next generations will not have, of some kind or other, as much occasion for an extraordinary effort in the way of defence or of improvement as the present generation has had. It is a common but harmful illusion to estimate what has now to be done as of much more importance than what will have to be done. Therefore, to throw the present burden forward on another generation of men, who are likely to have to make their own special exertion, just as great and just as imperatively called for, is a procedure unwarranted by past experience. The view that has long prevailed in practice, that a great War-debt, for example, might be easily and justly cast upon posterity, has again and again given rise to needless and expensive wars; _those_ have been called upon to pay the piper, who perceived the utter inutility of the expenditure; and thus bitterness has been added to burden. Besides, the men to fight the battles, and the capital by which to feed, clothe, and furnish them the munitions of war, _must come from that generation_; and there is always great injustice in the manipulations of a great debt ostensibly incurred to obtain this capital, and the debt itself is usually in large part rather a memorial of the war than of the means by which its expenses were actually defrayed. The generation of American citizens not yet wholly passed off the stage was called on in the Providence of God to suppress a Civil War of enormous proportions, and to eradicate a social institution that was thoroughly bad; the expense of doing this was many fold enhanced by timorous counsels in the field, by class legislation in Congress, and by wretched financiering in the Cabinet; but the Debt, vast as it was, and needlessly incurred as a large portion of it was, has already in good part been paid off and must be entirely paid off by the generation that incurred it. That this great task may be thus completed, will require (1) an economical administration of the national Government; (2) an avoidance of intervention in the affairs of our Neighbors, and of entangling alliances with Foreigners; (3) a free Commercial System, under which the taxes shall be adjusted only towards the most productive revenue; and (4) a constant and onerous home Taxation. (6) The final Disadvantage of Credit is this, that it is apt to confuse the minds of men as to its own nature, from its apparent resemblance to something else, which is at bottom wholly unlike it. The people of the United States have suffered greatly from this confusion, and are likely to suffer from it still more in the time to come, both in their property and progress at home and in their good name abroad; and it becomes all good citizens, and especially all those called upon to pronounce on the Law of the Land, to know thoroughly the radical difference between a _Credit_ and a _Quittance_, and so to escape the contagious confusion that has entered and stirred up the popular, and even the judicial, mind of this country. All through the present chapter has been insisted on and illustrated the point, perhaps to the weariness of the reader, that Credit is always essentially the _Promise_ of one person to another, and that whatever is thus _Promised_ is necessarily and fundamentally different from the Promise itself. To confound those two things as if they were or could be made one and the same thing, is in thought illogical and in practice execrable. And yet it must be allowed, that there is somewhat in the nature of Credit, that makes this confusion plausible, or else it never would prevail; and also that there is something more still to make it plausible in the nature of Money, which last point can only be cleared up in the next following chapter under that title. Mr. E. G. Spaulding of Buffalo, in his copious and excellent History of the Legal Tender Act, "all of which he saw and part of which he was," as the chairman of the subcommittee of the Ways and Means at the time the Act was passed, demonstrates the extreme reluctance of everybody concerned to give a forced circulation, that is, a compulsory legal-tender quality, to the first batch of Treasury Notes to the amount of $150,000,000 in February, 1862. We have already noted in another place in this chapter, that two successive batches of similar Notes, each to the same amount as the first, were issued within less than a year. These Notes then and since called Greenbacks, bore at the time four essential features: first, they were both in terms and in reality _national Promises_ to pay to the bearer gold dollars of the then and present standard of weight and fineness, because there is no other possible meaning to the words "THE UNITED STATES WILL PAY TO THE BEARER FIVE DOLLARS"; second, in addition to their being a forced loan from the people to the amount of notes authorized, they were given a _forced circulation_ as money by means of the clause, "_and shall also be lawful money and a legal tender in payment of all debts public and private within the United States except duties on imports and interest on the national bonds_," which clause still recognizes gold dollars as the only universal and standard money; third, the notes were made _fundable_ in sums of fifty dollars, "or some multiple of fifty dollars," in six-per-centum gold bearing bonds of the United States, then called 5-20's, again in this clause recognizing the radical difference between the legal-tender paper promises as money and the gold dollars promised in them, in which gold money the interest and principal of the bonded debt must still be paid; and fourth, these notes were publicly known and acknowledged by the Issuer and the receivers to be presently _irredeemable_, since the Government did not have, and did not pretend to have, any coin with which to redeem them, and everybody knew that they were made a legal-tender _because_ they were irredeemable. These prompt recognitions of the impassable gulf between a Promise and what is Promised, were confirmed by all that happened afterwards. The notes, notwithstanding they were legal tender and all bonds of the United States could at first be bought with them at par, almost immediately began to droop as compared with gold. The daily quotations showed a pretty steady decline for two years. On Jan. 15, '64, gold in greenbacks was 100:155; April 15, 100:178; June 15, 100:197; June 29, 100:250, that is, 40 cents to the dollar; and July 11, 100:285, or 35 cents to the dollar in gold, their lowest point. From this depth they slowly rose with many fluctuations back and forth from many causes for 14 years. Jan. 1, 1879, they became redeemable in gold, and have so continued till the present time. When the Civil War was all over, and these startling vicissitudes of the paper money were measurably forgotten; though no prominent man, when they were passed, thought the Legal-Tender Acts constitutional; the paper money began to be popular; the distinction between a promise and its fulfilment began to fade out of the minds of the people; there had always been bank bills circulating as money in the country; these had been called "dollars" equally with the coin; and in December, 1869, a test case, Hepburn _versus_ Griswold, was decided by the Supreme Court on the question, whether Congress had the constitutional authority to make anything but gold and silver lawful money in satisfaction of _contracts entered into before the first legal-tender Act was passed_. The question, Can Congress make such notes a legal tender for contracts made _after_ the passage of the Act? was not involved in this case; but it was very clear from the Opinion of the court delivered by Chief Justice Chase, that the majority of the justices regarded the Act as being unconstitutional in its application to contracts made _after_ as well as _before_ the Act was passed. Upon the special question before the Court, the justices were divided in opinion; five, including the Chief Justice, agreed that the Act was invalid so far as it made the notes a legal tender on _contracts executed prior to its enactment_; and the three other judges were of the opinion that it was valid. Of course, the Decision of the Court was rendered by a majority of two, that the Act was unconstitutional. Chase, Nelson, Grier, Clifford, and Field constituted the majority; Miller, Swayne, and Davis, the minority. Salmon P. Chase was one of the greatest men of the great period of the Civil War. He was Secretary of the Treasury at the time the greenbacks were issued, and they were issued at his instance and advice, but he was opposed to the clause that made the notes a legal tender. He never expressed the opinion that the Legal-Tender Acts were constitutional, nor did he expect that the notes, of which these authorized the issue, would ever become a permanent national money. This is evident from the fact that the notes were made _fundable_ at his instance, not so much with the view of keeping up the value of the notes by giving them a present market in bonds, as with the view that they would help the sale of the bonds and would be absorbed by them as soon as the price of the bonds was above par in greenbacks. Afterwards Mr. Chase thought that this _fundability_ of the notes into bonds would so far take up the notes as to stand in the way of the negotiation of further necessary loans to the Government, and at his instance this provision of the law was repealed. Consequently, there was nothing inconsistent between his position as Secretary and his later position as Chief Justice. He was undoubtedly right in both of these positions. The making the greenbacks legal tender did not probably add one particle to their purchasing-power, but rather the reverse, because that feature implied a doubt on the part of Congress itself as to the validity and currency of such national promises-to-pay. That he was also right in his judicial opinion and decision, however subsequently overruled in his own Court, may be safely left to the inevitable future appeal to common sense and to the common principles of constitutional interpretation. This judgment in Hepburn _versus_ Griswold was favorably received by the country at large, as being just in the line of the great decisions of Chief Justice Marshall, and as being exactly in accordance with Amendment X of the Constitution, namely, "THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES RESPECTIVELY, OR TO THE PEOPLE." The State of Massachusetts particularly, which has always maintained and still maintains a strong doctrine of State Rights as over against, though in harmony with, the Rights of the United States under the Constitution, applauded this judgment as sound in law and politics, and as righteous altogether. But the then administration of General Grant, inexperienced alike in law and politics, and linked in entangling alliances with the great corporations of the country, received the Decision with marked dissatisfaction; and it was especially offensive to the huge railroad companies, whose bonds had been executed prior to Feb. 25, 1862, inasmuch as it made the principal and interest of these bonds payable in coin, which they had hoped to pay off in the depreciated greenbacks, made legal tender for all debts. The Administration lost no time in trying to bring about by fair means or foul, a reversal of this unwelcome decision. E. R. Hoar of Massachusetts, at that time attorney-general in Grant's Cabinet, was the principal agent in accomplishing this end by means so discreditable that he lost in consequence his popularity in Massachusetts and all chance of further political preferment. The means chosen and put into effect was the appointment by the President of two new judges, Strong and Bradley, the first to take the place of Grier, resigned, and the second appointed under a law increasing the number of judges to nine, whose opinions on the point at issue were known beforehand, and who were selected to serve on that very account. "_It was no secret, indeed it was a matter of public notoriety, that these justices were appointed in order that the decision of 1869 might be reversed. Their opinions in regard to the constitutionality of the Legal-Tender Acts had been clearly and publicly expressed. It was therefore pretty well known what the decision would be when the question was again presented._" (Hugh McCulloch.) The second Legal-Tender case, accordingly, that of Knox _versus_ Lee, decided in December, 1870, reversed the judgment of a year before, _no new points therefor being raised either by the new judges or by counsel in the new trial_, the Chief Justice and his three former associates still adhering to their original opinions. It was then five judges to four, the special question being, Is it constitutional to make promises-to-pay a legal tender on contracts executed before the promises were issued? The judicial answer was in this case, Yes; provided Congress regarded such action as a necessary means of preserving the Government in time of War, or any other period of extraordinary emergency. That is to say, _bona fide_ creditors were constitutionally bound to receive depreciated notes as legal tender in satisfaction of contracts entered into when no notes were in existence; to receive on contracts specifically calling for "_dollars_" the depreciated notes of the Government merely promising to pay "_dollars_," but on which the "_dollars_" could not be obtained! What is that, but the monstrous incongruity that _a promise_ is the same thing legally as its _fulfilment_? What is that but judicial blindness as to the _nature_ of Credit? What is it but the old confusion between _names_ and _things_? What is it, finally, but the dazed and hazy vision, pardonable perhaps in the popular mind but half-opened to radical distinctions, but unpardonable in learned men professing to lay down the law in a civilized country? It is scarcely needful to add, that the Supreme Court of the United States suffered in the judgment of good citizens by that transaction; that the best legal and financial opinion of the country yielded little respect to a decision _thus secured_; and that intelligent people do not believe that constitutional law _can_ sanction what contravenes at once common sense and common morality. Judge Field (and his memory the country will not willingly let die), one of the majority in the first decision, and writing the opinion of the dissenting minority in the second, used this strong but just language, "_It follows, then, logically, from the doctrine advanced by the majority of the Court as to the power of Congress over the subject of legal tender, that Congress may borrow gold coin upon a pledge to repay gold at the maturity of its obligations, and yet in direct disregard of its pledge, in open violation of faith, may compel the lender to take, in place of the gold stipulated, its own promises; and that legislation of this character would not be in violation of the Constitution, but in harmony with its letter and spirit. What is this but declaring that repudiation by the Government of the United States of its solemn obligations would be Constitutional?_" FOOTNOTES: [7] John Jay Knox's United States Notes. [8] Practical Political Economy, 1877, p. 452. CHAPTER V. MONEY. The subject of Money presents few difficulties, or rather none of any depth, to one who has thoroughly mastered the subject of Value. To all others the difficulties are insuperable. Essay after essay and volume after volume has been written in this country upon Money, by men who would have become good economists and good monetaries, if they had only begun their inquiries at the right place and followed them in the right direction. As we saw in the last chapter that it is impossible for anybody to understand the subject of Credit without first comprehending the matter of Value, so we shall see in this chapter that in the order of Nature Value precedes Money, and that the latter can only be learned in the light of the former. The logical reason for this in general is, that Money itself is always a Valuable, and comes to its function as money only through a comparison of itself with other Valuables. The thin difficulties that confront the student of Money, who has reached the topic along the proper highway cast up for economical inquiries, arise apparently from two sources; and we will begin our present discussion by first looking at these in their order. In the first place, Money is the only Valuable that may belong to two out of the three possible categories into which Valuables may be scientifically thrown. All Valuables are either Commodities, or Services, or Credits. These categories never change places. Once a Commodity always a commodity, so long as value can be predicate of it; a personal Service can never take on any other valuable form; and a Credit is ever a credit, and nothing else, until it is annihilated by Fulfilment. Now Money is the only Valuable that ever appears in two of these forms. The same Dollar indeed cannot be both a Commodity and a Credit; but some Dollars are a Commodity cut out from gold and silver, and some other Dollars (so-called) are a Credit issued by Government or parties responsible to government; while Money as a general term properly enough covers both kinds of Dollars, the Commodity-Dollar and the Credit-Dollar. In other words, Money is of two kinds, and only two kinds, either a Piece of valuable metal stamped as to weight and fineness by the image and inscription of Cæsar,--a Commodity; or a Promise to pay to somebody some of these pieces,--a Credit. This unique peculiarity of Money, by which, always a Valuable, it may appear and does appear in two out of three possible predicaments of Valuables, makes a little difficulty at the outset of its discussion, and requires continued care in formulating its scientific propositions. In the second place, a more considerable difficulty, and yet a slight one still, is found in the fact that the choices and the legislations of men have more to do in shaping the propositions of Money than in most other economical propositions. It is true, that Nature and men coöperate in the determination of every case of Value whatsoever; while there is a difference in the cases, though perhaps not a distinction, in respect to the fixedness and universality of the natural laws involved, in contrariety to the purely human impulses concerned. The Providential elements in Economics, both the social and the physical, are of course relatively fixed and unchangeable, otherwise Science could not grapple with and classify them; and so also are those principles of Human Nature related to exchanges, which may be said to be _universal_ in their character,--such as, for example, the preference to receive a larger rather than a less return-service, and to render a smaller rather than a larger effort; and at the same time there are other principles of human nature related to exchanges much more _variable_ in their character than these, such, for instance, as the nation's choice of the kind of Money it will use, or the kind of Taxation it will impose. It certainly follows from this, that some Economical laws must be more _general_ than others, owing to a less variation in the human impulses concerned in them: it follows, for example, that the law of landed rents, or the law of the approach of the price of raw materials to that of the finished products, is more universal in its terms of generalization than most of the propositions of Money and Taxation can be. It seems like a paradox, that those parts of Economics in which the human elements of variable choice may predominate over the relatively fixed laws of nature and of mind, should be just the parts hardest for men to catch clearly and hold firmly; because, we naturally think, that difficulty and mystery are rather to be found in those departments in which an Infinite Mind has been at work upon an infinite plan, and that there is no such profundity in the works of men; but after all, even those natural laws like Gravitation, which are clear and universal as laws, if they be such as the devices of men have to do with, such as may be modified and in a certain sense controlled by human actions, become from that very circumstance liable to some difficulty and perhaps to some mystery. Now all the truths of Money, and as we shall see in the final chapter all the truths of Taxation also, belong to this class of less general generalizations; still, it is scarcely less than foolish to say, that Money is such an elusive and ideal agent that nobody can understand it. That is the language of indolence and lack of penetration. Money is wholly a matter of man's device, though it comes into constant contact with something greater and more fixed than itself; it was invented, just as any other instrument is invented, to accomplish a certain economical purpose; and it would be strange indeed if men by taking pains could not perfectly comprehend what men themselves have wholly devised. We hope, accordingly, in the following paragraphs to clear up completely to all intelligent readers the whole doctrine of Money. The key to unlock all the superficial difficulties (and there are no others) is this: Money is always a Valuable before it becomes money, and continues a valuable independently of the fact that it _is_ money; and, it is always one or other of two kinds, either itself a Commodity or a Promise to pay a commodity. In this chapter, we will not begin with definitions and justify them afterwards, but will come up to them step by step, and, as it were, justify them beforehand. 1. Economical Exchanges may begin, be profitable to both parties, and go forward to a certain extent, without the use of any money at all. As a matter of fact and probably for a long time, while the Civilizations were gathering their inchoate forces for a further progress, men exchanged one Service directly for another without the intervention of any medium. This form of trade is called Barter. King Hiram of Tyre furnished to King Solomon of Judea a certain quantity of cedars from Mt. Lebanon for the building of the new Temple at Jerusalem, and Solomon in return furnished to the Tyrians a certain quantity of wheat and oil, Judea being a fertile agricultural country with no forests, and Tyre a wooded country with no farms. This may well serve us as an instance of Barter, although Money had been in current use in those regions a thousand years before, as is seen in the purchase by Abraham of the cave and field of Machpelah, for which he weighed out "_four hundred shekels of silver, current money with the merchants_." It is obvious, however, that while Barter is a good deal better than no exchanges at all, there are inherent and immense difficulties in that form of trade. (a) Under Barter trade is extremely limited in its _personnel_. Only those parties can engage in it, each of whom is in position to render to the other just such a Service as the other is in direct and immediate need of, and each of whom also wants another Service in kind and quantity exactly what the second man has to render. It is not enough under these conditions, that a man should have some Service to sell, but he must also find some other man, who not only wants that specific service but who also has some service to render in return just such as the first man wants. If A has wheat which he wishes to exchange for a coat, he must first find a party desiring wheat and also having a coat to sell, and moreover who wants just as much wheat as will pay for a coat, no more and no less; if he wants more, he may have nothing to render for the excess which A is willing to accept; if less, A may have nothing besides wheat with which to help pay for the coat. Even in the simpler states of Society the inconveniences of thus hunting up a specific market for each specific service are very great, and in more advanced states of civilization would become intolerable, if it were possible (as it is not) for Society to become advanced under such conditions. (b) Barter presents insuperable obstacles to trade in point of _place_. While men still exchanged in kind, as it is called, and knew no other mode, the purchasing-power of any Service was necessarily confined to that locality, and would not be parted with except in view of a return service actually there present in the same place. There could be no commercial contact without a local contact. The ultimate parties to every exchange must come together face to face. There could be no middle-men or distributors. The market was circumscribed to the hamlet. (c) Buying and selling under the scheme of Barter is also wretchedly limited in point of _time_. The fruit-dealer, for example, must dispose of his product quickly, or it perishes on his hands. So of many other commodities. If they are to be sold at all, they must be sold quick. The ultimate buyer must be on hand in time. As the result of these three concomitants of Barter, ten thousand things that are now bought and sold to profit never came to a market or thought of a market, exchanges were so limited in time and place and variety, human associations were so hampered, and the development of all peculiar talents so impeded, that one of the initial steps in the progress of all Civilization has been to hit upon some expedient to lessen these intrinsic difficulties, and so to facilitate Exchanges. 2. The Invention of Money was nothing in the world but the tentative selection by certain people in a certain locality of some Commodity then and there _valuable_, that is, capable of buying _some_ things then and there, and gradually giving to that commodity by general consent the capacity of buying _all_ things then and there salable. The commodity thus slowly becoming money, whatever it was, had and must have had a _limited_ purchasing-power to start with, because no instance to the contrary has ever been shown, and still more because that peculiar comparison between _two_ things that lies at the bottom in each single case of Value is exactly the same kind of comparison that holds between money and the _many_ things which money purchases; given a _valuable_ in common use as a starting-point, and the transition is easy and natural to a _generalized_ valuable, that is, to a recognized money; the relation of mutual purchase between the commodity and _some_ other things was a common fact to begin with, the making it money was merely the common consent that thereafter it should have a general purchasing-power within the circuit; so that as a simple result, whenever anybody had anything to exchange, he might first exchange it for this selected product, which was valuable before but is now generally valuable, and then with this money-product in hand he could buy whatever he might want at any time or place within the circuit. It is impossible from the very nature of Value, impossible from that comparison of two distinct Services, that precedes every Exchange, as well under Money as under Barter, that anything except a valuable anterior to and independent of its becoming money, could ever have become money at all. Money makes no alteration in any law of Value, but only substitutes for convenience' sake in every transaction in which it plays a part, a general for a specific purchasing-power; a book, for example, has a specific purchasing-power, since there is somebody who wants it, and is willing to give a sum of money for it; and the owner of the book by the sale of it parts with a product which has only the power to purchase something from a few persons, and receives a product in return which has the power to purchase something from all persons; it is not true to say that the money is worth more than the book, because they are just worth each other, as is demonstrated by the sale; but it _is_ true to say that the seller of the book has substituted in the place of a limited purchasing-power, of which he was proprietor, a general purchasing-power, of which he has now become proprietor; that is, that the command of the money, which has no larger value than the book had, does carry along with it a superior command over purchasable articles generally. In one word, Value in the form of money is in a more available shape for general buying and selling than value in any other form. This is the exact and ultimate expression for all the truth there is in the common vague remark, namely, that Money is something different from all other Valuables; it _is_ different from them in just one respect, namely, while they have the power of buying some things from some persons, it has the power derived from the _consensus_ of Society to buy all sorts of things from all sorts of persons. This simple change or substitution, which seems in itself so little and easy and natural, has changed in its ever-enlarging results the face of the world! It makes the valuable now selected to be money seem to the minds of men to be a very different thing from what it was before, although the change in itself is slight indeed. It removes most of the inconveniences of Barter as by a stroke of the hand. So soon as a commodity selected to become money by one people comes to be acceptable as such to all other peoples, as is the case with gold, the advantages of its use are vastly multiplied to all. Experience has shown many times over, and reflection will explain to any one, how that there is no other machine that has economized labor like money; no other instrument that plays so deep and broad a part in Production; no invention whatever, unless it be the invention of letters, which has contributed more to the civilization of mankind. Money makes vast distances relatively indifferent; for it is sufficient to constitute a market for any valuable that it is practically wanted anywhere on the round globe, the middle-man paying the seller for it in money transports it thither, and receives back his investment with a profit from the ultimate buyer. So, also, money generalizes any purchasing-power in point of time. The dealer, exchanging his perishable products for money, may keep its power of purchase locked in this form as long as he lists, putting an interval at his own pleasure between selling and buying, and with this generalized power in his pocket he may buy when he will and what he will and where he will. Money, too, makes any purchasing-power portable, divisible, and loanable. A man may carry the value of his farm in his purse, and may divide it up for a thousand different purchases, and especially is able to loan it in this form in order to receive it back again with interest at a future day. 3. It is important to notice in the next place, that, whatever made the commodity selected as money originally desirable and valuable, it has now become desirable and valuable for other and wider reasons. The tobacco of Virginia, for example, in the early days of that Colony, became valuable at first on account of the demand for it as a narcotic both there and in England; but as soon as it was made a legal money in the Colony by the general consent already described, its value depended in part upon another set of causes. Of course Demand and Supply still controlled its value just as before, only certain parties who had not desired it before as a mere _commodity_ thereafter desired it as a current _money_. Its convenience and necessity as money widened the circle of those parties willing to receive it and glad to render a return for it. It is true, that many now received it only because they could pay it out again to buy something else with; but that made no difference so far as Value is concerned; it was valuable before under a certain limited demand, and continued valuable under an additional and broader demand; we cannot certainly say, that it became _more_ valuable under this new and wider demand, because we do not know how the then combined demand affected the Supply. We may probably say, that the value became _steadier_ if not _larger_, under the double demand than under the previous single one; and the vital point to mark and remember is, that the _value of money_, previously valuable as a commodity only, is still maintained under the law of Demand and Supply, just as all other values are, the only peculiarity being this, namely, as a generalized valuable and consequently a potent social agent money is in demand by everybody who has anything else to sell. It follows from this in necessary sequence, that Money as such, whatever may have been the ground of its original value as a commodity, _is always received as money in order to be parted with_. It is not bought for its own sake to be used and enjoyed, as most other things are, but is only bought to be sold again. Men will sell everything to buy it, with the sole intent to sell it again to buy something else; and the odd thing about it is, that everybody buys it to sell again, not at all as the speculator buys grain to sell it again at a higher price by the bushel or centner, but, the money remaining constant in their minds, they sell for it something they care less about in order to buy with it something they care more about. Money, therefore, becomes a _medium_ in men's exchanges. The word "medium" in this proposition is to be taken in its etymological and strict sense, as something that comes between two extremes and serves also to relate them to each other. This is not the ultimate characteristic of Money, as we shall see, nor can a final definition be founded here, but it is a good step towards ultimates to see that money is exchanged for other things as a means and not as an end, that it is a great help in exchanging all other valuables but is never exchanged for itself in an ultimate transaction. Small boys, indeed, sometimes swop cents; but men, the miser excepted, who is under a deplorable fallacy of the senses, use and estimate money mainly as the _medium_ that facilitates the real exchanges of Society. What is actually and ultimately exchanged is the wheat, the cloth, the lumber, the furniture, the commercial service of every kind, and Money is but the instrument making those exchanges easy, which might perhaps go on in part without it, though with difficulty and loss. In short, money is somewhat like a railroad ticket. Transportation to a given place is what is really bought when one pays for a railroad ticket. The proof of the purchase is the bit of paper exhibited. That comes in as a _medium_ between the traveller and the railroad company; and while it facilitates the real exchange, it also partly disguises it. This comparison holds good in the main feature, but in two respects the resemblance fails: Money is not a specific ticket for a single purpose, as the pasteboard is, but is a general ticket (so far as it goes), for all purposes of purchase; and secondly, Money really stands as a value in its own right (so far as any single thing can so stand) at the same time it is serving as a _medium_, while the railroad ticket does not. Still, we are all desirous to get money, not for the sake of the money itself, but for the sake of those things which the money will buy. We part with money freely and constantly for those things which we care more about. What we exactly care for is what our money will buy, is the conscious command over all services and commodities which the possession of money insures to us. If we could give our own commodity or service or claim, whatever it may be, and receive directly in return the claim or commodity or service which we want, whatever that might be, there would be no need of money at all; but this is always inconvenient, and generally impossible; and, therefore, we introduce a middle term, and money is found to be a good mean to help exchange the two extremes. 4. We are now getting on towards a just conception and a true definition of Money, though two or three more points must still be noted as preparatory to that consummation. As a result of the fact already reached, that money serves as a _medium_ in men's exchanges, it follows of course that the power of money as such a medium is multiplied by what has been called _rapidity of circulation_, that is, a brisker use of the volume already in circulation will reach the same end as the increase of its volume. As in mechanics, so in money, the whole power is the product of mass and velocity. Money also is like any other tool, the more constant its use the more profitable its agency. The quick movement of a small mass, accordingly, is better than the torpid movement of a large mass, both in what it saves of expense, and in what it presupposes of the general conditions of exchange. The value of the money-volume of any country is a small fraction of the aggregate value of those products which the money helps directly to exchange; and a very small fraction indeed of the aggregate value of all the products which it helps indirectly to exchange through Credit by means of its _denominations_. We shall see better a little farther on, that Money works not only as a medium direct, itself exchanged against other Services, but also as furnishing those denominations of Value, like the _dollar_, which are always used in bargaining; and also used in all cases of Credit, in which settlement is not made by money but by offsetting one piece of indebtedness against another, and these denominations can arise only from the use of money as a direct medium. Therefore, we may say that the hub and the spokes and the rim of the wheel of exchange consist of personal services and commercial credits and all material commodities except money, while, to borrow the famous comparison of Hume, "Money is but the grease which makes the wheel turn easier." It would be a vast mistake to suppose, as some of the ancients did, that the grease is really the wheel. While Money thus facilitates the revolution of the wheel of Exchange, it follows too from its nature as a medium, that the dimensions of the wheel as a whole are vastly greater than they would have been but for the Money. Money indeed helped to exchange the products that already existed and were coming into existence at its first invention, but by far the largest part of products since have come into existence largely through the agency of Money. We get quite too low a view of the functions of this potent agent, if we think of it merely as an aid in circulating products, that would have existed whether or no; some products would certainly have existed whether or no, and money would surely be of great use and convenience in helping bring these to the ultimate consumers; but this is a partial and wholly inadequate view of the function of Money as a medium of exchange. The fact that such a medium is in universal circulation, and that the present holders of it are ready to exchange it against any sort of Services adapted to gratify their desires, exercises a kind of creative power, and brings a thousand products to the market which would otherwise never have come into existence. Since money will buy anything, men are on the alert to bring forward something which will buy money; and since Money is divisible into small pieces, an incredible number and variety of small services are brought forward to be exchanged against these pieces, for example, into railroad cars and fares of all sorts, which services we have no reason to suppose would ever be brought forward at all were it not for the strong attraction of the money. 5. From this last point of view we may gain another closely connected with it, namely, that Money must be a very important part of the _Capital_ of the world. We have already thoroughly learned that Capital is any product outside of man himself from whose use springs a pecuniary increase. Now any one may see that the monetary medium of any country is the most active and the most essential and the most profitable of all those instruments reserved in aid of further production. The axe, the plough, the spindle, the loom, the wheel, the engine, are all instruments, are all Capital, and they each aid respectively some part or parts of the processes of Production; but Money is a form of Capital which stimulates and facilitates all the processes of Production without exception. Just as we have seen that Money is a form of Value generalized, so is it also a form of generalized Capital, that is to say, it is an instrument capable of aiding all processes of Production in every department, while every other capitalized instrument is capable of aiding but few processes in one department. Without Money, for instance, there could be no thorough Division of Labor, because there would be no adequate means of estimating or rewarding each one's share in a complicated process. By means of Money all services small or great contributing towards a common product are neatly measured, and may be paid for by some one, who thereby becomes proprietor of the whole product; or, if the contributors choose, they may wait till the product itself is sold, and then the money received is divisible without loss to each contributor, according to the service rendered. Thus the influence of Money as Capital pervades the whole field of Exchange from centre to circumference, facilitating every transfer and stimulating new transfers. Now then, if Money be, as it is, a peculiar kind of Capital, since it is a Medium in all Exchanges, the question becomes pertinent, How much of it is wanted? Clearly, only _so much_ as will serve the _purposes_ which such a medium is fitted to subserve; there should be enough fairly to mediate between the Services actually ready to be exchanged then and there, and also enough fairly to call out other Services proper and profitable in the then circumstances of Society, and whose only obstacle to a profitable exchange then and there _is a lack of a facilitating medium_. All increase of the volume of money beyond this point, which the very nature of Money itself marks out as the boundary, leads to a diminution of Value of every part of it, to a consequent disturbance of all existing monetary contracts, to a universal rise of prices which are illusory and gainless, to unsteadiness and derangement in all legitimate business, and to a spirit of restless enterprise and speculation which seeks to draw off the excess of money in untried and reckless experiments. The only real subjects of Exchange are mutual efforts, mutual services, as these are expressed in Commodities and Services and Credits, and money is the instrument merely that comes in between the real exchanges to facilitate them; and, therefore, it seems to be perfectly conclusive on this point to remark that the quantity of money needed in any country or the whole world is limited by the number of the services ready to be exchanged, to make easy the exchange of which is the good purpose and sole end of Money. The physical and mental powers of man, which alone can give birth to commercial services, when considered as they must be in this connection as belonging to a given number of men at a given time and place, are strictly limited of course; and although the presence of money then and there is both a stimulus and an aid to all these men to bring forward services of all sorts to the market, there are obvious restrictions both in their powers and in their circumstances; and the quantity of money needed among them is just that quantity which will fairly act as a medium in exchanging the services which they are able and willing to render to each other. All increase in the quantity of money beyond that point would have, and could have, the only effect of increasing the nominal Prices of Services, without making the services themselves any greater in number or better in quality. It is with Money exactly as it is with any other form of Capital, allowance being made for the fact that Money is a kind of generalized capital. To illustrate, How many ships does a commercial nation need to employ? As many as will fairly take off its exports and bring in its imports. Ships are wanted for one definite purpose; and when enough are secured to answer that purpose, all additions will lessen the Value, that is, the purchasing-power, of ships generally. So of all instruments whatever. Enough is as good as a feast. Enough is better than more. In regard to every form of Capital, and consequently in regard to Money as such, the point of sufficiency is determined by the quantity of work to be done. And as no law of Congress is required to determine how many ships are best to do the transportation for the people of the United States, so no legislation is needed to fix the amount of Money that is best for the same people, or for any people. As the people find out for themselves how many steam-engines they want to do their work of the year, so they find out without any aid from their legislators how much money they want to make their exchanges of the year. The less Law and the more Liberty on all such points the better for all concerned. Let the reader notice in passing, as a corollary from what has just been shown, that when forms of Credit like bank cheques come into growing use to make payments with and settle balances, they displace to a large extent commodity-moneys, like gold and silver, which would otherwise have to be employed. Speculations, and even scientific discussions, over the needful amounts of gold and silver for money in the United States, have usually overlooked this essential consideration of displacement; and one result of this has doubtless been too large a coinage of the precious metals, to the hazard of their stable value, and especially to the hazard of the permanent maintenance of the gold standard. Men forget in their zeal for Money that it is nothing but a Tool, and that the multiplication of tools beyond the amount of work to be done by means of them always makes the tools a drug; and they are apt to forget also that the cheaper and more convenient substitutes for metallic moneys, namely, forms of Credit, are all the time and more and more taking the place of the older moneys, which, nevertheless, must still be kept at the foundation, though a lessened quantity of them be needful for circulation. 6. We must now carefully sink our analysis one grade deeper, in order to reach the bottom characteristic of Money, and so to formulate an ultimate definition of it. The only quality common to all valuable things is the fact that they are all _salable_; and if these various and multitudinous valuables are ever to be made in any way commensurable with each other, it must be by means of one of their number assumed as a _standard of comparison_ with the rest. Comparisons can only turn on points of _likeness._ The single respect in which all valuables whatsoever resemble each other is their common possession of purchasing-power, be it more or less. Therefore, as a yardstick, itself possessed of length, _and because it is possessed of length_, if assumed as a standard of comparison with other objects that have length, may be used to measure all such objects whatsoever, and may accurately express in units or fractions of itself the simple length of anything and everything; so, any valuable may be selected as a _standard_ with which to compare all other valuables, and by means of the terms of which to express numerically the reciprocal relations between all valuables whatsoever. This is just what is done whenever any valuable is selected as Money; and this is the exact and single purpose of such selection. What is the precise change, then, in the valuable chosen as Money when it becomes money? This: it was a valuable before, else it could not by any possibility serve the present purpose, but now it has become a _standard_ valuable, with which other valuable things may be compared in the single point of their _value_. Valuables are now commensurable. That is all. But that is a great deal. As we have already learned to the nail, Valuables are all Services; and now some one Service has been selected from the rest, capable in its very nature of _measuring_ all the rest, and so capable of becoming immensely _useful_ to mankind. What, accordingly, is the bottom characteristic of Money? And where shall we find the terms for an immutable definition of it? _The core of Money is this quality of being a Measure of Services, taken on in addition to the usual and universal qualities constituting anything a Valuable._ This additional quality arises under the choices and action of men, just as the ordinary qualities constituting anything a valuable arise under the choices and action of men. But it is an _additional_ quality, distinctly conferred, and vastly important. The valuable chosen as Money was a Service to start with, was constantly rendered as such then and there, and was consequently fitted by qualities already possessed to assume a further and a _unique_ quality, namely, the capacity to measure and express relatively to itself all other valuable Services whatever. As each and every Valuable is the outcome of a _comparison_ instituted by two persons as between two things, as is thoroughly unfolded in the first Chapter, it is not at all strange, rather it is natural and inevitable, that there should arise in connection with Valuables as a whole class some such further _comparative_ measure, as Money is now shown to be; because, without some such common measure of Services in general, itself a Service of the same kind, it would be inconvenient, not to say impossible, to carry on any considerable traffic anywhere. For instance: a baker has only loaves of bread, and wishes to buy a hat, a horse, a house. How many loaves shall he give for each? Unless there be some common Service, in the terms of which these differing Valuables can be expressed, and by means of which they can be brought into commercial relations with each other, it would be an awkward piece of business to effect even the _three_ exchanges; and every time the baker wished to buy another article, there must be a rude and slow calculation from independent data, in order to decide upon the terms of the exchange. Let now some Common Service be introduced, in the terms of which each of these values can express itself independently, and the difficulty disappears in an instant. "My loaves are worth ten cents each," says the baker. "My hat is worth ten dollars," says the hatter. Their saying so does not indeed _make_ it so; that matter is a preliminary; but each has come to that approximate conclusion by a relatively easy comparison of two Services, his own and another common one; and if the loaves will duly bring ten cents and the hat ten dollars, the terms of their own exchange are one hundred for one, and there is no need of parleying. So of the rest; so of everything that is ever bought and sold. Money becomes by common consent a Measure of them; because it measures them, it makes the interchange of them a very facile matter; because it measures them, it easily becomes a medium between them; and, accordingly, because the money rendered is itself a Service, it is a natural and universal measure of all other Services. MONEY IS A CURRENT AND LEGAL MEASURE OF SERVICES. With this final definition of "Money" the writer is more than willing to take all the risks. It was new when propounded many years ago in one of the editions of his earlier book. All subsequent testings of it in form and substance have but confirmed the original confidence in it. The word "legal" in this definition is not always to be pressed to its utmost signification, but denotes anything sanctioned by law or usage _equivalent to law_. The other words are to be taken in their full and technical meaning. It is believed that, while this definition is short and simple, it just covers the whole ground and no more. It is not enough that a certain valuable be "legal" as Money; it must also be "current" in order to be a true money. In the United States between 1862 and 1879, to take an example, gold coins, though legal tender all the time for all debts public and private, were not "current" in the full sense of that term, and hence were _not_ the Money of the country. Till the last-mentioned date, the gold dollar of 25-4/5 grains standard fine was required by law to pay customs-taxes with and the interest on the public debt, and was used to a small extent in a few branches of private business, and was not otherwise in the hands of the people. These dollars, accordingly, were not strictly money, but bore a premium over the "current" money of the country. To be Money, then, a Valuable must be recognized as money by law or custom as strong as law, and also circulate among all classes of the people as a medium in their exchanges. But we are bound to observe that Money becomes a _medium_ in men's exchanges, because it first became a _measure_ in their Services. Some economists think that these two functions are separate, and are of equal rank; but it is easy to see that one only is original, and that the other is derived from that. Even Aristotle perceived that Money is a Measure, inasmuch as he defined property "_anything that can be measured by money_." We may be pretty sure, in opposition to Professor Jevons, in his Money and the Mechanism of Exchange at page 13, who thinks there are _four_ characteristics of Money, that Money as such has but _one_ primary characteristic difference from other forms of Value, namely, this _measure_-quality, this _standard_-quality, this publicly recognized function as a _common measure_ to which all other valuables are constantly referred. This additional attribute put upon a money-valuable by law or custom is not what _makes_ it valuable, since an ounce of uncoined gold standard fine is worth within a very small fraction as much as an ounce of gold coins, but it makes the money a far more convenient instrument to purchase with, inasmuch as money, having now the attribute of making all other valuables easily commensurable with itself, becomes at once something which everybody is ready to receive, because everybody knows in general what its power will be to purchase all other things. In other words, Money becomes a _medium_ in exchanges just because it has already become a _measure_ of Services in general; and there are not consequently two prime functions of Money, still less four, but only one. This view seems to simplify the whole subject of Money very much; and we may be sure that it will be found to be scientifically correct, and that we shall find many means of testing its accuracy as we go on. To maintain, as we do, that "Money is a measure of Services," is much better than to say, in connection with many economists, that "Money is a Measure of Value." That phrase is objectionable because Value is always relative to two Services exchanged for each other; and to say that money is a measure of that _relation_ is neither so simple nor so ultimate as to say that it is a measure of each of the Services entering _into_ that relation. The Services may be conceived of and spoken of separate from the Value into which they merge, although they come into existence solely for the sake of that resultant Value, and it is more exact and final to propound that Money, itself a Service, is a measure of all other Services considered as constituent elements of the Values into which they fall. We are not without strong hopes, accordingly, that competent economists will concede, that here is a radical improvement in the nomenclature of our Science. In the place of our expression and definition, and the foregoing explanation consequent upon its use, President Walker in his Money, pages 280 _et seq._, prefers the mathematical and excellent phrase, "_the common denominator in exchange_"; Professor Bonamy Price, in his Practical Political Economy, page 363, shows his fondness for the formula (and it is a good one), "_the tool of exchange_"; and Henry Dunning Macleod, in his Elements of Banking, page 17, insists with much less reason, that "_Money is the representative of Debt_." He says: "The quantity of money in any country represents the amount of Debt which there would be if there was no money; and consequently when there is no debt there can be no money." The unfortunate use by some countries of a paper money, which is indeed a form of debt, gives some plausibility to the notion that Money is a representative of Debt; and perhaps the fact that Money is often used to pay debts previously contracted, and that debts are almost always contracted in the terms of Money, may give some additional plausibility to this view; but as Macleod himself goes on to say that "no substance possesses so many advantages as a metal for money," and that "all civilized nations therefore have agreed to adopt a metal as money, and of metals, gold, silver, and copper have been chiefly used," we do not see how he can logically hold that a gold dollar, or a gold sovereign, whose value is as substantive and independent as that of any Valuable in the world can be, becomes through coinage and circulation "a representative of Debt." Instead of saying as he does, "where there is no debt there can be no money," it may be confidently asserted on the other hand, where all transactions are settled at once in solid money there can be no debt. 7. Having thus looked into the nature of Money, and seen what is its one essential characteristic, and its one obvious and universal function as the result of that, it will help us now in our further discussion, to examine some of the material commodities that have served as Money at different times and places. _Cattle_ appear to have been the earliest money of which there remains any record. Homer, near the middle of the sixth book of the Iliad, indicates in the following lines that oxen were an incipient money in the Heroic age:-- "Then did the son of Saturn take away The judging mind of Glaucus, when he gave His arms of gold away for arms of brass Worn by Tydides Diomed,--the worth Of fivescore oxen for the worth of nine." We cannot certainly infer, when it is said in Genesis that "Abraham departed out of Egypt very rich in _cattle_ and silver and gold," that any of these were anything more than articles of valuable merchandise; but on the other hand it is certain from the Latin name of Money, _Pecunia_, which is derived from the root _pecus_, which means "_cattle_," that Cattle were the Money of the early Romans; and Pliny writes expressly that King Servius Tullius stamped the first bronze money of Rome with the _image of cattle_, undoubtedly indicating by that some equivalence in current value between the two. At any rate cattle have been used as Money among pastoral peoples very widely in place and in time, and are still so used in various parts of Africa. In the region of the Euphrates and Tigris the precious metals became money in very remote antiquity; for the art of coining, and all other arts, came thence westward to the Greek cities of Asia Minor, and to Greece itself, and we learn that Pheidon, King of Argos, coined silver money on a scale derived from the East in 869 B.C.; and a better proof still is the fact that burnt clay tablets are found in the Royal Library at Nineveh, discovered by Layard, which are really credit-money, notes issued by the Government, and made redeemable in gold and silver money on presentation at the king's treasury. Tablets of this character are extant bearing date as early as 625 B.C. But the gold and silver money must have been circulating a long time in their own right as valuables, before such a credit-money, such a promise-money, as those tablets are, could have originated in connection with them. Abraham, who himself migrated from "Ur of the Chaldees" about 2000 years B.C., not long after reaching the Mediterranean, "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." This is expressly said to be "money" and "current money." Perhaps it was coined money. At any rate, it was cut and piece money. It was indeed weighed out, and not counted out. This is still the more accurate and speedy manner, when the facilities for the weighing are present. The Bank of England at this day weighs, and not counts, the coins received and paid out. The Romans first coined silver money in 269 B.C., and gold money in 207 B.C., and gold coins were stamped in Greece about the time of Alexander the Great, say 333 B.C. Other metals than those called precious were also early used as money. Long before Pheidon's silver coinage in Greece, _copper skewers_ were used as money in that country, of which six made up a _drachm_, which was afterwards both a coin and a unit of weight, the coin being worth about 17 cents of our money, and the weight being about 66 grains avoirdupois. The word drachm is derived from ~dragma~, _a handful_; and the sixth part of it, called an _obol_, from the Greek word meaning a _spit_, became also both a coin and a weight, all which makes it evident that these were used in connection with roasting meat, and that one skewer or obol was originally a unit both of value and of weight. In Adam Smith's day, in certain districts in Scotland, _nails_ were still used as small money, which is a forcible reminder of these old Greek skewers. Iron became money in Sparta; money of lead was known to the ancients, and is still current in the Burman empire; the earliest Roman coins were of copper, which were cast rather than stamped, for no die would have sufficed for pieces so large and heavy, and the _denarius_ was the unit divided into ten _asses_, the _denarius_ being nearly the equivalent of the Greek _drachma_ whether of copper or silver, because the Romans reckoned from the first the ratio of copper to silver as 250:1; bronze is a mixture of copper and tin, and brass of copper and zinc, and copper coins with both these admixtures--used for the purpose of hardening the copper, it being a general law of metals that a mixture of two is harder than either--have been very common in ancient and modern times; Sicilian, Roman, and old British coins of tin alone are known to have been struck; and Herodotus makes the statement that the Lydians of Asia Minor were the first to make a coinage of _electrum_, which, as some claim, was a mixture of gold and silver, and of which ancient specimens are still existing. Cowry _shells_ are still used in the East Indies, and also in Africa in the place of small coins, and have sometimes been imported into England from India to be exported in trade to the coast of Africa, being reckoned in Bengal at about 3200 to a silver rupee, which is about 46 of our cents. The New England Indians also used beads or shells of periwinkles (white) and of clams (black), of which 360 made up a belt of _wampum_, as they called it, the black being counted worth twice as much as the white; and the English colonists accepted the wampum in their exchanges with the Indians, regarding a string of white as equal to five shillings, and a string of black to ten shillings, and afterwards made it legal tender among themselves for small sums, and even counterfeited it. Cakes of _tea_ have passed as money in India, and elsewhere; and it is said, that at the great annual fair at Novgorod, in Russia, the price of tea has first to be determined before the prices of other things can be settled upon, since that is a kind of standard of Values in that great mart. _Salt_ has been current money in Abyssinia; _cod-fish_ in Ireland and Newfoundland; and _beaver-skins_ in New Netherlands, New England, and the western parts of America. We do not here try at all to give a full list of the things that are known to have been used in the early states of society as money; and there would be no ground for surprise in any list, however large and varied, when we remember how great is the need of some such form of value generalized in order that exchanges may grow to any considerable size and vigor. Two points only need now to be noted, (1) that the tendency everywhere has been sooner or later to come to the metals as the best form of money, and among the metals to reach gold and silver as the only ultimately satisfactory materials for Money; and (2) that no instance has ever been found in the whole stretch of inquiry over all the earth, of anything becoming a Money that had not been previously a Valuable. We might be perfectly sure of this beforehand, without any search at all among the moneys of primitive times and states of civilization, because, from the _very nature of the case_ nothing could ever serve the purpose of Money except what was already a valuable to make the comparison with,--nothing could ever possibly serve as a measure of services except a service. It has several times been claimed, that actual exceptions to this law have been historically discovered, but when the alleged exceptions have been closely scrutinized they have been found to be apparent only. To take two or three of the most plausible examples: the Carthaginians had a kind of leather money, which originally enclosed bits of the precious metals, and circulated in virtue of them, though they afterwards came to circulate as bits of leather only, as counters and pledges, in a way that will be explained later. According to the Venetian traveller, Polo, China had in the thirteenth century a money made of the bark of the mulberry tree, cut into round pieces and stamped with the name of the sovereign, which money it was death to counterfeit or to refuse to take in any part of the empire. If we had the whole history of this money, it would surely ally itself either with the other commodity-moneys now being treated, or with the modern credit-moneys made legal tender to be treated hereafter. It is just as certain as anything can be, that these circles of stamped bark did not start out as money in their own right. The French writer, Montesquieu, asserted that there was in use in the last century among the people of the coast of Africa, what he called "an ideal money," "a sign of value without money," the unit of which was called a _macoute_, which was subdivided in ideal tenths, called _pieces_. This statement was startling, as implying a denomination without the thing denominated, as implying a standard of value which had no basis in a valuable thing. It was afterwards discovered, however, that this money of account had its origin, just as we should suppose it must have had, in an actual _macoute_, a piece of stuff, a fabric, which they had used first as a commodity-money, and afterwards its _name_ as a money of account. A valuable thing may become money, and then its name may become a _denomination_ of value, and still later a bit of leather or a bit of paper may be called by the same name, and in a certain sense take the place of the same thing. All this will be as clear as day pretty soon. 8. Contrary to what has often been affirmed by Economists, the real measure of Services is the service itself, the _thing_-dollar and not the _denomination_-dollar. The denominations are used in bargainings and calculations as representatives of the money itself, and thus indeed in a secondary sense serve as _measures_; but the subtle connection between the thing and its name, between money and its denominations, and the differences between the two, need to be clearly unfolded, because most of the current fallacies about money take their rise just at this point. An illustration will best serve us here. The original measure of Services in France and England and Scotland was the pound weight of silver. No coin of that weight was ever struck; but the pound of silver was cut into 240 coins called pence. Twelve of these pence were called a _solidus_ or shilling. Thus, as applied to silver, the symbols lb. and £ denoted equivalent weights, the former of uncoined metal, the latter of metal coined. But in course of time, more "pence" than 240, and at last in Elizabeth's reign 744 "pence were coined out of a lb. of silver." Yet all the while 240 of these pence were called a £. £ and lb., both a contraction of the Latin _libra_, were no longer equivalent. The lb. of weight continued stable; the £ of money had dwindled to less than one-third. Yet the _name_ pound continued to attach to 240 pence, although the pence embodied a less and less quantity of silver. Each actual penny had less silver in it, and though it was still called a penny as before, the _denomination_, though spelled and sounded as before, represented less silver, and therefore less _value_, than before. The denominations, then, always follow the fortunes of the coins, whose names they are, to the frequent loss and shame of the unthinking, who suppose the same _name_ must represent the same _thing_. Unfortunately it does not. Take another illustration. In 1834 the gold eagle of the United States was reduced in weight from 270 to 258 grains troy, and the alloy increased from one part in 12 to one part in 10. These changes took out more than 6 parts of gold from every 100 parts in all the gold coins of the country. Yet all these coins bore the same names as before. The things denominated changed, but the denominations changed not. Other things remaining equal, the coins lost six _per centum_ of their purchasing-power, or in other words, general prices rose in that proportion; the _measure_ became so much smaller; and the names, _eagle_, _dollar_, outwardly unchanged, varied simultaneously and equally with the change in the coins. Also, coins are liable to change in their function as a measure of general Services from unavoidable changes in the general purchasing-power of the precious metals themselves. If for any reason an ounce of gold will buy less of general Services than formerly, of course the coins cut from that gold will buy less than formerly; and this change in the _measure_ is followed instantly and inevitably by a corresponding change in the meaning, though not in the spelling, of the _denomination_. Not so with all other tables of denominations. These have a _basis_ independent of the things which they help to measure. The French _metre_, for example, is not variable by the lengths or breadths or heights of the things it measures, but is an invariable unit of length the world over; so is one of Troughton's inches; but this feature does not hold at all of the denominations of Money; because _sovereigns_, _dollars_, _marks_, _francs_, are denominations of _Value_, which is itself a variable relation. Such denominations, consequently, are _not_ an independent standard to which values themselves can be referred, as lengths are referred to metres and inches, but vary with the varying purchasing-power of the coins themselves. The "_dollar_," as a denomination, means more or less, just according as the "DOLLAR," as a coin, buys, that is, measures, more or less. Still, essential as is the point now made to any just understanding of the subject of Money, it is vastly important for all the interests of Exchange that the accepted measure of Services be as little liable to fluctuations as possible, especially in all cases in which lapse of time is involved before the exchange is fully consummated. An inflexible standard there cannot be from the very nature of the measuring, but also from the very nature of all measuring, the money-standard should be and should be kept as nearly inflexible as it possibly can be. For the same reason in kind, only multiplied a thousand-fold in force, that the bushel-measure should be of the same capacity in sowing-time and in harvest-time, to sell and buy by, always a bushel, no more and no less; and the yard-stick an inflexible measure of length, always 36 of Troughton's inches, no more and no less; so, as far as it is possible in the nature of Values, ought the current measure of Services, and hence its denominations, to represent, year in and year out, a uniform degree of purchasing-power. 9. This brings us logically to the historical fact, that, no matter what measure of services any people may have adopted in their primitive times, there has always been a steady force at work tending to displace these in favor of gold and silver. This has become the universal result the world over among all advanced peoples. Governor Bradford in his History of Plymouth Colony gives a quaint account of the origin of money among the Pilgrims, and in connection with that of the fee-simple in lands: "_The Pilgrims began now highly to prize corn as more precious than silver, and those that had some to spare began to trade one with another for small things, by the quart bottle and peck; for money they had none, and if any had, corn was preferred before it. That they might, therefore, increase their tillage to better advantage, they made suit to the governor to have some portion of land given them for continuance and not by yearly lot, for by that means that which the more industrious had brought into good culture (by such pains) one year came to leave it the next and often another might enjoy it; so as the dressing of their lands were the more sleighted over and to less profit; which, being well considered, their request was granted._" The neighboring Colony of Massachusetts, settled about ten years later, used Bullets for small change, reckoning them at a farthing apiece, and made them legal tender for debts of less than one shilling; for larger exchanges Wampum and Beaver-skins were long used; but the steady force just spoken of induced Massachusetts in 1652 to supplant these with a silver coinage of her own, called the Pine-tree shillings and sixpences and threepences and twopences. This mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. In 1691, the two Colonies were forced into one government through a new charter granted by William and Mary; and after lengthened trials of inferior moneys, not needful to be described now, Massachusetts determined in 1749 to have no other than silver money circulate in the Colony, and became thereafter till the Revolution the so-called "Silver Colony," and business rapidly and steadily revived and enlarged in consequence of the change, and in contrast with the rest of New England. Gold and silver, thus ever urging their way in to take the place of tentative and transient standards, and ever coming back again to stay if displaced for a time by cheaper and changeable moneys, have never been anywhere of equal value, weight for weight. An ounce of gold has always been more valuable than an ounce of silver. Probably in the Euphrates country where coinage began, and certainly in Asia Minor deriving thence its weights and measures, gold was strictly the standard with silver as subsidiary to that; in Greece, when Philip's victories established a double standard there, gold was reckoned relatively to silver as 1:12-1/2; in the Roman world, where silver had been the standard after 217 B.C., Augustus Cæsar legalized gold as a co-standard in the ratio of 1:12; in 1717 a double standard was established in Great Britain, gold being rated in the coinage as 1:15-1/5 of silver, but in 1816 by a law still in force, gold was made the sole standard for the United Kingdom, the legal use of silver being limited to 40s. in any one payment; in France the legal relation of gold to silver was fixed in 1803 as 1:15-1/2, and so continued till 1876; in the United States the ratio first established, in accordance with the recommendation of Alexander Hamilton as Secretary of the Treasury, was 1:15, but in 1834 this was changed to the relation of 1:15.98, and so it remains to this day; in 1871, the new German Empire adopted the sole gold standard, and limited silver to the amount of 20 _marks_ in any one forced payment, still allowing the old silver _thaler_ to circulate at the rate of three marks to a thaler; and since 1875, the Scandinavian Union permits gold alone to be coined for private persons, and limits the debt-paying power of silver to 20 _crowns_. A crown is 26.78, and a mark 23.82, of our standard cents. Moreover, the relative value of gold in silver never continues the same for any great length of time, even after the law has sought to ascertain and fix it. Indeed, any law fixing the ratio between the two has very little, if any, effect towards maintaining the ratio. Demand and Supply determine the value of the precious metals each in each at any one time as absolutely as they decree the value of Hindoo rice in silver. France managed to maintain her legal ratio at 1:15-1/2 for 73 years, because all the conditions were on the whole favorable; but when the Germans threw a portion of their silver on the world's market in hopes to reach the single gold standard, and the mines of Nevada poured forth on the same market their millions of silver, the ratio could no longer stand, the right of private individuals to have silver coined for them was taken away in behalf of the government, and only the five-franc silver pieces continued to be legal-tender to all amounts, the other silver coins becoming then (1876) only legal to pay debts to the amount of fifty francs. A franc is 19.29 of our standard cents. And this brings us to notice what are called _subsidiary coins_. France, England, Germany, and the United States have debased their smaller silver coins in weight, so that the _nominal_ value of these coins is from 7 to 15% above their _bullion_ value. For example, two halves, four quarters, ten dimes, of our silver since 1875 weigh 385.8 grains, which is also the exact weight of the French five-franc piece, while our standard silver dollar weighs 412-1/2 grains, both 9/10 fine, so that our "subsidiary" silver is debased in weight 6.48%. There are three advantages in thus treating the smaller silver: (1) there is so much clear profit to the Government minting them, thus lessening taxation; (2) a security to the peoples that they shall not lose their convenient small change by export to neighboring countries; and (3) this scheme allows a very considerable rise in the market value of silver without tending to throw the subsidiaries out of circulation. As these are never legal-tender except to very small amounts in domestic trade, there are no serious objections to their use in limited quantities. The English can pay debts in their silver to the amount of £2, and we in ours to the extent of $5. Coins of copper and of other inferior metals are also _subsidiary_ in principle and motive. Our 5-cent and 3-cent nickel pieces are 75 parts copper and 25 parts nickel, and the 1-cent piece is 95 parts copper and 5 parts tin-zinc; and debts of 4 cents can be paid in 1-cent pieces, of 60 cents in 3-cent pieces, and of 100 cents in 5-cent pieces. 10. The steady experience of civilized men for two milleniums and a half seems to demonstrate, that gold and silver constitute the best Money; and we must now investigate the reasons, one by one, _why_ they are the best money. The reasons appear to be three. Of these the first is by much the most important. (1) The first and main reason why gold and silver make the best money is to be found _in their comparatively steady general Value_. Since Money is a Measure of all other valuables, its success as a measure must depend on its own _steadiness_ of value, and gold and silver meet this test better than anything else. Money is a valuable, and not in any sense a _representative_ of value; except as to the subsidiaries, a coin does not owe its value at all to the _stamp_ impressed upon it or to the _law_ authorizing it, since the metal in it is worth as much out of the coinage as in it; coin-values arise under the same conditions as all other values, and are variable by any change in any one of the four elements which alone can vary the value of anything; and it would seem that nothing more is needed in order to remove the last vestiges of the dark cloud which has so long overhung this subject of Money, than to familiarize ourselves first of all, as we have already done, with the true doctrine of Value in general, and then to hold fast the truth exemplified on every hand, that the value of Money is just like every other value. Let us examine then, first, why the value of gold and silver is so steady. (a) On account of the comparatively steady Demand for these metals. Gold and silver are wanted for two general purposes: first, to be used as money, and second, to be used in the arts; and the usual estimate is, that about 2/5 of the aggregate quantity in the world is in the form of money, and the other 3/5 in the form of plate and utensils and ornaments. Now, so far as the element of Desire controls Value, the purpose for which any article is desired is a matter of indifference. The aggregate desire for it for all purposes, accompanied with the offer of something with which to buy it, constitutes the Demand; and the more universal the desire, no matter for what use, the steadier the Demand and so far forth the steadier the Value. It is a point still too little noticed, that the combined demand for the precious metals for all uses is what helps determine their general value, and not the demand for them as coin alone; just as the value of barley is regulated partly by the demand for it for food, and partly by the demand for it for malting purposes. Hence an ounce of bullion of the standard fineness destined for the smelting-pot of the artisan is worth within a very trifle as much as an ounce of coined money. For example, by the law of the Bank of England an ounce of standard gold (11/12 fine) is coined into £3 17s. 10-1/2d., and the Bank is obliged to buy all bullion and foreign coins of the standard fineness offered to it at £3 17s. 9d. per ounce,--a difference of only three half-pennies. Now, gold and silver are so indispensable in the form of money, so beautiful in the form of ornaments, so well adapted to serve the purposes of luxury and love of distinction, and so really useful in the arts, that the Demand for them is constant and well-nigh universal; and should there be in the progress of civilization a lessened demand for them for purposes of personal ornamentation and luxury, and a less quantity be required for coins on account of the multiplied use of cheques and other credit-forms, as seems likely in both cases, a greater quantity will doubtless be required for all the other uses old and new, and so, as the Demand in the past has been steady, and probably steadily increasing, there is every reason to expect the same course of things for the time to come. Moreover, it contributes to the steadiness in value of the gold and silver coin, that there is at hand at all times, in the form of plate, a reservoir from which a chance chasm in the coin may be replenished, or an extra demand for it answered. (b) On account of their tolerably uniform Cost of Production. Not Desires only but Efforts as well determine Value. Supply is the correlative of Demand; and when to a steady demand there answers a steady supply realized under conditions of pretty uniform difficulty, there will be as a matter of course a pretty steady Value. Nature herself, that is to say, God himself, has indicated in a manner not to be mistaken the intention, that these precious metals should be the Money of the nations. They are scattered all over the earth, and so scattered that the cost of their production has been on the whole pretty steady ever since civilization and commerce began in earnest. God is a God of order throughout all His works. Corresponding to the nature and necessities of men is the whole structure of the outward world. Science builds only on these predetermined lines of Order. Induction is only possible where original Resemblances run through great departments of phenomena. To be enabled to buy and sell to any considerable extent in order to meet their subjective wants, men must have an objective measure of mutual Services, and this measure must be a valuable steady in its purchasing-power: very well; such a possible measure was all provided for beforehand, when the foundations of the earth were laid. The precious metals have always been obtained in one or other of two ways: by surface diggings and washings, and by rock-mining. Both were employed in the very beginnings of Civilization. There is a description in the book of Job (chapter xxviii) of the way in which the ancient mines were wrought, and of the worth of the ores: "Truly there is a vein for silver, And a place for gold, which men refine. Iron is obtained from earth, And stone is melted into copper. Man putteth an end to darkness; He searcheth to the lowest depths For the stone of darkness and the shadow of death, From the place where they dwell they open a shaft. Forgotten by the feet They hang down, they swing away from men. The earth, out of which cometh bread, Is torn up underneath, as it were by fire. Her stones are the place of sapphires, And she hath clods of gold for man. The path thereto no bird knoweth, And the vulture's eye hath not seen it; The fierce wild beast hath not trodden it; The lion hath not passed over it. Man layeth his hand upon the rock; He upturneth mountains from their roots; He cleaveth out streams in the rocks, And his eye seeth every precious thing; He bindeth up the streams, that they trickle not, And bringeth hidden things to light." These methods and difficulties in rock-mining, thus poetically and beautifully delineated, have been substantially the same from that early day to the present time; and, consequently, there have been but two or three striking changes in the general value of gold and silver in the commercial world during the last 500 years, at least changes owing to easier and larger Supply. The discovery of the mines of Potosi in 1545, and the large influx of silver into Europe from those and other American sources, together with the irrational stimulus thereby given to the working of European mines under the false impression not even yet wholly dissipated that Value can be clutched bodily in mining, so increased the stock of silver, that its value as measured in grain or other commodities declined in Europe in 70 years after 1570 to about 25% of its previous purchasing-power. Adam Smith expresses the opinion in his Wealth of Nations, that silver did not perceptibly fall before 1570, nor continue to fall further after 1640. The discovery of gold deposits on the Pacific coast of the United States in 1848, and a similar discovery in Australia in 1851, enlarged the annual supply of gold for the world from $40,000,000 in 1848 (_Chevalier_), to an average of $136,000,000 for the five years ending in 1859 (_Jevons_); and the latter writer estimated the fall of gold in general commodities from 1845 to 1862 at about 15%. But with exceptions like these, and similar ones are perhaps not likely to recur, the precious metals have always maintained and seem likely to maintain in the future a considerable uniformity of Value, as estimated by their power to purchase other valuables, so far forth as Cost of Production goes to determine their value. Even the great changes just noted in the cost of the metals issued only gradually in a rise of Prices, which many were able to foresee and thus to provide for, but by which many more were caught and brought into distress and even pauperism. The two classes that suffer the most under a fall in the Value of Money are the wages-receivers and the holders of long annuities and other similar obligations. (c) On account of their Quantity. The amount of gold and silver in circulation in the commercial world, to say nothing of the quantity so easily brought into circulation from the reservoir of plate, is so vast, that it receives the annual contributions from the mines much as the ocean receives the waters of the rivers, without sensible increase of its volume, and parts with the annual loss by detrition and shipwreck, as the sea yields its waters to evaporation, without sensible diminution of volume. The yearly supply and the yearly waste are small in comparison with the accumulations of ages; and, therefore, the relation of the whole mass to the uses of the world, and the purchasing-power of any given portion, remain comparatively steady. It is probable, that production at the mines might cease altogether for a considerable interval without very sensibly enhancing throughout the commercial world the value of gold, as it is certain, from experience, that a production very largely augmented only very gradually and after a considerable interval of time diminishes its value. The mass of the precious metals has been aptly compared with the heavy balance-wheel in mechanics, which preserves an equable and working condition of the machinery under any sudden increase of the power, and even when the power is for a moment withdrawn. Just at this point a caution is needful. Because it is affirmed that the great amount of the precious metals is a ground of their firm value, it must not be supposed that we are going beyond our general doctrine, and introducing another element, namely, Quantity, besides the four elements, which, as we have so often alleged, can alone vary the value of any Service. Quantity, in itself, is not an element capable of varying the value of anything, but taken in connection with durability, it is an element of what might, perhaps, be called with propriety the _Inertia_ of Value, and tends to keep the purchasing-power of gold and silver where it is. _Value and Steadiness of Value are two distinct ideas._ The present value of an ounce of gold is decided by four things alone, two Desires and two Efforts; but other elements besides these may help determine that that ounce of gold shall have ten years from now a purchasing-power approximately the same as now. It will depend of course in the last analysis upon the relation of the then Demand to the then Supply; yet the vast quantity of the precious metals in existence, combined with their durability, prevents those fluctuations in the Supply which are so destructive to a steady value. It is not with them as with the fruits and the cereals, whose value varies perpetually with the seasons, and which are so perishable that they must be sold quick or never. Gold and silver are almost indestructible, and the existing mass is not liable to be lessened except by wear and accident, and in so far as the annual production from the mines exceeds the yearly waste there is a natural provision made for the natural increase of Demand to supply the wants of the world for money and for the arts without much disturbing the relation of the Demand and the Supply; and so Quantity in connection with durability helps preserve to them a tolerably steady value from generation to generation. (d) On account of their Fluency. Gold and silver are in demand the world over. Having great value in comparatively small bulk, they are easily transported from Continent to Continent; and whenever from any cause they become relatively in excess in any country, and so lose there a portion of their previous purchasing-power, there is an immediate motive in profits to export them to other countries, in which their power in exchange is greater, and thus the equilibrium tends to restore itself. The proposition is, The value of gold and silver is kept pretty steady throughout the commercial world by the facility with which they are carried from points where they are relatively in excess to points where they are relatively in deficiency. In any country or place where the precious metals are temporarily in excess, the prices of general commodities as measured in them will rise of necessity, because the unit of measure is smaller than it was; and for the same general reason, the country temporarily lacking in these will experience in consequence a fall of general prices. There is, therefore, a private gain in carrying these metals to those countries in which their power of purchase is the greatest owing to the lack of them, because more commodities can be obtained in exchange for them than at home; and private motives here coincide, as indeed they generally do, with public welfare, since what the traders do in carrying gold and silver abroad with an eye to their own interest only, helps maintain at home and abroad the steady value of these commodities. This law of the distribution of the precious metals by Commerce, and the equilibrium of their general value resulting therefrom, is as natural and beautiful as the law which preserves the level of the ocean, or that which balances the bodies of the planetary system. This has come at length to be recognized by the nations, and the laws which used to forbid by heavy penalties the exportation of gold and silver are all swept away, and these metals are now free to go and do actually go wherever they can obtain the most in exchange. It is absurd to suppose that their owners would carry them out of a country unless they were worth more abroad than at home; and, therefore, the prejudice which still exists in this country (the relics of itself) is a senseless prejudice. The gold is not given away, it is _sold_, and sold for more than it will buy at home; otherwise nothing in the world could start on its foreign travels. There is the same kind of gain in this as in all other exchanges of commodities, with this great incidental advantage in addition, that its general value is by this means kept pretty uniform throughout the commercial world. Unluckily for the darker and middle Ages, so far as they took their cue and thought from the Romans, the latter, in the teeth of the sound view of Aristotle, looked upon Money as something quite different from other forms of salable things, looked upon it in short as an _end_ in itself, as something to be gained and not readily to be parted with. If this were the right view of Money, as it is not, then the policy to spring from it might well be,--Get all the money possible into the country, and let as little as possible out! Just this came to be the policy of the Romans. In one of his Orations, Cicero says, "_The Senate solemnly decreed both many times previously, and again when I was consul, that gold and silver ought not to be exported._" The other and the true opinion, that money is bought and sold like any other valuable, and that its sole peculiar function is as a _means_ to further sales, was indeed held and argued at Rome, as we learn incidentally from a passage in the Institutes of Justinian; but the false though plausible opinion, that money is _ultimate_, and not _mediate_, is said in the same passage "to _have prevailed_"; and accordingly this superficial view of money, and that it "_ought not to be exported_," constitute what may be called the Bullion Theory, and it is the first general theory of Sales ever promulgated. The Romans brought it forth, and other nations took it from them. It could never stand in the light of Reason, and still less amid the exigencies of practical Commerce. It is an illustration of the continuity of human thinking as well in wrong as in right directions, that the second main theory of Sales, which has long been styled the Mercantile Theory, is a prolongation and expansion of the first. _That_ gave an undue weight to gold and silver over other goods in trade, and forbade their export: _this_ did the same thing too, but also tried to swell the exports of other goods beyond the worth of current imports, _so as to get back a balance in gold and silver_: both alike interfered with the international fluency of the precious metals, to the constant detriment of all parties to the restrictions. The common principles of both Theories may be thus expressed: _Gold and silver are the things to get; they are worth more than what they will buy; therefore let us get all of these in that we can, and let as little of them out as we can; and let us work all our trade so, that others shall have to give us a balance back in gold and silver._ These false postulates and inferences wrought centuries of woe in the world of commerce, because all the leading nations became devotees simultaneously to this scheme of each shrewdly plundering the rest. The germs of this Mercantile Theory appear first in France, when Phillippe le Bel, in ordinances of 1303 and 1304, put his hand in as king to mend the movement of trade, to forbid the export of gold and silver, to fix the price of wheat and to forbid its export, and to lessen imports by prohibitions of them. "_Considering that our enemies might profit by our provisions, and that it is important to leave them their merchandise, we have ordered that the former should not be exported nor the latter imported._" The famous Colbert, who laid down many financial maxims that are good, thought nevertheless, that he could so manage the foreign trade of France that she should get the better of her neighbors, and embodied his plan in the tariff of 1664. We will let him state his plan in his own words: "_To reduce export duties on provisions and manufactures of the Kingdom; to diminish import duties on everything which is of use in manufactures; and to repel the products of foreign manufactures by raising the duties._" The principle of the Mercantile Theory was never better or briefer expressed than by Ustariz, a Spaniard, in 1740: "_It is necessary rigorously to employ all the means that can lead us to sell to foreigners more of our productions than they will sell us of theirs, as that is the whole secret and the sole advantage of trade._" Too many nations knew the "whole secret" at the same time, and accordingly the "sole advantage" to any became exceedingly small. England was as deep in the sloughs and wars and losses of this false system as any of the rest. It may be laid down as an axiom, that no country will ever export for the sake of buying other things those things which are more needful for its own welfare at home. So long as human nature continues what it is, what it always was, what it always will be, no persons in any nation will ever export gold and silver except to buy therewith other valuables then and there more important to them and consequently to their country. There need not be the slightest fear that any nation which cultivates its own commercial advantages under freedom will ever lack for a day a sufficient _quantum_ of the precious metals; because under freedom these metals will always go, and go in just the right proportions, to and from those countries which produce and offer in exchange those desirable Services which other countries want. The greater the enterprise and skill, the keener the development of all peculiar and presently available resources, the more honorable and free the commercial system, so much the surer is any nation whether it be a gold-bearing country or not, of securing all the gold and silver which it needs. This is so, because _there_ will be a good market to buy in, an abundance of good and cheap goods will be there, and they who have gold will resort thither to buy. But such a free and enterprising nation will also want to buy other things besides gold and silver, and other things than those itself can make or grow to advantage, and when enough of the precious metals is secured for money and the arts, the residue will be exported, perhaps to the very countries from which it originally came, in payment for some products which _those_ countries have an advantage in producing. The United States, for example, is a gold- and silver-bearing country, and exported in the years 1850-60, both inclusive, $502,789,759 in coin and bullion, according to the official Report on the Finances, 1863; and during the same period imported from other countries $81,270,571 in coin and bullion. Where was the famous and fallacious "balance of trade" in that case? The United Kingdom, on the other hand, is not a gold- and silver-producing country at all, but it is the central market of the world for the precious metals all the same, its imports and exports of them are immense in all directions, because it is an enterprising country within the lines of Nature in agriculture and manufactures and commerce, and is not afraid to allow its people to buy and sell freely with all the world. Where lies in the technical sense the "balance of trade" between Great Britain and the rest of the world? Who can tell? All that is known, and all that is worth knowing, is, that all that trade is immensely profitable to all the parties to it wherever situated. Now, there is always a double advantage in these free movements of coin and bullion in exportation and importation. In the first place, more and better commodities are secured to the countries exporting, whether they be gold-bearing or not, than the gold could have bought in those countries, otherwise it would not have been carried abroad, that being the sole motive that stirs it from its present haunts; and in the second place, the benefit to the countries importing is the market for their own commodities created by the gold brought in, for we must never forget that a market for products is products in market, is a benefit also in naturally and easily filling up a chance deficiency in the quantum of coin there, and incidentally too a benefit to the world as tending to keep _in equilibrio_ the purchasing-power of the metals everywhere. This last is especially seen when new and pregnant sources of supply are opened in any country. For example, in the United States about the middle of the century the stock of gold was more than doubled in ten years' time; unless by much the larger part of this had been carried abroad in commerce, it would have inevitably depreciated the whole mass and disturbed the prices of everything; but by causing the new gold to impinge on the whole world's stock, the shock of the new production on the measure of Services, though perceptible, was reduced and deadened. The world's mass of the precious metals is comparatively torpid beneath the action of an accretion which would break down by its weight the metals of a single nation. Therefore, in conclusion on this topic, the Fluency of gold and silver, by which they pass easily in commerce to those places where their present value in exchange is greatest, or to such countries as India and China which have shown for centuries a wonderful power to absorb the metals of the West, and return as easily when the conditions are reversed, or when a larger use of paper-credits releases some portion of the coin, tends powerfully to make their general value uniform throughout the world, and consequently to make them the best medium of Exchange and the best measure of Services. (e) On account of this Circumstance, that every general rise or fall in the value of gold and silver tends quickly to check itself. This principle, indeed, is applicable more or less to the value of all commodities, but owing to their quantity and durability and fluency pre-eminently applicable to the value of the precious metals. The check is double in either direction. First, let us suppose that the purchasing-power of an ounce of gold or silver be rising: then, production will be stimulated at all the mines, and the more stimulated as the rise is more; and this new and enlarged Supply will tend to check a farther rise, and unless the permanent Demand has been in the meantime intensified, to bring back the value to the old point; moreover, when there is a rise in the value of the coin, a less quantity is required to do the same amount of business; and the demand for gold which causes the rise tends to be checked by the rise itself, because a lessened quantity is needed for money-use in consequence of the rise. If the exchanges mediated by money have become permanently greater than before, then of course the Demand will continue greater than before, and the rise in value may be maintained. And just so, _mutatis mutandis_, of a fall in the purchasing-power of the coin. The production of the metals is thereby slackened at the mines, and the lessened Supply tends naturally to enhance the value; and if the same amount of business is to be done as before, there is a stronger demand for money while the fall continues, and this new Demand helps also to bring back the old value. All this is in the interest of a steady value. (f) On account, lastly, of this Circumstance, that a stronger Demand for Money is met in either one of two ways, by increasing the stock of coin, or by an increased rapidity of circulation of that on hand. It is exceedingly fortunate that a brisker demand for money, especially if it be but temporary, does not necessarily enlarge the Supply or alter the value, but only hurries round the existing money. Oscillations in the Demand are responded to by a slower or a more rapid circulation. This tends admirably to keep the value of the existing-stock of money steady within certain limits. Ignorance of this principle, or indifference to it, has caused mighty mischiefs in the United States. In General Grant's administration, for instance, the cry that a larger _volume_ of money was needed "_to move the crops_" was disastrous in its results. The truth is, that the volume of Money in the United States was then, and has been ever since, by much too great, considering its character, as we shall see by and by. The multiplying and fructifying nature of Rapidity of Circulation has never been understood by our national financiers. When, however, enterprises are multiplying and Exchanges are being permanently increased in number and variety, then there must be a larger volume of money, and this larger amount is secured in the ways already indicated, with perhaps slight disturbances of value, but the temporary ebbs and flows of business should have no effect at all on the mass of money, but only on its movement, and its value consequently would scarcely be disturbed. These Six grounds appear to be satisfactory and sufficient to account for the superior steadiness of the value of gold and silver, so far as their value is determined by considerations relating to these metals themselves. We now proceed to the two reasons additional to this why gold and silver constitute the best Money. (2) The second general reason why gold and silver make the best money is found in the fact _that Governments have little to say or do about the Value and Quantity and Mode of Circulation of such Money_. In respect to Credit-Moneys, like our own Greenbacks and national Bank-Bills, the Government has everything to say. When we remember how governments are constituted, that they are only a transient Committee of the citizens for special purposes; of what sort of persons they commonly consist; the variety of subjects they are obliged to consider during short periods of office; the absence for the most part of expert knowledge among them; the enormous blunders they have made in the past in all financial measures; and that those who know the most about their action in the past and present in such matters have the least confidence in their ability to act wisely; the better we shall see the strength of the grounds of this second reason. In all essential respects money of gold and silver regulates itself. These metals came to be money and continue to be money in the main sense independent of the enactments of any Government. The people chose them: they choose them still. As we have seen, coins do not owe their value to the stamp of the Government, since the metal in them is worth within a trifle as much before coinage as after. Coinage publicly attests the quantity and quality of the metal in the coin, and that is all. Of the value of their coins governments say nothing. They can say nothing. That depends on men's judgments, and not on edicts at all. No law of the United States can add directly an appreciable fraction to the value of a gold dollar. The law makes it consist of 25-4/5 grains troy of gold 9/10 fine, the mint so stamps and attests it, and thereafter it takes its own chance as to value. Some Governments charge a little something for coining for their People, and some do not. What is charged is called _seignorage_. England coins gold for all comers at a seignorage of .032%, which is practically a free coinage. France charges for gold .216%; and by the law of 1874, the United States charge nothing for coining gold. It is left to the People to say _how much_ money they will have coined; and, having received it back from the mint, they may do just what they please with it; they may hoard it, they may melt it, they may sell it at home in purchase, and they may export it in foreign trade, at will. Now, it is a great gain, an immense relief, to have a Money with which the Government has nothing to do except to mint it; a money that asks no favors, needs no puffing, never deceives anybody, knows how to take care of itself, is always respectable and everywhere respected. (3) The last general reason why gold and silver make the best Money is to be found in their physical peculiarities, in accordance with which they are (a) _uniform in quality_, (b) _conveniently portable_, (c) _divisible without loss_, (d) _easily impressible_, and (e) _always beautiful_. Pure gold and pure silver, no matter where they are mined, are exactly of the same _quality_ all over the earth. Not so with iron and coal and copper. Gold is gold, and silver is silver. The gold mined to-day in California differs in no essential respect from the gold used by Solomon in the construction of the Temple, and the silver out of the Nevada mines is the same thing as the silver paid by Abraham for the cave of Machpelah. Nature with her wise finger has thus stamped them for the universal money; and a universal coinage, that is, coins of the same degree of fineness, and brought into easy numerical relations with each other in respect to weight, and current everywhere by virtue of universal confidence in them, though bearing the symbols preferred by the nation that mints them, is one of the dreams and hopes of economists, that will be realized in some "Fair future day Which Fate shall brightly gild." Gold and silver are sufficiently _portable_ for all the purposes of modern Money. Their weight is little relatively to their value. A thousand dollars in gold are not indeed carried so easily as a Bill of Exchange or a Bank-note; and expedients are easily adopted, and have been in use since the days of the Romans (really since the later days of the Assyrians), by which the transfer in place of large masses of coin is for the most part obviated; and these expedients have all been explained at length in the foregoing chapter on Commercial Credits. But for the ordinary exchanges for which they are designed, gold and silver coins are portable enough. The writer has carried across the ocean, incased in a glove-finger and borne in a vest-pocket, a troy pound of English sovereigns, worth about $230, scarcely conscious of their weight though easily reassured of their presence by a touch of the hand. The experience of those countries, like France and Germany, in which the Money has been and is still mostly metallic, has not pronounced it onerous on account of its weight; and, at any rate, it is better to accept all the other immense advantages of gold and silver money, together with some inconvenience as to weight, if one chooses to insist on that, than to adopt substitutes every way inferior as money, except that they are lighter in our purses. They are unfortunately "lighter" in other respects also. Moreover, gold and silver differ from jewels and most other precious things, in that they are _divisible_ without any loss of value into pieces of any required size. The aggregate of pieces is worth as much as the mass and the mass as much as the pieces. This is a great advantage in Money, because for the convenience of business a considerable variety of coins is required, and the proper proportion of each kind to the rest is a matter of trial, and if any kind be minted in excess of the demand nothing more is required than to remint in other denominations, and the whole value is thus saved to the country in the most convenient form. Then, gold and silver are easily _impressible_ by any stamp which the Government chooses to put upon them. Indeed in their natural state they are too soft to retain long the impress of the die. Accordingly for coinage purposes they are always alloyed with another metal, chiefly copper, since by a chemical law whenever two such metals are mixed together the compound is harder than either of the two ingredients. Most of the Nations now use in their gold and silver coins 1/10 alloy, but England still adheres to her ancient rule of 1/12 only. So compounded coins receive readily and retain for a long time with sharp distinctness the legend and other devices chosen for them to bear. In monarchical countries the head of the reigning sovereign is usually stamped upon the current coins; in all countries national emblems of some sort; quite recently some of the coins of the United States have been made to bear the appropriate legend "In God we trust"; so that patriotic and even religious associations are connected with the national Money. Although the alloys harden the coins, yet after long usage they will lose a part of their weight by abrasion, and Governments usually indicate a short weight, after coming to which the coins are no longer a legal tender for debts. Thus an English sovereign weighs 5 pennyweights 3-171/623 grains, containing 113-1/623 grains of fine gold, and when it falls below 5 pennyweights 2-3/4 grains, it loses its legal-tender character. Lastly, gold and silver when coined into Money are objects of great _beauty_. This is no slight recommendation of these metals for the money of the world. They are clean. They are beautiful. People like to see them, and to handle them, and to have them. Their perfectly circular form, the device covering the whole piece, the milled and fluted edges, the patriotic emblem, whatever it be, the religious or other legend, and their bright color, are all elements in their beauty. The educating power over the young of a good coinage well kept up, æsthetically, historically, and commercially, is a matter of consequence to any country. A whole people handling constantly such money cannot fail to receive a wholesome development thereby. The new German coinage, for example, in contrast with the old moneys of the German States, furnishes a good illustration of all this. The new German coins from highest to lowest are very beautiful, and have already tended and will tend more and more, other things being equal, to a true German nationality. 11. Silver is much inferior to gold as a metal for Money, for this main reason, that it has proved itself much less steady in its general _value_; and its value is less steady, because it is subject to greater changes in its Supply and greater variations in its Demand. As an example touching Supply, we cite the fact, that the annual silver product of the world _doubled_ in the third quarter of this Century, rising from an average of $40,000,000 yearly, 1851-61, to $80,000,000 in 1875; and that Nevada alone yielded in 1876 as much as the whole world yielded twenty years before. Then, too, Demand, that is, effective public opinion, does not hold to silver as it does to gold for a standard of Values. The action of England in 1816, of the United States in 1853, of Germany in 1871, of Scandinavia in 1874, and of the Latin Union in 1876, _in legally making gold the sole standard of Services and silver subsidiary to that_, of course affected more or less the Demand for silver as Money, and thus varied its value. We have at hand the data to demonstrate the effect of these two causes combined: the average price of silver in gold from 1833 to 1874, in the London market, which is the bullion market of the world, was for the 40 years just about 60 pence per ounce, never falling below 58-1/2 and never rising to 63. At 60 pence per ounce (444 grains of pure silver, standard English silver being .925 fine) the ratio of gold to silver is 1:15.716. But between May, 1875, and July, 1876, when both the above causes had come into full action, silver dropped in the London market to 47 pence per ounce, a fall of 21%, and a ratio of gold to silver of 1:20. The price gradually rose again to about 53 pence per ounce, and remained in that general neighborhood till 1882, between which date and 1890 the _sagging_ process went on to the general result of 25% discount as compared with the old average of 60 pence in gold per ounce of silver. These facts settle the question adversely to the fitness of silver to become an independent Measure of Values. When, however, it is designed that gold and silver shall circulate together in some numerical relation to each other as Money, it becomes needful that Government shall fix as well as it can, not the general value of either but the relative value each in each for the time being. But this specific value, too, goes on to regulate itself independently of government edicts. No matter how well the work is done at first by ascertaining the actual ratio in which they are exchanging in a free market, it will certainly require revision from time to time. This is what is called _Bimetallism_. The reader will now perceive the fundamental and ineradicable difficulty with the bimetallic system, which has led by bitter experience nearly all the European nations to abandon it. It especially becomes us to understand how the United States have fared in a century's attempt to keep _in equilibrio_ as a conjoint and legal Measure of Services both gold and silver in a fixed numerical relation. Alexander Hamilton as the first Secretary of the National Treasury, entering upon excellent preparatory work done both by Robert Morris and Thomas Jefferson, guided the action of Congress in establishing the Mint in 1792, and really determined the weight and fineness of the first federal coins and their relative value each in each, the silver coins being struck in 1794 and the gold ones in 1795. The silver dollar was copied from the Spanish milled dollar of commerce, which contained 371.25 grains of pure silver, and that has been the exact content of our national silver dollar from that day to this. The halves and quarters and dimes were exactly proportioned in weight and fineness to their units. Hamilton supposed that gold was then worth in Europe 15 times as much as silver, and advised consequently that the gold dollar should contain 24.75 grains pure, and that both dollars should be alloyed at the English rate of 1/12, thus making the silver dollar weigh 405 grains and the gold dollar 27 grains; but Congress, while enacting the gold dollar just as the Secretary recommended, preferred to _alloy_ the silver dollar by 44.75 grains instead of 33.75, thus making its weight 416 grains. Alloy is of no account in value. From the ratio of 1:15 fixed by the act of Congress in accord with Hamilton's opinion as to the relative value of gold in silver to be maintained in the coins, unforeseen and important consequences followed, since that was not the true ratio of their value at the time in the markets of the world; an ounce of gold was worth more at that time than 15 ounces of silver, and, accordingly, was worth more out of the coinage than in it, and was therefore exported in preference to silver in payment of foreign balances, especially after France had changed the relative legal value to 1:15-1/2, which happened in 1803; and of course the gold refused to circulate here under those circumstances, being _undervalued_ in the coinage, thus giving a neat illustration of the economical law to be unfolded under the next numerical heading, namely, that the cheaper money will always push the dearer out of the circulation. Not till 1834 was the attention of Congress so strongly drawn to this fact and consequence, as to secure an enactment to remedy it; and this coinage law of 1834 rated gold to silver as 1:15.98. The weight of the gold dollar was at the same time reduced from 27 to 25.8 grains, and the alloy increased from 1/12 to 1/10. These changes of 1834 increased the relative legal valuation of gold in silver 6.53%. But this in turn was going too far in the opposite direction; gold was not worth 1:15.98 in the bullion markets of Europe; France was holding steady her ratio of 1:15.50; and, consequently, the commercial current of the metals was now reversed, silver passing in preference to Europe to liquidate the balances of trade, and gold beginning to come to the United States, where it would buy more than 3% more silver than in Europe. Three years after the above changes, that is, in 1837, the standard of 9/10 fine instead of 11/12 was applied by law to silver also, and this altered fineness made a change in the weight of the silver coins necessary, if the ratio of 1:15.98 was to be maintained between the gold and silver. Accordingly, the weight of the silver dollar, and of two halves, four quarters, and so on, was reduced from 416 grains to 412-1/2, that is to say, less alloy was put into the silver coins, but the fine silver to the dollar was kept just as it was, namely, 371.25 grains. Since 1834 there has been no change in the gold dollar and its multiples, and since 1837 there has been no change in the silver _dollar-piece_, and the legal ratio of value between gold and silver in our coins is still 1:15.98, since the silver dollar of 1878 and onwards to 1890 corresponds in weight and fineness with the dollar of 1837. Still, notwithstanding the pains taken and the changes made from time to time to keep the two metals in legal _equilibrio_, there never has been any considerable period in the century now drawing to a close, during which gold dollars and silver dollars have circulated freely and indifferently in the United States. Sometimes it has been the one kind, and sometimes the other kind, but never both kinds at the same time. The present writing is in the spring-time of 1890: both kinds of dollars are legal tender for all debts public and private in the old-time ratio; the national Government professes to be indifferent whether it pay out gold or silver in redemption of its paper-moneys, but after all, with the exception of the Pacific States and a few special branches of business in the cities of the East and of the Middle, gold coins are not now in common circulation, the bank drawers crowded with silver dollars feel little of the weight and see little of the shine of the gold coins, and if any of these chance to be paid out to ordinary bank-customers they are pretty certain to return in speedy deposit. The theoretical bimetallism of the United States has been a practical though alternate monometallism with various incidental and concurrent disadvantages and losses. By 1853 these disadvantages of a long-attempted double Measure of Services made legal tender for all debts had become plain enough to everybody, for experience had demonstrated that the Value of gold and silver each in each was not constant but constantly variable; and Congress then wisely determined to make Gold alone the legal tender, except in sums below $5. In connection with this great change in the coinage, a lesser one was introduced at the same time, namely, to reduce the weight of the silver half-dollar and its subdivisions, so that their nominal value in the coinage should be considerably above their metallic value, and their exportations be thus prevented. Accordingly, the half-dollar was reduced in weight from 206-1/4 to 192 grains, and the smaller coins proportionally. This was in imitation of the English legislation of 1816, and brought into this country a _subsidiary_ silver coinage, which still continues, and of which a nominal dollar's worth weighed 6.91% less than the Silver Dollar, which was not mentioned one way or the other in the law of 1853, but which was then worth about three cents more than the gold dollar, and was of course wholly out of circulation. Through the influence of the late Samuel B. Ruggles, these subsidiary silver coins were brought in 1875 into harmony with the silver-system of France and the Latin Union. Their five-franc silver piece which is also 9/10 fine, weighs just 25 _grams_ or 385.8 _grains_; a dollar's worth of our subsidiary silver, as we have just seen, weighed 384 grains; and it was, therefore, needful to add only a slight fraction of weight to our smaller silver coins in order to knit a real connection between them and much of the European silver. Two halves, four quarters, ten dimes of our silver since 1875, are debased in weight (not in fineness) 6.47% as compared with the standard silver dollar. A more important coinage connection with Europe was knit through our first five-cent nickel pieces, each of which weighs just five _grams_, and five of which laid along in order measure exactly a _decimetre_ in length. These were the first official applications of the Metric System on the part of the United States. The nickel pieces, both the five-cent and the three-cent, are 75 parts copper and 25 parts nickel; and the one-cent piece is 95 parts copper and 5 parts tin-zinc. Debts of 4 cents can be legally paid in one-cent pieces, of 60 cents in three-cent pieces, of 100 cents in five-cent pieces, of 500 cents in _subsidiary_ silver, and of any amount in gold coins or in silver _dollars_. 12. _A money inferior in general value will, so long as it circulates locally, drive a superior money out of the circulation._ This proposition is a fundamental and universal one in monetary Science. The only exception to it is found in _token-coins_, and in subsidiary silver so far as that has the _token_-quality, that is, so far as its _nominal_ is above its _bullion_ Value. The main motive in coining tokens is to make sure for its own local uses of a nation's small change. Token-money is worthless for export, is only designed for the smaller exchanges, is legal tender only for very small sums, and is acceptable only on local and conventional grounds. The exception aside, the above proposition is a pervading and controlling Law of Finance and has been illustrated over and over again in every Age and Nation. It is as solid as the substance of truth can make it, although it looks at first sight like a paradox. We naturally think that what is excellent all round tends rather to displace what is inferior in spots, but with Money the exact reverse is the law; and the perfect coin of full weight, instead of driving out the light and the debased pieces, is always itself driven out of the circulation by them. The reason for this becomes obvious the moment we ponder the nature of Money. Money is always a Valuable, taking on in addition under Law or Custom the function of serving as an instrument of Exchange. As money, nobody wants it except to buy with, and so long as the Government and the community treat light coin and full coin as of equal value, receiving them indifferently in payment of debts and of taxes, it is clear that nobody will give in payment of debts and of taxes that which is really worth more so long as that which is really worth less will go just as far. The inferior pieces will abide in a market where they will fetch just as much as the superior pieces, while the superior pieces will take on a form or migrate to a place in which some advantage can be gained from their superiority. Thrown into the crucible, or exported in commerce, this superiority immediately manifests itself; and therefore into the crucible or into the channels of foreign trade it might be confidently predicted beforehand that such money would be thrown, and all experience testifies with one voice that exactly those are the destinations of such money. Aristophanes, the Greek comic poet, in the 5th century before Christ, seems to have been the first writer who noticed that good coins of full weight are apt to be crowded out of the circulation by the lighter and poorer pieces, and he, mistaking the cause of this, satirized his countrymen unmercifully for preferring bad coins to good, and demagogues, like Cleon, to honorable citizens for rulers. The following are the verses:-- "Oftentimes have we reflected on a similar abuse, In the choice of men for office, and of coins for common use; For your old and standard pieces, valued and approved and tried, Here among the Grecian nations, and in all the world beside, Recognised in every realm for trusty stamp and pure assay, Are rejected and abandoned for the trash of yesterday; For a vile, adulterate issue, drossy, counterfeit, and base, Which the traffic of the city passes current in their place! And the men that stood for office, noted for acknowledged worth, And for manly deeds of honor, and for honorable birth; Trained in exercise and art, in sacred dances and in song, All are ousted and supplanted by a base, ignoble throng; Paltry stamp and vulgar metal raise them to command and place, Brazen counterfeit pretenders, scoundrels of a scoundrel race, Whom the State in former ages scarce would have allowed to stand At the sacrifice of outcasts, as the scapegoats of the land." Sir Thomas Gresham, financier of Queen Elizabeth and founder of the Royal Exchange and of Gresham College in London, was the first thinker to understand fully and explain scientifically what Aristophanes and others had noticed as a fact, and what in its explanation may hence properly be called "_Gresham's Law_." We will append a few historical illustrations of the fact and the law as instructive in many ways. (a) The City of Amsterdam founded its famous Bank in 1609, because no other way seemed to open of preventing the clipped and worn foreign coins then and for a long time circulating in that great Mart of Trade from driving out completely the good money of full weight, which the Mint of the City had been constantly pouring in. The Bank was devised as a municipal Institution with this intent; it was a Bank of Deposit only; it took in all the old coins at their _bullion_ value only; and then had them reminted at full weight; it gave the depositors credit on its books in the terms of the _new_ money for all of the _old_ they chose to bring in; it then adjusted accounts between merchants and all other of its customers by mere transfers on its books; the City required all debts falling due in Amsterdam to be paid in the new "bank-money," which took away all uncertainty from Bills of Exchange drawn on Amsterdam, which were previously liable to be paid in the clipped and worn coin, and were therefore sometimes at as much as 10% discount in other cities; this simple requirement brought these foreign bills to par, and kept them there; the full-weighted money now stamped by the city Mint abode in the circulation, being now the sole Measure of Services there; and thus it became the interest and convenience of every business man in Amsterdam to have these simple dealings with the Bank, which in turn enjoyed unlimited credit in the commercial world for almost two hundred years. (b) The great English Recoinage of 1696 was completed under the imperatives of Gresham's Law. Graphically does Macaulay describe the causes and the effects of this in his 21st Chapter. The old silver coins had been stamped under the hammer; few of them were perfectly circular; the edges were neither milled nor fluted; the legend was not so near the edge as that the letters were impaired by a little clipping; it was easy to pare off a pennyworth or two, and then pass the coins along; it was profitable to do it, and in vain that Elizabeth enacted that the clipper must suffer the penalties of high treason; nearly all the coin of the realm became mutilated, and about 1660 a new process of coinage was brought in. A mill worked by horses fabricated the new coins on better principles. They were exactly round, and the edges were inscribed with a legend, and they were all of just and equal weight. They were thrown out to pass current with the hammered money, and it seems to have been expected that they would soon come to displace it. But they did not. Both were received at first without distinction by the individual traders and by the public tax-gatherers. But the milled money soon came to be scarce, and the old money grew constantly worse. The lighter the old coins became, the scarcer became the new ones; for who would pay two ounces of silver when one ounce was legal tender? The new money was melted, was exported, was hoarded, but circulate it would not. At length the lightest pieces began to be refused by some people, and other people demanded that their silver should be paid to them by weight and not by tale, and there was wrangling over every counter, and a dispute at every settlement, and the coin was really so diverse in its value that there was no longer any measure of value in the kingdom; business was in utmost confusion, society was by the ears, poor people were unmercifully fleeced, and shrewd ones grew enormously rich; and the Jacobites secretly exulted in the hope of being able to avail themselves of the prevailing discontent to overthrow the scarcely established revolutionary government of William and Mary; when, by the joint counsels of two such philosophers as Locke and Newton, and two such statesmen as Somers and Montague, the government took the bold resolution of recoining all the silver of the kingdom. An early day was fixed by Parliament after which no clipped money could pass except in payments to Government, and a later day after which it could not pass at all. (c) Gresham's Law has had beautiful illustrations in the monetary history of the United States. We have already seen the reason why the first silver dollars of 1794 could not compete in currency with the gold coins of 1795,--the silver was under-valued in the legal ratio 1:15,--it would have been much nearer the European market at 1:15.5. There was another reason operative in the same direction from the beginning, which did not, however, come to the notice of the Government till ten years later. Only 321 silver dollar-pieces were coined in the year 1805; and May 1, 1806, there stands an order from President Jefferson to the Director of the Mint,--"_that all the silver to be coined at the Mint shall be of small denominations, so that the value of the largest pieces shall not exceed half a dollar_." The presidential reason given for this order is,--"_that considerable purchases have been made of dollars coined at the Mint for the purpose of exporting them, and that it is probable that further purchases and exportations will be made_." The coinage of silver dollars thus suspended was not resumed for 30 years. What was the matter with these dollars? Nothing, only they were too valuable. Hamilton had adopted for his new dollar the exact weight in fine silver of the normal Spanish-Mexican dollar, then and for a long time the unit of the thriving West India commerce; clipped and worn coins of this popular stamp had slipped into circulation in large numbers throughout the United States, and driven out the new and good pieces in accordance with a principle much better understood now than then; the President's order itself was not very intelligent, inasmuch as two halves, four quarters, or ten dimes, were then equal in weight and purity with the dollar-pieces, and as a matter of fact were almost (if not quite) equally driven out by the smaller Spanish-Mexican coins. The "four-pences" and "nine-pences" ("York shilling") of that coinage were almost exclusively the small change of New York and New England during the first half of this century. The "dimes" and "half-dimes" of our own mintage, though long legalized, were but slowly naturalized. The coin-changes of 1853, already described, gave a fair chance for the first time to our smaller silver coins. The last native illustration of Gresham's Law will force us to anticipate here the discussion under the next numerical heading, so far as to assume that there is such a thing as paper money, and that the Law now in hand works in connection with that as well as with diverse forms of metallic money. In 1862, Treasury notes, commonly called Greenbacks, made a legal tender for debts though not bearing interest, were issued by the national Government to the amount of $450,000,000. Of course, under these circumstances they depreciated in value as compared with the gold dollars, which gold dollars _they were unfulfilled promises to pay_. Just so soon as the greenback dollars fell fairly below the gold dollars in value, the latter left the channels of trade in a very few days' time. Down sank the greenbacks gradually below the _subsidiary_ silver coins in value, and the latter obediently and utterly abandoned the commercial field. At last the greenbacks went down even below the level of the copper cents, which at that time cost the government about half a cent each, and this invariable law of money swept the circulation bare of coppers, and the people had to resort for their smallest change to postage-stamps and shin-plasters and other abominations. Happily, the country survived to see these processes exactly reversed, and the old law confirmed on its other side. When, after a considerable interval, the paper dollar appreciated to the proper height, it was interesting to watch the copper cents put in a prompt re-appearance; after a still larger appreciation of the paper, back came in abundance the subsidiary silver; and as the day of the redemption of the paper drew near, silver dollars and gold dollars greeted smilingly their old acquaintances of the street. 13. So far we have treated only of Coin-Money in its two forms, _substantive_ and _subsidiary_. The latter may now be dismissed as of little consequence in itself, and as already elucidated fully: the latter is the only Money that stands in its own right as a _commodity_, and the only Money that can give birth to the _Denominations_ of Value, such as sovereigns, dollars, marks, and francs. _What is a Dollar?_ A dollar is 25-4/5 grains of a metal compound coined, of which nine parts are pure gold and one part a hardening alloy. It is a definite _quantity_ of a thing definitely and legally described. It is a visible and tangible and well-known _commodity_. Government is competent, if it pleases, to alter the quantity of gold that shall constitute a dollar, although the People will quickly and roughly readjust the prices of Services to a changed measure of them; it is competent even to make a dollar out of silver, as our Government has tried to do (for the most part vainly) for a century, though it is _not_ competent to cause both dollars to circulate as such at the same time; but civilized and advanced Governments are not practically competent to make a Dollar out of anything else than gold and silver. Money is a current and legal Measure of Services; for the end and in the way in which Money alone originates and becomes current its material must be a valuable commodity; and after centuries of experiments and exclusions no civilized People now tolerate any other commodity in this relation than gold or silver. Such a selected commodity becoming in the manner already explained an actual medium passing from hand to hand in Exchanges, impresses its _name_ on the minds of men as an ideal _measure_ of services, which measure they can use, and do constantly use, without handling at the time the commodity itself. But these ideal-dollars, these denomination-dollars, need to be kept in check by a constant recurrence to actual, palpable thing-dollars. The denomination only comes into existence in connection with the use of the thing, cannot possibly exist independently of it, and needs constantly to be reduced to it (as it were by actual contact) in order to be useful as a measure. Just as men talk about inches, and calculate by inches, in thousands of cases in which no actual inch is used as a measure, and in every case of doubt, dispute, or difficulty have recourse to the actual inch, and thus the ideal inch is kept steady in the minds of men by frequent reference to the outward standard; so the mental measure of services, which men insensibly acquire from the use of the objective measure, needs to be kept true by actual and frequent contact with that measure. But besides this Thing-Dollar and its Denomination, which always go together like a man and his shadow, there is one other kind of Money, namely, the Promise-Dollar. We must now attend to this. What is a Dollar-Bill? How does it read? It is always a Promise of some Issuer to pay to bearer One Dollar, that is to say, this legal and definite quantity of a precious metal. There is no mystery here. There can be none. A Dollar is a tangible and weighable commodity. A Dollar-Bill is a Promise to render this commodity to bearer on demand. The difference is the same in kind as that between a bushel of corn and a man's promise to his poor neighbor to give him a bushel if he will come for it. It depends on the _man_, on his ability and character, how much the corn-promise is worth; and so it depends on the _issuer_, on his ability and character, how much the coin-promise is worth. The Issuer may be of such standing as to be able to secure for his promises that they become "a current and legal measure of Services"; and if so, they become Money under the definition. There is, then, such a thing as Paper-Money, though many high authorities are reluctant to concede, that any mere promises can be money at all. For ourselves we cannot refuse the courtesy of the term "money" to paper-promises-to-pay-coin, which our Country makes a legal tender for all debts, public and private. The making them legal tender, however, does not alter their nature one particle. They are still promises,--and nothing more. Their _Value_ depends in all cases upon the character and resources of the Issuer; their _Currency_ may be quickened (at some rate of value) by their being made a legal tender. Nothing can by any possibility become a Money unless it first be a Valuable. The essential characteristic of Money is its possession of a _generalized_ purchasing-power. The Value of a promise depends on one set of causes, with which we are now very familiar,--the same causes on which the value of everything depends; the Generalization of any purchasing-power into money depends upon another set of causes, of which the action of a Government in legislation may be one. Paper-Money, as now defined, may be issued by Banks with or without an indirect government sanction, or through the direct action of Government. The Bank of England has been issuing since 1694 paper-money under a series of Charters granted by the Government, which becomes thereby in a manner responsible to the bearers for the redemption, that is, the fulfilment, of the direct promises of "The Governor and Company of the Bank of England"; since 1863 the so-called National Banks of the United States have issued promises-to-pay, designed to circulate as money, under the direct authority and quasi-endorsement of the national Government; and since 1862 that Government has been putting out directly its own promises commonly called "greenbacks." These last have rested and now rest for their value solely on the good faith of the People as between themselves. By a separate and additional act of legislation, which it is mischievous as well as unscientific to confound with the original promise-legislation, this particular paper-money was and is legal tender for debts, which collateral circumstance whether wise or unwise neither changes the nature nor lessens the obligation of the original promise to pay coin. No so-called Decision of the Supreme Court can abolish or abridge a natural and scientific distinction. Money is at bottom of two kinds only: the first kind is an intermediate and equivalent merchandise, COIN; and the second kind is Promises to pay this to a bearer on demand, PAPER MONEY. The only way to make any promise respectable is to fulfil it in due time. The only way to make Paper Money a decency is to hold sacred in action the promise that distends it. The United States undertook in 1862 and onwards to make its own plain promises respectable by a different method, namely, by legally asserting in substance that the _promise_ is its own _fulfilment_, and needs no other; and in this persistent undertaking encountered a miserable failure throughout; because the People also persisted in _estimating_ the promise solely in the light of the _prospect_ of its literal fulfilment. The greenbacks at one time lost two-thirds of their normal value under the working of such estimation. This question of the relation of two kinds of Money to each other is a question of Economics, and not of Constitutional Law; or rather, it is a question of common sense and common honesty, and the judgment upon it of nine men learned in the Law is no whit better than the judgment of nine other intelligent men. As Money is analyzable into two varieties only, Coin and Paper, so Paper Money falls into two classes, Convertible and Inconvertible. A convertible paper money consists of promises that are always _kept_ by the issuer according to their terms, that is to say, that are paid in specie at the will of the holder. An inconvertible paper money is only another name for unfulfilled promises. Is it any wonder that unfulfilled promises to pay invariably become less valuable than _that_ which they promise to pay? They are valuable to start with, else they could not become money, and they are valuable because men suppose the promise will be kept: they are commonly valueless to end with, because men lose faith in the fulfilment of a promise long delayed. This is the simple secret of the depreciation of inconvertible money so soon as the amount of it passes a certain limit, and so soon as a certain time has elapsed after its issue and the issuer shows no signs of keeping his word. As money is only a measure of Services, and as possible Services are limited at any one time and place, and consequently as the amount of money needed for healthful business is limited also, a steadily convertible paper money, provided the limit of quantity be not overpassed, will constitute a tolerable money. But this limit of quantity is apt to be overpassed, whether the paper money be convertible or inconvertible, and especially in the latter case, because the temptation to issue promises to pay in excess of the means of promptly redeeming them always besets the issuer on account of the _gain_ to him in such issue at least for a time. This temptation has been yielded to first or last by every nation, and probably by every corporation, that has ever issued paper money. The Bank of England has been on the whole the best managed Bank of Issue in the world, and its Bills (Promises) have gained the most confidence and the widest circulation. This is because they have been kept by the Issuers _convertible_ from the beginning, with the exception of two comparatively brief intervals of time. As already related under the last general proposition, the silver coins of the realm were much worn and clipped when the Bank was established in 1694, the Bank, however, had received them on deposit of customers at their full nominal value; but after the Recoinage began in 1696, it was obliged under the law to redeem its Bills in new coin of full weight, that is, for perhaps 9 ounces of silver received, it was now bound to pay 12. Consequently its enemies, the Jacobites, made a "run" upon the Bank by collecting up its Bills to a large amount and presenting them for payment. The Bank was obliged to suspend payment, at first partially, and then generally. In February, 1697, the Bills were 24% below par. The Promises could not be kept, and therefore they drooped in value according to man's estimation of the probability of their becoming again _convertible_, which happened in the course of that year under a new charter and privileges from Government to the Bank. Just 100 years after the first suspension of specie payments, in 1797, when the War of the French Revolution made such demands upon the English for money, the Bank broke its solemn promises the second time, and did not formally resume payments until 1821. Government and the business men of London did their best to hold up the credit of the notes during the suspension, _but they were not made a legal tender for debts_. Government received them at par for taxes, and provided that business payments in notes would be held as payments in cash if offered and accepted as such. Debtors, having tendered bank notes, which the creditor refused, had certain privileges before the law which other debtors had not. The notes therefore had a _quasi_ legalization, but not a forced circulation. The bank was also authorized at this time to issue £5, £2, and £1 notes. Cautiously issued at first, bank paper continued at par for several years after the suspension, which proves that when government possesses the monopoly of issuing paper money, and carefully limits its quantity, and both receives and pays it out at par, it may keep an inconvertible paper at par, or even by sufficiently limiting its quantity carry it above par. But this truth does not make an inconvertible paper a good money, because it does not make it a self-regulating money, and because government is not wise and firm enough to fix and maintain a proper limit. Though Parliament intended in successive acts to confirm to the Bank of England the monopoly of banking by enacting that no partnership of more than six persons should take up money on its own bills, yet the common law assured to private persons and smaller partnerships the right to do this; and private bankers multiplied after the suspension, since they were allowed to pay their notes in Bank of England notes. Thus the quantity of paper money gradually increased till in August, 1813, the Bank of England notes were at 30% discount in gold. The United States, both as Colonies and as a Country, have had varied and instructive experience with inconvertible paper Money. We will glance at two or three specimens only. The first issue of Treasury Notes, commonly called Greenbacks, given by Congress the quality of legal tender for all debts, public and private, except duties on imports and interest and principal of the national bonds, was made in April, 1862, and was justified in Congress and out solely as a war measure. An aggregate of $450,000,000 was put out in all, of which $87,000,000 were afterwards taken in, and the balance was still circulating in 1890. In one month after the first issue of $150,000,000, these greenbacks began to droop in value as compared with gold; in four months, when the second batch of $150,000,000 was authorized, their depreciation was already marked and firm; and in nine months, when President Lincoln reluctantly gave his approval to the third issue of the same amount in order to pay off the soldiers and sailors, he uttered a solemn protest against the policy of thus inflating the current money, which, he said, "_has already become so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country_." In March, 1863, $50,000,000 of paper promises for fractions of a dollar were authorized, redeemable in sums of not less than three dollars in greenbacks, and receivable for all dues to the United States less than five dollars, except for duties on imports. Subsidiary silver coins have since taken the place of these fractionals. In July, 1863, the greenback dollar had lost one-quarter of its nominal value; in July, 1864, it had lost almost two-thirds of its nominal value, as its lowest point was reached in that month, namely, 35 cents as compared with the gold dollar; in July, 1865, it had risen to 70 cents; in July, 1866, it stood at 66 cents, just two-thirds of a dollar proper; and from that time it slowly rose, with many fluctuations, till New Year's, 1879, when it became legally and actually redeemable in gold and silver. Its variations for the sixteen years, however, cannot be counted by the number of years, nor even by the number of days; for they were numerous on each business day, and, as Comptroller Knox says, "_can only be numbered by tens of thousands_." What a Measure of Services that was! Between 1863 and 1879 the Bills of the new national Banks were redeemable in the greenbacks only, that is to say, one species of national promises-to-pay were paid on demand by another species of similar promises, both alike inconvertible into coin; and, as a natural consequence, the bank-bills bobbed up and down in value in servile obedience to the inconvertible legal tenders. Massachusetts Colony was the first constituent of the present United States both to mint silver, and to issue irredeemable promises to pay it. Under the false impression that only Money made inferior to Sterling would stay in the Colony, Massachusetts began to mint in 1652 silver shillings and sixpences and threepences purposely debased in weight (including seigniorage) 22% below sterling. The silver for these coins came in mostly from the trade with the West Indies, to which were now shipped peltry, fish, various forms of lumber, beef, pork, pease, cattle, and horses, for which they took mainly sugar, molasses, rum, and silver. "_They would have brought more silver and less rum and other merchandise, had the first been in greater request at home._" (Bronson.) John Hull, the mint-master took out 15 pence out of every £ for his own pay, and grew rich by the process. That was over 6%. In 1662, a twopenny piece was added to the series, and the mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. This paucity of dates is commonly and perhaps properly accounted for on the ground that coining in the colony was contrary to the prerogative of the Crown; but it is to be added that John Hull was not a man to get new dies so long as the old ones would answer his purpose. The law forbade the exportation of these pieces under the penalty of thereby forfeiting one's whole visible estate; because, though this money was much worse than sterling, there was a worse money than this circulating in the colony, and Gresham's law began to crowd it from the first, and to some extent it was both smuggled out and clipped down. But it furnished a sort of standard, nevertheless, and tended to keep the later money within distant sight of the silver, and became the reason why in New England there were six shillings to the dollar. The Spanish pillar dollar, which was the standard in the West Indies, was worth 4_s._ 6_d._ sterling; and in 1672 a law was passed in Massachusetts allowing these dollars to circulate at 6_s._ provincial, which was a discount on the home pieces of 25%. Ever after there were six shillings in a dollar in New England. Hull's money is called the "pine-tree" coinage, and was the only coin money minted in the country till after Independence. Also in 1690 Massachusetts set the first example, which was imitated 20 years later by the other New England Colonies and by New York and New Jersey, of issuing "Bills of Credit" to meet the expenses of the two disastrous Expeditions against the French in Canada. Those Bills were not made legal tender in private payments, and pains were taken to keep up their credit, but they were depreciated from the first, and came to be very much depreciated. Massachusetts and Connecticut made their bills receivable for taxes at a premium of 5%, laid special taxes for their redemption, and from time to time called in portions of the issues. In 1718 Connecticut enacted that a debtor tendering these bills should not be liable to legal execution on his estate or person for the payment of that debt, an expedient, as we have seen, resorted to by England in the great Bank restriction of 1797-1821. These early New England bills bore no interest, were not loaned out by the colony, and were a convenient though dangerous means of anticipating the income of future taxes; but after 1712 a paper money scheme originating in South Carolina came into favor in the colonies, which was, to open loan-offices for the issue of colony bills on the mortgage of land, the interest on which helped to pay the colony expenses, the principal of which at first, and on being paid back and re-loaned, furnished a capital to borrowers, while the bills themselves furnished a money for the people. Pennsylvania had the best luck with this scheme of all the colonies which tried it: as early as 1729 Benjamin Franklin became thoroughly possessed of John Law's notion, that paper money may be "based" on land or other valuables, saying in a pamphlet of that year that "_bills issued upon land are in effect coined land_": Pennsylvania bills nevertheless were at 46% discount in 1748. Some of the later colony bills bore interest, some were of a "new-tenor," so-called, designed to take up the old ones,--Virginia in 1755 made hers a legal tender for debts,--some were issued in bounties for Indian scalps and for various manufactures and fisheries, but all ran one road of depreciation and gave birth to one set of results. Connecticut managed her issues the best of the colonies, and yet Bronson says of the state of things in that colony in 1749, "_Trade was embarrassed and the utmost confusion prevailed: no safe estimate could be made as to the future, and credit was almost at an end: no man could safely enter into a contract which was to be discharged in money at a subsequent date: prudence and sagacity in the management of business were without their customary reward._" John Law, a shrewd Scotchman, born in Edinburgh in 1671, son of a goldsmith, with an innate talent for finance and well educated, was the first to give scientific form and color to the false theory that paper money _represents_ commodities of some sort, and may be issued to an amount equal to the value of these. "_Any goods that have the qualities necessary in money may be made money equal to their value. Five ounces of gold is equal in value to £20, and may be made money to that value; an acre of land is equal to £20, and may be made money equal to that value, for it has all the qualities necessary in money._" The fallacy in these words of Law is patent enough to any one who will stop to think a moment about the _nature of Money_. Because land, for example, has value, it does not follow that it has "_all the qualities necessary in money_"; and, as a matter of fact, it lacks the precise quality necessary in money, because, though it has purchasing-power, it cannot from its very form and nature become _a generalized and current_ purchasing-power. Money is indeed a valuable thing, but that does not prove that all valuable things can be money. With this radical vice of Law's view was wrapped up another, namely, that there may be in any country as much paper money as the sum of the values of all its valuable things. Now, we have learned perfectly, what escaped the acute intellect of John Law, that Money is only a valuable _measure_ of all other salable Services; and therefore, that the amount of it that can be made useful at any one time and place is strictly limited, and bears very little relation to the sum of the values present at that time and place. Scotland fought shy of Law's idea when he published it there in 1705, and so did Paris the first time he visited that city, in which and in other cities he gambled successfully and talked finance to princes and statesmen fascinatingly; but when he returned to Paris in 1715 with his ill-gotten fortune, he gained the ear of the Regent Duke of Orleans, who permitted him to found a bank there, in which were incorporated some sound principles of monetary science as well as the prime fallacy of his system. The bank bought a portion of the State Debt, just as the Bank of England had done, and laid in also a fair stock of coin, and thereupon issued a paper money. For a couple of years, or so, the bank surpassed all hopes, for Law had touched a spring till then but little known in France, the potent spring of Credit. But his whole thought, meditated on for years, could not be expressed through a private bank. The State should be a banker; it should collect all its revenues into a central bank, and attract the money of individuals to it as deposits; besides, the State has public property of vast value, on the strength of which paper money can be emitted and made legal tender; and thus the State, instead of borrowing, should lend to all on easy terms and the profits thus accruing would lessen or abolish taxes. Nor was this all. The State should also be a merchant; the whole nation should form a commercial company, a body of traders, whose common treasury should be the State bank. Commerce by individuals creates great wealth; why should not the organized commerce of a State make everybody rich? The discounts of the bank, and the profits of the trade, would surely provide for the public service without taxation. These vast ideas were actually carried out. Law's bank became the Royal Bank, issuing a paper money guaranteed by the State and resting back upon the value of all national property. The money was receivable in taxes, nominally redeemable in coin, and made a legal tender. It actually bore at one time 5 and 10% premium over gold and silver. People were anxious to exchange their coin for notes. Meanwhile a commercial company was formed in connection with the bank, to which the State ceded at first the monopoly of the commerce of Louisiana and of the Canada beaver trade for twenty-five years, and the soil of Louisiana forever; under the auspices of which NEW ORLEANS was founded, and named from the Regent, the patron of the grand system; and in succession, the monopoly of tobaccos, the rights of the Senegal Company, of the East India Company, of the China Company, and of the Barbary Company; until, having almost all the commerce of France outside of Europe in its hands, it entitled itself the COMPANY OF THE INDIES. Its shares rose from a par value of 500 francs to 10,000 francs, more than forty times their value in specie at their first emission. To support such speculations, which completely turned the heads of all classes of the people, the amount of paper money reached at last the sum of 3,071,000,000 francs, 833,000,000 more than had been legally authorized to be emitted. The collapse of this most gigantic bubble of history was terrific. Before the close of 1720, the shares of the Company could be bought for a louis d'or, or twenty shillings sterling, and the paper money of course became worthless. The ghost of John Law reappears gibbering and chattering in some human shape once in a generation or two in all civilized countries. In March, 1890, Senator Stanford of California, himself reputed to be worth $30,000,000, propounded the question in the Senate of the United States, whether it were not advisable for the Government to issue legal-tender notes on the basis of the real estate of the country. His interrogative argumentation implied, (1) that there was a scarcity of Money causing great hardship to individuals and depression to business, (2) that if national bank bills are properly issued on government bonds it is equally proper to base legal tenders on real property, (3) that there is no natural and strict limitation to the amount of Money in a country at any one time, and (4) that as far as he knows there may well enough be as much money in amount as the estimated value of the real estate. All this is John Lawism pure and simple. All this utterly ignores the nature of Money as a valuable measure of all other Services. It also ignores the truth, that an advancing country needs less rather than more Money in amount as it advances, because cheques and other forms of non-money Credits are constantly increasing both absolutely and relatively. It is because this Senator's monetary notions seemed to correspond with those of a majority of the Senate, that it is perhaps proper to give them here a moment's attention. These supposed legal-tender notes would be secured by a government lien on land and buildings, and by the direct credit of the Government as well; just as the national bank bills are secured by the bonds of the nation held in reserve for that purpose, and also by the direct image and superscription of Cæsar upon every bill. People holding mortgaged real estate could accept a non-interest bearing government lien instead of a 6% or 8% private mortgage, that is, could pay off their mortgages with the legal tenders given them by the Government, the latter taking the lien or new mortgage; and people owning real estate clear could, if they chose, execute a perpetual mortgage to the Government, that is, give up the fee simple to their lands, and receive legal-tender notes to the full amount in return. This would at least relieve the "scarcity" of Money! The volume of national Money at that moment was in round numbers $1,400,000,000; the assessed valuation of the real property of the country was at the same moment at least $15,000,000,000; so that, on this scheme, perhaps $10,000,000,000 of additional legal-tender Money could be issued! Here is paternalism and socialism and John Lawism all combined. Here is a Government of strictly limited and carefully enumerated powers, under a written Constitution as precise as language can make it, containing the solemn declaration that all "powers not delegated to the United States are reserved to the States respectively or to the People," owning or soon to own not only the railroads and the telegraphs but also the major part of the lands of a free country, and going into the mortgage business on the heroic scale! If this honorable Senator and his like-minded colleagues were tolerably familiar with the financial history of their country, and perhaps they were, they would have known that this precise scheme had had a practical trial in Rhode Island, just before the adoption of the national Constitution. The Legislature authorized the issue of $500,000 in scrip-money based upon the value of the real estate of the farmers of the Colony. The law required a mortgage for twice the amount of scrip-money based upon it, and it was therefore supposed the money would be as good as gold or better. But somehow or other the merchants of the towns could not see the matter in that light. The depreciation of the scrip-money began at once, and the prices of wares ran up in a way that should have set business in active motion, according to all the views of the "scarcity" school. It was therefore enacted by the Legislature, that anybody who refused to accept the scrip at its face value should be fined $500 and lose the right of suffrage! They made it a legal tender! But business refused to boom. The merchants shut up their stores, the farmers could not market their crops, and idleness and rioting set in all over the State. Then the farmers organized a boycott against the towns, and food became scarce. Meanwhile the mortgage legal tenders would not pass at the best for over 16 cents to the dollar! There was more of "enforcing" legislation, and appeal to the courts, but nothing could boost the mortgage-money. The chief result of the experiment was, that Rhode Island gained in this way the title of "Rogues' Island." No matter how good the cause, how patriotic the People, an inconvertible paper money is sure to run down at the heel. In June, 1775, one week after Bunker Hill, the Continental Congress voted to emit $2,000,000 in "Bills of Credit" issued on the faith of the "Continent." Eleven separate Colonies, New Hampshire and Georgia issuing none, began about the same time their revolutionary issues of the same sort, amounting in all during 1775-83 to $209,524,776. The vice of such irredeemable scrip is, there is no economical limitation of the Supply. The middle of 1777, when Burgoyne was prosperously advancing from Canada towards New York, saw a general fall of the notes both Continental and Colonial, and of course and in consequence a universal rise of the prices of other products. At the close of that year, the average depreciation from silver was not far from 3 to 1; at the close of 1778, it was not far from 6 to 1; at the end of 1779, it was about 28 to 1; the Continental press then rested, after $200,000,000 nominally had been put out, but actually about $40,000,000 more than that, a usual if not universal accompaniment of such issues. When the stuff dropped out altogether in the spring of 1781, the country found no more lack of silver for Money than Massachusetts had found in 1749, when and after she redeemed her outstanding bills of credit at 11 for 1 in sterling silver, £138,649 of which, the share falling to her from the capture of Louisburg, was shipped to the Colony in coin, and she became for the next 25 years the "Silver Colony." Assuming that only $200,000,000 Continental had been issued, Thomas Jefferson carefully estimated that the Nation realized from them $36,367,720 in specie value, or 18% of the nominal value. 14. Whether the Money of any Nation be coin or paper or both, when once it is in the hands of the People, Government has properly nothing to say _about the rate of interest at which one person loans this money to another_. Usury Laws so-called, prohibiting the lender from taking more than a prescribed rate % for the use of money loaned, under penalties sometimes of the entire interest and sometimes of the entire debt have disfigured the statute-books of all Nations and of all the States of this Union. Such laws cannot justify themselves for a moment in the light of sound principles of Political Economy. Their origin may be explained by a reference to two false views, now happily exploded. (a) The laws of Moses forbade to the Israelites the taking from one another any _interest_ on money loaned, but at the same time it allowed them to take such interest freely of strangers; the permission in the one case going to show that there is nothing in the taking of interest that is unjust or sinful, and the prohibition in the other being readily explainable from the general purpose of the municipal regulations of Moses, which was to found an agricultural and not a trading commonwealth, in which every family was to possess land that could not be permanently alienated or sold, in which it was a great object to maintain the personal independence and equality of these families, in which the law for the recovery of debts was very summary and effective, lessening the risk of losing the principal, and which was to be and was sedulously separated in its usages from the surrounding nations. It has been well understood for a long time that the municipal code of Moses was local and peculiar, not necessarily applicable at all to the circumstances of other States, and in no sense binding on the conscience of legislators; and yet there doubtless sprang from the prohibition referred to a prejudice against interest, and this prejudice was perhaps deepened in the Middle Ages and onwards by the conduct of the Jews themselves, who, in addition to their sin of persistently growing rich in spite of the endless disabilities laid on them by the people of Europe, always demanded, in accordance with the permission of their great lawgiver, a good rate _per centum_ of interest from those strangers to whom they became money-lenders. The Jews were everywhere hated, and consequently the usury which they practised was hated also. The fundamental absurdity of forbidding in trading communities the taking of interest on sums loaned to a borrower which he was at liberty to use for his own profit, deterred the nations from going to the length of prohibition, unless it might be in the case of the hated Jews. There is a clause of Magna Charta, interesting as showing how early the children of Abraham became the money-lenders of Europe, to the effect that, during the minority of any baron, while his lands are in wardship, no debt which he owes to the Jews shall bear any interest. (b) Governments formerly deemed themselves competent to determine and fix the _general_ purchasing-power of their own money. Even the Constitution of the United States uses this language: "to coin money, _regulate the value thereof, and of foreign coins_." There was formerly, and there is still to some extent, a curious and harmful confusion in the public mind in respect to this term, "the value of money." In the only proper sense of the term the _value of money_ means its power of purchasing services in general, and the value of money is _high_ when a given sum of it will purchase much of general services, and _low_ in the contrary case; and a high or low value of money in this true sense depends on a very distinct set of causes from those which determine the high or low rate of interest on money loaned; nevertheless, so long as governments supposed that they could regulate the former, it is very natural that they should also suppose that they could regulate the latter; and although all intelligent governments have given over the idea of being able to regulate the general value of the money they furnish to the people, many of them still adhere to the notion, equally false with the other, that they _are_ able to regulate the loanable value, or the rate of interest, at least to prevent any more than their prescribed maximum rate from being taken. A few simple considerations will sufficiently condemn all usury laws. (1) It is at once needless and invidious to deny by law to money-lenders, who offer just as honorable and useful services to society as any other class of men, the privilege of selling _their_ service for what it will bring in the market, while other men in every department of business are allowed to exchange their services on the best terms they can make without interference or control. Let us see precisely the nature of the transaction when one man loans money to another. It is a clear case of value. The lender does a service to the borrower, and for this service justly demands a compensation. The service is this: The lender might himself use the money to gratify his own desires. It is his money; he may use it, as he pleases, for his own gratification. Or he may himself employ it productively, and, at the end of the period, receive back his principal with the customary rate of profit. If he surrenders this advantage to the borrower, if he passes over to him the right to use this money, say, for a year, he practises what we call in Political Economy _abstinence_. For this abstinence he has a right to claim a reward, precisely as the man has a right to claim a reward who foregoes working for himself in order to work for another. This reward of abstinence is _interest_. The money-lender foregoes an advantage. He performs a service for the borrower; and, therefore, the right to interest stands on just as unassailable ground as the right to wages. Moreover, the loanable value of money varies under Supply and Demand just like other values; there are always those who want to borrow, and always those who want to lend; both parties must be assumed to know their own minds, and to be equally competent to make their own bargains; it is a case of mutual exchange for a mutual benefit, like all other trade; and the current rate of interest is determined at any one time by the actual free exchanges between borrowers and lenders. Now for any government to try to compel a lender by law to take only 6% when his money is worth 8, is a direct violation of the rights of property. It is a forcible and pernicious interference with the freedom of contracts. It is based on the false premise that the loanable value of money is uniform, and that government is competent to determine what it is. No value is uniform. And no government is competent to determine even the maximum price of money loaned, any more than the maximum price of commodities. (2) Usury laws are almost uniformly _disregarded_, both by the governments which make them and by the people for whom they are made. Indeed, such laws cannot be enforced in a commercial community. Common sense is outraged by a law which requires a man to part with his property at less than the actual value; and when common sense is against a law, it stands a slim chance of observance. If the legal rate be six, and the actual worth be eight, who lends at six? Not the banks. They require deposits of their customers, the use of whose money shall make up to them the difference between the legal and the actual rate. The modes of evasion are various, but they are adequate and universal. Besides, governments themselves have shown a noteworthy inconsistency in this matter, which incidentally proves the unsoundness of their whole action. While announcing pains and penalties to those who take more than a given rate, they are careful never to bind themselves down to any given rate. Governments are always more or less borrowers, and if usury laws are necessary in order to help borrowers in a pinch, there ought to be a clause in the organic law of every country, forbidding the government to pay and its lenders to take any more than a certain rate per cent. There is no such clause in any organic law. Governments wisely follow the natural market, and borrow low when they can, and pay high when they must. In the last months of Mr. Buchanan's administration, the United States paid 12% on a public loan, and could get but little at that. Sauce for the goose is sauce for the gander, and if usury laws are good for the citizens, some solid reason ought to be rendered why they are not good for the government. The truth is, they are not good for either, since natural laws are perfectly competent to regulate the rate of interest, and do regulate it substantially in spite of a factitious, impertinent, and mischief-making interference. (3) If Usury laws were _not_ disregarded, they would be even worse in their effects than they are now. We must suppose that their aim is to aid borrowers, and make it easier for them to contract loans. But are borrowers, as a class, any more deserving of the fostering care of government than are lenders? Even if it could make its interference effective, as it cannot, is there any reason why government, leaving these borrowers to make all other bargains, sales, and transfers according to their best skill and judgment, should rush to their rescue only when they propose to borrow money? If they are competent to do their other business for themselves, government pays their capacity a poor compliment in undertaking to help them in the single matter of making loans; and the borrowers in turn have reason to pray to be delivered from their friends, since they, of all others, would be the men especially injured if all the lenders obeyed the usury laws. Suppose that a borrower is in great need of a loan, and that for some reason his credit is now a little weak. Many men would be willing to loan him at 9%, which affords a margin for the extra risk, but at 6, which we will suppose the maximum allowed by the law, he cannot borrow a dollar, because his credit is not quite equal to the best. If, therefore, the lenders obey the law, he, and such as he, must fail. And because it is unlawful to take over 6% he will be obliged to pay those who are willing to violate the law 10 or 12, to compensate them for the risk and odium of such violation, while, under freedom, he could borrow at 8. Moreover, if the loanable value of money at the time be actually 9, while the law only allows 6, many men will attempt to use their own capital productively, who would otherwise loan it, in order to realize the high rate; and this action of theirs still further restricts the loan-market and makes it more difficult to borrow. If, then, the purpose of government be to aid borrowers, no means could be more unskilfully chosen for that end than to pass usury laws, since such laws, so far as they are obeyed, have necessarily the opposite tendency; and even when violated redound to the disadvantage of borrowers, so long as the laws themselves are popularly regarded as of any legal or moral force. In 1716, the Bank of England, as a great loaning institution, was exempted from the operation of all usury laws: why the bank only, and not other people as well, the Act of Parliament does not state. In 1867, the State of Massachusetts repealed all its usury laws, though 6% is to be understood in the absence of special agreement, and the result has been entirely satisfactory to all classes of the people. Rhode Island had done this previously, and Connecticut did it subsequently, and both have experienced equal satisfaction in the result. Other States will soon follow in their lead; and this relic of ignorance and prejudice will pass away. Adam Smith left the Wealth of Nations disfigured by the concession that governments might properly enough pass usury laws; but it is gratifying to be able to add that he was convinced of his error in that by Bentham's book on Usury, and fully acknowledged his conviction in the spirit of a genuine lover of truth. We conclude, then, that usury laws are needless, since interest, like all other prices, will perfectly adjust itself. They are disregarded, since lenders will loan or withhold their money according to their own keen sense of interest. They are pernicious, since they infringe the rights of property, and tend to prevent weak borrowers from having a fair chance in the market. The present writing is at midsummer, 1890; and, in order to complete the entire discussion so far as this country is concerned, it is needful to add, that, between 1878 (when specie payments were resumed) and 1890, the circulating medium of all kinds is proven by official statistics of the highest authority to have increased from $805,793,807 to $1,405,018,000, or more than 57 _per centum_. This circulating medium consists of six formal kinds; namely, gold, silver, greenbanks, bank-bills, gold-certificates, and silver-certificates. Each of these differs in important respects from each of the rest, but all come alike under our fundamental classification of Moneys, as either an intermediate merchandise or promises to render it. This increase is way beyond any increase in the population of the country, and way beyond any apparent or proven increase in the national business; while at the same time the banking facilities of the country, which always spare the use of Money by substituting cheques therefor in the wholesale business and in a large share of the retail business also, have been increasing in equal measure. The number of national banks, especially in the West and South, has been multiplying. The use of cheques has been enlarging in every commercial community in the land. Yet up to the present time all of this vast volume of Money has been kept at par with gold, and consequently at the highest state of efficiency for commercial purposes. What about the immediate future? Science is not prophecy except in a quite subordinate sense. Congress is loudly threatening at this very moment to more than double the enforced monthly coinage of silver dollars at the public expense for the sole benefit of a comparatively few miners of silver. If this threat be executed upon a long-suffering people of tax-payers, who will have no one to blame but themselves if they tolerate the outrage, Science is willing to venture the prediction, that the monetary standard here will drop from gold to silver within a twelvemonth or two; that general prices will rise much beyond the appreciation of money implied in that drop, though they will be illusory and gainless; that prudent debtors will hold high carnival for a time at the expense of their creditors; that the country will become as empty of gold as a contribution-box is of other money between Sundays; that foreign trade (soon to be explained), already in a sickening decline, under restrictions and prohibitions, will hasten to a practical demise; and that the United States, at once the laughing-stock and the victim to the superior intelligence of other nations, will come through alternate fever and chills to a position of common sense and ultimate recovery. CHAPTER VI. FOREIGN TRADE. Wonderful is the continuity in the growth of any great Science, and equally so the persistency of any radical error that once gets fairly imbedded within it. As we saw fully in the last chapter Money is nothing in the world but a convenient, intermediate, equivalent, and easily measurable merchandise; but almost as soon as men began to analyze Sales and to generalize from their data, a notion nestled way down in their work, that Sales against Money were somehow or other different from Sales against other merchandise; and thence sprang up, particularly among the Romans, what we have called the Bullion Theory. The broad and the true view was held indeed from the beginning, and was maintained even among the Romans, as we learn from an interesting passage in the Roman Law,--"_Sabinus and Cassius think Value can dwell in another thing than money too, whence is that which was commonly said, Buying and Selling is carried on in the exchange of goods, and that view of purchase and sale is very old; but the opinion of Procullus has deservedly prevailed, who says, Exchange is a particular kind of transaction different from Selling._" Science has indeed sloughed off this old and vital error, and most of its sequels; but Public Opinion in many countries is full of it still; and Legislation, in our own country at least, is all the time trying or threatening to transmute merchandise (say silver) into money, as if that could raise its value or change its nature. It was but a single step from the Bullion Theory to the Mercantile System. If money be somehow different from and better than merchandise, then each nation should strive to handle its foreign trade so as to get back from other nations more money than it renders to them in exchange: in other words, each nation must try to sell to the rest more goods than it takes goods back in pay, so as to have a "_balance_" come in of gold and silver. How natural the transition from Bullionism to Mercantileism! And it was a step of genuine progress too. Goods are good, and there is profit in their exchange; but gold is somehow better than goods, and we must manage somehow to get a "balance" in that! If this position had only been sound, and one nation only been in possession of the precious secret, how nicely it might have worked for that nation! But all the leading Nations of Europe made the transition from Bullionism to Mercantileism at one and the same time, and they vexed and impoverished each other for three half-centuries, and went to war with each other besides, under the double illusion, (1) that gold could be practically gotten in that way, and (2) that if gotten it were one whit better than the goods for which it would have been at once spent. Economics as a Science is now free from every taint of Mercantileism also, but it lingers on more or less in half-informed minds, and in the less-experienced nations; and the system itself merged itself three half-centuries ago into another, which is not another, namely, into Protectionism. If nation A must sell more goods to nation B than it takes back in goods, so as to get the coveted "balance" in gold from B, would it not help that cause along to put obstacles in the way of restrictions or prohibitions against the introduction of goods from B to A? Less goods, more gold, argues A. A forgets that the same mental processes are going forward in B's mind towards the same conclusion in relation to A. Now, cogitates A, what kind of goods from B had we better restrict or prohibit? A, by the way, consists of some millions of individuals, some of whom are always on the watch to get their axes ground at the government grindstone. What kind of goods shall we prohibit from B? Why, of course, those kinds which we are now making or growing. We can supply these for ourselves. It does not escape the notice of these makers and growers, that the restriction or prohibition of similar goods from B will raise the price at home of their own goods. Scarce is ever costly. On go the restrictions, ostensibly at first in behalf of an imaginary "balance" in gold, which fragile reason soon passes out of mind in the presence of a very real reason for such restrictions, namely, artificial high prices for certain domestic goods, paid indeed by the entire home community to the comparatively few makers or growers of the goods now "protected," as the current phrase is. Mercantileism has passed over into protectionism. The feeble friends of a "balance" have now become the strong friends of a "monopoly." Personal greed to grow rich at the expense of one's own countrymen thus becomes the single or combined force that puts on and keeps on and piles up the so-called "protective" restrictions and prohibitions. Scientifically Protectionism is as dead as Mercantileism and Bullionism. There is not an Economist in Christendom, of any international or even national reputation, who now undertakes fairly and squarely by means of analysis and induction, to propound or defend a scheme so contrary to common sense and common honesty as this is, and which, universally applied, would annihilate the commerce of the world. But many of the nations are still tinctured more or less by the old subtlety, and powerful classes within them and specially within the United States, classes grown rich and powerful by what is nothing else than public plunder, are strenuous and successful advocates, not in open discussion and fair debate but by clandestine and corrupting methods and combinations, to maintain in the light of the nineteenth century an outworn and decrepit "something" worthy only of the dark ages. The old and foolish cry for a "balance of trade" is merged now in the United States into the insane and hateful clamor for the destruction of public trade in the behalf of private gain. This is the sole reason why we must now undertake a careful chapter on Foreign Trade. There is no reason in the nature of things, or in the nature of trade, why Foreign Commerce should be treated of separately from Domestic Commerce. The two are precisely alike in all their principles and in all their results. In one as in the other, in every case and everywhere, there are (1) two persons, each of whom has a Service in his hands to sell against a Service in the hands of the other; (2) two reciprocal estimates, by which each owner concludes that he prefers the Service of the other to his own; (3) two mutual renderings, by which each Service comes into the possession, present or prospective, of the new owner; and (4) two personal satisfactions as the result of all, constituting the ultimate motive and the sole reward of Buying and Selling. There are two possible differences in certain cases between Domestic and Foreign trade, both superficial and but barely worth the mention here. Foreign countries engaged in trade _may_ be more remote from each other than places exchanging products within the same country. The distances, however, between Bangor selling ice to New Orleans for sugar, and Boston selling boots and shoes to San Francisco for fruits and wine, are much greater than those between Liverpool and St. Petersburg, or those between Stockholm and Palermo; so that, it may be said in general, that the trade between all the European countries confronts less distances, and presumably less costs of transportation, than the trade within the United States. And another thing is to be said in this connection: Foreign trade as a general rule is conducted by water-routes, and domestic trade under the same rule is carried on by land-routes; and, therefore, the costs of transportation by the latter are much more expensive. The other possible difference is more considerable, and considerably more in favor of Foreign as compared with Domestic trade. We have learned perfectly already, and the point is fundamental, that all trade proceeds on the sole basis of a relative Diversity of Advantage as between the two parties exchanging. This relative superiority of each exchanger over the other at different points depends in domestic trade partly upon divergent natural gifts to individuals, partly upon their concentration of mind or muscle or both on a single class of efforts each, and partly upon the use and familiarity in the use of the gratuitous helps of Nature aiding that class of efforts. But in foreign trade there are commonly some additional grounds of Diversity, since the various countries of the earth have received from the hands of God a diversity of original gifts, in climate, soil, natural productions, position, and opportunity. And besides these original international differences, there has been developed of course in the history of the inhabitants of these countries a diversity of tastes, aptitudes, habits, strength, intelligence, and skill to avail themselves of the forces of Nature around them. International trade, accordingly, is somewhat more broadly and firmly based than the home trade can be, inasmuch as these international differences are apt to be more inherent and less flexible than domestic differences between individuals; it is on these diversities, original, traditional and acquired, that international commerce hangs; it could never have come into existence without them; and it would cease instantly and completely were they to fade out. Men engage in foreign trade,--not for the pleasure of it,--but for the sake of the mutual gain derivable to both parties; they desist from it so soon as that mutual gain disappears; and there is no gain in any series of exchanges, unless each party has a superior power in producing that which is rendered, compared with his power in producing that which is received. With these few preliminaries, we pass now, in the first place, to unfold in order the COMMON AND UNIVERSAL PRINCIPLES OF FOREIGN TRADE. For the sake of illustrating these, we will now take a simple supposed case, a trade between England and France in cottons and silks, and follow it through clearly to the end. 1. When will it be mutually profitable for England, that is, for certain English merchants, to send cottons to France to buy silks with, and for France, that is, for certain French traders, to send silks to England to buy cottons with? Money and all other commodities except these two, silks and cottons, are wholly out of the question now and should be wholly out of our minds the while, though for simplicity's sake we shall use the _denominations_ of money for comparing the respective efforts, translating pounds and francs into dollars. The answer is easy: the trade will be mutually profitable, when efforts bestowed in France upon silks will procure through exchange with England more of cottons than the same amount of efforts bestowed in France upon cottons will produce of cottons directly; _and_ then, when efforts bestowed upon cottons in England will procure more of silks through exchange with France than the same amount of efforts bestowed in England upon silks will produce of silks directly. It is not a question of the absolute cost of either commodity to the parties producing it, or of a comparison of those absolute costs at all, but a question of the relative cost of that produced in either country compared with what would be the cost of the other commodity were it to be produced in that country. So long as there is a difference of relative efficiency in the production of the two commodities in the two countries, so long, setting aside the costs of carriage, may there be a profitable exchange of the two. A demand in each country for the product of the other is of course presupposed in the illustration. Suppose now, that Efforts in England on certain cottons be gauged at $100, and that Efforts in France on certain silks be gauged at $80, and that these finished commodities then exchange even-handed against each other: is that a losing trade for England and a gainful trade for France? That is more than we can tell yet. That depends upon the further decisive question, whether the Efforts gauged at $100 if expended in England in the manufacture of silks will procure as many and as good silks as the same obtain in exchange with France; and whether the Efforts gauged at $80 if expended in France on cottons directly will secure as many of them as if expended on silks directly and then traded off for cottons. In effect the Frenchmen ask, Can we get more and better cottons by working on silks and then trading them off for English cottons than we can get by equivalent Efforts in working on cottons at home? Likewise the Englishmen ask, Can we get more and better silks by working on cottons at home and then trading with France for silks than we can get by trying to make silks directly? France by climate and soil and habitudes is better adapted to silks than cottons: England by virtue of the same is better adapted to cottons than silks. 2. How does the Diversity of relative Advantage practically work in foreign trade? Let us suppose that while the cottons cost $100 in England, it would cost $120 to manufacture there as good silks as can be made in France for $80; and that while the silks cost but $80 in France, it would cost $96 to make cottons there as good as the English can make for $100. On this supposition France can make both the silks and the cottons at a cheaper absolute cost than England can. What of it? Does that destroy the motive and the gain of an exchange between the countries in these two articles? Let us see. By an exchange with England, France gets for $80 in silks, cottons which would otherwise cost her $96, which is a handsome gain of 20%; while England gets for cottons costing her $100 silks which would otherwise have cost her $120, which is another handsome gain of 20%. Although France can make each commodity for less absolute money than England can make either of them, there is a Diversity of relative Advantage; and, therefore, there might be in this case, as there is actually in many such cases, a very profitable trade. The efficiency of France in making silks relatively to the efficiency of England in making silks is in the ratio of 80 to 120, namely, a difference of 50%; while the aptitudes of France in making cottons relatively to that of England in making the same is only in the ratio of 96 to 100, namely, a difference of 4-1/6%. So long as England offers in cottons a good market for French silks, how utter the folly and large the loss of France in going to work to make cottons! In the majority of cases, doubtless, foreign trade takes place in articles, in the production of one of which each of the respective countries has an absolute advantage over the other; but an every way advantageous trade may be carried on in commodities, in the production of _both_ of which one nation shall have an absolute superiority over the other, provided only that this superiority be _relatively diverse_ in the two commodities, as has just been shown. This is an effectual answer to the ignorant clamor of some, we take it, who make objection to importing articles which might be made at home for the same sum of money as foreigners expend in making them; admitted, that they might be so made, does it follow that the country importing them would get them as cheaply by making them itself? _By no means does that follow._ Let no nation, then, be in haste to drop a trade, because it thinks it can make the goods received in exchange as cheaply as the other nation makes them, so long as it has an advantage absolute or relative over the other in making the goods rendered in exchange; and when that advantage ceases, it may be sure, that the trade will drop of itself; because it always takes _motives_ to make the mare go. 3. What are the extreme limits of the Value of cottons and silks in the case supposed, and when will a third nation be able to undersell either in the ports of the other? This is the answer: the extreme value of French silks in English cottons will be 80 and 96; they cannot fall below 80 because they cost the French that to manufacture them; they cannot rise above 96, because at that rate the French can make cottons, and there would be no motive, that is, no _gain_, in their exchanging for cottons. Nations, that is to say, individuals, will never get themselves served at a greater effort than that at which they can serve themselves. If a given effort does not realize more through exchange than it would do directly, then that exchange ceases of necessity, as fire goes out for lack of fuel. The extreme limits of the value of English cottons in French silks will be 100 (lowest) and 120 (highest) for reasons precisely similar in the case of the English. Therefore, the highest profits possible to both nations under the conditions of the trade are 20% each. France would be glad to take the cottons at a return of 80 in silks, at which rate her gain would be 20%, and she cannot under any circumstances offer quite 96, at which rate her gain would disappear. No third nation, accordingly, in a trade of silks for cottons can expel the French from the English ports, until it is prepared to offer nearly 96 (or more) in silks in return for English cottons; that is to say, until its efficiency in making silks relatively to that of England in making them presents a greater difference than the difference of efficiency between France and England in making silks, which is a difference of 50%. England would be glad to take the silks from France at a return of 100 in cottons, at which rate her gain also is 20%, and she cannot possibly offer quite 120 in cottons, because at that rate her gain would wholly vanish. England could be undersold in the French ports, when somebody is ready to offer nearly 120 (or more) in cottons against the French silks, whose _quantum_ in the exchange may vary from 80 towards 96. Here is the whole doctrine of one nation underselling another in the ports of a third nation. Silks stand here for sample of all French commodities of whatever name and cottons for all English goods whatsoever; and England and France stand in the illustration for any and all nationalities. Any nation obtains any share or a greater share in the commerce of the world solely in virtue of a greater relative efficiency in producing _something_ valuable, as compared with some other nation's power in producing something _else_ that is valuable. 4. How does the varying play of International Demand affect the value of articles in foreign trade? The answer is clear and easy: if the demand for French silks in England just answers to the demand for English cottons in France, so that the silks offered by France just pay for the cottons offered by England, then, cost of carriage aside, the gains of the trade will be equally divided between the two sets of merchants, and each will realize 20% profits, because neither will have any motive to lower the value of its commodity below its highest value. The Frenchmen from their point of view will offer 80 in silks and take 96 in cottons: the Englishmen from their standpoint will offer 100 in cottons and get 120 in silks. Demand and Supply are equalized at a point of value most favorable to both parties, and one really determined by the relative cost of production. This case of equalization, though possible, is likely rarely to occur in practice. On any terms of exchange first offered, there is likely to be a stronger demand in one country for the product of the other than in this country for the product of that. This will of course lead to a change of Value, and a new division of Profits. The product for which the demand is less will find its market sluggish, and in order to tempt further and brisker exchanges will be compelled to offer more favorable conditions. He who enters a market in quest of what is _more_ in demand with a service which is _less_ in demand, will have to lower his terms, or not trade. The equalization of Supply and Demand will only be reached in this case, by quickening the demand for the commodity now less in demand through an offer of better terms in trade. Thus, if the demand for French silks in the English ports be slack, in comparison with the demand for English cottons in France, at the rate of exchange first established, say, 80 for 96, the French merchant has no resource, if he wishes to continue the trade, but to agree to give more silks, for the same amount of cottons, say, 85 for 96. If this actual reduction prove sufficient to cancel the account in cottons with the account in silks, then the trade will proceed on this new basis for a while, because the equalization of demand and supply has been reached through a new valuation of the two commodities, and there is now consequently a new division of the profits. France gains less than 13% by her trade with England, while England gains 27% in her trade with France. Under these new terms of exchange, it is quite possible that silks may again become heavy in reference to cottons, and a new decline take place in their relative value. If the French are obliged in consequence to offer 90 for 96, in order to obtain the cottons they want, their own profits will sink to 6%, while the same causes will lift the English profits to 35%. If, in any contingency, the French were driven by the state of the market to concede something near to 96 in silks for 96 in cottons, the trade would cease in that case, just as every transaction ceases when the motive for it ceases. We must remember of course, that the cottons of England are just as likely to become slack in reference to silks, as the silks are relative to the cottons; and when this happens, the English dealers will have to lower their terms, and thus surrender a larger share of the profits to the French. By this ceaseless play of Supply and Demand, within the outermost limits drawn by the relative Cost of Production at the time, is the Value of commodities determined in Foreign Trade; and no degree of complication in the variety of articles, or in circuitous exchanges, affects, for substance, these fundamental principles. 5. What are the causes deciding the exportable articles of any nation, and their order of precedence in Export? Watch a little at this point, and the true answer will loom up steady and certain. If, instead of one article, say cottons, England sends two or ten kinds of goods to France in payment for silks or wines or whatnot, she will of course send in preference that commodity in which her own commercial efforts are relatively most efficient, so long as the French demand will receive it, because her own profits will be the greatest on that; then, when obliged to lower terms on that down to the point of relative advantage at which her next available article stands, she will send that next in quantities regulated by the demand for that; and so on down to the end of the list of possible exportables to France. France is guided as to her exportables to England by precisely the same principles and prospects of profit. So of all commercial nations whatsoever. No matter whether the articles be one or many; no matter whether the trade be a direct or indirect trade; the profits in international commerce depend in all cases, first, upon the ratio of the cost of what is rendered to what would otherwise be the cost of what is received, secondly, upon the relative intensity of the two Demands. It follows logically and necessarily from all this, that what a nation purchases by its exports, it purchases by its own most efficient Production, and consequently at the cheapest possible rate to itself, and at the highest possible profit to its merchants. Under a decent freedom of international choice and action, of sale and delivery, only _those things_ are ever exported, for the procuring of which a nation possesses decided advantages relatively to other nations, and relatively to its own advantages in producing directly what is received in return; and hence, the return cargoes, no matter what they have cost their original producers, are purchased by this nation as cheaply as if they had been produced by its own most advantageously expended Effort. This is a wholly impregnable position; and the advocates of restricting and prohibiting Foreign Trade are challenged to try their hand a little or a good deal (as best suits them) at its bristling defences. It follows also from the discussion under this head, what shallow thinkers are they, who deem it needful that each nation should be able "_to compete_" with other nations in every branch of production. Why are they not consistent enough to apply their favorite catchword, "_compete_," to domestic exchanges also, and require that the clergyman shall have artificial and governmental facilities for "_competing_" with the lawyer, the tailor with the blacksmith, the farmer with the manufacturer, the publisher with the author? Will folks never learn that _all_ Exchanges, domestic as well as foreign, hang on relative superiority at different points, and that any Nation trying to make its success in production equal at all points would be just as stupid as an artisan trying to learn and practice all the trades at once? Suppose the said nation to succeed, what then? It would supply its wants at a certain low average efficiency of effort; whereas, by a thorough development of all its own peculiar resources, it could command by exchange the products of the whole world at a cost not exceeding that of its own most productive and efficient Exertion. The precious metals, whether produced at home or obtained from other nations by another series of exchanges, whether coined or in the form of bullion, stand here in the same relations as other commodities, and are frequently the most profitable articles that a nation can export. In one word, whatever justifies individuals in selecting diverse paths of production according to their capacities and opportunity, the same (and even more) justifies the Nations in fully drawing out their own best capabilities under the conditions in which God has placed them; and then, exchanging what costs them little for what would otherwise cost them much, in enjoying all that the world offers at the least possible expenditure of irksome effort. Such wise and wide action promotes the common good of all the nations, and makes the best of all accessible to all, and arms each with the power of all; while the narrow and senseless policy of drawing into one's own shell after putting up barricades against one's neighbors, by lessening everywhere the Diversities of relative Advantage, so far forth incapacitates all for profitable and progressive Exchanges. 6. How do new improvements in machinery and other enhanced facilities of Production in one country affect its foreign trade? A cheering response will be drawn out, if we now apply this question to the conditions of our old trade in silks and cottons. Suppose France by new methods of silk culture to become able to make the silk which before cost $80 for $50, cottons in France and silk and cottons in England remaining in natural cost as before, does France alone gain the entire advantage of the increased cheapness of silk? Wait a minute, and we will see. The production of silk in France is greatly quickened by the cheaper methods, more is produced, more is carried to England to buy cottons with, but at the old rate of 80 for 96, the English will not take any more silks, and the French who can now abundantly afford it, since their nominal 80 is really 50, will offer more silks for 96 in cottons, in order to tempt a brisker and broader sale. They offer, say, 96 in silks for 96 in cottons, and if that reduction of Value of silks in cottons be enough for the equalization of the respective Demands, the trade will proceed on that basis, at least for a time; and as there is now a larger difference of relative advantage than before, there will be, as always in such cases, larger profits to be divided between the two parties. The 96 now in silks to the English is really only 60 in cost to the French, so that the French gain in the trade is largely increased; because they now get for what costs them 60 what would otherwise cost them 96, a clear gain of 60%. Before the new methods of silk culture were introduced they could gain but 20% at the utmost. But the English have also reaped largely from the ingenuity and diligence of their neighbors. Before, they gained only 20% in the exchange at best; but now they get for what cost them $100 that which would otherwise cost them $144, a handsome profit of 44%. Indeed, it might easily happen, through the incessant changes in International Demand, that even a larger share of the benefit of the French improvements should accrue to the English than to the French themselves; the share of the French all the while being large, and much larger, than if, greedily endeavoring to keep all the benefit, they should refuse to trade at all. Thus we reach again from another outlook, a grand and universal doctrine of Exchange, _that each party is benefited by the progress and prosperity of the other_. Indeed, the only possible way in which all nations can share in the thrift and enterprise and improvements of each other, is through mutual international exchanges; and when each nation sees to it that it have a few commodities at least for which there is a strong demand among foreigners, and in the production of which themselves have a strong superiority, it may rest assured that it buys all it buys from abroad, gold included, at the cheapest rate to itself, and shares a part of the prosperity of every nation with which it trades. 7. Which party in foreign trade pays the Costs of Carriage, or do each pay them in equal proportion? It is plain, that the aggregate cost of transportation to the foreign markets is just so much added to the Cost of Production, and is a deduction of so much from what would otherwise be the whole gain of the Commerce; but it is plainly not true, that each party necessarily pays the whole of his own freights; and, therefore, that the party carrying bulky articles is at a disadvantage compared with the other. He may or may not be at a disadvantage on that account. That will depend on the effect of the new expense for freight, however divided, on the Demand in each country for the product of the other. We will suppose, that in the outset England pays the whole cost of carrying cottons to France, and France the whole cost of sending silks to England; but as cottons are many times more bulky than silks proportionably to value, a larger bill of freights would fall of course to England; and cottons would therefore fall in value relatively to silks; but cottons and silks have both risen absolutely, that is, with reference to any given effort, or with reference to a money standard. Suppose now that France, instead of 80 for 96, has to render 82 for 96; and England, instead of 100 for 120, now has to give 105 for 120. The French gain in the trade is reduced from 20 to nearly 17%, and the English gain from 20 to nearly 14%; but it is by no means certain, that the commerce would go on precisely on these terms; the enhanced value of silks might well deaden the demand for them in England, more than the relatively less enhanced value of cottons in France would affect the demand for them. Silks have risen in England 5%, but cottons have risen in France only 2-1/2%; it is therefore very likely that thereafter the demand for cottons will be stronger than the demand for silks, and if so, the French will have to offer better terms, or, what is the same thing, to be obliged to pay a part of the English freights; so that there is nothing in the true state of the case to justify the conclusion jumped at by some people, that they who carry heavy goods are at a disadvantage compared with those who carry light goods. That will depend wholly upon the Equation of International Demand as between the two kinds of goods. Nothing in the nature of things hinders, that each party shall in effect pay the freights of the other, or one even really pay the freights of both. 8. Lastly, what is the effect upon international commerce of the constant play of the Par of Foreign Exchange. This is a point of great importance, that has been but little discussed in this connection, because it has not been popularly understood or scarcely even popularly explained. In the light of the full unfolding of "Credits" in our Fourth Chapter, and in the light of these simple principles now under discussion, there will be no great difficulty to any intelligent reader in fully understanding this matter of Foreign Exchange,--a matter never before so vital to the commercial interests of the United States as now. For the sake of general illustration we will take the "Exchange" as between the United States and Great Britain, since the same fundamental principles apply as between all commercial countries. When merchants export goods, say from New York to London, or _vice versa_, they do not wait for their pay till the goods be actually marketed abroad, but draw at once Bills of Exchange to the amount of the home value of the goods on the parties to whom the goods are sent, and then put these bills on present sale with brokers or middlemen at home. There thus becomes a market or prices current in New York for commercial bills drawn on London, and similarly a market in London for bills drawn on New York. The New York exporter, accordingly, is not certain of getting in money the full face of his bill _minus_ interest for the time it has to run, because a great many such exporters may have thrown their similar bills upon the market the same day, which always tends so far forth to depress the price of the bills in accordance with an universal law of Economics. Scarce is ever costly: plenty is ever cheap. Who buys these bills when exposed for sale in New York? Who wants them? Clearly, only those who have commercial debts to pay in London. A bill of exchange drawn in New York on London is nothing but a debt due from somebody in London to anybody whom the drawer in New York chooses to make the payee. The debtor lives in London, and it is every way cheap and convenient for all parties, that he settle his debt with a creditor living in London. So it happens, that parties in London who have sold goods in New York and drawn bills on them for present payment, expose those bills for sale in London to the parties who have debts to pay in New York. If now, London or those whom London represents in these transactions, have sold but few goods to New York or to those whose business is settled in New York relatively to the amounts sold by New York to London, then London bills will be relatively scarce as compared with the New York bills drawn on London. In other words, New York has more debts to pay in London than London has in New York, and, consequently, the parties in London who want bills to pay New York debts with, have to buy them in a relatively scarce market. They have to _bid_ for them, as it were. The effect of this is always to carry up the price of that, for which the buyers are many and the sellers relatively few. So, under perfectly natural causes, London bills on New York come to a premium; that is to say, the London sellers get more than the face of their bills drawn, and the trade with New York becomes _extra_ profitable to them. Suppose London bills of Exchange on New York are selling for 101, thus giving 1% extra profit to English exporters; for precisely the same reasons that they are so selling, New York bills on London are selling in New York for 99, thus subtracting 1% from what would otherwise be the gains of the New York exporters to England under the common principles of Foreign Trade. It is evident, therefore, that the causes of the course of the international Par of Exchange are an essential part of the principles of foreign Commerce; and whatever tends to derange or upset the natural course of the Par, as a constant or constantly recurring cause, must receive careful attention in a book like the present. We have begun at the very beginning of this matter, and we are now going to follow it up to the very end. The Diversity of relative advantage in the Production of the two commodities exchanged, is the first and chief ground of mutual Profit in foreign trade; the varying Intensity of relative Desire on the part of each exchanger for the product of the other, is the second and secondary ground on which foreign trade must go on; and the third and final difference as between the two parties, which goes to make or mar the profit of each of them in the trade, is the current Price of the Bill of Exchange drawn by each creditor on his debtor abroad. It is plain that these three things must always be taken into account simultaneously by prudent exporters and importers, in order to estimate the prospect of a profitable trade then and there; and it is plain also, that one or even two of these three differences of relative advantage might fade out for a time, and a profitable trade still proceed, provided the other two or one of these differences were sufficiently pronounced. For example, to take an extreme case, silks from France might still go to England for cottons to the advantage of both countries for a time, though "exchange" were exactly at "par" between them and the "demand" for silks were precisely met by the "demand" for cottons, on the strength of a marked and persistent diversity in relative cost of production of the two textiles. Here is another of the trinities of Political Economy. Here is complication indeed, but a complication regulated and beautified by inflexible laws of Nature and the scarcely less inflexible laws of human Motives. So far the argument has proceeded on the supposition of a common standard of Value, say gold, between England and France, London and New York, and by implication all other commercial countries. Commerce rejoices in, and progresses by, a common measure of Values. By an experience of 2000 years the world has proven gold to be the best international Measure. From a simple comparison of the weights of pure metal in the standard coins of the nations is established a fixed monetary "par" as between them. Thus the dollar of the United States contains 23.22 grains of pure gold, and the English pound sterling contains 113.001 grains of the same; consequently, there are $4.8665 to the £ sterling, and this is and has been since 1834 the monetary "par" between the United States and Great Britain. Similarly, the par between France and the United States is $1 to 5 fr. 18 centimes, since the franc is 19.29 cents gold for gold. The monetary par, accordingly, as between any two nations using the gold standard, is a matter easily ascertained and kept in mind; while the constantly variable prices current of Bills of Exchange are reckoned in and from this monetary par. Thus, if a commercial bill drawn in New York on London sells for $4.8665 _minus_ current interest for the time it has to run, English "exchange" with us is said to be at "par"; if it sell for more than that, exchange is technically said to be "_against_" us, although the excess in price is just so much additional profit to the American exporter; and if it sell for less than that, exchange is said to be in our "_favor_," although the difference is just so much subtracted from the gains of the American exporter. The close of the second week in July, 1890, found in New York "Sterling exchange dull but firm, with actual business at $4.84-3/4 for 60-day bills and $4.89 for demand bills: the posted rates were $4.85-1/2 and $4.89-1/2 respectively." Exchange, accordingly, had turned "against" the United States, that is to say, American exporters could get a little more for their bills on London than the monetary par. Under such circumstances it may be cheaper to send the gold to liquidate a British debt than to buy bills and send _them_. Just this happened last week: $2,000,000 in gold went (mainly under this impulse) from New York to London. There is a limit, therefore, to any further rise in the price of "exchange," when it reaches in an upward direction the then present cost of sending gold to foreign creditors. The limit in the downward direction to the price of exchange is the last margin of profit to the exporter as such. Thus, when the New York exporter can only get, say, $4.83 for his sight bill of exchange on London, his loss in the trade so far forth is 1%; and it may be doubtful, whether his possible gains at the other two points, namely, relative cost of production and relative intensity of demand, will overbalance this certain loss and leave a sufficient margin of profit. This chance of profit or loss from casual turns in the commercial "exchanges" is a very small matter in foreign trade in comparison with the other two grounds of possible profit or loss. The main thing for every commercial nation to see to is, that it have at least a few (the more the better) commodities in general use throughout the world, _in the cost of the production of which it has a relative advantage over all competitors, and the demand for which by foreigners is relatively intense and constant_. And it will never come amiss for any nation with these two crucial advantages to keep a sharp watch over a class of its own citizens, lest they, shrewdly and greedily, for special reasons of their own, get laws passed the result of which can only be _to increase the costs of production of these few exportables, and at the same time lessen the foreign demand for them_. ETERNAL VIGILANCE IS THE PRICE OF LIBERTY OF COMMERCE. As a general rule for the last half century commercial "exchanges" have been "against" Great Britain, that is, her exporters have been able to get more than "par" for goods sent abroad in the price of the bills drawn on them, and her commerce has been _profitable_ to her so far as this cause is concerned; which during the same interval of time the "exchanges" have been "in favor" of the United States, that is, her exporters have been obliged to sell their bills drawn for less than "par," and her commerce so far forth has been _unprofitable_ to her. We may only briefly indicate here the causes of this state of things. (a) Great Britain has been during this period a vast loaner of Capital to other countries, and particularly to the United States; while the United States has been a vast borrower of Capital, particularly from Great Britain. The interest on these loans from Britain, and the principal also so far as it has been repaid, has been constantly remitted thither in goods for the most part, and bills of exchange drawn on these goods have been sold at all ports, and particularly at New York; the abundance of these bills has tended of course to lower their price at the place of sale, and so far forth to heighten in effect the relatively less abundant British bills drawn on exports thence; and the _creditor_ country for this reason is apt to sell its bills above "par," and the _debtor_ country its bills below par. It makes no difference at this point how the borrowed funds have been invested by the borrowing country, since the interest and the principal must be repaid at some time chiefly in the manner just indicated. (b) With the exception of a dozen or two articles customs-taxed for simple revenue, Great Britain in this period has kept her ports absolutely open to imports from all the world, and of course to all imports from the United States, which has tended to swell the volume of imports into that country, and the volume of foreign bills drawn on them, particularly of United States bills; while the United States during the same time has excluded imports by customs-taxes designed for that very purpose, to the number of over 4000, and in many cases to a height of tax involving prohibition of import. The Constitution of the United States expressly forbids customs-taxes upon exports, so that goods may indeed go out freely, so far as tariff-barriers are concerned; but as the only impulse that ever carries goods _out_ is to get _back_ more desirable goods in pay, and as these return-goods are greatly restricted or virtually prohibited by the United States, the Constitutionally-free exports are not large enough to help much in keeping down below "par" the price of bills of exchange drawn here. It should also be said that Great Britain is restrained in her exports to the United States by the latter's legal unwillingness to receive them, which tends of course to keep the price of bills drawn on the exports she can and does send still more above "par." (c) The enormous customs-taxes in the United States on ship-building materials and on almost everything else have practically destroyed the ocean merchant-marine of the country. The bulk of the Freights, therefore, on what foreign commerce there is left to us under the Chinese-wall policy of our Government,--the bulk of the freights both ways,--has to be paid to foreigners, mostly to the British, and these payments too are made in exportable goods, which wretched fact (looked at in its causes) increases exports hence relatively to imports hither, and of course diminishes _pro tanto_ the current price of mercantile bills drawn here. So far as these _extra_ exports to meet freight charges are carried to England, they tend to lift there in the usual way the price of bills drawn on British exports. It is a million pities, no matter from what point of view one looks at it, that the present governing classes of this country totally misapprehend the Nature of foreign trade, and by short-sighted legislation minimize its Benefits to the people. So far we have been unfolding the causes and courses of foreign exchange on the hypothesis, that both the nations exchanging employ the same standard in measuring Values. While the present paragraphs were in process of composition, the President of the United States signed (July 14, 1890) the so-called "Compromise Silver Bill," which is to go into operation after thirty days, and the effect of which in the judgment of some of the best economists and financiers of the country _may be_ to bring down the national measure of Values from the gold dollar to the silver dollar. We are bound at this point, therefore, to explain the action and reaction on the course of the "exchanges," of a monetary standard lower in general value than the standard prevailing in the commercial world. We have all the data needful for clearing up this matter completely, at once in the inflexible laws of Money and in the actual experience of several of the Nations. For example, England has the gold standard, and India the silver standard; there is an immense commerce between the two countries; silver is merchandise and not money in London, and gold is merchandise and not money in India; every cargo, accordingly, to and from either has to have its value "changed" through the price of current bills into the current money of the other country; the price of silver in gold in London (average) between 1852 and 1867 was 61-1/3 pence per ounce; at 60 pence per ounce the ratio of gold to silver is 1:15.716; between 1875 and 1882 silver drooped (with many fluctuations) in the London market, bearing about the average of 52-1/3 pence per ounce, which is a ratio with gold of 1:18; during the first half of 1890 the price of silver in London was as nearly as possible 43 pence per ounce, which is a ratio with gold of 1:21.93; so that, the prices of India bills in London and of London bills in Bombay have yielded up to the careful observer all the secrets of the "exchanges" between high-standard and low-standard countries. But we have no need to go out of our own country for illustrations of all this. Between May, 1862, and January, 1879, the "Greenback Dollar" was the measure of current Values. It was depreciated every day of that interval as compared with the gold dollar, and it fluctuated in the comparison more or less nearly every business day. The New York importer bought his foreign goods for gold, paid the customs-taxes on them in gold, and then sold them against greenbacks. How much must he charge for his goods in order to make himself whole? The current premium in gold over greenbacks was posted every day, and perhaps every hour, but was that a safe guide to greenback prices for our importer? Wholesales are rarely for immediate realization in money, and even if they were, the money would have to be rechanged into gold in the future for repurchases abroad. In the uncertainty of greenback values, the importer must _insure himself_ in his prices to-day against a possible further depreciation next week, or next month. In other words, _he must speculate in the prospective gold premium_. Suppose his industrial cycle to be one month. If he sell his foreign goods in greenbacks to-day as these stand in comparison with gold, and greenbacks fall still lower before the month is out, he will lose money in those transactions; if greenbacks should rise in the interval, he would gain money, because he could get more gold for them in the next turn. To the credit of human nature be it said, that in 9 cases out of 10 a merchant will raise the present prices of his goods in order to make himself as sure as possible in a case where all is uncertain. There can be no reasonable doubt that in the fifteen years of depreciated greenback units, retail prices to ultimate consumers were lifted 10% above the average reckoning of goods in greenbacks from this cause alone. In regard to exports at that time the facts and principles are still clearer. These exports were sold in Europe for gold. But the bills of exchange drawn on them were sold in New York for greenbacks. Take wheat, for example, of which there was a large export in all those years. The New York broker or banker in buying these bills was obliged to make the conversion from greenbacks to gold. He had to estimate as well as he could what the value of greenbacks would be when the gold-bill became payable in London. In other words, he had to speculate in greenbacks, because he had to take the risk of their declining or advancing value for an interval of time, say, one month. He would not take this risk without virtually making a charge sufficient in his judgment to cover it, and leave him a good profit in any case. This charge came out of the price of the wheat ultimately paid to the growers thereof. The bill of exchange was sold in New York or Chicago in order to get present pay for the farmers who furnished the wheat, and present profit for the commission-merchants or middlemen. But the bill brought less greenbacks than the quoted premium on gold would warrant for that day, on account of the risk, the uncertainty, the speculation. Therefore, less went to the farmers for their wheat per bushel or centner. _The masses of the people lose the immense losses of that depreciated money._ And during these very years also the Government put customs-taxes to a then unheard-of height on imports from abroad, not primarily for the sake of the revenue to come from the taxes, but chiefly with a view to keep certain foreign goods out of the country altogether, in order that _some_ citizens might be able to sell their own product _to the rest_ at artificially enhanced prices. Thus the natural market abroad for wheat and pork and petroleum and other provisions was enormously lessened by the prohibition of imports,--a market for products is products in market,--at the same moment when the actual prices for products exported were still further diminished by the action of depreciated money on the par of commercial exchange. Our neighboring Republic of Mexico has had for a long time the so-called bi-metallic standard of Money, the same as the United States have had.[9] When the great fall of silver in gold took place in the London market as indicated above, gold was rapidly exported from Mexico, and soon disappeared from circulation, in accordance with Gresham's Law. For many years now the simple silver standard has prevailed in Mexico. Its entire working in foreign trade through the "exchanges" has been sufficiently demonstrated; and as there is more than a possibility, more even than a bare probability, that the United States under the law of 1890, and other and earlier extremely complicated laws of Money, may drop from bi-metallism to silver monometallism in the near future, in the way of premonition and warning to our own people we may fitly close our discussion of foreign "Exchanges" by briefly stating what of hazard and disaster under the silver standard is now going forward among our neighbors to the southward. The effect of estimating Mexican transactions in silver money, while all the nations with which they trade estimate theirs in gold, is seen in an artificial enhancement of prices to the Mexicans on all their imports, and an artificial depression of prices to them on their exports. Look first at imports. There is of course a current discount on Mexican silver as compared with the gold in which the imported goods are bought. This discount is now over 20% throughout the commercial world, the London price of silver in gold giving the key to that song. But this is not all by any means; the discount is variable from day to day and from month to month; in changing his gold prices present into silver prices future, the Mexican importers must insure themselves. This necessitates a speculation in the future of silver. What the risk may be will depend somewhat on the activity of the silver market: if silver be rapidly fluctuating in price, the importer will add more to his silver prices additional to the current premium on gold, than if silver be comparatively stable; but in all cases he will add enough to cover all prospective risks. It is quite likely that five _per centum_ is added on the average to wholesale prices by Mexican importers on this ground alone, which addition with all the usual increments must be borne by retail and ultimate prices. Now look at Mexican exports. The larger part in value of these exports is silver in some form, mostly in the form of silver dollars. But these silver dollars are merchandise in London, and quite variable in price there, as has already been shown; and bills of exchange drawn on this silver in any form, and sold in Mexico to parties remitting gold values to London, are subject to constant depression on account of the uncertainty as to the value of silver in gold when the bills reach London. It follows from this, that the use of the silver standard in Mexico actually depresses the value of silver there. By means of the "exchanges" both ways, silver tends to be still further depreciated in comparison with gold, retail prices of all importables enhanced in silver, and the chief exportable (silver) depressed in value all the while! Truly, the Mexicans are between the upper and nether millstones. Poor Money never pays. In confirmation of this fact that Mexico has not lifted the relative value of silver by making it the sole Measure of Value, we have the corresponding fact that the herculean efforts of the United States since 1878 to advance the value of silver to a parity with that of gold in the legal ratio of 1:15.98, have issued in the constant relative decline of silver here; and, what is more surprising, in an almost constant increase of the yearly production of silver here. The following table tells the whole instructive story: the figures are official: commercial "fine ounces" are .915 of technically "fine" silver. +------+--------------+-------++------+--------------+-------+ | Year.| Production |Average|| Year.| Production |Average| | |(fine ounces).|Price. || |(fine ounces).|Price. | +------+--------------+-------++------+--------------+-------+ | 1878 | 34,960,000 | $1.15 || 1884 | 37,800,000 | $1.11 | | 1879 | 31,550,000 | 1.12 || 1885 | 39,910,000 | 1.06 | | 1880 | 30,320,000 | 1.14 || 1886 | 39,440,000 | .99 | | 1881 | 33,260,000 | 1.13 || 1887 | 41,260,000 | .97 | | 1882 | 36,200,000 | 1.13 || 1888 | 45,780,000 | .93 | | 1883 | 35,730,000 | 1.11 || | | | +------+--------------+-------++------+--------------+-------+ These Seven, then, are the essential Principles of Foreign Trade, brought out, it is hoped, as clearly and consecutively as the relative and complicated nature of the transactions will allow; in the light of these Principles it is very clear, that Foreign Trade is just as legitimate as, and may be more profitable than, Domestic Trade; that it rests on the same ultimate and unchangeable grounds in the constitution of Man, and in the Providential arrangements of Nature; that the Profit of it is mutual to both parties, or it would never come into being, or, coming into being, would cease of itself; that to prohibit it, or restrict it, otherwise than in the interest of Morals, Health, or Revenue, must find its justification, if any at all, wholly outside the pale of Political Economy; and that for any Government to say to its citizens (of whom Government itself is only a Committee), who may wish to render commercial services to foreigners in order to receive back similar services in return, that such services shall neither be rendered nor received, is not only to destroy a Gain to both parties, but also to interfere losingly with a natural and inalienable Right belonging to both. If the reader pleases, we will turn now, in the second place, to the METHODS AND MOTIVES IN VOGUE TO RESTRICT AND PROHIBIT FOREIGN TRADE. The instrument for this purpose is called a _Tariff_. The origin of the word Tariff, its nature and kinds, will throw much light upon what has been a vexed question, but is one easily solvable, and indeed long ago resolved. 1. Origin.--When the Moors from Africa conquered Spain in the year of our Lord 711, they fortified the southernmost point of the peninsula where it juts down into the Straits of Gibraltar, and by means of their castle and town, called in their Barbary language _Tarifa_, compelled all vessels passing through the Straits to stop and to pay to these Moorish lords of the castle a certain part (determined by themselves) of the value of the cargoes. This payment appears to have been blackmail pure and simple; it was certainly extorted by force; and whether there were any pretence of a return-service in the form of promised exemption from further pillage or not, that made no real difference in the nature of the transaction. Eleven centuries later, the United States demonstrated what they thought about similar extortions on American commerce practised in the same waters by the descendants of these same Moors, by despatching Commodore Decatur with a strong fleet to Algiers and Tunis and Tripoli; to which piratical states they had already paid in twenty-five years two millions of dollars in "tribute" or "presents" for exemptions of their Mediterranean commerce from plunder; who captured the pirate ships and compelled the terrified Dey of Algiers (and the rest) to renounce all claim thereafter to American "tribute" or "presents" of any kind. The word _Tarifa_, accordingly, in English and other modern languages, a word which seems to be very dear to some men's hearts, does not appear to have had a very respectable origin, though that is not sufficient of itself to condemn the thing described by the word. That will depend upon its nature and purposes. 2. Its nature.--There never was one particle of doubt on the part of those compelled to pay the Moorish demands at Tarifa, or on the part of the United States compelled to pay "tribute" to the Algerines for a quarter of a century, about the _nature_ of the transaction. The sign at Tarifa was _minus_, and not _plus_. To the credit of those pirates let it be said, that they never pretended to take what they took for the _benefit_ of those from whom they took it. They took it for their own benefit. The action was abominable, but it was aboveboard. There was no deceit and no pretence about it. Both parties knew perfectly what was going on. What was delivered was just so much _out_ from what would otherwise have been the _gains_ of the voyage. And the truth is, the thing, tariff, is always true to the origin of the word, tariff, so far as this, that a tariff always _takes_, and never _gives_. The only phrase a tariff speaks, or can speak, is, _Thou shalt pay_! There is lying open on the table of the writer at this moment a stout volume of 417 pages, printed, with nearly as many more interleaved, entitled Tariff Compilation, published by the United States Senate in 1884, containing every item of all the tariffs passed by Congress from 1789 to the present time. One may read this volume from beginning to the end, or he may read it from the end backwards to the beginning, or he may begin in the middle and read both ways, and all he will find between the covers is a series of _Demands_ made upon somebody to _pay_ something. These demands, of course, are made upon, and realized from, the citizens of the United States, who are the only people under the authority and jurisdiction of the Congress. A tariff, then, may be correctly defined as _a body of takings or taxings levied upon the people of any country by their own government on their exchanges with foreigners_. How anybody can intelligently suppose that a body of _taxes_, which their own countrymen will have _to pay_, can be so cunningly adjusted as to become to them a positively productive agent, a blessing and enrichment to the payers, a spur to the progress of their Society, _they_ may be properly called upon to explain who pretend to believe such an absurdity in the nature of things. 3. Its kinds.--There are two kinds of Tariffs under our general definition, very diverse from each other in their respective purposes, principles, incidence, and results. (1) There is a tariff for Revenue. The sole purpose of a revenue tariff as such is to get money by this mode of indirect taxation out of the pockets of the People for the coffers of the Government, in order to be then expended, governmentally, for the general benefit of those who have paid the money in for that single end. The underlying thought of this kind of tariff, a tariff for revenue only, is, that the Government itself shall get all the money which the people are obliged to pay under these taxes, except the bare cost of collecting them; that only _such_ taxes shall be levied at all as will come bodily and readily into the general Treasury for public uses; and no intelligent and justice-loving people will long tolerate tariff-taxes laid with any other intent than the economical support of their government, or laid in any other way than shall bring into the Treasury all that is taken out of the People. A Revenue Tariff, therefore, may be properly defined as _a schedule of taxes levied on certain imported goods with an eye only to just and general taxation_. There are three vital principles on which a revenue tariff as such must always be levied. (a) As the sole object is to get money for the national treasury, and as money can only be gotten as the foreign goods taxed are allowed _to come in_, such taxes must be levied at _a low rate_ on each article taxed, so as not to interfere essentially with the bringing in of that class of goods with a profit to the importers, and not at all to encourage the smuggling of them in. (b) A varied experience of all the commercial nations has shown, that it is not needful in order to derive a large and growing revenue to lay even low rates on _all_ goods imported, but only on certain classes of them, so as to burden at as few points as possible the successful ongoing of international exchanges; since the prosperity ever induced by commercial freedom enables a country to import and to pay for in its own quickened products vast quantities of the articles subjected to the tax, so that large revenues come from low rates levied at few points. Here we lay bare the ground of a great income in the exemption of the bulk of imports from any tax at all. (c) Custom-taxes should be laid wholly or at least mainly on articles procured from abroad, and not also produced at home; for otherwise the incidence of the tax on the portion imported will necessarily raise the price also of that portion made or grown at home; and thus the people will pay _more_ money in consequence of the tax than the Government _gets_ from the tax in revenue. Three points, then, in a revenue tariff, namely, _low duties on few articles, and these wholly foreign_. The best modern example of a purely revenue tariff is that of Great Britain since 1860. All duties are on one or other of the following sixteen items, namely, Beer, Cards, Chiccory, Chocolate, Cocoa, Coffee, Fruit, Malt, Pickles, Plate, Spirits, Spruce, Tea, Tobacco, Vinegar, and Wine. Of these, Spruce yielded no revenue in 1880; Cards, Malt, Pickles, and Vinegar, yielded in the aggregate that year only £1.491; leaving the other eleven items to furnish practically all the customs revenue; but of these Coffee and its three substitutes with Beer and Plate, furnished only £337.258, so that, the remaining five articles yielded £18.915.489, or 98% of the whole income in 1880. In other words, Fruit, Spirits, Tea, Tobacco, and Wine, brought in all but 2% of the customs-taxes of Great Britain in 1880. In 1890, the duties on certain Wines and Spirits having been lifted, there was a large surplus of revenue over the Estimates, which has just been devoted to the enlargement of the Navy. Every other European commercial country had a deficit that year as compared with its Estimates of the year preceding. The figures are not now at hand for an exact statement, but there can be little reasonable doubt that the "Five Articles" rendered at least 98-1/2% of the tariff-taxes of England last year. If there be also some domestic production of any article taxed by the British tariff, a corresponding excise-tax on that part produced at home, which part would otherwise be raised in price by the tariff-tax to no advantage of the Revenue, enables that Government to get easily all that the people are made to pay in consequence of the tariff-tax on the imported part. (2) There is a tariff under Protectionism so-called. The ruling aim in this second kind of tariff is not at all to obtain income for Government in order to promote the general good, but on the contrary by means of heavy taxes on _foreign_ articles to raise the prices of corresponding _domestic_ ones for the exclusive benefit of a few producers of these home goods at the expense of all home buyers of them. If these special tariff-taxes be so high and complicated as to keep out altogether the foreign articles, and so the Treasury realize nothing at all from the taxes on them, so much the more "protectionist" do they become, and so much the better pleased are the special domestic producers with the entire monopoly of the home market at their own prices. Such taxes are prohibitory and protectionist at the same time. Prohibition is the perfection of Protectionism. A Protectionist Tariff, accordingly, may be justly defined as _a body of taxes laid on specified imported goods with a single eye to raise thereby the prices of certain home commodities_. The vital points of a protectionist tariff are also three, but these are the exact opposites and antipodes of the three points of a revenue tariff, so that it is self-contradictory and impossible to combine in one tariff-bill the two sets of contrary elements. A revenue tariff with incidental protectionism is a solecism. (a) If a tariff-rate is to be protectionist in character, that is, competent to raise the price of home products, it must be _high_, so as either to exclude altogether the corresponding foreign products, in which case there is no revenue at all, or else to make their price by means of the duty added reach the point at which the home producers plan to sell their own, in which case there will be very little revenue. For instance, when the Bessemer steel companies asked in 1870 for two cents a pound tariff-tax on foreign steel rails, they called it in terms in their "confidential" statement to the Ways and Means "_exceptional protection_," and admitted in so many words that they expected to supply the home market entirely, and so the Government would get _nothing_ in revenue and the people be compelled to pay $44.80 _extra_ for their home steel rails per ton. It is a little bit of comfort to think, that they only obtained $28 per ton, or 1-1/4 cents per pound, which was not quite prohibitory, so that the Government got a little revenue on steel rails, and the people paid for some years only about _double_ for their rails what they were worth in a free market! To reach its end a protectionist tariff-tax must be _high_ of necessity. (b) No system of protectionist tariff-taxes can be entered upon or continued in any country except by means of many persons who all alike want their special products artificially lifted in price by legislation, and who are obliged _to combine_ in order to get and keep what they want, so that protectionist taxes on a few things only were rarely or never found in a tariff; so contrary are such taxes to the common sense and common interests of man, that only strong combinations of many special interests can begin or maintain them, whence there must be _many_ taxes if any under this strongly selfish scheme; and by an actual count of them by the writer in 1868 there were found to be 2317 distinct rates of tax assessed on different foreign articles in the Tariff of the United States, which was strikingly in contrast with the Revenue Tariff of Britain in point of the number of things taxed. So needful is log-rolling to the maintenance of protectionism, that the passage of the "knit-goods bill" in the summer of 1882, for example, was contingent on the contemporaneous passage of the famous "River and Harbor bill" of that year. (c) While Revenue Taxes select by preference things wholly imported, Protectionist Taxes are placed of course on such foreign goods as are also and especially made or grown at home, otherwise their plain and sole purpose would be thwarted, which completes the contrast between the two kinds of tariffs. For illustration, Tea and Coffee are the best things possible to tax in a tariff for revenue, because (1) they are in universal consumption, and (2) they are wholly imported, and taxes upon them do not raise the price of anything else, and so the Government gets all that the people pay under them; for this very reason the taxes upon Tea and Coffee, which had yielded for years some $20,000,000 of revenue yearly, were thrown off in 1872 under protectionist leadership, by the deceptive cry of "_a free breakfast table_," in the subtle interest of commercial bondage; seeking to give the impression on the one hand that everything on the breakfast table was to be free, whereas nothing on it or around was to be free except the two beverages mentioned, and on the other hand that the removal of these two taxes was a great boon to the people, whereas the motive for the removal of these was _to continue_ on the people burdens tenfold heavier. Eighteen years have rolled away since then, and Tea and Coffee are still upon the free list; the incompatibility of the two kinds of tariff-taxes is demonstrated in the fact, that there has not been for years a single tax primarily for revenue in the United States tariff,[10] the opposite protectionist idea having logically wrought itself out there; and the same incompatibility is shown in the British tariff, in which there has been no protectionist tax since 1860. Each aim logically carried out completely excludes the other aim. The best and worst specimen of a protectionist tariff that the world has ever seen, has been in operation in the United States for thirty years, 1861-1890. Its inner history is not yet fully known by the public, but enough is known to expose the motives and to condemn the action of all those, whether constituents or congressmen, who knowing what they were doing, contributed to build up gradually that mass of incongruities and iniquities, under which the entire agricultural class of the country (nearly one-half of the people) has become impoverished, by much the larger part of the farming lands of the Union covered by heavy mortgages, and the ocean-marine of a naturally nautical people almost totally destroyed. Attempts more or less successful have been made at various times and at different points to conceal from the Public the impulses really behind the provisions of this tariff, and even the amount and the mode of the incidence of its taxes; many of the most protectionist taxes have been complex, combining upon the same article _specific_ and _advalorem_ rates, as for instance, upon blankets "_50 cents per pound and 35% advalorem_," so that it was difficult or rather impossible for the common reader or buyer to ascertain how much the tariff-tax really was; much of the language of the tariff-bills has been to the last degree involved and uncertain, often leading to perplexing disputes and costly litigations, and sometimes covering up a half-hidden purpose; importers have been bribed, as it were, in cases of doubtful legality, to pay the maximum rates demanded, by the prospect and promise that the extra sums if ultimately found by the courts illegal should be repaid bodily _to them_ and not to the people who in the mean time had bought and paid for the goods thus enormously enhanced in price, and millions of the people's money have gone back in that way to importers and to spies and informers; a careless wording in tariff-descriptions has again and again covered goods not designed to be touched, as the lastings and rubber webbings of the shoemakers to the consternation of that great interest, which asked for no protectionist privilege for itself, but wanted its raw materials at their natural price; and the iron industry of Pennsylvania was bitterly angry at Secretary Sherman, who construed a line of the tariff relating to cotton ties used at the South more favorably to the planters than to the iron-workers, although the latter were strongly privileged at every point of the tariff (even at this) in the teeth of the interests of the consumers of iron, and the later honorable ambition of the Secretary to become a candidate for the Presidency of the United States was largely thwarted in consequence by the hostility of these miserable and revengeful monopolists. There were fifty descriptions of iron and steel taxed by the tariff in 1879, and the average rate of tax on these at that time was 77% _advalorem_, and this was about the average rate for the thirty years under the consideration. On special articles of prime necessity and universal consumption, as steel rails, the tax varied under the rate of $28 per ton put on in 1870 from 85% to 100% _advalorem_; and the purpose of this particular tax was plainly seen in an average price of domestic steel rails in this country $24.44 a ton higher than in England for better rails under a longer guarantee for the eleven years, 1870-80; in other words, 87% of the tax paid on the smaller and better part imported was added to the average price of the larger and worser part produced at home during those eleven years. That the English rails were better and even regarded as cheaper under their guarantee with the $28 a ton added to their price, is proven by the fact that the N. Y. Central railroad company relaid their tracks with the English rails, and were putting them down in Detroit in plain sight of simultaneous track-laying across the river in Canada, where the same kind of English rails were costing $28 a ton less. Every passenger and ton of freight carried by steel-track roads in the United States in this interval contributed his and its share to make up to the roads this _extra_ price paid for steel rails. In 1883 the tariff-tax on steel rails was reduced to $17 per ton. That this enormous artificial price of iron and steel products under tariff-taxes redounded wholly to the profit of the capitalists concerned, and not at all to the benefit of the laborers concerned, is shown by the Census of 1880, which gives $393 as the average pay for that year of the persons employed in the iron and steel industries of the country; and the late Senator Beck of Kentucky demonstrated on the floor of the Senate, _nemine contradicente_, that only 8.8% of the value of the products of the Bessemer steel industry in 1881 went to the laborers employed in it, while 66.9% of the same went to the capitalists as profits. Let the thoughtful reader remember at this point, that iron and steel products are only one of an indefinite number coddled and privileged by the tariff at the expense of the masses of consumers. It is impossible to tell exactly _how much_ more the people of the United States were compelled to pay for their commodities under tariff-taxes, whose ground-thought was to compel them to pay more and the more the better, than the Treasury received as the direct product of these taxes during 1861-90, but an approximation can be made within the truth whose results are fitted to startle the minds of all good citizens. For convenience' sake only, and because the official figures are complete for the shorter period, let us take for comparison the twenty years, 1863-82. The annual average tariff-income for those 20 years was in round numbers $158,000,000; but the ground-thought of the tariff-scheme in all those years was not to get an income for Government, but factitious prices for capitalists privileged by law; and during the last half of the time there were no tariff-taxes on Tea and Coffee, which had been before the principal revenue taxes. If, now, we may fairly suppose, that for each _one_ foreign article paying a tax into the Treasury there were _four_ domestic articles raised each in price as much as the foreign article paid in customs-tax, then it follows, that the People paid in each of those 20 years under customs chiefly protectionist, $632,000,000, or $12,640,000,000 in all, no penny of which went into the Treasury of the United States. That this supposition of 4:1 is wholly reasonable, appears partly from the known proportion (officially reported) between Domestic and Imported as to several leading articles, for example, of steel rails in 1880 the Domestic was 20 times the Imported, and the People paid 19 times more under the tax than the Treasury got; and on woollen blankets in 1881 the Treasury took in less than $2000, while the People paid in the _extra_ price of blankets more than 1000 times that sum that year; and on iron and steel goods of all kinds the average tariff-taxes were about 77% in that interval of time and the vast bulk of the iron and steel goods consumed was boasted to be of domestic production. Let us confirm these striking results by another more than reasonable supposition taken from the opposite quarter. The census of 1870 gave $4,232,000,000 as the value of home manufactures for that year, which we may fairly take as the average of the 20 years under consideration; now, if we throw off one-third of those home products as not affected by the tariff at all, and reckon that the rest were only raised in price 22%, which was only one-half of the average rate of tax on dutiable goods,--the average rate on these was officially pronounced in 1880 at 44%,--then almost precisely the same results will follow as before: two-thirds of $4,232,000,000 is $2,880,000,000, and 22% on that sum is $633,600,000. An acknowledged statistical expert of national reputation, Mr. J. S. Moore, calculated from data quite diverse from our own, that the People paid $1,000,000,000 in the one year, 1882, _extra_ to the sum reaching the Treasury that year, under protectionist tariff-taxes. We see, then, clearly the _methods_, by which Protectionism reaches its ends, and we cannot but conclude, that these methods issue in monstrously unjust burdens on the masses of the People. It remains, under this second general head, to examine the _motives_ of those men, who have gotten the protectionist tariff-taxes put upon the different classes of imported goods in this country. Fortunately we have data of unquestionable authority, covering the entire first century of our national existence, which prove these two propositions: first, _that no protectionist tax has ever been_ PUT ON _by our Congress from the first day until this day except at the instance and under the pressure of the very men personally and pecuniarily interested to secure thereby an artificial rise of price for their own domestic wares_; and second, _that these very men have been almost, if not quite, as active and determined_ TO KEEP OFF _protectionist taxes on other goods used by them in their processes of production, whether raw material, machinery, or accessories_. These two propositions, taken together, demonstrate beyond a cavil the motives of the protectionists as a class. Of course, they have had their dupes and tools. Out of their own mouths and out of their own actions are they to be judged. One hundred years is long enough of time in order to display perfectly the motives of a prominent and persistent class of men, under that Government of the world, whose key-note is Exposure, and under that maxim of the world, Actions speak louder than words. Thomas H. Benton, a United States Senator from Missouri for 30 years, 1820-50, himself in all that time a prominent leader and debater, and always an indefatigable investigator, published an _Abridgment of the Debates in Congress from 1789 to 1856_ in 15 large volumes. Each important tariff Debate for the first 70 years of our national history is distinctly brought out in these volumes, and the impulses and motives behind each leading speaker may be discerned as clear as day. The present writer has been over these debates with great care, and has mastered them in their substance and motives on both sides; and he has been besides a deeply interested reader and excerptor of all Congressional tariff-debates for more than 30 years just past; and now invites his present readers to take a cursory glance over this broad field, and satisfy themselves as to the motives personal and associate of the protectionist debaters from the first to the present time. Because the new Constitution prescribed that "_all bills for raising revenue shall originate in the House of Representatives_," the main debates on the first tariff-act of 1789 were in that branch of the national Legislature. Nothing could be simpler or sounder than the basis of the new tariff as proposed by Madison, the acknowledged leader in the debates, namely, the so-called Revenue System of 1783, as adopted by the old Congress, and ratified by all the States in succession, excepting New York. That was, small specific taxes on eight articles, namely, Wines, Spirits, Tea, Coffee, Cocoa, Molasses, Sugar, and Pepper. In the earlier part of the discussion no other end than revenue was mentioned in connection with the taxes. Madison said: "_I own myself the friend of a very free system of commerce: if industry and labor are left to take their own course they will generally be directed to those objects which are most productive, and that in a manner more certain and direct than the wisdom of the most enlightened legislature could point out; nor do I believe that the national interest is more promoted by such legislative directions than the interests of the individuals concerned._" It is significant of after times that the first word in this debate respecting any other word than revenue through the tariff-taxes came from Pennsylvania; and equally significant, that the next and strongest words for something else than revenue came from Massachusetts; and more significant than either was the junction of the two States in influence and votes when it came to the final adjustment of the actual tariff-rates. Pennsylvania had already gotten well forward in the manufacture of iron and steel products, particularly of nails, and wanted "_encouragement_," that is, protectionist taxes upon the foreign products corresponding. Said Hartley of Pennsylvania: "_I am therefore sorry that gentlemen seem to fix their mind to so early a period as 1783; for we very well know our circumstances are much changed since that time: we had then but few manufactures among us, and the vast quantities of goods that flowed in upon us from Europe at the conclusion of the war rendered those few almost useless; since then we have been forced by necessity, and various other causes, to increase our domestic manufactures to such a degree as to be able to furnish some in sufficient quantity to answer the consumption of the whole Union, while others are daily growing into importance. Our stock of materials is, in many instances, equal to the greatest demand, and our artisans sufficient to work them up even for exportation. In these cases, I take it to be the policy of every enlightened nation to give their manufactures that degree of encouragement necessary to perfect them, without oppressing other parts of the community._" Massachusetts was not a whit behind Pennsylvania in asking for discriminations in her own favor at the obvious expense of the rest of the country. New England rum was made out of molasses, and Jamaica rum was its competitor in public favor; distillers in the neighborhood of Boston and Salem wanted therefore a _high tax_ on Jamaica rum, and a _low one_ on the imported molasses used in the home manufacture. Madison was willing to discourage rum-making and rum-selling both in the interest of temperance, and proposed a tax of eight cents a gallon on molasses and fifteen cents on Jamaica rum, which called out this indignant burst from Goodhue of Massachusetts: "_Molasses is a raw material, essentially requisite for the well-being of a very extensive and valuable manufacture. It ought likewise to be considered a necessary of life. In the Eastern States it enters into the diet of the poorer classes of people, who are, from the decay of trade and other adventitious circumstances, totally unable to bear such a weight as a tax of eight cents would be upon them. I cannot consent to allow more than two cents. Massachusetts imports from 30,000 to 40,000 hogsheads annually, more than all the other States together. Fifteen cents, the sum laid on Jamaica spirits, is about one-third part of its value: now eight cents on molasses is considerably more: the former is an article of luxury, therefore that duty may not be improper; but the latter cannot be said to partake of that quality in the substance, and when manufactured into rum is no more a luxury than Jamaica spirits._" The Senate in the First Congress sat with closed doors, and was thus more open than the House to the influence of interested petitions which soon began to pour in upon it, asking for amendments to the House bill in the line of protectionism; and through such amendments the Massachusetts and Pennsylvania members, with a few other members similarly inclined, partially carried their points into the first Tariff. The tax on molasses was fixed at 2-1/2 cents a gallon, and on Jamaica rum at ten cents a gallon; nails were taxed one cent per pound imported; and an accepted Senate amendment classed Hemp and Cotton together as two products of the soil worth "encouraging," hemp at 3/5 of a cent per pound and cotton at three cents a pound; yet hemp constantly "encouraged" to this day at the cost of ship building and other industries has never risen to the rank of a staple. Coal was also taxed protectionistly, at the instance of Virginia, then the coal-producing State. Note the three universal features of Protectionism in the original application of it to the United States; (1) the purely selfish call to tax one's neighbor in order to lift the price of one's own wares (nails), (2) the equally selfish resistance to such a tax as falls on one's raw materials (molasses), and (3) the final log-rolling among those legally privileged at different points (Massachusetts and Pennsylvania and Virginia). Take a second instance of the same general point from our second Tariff, passed in 1816. Two Massachusetts young men, Lowell and Jackson, brothers-in-law, had started a modern cotton-mill in Waltham, near Boston, in 1813, and constructed in it, with the help of an ingenious mechanic named Moody, a power-loom; as soon as the war with England was over, and Congress in consequence began to talk about a new Tariff, Lowell went to Washington, and by personal influence with Mr. Calhoun, then the leading man in the House, with Mr. Lowndes his colleague from South Carolina, who afterwards reported the new bill, and with other members of Congress, contributed largely to the introduction into this Tariff of protectionist features towards _cottons_. Lowell struck strong at the start. He represented (doubtless with entire honesty) to Calhoun and Lowndes, both from a cotton-planting State, that a domestic market for raw cotton _in addition_ to the foreign market would raise the price of that agricultural staple. Both were easily convinced that such would be the case, although both found ample reasons afterwards for altering their opinion in that regard. Lowell, the "cotton city" on the Merrimack, founded in 1821, was named from the successful lobbyist of 1816. Lowndes reported a tax on cottons of 33-1/3% _advalorem_, with a proviso _that all cottons should be assumed at the custom-house to have cost at least 25 cents to the square yard_. This was the famous principle of the "_minimum_," a device to increase the protectionism without _seeming_ to do so. The debate on this feature of the bill was a marvel in many ways. The penetrating reader will not be at a loss for the reason of this. John Randolph moved to strike out from the bill the proviso for the cotton _minimum_, and argued at some length "_against the propriety of promoting the manufacturing establishments to the extent and in the manner proposed by the bill, and against laying up 8000 tons of shipping now employed in the East India trade, and levying an immense tax on one portion of the community to put money into the pockets of another_." Calhoun rejoined: "_Until the debate assumed this new form, he had determined to be silent; participating, as he largely did, in that general anxiety which is felt, after so long and laborious a session, to return to the bosom of our families. It has been objected to that bill, that it will injure our marine, and consequently impair our naval strength. How far it is fairly liable to this charge, he was not prepared to say. He hoped and believed it would not, at least to any alarming extent, have that effect immediately; and he firmly believed that its lasting operation would be highly beneficial to our commerce. The trade to the East Indies would certainly be much affected; but it was stated in debate that the whole of that trade employed but six hundred sailors. The cotton and woollen manufactures are not to be introduced: they are already introduced to a great extent; freeing us entirely from the hazards, and in a great measure, the sacrifices experienced in giving the capital of the country a new direction. The restrictive measures and the war, though not intended for that purpose, have by the necessary operation of things turned a large amount of capital to these new branches of industry. But it will no doubt be said, if they are so far established, and if the situation of the country be so favorable to their growth, where is the necessity of affording them protection? It is to put them beyond the reach of contingency._" Thus Calhoun goes on, making the greatest mistake of his life which he regretted to his dying day, to give plausible reasons for his insistence and his vote, but he does not even touch upon the _real reason_. If he had detailed his conversations with Lowell, it would have been far more to the point. His motive, like that of every other man in Congress who has urged protectionist schemes, was the special benefit of some of his constituents at the more or less concealed expense of their countrymen. But, as always happens when men really act from unavowed motives, he was suspected of having them; and he guarded himself: "_He was no manufacturer; he was not from that portion of the country supposed to be peculiarly interested. Coming as he did from the South, and having in common with his immediate constituents, no interest but in the cultivation of the soil, in selling its products high, and buying cheap the wants and conveniences of life, no motives could be attributed to him but such as were disinterested._" But Randolph still charged, that the discussion showed "_a strange and mysterious connection_" between this measure and the National Bank bill which had just passed. This was a loophole of escape for Calhoun: "_he wished merely to reply to the insinuation of a mysterious connection between this bill and that to establish the Bank. He denied any improper or unfair understanding, and could challenge the House to support the charge._" A beautiful instance of the _confession_, which all protectionists make in action when it comes to the pinch, that a rise of price is at once the object and the result of protectionist tariff-taxes, is found in the awkward attempt of Congress to relieve indirectly the burnt-out citizens of Chicago in 1871. The great fire occurred in October of that year. In the winter following a bit of legislation took place in Congress in consequence, which is too instructive to be passed by without notice, because in all the parts of it taken together we have in epitome the motives and the processes and the prompt confessions of Protectionism. Contributions were taken up all over the country, and even in Europe, for the relief of the people of Chicago. As Whittier puts it: "From East, from West, from South and North, The messages of love shot forth, And, underneath the severing wave, The world, full-handed, reached to save." But cannot Congress do something to help rebuild the ruined city? April 5, 1872, President Grant set his signature to a congressional bill enacted to last one year only, and for the express benefit of Chicago alone, _to exempt all building materials except lumber from the operation of tariff-taxes_. As a public and emphatic confession on the part of Congress, that tariff-taxes raise the prices of protectionist goods, and that the remission of such taxes lowers the prices of such goods and becomes a boon to the buyers, all this is refreshing and satisfactory; but why was _lumber_, by much the most important of the building materials needed, _excepted_ from the bounty of the legislators to the unfortunates of Chicago? The bill applied to Chicago only, and was to last but one year at best! The bill as drawn and debated included _all_ building materials. Why was lumber excepted? Because, while the bill was still pending, a special car filled with the lumber-lords of Michigan and Wisconsin was rolled to Washington in haste, and the potent influence of these men was sufficient to cause the express exemption of their product from the intended cheapening (for one year) of the building materials for desolated Chicago. The brief official record of this curious transaction will be found in U.S. Statutes for 1872, page 33. It needs no comment but the obvious one, that here is the whole matter of protectionism in a nutshell;--the motive, the open confession, the greedy lobby determined to thrive on their neighbors' misfortunes, the inhumanity, the spirit of monopoly, the infernalism,--a game of grab from beginning to end! Shameless as the protectionist debates in Congress have been from the start, in letting it be plainly seen, that the sole motive of their efforts is an artificial rise of price in certain goods which their fellow-citizens would be compelled under the law to pay, the debate in the House of Representatives in the spring of 1883 was by far the most shameless and avowed in this respect of any that ever transpired there. In the last days of that debate all pretence of any action for the good of the country at large dropped utterly out of the discourse: the old fallacies and disguises and subterfuges of "home markets" and "higher wages" and "commercial independence" were no longer put forward even in word under the clash of selfish interests, and in the eagerness to secure for their wares a factitious price to be paid by their countrymen; proposed reductions in tariff-taxes were fought off by these men, and in many instances still higher taxes were urged on, under their unabashed avowal that, unless home prices were thus stiffened and uplifted, they could not make and sell their wares at a profit; one honorable member from New Jersey brought his pottery wares upon the floor of the House, and tried to demonstrate to his fellow-members that, unless these very goods were hoisted in price, by taxes on his foreign competitors, he could no longer tread his clay and work his wheels with profit to himself: in other words, he and others like-circumstanced, by lobbying and log-rolling, persuaded Congress to pass so-called laws to compel their countrymen _to hire them to carry on what they publicly alleged were unprofitable branches of business_. By their own confession, the only trouble with their goods was, that they were inferior in quality and superior in price to otherwise similar goods in the open market of the world. One more, and the latest instance, out of hundreds equally accessible and equally conclusive, will suffice for a demonstration of the point in hand. In the early summer of 1890, a Massachusetts member of the House of Representatives, an avowed protectionist from an alleged protectionist district of that State, waxed so warm in arguing against a protectionist tax upon a certain raw material useful in tanning leather, that he took off his coat and proceeded in his shirt-sleeves! One would suppose, both from his zeal and the tenor of his speech, that he was a veritable free-trader! But no! He had argued a hundred times that protectionist taxes (to be paid by other people) were a good thing for the payers, and enriched the whole country; but lo! it turned out in this case that he himself was a buyer of this particular material, and lo! he did not relish the tax-lifted prices caused by the tariff. They were all wrong. They must be fought off at all hazards, even in the hottest weather! This is a very respectable gentleman, well thought of by his neighbors in Worcester County, but his protectionism is _not_ respectable. It is chameleon-colored. It is one thing in one light, and an opposite thing in another light. Indeed, the protectionist congressman has never yet been discovered in this country, who was fond of paying protectionist taxes himself, or willing that his immediate and powerful constituents should pay them! It has been proven many times over, that the very strongest friends of a Free List in this broad land have been certain so-called protectionist Senators and Representatives. From these few sample-examples, the reader of penetration will perceive, that there is no element of logical coherence or moral decency or even outward respectability in Protectionism. There is no _principle_ in it or of it. It does not hang together. It walks in darkness and not in light. It is full of deceit. It is fond of disguises. It is contrary to common sense. It offends justice. Morality frowns at it. It has no basis in any Science, least of all in the Science of Buying and Selling, whose best impulses it feebly tries to deny, and whose largest and most innocent gains it fain would destroy. Next in order we will examine, in the third place, a few of the chief FALLACIES AND FALSEHOODS, by which Protectionism has striven to give itself a standing in the commercial world. In our day at least, these are, without exception, afterthoughts and subterfuges. We have just seen under the last head the real impulses, plain as a mountain peak, which put on and keep on and pile up these taxes on the masses of the people; but these real motives will not bear inspection and public criticism, and so plausible reasons must be found or at least propounded, which shall do the double duty of covering the real reasons, and of seeming to convince while they only perplex the victims of the scheme. These plausibilities we propose now to analyze and to expose. The test of any alleged truth is its harmony with acknowledged truths: the test of any propounded error is its incongruity with and contradiction of acknowledged truths. On a logical comparison, therefore, of any false proposition with any known truth, the latter will be sure to fling out its flat contradiction and floor the falsehood forever. Protectionism contradicts economic truths at practically innumerable points, but we will now watch the collisions at the principal points only. Fallacy A: _that a nation may still sell to foreign nations while prohibiting the buying from them_. Protectionism is multiplied prohibitions on the buying of goods from foreigners. Between four and five thousand of such prohibitions deface our national Statute-book at the present moment. All the while, however, the assumption underlies this policy, and the express proposition is often heard in different forms along the lines, that our citizens may still sell their products to foreigners, nevertheless. England has _got to buy_ our cotton or starve: the Continent _is compelled_ to take our pork products, for they are the cheapest food in the world: how can China or India _help_ taking the silver from our mines? Softly. Buying and selling from the very nature of it is never compulsory, but always voluntary. A commercial service is never rendered but in plain view of a return-service to be received. The mental estimation of each buyer is couched in the very terms of what is offered in return by each seller. Buying and selling from its inmost nature is always one act of two persons acting conjointly and inseparably to the advantage of each. How, then, can the individuals of one country _sell_ anything to individuals of another country without at the same instant _buying_ of these in return? The act of selling is just as much buying as it is selling, and the act of buying is just as much selling as it is buying. As we have abundantly seen already, the introduction of Money as a _medium_ in the transaction makes no difference in the _nature_ of the exchange of commodities internationally. The postulate, therefore, that the people of one country can continue to sell products to the people of another while refusing to take their products of some kind in return, is an _absurdity_ in the nature of things and an _impossibility_ in the world of facts. _A market for products is products in market._ All known facts confirm this irrefragable reasoning, and discredit utterly the fallacy in hand. When France and Germany a few years ago gave back to our protectionists a dose of their own medicine, and prohibited American pork-products, ostensibly because they feared the trichinæ but really to cajole their own farmers under the plea of protectionism, their brethren in the faith have made up all sorts of faces ever since, have wound up the respective diplomatic clocks to strike twelve against the too presumptuous countries which ventured to restrict American products in their ports, have protested and proclaimed. What is the matter? Is not sauce for the goose sauce for the gander also? Have not American protectionists shut out French and German products 100:1 under the same plea now used on the Continent? "_But we cannot sell our products abroad_," cry the angered Western farmers. Of course they cannot, because restrictions on buying _are_ restrictions on selling; and additional restrictions of the same kind put on French and German buying are of course still further restrictions on American selling. And the farmers are, as usual, the victims both ways. To hear an ordinary American protectionist talk, one would think that Great Britain is the enemy of mankind for admitting into her ports practically without let or hindrance the goods of all the world. _Free Trade England!_ Let us look a moment. England has to pay for all these goods received from all quarters. In what does she pay? In her own goods, of course. What is her market? The whole world. Is that market ever slack on the whole? Never. Is she ever flooded with cheap goods? The more she buys the more she sells of necessity. How much does she sell _per capita_ of her people? More than twice as much as the United States sells _per capita_. How can she sell so much of her own stuff? Because she buys freely other stuff from all the world. What are the limits to her capacity to sell her own goods to foreigners? Precisely the limits of her willingness to take in pay other goods from foreigners. Cannot these limits be overpassed in either direction? By no possibility: when people can no longer pay for what they buy, the buying ceases; and when they are not permitted to take their pay for what they sell, the selling ceases. Is this free trade profitable to Great Britain? Immensely so in every way. Whither has it carried up her ocean-marine? To the topmost notch. Is capital abundant in England in bulk, and are its loanable rates low? England is the richest country in the world, and all nations resort thither to buy. What is the source of this vast volume of Capital? The only source of Capital is savings from the natural gains of Buying and Selling. Is Great Britain willing to take in goods from the United States? Certainly, under the universal conditions of taking in foreign goods at all. Is the United States willing to take in British goods in pay for her own goods exported thither? She is not, except over protectionist barriers averaging 47%. Is it a good thing for the United States, that Great Britain takes in her goods freely? We should suppose so! Does the former already sell to the latter and through the latter more goods than to all the world besides? Much more. Could this profitable trade be easily increased? It could be quadrupled in a very short time. How? By simply according to our citizens a decent liberty, which is their inalienable right. Would the United States like it to be commercially treated by Britain exactly as the former treats the latter? It would bankrupt the United States in six months. Would our protectionists like it? It would make them howl. Is it the commercial salvation of the United States that Britain is immovably for free trade with her and the rest of the world? Nothing else saves her from commercial ruin. Can the ghost of a reason be given, commercial or other, why the United States should continue to fling double fists into the face of British goods seeking a market and so making one? Not a shadow of a shade of a good reason was ever given for such folly, or ever can be. It is more than a pleasure to acknowledge at this point the great service done by James G. Blaine, Secretary of State, during the summer of 1890, to Country and Commerce, by his courageous avowal contrary to his own personal record and to the vehement behest of his party, that the economic principle just enunciated is sound, and should be at once applied by the United States in connection with all the countries of Latin America. In a letter to the Senate on the results of the recent Pan-American Conference, he said: "_The Conference believed that while great profit would come to all the countries, if reciprocity treaties could be adopted, the United States would be by far the greatest gainer._" The principle of reciprocity is the principle of free trade applied by both parties to the trade. It is the sound principle, that goods buy goods and pay for goods at the same instant to a mutual profit. Manifold reiterations of this principle came from the Secretary that summer, especially in vigorous protestations against the McKinley tariff-bill then pending, alleging with truth that "_there is not a line or a section in the bill which opens a market for another bushel of wheat or another barrel of pork_." The unequivocal statements of a favorite statesman have roused the somewhat indifference of thousands of citizens, and make certain the speedy prevalence in the United States of the unassailable doctrine, that any People must buy freely if they would sell broadly. Fallacy B: _that tariff-taxes are needful in order to start infant industries_. There is no analogy whatever between Child-bearing and Child-growing and any form of Buying and Selling at any time, but the deceit in the wretched simile has cost the world billions of dollars of pure loss. To bring up infants from birth to maturity is indeed a good deal of a task for the parents, but it is not in any sense an economical task: the parents neither ask for nor receive a return-service in kind: the transaction is wholly moral in its character, and not economical at all: there is no party of the second part in the premises: there is a free giving, and that is all. Buying and Selling, on the contrary, has no infancy, and no maturity and no old age. This particular Minerva springs at once full-grown and full-armed from the brain of Jove. The conditions of Trading are forever the same; with no reference to the age of the parties, the antiquity of the industry, or any other such irrelevant thing. If any person anywhere (old or young) has got something to sell, and finds (directly or indirectly) any other person anywhere who wants his wares and can pay for them,--all the conditions of mutual profit are present, and everything else is an impertinence. Much more than this. Tariff-taxes have to be paid by somebody. Their payment is inexorable at the custom-house, and interest and other charges are added before the sum reaches the ultimate payer. But the ultimate sum however made up is exactly so much _out_ of the commercial gains of the payer. The sign is every time _minus_ and _not_ plus. When egregiously high tariff-taxes are multiplied in number, and all the additions are made to them, they become an incalculably large sum, every cent of which _has to be paid_ out of the gains of current Industry. Now, what a queer way that is to foster industries! What a queer way to help start them! It takes Capital to start new industries, and to carry on old ones; but tariff-taxes (with all their accretions) take just so much _out_ from what would otherwise naturally become Capital. That is to say, all Capital is savings from the gains of Exchanges; and these gains are _reduced_ by every tariff-tax that touches them directly or indirectly. Taxes from their very nature can help nobody. They hurt everybody. What a device this is to start new industries with, namely, to pick the pockets of the very men, who are to start the industries, if they ever are to start at all! Lower your reservoir to begin with, in order to give head and force to your faucet flow! But this is not half of it. On what industries do the protectionist taxes fall at first to weaken and discourage them? Of course on the natural and profitable ones, which only ask to be let alone in order to maintain a healthful life and growth. If, under natural conditions, any industry is in existence, one may be perfectly sure it is profitable, since Profit is the only thing in the world that can start and build up an industry: when the profit ceases, the trade ceases of necessity: the motive to it is _gone_. In behalf of what sort of industries are these taxes ostensibly and plausibly levied? Only, if we are to believe the protectionists, the weak and presently unprofitable ones. _It is the infant industries that need the nursing-bottle!_ That is to say, tax down and perhaps destroy the _profitable_ industries, the industries that _pay_, that can paddle their own canoe and no thanks to anybody, in order to bring forward certain other industries, which by confession and open proclamation are _unprofitable_, and can only _start_ by taxing their neighbors! Of course, there is a cat in this meal, and we shall let her out of the bag in plain sight presently; but we are taking now our friends, the protectionists, at their own word, and exhibiting their marvellous wisdom under the terms of their own choosing. What a blessed way for a nation to grow rich, to smite down with high taxes the active and enterprising and independent and therefore profitable industries with one hand, and grope around with the other to find some poor and inactive and unfrugal and naturally unprofitable industries, in order to fetch forward these by means of the plunder filched from the others! To go back for historical illustration to Washington's first administration, when the first (extremely mild) protectionist taxes were levied in this country, we have the highest authority for knowing that many of the leading branches of manufactures were prosperous and profitable. They had no artificial help in order to start, but on the contrary had had continual discouragement for a century under the miserable protectionist policy of the mother country. Washington himself was inaugurated in a dark brown suit of woollen cloth of American manufacture: so was John Adams inaugurated first Vice-President of the United States about the same time in a garb of wholly native manufacture.[11] This was in April, 1789. In November of the same year, Washington returned to New York from his first tour in New England "_astonished both at the marvellous growth of commerce and manufactures in New England and the general contentment of its inhabitants with the new government_" (Schouler, p. 117). Alexander Hamilton, the first Secretary of the Treasury, in his famous Report to Congress on Manufactures, in 1791, enumerated seventeen branches as then thriving so as to fairly supply the home market, and settle into regular trades. These were, skins and leather, flax and hemp, iron and steel, brick and pottery, starch, brass and copper, tinware, carriages, painter's colors, refined sugars, oils, soaps, candles, hats, gunpowder, chocolate, snuff and chewing tobacco. It is plain enough from the debates of the time as well as from the nature of the case, that the protectionist taxes in our first two Tariffs, already considered here in detail, although they were comparatively slight in number and amount, fell in the way of discouragement on these incipient yet independent manufactures as well as upon all the farmers of the land. There can be but little rational question, that the woollen industry was sounder at the core in 1789, when Washington was inaugurated in native woollens, than in 1889, when Harrison was inaugurated in the same, the ostentatious gift of a firm of protectionist woollen manufacturers shortly afterwards adjudged to be bankrupt and fraudulently so. The best point, after all, to make against this hollow fallacy, is the practical one, that no industry whatever, whether "infant" or other, has ever come in this country into an acknowledged self-sustaining position under a whole century's tariff-taxes. Salt, hemp, coal, cottons, woollens, nails, and iron and steel products generally, were the chief articles protectionized at first, and have been protectionized ever since, but no one of them all has ever come into a condition of self-support according to the view of the privileged beneficiaries. Each one of them was an old industry, and a relatively rich industry, when it was taken under the "fostering care" of the tariff-taxes, levied for their further enrichment on the masses of the people; and it was only greedy and secret combinations among these for that purpose, which put them at first and has kept them ever since in the rank of public beneficiaries. The simple truth is, that diversity of employments is rooted in human nature and in the circumstances amid which God has placed men, and so far is it from being true that taxes and restrictions are needful in order to foster manufactures, taxes and prohibitions cannot prevent them from springing into life! They are just as natural to men and to colonies as agriculture is. Indeed, agriculture can scarcely take a step without them. The farmer must have ploughs and carts and other implements; and, depend upon it, there are some natural mechanics in that colony. Clothes are as needful as food, and spinning and weaving in some form will begin at once, and prohibitions will be powerless to stop them. Deadly to the fallacy in hand is the word of unquestionable History. Any one may read in Palfrey and Bancroft and Hildreth such facts as these, scattered all along through the noble volumes. The manufacture of linen and woollen and cotton cloth was begun in Massachusetts in 1638, in Rowley, by some families from Yorkshire; and became so remunerative in a couple of years that some acts of the General Court designed to stimulate it were repealed. Brick-making and glass-works and the manufacture of salt were all begun in Massachusetts before 1640. In 1643, the younger Winthrop established iron-works in Braintree and Lynn, which after some losses were successfully prosecuted. Within less than twenty years thereafter, tannery and shoemaking had made such strides, that boots and shoes became articles of export. That these were no fancy beginnings in manufactures, we may strikingly learn from an Act of Parliament passed in 1698. Notice the date. This law is a sample of many more:--"_After the first day of December, 1699, no wool, or manufacture made or mixed with wool, being the produce or manufacture of any of the English plantations in America, shall be loaden in any ship or vessel, upon any pretence whatsoever,--nor loaden upon any horse, cart, or other carriage,--to be carried out of the English plantations to any other of the said plantations, or to any other place whatsoever._" Thus the fabrics of Massachusetts were forbidden to find a market in Connecticut, or to be carried to Albany to traffic with the Five Nations. "That the country which was the home of the beaver might not manufacture its own hats, no man in the colonies could be a hatter or a journeyman at that trade, unless he had served an apprenticeship of seven years. No hatter might employ more than two apprentices. No American hat might be sent from one plantation to another." In 1701 the three charter colonies are reproached by the lords of trade "_with promoting and propagating woollen and other manufactures proper to England_." In 1721 New England alone had six furnaces and nineteen forges, and there were many others in Pennsylvania and Virginia. Parliament enacted in 1750 that no more mills should be erected in America for slitting or rolling iron, or forges for hammering it, or furnaces for making steel; and in certain cases, agents of the crown were authorized to tear down such establishments as "_nuisances_." How far all the arts of navigation had been carried in the Colonies before the Revolution, every one may read in Burke's famous speech on Conciliation with America. How far the products of the loom, the forge, and the anvil, were already being exported, in spite of British legislation, to other countries, any one may see in Lord North's last proposals and concessions to ward off Independence. Protectionism having once fed its petted beneficiaries from the public crib, that is to say, from taxes wrenched from the many to enrich the few, invariably clamors for more and more rations for its pets from the same public source. Not only does no industry become self-supporting by its bite and its sup, but each becomes according to its own facile representations and representatives, more and more helpless in itself, more and more shameless in its demands, more and more _entitled_ to public charity, and less and less inclined to surrender one iota of past or present privilege. The daughters of the horse-leech cry continually, Give! Give! The following schedule relates to woollens mainly, but it is a fair sample of many other protectionized classes of goods under the successive tariffs in this country, in point of increased taxes on the people in their behoof. While these lines are being written, the McKinley tariff-bill, so-called, having passed the House, is pending in the Senate. It is significant, that this piece of legislation, whether it be finally enacted or not, proposes to open the second century of the United States Protectionism by largely hoisting the tariff-taxes along the main line. Infant industries indeed! ======================+=============================================== | RATE OF DUTIES UNDER THE TARIFF OF ARTICLES. +-----+-----+--------+--------+--------+-------- |1791.|1859.| 1861. | 1864. | 1883. | 1890. ----------------------+-----+-----+--------+--------+--------+-------- | Per | Per | | | | |cent.|cent.| | | | Dress goods of cotton | 5 | 19 | 30 per | 55 per | 68 per | 88 per and worsted, | | | cent.| cent.| cent.| cent. costing 15 cts. | | | | | | the sq. yd. | | | | | | | | | | | | Same, costing 20 | 5 | 19 | 30 " | 50 " | 60 " | 90 " cents sq. yd. | | | | | | | | | | | | Same, all wool or | 5 | 24 | 30 " | 47 " | 77 " |100 " of mixed materials, | | | | | | costing 24 cents | | | | | | sq. yd. | | | | | | | | | | | | Same, costing 30 | 5 | 24 | 30 " | 55 " | 70 " | 90 " cents sq. yd. | | | | | | | | | | | | Same, costing 60 | 5 | 24 | 30 " | 45 " | 55 " | 70 " cents sq. yd. | | | | | | | | | | | | Same, weighing over | 5 | 24 |25% and |40% and |40% and |50% and 4 oz. sq. yd. | | | 12 cts.| 24 cts.| 23 cts.| 44 cts. | | | per lb.| per lb.| per lb.| per lb. | | | | | | Ready-made clothing |7-1/2| 24 |25% and |40% and |35% and |60% and | | | 12 cts.| 24 cts.| 40 cts.| 50 cts. | | | per lb.| per lb.| per lb.| per lb. | | | | | | Tapestry Brussels |7-1/2| 24 |30 cts. |50 cts. |20 cts. |28 cts. carpets | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Tapestry velvet |7-1/2| 24 |50 cts. |80 cts. |25 cts. |40 cts. carpets | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Brussels carpets |7-1/2| 24 |40 cts. |70 cts. |30 cts. |40 cts. | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Druggets and bockings | 5 | 24 |20 cts. |25 cts. |15 cts. |20 cts. | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Silk goods, including |7-1/2| 19 | 30 per | 60 per | 50 per |Average velvets and plushes | | | cent.| cent.| cent.|probably | | | | | | 90% | | | | | | Woollen hosiery and | | | | | | underwear: | | | | | | Costing 32 cents | 5 | 24 | 30 " | 90 " | 77 " |214 per per lb. | | | | | | cent. Costing 42 cents | 5 | 24 | 30 " | 79 " | 79 " |175 " per lb. | | | | | | Costing 62 cents | 5 | 24 | 30 " | 62 " | 74 " |135 " per lb. | | | | | | Costing 82 cents | 5 | 24 | 30 " | 54 " | 82 " |120 " per lb. | | | | | | | | | | | | Linen goods | 5 | 15 | 30 " |Average | 35 " | 50 " | | | |37-1/2% | | Cotton hosiery: | | | | | | Costing 62-1/2 cents|7-1/2| 24 | 30 " | 35 per | 40 " |110 " per doz. | | | | cent.| | Costing 2.10 cents |7-1/2| 24 | 30 " | 35 " | 40 " | 76 " per doz. | | | | | | Costing 4.10 cents |7-1/2| 24 | 30 " | 35 " | 40 " | 64 " per doz. | | | | | | ======================+=====+=====+========+========+========+======== It is also significant in this connection to read an extract from the Report of Mr. William Whitman, President of the National Association of Wool Manufacturers, dated March 29, 1890, to the Stockholders of the Arlington Mills, Massachusetts. "_I have been your Treasurer for a consecutive period of twenty years. During this period the average earnings have been_ 20-8/10 _per centum upon the capital. The earnings of the last year were nearly three and a half times those of the year previous, and there is every indication that the current year will be the most profitable one in the company's history._" Fallacy C: _that a home market is better and broader than a foreign market_. Professor Thompson of Pennsylvania has publicly and repeatedly stated, that, by a persistent policy of Protectionism a "home market" would be created for all the bread-stuffs that this great country produces; and John Roach, the shipbuilder, expatiated at length before the Tariff Commission of 1882 on the advantages the farmer derives from the better "home market" already created by Protectionism. To come nearer home in place and further down in time, there was organized in Eastern Massachusetts with headquarters at Boston in some connection with the national election of 1888, a so-called "Home Market Club" of large proportions. It is generally understood in the State, that a large minority, if not a majority, of the members, are displeased with the McKinley Bill of 1890, declaring that the mustard is carried to fanaticism in this bill, that neither the "home market" nor any other can profit by such a series of prohibitions. However this last may be, it is plain, that a ridiculous and most harmful fallacy underlies all references to a "home market" in any connection with foreign trade. It is simple Gospel charity to believe, that Thompson and Roach and the founders of the Home Market Club and all others, who repeat this wretched stuff, never stopped in their thoughts long enough to inquire what a "market" really is, never analyzed into its simple elements that composite thing called a "market," but each and all in turn have taken up a catch-word carelessly which seems on the surface to have some significance though in reality it has none. All will agree, if they will stop to think, that a "market" is always made up of _buyers_ with return-services in their hands. A bigger home market than before consists only in more domestic buyers than before, all ready with acceptable pay in all their hands. More persons than before, more services-in-return than before. Now, if Protectionism _can enlarge the home market_, it must be (1) either by increasing the number of births or diminishing the number of deaths in a given time in a given country. Precisely how big bundles of big taxes, which the whole population must pay in one form or another and over and over again, may be made to stimulate births or prolong lives, no reasonable man can see, and it is not unreasonable to deny that a protectionist can see it. But conceding that he can see and show this, his task is then but half done, for he must proceed to see and show how these same onerous taxes are able (2) to multiply the return-services in the hands of this increased population! If he think at all, the protectionist is compelled to remember, that his system is always and everywhere a series of prohibitions on profitable trade. A profitable trade always gives birth to gains. It always gives birth to Capital. It always gives birth to Plenty. That is the nature of it, and the Divinely ordained blessing on it. But when the greater part of these gains are artificially cut off, when the possible capital is reduced in volume, when the scarcity comes in which is the primary _purpose_ of Protectionism to create, it shall go hard if there be even as many return-services as when the process began. Not a better "home market," but a more meagre one, is the inevitable issue of restrictions and prohibitions. If our protectionist try to get out of this snug place, in which he now finds himself, provided he is able to feel the force of any logic whatever, by claiming that his broader "home market" is to be made by new immigrants with old-world values in their hands to buy with, he certainly cannot escape by this route, because (1) he must in order to do this see and show what there is in big taxes enormously multiplied to invite immigrants here at all; and (2) our typical protectionist is scared to death by the _handiwork_ of foreign "pauper labor" wherever exposed for sale, and of course he is not prepared to welcome the pauper laborers themselves, of which class as described by him the immigrants would mostly consist; and besides, the tariff would not admit to our shores the old-world values, which would be the immigrants' sole _return-services_ to help make up the new market! Within a week of the present writing, Senator Morrill of Vermont has broached from his place the idea in debate, that the industries of the United States can be so stimulated by protectionism as to cause the consumption of all the agricultural products of the United States. Well, when? The stimulus has been applied now just thirty years under Mr. Morrill's own eye, and by a tariff called by Mr. Morrill's own name, increasing its rates every little while, even in 1883, when the public pretence was to diminish them; and agricultural products of all kinds, including lard and pork and wool, have never been so "deadly dull" as in this interval of high protectionism. Scores of thousands of bushels of well-ripened Indian corn were burned for fuel in the more western States and Territories the very last winter, because the market for it was too poor to pay for its transportation to Chicago over protectionized rails, and in cars built of tariff-cursed lumber, every nail and bolt and screw in which doubled in price from the same general causes. If Mr. Morrill were not in his dotage, or if in his prime he had ever closely analyzed a single case of trade, foreign or domestic, he would see that the abandoned farms of his own State reckoned to be about one-third of the cultivated land on the eastern slope of the Green Mountains to the Connecticut River,--Mr. Morrill's own native region and residence,--abandoned farms for two years past assiduously sought by State officials to be filled in if possible by immigrants from Sweden virtually giving them the lands and farm-buildings,--fling out their flat contradictions to this senatorial drivel; that the constant decline for a quarter of a century of the farming population in every State in New England gives the lie to this miserable proposition; and that the constantly increasing area of mortgaged farms in every agricultural State in this Union is an overwhelming proof that the "home market" for farm staples has been growing constantly worse for years under this boasted protectionism. The year 1890 is likely to prove the pivotal point of time in the swing of this whole proposition of Deceit, for two reasons, namely, (1) it is the year of the decennial Census, in which at least a half-hearted attempt is being made to bring out the aggregate area in each State of the mortgaged farming lands, and nothing can prevent the appearance in which of the lessening volumes of population in the purely agricultural communities; and (2) the year has already been marked by the political revolt from the party of protectionism of the masses of the farmers in the Mississippi Valley, and their organization into "Farmers' Alliances," naturally and demonstrably hostile to all Restrictions on the sale of farmers' produce. Fallacy D: _that protectionism tends to raise the wages of general laborers_. In our third chapter, the whole doctrine of Wages was clearly and carefully laid down, and it is only needful now to remind the reader of two or three of those fundamental principles. The Labor-giver and the Labor-taker only touch each other at the old points of reciprocal Desires and Renderings. There are two persons standing in that relation each to each. A rate of Wages is always a result of a Comparison. If the Labor-takers, whoever they may be, more strongly desire the services of the Labor-givers, whoever they may be, other things remaining as before, there will be a rise in the rates of Wages, because Effects always follow the operation of Causes in Economics, as in all other scientific spheres; and if the Labor-takers, for any reason, desire less than before the services of Laborers, other things being equal, the general rates of Wages will decline of necessity. Now, what is the necessary effect of Protectionism upon the general Demand for Laborers? How is the whole class of Labor-takers affected by prohibitory tariff-taxes? Note every time, that it is the presently and independently _profitable_ industries, the industries that ask for nothing except to be let alone, that are struck and restrained by these tariff-taxes; the fact that any industry is successfully going forward under its own motives is sufficient proof of its own profitableness; these are the industries, in every case, which are curtailed by restrictive tariff-taxes, their former gains are lessened of course and by design, and their _motives_ consequently to hire Laborers to carry on these branches of business now taxed and tormented are _lessened_; less Desire for Labor-givers gives laborers less every time round; the so-called argument of Protectionists is, to introduce alleged _unprofitable_ industries by means of taxing down _profitable_ ones; and pray, what effect must that have upon the general Desire to employ Labor-givers, and consequently what effect upon general rates of Wages? Take one look further along this same line. Tariff-taxes of this character are designed to keep out, and do keep out, foreign wares, which are the natural and profitable market for domestic wares: how will this forced exclusion affect the Demand for laborers to make or grow the domestic wares whose market is now lost? And what is the influence on the Wages of those whose services are now in lessened Desire along the whole line? Causes produce their Effects everywhere and every time. Dissatisfaction among, and actual disaster to, Labor-givers as a class, have always followed the imposition of protectionist tariff-taxes in this country, as a matter of plain observation and record; have followed increasingly and more disastrously increased restrictions and prohibitions on profitable trade; "Strikes" on the one hand to resist a lowering or secure a lifting of Wages, "Lockouts" on the other to bring laborers to terms, "Shut-downs" for pretended repairs in order to gain time to tide over the gluts that always accompany artificially restricted markets, semi-hostile relations between Employers and Employed, interruptions to travel and transportation, timidities of Capital fatal to new and enlarged enterprises, have never characterized this country so strikingly as during the quarter-century of Protectionism culminating in 1890. The following table accurately compiled by Editor Philpott of Iowa, from the National Census, shows in remarkable figures the relatively slow rate of progress of the Nation in thirteen essential items of growth under the Morrill Tariff, as compared with the rapid rates of progress in the leading lines under the Walker Tariff. _The comparison lies in the per centum of increase over the previous decade of the period_ 1850-60 _relatively to each of the two periods_ 1860-70 _and _1870-80_: the average of the last two periods is taken for the sake of an easier comparison of the progress of the one decade (Walker) with the average of the two later ones (Morrill)._ +----------------------------------+------------+-------------------+ | Lines of Progress. | 1850-1860. | Average each Ten | | | | years--1860-1880. | +----------------------------------+------------+-------------------+ | Population | 35.5 | 26.2 | | Wealth | 126.6 | 61.0 | | Foreign commerce, aggregate | 131.0 | 45.6 | | Foreign commerce, per capita | 70.3 | 15.2 | | Railroads, aggregate | 240.0 | 69.0 | | Railroads, per capita | 150.0 | 34.0 | | Capital in manufactures | 90.0 | 66.0 | | Wages in manufactures, aggregate | 60.3 | 58.2 | | Wages in manufactures, per hand | 17.3 | 9.4 | | Products | 85.0 | 69.6 | | Value of farms | 103.0 | 23.6 | | Farm tools and machinery | 62.0 | 27.7 | | Live stock on farms | 100.0 | 17.3 | +----------------------------------+------------+-------------------+ The State of Massachusetts has been diligently and scientifically taking the Statistics of everything relating to Laborers as such for many years; and we take now by way of confirmation of what has just been written a few statements of fact from the official Reports. _One-third of Massachusetts wage-earners were out of work one-third of the time under the benign influence of Protectionism [1887]. Wages went down in Massachusetts on the whole average 5 per centum 1872-83, while in the same interval of time they went up 9 per centum in Great Britain [1885]. Wages in Massachusetts advanced in 1830-60 (Walker) 52 per centum and in 1860-83 only 28 per centum (Morrill). What is called the needful cost of living increased in Massachusetts between 1860 and 1878 (Morrill) 14-1/2 per centum in spite of immense cheapenings in costs of production and transportation [1885]._ The U. S. Government has been gathering for a long time important Statistics relating to Laborers and their Wages and their Costs of Living, not only in the decennial Censuses but also in Consular Reports and in the Reports of a national Commission established for that purpose. We excerpt a few relevant statements from these almost at random. _Wages in free-trade England are from 50 to 100 per centum higher than they are in any protectionized country on the Continent of Europe. The aggregate Values of this country increased 1850-60 (Walker) 126 per centum, and in 1870-80 (Morrill) only 80 per centum, after reducing the census values of 1870 to a gold basis. Vessels American-owned and American-built controlled three-fourths of our foreign carrying trade in 1856, and less than one-sixth of it in 1886._ The Census of 1880 gives the total number of persons employed in the great subdivisions of industry in the United States as follows:-- Trade and transportation 1,810,256 Manufactures, mechanical and mining 3,837,112 Professional and personal services 4,074,238 Agriculture 7,670,493 The following table compiled from the censuses of the last four decades will be found to yield food for thought in the light of the present paragraphs. _It relates solely to manufactured goods at the four successive epochs._ +-----------+--------------+--------------+--------------+--------------+ | | 1850. | 1860. | 1870. | 1880. | +-----------+--------------+--------------+--------------+--------------+ |Value of | | | | | | products |$1,019,109,616|$1,885,861,676|$4,232,325,442|$5,369,579,191| |Value of | | | | | | materials | 555,174,320| 1,031,605,092| 2,488,427,242| 3,395,823,547| |Wages paid | | | | | | out | 236,759,464| 378,878,966| 775,584,343| 947,953,795| |Materials | | | | | | to | | | | | | products, | | | | | | per cent | 54| 54| 58| 63| |Wages to | | | | | | products, | | | | | | per cent | 22| 21| 18| 17| |Average | | | | | | wages | | | | | | earned | $247| $289| $377| $346| |Capital to | | | | | | products, | | | | | | per cent | 52| 53| 50| 50| |Number of | | | | | | establish-| | | | | | ments | 123,029| 140,433| 252,148| 253,852| |Average | | | | | | hands | | | | | | each | 7.79| 9.34| 8.16| 10.79| +-----------+--------------+--------------+--------------+--------------+ Our manufactures were put down in the Census of 1880 as in value $5,369,579,191. But this sum contains $1,670,000,000 that does not strictly belong to manufactures, such as flouring, lumbering, blacksmithing, sugar-refining, coffee-roasting, slaughtering, and a few others. This sum being taken out, there is left in round numbers but $3,700,000,000. This is not a great amount for 50,000,000 of people, and for a land with such natural advantages for manufacturing as our own. Fallacy E: _that the costs of Wages to employers and of Materials to manufacturers somehow justify Protectionism_. The harmful confusion is constantly made here between Rates of Wages and Costs of Labor--two very diverse matters. Rates of Wages depend on a very different set of circumstances from Costs of Labor. Failure to draw this distinction, and a desperate desire to clutch even at a straw with which to bolster up absurd Restrictions, have made a hotch-potch and a caricature of attempted argument at this point. Rates of Wages have always been relatively high in this country as compared with the countries of Europe for two general reasons: (1) the country is new, with enormous natural advantages of every sort, with comparatively few laborers competing steadily with each other for work, large numbers of persons passing constantly out of the employed into the employing classes; and (2) there has almost always been from the first, and there is likely to be again in the immediate future even if there be not at the present moment, a Money in this country depreciated below the gold standards of Europe, in which the rates of current wages are always reckoned, and which makes them _seem_ to be higher than they actually are in purchasing-power. On the other hand, Costs of Labor have always been, and are now, low in this country as compared with Europe, for two general reasons also: (1) all classes of laborers are more efficient and skilled in this country than in Europe, working with more energy more hours in the week, under less cost of superintendence, being as a rule more temperate and healthful and educated persons, so that employers _get more for what they give_ than do employers abroad; and (2) the cost of that to the employers in which the laborers are paid, whether money or other valuables, is always less here than abroad, because the money usually is depreciated money which costs less in commodities, and even if it be not, the current prices of general commodities are higher here than there, so that the cost of wages paid directly or indirectly in commodities is less here to employers. A second and distinct and wholly convincing proof, that the Cost of Labor to employers has been less here than abroad during the first century of our national existence, has been the unquestioned fact, that the Rate of Profits has been higher. A constant stream of foreign Capital has come hither for investment, drawn solely by the higher rates of Profit. But if the rates of Profit have proven to be higher, the costs of Labor must have been lower, because laborers and capitalists divide the whole returns between them. Nobody else has any claim upon the conjoint proceeds. _Profits are the Leavings of the Costs of Labor._ If, therefore, these Leavings are larger in one country than another, then of necessity the Costs of Labor are lower in the first country. Now, Protectionists have had the effrontery (largely the result of ignorance) to contend, that they are at a disadvantage as employers of laborers on account of the rates of Wages they are obliged to pay to them! _Exactly the reverse is the truth._ Instead of being at any disadvantage at this point, it is a matter of absolute demonstration, that American employers pay the smallest costs of Labor in the world! Employers as such have no interest in the rates of Wages as such, but only in the costs of Labor to themselves as capitalists. High rates of Wages not only usually accompany low costs of Labor, but also are a proof of them! The patient (not to say stupid) American People have consented for thirty years past to be abominably taxed for the exclusive benefit of a set of brazen mendicants, on the ostensible ground, that the said public beggars were unfortunately placed in comparison with European competitors, when the simple truth has been, that they had a constant advantage in the best, and cheapest (in cost to themselves), and steadiest and most intelligent (on the whole), laborers in the world. What is the truth about raw materials in this country? Especially raw materials in those branches of industry, which have been most steadily protectionized from the first, like iron and copper, and cottons and woollens? Can any reason be found for legislatively excluding foreign products of these classes on the ground of any disadvantage of our producers on the score of raw materials? Look at iron ore, for example, now protectionized to the extent of 75 cents per ton. No country in the world possesses such deposits in quantity and quality and accessibility of iron ore as the United States of America. Vast beds of the best ore in the world, especially in wide regions along the whole course of the Tennessee River, lie directly upon the surface of the ground; and the so-called "Iron Mountain" in Missouri is said to have ore enough above the general surface of the country round to supply the wants of the entire United States for two centuries! Yet every ton of this ore is artificially lifted in price to the very People to whom God gave it in exceeding abundance. The average cost of mining, washing, screening, and loading upon steam freight-cars for transportation to market, of brown-hematite ore at one of the Mines in Tennessee during the summer and autumn of 1890, was 33 cents per ton, with a constant downward tendency in cost as machinery was multiplied and methods improved. This included the rent paid to the owners of the land holding the ore-beds, and every other item of cost carefully computed by the owner of the capital and manager at the mines. This statement is made on the authority of the said owner and manager over his own sign manual, with his consent given that it be printed as at present in the interest at once of Science and Righteousness. It has often been publicly stated by experts, that there is more coal in deposit in the United States than in all the rest of the world put together. Nevertheless, bituminous coal has been protectionized since 1874 to the extent of 75 cents per ton, and slack or culm (another form of coal) 40 and 30 cents per ton. The bounty of God to the people of this country has been so far forth thwarted by the greed of mine-owners acting on the subservience of members of Congress to the few rich combined for that purpose to the impoverishment of the unorganized masses. Especially has every interest of New England both popular and manufacturing been sacrificed to the short-sighted selfishness of the mine-owners, because the British Provinces, just to the northward, are full of bituminous coal waiting for a market against New England goods. Limestone is a second indispensable requisite for the reduction of iron ores. God has put the ore and the coal and the lime in unfailing quantities in close proximity with each other throughout the entire valley of the Tennessee. So small is the natural cost of making iron in that favored region, that it has been transported this summer to Savannah by rail (freights heightened by tariff-taxes on steel rails and lumber), and then exported 3000 miles to Liverpool with good profits to the makers by their own confession. Steel rails are protectionized at present to the extent of $17 per ton, formerly $28 per ton. Fortunately, we have at present a competent National Labor-Commissioner, heretofore in the service of Massachusetts in the same capacity, Carroll D. Wright, who has just made a Report to Congress on the comparative cost of producing steel rails here and abroad. The following table is national and official and indisputable. It shows the Element of Cost in one ton of steel rails in Eleven distinct establishments, the first Two being located in the United States, the next Seven in countries on the Continent of Europe, and the last Two in Great Britain. The first column gives the Cost of the Material in the several districts, the second the Cost of Labor, and the third the total cost of the rails. +-----------------+-------------+-------------+-------------+ | Distinct | Materials. | Labor. | Total Cost. | | Establishments. | | | | +-----------------+-------------+-------------+-------------+ | 1 | $21.10 | $1.54 | $24.79 | | 2 | 25.11 | 1.38 | 27.68 | | 3 | 17.67 | 1.04 | 19.57 | | 4 | 18.06 | 2.51 | 22.18 | | 5 | 18.06 | 4.64 | 25.65 | | 6 | 18.23 | 2.58 | 23.12 | | 7 | 18.10 | 2.68 | 23.19 | | 8 | 18.66 | 2.97 | 23.74 | | 9 | 23.42 | 2.01 | 27.02 | | 10 | 18.05 | 2.54 | 21.90 | | 11 | 16.39 | 1.36 | 18.58 | +-----------------+-------------+-------------+-------------+ The reader who knows how to read between the lines will observe the strong confirmation of this table to the point already made in these pages, namely, that the "pauper labor of Europe" costs much more at a given point than the more highly paid labor of England and the United States. Thus: the average Cost of Labor in a ton of rails in the two latter countries is $1.70; the average in the seven Continental countries is $2.63. The average total cost per ton in the nine foreign countries is $22.77; the average in the two establishments here is $26.23. It must be remembered, that the cost of the material and of all the processes of manufacture here is greatly enhanced by the device of the tariff-taxes: still the difference in cost is even then only $3.46 per ton greater than the foreigners' cost: considering that these foreign rails must be carried 3000 miles over sea, how comes it that a tariff-tax of $28 or $17 per ton is needful in order to foster rail-making in this country? Take off all the tariff-taxes the rail-makers and transporters have _to pay out_, and could they not well forego the additional taxes they now impose on their fellow-citizens? Is there anything anywhere in the natural costs of Materials and Labor here to put American manufacturers at any disadvantage in their natural lines of business as compared with foreigners in _their_ natural lines of industry? Fallacy F: _that artificial tariff-burdens placed at one point may become a compensation for other such burdens placed at another point of the same general line_. This fallacy has been luridly illustrated in this country since 1867, when in the Wool and Woollens Tariff of that year additional protectionism was accorded to Woollens ostensibly to compensate the manufacturers for protectionism then first accorded to raw wools. For a number of years the woollen manufacturers had succeeded in persuading the wool-growers not to demand of Congress tariff-taxes on raw wools, thus publicly confessing that such taxes raise the prices of materials to the manufacturers thereof. But the wool-raisers argued naturally, if protectionism be good for woollens, it must also be good for wools; the truth was, it was equally baneful to both, and to every other beneficiary of it in the long run; but the wool-workers had no answer to the simple logic of the wool-growers,--they gave their case away when they alleged that _they_ could not live without government aid,--and so they were obliged to surrender to their already angered brethren of the fleeces in 1867, and higher tariff-taxes were put on the woollens in order to compensate the manufacturers for the anticipated rise in the price of wools. Of course it was supposed that the patient people would bear the now doubled burdens put upon them by _two_ privileged sets of their fellow-citizens. If protectionist taxes made the manufacturers rich, why should they not also enrich the rural herdsmen? In short, why may not such taxes make everybody rich? There were those at the time, and the present writer was one of them, who foresaw and foretold just what has actually happened, namely, that both allies in this scheme of popular plunder were going in to their own death as well as in to the impoverishment of their countrymen. How would any level-headed man, capable of seeing beyond the point of his nose, have prognosticated in the premises? Something like this: it takes many kinds of wools mixed, say six or eight, to make the best woollen cloths, and several kinds to make good cloths at all; the United States could only furnish two or three kinds, and these in quite limited quantities; the tariff-taxes would raise the price of the foreign wools by just so much, to the detriment of the manufacturers, who could no longer buy the foreign wools, needful for good cloths, and must consequently drop down to inferior cloths in their mills, using shoddy and cotton and what not: how will that affect the market for native wools, especially the fine Ohio and Vermont wools? Only as the manufacturers are prosperous in making good cloths that find a quick and wide market at home, can the growers find a good market for their wool; from these heavy taxes on their material and machinery and lumber and dye-stuffs and so on, the manufacture will surely droop, and employ itself on poor goods from cheap materials, and the market for native fleeces will droop in consequence, and the prices of home-wools will go down and down and down of necessity. Precisely this has happened. The gold prices of wool were never before so low in this country as since the unholy alliance of 1867, and as a rule they have gone down lower and lower and lower. Why? Because the manufacturers _could_ not, under the tax-laws of their country which they themselves had egged on, make the cloths demanding the native fine wools. Sheep-raising became unprofitable. Millions of fine-woolled sheep were slaughtered in a few years for their pelts and mutton in Ohio alone. The following official table from the Department of Agriculture exhibits the relative number of sheep in thirteen States of the Union, at the two epochs 22 years apart:-- +--------------+------------+------------+ | States. | Feb. 1867. | Feb. 1889. | +--------------+------------+------------+ | Maine | 895,884 | 547,725 | | Vermont | 1,335,980 | 365,770 | | New York | 5,373,005 | 1,548,426 | | Pennsylvania | 3,456,568 | 935,646 | | Kentucky | 933,193 | 805,978 | | Virginia | 700,666 | 435,846 | | Missouri | 1,005,509 | 1,109,444 | | Illinois | 2,764,072 | 773,468 | | Indiana | 3,033,870 | 1,420,000 | | Ohio | 7,159,177 | 4,065,556 | | Michigan | 4,028,767 | 2,134,134 | | Wisconsin | 1,664,388 | 793,146 | | Iowa | 2,399,425 | 540,700 | | +------------+------------+ | | 34,750,504 | 15,475,839 | +--------------+------------+------------+ The effect of the tariff-taxes on wools, accordingly, even during a period when the population of the country increased 65 _per centum_, has been _to diminish the number of sheep in the hands of the farmers by more than one-half_. The wool clip in the entire country has indeed increased since 1867, but it has been in Texas and on the free ranges of the extreme boundaries of civilization in the West, where about one pound in three of the gross fleece is clean wool, and the most favorable estimate of the present clip would only suffice to clothe about one-half of the people of the country. Does this look like becoming "_independent_" of the rest of the world in the matter of woollen clothing for our great People? Will our folks never learn that there is nothing "_dependent_" in Buying and Selling, that the more any individual or nation Buys and Sells the more _independent_ they become of course, and that the hermit in his poverty-stricken cell is the best image of Protectionism? The extra barriers heaped up in 1867 against foreign woollens not only did not lessen their importation, but in connection with the discouragements thrown upon the domestic manufacture as just explained increased the importations; so that, in 1877, imports of woollen goods stood at $25,000,000; and in 1882 had increased to $42,000,000, the latter being an increase in one year, from 1881, of 34 _per centum_. The people must be clothed at some rate, and many people will have good cloth at any cost; and the whole result of this imbecile policy of Prohibitions on wool and woollens has been demonstrated right before our eyes, (1) to kill off the sheep, (2) to compel the manufacture of poor goods, (3) to multiply foreign woollens in domestic use, and (4) to double in general the cost of clothing the American People. It is difficult to say whether the grangers as a class, or the manufacturers as a class, or the consumers of woollens, are more put out by this state of things. They are all in the slough together, and have only themselves to thank for their condition. And it is growing worse and worse. As a mere and small example, less than one-half the amount of woollen machinery is now in operation in Berkshire County, Massachusetts, that was running here 15 years ago; and three-fourths of all the woollen manufacturers doing business in the County have failed in the 20 years just now past. In one word, _it is no compensation to one industry for artificial burdens piled upon it, to pile corresponding burdens upon other industries affiliated with it_. ALL LEGITIMATE INDUSTRIES EVERYWHERE ARE INTIMATELY AFFILIATED WITH EACH OTHER. Fallacy G: _that because some kinds of prosperity sometimes accompany and follow after Protectionism, therefore they are caused by it_. This is at once the commonest and the hollowest of the forms of false argumentation employed in this country to bolster up a monstrously unjust Privilege. The rapid growth of Chicago, for example, in the ten years following the first imposition of the Morrill tariff-taxes, was often referred to, as if the Taxes caused the Growth. Admitting for argument's sake, what would be the height of folly to admit in reality, that these Taxes were _among_ the causes of that Growth, how absurd to refer to one antecedent the result of one hundred or one thousand antecedents! So of the growth of national population in the twenty years following the Wool and Woollens Tariff of 1867: population increased about 65 _per centum_ in that interval: tariff-taxes on most of the necessaries of life increased in the same interval just about in the same proportion: was there any tie of Cause and Effect as between the rise of taxes and the rising tide of population? Any _tendency_ in the one to bring the other? Because one thing _follows_ another in point of time, is that any proof that the second is the _result_ of the other in point of cause? In the old classification of Logical Fallacies this particular one was called by the Romans "_post hoc ergo propter hoc_," that is, _after something therefore on account of that thing_. The thoughts and the speech of civilized men have always been full of some form of this incongruity of inference; but it is the stock in trade, the staple and body of protectionist argumentation. But it is utterly devoid of any significance whatever. Unless some natural tie of connection can be shown, as between precedent and consequent, unless it can be probably shown that _nothing but_ the precedent could cause the consequent, unless taxes are adapted in their very nature to increase riches, unless repeated subtractions can be shown to be the same thing as multiplied additions, then all this sickening talk of cheapening prices and intensified activities and diffused popular blessings under an odious scheme of subtle taxes that only _take_ and can never _give_, is to be treated with a silent and pitying contempt, whether used by the duped or the duping. A good instance of this empty form of reasoning,--much better because more uniform than any one ever sought to be applied in the realm of Trade,--would be this: the Day has uniformly followed after the Night ever since the dawn of Time, and therefore the Night is the cause of the Day! It has been indeed hard work to destroy the commerce utterly of a great People by legal restraints however multiplied and by mountain-barriers however piled up, and some prosperity has pushed itself into prominence after all these and in spite of all these. Behold! cry the logical protectionists, behold in such prosperity the _effects_ of our beautiful legislation! Immeasurable areas of fertile land to be had by all Immigrants for the asking; endless deposits on every hand of coal and of all the useful and precious metals; primeval forests and streams leaping with power from their mountain springs to mill-wheel and intervale; commodious land-locked ocean harbors on every side but one, and vast chains of inland "unsalted seas"; a salubrious climate, and an ingenious, well-trained people; self-organized and liberal governments, guaranteeing all rational liberties to the people--but one; all these antecedents and accompaniments go, as it were, for nothing in the minds and on the tongues of some of our citizens, as causes of accruing prosperity, in comparison with (as a cause) the commercial bondage at the one point possible under our liberal and blessed institutions. These are seven of the fundamental Falsities of Protectionism. They might easily be made seven times seven, and even seventy times seven. But not one of them is to be forgiven. They are unpardonable sins against Science and Liberty and Progress. Any radical and comprehensive Falsehood, like Protectionism, practically contradicts the Truth at innumerable points. The test of any proposed truth is its harmony with other and acknowledged truths: the test of any suspected error is its contradiction to such truths. Enough has now been said to settle the place of any pretended right of a part of the people commercially to enslave the other part, and ultimately themselves also. It only remains in this chapter, in the fourth place, to indicate briefly at a few points the course of OPINIONS in relation to commercial Restrictions and Prohibitions in general, such as exist at present in their most exaggerated forms within the United States, on the part of those best entitled by study and intellect and opportunity to form and formulate a candid judgment in such matters. In respect to the personal motive and circumstances of those combining to frame such legal interferences with the natural liberty of their contemporaries, and the inevitable results of them, we will quote first from Sir Thomas More, a man of men, in his Utopia, written in 1516. "_The rich are ever striving to pare away something further from the daily wages of the poor by private fraud, and even by public laws; so that the wrong already existing, for it is a wrong that those from whom the State derives most benefit should receive least reward, is made yet greater by means of the law of the State. It is nothing but a conspiracy of the rich against the poor. The rich devise every means by which they may in the first place secure to themselves what they have amassed by wrong, and then take to their own use and profit at the lowest possible price the work and labor of the poor. And so soon as the rich decide on adopting these devices in the name of the public, then they become law. The life of the labor-class becomes so wretched in consequence that even a beast's life seems enviable._" The utter folly of supposing that a Parliament or a Congress or a Committee of either is fit to determine, or to have any voice in deciding, what shall or what shall not be manufactured or grown, what shall or what shall not be exported and imported, was never more happily exposed than by Adam Smith in his Wealth of Nations, published in 1776. "_The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but would assume an authority which could be safely trusted not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it._" Alexander Hamilton, our first Secretary of the Treasury, and in some respects the most brilliant of all our statesmen, has often been claimed and referred to as a protectionist by those unfamiliar with his writings; but the paragraph of those writings, or the phrase of any authenticated conversation of his, has never been quoted and never can be, because they do not exist, which proves him to have been a "protectionist" in the modern, or any other proper, sense of that word. On the contrary, his deliberate and well-founded opinion in the premises is given at length in number XXXV of the Federalist, this number printed early in 1788: "_Exorbitant duties on imported articles serve to beget a general spirit of smuggling; which is always prejudicial to the fair trader, and eventually to the revenue itself: they tend to render other classes of the community tributary, in an improper degree, to the manufacturing classes, to whom they give a premature monopoly of the markets: they sometimes force industry out of its most natural channels into which it flows with less advantage; and in the last place, they oppress the merchant, who is often obliged to pay them himself without any retribution from the consumer. When the Demand is equal to the quantity of goods at market, the consumer generally pays the duty; but when the markets happen to be overstocked, the great proportion falls upon the merchant, and sometimes not only exhausts his profits, but breaks in upon his capital. I am apt to think, that a division of the duty between the seller and the buyer more often happens than is commonly imagined. There is no part of the administration of the Government that requires extensive information, and a thorough knowledge of the principles of Political Economy, so much as the business of taxation. The man who understands those principles best, will be least likely to resort to oppressive expedients, or to sacrifice any particular class of citizens to the procurement of revenue. It might be demonstrated that the most productive system of finance will always be the least burdensome._"[12] Shrewd old Benjamin Franklin, impersonation of common sense and common honesty, ridicules in his sly way the whole wretched business in the columns of the "Pennsylvania Gazette" in 1789. "_I am a manufacturer, and was a petitioner for the act to encourage and protect the manufacturers of Pennsylvania. I was very happy when the act was obtained, and I immediately added to the price of my manufacture as much as it would bear, so as to be a little cheaper than the same article imported and paying the duty. By this addition I hoped to grow richer. But as every other manufacturer, whose wares are under the protection of the act, has done the same, I begin to doubt whether, considering the whole year's expenses of my family, with all these separate additions which I pay to other manufacturers, I am at all the gainer. And I confess, I cannot but wish that, except the protecting duty on my own manufacture, all duties of the kind were taken off and abolished._" In the first congressional debate on the Tariff after the new Government went into operation, that is, in 1789, Fisher Ames of Massachusetts, who had just before made the strongest plea against the Molasses Tax, the raw material of New England rum, became also the strongest stickler there for the protectionist view, that artificial manufactures may properly enough fasten and fatten upon Agriculture, like shell-fish upon ship-bottoms, and went to the root of the whole matter of that inevitable antagonism in a few frank and radical words, the best because the most truthful words that can be found upon that side in the century that has followed. "_From the different situation of the manufacturers in Europe and America, encouragement is necessary. In Europe, the artisan is driven to labor for his bread. Stern necessity, with her iron rod, compels his exertion. In America, invitation and encouragement are needed. Without them, the infant manufacture droops, and those who might be employed in it seek with success a competency from our cheap and fertile soil._" Gouverneur Morris, one of the youngest and among the most gifted of the Revolutionary statesmen, had a clear insight into Economic realities. "_Whatever saves Labor rewards Labor._" "_Those who will give the most for money, in other words, those who will sell cheapest, will have the most money._" "_Taxes can be raised only from revenue: push the matter further, and their nature is changed: it is no longer taxation, it is confiscation._" FOOTNOTES: [9] See an excellent Essay on Mexican Finance by M. L. Scudder, Jr. [10] Public Statement of Professor Taussig of Harvard College. [11] See James Schouler's United States, p. 77 of Vol. I. [12] There were two other authors of some of the papers of the Federalist, Madison and Jay; but Hamilton's authorship of number XXXV was never questioned by anybody; he himself claimed it expressly with his other numbers a few days before he was shot. CHAPTER VII. TAXATION. Political Economy is the Science of Buying and Selling. It must include of course in its discussions the Motives, the Methods, the Obstacles, the Rewards, relating to Sales, which are themselves first to be defined as furnishing the sole Field of the Science. We have now gone through with painstaking all of these topics in order, but we have not yet fairly struck Taxation, which is indeed in all its forms an obstacle to Sales, and in some of them the annihilation of Sales, but which in its nature is something much more than an obstacle, namely, a Condition of something higher than itself. In the very strictest sense of the terms, Taxation is not a part of the Science of Political Economy, because it is not an essential part of any one of those natural processes by which men buy and sell and get gain. It is rather a Condition through Government of the successful ongoing of all those processes. There cannot be, therefore, a _science_ of Taxes, as there is unquestionably a science of Sales. The facts of Taxes are artificial and governmental, the facts of Sales are natural and original. All forms of Production, as we have now seen, go forward in accordance with positive natural forces and motives, which God has appointed, and which men have a natural impulse to ascertain and generalize and profit by; for it is Nature bids men work and save, buy and sell, invent and transport, navigate and grow rich; but Nature has given no whisper anywhere, at least that we can hear, about any Taxes. That is the work of Society. That seems to be something negative, not positive, so far as Buying and Selling is concerned. Taxation is indeed something necessary to the social order, as men are; it furnishes means of defence against greater evils than itself is; but in itself considered, it is an economic evil, because it takes away from exchangers a part of the gains of their exchanges; strictly speaking, therefore, it cannot be made a part of Economic Science. But, on the other hand, as we shall see at length in the exposition that follows, all the relations of Taxation from the beginning to the end are so ultimately connected with Exchanges, are so founded on and limited by Exchanges, its true principles are so exclusively economical, and its abuses are so instantly and constantly harmful to all the ongoings of natural and profitable Trade, that Taxation must always be treated as if it were a part of Economics. The latter is a science, the former is an art; but the art is almost exclusively dependent upon the principles of this one science; and a comprehensive treatise on the science, accordingly, must exhibit all its main bearings upon those practical rules of Taxation, which are so vital to the happiness and prosperity of any People. All scientific Economists, therefore, have considered the subject of Taxes to lie within their legitimate beat. They have, however, justified the inclusion upon very different grounds, one from another; and so far as now appears, the present writer was the first technical Economist to disclaim in the name of his Science direct jurisdiction over Taxation. A careful discussion of a series of distinct though related Questions belonging to Taxes will exhibit the whole practical matter in the light of well-established principles of economical Science. 1. What is the fundamental GROUND of Taxes? _Government_ is an essential prerequisite to any general and satisfactory Exchanges, since it contributes by direct effort to the security of person and property; and justly claims, therefore, from each citizen a compensation in return for the Services thus rendered to him. We do not mean to say that government exists solely for the protection of person and property, or that all the operations of government are to be brought down within the sphere of exchange, for government exists as well for the improvement as for the protection of society, and many of its high functions are moral, to be performed under a lofty sense of responsibility to God and to future ages; nor do we mean to say that government has not also a deep ground for its existence, in virtue of which it may on extraordinary occasions demand all the property of all, and even the lives of some, of its citizens; but we do mean to say that, whatever may be conceded as the ultimate ground of government, the matter of taxation, by which government is outwardly and ordinarily supported, and by which it takes to itself a part of the gains of every man's industry, finds a ready and solid justification in the common principles of Exchange. If, as far as the tax-payer is concerned, the exchange does not seem to be voluntary, on a closer analysis it is seen to be really voluntary; for in effect the people organize government for themselves, and voluntarily support it, and there is no government separate from the will of the people. In a very important sense, accordingly, a tax paid is a reward for a service rendered. The service which government renders to Production by its laws, courts, and officers, by the force which it is at all times ready to exert in behalf of any citizen or the whole society when threatened with evil in person or property, is rendered somewhat on the principle of division of labor, one set of agents devoting themselves to that work; and, notwithstanding some crying abuses of authority which no constitution or public virtue has yet been found adequate wholly to avert, is rendered on the whole economically and satisfactorily. Taxes, therefore, demanded of citizens by a lawful government which tolerably performs its functions, are legitimate and just on principles of Exchange alone. 2. What is the SOURCE out of which Taxes are actually paid? The answer is, out of the gains of Exchanges of some sort. Gifts aside, and thefts which are out of the question, no man ever did, no man ever can, pay his taxes, except out of the gains of some sales which he has already made. Even the man who lives wholly on the interest of his money must make a true exchange in lending it (a credit transaction), and must already have gotten his return-service in interest, before he can pay his taxes; personal and professional servants must receive their wages, the outcome of exchanges, before they can possibly pay their taxes; and men can realize nothing for taxes or other payments from their farms or foundries or stocks in trade except as they sell either them or their products. The more sales, the more gains, and the greater reservoir whence taxes may be drawn. Political Economy, as the vindicator of sales, as the defender of all legitimate gains whatsoever, is the best possible friend of tax-payers and tax-gatherers as such. Whatever thought or force restricts sales, makes it _pro tanto_ the harder to pay and collect taxes, so much the harder for a government to keep its head above water and reach the ends of its being. It follows from all this, by a necessary inference, that the annual Taxes of any country must come out of the annual Earnings of the people of that country, using the word "earnings" in its general and proper sense. The greater the earnings _per capita_, the easier are the taxes paid. Sir Richard Temple read an address not long since in the Section of Economic Science and Statistics of the British Association, some of whose results are not only interesting but also astonishing. For instance, taking the whole population of the United Kingdom (England, Scotland, and Ireland), without division into classes, he demonstrates that the average of yearly earnings per head of the population is £35 4_s._, or $171.28. This exceeds the average earnings in the United States by 30%, £27 4_s._:£35 4_s._ It exceeds also the average on the Continent of Europe by 95%, £18 1_s._:£35 4_s._ It falls below that of Australia only, £43 4_s._:£35 4_s._, or 19% less. Canada's average earnings _per capita_ are $126.80, or 5% less than those in the United States, £27 4_s._:£26 18_s._ According to the same unimpeachable authority in the same paper, the annual income from investments is in Great Britain and the United States as nearly as possible one-seventh of the aggregate Property in each (all kinds), or 14%. In Canada and Australia, 18% and 22% respectively. Undoubtedly the most profitable country in the world at present is Australia, and Great Britain stands next. The only apparent reason why the United States, whose natural resources of every kind are vastly superior to either, takes the third rank is, that profitable exchanges here are forcefully suppressed by law, and that to an enormous extent, neutralizing natural resources and glorious opportunities for easily acquired and widespread gains. This violent suppression of commerce by national legislation makes it just so much the harder for any man to pay his taxes, whether these be due to Nation, State, or Municipality. If the reservoir be diminished the flow from it through every pipe becomes feebler. 3. In what PROPORTION ought the individual citizens to contribute to the fund annually necessary to be raised by Taxation? The usual answer has been, that a man should be taxed according to his _Property_. That is the radically correct answer, though most who have given it have not understood clearly the meaning of the word _property_. We have already seen that the ultimate idea of property is the power and right to render services in exchange, and defined it as _anything that can be bought and sold_. Robinson Crusoe, while solitary upon his island, did not and could not have property, in the true sense of that word. It is not the fact of appropriation that makes anything property; it is not the fact that a man has made it or transformed it, that makes anything property; it is not the fact that a man may rightfully give it away, that makes anything property; but it is the fact that a man has something, no matter what it is, for which something else may be obtained in exchange, that makes that something property, and gives government the right to tax it. In other words, property consists in Values, in a purchasing-power, and not in possession, or in appropriation, or in the esteem in which a man holds anything he has as long as it is his own. The test of property is a sale; that which will bring something when exposed for exchange is property; that which will bring nothing, either never was, or has now ceased to be, distinctively property. This view may not seem to be as novel as it is, or it may be prejudiced by its very novelty, but at any rate it carries along with it that strongest of the criteria of truth, that it simplifies and illumines a confused section of the field of human thinking; and at the same time justifies a practice which governments have reached, as it were through instinct, the practice, namely, of taxing men who have neither real estate nor chattels, on their incomes from industry and from credits. To the general question, then, in what proportions shall the citizens contribute in taxes to the support of government, the general answer comes, that they ought to contribute _in proportion to the gains of their exchanges_, of whatever kind they may be. The farm, the foundry, the mill, the railroad, the real estate of every name; personal property of every kind; and personal acquirements and efforts of all descriptions, best appear, for the purposes of taxation, _through the gains realized by means of them_. If, for any reason, any of these become unproductive, taxes should cease to be derived from them; indeed, must cease to be derived from them, because their owners can no longer pay by virtue of them. It may be objected that lands, for example, presently unproductive, may be held untaxed under this principle, held for the sake of a prospective rise of price. Very well; when they are sold at a profit, let the owner be taxed on that profit: it will be time enough then, especially as men do not like to hold unproductive forms of property. It may also be objected, that, under this principle, wages, the result of personal and professional exertion, would be taxed just the same as profits and rents, the result of previously accumulated property. Very well; they ought to be so taxed. Can anybody give a solid reason why they ought not to be so taxed? One may say, that a professional man earning a large income, on which taxes are paid the same as on a similar income of a land proprietor, dying, leaves to his children no further means of earning, while the land-proprietor, dying, does leave such means. Granted; but the land income continues to pay taxes, while that professional income does not! Other members of the profession will do the business which the former one would have done had he lived, and they will pay taxes on the income from it. What a man transmits to his children, whether a great name or a great estate, has nothing to do with the amount of taxes that he ought to pay while he lives. There is an illusion about lands and real property that needs to be dissipated before men will understand clearly the whole matter of Taxation. Without constant watchfulness and foresight, without constant efforts in improvements and repairs, almost every form of realized property will rapidly deteriorate and become unproductive. Land even in Great Britain, where land is scarce, is only worth about twenty-five years' rent; and without the exercise of intelligence and will property ceases to be. _Property has its birth in services exchanged; services exchanged give rise to gains; taxes can only be paid out of these gains; they ought to be proportioned to the amount of these gains without any reference to the class of exchanges producing them; while the right to tax on the part of the government is connected with a service rendered by government, and both grows out of and is limited by the right to exchange on the part of the citizens._ These considerations, though they may exclude the propriety of a poll-tax, are consistent with most other forms of taxation, and give unity to them. 4. Does it not follow from all the preceding, that a single and universal INCOME-TAX would prove the best form of what is in its own nature a subtraction from the gains of the governed for the maintenance of Government? If the approximate amount of Income could in all cases be ascertained, and if no other form of tax were levied upon the same persons, this would seem to be a perfectly unexceptionable mode of Taxation. The only sources of Income are three: Wages, Profits, Rents. It does not seem that gifts are legitimately taxable; they lie outside the field of exchange; they spring from sympathy, from benevolence, from duty; and while exchange must claim all that fairly belongs to it, it must be careful not to throw discouragements into the adjacent but distinct fields of morals. Hence, it may well be questioned whether legacies, bequeathments, gifts to charitable and educational institutions, and gifts to individuals proceeding from friendship, gratitude, or other such impulse, are properly subject to taxation. The property is taxable in the hands of the donor, and may be in the hands of the recipient, but the passage from one to the other ought to be unobstructed by a tax. Gifts, then, excepted, and plunder, which is out of the question, the sources of income are few and simple, and there is no great difficulty in every man ascertaining about what his annual income is. Because this income, exactly ascertained, exactly measures the gains of his exchanges for that year, a tax upon that income is the fairest of all possible forms of taxation, and might be made with advantage, in time, to supersede all other forms. Superficial objections may be easily raised, and are raised constantly in the United States, against any form of an income-tax. Reference is often had to our national experience with such a tax during and just after the late Civil War. The truth is, that tax was thrown on in addition to, and in no proper relations with, a large number of other national taxes of all sorts, good and bad; it was no possible experiment in Taxation, because there was no opportunity of watching its operation separate from that of other and confused forms; industry of all kinds was demoralized by the war, and still more by a depreciated and abominable paper money made legal tender for all debts; and the tax became unpopular in influential quarters for certain reasons not inherent in the nature of the tax, and was discontinued in consequence. In order to be fairly tested, an income-tax should either be exclusive, all other taxes being intermitted for the time being; or at least levied simply in itself in connection with a few other simple taxes, each of which can be watched in its incidence and results separately from the others. Great Britain derives its national revenues almost wholly from five sources; namely, (1) Excises, say £27,000,000 annually; (2) Customs, say £20,000,000; (3) Incomes, say £12,000,000; (4) Stamps, say £12,000,000; (5) Postals, say £9,000,000. The remaining, say £10,000,000, come from miscellaneous sources. One feature of the English Income-tax is, that it is varied from time to time according to prevailing national needs, the rate having been lifted from 2_d._ to 16_d._ per pound of income, according to estimated expenditures. In 1857, it realized in our money $80,255,000. In 1866, the largest year, our own national income-tax realized $60,894,135. By varying the rate to the pound of income according to the prospective wants of the Exchequer, the English have found for about forty years their income-tax to be the most uniform, unfailing, expansive, and responsive to control, of all their fiscal expedients. The Prussians, too, are applying an income-tax as a means of raising revenue with good success. There, as in England it is somewhat complicated with other kinds of taxes, and cannot exhibit itself altogether in its own nature as if it were _exclusive_, such as all scientific economists would like to see it tried somewhere on a large scale; and the Germans have a different method from the English, of making the tax more or less flexible as circumstances vary. The English change the _rate_ of the tax to the unit of income: the Germans _graduate_ the tax to different classes of income-receivers. For example, those persons having an income between 420 and 660 _marks_ a year pay 84 pennies (_pfennige_) as income-tax; persons in the next higher class pay 164 pennies a year; those in the class, whose maximum income is 6000 marks, pay 44 marks and 80 pennies a year; and all persons whose income does not rise above 420 marks are not subject to this tax. On account of hard times a few years ago, Bismarck brought it about, that all the classes included between 420 and 6000 marks of income should be wholly exempted from one-quarter's taxes. A _mark_ is 23.82 of our cents; and a _pfennig_ is one-hundredth of a mark. Besides the complete harmony of an Income-tax with the general principles of Taxation, as already unfolded, it has several specific advantages over other forms of Taxes. a. It has no tendency _to disturb prices_. Were there no taxation except on Incomes, and were all the incomes rightly ascertained, the prices of everything would be just as if there were no taxes at all. Taxation would then be like the atmosphere, pressing equally on all points and consciously on none. It is through tricks wrought on Prices, that the greatest and most widely spread injustices have been done and suffered in this country during the past thirty years: a depreciated Money, whether of paper or silver, raises some prices and not others, and some prices before others, and thus distributes its mischiefs unequally; protectionist tariff-taxes play of design fantastic tricks with prices, raising some and depressing others, thus working monstrous injustice on a vast scale; and almost all forms of taxation become unequal and unjust through their diverse action on Prices. But a universal Income-tax exclusive of all others, properly levied and fully responded to by the payers, would have no influence at all upon prices, could by no possibility work essential injustice, and would be certain to be very productive without becoming burdensome. b. A second great advantage of such an Income-tax in such a country as this, would manifestly be, that all men would be obliged to keep exact pecuniary accounts; more orderly methods of Business would generally prevail; most men would know much better than they do now how they stand themselves, and whom of others to safely trust; sudden commercial failures, indeed failures at all, would be less frequent and severe; and everything in the business world would be more aboveboard and better known. c. A third advantage of such an Income-tax, and the chief, would be its tendencies _to fiscal simplicity_. Complexities in the Exchequer are always and in many ways expensive to the People. In this country, where distinct taxes have to be paid, first to the local municipality, then to the State, and last to the Nation, Income-taxes, were all others abolished, would have this striking advantage, that the local municipality might best ascertain the incomes of all its legal residents once for all, no matter from what sources local or other the incomes be derived; and, having collected its own local _per centum_, the State and then the Nation would each have to collect an additional _per centum_ on the same income for themselves. Or, better still, by an amicable arrangement, neither party yielding up its inherent right to tax, one set of officials might ascertain the incomes and also collect the tax for all three governments once for all. It may be long, it doubtless will be, before we shall ever come to such economy and simplicity and fiscal beauty as this is; for the pride of sovereignty is very strong both in State and Nation; each is jealous of the powers of the other, each is fond of the pelf and patronage and officialism connected with the gathering of the taxes, and each would be disinclined to yield anything to the other; but the fact remains, that, as it is of acknowledged moment to have the single Cæsar's image and inscription on every piece of the national Money, so it is of almost equal moment in point of cheapness and clearness and simplicity to have the hand of Cæsar seen but once in taking in the Taxes. Objection has been often raised to any form of Income-tax from the publicity of private affairs resulting from it. It was just this that proved fatal to our own first experiment along this line of national action. But there seems to be some confusion of ideas in connection with this phrase, "publicity of private affairs," for really, so far as taxation is concerned, there ought to be nothing "private" about the amount of any man's income, or the aggregate of all forms of his property, inasmuch as every man has a _right_ to know, that all his neighbors are contributing _pro rata_ with himself to support that Government, which is _common_ to him and them. There is nothing, at least there should be nothing, "private" in connection with Government; that is the one absolutely "_public_" thing of the world; least of all should there be anything private in the matter of public taxes, since in bearing up the burdens of Government all the citizens are alike copartners, and in this view and for this purpose each has a right to demand a look into the books of all the others. Another objection has often been raised, namely, that some men will never give in a true return of their Income. Ah! but they can be made to do so, as the forms are perfected, as fraudulent returns are promptly punished by additional assessment and collection, and as the memory and conscience of the payers are quickened by the action of a healthful public opinion brought to bear through the annual publication of the list of their returns. Men are not so isolated from each other as that a man's neighbors do not know pretty well the general amount of his income. There is the additional security of an oath, of the fear of punishment, and of the wish to stand well with one's class. At the worst, it may be said, that evasions and fraud accompany also all other forms of Taxation. 5. What is the difference between DIRECT and INDIRECT Taxes? This is an old and proper division: we must now see what is the economical basis of it. A direct tax is levied on the very persons who are expected themselves to pay it; an indirect tax is demanded from one person in the expectation that he will pay it provisionally, but will indemnify himself in the higher price which he will receive from the ultimate consumer. Thus an income tax is direct, while duties laid on imported goods are indirect. There has been a great amount of discussion on the point whether direct or indirect taxation be the more eligible form; but the reader of penetration will perceive that there is not at bottom any very radical difference between them; each is alike a tax on actual or possible exchanges, with this main difference, that men pay indirect taxes as a part of the price of the goods they buy, without thinking perhaps that it is a tax they are paying, and consequently without any of the repugnance that is sometimes felt towards a tax-gatherer who comes with an unwelcome demand. Thus indirect taxes are conveniently and economically collected. Especially is this true of impost taxes; since one set of custom-house officers may collect easily and at once the government tax which is ultimately paid by consumers all over the country. The taxes also levied by the present United States internal revenue law are indirect taxes, whereby the government gets in a lump what is afterwards distributed over many subordinate exchanges. The countervailing disadvantage of indirect taxation, however, is, that the price of the commodity is usually enhanced to an extent much beyond the amount of the tax, partly because it is a cover under which dealers may put an unreasonable demand, and partly because the tax, having to be advanced over and over again by the intermediate dealers, profits rapidly accumulate as an element of the ultimate price. Direct taxes are laid either on Income or Expenditure. As the difficulty of a tax on a person's whole expenditure is much greater than one on his whole income, inasmuch as the items are more numerous and more diffused, it is only attempted to levy a few taxes on some special items of expenditure, such as those on horses, carriages, plate, watches, and so on; but as these do not reach all persons with any degree of quality, they are so far forth objectionable. A house-tax, levied on the occupier, and not on the owner, unless he be at the same time the occupier, would be a direct tax on expenditure every way unobjectionable. Taking society at large, the house a man lives in and its furniture are probably the most accurate index attainable of the size of his general expenditures. They are open to observation and current remark; they are that on which persons rely more perhaps than on anything else external for their consideration and station in life; the tax could be assessed with very little trouble on the part of the assessor; and it is well worthy the attention of our State and National Legislatures, whether such a tax, if more taxes should be needed, would not be more equal and more easy of collection than any others now open; or whether it might not with advantage take the place of some of the complicated and objectionable taxes now laid. Direct taxes have this general advantage over indirect, that they bring the people into more immediate contact with the government that lays the taxes, and subject it to a quicker supervision and more effectual curb, whenever its expenditures grow larger than the people think it desirable to incur; perhaps they have this general disadvantage over indirect taxes, especially over imposts, that the number of officials required to assess and collect them is larger, thus swallowing up a part of the proceeds of the taxes, with this liability also of bringing the people into an attitude of hostility to the government and to its contemplated expenditures. But whether the taxes be direct or indirect, or whatever be their form, except it be a poll-tax, which is questionable at best, they are laid upon Exchanges, and are designed to withdraw for the use of the government a part of the Gains of exchanges. 6. Are CREDITS a legitimate subject of Taxation? The answer is very easy. Unless this whole treatise from beginning to end be unsound, Credits stand upon the same economical grounds as Commodities and Services, and so may be taxed for the same reasons as those may be taxed. Whatever is bought and sold is properly enough taxed, if the needs of the government require it, and if such taxation would be productive and not too unequal. As Values always spring from the action of individuals, so the incidence of taxes is upon persons rather than upon things; and the question is what can a man sell, or what has he already sold, on the gains of which sale the government may lay some claim? If I have a note and mortgage on my neighbor's farm, I can sell it at any time to a third party; it pays me interest _ad interim_, and I can collect it at maturity. Government therefore properly taxes me for that credit in my possession. It is a part of my property. The holders of the government bonds occupy an economical position exactly similar. They have a lien on the national property and income. The credits they hold are vendible commodities. They are a paper bearing interest. They can be collected at maturity. They are indeed exempted by law from municipal and State taxation. That was a legitimate inducement held out to everybody alike to invest in the bonds. But there is no reason why the nation, having withdrawn them from town and State taxation, should not itself all the more subject them to their fair share of the national burdens, unless indeed it be claimed, as perhaps it fairly may be, that the exemption enables the government to borrow at a just so much lower rate of interest. The income at any rate derived from the bonds should be taxed as soon as any other income is. It is no longer any ground of merit, even if it ever has been, for persons to buy the government debt. It is a mercantile transaction, and should be so considered in relation to taxes. So of other mercantile credits. They are taxable. Massachusetts has had a great deal of trouble of late years both in the Legislature and otherwise about the taxation of mortgages on taxed Massachusetts farms and other real estate. The question is intricate and full of difficulty. Some things about it, however, are clear. The note and mortgage is a different _piece_ of property, and a different _kind_ of property, from the real estate. It is a peculiar sort of credit. The owner of it is a different person from the owner of the real estate. Either bit of property may change hands without changing the _status_ of the other. The question of taxing the note and mortgage, like the question of taxing the bonds, seems to hinge on the effect it would have on the rate of interest of the obligation secured by the mortgage. If the holder of the mortgage expects to have to pay a tax upon it, he will try to get a higher rate of interest on his money loaned and thus secured. Whether mortgagees taxed as such _can_ throw off the tax upon the mortgagors in a higher rate of interest on the money loaned is a point much disputed and at least doubtful. General principles would lead us to favor the taxation of note and mortgages in the hands of their holders, so long as such cumbersome forms of taxing as prevail in Massachusetts are maintained. A universal income-tax would solve this difficulty also in a moment of time. 7. Has Political Economy anything to say about the RATE of taxes per unit of that which is subject to tax? Yes; it has an important word to say upon that point. From the very nature of Taxes in general, and in order that they may be most productive in the long run, as well as discourage as little as possible the Exchanges which would otherwise go forward, the Rate of taxes ought always to be _low_ relatively to the amount of Values exchangeable. A high rate of tax not infrequently stops exchanges in the taxed articles altogether, and of course the tax then realizes nothing to the government. As the only motive to an exchange is the gain of it, the exchange ceases whenever the government cuts so deeply into the gain as to leave little margin to the exchangers. The greater the gain left to the parties, after the tax is abstracted, the more numerous will the exchanges become, and the greater the number of times will the tax fall into the coffers of the government. In almost all articles, consumption increases from a lowered price in even a greater ratio than the diminution of the rate of tax; so that the interests of consumers and of the revenue are not antagonistic but harmonious. On articles of luxury and ostentation, and on those, such as liquors and tobaccos, whose moral effects are clearly questionable, very high taxes may properly enough be laid, because their incidence will hardly tend to diminish consumption, and it would scarcely be regretted if it did; but with this exception, duties and taxes should be levied at a low rate _per centum_ as well for the interest of revenue as of consumers. It is to be added, however, that the taxes even on these articles may be too high to meet either a revenue or a moral purpose. The internal tax of two dollars a gallon upon distilled spirits was of this character. Experience has demonstrated that a less tax will produce more revenue, and the drinking of whiskey, bad as that is, is less culpable than the endless frauds on the government provoked by the high tax. 8. What is the difference between SPECIFIC and ADVALOREM Taxes, and why should the student take careful note of these both singly and combined? These terms are used more particularly in relation to Tariff-taxes, but there is nothing in the distinction itself so to limit its application. A Specific tax is a tax of so many cents or dollars on the pound, yard, gallon, or other _quantity_ measurable: an Advalorem tax is a tax of so much _per centum_ on the invoiced or appraised _money value_ of the goods subject to the tax. Specific taxes, accordingly, are far simpler and steadier in their operation than the others; it is easy to ascertain the weight or number or other quantity of valuables, and then to apply a fixed ratio to them in the way of tax; the payer knows or may know beforehand precisely how much the tax will amount to, and consequently just how it is to affect the profitableness of his current trade; and on these and other grounds specific taxes are preferable to advalorem ones. To be sure, this form of tax involves that high-priced grades of an article pay no higher taxes than low-priced grades of the same, but this consideration is largely overbalanced by those of convenience and productiveness. Advalorem taxes, on the other hand, are never calculable beforehand; because Values from their nature are variable, and as a matter of fact do constantly vary. Imported goods, for instance, bring with them the invoice of the seller giving the values at the place of exportation. But the importer is by no means sure that the tax will be levied upon that valuation. The home valuation will of course be higher, otherwise the goods would not be imported. Whenever it becomes the policy of a country, as of the United States at present, to keep foreign goods _out_ to the utmost extent possible under the law, which law is itself devised on purpose to keep them out, there will always be suspicions and charges of undervaluations at the place of export; there will always be a motive on the part of the foreign seller or agent thus to undervalue the goods in the interest of the importer, so as to lessen his tax, and so increase the seller's market; such abnormal tariff-taxes are the enemy of mankind in general, and, therefore, there will be no end of deceits and evasions at both terminals of the ocean-route, and "custom-house oaths" will become a by-word of course; the importing, or rather the non-importing, country will keep in pay an army of spies and informers on both sides of the water in order to prevent what is called "frauds," and another army of "appraisers" at its custom-houses in order to discredit the invoices, and to jump at a valuation of the goods, on which the tax shall be levied; and honorable merchants and importers, without any fault of their own, are liable to get entangled in the miserable meshes of such goings-on, as happened in a memorable case in New York a few years ago, and be mulcted in fines (perhaps to immense amounts) one-half of which shall go to the informer. There are too many practical difficulties connected with either of these two forms of tax to make it proper to combine the two upon the same article of merchandise. To combine them thus is one of the tricks and traps of Protectionism. That makes it next to impossible for any importer to tell beforehand what the two taxes will aggregate, and quite impossible for any ultimate consumer to tell how much of his price paid is due to the demands of his Government. Opening the official tax-book at random, we quote as follows from a single page: "Webbings, pound 50 cents, and 50 per cent"; "Buttons, pound 50 cents, and 50 per cent"; "Suspenders, pound 50 cents, and 50 per cent"; "Mohair cloth, pound 30 cents, and 50 per cent"; "Dress trimmings, pound 50 cents, and 50 per cent." Besides these, on that same page, there are 14 other articles under similar compound taxes, mostly at 50 cents a pound and 50 per cent additional, this as under the Tariff as it was 1874-83; but all these 18 articles were put in 1883 at "_pound 30 cents, and 50 per cent_." 9. What are the economical reasons for an EXCISE or INTERNAL-TAX in connection with Tariff-taxes for revenue? A tariff-tax, whether for revenue or other purpose, raises the price by so much of the article subjected to it and actually imported; now, if similar articles of the same quality be made or grown at home, and be not subjected to a corresponding tax, these will inevitably rise to the price of the foreign, with the tariff-tax added, for there is no possible competition or conceivable impulse that can keep it lower than that; so that, in that case, the government gets in revenue, only the taxes paid on the part imported, while the people are compelled to pay in addition virtually the same taxes on all that part produced at home. Why should not the government have the proceeds of the last as well as of the first? The last is the direct result of the first. If now, a corresponding excise-tax be put on the domestic product also, the government will get in revenue all that the people are obliged to pay in consequence of government-tax. This is just: the other is wantonly unjust. Take an illustration, please. The national Census of 1890 gives the Pig-iron production of the Census year as 9,579,779 tons of 2000 lbs. each. This is an increase over the production of the Census year, 1880, of 255 _per centum_,--3,781,021:9,579,779. Fortunately the present Census adds the net imports for the two years respectively, with these results: the _per capita_ consumption of Pig-iron in 1880 was 196 lbs., of which 126 was home production, and 70 of foreign import; while in 1890 the consumption was 320 lbs. _per capita_, of which 299 was domestic, and 21 foreign. That is to say, in 1880, 65% of the pig-iron consumed in this country was of home production, and 35% was of foreign production. At that time the tariff-tax on imported pig was $7 per ton. Government secured this tax on a little more than one-third of what was consumed, while a small circle of citizens banded together for that purpose secured for themselves this tax on the remaining two-thirds of all pig-iron consumed that year, _and the whole people paid the tax on the entire three-thirds_. As we shall see fully a little further on, our national Government has no constitutional or other right to tax the people one penny except to supply its own needs as such; if, therefore, the $7 impost per ton were put on as a legitimate tax, there should have been an _excise_ or internal-tax to the same amount put on the pig-iron produced at home. That would have cost the people no more, and the Government would have gotten twice as much more as it did get from the tax. If there be an axiom in Taxation, one point indisputable by any rational human being, it is this: _The Treasury should receive all that the people are made to give up under a public tax._ In 1890, this particular matter came to be much more flagrant. Only 21 parts out of 320 parts were in that year foreign pig-iron; that is, a little less than 7%, while 93% was domestic pig-iron; the tariff-tax at that date was .3 of a cent per pound, or $6.72 per ton of 2240 lbs.; the tax was sufficient practically to exclude foreign pig, although the Scotch pig as more fluent is very much desired here in some branches of the iron manufacture, particularly in making steel rails; Government received the proceeds of its own tax on only one-fourteenth of that, which really paid the tax on its whole fourteen-fourteenths; where did the tax on the thirteen-thirteenths go to? If this were a matter of genuine taxation, ought there not to have been an _excise_ on the domestic corresponding to the _impost_ on the foreign? Precisely that is what we do in the case of other articles not _protectionized_. For example, in the fiscal year 1889, the excise or internal-tax on "distilled spirits and wines" realized to the Treasury $74,312,200, and the tariff-tax on the same realized $7,123,062, total, $81,435,268; on "malt or fermented liquors" the same year, the excise was $23,723,835, the impost only $663,337, total, $24,387,172; and on "tobacco" the excise was $31,866,860, the impost $11,194,486, total, $43,061,346. These figures are official. An ostentatious display of private figures and price-lists is often made, with a design to show that the prices of home-made products protectionized are not lifted so high to consumers or buyers as those of foreign-made products with the tariff-taxes added. The main sophistry in these figures is this: the pure assumption, that the _quality_ of the home-made products alleged to be cheaper than the tax-added price of the foreign, is _the same_ as that of the foreign. Unluckily, things are often called by the same names, and even described by the same technical terms, which are very different sorts of things in reality. A subordinate sophistry in these figures, often allowed to pass, but not requiring any sharp insight to detect, is, that the selected price-lists are not the results of an average extending throughout years, but are _picked_ at points when (owing to other causes than the taxes) the current prices of protectionized home products are lower than the average of the years. One easy way to expose the putters-forth of these figures, as not themselves really believing in them, is, gravely to propose to lower or remove the tariff-taxes, which (it is alleged) do not have the effect to lift much, if any, domestic prices. This simple experiment has several times been tried, with ludicrous effect upon the figure-mongers; they cannot spare one iota of present taxes on foreign products: if the smallest fraction be removed, they can no longer make and vend their wares; indeed, heavier tariff-taxes are needed at this very moment, in order to lift the domestic prices higher; and, presto! another set of figures are forthcoming at once to prove the disabilities, either in respect to Labor or Capital, under which the poor protectionized producers are staggering in order to keep the home market! Another complete refutation of the false position of the protectionists, namely, that the domestics are not lifted in price on the average to the price of the foreigns of the same quality with the tariff-taxes added, is their utter failure and inability to project any reason in the nature of things or the motives of men, why the _home-prices should_ NOT _be thus lifted_! What impulse, pray, on the earth or under the earth, can serve to depress them on the whole average _below_ that point? Does any one say, that "domestic competition" will depress and keep depressed the prices of home goods of the same grade below the prices of the foreign taxes paid? Did this astute objector ever hear of "domestic combination" to keep prices up to the highest possible point? To shut down mills and factories, to avoid depressing prices? To sell surplus stocks abroad for what can be gotten for them, in order to make prices at home up to the usual scarcity point? In July, 1890, the Boston Commercial Bulletin, the special organ of Protectionism in New England, and special spokesman for the wool-and-woollens industry, spoke thus of that industry, after 30 years of public hiring the growers and manufacturers to carry it on with a _bonus_, just at a time when the worsted tariff-taxes had been advanced, alleged custom-house frauds stopped, and still higher tariff-taxes on their way from the so-called McKinley Bill in Congress: "_The woollen goods industry was probably never in much worse condition in this country. The slowness of its development may be judged from the fact, that, despite an average yearly increase of over a million in population, the increase in the number of wool cards in this country is less than a hundred a year, while the proportion of woollen machinery shut down between June 1 and September 1 bids fair to be the largest ever known. The market is dull, deadly dull. The large amount of silent machinery is making its presence felt. The sluggish sales of wool are due to most of the big mills being closed. Depression in business is the cause of so many woollen mills closing, and the news comes this week of four woollen mills, three in the Bay State and one in Pennsylvania, that will close for periods ranging from two weeks to several months._" Not only is it true, that the purpose and usual effect of tariff-taxes is to hoist the price of domestics protectionized up to the limit of the corresponding foreigns with the taxes added, but it sometimes happens that the home products are carried for considerable periods at a level a good deal above that. A conspicuous instance of this, commented on at the time by all the Boston papers, was brought to notice a couple of years ago in connection with the steel beams purchased by the city for the new and noble Boston Court-House. The beams were bought in Belgium at $28 a ton, paid at the Boston Custom-house "_one and one-fourth cents a pound_," that is, just $28 a ton, making their cost to the city $56 a ton. But domestic steel beams of the same general description were selling here at $73 a ton. Their price had been raised here twice in one summer, about fifty cents a ton each time. One of the conglomerated curses of cutting off by law the natural competition in such products is, that the unnatural competition still permitted by law is sluggish in coming into operation, and the monopoly becomes even more such than was intended by the law. The tariff-tax on steel rails is $17 a ton, formerly $28 a ton, proposed in the McKinley bill to be reduced to $11.20 a ton. That even this last is wholly needless, or any tax at all on steel rails, is proven by the fact, that in March, 1890, Pittsburg rail-makers sold 5000 tons of rails at Vera Cruz at lower prices than the corresponding European rails were offered for in Mexico. Another fact that proves the same thing is this: James M. Swank, the mouth-piece of the Pennsylvania iron and steel interests, describes the year 1885 as one of unprecedented prosperity in the steel-rail industry, and gives a formidable list of new establishments opened in that year. But steel rails were much lower in that exceptional year than in any year before or since. A tariff-tax of $5 a ton would have been in that year absolutely prohibitory, for steel rails were worth less than $28 a ton the greater part of that year. Yet that very year was the year of greatest prosperity, Mr. Swank being the competent witness! But the fact in general, which ought to overwhelm the iron and steel protectionists with confusion, if they were capable of any such emotion, is, that iron and steel in every form of both, owing to the unprecedented bounty of God to this good land, costs less both in labor and capital here than in any other country in the world. The official figures of the current Census demonstrate this, authentic statements of practical operators at the iron mines and furnaces and foundries throughout the Tennessee Valley confirm it, and there is not one particle of evidence to the contrary of any name or nature. Let the reader notice carefully the following quotation from a private letter to the writer, dated July 30, 1890, written by a graduate of this college, in whom all who know him have the fullest confidence: "_We began to open the mines here just three years ago this Fall, and began shipping the following Spring. Our price for the ore was then about $1.50 a ton, depending on the analysis. We mined in the old-fashioned way--with picks and shovels--and I am safe in saying it cost us all we got for it. I know I was continually making drafts on my father to keep me out of debt. I did not figure on the cost at that time--I was afraid of the figures. My only thought was how to reduce the cost. We had a Steam Shovel in Pennsylvania, and I got my father to send it to me for trial in this ore. We found we could use it to advantage by using also plenty of powder, and I was soon able to buy the second shovel. Of course that reduced the cost of production still lower, and as there was a market for all I could do, I got the third, and am now putting in the fourth, and the fifth is bought and to be delivered inside of 60 days. This doubling up of the shovels made me get locomotives to carry the ore in the mines instead of mules. I have now two locomotives. You will understand how it would make a saving at that point. It would require 15 mules to do that work, and it could not be done so promptly._ _During the month of May we shipped about 14,500 tons with the use of three shovels, and at a cost per ton for labor and fuel and powder of 33 cents. We have reduced the cost on a week's run, in good weather and with no lack of empty cars, to 29 cents, but it never came lower on the month's average than 33. I expect this Fall, with five shovels instead of three, and two locomotives instead of one, to lower the cost of production._ _Our average price at the mines is $1.20; we sell some higher. I have just now taken a contract for 40,000 tons to be delivered between now and the 1st of February, 1891, at $1.12-1/2. This is the lowest contract price we have ever made, and likely that has ever been made in this locality; but I did it to get into a different market. That ore is to go to Nashville--a distance of 120 miles. The reason for cutting the price to get the increased quantity I will not need to explain to you. You taught it to me. The freight to Nashville is 75 cents. To our other furnaces in Alabama, at Sheffield and Florence, the freight is only 35 cents. What other contracts I have at present are at $1.25._ _With three shovels we make from 600 to 800 tons a day. With one shovel we made from 150 to 250 a day. The variation from day to day depends on the quality of the material we handle._ _The ore is all washed and picked and screened before it is loaded on the cars. A very important part of the work is the work done in the washer. It requires very expensive machinery, and the wear and tear is enormous._ _We pay unskilled laborers ten cents an hour, skilled men as high as twenty-five. We work eleven hours a day. Our general foreman gets $100 a month._" Sugar and Molasses brought in through the tariff in the fiscal year 1889, $55,995,137. The quantity of domestic sugar and molasses relatively to the quantity imported is so small, that an excise upon it in accordance with the general principle of these paragraphs is not worth while, but would be far more just and rational than to offer bounties to the domestic producers out of the taxes paid by the consumers of foreign sugar. A "bounty" in this sense is at once an abuse of a good word, and an abomination in point of fact. For any Government, which is nothing but a Committee of all the citizens to attend to certain joint concerns of all, to abstract money through taxes from the pockets of a part of these citizens in order to reward another part for carrying on an unprofitable branch of business, is something equally repugnant to Economy and Equality. 10. What, then, is the BOTTOM-PRINCIPLE in the Mode of Taxation? It is this: _Relatively low taxes so adjusted on comparatively few things as not to disturb natural prices_. The principle is simple: the problem is difficult; but wonderfully less so the moment all attempts are given up to foster any branch of industry whatever. Our legislators are not called upon to foster any industries. It is out of their beat. They cannot permanently do it, if they try; and they do immense harm while they try. Their "bounty," instead of being a gift, as the word imports, is a haphazard bestowment of other people's money extorted from them by public taxes. The problem becomes simpler every year of public experience under the practical design of so laying the public burdens as to realize to the Treasury the most money with the least possible interference with what would otherwise be the on-going of Exchanges in all directions. So relatively simple and easy has the English taxing system become, under this one leading design, that Gladstone performed without difficulty the functions of Chancellor of the Exchequer in conjunction with the far more arduous and complicated duties of Prime Minister. _Low taxes on few things._ The opposite of this principle at either of its two points becomes at once pernicious. High taxes in general prevent exchanges altogether, by cutting in too deeply in the gain of them, which is the sole motive to them; high imposts prevent importations, and of course destroy the profitable exportations consequent to, and conditioned on, such importations; high taxes even on few things are apt to raise prices of other articles than those on which they are directly levied, and so become objectionable always, and unbearable whenever it is their purpose to raise such prices: taxes on many things, and even on few things every time they change hands, throw an indefinite burden on Exchange, whose weight cannot well be calculated beforehand, either by the consumer or by the government, through uncertainty as to the number of transfers. Once for all, and then an end. Exchanges are indeed the only legitimate subject of taxation, but not every specific and subordinate exchange. An attempt to tax all sales whatever was followed in Spain, and will be followed everywhere, by a sluggish indisposition to trade at all. Let the amount of the tax be definite, and let everybody be sure that when it is once paid government will produce no further claim, and industry will go along under heavy taxes better than under those nominally lighter to which uncertainty as to time or amount attaches. All the more advanced governments have been simplifying of late years their systems of taxation, and collecting their revenue at fewer points, and under more tangible conditions, in order to interfere as little as possible with a free industry and free exchange. The subsidiary principle is important, namely, that all taxes should be collected by the government in as economical a manner as possible, inasmuch as all direct and indirect costs of collection are so much added to the burdens of the People. This covers two practical points: (1) the number and efficiency of the tax-gatherers, and the whole outward machinery of collection, such as the custom-houses, offices of internal revenue, and so on. These, as they concern the whole people equally, should be separated as far as possible from party politics, and the inevitable corruptions thereupon attendant. All the fiscal officers of the United States, from the Secretary of the Treasury down to the lowest tide-waiter, are liable to be changed every four years, and as a matter of fact are usually to a very large extent so changed, to the great detriment of the service and ultimate expense of the people, to say nothing of the moral losses and crevasses involved. (2) The tax-money should be kept out of the pockets of the people as short a time as possible, disbursement following quick upon collection. It is poor policy to gather taxes at the beginning of the year which will not be disbursed till the end of the year. Let the people use their funds till they are wanted at the treasury; and if the taxes do not then come in as fast as wanted, it is better to issue what are called in England exchequer-bills, and in the United States certificates of indebtedness, to be redeemed at the end of the year from the proceeds of the taxes, than to let the people's money lie idle in the treasury. The Secretary of the Treasury should have nothing to do or say about the circulating medium of the country, or the loanable price of the units of it, under any circumstances whatever. He is neither competent enough in Knowledge nor enough established in Integrity to be trusted with any such functions. 11. Should there be any EXEMPTIONS from Taxation? If the necessities of the State require it, government has the right to demand from all persons who are capable of making exchanges, and who do make them, something in the form of taxes. But it is every way better, when possible, that people of very moderate means should be exempted altogether from direct taxes; and the payment of indirect taxes is a matter more in their own option, since they are at liberty to buy much or little of those commodities subjected to an indirect tax. In the State of Massachusetts, incomes not exceeding $2000 are exempted by the law. If a house-tax should be levied, all houses below a certain grade of style and comfort should be exempted, and the tax pass up by easy gradations from those just taxed to the palatial residences of the rich. In the present age of the world, the well-to-do citizens of every country are able to bear without too great difficulty the burdens of the government, and nothing tests better the degree of civilization which a nation has reached than the care and solicitude it displays for the welfare of its poorer citizens. 12. Who pays the INDIRECT TAXES? At a court ball, Napoleon the First once observed a lady noticeable as richly dressed and as wearing splendid diamonds, and on asking her name, found that she was the wife of a tobacco manufacturer of Paris; it occurred at once to the quick mind of the French ruler, that the State might just as well have those profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly, which now yields about 400,000,000 francs a year. That is indirect taxation. So is the British and United States tariff and excise on tobacco. Producers and dealers and bankers and companies add the tax demanded from them, and sometimes more than the tax under color of it, to the price of their wares. But it is not true that they can always realize the whole of this enhanced price. Generally they can, sometimes they cannot. If the article be one of necessity, or a luxury that has become equivalent to a necessity, and there be no other source of supply than the taxed one, then, as a rule, the tax falls wholly on the consumer, and is a matter of indifference to the producer or dealer. But the usual effect of an enhanced price is to lessen demand, and if the article is dispensable, or its consumption can be lessened, or it can be obtained elsewhere, the market will be sluggish under the tax, and producers or dealers will be likely to tempt it by lowering prices, in other words, by sharing the tax with consumers, and paying that share out of profits. This is the principle. Producers and dealers would rather the tax were off. Consumers generally, but do not always, pay the whole of it. 13. What is to be said about the DIFFUSION of Taxes? David A. Wells, an admirable and indefatigable authority on all practical questions in Economics, though perhaps less skilled in scientific classification and generalizations, several years ago made somewhat prominent in public discussion the tendency of Taxes _to diffuse themselves_. Much more has been written about this than is actually known about it. By Diffusion is meant that it does not make so much difference upon what or upon whom a tax is originally levied, because the tendency of things is to _diffuse it_, that is, to compel others to assist in paying the tax. The result of much personal reading and reflection on this point is the conclusion that taxes do not "diffuse themselves" nearly so much as has been sometimes supposed; and that, at any rate, it is a good deal better to take the taxes from those who ought to pay them, than to lay them at random, and then to trust some unknown forces to make them afterwards just. It is certain that _some_ unjust taxes cannot be diffused; for example, the protective tariff-taxes paid by the farmers upon articles of necessary consumption. These taxes have no tendency to raise the price of the farmers' produce, for _that_ is determined by the foreign market, to which large parts of the produce are exported. For such taxes the farmers cannot reimburse themselves. Taxes that affect no prices are the best of all; taxes that affect prices the least are the next best; and taxes that are _designed_ to affect prices are the very worst. 14. What are the bearings of the UNITED STATES CONSTITUTION on the whole matter of Taxation in this country? We have now seen pretty fully, what the science of Economics has to say about the sources and modes and results of tax-laying: but we are bound to tell also, what the kindred but much less developed science of Politics, and particularly what the Constitution of the Fathers, has to say upon the same vitally important topics. (1) The first power granted by the People to Congress, which is simply their agent, in that Instrument from which each of the three great Departments of Government derives all its authority, is in these words, exactly copied from the original and official parchment in every particular: "_The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States._" This grant of power, which stands first in order, is followed by seventeen other express powers granted to Congress in the same eighth Section of the first Article. There never has been any difference of opinion, and there cannot be under such completely explicit language as this, among competent Statesmen and Commentators, as to the exact meaning of this clause, namely, Congress is given power to lay taxes in order to get money, with which to pay the debts and provide for the common defence and general welfare of the United States. That was the opinion and purpose of every member of the Federal Convention, that framed the Constitution in the summer of 1787; of Alexander Hamilton, who was first called on as Secretary of the Treasury officially to interpret it; of Daniel Webster, often called the "great expounder" of the Constitution; of John Marshall, the great Chief Justice of the Supreme Court; of Judge Story, the first copious and most distinguished commentator upon the Text; of George Bancroft and George T. Curtis, the learned and elaborate historians of the Text; and in short, of everybody else, who has earned any right in any way to have an opinion on any such matter of political interpretation. Why, then, has there been from the first until now, a feeble flutter of butterfly wings around the clause, as if, somehow or other, it gave Congress by hook or by crook some power or other to do something _else_ than to lay taxes in order to get money for the maintenance of the national Government? As if there lay concealed in the language somewhere a power to lay taxes for a purpose precisely opposite to that expressed in the text, namely, _nominal taxes designed to prohibit any money being gotten under them_? And why did Hamilton himself, whose wings were those of an eagle, sweep low and hover uncertainly about these words, and so give color to the political historians of our time to say: "_Once more laying hold of the "general welfare" clause of the Constitution, Hamilton here argued, under color of giving bounties to manufactures, as though Congress might take under its own management every thing which that body should pronounce to be for the general welfare, provided only it was susceptible of the application of money. Though he limited this central discretion to the application of money, and stated some restrictions rather vaguely, the insidious tenor of his report was to show that the Federal power of raising money was plenary and indefinitely great._" The true answer to these questions is a point of Grammar. The simple English infinitive, unlike the simple infinitive of any other language with which the writer is acquainted, _often expresses purpose_, as well as the action of the verb without limitation of person or number; so that, it is perfectly good English to say, "To lay taxes to pay," when the only possible sense of it is, "To lay taxes _in order to pay_." Greek, Latin, and German would use here with the infinitive the particle expressing the purpose: the English language does not. It is not true to say, that ambiguity enters this clause, through the common and elegant use of the simple infinitive in English to express the purpose; but it _is_ true to say, that superficial confusion has entered here, and a mess of bad logic. What makes it absolutely certain, beyond the possibility of a controversy, that Congress can levy taxes only in order to get money by means of them, is, (a) that is the only English of the clause; (b) the "debts" of the United States can only be paid in money; and (c) if this be _not_ the meaning of the clause, its meaning must then be plenary, and there would be no need or place for the remaining seventeen powers, "and all other powers vested by this Constitution in the Government of the United States or in any Department or Officer thereof"; in other words, any other interpretation of the taxing clause than the plain one would destroy the Constitution root and branch; for, if Congress have the general power "to pay the debts and provide for the common defence and general welfare of the United States," all other possible powers are included in this, and President and Court disappear, and all other clauses of the Text are a nullity. If the above course of reasoning be sound, and he would be a bold logician who should openly dispute it, then taxes laid for any other end than revenue are clearly unconstitutional. The Supreme Court has never passed upon this bald point, for it has never been mooted in this form; but one would think, there can be little doubt how the judges would decide in any "case" directly involving the constitutional power of Congress to levy prohibitory tariff-taxes, whose avowed or clearly inferrible design it is, _not_ to get money with which to pay the debts and so on, but to cut off the possibility of getting any money thereby. The general trend of the decisions of the Supreme Court has wisely been, to leave in their interpretations of the Text the widest margin of discretion to the Legislative branch as to the best means of _raising_ revenue; but when it comes to face the question of allowing as constitutional the best means of _preventing_ revenue,--well, may we be there to see and hear! (2) There are prohibitions on Congress in the Constitution, as well as powers conferred, and among these this: "_No tax or duty shall be laid on Articles exported from any State._" This is a part of the third great Compromise of the Constitution, and was a concession to the southern and planting States to make more palatable to them the power "to regulate commerce," that was expected to be used (and was used) in behalf of the northern and navigating States. But the concession was more nominal than real, as the southerners found out in time to their vexation. To prohibit taxes on exports, and to leave in full vigor the power to tax imports, though consonant with the then prevailing delusion of Mercantilism, is no boon to commerce in general; because, any restriction on buying products is equally and instantly a restriction on selling products. Exemption from taxes on exports is a good thing in itself, but the only reason for selling exports is to take in profitable pay the imports naturally offered against them; and if these be restricted or prohibited, the restriction or prohibition applies instantaneously and inevitably to the would-be exports. A reasonable liberty of exporting is nothing, unless accompanied by a reasonable liberty of importing, because the imports pay for the exports and the exports buy the imports. The southern States rejoiced for a time in this exemption-clause of the Constitution, for their rice and cotton and indigo found no obstacles in going out; but the only motive in sending them out was to buy something with them to bring back; and after the snare of Protectionism entangled the People in 1816, 1824, and specially in 1828, when the "Tariff of Abominations" was passed, the southern people saw only too distinctly, that taxes on imports which they wished to bring in were the same in effect as taxes on their own exports would have been. Mr. Calhoun and the others were effectually undeceived by the customary on-goings of commerce; and as the northern statesmen unwisely and unpatriotically determined to crowd this iron home in 1828, the party of the other part developed under great provocation the doctrines of Nullification and Secession, which have since caused a plenty of tears and bloodshed. One wrong ever begets other wrongs. The wretched Greed of one section of the country was own father to the wrongful Secession of the other section. The Farmers of this country have often been congratulated on their privilege under the constitution of exporting their agricultural products without a tax. The congratulation is hollow. Of what use is it to go out free and come back manacled? The ultimate is always the return-service. The farmers are cheated. Their agricultural exports are falling off year by year solely in consequence of outrageous tariff-taxes on imports. In 1881, farmers' produce was exported to the amount of $730,394,943, and that was not one-half what it would have been under a simple and adequate Tariff for Revenues; but in 1889, these exports only reached $532,141,490, a falling off of nearly $200,000,000. This decline was chiefly in meats and breadstuffs. No wonder the farmers have been complaining of terribly hard times of late years: no wonder they are organizing "Alliances" and other machinery for reaching a remedy: they must see clearly first where the disease lies: the truth is, they are tariff-taxed to death: their foes are they of their own household: Vermont, a purely agricultural State, is the only one in the Union, that has actually _retrograded_ in property and population in the last census-decade: those excellent people have hugged the Tariff-delusion to their ruin; their senior Senator, whose name is unpleasantly connected with the national tax-laws of a generation, has never yet in the course of a long and reputable life gained a glimmer of the commercial truth,--if men _will_ not buy they _can_ not sell. (3) The only other clause of the Constitution, which, as students of Taxation, we are bound to examine, is the following: "_No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken._" A capitation tax is a poll-tax, which may be easily "proportioned" to the Census. It is not clear, what is the meaning of the words "or other direct tax"; the Supreme Court early struggled with that question, to this apparent result, that _lands_, as the only form of property that can be "proportioned" in their appraised value to population with any considerable degree of accuracy, are the only "other" subject of "direct" Taxation. However this may be, it is of considerable consequence to note, that the term, "direct tax," as used in the Constitution, does not correspond in its meaning to the significance of the same term as employed in Economics. With us, a "direct tax" means one demanded from and paid by the person on whom it is ostensibly levied, and cannot be thrown off or forward on anybody else; while an "indirect tax" is one which can be so thrown off or forward. Attention is called to the distinction here, in order to show that an Income-tax, while in the Economical sense it is a "direct tax," is not such in the sense of the Constitution. Objections were urged against the late Income-tax in this country, that it was a "direct tax," and so, because it could not be proportioned to the population, was unconstitutional. The point is not well taken. It remains, and will remain, after the most searching scrutiny, that an universal Income-tax, all other taxes being abolished, is the form most consonant with the principles of Political Economy, and not at all repugnant to the Constitution of the United States. 15. Finally, are there any hints and guides to thought and legislation in the matter of Taxation through an extremely brief summary of the HISTORY of Taxes? So far as the Greeks are concerned, they showed a practical good sense in their laws of Property in general, and in their laws relating to Taxes in particular. The natural march of industry and commerce was not hindered by taxation: there was no forbidding the export of raw materials or specie; no favoring of manufactures at the expense of agriculture; no hint of the future Mercantilism in any efforts to preserve an artificial balance of trade; and no taxes on imports except for purposes of Revenue. These at Athens itself were usually 2% of the value of the goods, at the ports of her subject-allies 5%, and exceptional cases of higher rates than these were regarded as extortionate. The Romans also were sensible and moderate in their modes of Taxation. They laid taxes for the sake of getting money for the public treasury, and had no other end in view. They knew nothing of what has since become famous under the name of "Protectionism." Their taxes were both direct and indirect, but especially the latter. The chief direct tax was the land-tax, that is, a claim to the tenth part of the sheaves and of other field produce, such as grapes and olives; and also pasture-money (_scriptura_) demanded of those who made use of the public pastures and woods. In Macedonia and the other larger Provinces, in lieu of the land-tax a fixed sum of money (_tributum_) was paid to Rome each year by each community in its own way. The grain-tenths and pasture-moneys were always farmed out to private contractors or companies on condition of their paying fixed quantities of grain or fixed sums of money. The chief indirect tax was customs-duties. There never was at any time a general tariff for the whole empire, but there were customs-districts, such as Italy, Sicily, proconsular Asia, the province of Narbo in Gaul, and others, each with a sort of tariff of its own, and some with special immunities. Goods imported by sea into Italy, for example, not for the personal use of the importer, were subject to a tax, which seems to have been mainly a tax on luxuries, since pepper, cinnamon, myrrh, ginger, perfumes, ivory and diamonds, are among the dutiable goods mentioned in one of these tariffs. Sicily had a tariff-tax quite distinct from this, since one-twentieth of the value of the goods (5%) was levied on the frontier on _all_ imports and exports; and a similar tax of one-fortieth was laid by the Sempronian law on the province of Asia. These imposts, too, were leased to contractors, which gave, of course, some chance of fraud and wrong. There were other temporary taxes, like those, for instance, which Augustus laid of 5% on legacies and inheritances, and of 1% on articles publicly exposed for sale. Green's History of England (I., 322 _et seq._) gives an outline of the taxes there from the beginning of the monarchy. As land was almost the only source of salable things in the early time, so it was almost the only thing on which taxes were levied. Danegeld and scutage and feudal aids fastened only on the land. "But a new principle of taxation was disclosed in the tithe levied for a Crusade at the close of Henry Second's reign. Land was no longer the only source of wealth. The growth of national prosperity, of trade and commerce, was creating a mass of personal property which offered irresistible temptations to the Angevin financiers. No usage fettered the Crown in dealing with personal property, and its growth in value promised a growing revenue. Grants of from a seventh to a thirtieth of movables, household property, and stock were demanded. The right of the king to grant licenses to bring goods into or to trade within the realm, a right springing from the need of his protection, felt by the strangers who came there for purposes of traffic, laid the foundation for our taxes on imports. Those on exports were only a part of the general system of taxing personal property. How tempting this source of revenue was proving, we see from a provision of the Great Charter, which forbids the levy of more than the ancient customs on merchants entering or leaving the realm. Commerce was in fact growing with the growing wealth of the people." This passage shows, that, as a matter of fact, _taxes_ have always hinged, and must hinge, on _trade_. A few facts in the most recent movements of national Taxation in the United States may fitly conclude this Chapter and this Volume. Since 1867, Wool and Woollens have been the ass, upon whose breaking back the most conspicuous burdens have been piled; and the "McKinley Bill" so-called, still pending at the present writing in the Senate, heaps up still higher the groaning loads. The following table shows how futile is the attempt to keep out wools and woollens from such a country as ours, even by the most exaggerated barriers:-- IMPORTS OF WOOLS AND WOOLLENS. (Calendar Years.) -------------------------------------- | Years. | Wools. | Woollens. | |--------+-------------+-------------| | 1886 | $17,403,099 | $43,995,641 | | 1887 | 15,645,020 | 45,065,986 | | 1888 | 14,542,244 | 49,984,298 | | 1889 | 18,696,277 | 54,080,159 | | 1890 |(fiscal year)| 56,582,000 | -------------------------------------- Roger Q. Mills of Texas stated from his place in the House of Representatives in 1888, that the United States grows but about 265,000,000 lbs. of wool yearly, while it takes about 600,000,000 lbs. to clothe our own people. Why should more than half the wool needed to clothe the people be taxed in such a way as to double (in general) the cost of the people's clothing? And why should Benjamin Harrison, now President of the United States, have said in that same year, in view of these elsewhere unheard-of taxes, and in view of the average climate of his country, that somehow it seemed to him _that cheap clothing implied a cheap man_? In view of the enormous natural demand for woollens, in order to keep comfortable day and night 64,000,000 of inhabitants, is it not strange, and must there not be artificial causes for it in the kind and mode of national Taxation, that the United States has but 16 sheep to the square mile, while Germany has 92, France 111, and Great Britain 339? Senator John Sherman stated in his place in August, 1888, and again in substance Sept. 2, 1890, that a line of custom-houses on our joint-frontier with Canada was "_the height of nonsense, and almost a crime against civilization_." Well might he say this in view of what his colleague, Allison of Iowa, has recently said, namely, that the Dominion bought in 1880 of the United States 8% of its brass goods, 86% of its copper manufactures, 94% of its cordage, 88% of its gingham, 65% of its glasswares, 99% of its rubber goods, 94% of its printing ink, 92% of wooden wares, 91% of tinware, 90% of wall-paper, 72% of paper wares, 98% of ploughs, 97% of engines, 99% of sewing-machines, and 90% of miscellaneous machinery. The imports and exports of the United States for the last two fiscal years are as follows:-- ------------------------------------------------------- | | 1889. | 1890. | |-------------------------+-------------+-------------| |Imports, free |$256,487,078 |$265,588,499 | |Imports, dutiable | 488,644,574 | 523,633,729 | |Total | 745,131,652 | 789,222,228 | |Exports | 742,401,375 | 857,824,834 | |Gold and Silver {Imports | 28,963,073 | 33,976,326 | | {Exports | 96,641,533 | 52,148,420 | |Total Imports | 774,094,725 | 823,198,554 | |Total Exports | 839,042,908 | 909,973,254 | ------------------------------------------------------- There two or three noticeable points from this table. First, the large relative increase of free imports over those of former years. Free articles in 1867 were less than 5% of the whole; in 1882, 30%; and in 1890, 33.9%. The Free List, so-called, has indeed been enlarged in the interval, but free goods tend naturally to swell over the taxed goods, so that in 1890 the free were almost exactly one-half of the taxed. Second, of the large total of merchandise exports, it is to be sorrowfully noted, that more than 82% of the whole is made up of the products of agriculture and forests and mines (not gold and silver); while manufactures compose only 17.8%. What ails our manufactures, that we cannot sell them abroad? We have been for 30 years under a vaunted scheme warranted to develop manufactures,--expressly designed and recommended to make them cheap and good,--under an elaborate and artificial scheme that makes everything bend, even the backs of the toiling millions, to foster and propel manufactures! But we do not succeed in selling much of them abroad, except some fractions of them to Canada. The ratio of them to the total of exports of merchandise seems to be growing less: in 1889, 18.9%; in 1890, 17.8%. The simple truth is, that we are able to sell abroad even this beggarly proportion of manufactures to the total exports of merchandise, only in consequence of a shrewd device working within the Grand Device, namely, the so-called "Free List." Some of the little wheels within the big wheel revolve rapidly. Manufacturers do not like to pay protectionist tariff-taxes _themselves_ any better than other people like to pay them. They have by their own open confession in overt act precisely the same opinion of their deadening influence, that other people have. If, however, they can escape such taxes on the things they have to buy, especially their raw material, and _keep_ them on their own finished goods offered for sale in a monopoly market, they would be happy. Hence, the Free List. Hear Senator Dawes before the Paper-makers' Convention at Saratoga in 1887: "_There is one other feature of tariff revision much discussed at the present time which must not escape our attention, and that is free raw material. No industrial policy will promote the highest prosperity of both labor and capital in this country, which fails to lay down the raw material at the door of the manufactory at the lowest possible cost. In any new revision of the tariff this rule of preference for our own raw material must be adhered to by those who do not propose to give up the American for the indifferent policy in legislating between ourselves and foreigners._ IT WILL BE FOUND, HOWEVER, TO ADD VERY FEW RAW MATERIALS TO THE FREE LIST, FOR THE REVISIONS OF 1874 AND 1883 HAVE ALREADY MADE FREE ALL SUCH NON-COMPETING RAW MATERIALS AS AT THE TIME OF THE PASSAGE OF THOSE ACTS WERE ENTERING TO ANY CONSIDERABLE EXTENT INTO THE CONSUMPTION OR PRODUCTION OF THE COUNTRY." Till now, we have been dealing in facts, and figures, and in careful generalizations after the inductive manner: let us, at the very last, indulge in a freak of fancy. Suppose for a moment, that all taxes of every name could be abolished instantaneously, and the Governments, like the Israelites, live on manna for forty years. What harm would ensue? What industry would decline? Who would be impoverished? What stimulus to work and save and grow rich would be weakened thereby? Would not wages, and profits, and rents, all be lifted thereby, with no damage to anybody? A child can see that Taxes from their very nature are a burden, are a subtraction from income, are a _minus_ and not a _plus_. Who, then, except from sinister motives, can imagine and represent, that Taxes are a good in themselves, a positive blessing, a spur to the progress of Society? Taxes of some sort there must be for the maintenance of Governments, which are established for the good of all. Why, then, should not the Taxes be just as few, just as simple, just as comprehensible, just as universal and equitable, as is consonant with the single end of their existence at all? INDEX. A. Abraham, 9, 384. Abstinence, 93, 191, 338, 445. Abyssinia, 386. Activities of men, 1. Actors, 4. Act of Parliament, 127. Act of 1624, 135. Adams's inauguration suit, 510. Administration, 358. Advalorem rates of tariff tax, 489, 558. Advantages of credit, 271. Advantages of discount, 302. African _macoute_, 388. "African, the," 158. Agent of the mill, 4. Age of iron, 95. Ages of stone, 95. Agreeableness of rendering, 218. Agriculture, 149, 538. Allison of Iowa, 582. Alloy, 416. America, 3. American capital, 166. Ames, Fisher, 538. Amsterdam, 165, 311, 421. Analysis, 15. Ancient Romans, 2. Annual earnings, 543. Apprenticeship, 186, 203. Arbitration, 266. Aristophanes, 420. Aristotle, 47, 98, 158, 248, 381, 402. Aristotle's Logic, 63. Arkwright, Richard, 108. Arlington Mills, 516. Artisans of every name, 2. Ascertainment, 15, 246. Asia, 19. Asia Minor, 333. Asia, pro-consular, 579. Association, 99. Assyria and Babylonia, 330. Astor, J. J., 180. Astronomy, 63. Auction, 57. Augustus Cæsar, 392, 580. Australia, 252, 399. Axe, 90. Axioms, 69. B. Babylonian tablets, 332. Bacon, Lord, 63, 64. Bailee, 278. "_Balance of trade_," 312, 406, 452. Bales of cotton, 345. Ball, John, 228. Balloon of promise, 343. Bancroft, historian, 512, 573. Bangor, 454. Bank bills, 286. Bank defined, 291. Bank deposits, 291. Bank discount, 299. Bank messengers, 5. Banker defined, 6. "Bankers' bills," 315. Bank of Amsterdam, 280. Bank of England, 82, 287, 292, 350, 396, 448. Bank of Massachusetts, 288. Bank of New York, 288. "Bank of North America," 288. Bank of Scotland, 325. Banks of Newfoundland, 180. Barter, 364. Bascom, John, 71. Bastiat, 47. Beauty of gold and silver coins, 413. Beck, Senator, 491. Benevolence and impertinence in trade, 239. Bentham, Jeremy, 252, 448. Benton, Thomas H., 494. Berkshire Co., Mass., 260, 533. Berlin, 3. Berlin Geographical Society, 27. Bernhardt, 211. Bessemer Steel Co., 487, 491. Best money, 395. Best tenure of lands, 155. Betterments on land, 173. Bill-discounters, 300. Bill of exchange, 278, 300, 303. Bill of lading, 277. "Bills of credit," 435. Bimetallism, 415. Bismarck, 210. "Black Death," 227. Blacksmith's capacity, 118. Blades of the shears, 249. Blaine, Secretary, 507. "Blanket" mortgage, 284. Blunders in economics, 75. "Body," 78. Bombay spinner, 201. Bonnieres quarry, 164. "Book of Trades," 114. Borrow, 277. Boston Commercial Bulletin, 563. Boston Custom House, 564. Botany, 63. Bottom-principle in taxes, 567. Bounty of God, 43. Bradford, Governor, 391. Bradley, Mr. Justice, 359. Breadth of contracts, 241. Bright, John, 199. British colonies, 313. British Isles, 84. British Provinces, 527. British Revenue Tariff, 485. British statesman, 153. Brokers' board, 302. Broker's office, 6. Bronson, 434, 436. Brotherhoods, 226. Buchanan, James, 447. Bullets as money, 392. Bullion theory, 403, 451, 453. Bureau of Statistics, 264. Burman Empire, 385. Buying, 14. Buying and selling, 4, 15, 236. C. Cakes of tea, 386. Calhoun, Senator, 497, 499. Calicoes, 105. Canada, 179. Capital, 92, 96, 246. Capital defined, 93. Capital wears out, 171. Capitalists as a class, 233. Capitalists of Boston, 4. Captains of industry, 196, 244. Carey, H. C., 103. Carpenter's square, 38. Carthage, 21, 84. Carthaginians, 387. Cartwright, Edmund, 111. Cases and classes, 68. "Cash accounts," 333. Cash credits, 324, 327. Cattle, 80. Cattle as money, 383. Causes of labor troubles, 238. Cavour, 210. Cecil, Robert, 126. Cedars, 23, 40. Census, 75. Central America, 27. Chadwick, Sir Edwin, 197, 200. Chaldean tablets, 331. Chalmers, Thomas, 137, 215. Chase, Chief Justice, 356, 357. Chatham, 210. Chattels, 93. Checks on market rate, 56. Chemistry, 63. Cheque-Bank, 321, 329. Cheques, 303, 317. Chevalier, 399. Chicago, 278, 477, 501. Chicago, fire in, 500. China, 19, 387. Chinese-wall policy, 474. Christianity, 22, 30. Christians, 10. Church relations, 241. Cicero, 97, 189, 248, 333, 403. Circular credits, 327. "Circular notes," 328. Circulating capital defined, 99. Civil Law of Rome, 206. Civil war, 353. Civil wars, 260. Civilization, 10, 89, 252, 366. Claims of conscience, 243. Classes of facts, 66. Classes of salable things, 7. Classes of valuable things, 5, 62. "Clearing house," 318, 321. Cleon, 421. Clergyman, 4. Clerks at the clearing, 320. Clifford, Mr. Justice, 357. Clog of economy, 33. "Cloth-workers' guild," 258. Coal, 497, 527. Cobden, Richard, 202. Codification, 206. Coffee and tea, 488. Cog-wheel railway, 1. Cohoes, 3. COIN, 429. Coined money of two kinds, 426. Coke, Lord, 89. Colbert, 404. Colonies of New England, 249. Columbus, 26. Commerce, 17, 402. Commercial credits, 49, 271. Commercial crises, 347. Commercial treaty of 1860, 30. _Commodatum_, 276, 340. Commodities, 2, 8, 20. Commodities defined, 80. Common law, 9, 88, 130, 205. "Company," 4. COMPANY OF THE INDIES, 438. "Compete," 464. Competition, 44, 121, 175. "Compromise Silver Bill," 475. Conditions of production, 99. Conditions of a science, 67. Conditions of trade, 15. Congress, 256, 288, 450. Connecticut, 100, 435. Conrad, John, 183. "Consolidated annuities," 274. Consols, 285. Constancy of employment, 219. Constitution of the United States, 133, 178, 256, 358, 444, 474, 494, 572, 578. Constitutional law, 429. Continental Congress, 441. Cooley, Judge, 113. Co-operation, 268. Cooper Union, 222. Copper skewers, 385. Copyrights, 132. Core of money, 378. Corn laws, 58, 177, 217. Cost by railway mile run, 233. Cost of capital, 161, 165, 231. Cost of labor, 161, 231. Costs of carriage, 466. Costs of production, 159, 165, 397, 462. Cotton, 105. "Cotton City," 498. Cotton-gin, 100. Cottons and silks, 457. Coupons, 337. Court calendars, 254. Craft-box, 226. Craftsmen, 259. Credit, 372. Credit-claims, 6. Credit defined, 275. Credits, 8, 20, 58. Credits are capital, 338. Credits as taxable, 555. Crompton, Samuel, 110. Crossed cheques, 321. Current rate per centum, 165. Curtis, George T., 573. Custom, 224. Customs-taxes, 238, 474. D. Damascus, 8. Davis, Mr. Justice, 357. Dawes, Senator, 584. Dawn of history, 8. Dealer in services, 6. Debits at the bank, 6. Debt, its etymology, 275. Debts of the bank, 6. Decatur, Commodore, 482. Decennial Census, 519. Deduction, 62, 69. Deductive sciences, 63. De Foe, 100. Demand acts upon value, 54. Demand and supply, 369. Demand defined, 52, 190. Denarius of Rome, 238, 385. Denomination-dollar, 388, 390. Denominations of money, 372, 388. "Depositaries," 295. Deposit-banking, 293, 295, 297. Deposits, 296. Descartes, 68. Desires, 18, 64, 75, 138. Detroit, 491. Dey of Algiers, 482. Diffusion of taxes, 571. Diminishing profits, 228. Direct taxation, 553. Disadvantages of credit, 271, 343. Discount, 273. Discount defined, 301. Diversity of advantage, 25, 102, 117, 131, 136, 262, 455, 458. Divine purpose, 26. Division of labor, 252, 257, 374. Dock laborers' strike, 313. Doctors' fees, 204. Doctrine of chances, 221. Doctrine of rent, 146. Dollar-bill, 427. "Dollars," 359. Domestic trade, 481. Dorsetshire laborer, 223. Drachm, 385. Drawee, 329. Drawer and bearer, 330. Duke of Orleans, 437. Durability of machinery, 168. Dutch capital, 166. Dutch East India Co., 280. Duty, 65. E. Easiness of learning, 219. East India Co., 114, 132. Economics, 31, 40, 64. Efficiency, 164. Efforts, 20, 59. Efforts and renderings, 32. Egypt, 9, 11, 24. Electricity and lightning, 70. Elliott, Ebenezer, 202. Ely, Professor, 251. "Empire State," 286. English recoinage, 422. English shilling, 317. Enlarging wages, 228. Ephron, 9, 384. Equation of international demand, 468. Erie Canal, 286. Estimates, 22, 34, 39, 43, 60. Ethics, 64, 75. Etymology, 37. Etymology of "credit," 275. Euphrates country, 392. Euripides, 237. Europe, 9. Evarts, William M., 73. Exact sciences, 63, 65. "Exchange against," 314. "Exchange in favor," 315. Exchequer, 549, 568. Excise tax, 560. Exemption from taxes, 570. Experience and experiments, 65. Exports, 462. Exposure, 15. Ezekiel the prophet, 11, 83. F. Fallacies of protectionism, 503. Fallacy A, 504. Fallacy B, 508. Fallacy C, 516. Fallacy D, 520. Fallacy E, 524. Fallacy F, 529. Fallen market rate, 55. Fall of valuables, 49, 77. Falsities of protectionism, 535. "Farmer," 156. "Farmers' Alliances," 519. Farmers of United States, 577. Fawcett, Professor, 223. Federalists, the, 537. Fees of preachers, 207. Feigned cases, 65, 73. Feudalism, 248. Field, David Dudley, 206. Field, Mr. Justice, 357, 360. Field of investigation, 1. Field of the science, 540. Fire Insurance Co., 298. First difficulty in money, 361. "Five articles," 485. "Five-twenties," 285, 355. Fixed capital defined, 99. Fluency of gold and silver, 401, 407. Foreign bills of exchange, 306, 336. Foreign trade, 454, 462. Forms of credit, 271. France and England, 30. France and England in trade, 456. Franklin, Benjamin, 436, 538. Franklin's experiment, 69. Fraud, 16. Freak of fancy, 584. "_Free breakfast table_," 488. Free list, 583. Freedom, 99, 112. French "francs," 316. French government, 56. French lands, 156. Fruit dealer, 366. Funds, British, 284. Future time in credit, 273. G. Gambling, 347. Gangs of slaves, 100. Garibaldi, 211. General rise of prices, 348. Generalizations, 7, 67. Genesis, Book of, 143. _Genus_, 7. George, Henry, 142, 147, 151, 174. Georgia, 441. German Empire, 133. German "Mark," 317, 393, 413. Germans in Italy, 292. Gibbon, historian, 130. Gift, 16. Gifts of God, 85. Giving, 15. Gladstone, W. E., 151, 153, 172, 568. Glasgow, 137. Gloversville, 103. Glut of products, 140. Gold and silver divisible, 412. Gold and silver impressible, 412. Gold coins, 409. Gold eagle, 35. Gold eagle of United States, 389. Gold in greenbacks, 356. Goodhue of Massachusetts, 496. Gould, Jay, 204. Government a committee, 252, 481. Governments, 29, 267, 409. Gradual occupation of the earth, 154. Graduated income tax, 549, 550. Grains, 57, 87. Grand Device, 583. Grand Trunk Railway, 163. Grant, General, 358, 359, 408, 500. Gratuitous elements, 144. Gravitation, 363. Great Britain, 313. Greek cities, 384. Greek language, 298. Greeks, 73. Greeley, Horace, 129. Greenback dollar, 476. Greenbacks, 51, 280, 290, 409, 425, 432. Green Mountains, 519. Green's History, 9, 580. Gresham's Law, 421. Gresham, Sir Thomas, 421. Grier, Mr. Justice, 357. Ground of taxes, 542. Ground of trade, 25. Grounds of production, 116. Guild of Armorers, 226. "Guildhall," 226. Guilds of the Middle Ages, 258. H. Hamilton, Alexander, 288, 393, 415, 511, 536, 573. "Handsome is that handsome does," 250. Hargreaves, John, 106. Harrison, President, 582. Harrison's inaugural suit, 511. Hartley of Pennsylvania, 495. Health, 113. Hebron, 9, 81, 83. Henry II., 580. Hepburn _vs._ Griswold, 356. Herodotus, 386. Heyd, Dr. W., 27. Hildreth, historian, 512. Hills of Judah, 25. Hindoo rice, 393. Hired men lack motives, 255, 208. History of taxes, 579. Hoar, Judge E, R., 358. Holland, 280. "Home Market Club," 516. Home Rule, 173. Homer, 81, 383. Homer, Sidney, 351. Hoosac River, 27. Hoosac Tunnel, 286. Horse-leech cry, 514. House-tax, 555, 570. Hudson's Bay Company, 114, 180. Hull, John, 434. Human efforts, 89. Human nature, 363. Hume, David, 121, 124, 326, 373. "Hymn to the Nativity," 149. I. Ideal dollar, 426. Idle capital, 191. Iliad, 81, 383. Illinois Central Railway, 232. Impeachments, 253. Imports, 474. Improvements in machinery, 465. Income bonds, 284. Income tax, 547, 549, 578. Indented servants, 248. India, 26. Indirect taxation, 553, 570. Individuals _vs._ Government, 253. Indorsements, 304. Induction, 62, 397. "Infant industries," 514. Infinite Mind at work, 363. "In God we Trust," 413. Inland bills of exchange, 306, 336. Inquiry, 78. Internal taxes, 560. International demand, 460. "International Copyright," 212. International exchange, 330. Introspection, 65, 67, 71, 77. Invention, 99, 104. Invention of money, 366. Ireland, 386. Irish banks, 288. Irish Land Bill, 151. Irish leases, 173. Iron Mountain, 526. Iron in Tennessee Valley, 565. Irving, Washington, 180. Israelites, 584. Issuer and bearer, 355, 427. Italy, 150. J. Jack-knife, 94. Jacob, 9. Jacobites, 292, 422, 431. Jamaica rum, 496. Jamestown, Va., 162. Jay, John, 537. "Jealousy of Trade," 121. Jefferson, Thomas, 415, 424, 442. Jerusalem, 12, 24. Jevons, Professor, 319, 381, 399. Jews, 9, 10, 21, 24, 240, 333, 443. Job, the Book of, 83, 397. Jonson, Ben, 88. Joppa, 22, 23. Judges, 4. K. Kay, father and son, 106. Kentucky, 491. Key to unlock difficulties, 364. Kinds of tariffs, two, 483. Kinds of utility, 44. King Hiram, 11, 16, 364. King Philip's victories, 392. King Solomon, 11, 16, 364. _Kinkiness_, 105. "Knit-goods Bill," 488. Knox, Comptroller, 433. Knox _vs._ Lee, 359. Kountze Brothers, 328. L. Labor, 182. "Labor and Capital," 183. Labor defined, 90, 161, 184. Laborers, 4, 184, 186. Laborers as a class, 233. Labor-troubles, 237. _Laissez faire_, 252. Land Bill, 1881, 172. Land parcels, 146, 170. Lands, 141. Lapoint, Alfred, 130. Latin Union, 414. Law, John, 341, 436, 439. Law of diminishing returns, 153, 172. Law of supply and demand, 52, 53. Laws of Moses, 443. Lawyers, 4. Layard, 331, 384. Legal rate of interest, 234. Legal ratio of gold and silver, 393. Legal restrictions, 225. Legal tender, 355, 356, 359. Legislators, 4, 270, 377, 451. Life Insurance Co., 298. Lightning-rod, 70. Limestone, 527. Limits of production, 136. Limits of value, 58. Lincoln, Abraham, 210. Lind, Jennie, 187. Liverpool, 455, 528. Loan, 276. Loaves of bread, 379. Locke and Newton, 423. Lockouts, 247, 266, 521. Locomotives, 233. Logic, 63. Logical fallacies, 534. London bills, 310. London bills of exchange, 469. London Bridge, 2, 3, 313. Lord Mayor of London, 265. Losses from depreciated money, 478. Louisiana, 438. Lowell, 3. Lowell and Jackson, 497. Lowell mill, 7. Lowell on the Merrimack, 498. Lowering rates of interest, 234. Lowndes, Congressman, 498. Low taxes on few things, 568. Lucretius, 95. M. Macaulay, 123, 422. McCulloch, Hugh, 359. Macedonia, 579. Machinery, 197, 200. McKinley, 508, 516, 563, 581. Macleod, Henry Dunning, 47, 278, 292, 382, 383. Machpelah, 82, 365. Madison, James, 494, 537. Magellan, 26. Magna Charta, 444, 581. Major Premise, 63. Malthus, T. R., 215. Manager at the Clearing, 5, 320. Mania, 16. Market defined, 137. Market for products, 54. Market value, 54. MARKETS, 195. Marshall, Mr. Justice, 358, 573. Mason's trowel, 38, 98. Massachusetts, 286. Material commodities, 49. Maximum value, 61. Mechanics, 42. Mediterranean, 23. Mercantile sagacity, 140. Mercantile system, 115, 312. Mercantile Theory, 403, 452. Mercantilism, 576. Merchant defined, 6. Merchants as a class, 9. Messengers at the Clearing, 320. Metaphysics, 64, 75, 242. Methods and motives in foreign trade, 481. Methods of mining, 398. Metric system, 419. Metropolitan Museum, 332. Mexican exports, 479. Mexican imports, 479. Mexicans, 105. Mill, John Stuart, 32, 63. Miller, Mr. Justice, 47, 357. Mills, Roger Q., 581. Milton, 149. "Mind-cure," 263. Mint of Amsterdam, 422. Mississippi Valley, 519. Mobility of laborers, 221. Molasses, 496. Molasses tax, 538. Mommsen, 238. Monetary Conference at Paris, 73, 74. Monetary "par," 471. Money, 77, 361, 367. Money a measure, 380, 415. Money a "medium," 370. Money a tool, 377. Money, current, 51. Money defined, 380. Money divisible, 374. Money is capital, 374. Monopoly, 88, 122. Montesquieu, 388. Moody's "power-loom," 497. Moors from Africa, 481. Moral sciences, 63. Morals, 113, 248. More, Sir Thomas, 536. Morrill, Senator, 518. "Morrill Tariff," 521, 533. Morris, Gouverneur, 539. Morris, Robert, 415. Moses, 11. Motives of Protectionists, 493. Motives to trade, 77. Mountain view, 1. Mountains of Israel, 25. Mount Lebanon, 23, 364. Mozart, 211. Munn, Dr., 204. Murillo, 56. Muscular effort, 189. Musicians, 4. _Mutuum_, 276. Myers, P. V. N., 332. N. Names on notes, 301. Napoleon, the First, 134, 570. Narbo in Gaul, 579. National Bank, 289. National Banks of United States, 428. National Debt, 351. National Labor Commissioner, 528. Nationalism, 251, 256. Nature, 102. Nature of Credit, 271. Natural agents, 85, 86. "Natural monopolies," 136. Nebuchadnezzar, 332. Nelson, Mr. Justice, 357. Nevada mines, 411. New England, 145. New Hampshire, 36, 441. New Jersey, 502. New Orleans, 438, 454. New Testament, 12. New York, 165, 477. New York Central Railway Co., 491. New York Clearing-House, 5, 7, 319. "New York Public," 350. Nickel pieces, 394. Non-capital, 97. North Carolina, 92. Nottinghamshire, 163. Novgorod, in Russia, 386. Nullification, 577. O. Objective and subjective, 31. Objective realities, 76. Obligation in credit, 275. Ocean freights, 474. O'Connell, Daniel, 177. Ohio sheep, 530. "Oil Trust," 179. Oklahoma, 221 Old Testament, 11. Open ports of Great Britain, 474. Operatives, 4. Opinions on Protectionism, 535. Orders to pay, 328. O'Reilly's poem, 208. Oresme, Nicole, 98. Origin of capital, 95. Oscillations of demand, 408. "_Ought_," 65. Ounce of silver, 36. Our Lord, 12. Outlying cases, 142. Overseers of the mill, 4. Owners, 38. Oxford University, 338. Oxus River, 27. P. Pacific States, 418. Paganini, 187. Palermo, 455. Palfrey, historian, 512. Paper-makers, 197. Paper-makers' convention, 584. Paper money, 427, 429. Par of Exchange, 307, 316. Par of foreign exchange, 468. Paradise Lost, 88. Parcels in the Clearing, 6. Paris, 3, 57. Paris bills of exchange, 470. Parliament, 284. Past time in commodities, 274. Patent rights, 132. Paul, Lewis, 109. Pauper labor of Europe, 528. Payer and payee, 329. Peace, 29. Peas and potatoes, 272. Peasant proprietor, 157. Peculiarities of Credit, 271. _Pecunia_, 81, 384. Pence and pound, 389. Pennsylvania, 436, 490. Personal services, 181. Personal slavery, 80. _Persons_ in credit, 275. Petals of flowers, 70. Pheidon, King of Argos, 384. Philip le Bel, 404. Philpott, editor, 521. Phoenicians, 21. Physical sciences, 32, 63, 64, 71. Physicians, 4. "Physiocrats," 141. Physiology, 216. Pierre and Company of Paris, 307. Piers Ploughman, 228. Pig-iron production, 560. Pilgrims, 391. Pillars of Hercules, 84. Pine-tree shillings, 392. Plato, 248. Pliny, 384. "Political Economy," 15, 174. Polo, the traveller, 387. "Pool," the, 2. Poor Richard's Almanack, 158, 243. Poor's Railroad Manual, 229. Popular remedies for low wages, 251. Portability of money, 411. Porter, Dr. Samuel, 28. Porters, 2. Portfolio of governments, 254. _Post hoc ergo propter hoc_, 534. Post Offices, 256. Potosi, silver of, 398. Pottery wares, 502. Pounds sterling, 310. "Power," 91. "Power-loom," 111. Preamble of the Constitution, 256. Present time in services, 274. President Jackson, 289. Press and Pulpit, 244. Price, 50. Price, Bonamy, 338, 382. "Prices current," 50. Prices of services, 375. Prices under taxation, 549. Principle of taxes, 546. Privy Council, 350. Probabilities, 347. Probability of success, 220. _Procullus_, 451. Production defined, 84. Products in market, 54. Profitable exchanges, 473. Profits, 94. Profits the leavings of wages, 235. Progress of civilization, 10. Promise to pay, 279. Promissory notes, 300. Property, 101, 275, 545. "Property is theft," 148. Proportion of taxes, 544. "Protectionism," 309, 453, 493. Protectionism is prohibition, 486. Proverbs, 12. Providential elements in Economics, 362. Prudhon, 148. Prussians, 549. Public opinion, 451. "Pulpit or Platform," 22. Q. Quality of gold uniform, 411. Quantity of metals, 399. Queen Elizabeth, 123. Questions of taxes, 541. "Quick sales and small profits," 344. Quittance, 354. R. Randolph, John, 498. Rapidity of circulation, 372, 409. Rate of interest in Holland, 234. Rate of taxes, 556. Rates of discount, 316. Ratio of gold and silver, 74. Raw materials, 526. Redemption of greenbacks, 291. Religion higher than morals, 263. Remedies for labor troubles, 238. Renderings, 26, 59, 76, 78. Rent, 160, 169. Rent defined, 170. Republic of Mexico, 478. Republic of Venice, 291. Requisites of production, 84. Return services, 138. Revenue, 113. Revenue rights, 134. Ricardo, David, 146, 153, 169, 176. Right and wrong, 65. Rise in market rate, 55, 77. Rise of prices, 408. Rise of valuables, 49. "River and Harbor Bill," 488. Roach, John, 516. Robinson Crusoe, 100. "Rogues' Island," 441. Roman coins, 385. Roman Law, 277. Roman mercantile transactions, 238. Roman taxes, 579. Romans, 313, 402, 579. Royal Bank of France, 438. Royal library at Nineveh, 384. Ruggles, S. B., 74, 418. Rupee, 386. Russia, 150. S. _Sabinus and Cassius_, 451. Salary-class, 184. Salt, 178. San Francisco, 455. Sandal-wood, 23. Sardanapalus, 331. Satisfactions, 28, 75, 115. Savannah, 527. Savings banks, 270, 334. Saxon ancestors, 93. Say, J. B., 137. Scandinavian "crown," 317, 393. "Scarcity" of money, 440. Schouler, James, 511. Science as prophetic, 450. Science defined, 62. Science of buying and selling, 61. Science of value, 42. Scotch banking, 325. Scotch banks, 288. Scotland, 437. Scott, W. L., 265. Screw of Discount, 316. Scriptures, 9, 14. Scudder, M. L., 478. Secession, 577. Second difficulty in money, 362. Secretary of the Treasury, 296. Sempronian law, 580. Services, 7. Servius Tullius, 384. "Seven-thirties," 285. Shakspeare, 88, 98, 211. Shears, 91. Shekels, 9. Sherman, Senator, 48, 490, 582. Shoddy, 130. "Shoemakers' Guild," 258. Shut-downs, 521. Shuttle, 91. Shylock, 98. Sicily, 580. Silks and cottons, 457. Silo, 155. Silver certificates, 279. "Silver Colony," 392, 442. Silver dollar, 418. Six kinds of exchanges, 8. Skilled laborers, 186. Smith, Adam, 114, 385, 398, 448, 536. Smith, Captain John, 162. Smith, Jonathan, 205. Smithson, James, 214. Social relations, 241. Society, 5, 18. Sociology, 242. Solomon, 18. Somers and Montague, 423. Sons of Heth, 9. Source of taxes, 543. Sources of income, three, 547. South Carolina, 435, 497. Spain, taxes in, 569. Spanish-Mexican dollar, 424. Spanish milled dollar, 415. Spaulding, E. G., 354. Speaker of Commons, 126. Specialties, 103. Species, 8. Specific rates of tariff-tax, 489. Specific taxes, 558. Speculation, 476. Speculation proper, 346. Spencer, Herbert, 342. Spinning, 106. Spinning-Jenny, 108. "Springfield Republican," 265. St. Louis, 114. St. Petersburg, 455. St. Timothy, 242. Standard of comparison, 377. Stanford, Senator, 439. "Star Route Frauds," 256. State banks, 288. States and nation, 68. Statistics, 230. Statute law, 9. Stealing, 15. Steel beams, 564. Steel rails, 487, 490. Sterling exchange, 472. Stephenson, Robert, 129. Stock, 284. Stock Exchange, 347. Stockholm, 455. Storrs, Dan, 303. Story, Mr. Justice, 573. "Straddles," 347. Straits of Gibraltar, 481. Strikes, 247, 261, 521. Strong, Mr. Justice, 359. "Subdue," 144. Sub-forms of capital, 99. Subject of money clear, 361. Subject of Political Economy, 1. Subjective elements, 39. Subsidiary coins, 394, 418, 425, 433. Sub-treasury of United States, 319. Sugar and molasses, as taxed, 567. "Suppliants" of Euripides, 237. Supply and demand, 36, 445. Supply defined, 53. Supply of laborers, 219. Supreme Court, 575. Supreme Court of United States, 360. Suspension of specie payment, 431. Swank, James M., 565. Swayne, Mr. Justice, 357. Syllogism, 69. T. Taconics, 27. Tailor's capacity, 119. Talents, Parable of, 13. Tariff, 128, 481. Tariff defined, 483. Tariff delusion, 577. Tariff for revenue, 483. Tariff Monopolies, 134. "Tariff of Abominations," 576. Tariff of United States, 487. Taussig, Professor, 128, 488. Taxation, 363, 540. Tea and coffee, 488, 492. Teachers, 4. Temple at Jerusalem, 364. Temple, Lord Richard, 199, 202, 544. "Thaler," 393. Theft, 16. Thing-dollar, 427. Third nation in trade, 459. Thompson, Professor, 516. Thoughts, 64. Ticket, a general, 371. Time of advance, 166. Tobacco of Virginia, 369. Tobacco taxes, 571. Tools, 95. Trade, 10, 72. Trades-unions, 226, 258. Treasurer of the mill, 4. Trebizond, 27. Tree-wool, 105. Troughton's inch, 390. Trust, 10. Trustee, 278. Tubal Cain, 95. Tunis and Tripoli, 482. Tyre, 11, 83. Tyrians, 19, 22. U. Ulpian, 277. "Ulster right," 224. Ultimate elements, 30. Union Bank of London, 328. Unique cases, 46. United Kingdom, 171, 203, 393, 406. United States, 139, 165, 247, 288, 380, 405, 415, 450. United States Bank, 288, 289, 293. United States Money, 310. United States Treasury, 279. Universal income tax, 556. University, Johns Hopkins, 251. Unprofitable exchanges, 473. Unseen elements, 31. Unvalued lands, 143. "Ur of the Chaldees," 384. Usury laws, 442, 448. Utility, 144, 161. Utility and Value, 43, 147. V. Vale of Sharon, 26. Valuable lands, 143. Valuables, 7, 49, 368, 378. Value, 32, 65. Value acts upon demand, 54. Value defined, 46. Value of cottons and silks, 459. Vasco da Gama, 27. Vermont, 577. Vermont wools, 530. Vice-President Clinton, 289. Virginia in 1755, 436. Vital principles of a protective tariff, three, 486. Vital principles of a revenue tariff, three, 483. Voluntary associations, 226. W. "Wages," 161, 184. Wages-portion, 192, 257. "Wages-question," 163. Wages, the leavings of profits, 235. Walker, Francis A., 163, 184. Walker, J. H., 340. Walker's "Money," 382. "Walking-delegate," 265. Waltham, 497. Wampum, 386. War debt, 353. Washington, 210. Washington's inauguration suit, 510. Water from the spring, 59. Waterfall, 87. "Water-twist," 109. Ways and means, 355, 487. "Wealth," 32. "Wealth of Nations," 398, 536. Webster, Daniel, 88, 187, 573. Wells, David A., 571. West of Europe, 19. Whigs, 292. Whitman, William, 516. Whittier, 258, 500. Will, 64. William and Mary, reign of, 292, 392, 423. Wiltshire laborer, 223. Wolfe, General, 207. Wool, 105. Wool and woollen industry, 563, 581. Wool and woollens tariff, 529, 533. Wool manufacturers, 516. Worn-out farms of New England, 155. Wright, C. D., 267, 528. Y. Yard-stick, 378. York shilling, 424. Typography by J. S. Cushing & Co., Boston. Presswork by Berwick & Smith, Boston. * * * * * Two Earlier Works By PROF. PERRY. INTRODUCTION TO POLITICAL ECONOMY. Revised Edition. 12mo, $1.50. POLITICAL ECONOMY. Eighteenth Edition. Rewritten and Enlarged. Crown 8vo, $2.50. Prof. Perry's most elementary text-book, Introduction to Political Economy, presents the subjects of Value, Production, Commerce, Money, Credit, and Taxation, in a way plain and easily grasped by young minds, but at the same time scientifically exact. In his preface the author says: "I have endeavored so to lay the foundations of Political Economy in their whole circuit, that they will never need to be disturbed afterwards by persons resorting to it for their early instruction, however long and however far these persons may pursue their studies in this science." "This work is not meant in any way to take the place of its author's larger treatise, but rather to occupy a field which, in the nature of the case, that work cannot occupy. It is not an abridgment of that work but a separate treatise, intended primarily for the use of students and readers whose time for study is small, but who wish to learn the broad principles of the science thoroughly and well, especially with reference to the scientific principles which are involved in the practical discussions of our time.... We need scarcely add, with respect to a writer so well known as he, that his thinking is sound as well as acute, or that his doctrines are those which the greatest masters of political science have approved." --_The N. Y. Evening Post._ _Prof. Perry's Advanced Work._ POLITICAL ECONOMY. Eighteenth Edition. _Rewritten and Enlarged, 1 vol., Crown 8vo. $2.50._ This book has passed through several revisions, to the most thorough of which it was subjected in 1883. It has grown in size, in symmetry and in maturity of thought and expression, so that it is a complete exposition of the science, both historically and topically. The distinctive feature of the work is its discarding the term _Wealth_ and making _Value_ the subject of the science. Original light is thrown on the vexed questions of Land, Money, and Credit, and the whole trend of the book is on the side of sound currency and unrestricted trade. Professor Perry's style is admirably clear and racy; his illustrations are forcible and well chosen, and he has made a subject interesting and open to the comprehension of any diligent student, which has often been left by writers vague and befogged and bewildering. This work has stood excellently the test of the class room, and has been adopted by many of the chief educational institutions in this country. Among them are Yale College, Bowdoin College, Dartmouth, Trinity, Wesleyan, University of Wooster, Dennison University, Rutgers College, New York University, Union College, Seton Hall College, Hampden-Sidney, and many other colleges and normal and high schools. * * * * * CRITICAL NOTICES. "This edition has the marks of mature power and complete grasp of the subject, and that finished style in which thought and language have become perfectly adjusted to each other. The statements and illustrations convey the thought clearly and aptly."--_Boston Watchman._ "You have made an exceedingly valuable contribution to the science of political economy. I am not a little surprised that a college professor should have written a book so intelligible to the common mind, and so eminently practical and instructive. Accept my thanks for your kindness in sending me the book, and my grateful acknowledgments as your fellow-citizen for the service you have rendered the country. It is, in my judgment, the ablest and most valuable work yet published upon the science of which it treats. I do not see where it could be improved in matter, or style, or arrangement."--_Hon. H. McCullough, Secretary of the U. S. Treasury._ "Your book interests students more than any I have ever instructed from."--_President T. D. Woolsey, Yale College._ "So far as I have been able to read it, it seems to my humble judgment remarkably clear, as well as well-timed and sound."--_Hon. W. E. Forster, M.P., Leeds, Eng._ "The gem of your work is 'foreign trade.' It is the best thing I have ever seen, the most clear and satisfactory. If my friend Cobden were alive, he would send you his congratulations and thanks."--_Hon. Amasa Walker, M.C., Lecturer on Political Economy, Amherst College._ "As a manual for general reading and popular instruction, Prof. Perry's book is far superior to any work on this subject before issued in the United States."--_New York Times._ "We cordially recommend this book to all, of whatever school of political economy, who enjoy candid statement and full and logical discussion."--_New York Nation._ "There is more common sense in this book than in any of the more elaborate works on the same subject that have preceded it. It is the most interesting and valuable one that has been given to the American public on this important subject."--_New York Independent._ "In all the portions of the book which we have read the author shows himself to be a clear, strong, bold, and generally sound thinker."--_New Englander._ "Prof. Perry has certainly produced one of the best elementary treatises on political economy that we have ever met with in any language."--_New York Commercial._ "Prof. Perry is a vigorous thinker, a clear and forcible writer."--_Princeton Review._ .*. _Full Descriptive Catalogue of distinguished works in all departments of education sent free. Introductory and examination rates furnished on application._ CHARLES SCRIBNER'S SONS, Publishers, 743 and 745 Broadway, New York. * * * * * Transcriber's note: Obvious typographical errors were corrected. Unusual spelling (for example: estop, Shakspeare), grammatical usage, and hyphenation variants present in the original (including co-operate and coöperate) have been retained. Alphanumerical paragraph labels and their formats were inconsistent in the original. These inconsistencies have been retained. P. 351, Table in original did not include data for 1877. P. 385, ~dragma~, original appeared in Greek script (script included in html version) Several index entry page number references were incorrect--in some cases up to 100 pages. These have been corrected. At the end of the advertisements, ".*." indicates an asterism. 
42759	----	generously made available by Internet Archive (https://archive.org) Note: Images of the original pages are available through Internet Archive. See https://archive.org/details/distributivejust00ryaniala DISTRIBUTIVE JUSTICE * * * * * [Illustration: (MACMILLAN LOGO)] THE MACMILLAN COMPANY NEW YORK · BOSTON · CHICAGO · DALLAS ATLANTA · SAN FRANCISCO MACMILLAN & CO., LIMITED LONDON · BOMBAY · CALCUTTA MELBOURNE THE MACMILLAN CO. OF CANADA, LTD. TORONTO * * * * * DISTRIBUTIVE JUSTICE The Right and Wrong of Our Present Distribution of Wealth by JOHN A. RYAN, D.D. Associate Professor of Political Science at the Catholic University of America; Professor of Economics at Trinity College; Author of "A Living Wage," "Alleged Socialism of the Church Fathers," Joint Author with Morris Hillquit of "Socialism: Promise or Menace?" New York The Macmillan Company 1916 All rights reserved Nihil Obstat. _REMIGIUS LAFORT, S. T. D., Censor_. Imprimatur. _JOHN CARDINAL FARLEY, Archbishop of New York_. COPYRIGHT, 1916, BY THE MACMILLAN COMPANY Set up and electrotyped. Published November, 1916. TO ARCHBISHOP IRELAND IN ADMIRATION AND GRATITUDE PREFACE Five of the nine members of the late Federal Commission on Industrial Relations united in the declaration that the first cause of industrial unrest is, "unjust distribution of wealth and income." In all probability this judgment is shared by the majority of the American people. Regarding the precise nature and extent of the injustice, however, there is no such preponderance of opinion. Even the makers of ethical and economic treatises fail to give us anything like uniform or definite pronouncements concerning the moral defects of the present distribution. While the Socialists and the Single Taxers are sufficiently positive in their statements, they form only a small portion of the total population, and include only an insignificant fraction of the recognised authorities on either ethics or economics. The volume in hand represents an attempt to discuss systematically and comprehensively the justice of the processes by which the product of industry is distributed. Inasmuch as the product is actually apportioned among landowners, capitalists, business men, and labourers, the moral aspects of the distribution are studied with reference to these four classes. While their rights and obligations form the main subject of the book, the effort is also made to propose reforms that would remove the principal defects of the present system and bring about a larger measure of justice. Many treatises have been written concerning the morality of one or other element or section of the distributive process; for example, wages, interest, monopoly, the land question; but, so far as the author knows, no attempt has hitherto been made to discuss the moral aspects of the entire process in all its parts. At least, no such task has been undertaken by any one who believes that the existing economic system is not inherently unjust. That the present essay in this field falls far short of adequate achievement the author fully realises, but he is sustained by the hope that it will provoke discussion, and move some more competent person to till the same field in a more thorough and fruitful way. JOHN A. RYAN. The Catholic University of America, Washington, D. C., June 14, 1916. CONTENTS PREFACE vii INTRODUCTORY CHAPTER: THE ELEMENTS AND SCOPE OF THE PROBLEM xiii General References xvii SECTION I THE MORALITY OF PRIVATE LANDOWNERSHIP AND RENT CHAPTER PAGE I THE LANDOWNER'S SHARE OF THE NATIONAL PRODUCT 3 Economic Rent Always Goes to the Landowner 4 Economic Rent and Commercial Rent 5 The Cause of Economic Rent 6 II LANDOWNERSHIP IN HISTORY 8 No Private Ownership in Pre-Agricultural Conditions 10 How the Change Probably Took Place 12 Limited Character of Primitive Common Ownership 14 Private Ownership General in Historical Times 15 Conclusions from History 17 III THE ARGUMENTS AGAINST PRIVATE LANDOWNERSHIP 19 Arguments by Socialists 19 Henry George's Attack on the Title of First Occupancy 21 His Defence of the Title of Labour 24 The Right of all Men to the Bounty of the Earth 30 The Alleged Right of the Community to Land Values 39 IV PRIVATE OWNERSHIP THE BEST SYSTEM OF LAND TENURE 48 The Socialist Proposals Impracticable 48 Inferiority of the Single Tax System 51 V PRIVATE LANDOWNERSHIP A NATURAL RIGHT 56 Three Principal Kinds of Natural Rights 57 Private Landownership Indirectly Necessary for Individual Welfare 59 Excessive Interpretations of the Right of Private Landownership 61 The Doctrine of the Fathers and the Theologians 62 The Teaching of Pope Leo XIII 64 VI LIMITATIONS OF THE LANDOWNER'S RIGHT TO RENT 67 The Tenant's Right to a Decent Livelihood 69 The Labourer's Claim Upon the Rent 71 VII DEFECTS OF THE EXISTING LAND SYSTEM 74 Landownership and Monopoly 75 Excessive Gains from Private Landownership 80 Exclusion from the Land 90 VIII METHODS OF REFORMING OUR LAND SYSTEM 94 The Leasing System 95 Public Agricultural Lands 97 Public Ownership of Urban Land 98 Appropriating Future Increases of Land Value 100 Some Objections to the Increment Tax 102 The Morality of the Proposal 108 The German and British Increment Taxes 114 Transferring Other Taxes to Land 117 The Morality of the Plan 120 Amount of Taxes Practically Transferable 122 The Social Benefits of the Plan 127 A Supertax on Large Holdings 130 References on Section I 133 SECTION II THE MORALITY OF PRIVATE CAPITAL AND INTEREST IX THE NATURE AND THE RATE OF INTEREST 137 Meaning of Capital and Capitalist 137 Meaning of Interest 138 The Rate of Interest 141 X THE ALLEGED RIGHT OF LABOUR TO THE ENTIRE PRODUCT OF INDUSTRY 145 The Labour Theory of Value 146 The Right of Productivity 149 XI THE SOCIALIST SCHEME OF INDUSTRY 152 Socialist Inconsistency 152 Expropriating the Capitalists 154 Inefficient Industrial Leadership 158 Inefficient Labour 162 Attempted Replies to Objections 162 Restricting Individual Liberty 168 XII ALLEGED INTRINSIC JUSTIFICATIONS OF INTEREST 171 Attitude of the Church Toward Interest on Loans 172 Interest on Productive Capital 175 The Claims of Productivity 177 The Claims of Service 181 The Claims of Abstinence 182 XIII SOCIAL AND PRESUMPTIVE JUSTIFICATIONS OF INTEREST 187 Limitations of the Sacrifice Principle 187 The Value of Capital in a No-Interest Régime 188 Whether the Present Rate of Interest is Necessary 191 Whether at Least two Per Cent. is Necessary 193 Whether any Interest is Necessary 196 The State is Justified in Permitting Interest 199 Civil Authorisation not Sufficient for Individual Justification 201 How the Interest-Taker is Justified 204 XIV CO-OPERATION A PARTIAL SOLVENT OF CAPITALISM 210 Reducing the Rate of Interest 211 Need for a Wider Distribution of Capital 213 The Essence of Co-operative Enterprise 214 Co-operative Credit Societies 216 Co-operative Agricultural Societies 217 Co-operative Mercantile Societies 220 Co-operation in Production 222 Advantages and Prospects of Co-operation 228 References on Section II 233 SECTION III THE MORAL ASPECT OF PROFITS XV THE NATURE OF PROFITS 237 The Functions and Rewards of the Business Man 237 The Amount of Profits 239 Profits in a Joint-Stock Company 241 XVI THE PRINCIPAL CANONS OF DISTRIBUTIVE JUSTICE 243 The Canon of Equality 243 The Canon of Needs 244 The Canon of Efforts and Sacrifice 246 The Canon of Productivity 247 The Canon of Scarcity 250 The Canon of Human Welfare 252 XVII JUST PROFITS IN CONDITIONS OF COMPETITION 254 The Question of Indefinitely Large Profits 255 The Question of Minimum Profits 258 The Question of Superfluous Business Men 260 XVIII THE MORAL ASPECT OF MONOPOLY 262 Surplus and Excessive Profits 263 The Question of Monopolistic Efficiency 265 Discriminative Underselling 267 Exclusive-Sales Contracts 270 Discriminative Transportation Arrangements 272 Natural Monopolies 273 Methods of Preventing Monopolistic Injustice 275 Legalised Price Agreements 277 XIX THE MORAL ASPECTS OF STOCKWATERING 279 Injurious Effects of Stockwatering 281 The Moral Wrong 284 The "Innocent" Investor 286 Magnitude of Overcapitalisation 288 XX THE LEGAL LIMITATION OF FORTUNES 291 The Method of Direct Limitation 292 Limitation Through Progressive Taxation 296 The Proper Rate of Income and Inheritance Taxes 299 Effectiveness of Such Taxation 300 XXI THE DUTY OF DISTRIBUTING SUPERFLUOUS WEALTH 303 The Question of Distributing Some 303 The Question of Distributing All 308 Some Objections 311 A False Conception of Welfare and Superfluous Goods 314 The True Conception of Welfare 316 References on Section III 318 SECTION IV THE MORAL ASPECTS OF WAGES XXII SOME UNACCEPTABLE THEORIES OF WAGE-JUSTICE 323 I The Prevailing-Rate Theory 323 Not in Harmony with Justice 325 II Exchange-Equivalence Theories 326 The Rule of Equal Gains 326 The Rule of Free Contract 328 The Rule of Market Value 330 The Mediæval Theory 332 A Modern Variation of the Mediæval Theory 337 III Productivity Theories 340 Labour's Right to the Whole Product 341 Clark's Theory of Specific Productivity 347 Carver's Modified Version of Productivity 351 XXIII THE MINIMUM OF JUSTICE; A LIVING WAGE 356 The Principle of Needs 356 Three Fundamental Principles 358 The Right to a Decent Livelihood 360 The Claim to a Decent Livelihood from a Present Occupation 362 The Labourer's Right to a Living Wage 363 When the Employer is Unable to Pay a Living Wage 366 An Objection and Some Difficulties 370 The Family Living Wage 373 Other Arguments in Favour of a Living Wage 376 The Money Measure of a Living Wage 378 XXIV THE PROBLEM OF COMPLETE WAGE JUSTICE 381 Comparative Claims of Different Labour Groups 381 Wages Versus Profits 388 Wages Versus Interest 390 Wages Versus Prices 393 Concluding Remarks 398 XXV METHODS OF INCREASING WAGES 400 The Minimum Wage in Operation 400 The Question of Constitutionality 405 The Ethical and Political Aspects 407 The Economic Aspect 408 Opinions of Economists 412 Other Legislative Proposals 416 Labour Unions 417 Organisation Versus Legislation 420 Participation in Capital Ownership 423 References on Section IV 425 XXVI SUMMARY AND CONCLUSION 426 The Landowner and Rent 426 The Capitalist and Interest 427 The Business Man and Profits 428 The Labourer and Wages 430 Concluding Observations 431 INDEX 453 INTRODUCTORY CHAPTER THE ELEMENTS AND SCOPE OF THE PROBLEM Distributive justice is primarily a problem of incomes rather than of possessions. It is not immediately concerned with John Brown's railway stock, John White's house, or John Smith's automobile. It deals with the morality of such possessions only indirectly and under one aspect; that is, in so far as they have been acquired through income. Moreover, it deals only with those incomes that are derived from participation in the process of production. For example; it considers the labourer's wages, but not the subsidies that he may receive through charity or friendship. Its province is not the distribution of all the goods of the country among all the people of the country, but only the distribution of the products of industry among the classes that have taken part in the making of these products. These classes are four, designated as landowners, capitalists, undertakers or business men, and labourers or wage earners. The individual member of each class is an _agent_ of production, while the instrument or energy that he owns and contributes is a _factor_ of production. Thus, the landowner is an agent of production because he contributes to the productive process the factor known as land, and the capitalist is an agent of production because he contributes the factor known as capital; while the business man and the labourer are agents not only in the sense that they contribute factors to the process, but in the very special sense that their contributions involve the continuous expenditure of human energy. Now the product of industry is distributed among these four classes precisely because they are agents of production; that is because they own and put at the disposal of industry the indispensable factors of production. We say that the agents of production "put the factors of production at the disposal of industry," rather than "exercise or operate the factors," because neither the landowner nor the capitalist, as such, expend continuous energy in the productive process. All that is necessary to enforce a claim upon the product is to contribute an instrument or factor without which production cannot be carried on. The product distributed in any country during a single year is variously described by economists as the national product, the national income, the national dividend. It consists not merely of material goods, such as houses, food, clothing, and automobiles, but also of those non-material goods known as services. Such are the tasks performed by the domestic servant, the barber, the chauffeur, the public official, the physician, the teacher; or any other personal service "that is valued, as material commodities are valued, according to their selling prices." Even the services of the clergyman are included in the national income or product, since they are paid for and form a part of the annual supply of good things produced and distributed within the country. In the language of the economist, anything that satisfies a human want is a utility, and forms part of the national wealth; hence there can be no sufficient reason for excluding from the national income goods which minister to spiritual or intellectual wants. The services of the clergyman, the actor, the author, the painter, and the physician are quite as much a part of the utilities of life as the services of the cook, the chambermaid, or the barber; and all are as clearly utilities as bread, hats, houses, or any other material thing. In a general way, therefore, we say that the national product which is available for distribution among the different productive classes comprises all the utilities, material and non-material, that are produced through human agents and satisfy human desires. In the great majority of instances the product is not distributed in kind. The wheat produced on a given farm is not directly apportioned among the farmers, labourers, and landowners that have co-operated in its production; nor are the shoes turned out by a given factory divided among the co-operating labourers and capitalists; and it is obvious that personal services cannot be returned to the persons that have rendered them. Cases of partial direct distribution do, indeed, occur; as when the tenant takes two-thirds and the landowner one-third of the crop raised by the former on land belonging to the latter; or when the miller receives his compensation in a part of the flour that he grinds. To-day, however, such instances are relatively insignificant. By far the greater part of the material product is sold by the undertaker or business man, and the price is then divided between himself and the other agents of production. All personal services are sold, and the price is obtained by the performers thereof. The farmer sells his wheat, the miller his flour, and the barber his services. With the money received for his part in production each productive agent obtains possession of such kinds and amounts of the national product as his desires dictate and his income will procure. Hence the distribution of the product is effected through the conversion of producers' claims into money, and the exchange of the latter for specific quantities and qualities of the product. While the national product as a whole is divided among the four productive classes, not every portion of it is distributed among actually distinct representatives of these classes. When more than one factor of production is owned by the same person, the product will obviously not go to four different classes of persons. For example; the crop raised by a man on his own unmortgaged land, with his own instruments, and without any hired assistance; and the products of the small shopkeeper, tailor, and barber who are similarly self sufficient and independent,--are in each case obtained by one person, and do not undergo any actual distribution. Even in these instances, however, there occurs what may be called _virtual_ distribution, inasmuch as the single agent owns more than one factor, and performs more than one productive function. And the problem of distributive justice in such cases is to determine whether all these productive functions are properly rewarded through the total amount which the individual has received. Where the factors are owned by distinct persons, or groups of persons, the problem is to determine whether each group is properly remunerated for the single function that it has performed. The problem of the morality of industrial incomes is obviously complex. For example; the income of the farmer is sometimes derived from a product which he must divide with a landowner and with labourers; sometimes from a product which he shares with labourers only; and sometimes from a product which he can retain wholly for himself. The labourer's income arises sometimes out of a product which he divides with other agents of production; sometimes out of a product which he divides with other labourers as well as other agents; and sometimes out of a product of which he receives the full money equivalent. The complexity of the forces determining distribution and income indicate a complexity in the forces affecting the morality of income. Moreover, there is the more fundamental ethical question concerning the titles of distribution: whether mere ownership of a factor of production gives a just claim upon the product, as in the case of the landowner and the capitalist; whether such a claim, assuming it to be valid, is as good as that of the labourer and the business man, who expend human energy in the productive process; whether different kinds of productive activity should be rewarded at different rates; and if so in what proportion. Why should the capitalist receive six per cent., rather than two per cent., or sixteen per cent.? Why should the locomotive engineer receive more than the trackman? Why should not all persons be compensated equally? Should all or any of the benefits of industrial improvements go to the consumer? Such are typical questions in the study of distributive justice. They are sufficient to give some idea of the magnitude and difficulty of the problem. Scarcely less formidable is the task of suggesting means to correct the injustices of the present distribution. The difficulties in this part of the field are indicated by the multiplicity of social remedies that have been proposed, and by the fact that none of them has succeeded in winning the adhesion of more than a minority of the population. We shall be obliged not only to pass moral judgment upon the most important of these proposals, but to indicate and advocate a more or less complete and systematic group of such reforms as seem to be at once feasible and righteous. GENERAL REFERENCES TAUSSIG: Principles of Economics. Macmillan; 1911. DEVAS: Political Economy. Longmans; 1901. HOBSON: The Industrial System. Longmans; 1909. CLARK: The Distribution of Wealth. Macmillan; 1899. SMART: The Distribution of Income. London; 1899. WILLOUGHBY: Social Justice. Macmillan; 1900. CARVER: Essays in Social Justice. Harvard University Press; 1915. ELY: Property and Contract in Their Relations to the Distribution of Wealth. Macmillan; 1914. NEARING: Income. Macmillan; 1915. STREIGHTOFF: The Distribution of Incomes in the United States. Longmans; 1912. WAGNER: Grundlegung der Nationaloekonomie. Leipzig; 1892-1894. PESCH: Lehrbuch der Nationaloekonomie. Freiburg; 1905-1913. ANTOINE: Cours d'Économie Sociale. Paris; 1899. HITZE: Capital et Travail. Louvain; 1898. HOLLANDER: The Abolition of Poverty. Houghton Mifflin Company; 1914. ELLWOOD: The Social Problem. Macmillan; 1915. GARRIGUET: The Social Value of the Gospel. Herder; 1911. PARKINSON: A Primer of Social Science. Devin-Adair Co.; 1913. VERMEERSCH: Quaestiones de Justitia. Bruges; 1901. KING: The Wealth and Income of the People of the United States. Macmillan; 1915. COMMISSION ON INDUSTRIAL RELATIONS. Final Report; 1915. SECTION I THE MORALITY OF PRIVATE LANDOWNERSHIP AND RENT DISTRIBUTIVE JUSTICE CHAPTER I THE LANDOWNER'S SHARE OF THE NATIONAL PRODUCT That part of the national product which represents land, and is attributed specifically to land, goes to the landowner. It is called economic rent, or simply rent. We say that rent "is attributed specifically to land," rather than "is produced specifically by land," because we do not know what proportion of the joint product of the different factors of production exactly reflects the productive contribution of any factor. Economic rent represents the productivity of land in so far as it indicates what men are willing to pay for land-use in the productive process. In any particular case rent comes into existence because the land makes a commercially valuable contribution to the product; and it goes to the landowner because this is one of the powers or rights included in the institution of private ownership. And the landowner's share is received by him precisely in his capacity as landowner, and not because he may happen to be labourer, farmer, or proprietor of agricultural capital. It is perhaps superfluous to observe that not all land produces rent. While almost all land is useful and productive, at least potentially, there is in almost every locality some land which in present conditions does not warrant men in paying a price for its use. If the crop raised on very sandy soil is so small as to cover merely the outlay for labour and capital, men will not pay rent for the use of that soil. Yet the land has contributed something to the product. Herein we have another indication that rent is not an adequate measure of land productivity. It merely represents land value,--at a given time, in given circumstances. _Economic Rent Always Goes to the Landowner_ All land that is in use, and for the use of which men are willing to pay a price yields rent, whether it is used by a tenant or by the owner. In the latter case the owner may not call the rent that he receives by that name; he may not distinguish between it and the other portions of the product that he gets from the land; he may call the entire product profits, or wages. Nevertheless the rent exists as a surplus over that part of the product that he can regard as the proper return for his labour, and for the use of his capital-instruments, such as, horses, buildings, and machinery. If a farmer employs the same amount and kind of labour and capital in the cultivation of two pieces of land, one of which he owns, the other being hired from some one else; if his net product is the same in both cases, say, 1,000 dollars; and if he must pay 200 dollars to the owner of the hired land,--then, 200 of the 1,000 dollars that he receives from his own land, is likewise to be attributed specifically to his land rather than to his capital or labour. It is rent. While the whole product is due in some degree to the productive power of land, 200 dollars of it represents land value in the process of production, and goes to him solely in his capacity as landowner. The rent that arises on land used for building sites is of the same general character, and goes likewise to the owner of the land. The owner of the site upon which a factory is located may hire it to another for a certain sum annually, or he may operate the factory himself. In either case he receives rent, the amount that the land itself is worth for use, independently of the return that he obtains for his expenditure of capital and labour. Even when a person uses his land as a site for a dwelling which he himself occupies, the land still brings him economic rent, since it affords him something for which he would be obliged to pay if his house were located on land of the same kind owned by some one else. _Economic Rent and Commercial Rent_ It will be observed that the landowner's share of the product, or economic rent, is not identical with commercial rent. The latter is a payment for land and capital, or land and improvements, combined. When a man pays nine hundred dollars for the use of a house and lot for a year, this sum contains two elements, economic rent for the lot, and interest on the money invested in the house. Assuming that the house is worth ten thousand dollars, and that the usual return on such investments is eight per cent., we see that eight hundred dollars goes to the owner as interest on his capital, and only one hundred dollars as rent for his land. Similarly the price paid by a tenant for the use of an improved farm is partly interest on the value of the improvements, and partly economic rent. In both cases the owner may reckon the land as so much capital value, and the economic rent as interest thereon, just as the commercial rent for the buildings and other improvements is interest on their capital value; but the economist distinguishes between them because he knows that they are determined by different forces, and that the distinction is of importance. He knows, for example, that the supply of land is fixed, while the supply of capital is capable of indefinite increase. In many situations, therefore, rent increases, but interest remains stationary or declines. Sometimes, though more rarely, the reverse occurs. As we shall see later, this and some other specific characteristics of land and rent have important moral aspects; consequently the moralist cannot afford to confuse rent with interest. _The Cause of Economic Rent_ The cause of economic rent is the fact that land is limited relatively to the demand for it. If land were as plentiful as air mere ownership of some portion of it would not enable the owner to collect rent. As landowner he would receive no income. If he cultivated his land himself the return therefrom would not exceed normal compensation for his labour, and normal interest on his capital. Since no one would be compelled to pay for the use of land, competition among the different cultivators would keep the price of their product so low that it would merely reimburse them for their expenditures of capital and labour. In similar conditions no rent would arise on building sites. The cause of the _amount_ of rent may also be stated in terms of scarcity. At any given time and place, the rent of a piece of land will be determined by the supply of that kind of land relatively to the demand for it. However, the demand itself will be regulated by the fertility or by the location of the land in question. Two pieces of agricultural land equally distant from a city, but of varying fertility, will yield different rents because of this difference in natural productiveness. Two pieces of ground of equal natural adaptability for building sites, but at unequal distances from the centre of a city, will produce different rents on account of their difference of location. The absolute scarcity of land is, of course, fixed by nature; its relative scarcity is the result of human activities and desires. The definition of rent adopted in these pages, "what men are willing to pay for the use of land," or, "what land is worth for use," is simpler and more concrete, though possibly less scientific, than those ordinarily found in manuals of economics, namely: "that portion of the product that remains after all the usual expenditures for labour, capital, and directive ability have been deducted;" or, "the surplus which any piece of land yields over the poorest land devoted to the same use, when the return from the latter is only sufficient to cover the usual expenses of production." The statement that all rent goes to the landowner supposes that, in the case of hired land, the tenant pays the full amount that would result from competitive bidding. Evidently this was not the case under the feudal system, when rents were fixed by custom and remained stationary for centuries. Even to-day, competition is not perfect, and men often obtain the use of land for less than they or others might have been willing to give. But the statement in question does describe what tends to happen in a system of competitive rents. Before discussing the morality of the landowner's income, and of rent receiving, we may with profit glance at the history of land tenure. Thus we shall get some idea, first, of the antiquity of the present system, and, second, of its effects upon individual and social welfare. Both these considerations have an important bearing upon the moral problem; for length of existence creates a presumption in favour of the social, and therefore the moral, value of any institution; and past experience is our chief means of determining whether an institution is likely to be socially beneficial, and therefore morally right, in the future. CHAPTER II LANDOWNERSHIP IN HISTORY Thirty or thirty-five years ago, the majority of economic historians seemed to accept the theory that land was originally owned in common.[1] They held that in the beginning the community, usually a village community, was the landowner; that the community either cultivated the land as a corporation, and distributed the product among the individual members, or periodically divided the land among the social units, and permitted the latter to cultivate their allotments separately. The second of these forms of tenure was the more general. The primitive time to which the theory referred was not the period when men got their living by hunting and fishing, or by rearing herds, but the agricultural stage of economic development, when life had become settled. Of the arguments upon which the theory was based, some consisted of ambiguous statements by ancient writers, such as Plato, Cæsar, and Tacitus, and others were merely inferences drawn from the existence of certain agrarian institutions: family ownership of land; common pasture lands and woodlands; periodical distribution of land among the cultivators, as in the German Mark, the Russian Mir, the Slavonic Zadruga, and the Javanese Dessa. All these practices have been interpreted as "survivals" of primitive common ownership. Only on this hypothesis, it is argued, can they be satisfactorily explained. More recent writers have subjected the various arguments for this theory to a searching criticism.[2] To-day the great majority of scholars would undoubtedly accept the conclusion of Fustel de Coulanges, that the arguments and evidence are not sufficient to prove that in the earliest stages of agricultural life land was held in common; and a majority would probably take the more positive ground that common ownership in the sense of communal cultivation and distribution, never existed for any considerable length of time among any agricultural people. The present authoritative opinion on the subject is thus summarized by Professor Ashley: "From the earliest historical times, in Gaul and Germany, very much land was owned individually, and wealth on one side and slavery on the other were always very important factors in the situation. "Even in Germany, communal ownership of land was never a fundamental or generally pervasive social institution; there was something very much like large private estates, worked by dependents and slaves, from the very earliest days of Teutonic Settlement. "As to England, it is highly probable that we shall not find anything that can fairly be called a general communal system of landowning, combined with a substantial equality among the majority of the people, under conditions of settled agriculture. To find it in any sense we shall have to go back to an earlier and 'tribal' condition, if, indeed, we shall find it there!"[3] _No Private Ownership in Pre-Agricultural Conditions_ Whenever and wherever men got their living by hunting and fishing, there was no inducement to own land privately, except possibly those portions upon which they built their huts or houses. "Until they become more or less an agricultural people they are usually hunters or fishermen or both, and possibly also to a limited extent keepers of sheep and cattle. Population is then sparse and unoccupied territory is plentiful, and questions of the ownership of particular tracts of land do not concern them."[4] In any region occupied by a group or tribe, all portions of the land and the water were about equally productive of game and fish; the amount obtainable by any individual had no relation to labour on any particular piece of soil; and it was much easier for each to range over the whole region in common with his fellows than to mark off a definite section upon which he would not permit others to come, but beyond which he himself would not be permitted to go. In such conditions private ownership of land would have been folly. Tribal or group ownership was, however, in vogue, especially among those groups that were in control of the better grounds or streams. Even this form of proprietorship was comparatively unstable, since the people were to a considerable degree nomadic, and were willing to abandon present possessions whenever there was a prospect of obtaining better ones elsewhere. Among men who got their living by rearing herds, the inducement to hold land in exclusive private control would be somewhat stronger. The better grazing tracts would be coveted by many different persons, especially in the more populous communities. And there would always be the possibility of confusion among the different herds, and contention among their owners. In such circumstances the advantages of exclusive control would sometimes outweigh the benefits of common use and ownership. In the thirteenth chapter of Genesis we are told that, owing to strife between the herdsmen of Abram and Lot, the brothers separated, and agreed to become the exclusive possessors of different territories. Nevertheless, it is probable that tribal ownership was the prevailing form of land tenure so long as people remained mainly in pastoral conditions. It is likewise probable that the same system continued in many cases for some time after men began to cultivate the soil. At least, this would seem to have been the natural arrangement while land was plentiful, and the methods of cultivation crude and soil-exhausting. It would be more profitable to take up new lands than to continue upon the old. Within historical times this system prevailed among the ancient Germans, some of the tribes of New Zealand, and some of the tribes of Western Africa. Where land was not so plentiful it was sometimes redistributed among individuals or heads of families, as often as a death occurred or a new member arrived in the community. Some of the tribes and peoples who observed this practice were the ancient Irish, the aborigines of Peru, Mexico, and parts of what is now the United States, and Australia, and some of the tribes of Africa, India, and Malaysia.[5] Whether the most primitive agricultural systems of every people were of this nature we have, of course, no means of knowing, but the supposition is antecedently probable; for agriculture must have begun very gradually, and been for some time practised in connection with the more primitive methods of obtaining a livelihood. As the land had been held for the most part in common during the hunting and fishing stage and during the pastoral stage, the same arrangement would probably continue until the people found it necessary to cultivate the same tracts of land year after year, and conceived the desire to retain their holdings in stable possession and to transmit them to their children. Moreover, so long as the members of the clan remained strongly conscious of their kinship, and realised the necessity of acting as a unit against their enemies, there would be a strong incentive to clan ownership of the land, and clan allotment of it among the individual members. In other words, the clan would, in these circumstances, have the same motives for common ownership that exist to-day in the family. The oldest historical peoples, the Israelites, Egyptians, Assyrians, Babylonians, and Chinese, had private ownership of land at the beginning of their recorded history. Most of them, however, had been cultivating land for a considerable length of time, and had acquired a considerable degree of civilisation, before the earliest period of their existence of which we have any knowledge. It is quite possible that those among them that had passed through the hunting and fishing or the pastoral stage of existence, had practised tribal or common ownership during the earlier portion of their agricultural life. _How the Change Probably Took Place_ The change from tribal to private landownership could have occurred in a great variety of ways. For example, the chief, patriarch, or king might have gradually obtained greater authority in making the allotments of land among the members of the tribe or group, and thus acquired a degree of control over the land which in time became practical ownership; he might have seized the holdings of deceased persons, or of those who were unable to pay him the tax or tribute that he demanded, or of those who were for any reason obnoxious to him. Again, the taxes paid to the chief man in a community for his services as ruler might have come in time to be regarded as a payment for the use of the land, and therefore as an acknowledgment that the chief was also the landlord. Even in the Middle Ages the rents received by the feudal lords were in great measure a return for social and political services, just as are the taxes received to-day from private landowners by the State. In primitive times, as well as later on, the chief would naturally do his best to convert this institution of tax paying or tribute paying into rent paying, and to add the position of landowner to his other prerogatives. After all, the transition from tribal ownership, with private cultivation and private receipt of the produce of individual allotments, to overlordship and landlordism, would not have been greater than that which actually took place in England between the fifteenth and the nineteenth centuries, when the lords became absolute owners of land that they had previously held with their tenants in a sort of divided or dual ownership. In a word, tribal ownership could have been displaced by landlordism through the same methods that have been used everywhere by the powerful, the ambitious, and the greedy against the weak, the indifferent, and the upright. Nor must we forget the influence of conquest. Most of the countries that appear in historical times with a system of private ownership had at some previous period been subjugated by an alien people. In many of these the conquerors undoubtedly introduced a considerable degree of individual ownership, the more powerful among them becoming landlords, while their weaker companions and the mass of the conquered population were established in a condition of tenancy. Where a somewhat widely diffused private ownership succeeded the primitive system, it was probably due to the free action of the cultivators, as soon as they came to realise the inconveniences of ownership in common. "Any enclosed land round their permanent dwellings, and any land outside the settlement which was cleared, reclaimed, and cultivated, or occupied with cattle by individuals or families, was recognised as their personal property. Only those who were industrious, enterprising, and courageous enough would clear, occupy, retain, cultivate, and defend waste land. They would become personal owners of cattle, and would gradually acquire wealth which would enable them to employ others and still further improve their position. As their power increased, and as population grew, the bravest, wealthiest, and most capable fighting men amongst them would become chiefs or a species of nobles, and the force of circumstances, often no doubt aided by force and fraud, would eventually make them the landowners of the greater part of the district, with the more or less willing acquiescence and consent of the community amongst whom they lived, and to whom they extended their protection."[6] _Limited Character of Primitive Common Ownership_ A great deal of the opposition to the theory of primitive common ownership of agricultural land, seems to be based upon an exaggerated conception of the scope of that institution. The average man who thinks or speaks of ownership to-day has in mind the Roman concept and practice of private property. This includes the unrestricted right of disposal; that is, the power to hold permanently, to transfer or transmit, to use or to abuse or not to use at all, to retain the product of the owner's use, to rent the property to any person and for any period that the owner chooses, and to obtain a price in return called rent. Any man who takes the theory of primitive common ownership to imply that the community or tribe exercised all these powers over its land, will have no difficulty in proving that the evidence is overwhelmingly against any such theory. Even among those people that are certainly known to have practised so-called common ownership of land, there are very few instances of communal cultivation, or communal distribution of the product. Yet these are included in the Roman concept of ownership. The usual method seems to have been periodical allotment by the community of the land among individuals, individual cultivation of the allotted tracts, and individual ownership of the product. Moreover, there was always a chief or patriarch who exercised considerable authority in the distribution of the land, frequently collected a rent or tax from the cultivators, and almost invariably exercised something like private ownership of a portion of the land for his direct and special benefit. Sometimes other men of importance in the community possessed land which was not subject to the communal allotment. Primitive ownership of land in common was, therefore, very far from vesting in the community all the powers that inhere in the private proprietor of land according to the Roman law and usage. _Private Ownership General in Historical Times_ So much for land tenure in prehistoric times. During the historical period of the existence of the race, almost all civilised peoples have practised some form of private ownership in the matter of their arable lands. While differing considerably at various times and places, it has always excluded communal allotment of land and communal distribution of the product, and has always included private receipt of the product by the owner-user, or private receipt of rent when the owner transferred the use to some one else. But it did not always include the right to determine who should be the user. In the later centuries of the feudal system, for example, the lord could not always expel the tenants from the land, nor prevent them from transmitting the use of it to their children. Moreover, the rent that he received was customary and fixed, not competitive and arbitrary, and it was looked upon in great measure as a return to the lord for social, military, and political services, as well as a payment for the use of land. This system was private ownership, indeed, but if we apply the Roman notion of ownership we shall find it difficult to decide whether the tenant or the lord should more properly be called the owner. At any rate, the right of ownership possessed by the lord was greatly limited by restrictions which favoured the masses of the cultivators. In every community there were common wood lands and pasture lands for the free use of all the inhabitants. Among other restrictions of private ownership and control in favour of the principle of equal access to the land by all persons, we may mention the division of the English villein's holding into several portions, intermingled with those of his neighbours, so that each would have about the same amount of good land; and the ancient Hebrew law whereby alienated land was returned to the descendants of its original owners every fifty years.[7] Reckoning the feudal lord, and all other overlords who had the same control over land, as private proprietors, we may say that in historical times the arable land of every country has been owned by a minority of the population. Since the downfall of feudalism, the tendency in most regions of the Western world has been toward an increase in the number of owners, and a decrease in the number of great estates. This tendency has been especially marked during the last one hundred years. It will, however, need to continue for a very long time, or else to increase its pace very rapidly, before land ownership will be diffused in anything like the measure that is necessary if its benefits are to be shared by all the people. Even in the United States, where the distribution is perhaps more general than in any other country, only 38.4 per cent. of the families in towns and cities owned, in 1910, the homes in which they lived, and therefore the land upon which their homes were located. In the rural districts the per cent. of home-owning families was only 62.8. _Conclusions from History_ What conclusions does history warrant concerning the social and moral value of private landownership? Here we are on very uncertain ground; for different inferences may be drawn from the same group of facts if a different section of them be selected for emphasis. Sir Henry Maine and Henry George both accepted the theory of primitive agrarian communism, but the former saw in this assumed fact a proof that common ownership was suited only to the needs of rude and undeveloped peoples, while the latter regarded it as a sure indication that common ownership was fundamentally natural and in accordance with permanent social welfare. The fact that practically all peoples whose history we know discarded communal for private ownership as soon as they had acquired a moderate degree of proficiency in methods of cultivation and in the arts of civilised life does, indeed, create a presumption that the latter system is the better for civilised men. To this extent Sir Henry Maine is right. Against this presumption Henry George maintained that common ownership was abandoned solely because of the usurpation, fraud, and force employed by the powerful and privileged classes. Undoubtedly this factor played a great part in bringing about the private ownership that has existed and still exists, but it does not account for the institution as a whole and everywhere. If chiefs, kings, and other powerful personages had never usurped control of the land, if no people had ever conquered the territory of another, it is probable that private ownership would have taken place to the same extent, although it would have been much more widely diffused. For the system of periodical repartition of land, to say nothing of communal cultivation and communal distribution of the product, does hinder that attachment to a particular portion of the soil and that intensive cultivation which are so necessary to the best interests of the cultivator, the most productive use of the land, and therefore the welfare of society. On the other hand, the limitations on the right of private ownership which have been established in so many places and times in favour of those who were not owners, show that men have very generally looked upon land as in some measure the inheritance of all the people. Hence arises the presumption that this conviction is but the reflection of fundamental and permanent human needs. Summing up the matter, we may say that the history of land tenure points on the whole to the conclusion that private ownership is socially and individually preferable to agrarian communism, but that it should be somewhat strictly limited in the interest of the non-owners, and of the community as a whole. FOOTNOTES: [1] The most notable exponents of this view were: Von Maurer, "Einleitung zur Geschichte der Mark," 1854; Viollet, "Bibliotheque de l'école des chartres," 1872; Maine, "Village Communities in the East and the West," 1872; and De Laveleye, "De la propriété et ses formes primitives," 1874, of which an English translation appeared in 1878 under the title, "Primitive Property." [2] Chief among these writers are: Fustel de Coulanges in an article in "Revue des Questions Historiques," April, 1889; translated by Margaret Ashley, and published with an introductory chapter by W. J. Ashley under the title, "The Origin of Property in Land," 1891; G. Von Below, "Beilage zur Allgemeine Zeitung: Das kurze Leben einer vielgenannten Theorie," 1903; F. Seebohm, "The Village Community," 1883. Cf. Whittaker, "Ownership, Tenure, and Taxation of Land," 1914, ch. ii; Cathrein, "Das Privatgrundeigenthum und seine Gegner," 1909; and Pesch, "Lehrbuch der Nationaloekonomie," I, 183-188. [3] Quoted in Whittaker, op. cit., pp. 27, 28. [4] Idem, p. 29. [5] Cf. P. W. Joyce, "A Social History of Ancient Ireland," 1903; and Letourneau, "Property: Its Origin and Development," 1896. [6] Whittaker, op. cit., pp. 30, 31. [7] Leviticus xxv, 23-28. CHAPTER III THE ARGUMENTS AGAINST PRIVATE LANDOWNERSHIP If land were not privately owned there would be no receiving of rent by individuals. Therefore, the morality of the landlord's share of the national product is intimately related to, and is usually treated in connection with, the morality of private ownership. Substantially all the opponents of private property in land to-day are either Socialists or disciples of Henry George. In the view of the former, land as well as the other means of production should be owned and managed by the State. Although they are more numerous than the Georgeites, their attack upon private landownership is less conspicuous and less formidable than the propaganda carried on by the Henry George men. The Socialists give most of their attention to the artificial instruments of production, dealing with land only incidentally, implicitly, or occasionally. The followers of Henry George, commonly known as Single Taxers or Single Tax men, defend the private ownership of artificial capital, or capital in the strict economic sense, but desire that the control of the community over the natural means of production should be so far extended as to appropriate for public uses all economic rent. Their criticism of private ownership is not only more prominent than that made by the Socialists, but is based to a much greater extent upon ethical considerations. _Arguments by Socialists_ Indeed, the orthodox or Marxian Socialists are logically debarred by their social philosophy from passing a strictly moral judgment upon property in land. For their theory of economic determinism, or historical materialism, involves the belief that private landownership, like all other social institutions, is a _necessary product_ of economic forces and processes. Hence it is neither morally good nor morally bad. Since neither its existence nor its continuance depends upon the human will, it is entirely devoid of moral quality. It is as unmoral as the succession of the seasons, or the movement of the tides. And it will disappear through the inevitable processes of economic evolution. As expressed by Engels: "The growing perception that existing social institutions are unreasonable and unjust, that reason has become unreason, and right wrong, is only proof that in the modes of production and exchange changes have taken place, with which the social order, adapted to earlier economic conditions, is no longer in keeping."[8] Frequently, however, the individual Socialist forgets this materialistic theory, and falls back upon his common sense, and his innate conceptions of right and wrong, of free will and responsibility. Instead of regarding the existing land system as a mere product of blind economic forces, he often denounces it as morally wrong and unjust. His contentions may be reduced to two propositions: The proprietor who takes rent from a cultivator robs the producer of a part of his product; and no one has a right to take for his exclusive use that which is the natural heritage and means of support for all the people. Referring to the receipt of 35,000,000 pounds a year in rent by 8,000 British landlords, Hyndman and Morris exclaim: "Yet in the face of all this a certain school still contend that there is no class robbery."[9] Since the claim that the labourer has a right to the full product of his labour applies to capital as well as to land, it can be more conveniently considered when we come to treat of the income of the capitalist. With regard to the second contention, the following statement by Robert Blatchford may be taken as fairly representative of Socialist thought: "The earth belongs to the people.... So that he who possesses land possesses that to which he has no right, and he who invests his savings in land becomes the purchaser of stolen property."[10] Inasmuch as this argument is substantially the same as one of the fundamental contentions in the system of Henry George, it will be discussed in connection with the latter, in the pages immediately following. _Henry George's Attack on the Title of First Occupancy_ Every concrete right, whether to land or to artificial goods, is based upon some contingent fact or ground, called a title. By reason of some title a man is justified in appropriating a particular farm, house, or hat. When he becomes the proprietor of a thing that has hitherto been ownerless, his title is said to be original; when he acquires an article from some previous owner, his title is said to be derived. As an endless series of proprietors is impossible, every derived title must be traceable ultimately to some original title. Among the derived titles the most important are contract, inheritance, and prescription. The original title is either first occupancy or labour. The prevailing view among the defenders of private landownership has always been that the original title is not labour but first occupancy. If this title be not valid every derived title is worthless, and no man has a true right to the land that he calls his own. Henry George's attack upon the title of first occupancy is an important link in his argument against private property in land. "Priority of occupation give exclusive and perpetual title to the surface of a globe in which, in the order of nature, countless generations succeed each other!... Has the first comer at a banquet the right to turn back all the chairs, and claim that none of the other guests shall partake of the food provided, except as they make terms with him? Does the first man who presents a ticket at the door of a theatre, and passes in, acquire by his priority the right to shut the doors and have the performance go on for him alone?... And to this manifest absurdity does the recognition of the individual right to land come when carried to its ultimate that any human being, could he concentrate in himself the individual rights to the land of any country, could expel therefrom all the rest of the inhabitants; and could he concentrate the individual rights to the whole surface of the globe, he alone of all the teeming population of the earth would have the right to live."[11] In passing, it may be observed that Henry George was not the first distinguished writer to use the illustration drawn from the theatre. Cicero, St. Basil, and St. Thomas Aquinas all employed it to refute extravagant conceptions of private ownership. In reply to the foregoing argument of Henry George, we point out: first, that the right of ownership created by first occupancy is not unlimited, either extensively or intensively; and, second, that the historical injustices connected with private ownership have been in only a comparatively slight degree due to the first occupation of very large tracts of land. The right of first occupancy does not involve the right to take a whole region or continent, compelling all subsequent arrivals to become tenants of the first. There seems to be no good reason to think that the first occupant is justified in claiming as his own more land than he can cultivate by his own labour, or with the assistance of those who prefer to be his employés or his tenants rather than independent proprietors. "He has not the right to reserve for himself alone the whole territory, but only that part of it which is really useful to him, which he can make fruitful."[12] Nor is the right of private landownership, on whatever title it may rest, unlimited intensively, that is, in its powers or comprehension. Though a man should have become the rightful owner of all the land in a neighbourhood, he would have no moral right to exclude therefrom those persons who could not without extreme inconvenience find a living elsewhere. He would be morally bound to let them cultivate it at a fair rental. The Christian conception of the intensive limitations of private ownership is well exemplified in the action of Pope Clement IV, who permitted strangers to occupy the third part of any estate which the proprietor refused to cultivate himself.[13] Ownership understood as the right to do what one pleases with one's possessions, is due partly to the Roman law, partly to the Code Napoléon, but chiefly to modern theories of individualism. In the second place, the abuses which have accompanied private property in land are very rarely traceable to abuses of the right of first occupancy. The men who have possessed too much land, and the men who have used their land as an instrument of social oppression, have scarcely ever been first occupants or the successors thereof through derived titles. This is especially true of modern abuses, and modern legal titles. In the words of Herbert Spencer: "Violence, fraud, the prerogative of force, the claims of superior cunning,--these are the sources to which these titles may be traced. The original deeds were written with the sword, rather than with the pen: not lawyers but soldiers were the conveyancers: blows were the current coin given in payment; and for seals blood was used in preference to wax."[14] Not the appropriation of land which nobody owned, but the forcible and fraudulent seizure of land which had already been occupied, has been one of the main causes of the evils attending upon private landownership. Moreover, in England and all other countries that have adopted her legal system, the title of first occupancy could never be utilised by individuals: all unoccupied land was claimed by the Crown or by the State, and transferred thence to private persons or corporations. If some individuals have got possession of too much land through this process, the State, not the title of first occupancy, must bear the blame. This is quite clear in the history of land tenure in the United States and Australasia. Henry George's attack upon private landownership through the title of first occupancy is therefore ineffective; for he attributes to this qualities that it does not possess, and consequences for which it is not responsible. _His Defence of the Title of Labour_ Thinking that he has shattered the title of first occupancy, Henry George undertakes to set up in its place the title of labour. "There can be to the ownership of anything no rightful title which is not derived from the title of the producer, and does not rest on the natural right of the man to himself."[15] The only original title is man's right to the exercise of his own faculties; from this right follows his right to what he produces; now man does not produce land; therefore he cannot have rightful property in land. Of these four propositions the first is a pure assumption, the second is untrue, the third is a truism, and the fourth is as unfounded as the first. Dependently upon God, man has, indeed, a right to himself and to the exercise of his own faculties; but this is a right of action, not of property. By the exercise of this right alone man can never produce anything, never become the owner of anything. He can produce only by exerting his powers upon something outside of himself; that is, upon the goods of external nature. To become the producer and the owner of a product, he must first become the owner of materials. By what title is he to acquire these? In one passage[16] Henry George seems to think that no title is necessary, and refers to the raw material as an "accident," while the finished product is the "essence," declaring that "the right of private ownership attaches the accident to the essence, and gives the right of ownership to the natural material in which the labour of production is embodied." Now this solution of the difficulty is too simple and arbitrary. Its author would have shrunk from applying it universally; for example, to the case of the shoemaker who produces a pair of shoes out of stolen materials, or the burglar who makes an overcoat more useful (and therefore performs a task of production) by transferring it from a warehouse to his shivering back! Evidently Henry George has in mind only raw material in the strict sense, that which has not yet been separated from the storehouse of nature; for he declares in another place that "the right to the produce of labour cannot be enjoyed without the free use of the opportunities offered by nature."[17] In other words, man's title to the materials upon which he is to exercise his faculties, and of which he is to become the owner by right of production, is the title of gift conferred by nature, or nature's God. Nevertheless this title is applicable only to those goods that exist in unlimited abundance, not to those parts of the natural bounty that are scarce and possess economic value. A general assumption by producers that they were entitled to take possession of the gifts of nature indiscriminately would mean industrial anarchy and civil war. Hence Henry George tells us that the individual should pay rent to "the community to satisfy the equal rights of all other members of the community."[18] Inasmuch as the individual must pay this price before he begins to produce, his right to the use of natural opportunities is not "free," nor does his labour alone constitute a title to that part of them that he utilises in production. Consequently labour does not create a right to the concrete product. It merely gives the producer a right to the value that he adds to the raw material. His right to the raw material itself, to the elements that he withdraws from the common store, and fashions into a product, say, wheat, lumber, or steel, does not originate in the title of labour but in the title of contract. This is the contract by which in exchange for rent paid to the community he is authorised to utilise these materials. Until he has made this contract he has manifestly no full right to the product into which natural forces as well as his own labour have entered. According to Henry George's own statements, therefore, the right to the product does not spring from labour alone, but from labour plus compensation to the community. Since the contract by which the prospective user agrees to pay this compensation or rent must precede his application of labour, it instead of labour is the original title. Since the contract is made with a particular community for the use of a particular piece of land, the title that it conveys must derive ultimately from the occupation of that land by that community,--or some previous community of which the present one is the legal heir. So far as economically valuable materials are concerned, therefore, the logic of Henry George's principles leads inevitably to the conclusion that the original title of ownership is first occupancy. Even in the case of economically free goods, the original title of ownership is occupancy. Henry George declares that the traveller who has filled his vessels at a free-for-all spring owns the water when he has carried it into a desert, by the title of labour.[19] Nevertheless, in its original place this water belonged either to the community or to nobody. In the former supposition it can become the property of the traveller only through an explicit or implicit gift from the community; and it is this contract, not labour, that constitutes his title to the water. If we assume that the spring was ownerless, we see that the labour of carrying a portion of it into the desert still lacks the qualifications of a title; for the abstracted water must have belonged to him before he began the journey. It must have been his from the moment that he separated it from the spring. Otherwise he had no right to take it away. His labour of transporting it gave him a right to the utility thus added to the water, but not a right to the water when it first found a local habitation in his vessels. Nor was the labour of transferring it from the spring into his vessels the true title; for labour alone cannot create a right to the material upon which it is exerted, as we see in the case of stolen objects. If it be contended that labour together with the natural right to use the ownerless goods of nature have all the elements of a valid title, the assertion must be rejected as unprecise and inadequate. The right to use ownerless goods is a general and abstract right that requires to become specific and concrete through some title. In the case of water it is a right to water in general, to some water, but not a right to a definite portion of the water in this particular spring. The required and sufficient title here is that of apprehension, occupation, the act of separating a portion from the natural reservoir. Therefore, it is first occupancy as exemplified in mere seizure of an ownerless good, not labour in the sense of productive activity, nor labour in the sense of painful exertion, that constitutes the precise title whereby the man acquires a right to the water that he has put into his cup or barrel. Mere seizure is a sufficient title in all such cases as that which we are now considering, simply because it is a reasonable method of determining and specifying ownership. There is no need whatever of having recourse to the concept of labour to justify this kind of property right. In the present case, indeed, the acts of apprehension and of productive labour (the labour of dipping the water into a vessel _is_ productive inasmuch as the water is more useful there than in the spring) are the same physically, but they are distinct logically and ethically. One is mere occupation, while the other is production; and ownership of a thing must precede, in morals if not in time, the expenditure upon it of productive labour. "The theory which bases the right of property on labour really depends in the ultimate resort on the right of possession and the fact that it is socially expedient, and is therefore upheld by the laws of society. Grotius, discussing this in the old Roman days, pointed out that since nothing can be made except out of pre-existing matter, acquisition by means of labour depends, ultimately, on possession by means of occupation."[20] Since man's right to his faculties does not of itself give him a right to exercise them upon material objects, productive labour cannot of itself give him a right to the product therefrom created, nor constitute the original title of ownership. Since labour is not the original title to property, it is not the only possible title to property in land. Hence the fact that labour does not produce land, has no bearing on the question of private landownership. In passing it may be observed that Henry George implicitly admitted that the argument from the labour title was not of itself sufficient to disprove the right of private property in land. Considering the objection, "if private property in land be not just, then private property in the products of land is not just, as the material of these products is taken from the land," he replied that the latter form of ownership "is in reality a mere right of temporary possession," since the raw material in the products sooner or later returns to the "reservoirs provided for all ... and thus the ownership of them by one works no injury to others."[21] But private ownership of land, he continued, shuts out others from the very reservoirs. Here we have a complete abandonment of the principle which underlies the labour argument. Instead of trying to show from the nature of the situation that there is a logical difference between the two kinds of ownership, he shifts his ground to a consideration of consequences. He makes the title of social utility instead of the title of labour the distinguishing and decisive consideration. As we shall see later, he is wrong even on this ground; for the fundamental justification of private landownership is precisely the fact that it is the system of land tenure most conducive to human welfare. At present we merely call attention to the breakdown in his own hands of the labour argument. To sum up the entire discussion on the original title of ownership: Henry George's attack upon first occupancy is futile because based upon an exaggerated conception of the scope of private landownership, and upon a false assumption concerning the responsibility of that title for the historical evils of the system. His attempt to substitute labour as the original title is likewise unsuccessful, since labour can give a right only to the utility added to natural materials, not to the materials themselves. Ownership of the latter reaches back finally to occupation. Whence it follows that the title to an artificial thing, such as a hat or coat, water taken from a spring, a fish drawn from the sea, is a joint or two-fold title; namely, occupation and labour. Where the product embodies scarce and economically valuable raw material, occupation is usually prior to labour in time; in _all_ cases it is prior to labour logically and ethically. Since labour is not the original title, its absence in the case of land does not leave that form of property unjustified. The title of first occupancy remains. In a word, the one original title of all property, natural and artificial, is first occupancy. The other arguments of Henry George against private landownership are based upon the assumed right of all mankind to land and land values, and on the contention that this right is violated by the present system of tenure. _The Right of All Men to the Bounty of the Earth_ "The equal right of all men to the use of land is as clear as their equal right to breathe the air--it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have a right to be in the world, and others no right. "If we are here by the equal permission of the Creator, we are all here with an equal title to the enjoyment of his bounty--with an equal right to the use of all that nature so impartially offers.... There is in nature no such thing as a fee simple in land. There is on earth no power which can rightfully make a grant of exclusive ownership of land. If all existing men were to grant away their equal rights, they could not grant away the rights of those who follow them. For what are we but tenants for a day? Have we made the earth that we should determine the rights of those who after us shall tenant it in their turn?"[22] The right to use the goods of nature for the support of life is certainly a fundamental natural right; and it is substantially equal in all persons. It arises, on the one hand, from man's intrinsic worth, his essential needs, and his final destiny; and, on the other hand, from the fact that nature's bounty has been placed by God at the disposal of all His children indiscriminately. But this is a general and abstract right. What does it imply specifically and in the concrete? In the first place, it includes the actual and continuous use of some land; for a man cannot support life unless he is permitted to occupy some portion of the earth for the purposes of working, and eating, and sleeping. Secondly, it means that in time of extreme need, and when more orderly methods are not available, a man has the right to seize sufficient goods, natural or produced, public or private, to support life. So much is admitted and taught by all Catholic authorities, and probably by all other authorities. Furthermore, the abstract right in question seems very clearly to include the concrete right to obtain on reasonable conditions at least the requisites of a decent livelihood; for example, by direct access to a piece of land, or in return for a reasonable amount of useful labour. All of these particular rights are equally valid in all persons. Does the equal right to use the bounty of nature include the right to equal _shares_ of land, or land values, or land advantages? Since the resources of nature have been given to all men in general, and since human nature is specifically and juridically equal in all, have not all persons the right to share equally in these resources? Suppose that some philanthropist hands over to one hundred persons an uninhabited island, on condition that they shall divide it among themselves with absolute justice. Are they not obliged to divide it equally? On what ground can any person claim or be awarded a larger share than his fellows? None is of greater intrinsic worth than another, nor has any one made efforts, or sacrifices, or products which will entitle him to exceptional treatment. The correct principle of distribution would seem to be absolute equality, except in so far as it may be modified on account of varying needs, and varying capacities for social service. In any just distribution account must be taken of differences in needs and capacities; for it is not just to treat men as equal in those respects in which they are unequal, nor is it fair to deprive the community of those social benefits which can be obtained only by giving exceptional rewards for exceptional services. The same amount of food allotted to two persons might leave one hungry and the other sated; the same amount of land assigned to two persons might tempt the one to wastefulness and discourage the other. To be sure, the factor of exceptional capacity should not figure in the distribution until all persons had received that measure of natural goods which was in each case sufficient for a decent livelihood. For the fundamental justification of any distribution is to be sought in human needs; and among human needs the most deserving and the most urgent are those which must be satisfied as a prerequisite to right and reasonable life. Now it is true that private ownership of land has nowhere realised this principle of proportional equality and proportional justice. No such result is possible in a system that, in addition to other difficulties, would be required to make a new distribution at every birth and at every death. Private ownership of land can never bring about ideal justice in distribution. Nevertheless it is not necessarily out of harmony with the demands of _practical_ justice. A community that lacks either the knowledge or the power to establish the ideal system is not guilty of actual injustice because of this failure. In such a situation the proportionally equal rights of all men to the bounty of nature are not actual rights. They are conditional, or hypothetical, or suspended. At best they have no more moral validity than the right of a creditor to a loan that, owing to the untimely death of the debtor, he can never recover. In both cases it is misleading to talk of injustice; for this term always implies that some person or community is guilty of some action which could have been avoided. The system of private landownership is not, indeed, perfect; but this is not exceptional in a world where the ideal is never attained, and all things are imperfect. Henry George declares that "there is on earth no power which can rightfully make a grant of exclusive ownership in land"; but what would he have a community do which has never heard of his system? Introduce some crude form of communism, or refrain from using the land at all, and permit the people to starve to death in the interests of ideal justice? Evidently such a community must make grants of exclusive ownership, and these will be as valid in reason and in morals as any other act that is subject to human limitations which are at the time irremovable. Perhaps the Single Taxer would admit the force of the foregoing argument. He might insist that the titles given by the State in such conditions were not exclusive grants in the strict sense, but were valid only until a better system could be set up, and the people put in possession of their natural heritage. Let us suppose, then, that a nation were shown "a more excellent way." Suppose that the people of the United States set about to establish Henry George's system in the way that he himself advocated. They would forthwith impose upon all land an annual tax equivalent to the annual rent. What would be the effect upon private land-incomes, and private land-wealth? Since the first would be handed over to the State in the form of a tax, the second would utterly disappear. For the value of land, like the value of any other economic good, depends upon the utilities that it embodies or produces. Whoever controls these will control the market value of the land itself. No man will pay anything for a revenue-producing property if some one else, for example, the State, is forever to take the revenue. The owner of a piece of land which brings him an annual revenue or rent of one hundred dollars, will not find a purchaser for it if the State appropriates the one hundred dollars in the form of a tax that is to be levied year after year for all time. On the assumption that the revenue represents a selling value of two thousand dollars, the private owner will be worth that much less after the introduction of the new system. Henry George defends this proceeding as emphatically just, and denies the justice of compensating the private owners. In the chapter of "Progress and Poverty" headed, "Claim of Land Owners to Compensation," he declares that "private property in land is a bold, bare, enormous wrong, like that of chattel slavery"; and against Mill's statement that land owners have a right to rent and to the selling value of their holdings, he exclaims: "If the land of any country belong to the people of that country, what right, in morality and justice, have the individuals called land owners to the rent? If the land belong to the people, why in the name of morality and justice should the people pay its salable value for their own?"[23] Here, then, we have the full implication of the Georgean principle that private property in land is essentially unjust. It is not merely imperfect,--tolerable while unavoidable. When it can be supplanted by the right system, its inequalities must not continue under another form. If inequalities are continued through the compensation of private owners, individuals are still hindered from enjoying their equal rights to land, and the State becomes guilty of formal and culpable injustice. The titles which the State formerly guaranteed to the private owners did not have in morals the perpetual validity which they professed to have. Since the State is not the owner of the land, it was morally powerless to create or sanction titles of this character. Even if all the citizens at any given time had deliberately transferred the necessary authorisation to the State, "they could not," in the words of Henry George, "grant away the right of those who follow them." The individual's right to land is innate and natural, not civil or social. The author of "Progress and Poverty" attributes to the individual's _common_ right to land precisely the same absolute character that Father Liberatore predicates of the right to become a _private_ land owner.[24] In the view of Henry George, the State is merely the trustee of the land, having the duty of distributing its benefits and values so as to make effective the equal rights of all individuals. Consequently, the legal titles of private ownership which it creates or sanctions are valid only so long as nothing better is available. At best such titles have no greater moral force than the title by which an innocent purchaser holds a stolen watch; and the persons who are thereby deprived of their proper shares of land benefits, have the same right to recover them from the existing private owners that the watch-owner has to recover his property from the innocent purchaser. Hence the demand for compensation has no more merit in the one case than in the other. To the objection that the civil laws of many civilised countries would permit the innocent purchaser of the watch to retain it, provided that sufficient time had elapsed to create a title of prescription, the Single Taxer would reply that the two kinds of goods are not on the same moral basis in all respects. He would contend that the natural heritage of the race is too valuable, and too important for human welfare to fall under the title of prescription. To put the matter briefly, then, Henry George contends that the individual's equal right to land is so much superior to the claim of the private owner that the latter must give way, even when it represents an expenditure of money or other valuable goods. The average opponent does not seem to realise the full force of the impression which this theory makes upon the man who overemphasises the innate rights of men to a share in the gifts of nature. Let us see whether this right has the absolute and overpowering value which is attributed to it by Henry George. In considering this question, the supremely important fact to be kept in mind is that the natural right to land is not an end in itself. It is not a prerogative that inheres in men, regardless of its purposes or effects. It has validity only in so far as it promotes individual and social welfare. As regards individual welfare, we must bear in mind that this phrase includes the well being of all persons, of those who do as well as of those who do not at present enjoy the benefits of private landownership. Consequently the proposal to restore to the "disinherited" the use of their land rights must be judged by its effects upon the welfare of all persons. If existing landowners are not compensated they are deprived, in varying amounts, of the conditions of material well being to which they have become accustomed, and are thereby subjected to varying degrees of positive inconvenience and hardship. The assertion that this loss would be offset by the moral gain in altruistic feelings and consciousness, may be passed over as applying to a different race of beings from those who would be despoiled. The hardship is aggravated considerably by the fact that very many of the dispossessed private owners have paid the full value of their land out of the earnings of labour or capital, and that all of them have been encouraged by society and the State to regard landed property in precisely the same way as any other kind of property. In the latter respect they are not in the same position as the innocent purchaser of the stolen watch; for they have never been warned by society that the land might have been virtually stolen, or that the supposedly rightful claimants might some day be empowered by the law to recover possession. On the other hand, the persons who own no land under the present system, the persons who are deprived of their "birthright," suffer no such degree of hardship when they are continued in that condition. They are kept out of something which they have never possessed, which they have never hoped to get by any such easy method, and from which they have not been accustomed to derive any benefit. To prolong this condition is not to inflict upon them any new or positive inconvenience. Evidently their welfare and claims in the circumstances are not of the same moral importance as the welfare and claims of persons who would be called upon to suffer the loss of goods already possessed and enjoyed, and acquired with the full sanction of society. Henry George is fond of comparing the private owner of land with the slave owner, and the landless man with the man enslaved; but there is a world of difference between their respective positions and moral claims. Liberty is immeasurably more important than land, and the hardship suffered by the master when he is compelled to free the slave is immeasurably less than that endured by the slave who is forcibly detained in bondage. Moreover, the moral sense of mankind recognises that it is in accordance with equity to compensate slave owners when the slaves are legally emancipated. Infinitely stronger is the claim of the landowner to compensation. If the Georgeite replies that the landless man is at present kept out of something to which he has a right, while confiscation would take from the private owner something which does not really belong to him, the rejoinder must be that this assertion begs the question. The question is likewise begged when the unreasonable defender of private property declares that the right of the landless is vague and undetermined, and therefore morally inferior to the determinate and specific right of the individual landowner. This is precisely the question to be solved. Does the abstract right of the landless man become a concrete right which is so strong as to justify confiscation? Is his natural right valid against the acquired right of the private proprietor? These questions can be answered intelligently only by applying the test of human welfare, individual and social. To say that land of its very nature is not morally susceptible of private ownership, is to make an easy assertion that may be as easily denied. To interpret man's natural right to land by any other standard than human welfare, is to make of it a fetish, not a thing of reason. Henry George himself seemed to recognise this when he wrote that wonderfully eloquent but overdrawn and one-sided description of the effects of private ownership which occurs in the chapter entitled, "Claim of Landowners to Compensation."[25] When we say that human welfare is the final determinant of the right to land, we understand this phrase in the widest possible sense. To divide the goods of the idle rich among the deserving poor, might be temporarily beneficial to both these classes, but the more remote and enduring consequences would be individually and socially disastrous. To restore a legacy to persons who had been defrauded of it when very young, would probably cause more hardship to the swindler than the heirs would have suffered had there been no restitution; nevertheless the larger view of human welfare requires that the legacy should be restored. When, however, two or three generations have been kept out of their inheritance, the civil law permits the children of the swindler to retain the property by the title of prescription; and for precisely the same reason, human welfare. The social consequences of the confiscation of rent and land values, would be even more injurious than those falling upon the individuals despoiled. Social peace and order would be gravely disturbed by the protests and opposition of the landowners, while the popular conception of property rights, and of the inviolability of property, would be greatly weakened, if not entirely destroyed. The average man would not grasp or seriously consider the Georgean distinction between land and other kinds of property in this connection. He would infer that purchase, or inheritance, or bequest, or any other title having the immemorial sanction of the State, does not create a moral right to movable goods any more than to land. This would be especially likely in the matter of capital. Why should the capitalist, who is no more a worker than the landowner, be permitted to extract revenue from his possessions? In both cases the most significant and practical feature is that one class of men contributes to another class an annual payment for the use of socially necessary productive goods. If rent-confiscation would benefit a large number of people, why not increase the number by confiscating interest? Indeed, the proposal to confiscate rent is so abhorrent to the moral sense of the average man that it could never take place except in conditions of revolution and anarchy. If that day should ever arrive the policy of confiscation would not stop with land. _The Alleged Right of the Community to Land Values_ In the foregoing pages we have confined our attention to the Georgean principle which bases men's common right to land and rent upon their common nature, and their common claims to the material gifts of the Creator. Another argument against private ownership takes this form: "Consider what rent is. It does not arise spontaneously from the soil; it is due to nothing that the landowners have done. It represents a value created by the whole community.... But rent, the creation of the whole community, necessarily belongs to the whole community."[26] Before taking up the main contention in this passage, let us notice two incidental points. If all rent be due to the community by the title of social production, why does Henry George defend at such length the title of birthright? If the latter title does not extend to rent it is restricted to land which is so plentiful as to yield no rent. Since the owners or holders of such land rarely take the trouble to exclude any one from it, the right in question, the inborn right, has not much practical value. Probably, however, the words quoted above ought not to be interpreted as excluding the title of birthright. In that case, the meaning would be that rent belongs to the community by the title of production, as well as by the congenital title. The second preliminary consideration is that the community does not create _all_ land values nor _all_ rent. These things are as certainly due to nature as to social action. In no case can they be attributed exclusively to one factor. Land that has no natural qualities or capacities suitable for the satisfaction of human wants will never have value or yield rent, no matter what society does in connection with it: the richest land in the world will likewise remain valueless, until it is brought into relation with society, with at least two human beings. If Henry George merely means to say that, without the presence of the community, land will not produce rent, he is stating something that is perfectly obvious, but it is not peculiar to land. Manufactured products would have no value outside of society, yet no one maintains that their value is all created by social action. Although the value of land is always due to both nature and society, for practical purposes we may correctly attribute the value of a particular piece of land predominantly to nature, or predominantly to society. When three tracts, equally distant from a city, and equally affected by society and its activities, have different values because one is fit only for grazing, while the second produces large crops of wheat, and the third contains a rich coal mine, their relative values are evidently due to nature rather than to society. On the other hand, the varying values of two equally fertile pieces of land unequally distant from a city, must be ascribed primarily to social action. In general, it is probably safe to say that almost all the value of land in cities, and the greater part of the value of land in thickly settled districts, is specifically due to social action rather than to differences in fertility. Nevertheless, it remains true that the value of every piece of land arises partly from nature, and partly from society; but it is impossible to say in what proportion. Our present concern is with those values and rents which are to be attributed to social action. These cannot be claimed by any person, nor by any community, in virtue of the individual's natural right to the bounty of nature. Since they are not included among the ready made gifts of God, they are no part of man's birthright. If they belong to all the people the title to them must be sought in some historical fact, some fact of experience, some social fact. According to Henry George, the required title is found in the fact of production. Socially created land values and rents belong to the community because the community, not the private proprietor, has produced them. Let us see in what sense the community produces the social value of land. In the first place, this value is produced by the community in two different senses of the word community, namely, as a civil, corporate entity, and as a group of individuals who do not form a moral unit. Under the first head must be placed a great deal of the value of land in cities; for example, that which arises from municipal institutions and improvements, such as, fire and police protection, water works, sewers, paved streets, and parks. On the other hand, a considerable part of land values both within and without cities is due, not to the community as a civil body, but to the community as a collection of individuals and groups of individuals. Thus, the erection and maintenance of buildings, the various economic exchanges of goods and labour, the superior opportunities for social intercourse and amusement which characterise a city, make the land of the city and its environs more valuable than land at a distance. While the activities involved in these economic and "social" facts and relations are, indeed, a social not an individual product, they are the product of small, temporary, and shifting groups within the community. They are not the activities of the community as a moral whole. For example, the maintenance of a grocery business implies a series of social relations and agreements between the grocer and his customers; but none of these transactions is participated in by the community acting as a community. Consequently such actions and relations, and the land values to which they give rise are not due to, are not the products of the community as a unit, as a moral body, as an organic entity. What is true of the land values created by the grocery business applies to the values which are due to other economic institutions and relations, as well as to those values which arise out of the purely "social" activities and advantages. If these values are to go to their producers they must be taken, in various proportions, by the different small groups and the various individuals whose actions and transactions have been directly responsible. To distribute these values among the producers thereof in proportion to the productive contribution of each person is obviously impossible. How can it be known, for example, what portion of the increase in the value of a city's real estate during a given year is due to the merchants, the manufacturers, the railroads, the labourers, the professional classes, or the city as a corporation? The only practical method is for the city or other political unit to act as the representative of all its members, appropriate the increase in value, and distribute it among the citizens in the form of public services, institutions, and improvements. Assuming that the socially produced value of land ought to go to its social producer rather than to the individual proprietor, this method of public appropriation and disbursement would seem to be the nearest approximation to practical justice that is available. Is the assumption correct? Do the socially produced land values necessarily belong to the producer, society? Does not the assumption rest upon a misconception of the moral validity of production as a canon of distribution? Let us examine some of the ways in which values are produced. The man who converts leather and other suitable raw materials into a pair of shoes, increases the utility of these materials, and in normal market conditions increases their value. In a certain sense he has created value, and he is universally acknowledged to have a right to this product. Similarly the man who increases the utility and value of land by fertilising, irrigating, or draining it, is conceded the benefit of these improvements by the title of production. But value may be increased by mere restriction of supply, and by mere increase in demand. If a group of men get control of the existing supply of wheat or cotton, they can artificially raise the price, thereby producing value as effectively as the shoemaker or the farmer. If a syndicate of speculators gets possession of all the land of a certain quality in a community, they can likewise increase its value, produce new value. If a few powerful leaders of fashion decide to adopt a certain style of millinery, their action and example will effect an increase in the demand for and the value of that kind of goods. Yet none of these producers of value are regarded as having a moral right to their product. When we turn to what is called the social creation of land values, we find that it takes two forms. It always implies increase of social demand; but the latter may be either purely subjective, reflecting merely the desires and power of the demanders themselves, or it may have an objective basis connected with the land. In the first case it may be due solely to an increase of population. Within the last few years, agricultural land which is no more fertile nor any better situated with regard to markets or other social advantages than it was thirty years ago, has risen in value because its products have risen in value. Its products have become dearer because population, and therefore demand, have grown faster than agricultural production. Merely by increasing its wants the population has produced land values; but it has obviously no more right to them than have the leaders of fashion to the enhanced value which they have given to feminine headgear. On the other hand, the increased demand for land, and the consequent increase in its value, are frequently attributable specifically to changes connected with the land itself. They are changes which affect its utility rather than its scarcity. The farmer who irrigates desert land increases its utility, as it were, _intrinsically_. The community that establishes a city increases the utility of the land therein and thereabout _extrinsically_. New _relations_ are introduced between that land and certain desirable social institutions. Land that was formerly useful only for agriculture becomes profitable for a factory or a store. Through its new external relations, the land acquires new utility; or better, its latent and potential uses have become actual. Now these new relations, these utility-creating and value-creating relations, have been established by society, in its corporate capacity through civil institutions and activities, and in its non-corporate capacity through the economic and "social" (in the narrower "society" sense) activities of groups and individuals. In this sense, then, the community has created the increased land values. Has it a strict right to them? a right so rigorous and exact that private appropriation of them is unjust? As we have just seen, men do not admit that mere production of value constitutes a title of ownership. Neither the monopolist who increases value by restricting supply, nor the pace-makers of fashion, who increase value by merely increasing demand, are regarded as possessing a moral right to the value that they have "created." It is increase of utility, and not either actual or virtual increase of scarcity to which men attribute a moral claim. Why do men assign these different ethical qualities to the production of value? Why has the shoemaker a right to the value that he adds to the raw material in making a pair of shoes? What is the precise basis of his right? It cannot be labour merely; for the cotton monopolist has laboured in getting his corner on cotton. It cannot be the fact that the shoemaker's labour is socially useful; for a chemist might spend laborious days and nights producing water from its component elements, and find his product a drug on the market. Yet he would have no reasonable ground of complaint. Why, then, is it reasonable for the shoemaker to require, why has he a right to require payment for the utilities that he produces? Because men want to use his products, and because they have no right to require him to serve them without compensation. He is morally and juridically their equal, and has the same right as they to have access on reasonable terms to the earth and the earth's possibilities of a livelihood. Being thus equal to his fellows, he is under no obligation to subordinate himself to them by becoming a mere instrument for their welfare. To assume that he is obliged to produce socially useful things without remuneration, is to assume that all these propositions are false; it is to assume that his life and personality and personal development are of no intrinsic importance, and that his pursuit of the essential ends of life has no meaning except in so far as may be conducive to his function as an instrument of production. In a word, the ultimate basis of the producer's right to his product, or its value, is the fact that this is the only way in which he can get his just share of the earth's goods, and of the means of life and personal development. His right to compensation does not rest on the mere fact of value-production. As a producer of land values, the community is not on the same moral ground with the shoemaker. Its productive action is indirect and extrinsic, instead of direct and intrinsic, and is merely incidental to its principal activities and purposes. Land values are a by-product which do not require the community to devote thereto a single moment of time or a single ounce of effort. The activities of which land values are a by-product, have already been remunerated in the price paid to the wage-earner for his labour, the physician for his services, the manufacturer and the merchant for their wares, and the municipal corporation in the form of taxes. On what ground can the community, or any part of it, set up a claim in strict justice to the increased land values? The right of the members of the community to the means of living and self development is not dependent upon the taking of these values by the community. Nor are they treated as instruments to the welfare of the private owners who do get the socially created land values; for they expend neither time nor labour in the interest of the latter directly. Their labour is precisely what it would have been had there been no increase in the value of the land. Since social production does not constitute a right to land values nor to rent, it affords not a shadow of justification for the confiscation of these things by the community. If social appropriation of socially created land values had been introduced with the first occupation of a piece of land, it might possibly have proved more generally beneficial than the present system. In that case, however, the moral claim of the community to these values would have rested on the fact that they did not belong to anybody by a title of strict justice. They would have been a "res nullius" ("nobody's property") which might fairly have been taken by the community according as they made their appearance. The community could have appropriated them by the title of first occupancy. But there could have been no moral title of social production. When, however, the community or the State failed to take advantage of its opportunity to be the first occupant of these values, when it permitted the individual proprietor to appropriate them, it forfeited its own claim. Ever since it has had no more right to already existing land values than it has to seize the labourer's wages or the capitalist's interest,--no more right than one person has to recover a gift or donation that he has unconditionally bestowed upon another. To sum up the conclusions of this chapter: The argument against first occupancy is valid only with regard to the abuses of private ownership, not with regard to the institution; the argument based upon the title of labour is the outcome of a faulty analysis, and is inconsistent with other statements of its author; the argument derived from men's equal rights to land merely proves that private ownership does not secure perfect justice, and the proposal to correct this defect by confiscating rent is unjust because it would produce greater evils; and the so called production of the social values of land confers upon the community no property right whatever. FOOTNOTES: [8] "Socialism: Utopian and Scientific," p. 45; Chicago, 1900. [9] "A summary of the Principles of Socialism," p. 23; London, 1899. [10] "Socialism: A Reply to the Pope's Encyclical," p. 4; London, 1899. [11] "Progress and Poverty," book vii, ch. i. [12] "La Propriété Privée," par L. Garriguet, I, 62; Paris, 1903. [13] Cf. Ardant, "Papes et Paysans," pp. 41, sq. [14] "Social Statics," chap, ix; 1850. Spencer's retractation, in a later edition of this work, of his earlier views on the right of property in land does not affect the truth of the description quoted in the passage above. [15] "Progress and Poverty," loc. cit. [16] "Open Letter to Pope Leo XIII," page 25 of Vierth's edition. [17] "Progress and Poverty," loc. cit. [18] "Progress and Poverty," loc. cit. [19] "Open Letter to Pope Leo XIII," loc. cit. [20] Whittaker, op. cit., p. 32. [21] "Open Letter," loc. cit. [22] "Progress and Poverty," book vii, ch. i. [23] Cf. chapter entitled "Compensation" in "A Perplexed Philosopher." [24] Cf. "Principles of Political Economy," 1891, p. 130. [25] "Progress and Poverty." [26] "Progress and Poverty," book vii, ch. iii. CHAPTER IV PRIVATE OWNERSHIP THE BEST SYSTEM OF LAND TENURE The defence of private landownership set forth in the last chapter has been conditional. It has tended to show that the institution is morally lawful so long as no better system is available. As soon as a better system has been discovered, the State and the citizens are undoubtedly under some degree of moral obligation to put it into practice. Hence the important present question is whether this condition or contingency has become a reality. The only proposed and the only possible alternative systems are Socialism and the Single Tax. All other forms of tenure are properly classed as modifications of private ownership, rather than as distinct systems. Consequently the worth, and efficiency, and morality of private ownership can be adequately determined by comparison with the two just mentioned. _The Socialist Proposals Impracticable_ As now existing and as commonly understood, private landownership comprises four elements which are not found together in either Socialism or the Single Tax. They are: security of possession combined with the power to transfer and transmit; the use of land combined with the power to let the use to others; the receipt of revenue from improvements in or upon the land; and the receipt of economic rent, the revenue due to the land itself, apart from improvements. In its extreme form, and as formerly understood by the majority of its authoritative exponents, Socialism would take from the individual all of these elements or powers. The State, or the Collectivity, would own and manage all productive land and land-capital, and would receive and distribute the product. Consequently the cultivators of the land would be deprived of even that limited degree of control which is now possessed by the tenant on a rented farm; for the latter, though not a landowner, is the owner of a farming business, and of agricultural instruments of production. Under Socialism the users of the land would not receive the revenue either from improvements or from the land itself. They would be substantially employés of the community, receiving a share of the product according to some plan of distribution established by public authority. Land occupied by dwellings would likewise be owned and managed by the State, although its product, the benefit of its use, would necessarily go in the first instance to the occupier. In return for this benefit he would undoubtedly be required to pay some kind of rent to the State. Now the majority of persons believe that this system of land tenure would be inferior to private ownership, both as regards individual welfare and social welfare. The reasons for this belief will be given in detail in the chapter on "The Socialist Scheme of Industry." For the present it will be sufficient to point out in a summary way that Socialism would be unable to organise and carry on efficiently all agricultural and extractive industries, either under one central direction or under many provincial authorities; that it could not adjust wages and salaries satisfactorily, nor give the individual worker an incentive as effective as the self interest that goes with private ownership; that it would deprive the worker of a great part of the freedom that he now enjoys in the matters of occupation and residence; that it would leave to the consumer less choice in the demand for the products of land; that it would place all the people in a position of dependence upon a single agency for all these products; and that it would make all land users, whether as workers or as residents, tenants-at-will on the property of the State. From the nature of the case, none of the foregoing propositions can be demonstrated mathematically. Nevertheless they are as nearly evident as any other practical conclusions which are based upon our general experience of human nature, its tendencies, and its limitations. At any rate, the burden of proof is upon the advocates of the new system. Until they have assumed and satisfactorily disposed of this burden, we are justified in rejecting their prophecies, and in maintaining the superiority of private ownership.[27] To-day, however, many Socialists, possibly the majority of them in some countries, would reject the extreme form of land socialisation discussed in the preceding paragraphs. "The nearest approach which Socialists have made to a _volte face_ since Marx, has been in relation to Agrarianism.... Marx thought that the advantage of concentrating capital would be felt in agriculture as in other industries; but, in spite of a temporary confirmation of this view by the mammoth farms which sprang up in North America, it now appears very doubtful.... Recognition of this has led reformists to substitute a policy of actively assisting the peasants for the orthodox policy of leaving them to succumb to capitalism. Their formula is: 'Collectivise credit, transport, exchange, and all subsidiary manufacture, but individualise culture.'"[28] The Belgian Socialist leader, Vandervelde, seems to prefer State ownership and management of the great agricultural industries which require large masses of capital for their efficient operation, such as dairying, distilling, and sugar making, together with State ownership of the land thus used. Other lands he would have owned by the State, but cultivated by individuals according to a system of leasing and rent-paying.[29] By a referendum vote the members of the Socialist party in the United States recently amended their platform on land, to read as follows: "The Socialist party strives to prevent land from being used for the purpose of exploitation and speculation. It demands the collective possession, control or management of land to whatever extent may be necessary to attain that end. It is not opposed to the occupation and possession of land by those using it in a useful and bona fide manner without exploitation."[30] As to land occupied by dwellings, perhaps the majority of Socialists would now agree with Spargo in the statement that, "so far as the central principle of Socialism is concerned, there is no more reason for denying the right of a man to own his own home than there is to deny him the right to own his hat."[31] In so far as the foregoing modifications of Socialist proposals would allow the individual to own the land that he cultivates or occupies, they do not call for further discussion here. In so far as they combine State ownership of land with individual management of cultivation, they are subject to at least all the limitations of the Single Tax. To the latter system we now turn our attention. _Inferiority of the Single Tax System_ Of the four leading elements of private ownership enumerated above, the Single Tax scheme would comprise all but one. In the words of Henry George himself: "Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call _their_ land. Let them continue to call it _their_ land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. _It is not necessary to confiscate land; it is only necessary to confiscate rent...._ In this way the State may become the universal landlord without calling herself so, and without assuming a single new function. In form, the ownership of land would remain just as now. No owner of land need be dispossessed, and no restriction need be placed upon the amount of land that any one could hold."[32] Individuals would, therefore, still enjoy security of possession, the managerial use of land, and the revenue due to improvements. The income arising from the land itself, the economic rent, they would be obliged to hand over as a free gift to the State. As we have seen in a preceding chapter, this confiscation of rent by the State would be pure and simple robbery of the private owner. Suppose, however, that the State were willing to compensate individual proprietors with a sum equal to the present value, or the capitalised rent, of their land. In that case the only difference made to the individual would be that he could no longer invest his money in land nor profit by the increases in land values. While this would deprive some persons of advantages that they now enjoy, it would be beneficial to the majority, and to the community. Since no man would find it profitable to retain control of more land than he could use himself, the number of actual land users would be increased. The land speculator would disappear, together with the opportunity of making and losing fortunes by gambling on the changes in land values. Owing to the removal of taxation from the necessaries of life and from industry, consumers would get goods cheaper, and some stimulus would be given to production and employment. Those monopolies which derive their strength from land would become weaker and tend to disappear. Sooner or later there would probably be a considerable increase in the amount of money available for public improvements and socially beneficial institutions. On the other hand, there would be certain and serious disadvantages. A considerable number of land users might permit their holdings to deteriorate through careless cultivation. To be sure, they would not find this a profitable course if they intended to remain on the land permanently; but they might prefer to exhaust the best qualities of a farm in a few years, and then retire, or go into some other business, or repeat the wearing-out process on other lands. Thus the community would suffer through the lowered productiveness of its land, and because of the lower rent that it would receive from all subsequent users of the deteriorated tracts. In the second place, the administrative machinery required to levy and collect the rent, and to apportion the different holdings among competitive bidders, would inevitably involve a vast amount of error, inequality, favouritism, and corruption. For the land tax to be levied and collected would not be, as now, a fraction of the rental value, but the full amount of the annual rent. In the third place, cultivators would not have the inducement to make improvements which arises from the hope of selling both the improvements and the land at a profit, owing to the increased demand for the land. Perhaps the greatest disadvantage of the system would be the instability of tenure, with regard to both productive and residential lands. Owing to misfortunes of various kinds, for example, one or two bad crops, many cultivators would be temporarily unable to pay the full amount of the land tax or rent. It is scarcely conceivable that the State would remit the deficiency, or refuse to turn the land over to other persons on terms more advantageous to itself. Inasmuch as the value and rent of land would be continuously adjusted by competition, the more efficient and more wealthy would frequently supplant the less efficient and the less wealthy, even though the latter had occupied their holdings or their dwellings for a great number of years. Legal security of tenure, though theoretically the same as that enjoyed by the private owner to-day, would be much less effective practically. In this respect land users would be in almost as bad a case as renters are at present.[33] Our conclusion, then, is that private landownership is certainly better than extreme Socialism, or any form of Socialism which does not concede to the land user all the control that he would have under the Single Tax system, and that it is very probably superior to the latter. In making this comparison and drawing this conclusion, we have in mind private ownership, not at its worst nor as it exists or has existed in any particular country, but private ownership in its essential elements, and with its capacity for modification and improvement. If we were to examine carefully the results of private ownership as it obtained in Ireland for several centuries before the enactment of the recent Land Purchase Act, we should probably be tempted to declare that the most extreme form of agrarian Socialism could scarcely have been productive of more individual and social injury. Certain other countries present almost equally unfavourable conditions of comparison. Failure to note this distinction between the historical and the potential aspects of private landownership has vitiated many otherwise excellent defences of the institution. It has provoked the retort that almost any plausible change would be an improvement upon private ownership as it has existed in this or that country. But these are not the real alternatives. The practical choice is between private ownership as shown by experience and reason to be capable of improvement, and some untried system which is subject to grave defects, and which at its best would be probably inferior to modified private ownership. An attempt to describe some of these modifications and improvements will be made in a subsequent chapter. In the meantime we content ourselves with the statement that private land ownership is capable of becoming better than Socialism certainly, and probably better than the Single Tax system. Consequently it is justified not merely so long as neither of these schemes is introduced, but as an institution which the State would do well to maintain, protect, and improve. FOOTNOTES: [27] Cf. Chapter xi. [28] Ensor, "Modern Socialism," p. xxxi, N. Y., 1904. [29] Idem, pp. 213-216. [30] Cited by Spargo, "The Substance of Socialism," p. 88, N. Y., 1909. [31] Idem, p. 90. [32] "Progress and Poverty," book viii, ch. ii. [33] Cf. Walker, "Land and Its Rent"; and Seligman, "Essays in Taxation." CHAPTER V PRIVATE LANDOWNERSHIP A NATURAL RIGHT The conclusions of the preceding chapter include the statement that individuals are morally justified in becoming and remaining landowners. May we take a further step, and assert that private landownership is a natural right of the individual? If it is, the abolition of it by the State, even with compensation to the owners, would be an act of injustice. The doctrine of natural rights is so prominent in the arguments of both the advocates and the opponents of private landownership that it deserves specific treatment. Moreover, the claim that private landownership is a natural right rests upon precisely the same basis as the similar claim with regard to the individual ownership of capital; and the conclusions pertinent to the former will be equally applicable to the latter. A natural right is a right derived from the nature of the individual, and existing for his welfare. Hence it differs from a civil right, which is derived from society or the State, and is intended for a social or civil purpose. Such, for example, is the right to vote, or the right to hold a public office. Since a natural right neither proceeds from nor is primarily designed for a civil end, it cannot be annulled, and it may not be ignored, by the State. For example: the right to life and the right to liberty are so sacred to the individual, so necessary to his welfare, that the State cannot rightfully kill an innocent man, nor punish him by a term in prison. _Three Principal Kinds of Natural Rights_ Although natural rights are all equally valid, they differ in regard to their basis, and their urgency or importance. From this point of view, we may profitably distinguish three principal types. The first is exemplified in the right to live. The object of this right, life itself, is intrinsically good, good for its own sake, an end in itself. It is the end to which even civil society is a means. Since life is good intrinsically, the right to life is also valid intrinsically, and not because of consequences. Since there is no conceivable equivalent for life in the case of any individual in any contingency, the right to life is immediate and direct in all possible circumstances. Among the natural rights of the second class, the most prominent are the right to marry, to enjoy personal freedom, and to own consumption-goods, such as food and clothing. The objects of these rights are not ends in themselves, but means to human welfare. Confining our attention to marriage, we see that membership in the conjugal union is an indispensable means to reasonable life and self development in the majority of persons. The only conceivable substitutes are free love and celibacy. Of these the first is inadequate for any person, and the second is adequate only for a minority. Marriage is, therefore, _directly_ and _per se_ necessary for the majority of individuals; for the majority it is an _individual_ necessity. If the State were to abolish marriage it would deprive the majority of an indispensable means of right and reasonable life. Consequently the majority have a _direct_ natural right to the legal power of marrying. In the case of the minority who do not need to marry, who can live as well or better as celibates, the legal opportunity of marriage is evidently not directly necessary. But it is necessary indirectly, inasmuch as the _power of choice_ between marriage and celibacy is an individual necessity. No argument is required to show that the State could not decide this matter consistently with individual welfare or social peace. Whence it follows that even the minority who do not wish or do not need to marry, have a natural right to embrace or reject the conjugal condition. In their case the right to marry is indirect, but none the less inviolable.[34] Private ownership of land belongs in a third class of natural rights. Inasmuch as it is not an intrinsic good, but merely a means to human welfare, it differs from life and resembles marriage. On the other hand, it is unlike marriage in that it is not _directly_ necessary for any individual whatever.[35] The alternative to marriage, namely, celibacy, would not even under the best social administration enable the majority to lead right and reasonable lives. The alternative to private landownership (and to private ownership of capital as well), namely, some form of employment as wage receiver, salary receiver, or fee receiver enables the individual to attain all the vital ends of private ownership: food, clothing, shelter, security of livelihood and residence, and the means of mental, moral, and spiritual development. None of these vital ends or needs is essentially dependent upon private ownership of land; for millions of persons satisfy them every day without becoming landowners. Nor are they exceptions, as those who can get along without marriage are exceptions. The persons who live reasonable lives without owning land are average persons. What they do any other person could do if placed in the same circumstances. Therefore, private landownership is not directly necessary for the welfare of any individual. _Private Landownership Indirectly Necessary for Individual Welfare_ In our present industrial civilisation, however, private landownership is _indirectly_ necessary for the welfare of the individual. It is said to be indirectly necessary because it is necessary as a _social institution_, rather than as something immediately connected with individual needs as such. It is not, indeed, so necessary that society would promptly go to pieces under any other form of land tenure. As we have seen in the last chapter, it is necessary in the sense that it is capable of promoting the welfare of the average person, of the majority of persons, to a much greater degree than State ownership. It is necessary for the same reason and in the same way as a civil police force. As the State is obliged to maintain a police force, so it is obliged to maintain a system of private landownership. As the citizen has a right to police protection, so he has a right to the social and economic advantages which are connected with the system of private ownership of land. These rights are natural, derived from the needs of the individual in society, not dependent upon the good pleasure of the city or the State. They are individual rights to the presence and benefits of these social institutions. But man's rights in the matter of land tenure are more extensive than his rights with regard to a police force. They are not restricted to the presence and functioning of a social institution. Every citizen has a natural right to police protection, but no citizen has a natural right to become a policeman. The welfare of the citizen is sufficiently looked after when the members of the police are selected by the authorities of the city. On the contrary, his welfare would not be adequately safeguarded if the State were to decide who might and who might not become landowners. In the first place, the ideal condition is that in which _all_ persons can easily become actual owners. In the second place, the mere legal opportunity of becoming owners is a considerable stimulus to the energy and ambition of all persons, even of those who are never able to convert it into an economic opportunity. Therefore, only a very powerful reason of social utility would justify the State in excluding any person or any class from the legal power to own land. No such reason exists; and there are many reasons why the State should not attempt anything of the sort. As a consequence of these facts, every person, whether an actual owner or not, has a natural right to acquire property in land. This right is evidently a necessary condition of a fair and efficient system of private ownership, which is in turn a necessary condition of individual welfare. The right of private landownership is, therefore, an indirect right; but it is quite as valid and quite as certain as any other natural right. Now this right is certainly valid as against complete Socialism, which includes State management and use, as well as State ownership. Is it valid against the Single Tax system, or against such modified forms of Socialism as would allow the individual to rent and use the land as an independent cultivator with security of tenure? Would the introduction of some such scheme in a country in which only a small minority of the population were actual owners, constitute a violation of individual rights? While we cannot with any feeling of certainty return an affirmative answer to these questions, we can confidently affirm that reform within the lines of private ownership would in the long run be more effective, and, therefore, that the right of private ownership is _probably_ valid even against these modified forms of common ownership.[36] _Excessive Interpretations of the Right of Private Landownership_ The indirect character of the right of private landownership, its relativity to and dependence upon social conditions, is not always sufficiently grasped by either its advocates or its opponents. In the writings of the former we sometimes find language which suggests that this right is as independent of social conditions as the right to marriage or the right to life. "The State has no right to abolish private property [in land] because private property is not a social right, but an individual right derived from nature, not derived from the State." It exists for _human_ welfare, not merely for _civil_ welfare.[37] The only defect in this reasoning is that the premises do not justify the conclusion. Undoubtedly the State may not abolish private ownership, _so long as it is necessary for human or individual welfare_; but, when this necessity ceases, the moral justification of the institution likewise disappears. The institution may then be abolished, somehow, by some agency, without any violation of individual rights. Why may not the task of abolition be performed by the State? No other agency is available. The assertion that the State is incompetent to decide whether the institution of private ownership has outlived its usefulness, is entirely gratuitous; besides, it implies that a small minority of selfishly interested persons may justly require the continuation of a system of land tenure which has become harmful to the overwhelming majority of the community. Extreme defences of the right of private landownership are largely responsible for the misconceptions of many of its opponents. Occasionally the latter represent this right as an _a priori_ monstrosity which is serenely independent of the facts of life and industry. While such persons are at liberty to reject the interpretations of facts contained in the preceding paragraphs, they cannot reasonably deny the logic of the process which has led to the conclusion that the individual has a natural right to own land. So much for the natural right of landownership as seen in the light of reason. Let us now consider it briefly from the side of doctrinal authority, namely, the writings of the Fathers and Theologians of the Church, and the formal pronouncements of the Popes. _The Doctrine of the Fathers and Theologians_ Some of the Church Fathers, particularly Augustine, Ambrose, Basil, Chrysostom, and Jerome, denounced riches and the rich so severely that they have been accused of denying the right of private ownership. The facts, however, are that none of the passages upon which this accusation is based proves it to be true, and that in numerous other passages all of these writers explicitly affirm that private ownership is lawful.[38] Speaking generally, we may say that they taught the moral goodness of private ownership without insisting upon its necessity. Hence they cannot be cited as authorities for the doctrine that the individual has a natural right to own land. Some of the great theologians of mediæval and post-mediæval times denied this right, inasmuch as they denied that the institution of private ownership was imposed or commanded by the natural law. Among them are Scotus,[39] Molina,[40] Lessius,[41] Suarez,[42] Vasquez,[43] and Billuart.[44] Since private ownership is not absolutely necessary to human welfare in all forms of society, it cannot, in their view, be regarded as strictly prescribed by the natural law, nor be instituted without the positive action of civil authority, or the consent of the community. Nevertheless they all admit that it is much better than common ownership in contemporary societies. The difference between their position and that of de Lugo, for example, seems to be two-fold: First, they put stronger emphasis upon the doctrines that the earth belongs to all men in common, that in the absence of original sin ownership would likewise have been common, and that this arrangement is therefore in a fundamental sense normal, agreeing with nature and the natural law; and, second, they put a lower estimate upon the superiority of private ownership even in contemporary conditions. In a word, they denied that private ownership was so much better than any alternative system as to confer upon the individual a natural right in the strict sense; that is, a right which laid upon the State the correlative obligation of maintaining the institution of private landownership. On the other hand, many of the ablest theologians of the same period declared that private ownership was enjoined by the natural law and right reason, and consequently that it was among the individual's natural rights. According to St. Thomas Aquinas, private property is "necessary for human life," and is one of those social institutions which are prescribed by the _jus gentium_; and the content of the _jus gentium_ is not determined by positive law, but by the dictates of "natural reason," by "natural reason itself."[45] These statements seem to convey the doctrine of natural right as clearly as could be expected in the absence of an explicit declaration. Cardinal de Lugo sets forth the same teaching somewhat more compactly, but in substantially the same terms: "Speaking generally, a division of goods and of ownership-titles proceeds from the law of nature, for natural reason dictates such division as necessary in the present circumstances of fallen nature and dense populations."[46] This view is to-day universally accepted among Catholic writers. _The Teaching of Pope Leo XIII_ The official teaching of the Church on the subject is found in the Encyclical, "On the Condition of Labour," by Pope Leo XIII. In this document we are told that the proposals of the Socialists are "manifestly against justice"; that the right of private property in land is "granted to man by nature"; that it is derived "from nature not from man, and the State has the right to control its use in the interest of the public good alone, but by no means to abolish it altogether." These statements the Pope deduces from a consideration of man's needs. Private property in land is necessary to satisfy the wants, present and future, of the individual and his family. Were the State to attempt the task of making this provision, it would exceed its proper sphere, and produce manifold domestic and social confusion. While Pope Leo defines the natural right of private ownership as incompatible with complete Socialism, that is, collective use as well as collective ownership, his statements cannot fairly or certainly be interpreted as condemning the Single Tax system, or any other arrangement which would leave to the individual managerial use and secure possession of his holding, together with the power to transmit and transfer it, and full ownership of improvements. These are the only elements of ownership which the Holy Father defends, and which he insists upon as necessary. The one element of private ownership which the Single Tax system would exclude; namely, the power to take rent from and profit by the changes in land values, finds no place among the advantages of private ownership enumerated in the Encyclical. There is, indeed, one passage of the Encyclical in which Pope Leo seems to allude to the Single Tax, or to some similar proposal. He expresses his amazement at those persons who "assert that it is right for private persons to have the use of the soil and its various fruits, but that it is unjust for any one to possess outright either the land on which he has built, or the estate which he has brought under cultivation. But those who deny these rights do not perceive that they are defrauding man of what his own labour has produced. For the soil which is tilled and cultivated with toil and skill utterly changes its conditions: it was wild before, now it is fruitful; was barren, but now brings forth in abundance. That which has thus altered and improved the land becomes so truly a part of itself as to be in great measure indistinguishable and inseparable from it. Is it just that the fruit of a man's own labour should be possessed and enjoyed by any one else? As effects follow their cause, so is it just and right that the results of labour should belong to those who have bestowed their labour." In this passage we find two principal statements: first, that those persons are in error who declare full private ownership of land to be unjust; and, second, that it is wrong to deprive a man of the improvements which he makes in the soil. Now the first of these propositions does not touch the Single Tax system as such; it only condemns the assertion of Henry George that private ownership is essentially unjust. It is directed against one of the arguments for the system, not against the system itself. More specifically, it is a refutation of an argument against private land ownership, rather than a positive attack upon any other system. It could be accepted by any Single Taxer who does not agree with Henry George that the present system is essentially unjust. The second proposition does not apply to the Single Tax system at all; for the latter would concede to the individual holder the full ownership and benefit of improvements; and it could easily be so administered as to protect him against injury in any case in which improvement values were not exactly and clearly distinguishable from land values. While Henry George opposed the doctrines of the Encyclical in his "Open Letter to Pope Leo XIII," all his arguments are directed against the proposition that private ownership is right and just. The "Letter" is an attack upon private ownership rather than a defence of the Single Tax. Apparently its author did not find that Pope Leo condemned any positive or essential element of the Single Tax as a proposed system of land tenure. If the rejoinder be made that Pope Leo could have had no other group of persons in mind than the Single Taxers, when he wrote the paragraph quoted above, our answer must be that he did not definitely identify them, either by naming them, as he named the Socialists, or by any other sufficiently explicit designation. Applying to this paragraph the customary and recognised rules of interpretation, we are obliged to conclude that it does not contain an explicit condemnation of the Single Tax system. To put the substance of this chapter in two sentences: Private landownership is a natural right because in present conditions the institution is necessary for individual and social welfare. The right is certainly valid as against complete Socialism, and probably valid as against any such radical modification of the present system as that contemplated by the thoroughgoing Single Taxers. FOOTNOTES: [34] The marriage rights of criminals, degenerates, and other socially dangerous persons, are passed over here as not pertinent to the present discussion. For the same reason nothing is said of the perfectly valid _social_ argument in favour of the individual right of marriage. [35] Cf. Vermeersch, "Quaestiones de Justitia," no. 204. [36] The argument in the text is obviously empirical, drawn from consequences. There is, however, a putatively intrinsic or metaphysical argument which is sometimes urged against the justice of the Single Tax system. It runs thus: since the fruits of a thing belong to the owner of the thing, "res fructificat domino," rent, which is the economically imputed fruit of land, necessarily and as a matter of natural right should go to the owner of the land. As will be shown later, the formula at the basis of this contention is not a metaphysical principle at all, but a conclusion from experience. Like every other formula or principle of property rights, it must find its ultimate basis in human welfare. [37] Liberatore, "Principles of Political Economy," pp. 130, 134. [38] Cf. Vermeersch, op. cit., no. 210; Ryan, "Alleged Socialism of the Church Fathers." [39] "In IV Sent.," d. 15, q. 2, n. 5; and "Reportata parisiensia," d. 15, q. 4, n. 7-12. [40] "De Justitia et Jure," tr. 2, d. 18 and 20. [41] "De Justitia et Jure," c. 5, n. 3. [42] "De Legibus," l. 2, c. 14, n. 13 and 16. [43] "In Summa," 1ma 2ae, d. 157, n. 17. [44] "De Justitia et Jure," d. 4, a. 1. [45] "Summa Theologica," 2a 2ae, q. 57, a. 2 and 3. [46] "De Justitia et Jure," d. 6, s. 1, n. 6. CHAPTER VI LIMITATIONS ON THE LANDOWNER'S RIGHT TO RENT The chapters immediately preceding have led to the conclusion that private ownership is the best system of land tenure, and that the individual has a natural right to participate in its advantages. Although this system confers upon the individual owner the power to take the rent of the land, we are not logically debarred from raising the question whether this power is a necessary part of the moral rights of landownership. Does the right to own a piece of land necessarily include the right to take its rent? By what ethical principle of distribution is the landowner justified in appropriating a revenue in return for which he has performed no labour, nor made any sacrifice? This is unquestionably what happens when a man hires out his land to another. And in conditions of perfect competition, those owners who operate their own land are fully remunerated for their labour in the form of profits. Over and above this sum they receive rent, the payment that they could get from the land if they were to let its use to tenants. In the normal situation, therefore, rent is a workless income. On what moral ground may it be taken by the landowner?[47] The fact that we have rejected the Single Tax and the confiscation of rent by the community, does not of itself commit us to the conclusion that the private owner has a moral right to receive rent. We have condemned the State appropriation of rent on the assumption that it would take place without a similar confiscation of interest. Such discrimination would be grossly unfair; for it would cause land values to sink to zero, while leaving the value of capital substantially undisturbed. To carry out such a programme would be to treat property owners unequally, to penalise one set of beneficiaries of "workless" incomes, while leaving another set untouched. Consequently, the State is not justified in confiscating rent unless it is justified in confiscating or prohibiting interest; and the landowner is as fully justified in taking rent as the capital owner is in taking interest. The contention of the Single Taxer that ownership of the former kind is morally wrong, while ownership of capital is morally legitimate, has already received sufficient discussion. The specific question remains, therefore,--whether the landowner and the capitalist are justified in receiving and retaining their "workless" incomes. Inasmuch as the principles and pertinent facts involved in this question can be more effectively and more conveniently discussed in relation to interest than in relation to rent, the solution will be deferred to the chapters on interest. Assuming provisionally that the outcome of the discussion will be favourable to the claims of the landowner, let us inquire whether he always has a moral right to _all_ the rent. The parallel question regarding the capitalist will be considered in connection with the right of the labourer to a living wage. _The Tenant's Right to a Decent Livelihood_ The actual payments made by tenants to landowners sometimes leave the former without the means of decent living. Such had been the condition of a large part of the Irish tenant farmers before 1881, when the Land Courts were established. In the course of twenty-five years these courts reduced the rents by twenty per cent. on the average in upwards of half a million cases. While a part of the reductions was intended to free the tenants from the unjust burden of paying rent on their own improvements, another part was undoubtedly ordered on the theory that the tenants were entitled to retain a larger share of the product for their own support. Yet the latter portion of the reduction apparently represented true economic rent; for it was included in the difference between the product and the current cost of production; it was included in the amount that men in Ireland were willing to pay for the use of land. It was a part of the surplus that they had left after defraying their expenditures for capital and labour. To be sure, the tenants in some other countries, say, the United States, would not have been satisfied with such a small remuneration, and would not have handed over so much to the landlord; but if the concept of economic rent is to have any serviceable meaning it must be determined by the actual returns to capital and labour in each locality, and not by the standards of some other place which are assumed to be normal. In any case, the Irish Land Courts did reduce the rents below the level fixed by competition, by the unregulated forces of supply and demand. Was this treating the landlords justly? May a tenant ever retain a part of the rent which the free course of competition would yield to the landowner? Here we must distinguish between the tenant who is and the tenant who is not in possession of a holding sufficiently large to require all the time and labour of a cultivator possessing average efficiency. The tenant who controls and cultivates less than this amount of land ought not to expect to get all his livelihood therefrom. Failure to do so would not necessarily mean that he was paying exorbitant rent. Holdings of this sort are rightly called "uneconomic"; that is, they are too small to permit a profitable and reasonable application of labour and capital. On such holdings the fair rent would be that amount per acre which would be regarded as fair for the use of the same land held in farms of "economic" size. The proper recourse for the occupiers of uneconomic holdings is to get control of more land, which is exactly what has been happening in Ireland through the action of the Congested Districts Board. This brings us to the case of the man who cannot pay the competitive rent on a holding of normal size, and have sufficient left to provide himself and family with a decent livelihood. The fundamental reason why the rent is so high is to be found in the economic weakness of the great mass of the tenants, who can neither emigrate to another country nor get a better living as wage earners in their own. Their predicament is exactly the same as that of the helpless and unskilled labourers who are compelled by the force of competition to accept less than living wages. In these circumstances it seems clear that a government commission would be justified in reducing the rents to such a level as would leave the tenants of average efficiency on normal holdings the means of maintaining a decent standard of living. In such cases, then, the landowner has not a right to the full economic or competitive rent. His right thereto is morally inferior to the tenant's right to a decent livelihood, just as the capitalist-employer's right to the prevailing rate of interest is morally inferior to the labourer's right to a living wage. Neither in the one case nor in the other is mere competition the final determinant and measure of justice. It has no moral validity when it comes into conflict with man's natural right to get a reasonable livelihood on reasonable conditions from the bounty of the earth. These fundamental questions will be discussed at length in the chapters on wages. To the possible objection that the concept of a "normal" holding is vague, the sufficient reply is that in practice it can be estimated with as much definiteness as the concept of the "average" labourer. As we see from the history of the Irish Land Courts and their "Judicial Rents," it can be defined with sufficient accuracy to serve the ends of practical justice. More than this is not attained in any department of human relations, particularly, economic relations. _The Labourer's Claim Upon the Rent_ Should any part of the rent go to the labourer? Let us take first the case of the labourer who is employed by a tenant, and who is not occupied in personal service but in some productive task connected with the land. Like all other wage earners he has a right to a sufficient share of the product to afford him a decent livelihood. Since the tenant is the employer, the director of the business, and the owner of the product, he rather than the landowner is the person who is primarily charged with the obligation of providing the labourer with a living wage. As noted above, his own claim to a decent livelihood is morally superior to the landlord's claim to rent; but if, having taken this amount from the product, he finds himself unable to pay living wages to all his employees unless he deducts something either from the normal interest-return on his own capital or from the rent that would ordinarily go to the landowner, he is morally bound to choose the former course. He, not the landowner, is the wage payer. That he is obliged to provide living wages to his labour force even at the cost of interest on his own investment in the business, is a proposition that will receive ample discussion and defence in a later chapter.[48] Suppose, however, that the tenant has not the means of paying full living wages after turning into the wage fund all the money that he had hoped to retain as interest on his capital. May he withhold from the landowner a sufficient portion of the rent to cover the deficit in wages? Were this action practicable it would be undoubtedly justifiable; for the landowner's claim to rent is no stronger than the tenant-capitalist's claim to interest. As claims upon the product, both are morally weaker than the labourer's right to a living wage. Nevertheless, the tenant who should attempt to carry out this course would probably be prosecuted for non-fulfilment of his contract with the landowner, or would be evicted from the holding. Nor is the landowner obliged in such cases to give up the rent in order that a living wage may be paid to the tenant's labour force. He cannot be certain that the failure of the latter to receive full living wages has not been due to inefficiency or fraudulent conduct on the part of the tenant. Moreover, the landowner would be justified in seeking to protect himself against the recurrence of such situations by putting his land in charge of a more capable tenant, or by selling it and investing or lending the money elsewhere. However clear may be the abstract proposition that the claim to a living wage possessed by the employee of the tenant is superior to the claim to rent possessed by the landowner, the difficulty of realising this right in practice is sufficient to relieve even conscientious proprietors from the obligation of giving up the rent for this purpose. When the landowner is operating or cultivating his land himself, he is evidently obliged to pay a living wage to all his employees at the expense of rent, just as he is obliged to do so at the cost of interest on his artificial capital. To be sure, the first charge upon the product should be a decent livelihood for himself; but, when he has obtained this, the right of his employees to a living wage is morally superior to his right to either rent or interest. At present the State takes a part of the rent through taxation. May it take a larger share without violating justice? This question will be considered in the second chapter following. In the meantime, we shall examine the principal defects of the existing system of land tenure with a view to the suggestion of appropriate remedies, whether through taxation or otherwise. FOOTNOTES: [47] The assumption that perfect competition is even roughly approximated in relation to men who operate their own land, and that they generally obtain an adequate return for their labour in addition to the sum that they might have obtained through hiring out their land, may appear rather violent in view of the estimate that the average farmer in the United States gets only $402 annually in payment for the labour of himself and family. See article on "The Farmer's Income" in the _American Economic Review_, March, 1916. However, this income is mostly in the form of food, fuel, and shelter, which would cost very much more in the city; consequently it is probably equivalent to an urban income of $600. Its value is still further enhanced by the farmer's independent position, and by his expectation of profiting by the future increase of land values. Hence it would seem that the rent and interest allowance of $322 might fairly be regarded as a surplus in excess of the necessary payment for labour. [48] Chapter xxii. CHAPTER VII DEFECTS OF THE EXISTING LAND SYSTEM Starting from the principle that the rightness or wrongness of any system of land tenure is determined not by metaphysical and intrinsic considerations, but by the effects of the institution upon human welfare, we arrived at the conclusion that private landownership is not unjust, so long as no better system is available. By the same test of human welfare we found that it would be wrong to substitute a better system through the process of confiscating rent, while leaving interest undisturbed. A further step brought us to the conclusion that complete Socialism would certainly, and the complete Single Tax probably, be inferior to the present system. As a sort of corollary, the social and moral superiority of private landownership was stated in terms of natural rights. Finally, the question was raised whether the landowner has a right to take rent, and to take all the rent. In stating the superiority of the present system, we explicitly noted that we had in mind the system as capable of improvement. This implied that there are defects in the present form of land tenure, and that these can be eliminated in such a way as to make the system more beneficial and more in harmony with the principles of justice. In the present chapter we shall give a summary review of the principal defects, and in the following chapter we shall suggest some methods of reform. All the defects and abuses may conveniently be grouped under three heads: Monopoly; Excessive Gains; and Exclusion from the Land. _Landownership and Monopoly_ In the literature of the Single Tax movement the phrase, "land monopoly," is constantly recurring. The expression is inaccurate; for the system of individual landownership does not conform to the requirements of a monopoly. There is, indeed, a certain resemblance between the control exercised by the owner of land and that possessed by the monopolist. As the proprietor of every superior soil or site has an economic advantage over the owner of the poorest soil or site, so the proprietor of a monopolistic business obtains larger gains than the man who must operate in conditions of competition. In both cases the advantage is based upon the scarcity of the thing controlled, and the extent of the advantage is measured by the degree of scarcity. Nevertheless, there is an important difference between landownership and monopoly. The latter is usually defined as that degree of unified control which enables the persons in control arbitrarily to limit supply and raise price. As a rule, no such power is exercised by individuals, or by combinations of individuals with regard to land. The pecuniary advantage possessed by the landowner, that is, the power to take rent, is conferred and determined by influences outside of himself, by the natural superiority of his land, or by its proximity to a city. He can neither diminish the amount of land in existence nor raise the price of his own. The former result is inhibited by nature; the latter by the competition of other persons who own the same kind of land. To be sure, there are certain kinds of land which are so scarce and so concentrated that they do fall under true monopolistic control. Such are the anthracite coal mines of Pennsylvania, and some peculiarly situated plots in a few great cities, for example, land that is desired for a railway terminal. But these instances are exceptional. The general fact is that the owners of any kind of land are in competition with similar owners. While the element of scarcity is common to landownership and to monopoly, it differs in its operation. In the case of monopoly it is subject, within limits, to the human will. This difference is sufficiently important, both theoretically and practically, to forbid the identification or confusion of landownership with monopoly. A notable illustration of such confusion is the volume by Dr. F. C. Howe, entitled, "Privilege and Democracy in America." He maintains that bituminous coal, copper ore, and natural gas are true monopolies, but gives no adequate proof to support this assertion. Moreover, he exaggerates considerably the part played by landownership in the formation of industrial monopolies. Thus, his contention that the petroleum monopoly is due to ownership of oil-producing lands is certainly incorrect; for the Standard Oil Company (or companies) has never controlled as much as half the supply of raw material. "The power of the Standard does not rest upon a direct monopoly of the production of crude oil through ownership of the wells."[49] Perhaps the most remarkable misstatement in the volume is this: "The railway is a monopoly because of its identity with land."[50] Now there are a few important railway lines traversing routes or possessing terminal sites which are so much better than any alternative routes or sites as to give all the advantages of a true monopoly. But they are in a small minority. In the great majority of cases, a second parallel strip or parallel site could be found which would be equally or almost equally suitable. Neither the amount nor the kind of land owned by a railroad, nor its legal privilege of holding land in a long, continuous strip, is the efficient cause of a railway monopoly. To attribute the monopoly to land is to confound a condition with a cause. One might as well say that the land underlying the "wheat king's" office is the cause of his corner in wheat. It is true that in a few of the great cities the existing railroads may, through their ownership of all the suitable terminal sites, prevent the entrance of a competing line. In the first place, such instances are rare; in the second place, the fact that there are several roads already in existence shows that competition was possible without the entrance of another one. The influence impelling them to form a monopoly for the regulation of charges is not their ownership of terminal sites. No sort of uniform action with regard to terminals would produce any such effect. The true source of the monopoly element in railways is inherent in the industry itself. It is the fact of "increasing returns," which means that each additional increment of business is more profitable than the preceding one, and that in most cases this process can be kept up indefinitely. As a consequence, each of two or more railroads between two points strives to get all the traffic; then follows unprofitable rate cutting, and finally combination.[51] The same forces would produce identical results if railroad tracks and terminals were suspended in the air. Dr. Howe asserts that the monopolistic character of such public utility corporations as street railways and telephone companies is due to their occupation of "favoured sites."[52] How can this be true, when it is possible to build a competing line on an adjoining and parallel street? If the city forbids this, and gives an exclusive franchise to one company, this legal ordinance, and not any exceptional advantage in the nature of the land occupied, is the specific cause of the monopoly. If the city permits a competing line, and if the two lines sooner or later enter into a combination, the true source and explanation are to be found in the fact of increasing returns. Combination is immeasurably more profitable than cut-throat competition. Moreover, the evils of public service monopolies can be remedied through public control of charges and through taxation. Neither in railroads nor in public utilities is land an impelling cause of monopoly, or a serious hindrance to proper regulation. Most of Dr. Howe's exaggerations of the influence of land upon monopoly take the form of suggestion rather than of specific and direct statement. When he attempts in precise language to enumerate the leading sources of monopoly, he mentions four; namely, land, railways, the tariff, and public service franchises.[53] Nor is he able to prove his assertion that of these the most important is land. Nevertheless, land is one of the foremost causes. The most prominent examples of land monopoly in this country are the anthracite coal mines and the iron ore beds. Fully ninety per cent. of our anthracite coal supply (exclusive of Alaska) is under the control of eight railway systems which in this matter act as a unit.[54] According to Dr. Howe, the excessive profits reaped from this monopolistic control amount to between one hundred and two hundred million dollars annually.[55] In other words, the consumers of anthracite coal must pay every year that much more than they would have expended if the supply had not been monopolised. On the other hand, the formation of monopoly would have been much more difficult if the railroads had been legally forbidden to own coal mines. As things stand, railway monopoly is an important cause of the anthracite coal monopoly. Some authorities are of the opinion that a similar condition of monopoly will ultimately prevail in the bituminous coal mines. Iron ore has been brought under the control of the United States Steel Corporation to such an extent that the Commissioner of Corporations writes: "Indeed, so far as the Steel Corporation's position in the entire iron and steel industry is of a monopolistic character, it is chiefly through its control of ore holdings and the transportation of ore."[56] From this statement, however, it is evident that the monopoly depends upon control of transportation as well as upon ownership of the ore beds. If the former were properly regulated by law, the latter would not be so effective in promoting monopoly. Speaking generally, we may say that when a great corporation controls a large proportion of the raw material entering into its manufactured products, such control will supplement and reinforce very materially those other special advantages which make for monopoly.[57] Prominent examples are to be found in steel, natural gas, petroleum, and water powers. In his "Report on Water Power Development in the United States," the Commissioner of Corporations (March 14, 1912) declared that the rapidly increasing concentration of control might easily become the nucleus of a monopoly of both steam and water power. Ten great groups of interests, he said, already dominated about sixty per cent. of the developed water power, and were pursuing a policy characterised by a large measure of agreement.[58] As a rough generalisation, it would be fair to say that in one or two instances, at least, landownership is the chief basis, and in several other cases an important contributory cause of monopoly. Even an approximately accurate estimate of the amount of money which consumers are compelled to pay annually for the products of such concerns over and above what they would pay if the raw material were not wholly or partially monopolised, is obviously impossible. It may possibly run into hundreds of millions of dollars. _Excessive Gains from Private Landownership_ The second evil of private landownership to be considered here, is the general fact that it enables some men to take a larger share of the national product than is consistent with the welfare of their neighbours and of society as a whole. As in the matter of monopoly, however, so here, Single Tax advocates are chargeable with a certain amount of overstatement. They contend that the landowner's share of the national product is constantly increasing, that rent advances faster than interest or wages, nay, that all of the annual increase in the national product tends to be gathered in by the landowner, while wages and interest remain stationary, if they do not actually decline.[59] The share of the product received by any of the four agents of production depends upon the relative scarcity of the corresponding factor. When undertaking ability becomes scarce in proportion to the supply of land, labour, and capital, there is a rise in the remuneration of the business man; when labour decreases relatively to undertaking ability, land, and capital, there is an increase in wages. Similar statements are true of the other two agents and factors. All these propositions are merely particular illustrations of the general rule that the price of any commodity is immediately governed by the movement of supply and demand. In view of this fact, it is not impossible that rent might increase to the extent described in the preceding paragraph. All that is necessary is that land should become sufficiently scarce, and the other factors sufficiently plentiful. As a fact, the supply of land is strictly limited by nature, while the other factors can and do increase. There are, however, several forces which neutralise or retard the tendency of land to become scarce, and of rent to rise. Modern methods of transportation, of drainage, and of irrigation have greatly increased the supply of available land, and of commercially profitable land. During the nineteenth century, the transcontinental railroads of the United States made so much of our Western territory accessible that the value and rent of New England lands actually declined; and there are still many millions of acres throughout the country which can be made productive through drainage and irrigation. In the second place, every increase of what is called the "intensive use" of land gives employment to labour and capital which otherwise would have to go upon new land. In America this practice is only in its infancy. With its inevitable growth, both in agriculture and mining, the demand for additional land will be checked, and the rise in land values and rents be correspondingly diminished. Finally, the proportion of capital and labour that is absorbed in the manufacturing, finishing, and distributive operations of modern industry is constantly increasing. These processes call for very little land in comparison with that required for the extractive operations of agriculture and mining. An increase of one-fifth in the amount of capital and labour occupied in growing wheat or in taking out coal, implies a much greater demand for land than the same quantity employed in factories, stores, and railroads.[60] As a consequence of these counteracting influences, it appears that the share of the landowners has not increased disproportionately. The most comprehensive endeavour yet made to determine the growth and relative size of the different shares of the national product is embodied in Professor W. I. King's volume, "The Wealth and Income of the People of the United States," published in 1915. It estimates that the total annual income of the nation increased from a little less than two and one-fourth billions of dollars in 1850 to a little more than thirty and one-half billions in 1910, or slightly more than fifteen times. During the same period rent, the share of the landowners, advanced from $170,600,000 to $2,673,900,000, or about fifteen and three quarter times. In the year 1910, therefore, the landowners were receiving but a very small fraction more of the national product than their predecessors obtained sixty years earlier.[61] As to the relative size of the shares going to the different factors in 1910, the figures are even more remarkable. Wages and salaries absorbed 46.9 per cent.; profits, 27.5 per cent.; interest, 16.8 per cent.; and rent, only 8.8 per cent.[62] This was exactly the same per cent. that the landowners received in 1860. To be sure, these figures are only approximations, but they are probably the most reliable that can be obtained from our notoriously incomplete statistics, and they will deserve respectful consideration until they have been refuted by specific criticism and argument. In the opinion of their compiler: "The figures for wages and salaries are believed to be fairly accurate; those for rent are thought to have an error of not more than twenty per cent. The separation of the share of capital from that of the entrepreneur is very crudely done and no stress should be laid on the results. The total for all shares is thought to be more accurate than the mode of distribution, and for the last three census years should come within ten per cent. of the correct statement of the national income. For earlier years the error should not be over twenty per cent. at the outside."[63] If we make the maximum allowance for error in reference to the share of the landowner, and assume that the rent estimate is twenty per cent. too low, we find that it was still only ten and one-half per cent. of the total product in 1910, which represents an increase of less than three per cent. since 1850. It is significant that Dr. Howe, who has no bias toward belittling the share of the landowner, suggested as his minimum and maximum estimates of the land values of the country in 1910 figures which are respectively fifty per cent. below and only five per cent. above the amount taken by Professor King as the basis for his estimate of rent.[64] There is, consequently, a strong presumption that Professor King is right when he stigmatises as "absurd" the contention of the Single Taxer, "that all the improvements of industry result only in the enrichment of the landlord.... The value of our products has increased since 1850 to the extent of some twenty-eight billions of dollars, while rent has gained less than three billions. Evidently it has captured but a meagre part of the new production."[65] There are strong indications, however, that the per cent. of the product going to the owners of land has increased considerably in the last twenty years, and that this movement will continue indefinitely. According to Professor King's calculations, the per cent. of the total product assignable as rent advanced from 7.8 in 1900 to 8.8 in 1910, which meant that during that period the national income increased only 70 per cent., while the share of the landowner increased 91 per cent.[66] It is true that a disproportionate advance in rent has occurred between other census years, only to be neutralised by subsequent decreases; but the present instance seems to include certain features which did not characterise any of the former gains in the relative share of the landowner. Since 1896 the prices of food products "rose most rapidly in the case of meat, dairy products, and cereals, which were derived directly from the land. The prices of raw materials show a like relation. Timber, grain, and other raw materials obtained directly from the land have risen rapidly in price, while semi-manufactured articles have increased less rapidly, or have decreased in price.... There is no parallel in any other field to the advance in those land values upon which civilisation most directly depends--timber lands, fertile agricultural land, and land in large commercial and industrial centres. The recent rise in land values has been little short of revolutionary."[67] Between 1900 and 1910 the value of farm lands _per acre_ in the United States advanced 108.1 per cent.[68] During the eight years beginning with July 1, 1906, the value of land in Greater New York increased something more than one-third; in the principal cities of New Jersey, and in Worcester, Washington, Boston, and Buffalo, somewhat less; in Springfield and Holyoke, considerably more. In the most recent ten years for which figures are available (since 1900 in every case) the land values of Milwaukee, St. Louis and San Francisco averaged only a slight degree of expansion, while those of Kansas City doubled, and those of Houston, Dallas, Los Angeles, and Seattle trebled. To quote Professor Nearing, from whose compilations these estimates have been summarised: "The total extent of the increase in American city land values may be hinted at rather than stated with any certainty. The scattering instances in which land and improvements are separately assessed led to the conclusion that in a large, well-established city, growing at approximately the same rate as the other portions of the United States, the land value is doubling in from ten to twenty-five years. In the new, rapidly growing city of the middle and far West and in some of the smaller cities of the East, the ratio of increase in land values is far greater, amounting to two-fold or even three-fold in a decade. In a few instances the rate of increase is much smaller, and in one case, Jersey City, land values over a period of seven years have actually decreased.... Nevertheless, the few available long range figures indicate a widespread and considerable increase in American city land values."[69] The rise in the value of timber lands during the last thirty years has been, in the words of the federal investigators, "enormous." For the ten-year period ending in 1908, "the value of a given piece of southern pine taken at random is likely to have increased in any ratio from three-fold to ten-fold." About the same ratio of increase obtained in the Pacific Northwest, and a somewhat smaller increase in the region of the Great Lakes.[70] While a considerable decline has taken place since 1908, it is only temporary; for the demand for timber is notoriously increasing several times as fast as the supply. That this upward movement in the value of all three kinds of land will continue without serious interruption, seems to be as nearly certain as any economic proposition that is dependent upon the future. Although millions of acres of arable lands are still unoccupied in the United States and Canada, the far greater part of them require a comparatively large initial outlay for draining, clearing, irrigation, etc., in order to become productive. Hence there is no likelihood that they can be brought under cultivation fast enough to halt or greatly retard the advancing values which follow upon the growth of population and the increased demand for agricultural products. In all probability the greater part of them will not come into use until the prices of farm products have risen above the present level. Obviously this supposes an increase in the value of all farm land, old and new. Nor is the adoption of better methods of farming likely to check seriously the upward movement. Between 1900 and 1910 the urban population of America increased 34.8 per cent., as against a gain of only 21 per cent. in the total population. This disproportionate growth in the number of the city dwellers will if continued make certain what is in any case extremely probable, a steady and considerable advance in urban land values and rents. The circumstance that these remarkable increases in land values are a comparatively recent phenomenon has prevented them from receiving the attention that they deserve, either from the general public or from the students of economic and social problems. The total value of the land of the country has increased steadily from decade to decade, but so has the total value of capital, and even between 1900 and 1910 the increase in the share of the capitalist was exactly equal to the increase in the share of the landowner, that is, 91 per cent.[71] Those persons who complacently make such comparisons overlook the new and significant feature of the more recent advances in land value; namely, that they are due in only a slight degree to an expansion of the _area_ of land under consideration. The increases of value quoted in the foregoing paragraphs are increases _per acre_ and _per urban lot_, not increases derived from bringing new land under cultivation or new tracts within municipal limits. On the other hand, the increases in the value of capital, now as always, represent for the most part concrete additions to the existing stock of productive instruments. Except where monopoly holds sway, particular capital instruments, unlike particular pieces of land, do not increase in value. Hence the owner of a given amount of capital does not profit by the advance in the total value of capital as the owner of the average parcel of land profits by the general increase in the value of land. This means that all those consumers of products who are not landowners must pay an increasing tribute to those who are landed proprietors. So much for the _proportion_ of the national product which goes to the landowning class. Let us next inquire how the landowner's share, or rent, is distributed throughout the population. If it were equally divided among all persons, its increase relatively to the shares of the other factors would, from the social viewpoint, be a matter of considerable indifference. On the other hand, if it is secured by a minority of the population, and if that minority tends to become smaller as the share itself becomes larger, we have a socially undesirable condition. In the twenty years between 1890 and 1910, the proportion of farm families in the United States owning farm land, mortgaged or unmortgaged, declined from 65.9 per cent. to 62.8 per cent.; the proportion of urban families owning their homes, encumbered or unencumbered, increased from 36.9 to 38.4 per cent., and the proportion of all families owning homes, encumbered or unencumbered, fell from 47.8 to 45.8 per cent. Of the homes owned by their occupiers, 28 per cent. were mortgaged in 1890, and 32.8 per cent. in 1910.[72] While a decline of two per cent. in the home owning and landowning families in twenty years, and an increase of almost five per cent. in the number of those families who hold their property subject to encumbrance, may not seem very serious in themselves, they indicate a definitely unhealthy trend. Not only are the landowning families in a minority, but the minority is becoming smaller. Nevertheless, when we consider the amount of gains accruing to the average member of the landowning class, we do not find that it is unreasonably large. The great majority of landed proprietors have not received, nor are they likely to receive, from their holdings incomes sufficiently large to be called excessive shares of the national product. Their gross returns from land have not exceeded the equivalent of fair interest on their actual investment, and fair wages for their labour. The landowners who have been enabled through their holdings to rise above the level of moderate living constitute a comparatively small minority. And these statements are true of both agricultural and urban proprietors. It is true that a considerable number of persons, absolutely speaking, have amassed great wealth out of land. It is a well known fact that land was the principal source of the great mediæval and post-mediæval fortunes, down to the end of the eighteenth century. "The historical foundation of capitalism is rent."[73] Capitalism had its beginning in the revenue from agricultural lands, city sites, and mines. A conspicuous example is that of the great Fugger family of the sixteenth century, whose wealth was mostly derived from the ownership and exploitation of rich mineral lands.[74] In the United States very few large fortunes have been obtained from agricultural land, but the same is not true of mineral lands, timber lands, or urban sites. "The growth of cities has, through real estate speculation and incremental income, made many of our millionaires."[75] "As with the unearned income of city land, our mineral resources have been conspicuously prolific producers of millionaires."[76] The most striking instance of great wealth derived from urban land is the fortune of the Astor family. While gains from trading ventures formed the beginning of the riches of the original Astor, John Jacob, these were "a comparatively insignificant portion of the great fortune which he transmitted to his descendants."[77] At his death, in 1848, John Jacob Astor's real estate holdings in New York City were valued at eighteen or twenty million dollars. To-day the Astor estate in that city is estimated at between 450 and 500 millions, and within a quarter of a century will not improbably be worth one billion dollars.[78] According to an investigation made in 1892 by the _New York Tribune_, 26.4 per cent. of the millionaire fortunes of the United States at that time were traceable to landownership, while 41.5 per cent. were derived from competitive industries which were largely assisted by land possessions.[79] The proportion of such fortunes that is due, directly or indirectly, in whole or in part, to landownership has undoubtedly increased considerably since 1892. With regard to great individual or corporate land holdings, there exist no adequate statistics. A few conspicuous instances may be cited. The United States Steel Corporation owns lands yielding iron ore, coal, coke, and timber which are valued by the Commissioner of Corporations at nearly 250 million dollars, and by the Steel Corporation itself at more than 800 million dollars.[80] Three companies own nearly eleven per cent., and 195 individuals or corporations own 48 per cent. of all the privately owned timber in the United States.[81] The United States Census of 1910 shows that the number of farms containing 500 acres or over was about 175,000, and comprised ten per cent. of the total farm acreage. One hundred and fifty persons and corporations are said to own 220,000,000 acres of various kinds of land. None of these holders has less than ten thousand acres, and two of the syndicates possess fifty million acres each.[82] _Exclusion from the Land_ One of the most frequent charges brought against the present system of land tenure is that it keeps a large proportion of our natural resources out of use. It is contended that this evil appears in three principal forms: owners of large estates refuse to break up their holdings by sale; many proprietors are unwilling to let the use of their land on reasonable terms; and a great deal of land is held at speculative prices, instead of at economic prices. So far as the United States are concerned, the first of these charges does not seem to represent a condition that is at all general. Although many holders of large mineral and timber tracts seem to be in no hurry to sell portions of their holdings, they are probably moved by a desire to obtain higher prices rather than to continue as large landowners. As a rule, the great landholders of America are without those sentiments of tradition, local attachment, and social ascendency which are so powerful in maintaining intact the immense estates of Great Britain. On the contrary, one of the common facts of to-day is the persistent effort carried on by railroads and other holders of large tracts to dispose of their land to settlers. While the price asked by these proprietors is frequently higher than that which corresponds to the present productiveness of the land, it is generally as low as that which is demanded by the owners of smaller parcels. To be sure, this is one way of unreasonably hindering access to the land, but it falls properly under the head of the third charge enumerated above. There is no sufficient evidence that the _large_ landholders are exceptional offenders in refusing to sell their holdings to actual settlers. The assertion that unused land cannot be rented on reasonable terms is in the main unfounded, so far as it refers to land which is desired for agriculture. As a rule, any man who wishes to cultivate a portion of such land can fulfil his desire if he is willing to pay a rent that corresponds to its productiveness. After all, landowners are neither fools nor fanatics: while awaiting a higher price than is now obtainable for their land, they would prefer to get from it some revenue rather than none at all. As a matter of fact, almost all the agricultural land that is immediately available for renting, is constantly under cultivation. This refers to land that is already under the plough, and is provided with buildings and other necessary improvements. Practically none of this is out of use. New land which is without buildings is not wanted by tenants, unless it is convenient to their residences, because they do not desire to expend money for permanent improvements upon land that they do not own. True, the present owners of such land might erect buildings, and then let it to tenants. In so far as new land might profitably be improved and cultivated, and in so far as the owners are unwilling or unable to provide the improvements, the present system does keep out of use agricultural land that could be cultivated by tenants. Mineral and timber lands are sometimes withheld from tenants because the owners wish to limit the supply of the product, or because they fear that a long-term lease would prevent them from selling the land to the best advantage. As to urban sites, the contention that we are now examining is generally true. The practice of leasing land to persons who wish to build thereon does not, with the exception of a very few cities, obtain in the United States for other than very large business structures. As a rule, it does not apply to sites for residences. The man who wants a piece of urban land for a dwelling or for a moderately sized business building cannot obtain it except by purchase. Cannot the land be bought at a reasonable price? This brings us to the third and most serious of the charges concerning exclusion from the land. Since the value of land in most cities is rising, and apparently will continue to rise more or less steadily, the price at which it is held and purchasable is not the economic price but a speculative price. It is higher than the capitalised value of the present revenue or rent. For example: if five per cent. be the prevailing rate of interest, a piece of land which returns that rate on a capital of one thousand dollars cannot be bought for one thousand dollars. The purchaser is willing to pay more because he hopes to sell it for a still higher price within a reasonable time. He knows that he cannot immediately obtain five per cent. on the amount (say, 1,200 dollars) that he is ready to pay for the land, but his valuation of it is not determined merely by its present income-producing power, but by its anticipated revenue value and selling value.[83] The buyer will pay more for such land than for a house which yields the same return; for he knows that the latter will not, and hopes that the former will, bring a higher return and a higher price in the future. Wherever this discounting of the future obtains, the price of land is unreasonably high, and access to vacant land is unreasonably difficult. This condition undoubtedly exists most of the time in the great majority of our larger cities. Men will not sell vacant land at a price which will enable the buyer to obtain immediately a reasonable return on his investment. They demand in addition a part of the anticipated increase in value. In the rural regions this evil appears to be smaller and less general. The owners of unused or uneconomically used arable land are more eager to sell their holdings than the average proprietor of a vacant lot. So far as this sort of land is concerned, it is probable that most of the denunciation of "land speculators" and "land monopolists" overshoots the mark. Not the high price at which unused arable lands are held, but the great initial cost of draining, clearing, or irrigating them, is the main reason why they are not purchased by cultivators. While no general and precise estimate can be given of the extent to which the speculative exceeds the actual rent-producing value of land in growing cities, twenty-five per cent. would not improbably be a fair conjecture. Even when a reaction occurs after a period of excessive "land-booming," the lower prices do not bring the manless land any nearer to the landless men. Only the few who possess ready money or excellent credit can take advantage of such a situation. On the whole the evil that we are now considering is probably greater than any other connected with the private ownership of land. All the tendencies and forces that have been described in the present chapter under the heads of Monopoly, Excessive Gains, and Exclusion from the Land, are in some degree real defects and abuses of the existing system of land tenure. Most of them do not seem to be sufficiently understood or appreciated by the more ardent defenders of private ownership. To recognise them, and to seek adequate correctives of them would seem to be the task of both righteousness and expediency. In the next and final chapter of this Section, we shall consider certain remedies that seem to be at once effective and just. FOOTNOTES: [49] "Report of the Commissioner of Corporations on the Petroleum Industry," Part I, p. 8. [50] P. 138. [51] Cf. Ely, "Monopolies and Trusts," pp. 59, sq. [52] P. 133. [53] Pp. 68, 69. [54] "Final Report of the U. S. Industrial Commission," p. 463; Bliss, "New Encyclopedia of Social Reform," pp. 245, 770; Van Hise, "Concentration and Control," pp. 32, 33. [55] Idem, pp. 46, 47; cf. "Final Report of Industrial Commission," pp. 463-465. [56] "Report of the Commissioner of Corporations on the Steel Industry," Part I, p. 60. [57] Cf. Hobson, "The Industrial System," pp. 192-197. [58] Pp. 15, 16, 29-31. [59] Cf. "Progress and Poverty," books III and IV. [60] Cf. Walker, "Land and Its Rent," pp. 168-182, Boston, 1883. [61] Page 158. [62] Page 160. [63] Page 158; footnote. [64] "Privilege and Democracy," p. 307. [65] Page 160. [66] Op. cit., pages 160, 158. [67] Professor Nearing in "The Annals of the American Academy of Political and Social Science," March, 1915. [68] Thirteenth Census, Bulletin on "Farms and Farm Property," page 1. [69] _The Public_, Nov. 26, 1915. For an account of increases in the principal European cities, see Camille-Husymans, "La plus-value immobilière dans les communes belges"; Gand, 1909. [70] "Report of the Commissioner of Corporations on the Lumber Industry," Part I, pp. 214-216. [71] King, op. cit., p. 158. [72] Thirteenth Census, Vol. I, p. 1295. [73] Hobson, "The Evolution of Modern Capitalism," p. 4; London, 1907. [74] _Harper's Monthly Magazine_, Jan., 1910. [75] Watkins, "The Growth of Large Fortunes," p. 75; N. Y., 1907. [76] Idem, p. 93. [77] Youngman, "The Economic Causes of Great Fortunes," p. 45; N. Y., 1909. [78] Howe, op. cit., pp. 125, 126. [79] Cf. Commons, "The Distribution of Wealth," pp. 252, 257; N. Y., 1893. [80] "Report of the Commissioner of Corporations on the Steel Industry," Part I, p. 314. [81] "Summary of Report of the Commissioner of Corporations on the Lumber Industry," pp. 3-8. [82] From articles in "The Single Tax Review," vol. 9, nos. 5, 6. [83] "In a growing city, an advantageous site will command a price more than in proportion to its present rent, because it is expected that the rent will increase still further as the years go on." Taussig, "Principles of Economics," II, 98; N. Y., 1911. CHAPTER VIII METHODS OF REFORMING OUR LAND SYSTEM In economic and social discussion the word reform is commonly opposed to the word revolution. It implies modification rather than abolition, gradual rather than violent change. Hence reforms of the system of land tenure do not include such radical proposals as those of land nationalisation or the Single Tax. On the other hand, some extension of State ownership of land, and some increase in the proportion of taxes imposed upon land, may quite properly be placed under the head of reform, inasmuch as they are changes in rather than a destruction of the existing system. In general, the reform measures needed are such as will meet the defects described in the last chapter; namely, monopoly, excessive gains, and exclusion from the land. Obviously they can be provided only by legislation; and they may all be included under two heads, ownership and taxation. By far the greater part of the more valuable lands of the country are no longer under the ownership of the State. Urban land is practically all in the hands of private proprietors. While many millions of acres of land suitable for agriculture are still under public ownership, almost all of this area requires a considerable outlay for irrigation, clearing, and draining before it can become productive. Forty years ago, three-fourths of the timber now standing was public property; at present about four-fifths of it is owned by private persons or corporations.[84] The bulk of our mineral deposits, coal, copper, gold, silver, etc., have likewise fallen under private ownership, with the exception of those of Alaska. The undeveloped water power remaining under government ownership has been roughly estimated at fourteen million horse power in the national forests, and considerably less than that amount in other parts of the public domain.[85] This is a gratifying proportion of the whole supply, developed and undeveloped, of this national resource, which is said to be somewhere between 27 and 60 millions horse power.[86] Only about seven million horse power has yet been developed, almost all of which is privately owned. _The Leasing System_ In many countries of Europe it has long been the policy of governments to retain ownership of all lands containing timber, minerals, oil, natural gas, phosphate, and water power. The products of these lands are extracted and put upon the market through a leasing system. That is; the user of the land pays to the State a rental according to the amount and quality of raw material which he takes from the storehouse of nature. Theoretically, the State could sell such lands at prices that would bring in as much revenue as does the leasing system; practically, this result has never been attained. The principal advantages of the leasing arrangement are: to prevent the premature destruction of forests, the private monopolisation of limited natural resources (which has happened in the case of the anthracite coal fields of Pennsylvania) and the private acquisition of exceptionally valuable land at ridiculously low prices; and to enable the State to secure just treatment for the consumer and the labourer by stipulating that the former shall obtain the product at fair prices, and that the latter shall receive fair wages. This example should be followed by the United States. All timber, mineral, gas, oil, and water power lands which have not been alienated to private persons should remain under government ownership, and be brought into use through a leasing arrangement which would enable the private operators to obtain the rates of profit and interest which are ordinarily yielded by enterprises subject to the same degree of risk. Happily this policy now seems likely to be adopted. In 1913 a law was passed by the United States providing for the operation of the coal mines of Alaska on leases. The amount that can be leased by any person or corporation is limited to 2560 acres, and the penalty for attempting to monopolise the product is forfeiture of tenure. The Secretary of the Interior has urged a similar arrangement for the development and extraction of water power, coal, oil, gas, phosphate, sodium, and potassium on the public domain of Continental United States, and his recommendation will probably be adopted by Congress. Thus the rent of these lands will go to the whole people instead of to a comparatively small number of individuals, monopoly of the products will be made impossible, and our remaining public resources will be protected from rapid and ruinous exploitation. To the objection that capitalists will not invest their money in nor carry on extractive enterprises on a leasing basis, the sufficient answer is that they are doing it now. In 1909, 24.5 per cent. of all the lands producing minerals, precious metals, and stone; 94.6 per cent. of the lands producing petroleum and gas; and 61.2 per cent. of the two groups of lands combined, were operated under leases from private owners or from the government.[87] If the rental or royalty demanded is not unreasonably high capitalists will be quite as willing to produce raw materials of these kinds from leased land as they are to manufacture or sell goods in a rented building. Not the leasing system, but the terms of the particular lease are the important consideration. Public grazing lands should remain government property until such time as they become available for agriculture. Cattle owners could lease the land from the State on equitable terms, and receive ample protection for money invested in improvements. _Public Agricultural Lands_ The leasing system cannot well be applied to agricultural lands. In order that they may be continuously improved and protected against deterioration, they must be owned by the cultivators. The temptation to wear out a piece of land quickly, and then move to another piece, and all the other obstacles that stand in the way of the Single Tax as applied to agricultural land, show that the government cannot with advantage assume the function of landlord in this domain. In the great majority of cases the State would do better to sell the land in small parcels to genuine settlers. There are, indeed, many situations, especially in connection with government projects of irrigation, clearing, and drainage, in which the leasing arrangement could be adopted temporarily. It should not be continued longer than is necessary to enable the tenants to become owners. With this end in view the State should make loans to cultivators at moderate rates of interest, as is done in New Zealand and Australia. Whether the State ought to purchase undeveloped land from private owners in order to sell it to settlers, may well be doubted. The only lands to which such a scheme would be at all applicable are large estates which are held out of use by their proprietors. Even here the transfer of the land to cultivators could be accomplished indirectly, through an extra heavy tax. This method has been adopted with success by Australia and New Zealand. The only other action by the State that seems necessary or wise in order to place settlers upon privately owned agricultural land, is the establishment of a comprehensive system of rural credits. The need of cheaper food products, and the desirability of checking the abnormal growth of our urban populations, are powerful additional reasons for the adoption of this policy. The Hollis Rural Credits Bill recently enacted into law by Congress goes a considerable way toward meeting these needs. _Public Ownership of Urban Land_ No city should part with the ownership of any land that it now possesses. Since capitalists are willing to erect costly buildings on sites leased from private owners, there is no good reason why any one should refuse to put up or purchase any sort of structure on land owned by the municipality. The situation differs from that presented by agricultural land; for the value of the land can easily be distinguished from that of improvements, the owner of the latter can sell them even if he is not the owner of the land, and he cannot be deprived of them without full compensation. While the lessee paid his annual rent, his control of the land would be as complete and certain as that of the landowner who continues to pay his taxes. On the other hand, the leaseholder could not permit or cause the land to deteriorate if he would; for the nature of the land renders this impossible. Finally, the official activities involved in the collection of the rent and the periodical revaluation of the land, would not differ essentially from those now required to make assessments and gather taxes. The benefits of this system would be great and manifest. Persons who were unable to own a home because of their inability to purchase land, could get secure possession of the necessary land through a lease from the city. Instead of spending all their lives in rented houses, thousands upon thousands of families could become the owners and occupiers of homes. The greater the amount of land thus owned and leased by the city, the less would be the power of private owners to hold land for exorbitant prices. Competition with the city would compel them to sell the land at its revenue-producing value instead of at its speculative value. Finally, the city would obtain the benefit of every increase in the value of its land by means of periodical revaluation, and periodical readjustment of rent. Unfortunately the amount of municipal land available for such an arrangement in our American cities is negligible. If they are to establish the system they must first purchase the land from private owners. Undoubtedly this ought to be done by all large cities in which the housing problem has become acute, and the value of land is constantly rising. This policy has been adopted with happy results by many of the municipalities of France and Germany.[88] At the state election of 1915 the voters of Massachusetts adopted by an overwhelming majority a constitutional amendment authorising the cities of the commonwealth to acquire land for prospective home builders. In Savannah, Georgia, no extension of the municipal limits is made until the land to be embraced has passed into the ownership of the city. Another method is to refrain from opening a new street in a suburban district until the city has become the proprietor of the abutting land. Whatever be the particular means adopted, the objects of municipal purchase and ownership of land are definite and obvious: to check the congestion of population in the great urban centres, to provide homes for the homeless, and to secure for the whole community the socially occasioned increases in land values. Indeed, it is probable that no comprehensive scheme of housing reform can be realised without a considerable amount of land purchase by the municipalities. Cities must be in a position to provide sites for those home builders who cannot obtain land on fair conditions from private proprietors.[89] Turning now from the direct method of public ownership to the indirect method of reform through taxation, we reject the thoroughgoing proposals of the Single Taxers. To appropriate all economic rent for the public treasury would be to transfer all the value of land without compensation from the private owner to the State. For example: a piece of land that brought to the owner an annual revenue of one hundred dollars would be taxed exactly that amount; if the prevailing rate of interest were five per cent. the proprietor would be deprived of wealth to the amount of two thousand dollars; for the value of all productive goods is determined by the revenue that they yield, and benefits the person who receives the revenue. Thus the State would become the beneficiary and the virtual owner of the land. Inasmuch as we do not admit that the so-called social creation of land values gives the State a moral right to these values, we must regard the complete appropriation of economic rent through taxation as an act of pure and simple confiscation.[90] _Appropriating Future Increases of Land Value_ Let us examine, then, the milder suggestion of John Stuart Mill, that the State should impose a tax upon land sufficient to absorb all future increases in its value.[91] This scheme is commonly known as the appropriation of future unearned increment. Either in whole or in part it is at least plausible, and is to-day within the range of practical discussion. It is expected to obtain for the whole community all future increases in land values, and to wipe out the speculative, as distinguished from the revenue-producing value of land. Consequently it would make land cheaper and more accessible than would be the case if the present system of land taxation were continued. Before discussing its moral character, let us see briefly whether the ends that it seeks may properly be sought by the method of taxation. For these ends are mainly social rather than fiscal. To use the taxing power for a social purpose is neither unusual nor unreasonable. "All governments," says Professor Seligman, "have allowed social considerations in the wider sense to influence their revenue policy. The whole system of productive duties has been framed not merely with reference to revenue considerations, but in order to produce results which should directly affect social and national prosperity. Taxes on luxuries have often been mere sumptuary laws designed as much to check consumption as to yield revenue. Excise taxes have as frequently been levied from a wide social, as from a narrow fiscal, standpoint. From the very beginning of all tax systems these social reasons have often been present."[92] Our Federal taxes on imports, on intoxicating liquors, on oleo-margarine, and on white phosphorus matches, and many of the license taxes in our municipalities, as on pedlars, saloon keepers, and dog owners, are in large part intended to meet social as well as fiscal ends. They are in the interest of domestic production, public health, and public safety. The reasonableness of effecting social reforms through taxation cannot be seriously questioned. While the maintenance of government is the primary object of taxation, its ultimate end, the ultimate end of government itself, is the welfare of the people. Now if the public welfare can be promoted by certain social changes, and if these in turn can be effected through taxation, this use of the taxing power will be quite as normal and legitimate as though it were employed for the upkeep of government. Hence the morality of taxing land for purposes of social reform will depend entirely upon the nature of the particular tax that is imposed. _Some Objections to the Increment Tax_ The tax that we are now considering can be condemned as unjust on only two possible grounds: first, that it would be injurious to society; and, second, that it would wrong the private landowner. If it were fairly adjusted and efficiently administered it could not prove harmful to the community. In the first place, landowners could not shift the tax to the consumer. All the authorities on the subject admit that taxes on land stay where they are put, and are paid by those upon whom they are levied in the first instance.[93] The only way in which the owners of a commodity can shift a tax to the users or consumers of it, is by limiting the supply until the price rises sufficiently to cover the tax. By the simple device of refusing to erect more buildings until those in existence have become scarce enough to command an increase in rent equivalent to the new tax, the actual and prospective owners of buildings can pass the tax on to the tenants thereof. By refusing to put their money into, say, shoe factories, investors can limit the supply of shoes until any new tax on this commodity is shifted upon the wearers of shoes in the form of higher prices. Until these rises take place in the rent of buildings and the price of shoes, investors will put their money into enterprises which are not burdened with equivalent taxes. But nothing of this sort can follow the imposition of a new tax upon land. The supply of land is fixed, and cannot be affected by any action of landowners or would-be landowners. The users of land and the consumers of its products are at present paying all that competition can compel them to pay. They would not pay more merely because they were requested to do so by landowners who were labouring under the burden of a new tax. If all landowners were to carry out an agreement to refrain from producing, and to withhold their land from others until rents and prices had gone up sufficiently to offset the tax, they could, indeed, shift the latter to the renters of land and the consumers of its products. Such a monopoly, however, is not within the range of practical achievement. In its absence, individual landowners are not likely to withhold land nor to discontinue production in sufficient numbers to raise rents or prices. Indeed, the tendency will be all the other way; for all landowners, including the proprietors of land now vacant, will be anxious to put their land to the best use in order to have the means of paying the tax. Owing to this increased production, and the increased willingness to sell and let land, rents and prices must fall. It is axiomatic that new taxes upon land always make it cheaper than it would have been otherwise, and are beneficial to the community as against the present owners. In the second place, the tax in question could not injure the community on account of discouraging investment in land. Once men could no longer hope to sell land at an advance in price, they would not seek it to the extent that they now do as a field of investment. For the same reason many of the present owners would sell their holdings sooner than they would have sold them if the tax had not been levied. From the viewpoint of the public the outcome of this situation would be wholly good. Land would be cheaper and more easy of access to all who desired to buy or use it for the sake of production, rather than for the sake of speculation. Investments in land which have as their main object a rise in value are an injury rather than a benefit to the community; for they do not increase the products of land, while they do advance its price, thereby keeping it out of use. Hence the State should discourage instead of encouraging mere speculators in land. Whether it is or is not bought and sold, the supply of land remains the same. The supreme interest of the community is that it should be put to use, and made to supply the wants of the people. Consequently the only land investments that help the community are those that tend to make the land productive. Under a tax on future increases in value, such investments would increase for the simple reason that land would be cheaper than it would have been without the tax. Men who desired land for the sake of its rent or its product would continue as now to pay such prices for it as would enable them to obtain the prevailing rate of interest on their investment after all charges, including taxes, had been paid. Men who wanted to rent land would continue as now to get it at a rental that would give them the usual return for their capital and labour. So much for the effect of the tax upon the community. Would it not, however, be unjust to the landowners? Does not private ownership of its very nature demand that increases in the value of the property should go to the owners thereof? "Res fructificat domino:" a thing fructifies to its owner; and value-increases may be classed as a kind of fruit. In the first place, this formula was originally a dictum of the civil law merely, the law of the Roman Empire. It was a legal rather than an ethical maxim. Whatever validity it has in morals must be established on moral grounds, by moral arguments. It cannot forthwith be assumed to be morally sound on the mere authority of legal usage. In the second place, it was for a long time applied only to natural products, to the grain grown in a field, to the offspring of domestic animals. It simply enunciated the policy of the law to defend the owner of the land in his claim to such fruits, as against any outsider who should attempt to set up an adverse title through mere appropriation or possession. Thus far, the formula was evidently in conformity with reason and justice. Later on it was extended, both by lawyers and moralists, to cover commercial "fruits," such as, rent from lands and houses, and interest from loans and investments. Its validity in this field will be examined in connection with the justification of interest. More recently the maxim has received the still wider application which we are now considering. Obviously increases in value are quite a different thing from the concrete fruit of the land, its natural product. A right to the latter does not necessarily and forthwith imply a right to the former. In the third place, the formula in question is not a self evident, fundamental principle. It is merely a summary conclusion drawn from the consideration of the facts and principles of social and industrial life. Consequently its validity as applied to any particular situation will depend on the correctness of these premises, and on the soundness of the process by which it has been deduced. The increment tax is sometimes opposed on the ground that it is new, in fact, revolutionary. In some degree the charge is true, but the conditions which the proposal is intended to meet are likewise of recent origin. The case for this legislation rests mainly on the fact that, for the first time in the world's history, land values everywhere show an unmistakable tendency to advance indefinitely. This means that the landowning minority will be in a position to reap unbought and continuous benefits at the expense of the landless majority. This new fact, with its very important significance for human welfare, may well require a new limitation on the right of property in land. It is also objected that to deprive men of the opportunity of profiting by changes in the value of their land would be an unfair discrimination against one class of proprietors. But there are good reasons for making the distinction. Except in the case of monopoly, increases in the value of goods other than land are almost always due to expenditures of labour or money upon the goods themselves. The value increases that can be specifically traced to external and social influences are intermittent, uncertain, and temporary. Houses, furniture, machinery, and every other important category of artificial goods are perishable, and decline steadily in value. Land, however, is substantially imperishable, becomes steadily scarcer relatively to the demand, and its value-increases are on the whole constant, certain, and permanent. Moreover, it is the settled policy of most enlightened governments to appropriate or to prevent all notable increases in the value of monopolistic goods, either through special taxation or through regulation of prices and charges. Taking the increment values of land is, therefore, not so discriminative as it appears at first glance.[94] Another objection is that the proposal would violate the canons of just taxation, since it would impose a specially heavy burden upon one form of property. The general doctrine of justice in taxation which is held by substantially all economists to-day, and which has been taught by Catholic moralists for centuries, is that known as the "faculty" theory.[95] Men should be taxed in proportion to their ability to pay, not in accordance with the benefits that they may be assumed to receive from the State. And it is universally recognised that the proper measure of "ability" is not a man's total possessions, productive and unproductive, but his income, his annual revenue. Now, the increment tax does seem to violate the rule of taxation according to ability, inasmuch as it would take all of one species of revenue, while all other incomes and properties pay only a certain percentage. All the adherents of the faculty theory maintain, however, that it is subject to certain modifications. Incomes from interest, rent, and socially occasioned increases in the value of property should be taxed at a higher rate than incomes that represent expenditures of labour; for to give up a certain per cent. of the former involves less sacrifice than to give up the same per cent. of the latter. Therefore, increments of land-value may be fairly taxed at a higher rate than salaries, personal property, or even rent and interest. When, however, the law absorbs the whole of the value increments, it seems to be something more than a tax. The essential nature of a tax is to take only a portion of the particular class of income or property upon which it is imposed. The nearest approach to the plan of taking all future increases in land value is to be found in the special assessments that are levied in many American cities. Thus, the owners of urban lots are frequently compelled to defray the entire cost of street improvements on the theory that their land is thereby and to that extent increased in value. In such cases the contribution is levied not on the basis of the faculty theory, but on that of the benefit theory; that is, the owners are required to pay in proportion to benefits received. All adherents of the faculty theory admit that the benefit theory is justifiably applied in situations of this kind. It might be argued that the latter theory can also be fairly applied to increments of land value that are to arise in the future. In both cases the owner returns to the State the equivalent of benefits which have cost him nothing. There is, however, a difference. In the former case the value increases are specifically due to expenditures made by the State, while in the latter they are indirectly brought about by the general activities of the community. We do not admit with the Single Taxers that this "social production" of value increments creates a right thereto on the part of either the community or the civil body; but even if we did we should be compelled to admit that the two situations are not exactly parallel; for the social production of increases in the value of land involves no special expenditure of labour or money. Hence it is very questionable whether the appropriation of the whole of the future value increments can be harmonised with the received conceptions and applications of the canons of taxation. _The Morality of the Proposal_ However, it is neither necessary nor desirable to justify the proposal on the mere ground of taxation. Only in form and administration is it a tax; primarily and in essence it is a method of distribution. It resembles the action by which the State takes possession of a newly discovered territory by the title of first occupancy. The future increases of land value may be regarded as a sort of no man's property which the State appropriates for the benefit of the community. And the morality of this proceeding must be determined by the same criterion that is applied to every other method or rule of distribution; namely, social and individual consequences. No principle, title, or practice of ownership, nor any canon of taxation, has intrinsic or metaphysical value. All are to be evaluated with reference to human welfare. Since the right of property is not an end in itself, but only a means of human welfare, its just prerogatives and limitations are determined by their conduciveness to the welfare of human beings. By human welfare is meant not merely the good of society as a whole, but the good of all individuals and classes of individuals. For society is made up of individuals, all of whom are of equal worth and importance, and have equal claims to consideration in the matter of livelihood, material goods, and property. In general, then, any method of distribution, any modification of property rights, any form of taxation, is morally lawful which promotes the interests of the whole community, without causing undue inconvenience to any individual. Whether a given rule of ownership or method of distribution which is evidently conducive to the public good is, nevertheless, unduly severe on a certain class of individuals, is a question that is not always easily answered. Some of the methods and practices appearing in history were clearly fair and just, others clearly unfair and unjust, and still others of doubtful morality. Frequently the State has compelled private persons to give up their land at a lower price than they paid for it; in more than one country freebooters and kingly favourites robbed the people of the land, yet their heirs and successors are recognised by both moralists and statesmen as the legitimate owners of that land; in Ireland stubborn landlords are to-day compelled by the British government to sell their holdings to the tenants at an appraised valuation; in many countries men may become owners of their neighbours' lands by the title of prescription, without the payment of a cent of compensation. All these practices and titles inflict considerable hardship upon individuals, but most of them are held to be justified on grounds of social welfare. Now the public appropriation of all future increments of land value would evidently be beneficial to the community as a whole. It would enable all the people to profit by gains that now go to a minority, and it would enable the landless majority to acquire land more easily and more cheaply. We have in mind, of course, only those value increases that are not due to improvements in or on the land, and we assume that these could be distinguished in practice from the increments of value that represent improvements. Would the measure in question inflict undue hardship upon individuals? Here we must make a distinction between those persons who own land at the time that, and those who buy land after, the law is enacted. The only inconvenience falling upon the latter class would be deprivation of the power to obtain future increases in value. The law would not cause the value of the land to decline below their purchase price. Other forces might, indeed, bring about such a result; but, as a rule, such depreciation would be relatively insignificant, for the simple reason that it would already have been "discounted" in the reduction of value which followed the law at the outset. The very knowledge that they could not hope to profit by future increases in the value of the land would impel purchasers to lower their price accordingly. While taking away the possibility of gaining, the law enables the buyers to take the ordinary precautions against losing. Therefore, it does not, as sometimes objected, lessen the so called "gambler's chances." On the other hand, the tax does not deprive the owners of any value that they may add to the land through the expenditure of labour or money, nor in any way discourage productive effort. Now it is, as a rule, better for individuals as well as for society that men's incomes should represent labour, expenditure, and saving instead of being the result of "windfalls," or other fortuitous and conjunctural circumstances. And the power to take future value increments is not an intrinsically essential element of private property in land. Like every other condition of ownership, its morality is determined by its effects upon human welfare. But we have seen in the last paragraph that human welfare in the sense of the social good is better promoted by a system of landownership which does not include this element; and we have just shown that such a system causes no undue hardship to the individual who buys land after its establishment. Such is the answer to the contention, noticed a few pages back, that the landowner has a right to future increments of value because they are a kind of fruit of his property. It is more reasonable that he should not enjoy this particular and peculiar "fruit." Were the increment tax introduced into a new community before any one had purchased land, it would clearly be a fair and valid limitation on the right of ownership. Those who should become owners after the regulation went into effect in an old community would be in exactly the same moral and economic position. Finally, there exists some kind of legal precedent for the proposal in the present policy of efficient governments with regard to the only important increases that occur in the value of goods other than land; namely, increases due to the possession of monopoly power. By various devices these are either prevented or appropriated by the State. Those persons who are landowners when the increment tax goes into effect are in a very different situation from those that we have just been considering. Many of them would undoubtedly suffer injury through the operation of the measure, inasmuch as their land would reach and maintain a level of value below the price that they had paid for it. The immediate effect of the increment tax would be a decline in the value of all land, caused by men's increased desire to sell and decreased desire to buy. In all growing communities a part of the present value of land is speculative; that is, it is due to demand for the land by persons who want it mainly to sell at an expected rise, and also to the disinclination of present owners to sell until this expectation is realised. The practical result of the attitude of these two classes of persons is that the demand for, and therefore the value of land is considerably enhanced. Let a law be enacted depriving them of all hope of securing the anticipated increases in value, and the one group will cease to buy, while the other will hasten to sell, thus causing a decline in demand relatively to supply, and therefore a decline in value and price. All persons who had paid more for their land than the value which it came to have as a result of the increment tax law, would lose the difference. For, no matter how much the land might rise in value subsequently, the increase would all be taken by the State. And all owners of vacant land the value of which after the law was passed did not remain sufficiently high to provide accumulated interest on the purchase price, would also lose accordingly. To be sure, both these kinds of losses would exist even if the law should cause no decline in the value of land, but they would not be so great either in number or in volume. Landowners who should suffer either of these sorts of losses would have a valid moral claim against the State for compensation. Through its silence on the subject of increment-tax legislation, the State virtually promised them at the time of their purchases that it would not thus interfere with the ordinary course of values. Had it given any intimation that it would enact such a law at a future time, these persons would not have paid as much for their land as they actually did pay. When the State passes the law, it violates its implicit promise, and consequently is under obligation to make good the resulting losses. Is it not obliged to go further, and pay for the positive gains that many of the owners would have reaped in the absence of the law? For example: a piece of land is worth one thousand dollars the day after the tax goes into effect, and that was exactly the price paid for it by the present owner; another piece has the same value, but was bought by the present owner for eight hundred dollars. While neither of these men suffer any loss on their investments, they are deprived of possible gains; for had the law not been enacted their holdings would be worth, say, eleven hundred dollars. Nevertheless, they are no worse off in this respect than those persons who buy land after the increment tax goes into effect, and have no greater claim to compensation for abolished opportunities of positive gain. As we have seen above, the certain advantages of the measure to the community, the doubtful advantages to individuals of profiting by changes in price which do not represent labour, expense, or saving, show that the owners have no strict right to compensation. And it is still clearer that no landowner has a valid claim on account of value increases that would have taken place subsequent to the time that the measure was enacted. There is no way by which owners who would have held their land long enough to profit by these increments can be distinguished from owners who would not have availed themselves of this conjectural opportunity, nor any method by which the amount of such gains can be determined. On the other hand, it might be objected that, in reimbursing all owners who suffer the positive losses above described, the State is unduly generous; for if the law had not been enacted many of the reimbursed persons would have sold their holdings at a price insufficient to cover their losses. But these cannot be distinguished from those who would have sold at a remunerative price. Hence the State must compensate all or none. The former alternative is not only the more just all round, but in the long run the more expedient. In view of the social benefits of the increment tax, especially the removal of many of the inequities of the present taxing system, the State might sometimes be justified in making good only a part of the losses that we have been discussing. But this could probably occur only for administrative reasons, such as the difficulty of determining the persons entitled to and the amounts of compensation. It would not be justified merely to enable the State to profit at the expense of individuals. And, in any case, there seems to be no good reason why the unpaid losses should amount to more than a small fraction of the whole. In the foregoing pages we have been considering a law which would from the beginning of its operation take _all_ the future increments of land value. There is, however, no likelihood that any such measure will soon be enacted in any country, least of all, in the United States. What we shall probably see is the spread of legislation designed to take a part, and a gradual growing part, of value increases, after the example of Germany and Great Britain. Let us glance at the laws in force in these two countries. _The German and British Increment Taxes_ The first increment tax (Werthzuwachssteuer) was established in the year 1898 in the German colony of Kiautschou, China. In 1904 the principle of the tax was adopted by Frankfort-am-Main, and in 1905 by Cologne. By April, 1910, it had already been enacted in 457 cities and towns of Germany, some twenty of which had a population of more than 100,000 each, in 652 communes, several districts, one principality, and one grand duchy. In 1911 it was inserted in the imperial fiscal system, and thus extended over the whole German Empire. While these laws are all alike in certain essentials, they vary greatly in details. They agree in taking only a per cent. of the value increases, and in imposing a higher rate on the more rapid increases. The rates of the imperial law vary from ten per cent. on increases of ten per cent. or less to thirty per cent. on increases of 290 per cent. or over. In Dortmund the scale progresses from one to 12-1/2 per cent. Inasmuch as the highest rate in the imperial law is 30 per cent., and in any municipal law (Cologne and Frankfort) 25 per cent.; inasmuch as all the laws allow deductions from the tax to cover the interest that was not obtained while the land was unproductive; and inasmuch as only those increases are taxed which are measured from the value that the land had when it came into the possession of the present owner,--it is clear that landowners are not obliged to undergo any positive loss, and that they are permitted to retain the lion's share of the "unearned increment."[96] It is to be noted that most of the German laws are retroactive, since they apply not merely to future value increases, but to some of those that occurred before the law was enacted. Thus, the Hamburg ordinance measures the increases from the last sale, no matter how long ago that transaction took place. The imperial law uses the same starting point, except in cases where the last sale occurred before 1885. Accordingly, a man who had in 1880 paid 2500 marks for a piece of land which in 1885 was worth only 2000 marks, and who sold it for 3000 marks after the law went into effect, would pay the increment tax on 1000 marks,--unless he could prove that his purchase price was 2500 marks. In all such cases the burden of proof is on the owner to show that the value of the land in 1885 was lower than when he had bought it at the earlier date. Obviously this retroactive feature of the German legislation inflicts no wrong on the owner, since it does not touch value increases that he has paid for. Indeed, the value of the land when it came into the present owner's possession seems to be a fairer and more easily ascertained basis from which to reckon increases than any date subsequent to the enactment of the law. On the one hand, persons whose lands had fallen in value during their ownership would be automatically excluded from the operation of the law until such time as the acquisition value was again reached; on the other hand, those owners whose lands had increased in value before the law went into effect would be taxed as well as those whose gains began after that event; thus the law would reach a greater proportion of the existing beneficiaries of "unearned increment." Moreover, it would bring in a larger amount of revenue. The British law formed a part of the famous Lloyd-George budget of 1909. It taxes only those increments that occur after its enactment. These are subject to a tax of twenty per cent. on the occasion of the next transfer of the land, by sale, bequest, or otherwise.[97] In some cases this arrangement will undoubtedly cause hardship. For example: if land which was bought for 1,000 pounds in 1900 had fallen to 800 pounds in 1909, and were sold for 1,000 pounds in 1915, the owner would have to pay a tax of twenty per cent. on 200 pounds. This would mean a net loss of forty pounds, to say nothing of the loss of interest in case the land was unproductive. It would seem that some compensation ought to be given here; yet the rarity of such instances, the administrative difficulties, and the general advantages of this sort of legislation quite conceivably might forbid the conclusion that the owner was made to suffer certain injustice. The compensating social advantages of the increment tax as well as of other special taxes on land, will receive adequate discussion presently. _Transferring Other Taxes to Land_ Another taxation plan for reducing the evils of our land system consists in the imposition of special taxes on the _present_ value of land. As a rule, these imply, not an addition to the total tax levy, but a transfer of taxes from other forms of property. The usual practice is to begin by exempting either partly or wholly buildings and other kinds of improvements from taxation, and then to apply the same measure to certain kinds of personal property. In most cases the transfer of such taxes to land is gradual, extending over a period of five, ten, or fifteen years. The plan is in operation in Canada and Australasia, and to a slight extent in the United States. It has received its greatest development in the western provinces of Canada; namely, British Columbia, Alberta, Saskatchewan, and Manitoba. The cities of Edmonton, Medicine Hat, and Red Deer; Vancouver, Victoria, and thirteen others of the thirty-three cities of British Columbia; all the towns of Alberta except two; all but one of the villages of Alberta, and one-fourth of those in Saskatchewan; all the rural municipalities and local improvements districts in Alberta, Manitoba, and Saskatchewan, and 24 of the 28 in British Columbia,--exempt improvements entirely from taxation. The three cities in Alberta which retain some taxes on improvements; all the cities and towns and three-fourths of the villages in Saskatchewan; the four largest cities in Manitoba; and a considerable number of the municipalities in Ontario (by the device of illegal under-assessment in this instance),--tax improvements at less than full value, in some cases as low as fifteen per cent. Land is invariably assessed at its full value. It is to be observed that these special land taxes provide only local revenues; they do not contribute anything to the maintenance of either the provincial or the dominion governments. The reason why the local jurisdictions have adopted these taxes so much more extensively in Alberta than in the other provinces is to be found in a provincial law enacted in 1912, which requires all towns, villages, and rural areas to establish within seven years the practice of exempting from taxation personal property and buildings. Saskatchewan permits cities and towns to tax improvements up to sixty per cent. of their value, while British Columbia and Manitoba leave the matter entirely in the hands of the local authorities. The provincial revenues are derived from many sources, chiefly real estate, personal property, and incomes; but British Columbia, Saskatchewan, and Alberta levy a special tax on unimproved and only slightly improved rural land. The rate of this "wild lands tax" is in British Columbia four per cent., and in the other two provinces one per cent. Some of the municipalities of British Columbia and Saskatchewan also impose a "wild lands tax." By a law passed in 1913 Alberta levies a provincial tax of five per cent. on the value increases of non-agricultural lands. A movement for the reduction of the tax on buildings has developed considerable strength in the eastern provinces of Ontario, Nova Scotia, and New Brunswick.[98] New Zealand and most of the states of Australia have for several years levied special taxes on land, consisting mainly of general rates on estates of moderate size, and a progressive super tax on large estates. The Commonwealth of Australia also imposes a tax of one penny in the pound on the value of land. A considerable proportion of the cities and towns in both New Zealand and Australia derive practically all their revenues from land, exempting improvements entirely. In both countries, however, the bulk of the total revenue is obtained from other sources than land taxes. In New Zealand they yield less than thirteen per cent. of the national receipts.[99] Pittsburgh and Scranton were required by a law enacted in 1913 to reduce the local tax rate on buildings at such a pace that in 1925 and thereafter it would be only one-half the highest rate on other forms of property. Everett, Wash., and Pueblo, Col., within recent years adopted by popular vote more sweeping measures of the same character, but the Everett law has never gone into effect, and the Pueblo statute was repealed two years after it had been passed. In many cities of the United States, buildings are undervalued relatively to land by the informal and illegal action of assessors. The most pronounced and best known instance of this kind is Houston, Texas, where in 1914 land was assessed at seventy per cent. of its value and buildings at only twenty-five per cent. In 1915, however, the practice was forbidden by the courts as contrary to the Texas constitution. At more than one recent session of the New York legislature, bills have been introduced providing for the gradual reduction of the tax on buildings in New York City to a basis of fifty per cent. of their value. While none of them has been passed, the sentiment in favour of some such measure is probably increasing. A similar movement of opinion is apparent in many other sections of the country. On the whole, the special land taxes of Canada and Australasia are not remarkably high. They seem to be as low or lower than the average rates imposed on land, as well as on other forms of general property, in the United States. In the provinces, the special land taxes provide only a small portion of the total revenues; in the cities and towns, there are, as a rule, other sources of revenue as well as land, and the expenses of municipal government are probably not as high as in this country. Hence the land taxes of Canada have not reached an abnormally high level, and are probably lower than most persons who have heard of them would be inclined to expect. The chief exceptions to the foregoing statements are to be found in the "wild lands tax" of British Columbia, and in the land taxes of some of the towns (not the cities) of Alberta. A rate of four per cent. on unimproved and slightly improved rural land is extraordinary in fiscal annals, and is scarcely warranted by any received principle of taxation, although it may possibly be justified by peculiar social and administrative conditions in the province of British Columbia. Some of the smaller towns of Alberta which adopted the land tax during the recent period of depression have been compelled to impose even higher rates, the maximum being reached by Castor in 1912, with a rate of 8-1/2 per cent. As a natural consequence, a large proportion of the land in this town was surrendered by its owners to the municipality. While this amazing tax rate is probably temporary, and is likely to be lowered after the return of the average conditions of prosperity, it inflicts unfair hardship upon those owners whose circumstances are such that they must give up their land, instead of awaiting the hoped for decline in the rate of taxation. _The Morality of the Plan_ The losses of various kinds that would result from the transfer of other taxes to land may be thus summarised. Land would depreciate in value by an amount equal to the capitalised tax. For example; if the rate of interest were five per cent., an additional tax of one per cent. would reduce land worth one hundred dollars an acre to eighty dollars. This decline might, indeed, be partly, wholly, or more than offset by a simultaneous rise due to economic forces. In any case, however, the land would be worth twenty dollars less than it would have been worth had the tax not been imposed. For some owners this would mean a positive loss; for others it would signify mere failure to gain. The latter would happen in the case of all those owners who at any time after the imposition of the tax sold their land at as high a price as they had paid for it. Not all of the owners whose land was forced by the tax to a figure below their purchase price would suffer positive loss; for the land might subsequently rise in value sufficiently to wipe out the unfavourable difference. In this respect a special tax on the present value of land has a different effect from a tax that appropriates all the future value increases. Only those owners who actually sold their land below their purchase price could charge the former tax with inflicting upon them positive losses. In the case of the land exemplified above, the owner who sold at ninety dollars per acre could properly attribute to the tax a loss of ten dollars; the owner who sold at eighty dollars would have a grievance amounting to twenty dollars; and a loss would be suffered by any owner who sold for less than eighty dollars. In the second place, all owners of vacant land who sold at a price insufficient to provide for accumulated interest on the purchase price, could justly hold the tax responsible, so long as the deficiency did not exceed the value-depreciation caused by the tax. Thirdly, all persons whose land had an unusually high value relatively to the value of their exempted property, would suffer losses as taxpayers. They would lose more through the heavier land taxes than they would gain through the lighter taxes, or the absence of taxes, on their other property. To compensate all owners who underwent these three kinds of losses would be practically impossible. The number of persons would be too large, the difficulty of proving many of the claims would be too expensive, and the compensation process would be too long drawn out, since it would have to continue until the death of all persons who had owned land when the last instalment of the increased land taxes went into effect. Therefore, the losses in question must be counterbalanced by other and indirect methods. These will be found mainly in the following considerations: the amount of the new taxes; the gradual method of imposing them; and their socially beneficial results. _Amount of Taxes Practically Transferable_ According to Professor King's computations, the total rent of land in the United States in 1910 was $2,673,900,000, while the total expenditures of national, state, county and city governments were $2,591,800,000.[100] In his opinion (p. 162) "the rent would have been barely sufficient to pay off the various governmental budgets as at present constituted, and with the growing concentration of activities in the hands of the government, it appears that rent will soon be a quantity far too small to meet the required changes. With increasing pressure on our natural resources, however, it is probable that the percentage of the total income paid for rent will gradually increase and, since this is true, the lag behind the growing governmental expenses will be considerably less than would otherwise be the case." A change in our fiscal system providing for the immediate derivation of all revenues from land taxes would, therefore, involve the confiscation of all rent, and the destruction of all private land values. Land would be worth nothing to the owners when its entire annual return was taken by the State in the guise of taxes. Even if the process of imposing the new taxes on land were extended over a long term of years the same result would be reached in the end; for whatever increase had taken place in the economic value of land during the process would in all probability have been neutralised by the increase in governmental expenditures. It is evident, therefore, that the proposal to put _all_ taxes on land must be rejected on grounds of both morals and expediency. Let us suppose that all national revenues continued, as now, to be raised from other sources than land, and that all state, county, and city revenues remained as they are, except those derived from the general property tax. This would mean that all the following taxes would be unchanged: all federal taxes, the taxes on licenses of all kinds, all taxes on business, incomes, and inheritances, and all special property taxes. If, then, the whole of the general property tax were concentrated on land; that is, if all the taxes on improvements and on all forms of personal property were legally shifted to land,--the entire revenue to be raised from land would in 1912 have amounted to $1,349,841,038.[101] This is slightly more than one-half of Professor King's estimate of the total rent for 1910, which was $2,673,900,000. But this figure equals four per cent. of the land values of the country; hence the concentration of the general property tax on land would mean a tax rate of two per cent. on the full value of the land. How much would this change increase the present rate of land taxes, and decrease existing land values? While no accurate and definite answer can be given to either of these questions, certain approximations can be attempted which should be of considerable service. In 1912 the average tax rate on the assessed valuation of all goods subject to the general property tax was .0194, or $19.40 per thousand dollars.[102] The assessed valuation of taxed real property and improvements (land, buildings, and other improvements) was nearly fifty-two billion dollars, while the true value of the same property was nearly ninety-eight and one-half billions.[103] Consequently, the actual tax rate of .0194 on the assessed valuation was exactly one per cent. on the true value of real estate. On the assumption that both land and improvements were undervalued to the same extent, the land tax was one per cent. of the full value of the land. If now we take Thomas G. Shearman's estimate, that land values form sixty per cent. of the total value of real estate, we find that the taxes derived from land constituted only forty-four per cent. of the total revenues raised by the general property tax. To concentrate the whole of the general property tax on land, by transferring thereto the taxes on improvements and on personal property, would, accordingly, cause the land tax to be somewhat more than doubled. It would be slightly above two per cent. on the full value of the land. This is the same estimate that we obtained above by a different process; that is, by comparing Professor King's estimate of land value and rent with the total revenues derived from the general property tax. However, it is not improbable that sixty per cent. is too low an estimate of the ratio of land values to entire real estate values. In 1900, farm land and improvements, exclusive of buildings, formed 78.6 per cent. of the value of real estate, i.e., land, improvements, and buildings. In 1910, the per cent. was a little less than 82. Now it is quite unlikely that the value of non-building improvements on farms amounted to the difference between sixty per cent. and seventy-eight per cent. in 1900, or between sixty per cent. and eighty-two per cent. in 1910. Hence the value of farm land is something more than sixty per cent. of farm real estate. On the other hand, the value of factory land in 1900 formed only 41.5 per cent. of the total value of factory land and buildings, while the value of city and town lots in five rural states varied from 34 to 62 per cent. of this species of real estate.[104] In Greater New York land constitutes 61 per cent. of real estate values.[105] Owing to the lack of data, the average ratio for all kinds of real estate for the whole country is impossible of determination. If the estimate of seventy per cent. be adopted, which is probably the upper limit of the average proportion between land values and real estate values throughout the country, the portion of the general property tax now paid by land amounts to about fifty-two per cent. Consequently the imposition of the whole general property tax on land would not quite double the present rate on land. To the first of the two questions raised above the answer can be given with a fair amount of confidence that the transfer of improvement and personal property taxes to land would cause land taxes to be about twice what they are at present. To the second question, concerning the extent to which land values would fall in consequence of the heavier taxes, the answer must be somewhat less definite. The added land taxes would be about one-half the present general property taxes, or $675,000,000. This is about one per cent. the total land values of the country. One per cent. of land values capitalised at five per cent. represents a depreciation of twenty per cent. in the value of land; capitalised at four per cent., it represents a depreciation of twenty-five per cent. For example; if land worth one hundred dollars an acre returns to its owner a net income of five dollars annually, the appropriation of one dollar by a new tax will leave a net revenue of only four dollars; capitalised at the current rate of five per cent., this represents only eighty dollars of land value, or a depreciation of twenty per cent. If the land has the same value of one hundred dollars, and still yields only four dollars revenue, a deduction of one dollar in new taxes will leave only three dollars net; capitalised at the current rate of four per cent., this represents only seventy-five dollars of land value, or a depreciation of twenty-five per cent. Using the other method of calculation, which estimated the present tax rate on the full value of land at one per cent., we get exactly the same results; namely, the new tax is one per cent., which is equivalent to a depreciation of twenty per cent. or of twenty-five per cent., according as we assume an interest rate of five per cent. or of four per cent. Suppose, however, that the assessors do not undervalue land to the extent that we have been assuming; suppose that the present rate of .0194 on assessed valuation is equivalent to, not merely one per cent., but one and one-half per cent. of the full value of land. In that hypothesis the additional tax would likewise be one and one-half per cent., which capitalised at five per cent, would represent a depreciation of thirty per cent., and at four per cent. a depreciation of thirty-seven and one-half per cent. Combining in one generalisation the various suppositions made in this paragraph, we estimate the depreciation of land values resulting from the proposed tax transfer as somewhere between twenty and forty per cent. We have considered two hypothetical transfers of taxes to land. The first we found to be out of the question because it would appropriate the whole of the rent and destroy all private land values. The second would apparently amount to two per cent. of the value of land, and cause land values to depreciate from twenty to forty per cent. It is unnecessary to consider the probable effects of any plan that would involve heavier land taxes than the second; that is, the scheme of imposing all the general property tax on land; for it represents the extreme feasible and fair limit of the movement within, at any rate, the next fifteen or twenty years. Even this degree of tax transference would be unjust to the landowners if it were brought about at once. No social or other considerations exist that would justify a depreciation in land values of from twenty to forty per cent. If, however, the process were extended over a period of, say, twenty years, the decline would be only one or two per cent. annually, which is considerably less than the rate at which farm lands and the land in large cities have risen in value during recent years. Under such an arrangement the great majority of owners would probably find that the depreciation caused by the heavier land taxes, had been more than offset by the upward tendency resulting from the increased demand for land. Nevertheless, there would still be positive losses of the three kinds described a few pages back; namely, to owners who sold land below the price that they had paid for it; to owners who sold vacant land at a price insufficient to cover accumulated interest on the investment; and to owners whose aggregate tax burdens were increased. Some degree of each of these sorts of losses would be due specifically to the new land taxes. As noted above, public compensation in all such cases would be impracticable. Consequently the justification of a law that inflicts such losses must be found, if it exists, in social considerations. _The Social Benefits of the Plan_ These may be summed up under three heads: making land easier to acquire; cheapening the products and rent of land; and reducing the burdens of taxation borne by the poorer and middle classes. An increase in the tax on land would reduce its value and price, or at least cause the price to be lower than it would have been in the absence of the tax. This does not mean that land would be more profitable to the purchaser, since he is enabled to buy it at a lower price only because it yields him less net revenue, or because it is less likely to increase in value. The value of land is always determined by its revenue-producing power, and by its probabilities of price-appreciation. Consequently, what the purchasers would gain by the lower price resulting from the new tax, they would lose when they came to pay the tax itself, and when they found the chances of value increases diminished. If a piece of land which brings a return of five dollars a year costs one hundred dollars before the new tax of one per cent. is imposed, and can be bought for eighty dollars afterward, the net interest on the purchase price has not changed. It is still five per cent. Hence the only advantage to the prospective purchaser of land in getting it cheaper consists in the fact that he can obtain it with a smaller outlay of capital. For persons in moderate circumstances this is a very important consideration. In the second place, higher taxes would cause many existing owners either to improve their land, in order to have the means of meeting the added fiscal charges, or to sell it to persons who would be willing to make improvements. And the desire to erect buildings and other forms of improvements would be reinforced by the reduction or abolition of taxes on those kinds of personal property which consist of building materials. An increase in the rapidity of improvements on land would mean an increase in the rate at which land was brought into use, and therefore an unusual increase in the volume of products. This virtual increase in the supply of land, and actual increase in the supply of products, would cause a fall in three kinds of prices: the price of products, the rent of land, and the price of land. The last named reduction would be distinct from the reduction of land value caused in the first instance by the imposition of the tax. In the third place, the reduction, and finally the abolition, of taxes on improvements and personal property would be especially beneficial to the poorer and middle classes because they now pay a disproportionate share of these charges. Lower taxes on dwellings would mean lower rents for all persons who did not own their homes, and lower taxes for all owners whose residence values were unusually large relatively to their land values. And the tendency to lower rents on dwellings would be reinforced by the lower cost of building materials resulting, as noted above, from the increased supply and the lower tax on this form of personal property. Lower taxes on that species of personal property which consists of consumers' goods, such as household furniture and wearing apparel, would lessen the present inequity of taxation because this class of goods is reached to a much greater extent in the case of the poor than in the case of the rich. It is not easy to conceal or to undervalue a relatively small number of simple and standard articles; but diamonds, costly furniture, and luxurious wardrobes can be either hidden, or certified to the assessor at a low valuation. As for those forms of personal property which are of the nature of capital and other profit producing goods, such as machinery and tools of all kinds, productive animals, money, mortgages, securities, the stocks of goods held by manufacturers and merchants, and likewise buildings which are used for productive purposes,--the taxes on all these kinds of property are for the most part shifted to the consumer. The latter ultimately pays the tax in the form of higher prices for food, clothing, shelter, and the other necessaries and comforts of life.[106] Now a tax on consumption is notoriously unfair to the poorer and middle classes because it affects a greater portion of their total expenditures, and takes a larger per cent. of their income than in the case of the rich. Hence the removal of the taxes specified in this paragraph would be at once the abolition of a fiscal injustice, and a considerable assistance to the less fortunate classes. All those landowners who occupied rented dwellings would benefit by the reduction in house rent, and all landowners without exception would reap some advantage from the reduction or abolition of the taxes on consumers' goods and on the various forms of producers' goods. It is not improbable that a considerable proportion of them would gain as much in these respects as they would lose in the capacity of landowners. Would the social benefits summarily described in the foregoing paragraphs be sufficient to justify the increased land taxes in the face of the losses that would be undergone by some landowners in the three ways already specified? In view of our ignorance concerning the probable amount of benefits on the one hand and losses on the other, it is impossible to give a dogmatic answer. However, when we reflect on the manifold social evils that are threatened by a rapid and continuous increase in land values, and the resulting decrease in the proportion of the population that can hope to participate in the ownership of land, we are forced to conclude that some means of checking both tendencies is urgently necessary for the sake of social justice and social peace. The project that we have been considering; namely, the transfer of taxes on improvements and on personal property to land by a process extending over twenty years, seems to involve a sufficiently large amount of advantage and a sufficiently small amount of disadvantage to justify systematic and careful experiment. _A Supertax on Large Holdings_ Every estate containing more than a maximum number of acres, say, ten thousand, whether composed of a single tract or of several tracts, could be compelled to pay a special tax in addition to the ordinary tax levied on land of the same value. The rate of this supertax should increase with the size of the estate above the fixed maximum. Through this device large holdings could be broken up, and divided among many owners and occupiers. For several years it has been successfully applied for this purpose in New Zealand and Australia.[107] Inasmuch as this tax exemplifies the principle of progression, it is in accord with the principles of justice; for relative ability to pay is closely connected with relative sacrifice. Other things being equal, the less the sacrifice involved, the greater is the ability of the individual to pay the tax. Thus, the man with an income of ten thousand dollars a year makes a smaller sacrifice in giving up two per cent. of it than the man whose income is only one thousand dollars; for the latter case the twenty dollars surrendered represent a privation of the necessaries or the elementary comforts of life, while the two hundred dollars taken from the rich man would have been expended for luxuries or converted into capital. While the incomes of both are reduced in the same proportion, their satisfactions are not diminished to the same degree. The wants that are deprived of satisfaction are much less important in the case of the richer than in that of the poorer man. Hence the only way to bring about anything like equality of sacrifice between them is to increase the proportion of income taken from the former. This means that the rate of taxation would be progressive.[108] It is in order to object that the principle of progression should not be applied to the taxation of great landed estates, since a considerable part of them is unproductive, and consequently does not directly affect sacrifice. But the same objection can be urged against any taxation of unoccupied land. The obvious reply is that the equal taxation of unproductive with productive land is justified by social reasons, chiefly, the unwisdom of permitting land to be held out of use. The same social reasons apply to the question of levying an exceptionally high tax on large estates, even though they may at present produce no revenue. While the tax is sound in principle, it is probably not much needed in America in connection with agricultural or urban land. Its main sphere of usefulness would seem to be certain great holdings of mineral, timber, and water power lands. "There are many great combinations in other industries whose formation is complete. In the lumber industry, on the other hand, the Bureau now finds in the making a combination caused, fundamentally, by a long standing public policy. The concentration already existing is sufficiently impressive. Still more impressive are the possibilities for the future. In the last forty years concentration has so proceeded that 195 holders, many interrelated, now have practically one-half of the privately owned timber in the investigation area (which contains eighty per cent. of the whole). This formidable process of concentration, in timber and in land, clearly involves grave future possibilities of impregnable monopolistic conditions, whose far reaching consequences to society it is now difficult to anticipate fully or to overestimate."[109] In January, 1916, the Secretary of Agriculture called the attention of Congress to the fact that a small number of corporations closely associated in a policy of community of interest were threatening to secure and exercise a monopoly over the developed water power of the country. Ninety per cent. of the anthracite coal lands of Pennsylvania are owned or controlled by some nine railroads acting as a unit in all important matters. For situations of this kind a supertax on large estates would seem to hold the promise of a large measure of relief. To sum up the main conclusions of this very long chapter: Exceptionally valuable lands, as those containing timber, minerals, oil, gas, phosphate, and water power, which are still under public ownership should remain there. Through a judicious system of loans, deserving and efficient persons should be assisted to get possession of some land. Municipalities should lease rather than sell their lands, and should strive to increase their holdings. To take all the future increases in the value of land would be morally lawful, provided that compensation were given to owners who thereby suffered positive losses of interest or principal. To take a small part of the increase, and to transfer very gradually the taxes on improvements and on personal property to land, would probably be just, owing to the beneficial effects upon public welfare. A supertax on large holdings of exceptionally valuable and scarce land would likewise be beneficial and legitimate.[110] REFERENCES ON SECTION I ASHLEY: The Origin of Property in Land. London; 1892. LAVELEYE: Primitive Property. London; 1878. WHITTAKER: The Taxation, Tenure, and Ownership of Land. London; 1914. PREUSS: The Fundamental Fallacy of Socialism. St. Louis; 1908. GEORGE: Progress and Poverty; and A Perplexed Philosopher. MARSH: Land Value Taxation in American Cities. N. Y.; 1911. FILLEBROWN: A Single Tax Handbook for 1913. Boston; 1912. YOUNG: The Single Tax Movement in the United States. Princeton; 1916. SHEARMAN: Natural Taxation. N. Y.; 1898. MATHEWS: Taxation and the Distribution of Wealth. N. Y.; 1914. CATHREIN: Das Privatgrundeigenthum und seine Gegner. Freiburg; 1909. FALLON: Les Plus-Values et l'Impot. Paris; 1914. NEARING: Anthracite. Philadelphia; 1916. HAIG: Final Report of the Committee on Taxation of the City of New York; 1916. The exemption of Improvements from Taxation in Canada and U. S.; 1915. Some Probable Effects of Exemption in City of New York; 1915. KELLEHER: Private Ownership. Dublin; 1911. Proceedings of the 1913 Meeting of the American Economic Association. U. S. COMMISSIONER OF CORPORATIONS: Reports on the Lumber, Petroleum, Steel, and Water Power of the United States. SELIGMAN: Essays in Taxation; Shifting and Incidence of Taxation; and Progressive Taxation in Theory and Practice. Also the works of Taussig, Devas, Carver, Pesch, King, Vermeersch, Willoughby, and the Commission on Industrial Relations, all of which are cited at the end of the introductory chapter. FOOTNOTES: [84] "Summary of Report of the Commissioner of Corporations on the Timber Industry in the United States," p. 3. [85] "Report of the Commissioner of Corporations on Water Power Development in the United States," pp. 193-195. [86] Idem, pp. 4, 5. [87] "Abstract of the Thirteenth Census," p. 552. [88] Cf. Marsh, "Land Value Taxation in American Cities," p. 95. [89] Municipal purchase and ownership of land have been advocated by such a conservative authority as the Rev. Heinrich Pesch, S.J. "Lehrbuch der Nationaloekonomie," I, 203. [90] As we shall see in a later chapter, the confiscation and injustice would be smaller if the State should simultaneously abolish interest. In any case, the decline in land value resulting from complete confiscation of rent should be made up to the private owner by public compensation. [91] "Principles of Political Economy," book V, ch. 2, sect. v. [92] "Progressive Taxation in Theory and Practice," 1908, p. 130. [93] Cf. Taussig, "Principles of Economics," II, 516: Seligman, "The Shifting and Incidence of Taxation," p. 223. [94] The "discrimination" objection is put in a somewhat different form by the Rev. Sydney F. Smith, S.J., in an article in _The Month_, Sept., 1909, entitled "The Theory of Unearned Increment." His argument is in substance that if the people of a city can claim the increases in land values which their presence and activity have occasioned, the purchasers of food, clothes, books, or concert tickets are equally justified in claiming that, "having added to the value of the shops and music halls, they had acquired a co-proprietary right in the increased value of the owners' stock, and the owners' premises." While this argument is specifically directed against those who maintain that the "social production" of values confers a right thereto, it affects to some extent our thesis that there is a vast difference between value-increases in land and in other goods. Father Smith seems to confuse the origination of value with the increase of value. The presence of consumers is an obvious prerequisite to the existence of any value at all in any kind of goods, but labour and financial outlay on the part of the producers of the goods are an equally indispensable prerequisite. The reason why the value is appropriated by the latter rather than the former is that this is clearly the only rational method of distribution. What we are concerned with here, however, is not this initial or cost-of-production-value of artificial goods, but the _increases_ in value above this level which are brought about by external and social influences. Theoretically, the State could as reasonably take these as the increases in the value of land; practically, such a performance is out of the question, for the simple reason that such increases are spasmodic and exceptional. If Father Smith thinks that "food or clothes, or books, or concert tickets" regularly advance above the cost-of-production-value, he is simply mistaken. Since these and other artificial goods bring to their owners as a rule no socially occasioned increments of value, they and their owners are in quite a different situation from land and the owners of land. [95] Cf. Seligman, "Progressive Taxation in Theory and Practice," part II, chs. ii and iii; also the classic refutation of the "benefit" theory by John Stuart Mill in "Principles of Political Economy," book V, ch. ii, sec. 2. The traditional Catholic teaching on the subject is compactly stated by Cardinal de Lugo in "De Justitia et Jure," disp. 36; cf. Devas, "Political Economy," p. 594, 2d ed. [96] Cf. Fallon, "Les Plus-Values et l'Impot," pp. 455, sq.; Paris, 1914; Fillebrown, "A Single Tax Handbook for 1913"; Boston, 1912; Marsh, "Taxation of Land Values in American Cities," pp. 90-92; New York, 1911; "The Quarterly Journal of Economics," vols. 22, 24, 25; "The Single Tax Review," March-April, 1912; "Stimmen aus Maria-Laach," Oct., 1907. [97] See the references in the second last paragraph. [98] The most comprehensive and reliable account of the special land taxes in Canada is contained in the report prepared for the Committee on Taxation of the City of New York, by Robert Murray Haig, Ph.D., entitled, "The Exemption of Improvements from Taxation in Canada and the United States"; New York, 1915. See also Fallon, op. cit., pp. 452-455. [99] Cf. Fallon, op. cit., pp. 443-452. [100] "The Wealth and Income of the People of the United States," pp. 158, 143. [101] "Abstract of Bulletins on Wealth, Debt, and Taxation," p. 16; U. S. Census, 1913. [102] Idem, p. 15. [103] Idem, p. 16; and Bulletin of the Census on "Estimated Valuation of National Wealth," p. 15. [104] "Special Report of the Twelfth Census on Wealth, Debt, and Taxation," pp. 12, 13. [105] Haig, "Probable Effects of Exemption of Improvements....", p. 23. [106] Cf. Seligman, "The Shifting and Incidence of Taxation," pp. 187, 245, 272, and all of part II; N. Y., 1899; Taussig, "Principles of Economics," II, 518-549, and chs. 67-69. [107] Cf. Fallon, op. cit., pp. 442, sq. [108] Cf. Vermeersch, "Quaestiones de Justitia," pp. 94-126; Seligman, "Progressive Taxation in Theory and Practice," pp. 210, 211; Mill, "Principles of Political Economy," book V, ch. ii, sec. 3. [109] "Summary of Report of the Commissioner of Corporations on the Lumber Industry in the United States," p. 8. [110] Probably the most concrete and satisfactory discussion of the increment tax and the project to transfer improvement taxes to land, is that presented in the "Final Report of the Committee on Taxation of the City of New York"; 1916. It contains brief, though complete, statements of all phases of the subject, together with concise arguments on both sides, majority and minority recommendations, a great variety of dissenting individual opinions, and considerable testimony by experts, authorities, and other interested persons. SECTION II THE MORALITY OF PRIVATE CAPITAL AND INTEREST CHAPTER IX THE NATURE AND THE RATE OF INTEREST Interest denotes that part of the product of industry which goes to the capitalist. As the ownership of land commands rent, so the ownership of capital commands interest; as rent is a price paid for the use of land, so interest is a price paid for the use of capital. However, the term capital is less definite and unambiguous, both in popular and in economic usage, than the word land. The farmer, the merchant, and the manufacturer often speak of their land, buildings, and chattels as their capital, and reckon the returns from all these sources as equivalent to a certain per cent. of interest or profit. This is not technically correct; when we use the terms capital and interest we should exclude the notions of land and rent. _Meaning of Capital and Capitalist_ Capital is ordinarily defined as, wealth employed directly for the production of new wealth. According as it is considered in the abstract or the concrete, it is capital-value or capital-instruments. For example, the owner of a wagon factory may describe his capital as having a value of 100,000 dollars, or as consisting of certain buildings, machines, tools, office furniture, etc. In the former case he thinks of his capital as so much abstract value which, through a sale, he could take out of the factory, and put into other concrete capital forms, such as a railroad or a jobbing house. In the latter case he has in mind the particular instruments in which his capital is at present embodied. The capital-value concept is the more convenient, and is usually intended when the word capital is used without qualification. It is also the basis upon which interest is reckoned; for the capitalist does not measure his share of the product as so many dollars of rent on his capital-instruments, but as so many per cent. on his capital-value. Capitalists are of two principal kinds: those who employ their own money in their own enterprises; and those who lend their money to others for use in industry. The former may be called active capitalists, the latter loan-capitalists. Perhaps a majority of active capitalists use some borrowed money in their business. To the lenders of this borrowed money or capital they turn over a part of the product in the form of interest. When, therefore, interest is defined as the share of the product that goes to the capitalist, it is the owner of capital-value rather than of capital-instruments that is meant. For the man who has loaned 50,000 dollars at five per cent. to the wagon manufacturer is not, except hypothetically, the owner of the buildings which have been erected with that money. These are owned (subject possibly to a mortgage) by the borrower, the active capitalist. But the abstract value which has gone into them continues to be the property of the lender. As owner thereof, he, instead of the active capitalist, receives the interest that is assigned to this portion of the total capital. Hence interest is the share of the product that is taken by the owner of capital, whether he employs it himself or lends it to some one else. While the fundamental reason of interest is the fact that certain concrete instruments are necessary to the making of the product, interest is always _reckoned_ on capital-value, and goes to the owner of the capital-value. It goes to the man whose money has been put into the instruments, whether or not he is the owner of the instruments. _Meaning of Interest_ Interest is the share of the capitalist as capitalist. The man who employs his own capital in his own business receives therefrom in addition to interest other returns. Let us suppose that some one has invested 100,000 dollars of borrowed money and 100,000 dollars of his own money in a wholesale grocery business. At the end of the year, after defraying the cost of labour, materials, rent, repairs, and replacement, his gross returns are 15,000 dollars. Out of this sum he must pay five thousand dollars as interest on the money that he has borrowed. This leaves him a total amount of ten thousand dollars, as his share of the product of the industry. Since he could command a salary of three thousand dollars if he worked for some one else, he regards his labour of directing his own business as worth at least this sum. Deducting it from ten thousand dollars, he has left seven thousand dollars, which must in some sense be accredited as payment for the use of his own capital. However, it is not all pure interest; for he runs the risk of losing his capital, and also of failing to get the normal rate of interest on it during future unprosperous years. Hence he will require a part of the seven thousand dollars as insurance against these two contingencies. Two per cent. of his capital, or two thousand dollars, is not an excessive allowance. If the business did not provide him with this amount of insurance he would probably regard it as unsafe, and would sell it and invest his money elsewhere. Subtracting two thousand dollars from seven thousand, we have five thousand left as pure interest on the director's own capital. This is equivalent to five per cent., which is the rate that he is paying on the capital that he has borrowed. If he could not get this rate on his own money he would probably prefer to become a lender himself, a loan capitalist instead of an active capitalist. This part of his total share, then, and only this part, is pure interest. The other two sums that he receives, the three thousand dollars and the two thousand dollars, are respectively wages for his labour and insurance against his risks. Sometimes they are classified together under the general name of profits. Let us suppose, however, that the gross returns are not 15,000 dollars, but 17,000. How is the additional sum to be denominated? In strict economic language it would probably be called net profits, as distinguished from normal or necessary profits, which comprise wages of direction and insurance against loss. Sometimes it is called interest. In that case the owner of the store would receive seven instead of five per cent, on his own capital. Whether the extra two per cent. (2,000 dollars) be called net profits or surplus interest, is mainly a matter of terminology. The important thing is to indicate clearly that these terms designate the surplus which goes to the active capitalist in addition to necessary profits and necessary interest. At the risk of wearisome repetition, one more example will be given to illustrate the distinction between interest and the other returns that are received in connection with capital. The annual income from a railway bond is interest on lender's capital, and consequently pure interest. Ordinarily the bondholder is adequately protected against the loss of his capital by a mortgage on the railroad. On the other hand, the holder of a share of railway stock is a part owner of the railroad, and consequently incurs the risk of losing his property. Hence the dividend that he receives on his stock comprises interest on capital plus insurance against loss. It is usually one or two per cent. higher than the rate on the bonds. Since the officers and directors are the only shareholders who perform any labour in the management of the railroad, only they receive wages of management. Consequently the gross profits are divided into interest and dividends at fixed rates, and fixed salaries. When a surplus exists above these requirements it is not, as a rule, distributed among the stockholders annually. In railroads, therefore, and many other corporations, interest is easily distinguished from those other returns with which it is frequently confused in partnerships and enterprises carried on by individuals. _The Rate of Interest_ Is there a single rate of interest throughout industry? At first sight this question would seem to demand a negative answer. United States bonds pay about two per cent.; banks about three per cent.; municipal bonds about four per cent.; railway bonds about five per cent.; the stocks of stable industrial corporations about six per cent. net; real estate mortgages from five to seven per cent.; promissory notes somewhat higher rates; and pawnbrokers' loans from twelve per cent. upwards. Moreover, the same kind of loans brings different rates in different places. For example, money lent on the security of farm mortgages yields only about five per cent. in the states of the East, but seven or eight per cent. on the Pacific coast. These and similar variations are differences not so much of interest as of security, cost of negotiation, and mental attitude. The farm mortgage pays a higher rate than the government bond partly because it is less secure, partly because it involves greater trouble of investment, and partly because it does not run for so long a time. For the same reasons a higher rate of interest is charged on a promissory note than on a bank deposit certificate. Again, the lower rates on government bonds and bank deposits are due in some degree to the peculiar attitude of that class of investors whose savings are small in amount, who are not well aware of the range of investment opportunities, and to whom security and convenience are exceptionally important considerations. If such persons did not exist the rates on government bonds and savings deposits would be higher than they actually are. The higher rates in a new country on, say, farm mortgages are likewise due in part to psychical peculiarities. Where men are more speculative and more eager to borrow money for industrial purposes, the demand for loans is greater relatively to the supply than in older and more conservative communities. Therefore, the price of the loans, the rate of interest, is higher. In one sense it would seem that the lowest of the rates cited above, namely, that on United States bonds, represents pure interest, and that all the other rates are interest plus something else. Nevertheless, the sums invested in these bonds form but a very small part of the whole amount of money and capital drawing interest, and they come from persons who do not display the average degree either of business ability or of willingness to take risks. Hence it is more convenient and more correct to regard as the standard rate of interest in any community that which is obtained on first class industrial security, such as the bonds of railroads and other stable corporations, and mortgages on real estate. Loans to these enterprises are subject to what may properly be called the average or prevailing industrial risks, are negotiated in average psychical conditions, and embrace by far the greater part of all money drawing interest; consequently the rate that they command may be looked upon as in a very real and practical sense normal. While this conception of the normal rate is in a measure conventional, it accords with popular usage. It is what most men have in mind when they speak of the prevailing rate of interest. The prevailing or standard rate in any community can usually be stated with a sufficient approach to precision to be satisfactory for all practical purposes. In all the Eastern States it is now about five per cent.; in the Middle West it is somewhere between five and six per cent.; on the Pacific coast it is between six and seven per cent. The supreme court of Minnesota decided in 1896 that, in view of the actual rates of interest then obtaining, five per cent. on the reproduction cost of railroads was a fairly liberal return, and could be adopted by the state authorities in fixing charges for carrying freight and passengers.[111] A few years later the Michigan tax commission allowed the railroads four per cent. on the reproduction cost of their property, on the ground that investments which yielded that rate in addition to the usual tax of one per cent. (or five per cent. before the deduction of the tax) stood at par on the stock market.[112] In other words, the prevailing rate was five per cent. At the beginning of the year 1907, the railroad commission of Wisconsin fixed six per cent. as the return to which the stockholders of railroads were entitled, because this was about the return which investors generally were able to get on that kind of security. In the view of the Commission, the current rate of interest on railroad _bonds_, and similar investments, was about five per cent.[113] The significance of these decisions by the public authorities of three states is found not so much in the particular rates which they sanctioned as in the fact that they were able to determine a standard or prevailing rate. Therefore a standard rate exists. At the same time it is interesting to note that in all three states the rate of industrial interest was declared to be about the same, that is, five per cent. Perhaps it is safe to say that, throughout the greater part of the industrial field of America, five or six per cent. is the prevailing rate of interest. What causes the rate to be five per cent., or six per cent., or any other per cent.? Briefly stated, it is the interplay of supply and demand. Since interest is a price paid for the use of a thing, i.e., capital, its rate or level is determined by the same general forces that govern the price of wheat, or shoes, or hats, or any other commodity that is bought and sold in the market. The rate is five or six per cent. because at that rate the amount of money offered by lenders equals the amount demanded by borrowers. Should the amount offered at that rate increase without a corresponding increase in the amount demanded, the rate would fall, just as it would rise under opposite conditions. Supply and demand, however, are merely the immediate forces. They are themselves the outcome or resultant of factors more remote. On the side of supply, the principal remote forces which regulate the rate of interest are: the industrial resources of the community, and the relative strength of its habits of saving and spending. On the side of demand, the chief ultimate factors are: the productivity of capital-instruments, the comparative intensity of the social desires of investing and lending, and the supplies of land, business ability and labour. Each of these factors exercises upon the rate of interest an influence of its own, and each of them may be assisted or counteracted by one or more of the others. Precisely what rate will result from any given condition of the factors, cannot be stated beforehand, for the factors cannot be measured in such a way as to provide a basis for this kind of forecast. All that can be said is that, when changes occur on the side of either demand or supply, there will be a corresponding change in the rate of interest, provided that no neutralising change takes place on the other side. FOOTNOTES: [111] "Final Report of the Industrial Commission," pp. 410, 411. [112] "Report of the Industrial Commission," vol. IX, p. 380. [113] "Publication No. 32 of the Railroad Commission of Wisconsin," pp. 165, 166. CHAPTER X THE ALLEGED RIGHT OF LABOUR TO THE ENTIRE PRODUCT OF INDUSTRY In a preceding chapter we saw that Marxian Socialism is logically debarred from passing _moral_ judgment upon any social institution or practice.[114] If social institutions are produced necessarily by socio-economic forces they are neither morally good nor morally bad. They are quite as unmoral as rain and snow, verdure and decay, tadpoles and elephants. Consistent Socialists cannot, therefore, censure on purely ethical grounds the system of private capital and interest. This logical requirement of the theory of economic determinism is exemplified in much of the rigidly scientific discussions of Socialists. Marx maintained that the value of commodities is all determined and created by labour, and that interest is the surplus which the labourer produces above the cost of his keep; nevertheless Marx did not formally assert that the labourer has a moral right to the whole product, nor that interest is theft. He set forth his theories of value and surplus value as positive explanations of economic facts, not as an ethical evaluation of human actions. His object was to show the causes and nature of value, wages, and interest, not to estimate the moral claims of the agents of production, or the morality of the distributive process. In his formal discussion of the theory of value and of surplus value, Marx said nothing that implied a belief in genuine moral responsibility, or that contradicted the principles of philosophical materialism and economic determinism. It is, therefore, quite erroneous to infer that, since the Marxian theory attributes all value and products to the action of labour, Marxian Socialists must condemn the interest-taker as a robber. Neither Marx nor any other Socialist authority, however, has always held consistently to this purely positive method of economic exposition. When they declare that the labourer is "exploited," that surplus value is "filched" from him, that the capitalist is a "parasite," etc., they are expressing and conveying distinct moral judgments. In their more popular writings Socialist authors do not seriously attempt to observe the logical requirements of their necessitarian philosophy. They assume the same ethical postulates, and give expression to the same ethical intuitions as the man who believes in the human soul and free will.[115] And the great majority of their followers likewise regard the question of distribution as a moral question, as a question of justice. In their view the labourer not only creates all value, but has a just claim to the whole product. _The Labour Theory of Value_ This doctrine is sometimes formally based upon the Marxian theory of value, and is sometimes defended independently of that theory. In the former case its groundwork is about as follows: By eliminating the factors of utility and scarcity, Marx found that the only element common to all commodities is labour, and then concluded that labour is the only possible explanation, creator, and determinant of value.[116] Since capital, that is, concrete capital, is a commodity, its value is likewise determined and created by labour. Since it cannot create value, for only labour has that power, it can contribute to the product of the productive process in which it is engaged only as much value as it originally received. Since it is only a reservoir of value, it cannot transfer more value than it holds and possesses. In the words of Marx, "the means of production transfer value to the new product, so far only as during the labour-process they lose value in the shape of the old use-value. The maximum loss of value that they can suffer in the process is plainly limited by the amount of the original value with which they came into the process, or, in other words, by the labour time necessary for their production. Therefore, the means of production can ever add more value to the product than they themselves possess independently of the process in which they assist. However useful a given kind of raw material, or a machine, or other means of production may be, though it may cost 150 pounds, or say 500 days' labour, yet it cannot, under any circumstances, add to the value of the product more than 150 pounds."[117] To view the matter from another angle: capital contributes to the product only sufficient value to pay for its own reproduction. When, as is the normal usage, the undertaker has deducted from the product sufficient value or money to replace the deteriorated or worn out machine, or other concrete capital, all the remaining value in the product is due specifically to labour. When, therefore, the capitalist goes further, and appropriates from the product interest and profits, he takes a part of the value that labour has created. He seizes the surplus value which labour has produced in excess of the wages that it receives. In ethical terms, he robs the labourers of a part of their product. It is not necessary to introduce any extended refutation of this arbitrary, unreal, and fantastic argument. "The theory that labour is the sole source of value has few defenders to-day. In the face of the overwhelming criticism which has been directed against it, even good Marxists are forced to abandon it, or to explain it away."[118] It may, however, be useful to recount very briefly the facts which disprove the theory. Labour creates some things which have no value, as wooden shoes in a community that does not desire wooden shoes; some things have value, exchange value, although no labour has been expended upon them, as land and minerals; the value of things is sometimes greater, sometimes less, proportionately, than the labour embodied in them; for example, paintings by the old masters, and last year's styles of millinery; and, finally, the true determinants of value are utility and scarcity. If it be objected that Marx was aware of these two factors, the reply is that he either restricted them to the function of conditions rather than efficient causes of value, or attributed to them an influence that is inconsistent with his main theory that labour is the sole determinant of value. Indeed, the contradictions into which Marx was led by the theory are its sufficient refutation.[119] With the destruction of the labour theory of value, the Marxian contention that capital contributes only its own original value to the product is likewise overthrown. The same conclusion is reached more directly by recalling the obvious facts of experience that, since the joint action of both capital and labour is required to bring into being every atom of the product, each is in its own order the cause of the whole product, and the proportion of the whole that is specifically due to the casual influence of either is as incapable of determination as the procreative contribution of either parent to their common offspring. The productive process carried on by labour and capital is virtually an organic process, in which the precise amount contributed by either factor is unknown and unknowable. In so far, therefore, as the alleged right of labour to the whole product is based upon the Marxian theory of value, it has not a shadow of validity. _The Right of Productivity_ But the claim is not necessarily dependent upon this foundation. Those Socialists who have abandoned the labour theory of value can argue that the labourer (including the active director of industry) is the only _human_ producer, that the capitalist as such produces nothing, and consequently has no moral claim to any part of the product. Whatever theory of value we may adopt, or whether we adopt any, we cannot annul the fact that interest does not represent labour expended upon the product by the capitalist. Nevertheless, this fact does not compel the conclusion that the share of the product now taken by the capitalist belongs of right to the labourer. Productivity does not of itself create a right to the product. It is not an intrinsic title. That is to say, a right to the product is not inherent in the relation between product and producer. It is determined by certain extrinsic relations. When Brown makes a pair of shoes out of materials that he has stolen, he has not a right to the whole product; when Jones turns out a similar product from materials that he has bought, he becomes the exclusive owner of the shoes. The intrinsic relation of productivity is the same in both cases. It is the difference of extrinsic relation, namely, the relation between the producer and the material, that begets the difference between the moral claims of the two producers upon the product. The right of the producer is conditioned by certain other and more fundamental relations. Why has Jones a right to the shoes that he has made out of materials that he has bought? Not because he needs them; he is not alone in this condition. The ultimate reason and basis of his ownership is to be sought in the practical requirements of an equitable social distribution. Unless men receive an adequate return for their labour, they will not be able to satisfy their wants in a regular and sufficient manner. If they are forced to labour for others without compensation, they are deprived of the opportunity to develop their personality. They are treated as mere instruments to the welfare of beings who are not their superiors, but their moral and juridical equals. Their intrinsic worth and sacredness of personality is outraged, their essential equality with their fellows is disregarded, and their indestructible rights are violated. On the other hand, when a producer, such as Jones, gets possession of his product, he subordinates no human being to himself, deprives no man of the opportunity to perform remunerative labour, nor appropriates an unreasonable share of the common bounty of the earth. He has a right to his product because this is one of the reasonable methods of distribution. In fact, it is the exigencies of reasonable distribution that constitute the fundamental justification of every title of ownership. The title of purchase by which a man claims the hat that he wears; the title of inheritance by which a son claims the house that once belonged to his father; the title of contract through which a labourer gets wages, a merchant prices, and a landlord rent,--are all valid simply because they are reasonable devices for enabling men to obtain the goods of the earth for the satisfaction of their wants. All titles of property, productivity included, are conventional institutions which reason and experience have shown to be conducive to human welfare. None of them possesses intrinsic or metaphysical validity.[120] Therefore, the Socialist cannot establish the right of labour to the full product of industry until he proves that this so-called right could be reduced to practice consistently with individual and social welfare. In other words, he must show that to give the entire product to the labourer would be a reasonable method of distribution. Now the arrangement by which the Socialist proposes to award the whole product of labour is the collective ownership and operation of the means of production, and the social distribution of the product. If this system would not enable the labourer and the members of society generally to satisfy their wants to better advantage than is possible under the present system, the contention that the labourer has a right to the entire product of industry falls to the ground. The question will be considered in the following chapter. FOOTNOTES: [114] Cf. Engels, "Socialism: Utopian and Scientific," pp. 45, 46; and Hillquit-Ryan, "Socialism: Promise or Menace," 103, 104, 143-145. [115] Cf. Hillquit-Ryan, op. cit., pp. 75, 76. [116] "Capital," pp. 1-9. [117] Op. cit., p. 117; Humboldt Edition. [118] Skelton, "Socialism: A Critical Analysis," pp. 121, 122. [119] Cf. Skelton, loc. cit. [120] The exaggerated claims made on behalf of social productivity in the matter of land values have been examined in a previous chapter. Similar exaggerations with regard to capital will be considered in chapter xii. CHAPTER XI THE SOCIALIST SCHEME OF INDUSTRY "Never has our party told the workingman about a 'State of the future,' never in any way than as a mere utopia. If anybody says: 'I picture to myself society after our programme has been realised, after wage labour has been abolished, and the exploitation of men has ceased, in such and such a manner,--' well and good; ideas are free, and everybody may conceive the Socialist State as he pleases. Whoever believes in it may do so; whoever does not, need not. These pictures are but dreams, and Social Democracy has never understood them otherwise."[121] Such is the official attitude of Socialism toward descriptions of its contemplated industrial organisation. The party has never drawn up nor approved any of the various outlines of this sort which have been defended by individual Socialists. It maintains that it cannot anticipate even the essential factors in the operation of a social and industrial system which will differ so widely from the one that we have to-day, and which will be so profoundly determined by events that are in the nature of the case impossible to prognosticate. _Socialist Inconsistency_ From the viewpoint of all but convinced Socialists, this position is indefensible. We are asked to believe that the collective ownership and operation of the means of production would be more just and beneficial than the present plan of private ownership and operation. Yet the Socialist party refuses to tell us how the scheme would bring about these results; refuses to give us, even in outline, a picture of the machine at work. As reasonably might we be expected to turn the direction of industry over to a Rockefeller or a Morgan, making an act of faith in their efficiency and fairness. We are in the position of a man who should be advised to demolish an unsatisfactory house, without receiving any solid assurance that the proposed new one would be as good. To our requests for specific information about the working of the new industrial order the Socialists, as a rule, answer in terms of prophesied results. They leave us in the dark concerning the causes by which these wonderful results are to be produced. From the viewpoint of the confirmed Socialist, however, this failure to be specific is not at all unreasonable. He can have faith in the Socialist system without knowing beforehand how it will work. He believes in its efficacy because he believes that it is inevitable. In the words of Kautsky, "what is proved to be inevitable is proved not only to be possible, but to be the only possible outcome."[122] The Socialist believes that his scheme is inevitable because he thinks that it is necessarily included in the outcome of economic and social evolution. Neither the premises nor the conclusion of this reasoning is valid. The doctrines of economic determinism, the class struggle, the concentration of capital, the disappearance of the middle classes, the progressive pauperisation of the working classes, and all the other tenets of the Socialist philosophy, have been thoroughly discredited by the facts of psychology, the experience of the last half century, and the present trend of industrial and social forces.[123] Even if the Socialist outcome were inevitable, it would not necessarily be an improvement on the present system. It might illustrate the principle of retrogression. Since we cannot make an act of faith in either the inevitableness or the efficacy of the Socialist industrial scheme, we are compelled to submit it to the ordinary tests of examination and criticism. We must try to see what would be the essential structure, elements, and operation of a system in which the means of production were owned and managed collectively, and the product socially distributed. In attempting to describe the system, we shall be guided by what seems to be inherently necessary to it, and by the prevalent conception of it among present day Socialists. In this connection we have to observe that some of the criticisms of the Socialist order attribute to it elements that are not essential, nor any longer demanded by the authoritative spokesmen of the movement; for example, complete confiscation of capital, compulsory assignment of men to the different industrial tasks, equality of remuneration, the use of labour checks instead of money, the socialisation of all capital down to the smallest tool, and collective ownership of homes. _Expropriating the Capitalists_ The first problem confronting a Socialist administration would be the method of getting possession of the instruments of production. In the early years of the Socialist movement, most of its adherents seemed to favour a policy of outright confiscation. Professor Nearing estimates the total property income now paid in the United States as, "well above the six-billion-dollar mark."[124] Were the Socialist State to seize all land and capital without compensation, it could conceivably transfer more than six billion dollars annually from landowners and capitalists to the community. Not all of it, however, would be available for diversion to the labourers. According to the computations of Professor King, about two billion dollars were in 1910 saved and converted into capital.[125] A progressive Socialist régime would want to appropriate at least that sum for the renewal and increase of the instruments of production. Consequently, it would have only four billion dollars to add to the present total income of labour. This would be equivalent to $43.50 for every person in the United States. Desirable as would be such an addition to the remuneration of labour, it could never be realised through the process of confiscation. The owners of land and capital would be sufficiently powerful to defeat any such simple scheme of setting up the collectivist commonwealth. They constitute probably a majority of the adults of our population, and their economic advantages would make them much stronger relatively than their numbers.[126] Ethically the policy of confiscation would be, on the whole, sheer robbery. To be sure, not all owners of land and capital have a valid claim to all their possessions, but practically all of them hold the greater part of their wealth by some kind of just title. Much land and capital that was originally acquired by unjust means has become morally legitimatised by the title of prescription. The majority of present day Socialists seem to advocate at least partial compensation.[127] But this plan does not seem to offer any considerable advantage over complete confiscation. As regards morality, it would differ only in the degree of its injustice; as regards expediency, it would be at best of doubtful efficacy. If the capitalists were given only a small fraction of the value of their holdings they would oppose the change with quite as much determination as though they were offered nothing; if they were paid almost the full value of their possessions there would be no substantial gain to the community from the transfer; if they were compensated at a figure somewhere between these two extremes their resistance would still be more costly to the State than the extra amount required to make full compensation. Finally, if full compensation were offered it would have to take the form of government obligations, securities, or bonds. If these did not bear interest the great majority of capital owners would regard the scheme as partial and considerable confiscation, and would fight it with determination and effectiveness. If the State bound itself to pay interest on the bonds it would probably find itself giving the dispossessed capitalists as high a rate of return on their capital, as large a share of the national product, as they receive under the present system. Consequently, the expropriation of the capitalists would bring no direct and pecuniary gain to the labouring classes. Indeed, the latter would suffer positive loss by the change, owing to the fact that the State would be required to withdraw from the national product a considerable amount for the maintenance, renewal, and expansion of the instruments of production. At present the capitalist class performs the greater part of this function through the reinvestment of the incomes that it receives in the form of interest and rent. The average Socialist entirely ignores this capitalistic service, when he draws his pessimistic picture of the vast share of the national product which now goes to "idle capitalists." So far as the larger capitalist incomes are concerned; that is, those in excess of twenty-five thousand dollars annually, it is probable that the greater part is not consumed by the receivers, but is converted into socially necessary capital instruments. Since this would not be permitted in a Socialist order, the capitalists would strive to consume the whole of the incomes received from the public securities, and the State would be compelled to provide the required new capital out of the current national product. In a word, society would have to give the capitalists as much as it does at present, and to withhold from the labourers for new capital an immense sum which is now furnished by the capitalists. It is undoubtedly true that the richest capitalists would be unable to expend the whole of their incomes upon themselves and their families. If they turned a considerable part of it over to the State, the surrendered sum would be available as capital, thereby reducing the amount that the State would need to take out of the national product for this purpose. Were all those possessing incomes in excess of fifty thousand dollars per family to give up all above that amount, the total thus accruing to the State would be a little more than one billion dollars.[128] But this would be only one-half the required new capital. A part of the additional one billion is now provided out of wages and salaries, but the greater part probably comes out of rent and interest. Under Socialism this latter portion would have to be deducted from that part of the national product which at present goes to the workers and is consumed by them. Hence they would undergo a loss of several hundred million dollars. One reply to this difficulty is that the total product of industry would be much increased under Socialism. Undoubtedly an _efficient_ organisation of industry on collectivist lines would be able to effect economies by combining manufacturing plants, distributive concerns, and transportation systems, and by reducing unemployment to a minimum; but it could not possibly make the enormous economies that are promised by the Socialists. The assertion that under Socialism men would be able to provide abundantly for all their wants on a basis of a working day of four, or even two, hours is seductive and interesting, but it has no support in the ascertainable facts of industrial resources. Even if the Socialist organisation were operating with a fair degree of efficiency, the gains that it could effect over the present system would probably not more than offset the social losses resulting from increased consumption by the compensated capitalists. But the proposed industrial organisation would not operate with a fair degree of efficiency. According to present Socialist thought, industries that are national in scope, such as the manufacture of petroleum, steel, and tobacco, would be carried on under national direction, while those that supplied only a local market, such as laundries, bakeries, and retail stores, would be managed by the municipalities. This division of control would be undoubtedly wise and necessary. Moreover, the majority of Socialists no longer demand that _all_ tools and all industries should be brought under collective or governmental direction. Very small concerns which employed no hired labour, or at most one or two persons, could remain under private ownership and operation, while even larger enterprises might be carried on by co-operative associations.[129] Nevertheless the attempt to organise and operate collectively the industries of the country, even with these limitations, would encounter certain insuperable obstacles. These will be considered under the general heads of inefficient industrial leadership, inefficient labour, and interference with individual liberty. _Inefficient Industrial Leadership_ Under Socialism the boards of directors or commissions which exercised supreme control in the various industries, would have to be chosen either by the general popular vote, by the government, or by the workers in each particular industry. The first method may be at once excluded from consideration. Even now the number of officials chosen directly by the people is far too large; hence the widespread agitation for the "short ballot." Public opinion is coming to realise that the voters should be required to select only a few important officials, whose qualifications should be general rather than technical, and therefore easily recognised by the masses. These supreme functionaries should have the power of filling all administrative offices, and all positions demanding expert or technical ability. If the task of choosing administrative experts cannot be safely left to the mass of the voters at present, it certainly ought not to be assigned to them under Socialism, when the number and qualifications of these functionaries would be indefinitely increased. If the boards of industrial directors were selected by the government, that is, by the national and municipal authorities, the result would be industrial inefficiency and an intolerable bureaucracy. No body of officials, whether legislative or executive, would possess the varied, extensive, and specific knowledge required to pick out efficient administrative commissions for all the industries of the country or the city. And no group of political persons could safely be entrusted with such tremendous power. It would enable them to dominate the industrial as well as the political life of the nation or the municipality, to establish a bureaucracy that would be impregnable for a long period of years, and to revive all the conceivable evils of governmental absolutism. The third method is apparently the one now favoured by most Socialists. "The workers in each industry may periodically select the managing authority," says Morris Hillquit.[130] Even if the workers were as able as the stockholders of a corporation to select an efficient governing board, they would be much less likely to choose men who would insist on hard and efficient work from all subordinates. The members of a private corporation have a strong pecuniary interest in selecting directors who will secure the maximum of product at the minimum of cost, while the employés in a Socialist industry would want managing authorities who were willing to make working conditions as easy as possible. The dependence of the boards of directors upon the mass of the workers, and the lack of adequate pecuniary motives, would render their management much less efficient and progressive than that of private enterprises. In the rules that they would make for the administration of the industry and the government of the labour force, in their selection of subordinate officers, such as superintendents, general managers, and foremen, and in all the other details of management, they would have always before them the abiding fact that their authority was derived from and dependent upon the votes of the majority of the employés. Their supreme consideration would be to conduct the industry in such a way as to satisfy the men who elected them. Hence they would strive to maintain an administration which would permit the mass of the labour force to work leisurely, to be provided with the most expensive conditions of employment, and to be immune from discharge except in rare and flagrant cases. Even if the members of the directing boards were sufficiently courageous or sufficiently conscientious to exact reasonable and efficient service from all their subordinates and all the workers, they would not have the necessary pecuniary motives. Their salaries would be fixed by the government, and in the nature of things could not be promptly adjusted to reward efficient and to punish inefficient management. So long as their administration of industry maintained a certain routine level of mediocrity, they would have no fear of being removed; since they would be supervised and paid by public officials who would have neither the extraordinary capacity nor the necessary incentive to recognise and reward promptly efficient management, they would lack the powerful stimulus which is provided by the hope of gain. In the large private corporations, the tenure of the boards of directors depends not upon the workers but upon the stockholders, whose main interest is to obtain a maximum of product at a minimum of cost, and who will employ and discharge, reward and punish, according as this end is attained. Moreover, the members of the boards, and the executive officers generally, are themselves financially interested in the business and in the maintenance of the policy demanded by the other stockholders. All the subordinate officers, such as department managers, superintendents, foremen, etc., would exemplify the same absence of efficiency. Knowing that they must carry out the prudent policy of the board of directors, they would be slow to punish shirking or to discharge incompetents. Realising that the board of directors lacked the incentive to make promotions promptly for efficient service, or to discharge promptly for inefficient service, they would devote their main energies to the task of holding their positions through a policy of indifferent and routine administration. Invention and progress would likewise suffer. Men who were capable of devising new machines, new processes, new methods of combining capital and labour, would be slow to convert their potencies into action. They would be painfully aware that the spirit of inertia and routine prevailing throughout the industrial and political organisation would prevent their efforts from receiving quick recognition and adequate rewards. Inventors of mechanical devices particularly would be deprived of the stimulus which they now find in the hope of indefinitely large gains. Boards of directors, general managers, and other persons exercising industrial authority would be very slow to introduce new and more efficient financial or technical methods when they had no certainty that they would receive adequate reward in the form of either promotion or money compensation. They would see no sufficient reason for abandoning the established and pleasant policy of routine methods and unprogressive management. _Inefficient Labour_ The same spirit of inefficiency and mediocrity would permeate the rank and file of the workers. Indeed, it would operate even more strongly among them than among the officers and superiors; for their intellectual limitations and the nature of their tasks would make them less responsive to other than material and pecuniary motives. They would desire to follow the line of least resistance, to labour in the most pleasant conditions, to reduce irksome toil to a minimum. Since the great bulk of their tasks would necessarily be mechanical and monotonous, they would demand the shortest possible working day, and the most leisurely rate of working speed. And because of their numerical strength they would have the power to enforce this policy throughout the field of industry. They would have the necessary and sufficient votes. In a general way they might, indeed, realise that the practice of universal shirking and laziness must sooner or later result in such a diminution of the national product as to cause them great hardship, but the workers in each industry would hope that those in all the others would be more efficient; or doubt that a better example set by themselves would be imitated by the workers in other industries. They would not be keen to give up the certainty of easy working conditions for the remote possibility of a larger national product. _Attempted Replies to Objections_ All the attempts made by Socialists to answer or explain away the foregoing difficulties may be reduced to two: the achievements of government enterprises in our present system; and the assumed efficacy of altruism and public honour in a régime of Socialism. Under the first head appeal is made to such publicly owned and managed concerns as the post office, railroads, telegraphs, telephones, street railways, water works, and lighting plants. It is probably true that all these enterprises are on the whole carried on with better results to the public than if they were in private hands. It is likewise probable that these and all other public utility monopolies will sooner or later be taken over by the State in all advanced countries. Even if this should prove in all cases to be a better arrangement from the viewpoint of the general public welfare than private ownership and management, the fact would constitute no argument for a Socialist organisation of all industry. In the first place, the efficiency of labour, management, and technical organisation is generally lower in public than in private enterprises, and the cost of operation higher. Despite these defects, government ownership of public utilities, such as street railways and lighting concerns, may be socially preferable because these industries are monopolies. Inasmuch as their charges and services cannot be regulated by the automatic action of competition, the only alternative to public ownership is public supervision. Inasmuch as the latter is often incapable of securing satisfactory service at fair prices, public ownership and management becomes on the whole more conducive to social welfare. In other words, the losses through inefficient operation are more than offset by the gains from better service and lower charges. Three cent fares and adequate service on an inefficiently managed municipal street railway are preferable to five cent fares on a privately owned street railway whose management is superior. On the other hand, all those industries which are not natural monopolies can be prevented from practising extortion upon the public through regulated competition. In them, therefore, the advantages of private operation, of which competition itself is not the least, should be retained. In the second place, practically all the public service monopolies are simpler in structure, more routine in operation, and more mature in organisation and efficiency than the other industries. The degree of managerial ability required, the necessity of experimenting with new methods and processes, and the opportunity of introducing further improvements in organisation are relatively less. Now, it is precisely in these respects that private has shown itself superior to public operation. Initiative, inventiveness, and eagerness to effect economies and increase profits are the qualities in which private management excels. When the nature and maturity of the concern have rendered these qualities relatively unimportant, public management can exemplify a fair degree of efficiency. In the third place, the ability of the State to operate a few enterprises, does not prove that it could repeat the performance with an equal degree of success in all industries. I can drive two horses, but I could not drive twenty-two. No matter how scientific the organisation and departmentalisation of industries under Socialism, the final control of and responsibility for all of them would rest with one organ, one authority, namely, the city in municipal industries, and the nation in industries having national scope. This would prove too great a task, too heavy a burden, for any body of officials, for any group of human beings. Finally, it must be kept in mind that the publicly operated utilities are subject continuously to the indirect competition of private management. By far the greater part of industry is now under private control, which sets the pace for efficient operation in a hundred particulars. As a consequence, comparisons are steadily provoked between public and private management, and the former is subject to constant criticism. The managers of the State concerns are stimulated and practically compelled to emulate the success of private management. This factor is probably more effective in securing efficiency in public industries than all other causes put together. In the words of Professor Skelton: "A limited degree of public ownership succeeds simply because it is a limited degree, succeeds because private industry, in individual forms or in the socialised joint stock form, dominates the field as a whole. It is private industry that provides the capital, private industry that trains the men and tries out the methods, private industry that sets the pace, and--not the least of its services--private industry that provides the ever-possible outlet of escape."[131] The Socialist expectation that altruistic sentiments and public honour would induce all industrial leaders and all ordinary workers to exert themselves as effectively as they now do for the sake of money, is based upon the very shallow fallacy that what is true of a few men may very readily become true of all men. There are, indeed, persons in every walk of life who work faithfully under the influence of the higher motives, but they are and always have been the exceptions in their respective classes. The great majority have been affected only feebly, intermittently, and on the whole ineffectively by either love of their kind or the hope of public approval. A Socialist order could generate no forces which would be as productive of unselfish conduct as the motives that are drawn from religion. History shows nothing comparable either in extent or intensity to the record of self surrender and service to the neighbour which are due to the latter influence. Yet religion has never been able, even in the periods and places most thoroughly dominated by Christianity, to induce more than a small minority of the population to adopt that life of altruism which would be required of the great majority under Socialism. Moreover, the efficacy of the higher motives is much greater among men devoted to scientific, intellectual, and religious pursuits than in either the leaders or the rank and file engaged in industrial occupations. The cause of this difference is to be sought in the varying nature of the two classes of activity: the first necessarily develops an appreciation of the higher goods, the things of the mind and the soul; the second compels the attention of men to rest upon matter, upon the things that appeal to the senses, upon the things that are measurable in terms of money. There is a special fallacy underlying the emphasis placed by Socialists on the power of public honour. It consists in the failure to perceive that this good declines in efficacy according as the number of its recipients increases. Even if all the industrial population were willing to work as hard for public approval as they now do for money, the results expected by Socialists would not be forthcoming. Public recognition of unselfish service is now available in relatively great measure because the persons qualifying for it are relatively few. They easily stand out conspicuous among their fellows. Let their numbers vastly increase, and unselfishness would become commonplace. It would no longer command popular recognition, save in those who displayed it in exceptional or heroic measure. The public would not have the time nor take the trouble to notice and honour adequately every floor walker, retail clerk, factory operative, street cleaner, agricultural labourer, ditch digger, etc., who might become a candidate for such recognition. When the Socialists point to such examples of disinterested public service as that of Colonel Goethals in building the Panama Canal, they confound the exceptional with the average. They assume that, since an exceptional man performs an exceptional task from high motives, all men can be got to act likewise in all kinds of operations. They forget that the Panama Canal presented opportunities of self satisfying achievement and fame which do not occur once in a thousand years; that the traditions and training of the army have during many centuries deliberately and consistently aimed and tended to produce an exceptionally high standard of honour and disinterestedness; that, even so, the majority of army officers have not in their civil assignments shown the same degree of faithfulness to the public welfare as Colonel Goethals; that the Canal was built under a régime of "benevolent despotism," which placed no reliance upon the "social mindedness" of the subordinate workers; and that the latter, far from showing any desire to qualify as altruists or public benefactors, demanded and received material recognition in the form of wages, perquisites, and gratuities which greatly surpassed the remuneration received by any other labour force in history.[132] In a word, wherever in the construction of the Canal notable disinterestedness or appreciation of public honour was shown, the circumstances were exceptional; where the situation was ordinary, the Canal builders were unable to rise above the ordinary motives of selfish advantage. Beneath all the Socialist argument on this subject lies the assumption that the attitude of the _average man_ toward the higher motives can by some mysterious process be completely _revolutionised_. This is contrary to all experience, and to all reasonable probability. Only a small minority of men have ever, in any society or environment, been dominated mainly by altruism or the desire of public honour. What reason is there to expect that men will act differently in the future? Neither legislation nor education can make men love their neighbours more than themselves, or love the applause of their neighbours more than their own material welfare. _Restricting Individual Liberty_ Even though human nature should undergo the degree of miraculous transformation necessary to maintain an efficient industrial system on Socialist lines, such a social organisation must soon collapse because of its injurious effect upon individual liberty. Freedom of choice would be abolished in the most vital economic transactions; for there would be but one buyer of labour, and one seller of commodities. And these two would be identical, namely, the State. With the exception of the small minority that might be engaged in purely individual avocations, and in co-operative enterprises, men would be compelled to sell their labour to either the municipality or the national government. As competition between these two political agencies in the matter of wages and other conditions of labour could not be permitted, there would be virtually only one employer. Practically all material goods would have to be purchased from either the municipal or the national shops and stores. Since the city and the nation would produce different kinds of goods, the purchaser of any given article would be compelled to deal with one seller. His freedom of choice would be further restricted by the fact that he would have to be content with those kinds and grades of commodities which the seller saw fit to produce. He could not create an effective demand for new forms and varieties of goods, as he now does, by stimulating the ingenuity and acquisitiveness of competing producers and dealers. Prices and wages would, of course, be fixed beforehand by the government. The supposition that this function might be left to the workers in each industry is utterly impracticable. Such an arrangement would involve a grand scramble among the different industries to see which could pay its own members the highest wages, and charge its neighbours' members the highest prices. The final result would be a level of prices so high that only an alert and vigorous section of the workers in each industry could find employment. Not only wages and prices but hours, safety requirements, and all the other general conditions of employment, would be regulated by the government. The individuals in each industry could not be permitted to determine these matters any more than they could be permitted to determine wages. Moreover, all these regulations would from the nature of the case continue unchanged for a considerable period of time. The restriction of choice enforced upon the sellers of labour and the buyers of goods, the utter dependence of the population upon one agency in all the affairs of their economic as well as their political life, the tremendous social power concentrated in the State, would produce a diminution of individual liberty and a perfection of political despotism surpassing anything that the world has ever seen. It would not long be tolerated by any self respecting people. To reply that the Socialist order would be a democracy, and that the people could vote out of existence any distasteful regulation, is to play with words. No matter how responsive the governing and managing authorities might be to the popular will, the dependence of the individual would prove intolerable. Not the manner in which this tremendous social power is constituted, nor the personnel of those exercising it, but the fact that so much power is lodged in one agency, and so little immediate control of his affairs left to the individual,--is the heart of the evil situation. In a word, it is a question of the liberty of the individual versus the all pervading control of his actions by an agency other than himself. Moreover, the people in a democracy means a majority, or a compact minority. Under Socialism the controlling section of the voting population would possess so much power, political and economic, that it could impose whatever conditions it pleased upon the non-controlling section for an almost indefinite period of time. The members of the latter part of the population would not only be deprived of that immediate liberty which consists in the power to determine the details of their economic life, but of that remote liberty which consists in the power to affect general conditions by their votes. In the last chapter we saw that the claim to the full product of industry, made on behalf of labour by the Socialists, cannot be established on intrinsic grounds. Like all other claims to material goods, it is valid only if it can be realised consistently with human welfare. Its validity depends upon its feasibility, upon the possibility of constructing some social system that will enable it to work. The present chapter has shown that the requirements of such a system are not met by Socialism. A Socialist organisation of industry would make all sections of the population, including the wage earning class, worse off than they are in the existing industrial order. Consequently, neither the private ownership of capital nor the individual receipt of interest can be proved to be immoral by the Socialist argument. Since private ownership and management of capital are superior to Socialism, the State is obliged to maintain, protect, and improve the existing industrial system. This is precisely the conclusion that we reached in chapter iv with reference to private ownership of land. In chapter v we found, moreover, that individual ownership of land is a natural right. The fundamental considerations there examined lead to the parallel conclusion that the individual has a natural right to own capital. But we could not immediately deduce from the right to own land the right to take rent. Neither can we immediately deduce from the right to own capital the right to take interest. The positive establishment of the latter right will occupy us in the two following chapters. FOOTNOTES: [121] Wilhelm Liebknecht, cited in Hillquit's "Socialism in Theory and Practice," p. 107. [122] "Das Erfurter Program," cited by Skelton, op. cit., p. 178. [123] Cf. Skelton, op. cit., ch. vii; Bernstein, "Evolutionary Socialism," pp. 1-94; Simkhovitch, "Marxism vs. Socialism," _passim_; Walling, "Progressivism and After," _passim_; Hillquit-Ryan, op. cit., ch. iv. [124] "Income," p. 152. [125] "The Wealth and Income of the People of the United States," p. 132. [126] Cf. Hillquit-Ryan, op. cit., pp. 107, 136. [127] Cf. Hillquit-Ryan, op. cit., pp. 73-77; Skelton, op. cit, p. 183; Walling, "Socialism as It Is," p. 429. [128] Cf. King, op. cit., pp. 224-226. [129] Cf. Kautsky, "The Social Revolution," pp. 166, 167; Hillquit-Ryan, op. cit., p. 72. [130] Hillquit-Ryan, op. cit., p. 80; cf. Spargo, "Socialism," pp. 225-227. [131] "Socialism: A Critical Analysis," p. 219. [132] Cf. "The Panama Gateway," by Joseph Bucklin Bishop, p. 263. CHAPTER XII ALLEGED INTRINSIC JUSTIFICATIONS OF INTEREST In his address as President of the American Sociological Society at the annual meeting, Dec. 27, 1913, Professor Albion W. Small denounced "the fallacy of treating capital as though it were an active agent in human processes, and crediting income to the personal representatives of capital, irrespective of their actual share in human service." According to his explicit declaration, his criticism of the modern interest-system was based primarily upon grounds of social utility rather than upon formally ethical considerations. A German priest has attacked interest from the purely moral viewpoint.[133] In his view the owner of any sort of capital who exacts the return of anything beyond the principal, violates strict justice.[134] The Church, he maintains, has never formally authorised or permitted interest, either on loans or on producing capital. She has merely tolerated it as an irremovable evil. Is there a satisfactory justification of interest? If there is, does it rest on individual or on social grounds? That is to say: is interest justified immediately and intrinsically by the relations existing between the owner and the user of capital? Or, is rendered morally good owing to its effects upon social welfare? Let us see what light is thrown on these questions by the anti-usury legislation of the Catholic Church. _Attitude of the Church Toward Interest on Loans_ During the Middle Ages all interest on _loans_ was forbidden under severe penalties by repeated ordinances of Popes and Councils.[135] Since the end of the seventeenth century the Church has quite generally permitted interest on one or more extrinsic grounds, or "titles." The first of these titles was known as "lucrum cessans," or relinquished gain. It came into existence whenever a person who could have invested his money in a productive object, for example, a house, a farm, or a mercantile enterprise, decided instead to lend the money. In such cases the interest on the loan was regarded as proper compensation for the gain which the owner might have obtained from an investment on his own account. The title created by this situation was called "extrinsic" because it arose out of circumstances external to the essential relations of borrower and lender. Not because of the loan itself, but because the loan prevented the lender from investing his money in a productive enterprise, was interest on the former held to be justified. In other words, interest on the loan was looked upon as merely the fair equivalent of the interest that might have been obtained on the investment. During the seventeenth, eighteenth, and nineteenth centuries, another title or justification of loan-interest found some favour among Catholic moralists. This was the "praemium legale," or legal rate of interest allowed by civil governments. Wherever the State authorised a definite rate of interest, the lender might, according to these writers, take advantage of it with a clear conscience. To-day the majority of Catholic authorities on the subject prefer the title of virtual productivity as a justification. Money, they contend, has become virtually productive. It can readily be exchanged for income-bearing or productive property, such as, land, houses, railroads, machinery, and distributive establishments. Hence it has become the economic equivalent of productive capital, and the interest which is received on it through a loan is quite as reasonable as the annual return to the owner of productive capital. Between this theory and the theory connected with "lucrum cessans" the only difference is that the former shifts the justification of interest from the circumstances and rights of the lender to the present nature of the money itself. Not merely the fact that the individual will suffer if, instead of investing his money he loans it without interest, but the fact that money is generally and virtually productive, is the important element in the newer theory. In practice, however, the two explanations or justifications come to substantially the same thing. Nevertheless, the Church has given no positive approval to any of the foregoing theories. In the last formal pronouncement by a Pope on the subject, Benedict XIV[136] condemned anew all interest that had no other support than the intrinsic conditions of the loan itself. At the same time, he declared that he had no intention of denying the lawfulness of interest which was received in virtue of the title of "lucrum cessans," nor the lawfulness of interest or profits arising out of investments in productive property. In other words, the authorisation that he gave to both kinds of interest was merely negative. He refrained from condemning them. In the Responses given by the Roman Congregations from 1822 onward to questions relating to the lawfulness of loan-interest, we may profitably consider four principal features. First, they declare more or less specifically that interest may be taken in the absence of the title of "lucrum cessans"; second, some of them definitely admit the title of "praemium legale," or civil authorisation, as sufficient to give the practice moral sanction; third, they express a genuine permission, not a mere toleration, of interest taking; fourth, none of them explicitly declares that any of the titles or reasons for receiving loan-interest will necessarily or always give the lender a _strict right_ thereto. None of them contains a positive and reasoned approval of the practice. Most of them merely decide that persons who engage in it are not to be disturbed in conscience, so long as they stand ready to submit to a formal decision on the subject by the Holy See. The insertion of the latter condition clearly intimates that some day interest taking might be formally and officially condemned. Should such a condemnation ever appear, it would not contradict any moral principle contained in the "Roman Responses," nor in the present attitude of the Church and of Catholic moralists. Undoubtedly it could come only as the result of a change in the organisation of industry, just as the existing ecclesiastical attitude has followed the changed economic conditions since the Middle Ages. All the theological discussion on the subject, and all the authoritative ecclesiastical declarations indicate, therefore, that interest on loans is to-day regarded as lawful because a loan is the economic equivalent of an investment. Evidently this is good logic and common sense. If it is right for the stockholder of a railway to receive dividends, it is equally right for the bondholder to receive interest. If it is right for a merchant to take from the gross returns of his business a sum sufficient to cover interest on his capital, it is equally right for the man from whom he has borrowed money for the enterprise to exact interest. The money in a loan is economically equivalent to, convertible into, concrete capital. It deserves, therefore, the same treatment and the same rewards. The fact that the investor undergoes a greater risk than the lender, and the fact that the former often performs labour in connection with the operation of his capital, have no bearing on the moral problem; for the investor is repaid for his extra risk and labour by the profits which he receives, and which the lender does not receive. As a mere recipient of interest, the investor undergoes no more risk nor exertion than does the lender. His claim to interest is no better than that of the latter. _Interest on Productive Capital_ On what ground does the Church or Catholic theological opinion justify interest on invested capital? on the shares of the stockholders in corporations? on the capital of the merchant and the manufacturer? In the early Middle Ages the only recognised titles to gain from the ownership of property were labour and risk.[137] Down to the beginning of the fifteenth century substantially all the incomes of all classes could be explained and justified by one or other of these two titles; for the amount of capital in existence was inconsiderable, and the number of large personal incomes insignificant. When, however, the traffic in rent charges and the operation of partnerships, especially the "contractus trinus," or triple contract, had become fairly common, it was obvious that the profits from these practices could not be correctly attributed to either labour or risk. The person who bought, not the land itself, but the right to receive a portion of the rent thereof, and the person who became the silent member of a partnership, evidently performed no labour beyond that involved in making the contract. And their profits clearly exceeded a fair compensation for their risks, inasmuch as the profits produced a steady income. How then were they to be justified? A few authorities maintained that such incomes had no justification. In the thirteenth century Henry of Ghent condemned the traffic in rent charges; in the sixteenth Dominicus Soto maintained that the returns to the silent partner in an enterprise ought not to exceed a fair equivalent for his risks; about the same time Pope Sixtus V denounced the triple contract as a form of usury. Nevertheless, the great majority of writers admitted that all these transactions were morally lawful, and the gains therefrom just. For a time these writers employed merely negative and _a pari_ arguments. Gains from rent charges, they pointed out, were essentially as licit as the net rent received by the owner of the land; and the interest received by a silent partner, even in a triple contract, had quite as sound a moral basis as rent charges. By the beginning of the seventeenth century the leading authorities were basing their defence of industrial interest on positive grounds. Lugo, Lessius, and Molina adduced the productivity of capital goods as a reason for allowing gains to the investor. Whether they regarded productivity as in itself a sufficient justification of interest, or merely as a necessary prerequisite to justification, cannot be determined with certainty. At present the majority of Catholic writers seem to think that a formal defence of interest on capital is unnecessary. Apparently they assume that interest is justified by the mere productivity of capital. However, this view has never been explicitly approved by the Church. While she permits and authorises interest, she does not define its precise moral basis. So much for the teaching of ecclesiastical and ethical authorities. What are the objective reasons in favour of the capitalist's claim to interest? In this chapter we consider only the intrinsic reasons, those arising wholly out of the relations between the interest-receiver and the interest-payer. Before taking up the subject it may be well to point out the source from which interest comes, the class in the community that pays the interest to the capitalist. From the language sometimes used by Socialists it might be inferred that interest is taken from the labourer, and that if it were abolished he would be the chief if not the only beneficiary. This is incorrect. At any given time interest on producing capital is paid by the consumer. Those who purchase the products of industry must give prices sufficiently high to provide interest in addition to the other expenses of production. Were interest abolished and the present system of private capital continued, the gain would be mainly reaped by the consumer in the form of lower prices; for the various capitalist directors of industry would bring about this result through their competitive efforts to increase sales. Only those labourers who were sufficiently organised and sufficiently alert to make effective demands for higher wages before the movement toward lower prices had got well under way, would obtain any direct benefit from the change. The great majority of labourers would gain far more as consumers than as wage earners. Speaking generally, then, we may say that the capitalist's gain is the consumer's loss, and the question of the justice of interest is a question between the capitalist and the consumer. The intrinsic or individual grounds upon which the capitalist's claim to interest has been defended are mainly three: productivity, service, and abstinence. They will be considered in this order. _The Claims of Productivity_ It is sometimes asserted that the capitalist has as good a right to interest as the farmer has to the offspring of his animals. Both are the products of the owner's property. In two respects, however, the comparison is inadequate and misleading. Since the owner of a female animal contributes labour or money or both toward her care during the period of gestation, his claim to the offspring is based in part upon these grounds, and only in part upon the title of interest. In the second place, the offspring is the definite and easily distinguishable product of its parent. But the sixty dollars derived as interest from the ownership of ten shares of railway stock, cannot be identified as the exact product of one thousand dollars of railway property. No man can tell whether this amount of capital has contributed more or less than sixty dollars of value to the joint product, i.e., railway services. The same is true of any other share or piece of concrete capital. All that we know is that the interest, be it five, six, seven, or some other per cent., describes the share of the product which goes to the owner of capital in the present conditions of industry. It is the conventional not the actual and physical product of capital. Another faulty analogy is that drawn between the productivity of capital and the productivity of labour. Following the terminology of the economists, most persons think of land, labour, and capital as productive in the same sense. Hence the productivity of capital is easily assumed to have the same moral value as the productive action of human beings; and the right of the capitalist to a part of the product is put on the same moral basis as the right of the labourer. Yet the differences between the two kinds of productivity, and between the two moral claims to the product are more important than their resemblances. In the first place, there is an essential physical difference. As an instrument of production, labour is active, capital is passive. As regards its worth or dignity, labour is the expenditure of human energy, the output of a _person_, while capital is a material thing, standing apart from a personality, and possessing no human quality or human worth. These significant intrinsic or physical differences forbid any immediate inference that the moral claims of the owners of capital and labour are equally valid. We should logically expect to find that their moral claims are unequal. This expectation is realised when we examine the bearing of the two kinds of productivity upon human welfare. In the exercise of productive effort the average labourer undergoes a sacrifice. He is engaged in a process that is ordinarily irksome. To require from him this toilsome expenditure of energy without compensation, would make him a mere instrument of his fellows. It would subordinate him and his comfort to the aggrandisement of beings who are not his superiors but his moral equals. For he is a person; they are no more than persons. On the other hand, the capitalist as such, as the recipient of interest, performs no labour, painful or otherwise. Not the capitalist, but capital participates in the productive process. Even though the capitalist should receive no interest, the productive functioning of capital would not subordinate him to his fellows in the way that wageless labour would subordinate the labourer. The precise and fundamental reason for according to the labourer his product is that this is the only rational rule of distribution. When a man makes a useful thing out of materials that are his, he has a strict right to the product simply because there is no other reasonable method of distributing the goods and opportunities of the earth. If another individual, or society, were permitted to take this product, industry would be discouraged, idleness fostered, and reasonable life and self development rendered impossible. Direful consequences of this magnitude would not follow the abolition of interest. Perhaps the most important difference between the moral claims of capitalist and labourer is the fact that for the latter labour is the sole means of livelihood. Unless he is compensated for his product he will perish. But the capitalist has in addition to the interest that he receives the ability to work. Were interest abolished he would still be in as good a position as the labourer. The product of the labourer means to him the necessaries of life; the product of the capitalist means to him goods in excess of a mere livelihood. Consequently their claims to the product are greatly unequal in vital importance and moral value. The foregoing considerations show that even the claim of the labourer to his product is not based upon merely intrinsic grounds. It does not spring entirely from the mere fact that he has produced the product, from the mere relation between producer and thing produced. If this is true of labour-productivity we should expect to find it even more evident with regard to the productivity of capital; for the latter is passive instead of active, non rational instead of human. The expectation is well founded. Not a single conclusive argument can be brought forward to show that the productivity of capital directly and necessarily confers upon the capitalist a right to the interest-product. All the attempted arguments are reducible to two formulas: "res fructificat domino" ("a thing fructifies to its owner") and "the effect follows its cause." The first of these was originally a legal rather than an ethical maxim; a rule by which the title was determined in the civil law, not a principle by which the right was determined in morals. The second is an irrelevant platitude. As a juristic principle, neither is self evident. Why should the owner of a piece of capital, be it a house, a machine, or a share of railway stock, have a right to its product, when he has expended neither time, labour, money, nor inconvenience of any kind? To answer, "because the thing which produced the product belongs to him," is merely to beg the question. To answer, "because the effect follows the cause," is to make a statement which has nothing to do with the question. What we want to know is why the ownership of a productive thing gives a right to the product; why this particular effect should follow its cause in this particular way. To answer by repeating under the guise of sententious formulas the thesis to be proved, is scarcely satisfactory or convincing. To answer that if the capitalist were not given interest industry and thrift would decrease and human welfare suffer, is to abandon the intrinsic argument entirely. It brings in the extrinsic consideration of social consequences. _The Claims of Service_ The second intrinsic ground upon which interest is defended, is the _service_ performed by the capitalist when he permits his capital to be used in production. Without capital, labourers and consumers would be unable to command more than a fraction of their present means of livelihood. From this point of view we see that the service in question is worth all that is paid in the form of interest. Nevertheless it does not follow that the capitalist has a claim in strict justice to any payment for this service. According to St. Thomas, a seller may not charge a buyer an extra amount merely because of the extra value attached to the commodity by the latter.[138] In other words, a man cannot justly be required to pay an unusual price for a benefit or advantage or service, when the seller undergoes no unusual deprivation. Father Lehmkuhl carries the principle further, and declares that the seller has a right to compensation only when and to the extent that he undergoes a privation or undertakes a responsibility.[139] According to this rule, the capitalist would have no right to interest; for as mere interest-receiver he undergoes no privation. His risk and labour are remunerated in profits, while the responsibility of not withdrawing from production something that can continue in existence only by continuing in production, is scarcely deserving of a reward according to the canons of strict justice. Whatever we may think of this argument from authority, we find it impossible to prove objectively that a man who renders a service to another has an intrinsic right to anything beyond compensation for the expenditure of money or labour involved in performing the service. The man who throws a life preserver to a drowning person may justly demand a payment for his trouble. On any recognised basis of compensation, this payment will not exceed a few dollars. Yet the man whose life is in danger would pay a million dollars for this service if he were extremely rich. He would regard the service as worth this much to him. Has the man with the life preserver a right to exact such a payment? Has he a right to demand the full value of the service? No reasonable person would answer this question otherwise than in the negative. If the performer of the service may not charge the full value thereof, as measured by the estimate put upon it by the recipient, it would seem that he ought not to demand anything in excess of a fair price for his trouble. In other words, he may not justly exact anything for the service as such. It would seem, then, that the capitalist has no moral claim to pure interest on the mere ground that the use of his capital in production constitutes a service to labourers and consumers. It would seem that he has no right to demand a payment for a costless service. _The Claims of Abstinence_ The third and last of the intrinsic justifications of interest that we shall consider is _abstinence_. This argument is based upon the contention that the person who saves his money, and invests it in the instruments of production undergoes a sacrifice in deferring to the future satisfactions that he might enjoy to-day. One hundred dollars now is worth as much as one hundred and five dollars a year hence. That is, when both are estimated from the viewpoint of the present. This sacrifice of present to future enjoyment which contributes a service to the community in the form of capital, creates a just claim upon the community to compensation in the form of interest. If the capitalist is not rewarded for this inconvenience he is, like the unpaid labourer, subordinated to the aggrandisement of his fellows. Against this argument we may place the extreme refutation attempted by the Socialist leader, Ferdinand Lassalle: "But the profit of capital is _the reward of abstinence_. Truly a happy phrase! European millionaires are ascetics, Indian penitents, modern St. Simons Stylites, who perched on their columns, with withered features and arms and bodies thrust forward, hold out a plate to the passers-by that they may receive the wages of their privations! In the midst of this sacro-saint group, high above his fellow-mortifiers of the flesh, stands the Holy House of Rothschild. That is the real truth about our present society! How could I have hitherto blundered on this point as I have?"[140] Obviously this is a malevolently one-sided implication concerning the sources of capital. But it is scarcely less adequate than the explanation in opposition to which it has been quoted. Both fail to distinguish between the different kinds of savers, the different kinds of capital-owners. For the purposes of our inquiry savings may be divided into three classes. First, those which are accumulated and invested automatically. Very rich persons save a great deal of money that they have no desire to spend, since they have already satisfied or safeguarded all the wants of which they are conscious. Evidently this kind of saving involves no real sacrifice. To it the words of Lassalle are substantially applicable, and the claim to interest for abstinence decidedly inapplicable. Second, savings to provide for old age and other future contingencies which are estimated as more important than any of the purposes for which the money might now be expended. Were interest abolished this kind of saving would be even greater than it is at present; for a larger total would be required to equal the fund that is now provided through the addition of interest to the principal. In a no-interest régime one thousand dollars would have to be set aside every year in order to total twenty thousand dollars in twenty years; when interest is accumulated on the savings, a smaller annual amount will suffice to produce the same fund. Inasmuch as this class of persons would save in an even greater degree without interest, it is clear that they regard the sacrifice involved as fully compensated in the resulting provision for the future. In their case sacrifice is amply rewarded by accumulation. Their claim to additional compensation in the form of interest does not seem to have any valid basis. In the words of the late Professor Devas, "there is ample reward given without any need of any interest or dividend. For the workers with heads or hands keep the property intact, ready for the owner to consume whenever convenient, when he gets infirm or sick, or when his children have grown up, and can enjoy the property with him."[141] The third kind of saving is that which is made by persons who could spend, and have some desire to spend, more on present satisfactions, and who have already provided for all future wants in accordance with the standards of necessaries and comforts that they have adopted. Their fund for the future is already sufficient to meet all those needs which seem weightier than their present unsatisfied wants. If the surplus in question is saved it will go to supply future desires which are no more important than those for which it might be expended now. In other words, the alternatives before the prospective saver are to procure a given amount of satisfaction to-day, or to defer the same degree of satisfaction to a distant day. In this case the inducement of interest will undoubtedly be necessary to bring about saving. As between equal amounts of satisfaction at different times, the average person will certainly prefer those of the present to those of the future. He will not decide in favour of the future unless the satisfactions then obtainable are to be greater in quantity. To this situation the rule that deferred enjoyments are worth less than present enjoyments, is strictly applicable. The increased quantity of future satisfaction which is necessary to turn the choice from the present to the future, and to determine that the surplus shall be saved rather than spent, can be provided only through interest. In this way the accumulations of interest and savings will make the future fund equivalent to a larger amount of enjoyment or utility than could be obtained if the surplus were exchanged for the goods of the present. "Interest magnifies the distant object." Whenever this magnifying power seems sufficiently great to outweigh the advantage of present over future satisfactions, the surplus will be saved instead of spent. Among the well-to-do there is probably a considerable number of persons who take this attitude toward a considerable part of their savings. Since they would not make these savings without the inducement of interest, they regard the latter as a necessary compensation for the sacrifice of postponed enjoyment. In a general way we may say that they have a strict right to this interest on the intrinsic ground of sacrifice. Inasmuch as the community benefits by the savings, it may quite as fairly be required to pay for the antecedent sacrifices of the savers as for the inconvenience undergone by the performer of any useful labour or service. Summing up the matter regarding the intrinsic justification of interest, we find that the titles of productivity and service do not conclusively establish the strict right of the capitalist to interest, and that the title of abstinence is morally valid for only a portion, probably a rather small portion, of the total amount of interest now received by the owners of capital. Consequently interest as a whole is not conclusively vindicated on individual grounds. If it is to be proved morally lawful its justification must be sought in extrinsic and social considerations. This inquiry will form the subject of the next chapter. FOOTNOTES: [133] Hohoff, "Die Bedeutung der Marxschen Kapitalkritik"; Paderborn, 1908. [134] Pp. 64-67, 88, 89, 96. [135] Cf. Van Roey, "De Justo Auctario ex Contractu Crediti"; and Ashley, "English Economic History." [136] Encyclical, "Vix Pervenit," 1745. [137] Cf. St. Thomas, "Summa Theologica," 2a 2ae, q. 78, a. 2 et 3. [138] "Secunda Secondae," q. 77, a. 1, in corp. [139] "Theologia Moralis," I, no. 1050. [140] "What is Capital?" p. 27. [141] "Political Economy," p. 507. CHAPTER XIII SOCIAL AND PRESUMPTIVE JUSTIFICATIONS OF INTEREST As we saw in the last chapter, interest cannot be conclusively justified on the ground of either productivity or service. It is impossible to demonstrate that the capitalist has a strict right to interest because his capital produces interest, or because it renders a service to the labourer or the consumer. A part, probably a small part, of the interest now received can be fairly justified by the title of sacrifice. Some present owners of capital would not have saved had they not expected to receive interest. In their case interest may be regarded as a just compensation for the sacrifice that they underwent when they decided to save instead of consuming. _Limitations of the Sacrifice Principle_ Nevertheless these men would suffer no injustice if interest were now to be abolished. Up to the moment of the change, they would have been in receipt of adequate compensation; thereafter, they would be in exactly the same position as when they originally chose to save rather than consume. They would still be able to sell their capital, and convert the proceeds to their immediate uses and pleasures. In this case they would obviously have no further claim upon the community for interest. On the other hand, they could retain the ownership of their capital, and postpone its consumption to some future time. In making this choice they would regard future as more important than present consumption, and the superiority of future enjoyment as sufficiently great to compensate them for the sacrifice of postponement. Hence they would have no moral claim to interest on the ground of abstinence. In general, then, the sacrifice-justification of interest continues only so long as the interest continues. It extends only to the interest received by certain capitalists in certain circumstances, not to all interest in all circumstances. Therefore, it presents no moral obstacle to the complete abolition of interest. Since probably the greater part of the interest now received cannot be justified on intrinsic grounds, and since that part of it which is thus justified could be abolished consistently with the rights of the recipients, let us see whether it is capable of justification for reasons of social welfare. Would its suppression be socially beneficial or socially detrimental? _The Value of Capital in a No-Interest Régime_ The interest that we have in mind is pure interest, not undertaker's profit, nor insurance against risk, nor gross interest. Even if all pure interest were abolished the capitalist who loaned his money would still receive something from the borrower in addition to the repayment of the principal, while the active capitalist would get from the consumer more than the expenses of production. The former would require a premium of, say, one or two per cent. to protect him against the loss of his loan. The latter would demand the same kind of insurance, and an additional sum to repay him for his labour and enterprise. None of these payments could be avoided in any system of privately directed production. The return whose suppression is considered here is that which the capitalist receives over and above these payments, and which in this country seems to be about three or four per cent. Would capital still have value in a no-interest régime, and if so how would its value be determined? At present the lower limit of the value of productive capital, as of all other artificial goods, is fixed in the long run by the cost of production. Capital instruments that do not bring this price will not continue to be made. In other words, cost of production is the governing factor of the value of capital from the side of supply. It would likewise fix the lower limit of value in a no-interest régime; only, the cost of producing capital instruments would then be somewhat lower than to-day, owing to the absence of an interest charge for the working capital during the productive process. But the cost of production is not a constant and accurate measure of the value of artificial capital. The true measure is found in the revenue or interest that a given piece of capital yields to its owners. If the current rate of interest is five per cent., a factory that brings in ten thousand dollars net return will have a value of about two hundred thousand dollars. This is the governing factor of value from the side of demand. In a no-interest economy the demand factor would be quite different. Capital instruments would be in demand, not as revenue producers, but as the concrete embodiments, the indispensable requisites of saving and accumulation. For it is impossible that saving should in any considerable amount take the form of cash hoards. In the words of Sir Robert Giffen: "The accumulations of a single year, even taking it at one hundred and fifty millions only, ... would absorb more than the entire metallic currency of the country [Great Britain]. They cannot, therefore, be made in cash."[142] The instruments of production would be sought and valued by savers for the same reason that safes and safety deposit boxes are in demand now. They would be the only means of carrying savings into the future, and they would necessarily bring a price sufficiently high to cover the cost of producing them. One man might deposit his savings in a bank, whence they would be borrowed without interest by some director of industry. When the owner of the savings desired to recover them he could obtain from the bank the fund of some other depositor, or get the proceeds of the sale of the concrete capital in which his own savings had been embodied. Another man might prefer to invest his savings directly in a building, a machine, or a mercantile business, whence he could recover them later from the sale of the property. Hence the absence of interest would not change essentially the processes of saving or investment. Capital would still have value, but its valuation from the demand side would rest on a different basis. It would be valued not in proportion to its power to yield interest, but because of its capacity to become a receptacle for savings, and to carry into the future the consuming power of the present. The question whether the abolition of interest by the State would be socially helpful or socially harmful is mainly, though not entirely, a question of the supply of capital. If the community would not have sufficient capital to provide for all its needs, actual and progressive, the suppression of interest would obviously be a bad policy. Most economists seem inclined to think that this condition would be realised; that, without the inducement of interest, men would neither make new savings nor conserve existing capital in sufficient quantity to supply the wants of society. Very few of them, however, pretend to be able to prove this proposition. So many complex factors with regard to the possibilities of saving and the motives of savers, enter into the situation that no opinion on the subject can have any stronger basis than probability. As a preliminary to our consideration of the question of abolition, let us inquire whether there exists any definite relation between the present supply of capital and the current rate of interest. _Whether the Present Rate of Interest Is Necessary_ It is sometimes contended that the interest rate must be kept up to the present level if the existing supply of capital is to be maintained. The underlying assumption is that some of the present savers would discontinue that function at any lower rate, with the consequence that the supply of capital would fall below the demand. Owing to this excess of demand over supply, the rate of interest would rise, or tend to rise, to the former level. Therefore, the rate existing at any given time is the socially necessary rate. The rate of interest is said to be analogous to the rate of wages. For example; of ten thousand men receiving five dollars a day, nine thousand may be willing to work for four dollars rather than quit their present jobs. But the other thousand set their minimum price at five dollars. If the wage is reduced to four dollars these men will get employment elsewhere, thus causing such an excess of demand over supply as to force the wage rate back to five dollars. The same thing, it is contended, will happen when the high-priced section of the savers, "the marginal savers," discontinue saving on account of the artificial lowering of the rate of interest. The analogy, however, is misleading. The "marginal" one thousand wage earners refuse to work for four dollars a day because they can get better compensation in some other occupation. This phenomenon has been proved over and over again by observation and experience. On the other hand, there is no experience, no positive evidence, which shows or tends to show that any _necessary_ group of present savers would discontinue or materially reduce their accumulations if they were no longer able to secure the present rate of interest. If the rate were lowered simultaneously in all civilised countries the dissatisfied savers, unlike the dissatisfied labourers, would not be able to get a better price for their capital elsewhere. Their only alternative would be to spend their actual or potential savings for present enjoyment. Now we have no empirical data to justify the assumption that any considerable number of savers would choose this alternative in preference to, say, three or two per cent. interest. The fact that any group of savers at present gets and insists on getting a higher rate, merely proves that they can get it, and that they are selfish enough to take advantage of the possibility. We know that some men who now obtain six per cent. interest would accept two rather than cease to save; yet they do not hesitate to demand six per cent. So far as we know, all present savers might take the same attitude. At any rate, we can not conclude that they would not take less from the fact that they now get more. Why then does not the rate of interest fall? If all present savers are getting a higher rate than is necessary to induce them to save, why do they not increase their savings to such an extent that the supply of capital will exceed the present volume of demand, and thus lead to a decline in the rate of interest? This is what happens when the price of consumption-goods rises appreciably above the minimum level that satisfies the most high-priced or "marginal" producers. There is, however, an important difference between the two cases. The capacity to produce more goods is practically unlimited, and the corresponding desire is also unlimited, so long as the price of the product exceeds the cost of production. The capacity to save is not unlimited, and the desire to save is neutralised and sharply restricted by other and more powerful desires. Hence it is quite possible that the price of capital, i.e., interest, is determined to only a slight degree by the "cost" of saving, being mainly dominated and regulated from the side of demand. Even though many of the present savers and owners of capital should diminish or discontinue their functions on account of a fall in the rate of interest, a reduction would not necessarily take place in the supply of capital. The function of these "marginal savers" would in all probability be performed by other persons, who would be compelled to increase their accumulations in order to provide as well for the future as they had previously been able to provide with a smaller capital at a higher rate of interest.[143] _Whether at Least Two Per Cent. Is Necessary_ While admitting that the present rate is unnecessarily high, Professor Cassel maintains that a certain important class of savers would diminish very considerably their accumulations if the interest rate should fall much below two per cent. This class comprises those persons whose main object in saving is a fund which will some day support them from its interest. At six per cent. a person can accumulate in about twelve years a sum sufficient to provide him with an interest-income equal to the amount annually saved. For example; two thousand dollars put aside every year, and subjected to compound interest, will aggregate in twelve years a principal capable of yielding an annual income of two thousand dollars. At two per cent. the same amount of yearly saving will not lead to the same income in less than thirty-five years. If the rate be one and one-half per cent., forty-seven years will be required to produce the desired income. Hence, concludes Cassel, if the rate falls below two per cent. the average man will decide that life is too short to provide for the future by means of an interest-income, and will expect to draw upon his principal. This means that he will not need to save as much as when he sought to accumulate a capital large enough to support him out of its interest alone. The argument is plausible but not conclusive. If the rate of interest is so low that a man must save for forty-seven years in order to obtain a sufficient interest-income to support him in his declining years, he will rarely attain that end. In the great majority of instances men who are unable to save more annually than the amount that they will need each year in old age, will expect and be compelled to use up a part or all of their capital in the period following the cessation of their economic usefulness. Nevertheless, it does not follow that they will save less at one and one-half per cent. than at six per cent. The determining factor in the situation is the attitude of the saver toward the _capital sum accumulated_. He either desires or does not desire to leave this behind him. In the latter case he will save only as much as is necessary to provide an annual income composed partly of interest and partly of the principal. If this contemplated income is two thousand dollars, and the rate of interest is six per cent., he will not need to save that much annually for as long a period as ten years. He can diminish either the yearly amount saved or the length of time devoted to saving. On the other hand, if the rate is only one and one-half per cent. he will be compelled to save a larger total in order to secure an equal accumulation and an equal provision for the future. In all cases, therefore, in which the saving is carried on merely for the saver's own lifetime it will be increased instead of decreased by a low rate of interest. If the saver does desire to bequeath his capital he will not always be deterred from this purpose merely because he is compelled to use some of the capital for the satisfaction of his own wants. Take the man who can save two thousand dollars a year, and with the rate of interest at six per cent. assure himself an interest-income of the same amount, and who intends to leave the principal (some thirty-three thousand dollars) to his children. Should the rate fall to one and one-half per cent. he would be unable to accumulate and bequeath nearly such a large sum. Surely this fact, discouraging as it is, will not determine him to save nothing. He will not, as Cassel's argument assumes, decide to leave nothing to his children, and content himself with that amount of saving which will suffice to provide for his own future. In all probability he will try to accumulate a sum which, even when diminished by future deductions for his own wants, will approximate as closely as possible the amount that he could have bequeathed had the rate remained at six per cent. This means that he will save more at the low than at the high rate of interest. The relative insignificance of the sum which would be saved at a low rate might sometimes, indeed, deter a person from saving for testamentary purposes. With the rate at six per cent., a man might be willing to save six hundred dollars a year for a sufficiently long period to provide a legacy of twenty thousand dollars to an educational institution. With the rate at one and one-half per cent., the amount that he could hope to accumulate would be so much smaller that it might seem to him not worth while, and he would decline to save the six hundred dollars annually. Cases of this kind, however, always involve the secondary objects of saving, the luxuries rather than the necessaries of testamentary transmission. They do not include such primary objects as provision for one's family. When the average man finds that he cannot leave to his family as much as he would desire, as much as he would have bequeathed to them at a higher rate of interest, he will strive to increase rather than decrease his efforts to save for this purpose. Speaking generally, then, we conclude that the assumption underlying Professor Cassel's theory is contradicted by our experience of human motives and practices. Men who save mainly for a future interest-income, at the same time wishing to keep the principal intact until death, and who could have fully realised this desire under a high interest régime, will not become entirely indifferent to it when they find that they cannot attain it completely. They will ordinarily try to leave behind them as large a capital or principal as they can. Hence they will save more rather than less. _Whether Any Interest Is Necessary_ Perhaps the best known recent statement of the opinion that interest is inevitable, appears in Professor Irving Fisher's "The Rate of Interest."[144] While he does not assert explicitly that sufficient capital would not be provided without interest, and even admits that in certain circumstances interest might disappear, the general logic and implications of his argument are decidedly against the supposition that society could ever get along without interest. He lays such stress upon the factor of "impatience," i.e., man's unwillingness to wait for future goods, as to suggest strongly that other causes of interest, and the number of savers free from "impatience," are quite insignificant. Now, if "impatience" were the only cause of interest the latter must continue as long as "impatience" continues; and if practically all savers, actual and possible, are completely dominated by "impatience" the abolition of interest would be socially disastrous. However, neither of these assumptions is demonstrable. We have just seen that the present rate of interest has other causes than "impatience"; that a large proportion of savers insist upon getting the present rate, not because they require it to offset their "impatience," but simply because they can obtain it, and because they prefer it to the lower rate. Therefore, the mere existence of the present rate does not prove it to be necessary. By the same argument it is evident that the existence of any interest does not demonstrate the necessity of some interest. In the second place, the number of savers, present and prospective, whose "impatience" is so weak as to permit them to save without interest, is probably greater than the average reader of Professor Fisher's pages is led to assume. The question whether interest is necessary cannot be answered by reference to the general fact of human "impatience"; it demands a preliminary analysis of the extent to which "impatience" affects the different classes of savers. With interest abolished, those persons who were willing to subordinate present secondary satisfactions to the primary future needs of themselves and their families, would save at least as much for these purposes as when they could have obtained interest. Most of them would probably save more in order to render their future provision as nearly as possible equal to what it would have been had interest accrued on their annual savings. Whether a person intended to leave all his accumulations, or part of them, or none of them to posterity, he would still desire them to be as large as they might have been in a régime of interest. In order to realise this desire, he would be compelled to increase his savings. And it is reasonable to expect that this is precisely the course that would be followed by men of average thrift and foresight. Such men regard future necessaries and comforts, whether for themselves or their children, as more important than present non-essentials and luxuries. Interest or no interest, prudent men will subordinate the latter goods to the former, and will save money accordingly. When, however, both future and present goods are of the same order and importance, the future is no longer preferred to the present. In that case the preference is reversed. The luxuries of to-day are more keenly prized than the luxuries of to-morrow. If the latter are to be preferred they must possess some advantage over the luxuries that might be obtained here and now. Such advantage may arise in various ways; for example, when a man decides that he will have more leisure for a foreign journey two years hence than this year, or when he prefers a large amount of future enjoyment at one time to present satisfactions taken in small doses. But the most general method of conferring advantage upon the secondary satisfactions of the future as compared with those of the present, is to increase the quantity. The majority of foreseeing persons are willing to pass by one hundred dollars' worth of enjoyment now for the sake of one hundred and five dollars' worth one year hence. This advantage of quantity is provided through the receipt of interest. It affects all those persons whose saving, as noted in the last chapter, involves a sacrifice for which the only adequate compensation is interest, and likewise all those persons who are in a position to choose between present and future luxuries. Were interest suppressed these classes of persons would cease to save for this kind of future goods. According to Professor Taussig, "most saving is done by the well-to-do and the rich."[145] On this hypothesis it seems probable that the abolition of interest would diminish the savings and capital of the community very considerably; for the accumulations of the wealthy are derived mainly from interest rather than from salaries. On the other hand, the suppression of interest should bring about a much wider diffusion of wealth. The sums formerly paid out as interest, would be distributed among the masses of the population as increased wages and reduced costs of living. Hence the masses would possess an immensely increased capacity for saving, which might offset or even exceed the loss of saving-power among those who now receive interest-incomes.[146] To sum up the results of our inquiry concerning the necessity of interest: The fact that men now receive interest does not prove that they would not save without interest. The fact that many men would certainly save without interest does not prove that a sufficient amount would be saved to provide the community with the necessary supply of capital. Whether the savings of those classes that increased their accumulations would counteract the decreases in the saving of the richer classes, is a question that admits of no definite or confident answer. _The State Is Justified in Permitting Interest_ If we assume that the suppression of interest would cause a considerable decline in saving and capital, we must conclude that the community would be worse off than under the present system. To diminish greatly the instruments of production, and consequently the supply of goods for consumption, would create far more hardship than it would relieve. While "workless" incomes would be suppressed, and personal incomes more nearly equalised, the total amount available for distribution would probably be so much smaller as to cause a deterioration in the condition of every class. In this hypothesis the State would do wrong to abolish the system of interest. If, however, we assume that no considerable amount of evil would follow, or that the balance of results would be favourable, the question of the proper action of the State becomes somewhat complex. In the first place, interest could not rightfully be suppressed while the private taking of rent remained. To adopt such a course would be to treat the receivers of property incomes inequitably. Landowners would continue to receive an income from their property, while capital owners would not; yet the moral claims of the former to income are no better than those of the latter. In the second place, the State would be obliged to compensate the owners of existing capital instruments for the decline in value which, as we have already seen, would occur when the item of interest was eliminated from the cost of reproducing such capital instruments. It would likewise be under moral obligation to compensate landowners for whatever decrease in value befell their property as a result of the abolition of rent. Nevertheless, the practical difficulties confronting the legal abolition of interest are apparently so great as to render the attempt socially unwise and futile. In order to be effective the prohibition would have to be international. Were it enforced in only one or in a few countries, these would suffer far more through the flight of capital than they would gain through the abolition of interest. The technical obstacles in any case would be well nigh insuperable. If the attempt were made to suppress interest on producing capital, as well as on loans, the civil authorities would be unable to determine with any degree of precision what part of the gross returns of a business was pure interest, and what part was a necessary compensation for risk and the labour of management. Should the State try to solve this problem by allowing the directors of industry varying salaries to correspond with their comparative degrees of efficiency, and different rates of insurance-payments to represent the different risks, it would inevitably make some allowances so low as to discourage labour and enterprise, and others so high as to give the recipients a considerable amount of pure interest in the guise of profits and salaries. Should it fix a flat rate of salaries and profits, the more efficient undertakers would refuse to put forth their best efforts, and the more perilous enterprises would not be undertaken. The supervision of expenses, receipts, and other details of business that would be required to prevent evasion of the law, would not improbably cost more than the total amount now paid in the form of interest. On the other hand, if the method of suppression were confined to loans it would probably prove only a little less futile than the effort to abolish interest on productive capital. The great majority of those who were prevented from lending at interest would invest their money in stocks, land, buildings, and other forms of productive property. Moreover, it is probable that a large volume of loans would be made despite the prohibition. In the Middle Ages, when the amount of money available for lending was comparatively small, and when State and Church and public opinion were unanimous in favour of the policy, the legal prohibition of loans was only partially effective. Now that the supply of and the demand for loans have enormously increased, and interest is not definitely disapproved by the Church or the public, a similar effort by the State would undoubtedly prove a failure. Even if it were entirely successful it would only decrease, not abolish, interest on productive capital.[147] In view of the manifold and grave uncertainties of the situation, it is practically certain that modern States are justified in permitting interest. _Civil Authorisation not Sufficient for Individual Justification_ This justification of the attitude of the State does not of itself demonstrate that the capitalist has a right to accept interest. The civil law tolerates many actions which are morally wrong in the individual; for example, the payment of starvation wages, the extortion of unjust prices, and the traffic in immorality. Obviously legal toleration does not _per se_ nor always exonerate the individual offender. How, then, shall we justify the individual receiver of interest? As already pointed out more than once, those persons who would not save without interest are justified on the ground of sacrifice. So long as the community desires their savings, and is willing to pay interest on them, the savers may take interest as the fair equivalent of the inconvenience that they undergo in performing this social service. The precise problem before us, then, is the justification of those savers and capitalists who do not need the inducement of interest, and whose functions of saving and conserving capital are sufficiently compensated without interest. It is a fact that the civil law can sometimes create moral rights and obligations. For example; the statute requiring a person to repair losses that he has unintentionally inflicted upon his neighbour is held by the moral theologians to be binding _in conscience_, as soon as the matter has been adjudicated by the court. In other words, this civil regulation confers on the injured man property rights, and imposes on the morally inculpable injurer property obligations. The civil statutes also give moral validity to the title of prescription, or adverse possession. When the alien possessor has complied with the legal provisions that apply, he has a moral right to the property, even though the original owner should assert his claim at a later time. Some moral theologians maintain that a legal discharge in bankruptcy liberates the bankrupt from the moral obligation of satisfying his unpaid debts. Several other situations might be cited in which the State admittedly creates moral rights of individual ownership which would have no definite existence in the absence of such legal action and authorisation.[148] This principle would seem to have received a particularly pertinent application for our inquiry in the doctrine of _præmium_ legale as a title of interest on loans. In the "Opus Morale" of Ballerini-Palmieri can be found a long list of moral theologians living in the seventeenth and eighteenth centuries who maintained that the mere legal sanction of a certain rate of interest was a sufficient moral justification for the lender.[149] While holding to the traditional doctrine that interest was not capable of being justified on intrinsic grounds, these writers contended that by virtue of its power of eminent domain the State could transfer from the borrower to the lender the right to the interest paid on a loan. They did not mean that the State could arbitrarily take one man's property and hand it over to another, but only that, when it sanctioned interest for the public welfare, this extrinsic circumstance (like the other "extrinsic titles" approved by moralists) annulled the claim of the borrower in favour of the lender. In other words, they maintained that the money paid in loan-interest did not belong to either borrower or lender with certainty or definiteness until the matter was determined by economic conditions and extrinsic circumstances. Hence legal authorisation for the common good was morally sufficient to award it to the lender. More than one of them declared that the State had the same right to determine this indeterminate property, to assign the ownership to the lender, that it had to transfer property titles by the device of prescription. And their general position seems to have been confirmed by the response of the Congregation of the Poenitentiaria, Feb., 1832, to the Bishop of Verona, the substance of which was that a confessor might adopt and act upon this position.[150] And yet, neither this nor any of the other precedents cited above, are sufficient to give certain moral sanction to the practice of interest-taking by those persons who would continue to save if interest were abolished. All the acts of legal authorisation that we have been considering relate to practices which are beneficial and necessary to society. Only in such cases has the State the moral authority to create or annul property rights. In the seventeenth and eighteenth centuries the legal authorisation of a certain rate of interest made that rate morally lawful simply because this legal act gave formal and authoritative testimony to the social utility of interest-taking. The State merely declared the reasonableness, and fixed the proper limits of the practice. The beneficent effect of interest-taking upon society was its underlying justification, was the ultimate fact which made it reasonable, and which gave to the action of the State moral value. Had the taking of interest on loans not been allowed the bulk of possible savings would either not have been saved at all, or would have been hoarded instead of converted into capital. And that money was badly needed in the commercial and industrial operations of the time. Hence the owners of it were in the position of persons who regarded saving and investing as a sacrifice for which interest was a necessary and proper compensation. To-day, however, there are millions of persons who would continue to perform both these functions without the inducement of interest. Therefore, the public good does not require that they should receive interest, nor that the State should have the power to clothe their interest-incomes with moral lawfulness. Inasmuch as the State is not certain that the abolition of interest would be socially expedient or practically possible, it is justified in permitting the institution to continue; but it has no power to affect the morality of interest-taking as an individual action. _How the Interest-Taker Is Justified_ Although the interest received by the non-sacrifice savers is not clearly justifiable on either intrinsic or social grounds, it is not utterly lacking in moral sanctions. In the first place, we have not contended that the intrinsic factors of productivity and service are _certainly_ invalid morally. We have merely insisted that the moral worth of these titles has never been satisfactorily demonstrated. Possibly they have a greater and more definite efficacy than has yet been shown by their advocates. In more concrete terms, we admit that the productivity of capital and the service of the capitalist to the community, are possible and doubtful titles to interest. A doubtful title to property is, indeed, insufficient by itself. In the case of the interest receiver, however, the doubtful titles of productivity and service are reinforced by the fact of possession. Thus supplemented, they are sufficient to justify the non-sacrifice saver in giving himself the benefit of the doubt as regards the validity of his right to take interest. To be sure, this indefinite and uncertain claim would be overthrown by a more definite and positive title. But no such antagonistic title exists. Neither the consumer nor the labourer can show any conclusive reason why interest should go to him rather than to the capitalist. Hence the latter has at least a presumptive title. In the circumstances this is morally sufficient. To this justification by presumption must be added a justification by analogy. The non-sacrifice savers seem to be in about the same position as those other agents of production whose rewards are out of proportion to their sacrifices. For example; the labourer of superior native ability gets as much compensation for the same quality and quantity of work as his companion who has only ordinary ability; and the exceptionally intelligent business man stands in the same relation to his less efficient competitor; yet the sacrifices undergone by the former of each pair is less than that suffered by the latter. It would seem that if the more efficient men may properly take the same rewards as those who make larger sacrifices, the non-sacrifice capitalist might lawfully accept the same interest as the man whose saving involves some sacrifice. On this principle the lenders who would not have invested their money in a productive enterprise were nevertheless permitted by the moralists of the post-mediæval period to take advantage of the title of _lucrum cessans_. Although they had relinquished no opportunity of gain, nor made any sacrifice, they were put on the same moral level as sacrificing lenders, and were allowed to take the same interest. As a determinant of ownership, possession is the feeblest of all factors, and yet it is of considerable importance for a large proportion of incomes and property. In the distribution of the national product, as well as in the division of the original heritage of the earth, a large part is played by the title of first occupancy. Much of the product of industry is assigned to the agents of production mainly on the basis of inculpable possession. That is; it goes to its receivers automatically, in exchange for benefits to those who hand it over, and without excessive exploitation of their needs. Just as the first arrival on a piece of land may regard it as a no-man's territory, and make it his own by the mere device of appropriation, so the capitalist may get morally valid possession of interest. Sometimes, indeed, this debatable share, this no-man's share of the product of industry, is secured in some part by the consumer of the labourer. In such cases their title to it is just as valid as the title of the capitalist, notwithstanding the doubtful titles of productivity and service which the latter has in his favour. First occupancy and possession are the more decisive factors. In the great majority of instances, however, the capitalist is the first occupant, and therefore the lawful possessor of the interest-share. The general justification of interest set forth in the immediately preceding paragraphs is supplemented in the case of the great majority of capital owners by the fact that their income from this source is relatively insignificant. The average income of the farmers of the United States is only 724 dollars per year, and of this 322 dollars is interest on the capital invested in the farm.[151] Even when we make due allowance for the high purchasing power of farm incomes, due to the lower cost of foodstuffs and house rent, the total amount of 724 dollars provides only a very moderate living. Consequently the great majority of farmers can regard the interest that they receive as a necessary part of the remuneration that is fairly due them on account of their labour, sacrifices, and risks. So far as they are concerned, the justification of interest, as interest, is not a practical question. The same observation applies to the majority of urban business men, such as small merchants and manufacturers. Their interest can be justified as not more than fair wages and profits. Again, there is a large number of interest receivers who are entirely dependent upon this kind of income, and who obtain therefrom only a moderate livelihood. They are mainly children, aged persons, and invalids. Unlike the classes just described, they cannot justify their interest as a fair supplement to wages; however, they may reasonably claim it as their equitable or charitable share of the common heritage of the earth. If they did not receive this interest-income they would have to be supported by their relatives or by the State. For many reasons this would be a much less desirable arrangement. Consequently their general claim to interest is supplemented by considerations of human welfare. The difference between the ethical character of the interest discussed in the last two paragraphs and of that received by persons who possess large incomes, is too often overlooked in technical treatises. Every man owning any productive goods is reckoned as a capitalist, and assumed to receive interest. If, however, a man's total interest-income is so small that when combined with all his other revenues it merely completes the equivalent of a decent living, it is surely of very little significance as interest. It stands in no such need of justification as the interest obtained by men whose incomes amount to, say, ten thousand dollars a year and upwards. Still another confirmatory title of interest is suggested by the following well known declaration of St. Thomas Aquinas: "The possession of riches is not in itself unlawful if the order of reason be observed: that a man should possess justly what he owns, and _use_ it in a proper manner for himself and others."[152] Neither just acquisition nor proper use is alone sufficient to render private possessions morally good. Both must be present. As we have seen above, the capitalist can appeal to certain presumptive and analogous titles which justify practically his acquisition of interest; but there can be no doubt that his claim and his moral power of disposal are considerably strengthened when he puts his interest-income to a proper use. One way of so using it is for a reasonable livelihood, as exemplified in the case of the farmers, business men, and non-workers whom we considered above. Those persons who receive incomes in excess of their reasonable needs could devote the surplus to religion, charity, education, and a great variety of altruistic purposes. We shall deal with this matter specifically in the chapter on the "Duty of Distributing Superfluous Wealth." In the meantime it is sufficient to note that the rich man who makes a benevolent use of his interest-income has a special reason for believing that his receipt of interest is justified. The decisive value attributed to presumption, analogy, possession, and doubtful titles in our vindication of the capitalist's claim to interest, is no doubt disappointing to those persons who desire clear-cut mathematical rules and principles. Nevertheless, they are the only factors that seem to be available. While the title that they confer upon the interest receiver is not as definite nor as noble as that by which the labourer claims his wages or the business man his profits, it is morally sufficient. It will remain logically and ethically unshaken until more cogent arguments have been brought against it than have yet appeared in the denunciations of the income of the capitalist. And what is true of him is likewise true of the rent receiver, and of the person who profits by the "unearned increment" of land values. In all three cases the presumptive justification of "workless" incomes will probably remain valid as long as the present industrial system endures. FOOTNOTES: [142] "Growth of Capital," p. 152. [143] Cf. Gonner, "Interest and Saving," p. 73; Cassel, "The Nature and Necessity of Interest," ch. iv. [144] New York, 1907. [145] "Principles of Economics," II, 42. [146] Cf. Hobson, "The Economics of Distribution," pp. 259-265. [147] Cf. Fisher, "Elementary Principles of Economics," pp. 396, 397. However, he does not discuss in this passage the possibility of suppressing interest on productive capital by a direct method. [148] Cf. Lehmkuhl, "Theologia Moralis," I, nos. 917, 965, 1035. [149] Vol. 3, pp. 617-629; 2d ed. [150] Ballerini-Palmieri, loc. cit.; cf. Van Roey, op. cit., pp. 73-75. [151] Cf. _American Economic Review_, March, 1916; p. 46. [152] "Contra Gentiles," lib. 3, c. 123. CHAPTER XIV CO-OPERATION AS A PARTIAL SOLVENT OF CAPITALISM Interest is not a return for labour. The majority of interest receivers are, indeed, regularly engaged at some active task, whether as day labourers, salaried employés, directors of industry, or members of the professions; but for these services they obtain specific and distinct compensation. The interest that they get comes to them solely in their capacity as owners of capital, independently of any personal activity. From the viewpoint of economic distribution, interest is a "workless" income. As such, it seems to challenge that ethical intuition which connects reward with effort and which inclines to regard income from any other source as not quite normal. Moreover, interest absorbs a large part of the national income, and perpetuates grave economic inequalities.[153] Nevertheless, interest cannot be wholly abolished. As long as capital remains in private hands, its owners will demand and obtain interest. The only way of escape is by the road of Socialism, and this would prove a blind alley. As we have seen in a preceding chapter, Socialism is ethically and economically impossible. May not the burdens and disadvantages of interest be mitigated or minimised? Such a result could conceivably be reached in two ways: the sum total of interest might be reduced, and the incomes derived from interest might be more widely distributed. _Reducing the Rate of Interest_ No considerable diminution of the interest-volume can be expected through a decline in the interest rate. As far back as the middle of the eighteenth century, England and Holland were able to borrow money at three per cent. During the period that has since intervened, the rate has varied from three to six per cent. on this class of loans. Between 1870 and 1890, the general rate of interest declined about two per cent., but it has risen since the latter date about one per cent. The Great War now (1916) in action is destroying an enormous amount of capital, and it will, as in the case of all previous military conflicts of importance, undoubtedly be followed by a marked rise in the rate of interest. On the other hand, the only definite grounds upon which a decline in the rate can be hoped for are either uncertain or unimportant. They are the rapid increase of capital, and the extension of government ownership and operation of natural monopolies. The first is uncertain in its effects upon the rate of interest because the increased supply of capital is often neutralised by the process of substitution. That is, a large part of the new capital does not compete with and bring down the price of the old capital. Instead, it is absorbed in new inventions, new types of machinery, and new processes of production, all of which take the place of labour, thus tending to increase rather than diminish the demand for capital and the rate of interest. To be sure, the demand for capital thus arising has not always been sufficient to offset the enlarged supply. Since the Industrial Revolution capital has at certain periods and in certain regions increased so rapidly that it could not all find employment in new forms and in old forms at the old rate. In some instances a decline in the rate of interest can be clearly traced to the disproportionately quick growth of capital. But this phenomenon has been far from uniform, and there is no indication that it will become so in the future. The possibilities of the process of substitution have been by no means exhausted. The effects of government ownership are even more problematical. States and cities are, indeed, able to obtain capital more cheaply than private corporations for such public utilities as railways, telegraphs, tramways, and street lighting; and public ownership of all such concerns will probably become general in the not remote future. Nevertheless the social gain is not likely to be proportionate to the reduction of interest on this section of capital. A part, possibly a considerable part, of the saving in interest will be neutralised by the lower efficiency and greater cost of operation; for in this respect publicly managed are inferior to privately managed enterprises. Consequently, the charges to the public for the services rendered by these utilities cannot be reduced to the same degree as the rate of interest on the capital. On the other hand, the exclusion of private operating capital from this very large field of public utilities should increase competition among the various units of capital, and thus bring down its rewards. To what extent this would happen cannot be estimated even approximately. The only safe statement is that the decline in the general rate of interest would probably be slight. _Need for a Wider Distribution of Capital_ The main hope of lightening the social burden of interest lies in the possible reduction in the necessary volume of capital, and especially in a wider distribution of interest-incomes. In many parts of the industrial field there is a considerable waste of capital through unnecessary duplication. This means that a large amount of unnecessary interest is paid by the consumer in the form of unnecessarily high prices. Again, the owners of capital and receivers of interest constitute only a minority of the population of all countries, with the possible exception of the United States. The great majority of the wage earners in all lands possess no capital, and obtain no interest. Not only are their incomes small, often pitiably small, but their lack of capital deprives them of the security, confidence, and independence which are required for comfortable existence and efficient citizenship. They have no income from productive property to protect them against the cessation of wages. During periods of unemployment they are frequently compelled to have recourse to charity, and to forego many of the necessary comforts of life. So long as the bulk of the means of production remains in the hands of a distinct capitalist class, this demoralising insecurity of the workers must continue as an essential part of our industrial system. While it might conceivably be eliminated through a comprehensive scheme of State insurance, this arrangement would substitute dependence upon the State for dependence upon the capitalist, and be much less desirable than ownership of income-bearing property. The workers who possess no capital do not enjoy a normal and reasonable degree of independence, self respect, or self confidence. They have not sufficient control over the wage contract and the other conditions of employment, and they have nothing at all to say concerning the goods that they shall produce, or the persons to whom their product shall be sold. They lack the incentive to put forth their best efforts in production. They cannot satisfy adequately the instinct of property, the desire to control some of the determining forms of material possession. They are deprived of that consciousness of power which is generated exclusively by property, and which contributes so powerfully toward the making of a contended and efficient life. They do not possess a normal amount of freedom in politics, nor in those civic and social relations which lie outside the spheres of industry and politics. In a word, the worker without capital has not sufficient power over the ordering of his own life. _The Essence of Co-operative Enterprise_ The most effective means of lessening the volume of interest, and bringing about a wider distribution of capital, is to be found in co-operative enterprise. Co-operation in general denotes the unified action of a group of persons for a common end. A church, a debating club, a joint stock company, exemplifies co-operation in this sense. In the strict and technical sense, it has received various definitions. Professor Taussig declares that it "consists essentially in getting rid of the managing employer"; but this description is applicable only to co-operatives of production. "A combination of individuals to economise by buying in common, or increase their profits by selling in common" (Encyclopedia Britannica) is likewise too narrow, since it fits only distributive and agricultural co-operation. According to C. R. Fay, a co-operative society is "an association for the purpose of joint trading, originating among the weak, and conducted always in an unselfish spirit." If the word, "trading" be stretched to comprehend manufacturing as well as commercial activities, Fay's definition is fairly satisfactory. The distinguishing circumstance, "originating among the weak," is also emphasised by Father Pesch in his statement that the essence, aim, and meaning of co-operation are to be found in "a combination of the economically weak in common efforts for the security and betterment of their condition."[154] In order to give the proper connotation for our purpose, we shall define co-operation as, that joint economic action which seeks to obtain for a relatively weak group all or part of the profits and interest which in the ordinary capitalist enterprise are taken by a smaller and different group. This formula puts in the foreground the important fact that in every form of co-operative effort, some interest or profits, or both, are diverted from those who would have received them under purely capitalistic arrangements, and distributed among a larger number of persons. Thus it indicates the bearing of co-operation upon the problem of lightening the social burden of interest. From the viewpoint of economic function, co-operation may be divided into two general kinds, producers' and consumers'. The best example of the former is a wage earners' productive society; of the latter, a co-operative store. Credit co-operatives and agricultural co-operatives fall mainly under the former head, inasmuch as their principal object is to assist production, and to benefit men as producers rather than as consumers. Hence from the viewpoint of type, co-operation may be classified as credit, agricultural, distributive, and productive. _Co-operative Credit Societies_ A co-operative credit society is a bank controlled by the persons who patronise it, and lending on personal rather than material security. Such banks are intended almost exclusively for the relatively helpless borrower, as, the small farmer, artisan, shopkeeper, and the small man generally. Fundamentally they are associations of neighbours who combine their resources and their credit in order to obtain loans on better terms than are accorded by the ordinary commercial banks. The capital is derived partly from the sale of shares of stock, partly from deposits, and partly from borrowed money. In Germany, where credit associations have been more widely extended and more highly developed than in any other country, they are of two kinds, named after their respective founders, Schulze-Delitzsch and Raiffeisen. The former operates chiefly in the cities, serves the middle classes rather than the very poor, requires all its members to subscribe for capital stock, commits them to a long course of saving, and thus develops their interest as lenders. The Raiffeisen societies have, as a rule, very little share capital, exist chiefly in the country districts, especially among the poorest of the peasantry, are based mostly on personal credit, and do not profess to encourage greatly the saving and lending activities of their members. Both forms of association loan money to their members at lower rates of interest than these persons could obtain elsewhere. Hence credit co-operation directly reduces the burden of interest. The Schulze-Delitzsch societies have more than half a million members in the cities and towns of Germany, sixty per cent. of whom take advantage of the borrowing facilities. The Raiffeisen banks comprise about one-half of all the independent German agriculturists. Some form of co-operative banking is well established in every important country of Europe, except Denmark and Great Britain. In the former country its place seems to be satisfactorily filled by the ordinary commercial banks. Its absence from Great Britain is apparently due to the credit system provided by the large landholders, to the scarcity of peasant proprietors, and to general lack of initiative. It is especially strong in Italy, Belgium, and Austria, and it has made a promising beginning in Ireland. In every country in which it has obtained a foothold, it gives indication of steady and continuous progress. Nevertheless it is subject to definite limits. It can never make much headway among that class of persons whose material resources are sufficiently large and palpable to command loans on the usual terms offered by the commercial banks. As a rule, these terms are quite as favourable as those available through the co-operative credit associations. It is only because the poorer men cannot obtain loans from the commercial banks on the prevailing conditions that they are impelled to have recourse to the co-operative associations. _Co-operative Agricultural Societies_ The chief operations of agricultural co-operative societies are manufacturing, marketing, and purchasing. In the first named field the most important example is the co-operative dairy. The owners of cows hold the stock or shares of the concern, and in addition to dividends receive profits in proportion to the amount of milk that they supply. In Ireland and some other countries, a portion of the profits goes to the employés of the dairy as a dividend on wages. Other productive co-operatives of agriculture are found in cheese making, bacon curing, distilling, and wine making. All are conducted on the same general principles as the co-operative dairy. Through the marketing societies and purchasing societies, the farmers are enabled to sell their products to better advantage, and to obtain materials needed for carrying on agricultural operations more cheaply than would be possible by isolated individual action. Some of the products marketed by the selling societies are eggs, milk, poultry, fruit, vegetables, live stock, and various kinds of grain. The purchasing societies supply for the most part manures, seeds, and machinery. Occasionally they buy the most costly machinery in such a way that the association becomes the corporate owner of the implements. In these cases the individual members have only the use of the machines, but they would be unable to enjoy even that advantage were it not for the intervention of the co-operative society. Where such arrangements exist, the society exemplifies not only co-operative buying but co-operative ownership. Agricultural co-operation has become most widely extended in Denmark, and has displayed its most striking possibilities in Ireland. Relatively to its population, the former country has more farmers in co-operative societies, and has derived more profit therefrom, than any other nation. The rapid growth and achievements of agricultural co-operation in the peculiarly unfavourable circumstances of Ireland constitute the most convincing proof to be found anywhere of the essential soundness and efficacy of the movement. Various forms of rural co-operative societies are solidly established in Germany, France, Belgium, Italy, and Switzerland. In recent years the movement has made some progress in the United States, especially in relation to dairies, grain elevators, the marketing of live stock and fruit, and various forms of rural insurance. The co-operative insurance companies effect a saving to the Minnesota farmers of $700,000 annually, and the co-operative elevators handle about 30 per cent. of the grain marketed in that state. In 1915 the business transacted by the co-operative marketing and purchasing organisations of the farmers of the United States amounted to $1,400,000,000. The transformation in the rural life of more than one European community through co-operation has amounted to little less than a revolution. Higher standards of agricultural products and production have been set up and maintained, better methods of farming have been inculcated and enforced, and the whole social, moral, and civic life of the people has been raised to a higher level. From the viewpoint of material gain, the chief benefits of agricultural co-operation have been the elimination of unnecessary middlemen, and the economies of buying in large quantities, selling in the best markets, and employing the most efficient implements. As compared with farming conducted on a large scale, the small farm possesses certain advantages, and is subject to certain disadvantages. It is less wasteful, permits greater attention to details, and makes a greater appeal to the self interest of the cultivator; but the small farmer cannot afford to buy the best machinery, nor is he in a position to carry on to the best advantage the commercial features of his occupation, such as borrowing, buying, and marketing. Co-operation frees him from all these handicaps. "The co-operative community ... is one in which groups of humble men combine their efforts, and to some extent their resources, in order to secure for themselves those advantages in industry which the masters of capital derive from the organisation of labour, from the use of costly machinery, and from the economies of business when done on a large scale. They apply in their industry the methods by which the fortunes of the magnates in commerce and manufacture are made." These words, uttered by a prominent member of the Irish co-operative movement, summarise the aims and achievements of agricultural co-operation in every country of Europe in which it has obtained a strong foothold. In every such community the small farm has gained at the expense of the large farm system. Finally, agricultural co-operation reduces the burden of interest by eliminating some unnecessary capital, stimulates saving among the tillers of the soil by providing a ready and safe means of investment, and in manifold ways contributes materially toward a better distribution of wealth. _Co-operative Mercantile Societies_ Co-operative stores are organised by and for consumers. In every country they follow rather closely the Rochdale system, so called from the English town in which the first store of this kind was established in 1844. The members of the co-operative society furnish the capital, and receive thereon interest at the prevailing rate, usually five per cent. The stores sell goods at about the same prices as their privately owned competitors, but return a dividend on the purchases of all those customers who are members of the society. The dividends are provided from the surplus which remains after wages, interest on the capital stock, and all other expenses have been paid. In some co-operative stores non-members receive a dividend on their purchases at half the rate accorded to members of the society, but only on condition that these payments shall be invested in the capital stock of the enterprise. And the members themselves are strongly urged to make this disposition of their purchase-dividends. Since the latter are paid only quarterly, the co-operative store exercises a considerable influence toward inducing its patrons to save and to become small capitalists. In Great Britain the vast majority of the retail stores have been federated into two great wholesale societies, one in England and the other in Scotland. The retail stores provide the capital, and participate in the profits according to the amounts purchased, just as the individual consumers furnish the capital and share the profits of the retail establishments. The Scottish Wholesale Society divides a part of the profits among its employés. Besides their operations as jobbers, the wholesale societies are bankers for the retail stores, and own and operate factories, farms, warehouses, and steamships. Many of the retail co-operatives likewise carry on productive enterprises, such as milling, tailoring, bread making, and the manufacture of boots, shoes, and other commodities, and some of them build, sell, and rent cottages, and lend money to members who desire to obtain homes. The co-operative store movement has made greatest progress in its original home, Great Britain. In 1913 about one person in every three was to some degree interested in or a beneficiary of these institutions. The profits of the stores amounted to about $71,302,070, which was about 35 per cent. on the capital. The employés numbered about 145,000, and the sales for the year aggregated $650,000,000. The English Wholesale Society was the largest flour miller and shoe manufacturer in Great Britain, and its total business amounted to $150,000,000. Outside of Great Britain, co-operative distribution has been most successful in Germany, Belgium, and Switzerland. It has had a fair measure of development in Italy, but has failed to assume any importance in France. "There is every sign that within the near future--except in France--the stores will come to include the great majority of the wage earning class, which is a constantly growing percentage of the total population."[155] Within recent years a respectable number of stores have been established on a sound basis in Canada and the United States. Owing, however, to the marked individualism and the better economic conditions of these two countries, the co-operative movement will continue for some time to be relatively slow. As in the case of agricultural co-operation, the money benefits accruing to the members of the co-operative stores consist mainly of profits rather than interest. In the absence of the store societies, these profits would have gone for the most part to middlemen as payments for the risks and labour of conducting privately owned establishments. Forty-seven of the sixty million dollars profits of the British co-operative stores in 1910 were divided among more than two and one-half million members of these institutions, instead of going to a comparatively small number of private merchants. The other thirteen million dollars were interest on the capital stock. Had the members invested an equal amount in other enterprises they could, indeed, have obtained about the same rate and amount of interest, but in the absence of the co-operative stores their inducements and opportunities to save would have been much smaller. For it must be kept in mind that a very large part of the capital stock in the co-operative stores is derived from the members' dividends on their purchases at such stores, and would not have come into existence at all without these establishments. The gains of the co-operative stores, whether classified as profits or as interest, are evidently a not inconsiderable indication of a better distribution of wealth. _Co-operation in Production_ Co-operative production has occasionally been pronounced a failure. This judgment is too sweeping and too severe. "As a matter of fact," says a prominent London weekly, "the co-operators' success has been even more remarkable in production than in distribution. The co-operative movement runs five of the largest of our flour mills; it has, amongst others, the very largest of our boot factories; it makes cotton cloth and woollens, and all sorts of clothing; it has even a corset factory of its own; it turns out huge quantities of soap; it makes every article of household furniture; it produces cocoa and confectionery; it grows its own fruit and makes its own jams; it has one of the largest tobacco factories, and so on." Obviously this passage refers to that kind of productive co-operation which is carried on by the stores, not to productive concerns owned and managed by the workers therein employed. Nevertheless the enterprises in question are co-operatively managed, and hence exemplify co-operation rather than private and competitive industry. They ought not to be left out of any statement of the field occupied by co-operative production. The limitations and possibilities of co-operation in production can best be set forth by considering its three different forms separately. The "perfect" form occurs when all the workers engaged in a concern own all the share capital, control the entire management, and receive the whole of the wages, profits, and interest. In this field the failures have been much more numerous and conspicuous than the successes. Godin's stove works at Guise, France, is the only important enterprise of this kind that is now in existence. Great Britain has several establishments in which the workers own a large part of the capital, but apparently none in which they are the sole proprietors and managers. The "labour societies" of Italy, consisting mostly of diggers, masons, and bricklayers, co-operatively enter into contracts for the performance of public works, and share in the profits of the undertaking in addition to their wages; but the only capital that they provide consists of comparatively simple and inexpensive tools. The raw material and other capital is furnished by the public authority which gives the contract. A second kind of productive co-operation is found in the arrangement known as co-partnership. This is "the system under which, in the first place, a substantial and known share of the profit of a business belongs to the workers in it, not by right of any shares they may hold, or any other title, but simply by right of the labour they have contributed to make the profit; and, in the second place, every worker is at liberty to invest his profit, or any other savings, in shares of the society or company, and so become a member entitled to vote on the affairs of the body which employs him."[156] So far as its first, or profit sharing, feature is concerned, co-partnership is not genuine co-operation, for it includes neither ownership of capital nor management of the business. Co-operative action begins only with the adoption of the second element. In most of the existing co-partnership concerns, all the employés are urged, and many of them required to invest at least a part of their profits in the capital stock. The most notable and successful of these experiments is that carried on by the South Metropolitan Gas Company of London. Practically all the company's 6,000 employés are now among its stockholders. Although their combined holdings are only about one-twenty-eighth of the total, they are empowered to select two of the ten members of the board of directors. Essentially the same co-partnership arrangements have been adopted by about one-half the privately owned gas companies of Great Britain. In none of them, however, have the workers obtained as yet such a large percentage of either ownership or control as in the South Metropolitan. Co-partnership exists in several other enterprises in Great Britain, and is found in a considerable number of French concerns. There are a few instances in the United States, the most thoroughgoing being that of N. O. Nelson & Co. at Le Claire, Ill. As already noted, the co-operative stores exemplify a third type of co-operative production. In some cases the productive concern is under the management of a local retail establishment, but the great majority of them are conducted by the English and Scottish Wholesale Societies. As regards the employés of these enterprises, the arrangement is not true co-operation, since they have no part in the ownership of the capital. The Scottish Wholesale Society, as we have seen, permits the employés of its productive works to share in the profits thereof; nevertheless it does not admit them as stockholders, nor give them any voice in the management. In all cases the workers may, indeed, become owners of stock in their local retail stores. Since the latter are stockholders in the wholesale societies, which in turn own the productive enterprises, the workers have a certain indirect and attenuated proprietorship in the productive concerns. But they derive therefrom no dividends. All the interest and most of the profits of the productive establishments are taken by the wholesale and retail stores. For it is the theory of the wholesale societies that the employés in the works of production should share in the gains thereof only as consumers. They are to profit only in the same way and to the same extent as other consumer-members of the local retail establishments. The most effective and beneficial form of co-operative production is evidently that which has been described as the "perfect" type. Were all production organised on this plan, the social burden of interest would be insignificant, industrial despotism would be ended, and industrial democracy realised. As things are, however, the establishments exemplifying this type are of small importance. Their increase and expansion are impeded by lack of directive ability and of capital, and the risk to the workers' savings. Yet none of these obstacles is necessarily insuperable. Directive ability can be developed in the course of time, just as it was in the co-operative stores. Capital can be obtained fast enough perhaps to keep pace with the supply of directive ability and the spirit of co-operation. The risk undertaken by workers who put their savings into productive concerns owned and managed by themselves need not be greater than that now borne by investors in private enterprises of the same kind. There is no essential reason why the former should not provide the same profits and insurance against business risks as the latter. While the employés assume none of the risks of capitalistic industry, neither do they receive any of the profits. If the co-operative factory exhibits the same degree of business efficiency as the private enterprise it will necessarily afford the workers adequate protection for their savings and capital. Indeed, if "perfect" co-operative production is to be successful at all its profits will be larger than those of the capitalistic concern, owing to the greater interest taken by the workers in their tasks, and in the management of the business. For a long time to come, however, it is probable that "perfect" co-operative production will be confined to relatively small and local industries. The difficulty of finding sufficient workers' capital and ability to carry on, for example, a transcontinental railroad or a nationwide steel business, is not likely to be overcome for one or two generations.[157] The labour co-partnership form of co-operation is susceptible of much wider and more rapid extension. It can be adapted readily to the very large as well as to the small and medium sized concerns. Since it requires the workers to own but a part of the capital, it can be established in any enterprise in which the capitalists show themselves willing and sympathetic. In every industrial corporation there are some employés who possess savings, and these can be considerably increased through the profit sharing feature of co-partnership. A very long time must, indeed, elapse before the workers in any of the larger enterprises could get possession of all, or even of a controlling share of the capital, and a considerable time would be needed to educate and fit them for successful management. Production under the direction of the co-operative stores can be extended faster than either of the other two forms, and it has before it a very wide even though definitely limited field. The British wholesale societies have already shown themselves able to conduct with great success large manufacturing concerns, have trained and attracted an adequate number of competent leaders, and have accumulated so much capital that they have been obliged to invest several million pounds in other enterprises. The possible scope of the stores and their co-operative production has been well described by C. R. Fay: "distribution of goods for personal consumption, first, among the working class population, secondly, among the salaried classes who feel a homogeneity of professional interest; production by working class organisations alone (with rare exceptions in Italy) of all the goods which they distribute to their members. But this is its limit. Distribution among the remaining sections of the industrial population; production for distribution to these members; production of the instruments of production, and production for international trade; the services of transport and exchange: all these industrial departments are, so far as can be seen, permanently outside the domain of a store movement."[158] The theory by which the stores attempt to justify the exclusion of the employés of their productive concerns from a share of the profits thereof is that all profits come ultimately from the pockets of the consumer, and should all return to that source. The defect in this theory is that it ignores the question whether the consumers ought not to be required to pay a sufficiently high price for their goods to provide the producers with profits in addition to wages. While the wholesale stores are the owners and managers of the capital in the productive enterprises, and on the capitalistic principle should obtain the profits, the question remains whether this is necessarily a sound principle, and whether it is in harmony with the theory and ideals of co-operation. In those concerns which have adopted the labour co-partnership scheme, the workers, even when they own none of the capital, are accorded a part of the profits. It is assumed that this is a fairer and wiser method of distribution than that which gives the labourer only wages, leaving all the profits to the manager-capitalist. This feature of co-partnership rests on the theory that the workers can, if they will, increase their efficiency and reduce the friction between themselves and their employer to such an extent as to make the profit sharing arrangement a good thing for both parties. Consequently the profits obtained by the workers are a payment for this specific contribution to the prosperity of the business. Why should not this theory find recognition in productive enterprises conducted by the co-operative stores? In the second place, the workers in these concerns ought to be permitted to participate in the capital ownership and management. They would thus be strongly encouraged to become better workers, to save more money, and to increase their capacity for initiative and self government. Moreover, this arrangement would go farther than any other system toward reconciling the interests of producer and consumer. As producer, the worker would obtain, besides his wages, interest and profits up to the limit set by the competition of private productive concerns. As consumer, he would share in the profits and interest which would otherwise have gone to the private distributive enterprises. In this way the producer and consumer would each get the gains that were due specifically and respectively to his activity and efficiency. _Advantages and Prospects of Co-operation_ At this point it will perhaps be well to sum up the advantages and to estimate the prospects of the co-operative movement. In all its forms co-operation eliminates some waste of capital and energy, and therefore transfers some interest and profits from a special capitalist and undertaking class to a larger and economically weaker group of persons. For it must be borne in mind that all co-operative enterprises are conducted mainly by and for labourers or small farmers. Hence the system always makes directly for a better distribution of wealth. To a considerable extent it transfers capital ownership from those who do not themselves work with or upon capital to those who are so engaged; namely, the labourers and the farmers; thus it diminishes the unhealthy separation now existing between the owners and the users of the instruments of production. Co-operation has, in the second place, a very great educational value. It enables and induces the weaker members of economic society to combine and utilise energies and resources that would otherwise remain unused and undeveloped; and it greatly stimulates and fosters initiative, self confidence, self restraint, self government, and the capacity for democracy. In other words, it vastly increases the development and efficiency of the individual. It likewise induces him to practise thrift, and frequently provides better fields for investment than would be open to him outside the co-operative movement. It diminishes selfishness and inculcates altruism; for no co-operative enterprise can succeed in which the individual members are not willing to make greater sacrifices for the common good than are ordinarily evoked by private enterprise. Precisely because co-operation makes such heavy demands upon the capacity for altruism, its progress always has been and must always continue to be relatively slow. Its fundamental and perhaps chief merit is that it does provide the mechanism and the atmosphere for a greater development of the altruistic spirit than is possible under any other economic system that has ever been tried or devised. By putting productive property into the hands of those who now possess little or nothing, co-operation promotes social stability and social progress. This statement is true in some degree of all forms of co-operation, but it applies with particular force to those forms which are carried on by the working classes. A steadily growing number of keen-sighted social students are coming to realise that an industrial system which permits a comparatively small section of society to own the means of production and the instrumentalities of distribution, leaving to the great majority of the workers nothing but their labour power, is fundamentally unstable, and contains within itself the germs of inevitable dissolution. No mere adequacy of wages and other working conditions, and no mere security of the workers' livelihood, can permanently avert this danger, nor compensate the individual for the lack of power to determine those activities of life which depend upon the possession of property. Through co-operation this unnatural divorce of the users from the owners of capital can be minimised. The worker is converted from a mere wage earner to a wage earner plus a property owner, thus becoming a safer and more useful member of society. In a word, co-operation produces all the well recognised individual and social benefits which have in all ages been evoked by the "magic of property." Finally, co-operation is a golden mean between individualism and Socialism. It includes all the good features and excludes all the evil features of both. On the one hand, it demands and develops individual initiative and self reliance, makes the rewards of the individual depend upon his own efforts and efficiency, and gives him full ownership of specific pieces of property. On the other hand, it compels him to submerge much of the selfishness and indifference to the welfare of his fellows which characterise our individual economy. It embraces all the good that is claimed for Socialism because it induces men to consider and to work earnestly for the common good, eliminates much of the waste of competitive industry, reduces and redistributes the burdens of profits and interest, and puts the workers in control of capital and industry. At the same time, it avoids the evils of an industrial despotism, of bureaucratic inefficiency, of individual indifference, and of an all pervading collective ownership. The resemblances that Socialists sometimes profess to see between their system and co-operation are superficial and far less important than the differences. Under both arrangements the workers would, we are told, own and control the means of production; but the members of a co-operative society directly own and immediately control a _definite amount of specific capital_, which is essentially _private_ property. In a Socialist régime the workers' ownership of capital would be collective not private, general not specific, while their control of the productive instruments with which they worked would be shared with other citizens. The latter would vastly outnumber the workers in any particular industry, and would be interested therein not as producers but as consumers. No less obvious and fundamental are the differences in favour of co-operation as regards the vital matters of freedom, opportunity, and efficiency. In so far as the future of co-operation can be predicted from its past, the outlook is distinctly encouraging. The success attained in credit, agriculture, and distribution, is a sufficient guarantee for these departments. While productive co-operation has experienced more failures than successes, it has finally shown itself to be sound in principle, and feasible in practice. Its extension will necessarily be slow, but this is exactly what should be expected by any one who is acquainted with the limitations of human nature, and the history of human progress. If a movement that is capable of modifying so profoundly the condition of the workers as is co-operative production, gave indications of increasing rapidly, we should be inclined to question its soundness and permanence. Experience has given us abundant proof that no mere system or machinery can effect a revolutionary improvement in economic conditions. No social system can do more than provide a favourable environment for the development of those individual capacities and energies which are the true and the only causal forces of betterment. Nor is it to be expected that any of the other three forms of co-operation will ever cover the entire field to which it might, absolutely speaking, be extended; or that co-operation as a whole will become the one industrial system of the future. Even if the latter contingency were possible it would not be desirable. The elements of our economic life, and the capacities of human nature, are too varied and too complex to be forced with advantage into any one system, whether capitalism, Socialism, or co-operation. Any single system or form of socio-economic organisation would prove an intolerable obstacle to individual opportunity and social progress. Multiplicity and variety in social and industrial orders are required for an effective range of choices, and an adequate scope for human effort. In a general way the limits of co-operation in relation to the other forms of economic organisation have been satisfactorily stated by Mr. Aneurin Williams: "I suggest, therefore, that where there are great monopolies, either natural or created by the combination of businesses, there you have a presumption in favour of State and municipal ownership. In those forms of industry where individuality is everything; where there are new inventions to make, or to develop or put on the market, or merely to adopt in some rapidly transformed industry; where the eye of the master is everything; where reference to a committee, or appeals from one official to another, would cause fatal delay: there is the natural sphere of individual enterprise pure and simple. Between these two extremes there is surely a great sphere for voluntary association to carry on commerce, manufacture, and retail trade, in circumstances where there is no natural monopoly, and where the routine of work is not rapidly changing, but on the whole fairly well established and constant."[159] The province open to co-operation is, indeed, very large. If it were fully occupied the danger of a social revolution would be non-existent, and what remained of the socio-industrial problem would be relatively undisturbing and unimportant. The "specialisation of function" in industrial organisation, as outlined by Mr. Williams, would give a balanced economy in which the three great socio-economic systems and principles would have full play, and each would be required to do its best in fair competition with the other two. Economic life would exhibit a diversity making strongly for social satisfaction and stability, inasmuch as no very large section of the industrial population would desire to overthrow the existing order. Finally, the choice of three great systems of industry would offer the utmost opportunity and scope for the energies and the development of the individual. And this, when all is said, remains the supreme end of a just and efficient socio-industrial organisation. REFERENCES ON SECTION II FISHER: The Rate of Interest. New York; 1907. CASSEL: Nature and Necessity of Interest. London; 1903. GONNER: Interest and Saving. London; 1906. LANDRY: L'Intérêt du Capital. Paris; 1904. MENGER: The Right to the Whole Produce of Labour. London; 1899. CATHREIN-GETTELMAN: Socialism. St. Louis; 1904. SKELTON: Socialism: A Critical Analysis. New York; 1911. SPARGO: Socialism. Macmillan; 1906. WALLING: Socialism As It Is. New York; 1912. HILLQUIT-RYAN: Socialism: Promise or Menace? Macmillan; 1914. SAVATIER: La Théorie Moderne du Capital et la Justice. Paris; 1898. GARRIGUET: Régime du Travail. Paris; 1908. FUNK: Zins und Wucher. Tübingen; 1868. HOLYOAKE: The History of Co-operation. London; 1906. FAY: Co-operation at Home and Abroad. London; 1908. WILLIAMS: Copartnership and Profit-Sharing. Henry Holt & Co.; 1913. MANN, SIEVERS, COX: The Real Democracy. London; 1913. Also the works of Taussig, Devas, Antoine, Hobson, Nearing, Willoughby, and Hitze, which were given at the end of the introductory chapter. FOOTNOTES: [153] Professor Scott Nearing estimates the annual income derived from the ownership of property in the United States; that is, land and all forms of capital, at from six to nine billion dollars. Professor W. I. King gives the combined shares of the national income received by the landowners and the capitalists at more than six and three-quarter billions in 1910. According to the Census Bulletin on the "Estimated Valuation of National Wealth," the capital goods of the country were in 1912 approximately $175,000,000,000.00. At four per cent. this would mean an annual income of seven billion dollars. The lowest of the three estimates, six billion dollars, is equivalent to more than sixty dollars a year for every man, woman, and child in the United States. If that sum were equally distributed among the whole population, it would mean an increase of between forty and sixty per cent. in the income of the majority of workingmen's families! Nor do present tendencies hold out any hope of an automatic reduction of the interest-burden in the future. In the opinion of Professor Scott Nearing, "the present economic tendencies will greatly increase the amount of property income paid with each passing decade." "Income," p. 199; New York, 1915. See especially ch. vii. According to Professor Taussig, "the absolute amount of income going to this [the capitalist] class tends to increase, and its share of the total income tends also to increase; whereas for the labourers, though their total income may increase, their share of income of society as a whole tends to decline." "Principles of Economics," II, 205. [154] "Lehrbuch der Nationaloekonomie," III, 517. [155] Fay, "Co-operation at Home and Abroad," p. 340. [156] Schloss, "Methods of Industrial Remuneration," pp. 353, 354. [157] Cf., however, Mr. A. R. Orage's work, "National Guilds," London, 1914. [158] Op. cit., p. 341. [159] "Copartnership and Profit-Sharing," p. 235. SECTION III THE MORAL ASPECT OF PROFITS CHAPTER XV THE NATURE OF PROFITS We have seen that rent goes to the landlord as the price of land use, while interest is received by the capitalist as the return for the use of capital. The two shares of the product which remain to be considered include an element which is absent from both rent and interest. The use for which profits and wages are paid comprises not merely the utilisation of a productive factor, but the sustained exertion of the factor's owner. Like the landowner and the capitalist, the business man and the labourer put the productive factors which they control at the disposal of the industrial process; but they do so only when and so long as they exercise human activity. The shares that they receive are payments for the continuous output of human energy. No such significance attaches to rent or interest. _The Functions and Rewards of the Business Man_ Who is the business man, and what is the nature of his share of the product of industry? Let us suppose that the salaried manager of a hat factory decides to set up a business of the same kind for himself. He wishes to become an entrepreneur, an undertaker, a director of industry, in more familiar language, a business man. Let us assume that he is without money, but that he commands extraordinary financial credit. He is able to borrow half a million dollars with which to organise, equip, and operate the new enterprise. Having selected a favourable site, he rents it on a long term lease, and erects thereon the necessary buildings. He installs all the necessary machinery and other equipment, hires capable labour, and determines the kinds and quantities of hats for which he thinks that he can find a market. At the end of a year, he realises that, after paying for labour of all sorts, returning interest to the capitalist and rent to the landowner, defraying the cost of repairs, and setting aside a fund to cover depreciation, he has left for himself the sum of ten thousand dollars. This is the return for his labour of organisation and direction, and for the risk that he underwent. It constitutes the share called profits, sometimes specified as net profits. This case is artificial, since it assumes that the business man is neither capitalist nor landowner in addition to his function as director of industry. It has, however, the advantage of distinguishing quite sharply the action of the business man as such. For the latter merely organises, directs, and takes the risks of the industrial process, finds a market for the product, and receives in return neither rent nor interest but only profits. In point of fact, however, no one ever functions solely as business man. Always the business man owns some of the capital, and very often some of the land involved in his enterprise, and is the receiver not only of profits but of interest and rent. Thus, the farmer is a business man, but he is also a capitalist, and frequently a landowner. The grocer, the clothier, the manufacturer, and even the lawyer and the doctor own a part at least of the capital with which they operate, and sometimes they own the land. Nevertheless their rewards as business men can always be distinguished from their returns as capitalists and landowners by finding out what remains after making due allowance for rent and interest. It is a fact that many business men, especially those directing the smaller establishments, use the term profits to include rent and interest on their own property. In other words, they describe their entire income from the business as profits. In the present discussion, and throughout this book generally, profits are to be understood as comprising merely that part of the business man's returns which he takes as the reward of his labour, and as insurance against the risks affecting his enterprise. Deduct from the business man's total income a sum which will cover interest on his capital at the prevailing rate and rent on his land, and you have left his income as business man, his profits. _The Amount of Profits_ In a preceding chapter we have seen that where the conditions of capital are the same, there exists a fairly uniform rate of interest. No such uniformity obtains in the field of profits. Businesses subject to the same risks and requiring the same kind of management yield very different amounts of return to their directors. In a sense the business man may be regarded as the residual claimant of industry. This does not mean that he takes no profits until all the other agents of production have been fully remunerated, but that his share remains indeterminate until the end of the productive period, say, six months or a year, while the shares of the other agents are determined beforehand. At the end of the productive period, the business man may find that his profits are large, moderate, or small, while the landowner, the capitalist, and the labourer ordinarily obtain the precise amounts of rent, interest, and wages that they had expected to obtain. That there exists no definite upper limit to profits is proved by the history of modern millionaires. That there exists no rigid lower limit is proved by the large proportion of enterprises that meet with failure. Nevertheless it would be wrong to infer that the volume of profits is governed by no law whatever, or that they show no tendency toward uniformity in any part of the industrial field. There is a calculated or preconceived minimum. No man will embark in business for himself unless he has reason to expect that it will yield him, in addition to protection against risks, an income as large as he could obtain by hiring his services to some one else. In other words, contemplated profits must be at least equal to the income of the salaried business manager. No tendency toward uniformity of profits exists among very large enterprises nor among industries which are constantly adopting new methods and new inventions. In businesses of small and moderate size, and in those whose methods have become standardised, such as a retail grocery store, or a factory that turns out staple kinds of shoes, profits tend to be about the same in the great majority of establishments. In such industries the profits of the business man do not often exceed the salary that he could command as general manager for some one else in the same kind of business. Professor King estimates the total volume of profits in the United States in 1910 as almost eight and one-half billion dollars. This was 27.5 per cent. of the national product, as against 24.6 per cent. in 1890 and 30 per cent. in 1900.[160] He interprets the fall in the wage earners' share which has taken place since 1890 (53.5 to 46.9 per cent.) as indicating a considerable increase in the share of those business men who control the very large industries. "The promoters and manipulators of these concerns have received, as their share of the spoils, permanent income claims, in the shape of securities, large enough to make Croesus appear like a pauper."[161] Moreover, even outside this monopoly field, the more able and successful business men seem to have obtained in recent years what might be termed a relatively large share of the product of industry. The exceptionally efficient undertakers, those possessing the imagination, foresight, judgment, and courage to take full advantage of the recent improvements in the industrial arts, and in the methods of production generally, seem to have advanced in wealth and income more rapidly than any other class that has been subject to the operation of competition. _Profits in the Joint-Stock Company_ Up to this point we have been considering the independent business man, the undertaker who manages his enterprise either alone or as a member of a partnership. In all such concerns it is easy to identify the business man. Who or where is the business man in a joint stock company? Where are the profits, and who gets them? Strictly speaking, there is no undertaker or business man in a corporation. His functions of ownership, responsibility, and direction are exercised by the whole body of stockholders through the board of directors and other officers. It is true that in very many, probably in most corporations, one or a very few of the largest stockholders dominate the policies of the concern, and exercise almost as much power and authority as though they were the sole owners. Neither these, however, nor any other officer in a corporation receives profits in the same sense as the independent owner of a business. For their active services the officers of the corporation are given salaries; for the risks that they undergo as owners of the stock they are compensated in the same way as all the other stockholders, that is, through a sufficiently high rate of dividend. For example, in railroads the bonds usually pay from four to five per cent., the stock from five to six per cent. The bonds represent borrowed money, and are secured by a mortgage on the physical property. The stock represents the money invested by the owners, and is subject to all the risks of ownership; hence its holders require the protection which is afforded by the extra one per cent. which they obtain over that paid to the bondholders. While a corporation has no profits in the sense of a reward for directive activity or a protection against risk, it frequently possesses profits in the sense of a surplus which remains after costs and expenses of every kind have been defrayed. These profits are ordinarily distributed pro rata among the stockholders, either outright in the form of an extra dividend, or indirectly through enlargement of the property and business of the company. They are surplus gains or profits having the same intermittent and speculative character as the extra gains which the individual business man sometimes obtains in addition to those profits which are necessary to remunerate him for his labour, and protect him against risks. They are not profits in the ordinary economic sense of the term. FOOTNOTES: [160] "The Wealth and Income of the People of the United States," 158, 160. [161] Idem, p. 218. CHAPTER XVI THE PRINCIPAL CANONS OF DISTRIBUTIVE JUSTICE Before taking up the question of the morality of profits, it will be helpful, if not necessary, to consider the chief rules of justice that have been or might be adopted in distributing the product of industry among those who participate actively in the productive process. While the discussion is undertaken with particular reference to the rewards of the business man, it will also have an important bearing on the compensation of the wage earner. The morality of rent and interest depends upon other principles than those governing the remuneration of human activity; and it has been sufficiently treated in chapters xii and xiii. The canons of distribution applicable to our present study are mainly six in number: arithmetical equality; proportional needs; efforts and sacrifices; comparative productivity; relative scarcity; and human welfare. _The Canon of Equality_ According to the rule of arithmetical equality, all persons who contribute to the product should receive the same amount of remuneration. With the exception of Bernard Shaw, no important writer defends this rule to-day. It is unjust because it would treat unequals equally. Although men are equal as moral entities, as human persons, they are unequal in desires, capacities, and powers. An income that would fully satisfy the needs of one man would meet only 75 per cent., or 50 per cent., of the capacities of another. To allot them equal amounts of income would be to treat them unequally with regard to the requisites of life and self development. To treat them unequally in these matters would be to treat them unequally as regards the real and only purpose of property rights. That purpose is welfare. Hence the equal moral claims of men which admittedly arise out of their moral equality must be construed as claims to equal degrees of welfare, not to equal amounts of external goods. To put the matter in another way, external goods are not welfare; they are only means to welfare; consequently their importance must be determined by their bearing upon the welfare of the individual. From every point of view, therefore, it is evident that justice in industrial distribution must be measured with reference to welfare rather than with reference to incomes, and that any scheme of distribution which provided equal incomes for all persons would be radically unjust. Moreover, the rule of equal incomes is socially impracticable. It would deter the great majority of the more efficient from putting forth their best efforts and turning out their maximum product. As a consequence, the total volume of product would be so diminished as to render the share of the great majority of persons smaller than it would have been under a rational plan of unequal distribution. _The Canon of Needs_ The second conceivable rule is that of proportional needs. It would require each person to be rewarded in accordance with his capacity to use goods reasonably. If the task of distribution were entirely independent of the process of production, this rule would be ideal; for it would treat men as equal in those respects in which they are equal; namely, as beings endowed with the dignity and the potencies of personality; and it would treat them as unequal in those respects in which they are unequal; that is, in their desires and capacities. But the relation between distribution and production cannot be left out of account. The product is distributed primarily among the agents of production only, and it must be so distributed as to give due consideration to the moral claims of the producer as such. The latter has to be considered not merely as a person possessing needs, but as a person who has contributed something to the making of the product. Whence arise the questions of relative efforts and sacrifices, and relative productivity. Since only those who have contributed to the product participate in the distribution thereof, it would seem that they should be rewarded in proportion to the efforts and sacrifices that they exert and undergo. As an example of varying effort, let us take two men of equal needs who perform the same labour in such a way that the first expends 90 per cent. of his energy, while the second expends 60 per cent. As an example of varying sacrifice, let us take the ditch digger, and the driver who sits all day on the dump wagon. In both these examples the first man expends more painful exertion than the second. This would seem to make a difference in their moral desert. Justice would seem to require that in each case compensation should be proportionate to exertion rather than to needs. At any rate, the claims of needs should be modified to some extent in favour of the claims of exertion. It is upon the principle of efforts and sacrifices that we expect our eternal rewards to be based by the infinitely just Rewarder. The principle of needs is likewise in conflict with the principle of comparative productivity. Men generally demand rewards in proportion to their products. The validity of this demand we shall examine in a subsequent paragraph. Like the rule of arithmetical equality, the rule of proportional needs is not only incomplete ethically but impossible socially. Men's needs vary so widely and so imperceptibly that no human authority could use them as the basis of even an approximately accurate distribution. Moreover, any attempt to distribute rewards on this basis alone would be injurious to social welfare. It would lead to a great diminution in the productivity of the more honest, the more energetic, and the more efficient among the agents of production. _The Canon of Efforts and Sacrifice_ The third canon of distribution, that of efforts and sacrifices, would be ideally just if we could ignore the questions of needs and productivity. But we cannot think it just to reward equally two men who have expended the same quantity of painful exertion, but who differ in their needs and in their capacities of self development. To do so would be to treat them unequally in the matter of welfare, which is the end and reason of all distribution. Consequently the principle of efforts and sacrifices must be modified by the principle of needs. Apparently it must also give way in some degree to the principle of comparative productivity. When two men of unequal powers make equal efforts, they turn out unequal amounts of product. Almost invariably the more productive man believes that he should receive a greater share of the product than the other. He believes that the rewards should be determined by productivity. It is evident that the rule of efforts and sacrifices, like those of equality and needs, could not be universally enforced in practice. With the exception of cases in which the worker is called upon regularly to make greater sacrifices owing to the disagreeable nature of the task, attempts to measure the amounts of effort and painful exertion put forth by the different agents of production would on the whole be little more than rough guesses. These would probably prove unsatisfactory to the majority. Moreover, the possessors of superior productive power would in most instances reject the principle of efforts and sacrifices as unfair, and refuse to do their best work under its operation. The three rules already considered are formally ethical, inasmuch as they are directly based upon the dignity and claims of personality. The two following are primarily physical and social; for they measure economic value rather than ethical worth. Nevertheless, they must have a large place in any system which includes the factor of competition. _The Canon of Productivity_ According to this rule, men should be rewarded in proportion to their contributions to the product. It is open to the obvious objection that it ignores the moral claims of needs and efforts. The needs and use-capacities of men do, indeed, bear some relation to their productive capacities, and the man who can produce more usually needs more; but the differences between the two elements are so great that distribution based solely upon productivity would fall far short of satisfying the demands of needs. Yet we have seen that needs constitute one of the fundamentally valid principles of distribution. Between productivity on the one hand and efforts and sacrifices on the other, there are likewise important differences. When men of equal productive power are performing the same kind of labour, superior amounts of product do represent superior amounts of effort; when the tasks differ in irksomeness or disagreeableness, the larger product may be brought into being with a smaller expenditure of painful exertion. If men are unequal in productive power their products are obviously not in proportion to their efforts. Consider two men whose natural physical abilities are so unequal that they can handle with equal effort shovels differing in capacity by fifty per cent. Instances of this kind are innumerable in industry. If these two men are rewarded according to productivity, one will get fifty per cent. more compensation than the other. Yet the surplus received by the more fortunate man does not represent any action or quality for which he is personally responsible. It corresponds to no larger output of personal effort, no superior exercise of will, no greater personal desert. It is based solely upon a richer physical endowment by the Creator. It is clear, then, that the canon of productivity cannot be accepted to the exclusion of the principles of needs and efforts. It is not the only ethical rule of distribution. Is it a valid partial rule? Superior productivity is frequently due to larger effort and expense put forth in study and in other forms of industrial preparation. In such cases it demands superior rewards by the title of efforts and sacrifices. Where, however, the greater productivity is due merely to higher native qualities, physical or mental, the greater reward is not easily justified on purely ethical grounds. For it represents no personal responsibility, will-effort, or creativeness. Nevertheless, the great majority of the more fortunately endowed think that they are unfairly treated unless they are recompensed in proportion to their products. Sometimes this conviction is due to the fact that such men wrongly attribute their larger product to greater efforts. In very many cases, however, the possessors of superior productive power believe that they should be rewarded in proportion to their products, regardless of any other principle or factor. Probably the true explanation of this belief is to be found in man's innate laziness. While the prevalence of the conviction that superior productivity constitutes a just title to superior compensation, does create some kind of a presumption in favour of its correctness, it must be remembered that presumption is not proof. Weighing this presumption against the objective considerations on the opposite side of the argument, we take refuge in the conclusion that the ethical validity of the canon of comparative productivity can neither be certainly proved nor certainly disproved. Like the rules of equality, needs, and efforts, that of productivity cannot be universally enforced in practice. It is susceptible of accurate application among producers who perform the same kind of work with the same kind of instruments and equipment; for example, between two shovellers, two machine operators, two bookkeepers, two lawyers, two physicians. As a rule, it cannot be adequately applied to a product which is brought into existence through a combination of different processes. The engine driver and the track repairer contribute to the common product, railway transportation; the bookkeeper and the machine tender co-operate in the production of hats; but we cannot tell in either case whether the first contributes more or less than the second, for the simple reason that we have no common measure of their contributions. Sometimes, however, we can compare the productivity of _individuals_ engaged in different processes; that is, when both can be removed from the industry without causing it to come to a stop. Thus, it can be shown that a single engine driver produces more railway transportation than a single track repairer, because the labour of the latter is not indispensable to the hauling of a given load of cars. But no such comparison can be made as between the whole body of engine drivers and the whole body of track repairers, since both groups are indispensable to the production of railway transportation. Again, a man can be shown to exert superior productivity because he affects the productive process at more points and in a more intimate way than another who contributes to the product in a wholly different manner. While the surgeon and the attendant nurse are both necessary to a surgical operation, the former is clearly more productive than the latter. When due allowance is made for all such cases, the fact remains that in a large part of the industrial field it is simply impossible to determine remuneration by the rule of comparative productivity. _The Canon of Scarcity_ It frequently happens that men attribute their larger rewards to larger productivity, when the true determining element is scarcity. The immediate reason why the engine driver receives more than the track repairer, the general manager more than the section foreman, the floorwalker more than the salesgirl, lies in the fact that the former kinds of labour are not so plentiful as the latter. Were general managers relatively as abundant as section foremen their remuneration would be quite as low; and the same principle holds good of every pair of men whose occupations and products are different in kind. Yet the productivity of the general managers would remain as great as before. On the other hand, no matter how plentiful the more productive men may become, they can always command higher rewards than the less productive men in the same occupation, for the simple reason that their products are superior either in quantity or in quality. Men engaged upon the more skilled tasks are likewise mistaken when they attribute their greater compensation to the intrinsic excellence of their occupation. The fact is that the community cares nothing about the relative nobility, or ingenuity, or other inherent quality of industrial tasks or functions. It is concerned solely with products and results. As between two men performing the same task, superior efficiency receives a superior reward because it issues in a larger or better product. As between two men performing different tasks, superior skill receives superior compensation simply because it can command the greater compensation; and it is able to do this because it is scarce. In most cases where scarcity is the immediate determinant of rewards, the ultimate determinant is, partly at least, some kind of sacrifice. One reason why chemists and civil engineers are rarer than common labourers is to be found in the greater cost of preparation. The scarcity of workers in occupations that require no special degree of skill is due to unusual hazards and unpleasantness. In so far as scarcity is caused by the uncommon sacrifices preceding or involved in an occupation, the resulting higher rewards obviously rest upon most solid ethical grounds. However, some part of the differences in scarcity is the result of unequal opportunities. If all young persons had equal facilities of obtaining college and technical training, the supply of the higher kinds of labour would be considerably larger than it now is, and the compensation would be considerably smaller. Scarcity would then be determined by only three factors; namely, varying costs of training, varying degrees of danger and unattractiveness among occupations, and inequalities in the distribution of native ability. As a consequence, competition would tend to apportion rewards according to efforts, sacrifices, and efficiency. How can we justify the superior rewards of that scarcity which is not due to unusual costs of any sort, but merely to restricted opportunity? So far as society is concerned, the answer is simple: the practice pays. As to the possessors of the rarer kinds of ability, they are in about the same ethical position as those persons whose superior productivity is derived entirely from superior native endowment. In both cases the unusual rewards are due to factors outside the control of the recipients; to advantages which they themselves have not brought into existence. In the former case the decisive factor and advantage is opportunity; in the latter it is a gift of the Creator. Now we have seen that this sort of productivity cannot be proved to be immoral as a canon of distribution; consequently the same statement will hold good of this sort of scarcity. _The Canon of Human Welfare_ We say "human" welfare rather than "social" welfare, in order to make clear the fact that this canon considers the well being of men not only as a social group, but also as individuals. It includes and summarises all that is ethically and socially feasible in the five canons already reviewed. It takes account of equality, inasmuch as it regards all men as persons, as subjects of rights; and of needs, inasmuch as it awards to all the necessary participants in the industrial system at least that amount of remuneration which will meet the elementary demands of decent living and self development. It is governed by efforts and sacrifices, at least in so far as they are reflected in productivity and scarcity; and by productivity and scarcity to whatever extent is necessary in order to produce the maximum net results. It would give to every producer sufficient remuneration to evoke his greatest net contribution to the productive process. Greatest "net" contribution; for a man's _absolute_ maximum product may not always be worth the required price. For example: a man who for a salary of 2500 dollars turns out a product valued at 3000 dollars, should not be given 3000 dollars in order to induce him to bring forth a product worth 3300 dollars. In this case a salary of 2500 dollars evokes the maximum net product, and represents the reward which would be assigned by the canon of human welfare. Once the vital needs of the individual have been safeguarded, the supreme guide of the canon of human welfare is the principle of maximum net results, or the greatest product at the lowest cost. It is not contended here that this canon ought never to undergo modification or exception. Owing to the exceptional hazards and sacrifices of their occupation, a combination of producers might be justified in exacting larger compensation than would be accorded them by the canon of human welfare on the basis of net results in the present conditions of supply and scarcity. Unusual needs and capacities might also justify a strong group in pursuing the same course. All that is asserted at present is that in conditions of average competition the canon of human welfare is not unjust. And this is all that is necessary as a preliminary to the discussion of just profits.[162] FOOTNOTE: [162] A very suggestive discussion of the psychology, the general principles, and the practical limitations of distributive justice, will be found in an article by Gustav Schmoller, entitled, "The Idea of Justice in Political Economy." It is No. 113 in the Publications of the American Academy of Political and Social Science. CHAPTER XVII JUST PROFITS IN CONDITIONS OF COMPETITION We have seen that profits are that share of the product of industry which goes to the business man. They comprise that residual portion which he finds in his hands after he has made all expenditures and allowances for wages, salaries, interest at the prevailing rate on both his own and the borrowed capital, and all other proper charges. They constitute his compensation for his labour of direction, and for the risks of his enterprise and capital. In the opinion of most Socialists, profits are immoral because they are an essential element of an unjust industrial system, and because they are not entirely based upon labour. Under Socialism the organising and directing functions that are now performed by the business man, would be allotted to salaried superintendents and managers. Their compensation would include no payment for the risks of capital, and it would be fixed instead of indeterminate. Hence it would differ considerably from present-day profits. To the assertion that profits are immoral a sufficient reply at this time is that Socialism has already been shown to be impracticable and inequitable. Consequently the system of private industry is essentially just, and profits, being a necessary element of the system, are essentially legitimate. The question of their morality is one of degree not of kind. It will be considered under two principal heads: the right of the business man to obtain indefinitely large profits; and his right to a certain minimum of profits. _The Question of Indefinitely Large Profits_ As a general rule, business men who face conditions of active competition have a right to all the profits that they can get, so long as they use fair business methods. This means not merely fair and honest conduct toward competitors, and buyers and sellers, but also just and humane treatment of labour in all the conditions of employment, especially in the matter of wages. When these conditions are fulfilled, the freedom to take indefinitely large profits is justified by the canon of human welfare. The great majority of business men in competitive industries do not receive incomes in excess of their reasonable needs. Their profits do not notably exceed the salaries that they could command as hired managers, and generally are not more than sufficient to reimburse them for the cost of education and business training, and to enable them to live in reasonable conformity with the standard of living to which they have become accustomed. Efforts and sacrifices are reflected to some extent in the different amounts of profits received by different business men. When all due allowance is made for chance, productivity, and scarcity, a considerable proportion of profits is attributable to harder labour, greater risk and worry, and larger sacrifices. Like the principle of needs, that of efforts and sacrifices is a partial justification of the business man's remuneration. Those profits which cannot be justified by either of the titles just mentioned, are ethically warranted by the principles of productivity and scarcity. This is particularly true of those exceptionally large profits which can be traced specifically to that unusual ability which is exemplified in the invention and adoption of new methods and processes in progressive industries. The receivers of these large rewards have produced them in competition with less efficient business men. While the title of productivity does not entirely satisfy the seeker for decisive ethical sanctions, it is stronger morally than any opposing considerations that can be invoked. It is probably as strong as some other principles that we have to accept as the best attainable in the very difficult field of industrial ethics. Nevertheless, it would seem that those business men who obtain exceptionally large profits could be reasonably required to transfer part of their gains to their employés in the form of higher wages, or to the consumers in the form of lower prices. Both of these methods have been followed by Henry Ford, the automobile manufacturer. Neither of them is certainly demanded by the principles of strict justice; they rest upon the feebler and less decisive principle of general equity or fairness.[163] This concept is less definite than those of charity and justice, and stands midway between them. It comes into operation when an action is obligatory on stricter grounds than those of charity, and yet cannot with certainty be required on grounds of justice. Notwithstanding its vagueness, it is sufficiently strong to make the average conscientious man feel uncomfortable if he neglects its prescriptions entirely. It has, therefore, sufficient practical value to deserve a place in the ethics of distribution. And it seems to have sufficient application to the problem before us to justify the statement that the receivers of exceptionally large profits are bound in equity to share them with those persons who have co-operated in producing and providing them, namely, wage earners and consumers. In the field of profits the canon of human welfare is not only sound ethically but expedient socially. It permits the great majority of business men to obtain, if they can, sufficient remuneration to meet their reasonable needs. Whether it requires society to _guarantee_ at least this amount of profit-income is a question that we shall examine presently. It encourages efforts, and makes for the maximum social product by permitting business men to retain all the profits that they can get in conditions of fair competition. Does it forbid any attempt by society to limit exceptionally large profit-incomes? If the limit were placed very high, say, at 50,000 dollars per year, it would not apparently check the productive efforts of the great majority of business men, since they never hope to pass that figure. Whether it would have a seriously discouraging effect upon the activity and ambition of those who do hope to reach, and of those who have already reached that level, is uncertain. Among business men who are approaching or who have passed the 50,000 dollars annual profit-income mark, the desire to possess more money is frequently weaker as a motive to business activity than the longing for power and the driving force of habit. At any rate, the question is not very practical. Any sustained attempt to limit profits by law would require such extensive and minute supervision of business that the policy would prove to be socially intolerable and unprofitable. The espionage involved in the policy would provoke general resentment, and the amount of profits that could be diverted either to the State or to private persons would be relatively insignificant. Thus far we have been considering the independent business man and business firm, not the joint stock company or corporation. In the latter form of organisation, the labour of direction is remunerated by fixed salaries to the executive officers, while the risks of enterprise and capital are covered by the regular dividends received by the whole body of stockholders. Consequently the only revenues comparable to profits are the surplus gains that remain after wages, salaries, interest, dividends, rent, and all other expenses and charges have been met. These are apportioned through one process or another among the stockholders. On what ethical principle can they be thus distributed? The general principle of productivity, or superior productivity, is the only one available. If a corporation which uses fair methods of competition can obtain surplus gains, while the majority of its competitors fail to do so, the cause must be sought in its superior business management. This superiority must be credited to the whole body of stockholders, even though the great majority of them are responsible for it only in a very remote way, through their selection of the executive officers. The stockholders surely have a better claim to these surplus gains than any other group in the community. At the same time, they are, like the independent business man, bound by the principle of equity to share the surplus with the labourers and consumers. _The Question of Minimum Profits_ Has the business man a strict right to a minimum living profit? In other words, have all business men a right to a sufficient volume of sales at sufficiently high prices to provide them with living profits or a decent livelihood? Such a right would imply a corresponding obligation upon the consumers, or upon society, to furnish the requisite amount of demand at the required prices. Is there such a right, and such an obligation? No industrial right is absolute. They are all conditioned by the possibilities of the industrial system, and by the desires, capacities, and actions of the persons who enter into industrial relations with one another. As we shall see later, this statement is true even of the right to a living wage. When the industrial resources are adequate, all persons of average ability who contribute a reasonable amount of labour to the productive process have a right to a decent livelihood on two conditions: first, that such labour is their only means of sustenance; and, second, that their labour is economically indispensable to those who utilise it or its product. "Economically indispensable" means that the beneficiary of the labour would rather give the equivalent of a decent livelihood for it than go without it. While both these conditions are apparently fulfilled in the case of the great majority of wage earners, they are only rarely realised with regard to business men. In most instances the business man who is unable to make living profits could become an employé, and thus convert his right to a decent livelihood into a right to a living wage. Even when no such alternative is open to him, he cannot claim a strict right to living profits, for the second condition stated above remains unfulfilled. The consuming public does not regard the business function of such men as economically indispensable. Rather than pay the higher prices necessary to provide living profits for the inefficient business men, consumers will transfer their patronage to the efficient competitors. Should the retail grocer, for example, raise his prices in the effort to get living profits, his sales would fall off to such an extent as to reduce his profits still lower. While the consumers may be willing to fulfil their obligation of furnishing living profits for all necessary grocers, they are not willing, nor are they morally bound, to do so in the case of grocers whose inability to command sufficient patronage at remunerative prices shows that they are not necessary to the community. The consuming public does not want to employ such business men at such a cost. Nor is the State under obligation to ensure living profits for all business men. To carry out such a policy, either by enforcing a sufficiently high level of prices, or by subsidising those who fail to obtain living profits, would be to compel the public to support inefficiency. In the foregoing paragraphs we have assumed that the inability of the business men under consideration to get living profits is due to their own lack of capacity as compared with their more efficient competitors. When, however, their competitors are not more efficient, but are enabled to undersell through the use of unfair methods, such as adulteration of goods and oppression of labour, a different moral situation is presented. Honest and humane business men undoubtedly have a claim upon society to protection against such unfair competition. And the consumers are under obligation to make reasonable efforts to withhold their patronage from those business men who practise dishonesty and extortion. _The Question of Superfluous Business Men_ Although we have rejected as impractical the proposal to set a legal limit to profit-incomes, we have to admit that many of the abler business men would continue to do their best work even if the profits that they could hope to obtain were considerably smaller in volume. These men hold a strategic position in industry, inasmuch as they are not subject to the same degree of constant competition as the other agents of production.[164] Were the supply of superior business capacity more plentiful, their rewards would be automatically reduced, and the burden of profits resting upon society would be to that extent diminished. On the other hand, the number of mediocre business men, especially in the distributive industries, is much larger than is necessary to supply the wants of the community. This constitutes a second unnecessary volume of payments under the head of profits. Is there no way by which these wastes can be reduced? The volume of exceptionally large profits could be diminished by an extension of the facilities of technical and industrial education. Thus the number of persons qualifying as superior business men could be gradually increased, competition among this class of men would be intensified, and their rewards correspondingly diminished. The profits that go to superfluous business men, especially in the class known as middlemen, can be largely eliminated through combination and co-operation. The tendency to unite into a single concern a large number of small and inefficient enterprises should be encouraged up to the point at which the combination threatens to become a monopoly. That this process is capable of effecting a considerable saving in business profits as well as in capital, has been amply demonstrated in several different lines of enterprise. As we have seen in a preceding chapter, the co-operative movement, whether in banking, agriculture, or stores, has been distinctly successful in reducing profits. Millions of dollars are thus diverted every year from unnecessary profit-receivers to labourers, consumers, and to the man of small resources generally. Yet the co-operative movement is only in its infancy. It contains the possibility of eliminating entirely the superfluous business man, and even of diminishing considerably the excessive profits of the exceptionally able business man. FOOTNOTES: [163] Cf. pp. 212, 213 of Castelein's "Philosophia Moralis et Socialis." [164] Cf. Hobson, "The Industrial System," chapter on "Ability." CHAPTER XVIII THE MORAL ASPECT OF MONOPOLY The conclusion was drawn in the last chapter that the surplus gains of corporations operating in conditions of competition, can justly be retained by the stockholders as the remuneration of exceptional productive efficiency. It is, of course, to be understood that the proper allowance for interest on the capital is not necessarily the amount authorised by the stipulated rate of dividend on the stock, but the prevailing or competitive rate of interest plus an adequate rate of insurance against the risks of the enterprise. If the prevailing rate of interest is five per cent., and the risk is sufficiently protected by an allowance of one per cent., the fair rate of return on the investment is six per cent. The fact that a concern may actually award its stockholders ten per cent. dividends, has no bearing on the determination of the genuine surplus. If the actual surplus that remains after paying all other charges and allowing ten per cent. on the stock, is only 50,000 dollars, whereas it would be 100,000 dollars with an allowance of only six per cent., then the true surplus gains, or profits, are the latter amount not the former. No part of the 100,000 dollars can be justified as interest on capital. It must all find its justification as profits proceeding from superior productivity. Bearing in mind this distinction between the actual rate of dividend and the proper allowance for interest on capital, we take up the question of the morality of profits or surplus gains in conditions of monopoly. _Surplus and Excessive Profits_ Several of the great industrial combinations of the United States have obtained profits which are commonly stigmatised as "excessive." For example, the Standard Oil Company paid, from 1882 to 1906, an average annual dividend of 24.15 per cent. on the capital stock, and had profits in addition at the rate of about 8 per cent. annually;[165] from 1904 to 1908 the American Tobacco Company averaged 19 per cent. on its actual investment;[166] and the United States Steel Corporation obtained an average annual return of 12 per cent. on its investment from 1901 to 1910.[167] A complete list of the American monopolies that have reaped more than the competitive rate of return on their capital would undoubtedly be a very long one. Is it possible to justify such returns? Has a monopoly a right to take surplus gains? Let us suppose a concern which is getting 15 per cent. on its investment. Inasmuch as the risks are smaller than in competitive enterprises, six per cent. is an ample allowance for interest. Of the remaining 9 per cent., 4 per cent., we shall assume, is derived from economies of production as compared with the great majority of competitive concerns. This portion of the surplus, being the reward of superior efficiency, may be retained by the owners of the monopoly quite as justly as similar gains are taken by the exceptionally efficient corporation in conditions of competition. The objection that the monopoly ought to share these gains with the public, since it limits individual opportunity in a socially undesirable way, has some merit, but it can scarcely be urged on grounds of strict justice. At most it points only to an obligation in equity. By what canon of distribution can the retention of the other 5 per cent. of surplus gain be justified? Not by the titles of needs and efforts, for these have already been satisfied through the salaries paid to those stockholders who perform labour in the management of the concern. These titles afford no basis for any other claim than that which proceeds from labour. They cannot be made to justify claims made on behalf of capital. Not by the title of productivity, for this has already been remunerated in the 4 per cent. just considered. Not as interest on capital, for ample allowance has already been made under this head in the original 6 per cent. As we have seen in an earlier chapter, the only reasons that give ethical support to interest on capital are the sacrifice that is involved in some kinds of saving, the possibility that interest is necessary in order to induce the provision of sufficient capital, the certainty that the State would be unable to enforce the abolition of interest, and some presumptive considerations. Since all of these reasons and ends are satisfied by the competitive rate of interest, none of them will justify the exaction of more than the competitive rate. It is not possible to justify a higher rate on either social or individual grounds. Therefore, the only basis that is left upon which to defend the retention of the five per cent. surplus that we are discussing, is the power of appropriation. The monopoly possesses the economic strength to take this five per cent. because it is able to impose higher than competitive prices upon the consumer. Obviously such power has no greater ethical sanction or validity than the pistol of the highwayman. In both cases the gains are the product of extortion. The conclusion that men have no right to more than the competitive rate of interest, as interest, on their capital, and that a monopoly has consequently no right to those surplus gains that are not produced by superior efficiency, is confirmed by public opinion and by the decisions of the courts. The monopolistic practice of taking more than the usual rate of returns on capital merely because there exists the power to take it, is universally condemned as inequitable. In fixing the charges of public service corporations, the courts with practical unanimity allow only the rate of return that is obtainable in competitive conditions of investment. The statement that the monopoly may retain those surplus gains which are derived from superior efficiency assumes, of course, that fair wages have been paid to employés, and fair prices to the sellers of materials, and that fair methods have been used toward competitors. In so far as any of these conditions is not met, the monopolistic concern has no right to surplus gains of any sort. All three of the claims just mentioned are morally stronger than the claim to superior rewards because of superior efficiency. _The Question of Monopolistic Efficiency_ So much for the moral principle. What proportion of the surplus gains of monopoly are due to extortionate prices rather than to economies in production, cannot be known even approximately. According to Justice Brandeis, who is one of the most competent authorities in this field, only a very small part of these gains are derived from superior efficiency.[168] Professor E. S. Meade writes: "During a decade [1902-1912] of unparalleled industrial development, the trusts, starting with every advantage of large capital, well-equipped plants, financial connections, and skilled superintendence, have not succeeded."[169] On the other hand, President Van Hise thinks that, "the weight of argument is strongly in favour of the increased efficiency of large combinations of industry on the average."[170] The difference of opinion existing among students of this subject is due to lack of adequate data, particularly to the absence of such uniform and comprehensive systems of accounting as would be required to provide a basis for reliable general conclusions. Opposing particular statements may be equally true, because based upon different instances; but general statements are little better than guesses. Let us approach the question from another side, that of prices. Whenever the charges imposed by monopolistic concerns upon their products are higher than those that would have prevailed under competition, the surplus gains are obviously to that extent not due to superior efficiency. They have their source in the arbitrarily made prices. The Final Report of the United States Industrial Commission, which was made at the beginning of the year 1902, declared that, "in most cases the combination has exerted an appreciable power over prices, and in practically all cases it has increased the margin between raw materials and finished products."[171] Since the cost of production had decreased during the preceding decade, this increase in the margin, and the ensuing increased profits, necessarily involved an increase in prices to the consumer. Taking the period of 1897-1910, and comparing the movement of prices between eighteen important trust-controlled products, and the same number of important commodities not produced by monopolistic concerns, Professor Meade concluded that the former were sold at a "much lower" relative level than the latter.[172] His computations were based upon figures compiled by the Bureau of Labour. According to the Commissioner of Corporations, the Standard Oil Company "has taken advantage of its monopoly power to extort prices much higher than would have existed under free competition."[173] The same authority shows that the American Tobacco Company used its power to obtain considerably more than competitive prices on some of its products.[174] Excessive prices, as measured by the standards of competition, were also established by the United States Steel Corporation, the American Sugar Refining Company, and the combinations in meat packing and in lumber.[175] A safe statement would probably be that the greater part of the surplus gains of the most conspicuous American monopolies have been due to excessive prices rather than to economies of production. Let us turn from the subject of unjust monopoly gains to that of unfair methods used by the great combinations toward their competitors. These methods are mainly three: discriminative underselling, exclusive-selling contracts, and advantages in transportation. _Discriminative Underselling_ The first of these practices is exemplified when a monopoly sells its goods at unprofitably low rates in competitive territory, while maintaining higher prices elsewhere; and when it offers at very low prices those kinds of goods which are handled by competitors, while holding at excessively high prices the kinds of commodities over which it has exclusive control. Both forms of the practice seem to have been extensively used by most of the monopolistic concerns of America.[176] The Standard Oil Company has been perhaps the most conspicuous offender in this field.[177] This practice is unjust because it violates the fundamental moral principle that a man has a right to pursue a lawful good without hindrance through illicit means. Among the illicit means enumerated by the moral theologians are force, fraud, deception, lying, slander, intimidation, and extortion.[178] The illicit means employed in discriminative underselling are chiefly extortion and deception. If the very low prices at which the monopoly sells in the field which contains competitors were maintained outside of that field also, and if they were continued not merely until the independent concerns were driven out of business, but indefinitely afterward, no injustice would be done the latter. For no man has a natural right to any particular business. If a powerful concern can eliminate competitors through low prices made possible by superior efficiency, the competitors are not unjustly treated. They have no more just cause of complaint than the inefficient grocer whose custom is attracted from him by other and more efficient merchants. The offence is at the worst contrary to charity. But when the monopoly maintains the low and competition-eliminating prices only locally and temporarily, when it is enabled to establish and continue these prices only because it sells its goods at extortionate rates elsewhere, the latter prices are evidently the instrument or means by which the competitors are injured and eliminated. In that case the monopoly violates the right of the competitors to pursue a lawful good immune from unfair interference. The lawful good is a livelihood from this kind of business; and the illicit interference is the unjust prices maintained outside the competitive field. In the preceding paragraph we have assumed that the extortionate prices are operative at the same time as the excessively low prices, but in a different place. Suppose that the former are imposed only after the independent concerns are eliminated. The injustice to the competitors remains the same as in the preceding case. Although the extortionate prices are later in time, they are the instrumental cause of the destructive low prices through which the competitors were driven out of business. If the owners of the monopoly were not certain of their ability to establish the subsequent extortionate prices, they would not have put into effect the unprofitably low prices. Hence there is a true causal connection between the former and the latter. Although the connection is mainly psychical, through the consciousness of the monopoly owners, it is none the less real and effective. Its practical effectiveness is seen in the fact that the subsequent possibility of imposing extortionate prices will induce men to lend the monopoly money to carry on the process of exterminating competition. The process is maintained by means of the extortionate prices quite as effectively as though the two things were simultaneous. In so far as the patrons of the independent concerns are deceived into expecting that the very low prices will be permanent, and in so far as this impression causes them to withdraw their patronage from the independents, the latter are injured through another illicit means, namely, deception. The competitors have a right not to be deprived of their customers through imposture. What is the measure of extortionate prices in this connection? How can we know that the high, competition-eliminating prices are really extortionate? There are only two possible tests of just price. The first is the proper cost of production,--fair wages to labour, fair prices for materials, and fair interest on capital. If the monopoly does not raise prices above this level, it obviously does not impose extortionate prices, nor inflict injustice upon the eliminated competitor. Moreover, if the monopoly has introduced economies of production it may, as we have seen, justly charge prices somewhat above the cost-of-production level. But it may not raise them above the level that would have prevailed under competition. This is the second test of just price. No possible justification can be found, except one to be mentioned presently, for charging the consumers higher prices than they could have obtained under competitive conditions. At such prices the monopoly will be able to secure the prevailing rate of interest on its capital, and all the surplus gains that proceed from superior efficiency. A higher scale of prices will be, therefore, extortionate, and the competitors who are eliminated through its instrumentality will be the victims of injustice.[179] The exception alluded to above occurs when the monopoly uses the excess which it obtains over the competitive price to pay fair wages to those labourers who were insufficiently compensated in competitive conditions. In such a case the eliminated competitors would have no just claim against the monopoly; for their elimination took place in the just interest of the producers. The case, however, is purely academic, since the discriminative underselling practised by our monopolistic concerns has not been impelled by any such motive, nor has it achieved any such result. _Exclusive-Sales Contracts_ The second unfair method employed by monopolies toward competitors is that of exclusive-selling contracts, sometimes called the "factor's agreement." It requires the dealer, merchant, or jobber to refrain from selling the goods produced by independent concerns, on penalty of being refused the goods produced by the monopoly. The merchant is compelled to choose between the less important line of wares to be had from the former, and the more important line obtainable from the latter. He will not be permitted to handle both. "Here is somebody who has been buying goods, let us say, by way of illustration, from the American Tobacco Company, and a rival producer comes in whom the merchant likes to patronise. He buys goods for a time from the rival, and an agent of the trust sends him a note to the effect that he must not buy any more from that rival corporation; that, if he does so, the trust will give all of its own goods, some of which the merchant is obliged to have, to another agent. That will probably bring him to terms."[180] By this method the independent manufacturer can be deprived of sufficient patronage to injure him seriously, and perhaps to drive him out of business. This process is one of intimidation brought to bear upon the merchant. Through fear of loss he is compelled to discontinue selling the goods of the competing manufacturer. It is a kind of secondary boycott. As such, it is an unreasonable interference with the liberty of the merchant unless its object is to compel him to do something that he may be reasonably required to do. In the case that we are considering, the object of the pressure is not of that character; for to drive the rival manufacturer out of business, or to assist in his expulsion, is not a reasonable thing. The exclusive-selling contract which is forced upon the merchant is quite as unreasonable as though its purpose were to prevent him from, say, patronising manufacturers having red hair. Being thus unreasonable, thus injurious to individual liberty, it violates not only the law of charity but that of justice. It transgresses the merchant's right to enter reasonable contracts with the rival manufacturer, and if it results in a pecuniary loss to the former it is an invasion of his rights of property. It likewise violates the rights of the competitive manufacturer, since it is among the unfair means which may not be used to prevent a man from pursuing a legitimate good. It is an unfair means because it involves unreasonable intimidation, uncharity, and injustice toward the merchant. When the independent manufacturer is injured through such an instrumentality, he suffers injustice quite as certainly at the hands of the monopoly as though his property were destroyed through the strong-arm methods of hired thugs. _Discriminative Transportation Arrangements_ Concerning the third unfair method, discriminative advantages in transportation, the United States Industrial Commission declared: "It is incontestable that many of the great industrial combinations had their origin in railroad discrimination. This has been emphasised many times in the history of the Standard Oil Company, and of the great monopolies dealing in live stock, dressed beef, and other products."[181] The American Sugar Refining Company has been several times convicted of receiving illegal favours from railroads, and has paid in fines thousands upon thousands of dollars. Sometimes the monopoly has openly been accorded lower freight rates than its competitors, and sometimes it has paid the regular charges, and then received back a part of them as a refund or rebate. At one time the Standard Oil Company obtained rebates not only on its own shipments, but on those of its rivals![182] Special advantages of this sort necessarily involve injustice to the competitors of the monopoly. If the low rates given to the monopolistic concern are a sufficiently high price for the service of carrying freight, the higher charges imposed upon the competing concerns are extortionate; if the former rates are unprofitably low, the difference between sufficient and insufficient freight charges is made up by the independent concerns. In the former case the independents pay the railroad too much; in the latter case they bear burdens that should properly rest upon the monopoly. The monopolistic concern is partly responsible for this injustice inasmuch as it urges and often intimidates the railroad to establish the discriminating rates. All three of the practices that we have been considering are universally condemned by public sentiment. They are all likewise under the ban of statutory law. The first two have recently received detailed and explicit prohibition in the Clayton Anti-Trust Act. _Natural Monopolies_ Up to this point we have been dealing with private and artificial monopolies. We turn now to consider briefly those natural and quasi-public monopolies which are either tacitly or explicitly recognised as monopolies by public authority, and whose charges are to a greater or less extent regulated by some department of the State. Such are, for example; steam railroads and municipal utilities. When the charges made for the services of these corporations are _adequately_ regulated by public authority, the owners of such concerns will have a right to all the surplus gains that they can obtain. In that case a contract is made between the corporation and the public which is presumably fair to both parties, and which represents the social estimate of what is just. If the public authorities have not sufficiently safeguarded the interests of the people, if they have permitted the charges to be so high as to provide excessive returns for the corporation, the latter is under no moral obligation to refrain from reaping the full benefit of the State's negligence or incompetence. If, however, the unduly high rates have been brought about through bribery, extortion, or deception practised by the corporation, the inequitable contract thus arranged will not justify the surplus gains thus produced. For example; if the corporation deliberately and effectively conceals the real value of its property through stockwatering, and thus misleads the public authority into permitting charges which return twelve instead of six per cent. on the actual investment, the corporation cannot forthwith justly claim the surplus gain represented by the extra six per cent. When the public authorities either fail entirely to regulate charges, or do so only spasmodically and partially, the quasi-public monopoly will not necessarily have a right to all the obtainable surplus gains. For a long time the express companies of the United States were permitted to exact what charges they pleased, and even yet the rates on some of our railroads are not adequately regulated by the State. In such cases the charges imposed on the public are not an adequate expression of the social estimate of justice, nor an adequate basis of legitimate surplus gains. In the absence of sufficient public regulation, a quasi-public monopoly is morally bound to fix its charges at such a level as will enable it to obtain only the prevailing rate of interest on the investment, and such surplus gains as it can produce through exceptional efficiency. In all such cases the public service corporation is in the same moral position as the artificial monopoly: it has no possible basis except superior efficiency for claiming or getting any returns above the competitive rate of interest on its capital. Its only possible reason for obtaining more is the fact that it has the power to take more. This fact has obviously no moral validity. _Methods of Preventing Monopolistic Injustice_ How shall the injustices of monopoly be prevented in the future? So far as quasi-public monopolies are concerned, all students of the subject are now agreed that these should be permitted to exist under adequate governmental regulation as to prices and service. The reason is that in this field successful and useful competition is impossible. Public utility corporations are natural monopolies, and must be dealt with by the method of regulation until such time as they are brought under the ownership and operation of the State. With regard to the great industrial combinations which have become or threaten to become artificial monopolies, there exists substantial agreement among competent authorities on one point, and disagreement on another point. All admit that the unfair competitive methods described in an earlier part of this chapter should be stringently prohibited. No possible reason can be found for legal toleration of these or any other discriminative, uncharitable, or unjust practices on the part of stronger toward weaker competitors. The disagreement among students of monopoly relates to the fundamental question of permitting or not permitting these combinations to exist. According to the first theory, of which Mr. Justice Brandeis is the most distinguished exponent, no new industrial monopolies should be permitted, and those that we have should be dissolved. The basis of this theory is the assumption that all the economies and all the productive efficiency found in monopolistic concerns can be developed and maintained in smaller business organisations, and that the method of prevention and dissolution is the simplest means of protecting the public against the danger of extortionate monopoly prices. Attention has been called in a preceding paragraph to the impossibility of determining whether the great monopolistic combinations have on the average shown themselves to be more efficient than concerns subject to active and adequate competition. It is significant, however, that in the discussion of this subject which took place at the twenty-sixth annual meeting of the American Economic Association, at Minneapolis in 1913, the economists who participated were practically unanimous in holding that the superior efficiency of the trusts had not been demonstrated, but was a matter of serious doubt, and that the burden of proof of their alleged superiority had been definitely shifted upon those who maintained the affirmative.[183] Probably the great majority of the whole body of American economists would share these conclusions. On the other hand, the opponents of prevention and dissolution, of whom Mr. George W. Perkins is probably the most conspicuous, point to the obvious economies of large-scale over small-scale production, and contend that these are sufficient reason for permitting and even encouraging the great combinations. The power to oppress competitors by unjust methods of business, and the public by extortionate prices, should be kept under rigid control by supervision, and government regulation of maximum prices. But the arguments advanced in favour of this position are never conclusive. Most of its advocates fail to realise, or at least to take adequately into account, the difference between large-scale production and production by a monopoly. While the large plant and the large business organisation have in many lines of manufacture and trade a considerable advantage over the small plant and the small organisation, there is not a scintilla of evidence to show that the efficiency of magnitude increases indefinitely with magnitude. There is no proof that the maximum efficiency is reached only with the maximum size of the business unit. On the contrary, all the evidence that we have points to the conclusion that in every field of industrial and commercial enterprise, all the economies of magnitude and of combination are obtained long before the concern becomes a monopoly. There is not an industry of any importance in the United States in which all the advantages of bigness and concentration cannot be made operative in concerns that control as low as twenty-five per cent. of the total product. The highest economy and efficiency can be obtained without monopoly. Indeed, this is admitted by the more reasonable advocates of the regulation and price-fixing policy. While maintaining that "concentration must go far in order to give the maximum of efficiency," President Van Hise does not hold "that it should go to the extent that the element of monopoly enters"; and he would have the law "declare restraint of trade unreasonable that gets to monopoly," and fix the definite per cent. of business control which constitutes a monopoly.[184] We are justified, therefore, in concluding that the theory of prevention and dissolution (provided that the competing units are not made so small as to destroy the certain economies of magnitude) rather than the theory of permission and regulation, indicates the sound economic and social policy of dealing with monopolies. _Legalised Price Agreements_ President Van Hise advocates the regulation policy in a modified form. In substance his view is that, while no corporation should be permitted to control the greater part of any product, monopolistic price-agreements should be sanctioned and regulated by law. No amount of restrictive legislation, he maintains, can secure universal competition in the matter of prices. Experience shows that the destructive results of cut-throat competition compel the more powerful competitors to make price agreements in some lines of business.[185] For example; all the retail grocers in a city are often found selling certain staples at a uniform price for long periods of time. Agreements of this sort should, in the opinion of President Van Hise, be formally permitted by law, with the proviso that a government commission should fix the maximum and possibly the minimum limits. And he contends that the task of fixing fair maximum and minimum prices would be much less difficult than is commonly supposed, and that it would be much simpler and easier than the task of regulating railway freight rates. Whatever may be the merits of this plan, it is not likely to be embodied in legislation in the near future. So far as we can see now, the American people are committed to the policy of endeavouring to restore genuine competition by prohibiting those predatory practices to which the great monopolies mainly owe their existence. The attempt will be made to give competition a fair opportunity to prevent both monopolistic control of products and monopolistic fixing of prices. Competition has not enjoyed any such opportunity during the last quarter of a century. If this attempt should fail after a thorough trial, the time will be at hand for the regulation of prices by the government. Until that time has arrived (let us hope that it never will arrive) the State will not, and should not, embark upon such a large and difficult experiment. FOOTNOTES: [165] Report of the Commissioner of Corporations on the Petroleum Industry, II, 40, 41. [166] Report of the Commissioner of Corporations on the Tobacco Industry, II, 26-34. [167] Report of the Commissioner of Corporations on the Steel Industry, I, 51. According to F. J. McRae, the expert accountant for the Stanley congressional investigating committee, this concern secured 40 per cent. on the _cost_ of its property. [168] Hearings Before the Interstate Commerce Committee, U. S. Senate, Part XVI, pages 1146-1166. [169] _The Journal of Political Economy_, April, 1912, p. 366. [170] "Concentration and Control," p. 20. [171] Page 621. [172] _The Journal of Political Economy_, April, 1912, p. 363. [173] Report on the Petroleum Industry, II, 74. [174] Report on the Tobacco Industry, II, 27. [175] Cf. Van Hise, op. cit., pp. 140, 149, 153, 159. [176] Final Report of the Industrial Commission, pp. 660-662. [177] Report on the Petroleum Industry, I, 328-332. [178] Cf. Lehmkuhl, "Theologia Moralis," I, No. 974. [179] It may be of interest to recall the mediæval attitude toward monopolistic exactions, as summarily stated by St. Antoninus, who was archbishop of Florence in the first half of the fifteenth century: "When monopolist merchants agree together to preserve a fixed price, so as to secure an unlimited profit, they are guilty of sinful trading." He maintained that they should not sell above the market price, and should be prevented from so doing by law. See his "Summa Theologica," III, 8, 3, iv, and II, 1, 16, ii. Present day moral theologians lay down the same doctrine, and in addition condemn the characteristic monopolistic methods as unjust. See Tanquerey, "De Justitia," nos. 776, 777; Lehmkuhl, "Theologia Moralis," vol. I, no. 1119. [180] Clark, "The Problem of Monopoly," p. 35. [181] Final Report, p. 361. [182] Report on the Petroleum Industry, pp. 22, 23. [183] "Papers and Proceedings," pp. 158-194. [184] Op. cit., pp. 20, 251. [185] Op. cit., pp. 254-265. CHAPTER XIX THE MORAL ASPECT OF STOCK WATERING In the last chapter we saw that a monopoly has no right to gains in excess of the competitive rate of interest on its capital, except in so far as these have been derived from superior efficiency. Now superior efficiency is clearly present whenever the monopolistic concern obtains surplus gains by selling its product at competitive prices, or at the prices that would have prevailed under competition. Evidently the surplus in such a case is due to the greater productivity of the monopoly as compared with the average productivity of competitive concerns. When, however, the monopoly charges prices above the competitive level, its surplus gains cannot all be attributed to unusual efficiency. A part if not all of them are the result simply of the power to take; consequently they are immoral. One of the means by which some monopolies have obtained unjust surplus gains is overcapitalisation, or stockwatering. This practice is rarely found in businesses that are subject to normal competition. So far as the consumer is concerned, a corporation that cannot fix prices arbitrarily has nothing to gain by inflating its capital. Unless it develops exceptional efficiency, it cannot hope to obtain more than the competitive rate of interest on its capital; if it does become exceptionally efficient, it can take the resulting surplus gains without arousing public resentment or criticism. In either case, it will have no sufficient reason to deceive the public by exaggerating the amount of its capital. When a competitive concern does water its stock, the object will be to defraud investors. If the scheme is successful the unjust surplus gains are taken by one set of stockholders from another set of stockholders. Whenever anything of this sort occurs, the deceptive devices employed are so crude and obvious that they present no special problem for the moralist. Even as practised by monopolies, stockwatering raises no principle that has not been already discussed. It does, however, create some special difficulties in the matter of applying the moral principles involved. Consequently, it may with advantage be considered in a separate chapter. The general definition of overcapitalisation is capitalisation in excess of the proper valuation of a business. What is the measure of proper valuation? According to many corporation directors, it is earning power. If a concern is able to get the prevailing rate of interest on a capitalisation of ten million dollars, that is the proper capitalisation for that concern, even though the money actually invested might not have exceeded five million dollars. In the opinion of most other persons, however, a company is overcapitalised when the face value of its securities is greater than the money put into the business plus the subsequent enhancement in the value of its land. "The money put into the business," means that which has been expended for labour, materials, land, equipment, and all other items and costs of organising the concern, together with the sum that is necessary to cover the interest not obtained by the investors during the preparatory period before the business became productively operative. The increase in the value of the land after its acquisition by the company also deserves a place in the legitimate valuation, and may reasonably be represented by an appropriate amount of securities. Monopolistic corporations have as good a right, generally speaking, to profit by the "unearned increment" of land as competitive concerns. In brief, the proper measure of capitalisation is cost: either the original cost, as just explained and supplemented; or the present cost of reproducing the business. _Injurious Effects of Stockwatering_ Stockwatering can become an instrument of unjust gains in two ways: first, through fraud inflicted upon some of the investors; second, through the imposition of exorbitant prices upon the consumers. The former cannot occur so long as the process of inflation does not go beyond earning power; for in that case all stockholders, barring dishonest manipulation of the company's receipts, will obtain the normal rate of interest on their investment. If, however, stock is sold in excess of the earning power of the concern, those stockholders who fail to obtain the ordinary rate of interest on their money are unjustly treated in so far as they have been deceived. And those officers or other members of the corporation who have profited by the deception of and injury to these stockholders, are the recipients of unjust gains. Daniel Drew inflated the capitalisation of the Erie Railroad from seventeen millions to seventy-eight millions within four years for the purpose of manipulating the stock market; owing to excessive issues of stock, the American Shipbuilding Company was thrown into bankruptcy to the great injury of all but one of its stockholders;[186] because they issued securities to buy subsidiary railway lines at exorbitant prices, and to provide extravagant commissions and discounts for bankers, the directors of the 'Frisco System forced it into a receivership, after having inflicted a net loss of four million dollars per year upon the stockholders.[187] Many other notable performances might be cited where stockwatering, both in railroads and in industrial concerns, has defrauded investors of millions of dollars, and enabled a few powerful directors to reap corresponding enormous profits. At first sight it would seem that stockwatering is of little or no importance to the consumer. Since a monopolistic concern endeavours to fix its prices at the point that will yield the maximum net profit in any case, the amount of stock in existence would seem to be irrelevant to the problem. Nevertheless, the presence of a large quantity of fictitious capital whose owners are calling for dividends, sometimes constitutes a special force impelling the imposition of higher prices and charges. "It will happen at times that overcapitalisation does at least cause a clinging to high prices. The managers of an overcapitalised monopoly may have to face the fact that great blocks of securities are outstanding, very likely issued by their predecessors, and now held by all sorts of investors. They are then loath to let go any slice of its profits. We have seen that often the monopoly principle of maximum net profit is not applied in its full sweep, especially in industries which are potentially subject to public control. Where abnormal returns on the original investment have been made, concessions to public opinion in the way of low rates and better facilities are more likely to come when capitalisation has not been inflated."[188] The United States Industrial Commission found that as regards railroads: "In the long run excessive capitalisation tends to keep rates high; conservative capitalisation tends to make rates low."[189] This indirect influence of stockwatering toward excessive rates and prices becomes effective in two ways. The existence of fictitious capital conceals from the public the high rate of return that is obtained on the true valuation, thus preventing effective action for a reduction in prices and charges; and it sometimes causes the rate-making authorities to allow rates to be sufficiently high to yield something to the investors in the inflated capital. If a trust or a railroad has issued stock having a par value of twice the capital invested, its rate of dividend on the entire capitalisation will be only one-half the rate of interest that it is receiving on the investment. If it pays, for example, seven per cent. on all its stock, it will be getting fourteen per cent. on its genuine capital. While the consumers of tobacco, or the patrons of a railroad, would raise no outcry against seven per cent. dividends, they would probably begin to agitate for an enforcement of the anti-trust laws, and for a reduction in freight and passenger charges, if they realised that they were providing for dividends of fourteen per cent. Nor is the public adequately protected by government investigations of trusts and regulation of railway rates. Despite the anti-trust laws, many American monopolies have for many years received exorbitant profits through excessive prices imposed upon the consumer; and in many of these instances overcapitalisation and its resulting concealment of real profits have been of considerable assistance to the extortionate monopoly. In fixing railway rates, the Interstate Commerce Commission, and the various state railroad commissions, have been seriously hampered by their inability to determine the real investment of the roads, and to separate the genuine from the fictitious capitalisation. Not until the year 1913 did the national government begin the task of making a valuation of interstate railroad property, and the work will require several years. Very few of the states have made valuations of the railroads within their borders. In the meantime it is certain that many of the rates fixed by both the national and the state bodies will continue, as in the past, to be higher than they would have been if the true value of the railroads were known and accepted as the basis of freight and passenger charges. The second bad effect of stockwatering on the consumer is seen when rate-fixing bodies deliberately permit the charges of public service corporations to be high enough to include some returns on that portion of the capitalisation which is fictitious. It is very difficult for such authorities to resist entirely the plea of the "innocent investor." Consequently, railroad commissions and other rate making authorities, and even the courts, have occasionally made some provision for dividends on the "water." Chairman Knapp of the Interstate Commerce Commission admitted a few years ago that, in considering the reasonableness of a given rate, this body took into account the financial condition, and therefore the capitalisation of the railroad.[190] In 1914 and 1915 practically all the great railway systems of the United States made powerful, and in a measure successful, appeals to the Interstate Commerce Commission for a rise in rates on the ground that they were unable to pay the normal rate of interest on their securities, and hence could not obtain on advantageous terms new capital needed for improvements. Had the capitalisation of the roads been kept down to the actual investment, most of them would have been able to pay the competitive rate of interest on all their stock, and still have a sufficient surplus to command excellent credit. _The Moral Wrong_ When prices or charges are made high enough to provide returns on fictitious capital, the consumer is treated unjustly. As we have shown more than once, the consumer cannot rightfully be required to pay for the products of a monopoly at a greater rate than is necessary to provide the competitive rate of interest on capital in the average conditions of efficiency. If some concerns are able to sell at this price, and still obtain surplus gains, they have a right thereto on account of their exceptional productivity. But the capital upon which a monopolistic concern has a claim to the prevailing rate of interest, is genuine capital: that is, the actual investment as interpreted above, not an inflated capitalisation. The consumers may justly be required to pay for the use and benefit of actual productive goods; but it is not just that they should be compelled to pay for the supposed use of a capital that has no concrete reality. The stockholders of the monopolistic corporation which imposes upon the consumers exorbitant prices or charges through the instrumentality of inflated capitalisation, can become guilty of this injustice in two ways: by promoting the improper capitalisation; and by getting dividends on stock for which they have not given a fair equivalent. As a rule, the greater part of such guilt and responsibility rests upon certain special and powerful groups among the stockholders. For example; the J.P. Morgan syndicate which organised the United States Steel Corporation received for that service securities to the value of $63,500,000. "There can be no question," says the Commissioner of Corporations, "that this huge compensation to the syndicate was greatly in excess of a reasonable payment."[191] The syndicate was able to exact this stupendous sum mainly because some of its members were also in control of some of the companies that were brought into the combination. "In other words, as managers of the Steel Corporation these various interests virtually determined their compensation as underwriters."[192] In the opinion of the minority members of the Stanley congressional investigating committee, "such a sum bore no relation whatever to the service rendered, the risk run, and the capital advanced."[193] The majority of the committee characterised the transaction in even stronger language. It is clear, therefore, that the syndicate committed injustice toward the consumers both by organising a monopoly which afterward imposed unjust prices, and by taking millions of dollars in securities which its members did not earn, and on which they received interest through the exorbitant prices. While this transaction is exceptionally conspicuous, it is substantially typical of the methods by which many powerful monopolies have watered their stock to the detriment of the public, and the advantage of a small group of directors and financiers. _The "Innocent" Investor_ Is the State obliged to protect, or is even justified in protecting, the innocent victims of stockwatering? That is to say, should rate-making authorities fix the charges of public service corporations high enough to return some interest to the purchasers of fictitious securities? All the facts and presumptions of the case seem to demand an answer in the negative. In the first place, it is impossible to distinguish the "innocent" holders from those who were fully acquainted with the questionable and speculative nature of the stock at the time it came into their possession. In the second place, the civil law has never formally recognised any such claim on the part of even innocent investors, nor any such obligation on the part of itself. It has never laid down the principle that any class of investors in fictitious stock has a legal or moral right to obtain the normal rate of interest on such stock through the imposition of sufficiently high charges upon the consumers. Nor have the courts, except in isolated instances, sanctioned any such principle. On the contrary, the Supreme Court of the United States, in the case of Smyth vs. Ames, declared that a railroad "may not impose upon the public the burden of such increased rates as may be required for the purpose of realising profits upon such excessive valuation or fictitious capitalisation." In the third place, when we consider the matter from the side of morals, we see that the innocent investors are not the only persons whose rights are involved. If charges are placed high enough to cover interest on fictitious capital, the cost and the injury fall upon the consumers. The latter have a right to the services of utility corporations, such as railways and gas companies, at a fair price; that is, a price which will return to the capital put into the concern the prevailing rate of interest, plus whatever gains are obtained by exceptional efficiency. To require them to pay more than this, is to compel them to give something for nothing; namely, to provide interest on capital which does not exist, and from which they receive no benefit. When, therefore, the State intervenes to secure fair charges for the consumers, it should base them upon the capital actually invested and used in the business of public service. Frequently, however, the State has permitted overcapitalisation, and charges sufficient to pay normal dividends thereon, for long periods of years. Has it not thereby encouraged investors to cherish the expectation that these high charges would be permitted to continue, and that the fictitious stock would remain indefinitely as valuable as when it came into their possession? Is it not breaking faith with these investors when it reduces charges to the basis of the actual investment? A sufficient answer to these questions is found in the fact that the State has never officially sanctioned the practice of stockwatering, nor in any way intimated that it would recognise the existence of the fictitious stock when it should take up the neglected task of fixing fair rates and charges. At the most, the civil law has merely tolerated the practice, and the resulting extortion upon the public. And there has never been a time when the greater and saner part of public opinion did not look upon overcapitalisation as at the least abnormal and irregular. Neither from the civil law nor from public sentiment have the devices of inflating capitalisation received that measure of approval which would confer upon investments therein the legal or the moral status of vested rights. To the "innocent investor" in watered stocks the maxim, _caveat emptor_, is as fairly applicable as to the man who has been deceived into lending his money on insufficient security, or the man who has been induced by the asseverations of a highly imaginative prospectus to put his money into a salted gold mine, or the man who buys stolen goods from a pawn shop, or the man who because of insufficient police protection loses his purse to a highwayman. In all these cases perfect legal safeguards would have prevented the loss; yet in none of them does the State undertake to make the loss good to the innocent victim. Such seems to be the strict justice of the situation as between the consumer and the innocent investor. It may sometimes happen that a particularly grave hardship can be averted from the latter at a comparatively slight cost to the former. In such a case equity would seem to require that some concession be made to the investors through the imposition of somewhat higher charges upon the consumer. _Magnitude of Overcapitalisation_ Probably the majority of the great steam railroads, street railways, and gas companies that were organised during the last quarter of the nineteenth century inflated their capitalisation to a greater or less extent. Since the year 1900 the trusts have been the chief exponents and illustrations of the practice. According to President Van Hise, "the majority of the great concentrations of industry have gone through two or three stages of reorganisation, the promoters and financiers each time profiting greatly, sometimes enormously."[194] For example; in 1908 the "water" in the American Tobacco Company was estimated by the Commissioner of Corporations at $66,000,000; the United States Shipbuilding Company diluted its twelve and one-half million dollars of capital with more than fifty-five millions of "water"; the United States Steel Corporation contained at the time of its organisation fictitious capital to the amount of $500,000,000; and at least fifty per cent. of the common stock of the American Sugar Refining Company represented no actual investment.[195] Owing to the penetrating and widespread criticism, and the government investigations and prosecutions of the last few years, the practice of stockwatering has very greatly diminished. Perhaps the most flagrant recent example is that of the Pullman Company, which according to the testimony of R. T. Lincoln before the Federal Commission on Industrial Relations, distributed among its stockholders $100,000,000 in stock dividends between 1898 and 1910. Nevertheless the temptation to inflate capital will exist until the device is stringently prohibited by law. Both the nation and the states ought to adopt the policy of forbidding the sale of stock at less than par value, and restricting issues of stock to the amount required for the establishment, equipment, and permanent betterment of a concern, including a sum to cover the loss of interest to the investors during the early period of the business. Any extraordinary risks to which an enterprise is liable can be protected by the simple device of allowing a correspondingly high rate of interest on the securities. With such legislation enacted and enforced, neither the investor nor the consumer could be deceived or defrauded; and the financing and management of corporations would become less speculative, and more beneficial to the community. The present chapter may be fittingly closed with a moderate and significant statement from the pen of Professor Taussig: "It is doubtful whether the whole mechanism of irregular and swollen capitalisation was at any time necessary or wise. Why not provide once for all that securities shall be issued only to represent what has been invested?... It is sometimes said that freedom, even recklessness, in the issue of securities was a useful device, in that it enabled the projectors to look forward to returns really tempting, and at the same time concealed these returns from a grudging public.... A more simple and straightforward way of dealing with the issue of securities might thus have dampened in some degree the feverish speculation and restless progress of railway development. But a slower pace would have had its advantages also, and, not least, restriction of securities would have saved great complications in the later stages of established monopoly and needed regulation."[196] FOOTNOTES: [186] Cf. Ripley, "Trusts, Pools, and Corporations," pp. 207-210. [187] See Report of the Interstate Commerce Commission on these transactions. [188] Taussig, "Principles of Economics," II, 385, 386. [189] Final Report, p. 414. [190] Final Report of the Industrial Commission, p. 413. [191] Report on the Steel Industry, p. 38. [192] Idem, p. 39. [193] _Chicago Record-Herald_, July 29, 1912. [194] Op. cit., p. 28. [195] Cf. Van Hise, op. cit., pp. 29, 142, 149. [196] Op. cit., II, 387, 388. CHAPTER XX THE LEGAL LIMITATION OF FORTUNES If the taxation and other measures of reform suggested in Section I were fully applied to our land system; if co-operative enterprise were extended to its utmost practicable limits for the correction of capitalism; and if the wide extension of educational opportunities, and the elimination of the surplus gains of monopolies restricted the profits of the business man to an amount strictly commensurate with his ability and risks,--if all these results were accomplished the number of men who could become millionaires through their own efforts would be so small that their success would arouse popular applause rather than popular envy. Their claim to whatever wealth they might accumulate would be generally looked upon as entirely valid and reasonable. Their pecuniary eminence would be pronounced quite as deserved as the literary eminence of a Lowell, the scientific eminence of a Pasteur, or the political eminence of a Lincoln. In such conditions there could be no disconcerting discussion of the menace of great fortunes. In the meantime, these reforms are not realised, nor are they likely to be even approximately established within the present generation. For some time to come it will be possible for the exceptionally able, the exceptionally cunning, and the exceptionally lucky to accumulate great riches through clever and fortuitous utilisation of special advantages, natural and otherwise. Moreover, a great proportion of the large fortunes already in existence will persist, and will be transmitted to heirs who will in many cases cause them to increase. Can nothing be done to reduce the size and lessen the number of these great accumulations? If so, is such a proceeding socially and morally desirable? _The Method of Direct Limitation_ The law might directly limit the amount of property to be held by any individual. If the limit were placed fairly high, say, at one hundred thousand dollars, it could scarcely be regarded as an infringement on the right of property. In the case of a family numbering ten members, this would mean one million dollars. All the essential objects of private ownership could be abundantly met out of a sum of one hundred thousand dollars for each person. Moreover, a restriction of this sort need not prevent a man from bestowing unlimited amounts upon charitable, religious, educational, or other benevolent causes. It would, indeed, hinder some persons from satisfying certain unessential wants, such as, the desire to enjoy gross or refined luxuries, great financial power, and the control of immense industrial enterprises; but none of these objects is necessary for any individual's genuine welfare. In the interest of the social good such private and unimportant ends may properly be rendered impossible of realisation. Such a restriction would no more constitute a direct attack upon private ownership than limitations upon the use and kinds of property. At present a man may not do what he pleases with his gun, his horse, or his automobile, nor may he invest his money in the business of carrying the mails. The limitation of fortunes is just what the word expresses, a _limitation_ of the right of property. It is not a denial nor _destruction_ of that right. As a limitation of the amount to be held by an individual, it does not differ in principle from a limitation of the kinds of goods that may become the subject of private ownership. There is nothing in the nature of things nor in the reason of property to indicate that the right of ownership is unlimited in quantity any more than it is in quality. The final end and justification of individual rights of property is human welfare; that is, the welfare of all individuals severally and collectively. Now it is quite within the bounds of physical possibility that the limitation under discussion might be conducive to the welfare of human beings both as individuals and as constituting society. Nevertheless the dangers and obstacles confronting any legal restriction of fortunes are so real as to render the proposal socially inexpedient. It would easily lend itself to grave abuse. Once the community had habituated itself to a direct limitation of any sort, the temptation to lower it in the interest of better distribution and simpler living would become exceedingly powerful. Eventually the right of property might take such an attenuated and uncertain form in the public mind as to discourage labour and initiative, and thus seriously to endanger human welfare. In the second place, the manifold evasions to which the measure would lend itself would make it of very doubtful efficacy. To be sure, neither of these objections is absolutely conclusive, but taken together they are sufficiently weighty to dictate that such a proposal should not be entertained so long as other and less dangerous methods are available to meet the problem of excessive fortunes. Four of the nine members of the Federal Commission on Industrial Relations have suggested that the amount of property capable of being received by the heirs of any person be limited to one million dollars.[197] If we assume that by heirs the Commission meant the natural persons to whom property might come by bequest or succession, this limitation would permit a family of ten persons to inherit one hundred thousand dollars each, and a family of five persons to obtain two hundred thousand dollars apiece. Would such a restriction be a violation of the right of private ownership? The answer depends upon the effects of the measure on human welfare. The rights of bequest and succession are integral elements of the right of ownership; hence they are based upon human needs, and designed for the promotion of human life and development. A person needs private property not only to provide for his personal wants and those of his family during his lifetime, but also to safeguard the welfare of his dependents and to assist other worthy purposes, after he has passed away. Owing to the uncertainty of death, the latter objects cannot be adequately realised without the institutions of bequest and succession. All the necessary and rational ends of bequest and succession could be attained in a society in which no man's heirs could inherit more than one million dollars. Under such an arrangement very few of the children of millionaires would be prevented from getting at least one hundred thousand dollars. That much would be amply sufficient for the essential and reasonable needs of any human being. Indeed, we may go further, and lay down the proposition that the overwhelming majority of persons can lead a more virtuous and reasonable life on the basis of a fortune of one hundred thousand dollars than when burdened with any larger amount. The persons who have the desire and the ability to use a greater sum than this in a rational way are so few that a limitation law need not take them into account. Corporate persons, such as hospitals, churches, schools, and other helpful institutions, should not, as a rule, be restricted as to the amount that they might inherit; for many of them could make a good use of more than the amount that suffices for a natural person. So much for the welfare and rights of the beneficiaries of inheritance. The owners of estates would not be injured in their rights of property by the limitation that we are here considering. In the first place, the number of persons practically affected by the limitation would be extremely small. Only an insignificant fraction of property owners ever transmit or expect to be wealthy enough to transmit to their families more than one million dollars. Of these few a considerable proportion would not be deterred by the million dollar limitation from putting forth their best and greatest efforts in a productive way. They would continue to work either from force of habit and love of their accustomed tasks, or from a desire to make large gifts to their heirs during life, or because they wished to assist some benevolent enterprise. The infinitesimally small number whose energies would be diminished by the limitation could very safely be treated as a socially negligible element. The community would be better off without them. The limitation of inheritance would, indeed, be liable to abuse. Circumstances would undoubtedly arise in which the community would be strongly tempted to make the maximum inheritable amount so low as to discourage the desire of acquisition, and to deprive heirs of reasonable protection. While the bad effects of such a limitation would not be as great as those following a similar abuse with regard to possessions, they are sufficiently grave and sufficiently probable to suggest that the legal restriction of bequest and succession should not be considered except as a last resort, and when the transmission of great fortunes had become a great and certain public evil. It seems reasonable to conclude, then, that neither the limitation of possessions nor the limitation of inheritance is necessarily a direct violation of the right of property, but that the possible and even probable evil consequences of both are so grave as to make these measures of very doubtful benefit. Whether the dangers in question are sufficiently great to render the adoption of either proposal morally wrong, is a question that cannot be answered with any degree of confidence. What seems to be fairly certain is that in our present conditions legislation of this sort would be an unnecessary and unwise experiment. _Limitation Through Progressive Taxation_ Is it legitimate and feasible to reduce great fortunes indirectly, through taxation? There is certainly no objection to the method on moral or social principles. As we have seen in chapter viii, taxes are not levied exclusively for the purpose of raising revenue. Some kinds of them are designed to promote social rather than fiscal ends. Now, to prevent and diminish dangerous accumulations of wealth is a social end which is at least as important as most of the objects sought in license taxes. The propriety of attempting to attain this end by taxation is, therefore, to be determined entirely by reference to its probable effectiveness. The precise method of taxation available here is a progressive tax on incomes and inheritances. By a progressive tax is meant one whose rate advances in some definite proportion to the increases in the amount taxed. For example, a bequest of 100,000 dollars might pay one per cent.; 200,000 dollars, two per cent.; 300,000 dollars, three per cent., and so forth. The reasonableness of the principle of progression in taxation has been well stated by Professor Seligman: "All individual wants vary in intensity, from the absolutely necessary wants of mere subsistence to the less pressing wants which can be satisfied by pure luxuries. Taxes, in so far as they rob us of the means of satisfying our wants, impose a sacrifice upon us. But the sacrifice involved in giving up a portion of what enables us to satisfy our necessary wants is very different from the sacrifice involved in giving up what is necessary to satisfy our less urgent wants. If two men have incomes of one thousand dollars and one hundred thousand dollars respectively, we impose upon them not equal but very unequal sacrifices if we take away from each the same proportion, say ten per cent. For the one thousand dollar individual now has only nine hundred dollars, and must deprive himself and his family of necessaries of life; the one hundred thousand dollar individual has ninety thousand dollars, and if he retrenches at all, which is very doubtful, he will give up only great luxuries, which do not satisfy any pressing wants. The sacrifice imposed on the two individuals is not equal. We are laying on the one thousand dollar man a far heavier sacrifice than on the one hundred thousand dollar man. In order to impose equal sacrifices we must tax the richer man not only absolutely, but relatively, more than the poor man. The taxes must be not proportional, but progressive; the rate must be lower in the one case than in the other."[198] The principle of equality of sacrifices which underlies the progressive theory does not justify the levelling and communistic inferences that have sometimes been brought against it. Equality of sacrifice does not mean equality of satisfied, or unsatisfied, wants after the tax has been collected. If Brown pays a tax of one per cent. on his income of two thousand dollars, it does not follow that Jones with an income of ten thousand dollars should pay a sufficiently high rate to leave him with only the net amount remaining to Brown; namely, 1980 dollars. Equality of sacrifice means proportional equality of burden, not equality of net resources after the tax has been deducted. The object of the progressive rate is to make relatively equal the sacrifices _caused by the tax itself_, not to equalise the sum total of burdens or unsatisfied wants that exist among men. Another objection to progressive taxation is that it readily lends itself to confiscation of the largest incomes. All that is necessary to produce this result is to increase the rate with sufficient rapidity. This could be accomplished either by large steps in the rate itself or by small steps in the income increases which formed the basis of the advances in the rate. For example, if the Federal income tax, which at present levies two per cent. on incomes of more than three thousand dollars, and three per cent. on incomes of over twenty thousand dollars, should thereafter progress geometrically with every geometrically progressive increment of income, the rate on incomes above $640,000 would be 96 per cent.! Or if the rate should progress arithmetically with every ten thousand dollars of increase above twenty thousand dollars, it would be 100 per cent. on incomes of over $990,000! To this objection there are two valid answers. Even if the rate should ultimately reach one hundred per cent. it need not, and on progressive principles it should not, effect confiscation of an entire income. The progressive theory is satisfied when the successive rates of the tax apply to successive increments of income, instead of to the entire income. For example, the rate might begin at one per cent. on incomes of one thousand dollars, and increase by one per cent. with every additional thousand, and yet leave a very large part of the income in the hands of the receiver. Each one thousand dollars would be taxed at a different rate, the first at one per cent., the fiftieth at fifty per cent., and the last at one hundred per cent. If the hundred per cent. rate were applied to the whole of the higher incomes, it would be a direct violation of the principle of equality of sacrifice. In the second place, the progressive theory forbids rather than requires the rate to go as high as one hundred per cent. While the sacrifices imposed by a given rate are greater in the case of small than of large properties, they become approximately equal as between all properties above a certain high level. After this level is reached, additional increments of wealth will all be expended either for extreme luxuries, or converted into new investments. Consequently they will supply wants of approximately equal intensity. For example, the wants dependent upon a surplus of 25,000 dollars in excess of an income of 100,000 dollars, and the wants dependent upon a surplus of 75,000 dollars above the same level do not differ materially in strength. To diminish these surpluses by the same per cent., say, ten, would impose proportionally equal burdens. Hence the rate of progression should be degressive; that is, it should increase at a constant pace until a certain high level of income is reached, then increase at a steadily diminishing pace, and finally become uniform on the very highest incomes. For example; if the rate increased one per cent. with every additional five thousand dollars, reaching fifteen per cent. on incomes of seventy-five thousand dollars, it should be on eighty thousand dollars, not sixteen but fifteen and one-half per cent. On 85,000 dollars the rate should be 15-3/4 per cent.; on 90,000, 15-7/8 per cent.; on 95,000, 15-15/16 per cent.; and on all sums of 100,000 and over, 16 per cent. The point at which the increments in the rate began to decline would be that at which differences in wants began to diminish, and the point at which the rate became stationary would be that at which wants fell to the same level of intensity. _The Proper Rate of Income and Inheritance Taxes_ While the principle of equality of sacrifices forbids a rate of tax that would reach or approximate confiscation, it gives no definite indication of the proper scale of progression, or of the maximum limit that justice would set to the rate. Under our Federal law the highest rate on incomes is now 13 per cent.; under the Wisconsin law it is 6 per cent.; under the law of Prussia it is 4 per cent.; and under the British act of 1909 it is about 8-1/2 per cent. Evidently a much higher rate than any of these would be required to make any impression upon swollen fortunes. The British government recently (September, 1915) made the maximum rate about 33-1/3 per cent. To be sure, this is a war measure which probably will not continue after the restoration of peace. However, if it were made permanent it could not be proved to be unjust, provided that it were applied to the _increments_ of income above a certain high limit, but not to these incomes in their entirety. Our present inheritance taxes are very low, averaging less than 3 per cent. throughout the United States. Probably the highest rate is to be found in Wisconsin, where bequests to non relatives in excess of half a million dollars are subject to a tax of fifteen per cent. It is clear that all the existing rates could be raised very considerably without causing a violation of justice. Some years ago Andrew Carnegie recommended a tax of fifty per cent. on estates amounting to more than one million dollars.[199] No country has yet reached this high level of inheritance taxes. Nevertheless we cannot certainly stigmatise it as unjust either to the testator or his heirs, nor can we prove that it is in any other manner injurious to human welfare. All that can be said with confidence concerning the just rates of inheritance taxation must take the form of generalisations. The increments of the tax should correspond as closely as possible to the diminishing intensity of the wants which the tax deprives of satisfaction; in the case of each heir a certain fairly high minimum of property should be entirely exempt; on all the highest estates the rate should be uniform, and it should fall a long way short of confiscation; and the tax should at no point be such as to discourage socially useful activity and enterprise. _Effectiveness of Such Taxation_ The essential justice of the measures is not the only consideration affecting high income and inheritance taxes. There remain the questions of expediency and feasibility. Under the first head the objection is sometimes raised that taxes which appropriated a considerable portion of the larger incomes and inheritances would diminish very materially the social supply of capital. Immense sums of money would go into the public treasury which otherwise would have been invested in commerce and industry. Two questions are raised by this situation: first, whether it might not be better for society to have these sums devoted, through public works of various kinds, to consumptive uses instead of to an increase in the supply of capital; second, whether the reduction in the savings and capital provided by the persons paying the taxes could be offset by increases in saving among other classes. Even if it be assumed that the first question should receive a negative answer, it is not improbable that the second should be answered in the affirmative. In other words, the increased saving which the poorer and middle classes would be enabled to make as a result of the shifting of some of their burden of taxation to the large incomes and inheritances, might very well counterbalance the curtailment in the investments of the wealthy classes. Even if this possibility were not fully realised, even if the net volume of capital in the community were somewhat diminished, this disadvantage might be more than neutralised by the wider social benefits of the taxation policy. With regard to the feasibility of very heavy income and inheritance taxes, it is sometimes contended that neither of these measures can be made effective toward the reduction of abnormal fortunes.[200] It is held that the successful collection of these taxes requires the co-operation of the persons affected by them; that if the rate should go above ten or twelve per cent., the income receiver would evade the tax in a great variety of ways, while the owner of a large estate would transfer his property outright to a trust company, which would after his death make the desired distribution. The man who urges these objections is a very high authority on taxation, especially on its administrative side; nevertheless his contentions are not absolutely conclusive. In particular, it does not seem probable that high inheritance taxes could be evaded by the simple devices that he mentions. It ought not to be beyond the power of administrative ingenuity to find methods of defeating such subterfuges. However, it is altogether likely that the possibilities of evasion would be sufficient to prevent the imposition of tax rates that approached within measurable distance of the borderland of confiscation. The sum of the matter seems to be that the reduction and prevention of great fortunes cannot prudently be accomplished by the method of direct limitation; that these ends may wisely and justly be attained indirectly, through the imposition of progressive income and inheritance taxes; but that the extent to which these measures would be genuinely effective cannot be estimated until they have been given a thorough trial. FOOTNOTES: [197] "Final Report," p. 32. [198] "Progressive Taxation," pp. 210, 211; cf. Vermeersch, "Quaestiones de Justitia," pp. 94-126. [199] "The Gospel of Wealth," pp. 11, 12. [200] Cf. Dr. T. S. Adams in "Papers and Proceedings of the 27th Annual Meeting of the American Economic Association," pp. 234, sq. CHAPTER XXI THE DUTY OF DISTRIBUTING SUPERFLUOUS WEALTH The correctives of the present distribution that were proposed before the beginning of the last chapter related mainly to the apportionment of the product among the agents of production. They would affect that distribution which takes place as an integral element of the productive process, not any disposition which the productive agents might desire or be required to make of the shares that they had acquired from the productive process. Such were many of the proposals regarding land tenure, and all of those concerning co-operative enterprises and monopoly. In the last chapter we considered the possibility of neutralising to some extent the abuses of the primary distribution by the action of government through the taxation of large fortunes. These were proposals directly affecting the secondary distribution. And they involved the method of compulsion. In the present chapter we shall inquire whether desirable changes in the secondary distribution may not be effected by voluntary action. The specific questions confronting us here are, whether and how far proprietors are morally bound to distribute their superfluous wealth among their less fortunate fellows. _The Question of Distributing Some_ The authority of revealed religion returns to the first of these questions a clear and emphatic answer in the affirmative. The Old and the New Testaments abound in declarations that possessors are under very strict obligation to give of their surplus to the indigent. Perhaps the most striking expression of this teaching is that found in the Gospel according to St. Matthew, ch. 25, verses 32-46, where eternal happiness is awarded to those who have fed the hungry, given drink to the thirsty, received the stranger, covered the naked, visited the sick, and called upon the imprisoned; and eternal damnation is meted out to those who have failed in these respects. The principle that ownership is stewardship, that the man who possesses superfluous goods must regard himself as a trustee for the needy, is fundamental and all-pervasive in the teaching of Christianity. No more clear or concise statement of it has ever been given than that of St. Thomas Aquinas: "As regards the power of acquiring and dispensing material goods, man may lawfully possess them as his own; as regards their use, however, a man ought not to look upon them as his own, but as common, so that he may readily minister to the needs of others."[201] Reason likewise enjoins the benevolent distribution of surplus wealth. It reminds the proprietor that his needy neighbours have the same nature, the same faculties, capacities, wants, and destiny as himself. They are his equals and his brothers. Reason, therefore, requires that he should esteem them as such, love them as such, and treat them as such; that he should love them not merely by well wishing, but by well doing. Since the goods of the earth were intended by the Creator for the common benefit of all mankind, the possessor of a surplus is reasonably required to use it in such a way that this original purpose of all created goods will be fulfilled. To refuse is to treat one's less fortunate neighbour as something different from and less than oneself, as a creature whose claim upon the common bounty of nature is something less than one's own. Multiplying words will not make these truths plainer. The man who does not admit that the welfare of his neighbour is of equal moral worth and importance with his own welfare, will logically refuse to admit that he is under any obligation of distributing his superfluous goods. The man who does acknowledge this essential equality will be unable to find any logical basis for such refusal. Is this obligation one of charity or one of justice? At the outset a distinction must be made between wealth that has been honestly acquired and wealth that has come into one's possession through some violation of rights. The latter kind must, of course, be restored to those persons who have been wronged. If they cannot be found or identified the ill-gotten gains must be turned over to charitable or other worthy objects. Since the goods do not belong to the present holder by any valid moral title, they should be given to those persons who are qualified by at least the claim and title of needs. Some of the Fathers of the Church maintained that all superfluous wealth, whether well or ill gotten, ought to be distributed to those in want. St. Basil of Cæsarea: "Will not the man who robs another of his clothing be called a thief? Is the man who is able and refuses to clothe the naked deserving of any other appellation? The bread that you withhold belongs to the hungry; the cloak that you retain in your chest belongs to the naked; the shoes that are decaying in your possession belong to the shoeless; the gold that you have hidden in the ground belongs to the indigent. Wherefore, as often as you were able to help men and refused, so often you did them wrong."[202] St. Augustine of Hippo: "The superfluities of the rich are the necessities of the poor. They who possess superfluities possess the goods of others."[203] St. Ambrose of Milan: "The earth belongs to all; not to the rich; but those who possess their shares are fewer than those who do not. Therefore, you are paying a debt, not bestowing a gift."[204] Pope Gregory the Great: "When we give necessaries to the needy, we do not bestow upon them our goods; we return to them their own; we pay a debt of justice rather than of mercy."[205] The great systematiser of theology in the thirteenth century, St. Thomas Aquinas, who is universally recognised as the most authoritative private teacher in the Church, stated the obligation of distribution in less extreme and more scientific terms: "According to the order of nature instituted by Divine Providence, the goods of the earth are designed to supply the needs of men. The division of goods and their appropriation through human law do not thwart this purpose. Therefore, the goods which a man has in superfluity are due by the natural law to the sustenance of the poor."[206] That this is the official teaching of the Church to-day is evident from the words of Pope Leo XIII: "When one has provided sufficiently for one's necessities and the demands of one's state of life, there is a duty to give to the indigent out of what remains. It is a duty not of strict justice, save in case of extreme necessity, but of Christian charity."[207] Nearly thirteen years earlier, the same Pope had written: "The Church lays the rich under strict command to give their superfluity to the poor."[208] The only difference between the Fathers and Pope Leo XIII and St. Thomas on this question has reference to the precise nature of the obligation. According to the Fathers, the duty of distribution would seem to be a duty of justice. In the passage quoted above from St. Thomas, superfluities are said to "belong," or to be "due" ("debetur") to the needy; but the particular moral precept that applies is not specified. In another place, however, the Angelic Doctor declares that almsgiving is an act of charity.[209] Pope Leo XIII explicitly says that the obligation of giving is one of charity, "except in extreme cases." The latter phrase refers to the traditional doctrine that a person who is in extreme need; that is, in immediate danger of losing life, limb, or some equivalent personal good, is justified in the absence of any other means of succour in taking from his neighbour what is absolutely necessary. Such appropriation, says St. Thomas, is not properly speaking theft; for the goods seized belong to the needy person, "inasmuch as he must sustain life."[210] In a word, the mediæval and the modern Catholic teaching would make distribution of superfluous goods a duty of justice only in extreme situations, while the Fathers laid down no such specific limitation. Nevertheless, the difference is less important than it appears to be on the surface. When the Fathers lived, theology had not been systematised nor given a precise terminology; consequently, they did not always make exact distinctions between the different classes of virtues and obligations. In the second place, the Patristic passages that we have quoted, and others of like import, were mostly contained in sermons addressed to the rich, and consequently were expressed in hortatory rather than scientific terms. Moreover, the needs of the time which the rich were exhorted to relieve were probably so urgent that they could correctly be classed as extreme, and therefore would give rise to an obligation of justice on the part of those who possessed superfluous wealth. The truly important fact of the whole situation is that both the Fathers and the later authorities of the Church regard the task of distributing superfluous goods as one of strict moral obligation, which in serious cases is binding under pain of grievous sin. Whether it falls under the head of justice or under that of charity, is of no great practical consequence. _The Question of Distributing All_ Is a man obliged to distribute _all_ his superfluous wealth? As regards the support of human life, Catholic moral theologians distinguish three classes of goods: first, the necessaries of life, those utilities which are essential to a healthy and humane existence for a man and his family, regardless of the social position that he may occupy, or the standard of life to which he may have been accustomed; second, the conventional necessities and comforts, which correspond to the social plane upon which the individual or family moves; third, those goods which are not required to support either existence or social position. Goods of the second class are said to be necessary as regards conventional purposes, but superfluous as regards the maintenance of life, while those of the third class are superfluous without qualification. No obligation exists to distribute the first class of goods; for the possessor is justified in preferring his own primary and fundamental needs to the equal or less important needs of his neighbours. The owner of goods of the second class is under obligation to dispense them to persons who are in extreme need, since the preservation of the neighbour's life is more important morally than the maintenance of the owner's conventional standard of living. On the other hand, there is no obligation of giving any of these goods to meet those needs of the neighbour which are social or conventional. Here, again, it is reasonable that the possessor should prefer his own interests to the equal interests of his fellows. Still less is he obliged to expend any of the second class of goods for the relief of ordinary or common distress. As regards the third class of goods, those which are absolutely superfluous, the proportion to be distributed is indefinite, depending upon the volume of need. The doctrine of the moral theologians on the subject is summed up in the following paragraph. When the needs to be supplied are "ordinary," or "common"; that is, when they merely expose a person to considerable and constant inconvenience, without inflicting serious physical, mental, or moral injury, they do not impose upon any man the obligation of giving up all his superfluous goods. According to some moral theologians, the possessor fulfils his duty in such cases if he contributes that proportion of his surplus which would suffice for the removal of all such distress, provided that all other possessors were equally generous; according to others, if he gives two per cent. of his superfluity; according to others, if he contributes two per cent. of his annual income. These estimates are intended not so much to define the exact measure of obligation as to emphasise the fact that there exists some degree of obligation; for all the moral theologians agree that some portion of a man's superfluous goods ought to be given for the relief of ordinary or common needs. When, however, the distress is grave; that is, when it is seriously detrimental to welfare; for example, when a man or a family is in danger of falling to a lower social plane; when health, morality, or the intellectual or religious life is menaced,--possessors are required to contribute as much of their superfluous goods as is necessary to meet all such cases of distress. If all is needed all must be given. In other words, the entire mass of superfluous wealth is morally subject to the call of grave need. This seems to be the unanimous teaching of the moral theologians.[211] It is also in harmony with the general principle of the moral law that the goods of the earth should be enjoyed by the inhabitants of the earth in proportion to their essential needs. In any rational distribution of a common heritage, the claims of health, mind, and morals are surely superior to the demands of luxurious living, or investment, or mere accumulation. What per cent. of the superfluous incomes in the United States would suffice to alleviate all the existing grave and ordinary distress? Nothing like an exact answer is possible, but we can get an approximation that will have considerable practical value. From the estimates of family incomes given by Professor W. I. King, it appears that in 1910 the number of families with annual incomes of less than one thousand dollars was a little more than ten and three quarter millions, and that the total incomes of those families receiving more than ten thousand dollars a year amounted to a little more than three and three quarter billions.[212] If each of the latter class of families should expend ten thousand dollars per year for the needs of life and social position, they would have left nearly two and three quarter billions for distribution among the ten and three quarter million families who are below the one thousand dollar level. So far as the figures of Professor King's table enable us to judge, the greater part if not all of this sum would be required to bring this group of families up to that standard. Possibly an income of one thousand dollars per family is not required to remove all ordinary and grave distress; and possibly ten thousand dollars is not enough for the reasonable requirements of some families. If both these suppositions are true they will tend to cancel each other: the needs to be met will be less, but the superfluous income to be distributed will be less also. Whatever be the minimum and maximum limits of family income that approve themselves to competent students, the conclusion will probably be inevitable that the greater part of the superfluous income of the well-to-do and the rich would be required to abolish all grave and ordinary need. _Some Objections_ The desirability of such a thoroughgoing distribution of superfluous incomes appears to be refuted by the fact that a considerable part of the capital and organising ability that function in industry is dependent upon the possession of superfluous goods by the richer classes. That surplus of the larger incomes which is not consumed or given away by its receivers at present, constitutes no small portion of the whole supply of savings annually converted into capital. Were all of it to be withdrawn from industry and distributed among the needy, the process might involve more harm than good. Moreover, the very large industrial enterprises are initiated and carried on by men who have themselves provided a considerable share of the necessary funds. Without these large masses of personal capital, they would have much more difficulty in organising these great enterprises, and would be unable to exercise their present dominating control. To the first part of this objection we may reply that the distribution of superfluous goods need not involve any considerable withdrawal of existing capital from industry. The giving of large amounts to institutions and organisations, as distinguished from needy individuals, might mean merely a transfer of capital from one holder to another; for example, the stocks and bonds of corporations. The capital would be left intact, the only change being in the persons that would thenceforth receive the interest. Small donations could come out of the possessor's income. Moreover, there is no reason why the whole of the distribution could not be made out of income rather than out of capital. While the givers would still remain possessed of superfluous wealth, they would have handed over to needy objects, persons, and causes the thing that in modern times constitutes the soul and essence of wealth; namely, its annual revenues. Nevertheless, the distribution from income would apparently check the necessary increase of capital, lessen unduly the supply of capital for the future. Were all, or the greater part of superfluous incomes devoted to benevolent objects it would be used up for consumption goods; such as, food, clothing, housing, hospitals, churches, schools. Would not this check to the increase of capital cause serious injury to society? New investment would not be diminished by an amount equal to the whole amount of income transferred to objects of benevolence. For the improved position of the poorer classes that had shared in the distribution would enable them to increase their productive power and their resources, and therefore to save money and convert it into capital. Again, their increased consuming power would augment the demand for goods, bring about a larger use of existing capital instruments, and therefore lead to an enlargement of the community's capacity for saving. Thus, the new saving and capital would, partially at least, take the place of that which was formerly provided by the possessors of surplus income. In so far as a net diminution occurred in the community's supply of capital, it would probably be more than offset, from the viewpoint of social welfare, by the better diffusion of goods and opportunities among the masses of the population. The second difficulty noted above, that such a thorough distribution of superfluous goods would lessen considerably the power of the captains of industry to organise and operate great enterprises, can be disposed of very briefly. Those who made the distribution from income rather than from invested wealth, would still retain control of large masses of capital. All, however, would have deprived themselves of the power to enlarge their business ventures by turning great quantities of their own income back into industry. But if their ability and character were such as to command the confidence of investors, they would be able to find sufficient capital elsewhere to equip and carry on any sound and necessary enterprise. In this case the process of accumulating the required funds would, indeed, be slower than when they used their own, but that would not be an unmixed disadvantage. When the business was finally established, it would probably be more stable, would respond to a more definite and considerable need, and would be more beneficial socially, inasmuch as it would include a larger proportion of the population among its proprietors. And the diminished authority and control exercised by the great capitalist, on account of his diminished ownership of the stock, would in the long run be a good thing for society. It would mean the curtailment of a species of power that is easily liable to abuse, wider opportunities of industrial leadership, and a more democratic and stable industrial system. Only a comparatively small portion of the superfluous goods of the country could with advantage be immediately and directly distributed among needy individuals. The greater part would do more good if it were given to religious and benevolent institutions and enterprises. Churches, schools, scholarships, hospitals, asylums, housing projects, insurance against unemployment, sickness, and old age, and benevolent and scientific purposes generally,--constitute the best objects and agencies of effective distribution. By these means social and individual efficiency would be so improved within a few years that the distress due to economic causes would for the most part have disappeared. The proposition that men are under moral obligation to give away the greater portion of their superfluous goods or income is, indeed, a "hard saying." Not improbably it will strike the majority of persons who read these pages as extreme and fantastic. No Catholic, however, who knows the traditional teaching of the Church on the right use of wealth, and who considers patiently and seriously the magnitude and the meaning of human distress, will be able to refute the proposition by reasoned arguments. Indeed, no man can logically deny it who admits that men are intrinsically sacred, and essentially equal by nature and in their claims to a reasonable livelihood from the common heritage of the earth. The wants that a man supplies out of his superfluous goods are not necessary for rational existence. For the most part they bring him merely irrational enjoyment, greater social prestige, or increased domination over his fellows. Judged by any reasonable standard, these are surely less important than those needs of the neighbour which are connected with humane living. If any considerable part of the community rejects these propositions the explanation will be found not in a reasoned theory, but in the conventional assumption that a man may do what he likes with his own. This assumption is adopted without examination, without criticism, without any serious advertence to the great moral facts that ownership is stewardship, and that the Creator intended the earth for the reasonable support of all the children of men. _A False Conception of Welfare and Superfluous Goods_ If all the present owners of superfluous goods were to carry out their own conception of the obligation, the amount distributed would be only a fraction of the real superabundance. Let us recall the definition of absolute superfluity as, that portion of individual or family income which is not required for the reasonable maintenance of life and social position. It allows, of course, a reasonable provision for the future. But the great majority of possessors, as well as perhaps the majority of others, do not interpret their needs, whether of life or social position, in any such strict fashion. Those who acquire a surplus over their present absolute and conventional needs, generally devote it to an expansion of social position. They move into larger and more expensive houses, thereby increasing their assumed requirements, not merely in the matter of housing, but as regards food, clothing, amusements, and the conventions of the social group with which they are affiliated. In this way the surplus which ought to have been distributed is all absorbed in the acquisition and maintenance of more expensive standards. All classes of possessors adopt and act upon an exaggerated conception of both the strict and the conventional necessities. In taking this course, they are merely subscribing to the current theory of life and welfare. It is commonly assumed that to be worth while life must include the continuous and indefinite increase of the number and variety of wants, and a corresponding growth and variation in the means of satisfying them. Very little endeavour is made to distinguish between kinds of wants, or to arrange them in any definite scale of moral importance. Desires for purely physical goods, such as, food, drink, adornment, and sense gratifications generally, are put on the same level with the demands of the spiritual, moral, and intellectual faculties. The value and importance of any and all wants is determined mainly by the criterion of enjoyment. In the great majority of cases this means a preference for the goods and experiences that minister to the senses. Since these satisfactions are susceptible of indefinite increase, variety, and cost, the believer in this theory of life-values readily assumes that no practical limit can be set to the amount of goods or income that will be required to make life continuously and progressively worth living. Hence the question whether he has superfluous goods, how much of a surplus he has, or how much he is obliged to distribute, scarcely occurs to him at all. Everything that he possesses or is likely to possess, is included among the necessaries of life and social position. He adopts as his working theory of life those propositions which were condemned as "scandalous and pernicious" by Pope Innocent XI in 1679: "It is scarcely possible to find among people engaged in worldly pursuits, even among kings, goods that are superfluous to social position. Therefore, hardly any one is bound to give alms from this source." The practical consequences of this false conception of welfare are naturally most conspicuous among the rich, especially the very rich, but they are also manifest among the comfortable and middle classes. In every social group above the limit of very moderate circumstances, too much money is spent for material goods and enjoyments, and too little for the intellectual, religious, and altruistic things of life. _The True Conception of Welfare_ This working creed of materialism is condemned by right reason, as well as by Christianity. The teaching of Christ on the worth of material goods is expressed substantially in the following texts: "Woe to you rich." "Blessed are you poor." "Lay not up for yourselves treasures on earth." "For a man's life consisteth not in the abundance of things that he possesseth." "Be not solicitous as to what you shall eat, or what you shall drink, or what you shall put on." "Seek ye first the kingdom of God and his justice, and all these things shall be added unto you." "You cannot serve God and Mammon." "If thou wouldst be perfect, go, sell what thou hast and give to the poor, and come follow me." Reason informs us that neither our faculties nor the goods that satisfy them are of equal moral worth or importance. The intellectual and spiritual faculties are essentially and intrinsically higher than the sense faculties. Only in so far as they promote, either negatively or positively, the development of the mind and soul have the senses any reasonable claim to satisfaction. They have no value in themselves; they are merely instruments to the welfare of the spirit, the intellect, and the disinterested will. Right life consists, not in the indefinite satisfaction of material wants, but in the progressive endeavour to know the best that is to be known, and to love the best that is to be loved; that is, God and His creatures in the order of their importance. The man who denies the intrinsic superiority of the soul to the senses, who puts sense gratifications on the same level of importance as the activities of mind, and spirit, and disinterested will, logically holds that the most degrading actions are equally good and commendable with those which mankind approves as the noblest. His moral standard does not differ from that of the pig, and he himself is on no higher moral level than the pig. Those who accept the view of life and welfare taught by Christianity and reason cannot, if they take the trouble to consider the matter, avoid the conclusion that the amount of material goods which can be expended in the rational and justifiable satisfaction of the senses, is very much smaller than is to-day assumed by the great majority of persons. Somewhere between five and ten thousand dollars a year lies the maximum expenditure that any family can reasonably devote to its material wants. This is independent of the outlay for education, religion, and charity, and the things of the mind generally. In the overwhelming majority of cases in which more than five to ten thousand dollars are expended for the satisfaction of material needs, some injury is done to the higher life. The interests of health, intellect, spirit, or morals would be better promoted if the outlay for material things were kept below the specified limit. The distribution advocated in this chapter is obviously no substitute for justice or the deeds of justice. Inasmuch, however, as complete justice is a long way from realisation, a serious attempt by the possessors of true superfluous goods to fulfil their obligations of distribution would greatly counteract and soften existing injustice, inequality, and suffering. Hence, benevolent giving deserves a place in any complete statement of proposals for a better distribution of wealth. Moreover, we are not likely to make great advances on the road of strict justice until we acquire saner conceptions of welfare, and a more effective notion of brotherly love. So long as men put the senses above the soul, they will be unable to see clearly what is justice, and unwilling to practise the little that they are able to see. Those who exaggerate the value of sense gratifications cannot be truly charitable, and those who are not truly charitable cannot perform adequate justice. The achievement of social justice requires not merely changes in the social mechanism, but a change in the social spirit, a reformation in men's hearts. To this end nothing could be more immediately helpful than a comprehensive recognition of the stewardship of wealth, and the duty of distributing superfluous goods. REFERENCES ON SECTION III ELY: Monopolies and Trusts. Macmillan; 1900. VAN HISE: Concentration and Control. Macmillan; 1912. STEVENS: Industrial Combinations and Trusts. Macmillan; 1913. RUSSELL: Business, the Heart of the Nation. John Lane; 1911. GARRIGUET: Régime du Travail. Paris; 1909. The Social Value of the Gospel. St. Louis; 1911. HOBSON: Work and Wealth, a Human Valuation. Macmillan; 1914. WEST: The Inheritance Tax. New York; 1908. SELIGMAN: Progressive Taxation. Princeton; 1908. The Income Tax. New York; 1913. BOUQUILLON: De Virtutibus Theologicis. Brugis; 1890. Also, the works of Taussig, Devas, Hobson, Antoine, Pesch, Carver, Vermeersch, Nearing, and King which are cited in connection with the introductory chapter. FOOTNOTES: [201] "Summa Theologica," 2a. 2ae., q. 66, a. 3. [202] "Patrologia Graeca," vol. 31, cols. 275, 278. [203] "Patrologia Latina," vol. 37, col. 1922. [204] "Patrologia Latina," vol. 14, col. 747. [205] "Patrologia Latina," vol. 77, col. 87. These and several other extracts of like tenor may be found in Ryan's "Alleged Socialism of the Church Fathers," ch. i; St. Louis, 1913. [206] Op. cit., 2a. 2ae., q. 66, a. 7. [207] Encyclical, "On the Condition of Labour," May 15, 1891. [208] Encyclical, "On Socialism, Communism, Nihilism," Dec. 28, 1878. [209] Op. cit., 2a. 2ae., q. 32, a. 1. [210] Idem, q. 66, a. 7. [211] A comprehensive, though brief, discussion of this question and numerous references are contained in Bouquillon, "De Virtutibus Theologicis," pp. 332-348. When Pope Leo XIII declared that the rich are obliged to distribute "out of" their superfluity, he did not mean that they are free to give only a portion thereof. The particle "de" in his statement, "officium est de eo quod superat gratificari indigentibus," is not correctly translated by "some." It means rather "out of," "from," or "with"; so that the affluent are commanded to devote their superfluous goods indefinitely to the relief of the needy. In the Encyclical, "Quot Apostolici Muneris," he used the expression, "gravissimo divites urget praecepto ut quod superest pauperibus tribuant," which clearly declares the duty of distributing all. [212] "The Wealth and Income of the People of the United States," pp. 224-226. SECTION IV THE MORAL ASPECT OF WAGES CHAPTER XXII SOME UNACCEPTABLE THEORIES OF WAGE-JUSTICE "It may be that we are not merely chasing a will-o'-the-wisp when we are hunting for a reasonable wage, but we are at any rate seeking the unattainable." Thus wrote Professor Frank Haight Dixon in a paper read at the twenty-seventh annual meeting of the American Economic Association, December, 1914. Whether he reflected the opinion of the majority of the economists, he at least gave expression to a thought that has frequently suggested itself to every one who has gone into the wage question free from prejudices and preconceived theories. One of the most palpable indications of the difficulty to which Professor Dixon refers is the number of doctrines concerning wage justice that have been laboriously built up during the Christian era, and that have failed to approve themselves to the majority of students and thinkers. In the present chapter the attempt is made to set forth some of the most important of these doctrines, and to show wherein they are defective. They can all be grouped under the following heads: The Prevailing-Rate Theory; Exchange-Equivalence Theories; and the Productivity Theories. I. THE PREVAILING-RATE THEORY This is not so much a systematic doctrine as a rule of expediency devised to meet concrete situations in the absence of any better guiding principle. Both its basis and its nature are well exemplified in the following extract from the "Report of the Board of Arbitration in the Matter of the Controversy Between the Eastern Railroads and the Brotherhood of Locomotive Engineers:"[213] "Possibly there should be some theoretical relation for a given branch of industry between the amount of the income that should go to labour and the amount that should go to capital; and if this question were decided, a scale of wages might be devised for the different classes of employés which would determine the amount rightly absorbed by labour.... Thus far, however, political economy is unable to furnish such a principle as that suggested. There is no generally accepted theory of the division between capital and labour.... "What, then, is the basis upon which a judgment may be passed as to whether the existing wage scale of the engineers in the Eastern District is fair and reasonable? It seems to the Board that the only practicable basis is to compare the rates and earnings of engineers in the Eastern District with those of engineers in the Western and Southern Districts, and with those of other classes of railway employés." Six of the seven men composing this board of arbitration subscribed to this statement. Of the six one is the president of a great state university, another is a successful and large-minded merchant, the third is a great building contractor, the fourth is a distinguished lawyer, the fifth is a prominent magazine editor, and the sixth is a railway president. The dissenting member represented the employés. Since the majority could not find in any generally accepted theory a principle to determine the proper division of the product between capital and labour, they were perhaps justified in falling back upon the practical rule that they adopted. _Not in Harmony with Justice_ From the viewpoint of justice, however, this rule or standard is utterly inadequate. It is susceptible of two interpretations. "Wages prevailing elsewhere," may mean either the highest rates or those most frequently occurring. According to the latter understanding, only those wages which were below the majority rates should be raised, while all those above that level ought to be lowered. In almost all cases this would mean a reduction of the highest wages, as these are usually paid only to a minority of the workers of any grade. The adoption of the highest existing rates as a standard would involve no positive losses, but it would set a rigid limit to all possible gains in the future. According to either interpretation of the prevailing rate, the increases in wages which a powerful labour union seeks to obtain are unjust until they have been established as the prevailing rates. Thus, the attorney for the street railways of Chicago dissented from the increases in wages awarded to the employés by the majority of the board of arbitration in the summer of 1915 because, "these men are already paid not only a fair wage but a liberal wage, when the wages in the same employment and the living conditions in other large cities are taken into consideration, or when comparison is made of these men's annual earnings with the earnings in any comparable line of work in the city of Chicago."[214] In other words, the dominant thing is always the right thing. Justice is determined by the preponderance of economic force. Now, a rule such as this, which condemns improvement until improvement has somehow become general, which puts a premium upon physical and intellectual strength, and which disregards entirely the moral claims of human needs, efforts, and sacrifices, is obviously not an adequate measure of either reason or justice. And we may well doubt that it would be formally accepted as such by any competent and disinterested student of industrial relations. II. EXCHANGE-EQUIVALENCE THEORIES According to these theories, the determining factor of wage justice is to be found in the wage contract. The basic idea is the idea of equality, inasmuch as equality is the fundamental element in the concept of justice. The principle of justice requires that equality should be maintained between what is owed to a person and what is returned to him, between the kinds of treatment accorded to different persons in the same circumstances. Similarly it requires that equality should obtain between the things that are exchanged in onerous contracts. An onerous contract is one in which both parties undergo some privation, and neither intends to confer a gratuity upon the other. Each exchanger desires to obtain the full equivalent of the thing that he transfers. Since each is equal in personal dignity an intrinsic worth to the other, each has a strict right to this full equivalent. Owing to the essential moral equality of all men, no man has a right to make of another a mere instrument to his own interests through physical force or through an onerous contract. Men have equal rights not only to subsist upon the earth, but to receive benefits from the exchange of goods. _The Rule of Equal Gains_ The agreement between employer and employé is an onerous contract; hence it ought to be made in such terms that the things exchanged will be equal, that the remuneration will be equal to the labour. How can this equivalence be determined and ascertained? Not by a direct comparison of the two objects, work and pay, for their differences render them obviously incommensurable. Some third term, or standard, of comparison is required in which both objects can find expression. One such standard is individual net advantage. Inasmuch as the aim of the labour contract is reciprocal gain, it is natural to infer that the gains ought to be equal for the two parties. Net gain is ascertained by deducting in each case the utility transferred from the utility received; in other words, by deducting the privation from the gross return. The good received by the employer when diminished by or weighed against the amount that he pays in wages should be equal to the good received by the labourer when diminished by or weighed against the inconvenience that he undergoes through the expenditure of his time and energy. Hence the contract should bring to employer and employé equal amounts of net advantage or satisfaction. Plausible as this rule may appear, it is impracticable, inequitable, and unjust. In the vast majority of labour contracts it is impossible to know whether both parties obtain the same quantity of net advantage. The gains of the employer can, indeed, be frequently measured in terms of money, being the difference between the wages paid to and the specific product turned out by the labourer. In the case of the labourer no such process of deduction is possible; for advantage and expenditure are incommensurable. We cannot subtract the labourer's privation, that is, his expenditure of time and energy, from his gross advantage, that is, his wages. How can we know or measure the net benefit obtained by a man who shovels sand ten hours for a wage of two dollars? How can we deduct his pain-cost from or weigh it against his compensation? So far as the two sets of advantages are comparable at all, those of the employé would seem to be always greater than those of the employer. A wage of seventy-five cents a day enables the labourer to satisfy the most important wants of life. Weighed against this gross advantage, his pain-cost of toil is relatively insignificant. His net advantage is the greatest that a man can enjoy, the continuation of his existence. The net advantage received by the employer from such a wage contract is but a few cents, the equivalent of a cigar or two. Even if the wage be raised to the highest level yet reached by any wage earner, the net advantage to the labourer, namely, his livelihood, will be greater than the net advantage to the employer from that single contract. Moreover, the sum total of an employer's gains from all his labour contracts is less quantitatively than the sum total of the gains obtained by all his employés. The latter gains provide for many livelihoods, the former for only one. Again, no general rate of wages could be devised which would enable all the members of a labour group to gain equally. Differences in health, strength, and intelligence would cause differences in the pain-cost involved in a given amount of labour; while differences in desires, standards of living, and skill in spending would bring about differences in the satisfactions derived from the same compensation. Finally, various employers would obtain various money gains from the same wage outlay, and various advantages from the same money gains. Hence if the rule of equality of net advantages were practicable it would be inequitable. It is also fundamentally unjust because it ignores the moral claims of needs, efforts, and sacrifices as regards the labourer. As we have seen in the chapter on profits in competitive conditions, and as we shall have occasion to recognise again in a later chapter, no canon or scheme of distributive justice is acceptable that does not give adequate consideration to these fundamental attributes of human personality. _The Rule of Free Contract_ Another form of the exchange equivalence theory would disregard the problem of _equality_ of gains, and assume that justice is realised whenever the contract is free from force or fraud. In such circumstances both parties gain something, and presumably are satisfied; otherwise, they would not enter the contract. Probably the majority of employers regard this rule as the only available measure of practicable justice. The majority of economists likewise subscribed to it during the first half of the nineteenth century. In the words of Henry Sidgwick, "the teaching of the political economists pointed to the conclusion that a free exchange, without fraud or coercion, is also a fair exchange."[215] Apparently the economists based this teaching on the assumption that competition was free and general among both labourers and employers. In other words, the rule as understood by them was probably identical with the rule of the market rate, which we shall examine presently. It is not at all likely that the economists here referred to would have given their moral approval to those "free" contracts in which the employer pays starvation wages because he takes advantage of the ignorance of the labourer, or because he exercises the power of monopoly. No matter by whom it is or has been held, the rule of free contract is unjust. In the first place, many labour contracts are not free in any genuine sense. When a labourer is compelled by dire necessity to accept a wage that is insufficient for a decent livelihood, his consent to the contract is free only in a limited and relative way. It is what the moralists call "_voluntarium imperfectum_." It is vitiated to a substantial extent by the element of fear, by the apprehension of a cruelly evil alternative. The labourer does not agree to this wage because he prefers it to any other, but merely because he prefers it to unemployment, hunger, and starvation. The agreement to which he submits in these circumstances is no more free than the contract by which the helpless wayfarer gives up his purse to escape the pistol of the robber. While the latter action is free in the sense that it is chosen in preference to a violent death, it does not mean that the wayfarer gives, or intends to give, the robber the right of ownership in the purse. Neither should the labourer who from fear of a worse evil enters a contract to work for starvation wages, be regarded as transferring to the employer the full moral right to the services which he agrees to render. Like the wayfarer, he merely submits to superior force. The fact that the force imposed upon him is economic instead of physical does not affect the morality of the transaction. To put the matter in another way, the equality which justice requires is wanting in an oppressive labour contract because of the inequality existing between the contracting parties. In the words of Professor Ely: "Free contract supposes equals behind the contract in order that it may produce equality."[216] Again, the rule of free contract is unjust because it takes no account of the moral claims of needs. A man whose only source of livelihood is his labour does wrong if he accepts a starvation wage willingly. Such a contract, however free, is not according to justice because it disregards the requirements of reasonable life. No man has a right to do this, any more than he has a right to perpetrate self mutilation or suicide. _The Rule of Market Value_ A third method of interpreting exchange equivalence is based upon the concept of value. Labour and compensation are thought to be equal when the value of one is equal to the value of the other. Then the contract is just and the compensation is just. The only objection to these propositions is that they are mere truisms. What does value mean, and how is it to be determined? If it is to receive an ethical signification; if the value of labour is to be understood as denoting not merely the value that labour will command in a market, but the value that labour ought to have,--the statement that wages should equal the value of labour becomes merely an identical proposition. All that it tells us is that wages ought to be what they ought to be. In its simplest economic sense value denotes purchasing power, or importance in exchange. As such, it may be either individual or social; that is, it may mean the exchange importance attributed to a commodity by an individual, or that attributed by a social group. In a competitive society social value is formed through the higgling of the market, and is expressed in market price. Now individual value is utterly impracticable as a measure of exchange equivalence in the wage contract. Since the value attributed to labour by the employer differs in the great majority of instances from that estimated by the labourer himself, it is impossible to determine which is the true value, and the proper measure of just wages. The doctrine that the social value or market price of labour is also the ethical value or just price, is sometimes called the classical theory, inasmuch as it was held, at least implicitly, by the majority of the early economists of both France and England.[217] Under competitive conditions, said the Physiocrats, the price of labour as of all other things corresponds to the cost of production; that is, to the cost of subsistence for the labourer and his family. This is the natural law of wages, and being natural it is also just. Adam Smith likewise declared that competitive wages were natural wages, but he refrained from the explicit assertion that they were just wages. Nevertheless his abiding and oft-expressed faith in the theory that men's powers were substantially equal, and in the social beneficence of free competition, implied that conclusion. Although the great majority of his followers denied that economics had moral aspects, and sometimes asserted that there was no such thing as just or unjust wages, their teaching tended to convey the thought that competitively fixed wages were more or less in accordance with justice. As noted above, their belief in the efficacy of competition led them to the inference that a free contract is also a fair contract. By a free contract they meant for the most part one that is made in the open market, that is governed by the forces of supply and demand, and that, consequently, expresses the social economic value of the things exchanged. All the objections that have been brought against the rule of the prevailing rate apply even more strongly to the doctrine of the market rate. The former takes as a standard the scale of wages most frequently paid in the market, while the latter approves any scale that obtains in any group of labourers or section of the market. Both accept as the ultimate determinant of wage justice the preponderance of economic force. Neither gives any consideration to the moral claims of needs, efforts, or sacrifices. Unless we are to identify justice with power, might with right, we must regard these objections as irrefutable, and the market value doctrine as untenable. _The Mediæval Theory_ Another exchange-equivalence theory which turns upon the concept of value is that found in the pages of the mediæval canonists and theologians. But it interprets value in a different sense from that which we have just considered. As the measure of exchange equivalence the mediæval theory takes objective value, or true value. However, the proponents of this view did not formally apply it to wage contracts, nor did they discuss systematically the question of just wages. They were not called upon to do this; for they were not confronted by any considerable class of wage earners. In the country the number of persons who got their living exclusively as employés was extremely small, while in the towns the working class was composed of independent producers who sold their wares instead of their labour.[218] The question of fair compensation for the town workers was, therefore, the question of a fair price for their products. The latter question was discussed by the mediæval writers formally, and in great detail. Things exchanged should have equal values, and commodities should always sell for the equivalent of their values. By what rule was equality to be measured and value determined? Not by the subjective appreciations of the exchangers, for these would sometimes sanction the most flagrant extortion. Were no other help available, the starving man would give all he possessed for a loaf of bread. The unscrupulous speculator could monopolise the supply of foodstuffs, and give them an exorbitantly high value which purchasers would accept and pay for rather than go hungry. Hence we find the mediæval writers seeking a standard of _objective_ value which should attach to the commodity itself, not to the varying opinions of buyers and sellers. In the thirteenth century Albertus Magnus[219] and Thomas Aquinas[220] declared that the proper standard was to be found in labour. A house is worth as many shoes as the labour embodied in the latter is contained in the labour embodied in the former. It is worthy of note that the diagram which Albertus Magnus presents to illustrate this formula of value and exchange had been used centuries before by Aristotle. It is likewise noteworthy that this conception of ethical value bears a striking resemblance to the theory of economic value upheld by Marxian Socialists. However, neither Aristotle nor the Schoolmen asserted that all kinds of labour had equal value. Now this mediæval labour-measure of value could be readily applied only to cases of barter, and even then only when the value of different kinds of labour had already been determined by some other standard. Accordingly we find the mediæval writers expounding and defending a more general interpretation of objective or true value. This was the concept of normal value; that is, the average or medium amount of utility attributed to goods in the average conditions of life and exchange. On the one hand, it avoided the excesses and the arbitrariness of individual estimates; on the other hand, it did not attribute to value the characters of immutability and rigidity. Contrary to the assumptions of some modern writers, the Schoolmen never said that value was something as fixedly inherent in goods as physical and chemical qualities. When they spoke of "intrinsic" value, they had in mind merely the constant capacity of certain commodities to satisfy human wants. Even to-day bread has always the intrinsic potency of alleviating hunger, regardless of all the fluctuations of human appraisement. The objectivity that the mediæval writers ascribed to value was relative. It assumed normal conditions as against exceptional conditions. To say that value was objective merely meant that it was not wholly determined by the interplay of supply and demand, but was based upon the stable and universally recognised use-qualities of commodities in a society where desires, needs, and tastes were simple and fairly constant from one generation to another. How or where was this relatively objective value of goods to find concrete expression? In the "communis aestimatio," or social estimate, declared the canonists. Objective value and just price would be ascertained practically through the judgment of upright and competent men, or preferably through legally fixed prices. But neither the social estimate nor the ordinances of lawmakers were authorised to determine values and prices arbitrarily. They were obliged to take into account certain objective factors. In the thirteenth and fourteenth centuries, the factors universally recognised as determinative were the utility or use-qualities of goods, but especially their cost of production. Later on, in the sixteenth and seventeenth centuries, risk and scarcity were given considerable prominence as value determinants. Now cost of production in the Middle Ages was mainly labour cost; hence the standard of value was chiefly a labour standard. Moreover, this labour doctrine of true value and equality in exchanges was strongly reinforced by another mediæval principle, according to which labour was the supreme if not the only just title to rewards. How was labour cost to be measured, and the different kinds of labour evaluated? By the necessary and customary expenditures of the class to which the labourer belonged. Mediæval society was composed of a few definite, easily recognised, and relatively fixed orders or grades, each of which had its own function in the social hierarchy, its own standard of living, and its moral right to a livelihood in accordance with that standard. Like the members of the other orders, the labourers were conceived as entitled to live in conformity with their customary class-requirements. From this it followed that the needs of the labourer became the main determinant of the cost of production, and of the value and just price of goods. Inasmuch as the standards of living of the various divisions of the workers were fixed by custom, and limited by the restricted possibilities of the time, they afforded a fairly definite measure of value and price,--much more definite than the standard of general utility. To Langenstein, vice chancellor of the University of Paris in the latter half of the fourteenth century, the matter seemed quite simple; for he declared that every one could determine for himself the just price of his wares by referring to the customary needs of his rank of life.[221] Nevertheless, class needs are not and cannot be a standard of exchange-equivalence. They cannot become a criterion of equality, a common denominator, a third term of comparison, between labour and wages. When we say that a given amount of wages is equal to a given content of livelihood, we express a purely economic, positive, and mathematical relation: when we say that a given amount of labour is equal to a given content of livelihood, we are either talking nonsense or expressing a purely ethical relation; that is, declaring that this labour _ought to_ equal this livelihood. In other words, we are introducing a fourth term of comparison; namely, the moral worth or personal dignity of the labourer. Thus, we have not a single and common standard to measure both labour and wages, and to indicate a relation of equality between them. While class needs directly measure wages, they do not measure labour, either quantitatively, or qualitatively, or under any other aspect or category. Aside from this purely theoretical defect, the canonist doctrine of wage justice was fairly satisfactory as applied to the conditions of the Middle Ages. It assured to the labourer of that day a certain rude comfort, and probably as large a proportion of the product of industry as was practically attainable. Nevertheless it is not a universally valid criterion of justice in the matter of wages; for it makes no provision for those labourers who deserve a wage in excess of the cost of living of their class; nor does it furnish a principle by which a whole class of workers can justify their advance to a higher standard of living. It is not sufficiently elastic and dynamic. _A Modern Variation of the Mediæval Theory_ In spite of its fundamental impossibility, the concept of exchange-equivalence still haunts the minds of certain Catholic writers.[222] They still strive to get a formula to express equality between labour and remuneration. Perhaps the best known and least vulnerable of the attempts made along this line is that defended by Charles Antoine, S.J.[223] Justice, he declares, demands an objective equivalence between wages and labour; and objective equivalence is determined and measured by two factors. The remote factor is the cost of decent living for the labourer; the proximate factor is the economic value of his labour. The former describes the _minimum_ to which the worker is entitled; the latter comprises perfect and adequate justice. In case of conflict between the two factors, the first is determinative of and morally superior to the second; that is to say, no matter how small the economic value of labour may _seem_ to be, it never can descend below the requisites of a decent livelihood. Now, neither of these standards is in harmony with the principle of exchange-equivalence, nor capable of serving as a satisfactory criterion of wage justice. Father Antoine argues that labour is always the moral equivalent of a decent livelihood because the worker expends his energies, and gives out a part of his life in the service of his employer. Unless his wage enables the labourer to replace these energies and conserve his life, it is not the equivalent of the service. If the wage falls short of this standard the labourer gives more than he receives, and the contract is essentially unjust. In this conception of equivalence, energy expended, instead of cost of living, becomes the term of comparison and the common measure of labour and remuneration. Energy expended is, however, technically incapable of providing such a common standard; for it does not measure both related terms in the same way. The service rendered to the employer is the _effect_ rather than the equivalent of the energy expended; and the compensation is a _means_ to the replacement of this energy rather than its formal equivalent. Moreover, the formula does not even furnish an adequate rational basis for the claim to a decent minimum wage. A wage which is merely adequate to the replacement of expended energy and the maintenance of life, is really inadequate to a decent livelihood. Such compensation would cover only physical health and strength, leaving nothing for intellectual, spiritual, and moral needs. As Father Antoine himself admits and contends, the latter needs are among the elements of a decent livelihood, and a wage which does not make reasonable provision for them fails to comply with the minimum requirements of justice. The second factor of "objective equivalence" is even more questionable than the first. To be _completely_ just, says Father Antoine, wages must be not merely adequate to a decent livelihood, but equivalent to the "economic value of the labour" ("la valeur économique du travail"). This "economic value" is determined objectively by the cost of production, the utility of the product, and the movement of supply and demand; subjectively, by the judgment of employers and employés. In case of conflict between these two measures of value, and in case of uncertainty concerning the objective measure, the decision of the subjective determinant must always prevail. These statements are hopelessly ambiguous and confusing. If the objective measure of "economic value" is to be understood in a purely positive way, it merely means the wages that actually obtain in a competitive market. In the purely positive or economic sense, the utility of labour is measured by what it will command in the market, the movement of supply and demand is likewise reflected in market wages, and the determining effect of cost of production is also seen in the share that the market awards to labour after the other factors of production have taken their portions of the product. In other words, the "economic value" of labour is simply its market value. This, however, is not Father Antoine's meaning; for he has already declared that the "economic value" of labour is never less than the equivalent of a decent livelihood, whereas we know that the market value often falls below that level. In his mind, therefore, "economic value" has an ethical signification. It indicates at least the requisites of decent living, and it embraces more than this in some cases. When? and how much more? Let us suppose a business so prosperous that it returns liberal profits to the employer and the prevailing rate of interest on the capital, and yet shows a surplus sufficient to give all the labourers ten dollars a day. Is "cost of production" to be interpreted here as allowing only the normal rate of profits and interest to the business man and the capitalist, leaving the residue to labour? Or is it to be understood as requiring that the surplus be divided among the three agents of production? In other words, is the "economic value" of labour in such cases to be determined by some ethical principle which tells beforehand how much the other agents than labour ought to receive? If so, what is this principle or formula? None of these questions is satisfactorily answered in Father Antoine's pages. They are all to be solved by having recourse to the subjective determinant of "economic value"; namely, the judgment of employers and employés. Thus his proximate factor of justice in wages, his formula of complete as against minimum just wages, turns out to be something entirely subjective, and more or less arbitrary. It is in no sense a measure of the equivalence between work and pay. Moreover, it is inadequate as a measure of justice. Should the majority of both employers and employés fix the "economic value" of the labour of carpenters at five dollars a day, there would be no certainty that this decision was correct, and that this figure represented just wages. Should they determine upon a rate of fifty dollars a day, we could not be sure that their decision was unjust. Undoubtedly the combined judgment of employers and employés will set a fairer wage than one fixed by either party alone, since it will be less one-sided; but there is no sufficient reason for concluding that it will be in all cases completely just. Undoubtedly employers and employés know what wages an industry can afford at prevailing prices, on the assumption that business ability and capital are to have a certain rate of return; but there is no certainty that the prevailing prices are fair, or that the assumed rates of profits and interest are fair. In a word, the device is too arbitrary. To sum up the entire discussion of exchange-equivalence theories: Their underlying concept is fundamentally unsound and impracticable. All of them involve an attempt to compare two entities which are utterly incommensurate. There exists no third term, or standard, or objective fact, which will inform men whether any rate of wages is the equivalent of any quantity of labour. III. PRODUCTIVITY THEORIES The productivity concept of wage justice appears in a great variety of forms. The first of them that we shall consider is advocated mainly by the Socialists, and is usually referred to as the theory of the "right to the whole product of labour."[224] _Labour's Right to the Whole Product_ We have seen that Adam Smith's belief in the normality and beneficence of free competition would have logically led him to the conclusion that competitive wages were just; and we know that this doctrine is implicit in his writings. On the other hand, his theory that all value is determined by labour would seem to involve the inference that all the value of the product belongs to the labourer. As a matter of fact, Smith restricted this conclusion to primitive and pre-capitalist societies. Apparently he, and his disciples in an even larger degree, was more interested in describing the supposed beneficence of competition than in justifying the distribution that resulted from the competitive process. The early English Socialists were more consistent. In 1793 William Godwin, whom Anton Menger calls "the first scientific Socialist of modern times," laid down in substance the doctrine that the labourer has a right to the whole product.[225] In 1805 Charles Hall formulated and defended the doctrine with greater precision and consistency.[226] In 1824 the doctrine was stated more fundamentally, systematically, and completely by William Thompson.[227] He accepted the labour theory of value laid down by Adam Smith, and formally derived therefrom the ethical conclusion that the labourer has a right to the whole product. "Thompson and his followers are only original in so far as they consider rent and interest to be _unjust_ deductions, which violate the right of the labourer to the whole product of his labour."[228] He denounced the laws which empowered the land owner and the capitalist to appropriate value not created by them, and gave to the value thus appropriated the name, "surplus value." In the use of this term he anticipated Karl Marx by several years. His doctrines were adopted and defended by many other English Socialist writers, and were introduced into France by the followers of Saint-Simon. "From his works," says Menger, "the later Socialists, the Saint-Simonians, Proudhon, and above all, Marx and Rodbertus, have directly or indirectly drawn their opinions."[229] Although Saint-Simon never accepted the doctrine of the labourer's right to the whole product, his disciples, particularly Enfantin and Bazard, taught it implicitly. In a just social state, they maintained, every one would be expected to labour according to his capacity, and would be rewarded according to his product.[230] Perhaps the most theoretical and extreme statement of the theory that we are considering is found in the writings of P. J. Proudhon.[231] He maintained that the real value of products was determined by labour time, and that all kinds of labour should be regarded as equally effective in the value-creating process, and he advocated therefore equality of wages and salaries. For the realisation of this ideal he drew the outlines of a semi-anarchic social order, of which the main feature was gratuitous public credit. Neither his theories nor his proposals ever obtained any considerable number of adherents. A milder and better reasoned form of the theory was set forth by Karl J. Rodbertus.[232] Professor Wagner calls him, "the first, the most original, and the boldest representative of scientific Socialism in Germany." Yet, as Menger points out, Rodbertus derived many of his doctrines from Proudhon and the Saint-Simonians. He admitted that in a capitalist society the value of commodities does not always correspond to the labour embodied in them, and that different kinds of labour are productive in different degrees. Therefore, he had recourse to the concept of a normal, or average, day's labour in any group, and would have the various members of the group remunerated with reference to this standard. This was to be brought about by a centralised organisation of industry in which the whole product would ultimately go to labour, and the share of the individual worker would be determined by his contribution of socially necessary labour. Although Karl Marx adopted and formulated in his own terms the theory that value is determined by labour, he did not thence deduce the conclusion that labour has a right to the whole product.[233] Being a materialist, he consistently rejected conceptions of abstract justice or injustice, rights or wrongs. In opposition to the methods of his predecessors, he endeavoured to discover the historical and positive forces which determined the actual distribution, and to derive therefrom the laws that were necessarily preparing the way for a new social order. While he contended that rent receivers and interest receivers appropriated the surplus value created by labour, he refrained from stigmatising this process as morally wrong. It was merely a necessary element of the capitalist system. To call it unjust was in Marx' view to use language without meaning. As well might one speak of the injustice of a hurricane or an avalanche. Not the preaching of abstract justice, but the inevitable transformation of the capitalist into the collectivist organisation of industry, would enable labour to obtain its full product. Nevertheless, it is probably true that a majority of the followers of Marx have drawn from his labour theory of value the inference that all the value of the product belongs by a moral right to the labourer. So deeply fixed in the human conscience is the conception of justice, and so general is the conviction of the labourer's right to his product, that most Socialists have not been able to maintain a position of consistent economic materialism. Indeed, Marx himself did not always succeed in evading the influence and the terminology of idealistic conceptions. He frequently thought and spoke of the Socialist régime as not only inevitable but as morally right, and of the capitalist system as morally wrong. Despite his rigid, materialistic theorising, his writings abound in passionate denunciation of existing industrial evils, and in many sorts of "unscientific" ethical judgments.[234] In so far as the right to the whole product of labour has been based upon the labour theory of value, it may be summarily dismissed from consideration. The value of products is neither created nor adequately measured by labour; it is determined by utility and scarcity. Labour does, indeed, affect value, inasmuch as it increases utility and diminishes scarcity, but it is not the only factor that influences these categories. Natural resources, the desires and the purchasing power of consumers determine value quite as fundamentally as does labour, and cause it to vary out of proportion to the labour expended upon a commodity. To-day there are probably not many adherents of the right-to-the-whole-product doctrine who attempt to base it upon any theory of value. The majority appeal to the simple and obvious fact that the labourers, together with the active directors of industry, are the only human beings who expend energy in the productive process. The only labour that the capitalist and the landowner perform in return for the interest and rent that they respectively receive, consists in choosing the particular goods in which their money is to be invested. As capitalist and landowner, they do not participate in the turning out of products. They are owners but not operators of the factors of production. In the sense, therefore, of active agents the labourers and the business men are the only producers. Whether land and capital should be called _productive_, whether the product should be regarded as _produced_ by land and capital as well as by labour and undertaking activity, is mostly a matter of terminology. Inasmuch as they are instrumental in bringing forth the product, land and capital may properly be designated as productive, but not in the same sense as labour and business energy. The former are passive factors and instrumental causes of the product, while the latter are active factors and original causes. Moreover, the former are non-rational entities, while the latter are attributes of human beings. As we have seen in former chapters, it is impossible to prove that mere ownership of a productive thing, such as a cow, a piece of land, or a machine, necessarily creates a right to either the concrete or the conventional product. The formula, "_res fructificat domino_," is not a self evident proposition. Nor are there any premises available from which the formula can be logically and necessarily deduced. On the other hand, we cannot prove conclusively that ownership of productive property does _not_ give a right to the product. Whence it follows that the owners of land and capital have at least a presumptive claim to take rent and interest from their possessions. Moreover, those owners of capital who would not have saved money without the hope of interest have a just claim thereto on account of their sacrifices in saving. Would the State be justified in abolishing rent and interest, and thus enabling labour to obtain the whole product? Conceivably this result might be brought about under the present system of private ownership, or through the substitution of collectivism. Were the change made by the former method land and capital would no longer be sought or have value on account of their annual revenues, but only as receptacles of saving. They would be desired solely as means of accumulating stores of goods which might be exchanged for articles of consumption some time in the future. While we cannot estimate even approximately the decline that would thus occur in the value of land and capital, we may safely assert that it would be considerable. Unless the proprietors received adequate compensation for this loss, they would be compelled to suffer obvious and grave injustice. Any attempt, however, to carry out such a scheme, either with or without compensation, would inevitably fail. Rent might be terminated through the Single Tax, but interest could not be abolished by any mere legal prohibition. Nor does Socialism afford a way out; for, as we have seen in a former chapter, it is an impracticable system. Consequently the theory of the right to the whole product of labour is confronted by the final objection that its realisation would involve greater evils and injustices than those which it seeks to abolish. Finally, the theory is radically incomplete. It professes to describe the requirements of justice as between the landowners and capitalists on the one side, and the wage earners on the other; but it provides no rule for determining distributive justice as between different classes of labour. In none of its forms does it provide any comprehensive rule or principle to ascertain the difference between the products of different labourers, and to decide how the product belonging to any group of men as a whole should be divided among the individual members. Does the locomotive engineer produce more than the section hand, the bookkeeper more than the salesman, the ditch digger more than the teamster? These and countless similar questions are, from the nature of the productive process, unanswerable. Even if it were ethically acceptable, the doctrine of the right to the whole product is hopelessly inadequate. As intimated above, the notion that if the labourer receives compensation according to his product he receives just compensation, is one of the most prevalent and fundamental concepts in the controversy about wage justice. Hence we find it in certain theories which reject the doctrine of the right to the whole product. According to these theories, not only the labourer but all the agents of production should be rewarded in proportion to their productive contributions. Instead of the whole product, the worker ought to receive that portion of it which corresponds to his specific productivity, that is, that portion of the product which represents his productive influence as compared with the productive efficacy of land, capital, and business energy. _Clark's Theory of Specific Productivity_ One of the theories referred to in the last paragraph is that which has been elaborated in great detail and with great ingenuity by Professor John Bates Clark. As stated by himself in the opening sentence of the preface to his "Distribution of Wealth," its main tenet is, "that the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates." In a régime of perfect competition, therefore, the labourer would get, not the whole product of industry, but the whole product due to his own exertions. It is impossible, and indeed unnecessary, to enter upon an extended examination of this contention. It will be sufficient to state in a summary way the most obvious and cogent objections. Without making any examination of Professor Clark's theory, we should expect to find it unconvincing. For the productive process is by analogy an organic process, in which every factor requires the co-operation of every other factor in order to turn out even the smallest portion of the product. Each factor is in its own order the cause of the whole product. Consequently no physical portion of the product can be set aside and designated as wholly due to any one factor. Can we not, however, distinguish the _proportionate productive influence_ exerted by each factor, and the proportion of the product which represents such productive influence? This is the question to which Professor Clark addresses himself with much ingenuity, subtlety, and labour, and to which he returns an affirmative answer.[235] He contends that the amount of product added by the presence of the least productive labourer in a group or establishment describes the productivity of that and every other labourer for whom the man in question can be substituted. Nevertheless this marginal labourer had the use of _some_ capital, no matter how little or how poor; consequently the increment of product which follows his activity is partly due to capital. It represents something other than his own productive power. If his wage equals the value of this increment of product, he is receiving something more than his specific product. In the second place, Professor Clark maintains that the difference between what a labourer produces when he uses the whole of a certain supply of capital and what he produces when he has shared that capital with another labourer, represents the specific productivity of the relinquished capital. Let us assume that in a given case the difference is ten units of product. When the first man had the whole capital to himself, the product was one hundred units; when he shares the use of it with another, the total product is one hundred and eighty units. As the two men are assumed to be equally productive, each has to his credit ninety units of product. Working with half the capital, the first man finds that the resulting product is ten units less than when he was using the whole capital. Hence these ten units represent the portion that the relinquished capital contributed to the product; and if the productivity of half the capital is ten units, that of the whole capital must be twenty units. Nevertheless, the ten units by which the product was enlarged when the man had the whole capital, did not come into being without his co-operation; hence they cannot be entirely attributed to the one-half share of the capital. In other words, the productivity of the relinquished capital seems to be less than ten units. It also seems to be more than ten units; for we may assume that if each man were to use one-half the capital independently of the other, the resulting total product would be less than one hundred and eighty units, or less than ninety units for each. Consequently the difference between the product resulting from the first man's use of the whole capital and that resulting from his use of half the capital would be more than ten units; and this difference is specifically attributable to half the capital. Who can say which of these calculations is correct, or whether either of them is correct? The method of ascertaining specific productivity which has been described in the last paragraph is thought by Professor Clark to receive confirmation from the fact that it leads to the same conclusion as the first and more direct method; namely, that the specific productivity of labour is expressed in the product of the marginal labourer. As a matter of fact, this conclusion is yielded by both methods; for the specific productivity of the first labourer appeared as eighty units, which was also the specific productivity of the second labourer, who was the marginal labourer. As we saw in the second last paragraph, however, the marginal product is not due to labour alone; hence the verification provided by the second method is in reality a refutation. Apparently the majority of economists do not accept Professor Clark's theory; for of the nine who discussed certain applications of it at the nineteenth annual meeting of the American Economic Association only one approved it, three were non-committal, and five expressed their dissent.[236] Even if the theory were true its hypothetical character would deprive it of any practical value. It assumes a régime of perfect competition, but this assumption is so seldom realised that no rule based upon it can throw much light on the question of the productivity of present day labourers. Even if it were exactly applicable to existing conditions, that is, if labourers were actually getting their specific products, the theory would not provide us with a doctrine of just wages. As we have seen in former chapters, productivity is neither the only nor the highest canon of justice, whether as regards the comparative claims of capital and labour, or as regards the claims of different labourers. The contention that capital ought to command interest because it aids in bringing forth the product, is neither self evident nor demonstrable by any process of reasoning. Even if we should concede that the capitalist has a right to interest by virtue of the productivity of his capital, we should not therefore conclude that this right is as cogent as the corresponding right of the labourer. In the former case the productive agency is not human nor active, but only material and passive; and the recipient of the product performs no labour as capitalist, but is left free to get a livelihood by personal activity. The productivity of labour differs in all these respects, and the difference is ethically sufficient to justify the claim that the labourer may sometimes have a right to a part of the specific product of capital. To sum up the matter in the words of Professor Wicker: "To have proved that the capitalist gets in interest what his capital produces is not to have proved that the capitalist gets what he has earned. To have proved that the landlord gets what his land produces is not to have proved that the landlord earns his distributive share.... Economics is not ethics; explanation is not justification."[237] Indeed, Professor Clark nowhere explicitly asserts that productivity is an adequate rule of justice. "We might raise the question," he says, "whether a rule that gives to a man his product is in the highest sense just."[238] Scattered throughout his volume, however, are many expressions which might fairly be interpreted as answering this question in the affirmative. The statements that distribution according to product is a "natural law," and that if the labourer does not get his full specific product he is "despoiled," suggest if they do not imply that wages according to productivity is not merely the economic but the ethical norm. At any rate, the assumption of productivity as the adequate canon of wage justice, is very widely adopted, and is frequently brought forward to give sanction to insufficient rates of remuneration. Hence it has been thought well to show that the economic basis of the assumption, i.e., that the labourer gets what he produces, is unproved and unprovable. _Carver's Modified Version of Productivity_ Professor Carver makes no attempt to ascertain or state the exact physical productivity of labour as compared with that of capital, but confines his attention to what he calls the "economic" productivity of a given unit of labour in a given productive process.[239] "Find out accurately how much the community produces with his [the labourer's] help, over and above what it produces without his help, and you have an exact measure of his productivity."[240] By this rule we can determine a man's productivity not only as compared with his inactivity in relation to a given industry or establishment, but as compared with the productivity of some other man who might be substituted for him. Thus understood, productivity expresses the economic value of a man to the industrial process in which he participates. It "determines how much a man is worth, and consequently, according to our criterion of justice, how much a man ought to have as a reward for his work."[241] While this conception of productivity is relatively simple, and the canon of justice based upon it is somewhat plausible, neither is adequate. To many situations the productivity test is substantially inapplicable. The removal from industry of the man who works alone; for example, the independent shoemaker, blacksmith, tailor, or farmer, would result not in a certain diminution, but in the entire non-appearance of the product; and the removal of the capital or tools would have precisely the same effect. According to the former method, the labourer is to be credited with the whole product, and capital with nothing; according to the latter method, capital produces everything, and labour nothing. Even when several labourers are employed in an establishment, the test is inapplicable to those who are engaged upon indispensable tasks; for example, the engineer in the boiler room of a small factory, and the bookkeeper in a small store. Remove them, and you have no product at all; hence a rigid enforcement of Professor Carver's test would award them the whole product. To be sure, we can get some measure of the productivity of these men by observing the effect on the product when inferior men are put in their places; but this merely enables us to tell how much more they are worth than other men, not their total worth. Moreover, even the substitution test is not always practicable. The attempt to ascertain the productivity of a workman of high technical skill by putting in his place an utterly unskilled labourer, would not yield very satisfactory results, either to the inquiry or to the industry. In the majority of such cases, the difference in the resulting product would probably far exceed the difference in the existing wage rates of the two men, thus showing that the skilled worker is getting considerably less than he is "economically worth." In the field to which it is applicable, namely, that of more or less unspecialised labour in large establishments, Professor Carver's theory violates some of the most fundamental conceptions of justice and humanity. He admits that it takes no account of the labourer's efforts, sacrifices, or needs, and that when unskilled labour becomes too plentiful, the value of the product may fall below the cost of supporting a decent standard of living. While he looks with some sympathy upon the demand for a minimum wage of two dollars per day, he contends that unless the labourer really _earns_ that amount, some other man will be paid less than he earns, "which would be unjust." To "earn" two dollars a day means, in Professor Carver's terminology, to add that much value to the product of the establishment in which the labourer is employed; for this is the measure of the labourer's productivity. If all the men who are now getting less than two dollars a day are receiving the full value of their product, and if all the other workers are likewise given the full value of their product, an increase in the remuneration of the former will mean a deduction from the compensation of the latter. These conclusions of ethical pessimism are extremely vulnerable. As we have shown in chapter xvi, efforts, sacrifices, and needs are superior to productivity as claims to reward, and must be given due consideration in any just scheme of distribution. Professor Carver would leave them out of account entirely. In the second place, it is not always nor necessarily ever true that to raise the wages of the poorest paid labourers will mean to lower the remuneration of those who are better paid. Many workers, particularly women, are now receiving less than the measure of their "productivity," less than they "earn," less than their worth to the employer, less than he would be willing to pay rather than go without their services. Professor Carver would, of course, not deny that the wages of all such labourers could be raised without affecting the remuneration of other workers. Even when the poorest paid class is receiving all that its members are at present worth to the employer, an increase in their compensation would not necessarily come out of the fund available for the better paid. It could be deducted from excessive profits and interest; for we know well that in many industries competition does not automatically keep down these shares to the minimum necessary to retain the services of business ability and capital. It could be provided to some extent out of the enlarged product that would result from improvements in the productive process, and from the increased efficiency of those workers whose wages had been raised. Finally, the increased remuneration could be derived from increased prices. When we speak of the unskilled labourer as getting all that he produces, or all that he earns, we refer not to his concrete product, but to the value of that product, to the selling price of the product. Neither this price, nor any other existing price, has anything about it that is either economically or ethically sacred. In a competitive market current prices are fixed by the forces of supply and demand, which often involve the exploitation of the weak; in a monopoly market they are set by the desires of the monopolist, which are likewise destitute of moral validity. Hence a minimum wage law which would raise the price and value of the product sufficiently to provide living wages for the unskilled workers, thus increasing their "productivity" and enabling them to "earn" the legal wage, would neither violate the principles of justice, nor necessarily diminish the compensation of any other labouring group. To be sure, the increased prices might be followed by such a lessening of demand for the product as to diminish employment; but this is another matter which has no direct bearing on either the economic or the ethical phases of productivity and earning power. And the disadvantages involved in the supposition of a reduced volume of employment may possibly be not so formidable socially as those which accompany a large volume of insufficiently paid occupations. This question will receive further consideration in a later chapter. In the meantime, we conclude that Professor Carver's theory or rule is inapplicable to a large part of the industrial field, and that where it does apply it frequently runs counter to some of the fundamental principles of distributive justice. FOOTNOTES: [213] Page 47. [214] _The Chicago Daily Tribune_, July 17, 1915. [215] Article on "Political Economy and Ethics," in Palgrave's Dictionary of Political Economy. [216] "Property and Contract," II, 603. [217] Cf. "L'Idée du Juste Salaire," by Léon Polier, ch. iii. Paris; 1903. [218] Polier, op. cit., pp. 33, sq.; Ryan, "A Living Wage," pp. 26, sq. [219] "Ethica," lib. 5, tr. 2, cap. 5. [220] "Comment. ad Eth.," XXI, 172. [221] Cf. Polier, op. cit., pp. 66-75; Ryan, op. cit, pp. 93, 94. [222] Cf. Polier, op. cit., pp. 92-95. [223] "Cours d'Économie Sociale," pp. 598, sq. [224] Polier, op. cit., pp. 219-359; Menger, "The Right to the Whole Produce of Labour"; English Translation. London; 1899. [225] "Enquiry Concerning Political Justice." [226] "On the Effects of Civilisation on the People of European States." [227] "An Inquiry Into the Principles of the Distribution of Wealth Most Conducive to Human Happiness." [228] Menger, op. cit., p. 56. [229] Op. cit., p. 51. [230] Cf. Menger, op. cit., pp. 62-73. [231] "Qu' est-ce que la propriété ou recherches sur la principe du droit et du gouvernment." 1840. [232] "Zur Erkentniss unserer staatswirthschaftlichen Zustande," 1842. [233] "Das Kapital," 1867. [234] Cf. Polier, op. cit., pp. 352, sq. [235] Cf. especially chap. xxi, "The Theory of Economic Causation." [236] "Proceedings," pp. 23-54. [237] "Proceedings of the 22d Annual Meeting of the American Economic Association," pp. 160, 161. [238] Op. cit., p. 8. [239] "Essays in Social Justice"; especially ch. vii. [240] Op. cit., pp. 187, 188. [241] Op. cit., p. 201. CHAPTER XXIII THE MINIMUM OF JUSTICE: A LIVING WAGE Although the principle of needs is somewhat prominent among the theories of wage justice, it received only incidental mention in the last chapter. Considered as a comprehensive rule, this principle has been defended with less energy and definiteness than most of the other canons. Considered as a partial rule, it is sound and fundamental, and therefore could not have been classed among theories that are unacceptable. _The Principle of Needs_ Many of the early French Socialists of the Utopian school advanced this formula of distribution: "From each according to his powers; to each according to his needs." It was also put forward by the German Socialists in the Gotha Program in 1875. While they have not given to this standard formal recognition in their more recent platforms, Socialists generally regard it as the ideal rule for the distant future.[242] The difficulties confronting it are so great and so obvious that they would defer the introduction of it to a time when the operation of their system will, they hope, have eradicated the historical human qualities of laziness and selfishness. To adopt needs as the sole rule of distribution would mean, of course, that each person should be rewarded in proportion to his wants and desires, regardless of his efforts or of the amount that he had produced. The mere statement of the proposal is sufficient to refute it as regards the men and women of whom we have any knowledge. In addition to this objection, there is the insuperable difficulty of measuring fairly or accurately the relative needs of any group composed of men, women, and children. Were the members' own estimates of their needs accepted by the distributing authority, the social product would no doubt fall far short of supplying all. If the measurement were made by some official person or persons, "the prospect of jobbery and tyranny opened up must give the most fanatical pause." Indeed, the standard of needs should be regarded as a canon of Communism rather than of Socialism; for it implies a large measure of common life as well as of common ownership, and paternalistic supervision of consumption as well as collectivist management of production. While the formula of needs must be flatly rejected as complete rule of distributive justice, or of wage justice, it is valid and indispensable as a partial standard. It is a partial measure of justice in two senses: first, inasmuch as it is consistent with the admission and operation of other principles, such as productivity and sacrifice; second, inasmuch as it can be restricted to certain fundamental requisites of life, instead of being applied to all possible human needs. It can be made to safeguard the minimum demands of reasonable life, and therefore to function as a minimum standard of wage justice. Human needs constitute the primary title or claim to material goods. None of the other recognised titles, such as productivity, effort, sacrifice, purchase, gift, inheritance, or first occupancy, is a fundamental reason or justification of either rewards or possessions. They all assume the existence of needs as a prerequisite to their validity. If men did not need goods they could not reasonably lay claim to them by any of the specific titles just enumerated. First comes the general claim or fact of needs; then the particular title or method by which the needs may be conveniently supplied. While these statements may seem elementary and platitudinous, their practical value will be quite evident when we come to consider the conflicting claims that sometimes arise out of the clash between needs and some of the other titles. We shall see that needs are not merely a physical reason or impulse toward acquisition and possession, but a moral title which rationalises the claim to a certain amount of goods.[243] _Three Fundamental Principles_ The validity of needs as a partial rule of wage justice rests ultimately upon three fundamental principles regarding man's position in the universe. The first is that God created the earth for the sustenance of _all_ His children; therefore, that all persons are equal in their inherent claims upon the bounty of nature. As it is impossible to demonstrate that any class of persons is less important than another in the eyes of God, it is logically impossible for any believer in Divine Providence to reject this proposition. The man who denies God or Providence can refuse assent to the second part of the proposition only by refusing to acknowledge the personal dignity of the human individual, and the equal dignity of all persons. Inasmuch as the human person is intrinsically sacred and morally independent, he is endowed with those inherent prerogatives, immunities, and claims that we call rights. Every person is an end in himself; none is a mere instrument to the convenience or welfare of any other human being. The worth of a person is something intrinsic, derived from within, not determined or measurable by reference to any earthly object or purpose without. In this respect the human being differs infinitely from, is infinitely superior to, a stone, a rose, or a horse. While these statements help to illustrate what is meant by the dignity of personality, by the intrinsic worth, importance, sacredness of the human being, they do not prove the existence of this inherent juridical quality. Proof in the strict sense is irrelevant and impossible. If the intrinsic and equal moral worth of all persons be not self evident to a man, it will not approve itself to him through any process of argumentation. Whosoever denies it can also logically deny men's equal claims of access to the bounty of the earth; but he cannot escape the alternative conclusion that brute force, exercised either by the State or by individuals, is the only proper determinant of possessions and of property. Against this monstrous contention it is not worth while to offer a formal argument. The second fundamental principle is that the inherent right of access to the earth is conditioned upon, and becomes actually valid through, the expenditure of useful labour. Generally speaking the fruits and potentialities of the earth do not become available to men without previous exertion. "In the sweat of thy brow thou shalt eat thy bread," is a physical no less than a moral commandment. There are, indeed, exceptions: the very young, the infirm, and the possessors of a sufficient amount of property. The two former classes have claims to a livelihood through piety and charity, while the third group has at least a presumptive claim of justice to rent and interest, and a certain claim of justice to the money value of their goods. Nevertheless, the general condition is that men must work in order to live. "If a man will not work neither shall he eat." For those who refuse to comply with this condition the inherent right of access to the earth remains only hypothetical and suspended. The two foregoing principles involve as a corollary a third principle; the men who are in present control of the opportunities of the earth are obliged to permit reasonable access to these opportunities by persons who are willing to work. In other words, possessors must so administer the common bounty of nature that non-owners will not find it unreasonably difficult to get a livelihood. To put it still in other terms, the right to subsist from the earth implies the right to access thereto on reasonable terms. When any man who is willing to work is denied the exercise of this right, he is no longer treated as the moral and juridical equal of his fellows. He is regarded as inherently inferior to them, as a mere instrument to their convenience; and those who exclude him are virtually taking the position that their rights to the common gifts of the Creator are inherently superior to his birthright. Obviously this position cannot be defended on grounds of reason. Possessors are no more justified in excluding a man from reasonable access to the goods of the earth than they would be in depriving him of the liberty to move from place to place. The community that should arbitrarily shut a man up in prison would not violate his rights more fundamentally than the community or the proprietors who should shut him out from the opportunity of getting a livelihood from the bounty of the earth. In both cases the man demands and has a right to a common gift of God. His moral claim is as valid to the one good as to the other, and it is as valid to both goods as is the claim of any of his fellows. _The Right to a Decent Livelihood_ Every man who is willing to work has, therefore, an inborn right to sustenance from the earth on reasonable terms or conditions. This cannot mean that all persons have a right to equal amounts of sustenance or income; for we have seen on a preceding page that men's needs, the primary title to property, are not equal, and that other canons and factors of distribution have to be allowed some weight in determining the division of goods and opportunities. Nevertheless, there is a certain minimum of goods to which every worker is entitled by reason of his inherent right of access to the earth. He has a right to at least a _decent_ livelihood. That is; he has a right to so much of the requisites of sustenance as will enable him to live in a manner worthy of a human being. The elements of a decent livelihood may be summarily described as: food, clothing, and housing sufficient in quantity and quality to maintain the worker in normal health, in elementary comfort, and in an environment suitable to the protection of morality and religion; sufficient provision for the future to bring elementary contentment, and security against sickness, accident, and invalidity; and sufficient opportunities of recreation, social intercourse, education, and church-membership to conserve health and strength, and to render possible in some degree the exercise of the higher faculties. On what ground is it contended that a worker has a right to a decent livelihood, as thus defined, rather than to a bare subsistence? On the same ground that validates his right to life, marriage, or any of the other fundamental goods of human existence. On the dignity of personality. Why is it wrong and unjust to kill or maim an innocent man? Because human life and the human person possess intrinsic worth; because personality is sacred. But the intrinsic worth and sacredness of personality imply something more than security of life and limb, and the material means of bare existence. The man who is not provided with the requisites of normal health, efficiency, and contentment lives a maimed life, not a reasonable life. His physical condition is not worthy of a human being. Furthermore, man's personal dignity demands not merely the conditions of reasonable physical existence, but the opportunity of pursuing self perfection through the harmonious development of all his faculties. Unlike the brutes, he is endowed with a rational soul, and the capacity of indefinite self improvement. A due regard to these endowments requires that man shall have the opportunity of becoming not only physically stronger, but intellectually wiser, morally better, and spiritually nearer to God. If he is deprived of these opportunities he cannot realise the potentialities of his nature nor attain the divinely appointed end of his nature. He remains on the plane of the lower animals. His personality is violated quite as fundamentally as when his body is injured or his life destroyed. While it is impossible to define with mathematical precision the degree of personal development that is necessary to satisfy the claims of personal dignity, it is entirely practicable to state with sufficient definiteness the minimum conditions of such development. They are that quantity of goods and opportunities which fair-minded men would regard as indispensable to humane, efficient, and reasonable life. The summary description of a decent livelihood at the end of the second last paragraph, would probably be accepted by all men who really believe in the intrinsic worth of personality. _The Claim to a Decent Livelihood from a Present Occupation_ The claim of a worker to a decent livelihood from the goods of the earth does not always imply a strict right to a livelihood from one's present occupation. To demand this would in some circumstances be to demand a livelihood not on reasonable but on unreasonable terms; for the persons in control of the sources could not reasonably be required to provide a decent livelihood. Their failure to do so would not constitute an unreasonable hindrance to the worker's access to the earth in such circumstances. In chapter xvi we saw that not all business men have a strict right to that minimum of profits which is required to yield them a decent livelihood: first, because the direction of industry is not generally the business man's only means of getting a living; second, because the community, the consumers, do not regard the presence and activity of all existing business men as indispensable. Of course, the community is morally bound to pay such prices for goods as will enable all the necessary business men, whether manufacturers or traders, to obtain a decent livelihood in return for their directive functions; but it is not obliged to provide a livelihood for those business men whose presence is not required, who could vanish from the field of industrial direction without affecting either the supply or the price of goods, and whose superfluous character is proved by the fact that they cannot make a livelihood at the prevailing prices. They are in the position of persons whom the community does not desire to employ as business men. In refusing to pay prices sufficiently high to provide these inefficient business men with a decent livelihood, the community is not unreasonably hindering their access to the common goods of the earth. Such men are really demanding a livelihood on unreasonable terms. _The Labourer's Right to a Living Wage_ On the other hand, the wage earner's claim to a decent livelihood is valid, generally speaking, in his present occupation. In other words, his right to a decent livelihood in the abstract means in the concrete a right to a living wage. To present the matter in its simplest terms, let us consider first the adult male labourer of average physical and mental ability who is charged with the support of no one but himself, and let us assume that the industrial resources are adequate to such a wage for all the members of his class. Those who are in control of the resources of the community are morally bound to give such a labourer a living wage. If they fail to do so they are unreasonably hindering his access to a livelihood on reasonable terms; and his right to a livelihood on reasonable terms is violated. The central consideration here is evidently the _reasonableness_ of the process. Unlike the business man, the rent receiver, and the interest receiver, the labourer has ordinarily no other means of livelihood than his wages. If these do not furnish him with a decent subsistence he is deprived of a decent subsistence. When he has performed an average day's work, he has done all that is within his power to make good his claim to a decent livelihood. On the other hand, the community is the beneficiary of his labour, and desires his services. If, indeed, the community would rather do without the services of an individual labourer than pay him a living wage, it is morally free to choose the former alternative, precisely as it is justified in refusing to pay a price for groceries that will enable an inefficient grocer to obtain living profits. Whatever concrete form the right of such persons to a decent livelihood may take, it is not the right to living wages or living profits from the occupations in question. Here, however, we are discussing the labourer to whom the community would rather pay a living wage than not employ him at all. To refuse such a one a living wage merely because he can be constrained by economic pressure to work for less, is to treat him unreasonably, is to deprive him of access to a livelihood on reasonable terms. Such treatment regards the labourer as inferior to his fellows in personal worth, as a mere instrument to their convenience. It is an unreasonable distribution of the goods and opportunities of the earth. Obviously there is no formula by which such conduct can be mathematically demonstrated as unreasonable; but the proposition is as certain morally as any other proposition that is susceptible of rational defence in the field of distribution. No man who accepts the three fundamental principles stated some pages back, can deny the right of the labourer to a living wage. The man who does not accept them must hold that all property rights are the arbitrary creation of the State, or that there is no such thing as a moral right to material goods. In either supposition the distribution and possession of the earth's bounty are subject entirely to the arbitrament of might. There is nothing to be gained by a formal criticism of this assumption. What persons, or group, or authority is charged with the obligation which corresponds to the right to a living wage? We have referred to "the community" in this connection, but we do not mean the community in its corporate capacity, i.e., the State. As regards private employments, the State is not obliged to pay a living wage, nor any other kind of wage, since it has not assumed the wage-paying function with respect to these labourers. As protector of natural rights, and as the fundamental determiner of industrial institutions, the State is obliged to enact laws which will enable the labourer to obtain a living wage; but the duty of actually providing this measure of remuneration rests upon that class which has assumed the wage-paying function. This is the employers. In our present industrial system, the employer is society's paymaster. He, not the State, receives the product out of which all the agents of production must be rewarded. Where the labourer is engaged in rendering personal services to his employer, the latter is the only beneficiary of the labourer's activity. In either case the employer is the only person upon whom the obligation of paying a living wage can primarily fall. If the State were in receipt of the product of industry, the wage-paying fund, it would naturally be charged with the obligation that now rests immediately upon the employer. If any other class in the community were the owners of the product that class would be under this specific obligation. As things are, the employer is in possession of the product, and discharges the function of wage payer; consequently he is the person who is required to perform this function in a reasonable manner. _When the Employer Is Unable to Pay a Living Wage_ Evidently the employer who cannot pay a living wage is not obliged to do so, since moral duties suppose a corresponding physical capacity. In such circumstances the labourer's right to a living wage becomes suspended and hypothetical, just as the claim of a creditor when the debtor becomes insolvent. Let us see, however, precisely what meaning should reasonably be given to the phrase, "inability to pay a living wage." An employer is not obliged to pay a full living wage to all his employés so long as that action would deprive himself and his family of a decent livelihood. As active director of a business, the employer has quite as good a right as the labourer to a decent livelihood from the product, and in case of conflict between the two rights, the employer may take advantage of that principle of charity which permits a man to prefer himself to his neighbour, when the choice refers to goods of the same order of importance. Moreover, the employer is justified in taking from the product sufficient to support a somewhat higher scale of living than generally prevails among his employés; for he has become accustomed to this higher standard, and would suffer a considerable hardship if compelled to fall notably below it. It is reasonable, therefore, that he should have the means of maintaining himself and family in moderate conformity with their customary standard of living; but it is unreasonable that they should indulge in anything like luxurious expenditure, so long as any of the employés fail to receive living wages. Suppose that an employer cannot pay all his employés living wages and at the same time provide the normal rate of interest on the capital in the business. So far as the borrowed capital is concerned, the business man has no choice; he must pay the stipulated rate of interest, even though it prevents him from giving a living wage to all his employés. Nor can it be reasonably contended that the loan capitalist in that case is obliged to forego the interest due him. He cannot be certain that this interest payment, or any part of it, is really necessary to make up what is wanting to a complete scale of living wages. The employer would be under great temptation to defraud the loan capitalist on the pretext of doing justice to the labourer, or to conduct his business inefficiently at the expense of the loan capitalist. Anyhow, the latter is under no obligation to leave his money in a concern that is unable to pay him interest regularly. The general rule, then, would seem to be that the loan capitalist is not obliged to refrain from taking interest in order that the employés may have living wages. Is the employer justified in withholding the full living wage from his employés to provide himself with the normal rate of interest on the capital that he has invested in the enterprise? Speaking generally, he is not. In the first place, the right to any interest at all, except as a return for genuine sacrifices in saving, is not certain but only presumptive.[244] Consequently it has no such firm and definite basis as the right to a living wage. In the second place, the right to interest, be it ever so definite and certain, is greatly inferior in force and urgency. It is an axiom of ethics that when two rights conflict, the less important must give way to the more important. Since all property rights are but means to the satisfaction of human needs, their relative importance is determined by the relative importance of the ends that they serve; that is, by the relative importance of the dependent needs. Now the needs that are supplied through interest on the employer's capital are slight and not essential to his welfare; the needs that are supplied through a living wage are essential to a reasonable life for the labourer. On the assumption that the employer has already taken from the product sufficient to provide a decent livelihood, interest on his capital will be expended for luxuries or converted into new investments; a living wage for the labourer will all be required for the fundamental goods of life, physical, mental, or moral. Evidently, then, the right to interest is inferior to the right to a living wage. To proceed on the contrary theory is to reverse the order of nature and reason, and to subordinate essential needs and welfare to unessential needs and welfare. Nor can it be maintained that the capitalist-employer's claim to interest is a claim upon the product prior to and independent of the claim of the labourer to a living wage. That would be begging the question. The product is in a fundamental sense the common property of employer and employés. Both parties have co-operated in turning it out, and they have equal claims upon it, in so far as it is necessary to yield them a decent livelihood. Having taken therefrom the requisites of a decent livelihood for himself, the employer who appropriates interest at the expense of a decent livelihood for his employés, in effect treats their claims upon the common and joint product as essentially inferior to his own. If this assumption were correct it would mean that the primary and essential needs of the employés are of less intrinsic importance than the superficial needs of the employer, and that the employés themselves are a lower order of being than the employer. The incontestable fact is that such an employer deprives the labourers of access to the goods of the earth on reasonable terms, and gives himself an access thereto that is unreasonable. Suppose that all employers who found themselves unable to pay full living wages and obtain the normal rate of interest, should dispose of their businesses and become mere loan capitalists, would the condition of the underpaid workers be improved? Two effects would be certain: an increase in the supply of loan capital relatively to the demand, and a decrease in the number of active business men. The first would probably lead to a decline in the rate of interest, while the second might or might not result in a diminution of the volume of products. If the rate of interest were lowered the employing business men would be able to raise wages; if the prices of products rose a further increase of wages would become possible. However, it is not certain that prices would rise; for the business men who remained would be the more efficient in their respective classes, and might well be capable of producing all the goods that had been previously supplied by their eliminated competitors. Owing to their superior efficiency and their larger output, the existing business men would be able to pay considerably higher wages than those who had disappeared from the field of industrial direction. As things are to-day, it is the less efficient business men who are unable to pay living wages and at the same time obtain the prevailing rate of interest on their capital. The ultimate result, therefore, of the withdrawal from business of those who could not pay a living wage, would probably be the universal establishment of a living wage. Of course, this supposition is purely fanciful. Only a small minority of the business men of to-day are likely to be driven by their consciences either to pay a living wage at the cost of interest on their capital, or to withdraw from business when they are confronted with such a situation. Is this small minority under moral obligation to adopt either of these alternatives, when the effect of such action upon the great mass of the underpaid workers is likely to be very slight? The question would seem to demand an answer in the affirmative. Those employers who paid a living wage at the expense of interest would confer a concrete benefit of great value upon a group of human beings. Those who shrank from this sacrifice, and preferred to go out of business, would at least have ceased to co-operate in an unjust distribution of wealth, and their example would not be entirely without effect upon the views of their fellow employers. _An Objection and Some Difficulties_ Against the foregoing argument it may be objected that the employer does his full duty when he pays the labourer the full value of the product or service. Labour is a commodity of which wages are the price; and the price is just if it is the fair equivalent of the labour. Like any other onerous contract, the sale of labour is governed by the requirements of commutative justice; and these are satisfied when labour is sold for its moral equivalent. What the employer is interested in and pays for, is the labourer's activity. There is no reason why he should take into account such an extrinsic consideration as the labourer's livelihood. Most of these assertions are correct, platitudinously correct, but they yield us no specific guidance because they use language vaguely and even ambiguously. The contention underlying them was adequately refuted in the last chapter, under the heads of theories of value and theories of exchange equivalence. At present it will be sufficient to repeat summarily the following points: if the value of labour is to be understood in a purely economic sense it means market value, which is obviously not a universal measure of justice; if by the value of labour we mean its ethical value we cannot determine it in any particular case merely by comparing labour and compensation; we are compelled to have recourse to some extrinsic ethical principle; such an extrinsic principle is found in the proposition that the personal dignity of the labourer entitles him to a wage adequate to a decent livelihood; therefore, the ethical value of labour is always equivalent to at least a living wage, and the employer is morally bound to give this much remuneration. Moreover, the habit of looking at the wage contract as a matter of commutative justice in the mere sense of contractual justice, is radically defective. The transaction between employé and employer involves other questions of justice than that which arises immediately out of the relation between the things exchanged. When a borrower repays a loan of ten dollars, he fulfils the obligation of justice because he returns the full equivalent of the article that he received. Nothing else is pertinent to the question of justice in this transaction. Neither the wealth nor the poverty, the goodness nor the badness, nor any other quality of either lender or borrower, has a bearing on the justice of the act of repayment. In the wage contract, and in every other contract that involves the distribution of the common bounty of nature, or of the social product, the juridical situation is vitally different from the transaction that we have just considered. The employer has obligations of justice, not merely as the receiver of a valuable thing through an onerous contract, but as the _distributor_ of the common heritage of nature. His duty is not merely contractual, but social. He fulfils not only an individual contract, but a social function. Unless he performs this social and distributive function in accordance with justice, he does not adequately discharge the obligation of the wage contract. For the product out of which he pays wages is not his in the same sense as the personal income out of which he repays a loan. His claim upon the product is subject to the obligation of just distribution; the obligation of so distributing the product that the labourers who have contributed to the product shall not be denied their right to a decent livelihood on reasonable terms from the bounty of the earth. On the other hand, the activity of the labourer is not a mere commodity, as money or pork; it is the output of a _person_, and a person who has no other means of realising his inherent right to a livelihood. Consequently, both terms of the contract, the labour and the compensation, involve other elements of justice than that which arises out of their assumed mutual equivalence. In a word, justice requires the employer not merely to give an equivalent for labour (an equivalent which is determined by some arbitrary, conventional, fantastic, or impossible attempt to compare work and pay) but to fulfil his obligation of justly distributing that part of the common bounty of the earth which comes into his hands by virtue of his social function in the industrial process. How futile, then, to endeavour by word juggling to describe the employer's obligation in terms of mere equivalence and contractual justice! Some difficulties occur in connection with the wage rights of adult males whose ability is below the average, and female and child workers. Since the dignity and the needs of personality constitute the moral basis of the claim to a decent livelihood, it would seem that the inefficient worker who does his best is entitled to a living wage. Undoubtedly he has such a right if it can be effectuated in the existing industrial organisation. As already noted, the right of the workman of average ability to a living wage does not become actual until he finds an employer who would rather give him that much pay than do without his services. Since the obligation of paying a living wage is not an obligation to employ any particular worker, an employer may refrain from hiring or may discharge any labourer who does not add to the product sufficient value to provide his wages. For the employer cannot reasonably be expected to employ any one at a positive loss to himself. Whence it follows that he may pay less than living wages to any worker whose services he would rather dispense with than remunerate at that figure.[245] Women and young persons who regularly perform a full day's work, have a right to compensation adequate to a decent livelihood. In the case of minors, this means living at home, since this is the normal condition of all, and the actual condition of almost all. Adult females have a right to a wage sufficient to maintain them away from home, because a considerable proportion of them live in this condition. If employers were morally free to pay home-dwelling women less than those adrift, they would endeavour to employ only the former. This would create a very undesirable social situation. The number of women away from home who are forced to earn their own living is sufficiently large (20 to 25 per cent. of the whole) to make it reasonable that for their sakes the wage of all working women should be determined by the cost of living outside the parental precincts. This is one of the social obligations that reasonably falls upon the employer on account of his function in the present industrial system. In all the American minimum wage laws, the standard of payment is determined by the cost of living away from home. Besides, the difference between the living costs of women in the two conditions is not nearly as great as is commonly assumed. Probably it never amounts to a dollar a week. _The Family Living Wage_ Up to the present we have been considering the right of the labourer to a wage adequate to a decent livelihood for himself as an individual. In the case of an adult male, however, this is not sufficient for normal life, nor for the reasonable development of personality. The great majority of men cannot live well balanced lives, cannot attain a reasonable degree of self development outside the married state. Therefore, family life is among the essential needs of a normal and reasonable existence. It is not, indeed, so vitally necessary as the primary requisites of individual life, such as food, clothing, and shelter, but it is second only to these. Outside the family man cannot, as a rule, command that degree of contentment, moral strength, and moral safety which are necessary for reasonable and efficient living. It is unnecessary to labour this point further, as very few would assert that the average man can live a normal and complete human life without marriage. Now, the support of the family falls properly upon the husband and father, not upon the wife and mother. The obligation of the father to provide a livelihood for the wife and young children is quite as definite as his obligation to maintain himself. If he has not the means to discharge this obligation he is not justified in getting married. Yet, as we have just seen, marriage is essential to normal life for the great majority of men. Therefore, the material requisites of normal life for the average adult male, include provision for his family. In other words, his decent livelihood means a family livelihood. Consequently, he has a right to obtain such a livelihood on reasonable terms from the bounty of the earth. In the case of the wage earner, this right can be effectuated only through wages; therefore, the adult male labourer has a right to a family living wage. If he does not get this measure of remuneration his personal dignity is violated, and he is deprived of access to the goods of the earth, quite as certainly as when his wage is inadequate to personal maintenance. The difference between family needs and personal needs is a difference only of degree. The satisfaction of both is indispensable to his reasonable life. Just as the woman worker who lives with her parents has a right to a wage sufficient to maintain her away from home, so the unmarried adult male has a right to a family living wage. If only married men get the latter wage they will be discriminated against in the matter of employment. To prevent this obviously undesirable condition, it is necessary that a family living wage be recognised as the right of all adult male workers. No other arrangement is reasonable in our present industrial system. In a competitive régime the standard wage for both the married and the unmarried men is necessarily the same. It will be determined by the living costs of either the one class or the other. At present the wage of the unskilled is unfortunately adjusted to the subsistence cost of the man who is not married. Since two prevailing scales of wages are impossible, the remuneration of the unmarried must in the interests of justice to the married be raised to the living costs of the latter. Moreover, the unmarried labourer needs more than an individual living wage in order to save sufficient money to enter upon the responsibilities of matrimony. Only two objections of any importance can be brought against the male labourer's claim to a family living wage. The first is that just wages are to be measured by the value of the labour performed, and not by such an extrinsic consideration as the needs of a family. It has already been answered in this and the preceding chapters. Not the economic but the ethical value of the service rendered, is the proper determinant of justice in the matter of wages; and this ethical value is always the equivalent of at least a decent livelihood for the labourer and his family. According to the second objection, the members of the labourer's family have no claim upon the employer, since they do not participate in the work that is remunerated. This contention is valid, but it is also irrelevant. The claim of the labourer's family to sustenance is directly upon him, not upon his employer; but the labourer has a just claim upon the employer for the means of meeting the claims of his family. His right to this amount of remuneration is directly based neither upon the needs nor the rights of his family, but upon his own needs, upon the fact that family conditions are indispensable to his own normal life. If the wife and young children were self supporting, or were maintained by the State, the wage rights of the father would not include provision for the family. Since, however, family life involves support by the father, the labourer's right to such a life necessarily includes the right to a wage adequate to family support. _Other Arguments in Favour of a Living Wage_ Thus far, the argument has been based upon individual natural rights. If we give up the doctrine of natural rights, and assume that all the rights of the individual come to him from the State, we must admit that the State has the power to withhold and withdraw all rights from any and all persons. Its grant of rights will be determined solely by considerations of social utility. In the concrete this means that some citizens may be regarded as essentially inferior to other citizens, that some may properly be treated as mere instruments to the convenience of others. Or it means that all citizens may be completely subordinated to the aggrandisement of an abstract entity, called the State. Neither of these positions is logically defensible. No group of persons has less intrinsic worth than another; and the State has no rational significance apart from its component individuals. Nevertheless, a valid argument for the living wage can be set up on grounds of social welfare. A careful and comprehensive examination of the evil consequences to society and the State from the under-payment of any group of labourers, would show that a universal living wage is the only sound social policy. Among competent social students, this proposition has become a commonplace. It will not be denied by any intelligent person who considers seriously the influence of low wages in diminishing the efficiency, physical, mental, and moral, of the workers; in increasing the volume of crime, and the social cost of meeting it; in the immense social outlay for the relief of unnecessary poverty, sickness, and other forms of distress; and in the formation of a large and discontented proletariat.[246] The living wage doctrine also receives strong support from various kinds of authority. Of these the most important and best known is the famous encyclical, "On the Condition of Labour," May 15, 1891, by Pope Leo XIII. "Let it then be granted that workman and employer should, as a rule, make free agreements, and in particular should agree freely as to wages; nevertheless, there is a dictate of natural justice more imperious and ancient than any bargain between man and man; namely, that the remuneration should be sufficient to maintain the wage earner and reasonable and frugal comfort." Although the Pope refrained from specifying whether the living wage that he had in mind was one adequate merely to an individual livelihood, or sufficient to support a family, other passages in the Encyclical leave no room for doubt that he regarded the latter as the normal and equitable measure of remuneration. Within a dozen lines of the sentence quoted above, he made this statement: "If the workman's wages be sufficient to maintain himself, his wife, and his children in reasonable comfort, he will not find it difficult, if he be a sensible man, to practise thrift; and he will not fail, by cutting down expenses, to put by some little savings and thus secure a small income." All lesser Catholic authorities hold that the adult male labourer has some kind of moral claim to a family living wage. In all probability the majority of them regard this claim as one of strict justice, while the minority would put it under the head of legal justice, or natural equity, or charity. The differences between their views are not as important as the agreements; for all the Catholic writers maintain that the worker's claim is strictly moral in its nature, and that the corresponding obligation upon the employer is likewise of a moral character. The Federal Council of the Churches of Christ in America, representing the principal Protestant denominations, has formally declared in favour of "a living wage as a minimum in every industry." Public opinion likewise accepts the principle of a living wage as the irreducible minimum of fair treatment for all workers. Indeed, it would be difficult to find any important person in any walk of life to-day who would have the temerity to deny that the labourer is entitled to a wage sufficient for reasonable family life. Among employers the opinion is fairly general that the narrow margin of profit in competitive industries renders the burden of paying a family living wage to all adult males unfairly heavy; but the assertion that the wage contract is merely an economic transaction, having no relation to justice, is scarcely ever uttered publicly. _The Money Measure of a Living Wage_ For self-supporting women a living wage is not less than eight dollars per week in any city of the United States, and in some of our larger cities it is from one to two dollars above this figure. The state minimum wage commissions that have acted in the matter, have fixed the rates not lower than eight nor higher than ten dollars per week.[247] These determinations are in substantial agreement with a large number of other estimates, both official and unofficial. When the present writer was making an estimate of the cost of decent living for a family about eleven years ago, he came to the conclusion that six hundred dollars per year was the lowest amount that would maintain a man and wife and four or five small children in any American city, and that this sum was insufficient in some of the larger cities.[248] Since that time retail prices seem to have risen at least twenty-five and possibly forty-five per cent.[249] If the six hundred dollar minimum were correct in 1905 it should, therefore, be increased to seven hundred and fifty dollars to meet the present range of prices. That this estimate is too low for some of the more populous cities, has been fully proved by several recent investigations. In 1915 the Bureau of Standards put the minimum cost of living for a family of five in New York City at $840.18. About the same time the New York Factory Investigating Commission gave the estimate of $876.43 for New York City, and $772.43 for Buffalo. In 1908, when the cost of living was from ten to thirty per cent. cheaper than to-day, the United States Bureau of Labour found that, "according to the customs prevailing in the communities selected for study," a fair standard of living for a family of five persons among mill workers, was $600.74 in the South, and from $690.60 to $731.64 in Fall River, Massachusetts.[250] According to the "Manly Report" of the Federal Commission on Industrial Relations, between two-thirds and three-fourths of the adult male labourers of the United States receive less than $750.00 a year, and the same proportion of women workers are paid under eight dollars a week. A considerable majority, therefore, of both male and female labourers fail to obtain living wages. We are still very far from having actualised even the minimum measure of wage justice. FOOTNOTES: [242] Cf. Skelton, "Socialism: A Critical Analysis," p. 202; Menger, "The Right to the Whole Produce of Labour," pp. 8, sq. [243] All the questions treated in this chapter are discussed at much greater length in the author's work, "A Living Wage"; Macmillan; 1906. [244] See chapters xii and xiii. [245] While the statement in the text applies to _all_ labourers of less than average ability, it obviously is applicable only to individual cases among those who are up to the average. These are the workers at the "margin" of the labour force in an establishment, those who could be discharged without causing the industry to shut down. If an employer would rather go out of business than pay a living wage to all his necessary labourers of average ability, he is morally free to do so; but he may not employ them at less than living wages in order to obtain interest on his capital. [246] One of the best statements of the evil social results of low wages will be found in Webb's "Industrial Democracy," vol. II, pp. 749-766. [247] See reports of these commissions in Oregon, Washington, Massachusetts, Minnesota, and California. [248] "A Living Wage," p. 150. [249] See Bulletins of the Federal Bureau of Labour Statistics on "Retail Prices"; and Nearing, "Reducing the Cost of Living." [250] "Summary of the Report on Condition of Woman and Child Wage Earners in the United States," pp. 383, 384. The best intensive study of family cost of living is that published in the volume edited by Robert C. Chapin, "The Standard of Living Among Workingmen's Families in New York City"; 1909. It led to the conclusion that anything less than eight hundred dollars was insufficient for the yearly maintenance of a husband and wife and three small children in Manhattan. CHAPTER XXIV THE PROBLEM OF COMPLETE WAGE JUSTICE A living wage for all workers is merely the _minimum_ measure of just remuneration. It is not in every case complete justice. Possibly it is not the full measure of justice in any case. How much more than a living wage is due to any or all of the various classes of labourers? How much more may any group of workers demand without exposing itself to the sin of extortion? By what principles shall these questions be answered? The problem of complete wage justice can be conveniently and logically considered in four distinct relations, as regards: the respective claims of the different classes of labourers to a given amount of money available for wage payments; the claims of the whole body of labourers, or any group thereof, to higher wages at the expense of profits; at the expense of interest; and at the expense of the consumer. _Comparative Claims of Different Labour Groups_ In the division of a common wage fund, no section of the workers is entitled to anything in excess of living wages until all the other sections have received that amount of remuneration. The need of a decent livelihood constitutes a more urgent claim than any other that can be brought forward. Neither efforts, nor sacrifices, nor productivity, nor scarcity can justify the payment of more than living wages to any group, so long as any other group in the industry remains below that level; for the extra compensation will supply the nonessential needs of the former by denying the essential needs of the latter. The two groups of men will be treated unequally in respect of those qualities in which they are equal; namely, their personal dignity and their claims to the minimum requisites of reasonable life and self development. This is a violation of justice. Let us suppose that all the workers among whom a given amount of compensation is to be distributed, have already received living wages, and that there remains a considerable surplus. On what principles should the surplus be apportioned? For answer we turn to the canons of distribution, as explained in chapter xvi. When the elementary needs of life and development have been supplied, the next consideration might seem to be the higher or nonessential needs and capacities. Proportional justice would seem to suggest that the surplus ought to be distributed in accordance with the varying needs and capacities of men to develop their faculties beyond the minimum reasonable degree. As we have already pointed out, this would undoubtedly be the proper rule if it were susceptible of anything like accurate application, and if the sum to be distributed were not produced by and dependent upon those who were to participate in the distribution. However, we know that the first condition is impracticable, while the second is non-existent. Inasmuch as the sharers in the distribution have produced and constantly determine the amount to be apportioned, the distributive process must disregard nonessential needs, and govern itself by other canons of justice. The most urgent of these is the canon of efforts and sacrifices. Superior effort, as measured by unusual will-exertion, is a fundamental rule of justice, and a valid title to exceptional reward. Men who strive harder than the majority of their fellows are ethically deserving of extra compensation. At least, this is the pure theory of the matter. In practice, the situation is complicated by the fact that unusual effort cannot always be distinguished, and by the further fact that some exceptional efforts do not fructify in correspondingly useful results. Among men engaged at the same kind of work, superior effort is to a great extent discernible in the unusually large product. As such it actually receives an extra reward in accordance with the canon of productivity. When men are employed at different tasks, unusual efforts cannot generally be distinguished and compensated. Hence the general principle is that superior efforts put forth in the production of utilities, entitle men to something more than living wages, but that the enforcement of this principle is considerably hindered by the difficulty of discerning such efforts. The unusual sacrifices that deserve extra compensation are connected with the costs of industrial functions and the disagreeable character of occupations. Under the first head are included the expense of industrial training and the debilitating effects of the work. Not only justice to the worker but a farsighted view of social welfare, dictate that all unusual costs of preparation for an industrial craft or profession should be repaid in the form of unusual compensation. This means something more than a living wage. For the same reasons the unusual hazards and disability resulting from industrial accidents and diseases should be provided for by higher remuneration. In the absence of such provision, these costs will have to be borne by parents, by society in the form of charitable relief, or by the worker himself through unnecessary suffering and incapacity. The industry that does not provide for all these costs is a social parasite, the workers in it are deprived of just compensation for their unusual sacrifices, and society suffers a considerable loss through industrial friction and diminished productive efficiency. In so far, however, as any of the foregoing occupational costs are borne by society, as in the matter of industrial education, or by the employer, as by the devices of accident compensation or sickness insurance, they do not demand provision in the form of extra wages. Other unusual sacrifices that entitle the worker to more than living wages, are inherent in disagreeable or despised occupations. The scavenger and the bootblack ought to get more than the performers of most other unskilled tasks. On the principles of comparative individual desert, they should receive larger remuneration than many persons who are engaged upon skilled but relatively pleasant kinds of work. For if they were given the choice of expending the time and money required to fit them for the latter tasks, or of taking up immediately their present disagreeable labour, they would select the more pleasant occupations, for the same or even a smaller remuneration. And the majority of those who are now in the more skilled occupations would make the same choice. Hence the sacrifices inherent in disagreeable kinds of work are in many cases as great as or greater than the sacrifices of preparation for the more pleasant tasks; consequently the doers of the former are relatively underpaid. If all wages were regulated by some supreme authority according to the principles of complete justice, the workers in disagreeable occupations would receive something more than living wages. Nor would this determination of rewards be in any way contrary to social welfare or the principle of maximum net results; for the superior attractiveness of the other kinds of work would draw a sufficient supply of labour to offset the advantage conferred by higher wages upon the disagreeable occupations. The main reason why the latter kind of labour is so poorly paid now is the fact that it is very plentiful, a condition which is in turn due to the unequal division of industrial opportunity. Were the opportunities of technical education and of entrance to the higher crafts and professions more widely diffused, the labourers offering themselves for the disagreeable tasks would be scarcer and their remuneration correspondingly larger. This would be not only more comfortable to the abstract principles of justice, but more conducive to social efficiency. To sum up the discussion concerning the canon of efforts and sacrifices: Labourers have a just claim to more than living wages whenever they put forth unusual efforts, and whenever their occupations involve unusual sacrifices, either through costs of preparation, exceptional hazards, or inherent disagreeableness. The precise amount of extra compensation due under any of these heads can be determined, as a rule, only approximately. The next canon to be considered as a reason for more than living wages is that of productivity. This offers little difficulty; for the unusual product is always visible among men who are performing the same kind of work, and the employer is always willing to give the producer of it extra compensation. While superior productive power which is based solely upon superior native ability has only presumptive validity as a canon of justice, that is ethically sufficient in our workaday world. Moreover, the canon of human welfare demands that superior productivity receive superior rewards, so long as these are necessary to evoke the maximum net product. The canon of scarcity has exactly the same value as that of productivity. Society and the employer are well advised and are justified in giving extra compensation to scarce forms of labour when the product is regarded as worth the corresponding price. This remains true even when the scarcity is due to restricted opportunity of preparation, rather than to sacrifices of any sort. In that case the higher rewards are as fully justified as the superior remuneration of that superior productivity which is based upon exceptional native endowments. The amount of extra compensation which may properly be given on account of scarcity is determined either by the degree of sacrifice involved or by the ordinary operation of competition. When men are scarce because they have made exceptional sacrifices of preparation, they ought to be rewarded in full proportion to these sacrifices. When they are scarce merely because of exceptional opportunities, their extra compensation should not exceed the amount that automatically comes to them through the interplay of supply and demand. The canon of human welfare has already received implicit application. When due regard is given to efforts, sacrifices, productivity, and scarcity, the demands of human welfare, both in its individual and its social aspects, are sufficiently safeguarded. In the foregoing pages the attempt has been made to describe the proportions in which a given wage fund ought to be distributed among the various classes of labourers who have claims upon the fund. The first requisite of justice is that all should receive living wages. It applies to all workers of average ability, even to those who have no special qualifications of any sort. When this general claim has been universally satisfied, those groups of workers who are in any wise special, whose qualifications for any reason differentiate them from and place them above the average, will have a right to something more than living wages. They will have the first claim upon the surplus that remains in the wage fund. Their claims will be based upon the various canons of distribution explained in detail above; and the amounts of extra remuneration to which they will be entitled, will be determined by the extent to which their special qualifications differentiate them from the average and unspecialised workers. If the total available wage fund is merely sufficient to provide universal living wages and the extra compensation due to the specialised groups, no section of the labour force will be justified in exacting a larger share. Even though the employer should withhold a part of the amount due to some weaker group, a stronger group that is already getting its proper proportion would have no right to demand the unjustly withheld portion. For this belongs neither to the employer nor to the powerful labour group, but to the weaker section of labourers. This does not mean that a powerful body of workers who are already receiving their due proportion as compared with other labour groups, would not be justified in seeking any increase in remuneration whatever. The increase might come out of profits, or interest, or the consumer, and thus be in no sense detrimental to the rights of the other sections of labourers. This problem will be considered a little later. At present we confine our attention to the relative claims of different labour groups to a definite wage fund. Suppose, however, that after all workers have received living wages, and all the exceptional groups have obtained those extra amounts which are due them on account of efforts, sacrifices, productivity, and scarcity, there remains a further surplus in the wage fund. In what proportions should it be distributed? It should be equally divided among all the labourers. The proportional justice which has been already established can be maintained only by raising the present rates of payment equally in all cases. All the average or unspecialised groups would get something more than living wages, and all the other groups would have their extra compensation augmented by the same amount. Of course, the wage-fund hypothesis which underlies the foregoing discussion is not realised in actual life, any more than was the "wage fund" of the classical economists. Better than any other device, however, it enables us to describe and visualise the comparative claims of different groups of labourers who have a right to unequal amounts in excess of living wages. _Wages Versus Profits_ Let us suppose that the wage fund is properly apportioned among the different classes of labourers, according to the specified canons of distribution. May not one or all of the labour groups demand an increase in wages on the ground that the employer is retaining for himself an undue share of the product? As we have seen in the last chapter, the right of the labourers to living wages is superior to the right of the employer or business man to anything in excess of that amount of profits which will insure him against risks, and afford him a decent livelihood in reasonable conformity with his accustomed plane of expenditure. It is also evident that those labourers who undergo more than average sacrifices have a claim to extra compensation which is quite as valid as the similarly based claim of the employer to more than living profits. In case the business does not provide a sufficient amount to remunerate both classes of sacrifices, the employer may prefer his own to those of his employés, on the same principle that he may prefer his own claim to a decent livelihood. The law of charity permits a man to satisfy himself rather than his neighbour, when the needs in question are of the same degree of urgency or importance. As to those labourers who turn out larger products than the average, or whose ability is unusually scarce, there is no practical difficulty; for the employer will find it profitable to give them the corresponding extra compensation. The precise question before us, then, is the claims of the labourers upon profits for remuneration above universal living wages and above the extra compensation due on account of unusual efforts, sacrifices, productivity, and scarcity. Let us call the wage that merely includes all these factors "the equitable minimum." In competitive conditions this question becomes practical only with reference to the exceptionally efficient and productive business men. The great majority have no surplus available for wage payments in excess of the "equitable minimum." Indeed, the majority do not now pay the full "equitable minimum"; yet their profits do not provide them more than a decent livelihood. The relatively small number of establishments that show such a surplus as we are considering have been brought to that condition of prosperity by the exceptional ability of their directors, rather than by the unusual productivity of their employés. In so far as this exceptional directive ability is due to unusual efforts and sacrifices, the surplus returns which it produces may be claimed with justice by the employer. In so far as the surplus is the outcome of exceptional native endowments, it may still be justly retained by him in accordance with the canon of productivity. In other words, when the various groups of workers are already receiving the "equitable minimum," they have no strict right to any additional compensation out of those rare surplus profits which come into existence in conditions of competition. This conclusion is confirmed by reference to the canon of human welfare. If exceptionally able business men were not permitted to retain the surplus in question they would not exert themselves sufficiently to produce it; labour would gain nothing; and the community would be deprived of the larger product. When the employer is a corporation instead of an individual or a partnership, and when it is operating in competitive conditions, the same principles are applicable, and the same conclusions justified. The officers and the whole body of stockholders will have a right to those surplus profits that remain after the "equitable minimum" has been paid to the employés. Every consideration that urges such a distribution in the case of the individual business holds good for the corporation. The corporation that is a monopoly will have the same right as the competitive concern to retain for its owners those surplus profits which are due to exceptional efficiency on the part of the managers of the business. That part of the surplus which is derived from the extortion of higher than competitive prices cannot be justly retained, since it rests upon no definite moral title. As we saw in the chapter on monopoly, the owners have no right to anything more than the prevailing rate of interest, together with a fair return for their labour and for any unusual efficiency that they may exercise. Should the surplus in question be discontinued by lowering prices, or should it be continued and distributed among the labourers? As a rule, the former course would seem morally preferable. While the labourers, as we shall see presently, are justified in contending for more than the "equitable minimum" at the expense of the consumer, their right to do so through the exercise of monopoly power is extremely doubtful. Whether this power is exerted by themselves or by the employer on their behalf, it remains a weapon which human nature seems incapable of using justly. _Wages Versus Interest_ Turning now to the claims of the labourers as against the capitalists, or interest receivers, we perceive that the right to any interest at all is morally inferior to the right of all the workers to the "equitable minimum." As heretofore pointed out more than once, the former right is only presumptive and hypothetical, and interest is ordinarily utilised to meet less important needs than those supplied by wages. Through his labour power the interest receiver can supply all those fundamental needs which are satisfied by wages in the case of the labourer. Therefore, it seems clear that the capitalist has no right to interest until all labourers have received the "equitable minimum." It must be borne in mind, however, that any claim of the labourer against interest falls upon the owners of the productive capital in a business, upon the undertaker-capitalist, not upon the loan-capitalist. When all the labourers in an industry are receiving the "equitable minimum," have they a right to exact anything more at the expense of interest? By interest we mean, of course, the prevailing or competitive rate that is received on productive capital--five or six per cent. Any return to the owners of capital in excess of this rate is properly called profits rather than interest, and its relation to the claims of the labourers has received consideration in the immediately preceding section of this chapter. The question, then, is whether the labourers who are already getting the "equitable minimum" would act justly in demanding and using their economic power to obtain a part or all of the pure interest. No conclusive reason is available to justify a negative answer. The title of the capitalist is only presumptive and hypothetical, not certain and unconditional. It is, indeed, sufficient to justify him in retaining interest that comes to him through the ordinary processes of competition and bargaining; but it is not of such definite and compelling moral efficacy as to render the labourers guilty of injustice when they employ their economic power to divert further interest from the coffers of the capitalist to their own pockets. The interest-share of the product is morally debatable as to its ownership. It is a sort of no-man's property (like the rent of land antecedently to its legal assignment through the institution of private landownership) which properly goes to the first occupant as determined by the processes of bargaining between employers and employés. If the capitalists get the interest-share through these processes it rightfully belongs to them; if the labourers who are already in possession of the "equitable minimum" develop sufficient economic strength to get this debatable share they may justly retain it as their own. The foregoing conclusion may seem to be a very unsatisfactory solution of a problem of justice. However, it is the only one that is practically defensible. If the capitalist's claim to interest were as definite and certain as the labourer's right to a living wage, or as the creditor's right to the money that he has loaned, the solution would be very simple: the labourers that we are discussing would have no right to strive for any of the interest. But the claim of the capitalists is not of this clear and conclusive nature. It is sufficient when combined with actual possession; it is not sufficient when the question is of future possession. The title of first occupancy as regards land is not valid until the land has been actually occupied; and similarly the claim of the capitalist to interest is not valid until the interest has been received. If the economic forces which determine actual possession operate in such a way as to divert the interest-share to the labourers, they, not the capitalists, will have the valid moral title, just as Brown with his automobile rather than Jones with his spavined nag will enjoy the valid title of first occupancy to a piece of ownerless land which both have coveted. This conclusion is confirmed by reference to the rationally and morally impossible situation that would follow from its rejection. If we deny to the labourers the moral freedom to strive for higher wages at the expense of the capitalist, we must also forbid them to follow this course at the expense of the consumer. For the great majority of consumers would stand to lose advantages to which they have as good a moral claim as the capitalists have to interest. Practically this would mean that the labourers have no right to seek remuneration in excess of the "equitable minimum"; for such excess must in substantially all cases come from either the consumer or the capitalist. On what principle can we defend the proposition that the great majority of labourers are forever restrained by the moral law from seeking more than bare living wages, and the specialised minority from demanding more than that extra compensation which corresponds to unusual efforts, sacrifices, productivity, and scarcity? Who has authorised us to shut against these classes the doors of a more liberal standard of living, and a more ample measure of self development? _Wages Versus Prices_ The right of the labourers to the "equitable minimum" implies obviously the right to impose adequate prices upon the consumers of the labourer's products. This is the ultimate source of the rewards of all the agents of production. Suppose that the labourers are already receiving the "equitable minimum." Are they justified in seeking any more at the cost of the consumer? If all the consumers were also labourers the answer would be simple, at least in principle: rises in wages and prices ought to be so adjusted as to bring equal gains to all individuals. The "equitable minimum" is adjusted to the varying moral claims of the different classes of labourers; therefore, any rise in remuneration must be equally distributed in order to leave this adjustment undisturbed. It is a fact, however, that a large part of the consumers are not labourers; consequently they cannot look to rises in wages as an offset to their losses through rises in prices. Can they be justly required to undergo this inconvenience for the benefit of labourers who are already getting the "equitable minimum"? Let us consider first the case of higher wages versus lower prices. A few progressive and efficient manufacturers of shoes find themselves receiving large surplus profits which are likely to continue. So far as the presumptions of strict justice are concerned, they may, owing to their superior productivity, retain these profits for themselves. Seized, however, with a feeling of benevolence, or a scruple of conscience, they determine to divide future profits of this class among either the labourers or the consumers. If they reduce prices the labourers will gain something as users of shoes, but the other wearers of shoes will also be beneficiaries. If the surplus profits are all diverted to the labourers in the form of higher wages the other consumers of shoes will gain nothing. Now there does not seem to be any compelling reason, any certain moral basis, for requiring the shoe manufacturers to take one course rather than the other. Either will be correct morally. Possibly the most perfect plan would be to effect a compromise by lowering prices somewhat and giving some rise in wages; but there is no strict obligation to follow this course. To be sure, since the manufacturers have a right to retain the surplus profits, they have also a right to distribute them as they prefer. Let us get rid of this complication by assuming that the manufacturers are indifferent concerning the disposition of the surplus, leaving the matter to be determined by the comparative economic strength of labourers and consumers. In such a situation it is still clear that either of the two classes would be justified in striving to secure any or all of the surplus. No definite moral principle can be adduced to the contrary. To put the case in more general terms: there exists no sufficient reason for maintaining that the gains of cheaper production should go to the consumer rather than to the labourer, or to the labourer rather than to the consumer, so long as the labourer is already in receipt of the "equitable minimum." Turning now to the question of higher wages at the cost of higher prices, we note that this would result in at least temporary hardship to four classes of persons: the weaker groups of wage earners; all self employing persons, such as farmers, merchants, and manufacturers; the professional classes; and persons whose principal income was derived from rent or interest. All these groups would have to pay more for the necessaries, comforts, and luxuries of living, without being immediately able to raise their own incomes correspondingly. Nevertheless, the first three classes could in the course of time force an increase in their revenues sufficient to offset at least the more serious inconveniences of the increase in prices. So far as the wage earners are concerned, it is understood that all these would have a right to whatever advance in the money measure of the "equitable minimum" was necessary to neutralise the higher cost of living resulting from the success of the more powerful groups in obtaining higher wages. The right of a group to the "equitable minimum" of remuneration is obviously superior to the right of another group to more than that amount. And a supreme wage-determining authority would act on this principle. It cannot be shown, however, that in the absence of any such authority empowered to protect the "equitable minimum" of the weaker labourers, the more powerful groups are obliged to refrain from demanding extra remuneration. The reason of this we shall see presently. In the meantime we call attention to the fact that, owing to the greater economic opportunity resulting from the universal prevalence of the "equitable minimum" and of industrial education, even the weaker groups of wage earners would be able to obtain some increases in wages. In the long run the more powerful groups would enjoy only those advantages which arise out of superior productivity and exceptional scarcity. These two factors are fundamental, and could not in any system of industry be prevented from conferring advantages upon their possessors. As regards the self employing classes, the remedy for any undue hardship suffered through the higher prices of commodities would be found in a discontinuance of their present functions until a corresponding rise had occurred in the prices of their own products. They could do this partly by organisation, and partly by entering into competition with the wage earners. Substantially the same recourse would be open to the professional classes. In due course of time, therefore, the remuneration of all workers, whether employés or self employed or professional, would tend to be in harmony with the canons of efforts, sacrifices, productivity, scarcity, and human welfare. Since the level of rent is fixed by forces outside the control of labourers, employers, or landowners, the receivers thereof would be unable to offset its decreased purchasing power by increasing its amount. However, this situation would not be inherently unjust, nor even inequitable. Like interest, rent is a "workless" income, and has only a presumptive and hypothetical justification. Therefore, the moral claim of the rent receiver to be protected against a decrease in the purchasing power of his income, is inferior to the moral claim of the labourer to use his economic power for the purpose of improving his condition beyond the limits of welfare fixed by the "equitable minimum." What is true of the rent receiver in this respect applies likewise to the case of the capitalist. As we saw a few pages back, the wage earners are morally free to take this course at the expense of interest. Evidently they may do the same thing when the consequence is merely a diminution in its purchasing power. To be sure, if capital owners should regard their sacrifices in saving as not sufficiently rewarded, owing either to the low rate or the low purchasing power of interest, they would be free to diminish or discontinue saving until the reduced supply of capital had brought about a rise in the rate of interest. Should they refrain from this course they would show that they were satisfied with the existing situation. Hence they would suffer no wrong at the hands of the labourers who forced up wages at the expense of prices. Two objections come readily to mind against the foregoing paragraphs. The more skilled labour groups might organise themselves into a monopoly, and raise their wages so high as to inflict the same degree of extortion upon consumers as that accomplished by a monopoly of capitalists. This is, indeed, possible. The remedy would be intervention by the State to fix maximum wages. Just where the maximum limit ought to be placed is a problem that could be solved only through study of the circumstances of the case, on the basis of the canons of efforts, sacrifices, productivity, scarcity, and human welfare. The second objection calls attention to the fact that we have already declared that the more powerful labour groups would not be justified in exacting more than the "equitable minimum" out of a common wage fund, so long as any weaker group was below that level; yet this is virtually what would happen when the former caused prices to rise to such an extent that the weaker workers would be forced below the "equitable minimum" through the increased cost of living. While this contingency is likewise possible, it is not a sufficient reason for preventing any group of labourers from raising their remuneration at the expense of prices. Not every rise in prices would effect the expenditures of the weaker sections of the wage earners. In some cases the burden would be substantially all borne by the better paid workers and the self employing, professional, and propertied classes. When it did fall to any extent upon the weaker labourers, causing their real wages to fall below the "equitable minimum," it could be removed within a reasonable time by organisation or by legislation. Even if these measures were found ineffective, if some of the weaker groups of workers should suffer through the establishment of the higher prices, this arrangement would be preferable on the whole to one in which no class of labourers was permitted to raise its remuneration above the "equitable minimum" at the expense of prices. A restriction of this sort, whether by the moral law or by civil regulation, would tend to make wage labour a status with no hope of pecuniary progress. It is true that a universal and indefinite increase of wages at the expense of prices might at length leave the great majority of the labourers no better off than they were when they had merely the "equitable minimum." Such would certainly be the result if the national product were only sufficient to provide the "equitable minimum" for all workers, and that volume of incomes for the other agents of production which was required to evoke from them a fair degree of productive efficiency. In that case the higher wages would be an illusion. The gain in the amount of money would be offset by the loss in its purchasing power. Even so, this condition would be greatly superior to a régime in which the labourers were universally prevented from making any effort to raise their wages above a fixed maximum. _Concluding Remarks_ All the principles and conclusions defended in this chapter have been stated with reference to the present distributive system, with its free competition and its lack of legal regulation. Were all incomes and rewards fixed by some supreme authority, the same canons of justice would be applicable, and the application would have to be made in substantially the same way, if the authority were desirous of establishing the greatest possible measure of distributive justice. The main exception to this statement would occur in relation to the problem of raising wages above the "equitable minimum" at the expense of prices. In making any such increase, the wage-fixing authority would be obliged to take into account the effects upon the other classes of labourers, and upon all the non-wage-earning classes. Substantially the same difficulties would confront the government in a collectivist organisation of industry. The effect that a rise in the remuneration of any class would produce, through a rise in the prices of commodities, upon the purchasing power of the incomes of other classes, would have to be considered and as nearly as possible ascertained. This would be no simple task. Simple or not, it would have to be faced; and the guiding ethical principles would always remain efforts, sacrifices, productivity, scarcity, and human welfare. The greater part of the discussion carried on in this chapter has a highly theoretical aspect. From the nature of the subject matter this was inevitable. Nevertheless the principles that have been enunciated and applied seem to be incontestable. In so far as they are enforcible in actual life, they seem capable of bringing about a wider measure of justice than any other ethical rules that are available. Possibly the applications and conclusions have been laid down with too much definiteness and dogmatism, and the whole matter has been made too simple. On the other hand, neither honesty nor expediency is furthered by an attitude of intellectual helplessness, academic hyper-modesty, or practical agnosticism. If there exist moral rules and rational principles applicable to the problem of wage justice, it is our duty to state and apply them as fully as we can. Obviously we shall make mistakes in the process; but until the attempt is made, and a certain (and very large) number of mistakes are made, there will be no progress. We have no right to expect that ready-made applications of the principles will drop from Heaven. For a long time to come, however, many of the questions discussed in this chapter will be devoid of large practical interest. The problem immediately confronting society is that of raising the remuneration and strengthening generally the economic position of those labourers who are now below the level, not merely of the "equitable minimum," but of a decent livelihood. This problem will be the subject of the next chapter. CHAPTER XXV METHODS OF INCREASING WAGES Proposals for the reform of social conditions are important in proportion to the magnitude of the evils which they are designed to remove, and are desirable in proportion to their probable efficacy. Applying these principles to the labour situation, we find that among the remedies proposed the primacy must be accorded to a minimum wage. It is the most important project for improving the condition of labour because it would increase the compensation of some two-thirds of the wage earners, and because the needs of this group are greater and more urgent than the needs of the better-paid one-third. The former are below the level of reasonable living, while the latter are merely deprived of the opportunities of a more ample and liberal scale of living. Hence the degree of injustice suffered by the former is much greater than in the case of the latter. A legal minimum wage is the most desirable single measure of industrial reform because it promises a more rapid and comprehensive increase in the wages of the underpaid than any alternative device that is now available. The superior importance of a legally established minimum wage is obvious; its superior desirability will form the subject of the pages that are immediately to follow. _The Minimum Wage in Operation_ Happily the advocate of this measure is no longer required to meet the objection that it is novel and utterly uncertain. For more than twenty years it has been in operation in Australasia. It was implicit in the compulsory arbitration act of New Zealand, passed in 1894; for the wages which the arbitration boards enforce are necessarily the lowest that the affected employers are permitted to pay; besides, the district conciliation boards are empowered by the law to fix minimum wages on complaint of any group of underpaid workers. The first formal and explicit minimum wage law of modern times was enacted by the state of Victoria in 1896. In the beginning it applied to only six trades, but it has been extended at various legislative sessions, so that to-day it protects substantially all the labourers of the state, except those employed in agriculture. Since the year 1900 all the other states of Australia have made provision for the establishment of minimum wages. At present, therefore, the legal minimum wage in some form prevails throughout the whole of Australasia. In 1909 the Trade Boards Act authorised the application of this device to four trades in Great Britain. In 1913 the provisions of the Act were made applicable to four other trades, and in 1914 to a third group of four industries. A special minimum wage law was in 1912 enacted to govern the entire coal mining industry of the country. The first minimum wage law in the United States was passed in 1912 by Massachusetts. It has been followed by similar legislation in ten other states; namely, Arkansas, California, Colorado, Kansas, Minnesota, Nebraska, Oregon, Utah, Washington, and Wisconsin. California has adopted a constitutional amendment which specifically authorises minimum wage legislation for women and minors, and Ohio added a similar provision to her constitution which applies to men as well. The minimum wage statutes of Australasia and Great Britain cover all classes of workers, but those of the United States are restricted to minors and women. With the exception of the Utah act, all the important laws on this subject in all three regions establish minimum wages indirectly, by authorising commissions and wage boards to determine the actual rates. In Australasia and Great Britain the statutes do not attempt to specify any standard to which the wage determinations of the boards must conform, but the tendency in the former country in recent years has been to enforce a living wage as the minimum; that is, wage rates sufficiently high to provide a decent family livelihood for men, and a reasonable personal livelihood for women and minors. All the laws in America but one require the commissions to establish living wages. In Utah no commission is provided for, as the law itself specifies in terms of money the minimum rates of remuneration that the employers of women are permitted to pay. The effectiveness of the laws that have been put into operation is at least as great as their friends had dared to hope. According to Professor M. B. Hammond of Ohio, who investigated the situation on the spot in the winter of 1911-1912, the people of Australasia have accepted the minimum wage "as a permanent policy in the industrial legislation of that part of the world." Professor Hammond's observations, and the replies of the Chief Factory Inspector of Melbourne to the New York Factory Investigating Commission, show the main effects of minimum wage legislation to be as follows: sweating and strikes have all but disappeared; the efficiency of the workers has on the whole increased; the number of workers unable to earn the legal minimum has not been as great as most persons had feared, and almost all of them have obtained employment at lower remuneration through special permits; the legal minimum has not only not become the actual maximum, but is exceeded in the case of the majority of workers; no evidence exists to show that any industry has been crippled, or forced to move out of the country; with the exception of a very few instances, the prices of commodities have not been raised by the law.[251] In the four trades of Great Britain which were first brought under the operation of the Trade Boards Act, and which presented some of the worst examples of economic oppression, the beneficial effects of the minimum wage have been even more striking than in Australasia. Wages have been considerably raised, in some cases as high as one hundred per cent.; dispirited and helpless workers have gained courage, power, and self-respect to such an extent as to increase considerably their membership in trade unions, and to obtain in several instances further increases in remuneration beyond the legal minimum; the compensation of the better paid labourers has not been reduced to the level fixed by the trade boards; the efficiency of both employés and productive processes has been on the whole increased; the number of persons forced out of employment by the law is negligible; no important rise of prices is traceable to the law; and the number of business concerns unable to pay the increase in wages is too small to deserve serious consideration. All these results had been established before the outbreak of the war.[252] The legal minimum wage has been carried into effect in only four states of our own country. It covers practically all the industries employing women and minors in Oregon and Washington, all the working women and girls of Utah, and the women and minors of a few trades in Massachusetts. The rates established for experienced women vary from $7.50 per week in Utah to ten dollars a week for some classes in Washington. As the first wage determinations were put into effect only in 1913, American experience has been too short as well as too narrow to warrant certain conclusions. So far as it has been applied, however, the legal minimum wage has been as successful in the United States as in Australasia or Great Britain. All competent witnesses agree that it has brought a considerable increase in wages to a considerable proportion of the women and minors in the industries in which it is operative, and that it has neither thrown any important number of workers out of employment nor forced any important concern out of business. Speaking of the three leading industries in which minimum wages were first established in Washington, the Industrial Welfare Commission of that state testifies: "Seldom has any piece of legislation, in prospect, engendered so much discussion and so much criticism, as did the minimum wage law, with the intricacies of its ramifications touching almost every industry in the state, large or small, and the family of nearly every wage earner; seldom, too, has any law, in actuality, been so well received, its application been accomplished with so little open opposition, and, for a law of this character, has been attended with so little industrial disturbance as that same minimum wage law. None of the dire predictions made prior to the passage of the law have come about to an extent that questions the general efficiency of the law. There has been no wholesale discharge of women employés, no wholesale levelling of wages, no wholesale replacing of higher paid workers by cheaper help, no tendency to make the minimum the maximum, while the employers of the state in general have been following the letter and spirit of the law, and aiding greatly in its application.... The law, in other words, has advanced the wages of practically sixty per cent. of the workers in these industries, and has done it without serious opposition at a time when business conditions were none too good."[253] The Bureau of Labour Statistics of the United States investigated the operation of the minimum wage in the mercantile establishments of Oregon at the end of the first year. The conclusions of the investigators were in brief that both the number and the proportion of women getting the legal minimum ($9.25 per week) for adults had increased, that the proportion obtaining more than this rate had likewise increased, that those who had received a rise in remuneration did not show any decline in efficiency, that women had not been displaced by men, and that the average increase in the labour cost resulting from the advance in wages was only three mills on each dollar of sales.[254] The effects of the Utah law during the first year of its operation were summarised by the Labour Commissioner, Mr. H. T. Haines, as follows: a rise in the wages of a "number of women and girls who most needed the additional sums of money"; increased efficiency of female workers admitted by most employers; but few cases of women or girls utterly deprived of employment by the law; none of the higher paid women suffered a reduction in wages; and ninety per cent. of the employers are satisfied with the minimum wage statute.[255] So far as the law has been applied in Massachusetts, it seems to be relatively as successful as in the other three states.[256] _The Question of Constitutionality_ The principal reason why the minimum wage laws on the statute books of the other seven states have not been carried into effect, is the uncertainty of the validity of minimum wage legislation in our constitutional system. In November, 1914, a district judge granted a writ of injunction, restraining the Minimum Wage Commission of Minnesota from enforcing their wage determinations, on the ground that the law attempted to delegate legislative power, and that its provisions violated that section of the fourteenth amendment to the United States Constitution which forbids any state to deprive a person of life, liberty, or property without due process of law. One of the courts of Arkansas has taken substantially the same position. The second objection urged by the Minnesota judge is probably much the more serious of the two, and is the one upon which chief emphasis has been laid in the briefs filed in various courts by the opponents of minimum wage legislation. As regards labour legislation, "due process of law" may be practically translated, "reasonable and necessary exercise of the State's police power." And the police power means that indefinite power of the State to legislate for the health, safety, morals, and welfare of the community.[257] Now it is obvious that a minimum wage law deprives both employer and employé of some liberty of contract, and also that it virtually deprives the former of some property, inasmuch as it generally increases his outlay for wages. On the other hand, this restriction of liberty and equivalent diminution of property seem to be carried out in harmony with due process of law, since they constitute an exercise of the police power of the State on behalf of the general welfare. Some months before the Minnesota judge granted the writ of injunction against the enforcement of the minimum wage law of that state, a lower court and the Supreme Court of Oregon had pronounced the Oregon statute constitutional, as a legitimate exercise of the police power. An appeal from this judgment was argued in the Supreme Court of the United States, Dec. 17, 1914, but no decision has yet (October, 1916) been rendered. Until the highest court has spoken on the question of constitutionality, no state is likely to take any further step toward establishing minimum wages. Should the decision of the Supreme Court be unfavourable valid minimum wage legislation will be impossible without an amendment of the United States Constitution.[258] _The Ethical and Political Aspects_ Whether it be considered from the viewpoint of ethics, politics, or economics, the principle of the legal minimum wage is impregnable. The State has not only the moral right but the moral duty to enact legislation of this sort, whenever any important group of labourers are receiving less than living wages. One of the elementary functions and obligations of the State is to protect citizens in the enjoyment of their natural rights; and the claim to a living wage is, as we have seen, one of the natural rights of the person whose wages are his only means of livelihood. Therefore, the establishment of minimum living wages is not among the so-called "optional functions" of the State in our present industrial society. Whenever it can be successfully performed, it is a primary and necessary function. So far as political propriety is concerned, the State may as reasonably be expected to protect the citizen against the physical, mental, and moral injury resulting from an unjust wage contract, as to safeguard his money against the thief, his body against the bully, or his life against the assassin. In all four cases the essential welfare of the individual is injured or threatened through the abuse of superior force and cunning. Inasmuch as the legal minimum wage is ethically legitimate, the question of its enactment is, politically speaking, entirely a question of expediency. _The Economic Aspect_ Now the question of expediency is mainly economic. A great deal of nonsense has been written and spoken about the alleged conflict between the legal minimum wage and "economic law." Economists have used no such language, indeed; for they know that economic laws are merely the expected uniformities of social action in given circumstances. The economists know that economic laws are no more opposed to a legal minimum wage than to a legal eight hour day, or legal regulations of safety and sanitation in work places. All three of these measures tend to increase the cost of production, and sometimes carry the tendency into reality. A minimum wage law is difficult to enforce, but not much more so than most other labour regulations. At any rate, the practical consideration is whether even a partial enforcement of it will not result in a marked benefit to great numbers of underpaid workers. It may throw some persons, the slower workers, out of employment; but here, again, the important question relates to the balance of good over evil for the majority of those who are below the level of decent living. At every point, therefore, the problem is one of concrete expediency, not of agreement or disagreement with a real or imaginary economic law. Some of those who oppose the device on the ground of expediency set up an argument which runs about as follows: the increase in wages caused by a minimum wage law will be shifted to the consumer in the form of higher prices; this result will in turn lead to a falling off in the demand for products; a lessened demand for goods means a reduced demand for labour; and this implies a diminished volume of employment, so that the last state of the workers becomes worse than the first. Not only is this conception too simple, but it proves too much. If it were correct every rise in wages, howsoever brought about, would be ill advised; for every rise would set in motion the same fatal chain of events. Voluntary increases of remuneration by employers would be quite as futile as the efforts of a labour union. This is little more than the old wages fund theory in a new dress. And it is no less contrary to experience. The argument is too simple because it is based upon an insufficient analysis of the facts. There are no less than four sources from which the increased wages required by a minimum wage law might in whole or in part be obtained. In the first place, higher wages will often give the workers both the physical capacity and the spirit that make possible a larger output. Thus, they could themselves equivalently provide a part at least of their additional remuneration. When, secondly, the employer finds that labour is no longer so cheap that it can be profitably used as a substitute for intelligent management, better methods of production, and up to date machinery, he will be compelled to introduce one or more of these improvements, and to offset increased labour cost by increased managerial and mechanical efficiency. This is what seems to have happened in the tailoring industry of England. According to Mr. Tawney, "the increased costs of production have, on the whole, been met by better organisation of work and by better machinery."[259] In the third place, a part of the increased wage cost can be defrayed out of profits, in two ways: through a reduction in the profits of the majority of business concerns in an industry; but more frequently through the elimination of the less efficient, and the consequent increase in the volume of business done by the more efficient. In the latter establishments the additional outlay for wages might be fully neutralised by the diminished managerial expenses and fixed charges per unit of product. This elimination of unfit undertakers would not only be in the direction of greater social efficiency, but in the interest of better employment conditions generally; for it is the less competent employers who are mainly responsible for the evil of "sweating," when they strive to reduce the cost of production by the only method that they know; that is, the oppression of labour. Should the three foregoing factors fall short of providing or neutralising the increased wages, the recourse would necessarily be to the fourth source; namely, a rise in the price of products. However, there is no definite reason for assuming that the rise will in any case be sufficient to cause a net decrease of demand. In Oregon the increased labour cost due to the minimum wage law amounted, as we have seen, to only three mills per dollar of sales in mercantile establishments. Even if this were all shifted to the consumer--something that is practically impossible--it would be equivalent to an increase of only three cents on each ten dollars' worth of purchases, and thirty cents on each hundred. The reduction in sales on account of such a slight rise in prices would be infinitesimal. In the case of possibly the majority of products, the lessened demand on the part of the other classes might be entirely counterbalanced by the increased demand at the hands of the workers whose purchasing power had been raised through the minimum wage law. The effect upon sales, and hence upon business and production, which follows from an increase in the effective consuming power of the labouring classes is frequently ignored or underestimated. So far as consumers' goods are concerned, it seems certain that a given addition to the income of the wage-earning classes will lead to a greater increase in the demand for products than an equal addition to the income of any other section of the people. Nevertheless, the possibility must be admitted of some diminution of employment, owing to higher prices and decreased demand. And it is certain that some workers would not be worth the legal minimum to their employers. A part, but probably not all, of these could find employment at a lower wage, through a system of permits for "slow workers." Whatever the amount of unemployment resulting from both these causes, it would undoubtedly be an evil of lesser magnitude than that which at present follows from the under-payment of a majority of the labouring population. And it could be remedied by two measures which are in any case necessary for social welfare, and which would be hastened by the establishment of a legal minimum wage. These are adequate and scientific laws and institutions to deal with the general problem of unemployment, and a comprehensive system of industrial and vocational training. These conclusions, then, seem to be justified: the economic objections to a legal minimum wage are not essentially different from those that may be urged against any other beneficial labour legislation; and they have been sufficiently refuted by experience to throw the burden of proof upon the objectors. Expediency suggests, however, that in the United States the device should be applied gradually in two respects: for a few years it ought to be confined to women and minors; and when it is extended to men, the rates should approach the level of a complete family living wage by stages, covering, say, three or four years. The former restriction would enable the law to be carried through its experimental stages with a minimum disturbance to industry as a whole, and with a minimum of opposition, and the latter would greatly reduce the danger of male unemployment.[260] _Opinions of Economists_ When the present writer made an argument for the legal minimum wage something more than ten years ago, he was able to find only one American economist who had touched the subject, and the verdict of that one was unfavourable.[261] A little over a year ago, Dr. John O'Grady sent an inquiry to one hundred and sixty economists of the United States to ascertain their opinions on the same subject. Of the ninety-four who replied seventy were in favour of a minimum wage law for women and minors, thirteen were opposed, and eleven were non-committal; fifty-five favoured such legislation for men, twenty were against it, and nineteen were disinclined to give a categorical answer. About three-fourths of those who responded expressed the opinion that the measure would tend to increase the efficiency both of the workers and of methods of production.[262] It is worthy of note that the nine members of the late Federal Commission on Industrial Relations, although disagreeing widely and variously on most other important questions and proposals, were all favourable to a minimum wage law for women and minors.[263] The most comprehensive and most searching criticism of the legal minimum wage from the viewpoint of economic theory has been made by Professor F. W. Taussig.[264] While he does not commit himself definitely to the assertion that a universal minimum wage of, say, eight dollars per week, would cause a notable amount of unemployment among women, he regards this consequence as sufficiently probable to indicate the "need of going slow in the regulation of women's wages." Specifically, he would have public wage boards refrain from fixing the minimum rates high enough to maintain women living away from home. His final and only serious argument for this position relates to the marginal effectiveness of women workers. He assumes that all "the fitful, untrained, indifferent women are got rid of; that all who offer themselves for work at the age of (say) eighteen years have had an industrially helpful education,--" and then raises the question whether all of them will be "able to get distinctly higher wages than are now current."[265] Obviously the question is not serious unless it contemplates the probability of unemployment for a _considerable proportion_. If only one per cent. or less of the women should be unable to find employment at the higher wages, the net social advantage of the minimum wage device would be so obvious as to render Professor Taussig's opposition quite unreasonable. Making the assumptions quoted above from his pages, let us try to see whether his apprehensions are economically justifiable. If they are reasonable or probable they must rest on one of two fundamental conditions: the occupations available to women are too few to absorb all that would seek to become wage earners at eight dollars per week; or a considerable section of them would be unable to produce such a high wage. Possibly the first of these assumptions is true, but neither Professor Taussig nor any other authority has presented evidence to support it, and it is on the face of things not sufficiently probable to justify hesitation in the advocacy of a minimum living wage. If the second assumption be correct, if the product of a considerable section of women (all adequately trained) would be insufficient to yield them eight dollars per week, in addition to the other costs of production, the conclusion is inevitable that the same result would follow the attempt to pay all male adults (likewise adequately trained) a family living wage of, say, fifteen dollars per week. For the product of the average man does not exceed that of the average woman by even as great a ratio as fifteen to eight. If the average woman is not worth eight dollars a week to an employer in any kind of woman's occupation, the average man is not worth fifteen dollars. Therefore, we cannot hope, even with the aid of a thorough system of industrial and vocational training, to provide all adult males of average capacity with a family living wage and the minimum means of living a reasonable life. This is a veritable counsel of despair. It implies either that the law of diminishing returns is already operating in this country in such a way as to prevent the national product from being sufficiently large to provide a minimum wage of fifteen dollars a week for men, and eight dollars a week for women; or that the product, though ample for this purpose, and for all the other necessary payments to the higher priced workers and to the other agents of production, cannot under our present industrial system be so distributed as to attain the desired end. For the first of these hypotheses there is no evidence worthy of the name. If Professor King is right in his estimate of an average family income of 1494 dollars annually[266] the difficulty before us does not lie in the field of production. Professor Taussig seems to rest his fears on the second hypothesis, on the assumed impossibility of bringing about the required distribution; for he points out that increased efficiency of the workers may, like increased efficiency of the material instrumentalities of production, in the long run redound mainly to the benefit of the consumers, while wages may be little if any above the old level. If these fears are justified, if the difficulty is entirely one of the mechanism of distribution, and if it cannot be overcome by legal enactment, then is our competitive organisation of industry bankrupt, and the sooner we find out that fact definitely the better. If the legal minimum wage will help to expose such a situation, will show that, no matter how much the productivity of the workers may be increased, a large proportion of them must by the very nature of the competitive system be forever condemned to live below the level of decent existence, then the minimum wage is worth having merely as an instrument of economic enlightenment. Professor Taussig's argument and illustrations[267] seem to contemplate a condition in which the number of women who become fitted for a certain trade is excessive relatively to the demand for its products, and to the supply of women in other industries. Were industrial training thus misdirected, and were the trained persons unable or unwilling to distribute themselves over other occupations, they would, indeed, face precisely the same dilemma as do the unskilled workers to-day. That is; a majority would be condemned to insufficient wages, or a minority to unemployment. But we have been assuming an _adequate_ system of industrial and vocational training, a well-balanced system, one that would enable the workers to adjust their supply to the demand throughout the various occupations. In these conditions the economic axiom that a supply of goods is a demand for goods should become beneficently effective: the workers should all be able to find employment, and to obtain the greater part of their increased product. Surely Professor Taussig does not mean to commit himself to the view that every increase in the productive power of the workers will in the long run help them only inasmuch as they are consumers, the lion's share of the additional product being taken by other classes. Probably such is the usual result in a régime of unregulated competition, and unlimited freedom as regards the wage contract. But this is precisely what we expect a minimum wage law to correct and prevent. We rely upon this device to enable the workers to retain for themselves that share of the product which under free competition would automatically go to the non-labouring consumers. We hope that blind and destructive economic force can be held in check by deliberate and beneficent social control. The fact of the matter seems to be that Professor Taussig's argument is too hypothetical and conjectural to justify his pessimistic conclusions. It is unpleasantly suggestive of the reasoning by which the classical economists tried to show the English labourers the folly and futility of trade unionism. _Other Legislative Proposals_ The ideal standard of a minimum wage law is a scale of remuneration adequate not only to the present needs of individuals and families, but to savings for the contingencies of the future. Until such time as the compensation of all labourers has been brought up to this level, the State should make provision for cheap housing, and for insurance against accidents, sickness, invalidity, old age, and unemployment. The theory underlying such measures is that they would merely supplement insufficient remuneration, and indirectly contribute to the establishment of genuine living wages. In Europe, housing and insurance legislation is so common that no reasonable and intelligent person any longer questions the competency or propriety of such action by the State. If an adequate legal minimum wage, in the sense just defined, were universally established, the State would not be required to do anything further to effectuate wage justice, except in the matter of vocational and industrial education. This would qualify practically all persons to earn at least a living wage, and would enable those who underwent unusual sacrifices either before or during their employment to command something over and above. In other words, all workers would then be able to obtain what we have called "the equitable minimum." And the labouring class as a whole would possess sufficient economic power to secure substantially all that was due by any of the canons of distributive justice. _Labour Unions_ The general benefits and achievements of labour organisations in the United States down to the beginning of the present century, cannot be more succinctly nor more authoritatively stated than in the words of the United States Industrial Commission: "An overwhelming preponderance of testimony before the Industrial Commission indicates that the organisation of labour has resulted in a marked improvement in the economic condition of the workers."[268] Some of the most conspicuous and unquestionable proofs of rises in wages effected by the unions are afforded by the building trades, the printing trades, the coal mining industry, and the more skilled occupations on the railroads. Between 1890 and 1907 wages increased considerably more in the organised than in the unorganised trades.[269] Nevertheless, when all due credit is given to the unions for their part in augmenting the share of the product received by labour, there remain two important obstacles which seriously lessen their efficacy as a means of raising the wages of the underpaid. The first is the fact that the unions still embrace only a small portion of the total number of wage earners. According to Professor Leo Wolman, a little more than twenty-seven million of the thirty-eight million persons engaged in "gainful occupations" in the United States in 1910 were wage earners in the ordinary sense of that phrase, and of these twenty-seven million only 2,116,317, or 7.7 per cent., were members of labour organisations.[270] The membership to-day is about two and three quarter millions. If the total number of wage earners increased between 1910 and 1916 at the same rate as during the preceding decade, the organised portion is now somewhat less than 7.7 per cent. of the whole. Evidently the labour unions have not grown with sufficient rapidity, nor are they sufficiently powerful to warrant the hope that they will be soon able to lift even a majority of the underpaid workers to the level of living wage conditions. The second obstacle is the fact that only a small minority of the members of labour unions are drawn from the unskilled and underpaid classes, who stand most in need of organisation. The per cent. of those getting less than living wages that is in the unions is almost negligible. With the exception of a few industries, the unskilled and the underpaid show very little tendency to increase notably their organised proportion. The fundamental reason of this condition has been well stated by John A. Hobson: "The great problem of poverty ... resides in the conditions of the low-skilled workman. To live industrially under the new order he must organise. He cannot organise because he is so poor, so ignorant, so weak. Because he is not organised he continues to be poor, ignorant, weak. Here is a great dilemma, of which whoever shall have found the key will have done much to solve the problem of poverty."[271] The most effective and expeditious method of raising the wages of the underpaid through organisation is by means of the "industrial," as distinguished from the "trade," or "craft," union. In the former all the trades of a given industry are united in one compact organisation, while the latter includes only those who work at a certain trade or occupation. For example: the United Mine Workers embrace all persons employed in coal mines, from the most highly skilled to the lowest grade of unspecialised labour; while the craft union is exemplified in the engineers, firemen, conductors, switchmen, and other groups having their separate organisations in the railroad industry. The industrial union is as much concerned with the welfare of its unskilled as of its skilled members, and exerts the whole of its organised force on behalf of each and every group of workers throughout the industry which it covers. The superior suitability of the industrial type of union to the needs of the unskilled labourers is seen in the fact that more of them are organised in the coal mining than in any other industry, and have received greater benefits from organisation than their unskilled fellow workers in any other industry. Were the various classes of railway employés combined in one union, instead of being organised along the lines of their separate crafts, it is quite improbable that the unskilled majority would be getting, as they now are getting, less than living wages. While it is true that the various craft unions in an industry are often federated into a comprehensive association, the bond uniting them is not nearly so close, nor so helpful to the weaker groups of workers as in the case of the industrial unions. Human nature being what it is, however, the members of the skilled crafts cannot all be induced or compelled to adopt the industrial type of organisation. The Knights of Labour attempted to accomplish this, and for a time enjoyed a considerable measure of success, but in the end the organisation was unable to withstand those fundamental inclinations which impel men to prefer the more narrow, homogeneous, and exclusive type of association. The skilled workers refused to merge their local and craft interests in the wider interests of men with whom they had no strong nor immediate bonds of sympathy. Among labourers, as well as among other persons, the capacity for altruism is limited by distance in space and occupational condition. The passion for distinction likewise affects the wage earner, impelling the higher groups consciously or unconsciously to oppose association that tends to break down the barrier of superiority. Owing to their greater resources and greater scarcity, the skilled members of an industrial union are less dependent upon the assistance of the unskilled than the latter are dependent upon the former; yet the skilled membership is always in a minority, and therefore in danger of being subordinated to the interests of the unskilled majority. For these and many other reasons it is quite improbable that the majority of union labourers can be amalgamated into industrial unions in the near future. The most that can be expected is that the various occupational unions within each industry should become federated in a more compact and effective way than now prevails, thus conserving the main advantages of the local and craft association, while assuring to the unskilled workers some of the benefits of the industrial union. _Organisation Versus Legislation_ In the opinion of some labour leaders, the underpaid workers should place their entire reliance upon organisation. The arguments for this position are mainly based upon three contentions: it is better that men should do things for themselves than to call in the intervention of the State; if the workers secure living wages by law they will be less likely to organise, or to remain efficiently organised; and if the State fixes a minimum wage it may some day decide to fix a maximum. Within certain limits the first of these propositions is incontestable. The self education, self reliance, and other experiences obtained by the workers through an organised struggle for improvements of any kind, are too valuable to be lightly passed over for the sake of the easier method of State assistance. Indeed, it would be better to accept somewhat less, or to wait somewhat longer, in order that the advantages might be secured through organisation. However, these hypotheses are not verified as regards the minimum wage problem. The legal method promises with a high degree of probability to bring about universal living wages within ten or fifteen years. The champions of organisation can point to no solid reasons for indulging the hope that their method would achieve the same result within a half a century. Therefore, the advantages of the device of organisation are much more than neutralised by its disadvantages. The fear that the devotion of the workers to the union would decline as soon as living wages had been secured by law, seems to have no adequate basis either in experience or in probability. Speaking of the establishment of minimum wages in the tailoring industry of Great Britain, Mr. Tawney declares that it "has given an impetus to trade unionism among both men and women. The membership of the societies connected with the tailoring trade has increased, and in several districts the trade unions have secured agreements fixing the standard rate considerably above the minimum contained in the Trade Board's determination."[272] Similar testimony comes from Australasia. Indeed, this is precisely what we should be inclined to expect; for the workers whose wages had been raised would for the first time possess the money and the courage to support unions; and would have sufficient incentives thereto in the natural desire to obtain something more than the legal minimum, and in the realisation that organisation was necessary to give them a voice in the determination of the minimum, and to enable them to co-operate in compelling its enforcement. Indeed, general experience shows that organisation becomes normally efficient and produces its best results only among workers who have already approximated the level of living wages. To be sure, the State could set up maximum instead of minimum wages,--if the employing classes were sufficiently powerful. But all indications point to a decline rather than an increase in their political influence, and to a corresponding expansion in the governmental influence of the labouring classes and their sympathisers. Moreover, the labour leaders who urge this objection are inconsistent, inasmuch as they advocate other beneficial labour legislation. The distinction which they profess to find between laws that merely remove unfair legal and judicial disabilities and laws that reduce the length of the working day or fix minimum wages, has no importance in practical politics or in the mind of the average legislature. If the political influence of labour should ever become so weak and that of capital so strong as to make restrictive labour legislation generally feasible, legislators would not confine their unfriendly action to the field of positive measures. They would be quite as ready to pass a law prohibiting strikes as to enact a statute fixing maximum wages. The formal legalisation of strikes, picketing, and the primary boycott which is contained in the Clayton Act, and for which the labour unions worked long and patiently, could conceivably be seized upon by some future unfriendly Congress as a precedent and provocation for legislation which would not only repeal all the favourable provisions of the Clayton Act, but subject labour to entirely new and far more odious restraints and interferences. The fact that governments passed maximum wage laws in the past is utterly irrelevant to the question of wage legislation to-day. A legal minimum wage, and a multitude of other protective labour laws are desirable and wise in the twentieth century for the simple reason that labour and the friends of labour are sufficiently powerful to utilise this method, and because their influence seems destined to increase rather than decrease. The contrary hypothesis is too improbable for serious consideration. The conclusions that seem justified by a comprehensive and critical view of all the facts of the situation, are that organisation is not of itself an adequate means of bringing about living wages for the underpaid, but that it ought nevertheless to be promoted and extended among these classes, not only for its direct effect upon wages, but for its bearing upon legislation. The method of organisation and the method of legislation are not only not mutually opposed, but are in a very natural and practical manner complementary. _Participation in Capital Ownership_ While those workers whose remuneration is below the level of decent maintenance are not ordinarily in a position to become owners of any kind of capital, many of them, especially among the unmarried men, can accumulate savings by making large sacrifices. As a matter of fact, hundreds of thousands of the underpaid have become interest receivers through the medium of savings banks, real estate possessions, and insurance policies. Every effort in this direction is distinctly worth while, and deserving of encouragement. Labourers who are above the minimum wage level can, of course, save much larger amounts, and with less sacrifices than the underpaid classes. In all cases the main desideratum is that the workers should derive some income from capital; but it is almost equally important that their capital ownership should wherever possible take the form of shares in the industry in which they are employed, or the store at which they buy their goods. This means co-operative production and co-operative distribution. The general benefits of the co-operative enterprise have already been described in chapter xiv. For the wage earner proprietorship in a co-operative concern is preferable to any other kind of capital ownership because of the training that it affords in business management and responsibility, in industrial democracy, and in the capacity to subordinate his immediate and selfish interests to his more remote and larger welfare. Co-operative ownership of the tools with which men work has advantages of its own over co-operative ownership of the stores from which they made their purchases, inasmuch as it increases their control over the conditions of employment, and gives them incentives to efficiency which results in a larger social product and a larger share thereof for themselves. As already pointed out in chapter xiv, the ideal type of productive co-operation is that known as the "perfect" form, in which the workers are the exclusive owners of the concern where they exercise their labour. Nevertheless, the "federal" type, in which the productive concern is directly owned by a wholesale co-operative, indirectly by the retail co-operative store, and ultimately by the co-operative consumers,--presents one important advantage. It could be so modified as to enable the employés of the productive enterprise to share the ownership of the latter with the wholesale establishment. Such an arrangement would at once give the workers the benefits of productive co-operation mentioned above, and render probable a satisfactory adjustment of the conflicting claims of producers and consumers. As intimated in chapter xxiv, such a conflict is inherent in every system of industrial organisation, and will become more evident and more acute in proportion to the strengthening of the position of labour. A final reason for ownership of capital by labour deserves mention here, even though it has no immediate bearing upon the question of remuneration. Were all labourers receiving the full measure of wages to which they are entitled by the canons of distributive justice, it would still be highly desirable that the majority if not all of them should possess some capital, preferably in the productive and distributive concerns in which they were immediately interested. It does not seem probable that our economic system as now constituted, with the capital owners and the capital operators for the most part in two distinct classes, will be the final form of industrial organisation. Particularly does this arrangement seem undesirable, incongruous, and unstable in a society whose political form is that of democracy. Ultimately the workers must become not merely wage earners but capitalists. Any other system will always contain and develop the seeds of social discontent and social disorder. REFERENCES ON SECTION IV ADAMS AND SUMNER: Labour Problems. Macmillan; 1905. COMMONS AND ANDREWS: Principles of Labour Legislation. Harpers; 1916. WALKER: The Wages Question. New York; 1876. RYAN: A Living Wage. Macmillan; 1906. SNOWDEN: The Living Wage. London; Hodder & Stoughton. O'GRADY: A Legal Minimum Wage. Washington; 1915. BRODA: La Fixation Légale des Salaires. Paris; 1912. N. Y. FACTORY INVESTIGATING COMMISSION. Appendix to Vol. III. TAWNEY: Minimum Rates in the Chain-Making Industry. London; 1914. Minimum Rates in the Tailoring Industry. London; 1915. TURMAN: Le Catholicisme Social. Paris; 1900. POTTIER: De Jure et Justitia. Liege; 1900. POLIER: L'Idée du Juste Salaire. Paris; 1903. MENGER: The Right to the Whole Produce of Labour. London; 1899. GARRIGUET: Régime du Travail. Paris; 1908. NEARING: Reducing the Cost of Living. Philadelphia; 1914. CHAPIN: The Standard of Living in New York City. New York; 1909. Also the works on co-operation cited in connection with Section II, and those of Hobson, Carver, Nearing and Streightoff. FOOTNOTES: [251] See articles by Hammond in the _American Economic Review_, June, 1913, and in the _Annals of the American Academy of Political and Social Science_, July, 1913; and page 62 of the Appendix to the third volume of the Report of the New York State Factory Investigating Commission. [252] See the replies of the London Board of Trade to the N. Y. Factory Investigating Commission, on pages 77, 78 of the volume cited above; and especially the two monographs by R. H. Tawney, "The Establishment of Minimum Rates in the Chain-Making Industry," and "The Establishment of Minimum Rates in the Tailoring Industry." London; 1914 and 1915. [253] "First Biennial Report of the Industrial Welfare Commission of Washington," pp. 13, 15. [254] "Effect of Minimum Wage Determinations in Oregon." Bulletin No. 176 of United States Bureau of Labour Statistics. [255] From a paper read before the National Convention of the Association of Government Labour Officials, Nashville, Tenn., June 9, 1914. [256] See Bulletins of Massachusetts Minimum Wage Commission. [257] See the excellent and varied series of papers on the subject in Orth's "The Relation of Government to Property and Industry," pp. 103-178. Ginn & Company; 1915. [258] The arguments for and against the constitutionality of a legal minimum wage are adequately presented in the briefs, respectively, of Louis D. Brandeis and Rome G. Brown, in the cases of Stettler _vs._ O'Hara and Simpson _vs._ O'Hara. The former is published by the National Consumers' League, New York, and the latter by the Review Publishing Company, Minneapolis. [259] "Minimum Rates in the Tailoring Industry," p. 161. [260] One of the best statements of the economic aspect of the minimum wage is that by Sidney Webb, in the _Journal of Political Economy_, Dec., 1912. Probably the most varied and comprehensive general discussion is the symposium in the _Survey_, Feb. 6, 1915. See especially the excellent presentation in Commons and Andrews' "Principles of Labour Legislation," pp. 167-200. [261] See pages 303, 304 of "A Living Wage"; Macmillan, 1906. [262] O'Grady, "A Legal Minimum Wage"; Washington, 1915. [263] "Final Report," pp. 101, 255, 364. [264] _The Quarterly Journal of Economics_, May, 1916. A somewhat less unfavourable criticism is contained in the paper by Professor John Bates Clark in the _Atlantic Monthly_, September, 1913. [265] Page 436. [266] "The Wealth and Income of the People of the United States," p. 129. [267] Page 437. [268] "Final Report," p. 802. Washington, 1902. [269] See article by Professor Commons in "The New Encyclopedia of Social Reform," p. 1233. [270] _The Quarterly Journal of Economics_, May, 1916, p. 502. [271] "Problems of Poverty," p. 227. London, 1891. [272] "Minimum Rates in the Tailoring Industry," p. 96. CHAPTER XXVI SUMMARY AND CONCLUSION Throughout this book we have been concerned with a two-fold problem: to apply the principles of justice to the workings of the present distributive system, and to point out the modifications of the system that seemed to promise a larger measure of actual justice. The mechanism of distribution was described in the introductory chapter as apportioning the national product among the four classes that contribute the necessary factors to the process of production, and the first part of the problem was stated as that of ascertaining the size of the share which ought to go to each of these classes. _The Landowner and Rent_ We began this inquiry with the landowner and his share of the product, i.e., rent. We found that private ownership of land has prevailed throughout the world with practical universality ever since men began to till the soil in settled communities. The arguments of Henry George against the justice of the institution are invalid because they do not prove that labour is the only title of property, nor that men's equal rights to the earth are incompatible with private landownership, nor that the so-called social production of land values confers upon the community a right to rent. Private ownership is not only socially preferable to the Socialist and the Single Tax systems of land tenure, but it is, as compared with Socialism certainly, and as compared with the Single Tax probably, among man's natural rights. On the other hand, the landowner's right to take rent is no stronger than the capitalist's right to take interest; and in any case it is inferior to the right of the tenant to a decent livelihood, and of the employé to a living wage. Nevertheless, the present system of land tenure is not perfect. Its principal defects are: the promotion of certain monopolies, as, anthracite coal, steel, natural gas, petroleum, water power, and lumber; the diversion of excessive gains to landowners, as indicated by the recent great increases in the value of land, and the very large holdings by individuals and corporations; and the exclusion of large masses of men from the land because the owners will not sell it at its present economic value. The remedies for these evils fall mainly under the heads of ownership and taxation. All mineral, timber, gas, oil, grazing, and water-power lands that are now publicly owned, should remain the property of the states and the nation, and be brought into use through a system of leases to private individuals and corporations. Cities should purchase land, and lease it for long periods to persons who wish to erect business buildings and dwellings. By means of taxation the State might appropriate the future increases of land values, subject to the reimbursement of private owners for resulting decreases in value; and it could transfer the taxes on improvements and personal property to land, provided that the process were sufficiently gradual to prevent any substantial decline in land values. In some cases the State might hasten the dissolution of exceptionally large and valuable estates through the imposition of a supertax. _The Capitalist and Interest_ The Socialist contention that the labourer has a right to the entire product of industry, and therefore that the capitalist has no right to interest, is invalid unless the former alleged right can be effectuated in a reasonable scheme of distribution; and we know that the contemplated Socialist scheme is impracticable. Nevertheless, the refutation of the Socialist position does not automatically prove that the capitalist has a right to take interest. Of the titles ordinarily alleged in support of such a right, productivity and service are inconclusive, while abstinence is valid only in the case of those capital owners to whom interest was a necessary inducement for saving. Since it is uncertain whether sufficient capital would be provided without interest, and since the legal suppression of interest is impracticable, the State is justified in permitting the practice of taking interest. But this legal permission does not justify the individual interest-receiver. His main and sufficient justification is to be found in the presumptive title which arises out of possession, in the absence of any adverse claimant with a stronger title to this particular share of the product. The only available methods of lessening the burden of interest are a reduction in the rate, and a wider diffusion of capital through co-operative enterprise. Of these the former presents no definite or considerable reasons for hope, either through the rapid increase of capital or the inevitable extension of the industrial function of government. The second proposal contains great possibilities of betterment in the fields of banking, agriculture, stores, and manufacture. Through co-operation the weaker farmers, merchants, and consumers can do business and obtain goods at lower costs, and save money for investment with greater facility, while the labourers can slowly but surely become capitalists and interest-receivers, as well as employés and wage-receivers. _The Business Man and Profits_ Just remuneration for the active agents of production, whether they be directors of industry or employés, depends fundamentally upon five canons of distribution; namely, needs, efforts and sacrifices, productivity, scarcity, and human welfare. In the light of these principles it is evident that business men who use fair methods in competitive conditions, have a right to all the profits that they can obtain. On the other hand, no business man has a strict right to a minimum living profit, since that would imply an obligation on the part of consumers to support superfluous and inefficient directors of industry. Those who possess a monopoly of their products or commodities have no right to more than the prevailing or competitive rate of interest on their capital, though they have the same right as competitive business men to any surplus gains that may be due to superior efficiency. The principal unfair methods of competition; that is, discriminative underselling, exclusive-selling contracts, and discrimination in transportation, are all unjust. The remedies for unjust profits are to be found mainly in the action of government. The State should either own and operate all natural monopolies, or so regulate their charges that the owners would obtain only the competitive rate of interest on the actual investment, and only such surplus gains as are clearly due to superior efficiency. It should prevent artificial monopolies from practising extortion toward either consumers or competitors. Should the method of dissolution prove inadequate to this end, the State ought to fix maximum prices. Inasmuch as overcapitalisation has frequently enabled monopolistic concerns to obtain unjust profits, and always presents a strong temptation in this direction, it should be legally prohibited. A considerable part of the excessive profits already accumulated can be subjected to a better distribution by progressive income and inheritance taxes. Finally, the possessors of large fortunes and incomes could help to bring about a more equitable distribution by voluntarily complying with the Christian duty of bestowing their superfluous goods upon needy persons and objects. _The Labourer and Wages_ None of the theories of fair wages that have been examined under the heads of "the prevailing rate," "exchange-equivalence," or "productivity" is in full harmony with the principles of justice. The minimum of wage justice can, however, be described with sufficient definiteness and certainty. The adult male labourer has a right to a wage sufficient to provide himself and family with a decent livelihood, and the adult female has a right to remuneration that will enable her to live decently as a self supporting individual. At the basis of this right are three ethical principles: all persons are equal in their inherent claims upon the bounty of nature; this general right of access to the earth becomes concretely valid through the expenditure of useful labour; and those persons who are in control of the goods and opportunities of the earth are morally bound to permit access thereto on reasonable terms by all who are willing to work. In the case of the labourer, this right of reasonable access can be effectuated only through a living wage. The obligation of paying this wage falls upon the employer because of his function in the industrial organism. And the labourer's right to a living wage is morally superior to the employer's right to interest on his capital. Labourers who put forth unusual efforts or make unusual sacrifices have a right to a proportionate excess over living wages, and those who are exceptionally productive or exceptionally scarce have a right to the extra compensation that goes to them under the operation of competition. Labourers who are receiving the "equitable minimum" described in the last sentence have a right to still higher wages at the expense of the capitalist and the consumer, if they can secure them through the processes of competition; for the additional amount is an ethically unassigned or ownerless property which may be taken by either labourer, capitalist, or consumer, provided that there is no artificial limitation of supply. The methods of increasing wages are mainly three: a minimum wage by law, labour unions, and co-operative enterprise. The first has been fairly well approved by experience, and is in no wise contrary to the principles of either ethics, politics, or economics. The second has likewise been vindicated in practice, though it is of only small efficacy in the case of those workers who are receiving less than living wages. The third would enable labourers to supplement their wage incomes by interest incomes, and would render our industrial system more stable by giving the workers an influential voice in the conditions of employment, and laying the foundation of that contentment and conservatism which arise naturally out of the possession of property. As a matter of convenience, the foregoing paragraphs may be further summarised in the following abridgment: The landowner has a right to all the economic rent, modified by the right of his tenants and employés to a decent livelihood, and by the right of the State to levy taxes which do not substantially lower the value of the land. The capitalist has a right to the prevailing rate of interest, modified by the right of his employés to the "equitable minimum" of wages. The business man in competitive conditions has a right to all the profits that he can obtain, but corporations possessing a monopoly have no right to unusual gains except those due to unusual efficiency. The labourer has a right to living wages, and to as much more as he can get by competition with the other agents of production and with his fellow labourers. _Concluding Observations_ No doubt many of those who have taken up this volume with the expectation of finding therein a satisfactory formula of distributive justice, and who have patiently followed the discussion to the end, are disappointed and dissatisfied at the final conclusions. Both the particular applications of the rules of justice and the proposals for reform, must have seemed complex and indefinite. They are not nearly so simple and definite as the principles of Socialism or the Single Tax. And yet, there is no escape from these limitations. Neither the principles of industrial justice nor the constitution of our socio-economic system is simple. Therefore, it is impossible to give our ethical conclusions anything like mathematical accuracy. The only claim that is made for the discussion is that the moral judgments are fairly reasonable, and the proposed remedies fairly efficacious. When both have been realised in practice, the next step in the direction of wider distributive justice will be much clearer than it is to-day. Although the attainment of greater justice in distribution is the primary and most urgent need of our time, it is not the only one that is of great importance. No conceivable method of distributing the present national product would provide every family with the means of supporting an automobile, or any equivalent symbol of comfort. Indeed, there are indications that the present amount of product per capita cannot long be maintained without better conservation of our natural resources, the abandonment of our national habits of wastefulness, more scientific methods of soil cultivation, and vastly greater efficiency on the part of both capital and labour. Nor is this all. Neither just distribution, nor increased production, nor both combined, will insure a stable and satisfactory social order without a considerable change in human hearts and ideals. The rich must cease to put their faith in material things, and rise to a simpler and saner plane of living; the middle classes and the poor must give up their envy and snobbish imitation of the false and degrading standards of the opulent classes; and all must learn the elementary lesson that the path to achievements worth while leads through the field of hard and honest labour, not of lucky "deals" or gouging of the neighbour, and that the only life worth living is that in which one's cherished wants are few, simple, and noble. For the adoption and pursuit of these ideals the most necessary requisite is a revival of genuine religion. INDEX Abstinence: as a title to interest, 182-186. Adams, T. S.: 301, 302. Adam Smith: 331, 341. Agriculture: co-operation in, 217-220. Alaska: leasing system in, 96. Altruism: efficacy of under Socialism, 165-167; promoted by co-operation, 229. Ambrose, Saint: 305. American Sugar Refining Company: 267, 272, 289. American Tobacco Company: 263, 267, 288. Analogy: economic, as justifying interest, 205, 206. Anthracite coal: a monopoly, 75, 78, 95, 132. Antoine, Charles: 337-340. Antoninus, Saint: 270. Aquinas, Saint Thomas: 63, 64, 175, 181, 208, 304, 306, 307, 333. Arbitration: failure of, 324. Ashley, W. J.: 9. Astor estate: 88, 89. Augustine, Saint: 305. Australasia: special land taxes in, 118-120, 131; minimum wage in, 401, 402. Authorities: Catholic and Protestant, on living wage, 277, 278. Basil, Saint: 305. Bible, the: on the duty of benevolence, 303, 304, 316, 317. Brandeis, Louis D.: 265, 275. Business man: functions and rewards of, 237-239, 255-258; no right of to minimum profits, 258-260, 362, 363; the superfluous, 260, 261. Canada: special land taxes in, 117-120. Canonist: doctrine of wage justice, 333-336. Canons of distributive justice: 243-253. Capital: meaning of, 137, 138; power of to create value, 146-148; Catholic teaching concerning interest on, 175-177; titles of to interest, 177-186; value of in a no-interest régime, 188-190; need for a wider distribution of, 213, 214; need for ownership of by labour, 214, 229, 230. Capitalists: two kinds of, 138; expropriation of, 154-158; right of to take interest, 201-209; claims of, versus claims of labourers, 367-369, 390-393, 396. Carnegie, Andrew: 300. Carver, T. N.: 351-355. Catholic Church: attitude of toward interest, 172-176. Child workers: right of to a living wage, 373. Christian conception of welfare: 316-318. Clark, J. B.: 271, 347-351. Compensation: to landowners, 34-39; to capitalists under Socialism, 154-158. Competition: alleged failure of, 275-278. Confiscation: of land values under the Single Tax, 34-39; of capital under Socialism, 154-158; of wealth by taxation, 297, 298. Constitutionality of minimum wage laws: 405-407. Consumer: injury to through stockwatering, 282-288; obligations of to business man, 258, 259, 362, 363; versus labourer, 393-398. Contract: onerous, 326; free, as a rule of wage justice, 328-330, 370-372. Co-operation: as a partial solvent of capitalism, 210-233; essence and kinds of, 214, 215; in banking, 216, 217; in agriculture, 217-220; in stores, 220-222; in production, 222-228; effect of on social stability, 229, 230; as compared with individualism and Socialism, 230, 231; province and limitations of, 231-233; bearing of on the superfluous business man, 260, 261; and on the labouring classes, 423-425. Co-partnership: 223, 224. Corporation: profits of a, 241, 242, 257, 258, 262, 389. Cost of living: 378, 379. Cost of production: of capital, 188, 189. Credit societies: co-operative, 216, 217. Defects of our land system: 74-93; monopoly, 75-80; excessive gains, 80-89; exclusion, 90-93. Devas, Charles: 184. Disagreeable tasks: 384, 385. Dixon, F. H.: 323. Discriminative transportation contracts: 272, 273. Discriminative underselling: 267-270. Distribution of superfluous wealth: 303-319. Distributive justice: canons of, 243-253, 381, 382. Earth: right of access to, 358-360. Economic determinism: inconsistent with ethical judgments, 20, 145, 146, 343, 344. Efficiency: monopolistic, 265-267, 275-277, 279; exceptional, 388-390. Efforts: exceptional, as claim to rewards, 382-383. Efforts and sacrifices: as canons of distribution, 245-247. Ely, R. T.: 330. Employer: gains of from wage contract, 327, 328; obligation of to pay a living wage, 365-372. Engels, F.: 20. Ensor, E. K.: 50. Equal gains: as a canon of wage justice, 326-328. Equality: as a canon of justice, 243, 244; of men's claims to the bounty of nature, 358, 359; of rights to a decent livelihood, 360-363. "Equitable minimum": of wages, 388, 390, 392, 393, 395, 397, 398, 399, 417. Equity: meaning of, 256. Exchange-equivalence: theories of, 326-340; equal gains, 326-328; free contract, 328-330; market value, 330-332; mediæval, 332-336; modern, 336-340. Exclusion from the land: 90-93. Exclusive-sales contracts: 270-272. Expropriation: of capitalists under Socialism, 154-158. Extrinsic titles: of interest, 172. Family living wage: 373-376. Fathers of the Church: on private property in land, 62; on duty of beneficence, 305, 306. Fay, C. R.: 214, 221, 227. Fisher, Irving: 196. Fortunes: legal limitation of, 291-302; directly, 292-295; by taxation, 296-302. France: co-operative production in, 223. Fustel de Coulanges: 9. Gains: excessive from land, 80-89; from monopolies, 263-265. Germany: co-operation in, 216. Giffen, Sir Robert: 189. Godwin, W.: 341. Government ownership: 93-95; limitations of, 163-165; and rate of interest, 212. Great Britain: co-operation in, 220-222; income taxes in, 299-300; minimum wage in, 401, 402. Haines, H. T.: 405. Hammond, M. B.: 402. Henry George: on primitive common ownership, 17; on first occupancy, 21-24; on title of labour, 24-29; on natural right to land, 30-39; on right of community to land values and rent, 39-47; on Single Tax, 51, 52. Hillquit, Morris: 159. Hobson, J. A.: 418. Howe, F. C.: 76-78. Human welfare: the test of property rights in land, 36-38; and of a system of land tenure, 74; and of increment taxes, 109-111; and of titles of property, 150, 151, 244, 293-295; as a canon of distributive justice, 252, 253; as justifying profits, 256, 257, 389; as justifying higher than living wages, 386. Hyndman and Morris: 20. Income: distribution of national, 81-83. Incomes: injustice of equal, 244; progressive taxation of, 297-302. Increment taxes: 102-117. Inefficiency: of leadership and labour under Socialism, 158-168. Inheritance: legal limitation of, 293-295; progressive taxation of, 296-302. Interest: nature of, 137-140; rate of, 141-144; alleged intrinsic justifications of, 171-186; attitude of Church toward, 172-176; extrinsic titles of, 172; and the title of productivity, 176-181; and the title of service, 181, 182; and the title of abstinence, 182-186; social and presumptive justifications of, 187-209; necessity of, 191-199; civil authorization, 201-204; how justified, 204-209, a "workless" income, 210; possibility of reducing rate, 211-213; distinguished from profits, 238, 239; versus wages, 390-393. Investor: the "innocent," 286, 287. Ireland: reduction of rents in, 69-71; compulsory sale of land in, 110; co-operation in, 217-219. Italy: co-operation in, 223. Justice: dependence of on charity, 318; not found in prevailing-rate theory, 325; nor in exchange equivalence theories, 326-340; nor in productivity theories, 340-355; and the wage contract, 370-372; and the legal minimum wage, 407. Kautsky, Karl: 153. King, W. I: 82, 83, 122, 123, 155, 240, 310, 414. Labour: as a title to land, 24-29; and to products, 45; and to the entire product of industry, 145-152; 341-347; productivity of, 178, 179; inefficiency of under Socialism, 162-167; mediæval measure of cost of, 336, 337; claims of different groups of, 381-387; legislative proposals for, 416, 417. Labour unions: efficacy and limitations of, 417-420; and legislation, 420-423. Labourer, the: claim of to rent, 71-73; right of to his product, 25, 26, 28, 43, 45, 149, 150, 179, 180; gains of from wage contract, 327, 328; right of to a living wage, 363-369, 373; versus the capitalist, 390-393, 396; versus the consumer, 393-398; and co-operative enterprise, 423-425. Land: distribution of, 16, 17, 87-89; large holdings of, 89, 90; accessibility to, 91-95; the leasing system, 95-97; public ownership of, 98-100. Landowner: right of to rent, 67-73; his share of product, 80-89. Landownership: in history, 8-18; two theories of, 8, 9; in pre-agricultural conditions, 10-12; origin of private, 12-14; prevalence and benefits of, 15-18; arguments against private, 19-47, by Socialists, 19-21, by Henry George, 21-47; private, the best system of tenure, 48-55; four elements of, 48; a natural right, 55-56. See Henry George, Occupancy, Labour, Right, Compensation, Confiscation, Defects, Rent. Land System: defects of the existing, 74-93. Land values: how created by the community, 40-47; increase of, 83-86; taxation of, 117-130. Langenstein: 335. Lassalle, F.: 183. Large estates: special taxation of, 130-132. Leadership: industrial, under Socialism, 158-167. Leasing system: 95-97. Legislation: for labour, 120-123, 416. Liberty: under Socialism, 168-170. Liebknecht, W.: 152. Life: right to, 57; true conception of, 317. Limitation of fortunes: 291-302; directly, 292-295; by taxation, 296-302. Livelihood, decent: 360-363; the labourer's right to, 363-365; the employer's, 366. Living wage: the minimum of wage justice, 356-380; three fundamental principles, 358-360; and a decent livelihood, 360-363; right of labourer to, 363-369; obligation of employer to pay, 365-372; for a family, 373-376; and social welfare, 376, 377; authorities for, 377, 378; money measure of, 378-380; versus other titles of reward, 381, 382, 386. Loan capitalist: and the claims of the labourer, 366, 367, 390, 391. Loans: attitude of Church toward interest on, 172-174; and productive capital, 174, 175. Maine, Sir Henry: 17. Market value: and wage justice, 330-332, 370, 375. Marriage: right to, 57, 58; and reasonable life, 374. Marx, Karl: 145-148, 342, 343, 374. Materialism: in current conception of welfare, 314-318. Meade, E. S.: 265, 266. Menger, A.: 342. Middle Ages, doctrines of: on interest, 172, 175, 176, 201; on titles of gain, 175; on wage justice, 332-336. Minimum: of wage justice, 356-380. Minimum profits: question of right to, 258-260. Minimum wage: 353-355, 400-423; in operation, 400-405; ethical and political aspects of, 407, 408; economic aspect of, 408-416; opinions of economists on, 412-416, 420-423. Modern: version of exchange-equivalence, 336-340. Monopoly: in relation to land, 75-80; moral aspect of, 262-278; excessive gains of, 263-265; efficiency of, 265-267, 275-277; discriminative underselling by, 267-270; favors to by railroads, 262, 273; natural, 273-275; suppression versus regulation of, 275-278; by labour, 390, 397. Natural monopolies: 273-275. Natural rights: 57-59. See Rights. Nearing, Scott: 83-85; 154, 210, footnote. Needs: as a canon of justice, 244, 246, 356-358; classification of, 308, 309; exaggerated conception of, 314-318; a standard of wage justice in Middle Ages, 335, 336. Occupancy, first: as a title to land, 21-24; as exemplified in increment taxes, 109. Occupation: question of right to a livelihood from a present, 362, 363. Original titles: See Occupancy, Labour. Overcapitalization: 279-290. See Stockwatering. Ownership: titles of determined by reasonable distribution, 150, 151. Perkins, G. W.: 276. Personality: as basis of industrial rights, 358-371, 374. Pesch, H.: 215. Pope Benedict XIV: 173. Clement IV: 23. Gregory the Great: 306. Innocent XI: 316. Leo XIII: 64-66, 306, 309, 377. Sixtus V: 176. Population: excessive increase of urban, 86. Possession: as a partial justification of interest: 205, 206. Possessors: obligation of to non-possessors, 359, 360. Presumption: as a partial justification of interest, 205; and the canon of productivity, 248. Prevailing rate theory: of wage justice, 323-325. Prices: test of extortionate, 269, 270; legalized agreements fixing, 277, 278; versus wages, 393-399. Principles: three fundamental to living wage doctrine, 358-360. Product: distribution of national, 181-183. See Labour, Labourer, Right. Production: of land values by the community, 39-47; co-operation in, 222-228. Productivity: as a title to the product, 25, 26, 28, 43, 45, 149, 150, 179; as a title to interest, 172, 173, 176-181, 204, 205; of labour and capital, 178-180; as a canon of distribution, 246-249, 350, 351; as justifying large profits, 255-258, 262, 388, 389; as a title to wages, 341-355, 385; Clark's theory of, 347-351; Carver's theory of, 351-355. Profits: nature of, 237-242; as compared with interest and rent, 139, 140, 238, 239; amount of, 239, 240; in a corporation, 241, 242; in conditions of competition, 254-261; indefinitely large, 255-258; minimum, 258-260; surplus and excessive, 263-265; in natural monopolies, 273, 274; versus wages, 388-390. "Progress and Poverty": 21, 22, 24, 25, 30, 34, 39, 51, 52. Proudhon: 342. Public honour: efficacy of under Socialism: 165-167. Pullman Company: 289. Reform: versus revolution, 94. Rent: economic, 3-7; commercial, 5; how produced by society, 39-47; right of landowner to, 67-75; right of tenant and labourer to, 69-73, 396; increase and amount of, 80-87; distribution of, 87-89; in United States, 122. Rent charges: attitude of theologians toward, 175, 176. "Res fructificat domina": limitations of this formula, 60, 61, 104, 105, 111, 180, 345. Revolution: versus reform, 94. Riches: from land, 88, 89. Right: of the individual to land, 30-39; of the community to land values and rent, 39-47; of the producer to his product, see productivity; of private landownership, 56-66; to take rent, 67-73; of access to the earth, 358-360; to a decent livelihood, 360-363; to a living wage, 363-369, 372, 376. Rights: three principal kinds of natural, 57-59; of property, as created by the State, 202. Rodbertus, K.: 342. Roman Congregations: on lawfulness of interest taking, 173, 174. Saint-Simon: 342. Sacrifice: principle of in taxation, 131, 297; as a title to interest, 185-188; as a title of reward, 383-385. Savers: three kinds of, 183-185. Scarcity: effect of on rewards of productive agents, 80; as a canon of distributive justice, 250, 251; as justifying very large profits, and more than a living wage, 255-258. Schmoller: 253. Schoolmen: doctrines of on wage justice, 333-336. Seligman, E. R. A.: 101, 296, 297. Service: as a title to interest, 181, 182, 204, 205. Shifting: of land taxes, 102, 103. Sidgwick, H.: 329. Single Tax: injustice of, 33-39, 100; proposals and defects of, 51, 54, 108. Skelton, O. D.: 165. Small, A. W.: 171. Social benefits: of special taxes on land, 127-130. Socialism: as regards land, 49, 51; not inevitable, 153; expropriation of capitalists by, 154-158; inefficiency of, 158-168; hostile to individual liberty, 168-170; not co-operation, 230, 231. Socialists: on private landownership, 19-21; on interest, value, and labour, 145-148; on the collectivist State, 152, 153; on morality of profits, 254; on wage justice, 341-347; on the principle of needs, 356. Socialist party: of the United States, on landownership, 51. Spargo, John: 51. Specific productivity: as a measure of wage justice, 347-351. Speculation: effect of on land values, 92, 93, 103. Spencer, Herbert: 23. Standard Oil Company: 76, 263, 267. State, the: should permit interest, 199-201; power of to create property rights, 202-204; not obliged to guarantee living profits, 259; fixing of maximum prices by, 275-278; and the "innocent" investor, 286, 287; and the prevention of stockwatering, 289, 290; and the limitation of fortunes, 291-302; and payment of living wages, 365; and minimum wage, 407, 408, 420-423; and other labour legislation, 416, 417. Stockholders: claim of to surplus gains, 257, 258, 262; as related to stockwatering, 279-281, 285. Stockwatering: moral aspect of, 279-290; definition of, 280; injurious effects of, 281-286 and the "innocent" investor, 286, 287; magnitude of, 288, 289; prevention of, 289, 290. Stores: co-operation in, 220-222. Superfluous wealth: duty of distributing, 303-319; kinds of, 308, 309; a false conception of, 314-316; true conception of, 318, 319. See Wealth. Supertax: on large landed estates, 130-132. Supply and demand: as determining rent, 80; as determining interest, 143, 144. Taussig, F. W.: 198, 214, 282, 289, 290; on minimum wage, 412-416. Tawney, R. H.: 421. Taxation: as a social instrument, 101, 102; of increases in land value, 102-117; faculty theory of, 107, 108; progressive, as a method of limiting fortunes, 296-302. Taxes: shifting of to land, 117-130; social benefits of, 127-130. Tenant: claim of to rent, 69-71. Theologians: on private landownership, 62-64; on interest, 172-176, 202-204; on civil creation of property rights, 202; on duty of benevolent distribution, 308, 309. Thompson, W.: 341. Undertaker: See Business man. United States: special land taxes in, 119; co-operation in, 218, 263; minimum wage in, 401, 403-407. United States Commissioner of Corporations, reports of: on Standard Oil Company, 76, 263, 267, 268, 272; on Steel Corporation, 79, 89, 263, 267, 285; on water power ownership, 79, 95; on the lumber industry, 85, 89, 94, 132; on American Tobacco Company, 263, 267, 288; on American Sugar Refining Company, 267, 272, 289. United States Shipbuilding Company: 288, 289. United States Steel Corporation: 79, 89, 267, 285, 289. Use: right, as a confirmatory justification of interest taking, 206-208. Value: Marxian theory of, 145-148, 333, 343, 344; relation of to wage justice, 330-340; and to a living wage, 370, 375. Van Hise, C. R.: 266, 267, 277, 278, 288. Wage justice: unacceptable theories of, 323-355; prevailing rate theory, 323-325; exchange equivalence theory, 326-340; productivity theories, 341-355; the minimum of, 356-380; problem of complete, 381-399; claims of different labour groups, 381-387; wages versus profits, 388-390; wages versus interest, 390-393; wages versus prices, 393-399. Wages: versus profits, 388-390; "equitable minimum" of, 388; versus interest, 390-393; versus prices, 393-399; methods of increasing, 400-425; legal minimum, 400-416; other legislation for, 416, 417; labour unions, 417-423; co-operative enterprise, 423-425. Wagner, A.: 342. Watered stock: 279-290. See Stockwatering. Water power: in the United States, 79, 95. Wealth, superfluous: duty of distributing, 303-319; as regards a part, 303-307; as regards the whole, 308-314; a duty of charity or of justice, 305-307; the supply of capital and business ability, 311-313; false and true conceptions of, 314-316. Welfare: a false conception of, 314-316; true conception of, 316-318; social, demands a living wage for all, 376, 377. See Human welfare. Whittaker, Sir Thomas: 10, 14, 28. Wicker, G. R.: 350, 351. Williams, A.: 232. Wolman, L.: 417, 418. Women: right of to a living wage, 373. PRINTED IN THE UNITED STATES OF AMERICA * * * * * The following pages contain advertisements of books by the same author or on kindred subjects. * * * * * Socialism: Promise or Menace BY MORRIS HILLQUIT and JOHN A. RYAN, D.D. _270 pp., 12mo, $1.25_ A debate on the right or wrong of the movement in which opposing arguments are presented dealing with various phases of the subject. The attack is made by Dr. Ryan, Professor of Moral Theology and Economics in St. Paul Seminary and author of _A Living Wage_. The defender, Mr. Hillquit, is a practising lawyer and has been a delegate to national and international socialist conferences for several years. "One of the most important books ever published, bearing on the issue of Socialism."--_Ohio State Journal._ "Many books have been written on the subject, but no better presentation of both sides in one volume can be found than in _Socialism, Promise or Menace_.... It is a fine, fair and square discussion."--_Congregationalist._ "Nowhere else within the covers of a single volume can be found such a satisfactory presentation of the leading arguments and counter-arguments on a great question, for each debater is amply qualified to present his case."--Boston _Globe_. * * * * * _A Living Wage, Its Ethical and Economic Aspects_ By JOHN A RYAN, S.T.L. Professor of Ethics and Economics in St. Paul's Seminary. _Cloth, 12mo, $1.00; Standard Library Edition, $.50_ "Father Ryan's work on the Living Wage is perhaps the best exposition of the labor phase of the social problem. It has taken its place on the shelves of public and private libraries beside other standard works, while the name of the author is associated with the leading American sociologists. "The volume is prefaced by an introduction by Professor Richard T. Ely, the noted American economist. As the title indicates, the subject is not merely treated from an economic point of view, but also in its economic aspects--a course of procedure that is somewhat of a departure from prevailing discussions of economic subjects. There is a tendency to treat political economy as a subject related to mathematics. Statistics and axioms are the predominating features. However, the science of political economy cannot disregard the origin and destiny of man. "'The Living Wage' is based on the principles of Christian philosophy. Its logic proceeds from the Christian conception of the dignity of man. Father Ryan's book is thus a most timely and necessary contribution to sociological literature. That 'The Living Wage' has met the popularity that it has, is evidence of the growing conviction that the social problem cannot be solved except on Christian principles."--_Common Cause._ "It is refreshing to pick up a book by Dr. Ryan, who is always so sane and so convincing."--_North Western Chronicle._ "The book is considered the best presentation of Catholic economic thought at the disposal of the general reader."--_Albany Times-Union._ "That this economic study by Father Ryan is a solid work is evidenced by the fact that it was first published in 1906, and was reprinted in 1908, 1910, and 1912.... Instead of appeals to sentiment or glittering generalities, Professor Ryan offers seasoned arguments and precise doctrine."--_Portland Evening Telegram._ "The most judicious and balanced discussion at the disposal of the general reader."--_World To-day._ * * * * * Property and Contract in Their Relations to the Distribution of Wealth By RICHARD T. ELY, Ph.D., LL.D. Of the University of Wisconsin, Author of "Outlines of Economics," Editor of the "Citizens' Library," etc. _In two volumes, $4.00. Special Law Library Edition, Sheep, 8vo, $7.50_ In this work, which is based upon legal decisions as well as upon economic principles, a leading authority on political economy considers simply and concisely one of the greatest problems now before the American people. Much has been heard and written of late about judicial readjustment and direct government, but few who have discussed the subject have seen the heart of it as clearly as does Professor Ely. Of special importance is his treatment of the police power, a burning question in American jurisprudence. An idea of the scope and comprehensiveness of the work may be gained from the following condensed table of contents: Introduction; Book I, The Fundamentals in the Existing Socio-Economic Order Treated from the Standpoint of Distribution; Part I, Property, Public and Private: I, Property, Public and Private, The First Fundamental Institution in the Distribution of Wealth; II, Illustrations Showing the Importance of Property in Wealth Distribution; III, Property Defined and Described; IV, Property, Possession, Estate, Resources; V, The Attribute and Characteristic of Property; VI, The Social Theory of Private Property; VII, Property and the Police Power; VIII, What May I Own? IX, The Conservative Nature of the Social Theory of Property; X, XI, A Discussion of the Kinds of Property; XII, The General Grounds for the Maintenance of Private Property; XIII, A Critical Examination of the General Grounds for the Maintenance of Private Property; XIV, XV, XVI, XVII, XVIII, XIX, The Present and Future Development of Private Property; XX, The Transformation of Public Property into Private Property and of Private Property into Public Property; XXI, The Management of Public Property with Reference to Distribution; XXII, Theories of the Origin of Private Property; Part II, Contract and Its Conditions: I, Introductory Observations; II, Contract Defined and Described; III, The Economic Significance of Contract; IV, Contract and Individualism; V, Criticism of the Individualistic Theory of Contract and the Social Theory; VI, Contracts for Personal Services; VII, Class Legislation; VIII, Facts as to Impairment of Liberty; IX, The Courts and Constitutions; X, Concluding Observations; Appendix I, Part III, Vested Interests; Appendix II, Part IV, Personal Conditions; Appendix III, Production, Present and Future, by W. I. King, Ph.D., Instructor in Statistics, University of Wisconsin; Appendix IV, List of Cases Illustrating the Attitude of the Courts Toward Property and Contract Rights and the Consequent Evolution of These Rights, by Samuel P. Orth, Ph.D., Professor of Political Science, Cornell University. * * * * * Principles of Economics BY F. W. TAUSSIG Henry Lee Professor of Economics in Harvard University _New edition. Cloth, 8vo, 2 vols., each $2.00_ Volume I, 547 pages Volume II, 573 pages The present edition of Professor Taussig's standard work embodies many changes throughout the text, thus bringing his work abreast of the most recent developments. The chapter on banking in the United States has been entirely re-written; as it now stands, it includes a description of the Federal Reserve Bank system and a consideration of the principles underlying the new legislation. The chapter on trusts and combinations has been largely re-written, with reference to the laws enacted in 1914. Considerable addition and revision has been made in the chapter on workmen's insurance, calling attention to the noteworthy steps taken of late years in England and the United States. The chapters on taxation and especially on income taxes, and on some other topics, have been similarly brought to date. A remarkable tribute to the merit of this book is that while it was not intended primarily as a class text, it has been adopted for exclusive use as a text in many of the colleges and universities, both large and small. Experience has shown conclusively that the book's clarity of expression and freedom from the usual technical treatment of the subject has made it an especially suitable text for all colleges. For the smaller institutions, the book has the additional advantage of containing all the necessary material required in the usual course in economics, and thus avoids the extra expense and trouble of using several other books to supplement the basic text. In fact, the value and the extended use of this work as a comprehensive, untechnical treatment of the subject, have led many eminent economists to regard it as the most notable contribution to the subject of economics since the time of John Stuart Mill. THE MACMILLAN COMPANY Publishers 64-66 Fifth Avenue New York * * * * * Transcriber's Notes: Obvious typographical errors were corrected. Hyphenation inconsistency between "co-partnership" as used by the author, and "Copartnership" as in the title of a quoted reference, was retained as in the original. A few out-of-order index entries were relocated. Advertisements: "THE MACMILLAN COMPANY Publishers 64-66 Fifth Avenue New York" appeared at the bottom of each ad page in the original. This has been reduced to one occurrence after the final ad. 
40077	----	THE PRINCIPLES OF ECONOMICS WITH APPLICATIONS TO PRACTICAL PROBLEMS BY FRANK A. FETTER, PH.D. PROFESSOR OF POLITICAL ECONOMY AND FINANCE, CORNELL UNIVERSITY NEW YORK THE CENTURY CO. 1904 Copyright, 1904, by THE CENTURY CO. THE DEVINNE PRESS TO THE STUDENTS OF THREE UNIVERSITIES --INDIANA, STANFORD, AND CORNELL-- FOR WHOM, WITH WHOM, AND BY WHOSE AID THIS BOOK CAME TO BE WRITTEN CONTENTS PART I PAGE THE VALUE OF MATERIAL THINGS 1-169 DIVISION A--WANTS AND PRESENT GOODS CHAPTER 1 THE NATURE AND PURPOSE OF POLITICAL ECONOMY: NAME AND DEFINITION; PLACE OF ECONOMICS AMONG THE SOCIAL SCIENCES; THE RELATION OF ECONOMICS TO PRACTICAL AFFAIRS 3 2 ECONOMIC MOTIVES: MATERIAL WANTS, THE PRIMARY ECONOMIC MOTIVES; DESIRES FOR NON-MATERIAL ENDS, AS SECONDARY ECONOMIC MOTIVES 9 3 WEALTH AND WELFARE: THE RELATION OF MEN AND MATERIAL THINGS TO ECONOMIC WELFARE; SOME IMPORTANT ECONOMIC CONCEPTS CONNECTED WITH WEALTH AND WELFARE 15 4 THE NATURE OF DEMAND: THE COMPARISON OF GOODS IN MAN'S THOUGHT; DEMAND FOR GOODS GROWS OUT OF SUBJECTIVE COMPARISONS 21 5 EXCHANGE IN A MARKET: EXCHANGE OF GOODS RESULTING FROM DEMAND; BARTER UNDER SIMPLE CONDITIONS; PRICE IN A MARKET 30 6 PSYCHIC INCOME: INCOME AS A FLOW OF GOODS; INCOME AS A SERIES OF GRATIFICATIONS 39 DIVISION B--WEALTH AND RENT 7 WEALTH AND ITS DIRECT USES: THE GRADES OF RELATION OF INDIRECT GOODS TO GRATIFICATION; CONDITIONS OF ECONOMIC WEALTH 46 8 THE RENTING CONTRACT: NATURE AND DEFINITION OF RENT; THE HISTORY OF CONTRACT RENT AND CHANGES IN IT 53 9 THE LAW OF DIMINISHING RETURNS: DEFINITION OF THE CONCEPT OF (ECONOMIC) DIMINISHING RETURNS; OTHER MEANINGS OF THE PHRASE "DIMINISHING RETURNS"; DEVELOPMENT OF THE CONCEPT OF DIMINISHING RETURNS 61 10 THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT: DIFFERENTIAL ADVANTAGES IN CONSUMPTION GOODS; DIFFERENTIAL ADVANTAGES IN INDIRECT GOODS 73 11 REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT: REPAIR OF RENT-BEARING AGENTS; DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR; DESTRUCTION OF NATURAL STORES OF MATERIAL 81 12 INCREASE OF RENT-BEARERS AND OF RENTS: EFFORTS OF MEN TO INCREASE PRODUCTS AND RENT-BEARERS; EFFECTS OF SOCIAL CHANGES IN RAISING THE RENTS OF INDIRECT AGENTS 90 DIVISION C--CAPITALIZATION AND TIME-VALUE 13 MONEY AS A TOOL IN EXCHANGE: ORIGIN OF THE USE OF MONEY; NATURE OF THE USE OF MONEY; THE VALUE OF TYPICAL MONEY 98 14 THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL: THE BARTER ECONOMY AND ITS DECLINE; THE CONCEPT OF CAPITAL IN MODERN BUSINESS 108 15 THE CAPITALIZATION OF ALL FORMS OF RENT: THE PURCHASE OF RENT-CHARGES AS AN EXAMPLE OF CAPITALIZATION; CAPITALIZATION INVOLVED IN THE EVALUATING OF INDIRECT AGENTS; THE INCREASING ROLE OF CAPITALIZATION IN MODERN INDUSTRY 118 16 INTEREST ON MONEY LOANS: VARIOUS FORMS OF CONTRACT INTEREST; THE MOTIVE FOR PAYING INTEREST 131 17 THE THEORY OF TIME-VALUE: DEFINITION AND SCOPE OF TIME-VALUE; THE ADJUSTMENT OF THE RATE OF TIME-DISCOUNT 141 18 RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL: HOW VARIOUS FORMS OF CAPITAL MAY BE INCREASED; SOCIAL SIGNIFICANCE OF THESE DIFFERENCES 152 19 SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST: SAVING AS AFFECTED BY THE INTEREST RATE; CONDITIONS FAVORABLE TO SAVING; INFLUENCE OF THE INTEREST RATE ON METHODS OF PRODUCTION 159 PART II THE VALUE OF HUMAN SERVICES 171-355 DIVISION A--LABOR AND WAGES 20 LABOR AND CLASSES OF LABORERS: RELATION OF LABOR TO WEALTH; VARIETIES OF TALENTS AND OF ABILITIES IN MEN 173 21 THE SUPPLY OF LABOR: WHAT IS A DOCTRINE OF POPULATION? POPULATION IN HUMAN SOCIETY; CURRENT ASPECT OF THE POPULATION PROBLEM 184 22 CONDITIONS FOR EFFICIENT LABOR: OBJECTIVE PHYSICAL CONDITIONS; SOCIAL CONDITIONS FAVORING EFFICIENCY; DIVISION OF LABOR 195 23 THE LAW OF WAGES: NATURE OF WAGES AND THE WAGES PROBLEM; THE DIFFERENT MODES OF EARNING WAGES; WAGES AS EXEMPLIFYING THE GENERAL LAW OF VALUE 205 24 THE RELATION OF LABOR TO VALUE: RELATION OF RENT TO WAGES, RELATION OF TIME-VALUE TO WAGES; THE RELATION OF LABOR TO VALUE 215 25 THE WAGE SYSTEM AND ITS RESULTS: SYSTEMS OF LABOR; THE WAGE SYSTEM AS IT IS; PROGRESS OF THE MASSES UNDER THE WAGE SYSTEM 226 26 MACHINERY AND LABOR: EXTENT OF THE USE OF MACHINERY; EFFECT OF MACHINERY ON THE WELFARE AND WAGES OF THE MASSES 236 27 TRADE-UNIONS: THE OBJECTS OF TRADE-UNIONS; THE METHODS OF TRADE-UNIONS; COMBINATION AND WAGES 245 DIVISION B--ENTERPRISE AND PROFITS 28 PRODUCTION AND THE COMBINATION OF THE FACTORS: THE NATURE OF PRODUCTION; COMBINATION OF THE FACTORS 257 29 BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION: THE DIRECTION OF INDUSTRY; QUALITIES OF A BUSINESS ORGANIZER; THE SELECTION OF ABILITY 265 30 COST OF PRODUCTION: COST OF PRODUCTION FROM THE ENTERPRISER'S POINT OF VIEW; COST OF PRODUCTION FROM THE ECONOMIST'S STANDPOINT 273 31 THE LAW OF PROFITS: MEANING OF TERMS; THE TYPICAL ENTERPRISER'S SERVICES REVIEWED; STATEMENT OF THE LAW OF PROFITS 282 32 PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION: PROFIT-SHARING; PRODUCERS' COÖPERATION; CONSUMERS' COÖPERATION 292 33 MONOPOLY PROFITS: NATURE OF MONOPOLY; KINDS OF MONOPOLY; THE FIXING OF A MONOPOLY PRICE 302 34 GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES: GROWTH OF LARGE INDUSTRY IN THE UNITED STATES; ADVANTAGES OF LARGE PRODUCTION; CAUSES OF INDUSTRIAL COMBINATIONS 312 35 EFFECT OF TRUSTS ON PRICES: HOW TRUSTS MIGHT AFFECT PRICES; HOW TRUSTS HAVE AFFECTED PRICES 323 36 GAMBLING, SPECULATION, AND PROMOTERS' PROFITS: GAMBLING VS. INSURANCE; THE SPECULATOR AS A RISK TAKER; PROMOTER'S AND TRUSTEE'S PROFITS 333 37 CRISES AND INDUSTRIAL DEPRESSIONS: DEFINITION AND DESCRIPTION OF CRISES; CRISES IN THE NINETEENTH CENTURY; VARIOUS EXPLANATIONS OF CRISES 345 PART III THE SOCIAL ASPECTS OF VALUE 357-563 DIVISION A--RELATION OF PRIVATE INCOME TO SOCIAL WELFARE 38 PRIVATE PROPERTY AND INHERITANCE: IMPERSONAL AND PERSONAL SHARES OF INCOME; THE ORIGIN OF PRIVATE PROPERTY; LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY 359 39 INCOME AND SOCIAL SERVICE: INCOME FROM PROPERTY; INCOME FROM PERSONAL SERVICES 370 40 WASTE AND LUXURY: WASTE OF WEALTH; LUXURY 381 41 REACTION OF CONSUMPTION ON PRODUCTION: REACTION UPON MATERIAL PRODUCTIVE AGENTS; REACTION UPON THE EFFICIENCY OF THE WORKERS; EFFECTS ON THE ABIDING WELFARE OF THE CONSUMER 392 42 DISTRIBUTION OF THE SOCIAL INCOME: THE NATURE OF PERSONAL DISTRIBUTION; METHODS OF PERSONAL DISTRIBUTION 402 43 SURVEY OF THE THEORY OF VALUE: REVIEW OF THE PLAN FOLLOWED; RELATION OF VALUE THEORIES TO SOCIAL REFORMS; INTERRELATION OF ECONOMIC AGENTS 412 DIVISION B--RELATION OF THE STATE TO INDUSTRY 44 FREE COMPETITION AND STATE ACTION: COMPETITION AND CUSTOM; ECONOMIC HARMONY THROUGH COMPETITION; SOCIAL LIMITING OF COMPETITION 422 45 USE, COINAGE, AND VALUE OF MONEY: THE PRECIOUS METALS AS MONEY; THE QUANTITY THEORY OF MONEY 431 46 TOKEN COINAGE AND GOVERNMENT PAPER MONEY: LIGHT-WEIGHT COINS; PAPER MONEY EXPERIMENTS; THEORIES OF POLITICAL MONEY 443 47 THE STANDARD OF DEFERRED PAYMENTS: FUNCTION OF THE STANDARD; INTERNATIONAL BIMETALLISM; THE FREE-SILVER MOVEMENT IN AMERICA 453 48 BANKING AND CREDIT: FUNCTIONS OF A BANK; TYPICAL BANK MONEY; BANKS OF THE UNITED STATES TO-DAY 462 49 TAXATION IN ITS RELATION TO VALUE: PURPOSES OF TAXATION; FORMS OF TAXATION; PRINCIPLES AND PRACTICE 471 50 THE GENERAL THEORY OF INTERNATIONAL TRADE: INTERNATIONAL TRADE AS A CASE OF EXCHANGE; THEORY OF FOREIGN EXCHANGES OF MONEY; REAL BENEFITS OF FOREIGN TRADE 480 51 THE PROTECTIVE TARIFF: THE NATURE AND CLAIMS OF PROTECTION; THE REASONABLE MEASURE OF JUSTIFICATION OF PROTECTION; VALUES AS AFFECTED BY PROTECTION 491 52 OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION: SOCIAL LEGISLATION; LABOR LEGISLATION 504 53 PUBLIC OWNERSHIP OF INDUSTRY: EXAMPLES OF PUBLIC OWNERSHIP; ECONOMIC ASPECTS OF PUBLIC OWNERSHIP 514 54 RAILROADS AND INDUSTRY: TRANSPORTATION AS A FORM OF PRODUCTION; THE RAILROAD AS A CARRIER; DISCRIMINATION IN RATES ON RAILROADS 525 55 THE PUBLIC NATURE OF RAILROADS: PUBLIC PRIVILEGES OF RAILROAD CORPORATIONS; POLITICAL AND ECONOMIC POWER OF RAILROAD MANAGERS; COMMISSIONS TO CONTROL RAILROADS 534 56 PUBLIC POLICY AS TO CONTROL OF INDUSTRY: STATE REGULATION OF CORPORATE INDUSTRY; DIFFICULTIES OF PUBLIC CONTROL OF INDUSTRY; TREND OF POLICY AS TO PUBLIC INDUSTRIAL ACTIVITY 544 57 FUTURE TREND OF VALUES: PAST AND PRESENT OF ECONOMIC SOCIETY; THE ECONOMIC FUTURE OF SOCIETY 555 QUESTIONS AND CRITICAL NOTES 565 INDEX 595 PREFACE This book had its beginning ten years ago in a series of brief discussions supplementing a text used in the class-room. Their purpose was to amend certain theoretical views even then generally questioned by economists, and to present most recent opinions on some other questions. These critical comments evolved into a course of lectures following an original outline, and were at length reduced to manuscript in the form of a stenographic report made from day to day in the class-room. The propositions printed in italics were dictated to the class, to give the key-note to the main divisions of the argument. Repeated revisions have shortened the text, cut out many digressions and illustrations, and remedied many of the faults both of thought and of expression; but no effort has been made to conceal or alter the original and essential character of the simple, informal, class-room talks by teacher to student. To this origin are traceable many conversational phrases and local illustrations, and the occasional use of the personal form of address. The lectures, at the outset, sought to give merely a summary of widely accepted economic theory, not to offer any contribution to the subject. While they were in progress, however, special studies in the evolution of the economic concepts were pursued, and the manuscript of a book on that more special subject was carried well toward completion. That work, which it is hoped some time to complete, was, for several reasons, put aside while the present text was preparing for publication. The economic theories of the present transition period show many discordant elements, yet the author felt that his attempt to unify the statement of principles, in an elementary text explaining modern problems, and consistent in its various parts, helped to reveal to him both difficulties and possible solutions in the more special theoretical field. The unforeseen outcome of these varied studies is an elementary text embodying a new conception of the theory of distribution, an outline of which will be found in Chapter Forty-three. It is, in brief, a consistently subjective analysis of the relations of goods to wants, in place of the admixture of objective and subjective distinctions found in the traditional conceptions of rent, interest, and price. The beginning of the systematic study of economics, like the first steps in a language, is difficult because of the entire strangeness of the thought, and it is not to be hoped that any pedagogic device can do away with the need of strenuous thinking by the student. The aim, however, in the development of this theory of distribution, has been to proceed by gradual steps, as in a series of geometrical propositions, from the simple and familiar acts and experiences of the individual's every-day life, through the more complex relations, to the most complex, practical, economic problems of the day. The hope has long been entertained by economists that a conception of the whole problem of value would be attained that would coördinate and unify the various "laws,"--those of rent, wages, interest, etc. This solution has here been sought by a development of recent theories, the unit of the complex problem of value being the simplest, immediate, temporary gratification. Possibly some teachers will observe and regret the almost entire absence of critical discussions of controverted points in theory, which make up so large a part of some of the older texts. The more positive manner of presentation has been purposely adopted, and only such reference is made to conflicting views as is needed to guard the student against misunderstanding in his further reading. The author would not have it thought that he doubts the disciplinary value of economic theory or its scientific worth for more advanced students, for, on the contrary, he believes in it, perhaps to an extreme degree; but, for his own part, he has become convinced of the unwisdom of carrying on these subtle controversies in classes of beginners. The inherent difficulties of the subject are great enough, without the creation of new ones. The fifty-seven chapters represent the work of the typical college course in elementary economics, allowing two chapters a week, and a third meeting weekly for review and for the discussion of questions, exercises, and reports. The subject is so large that the text is, in many places, hardly more than a suggestive outline. In class-room work it should be supplemented by other sources of information, such as personal observation by the students (many of the questions following the text serving to stimulate the attention); visits to local industries; interchange of opinions; examples given by the teacher; study and discussion, in the light of the principles stated in the text, of some such problems as are suggested in the appended list of questions; collateral reading; the preparation of exercises and the use of statistical material from the census, labor reports, etc.; history and description of industries; history of the growth of economic ideas. Suggestions, from teachers, of changes that will make the text more useful in their classes, will be thankfully received by the author. Lack of space makes it impossible to mention by name the many sources to which the writer is indebted. Special acknowledgment, however, is gratefully made to C. H. Hull, of Cornell University; to E. W. Kemmerer, now of the Philippine Treasury Department, and to U. G. Weatherly, of Indiana University, who have read large portions of the manuscript, and have made many valuable suggestions; to W. M. Daniels, of Princeton University, who has read every page of the copy, and to whom are due the greatest obligations for his numerous and able criticisms both of the argument and of the expression; to R. C. Brooks, now of Swarthmore College, for a number of the questions in the appended list, and for helpful comments given while the course was developing; and to R. F. Hoxie and to A. C. Muhse, whose thoughtful reading of the proof has eliminated many errors. For the defects remaining, not these friendly critics, but the author alone, should be held accountable. No book on economics can to-day satisfy everybody--"Or even anybody," adds a friend. But with this book may go the hope that what has been written with love of truth and of democracy may serve, in its small way, both to further sound economic reasoning and to extend among American citizens a better understanding of the economic problems set for this generation to solve. FRANK A. FETTER. Ithaca, N. Y., August, 1904. THE PRINCIPLES OF ECONOMICS PART I DIVISION A--WANTS AND PRESENT GOODS CHAPTER I THE NATURE AND PURPOSE OF POLITICAL ECONOMY § I. NAME AND DEFINITION [Sidenote: Verbal definition of economics] 1. _Economics, or political economy, may be defined, briefly, as the study of men earning a living; or, more fully, as the study of the material world and of the activities and mutual relations of men, so far as all these are the objective conditions to gratifying desires._ To define, means to mark off the limits of a subject, to tell what questions are or are not included within it. The ideas of most persons on this subject are vague, yet it would be very desirable if the student could approach this study with an exact understanding of the nature of the questions with which it deals. Until a subject has been studied, however, a definition in mere words cannot greatly aid in marking it off clearly in our thought. The essential thing for the student is to see clearly the central purpose of the study, not to decide at once all of the puzzling cases. [Sidenote: Natural sciences deal with material things] 2. _A definition that suggests clear and familiar thoughts to the student seem at first much more difficult to get in any social science than in the natural sciences._ These deal with concrete, material things which we are accustomed to see, handle, and measure. If a mere child is told that botany is a study in which he may learn about flowers, trees, and plants, the answer is fairly satisfying, for he at once thinks of many things of that kind. When, in like manner zoölogy is defined as the study of animals, or geology as the study of rocks and the earth, the words call up memories of many familiar objects. Even so difficult and foreign-looking a word as ichthyology seems to be made clear by the statement that it is the name of the study in which one learns about fish. It is true that there may be some misunderstanding as to the way in which these subjects are studied, for botany is not in the main to teach how to cultivate plants in the garden, nor ichthyology how to catch fish or to propagate them in a pond. But the main purpose of these studies is clear at the outset from these simple definitions. Indeed, as the study is pursued, and knowledge widens to take in the manifold and various forms of life, the boundaries of the special sciences become not more but less sharp and definite. [Sidenote: Economics studies some social acts and relations] Political economy, on the other hand, as one of the social sciences, which deal with men and their relations in society, seems to be a very much more complex thought to get hold of. We are tempted to say that it deals with less familiar things; but the truth may be, as a thoughtful friend suggests, that the simple social acts and relations are more familiar to our thought than are lions, palm-trees, or even horses. Every hour in the streets or stores, one may witness thousands of acts, such as bargains, labor, payments, that are the subject-matter of economic science. Their very familiarity may cause men to overlook their deeper meaning. Many other definitions have been given of political economy. It has been called the science of wealth, or the science of exchanges. Evidently there are various ways in which wealth may be considered or exchanges made. The particular aspects that are dealt with in political economy will be made clear by considering two other questions, the place of economics among the social sciences and the relation of economics to practical affairs. § II. PLACE OF ECONOMICS AMONG THE SOCIAL SCIENCES [Sidenote: Economics contrasted with the natural sciences] 1. _Political economy, as one of the social sciences, may be contrasted with the natural sciences, which deal with material things and their mutual relations, while it deals with one aspect of men's life in society, namely, the earning of a living, or the use of wealth._ It is true that political economy also has to do with plants and animals and the earth--in fact, with all of those things which are the subject-matter of the natural sciences; but it has to do with them only in so far as they are related to man's welfare and affect his estimate of the value of things; only in so far as they are related to the one central subject of economic interest, the earning of a living. [Sidenote: Character of the social sciences] 2. _The social sciences deal with men and their relations with each other._ The word "social" comes from the Latin socius, meaning a fellow, comrade, companion, associate. As men living together have to do with each other in a great many different ways, and enter into a great many different relations, there arise a great many different social problems. Each of the social sciences attempts to study man in some one important aspect--that is, to view these relations from some one standpoint. Man's acts, his life, and his motives are so complex that it is not surprising that there has been less definiteness in the thought of the social sciences, and that they have advanced less rapidly toward exactness in their conclusions, than have the natural sciences. This complexity also explains the discouragement of the beginner in the early lessons in this subject. Usually the greatest difficulties appear in the first few weeks of its study. The thought is more abstract than in natural science; it requires a different, I will not say higher, kind of ability than does mathematics. But little by little the strangeness of the language and ideas disappears; the bare definitions become clothed with the facts of observation and recalled experiences; and soon the "economic" acts and relations of men in society come to be as real and as interesting to the student as are the materials in the natural world about him--often, indeed, more interesting. [Sidenote: Economics, politics, law, and ethics] 3. _Political economy is related to all the other social sciences, it being the study of certain of men's relations, while politics, law, and ethics have to do with other relations or with relations under a different aspect._ Politics treats of the form and working of government and is mainly concerned with the question of power or control of the individual's actions and liberty. Law treats of the precepts and regulations in accordance with which the actions of men are limited by the state, and the contracts into which they have seen fit to enter are interpreted. Ethics treats the question of right or wrong, studies the moral aspects of men's acts and relations. The attempt just made to distinguish between the fields occupied by the various social sciences betrays at once the fundamental unity existing among them. The acts of men are closely related in their lives, but they may be looked at from different sides. The central thought in economics is the business relation, the relation of men in exchanging their services or material wealth. In pursuing economic inquiries we come into contact with political, legal, and ethical considerations, all of which must be recognized before a final practical answer can be given to any question. Nevertheless the province of economics is limited. It is because of the feebleness of our mental power that we divide and subdivide these complex questions and try to answer certain parts before we seek to answer the whole. When we attempt this final and more difficult task, we should rise to the standpoint of the social philosopher. § III. THE RELATION OF ECONOMICS TO PRACTICAL AFFAIRS [Sidenote: Economics is first a science] 1. _The ideal of political economy here set forth is that it should be a science, a search for truth, a systematized body of knowledge, arriving at a statement of the laws to which economic actions conform._ It is not the advocacy of any particular policy or idea, but if it arrives at any conclusions, any truths, these cannot fail to affect the practical action of men. [Sidenote: But it touches many practical interests] Political economy, because defined as the science of wealth, has been described by some as a gospel of Mammon. It is hardly necessary to refute such a misconception. Political economy is not the science of wealth-getting for the individual. Its study is not primarily for the selfish ends and interest of the individual. (Certainly some of its lessons may be of practical value to men in active business) for many economic "principles" are but the general statement of those ideas that have been approved by the experience of business men, of statesmen, and of the masses of men. Some of its lessons must have educational value in practical business, for political economy is not dreamed out by the closet philosopher, but more and more it is the attempt to describe the interests and the action of the practical world in which men must live. Many men are working together to develop its study--those who collect statistics and facts bearing on all kinds of practical affairs, and those who search through the records of the past for illustrations of experiments and experiences that may help us in our life to-day. [Sidenote: Economic study needed in a democracy] 2. _But, in the main, the study of political economy is a social study for social ends and not a selfish study for individual advantage._ The name political economy was first suggested in France when the government was monarchical and despotic in the extreme. As domestic economy indicates a set of rules or principles to guide wisely the action of the housekeeper or the owner of an estate, so political economy was first thought of as a set of rules or principles to guide the king and his counselors in the control of the state. The term has continued to bear something of that suggestion in it, though of late the term "economics," as being broader and less likely to be confused with politics, has very generally come into use. But in the degree in which unlimited monarchy has given way to the rule of the people, the conception of political economy has been modified. In a democracy there is need for a general diffusion of knowledge. The power now rests not with the king and a few counselors, but in the last resort with the people, and therefore the people must be acquainted with the experience of the past, must have all possible systematic knowledge to enlighten public policy and to guide legislation. [Sidenote: Is of growing interest and influence] Moreover, with the growth of the modern state, with the interest increasing importance of business, and of industrial and commercial interests, as compared with changes of dynasty or the personal rivalries of rulers, economic questions have grown in relative importance. In our own country, particularly since the subjects of slavery and of States' rights ceased to absorb the attention of our people, economic questions have pushed rapidly into the foreground. Indeed, it has of late been more clearly seen that many of the older political questions, such as the American Revolution and slavery, formerly discussed almost entirely in their political and constitutional aspects, were at bottom questions of economic rivalry and of economic welfare. The remarkable increase in the attention given to this study in colleges and universities in the last twenty years is but the index of the greatly increased interest and attention felt in it by citizens generally. To sum up, it may be said that in the study of political economy we are seeking the reason, connection, and relations in the great multitude of acts arising out of the dependence of desires on the world of things and men. CHAPTER 2 ECONOMIC MOTIVES § I. MATERIAL WANTS, THE PRIMARY ECONOMIC MOTIVES [Sidenote: Feeling urges to economic actions] 1. _A logical explanation of industry must begin with a discussion of the nature of wants, for the purpose of industry is to gratify wants._ An economic want may be defined as a feeling of incompleteness, because of the lack of a part of the outer world or of some change in it. Often the question asked when one first sees a moving trolley car or automobile or bicycle is: What makes it go? The first question to ask in the part of the study of economic society here undertaken is: What is its motive force? Without an answer to that question one cannot hope to understand the ceaseless and varied activities of men occupied in the making of a living. The question merits long and careful study, but the general answer is so simple that it seems almost self-evident: The motive force in economics is found in the feelings of men. It is men's desire to make use of men and things about them which calls forth all the manifold phenomena studied in economics. [Sidenote: Animal species shaped by their environment] 2. _Wants among animals depend on the environment; that is to say, the utmost that creatures of a lower order than man can do is to take things as they find them._ The imagination and intelligence of animals are not developed enough to lead them to desire much beyond that which is ordinarily to be obtained. And so the environment shapes and affects the animal. The fish is fitted to live in the water and thrives there, and we must believe, enjoys living there. The horse and the cow like best the food of the fields, and so each species of animal, in order to survive in the severe struggle for existence, has been forced to fit itself to the conditions in which it lives. After the animal has been thus fitted, its desire is for those things normally to be found in its surroundings. So different animals desire or want different things, but always it is the environment that determines the want, and not the want that determines the environment. [Sidenote: Simple wants of primitive men] 3. _In simpler human societies, wants are mostly confined to physical necessities; that is, in the earlier stages of society, man's wants are very much like those of the animals._ Man bends his energies to securing the things necessary to survival. He feels the pangs of hunger and he strives to secure food. He feels the need of companionship, for it is only through association and mutual help that men, so weak as compared with many kinds of animals, are able to resist the enemies which beset them. He needs clothing to protect him against the harsher climates of the lands to which he moves. For the same purpose, to protect himself against the cold and rain, he needs a shelter, a cave, a wigwam, or a hut; for a house is but a larger dress. [Sidenote: Manifold wants in civilized society] 4. _In human society, wants develop and transform the world._ In the rudest societies of which there is any record, savages are found with wants developed in a great number of directions beyond the wants of any animals. Man is not a passive victim of circumstances; his wants are not determined solely by his environment; his desires soar beyond the things about him. As men become more the masters of circumstances, their desires anticipate mere physical wants; they seek a more varied food of finer flavor and more delicately prepared. Dress is not limited by physical comfort, for one of the earliest of the esthetic wants to develop is the love of personal ornament. The rude hut or communal lodge to protect against rain and cold becomes a home. Out of the earlier rude companionship develop the noblest sentiments of friendship and family life. Seeking to gratify the senses and the love of action, men develop esthetic tastes, the love of the beautiful in sound, in form, in taste, in color, in motion. And finally, as the imagination and intellect develop, there grow up the various forms of intellectual pleasures--the love of reading, of study, of travel, and of thought. The various wants of man are sometimes classified as necessities, comforts, and luxuries, but all economists take care to emphasize that these terms have only relative meanings which, in the rapidly changing conditions of modern life, are changing constantly. The comforts of one generation, or of one country, become the necessities in another; and luxuries becoming comforts, are looked upon finally as necessities. And as the desires grow, they more and more alter the world. Man has changed the face of the earth; he has affected its climate, its fertility, its beauty, because, either for better or for worse, his desires have impressed themselves upon the world about him. [Sidenote: Wants must precede wealth] 5. _In human society the growth of wants is necessary to progress._ From the earliest times teachers of morals have argued for simplicity of life and against the development of refinements. We do not now raise the moral question, but there is no doubt that the economic effect of developing wants is in the main to impel to greater effort. They are the mainspring of economic progress. In recent discussion of the control of the tropics, the too great contentedness of tropical peoples has been brought out prominently. Some one has said that if a colony of New England school-teachers and Presbyterian deacons should settle in the tropics, their descendants would, in a single generation, be wearing breech-clouts and going to cock-fights on Sunday. Certain it is that the energy and ambition of the temperate zone are hard to maintain in warmer lands. The negro's content with hard conditions, so often counted as a virtue, is one of the difficulties in the way of solving the race problem in our South to-day. Booker T. Washington, and others who are laboring for the elevation of the American negroes, would try first to make them discontented with the one-room cabins, in which hundreds of thousands of families live. If only the desire for a two- or three-room cabin can be aroused, experience shows that family life and industrial qualities may be improved in many other ways. [Sidenote: But impossible hopes lessen gratifications] Not only in America, but in most civilized lands to-day, is seen a rapid growth of wants in the working-classes. The incomes and the standard of living have become increasing, but not so fast as have the desires of the working-classes. Regret has been expressed by some that the workers of Europe are becoming "declassed." Increasing wages, it is said, bring not welfare, but unhappiness, to the complaining masses. If discontent with one's lot goes beyond a moderate degree, if it is more than the desire to better one's lot by personal efforts, if it becomes an unhappy longing for the impossible, then indeed it may be a misfortune. But a moderate ambition to better one's condition is the "divine discontent" absolutely indispensable if energy and enterprise are to be called into being. [Sidenote: Wants grow refined as wealth advances] It is a suggestive fact that civilized man, equipped with all of the inventions and the advantages of science, spends more hours of effort in gaining a livelihood than does the savage with his almost unaided hands. Activity is dependent not on bare physical necessity, but on developed wants--in the economic sense of the term. Such social institutions as property and inheritance owe their origin and their justification to their average effect on the motives to activity. If society is to develop, if progress is to continue, human wants--not of the grosser sort, but ever more refined--must continue to emerge and urge men to action. § II. DESIRES FOR NON-MATERIAL ENDS, AS SECONDARY ECONOMIC MOTIVES [Sidenote: The real man in economics] 1. _The spiritual nature of man must not be ignored in economic reasoning._ There has been much and just criticism of the earlier writers and of their conclusions because so little account was taken by them of any but the motive of self-interest in economic affairs. Generally it was assumed that men knew their own interest, and sought in a very unsympathetic way those things which would gratify their material wants. Thus man in economic reasoning was made an abstraction, differing from real men in his lack of manifold spiritual and social elements. [Sidenote: Desires for the non-material may become economic motives] 2. _The main classes of non-material wants that are secondarily economic are fear of temporal punishment; sentiments of moral and religious duty; pride, honor, and fear of disgrace; and pleasure in work for itself, for social approval, or for a social result._ The first is best illustrated by slavery, where the slave is not impelled to seek wealth for his own welfare, but is driven by punishment to perform the task. The object is to create within the mind of the slave a motive that will take the place of the ordinary economic motive. The feeling of religious or moral duty leads men to act often in direct opposition to the usual economic motive. The taboo is faithfully observed by the members of a savage tribe who suffer as a result the severest hardships. A religious injunction prevents the use of food that would save from starvation. Pride, either of family or of calling; the soldier's honor leading him to sacrifice not only his future but his life; the love of social approval, holding men to the most disagreeable tasks--these illustrate how strongly social sentiments oppose the narrower motive of immediate self-interest as generally thought of. Pleasure in work for work's sake, and pride in the result, may act as motives quite as strong in some cases as desire for the product that can be used. And even where this does not change the kind of work done, it comes in to influence the interest and earnestness with which the work is performed. [Sidenote: Economists must overlook no influence on value] 3. _Whatever motive in man's complex nature makes him desire things more or less, becomes for the time, and in so far, an economic motive._ These various social and spiritual motives sometimes work positively, in the direction of magnifying man's desire for things; sometimes negatively, to diminish it. If we are to understand economic action, we must take men as they are. A religious motive that leads men to refrain from the eating of meat or to eat fish in preference on certain days, is a fact which the economist has but to accept, for it is sure to affect the value of meat and fish at that place and time. Moral convictions, whatever be their origin, whether due to the teaching of parents, to unconscious influences, or to native temperament, may be quite as effective as the pangs of hunger in determining what men desire. Therefore, while these various motives are primarily social or moral or religious, they may be said to be secondarily economic motives, and they may become in certain cases the most important influences of which the economist must take account. CHAPTER 3 WEALTH AND WELFARE § I. THE RELATION OF MEN AND MATERIAL THINGS TO ECONOMIC WELFARE [Sidenote: Man is the center of economic reasoning] 1. _The gratifying of economic wants depends on things outside of the man who feels the wants._ Man is to himself the center of the world. He groups things and estimates things with reference to their bearing on his desires, be these what are called selfish or unselfish. If we were discussing the economics of an inferior species of animals, things would be grouped in a very different way. But economics being the study of man's welfare, everything must be judged from his standpoint, and things are or are not of economic importance according as they have relation to his wants and satisfactions. Things needful for any of the lower animals are spoken of as "ministering to welfare" in the economic sense only in case these animals are useful to men. Examples are the mulberry-tree on which the silkworm feeds, the flower visited by the honey-bee. In the same view some men are seen to minister to the welfare of other men and therefore bear the same relation for the moment to the welfare of the others as do material things. In any case we study man's welfare as affected by the world which surrounds him. [Sidenote: Physical nature is an unchangeable fact] 2. _Material things and natural forces differ in kind and nature._ This is an axiom which we must take as a basis for reasoning in economics. Things have certain physical qualities quite apart from any action or influence of man. They are operated on by mechanical laws; the force of gravitation causes them to fall at a certain rate under given conditions. They differ in specific gravity, reflect the rays of light, absorb or transmit heat. All these things are for man ultimate physical facts, but unless he knows these facts he cannot take full advantage of the favorable qualities of things or weigh properly their importance to his welfare. Things differ in a multitude of ways in their chemical qualities. Niter, charcoal, and saltpeter, combined in certain proportions, give certain reactions; different combinations give various results. Solids combine to form gases, and liquids unite to form solids, and these qualities and reactions of material things are for man ultimate truths of chemistry. Likewise many things have certain physiological effects. Sunshine acts on living bodies, whether plant, animal, or man, in certain ways. Some plants are nourishing to man, others are poisonous. If man were not on the earth, things would have the same physical and chemical qualities, mechanical laws would be the same as at present so far as we can conclude. Man cannot change the nature of things; but he can acquaint himself with that nature and then put the things into the relations where a given result will follow. [Sidenote: But economics has to do with psychological effects] 3. _As a result of these differences, things have different relations to wants._ These various qualities, physical, chemical, physiological, are important in an economic sense only as they produce psychological effects, that is, as they affect the feelings and judgments of men. We come to some general thoughts which it will be well to define. [Sidenote: Some definitions] Gratification is the feeling that results when a want has been met. Feelings are hard to define in words; the best definition is found in the experience of each individual. We can only say, therefore, that gratification is the attainment of desire, the fulfilment of wants. The word that has usually been employed in this sense in economic discussion is "satisfaction"; but by its derivation and general usage satisfaction means "the complete or full gratification" of a desire, and this meaning is quite inconsistent with the thought in many connections in which the word is used. We shall therefore prefer here the word gratification, and its corresponding verb, gratify. Wealth is the collective term for those things which are felt to be related to the gratification of wants. The word is applied in economic discussion to any part of those things, no matter how small. We shall have occasion later to define and discuss this term more fully. Welfare, in an immediate or narrow sense, is the same as gratification of the moment; in a broader sense, it means the abiding condition of well-being. We have here a distinction very much like that often made between pleasure and happiness. If we think of only the present moment, welfare is the absence of pain, and the presence of the pleasureable feeling; but if we consider a longer period in a man's life or his entire lifetime, it is seen that many things that afford a momentary gratification do not minister to his ultimate, or abiding, welfare. Moralists and philosophers often have dwelt on this contrast. The difference is illustrated by the thoughtlessness and impulsiveness of a child or savage as contrasted with the more rational life of those with foresight and patience. [Sidenote: Economics first studies wealth] Wealth, in the general economic sense, is judged with reference to gratification rather than with reference to abiding welfare. It is the first duty of the economist not to preach what should be, but to understand things as they are. He must, in studying the problem of value, recognize any motive that leads men to attach importance to acts and things. He will therefore take account of abiding welfare and of immediate gratification to exactly the degree that men in general do, and the sad fact is that the present impulse rules a large part of the acts of men. Whether tobacco or alcohol or morphine minister to the abiding happiness of those who use them does not alter the immediate fact that here and now they are sought and an importance is attached to them because of their power to gratify an immediate desire. [Sidenote: Then wealth and welfare] 5. _In studying the question of social prosperity, however, we must rise to the standpoint of the social philosopher and consider the more abiding effects of wealth._ Wants may be developed and made rational, and the permanent prosperity of a community depends upon this result. Any species of animal that continued regularly to enjoy that which weakens the health and strength would become extinct. Any society or individual that continues to derive gratification, to seek its pleasure, in ways that do not, on the average, minister to permanent welfare, sinks in the struggle of life and gives way to those men or nations that have a sounder and healthier adjustment of wants and welfare. We touch here, therefore, on the edge of the great problems of morals, and while we must recognize the contrast that often exists in the life of any particular man between his "pleasures" and his health and happiness, we see that there is a reason why, on the whole, and in the long run, these two cannot remain far apart. The old proverbs, "Be virtuous and you will be happy," "Honesty is the best policy," and "Virtue is its own reward," have a sound basis in the age-long experience of the world. Cynics or jesters may easily disprove these truths in a multitude of particular cases. [Sidenote: Freemen are not economic wealth] 6. _Wealth does not include such personal qualities as honesty, integrity, good health._ Some economists speak of these as "internal goods," but it is far better not to speak of free men or of their qualities as wealth. Many difficulties arise from such a use of the term in practical discussion. One of the most important of all distinctions to maintain in economics is that between material things and men. Only in the case of human slavery may persons be counted as economic wealth. It is a different thing, however, to consider human services as wealth of an ephemeral kind at the moment they are rendered. We are, thus merely recognizing that men may bear at the given moment the same relation to our wants as do material things. § II. SOME IMPORTANT ECONOMIC CONCEPTS CONNECTED WITH WEALTH AND WELFARE [Sidenote: Popular meaning of useful] 1. _Utility, in its broadest usage, is the general capability that things have of ministering to human well being._ The term is evidently one without any scientific precision. It expresses only a general or average impression that we have in reference to the relation of a class of goods to human wants. Every one would agree to the statement that "water is useful," thinking of the fact that it is indispensable to life and that it ministers to life in a multitude of ways. But what of water in one's cellar, water soaking one's clothes on a cold day, water breaking through the walls of a mountain reservoir and carrying death and destruction in its path? The poison that is doing what we at the moment desire, we call useful; that doing what we would prevent, we call harmful. Noxious weeds become "useful" by the discovery of some new process by which they can be worked into other forms, though they may still continue to be noxious in many a farmer's fields. The utility of anything, therefore, is seen to be of a relative and limited nature. The term "utility" in popular speech is very inexact. It can be employed in economic discussion only when carefully modified and defined. [Sidenote: Kinds of goods] 2. _Goods consist of all those things objective to the user which have a beneficial relation to human wants._ They fall into several classes. We may first distinguish between free and economic goods. Free goods are things that exist in superfluity, that is, in quantities sufficient not only to gratify, but to satisfy all the wants that may depend on them. Economic goods are things so limited in quantity that all of the wants to which they could minister are not satisfied. The whole thought of economy begins with scarcity; indeed, even the conception of free goods is hardly possible until some limitation of wants is experienced. Practical economics is the study of the best way to employ things to secure the highest amount of gratification. The problem itself arises out of the fact that many things are used up before all wants dependent on them are completely satisfied. A distinction is often made between consumption and production goods, or it may be better to say immediate and intermediate goods. Consumption goods are those things which are immediately at the point of gratifying man's desires. Production goods are those things which are not yet ready to gratify desires; some of them, being merely means of securing consumption goods, never will themselves immediately gratify desire. [Sidenote: Value is utility given precision] 3. _Value, in the narrow personal sense, may be defined as the importance attributed to a good by a man._ The vagueness and inexactness of the word "utility," or the word "good," disappears when we reach the word "value." It is not a usual relation or a vague degree of benefit sometimes present and sometimes absent, but it refers to a particular thing, person, time, and condition. Value is in the closest relation with wants, and in this narrow sense depends on the individual's estimate. From the meeting and comparison of the estimates of individuals, arise market values or prices, which are the central object of study in economics. CHAPTER 4 THE NATURE OF DEMAND § I. THE COMPARISON OF GOODS IN MAN'S THOUGHT [Sidenote: Wants and goods must be constantly adjusted] 1. _As wants differ in kind and degree, so goods differ in their power to gratify wants._ This general and simple statement unites the leading thoughts of the two chapters preceding. Confirmation of its truth may be found in observation and experience. The purpose of this chapter is to show how, starting from the general nature of wants and the nature of goods, we can arrive at an explanation of the exchange of goods. Recognizing the simple but fundamental fact stated at the opening of this paragraph, an exchange may be seen to be a rational and a logical result when men are living together in society. [Sidenote: Ripe and unripe goods] 2. _Immediately enjoyable goods are the first objective things whose value is to be explained._ Goods come into relation with wants in a multitude of ways. Some things will not gratify a want until after the lapse of a long time, as ice cut in December and stored for summer use. Other things will never themselves directly gratify a want, but will be of help in getting things that do; such are the young fruit trees planted in the orchard, and the hammer that will be used to drive nails in a house that will shelter men. Still other things are gratifying wants at this moment, or are ready for use and will be used up in a very short time; examples of such are the food on the table and in the pantry, and the cigar in the pocket. All these things are called goods, because of their beneficial relation to man's desires, but the relation is very immediate in some cases, very remote in others. The value of all goods is to be explained, but the explanation will be more or less complex according to the directness or indirectness of their relation with wants. As it is the power of goods to gratify wants that alone causes value to be attributed to them, those goods which are ripest, which are ready to gratify wants, are nearest to the source of an explanation. The value of unripe enjoyments must be traced to some expected gratification as its cause or basis. In order to attack the difficulties one by one we will, therefore, in the following discussion, deal first with this class of ripe, consumable goods, as food, personal services, enjoyments of any sort that are immediately available. The explanation of these cases of value must precede that of cases in which the relation to wants is less obvious and direct. [Sidenote: The law of diminishing utility] 3. _As the amount of any good increases, after a certain point the gratification that the added portions afford decreases._ This is called the law of the diminishing utility of goods or of the decreasing gratification afforded by goods. The reason for the truth of this proposition is found in the very nature of man and his nervous organization. Any stimulus to the nerves, however pleasant at first, becomes painful when long continued or increased unduly. The trumpet too distant at first for the ear to distinguish its notes, may swell to pleasing tones as it approaches, until at length its volume and its din may become absolutely painful. If we were to express the degree of gratification by a curve, we should see the curve rising gradually to a maximum, and then falling somewhat suddenly and becoming a negative quantity, when pain, not pleasure, resulted. The same change could be illustrated by any sensation or by any of men's activities. The proposition must be understood as applying to the gratification resulting from each added portion of the sensation. There is a maximum point in the gratification afforded by any nerve-stimulus. A man coming in from the winter's storm and holding out his hands before the fire, feels an intense pleasure in the grateful warmth; a few moments later, the same heat becomes unpleasant. In winter we wish for a moderation of the temperature; on the sultry days of summer, we think of a cool breeze as the most to be desired of all things. Whether the temperature rises or falls, there is a point beyond which the change is no longer an addition to, but a subtraction from, pleasure. A man, however hungry at first, may be made miserable if forced to eat beyond his capacity. Each added portion of the good consumed contributes to the gratification up to a certain point. The sum of these pleasurable sensations may be called the total gratification, which finally reaches satisfaction or fullness. Then begins what may be called in algebraic phrase a "negative gratification" which, if it becomes large enough, will make the total gratification a negative quantity. Each added portion, dose or increment beyond a certain point reduces thus the welfare of the user. One may have too much of a good thing. [Sidenote: The marginal utility] 4. _Marginal utility is the gratification afforded by the added portion of the good._ The marginal dose, increment, or portion is that which may be logically considered as coming last in the case of any good or group of goods divisible into small parts. In considering the strict theory of the case, in order to get at the principle involved, the doses may be spoken of as infinitesimally small. The marginal utility expresses the importance that men attach to one unit of this kind of goods under the particular circumstances at the moment existing, and not under certain conceivable conditions which do not in fact exist or need to be taken into account by the persons affected. The marginal unit of a homogeneous supply cannot be considered to have a greater utility than any other unit at the moment, and therefore the product of the marginal utility by the number of units, gives the total measure of importance of the supply then and there, and this is the value. The value of goods, as has been indicated, is the measure of the dependence felt by men on a portion of the outer world, as the condition of gratifying their wants. From the very nature of wants, which reside in feelings, a dependence that is not felt, a relation between things and gratification that is not recognized, can have no influence on value. Now, it is at this margin of supply that dependence is felt. Men do not concern themselves about that which they have in superfluity--unless, indeed, the excess causes them some discomfort. It is well that they do not, for a wise direction of effort can only take place when men think mainly of their need of things that they want, and want most, and direct their efforts toward securing them. [Sidenote: From marginal utility to value] The diminishing utility of successive portions (doses or increments, as they are called) may be represented by a curve of utility. [Illustration: _Scale of Supply_] The diagram is constructed on the hypothesis that a tenth unit of a certain good would have a utility expressed as 36; a fifteenth unit of 30, etc., and that the value of the whole supply is estimated according to these marginal units. Of course if the conditions were that "all or none" was to be taken, the result would be different. Unit of Supply Marginal Utility Value of Whole Supply 10 36 360 15 30 450 20 25 500 30 19 570 40 15 600 50 10 500 60 5 300 This diagram is frequently used, and it is important to guard against some misunderstandings. The marginal unit of any given supply--for example, ten units--is not any particular unit, it is any one of the ten units. In the presence of nine units of the good the person or persons find all the various wants that are dependent on that good gratified to such a degree that the tenth unit has an importance expressed by 36. But as this last or marginal unit of supply may be used for any of the purposes, the importance of each and every unit likewise will be expressed by 36. Any one of the units, when once present is, in a logical sense, a marginal unit. When, however, it is a question of increasing the supply, some one unit may properly be looked upon as marginal. The dependence felt by men on the whole group is the product of the units by the marginal utility. As the number of units increases, the marginal utility decreases, until at length it may reach zero, and the total value would be nothing. A point of maximum value evidently will be found somewhere between the two extremes. [Sidenote: Only one marginal utility at one moment] Note carefully that on the one diagram are represented a large number of marginal utilities which never exist at one and the same moment. At any one moment there is a given number of units and there is but one marginal utility, and this is the same for each of the units. It is quite erroneous to say that when there are 30 units the utility of the tenth unit is 36; of the twentieth, 25; of the thirtieth, 19. It is equally incorrect to say that when there are 60 units the "total utility" is equal to the area between the right angle and the curve a-g, while the value is equal to the rectangle below and to the left of the point g. The curve from a-g but marks the height of marginal utilities that have no existence when the supply is 30. The "total utility," often spoken of in this connection, if it has any existence certainly cannot be calculated. The diagram must be understood as representing indicatively at any given moment but one marginal utility, the same for every unit of like goods. The other perpendicular lines are expressed in the conditional mood; they are what the marginal utility would be were the numbers of units different. [Sidenote: Changing feelings changes utility] 5. _Since goods possess utility only as they gratify wants, it follows that if wants change, the utility changes._ Utility does not rest unchanging in the goods as something "intrinsic," but it depends on the relation of goods to men. This truth, unrecognized for many centuries, is now seen to be fundamental to the whole problem of value. The portions of a good added later do not appeal to the same man as the earlier portions. The man has been changed by what he has enjoyed. In changing his feelings, goods have also changed his wants. Hence, the added portions of the good are changed in respect to their utility or power to gratify a man's wants. Though physically and chemically, _i.e._, in every material way, they are exactly like the earlier portions, they cannot have the same want-gratifying power until he again changes, for they are not in the presence of the same feelings. Wants are constantly shifting; different kinds of goods are compared in man's thought and arranged on a scale at every moment according to their felt utility. An increase in the amount of a good will drop the marginal utility of the added portions down the scale of usefulness for the next moment. When we rise in the morning, we want our breakfast; the breakfast eaten, another breakfast does not appeal to us. Our tasks done, we take a boat-ride or go golfing; then, appetite returning, we are tempted to our dinner. And thus from hour to hour wants are gratified, are altered and are shifted, until, wearied with the day's labor and pastimes, we go to rest. In a well-ordered life, in an advanced economic society, the means for gratifying our wants as they arise are provided in advance. The changing series of desires is met by a changing series of goods. Life has been defined as a constant adjustment of inner relations to outer conditions. Economic life is therefore like physical life, a constant adjustment; and this adjustment of goods but reflects the shifting and adjustment of feelings. [Sidenote: Choice is constantly shifting] 6. _The substitution of goods in men's thought is the shifting of the choice from a good that does not give the highest gratification economically possible at the time, to another good that does._ The shifting that takes place on the scale of gratification makes it necessary for man to shift constantly his choice of goods. This again is the problem of "economy." Waste results when goods continue to be used to secure a lower degree of gratification, if they might be used to secure a higher. The change of choice may be because of a change in the man, or because of a change in the quality or the quantity of the goods; or because of a change in the ratio at which the goods can be secured. § II. DEMAND FOR GOODS GROWS OUT OF SUBJECTIVE COMPARISONS [Sidenote: Desire may become demand] 1. _Demand is desire for goods united with the power to give something in exchange._ An example frequently given to show the difference between desire and demand is the hungry boy looking longingly at the sweetmeats in the confectioner's window. He represents desire, but not until the kind-hearted gentleman gives him a nickel does he represent effective demand. Desire, therefore, must be united with power to give something in exchange before it can be called demand. It must be for something that is attainable; yearning for something beyond reach, sighing for the moon, is desire that never can become effective demand. [Sidenote: Demand the Social expression of shifting choice] 2. _Demand is the social aspect of the individual man's comparison of utilities._ It is the expression of the man's wish to substitute some of his goods for some one else's goods in order to get a higher satisfaction. This comparison is often made between two goods owned in different quantities. When men are constantly comparing things in their own possession, it is a short step to compare their goods with their neighbor's. Demand for consumption goods is thus the manifestation of the man's desire to redistribute his enjoyments. In demand for goods men virtually say: "Part of what I have I am ready to give for part of what you have." The strength of their desire is expressed by the amount of their offer. When he makes this comparison and this offer, man enters into a social, economic relation with his fellows. [Sidenote: The limit of the exchanger's demand] 3. _The law of individual demand is: The trader will reduce his stock of a particular good to the point where its marginal utility equals that of the alternative goods._ The greater the divergence in his estimates of the marginal utilities of two goods, the more ready is he to trade the lower utility for the higher one. Exchange is but the effort to adjust goods to wants in the best way. The less useful (marginally viewed) is traded for the more useful. The greater the difference, in the one trader's judgment, between the marginal utilities of the two goods, the greater is the maladjustment, and the greater, therefore, is the motive to seek readjustment by means of exchange. As the quantity of the good parted with declines, its marginal utility increases; and as more of the other good is acquired, its marginal utility declines. The marginal utility of the two exchangeable units must come to equilibrium in the individual's judgment. At this point demand ceases, not because an additional unit of the one good could afford no gratification, but because it would afford less gratification than the other good in which demand must be expressed to be effectual. [Sidenote: The Demand curve] 4. _Demand thus varies at different ratios of exchange between goods, and may be expressed graphically by a demand curve._ This would show for any one man the decline of the marginal utility of each added portion of a good, and these individual demand curves may be united into a demand curve for a group of men. The demand curve expresses graphically what a man would be willing to pay at each particular stage in the increase of goods. We have here come to the very threshold of the subject of markets and exchange. [Sidenote: Elasticity of demand] 5. _Elasticity of demand, in the case of any good, expresses the degree in which a change in its ratio to other goods will increase the demand._ Elasticity varies for different classes of men according to their wealth and to the cost of the goods. If strawberries are a dollar a box in the city market, a slight fall in the price, say to seventy-five cents, will increase the demand but slightly. But if the price is fifteen cents and falls to ten, the increase in the demand will be marked, for the number of consumers to whom a difference of five cents is important is then very great. The demand for the staples is comparatively inelastic. A certain amount of simple food is necessary to support life; an increase in its price will not quickly check the demand. On the other hand, if the price of staple foods falls, no very great increase will take place in the demand. CHAPTER 5 EXCHANGE IN A MARKET § I. EXCHANGE OF GOODS RESULTING FROM DEMAND [Sidenote: Reciprocal demand becomes exchange] 1. _Exchange in the usual economic sense is the transfer of two goods by two owners, each of whom deems the good taken more than a value-equivalent for the one given._ The comparison of goods that has been discussed above is a kind of exchange. When a person chooses one thing rather than another, one form of gratification may be said to be mentally exchanged for another. This is exchange in that person's mind, or subjective exchange. But the word "exchange" as usually employed means an exchange of goods between persons. It is objective exchange, and when the word is used without modification, it is to be understood in the objective sense. In the last chapter were analyzed the motives of the individual man. Robinson Crusoe on his desert island would in very many ways be acted upon by the same motives in reference to economic goods that men are in society. Yet, it is exchange in society and the complicated problems arising from this transfer of goods from person to person that constitute nearly the whole of the subject-matter of political economy. Exchange is seen to arise out of the differences in the situations of men with reference to goods. The different subjective valuations give rise to demand, and demand leads to exchange. In early societies differences in natural products were the most usual causes of exchange. Salt, though so essential to life, is found in few places. The metals early became indispensable for weapons of defense or for the chase, and were sought far and wide. Rare shells, feathers, jewels, and the precious metals appealed in early times to a universal desire for ornament. Products like these are the objects of a rude sort of exchange in the first simple efforts made to adjust possessions to wants. Within the tribe, differences in the skill and ability of men to produce arrow heads or weapons or ornaments, bring about the exchange of goods. [Sidenote: Mutual advantage in exchange] 2. _The advantage of exchange consists in the raising of the want-gratifying power of goods to both parties._ It generally was assumed by medieval thinkers that if one party to an exchange gained, the other must lose. The mistaken idea prevailed that value is something fixed in the good, and unchangeable. Where the exchange is voluntary (and only that kind is here being considered), it is mutual advantages which make the exchange rational. Many false conclusions on practical questions still result from a failure to grasp this simple truth. It follows from this that the act of exchange is itself useful, for goods having a small importance to men are given a higher importance by being brought into better relations with wants. Merchants, peddlers, traders, and common carriers of all sorts, therefore, are adding to the utility of goods. This idea has been only slowly apprehended, but is now one of the least disputed propositions in economics. [Sidenote: Demand is supply in another aspect] 3. _Barter is the exchange of goods without the use of money._ Either one of the goods traded in cases of barter may be considered as sold, and either one as bought, according as the matter is looked at from the standpoint of the one or the other party to the exchange. Demand, therefore, is supply, and supply is demand when the point of view is shifted from one party to another. The fisherman's demand for venison is expressed in terms of fish; the hunter's demand for fish is expressed in terms of venison. But to the fisherman the venison is the supply offered to him. The term "marginal utility" of a good, therefore, does not refer merely to the demand of the consumer; for it expresses by a single phrase the idea both of demand and of supply. The utility of the goods composing the supply is expressed in terms of the goods that represent demand and vice versa. The only way in which man can give definite, concrete, numerical expression to his desire for goods is to state it in terms of other goods. In expressing numerically, in terms of other objects, an estimate of the utility of an apple, a horse or a house, one inevitably gives expression to a ratio of exchange; demand for one good is the offer of another good. § II. BARTER UNDER SIMPLE CONDITIONS [Sidenote: In isolated exchange the price is not economically fixed] 1. _In isolated exchange, where only two traders engage in barter, their estimates give respectively the upper and the lower figures of the ratio at which the trade can take place._ Let us recall the fact that a difference in the _relative_ estimates that men place on goods is the first essential of exchange. Those estimates may be expressed in a ratio; we may say that A will give four apples for one orange, would be glad to give fewer, but will not give more; while B will give one orange for three apples, would be glad to get more apples, but will not take fewer. The outside limits of the ratio at which the exchange must take place will, therefore, be one orange for three or four apples. A, seller of apples, offers 4 (or fewer) apples for 1 orange. B, buyer of apples, demands 3 (or more) apples for 1 orange. There is, in entirely isolated exchange, therefore, a lack of definiteness in the price, much depending on what Adam Smith called the "higgling of the market." In the old-time American horse trade much depended on "bluff"; in such cases it was as important to be able to judge character as to judge horses. A thorough analysis of the trade, however, would probably show that the bargain is concluded at a point which exactly balances the hopes of gain and fears of loss of one of the parties. [Sidenote: Competitive bidding narrows the limits of price] 2. _Where one-sided competition exists, the ratio of the exchange will be somewhere between the estimates of the two buyers most eager for the last portion offered_. By competition is here meant the independent seeking of the same thing at one time by two or more persons. Where there is one market price paid by a number of buyers, it may be that no two of the subjective estimates are alike; the exchange value may differ from all of their estimates, and yet must correspond closely to two. Auction sales well illustrate the principle. If there is one ax to be sold and ten possible buyers for an ax, and there is no combination among them, the bidding will go on until the estimate of the buyer next to the most eager, has been reached. The most eager buyer can then secure the ax by bidding just a little above his next competitor. But if there are ten axes and ten buyers who know that there will be ten axes offered, the more eager buyers will refuse to bid much above the less eager ones. A shrewd auctioneer, therefore, often conceals the fact that there is more than one of an article, and having sold it off, brings out a second or a third one of the same kind, thus keeping the buyers in ignorance of the supply and getting somewhere near the estimate of the most eager buyer in each case. Advertisements of "a limited supply," "the last chance," "positively the last appearance," are meant to stimulate the demand of the patrons, and to lead them to buy at once. In general, therefore, where competition exists on one side, price is fixed with greater definiteness than in isolated exchange. Not so much depends on shrewd bargaining, on bluff, or on the stubbornness of an individual. Far more depends on forces outside the control of any one man. The bidders are impelled by self-interest to outbid their competitors, and thus the limits within which the market price must fall are narrowly fixed. [Sidenote: Buyers fix price of perishable goods] If things already brought to market must be sold at any price that can be secured, the buyers may be said to fix the price. This does not mean that they can buy it for any sum that they wish, but it means that when each one is trying to get it as cheap as possible, their bids finally determine how much it will sell for. In such cases, therefore, the competition is for the moment one-sided. If a part of the supply can be withdrawn and kept without great loss, this will be done if the price is low. Strawberries, fish, and meat may be sold Saturday night at any price that will secure purchasers, but every thing that can be kept with little or no depreciation will be withheld from sale for a time. It may even be of advantage to the seller to destroy a part of the supply, when the increased price of the smaller amount will give a larger total. [Sidenote: The margin of advantage and the marginal pair] 3. _Where two-sided competition exists, the bidding goes on until a price is reached where the least eager seller and the least eager buyer have the narrowest possible motive to exchange_. As the market ratio varies from those in the minds of the individuals when they come to the market, there is left a considerable margin to some and a very small one to others. This difference between the market value and the ratio of exchange at which any given individual would continue to exchange for the good may be called the _margin of advantage_. Moreover, the buyers will have a margin and the sellers a margin, and as that margin narrows there is less and less motive to continue the exchange until, finally, the margin disappearing, the buyer or seller, withdrawing from the market, ceases to be an exchanger, at least for that particular part of the goods. The least eager buyer and the least eager seller may be called the _marginal pair_. They are the buyer and the seller respectively having the narrowest margin of advantage. Their outside estimates are nearest to the market ratio. If the market ratio shifts slightly in either direction, one of them will drop out of the exchange. It is evident that a buyer who is taking ten units may be on the margin with reference to the tenth unit, and yet may continue to be one of the most eager buyers to secure one unit. Thus, the marginal buyer is to be thought of as that person who, logically considered, is the least eager, or on the margin, with reference to a particular unit of supply, however eager he may be with reference to any other unit of supply. It would be well to recall here the discussion of the nature of wants and the variation in the intensity of demand. [Illustration: _Units of Goods_] [Sidenote: Market values built on individual estimates] 4. _Market values are built up on subjective valuations._ The idea of market values, therefore, is that of the want-gratifying power of goods as expressed in terms of other goods, where there are various buyers and sellers. They are not an average of the subjective valuations, nor are they made up of the extremes. They correspond closely with the subjective estimates of two of the exchangers. The other parties to the exchange are willing to accept the market ratio, for it offers them more inducements than it does to either one of the marginal pair. § III. PRICE IN A MARKET [Sidenote: One price in a market] 1. _A market is a body of buyers and sellers in such close business relations that the actual price conforms closely to the valuation of the marginal pair._ The word "price" which we have used, may be defined as value expressed in terms of some commonly exchanged commodity. The term is used more broadly of anything given in exchange. The very terms of this definition imply that there can be but one price in a market. This is a somewhat abstract but a useful economic proposition. Very often within sound of each other's voices traders are paying different prices for a good. On the occasion of a break in the stock-market, excited traders within ten feet of each other make bids that differ by thousands of dollars. Retail and wholesale merchants may be purchasing goods in the same room at the same time at very different prices. But within a group of buyers and sellers where competition is approximately complete, price is fixed with some degree of exactness. The more nearly the actual conditions approach to the ideal of a market, the less are prices fixed by higgling, and the more impersonal they become, the buyers and sellers being compelled to adjust their bids to the needs of the market, and not being able to vary them greatly one way or the other. [Sidenote: The earlier markets] 2. _Markets are steadily widening through the improvement of means of communication and transportation._ The earliest markets were established on the borders between tribes, villages or nations as a common ground where strangers met to trade. At such markets were brought together from sparsely settled districts a comparatively large number of merchants and customers. Buyers had the opportunity of wide selection both in kind and quality, and the sellers found a large body of customers gathered at one point. Throughout the Middle Ages purchases were made by the more prosperous husbandmen in great quantities once a year at the fairs or markets. As both the buyers and sellers came from widely separated places, there was, in most respects, no combination, and the conditions of a competitive market were present. [Sidenote: The growth of markets] The number of buyers and sellers that can constitute a single market is limited both directly and indirectly by the means of transportation. A dense population cannot usually be maintained without easy means of transportation to bring in a large supply of food, and to carry back manufactured goods great distances. The remarkable growth in the means of commerce since the application of steam to water traffic, and the invention of the railroad, have made it possible for goods to be gathered from most distant points. A market implies a common understanding among traders. Modern means of communication such as newspapers, post-offices, telegraph and cable, trade bulletins, commercial travelers, the consular service, and many forms of special agencies, are diffusing information widely. As a result of these changes, there has been a widening of the village-market to the markets of the province, of the nation, and finally of the world. While a part of every one's purchases continues to be made in the neighborhood, a greater and greater portion of the total business is done by traders who are widely separated and who are indeed members of the world market. Various articles produced in the same locality may seek different markets. The market for wheat may be in Liverpool, while that for fruit and eggs is in the village near the farm-house. If a given product of any community is sold in different markets, the net prices secured must be very nearly equal. [Sidenote: The conceptions normal and market price] 3. _Normal price is spoken of in contrast to market price when the actual market price results from exceptional circumstances and probably will not be maintained._ The term "normal price," much used in economic discussion, is the price which, apart from exceptional conditions, is expected to prevail, and to which actual prices seem constantly striving to adjust themselves. As actual prices are nearly always either more or less than so-called normal price, and only momentarily ever correspond with it, the term "normal" would appear to be something of a misnomer. Moreover, as the circumstances of production change, this normal price itself is altered so that what is normal one day may be quite abnormal the next. The thought of "normal price" is an abstract one, but despite the inaptness of the word it is not without some practical validity. In determining whether he shall continue to produce certain goods, the business man is practically guided by his view of normal price. An example of departure from normal price as above defined, is found in the price of food when an expected ship has failed to arrive at a port with its cargo of grain. A scarcity amounting almost to famine might thus exist in a seaboard city, and the market price would rise; but as this would be due to an accident and would afford a larger gain than usual to those who happened to have a supply of grain, men would say that the market price was above the normal price. The arrival of the expected ship would cause the market price to return to the normal. [Sidenote: Review of the argument] In review, we see that the market value of goods grows out of the different personal estimates made by men. Market value itself being a complex and difficult problem, it can be mastered only by dividing it. First, therefore, must be studied the more general and obvious motives of men, the nature of wants and their effects on man's subjective estimates. The same simple motives that influence the subjective valuations made by individual men, may be traced to the conditions of the complicated market. It is their workings that are seen in the obscurest problems of market price. CHAPTER 6 PSYCHIC INCOME § I. INCOME AS A FLOW OF GOODS [Sidenote: The recurrence of wants] 1. _Satisfaction and gratification being only temporary conditions, economic wants appear in more or less regularly recurring series._ Impressions are short lived, sensations are temporary, wants that have been satisfied recur. Wants recur for the same reason that they first arose. No impression on the nerves or on the senses is lasting. Man's senses were developed for the purpose of bringing him into relation with the outer world, of enabling him to survive in his struggle with the forces of nature. So, when a good has been enjoyed, the utility to that person of that thing or service for that particular moment, falls, it may be even to zero. To keep wants satisfied is impossible; we cannot do next year's reading or next week's eating now; we cannot live the life of to-morrow. The best results in reading or eating come from taking the right amount day by day. But it is a need in the life of men that wants should recur after a time, otherwise there would be no motive for action. [Sidenote: Series of wants and series of goods] 2. _The economic ideal is that this series of recurring wants should be met by a corresponding series of goods._ It is evident that if a series or succession of goods varies, at different times, moments, and conditions, in its power to gratify wants, the closer the correspondence between the two series, that of wants and that of goods, the greater will be the total of gratification. We may liken man's life to a journey in which the supplies of food are gotten at the stations. If any one of these supplies fails, the traveler suffers the pangs of hunger, and if two or three supplies are at one point, they do not serve the needs of man so well as if distributed along the way. This constant inflow of goods is one of the fundamental needs of life. The savage dimly understands this need. Even the birds and the beasts adjust their lives to it either by travel or by toil. The spring and autumn migrations to new feeding grounds are the attempts of the bird to gratify this series of wants as they arise. The ant, the bee, and the squirrel anticipate, and work to fill their storehouses against the days of need. [Sidenote: Social and private incomes] 3. _Objective income consists of the additional sums of goods acquired by individuals or by society during the income period._ The term national or social income may be contrasted with individual or private income in the objective sense. The nature of the acquisition of objective incomes may, in some cases, be different if viewed from the social and individual standpoints. Society, as a whole, may be said to acquire income only when goods are produced; individuals may acquire income by gift, bequest, theft, or other modes of transfer from other individuals. In many cases the two kinds of income, however, agree, the objective income of society being the algebraic sum of the goods acquired or parted with by all the individuals. We should not understand that either social or private objective incomes include only material goods, for many utilities and labor services that never take on a material or money expression are included in either case. Indeed, we are close here to the conception of psychic income which is to be developed more fully. [Sidenote: Money income] Income of money is not often the same as income of things. Usually many of these subtler utilities are overlooked and omitted from the recognized money income. In this day the use of money is so common that we are sometimes led to ignore the value of things to which the money expression is not given. The money income is merely the money expression of the value of currently acquired goods, and it is the only medium through which such varied sources of gratification can be compared. [Sidenote: Gross and net income] 4. _Income in the logical sense must be a net addition, but the term gross income is not without popular and practical meaning._ Gross income is sometimes spoken of in the sense of total receipts, as the total of goods secured; net income is the remainder after deducting expenditures and after replacing the goods employed to secure the income. In order to produce some goods technically, men make use of other goods. While they are storing up a supply of wood or coal it may be looked upon as the income, but they may burn it to help grow hothouse plants. While they gather flowers with one hand, they destroy fuel with the other. Only the net increase in value can be accounted income in the second period. The goods that come into a man's possession in any period are of many sorts: to get some he has destroyed many previously existing goods; while to get others he has not needed to use up the accumulations of the past or to mortgage the future. The one kind is gross, the other net income. [Sidenote: Wealth and income] 5. _An income of consumption goods is a part of wealth, but not the whole of it._ The consumption goods, the "present goods" at the moment available, are the essential part of wealth for the moment's enjoyment. The only essential and immediate conditions of a series of gratifications is a regular series of consumption goods. But many things existing which could be used to secure a gratification are not in fact treated as consumption goods. A crop of corn is not all income. In a time of famine it could be used, but seed-corn was saved from last year, and some must be kept for next year. This is a part of wealth, but not of "present goods" as we understand the term. [Sidenote: Some goods never can become enjoyable goods] Further, in the economic world there is much wealth that never can gratify any want directly; many forms of wealth never can be consumption goods. It is true that everything called wealth is expected to contribute sooner or later in some way to the sum of gratifications. It is for that reason it is called wealth. It is, however, a mere figure of speech to say indirect want-gratifiers become want-gratifying goods. For example, the engine transporting a load of coal is indirectly gratifying wants; if it is transporting a train-load of passengers, the gratification is direct. A machine making cloth for next year is gratifying wants only in a metaphorical sense. A field used to produce food is not a direct want-gratifier until it is transformed into a residence site, a playground, or a tennis-court. It is necessary therefore to recognize the distinction between present and future incomes. The value of the mass of wealth in possession and yielding income, rests in large part upon its power of contributing to income in some future period. Thus, any durable good may be looked upon as embodying a series of incomes ranging from present to future in varying degrees. This will be fully considered under the subject of capital. [Sidenote: Income from wealth and from labor] 6. _Incomes are called funded or unfunded according to the sources from which they are derived._ Funded income arises from the possession of wealth or of claims on wealth, such as lands, railroad stocks, government bonds, etc. The income is "funded" because it corresponds to an abiding fund of wealth. The income arising from current labor is unfunded, because there is no permanent fund of accumulated wealth corresponding to it. The idea of regularity connected with funded income is not essential to the idea of income in general, _i.e._, we cannot refuse to call a thing income because it occurs only this year. If it is part of the sum of goods that flows in, that is newly available for the man's use, it is income. But funded income is the more abiding, for income from wages stops when the man dies or fails to perform his work, while the income from wealth continues after he ceases to be active. Thus, families with equal incomes may differ greatly in wealth, the one depending entirely on salaries, the other on rents. § II. INCOME AS A SERIES OF GRATIFICATIONS [Sidenote: Gratification the test of psychic income] [Sidenote: All sources of income are productive] 1. _The value of consumption goods is derived from the pleasurable psychic impressions which they aid to produce, and these psychic effects constitute the psychic income._ The objective income is sometimes called the "real" income, but certainly it is not income in the most essential sense. Things outside of men cannot be feelings, they can only call out or occasion feeling, and it is the attainment of pleasurable conditions in mind or soul that is the aim of all economic activity. Material income and immaterial income are both related to and reducible to psychic income. Some portions at least of the objective incomes of goods are continually by use becoming subjective incomes of enjoyment. Men talk of material income as consisting of bushels of wheat, head of cattle, etc., and of immaterial income as the uses that durable goods yield directly or that men perform for each other, _e.g._, those of the singer, physician, teacher, judge--all services that do not take on material form. There was a long-standing dispute in economic literature regarding the difference between productive and unproductive labor. Productive labor was said to be that which embodied itself in abiding material form. The distinction led to some peculiar puzzles and paradoxes. The bartender mixing drinks, adds to the value of those ingredients; in a minute that value is dissipated. According to the distinction in question, he is a productive laborer because his services are embodied in material form, whereas the lecturer is regarded as an unproductive laborer because the results of his labor are not embodied in material form. But whether or not the service has for a moment embodied itself in material form is of no essential economic import. The presence of the waiter is as essential to the well-served dinner as are the polished silver and china, or as the well-cooked food. The distinction in question is not now made by economists, all labor that contributes to value being regarded as productive. But a similar distinction is inconsistently preserved by many writers in the case of material things. A building used as a factory is called productive, but used by the owner as a dwelling it is called unproductive because the service it renders does not appear in material form. But the use of the house, or that of land for a school ground or campus, secures a certain gratification, an immaterial good. Consistency requires that the services of men and the use of material things be judged by their psychic results, the question whether the service takes on a material or an immaterial form being disregarded. [Sidenote: All wealth is logically related to psychic income] 2. _Only those things and actions that are in some causal relation to gratifications can have value to man._ This proposition of theory is demonstrated every hour in practical life. The business man always is trying to trace a causal relation between things that do not and cannot themselves directly satisfy wants, and things that do. The vineyard has no value to Tantalus, unable to reach its fruit. A captive, chained to a rock, attaches value only to the things within his reach. Men living in savagery and ignorance starve amid the possibilities of plenty. Chained by their ignorance and improvidence to a little spot of earth, they do not see clearly, either in time or space, the economic relations about them. [Sidenote: Values of things distant in time] 3. _Man's foresight and knowledge enable him to think of many periods at once, and thus his felt dependence on goods extends over a series of future productive agents._ In order to simplify the problem, we have spoken of the economic man as living only in and for the moment. If he had no more knowledge, memory, or imagination than is necessary to compare goods here, only present goods could have value to him. Even the higher animals, and much more the savages, rise above that level of improvidence. With increased intelligence the economic life of man expands, and he attaches importance to things which at the present moment have not, and cannot have, the slightest influence on his immediate gratification. The extension of man's view works a momentous change in his economic estimates. Of the thousands of forms of matter in the world, only a comparatively few ever will make an immediate gratifying impression on man's senses. But many of them are so connected in his thought by chains of association with pleasures or uses, that almost instinctively and most intensely he attaches an importance to them. In most cases it would require close thought to see that the service attributed directly to them was but a reflection of that performed by some other good. Thus, more and more, the estimates placed by men on goods come to depend on knowledge and foresight, and not on immediate impressions and feelings. [Sidenote: Goods related in varying degrees to psychic income] 4. _Things are causally related in varying degrees to the psychic income, and have value only as their relation is known and felt._ The explanation of value is not complete till value has been traced back to its source in gratification. Often the complex nature of the problem is ignored. If one discusses the trading of a bushel of grain, to be used by a hungry man for food, for a sheep to be kept for breeding, or for wool to be made into cloth next year, he may overlook the difference in the grade of wants compared. In this case, a gratification of the present moment is compared with a gratification of a very different kind at a future time. The problem involved is complex because of differences in time, in place, and in the nature of the want-gratifiers. The student should endeavor to reduce the problem of value to its simplest form by considering first the exchange, at the present moment, of immediately enjoyable goods. The logical starting-point in the theory of value is in those goods that are in closest touch with feeling, and on this basis may be built up an explanation of values in which reason and forethought have a greater part. Starting from the proposition that psychic income is the foundation of all values, we shall go on, however, to trace causes that give value to all the physical agents, and to the most indirect of want-gratifiers. DIVISION B--WEALTH AND RENT CHAPTER 7 WEALTH AND ITS INDIRECT USES § I. THE GRADES OF RELATION OF INDIRECT GOODS TO GRATIFICATION [Sidenote: Technical rank of agents] 1. _Goods may be ranked according to their technical relation to wants._ The technical rank of goods (sometimes spoken of as the degree of roundaboutness of the process) signifies the number of steps or processes that intervene between the agent used and the desired form. If one wishing the hickory-nut hanging above his head must first pick up a stick to throw at it, the nut is removed one step from desire. But even among savages the processes are much more complicated. The Indian with a crude knife fashions his bow and arrow, fastens the flint and cord which represent still other processes of industry, and shoots the bird which satisfies his hunger. In modern conditions the relations are vastly more complicated; only at the end of a long series do men arrive at the thing which gratifies their wants. [Sidenote: Time relations of goods to wants] 2. _Goods may be ranked by their relation to wants in time._ The relation in respect to time is measured by the period that must elapse before the utility of an agent results in, is converted into, gratification. No agent or influence intervening, a thing may yet be removed a long way from gratification. A tree may not be fitted to bear fruit for ten years to come. Meantime, there are many other possible uses for the tree: it may be used for fuel, or to make a canoe with which to catch fish, or to follow some other indirect method of production. Evidently the technical and time relations of goods are very different. The number of steps has no necessary relation to the time. A number of technical steps may be taken in half an hour, or a process of a single technical step may last a year. In the mechanic arts the technical relations are of primary significance, but in economics the time relations are mainly to be considered. 3. _Economic goods may be classified as immediately enjoyable goods and durable agents._ Enjoyable goods are goods in a final form, producing gratification or just ready to give gratification the next moment, as the cool draft of air made by a fan on a hot day, the cup of coffee steaming on the table. [Sidenote: Enjoyable goods and durable agents] Many goods of just the same form as the foregoing may not be affording current gratification (except that afforded by thrift and forethought), but are kept because later they will gratify a more intense want or gratify a want better. Apples and potatoes are kept in a cellar so that their use is distributed throughout the winter; cider and wine are kept till they get a quality that appeals more to the palate. Coal, wood, and stocks of goods, are thus kept in the form of enjoyable goods, destined to be physically destroyed when at length they yield a gratification. Evidently they must be storing up meantime a certain additional utility, for otherwise there would be no reason why they should be kept for the future. Such goods as these are sometimes called unripened consumption goods, but until ripened they bear in part the character of durable agents. Abiding sources of economic enjoyments are called durable agents. The inhabited house is a source of continued gratification in each moment's shelter it affords; but, further, it is the durable source of a series of future uses, as yet unripened. The hammer, the hoe, the tree, the field may all be considered as agents to secure consumption goods. Some of these are but one step removed from direct gratification, as the hoe helping the gardener to get food for his own use. Other agents are bound by many technical links to the ultimate gratification. [Sidenote: Degrees of durableness] 4. _This classification of goods is abstract, in that it is a classification, not of concrete goods, but of qualities shared in some degree by nearly all goods._ Most goods unite in some degree both characters, but in varying measure. This is, therefore, a continuity classification, the varying classes of goods grading from those whose durableness is zero (just at the moment of consumption) to those most durable, which yield an endless series of uses or products. Yet the classification is practical, corresponding as it does with thoughts which men have in the use of goods. By repairs and other methods goods become, and are looked upon as, durable sources of a series of uses. It is to be noted further that the enjoyable goods pass over into psychic income, that is, they are the stream of objective utilities that is each moment detaching itself as income from the great mass of wealth. The durable goods are those utilities which for the time remain, not yet ripened or ready to be converted into psychic income. § II. CONDITIONS OF ECONOMIC WEALTH [Sidenote: Income as affected by climatic conditions] 1. _The bounty and variety of the natural supply of indirect goods in the material world are the prime conditions of a bountiful income to society._ The effect of climate on the supply of goods available for man is complex. Climate is itself a direct source of gratification. As temperature must be adjusted to man's need, climate satisfies wants directly. Health, energy, the beauty of noonday woods and of sunlit clouds are conditioned on the favor of nature. Climate affects, further, the supply of material economic goods. All the earlier civilizations arose in warmer countries. But, after man had gained a certain mastery over the obstacles of nature, he was able to soften the harsher features of climate, and with better shelter and clothing, with better stocks of winter food and fuel, the more favorable features of the temperate zone could be utilized. So civilization moved northward from Egypt and India to Greece and Rome, to northern Europe and America. [Sidenote: By natural resources] Soil conditions for vegetable life determine first the amount and kind of animal life. Animal life from one point of view is a parasite, living on the vegetable; it is only the vegetable that has power to assimilate most inorganic compounds. Water being a need of plant life, the amount of rainfall is one of the most important conditions of industry. Man, therefore, depends on the resources of the soil directly or indirectly; a fertile soil furnishes him either directly a supply of vegetable food, or indirectly a supply of animal food. Natural supplies of metals, of coal, and of timber are important consumption goods, but they are also indirectly the condition for a vast variety of other goods. The industry that could exist without iron, copper, and coal would be of a very low grade. [Sidenote: By flora and fauna] The variety of flora and fauna, and their fitness for man's needs, largely condition the possible production. If, in the course of evolution, it had chanced that wheat and corn, the horse and the cow, had been crowded out in the struggle for existence, we should have had a very different civilization. The possibilities of civilization in Peru, and those of all the Indians on the American continent, were limited for lack of domestic animals. Animals that are fit for domestication are a necessary intermediate agent by aid of which man can appropriate and turn to his use the fertile qualities of the soil. Not content with the material world about him, even when it is at its best, man alters it in many ways. He enriches the soil, improves the varieties of animals, he even in some slight degree affects the climate, and by the use of a multitude of artificial bits of matter called tools, works profound changes in the world in which he lives. [Sidenote: By motion and energy] 2. _A large part of the utility of goods is conditioned on motion and energy._ It has been said that man's power in production is limited to moving things. The outer world is to man the sole source of motive forces. He can bring things together and they produce the result. Further, it may be said that nearly every kind of utility is conditioned on motion. It is man's aim to secure a constant inflow of goods. To secure this either he must move to get the goods, or he must cause goods to move toward him. The law of "conservation of energy" helps to explain economic action; the supply of energy in the universe cannot be increased or diminished, but may take on new forms. So a limited supply in man's control may take on various forms and so have different effects on gratifications. One and the same source of energy may be converted into the different forms of heat, light, motion, electricity, etc. But there must be some source. Man's desire is directed to getting force at the right place and in the right degree. If light or heat is too intense, it causes pain; the glare of the sun blinds instead of giving keener vision. A moderate force applied to any of the senses gives the maximum clearness or pleasure. Man is constantly endeavoring to secure forces from the outer world and to adjust motion so that it will directly or indirectly best serve his purposes. [Sidenote: By food, animals, and fuel] 3. _Among the main sources of power used by men are food, domestic animals, and fuel._ In eating food man stores up force in his own body. When he draws the bow he puts force into it to lie latent until liberated at the right moment. There must be a source of energy likewise that mental action may go on, and the power of sunbeams, stored for a time in food, is liberated in the processes of thought. This first natural mode of liberating energy within their own bodies does not satisfy the growing needs and aims of men. Such a mode is "labor," which becomes at times painful and distasteful. In the earliest societies known, some sorts of domestic animals are found supplementing man's efforts and acting upon the material world to alter it for man. The dog joining in the chase guards his master's safety, and helps to bear his burdens. The draft-beast in the field turns the heavy soil, and aids in the final harvest. The trained elephant does the work of twenty men piling logs, loading ships, or carrying burdens. Man further increases his control over the material world by making other men do his bidding. Domestic slavery, where wife or child serves the father of the family, or chattel slavery, where the vanquished toils for the victor, are all but universal in early communities. Such a method of increasing one's control over the forces of the world requires only superior strength, no special intelligence in mechanics, and is thus one of the first crude devices in a primitive civilization. Fuel has been, up to the present time, perhaps the most important source of energy. Fire in the hands of savage man gave him dominion over the forests and over the metals. In this age of steam the liberation of the energy of the sun, stored up in coal in ages past, is still the indispensable condition of our developed industry. [Sidenote: By the energy in wind and flowing water] 4. _The greatest and most exhaustless reservoirs of power for man's use are in wind and water._ While the supply of fuel is being used at a progressive rate and will soon approach exhaustion, there are elsewhere exhaustless stores of energy awaiting man's command. To make use of the wind for sailing a boat, only the simplest arrangements are needed; a windmill fixed at one place requires more ingenuity and machinery. The energy of the wind is derived from the sun and will last until the sun loses its heat. If some means can be found for equalizing the flow and for storing the power of the wind, it may yet become a great agency of industry. The force of falling water, long used in a petty way by the old water-mills, is just beginning to be employed on a large scale at such points as Niagara. Where fuel is high, as on the Pacific coast, wave motors have been successfully used in a small way, but wave motion is too irregular to serve well the needs for power. But the constant motion of the tides offers, at some favored points, a source of power that will remain as long as the earth revolves upon its axis. [Sidenote: By the intelligent utilization of all these agencies] 5. _Man studies and compares the durable goods that give him command over enjoyable goods, and attaches value to them._ Thus energy is found dissipating itself throughout the world in ways useless to man, and in places where it cannot serve his purposes. As man grows in power of control over nature, he seeks to apply these forces in forms and at places he has selected. If he can arm himself with the energies of mine and torrent, he can react with giant strength on the material world. He ceases to accept passively its conditions, and to live on its grudging gifts; he becomes its fashioner, in a sense its creator. His intelligence and his wants are most important factors determining what the form of the physical world about him shall be. But all the efforts of men in the most developed economy cannot make to disappear the differences in the quality of goods and agents. Desirable goods to consume are limited in quantity, and they vary in quality; hence they have value and some higher than others. Likewise, durable material agents and sources of power are limited in number and vary in convenience of location and efficiency. As men seek to gratify their desires, they attach importance to these agents of power. Each is valued for its service or its series of services. When anything is seen to contain a series of uses, it becomes a rent-bearer, and the economic problem of rent arises, one step more complex than the problem of valuing simple consumption goods. CHAPTER 8 THE RENTING CONTRACT § I. NATURE AND DEFINITION OF RENT [Sidenote: Temporary use and permanent possession of agents] 1. _The temporary use of materials and power and their sources is necessary to bring most enjoyable goods into being._ Indirect goods have value solely because they help to get direct goods. The apple-tree is valued because it bears fruit, and the orchard because the trees give promise of yielding a succession of crops for years to come. There are thus two problems of value in connection with durable goods: that of the value of a temporary use for a brief period, as for a year; and that of the value of a thing itself, the use-bearer, for a long series of years or in perpetuity. To explain what fixes the value of the temporary use is the problem of rent; to explain what determines the value of long-continued use or of permanent control and ownership of a use-bearer is the problem of capitalization. [Sidenote: Origin of the term rent] 2. _The term rent is used in a number of senses, which must be carefully distinguished._ The original meaning of rent was any regular income or revenue arising from wealth. The word comes from the low Latin _renta_ from _renda_, in turn from _redditus_, that which is given, yielded or given back, or _rendita_, that which is given or returned. The French _rendre_ (English render), to give or return that which belongs to one, is used very early. Chaucer used "rente" as an income. "Cattle had he enough and rente," cattle probably meaning property (chattels), and rente income. Rental is a collective term for a number of rents. The total yield of an estate was called its rental or rent-roll, and a list of the various sources of income, including all payments from tenants in money, produce or services, constituted its rental. [Sidenote: Popular and special meaning of rent] 3. _The popular meaning of rent is the amount paid for the use of material things which must be returned to the owners after the time of use agreed upon._ We speak of the rent of a house, boat, etc., using the word as a synonym for hire. In the European languages the word is used more frequently in that sense. In the French _la rente_ means the income from any kind of property; but corporate securities and national bonds came particularly to be called _les rentes_, because they are a form of investment yielding a permanent income. The one who has a perpetual income from bonds or rents is called a _rentier_. In German the term _Rente_ is used more broadly than in English, as an income of any sort, _Grundrente_ meaning the rent of land, and _Capitalrente_ the income usually in England called interest. A restricted meaning has long been applied by economists to the word: the income yielded by lands, etc. This was put in contrast with interest for money and capital, and with wages of labor. This meaning is now being abandoned by economic students. A wider meaning recently given to the word by many economists turns on the supposed relation of some portions of price to cost of production. Thus, frequent use is made of the expressions: consumer's rent, producer's rent, buyer's rent, seller's rent, etc. In the well-founded opinion of some recent critics this usage rests on a mistaken reasoning. However, in the midst of this wide variety of usage the student must be forewarned and alert. Doubtless agreement will at length be arrived at. Meantime, no economist can dictate what meaning is to be attached to the term, but one may suggest the definition that seems to him most expedient. Throughout this work we shall endeavor to use the term rent uniformly and consistently as it is now to be defined. [Sidenote: The essence of rent] 4. _The essential thought in rent, as we shall use it, is that it is the value of the usufruct as distinguished from the value of the use-bearer or thing itself._ The meaning of usufruct is the use of the fruits, or in legal phrase: "the right of using and enjoying the income of an estate or other thing belonging to another, without impairing the substance." The obvious fact is that fruits can be eaten without destroying the tree, the harvest gathered without destroying the field. By a metaphor the word in legal discussion is applied to the use of any product, and we shall employ it, as in common speech, in reference to one's own goods as well as to the goods of another. [Sidenote: Rented agents are looked upon as durable] The qualities whose use gives value are not usually indestructible, but they are treated as undestroyed. There is a famous phrase used by Ricardo, "rent is paid for the original and indestructible qualities of the soil." He said "indestructible," but the word is not apt. There are many qualities in the fertile field that _must_ be destroyed when it is used. Every economist since Ricardo's time has recognized this, and many excuses for the inaccuracy have been given. After every harvest, the field is less serviceable than before, and if it is to be of the same grade of efficiency, the fertile elements must be restored. We cannot assert that Ricardo meant _undestroyed_, for he was not quite clear on the question. But it is evident that one can count as true income only that part of the value of product that remains after full repairs have been made. It is only by a fiction that most indirect agents can be regarded as indestructible. Things yielding rent are not indestructible, but generally they are preserved undestroyed. [Sidenote: True rent a net income] 5. _A distinction must be made between gross and net, or true and false rent._ Before the usufruct is estimated, allowance must be made for repairs, depreciation, and for various expenses which absorb a good portion of the gross product. When this allowance has been made, the income may be considered as a net sum not due to the sale, or to the using up of any part of the thing rented. This is the essential thought in typical rent--that it is the value of the surplus, or net product, of an economic agent leaving the agent itself unimpaired in efficiency. The total product is sometimes called the "gross rent," but economic rent is "net rent." This thought is made clearer by the following discussion. § II. THE HISTORY OF CONTRACT RENT AND CHANGES IN IT [Sidenote: Economic and contract rent distinguished] 1. _Economic rent (likewise called natural, competitive, and sometimes rack rent) is to be distinguished from contract rent._ Economic rent is the market value of the usufruct, and contract rent is the amount a man pays for the use of wealth by virtue of an existing agreement. The one is impersonal or economic; the other is personal or legal, being fixed by agreements between persons. The rents usually spoken of are contract rents. The two diverge more or less. If the contract has been lately made the two will be nearly the same. Contracts of long standing often bind the tenant or borrower to pay either more or less than the present competitive price. If, after a time, the value of the use is greater than the contract rent, the tenant is fortunate in having his lease. But he is the loser if he is bound by lease or agreement to pay rent in a locality where land has become less valuable. Economic and contract rent usually diverge also because of the agreement that the owner, or lender, keep up the repairs and pay the taxes. Here it is simply the difference between gross and net rent. Custom may prevent the owner from charging all the usufruct of the agent is worth. If the contract rent is less than the economic rent, evidently the borrower enjoys a part of the usufruct, without charge, and to that degree is in the position of an owner. The usufruct in this case is divided between the two parties. Such instances were numerous in the Middle Ages in the renting of land, and still are found in many countries. Contract rent is based on economic rent and tends to conform to it whenever there is competition. The existence of economic rent is the basis of the agreement to pay contract rent. Prospective hirers of agents forecast what the use will be worth to them and make their bids accordingly. [Sidenote: The renting contract for the use of wealth] 2. _The renting contract is the agreement of a borrower to pay for the use of a thing and, at the end of the time, to restore it in good condition or pay for its complete repair._ In practical business it is necessary to have definite agreements to prevent disputes. Some provide that one party, some that the other party, shall keep up repairs. The form of the renting contract is observed by men in estimating the uses of their own wealth where no contract exists. If they count the gross product of an agent as rent, it is bad bookkeeping. In many cases it is necessary, therefore, to follow the form of the renting contract in order to determine the net yield of indirect goods. [Sidenote: The renting contract in the middle Ages] 3. _In early stages of industry the use of nearly all wealth is estimated under the renting contract._ In the lower stages of culture, in hunting, fishing, or nomadic pastoral tribes, land is not recognized as wealth to be exchanged or owned. But at a later stage, as in the Middle Ages in Europe, land and the things pertaining to it, as ditches, houses, mills, cattle, stock, and the few simple implements, constituted the larger portion of the wealth. Land was granted to the tenant or serf in return for services. The contract was pretty strictly drawn and all items were specified. It was not hard to hold the tenant to his contract to keep the land in about the same condition. There was a certain rotation of crops; the tenant was obliged to keep his stock up to standard; and, moreover, he had a certain interest in the land because his contract rent (as explained above) was less than the economic rent. The landlord, therefore, could count pretty surely on the undiminished power of his land and stock from one year to another. At that time, truck and barter were the common modes of exchange, and rents were paid in products and services, not in money. The fruits of the soil were consumed on the spot instead of being sold as now. Land was rarely, if ever, sold outright, so that there was no occasion to estimate its total selling value. It was thought of as a place on which to live and as a source of livelihood. Its yearly use was all that was subject to contract, sale, and exchange. Not the land itself but a _rent charge_ on the land was sold, the term rent charge meaning an annual sum payable out of the yield of an estate. Many medieval estates were so tied up by legal conditions that they could not be sold outright; all that the owner could do was to sell or mortgage the annual rental. Thus, in the Middle Ages, it was all but universal to look upon most indirect agents as exchangeable only under the renting contract, as subject to renting but not to complete transfer and sale. [Sidenote: The renting contract not convenient in commerce] 4. _As industry developed, the renting contract remained almost wholly confined to cases of renting lands and houses._ The materials and appliances needed for manufacture and commerce are so manifold and varying in quality that the rent-form of contract is very cumbersome and difficult for exchangers to enforce. If a merchant about to embark on a trading journey wished to rent a ship and a stock of goods, the renting contract became most difficult to interpret. He must agree to repay the loan in goods of the same kind and quality as those received, a contract most difficult to execute, and giving occasion to costly tests and countless disagreements. It was much easier for the merchant to get his loan under the interest contract, _i.e._, a money loan, with which to buy the goods. With the growth of industry and commerce, wealth increased in towns, taking many forms, as those of ships, wagons, tools, and stocks of goods, that could not conveniently be rented. [Sidenote: The thought of it remains associated with a rural economy] In England, the country which developed its industrial system earliest, the idea of rent, therefore, gradually became disassociated almost entirely from the use or hire of any wealth but land and real property. Because in the Middle Ages rent was associated almost entirely with natural resources, they being the only important forms of wealth which men rented from others, there was fostered the idea that the essential mark of rent is the connection with natural resources. It is a simple example of the association of ideas. In the transfer or loan of movable goods, the rent contract was quite overshadowed by the other form of contract, that of a money loan. According to this explanation the essential and primary difference between renting wealth and borrowing money at interest is not in the kind of wealth whose use is thus temporarily transferred, but in the nature of the contract. But as forms of wealth differ in their fitness for transfer under the two forms of contract, there goes on a competition between them, as a result of which each becomes associated with certain groups of goods. In the Middle Ages the renting contract was the dominant form, but it has been progressively displaced by loans in the money form, and its importance is still declining. [Sidenote: Renting contracts most used with land] 5. _The main forms of wealth whose usufruct is still sold under long renting contracts are land and its more durable improvements._ In England farms are let under long leases, a very common form being the thirty-year lease. Under the old, almost fixed, conditions in agriculture such a lease was equitable, but when prices are rapidly changing and when new methods are being introduced, it gives rise to great hardships. About twenty-five years ago, the great fall in the price of agricultural products brought ruin to many of the tenant farmers. The land troubles in Ireland have been largely about tenants' improvements. When the lease expired, the landlord could appropriate all the improvements that the tenant had made. In America farms are let usually on shares, and from year to year, but the plan of a money rent is increasingly followed. The difficulty of getting an equitable arrangement between landlord and tenant is recognized by all. The landlord must make the proper repairs or see that they are made; he must specify in the contract whether the products can be taken away or are to be fed on the place so that the soil may not be impoverished, and he must provide for the purchase of other fertilizers. On the other hand, the tenant under the renting contract has little motive for improvement, and many occasions for discontent. So in America, far more than in the older countries, land changes hands by sale, the purchaser going into debt for it, giving his note and paying interest on the loan rather than rent for the farm. [Sidenote: But many other goods are rented] Many less durable goods are rented for brief periods. Carriages are rented for the day, bicycles by the week or month. Sewing-machines, boats, guns, tents, and even diamond engagement rings, yield their joys under the renting contract. People frequently hesitate between the renting and the purchase of a piano, and in some cases renting is the more convenient and desirable way of securing its use. The purchase of a dress-coat or of a masquerade-suit to be worn but once, involves for some an excessive and needless sacrifice. For a moderate sum its temporary use may be had, and it is then returned, little the worse for wear, to the accommodating clothier. [Sidenote: Economic rent much wider than the renting contract] A final word of caution may be given. Economic rent is not confined to the cases of contract rent. It exists in every case where a more or less durable agent yields a use that is scarce and desirable. The owner who uses a thing himself gets the advantage in the product as clearly as if he collected rent from a borrower. Houses lived in by the owners, house furnishings, clothing, books, all scarce and durable agents, are yielding rents in this logical sense. To the economist, therefore, the problem of economic rent, as one of the grand divisions of the problem of value, remains of undiminished importance, for in these unceasing streams of uses emanating from our environment, is found the basis for the value of all durable wealth. CHAPTER 9 THE LAW OF DIMINISHING RETURNS § I. DEFINITION OF THE CONCEPT OF (ECONOMIC) DIMINISHING RETURNS [Sidenote: Economic agents contain uses to be obtained only with progressive difficulty] 1. _The phrase "diminishing returns of industrial agents" is the expression of the fact that there is an elastic limit to the utility any indirect good can afford within a given time._ Successive attempts to get additional services from a thing are usually in part successful, but each additional service is gained with more difficulty, or a smaller added service is gained for an equal expenditure of materials or effort. A book stands many hours untouched on the shelves of the library; but if, as often happens, two or more persons wish to use it at the same hour, time and energy are wasted. The book has a potential use during the twenty-four hours, but all this can be secured only at the cost of the greatest inconvenience. The greatest net uses, therefore, are seen to be to the first user and in the first hour, for these uses cost the least time and trouble. If the members of a family will take turns, one chair will serve for all of them; but if all are to be able to sit down together, a chair must be provided for each. Often it will happen that only one chair is in use, the other nine chairs being valued only for their potential uses. I knew two young men who owned a dress-coat in partnership, and as they had different evenings free from business all went well until both were invited to a reception which both were very eager to attend. [Sidenote: This is true of all classes of agents] Illustrations of this principle may be drawn from every class of durable goods. The example generally given is that of a field used for agriculture. It was long ago seen that a larger crop could usually be obtained on the same area, only with greater effort or expenditure; but this fact has been thought to be peculiar to the use of land. The examples given above have been purposely chosen from very different fields, to show that the truth is a general one: a good that affords a given service can be made to increase that service, ordinarily, only on condition that men put forth greater effort, or sacrifice more goods. The decreased utility is most clearly seen in the diminished effect which other agents produce when used in connection with the thing. When several are trying to use the same book, and are wasting time trying to get it, we often say their study hours are less fruitful because of the poor library facilities. Again, we speak either of the diminished returns of the field, or of the labor applied to the field. Either the particular thing is said to show diminished returns or the other coöperating agents are said to show them. [Sidenote: Decreasing technical effectiveness of material things] 2. _As the agents used in connection with a fixed amount of any other agent (for mechanical, chemical, physiological, psychological, and other purposes) increase, their objective effectiveness after a given point decreases._ Objective or technical effectiveness means effectiveness independent of the thought or estimate of men. It is not the effectiveness to produce a feeling in men, but to produce results on the material world. In a mechanism, if one part is increased without increasing the other parts, a point is reached where it does not add to the result. If in the building of a bridge the weight of the floor is increased beyond a certain point, the rest of the bridge being left unchanged, the bridge is weakened instead of strengthened. If the weight of the iron in the framework is increased beyond a certain point without strengthening the piers, the structure is weakened. If the pier is greatly enlarged, the bridge may not be weakened, but there is an utter waste of material and effort, and perhaps the main purpose of the bridge is defeated by the damming up of the stream. A bicycle frame, like a chain, is no stronger than its weakest part. If the strength of all parts of the wheel and frame is in equal proportion to the strain they must bear, added weight to any single part weakens the whole machine. The development of the modern type of bicycle, by many experiments, is a good example of the adjustment of materials according to the principle of technical efficiency. A variation of the same principle is seen in chemical combinations. Exact proportions of materials must be used to get a certain result. Increase of one ingredient will not increase the desired product. Either the added part is rejected, does not enter at all into the compound, or it unites to form another and different product. That the same principle holds good of the psychological effects of things, we have already fully recognized in discussing wants and marginal utility. A given amount of a good will affect the senses in a pleasurable way, but an increase in the amount will not cause a proportional addition to pleasure of sight, sound, or smell. On the contrary, such an increase may defeat the object entirely. Here we are at the threshold of the economic problem, for we have touched on "feeling." [Sidenote: Economic diminishing returns relate to value] 3. _The idea of economic diminishing returns arises when man recognizes these technical facts and their relation to gratification, in his use of a limited supply of indirect agents._ All economy begins with scarcity. The varying effects produced by different agents therefore require to be studied or the sum or direct goods of enjoyment will not be as great as is possible. Waste will take place. A bridge will have its maximum use with a minimum outlay when the parts are in a certain proportion. Beyond that point, the increase of any part may add something to the usefulness of the bridge, but the agents must be taken from some other and greater use. The thought of economic diminishing returns always has reference to value. If a particular kind and amount of a certain material is used in varying combinations with other agents, the value of the added product will not always be in the same proportion to the value of the added agent. The bridge-builder must consider not only what the added material will add to strength, but what it will cost, and whether the result will justify this expense. So the economic problem of diminishing returns is more complicated than the mechanical one, for it contains not only the technical but other factors. [Sidenote: The marginal utility in goods] If the value of the product increases less rapidly than the cost of the agents successively added to secure it, a point must at length be reached where the value of the added agents and of the additional product just balance; this is called the point of marginal utility. If a certain value in labor, fertilizer, or material, be applied to an acre of land, it may be more than recovered in the value of the product. Further applications give a product increased not in equal proportion to the former yield, and so on till the value of the last-added agent just balances that of the added product. This is the best adjustment possible, and beyond this point there will be a deficit in value. Just where the equilibrium is found at any time is the margin of cultivation. The term "cultivation" is taken from agriculture but must be understood in the broader sense of utilization, as the principle is not confined to the case of land or agriculture, but applies as well to the use of furniture, books, clothing, horses, or any other indirect agents. [Sidenote: Meaning of intensive margin of utilization] [Sidenote: The extensive margin of utilization] 4. _There are two margins, the intensive and the extensive._ The margin of utilization in the case of a single piece of wealth is called the intensive margin. Any form of indirect wealth, anything kept to use, may be considered as containing a series of uses. Using one thing more and more while uniting other things with it, is using it more intensively. Getting more use out of the book by effort, out of the farm by applying more fertilizer, out of the house by putting more people into it, is intensive utilization. The earlier uses come easily, naturally; the later ones are gotten with increasing difficulty. When a number of agents are of different qualities, the point between the one last used and the next unused is the extensive margin of utilization. The best agents that are available are naturally used first, but as they are more intensively used there is increasing inconvenience. Then recourse must be made to the inferior agents, whose first uses, however, are greater than the later, intensive uses, of the better grades. When the step is made to the use of agents that were before unused because inferior, it is extending the margin of utilization. The intensive margin of use is in the particular thing; the extensive margin of use lies outside of this. [Illustration: _Extensive Grades of Uses_] The relation of the two margins may be shown in a simple diagram. Let the better grades of indirect agents be represented by longer rectangles, the upper parts of which represent the more accessible, more easily secured utilities. Each agent consists of many strata of uses. The best uses are grades a, b, and c, in M; but after M has been utilized intensively down to d, N will begin to be utilized at its highest point. When utilization goes down to f, O comes into use, and so on. Therefore it will be seen that until the intensive margin takes in d, M is on the extreme margin of utilization, and N is just outside it; when the intensive margin falls to g and h, P is inside the extensive margin, and Q is just outside. [Sidenote: Equilibrium of the two margins] The marginal utility or effectiveness of added agents tends to be equal on the intensive and the extensive margins. This is simply a case of the substitution of goods in the use of indirect agents. If the value of the added product in the use of a particular good decreases, a point finally is reached where it is better to transfer the outlay to another agent, to change from intensive to extensive utilization, to go over to the use of another field or of another machine not so good. The effectiveness of the labor or capital that men have to apply is being compared constantly in the two cases, and to the extent that this comparison is perfect the effectiveness of the agents tends to be equal on the margin in the two applications. § II. OTHER MEANINGS OF THE PHRASE "DIMINISHING RETURNS" [Sidenote: Does not mean declining prosperity] 1. _The phrase diminishing returns is sometimes taken as meaning merely a decrease in prosperity._ Many ideas are connected with this phrase. It is not self-explanatory. It suggests various thoughts according to context and these have not failed to give rise to different uses. The student must be cautious if he is to think clearly about it. If population declines, or industry changes from one place to another, or from one kind of goods to another, it is sometimes said that returns are diminishing in the deserted district. [Sidenote: Nor exhaustion of the soil] 2. _A more common misuse of the term is to apply it to the exhaustion of the soil._ If the soil of a district has been robbed of its fertile qualities and smaller crops are raised than was the case fifty years before, it is said to be a case of of the increased difficulty in the extraction of natural stores in mining. The veins near the surface being mined first, later the galleries must be cut deeper and greater expense incurred to get the stores. But the conditions here are very different from those we have considered under diminishing returns. Mines are used not under the renting contract, but under the royalty contract, which permits and contemplates a progressive using up of the limited stores of natural resources. [Sidenote: Fallacious contract between manufacture and agriculture] [Sidenote: All industries if limited as to one factor, as area, show diminishing returns] 3. _Manufactures are often said to show increasing returns in contrast with agriculture as an industry of decreasing returns._ There is here an inconsistent shifting of thought. Agriculture is thought of as limited to a certain area of ground, whereon evidently diminishing returns will take place. But the fixed limit of ground-space is not thought of in connection with manufactures. Taking the same view of manufactures, commerce, education, etc., that is, assuming each industry to be confined to limited area of ground, each is seen to be subject to diminishing returns. Some ground-space is one of the essentials to carry on any business. If the attempt is made to accumulate a large library in one small room, a point is reached where much energy is wasted in trying to find the books. In a university the psychical product, education, may be limited by the need of space. The school-room, laboratory, or college class-room could be used at midnight, it is true, but not conveniently; and as students increase, buildings must be added. The same is true of any industry. We cannot conveniently increase the business of a lumber-yard without a larger yard-space, or of a factory without a larger floor-space. But the added space may be gotten by spreading horizontally or piling up perpendicularly. A ten-story building on an acre lot represents ten acres of floor-space. Putting up higher buildings is an expansion in area by the more intensive utilization of the land. Devices like elevators, and more compact appliances, make possible an increasing business in manufacture, trade, or commerce upon the same area of land. All industries, if looked at consistently from this standpoint, are subject to the same condition, though it is true this will make itself felt in varying degrees in different lines of industry. In agriculture some similar devices are possible by the use of greenhouses, but it is true that in it, on account of the need of sun, light, and air, the limits of space are more quickly felt, and are less elastic than in most other industries. The difference, however, is one of degree, and not of kind. Higher factories, larger stores, enable manufacturers to adapt themselves to the law as applied to the surface of land, but not to escape its operations. Neither the law of gravitation nor the law of diminishing returns is violated or broken when materials are lifted to build the upper stories. Both "laws" are at work, even when the building is rising from the ground. Men are merely adapting their conduct to the conditions imposed by gravitation and diminishing returns. [Sidenote: Confused with the question of large production] Manufactures usually are thought of as enlarging by increase of the amount of capital employed, without limitation as to the area covered. But even here a limit is reached in the amount of capital that can be employed at any one location because of the difficulty of widening the market. The question, however, is one of the advantages of large production with large capital, not of the increasing use of a limited area of land. If manufactures and agriculture are to be compared with reference to their economic nature, it is essential to clear thinking that both be looked at with reference to the same conditions, and from the same point of view. [Sidenote: Technical confused with historical diminishing returns] 4. _Technical diminishing returns are often confused with historical diminishing returns._ The principle of technical diminishing returns is that at any given moment the uses obtainable from any indirect agent cannot be indefinitely increased without increasing difficulty. Historical diminishing returns occur when, in fact, human effort is less bountifully rewarded in a later period than in an earlier one. If to-day a day's labor in agriculture produced less than fifty years ago, historical diminishing returns would have occurred. In fact, labor is more bountifully rewarded in agriculture than fifty years ago, yet it is true to-day that there are few fields or appliances which, if used more intensively with the prevailing prices of labor and material, would not show a diminishing return to the additional capital applied. Therefore, in the historical sense, increasing returns have prevailed, yet at every moment it has been necessary to apply resources under the guidance of the principle of diminishing returns. § III. DEVELOPMENT OF THE CONCEPT OF DIMINISHING RETURNS [Sidenote: Recognition of diminishing returns to land] 1. _The law of "diminishing returns" was first recognized and expressed with reference to the use of land in agriculture._ There are several evident reasons why this occurred. It is obvious to every farmer and gardener that he cannot indefinitely increase his crop, that two men cannot always produce twice as much as one man, and that in general the product does not always vary in proportion to the labor and materials applied. Moreover, the food supply is a fundamental factor in industry and in the welfare of states. The limit to the supply of food on a given area, cultivated by a given method, early appeared and became a serious practical problem. The circumstances in Europe in the eighteenth century drew attention to the subject. Population was increasing, and the pressure for food was strong. While all the forms of industry most common in cities were increasing, and the wealth of the cities was growing, poverty was increasing among the peasantry. Especially was this true in England during the Napoleonic wars, 1793-1815, owing to exceptional conditions. The food-supply from abroad was cut off, and when the English farmers, tempted by the high prices, took poorer land into cultivation, and sought to get larger crops from their older fields, a great object-lesson was presented on the principle of diminishing returns in agriculture. [Sidenote: This confused with historical diminishing returns] 2. _This truth of diminishing returns in agriculture was confused with the thought of historical diminishing returns._ Circumstances of the time led to the belief that because of lack of food misery must continue among the masses of men. It was thought inevitable that the population would continue to increase and food become more scarce. The idea of diminishing returns became thus a prophecy of what would happen, a social philosophy, that affected the thought of men on every practical social question. [Sidenote: The principle applies to land in all of its uses] 3. _The application of the principle of diminishing returns was soon broadened to include land in other than agricultural uses._ This was a natural and inevitable extension of the thought. It was evident that an unlimited use could not be made of a limited area of land, in any industry whatever. There is no explanation of rent of business sites, residences, lots, wharves, waterfalls, etc., unless account is taken of diminishing returns. If it were possible to do an unlimited amount of business upon a limited area of land, it would never get more scarce and could never rise in value. The idea of diminishing returns came properly, therefore, to be applied to land in all its uses. It is true, however, that the relatively large areas needed in agriculture make the phenomenon of diminishing returns much more striking in it than in most other industries. [Sidenote: And to all indirect agents] 4. "Diminishing returns" should be broadly applied to all wealth having indirect uses. The argument for this view may take both a negative and a positive form. Why should we say that the principle applies to land and not to cases of other industrial agents? Why in the case of a waterfall and not in the case of the water-wheel? Why in the case of the field and not in the case of the trees in the field? Are they not all scarce and desirable goods yielding a limited supply of uses? Positively it can be argued that the concept of diminishing returns is indispensable to a reasonable explanation of the value of any indirect agents. Anything that could afford an infinite series of uses at once would be an infinite supply. If an infinite number of uses could be gotten out of one hammer in all places at once, it would pound all the nails in the world. One wagon, one acre of land, one ax, one book of each kind, would serve for all men, and duplicates would be valueless. But in the case of every material thing there is a limit of convenient and economic use. [Sidenote: Diminishing returns related to diminishing gratification] 5. _Diminishing returns of indirect agents is a special case of the universal law of the diminishing utility of goods._ Diminishing returns have to do with indirect goods, while diminishing gratification has to do with direct or consumption goods. They are two species or aspects of the same general principle. If the supply of certain indirect agents is increased, thereby increasing consumption goods, the utility of the indirect agents per unit diminishes. In such a case a diminishing return is the reflection, back to the indirect good, of the diminishing utility of the direct goods it helps to secure. Any indirect agent, added to a fixed amount of other agents with which it is technically used, is credited with a diminished utility, just as an additional supply of enjoyable goods, coming to meet a fixed demand, falls in value. The concept of technical diminishing returns has reference to a limited period of time. Though a definite agent may have bound up in it a long series of uses, these cannot be secured at the moment. If a rent-bearer, such as a fruit-tree, were permanent, and men could wait through eternity for its yield, they would get an infinite yield of fruit. But in any finite period, there can be only a limited yield. [Sidenote: The basal law of economics] The concept of diminishing returns is one aspect of the great economic law of proportionality, that is, it is one expression of the fundamental, axiomatic truth, that there is a best or proper adjustment of means and ends. It is, therefore, the central and essential thought in political economy. On it depend all important conclusions with reference to the value of indirect goods. Out of it grow the important economic theories of rent and capitalization. CHAPTER 10 THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT § I. DIFFERENTIAL ADVANTAGES IN CONSUMPTION GOODS [Sidenote: Connection between gratification, rents, and value of wealth] 1. _Both rent and the value of durable wealth are based on the value of the fruits or products yielded by the wealth._ Gratification, afforded directly or indirectly, is the basis of all values. The relation of most kinds of wealth to wants is indirect; but gratification thus afforded indirectly is none the less the basis on which the usufruct of wealth is estimated. Men find the logical or causal connection between direct goods, or final product, and indirect goods, or agents. To explain the value of the durable wealth, or rent-bearer, a still farther step in thought must be taken. The value of the rent-bearer is based on the series of rents which it affords. To explain how these rents are added to give the value of the indirect agents is the task of a theory of capitalization. This being the relation, a change in the value of the product changes the rent, and this in turn changes the value of the rent-bearer. The theory of rent, therefore, has to begin with a review of the valuation of enjoyable goods. [Sidenote: Effect of scarcity on utility of uniform goods] 2. _In a group of consumption goods, all of the same quality, the marginal utility declines as the quantity increases._ If the quantity of an article capable of ministering to man's wants is very limited, its value is high. If the supply of something of uniform quality, for which there is no substitute, is scanty, the value is estimated without reference to any other grade. If a fishing tribe caught very few fish, but these were all equally good, and if no other food were to be had, fish would have a high ratio of exchange with every other kind of goods. If the quantity increases, the value of each unit of the whole supply falls, as the importance attributed to its parts declines. If an Indian hunting-party met with unusual success, the value of buffalo meat declined. If there is a remarkable potato crop, potatoes fall in value. [Sidenote: Relation of different grades of consumption goods] 3. _In a series of consumption goods of different qualities, the lower grades acquire value only as scarcity increases in the higher grades._ If difference in quality between two grades of apples is marked and there is a superabundant supply of the best grade, no importance is attached to the poorer. But if the better grade becomes scarce, the appetite for the poorer grade increases, and finally it, too, will be consumed. In some years the small, knotty apples are allowed to rot on the ground; in other years they are gathered and are sold at good prices. But if there is an abrupt difference in quality, and hence in the marginal utility of the two grades, the value of the better goods may rise considerably before there is any recourse to the poorer. If the differences in quality are very slight, the presence of the lower grades has the effect of limiting the increase of value of the higher grades. Practically in almost all kinds of goods there are gradations in quality. Complete uniformity is of the rarest occurrence. When did one ever see a basket of peaches that were all of the same size, ripeness, color, flavor, and perfection? If the step from the higher to the lower grade is very slight, resort is immediately made to the next lower grade, some of which is substituted for the higher. There is an independent reason for the value of each grade of goods; each grade would have value if there were none of the other, but they mutually affect each other's value when they exist, side by side, in the same market. The marginal utility of each is lessened by the presence of the other. And thus, two or ten grades constitute for many purposes a single supply as they shade into each other or are merged by substitution. [Illustration: _Grades of Consumption Goods by Quality_] [Sidenote: Free goods are on the margin of utilization] 4. _Goods of the lowest grades, having no marginal utility, are free goods._ This is a simple truth, but it has important bearings. There may be said to be an "extensive margin of utilization" of many consumption goods. The poorer grades of apples, rotting on the ground, the multitudes of waste things not valued, are on the margin of utilization. When a lower grade is used, the margin is extended. The value of goods is measured upward from the margin of utilization, but this is simply to say that their value is measured from zero upward. Likewise, there is an intensive marginal utility in consumption goods. As the better grade of apples becomes more scarce, they will be used more sparingly and kept to satisfy only the intenser wants. The superiority of some consumption goods, either in quantity or quality, often is exactly analogous to the "differential advantage" spoken of by economists in the case of productive agents. The differential advantage of the highest grade over the grade of free goods, whose value is zero, evidently is the whole value of the highest grade. § II. DIFFERENTIAL ADVANTAGES IN INDIRECT GOODS [Sidenote: Differential advantage of agents in the quality of their products] 1. _Rent varies with the quality of the products yielded by agents, other things being equal._ Let us take first a simple case where the agent is the sole condition of the product. If there is but one tree bearing a certain luscious fruit, or but one spring yielding a mineral water, the rent of the tree or spring being equal to the value of the products must vary as the quality of the products varies. If two or more trees are standing side by side, they will be compared with regard to the difference in the quality of their fruits. If two fields differ in quality, greater importance will be attached to the field capable of producing the better grade or variety of fruit or product. A peculiar mineral quality in the soil may impart to wine a choice flavor that can at once be recognized by experts; while other fields, distant but a few rods, cannot by any effort be made to produce wine of the same rare quality. There is said to be a marked difference in the success of vineyards lying only a short distance apart on the shores of the larger lakes of New York. Nearness to the water moderates the temperature, often prevents frosts, and hence insures the ripening and quality of the fruit. In the Santa Clara valley, as in other parts of California, there is a frostless belt, sharply marked off from the lands where it is unsafe to attempt to cultivate the delicate orange-tree and other semi-tropical plants. In manifold ways differences in geological formation affect the use of land and the success of many industries. On one side of a little creek is limestone land, on the other shale, the limestone producing a crop larger and of better quality. When the peculiar nature of the one field is found to be the cause of the exceptional quality of its fruits, the difference in value is attributed to it. [Sidenote: The lower grade limits the value of the higher grade] If there is but one grade of agent, it is, of course, valued without reference to any lower grade. The effect of the presence of lower grades of agents is to lower the value of the higher, inasmuch as the lower grades are substituted for the higher. There may be at first enough of the higher grade of agents to produce all the fruit wanted of the better quality. If, then, there is an increasing demand, and the additional yield can be secured only with greater effort, the value of the product will rise. The presence of poorer grades, however, checks that rise, because use can be shifted to them. The value of grade one is not high because grades two, three, and four, which are worse than it, are available, but because they are not of better quality than they are. Poor as they are, their presence reduces somewhat the intensity of demand for the best grade. Indirect agents, therefore, are seen to be subject to just the same comparisons, substitutions, and estimates, when their value is considered, as are direct consumption goods. [Sidenote: Differential advantage of agents in the amount of their products] 2. _The rents of two agents differ as do the quantities of goods yielded by them, other things being equal._ In the case just considered, the quantity remained the same while the quality differed; now is to be considered the case where the quantity differs while the quality remains the same. It is possible that one grade of agents is "poorer" because it produces less fruit, not fruit of poorer quality. Consider first the static problem. If both agents yield fruits exactly alike, the value of equal units at the same place and time must be equal, and the usufructs would vary in just proportion with the quantity of product. Now consider the dynamic problem. If the desire for that fruit increases, rent would grow as scarcity became more felt. The agents yielding, under the prevailing conditions, the largest product, would first be used; later, the poorer agents. The possibility of resorting to the poorer agents would keep the better from rising so high. [Illustration: _Grades of Agents by amount of Product of Uniform Quality_] [Sidenote: Complementary agents unite to form a product] 3. _When two agents are necessary to secure a product, the value attributed to each is influenced by competing uses._ The thought of one agent independently producing a certain product is far too simple to correspond with reality. Two or more agents unite to produce a single product, and each agent at the same time can be used for acquiring other products. Complex as the problem appears, it is solved according to the principle of marginal utility at every moment in every market. The different uses, figuratively speaking, bid for an agent, and thus its marginal utility is determined just as is the price of a good by the bidding of buyers. Indeed, it is the bidding of buyers, indirectly. The more urgent the use, the higher the bid. The felt importance is reflected from the consumption goods that are sought, to the agent that will aid to get them. Two or more agents that are mutually needed for the acquiring of a product are complementary goods. A complementary agent may be either other material agents or labor. [Sidenote: Complementary agents used intensively show diminishing returns] When labor is applied to an agent, either to improve the Quality or to increase the quantity, it is subject to the law of diminishing returns. In the effort to increase the quantity of products, labor is applied first more intensively to the better agents. If it meets with resistance, if returns diminish, it is transferred to any of the poorer agents that have in them uses of as high grade as those still in the better agent. The superior effectiveness of the earlier over the later units of the added agent is called the "differential advantage" of the two fixed agents. The result of a day's labor applied to a field may be represented by 100, a second day's labor by 90 (it being only ninety per cent, as effectual), a third day's labor by 75; but it is more usual to say that the first field produces 10 more than the second and 25 more than the third, the second 15 more than the third. To the agent fixed in supply is attributed the difference in the effectiveness of the agent that is applied. [Sidenote: The relentless extensive margin of agents] 4. _The marginal uses of indirect goods are free uses._ Here again is noted the close parallelism in the process of evaluating direct and indirect goods. There is an extensive margin in the use of an indirect agent, a point in the gradation from the better to the poorer agents where the materials and forces are left unused and have no value. Land beyond that point is free. Outworn goods in manifold forms, old pictures, old machines, having no longer charms even for a rummage sale, form a no-rent margin of wealth. On every hand a great multitude of things unused and worthless differ by only a shade from things that still are used and valued. Every rubbish-heap, rag-bag, junk-shop, and garret contains things once prized, now lingering on the margin of utilization. There is also in agents an intensive margin, beyond which are certain unexploited uses in the things that we already have. This is a more subtle thought, but it has been already discussed in connection with diminishing returns. These potential uses in agents, uses which in the existing conditions lie outside the margin of utilization, of course have no value. We have noted that there is an equilibrium between these two margins. Rent is measured from a zero point of utility either in a good, or in other poorer grades of goods. A corollary of this proposition is that there is a limit to the rental that anything can yield under any given condition. Below the present margin of utility of any goods there exist great quantities of free goods, unused goods, or unexploited uses. It is only uses above this margin that yield rent. Rent is the difference between the value of the better grades and the value of the free goods. It is therefore due to the limitation in the supply of indirect agents of the better quality, or to the scarcity of the more effective uses in those agents. [Sidenote: Restatement of rent, economic and contract] [Sidenote: Economic rent is primary] 5. _Rent may be redefined as the value of the scarce uses of wealth within a given period._ Rent is the felt importance of the usufructs of agents in securing gratification. It is measured by the marginal utility of any particular grade of agents in securing products. These definitions and the discussion throughout this chapter applies to economic rather than to contract rent. In fixing and agreeing on contract rent, men are seeking to estimate the importance of indirect goods, the importance that an agent will have in getting a product. They are bidding for the use of things, and what they bid is contract rent. Contract rent is based on the existence of economic rent. Economic rent does not depend on contract rent, but on the differences in the effectiveness of agents to secure a given product. If there were not differences in the product, and no limits to the supply of indirect agents, rent could not exist; it would be inconceivable. But these differences existing, economic rent inevitably arises, for men cannot keep from attaching value to the things that affect their desires. Contract rent in turn appears wherever the use of wealth becomes an object of exchange and agreement between men in a free society. CHAPTER 11 REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT § I. REPAIR OF RENT-BEARING AGENTS [Sidenote: The necessity of repairing nearly all economic agents] 1. _The continued rent of indirect agents is dependent on the continual repair of certain parts necessary for their efficiency._ All earthly things wear out or decay. Whenever man's hand is withheld, nature takes possession of his work, regardless of his purposes. Dust gathers on unused clothes, and moths burrow in them. Shut up a house, and windows are shattered, roofs leak, and vermin swarm. To close a factory is to hasten the time when buildings and machinery will be piled upon the rubbish heap. The most magnificent and solid works of man have crumbled under the finger of time. The earth is strewn with ruins of gigantic engineering works, aqueducts, canals, temples, and monuments, whose restoration would be no less a task than was their first building. Everywhere vigilance and repairs are the conditions of continued uses of wealth. Some works of nature, such as waterfalls, may appear to have a continued use without repair, but they bear rent only when used with other things that must be constantly mended. A certain amount of labor on the banks of the mill-stream, and certain repairs on the dam, the water-wheel, and the gates are necessary. By a fiction in business contracts the waterfall may be dealt with apart from those conditions to its use, and may be rented, as a field is, with the agreement that the tenant keep up the repairs. The efficiency of land as mere standing-room usually does not seem to be dependent on repairs. But here again the land yields rent in connection with other rent-bearing agents (such as houses and other agents above ground), which must be repaired. Standing-room on land is not a complete indirect agent; it is but one of the conditions for carrying on an industry, and even it often requires repairs to make it usable. Ranging from these extreme cases of stableness and durability, indirect agents vary to the extremes of fragility and ephemeralness. [Sidenote: The fertile lands of large regions have lost their usefulness] 2. _Most of the qualities that contribute to make land fertile in agriculture being destructible, the constant repair of tilled land is necessary to its continued fertility._ If any things could be said to be indestructible, they would be some of the works of nature. In a sense, all matter is indestructible. Man cannot annihilate it, he can simply change its condition. But in economic discussion it is the value of things that is being considered, and from this point of view everything is in some degree destructible. The effects of bad husbandry are everywhere apparent, and in many regions fertile fields have been physically and economically destroyed. In Asia, lands that once supported millions, perhaps hundreds of millions, of population are now deserts. Egypt, for a time reduced to a semi-desert condition, has only in the past century been restored to a certain extent by the use of new methods and a return to the old ones. Many of the areas that were the granaries of Rome can now hardly support a sparse, half-starving population. The lands, or at any rate, the elements that gave them value, have been destroyed. [Sidenote: Wearing out of some American lands] Even in young America may be seen the effect of a failure to keep land in repair. As the new rich lands of the West were opened up, the old lands in the East were allowed to wear out, and many of them were abandoned. On the new lands in turn the same methods were followed, using up the first rich store of fertility with no attempt to keep up the quality of the soil. This may have been the best policy for the time; it would not have been economical to employ Old World methods of intensive husbandry when such rich extensive areas were being opened up. But the process was one destructive of natural resources. As settlement moved westward, great forests fell in ashes, and the soil was robbed of the fertile elements which it had taken centuries for nature to store up. [Sidenote: Wearing out of the parts the railroad] 3. _The machinery and appliances used in transportation and manufacturing are all perishable in varying degrees._ Take as an example the great agency for transportation, the railway. The roadbed, which is but the natural soil excavated or filled to a better grade, is the most permanent part; yet every frost weakens, every rain undermines, a portion of it. Earthquake, landslide, and flood fill up the ditches, or tear down the embankments. Constant work is needed to keep it fit and safe for use. Above this is the track, slightly less permanent, more frequently changed. The ties rot, and even the rails of steel must be at times replaced. The rolling-stock is still less durable, and the different parts vary in length of life. It is said that the wheel-tires are renewed four times, the boiler three times, and the paint seven times, before a locomotive is entirely worn out. The oil used in the wheel, which is a necessary part of the running machine, has to be applied every day. [Sidenote: Depreciation of manufacturing appliances] There is a great difference in the length of life of manufacturing appliances. The building is fairly durable; yet an average depreciation-rate of one and one half per cent. a year must be allowed to offset a reduction in its value of over fifty per cent, in thirty years. Machinery differs greatly in durability; well-made, substantial machinery depreciates about five per cent. yearly. The engines and boilers depreciate more rapidly than the running gear; the loose tools have to be replaced every second to fourth year; while the materials consumed in the industry must be repaired and replaced at every repetition of the process of manufacture. If a factory is to be maintained in its efficiency in accordance with the terms of the renting contract, and is to continue its renting power, everything about it must be from time to time repaired and replaced. [Sidenote: Neglect of repairs often has evil effects] 4. _Neglect or postponement of repairs must cause a falling off of the rent-earning power._ The neglect of repairs may have different results in the factory. The neglect of one kind simply reduces present rental while not preventing the future restoration of the plant to its full efficiency. If certain necessary tools wear out and are not replaced, the factory as a whole will be less efficient. Each part of the entire outfit being needed in due proportion, the loss in rental will correspond not merely to the lost efficiency of the missing tools, but to the crippled efficiency of the remaining appliances. Failure to apply seed to the land causes the land as a whole to be useless for that year's crop. In other cases, neglect of repairs increases the expenses of repairs and cuts off future rental. The adages, "A stitch in time saves nine," and "An ounce of prevention is worth a pound of cure," must be acted upon in every industry. The neglect to repair a roof causes damage to an amount many times the cost of a new roof. Failure to replace a bolt costing five cents may result in the rack and ruin of a machine worth many dollars. A handful of earth on a dike may save a whole country from destruction. [Sidenote: But sometimes is economical] Neglect of repairs may be economical, however, when outer conditions have first reduced the demand for the agent and consequently the rental. When the line of travel changes, it does not pay to keep an old hotel up to the same state of repair as when it had a great patronage. Old factories sometimes may better be allowed to depreciate while the price of repairs is invested in more prosperous industries. In a declining neighborhood the houses fall into decay, the owners seeing that "it would not pay" to keep them up. § II. DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR [Sidenote: Repairs can not always prevent ultimate decay of agents] 1. _Even where repairs are thoroughly kept up and present rent is undiminished, future rents may be decreasing because of natural decay._ Changes go on in the substance of things which cannot be prevented by any attention to repairs. The wood in a framework will decay, the metals crystallize. There is also an unpreventable wear of parts that cannot be replaced without replacing the whole machine. It is the aim of the modern manufacturers to make machines like the wonderful one-horse shay, every part of equal durability. The development in America of the system of "interchangable parts" has greatly simplified and cheapened repairs, and has lengthened the working life of machines; nevertheless their lot is the scrap-heap at last. This general depreciation appears to be nearly avoided in large factories where there is serial replacement of the parts, but occasionally some invention or some improvement of process necessitates an almost completely new equipment. An old man once said to me: "I have lived in this house forty years: it was well built, has been repainted regularly, has never been allowed to leak a drop, and it is as good as it ever was. I see no reason why it could not be kept to eternity if always kept in repair." But the same could not be said of the house now. In general, there is finally a termination of the rent-earning power of wealth, and the whole has to be replaced. [Sidenote: Technical changes destroy the uses of agents] 2. _A change in inventions and processes may reduce the rent of agents, independently of their material condition._ Rent is dependent on the indirect relation of things to wants; that relation may be changed if some other agent is found fitted to serve these wants more directly. Not only do the materials of houses change, but fashion and engineering skill change, making the old mansions cheerless and inconvenient, and affecting their rent-earning power. At every moment, in a progressive society, many rent-earning agents are being thrown out of use. The machinery in flour-mills has been almost completely changed, parts of it repeatedly, while the roller process has been substituted for the old millstones. Water-power, because of its uncertainty, has been replaced in many places by steam-power, and in many places steam-power in turn, has been rivaled by water-power since the improvements in the generation and transmission of electricity. A change in the process of making paper threw out of use much machinery that was only in part saved by its removal and adaptation to the making of coarser grades of paper. Many minor inventions in the iron industry, still more the invention of the Bessemer process, threw out of use great numbers of the old appliances. [Sidenote: Industrial circumstances affect the uses of agents] 3. _A change in the outer conditions that give occasion to the use of agents may cause depreciation._ The exhaustion of materials on which machinery is employed may reduce its usefulness. A sawmill located in the midst of a forest has a high-earning power while the forest lasts, but when the forest is cut off the mill itself declines in value. Unless it can be removed to another forest and thus have its earning power renewed, it will have the value only of scrap-iron; it has become an indirect agent in the wrong place. Oil-boring machinery where a rich supply of oil is found has a high rental for a time, but when the oil-fields give out the machinery falls in value, being worth more or less than the cost of transporting it according as the next oil-field is near or far. Changes in fashions, calling for different kinds of products, cause a depreciation in the value of the old agents. Coarse salt, evaporated by the sun, was used by our fathers, but the finer product of the steam process is driving out the product of the old solar plants. As homespun went out of use, much machinery still in good physical condition was cast aside. Changes in transportation work revolutions in industrial methods. Many prosperous small forges on the country roads of Pennsylvania became valueless after the building of the railroads. New forges were built at favored points where materials and products could be shipped by rail. [Sidenote: Various grades of efficiency in rent-bearers] 4. _The agents employed in any industry range from the more efficient, high rent, down to the less efficient, low rent, grades in a more or less regular series._ It follows that as these changes are going on, the place of agents on the scale of efficiency is constantly shifting. The various agents represent all grades of efficiency. One depreciates, possibly is restored later and takes a high place, and again depreciates until finally it is thrown out of use. One loom embodies the latest improvements and corresponds to the most fertile field; another can still be made to yield a little rent; the use of a third results in certain loss. A great mass of no-rent agents lie just below the margin of utilization in every industry. Some of these are permanently abandoned; some will be taken back into use when business conditions improve. When the iron industry is dull, many forges are out of blast; but when iron is again in demand, there is a gradual taking up of the abandoned forges, factories, and machines as they are brought within the margin of profitable utilization. Many agents not actually earning a rent, may become rent-earning through a change in business conditions. § III. DESTRUCTION OF NATURAL STORES OF MATERIALS [Sidenote: Destruction of the American forests] 1. _A large part of industry is now conducted without regard to the preservation of the source of income._ A striking example of this is the use, or rather the destruction, of the American forests. In the last century the demand for lumber grew rapidly both on account of domestic needs and of the needs of the older countries. Great quantities of wood have been used and still greater quantities wasted, trees being girdled, the ground burned over, the timber destroyed in any way that would clear the soil--timber which to-day would be of far more value than is the cleared land on which it stood. Considering present needs and conditions, the labor seems to have been worse than wasted. [Sidenote: Effects on value of timber] The direct effect of this destruction of the supply has been the increase in the value of timber. To the settlers much of the timber was worse than useless; they paid and labored to get rid of it; now the supplies of lumber must be sought on the very margins of our territory: Florida, Maine, northern Michigan and Wisconsin, Washington, and Oregon. The supplies in Washington and Oregon are almost unavailable in the Eastern states on account of the cost of transportation. Professor Marsh, thirty years ago, strikingly characterized the policy that has been pursued: "We are breaking up the foundation timbers and the wainscoting of the house in which we live in order to boil our mess of pottage." [Sidenote: Physical effects] The indirect effects of these changes are fully as great as the direct ones. Forests greatly affect climate, temperature, and soil; they influence the humidity. They equalize the flow of streams, moderate floods, and by preventing the washing down of the rich soil, keep the mountain sides from becoming bare and sterile rocks. So, within the last two decades, the people in America have begun to think of forestry. Its purpose is to restore the forests to the condition of permanent rent-earners, to make the mountains yield not a temporary supply, but a perpetual crop of timber. [Sidenote: Possible exhaustion of the coal-supply] 2. _The extraction of coal and other mineral deposits reduces for future generations a supply already limited._ The coal deposits in the earth have only recently been drawn upon. A small city like Ithaca probably uses to-day a greater quantity of coal than was used in all Europe two centuries ago. The large deposits of coal and their early development in England long gave a great advantage to English industry over that of other countries. In England, however, has first been felt the fear of the exhaustion of the coal-supply. Professor Jevons, in 1861, sounded the note of alarm; he prophesied that because the coal deposits of America were many times as great as those of England, industrial supremacy must inevitably pass to America. Already the supremacy in coal and iron production has passed to America, and that in textiles soon will come. In England the accessible supply of coal is limited, deeper shafts must be sunk, and the coal gotten with greater difficulty and at greater expense. Coal has risen in price in England within the last few years, and will continue to rise in the future. The coal deposits of America are thirty-seven times as great as those of England, but even these will soon be exhausted. And yet on the part of all except the coal trust, there appears in America a thoughtless disregard for the future. Supplies of copper, iron, and lead in favored positions are likewise limited, and are being rapidly centered in the hands of great companies. The increasing demand for these products insures a steadily rising income from their annual use. The value of the mines, being based on the series of incomes they will yield, may increase while their unused treasures dwindle in quantity. [Sidenote: Many natural resources are being rapidly exhausted] 3. _The exhaustion of natural stores of material is due to civilization, but it threatens to put an end to industrial progress._ The savage does not go deep enough to use up permanently the world in which he lives. He uses the fruits that he finds, and those fruits are, almost without exception, renewed the next year. The only mines that were worked out in ancient times were gold and silver mines, while the mines of useful metals were touched but lightly. Within the last century the earth's crust has been exploited with startling rapidity. Scientific knowledge and mechanical improvement have combined to unlock the storehouses of the geologic ages. At the ever-increasing rate of their use, many important materials must be exhausted in the not far distant future. While it is probable that substitutes will be discovered for many of them, the outlook in some directions has little promise. To treat terminable incomes, exhaustible sources of supply, as permanent sources of income, leads alike to unsound theory and to reckless practice. CHAPTER 12 INCREASE OF RENT-BEARERS AND OF RENTS § I. EFFORTS OF MEN TO INCREASE PRODUCTS AND RENT-BEARERS [Sidenote: Desire for better agents impels men to improvements] 1. _While man destroys some agents of production he multiplies many others._ We have noted many kinds of depreciation, destruction, and wearing out of wealth; but the normal thing in a healthy society is an increase, on the whole, of rent-bearers. The increase of rents is due to two causes: changes in the agents by which they become more efficient technically, or more numerous; and changes taking place outside of the agents, affecting the utility of the products. The first of these will be considered in this section. The increase of the efficiency of agents is usually the aim of the individual producer, and thus is brought about an increase of the stock of wealth. In some cases, however, improvements such as the dredging of harbors or as the protecting of forests, are made by men collectively through the agency of governments. Somewhere, however, the desire for these changes must arise in the minds of individuals. Increase of most things involves "cost" or sacrifice, in the psychological sense; that is, man must strive, perhaps suffer, to get a certain result. This end, therefore, must be in itself desirable, and social organization must be such as to present a motive to the men to make the needed effort. [Sidenote: Improvements by adaptation of natural resources] 2. _Rent-bearers may be increased in quantity and improved in quality by the adaptation of natural resources to man's purposes._ To get food, men use the tracts of land that under the conditions give the largest product. Other tracts less fertile, or for some reason less available, are ditched, tiled, and diked, and fertilizers are carried up steep hillsides to make a soil upon the very crags. In commerce and transportation, new ways are opened by canals, railroads, and tunnels. An isthmian canal will raise the efficiency of ships plying between New York and San Francisco, enabling them to carry a greater amount of freight within a year. The tolls will represent to the users an expenditure only partially offsetting the increased efficiency of the agents of transportation. By the building of wharves, the dredging of harbors, and by many other methods, indirect agents are constantly growing in number and efficiency. [Sidenote: Machinery is an adaptation of natural resources] 3. _Rent-bearers may be increased by inventions and improvements that make machines stronger, quicker, and better._ This proposition is not logically different from the preceding. A machine is an arrangement of material things through which force may be indirectly applied to move matter. No fast line divides machinery as regards form, purpose, or cause of value, from the artificially improved natural agents that we have been discussing. Just as a field is drained, plowed, and cultivated to fit it better to yield a crop, so is the iron ore shaped into a form called a machine, better fitted to cut, carve, and weave as man wills. Machines are merely adaptations of natural resources. [Sidenote: Bettering quality of agents] Increase in machinery may be either in quality or quantity. The two causes have in most cases the same result. If the quality or efficiency of looms is doubled, it is as if their number had grown in like proportion. In its economic function the beast of burden may not illogically be classed with inanimate machines. The horses in America have been remarkably improved of recent years by the importation of thoroughbred stock from Europe. Ten or fifteen years ago the number of horses in the United States was found to have decreased, and there was much comment on this evidence of a declining industry. It was not at once recognized that there was embodied in horse-flesh more horse-power than ever before, as a single Norman horse has the strength of several Mexican mustangs. Numbers alone are not the measure of efficiency. [Sidenote: Increasing number and better grouping of agents] 4. _The increase of wealth and the betterment of environment go on as well through the increase in the number of appliances and through their improved arrangement, as through changes in their kind._ A machine is an adjustment of various natural agents to each other so as to make a more efficient agent, and machines in turn may be adjusted as parts of a larger system of production. The ideal of the modern factory system is so to arrange the machinery that no bit of material will make an unnecessary motion. The log, once started through the mill, is carried automatically from one machine to another until it emerges as a roll of paper or as a box of tooth-picks, ready for use. In an American watch-factory one man tends twelve or fifteen automatic machines. A small brass rod is fed automatically to the machine; a piece is cut off, is picked up by a human-like metal hand; is put into a lathe, and shifted or held firmly while it goes through fifteen or twenty processes; and then is dropped into a box where it is ready for the "assembling" of the watch. As the machinery improves, factories making allied products are grouped to make a system still more efficient. As the number of agents increases they are distributed so as to be where most useful to the owner. A man having two umbrellas keeps one at his office and the other at home; a student having two books of the same kind keeps one at his room and the other at the university; a farmer having two hoes keeps one at the barn and the other in a distant field, and by this distribution the agents are increased in efficiency. [Sidenote: A larger and better environment] The aim of a progressive society is to enlarge the environment, and constantly to adapt it better to the service of wants. This is done largely by mechanical agents, which capture the natural forces of the world, put them into the right place at the right time, and make them do the right thing, or which group and relate the materials of the world in the right ways. Some of the groupings in the chemical and physical world that do not fit man's purposes may be made to do so. The world in this way becomes more and more a great workshop, better and better adjusted to man's wants. [Sidenote: Increasing some rent-bearers reduces the rents of others] 5. _The betterment of the environment of society in some directions reduces the rent of other parts._ The wish of the individual is to raise his own rent-bearers in efficiency, but in doing that he affects the agents owned and controlled by others. The ideal from a social standpoint is to increase not rent but the welfare of society, and this is not always the ideal of individuals seeking their own interest. However, as the efficiency of some agents rises, it becomes unnecessary and unprofitable to use the less fertile fields; they cease to be rent-bearers, and the rent of the richer fields falls under the influence of the new supply of products. Some inventions suddenly increase the efficiency of free goods to such a degree that the less efficient rented agents are thrown out of use, and the margin of utilization is moved to a higher plane than it was on before. Improved types of machinery more or less rapidly displace the older, less efficient types, which, therefore, more or less completely lose their rent-bearing power long before they are physically worn out. When improvements in agriculture that are applicable to a considerable area of land take place, and the product thus is increased and cheapened, the poorer land is abandoned. Inventions and improvements thus gradually becoming common property, increase the free goods and free uses not bearing rent and open to every one. One who improves the quality of a machine or the economy of a process may thus unintentionally injure some of the owners of low-rent agents, while unintentionally increasing the welfare of the mass of men for whom the margin of utilization is thus lifted. § II. EFFECTS OF SOCIAL CHANGES IN RAISING THE RENTS OF INDIRECT AGENTS [Sidenote: Effect of decrease of the competing agents] 1. _Changes in the number and kind of competing resources may raise the rents of particular agents._ Rents may increase without increase in the quantity or number of a particular group of agents or without change in their technical efficiency. As changes in the conditions of society may reduce rents, so other changes may increase them. Agents of the same kind may diminish in number, either absolutely or relatively. If some of the competing machines are destroyed, the rents of the machines that remain rise, while if new supplies are found, either in nature or by improved industrial processes, the rents of the older agents fall. [Sidenote: Effect of new uses for agents] 2. _The discovery of new uses for agents or for their products raises their rents._ Farm land of the poorest kind often is found to contain valuable mineral deposits. Such a lucky find has lifted the mortgage from a farm in eastern Pennsylvania, from which, in two or three years, has been taken feldspar exceeding in value the agricultural products of the same land in the last fifty years. The discovery of building stone, coal, natural gas, or oil land may make the annual rent (or royalty) of land tenfold its former total value. Fitness to produce nettles is not ordinarily a virtue in land, but the discovery that certain fields produce a superior quality of the nettle used for heckling cloth, causes them to take on a new value. A mineral spring, because of the supposed or proved healing properties of its waters, may be as good as a mine to the owner. Peculiar fitness for the cultivation of celery may convert marsh land into a substantial source of income. Social changes are constantly causing agents to shift from lower to higher uses. As population grows and groups about new industries, farm land is used for residence lots, and in turn for business purposes. Rents therefore rise, and this rise is reflected in the higher selling value of the land. If a new demand arises for the product of any machine, its rent rises, although it may continue to turn out the same product as measured by number or quantity. For, if consumers increase, a given supply of agents becomes relatively smaller than before. [Sidenote: Sudden variations in demand] 3. _A rise in rents due to social changes may be relatively permanent or temporary._ Business conditions sometimes change quickly. An urgent demand for special machinery raises quickly its rent and value. It is said that lace machinery is sometimes thrown out of use for several years, until a sudden renewal of the demand for lace causes the rental to equal, in two years, more than the original cost. At such times the value of factories increases greatly, but after a few years of prosperity business again collapses. Such prosperous periods are the opportunity of the business man and of the promoter to sell the factory at its highest price. Machinery adapted only for a special product will not sell as readily when less needed for its special use, as that which, like a turning-lathe, can be used for many purposes; but the more special the appliances needed for a certain product, the higher, more abnormal will be their temporary value when they are suddenly needed. Land near the site of an exposition takes on a very great value and again falls after the exposition is over. During the Boer War horses and mules rose in price in the United States on account of British purchases. [Sidenote: Cause efforts to increase the supply of agents] A rise in the value of any agent at once causes an attempt to duplicate it or to find a substitute for it; this attempt, if successful, puts a check or sets a limit to the rise. In this search for new devices the man who can see most quickly and clearly has a key to wealth. Some kinds of agents, as rare minerals or tools that can be produced only by highly skilled labor, cannot be increased rapidly in number and remain high in price for a long period; and favorably located building sites illustrate the same principle. In some cases, it is true, the demand may be due to some temporary cause, as in a period of unsound land speculation, but usually the growing value of location is due to a steady and abiding change in population or business. [Sidenote: Franchises guard the growing rents from the influence of substitution] 4. _Such public utilities as are guarded from competition by franchises, often rise in rental with increase in population._ The leading classes of public utilities referred to are waterworks, gas-works, street-railways, ferries, and wharves. This evidently is only a special illustration of the principle just stated, where it is not easy to find a substitute for certain agents. Public franchises entitle the owners to special, sometimes exclusive, privileges, and protect them legally from competition. Not all franchises are valuable; many street-railways are unfortunate ventures, the earnings being insufficient to pay expenses, to say nothing of interest on the investment. But when they pay greatly, their high value is due to the impossibility of competition. The cars, mules, dynamos, steam-engines, and other agents combined to furnish transportation, have a special earning power because other similar agents are forbidden to be used in that market. [Sidenote: Various kinds of "unearned increments"] 5. _Industry abounds with cases of unearned increments of value due to accidental and social causes raising the rents of wealth._ The term unearned increment may be defined as an increase in rents (or value) of agents, due to something other than the efforts or merits of the owner; in fact, it is that of which we have been speaking. In some cases powerful or wealthy men can bring about social changes in entirely legitimate ways. The owner of a large factory, moving it into the country, may buy up surrounding land and found a city, converting pasture lands and corn-fields into valuable building lots. Again, social changes are produced immorally, if not illegitimately, when wealthy men or influential politicians cause laws to be passed which inure to their advantage but which may ruin many other citizens. [Sidenote: Also many chances of loss] In most cases, however, social changes are impersonally caused. The individual owner who profits by them is powerless to affect the result. He can only adapt his conduct in some measure so as to reap an advantage. He can strive to increase the number and quality and to get control of such agents as he foresees will yield higher rents. In making such a forecast there is chance of loss as well as of gain. The term "unearned increment" has been frequently used in recent years. It is often assumed to be a peculiar thing, sharply in contrast to other changes in value. The foregoing hasty review may serve to suggest how manifold and complex are the instances of it, and what an important part it plays in modern industry. DIVISION C--CAPITALIZATION AND TIME-VALUE CHAPTER 13 MONEY AS A TOOL IN EXCHANGE § I. ORIGIN OF THE USE OF MONEY [Sidenote: The consideration of money can no longer be postponed] 1. _The exchange of goods by barter is extremely difficult in most cases._ Thus far we have not considered the subject of money and have so far as possible avoided even the use of the term. Value in economics does not depend on money, and is not necessarily connected with it. Things can be compared in their utility, their importance to our welfare can be estimated, without the use of money. Many problems of economics can be discussed pretty thoroughly and solved without the use of the word money or any term of similar meaning. But to-day it is impossible to go very far in the discussion of economic questions without using the concept of money, which is interwoven with every practical and theoretical problem in economics. We have delayed to the farthest limit the formal recognition of the subject; but we are now approaching the question of capital and interest, and it is no longer possible to avoid a preliminary consideration of the money concept. [Sidenote: Exact measurement of utilities is not possible without some medium of exchange] In considering the problem of exchange of consumption goods, we have assumed that it is possible to weigh small differences in the marginal utility of goods, and that such differences have influence on exchange. Now in exchange by barter such a small estimate is impossible. In barter things are exchanged directly for each other in kind. If the two things do not chance to coincide in value, the exchange cannot be completed. An equivalent must be found, or a multiple, if the marginal utility of two goods is to be equalized for either party by exchange. As in most cases this adjustment must be very incomplete, many exchanges that otherwise would be advantageous cannot take place. In the earlier stages of development, this careful estimate of value is not found. Children do not make it. The typical trade of the small boy is a "trade even"; Johnny exchanges his gingerbread for Jimmie's jack-knife. It marks an epoch in the industrial development of the boy when he begins to keep store with pins, and no longer trades candy for apples, but both for pins, which have become the medium of exchange in his boy world. He then can express values in much more exact terms. In our society most children begin early to grow familiar with this conception; but travelers find some savage tribes still in the earlier childish stage of development, unable to grasp the thought of a general medium of exchange. When, through lack of a medium of exchange, there is a failure to adjust utilities, there is a loss of the possible advantage in each defeated exchange. There is a further waste of time and of vain efforts to find something that will be accepted in exchange, and the loss offsets a large part of the gain even when the barter is effected. [Sidenote: Money is found to serve as a general medium of exchange] 2. _Some kind of enjoyable good in general use comes to be money, that is, to be accepted as a medium of exchange._ The difficulties just mentioned are met by the use of a medium of exchange. A medium of exchange is simply one kind of wealth which is taken, not for itself, but to pass along, in the belief that it will enable the taker to gratify his wants and distribute his purchasing power in a more effective way. Money is an "invention" in that it is a means of exchange that came into use independently in a great number of communities. It is not an invention in the sense of a mechanical device suddenly hit upon, but rather in the sense of a social custom that grows as its convenience is tested by practice. Money is used, in some degree, everywhere except in the most primitive tribes. Historically viewed, the money first used in any community is seen in every case to be a commodity capable of giving immediate gratification, a direct good in immediate use. It then gradually comes to be used as money, which is an indirect agent. Still later, when the money habit is well established, a kind of material having no utility except as a medium of exchange may come to be used. [Sidenote: Qualities of the primitive money] 3. _Money in its origin is that good which best unites the qualities that make it easy to sell, to carry, to know, to keep, to divide, and unite._ It is evident that if some one commodity is gradually to take on this use as a medium of exchange there will be a choice; some things will be better fitted than others. First, this thing must have the quality of salability, or marketability. In the channels of exchange it is taken not because it is wanted for itself, but because it will help to get something else that is wanted. To be sure of a ready sale in a primitive community it must, however, be something that is generally desired. Food and clothing, which supply the fundamental physical needs, are the most generally used and desired of all goods. But they do not have the second quality of a good money material, that of great value in small bulk, transportability. Food is bulky. The carrying of a venison or of a bag of wheat on one's back a short distance requires an effort as great as that for the procuring of the food. Furs, however, have this quality in a high measure, united with other qualities of money, as is shown by their general use in the exchanges of northern tribes. Thirdly, a thing must be recognizable; counterfeits must be easily avoided, and the quality must be easy to test: this is the quality of cognizability. The love of ornament is universal in human societies, and gives value to many materials combining in a high degree the qualities thus far named. Fourthly, the money material, when taken in exchange, must remain without loss of quality, perhaps for long periods, until it can be exchanged again. Food does not answer to this requirement, being organic and perishable. But some of the metals, having value in small bulk, salability, cognizability, and durability, step by step displaced other forms of money. Finally, money must be made of a material easy to divide and unite. It is a great convenience in small transactions to be able to represent a fractional value by a small coin. The money material thus, likewise, is easily shifted to and from its money use. It is a very poor money that has not this quality, yet a thing may serve for money in larger transactions without it. Cattle, slaves, and land have been thus used, although they answer in a very rough way these fundamental requirements of the money material. [Sidenote: Industrial changes affect the convenience of certain money forms] 4. _The changing material and industrial conditions of society change the kind of money that is used._ The money use, as has just been shown, is a resultant of a number of different motives in men. Things that have the highest claim to fitness for money with a people at one stage of development would have a low claim at another. As each of these stages is passed, the thing used as money either increases or decreases in its fitness. The final choice depends on the resultant of all the advantages. The use of a material may become more general or less so. Shells used for ornament in poor communities cease to be so used in a higher state of advancement, and thus their salability ceases. Furs, used at some stage of development as money in all northern climes, cease to be generally marketable when the fur-bearing animals are nearly killed off and the fur trade declines. Tobacco was at one time in Virginia a great staple. Merchants were always ready to take it, and its market price was known by all; but as it ceased to be the almost exclusive product of the province, it lost the knowableness and marketability it had before. In agricultural and pastoral communities where every one had a share in the pasture, cattle were a fairly convenient form of money, but to-day would be a most inconvenient one; a city merchant exchanging goods for Poland China pigs and Texas steers would envy the proverbial owner of a white elephant. [Sidenote: The proved fitness of gold and silver as money] The value of the money material may fall so greatly as a result of greater production, as in the case of iron, tin, copper, that it becomes unsuitable. Again, as wealth grows, as exchanges increase, as the use of money develops, as commerce extends to more distant lands, the heavier, less precious metals fail to serve the money need, especially in the larger transactions. Thus, in a sense, different commodities compete, each trying to prove its fitness to be a medium of exchange; but only one, or two, or three at the most, can at one time hold such a place. Silver and gold, step by step, often making little progress in a century, have displaced other commodities, and are the staple and dominant forms of money in the world to-day. Every community has witnessed some stage of this evolution. Now nations are divided into two great groups, silver- and gold-using, in accordance with the metals they use as standards. The gold-using countries are the most advanced industrially, requiring the most valuable money metal. Many countries have passed in the last century from the silver to the gold standard, and in an intermediate period have tried to use both standards. The Asiatic and South American countries mainly use silver, while most of those in North America and Europe use gold. While industrial changes thus affect the choice of money, in turn money reacts upon the other industrial conditions. If a new and more convenient material is found, or the value of the money metal changes to a degree that affects the generalness of its use, industry is greatly affected. The discovery of mines in America brought into Europe, in the sixteenth century, a great supply of the precious metals, and this change in the use of money reacted powerfully on industry. Money being itself one of the most important of the industrial conditions, is affected by and in turn affects all others. § II. NATURE OF THE USE OF MONEY [Sidenote: Money is an indirect agent, a tool to effect exchanges] 1. _Money in all its money uses is an indirect agent, to be judged just as other indirect agents are._ The key to this section is the thought that the function of money is to serve as an indirect agent. Money is often, by a figure of speech, called a tool. Literally a tool is a bit of material which, taken in the hand, is used to apply force to other things, to shape them or move them. Figuratively, this is just what money does. A man takes it in his hand not to get enjoyment out of it, but to apply force, to move something, and that which he moves is the other commodity. Adam Smith aptly likened money to the road and wagons that transport goods, thus gratifying wants by putting things into a more convenient place. Money is only one of a multitude of forms of wealth. It is not even the most "valuable"; it has value just as other indirect agents have. The loss caused by taking away an indirect agent entirely is greater than the benefit usually attributed to it. Its utility in the extremest conditions is greater than its marginal utility under ordinary conditions. Food is not credited in the market with enormous value, but if starvation threatened, all else would be given for food. In a like manner, each individual values money according to the importance of the marginal service it renders, but the marginal service is far from measuring the loss that would be caused by the entire disuse of money. In a society without money, industrial processes would be very different, and exchange would be hampered in almost inconceivable ways. It is true, therefore, that money is an economic factor of high importance, but it is not so indispensable as many other factors to which far less value is attributed. [Sidenote: Why a poor community lacks money] A poor community has little money because it cannot afford more; it gets along with less money than is convenient just as it gets along with fewer indirect agents of every other kind than it could use. Pioneers in a poor community where the average wealth is low, cannot afford to keep a large number of wagons, plows, good roads, or school-houses. If the community were wealthy enough it would have more of these and of other things, and great as is the convenience of money, poorer communities have to do with little of it. It is, therefore, a confusion of cause and effect for poor communities to imagine that their poverty is due to lack of money. [Sidenote: The use of money as a common denominator] 2. _Out of its use as a medium of exchange comes the use of money as a common denominator of values._ Money serves as a "common denominator," for, as all other things can be expressed in terms of money, through it the value of other things can be compared. The other things can be expressed in money because they are constantly exchanged for it. All things being compared with money, can in turn be compared with each other. Some consider this service as a common denominator to be the primary and most important function of money. Sometimes a money of account is found, which is not in use as a medium of exchange. Cattle and slaves have served as money of account while not used as a medium of exchange in larger transactions. Money of account is used, as the shilling in New York, which for a century has not been in use at all as a medium of exchange. It is, however, only apparently a denominator of value; the shilling represents five fourths of ten cents. The actual standard is the dollar; the shilling is only a habitual form of speech and is mentally reduced to terms of the money in use. A decimal system is a great convenience in the use of money as a common denominator, but not indispensable. It is a striking fact that England, until a few years ago the greatest industrial nation, still uses a money unit requiring cumbrous calculations. [Sidenote: Money used as a storehouse for saving.] 3. _Other uses of money are as a storehouse of saving and as a standard of deferred payments. These uses grow out of those before mentioned._ The standard of deferred payments is the unit of value in which debts are agreed to be paid later. It is evidently most convenient, and therefore almost inevitable, that the common denominator in which all values are expressed from day to day should continue to be taken as the value unit when the completion of the exchange is delayed a day, a month, or a year. This will be more fully discussed at a later stage of our study. The use of money as a storehouse of saving was more common formerly than it is now, when better ways than the hoarding of money are found for "laying up for a rainy day." In some measure, however, money is hourly serving this use, which is still an important one. Money kept to be used to-morrow or five years hence is a storehouse of value for twenty-four hours or for five years. In either case it is being kept to complete at a later time its use as a medium of exchange. A thing ceases to be money, logically viewed, the moment its owner keeps it without the purpose that it shall be spent ultimately. The typical miser is a man who has lost his reason as regards the money use. Money must be deemed, therefore, to perform the same essential service as a storehouse of saving that it does as a medium of exchange. In either case it is to be kept only to the moment when it will afford the maximum of pleasure. § III. THE VALUE OF TYPICAL MONEY [Sidenote: The money use is added to other uses] 1. _The money use, historically considered, is a new use added to a good, and increases the demand for that good._ The history of any particular kind of money may be traced back to a point where it was not money, since which the money use has been added gradually to the other uses. The value of the material later to become money is determined, as is that of any good, according to its marginal utility in all possible applications. No new theory is required to explain the value of this same commodity as it gradually acquires the added use of a medium of exchange. The new use influences demand for the thing just as do the other uses. What is here said must be understood as applying to typical money, which is at the same time a commodity having other uses. Other things that are not typical money come later to be used as money, under legal regulations. [Sidenote: The other uses continue, slightly modified by the money use] 2. _A good that comes to be used as money continues to have a commodity use along with the money use._ When a thing is wanted for some quality that gives immediate gratification to the user, the explanation of its value is simple. Ornaments, shells, feathers, food can be seen to have a direct want-gratifying power. The money use is one that works no physical or visible change in goods, and to many minds it appears so different from other utilities that it remains quite mysterious and incomprehensible. To persons accustomed to thinking on problems of value, this case appears to be no more difficult than that of anything else having two or more uses. Cows are used for milk, for meat, and as beasts of burden. Each of these uses is logically independent as a cause of value, yet all are mutually related, the values of cattle being determined by the consideration of all their uses united into one scale of diminishing utility. [Sidenote: Money yields a series of rents which are the basis of its value] 3. _The uses of money make it a rent-bearing form of wealth._ The rent that money yields is in the form of convenience and economy. This is sometimes rendered directly as psychic income, as in enabling the traveler to buy his dinner, for the money thus yields gratification just as does the carriage in which he rides. One may go for a day to the seashore without a parasol and suffer from heat, or without money and suffer from hunger. In every case where money is retained for a time in possession, there is expected from it a usufruct as great as, or greater than, can be secured from anything else for which it can be exchanged. This usufruct is a net surplus, or income, yielded by a sum of money undiminished in amount up to the moment it is spent, but meantime increasing in the gratification it will help to secure. In many cases in practical business money yields gratification only indirectly, as the objective contract rent received as interest for borrowed money in business uses, or as economic rent when the use of money in business enables one to secure a larger income. Because money yields a rent men make the sacrifice involved in keeping a stock of it on hand. On this rent is based that part of the value of money that is derived from its money use. As the use of money as a standard of deferred payment, or basis of commercial obligations, does not require that it be owned by the parties writing the contract, this use of money is a free good, a sort of social by-product of the medium of exchange. When money is in use in a community, any person may draw up contracts in terms of money, borrowing and lending, buying and selling wealth, later to be repaid in other wealth or services expressed in the circulating medium. [Sidenote: The general use of money is characteristic of this age] 4. _Money may be defined as a generally accepted material means of payment and medium of exchange._ This, its primary and essential function, may appear to be less important as new modes of balancing accounts of wealth are devised. But its functions as a common denominator of values and as a standard of deferred payment are increasingly important in an advancing society. It is this expression of the value of all other things in terms of money which may well be deemed the essential characteristic of the capitalistic age. In earlier periods wealth was thought of and expressed in concrete terms; now it is expressed in money. The general use of money affects men's ways of looking at wealth and speaking of it. Without appreciating the nature and function of money, it is impossible to grasp the significance of capital in modern industry, the consideration of which we are now to enter upon. CHAPTER 14 THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL § I. THE BARTER ECONOMY AND ITS DECLINE [Sidenote: Various points of view of the students regarding money] 1. _The use of money prevails in very different degrees in various parts of the United States._ The members of this class, representing nearly every state and territory in the Union, have lived amid very diverse industrial conditions. Some know best the country where conditions are similar to those of a hundred years ago; some, the villages where may be seen the handicrafts and the small general store. Others know better the cities with their varied industries; while doubtless still others, through family relations, know of the methods of great wholesale business, perhaps even of the larger commerce and foreign trade. Methods differ in the different lines of business, and according as a man is a farmer, a merchant, or a banker, he has different ideas as to the use of money and of the part it plays in modern industry. You come to this study with different experiences and preconceptions; as a result every statement produces a somewhat different impression on each of you. This is true in general of the statements made in political economy; but it is most strikingly true in the discussions of money. A city boy rarely sees a case of barter; whereas in many parts of the West and Southwest, and in the mountainous districts of the East, a large part of the business is carried on in this way. Town and city in New York state differ in this respect, but hardly more than do the rural districts of the different sections of our country. Banks are very numerous in the East, are few in the Northwest, and still fewer in the South. Men can understand each other better in a discussion if they are conscious of the fact that they do not instinctively take the same point of view. [Sidenote: Countries differ in their use of money] 2. _The extent to which, on an average, money is used in different countries of the world, differs widely._ Statements in political economy must be guarded; few of them can be taken as universally true. As the different parts of one country may be contrasted, so may the different countries. The use of money in Siberia would be much less than that in Moscow and St. Petersburg, and again the average use in Western Russia is doubtless less than that in Austria. In Austria the money use is less developed than in Germany. While there is now little difference between Germany and France in this respect, France for a long time was the more developed industrially and made greater use of money. There is greater use of money in the cities of the outlying countries than in the rural districts. In the cities of Mexico banks and credit agencies are employed as in the American cities. The rural districts are more backward and make far less use of money than is the case in the United States. The great ports of China are provided with all the facilities of modern banking. In the great cities of India one can get a bank draft that will be paid in any part of the world. But go a very little way out of the cities of China and India, and conditions greatly change; money is far less used and principally as a storehouse of saving. [Sidenote: Slight use of money in the Middle Ages] 3. _In a historical view the European nations are seen to begin with a barter economy and to pass through great changes as regards the use of money._ Here the view shifts from a comparison of different nations at the same moment to a comparison of the same nation through a period of centuries. To understand, even in a measure, what is about them men must know out of what it grows. In the early Middle Ages money was used chiefly in cities, and there only to a limited extent. Almost universally a "barter economy" prevailed, or, as it has been called, a "natural economy," a term taken from the German "Naturalien," which means natural products, enjoyable things, as opposed to money. Natural economy, therefore, means that condition of society in which things are exchanged in kind. In the Middle Ages land was the great and dominant form of wealth. The prince himself was dependent on land for his income. The conquering chief or invader took possession of the land and parceled it out to his followers, and they in turn to their vassals. The income of the rulers was in the form of "Naturalien" (wheat, chickens, eggs), the kind and amount of which was fixed by contract or by immemorial usage. The landlord had land as his wealth and income-getter; the tenant received the use of the land in payment for his labor. [Sidenote: Land, the main form of wealth, was rented without the use of money] The condition of the serf appears to have been, under these circumstances, inevitably connected with the "barter economy" as applied to the renting of land. A farm cannot be moved, and in medieval conditions its products mainly had to be used on the spot. If the serf was to use and enjoy the land, he had to stay upon it. Having no money he had to pay in labor or in products, for its usufruct. In those times the powerful man, politically, was also a wealthy man whose wealth consisted of landed estates. Between the landlord and the serf existed a lasting relation, inherited rather than voluntary, but similar in its conditions to the renting contract. The villein had the use of the stock, pastures, fields, woodlands, provided he kept them undiminished and undestroyed to transmit to his children. Under such conditions there was great fixity of economic relations. While in some respects this was a happy condition, it had its disadvantages. The renting contract, in connection with a fixed rotation of crops and some communal modes of cultivation, hindered improvements. The more intelligent cultivator could not change his methods for the better. It may be seen not only that the use of money on a medieval manor was slight, but that the conditions for the growth of the money habit were most unfavorable. The terms of agricultural contracts, the modes of speech, the habits and thought of the mass of the people, were therefore determined by the conditions of the barter economy. A change in these respects was slowly worked by forces originating outside, in a very different industrial environment. [Sidenote: Contrast between city wealth and feudal estates in the Middle Ages] 4. _With the growth of cities developed a new class of wealthy men and a new view of wealth._ The student of history knows of the conflict that grew up during the Middle Ages between the cities and the landed aristocracy. It found its cause in economic conditions. There were obvious differences between the wealth of the feudal landlords, and the wealth that grew up in cities. One must be used mostly on the spot, the other can be moved. The fruits of one are perishable for the most part; the fruits of the other can be kept for a longer period. The methods of agriculture are exceptionally stable; production by handicraftsmen is dependent on the peculiar skill of the workman, giving greater room for invention and a premium on skill. The one industry may be carried on by servile labor; the other can be efficiently followed only by free workers having the ambition to excel. [Sidenote: Money thus more used in city trade] The use of money grew up in the city. The density of population made it easy, the growth of wealth made it possible, and the nature of the exchanges made it necessary. Whereas the relation of landlord and serf under the renting contract continues from year to year, the relation of the buyer and seller of shoes, hats, etc., in the city, is temporary, these things forming only a part of man's economic needs. Barter with a particular individual is much more inconvenient if exchange is only occasional than where the contract is a continuing one, and there is an annual balancing and settlement of accounts. So, as city industry and commerce grew the use of money increased, both in small neighborhood trade and in the larger transactions with distant countries; and thus the business methods of the cities grew into sharper contrast with those of the rural districts. [Sidenote: Money loaned and borrowed in cities] 5. _The loan and hire of wealth in medieval cities came to be expressed as a money loan._ The loan of money and of other wealth expressed in terms of money, began in the cities. The use of money and the expression of the value of things in terms of money was common there throughout the Middle Ages. Moreover, as the movable forms of wealth multiplied, the agreement to return borrowed wealth in kind became impossible in cities; the loan in terms of money became the only practicable thing. A merchant embarking on a trading expedition must have such a number and variety of goods, that he finds it both very difficult to rent them and wasteful in time to enumerate them and return them in like kind. It therefore became usual to make a loan either of the things expressed in terms of money, or of money with which to buy the things, thereby reducing to a single, simple, easily interpreted contract, the indebtedness which the borrowing of a thousand different things occasioned. [Sidenote: The medieval opposition to loans at interest] Such a contract differed not in economic purpose, but only in form and terms of obligation, from the renting of wealth. The church writers, however, got much confused in regard to the nature of money loans. They did not see that it was _things_ which the merchant wished to borrow. They did not see that the money loan was simply a more convenient mode of transferring the use of wealth from one person to another. The moralists and lawmakers of that day said: Money is unfruitful, therefore taking interest for it is robbery. We cannot follow here the controversy as to the justice of interest on money which involved other ideas than those mentioned, but even to the present time traces of the old fallacy may be seen more or less plainly in the economic theory as well of conservative writers as of the socialistic opponents of interest. The principal sum expressed in the loan contract was called the capital sum, from _caput_, head, and the amount paid for its use was first called usury, money for the use. How the word interest came to take its place, and the word usury came to mean _excessive_ interest is one of the most interesting chapters in economic history. The term capital then came to be connected with city wealth, with movable forms of wealth, with things supposed to be peculiarly "the product of labor"; and interest was assumed to be connected only with this capital. The term rent on the other hand was connected especially with the use of land. The connection was a historical accident, but it has had an important influence on economic theory. [Sidenote: Rivalry of the commercial and landholding classes in Europe] 6. _The owners of city wealth and of country landed estates often were opposed as well in social and political as in economic affairs._ The practical economic questions of the Middle Ages and the practical political questions largely turned on these two groups of interests. The men of wealth in the cities, the merchants and manufacturers, often were found opposed to the landed aristocracy. This social division between the commercial and agricultural classes doubtless helped to strengthen the prejudgment as to the nature of the two kinds of wealth. Indeed, in view of the situation, it may have been in a measure justifiable and expedient to contrast the thought of city wealth, which has come to be called capital, with that of landed wealth. But even if it were, it is now misleading and erroneous to continue the use of such concepts in a new country and in our modern conditions. [Sidenote: Land continues to be rented while city wealth is borrowed in money form] Indeed, for centuries the sharper features of the contrast have been steadily softened. The money economy of the city gradually spread to the rural districts, but never entirely displaced barter, which lingers everywhere. Important steps toward a money economy were the commuting of forced or customary labor of the serfs into a money payment to the lord, and at the same time the substitution of money payments for payments in kind (use of lands, specified goods, etc.) to the peasants. Thus arose a free peasant class receiving wages. But land continued to be rented and landed estates to be hereditary throughout Europe. As they did not pass from hand to hand as a commercial or marketable form of wealth, their value was rarely, if ever, expressed in terms of money and as a ratio to the rent they bore. The result was the fixing of the erroneous idea that agricultural wealth is essentially different in the character of its service and yield from wealth used in manufactures. One phase of the error was the idea held by the physiocratic writers and by Adam Smith that in agriculture "nature labors along with man," while in manufacture "nature does nothing, man does all." This view was corrected by later critics (Buchanan, Ricardo, and others), but the main portion of the fallacy persisted in the supposed contrast between the characters of the services performed by natural resources and by artificially produced wealth. § II. THE CONCEPT OF CAPITAL IN MODERN BUSINESS [Sidenote: Extension of the use of the money loan and of the capital concept] 1. _The development of the use of money and credit has led to the expression of the value of all indirect agents, without distinction, in terms of money._ This is a capitalistic age. The development of a class of money-lenders has led to a transfer of all sorts of wealth from owners to users by means of money. As in medieval Europe city wealth was bought and sold, and measured and expressed, so in twentieth century America are the farm, the waterfall, and the mine. Every purchase with money owned or borrowed is to-day called an investment of capital. To invest means to clothe, and an investment of capital is clothing money in any kind of wealth, whether it be a ship, a factory, or a farm. Interest on money is the contractual form in which more and more the use of wealth is paid for. The borrower does not ask the wealthy man to buy for him a factory and to rent it to him. It is not impossible for the transaction to take that form; but in practice it is inconvenient. The capital concept, the expression of wealth in the form of money, spreads over almost the whole face of the economic world. In promissory notes, mortgages, capital stock, bonds, and many other forms, are expressed the obligations of borrowers bound to pay regularly a sum called interest for the use of the multifarious wealth they have chosen to employ. [Sidenote: Definition of capital] 2. _Capital to-day may be defined as economic wealth expressed in terms of the general unit of value._ In economic discussion new conditions must be recognized and an attempt made to adapt definitions to the language and needs of practical life. By this definition, capital, at any given moment of time, includes all economic goods in existence, when they are thought of in terms of their value. But things have different durations, some are parts of the capital of the world only for an instant, others for a week, a month, or years. Most capital is composed of things durable in a large degree. It has been seen above that there is no reason for keeping things unless they will increase in value, that is, unless a rental is logically attributable to them. Everything kept for a day, a month, a year, is kept because thus it will continually give off uses or by accumulating them it will become more useful. Hence, when interest is defined as the payment for the use of capital, it is connected with all wealth that is expressed in the capital form. In practical business and in theoretical discussion this is the idea of capital that alone can be consistently followed. Capital is the value equivalent of a sum of money "invested," "clothed" in forms of wealth purchased and exchanged. Wealth has become fluid in modern times; it was crystallized in medieval times. Under the new conditions, wealth, expressed in the mobile form of capital, flows into the most distant corners of the industrial world. [Sidenote: Distinction between money and capital] 3. _Capital must not be identified with money although it is expressed in terms of money._ While money and capital are not identical, neither are they opposite or mutually contradictory. Money is but one species of the genus capital. It is a particularly durable form when industry as a whole is considered, a particularly fleeting form in the individual's possession, and a particularly important, though not necessarily the most important, form in its social significance. The things composing capital are concrete things, scarce forms of wealth, some of which are yielding gratification at the present moment, or are destined to do so at some future moment; others of which are not themselves giving direct gratification, but are indirect agents for the gratifying of wants. To this latter group belongs money. The caution contained in this proposition may appear to some to be superfluous, but it is most needed. The mind is so prone to identify things that are expressed currently by the same words. The ease with which money and capital are thus confused has led to various popular fallacies on practical economic questions. [Sidenote: Contractual interest and rent involve a difference of business procedure] 4. _Renting wealth and borrowing capital have the same economic purpose, but the capital contract presents certain peculiar features._ In the interest contract for the loan of capital the interest always is and must be expressed in money; the capital sum must be expressed as value; and the interest rate expresses the relation between these two values. In each of these features the interest contract is in contrast with the renting contract. While the rent itself may or may not be expressed in terms of money, the value of the rented wealth is not so expressed, and there is no rent-rate expressing the relation between the two values. [Sidenote: The wealth concept and the capital concept contrasted] As here presented, the essence of the capital concept is in the mode or form of expression of wealth, not in the physical nature, the origin of its value, or any peculiarity in the kind of wealth; the content of the concept is limited only by man's thought of wealth, every good becoming capital when it is capitalized, that is, when the totality of its uses is expressed as a present sum of values. The difference between the wealth concept and the capital concept is therefore subjective, not objective; it is a difference in the mode of man's thought regarding wealth. The rent contract and the interest contract are modes of borrowing and lending which reflect this difference of conception. In their effort to express more exactly to themselves and to others the relative felt importance of their environment, men take in turn different points of view, and use different modes of expression. The most developed and exact of these devices for the social expression of valuations, which became possible only with a money economy and widened markets, is the capital concept, whose nature has been analyzed here. [Sidenote: The capital concept now prevalent] Summarizing the thought of this chapter, it may be said that the capital concept has gradually developed with industry, and is now the most widely prevailing mode of expressing the quantity of wealth. It is used in the discussion of all the most important problems of modern industry. The questions of income from wealth, of trusts and corporations, nearly all that is most notable in the development of modern industry, require the use of the capital concept. Yet (returning to the thought with which this chapter started) in many of the outlying districts other modes of looking upon wealth are employed. References to modern industry must be understood usually as applying to the most developed capitalistic conditions. CHAPTER 15 THE CAPITALIZATION OF ALL FORMS OF RENT § I. THE PURCHASE OF RENT-CHARGES AS AN EXAMPLE OF CAPITALIZATION [Sidenote: The nature and sale of rent-charges] 1. _From the twelfth to the sixteenth centuries the sale and purchase of rent-charges was the most general form of borrowing and lending wealth._ A rent-charge in the Middle Ages was a definite income that was to be paid out of the rents of an estate, business house, manor, etc. The property was said to be "charged" with the payment of that income, and some estates were passed on for generations from father to son charged with a certain rent. It was thus possible for the owner of money to buy a rent-charge, either one that had been created a generation before, or a new one created by some landowner for the especial purpose of borrowing money to go on a crusade or of improving his estate or of investing in other business. The transaction took this form: the purchaser of the rent-charge paid a sum of money, called the capital sum, and obtained in return a rent-paper entitling him to receive permanently a given income. The house or land was security for the debt. The seller gave up the right to the rent as it came in year by year, and received in return a capital sum in hand. Generally he had the right to repay the sum whenever he wished and thus extinguish the rent-charge. Logically viewed, the purchaser bought an equitable part of the income, therefore an equitable part of that rent-bearing wealth. In effect it was just like a loan except that the purchaser of the rent-charge could not demand the repayment of his money. He could, however, sell the rent-charge when he wished to get his capital out. Gradually it became usual to sell and transfer rent-papers just as is done to-day with mortgages and bonds. Rent-papers thus came in the fifteenth century to be negotiable paper in somewhat general use. There was a rise and fall of the value of the rent-paper with changes in the demand for investment in rent-charges or with changes in the security. [Sidenote: Rent-charges were a convenient investment in medieval cities] 2. _The sale of rent-charges grew out of an industrial need of the exchange of safe permanent incomes for larger sums of wealth._ The custom of the purchase of rent-charges grew up in the cities. The increasing wealth of cities, the growth of commerce and enterprise, caused rent-charges to be sold by the owners of houses and real estate in the cities, and the custom spread to the country. It is an instance of the way income became more fluid in the cities during the Middle Ages. This kind of loan contrasted strikingly in the Middle Ages with those loans made commonly by reckless kings, prodigal nobles, and distressed peasants to secure consumption goods. Merchants needed large amounts of wealth for their growing enterprises, and they felt that if they could get a capital sum down they could make it earn more than the rent-charge. A perpetual income of one hundred units was therefore exchanged for a sum at the moment of twenty or twenty-five times that amount. As the wealth of the cities increased, there were some men who wished to retire from active business, and there were widows and children with property which they could not manage directly. Such persons either could not afford to take the risks of active business, or could not judge of them, and they formed a class of lenders or investors seeking some safe income. Between the two classes of active merchants and capitalist lenders, each of whom saw his own advantage and followed it, the practice of buying and selling rent-charges thus grew up. [Sidenote: Rent-charges were not forbidden by the church] The practice was allowed by the church, though interest and the lending of money were forbidden. The loan was substantially a loan of capital and the rent-charge was substantially interest, but in the eyes of the church moralists there was a marked difference, in that the obligation to the purchaser of the rent-charge was secured by a permanent and substantial form of wealth, and the contract usually was favorable to the borrowers. In its origin the practice was not merely an evasion of the law against usury, but a convenient form of contract. It doubtless came, however, to be used as a means of evading the law of the church against usury, and thus became an entering wedge for the general use of money loans. [Sidenote: The market value of rent-charges reflects the exchange ratio between present and future money incomes] 3. _Rent-charges had a market-value, varying with time and place, and expressed as a number of years' purchase of the rent-charge._ The sellers of rent-charges were influenced by many motives: a lord wished to build a castle, or go on a crusade; a farmer wished to improve his estate; a merchant wished to embark on larger ventures. Opportunities thus opened in the cities for men of wealth to get a fixed income for a payment of ready money. In the cities, the buyers seeking a fixed income would bid down, or bid up, the value of the rent-charges, which thus came to have a quotable market value. In time, greater and greater amounts were paid by the investors in return for the guarantee of a given income. In rural districts the value of the charges was low, that is, the capital sum was but ten or twelve times the value of the annual rent-charge; while in the cities it rose to twenty and even twenty-five times the annual rent-charge. A memento of this practice, probably, is the manner in which the price paid for land is spoken of still in England and the continental countries in a phrase quite unfamiliar to American ears, as a certain number of "years' purchase." If an estate is sold for twenty times the annual net rental it is said to be sold at twenty "years' purchase." This does not mean that the rental for twenty years only is sold, but that the rental _in perpetuity_ is sold for twenty times the annual rent; that is, the land is sold outright for twenty years' rent paid at once. The estate is looked upon primarily as yielding a fixed income; the value of the permanent possession of the estate is thought of as a certain number of times the value of the income secured. "Years' purchase" means, therefore, the length of time required for the income to amount to the purchasing price. This attains the thought of the present value of the estate, or capital sum in it, though the capital sum is thought of as a multiple of the income, instead of the income being calculated as a percentage of the capital value. Now at the rate of "ten years' purchase" an investment of money in land affords an annual interest of ten per cent., as each year the rental is one tenth of the original investment; twelve years' purchase yields eight and one third per cent., twenty years' purchase, five per cent., and twenty-five years' purchase, four per cent. Increase in the number of years' purchase corresponds to a decrease in the rate of interest which the original investment of money, the capital sum, is expected to yield. This is equally true whether the investment be in the legal form of a purchase of the fee-simple of land, or in that of the purchase of a rent-charge. We are brought to this conclusion: that the present value of the rents in perpetuity, of any given wealth, is the capital value of the wealth; and that the reciprocal of the number of years' purchase is the rate of interest that an investment is expected to yield. [Sidenote: Purchase and sale of rent-charges gives way to more modern contracts] 4. _The sale of rent-charges has gradually given place to the modern form of money loan._ The conditions of the contract in the sale of rent-charges were gradually changed for greater convenience. When the purchaser (the lender) was given the right to require repayment of the capital sum at the end of a specified time, the transaction was brought still closer to an ordinary loan. In this form, the sale of rent-charges is still found in southern Germany, but the greater simplicity of the money loan, and of the sale outright, has led to the almost total disuse of the older form of transaction. The purchase of rent-charges was long looked upon as a very different thing from the loan of money, but to modern eyes it is not, and the old distinctions between the moralities of the two kinds of income appear now mainly quibbles, justified in a slight degree by certain social facts of the time. The rise of industry led to different ideas on the lending of money; the prejudice against it weakened in large classes of the population, especially in Protestant countries, and its use rapidly spread. Not until 1830 did a decision of Rome remove all disapproval on the part of the church. Rent-charges are instructive now as showing the mode in which rents began to be capitalized in earlier centuries. § II. CAPITALIZATION INVOLVED IN THE EVALUATING OF INDIRECT AGENTS [Sidenote: The capital value of durable wealth is the sum of its expected rents] 1. _The buying of any indirect agent is practically the purchasing of a "rent-charge."_ To account rationally for the market value of anything, its importance must be traced back to "gratification." We have examined and accepted the proposition that if a good is not affording enjoyment at the present moment it is kept because it will yield a rent until it is used. If it is never to afford direct enjoyment, if it is never to mature physically into the class of enjoyable goods, the explanation for its value must be found in the fact that it is capable of yielding a series of rents of enjoyable goods. In the last analysis the value of anything must be found in its power of affording psychic income, a series of psychic rents. Now when such a durable income is bought outright, what is the basis on which its value is estimated? What other than the rents it will afford? Exactly as did the purchasers of a medieval rent-charge, the buyer of the durable wealth pays a definite sum in return for the right to enjoy a series of future rents. As was the case with rent-charges, however, the amount paid will be less than the full matured value of the rents. A long series, even a perpetual series, may be exchanged for no more than ten, twenty, or twenty-five annual rents. While therefore the selling value of the good is the sum of the values of the rents, it evidently is that sum discounted. Immediately, when we have reached this point in the reasoning, our proposition must suggest itself as self-evidently true in this form: the value of any good is the sum of the entire series of rents it contains, discounted, at _some_ rate, to their present worth. What determines the rate of discount is a question that will call later for a fuller explanation. [Sidenote: Capital value is not primary] 2. _There are two modes of approach to the problem of interest: one from the side of income (rents); the other, from the side of the bearer (capital)._ The rate of interest expresses a relation between two values, the value of the income and the value of the sum loaned, whether it consists of money or of other wealth expressed in terms of money; But which of these values is primary in a study of the causes of value? Which is the base from which the other is derived by multiplying at the rate expressing their ratio? The answer to this question cannot be a matter of indifference to the economic theorist. Universally heretofore the study of interest has been approached from the side of capital. A capital sum was said to be invested and to earn a certain interest, that is, per cent., of that sum. The usage of speaking of the investment of capital as a sum given, and of "interest on capital" predisposes the mind to this view. [Sidenote: Expected rents are primary, and capital value is the "years' purchase"] But the approach from the side of income has been shown to be in some important cases the historical origin of the rate of interest, and we need but reconsider reasoning that has gone before to see that this is the logical order in all cases. Rent, or income, is a link in the chain of value, connecting gratification or psychic income, consumption goods, rent or usufruct value, and finally capital value. To one keeping in mind the logical cause of value, it becomes inconceivable that capital value could precede income, a view possible only when a fragment of the problem is seen. This being true, the mere mention of a capital sum implies the interest problem, and assumes the interest rate. The capital is of that amount because the anticipated incomes, discounted at some rate, equal that sum. The capital sum is a certain number of years' purchase of the series of rents which can be secured by the use of wealth in various industries. The owner of a number of dollars (or of an amount of other wealth expressed in dollars) has open to him various investments. The value of any wealth is due to the possibility of deriving incomes from it. If, however, the expected income fails to be realized, the capital loses its value, or it is revalued on the basis of the new rents. The investment is then said to be a losing one. Thus, at each stage in the valuation of capital, before it is invested and at every moment thereafter when the valuation is readjusted to the rents realized or expected, rents are logically primary, the source from which the capital sum is derived. [Sidenote: The rate of capitalization of rents is not fixed merely in commerce] 3. _The capitalization of comparatively safe permanent incomes from real estate contains within itself all the factors for the independent determination of the interest rate, and is not to be explained merely by reference to "the prevailing rate of interest" in other investments._ The value of land usually is explained simply as the capitalizing of its rents at "the prevailing rate of interest." The rate is assumed to be fixed by conditions in manufacturing and commerce, and if five per cent, can be gotten there the capitalist would never buy land unless investment in it were made equally attractive. The cause of the rate thus is supposed to rest outside the transaction itself, the exchange of land for other capital seeking investment. The economic student is safe in assuming always that explanations of this sort are fallacious. The cause of value in any one exchange or any one industry is not thus to be juggled and shifted into another industry. It is true that the values of goods are so wonderfully interrelated by substitution that as the price of fresh beef will affect that of salt mackerel, so the capitalization rate of machinery affects that of land; but the influence is not from one side only, it is mutual. When anything has value, it must have in itself an independent cause of value. [Sidenote: The exchange of any present and future rents results in a rate of time discount] It can not be otherwise in the particular problem of value called capitalization. The first task of scientific study is to state clearly the nature of the problem. In this case it is seen to be the exchange of a present sum of wealth for a series of future rents. Whenever there are income-bearers and buyers and sellers of them, there are the conditions required for the determination of the market rate at which those future incomes shall be discounted. Manufactures and commerce have no peculiar relation to this process. By a flight of scientific imagination we might assume that the stock of indirect agents in the world consisted only of natural food producers, and that this stock and its yield were absolutely unchangeable by man's will or efforts. Each man in such case would have to stand with hands tied, and take the fruits as they matured. Even in such a case there would be capitalization and a rate of discount on future rents. The fruit-tree (that is, the whole future series of fruits) would bear a certain relation to one year's yield; the field would bear a certain relation to its crop. Wherever there are buyers and sellers of more or less durable agents of it matters not what kind or origin, there are present the elements and causes for the fixing of a rate of time discount. [Sidenote: Capitalization of a perpetual uniform series of rents;] 4. _In practical business may be seen innumerable instances of the capitalization of both permanent and limited series of incomes._ The simplest case is the capitalization of an unvarying and supposedly perpetual series of rents. Whatever the rate of time discount prevailing, rents infinitely distant become infinitesimally small when discount is compounded. The present rent is worth most, next year's less, and so on in a decreasing series. [Sidenote: Of a probably increasing series of rents;] But social changes alter rental values, and so far as these changes are foreseen, these anticipated or expected rents are made the basis for present capitalization. Investors and owners alike may foresee that a piece of land used only for agriculture will, within a few years, be taken up for city lots, or will be needed for a factory or as the site of a railroad station. The capitalized value would not in this case be based upon a series of uniform rents each of the amount yielded annually now, but on the progressive series expected. In some cases the physical output of an agent may decline while the price of the product increases. Modern foresters foresee that the selling price of the timber will be greater twenty-five years from now than it is to-day, and they therefore estimate the rental value of the forest on the basis of the future price, thus justifying expenditure that would be unwise if present prices were to continue. [Sidenote: And of a declining or fluctuating series of rents] Again the expected series of incomes may be declining, as the royalties (not typical rents) secured from mines. If the income is expected steadily to fall, and to disappear at the end of the twenty-fifth year, the value of the mine would be the capitalized sum of a limited and degressive series of incomes. [Sidenote: Mode of fixing the rate of time discount in practical business] Every exchange of a durable agent involves an estimate, rough and imperfect it may be, of that agent's future. The practical men, however, who are thus fixing the "capital value" of goods, are usually only dimly conscious of the logical nature of the process. In fact the process goes on in a way much less analytical and conscious, much more empirical, than this analysis would indicate. Most men simply buy as cheap as they can the agents which at the price they believe will add most to their income. The future changes are only roughly, not accurately estimated. The shrewd bargainer is the one who foresees more clearly than his fellows the complex changes to come. Other men blindly follow. The ability and the inability to foresee such changes make men rich and poor. In all this bidding for capital the logical basis of the value is the series of rents. When the agent is bought outright, the very concluding of the bargain fixes a relation between the expected value of the income and the value of the capital invested. In other words, the exchange of durable agents virtually wraps up in them a net income, which it is expected will unfold year by year when rents mature and are secured. At the moment of the investment, the expected rents are expressed as a percentage of the capital sum. § III. THE INCREASING ROLE OF CAPITALIZATION IN MODERN INDUSTRY [Sidenote: As exchange increases capitalization of goods becomes more usual] 1. _Where a system of exchange is highly developed, things are looked upon as capital yielding an objective income rather than as wealth yielding immediate means of enjoyment._ In the old organization of industry most men got most of their living from the things they raised or made. At the present time goods are gotten in the most indirect ways; men seek wealth because it will yield them an objective or money income, knowing that if they can get the income, they can get other things by exchange. In business to-day, wherever there is a rental, it is capitalized, has a market value, is bought and sold. Men compete in the purchase of income-yielding agents. There is a continual contest in judgment among investors to secure the largest rent for the smallest outlay. On the other hand, the owners of any rental strive to secure the largest capitalization for it that they can. In this market for capital it is money rents that are exchanged as an indirect means of arriving at gratifications. [Sidenote: Various kinds of corporation securities put expected incomes in salable form] 2. _The issue of capital stock is the putting of the incomes of wealth into marketable form._ Stock companies, or corporations, are business enterprises which issue stock, or certificates of a share in their wealth and income. Doubtless the convenience of the sale and transfer of invested capital by the use of stock, has been one of several reasons for the large increase of this form of organization during the past century. Originally the stock of a company taken collectively represented all the capital invested, and each share entitled the owner to a given portion of the total income earned. The shares were issued in regular denominations in terms of money, and this amount expressed on the face of the stock remained fixed. But as a business proves more or less profitable, the value of a share of its income rises and falls regardless of the original amount of stock issued. At once there is a divergence between the nominal or face value and the market value of the stock. The nominal value is relatively permanent, the same year after year; it may increase by further issues, but rarely is it decreased. But when stock is the only form of claim on the earnings that is issued, the fluctuations of the market value of the stock record the real value of the business, that is, the capital value of the rents it is expected to yield. But in present practice there are several forms (of which stock is but one) in which an investor may buy a share in the earnings of a business. Bonds usually do not give their owner a vote in the management or make him in the technical legal sense a part owner in the business. Bonds representing money loaned to a company, and entitling their holder to regular interest payments, are nearest in form to the medieval rent-charge. Next stands preferred stock, which entitles the owners to share first in the dividends, if there are any; and finally the common stock, which gets a share only when the other claims are satisfied. By the multiplication and further variation of these readily salable claims on industrial incomes, the needs and desires of investors are met more fully and with greater precision. [Sidenote: Any continuing income can be capitalized] 3. _Men seek to convert into marketable capital any increase of income in their wealth or business._ A man who invests a given capital sum in machines, buildings, and materials buys them, as others do, at prices that represent their usual, or market, earning power. If he succeeds exceptionally in his business, he makes the capital earn more than the rents on which it was capitalized. The same material wealth becomes worth more because of the reputation of his products, and therefore the trade-mark and good-will of the business can be capitalized. In this sense a good name can be sold, and is at least as much to be desired, even in a mercenary age, as great riches. Likewise, social changes, new needs, the growth of population, increase the net income of wealth, or the rents of a business. The basis of capital value is income, and whatever be its cause, political or economic, material income can and will be capitalized and added to the market value of the privilege, wealth, or industry on which the income is conditioned. [Sidenote: The capitalizing of franchises for public-service corporations] Notable cases of this sort arise in connection with public franchises. If a street-railway or a gas-company is given the exclusive right to operate in a given locality, any income above average interest on the investment is capitalized either in the higher price of the stock or in additional stock issued without the addition of any material to the plant. If the franchise is unlimited, the income may be capitalized as practically perpetual; if the franchise is limited, and is to expire in thirty or forty years, only the limited series of privileged incomes can ordinarily be capitalized. When, however, the managers are able to exert influence enough to have the franchise extended, and the investors believe in the skill of the managers and perhaps in their power to bribe the legislators, the value of the stock continues higher than it could usually be under a limited franchise. Such circumstances becloud the question whether the exceptional income arising under the franchise should go to the public or to the company. Granted, however, that the company is entitled to the income, the burden of proof is on those who object to the capitalizing of the income as is done in every other business. [Sidenote: Some difficulties in the capitalization of corporate incomes] 4. _The manipulation of dividends and the resulting changes in capitalization open up great opportunities for the dishonest increase of private fortunes._ A great change in the market value of stock is made by a comparatively small change in the income it regularly affords, for if the prevailing rate of interest on money loans is five per cent., each dollar of dividends is capitalized at $20. It might seem that the dividend would be declared if earned, otherwise not. The matter is not so simple and impersonal, however. The control of corporations is vested in the hands of a small group of directors who have both the opportunity and the temptation to withhold dividends when they are earned, to pay them with borrowed money if unearned, and in either case to keep the stockholders and the public in ignorance of the real condition and earning power of the business. The stocks can, by this manipulation of dividends, be made a lottery for the legitimate investor, a trap for the unwary, and a source of unrighteous gain by men recreant to their trusts. In this way it may be seen that an earning power not known to bidders in the market does not enter into capitalization; a fictitious earning power, however, is capitalized so long as the investors continue to be deceived. Instances of this kind present problems not only of private morality, but of the preservation of free industrial institutions. The solution of these problems would perhaps be hastened if the a economic nature of capitalization were more clearly understood. Capital value in modern industry is everywhere the expression of the serial rents of wealth, discounted at a prevailing rate of time discount. CHAPTER 16 INTEREST ON MONEY LOANS § I. VARIOUS FORMS OF CONTRACT INTEREST [Sidenote: Distinction between contract interest and time-value] 1. _Interest, the amount paid according to contract by one person to another for credit given in terms of money, is but one expression of a larger problem, that of the difference in present worth of goods at two periods of time._ This larger problem appears under several forms: first, as a difference in value, due to time, where there is no money expression (to be considered in the following chapter); second, in discount on a money loan for a short, definite time; third, in a long-time money loan at a fixed rate of interest; fourth, in a credit loan--that is, the sale of the thing on credit in terms of money. The last three cases involve interest more or less clearly. Time-discount, as will be more fully explained, is the basis of interest. The interest may be greater or less than the time-discount in the goods, owing to miscalculation on the part of the borrower or to an unforeseen change in the conditions. Men bid for the use of wealth with the intention of repaying it at some future time, and the interest they agree to pay is based on their estimate of the discount of future rents, which they think is involved in the present valuations of the goods. Time-discount is involved in goods, however, in numberless cases where there is no contract interest. Even a Robinson Crusoe must recognize in his consumption goods and in his various indirect agents differences in value at different periods of time, of which he must take account. [Sidenote: Risk and expenses to the money-lender] 2. _Gross interest must be distinguished from net interest._ The forms of wealth yielding incomes are so mutable, and are used under such complicated conditions, that both in theoretical discussion and in practice much care is needed to distinguish between the yield attributable to the income-bearer, and that attributable to other wealth or services used in connection with it. That the sum paid as interest on a loan contains other elements is recognized constantly in practice. As in the case of contract-rent allowance must be made for repairs and depreciation, so in the case of contract-interest allowance must be made for risk, or the average loss occurring in the industry. Money loaned in hazardous ventures must yield a higher rate of interest. Likewise capital used by the owner in a hazardous venture must frequently earn very high returns (not all logically interest) to offset the losses that are likely to occur. The lender must also, in estimating net interest, count the cost of placing, supervising, and collecting the loan. A pawnbroker lends only small sums and spends much time and effort to keep at interest a moderate capital. Five thousand dollars loaned in sums averaging ten dollars represents five hundred transactions, and yet if placed at five per cent, it yields but two hundred and fifty dollars a year. While, therefore, the borrower of a small sum estimates the economic interest (or anticipated gain in income) even higher than the oppressively high contract-interest he may be forced to pay, the lender must credit a large part of the gross interest to the labor he expends in carrying on the business. [Sidenote: Short-time loans by discounting of commercial paper] 3. _The most usual form of short-time loan is that made by a bank or broker to business men on security of commercial paper._ By commercial paper is meant promissory notes given by customers of the merchants, bills of lading for goods that have been shipped to their customers, and various other evidences of indebtedness that may be offered the banks for discount. When goods have been sold on time (as thirty, sixty, or ninety days) the seller has the choice between letting the time expire and collecting the bills direct from the customers, and discounting the bills for ready money at the bank. According to the conditions and needs of the particular business, either method may be chosen. In most industries there is need for larger capital at the seasons when the product is put upon the market. The merchant or manufacturer plans his business in the expectation of an average rate of discount at such times, and if it chances that the discount rates are abnormally high, he has no choice but to go on borrowing and paying the high interest out of the expected profits of his business. This risk of a change in the interest rate is one of many chances he has to run. [Sidenote: Long-time loans by purchase of mortgages, bonds, and stocks] 4. _Most debts in modern times are outstanding for a term of years and represent the lender's purchase of a claim on the earnings of some productive enterprise._ The simplest forms of long-time loans are those made on the security of real estate, which is mortgaged to the lender for the term of the debt. Usually the debtor is obliged to pay the interest either annually or semi-annually, and often, but not always, is permitted to reduce the principal by partial payments. These real-estate mortgages rest on the security of the particular mortgaged wealth, and, unlike most short-time loans in bank, are not personal obligations resting on the general credit of the borrower. Most other long-time debts share this character of being non-personal; if payment is defaulted, only the particular wealth can be sold for payment, not the general wealth of the borrower. Corporation bonds, issued by railroads and other large stock companies, have increased greatly in number in recent years. They yield an income fixed in advance, and are secured usually by mortgage on the entire property of the corporation issuing them. The income of some special kinds of "preferred stocks" is so guaranteed as to make them for investors substantially the same as bonds. Another large class of long-time loans are those made by national, state, and local governments. Tens of billions of dollars of public debts are now outstanding, held by private investors in every walk of life. The contract in the case of each kind of these loans provides for a fixed term after which the borrower must repay or renew, and for a fixed rate on the nominal or par value of the loan. Nearly all the securities (bonds, certificates, evidences of indebtedness) are salable at a market rate. It is therefore the income that is fixed, the selling price (or capital value) fluctuating above or below the nominal sum except just at the moment when it is payable. The long-time loan thus is very similar in its economic character to the old-time rent-charge. [Sidenote: The cost of credit to the improvident buyer] 5. _The sale of goods on credit is a mode of lending and involves interest in a disguised form._ In some cases merchants will not sell cheaper for cash than for credit, for fear of offending their main body of credit customers; but this is exceptional, as there are good reasons why such a difference should be made. The credit sale usually involves interest, and often at a very high rate. In many stores there are two appreciably different prices, one for "slow pay," the other for "spot cash." If a bill paid at the end of the month is five per cent. more than the cash price, the difference is equal to sixty per cent. per annum for the privilege of postponing payment. Such a rate of interest is paid only by the improvident, but that is a large class ranging from factory workers to college students. The cash discounts allowed by merchants clearly express the time difference. On fifty to one hundred dollars of outstanding bills, many perfectly honest persons are paying interest at the rate of seventy-five per cent. per annum. The merchant is forced to make this difference because he must seek not only to earn interest on the capital thus invested, but to recover the costs of bookkeeping and collections, and the risk and loss of unpaid bills. The discounts allowed by manufacturers and wholesale houses measure in the same way the difference between cash and credit sales. Not unusual is a discount of "six per cent, in ten days, five per cent, in thirty, or sixty net." The buyer allowing his bills to run for two months (six per cent, for sixty days) pays thirty-six per cent, per annum for the use of that money. The difference is so great that it is impossible to carry on in this way a large business against strong competition. Such purchases on credit frequently are made, however, by dealers in small towns. [Sidenote: Evasion of legal rate of interest] 6. _Interest is often concealed under other forms which increase the apparent rate._ This fact is well shown in the ways by which usury laws fixing the legal rate of interest are evaded. A simple method is for the lender to charge a commission for making the loan, or, if it is a bank, to charge for a pretended cost of exchange to bring the money from some other city. Sometimes the borrower is required to keep larger deposits with the bank than he voluntarily would. Needing $5000, he is compelled to borrow $10,000 and to pay interest on twice as much as he is permitted to use. Again the borrower, in periods of unusual demand for money, is forced to make a long loan instead of a short one. When a one month's loan at ten per cent, would meet his need, he is forced to borrow for twelve months at six per cent., during ten months of which time four or five per cent, is the prevailing rate. In these and other ways the real rate, or burden of the loan, is made different from that which is expressed. § II. THE MOTIVE FOR PAYING INTEREST [Sidenote: Money borrowed to buy consumption goods] 1. _Interest for loans to obtain consumption goods is paid because they are felt to have greater importance at the moment than an equal amount (either of goods or of money) will have in the future._ A sudden stress of misfortune may impart to a thing at the moment far more than its usual value. One standing face to face with starvation cannot be worse off a year hence; often there is good ground to hope that if the present misfortune can be relieved, the future better fortune will make it possible to repay a loan with interest. In other cases, the object of a loan of consumption goods is to increase the future earning-power of the borrower. When the student borrows money that represents to him food, clothing, text-books, tuition, and other expenses incidental to a course in college, the expenditure is intended to increase the effectiveness of the worker. When he borrows he has little earning-power, but with that faith in himself which makes the young American so interesting, he pictures himself four years later, sheepskin in hand, drawing a munificent salary with which he can easily satisfy the most exacting Shylock. Such an expenditure is sometimes called "an investment of capital," but it should be called a consumption loan--nevertheless in many cases a loan wisely made. To call this an investment of capital is to confuse man, the end of production, with material means. Sometimes this higher estimate of the present good is unwise, viewed in the light of wider experience. Goods that meet momentary desire make an exaggerated appeal to untrained minds. The child, the spendthrift, the savage, cannot properly estimate the relative values of present and future. The improvident sometimes lightly agree to pay an exorbitant interest for an immediate consumption loan, making a ruinous difference between present and future gratifications. [Sidenote: Money borrowed to buy indirect agents] 2. _Interest on indirect agents is paid as a more or less indirect means of securing gratification._ This can be clearly seen when durable agents are hired that produce gratification directly. A carriage bought with borrowed capital and used for the pleasure of the borrower is expected to afford a utility greater than that to be gotten by the amount of the interest in any other way. A spade bought with borrowed capital and used to cultivate the owner's garden is expected to add products of greater value than the interest. But how is it in case the agent is used to gratify persons other than the owner? The music-teacher who buys a piano on credit expects to increase his earnings by a sum greater than the interest he has to pay. If the addition to his earnings exceeds the interest charge, it is because he has found a use for the borrowed capital greater than that on the basis of which it was capitalized in the market. The amount of the interest is secured through the pleasures and services the piano affords to the patrons of the teacher. In the most complex cases of the borrowing and use of indirect agents, there is ultimately this same basis for the interest: enjoyment afforded by the use of capital in the particular period. To the borrower, what the capital makes possible is an addition to his income as great as, or greater than, the prevailing interest. Most loans in our society are now of this sort. Money is borrowed to invest in business, to get better machinery or a larger stock; with this capital is secured a better or larger product, and the product finally being sold at a profit, the business man is at a point where he can satisfy his wants without encroaching on his capital. Logically, therefore, the consumer of the product pays the interest in the price, and the final consumer's enjoyment must be deemed the logical source of the money interest. The borrower's motive for paying interest on these indirect goods evidently is his hope of profit through realizing a greater money rent than he has contracted to pay for their use. [Sidenote: The special case of money borrowed to pay debts] 3. _The money market in which short-time loans are made is peculiar in that the money frequently is borrowed to pay debts, not for investment._ In beginning the discussion of interest, it always is remarked that it is not money, but capital, that is borrowed and loaned. This caution against the superficial errors that so easily beset the popular discussion of interest is much needed, but it is well to note a peculiar case which is apparently in contradiction to this statement. The usual method by which money is loaned in the great industrial centers is called discount, which is the exchange of a certain sum of money for a note or other credit paper of a larger amount, the interest thus being taken out in advance. Much borrowing in the form of discount is for the same purpose as other borrowing--to acquire control of more productive agents, to embark on new enterprises. The peculiarity of the discount money-market is that an unusual number of loans are made to meet contracts that have already been made. There is always a great mass of outstanding obligations, and merchants are compelled to renew these loans on penalty of bankruptcy. This market for short-time loans is not connected closely with the general market for loanable capital. When the need is for ready money, other concrete capital cannot flow in to meet it. This special money demand, therefore, in time of greater or less stress, may fluctuate rapidly, and the interest rate be temporarily higher or lower than the rate on long-time loans. This case is similar to that where two markets, as a retail and a wholesale one, exist side by side, but slowly exerting a mutual influence. [Sidenote: Productive borrowers seek a profit on their investments] 4. _In the long-time money loan the money generally is borrowed first merely as a medium of exchange to get control of indirect agents._ The borrower of a long-time money loan for productive purposes is always seeking to gain by investing the money in wealth that will yield an income larger than the interest he must pay. The borrower, therefore, invests in view of the rate of interest, of the market price of the goods in which he plans to invest, and of the probable chances for earning profits in the business. This case, where certain goods whose price is known are approximately selected before the money is borrowed for investment, is the type of loan to be kept most usually in mind in economic discussion. Evidently the price of these goods, to control which is the real object of the loan, is merely the sum of the expected rents they will yield, capitalized at the prevailing rate of time-discount. The borrower expects either to make these particular goods earn rents larger than those on the basis of which they have been capitalized, or to transfer them to an economy where goods are capitalized at a higher rate than he is paying. The income yielded by these goods, if the borrower's expectation is fulfilled, is but the difference between present and future rents that has been wrapped up in their capitalization. As time elapses and the rents emerge in wisely chosen investments, the borrower has a surplus large enough to pay the contract interest. It appears, therefore, that the motive of the borrower is to get control of future rents at prices that already involve, in their capitalization, a rate of discount somewhat greater than the interest he contracts to pay. [Sidenote: The developed market for money loans] 5. _The rate of contract interest on money loans is adjusted at each moment in the money market by the bidding for money loans._ This is a true statement only if it is understood in a somewhat superficial sense. No error connected with interest is, however, more crude than the view that the interest rate is in any broad sense due to the quantity of money. Some loans are made apart from the general market, by private agreement between borrower and lender; but in nearly every such case the rate agreed upon is seen to be closely related to that of the general market to which either borrower or lender can resort if he wishes. The greater number of borrowers and lenders of money have a range of choice in their bargaining. The interest rate in modern developed money markets is that rate which brings to equilibrium the demand for money loans and the money capital available within the period. If the ready, loanable money in private hands, in banks, in insurance-company reserves, &c., increases, a lower rate must be offered to borrowers; if the supply decreases, a higher rate will be quoted. In the one case, more men borrow; in the other, fewer borrow and more seek to lend. Thus a rate results, but a rate that is closely connected with larger set of facts--those, indeed, which determine in the long run the rate of capitalization in the community. [Sidenote: Every person is a buyer or a seller of present goods] 6. _The individual must adjust his business dealings to the market rate of interest._ The market rate is fixed by the bidding of individuals, and every one has something to do with fixing it. In a multitude of minutely small ways, as present and future goods are compared by men, the rate of interest is affected positively or negatively. But for practical purposes the individual, counting for little in the midst of millions, must look upon the interest rate as beyond his influence. Therefore, while the rate is determined by each to some degree, all that any one does is to buy or sell present goods, borrow or lend capital, use up or save wealth, according as his own estimate of time-value is less or more than the market rate. In fact, the estimates of individuals diverge constantly from the market rate, but are brought into harmony by their actions with reference both to money loans and to the use and valuation of the various forms of wealth. A Robinson Crusoe working on his island and valuing future goods relatively to present goods higher than before, consumes less; or, valuing them lower, consumes more. The business man who values indirect agents above the market rate borrows, and if he miscalculates and fails to make them earn the expected rent, he loses. In this experimental way many other acts are influenced by the prevailing interest rate and in turn affect it, thus aiding to formulate society's estimate of the value of present as compared with future rents. CHAPTER 17 THE THEORY OF TIME-VALUE § I. DEFINITION AND SCOPE OF TIME-VALUE [Sidenote: The simplest cases of time-value] 1. _Time-value is the difference between the values of things at different times._ Things differ in value according to form, place, quality of goods, and according to the feelings of men, and--not least important factor--according to time. The simplest and clearest case of time-value is the difference noticeable in the same thing at different moments. Is this good worth more now or next week? Shall this apple be eaten now or next winter? These questions can be answered only after comparing the marginal utilities which differ according to the varying conditions of the two periods. All the other cases of time-value can, by the practical device of substituting other goods of equivalent value, be reduced to the typical case of comparison of the same thing at different times. The comparison may be between very similar things, the one consumed being replaced by a duplicate. An apple borrowed now may be returned next year in the form of one of the same size and quality. The essential thing in this comparison is not physical identity, but equivalence in size, sort, and quality at the two periods. This is borrowing under the renting contract. [Sidenote: Time-value in the case of different kinds of gratifications] But two or more quite different things may be expressed in terms of another thing and so be made comparable. Money becomes the value-unit through which different things may be reduced to the same terms for comparison. With this mode of expressing the value-equivalence of various goods, the interest contract first becomes possible, money (the standard of deferred payments) being the thing exchanged (possibly only in name) at two periods of time. What is really compared are various gratifications which may be produced by very different material things or services. In its last analysis comparison of values at different periods of time must be a comparison of psychic incomes, of two sums of gratification. The comparison of the value of a bushel of apples with that of a barrel of potatoes or a suit of clothes at the same moment appears simple enough. When all are expressed in terms of money, the comparison of each with its value-equivalent at a later date becomes easy. The simplicity and obviousness of time-value in the case of money loans at interest led men at first to recognize that phase of the problem exclusively, and later the term "interest," not without much confusion of thought, was given a wider significance. Let us now see how large a part of the whole problem of time-value is outside of the money loan. [Sidenote: Time-value is involved in capitalization of land] 2. _The problem of time-value is quite separable from the concepts of money and capital, though usually connected with them in practice and theory._ It is true that the problem of time-value was first clearly recognized in connection with money and a formally expressed capital sum. Misled by this fact, and taking a very narrow view, writers seventy-five years ago recognized but dimly the problem of time-value in connection with the valuation of the incomes derived from land. It is true, as has been shown above, that the mere putting of an estimate on a durable good such as land involves the process of capitalization, which in turn implies a comparison of the values of the rents expected at different periods. Diminishing returns in the use of agents involves a loss of time to secure the usufructs emerging. The relation of these facts was not clearly seen until of late. The phenomenon of time-value as above defined may be seen to be broader even than that of capitalization. The difference in the value of the successive rents of wealth must have been recognized and in some degree measured before there was any conscious calculation of capital value. Differences in value due to time are everywhere. The problem of time-value often is present where money is not even spoken of or thought of. Money no more causes this time-difference in value than balances cause weight. [Sidenote: Time-value is taken account of in the keeping up of repairs] 3. _The problem of time-value is involved in repairs and depreciation, and in the use of consumption goods._ It is possible, as we have seen, to increase the sum available for present needs, and to encroach upon the future by postponing repairs on intermediate goods. The balancing of the cost of repairs against the future income is a never-ending task in practical business. One making repairs must purchase the needed materials and labor at a capitalization determined by their expected earning-power in other industries. If the repairs in question will not ensure an annual saving as great as this expected rent, they will not be made. When an industry is declining, it may, for the sake of putting the capital into a better business, be good policy to let the machinery fall into bad repair. The problem of time-value is involved in the application of one's energy to repairing one's own possessions. It is a thought of wide bearings that numberless minor decisions in every petty business involve, if they are correctly made, a measuring of the rate of capitalization. [Sidenote: And in the choice of enjoyments] As will be more fully shown in discussing the relation of the prevailing rate of interest to saving, the recognition of time-value is implied in the use men make of consumption goods, in their postponement of enjoyment, in their storing of goods for future use. The varying gratifications yielded by consumption goods, and their values in different conditions cannot be explained without taking account of differences in time. Wherever there can be a choice in the time at which, and consequently in the conditions under which, a thing can be used, there is a choice presented between the different values. Time-value is present even in a period during which no goods continue to exist, as when a good is consumed at a moment of greater need, to be replaced at a time when less valuable. If an apple is borrowed on the promise to return an apple and a peach at the end of a year, the peach represents the time-difference in value but in the meantime there has been no apple in existence. It is only in a figurative sense that it may be said that interest is paid on that "capital." Interest is paid because of a difference in want-gratifying power, but during the interval there is no material capital. [Sidenote: Prodigality and vice involve a high discount of future happiness] 4. _The problem of time-value is involved in much foolish pleasure, in prodigality, and in vice._ Economics touches frequently on the borders of ethics. If there were to be formulated an economics of personal conduct, it surely would give a large place to the comparison between present and future pleasures. Forethought, or prudence, is the virtue of recognizing not only future dangers to be avoided, but the greater future joys to be gained in exchange for present pleasures. The reckless and the prodigal underestimate the future and barter all to gratify the moment's impulse. The drinker exchanges the hopes of worthy life for the exhilaration of the spree. Indulgence in social pleasures, if secured at the price of lost sleep, weakened health, and debauched character, are loans from the future made by youthful prodigals at usurious interest. If no one ever paid more than a moderate rate of interest for the gratification of his present whims and impulses, most hospitals, drug-stores, and medical colleges would close, and half, if not all, the prisons would be empty. Indeed, time difference in value is a universal phenomenon of life and conduct. Contract interest is but one phenomenal form of time-value, and this in turn is but one phase of value. This section may serve to suggest how much more varied and pervasive the fact of time-value is than has usually been recognized in popular or economic discussion of the subject of interest. § II. THE ADJUSTMENT OF THE RATE OF TIME-DISCOUNT [Sidenote: The exchange value of present and future goods] 1. _The fixing of the discount on future goods is, in its essentials, like the fixing of the market price of consumption goods._ This problem appears to be one of the most difficult in economic theory; but reduced to its simplest terms, it is an aspect of exchange value, and its ultimate explanation must be found in a comparison of psychic incomes. There must be noted the conditions of demand and supply, the interplay and final equilibrium of the two forces. The declining and marginal utility to the two parties to exchange must be carefully analyzed. One who can do these things is prepared to find the answer to the problem of time-value. Whenever a group of buyers and sellers meet, a ratio of exchange commonly will be arrived at. The ratio of exchange between buyers and sellers of present and future rents likewise is fixed at the estimates of a "marginal pair," at which point the amount offered and taken comes to equilibrium, for at that point no motive exists for any one to change sides. [Sidenote: The peculiar nature of the exchange in the case of time-value] [Sidenote: Several reasons why this is not easily recognized] 2. _Time-value as the premium rate on present goods is unlike the ordinary market price, of goods only in the special nature of the utilities exchanged._ The one peculiar need in the theory of this subject is a clear understanding on this point. The goods exchanged, or compared, are direct and indirect goods, or present and future goods, or, more generally speaking, two goods or groups of goods unequally distant in time from present enjoyment. What are sold in a case such as capitalization, involving an estimate of time-value, are present goods or gratifications; what are bought are future gratifications, or indirect agents which stand for, typify, or make possible, future gratifications. Practically every man in a market acts on the knowledge of what the exchange of direct and indirect goods means; yet abstractly stated, the thought seems at first difficult. In valuing any durable good, the theory of time-value is implied. Every time a machine, a house, a book, a field, is bought, the distinction between direct and indirect goods is acted upon, for a choice has been made between present enjoyment and future provision. Anything that endures is an indirect good and implies in its valuation a premium rate on present goods. The real nature of the exchange in time-valuation is made unclear by the uncertainty of life, leading men to work on to provide against possibility of mishaps; for the most part the world's treasures never afford to their temporary owners the gratification that they typify, or could give. The nature of this exchange is made unclear also by habit, under the influence of which the exchange in so many cases is not carefully thought out, is not the result of a close comparison of the utilities of goods in present and future moments. The real nature of this exchange is made unclear by the indirect, or induced, gratification derived from wealth. Wealth gives to its owner power, prestige, the esteem of his fellows, and pride in evidences of success and growing prosperity. Its very possession creates a new need and imparts to it another utility, that of insuring against the misery of a declining fortune one who has enjoyed wealth and power. Men make the greatest efforts up to the last moment of life to retain wealth that they will enjoy only in this subtle and indirect way. Thus every motive that leads men to postpone present enjoyment makes them bidders for indirect agents and for future goods, and helps to determine the market rate of premium on the present, and of discount on the future. [Sidenote: The scarcity of present gratifications] 3. _There being a limited number of indirect agents, their limited powers in a given period limit the supply of present goods._ The principle is familiar that value is always connected with relative scarcity. Now the desire for the present goods is indefinitely large. If the right kind and quality could be had at will, an enormously greater amount of present goods would be used. But the present goods are dependent on indirect agents. The psychic income of a civilized community is dependent on a favorable and extremely refined environment: houses, libraries, theaters, the agencies of travel, as well as the sources supplying the more material needs. These indirect agents, even in the richest community, are limited in variety, in quality, and in number. [Sidenote: The total of future uses in vastly greater] But if indirect agents could produce an indefinitely large product at any given moment, the supply of present goods could be indefinitely increased. The supply of utilities, therefore, is limited by "diminishing returns" in the use of agents, making their maximum yield depend upon the lapse of time. The uses any given material can yield in a limited period have an absolute limit: an acre of land with the most perfect cultivation cannot feed the world; but remove the limit of time, wait an eternity, and the acre would yield an infinite crop. The economic return of a given agent in a given period is reached much sooner than the technical return. If agents are forced to yield more bountifully, it is at the sacrifice of utilities in other agents, and a point of maximum net yield is found in any given period. Here also the lapse of time is the condition of the increase of the net utilities derivable from limited agents. [Sidenote: The choice open to the investor of money] 4. _The rate of capitalization of income and the rate of contract interest on money capital tend to unite into a single market rate._ A person wishing to exchange present goods or income for future goods may buy an income-bearer at its capitalized value, or he may create a new rent-bearer. Having saved a sum of money, either he may purchase a factory known to be profitable; or he may hire the services of men and unite them with materials and machinery to create a new industry or a new form of income-bearer; or he may loan his money to others to make either kind of purchase. In any one of the three cases it is evident that capitalization (that is, the discounting of future rents in goods) is the primary and important fact making possible the emergence of a surplus, or net yield, over and above the value of the capital. The expected uses contained not only in whole industrial establishments, but in the particular materials and agents united to form new agents, are purchased at their capitalized value; that is, the future uses have been discounted and have entered into the price of the goods as less than they will be when realized as actual rents. This is the crucial point in the theory either of contract interest or of time value; for to explain the rate of interest as due to the process of "producing" capital agents out of other materials, is to beg the question involved. The surplus yielded by capital above its cost is but the realization of a net income made possible by the discounting of future rents. [Sidenote: The choice open to the borrower of wealth] A person wishing to make an exchange of the opposite kind to that described may sell his wealth for money; he may exchange for present enjoyable goods his income at its capitalized value; or he may use up what he has, let it depreciate, fail to make repairs, convert it to various consumption purposes, and thus invade his earning power. When the interest rate is five per cent., the sacrifice of any unit of regular income permits the spending of twenty times that amount for present enjoyment. The advantages of these various methods tend to equilibrium. If the owners of developed productive agents hold them at too high a capitalized value, investors will apply their efforts and savings to duplicating these forms of wealth. If, in turn, any of the minor factors, as materials or uses of goods, are overvalued (overcapitalized) it will appear ultimately in a check in the demand for them at these prices, and in a reduction in the demand for money loans. As it is possible for any investor and for any borrower to choose among these investments and loans, there is practically but one rate, the rate which expresses the general ratio of exchange between present and future income. Owners and investors take the line of least resistance, get the most they can for their money, and choose whatever form is most advantageous. The interrelations between the various interest rates are therefore close and constant. The market rate of interest thus extends over all forms of wealth and pervades every phase of business. The value of every durable agent is fixed with reference to a prevailing interest rate, through the discounting to their present worth of all the incomes it is believed to contain. [Sidenote: A sacrifice sale involves a high rate of interest] 5. _Where goods are sold at forced sale or sacrifice, it is equivalent to a contract loan at a high rate of interest._ Market values being dependent upon market conditions, the offer of goods at a given moment may not find the usual or normal number of buyers or the usual demand. Just such conditions are most likely to exist at the times when business men feel an unusual need of money. Two courses are open to them in this emergency, either to borrow the money at a very high rate of interest, holding the goods for better prices, or to sell the goods under the unfavorable conditions. The end of both courses is the same--to get ready money; and the methods are not essentially unlike--the exchange of greater future values for present values. The sacrifice sale thus reveals the merchant's high estimate of the interest rate. The purchaser of some kinds of property in times of depression is securing them at a lower capitalization than they will later have. The rise in value may be foreseen as well by seller as by buyer, but the low capitalization reflects the high interest rate temporarily obtaining. A. T. Stewart is said to have laid the foundation of his fortune when, being out of debt himself, he bought up the bankrupt stocks of his competitors in a great financial panic. The high contract interest at such times is but the reflection of the high premium on present purchasing power. Here then is another mode in which the prevailing rate of interest on money loans is kept in close harmony with the rate of time valuation. [Sidenote: Interrelations of the money interest rate and of time-discount] 6. _The rate of contract interest on safe long-time loans registers pretty nearly the prevailing rate of time-discount in the community._ There are of course different capital markets, and the estimates put upon next year's income as compared with this year's is very different in Montana, New York, and London. Because of the friction in the transfer of investments from one locality to another, these differences may persist indefinitely; but within each capital market the interest on any particular loan must, for reasons readily seen, tend to conform pretty closely to the prevailing rate. Various groups of men living in the same community have, however, varying estimates of time-value. The increase of safe long-time bonds issued by strong corporations and by wealthy nations as, for example, the New York Central Railroad, and the government of Great Britain, gives a large number of choice investments where the element of risk is almost entirely absent. Various agencies have developed for making the loans, that is, for bringing the borrower and lender together with the minimum of trouble and expense. Other efficient, but somewhat more costly, agencies for bringing together the owners of loanable capital and men wishing to use capital are savings-banks, building and loan associations, insurance companies issuing endowment policies, and mortgage-investment companies of many kinds. While on the one side of the bidding are thousands of lenders offering to exchange ready money for assured incomes, on the other are thousand of borrowers offering to exchange the promise of assured incomes for ready money. If either of these classes got far out of touch with the prevailing rate of capitalization, to which all the valuations are adjusted, that class would lose greatly. [Sidenote: Relations between the concepts of rent, interest, and time-value] 7. _All the net usufructs actually yielded by wealth are rents; economic time-discount is never a realized income; it is merely a calculation form, or anticipation of the difference between present and future gratifications._ There has been much discussion as to what should be the relations in thought between rent and interest. Space permits here only an indication of the view on this question involved in the foregoing treatment. Rent, as the term is here applied, includes all the net productivity attributable to the ownership and use of capital, whether the yield be in economic form (in an increment of value) or in contractual form. Even contract money-interest must be looked upon as a species of the genus contract rent, the peculiarity in the money loan being merely that the thing which it is agreed to return is a certain number of units of the standard money. The term "interest," first applied in the Middle Ages to a payment for the use of a money loan, came to be used more broadly by the earlier economists as the income attributable to those goods which generally were bought and sold in terms of money. In other words, interest was supposed (though erroneously) to be uniquely connected with the particular production instruments to which the term capital was narrowly and mistakenly confined. Still more to add to the confusion, the term interest was about this same time identified with the broad problem of time-value. The terminology has remained ever since in this stage of arrested development. Our suggestion is to retain the word interest in its original meaning, still almost universal in business circles, of a contractual payment on money loans, applying the term time-value (for lack of a better word) to the subtler economic problem. [Sidenote: Rent and time-value are essentially different phrases of the value problem] Time-value is here understood to be that all-pervading difference in the values of uses and gratifications of wealth at different points of time. A comparison of the value of momently appearing uses of wealth is the rent problem. Here are, therefore, very different aspects of the value problem. The rent conception is earlier grasped by men, is nearer in point of logic; the concept of time-value has only recently been clearly recognized. If men lived only in the moment, they would be concerned only with rent; living in the future also, they are constantly regulating their acts with reference to time-value. CHAPTER 18 RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL § I. HOW VARIOUS FORMS OF CAPITAL MAY BE INCREASED [Sidenote: The older and the modern way of viewing wealth] 1. _Men seek to increase income by increasing capital._ Men may strive to increase their rents without expressing the rent-bearer in terms of capital. Peasant owners and small proprietors, toiling fondly on their little estates, seeking steadily a larger crop, a larger income, accomplish wonders in bringing waste land to a high state of cultivation. Working on the soil that is at once their livelihood and their home, they do not consciously reckon the value of the labor they are putting upon it. No money can buy that which to them is beyond price. But, in our money economy, efforts are largely directed toward the increase of the capital sum. Investment takes the form of putting in a sum of money in the hope of getting an income bearing a certain relation to it. The first thought is of the value of the wealth invested, which has been carefully measured and expressed in dollars and cents. Wealth looked at in the older way was valued for what it did immediately for its owner, for its concrete fruits; looked at in the modern way, it is valued as a marketable income-bearer readily convertible into a multitude of other forms. Thus investments come to be thought of in terms of general purchasing power, from which it is expected to realize an income of a given percentage. [Sidenote: Free goods of unlimited supply] [Sidenote: Beginning of scarcity of common materials] 2. _There are some classes of goods that can be increased without any noticeable increase in difficulty._ The extremest examples are undiminished goods such as air, sea-water, the water of large rivers. These are free goods because, however much is used, the supply is immediately renewed. But they are undiminished only in a relative sense and in reference to present need. The water in the Western rivers long flowed on, undiminished by the uses made of it. But progressing civilization required more water for cities, for mining, and for irrigation, and now states and corporations are going to law over these formerly undiminished free goods. Some kinds of goods are produced from such very common materials that it might seem possible, by the substitution of agents, to produce an unlimited supply. How can bricks be limited in number, being made as they are from one of the commonest materials on the earth's surface? But the largest clay banks are limited in size; a large proportion of the places where bricks are needed are not near a supply of clay of good quality; and after a brick-yard has been used for a time there is increasing difficulty in getting out the material. While, therefore, bricks are scarce and hard to get from the outset in some places, the scarcity grows more marked in many places at first well supplied. If materials are scarce in any degree, their continued use for one purpose increases their scarcity in all other uses. Economic goods are goods having value; value implies scarcity, and an increasing demand means inevitably a higher value at some point. This is true of clay, stone, water, and the commonest kinds of labor. [Sidenote: No scarce goods can be indefinitely increased] It has long been customary for economists to talk of economic goods that could be increased indefinitely (meaning infinitely or, in any event, without any limit ever appreciable to man) without any increase in the cost or scarcity. This class of goods was considered to be very large. There is no such class of economic goods; it is evidently impossible that there should be. If they are already "scarce," increasing demand must make them scarcer. There are, however, some goods that practically can be increased with so little difficulty that their limitation is not of great social importance. Progress, population, prosperity, are not primarily conditioned on their amount; limitation will be felt far earlier elsewhere. They are at one end of the scale; they are the relatively increasable goods. [Sidenote: The products of land are increased at a given time and place at increasing cost] 3. _There is a large class of goods whose increase is seen to be gained with increasing difficulty._ This is seen most clearly in the diminishing returns from land. In the attempt to get some food-products in greater quantity from a given area at a given time, increasing difficulty is met with at once. This attempt continued for a series of years results in historical diminishing returns, as was strikingly illustrated in English experience during the Napoleonic wars, when wheat rose in value because of the greater difficulty of producing the larger supply needed. Some replenishing agents will restore themselves if given time; the forest will grow up if left untouched by man; the field will recover its fertile quality if allowed to lie fallow. But this self-replenishing of agents is a slow process, and time is costly. Man therefore tries in other ways to force more uses out of goods, until checked by the increasing difficulty. The goods subject to "the law of increasing cost," as it was called formerly, were considered to be a peculiar class comprising only a small portion of wealth. But it can now be seen that the law may apply ultimately, though in differing degrees, to every kind of economic goods. Indeed, the principle just discussed is no more than one phase of the law of economic diminishing returns, which has a universal application to the realm of values. [Sidenote: Agents most nearly fixed in amount are somewhat increasable] 4. _There is a class of goods, natural agents and stores of materials which appears to be relatively fixed in quantity or which is increasable only with much difficulty._ The first part of this proposition expresses mildly the thought that long obtained among economists: it was said that the supply of certain things was absolutely fixed, the chief of these being land used for agriculture. The idea as held by Malthus and Ricardo was modified by John Stuart Mill in somewhat inconsistent ways. Land, it was said, is a thing which "man cannot make," therefore its supply is fixed. The second part of the opening proposition expresses the view here held: the supply of no important class of goods is absolutely fixed, in any reasonable sense. Most, if not all, belong to the class that is increasable, although it may be with much difficulty. Even when the exact thing cannot be duplicated, as a bust by an ancient sculptor or an autograph of a dead author, many substitutes serving the same or closely related wants, affect and limit the demand, and thus increase the supply. Men cannot, it is true, increase the stores of copper in the earth, but they devise new processes to extract it from ores before worthless, and invent methods of procuring aluminium, which yields some of the same utilities as copper. Even the supply of land, as is shown elsewhere, is constantly changing. Thus all kinds of wealth can be increased in some degree; many kinds in the course of time are very greatly increased with little or no direct effort, but the supply of all alike can be secured in larger amount at any given moment only at the cost of increasing difficulty. § II. SOCIAL SIGNIFICANCE OF THESE DIFFERENCES [Sidenote: Physical amount vs. economic supply] 1. _Not the fixity of the physical amount of agents, but the economic supply is significant._ There is danger of confusion between these two ideas. The statement that "land" cannot be created and that therefore "the supply is fixed" involves a fallacy. The word supply means the amount that is available at the moment or during the period spoken of. The land in Greenland is not, and probably never can be, a part of the supply of land in England. The land in America for centuries was not, but now has become, for some purposes, a part of the supply in the same market as the land of England. The question of importance in economic discussion is not whether the physical material can be brought into existence, but whether the economic "supply" can be increased. The existence of coal-mines in Venus or Mars is of no economic importance to us, but coal-mines on the earth, yet undiscovered, present a potential supply that at any moment may be realized. [Sidenote: Discovery enlarges the supply of natural resources] 2. _Discovery of new lands and of new natural deposits continually enlarges the economic supply of the agents most nearly fixed in physical amount._ This proposition states a historical fact. Any explanation of the economic occurrences of the last five centuries or of the immediate future, that ignores this fact of the increasing supply of many kinds of land and natural resources in the markets of the civilized world, must lead to false conclusions. The rate of this movement has been more rapid in the past century than theretofore, and perhaps more rapid than it will be henceforward; but that this development will continue in large measure and for a long period, is not open to question. Undeveloped areas will be opened to the world, and new geologic realms will be explored. Yet the notion criticized above is found in all the older text-books. The idea arose in England in the first quarter of the nineteenth century when land and food were rapidly rising in price, and it has vitiated a large part of both the economic theory and the practical conclusions on this subject. [Sidenote: The effective supply grows by invention] 3. _Invention, including new modes of transportation and new processes, increases the economic supply of most scarce goods and provides substitutes for the others._ Some inventions increase economic supply by making available the uses in goods that were before unavailable. Subsoil ploughing annexes to agricultural land new layers of soil that are just as important as new acres added to the surface. If land could be used three times as deep, it would be as good for many purposes as if it were of three times the extent. New trade routes and new means of transportation add to the supplies available in the older countries as effectively as if their areas were increased. The building of railroads in western America had an effect on English rents identical in nature with that which would have been produced had an equal area of somewhat less fertile land touching England, risen out of the ocean. Every country in Europe has repeatedly felt the shock of these great economic changes which have compelled the recapitalization on a lower plane, of nearly all kinds of their landed wealth. Where the same agents have not been multiplied, substitutes have been found that are just as effective in meeting the economic need. It is the result, the gratification, that man seeks: any particular good is but the means to an end. [Sidenote: Production of land by physical change] 4. _Increasing wealth and new labor make possible the increase of the agents that appear most nearly fixed in supply._ When the need arises men turn to new enterprises. The reclaiming of land in Holland is a striking but far from isolated example. Among the larger undertakings of this kind are the draining of the Haarlem Lake in 1840-58, by which 40,000 acres of rich land were made available, and the draining of the Zuyder Zee, which is adding 1,300,000 acres. Though there have been many minor undertakings of the kind, the area reclaimed is relatively small compared with the whole area of the land in the world used for agricultural purposes. There are still great areas of fens, swamps, and marshlands, such as those on the Jersey coast in this country, which with moderate effort could be reclaimed. While the possibility must be recognized, the increase of the area of available agricultural land by means of such physical changes is relatively small. [Sidenote: And by the work of pioneers] The work of the pioneer, as a producer of a supply of land, is, however, of the greatest importance. The pioneer annexes new areas to the economic world and to the market in which he has lived. This is recognized of late by writers that perhaps do not fully mark its significance to economic theory. The work of the explorer and prospector is that of a producer of mineral resources, and daily market quotations reflect the changes in "the supply" of these natural stores. [Sidenote: Successive utilization of various grades of agents] 5. _Limitation of the supply appears first in the better qualities, and efforts to increase wealth are then directed to making available the poorer grades._ Great quantities of the poorer grades of wealth, even of those things that are relatively fixed in supply, lie unused. Great areas on the edge of civilization still await the pioneer, the prospector, and the miner. Here is a source of wealth and a field for enterprise. The growth of society may cause some of the poorer agents in time to become the best. When men crossed the ocean to settle on Manhattan Island, it was a wilderness; but the growth of commerce has caused the land in New York city to become more valuable than that in London. Changes are still in progress, for of late the smaller ports to the south have increased their trade at a more rapid pace than New York has. [Sidenote: Goods ranged on a scale of increasableness] The difference in increasableness of the various forms of wealth is of importance in considering various social questions such as the effects of an increase of population, and the kinds of taxation most equitable and most favorable to the progress of society. Account must be taken of the fact that the number of bricks can be increased more easily than the amount of land; but there must not be overlooked the possibility of increase in any of these forms of wealth, nor the limits to the increase of any one of them. When one wishes to save or increase wealth, he turns to these great unappropriated fields, unused things or things imperfectly used, and tries to convert them into effective agents. The different forms of wealth may be ranged on a scale according to the ease with which they can be increased by effort. They may therefore be classed as relatively fixed and relatively increasable. Some natural resources belong at one end, and some at the other end of this scale. No hard and fast line divides the different kinds of goods, but the difference in degree of increasableness is a fact of great social importance, affecting the direction in which industry can and must progress. CHAPTER 19 SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST § I. SAVING AS AFFECTED BY THE INTEREST RATE [Sidenote: The interest rate traces the division between present and future gratifications] 1. _In the case of consumption goods, present marginal uses are often less than future uses as judged at the present._ The proposition that future goods sometimes have a greater instead of a less value than present goods may at first seem to deny the general fact of economic interest, which is a premium on present over future goods. The contradiction is only apparent, however, and the proposition is merely a proper interpretation of the theory of interest. The assertion that present goods have greater value than future goods, as we have accepted it, requires two explanations. First, it means that this difference exists when the two are judged and compared _at the present moment_. The future use when it matures may be much greater than the present use; indeed, the very existence of interest depends upon this surplus of value arising by the lapse of time in the future use. Secondly, the proposition does not mean that every concrete good, or every use of the goods, is worth more in the present than in the future; it means merely that the demand for present goods preponderates so that a market rate in favor of present possession prevails. In a great many cases a particular good may have a greater value to be kept for the future than to be used at present, in which case it is kept, or it is exchanged for something else having a higher value in the present. But this preference of the future over the present cannot pass a moderate limit without condemning the person to present misery, and at length to death. On the other hand the excessive preference of present over future would lead to the using up and wearing out of wealth, to the present enjoyment of every possible resource, on the penalty of future misery. Evidently somewhere between these two extremes there must be, in each economy, a ratio of exchange between present and future, which in fact is the interest rate. This rate applied to utilities traces through each good a line analagous to the isothermal line on the map, marking off a zone of utilities for the present and other zones for each period of the future. There is thus a close relation between saving and the rate of time-discount. [Sidenote: The less necessary goods are the ones saved] [Illustration: Present VALUE line] Let us illustrate by the case of fruit stored in the cellar for future use. In the fall after the appetite for apples has been gratified up to a certain point, there still remains a large stock which affords less gratification if consumed at once than if kept for a time. Thus wood, food, and clothing are stored in the summer for the winter's need. Even the animals act on this principle. Squirrels, bees, and ants store up in the season of superfluity for the season of scarcity. The animals recognize with their feeble intelligence or by instinct, that a time will come when these consumption goods will represent greater importance to their welfare than they do at the moment. It results from the nature of wants and the principle of diminishing utility that in many cases some portion of a large supply of present goods must be worth less now than at a future time. This part, the marginal, less necessary part, will be left for a future time, and it is to this part that our opening proposition refers. This is roughly illustrated by the diagram. Things that cannot be kept, perishable goods, do not permit of this comparison. But if goods that can be kept continue to be used after utility has fallen down the scale, their high value for the future is cast away. Man lives not alone in the present but, in a far greater measure than do any animals, he lives in the future also. His economic life and his economic judgment comprehend a great number of periods at once. With the aid of memory and imagination he forecasts the future, and compares it with the present. The diminishing utility of goods, therefore, is modified by this fact that a thing has want-gratifying power at different periods. Before man uses goods for an inferior purpose he will ask whether, if they are kept for the future, they will not gratify a greater want. [Sidenote: The less valuable rise in value with the lapse of time] 2. _The gradual rise of a consumption good with the lapse of time from the lower to the higher degree of gratification is the rent it yields._ The difference in value of present and future rents is expressed by the discount of the future use when it is capitalized at any earlier moment, and emerges in the rise in value as the thing approaches to the time when it can render the later use. Next year the unit whose use is deferred will afford as much gratification as the earlier units do now, and more than if used at the present moment. The importance of any present utility is compared with its importance a year later, plus interest at a rate which expresses the limit to which future uses are discounted. Anything that makes men feel more the importance of future uses causes them to value those uses more. But the pressure of present want is such that a present use of a lower order competes with a future use of a higher order. Only goods of a lower order, nearer the margin, are reserved for the future. But just as the possibility of using a thing for several different purposes at present causes it to be valued more highly than if it had but one use, so the possibility of reserving to the future a portion of a stock imparts to every unit a higher marginal utility. [Sidenote: Interest is the equalizer of time values] 3. _The saving of present goods for future use is encouraged by the motive of gaining the interest._ Many consumption goods grow into higher uses in the hands of the owner, whether he uses them for himself or not. Ice may be stored in midwinter when it is all but a free good and a little labor serves to fill the ice-house. Kept until the summer months, the ice rises in value as the desire for it grows. Likewise the higher price secured by the owner of a thing kept for sale to others, reflects the change in utility, and affords practically a rent which is the motive for investing capital in that business. Any saver or abstainer puts aside present wants only when the future good, with the addition of time-value or of money interest, appears as large as the present good. Interest is therefore the equalizer of the value of things in different periods. Put into the scale of judgment when present and future are compared, it helps to balance the disparity in the gratifications given by economic goods in different periods of time. [Sidenote: Saving increases and improves economic agents] 4. _The postponement of present wants results in bettering the economic environment for the future._ Economic environment means simply the economic conditions in which men live, the stock of wealth, the supply of useful things with which they are surrounded. This betterment may be only temporary, only for the immediate future. Like the busy bee or the prudent ant, one may in summer store the cellar with consumption goods to be consumed the following winter. But often there is a more lasting way of improving the economic environment by converting savings into durable indirect agents. The accumulation of wealth that will yield its fruits only after years of growth is the record, so to speak, of the successful competition of forethought with present desires. It means that the two periods have presented their respective claims and that men have decided in favor of the future. Saving thus lifts society from poverty to wealth by the progressive enlargement of the sources of future utilities. [Sidenote: The kinds of abstinence] 5. _Abstinence is the faculty of mind that enables present wants to be subordinated to future wants._ Abstinence may be considered as a quality, or faculty, of the mind, or as an act resulting from that quality. There is little danger of confusion in this usage, but it is well to note the distinction and the fact that the former is the primary meaning. Abstinence expresses an act of the will, a choice made by man. It is the guardian of the future, so to speak, against the greediness of the present. For convenience we may speak of conservative abstinence as that which keeps men from using up or invading their present stock of resources, and of cumulative abstinence as that which impels them to add to that stock. There is no sharp dividing line, no abrupt break, between these two, yet on the whole they differ. There is a quality of mind very like the inertia or momentum of physical matter. The inertia of mind makes men resist stubbornly the reduction of wealth and of inherited social position; but it requires a more positive quality of mind to add to wealth at the cost of present sacrifice. Abstinence is embodied in individuals, never elsewhere, and is found in most varying degrees of strength. Upon it depends the growth and betterment of man's environment. § II. CONDITIONS FAVORABLE TO SAVING [Sidenote: Political insecurity discourages saving] 1. _Political security and domestic order are essential to the development of saving._ As saving results from a comparison of the future with the present, any lack of certainty regarding the future decreases the appeal it makes. Men employ roughly the theory of probabilities in this matter, and count a utility only half as much when there is but one chance in two of enjoying it. In countries where there are constant revolutions and border wars, as in Africa and South America, and in lands where brigandage is common, as in Italy, Macedonia, and Bulgaria, the motive for saving is cut in two. Oppressive and irregular taxation kills the motives of providence, and decreases the appeal made by the future. While the miserable subjects of the state live from hand to mouth, the very sources of the public revenue disappear. Improvidence grows upon such a people into a prevailing national custom; ambition is wanting; industry is the sport of chance; economic order and economic prosperity are impossible. [Sidenote: Influence of private property on saving] 2. _Social institutions that give a motive to the individual are essential to saving._ Among these institutions the most important are the family and, closely connected with it, the institution of private property which, in its ideal manifestation, places the responsibility for economic welfare on the individual or the family. Through it the state says to men: "Save if you will; the wealth and its fruits shall be yours. But if you spend and consume all you can, you alone will suffer the consequences." It is true that the institution of private property never is found in an ideal form. Dishonest public officials weaken and defeat its benefits. Every propertyless family marks a failure in its purpose. Private property is a favorite object of attack by social reformers, but it never can be safely abolished in a civilized state until some other incentive is provided, equally effective to make men subordinate present desires to future welfare. Unless the mass of men can be greatly changed, property creates the only motive that can induce saving regularly and on a large scale. It diffuses responsibility for present consumption. It multiplies the motives for abstinence and thus increases the welfare of all economic society. [Sidenote: Safe and paying investments encourage saving] 3. _Opportunity for the investment of small savings favors a spirit of abstinence._ The institution of small property, peasant proprietorship, worked powerfully in this direction in many parts of Europe, and the same effects have resulted in America from the wide diffusion of property in land. If the decline in the number of small independent farmers has somewhat weakened this influence in America, in other ways other agencies are effectively performing the same functions. Savings-banks, penny banks, building and loan associations, penny-provident funds, and other convenient means of investing small sums, encourage men to reduce their tobacco bills, their candy bills, their saloon bills, and to lay aside for the winter's coal, for the children's education, for houses, for business investments, or for old age. Probably no one thing has given a greater stimulus to saving than has the development of insurance and the endowment policies in connection with it. While the great modern corporations have destroyed many of the small business enterprises into which so much of the saving of the past was put, at the same time the increase of negotiable paper, of loans, and of stock in joint-stock companies, has opened up other large fields for investors. [Sidenote: Changing interest rate in relation to saving] 4. _Variations in the rate of discount of the future react upon the spirit of saving in various ways._ This very general proposition requires more detailed discussion. In general, a high rate of interest gives a large motive to save, for as the discount on the future is large, so is the reward for waiting. But this favoring motive may be offset by other unfavorable conditions, and is, in fact, wherever the high rate continues. In countries backward economically, where war, brigandage, and political oppression prevail, the rate of interest is frequently ten and twelve per cent. on the best secured loans. A high interest rate does not of itself insure a high degree of cumulative abstinence; it is only one of several factors. But in a new and favored country like America, a high rate of interest is a strong stimulus to saving. Again, interest may fall while saving continues at the same or a greater pace. Ordinarily a fall from six per cent. to five, giving men a smaller motive for abstinence, would be expected to cause less saving, yet this is not always the case. Custom and example help to fix a habit of saving in individuals and cause them to continue saving at a lower rate of interest. With the growth of wealth, the prevailing ideas as to the amount needed for a competence change, impelling to greater saving. The tendency, however, of a fall in the rate of interest is to weaken, and that of a rise of the rate, other things being equal, is to strengthen the motive to save. But the influence of the interest rate on saving is relative to the character of men. § III. INFLUENCE OF THE INTEREST RATE ON METHODS OF PRODUCTION [Sidenote: Saving permits improvement of agents] 1. _The individual saver is enabled to improve the agents that he uses._ The simplest case is presented when means of enjoyment are improved and made more durable. If Crusoe on his island spends less time and fewer resources on gratifying his immediate wants, he may improve the quality of his clothing and the convenience of his house and furniture. By thus putting his consumption goods into durable instead of temporary forms, he will increase eventually the sum of utilities enjoyed. Again, abstinence permits the tools of the laborer to be made more convenient. If the farmer spends less time in the garden and he and his family live on plainer food, while he makes a plow, mends a rake, and builds a shed, he will be enabled thereafter to gather a greater crop with less effort. [Sidenote: Saving of consumption goods for exchange] 2. _Consumption goods, when saved, may be exchanged for services, and these may be used to create durable agents._ Various ways are open to one wishing to increase his stock of durable agents. He may forego seeking immediate enjoyments while he makes durable agents himself. Or he may make and save a stock of consumption goods, a surplus supply for the future, and exchange it for durable agents. Finally, one who has accumulated consumption goods can always exchange them for the services of those seeking subsistence and enjoyment; and thus in control of a labor force, he can direct it toward the production of new forms of productive agents. [Sidenote: Money savings are converted into other wealth] 3. _In modern industry, saving frequently takes the form of money, which is then loaned to productive borrowers._ This is the typical form of saving in modern industry. As it is more and more the case that income takes first the form of money, saving most conveniently takes the money form. The clerk on a salary of $60 a month spends $50 and saves $10 which he lends to a neighbor or deposits in a savings-bank. The borrower is thus empowered to increase his stock of productive agents in the measure that the lender has limited his consumption. The complexity of the process by which money saving becomes embodied through a money loan in new productive agents should not blind to its real nature. The money is saved as a means to the exchange of present goods for future income. Money even in our day is occasionally stored away for future use under hearthstones or in old stockings and hollow trees, but this is a primitive and wasteful method, involving the loss of all the additional rents that its exchange and investment would yield. If the money saved by the thrifty saver is loaned to a thriftless borrower, wealth is not increased, but merely changes hands. The prodigal mortgaging his wealth, spending the money, and living beyond his income, absorbs the savings of the other. One saves and adds to wealth, the other consumes it. There is no net increase of goods, but two individuals have shifted positions; each has gotten his reward of growing affluence or penury. The "normal" end, however, of savings and loans is productive. The borrower, in getting control of purchasing power, aims to put a new machine where it will be useful, to remove obstacles, and to make economic agents more effective. Along the border-land of industry the active and alert borrower seeks out opportunities to make new agents earn a rental, and having found the opening, turns to the money market for the means to profit by it. [Sidenote: Lower interest means higher capitalization] 4. _A fall in the rate of interest normally accompanies an increase in the mass, efficiency, and valuation of durable economic agents._ A lower rate of interest means a higher capitalization of all incomes. It is not that either can be called the cause of the other; rather both are aspects of the same thing, the interest rate merely registering the change in capitalization. If the rate of interest has been five per cent., an income of $100 has been capitalized at $2000. When the rate falls to four per cent. the income is recapitalized at $2500. All along the line of investment there is an increase in the value of the durable economic agents. [Sidenote: And more complex industrial processes] [Sidenote: It encourages the increase of fixed charges to reduce cost of operation] Another phase of the change is the greater complexity of the processes of industry. Production becomes technically more complex when interest falls. Rental, product, and present goods, bear a smaller ratio to the value of capital, and therefore it becomes advantageous to apply newly formed capital to uses which before did not justify the investment. Where formerly the utility of a second tool did not justify its making, now it can be made to earn the smaller rental needed to balance its capital value. One form, therefore, which the change takes, is a multiplication of the tools already used. Things are placed wherever most convenient. Another form this change takes is the putting of new links into the chain of technical production. Cost of operation constantly is compared with fixed charges, the interest with the capital investment. Expensive improvements on railroads, the straightening of curves, the tunneling of mountains, the reducing of grades, the replacement of lighter by heavier rails, have been made possible by a fall in the rate of interest. A fall in the rate of interest disturbs the equilibrium that has been arrived at, between the cost of operation, the amount paid for wages, coal, etc., and the income on permanent investment. If the rate of interest has been five per cent. and falls to four per cent. many permanent improvements before unwise become economical. One thousand dollars paid annually in wages then balanced an interest charge on a capital investment of $20,000; now it balances the interest charge on $25,000. It becomes a paying thing for the railroad to abandon or throw aside an enormous capital represented by the old, less perfect roadbed, and build a new one alongside of it. The changes of this kind one sees in traveling on the great and progressive railroads, reflect in part the growth of traffic, but in part also a change of the interest rate, making it a net saving to increase the capital investment in order to reduce the cost of operation per unit of traffic. [Sidenote: Diffused benefits of saving] The benefits of saving viewed broadly are not confined to the owner of the wealth saved, but are diffused throughout society, in the degree that they increase and improve the industrial environment, and thus raise the efficiency of production. Such a change works the same results as would a magical increase in the fertility of the soil, an improvement in the richness and accessibility of natural mineral stores, or in the quantity and quality of artificial appliances. PART II THE VALUE OF HUMAN SERVICES DIVISION A--LABOR AND WAGES CHAPTER 20 LABOR AND CLASSES OF LABORERS § I. RELATION OF LABOR TO WEALTH [Sidenote: Work and play defined and distinguished] 1. _Labor is any human effort having an aim or purpose outside of itself._ It is difficult to define satisfactorily the term labor. No definition will quite mark off all the cases. The efforts put forth by men may be classified according as they are pleasant in themselves, and according as they have separable useful results. These two factors combine to form four groups of actions. Effort Objective result sought Name of action 1. Pleasurable Not useful Play 2. Pleasurable Useful Labor 3. Painful Useful Labor 4. Painful Not useful No special name The fourth combination is not found in rational life, for no motive exists to do a painful act for a useless result. Let us consider the other three. [Sidenote: Play] The first group comprises most of the sports, games, and pastimes found in every land and time. In the mere putting forth of the powers of mind and muscle there is a joy felt by children and men of all races, and this is heightened by companionship, emulation, and even by a spice of danger. Play is not dependent on a useful objective result later to be enjoyed, but, like beauty, is its own excuse for being. The tired student goes out-of-doors to bat the tennis-ball, making no change in the material world, except to wear out his shoes and to lose the ball, but finding that hour rich in the joy of life. If properly chosen, play strengthens and vivifies both soul and body, leaving an afterglow of health and happiness. The choice of sports and temperance in their pursuit are among the surest tests of wisdom in men and in societies. A love of vigorous play no less than the power of sustained work, marks the dominant and progressive peoples of the earth. [Sidenote: Labor as pleasure] Acts in the second group give pleasure and at the same time leave an objective result. The hunter gets more pleasure if he returns with well-filled bags of game, but the distinction between the sportsman and the "pot-hunter" is not hard to find. The one has his joy in the sport, the other in the material results of the sport. This kind of action presents some puzzling cases, but in general must be classed as labor, since labor is to be judged by the objective economic results rather than by the pleasure of the act itself. [Sidenote: Labor as sacrifice] In a third class are the acts that are painful in themselves, that are done unwillingly, but that leave a pleasurable result. Unfortunately a large part of the actions of men are of this class, which to most minds is the typical labor. [Sidenote: Joy in work is the ideal] There is thus labor that is pleasurable in itself and labor that is painful though it leads to a desirable result. The social ideal clearly is that all human labor should be made pleasurable. Social dreamers love to picture a day when all shall find for effort a full reward in the mere doing,--the reward of the artist, of the scholar, of the saint, in addition to the objective result in economic wealth. Probably we are slowly nearing this ideal. Not only in the professions and in the esthetic arts, but in commerce, in mechanics, and in the humblest walks of life are found men free from envy, rejoicing in their daily tasks. Such is the normal feeling of the healthy optimist. And yet in every serious occupation there are numberless moments and occasions when the spirit flags and only hard necessity holds men to their tasks. The dilettante does not go far or long or steadily; the real tasks of the world are done by men that labor, now with joy, now wearily. [Sidenote: The distinction between men and things] 2. _The agents of production compose two great species, material goods and human services._ Our discussion of consumption goods, rent, and interest has been an analysis of the nature and uses of material goods. We now come to the other great species, human services, which comprise those acts of men (one's own or other's) that minister to the gratification of wants. There are also misdirected efforts, and evil deeds which are "disutilities" to all but the doer. The distinction between men and things is fundamental in modern economic discussion where each man is looked upon as free. It is not so clear where slavery exists and the master looks in the same way upon the services of his cattle, of his chattel slaves, and of his land. Even in the freest society, man's services are compared purely as to their utility, with the uses of other parts of the material world. It is said that the price of mules at the Pennsylvania mines has been affected by immigration, because a man and a mule sometimes represent interchangeable services. But in the study of political economy the distinction between men and other material things must never be lost sight of; they are the two fundamental classes of economic agents, the one being solely a means to an end, the other being an end in itself. [Sidenote: Rent and wages mutually affect each other] 3. _Labor and material wealth are complementary and indispensable to each other in most of their uses._ The discussion of material wealth and its value apart from the subject of labor, of the problem of rent and interest apart from that of wages, does not imply that this material wealth would have the same value in real life if labor were absent. As one field affects the value of another field, and one good, by substitution, the value of another good, so does labor affect material wealth. Some material wealth can be used apart from labor, but most of it must be used in combination with some labor. Rent, therefore, is not determined in concrete cases apart from men and their services. It is allowable, however, in abstract analysis, to simplify the question by leaving out a difficult complication, and thus to set forth more clearly the logical bearing and effect of a certain factor. [Sidenote: Certain shares of the product are logically attributed to each] Each of two kinds of agents used together affects the utility of the other, and the value of the product. If neither can be credited with the whole value, how is any distribution to be made between them? It is not possible to measure their technical services in the product, but it usually is possible to gage their marginal utility under particular conditions. Flour, water, and labor are needed to make biscuits; but water being a free agent, does not enter into the combination with any marginal utility. A match also is almost indispensable to start the fire (and who has not seen the time when he would give far more for a match than for a bucket of coal), but as things usually are, the match is credited with a value of a very small fraction of a cent. Again, how is to be measured the economic service of the tree and of the labor needed for gathering its fruits? There is here suggested the superficial aspect of what is known as the problem of complementary values. Where two or more things are indispensable to a product, how much shall be credited to each? [Sidenote: Labor gratifies directly and indirectly] 4. _Human service has the same general relation to wants that material goods have, affording gratification either directly or indirectly._ It is axiomatic that to be "economic goods" human efforts like material goods must afford utilities whose importance is felt. Many services give pleasure directly and are immediately consumed. A tropical potentate has an attendant to fan him, and another to carry an umbrella; a humble citizen is shaved, doctored, sung to, and played for. The gratification in such cases is directly produced in personal comfort, in the consciousness of heightened beauty, in the feeling of self-esteem. Value is thus created and consumed immediately, taking no material form apart from the consumer. [Sidenote: Labor embodied for a time in material form] But the results of most human services may be seen to rest, at least temporarily, in some material form. Effort is put upon a material thing to be used later. The work of the waiter in spreading and arranging the table is not an immediate service, for it is embodied in material form an hour or two before the meal. The service of cook no less than that of gardener and butcher, is put into material form before it comes to the consumer. The woodman fells, cuts up and splits a tree, and piles it at the door, putting his labor into a utility to be consumed months afterward. The old economists used to class labor as productive and unproductive according as it was or was not embodied in material form. The classing of the services of cook, waiter, valet, etc., as unproductive seems, even from the old point of view, to have been inconsistent, and the attempt to distinguish services by any such test is now wholly given up. Whether the service rests in material form for a week, a month, a year, or as often happens, for a much longer period, is not essential. The test of the productiveness of services is not their embodiment in material form, but their appearance as psychic income, their ministry to wants. The most varied kinds of human activity may be unified by this thought in the concept of economic labor. § II. VARIETIES OF TALENTS AND OF ABILITIES IN MEN [Sidenote: Grades of labor are analogous to grades of wealth] 1. _As material things differ in their fitness to gratify wants, so do men differ in their powers of labor._ The fields, hammers, plows, tools, and machinery of different kinds and qualities have been seen to grade off from the best to the poorest. The poorest, discarded or just about to be discarded, are no-rent agents. The utility felt and recognized in the better qualities is expressed in the rents they yield. Recognizing the variety and inequality of human talent, some economists of late speak of the "rent" of ability, meaning that, like land rent, the greater utility (and corresponding reward) of some labor as compared with others, reflects the difference in the quality of agents. But this expression, though often met in contemporary economic writings, is one to be avoided because it tends to blur the essential distinction between human and other agents. Pursuing the same analogy some economists have talked of capitalizing the worker,--expressing in a lump sum the value of the man as the present worth of the series of incomes which he may be expected to earn in his working life. This, also, is to be avoided, for while possibly it is suggestive in studying some problems, it is on the whole a misleading analogy, dimming the distinction between free-workers and owned and exchangeable wealth. [Sidenote: Physical differences among men] 2. _The physical strength of workers differs according to age, individual, race, and sex._ Differences due to age are the most obvious. The child, at first weak, grows toward his maximum of physical strength, which he attains before his fullest intellectual capacity. The period of maximum physical working power lasts fifteen to twenty-five years according to the individual, and then gradually declines as the old worker approaches again the inefficiency of the child. Mental efficiency develops more slowly and longer, the highest qualities of judgment and wisdom being the fruits only of a life rich in experiences. Families and strains of stock differ notably in physical and mental powers; one excels in stature, another in development of muscle. The differences within families are inexplicable, sometimes one brother excelling in one thing, the other in another. The physically perfect man is a rare product. Among three thousand students are but two score endowed with the remarkable combination of lungs, heart, muscle, nerve, and character, that makes possible the finest athletes. The national and racial differences in working power, even in the simplest tasks, are marked but difficult to explain, as so many influences of customs, habits of life, and varieties of diet modify the result. We cannot tell how much of the Englishman's great superiority over the East Indiaman is due to individual, native differences of mind and body, how much to the social environment in which they have lived. Certainly, though, the difference is not mainly one in size; in the Chinese War the little brown men of Japan outmarched all the others. Certainly fiber counts for more than bulk, and character for more than muscle. [Sidenote: Comparative strength of men and women] A difference in the physical strength of the sexes is found in some degree throughout the world, but it would appear to be far more marked in civilized than in savage communities. Compare the records at the Vassar field-games with that of the men in any leading college: in the hundred-yard dash, fifteen seconds as against ten and a fraction; in the high jump, forty-eight inches as against six feet and over. The muscular force of American college women as tested in the Yale and the Oberlin gymnasiums is but one third that of men, that is, taking all the students, the weaklings and the little men along with the athletes, and the women large and small. As to strength of back the average for men is 154 kilograms, for women 54 kilograms; legs, average for men 186, average for women 76.5; right forearm, average for men 56, average for women 21.4. This is an abnormal difference. The natural and possible strength is more nearly attained by men than by women under our social conditions. Women escape the physical toil which strengthens, but not the mental strain which kills. Men carry more of the wood, but the women not less of the worries. A fairer test is applied among peasants in field-work in France and Germany, where the strength of women is found to be about two thirds that of men. American women should do and will do more to attain their natural strength when we attain sounder ideas of education and saner modes of living. [Sidenote: Talent and training as factors of efficiency] 3. _Differences in intelligence are a resultant of native talent and acquired ability._ It is difficult to distinguish these two factors sharply. Two men sitting side by side in an examination, get the same grade; one of them has had excellent preparation from childhood, and all the opportunities that money, travel, and cultured associates can give; the other, under great difficulties, has prepared in a country district school with a little coaching now and then, and struggling against great odds, has at last entered college. The same grade does not mean that their natural ability or even their efficiency in this particular class, is equal. Yet the grade is the best expression to be had of their efficiency in the particular work. Native intelligence shortens the time needed for preparation in any calling; hastens new methods; decreases the cost of supervision; saves materials, tools, and time; diminishes loss from breakage; makes possible the use of finer machinery and better appliances, and imparts those subtler qualities that distinguish the best from the mediocre products. Education and native talent are in a degree interchangeable; one supplements the other. Education increases adaptability; the trained mind will outstrip the untrained mind of greater power. It makes direction easier, fits for higher tasks, and decreases the difficulty of coöperation. Any ability may be helped by education in the broad and true sense, though a fool cannot be made wise by training, and though many a potential genius doubtless has been dwarfed in dusty school-rooms by stupid teachers. [Sidenote: The moral qualities required in industry] 4. _The moral qualities of the worker are increasingly important as society grows more complex._ The need of a particular moral quality is relative to the special task in hand. Honesty is needed in the bank teller, but he need not spoil a good story. The champion broncho-buster of Arizona is not a Sunday-school superintendent. So, discipline, obedience, self-control, regularity, and punctuality are needed, for more and more in these days business is run by the watch; confidence, patience, good temper, in fact all the virtues in the calendar are necessary at some time and place, and most of them are needed all the time in business. Places may be found in our developed society for those who are deficient in these qualities (it is fortunate that it is so), but these are the poorer places. Many men fail to examine the qualities necessary for success, and do not understand the causes of their own failure. Blind to their own faults, they are dropped down one notch after another in the scale of industry, and, equally blind to the virtues of their successful rivals, they rail against the unjust fates. [Sidenote: The union of many qualities needed] 5. _Skill and capacity in industrial tasks is a resultant of many qualities._ The simplest task calls for a combination of force and judgment,--even the digging of a ditch, the raising of a window, or the fitting of a stovepipe. For most industrial tasks rarer combinations of qualities are required. The retail clerk must be neat, punctual, polite, and long suffering. A confidential clerk must have discretion, judgment, and other moral qualities in an unusual combination. The substitution of qualities is possible within limits; a rare quality may make amends for the lack of a commoner one, and a man may, because of peculiar fitness in some regards, continue to hold a position for which in other ways he is little fitted. The rarest and most valued worker is one uniting many good qualities and fitted to deal with emergencies. The economic efficiency of the worker often is no stronger than its weakest link. A strong motive for training is offered by the fact that supplying some one lacking quality may raise the total efficiency in a remarkable degree. [Sidenote: Inequality of talents shown by biologic studies] 6. _Biologic studies have of late made clearer the existence and continuation of the inequality of talents._ The political philosophy of the eighteenth century was based on the idea of natural rights and natural equality. Adam Smith, accepting the prevailing view, discussed wages on the assumption that all men had equal natural ability. It is still a favorite assumption of radical social reformers that the natural ability of all men is equal, and that all the differences in success result from political injustice. The study of biology of late has made patent the unending differences that prevail throughout the animate world. No two members of the same family or species are just alike; no two pigeons have wings of just the same length. Nature by numberless devices is experimenting constantly with variations on either side of the established mean. The accepted fact of biologic evolution rests on the foundation of inequality in structure and powers, making possible selection and adaptation. Men in all their qualities of mind and body display this kaleidescopic variety. In all life there is inequality, and the whole drama of human history as well as that of biologic evolution must be meaningless or illusory to the man who does not see this truth. Accustomed now to this point of view, we as inevitably think of the natural inequalities in men as did Adam Smith of their equality. This fact does not force to the conclusion that industrial inequality as it exists to-day, the great disparity of incomes, correctly or justly reflects the degree of difference in men's qualities, either native or acquired. It does not follow that a thousand-dollar income represents ten times the ability of a hundred dollar one--far from it. But to those who ignore the inequality of men, the whole problem of industrial remuneration must remain a mystery. A crude socialism is possible only to those who are blind to the enormous differences in human capacity. [Sidenote: Scarcity of labor is essential to wages] [Sidenote: Unlimited demand for labor] 7. _The scarcity of human services, relative to wants, is the fundamental fact in the problem of wages._ It is clearly seen that some qualities of service are scarce. Most women will confess that they cannot warble as Patti could, most men will admit that they have not the mercantile ability of John Wanamaker. The man of mediocre capacity recognizes even through the fog of his self-esteem that there is a reason for the high value of certain rare services. But it must also be recognized that the commonest services have value only because they are scarce. There are many things to be done if there were labor enough to do them. There is no need to "make work," in the popular sense; it is here, but labor is lacking to do it. It is true there may be a temporary superfluity of human labor at a time of an industrial crisis. There is at all times a superfluity of "useless" human agents whose qualities are such that they have no net utility. The ignorant, insane, feeble-minded, vicious, drunken, and debauched, can give to the world only negative utilities. But services that are in any degree useful are nearly always in demand, and the higher services are so rare that they are in great demand. The proverb, "There's always room at the top," is seen to be true when conditions are thus analyzed. There is a large, though limited, supply of the commoner kinds of services at the bottom of the scale, but in every branch of human effort there is a never-ending lack of that higher qualification and training required for the best results. CHAPTER 21 THE SUPPLY OF LABOR § I. WHAT IS A DOCTRINE OF POPULATION? [Sidenote: The employer's and the social view of supply of labor] 1. _The supply of labor means here not the number of workers available in any one industry, but the number available in the whole field of industry._ The individual employer thinks of the supply of labor as consisting of the men seeking employment in his special industry. In this view it is the demand by the employers that apportions the workers among the various occupations. The social view of the supply of labor, however, looks at the whole field. The demand for labor is then seen to be represented not by human employers, but by resources and agents presenting opportunities and demanding labor to employ them. The rich acre, the tool, the machine, all material wealth needing the human touch to give it a higher utility, represent a demand for labor in this broad sense. The thought of a supply of labor is therefore relative to that of the demand embodied in resources. A million men are a great or a small supply of labor according as they occupy a little island or a large continent, according as they are equipped with a small or a large supply of agents. [Sidenote: Population in relation to resources] 2. _"Supply of labor," as an economic problem, presents a large and complex case of diminishing returns._ The population of different countries and of different sections of a country is seen to bear a general relation to their resources. An unintelligent race with little wealth and poor machinery is doomed to remain few in numbers. Mountains, districts poorly watered, the frozen regions of the North, are sparsely populated because natural resources are lacking. If food production alone is thought of there are apparent exceptions to this statement, but there are no absolute contradictions of it. A favored harbor may make possible a flourishing commerce on a rocky coast; an unfertile soil may support a large population when great deposits of coal or iron insure by exchange great food-supplies. Productivity must be measured under modern conditions by the purchasing power that is possible in the environment. The connection of wealth and resources with the extent of the population is in itself a recognition of diminishing returns, of an objective limit to the number of men that can occupy a certain area and employ a given stock of agents. [Sidenote: Equilibrium between numbers of animals of different species] 3. _Each species of the lower animals is seen to have a relatively fixed habitat limited by its food-supply and by its enemies._ The rocks tell a story of a slow and steady change that has gone on in the earth and in the species of animals that inhabit it. History records some rapid changes due to convulsions of nature or to interference by man with the natural conditions. But the usual condition is an equilibrium of numbers, long maintained, though each species appears to have in itself a capacity for unlimited increase. Why this contradiction? The limit set by the food-supply is seen in a simple case when herbivorous animals are placed on an island from which they cannot escape, and where there are no dogs, wolves, weasels, or foxes. Substantially this experiment was unintentionally tried on an enormous scale with the rabbit in Australia. This peculiar and long-isolated continent contained none of the rabbit's ancient enemies. The rabbits became a pest, devastated great areas, were hunted, trapped, poisoned, and great numbers of them died of starvation outside the fences erected to stop their advance. In the imaginary island they would increase up to the point where starvation would bring about an equilibrium between the number of animals and the food supply. The destruction of one kind of animal by another limits numbers in another way. The number of lions is limited by the number of their prey in the region where they roam. The number of deer, therefore, is limited in two ways, by the amount of their food and by the number of lions which catch the deer. The more numerous the lions, the fewer the deer; the fewer the deer, the greater the supply of vegetable food; as the pressure increases on one side, it decreases on the other, until an equilibrium is reached. [Sidenote: The surplus of life germs] Throughout nature each species of animal keeps its customary place, changing little despite its efforts to increase and to crowd into the habitat of other species. Even the slow-breeding elephant, with a period of gestation of three years, and producing one calf at a birth, would cover the entire earth and leave no standing-room in a few centuries if every calf born could live to full age. The myriads of frogs born every spring, the swarms of insects, the countless plants, are struggling to find a foothold on the crowded earth. Of the vastly greater number of seeds and embryos, only one in a multitude ever comes or could come to maturity. Here are the undisputed facts on which rests a biologic "doctrine of population," so to speak, for the vegetable and lower animal world. Because of the limited powers of the soil, no form of life, animal or vegetable, can continue to increase even for a single generation, without meeting enormous forces of opposition, which destroy great numbers and set a limit to the increase of the species. [Sidenote: These facts related to the doctrine of population] 4. _A doctrine of human population is a reasoned explanation of the causes determining the number of people in the world._ Man in his economic life is constantly struggling with the problem of the scarcity of goods. If in any given environment men continue long to increase, they must, like the lower animals, meet limits in the capacities of the resources they use. The supply of labor force which is thus brought to be combined with the material agents must meet with diminishing returns unless these agents also continue to increase at a like rate. The relation of population to resources thus presents probably the most fundamental problem in the realm of economics. It is a problem of great complexity, bristling with difficulties, and incapable of exact mathematical treatment; but it is capable of rational study. There is a great difference between a purely fatalistic view of this question and the view that is to be reached by a consideration of the motives, causes, and physical influences at work; It is possible to find some principles in the chaos of prejudices and contradictions that the subject presents. The fruit of a century of discussion of the economic, social, and biologic factors involved, is a rational, if not a final, doctrine of population. § II. POPULATION IN HUMAN SOCIETY [Sidenote: The biologic stage of human population] 1. _In the earlier stages of human history, population is limited mainly by biologic factors._ The biologic stage continues so long as there are no artificial restraints put on the birth-rate, and no deliberate destruction of offspring for the purposes of limiting the size of the family. There the limits are all objective; they are found in scantiness of the food-supply, or in destruction by enemies, animal or human. Each species has an average or normal birth-rate, great or small. Just why this varies, why the rabbit produces a score of young in a year, and the elephant but one in three years, is a question capable of a rational answer, but it is one for the natural scientist rather than for the economist. Each species is impelled by instinct to realize this birth-rate, to bring into existence as many young as possible. No human society known to us is so primitive that it has not passed this stage, but many societies have risen but little above it. In most savage tribes, where starvation, disease, and war are constantly at work, the difficult task is to maintain the population. Few of those born arrive at maturity. The custom of the adoption of captives from hostile tribes is widespread, because the efficiency and even the survival of the tribe depends upon keeping up its number of warriors. [Sidenote: War among primitive societies] 2. _War for the possession of limited resources is the first rude social remedy for an excess of population._ War is the normal condition of most primitive tribes. Its cause usually appears to be standing feuds and ancient enmities, but the deeper and abiding cause is the struggle for hunting-grounds, for pasturage, for natural resources. The rude industry and economy of hunting, fishing, or pastoral peoples, or of those in the earlier stages of agriculture, requires a large area for a small population. Distant excursions and frequent forays, when food fails, develop rival claims to favored districts, and war is the only settlement. Fighting under these conditions is an activity of such economic importance that much of the energy of the tribe must be strenuously given to it. The ceaseless loss of life in savage wars is almost incredible to modern minds. The invasion of the Roman Empire by the Teutonic tribes, the later successive inundations of medieval Europe by the fierce pastoral tribes from central Asia, are more recent and familiar examples of the economic and political effects of the increase of population and of the outgrowing of resources by barbarian peoples. When the custom arises of capturing enemies and reducing them to slavery instead of killing them, forces are set into operation to reorganize society and to create new checks on the growth of population. [Sidenote: Crude beginnings of volitional control] 3. _Volitional control of population begins by the destruction of offspring before or after birth._ The population problem ceases to be simply biologic, and takes on its sociological aspect, when the awakening intelligence of man first grasps the mystery of birth, and when the first attempts are made in any way to regulate family relations or to interfere with the growth of numbers. The student of primitive peoples finds in the methods applied to prevent the birth of children an almost inconceivable brutality. The same methods to a large degree persist in savage communities to-day. Infanticide was generally practiced in ancient times among peoples of advanced civilization, as, for example, in Sparta and Rome, where not only deformed and weak children, but unwelcome ones, commonly were destroyed. The practice, if not legalized, is at least permitted even to-day by public opinion in great portions of India, China, and other densely populated districts of the world. It is one of the dark spots on our own civilization. [Sidenote: Private property limits population] [Sidenote: The problem a psychic one] 4. _The pressure of increase of numbers on resources is confined by individual industry and by private property to special portions of the population._ A condition of communism, where all the members of the tribe or family share equally, means that all enjoy together when food and wealth are abundant, and all starve together when it becomes scarce. Along with a fierce enmity for other tribes, is found in many early societies a close approximation to tribal communism. Private property alters the nature of the struggle for subsistence and of the motives for limiting population. Society divides into a number of partially independent classes or family groups, each holding its share of wealth apart, not in common with the tribe. A society with private property is like a ship divided into a number of water-tight compartments. In communistic conditions if population increases, all sink together into want. The self-interest of those having private property keeps them from dividing their property, and starvation is confined to the propertyless members. This acts in two ways: it increases the motive for the production of wealth; it gives a motive for the limitation of the consumers of the wealth. A smaller family with larger resources means a wider margin between numbers and misery. This converts the problem of population from a material one of a balance of food and physical needs, to a psychic one of a balance of motives in the minds of men. When this stage is reached, the extreme objective limit of the birth-rate or of increase of population is no longer attained in the well-to-do classes, although it may still continue to be in the less provident. [Sidenote: Social classes differ in volitional control] 5. _Volitional control is effective in very different degrees in different families and industrial classes._ The possession of property is both a sign of forethought and an incentive to it. Concern for the welfare of children is one of the most powerful motives, especially after social distinctions become marked. It may become abnormally strong, leading parents to sacrifice their own welfare or their own lives foolishly for their children, as is done often in the accumulation of property. Among the classes with property the provision for the children depends not only upon the amount of wealth, but upon the number among whom it is to be divided. It is simple division: wealth the dividend, number of children the divisor. Among the poorer classes very different motives operate. After the first few years the parents' income is increased by the earnings of the children, both on the farm and in the factory districts if the laws do not prohibit child labor. Moreover, when the children are grown, their wages will depend on the general labor market, not upon the number of their brothers and sisters. So, according as the family income is from rents or from wages, the motives of the parents differ. [Sidenote: Motives in volitional control] Postponement of marriage must be classed as a mode of volitional control of population. The average age of marriage, both of men and women, is higher in the classes of greater wealth and ambition than in the poorer classes. The contrast in this regard between civilized and savage peoples is likewise noteworthy. The failure to marry, from whatever cause, is, in the social view of the question, volitional control. It is rare that the motive is directly and immediately the wish to avoid parenthood; now it is religious zeal, again it is disappointed sentiment; here it is conflicting duty, and there it is the individual selfish wish to retain an undivided income for one's own enjoyment. By countless strands of motive in the form of sentiments, social institutions, and interests, the primitive impulses of humanity are firmly bound; and in varying degrees, in different classes, the enormous possibilities of reproduction are controlled by human volition. § III. CURRENT ASPECT OF THE POPULATION PROBLEM [Sidenote: The many motives controlling population] 1. _Changes in population are resultants of many forces: those favoring a high birth-rate and low death-rate, and those limiting births or survival._ Whether the population on the whole shall grow, stand still, or diminish, depends upon the relative strength of contending forces making for life or death. But this control may lose its cruder aspect and may be waged in the realm of motive. More and more it is volition that controls in human society the growth of population; less and less it is the objective limit of the food-supply. Dire need resulting in ill-health and even in starvation, is still acting in some portions of society, but less to-day than ever before. The growth of population in this stage is not "fatalistic," as there is no inevitable tendency to increase or to decrease. It depends on the interaction of a number of forces, clearly distinguishable, by which population actually is kept far within the limits of food resources. Volitional control is not by a central and unified despotism determining human action, but it is by motives of the most complex sort, diffused throughout society and acting upon every member of it. [Sidenote: The standard of life in Asiatic countries] 2. _The desire to maintain and raise the standard of life is the most effective motive limiting population in our society._ The phrase "standard of life" expresses the complex thought of that measure of necessities, comforts, and luxuries considered by any individual to be indispensable for himself and his children; that measure which he will make great sacrifices to secure. This standard differs from land to land, and from time to time. In the Asiatic countries it is so low that it touches in large classes the minimum of subsistence. Despite adverse influences and the uninterrupted series of famines, the population of India in the last century under English rule increased from two hundred millions to three hundred millions. Such a population "lets out all the slack" of income, and never takes up any. The great public works of irrigation, forestry, and transportation, and the development of industry under English rule, gave an opportunity for a higher standard of living; but it was used instead to permit the existence of a greater number of men in the same old misery. These facts have a bearing upon the question of Oriental immigration to America. The emigration of millions of Chinese from their native land would leave no void in their numbers. Peopling their own land constantly down to their own standard of living, they have the power, if they are tempted hither in great numbers, to people this continent also to the same density. [Sidenote: The American standard] The American standard of living, while it differs in different classes, is on the whole the highest found anywhere in the world. The increasing appeal to individual selfishness in the last twenty-five years, the greater ease of travel and taste for it, the multiplied and costly pleasures and pastimes, make children a greater and greater burden. The abnormal conditions of city life increase the sacrifice required to support children, and take away a large part of the value of their services in the home. In the greater cities are whole areas larger than the city of Ithaca where children are not admitted to the apartment houses, where no one who has a child can rent rooms. Despite the increasing incomes of the masses of the population, the number of childless homes is increasing, and while the standard of comfort grows, the size of the average family dwindles. [Sidenote: The decreasing death-rate] 3. _Great improvements in medical and in sanitary science are decreasing the death-rate and thus partly neutralizing the effects of a lower birth-rate._ The death-rate in a community is a fairly good index of its general welfare. The death of a large proportion of the children before they arrive at maturity indicates poverty or ignorance. The death-rate in the Middle Ages, especially in cities, was tremendously high, but during the last hundred years has steadily decreased. The race of man which, ever since the beginnings of volitional control, probably has had a smaller death-rate relative to the total number of individuals coming into existence than has any other species of living creatures, has to-day a far lower rate than ever before. Even in the most miserable industrial population where one half the children die before they are five years old, the death-rate is much less than among the young of the lion or the eagle. [Sidenote: The quality of population counts] 4. _Volitional control is acting with the greatest force in the more capable classes and thus threatens to reduce the quality of the population._ The quality of population is of more import than its quantity, alike in its economic, its social, and its ethical results. The productive force of a population is not measured merely by numbers. "Who" make up the population at any moment is no more a matter of indifference than "how many." One new-born child represents a negative addition to society, unintelligent, incapable, foredoomed to become a burden; another, with energy, thrift, inventive genius, comes to enrich and uplift his fellow-men. Quality counts for much. [Sidenote: Change in the American birth-rate] The average number of children reaching maturity in the families of the American colonists was six; the average number to-day in families of American descent is about two. Since many of these do not live to maturity, and of those who do survive many do not marry, the stock does not maintain itself in numbers. Much larger families are found among the poor whites of the mountains, the foreign population, the rate negroes, and, in general, in the lower ranks of labor. Forces are at work to sterilize or reduce in number the more intelligent elements of the population. The "new woman" movement, tempting into "careers," takes away from family life many of the women most worthy to become the mothers of succeeding generations, Self-interest is at war with the social interest. The individual asks, "Am I bound to sacrifice my comfort and happiness to the general good?" If this continues, the result must be a steady decline in the proportion of the population born of the successful strains of stock, and a steady increase of the descendants of the mediocre and duller-witted elements. [Sidenote: Rate of increase in the nineteenth century] 5. _Population increased at an unprecedented rate throughout Christendom in the nineteenth century, but the pace is now slackening._ The nineteenth century saw a great increase in the food-supplies available for Europe. The resources of the American continent were hardly touched until the great Western movement of population began and new agencies of transportation brought American fields thousands of miles nearer to European markets. The improvement of machinery and of other economic equipment in Europe likewise aided to increase production rapidly. Population followed, though not with equal step. Europe had a population of 200,000,000 in 1800, nearly 400,000,000 in 1900. The increase in England was from 12 to 18 per cent, each decade; it had 8,000,000 in 1800 and 30,000,000 in 1900. The United States had 5,000,000 at the beginning of the century and 75,000,000 at the close, an increase of over 30 per cent, each decade. Recently there has been a notable decline in the rate of increase in all the countries of Europe. France is already at the stationary stage, and England probably will have reached it by the middle of the century. The rate of increase by decades has fallen in America from thirty-three to twenty-four since the Civil War. Though the movement of the population is still upward, large classes are stationary or declining in numbers. [Sidenote: Conclusion] Population should increase more slowly than wealth and resources if progress is to go on. It has done so in the past century, and there is no probability of a too rapid increase in Christendom in the near future. A stationary or declining population, while not desirable, is not an impossibility. But this does not destroy the significance of the fact that there is inherent in humanity a great potential power of increase, the realization of which would be disastrous, the control of which is an important and ever-present condition of the social welfare. CHAPTER 22 CONDITIONS FOR EFFICIENT LABOR § I. OBJECTIVE PHYSICAL CONDITIONS [Sidenote: Subjective and objective factors of efficiency] 1. _The efficiency of labor, in its broadest sense, is its ability to render services or produce things that minister to welfare._ The efficiency of labor is a resultant of many influences. In part it depends on the physical and mental powers of men; in part on things outside of the worker that either stimulate and strengthen him, or give him more favorable conditions in which to work. These are respectively the subjective and the objective factors of efficiency. In its broader sense, therefore, the phrase "efficiency of labor" implies any and every influence that makes for a larger and better supply of goods. [Sidenote: Bounty and goodness of productive agents affect the output of labor] 2. _The efficiency of labor is limited objectively by the abundance and quality of material resources._ Material resources include both those called natural (as the field and its fertile qualities), and those called artificial (as improvements and machinery). According as these resources are more or less developed, as labor is employed in a fertile or a barren field, with a sharp tool or a dull one, with a highly developed machine or a poor one, the product is more or less. If resources were much more abundant than at present, many goods now scarce would become almost, or quite, free. In the last chapter it was shown that an increase of the labor in a limited area or with a limited supply of indirect agents results in a decline in the relative bounty of the environment. A certain part of the result is thought of as due to material agents, a certain part to labor. "Efficiency of labor" is thought of in the narrower sense as the part of the product that is logically attributable to labor,--the laborer's contribution to the value of the product,--as apart from rent, the part attributable to material resources. [Sidenote: Causal relation of wages and efficiency; food] 3. _The laborer's efficiency is greatly affected by the quality of his food, clothing, and shelter._ Usually workmen that are getting good wages enjoy abundant food and creature comforts; poorly paid workers go scantily fed. The question arises: which is cause, which effect? Some maintain that all that is needed to make workmen more efficient is to feed them well. In some cases this is probably true. The Porto Ricans enlisted in the American regular army are reported to have increased at once in strength, weight, and vigor; the Filipino recruits, thanks to the American army rations, soon outgrew their uniforms. Some employers in Europe pay their workmen an extra sum on condition that it is spent for meat. But if wages increase, it is by no means certain that more or better food will be bought or if it is that the workmen's powers will be increased. There is a limit to the benefits of increasing food. There is some reason to believe that in America great numbers of our people, perhaps even many manual laborers, would be better off if they bought simpler and less costly food. The maximum of health and vigor may be attained with moderate outlay, and beyond that point richer food doubtless does more harm than good. Poor judgment in the selection of food is shown in many workers' families, and there is no appreciation of its influence on health. [Sidenote: An experiment in feeding] A few years ago an experiment in the feeding of pigs was tried on the Cornell farm. Four groups of six pigs each were put in four different pens and fed four different rations. Though alike in breed and age; the groups began at once to differ in character. One group squealed more; another scratched more; another waxed fat faster. Every week they were weighed, and finally were butchered, hung up, and photographed. At that same time, at the Elmira Reformatory Mr. Brockway was experimenting on some criminals of the lower class. They were given daily baths, special physical exercises, and were fed on a specially bountiful diet. Scientific philanthropy stopped there, but photographs "before and after," reproduced in the printed reports, show the great physical improvement that resulted, and a marked change occurred likewise in disposition and intelligence. Many laboratory experiments have been made of late to test the chemical nature and the physiological effects of foods. It is becoming more fully recognized that the quality and quantity of food, and the cooking of it, have a great influence on the economic quality of the worker. [Sidenote: Clothing] The effect of the quality and amount of clothing, while of course varying with the climate, is in general of less practical importance. Loss of heat and energy, dulling the powers, stiffening the muscles, causing illness with many trains of evils, make ill-clad workmen inefficient. The cost of clothing enough for comfort is, however, comparatively small, the amount spent for ornament is comparatively high. Even more important in its effects on efficiency is housing. The conditions in the factory and in the home make for health or for disease. [Sidenote: Physical conditions surrounding labor grow worse or better] 4. _The growth of society is, for the average man, making some of the conditions of efficiency more difficult, others more easy, to secure._ In agricultural and sparse populations fresh air, sunshine, good water, and unbounded natural playgrounds for children, where they can grow into strong and efficient manhood, are free goods. As population grows more dense, these things become more difficult to secure; men are brought into unnatural conditions, the evils of slum and factory life develop, and the housing problem appears. The character of the housing and working places could well be left to individuals in early times. If the individual chose to live and work in unsuitable places and under unsanitary conditions, it was usually his own fault and he bore the consequences. When the unsanitary conditions about each family are visited upon its neighbors, society must deal with them. Engineering, sanitary science, and medicine must be directed against the evils; factory and tenement-house legislation must seek to make possible a decent life in the cities, the factories, and the homes. Indeed, in many places the development in these and other directions has enabled the mass of the workers to enjoy blessings impossible to the most favored in the past. § II. SOCIAL CONDITIONS FAVORING EFFICIENCY [Sidenote: Government to insure the reward to labor] 1. _The first social condition for the workers' efficiency is political security._ For the same reason that this condition is favorable to the growth of capital, it is essential if men are to labor in the present and for the future. As the framers of the Constitution expressed it, the function of government is to insure domestic tranquillity, provide for the common defense, and insure the blessings of liberty to the citizen. Directness and certainty of reward are more essential than mere size of reward in insuring action and effort. There must be a close relation between work and the fruits of work. Political insecurity weakens this relation and makes the reward dependent on chance. [Sidenote: Common honesty as a condition to efficient labor] 2. _The prevalence of standards of honesty in private and public business is a condition to high efficiency._ Corruption in government has the same effect as political insecurity; in fact, it is but another form of it. We are accustomed to the thought that in an Asiatic despotism a worker beginning a task is uncertain whether he will reap the reward, as public officials may at any moment seize upon the fruits of his labor. But in our own country similar evils are not entirely lacking. Assessments often are unfair, and justice sometimes is bought. Men in high executive positions are able to make or mar the fortunes of their followers. Sometimes a legislator from a country town goes to the state capital poor and returns rich. Such things becoming generally known tend to break down the motives to industry. They breed the notion that wealth is more dependent on chance or jobbery than on efficient service. Dishonesty in private business means the use of energy not to produce wealth, not to add to the sum for all to enjoy, but to get it from some one else. Public corruption and commercial dishonesty alike entail on the industrious not only the immediate loss, but the far greater cost of weakened character, relaxed energy, and decreased efficiency of labor. [Sidenote: Effect of caste on efficiency of lower and upper classes] 3. _Custom and social ideals that raise or depress hope and ambition, affect efficiency._ The institution called caste, which fixes the place of the worker and makes it impossible to rise out of the social position in which he is born, and disgraceful to do any work reserved to other castes, is deadening to energy. It exists in some form throughout the world, and where it is not called by that name, the same caste spirit is at work. The European peasants in the Middle Ages lived under the shadow of it. Where slavery exists the master class at times feels its hardships. "It is not so hard to live," says the hungry Creole daughter in "The Grandissimes," "but it is hard to be ladies.... We are compelled not to make a living. Look at me: I can cook, but I must not cook; I am skilful with the needle, but I must not take in sewing; I could keep accounts; I could nurse the sick; but I must not." Nowhere in the world is there less caste than in America, but it is here. The negro's low measure of industrial virtues is partly the cause of the prejudice against him, but in turn doubtless inherited class feeling is in some measure the cause of his inefficiency. To close to a worker all but the menial occupations is to take from him the most powerful motives for effort. The thought is paralyzing. The race problem in America is in part one of caste sentiment, whatever can or cannot be done about it. [Sidenote: American democracy and the efficiency of labor] Democracy makes for the efficiency of American industry not less than do the great natural resources. If America is to surpass the world in all the great industrial lines, it will be largely because of her ideas and institutions. They lead to greater energy and to a faster working pace in all grades of labor than is found anywhere else in the world. There is danger that as the West is closed to settlement something of the spirit of enterprise will be lost. To Western eyes already the young men in the older East seem to be trammeled by social conventions. In an older community there is less of hopeful ambition; one's position depends more on what his fathers achieved; in the new community, more on what he does himself. If it is true, as wise students declare, that the frontier has been the nursery of our democratic ideas, we may well ask what effect the closing of the frontier will have on our national sentiment and on our material prosperity. [Sidenote: The balance of advantage between work and leisure] 4. _Custom and national temperament affect the efficiency of labor by determining the normal period of labor time._ After the bare necessities of life are provided for, the worker has a wide or narrow margin of productive energy to use as he pleases. If four hours' work a day would enable him to live, will he work longer or will he stop? The answer is determined by the balance of utility and disutility. Will additional hours of labor yield more gratification than idleness yields? Does the pain of toil repel more than its fruits attract? The use made of spare time differs according to climate, race, and temperament. In the tropics the margin is converted usually into loafing, in the temperate zones largely into objective forms of enjoyment. Individual differences are plainly seen when each man labors on his own field. The prudent man, in the old maxims, makes hay while the sun shines and ploughs deep while sluggards sleep. In the modern larger organization of industry, working hours are much the same for all workers in the establishment. Individual preferences are still expressed, however, in irregularity of employment. In the South some manufacturers have found that on an average the negroes will work in a factory not more than five or six hours a day, working ten hours for four days and lying off two days a week. Such a standard of working hours is the mark of the primitive stage of wants and industrial qualities, although a shortening of the hours of manual labor, as incomes increase above bare subsistence, is in accord with a rational valuation of leisure. A moderate change in that direction cannot but increase rather than diminish the efficiency of labor. § III. DIVISION OF LABOR [Sidenote: Division and exchange of labor] 1. _Division of labor is a term expressing that complex arrangement of industrial society whereby individual workers are enabled to apply themselves to the production of certain kinds of goods, securing others by exchange._ The term "division of labor" is simple, but the thought is a complex one. Its full discussion would cover the whole field of political economy, but only its most essential aspects can here be touched upon. Division of labor and exchange are counterparts and mutually determine each other. Division of labor depends on the extent of the market, and in turn widens its limits. The number of articles that any one would care to produce at one time and place depends upon the opportunity to exchange them. These two aspects of industry thus are inseparable in thought and practice. The worker finds division of labor existing as a social institution and, according as he adapts himself to it wisely or foolishly, it increases more or less his efficiency. [Sidenote: Division of labor between trades and territories] 2. _Division of labor is primarily between individuals, but appears between trades, territories, and nations._ In division of labor between trades, each worker applies himself to the production of some product or group of products and secures other goods by exchange. A special form of this is territorial division of labor, arising out of differences in soil, climate, and natural products, when each community develops in a high degree some one class of products to exchange in distant or foreign trade. Division of labor beginning because of such natural differences, becomes fixed by habit and training, by the advantage of a larger and regular labor supply, by the economy of nearness to related and tributary industries, and by the use of waste products where industry is conducted on a large scaled. The natural advantages in another district must be large to enable it to start successfully against these acquired economies, and territorial division of labor thus tends to continue for long periods when once established. [Sidenote: Advantages of division of labor] 3. _Division of labor increases efficiency by: (a) increasing skill; (b) saving time; (c) saving tools and materials; (d) improving quality; (e) increasing knowledge; (f) stimulating invention; (g) encouraging enterprise; (h) economizing talent._ There is a tradition that an ingenious lecturer in one of our universities was accustomed to give to his class eighty reasons why division of labor was of advantage. It is none too many, as every reason for the modern, as contrasted with the primitive, organization of industry should be included. The phrase division of labor is but a synonym for specialization, a word that expresses all that is most characteristic of our complex industrial society. The headings just given may serve, however, to suggest the leading phases of the subject. Repetition of the same task trains the muscles, forms a mental habit, and gives the swiftness and deftness of touch called _skill_. Specialization _saves time_ by making unnecessary the physical change of place for the worker, the frequent shifting of tools, and the mental readjustment required for the undertaking of a new task. Specialization _saves tools_ for, either each kind of work must be most ineffectively done, or there must be provided for each worker a complete set of tools which thus will be used rarely and will rust out rather than wear out. If a few tools are thoroughly used, they yield a larger income on the investment, and require less care and repairs in proportion to their uses. In fact this fuller economic use of machinery and plant where a large product is turned out at one place, is a prime factor in the advantages of large production, a subject to be treated elsewhere much more fully than is here possible. By specialization is made possible a _quality_ of goods never to be secured by the less skilled efforts of the Jack-of-all trades. The specialist steadily grows in _knowledge_ of his materials and of the best processes, and he gains a power of delicate observation and facility in meeting new difficulties that are impossible when attention is divided among a number of tasks. By dividing and simplifying processes, specialization _stimulates invention_. The most complex machines have been developed gradually by combinations and adaptations of simple tools, and the more a process is subdivided, the greater is the chance of hitting upon a device to repeat mechanically the few simple movements. Division of labor increases the motives of emulation and _enterprise_, by making possible the more exact comparison of results. It _economizes talent_ by giving to each the highest task of which he is capable, while fitting the less efficient workers into the minor places made possible by subdivision. In an American wagon-factory, a one-armed man operating a machine is turning out as large a product and earning as high wages as any other employee. The same advantages of specialization are found with modifying conditions in educational and professional lines. The marvelous progress of science in recent years has been made possible by each worker's doing a few things and doing them well. [Sidenote: Best adjustment of talent and occupation] [Sidenote: Choice of a life career] 4. _The individual worker, to attain his highest economic efficiency, must select from the occupations made possible by division of labor the one for which his talents are best fitted._ It seems unnecessary to state this almost axiomatic truth, yet the slight reflection given to the choice of an occupation by most young people gives to this statement a very practical bearing. The world is filled with industrial misfits, "round men in square holes," good carpenters spoiled to make poor doctors. It so often happens that the natural aptitude of the youth is the thing last or, in any event, least considered. Unreasoning imitation, family traditions, parental wishes, class pride, social prejudice, childish whim, are often decisive of the life career. Happily in some cases, before too late, the man "finds himself," but too often the poverty of the family and the obstacles to education preclude the exercise of intelligent choice. It is of importance to society as well as to the individual that talent should be discovered in time, that tasks should be fitted to aptitudes, that each member of society should attain to his highest efficiency. The approach to this ideal, made possible by popular education, the decline of caste, the spread of genuine democracy, the progress of social justice, will increase not only the workers' efficiency, but society's abiding welfare. CHAPTER 23 THE LAW OF WAGES § I. NATURE OF WAGES AND THE WAGES PROBLEM [Sidenote: Wages and rent compared and contrasted] 1. _Wage in the broad sense is the income due to labor, in distinction from that due to the control of material agents._ The uses of material agents, studied under the subject of rent, are sometimes called "material services." The adjective refers to the source or bearer of the use, and does not imply that the service is to be thought of as a material thing. In its last analysis a service is never a material thing, but a psychic effect on men and their wants. Material services and human services are merely specific kinds of the genus services (or utilities), and it would doubtless be a better usage to speak of labor's services and wealth's uses. Wages bear the same relation to man's services that rent does to the material uses of wealth. Wages are more like rent than like interest in that neither wages nor rent are expressed as a percentage. While rent is the value of the uses of things, wages is the value of the services of men. In discussing interest, wealth is capitalized; but, in discussing wages, men are thought of as affording utilities for a time, as is wealth under the renting contract. The resemblance thus is very close between rent and wages, but not so close between wages and interest. Despite this interesting analogy, it is not well to speak, as some do, of "the rent of labor"--as well might one speak of the wages of wealth. Such a usage only beclouds the distinction between two concepts, suggesting identity where there are important differences. The aim of scientific classification is missed when contrasts are thus concealed under a single term. [Sidenote: Nature of the law of wages] 2. _A law of wages is a statement of the relation of the general causes of value to the value of human services._ In real life no one agent is valued independently of other goods. The felt importance of a good depends on the degree to which other wants are gratified. If men are starving, they attach less importance to ornaments; if cold, more importance to clothing and fuel, being willing to part even with some needed food to secure them. That is, man's desire for each thing is affected by his general condition and by the existence of other goods and wants. A similar relation exists between the values of indirect agents, and must exist between wages and rent. We are to discuss the law of wages. An economic law does not state a command; it is not a political law; it states merely an observed relation. Things do not need to happen actually according to any law of wages that can be formulated, but they will happen in the measure that the assumed conditions exist. The law states a tendency of wages, just as the law of gravitation states a tendency and does not predict positively whether a given object will fall at a given moment. The "law of wages," therefore, is to be understood as a hypothetical statement of the value that will be attributed to labor under a given set of conditions. [Sidenote: Economic wages and contract wages] 3. _Economic wages are the value of human services in the broad sense; contract wages are the goods paid by one wages man to another according to an agreement._ In discussing rent and interest, we have become familiar with this important distinction between economic and contract values. Economic wages are fundamental, the primary subject of theoretical study. Contract wages are the wages paid by one man to another in accordance with an agreement, and may not at this moment coincide with economic wages. When the contract was made, one party may have been ignorant or helpless, and have failed to get all he now could; or meantime the conditions may have changed. But contract wages are based on economic wages and tend to conform to them. If one person performs services for another without expecting to receive economic goods or services in return, it is a gift, not wages. A workman can get as contract wages the amount of his economic wage if free competition exists and he acts intelligently. Of course, these are important conditions. Real and nominal wages must be distinguished: real wages are the reward of labor as measured in goods and enjoyments; nominal wages are the reward expressed in terms of money, whose purchasing power varies from time to time and from place to place. [Sidenote: Scarce services gratify wants] 4. _Human services, being one of the conditions of psychic income, bear the same relation to wants that material goods bear._ As the material agents that are fitted to gratify wants are scarce, labor is applied to the outer world to change and adapt it, thus making it answer desire better. Labor, thus, in many of its applications merely supplements the bounty of nature. Men have a use to and for each other; they have a relation to other men's welfare similar to that borne by material things. The different human actions have all grades of relation to gratification, from harmful to helpful, just as things have. According to their relation to this scale services therefore become ranked either high or low in the estimation of men. Some acts are negative services, to use the term service in a paradoxical sense; they are things to be avoided and escaped. Value then is attributed to the services of men according to their rank in this scale, just as it is to the uses of agents in the case of rent. Scarcity is the condition of value in labor, as it is of value in any good; but scarcity is a relative term. The commonest kinds of labor would not ordinarily be called scarce, but compared with their possible desirable uses, they are scarce, and this fact is the key to a large part of the wage problem. The question is: how and in what degree does this scarcity cause value to attach to labor? § II. THE DIFFERENT MODES OF EARNING WAGES [Sidenote: The simplest case of economic wages] 1. _The self-employed laborer earns wages in the broad economic sense._ In this sense the isolated workman, Robinson Crusoe on his island, earns wages, but these wages could not be measured at all exactly. They are a part of an indivisible income, and there is no way to determine how much should be attributed to the uses of the wealth employed and how much to the labor. The independent farmer, producing on his own farm nearly everything he consumes, may be said to earn wages in the broad sense. These can, moreover, be estimated, because they can be compared with what he could get by working for some one else. The farmer, therefore, attributes a certain part of his income to the farm as rent and a certain part to his own labor as wages. [Sidenote: Wages of the self-employed exchanging worker] 2. _The wages of self-employed labor are often simply the value of the material product it secures by exchange._ Labor has value indirectly because embodied in products. The worker value of these products is reflected to the labor which secures them. The wages of the fisherman day by day, as he follows his vocation, are simply the market value of the fish he catches day by day. The gold-miner, working with simple tools in the days of placer-mining, earned wages exactly expressed by the gold he washed out. The independent worker with few tools does not think of attributing any considerable part of his income to his tools. The umbrella-mender's "kit" is so small that his true wage is little less than his total receipts. The tinker, the shoemaker, and the tailor, who went from house to house in the old days, thought only in the vaguest way of marking off from their incomes a part to be counted as the rent of their little outfit of tools. Until very recent times the capital invested in tools commonly was small, and usually was owned by the handworker who thus received an undivided income, of which wages were by far the larger part. It was inevitable, therefore, that labor alone should have been thought of as the cause of the value of goods produced by the artisans in the towns and cities. This error, small at first, was magnified as the capital investment of modern industry grew, and it persists in many fallacious notions that still taint modern economic theory. [Sidenote: Both impersonal and personal causes of contract wages] 3. _Contract wages, paid by an employer, rest on the same cause of value, the direct or indirect effect of labor in the gratifying of wants._ When contract wages come to be spoken of, the personal element of bargaining between man and man comes in to obscure somewhat the impersonal causes that are operating. If the fisher and the miner bring their products to the general markets, the impersonal part of the problem is uppermost and the wages are recognized to be the market value of the material products. But if an employer hires a number of workmen, and the labor of each becomes merged and lost to view in a complex product, the uncritical mind stops, loses all hold on a guiding principle of value, and sees only the superficial fact of a personal bargain between employer and workman. Such a view overlooks the logical cause of value, and the network of impersonal forces which enwraps and binds the personal acts. [Sidenote: A single direct personal service] To begin with the simplest case: workers often are temporarily employed to produce for others means of gratification at once consumed. The barber shaves his patron, the ferryman takes the traveler across the river, the boy carries a message, the surgeon sets a broken bone. Each performs a useful service, but produces no long-abiding material result outside of the beneficiary, and no separable, salable material good. When each is paid according to the value of the gratification afforded, the first step is taken toward the regular contract-wage relation between man and man. [Sidenote: The continued wage contract for personal services] In ordinary domestic service the only condition not present in the cases just given is the more abiding character of the contract relation. The employer does not hire a coachman each time he wishes to take a ride, but having summed up the advantages of a coachman's services, he buys them by the month or the year. The price is determined in the market for coachmen of the needed ability, qualities ranging from stupid to bright, from weak to strong, and from drunk to sober. Instead of buying flowers from day to day, a wealthy man hires a gardener to cultivate them in a conservatory. The average market price of flowers influences the wages paid to the gardener, his wages being but the sum of the values (or of his contribution to the values) of flowers, well-kept lawn, and garden products. According to the conditions of each household and of the general market, the one or the other mode of buying these utilities is the more advantageous. [Sidenote: Labor employed on products exchanged] 4. _The payment of the laborer to produce goods for exchange is the most common modern case of wages._ The relation of wages to the value of the product is in this case more complex, for the employer is directing the labor to gratifying the wants of others, not his own wants. It is the desire of prospective customers for the product, and the chance of exchanging it, that will eventually enable the employer to recover the amounts paid to laborers. Labor is only one of the elements entering into the product. Within limits it may be substituted for the other elements, fewer machines being used and more laborers, or vice versa. No more will be given for any labor than it is expected to add to the value of the product. As employers test by experience the contribution of the marginal labor to the value of the product, labor is constantly compared with the value of other things. When industry becomes complex, the connection between the wages and the value ultimately realized in the product may be broken for a time, but rarely for a very long time. Because of miscalculations, labor is employed on things that prove to be quite valueless, and on other things that have a much greater value than was expected. When months or years intervene before the value of the labor is realized in the sale of the product, the employer must forecast the outcome as best he can, and employ labor only when the wages promise to be recovered. These are complicating facts, but in any logical view they do not falsify the principle that wages are determined by their prospective contribution to the utility of goods. [Sidenote: Various methods of remuneration, but one general rule] 5. _The wages paid by the various methods of remuneration--as, by time, by the piece, by premium for output--all conform in a general way to the economic value of the service._ Many methods are employed to measure the services of wage workers. If time is used, a general or average output is assumed, and the workman must come up to that standard if he is to hold his place. If payment is by the piece, the price per piece must be enough to make possible the prevailing time-wage to workers of that grade if the supply is to be maintained in that industry. The convenience of the different methods of payment varies from industry to industry, and even from task to task within the same factory, so that now one, now another method is followed. In any case, however, the aim is to find some convenient measurement of the rate of labor, and of its contribution to the value of the product. § III. WAGES AS EXEMPLIFYING THE GENERAL LAW OF VALUE [Sidenote: Ratio of exchange of services adjusted to their marginal utility] 1. _Each grade of labor is a potential supply of desirable things and its wage is determined in essentially the same way as if it were an actual supply._ If all the various psychic goods that labor produces were spread out before men in visible form, some would be in great demand, some would exchange in a very unfavorable ratio with others. The exchange would come to equilibrium at a point where each buyer had adjusted his supply of enjoyments in the most favorable way, had so distributed his purchasing power as to get those kinds and amounts of services which afford him the highest possible sum of enjoyment. [Sidenote: Differences in wages persist] In this situation the real wages of some being so much more than those of others, the low-paid workers will have a motive to change their occupations. But the various laborers have limited abilities and cannot change at will and, despite the unfavorable ratio, they may be compelled to continue at the same work. Just as apples cannot become peaches or sheep become horses when there is a change in their price, so the unskilled workman cannot become skilled quickly, if he ever can, and the possibility of changing occupations within any reasonable period is very small indeed. Labor is constantly trying to adjust itself, to get into the better-paid industries. It moves, it emigrates, it seeks training and education. Especially the workers between the ages of fifteen and twenty-five choose the callings that promise the highest reward. Within limits an adjustment is possible, but these limits are not wide and not quickly shifted, and the wages of labor continue diverse in different occupations for an indefinite time. [Sidenote: Various grades of labor and rates of wages] 2. _The term general rate of wages can be used only of a certain grade of labor and of the rate for the average worker._ Every grade and kind of ability has its rate of wages. To be sure, it is sometimes convenient to speak in a broad but inexact way of "a general rate of wages," when comparing different countries and periods. When it is said that the rate of wages is higher in America than in England, in England than in France, in France than in India, the comparison is between men of the same occupation in the different countries; _e.g._, the unskilled laborer or the mechanic gets more here than the same grade of laborer gets in England. There is no such thing as a general rate of wages extending throughout all industries. The different grades of ability differ more markedly in wages than do industries compared as wholes. In the manufacture of cloth all grades of ability are required, from the highly paid artist and engineer, down to the roustabout in the yard. The industries of manufacturing, commerce, and education alike require the coöperation of bookkeepers, janitors, carpenters, and superintendents. It is easy in most cases to pass from any grade of occupation in one industry to a corresponding grade in another industry; but it is difficult to pass from a lower grade to a higher grade in the same or another industry. [Sidenote: Equilibrium of services and wages] Abstractly considered, that is, wherever free competition exists, there is a constant tendency toward a state of equilibrium; each workman is moving into the industry where he earns the highest possible amount, and where he receives just what his fellow-men estimate his importance to be, judged by the service he performs. Each man's place is determined by his specific gravity, just as the place of liquids poured into a glass is determined by their density. There is much reason to believe that this condition is approached actually in a far greater degree than is thought by those who come to the question with preconceived notions of what ought to be, or of what they would like to see. This principle of the economic wage does not preclude the questioning of the justice of existing institutions, but it is a guide in the discussion of all practical problems of wages. [Sidenote: Wages follow the law of marginal valuation] 3. _The law of wages may be stated thus: in any state of the labor market the wages of any labor or class of labor is equal to its marginal contribution--that is, to the value of its products._ Each agent in industry, whether it be a plough, a horse, or a man, is valued in connection with other agents, never apart or isolated. It is not the total service any one of them performs that can be got at; all that can be got at is the utility attributed to the last unit of supply. Their marginal contribution determines their importance. Each agent is considered in combination with other things at a given moment under existing conditions of supply. [Sidenote: Wages exemplify the general law of value] This statement of the law of wages is broad, and appears to be modified in many ways in practice: by changes in industry, by ignorance on the part of the worker, by unequal skill in bargaining; but the law of wages just stated allows for these modifications, and is a guide amid the complexity of facts, for it gives a place to the influence of trade unions, caste, and everything else that affects the labor-supply. The law of wages is but the general law of value, working itself out amid the special conditions accompanying the gratification of wants by human effort. CHAPTER 24 THE RELATION OF LABOR TO VALUE § I. RELATION OF RENT TO WAGES [Sidenote: Concrete conditions of industry must be studied with wages] 1. _The law of wages must be considered in connection with other far-reaching influences._ One may use the sentence, "the marginal productivity of labor determines wages," without having a true understanding of its meaning. Memorizing a definition is only the first step toward economic reasoning. Till that definition becomes a real thing in the student's thought it helps him but little. The law of wages is an abstract statement of the logical relation of wages to utility; it is not a concrete statement of the industrial conditions in which labor works, yet these are more nearly in the nature of true causes of value. The marginal utility is itself determined by forces and conditions outside of labor that are constantly changing. The more thorough is the student's knowledge of the actual conditions of industry, the more correctly he can apprehend the relations of wages to other incomes, and the more wisely he will apply the abstract law to practical life. [Sidenote: Productivity of labor and diminishing returns of natural agents] 2. _The marginal productivity of labor is affected by the relative abundance and efficiency of natural resources._ If land suddenly becomes more abundant through the opening up of new continents, the lower grades of agents are sooner or later abandoned. Labor having more of a choice as to the place where it is to be used, spreads itself over the better grades and takes on a greater marginal productivity. The marginal unit of labor working on better soil than before produces more, and wages expressed in produce are higher. Ground rent, on the other hand, is less under these conditions. If, however, the land is fixed in area, and population increases, no other change taking place, the principle of diminishing returns applies. The marginal laborers (the last arrivals or the growing generation) being compelled to work with less efficient resources on a poorer quality of land, produce less than was the rule before, and a smaller product therefore is attributed to all the laborers of that grade. They get lower wages and more goes as rent to the owners of the land. By shifting of occupations this reduction may be somewhat moderated and equalized among the workers in other industries. In both these cases, wages vary more than does the physical amount of the total product. In the first case, wages are a larger proportion of a larger product; in the second case, the product is larger (there being more laborers) but wages are a smaller proportion of it. [Sidenote: The iron law of wages] 3. _The unwarranted assumption that a disproportionate increase in population is sure to occur, gave rise to the subsistence theory, or iron law of wages._ This assumption is now seen not to correspond with what is occurring in the civilized world. A hundred years ago, however, when the poorer classes of Europe appeared to be increasing with little restraint, it was not strange that thinkers should look upon this increase as inevitable. According to the subsistence theory, the question of population was simply a question of food; it was believed that men surely would multiply up to the point where they could not further increase their numbers, and starvation wages would be the rule. It was this way of looking at things that gave to political economy the name of the dismal science. When population is limited in large measure by volitional means instead of by war, starvation, and other material means, the problem changes and the error in such a theory of wages becomes clear. [Sidenote: The standard of living, and wages] The "standard of living" theory of wages is a refined form of the subsistence theory. This theory is that wages must rise to meet the cost of any standard that the laborers may set, and below which they will refuse to multiply. This is probably a fragmentary truth, but is quite inadequate as a theory. A high standard of living and all the social institutions and customs that aid in keeping the population from too rapid increase, are factors in determining ultimately the marginal productivity of labor and, hence, the height of wages. If these restraining influences suddenly were withdrawn, a reduction of wages would follow slowly because of the diminishing returns of material agents. But the standard of living is merely a partial and negative factor. No limitation of the number of workers can raise wages above their productive contribution and, in the present state of industry, a considerable falling off in population might be expected to result in a loss of enterprise, of coöperation, and of capital. The positive factor in wages is productivity. [Sidenote: If labor increases faster than wealth, wages fall] 4. _An increase of population more rapid than that of the artificial industrial agents would reduce marginal productivity._ Labor makes use of many kinds of agents besides the so-called natural resources. If population is stationary while tools are allowed to wear out or if an increasing population, while opening up a proportionate supply of land for food, fails to accumulate a proportionate stock of other tools, the marginal productivity of labor must diminish. Labor would be more imperfectly equipped with spades, hoes, wagons, horses, cattle, machinery. These artificial agents help in getting not only manufactured products, but food products. The equipment of labor must keep pace with the number of workers or they will be forced to the lower, or less effective, uses in the tools. On the other hand, the growth of science and invention, and the growth of wealth faster than the population, equipping labor as it does with more efficient implements, cause the marginal productivity of labor to rise, and hence also the wages. [Sidenote: The wage-fund theory explained] 5. _The "wage-fund theory" was an imperfect perception of this truth that wages are influenced by the efficiency of the industrial equipment._ As the subsistence theory took a partial view, looking at agricultural land alone as the determinant of wages, so the wage-fund theory looked alone at a portion of the capital in the hands of employers which was the fund from which wages were paid. The large part played in discussion by this doctrine and the strong hold it had on thought is somewhat puzzling now; for if one begins to doubt its entire truth it is difficult to be quite just to its merits or to state it in a form that is plausible. The theory was that wages depended on the amount of capital that, in some way not clearly seen, was set apart by employers for the payment of wages. The capital making up the fund out of which wages were supposed to be paid, was only a very small part of all capital, even in the narrow sense in which that term was then used. It was assumed that this wage fund, once set aside, was necessarily paid out to laborers, wages being therefore determined by simple division: laborers were the divisor, the wage fund the dividend, and the average wage the result. When the theory is thus baldly expressed, it appears to begin and end on the surface of the facts; and the wage fund appears to be rather the arithmetic sum of variously determined payments than, in any sense, the cause of wages. [Sidenote: The wage-fund theory a partial truth] The abler wage-fund theorists did not fail at times to see, though too dimly, as the determining causes behind the employers' action, certain other things, such as the material facilities, the desires of consumers, the capabilities of the workers, and the resulting value of the labor. The element of truth which still should be recognized in this theory is that the relation of labor to its equipment influences its efficiency, and determines the part of the product to be set aside for wages. In that sense, wages are related to the abstinence of capitalists and to the supply of "capital," but capital understood not as a special fund of the employers, but, in a broader sense, as labor's entire environment of indirect agents. § II. RELATION OF TIME-VALUE TO WAGES [Sidenote: Labor may be near or far, in time, from gratifications] 1. _The services of labor, whether for one's self or others, have a more or less immediate relation in time to the gratifying of wants._ While all human efforts to which the term services is applied have a relation to wants, there is much diversity in their nearness to the gratification for which they are destined. The process may be technically roundabout, to use the language of recent economists. One may break a stick from a tree, pick up a stone and drill a hole in it, catch an animal, cut thongs, tie the handle to the stone, and use it as a weapon to kill other animals for food, the first step being taken with the last object in view. But a still more essential relation we have seen to be the relation in time. Some things, some goods, are used at once, some after a long interval; some are durable, others perishable. Labor produces a song or a glass of lemonade to be consumed on the instant; it is employed on bridges, monuments, railroads, or interoceanic canals lasting for centuries. In all these cases the general object sought is the same though very different intervals of time must elapse before the gratification matures. [Sidenote: All future products of labor are discounted to their present value] 2. _As different periods of time must elapse before services are enjoyed, the expected value of all products but those immediately available is discounted in advance._ The services that afford gratification immediately, and those that afford gratification at a later time, are judged and compared at one and the same moment. All economic life centers in the present. This difference in the time of services surely cannot be ignored. If Robinson Crusoe, at work on his island with his limited supply of energy, continues to provide for next year's enjoyment, neglecting the present, present goods become scarce and their utility rises as compared with the future goods the same labor secures. To escape inconvenience, and in the extremest case to escape starvation, Crusoe would be compelled to restore the equilibrium between the wants of the two periods by shifting his labor back to the present. So in each little economic group and in our complex society there is constant rivalry of present and future wants, competing for the limited present supply of labor. The present says, "Give me your labor and I will give you the fullest enjoyment." The future says, "I will give you a greater gratification, but you must wait for it." A given labor force thus making possible a wide range of choice among present and future services, labor is distributed according to the prevailing rate of time-value, which, as we have seen, is approximately expressed by the rate of interest. If the rate of interest is high, it means that the present is urgent and will not easily yield to the future. If the rate is low, it implies that the present is comparatively well provided for, and that future wants are given more consideration. [Sidenote: The employer adjusts his labor force to the interest rate] 3. _The employer in hiring labor and producing goods takes account of these time differences._ In the preceding paragraph has been noted the influence of time differences in the simplest problem of economic wages. Interest is likewise taken account of in the bargains between workman and employer, by which contract wages are fixed. The employer of labor works subject to a prevailing rate of interest. If he ignores it he must lose. He should direct a given amount of labor to products that mature next year only when their expected selling price is greater than that of products that can be marketed this year. This difference due to time can no more be ignored than can any other difference in the cost of products. If the employer keeps the future goods to sell later, they will normally increase in value as they approach maturity; if he markets the goods at once, he normally must pass on to the purchaser the benefit of the discount he has made on their future value. That is to say, it is not the employer of labor, the purchaser of labor as such, who gains by discounting the future value of labor; it is the investor of capital (whether employer or later purchaser) who secures the rent as it matures. [Sidenote: The discount of the future value of services is inevitable] 4. _Hence all wages paid for help on products that are remote are based on the present worth, or discounted value, of the future gratification to which the labor contributes._ The idea is held in one form or another by all radical socialistic writers, that the laborer does not get the full value of his products. In the sense that is here discussed, he does not. He does not get what the product will sell for in the future. He gets the probable future value at its present worth, discounted at the prevailing rate. That part of the employer's gains corresponding to this discount on labor is economic time-value. Nor is this discount of future services dependent on a political system or on private property or on the wage system, as some have assumed. It is a universal truth. It is in the nature of wants that present and future should differ. A communistic or socialistic state would have to take account of this difference, else the whole social economy would be irrational and there would be no principle by which to apportion in time the productive forces of the community. Contracts to pay interest and contracts to pay wages might be forbidden and made criminal by formal law, but time-value would persist. [Sidenote: Relations of wages, rent, and time-value] 5. _Wages and rent are coördinate species of the value problem; time-value is a different kind of problem, bearing to both the other problems a similar relation._ A close examination of the problems of rent and wages serves to bring out the close parallelism of these two forms of income as here defined. Rent is the value of the usufruct of wealth, wages are the value of the usufruct of labor. The bearer of the use in one case is material goods, in the other is human agents. Different in the source of use, they are in large measure alike in the form of contract, or nature of the calculation. Together rent and wages comprise the value of all currently arising uses; they are the two coördinate species of the genus "value of uses." The two groups of uses are closely interrelated in practice, each acting and reacting on the value of the other. Time-value is a different genus of the value problem. Having to do with time differences, it must be found in connection with every use that is not immediate, whatever be the bearer of that use. Its application to rent is more frequent and obvious, as only the uses of material agents are capitalized, that is, sold in perpetuity. Moreover any service of labor that is not at once consumed is fixed in material form and appears thenceforward as wealth whose uses are yielded as rent or as consumption goods. § III. THE RELATION OF LABOR TO VALUE [Sidenote: Several conditions of value] 1. _Labor is a cause, but only one of the causes of value._ A cause is some one condition which is seen to be necessary to the existence of a thing, and usually that condition which brings the thing about, other things being assumed. In what sense ought a cause of value be spoken of? In one sense it is in the minds of men--it is their wants; again, looked at objectively it is in the nature of the good--it is the quality that fits it to gratify the want. But if both these causes are operative, and labor is applied to fit goods better to gratify wants, labor appears as the cause of value. Personal causes are so much more evident, an explanation through personal causation is so much more satisfying in the earlier stages of scientific inquiry, that labor long continued to be looked upon as the one source of value. This erroneous view has never quite ceased to influence economic thought, and a great deal of effort has been directed to formulating theories of value based upon it. The cruder form of the error has now almost disappeared, but in various little recognized ways it still persists. [Sidenote: Two phases of economic production] 2. _Economic production is the origin, or genesis, of value finding its source either in objective things or in services._ The writers of fifty years ago defined economic production as the application of labor to the creation of wealth. But as there are two factors in production, man and material things, so there are two productive sources of value. In some cases the origin of value is attributable to man's action; in other cases scarce uses arise in objective things without man's action. Broad as is this definition of production, it does not include the enjoyment of free goods, as in the case of the care-free darky basking in the sun. Anything that, causing a feeling of greater importance to attach to a thing, changes it from a free good to a scarce good or makes it more scarce, is a cause of its value. A large rainfall causing a greater crop of grain may be thought of as producing utility. The regular surplus of value attributable to the waterfall or to the railroad, is the product of the material services of wealth. Production through human action is the more obvious and is the more usually thought of; the part of material agents must be recognized if the fallacies of the labor theory of value are to be avoided. [Sidenote: Labor applied to creating utility] 3. _Human activity is directed to shaping and arranging things so as to increase their want-gratifying power._ Human and non-human agents are combined in different proportions in various products. In one thing more land and machinery are used, in another more labor is used. But either of these two great classes of agents may touch the vanishing point in the production of value. While it is true that man's part is the most striking aspect of production, yet there may be value without labor. The study of rent puts this abstractly, but in a clear light. In actual life, however, a part of the value is usually attributable to rent, a part to labor. [Sidenote: Value of labor derived from its products] But in what sense is even this part attributable? Not in the sense that the labor is the original source of value which imparts that value to its products. The usufruct of wealth is the basis of rent; the need to pay rent is not the cause of value in the product. Likewise, product is the basis of wages, labor is not the origin of value. Labor, like the forces and qualities of wealth, is the cause of technical changes. These changes, if favorable, cause the goods to take on a higher value which is reflected back to the labor. The labor itself has not a predetermined, ascertainable value, but only a resultant, derived value. An exception to this statement appears on a superficial view of the value of labor hired under the wage contract to make a particular product. The labor having a market value because of a large number of well-known alternate uses, can be diverted to a particular use only on condition of a definite payment. Labor here, as viewed by the employer, appears to have an original value; products, a derived value. But in the logical view, labor is seen to impart technical qualities to the goods; in turn, the goods to impart value to the labor. Man hunts throughout industry for those things to which his labor can be applied usefully. He foresees in them the changes that will increase the value. It is only as he has judged rightly that the value taken on by the things is reflected back to the labor attributed to it. [Sidenote: No unit of labor to serve as a standard of value] 4. _Labor being of many qualities and receiving many rates of pay, there is no unit of labor that can be used as a measure of value._ The idea of finding in a "unit of labor" an objective standard of value to which the value of all other things could be reduced has been a very attractive one. This fallacious hope animates every one beginning to think of the value problem. The thought was so plausibly formulated by Ricardo that it continued for a long time to be the generally accepted doctrine of value. Although most writers reject the formal statement of the labor theory of value, use is frequently made, even now, of the phrase "unit of labor," suggesting the thought that labor is the standard by which the value of all goods may be measured. This unit of labor of the text-books may be seen to be either labor arbitrarily assumed to be of uniform quality and quantity, as a day of unskilled labor (in that form quite incomparable as to amount with other qualities), or a given amount of money invested in labor of different grades at its market value. It is only by expressing labor in terms of its value that the various grades of skilled and unskilled labor can be reduced to a homogeneous unit, which is but a unit of money wages. This should not deceive us into the belief that in any peculiar sense labor can be used as a unit of value. It is equally valid and convenient to speak of units of machinery and of units of land. In terms of capital a factory site can be expressed as a multiple of a potato patch not less perfectly than can a sculptor's labor as a multiple of a ditch-digger's. [Sidenote: Scarcity and utility of labor] Scarcity of things desired is the one objective condition of value. The things that labor can produce and the labor to produce them being scarce, labor takes on a value. All things at last become comparable in terms of psychic income in each individual's judgment, but as yet neither in this comparison nor in the market values that are fixed in exchange, has any absolute standard been found by which the utility of all goods or the welfare of all men can be measured. CHAPTER 25 THE WAGE SYSTEM AND ITS RESULTS § I. SYSTEMS OF LABOR [Sidenote: The wage system defined] [Sidenote: Never the exclusive form of organization] 1. _The wage system is the organization of industry wherein some men, owning and directing capital, buy at their competitive value the services of men without capital._ The wage system is a method of organization never found completely realized. A community made up entirely of independent small farmers, living each on his little patch of ground, does not have any essential feature of the wage system. So long as they continue to be independent small farmers, owners of small capital, self-employing workers, the wage system does not exist in complete form. Some men with capital in every community are working for wages, while others, as independent producers, are their own employers. Society is not sharply divided into two classes, one controlling all the working capital, the other quite without resources. The wage system may be spoken of as prevailing to-day not as the exclusive, but as the typical, or dominant, form, while side by side or along with it is found independent production. It is clear that the wages here spoken of are contract wages. The wage system implies a money contract between employer and employed. The relation or bond between them is that of a wage payment. The wage system cannot be judged properly apart from questions to be later considered, such as private property and the enterpriser's part in industry; but some consideration of the subject properly belongs here. The wage system has become of recent years in America the dominant form of industry. The theory of wages is applied most frequently in the discussion of contract wages, and there are certain practical relations between the results of the wage system and the theory of wages. [Sidenote: Workers subordinate in early societies] 2. _The wage system, historically considered, is seen not to have displaced a system of independent labor._ This question should be viewed in historical perspective. As far back as history can be traced, the masses of workers have been subordinate. Civilization began with direction, with obedience to superiors on the part of the mass of men. Within the family, in the rudest tribes, the women and children were subject to the will of the stronger, the head of the family. Among the Aryan races the family system was widened, and the patriarch of the tribe secured personal obedience and economic service from all members of the community. Chattel slavery, the typical form of industrial organization in early tropical civilization, seems to have been one of the necessary steps to progress from rude conditions; students to-day incline to view it as an essential stage in the history of the race. But as conditions changed with industrial development, chattel slavery became a hindrance to progress, a disadvantage to higher industry. [Sidenote: Place of the workers in the Middle Ages] 3. _Serfdom for rural labor and many limitations on the workman's freedom in the towns, were the prevailing conditions in medieval Europe._ Serfdom was both a political and an economic relation. The serf was bound to the soil; the lord could command and control him; but the serf's obligations were pretty well defined. He had to give services, but in return for them he got something definite in the form of protection and the use of land. Between the lord and the serf continued a lifelong contract, which passed by inheritance from father to son, in the case both of the master and of the serf. In the towns conditions were better for the skilled workmen, but many things bore heavily on the mass of the workers shut out from special privileges. There were strict rules of apprenticeship; gild regulations forbidding the free choice of a trade or a residence; laws against immigration; settlement laws making it impossible for poor men to remove from one place to another; arbitrary regulation of wages, either by the gilds in the towns or by national councils and parliaments, forbidding the workmen to take the competitive wages that economic conditions forced the employers to pay; combination laws forbidding laborers to combine in their own interest. It is not an attractive picture, but, as far as is possible in a few words, it is a truthful picture of the conditions that existed before the coming of the modern system. [Sidenote: The wage system not the main cause of present evils] 4. _Many continuing limitations on the freedom of the worker are not the results of the wage system or a part of it, but are opposed to its complete workings._ The worker's ignorance is a limitation, preventing the choice of an occupation for which he might naturally be fitted. Neglect of children by parents is a limitation, preventing industrial training and the development of qualities that would make it possible for the child to excel. The faults of human nature cannot be attributed to any "system"; and if they are remediable, it is by education and better social opportunity. Trade unions often forbid boys to become apprentices, and forbid the choice of a trade except under conditions so exacting that to many they are impossible. Such limitations are made by the privileged few in their own interest, but they are annoying and opposed to the interests of the many. The typical wage system would be one in which all such hindrances were lacking, in which there were no social or political limitations on free competition except such as would help in educating and training the worker. The wage system should be judged by what it is, not by things directly opposed to its spirit. § II. THE WAGE SYSTEM AS IT IS [Sidenote: Merits and faults of the definite wage payment] 1. _Under the wage contract the worker gets in a definite sum at once the market value of his services._ Under the wage contract the employer takes the risk as to the future selling price of the product. That he is the one best prepared to assume the risk will be made clearer in the discussion of the employer's function. Wage payment, therefore, is a form of insurance to the workingman; he gets something definite instead of taking chances he is ill prepared to take. Wage payment is a form of credit to the laborer whose labor has not yet produced the distant gratification. The employer advances to the workman the value of the future gratification, discounting it at the prevailing rate of interest. The darker side of the wage bargain is that the "cash nexus," as Carlyle expressed it, is too often the only bond between the parties. When the wages are paid, the employer considers his obligations discharged. There is a lack of fellowship and sympathy in it all. Work should be a bond of communion between men, but as it is, the laborers in some great factories and their employers live in entirely different worlds. The great inequality of their condition makes mutual understanding difficult. They are master and man, "boss" and hireling, not co-workers, each with a worthy part in the noble tasks of industry. [Sidenote: Strength and weakness of the worker in competition] 2. _The wage-earner gets the competitive value of his services, securing in most cases much more than a bare subsistence._ At the present time competition is in a large measure active among employed as well as among employers. A believer in the subsistence theory of wages must, under these conditions, expect wages to fall to the starvation level. But according to the law of wages here presented, it is to be expected that wages can and will remain indefinitely above that level, falling or rising as conditions change. The increase in material wealth of itself tends to increase the wages of the workman. The laborer, though without resources and even though not contributing to the increase of capital by saving, thus shares in the benefit of increasing capital. It is true that under some conditions the workman is at a disadvantage in making the wage contract; labor must be applied from day to day or it is lost, and the laborer must work to live. While this does not determine the rate of wages in the long run in any occupation nor to any great extent except among the lowest grades of labor, it does give an advantage for the moment to the employer, and enables him to exercise at times a harsh power over the workmen in his immediate neighborhood. A single workman is thus very often at a disadvantage, but it must not be overlooked that in a large degree the competition for good workmen is effective between employers in different trades and in distant localities. [Sidenote: Wages as affecting the ambition of the worker] 3. _Increase of efficiency due to the sacrifice of parents or to personal exertion, goes to the individual worker._ The most essential practical feature in any industrial system is the appeal to the ambition of each man. This appeal is made where a premium is placed on increasing efficiency, by insuring to it a higher return. This result is possible and in large measure is attained under the wage system. Little less important is the appeal to family affection to make possible by its sacrifices each worker's best preparation. An offsetting disadvantage appears in the loss to the laborer in the decline of his powers. As he gains in wages if he increases in efficiency, so he loses if his strength fails from accident or in the course of years. This loss falls upon him, not, as is sometimes said to have been the case under serfdom or slavery, upon his owner (as if that secured to the slave immunity from suffering). It is true that in general under the wage system the worker has no guarantee against loss of work or, what is equally important, against sudden changes in industry. He may be, and often is, a victim of invention and of changes in machinery or industrial processes, by which the masses of men are the gainers. [Sidenote: Large liberty of the wage-worker] 4. _Liberty of the worker in his choice of work and outside of working hours makes for happiness, character, and progress._ Opinion is almost a unit as to the truth of this statement. The present wage system is the freest condition for the mass of men that ever has existed. Their religious, political, and personal convictions, are for the most part inviolate. There is a true but much misused maxim that liberty has its dangers. Freedom means freedom to make mistakes. Intelligence and strong industrial virtues are required to exercise properly a freedom newly acquired. Thus it is the lowest class of labor that reaps the smallest advantage from free conditions, and that suffers most from their misuse. [Sidenote: Limits to the worker's liberty] The main evil in the wage system is certainly not that the liberty of the worker is too great, but that it is too small. The sale of labor involves the obeying of orders during certain hours specified in the contract. Here again the evil is greatest in the lowest grades of work, while the great majority of wage-earners are left a large measure of choice in the time and manner of their work. Where labor is severe and without joy to the worker, it appears to be little better than a form of slavery. Contrast the condition of the section hand, cursed and beaten by a brutal foreman, with that of the wage-earner in the locomotive-cab, self-respecting, self-directing, and trusted with the safety of property and lives. The wage system is manifold, it is adaptable. If it holds a portion of the laborers with a harsh hand, it gives to all a wide measure of opportunity, and to most a great degree of independence in their lives. A hasty resort to indiscriminating analogy, as in calling wage-work "slavery," does not further truth or social justice. § III. PROGRESS OF THE MASSES UNDER THE WAGE SYSTEM [Sidenote: The rise of money wages] 1. _The nineteenth century was a period of great progress for the masses in America, England, and throughout Europe._ There are differences of opinion as to the extent of this progress, the way in which it is to be measured, and the degree to which it is an occasion for congratulation. There is no longer any dispute as to the actual fact that it has taken place. Many lines of evidence converge to confirm this one conclusion. The average money wages in the United States may be represented in 1840 by 87.7, in 1860 by 100, and in 1891 by 161.2. This was the high mark for a time and a decline followed. Again wages rose from 1897 on, and in 1899 had reached 163.2. They have continued to rise since and in 1903 attained the highest point in the history of our country and therefore in the history of the world. Another temporary decline undoubtedly will occur when industrial conditions become less prosperous. [Sidenote: Changes in real wages] Real wages, also, the power to purchase goods with labor, are greater than ever before so far as this can be measured in the price of leading commodities. The offsetting loss of the free health-giving pleasures of country life cannot easily be expressed. In England likewise the rise in money wages has been great. In 1860 it is represented by 100, in 1870 by 113, in 1880 by 125, in 1891 by 140, in the intervals some decline occurring. For a century in all civilized lands wages have moved in an ever-rising series of waves. The purchasing power of wages in England increased ninety per cent, in the thirty years between 1860 and 1891. Throughout Europe the same general change is seen, going always hand in hand with new industrial methods and the displacing of the old agricultural system by the wage system. As the hours of labor have at the same time been shortened, the workers have gained doubly. [Sidenote: Need of a broad explanation of rising wages] 2. _This progress is mainly due to the opening up of rich natural resources and to the development of industrial processes._ Recognized in some measure by every one, this progress is attributed by different observers to different causes: in America, by many to the protective tariff; in England, by many to the freer trade introduced about 1840; throughout the continent of Europe, to the spread of constitutional government and free institutions; by trade-unions everywhere, to the organization of labor. There is, doubtless, under certain conditions, some portion of truth in each of these claims. But, either separately or altogether, they fall short of a broad, reasonable, and sufficient explanation. The two-fold proposition just presented, the justification for which has been given in preceding chapters, points to a general and adequate cause. [Sidenote: The gloomy view as to the wage system was mistaken] Seventy-five years ago it was thought that, with the increase of machinery, of factories, of the concentrated control of wealth, and especially with the wage system, there must go a steady depression in the welfare of the workingman. This idea was connected with the iron law of wages. It was believed by some that, whatever the causes of advancing social income might be, the wage system would rob the wage-earners of all share in progress. In view of the facts, if it cannot now be asserted positively that the wage system is the cause of all the gain, it can be asserted negatively that it is not inconsistent with great progress on the part of the laboring classes. It might be possible to go further and to maintain that the organization of industry, under the wage system and competitive conditions, by its encouragement of enterprise, energy, and economy, has been an indispensable condition in the industrial progress which has in turn made possible the rising wages of labor. [Sidenote: More workers now in better-paid callings] 3. _The increased proportion of workers in the higher occupations means a further rise in the average condition of the masses._ A smaller proportion of workers is now engaged in the low-paid industries than fifty years ago, and a correspondingly larger proportion is in the better, or highly paid, industries. Decade by decade the proportion shifts toward the upper part of the scale. Both in America and in England (doubtless also in other countries) more men are now engaged in the higher professions and skilled occupations, a smaller proportion in the lower occupations. This would raise the average of wages even if the wages of particular occupations had not risen. [Sidenote: The masses gain by general social advance] 4. _The diffused advantages of progress mean relatively more to the masses than to the rich._ In the olden days the poor man was bound to the spot where he lived, the rich man had his carriage; to-day poor and rich ride side by side in the trolley car. The introduction of these cheap methods of enjoyment means relatively more to the poor. Better medical care, better sanitation, more abundant food, clothing, comfort, free schools, and libraries have all a part in this movement. The enormous possibilities in these lines are just beginning to be realized. The achievements of the last twenty years read like a story from fairy-land. It tells the leveling up of the conditions enjoyed by the common man. [Sidenote: Better social conditions must grow out of the wage system] [Sidenote: Improvement in the wage system] 5. _Any sound method of improving social conditions must grow out of experience, not break with it._ Even if things were on the downward instead of the upward road there would be no excuse for wild speculation. The only rational way is to find what is good in what is, and build upon it. There can be no excuse for suggesting a method from imagination. Projects of social change must be tried by successful experiment, and gradually fitted to present needs. It is in this way that the higher forms of life have developed; it is in this way that social and political institutions have come into being. Things that work successfully first in a small way are worthy of trial on a larger scale. The wage system is a favorite object of attack for radical social reformers. It has many unlovely features and there are many individual cases of hardship. It may well be asked, What method shall be pursued to reform it? Its retention, however, is not inconsistent with very great changes in the present political and economic arrangements. The impersonal economic forces are working for improvement; but further, there is a growth of sentiment, an increase in sympathy, a feeling among men that the "cash nexus" is not the only bond that should unite different classes, and this sympathy is becoming an economic force, softening and improving many of the most unlovely features of the modern wage system. CHAPTER 26 MACHINERY AND LABOR § I. EXTENT OF THE USE OF MACHINERY [Sidenote: Tools, machines, and power] 1. _A machine is a mechanical device by which power is applied in an automatically repeated manner, to change the place or form of things._ It is not easy, perhaps not important, to distinguish the machine from the tool in every case. Tools are portions of matter, such as bone, wood, iron, which man guides and directs in applying his energy to things. A machine may be used by the foot, but the hand is the great tool-using member. In many cases there is a clearly marked distinction between tool and machine. A simple, single piece that can be taken into the hand, as a spade, a hammer, a knife, is a tool; a combination of wheels, levers, pulleys, etc., is a machine. The simplest machine is but a slight adaptation of the tool, by which power may be applied in an automatically repeated manner. The drag develops into the cart, a simple machine. The spinning-stick, a tool used in ancient times, developed into the Saxon spinning-wheel of the sixteenth century, the form used when America was colonized. The use of power derived from nature, as that of wind and water and steam, while not the essential mark of machines, is the most characteristic feature of their modern development. Hand-machines, such as the hand-press and the type-writer, have had important industrial results, but it is the use of power leading to the concentration of industry and the ownership of machinery by the employers that has the greatest significance in the modern economic problem. [Sidenote: Machinery brought in an industrial revolution] 2. _Machinery of many sorts has long been used, but the "age of machinery" begins with the eighteenth century._ Inventions, new machines, and new processes, though not frequent, were not unknown in the Middle Ages; but no one class of machines took possession of a whole field of industry and gave rise to a great economic problem by the displacing of labor. The great industrial changes in the Middle Ages generally grew out of political changes, or of changes of routes of trade whereby large industries were disturbed, or of changes in the use of land through new methods and the bringing into use of land in other places. The industrial changes in England at the end of the eighteenth century on the contrary were due mainly to great mechanical inventions. The development of the textile machines for cotton and wool spinning and weaving mark the beginning of the movement. Here for the first time were inventions in such numbers, of such a nature, and under such conditions, that they were rapidly and widely applied, affecting the lives of a great number of workers. The steam-engine at the same time opened up the long line of mechanical inventions by which wood and iron are shaped and wrought, and the iron industry underwent notable developments. Since that time, have taken place in all Western countries that rapid expansion in the use of machines and those notable changes in industrial organization which distinguish our era from all others. [Sidenote: Increased use of power] 3. _Machinery is applicable in very different degrees to the different processes and industries._ Machinery can save much labor in some directions, little or none in others. It is especially adapted to the application of power. In the United States, in 1870, in manufactures alone, two and one third million horse-power were used; in 1900, eleven and one third million, the increase being five-fold. It is said that in the world, in 1870, three and one half million horse-power was furnished by stationary engines, ten millions by locomotives. Probably to-day the total is four-fold as great. [Sidenote: Machines can best be used in manufactures] Machinery is applicable with especial advantage to industries that change the form of materials easily transported and widely used. There must be a large output to justify the use of machinery. In 1840 a man's work in spinning cotton was three hundred and twenty times as effective as in 1769, in 1855 it was seven hundred times; and though the rate of improvement is diminishing, to-day the productivity of such labor is still greater. Similar examples are found in the manufacture of shoes, and in all varieties of wood- and iron-work. Machinery is most applicable where there is a compact plant; not so easily where the power has to be distributed over a wide area, unless a special track can be provided. [Sidenote: Not to so great an extent in agriculture] Machinery, therefore, has affected manufactures much more immediately and greatly than it has agriculture. It has not as yet, for example, been found practicable to apply steam to ploughing to any great extent. As the profitable use of most farm machinery requires a level surface and a large area given to a single crop, it cannot be used as well east of the Alleghany Mountains as in the Mississippi Valley, and it is still uneconomical in large portions of the civilized world. Despite this difficulty the methods of the farmer of to-day contrast strongly with those of one hundred or fifty years ago. Planters and seeders, reapers, harvesters, corn-shellers, hay-loaders, automatic unloading-forks, elevators, water-power-, steam-, and gasoline-engines allow great economies. The labor needed to produce food for one hundred people is a fraction of what it was one hundred years ago. In many other industries machines are usable only in a slight measure, indirectly, or not at all. They are of the least assistance in the personal services, and in the work of the thinker, the teacher, the speaker, and the artist. § II. EFFECT OF MACHINERY ON THE WELFARE AND WAGES OF THE MASSES [Sidenote: Evil of sudden introduction of machinery] 1. _The immediate effect of improved machinery, if suddenly introduced, is almost always to throw some men out of employment._ Any sudden change in industry injures men who have become adapted to the work that is affected. A well-mastered trade, a wage-earning though intangible possession, may be made suddenly valueless. Men cannot quickly change their methods of working or their place of work. This is as true of change brought about by new trade routes or by scientific discoveries (where machinery does not enter in) as in the case of labor-saving machines. If machines displace labor rapidly, men who cannot adjust themselves to the new conditions suffer, and there are always some who cannot adjust themselves, always some who suffer. It is rarely possible for a man past middle life to shift over into a new trade where his efficiency will be as great and his pay as high as in the old. New methods of puddling iron sent many old men into the poorhouses of Pennsylvania only a few years ago. Even where the total employment increases, the individual sometimes suffers. The increased demand resulting from the cheapening of a product may call for more workers than were employed before the new machinery came in, and yet some of the former workmen may be thrown out of employment. The introduction of the linotype is said to have displaced a large number of hand type-setters, but to have increased greatly the amount of printing. As the machines are expensive and cannot be worked properly by men not highly expert, men past thirty-five years of age have not been allowed to learn their use. [Sidenote: Loss falls on the less efficient workers] The least efficient men in any trade always suffer most. The change crushes hardest the man at the margin of employment. The more skilled workman can hasten his pace and still earn a living wage in competition with a machine, while the less skilled can but drop out entirely, innocent victims of an economic change, sacrifices to the cause of industrial progress. Happily such pathetic incidents are relatively not numerous. Most machinery is introduced in commercial centers, and gradually spreads to other factories in such a way that most men can adapt themselves to the change. The effect of machinery must not be judged by the extreme cases. It was found that there were more hand-looms in use in England in 1850 than fifty years before, though in the meantime power-looms had displaced the hand-looms in all the great factories. [Sidenote: Error of the "lump of labor" notion] 2. _After time for adjustment, the total sum of employment is as great as before, but the labor is differently distributed._ The "lump of labor" idea, as it is called, is widely held, especially among workingmen. The notion is that there is exactly so much labor predetermined to be done; therefore, if machines are introduced, there is that much less for men to do. The logical conclusion easily drawn is that every machine reduces wages. Few, however, would go on to the further conclusion that in the aggregate the existing machinery, like an enormous vampire, is sucking the life-blood of the working-people,--though traces of such a notion frequently appear. [Sidenote: Effect of machinery varies in different industries] If extreme examples are taken, it may be made to appear either that an increase or that a decrease of employment results from machinery. Industries grade off from those that are capable of developing a greater and greater demand, to those at the other extreme that are capable of a very slight increase, as a result of a lowering of the price. There seems to be practically no limit to the consumption of textiles, provided their price falls; the demand for dress alone is indefinitely expansible. Queen Elizabeth, who had a different dress for every day in the year, has many potential imitators. There is a constant increase relatively, as well as absolutely, in the number employed in transportation, as each census shows; there are more railroad men relatively than there were stage-drivers and teamsters before the day of railroads. The number of people now engaged in printing books and papers is larger by far than in the days when all the books of the world were written by the old monks in their cloisters. The proportion of workers in agriculture, on the other hand, is less than it formerly was. In part this is a change in appearance only, for the farmer once made a large part of his tools which are now made by workers employed in manufactures, yet who in a very real way are aiding in agriculture. In part the change is, however, the effect of the use of machinery and other improvements in agricultural processes. The amount of raw-food products required for each hundred persons is quite inelastic. As it becomes possible to expend more for food, the change is made in quality, variety, flavor, rather than in quantity. The greater part of the saving in the cost of food is, however, expended in other products, and the labor saved in agriculture finds employment in supplying these rising wants. In other cases also, new industries are made possible as machines liberate energy from the production of the more necessary goods. At each census it is necessary to change the schedule of occupations, because men have adopted callings unknown before. [Sidenote: Abnormal effect of the new machinery in England] 3. _In some cases the introduction of new machines injures particular workmen._ The only reason for the use of machinery is to improve the quality or to lower the price of products. If the workers can do nothing but blindly pursue the same tasks, it is to be expected that the wages of hand-labor will fall in a particular trade into which machinery is suddenly introduced. When, as sometimes happens, employers introduce machines for the immediate purpose of breaking a strike, the workmen are convinced that machinery is the enemy of labor. Because the extensive introduction of machinery in England was at first accompanied by the unhappy result of a lengthening of the hours of labor in factories, this result was deemed to be necessary in all other cases. It was in fact quite abnormal, and has not been seen elsewhere. The owners of factories wished to keep their machines employed as many hours as possible; the laboring classes of England, being at the same time demoralized and depressed by industrial and social influences that had no logical connection with machinery, had no power to resist this movement. In all other countries of Europe and in America, where the introduction of machinery has been more gradual and normal, it has been followed immediately by a shortening of working hours, as eventually it was in England also. [Sidenote: Higher wages logically result from the use of machinery] 4. _Indeed, the economic effect of improved appliances is logically and inevitably to raise wages._ It has been shown above, in the discussion of wages, that if the efficiency of machines increases faster than does the number of workers who use them, the marginal application of labor stops at the higher uses or services of agents and is not forced to the lower. The more perfect the economic environment, the higher the incomes even of those who own no part of the machinery. A part of this benefit may appear in the form of higher money wages received, a part in the form of the lower price of things bought. Real wages are the essential thing, and as a consumer the laborer shares with every other member of society in the benefits of improved machinery. The benefits resulting from greater abundance are diffused, and as goods are brought from the high, or scarcity, end of the scale of value down toward the level of free goods, everybody gains by the abundance and cheapness. [Sidenote: Some grades gain more than others] The general, or average, gain is not to be judged by comparing the conditions of the lowest grade of society with those of fifty years ago, for while that grade may have been bettered only a little, it has been possible for large numbers to rise to higher grades because of the use of machinery. The physical tasks are to-day much lighter than ever before, and a larger proportion of society is engaged in industries that require skill and thought rather than physical labor. That portion of the work is being more and more shifted upon machines. It is important, though, to distinguish between classes of workers in judging of the benefits and evils of machines. A machine is "an iron man," it has been said, and comes into competition with other men to lower their wages by outworking and underbidding them. But this iron man can do only automatic tasks; it is not capable of exercising judgment. Every intelligent laborer who can adjust, adapt, fit himself for more intelligent action will rise above the machine and profit by its presence. But the crude physical labor which can compete only on the plane of automatic machines, must find its field of employment more and more hedged in. If the wages of unskilled labor are not depressed, it is because of the enterprise of others who rise to more skilled employments and thus reduce the competitors of the lowest rank. [Sidenote: The growth of factories] 5. _The early effects of the factory system on the health, intelligence, and morals of the workers often have been bad; but not necessarily the abiding effects._ Some kinds of machines can be more profitably used when they are grouped in great factories, and, where this is common, it is spoken of as the factory system. In the ideal modern factory (realized in few cases) each smaller machine is a part of a larger organization of machinery, so perfect that the material goes in at one end of the building and out at the other without the loss of a single motion. Factories compel great numbers of laborers to live near each other and to work together. The sudden crowding together of people into new social relations is usually bad for morals. Men are moral under the eyes of their neighbors, acquaintances, and families; habits become adjusted to right standards, and the temptations in new conditions are always great. Until of late, engineering science has not been able to deal with the problems that arise where population is densely crowded, and the early factories with their surroundings were most unsanitary. Under the degrading conditions that resulted in some places, especially in England, the effect of machinery on the intelligence of the workers was bad. Whether this is its natural result is debatable, but the factory worker in general does not appear to be less intelligent than the agricultural worker. The alertness of the city dweller is due doubtless to social contact more than to the immediate work he does. This work may or may not be less thought-awakening than work with simple tools. There is a general improvement along all the lines of intelligence, morals, and health. The conditions in the cities as regards health and morals are approaching those of agricultural communities. While many factory districts are forlorn, there may be seen around many factories more happy conditions, better buildings, better sanitation, increased leisure for workers, workmen's clubs, educational agencies, and many other evidences of civic and social progress. [Sidenote: Problems of large industry] 6. _The great social consequences flowing from the concentration of industry and wealth are the most serious problems in the relation of machinery to labor._ The ownership of tools was widely diffused in medieval times. It is not yet evident how many can own a share in great factories, but the control drifts into few hands. It is not yet clear what social effects great corporations will have on our democratic institutions. Many problems of large industry remain to be solved in the near future. The question in the old form, as to the effect of machinery on labor, is no longer open. It has been clearly answered by experience and explained by theory: the economic effect of machinery is to lift the productiveness and efficiency of the average man. The benefits are unequally distributed, but nearly all share in them to some degree. The question which the future will have to answer is, What will be the social and political effects of the great fortunes that have been made possible by the enormous development of machinery? CHAPTER 27 TRADE-UNIONS § I. THE OBJECTS OF TRADE-UNIONS [Sidenote: Definition and purposes of trade-unions] 1. _A trade-union is an association of wage-workers for purposes of mutual information, mutual help, and for the raising of wages._ The term trade-union is used in a general sense both of combinations of workers in the same trade, and of men in different trades, though usually the latter are called _labor_-unions. The "Knights of Labor" is a good example of the labor-union, the "American Federation of Labor" of a combination of trade-unions. The Knights of Labor is composed of local branches to which workers of every class except lawyers and saloon-keepers are admitted. The Federation of Labor, however, is composed of chapters, or lodges, that are homogeneous, all the men of each lodge being in the same trade. The definition given is broad enough to include the various degrees of help given and the various methods adopted by trade-unions to accomplish their objects. Trade-unions are mutual-benefit associations: insurance against accident, sickness, death, or lack of employment, forms an important part, and in some cases almost the whole of their work. All unions in a measure serve their members as employment bureaus, while in some unions this is a most important feature. Through trade-papers, correspondence, and personal meetings, information is exchanged regarding trade conditions, and great mutual service is thus rendered. But a great deal of the help given is in the more impersonal economic ways: help to get from the employers better wages, to secure shorter hours, to improve in various ways the conditions of employment. [Sidenote: Lack of personal touch between employers and workmen] 2. _The organization of workers has resulted from the separation of the economic and personal interests of employers and workmen._ The control of industry has become more concentrated during the age of machinery, and this has reduced the feeling of economic unity among the different ranks of industry. There is now to the average workman no possibility of becoming a master, an employer. The largeness of industry forbids, moreover, the meeting and personal acquaintance of employer and workman which were before possible. Misunderstandings grow when men cannot talk over their differences. The social chasm has widened between the workmen and the responsible director of industry. As a result of these changes, the attitude of the employer very often has become that of the buyer of labor as a mere ware. He has with the mass of his employees no personal relations whatever. Under these conditions, when the employer feels the presence of competition, he is more likely to force the lowest wage that is possible. It is not unusual for the immediate direction of factories to be intrusted to paid managers, who are responsible to the stockholders and whose work is judged only by the dividends they succeed in earning. Many examples might be found where the managers or the resident owners have wished to pursue a more liberal policy than the absentee shareholders would permit. [Sidenote: Lack of personal acquaintance among workers] 3. _The need of organization of labor has grown with the growth of factories and with the loss of personal touch among the workers._ This is another aspect of the point just mentioned. The smaller the number of employers, the easier is it by an understanding to suppress competition on their side. If there is only one factory of a kind in a town or city, the employer is able to drive a harder bargain with the worker. Especially in times of industrial depression is a change of employment difficult for the laborer; it involves much risk, and loss of time and money in moving. In the long run competition must be felt even in such cases. The unfair employer will find his workmen drifting away, his force reduced in number and quality, and his evil reputation going abroad among workmen. But there is a great deal of friction in this adjustment and the loss falls largely upon the workman. In a large industry, especially, the workers have no personal acquaintance with each other, nothing to give them a sense of unity and power. In the old-fashioned shop, with its close association and its interchange of views, could grow up a strong public opinion; but in the wilderness of a modern factory the worker may be unknown in name and character to the man who touches elbows with him. Moreover, in America differences in nationality and in speech among immigrant workers is often an effective factor in preventing the assertion of their interests. There is an analogy (though it is only an analogy) between these conditions and the political conditions that have led pure democracies to give way to representative governments. So long as a community is small and men know each other personally, there may be popular government, but when the number becomes larger the only way in which public opinion can be concentrated and made effective is by delegating the functions of government to representatives. [Sidenote: Main objects of trade-unions to-day] 4. _The main objects of labor-unions to-day are to improve conditions in their working places, to maintain or increase wages, and to shorten working hours._ Better conditions of safety and sanitation in their work were not the first thought of the unions. The workers, as a result of habit and ignorance, were strangely unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers. But since better ideals have been developed, organized laborers strive to improve the sanitary, moral, and other conditions in the places of work. Their main object, however, was for a long time to raise wages, or to resist any decrease. Shorter hours have been a prime object of recent years, and almost coördinate with that of higher wages. The eight-hour movement has declined somewhat of late, but a few years ago it seemed possible that the eight-hour day would become the rule. This aim has never been lost sight of, however, and now and then another step is taken toward it. Labor leaders have repeatedly asserted in recent years, when the two demands have been made together, that shorter hours were more desirable than increased wages. § II. THE METHODS OF TRADE-UNIONS [Sidenote: Organized labor seeks to prevent competition among workers] 1. _The union's first aim is to get control of all the labor force in the market, and to minimize competition among workers._ Every labor federation aims to extend its control to every branch of its trade. A sense of wrong is one of the strongest forces to bring the workers into the organization. The appeal to a common interest is effective in times of great grievance, as it was effective in the dangerous times of the American Revolution, though failing during the Confederation. The unwilling are first persuaded, then coerced by threats, by petty persecutions, by the most cruel of all peaceful weapons, social ostracism, and finally by personal violence. The "public opinion" and class feeling fostered among workers by their organization are analogous to the sense of patriotism and loyalty in the country at large, and at times displace it, as is seen in the opposition to the militia and to the maintenance of public order at times of strikes. The individual who declines to enter the union is denounced as a traitor and made to feel the scorn of his associates. When all these measures fail, pressure is brought to bear upon the employer to get him to force the unwilling workers into the union. [Sidenote: The union seeks to secure the full competitive wage] [Sidenote: And as much more as possible] 2. _Its next aim is to use collective in the place of individual bargaining, to force as much as the competitive wage, and more if possible._ The term collective bargaining has been much used to describe bargaining between a group of labor leaders, the delegated representatives of the workingmen, and a group of employers or directors. It is sometimes claimed that all the trade-union seeks is to put the workman on an equality with the employer in bargaining, enabling him to get all he would if competition were free on both sides. It is said that organized labor simply prevents the employer from following the maxim of Napoleon to "divide and conquer," from meeting his employees one by one and forcing his own terms upon them. But the most effective argument in organizing the trade-union is that it forces a higher wage, more than the market would warrant. It is sometimes assumed by labor leaders that competitive wages would be very low, almost starvation wages, and anything above that level is credited to the work of the union; while in other cases where the wages are already large, the purpose frankly avowed is to limit the labor supply in the particular trade and to force a monopoly wage by any means possible. One's opinion of trade-unions is likely to differ according as they work in one or the other of these ways. The impartial onlooker sympathizes with the efforts of the trade-unions in so far as they serve merely to put the workers on an equality with the employers in bargaining. The public wants to see "fair play," and up to a certain point the union is merely a device to get fair play. But if the union is a device to defeat competition, to force artificially high wages, it will be judged differently. The public readily sees that if the unions force more than a fair and open market affords, it is rarely at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen shut out from the monopoly of labor. [Sidenote: The issue of the closed shop vs. the open shop] 3. _In order to accomplish their ends, the trade-unions seek to control their employers' business in various ways._ They demand, first, that no non-union men shall be employed even at union wages; they demand that the employer shall help them to force his employees into the unions. In this very usual demand for the "closed shop" or "union shop" the public can see very little justice. On this point, nearly always, unions forfeit in a strike the sympathy of the public; yet the unions assert that it is almost absolutely necessary to gain this point in order to carry out their objects. If a union and a non-union man work side by side there are many ways in which the employer may make the union man suffer. If business slackens, it is likely to be the union man that is discharged; if any preference is given, it is to the non-union man. Certainly all will agree that if the unions are to get the strength to enforce _all_ their demands it is essential that they make good this claim which leaves the employer almost helpless. Yet it certainly is not essential to the accomplishing of valuable services for the members of the union. The educational and mutual-benefit features are attained without this means; and much experience shows that, if their cause is strong, the organized men can carry with them a large proportion of the workers and the sympathy of the public in a contest for higher wages. It never has seemed to any considerable portion of the public any more desirable that organized labor through its officers should be able to dictate to employees, than that employers should crush the workmen. It is by just this assumption that union advocates beg the question of the "union shop." [Sidenote: Other limitations put upon industry by unions] Further, the unions direct and control the employment of labor, often limit the number of apprentices in a trade, and assume to determine who shall enjoy the privilege of learning it. They limit the output, fix the maximum amount, and forbid the use of labor-saving machinery. Whenever the unions are charged with these acts, labor leaders either deny the facts or avoid giving a direct answer, but there is no doubt that the charge is true in many ways and in many cases. The requirement that each special kind of work shall be controlled by a special trade, and disputes between rival trades, for which their jealousies are responsible, give rise to great annoyance, expense, and loss to employers and to the entire public. [Sidenote: The strike and the boycott] 4. _The strike is a threat and a mode of attack to enforce the demands of the union._ To most newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer or for making him suffer. When a new union is formed, it is nearly always dedicated by a strike, which is the simultaneous stopping of work by a number of workers. A strike is intended to force the employer to grant the wages and conditions demanded. Its effectiveness lies in the injury which it occasions or threatens in the stopping of machinery, the ruin of material, the loss of custom, and the failure to complete contracts undertaken. Its success being dependent on the inability of the employer to fill the places of the strikers, their energies are bent on persuading or coercing other workers from taking employment. There are many ways of coercing workers without personal violence. Public opinion does much, and probably the severest of all coercive measures is the social ostracism of the worker. What may be called the endless-chain boycott is an excommunication, without measure or limit, of the non-union worker and of every one in any way befriending him or the employer. So far as in their power lies, the enraged strikers dissolve the very bonds of society, brother casts off brother, and mother disowns son. The unhappy conditions in the coal regions in 1902 rivaled the tragedies of civil war. A reasonable use of the boycott, refusal to maintain social relations with the person who offends one, is doubtless a part of personal liberty; but the boycott, as experience shows, has moral limits, and it should have strict legal limits. Its use beyond the moderate limit of the first degree of personal relations is antisocial to the degree of criminality, whether it be used as the weapon of organized workers or of organized wealth. [Sidenote: Violence in strikes is mob law] When peaceable means fail, often there is a recourse to violence both against the employer and his property and against the non-union men. The evils of violence in strikes often are tardily recognized by the public, whose sympathy up to a certain point is with the striker as "the under dog." It is slow to realize that strike violence is mob-law. Whenever men of one group assume the right to coerce forcibly and to wreak their hatred against one of their fellow-workers, it is a blow at political liberty. No free society can safely go the first step in permitting one group of men to usurp control over others in this way. [Sidenote: Costliness of strikes] 5. _The great losses caused by strikes are the penalty of an unsolved industrial problem._ The losses to workers in wages, to employers and to investors in income and property, and to the public in interruption of business, aggregate an enormous sum. It is, however, impossible to estimate it at all exactly, as the losses are in many cases indirect and intangible. The strikers are concerned not with the balance of total losses and total gains to society as a whole, but with the net gain that in the long run accrues to them. It is true that there are indirect gains not easily calculable, as the advance of wages made to avoid a strike while the lesson of the consequences is still fresh. Opinion among workingmen is not a unit as to the value of strikes. A few years ago it seemed safe to say that strikes were declining as compared with the period of the early eighties. It is probably true, as is often said, that as laborers become educated they put less faith in strikes. The epidemic of labor troubles, marking the years from 1899 to 1903, gave no evidence of a decrease in the use of strikes, yet many of these were due to the recent organization in various trades. The coal strike of 1902, though doubtless due to real grievances, was opposed by the officers of the union, an unusually capable set of men, but the more violent and discordant elements overruled the more pacific counsels. The public is perhaps as favorable as it has ever been to the cause of labor, but it appears to have less patience with strikes than it had fifteen years ago, and strikes usually fail if not backed by public opinion. The public has not as yet thought out consistent conclusions on the question of the rights of the union. It is just now much impressed with the value of arbitration. As experience destroys the unsound sentiments, and divides the wise from the unwise measures, a peaceable solution of industrial differences must and will be found. § III. COMBINATION AND WAGES [Sidenote: Wages are raised by a labor monopoly] 1. _Wages in particular industries often are maintained above the competitive rate._ The older economic writers were somewhat unsympathetic with trade-unions, and were even inclined to deny that organization could be helpful in any way in raising wages. This view, it must now be recognized, was mistaken, and overlooked the hindrances to competition and the effective economic forces that organization can bring into play. The sympathies of most men favor the wage-earner so strongly that they hesitate to express an opinion in any way unfavorable to his efforts to raise wages. But the view of the economic theorist as to the services of the union cannot be as roseate as is that of the union labor leader. The general proposition, however, is applicable, that wherever it is possible to limit supply, prices may be raised. If men fitted to do a certain work are not permitted to do it, labor in the special industry becomes more scarce and consequently more highly valued. This involves the result that some men are forced to remain where they get lower wages than they could earn if free to act. The temporary need of the employer may enable the union to force from him a division of his profits. If the trade-union watches its opportunity and takes occasion to strike when a failure to fill orders would cause him great loss, it may compel him to pay for a time more than the normal value of the labor. It may well be doubted whether such action on the part of labor is generous, fair, honest, or in the long run wise; but that it may be immediately effective cannot be denied. By the principle of complementary goods an essential kind of labor can be given an artificially high value, if its supply can be controlled. If only the labor that is ready and willing to come in to take the place of the strikers can for a time be kept out, wages may be fixed practically according to monopoly principles, later to be discussed in connection with capitalistic organization. [Sidenote: Exaggerated claims made for trade-unions] 2. _Trade-unions can, in various but limited ways, set in motion economic forces to increase the productiveness of labor._ It is difficult to take a moderate view of trade-unions; it is easier to go to one extreme or the other. In a book by Trant, reprinted from the English edition and circulated by the American Federation of Labor as representing its theory and claims, all the advances in wages that have been made are said to be due to the trade-unions. This claim is believed by many besides the members of trade-unions. The thought is sometimes expressed even by social students that but for the trade-unions wages in America would be the same as in 1850. Many well-known facts should cause such an opinion to be accepted with hesitation, to say the least. Only about one tenth of the workers in England are unionists and of the twenty-two million workers in the United States, far less than ten per cent. are organized. Can it be maintained that one tenth of the labor supply fixes the value of all? In many lines where labor is not organized, as in teaching, clerical positions, professional and domestic service, wages have risen even more than in organized trade. The evidence advanced to support the extreme claim is that wages are higher in some organized trades than in other unorganized trades requiring the same grade of laborers. Trant says that "where there are no unions wages should be lower. This is exactly the case"; and he quotes: "Wherever we find union principles ignored, a low rate of wages prevails and the reverse where organization is perfect." But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." [Sidenote: Certain unquestionable reasons why union wages should be higher] If this be true, it is in accordance with strict competitive principles that, as the elite of the trade, they should get higher wages than those outside. Moreover the unions exist mainly in the more populated places where cost of living, wages, and all prices range higher than in the towns. A much higher standard of work prevails in the cities, both among union and non-union men, and the old men and the inefficient drift away to the smaller towns and the places where wages are lower. Many of the differences are explicable without taking any account of the union. So far as unions tend toward intelligence, education, sobriety, efficiency, fuller and fairer competition, they are economic factors in all branches of industry, and it cannot be doubted that they do work in some measure in all these ways. So far also as they strengthen the bargaining power of the laborers, or as they can enforce a monopoly of labor in a particular trade and locality, they can secure the full competitive or even a monopoly price. [Sidenote: Labor organizations a minor factor in lifting the mass of the workers] [Sidenote: The chief factors determining wages] 3. _Wages viewed in general industry, and in the long run, are determined mainly by impersonal economic forces._ That implies the converse, that they are not determined mainly by the trade-unions. This statement, in fact, is admitted in calmer moments by the extreme partisans of the unions. Even the book before quoted says somewhat vaguely that "it is an error to think that the trade-union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." Again it says: "Capital is increasing faster than population.... It seems therefore merely in obedience to natural laws that wages should rise." Men can easily see personal and immediate results. They cannot follow out the impersonal and ultimate workings of economic forces. The leaders make exaggerated claims; laborers believe them and pay their dues more readily; the public believes them and is the more inclined to pardon the excesses of so important an institution. That wages in a number of special trades are raised in a considerable degree cannot be questioned. The open or secret use of violence and other antisocial forces make much of this boasted service to some of the workers, an injury to others, and an occasion of reproach from the citizen who condemns the spirit of lawlessness thus encouraged. The chief factors tending to raise the general standard of wages are the productiveness of industry, peace, order, and security to wealth, honesty in man and master, in lawmaker and in judge, the efficiency and intelligence of the workers, and an earnest effort on their part to get the share that competition would accord them. Chiefly, though not exclusively, because of their bearing on this last factor, trade-unions have a useful, even though subordinate, part in the regulating of wages over the whole field of employment. DIVISION B--ENTERPRISE AND PROFITS CHAPTER 28 PRODUCTION AND THE COMBINATION OF THE FACTORS § I. THE NATURE OF PRODUCTION [Sidenote: Man's active intervention in production here to be studied] 1. _The aim of industrial effort is the increase of the quantity and quality of scarce goods; this is economic production._ The thought has become familiar to the student that the supply of economic resources of whatever sort is limited, while the wants are practically unlimited. A supply of consumption goods meets a perennial stream of wants, the result being that value is attributed to things. The aim of production is to add to scarce things, to make the supply of goods as large as possible. There is occasion here to recall the thought of the two aspects of production noticed in Chapter 24. Man's part in production is passive when goods come into existence without his effort. One can imagine the indolent savage of the tropics, lying under the banana-tree, letting the fruit drop into his mouth. One can conceive of a tribe living upon manna, where every day the people awoke to discover a certain amount of food provided to each person's hand. Though no effort could increase that amount, still, if the food differed in flavor and the better qualities were rare, value would come into existence and exchange would arise. Now there is something very analogous to that in daily experience. There are some goods which effort can do little to, increase. Usually, however, there is a possibility of change and adaptation to make them better suited to needs, and there is required the use of intelligence to choose among the goods and to employ them in the best way. Further, man can intervene and direct the course of industry; he does not merely gather what is provided. It is this active intervention and effort that is here to be considered. [Sidenote: The four essential characteristics of value] 2. _To have value, a thing must be of the right stuff, in the right form, at the right time, and at the right place to gratify wants._ A distinction is sometimes made between elemental, form, time, and place value. It is a mistake to say that the value of anything is due to any one of these features, for to have value all must be united in a single thing. But the distinction is useful in emphasizing the missing characteristics, which if supplied, cause value to emerge. Ice may be considered to have form value when produced artificially by a machine, time value when stored from winter to summer, and place value when brought from the north to the south. But not less essential is the psychological condition of a hungry and thirsty population ready to consume the ice. Any act or agent is said to be productive which works in any one of these respects: puts things in better form, or in a more fitting place, or provides them at a more fitting time to serve human wants. [Sidenote: Economic vs. technical changes in goods] 3. _Economic production (in contrast with technical or merely formal production) is such a change in goods as is attended by an increase in value._ It is often well to contrast form, appearance, imitation, with the thing itself, the reality. Men sometimes go through the forms of study when their eyes and thoughts are wandering; through the form of getting a college education when they are simply having a good time. Likewise in production there is the form and the reality. The young lady just out of boarding-school rarely produces a masterpiece with the tubes and brushes that Raphael might have used. The justification for amateur work is to be found in the doing and not in the market value of the result. Blue rosebuds, painted with loving if unskilled touch on red velvet slippers, may bloom into a romance and happiness; but to the economist this appears to be a consumption of good pigment for amusement, not a creation of value. The difference between the form and value of productive effort becomes, in the study of business organization, a most essential question. The significance of leadership and control of industry is found in this fact that economic goods may be united to produce results having either a less or a greater value than the materials that are used. [Sidenote: Acquisition vs. social production] 4. _Individual acquisition may be contrasted with social production in cases where the individual increases his wealth at the expense of others, without adding to value._ Most economic efforts increase the income of the individual and the income of society at the same time. The fruits of the field and the uses of machines are net additions to current income; they are not merely subtracted from the income of one and added to that of another. The increase of products by labor may depress somewhat the exchange value of competing labor, but the general welfare is furthered by the greater abundance. With very slight qualification it is true that in these cases the good of each is the good of all. But in some forms of human effort, social and individual interests clash. When two men bet, one gains and the other loses. The gambler's gain is a loss not only directly to his beaten opponent but indirectly to society. Certain forms of speculation approach dangerously near to the appropriation of the goods of others, and others become outright stealing, or cheating so nearly like stealing that it would be treated as a crime if discovered. But many a man prowls along the border-line of crime all his life and succeeds in making large gains without falling into the clutches of the law. Cheating that can be detected, and outright stealing, are prohibited by the law not because the burglar is an idler; he loses sleep; he has his trials too. The pursuit of burglary requires courage, effort, and ingenuity, but society does not reward these as virtues nor recognize as production the transfer of wealth from the bank-vault to the pocket of the burglar. It is the aim of social institutions to harmonize individual and social interests in the pursuit of wealth, to force men into lines of action where individual acquisition adds to the sum of social utilities. But there are many marginal cases where human justice discriminates only in a bungling way, and many controverted questions arise at the meeting-point of ethics, economics, and law. [Sidenote: Industries are socially more or less productive] 5. _In this sense, productive industries may be distinguished from unproductive ones._ The old distinction between productive and unproductive labor rested on the idea that production must be embodied in material and lasting form. We have rejected this for the thought that the tests of production are to be found in feeling, not in outward things. The distinction, therefore, between productive and unproductive labor must now be of a very different kind. Viewed from the social standpoint, the efforts of men may be seen to be directed along more or less productive lines. Enterprise and effort shade off from the more to the less productive, from the extreme where the value is a net addition to wealth, through other cases where one's gain is partly at the cost of others, to fraud and crime where there is merely a transfer of ownership. § II. COMBINATION OF THE FACTORS [Sidenote: The factors of production defined] 1. _The various parts, materials, and agents that unite to form products are called the factors of production._ In a general sense every separate thing that enters into industry is a factor; as, in agriculture, for example, the seed, plows, fields, fences, barns, cattle, labor. But usually in economic discussion, these numerous factors are grouped in large classes. The main factors are two, variously named as man and nature, or labor and material agents, or humanity and wealth. Rejecting, as we have, the old view as to the nature of consumption goods and as to the nature and possibility of the distinction between "land" and artificial capital, we class under wealth all material economic agents whatsoever. The discussion of labor and wages has broadly laid down the principles that apply to the value of human effort, but the factor of directing energy presents in modern society so many important features that it calls for special and fuller consideration. [Sidenote: Progressive stages of control over natural conditions] 2. _The economic progress of society has been marked by decreasing dependence on the bounties and chances of nature and by increasing control of natural forces by man._ Various stages of progress in human history have been recognized. First is the stage of _appropriation_--the stage of hunting, or of fishing, or of gathering fruits. Man in this stage is still an animal in his economic methods, not guiding and controlling nature, but merely gathering what nature chances to bring forth. The limitations to man's powers in this stage are marked. There is excess of supply and waste at one season, scarcity and great suffering at another. With such crude utilization of the bounties of nature, a vast area will support but a small population. When sheep and cattle have been domesticated, and where there is a large area for grazing, industry rises to the _pastoral_ stage. While still dependent on nature's bounties for the feeding of his cattle, man is hourly intervening to increase, regulate, and improve the supply of food and materials. Famines are more rare, economic welfare is greater, a greater population is nourished on the same area. The _agricultural_ stage begins whenever man plants seeds, trims, tends, and increases by his care the supply of vegetable food. This is a still greater intervention in the course of nature. Man anticipates the future, directs forces, and groups materials to his purpose of getting a regular food-supply. He is thus himself forced into settled life, begins hand-production, and makes the first steps in commerce. Then gradually comes the _industrial_ stage, in which control over nature grows, supplies increase, machinery and motive forces are utilized, and humanity is in the full tide of industrial development. These are not sharply marked changes, but throughout all there is a growth of security, of certainty, and of productivity. With man's increasing power and foresight, chance is lessened, for directing energy takes its place. [Sidenote: Increasing importance of skilled organization and direction] [Sidenote: The source of American enterprise] 3. _For a high efficiency of production, as a whole, conditions must favor the best organization and direction of industry._ Industry is dependent primarily upon natural resources. Climate, rainfall, iron deposits, fuel, supply of wood or coal, predetermine in large measure the limits within, and the direction in which, the industry of any community can move. The progress of production depends also on an increasing efficiency of labor as embodied in individual men, and upon social and political conditions making possible an increase of capital. But--a condition as important as any of these--production is dependent also on a wise combination of the factors. Social, political, and economic conditions must be such as to call forth the factor of direction and control of industry, to make possible industrial progress. This is one of the greatest sources of America's superiority to-day. It has been strikingly said that it is now no longer "young America and old Europe," but "old America and young Europe." America is older in industrial experience; Europe, with undeveloped resources, awaits the touch of American methods and machinery. There are dynamic forces in American society not present in equal degree in any other. It is therefore not alone the great resources of coal and iron,--equal resources may be found in unexplored parts of the world,--it is the dynamic social forces, invention, enterprise, and organization, which have brought America to the forefront in industry. Her natural resources have thus yielded an incentive and a premium to enterprise as a sort of by-product. Absence of caste, political liberty, the democracy following the spread of the frontier, have not made it possible for every one to succeed, but they have made it possible, as nowhere else in the world, for real ability to scale the barriers of birth, poverty, and hardship. A conservative population never can equal a progressive population in industrial efficiency. It has been remarked that America has little to fear from Oriental competition so long as the avenues of education and enterprise are open to her young men, insuring her the highest capacity in the organization and direction of industry. [Sidenote: Growing specialization of industry] 4. _A high efficiency of industry is dependent on many social causes making possible a great specialization._ It was said in another connection that division of labor is dependent upon the size of the market. With a large population massed at one spot, so that the demand for even the less important products is large, there may be a high specialization of industry. An increase of transportation, such as railways and telegraphs, is equivalent for many economic purposes to growth of population on one spot. In colonial days it took ten days to go from Boston to Philadelphia, and two weeks to go to Washington. San Francisco is now for many economic purposes but one fourth as far from Boston as Washington was at that time. California and the eastern states are distant only thirty minutes by telegraph and three days and a fraction by railroad, and are thus in many respects in the same market. The great development during the past century in the means of communication and of carriage has made possible, as never before, the massing of population to secure the advantages of division of labor in most lines, without meeting the hitherto insurmountable difficulty in the securing of food for such large numbers in a limited space. The population draws its food from the whole vast area; whereas it is massed at the points more favorable for other products and can make use of the most highly specialized machinery. These several conditions thus have favored the growth of large industry under a single control and direction, on a scale never before approached. These changes have brought in their train social problems connected with the concentration of economic power. It remains to be seen whether the unquestioned economies of this new organization can be retained and improved while it is divested of its evils. [Sidenote: Growing importance of directive ability] 5. _With the growing division of labor, grows the need of the highest ability for the directing of industry._ Ability may be judged by various standards. From one point of view, the scientific mind, grouping facts in the cold light of reason to arrive at truth, is the highest type. But supreme, each in his own sphere, are also the artist expressing, through painting, poetry, dramatic action, and music, the subtleties and complexities of feeling, the moral philosopher, the prophet, the preacher, in the best sense of the term the teacher, all aiding to guide the spiritual forces of humanity along lines that make for social welfare. Not least is the business enterpriser, whose function is to direct the economic forces for production. It is vain to assign a mean place to the organizing intelligence and its social work. Its importance grows apace with the growing magnitude and complexity of industry. Misjudgment now will destroy more wealth, and wise judgment can produce larger results, than ever before. The captain of industry also may work as an artist or as a gambler; he may, by the methods he pursues, uplift the moral plane of his society or he may help to corrupt and degrade it. No citizen is in control of more potent influence for good or ill than the successful business organizer. On the attitude of society toward him, and on the standards to which he is held, depend in large measure the use that will be made of his exceptional powers. CHAPTER 29 BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION § I. THE DIRECTION OF INDUSTRY [Sidenote: Judgment and self-direction as elements in personal skill] 1. _In the simplest kinds of individual production the value of the results depends largely on intelligent choice._ Even for the solitary worker the choice of the right time to do work is most important. The first thing Robinson Crusoe did was to turn to the ship to save as much as possible of the cargo before it was dashed in pieces by the waves. If he had begun first to till the soil to provide a future supply of food it would have shown one kind of foresight, but it would have shown very poor judgment. Every moment of delay in recovering the cargo of the wrecked vessel cost him many useful materials. The humblest farmer has a great range of choice and a need of good judgment in fixing the time to sow, to reap, to do each simple task. There is the same need to-day for the small shopkeepers, for the blacksmiths, for the small producers of all kinds to make wise choice of time in the use of their own labor. There is also a wide range of choice in the distributing and combining of labor, agents, and materials. A limited supply of agents can be used to secure a variety of goods, more or less desirable. There are many chances for mistake, but in the long run it is judgment, not chance, that determines the success of one man as compared with another. There is a choice in ways and methods by which a thing can be done. There are many wrong ways, there is but one best way, at any stage of industrial progress. While most work is done in customary ways and little independent judgment is required, yet in every business from time to time new problems arise and call for an exercise of choice as to methods. Moral qualities are continually called for, such as control of impulse, and the giving up of the comfort of the moment. The wisdom of our fathers is embodied in a multitude of proverbs that suggest the wise course. Men must "make hay while the sun shines," not lie in the shade. But virtue fails less often from lack of knowledge than from lack of will. As men differ in judgment, character, and will-power, their products differ, even in the simplest circumstances. The ability to choose and to do wisely is an element in personal skill. [Sidenote: Direction of a group of workers] 2. _When men work in an associated group, the direction of effort becomes relatively more important._ The first and simplest advantage of association is working in unison. Men unite their muscular efforts for a single task, and accomplish what is impossible to them working singly. But when many work in unison, the right selection of time and way is of greater importance; a mistake will waste more materials and agents. If association is to yield its advantages, there must be division of labor; hence harmony of effort, hence agreement or direction. While the gain of well-directed association is large, the waste of ill-directed effort is greater, when specialization has taken place, than with isolated workers. Most communal societies have failed because of the lack of a good head. The few exceptional successes have been due to the presence of a man of superior ability, such as George Rapp of the Harmonist Community, who, had he lived in this day, could have become easily the head of a great business corporation. [Sidenote: Direction of interrelated groups] 3. _Where various industrial groups are associated, direction becomes still more important._ In the single group it is an internal harmony alone that is needed. The work of a dozen men must be so arranged that each is in his fitting place. But as this group comes into contact with others, the relationship becomes two-fold, and there must be both internal and external harmony. The more complex the economic organization of society, the more the chance of mistake and the more injurious are the mistakes to a wide range of interests. Large amounts of capital and labor can be rapidly lost through lack of wise direction of associated groups. [Sidenote: Greatest need now of capable direction of industry] 4. _The increased efficiency of industry has been accompanied by the specialization of control._ The crude, early methods of enforcing harmony in industry were slavery and political subordination. Under division of labor, with free workmen, industry is ruled by impersonal economic forces that bring the less capable under the direction of the more capable. This work is rudely done, no doubt, but the penalties of bad direction of labor and capital are so great that blundering cannot be permitted. The man who shovels dirt must do it at the right time and place if, in this complex society, it counts for something and gives the effort value. If he cannot choose well for himself, he comes under direction. The average man cannot decide nearly as well here as he could on a desert island where and when to put in his spade. There it would be to raise food for the current year; here it may be to dig a canal or a tunnel whose uses will not become actual for many years. The more distant the end sought, the more difficult is the choice. To every worker, according to his personal skill, is left some degree of choice in the method of his work, but in a large part of industry the range of choice is very narrow. The man with the shovel and the man with the hoe come under direction. § II. QUALITIES OF A BUSINESS ORGANIZER [Sidenote: Technical knowledge and skill] 1. _The organizer and director of industry must first have technical knowledge of methods, processes, and materials._ The qualities required in the direction of industry are implied in the foregoing section, but they may be more specifically enumerated. Knowledge of technical processes is relatively more important in the direction of industry in the earlier stage. In the single independent producer it is the quality most desirable. He must know the quality of the materials with which he works and the best modes of combining them. But, as industrial organization becomes more complex, only a broad knowledge and ability to judge of the results of different processes and to compare plans are necessary in the organizer. He can hire the technical knowledge of details required in the larger management of business. Draftsmen, engineers, pattern-makers, men with far more education and capacity in certain lines than the business manager, work under his direction. [Sidenote: Judgment of men] 2. _The organizer requires ability to judge men and tact in relations with them._ In the small group, ability to get on well in personal contact with workmen is of great importance. Especially rare is the genial manner that wins the confidence and even the affection of the men. A sense of humor and the ability to turn a joke are said to have obviated many a strike and thus to have prevented losses both to the employer and to the men. In large affairs much of this managing tact can be hired in good foremen; but the organizer must still have a knowledge of men, ability to judge of human nature, to select his subordinates, and to animate them with his own purposes and plans. Mr. Carnegie has said that an appropriate epitaph for himself would be, "He was a man who knew how to surround himself with men abler than he was himself." That seems too modest; but in a sense it is not, because he claims for himself, and justly, the highest of all industrial qualities. A great administrator in political or industrial affairs can dispense with everything else rather than with this, the supreme quality of the great organizer. [Sidenote: Foresight in commercial affairs] 3. _The organizer must have unusual foresight and the ability to form a large commercial policy._ This proposition is to be interpreted relatively to the task before the organizer, and to the size of the business. Modern industry anticipates demand far more than did primitive industry. Large amounts of materials and energy are embarked in directions from which they cannot be recalled. With the progress of electrical engineering it soon may become possible to recall at any moment a cargo embarked for a distant port. But no wireless telegraphy is able to recall the great masses of capital that are embarked on distant and definite journeys in modern business. The organizer anticipates future demand, and prepares for it. The process has been figuratively expressed somewhat as follows: the enterpriser throws into the crucible great quantities of material; they melt, and an industrial result is secured, but whether the deposit is greater in value than the material is a question that cannot be answered for years. The need of anticipating demand is greater to-day than ever before, and this requires large investments months and even years in advance. The losses are proportionally large if there is miscalculation of demand. A large commercial policy is one that takes into account the more distant factors, and anticipates the new conditions. The rare ability to do this is rightly called statemanship in economic affairs. [Sidenote: Command of financial resources] 4. _The organizer need not himself have great wealth, but he must have ability to command financial resources._ Business to-day is done in many cases with borrowed capital. Even a subscription to stock is frequently as much in the nature of a loan, made in reliance on the reputation of the organizer, as an investment for profits. There are many temporary needs that require sudden loans. The confidence of investors, whether banks, trust companies, individual shareholders or investors in bonds, must be secured by the organizer. Good judgment of the money market often is as vital as judgment of the market for the particular product. In some of the largest corporate enterprises this quality becomes the most essential. [Sidenote: Scarcity of great organizing ability] [Sidenote: The industrial leaders] 5. _Organizing ability of the highest order is rarely found._ This is almost a superfluous statement after the foregoing. According to the theory of chances, such a combination and balancing of qualities is likely to occur in very few cases. Even where it exists, it may not be discovered or developed. The man may not find his opportunity, nor the task the man. There are many misfits in the world. On the occasion of the visit of Prince Henry of Prussia to America, in 1902, he was entertained at luncheon in New York with one hundred of the leaders in invention, finance, and industry, wherein have been the most characteristic achievements of America. In jocular reference to the French Academy, whose members are the forty most noted literary men of France, the newspapers called this the meeting of America's one hundred immortals. There were J. P. Morgan, the great financier; Vanderbilt, Hill, and Harriman, the railroad kings; Carnegie, the iron magnate; Irving Scott, "the man who built the Oregon"--nearly all the company deserving a place at the table mainly by reason of excellence as business organizers. Such a gathering has a dramatic interest as presenting the greatest leaders of industry, but about other tables might be gathered thousands of other less notable figures worthy to be accounted captains of industry in their several fields. One may well ask, How did they come into the important places they occupy? § III. THE SELECTION OF ABILITY [Sidenote: Various roads to industrial leadership] 1. _The men actually in control of industry have been selected in manifold ways._ Skill develops a small industry into a large one. A small factory owner gradually adds machine to machine, building to building, till he finds himself at the head of a great industry. Or an employee develops ability and becomes an employer. Who does not know of some one who, as a small boy, went into a store to do chores, worked up to a clerkship and, enlisting the confidence of men of wealth, was enabled to establish a business of his own and become an employer? Others have won promotion from the ranks to the head of a large industry in which they secured at last a controlling interest. Employees that have proved their ability may be selected by the directors of a stock company. Men that have worked their way up from the ranks may bequeath their business positions to their sons and grandsons, as in the case of the Vanderbilts and the Goulds. And finally, but rarely, there may be selection by fellow-workmen in the case of coöperative business. [Sidenote: Success as the evidence of ability] 2. _There is a constant selective process: dropping out the weak and advancing the efficient organizer._ There is, to be sure, an element of chance in this selection. The process in general is a rude one. Accidents and unforeseen changes, industrial crises, failure of health at a critical moment, fraud and crime, may defeat men of ability and they may never regain their foothold. Lack of experience may lead to disaster a naturally able but youthful heir, too suddenly burdened with the responsibilities of a fortune. On the other hand, men of limited ability may inherit fortunes and preserve them by caution, without enterprise. It is not always true, even in America, that "It is but three generations from shirt-sleeves to shirt-sleeves," although many fortunes slip away from the sons of rich fathers. In general, success in retaining the control of a business is an evidence of considerable ability. By loss of fortune unwisely risked, through unforeseen changes in methods, and after manifold blunders, the less capable drop out. Thus, by the ceaseless working of competition, the higher places are taken by those most capable of filling them, and the efficiency both of the employers and of the workmen is increased. [Sidenote: Various modes of business organization] 3. _In the various kinds of business organization the merits of men and of methods are tested._ The independent producer working entirely alone, directing his own industry, is analogous to the animal organism of a single cell. More complex is the family partnership found often in early stages of industry but more rarely now, where the father directs the work of his children and all share in common. The simplest form of the wage system is the single employer with a few assistants. When the employer is in danger of losing valuable assistants, he sometimes gives them a share in the business. In the ordinary partnership, two or more men divide the ownership and duties, agreeing as to the division of control. Coöperation among workmen, though rare, gives an unusual opportunity for the discovery of special talent. The dominant form of organization to-day is that of the stock company, or corporation, the ownership of which is divided among the holders of shares of stock, or of certificates of membership. [Sidenote: Many chances to try ability] This variety of organization affords opportunity for a two-fold test: that of the ability of men and of the merits, in varying circumstances, of the different forms of organization. Methods of organization are constantly tested by their results. Men having money to invest are asking whether they would be better off to go into business by themselves, or to join with a partner, or to buy stock in some large corporation. Each of these forms of organization has its peculiar advantages. A stock company can better enlist large amounts of capital, while the individual employer is generally more free from dictation and can adapt his business more quickly to changing conditions. At the same time this variety of organization offers better opportunities for managing ability to show its metal. On the watch towers of industry are many observers sweeping the horizon for the appearance of men of business talent. Some characters develop better under direction; others prove that nowhere does native ability count for more, and mere book-schooling for less, than in business administration. There is some ground for the belief that a college education does not increase executive capacity in business. Such ability often seems to be a freak of nature and a product of practical experience, rather than the result of college training. CHAPTER 30 COST OF PRODUCTION § 1. COST OF PRODUCTION FROM THE ENTERPRISER'S POINT OF VIEW [Sidenote: The enterpriser's cost] 1. _The task of the enterpriser is to get together the essential factors to secure valuable products._ The enterpriser must first decide what product he will endeavor to secure, and the kind, the place, the time, the quantity, and the quality. He must then select in the right proportion the materials, labor, plant, and machinery necessary for that product. He must purchase these factors in the market at the lowest price he can, unite them and sell the product to recover the expenses in the selling price. A thousand items enter into the cost and perhaps a single product emerges. What the business man thus pays out, expressed in money form, are the costs that are here to be considered. [Sidenote: Several meanings of cost] 2. _The term cost of production is used in several senses, the chief of which are money cost, psychic cost, and alternative cost._ The ambiguity of this term is a source of much confusion. _Psychic cost_ is the pain, fatigue, irksomeness of labor. This is not definitely measured except at rare points. When the pain of work more than offsets the value of the product, the worker who is free to determine the length of his own working-day, stops. At that point the psychic cost and the utility of the marginal unit are almost equal in intensity--the one as a positive, the other as a negative quantity. But the value of the product as a whole cannot be related to the psychic cost or sacrifice, and therefore it cannot serve as a measure of cost in every-day business. _Alternative cost_ is any good or gratification that must be given up when any other good is chosen. One may stay at home and read a book or go on a picnic; the pleasure of reading the book will cost the pleasure of the picnic. A good dress may cost a happy vacation that must be given up for it. In this sense, each thing is a cost of every other thing that might be chosen in the place of it. Alternative cost is therefore manifold and indefinite. The thought is significant at the moment of a choice, but it is not constantly measurable for practical purposes. The _money cost_ is the practical cost generally implied in the term cost of production. It expresses not the pain of the laborer in doing the work, not the sacrifice of the owner of the capital in saving the money, but merely the sum of money paid out by the producer. There is frequent confusion of these ideas in economic discussion, few even of the leading economists of the nineteenth century having quite escaped it. [Sidenote: The cost of the factors is their market price] 3. _The enterpriser, looking upon the cost of most of the factors as fixed, seeks to combine them as economically as possible._ Whether the enterpriser is running a factory or a farm, is engaged in a retail or a wholesale store, is conducting a school, or a railroad, he has to solve much the same problem. By close attention, good judgment, skilful bargaining, he may be able to buy slightly cheaper than his competitors, and thus have an advantage over them at the outset. When he does this, it is usually by searching out a better market in which to buy, buying at a better time, and judging better than his competitors the quality of goods. If, in a given market at a given time, goods are sold to one more cheaply than to others, it is an act of generosity. Even the best buyers pay nearly the prevailing market price for agents. The most successful enterprisers are not found to be those paying lower wages or lower ground-rent than their competitors. It must not be forgotten that the main forces fixing the prices of agents are impersonal, and can be only slightly modified in most cases by a particular buyer. He looks therefore upon the cost of the elements as an ultimate fact which he can change little, if at all, and he shows his judgment chiefly in the selection of quality. Cost determines and limits the extent of his business and determines the price at which he sells. [Sidenote: The right proportioning of the factors] 4. _The right proportioning and skilful substitution of the factors is a delicate technical task for the enterpriser._ Good buying and good selling must precede and follow the central part of the enterpriser's task, that is, the combining of the various factors. Each factor is applied, subject to diminishing returns, up to a point where its addition will not secure the value attributed to it in its cost. The enterpriser is constantly studying the question whether the application of another unit of any one factor at the price will add to the value of the product as much or more than the cost. This calculation is made for every one of the minor factors entering into the business, and for the business as a whole. The proper proportion varies at different prices, or costs. If wages rise, "it pays" to get machinery; if wages fall, it pays to let the machinery deteriorate and to do more by hand-labor. Likewise there is constant substitution of the various materials. The right proportions change constantly with inventions. A model factory is so proportioned that the buildings hold the right number of machines, with the right amount of space for the workmen, and the right amount of power. If there is more of a single factor than the ideal proportion, it is an unnecessary cost. Even the model factory begins to be out of date almost as soon as the walls are dry, and the latest method is to build as nearly as possible on the unit system, so that new parts may be added without the loss of harmony and proportion. [Sidenote: Pressure of price toward cost at certain points] [Sidenote: The enterpriser in contact with costs] 5. _The enterpriser's costs determine the lowest price at which he can continue to sell, but if successful he may have a wide margin of profits._ New factories are constantly arising with new and better adjustments. In industries of competing products, also, the processes are changing. Hence there is always a pressure of competition on some enterprisers who constantly complain that they must sell below the cost of production. The organizers of a trust always declare, some no doubt truly, that they have been selling below the cost of production. Business men say that competition is destructive, and it certainly does destroy the less favorably situated enterprises. Each enterpriser's price is the highest he can get in the market for his product; it may far exceed his costs; it may even fall below them, but only temporarily, for if sales continue to encroach on capital, the sheriff soon closes the doors. Successful competitors are constantly pressing upon the marginal enterpriser, fixing a price that leaves themselves a profit, but is below his cost. Even the most successful enterpriser comes into contact with cost, and seems to be compelled by it. He reaches out for trade, and sells some (not all) goods at a price which leaves him no profit. He enlarges his factory and ships goods farther, paying the freight, which means a lower price at the factory. The expanding business, therefore, comes at length to the point where it cannot go farther at the prevailing prices. Hence the business man's view of the costs is that they determine value. It is true in the sense that the supply of a particular product in any market is at last limited by cost of marginal producers or of marginal portions of supply. But it is not true of all the units of product that costs determine, or equal, market price. There is a margin above costs to the successful enterpriser on a large portion of his output. The margin may be narrow or wide, according to the business. The margin is "profit," or the gain of the enterpriser. § II. COST OF PRODUCTION FROM THE ECONOMIST'S STANDPOINT [Sidenote: Money cost not the ultimate explanation of value] 1. _The economist should view money cost as an intermediate and not as an ultimate explanation of value._ The value of all things must be traced back to gratification, to the relation of goods with psychic income. This being true, the value of the factors which the enterpriser uses must be derived from the value of the products, and not the reverse. This does not mean that the business man is deceived into the belief that he has in cost of production a final explanation of value. He simply is not interested in that question. He knows that there are many influences determining the cost of the factors he buys, but they are distant; he cannot influence them, and in the single stage of his production they seem to fix the price. In some purchases, and on the stock exchange, a marvelous recognition and analysis of the most distant influences is necessary; but in general a superficial view of value is taken in business; it does not pay to do other. The logical treatment, however, must go deeper into the question and trace the cost of agents back to the ultimate cause of value, that is, to want-gratifying power. To say that the price of a product is determined by the money cost, or price, of the factors is simply to postpone the answer to the question of value; one has still to ask, What determines the money cost, or price, of those factors themselves? [Sidenote: The cost of agents is fixed by their marginal utility in alternative uses] 2. _The demand for any factor entering into products is reflected, in an increased price, to its cost in all competing products._ Figuratively speaking, products compete with each other for the factors that enter into them. According to location, quality of the soil, and improvements, a certain area of land has various rival uses. These uses bid for the land, or put in an economic claim for it. Products of a higher value outbid and exclude those of a lower. If fine wine can be raised on a piece of land, potatoes ordinarily will not be planted in it. But if there is such a supply of that quality of land that it continues to be used side by side for both products, it will have the same value and yield the same rental in both uses. The least utility yielded by any portion of the supply fixes the value of all the units. Machines are usually made for some product determined in advance, but often they are only partially specialized and within limits they can be adapted. Sewing-machine factories were readily turned to the making of bicycles at the time of greatest demand, and bicycle factories later were used for the making of automobiles. Thus, in general, machinery is used for the product to which it contributes the most value. Any enterpriser seeking it for any other use finds its "cost" affected by its various alternative uses. The same is true of all the materials and of all the grades of labor entering into products. The enterpriser's _cost_ is therefore the reflection of the want-gratifying power of the productive agent in all its other uses as well as in the particular product he desires. To the enterpriser, cost seems the cause of the value of a product. To the economist it should be clear that the utility found in the various products is the basis of value in the factors, _i. e._, of the costs. [Sidenote: A single source of a single product] 3. _The genealogy of value may thus be traced through the various intermediate products to consumption goods._ A single product having a single source of supply shows most clearly the reflection of value directly from the product. The discovery of a mineral spring or of a good quality of building-stone on worthless land, will cause a value to attach at once to the source of supply. When a great singer like Adelina Patti commands several thousand dollars for each appearance in concert, the source is the magical throat of the singer, and the salary reflects the utility of the music in the minds of delighted hearers. [Sidenote: One source of several products] When the one source of supply yields several different kinds of products there is just one new condition which confuses the thought and suggests the error that value begins in the source (with costs therefore) and not in the product. Looking at the products severally, no one of them explains the value of the source, and, on the contrary, each one is seen to have a value independent of the particular use to which it is put. To make the illustration most simple: a savage finds in a wreck on the coast a number of bars of iron. His fellows wish them for various purposes: to make arrow heads, spears, knives, hatchets, hoes, ornaments, nails, needles, etc. Value is in this case derived in part, through the source, from the alternate uses. Taken jointly and considered as one sum, the value of the various products accounts as completely and exclusively for the value of the source as if they were merged into one product. The source (_S_) is distributed to each of the products in accordance with their marginal utility, and therefore the value of the various products from any source of supply constantly tends to equality. Any unit of product sought for any purpose must be paid for according to a marginal utility determined in all the applications. The genesis of the value is in the utility of the product; the value of the source is derived. [Illustration: _1. A single Product_ _2. Several Products from one Source_] [Sidenote: Complex conditions with intermediate products] In actual life the problem is far more complex, and yet, through its settlement runs just the same principle. There is constant bidding for materials, and through their price the claims of rival products are adjusted. A point is reached where it does not pay to use any more of an agent in a certain industry; the production of another unit results in a loss. There is a most complex relation among many different industries using the same factors, the value of a unit of product (at _a_) being reflected up to the source, and through successive links to the most distant product (_z_). The effect of this is to reduce the sale (of _z_) and correspondingly the use made of the agent in question. A higher price of leather, due to the increased use of shoes, raises the value of hides and cattle (this increasing the extent of cattle raising) and raises thus the cost of carriage-trimmings, pocket-books, foot-balls, leather belts, and every other leather product. As the price rises, substitutes for leather, and imitations of it, are used for such of the products as cannot bear the increased cost of leather. [Illustration: _3. Complex Relations Through Intermediate Products_] [Sidenote: The enterpriser the medium of price movements] [Sidenote: Costs are an expression of consumers' estimates] 4. _The enterpriser does not fix the value of products or of agents, but is the medium through which consumers express their estimates._ The enterpriser who anticipates aright and satisfies the public taste is the good medium. He readily transmits and accurately focuses the rays of public judgment. One that misjudges is a poor medium. The enterpriser is himself the servant of costs. Laborers sometimes assume that the employer can dictate wages, prices, and markets, can rule things with a lordly hand. With rare exceptions the ultimate control in these matters by business men is very slight. In the main the enterpriser masters the situation only by bowing to it, just as the scientist and the engineer gain mastery over nature because they know when to bend and how to obey. The consumer, by deciding to buy this or that product, sets in motion waves of value. The consumers of products are the true purchasers of labor, materials, and uses of agents. The enterpriser must conform closely to cost, to the price prevailing for the moment, or his competitors in this day of narrow margins will seize the opportunity. The enterpriser is merely the distributor or equalizer of cost among all the different products for which different agents can be used. If he acts efficiently, profits arise. CHAPTER 31 THE LAW OF PROFITS § I. MEANING OF TERMS [Sidenote: Broadest use of the term profit] 1. _The term profit is popularly used as any gain or advantage secured by any means in business._ The terms used in economics, being taken from popular language, vary in meaning according to the context. It is necessary to clear thinking to reject some words entirely and when using others to define them more strictly. The broad usage of the term profits just noted includes every kind of return to industry: such as interest on capital, and wages or services of the man owning the industry. Precise thinking requires its use in a much narrower sense. [Sidenote: Used of gross gains on sales] 2. _A common meaning of profits in retail business is the gross gain on a given sale._ Buying an article for one dollar and selling it for two dollars, is said by the merchant to be selling at one hundred per cent. profit, jocularly called, "The Dutchman's one per cent." The cost price is considered to be that paid to the manufacturer or wholesaler. In different lines of goods there is added regularly to this cost twenty, thirty, or fifty per cent., as the case may be, as the merchant's profit on the sale. This is of course a gross profit, and not net, or true profit. It leaves out of account rent, interest on capital, clerk hire, freight, and many other minor items that enter into the cost of running a store. It often happens that the Dutchman's way of reckoning is nearer the truth, and that the gross profit of one hundred per cent. proves at the end of the year to be only a net profit of one per cent. This evidently is a loose meaning, impossible in the discussion of theoretical questions. This meaning is sometimes developed, making profits the sum of all the gross profits on separate sales within a year, or the difference between the wholesale and retail prices of goods sold within the year. Another meaning given to the term is gross profit (as above) compared with the capital invested. The "profit" in this case varies partly with the rate of the turnover. To illustrate: if the amount invested in a printing-office is $100,000, and the annual business done is $300,000, the capital is said to be turned over three times; if the gross profits on sales averaged twenty per cent., they would be sixty per cent. on the investment; but, if the capital had been turned over four times, the gross profit would have been eighty per cent. on the investment. [Sidenote: Of net gains as a percentage of invested capital] 3. _Another meaning of profits is the annual net gain of the business, as compared with the average investment of capital._ This is a long step toward greater definiteness. If at the end of a year it were found that after paying all outside expenses there were $10,000 to set aside, this would be accounted a profit of ten per cent. on $100,000 invested. But confusion still reigns because of wide variation in the methods of estimating costs before fixing net profits. In one case the enterpriser rents lands and buildings, in another he owns them; in one case he has borrowed money and counts interest as a cost, in another he is free from debt; in one case he counts as a part of cost an estimated fair salary for himself and his partners, in another (usually in a small business) no such allowance is made Such a variation in business usage is most perplexing. In all these cases one must have the exact conditions in mind before it is possible to make any comparisons and draw any conclusions as to the relative profits of different industries. [Sidenote: Profits in economic theory] 4. _In the narrower and exacter sense profits are the net gain of the enterpriser after counting the rent of material agents and contract wages of employees at the prevailing rates._ Into the practical problem of cost and profit many factors enter, and the theoretical problem is to determine just how much ought to be attributed to each. In a large business usually the practical bookkeeping problem is not unlike that of economic analysis. A stock company counts as cost, as a part of fixed charges, interest on capital borrowed either from banks or bondholders. Its managers are paid salaries, counted as a part of cost. The net balance, after deducting these and all other expenses, is counted profits and paid in dividends to stockholders. The economic student is not attempting to get a theory of profits that is in contrast with practice. Rather, he is trying to analyze profits generally, just as they are analyzed in the few cases where the books are properly kept. In economic theory, therefore, profits are the part of the gain of any business that is logically attributable to fortunate investment and good management; profits are the income attributable to the enterpriser's services. [Sidenote: Profits a species of wages] 5. _Typical economic profits are thus a species of wages but are marked by peculiar features._ In some of the older treatises on political economy, profits are treated merely as a combination of "wages of management," and of interest on capital invested. A man hired at a fixed sum to manage a business is receiving simply contract wages. Economic profits are not _contract_ wages, not being paid by agreement, but being yielded impersonally by the industry. Profits are, however, _economic_ wages or the earnings of services. As business has developed, it has been seen that the enterpriser's work has its peculiar character and deserves special attention. The old English word "enterpriser," used of the "adventurer" who embarked in foreign trade, may fittingly apply to the organizer and director of business to-day. Foreign trade then, more often than now, was most uncertain, and there were many chances that the ship would be lost, or the venture prove a losing one. In the simplest business to-day there is this element of enterprise, or undertaking, combined with ordinary capital and labor. As industry develops, this special service stands out more clearly. In the corner-grocer and in the manager of the little news-stand, the elements of enterprise and labor are not apart. In the large wholesale house, the enterpriser is seen to be not merely an abstractly thinkable function, but a separate and concrete person. The typical enterpriser is the man who gives his time and energies to the launching and guiding of business. § II. THE TYPICAL ENTERPRISER'S SERVICES REVIEWED [Sidenote: The enterpriser's skilful use of capital] 1. _The enterpriser guarantees to the capitalist-lender a fixed return._ Agents will yield the highest economic rent of which they are capable only in the hands of those who can use them with exceptional skill. Owners of capital who for any reason, such as youth, inexperience, ill health, incapacity, or conflicting duties, are not able to make agents yield the average rent, seek out, or are sought out by, those who in general can make the agents yield more than the average. The interest contract between them is one of mutual advantage, in that the enterpriser pays a definite sum to the investor unable himself to apply his productive agents. Immense sums of capital are now put into the hands of small enterprisers, such as Western farmers improving their lands, builders of city homes and business blocks, and small manufacturers. But stocks and bonds of corporations give a wide variety of investments which shade off from the safer or capitalistic type, to the more uncertain, or enterpriser's type. First-mortgage bonds, being a first claim on the income and property, have the highest security and yield generally the lowest interest. Even national bonds are not absolutely safe, and for that reason as well as because of their fluctuation in price, even their purchase has something of the nature of an enterprise. Stocks are the enterpriser's type of investment, the dividends being more uncertain, but giving the chance of a higher return than the average. It is because some stand ready to assume the risk of making goods yield average returns or more, that others can sit and enjoy a fixed income with little effort and in comparative security. [Sidenote: The enterpriser's insurance of the lender's capital] 2. _The enterpriser gives up the certain income to be got by lending his own capital, and, becoming a borrower, offers his capital as insurance to the lender._ Every business has an element of uncertainty in it, and some one must meet the risk. A man with marked ability as an organizer of industry is rarely found long without capital of his own. But even a penniless man who can gain the confidence of investors is able to get backing and to secure the necessary funds to engage in business. The lenders in such a case, however, run a greater risk than when the enterpriser is a man of some means, and they therefore ask a higher rate of interest than if they were loaning to a wealthy man or to a wealthy company. They are in part the enterprisers. When, as usually, the enterpriser invests some of his own capital, it is a guarantee of his good faith, a sort of insurance reserve to protect the lender from loss. The first loss falls on the enterpriser, and the chance of loss to the lender is in large part, though not entirely, eliminated. It is characteristic of modern loans that the borrower may be rich, not poor,--often richer than the lender. The mortgage on real estate and the creditor's claim on a merchant's property usually give security of far greater value than the loan. [Sidenote: The enterpriser's insurance of the laborer's production] 3. _The enterpriser gives to other workers a definite amount for services applied to distant ends._ In discussing the wage system it was pointed out that most labor at the present time is put upon future goods. It is not known what they will be worth a month or a year later when they mature as consumption goods; their present worth can merely be estimated. If they prove to be worth little, the profits may be nothing or less than nothing. The enterpriser, however, buys the services for ready money, embodies them in goods, and assumes the risk; the goods may sell for more or less than the wages. It is sometimes said with a certain irony that if the enterpriser assumes the risk he is very careful to pay so little for labor that he does not lose. In this naive view the enterpriser is so independent of the market that he can pay much or little as he pleases. In fact in many cases he gains little, and in many he loses and loses largely. [Sidenote: The risk of the enterpriser's services] 4. _The enterpriser risks his own services and accepts an indefinite chance instead of a definite amount for them._ Assuming the risk for the right conduct of industry, he backs himself, expresses his faith in himself as a manager who can make labor earn more than the prevailing wages and make capital yield more than the prevailing rate of interest. If it were otherwise, he would loan what capital he has instead of borrowing more; instead of employing others, he would himself seek employment in some other industry. Men are constantly shifting from the class of hired workers to that of enterprisers. It is a rude and often tragic process of adjustment and selection that enables men having ability as enterprisers to continue in that work, and forces others into the class of employees. [Sidenote: The enterpriser the intermediary in industry] 5. _The enterpriser is the economic buffer; economic forces are transmitted through him._ In a more primitive industry each man is wage-earner, capitalist, and enterpriser combined in one. As industry develops, some of the factors of cost become distinguishable, and relatively stable and calculable. A low rate of interest, ranging from three to four per cent., can be secured with practical certainty by putting one's money into good corporation securities, into the savings-bank, or into national bonds. Contract wages in each class of labor also are fixed by competition at a point where they are a medium or average of gains and losses. The enterpriser is the most movable element. As the specialized risk-taker, he is the spring or buffer, which takes up and distributes the strain of industry. He feels first the influence of changing conditions. If the prices of his products fall, the first loss comes upon him, and he avoids further loss as best he can by paying less for materials and labor. At such times the wage-earners look upon him as their evil genius, and usually blame him for lowering their wages, not the public for refusing to buy the product at the former high prices. Again, if prices rise, he gains from the increased value of the stock in his hand that has been produced at low cost. If the employer often appears to be a hard man, his disposition is the result of "natural selection." He is placed between the powerful, selfish forces of competition, and his economic survival is conditioned on vigilance, strength, and self-assertion. Weak generosity cannot endure. [Sidenote: Fluctuation of profits] 6. _Profits therefore fluctuate more from industry to industry and from man to man than do other incomes._ As a somewhat exceptional case, small employers in industries such as baking and tailoring, may for long periods get less for their work than their employees get in wages. The pride in being an employer and occasional chances of greater gains perhaps explain the fact. The fluctuations of the market may sweep away from the enterpriser not only all his "profits," but all his accumulated wealth. As a consequence, profits may be at other times very high, for men will not take the risk of great losses unless there is a chance of large gains. While the income of the salaried man is occasionally advanced, and then for long periods remains unchanged, the profits of enterprise come in waves. In seasons of prosperity the income of the employer swells with a dramatic swiftness while rents and wages move tardily upward. But for years again the employer earns a return hardly exceeding a low interest on the capital invested in the enterprise, or runs the business for a time at a loss. Profits of this kind should not be spoken of as a percentage. Greater or less, they are the net result attributable to the enterpriser's skill, and bear no fixed or calculable relation to any capital investment. § III. STATEMENT OF THE LAW OF PROFITS [Sidenote: Antisocial or pseudo-profits] 1. _Some apparent profits are due to antisocial or criminal acts._ Cheating, lying, breaking of contracts, bribery of public officials, and many similar acts may greatly increase individual incomes. These are not profits, as the term is here understood, but they are hard to distinguish from profits in practical life. One man gains a temporary success by acts that are later punished as crimes; another, guilty of like deeds, escapes conviction for lack of evidence or on technicalities, and enjoys ill-gotten wealth. More fortunes, however, are due to actions on the border-line of ethics, which society is not yet honest enough to condemn or wise enough to prevent. No code of laws can be framed that will make possible the punishment of all antisocial acts. Any law that would catch all the guilty would injure many of the innocent. Economic analysis may exclude from the concept of profits the gains made by such means, but only omniscience could distinguish them in every actual case from "swag and boodle." [Sidenote: Chance profits] 2. _Some profits are the result of pure chance or luck._ What is luck? A result that is not calculable, coming to pass in conditions where a rational choice is not possible, is called luck, for lack of another name. Now pure luck often brings temporary profit to the individual, but chance does not in the least account for the average and abiding profits. There is bad luck as well as good luck. According to the law of chance, in the tossing of a coin for "heads and tails," one side is as likely to come up as the other, and in the long run the number of heads and tails will be equal. Where cases are numerous, losses and gains distribute themselves about a general average, and may be eliminated by insurance, as that against fire, flood, lightning, against sickness of the employer, which would cripple the business, or against his death, which would check it. But many factors evade all attempts to reduce them to rule, and chance remains a considerable factor in the success of many individuals. It still sometimes appears better to be born lucky than rich. [Sidenote: Profits due to a union of chance and choice] 3. _Some profits are temporary gains from happy but not entirely accidental choice of the best course._ Many cases of profit said to be due to chance are found on closer knowledge to be due to superior judgment. A slight advantage in choice will give now and then apparently chance gains. The adventurer who, on the discovery of gold, goes at once to California or to Alaska, may stumble upon a gold-mine. It is luck; but if he stays at home it is more likely, according to the theory of chances, that he will stumble over an ash-heap. In places where gold-mines are comparatively plentiful, one takes chances between a load of lead and a bag of money. Throughout life there is constant opportunity, but it must be sought. One who has the good judgment to be ever at the right time at the place where he has the best chance of stumbling upon a good thing, usually gets the advantage, and men call it luck. The more the causes of success in general are studied, the larger is found the element of choice, the smaller that of luck. Some writers make these temporary gains the essence of profits. Considering that profits are always due to the introduction of new and better methods, and not to the continued use of better ones, they argue that as the knowledge of these becomes common property profits will disappear. But this in our view is a partial truth. [Sidenote: Skill the essential condition of continuing profits] 4. _Continuing profits arise from the continued exercise of superior judgment._ After all the chance elements are taken into account, there remain differences in the abilities of men, and a continued and ever-renewed need of organizing power. Profits, being recognized as due to these differences in the abilities just as rent is due to differences in the fertility and efficiency of goods, have therefore been called differential gains. There would be no objection to the term were it not intended to emphasize a supposed difference between profits and rents on the one hand and interest wages on the other. [Sidenote: Risk of loss reduced by skill] Some writers have so magnified the thought that the enterpriser's function is to assume risk, as to make it a denial of the view that profits are the earnings of ability. The risks of business are not those of the throwing of dice in which (if it is fair) skill plays no part, and gains in the long run offset losses. Business risks are rather those of the rope-walker in crossing Niagara; the task is easily undertaken by the skilful Blondin, it is fatally dangerous to the man of unsteady nerve and limb. Profits are due not to risks, but to superior skill in taking risks. They are not subtracted from the gains of labor but are earned, in the same sense in which the wages of skilled labor are earned. So long as some men have better organizing ability than others, have better judgment, are better able to take the risks, there is reason to believe that profits will continue. Profits are the share, or income, of the enterpriser for his skill in directing industry and in assuming the risks. Despite the complex influences, they are determined by his contribution to industry essentially as is the value of any skilled service. CHAPTER 32 PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION § I. PROFIT-SHARING [Sidenote: Nature and definition of profit-sharing] 1. _Profit-sharing is rewarding labor with a share of the profits in addition to contract wages._ The essential mark of profit-sharing is that the additional payment depends on the net profits of the whole business at the end of the year. It is not to be confused with a free gift, or with special privileges granted by the employer, such as lunch-rooms, bathrooms or houses at a low rent. Profit-sharing is a contract made in advance, not a free gift. Nor is it the same as a bonus or premium for a larger output, made contingent on the physical product, on the increased number of pieces turned out by the workmen, individually or in groups. Premium for output is given for something directly under the influence of the worker. The amount of profits is affected by the amount of output, but also by a number of other things that are quite outside the control of the workmen. [Sidenote: The possibilities of profit-sharing] 2. _The purpose of the employer in adopting profit-sharing is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision._ The employer adopting the plan does not intend to lose by it; he believes that if he can get his workmen to take an interest in the business his costs will be reduced. He offers to divide with them the resulting savings. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workmen's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of personal interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes are averted, good feeling is promoted, and contentment is furthered if the interest of the worker can be made to approach, and actually to be in harmony with, that of the employer. The economic result of the plan, if it can be made to work, must be to reduce the costs of these establishments below what they are. The crucial question is whether this alone insures that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. This additional wage is made conditional on the employer's success in gaining a net profit on the year's business. [Sidenote: Its successes and failures] 3. _The profit-sharing plan is now successfully working in over one hundred firms in America and Europe._ The plan was first tried in Paris by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. The most important examples of profit-sharing in the United States are the Pillsbury Mills in Minneapolis, Procter and Gamble's soap-factories at Ivorydale, O., and the Nelson Mfg. Co. at Leclaire, Ill. In some cases both manufacturer and workman value the system highly. N. P. Gilman, the author of "Profit Sharing," puts the ratio of successes very high. Others declare that the failures are mostly lost sight of and are very many. The proportion of business done in this way is not large. One hundred firms is a very small fraction of one per cent. of the total number of firms in Germany, France, England, and America. A still more important fact is that this method of remuneration did not spread in the ten years preceding 1900. [Sidenote: Objections to and difficulties in profit-sharing in practice] 4. _The failure of profit-sharing to grow is due to objections on the side both of the employer and of the workman._ On the side of the workman there is the bookkeeping difficulty. He is suspicious, and he lacks knowledge of the business. If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it. Moreover, the plan puts a limitation upon the workman's freedom to compete for better wages by changing his place of work. It is almost indispensable to make length of service a condition to the sharing of profits. Workmen coming and going, working only a few months, cannot be allowed to share; the percentage given to the others increases with length of employment. Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages. The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the reason that organized labor opposes it. The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant grumbling and complaint of the workmen. It makes known the amount of his profits; if they are large, the advertising of his success invites competition; if they are small, publicity injures his credit and depresses the value of his property. In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually loses its efficiency after a short trial. Business methods are severely subject to the principle of the survival of the fittest. Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones. If a method fails to spread when it has been tried for fifty years and all are free to adopt it, there must be some defects inherent in it. That must be our conclusion as to profit-sharing. [Sidenote: Defective character of profit-sharing] 5. _It is usually better to make wages depend on the worker's efficiency rather than on the profits of the whole business._ The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker's control. In profit-sharing the added share is only partially due to increased effort of the worker. Labor is but one of the groups of costs. Profits are the net result of many influences. Chief among these is the wisdom of the enterpriser in planning and conducting the business. The "profits" may be nothing, though the worker may be exerting himself to the utmost. The plan is, therefore, reactionary, not in accord with the general progress of the wage system, which is tending constantly to centralize responsibility, to put the risk into the hands of competent managers, and to secure to the worker a definite amount in advance, as high as conditions make possible. The system of premiums, or bonus payments, for output, gives in most cases better results and is rapidly spreading. It is sounder in conception and works better in practice. This premium depends on the increase by the laborer of the output of his particular machine or process as compared with a standard based on the experience of some definite period. § II. PRODUCERS' COÖPERATION [Sidenote: Purpose of producers' coöperation] 1. _Producers' coöperation is the union of workers in a self-employing group to do away with any other enterpriser than themselves, and to secure for themselves the profits._ Its object is not to do away with any return on the capital investment. Capital may be borrowed either from outsiders or from the individual coöperators, and is paid a stipulated interest apart from the profits. The source of the gain is to be found in the saving of what the worker looks upon as the needless drain of profits into the pockets of the employer. The hope is that the enterpriser's function (if it is admitted that he has any useful function) will be performed by the workers collectively or through their representatives. They undertake to furnish brain as well as muscle, management as well as hand-work. The hope is even to increase the profits through increasing the stimulus to the workers and by saving in friction, disputes, and strikes. [Sidenote: Its limited success] 2. _Practically the plan has been made to work in a comparatively few simple industries._ The most notable examples of successful coöperation in America have been the cooper-shops in Minneapolis. There were a simple problem of costs, few and uniform materials, patterns, and qualities of product, few machines and much hand-labor, simple well-known processes, a sure local market. Mr. Lloyd, in a recent book, describes many successful societies in England, but they are all of a simple sort of industry, as agriculture and dairy-farming. Within the whole field of industry, this method of organization makes little if any progress. Most experiments have failed and the successful ones often become ordinary stock companies with the most able men in control. Therefore, whether losing or making money, they nearly all cease to exist as coöperative enterprises. This result has disappointed the prophecies of many wise men of seventy-five years ago. In the time of John Stuart Mill, great expectations were entertained of the future of productive coöperation, which was thought to be a solution of the whole social problem. [Sidenote: Its main difficulty] 3. _The main difficulty in productive coöperation is to secure managing ability of a high order._ There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in coöperative shops by the jealousies and rivalries, and by the politics among the workmen. A man thus selected by his fellows finds it almost impossible to enforce discipline. In coöperation there is occasionally developed good business ability that might have remained dormant under the wage system; some workmen showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing industries where their function is not in such bad repute, and where higher salaries can be earned; or they go into business independently, being able easily to get control of the necessary capital. [Sidenote: Coöperators under-value the enterpriser's function] 4. _Most coöperative schemes have suffered from a lack of good theory, an inability of the workers to see the importance of the enterpriser's service._ Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. They ignore further that the enterpriser's function is a productive and essential one. The theory of exploitation, or robbery, as explaining the employer's profits, is very commonly held in a more or less vague way by workmen. With a body of intelligent and thoroughly honest workmen, keenly alive to the truth, the dangers, and the risks of the enterprise, coöperation would be possible in many industries where now it is not. The producers' coöperative schemes usually stumble into an unsuspected pitfall. When a heedless and over-confident army ventures into an enemy's country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen. § III. CONSUMERS' COÖPERATION [Sidenote: Nature and kinds of consumers' coöperation] 1. _Consumers' coöperation is the union of a number of buyers to save for themselves the profits of the merchants or agents._ There are many classes of consumers' coöperation, but the chief ones are: (1) to sell goods (retail stores); (2) to provide insurance (coöperative insurance companies); (3) to provide credit or capital (coöperative banks). These are also productive enterprises, for the merchant's work adds value to the goods, the insurance company and its agent do a real service, the profits of the small bank are, ordinarily, earned fairly under existing conditions. The terms producers' and consumers' coöperation merely set in contrast the part of the productive process that is undertaken. Producers' coöperation is concerned with the earlier steps, usually stopping when the product is disposed of to wholesale or retail merchants. Consumers' coöperation (often called distributive coöperation) is concerned with the later steps, the placing of a consumption good (rarely also productive agents) into the hands of the final user. It imparts the same value to goods that the retail merchant does. The one thing this class of coöperators is sure of when they begin is a number of consumers to make use of the service or products they purpose to supply; hence the name. [Sidenote: Costliness of competitive mercantile business] 2. _The waste of competitive mercantile business is the source from which it is expected that the savings of the coöperative enterprise will come._ It is a great expense to the retail dealer to secure a body of customers. Rent of store-room, clerk hire, interest on invested capital are fixed charges, which can be met only on condition of a regular and frequent turnover of the stock. To attract customers the dealer must have a well-located store, must advertise, keep open long hours, and pay idle clerks. Frequently he must give credit, raising the price enough to cover the expense of bookkeeping, collection, bad accounts, and loss of interest. The public's likings, whims, lack of judgment, and lack of business analysis make these charges necessary. There are many communities where it would be impossible to carry on a cash business even at considerably lower prices. Customers are exacting and require the costly delivery of small packages; two horses and a driver must travel two miles to deliver a spool of thread or a half-dozen oranges. Frequent changes of fashion and the shifting of customers from one store to another keep the merchant always insecure in his trade. A number of buyers mutually agreeing to pay cash, to buy at certain times, to place all their orders with one store, to go to a cheaper location, down an alley or into a basement, can save much of this cost on one condition: that the management approaches in its efficiency that of ordinary competitive business. In spite of all these advantages, if there is inefficient management the final cost will be no less than that of ordinary business. [Sidenote: The more successful coöperative stores] 3. _Despite the possibilities of saving, most coöperative stores fail through a lack of good management._ Note first the greater successes. Since 1842, from which time it dates, the coöperative-store movement has progressed steadily in England, where the scores of retail societies are federated and own large wholesale stores. The long experience has developed good methods and a conservatism almost inconceivable to an American mind. They are practically great stock companies in which one can buy a share at a small cost and become a purchaser at usual prices, receiving a dividend later according to the amount of his purchases. Coöperative stores in American universities are generally successful, apparently because they don't coöperate. Some get into politics and go the way of the wicked. The survivors gravitate into the hands of a committee of the faculty, which tries to employ an efficient manager, and administers the business as a public trust without private profit. The wastefulness of multiplying orders for text-books to be used by a class whose number is definitely known in advance, and the comparatively uniform character of the supplies, make economy peculiarly easy in this case. A large part of the services of the coöperative store, however, are indirect; it reduces and regulates the charges in the stores near by. [Sidenote: The failures and their causes] Nearly all the Granger stores, started thirty years ago in great numbers, and most of the coöperative stores among American workmen, have failed. The failure is easily explained by the ignorance of danger, by lack of harmony, by credit sales, and by inefficient management. The wastes of competitive business are partly a tax imposed upon men (taken collectively) by their lack of business method; the community is not intelligent enough, honest enough, or self-sacrificing enough to do business in the most economical way. Partly they are the price paid for variety and change, and for the cherished American right "to kick"--something difficult for the members of a coöperative store to do without hurting themselves. [Sidenote: Profit-sharing and coöperation in relation to the enterpriser] [Sidenote: Continued need of the enterpriser] 4. _The experience with these plans verifies the analysis of the enterpriser's function: pure profits are the earnings of a productive service._ Comparing these three plans, they are seen to be alike in seeking to make workers share some of the profits, to change the destination to which profits would go. The first would create profits by the effort of the workers, and give them a part of the saving. The second would have collective workers perform the enterpriser's work in the factory and get his reward. The third would have collective buyers do the work of the merchant and save his profits and other costs. The last is the easiest to do. Profit-sharing is next in difficulty, and producers' coöperation is the hardest of all to put into practice. In some cases, under some conditions, the enterpriser's services may be more economically performed than at present, for the waste is great. But taking men as they are and things as they are, in most places the enterpriser's service is necessary and must be paid for. His contribution to the success of the industry depends on his nature and ability, and it can be distinguished theoretically and practically from the contribution made by the workmen. Nothing but changes in human nature, in education, and in morality can diminish the necessity for his service. CHAPTER 33 MONOPOLY PROFITS § I. NATURE OF MONOPOLY [Sidenote: Difficulty of fixing the meaning of monopoly] 1. _The term monopoly is used loosely and in many senses._ In popular discussion monopoly means almost any wealthy corporation or the power the corporation possesses, a power which is usually thought of as oppressive. Even economists have held the vaguest ideas regarding monopoly. The recent rise of trusts and monopolies has given a large new body of facts bearing upon the subject, but all the resulting discussion by the public and by economists has not brought agreement upon a definition entirely satisfactory. When usage has not settled upon any one meaning, the selection of a definition is in a measure arbitrary, though it may be guided by logic and considerations of expediency. Let us state the various meanings and indicate the one adopted in this discussion. [Sidenote: Monopoly is not merely scarcity] 2. _Monopoly should not be used as synonymous with scarcity._ Scarcity is the essential condition of all value. The simplest things--bricks, sand, the commonest unskilled labor--would have no value were there not a degree of scarcity relative to the wants that may be gratified. "Monopoly," whatever else it means, always conveys the idea of some exceptional kind of scarcity, scarcity due in part to some source or cause not ordinarily present. It is a bad practice in definition to apply two words to one idea, leaving the other idea unnamed, as is done when monopoly is made synonymous with scarcity. Both words are needed. Such a usage unfortunately is common in economic literature. Many economic writers, for example, have called landownership monopoly, saying that land being the work of nature cannot be increased by men, and therefore must always be scarce. Even if it were true that in the economic sense land could be produced by man, there still would be confusion here between a general class of goods and a special thing. The fact that a particular field cannot be duplicated does not make a monopoly of land as a whole, any more than the existence of desert land in Arizona makes land valueless or a free good. Nor is a land-owner a monopolist any more than is the owner of a valuable machine. The owner of forty acres of land worth four hundred dollars, or the owner of a village lot worth a hundred dollars, can hardly be called a monopolist. It leads to absurdity to use the word monopoly with reference to landownership indiscriminately. Neither mere scarcity nor the limitation of natural stores should be called monopoly when ownership is scattered and combination between owners does not exist. [Sidenote: Monopoly is not merely superior economic power] 3. _The ability of superior material agents and of skilled workers to secure higher returns than do poor ones does not constitute monopoly._ The free competition assumed in abstract discussions of value, does not mean equal capacity or efficiency, but the legal freedom and personal willingness to move a productive agent into the highest industrial place it is capable of holding. The rocky field does not compete with the fertile one in the sense that it can yield the same uses. The field fit only for potatoes does not compete with those rare and favored localities that can raise the best wines. The gardener earning two dollars a day does not compete with the skilled physician with an income of twenty thousand dollars a year, for he has not the economic capacity to do so; but he is _free_ to compete (as is the owner of the rocky field) unless law, caste, class legislation, social prejudice, or some other objective factor forbids. Anything, however, that prevents the labor or capital of buyers or sellers from application for which they are fitted, defeats free competition. To use the term monopoly of any and every limitation of economic ability is to extend it to every case of value. To use it of the high wages of skilled workmen, where no union to suppress competition exists among them, is to make it a colorless synonym of scarcity. It should be confined to a narrower and more exclusive use. Some special kinds of limitation should be connected with the idea of monopoly. [Sidenote: Monopoly consists in unified control] 4. _The limitation connected with monopoly is not that of economic capacity but that of ownership and control._ The derivation of the word from the Greek points to the general thought: _monos_, alone, _poléo_, to sell, a single seller, the sole source of supply in a given market. The term was first used in England of special grants or patents of monopoly from the crown to make or deal in specified articles, such as soap, candles, etc. The political power of the state created and defended the monopoly. This policy is pursued in a limited degree to-day for the encouragement of invention, in the granting of patents and copyrights. In the current definition, "The exclusive right, power, or privilege of dealing in some article or trading in some market," the term "dealing in" is well chosen, for it is broad enough to cover cases of buying as well as selling, and includes power derived from political as well as from other sources. But the term "exclusive" is too absolute, allows of no gradations, and makes the definition applicable only in the rarest cases. [Sidenote: Definition of monopoly] [Sidenote: Monopoly limits supply] 5. _Monopoly is such a degree of control over the supply of goods in a given market that a net gain will result to the seller if a portion is withheld._ Every producer has control over some agents and some portion of the supply of products; but ordinarily the portion controlled by any one is so small that withholding it entirely from sale would not cause the market price to rise in any appreciable degree. The producer in such a case regulates his action as if the market price were fixed beyond his control, and he uses his productive agents fully up to the point where costs equal price on the marginal unit of product. A skilled worker getting five dollars a day loses that sum every day he is idle. A landowner whose land can command a competitive rent of ten dollars an acre must take that sum or less, or nothing; he cannot get more. How can a net gain ever result from a smaller sale? As a reduction of supply results in a higher price, it is possible, as is seen in the paradox of value, for a situation to arise in the case of some goods, where a smaller number of units yield a larger sum in the market than a larger number of units. But the seller's interest lies not in the increase of total sales, but in that of net gains. Net gains, being the product of the number of units sold multiplied by the gain on each unit, increase at a much faster rate than do total sales. The existence of monopoly power in any degree depends therefore on several factors: the effect of contraction of supply in raising prices, the effect on costs, the number of units remaining in the ownership of the one contracting supply, and the possibility of preventing others from increasing supply later to profit by the higher prices. § II. KINDS OF MONOPOLY [Sidenote: The sources of monopoly power] [Sidenote: Political monopoly] 1. _Monopoly gets its power from political, economic, and commercial sources._ A political monopoly derives its power of control from a special grant from the government, forbidding others to engage in that business. The typical political monopoly is that conferred by a crown patent bestowing the exclusive right to carry on a certain business. A second kind is that conferred by a patent for invention, or the copyright on books, the object of which is to stimulate invention, research, and writing by giving the full control and protection of the government to the inventor and writer or their assignees. In this case the privilege is socially earned by the monopolist; it is not gotten for nothing. Moreover, the patent is limited in time, expires and becomes a social possession. A third kind is a government monopoly for purposes of revenue. In France, the government controls the tobacco trade, and the high price charged for tobacco makes the monopoly yield a large income. A fourth kind are public franchises for public service, as street-railways, lights, gas, waterworks, etc. These are granted to private capitalists to induce them to invest capital in something which has public utility. [Sidenote: Economic monopoly] Economic monopoly arises when the ownership of scarce natural agents, as mines, land, water-power, comes under the control of one man or one group of men who agree on a price. Economic monopoly is a result of private property that is undesigned by the government or by society. It is exceptional, considering the whole range of private property, but it is important. The oil-wells embracing the main sources of the world's supply have come under one control. One corporation may control so many of the richest iron-mines of the country as to be able to fix a price different from that which would result under competition. Coal-mines, especially those of some peculiar and limited kind, such as anthracite, appear to become easily an object of monopolization. Economic monopoly merges into political monopolies, such as patents and franchises. Private property is a political institution designed to further social welfare, and only rarely is any particular property a monopoly. Private control of great natural resources doubtless would have been prohibited had it been foreseen. [Sidenote: Commercial monopoly] Commercial monopoly, variously called contractual, organized, or capitalistic monopoly, arises where men unite their wealth to control a market, to overpower or intimidate opposition, and to keep out or limit competition by the mere magnitude of their wealth. These various kinds so merge into each other that they cannot always be distinguished in practice. A patent may help a capitalistic monopoly in getting control of a market; great wealth may enable a company to get control of rare natural resources. [Sidenote: Special classes of monopoly] 2. _Monopolies may, for special purposes, be classified also as selling and buying, producing and trading, lasting and temporary, general and local._ The terms selling and buying monopoly explain themselves, though the latter conflicts with the etymology. Under conditions of barter the selling and the buying monopoly would be the same thing in two aspects. A selling monopoly is by far the more common, but a buying monopoly may be connected with it. A large oil-refining corporation that sells most of the product may by various methods succeed in driving out the competitors who would buy the crude oil. It thus becomes practically the only outlet for the oil product, and the owners of the land thus must share their ownership with the buying monopoly by accepting, within certain limits, the price it fixes. The Hudson Bay Company, dealing in furs, had practically this sort of power in North America. Many instances can be found, yet, relatively to the selling monopolies, those of the buying kind are rare. A producing monopoly is one controlling the manufacture or the source of supply of an article; a trading monopoly is one controlling the avenues of commerce between the source and the consumers. Monopolies are lasting or temporary, according to the duration of control. By far the larger number are of the temporary sort, because high prices strongly stimulate efforts to develop other sources of supply. Yet the average profits of a monopoly may be large throughout a succession of periods of high and low prices. Monopolies are general or local, according to the extent of territory where their power is felt. At its maximum where transportation and other costs most effectually shut out competition, monopoly power shades off to zero on the border-line of competitive territory. [Sidenote: Relativity of monopoly] [Sidenote: The test of monopoly] 3. _Degrees of power to affect price result from varying extent of control; monopoly is a relative term._ The term monopoly by its derivation has reference to a single seller; but there are other thoughts in the concept. Monopoly has reference also to the amount of the supply controlled. The frequent use of the adjectives partial, limited, and virtual are implied but usually superfluous recognitions of the relative character of monopoly. Ownership of a particular knife, pencil, book, makes one the unique seller of it, but confers no monopoly power, as the power of substitution is practically absolute; the welfare of no one depends in any appreciable measure on that particular pencil. Ownership of an important fraction of an entire species of goods gives more power to affect value. One owning a large part of the desirable building sites or houses in town may gain by occasionally letting one stand vacant in order to drive better bargains with tenants. A trade-union may control most of the labor-supply of one kind in a town. But the test of monopoly is that a gain results from a higher price and fewer sales. It begins at the point where there is a motive to limit the supply in accordance with the paradox of value. The control of an entire species of goods gives price-fixing power, limited only by substitution of goods. Even though one person controlled all the coal and wood in any market, their prices still would be limited. If there were but one possible source of meat-supply, most people could live without meat. The monopoly of great species of goods can thus be seen gradually to merge from one grade into another. It is a matter of quality as well as quantity. There is more or less of it in the different industries, and, as noted in the preceding paragraph, it varies over time and territory. § III. THE FIXING OF A MONOPOLY PRICE [Sidenote: Forces governing competitive prices] 1. _A competitive producer gets the highest price that will permit him to dispose of his product._ The enterpriser seeks to get the highest price for his product that the market will afford. His ability to continue making a profit at a lower price does not induce him to reduce the price unless the reduction is to his interest. The ordinary competing manufacturer is limited in his price by two things: first, his customers may cease to buy such articles entirely and may substitute other goods if the price is too high; secondly, they may buy of other sellers. Between his wish to keep the price up, and the customer's wish to buy as cheaply as he can, the price is fixed at a point where there is no inducement for others to come in and reduce his sales, or for him to seek a better market. There may be under these conditions a potential but very limited monopoly power. The sole druggist in a small town might occasionally get extortionate prices from particular customers in times of dire need, but he would thus drive away much of his custom, and would tempt a fairer and less grasping competitor to come in. Thus, when men and capital are free to come and go, there results an average or normal return for ability and agents of a certain grade. Prices come to equilibrium where each is selling his total product. [Sidenote: Monopoly's greater control of price] 2. _Where a monopoly exists to a greater or less degree, there is less reason to fear loss of custom to competitors._ The degree of control determines the fear of competitors. If the control is slight, a very small rise of price will bring in competitors. The monopoly profits in this case either must be very small or they will be very brief. Those outside, controlling a large supply, will be tempted by large profits to market it at once and to increase it as fast as possible. Even where a large part of the supply is under one control, the fear of substitution puts a limit on the price demanded. If the control were extended to all wealth, the monopolist would be the absolute despot of the lives of his fellows. But as things are, the monopolist aims, just as the competitor does, to get the price that gives the maximum gain. The monopolist, however, is in a more or less favored position, as he can raise his price considerably before losing the most of his customers. Much depends on whether the costs increase or decrease as output grows. Where a large increase in output greatly decreases the cost, lower price may leave a larger margin between the cost and the selling price. A general monopoly price is therefore not an unlimited price. It is higher than the competitive price if the same cost of production is maintained. It may conceivably be lower than the former competitive price if the economies of combination greatly reduce the cost and justify a large increase of the output. [Sidenote: Discriminating monopoly rates] 3. _A monopoly often seeks to avoid a general market price, and it adjusts its charge in each small market separately._ This is a most important aspect of the monopoly problem and a most important modification of the principle just stated. A market price is the expression of the least urgent demand that aids in carrying off a given supply. It is a maxim that there can be but one price at a time in a given market. The baker ordinarily sells the loaf at the same price to every one buying a given quantity. If he had a monopoly of the bread-supply, however, he might deal with each customer separately, ascertain, by personal inquiry into the lives of the citizens and by the aid of a force of detectives, just how much each could or would pay rather than do without bread. The policy of varying prices is thus followed by monopolies, though usually in a less inquisitorial way, to enable them to get the highest possible returns. Under the name of "charging what the traffic will bear," it is practiced by the railroads as local and personal discrimination. The endurance of some communities and of some individuals being greater than that of others, the burden is adjusted to the back, being made not as light but as heavy as each can be forced to bear. [Sidenote: Low rates to destroy competitors] Large monopolies dealing in commodities use an adaptation of this method to kill off small competitors who, within a certain district, sell at less than the monopoly price. Prices are suddenly reduced in that community below cost until, the small competitor being ruined, the monopoly rate is reëstablished perhaps higher than before. Fear of suffering a like fate prevents others from attempting competition even when prices offer a great attraction and give a high monopoly profit. [Sidenote: The source of monopolistic profits] The profits of monopoly can be explained by the ordinary laws of value, yet evidently they form a peculiar economic and social problem. They appear to be due not to the services of the enterpriser in increasing production, but to his success in limiting it. There is, therefore, an antisocial element in them not found in the profits of ordinary industry. This deserves further and closer study. CHAPTER 34 GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES § I. GROWTH OF LARGE INDUSTRY IN THE UNITED STATES [Sidenote: Distinction between large capital] [Sidenote: Large production] [Sidenote: And monopoly] 1. _In the discussion of the so-called trust problem three things must be distinguished: large individual capital, large production, and monopoly power._ Capital, in the sense of valuable agents, is found in the smallest as well as the largest industry, and every owner, from the small shop-keeper to the wealthiest bondholder, is a capitalist. In popular discussion, however, the word frequently implies great wealth in a single hand, though this wealth may be invested in a large number of small industries. Large production is the concentration of capital into large units of industry. The capital may be the same as before, the ownership may or may not be widely diffused, but the control and management are unified. Large factories may or may not have monopoly power; as factories grow in size, competition among them often becomes more, not less, complete and severe. On the contrary, monopoly, as before defined, may exist where the industry is small, as the waterworks in a small town, or a small factory for making patented articles. In periods of depression a business with a capital of ten thousand dollars may go on and prosper, while one with millions may be forced into bankruptcy. These three ideas--great individual wealth, large industry, and monopoly power--are often hopelessly confused in the discussion of present-day questions. [Sidenote: Stages of tools and household industries] [Sidenote: Of simple machines] [Sidenote: And of large industry] 2. _Three industrial stages may be broadly distinguished: that of tools, that of machines and small factories, and that of large production._ Men are prone to forget that all the world is not doing just as they are. Over two thirds of the people on the globe are still in the first industrial stage. One billion people use only tools, and have no better source and means of power than domestic animals. This is true in the most of Asia and Africa, in the greater part of South America, and in many portions of North America. About two hundred million people live in the stage of simple machines and small factories. These are found in eastern and southern Europe, small portions of South America, some parts even of the United States. In this stage there is not enough manufacturing power in the community to supply much more than its own needs. About two hundred million people in the United States and western Europe have reached the third and highest industrial plane, where the highest mechanical devices are employed and industry becomes highly specialized. These differences are broadly stated; there are contrasts within every nation. Three hundred miles from here, in the Alleghanies, people still can be found spinning and weaving and wearing homespun as in colonial days. In a trip of twenty miles in Tyrol or Switzerland one can observe every one of these industrial stages. The most striking development, if not the typical form, in America to-day is large or concentrated industry. [Sidenote: Household industry in America] [Sidenote: Recent changes in number of factories] 3. _In the last half century the unit of organization in leading industries has tended to grow larger._ Seventy-five years ago a tool-using household industry, on farms and in homes where the greater part of the things used were produced in the family, was still the typical organization in the United States. The early factories growing out of the household industry were small. A family specialized in producing cloth and exchanged with its neighbors; so with shoes, candles, soap, canned goods, cured meats, etc. Since that time two counter forces have been at work to affect the ratio of manufacturing establishments to population. The number of establishments has been increased by specialization of farming which has called for many industries to produce the things once made on farms, and by increasing wealth and invention, which has made possible many small industries supplying things before almost unknown. The number of establishments has been diminished as the staple products that can be transported have come to be made in larger factories. The resultant of these movements during the thirty years ending in 1900 is somewhat surprising: the ratio of factories (with an output worth five hundred dollars) to population has somewhat increased. In 1870 there were two hundred and fifty-two thousand establishments; in 1890, three hundred and fifty-five thousand, and in 1900, five hundred and twelve thousand, a ratio to population of one to one hundred and sixty-two, one hundred and seventy-seven, and one hundred and forty-four respectively. The last date was one of great industrial prosperity, and doubtless many ephemeral enterprises had been called into existence, thus giving a somewhat abnormal result. Moreover, there has been a large increase in the number of things made in factories which were formerly made in the homes, and which then did not appear at all in the census of manufactures. [Sidenote: Large production in some industries] In cotton-weaving, however, the unit of industry is growing, factories in 1870 numbering nine hundred and fifty-six; in 1890, nine hundred and five; in 1900, one thousand and fifty-five, the later increase being due to the fact that many new factories in the South have been started in the last decade. The population meantime doubled. This movement has been going on for seventy years, there being about the same number of mills in 1900 as in 1830, though population had multiplied six-fold. Iron- and steel-mills numbered one thousand three hundred in 1880, one thousand in 1890, and nine hundred and sixty-five in 1900. In industries having local markets and sources of supply for materials, the change has been less rapid. There were twenty-four thousand grist-mills in 1880, eighteen thousand in 1890, and twenty-five thousand in 1900, a change of ratio from two thousand one hundred to three thousand population per grist-mill. There were twenty-six thousand sawmills in 1880, twenty-two thousand in 1890, and thirty-three thousand in 1900, a change from about one thousand nine hundred and twenty to two thousand two hundred and seventy persons per sawmill. But while the number of establishments in these staple industries was decreasing, the number of employees per establishment in most cases was increasing. The average in all industries, in 1870, was eight; in 1890, twelve; in 1900, ten and four tenths. In cotton-mills, in 1870, the average was one hundred and eighty-four; in 1890, two hundred and forty-four; in 1900, two hundred and eighty-seven. The grist-mills, in 1880, had two and four tenths persons per establishment; in 1890, three and four tenths. The sawmills, in 1880, averaged six employees each; in 1890, fourteen; iron- and steel-mills in 1880, one hundred and twenty-one each; in 1890, one hundred and ninety-six. [Sidenote: Growing concentration of capital into large industries] 4. _The amount of capital per establishment is tending to increase in the leading lines of industry._ The amount of capital is not so easy to determine as the number of employees, and it is recognized that the census figures on this subject are only approximately correct. We are told that in cotton-mills, in 1830, the average capital invested was fifty thousand dollars; in 1890, nearly four hundred thousand dollars; in 1900, four hundred and forty thousand dollars. It is easy to observe the large increase in investment of capital in flouring-mills since the new processes came into use. The average capital of all industries does not grow as in the staple ones, for many smaller industries have come into existence. In 1880, the average capital was eleven thousand dollars; in 1900, it was eighteen thousand dollars. [Sidenote: Recent formation of combinations] The years between 1890 and 1900 saw the rapid formation of trusts and combinations, and of larger industries. Consolidation took place on a great scale in railroads and in manufactures. Much of this has been of such a kind that it does not appear at all in the figures showing the number of establishments and of employees. Many discrepancies appear in the data regarding this movement given by different authorities, as there is no generally accepted rule by which to determine the selection of the companies to be included in the lists, and as the conditions are changing from day to day. A competent financial authority[1] gives the following figures regarding the "industrial" trusts (manufacturing and commercial) and gas trusts, organized in the United States between 1860 and 1899, not including combinations in such businesses as banking, shipping, railroad transportation, etc. The figures refer to the reorganization and consolidation of industries into larger units, some of which have much and others little or no monopoly power. Decade Number Organized Total Nominal Capital 1860-69 2 $13,000,000 1870-79 4 135,000,000 1880-89 18 288,000,000 1890-99 157 3,150,000,000 --------------- --- ------------- Total, 40 years 181 $3,586,000,000 The number organized and the capital represented by this movement in the last of these decades are eight times as great as in the thirty years preceding. In the last ten years can be traced the influence of general industrial conditions. Year Number Organized Total Nominal Capital 1890 6 $82,000,000 1891 13 168,000,000 1892 13 140,000,000 1893 5 226,000,000 1894 2 35,000,000 1895 7 104,000,000 1896 3 40,000,000 1897 6 93,000,000 1898 22 574,000,000 1899 80 1,688,000,000 --------------- --- ------------- Total, 10 years 157 $3,150,000,000 [Footnote 1: Compiled from data given by "The Journal of Commerce and Commercial Bulletin," reprinted in "The Commercial Year Book," Vol. V, 1900, pp. 564-569.] The first three years enjoyed great prosperity and the number of combinations were six, thirteen, thirteen. In 1893, the number was less, but the total nominal capital (preferred and common stocks and bonds) was still the greatest it had ever been in any year. Then came the period of depression, 1894-97, when both the numbers and the capital were comparatively small. Then followed the period of the greatest formation of trust companies the world has ever seen, which extended from 1898 to 1901, and ended in 1902. [Sidenote: Trust statistics for 1904] In a list recently revised by another authority[2] it appears that the data for all "industrial trusts" (nearly, but not quite, comparable with the foregoing figures), are in round numbers as follows: Number of Plants Acquired Total Date Number or Controlled Nominal Capital Jan. 1, 1904 318 5288 $7,246,000,000 [Footnote 2: John Moody, "The Truth About the Trusts," 1904.] These figures would indicate that the industrial trusts more than doubled within four years, most of the growth being within three years. The same authority, in a more comprehensive list, classifies in six groups all so-called "trusts" of the United States, at the date of January 1, 1904, as follows (the figures just given above are the totals of the first three groups): No. of Plants Acquired or Total Groups Number Controlled Nominal Capital 1. Greater industrial trusts 7 1528 $2,660,000,000 2. Lesser industrial trusts 298 3426 4,055,000,000 3. Other industrial trusts in process of reorganization or readjustment 13 334 528,000,000 4. Franchise trusts 111 1336 3,735,000,000 5. Great steam railroad groups 6 790 9,017,000,000 6. Allied independent railroad groups 10 250 380,000,000 --- ---- --------------- Total, 445 8664 $20,000,000,000 § II. ADVANTAGES OF LARGE PRODUCTION [Sidenote: Economical use of machinery in large production] 1. _A great technical advantage of large production is the better and fuller use of machinery._ A large factory with a large output can keep a special machine adjusted for each pattern and process, whereas in a small factory much time and energy are wasted in adjusting one machine for various processes. The machinery in a large factory is thus more fully utilized. Compare the machinery used in a large ax-factory with that used in twenty-five small ax-factories having the same total output: the one hundred and fifty workmen in twenty-five small factories would use twenty-five shears, one hundred trip-hammers, fifty grindstone-pits, fifty polishing-frames, a total of two hundred and twenty-five machines; the same one hundred and fifty men in one large factory would require three shears, a saving of twenty-two; twenty trip-hammers, a saving of eighty; thirty-seven grindstone-pits, a saving of thirteen; thirty polishing-frames, a saving of twenty; a total of ninety machines, a saving of one hundred and thirty-five machines. The difference in cost due to machinery is not so great as these figures indicate, as the unused machines last longer; but in the small factory there is more depreciation from rust and decay, and a larger proportionate investment of capital for which interest must be earned. The average amount of stock and materials required in a large factory is not so great in proportion to the output. [Sidenote: Economy in labor power] 2. _In a large factory the division of labor may be more complete and effective._ The technical economies of the division of labor can be realized in large measure only when a number of men work together. Partly because of the advantages in the use of machinery, but partly from other causes, labor in a large group is proportionately more effective than in a small group, especially in producing form-value. In making plows, nine men working separately will average sixty-six plows each per year, while one hundred and eighty men working together will average one hundred and ten each per year, the output per man being increased sixty-six and two thirds per cent. In a rifle-factory with a daily output of fifty, eight men are needed for the same product that can be supplied by three men in a factory with an output of one thousand daily. [Sidenote: Miscellaneous economies] 3. _In the larger industry the costs of management, supervision, and marketing are relatively less._ Division of labor decreases the difficulty of supervision in larger factories, where the processes are divided, systematized, and made a matter of routine. The necessary inspection of the results is more rapid and easy. The advertising of certain kinds of goods involves a large and inevitable outlay, which is relatively less for a larger business, as the greater the output the smaller the burden on each unit of the product. Combination effects a great saving in the number of commercial travelers, a result partly due to the decrease in competition, but partly also to better organization. Each of twenty different factories must send its drummers into every part of the country to seek business. In combination they can divide the territory, visit every merchant and get larger orders at smaller cost. Supplies can be purchased more cheaply in large amounts, and shipments in car-load and train-load lots make possible special (sometimes illegal) concessions from railroads and from carriers on waterways. [Sidenote: Limits to the growth of a single factory] 4. _There are some disadvantages in a large industry which put a limit to the growth of a single local establishment._ There is practically a limit to the advantages of size in a factory. When each man is working on the smallest possible subdivision of the product, doubling the number of employees will not increase his skill. When the finest machinery can be kept constantly in use, economy in its use has reached the maximum. As large factories tend to create cities around them, land rises in value and higher wages must be paid the workmen. Small factories are constantly seeking out lower rents, taxes, wages, salaries, cheaper local sources of materials, cheap though limited sources of power, and thus they compete successfully in many markets. The point is reached in the growth of establishments where oversight cannot be as perfect and complete; the eye of the master cannot be over all. The market that can be reached by one factory is limited by distance, as the cost of transportation finally offsets all the other advantages of large industry. [Sidenote: Do not necessarily limit consolidation] It is evident that most of these reasons apply to a single local factory with far greater force than to a federation of locally scattered plants. It was once believed that the growing disadvantages of large industry would set an early limit to consolidation. While there is a truth in this thought not to be overlooked, the effects must now be recognized to be more distant than was supposed. The limits to the advantages of combination have been removed by the application of the federative plan which makes possible under one management the maximum of advantages with the minimum of the disadvantages in large industry. That was the discovery of the early promoters of the trust movement. § III. CAUSES OF INDUSTRIAL COMBINATIONS [Sidenote: Trusts in the legal and the popular sense] 1. _Trusts are large combinations of capital with some degree of monopoly power._ The original, legal meaning of the term trust does not include the idea of monopoly. The old legal idea of a trust is the confidence imposed in a trustee. The method that was adopted by the early combinations was the trust method, that is, they made use of this legal device: the stock of the separate companies was put into the hands of a board of trustees to whom was thus given the right to control. As it has been found possible to accomplish the same end without the use of this legal method, the popular meaning of the word trust, as applied to a monopoly, no longer agrees with the legal meaning. The word trust is popularly used of any large industry, though usually there is connected with it the idea of some evil power to raise prices to the consumers. A large number of the corporations called trusts have, however, little monopoly power, and some have none at all. They are simply large establishments. [Sidenote: Economies of combination] 2. _A strong reason for combination of competing plants is found in the legitimate economies of large production._ The economies that are possible within a single factory may be still greater in a number of combined or federated industries. The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. A large aggregation can control credit better and escape loss from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation, it can reduce the friction. A strong combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities strengthens its influence with the railroads. Its political as well as its economic power is increased. [Sidenote: Integration of industry] A recent phase of corporate growth is the "integration of industry," that is, the grouping under one control of a whole series of industries. One company may carry the iron ore through all the processes from the mine to the finished product. A railroad line across the continent owns its own steamers for shipping goods to Asia or Europe. Large wholesale houses own or control the output of entire factories. The possibilities in this direction have only begun to be realized. [Sidenote: Combination prevents competition] 3. _The men uniting to form a trust always declare that its formation is the necessary result of excessive competition._ The statement is often true in the sense that a hard fight and lower prices have preceded the formation of the trust. But as this excessive competition usually is for the very purpose of forcing the combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never homogeneous from factory to factory, and to those that are on the margin competition may appear excessive. It is generally the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, force the smaller, weaker, industries to come into the trust. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination. [Sidenote: Financial gains of combination] 4. _Another strong motive for the combination is the profit to promoters and organizers._ There are indirect as well as direct gains to the managers of a large business. There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock. The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product. A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the discovery of a new El Dorado, a California, or a Klondike. Then is the time for the wily promoter to offer shares without limit to investors. These considerations show that the trust is not simple in its cause, nor in its nature. In a sense the most artificial of industrial arrangements, in another sense it is a natural evolution of industry. More and more it is being recognized that though it has in it something of evil, it has as well something of good, and certainly much of the inevitable. CHAPTER 35 EFFECT OF TRUSTS ON PRICES § I. HOW TRUSTS MIGHT AFFECT PRICES [Sidenote: Economics of the trust problem] 1. _The economist's task, strictly confined, is to explain the relation of trusts to prices, not to solve the problem of their political control._ The question of trusts is such a large one that its discussion here must be confined to those aspects having close relation to the central subject of economic study,--the laws of value. These laws were by the older economists thought to be true only within the limits of free competition. Seeing that in various ways this freedom is interfered with not only by caste, custom, organized labor, but by patents, political privileges, and the power of large aggregations of capital (in short by all things that check the flow of ability and of agents from one industry to another), the question occurs: Are the abstract laws of rents, profits, and wages of any significance or of any help in discussing the great practical questions of to-day? Are not prices determined by the personal whim of industrial despots who can bid defiance to the laws of price? The control of trusts by legislative action is largely a political problem, but it must be guided by a correct economic analysis. Proposed legislative measures often assume or imply that in no way, directly or indirectly, is competition found in the problem. It should be the aim of economic study to make clear the true bearing and force of monopoly power in practical problems of value. [Sidenote: Limited power of trusts] [Sidenote: Monopoly and supply] 2. _The fundamental principles of market value cannot be changed by a trust; a selling monopoly can affect price only as it affects supply or demand._ The strongest "trust" yet seen has not been omnipotent. Many careless expressions on the subject are heard even from ordinarily careful writers and speakers: "The trust can fix its own prices," "has unlimited control," "can determine what it will pay and for what it will sell." This implies that trusts are benevolent, seeing that the prices they charge are usually not far in excess of competitive prices in the past. Such a view overlooks the forces that limit the price a monopoly can charge. The law according to which the value of products on the market is determined, is as valid where there is a trust as anywhere else. The marginal utility of goods to the consumer determines the price of any given supply. If the supply remains the same, no trust can make the price go higher. What it gets in exchange are the services or the wealth of the rest of the public. At what rate can it exchange its products for the products of others (including other trusts)? The monopoly usually directs its efforts to affecting the supply, leaving the price to adjust itself. (This is the case of the selling monopoly; the statement must be adjusted where it is a buying monopoly.) It can affect the supply either by lessening its own output or by intimidating and forcing out its competitors. It is true that this logical order is not always the order of events. The trust does not first limit the supply, and then wait for prices to adjust themselves; it first raises its prices, but unless it is prepared to limit the supply in accordance with the new resulting conditions of demand, such action would be vain. The control of the sources of supply is the logical explanation of the higher price, even though the limitation of supply is effected later by successive acts found necessary to maintain the higher price. Monopoly price is therefore a rational thing, not a mystery entirely out of harmony with the simple law of value laid down for consumption goods. The trust works as the magician does, not as was thought of old, in defiance of natural laws, but in harmony with them and by their aid. The view the public took of the trusts was at first medieval. That should not be the view to-day. [Sidenote: Monopolistic gains from successful combination] 3. _The economies of large production after a successful combination may be divided in varying proportions among monopolists, workmen, and consumers._ If the great economies of large production are effected by a new combination which makes no attempt to fix a higher price and limit production, where will the fruits of these economies go? They will go first to the owners of the trust, because, unless inspired by motives of philanthropy, they have no need to lower prices. Though they are in possession of special facilities, they will try to secure as high a price as before. A wider margin permits greater profits on each unit without limiting the output or the sales. They may retain this so long as they do not yield to the temptation to increase the output in proportion to their new facilities. [Sidenote: Gains to workmen] These economies, may, however, at times inure to the benefit of the workmen in higher wages if they succeed by any means whatever in squeezing the employers at this time of exceptional gains. The suggestion has even come from employers that in order to allay labor troubles there should be a union of capital and labor to squeeze the consumer, by doing away with all competition in fixing prices. This proposition to divide the plunder of monopoly has been viewed approvingly by some leaders of organized labor, but it does not look especially alluring to the general public, to which is assigned the humble part of paying the bill. [Sidenote: Gains to consumers] Part of the advantages will go to the consumer whenever there is a motive on the part of the large establishment to increase supply in order to get a larger profit or to forestall new competition. As the improvements become matters of public knowledge, most of the new economic methods can and will be adopted by new enterprisers, and other large aggregations of capital will be induced to come in to reap the benefits. The effect, of course, is an increase in supply and a lowering of prices. The fiat of the trust to prices to remain fixed while supply increases is as vain as a mortal's commands to the waves to be still. The undesigned result of the economies of large production, therefore, where control is not great, is to lower the prices and to diffuse the benefits among the public. [Sidenote: Social burden of monopoly profits] 4. _If the trust succeeds in raising its prices it gains at the expense of the community._ If a producer has some monopoly power, recognizes and uses it, his gain does not correspond with an increase in production. It is taken from those who buy these products, it is deducted from the psychic incomes of other members of society. This raising of prices actually reduces technical production, for the output is limited in order to secure the higher price. The probably less urgent wants of the receivers of monopoly incomes are gratified in place of the probably more urgent wants of the average purchaser. The result is a decreased social income, with an increase of the inequality of distribution. There is an analogy here with the effects of trade-unions. If the trade-union succeeds in forcing prices higher than the competitive prices, it gains at the expense of the other portion of the community. But while its gains appear to be more largely at the expense of the richer elements of society, the gains of the trust are more likely at the expense of the poorer elements. If the success of organized labor means to some extent a leveling up of income, the success of the trust means a still further inequality. Hence a difference in public sympathy in the two cases. [Sidenote: The praise and blame for trust prices] 5. _The responsibility for either the rise or the decline of trust prices cannot always be determined._ Prices are changing constantly under competitive conditions. In this active, moving world, changes of demand, the exhaustion of sources of supply, new processes, expiration of patents, opening up of new lines of transportation, affect prices in a multitude of ways entirely independent of organization. Trust-controlled industries are open to all these influences. Economic forces cannot be isolated as can elements in a chemical laboratory, and, therefore, trusts claim the credit for all the reductions of price that have occurred. By such a calculation the trusts usually make a showing of progress, as, until 1896, for twenty years the tendency of prices in most lines was downward. Always getting the highest price they can under the market conditions, they yet pose as benefactors. They would claim that the economies possible only under trust organization cause even a monopoly price to be less than a competitive price would be. Critics of the trusts, on the other hand, charge them with causing all the increase that occurs, and with checking the decline in prices. The critics compare the percentages of decline in price during the decades before and after the combination was formed, and as it is impossible for a geometric rate of decrease in price, as a result of improvements, to be long maintained, this showing is very unfavorable to the trusts. A method has been found, however, of testing, in the case of a few leading industries, the effects they have had on the price of their portion of the productive process. § II. HOW TRUSTS HAVE AFFECTED PRICES [Sidenote: Trusts raise prices] [Sidenote: The oil trust] 1. _Examination of the course of prices in the case of some notable trusts shows that, wherever effective, they raise prices above the competitive rate possible to smaller production._ The most instructive study in the subject is that undertaken by J. W. Jenks a number of years ago, and later developed by him when working with the Industrial Commission from 1898 to 1900. Its results are embodied in a series of charts. It appears that the price of refined petroleum, in 1871, was twenty-five and seven tenths cents per gallon; in 1880, eight and six tenths cents; in 1887, seven and eight tenths cents; in 1900, seven and eight tenths cents. A writer in the "North American Review" claims that this decline was due to the economies accomplished by the Standard Oil Trust. It will be noticed, however, that prices fell most rapidly (from twenty-five and seven tenths cents to eight and six tenths cents) between 1871 to 1880, a period of intense competition, when the industry was new, and when the independent companies, fighting for their existence, introduced many improvements and began the construction of the pipe-lines that were later secured by the Standard Oil Co. Despite this rapid decline, the smaller companies still could have maintained a profitable business had it not been for the ruinous discrimination of the railroads against them. Because of this, the Standard Oil Co., in 1880, obtained almost complete control. The price twenty years later than that date was less than a cent cheaper. In the meantime the price for a time continued to fall. Competition was never quite stilled. The small competitor, wherever he saw a chance, has nibbled off a bit of the tempting profits. The rise from 1898 to 1900 was in accord with that occurring in other lines. A much lower cost of production is now possible to the great monopoly with its larger sales and more economical methods. The by-products, unknown at the beginning of the period, now yield large sums, yet the price remains much the same as a quarter of a century ago. The trust has succeeded in retaining a large part of the increasing margin of price over cost. [Sidenote: The sugar trust] The influence of the sugar trust may be studied by what is known as the method of differentials. The differential in sugar is the difference between the cost of the raw sugar and the refined granulated sugar. Raw sugar is the main material and the principal fluctuating item of cost beyond the control of the trust. Changes in the differential reflect the changes in profits except as modified by a cheapening of the process. The period from 1880 to 1887 was one of great competition. In 1880, the differential was one and ninety-two hundredths cents on each pound of refined sugar, but it fell steadily till, in 1887, it had reached sixty-four hundredths cents. In the fall of that year the trust was formed; and the next year the differential had risen to one and twenty-five hundredths cents, in 1889 to one and thirty-two hundredths cents. Tempted by the enormous profits, the rival refineries of Claus Spreckel were started, and with competition the differential fell, in 1890, to seventy hundredths cents. The rival factories were then bought up and under the new combination the differential went sailing up to one and three hundredths in 1892, and to one and fifteen hundredths in 1893. Rival factories again arose and competition grew stronger, reducing the differential to ninety-four hundredths in 1894. It was in that year that the firm of Arbuckle Brothers and Claus Doscher each opened a great refinery, and in the next year the differential fell to fifty hundredths cents. In 1900, some agreement, the terms of which were unknown to the public, was entered into by the rivals and the differential had risen, in March, 1901, to ninety-five hundredths cents. In every case the differential fell when competition was effective and went up when monopoly power was regained. [Sidenote: The nail trust] The differential of steel-wire nails is the difference between the cost of the steel billets and the price of the wire. Between 1890 and 1895 there was a steady decline in the differential. In 1895 was formed the nail pool, an agreement to share the profits, a form of combination. A rapid advance took place, both in the price and in the differential. In the fall of 1896 the pool was broken and then occurred a fall in prices and in the differential during 1896-97. In January, 1899, the nail trust was formed, controlling sixty-five to ninety-five per cent. of the output of wire nails, and a rapid advance occurred in the price and also in the differential. [Sidenote: The tin-plate trust] The tin-plate industry practically had its origin in the United States, in 1892, under the McKinley tariff. As competition increased, prices and the differential fluctuated and declined. At the end of 1898 the tin-plate company was formed and prices at once started upward with a rapid increase in the differential. Cause may, in a measure, be mistaken here for effect. In these cases the part of the rise in price due to the rise of materials is not brought about by the trust. The differential represents its part of the productive process and its source of profits. The power to make the differential high is due in part to the general conditions of business in the last three years considered. The profits of all industries in those years increased. While prices may have risen partly because the trust was formed, it may have been possible to form the trust because prices were rising. The general conclusion is that trust prices are always raised when, and to the extent that, control is secured. They are lowered below normal prices when competition becomes troublesome. Fluctuation of prices probably has been more rapid and more spasmodic under trusts than it has been under ordinary competitive conditions. [Sidenote: Effective trusts injure various producers] 2. _A large degree of monopoly control may lower the incomes of producers of materials, the value of competitive plants, and prices in special local markets._ A strong selling monopoly tends to become also a buying monopoly. A great industry using great quantities of materials may either own the sources or purchase from small producers. The steel trust owns mines, and ships and railroads to bring the ore to the furnaces; but the tobacco trust buys from the farmers. If the packing, refining, and marketing of a product is monopolized, the sellers of the raw or partly finished product are subject to one-sided competition. The small producers of tobacco, of crude oil, and of anthracite coal claim that the effect of the trusts is to give them lower prices for their products. Some have been severely punished by the monopolies for refusing to take the first offer made. Monopoly is thus likewise able to purchase competing plants at ridiculously small sums, by first making them valueless through fierce price-cutting, or by threats of it. "Rich" is often a relative term, and it is said that many a small millionaire producer has anxiously waited to see whether the great trust would next turn its attention to him. [Sidenote: The persistence of competition reducing prices] 3. _Competition of less capable producers works in most cases to prevent the great or continued rise of trust prices._ Early trusts overestimated their power. The persistence of competition in industries where the trusts have had great advantages in position and resources has been astonishing. The wall-paper trust, though for many years it kept prices above competitive rates, was repeatedly undermined by competition. The whisky trust, while it frequently raised prices, was as often forced by the growth of small distilleries to lower them below competitive rates. Competition in the oil industry has persisted under the greatest difficulties. The smaller companies have hauled the product by wagon when the trust was moving it by pipe-lines. The continuance of high prices by a trust depends on a high degree of control of supply. A recognition of the limits of their power has led trusts in some cases to a policy of moderate prices, affording a good profit, but not encouraging competition. [Sidenote: Supply as the condition of low prices] The limits of the power of the trust to control prices are strikingly shown by the fact that it cannot even insure low prices if the market conditions do not justify them. The steel trust, in 1902-3, declared that it would not advance the price of steel rails above twenty-eight dollars, and this was hailed as a beneficent effect of trust control, which, by equalizing production, could prevent excessive fluctuations of price. But the trust's declaration was a bit of inexpensive humor on the part of the managers; the trust had nothing to sell at the price quoted, as its entire product had been sold out months in advance. While, therefore, the trust continued calmly to quote steel rails at twenty-eight dollars, competition raised the market price to thirty-three dollars a ton; twenty-eight dollars or more was paid for second-hand rails, and a proportionate price for other iron products. Such exceptional conditions, raising prices to abnormal levels, are followed by a decline disastrous not only to the small producer, but to the trusts as well. [Sidenote: Modes of controlling trusts] 4. _The control of the trusts must be sought in the direction of maintaining potential competition through fair and free conditions of industry._ Many of the remedies suggested are reactionary and would give up the benefits of large production. Measures must be sought in harmony with the economic principles of price. Since many of the trusts have grown wealthy by special shipping privileges from the great quasi-public corporations, the railroads, and by special favors from public or corporation officers, who have been false to their duties, the solution must be a political and moral one; it must be sought in the development of honest citizenship and of a more efficient social regulation of quasi-public industries. The conditions of competition may be made fairer by requiring publicity of accounts, and by making it impossible for great corporations to strangle their local competitors by special and temporary prices. The state here has the same duty to perform that it has to protect the weak man from personal violence at the hands of the strong. This will not prevent competition, but it will determine the ways in which the rivalries of men can be manifested. Any measures for controlling the great combinations must start from a right understanding of the law of value, neither underestimating nor overestimating their economic power. Public sentiment toward the trust question has changed somewhat in recent years, because the nature of trusts and the extent of their power are better understood. There is now less fear of them, and more confidence that they can be tamed and made to serve the welfare of society. CHAPTER 36 GAMBLING, SPECULATION, AND PROMOTERS' PROFITS § I. GAMBLING VS. INSURANCE [Sidenote: Unavoidable chances] 1. _Many forms of chance are inseparable from the individual enterprise._ There are what may be called natural chances chances, arising from the uncertainties of the seasons, from rainfall, heat, hail, storm, flood, lightning, land-slides. Such chances must be taken both by the small enterpriser and by the large. In an earlier condition of society natural chance almost dominated industry, and it still remains and must always remain an important factor to deal with. There are political chances, as war and riot; as legislation on money, tariffs, credit, and business relations. These are caused, it is true, by the action of men, but it is a collective action out of the control, to a greater or less degree, of the individual--absolutely out of the control of most individuals. Men of greater political influence can to some extent control these chances, possibly in their own favor. There are chances of carelessness causing fire, explosions, wrecks on misplaced switches, and involving penalties and losses that must be met. There is the chance of physical or mental collapse, as the sudden insanity or the sudden death, unforeseen and unpreventable, of one performing responsible duties. Sickness often wrecks the plans and the fortune of a whole family. There are economic changes, such as those in methods of production, in machinery, in methods of transportation; such as the growth of fashions or the growth of population changing demand in some directions and for some materials. [Sidenote: Average of chances in each industry] Some of these chances are more connected with money-lending, others with manufacturing; some with agriculture, others with commerce; but all are present in some degree in every industry. In the broadest view they are not chances, for on the basis of experience it can be foretold that they will occur to some one; but no individual can tell when and how they will occur to him. A general average of chances in different lines of business causes some to be called safe, others extra-hazardous. The chance is averaged and added to the profit or gain of that industry, for an extra-hazardous industry must in general afford a higher average of profit in order to induce men to engage in it. It is folly to take a risk without ascertaining its degree, so far as general experience enables one to choose. But inasmuch and in as far as the gains and losses fall unequally upon different individuals, income depends on chance. [Sidenote: Other chances artificial and avoidable] 2. _The essence of gambling is the attempt to gain by taking chances that are not the unavoidable incidents of productive enterprise_. The chances just enumerated are not sought, but avoided as far as possible; yet they must be borne by some one, and the burden must be distributed throughout society. There are unquestionably many kinds of chance-taking which differ from these in economic, and therefore in moral quality; but it has taxed the ingenuity of philosophers to lay down an abstract definition of gambling that would permit ready and certain distinction in practice between gambling and legitimate chance-taking. Typical gambling is the transfer of wealth on the outcome of events absolutely unpredictable, so far as the two gamblers are concerned. Examples are the shaking of unloaded dice or the honest dealing of a pack of cards. There can be no doubt of the entire lack of a productive economic basis in the betting on prices carried on in so-called bucket-shops by ignorant persons having no connection with the market of real things, and seeking to get something for nothing as a result of mere chance. [Sidenote: Cheating and gambling] Cheating is not a necessary mark of gambling, although the cruder kinds of dishonesty, such as the loading of dice or the collusion of horse-owners or of horse-jockeys to deceive the betting public, are so common that they seem often to be its essential feature. Gamblers recognize fair as opposed to unfair methods. Fair gambling is a kind of minor morality within the immoral field of gambling, like the honor found among thieves. Gambling bears somewhat the same relation to legitimate chance-taking that play does to labor. The chance-taking in gambling has no useful purpose or result outside itself. The gamblers constitute themselves a little fictitious economic circle, and they transfer gains and losses on the turn of events that have no practical objective result within their circle except to determine the direction of the transfer. [Sidenote: Various cases of a mixed nature; partisan bets] 3. _Legitimate forms of chance, or risk-taking, shade off into illegitimate forms, or gambling._ Ranging between the extremes of legitimate risk-taking and of gambling are a number of cases of a mixed nature. The bets made on college games, races, and contests differ from ordinary bets only in the added feature of so-called college loyalty (a travesty on the real sentiment). These college gambling contracts are supposed (according to a mode of reasoning found also among primitive peoples) to exercise a subtle and irresistible influence upon the result. A crew that enters the race with the odds against it is unnerved and undone, thinks the patriotic collegian. [Sidenote: Knowledge and skill affecting the result] In nearly all wagers, judgment in some degree influences the choice of sides. One man bets on a horse whose pedigree and performances he knows thoroughly; another judges by the horse's appearance as it comes upon the track. The professional book-makers have the latest possible and most exact information on which to base their bids. In the bets made on one's own prowess, as on speed in running or rowing, or in playing cards (wherein also the element of pure chance is mingled) the chance-taking is still far over on the uneconomic side of the border-line. The running is for the sake of the wager, not for a useful purpose. A premium won by a runner for speed in delivering a message of economic importance is in striking contrast to the winnings in a wager. Finally, the very border-line of difficulty is reached in the purchase and sale of goods in the market with a view of profiting by chance changes in price. Land speculation, the purchasing and holding of lumber, grain, cattle, and other tangible and useful things, must be judged liberally. The quality of gambling depends somewhat on the motive as well as on the ability of the actor. The enterpriser dealing with real wealth, and fitted to take the risks, both because of his resources and of his exceptional knowledge, needs the motive of gain, and in a sense can be said to earn socially what he gets. The motive of the uninformed must be a blind trust in luck, and a hope to gain from a rise in prices which they are quite unable to foresee or rationally to explain. [Sidenote: Gambling an economic loss to society] 4. _In its relation to value, a bet, or wager, is the exchange of the chance of loss for the chance of gain, involving a social loss._ Even when fairest, the average results of such an exchange must be unfavorable to society. One person loses a part of his income that gratifies relatively urgent wants; another gains something that gratifies only less urgent wants than were represented by the sum he risked. The area that is subtracted from the loser's psychic income is larger than the area added to the winner's psychic income. The result would be different on the impossible condition that it were always the poorer man that gained and the richer one that lost. Betting, then, does not produce wealth; it merely transfers ownership in a way that reduces the total want-gratifying power of wealth. The effects that gambling and betting have upon character are still more important and dangerous than their effects upon income. Motives of economic activity are reduced; energy is diverted from productive enterprise; society is demoralized through dishonesty of men intoxicated by gambling; speculation and embezzlement occur; and there is a reduction both of production and of enjoyment in society. These things can be reasoned out with mathematical certainty by means of the law of marginal utility. [Sidenote: Insurance as a wager] 5. _Insurance is, in outer form, a bet; but its essential purpose is the useful one of equalizing and eliminating chance._ In its early form insurance was a bet made by a ship-owner to protect his cargo from loss. The chance of loss in shipping was even greater in the Middle Ages than now, and it became customary for the ship-owner to bet with a wealthy man that the ship would not return. If it did come back, the owner could afford to pay the bet; if it did not, he won his bet and thus recovered a part of his loss. It was what is called to-day "a hedge," that is, one bet made to neutralize, or offset, another. This gave to the smaller merchant the advantage of distributing his losses over a number of voyages, as was done by the owner of many vessels. Antonio, the wealthy merchant, is made thus to express his security: "My ventures are not in one bottom trusted Nor to one place; nor is my whole estate Upon the fortune of this present year. Therefore my merchandise makes me not sad." Gradually there came about a specialization of risk-taking by the men most able to bear it. They could tell by experience about what was the degree of uncertainty, and could lay their wagers accordingly. When several insurers were in the same business, competition forced them to insure the vessel and cargo of the ordinary trader for something near the percentage of risk involved. The insurance thus tended to become a mutual protection to the ship-owners; what had to be paid in premiums to cover risk came to be counted as part of the cost of carrying on that business. [Sidenote: Insurance as mutual protection] Modern insurance is mutual in nearly every case: the total premiums equal the total losses plus operating expenses, the interest on the reserve of premiums counting as part of the premium. Each one gets protection for the loss of his property in return for the payment of a sum that will cover the losses on others' property. Such an exchange is a profitable one. The premium comes from marginal income; the loss of house or property would fall upon the parts of income having higher marginal utility. The less urgent wants of the present are sacrificed in order to protect the income that gratifies the more urgent wants of the future. In insurance each party gives a smaller utility for a greater; each has a margin of advantage; while the greater certainty in business stimulates effort and rewards it. This is quite the opposite of the working of betting and gambling. [Sidenote: Conditions of sound insurance] 6. _To be economically sound, insurance must have to do with real productive agents, and with somewhat regular, ascertainable events beyond the control of the insured._ The difficulties that arise in case of fire-insurance are due largely to the failure to meet these requirements. When the insured sets fire to his own buildings, fire insurance ceases to be a legitimate thing. Constant efforts are made by insurance companies to guard against these "moral risks," the least calculable of any. Merchants whose stocks have been mysteriously burned two or three times find difficulty in getting insured. In life-insurance it was the custom formerly to refuse to pay death-losses in case of suicide; but now that condition is attached only for the first two or three years. It being reasonable to suppose that no man would plan suicide years in advance, death by one's own hand some years after taking life-insurance is regarded as coming under the ordinary rule of chance. § II. THE SPECULATOR AS A RISK-TAKER [Sidenote: An element of speculation in all business] 1. _Every enterpriser is to some extent specializing as a risk-taker._ This familiar idea may be taken as a starting point in discussing speculation. In its broadest sense speculation means to look into things, to examine attentively, study deeply, contemplate, meditate. In a business sense the speculator is one who studies carefully the conditions and the chances of a change of prices; hence arises the thought that speculation is connected with chance. The enterpriser can estimate these chances better than most men. He stands on a hilltop sweeping the horizon, and can see farther than the workingman can. He relieves the other agents of part of the risk, and he insures both laborer and capitalist against future fluctuations of prices. Some of the profits of successful enterprise in countries where no system of regular insurance has grown up, and in certain lines here where no insurance is possible, are speculative gains of this sort. Offsetting them, however, in large measure, are the speculative losses, by which in many cases the investment has been swept away altogether. The cautious business man tries to reduce chance as much as possible by insurance, and to confine his thought and worry to the parts of the productive process where his ability counts in the result. The wise have found out that it is better to shift the risk to some specialist who can take it better than they. For a man who has his thought and effort concentrated on running a flour-mill, it is foolish to take the risks of fire, of loss in shipment, of a rise in the price of grain needed to fill outstanding orders--it is as foolish as it would be for him to make his own machinery. Insurance being the economical way to cover risk, the reckless will, in the long run, be eliminated from the ranks of enterprisers. [Sidenote: Specialization of risk taking] 2. _In some lines the risk of marketing and carrying large stocks becomes highly specialized, so that ordinary enterprisers shift it to a small group of risk-takers._ In buying and selling large quantities of produce there is required the closest and most exclusive attention of a small group of men. The marketing of some staple products requires the most minute acquaintance with world conditions. To foretell the price of wheat one must know the rainfall in India, the condition of the crop in Argentina, must be in touch as nearly as possible with every unit of supply that will come into the market. Such knowledge is sought by the great produce speculators in the central markets. If all means of communication--telegraph, cables, mails--are open to all, competition among these speculators becomes intense, and the result is the extremest efficiency. Their survival depends on the development of acute insight into market conditions. It is the testimony of expert witnesses and of writers in the report of the Industrial Commission that the margin at which farm produce is sold has fallen greatly in the last few years. These products are marketed along the lines of the least resistance, that is, of the greatest economy. The function of the commercial specialists is to foresee the markets, and to ship to the best place, at the right time, in the right quantities. If a product shipped to Liverpool will, by the time it arrives there, be worth more in Hamburg, there is a loss. Such difficult decisions can be made best by a small group of men selected by competition. When handling actual products they perform a real economic service. [Sidenote: Produce speculators as insurers] [Sidenote: Source of legitimate speculators' gain] 3. _Even some mere speculators on the produce markets may and do at times perform a productive service as risk-takers._ Many of the speculators in staples, wheat, corn, wool, rarely handle the material things, the real products. They make it their business to study the world conditions, to foresee prices, and in a sense to bet upon them. Regular merchants buy and sell fictitious products of these men. When a miller buys ten thousand bushels of wheat that will remain in the mill three months before they are marketed as actual flour, he at the same time sells that number of bushels to a speculator for future delivery; or selling flour for future delivery the miller buys a future in wheat. In either case he cancels the chance of loss or gain, giving up the chance of profit in the rise of wheat in exchange for protection from the loss of the product on his hands. To him this is legitimate insurance, for he is striving not to create an artificial risk, but like the medieval ship-owners, to neutralize one that is inseparable from the ordinary conditions of his business. One may ask, How, if the miller in the long run benefits, can the speculator gain? He does not intend to perform this service for nothing. Yet as the sales in the whole market equal the purchases, some say that there can be no profits to the speculator. There are unsuccessful speculators and at any rate their losses go to the successful as a sort of gambling profit. Speculators do not dine entirely on "lambs"; they are anthropophagous. But, further, the sales to legitimate purchasers should net a gain to the abler speculator. In proportion as his estimates are correct, there will remain a regular slight margin of profit to him. If he agrees to sell wheat at eighty-five cents to be delivered in three months, he expects it to be a little less at that time. In the long run the ablest speculator probably buys at a little less and sells at a little more than the price really proves to be. This means that the merchants in the long run pay something for protection against changes in prices, just as they pay something for insurance. And yet this is the cheapest way to eliminate risk, and a man engaged on a large scale in milling is, it is said, at a disadvantage if he neglects this method of marginal buying. [Sidenote: Ignorant and dishonest speculation] 4. _The buying of margins by the "lambs" is simple betting, and much manipulation of the market is dishonest._ What has just been described is the more legitimate phase of marginal buying, not its darker aspect. One who, having no special opportunities to know the market, buys or sells wheat, or other commodities or securities, on margin, is called a lamb. He is simply betting. He has no unusual skill; he cannot foresee the result. The commission paid to brokers "loads the dice" slightly; the opportunities of the larger dealer of anticipating information load the dice heavily against the lambs. Secret combinations and all kinds of false rumors cause fluctuations large enough to use up the margins of the small speculator. At times a number of powerful dealers unite to cause an artificially high or low price, a situation called "a corner." But this is little other than gambling between betters. The general public gains and loses little if any by these operations, except in the evil effects they entail socially. § III. PROMOTER'S AND TRUSTEE'S PROFITS [Sidenote: The promoter's service to the owners] 1. _The promoter of trusts performs in some ways a substantial economic service._ A promoter is one who undertakes to convert a number of unrelated factories, or establishments, into a trust, or combination. He gets options on different factories, that is, the right to buy them at an agreed price within certain time limits. He gets some banking house to underwrite the combination, that is, to agree to dispose of a number of shares to the investing public. A certain number of shares go to the owners, a certain number to the banking house for its services in underwriting, and a substantial number, it may be ten or twenty per cent, of the enormous capitalization, to the promoter himself. This is payment for his ability to water the stock successfully, to capitalize it for more than its former value. Evidently the owners think he earns the money or they would not pay him. So far as there are economic advantages in large production, and inasmuch as there is always friction in the forming of new industrial arrangements, there is a real social service performed by the promoter. The gains of the promoter are in part the legitimate price of progress. [Sidenote: The loss of the investors] 2. _A large part of the profits of promoter and of owners is unfairly taken from the investor._ The larger modern business is less and less attached to particular neighborhoods. A much smaller proportion of investments is made in industries which the investor himself can control or even see in operation. Business, therefore, in these days is done largely on faith in other men. Especially the investor takes great chances. The prospectus announcing a reorganization is frequently misleading. It frequently misrepresents the sources of income and the probable dividends, conceals essential facts, and makes misleading statements. The capitalization often is absurdly high, compared with the value of the different establishments. In one case eight million dollars of stock were issued to represent factories whose combined value had been five hundred thousand dollars. So far as the capitalization is based on the increased profits due to the monopoly power, the profits of reorganization are taken out of the pockets of the public. But in fact even monopoly earnings cannot support such valuations, and from the outset if fair dividends are paid, they are falsely paid out of capital, not out of earnings. With the approach of bad times there must be a suspension of dividends, a fall in the value of securities, and a loss falling upon the investors. Such practices are a serious evil, for the stability of industry depends on the opening up of opportunities for safe investment to the average man. [Sidenote: The speculating trustee] 3. _Corporation officers and trustees, speculating in the stocks of their own companies, are reaping illegitimate gains._ It is recognized by public sentiment and in law that for public officials to let contracts to themselves is bad morals and bad public policy. It is the duty of legislators not to make laws for companies in which they are interested. One of the greatest scandals in American public life, "the Credit Mobilier affair," was caused by the acceptance by members of Congress, virtually as a gift, of shares in a company that was seeking favoring legislation. Such action must be looked upon as a sort of industrial treason, comparable to the old form of political treason. Corporation officers are in a position of public trust toward the investors quite comparable to that of government officers toward the citizens. The power of directors and of other officers to manipulate earnings and dividends, and thus to affect the market value of the stock, leaves the investing public helpless. The practice by officials in great corporations of speculating in their own stocks, whose prices they can manipulate, is so common as scarcely to attract comment. Large fortunes result from this betrayal of the trust imposed by the shareholders. This is not legitimate speculation; it is like loading the dice, pulling the horse, drugging the pugilist--things despised and condemned even in gambling and sporting circles. [Sidenote: Two types of speculation] It appears, therefore, that in the complex conditions of modern business there is a legitimate concentration of risk in the more capable hands, but also a growth of opportunities for illegitimate speculation and for large dishonest gains that were not possible before. These two types of speculation should be distinguished, as far as possible, in thought and in practice; but this it not easy in concrete instances, which vary almost indistinguishably from the clear case of honest earnings to the other extreme of illegitimate gains. CHAPTER 37 CRISES AND INDUSTRIAL DEPRESSIONS § I. DEFINITION AND DESCRIPTION OF CRISES [Sidenote: Broader definition of a crisis] 1. _In a broad sense, a crisis is a decisive moment or turning point; hence, in industry, a collapse of prosperity._ In the course of a fever the crisis is the point where there is a turn for the better or for the worse. The figure of speech as applied to industrial conditions would seem to fail, in that what precedes is apparently exuberant health, not disease. Business conditions do not move along uniformly. There are waves of prosperity. Profits are apparently great, then may be suddenly swept away. The profits of the prosperous time are partly illusory, or exist only on paper. The situation has all the unhealthiness of the fever-patient. Men trade in promises and when the crisis comes, they have only promises for profits. The discussion of business management and profits is not complete without a consideration of this rhythmic movement of confidence and prices. A crisis in the business affairs of an individual, in the sense of a collapse of prosperity, may occur from many mischances. A local crisis may be felt in some one neighborhood as a result of flood, of fire, or of other accidents. Such a case was that which occurred in 1864, in Manchester, England, when the cotton factories were compelled to close because the supply of cotton was cut off by the blockade of the ports of the South in the Civil War. Such a local crisis sometimes results from a change of transportation, throwing a town out of the line of trade. These have been mentioned in discussing chance and risk; but the phenomenon known generally as an industrial crisis is of wider extent and of a more peculiar nature. [Sidenote: Various types of crises] 2. _In a more special sense a financial crisis is the confusion and loss that mark the end of a period of rising prices; an industrial depression is the period of hard times that follows._ The word crisis suggests a brief period, a moment, something that is severe, sudden, and soon over. The term financial panic is frequently used as a synonym for financial crisis. A crisis in the narrower sense has to do with prices--is always connected with money in some way. While, therefore, crises may be divided into industrial, speculative, and financial, according to their immediate occasion, all of them are financial in the sense that they have to do with a change in the general price level. A crisis is a jolt to prices which shatters the credit of some banks, brokers, merchants, and manufacturers. Crises are thus peculiar to the money economy and to a developed industry. Not every business misfortune is to be called an industrial crisis, but only those where prices and credit are generally depressed. A long period of hard times is sometimes called a crisis, but it is better to distinguish it by the term industrial depression. [Sidenote: Industrial conditions preceding a crisis] 3. _The period leading up to a crisis is one of general prosperity._ Industry in successive decades does not pass through an unvarying series of changes, but history repeats itself with sufficient regularity to justify the view that a certain series of changes is typical in modern industry. When prices are at the lowest point many factories are closed, and much labor is unemployed. Conditions are worse in some industries than in others. General economy and great caution prevail; few new enterprises are undertaken. To those having available money this is a good time to buy, and property begins to change hands. Then hoarded money begins to come out of its hiding-places. Money flows in from other countries, particularly if business conditions are better abroad than here, for low prices make a country a good place in which to buy. At the same time that the money in circulation thus increases, there is a general return of confidence that increases credit. Not only are there more dollars, but each does more work. Then old enterprises are resumed and new ones are undertaken. The purchase of materials in larger quantities causes a rise in prices and an increase in costs. The surplus labor on the margin of efficiency gets employment, and wages begin to increase. The only classes not sharing in this improvement are the receivers of fixed incomes. As prices rise, the purchasing power of their incomes gradually falls. [Sidenote: The crisis and its results] 4. _The crisis is a moment of widespread loss, which is followed by a long period of small profits to most enterprises, and of enforced economy._ As prices cease to go up rapidly, the question arises in many minds whether the movement can continue, and if not, when it will cease. Men wish to hold on for the last profits, and are willing to risk something to gain them. When foreign prices do not rise in as great proportion as domestic prices, foreign imports are stimulated and the quantity of exports falls. This disturbs the equilibrium of money and requires at length large and continued exportation of specie. This checks prices, and, reducing the specie reserves of the banks, compels them to be more cautious. The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures. The falling prices, the shattered credit, and the financial losses force many factories to close; many workmen are thrown out of employment, and business must again enter upon a period of retrenchment, for it has completed the cycle of changing prices. § II. CRISES IN THE NINETEENTH CENTURY [Sidenote: No financial crises in the Middle Ages] 1. _The periods of industrial hardship in the Middle Ages were connected with adverse conditions of production, not with the collapse of prices._ Periods of exceptional hardship in medieval times were mostly due to political oppression, famine, wars, pestilence, and scourges of nature. There being very little of the money economy, there was no development of credit and of credit prices. The money economy began, as has been noted, in the cities. As the use of money spread, as larger commercial enterprises were undertaken, as borrowing and the payment of interest became common, there began to appear in city trading circles, on a small scale, the phenomena of the modern crisis. [Sidenote: European crises of the eighteenth and nineteenth centuries] 2. _In Europe general industrial crises date from 1763 and have occurred at more or less regular intervals since._ It frequently is said that the cycle, or period, of crises is ten years, but it takes an elastic imagination to find support for this in history. The crises of the eighteenth century occurred in 1763, 1783, 1793, these dates marking the close of wars of some magnitude. The crises were not widespread or general, but were more marked in England, which was most developed industrially and in its money economy. Likewise in the nineteenth century, the crises were of unequal force in the various countries, usually being severer in England. The English crises may be roughly dated 1803, 1825, 1838, 1847, 1857, 1864, 1875, 1890. These were attributed to various causes; that of 1825 to over-trading abroad; that of 1847 to railroad-building; that of 1864 to the interruption of the cotton trade and of commerce, as a result of the Civil War in America. While in many parts of England the crisis of 1864 was unusually severe, in other countries it was of little moment. Germany, after several years of great speculative prosperity, had a most severe crisis in 1875; while France (a somewhat significant fact), although prostrated by the war of 1870-71, losing a large amount of wealth, and paying a thousand millions of dollars to Germany as a war indemnity, escaped a commercial crisis almost entirely at that time. [Sidenote: Crises in the United States] 3. _In the United States there have been five marked crises: the first in 1817, the last in 1893._ These crises were of date 1817-20, 1837-39, 1857, 1873, 1893. Major crises thus occurred about twenty years apart, and minor crises in several instances alternated with them, notably in 1866, 1884, and we might add, 1903. These crises were the culmination of different kinds of speculation, usually spoken of as their causes. The crisis of 1817 was due to over-trading and to the immense importation following the war of 1812 and the resumption of commerce with Europe in 1816. In 1837-39 came in quick succession two crises, not quite distinct from each other, the second similar to the relapse of a fever patient. The immediate occasions were over-speculation in lands, a great issue of bank money, national expansion, and over-confidence, possibly in some degree the heedless financial measures of Andrew Jackson. The crisis of 1857 followed a period of great prosperity marked by the discovery of gold in California in 1848, by great expansion of commerce, by the building of railroads, and by a great increase in foreign trade. The crisis of 1873, probably the severest in our history, is attributable to great speculation, especially to railroad-building on an unexampled scale following the war. The blow, when it fell, was intensified by the contraction of currency leading to the return to a specie basis and lower prices. The crisis of 1884, a comparatively slight one, occasioned (rather than caused) by the discussion of the money question, was followed by some years of noticeable depression. The years 1889 to 1892 witnessed a prosperity that culminated in a crisis in September, 1893, (likewise generally explained as due to the unsettled state of our monetary system) followed by a period of depression lasting until 1897. The period from 1897 to 1903 has been marked by great prosperity and by rising prices. The over-hasty prophecies of collapse in the last two years have thus far been falsified,[3] but there is now a general feeling of distrust in investing circles. Already there has been a reduction of dividends in leading industries, and here and there a fall in the value of stocks. High prices have greatly checked building. The great credit advances made on "industrials," the stocks of manufacturing corporations, are one of the main sources of danger. Caution, however, has been learned by experience; the banking interests are more closely coördinated and give better mutual support than in the past, and a considerable decline in stocks has already occurred without as yet affecting general prices of commodities. Various novel features in the situation make prophecy difficult, but a period of liquidation and lower prices appears to be at hand. [Footnote 3: These statements are retained as they were made in March, 1903. In the following September occurred a very remarkable panic in stocks which had the minimum of effect on general business. While stock prices have somewhat recovered since that time, general business conditions, on the whole, tended for a while toward the worse until the spring of 1904.] [Sidenote: General features of crises] 4. _Irregular in time, and unlike in their immediate occasions, crises show some general features._ The chief of these are told in the brief story of the course of prices. Crises are less severe in countries with less developed money and credit systems. They are harder in the United States and England than in Germany, harder in Germany than in France, harder in western Europe than in eastern Europe, harder in Christendom than in heathendom. They are less severe in rural districts, where prosperity depends more on crop conditions, and business has in it less of financial speculation. Their effects are least felt in the staple industries, for when hard times come, people economize on the less essential things. The glove-factory, the silk-factory, the golf-club-factory are more likely to close than the flouring-mill. They are felt less by classes with fixed incomes than by those with variable ones. They affect wages and salaries less than profits. The rate of wages is affected only in a moderate degree, but laborers suffer in the loss of employment. The money-lender who has eliminated chance as far as possible and has taken a low rate of interest loses little; the risk-taker who draws his income from dividends on stock probably loses much. § III. VARIOUS EXPLANATIONS OF CRISES [Sidenote: Glut theories of crises] 1. _Over-production and under-consumption theories are those most widely held._ In the first annual report of the United States Commissioner of Labor (1886) is given a long list of theories, more or less wild, that have been advanced in explanation of crises. It is simply a catalogue, not a logical grouping. Most of the views can be classed as under-consumption or over-production theories, which are but two aspects of the same idea. One view is that too many things are produced, another that too few are consumed. The over-production theorist, seeing that warehouses are filled with goods that cannot be disposed of for what they cost, that factories are shut down and men are out of employment for lack of demand, declares that productive power has grown too great. The under-consumption theorist, seeing the same facts, says that the trouble is lack of purchasing power. He admits that there are people who would like to buy these things, but he asserts that such people lack money because production grows faster than wages, wages being fixed, as he believes, by the minimum of subsistence--a theory akin to the iron law of wages. In both over-production and under-consumption theories the inequality of demand and supply is looked upon as a general one. There is supposed to be not merely an unequal and mistaken distribution of production, but a general excess of productive power. [Sidenote: Defects of glut theories] The wide vogue held by these views would justify a fuller discussion and disproof of them here, did space permit. It must suffice to indicate merely that they have the same taint of illogicalness as the "fallacy of waste," the "fallacy of saving" and, still closer likeness, the "fallacy of luxury." They overlook the fact that an income, either of money or of other goods, coming even to the wealthiest, will be used in some way. It may be used either for immediate consumption or for further indirect use in durable form. Through miscalculation there may be, at a given moment, too many consumption goods of a particular kind, but the durable applications can find no limit until the inconceivable day when the material world is no longer capable of improvement. At the time of a crisis, there is unquestionably a bad apportionment of productive agents, and a still worse adjustment of their valuations, but these in no wise negative the basic economic fact of the scarcity of wealth. [Sidenote: Money theories of crises] 2. _Another group of theories explains the crises as being due to money, either too much or too little._ The unregulated issue of bank-notes has been assigned as the cause of crises, especially under the circumstances accompanying such crises as those of 1837 and 1857 in America, when bank-note issues chanced to be the agency most marked in the undue and unsound expansion of credit. The issue of government paper money, leading to inflation and speculation, is assigned as a cause leading up to such a crisis as that of 1873, following our Civil War. The reverse view is taken by the advocates of a cheap and plentiful money. They say that these crises were caused, not by the expansion, but by the reduction of bank-notes; for example, not by the inflation of prices through the issue of greenbacks in 1862 to 1865, but by the contraction of the currency from 1866 to 1873. [Sidenote: Their inadequacy] There is only a fragment of truth in these various views. It is always lack of money at the moment of the crisis that causes any particular failure, and in that sense it is always lack of money that causes a crisis. But the question is, whether in any reasonable sense it can be said that it was lack of a circulating medium before the crisis that brought it on. There is no support for this view, except in the rare case when the money standard is undergoing a rapid change, as in the United States from 1866 to 1873, and the statement then needs much modification and explanation. The money theories of crises are nearer to the truth than are the over-production type, for the crisis is always connected with money and prices. But it cannot be said that the absolute amount of money in circulation in the period preceding crises gives occasion to them. In a few instances a rapid change in the amount has had an important effect, but this fact does not explain crises in general. Lack of confidence is said to be a cause of crises. This is a truism, but the lack of confidence is not without reason and cause. Over-confidence in the period of expanding prices is succeeded by extreme depression when many false hopes are shattered. [Sidenote: Capitalization theory of crises] 3. _Crises must be explained essentially as the forcible and sudden movement of readjustment in the mistaken capitalization of productive agents._ Capitalization runs through all industry. The value of everything that lasts for more than a moment is built in part upon rents that are not actual, but expectative, whose amount, therefore, is a matter of guesswork, or "speculation." Many unknown factors enter into the estimate of future rents. The universal tendency to rhythm in motion (material or psychic) manifests itself in an overestimate or underestimate of rent and of every other factor in value. This is emphasized by a psychological factor called the "hypnotism of the crowd," Most men follow a leader in investment as in other things. The spirit of speculation grows till it becomes almost a frenzy, and people rush toward this or that investment, throwing capitalization in some industries far out of equilibrium with that in others. The use of credit enhances the rhythm of price. A large part of business is done practically on margins. If the value of a thing fully paid for falls in the hands of the owner, he alone loses; but if the value of a thing only partly paid for falls so much that the owner is forced to default in his payment, the loss may be transmitted along the line of credit to every one in the series of transactions. A credit system, highly developed, is a house of cards at a time of financial stress. There is an element of credit in all modern business. Enterprisers enter into strenuous rivalry to secure the profits of a rise, ever hoping to get out whole before the crisis comes. [Sidenote: Psychological nature and objective conditions of crises] The fundamental cause of crises thus is seen to be psychological; it is the rhythmic miscalculation of rents and of capital value, occurring to some degree throughout industry, but particularly in certain lines. But this subjective cause in men is given full opportunity for action only when certain favoring objective conditions are present. Most noteworthy of these besides the credit system is a dynamic condition of industry. The past century has opened up new fields for investment on an unexampled scale. Investment has advanced both intensively and extensively in a series of great waves. New machinery and processes have given undreamed of opportunities for enterprise in the older countries, and the physical frontier of investment has moved outward with the march of millions of immigrants to people the fertile wilderness. Such factors disturb the equilibrium of prices both in time and space, give a powerful impulse toward higher values in the older lands, and stimulate the hopes of all investors. When the balance between the capitalizations of various industries and between the rents of the various periods proves to be false, the inevitable readjustment causes suffering and loss to many, but particularly in the inflated industries. But, because of the mutual relations of men in business, few even of those who have kept freest from speculation can quite escape the evils. [Sidenote: Widespread effects on incomes] 4. _Crises must be discussed in connection with other subjects than profits._ In the text-books the subject of the crisis is variously classified. It may well be discussed with money, credit, and banking. It has its bearings on wages, justice in distribution, the theory of interest, and the consumption of wealth. But the reasons for taking it up in connection with the subject of profits are strongest. In no other connection is the presence of the element of speculation and of chance profit and loss in business so forcibly seen. [Sidenote: Their probable mitigation] The income of every class of society is to some extent affected by these more or less periodic fluctuations. They are in part the price paid for progress under the constantly shifting conditions of our dynamic industry. In part they are the proof of industrial maladjustment. The force of the shocks will no doubt be much reduced by better banking and business methods, and by a sound currency system. More important still, the development of moderation, conservatism, and a less speculative spirit among the leaders of business will do much toward softening the asperity of these scourges of industry. PART III THE SOCIAL ASPECTS OF VALUE DIVISION A--RELATION OF PRIVATE INCOME TO SOCIAL WELFARE CHAPTER 38 PRIVATE PROPERTY AND INHERITANCE § I. IMPERSONAL AND PERSONAL SHARES OF INCOME [Sidenote: Functional vs. personal distribution] 1. _Under the title "the social aspects of value" are to be considered the influences exerted upon incomes by various social acts, ideals, and institutions._ The incomes from the wages of free labor and those from the rent of wealth, as studied in the abstract theory of value, are alike in their impersonal aspect, their relation to utility. But while wage flows from a personal source--is an income appearing to reward the personal effort of the laborer, the income of the wealth-owner is due to the uses of goods. In the abstract theory of value we do not seek to get behind this impersonal phase of rent. The income arising from goods goes to the de facto owner of the goods. We do not ask how the goods first came into his possession, whether through labor or as a gift, whether stolen or inherited. Indeed, the economic theory of competitive rent may be said not to recognize the personal fact of ownership; it is concerned with the impersonal fact of usufruct. The theory of economic rent, of time-value and capital, and of wages, as measured by efficiency, is impersonal, is a study of functional distribution. In the problem of monopoly the personal factor is more prominent, but the economic study of rent cannot well stop there. [Sidenote: Social institutions and personal incomes] An answer, at least in broad outline, must now be given to the question why some men are permitted to hold wealth as their "own," that is, as "property," while other men are propertyless. Why do the owners exact payment for the use of goods, and why are they allowed by their fellows to do so? Back of these facts is a great system of social institutions that helps to determine what men will do. Market value is a social fact; price is determined by the bidding of men under the existing social and political conditions. These broader social aspects of value remain for consideration. The influence of lawmaking, of collective action, and of social institutions on value must be noted. Incidentally, this has been done in speaking of patents, political monopolies, and related questions; but mainly the subject has been viewed from the individual standpoint; now it must be looked at more fully from the social side. [Sidenote: Harmony of the studies of impersonal and of personal distribution] 2. _The study of personal distribution should include a further explanation of the various elements that unite to form the individual's income._ "Distribution" in economics is the reasoned explanation of the way in which the total product of a society is divided among its members. It is a logical question and not an ethical one. The economist first asks, What is the effect of utility on value? and, next, What is the relation of these goods to the personal incomes of the members of society? It is not his peculiar part to say whether this is the best distribution in an ethical sense, yet in pursuing the question of distribution one comes to the border of certain moral questions. The impersonal and the personal views of distribution are not, however, contradictory; they are different aspects of the same question. It cannot be said that the analysis of economic rent is a purely abstract piece of work. In fact, the impersonal view of distribution is essential to an understanding of the personal view of it. The one gives general principles, the other the special cases. In the practical economic issues of the day, the most urgent need is a better popular understanding of the abstracter theory of value. It is a guiding thread through otherwise bewildering mazes. [Sidenote: Composition of personal incomes] The actual incomes of individuals are made up of different elements. The wage-earner and the salaried man are rarely quite without material wealth. The enterpriser gets some income also in the form of contract interest, or as rent from machinery. Actual personal incomes are therefore a sum of various functional or impersonal incomes. The earnings of every agent may be thought of as always going either to some individual or to some group. By social convention the receiver of incomes that are not personal gifts is supposed to have produced them. This involves the great assumption that the owner of a piece of land has produced or contributed in some way to society an amount equal to the rent. This may be true in many cases, but in many cases this view cannot be accepted without close scrutiny. [Sidenote: Law in relation to wealth] 3. _Property and wealth are respectively the personal and the impersonal, the legal and the economic, aspects of productive agents._ Law holds an important place in the discussion of actual economic questions. This fact was not overlooked by John Stuart Mill, and it has been far more clearly recognized in the last few years, especially by the German economists. Political law in the broadest sense, as embodied in the state, is, in the first place, a set of rules to guide the conduct and regulate the relations of men in society--a legal code; it is, in the next place, a governmental machine to determine disputes between men--a judicial system; and it is, finally, physical power to bring contestants into court and to secure and protect their rights--a police force. Whether acting through legislature, courts, or police, in all its dealings with wealth the law is predominantly personal. The question the law asks and answers regarding wealth is not _What_, but _Who?_ Who is the owner, who should control, receive, enjoy the income? Economic wealth consists of scarce things, of valuable agents, and because they are scarce, men quarrel over them. Because of the impersonal economic fact that a field and a machine produce scarce goods, arises the legal question as to which man is entitled to enjoy them. [Sidenote: Property and wealth] In the case of material things, property value and capital value must be exactly equal. Property rights cover the ownership of a material thing. Material property consists of things viewed with reference to ownership; capital consists of the same things viewed with reference to their economic services. There are other property rights besides those in material things, various immaterial rights controlling the action of the individual and thus giving a sort of ownership of the individual's actions. Such are patents which forbid other men making a particular kind of machine; copyrights which forbid other men printing certain writings; legal contracts that limit the action of men in various ways, and thus appear to abridge their liberty. § II. THE ORIGIN OF PRIVATE PROPERTY [Sidenote: Property and income] 1. _Property is ownership, the legal control over the sources of economic income._ The Latin word property means ownership, and hence that which pertains to the individual, that which is a man's own. The control of property is greater or less. The law makes between property rights and equity rights certain subtle distinctions which have their reason in the history, if not in the logic, of the law, but which are not essential to economic discussion. What we are interested in are the equitable claims of men to wealth rather than the technical property rights. With that thought let us consider the value of the control of wealth. If a farm worth ten thousand dollars is mortgaged for five thousand dollars, its economic worth is ten thousand dollars after as before the mortgage, but the equitable claim is divided into two shares of five thousand dollars each. The value of the property right cannot, in a reasonable view, be greater than the value of the economic wealth it covers. There is much confusion in the law of taxation on this point. The law treats the farm as property and the debt upon it, whether secured by a mortgage or not, as another body of property. Needless to say, this leads to absurd conclusions in reasoning, and to gross injustice. [Sidenote: Forms and modes of ownership] There are different forms of ownership: first, private, as that of individuals, families, partnerships, or corporations; second, public or state, as the ownership of the state house, the highway, the Adirondack forest-reserve or the Erie Canal. These are equally effective as against the claims of outsiders, but the rights of those inside the circle of ownership differ. For example, the rights of one shareholder against another, or the rights of one member of a family as against another, are not the same as the rights against outsiders. Private property is the characteristic feature of our present industrial society, but it exists side by side with state property and with many intermediate grades between private and common property. Private property, while attacked on some sides, is usually accepted without question; but in this age of inquiry its origin should be examined, its limits and the reasons for them should be noted, and its purpose, faults, and effects should be set clearly before the judgment. [Sidenote: Various theories of property: Occupation] 2. _The older theories of the origin of private property are those of occupation, conquest, labor, natural rights, and law._ The theory of occupation is that property is based upon the priority of claim of one who finds wealth without an owner and appropriates it. This, to be sure, is a statement of what happens in the settlement of new countries, but it is not an explanation of the property rights that are arising every moment, nor does it give a logical reason for the continuance of ancient property rights. [Sidenote: Conquest] The same can be said of the conquest theory, the theory that property is based on force. It applies to the invasion of the Roman provinces by the barbarian tribes who divided the country and enslaved the population. But it rarely applies to present-day happenings and at its best it cannot, to modern minds, "justify" present property rights. [Sidenote: Labor] The labor theory, meeting some queries where others fail, is that ownership is based on production, on the right of a man to that to which his brain and his muscle have imparted value. It is evident that this test leaves without explanation or justification a great number of things that do exist and have existed as property. [Sidenote: Natural rights] The natural-rights theory is that property is necessary for the realization of the dignity of human nature. This, if true, would be not so much an explanation as a condemnation of private property as it has existed in most cases, as millions of men are in every land all but lacking in property, and inequality of possession is everywhere marked. This theory expresses, however, one of the worthy ideals of modern democracy. Although, in common with the various other "natural rights" theories, it must to-day be deemed too absolute and too individualistic, it contains a far-reaching truth, of which due account must be taken in our social philosophy. [Sidenote: Law] The legal theory is that property exists because the law says it shall. This expresses a truth, but is no more than a truism. The law determines the limits of property, but what determines the limits of the law? What practical or social justification is there for passing and continuing such law? The legal theory does not explain anything finally. Each of these theories has its defects, but each points to some fact important and significant, at certain times and places, in the explanation of this widespread institution. [Sidenote: Property in early societies] 3. _The institution of private property has evolved under diverse conditions; the question of its origin is not the same as that of its present justification._ In early societies individual property rights were not very clearly marked. Every tribe asserted against other tribes, and tried to uphold, by war, its claims upon its customary hunting-grounds; but the claims of the individual hunter and fisher within the tribe did not often come into conflict. Private property at the outset was in personal possessions, ornaments, weapons, utensils, which were very meager in that primitive society where it was the custom "to go calling with a club instead of a card-case." Only later came individual property in land. A few years ago it was generally believed that the organization of the old German tribes was politically an almost perfect democracy, and economically a communism wherein all had equal claims on the land. To-day this opinion is very seriously questioned. It seems probable that the so-called communism was really an oligarchy of the favored, and that the masses lived in subjection, cut off from all but a meager share in the public property. [Sidenote: Origin vs. present justification of property] However that may have been, strong forces within historic times have put an end to the common ownership and tillage of land as it existed among the serfs of Europe. The common tillage of land was shown by experience to be wasteful. Not only did competition tend to bring the economic agents into more efficient hands, but the movement was furthered by many acts of injustice and violence on the part of those in power. Inquiries into the origin and development of this social institution are interesting and helpful in forming an estimate of its present significance, but the problems of the past are not those of to-day. Whether or not the ancient beginning of property in Europe was in violence and evil has but a remote bearing on the question as to the present working of it. Social conditions and needs have not changed more than have the forms and limits of property itself. Each generation has its own problems to solve, and each must test existing institutions by their present results, ignoring for the most part the evils of the past. [Sidenote: Social expediency the ground of private property] [Sidenote: Shifting limits of the law of property] 4. _Private property may now be justified mainly on the grounds of social expediency._ This is a broad explanation under which can be brought the many varying conditions; but it has the fault of a broad explanation, that it needs be further explained. Conceding that private property works hardship to the individual in many cases, it must be justified on the ground that, on the whole, it furthers the progress of society. Private property is looked upon by some as merely reflecting or expressing the economic inequalities of men; the man poor in ability is the man poor in property. It is looked upon by others as exaggerating, indeed at times reversing, the economic abilities of men. In general, it must be judged by this test: Does it further the welfare of society better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that property is a fixed and uniform mode of control; there are many kinds of property. Different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and, in some countries, public property in railway-carriages. But any rule of property, like any other workable human law, must be applicable to all individuals that meet the conditions. Hence any human institution must be judged by its average working, not by exceptional cases. The very acceptance of the theory of social expediency implies the need of a readjustment of the institution of private property; for private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined, not according to the logic of expediency, but by the social inertia which often governs succeeding generations. § III. LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY [Sidenote: Public interests limiting property rights] 1. _Unmodified private control of property is unknown: the public makes many reservations in its own interest._ Few realize the manifold ways in which property rights are limited. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger is excluded. When, under the right of eminent domain, the state or the railroad takes the old homestead from its owner who would live and die there, the payment of money damages to him does not make this the less a limitation of his property rights. Rights of way on property exist either through contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may in no way approve. [Sidenote: Private claims limiting property rights] 2. _The law enforces a multitude of private claims against private owners._ A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a virtual limitation of the control and division of the ownership. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable interest in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to the execution of the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth. These claims mutually limit each other (whether they be called equitable claims, or liens, or property rights), and wealth is not multiplied by multiplying the claims, as the lawmakers unfortunately sometimes assume to be the case. [Sidenote: Limitation of bequest] 3. _The right of bequest, or of gift at death, is limited in various ways in different countries._ The term bequest implies a will, usually a written will in which the person, foreseeing death, has expressed his wishes as to the disposition of his property. It is said sometimes that bequest is a "logical" result of private property, but the law does not treat it as such. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills giving outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasts this with the frequent practice by rich men in America of giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. Settlements and _fidei commissa_ are limited in many countries, because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations, as a result of bequests by the pious. Only recently in England, and to a less extent in this country, has been seriously discussed the policy of permitting unlimited endowments to charitable institutions, and new legislation has diverted from their original purposes some of the old endowments. These varied and often strict limitations of the right of private property are all determined by some thought, wise or foolish, of social expediency. [Sidenote: Limitation of right of inheritance] 4. _The law of inheritance varies greatly with time and place._ Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The old idea of family unity survives in great measure in modern laws of inheritance. The nearest living relatives, no matter how distant they may be, inherit property when there is no will. When a miser dies in solitude and neglect, the world must be searched over to find a remote cousin to take the hoarded wealth. Inheritance is limited largely at present by the power of taxation. The view is growing that the claims of the society in which wealth has been acquired are stronger than those of relatives distant alike in space, in blood, and in affectionate interest. This view is reflected in many recent inheritance-tax laws which take from the shares of distant relatives a goodly portion for public purposes. The question is raised in many minds, If private property is not an absolute right, what shall be its limits? What changes should be made in it? The essential thought in the various attacks on the institution of private property is that, because it occasions inequality in incomes, it is not socially expedient. The conviction is growing that, in some general way, incomes should correspond to, and reflect, social service. It is well to consider more closely what the terms social expediency and social service imply. CHAPTER 39 INCOME AND SOCIAL SERVICE § I. INCOME FROM PROPERTY [Sidenote: The justice of property questioned] 1. _Property rights must meet the test of social expediency._ If private property is defended on the ground of social expediency, it must show good social results. It is not a sacred thing; it is open to examination, and must be judged by its fruits. Of all the forms of income, that from property has been most strongly attacked. The thought is that enjoyment of wealth should not be found apart from labor, and that it should bear some proportion to services performed. The enjoyment of an ample income by one who does no more than to draw checks or to sign coupons seems to many minds to be unjust; and it is often questioned whether there is any social service performed by the receivers of the rent from land. Property seems in many cases to be distributed without rule or reason. It does not correspond with beauty, strength, wit, wisdom, temperance, gentleness, or charity. Since the beginning of the Christian era, reformers have assailed and preached against the prevailing inequality of wealth. The idea that incomes, if not equal, should correspond to social service has always been present in some vague way in the minds of men. [Sidenote: Social effect of the right to give] 2. _The right to transmit property by inheritance or by gift may be judged with reference to its effect on the giver, on the receiver, and on society at large._ It is well to take these three points of view. The right to dispose of property either during life or at death has undoubtedly in many ways a good effect on the character of men. It stimulates the father to provide for his children, the husband to provide for his wife. There is a joy in giving, a joy in the power to bestow one's wealth on those one loves. The right to give stimulates industry, frugality, ingenuity, and yields productive results. Much of the existing wealth probably never would have been created if men did not have this right of gift. But there is a limit to the working of this motive, and other motives often are much more effective. Many men after gaining a competence continue to work for love of wealth and power in their own lifetime, as the miser continues to toil for love of gold. When men without families die wealthy, when men that have not the slightest interest in their nearest relatives labor and amass wealth till their dying day, it is evident that the right to bequeath property has little to do with their efforts. Love of accumulation and love of power in these cases supply the motive. A more limited liberty to dispose of property at death might still suffice, therefore, to call out the greater part of the efforts now made to accumulate property. [Sidenote: Effect of the right to receive] That the effects on the receiver of the property are good is somewhat more doubtful. It is true that children raised in great comfort or luxury would be more than ordinarily unhappy if plunged into poverty or even into humble circumstances on the death of their parents. There is much social justification for permitting families to maintain an accustomed standard of comfort. Few would deny that a moderate provision by parents to provide education and opportunity for their children is commendable and desirable. But the evil effects of waiting for dead men's shoes are proverbial. Many a boy's greatest curse has been his father's fortune. Men of native ability wait idly for fortune to come, and opportunities for self-help slip by unheeded. The world often exclaims over the failure of the sons of noted men to achieve great things, for, despite confusing evidence, men still have faith in heredity. A too easy fortune saps ambition and relaxes energy; and thus rich men's sons, if not most carefully and wisely trained, are made pitiable paupers in spirit, while the self-made fathers think their boys have chances they themselves did not enjoy. The greater social loss is not the dissipated fortunes, but the ruined characters. [Sidenote: Broader social effects of inheritance] The effects of inheritance on the community are good in so far as it secures efficient management of wealth. If the son or relative has been in business with the deceased, there is a reason that he should inherit the property, and his succession to it makes the least disturbance to existing business conditions. But every profligate son is an argument against inheritance; every incompetent heir is an argument in the hands of the enemies of the existing order of society. It is to society's interest that no able-bodied member shall stand idle. Every child should have presented to him the motive to devote his powers to the social welfare in economic or other directions. Moreover, many feel that the great fortunes now accumulating through successive generations in the hands of a few families are endangering our free society, even if these fortunes should continue to be well administered. There is a widespread feeling that the heredity of great wealth is, like the heredity of political power, out of harmony with the democratic spirit--though this may easily become a misleading comparison. Still, democracy wishes to see men as individuals put to the test, not profiting forever by the deeds of their forebears. This feeling is shared by those who cannot be charged with radical prejudices. A few years ago the Illinois Bar Association passed a somewhat startling resolution favoring moderate limits to inherited fortunes. Every year sees bills of this purport introduced in the legislatures and in Congress. Andrew Carnegie says it would be a good thing if every boy had to start in poverty and make his own way. Cecil Rhodes recorded in his will his contempt for the idle, expectant heir. [Sidenote: The test of wise inheritance laws] 3. _Social expediency will limit the right of intestate inheritance to persons in essential economic and social relations._ Public opinion is not yet crystallized in favor of this formal proposition, but tends strongly toward it. The foregoing considerations show that the right of gift in the lifetime of the giver should be the freest. The right of bequest, that is, of gift by will, should be liberal. The man who has acquired wealth may well be trusted to decide who bear to him a close social or personal relation, and to say whose lives have in a measure furnished the motives of his activity. But the right of intestate inheritance by distant relatives is one that stands on weak social foundations to-day. It appears to be an unreasonable survival from more patriarchal conditions. The true test is whether the wish to provide for these heirs has furnished the motive for the producing and preserving of the wealth. The claims of those nearest in blood and closest in personal relations are strongest. Family affection and friendship form the strongest of social ties, and it is socially expedient to cultivate them. Motives for abstinence and industry must be strengthened. But the same test shows that the zealous regard of the American law for the rights of grandnephews in Australia, or even of brothers long absent in distant quarters of this country, is irrational, and is unjust to the community where the fortune lies. [Sidenote: Social services of favored classes] 4. _Many fortunes built on favoring legislation are defended as due to social service._ In the Middle Ages kings often granted great estates to nobles as rewards for past merit and as a payment for expected public actions. The great landlords were the magistrates, military leaders, and supporters of social order, and thus, in the judgment both of the king and of the commonalty, the nobles earned their incomes by their social service. While this practice has disappeared under constitutional government, large grants are still made to royal families. Many Englishmen who are democratic at heart uphold such grants as the price of social stability. Regard for royalty is so deep-rooted in the minds of the people of any long-established monarchy that there is always danger in change. England must pay many millions annually as the price of loyal and conservative sentiment. So long as this is true, a family of royal figureheads and idlers performs a social service. [Sidenote: Possible social service of protected industries] Protective tariffs sought by wealthy manufacturers are granted, not ostensibly to help them, but to help the country. The argument is that the benefits are diffused. Aid to enterprises in private hands, such as ship subsidies or as the grants to the Pacific railroads, are defended on the ground that, as a whole, society benefits by thus increasing the income of one class. The promise of social service is most urged by those who get the immediate benefit. Their eyes are keenest. The manufacturer sees clearly the benefits that will come to his factory from a protective tariff, but before he can get it he must convince many others that they too will gain. The majority of the American electorate is not voting a special favor at the polls, but is recognizing what it believes to be in its own interest. Most students of social questions doubt the wisdom of most of these grants to the wealthy on grounds of social service. The burden of proof is on their advocates, but few to-day are so rash as to say that such a claim of social service is never sound. [Sidenote: Private property in land questioned] 5. _Property in natural agents is the most strongly attacked._ In the case of great natural deposits, such as those of coal or iron, the social service that is performed by the mine-owner is hard to see. Great incomes are drawn in the form of royalty or rent by those who never lift a pick or direct a stroke of work. Agricultural land in the hands of absentee landlords yields an income not very clearly due to social service, and this phase of property has been especially assailed during the past century. The modern form of this discussion is concerning "the unearned increment," the rise in the value of lands as a result of social growth. It is proposed to appropriate by "the single tax" the entire rental value of the land for the use of the public. The defense of property in land is first positive: taking not the extreme but the usual case, private property secures the discovery and development of natural resources and their thorough use and good management (not necessarily by personal labor with the hands). If this is true, it is well for the individual and for the community to have this wealth in private hands. But in other cases there is merely a negative argument for property in land: no other better method of employing it has been devised and found practicable The experience with state ownership of mines, forests, and estates has not definitely answered in every case the question whether the social results of state ownership are more favorable than those of private ownership. In some cases they clearly are not, in others they may be; and as the balance of opinion inclines in the direction of public ownership, other reforms will doubtless be undertaken. [Sidenote: Inequality of fortunes] 6. _The present inequality of wealth, not private property as such, is often attacked._ It is estimated that in the United Kingdom two per cent. of the families own seventy-five per cent. of all the wealth, while ninety-three per cent. own less than eight per cent. In the United States it is estimated that one per cent. of all the families own more than the remaining ninety-nine per cent.; and at the other part of the scale eighty-seven per cent. of all the families own less than twelve per cent. of all the wealth. The trend has been toward concentration of fortunes and a larger proportion of the growing income from property is in a few hands. Many feel that the law of property is defective when this is possible, although at the same time the average income of the wage-earner is increasing. Yet, it is not the institution as a whole that is attacked, but its details. The custom of equal division of property among children in the United States has not been as effective in keeping fortunes small as was expected. The wealthy American families have averaged small, and in some of the most prominent the rule of equal division has not been followed. Opportunities for the investment of small savings at low interest are not lacking, but the great fortunes overtower the little ones, securing the great profits and great political and economic power. The farms and the villages are refuges for the small industry and for the small fortunes, and this fact has a great influence on our national character. The whole social atmosphere in the cities, with their extremes of wealth, differs from that in the country, and this contrast promises to become greater as the years go on. [Sidenote: Private property vs. socialism] 7. _The ideal of property rights is that they shall furnish the highest motives for efficient social service._ Private property furnishes such a motive in a broad way, but its most ardent defenders will recognize that it does so imperfectly. It is an institution that has been tried and that does the work, while other methods suggested to do away with it are found to be dreams. The ideal of socialism is the abolition of private property, the centralizing under the control of the state of all wealth, except the simple personal belongings, clothing and other consumption goods. But history and human nature unite to testify that extreme socialism is an unworkable plan, excepting under special conditions, as in barbarous times and under a political despotism. The modern ideal for the control of wealth is the best attainable harmony of liberty and efficiency. If private property as it is, falls short of that ideal, at any rate it works either on a small or on a large scale, and socialism does not work at all. Property rights as they exist are not a product of pure reason. They are the result of social evolution, of historical accidents, of class legislation, and of selfish interest in many cases. Changing social conditions and ideas are bringing many changes in law, and further change must be expected to come. § II. INCOME FROM PERSONAL SERVICES [Sidenote: Some anti-social speculative gains] 1. _Incomes from legitimate enterprise and speculation correspond roughly to social service._ It has been recognized above that there are many grades of chance, of speculation, and of enterprise. The extreme cases are bald crimes and are punished as such. Over some men that never directly break the law there always hangs a suspicion of guilt. It is the purpose of the law to make dishonesty unprofitable, but how imperfectly it does so! There are many cases of chance gains where the lucky man without social service legally enjoys his fortune. The law must be framed in broad terms, and cannot provide for every case. It may broadly forbid lotteries whose evils clearly exceed their benefits. But what would be the effect of taking away reward for the discovery of a gold-mine, even though sometimes it is awkward stumbling, not industry, that reveals the veins of metal? Society has studied that question in the past; even now changes are being made in the laws; and in their turn the citizens and legislators of the next generation must decide the question. It is always under consideration. [Sidenote: Reward and enterprise] Are the rewards of the successful enterpriser greater than he deserves? How shall it be judged what he deserves? The answer is in the form of a question, Could society have the service without the reward? Society may be thought of as hiring the services of the efficient business man at the lowest price. Does it wish the services of Cornelius Vanderbilt in organizing a great system of railroads, of Andrew Carnegie, of Pierpont Morgan? What can it get them for? It must appeal not only to their love of money but to their love of power. Large services and large results can be bought only with large rewards. The shrewd enterpriser is not to be paid with abstract social gratitude. He is not to be tricked, as is a Chinese god, with tissue-paper gold. [Sidenote: Unmeasured gains of vast wealth] But in many ways fortunes appear to grow without social services, and sometimes with social harm. Russell Sage, the noted capitalist (who should know something of Wall Street), in speaking of the greatest of American corporations, said: "They dominate wherever they choose to go. They can make and unmake any property, no matter how vast. They can almost compel any man to sell out anything, at any price." Henry Clews, the well-known New York banker, said of a certain group of financiers: "Their resources are so vast that they need only to concentrate on any given property in order to do with it what they please.... There is an utter absence of chance that is terrible to contemplate. This combination controls Wall Street almost absolutely. With such power and facilities it is easily conceivable that these men must make enormous sums on either side of the market." [Sidenote: Antisocial use of rare ability] 2. _The high pay of rare ability and skilled labor reflects in general a high social service._ The large income of some men reflects service to a narrow class, not to society as a whole. Lawyers as a class aid in maintaining right, but a corporation lawyer may get enormous fees for defeating just public claims; a skilful criminal lawyer may grow rich aiding the guilty to escape justice. Other service ministers to the whims, follies, and vices of the men who pay the bill. Such a service is "social" in a mean sense, corresponding to the low standards of desire in that social group. But what of the high rewards of skilled service ministering to worthy ends? Such favorites of fortune as Jenny Lind and Patti have received five thousand dollars for a single concert. Is this because they are the lucky possessors of a rare gift, or because they perform a social service deserving such reward? Certainly many of their auditors get what they want and believe they are getting the worth of their money. [Sidenote: General social result of rewarding talent] In general the legal right of everyone to get the highest pay he can in a free and open market is essential to the calling forth of ability. In a particular instance it is possible that the service would continue if one half or more of the income were confiscated by the public; but such a personal discrimination would introduce an arbitrary and demoralizing uncertainty into the problem. Who can tell how far the exceptional money rewards have inspired to the highest cultivation of great genius and of many minor talents? In a broad but very true sense, therefore, it appears that high personal achievement, large economic reward, and large social service are connected. [Sidenote: Social service of manual workers] 3. _The low income of unskilled labor seems to fall short of its social service._ This does not refer to the feeble-minded or utterly inefficient, but rather to honest, industrious, "day-laborers," and to the low-paid manual workers in field, on railroad, and in factory. Their service is essential to the existence of society as it is, to all the higher arts, to the sciences, and to the amenities of life; their tasks are the roughest, most painful, most dangerous; yet their pecuniary rewards are the lowest. There is such a unity in society that each more fortunate man is dependent on the services of the humbler laborers who make up a large part of society. According to the breadth of social sympathy their claims seem more or less urgent. [Sidenote: The problem of increasing their reward] There is a vaguely recognized and growing conviction that these hewers of wood and drawers of water should enjoy a larger income. But how are they to get it? How is society to grant it to them? They get what they can under the competitive conditions, they get what their service is worth in the market. Are the conditions of the competition fair? If not, what will be the effect of a change? If they get more, others will get less; and with what result? However great the wish for better things, the attempt to change conditions fundamentally in a forcible and artificial way is both dangerous and foolish. Improvement must come through the coöperation of many indirect agencies gradually changing the nature and direction of the deeper economic forces. [Sidenote: Imperfect social and individual estimates of service] 4. _The services of each are being measured and paid for by each and all._ In two ways society is putting its valuation on the economic services of other members of society: first, by law, or formal social convention; secondly, by individual estimates. By formal law is determined what institutions shall be continued. If the class of property owners is considered worthy of this reward, the institution of property will be continued; if not, it will be altered or destroyed. These decisions are made imperfectly, but as well as men of limited intelligence and honesty can make them. If men were more capable in both these ways they would enact better laws. Again, individuals are putting their estimates on others in bidding for services to minister to wisdom and virtue or to ignorance and vice. If there is to be a much juster estimate of social service, there must be wiser men in society. [Sidenote: The ideal of social service] Does the world owe each man a living? No; on the contrary, each man owes the world his services in exchange for his living. The pauperism of spirit that consists in taking something for nothing is found in every rank of society that enjoys the blessings of progress without giving its best services in return. The ideal of a better adjustment of reward and service grows in the minds of men. Social evolution, shaped by this changing ideal and by accumulating experience, will bring into closer relation the social services and the economic rewards of men. CHAPTER 40 WASTE AND LUXURY § I. WASTE OF WEALTH [Sidenote: Loss of wealth in an isolated or an exchanging economy] 1. _The accidental destruction of wealth is a loss to the owner, rarely with benefit, on the whole, to others._ In the consumption of wealth the loss of its utility is accompanied by the gratifying of wants; in the destruction of wealth utility is lost without the gratifying of wants. In a simple society, without exchange, the result of such a loss is evident. If food is destroyed, men suffer from hunger or gratify appetite less perfectly; if clothing is destroyed, they are cold; if houses are destroyed, they have no shelter. Likewise, if the self-sufficing family on a farm loses wealth by fire or storm or blight, its economic environment is made less fitted to gratify wants. In the conditions of our society, where goods are exchanged, the result appears to be different. The need to replace the lost goods makes a demand for special kinds of labor or goods. There may be, therefore, an immediate benefit to some, which obscures the corresponding loss to others. If a part of the income of the loser must be diverted from other uses to replace the wealth destroyed, those from whom he would have bought suffer an unexpected falling off of their sales, and he has himself gained nothing. The net result is a loss of wealth and gratification to the community as a whole. There is a real exception where the accidental destruction removes some social difficulty. The great fire in London and the great fire in Chicago resulted in wonderful improvement. When an old city is built almost entirely of wood, each owner may think it to his interest to keep the old buildings. A great fire sweeps them all down and compels the rebuilding of the city on a new and higher standard. But the usual social result of accidental destruction is a loss. It is a use of wealth without a fulfilling of the purpose of production, the gratifying of wants. [Sidenote: Intentional destruction of wealth by the owner] 2. _The intentional destruction of wealth by the owner, to make trade good, benefits neither himself nor others._ The case in mind is one where there is full choice between keeping or losing the good, not such a case as the throwing overboard of a part of the cargo when the ship is in danger of sinking, in the hope thereby of saving the rest, or as the blowing up of buildings to prevent the spread of a fire. In such cases the destruction is inevitable without man's action; he merely tries to minimize it. The case in mind is the deliberate destruction of wealth that might be kept for use. One labor leader, for example, boasted that when he drank pop he always broke the bottle "to make trade good" by helping the glass industry. The refuting of this fallacy is one of the time-honored tasks in political economy. There is, it is true, an increase in the demand for glass and glass-blowers' labor, but without an increase in gratification; but at the same time there is a decrease in the demand for other goods which would afford additional gratification. The proverb, old in Shakespeare's time, runs, "Nothing can come of nothing." What is spent for one purpose cannot be for another; "you cannot eat your cake and have it too." A given income can be spent in one of many ways, but not in all ways or even in two ways at once. It is a question of this _or_ that. At the same moment that the demand for pop-bottles is increased, the demand for other things is decreased, possibly that for pop-corn or pop-guns or Populist papers--who can tell? Such a form of benevolence is a mistaken, uneconomic attempt to provide labor for one man by taking it from another. If the advocate of wealth-destruction would be consistent, he should break, not merely the pop-bottle, but the water-pitcher and the table as well; he should make a bonfire at least once daily of his clothing, his house, and its furnishings; he should advise blowing up the steamboat and ripping up the railroad when they have carried a single load of passengers. Thus, when all men were naked and starving, and civilization had sunk to savagery, trade would have been made as "good" as, by the policy of destruction, he could ever hope to make it. [Sidenote: Intentional destruction of others' wealth] 3. _The intentional destruction of wealth owned by other persons is falsely thought to benefit trade in general._ The cases referred to are not acts done with criminal motives, but those done with a view to the public interest. If one sets fire to the property of another, seeking revenge or plunder, he is guilty of the crime of arson. But what shall be said of volunteer firemen that let an old house burn down to provide labor for carpenters and "to make business good"? The duty of firemen is to put out fires, no matter what the building is; but they choose sometimes to be ministers to the social interest as they interpret it. The more spent for carpenters' work out of any income, the less can be spent for other objects. It is true, however, that if in a small town the money to rebuild is borrowed from a distant loan or insurance company, there is an increase in employment in that town for one season; and that is as far as most men try to carry their economic analysis. Let the student carry it further. [Sidenote: The seen and the unseen] Servants sometimes excuse the breaking of dishes and furniture on the ground that it makes work, and that the employer can afford it. But income is thus diverted from other expenditure, either for production or for consumption. In the light of the theory of wages, it would appear that carelessness reduces the servant's own efficiency, and in the long run the loss comes, in part at least, off the wages of that particular servant. Bastiat's discussion of the broken window-pane is often and deservedly quoted. What is seen is a certain immediate benefit that the glass-maker and glazier get; what is not seen is that the power to expend an equal amount for other things is thereby lost by the owner of the house. [Sidenote: The wasteful use of wealth] 4. _The destruction of unnecessarily large value to secure a given gratification is not economically sound._ The careless use of wealth to secure an inadequate result is likewise justified as "making trade good." The blunder that compels the rebuilding of a wall in a rich man's garden is an occasion for congratulation to those who see in it a happy provision of work for the unemployed. It is easy to forget that the proper use of goods is the final step in production. According as goods are well or poorly used, the production--that is, the real income or gratification they afford--is large or small. Differences in skill in the use of wealth are great. A French cook, we are often told, can make a palatable soup from what goes from the average American kitchen into the swill-pail. Waste in the use of goods is more likely to be found in new countries where wealth comes more easily and necessity does not enforce frugality. The praise of waste implies the error noted in the preceding propositions. Deliberately securing less than the maximum result from wealth is merely a minor degree of the intentional destruction of wealth. The mistaken view is essentially that of the opponents of labor-saving machinery. It may be true, if the interests of a small class of workers or of tradesmen for the moment are looked at; it is false, if the interests of society as a whole be considered. Far more of wisdom lies in the proverb, "A penny saved is two earned." The economic use of wealth as surely adds to wealth (and, ultimately, to the income of society) as any other mode of production. [Sidenote: Waste in public outlay] Some government expenditures, as for river and harbor improvements, are sometimes favored, not because their immediate purposes are good, but because they "make work" and "distribute money" throughout the country. This money comes from taxation, and no matter what the system of taxation, the burden falls on some one, reducing the incomes at the disposal of the people to expend for objects of their own choice. If the work is not worth doing for itself, the collection of money in small amounts from many taxpayers and its expenditure as a large sum in one locality results in a net loss to society as a whole. Where the result is worth something, but not enough by itself to justify the expenditure, the fallacy of the destruction of wealth is present in a smaller degree. Examples are seen in the extreme use of pensions and in some public subsidies. [Sidenote: The fallacy of waste] 5. _The supposed benefits of destruction and waste are due to a narrow and incomplete view of the question._ Let us restate the ideas that have been touched upon. In many cases it is possible that one person may benefit by another's mishap or folly in the use of wealth. The complex interrelations of men in society make this inevitable. But, to appreciate the final effects of such action upon society, one needs but to go back to the essential thought of wealth and its purposes. As the average efficiency and bounty of the world fall, so fall the income and welfare of men. As it rises, the social and economic levels rise also. Every kind of economic wealth has potentially two kinds of uses: to gratify wants--thus fulfilling its destiny--or to be converted into higher and more efficient agents--consumption or production. That the possibilities of the latter are boundless is overlooked in the fallacies here criticized. An efficient world would be the result of "economy" and saving; a wasted and used-up world, the result of the fallacy of the destruction and waste of wealth. § II. LUXURY [Sidenote: Luxury defined] 1. _Luxury, while variously defined, involves always the thought of great consumption of wealth for unessential pleasures._ It is not possible to define luxury absolutely; it is a relative term. Those opposed to it condemn it in their definition of it, as, for example: "an excessive consumption of wealth," or "devoting a relatively large amount of wealth to the satisfaction of a relatively superfluous want." Those who take a more moderate and favorable view say: "It is the enjoyment of forms of wealth not obtainable by the mass of men." The difficulty in the definition as well as in the problem of luxury is that it involves a mixture of economic and of ethical questions. [Sidenote: Extravagance "to give employment"] 2. _Luxury is erroneously justified by some as giving employment to labor._ Typical instances are extravagant dress and elaborate balls where fine and costly flowers, decorations, music, coaches, require the expenditure of a large amount of money. It is said of the Empress Eugenie, wife of Napoleon III, that, in order to help the glove industry of France, she wore no pair of gloves more than once; in order to help other French industries, she purchased many silks and laces. It is a very comfortable doctrine to some people that the oftener they change their dress, the greater benefactors to society they are. A few years ago the "Bradley-Martin ball" was given in New York city. It was possibly little more elaborate and expensive than many another ball, but it chanced to be a dull time for news and the papers all over the land gave columns to its discussion. In the many interviews with ministers and business men, the thought appeared over and over that the ball had at least the merit of giving employment to labor. [Sidenote: The fallacy of luxury] The fallacy of this is essentially the same as that in the argument for waste and destruction. From the fact that these particular tailors, musicians, and florists would have less employment if this ball were not given, it is falsely concluded that, but for this ball, this particular income, or capital, would not be used at all. The average of employment in those special industries which minister to luxury is the result of and is determined by the average level of demand. There are more caterers and florists in Ithaca than in Hayt's Corners. A more than ordinarily gay season gives unusual profits to these enterprises, and it is true that an abrupt and extreme falling off in demand would cause them large losses, and leave many workers lacking employment for that one season. But, if this limited demand became usual, capital and labor would shift to the other industries to which expenditure had shifted. Other modes of expenditure than twenty-five thousand-dollar balls are possible, as, for example, twenty-five thousand-dollar public libraries. Mr. Carnegie takes his dissipation in that form. That gives employment also; not less does investment in new houses, in new railroads, and in new factories. More employment of a particular kind of labor is caused in one case than in another, but not more employment of labor as a whole and on the average. [Sidenote: Results of a sudden change in standards of living] 3. _If all extreme luxury ceased, men of means would improve durable agents more or would give more or would take more leisure while producing less._ The question of luxury is most difficult when put thus: What would happen if everybody began suddenly to live on the simplest food and to confine himself to the bare necessities of life? A sudden change of this sort is almost unthinkable, but if it took place, all the factories and agents used for non-essentials would lose their value at once. A great industrial crisis would follow, as industry would have to adjust itself abruptly to an unprecedented standard of desires. What would happen if that standard continued would vary as human nature varies. There might follow increase of population, or a heightening of the efficiency of such agents as were of use, or, more probable than all else, a progressive lightening of labor, a use of the surplus of energy in study, rest, and recreation. It is, of course, illogical to suppose that with limited desires for the objective goods of the world there would continue undiminished efforts to produce goods and to save for future superfluities. In actual life changes of standard occur gradually. Economizing in material things by simpler living makes possible not only the increased efficiency of productive agents but the increased enjoyment of immaterial goods. [Sidenote: Luxury as an incentive to progress] 4. _The defenders of luxury claim that it is the great incentive to progress._ It is undoubtedly true that a dead level of conditions is unfavorable to the progress of society. There must be in society some motive for emulation and ambition after the bare necessities of life are provided. There is therefore much strength in the defense of luxury. Necessities, strictly understood, are things absolutely essential to life and health. No hard line can be drawn between necessities and comforts, between comforts and luxuries. The level rises; it is a trite and true saying that the luxuries of one age become the necessities of the next. The rise of the bath-tub in the nineteenth century is an epitome of the progress of civilization in that period. The free baths in our cities surpass the hopes of the wealthy of a century ago. Even the meaner motives of envy may have their social function. The lower social grades, emulous of the higher standard held before them, labor with greater energy. The successful and capable, not content with necessities, continue to give their efforts to production. The destruction of the motive of luxury before the development of a substitute in a higher social conscience, would be paralyzing to industry. Luxury in a moderate measure may be defended by the same arguments as those for private property. True as this view may be in many cases, in others it seems directly opposed to the facts. Let us look at the economico-moral questions involved from the side of the individual who is indulging in luxury, and from that of the society in which he lives. [Sidenote: Happiness and the simple life] 5. _As a question of consumption luxury involves for the individual both an economic and a moral problem._ The economic question is, Does luxury enhance the man's real income? Does a greater expenditure on himself give him a larger sum of gratification in life than a moderate expenditure would give? Ostentation has its penalties. Undue striving after effect defeats its own purpose. This is the cold fact of experience, not a speculative proposition. To get back to the fundamental principle: gratification results from a harmonious relation between man's nature and the world. Life loaded with too much luggage staggers under the burden. The tired faculties of the Sybarite cease at length to respond to natural pleasures. When the senses are robbed of their fineness, youth grows blasé, mature manhood is ennuied, life is empty. The praise of "the simple life" has lately been heard in a quarter whence such counsel does not usually come. In gay Paris, a wise pastor has made one of the most beautiful and rational pleas for plain and sincere living that society has heard since the time of the stoic philosophers. The word is needed. With the growth of incomes grows the strain to reach the self-imposed standards of frivolity. Insanity and suicide are on the increase. The stress of modern life makes men yearn for the simpler joys. Happiness dwells not outside of men; they must seek it within. [Sidenote: Luxury vs. social welfare] An economic failure, luxury is likewise in most cases a moral failure. Morality has to do with others; the social aspect of luxury is its effect on other people. The mere spending of a large income in selfish indulgence absorbs all the energies and interests of some men and women. Not only happiness in the narrow sense, but self-realization, is to such lives impossible. Those absorbed in display can give no due measure of thought to social obligations. A society made up of self-absorbed and self-centered individuals is a selfish society, foredoomed to decay. [Sidenote: Luxury generally condemned] 6. _The larger moral problem involved in luxury is connected with distribution or the justice of the income, rather than with consumption or the spending of the income._ The individual effects of luxury broaden thus into the larger social effects. Most of the enemies of luxury condemn all expenditure of wealth above a very moderate sum, declaring that it is "unjust" for one man to have much while others are in poverty. This communistic doctrine pervades the teaching of many moral teachers, pagan and Christian. In many ways a public opinion can be developed to disapprove and condemn ostentation. Frivolous display becomes bad taste. Flaunting riches meet the public frown. The spending of income for dress and display has never been successfully forbidden by law. The Middle Ages are full of futile sumptuary laws which sprang from the envy of the nobles for the wealthy merchants. The growth of good taste may do what formal law found impossible. [Sidenote: Increasing social uses of wealth] The use of wealth in these days is taking more social directions. It turns from dress toward education, art, music, and travel; then ceases to be applied merely to self and family, and benefits the community. Nowhere and never before has this movement gone so far as in America. Andrew Carnegie, with his gifts of millions annually to public libraries; Peter Cooper, founder of the People's Institute; Ezra Cornell, the patron and prophet of the modern type of higher education--are citizens of a kind better known in this country than in any other. [Sidenote: Justice of the large income] [Sidenote: Legal repression of luxury inadvisable] The immorality of luxury rests in most minds on the conviction that it is unjust that any one should have so large an income to use. The question of luxury leads back to the question of distribution: Has the man honestly gained his wealth? If so, he may spend it with good judgment or poor, with good taste or bad, but, so long as he does not injure others in the spending of it, there is much vagueness and confusion in the talk of "justice" or "injustice." Each must in large measure be his own judge of the wisdom of expenditure. Luxury is not always a question of wealth. Every person of moderate income has relatively superfluous and expensive tastes. One spends more for music than many a millionaire does; another more for books. How many college students' budgets could pass the censorship of Hetty Green, reputed to be the richest woman in America? If expenditures were regulated by the public, few persons would be within the law. But whatever the goods that are bought, if income is unjustly acquired, if its distribution is by rules that do not give the best possible approach to social service, there may well be talk of injustice. There is need of better standards of taste and judgment in expenditure, but not of sumptuary laws. If there is any legal change, it should be rather in the law of property. CHAPTER 41 REACTION OF CONSUMPTION ON PRODUCTION § I. REACTION UPON MATERIAL PRODUCTIVE AGENTS [Sidenote: Essential mark of the consumption of goods] 1. _Economic consumption is the enjoyment of the utilities which wealth is capable of affording._ All wealth looks toward consumption. To take away the prospect of the enjoyment of goods is to take away all their value. Consumption involves generally the using up of a thing. Food is consumed quickly, clothing more slowly, and houses wear out after many years. The using up is, in some cases, due to the forces of nature, and is not hastened by enjoyment. A house goes to ruin more rapidly if uninhabited than with a careful tenant; clothing is destroyed more quickly by moths than by wear. The use of many goods that give esthetic pleasures, as art, painting, sculpture, and the enjoyment of fine scenery or of beautiful building sites, does not destroy the things that afford the pleasure. The idea that all value originates in labor has led to false views on this question. The essential mark of consumption is the using of the income as it arises, not necessarily the using up of the material agents that afford it, though this frequently occurs as well. [Sidenote: Consumers' choice as influencing value] 2. _The kind of consumption affects the value of material agents._ Each buyer helps to determine the use of productive agents. The control of purchasing power means the potential control of industry to that degree. It was necessary in discussing the enterpriser to recognize that the buyer eventually dictates the direction of industry; the enterpriser seeks to produce that for which there is most demand. A change of taste affects the value of natural agents. An increase in the demand for meat affects the value of wheat and potatoes, and also the land used for producing them. A change in the national diet may be equivalent to the discovery or to the destruction of half a continent. If one chooses to drink wine instead of buying statuary, he increases the value of vineyards and decreases that of marble quarries: If one drinks beer, he bids for barley; if he eats candy, he may be offering a bounty for beets. Therefore, choosing vines or violets, pictures or pretzels, each with his nickel helps to determine what shall be produced. [Sidenote: Inventions influencing value] The distribution of wealth thus affects the value of agents. The wealthy spend relatively more for luxuries, the poor for food and other essentials. Where wealth and incomes are very nearly equally distributed, the demand of different families will be for much the same kinds of goods. If there were no rich men, the demand for vineyards producing fine wines would be less. The very best qualities of goods take on the highest prices when there is a small, but very wealthy, class of purchasers. Inventions often shift demand, and value follows. The invention of the bicycle with pneumatic tires, coincident with the adoption of electric traction for street cars, reduced the price of horses between 1890 and 1895. This doubtless was a factor in agricultural land values at that time. This change was sudden, extreme, and temporary, and there has since been a gradual adjustment and a return to the former values. [Sidenote: Consumers' choice as affecting productive forces] 3. _The production of the next period may be radically affected by the use now made of agents._ Some consumption takes the form of using up and reducing the stock of wealth. The demand for lumber causes the disappearance of the forests, whereas the demand for oranges stimulates the planting of orange trees. The reckless exploitation of natural resources leaves society poorer. Great herds of buffalo were slaughtered to get the hides, which were of comparatively slight value. Rich land has been exhausted to get a few harvests. War is a use of wealth for ends believed at the time to be necessary and believed to forward social welfare better in the long run than would dishonorable submission; but it causes misery and leaves industry prostrate. The forms taken by saving are affected by the choice of expenditure. In war the savings of individuals are given to the government and used for destructive purposes. The lender parts with his wealth and society uses it up. While the lender has a claim on the industry and on the remaining property of the community, society as a whole is the poorer. If the savings had taken the form of public buildings, libraries, railroads, and factories, the wealth and income of society as a whole would have been enhanced. [Sidenote: Consumers' choice as affecting wages] 4. _The kind of consumption affects the wages of the various classes of labor._ That an increase in the supply of a given grade of labor reduces its wages and encourages its use, and vice versa, is a truth that became familiar in the study of wages. An influence also is exerted from the side of goods upon the price of labor. A shift of demand from one kind of goods to another depresses the wage of the one kind of labor and raises that of the other. A low grade of labor that performs only simple tasks, and those but badly, is injured if demand shifts to better products. Back of the sweat-shop shirt is the problem of the inefficient worker. Progress takes place by the effort of labor to increase its efficiency and to move into higher paid callings, and at the same time by the desire of the purchaser to buy as good a quality as he can. [Sidenote: The consumer's responsibility] Every buyer then determines in some degree the direction of industry. The market is a democracy where every penny gives a right of vote. It is the thought of the society called "The Consumers' League" that through purchases, pressure may be brought to bear upon the employer to provide better conditions of work. The members of The Consumers' League refuse to buy goods not made under sanitary conditions. Undoubtedly there is here a great economic force which an enlightened public opinion, even without a formal association, can make in large measure effective. Every individual may organize a consumer's league, leaguing himself with the powers of righteousness. Will he read a yellow journal or a pink or a white one? A nickel or two will buy either. He has a dollar; will he go to the theater or buy ten dishes of ice-cream? He decides to buy a book, and more type and paper are made, and more printers are employed; he subscribes to foreign missions and Christian workers penetrate farther into Africa. Every purchase has far-reaching consequences. You may spend your monthly allowance as an agent of iniquity or of truth. You cannot escape a choice even by burying the money, for that is either a demand for gold or a gift to the issuer of paper currency. § II. REACTION UPON THE EFFICIENCY OF THE WORKERS [Sidenote: Instinctive choice as related to welfare] 1. _All consumption works some temporary change in the consumer, making him a more or less efficient producer._ Most consumption goods are used to gratify a wish of the moment. Many actions are governed by impulse rather than by reason; but in general this impulse is in harmony with the interests of efficiency. In primitive society instinct and appetite must generally have been safe guides. Food not merely appeased hunger and gratified the palate, but it gave strength. Sensations of cold, hunger, and thirst were developed by nature to stimulate men to do the things that helped them to survive. In primitive societies there are few chances to seek pleasures that are not favorable to efficiency. In the struggle for existence the more efficient tribes survive, and those that develop many abnormal tastes must perish. But the conditions of modern life are more complex, and temptations beset men on every side. Tastes are pampered and appetite is gratified at the expense of later welfare. [Sidenote: Choice of foods] 2. _The physical efficiency of the worker is conditioned on wise consumption._ Chemists and physiologists are telling now in accurate terms how the nutritive values of foods differ. Food values are not measured by the pleasure afforded the palate. The wide variety and greater choice now possible, even to the modest purse, make the chance of error much greater than in simpler conditions. This subject, already touched upon in the sections on the efficiency of labor, deserves further notice. From youth to age, the foolish choice of goods yields its harvest of ultimate misery. When babies are fed on crackers dipped in coffee, or, as among the Italian immigrants, on stale bread dipped in sour wine, there is a poor foundation laid for a vigorous manhood. Rich and poor cook too much for taste and too little for nutrition or digestion. Much cooking is still done in ways fit only for our grandfathers who had cast-iron stomachs and worked in the open air. Culinary methods have not been adapted as yet to a sedentary life. [Sidenote: Of drinks] Drinking tempts some men not only by taste, but by the appeal to sociability; to other coarser natures the joys of Bacchus offer the one hope of exhilaration. The pleasure from alcoholic liquor may at the moment outweigh the cost in money, but a diseased appetite forbids any reckoning of the vast psychic cost that follows. The coin paid for the drink is the beginning of the expense; misery, disgrace, degeneracy, and bestialty too often are the unreckoned items. [Sidenote: Of clothing] Clothing is primarily for ornament, secondly for physical comfort. That was the historical order, and it is the logical order in most minds to-day. How badly the two needs are harmonized! No wonder that the savage suffers in adopting civilized dress. Travelers describe the African potentate, attired in a high hat and a bracelet, striving to outshine his rival resplendent in full-dress coat and a palm-leaf fan. Civilization is making headway there; but the student of primitive peoples finds one of the important causes of their decay to be their bad judgment in adopting civilized dress, unsuited to their customs and climate. A mistake is made likewise by workers in physical tasks in imitating the dress of the wealthy and professional classes. The dress of the higher classes often is chosen because of its unsuitableness for an active worker. It serves thus to mark its wearer as one engaged in delicate tasks or as a person of leisure. Possibly, therefore, because of their strong social ambitions, the manual workers in America more than elsewhere adopt a costume that is not sensible or sanitary. [Sidenote: Reactions of enjoyment upon the intelligence] 3. _The intelligence of the worker is affected by the form of his enjoyments._ This does not refer to the use made of spare time for regular study in night schools, correspondence schools, vacation work, but to the use of time when seeking recreation. The choice of recreation reacts upon the nature of the man. Will he read a book or play billiards? In proper proportions both may be good, in excess both are evil. Liking realism, does he read Howells or the blood-curdling serial entitled "Piping the Mystery"? Does he devote his spare hours to the "Scientific American" or to the "Police Gazette"? At the moment there may be as much pleasure in one as in the other (and one might add, in Hibernian phrase, "Yes, and more too."). Does he enjoy music, the theater, or the cheaper attractions of Coney Island and the Bowery? Is his recreation permeated with a certain intellectual ambition? There may be just as much momentary joy in one choice as in another, and life is shaped by the direction of one's enjoyments. Much depends on the natural bent; some natures incline to the healthy as the plant grows toward the sun. With most characters much depends on the influences of neighborhood life; thus the boy's clubs and college settlements of the cities, the schools and playgrounds of the villages, are tending to surround child life with healthier conditions, that will mould it into better social habits. [Sidenote: Reaction upon the character] 4. _The form of the worker's expenditures affects his industrial virtues._ This is not a moral lecture; it is a look at the economic side of the subject. There are some moral qualities, however, that are closely connected with efficiency, while others are not. Some individuals are corrupt in private personal relations, but "square" in business dealings. But usually there is some connection between the two, and under modern conditions this is becoming closer. Fitness for daily tasks is affected by the daily thoughts of the worker. Sordid and foul thoughts, like an internal malady, sap the economic efficiency of the worker; clean, bright thoughts act as a tonic. Drink, gambling, fast living, unfit men for positions of trust, while many pastimes leave the moral nature cleaner and stronger. Few can live a double life--honorable, conscientious, and exact in one part of the day, and corrupt in another. Dr. Jekylls and Mr. Hydes are not often found in real life. The habitual train of thought in leisure hours possesses and controls the man throughout his work. It is said that "A man is what his work makes him," but it is equally true that a man's work tends to become what he is. A man fit for a higher kind of work rises to it in the usual order of things; but no matter how humble the task, it partakes of the worth and wholesomeness of its doer. § III. EFFECTS ON THE ABIDING WELFARE OF THE CONSUMER [Sidenote: Production vs. welfare] 1. _Man and his welfare are the end and aim of the economic process._ The starting point of industry is wants; the goal is welfare. Momentary gratification is only a way-station, not the journey's end. Too often, in economic reasoning, things are looked at from the employer's point of view. The older writers, such as Ricardo and Mill, were inclined to take what John B. Clark has called the "feed and work" view,--the view that the workman is merely an agent of production, a means to an end; that his food, the same as coal for an engine, is to be thought of rather as employer's cost than as consumer's gratification. But, in the broader view, the welfare of men as men is the subject most worthy of economic study. The workman's food is to gratify his hunger, primarily; not merely to make him a better working machine. This reverses the order of the older reasoning. The use made of the income is itself a kind of production--its last stage. Is the process, on the whole, worth while? This can only be judged by finding whether, on the whole, the welfare of man has been furthered. [Sidenote: The marginal application of income] 2. _An income yields the maximum gratification when it is apportioned among goods so that their marginal utilities, as nearly as possible, are equal._ Even a small income is income capable of many applications. The choice lies among many thousands of articles. Utility varies not only according to the kinds of good, but according to the varying quantities of each. Every moment, therefore, the conditions of a choice are changing. The best use of income forbids the purchase of an additional unit of any good unless it affords the highest gratification obtainable, at the moment, at an equal price. Various circumstances prevent the exact application of this rule. Expenditure is a matter of habit, in large measure, rather than a matter of judgment. The knowledge needed for a rational choice very often is lacking. Appetites change, making unwise the old purchases, yet men go on buying the same things in the same proportions simply because a readjustment that would give greater gratification requires thought. Finally, the best economic adjustment must conform to the abiding physical and moral welfare of the user, not to a temporary impulse; and such a choice is far more difficult than that of the temporary good. [Sidenote: Progress and the refinement of desires] 3. _Progress takes place where new wealth gratifies marginal wants as intense as those of the preceding period._ If the utility of every kind of goods decreased uniformly as wealth increased, desire would steadily decline in intensity. But old wants vary and new wants develop with prosperity. Desire grows by what it feeds on. Ambition passes on to other and higher peaks. The direction of the individual man's life thus is determined by the expenditure of his increasing income. Wealth makes possible a new adjustment of life, a new character, both in the individual and in the society. [Sidenote: Wealth a means to living] The thought that needs emphasis in this connection is that, while production and consumption are separable in thought and distinguishable in practice, they are not opposed in their ultimate purpose. The highest fruits of production are in the lessons of sacrifice and discipline, and in its opportunities for experience and self-expression. The best result of the consumption of wealth is not the gratification of appetite, but the strengthening of the spiritual forces within men. The world is to rise to a higher social stage not by banishing labor and by multiplying sensual enjoyments of the commoner sort. Wealth, even in an economic view, is not the end of life, but merely the means to its realization. [Sidenote: Variety and harmony in the choice of goods] 4. _Enjoyment is increased by a proper variety and harmony of goods._ As the old kinds of goods increase in amount and fall in value, there must be a substitution of new goods. An element added to the dress or to the diet heightens greatly the total gratification. The result is a unit. Think of a dinner without butter, or a cranberry-pie without sugar, or a dress-suit without a linen collar. Certain combinations are essential to the requirements of developed taste and present a problem of complementary goods. Combinations of complementary goods enhance the enjoyment; inharmonious combinations decrease it. That certain things "go together" is a fact that rests often in the nature of things. Complementary colors please the eye; well-seasoned dishes please the palate. Again, the harmony of goods is affected by the special nature of the occupation. A farmer with his out-of-door life can use tobacco with far less danger than the sedentary worker. A piano player cannot be a base-ball player: the one requires soft and supple hands, the other hard and callous ones. The young man must give up the piano or the game, or play both badly. The harmony may rest on a still more complex social adjustment. The loss to the man whose life is in the main on a higher plane is greater if he descends occasionally to a lower. A ditch-digger, looking at the question short-sightedly, may deem "a good drunk" a very desirable form of enjoyment. But a brain-worker, whose joy as well as efficiency depends on the clearness of his intellectual processes, must see that in his case the perils and the costs are much greater. [Sidenote: Unity of choice in happiness and in character] Wise consumption depends not alone on physical pleasures, but on the spiritual unity of the uses made of goods. Happiness and character are akin in the qualities of simplicity and unity. Happiness, so far as it depends on wealth, is a harmony of gratifications. Character is a harmony of actions, a group of complementary deeds. There can be no harmony, without a central, simple, guiding principle. The wise and moral use of goods and the economic use of them are therefore for the individual essentially the same. Life is a unity. The results of the choice of goods are reflected in the health, intelligence, happiness, morality, and progress of society. It is vain for the economist to ignore the ultimate relations between economic choice and morality; it is folly for the moralist to ignore the economic bases of right and wrong in human conduct. CHAPTER 42 DISTRIBUTION OF THE SOCIAL INCOME § I. THE NATURE OF PERSONAL DISTRIBUTION [Sidenote: Definition of personal distribution reviewed] 1. _Personal distribution, in economics, is the reasoned explanation of the ways in which income is divided among the members of the community._ Before noting more exactly the ways in which distribution can and does take place, it may be well to review briefly some definitions that have been given in other connections. Distribution is bound up in practice with production, but it can be thought of as a more or less distinct problem. Functional distribution is the attribution of value to agents or classes of producers, to land, machinery, and labor considered impersonally as groups of productive agents. Personal distribution is the actual apportioning of income to living persons. This theme now to be dealt with is the more important practically, for the abstract discussion of rent and interest is of use only as it helps to an understanding of this vital human problem. It is well to recall also the distinction between wealth income, money income, and psychic income. The first is the objective aspect, the last is the subjective aspect, of income; the second, money income, may be an expression, in money form, of either of the others, but commonly of the former. The money expression of psychic income can be only approximately attained. [Sidenote: Personal affection and distribution] 2. _The individual's income is determined by a number of forces, only part of which are primarily economic._ Many persons derive income directly neither from property nor from labor. They neither toil nor clip coupons, but they flourish in the favor of others--parent, husband, wife, friends, patrons. So long as the good-will continues these persons may be as well off as if they drew a salary or owned a bank. If a person in control of goods shares them with another, it is a matter that economists must recognize, but cannot well reduce to rules of value. It is not the task of economists to explain why the impulses of generosity arise, but only how they affect distribution. The economic problem of distribution really ends where owner or worker secures his income. Giving a part of it to some one else is essentially a form of consumption, and only secondarily a mode of distribution; it is the way chosen to spend the wealth income. [Sidenote: Complex source of psychic incomes] The psychic income of individuals, therefore, is often made up of many elements. Some parts are due to services performed by the person himself. When one combs his own hair he is adding to his income. Benjamin Franklin said it was better to teach a boy to shave himself than to give him a thousand dollars. Other goods are the uses and fruits of legally controlled wealth: chance finds, as gifts of value or lost and abandoned goods; goods assigned to one by authority; wealth inherited; illegal gains by robbery; goods secured on credit; gifts either of things or of services. The uses of this university are a gift forming a part, first, of the student's income, and, finally, of the social income. Such gifts can be traced back to large-hearted, public-spirited men like Ezra Cornell, but they must be looked upon as coming from some one. This list, incomplete as it is, suggests that the real income of most individuals has manifold sources. Let us undertake to examine and analyze the various methods in actual use in the distribution of income to the persons making up society. § II. METHODS OF PERSONAL DISTRIBUTION [Sidenote: Compulsory distribution; violence] 1. _Distribution is sometimes compulsory, by force or fraud._ This crude and primitive mode of distribution, the negation of personal liberty, never has been quite eliminated. In every country an unhappily large number of men from time to time break over into crime, from violence and highway robbery down to sneak-thieving, pocket-picking, and bunco games. Not more than ten per cent. of this criminal element is at any one time in prison. This method of personal distribution, not hinted at in most theories of distribution, determines a large part of the income of tens of thousands of men in this country and concerns the distribution of millions of dollars. These enemies of society appropriate whatever they can, and the law stops them if it is able. [Sidenote: Chattel slavery] Slavery is distribution by legalized force, but the force is not legalized by the consent of the victims. The evolution of the harsher slavery may be traced through various forms of milder serfdom. There is found an element of this in the freest existing societies; men unwilling are forced to do things. A patent example is the convict on a chain-gang, a slave to society as a penalty for his violation of its commands. But some radical reformers to-day claim that present society is wholly based on legalized force, and that the workingman is essentially a slave. Their ideal cannot be realized without dissolving social bonds and destroying civilization; yet the presence, even in our society, of this forced, unwilling submission on the part of some of its members cannot be ignored. [Sidenote: War indemnities] A similar example of forcible taking is seen in case of war. Savage tribes plunder and take captive their weaker neighbors. Conquering modern nations usually exact tribute from defeated enemies. Germany got a billion dollars from France, Japan a quarter of a billion from China. The terms of peace at the close of our great Civil War were the most liberal ever granted by conqueror to vanquished; and yet the federal pensions granted to Northern soldiers are a form of tribute, being paid by taxes falling alike upon the North and the South. In all these cases the distribution by force is unwillingly suffered. In none of them is it reducible to economic rules or capable of a strict economic explanation. [Sidenote: Charitable distribution within the family] 2. _Distribution may be charitable, that is, determined by considerations of benevolence and affection._ Charitable is here used in its original sense, as synonymous with love or affection. First to be mentioned is the love of parents, the root and type of all the forms of charity. The lack of economic equivalence in the relation of parent and child is complete in early years. The helpless infant gives nothing economic to the parent, the parent gives all to the child. Gradually, however, the balance is regained; as the years go on, not only does the child repay in affection but in many cases he repays in material ways. In the factory districts and on the farm the child in early years begins to reëstablish the balance, becomes a worker, and contributes as much as the cost of his support, and finally more. A student of modern English town life has traced the curve of poverty traversed by the average child of the poor, as the family moves, now below, again above, the level of minimum income required for physical efficiency. In the middle or propertied classes the children do not for many years take the burden from the parents, and it is doubtful whether in most cases the economic balance is ever reëstablished. It is not to the parents, but to the succeeding generation, that the debt is vicariously paid. [Sidenote: And in larger circles] Friendship widens the range of generosity and multiplies the mass of gifts. Broad sentiments of humanity lead to gifts outside the range of personal affection and personal interest, to the beggar on the street, to institutions devoted to charity. In New York state about twenty million dollars a year is given to charity, and in the country at large many times as much. In the year 1901 over one hundred million dollars was given to education in the United States by private donors; and that high mark will no doubt soon be passed. Gifts in cases of great disasters, as the Irish and Indian famines, the Chicago fire, the Galveston flood, the eruption of Mount Pelée, bespeak a widening generosity. Religion impels to the building of churches, to the support of priests, missions, and manifold religious undertakings. Charity in this connection is the expression of a sentiment that varies from the broadest and most general humanitarian sentiment to the most intense and ardent personal affection. [Sidenote: Authoritative distribution in the despotic state] 3. _Distribution may be by an authority willingly acknowledged._ The two preceding forms of distribution, force and love, shade off into this form. In them the ones from whom goods are taken or to whom they are given have no power to change the conditions; here is to be considered the case where the person bows willingly to the superior power and takes what that power accords him. There are few despotisms in which the government is not based on the wishes and average capacities of the governed. If the citizens as a body really desired and were deserving of better government, in most cases they could get it. Much is heard, for example, of despotism in Russia, and of the abject condition of the people; but travelers testify that while many in the educated student classes are filled with the greatest discontent, and the intelligent subject peoples, such as the Finns, detest their rulers, such sentiments are far from general throughout the empire. The power of the Czar could not exist for a single moment if the mass of the people did not look to him as the great father whom they venerate and love. If this is true, the despotism in Russia, though abhorrent to our ideals of freedom, is fitted to the aspirations of the mass of the people. So far as government determines income, the authority distributing income there, as elsewhere, is one willingly acknowledged. [Sidenote: In communities and families] In patriarchal tribes, in communal societies, in monastic and other religious orders distribution is by an accepted authority. Each person works at what he is commanded to do, and some one in authority (the patriarch, head of the community, the father of the monastic order) portions out the work and the reward. In the family this rule largely prevails, and even after the children have come to years of discretion they not infrequently accept, from habit or affection, the will of the parents, and give up their entire wages to receive back a portion. The method of charitable distribution while the child is young gradually changes to authoritative distribution after the child becomes a worker. The untrained and indocile youth, however, is made the subject of compulsory distribution. [Sidenote: In much governmental action] The collection and distribution of taxes is by public authority. No attempt is made to give back an exact equivalent to the tax-payer. The money is taken and spent by authority for the public good. This method is exemplified in the work of certain commissions appointed by law to fix rates or settle disputes, as boards of conciliation and arbitration and railway commissions. The courts sometimes find themselves obliged to enter this field, although they do so most unwillingly. They try to confine their efforts to interpreting the contracts men have voluntarily entered into, and they avoid, so far as possible, the making of contracts or the fixing of rates. [Sidenote: In various contests] In many cases, little thought of as economic distribution, the authoritative method is followed. Literary and oratorical contests are passed upon by a set of judges whose opinion of merit determines the award. It is a poor method, often resulting in injustice (as every defeated candidate will admit); but it is the only way practicable for deciding such contests. Yet there are literary and oratorical contests decided very differently. If a man advertises himself as an orator and charges fifty cents admission to his lecture, everyone who goes to hear the man votes that he is an orator; everyone having money but staying away votes that he is not of such value. The one is judgment by the authoritative, the other by the competitive, method. The essence of the method of distributing by authority is that one individual (or group of individuals) judges of the deserts or duties of others, decides what others must get or must pay, not what he himself is willing to pay. Authoritative distribution is necessary in many cases, but it is fraught with dangers. It is the essence of socialism that it would make this plan universal. 4. _Distribution of psychic income may be in part by the collective use of social wealth._ By collective use in the full sense is meant the continuing enjoyment at the same time by all caring to partake and without limit as to amount. [Sidenote: Distribution by collective enjoyment] Now it is evident that, because of difficulties that arise, not all things are capable of this kind of enjoyment. Free water for private use from public waterworks is wasted; free meals and clothing to school-children are open to still greater abuses. Men cannot thus collectively enjoy rare wines or good confectionery; they cannot partake without limit of a limited supply. But libraries and schools may practically be managed in this way. They require both certain qualifications and certain sacrifices on the part of the user. Collective enjoyment is most completely possible where the use of a permanent form of wealth, such as a park, can be made free to the public. All individuals may enjoy equal privileges, though general rules may limit the kind of use; for example: no one may be permitted to pull flowers or to walk on the grass, but all who make use of the park enjoy equal privileges. Henry van Dyke in one of his essays puts into the mouth of his boy the question, "Father, who owns the mountains?" and the answer is, He who can enjoy them. Every man without covetousness, as he stands on this hilltop, owns the mountains, the lake, and this beautiful valley. In some ways the amount of public enjoyment is decreasing, as by the growing density of population, by the loss of open spaces and commons for playgrounds, by the destruction or fencing in of natural scenery; but in other ways it is growing and must grow rapidly. The spirit of civic improvement spreads. The streets are better paved than formerly; there are more public buildings, art galleries, and noble monuments. Every cross-road in the land will some day have its fountain and its statue. The coöperation of the whole community gives to collective use many of the advantages of large production, and the maximum of enjoyment. [Sidenote: Distribution by custom and status] 5. _Distribution may be by status or set rules and customs._ Distribution by status fixes the shares of men independently of their effort and without their control. It is guided neither by their personal merit nor by the economic value of their services, but by the merits and acts of men not living. This method has prevailed and still prevails to a great extent, though in our society this is hardly realized. Feudal society was built on status. Men were born to certain privileges and positions; they inherited property which could neither be bought nor sold; they followed trades which could rarely be entered by any outside of favored families. Caste in India and in other Oriental countries regulates by status a large part of the life. In western countries to-day inheritance of property is the main legal form of status and it shades off into other forms of distribution. While in some cases inheritance may be looked upon as a gift to the heir, in other cases, elsewhere noted, it is partly earned by the heir who has helped to produce it. By public opinion and by prejudices, status is still maintained even where the law has formally abolished it, as is seen in modern race problems. [Sidenote: Competitive distribution the dominant form] 6. _Distribution is usually competitive in accordance with the value of the product._ This is the dominant form of distribution in modern society. It is the essentially economic form, as contrasted with the legal and personal forms just described, because it is impersonal and reducible to a rule of value. Distribution under competition is made not with reference to abstract ethical principles or to personal affection, but to the value of the product so far as it is honestly controlled. Monopoly, it may be noted, never has ceased to rest under the ban of Anglo-Saxon law, hence to exemplify compulsory, as opposed to competitive, distribution. A striking feature of the competitive method is its decentralization. Each helps to value the economic services of each. If one pays more for the services of the singer than for those of the cook, it is not because he would rather listen to the singing than to eat, but because by apportioning his income he can get the singing and the eating too. In the existing circumstances, the singer's services seem to him worth paying for, and he backs his opinion with his money. So each is measuring the services of all others, and all are valuing each. It is the democracy of valuation, while the method of authority is an oligarchy or monarchy. [Sidenote: Various ideals of distribution] 7. _The best distribution in practice must be sought in union and harmony of these various methods._ Various social reforms propose simply the extreme application of one kind to the exclusion of the others. There are two opposing views of competition: one, that it is the ideal to be sought; the other, that it is inherently bad, and therefore should be abolished. Extreme individualists, believing that everything would be settled for the best by free competition, wish to make it universal. They ignore the many cases where it does not, should not, and cannot exist. Socialists, ill content with the share secured by the less skilled laborer, say that the competitive plan is unsound at the core. They say that distribution should be not in proportion to value, but in proportion either to needs or to deserts (they are not agreed which), judged by a vague ethical standard. But this involves the principle of authority in its extremest form. It intrusts to some men the function of passing upon the economic merits or desires of all others. Yet that alone is not a conclusive argument against all use of authoritative distribution. In many practical cases the intrusting of power and authority to men to judge of the value of others cannot be avoided. Whatever is indispensable, whatever is the best possible, is, humanly speaking, just. Assessors, judges, jurors, must be employed. Interstate commerce commissioners determine whether rates are reasonable, boards of arbitration settle disputes, the strike commission adjudicates difficulties in the coal regions. Doubtless these methods will be increasingly used. [Sidenote: Need of a wise blending of methods] There is no other kind of distribution than those enumerated. The strongest contrast is between the competitive and the authoritative principles; the others are minor and modifying. None of them alone is sufficient; each has its merits and each has its defects; they must supplement each other. Actually they are employed in modern society side by side; each seems essential and best in some special application. But it does not follow that exactly the proper use is now made of each. No two generations have followed the same rule, and the proportions in which use has been made of them has constantly shifted. It must be recognized that the principle of diminishing utility applies to each method of distribution as it does to the productive processes. Each may be best under certain conditions and circumstances, but, extended in application, each reveals its weaknesses. In any productive process the best method depends upon the proper proportion and combination of elements. Progress toward the best possible distribution is to be sought in the wise adjustment of the various methods to human nature and to human needs. CHAPTER 43 SURVEY OF THE THEORY OF VALUE § I. REVIEW OF THE PLAN FOLLOWED [Sidenote: The cycle and order of economic study] 1. _The beginning and end of economic study is man._ Before leaving the more theoretical and abstracter part of the theory of value, it may be well, at the cost of some repetition, to restate and review the relations of the various parts of the argument. Intent on details of the theory of value the student is in danger of losing its broader perspective. The proposition with which this section opens was accepted as our axiomatic starting-point. It was not so in the older political economy; men too often were looked upon rather as a means to an end, namely, the creation of wealth. This proposition refers to all classes, not to a small group of men. The aim of economic study is democratic, being the welfare of all men. Economics does not purpose, however, to explain man's action with reference to all things. It asks and attempts to answer the question: "Why does man attach value to certain things and actions; why does he measure them in certain ratios as expressed in terms of each other; and why do these ratios change with changing conditions?" This purpose has determined the order of our study. Beginning with an analysis of the nature of wants, and of the mental process of valuing consumption goods, the circle of inquiry widened to the problem of valuing things whose relation to wants is more remote and indirect (though not less important). The problem of future uses, the major part of the theory of value, leads back to the question of the use man makes of things--a field claimed by the moralist, but one that cannot be neglected by the economist. Economics is not the whole science of social relations. It is a restricted part of the field. But it comes into relation with great practical questions that touch all sides of life. Thus economics broadens and unites with the general stream of sociology. In the pursuit of our study one comes back to the starting-point and cause of value--human wants and the use made of wealth to gratify them. The circle is completed. We have surveyed, rapidly and imperfectly it is true, the whole range of economic inquiry. [Sidenote: The unit in value problems] _2. The central point in economic study is the simplest problem of exchange value._ The first look at the economic world reveals so many things that have relation to wants, and relations so complex, that the mind is confused. The object of science is to simplify; it seeks unity in the midst of chaos. Relations exist between wants and things that certainly never can gratify them directly. Where is the simplest aspect of the problem to be found? Evidently in the exchange of consumption goods, for these are in closest touch with wants. Out of the complex of direct and indirect goods, those few which are at the moment gratifying wants must be somewhat abstractly, but logically, set apart and studied. In the simplest problem, the exchange of the most typical consumption goods, is the key to the larger problem of value. If one could follow it step by step into its complexer relations, he might hope to understand everything in economics. [Sidenote: Former or conventional conceptions of rent and interest] 3. _The problems of rent and of time-value are successive steps in the explanation of the exchange value of indirect agents._ The term rent has been so variously defined that no caution to the student as to its use can be deemed superfluous. Until recently economists sought to confine the term to the income from natural resources (or land). Rent, in their conception, was the income from one group of goods, physically distinguishable from another group of goods, called capital, which were supposed to yield interest. That is, rent and interest was each supposed to bear much the same relation to a particular set of durable agents; the difference between them was primarily in the agent that yielded them (though there were other complicating thoughts) rather than in the aspect of value they represented. [Sidenote: Rent and time-value as here used] Rent as defined in this volume has the much broader meaning of the usufruct of any material agent as contrasted with the use-bearer. Usufruct is a conception most intimately related to that of consumption goods, but is logically one step further removed from want. Time-value, as here considered, is a broader conception than that of contract interest, for it has to do with the all-pervading element of time in its influence on value. Some rents are logically, and in practical business as well, not measured over periods of time, but at the moment of their accrual. The measurement of time differences is mainly required in setting a valuation upon a more or less permanent use-bearer. This process, which is capitalization, has only recently been recognized to be the discounting of all the future uses to their present worth. While in its essence this is merely a problem in exchange value, it is the highest, subtlest, and most difficult of such problems. Its understanding presupposes rent, just as rent presupposes the analysis of wants and marginal utility. It is the outer zone of the value problem, carrying the thought of value years away (all but an eternity away) from present enjoyment. [Sidenote: Different stages in value] While both rent and time value are widened so that each applies in some manner to all durable agents, it is a grave error to conclude hastily that the intention is to make synonymous the old terms rent and interest. Rent and time-discount remain essentially different stages in the value problem. Actual concrete net _economic incomes_ as they arise _are always rents_. Interest never accrues in a concrete form except under the interest contract for a money loan (a contract income, not an economic income), and this evidently is a species of contract rent. Time-value is a phase of value connected logically with investment, or the calculation of future earning power; rents are both actual and expectative, or future, but as realized incomes they always express present earning power. Together, rent and capitalization embrace the whole problem of valuing durable material agents. [Sidenote: Wages and profits related] 4. _Wages and profits are of the same genus, the value of human services of different grades._ The attempt has been made in the foregoing treatment to show the unity between the problems of wages and profits, and to point out the difference between the conditions that surround them. Through the common characteristic, social utility, the employer's service can be compared with the most ordinary or the most artistic labor. Profits and wages, therefore, are simply different aspects of the same question. A common power, or principle, is found in all objects of value, a power to gratify human wants. In the variety of human services and in material goods must be sought this unity. The different kinds of services range from direct to most indirect goods. The commonest labor may serve welfare at the moment or may be embodied in a form to be used years later. In that light, wages seems a more complex problem than either rent or capitalization. But the moment the service embodies itself in a material good with future uses the general theory of capitalization applies to it. § II. RELATION OF VALUE THEORIES TO SOCIAL REFORMS [Sidenote: "Orthodox" political economy] 1. _The earlier theories of political economy implied a dismal view of the future of the masses._ The theory of value one holds is sure to affect his view of economic progress and of social reform. The theories from the middle of the eighteenth to the middle of the nineteenth centuries, however varied they were in other respects, nearly all gave a gloomy view of the condition of the laboring-men. The physiocratic school in France, the so-called "orthodox" economists in England (that is, the writers from about 1800 to 1850 that were in sympathy with the landholding or commercial classes), and the socialistic or laboring-class theorists, all inclined to this view. It was while this view prevailed that Carlyle characterized political economy by the term still sometimes heard--"the dismal science." The thinkers of that time started their study of value at wages, and assumed that population would always increase so fast as to force labor to a bare subsistence. The other shares (or the other classes of society) were supposed then to absorb all the surplus income. Economics to-day is not especially lugubrious, and its more cheerful note is due as well to its changed theory of value as to the evidence of advancing welfare among the masses. [Sidenote: The gloomy socialistic theory] 2. _The socialistic theory of value, akin to the other, holds that capitalists absorb all the benefits of progress._ The socialists (of the radical school) claim that their theory is merely the logical conclusion to be drawn from the old "orthodox" theory, stated in its extremest form. Usually, however, the orthodox theorists softened and modified greatly the statement of their harsher views. The socialists have not been willing to recognize any ameliorating conditions. They say: economic theory shows that under a competitive condition of society the laboring-man must be forever ground down in helpless misery; therefore the only hope of the laboring masses is to do away with competitive society and to substitute for it central, governmental control of all industry. They did not and do not attempt to distinguish carefully the part of production, due to brains and effort, from the part due to ownership of capital. The socialist theory is a plan for political agitation rather than a scientific theory of value. It was originated or elaborated by men such as Karl Marx, Frederick Engels, and Ferdinand Lasalle, as labor leaders and political agitators, who found a ready weapon in the bungling economic analysis of the time. The claim of a scientific basis for socialism has continued to be proudly made by their followers, but it has a tottering support in their defective theory of value. [Sidenote: George's single-tax theory] 3. _The single-tax theory of value is that ground-rent automatically absorbs all benefits of progress._ This is the most notable example of a plan of social reform growing out of an abstract theory of value. While the socialists first had their plan of social reform (or revolution), in whose support Marx's fanciful theory of value was invented, Henry George appears first to have got hold of a theory of value that suggested his plan of social reform. Studying the political economy of Ricardo and Mill, he accepted their ideas regarding the hopeless outlook of the laboring classes, and their conception of the theory of ground-rent with its false implication that landowners get all the surplus in society. George thus came to believe that, with private ownership in land, competition steadily robbed all but landlords, even the non-landholding capitalist, of any share in the benefits of progress. This theory of value is thought to explain all the poverty in the world. It calls, in the single-taxer's opinion, for a radical measure of reform, namely, the taking of all rent of land for public purposes as a common instead of an individual income. If the theory of value on which it is based were sound, the doctrine would have irresistible reasons in its favor; if it is false, most of the argument falls to the ground, though there may still be substantial reasons of a different nature for the exceptional treatment of ground-rents for purposes of taxation. [Sidenote: Recent hopeful theories of wages; Walker's] 4. _Recent theories of value assign to labor a more hopeful position._ A most optimistic theory of wages is "the residual claimant theory," presented by Francis A. Walker. His view was that the various shares of production, such as land-rent, the income from machinery, etc., and the enterpriser's profits, were fixed by forces independent of wages, and any increase in the product must therefore fall to the laborer as the residual claimant. This conclusion has the one merit of explaining somehow the rise in wages in the past century, but the fallacy of its method is too evident to call for exposure. Not to enter into the details of the method, it is enough to note that it involves the circular reasoning that land-rent is a surplus over cost of production, and is fixed regardless of wages, whereas the cost of production itself is made up of money wages. [Sidenote: Clark's wage theory] Another American economist, John B. Clark, is led by his theory of profits to a most hopeful conclusion as to the future of wages. Profits he considers to be essentially the reward for improvements in productive processes, which gradually accrue to the general benefit. As profits thus disappear, the average wage-earner is correspondingly uplifted, a conclusion quite as hopeful as that of Walker. In discussing profits above, dissent from the narrow conception of their source has been expressed. Some facts lend support to every one of these theories of social progress, but other facts refuse to be harmonized. The temptation to get a simple, dogmatic explanation of value should be resisted. When the interrelation of the factors is recognized there is little likelihood of concluding that some one of them will absorb all the benefits of progress. One is not driven to the extreme either of optimism or of pessimism. While the theory of value is not in itself a theory of society, it greatly influences social conclusions. Clear economic analysis is a condition to sound thinking on practical questions. § III. INTERRELATION OF ECONOMIC AGENTS [Sidenote: Organic nature of the productive process] 1. _The industrial process is a unity and the different agents bear an organic relation to each other._ The problem of value is not one of physical division; it is one of logical analysis, and this is not possible in isolation or without the competition of men. Production as now carried on is a social process; the determination of market price is a social process. The different agents are complementary goods, each necessary to the best use of the various other agents. The value of seed is not to be found apart from the use of the ground; or the value of the leather apart from the shoemaker or the thread he uses. When these things are brought together in society their value is found by the comparison and measurement of marginal utilities. Economic forces, like other classes of forces, act and react upon each other. Two bodies attract each other in space; two chemicals uniting are both transformed into a substance differing from either. The economic result of materials and men coöperating is something differing from either factor, yet dependent on both. [Sidenote: The conventional divisions of economics] 2. _The divisions of the older political economy are aspects of the general problem of value._ The divisions conventional in the text-books on political economy, namely, "production, exchange, distribution, and consumption," have not been observed in the plan of this work. It has not seemed possible to accept the view that each of these phases of the vital economic process could be discussed completely apart from the others. _Consumption_ must be studied at the beginning, as the basis of exchange value, and again at the end, when the circle of thought has returned to the use man makes of wealth; and it pervades the whole subject of value, for back of every price is the potential utility of the good. _Exchange_ is coextensive with the whole process of associated industry; for wherever there is a price, there is exchange. Subjective value outside a market forms a small, though not negligible, part of the problem for the student of to-day. _Production_ is implied in every exchange, as exchange is in all social production. They are, indeed, but different phases of the larger phenomenon, the economic process. Nor is _distribution_, considered in its impersonal or economic form, any other than the logical valuing of the shares of the factors in economic production. Impersonal distribution is coextensive with economic production. Whatever a good, logically considered, contributes to value in production, that is its share of the product. Personal distribution, it is true, brings in other great influences which have been partly considered, but which will be treated more fully in the division to follow, on the influence of the state in the distribution of income. [Sidenote: The broadest principle of value] 3. _The law of diminishing returns is the broadest principle of value._ The one character common to all goods is that their importance varies with their quantity in any given connection. This is true of direct goods whose power to gratify wants falls as the supply grows; it is true of indirect goods, whose technical importance diminishes as the quantity increases, and which when taken at any given cost can be applied, after a point, only with diminishing advantage. The gradual extension of the marginal principle from land used in agriculture to every conceivable economic agent is the most important development of the last century of economic theory. [Sidenote: Generality of the law of value] It being true that things are measured by the utility of the unit used last, logically considered, the least change in the combination alters the value of all the factors. Practical economic problems, therefore, are dynamic, not static. The view that the shares of the different factors are fixed by quite separate laws has not been accepted here. The law of rent is the same as the law of wages in its essential point and principle. It is a general law of value applied to a particular kind of want-gratifier. The law of substitution likewise is a general law, for within limits some substitution of factors is always possible along the margin. That being true, every movement of price creates its own resistance; substitutes will be found for materials, demand will decline, and a new equilibrium of price will be attained. [Sidenote: Mutual employment of the factors] [Sidenote: An ever changing problem] 4. _The factors and agents of production mutually furnish the field of employment for each other._ Each factor is dependent for its technical efficiency on the presence of the other factors. If labor is plentiful and machines are scarce, machines bear a high rent. In accordance with the law of diminishing returns, the last unit of labor in that case contributes little to the product, and labor gets low wages, while more is attributed to the machine. Each machine thus may be considered to offer a field for the employment of labor. If population increases and land remains fixed, the need for food raises the rental value of land. But if population increases slowly, and capital and science progress, the field for the employment of labor is enlarged; and if new lands are opened up or new resources are discovered beneath the surface of the land, the field for labor is still more enlarged and a greater share is attributed to labor. This changing character of the problem must be recognized; no share is foreordained in size. The pursuit of the analysis of value along the lines of marginal utility thus leads to conclusions far less mechanical, and, to the superficial student, less simple than were the doctrines prevailing in the older economics. But the conclusions are, let us hope, more exact and more applicable to the real world, enabling the student to arrive at juster views of the present interests and of the future welfare of society. DIVISION B--RELATION OF THE STATE TO INDUSTRY CHAPTER 44 FREE COMPETITION AND STATE ACTION § I. COMPETITION AND CUSTOM [Sidenote: Definition of economic freedom] 1. _Economic freedom exists when men's goods or their own services may be exchanged as they choose, without hindrance._ Competition is but another expression for economic freedom. Where men are _free_ to exchange their goods and to get the best price they can, and actually do so, they are said to compete. The action of men in the mass follows pretty regular lines, corresponding to certain abiding motives. If one man dictated all industry, a very fragmentary science of economics would be possible; but the mass of men act according to some rule and are free so to act. When men are free to bring their goods to a market and get the best price possible, a single market price results. When cost of production was believed to be the regulator of value, it was said that the law of value laid down was true "within the limit of free competition." Market price varied ceaselessly from cost of production, and whenever it did "the law of value" as then formulated was admittedly invalid or inapplicable. The law of monopoly price was supposed to be in marked contrast to the law of competitive prices. The law of prices, as followed in our study, stated in terms of marginal utility, is equally valid in competitive and in monopolistic conditions if there is merely one-sided, or buyers', competition. Two-sided competition is not the sole, though it is the usual condition, which the economist takes account of in reasoning on the problem of price. Anything that keeps men from exchanging what they have for the best price, interferes with competition. Some of these hindrances have been noted, others are now to be. [Sidenote: Economic freedom vs. equality of efficiency] 2. _Economic freedom does not mean equality of power or of efficiency._ It was said in discussing monopoly that it was not to be understood to be merely either scarcity or superiority. To speak of the class of laborers of ability above that of the average day laborer as having a monopoly is certainly a confusion of monopoly with the scarcity of efficiency. The term competition is not easy to define in practice; for it is not easy to see just what part of a man's inability to exchange is due to his own lack of efficiency, and what to things outside of himself which prevent him from exchanging his labor. But the thought is clear that free competition--economic freedom--is limited whenever men are hindered by any power outside themselves from using their economic power as they prefer. The limitations of competition, thus understood, are essentially social limitations, imposed by other men either unconsciously by custom, convention, tradition, or consciously by force or by laws. When, among Polynesian tribes, the custom of taboo prevailed, by which certain things were reserved to the rulers and were forbidden to the common man, there was a limitation on his economic freedom. Contrast such limits with those set by the penury of nature. The savage may like best to hunt, but if there is no game, he must fish; he may like best to make arrowheads, but in need of food he must dig roots. Economic action is limited by lack of knowledge and skill; the resources of nature lie unused under the feet of savages who are suffering from their lack. These are limitations not of economic freedom but of economic efficiency. [Sidenote: Limitation by custom in early society] 3. _In early society custom limits economic freedom in many ways._ The savage is not a man without law; he is bound in many ways to prescribed lines of conduct. Primitive custom usually takes on a religious sanction, and every member of the tribe is compelled to do as his fathers have done and as his neighbors are doing. He is not free to choose. Custom in some ways is favorable to the welfare of society, for it limits the power of masters and rulers, preserves the rights of individuals to common property, and is in the interest of the weak as well as of the strong. In an age of force if it were not for custom, he who had might on his side could take all. So in early society even economic relations were complex and yet almost fixed--changing only slowly from generation to generation. Every such social custom that limits the choice of men limits economic freedom. [Sidenote: Limitation by custom in the Middle Ages] 4. _Custom ruled a large share of the industrial life of the Middle Ages._ Political and economic interests were not clearly divided in the Middle Ages. Land was the all-important kind of wealth. Military and other public services were performed by the vassal, who thus at the same time paid his taxes and the rent of the land. The landlord was at once the ruler, the receiver of rents, and the collector of taxes. The rent, however, was not a competitive price, but consisted of the dues and services the forefathers had been accustomed to pay. This limited slavery, like all other slavery, was wasteful, as it did not give to the individual the strongest motive to increase the quantity and to improve the quality of his service. Trade became limited in almost every direction. Crafts and gilds arrogated to themselves the right of employment in their industries. No matter what talent the son of a peasant might show, he usually found it impossible and always found it difficult to follow the occupation of his choice. Privilege pervaded all the life of that time. In such conditions economic friction is great. Men are kept in trades below their ability, while others gain command of monopolistic and unearned returns. Yet through all the Middle Ages ran the forces of competition. The inefficiency of customary services was a constant invitation to competitors. Men were striving to break over the barriers of custom and prejudice. The strife for freedom was the vital economic force even of the Middle Ages. The industrial history of that time is largely the story of the struggle of the forces of competition against the bounds of custom. § II. ECONOMIC HARMONY THROUGH COMPETITION [Sidenote: Effect of modern forces on custom] 1. _The industrial events following the discovery of America strengthened the forces making for economic freedom._ Discoveries in the Western hemisphere opened up a wide field for the adventure and enterprise of Europe. Commerce is the strongest enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the village. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation and the spirit of the time, expressing the principle of personal liberty, allowing the individual to follow his own opinions and take the consequences, were favorable to competition. Despite these facts the restraints of the national governments on trade continued great, in some respects increasing during the seventeenth and eighteenth centuries, in France, Holland, and England. The regulation before attempted by towns and villages was employed on a larger scale by national governments with their commercial systems. The colonies in America were used for the economic ends of the "mother countries" and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the English policy of trade restriction. [Sidenote: Adam Smith's influence] [Sidenote: The philosophy of natural law] 2. _Adam Smith's work advocating greater economic freedom had a profound influence upon public thought._ "The Wealth of Nations," the first great work on political economy, was published in the year 1776. That was the "psychological moment," as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, following a few years later, emphasized this thought in the political field. The philosophers of the time believed in a "natural law" in industry and politics. The reformers of the time wished to throw off the trammels of the past and to give men opportunity to exert themselves "naturally." In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Although the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet to-day custom is stronger in Europe than in America. Serfdom was not abolished until the nineteenth century in Austria and southeastern Europe, and not until a few years ago in Russia. Many economic and cultural forces furthered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an impression did Smith's book make, that in the minds of men "free trade" became almost identical in thought with political economy, whereas that was but the temporary economic problem of the eighteenth century. [Sidenote: The doctrine of the economic harmonies] 3. _The doctrine of the "economic harmonies" is the extremest form of belief in the virtues of competition._ Every truth in political philosophy finds some exaggerated expression. The main task of the student is to determine what shade of gray things are, rather than whether they are white or black. The belief in the benefits of competition and the virtues of economic freedom found expression in the doctrine of "the economic harmonies." This is the faith that if men are left entirely free to do as their interest dictates, the highest and best efficiency for all will follow; it is the belief that the economic interests of all men are in harmony. The most striking evidence in support of this thought is the stimulating effect of self-interest freely working in the field of competition. Each strives to do what will bring him the largest return, and the price others pay measures their estimate of the service. Each seeking his own interest is led to make himself more useful to others. Thus are men stimulated to sacrifice, to invention, to preparation; thus is zeal animated and are efforts sustained. [Sidenote: Good social effects of self-interest] Through self-interest the working force is distributed over the field of industry wherever it is most needed. The remarkable adjustment of industry to the needs of each neighborhood is brought about by individual motives, not by centralized authority. It is not mere chance that produces this harmony. Wherever consumers settle, stores are started and factories are built. Wherever work is to be done, men come in about the right number to do it. Skill is adjusted to needs by the delicate measurement of the market rate of wages. Competition gives a definite rule of price--certainly the only definite impersonal rule; some say the only just rule. The competitive price must be appealed to even in arbitration. It is the standard to which things tend constantly to adjust themselves in an open market. [Sidenote: Conflicting interests in the business world] 4. _Experience shows that the economic interests of men are only partly, not wholly, in harmony._ That there is a great measure of truth in the statements just made, all must admit; but their application is limited. They are partial truths, never to be ignored, but quite false if taken, without modification, as practical rules of conduct. There are three species of competition in every market: that between sellers, that between buyers, and that between sellers on the one hand and buyers on the other. It is to the interest of the buyers that the sellers shall be numerous, eager, and freely competing. It is to the interest of the seller that supply shall be small, that sellers shall be united, and that buyers shall compete sharply. If at any point free competition is hindered, even the disciple of economic harmony must expect a discordant result. But in reality competition is rarely quite complete on both sides, and when it is not, the weak suffer. Men do not start with fair and equal opportunities. All that they may be entitled to under competition may be so little that social sympathy seeks to better the result; hence poor relief, public and private. Society as a whole has an interest in the outcome of the individual's economic struggle. It cannot see men starving or driven into crime. But the argument need not be confined to such crude and extreme cases, for wherever economic interests are not in harmony and it is possible to further the social welfare, will not society be justified in acting? § III. SOCIAL LIMITING OF COMPETITION [Sidenote: Imperfections of economic freedom] 1. _Undoubted evils result from some forms of competition under the conditions actually existing._ Complete freedom must remain a somewhat abstract ideal, and actual conditions must be recognized. Entire freedom of choice means freedom to make mistakes, a privilege whose enjoyment society cannot always permit. The child should be raised to good citizenship, and entire freedom of choice makes that impossible or improbable. The freedom of choice of the insane, the feeble-minded, and the criminal, cannot be recognized. Even where competition is the ideal of sound adult humanity, it is not to be too suddenly or extremely applied. The inequality of faculties, the prevailing dishonesty, the mass of inherited abuses, cannot be either ignored or at once ended. The immigrant from Europe, plunged into the trying conditions of city life, suffers in health and in morals, and often becomes a burden upon society. One of many competitors may drive competition to an evil extreme. The "problem of the twentieth man" is presented when nineteen men desire to limit competition in ways not socially harmful, as by closing shops on Sunday or in the evening, and the one man refuses. The appeal to economic harmony often is the cry of "peace, peace, where there is no peace." The highest social result may be attained now by limiting, again by directing, in other cases possibly by fostering, competition. [Sidenote: Forces opposing competition] 2. _The main rivals of competition are custom, religion, morality, combination, and state action._ The first three of these were the strongest forces in the past and they are still operating; but combination and state action are more characteristic of the present. The influence of custom, of morality, and of religion on value, has been touched upon at several points in our study; that of combination has been recently and more fully discussed. But state action, one of the most important of all the limitations, has been reserved for the concluding portion of our work. [Sidenote: The state's part in directing competition] 3. _It is a function of the state to determine in part the ways in which men shall exert their powers._ This is not the sole function of the state, nor is its influence toward this end exclusive. The state puts limits to the physical rivalry of men. In the distant past no doubt physical rivalry between men was an agent of progress. The strong drove out the weak; physical contest developed more vigorous limbs, keener senses, and higher sagacity. To-day it is one of the principal functions of the state to suppress the physical contest between men. The citizen is surrounded with a network of rules and regulations of which he is hardly conscious. Most men easily avoid coming into contact with the police and feel no irksomeness in the control of the civil courts. The state regulates economic interests in many other ways; it controls the building of streets; it inspects the material and construction of houses; it forbids acts injurious to the public welfare; it regulates the issue of money; it determines the manner in which credit may be extended, the forms of taxation, and the direction which trade may legally take. The state has a part in shaping great industries of a public or semi-public nature, such as waterworks, railroads, and the postal system. [Sidenote: Aim and failings of state action] The state is as wise as the men who constitute it. Men make mistakes, therefore men collectively will make them. The state regulates and limits--now wisely, now foolishly; but its aim is to preserve the benefits of competition without its evils, to lift the competition to a higher plane, and, by determining the direction in which men shall put forth their efforts, to give a higher and truer economic freedom. CHAPTER 45 USE, COINAGE, AND VALUE OF MONEY § I. THE PRECIOUS METALS AS MONEY [Sidenote: Money defined and reviewed] 1. _Money we have defined as a material means of payment and medium of exchange, generally accepted and passing from hand to hand._ The origin and function of money were set forth in the study of capital. The subject must now be approached from a different side and with the two-fold purpose of seeing whether there is anything peculiar in the relation of money to the general problem of value, and what is the influence of the action of the state on the value of money. The definition of money implies several ideas. First, the words "generally accepted means of payment" imply that money, as something bearing the stamp of social approval, has a peculiar social character, is not an ordinary good. Second, the definition implies that money itself must be a thing having value, otherwise it could not serve as a medium of exchange. Exchange means the taking and giving of things of value. Money is, therefore, not merely an order for goods, as a card or paper requesting payment; it is itself a thing of value, though this value may be due solely to its possessing the money function. This point is one of the most difficult in the subject. Third, the definition implies that money is a material thing. The telegram when transferring an order for the payment of money, the spoken word, the promise to pay, etc., are not money. Fourth, it implies that money passes from hand to hand, is a thing that can be handled, and is or can be bodily transported. [Sidenote: Difficulty in applying the definition] The application of the definition is not always easy, for money shades off into other things that serve the same purpose and are related in nature. Even special students differ as to the border-line of the concept, but as to the general nature of money there is essential agreement. In many problems it appears to be at the same time like and unlike other things of value, and just wherein lies the difference often is difficult to determine. The use of money is of such social importance, and it touches so many practical interests, that it raises many questions of a political and ethical nature. There are perhaps more popular errors on this than on any other one subject in economics. Yet the general principles of money are as fully understood and as firmly established as any parts of economics. [Sidenote: Standard, or primary, money] [Sidenote: Gold-using countries] 2. _The precious metals, gold and silver, are the standard, or primary, moneys in the world to-day._ Primary, typical, standard money is the unit in which the value of the money of a country is expressed, no matter what its form is; the standard is a certain weight and fineness of a particular metal. Coins of this standard are called full, or real, money by some writers who deny the title of money to everything else. It has been shown before that there has been an evolution in the use of money. The more efficient forms, gold and silver, have competed with copper, iron, tin, cattle, salt, tobacco. In this contest silver had proved itself a few centuries ago to be the fittest medium of exchange, but in the last century gold has, among the leading nations, been displacing silver rapidly. In a higher degree than any other material, gold has the qualities of a good standard money in rich and industrially developed communities. The gold-using countries to-day are those of the western world. England for perhaps two centuries practically has had gold as its standard money; the United States since 1834 (except for the period of paper money from 1862 to 1879); France since about the year 1855, at which time she shifted from silver under the working of the bimetallic law; and Germany, then more backward industrially, since 1873. Australia and Japan have reached that result only within the last few years, and Italy, Russia, India, Mexico--even China and other Oriental countries--are striving to attain it. [Sidenote: Subordinate kinds of money] In all these countries other kinds of money are used side by side with gold and silver. The actual money consists of a wide and confusing variety: silver, nickel, copper, paper in various forms and issued by various authorities. But among all the kinds, either gold or silver is found standing preëminent and in a peculiar position. The difficulties of the money problem must be attacked at the point of standard money where it is nearest to ordinary value problems and is less complicated than when the various money substitutes are included. Most of the fallacies regarding money have arisen not about standard money, but about paper and light-weight silver. [Sidenote: Coinage defined] 3. _Coinage is the act of shaping and marking a piece of metal to be used as money so as to indicate its weight and fineness._ The precious metals can and do circulate as money without coinage. Any other mark equally plain and equally recognizable serves for many purposes just as well as the government stamp on the standard metal. The use of metals in antiquity was without coinage, by weight and test of fineness. In backward countries to-day most payments are made by weight. International payments are made by means of gold ingots that bear the mark of some well-known banking-house, and for that purpose gold bullion is money without the coiner's stamp. But for most uses government coinage has marked advantages. It is far more convenient for the average citizen to handle coins uniform in size and design than the diverse coins that would be put out by private enterprisers. [Sidenote: Technical features of coinage] An established rate of fineness insuring uniform quality is a great convenience. In the United States all gold and silver coins are nine tenths fine; in Great Britain, eleven twelfths. The established weight of the gold dollar in the United States is twenty-three and twenty-two hundredths grains of fine gold or twenty-five and eight tenths grains of standard gold. The limit of tolerance is the variation either above or below the standard weight or fineness that a coin is allowed to have when it leaves the mint. The par of exchange between standard coins of different countries is the expression of the ratio of fine gold in them. Thus the par of exchange between the American dollar and the English sovereign (the "pound") is four and eighty-six and two third hundredths, that is, four and eighty-six and two third hundredths dollars contain the same amount of gold as an English gold sovereign. The embossed design, milled or lettered edges, and other similar devices are merely to make the coins easily recognizable and difficult to counterfeit. [Sidenote: Seigniorage defined] 4. _Seigniorage is the right the ruler or state has to charge for coinage, or it is the charge made for coinage._ Coinage as a function of great importance politically as well as economically was early exercised by governments or rulers. The prince, king, or emperor stamped his own device or portrait upon the coin; hence the term seigniorage from seignior (meaning lord or ruler). The right to issue money came to be one of the most essential prerogatives of sovereignty. Coinage is rarely without charge, and often has been a source of revenue to the ruler. In the Middle Ages this right was frequently exercised by princes for their selfish advantage to the injury and unsettling of trade. [Sidenote: Free or gratuitous coinage] When no charge is made for coinage, the coinage is said to be gratuitous. Coinage is said to be free if the subject or citizen can take bullion to the mint whenever he pleases, paying the usual seigniorage. Coinage is limited if the government or ruler determines when coinage is to take place. Thus, coinage may be both free and gratuitous, when citizens are allowed to bring bullion whenever they please and have it converted into coins without charge or deduction. But coinage is free without being gratuitous when any citizen may bring metal to the mint, whenever he chooses, to be coined subject to the seigniorage charge. [Sidenote: Money value under free coinage] 5. _Where coinage is free and gratuitous the coin is worth the same as the bullion that is in it._ This evidently and necessarily must be near the truth if the citizens exercise their right. They will not long keep metal uncoined in their possession when it is worth more in the form of money, nor will they long keep money from the melting-pot when it is worth more as bullion. Yet there may be a slight disparity between the bullion and the money values before the metal is converted into coin or the coin melted down into metal. A motive for action must exist before either change will be made; but a thing cannot have considerably different values in two different uses at the same moment. [Sidenote: Adjustment of supply to value] There is here no special problem of value. The value of gold as bullion and money is fixed by marginal demand. The several uses of gold are constantly competing for it: its uses for rings, pens, ornaments, championship cups, photography, dentistry, delicate instruments, and as a circulating medium. If the metal becomes worth more in one use, its amount there is increased and correspondingly diminished in the others. The supply likewise is influenced by changes in price. Gold-mining is one among various industries to which men may apply their labor and capital. Some mines are superior, others average, others marginal which it barely pays to work. There is, therefore, a rise and fall of the margin of production with change in price and change in cost of production. If at a given moment, when it barely pays to work a mine, gold becomes worth less, that mine will go out of use. As gold rises, some mines that did not pay before, come into use. A similar variation has been noted in the case of marginal land, marginal factories, marginal forges, and marginal agents of every kind. [Sidenote: "What is a dollar?"] The question was once asked in Parliament, "What is a pound?" and a good question to ask in beginning the study of money is, "What is a dollar?" The answer, so far as it refers to the standard money, is: a dollar is a convenient name applied to twenty-three and twenty-two hundredths grains of fine gold or twenty-five and eight tenths grains of standard fineness. The exchange value of gold varies in different places and conditions, but the name remains the same. A dollar exchanges for more wheat in Dakota than in New York or for more iron in Pittsburg than in Oregon, yet it is sometimes asserted that the value is always the same because the name is always the same. The fallacy of this may be seen in the equivalent expression that twenty-three and twenty-two hundredths grains of gold have the same value always and under all circumstances. The problem of the bullion value of money metal, under gratuitous coinage, presents no special difficulties. The ordinary theory of value applies to it. The difficulties of the money question begin at the point where the money value is seen to diverge from, and depend on, something else than the value of the bullion. Yet in the principles just discussed are found a firm foundation for any further study of the question. § II. THE QUANTITY THEORY OF MONEY [Sidenote: The money use] 1. _The fundamental use that money serves is to apportion incomes of goods so as to make them yield the maximum gratification._ Money first increases utility by increasing the ease with which exchange takes place. Like any tool or agent, it is valued for what it does or helps to do. But further, it enhances the sum of enjoyments by the division of goods into proper quantities, making them available at the best time. It follows from the principle of diminishing utility that the particular time at which goods are available for wants has an essential bearing on their value. A hundred loaves of bread in the hands of a single individual would mold long before they could be consumed. Money enables men in society to acquire these hundred loaves in a series so that they can be used when most needed. Money is the most successful device man has ever discovered for distributing the supplies of a journey along its course, and the goods of daily need over a period of time. The use of money as a storehouse of value is merely an extreme case of keeping things for the future when they will have a greater gratifying power. [Sidenote: Concept of the money demand] [Sidenote: Variation in the average] The fact that money is essentially a valuable good kept on hand as the best possible provision against emergencies points to the essential nature of the money demand. Money is sought, in order to form a cash reserve, up to a point where the loss from keeping it balances the probable gain. The money use is subject to the law of diminishing utility; beyond a certain point its added convenience is purchased at too great cost. Every man may be thought of as having an average, or usual, money demand, which is that proportion of his income that gives him more utility retained in money form than if at once expended. A man with an income and expenditure of fifty dollars a month paid monthly has use ordinarily for no more than fifty dollars as his cash reserve. While under ordinary circumstances this is his maximum demand, various circumstances may diminish it. If his expenses are distributed in two equal parts (the one on pay-day, the other thirty days later) his average money demand is twenty-five dollars, not fifty dollars. If most of his purchasing is done at the beginning of the month, his average money demand may be perhaps ten dollars. Many a workman purchases on credit, spends his fifty dollars within an hour after he receives it, and goes without money for the rest of the month. The average demand of a community for money required as a reserve is affected by the methods of doing business. With a given method of use a reduction in the supply of money results in loss of time and waste of effort; an increase in the supply results in a lowering of its value relative to other things. In either case the equilibrium of the marginal utilities of income must be restored. The thought of an average, rational, money demand relative to money income is the fundamental requisite for clear thinking on the question of money, but to grasp this thought there is needed a certain power of scientific imagination lacking in some minds. [Sidenote: The quantity theory of money] 2. _The quantity theory of money is that, other things being equal, the value of money falls as its quantity increases, and vice versa._ This is an abstract statement of a concrete and difficult problem. The phrase "other things being equal" betokens the statement of a tendency where there are several unknown factors. In recent discussion the quantity theory of money has been questioned by some critics; yet it is held by most economists to be merely the general law of value as applied to money. There are three sets of facts to be brought into relationship with each other in the quantity theory: (1) amount of business or exchanges to be effected; (2) the methods by which this is done; (3) the amount of money available to do it. According to the quantity theory we must expect that when conditions (1) and (2) remain fixed, the value of money will vary inversely as its quantity. This conclusion follows from the conception of the money demand as the value of circulating medium that bears an average proportion to the value of goods exchanged. [Sidenote: Example of its application] Let us consider various conditions. When a number of men, by reason of increasing gold supplies, get larger stocks of money than they have had, the former proportion between their money incomes and their money is altered. In reducing their stock of money by buying goods they bid up the prices of goods until the total value of goods exchanged again bears the same ratio as before to the total value of money. Taking an extreme case: if twice as many dollars get into circulation in a community, either some few men must have several times as many dollars as before, while others have the same; or every man will have his due proportion, just twice as much as before. The latter, "other things being equal," must be the logical result after equilibrium has been restored. Is any other result thinkable? Now if prices of goods remained the same as before, there would be twice as great a value of money available to effect exchanges. There is no reason why each should tie up twice as large a proportion of his income in a supply of the medium of exchange. If, however, there is a concerted movement to spend the surplus money, there results a general bidding down of the exchange value of money, a general bidding up of prices of goods. At what point will this movement stop? The rational conclusion must be that "other things being equal" equilibrium will be reëstablished only when the ratio between the value of money and the price of goods becomes the same as before. The money being doubled, prices must be double, and likewise for any other change in quantity. [Sidenote: Objections made to the quantity theory] 3. _The quantity theory is misunderstood, and is criticized on the ground that the facts oppose it._ If but one kind of metal were used as money, and this were coined of uniform weight and fineness, the problem would be comparatively simple. But in fact gold and silver, full-weight and light-weight coins, circulate side by side. More mysterious still, the money in circulation is partly coin and partly paper. How can the quantity theory hold in these conditions? Several objections to the quantity theory are presented. It is said, first, that prices do not vary exactly with the per capita circulation of different countries at a given moment. The per capita circulation in Mexico may be five dollars and in the United States twenty-five dollars, while prices are much less than five times as great here as in Mexico. Secondly, it is said that prices do not vary directly with changes in the amount of money in a given country. There is now perhaps five times as much money per capita in the United States as fifty years ago and yet prices are not five times as high. Thirdly, it is said that credit methods change, and therefore that money does not fix prices. Fourthly, it is said that even if true of primary money the theory fails to apply to actual conditions with many forms of money in circulation side by side. Fifthly, it is said that there are too many unknown quantities to permit the rule to be used. [Sidenote: The objections examined] 4. _A reasonable interpretation of the quantity theory makes it a statement of the effect of a change in a single factor._ The objections to the quantity theory assume that it is a statement of what occurs under all conditions, instead of what it is, an index to the working of one condition at a time. The foregoing objections need but to be further analyzed to show that in each of them it is not merely the quantity of money, but a number of other factors that differ in each of the propositions. We may note briefly in turn the defects in the arguments of the preceding paragraph. [Sidenote: Not a per capita rule] First, the quantity theory does not remotely imply that prices in different countries differ at a given moment according to the per capita money. In the case of the United States and Mexico not only the amount of exchange per capita but the method of exchange, and the rapidity of the circulation of money differ quite as much, doubtless, as does the per capita circulation. The quantity theory would lead any fairly careful student to a conclusion the exact opposite of that which its critics have twisted from it. [Sidenote: Recognizes the growth of trade] Second, the quantity theory does not imply that during a period of years when a country is changing in a multitude of ways, as in population, methods of industry, modes of exchange and transportation, and in wealth and income, the prices will vary directly either as the absolute or per capita amount of money does. In the light of the quantity theory the inquirer must be led to just the opposite of the ridiculous conclusion imputed to it. [Sidenote: Recognizes use of credit] Third, the theory does not overlook the effect of an increased use of credit, for it fully implies that any such a change, by economizing the use of money, would enable the same amount of money to support a higher scale of prices. [Sidenote: Not confined to primary money] Fourth, the theory does not overlook the variety of forms, and is not true merely of primary money. However great this variety, the money demand of individuals and of communities still represents a pretty definite ratio of the value of exchanges effected. If the primary money alone were doubled in quantity, while the various forms of substitute money (smaller coins, bank-notes, government notes, etc.) remained unchanged, the quantity of money as a whole would not be doubled, and according to the theory, prices would not be expected to double. Indeed, in such a case, the method of exchange would be very greatly altered, and the case is fully covered by the statement of the theory. [Sidenote: Is a practical rule] Fifth, despite the number of changing factors affecting the methods of exchange, the method of business, etc., the quantity theory is a rule usable at any moment. These various factors change slowly, and the quantity theory answers the question, What change occurs in prices as a result of an increase or decrease of the money in a given community at a given moment? Like the law of gravitation, the law of projectiles, and the statement of the chemical reaction to be expected when adding some substance to a given compound, the theory must be interpreted with practical limitations. When the quantity theory is thus stated and understood, its negation is unthinkable, as is evidenced by the involuntary use made of it constantly by every one of its few critics in explaining the simplest monetary phenomena. [Sidenote: Practical application of the quantity theory] [Sidenote: Recent price changes] 5. _The quantity theory makes intelligible the great and rapid changes in price that have followed sudden changes in the money supply._ Inductive demonstration of broadly stated economic principles is difficult, but in no other economic problem is laboratory experiment so nearly possible as in that of money. Many inflations and contractions of the circulating medium have occurred, now in a single country, again in the entire world, and the local or general results have served to exemplify richly the working of the quantity principle. With the scanty yield of silver- and gold-mines in the Middle Ages, prices were low. After the discovery of America, especially in the sixteenth century, quantities of silver flowed into Europe. The great rise of prices that occurred was explained by the keenest thinkers of that day along the essential lines of the quantity theory, though there were many monetary fallacies current at the time. The experience in England during the Napoleonic wars, when the money of England was inflated and prices rose above those of the Continent, led to the modern formulation of the theory by Ricardo and others. The discovery of gold in California and Australia, in 1848-50, increased the gold supply marvelously, and gold prices rose throughout the world. Between 1870 and 1890 the production of gold fell off greatly while its use as money increased and prices fell. A great increase of gold production has occurred in the period since 1890. In part the rising prices from 1897 to 1902 are explicable as the periodic upswing of confidence and credit, but in part doubtless they are due to the stimulus of increasing gold supplies. These are but a few of many instances in monetary history which, taken together, make an argument of probability in favor of the quantity theory so strong as to constitute practically its inductive proof. CHAPTER 46 TOKEN COINAGE AND GOVERNMENT PAPER MONEY § I. LIGHT-WEIGHT COINS [Sidenote: Seigniorage and the value of coins] [Sidenote: Saturation point for coinage] 1. _When the number of coins issued is limited properly, a seigniorage charge does not reduce their money value; they are worth more as money than as bullion._ The coinage thus far considered has been that of full-weight coins without seigniorage. The question now is, What is the effect of a seigniorage charge on the value of the coin as compared with the bullion that is in it? This is one of the most difficult phases of monetary theory. Two values must be thought of: one the value of the coin as money, the other the value of the bullion in it. When coinage is free and gratuitous, these two values are the same. How can they ever be different? The answer to the question is found in the theory of monopoly value. If the supply of coin is limited by the sole agency of issue, the value can be kept above the cost of production (_i.e._, in this case the bullion value), the seigniorage being the profit of the government. The limit within which the coinage must be kept is the number of coins that would circulate freely if they were made full weight without a seigniorage charge. This is the "saturation point" of the money demand of the country; it is a certain number of pieces of full-weight metal. If more than that amount gets into circulation it becomes worth less as money than as bullion, and it is melted or exported. [Sidenote: Example of seigniorage value in coins] If this full supply of money at a given moment is 100,000 pieces or dollars, a seigniorage charge of ten per cent. could be made if the number of pieces were not increased above 100,000. The government alone having the right of coinage, the need of money would give the circulating medium a monopoly value. The value of the money would rise until the coin would buy one ninth more bullion than was in it, but if there were any further rise the citizens would begin to take coins to the mint. After the ten per cent. charge was taken out they would receive a coin which, though containing one tenth less bullion, would be worth very nearly the same as the metal taken to the mint. No considerable depreciation could take place unless the volume of business fell off so that less money was needed than at the old standard. In that case there would be no outlet for the excess of coins until they fell to their bullion value, _i.e._, till they lost the entire value of the seigniorage, the monopoly element in them. Melting or exporting them before that point was reached would cause the loss of whatever element of seigniorage value they contained. [Sidenote: Example of excess and depreciation of coins] Assuming that the volume of business, or sum of exchanges, remains unchanged, let us consider what will result if the government begins to issue "on its own account." The number of coins might be increased until at the bullion price the total money value were equal to the original 100,000 full-weight coins, at which point exportation would take place. There being nine tenths as much precious metal as before, it would require ten ninths as many pieces, or 111,111 pieces, to have as great a value as the 100,000 had before. At this point there is no further profit to the government in issuing coins of that weight. To make a further profit it must again reduce the amount of pure metal in the coin. [Sidenote: Medieval examples of depreciation] This is essentially what occurred often throughout the Middle Ages. A ruler debased the quality or reduced the weight of money, but for a time the new coin, having the same money use, circulated as freely as the old coin. If, as so often happened, the ruler yielded to the temptation to issue more in order to get the profit, the older, heavier coins at once began to go abroad or into the melting-pot. Then occurred a fall in value, mystifying alike to the prince and the people. The reason is now perfectly plain: the number of pieces issued had not been kept within the proper limits, and the coins went down to their bullion value. [Sidenote: Difficulties with full-weight subsidiary coins] 2. _Subsidiary coins of lighter weight than the standard, if properly limited, will remain in circulation at par._ Money to serve all of its purposes must be of different denominations. The amount required of each denomination is determined by the volume of exchanges for which each is most convenient. Each kind of money, as the penny, nickel, dime, has its own peculiar demand and its saturation point. For the smaller denominations the standard metal is not suitable. A gold dollar cannot well be cut into twenty or a hundred pieces. Thus copper, nickel, silver remain in restricted use. When these are issued at their bullion value, difficulties arise; not only are they too heavy, but as they vary in bullion value, some of them become worth more as bullion than as coin, and suddenly disappear from circulation. [Sidenote: Adoption of light-weight minor coins] [Sidenote: Theory of light-weight coins] This happened often throughout the Middle Ages and until the nineteenth century. Gold and silver generally were coined at a ratio of weight corresponding exactly to their market ratio at a given moment, and every time the market conditions varied, one kind of the money went out of circulation, and the country was left either without the larger gold coins, or without subsidiary coin, or "small change." At length the plan was hit upon of issuing a limited number of subsidiary coins of less than full bullion value, that is, as "token coins." By this plan there is given to the minor coins a value greater than that of the bullion in them. The small profit made by the government on every penny, nickel, or dime issued, is a seigniorage charge. These minor coins, in somewhat confusing variety, circulate side by side with full-weight money, their value depending on the monopoly principle. The result of a large issue of any one denomination would be a lowering of its value. In practice their issue is determined by the needs of business and by the requests of citizens for small coins in exchange for standard money. One needing "change" gets it at the bank; when the bank finds its supply falling short it gets more from the government mints. As business increased in 1898, the demand for nickels, dimes, and quarters became unprecedented, and the mints worked night and day to supply them. [Sidenote: Gresham's law] 3. _Gresham's law of the circulation of coins of different bullion value is: bad money drives out good money._ This so-called "law" was stated in these circumstances: England had two kinds of metal money, silver and gold, which were coined at a fixed ratio in weight; and as the market value of the bullion changed, the new full-weight coins of the metal rising in value went out of circulation. The coining of the cheaper metal caused the melting or exporting of the one becoming dearer, and for those purposes the coins containing the most bullion were picked. Likewise full-weight coins disappear whenever money of less bullion value (either because containing more alloy, or because made of a cheaper metal or of paper) is poured into the circulation in large quantities. [Sidenote: Proper interpretation of Gresham's law] Gresham's law needs some explanation, for it is frequently misunderstood. "Bad" money means money that has not the bullion value equal to its money value, money that is either debased in quality or light in weight. But not every piece of bad money will drive out every piece of good money. If that were so, a single bad penny would drive out of circulation all the gold. The law applies only under certain conditions. The "good" will leave the country only if the total amount of money in circulation is in excess of what would be needed if all were of full weight or best quality. Paradoxically speaking, if there is not too much of the bad money, it is just as good as the good money. The good money may not leave the country. It may be hoarded, or be picked out by banks and savings-institutions to retain as their reserve, or it may be melted for use in the arts. Gresham's "law" is thus a practical precept: keep the amount of token or light-weight coin limited to the field of its peculiar use, or it will cause the other forms, the fuller weight money, to leave for a better market. That better market may be the melting-pot or it may be a foreign country. § II. PAPER MONEY EXPERIMENTS [Sidenote: Nature of paper money] [Sidenote: The legal-tender quality] 1. _Government paper money may be defined as money for which a seigniorage of one hundred per cent. is charged._ The order in the study of the money question is from seigniorage to paper money, because paper money embodies the principle of seigniorage in its extremest form. The issue of paper money grew out of the practice of debasing metal. The gain of seigniorage from paper money is greater and is just as easily secured. Government paper money is sometimes called "political money," in contrast with money whose value rests on the value of its material. In this sense, however, all coins containing an element of seigniorage, or monopoly value, are to that degree "political" money. The typical paper money is irredeemable, that is, it cannot be turned into bullion money on demand. It was simply put into circulation with the legal-tender quality. The "legal-tender" quality is the declaration of the government that the paper money must be accepted by citizens as a legal discharge for debts due them. The object of this is to compel people to use it as money whether they will or not. The purpose of the government in thus employing its power over the circulating medium is usually to profit, that is, to secure the value of the seigniorage for public purposes. Paper money differs from bank-notes in that it does not depend for its redemption on the credit of the issuer. It differs from bonds in that its value is not based on the interest it yields, but solely on its money uses. The issue of paper money may save the government the payment of interest on an equal amount of bonds. The promise to receive paper money in payment for taxes or for public lands, may help to maintain the value of the notes by reducing their quantity, but nothing short of prompt exchange for standard coins makes them truly redeemable. [Sidenote: Examples of paper money in the eighteenth century] 2. _The most notable examples of paper money in the eighteenth century were the American colonial currencies, the continental notes, and the French assignats._ In all the American colonies before the Revolution notes or bills of credit were issued which were in most cases legal tender. Without exception they were issued in large amounts and without exception they depreciated. Parliament forbade the issues, but to no effect. The continental notes were issued by the Continental Congress in the first year of the war (1775), and for the next five years. The object at first was to anticipate taxes, and it was expected that the states would redeem and destroy the notes, but this was not done. The notes passed at par for a time, but depreciated rapidly as their number increased. The country had less than $10,000,000 of coin before the war, and when, in 1780, over $200,000,000 of notes were in circulation they were completely discredited; hence the phrase "not worth a continental." Specie quickly came back into use. A few years later the leaders of the French Revolution, failing to learn the lesson of the American experience, issued, on the security of land, notes called assignats in such enormous quantities that they became worth no more than the paper on which they were printed. In a figurative sense they may be said to have fallen to their "bullion" value. [Sidenote: More recent examples of paper money] 3. _Notable examples of paper money in the nineteenth century were the English bank-notes in the years 1797-1820, and the American greenbacks, 1862-79._ There have been many other examples. During the Franco-Prussian War, France, through the medium of its great state bank, issued notes which only slightly depreciated. At the present time many countries--Russia, Austria, Portugal, Italy, all the South American republics--have depreciated paper currencies. But the English bank restriction of 1797-1820 is notable because it gave rise to the controversy which did most to develop the modern theory of the subject. The Bank of England was forbidden to redeem its notes in coin because the government wished to borrow all the coin the bank had. The result was the issue of a large amount of bank money not subject to the ordinary rule of redemption on demand. It was virtually government paper money. The notes depreciated and drove gold out of circulation, and not until 1820 was there a return to specie payments. [Sidenote: The greenbacks] The United States under the constitution did not try paper money till 1862 when paper notes (called greenbacks, because of the color of ink with which the reverse side was printed) were issued as a war measure to the amount of about $450,000,000. Other interest-bearing notes were issued with legal-tender quality and circulated as money to some extent. Greenbacks depreciated in terms of gold, and gold rose in price until, in June, 1864, it sold at two hundred and eighty a hundred. Fourteen years elapsed after the war before these notes rose to par, in terms of gold. [Sidenote: Evil effects of political money] 4. _Paper-money issues usually have had injurious effects on general industry._ The purpose of the issue of paper money is generally to relieve the financial necessities of the government. It is a costly expedient, resorted to only in desperate extremities. A result usually unintended is the derangement of business and of the existing distribution of incomes. The rapid and unpredictable changes in prices give opportunity for speculative profits, but most legitimate business is injured. This incidental effect on debts and industry becomes the main motive of some citizens in advocating the issue. It is peculiarly liable to be the subject of political intrigue and of popular misunderstanding. § III. THEORIES OF POLITICAL MONEY [Sidenote: Commodity-money theory] 1. _The commodity-money theorists declare that government is powerless to influence value, or to impart value to paper by law._ There are two extreme views regarding the nature of paper money, and a third which endeavors to find the truth between these two. First is that of the commodity-money theorists, or the cost-of-production theorists, who will not admit that there is any other basis for the value of money than the cost of the material that is in it. Money made of paper, on a printing press, has a cost almost negligibly small, and, therefore, they say it can have no value. The fact that it does circulate, and is treated as if it had value, is explained by the commodity theorists as follows: While the paper note is a mere promise to pay, with no value in itself, it is accepted because of the hope of its redemption, just as is any private note. Depreciation in this view is due to loss of confidence; the rise toward par measures the hope of repayment. Such a view overlooks the feature in which paper money differs from ordinary credit paper. The value of one's promise to pay depends on his reputation and his resources; the resources constitute the basis of value. Bonds have value because they yield interest and are payable at a definite time in standard money. But paper money, lacking this basis for its value, has another basis in its money use, in its power to buy goods. The money demand in connection with the monopoly power of government over the money supply, furnishes a satisfactory logical explanation of the value of paper money. [Sidenote: Fiat-money theory] 2. _The fiat-money advocates assert that government has unlimited power to maintain the value of paper money by conferring upon it the legal-tender quality._ The meaning of fiat is "let there be," and the fiat-money advocates believe that the government has but to say, "let it be money," to invest paper with value. The typical fiat advocates in the United States were the "Greenbackers," those voters who wished to retain the paper money issued in the Civil War, and to increase its amount greatly. They saw in paper money an unlimited source of income to the government. They proposed the payment of the national debt, the support of the government without taxes, and the loan of unlimited money without interest to citizens. All might live in luxury if the extreme fiat-money theorists could realize their dream. There are still some survivors of this faith in the power of the government fiat. The depreciation that has taken place in every case where government notes have been issued, they declare to be due to a too mild enforcement of the law of legal tender. To them the fact that paper money may circulate for a time at par appears a reason why it always should. They do not admit that there is a saturation point in the use of money, and that its use is still further limited by the fear of larger issues. They do not see that the ultimate basis of the value of paper money is economic,--is in its money use, not in the fiat of the government. [Sidenote: Theoretical possibility of a good paper money] 3. _A sound theory of paper money makes it a special case of monopoly value._ It has been seen that the power of almost every monopoly over price is relative, not absolute. As the power of a great private corporation over the price of its product is limited, so is that of the government over the value of political money. The money use is the source of value to the paper notes. Business conditions remaining unchanged, the limit of possible issue without depreciation is the number of units in circulation before the paper money was issued, the saturation point of full-weight and full-value coins. Because governments generally have not stopped at that point, paper money has depreciated. Popular error and selfish interests force legislation beyond the reasonable limit. In a few cases only have there been public integrity and courage enough to retrace the steps before great harm resulted. It is principally this lack of control that prevents paper money from being a good circulating medium. [Sidenote: Influence of law on value] It is sometimes said that government cannot affect value in any way, but it can do so in many ways. Certainly one of the most remarkable is by the use of its monopoly power over the medium of exchange, whereby it can, under certain conditions, cause a piece of paper to have the value of a piece of gold. Thereby at the same time it affects the interests of nearly every member of society, raising or lowering the value of many kinds of property, and of many incomes. CHAPTER 47 THE STANDARD OF DEFERRED PAYMENTS § I. FUNCTION OF THE STANDARD [Sidenote: Definition of the standard] 1. _The standard of deferred payments is the thing of value in which, by the law or by contract, the amount of a debt is expressed._ A credit transaction is a lengthened exchange; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date. The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the promise of its return at the end of the year with a part of the increase of the flock. A simple standard in which to express the debt is the thing borrowed, as horse, sheep, wheat, house, etc. This involves the use of the renting contract. Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed, and with the growth of the money economy and the use of the interest contract, money comes more and more to be used as the standard. The parties express the debt in terms of the standard unit established by law. [Sidenote: Increasing use of the interest contract] 2. _The importance of the standard of deferred payments increases with the use of money and with the amount of outstanding debts._ Until the use of money develops, the use of credit is difficult and limited; it becomes easy when the value of all things is expressed in terms of a common circulating medium. If all business were done for cash there would be no great interests affected when a change in the value of money occurred. Every dollar would change in value in the hands of the holder, but there the effect would cease. But the volume of outstanding debts expressed in terms of money now exceeds many fold the total value of the circulating medium. The value of all these debts changes in the same proportion as does that of the standard unit of money; when this is cheapened either by law or as a result of increasing supplies, a creditor to whom a thousand dollars are due loses the same as if he had a thousand metal dollars locked up in a strong chest. [Sidenote: Great effects of money changes] Outstanding contract debts may be roughly divided into three classes: short-time loans, running less than a year; medium-time, running from one to five years; long-time, running over five years. Fluctuations are rarely rapid and great enough to affect appreciably the debtors and creditors in the case of short-time loans. The results are greater in the case of long-time loans, such as national, state, and city debts, bonds of corporations, mortgages given by farmers on their land or by owners of city real estate. A multitude of interests are affected by a change in the value of money. When, as in the years 1873-96, money gains in purchasing power (prices fall) receivers of fixed incomes are gainers. When, as in the years 1896-1903, the value of money falls, the revenues from educational and charitable endowments, the salaries of public officials, and all fixed incomes, lose purchasing power. In a capitalistic age, therefore, almost every individual is affected in some way by a change in the value of money. In most cases the change escapes recognition; people do not trace out the relation that an industrial change bears to their own interests. In a few notable cases, however, the change has been revolutionary as in the period following the discovery of America, when the feudal dues had come to be expressed in terms of money instead of labor services. In modern times, the mass of debts being greater than ever before, such changes as those following the discovery of gold in California or the decrease in gold production between 1873 and 1890 have the gravest economic results. [Sidenote: Merits of gold and of silver as standards] 3. _The best standards of deferred payments available--the precious metals, gold and silver--are still imperfect._ The good that is most convenient as a standard of deferred payments is the one used as money. Gold to-day is constantly expressing the value of all other things. Borrowers prefer to make loans in the form of the general medium of exchange. From the usage of speaking of all things in terms of money, the false idea arises that the value of other things changes, but that the value of gold is always the same. Money is no such a fixed objective standard as a foot-rule or a pound weight. The value of gold rests on the estimates made by men, and is constantly changing according to conditions. A fixed objective standard of value is not possible of attainment. The value of the precious metals is stable as compared with most things. The current new supply is comparatively regular. For generations at a time there may be no radical changes in the output of gold and silver. For centuries there was no change in the methods of extraction. Recent inventions, however, have considerably altered these conditions. The nature of the use of gold and silver, likewise, is such as to make the demand for them, under ordinary conditions, most stable. The precious metals are but slowly worn out; only a portion of the annual output is used in the arts; there is, therefore, a large reservoir into which flows steadily a small stream; the existing stock is twenty or thirty times the annual output. Yet the value of the standard metals is never quite stable, and sometimes several influences combine, as in the last century, to affect their value greatly and suddenly. [Sidenote: Various standards suggested] [Sidenote: Enjoyment] [Sidenote: Sacrifice] [Sidenote: Labor] [Sidenote: Tabular standard] 4. _Various ideals for a standard of deferred payments have been suggested--as return of equal enjoyment, of equal sacrifice, social expediency; and various standards--as labor, commodities, and the tabular standard._ The ideal standard of deferred payments is one that will insure justice between borrower and lender. Different views have been taken as to what constitutes justice in this matter. The suggestion is attractive that the sum when returned should represent the same amount of enjoyment as it did when it was borrowed. Such a standard is impossible of realization in any general way, for men's circumstances are constantly changing. To insure even to the average man the same amount of enjoyment is only roughly possible. The same goods do not afford the same enjoyment when conditions have changed. Another suggestion is that the goods returned should represent the same sacrifice as those loaned. Here again the difficulty is in the lack of an objective standard. Whose sacrifice? That of the lender, who may be rich, or that of the borrower, who may be poor? Some have supposed the conditions of equal sacrifice were met by the labor standard, according to which the sum returned should purchase the same number of days of labor as when borrowed. But what kind of labor is to be taken, that of the lender or that of the borrower, or that of some one else? Labor is of many different qualities, which can be exactly compared only through their objective value in terms of some one good. The ideal of equal enjoyment has been supposed to be realized by the tabular standard, which consists of a number of leading commodities in fixed proportions. The money returned is to be enough to purchase the same goods at the expiration as at the making of the loan, and thus may be a larger or smaller sum than was borrowed. While this does not, as is sometimes claimed, insure equality of enjoyment, it averages the fluctuations of many goods, and thus prevents great extremes. This standard has been favored by notable monetary authorities, but the difficulties of its practical application are prohibitive. It must be recognized that any possible concrete standard of deferred payments will sometimes work hardship to individuals. The best average results for justice and social welfare will be secured by measuring debts in goods that change least often, least rapidly, and in the least unpredictable manner. Gold thus far has proved itself worthy to serve as the standard. § II. INTERNATIONAL BIMETALLISM [Sidenote: Examples of price fluctuations] 1. _The fall of prices in 1873 and the following years meant a great change in the standard of deferred payments._ The monetary changes following the discovery of America were due to the inflow to Europe of great quantities of silver taken by force from the native American rulers, and from the rich mines. Silver, at that time throughout Europe the main standard of deferred payments, was thus greatly lowered in value. This change lightened all outstanding obligations, lowered the money rents of the peasants, and the customary dues of labor wherever they had come to be expressed in money form. By the third quarter of the nineteenth century gold had become in Europe and America the main standard, though silver still served as such in some countries. The output of gold in 1849-57 caused the greatest money inflation that has occurred since the sixteenth century, favoring in a similar manner the debtor classes. The substitution of gold for silver by some countries at that time, by making a great additional market for gold, helped in some degree to check the fall in its value. [Sidenote: The recent great fall of prices] The decline in the output of gold was a change of the opposite character, causing a fall of prices and increasing the burden of debts. From 1873 to 1896 there was almost constant decline of the prosperity of the agricultural classes, due in part to this money influence, but in part to influences which cannot be dwelt upon here, as they had nothing to do with the money question. There was complaint, agitation, and demand for relief on the part of many interests in France, Germany, England, and the United States. [Sidenote: Bitmetallism defined] 2. _Bimetallism, the use of two metals as standard moneys, was the remedy proposed._ Bimetallism is legally complete when both metals are admitted to the mints for free coinage at an established ratio of weight; it is halting or limping when one of the metals is not freely coined. Bimetallism may be legally authorized, but not actually working. As soon as the legal ratio varies appreciably from the market value, only one of the metals will in fact be brought to the mint. National bimetallism is confined to a single country, as that in the United States before the Civil War, or in France before 1867. International bimetallism is an agreement among several nations to use two metals on the same terms, the only case in history being that of the Latin Union, which included France, Italy, Switzerland, and other countries. The discussion of international bimetallism in recent years has been on the proposal to make a much larger league of states than the Latin Union, embracing all the leading countries. [Sidenote: Object of international bimetallism] 3. _The main object of international bimetallism is to prevent the fluctuations of the standard of deferred payments._ Commercial dealings between gold-using and silver-using countries are of great magnitude, and the use of different standards leads to many difficulties. Fluctuations in the ratio of the two metals occasion much uncertainty and loss to individual traders. The rise in the value of gold meant an increase in the burden of the public debts of silver-using countries which collect their revenues in silver, but which must pay their debts, principal and interest, in gold. [Sidenote: Its theory] The theory of bimetallism is that the government can act on the value of the two metals through the principle of substitution. The metal tending to become dearer will not be coined, the other will be coined in greater quantities. The degree of influence that can thus be exerted on the value of the two metals depends on the size of the reservoir of the metal that is rising in price. When it all leaves circulation, the law on the statute book permitting it to be coined becomes a mere sounding phrase. In such a case there is bimetallism _de jure_, but monometallism _de facto_. The greater the league of states, the greater is the likelihood that the scheme will work. The economic theory of bimetallism was recognized by a majority of economists to be abstractly sound, but the political difficulties in the way of international agreements are great, and have proved to be insurmountable. § III. THE FREE-SILVER MOVEMENT IN AMERICA [Sidenote: Conditions leading to the demand for free-silver] 1. _International bimetallism, despite many efforts, failed of adoption._ This brief proposition sums up the history of the movement, from 1878 to 1892, to form a league of states and an agreement for international bimetallism. International conferences were held, and taken part in by the leading financiers of the world. France at first favored the policy, and the United States was always foremost in advocating it, while England in the main was opposed. Some of the advocates of bimetallism argued that the fall of prices was due not alone to economic forces, but also to a money conspiracy which had influenced legislation to introduce and continue the gold standard. This, of course, was strenuously denied. It is true that the commercial classes found gold the form of money most suitable to large business, and no doubt class interests entered into the question in some measure. The difficulties of the debtor class in America were peculiarly great, owing to the inflated paper currency, from 1862 to 1879, which had made our conditions quite abnormal. In the period of speculation following the Civil War an enormous mass of debts had been accumulated. The hopes of thousands of tillers of the soil suffering from a fall in prices, and of the great debtor class, clamoring for relief, were centered upon the success of this movement. Banking and other large business interests in general opposed it. [Sidenote: Purpose of the free-silver movement] 2. _The plan of the free-silver advocates was to legalize national bimetallism in the United States at a ratio between gold and silver very different from the market ratio._ Gold had become, long before 1860, the real standard of our money system, and after 1873 it was the only metal admitted to free coinage. Silver, little by little, was losing purchasing power in terms of gold, until from being worth, in 1873, one sixteenth as much, ounce for ounce, it became, in 1896, worth but one thirtieth as much as gold. It must be recognized that the power of silver to purchase general commodities fell much less than the change in its ratio to gold would indicate, gold having risen in terms of most other goods as well as of silver. Nevertheless, the proposal to open the mints to free silver at sixteen to one in the year 1896 meant a sudden and marked cheapening of money. The prime purpose was to lighten the burden of debts by making the standard of deferred payments cheaper. It was at first a debtors' movement, but to succeed it had to enlist the support of other large classes of voters. And thus, by force of political necessity, but doubtless in large part naïvely, it developed into the more sweeping theory that wages, welfare, and prosperity called for a larger supply of money independently of the effect on debts. [Sidenote: The free-silver theory] In its extreme form the free-silver plan was a fiat scheme, for some of its supporters believed that by the mere passage of the law the two metals could be made to bear to each other any ratio desired. But its most intelligent and high-minded advocates (who were moved to its support by a sincere sympathy and concern for the distressed agriculturalists) recognized fully that the force of the law was limited by economic conditions. The extreme opponents of the plan, ignoring the evident fact that the adoption of a metal as a standard money is one of the most essential of the market conditions, denied that government action could in any way affect the value. Most of the arguments presented on either side in the political campaigns showed little evidence of a sound theory of money. The victory of the gold standard in 1896 and 1900, it would seem, was due more to the well-founded fear that a sudden change of the money standard would cause a panic, than to a thorough understanding of the question. [Sidenote: Increase of gold production] 3. _The increase of the gold output has for the present checked the fall of prices._ Before 1890, for a number of years, the average output of gold was shrinking till it reached a scant hundred million per year. At the same time, nations which recently had gone over to the gold standard were striving to secure large stocks for their banks and general circulation, and those great reservoirs, as a result, became better filled than they ever were before. After the opening of new gold-yielding territory in South Africa and in the Klondike, the annual output of gold became greater than it had ever been, being at the opening of the South African War in 1898 nearly three times that of ten years earlier. The present methods of extracting gold resemble those of fifty years ago as civilized industry resembles that of savages. Intricate machinery has taken the place of crude tools, chemical processes have been introduced, and the principal product results from the regular and certain working of deep mines rather than from chance surface discoveries. Great masses of debris can now be reworked profitably. In many parts of the world are enormous deposits of low-grade ores, before useless, that can be worked economically by present methods. For a generation at least the world's supply of gold is likely to continue larger than ever before in history, and prices in terms of gold probably will rise. [Sidenote: Rising prices the temporary solution] Though no change seems likely or possible at the present time, the free-silver advocate has been justified by events against those gold advocates who said that the amount of money has nothing to do with prices. Prices have gone up as gold has increased. The free-silver advocates have gotten what they wanted through a change for which neither party can claim the credit. Yet the present situation is unsatisfactory and undeveloped. A standard better than a single metal, more stable than a single commodity, is desirable if it can be found. The money question must arise again and in a new form before many years. The difficulty has not been finally settled; it is but postponed. CHAPTER 48 BANKING AND CREDIT § I. FUNCTIONS OF A BANK [Sidenote: The essential banking function] 1. _A bank is a business whose income is derived chiefly from lending its promises to pay._ Banks have passed through many changes in the past three centuries. Originating on the street corner for exchange of money, they have evolved into great institutions of many forms, and performing many functions. The definition seems paradoxical, but it expresses what in modern thought is the essential feature of a bank: the lending of its credit. A reserve of money is needed by the man of business. But for the banks each man would have to keep his reserve in his own till. Except the small sum needed for current uses, a bank can keep this reserve more economically than individuals can. It has the advantages of large production similar to those of a large factory. The process of lending credit is called deposit and discount. It grew out of the deposit of actual money for safe keeping and the loaning to borrowers by the method of discounting their notes. The term now has a somewhat different meaning, for a merchant may obtain a deposit to-day without putting any money in the bank. He gets the bank to discount his notes or collateral security, and to enter the sum to his credit as a deposit. He becomes a depositor by borrowing, not by lending to the bank. The sum is under the borrower's control; he can check it out when he wishes; but he usually keeps a certain balance to his credit. The bank's gain is larger than ordinary interest, because it gets a discount on the large sums left in its possession. The bank increases its funds also by attracting deposits from those who do not care to borrow. [Sidenote: Other functions usually performed] 2. _Functions not essential to banking are ordinary money-lending, money-changing, exchange to distant points, safe deposit, and issue of bank-notes._ Banks often lend in the ordinary way, allowing borrowers to draw the money out at once, but this is not the business they prefer. Many individuals and corporations, such as endowed charities, colleges, insurance companies, lend great sums of their own money without thereby partaking in any degree of the peculiar character of banking. Money-changing (the exchange of coins of different countries) is done by banks, but likewise by many other agencies not sharing the essential banking character. Foreign and domestic exchange is the issue and cashing of "drafts" for money payments between distant places. Most banks are well fitted to perform this function, but some banks do not undertake it, and it is performed also by some business houses that are not banks. Safe deposit is the keeping of things to be returned in identical form, as silverware, notes, and papers. By banks in small towns this is sometimes done freely, sometimes for a slight charge; but in large cities safe-deposit vaults are generally quite unconnected with banks. Even bank-note issue is not essential to banking; most banks in the United States issue no notes, others issue very few. All these functions may be united under one management, but the essential banking function is deposit and discount. [Sidenote: Sources of the income of banks] 3. _The income of banks is derived from discounts, interest on their own capital, charges for exchange and collection, rents on investments, and profit from the loan of their bank-notes._ The income of banks is drawn from different sources, according to the size of the community, and the nature of the banks. While in the villages and smaller cities they perform a number of functions, in the larger cities they usually specialize in a far greater degree. Like every other enterprise, a bank must start in business with some paid-up capital as a guarantee of credit. Further security is afforded by the limited liability of shareholders for losses, in proportion to their capital stock. The same amount of money could be loaned with less trouble and more cheaply without starting a bank, but used as a banking capital a part of it can be loaned while still serving to attract money deposits. Charges to smaller customers for exchange are a source of income to some banks, but in many cases this service is freely performed for regular customers and becomes a considerable expense. Banks make few investments in real estate or other physical property; it is, in fact, their duty to keep out of ordinary enterprises, but they are forced sometimes to take for unpaid debts things that have been held as security. Profits on bank-notes have at times been the main, possibly the sole, motive for starting banks; but that is not the case to-day when the right of issue is so strictly limited. [Sidenote: Productive services of banks] 4. _Banks are productive economic agents performing important industrial services._ False ideas have long been entertained about the magic power of banks to produce wealth from nothing. To many, banks are a mystery much like paper money. Their opponents sometimes have pictured them as vampires fattening on the blood of industry. That they have shown abuses at times is undeniable, but, like other economic agents, they are to be judged by their net efficiency. The bank is a tool performing services similar to those of money. For some purposes money is an awkward and costly agent in comparison with banks. For remitting payments from New York to San Francisco or Hong Kong, money is a medieval device. Money can more safely be entrusted to a bank than to a strong chest in one's own house. The man who refused to make use of banks in this day would isolate himself economically, and would soon find himself out of any but the smallest business. He could no more get along without the banks than without the post, the telegraph, or the telephone. [Sidenote: The bank as a labor-saving device] The gathering of loanable funds by the banks, making them available at once, reduces hoarding, makes money move more rapidly, and creates a central market between borrowers and lenders for the sale of credit. While not creating more physical wealth directly, it adds to the efficiency of wealth; it oils the bearings of the industrial machine. To abolish banks would be to destroy labor-saving machinery. Banks perform incidentally a further service in developing better business methods in the community. In supplying credit to active business, banks are constantly passing judgment on the collateral security presented to them and on the solidity of the enterprises that are seeking support. They enforce promptness and exactitude in business dealings. Because in their public nature banks are very analogous to money, they have always been looked upon as properly subject to more supervision than most private business, and government has always exercised a considerable measure of control over them, sometimes for good, sometimes for evil. § II. TYPICAL BANK MONEY [Sidenote: Nature of typical bank money] 1. _Typical bank money consists of notes issued by banks on the credit of their general assets, without special regulation by law._ As no two leading countries have quite the same system of bank-notes, the subject is a difficult one. It is well to begin, therefore, with a clear conception of typical bank money, unregulated by government. Such a form of note is one with which few now living in the United States have had any experience, as the present national bank-notes differ in essential ways from the typical form. Typical bank-notes are notes issued by banks as a means of loaning their credit. The borrower, instead of receiving a credit balance at the bank subject to check, gets notes which he hands on to other men. These notes are returned for redemption to the issuing bank as soon as any one wishes specie in their stead. The limit of the issue of such notes is the need of the community for that form of money, and if they are promptly redeemed in gold on demand, they never can exceed that amount. A holder of a note (in the absence of special regulations) has the same claim on the bank that a depositor has. As it is to the interest of the bank to keep in circulation as many notes as possible, there is a temptation to abuse the power of note-issue, to which many banks yielded in the period of so-called "wild-cat banking" before the Civil War. [Sidenote: Bank-notes viewed as commercial paper] 2. _Bank-notes are viewed by some as a form of commercial credit._ Typical bank-notes are not legal tender, and every one has the legal right to take or refuse them as he pleases. It is therefore said by some that bank-note issue is of no special concern to the state, that it can safely be left to individual self-interest. It is said that if one has little faith in a note, he may refuse to accept it. But in reality every one is compelled to take the money that is current. The average citizen cannot know the credit of distant banks, and thus has not the same power of judging wisely in taking bank-notes that he has in making deposits in the bank of his own neighborhood. Between bank-notes and ordinary promissory notes, there are other differences of a nature pretty generally recognized. Bank-notes pass without endorsement and thus depend on the credit of the bank alone, not like checks, on the credit of the person from whom received. They yield no interest to the holder. They are intended to be used as money and are so used. Thus they come near to paper money in their nature, and the banks are near to exercising the right of coinage. [Sidenote: Bank-notes viewed as a form of political money] 3. _By others, bank-notes are considered to be almost identical with government paper money._ Some opponents of bank-note issue declare that it is a usurpation of the prerogatives of government, and that no power but the sovereign state should issue money. While many in America to-day hold this view, the comparison probably is false and strained. Typical bank-notes, unlike inconvertible paper money, depend for their value on the credit of the bank, not on their legal-tender quality and on political power. They must be redeemed on penalty of insolvency; government notes need not be, and yet will circulate at par if properly limited. While these differences mark off government paper money pretty sharply from typical bank-notes, it must be noted that in many cases actual bank-note issues have been far from this typical form. In the days of "wild-cat" banking, bank-notes were issued in excess and fell below par, yet the man in a Western community who dared to ask the bank to redeem the notes in specie was not only frowned on by the bank, but condemned by the public, which felt that business was endangered by such a demand. Redemption on demand would have required a reduction of the amount of money in circulation and would have caused a fall in prices. Inflation of the bank currency went on with results almost identical with those following an excessive issue of government paper money. Not formal law but public opinion made such bank-notes essentially political money. [Sidenote: Policy of public regulation of bank-notes] 4. _The public nature of bank money has led to many forms of public regulation of their issues._ Bank-notes thus stand midway in their economic nature between political money and private notes, sharing something of the character of each. An extreme analogy in either direction is misleading. It is of great social importance that the circulating medium should be reliable. The least possible amount of the citizen's energy and thought should be required to decide whether the money is good or bad. Nevertheless, those opposed to state interference in industry declare that if the citizen is not left to look out for himself, the growth of stupidity will be encouraged; and they say that it is no more essential for the state to guarantee the quality of bank-notes than the quality of woolen cloth or of sugar. Few, however, take so extreme a view, and it is generally held that it is a function of the state to insure in a greater or less degree the quality of the money in circulation. The actual bank-notes of the leading countries are thus of many varieties. The Canadian notes are the most nearly typical bank-notes issued to-day; those of Germany come next, while those of the United States have little of the typical character. § III. BANKS OF THE UNITED STATES TO-DAY [Sidenote: Forms of banks in the United States] 1. _The three forms of banks in the United States are private, state, and national._ Any one with a little capital may become a private banker. There are "curbstone brokers" in almost every town, and some of the great financial houses are private banks. But the law will not allow this to go very far. Some states will not allow a man to put up a sign announcing himself as a banker unless he complies with certain banking laws. In some states even private banks are subjected to the same inspection as the state banks and are required to make the same reports to the state officials. State banks are those organized under special state banking laws. They are usually subject to inspection by state-bank commissioners, must make regular reports, and are required to comply with certain rules as to their reserves, rates, and investments. In any case they do not issue bank-notes, because the national laws now tax the notes of state banks so heavily that they are unprofitable. National banks, the largest and most important portion of our banking system, were authorized by law in 1863, during the Civil War. They are subject to stricter regulation and inspection than are other banks, and that regulation is perhaps an advantage to them, as it strengthens public confidence in their stability. Yet this regulation does not insure the depositors against loss, as some national banks fail every year. They may be organized with twenty-five thousand dollars capital in towns of less than three thousand population, with fifty thousand dollars in towns of less than six thousand, with one hundred thousand dollars in cities of less than fifty thousand, and with two hundred thousand dollars in larger cities. [Sidenote: Nature of our national bank-notes] 2. _Our national bank-notes have no essential mark of typical bank money._ The one marked peculiarity of the national banks of the United States as compared with those of other countries, is their mode of note-issue. They perform all the other functions of banks, essential and unessential, and perform them well, but the issue of bank-notes is optional with them, and some of them do not issue any bank-notes. The legal condition to their issue is that bonds of the United States shall be purchased in the open market and deposited with the treasurer of the United States. Until 1900, notes might be issued only to ninety per cent. of the value of the bonds deposited; but now they may be issued up to the par value of the bonds. The notes, being secured by the value of the bonds, rest on the credit of the government, not on the credit of the bank. These notes are not promptly sent back for redemption to the banks issuing them, as is done with typical bank-notes. They may circulate thousands of miles away from the bank that issued them, and for years after that bank has gone out of business. They are not an "elastic currency" increasing or diminishing with the needs of business. The changes in their amount depend upon the chance of the banks to make more or less in this way than by any other use of their capital, and this in turn depends largely on the price of bonds and on the rate of interest they bear. From 1864 to 1870, fortunes were made from this source, but in recent years there has been little opportunity of gain from note-issues. Our present bank-note issues are not on a logical basis, and satisfy no one entirely. They are of importance neither to the bank, to which they afford little or no profit, nor to the public, for which they do a service equally well done by silver certificates, greenbacks, or coins. [Sidenote: Suggested reforms of the bank-note system] Along with the discussion of the currency has gone, since 1896, a vigorous discussion of the banking system. The two problems are so closely related that a change in the one suggests readjustment of the other. One extreme plan is to abolish bank-notes entirely and to replace them with additional issues of greenbacks; the other extreme plan is to authorize the issue of almost typical bank-notes. A modification of the Canadian banking system, which has great merits, is held up for imitation. Bills have been repeatedly before Congress authorizing the maintenance of a general guarantee fund with which the notes of failed banks could be redeemed, and at the same time authorizing branch banks such as those in Canada. Public sentiment has never strongly favored this plan, however, and there is more likelihood of the passage of a bill providing for emergency notes in time of financial stress, after the plan followed in Germany. [Sidenote: Bank regulation a protective measure] That the control of banking is an important duty of government is the conclusion of the practical world. The various banking systems of the leading countries embody different plans for the one purpose of the adequate control of banking in the public interest. Government control of bank-notes is felt to be of the same nature as factory inspection, that is, to be a protective measure. When public interests are at stake and private interests conflict with them, government acts to forbid one citizen from doing harm, and to protect other citizens from injury. CHAPTER 49 TAXATION IN ITS RELATION TO VALUE § I. PURPOSES OF TAXATION [Sidenote: Taxation defined] 1. _Provision for the expense of organized government is the fundamental purpose of taxation._ Taxation may be defined as the taking by the government of private property for public uses. This implies a certain degree of compulsion. When the national government accepts ten million dollars in trust for the Carnegie Institution, it is not taxation, though wealth is given for public uses. The effects of taxation pervade all industrial affairs, but they will be discussed here only in relation to the value of goods and to the distribution of incomes. By taxation the government interferes with the individual's free choice and with the impersonal economic forces. It expends income in different ways from those which would be chosen by the individual. [Sidenote: Taxation for public defense] The primary purpose of taxation is public defense. War often has driven men into closer social relations. Public defense requires sacrifice on the part of the family and of the individual. In family or patriarchal communities all share a common income and combine in the common defense, but self-preservation compels such small communities to form a larger, stronger state for the common defense. Personal service in the field gives place to money taxes permitting a more regular, continuing, and perfect organization of military forces. [Sidenote: To preserve domestic order] Next comes the need of civil government to insure domestic tranquillity. As political unity grows, the citizens need less often protection against foreign foes, and they need more often, relatively, defense against the aggressions of some of their own countrymen. The preservation of domestic order requires police, courts of justice, and other agencies. The ideal of the anarchist to do without government is nowhere realized. Everywhere there must be government to preserve peace and to protect property. Unfortunately, this need grows with the growing density of population. Crime increases when men swarm in great cities. To maintain and operate the social machinery requires ever-increasing resources. The courts which settle disputes between men, and which interpret their contracts, are agencies of peace, displacing physical contests. Many other public expenses tend to enlarge, as those for legislative bodies, public buildings, statistical inquiries, the printing of public documents. Government on these accounts has become in modern times an increasingly costly institution. [Sidenote: Developing public wants; social and industrial welfare] 2. _The promotion of the social and industrial welfare of society has come to be an important purpose of taxation._ Some functions of government, less essential than the primary ones just mentioned, seem naturally to grow out of them. In a democratic society, popular education is one of the necessary conditions of good government, as it appears that domestic order is not possible in a democratic state without intelligent citizens. Step by step the functions of government are widened. Some industrial functions are performed by the government in connection with the primary needs. Lighthouses are necessary to guide the navy, but they also serve to guide the merchant marine and to aid industry. The post was established as an agent of political and military government to connect the ruler with the outposts (a fact the name post indicates), but the postal service has grown in every country to be a great industrial and social agency. The consular service, beginning in the political need of keeping official representatives in foreign lands, has grown to be a great economic agency. Consuls are commercial travelers, advancing the trade-interests of their countries in all quarters of the globe. These social and industrial functions have been increasing of late. As the national and local governments engage more in industry, they usually make larger demands in the shape of taxation. [Sidenote: The sphere of the state expands] It is along the border-line between the primary and the secondary purposes of taxation that the contest goes on regarding the proper functions of government. If they are to stop short of the extreme of socialism, where shall the line be drawn? The movement has been of late toward greater government activity; more of the wants of men are thus supplied through the agency of the state. That year by year a greater sum is taken by taxation and spent for the citizen is a fact that may be recognized without debate here. The toll-road becomes a public road, the toll-bridge becomes free, more is supplied by taxation for schools, for advanced research, and for technical training. In our country great wealth was given by the Morrill Act to scientific and technical schools. The state universities, against much opposition, have become in many states of the Union the dominant educational force. Moreover, taxation often is used as a means not merely of raising revenue, but of discouraging one kind of industry and encouraging another. One industry wanes or dies under increasing burdens, another waxes strong by fostering exemptions and bounties. A large share of this "protective legislation" is done under the guise of taxation. [Sidenote: Government as a consumption good and as a means of production] 3. _Shifting of the limits of state action and corresponding changes in the weight of taxation are constantly affecting value and incomes._ Society as a whole is made up of many groups of industry. Government is the largest of these, collecting and expending more than any individual or corporation. Government is in one aspect a consumption good. In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities. But government becomes also a mode of social investment, an indirect agent, a productive enterprise. Wealth applied through it secures a greater product than is possible by individual action. Government can maintain lighthouses more economically than individuals could otherwise secure them. [Sidenote: Apportioning of the cost] But when the government undertakes these various tasks, the expense falls unequally on individuals and affects differently their incomes. When free schools take the place of private schools, the law compels every one to contribute to education. To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer's family of twelve. The average result may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action. Happily the subject is not always viewed with selfish eyes. The ethical and patriotic thought is not, "How will this affect my interests?" but, "How will it affect the general interests?" But as the question of value is always involved, men are usually found favoring or opposing a measure of taxation according as it affects their own income. Thus taxation is inevitably an economic question. § II. FORMS OF TAXATION [Sidenote: The various forms of taxes] [Sidenote: On incomes] [Sidenote: On property] [Sidenote: On expenditure] [Sidenote: On business] 1. _Taxes usually are a portion taken from the income arising from labor or from wealth._ In rare cases more than the net income of wealth may be taken, but the aim of taxation in general is to take only a portion of the income for public uses. As economic income has many sources, it may be intercepted at many different points, and taxation may take various forms. First, private income may be appropriated by a tax on income. This is the simplest in thought, but the administrative difficulties of the income-tax are great in practice. It is not easy to determine the money value of the various sources of enjoyment that come into a man's possession in the course of a year, including, as the ideal requires, the immaterial gratifications along with the material. A second form is a tax on property in proportion to value. Since the value of material wealth is the capitalization of the rentals at the prevailing rate of interest, the property tax, so far as it applies to material wealth, should take an approximately equal proportion of incomes. If it were accurately assessed, it would be in some respects better than a tax on actual rents, for it reaches the prospective, or speculative, rental. A third form of tax is one on consumption, or expenditure. This is but another mode of attacking income, for in the long run income is spent, not always by the individual who earned it, but by some one, and thus it is reached by a tax on expenditure. The principal consumption taxes in the United States are the tariff duties and the internal revenues of the national government. In time of war, internal revenues are extended in the United States to a multitude of articles, but usually they are limited (with minor exceptions) to liquor and tobacco. A fourth form of tax is one on selected agencies of industry; such are business taxes, licenses, taxes on investment in business, corporation taxes, etc. These burdens are diffused and rest eventually on some income, not always exactly ascertainable. Actual tax systems combine these forms in great variety, subtracting many minute fractions from each citizen's income in ways unsuspected by him. [Sidenote: Changes of taxation and in capitalization] 2. _The immediate effect of a change in the form of taxation is a change in the market value of goods._ If the new tax reduces the net rent of any productive agent, it reduces likewise its value, which is but the capitalization of its net rental. If taxes are taken off of factories and put upon farm rents, factories rise and farm-land falls in value. The immediate change in value is much greater than the annual tax, for if five dollars is to be taken permanently from the annual rental of the farm, nearly one hundred dollars is taken at once from its selling value. Taxes are reckoned by enterprisers as a part of the cost of production whenever the conditions of competition and of substitution make it possible to do so. In such a case the products rise in price and most of the tax falls upon the consumers. In the Civil War an increase in the tax on whisky increased its selling price, and distillers who owned stocks on which a smaller tax had already been paid reaped profits of millions of dollars. When recently the tax on tea was increased in England, all dealers who had accumulated a stock before the law went into effect were gainers. Every change in taxation inevitably affects, either favorably or unfavorably, many interests. The chance to anticipate a change in tax laws or to get, from those in power, information of a proposed change, makes speculation possible and political corruption profitable. [Sidenote: Shifting and incidence of taxation] 3. _After every change in taxation, competition among bargainers goes on and a new equilibrium of prices results._ The citizen who pays a tax into the public treasury is not always the one whose income is reduced in the long run. In most cases the final and regular burden of the tax is distributed over a number of incomes. The passing on of the burden is called the shifting of the tax; the location of the final burden is called the incidence of the tax. The lawmaker cannot tell exactly where the weight will fall. The principles of value give some guidance in the inquiry, but the workings of the principle are difficult to follow. Certain it is that the new tax, both in its collection and in its expenditure, becomes a new influence in industry. Some occupations are made more attractive, others less so. Some places are made more, others less, desirable to live in. As property thus fluctuates in value, as investments become more or less remunerative, the market price of corporation stocks rises and falls. The rate of adjustment varies greatly under different conditions. The inflow and the outflow of labor and capital are more or less rapid in the various industries. [Sidenote: Many personal incomes affected] The fact that a change in taxation is a disturbing element in price is not to be thought insignificant merely because "all comes out right in the end." Every change in taxation is an element of uncertainty in business and increases the fortunes of some men at the expense of others. Hence no considerable change should be made without good reasons in its favor. The older taxes have the virtue of stability, but in many cases they have grown out of harmony with the industrial conditions. While, therefore, from time to time there is a real need of a reform in the tax system, it should not be undertaken without recognizing the many and complex interests involved. § III. PRINCIPLES AND PRACTICE [Sidenote: Various standards of justice suggested] 1. _Taxation should be adjusted with reference to the general social interest._ Many standards have been suggested to measure the distribution of the burden of taxation, such as benefit, equality, and ability. Each of these terms is capable of various interpretations which have changed from time to time. The benefit derived by any citizen from most of the public services evidently cannot be measured with exactness. The standard of equality cannot be applied in any literal sense to strong and weak, to rich and poor. It is possible, however, to interpret equality with reference not to objective goods, but to the psychic sacrifice occasioned by taxation. Ability thus is of many kinds and may be differently understood. Some think ability to bear taxation is "in exact proportion to the money income"; others believe that it increases at a greater rate than money income, and favor, therefore, progressive taxation, that is, higher rates on the larger incomes. [Sidenote: Social welfare as the aim] The conflicting interests of the classes in each period are to some degree softened by the social conscience, and taxes are adjusted according to a vaguely held ideal of the social welfare. Social expediency, more or less broadly interpreted, determines who shall be taxed and what will give the best social results. The exemptions from taxation in feudal times were great, and viewed from our standpoint were inequitable, for it was the upper classes who escaped while the peasants bore all the burdens. The landlords and nobility who were assumed to be performing important social functions, often had outgrown their usefulness. Exemptions are granted liberally in most states to-day for some purposes and to some classes of citizens; to educational, religious, and charitable institutions; to the homes of priests and ministers; to homesteads purchased with pension money, etc. California alone of all the states in the Union continued until 1903 to tax churches and private schools. The social interest requires that taxes be both elastic and productive, so that the needs of the government shall be amply provided for. The harmonizing of these needs in the laws of taxation requires a high degree of wisdom, of foresight, and of integrity, in the legislator and in the citizen. No hard-and-fast rule for the apportioning of taxes can be laid down. The decision must be made in each generation by social opinion, guided by the social conscience. [Sidenote: Principles of administration] 2. _The administration of taxation should be economical, certain, and uniform._ Whatever taxes are adopted, whether on property or income, whether at a proportional or a progressive rate, their justice and expediency depend largely on their administration. Principle and practice in this as in most affairs may go far apart. Some laws are more easily and economically executed than others. The time of collection should be as convenient as possible for the citizen, and the mode of payment should be the most simple. As to the time, method of payment, and amount, the utmost certainty is desirable. Taxation that is variable, shifting, dependent on personal whim and favoritism, is despotism. Above all, the administration of the law should be uniform and impartial,--yet this is a principle most frequently departed from in practice. The assessment of taxes has to be intrusted to men with fallible judgment, imperfect knowledge, and selfish interests. The assessor is as near a despot as any agent of popular government to-day. Not infrequently it is to men incapable of earning two dollars a day in any private business that the power is given of passing judgment on the value of millions of dollars' worth of property. Under the circumstances, evils are to be expected and they occur. The small property-owner often is crushed under the unequal assessment while the large owner comes lightly off. Political friends are favored, political foes are made to suffer. Woman nearly everywhere pays more than her fair share of taxes, a fact that the advocates of woman suffrage do not fail to urge as an argument for their cause, although women's disadvantage in this matter is little greater than that of any man without special political influence. [Sidenote: Importance of taxation as a public question] 3. _The relation of taxation to private incomes makes it one of the largest public questions of the day._ The discussion of taxation has accompanied the growth of free government in England and America from the time of Magna Charta. The control of the public purse frequently was the occasion of conflict between the monarch and the people. Taxation was a leading issue in the American Revolution. While, therefore, it cannot be said that the subject has been of no great importance in the past, it is true that in our own national history since the adoption of the Constitution, taxation has not been much discussed, except in the one aspect of the tariff. Constitutional and political questions, states rights, and the question of slavery, long absorbed the interest of citizens and legislators. But with the aroused interest of the public in economic problems, taxation is attracting, and is certain to attract in the next few years, increasing attention in local, commonwealth, and national politics. CHAPTER 50 THE GENERAL THEORY OF INTERNATIONAL TRADE § I. INTERNATIONAL TRADE AS A CASE OF EXCHANGE [Sidenote: The motive of individual gain in foreign trade] 1. _International trade is exchange between individual men, and has the same object as other exchange of goods._ The term international trade should not be misunderstood as meaning that nations rather than individuals engage in it. International trade differs from domestic trade only in the fact that the parties are citizens of different sovereign states. Exchanges between men in the same village, between those in neighboring villages, and between those in different countries, are prompted by essentially the same economic motive--the wish to increase the want-gratifying power of goods. In every such case both parties gain or think they are gaining. In international trade there is the same chance for mistake as in domestic trade, but no more. In a single transaction in either domestic or foreign trade one party may be cheated, but the continuance of trade relations is dependent on continued benefits. The once generally accepted maxim that the gain of one in trade is the loss of another, is rarely applied now except to international trade. The starting point for the consideration of this subject is in this proposition: Foreign trade is carried on by individuals, for individual gain, with the same motives and for the same benefits as are found in other trade. [Sidenote: Natural differences affecting foreign trade] [Sidenote: Political boundaries and trade] 2. _As commerce has grown, the territorial division of labor has correspondingly increased._ Although economic motives have had influence in political affairs and have helped to determine political groupings and the limits of modern nations, there is to-day no very close correspondence between political and economic boundary lines. Both industrial and political conditions have changed so rapidly that the lines often have tended to diverge rather than to agree. It is common for two portions of a nation to exchange far less than do two portions of entirely different nations. The great territorial divisions of industry are determined first and mainly by differences of climate, soil, and natural resources. Thus trade arises easily between north and south, between warm and frigid climes, between new countries and old, between regions sparsely and regions densely populated. Foreign trade with distant lands is as old as history. In medieval times the luxuries of the temperate zone were mostly articles produced in the tropics. Political divisions usually have not been large enough to embrace widely varied soils and climates, the Roman Empire being an exception in marked contrast with the comparatively small political units of the Middle Ages. Before modern methods of transportation, a large free federal state like our republic was impossible. As in recent centuries the large political units have been formed, the question has arisen, Shall the political boundary be likewise the economic boundary marking the limits of trade? The firm constitutional Union of the American states arose out of difficulties with regard to trade. The German Zollverein, the forerunner of the modern German Empire, had a similar origin. The Australian Federation consummated within the last few years has grown out of the need of adjusting tariffs and tariff boundaries. These larger political units containing such varied resources can in larger measure, but never completely, become independent of the rest of the world if they will. [Sidenote: Differences in culture and industry] Territorial division of trade is determined secondly by differences in the accumulation of wealth, in the development of capital, of invention, and of organization, in the degree of intelligence of the workers, and in the grade of civilization. It is mainly trade due to this second group of causes, and carried on between old and new countries of about the same latitude, that is the subject of discussion in economic treatises on international trade. [Sidenote: Comparative costs as between individual workers] 3. _The doctrine of comparative costs is that relative, not absolute, advantages of production determine for a country the benefits of international trade._ The free-trade question in any country is whether it is for its interests as a whole to permit trade between its citizens and the citizens of other countries. The question appears especially difficult where both countries have natural resources of about the same character (as iron and coal in the case of England and America), and where, therefore, both can produce the things that are exchanged. If American labor can produce as much iron in a day as English labor,--or more,--is it not foolish and wasteful, it is asked, not to produce that wealth? Now, exactly the same case is presented in simple neighborhood exchanges. The merchant may be able to keep his books better than does the bookkeeper whom he employs. The proprietor may be able to sweep out the store better than the cheap boy does it. The carpenter may be able to raise better vegetables than can the gardener from whom he purchases, and yet the merchant and the carpenter do not quit their better-paying work and turn to clerking or to raising vegetables. [Sidenote: As between communities differing in advantages] It often happens that both countries can technically produce both the articles that are internationally exchanged. It may frequently happen that one of the two countries has an advantage in amount of sacrifice and effort, as to both articles; but if the advantage is greater in one article than in the other, the foreigners, like the low-paid clerk, will be willing to exchange at a ratio that will make it profitable to specialize in the product wherein the greater superiority lies. Therefore not the advantage as to a single product, enjoyed by one country over the other is most important in determining whether to produce at home or to exchange, but the comparative advantages enjoyed in the production of the two articles in question. [Sidenote: Examples of comparative costs] It must be remembered that comparative cost as here used refers to cost in effort, not to money cost,--a point on which there is often confusion. The money cost of a certain product is often greater in a new country because wages are high, and wages are high just because psychic cost is low, that is, because labor can produce so much. At the time of the great gold discoveries in 1849-50, the price of goods in California was much higher than in the East, and much higher in Australia than in Europe. A day's labor doubtless would produce as much food in Australia and in California as in New England and in Norway, but it produced far more gold. Hence butter and cheese were shipped by long routes from Norway to Australia and from New England around Cape Horn to California, to be exchanged for gold. One of the standing arguments against foreign trade is based on the idea that a country cannot profitably import goods unless it is at an absolute disadvantage in their production. It is declared that as our country can produce these goods "as well" as foreign countries (meaning with as few days' labor), there is a loss on every unit imported. [Sidenote: Selection of the most paying industries] 4. _The equation of international exchange is that adjustment of prices which results in the equalizing of the imports and exports of the country._ The superiority of a new country over an old one is not equally great in every line of industry. It is almost certainly most marked in those enterprises where natural resources are employed. To compete with the older country in less favored industries, capital and labor in the new are forced to take a lower rate than they can earn in the more favored. Without any government supervision, therefore, but simply through the choice of enterprisers seeking the best investment of capital, industries are developed in which the country is either most markedly superior or least inferior to its neighbors. If the productive energies of men interchanged between industries and between countries with perfect readiness, a perfect equilibrium of advantage would everywhere result. In every country, in every occupation, labor and capital of given quality and amount would receive the same reward. But the interchange of labor and capital between countries is never without friction. Adam Smith said that "a man is of all sorts of luggage the most difficult to be transported." The higher wages in a new country are sufficient to attract constantly from the older lands a portion of their labor supply; the higher rate of interest in the new countries attracts constant additions of capital; yet, despite these forces working toward equalization, the inequality may remain and through the working of other influences even increase in the course of years. [Sidenote: Persistence of the differences] The laborers, enterprisers, and investors in the one country are thus in a position of more or less enduring advantage relative to those of the other countries. The advantage is sometimes said to be a "monopoly" which they, or the country as a whole, enjoy; but in the absence of any contractual limiting of competition, this is a misuse of the term monopoly. This variation in the degree of scarcity of agents in different territories is not peculiar to nations as a whole. Differences of the same nature exist between the Northern and the Southern states of the American Union, have continued for decades between Eastern and Western states, and are found even between neighboring counties. The differences between two countries, however, are likely to be more marked, the circulation of factors being so active within a country that it is allowable to speak broadly of prevailing national rates of wages and of interest. [Sidenote: The ratio of international demand defined] Every exchange of goods between the countries is made at a ratio that reflects, or expresses, this abiding difference in comparative costs. The imports into the favored country represent regularly the results of more units of labor of a given grade than do the corresponding exports. The ratio which expresses the disparity of advantage of productive factors is called "the equation of international demand." This does not mean that the money value of the imports exceeds that of the exports, or vice versa. On the contrary, the equation itself embodies a maxim of international trade that "in the long run," or "on the average," imports and exports must be equal in value (_i.e._, equation of demand). This brings us to the theory of foreign exchanges, which is essential to an understanding of this feature of international trade. § II. THEORY OF FOREIGN EXCHANGES OF MONEY [Sidenote: Purpose of foreign exchange] [Sidenote: The rate of foreign exchange] 1. _Foreign exchange of money is the purchase and sale of the right to receive a given kind and weight of metal at a specified time and place._ Par of exchange is the number of units of the standard coin of one country that contain the same amount of fine gold (or silver) as the standard coin of the other country. Usually the English pound is taken as the basis in the tables which express the ratio of the gold in the standard coins of different countries. The _gold shipping point_ is par of exchange plus or minus the cost of moving the actual metal; it varies with means of transportation and communication. The par of exchange between England and America being $4.866 and the cost of expressing and insuring a gold pound between New York and London being approximately .03, the shipping point for the export of gold from New York is $4.896. At the upper and lower limits, there is a motive for shipping gold as a commodity. If each transaction were independent of all others, the cost of exchange would be the weight of metal called for, plus grains enough more to pay for loss of interest, cost of freight, risk, and trouble. In such a case it would cost $4.896 to remit one pound; while a debt of one pound payable in London would at the same time be worth $4.836 to the creditor in New York. When, in New York, a number of men having bills to pay in London meet a number of owners of bills receivable in London, a market for London drafts is created and a rate of exchange results somewhere between the shipping points. In this is the explanation of the variation of the rate, and of the facts that the cost of outward exchange sometimes is less than the par of exchange and that the value of foreign drafts sometimes is above par. [Sidenote: Variation about par of exchange] The balancing of foreign exchanges is of essentially the same nature as the domestic cancelation of indebtedness. It is going on constantly between two merchants in the same town, between two banks in the same town who represent groups of merchants, between men in neighboring towns, between distant states like New York and California, and between the trading nations of the world. The price of exchange to the individual is reduced by the specializing of the business in the hands of a few dealers, permitting cancelation of indebtedness or offsetting of exchange, and greatly reducing the amount of bullion to be transported. Exchange varies above and below par as conditions change. When the movement of money is into the country, drafts on London are bought and sold for less than par, for every pound draft thus remitted to London reduces the need of shipping gold to this country, while every London draft collected in New York at such a time increases the need to ship gold. [Sidenote: The cash balance of international trade] 2. _International shipment of money is always just the amount needed to balance the accounts due._ The proposition that in the long run the value of imports must equal the value of exports, while the fundamental truth in the theory of international trade, must be understood in a broad sense. Into the balance between the traders of two nations enter many items: the cash values of the imports and exports of each; freights, insurance premiums, and commissions; the expense of Americans traveling in foreign lands, and the cost of the foreign service of this government (such as the salaries of consuls and of diplomatic representatives) which count as the importation to America of an equivalent amount of food, clothing, and sundry services; subsidies and war indemnities to foreign nations representing, as they do, an expenditure, which at the moment may be paid in coin, but which, as is to be more fully explained, must be offset ultimately in some way by exports. [Sidenote: Various credit items entering into the balance] Many credit transactions affect the balance one way or another until settled. The loans made by European capital to the American government or to individuals and corporations in America, as well as the European capital expended in purchasing American enterprises, require the remitting of gold to New York, and thus offset many imports of goods to New York otherwise calling for the remitting of gold to London. In the direction opposite to this, act the interest payments and the eventual repayment of the principal loan, for these require either money or goods to be exported from America to the value of the obligations. Loans that run for years thus offset annually (in their accruing interest) a portion of the exports of the debtor country. An excess of exports may therefore at any given moment indicate either that the country is in debt or that it is getting out of debt. An excess of exports is generally looked upon as an evidence of national prosperity; but it is absolutely inconclusive on the point. Finally, after all the items of imports and credit paper purchased abroad are set opposite the items of exports and promissory papers sold abroad, the balance is paid in gold bullion and is shipped one way or the other. Evidently the amount of gold shipped is but a small fraction of the total volume of transactions. Industrial indebtedness is represented in various forms: bills of lading for goods shipped, drafts made by the creditor on his debtor for goods shipped or property sold, checks or letters of credit of travelers, bonds and notes public and private. These are the objects dealt in by the bankers who are the agents to carry on the work of exchange. [Sidenote: Relations of the international flow of goods to the flow of money] 3. _The territorial distribution of money is both a determined and a determining factor in international trade._ It appears to be determined in that the balance of all accounts for or against the country must be settled eventually in money. After any such a settlement one country has less, the other more money than before. The change in the amount of money at once reacts on prices and becomes a determining factor in international trade. The flow of money out of a country causes money to tighten, interest rates on short loans in the large cities to stiffen, and prices slightly to fall. When prices fall, imports decline, as the country is not so good a place to sell in; when prices rise, imports increase, as it is a better place to sell in. As the opposite effect is produced on exports, there occurs immediately a change in the quantity of money which continues until the national credits and debits balance and for a brief time remain in equilibrium. If the trade of a country with its neighbors continued long to give a balance of imports of goods and of debit items (exclusive of money) it would ultimately be drained of all its coin, and would default payment or cease to import. If the trade constantly gave a balance of exports and credit items, money would continue to flow in, until prices rose to unexampled heights. In fact no such extreme is even remotely approached, for a slight movement of money in either direction at once influences prices and sets in motion counteracting forces. Decade after decade the circulating medium of leading countries changes only slightly in amount, and the fluctuations during periods of so-called "favorable balance of trade" and of "unfavorable balance of trade" represent only the smallest fraction of the value of goods passing through the ports of the country. § III. REAL BENEFITS OF FOREIGN TRADE [Sidenote: Fallacious explanations of the gains from foreign trade] 1. _The direct advantages of foreign trade consist in the increased efficiency it imparts to productive forces._ In explanation of the advantages of foreign trade it is said to be a vent for surplus production and to give a wider market to what would otherwise go to waste. This involves the same fallacy as the "lump of labor," the destruction of machinery, and the praise of luxury. If backward nations now give a vent for products which would otherwise rot in the warehouses, at length a time will come when the world will have an enormous surplus unless neighboring planets can be successively annexed. Again it is said that the great purpose of foreign trade is to keep exports in excess of imports so that money may constantly increase in amount. The ideal of such theorists is an impossible condition where the country would constantly sell and never buy. In the commercial view the sole object of foreign trade is to afford a profit to the merchants, regardless of the welfare of the mass of the citizens. [Sidenote: The real advantages of foreign trade] The main advantage of foreign trade is the same as that of any other exchange. It is hardly necessary to review the explanation here: the increased efficiency of labor when it is applied in the way for which each country is best fitted; the liberation of productive forces for the best uses; the development of special branches of industry with increasing returns; the larger scale production with resulting greater use of machinery and with increased chance of invention; the destruction of local monopolies. The moral and intellectual gains of foreign commerce were formerly much emphasized. Commerce is an agent of progress; it stimulates the arts and sciences; it creates bonds of common interest; it gives an understanding of foreign peoples and an appreciation of their merits; it raises a commercial and moral barrier to war; and it furthers the ideal of a world federation, the brotherhood of man. [Sidenote: Conflict between general and special interests] [Sidenote: Prevalence of protective tariffs] 2. _Free foreign trade thus has in its favor the presumption of advantage to the citizens; but various interests may be adversely affected._ The general attitude of economic students for a century and a half has been favorable to a large measure of freedom in foreign trade. But the actual practice of nations is opposed to the principles laid down by the philosophers and accepted by nearly all serious students of the question. Germany adopted very restrictive measures under Bismarck in 1879 and by a recent law has discouraged trade still further. France, Italy, and other smaller nations of Europe have strong protective tariffs. The United States has followed a restrictive policy for the last century almost unvaryingly. The explanation of this contradiction is not entirely simple. Free trade is not the most desirable thing for every one. Great interests are affected by foreign trade and certain of these interests are able to dominate legislation. The general proposition of free trade between nations, as advocated by most economists since Adam Smith, is rejected by a majority of the people, by the politicians, and by the legislators. CHAPTER 51 THE PROTECTIVE TARIFF § I. THE NATURE AND CLAIMS OF PROTECTION [Sidenote: Nature of a tariff for revenue] 1. _A protective tariff is a schedule of import duties so arranged as to give appreciably more favorable conditions to some domestic industries than they would enjoy with free trade._ Tariff duties were first laid to get revenues for the government. The first effect of the tariff is the same as that of any tax that enters as a new factor into enterpriser's cost--the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot be produced within the country (as oranges, spices, and coffee, in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may affect somewhat the price in the producing country and may compel the foreign producers to sell each unit for less than before. As such a tariff does not increase home production, it is for revenue, not for protection. [Sidenote: Effects upon home industry] But if the article can be produced in the importing country at the new price, "home industries" will start. If the whole demand at home is thus supplied, imports stop and therewith stop all revenues to the government from that source. This is a prohibitive or completely protective tariff. Most tariffs combine the characters both of revenue and protective measures. Where the freight charges are low along the coast and on the main lines of transportation, some imports take place; while farther inland, where freight charges are high, some home production of the same goods takes place. A tariff that reduces imports but does not cut them off entirely is either a revenue tariff with incidental protection or a protective tariff with incidental revenue. The difference is partly one of legislative intention, partly one of degree only. [Sidenote: The beginning of the tariff under the Constitution] 2. _The tariff question has been the most discussed of economic questions in American politics._ The tariff bill passed by the first session of Congress in 1789 was primarily a revenue measure with rates averaging only about five per cent.; but incidentally it was protective (as most tariffs are), being laid on imports of iron and cloth, the production of which had been undertaken to some extent before, but which thus were further encouraged. Between 1808 and 1812, the United States and England were in constant disagreement, and our government repeatedly laid an embargo on British commerce, closing our ports to British ships, and British ports to our ships. The war from 1812 to 1815 almost annihilated American trade on the ocean. Added to this discouragement of foreign trade was the high tariff imposed, in the vain effort to get revenue from greatly decreased imports. Altogether these causes almost completely stopped importation and forced the American people to rely on their own efforts for such goods. Some industries having been "stimulated" in a high degree, their destruction was threatened by the repeal of the high war tariffs. Many investments and interests were at stake, and the tariff became a most important question. [Sidenote: The tariff controversy before 1865] The first period of real discussion of the protective policy was between 1816 and 1846. The result of the first twelve years was an increase of the tariff rates which, in 1828, reached a high point. By the compromise of 1832, the rates were reduced by steps till 1841. Again from 1842 to 1846 was a brief period of higher duties, followed by a policy which, relatively speaking, was one for revenue, from 1846 to 1860. Again in the Civil War, 1861-65, the rates were steadily increased without much discussion, the tariff not being the leading question at a time when the prosecution of the war was absorbing nearly all attention. [Sidenote: Recent discussion of the tariff] The latest period of discussion was from 1874 to 1892. In the Tilden and Hayes campaign of 1876 the tariff was made the leading issue and the advocates of a lower tariff were very nearly successful. In 1880, protection again triumphed in the election of Garfield. In the election of Cleveland in 1884, the issue of tariff reform had some part, but no effective legislation on the subject was enacted in the next four years. In 1888, Cleveland was defeated in a campaign fought mainly on the tariff issue, and Harrison was elected as a pronounced protectionist. In 1892, Cleveland was reëlected on the issue of tariff reform. From that time, however, there has been a lull in the discussion of the tariff question. The campaign of 1892 was the last presidential election in which the tariff was the dominant issue. Since 1896, the money question and imperialism have quite crowded the tariff issue off the stage. [Sidenote: The "balance of trade" argument] 3. _A leading argument in favor of a protective tariff is that by encouraging an excess of exports it maintains a favorable balance of trade._ This notion of the favorable balance of trade appears in several forms. One of these, already discussed in connection with foreign exchanges, is that the exports of a country in the form of merchandise must exceed the imports if the country is to prosper. The ideal cherished is to keep more merchandise constantly flowing out of the country than comes in. An interesting commentary on this delusion is the fact that this is the usual situation in poor debtor countries having constant interest payments to meet; while the opposite of the ideal is the situation in rich creditor countries. England for many years in the period of her greatest prosperity has had a constant excess of imports, these being goods to the value of the interest payments due to Englishmen from investments abroad. [Sidenote: "To keep money at home"] 4. _Another argument is that the protective tariff keeps money at home which, if trade is free, will be sent abroad to buy foreign goods, thus impoverishing the country._ This is the "favorable balance of trade" argument, with the emphasis on money rather than on goods. A superficial glance at the trade relations of an old and rich country with a new province seems to give evidence for such a belief. The older country is lending capital (which it sends to the debtor country in the form of goods) and it has at the same time a larger supply of money. These two facts--the lack of money and the poverty of the newer country--are looked upon by the protectionist as due to the importation of goods. The real cause of the imports to the newer country and of its scanty money-supply, it need hardly be said, is its comparative poverty. Europe and the United States, in their trade with China and South America, do not get gold in exchange, but merchandise of various sorts. It is true that in the trade of England and New York with great gold-producing districts, such as California, South Africa, and Alaska, gold is received in return for merchandise, for to these districts gold is merchandise and its export does not drain them of their supply. The richer states in the Union do not drain the poorer states of money. A few years ago the states of Kansas, Nebraska, Iowa, and their neighbors were filled with resentment against the money-lenders of the Eastern states. There was a widespread belief that hard times were due to an insufficient currency. Attempted action took the form of the greenback and free-silver movements, which were defeated by the opposition of the East, but there can be little doubt that if the Federal Constitution had not forbidden it, the discontented states would have established a protective tariff "to keep their money at home." Few advocates of protective tariffs are ready to admit that the money-supply of the country is dependent on the general wealth of the country, and on the methods of doing business, rather than on a protective tariff. [Sidenote: The "two profits" argument] 5. _It is said that the tariff keeps "two profits" at home, foreign trade gives but one._ The word "profits" is here used in the popular sense of gain from a single transaction. This argument becomes somewhat confused, for certainly in the admission that there are "two profits" in a trade, the notion that "one man's gain is another's loss" is rejected. Both parties are said to profit and both profits are thought to be secured at home when two citizens are forced to trade with each other. There is an error in elementary arithmetic here, both as to the number and as to the aggregate amount of profits. The purpose of a protective tariff is to compel _two_ of the citizens of a country to trade with each other instead of trading with _two_ citizens of a foreign state; the number of profits is therefore not increased by substituting domestic for foreign trade. What, then, as to the size and aggregate amount of the profits? The margin of advantage is not the same on all exchanges; the exchange is made if there is a margin to both parties, no matter how small it is; but the generous "profit" on one transaction where the conditions of the two parties are very different may be greater than the total of petty margins on a dozen exchanges between two traders of evenly matched powers. Can it safely be assumed that every trade with a foreigner is less advantageous than one with a fellow-citizen? Diamond cuts diamond, but two shrewd Yankees left to themselves surely should not be worsted in bargains with the universe. If they could exchange to better advantage with each other they probably would discover it as soon as the interested manufacturers and political orators who can prove so eloquently that they know the other man's business better than he knows it himself. Forcing the home trade is doubtless to the advantage of one citizen, but it is not likely to be to the advantage of both citizens. [Sidenote: The claim that protection raises wages] 6. _The most effective popular argument for protection is that it raises, or maintains, the general scale of wages in the country._ This argument is two-fold: first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them. In Germany the fear is of the higher paid and more efficient labor of England. In America, where wages at all times have been higher than in England, it was first argued that because of the greater cost of production, due to high wages, the tariff was needed to start certain industries; but after the tariff had long been established and the old argument had been forgotten, it was said that the tariff was the cause of the high wages and must be maintained to protect against the (so-called) "pauper" labor of the older countries. That wages generally are higher in new countries and where a tariff prevails is always claimed to be one of the chief fruits of a protective policy. The cause of the high wages in America appears to be the productive efficiency of industry under existing conditions. Labor is surrounded here with advantages in the forms of rich natural resources and of mechanical appliances such as never before were combined. Because of the scarcity of workers in particular protected industries, wages may be higher in them than in some other industries; but such workers form a small fraction of the population. The claim that the general scale of wages in all occupations is raised by the tariff protecting this fraction, is no less invalid than the sweeping claims in favor of trade-unions. § II. THE REASONABLE MEASURE OF JUSTIFICATION OF PROTECTION [Sidenote: Political arguments for protection] 1. _For military and political reasons an otherwise uneconomic tariff may be justified._ It usually is admitted by the believers in free trade that in the interest of diplomacy, to secure proper concessions, tariffs may sometimes be levied. Even in England, where protective arguments long have had little acceptance, Mr. Chamberlain, with his eye on a tariff union and imperial federation of England and her colonies, has been advocating this policy. In such a case there is no pretense that the justification of the tariff is its immediate economic advantages; it is an expenditure for ultimate gain. By the same argument a protective tariff is upheld as a means of defense--to encourage the building of ships, arsenals, and factories for munitions. It is always questionable whether an outright expenditure would not be better, whether the government cannot build its own arsenals, ship-yards, etc., more cheaply than it can foster private enterprise by means of a tariff. [Sidenote: The infant-industry argument] [Sidenote: Applied to America] 2. _Protection may be defended as encouraging infant industries and thus diversifying the industries of the country._ Most free-trade writers concede a limited validity to this argument. If the natural resources of a land are adapted to an industry, it may be called into being early by a fostering protective tariff. This is merely anticipating and hastening the natural order of progress. In the American colonies the manufactures of iron, cloth, hats, ships, and furniture sprang up not only without "protection," but despite numerous harassing trade restrictions made in the interest of the English merchants; and they continued in some cases despite their absolute prohibition by Parliament. Can it be doubted that many of these industries would have developed and flourished in America under no other fostering influences than those of rich resources and of economy in freights? The growth of industries in the Middle West in the last twenty-five years has been phenomenal. The discovery of natural gas and the presence of abundant coal, ore, and timber have enabled them to develop without protection against the Eastern states. Industries capable of eventual self-support must in most cases naturally appear in due time. Economic forces will bring them out. It is a trite but valid remark that protective tariffs are often like hothouse culture, anticipating the season by a few weeks and at great cost. The question is whether the mere possession of the hothouse is a luxury worth the price, if meantime the products can be gotten more cheaply by exchange. English manufactures flourished because they were well established, had excellent coal supplies, great stores of iron ore, and low-paid labor which did not have the opportunity of better alternatives, as did the American workman. If America had imported _more_ (it would not have been _all_) of her iron and coal, the English mines would have been exhausted earlier, and America's advantage surely would have asserted itself in time. Her iron manufactures undoubtedly were hastened--they cannot truly be said to have been created--by the protective tariff. [Sidenote: Social effects of the tariff] Industries are forced into an earlier diversification by tariffs. The peculiar advantages of a new country attract labor and enterprise into a few lines. Is it an evil? Contrast Iowa, Dakota, and Minnesota, or Kansas, if you please, with New York and Pennsylvania. Is it so certain that a dense population congested in cities and crowded in factories and mines is a more ideal social aggregation than is a community of prosperous farmers? The smoky industrialism fostered by protection often puts a premium on a low grade of immigrant and keeps him an alien to the American spirit. It would be surprising if Americanism on the Western plains were not as good as in the Eastern cities. But the infant-industry argument appeals strongly to the enterprise and the speculative spirit of Americans, who like to do all things rapidly and on a large scale. Every village aspires to be a great industrial center. Americans are impatient of the suggestion that things "will come in time"; they like things to come at once. [Sidenote: The "home-market" argument as to freights] 3. _The tariff develops a home market for the products of agriculture._ It has been especially hard to reconcile the farmers in America to the tariff. While in England the protection that existed before 1846 was almost entirely for the benefit of the landholding interests, the tariff in America has been peculiarly favorable to manufactures. The "home-market" argument is the protectionist appeal that has proved most effective with the American farmers. This argument, which takes on several aspects, is akin to the "two-profits" argument when it declares that the shipping of food to Europe and the importing of manufactures involve a great cost for freight which could be saved by manufacturing "at home." Of course the farmer is supposed to pay this cost, although there is nothing in the argument to show that it is not all paid by the European, either the manufacturer or the food consumer. Home trade "saves the freights" for the farmer only in case he can buy goods under a tariff with less of his own labor and products than under free trade. The payment of freight charges is true economy when the goods can be bought at a distance on more favorable terms than near home. The freight-argument proves too much, for it condemns every exchange, within the country, of goods produced a stone's throw away from the consumer. [Sidenote: As to security of trade] Again, the home-market argument dwells on the greater steadiness of domestic trade. War or political changes, it is said, may change the demand for products. This is true, but no other changes have affected American agriculture so radically as the peaceful development of domestic transportation and the opening of the West. [Sidenote: As to the value of farm-lands] The home-market argument is strongest when addressed, not to all farmers, but to one class of farmers, those whose lands are situated nearer the manufacturing cities. The higher value taken on by land as it is converted from the extensive cultivation of corn and wheat to dairying, fruit, and market-gardening, is pointed to as a benefit of protection. The decaying agriculture and deserted farms throughout the great industrial states during the past twenty-five years are pathetic evidence that this benefit has failed to come to the average farmer just where it should be most expected. There is, however, a partial validity in the argument as applied to a comparatively small number of farmers, who gain as landholders, not as tillers of the soil. [Sidenote: Exports and exhaustion of the soil] 4. _The tariff may keep some of the natural resources of a new country from becoming quickly exhausted._ The export of food takes out of the soil and out of the country fertile qualities never to be returned. The shipment of several hundred million dollars of food products year after year represents a tremendous drain from the soil of the United States. The assumption, however, that the use of the food in this country would preserve the fertility of our own fields has been in the main mistaken. The fertile material in the food shipped for human consumption five miles away from the field is almost absolutely lost. Engineering skill has as yet succeeded in saving hardly a fraction of the fertile organic matter that flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our cities. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufactures, has very effectually aided in exhausting the natural resources of the country. [Sidenote: Protection as a monopoly measure] 5. _A new country has a limited potential monopoly in certain kinds of products; a tariff may make it effective._ The opening up of a new country with rich natural resources may be a great gain to the average consumer in the older countries, although it causes a loss to a special class of landowners. Whether the citizens of the older or of the newer country shall reap the greater benefit in the trade depends on the reciprocal demand for the two classes of goods, as was seen in discussing the equation of international demand. A wide margin of advantage may go to one party and a narrow margin to the citizen of the more favored land. To put it concretely: if America, having great natural resources for agriculture, continues to exchange food for manufactures up to the narrowest margin of advantage, England reaps most of the benefits of the trade. An American tariff on manufactures from England will, under such conditions, check the demand for English products and compel some Americans to leave farming. This reduction of the American supply of wheat or corn and of the American demand for English manufactures compels a new ratio of exchange. It is conceivable that exchanging fewer goods at a larger margin of advantage, will give a larger total of gain to the favored nation. Thus, by the shifting of the ratio of exchange, foreigners may be compelled to pay a part of the tariff to enjoy the favored market. This is but a special case of the monopoly principle; the government by law artificially limits the supply of goods offered by its citizens. [Sidenote: Limited monopoly advantages of America] This argument is somewhat subtle, but probably is the soundest one in the theory of protection. The supposed conditions seldom occur, but they may exist, and probably have existed in America. When the great system of internal transportation was developed in the United States before that of the other new countries, this country had such peculiar advantages for the production of food that the quantity was enormously increased and the prices fell. At such a time the tariff may work toward retarding the unfavorable turn in the ratio of exchange and toward reëstablishing early a more favorable ratio. But the limited application of the principle must be recognized. The potential competition of undeveloped countries on all sides, seeking to develop their resources, to raise their own food, and to profit by the higher prices in the world-market caused by the tariff, threaten the peculiar advantages of the favored land. A great nation with its manifold interests is not eminently fitted to practice the gentle art of monopoly. § III. VALUES AS AFFECTED BY PROTECTION [Sidenote: Influence on the value of capital] 1. _An increase of the tariff is favorable to many capitalists and to many owners of natural resources._ A denial of large general advantages in protection is not the denial of all its influence on value. On the contrary, it cannot be too strongly emphasized that manifold interests are affected by the tariff. Owners of natural mineral resources are among the first to benefit. When the price of iron is low, many iron- and coal-mines may yield no rent and have small prospective values. A tariff forcing home production opens the marginal resources and gives them a large capital value. Factory sites and surrounding lands leap from the level of rural prices to that of city real estate. The owners of farms situated near the new industries have a home market and get scarcity prices, as they alone can supply the needed fresh vegetables and dairy products. Wealth less favorably situated, however, is in many cases depressed in value because its products exchange for smaller amounts of other products. [Sidenote: The special gains and the general burden] 2. _A tariff is immediately favorable to some enterprises and to special classes of workmen._ Enterprisers already acquainted with and engaged in a business always may hope to gain by the higher prices immediately following a rise in the tariff rates on their particular products. Though they are granted no enduring monopoly by the protection, they for the time enjoy the advantage of being on the ground and reap the first fruits of the favoring conditions. The enterpriser usually profits when the price of his product suddenly rises. Usually skilled workmen are affected slowly by competition when there is any considerable increase of their special industry. The burden of higher prices is very soon distributed to a number of less favored citizens. A part of it may be borne by the retail merchant, a part by his customers. The weight falling on each is usually small, often unsuspected, always hard to measure. The increased benefit is concentrated in a few industries and accrues to a comparatively few producers. Here is a recipe for riches: get everybody to give you a penny; they'll not miss it, and it will mean a great deal to you. Something like this happens in the case of many protected industries; every consumer of the article pays a penny more, a few wage-earners gain, and a few enterprisers wax wealthy. [Sidenote: Sudden tariff reduction injurious] 3. _A sudden reduction of the tariff causes local crises and may bring on a general crisis._ The repeal of the tariff works in a direction the reverse of its enactment. The benefits of the lower prices are diffused; the immediate injury is concentrated and acute. Factories are closed, capital is depreciated, labor is thrown out of employment. The organic nature of local industry causes the evil to be felt by many classes. Merchants, professional men, servants, and skilled laborers that are tributary to the depressed industry, suffer. The effects are transmitted to commercial and financial centers and credit is shaken. The readjustment of industry is slow and much capital is lost in the process. [Sidenote: The two policies in political discussion] It is rarely appreciated how great is the tactical advantage enjoyed in political contests by the advocates of a high tariff. They can so easily impress the popular judgment with the evident fruits of their own policy, and with the immediate dangers of the policy of their opponents. The low-tariff advocates in America undoubtedly have made the mistake of underestimating or of quite overlooking these immediate effects. They have been too abstractly doctrinaire, and have argued too absolutely for the merits of free trade. They have opposed one extreme system by another, with no thought of the inexpediency and injustice of sweeping changes. There is a strong feeling among business men that any tariff, be it high or low, is better than a shifting policy. Despite the great preponderance of domestic production over foreign trade, it is perhaps too much to say that the tariff is unimportant in our present conditions. It can, however, be said that the tariff agitation has taught that radical changes, especially sudden and large reductions, are fraught with evils, and that business can adjust itself in large measure to any settled conditions. The future of the tariff discussion in America is hard to prophesy. The infant-industry argument now is of little force. With the widening of our international relations are growing interests favorable to reciprocity or to other freer trade relations. CHAPTER 52 OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION § I. SOCIAL LEGISLATION [Sidenote: City growth and new social problems] 1. _Under modern conditions many laws restricting free competition are required to secure the health and convenience of the citizens._ The rapid growth of city populations has brought new social and economic problems. The friction in social relations is greater when men are crowded together. In 1790, three per cent. only of our population lived in cities of over eight thousand; to-day the percentage is thirty-three. Then the city dwellers numbered one hundred and thirty-one thousand; now they number twenty-five millions. Then there were but six cities of eight thousand or over; now there are five hundred and forty-five. Then the largest city (Philadelphia) numbered fifty thousand persons; to-day the largest city (New York) numbers three millions. Many laws are survivals suited only to the older rural conditions. In London, these problems were first forced into prominence, and a law passed after the great fire of 1665 to regulate the rebuilding of houses, streets, sidewalks, and sewers, foreshadowed alike the American law of special assessments and the modern tenement-house legislation. A mass of laws wise and foolish has resulted from the attempt to meet the new conditions. The laws of nuisance and of sanitation have been rapidly changing. [Sidenote: Need of social regulation] Why not leave such subjects to individuals? It is for the interest of every one that his back yard should not be a place of noisome smells and disagreeable sights. But men are at times strangely obstinate, selfish, and neglectful, and through one man's fault a whole community may suffer. The refusal of one man to put a sewer in front of his house would block the improvement of a whole street. The obstinacy of one may bring an epidemic upon an entire city. There must be a plan, and by law the will of the majority must be imposed upon the unsocial few. Where voluntary coöperation fails, compulsory coöperation often is necessary. Thus health laws, tax laws, and improvement laws regulate many of the acts of citizens, limit the use of property, and compel men to a course against their own wishes and judgments. The justification for these limitations on the right of private property, on free choice of the individual, on "free competition," must be found in the social result secured. [Sidenote: Tenement-house laws in cities] [Sidenote: Interests affected] 2. _Tenement-house legislation is an important recent expression of this social protective policy._ As city population grows denser, land increases in value, and the evils of bad housing threaten the welfare of the great majority of city dwellers. Light, sun, air are shut out, and cleanliness, decency, and home life are made impossible. Two policies are open to the public. It may be left to private enterprise to solve the problem. If the tenant agrees to rent a disease-breeding house, he is the first to suffer. The interests of investors, it is said, will supply as good a house as each tenant can pay for. The other policy now adopted is to set a minimum standard of sanitation and comfort, to which all builders and owners must attain. Property owners are no longer left free to determine plans, height of building, proportion of lot built on, lighting, materials, and workmanship. Complying with the legal requirements, they are left quite free to collect whatever rent they can get. Such legislation is partly in the interest of the body of landowners as against the selfish desires of some individuals. One bad building may bring down the rent of all on the street. Partly, however, the regulation is in the interest of the tenants and of society as a whole, and against that of the landlord. The rents from slum property are threatened; hence the strong opposition always manifested against tenement-house legislation by some landlords, architects, and contractors, who fight it bitterly as an interference with their interests and as a confiscation of their property. It is not quite certain how marked will be the effect of this policy in making the rents too high for the poorer tenants and driving them into the country. But this result, predicted by the enemies of the policy, is not so undesirable, and the enlightened sentiment of the public to-day favors all efforts to destroy the breeding-places of disease, misery, and crime. [Sidenote: Public inspection of goods used in the homes] 3. _Laws forbid adulteration of products for domestic use and provide for public inspection._ English laws of the Middle Ages forbade false measures and the sale of defective goods, and provided for the inspection of markets in the cities. Recent legislation in many lands has developed much further the policy of insuring the purity or the safety of articles consumed in the home. The oleomargarin law passed by Congress was, however, designed as protective legislation in the interest of the farmer. Usually, the self-interest of the purchaser is the best safeguard for the quality of goods; but personal inspection by each buyer frequently is difficult and time-consuming, requiring special and unusual knowledge of the products, and special costly testing apparatus. The state undertakes, therefore, to set a minimum standard of quality, and to apply it by the economical method of social coöperation. This policy extends only to staple products and to a comparatively few articles. It would be impossible as well as unwise to apply it to art products, except to protect the morality of the community. This inspection sometimes raises the price, but the evils are small compared with the convenience and the benefits resulting to the citizen. He is assured that the article he buys is of standard quality, and if he wishes a cheaper quality there is no law to prevent his adulterating it for his own use. [Sidenote: State support of education] 4. _Other kinds of social amelioration undertaken by the state, through free, compulsory education, charity, and temperance legislation, are likewise interferences with competition and freedom of contract._ Many of these are so customary that they are not thought of in this light. Schools are productive enterprises, education is industry, and the supply of this service is always in large measure undertaken by private enterprise and could be left entirely to it. But free elementary education is the established policy, and is no longer debatable in America and France. In England the policy is still debated, much as is that of public ownership of trolley lines in America. One by one the states are passing compulsory education laws, and thus interfering still further with the freedom of the individual. The affection of parents can in most cases be trusted to provide for the education of children, but when family affection fails, the child and the state are the victims of the resulting ignorance, crime, and pauperism. State support of higher education is more in dispute. It is a universally accepted view that social welfare requires a more generous support for higher education than could be secured if it were sold at a competitive price; but while in eastern America its provision is left mainly to private gifts, in the West and South it is undertaken largely by the state. The justification of this policy must be found, not in the benefit to the particular students, but in the benefit diffused throughout the commonwealth by the encouragement of science, arts, and letters. [Sidenote: Public charity] [Sidenote: Temperance legislation] The system of public relief for the defective classes of blind, deaf, insane, feeble-minded, and paupers, are examples of the social protective policy. The public interest undoubtedly is served by having these suffering classes systematically relieved, but the extent and nature of the provision are questions ever in debate. Still more debated is temperance legislation, both as to licensing and as to prohibiting the liquor traffic. Nowhere is the manufacture and sale of intoxicating liquor treated quite like the traffic in most other goods, because it is recognized that the public interest is affected in a different way. While it is beyond question that society should protect itself against the drunkard, it is more doubtful whether it owes to the man, for his sake, protection against his own blunders. Not even the gods can save the stupid. Temperance legislation is strongest in its social aspect. The opponent of it usually champions the individualist view; its partisans uphold, in varying degrees, the social view. [Sidenote: Other laws to protect public morals] Similar questions arise regarding lotteries, gambling, betting, horse-racing, etc. When a man backs a worthless horse against the field, money probably is transferred from the stupider to the shrewder party. The philosopher may say that the sooner a fool and his money are parted the better; but the broken gambler remains a burden and a threat to honest society. Gambling, lotteries, and speculation cause embezzlement, crime, unhappy homes, and wrecked lives. Here are to be found with difficulty the true boundaries between ethics and expediency. A busybody despotism may protect the fool, but it thereby helps to perpetuate and multiply his folly; yet if the fool is left alone, he too often is a plague to the wise and the virtuous. [Sidenote: Usury laws as social legislation] 5. _Usury laws are found almost universally in civilized lands._ By usury was formerly meant any payment for the loan of goods or money; now it means only excessive payments. In former times moralists and lawmakers were opposed to all usury or interest. Most loans were made in times of distress. The sources of loanable capital and the chances of profitable investment were fewer in the past than to-day. For the last four centuries there has been on the question of usury a gradual change of opinion, beginning in the commercial centers and most rapid in the countries with more developed industry. A moderate rate of interest is now everywhere permitted; but in all but a few communities the rate that can be collected is limited by law, and penalties more or less severe are imposed on the usurious lender. It has been noted in another connection that usury laws are practically evaded in a number of ways within the letter of the law. Many writers maintain that usury laws do more harm than good even to the borrower, whom they are designed to protect. In a developed credit economy, where a regular money-market exists, they are superfluous, to say the least, as most loans are made below the legal rate. Such laws, however, have a partial justification. In a small money-market they to some extent protect the weak borrower at the moment of distress from the rapacity of the would-be usurer. Their utility is disappearing, but in simpler industrial conditions usury laws are fruits of the social conscience, a recognition of the duty to protect the weaker citizen in the period of his direst need. § II. LABOR LEGISLATION [Sidenote: Growth of child-labor legislation] 1. _Factory laws now limit in many ways the employment of women and children, and the hours of work._ Factory legislation began in England, early in the nineteenth century, to check some of the worst evils then showing themselves in the factories. It has since increased in England and has been copied rapidly by other countries. Some of the agricultural states of the Union have as yet no factory laws, but the states industrially more advanced have many. They are made, first, to apply to children. The evil of forcing children into factories is easily recognized. The child, subject to the commands of his parents or guardians, is not a free agent. At times a lazy father is tempted to support himself in idleness on the wages of his young children. Often poverty leads the parents to rob their children of health, of schooling, and of the joys of childhood. Child-labor depresses the wages of adults and the evil grows. Children laboring long hours in close and grimy factories, and growing into blighted and ignorant manhood, are a threat to society. In agricultural conditions, such as have prevailed generally in America, there is far less need of limiting the hours of work and the age at which children may begin to work. The barefoot boy trudging over clover-fields to carry water to the harvesters may be the happier, healthier, and better for his work. [Sidenote: Women's work and shorter hours] The work of women in factories tends to depress the wages of men, is inevitably harmful to family life, and, when the work is arduous and continuous, the evils are visited upon succeeding generations. In the early days of the factory system in England, the hours of work were lengthened in order to make the machinery earn as much as possible. The first laws regulating hours applied especially to women and children, limiting their work to ten or twelve hours daily. Later, this regulation was made to apply to men, and now is found in most civilized lands. In recent years the agitation has been for an eight-hour day, and doubtless it will some day be adopted in the majority of trades. [Sidenote: The workmen's remedies for injuries] 2. _Many laws provide for the health and safety of workers in factories and mines._ Both workman and employer are in many ways interested in providing against danger from fire, bad ventilation and lighting, bad sanitation, unprotected and dangerous machinery, and bad moral conditions in the factories and other places of work. What can the workman do to protect himself? (1) He may refuse to work whenever the conditions are bad. But this requires that he inspect the factory and judge of the sanitary conditions in each case, and that he then resist the temptation to accept employment of which he may be sorely in need. (2) He may ask higher wages to compensate for the added risk. But this is not practically possible with his insufficient knowledge of conditions, and it supposes an equal caution in many other workers. It is well that individual men are not excessively cautious, or the state would lack brave citizens and defenders. It is better that the forethought be in part exercised by the community collectively. (3) The person injured in health or limb may sue for damages. But this, with his means and knowledge, is often impossible, and is a costly process, yielding a pitiful recompense for a blighted life. [Sidenote: Factory laws to reduce accidents] The employer is interested in attracting better workmen at lower wages, and in avoiding damages by making the conditions of work favorable. The law seeks the same end by more economical ways when it sets a minimum standard. Experience shows that certain safety appliances should always be present to prevent the evils; for a state to leave their provision to self-interest, is to trifle with the welfare of its citizens. Factory legislation usually is opposed by employers because of the expense it causes; but if the regulations apply to all factories, the expense becomes a part of the cost of production and is shifted, like the other expenses of production, to the general body of consumers, of which the employers form only a small part. [Sidenote: Legal regulation of wage-payment] 3. _Laws regulate the form, time, and methods of payment in manufactures and mining._ Companies sometimes keep stores and pay the workers in mines and factories in goods, instead of money. Such a store in the hands of a philanthropic employer might easily be made, without expense to himself, a great boon to his workmen, giving them more than the benefits of consumers' coöperation. But the usual result is told by the fact that such stores are known as "truck stores," "pluck-me stores." They are most often found where some one large corporation dominates in the community, as in mines, where the workers are in a very dependent condition. If the higher prices demanded practically lower real wages, it would seem that the worker had an immediate remedy in his power to demand higher money-wages. Recognizing that this is for the most part an illusion--for it is just in such places that the conditions for free competition are least present--the law in many states prohibits these stores. It regulates also the measuring of work, fixing the size of screens and of cars used in coal-mining. The law is especially favorable to the hand-laborer in regard to the collection of his wages, requiring regular monthly or fortnightly or sometimes weekly payments. Mechanics' liens give to workmen in the building trades the first claim on the products of their labor. [Sidenote: Limitation of freedom of contract] 4. _In some cases the law forbids "contracting out," and the courts fix the terms of the contract._ In general, the law does not interfere with the right of the citizen to make any formal contract he chooses. It confines itself to providing rules and agencies for interpreting and enforcing the contracts when made. Employers often compel workmen to sign a release from damages in case of accident. This practice was forbidden even by common law, and many recent statutes have specifically provided that employers cannot "contract out" of the right to claim damages. The courts are particularly watchful of the interests of children, who are usually deemed incapable of entering into contracts binding them to their injury. Sailors, likewise, have long been protected and guarded by the law, because, journeying far from home, they are peculiarly in the power of their employers. The English courts may even change the contract if the sailors have been coerced by their masters. The rights of married women to mortgage their property is limited in some states in recognition of the undue influence that may be exercised by their husbands. The attempts in the last twenty years to settle the Irish land-question have resulted in a steady increase of the interference of law and courts with the freedom of contract between tenant and landlord. Though in many ways freedom of contract is thus limited, competition is not entirely destroyed; it is turned in other and usually better directions. [Sidenote: General nature of this social legislation] [Sidenote: Economic or moral objects primary] 5. _This group of social laws resembles protective tariffs in preventing free competition, but differs from them in varying ways and degrees._ Writers class all such laws as protective legislation, in that they depart from the rule of free trade taken in its broadest sense. It does not follow, however, that all these laws stand or fall together,--that if the protective tariff is wrong, all are wrong. The justification of every such measure is limited and relative, and therefore of varying strength. All protective measures are alike in that the free choice of the citizen is forbidden by law. The argument for the tariff is economic and political. The tariff does not seek to prevent a moral evil; foreign trade is morally as good as other trade. In a large majority of social laws the moral purpose is fundamental. It is the demand of humanity that competition be placed on a higher plane. Tariff legislation is primarily in the interest of a special well-to-do class, with which other citizens are compelled unwillingly to trade. Most social legislation is to protect the weak from being forced into contracts injurious to their welfare and happiness. In any case, social legislation is not to be justified by any but the most general abstract principle,--the attainment of the best social result. The best test of social protective laws is their contribution to a higher independence and to a freer competition on a higher, more worthy, and more humane plane. CHAPTER 53 PUBLIC OWNERSHIP OF INDUSTRY § I. EXAMPLES OF PUBLIC OWNERSHIP [Sidenote: The kinds of political units] 1. _Local political units generally acquire only industries whose products must be used in the place where produced._ The word industry is used here in a broad sense, including agents of psychic income not usually so classed, such as public parks. The grouping of publicly owned industries according to the size and importance of the political units cannot be exact, because some classes of industries are owned by several kinds of political units. Yet, especially with application to American conditions, an approximate classification may be made on this principle. Federal states consist of three main groups of political units: national, provincial, and local. Provincial units are the largest subdivisions, as the American "states," or commonwealths, the German states, and the provinces in other countries. The term local political unit is more complex and may mean county, township, village, city, and school or sanitary district; but most of what is to be said of local ownership refers to cities or to incorporated villages. [Sidenote: Municipal ownership of parks, libraries, &c.] [Sidenote: Of bridges, markets, waterworks, &c.] Nearly all public parks and recreation grounds are owned by cities. As population has become more dense, private yards of any extent become impossible, in cities, for all but the wealthy. Public ownership of parks insures recreation grounds to the common man in the most economical way. Of late the movement for large and small public parks and playgrounds has gone on rapidly in American cities. Related to parks are public baths, public libraries, art collections, museums, zoölogical gardens, etc. Some have declared that such a policy stops little short of a paralyzing socialism for the masses. Reason and experience fail to reveal any such danger so long as the things supplied gratify the higher tastes--as art, music, literature, innocent social recreation. Not until the necessities of life, as bread, clothing, and houses, are supplied, is encouragement given to the increase of improvident families and to the breaking down of independent character. The means of local communication--streets, roads, bridges--were once owned largely by private citizens. Here and there still are found toll roads and toll bridges built under charters granted a century ago, but tolls on public thoroughfares are for the most part abolished. A public market, where the producer from the farm and the city consumer can meet, is an old institution that is now being established anew in many cities. The providing of apparatus for extinguishing fires is always a public duty; the conveyance of waste water is increasingly a public function; and the supply of pure water, while often a private enterprise in villages, and sometimes in large cities, is increasingly undertaken by public agencies. Public ownership of gas and electric lighting is less common, as the utility supplied is not so essential and the industry is somewhat less subject to monopoly; but the difference is one of degree only. Street-railroads are often under public ownership in Europe; but there has thus far been no case of the kind in the United States, and only one in Canada. [Sidenote: American failures in state industry] 2. _The American state owns and conducts industries mainly whose products have a wider territorial use._ The American commonwealth has retired from some fields where once it was engaged in industry. Students of American history know that between the years 1830 and 1840 some states engaged largely, even wildly, in the building of canals and undertook to construct railroads, to start banks, and to engage in other enterprises. The undertaking of these industries was determined often by political and by selfish local interests, and their operation often was wasteful. A few enterprises succeeded, the most notable of these being the Erie Canal in New York. The unsuccessful ones remained worthless property in the hands of the state or were sold to private companies, as in the case of the Pennsylvania railroad. This reckless state enterprise was a bitter lesson in public ownership, and even after seventy-five years is not without effect on public opinion. For a long time no proposal for public ownership could have a fair hearing in America. But railroads and canals are publicly owned, and more or less successfully operated, in many foreign countries, as in Prussia and other German states, in Switzerland, and in the new states of Australia. [Sidenote: State ownership of various kinds] There has been recently a rise of interest in forestry in America. This is especially likely to be a state enterprise wherever the forest tracts are entirely within the limits of the state, as is the case of the Adirondacks in New York. Most of the forests in Germany are either communal or state-owned. The schools, a great industry for turning out a product of public utility, are largely conducted by the American state and by local units rather than by the nation or by private enterprise. The state encourages researches in the arts and sciences, and gives technical training. A variety of minor enterprises have been undertaken by states to supply salt, phosphate, banking facilities, even some manufactures. In the prisons and public institutions, states, such as New York, that have adopted the system of labor on public account engage in agriculture and manufacturing on a large scale, the products, amounting to millions of dollars annually, being used almost entirely by public agencies. [Sidenote: National ownership of various kinds] 3. _The nation owns and controls many industries of the widest use and most general interest._ Some industries grow out of the political needs of government. Established as a means of communication with military outposts, the post became a convenient means of communication for merchants and other citizens and grew into a great economic institution. In most countries the telegraph is publicly owned and has been annexed to the post, to which it is very closely related in purpose. The national improvements connected with rivers and harbors were first political--that is, they were for the use of the governmental navy; they became, secondly, commercial--for the free use of all citizens engaged in trade; and they continue to unite these two characters. Forestry is most largely undertaken in this country by the national government, doubtless because the large forest areas in the West extend over state boundaries, and because large tracts of public lands were still unsold at the time public attention was attracted to the subject. Since 1890, the policy of reserving great areas for forests, and picturesque districts for national parks, has developed greatly. In some countries mines are thought to be peculiarly fitted for national ownership and control. In Germany, the state owns some coal, salt, and other mines. Coinage and banking are everywhere looked upon as a function of sovereignty, and yet it is no more necessary for a nation to own its own mint in order to control the monetary system than for it to print the bank-notes in order to regulate their issue. The American government has its own printing office and therewith its share of troubles with organized labor. The fish commission, and the various branches of the department, coöperate with private industry in many ways. In Germany, compulsory insurance is provided for the workingman. This hasty survey suggests that the industries undertaken by government are both varied in nature and large in extent, although small in proportion to the mass of private industry. § II. ECONOMIC ASPECTS OF PUBLIC OWNERSHIP [Sidenote: The primary need of public ownership] 1. _Public ownership is primarily to control the essential agencies of government._ A large part of public ownership and activity in industry develops from political functions. As society evolves, what was unessential to political life becomes essential. Civilized government requires the use of a number of material agents. Buildings for legislative and executive officers, custom-houses, post-offices, lighthouses, can be rented of private citizens, as post-offices usually are in small places; but it is obviously economical and convenient in large cities for the government to own the public buildings. Government can reduce to a minimum its employment of labor by "farming out" the taxes, as all countries once did to some extent, and as France continued to do up to the French Revolution. It is now the settled policy for government to own or control its essential agencies, but this does not involve in every case the employment of day-labor direct to clean the streets, to collect garbage, etc. The more simple political functions shade off into the economic. To coinage usually are added the issue of legal-tender notes and certain banking functions; the post carries packages, transmits money, and in some cases performs the function of a savings-bank for small amounts. The only open question is as to the proper limit to this development. [Sidenote: Conflict of public and private interests] 2. _Public industry expands to supply as free goods many essentials of good citizenship, and to insure cheaper and more bountiful supplies of others._ It is the ideal of Herbert Spencer and of a small surviving group of _laissez faire_ philosophers that government should confine itself exclusively to the most essential political functions, leaving the economic functions absolutely alone. It should keep the peace, prevent men from beating and robbing each other, and preserve the personal liberty of the citizen. They assume that all of the economic needs will be provided by competition, in the best way humanly possible, in quantities and at the rate needed. In many cases, however, the general interest fails to harmonize with that of the individual. The forest has an immediate utility to the consumers of lumber, and it has also a diffused utility in its influence on industry, on climate, and on torrents and floods. Yet, as the private owner cannot control enough of the forest to affect the climate, and could not sell climate even if he could affect it, he will cut down the tree whenever he can gain by doing so. In this situation either government control or government ownership of forests is essential. [Sidenote: Social economy of some public industry] In some cases the difficulty of private ownership is in the excessive cost of collecting for the service. The cost of maintaining tollhouses at short intervals on a turnpike sometimes exceeds the amount collected. Collection in other cases, as for the service of lighthouses to passing ships, is impossible. Public industry secures, through the economy of large production, a cheaper and more efficient service, the benefits and costs being diffused throughout the community. The benefits of the work of experiment-stations for agriculture are felt immediately by the farmers, but are diffused to all citizens. A manufacturer able to keep his methods secret, or to retain his advantages for a time, can afford to undertake experiments in his factory, but the farmer seldom can. The public ownership of parks for the use of all gives a maximum of economy in the production of the most essential utilities--fresh air, sunshine, natural beauty, and playgrounds in the midst of crowded populations. Municipal ownership of waterworks is an extension of the same idea. Not only because large amounts of water are used by the public, but because cheap, pure, abundant water is an essential condition to good citizenship, speculation should in every possible way be eliminated from this industry. [Sidenote: Monopolistic nature of localized industries] 3. _Public ownership tends constantly to include the industries of a monopolistic nature, locally supplying general necessities._ This is no abstract principle; it is merely a statement of what is seen to be happening. Some industries are of such a nature that they drift inevitably into monopolistic control. Waterworks, gas, electric lighting, street-railways, telephone systems, are among these. However fierce may be the competition for a time, sooner or later either one company drives out the other or buys it up, or both come to an agreement by which the public is made to pay higher prices. [Sidenote: Localized production favors monopoly] A feature favoring the growth of monopoly when such industries are left to private enterprise, is the need to produce and supply the utility at a given locality. While two street-railways can compete on neighboring streets, it is physically impossible for two or more to compete on the same street. Two systems of water-mains or gas-mains can be put down, as sometimes is done, but this is not only a great economic waste, but the tearing up of the streets is an intolerable public nuisance. This difficulty is less marked in the case of telephones and electric lighting, and some persons still cling to faith in competition to regulate the rates in those industries; but faith in competition between water-companies and between gas-companies has been given up by nearly all students of the subject. [Sidenote: Gains from large production favor monopoly] 4. _A second feature favoring monopoly in such industries is the marked advantage of large production in them._ These industries are usually spoken of as "industries of increasing returns." This advantage is enjoyed in some degree by every enterprise, but it is gradually neutralized and limited (as has been noted elsewhere). The need to extend an expensive physical plant to every point where customers are to be served, and the very much smaller cost per unit of delivering large amounts of water, gas, electricity, transportation, etc., on the same street, offered a greater inducement for one competitor to crowd out or buy out the other at a more than liberal price. Even then, larger net dividends and correspondingly larger capitalization are secured than were before possible to both companies combined. [Sidenote: Uniformity of products favors monopoly] 5. _A third feature favoring monopoly is uniformity in the quality of the product furnished._ It is a general truth that competition is most persistent where there is the greatest range of choice open to the customer, and consequently the most individual treatment required in the enterpriser. An artist, even a storekeeper, attracts about him a body of patrons who like his product (for the merchant's manner and method of dealing are a part of the quality of his goods), and who cannot be tempted away by slight differences in price. Rival companies in the stage of competition are seen to claim superiority for their particular goods and to improve their service in every way possible. A new telephone company, entering where a monopoly has held the field, works at once a wonderful betterment in rates, courtesy, and service. But as the product of all competitors attains the highest technical standard possible at the time, the rivalry is reduced to one of price, and it is usually a "fight to the finish." [Sidenote: Franchises favor monopoly] 6. _A fourth feature favoring monopoly in these enterprises is the necessity of making permanent and exceptional use of the public streets and alleys._ If this right were granted by a general law to every citizen, this feature would be sufficiently implied in the foregoing discussion. As it would be intolerable to allow private interests to use public property in whatever way they wished, the legislative body makes special grants in such cases in view of the circumstances. Not only is the legislature (or council, or county board of commissioners, etc.) induced by the economic difficulties to withhold a charter to a second company, but it is exposed to the greatest corrupting influences by the one already established. The knowledge of the opposition to be encountered in getting a franchise must keep competitors out, even though monopoly prices are maintained. In view of these several features, which are so closely related that they form a common character, more or less fully shared by various industries, and especially in view of the necessity for the formal granting to them of peculiar privileges in the form of a public franchise, the public, in order to protect the general interest, is forced to undertake an exceptional control of these industries. [Sidenote: Modes of controlling public utilities] 7. _Several courses are open to the public, acting in its political capacity, to retain these monopoly advantages for the general welfare._ First, it may do nothing, trusting vainly to competition to regulate the rate, or consciously leaving the result to be worked out by the monopoly principle; this is what in most cases has been done in the past in America. Second, in granting the franchise it may attempt to fix near cost the charge for the service or product, so that the franchise will be worth little or nothing. Third, it may leave the rate to be fixed by the monopoly principle, but charge for the franchise so much that the value of the monopoly is appropriated into the public treasury. Fourth, it may have public officials carry on the business, either selling the product at cost or making monopoly profits that go into the public treasury. Various combinations of these plans are followed in practice, the most common plan being the fixing of maximum rates which, with improved methods, generally become ineffective. It is difficult to fix a uniform rate that is equitable, because conditions change, and, further, because a uniform rate must be applied to all parts of the town, although the cost of service varies greatly. It is difficult to sell the franchise for near what it is worth, because of the uncertainty, of the political blackmail, and of the limited number of competent bidders. There remains only the policy of public ownership to secure the profits of monopoly to the public, either directly or in a diffused manner. [Sidenote: Economic basis of public ownership] [Sidenote: Cost under public or private ownership] 8. _Public ownership is economically justified when it secures a utility of widespread consumption, otherwise impossible, or insures the public a better quality or a lower price._ The question of public ownership is not exclusively an economic question. There are incidental problems, such as its effects on enterprise and on political integrity, with which it is not possible here to deal. In the main, however, public ownership is simply a business proposition which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership, as popular education or the climatic effect of forests, the only question to answer is whether the utility is worth the cost. In the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have on value. If public officials can furnish some goods cheaper than they are furnished by private enterprise, it is because of the wide margin of monopoly profit, not because there is any magic in public ownership. The same general items of cost must be met. The first cost of the plant and the annual interest payments are much the same. Experience shows that, because of political influence, wages are likely to be higher under public ownership, but salaries of officials are higher under private ownership. On the whole, public industry in these respects probably has no advantage. Some items of cost may be less under public management. Public collection of dues along with taxes is an advantage not enjoyed by private companies. Several public officials sometimes share the same office and thus reduce expenses. In small towns the public electric lighting and waterworks have been operated more economically under one roof. Public industry does not have to meet the cost of lobbying and blackmail which are often forced upon private companies. But the greatest source of saving in public ownership is the value of monopoly privileges that, under private management, go into private pockets. [Sidenote: Character of public officials] [Sidenote: Limits and effects of public ownership] The temptation to political corruption may be more insistent when a large force of men is constantly employed, and when large supplies are constantly purchased, by public officials, but the temptation is not so strong or so centralized as it is in the granting of franchises to wealthy corporations. Public industry is weakened by the absence of certain motives to excellence that are present in private business. The income of public officials not being dependent on the economy of management, the spur and motives of competitive industry are lacking. No social discovery has made individual honesty and civic virtue useless to good government. The decision in any specific case is one dependent on local conditions, and the exact limits of public ownership are not fixed. Industry is changing so rapidly that new experience is needed each year. The main outlines of public ownership, however, are now in large part determined. Some industries do well, others ill, under public management, and between these lie many debatable cases. Waterworks and probably electric lighting, because of the comparative simplicity of their operation, are more suitable for public ownership than are gas-works. No absolute line divides the one group from the other. But whatever the changes, the student of the theory of value must never overlook the fact that the increase of public ownership is altering in manifold ways the prices of goods, and is reacting also on the production, distribution, and consumption of incomes. CHAPTER 54 RAILROADS AND INDUSTRY § I. TRANSPORTATION AS A FORM OF PRODUCTION [Sidenote: Productivity of transportation] 1. _Transportation of goods and men is one of the most important modes of production._ When utility was thought of as inherent in things rather than as resulting from a relation between things and wants, it was usual to consider only those industries as truly productive that brought something physical into existence, as do agriculture and the extractive industries. Even after it was recognized that a change of form also imparted value, it was still denied that a changing of place could be truly productive industry. But when production is seen to be the bringing of things into right relations with wants, transportation may be deemed to be the primary and typical mode of increasing income. Movement is necessary to the existence of animals. The animal, in the order of evolution a higher form of life than the more fixed plants, goes to seek food, and has open to it a wider range of possibilities in life. With slight exceptions, it is true that the only way in which animals can bring about better place-relations between their wants and goods is by moving themselves. To this power man has added that of moving goods and thus adds enormously to income. Agents being valued in accordance with their net productiveness, the nearness to market and the ease of transporting the product are large factors in price. The location of a field enters into its value as truly as do the chemical qualities of the soil. A rocky field near a market may be richer, in an industrial sense, than the richest soil far remote, which can be used by men only at the cost of their alienation from society. Means of transportation set a limit to social and political groupings, to the size of the market, and to the possibility of exchange. Indeed, all exchange value is conditioned upon the possibility of transportation. [Sidenote: Original local advantages] 2. _Natural differences in the grades of fertility and of accessibility determine first the most valued locations._ Primitive man, dependent on the bounties of nature, had to take things as he found them. Few places unite the best grades of the essential things: water, food, fertile soil, a favorable climate, protection against enemies. Between tribe and tribe went on ceaseless war for the few favored spots of the earth. Where transportation is possible, trade can supply one or more of the missing elements. International trade began early, wherever it could, to strengthen economically the weak localities. Advantages in transportation are sometimes better than fertile soil and rich resources. The early centers of civilization were on the banks of rivers and the shores of seas. Around the Mediterranean were the ancient empires. Trading-towns grew up at ports and at the favored points of trade: Tyre, Sidon, Carthage, Florence, Genoa, Venice, Antwerp, London, New York. The early settlements in America were grouped along the coast. Without the cheap communication afforded by water, the colonies would have been cut off from the benefits of continuing contact with the older civilization. It would have been a great price to pay, even for a rich continent. [Sidenote: Influence of waterways on local advantages] 3. _The opening up of new water-routes of travel has profoundly altered the prosperity of nations._ Sometimes the relation of cause and effect is the reverse of that just noted. The conquest of Asia Minor by the Turks closed the lines of travel with the East, destroyed the trade of the Italian cities, and stimulated exploration for new routes. The War of 1812 in America stopped the coast trade and forced on the wagon-roads between the New England and the Southern states a great traffic, which declined quickly at the close of the war. Again, the growth of population and industry shifts the center of trade, as it did from the south to the north of Europe, and as it is doing from England to America. The discovery of new routes, however, has wrought the most rapid and sweeping changes. These three causes united, about the time of the discovery of America, to overthrow the prosperity of the older cities of Europe, while the opening of the resources in America, the abundance of silver and gold, trade with the colonists and the Indians, showered wealth and trade into the lap of Spain, Holland, Belgium, England, and the northern cities of Germany. Such changes continue under our eyes. The Erie Canal has an influence on values in every township from New York to Buffalo, and along the lake shores to the head of Lake Superior. The Suez Canal marked an epoch in ocean travel. The American Isthmian Canal will affect the value of many investments, from the Gulf of Mexico to the Pacific Coast. A marked change in transportation thus shifts the level of values in a locality. Fortunes are made and lost. One community rises and another sinks. Increments and decrements of value on a great scale are unearned, and all classes of goods are affected, though in varying degrees. § II. THE RAILROAD AS A CARRIER [Sidenote: Technical vs. economic efficiency of transportation] 1. _Different modes of transport are more or less economical relatively to the other industrial conditions._ Not only new routes but new agents of travel change the scale of values. In early societies, undeveloped industrially, first men, then domestic animals, were used as beasts of burden. The first vehicles are technically simple in design and construction; on land are used drags, sleds, carts; on waterways are used rafts, canoes, barges, and boats. Primitive means of transportation had to be inexpensive, for poverty and the uncertainty of early society forbade the tying up of large resources in them. Technical efficiency of means of transportation may be contrasted with economic efficiency. Technical goodness is absolute, and is measured in speed and weight of cargo; economic efficiency is relative, and varies with the money cost and money value of the services. A turnpike is more efficient than a mud road, yet in some districts it is bad economy to build it. A railroad is more efficient than a cart, yet in some places even pack-horses are more economical. To be economical, the expenditure needed to supply the efficient agent must be warranted by the volume and value of traffic. [Sidenote: Economic advantages of natural waterways] 2. _The most economical means of transportation before the railroad were the waterways, natural and artificial._ Some natural waterways still afford the most economical means of transportation between favorably situated ports. Coal is shipped most cheaply in sailing vessels from Wales around Cape Horn to ports along the western coasts of America. A part of California's regular fuel-supply is obtained in this way. Coal has been shipped from Pennsylvania to Europe, and in the anthracite coal-strike in 1902, some was shipped from England to America. Invention has reduced the cost of construction and operation of vessels and has increased their safety and speed, thus multiplying the efficiency of the natural waterways. The large cities in America are situated on waterways, usually where there is a break in transportation requiring reshipment, as, for example, at New York, San Francisco, Buffalo, New Orleans, Cincinnati, Chicago, Minneapolis, and St. Paul. Likewise many of the small cities and villages, serving as local trading centers, owe their existence to similar though less powerful influences. [Sidenote: Merits and defects of canals] Canals are begun as connecting links in a system of natural waterways to extend the advantages of cheap transportation. The Erie Canal not only serves the three hundred miles of territory along its banks, but it opened to commerce all the lands tributary to the Great Lakes. The great advantage of canals is cheapness of operation due to the simplicity of the machinery needed and to the great loads that can be moved with small power. A cent a ton-mile is a paying rate on a canal. For heavy, slow-moving freight, the railroads can hardly rival the canals at their best. As canals, however, can be built only along a level country and where the water supply is at a high level, their construction is limited to a small portion of the country. The law of extensive diminishing returns applies strongly to the construction of canals. The first canals are easily constructed and economically operated, but it is only with greater cost and difficulty that the system can be successively extended. In temperate climates their use is limited by ice to a part of the year, and the summer's drought sometimes limits it still further. At its best, therefore, the small land-locked canal is fitted only to be a supplementary agent in the system of transportation wherever industry demands high speed and great regularity. Far different is the case of the oceanic canal in a tropical climate. [Sidenote: Superior advantages of railroads] 3. _The railroad is rapidly surpassing in importance every other agency of transportation._ Even in respect to cheapness, the unique virtue of waterways in favored localities, the railroad has been making rapid gains. Improvements in roadbed, rails, cars, engines, and other equipment are reducing greatly the cost of conducting traffic on the main lines of roads. The adaptability of the railroad excels that of any other agent of transportation; it can go over mountains or tunnel through them. In certainty its superiority is marked; floods and snows may delay it for a day, but there is no seasonal stoppage of traffic. In speed, the railroad so far excels that the canal can survive only by dividing the traffic, taking the lower grades of freight, and leaving to the railroad the passenger traffic and fast freight. [Sidenote: Results of the rapid growth of railroads] Because of these qualities, the extension of the railroads in the last fifty years has been so rapid that it has not given time for a gradual adaptation of industry. It has worked in many places revolutionary changes. The building of railroads in the Mississippi valley in the seventies lowered the value of Eastern farms, ruined many English farmers, and depressed the peasantry in all western Europe. With the prices that resulted when the fertile lands of the Western prairies were opened to the world's markets, the stony and worked-out lands of the older districts could not compete. Great regions are still to be opened in this manner in Russia, Siberia, Africa, and South America. While one can only speculate upon the effects this development will have, the changes promise to be less sudden and tremendous than those of the last twenty years. Many minor changes, of no less moment in limited districts, result from the building of railroads. Local trading-centers decrease in importance. Villages and towns, hoping to be enriched by the railroads, see trade going to the cities. Commerce becomes centralized. Enormous increase of value at a few points is offset by losses in other localities. § III. DISCRIMINATION IN RATES ON RAILROADS [Sidenote: Monopoly power of railroads] 1. _The railroad has more monopoly power in fixing rates at points along its lines than is the case with other agents of transportation._ The ownership of the wagons, ships, and canal-boats of a country is usually divided. Every point along the line of the turnpike or the canal and at ocean ports enjoys competition between carriers, the great shipping combinations not having been successfully formed as yet. In the early days of the railroads it was believed that a company or the government would own the rails and charge toll to the different carriers, who would own cars and conduct the traffic as was done on the canals. Experience soon showed the utter impracticability of this scheme and the need of unified management. The railroad, therefore, has a monopoly at all points on its line not touched by other carriers. This, like all other monopoly, is limited by the need to secure some business and to meet competition at terminal points. The railroads in private hands early began to "charge what the traffic would bear" at every station, thus practising various forms of discrimination disastrous in their effects on the citizens. [Sidenote: Discrimination as to goods] 2. _Discrimination as to goods is charging more for transporting one kind of goods than for another without a corresponding difference in the cost._ When reasonably understood, this proposition does not apply to a higher charge for goods of greater bulk, as more per pound for feathers than for iron, the "dead weight" of car being much greater in one case than in the other. It does not apply where there is a difference in risk, as in carrying bricks and powder, or coal and crockery; nor where there is a difference in trouble, as in shipping live stock and wheat. Any difference that can reasonably be explained as due to a difference in cost is not discrimination; on the other hand a difference in cost without a difference in rate is discrimination. Discrimination as to goods may be by value, as low rates for heavy, cheap goods and high rates for lighter, valuable ones. Coal always goes at a low rate as compared with dry goods, and sometimes more is charged for coal to be used for gas than for coal to be used for heating purposes. Discrimination as to goods is the most usual and, if reasonably employed, one of the most justifiable of the various kinds of rate discriminations. [Sidenote: Local discrimination] 3. _Discrimination between places (local discrimination) is charging different rates to two localities for substantially the same service._ This occurs when local rates are high and through rates are low; when rates at local points are high and at competing points are low; when less is charged for shipments consigned to foreign ports than for domestic shipments; when more is charged for goods going east than for goods going west. The causes of local discrimination are: first, water-competition, found at great trade centers such as New York and San Francisco; second, differences in terminal facilities, making some places better shipping-points than others; third, competition by other railroads, which is concentrated at certain points, only four thousand (one tenth) of the stations of the United States being junctions; fourth, the influence of powerful individuals or large corporations and the personal favoritism shown by railroad officials. [Sidenote: Its effects] The effect of discrimination is to develop some districts and depress others; to stimulate cities and blight villages; to destroy established industries; to foster monopolies at favored points; and to sacrifice the future revenues of the road by forcing industry to move to the competing points to get the low rates. The power of railroad officials arbitrarily to cause rates to rise or fall is happily limited in practice by the need of earning as large and as regular an income as possible, but even as exercised it has been at times as great as that possessed by many political rulers. [Sidenote: Personal discrimination] 4. _Discrimination between shippers (personal discrimination) is charging one person more than another for substantially the same service._ This most odious of railroad vices, rarely practised openly, is done by false billing of weight, by wrong descriptions or false classification to reduce the charge below published rate-sheets, by carrying some goods free, by issuing passes to one and not to all patrons under the same conditions, or by donations or rebates after the regular rate has been paid. In some cases a subordinate agent shares his commission with the shipper, and the transaction does not appear on the books of the company. In other cases favored shippers are given secret information that the rate is to be changed, so that they are enabled to regulate their shipments to secure the lower rate. [Sidenote: Causes of personal discrimination] One group of reasons for personal discrimination is connected with the interests of the road. It is to build up new business; it is to make competition with rival roads more effective by favoring certain agents, as is very commonly done in the Western grain business; it is to exclude competition, as by refusing to make a rate from a connecting line or to receive materials for a new railroad which is to be a competitor; and it is to satisfy large shippers whose power, skill, and persistence make the concession necessary. Another group of reasons has to do with the interests of company officials. It is to enable them to grant special favors to friends; or it is to build up a business in which they are interested; or it is to earn a bribe that has been given them. [Sidenote: Evils of personal discrimination] That the evils of personal discrimination are great, need hardly be said. It introduces uncertainty, fear, and danger into all business; it causes business men to waste, socially viewed, an enormous fund of energy to get good rates and to guard against surprises; it grants unearned fortunes and destroys those honestly made; it gives enormous power and presents strong temptations to railroad officials to injure the interests of the stockholders on the one hand and of the public on the other. Apart from government, the railroad represents the greatest single economic factor in personal distribution. It has introduced a new form of problem into economic society. It has created a monopoly comparable to the prerogatives of feudal lords. No other industrial agency in private hands so affects all the producing forces of society and exercises such a potent influence on values. CHAPTER 55 THE PUBLIC NATURE OF RAILROADS § I. PUBLIC PRIVILEGES OF RAILROAD CORPORATIONS [Sidenote: Public nature of railroad franchises] 1. _Railroads enjoy peculiar public privileges through their charters, franchises, and the right of eminent domain._ Railroads in our country are owned by private corporations and are managed by private citizens, not, as in some countries, by public officials. They have been built under the motive of private enterprise, in the interest of the investor, not as a charity or as a public benefaction. Railroad-building appears thus at first glance to be a case of free competition where public interests are served in the following of private interests. But, looked at more closely, it may be seen to be in many ways different from the ordinary competitive business. Competition would make the building of railroads a matter of bargain with proprietors along the line, and an obdurate farmer could compel a long detour or could block the whole undertaking. But the public says: a public enterprise is of more importance than the interests of a single farmer. By charter or by franchise the railroad is granted the power of eminent domain, whereby the property of private citizens may be taken from them at an appraised valuation. The manufacturer, enjoying no such privilege, can only by ordinary purchase obtain a site urgently needed for his business. Why may the railway exercise the sovereign power of government and invade other private property rights? Because the railway is peculiarly "affected with a public interest." The primary object is not to favor the railroads, but to benefit the community. These charters and franchises are granted sparingly in most European countries. In this country they have been granted recklessly, often in general laws, by states keen in their rivalry for railroad extension. When thus great public privileges had been granted without reserve to private corporations, it was realized, too late in many cases, that a mistake had been made and that an impossible situation had been created. [Sidenote: State and National aid to American railroads] 2. _In America and in many other countries, large grants of lands and money have been made to railroads on the ground of their peculiar public nature._ Railroads were granted not only peculiar powers and privileges, but also material aid. The railroad enterprise was uncertain, the possibilities of its growth could not be foreseen, and private capital would not invest without great inducements. In European countries where capitalists were less enterprising or venturesome than in America, railroad extension was very slow except where the state in some manner extended its aid to the enterprise. The American states abandoned the principle of non-interference most recklessly, and vied with each other in giving lands, money, and privileges, in loaning bonds, in subscribing for stock, and in releasing from taxation. These protective measures fostering a special enterprise were expected by increasing wealth to diffuse a greater welfare throughout the community. Many of the states were forced to the point of bankruptcy by their reckless generosity, and some of them repudiated the debts thus incurred. The national government then took up the same policy and granted lands to the states to be used for this purpose. The first example of this was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south. Grants were made in fourteen states, covering tens of millions of acres of land. Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars--a debt settled by compromise only after thirty years. [Sidenote: Railroad grants by localities] Counties, townships, cities, and villages along the line of projected roads then entered into keen competition to secure them. Bonds, bonuses, tax-exemptions, and many special privileges were granted. To obtain this new Aladdin's lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come. The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate. Not the civil engineer, but the financial engineer platted the devious lines of many a railroad on the level prairies of America. The effects of these grants were in many cases disastrous, and since 1870 they have been forbidden in a number of states by legislation and by state constitutions. But before this era of generosity ended, probably the railroads had received more public aid than has ever been given to any other form of industry in private hands. [Sidenote: Investors' view of railroads' obligations] 3. _The railroads are now generally held to have peculiar public duties corresponding to their privileges._ Do all these grants in the past make the railroads other than mere private enterprises? One answer, that of those financially interested in the railroads, is No. They say that the bargain was a fair one, and is now closed. The public gave because it expected benefit; the corporation fulfilled its agreement by building the road. The terms of the charter, as granted, determine the rights of the public; but no new terms can now be read into it, even though the public now sees the question in a new light. Similar grants, though not so large, have been made to other industries. Bounties have been given to sugar-factories; tariffs have favored iron-forges and woolen-mills; factories have been given, by competing cities, land and exemption from taxation; yet no attempt is made on that account to control these businesses in a peculiar way and to treat them as public enterprises. So, it is said, the railroad is still merely a private business. [Sidenote: Social view of railroads' obligations] But the social answer is stronger than this. As to the precedent of tariff- and bounty-favored enterprises, most careful students would admit a close analogy in the two cases, but would maintain that the tariff policy also has been carried to an unjustifiable extreme, and that it could not be used to vindicate a still greater assault on public rights. But, further, privileges of railroads are greater in amount and more important in character than those granted to any ordinary private enterprise. The legislatures recognize constantly the peculiar public functions of the railroads. In other private enterprises, investors take all the risk; legislatures and courts recognize the duty of guarding, where possible, the investment of capital in railroads. Laws have been passed in several states to protect the railroads against ticket-scalping. Whenever the question comes before them, the courts maintain the right of the railroads to earn a fair dividend. Private enterprise has been invited to undertake a public work, yet public interests are paramount. [Sidenote: Need of harmonizing public and private interests] If an extremely abstract view is taken there is danger of losing sight of the real problem, which is that of harmonizing these two interests in thought and in public policy. Yet the extreme advocates of the private control of railroads have resented indignantly any public interference with railroad rates and with railroad management as an infringement of individual liberty. At the time of the passage of the Interstate Commerce Act this position was inconsistently taken by those in whose interests free competition had been violently set aside at the very outset of railroad construction, and for whom government interference had made possible great fortunes. The railroads cannot change from a public to a private character just as it suits their convenience. They cannot be allowed to play Dr. Jekyll and Mr. Hyde; smooth and affable in the character of public agents when public advantages are to be gained, and then as private enterprises ugly and scowling, flouting the public interests, charging all the traffic will bear, and resisting all reasonable regulation and conditions. Though railroads are private enterprises as regards the character of the investment, they are public enterprises as to their privileges, functions, and obligations. § II. POLITICAL AND ECONOMIC POWER OF RAILROAD MANAGERS [Sidenote: Railroad rates like taxes] 1. _In various ways railroad managers exercise great political influence and power._ Some writers maintain that the power to make rates on railroads is a power of taxation. They point out that if rates are not subject to fixed rules imposed by the state, the private managers of railroads wield the power of the lawmaker. By changing the rates on foreign exports or imports, the railroads frequently have made or nullified a protective tariff and have defeated the intention of the legislature. High rates on state-owned roads have openly been used in lieu of protective duties. These facts go to show that a change of railroad rates between two places within the country is similar in effect to the imposing or repeal of tariff duties between them. [Sidenote: Political influence of railroads] The wealth and industrial importance of the railroads give them widespread political power in other ways. It is commonly charged in some states that the legislature and the courts are "owned" by the railroads. The railroads, in part because they are the victims at times of attempts at blackmail by dishonest public officials, are compelled in self-defense to maintain a lobby. The railroad lobby, defensive and offensive, is in many states the all-powerful "third house." Railroads even have their agents in the primaries, they enter political conventions, they dictate nominations from the lowest office up to that of governor, and they elect judges and legislators. The extent to which this is done differs according as the railroads have large or small interests within the state. How is this great political problem to be met except by an appreciation of its importance and by a growth of public integrity? [Sidenote: The complex obligations of railroad directors] 2. _The economic power of the higher railroad officials enables them to exercise certain functions of an important public nature._ When the railroad was a young industry, its essentially public nature was not recognized. It was at first thought to be simply an iron-track turnpike to which the old English law of common carriers would apply. As this and similar notions proved illusory, the railroad manager became invested with complex and often conflicting duties to the stockholders and to the public. He wore his conscience-burden lightly, and frequently made little attempt to meet the one and no attempt whatever to meet the other obligation. The new field offered for speculation gave opportunities for great private fortunes. There were no precedents, no ripened public opinion, no established code of ethics, to govern. It was a betrayal of the interests of the stockholders when directors formed "construction companies" and granted contracts to themselves at outrageously high prices. It was an injury not only to shippers, but also to the stockholders, when special rates were granted to friends and to industries in which the directors were interested. [Sidenote: Unclear convictions as to the railroads' public nature] It is believed that a better code of business morality has developed, and that the officers' relation of trusteeship toward the shareholders is now more often recognized. But practical ethics need to be developed much farther than this. A railroad manager is engaged by the stockholders, is responsible to them, and looks to them for his promotion. Hence their interests are uppermost whenever the welfare of the public is not in harmony with the earning of liberal dividends. The manager feels bound to defend the principle of "charging what the traffic will bear" in the case of each individual, locality, and kind of goods. If this ruins some men and enriches others, if it destroys the prosperity of cities to increase the earnings of the road, at all events he feels he has done his full duty. Railroad directors do not yet recognize, and possibly never will, that their office is more than a private trusteeship, that it is a public trust. [Sidenote: Progress of railroad consolidation] 3. _The progress of consolidation among railroads is putting into fewer hands greater financial and economic power._ The early railroads, many of which were built in sections of a few miles in length, have been slowly welded into continuous trunk lines with many branches. The New York Central between Albany and Buffalo was a consolidation, by Commodore Vanderbilt, of sixteen short lines. The Pennsylvania system was formed link by link from scores of small roads. The growth of consolidation recently has been more rapid than ever before. Sixty per cent. of the mileage of the United States is under the control of five interests; seventy-five per cent. is controlled by a group of men that can sit about one table. The country is being divided territorially into great railroad domains, within each of which one financial interest is dominant. Great financial alliances and "community of interests" still further unify the policy of the leading roads. [Sidenote: Economic results of consolidation] Toward this result strong economic forces are working. Consolidation has many technical advantages: it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the terminal facilities of the railroads, and insures continuous train service. It has the advantages of other large production and the possible economies of the trusts. Most important, however, from the point of view of the railroads, is the prevention of competition and the making possible of higher rates and larger dividends. The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates. It is true that competition between roads does not prevent discrimination and excessive charges between stations on one line only; but competition usually has acted powerfully at well-recognized "competing points." The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies. It is a grim jest to say that consolidation does not change the railroad situation as regards the question of rates. § III. COMMISSIONS TO CONTROL RAILROADS [Sidenote: Railroad evils and the old legal remedies] 1. _Most of the states have undertaken, through commissions, to regulate the railroads in the public interest._ When it became evident that public and private interests in the railroads were so divergent, it still was not easy to determine how the public was to be safeguarded. At first, some general conditions such as maximum rates were inserted in the laws and charters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced. The early efforts at state ownership were, as was noted above, futile and disastrous, the remedy of state ownership, as then applied, being worse than the disease. The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for while delay was death to the shipper's business, cases hung for months or years in the courts; it was ineffectual, for even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers. [Sidenote: Object and working of the state commissions] Attempting to remedy these evils, thirty-one of the states have appointed commissions and, as the most important states are included, this mode of regulation applies probably to four fifths of all traffic beginning and ending in a single state. These commissions differ in power, but in general they attempt to prevent excessive discrimination in rates and to check all railroad practices injurious to the public welfare. The commission principle, strongly opposed at first by the railroads, has been upheld by the courts and is now an established public policy. The state commissions, however, have fallen far short of a solution of the problem. Though they have done much to make the accounts of the railroads intelligible, something to make the rates reasonable and subject to rule, and much to educate public sentiment, on the whole their results have been disappointing. It has been difficult to get commissioners at once strong, able, and honest; the public does not yet know its own mind well enough to support the commissions properly; and--more fatal weakness still--the courts early decided that state commissions could regulate only the traffic originating and ending within the state, and this left untouched the much greater volume and more important class of interstate traffic. [Sidenote: Passage of the Interstate Commerce Act] 2. _The Interstate Commerce Commission is an agency by which it was hoped to secure a uniform national public control of railroads._ Public hostility to private railroad management was greatest in the regions where the most rapid building of roads occurred from 1866 to 1873. One center of grievances was in "the granger states" of Illinois, Wisconsin, Kansas, Nebraska, Iowa, and Minnesota; another center was in the oil regions of Ohio and Pennsylvania. The Eastern states were not without their troubles, for the report of the Hepburn Committee of the New York legislature in 1879 shows that discrimination between shippers prevailed to an almost incredible degree in every portion of New York state. When the courts, in 1886, decided that the greater portion of the railroad rates could not be treated by state commissions, national control was loudly demanded. Scores of bills were presented to Congress between 1870 and 1886, and, despite the bitter opposition of the railroads, the Interstate Commerce Act was passed in 1887. [Sidenote: Its provisions] The act laid down some general rules: that rates should be just and reasonable; that railroads should not pool, or agree to divide, their earnings to avoid competition; that they should, unless expressly excused, fix rates in accordance with the long- and short-haul principle (to charge no more for a shorter distance than for a longer one on the same line and in the same direction, the shorter being included within the longer). The act provided for a commission of five men, to be appointed by the President, which might require uniform accounts from the railroads, and which should enforce the provisions of the act. [Sidenote: Results of the act] 3. _The object of the Interstate Commerce Act has been but imperfectly attained._ This brief proposition sums up the story of years of efforts and defeated hopes. The powers of the commission have proved inadequate to attain the main purposes of the act--the prevention of discrimination and the securing of steady and equitable rates to all shippers. By the decisions of the federal courts, the commission's power has been reduced far below the intentions of the Congress that passed the law. The railroads have in many cases refused to obey the orders of the commission and have succeeded in maintaining their refusal. Admirable results have been secured in the way of uniform accounting, uniformity of rates has been somewhat furthered at times, and the public has been in many cases enlightened. But the greatest evils remain. Railroads still give secret rates in great numbers; many competent witnesses before the Industrial Commission in 1900 and 1901 testified that discrimination had never been worse. From time to time the recognition of the injury to dividends wrought by discriminating rates prompts some railroad to offer its coöperation to the commission, and this inspires new hopes of an effective administration of the act. The pressure of competition, however, soon forces the penitent road back into its old ways. On one thing the railroads and the commission are agreed: that pooling should be permitted, though the commission wishes to have this under strict supervision. To this point the public has not yet advanced. [Sidenote: The railroad problem unsolved] Despite the general acceptance now of the principle that the railroads should be controlled in the public interest, despite the barren legal triumph of the commission principle, it is evident that the railroad is not yet under social control. The future must determine whether the solution is to be found in effective public regulation or in public ownership. CHAPTER 56 PUBLIC POLICY AS TO CONTROL OF INDUSTRY § I. STATE REGULATION OF CORPORATE INDUSTRY [Sidenote: The social problems of corporations] 1. _The great increase of late in the number of industries under corporate control has brought new problems of social regulation._ Inventions, machinery, better transportation, better communication, widening markets, have united to favor large-scale production, and this in turn to multiply corporations. Corporate organization makes possible greater massing of capital, greater stability of policy, and (because not dependent on a single life) greater permanence than does individual ownership. With these advantages the corporation brings also new social problems. The relations in corporate business are more complex than those in individual enterprise. The ordinary stockholder cannot have personal knowledge of the business or exercise personal supervision over his investment. The corporate official controls chiefly not his own wealth, but the wealth of others. When men deal personally with each other their sympathies are more appealed to. But, as noted in the case of the railroad, the corporate official at best seeks to satisfy his employers, often to the detriment both of the employes and of the public. Corporations are "soulless" because they permit less of the close personal relation that makes for morality. At various points in these later chapters on the relation of the state to industry, mention has been made of the measures society has taken to regulate corporate industry. The purpose now is to survey the field more systematically and to see the extent of this regulation, the difficulties arising, and the principles involved. [Sidenote: Examples of public control of corporate industry] 2. _Numerous laws and commissions recently have been established to provide public regulation of industry._ The Interstate Commerce Commission is the most prominent of the agencies for regulating corporate industry, as the railroad problem is the most prominent of the corporation questions. But before the advent of the railroad, banks had been recognized as having an exceptional public character. Not only stockholders, investors, depositors, and note-holders, but a large part of the public suffers losses by the failure of banks. As investigation by the various interested persons is quite impossible, the state through its agents inspects the books of the bank in a manner not thought of in the case of ordinary private business. The bank commission is the eye of the public, safeguarding the public welfare. State inspection of insurance companies, a later kind of corporate enterprise, grew out of a similar need. Insurance to provide for sickness, old age, or death is socially desirable and is possible in an equitable way only by the association of a large number of policy-holders. But inspection of the business by each policy-holder being impossible, regulation and control through some public agency is needed. The tax commissions now found in a majority of the states have been created principally to deal with corporations. In California, a debris commission regulates the relations between the farmers and the miners using hydraulic processes. A number of states have mining commissions, harbor commissions, labor commissions, boards of arbitration, and other similar bodies. The increase of these public agencies to regulate corporate industry has lately been condemned by some as a useless multiplication of state machinery. Doubtless some commissions have, through improper influences, been needlessly created; others having important duties have been intrusted to incompetent political appointees. But most of these commissions are needed, though at first their work may be ineffective. [Sidenote: Helplessness of the small investor] 3. _There is a strong and increasing demand for publicity in the business of the ordinary corporation, as a protection to investors._ The law has looked upon corporations, with few exceptions, as private businesses, having the right to keep every detail of their management secret from their rivals. The inner management, therefore, has been closely hidden from most of the stockholders, who, in the economic analysis, are in the main the enterprisers. More and more the business and capital of the country has thus come into the control of the few. The ordinary investor in corporate stock "buys a pig in a poke" and trusts to the integrity of officers working behind closed doors, responsible to no one, too often speculating in the stock of their own companies. The unearned gains thus secured have tainted with dishonesty many a large fortune. No small part of the evil is the closing of the avenues of safe investment to the small capitalists, giving to a favored few a measure of monopoly in investments yielding large returns. Only recently has it been recognized that no large corporation can now be a private business in the old sense. The evolution of industry has left investors and shareholders without protection in advance of a wrong, and usually without legal redress when a wrong has been committed. [Sidenote: Steps toward publicity to protect investors] The demand for some remedy for a condition whose seriousness has been steadily increasing has not come so much from radical quarters as from business and financial circles. In England, some of the worst abuses have been corrected by legislation. In 1900, a bill was drafted at the suggestion of Theodore Roosevelt, then Governor of New York, which aimed eventually to make the corporation a quasi-public institution, open to inspection. The organizers of a company voluntarily accepting the act were to be personally responsible for the statements in its prospectus; its issue of stock was to be limited to actual investment and to be publicly made; its office and records were to be open to inspection. Though public opinion was not ready for this bill, and it failed of passage, the bureau of corporations of the new department of commerce of the federal government, established in 1903 under President Roosevelt, may be looked upon as a fruit of this initial attempt. [Sidenote: Broad social grounds for publicity] 4. _Greater publicity of corporation business is essential in the interest of the public._ With the interests of the investor are usually united more general public interests; but in many cases the two groups of interests conflict. Some persons favor control of corporations only to the degree needed to protect investors, but others place the policy on broader social grounds. The ability of a manufacturing corporation, at times, by threats of removal, to coerce unfair terms from the community, from its employees, and from those who supply it with materials, has led to the proposal that factories shall be forbidden to change their location without the consent of the state. [Sidenote: Publicity to insure just prices] Especially does it seem desirable, if it is possible, to preserve the benefits of competition, by forbidding rates and agreements in restraint of trade. The old English idea, inherited in our law, is that the highest price that can be got in an open market, under ordinary conditions, is in general a just price. The control of any line of industry by a few corporations makes secret agreement much more easy, and thus replaces a general market-price by a discriminating rate, the highest that each individual will bear. A trust's price might still be a reasonable one if the seller met competition in every market; but it is not reasonable when opposition is crushed by local and by individual discriminations. The methods by which this result is obtained shrink from the public gaze. They include secret agreements with railroad agents, a system of espionage on the business of competitors, secret special rates to the competitor's customers, to say nothing more of corrupt political influence. Publicity in corporation accounts is the first condition to a public and uniform price. The need thus to develop potential competition is especially strong where a monopoly in a natural product exists. A more general recognition of the public nature of corporations will lead to further legislation and to the appointment of corporation commissions, as has been done already in some states. § II. DIFFICULTIES OF PUBLIC CONTROL OF INDUSTRY [Sidenote: Growing need of social coöperation] 1. _The progress of industry is compelling greater social contact and more use of the agencies of government._ The numerous exemplifications of this general statement that have been met in the course of this study have a common cause. In simple conditions of industry, where most of the productive energies were given to securing the necessities of life, the struggle of men was with nature. Social relations then were simple and crude, such as those of chattel slavery. Now, most men get their livelihood from their bargains with other men. The relations of men with nature now are fewer, and less close; the relations of men with men are more numerous and complex. Efficient coöperation is a factor in production. Right social relations are more essential to industry than a fertile soil. [Sidenote: The practical limits of legislative reform] The social institutions of any community are its answer, expressed in human consciousness and in formal laws, to this difficult problem of living together. Laws and ways for regulating industry may be good or bad. The good laws are those in harmony with human nature, giving the best motives for work and the greatest happiness both in the effort and in its reward. The merit of laws, therefore, is relative to human nature; those good for one kind of citizens may be bad for another. Men cannot be legislated into honesty without limit. The best that is possible is to enact laws that encourage the best in men as they are. A dishonest community neither has, nor is capable of choosing, men honest enough to supervise the others. Society cannot, by any amount of tugging and pulling on legislative boot-straps, lift itself above its own moral plane. But though the change in formal law cannot far precede, it may lag behind and retard, social progress. Law tardily adjusted to social needs tempts and corrupts men. A time has never been when a higher wisdom could not have corrected some ancient grievance, have leveled some unmerited inequality, and, by making laws as good as men were capable of administering at the moment, have freed their energies for further advances. It is only a spirit of moderate expectation that will not be cast down by the results of legal "reforms." Hence it cannot be hoped that abuses will not appear in the attempts to regulate private industry. Fallible men make mistakes and commit injustice, sometimes greater than that which they are seeking to prevent. [Sidenote: Local selfishness in industrial legislation] 2. _Legislative interference with industry presents temptations to community selfishness to misuse social legislation._ Community greed is not more lovely than individual greed. Many a citizen holds up a high standard for the public official and bewails the corruptions of politics when the legislator votes for his own interest instead of for his constituents' interests. Such a citizen rarely reflects that the responsibility for many legislative abuses comes back to the community and to the individual voter. Can the water rise higher than its source? Is it a high conception of a representative's duty that he should out-talk, outwit, and out-vote his fellow-representatives, to get "a graft" for the men who elect him? In many communities, the one public question of importance is tariff legislation in favor of the local industries. This selfish issue bribes the electorate, and blinds it and its legislator to every question of the general welfare. A great industrial commonwealth steeps its public life in corruption when its voters sell their political birthright for a duty on iron. Many congressmen are so burdened with the task of securing some public expenditure in their district to help their constituents that they have little thought and less interest to give to larger public questions. If a local improvement will furnish labor and increase the value of surrounding property, though it is most uneconomic for the general community, the representative is expected to labor hard to secure it. Many citizens see little harm in "log-rolling" by the legislator,--that is, in his voting for a law without merit in order to get another law that his constituents want. The guilt of this worst form of bribery comes back to the community that forces its representatives to such a course, sinking public morality to a lower level. [Sidenote: Political corruption in industrial legislation] 3. _The power of the legislature to affect private fortunes presents strong temptations to public representatives._ That the legislator is so often true to a high standard of public duty, goes to illustrate the familiar truth that the individual moral code is better than that of communities. That some individuals betray their trust is less surprising. The Credit-Mobilier scandal, in connection with legislation in aid of the Union Pacific Railroad, implicated many congressmen. A few years ago, in one of the greatest states, it was discovered that an innocent-looking bill, relating to the rights of property-owners on streams, practically involved the gift, to a ring of men, of a quarter of a billion dollars' worth of coal-lands, lying under the navigable streams, and belonging to the state. Such temptations for wealth-getting are too great for men selected solely for their ability to obtain offices and pensions for political supporters, and to secure class-legislation for reputable citizens. The power of the legislative bodies to grant franchises and to permit the use of public property to corporations, constantly gives opportunity for dishonesty and occasion for scandal in the larger cities. The histories of the granting of franchises in New York, Philadelphia, Pittsburg, St. Louis, and many other municipalities, are full of black pages. Public duties are too heavy for the public integrity. Industrial power has grown faster than the civic conscience, and somehow the balance must be made even. [Sidenote: Heavy duties of the courts] 4. _The power of the courts and of executive officers in the interpreting and executing of laws governing business has become greater._ With closer contact of men there is greater friction in social relations, and litigation increases. Fortunes turn on the result of a civil suit. While juries often are corrupt, yet it is remarkable how well the courts have kept their integrity in the midst of great temptations. Professional pride and the noble traditions of the English judiciary strengthen the individual's character on the bench, not infrequently transforming a dishonest lawyer into a just judge; but popular elections, selfish interests, and the social forces of wealth and ambition make the task at times too heavy. [Sidenote: Integrity needed in public officials] The executive branch of government is necessarily intrusted with great power, increasing with the extent of social regulation. The Secretary of the Treasury has discretion as to the sale and purchase of bonds, and thus can affect the rate of discount and the selling price of securities. One man's decision, if known in advance, makes possible fortunes for private pockets. A recognition of the importance of these facts, which are typical of a great class of facts, must help to develop a higher sense of public duty. Patriotism has been thought of too narrowly. The enemies of early society were outside its borders, and the citizen who traitorously gave them aid was held in abhorrence. Now, independently, in many quarters is voiced the conviction that the greatest enemies of society are within its borders, and that political corruption is the modern form of treason. A higher conception of civic virtue is required to meet the added tasks of society. Public official control must be united with private industrial control in a way to present the fewest temptations to the betrayal of public trust. Now, as never before, must be felt the wisdom of Emerson's words: "The best political economy is the care and culture of men." § III. TREND OF POLICY AS TO PUBLIC INDUSTRIAL ACTIVITY [Sidenote: Recent growth of state socialism] 1. _There has been a large increase of state socialism in recent years._ The term state socialism, broadly understood, includes all the forms of public participation in industry that have been passed in review: ownership by towns, cities, state, or nation; laws regulating the freedom of contract; agencies to inspect conditions and to enforce the laws; commissions to supervise and control corporate industry. From every direction comes evidence of the increase of state socialism within the past twenty-five years. To those accustomed to think of the spirit of the Germanic races as that of individual liberty and enterprise, it seems remarkable that this increase has been greater among people of Teutonic origin (Germany, England, America, Australia) than among those of Latin race. The change seems to be a part of the movement of democracy, even the measures of Bismarck in Germany having been taken to ward off the demands of the radical party. The mere name of socialism no longer frightens the citizens of a free state, and when men of strong individualistic spirit even claim with pride that they are socialists, the meaning of that term is becoming very vague indeed. [Sidenote: Varieties of socialism] 2. _State socialism must not be confused with collectivism, or radical socialism._ The word socialism is so variously defined that the earnest student sometimes despairs of getting a clear understanding of it. The thought of socialism ranges from the simplest form of state interference, such as the support of public schools and public fire-departments, up to complete public ownership of all industry. It is well to describe as radical socialists those who would abolish private property, and would strike at the very root of the existing order of society. The modern form of radical socialism originated among German thinkers of the school of Karl Marx, but it has many supporters in other lands. The typical radical socialist claims to possess the only pure brand of social reform, disdains any interest in state socialism, and scoffs at state control as mere temporizing, as not even a single step toward radical socialism. [Sidenote: Aim of state socialism] The typical state socialist agrees that these measures do not logically force him toward the extremer view. He is at heart an individualist, believing that the motive forces of society are in human character, not in governmental machinery; but he seeks to prevent some kinds of competition, to put other kinds on a better basis; "to make the rules of the game fairer," but not to suppress it. According to this difference in ultimate plan, men and present measures can in general be classified. Yet one view sometimes shades into the other in the life-history of a single individual. Believers in moderate interference sometimes move toward the extreme, and the most radical thinkers, sometimes with no less honesty, become, with broadening experience, more and more moderate. It would be surprising if any one who is thinking and growing in social philosophy should succeed in so exactly adjusting to each other all his opinions, as to be absolutely consistent at a particular moment in his views on social policy. [Sidenote: Unripe social philosophy] 3. _It is not safe to predict from present evidence a continued trend toward extreme social control._ Social prophecy is fascinating. Men like to answer out of their ignorance the question, Whither are we tending? A deeper study of social law should give this power, but it is not won by hasty generalization. Unripe social philosophers assume that because the theory of biological evolution is correct, the particular theory of social evolution which they choose to invent or accept is unimpeachable. Radical socialism is the exaggerated statement of a present social need. It is a bridging with hope, not with experience, of the chasm between reality and the dreams of the unsuccessful. [Sidenote: Progress of social control] [Sidenote: True Aim of social control] It is true that many evidences point to an increase in social control for some time to come. The laws, the institutions, the prevailing morality of society, have not kept pace with industrial growth in this period of sweeping change. What is seen, however, is a small arc of the curve of progress. Much of the social regulation in the Middle Ages was similar to that which is now increasing. Legislation by gilds and privileges of private corporations hedged industry about. A reaction against this in the seventeenth and eighteenth centuries brought on national and state control, and state interference of another kind rapidly increased until the time of Adam Smith. Then a strong reaction came, and the next period of fifty years saw far less of interference. The years from 1825 to 1840 were those of the greatest state socialism ever seen in America, but the results were so unfortunate that a violent reaction followed. The recent great increase of state activity is not likely to be continued indefinitely. The path of progress is a spiral. There are forces already at work creating a resistance to any great extension of this movement. Competition of the healthier sort cannot be suppressed without paralyzing results. Inequality and the opportunity for ability to realize itself cannot be destroyed. The social regulations must be of a sort to liberate the best energies of men, not to enchain them. If the evils of state regulation increasingly appear to outweigh the benefits, a limit must be put to the movement. While social control may aid in lifting production and competition to a higher and more moral plane, the ability of society will refuse to be ruled by the standards of the weak and inefficient. CHAPTER 57 FUTURE TREND OF VALUES § I. PAST AND PRESENT OF ECONOMIC SOCIETY [Sidenote: Definition of economics recalled] 1. _The meaning and scope of economics can be better seen at the end than at the beginning of its study._ The proposition with which this inquiry opened may well be recalled in the closing chapter. The words of the formal definition of economics should at this point convey a fuller meaning. In the wide range of subjects passed in review has been sought the answer to one question: What determines and affects the values of good? [Sidenote: Influence of economics on practical life] Perhaps now also can be better appreciated what the influence of such a study might and should be on practical action. At times economic students have gained the ear of statesmen and rulers, and have exercised much influence upon practical politics. It is sometimes bemoaned that economists have to-day so small a direct part in the government of our republic. They certainly have a greater part to-day than they had twenty years ago, but if they had not, there would be small occasion for regret. The immediate influence of the specialist on those in authority is at most times less in a republic than it is in a monarchy, at those rare times when a ruler shows the students his favor. That influence in America is mostly indirect, but it is no less sure and lasting. The results of the earnest pursuit of economic inquiry in the universities and outside of them are already appearing, not in dramatic ways, but in the more subtle, surer form of an intelligent public opinion. [Sidenote: Examples of mistaken social prophecy] 2. _Economic science has not reached a stage that permits of much prophecy._ Prediction is sometimes given as the test of science. This test, however, is one that only astronomy can meet in any remarkable degree. Chemistry can tell much of what will happen in the laboratory, but nothing of the date of future powder-mill explosions. Geology answers the question "What?" with surmises, and "When?" with an estimate of a few million years more or less. Is it surprising that in human affairs still less prediction is possible? There are countless unmeasured factors in human action. Such generalizations as are possible must be based on actions that appear and reappear with practical constancy. Though a number of facts unite to suggest some conclusions as to the immediate future, the experience of the last century bids one beware of sweeping predictions. The close of the French Revolution was a period marked by much speculation regarding the future of society. The optimists, with faith in the perfectability of human nature and of society, believed that all social ills were due to bad government; if despotism were but overthrown, man's nature would develop, untrammeled, to perfection. The economists of that day were sceptical, because, looking deeper, they saw sources of misery in the scantiness of man's environment, and in the sloth, ignorance, and incapacity of human nature. The pessimists--the communists, and socialists of that day--seeing the same evils, had other explanations to offer. While the economists of that day believed the conditions of poverty and misery to be inevitable, the pessimists pronounced them unendurable, and advocated a radical social change as the only hope of saving the masses from starvation. In such a variety of mutually contradictory views there must have been much error, but likewise much truth if it could be disentangled. [Sidenote: Economic prophecies of the nineteenth century] 3. _The unexpected changes in transportation and in industry altered the course of economic development in the last century._ Much of the economic theory of that day appears absurd in the light of history. The inventions of the period, from Adam Smith's writings to Ricardo's (1776 to 1820), were mostly for use in manufacturing. This suggested to the minds of that time the progressive cheapening of cloth, iron, pottery, and of all other products of machinery, but not the cheapening of food. Indeed, the situation in western Europe then suggested strongly the opinion that the products of the soil would steadily become more difficult to get. The railroad was not of practical importance until after 1830; the steamboat was not applied to ocean travel until 1837. The opening of a rich continent and its annexation, by these new agencies, to the available resources of the older countries were not dreamed of. It was not fully appreciated that a great change in social standards, controlling the growth of population, was in progress. This was the panorama of the progress of society as seen by both the conservative economists and the socialists of less than a century ago: continued invention, an increasing population, low wages, scanty food, growing wealth for the few, and growing poverty and misery for the masses. [Sidenote: Unexpected course of development in the nineteenth century] 4. _The actual course of economic development in the nineteenth century falsified the predictions alike of optimists, economists, and pessimists._ Not foreseeing the great supplies of natural resources soon to be made available for the older countries, the men of that day naturally thought of the supply of land as limited and fixed. Supply in the economic sense means the amount available at the given time in the market; but despite the great areas since brought into the world-markets, the false idea of a century ago still persists in the text-books, and shapes economic reasoning. It is vain to say that the circumstances have been unique and that the general principle is still valid. Much of the so-called orthodox economic analysis was essentially erroneous as applied to the conditions of the past century; it is erroneous to-day and will be so for years to come, if it ever fits the facts. New continents are about to be opened. The building of railroads the length of South America and to the center of Africa will make available new mineral wealth, rare woods, enormous forests, and some of the greatest food-producing areas on the globe. Population in Christendom has increased more rapidly than ever before in the history of the world, but it has not overtaken the progress in resources. The rate of increase of population is slackening. The result of this combination of events has been a general rise of the conditions making for popular welfare. Despite the problems and the abuses that every new change brings, the civilized world undoubtedly is more prosperous to-day than ever before. The greatest misery and discontent is in the more backward communities. This is past and present; what of the economic future? Is the present condition a normal one--is this prosperity likely to grow or to decline? Thus far, surely, the economic student may question the oracles; for though the distant future is veiled from man's view, the role of economic theory is to show causal relations, to convert mystery into reason, and thus to give a lamp to the feet of the present. § II. THE ECONOMIC FUTURE OF SOCIETY [Sidenote: Exhaustion of certain natural resources] 1. _Present industrial progress is largely due to material conditions, temporarily favorable._ Many of the materials now being destroyed in immense quantities have been slowly stored up through the ages and are not renewable.[4] Till modern times man knew little of the world beneath its crust. Living, he scratched the earth's surface, and dying, left his bones to fertilize the soil. But to-day, man exhausts the stores in the interior of the earth, burns the treasures of the carboniferous age, casts the fertilizing elements into the ocean, and leaves the world an empty shell. Forests are being so rapidly cut off that the price of fuel-wood and lumber in many parts of the United States has, within twenty years, been multiplied by three. The world's store of iron ore is not yet fully known, but much of it has been measured, and of the deposits known to be within the United States over one half are said to be owned by one corporation, and they are enough to continue its present output no more than sixty years. Many other natural products are in like manner gathered by civilized man from a stock created long ago. While the supply of vegetable food promises to be ample, the supply of meat will be maintained with difficulty as population becomes denser. [Footnote 4: Though at first glance this may seem contradictory to the statement in the foregoing paragraph regarding the nature of supply, it will not be found so on closer examination.] [Sidenote: Possibilities of other resources] 2. _Many other inexhaustible sources of essential materials have not yet been developed._ What has just been said is the darker side. The coal-mines can be emptied, but so long as the sun shines and the rains fall, Niagara will remain as a source of light, heat, and power. The tides flow on forever. In every thunder-storm enough force is dissipated to run thousands of factories. The heat in the center of the globe, though not inexhaustible, would suffice for man's needs for many centuries. The force in Mount Pelée, if chained and utilized, would run a million factories a million years. It is not too much to hope that engineering skill will some day reach and utilize these sources. Such a cheapening and diffusion of power would put a new face on many of the problems of industry. New sources of materials undoubtedly will be developed. It is reasonable to hope that before iron ore has become extremely scarce, a cheap and practicable method of extracting aluminium from clay will have been perfected. Secure of these permanent sources, civilization will stand on a firmer foundation. [Sidenote: Effect on values of shifting centers of power and materials] A great displacement of local values must accompany this shifting of the centers of power and materials. When the coal districts are heaps of slag and cinders, industry will be found near the water-power. Because of distance from raw materials, New England even now finds herself hard pushed in her rivalry with the Southern states in the manufacture of textiles. The industrial map of our country will be greatly altered a hundred years hence. The possession of rich natural resources to-day does not insure a community enduring prosperity. [Sidenote: Effect of accumulating wealth] 3. _The mass and quality of wealth will increase rapidly if social and political conditions remain stable._ The main method of increasing wealth must be the putting of energies and resources into more abiding forms. In order that a motive for saving may be present, there must be stable conditions. Increasing subordination of present to future will be accompanied by a fall in the rate of interest. The growth of wealth means a higher quality of all artificial productive agents. A larger part of the energies of men will then be directed merely to supervising the developed machinery. Man will live in a better environment, in a better and richer world. Wages must rise as the quality of tools and machinery improves. Population most probably will not increase proportionately and the relation of the labor-supply to the resources with which it works should be more and more in favor of the laboring classes. The difficult problems of the concentrated control of industry and of the control of wealth must be solved in the interests of all. [Sidenote: Social progress vs. race progress] 4. _Improvement of the race biologically, through selection of the ablest individuals, has been a great factor in human progress._ Social progress is not necessarily the steady biological betterment of the native ability of men. The education of the average member of society is becoming yearly better; it is doubtful whether the innate capacity of a new-born babe in Europe and America to-day is greater than it was among our Germanic ancestors in Roman times. Indeed, the progress of the past two thousand years has been in social organization, in the enlargement and simplifying of the mass of knowledge which has to be reappropriated by each new individual, rather than in race-breeding and in quality. [Sidenote: Nature vs. culture] Few thoughtful persons now hold the view that the race can be rapidly improved biologically by the process of educating the individual. Education is cumulative in so far as it builds up a better environment into which other children will be born, but the betterment is not due to the inheritance by the child of the acquired knowledge and skill of the parent. If this question is open to dispute among biologists, it is only as regards a minute increment of improvement. Practically, selection is the only means of improving the innate capacity of any species in any large measure. Many forces were at work in the past to lift man above the brute, and especially to increase the average brain-power of the human race. The weak, the ignorant, the incapable in primitive societies were ruthlessly killed off. The strong, the sagacious, and the enterprising left the largest numbers of descendants. [Sidenote: Decrease of the successful elements] 5. _Progress will be checked if the native quality of the race declines._ Under modern conditions, especially within the last quarter of a century, the successful elements of society are becoming less fertile. Large families were the rule among the capable pioneers of America; now they are rare except in the lower industrial ranks. Democracy and opportunity are favoring this process of increasing the mediocre and reducing the excellent strains of stock. Caste and status kept successful generations of capable men in humble social ranks from which only by chance some remarkable individual could rise. In a democracy, those of marked ability can more easily move into the better-paid callings and professions. This individual good fortune, however, reduces the probability of offspring. In the higher social ranks are more bachelors and old maids than in the lower ranks, and fewer children are born to each marriage. The president of our oldest university has shown that one fourth of the graduates of the last generation have remained single, and that the average number of children of the married graduate is two. That group of men, therefore, has left only three fourths enough descendants to maintain its numbers, and as the population has doubled within the same generation, that class represents only three eighths as large a proportion of the American stock as formerly. [Sidenote: The menace to progress] This sterilization of ability has cumulative results. If society were composed in equal parts of two distinct strains of stock, not intermarrying; if the total population kept intact from one generation to another (say each period of thirty years), but the superior strain contributed only three fourths of its own number, at the end of five generations it would have sunk from one half to a little more than one eighth of the population. A period brief in the life of nations would serve to leave it an almost negligible factor in social life. There can hardly be a doubt that at present our society is on the average increasing far more from the less provident, less enterprising, less intelligent classes. There has not yet been time for many of the cumulative effects of this process to appear. Progress is threatened unless social institutions can be so adjusted as to reverse the present process of multiplying the poorest, and of extinguishing the most capable families. [Sidenote: Sympathy and selfishness in relation to progress] 6. _If progress is to continue, there must be left a wide field for the ambitions and for the competition of individuals._ The results of any given ability are dependent upon the energy with which it is used. The social machinery finds its motive force in the nature of men. In taking economic wants as the starting point of our study, it was not implied that men were entirely selfish. Sympathy widens; economic wants include family, friends, and, in a growing measure, humanity. The happiness of a truly socialized man consists in part in the happiness of his fellows. As social sympathy broadens, the sense of duty becomes a stronger economic force. Men change, but not rapidly, and not always for the better. It is unsafe to overestimate the generosity of men. Individual wants and interests must, so far as can now be seen, continue to be among the stronger forces that move society. Progress is made because to exceptional ability in general is now presented the hope of large rewards. [Sidenote: Status endangering progress] [Sidenote: Envy endangering progress] These dynamic forces making for progress are at present, however, threatened from two sides. Enterprise is threatened from the side of privilege or status. The avoidance of certain kinds of work which, by social convention, come to be regarded as degrading, takes much ability out of business. The freedom of America to so great a degree from this disdain of honest labor has been a large factor in her progress, but it is endangered when men become timidly conservative of social position. Progress is threatened, secondly, by democracy, with its tendency to carry the notion of literal equality over into industry. When democracy becomes envious, it denies to exceptional ability an exceptional reward. The line of growth must be the resultant of the positive forces in these two principles. The energy of the social reformer must be directed along rational lines. If this can be done, the economic outlook is for a great development of wealth and popular welfare. Economics must be looked upon as the study of the forces in human nature as much as of the material resources of the world. QUESTIONS AND CRITICAL NOTES THE QUESTIONS.--These questions are not intended to be used merely as tests of knowledge of the text. They leave untouched many of the most important questions in the reading, and they raise other inquiries hardly hinted at in it. The list began ten years ago with one or two questions on each topic, assigned in advance of lectures and recitations, with the object of arousing the student's thought, quickening his observation, and stimulating his interest in the subjects. The possibilities of helpful questions of this kind are hardly more than suggested by the examples given, and every teacher will find peculiar opportunities in his own neighborhood for other similar inquiries. Other questions are more of the nature of those in _Problems in Political Economy_, by W. G. Sumner (published by Holt & Co., New York, 1884), which are intended to be reasoned out in the light of principles given in the class-room. Many teachers and students have found much help in that little book, which in turn acknowledges large obligations to earlier lists of questions. The changed point of view in economic theory has, however, made most of the older problems of this nature unusable except after reformulation. Fertile in suggestions of both of the kinds of questions mentioned are two books by H. J. Davenport, _Outlines of Economic Theory_ and _Outlines of Elementary Economics_ (The Macmillan Co., New York, 1896 and 1897), though some of the questions imply theoretical views differing from those of this book. Excellent lists of questions with references to reading have been prepared by W. G. L. Taylor, in his _Exercises in Economics_ (The University Publishing Co., Lincoln, Neb., 1900). The list of problems of this kind can easily be extended to meet the special conditions of each community. THE BIBLIOGRAPHICAL NOTES.--The few references and critical notes given are intended as a help to teachers and advanced students desirous of following some of the more recent contributions to controverted points in economic theory. No attempt has been made to furnish a list of books for the beginner or the regular reader. Among accessible books containing helpful lists of that kind may be mentioned: _The Reader's Guide in Economic, Social, and Political Science_, by Bowker and Iles. _Outlines of Economics_, by R. T. Ely (published by Macmillan, New York, 2d ed., 1900). Contains both questions and bibliographies. _Introduction to the Study of Economics_, by C. J. Bullock (published by Silver, Burdett & Co., 2d ed., 1900). The references to the literature are given by pages or sections at the end of each chapter, and at the back is a list (about twenty pages) of the most useful texts, documents, and materials. _Financial History of the United States_, by D. R. Dewey (published by Longmans, Green & Co., 1903). Contains excellent references on public finances, tariff, banking, and taxation of the United States. _Introduction to Economics_, by H. R. Seager (published by Holt & Co., New York, 1903). Each of the first twenty-six chapters is followed by fresh and well-selected references varying from one line to nearly a page in length. A good general bibliographical note is given on pp. 61-2. CHAPTER 1. THE NATURE AND PURPOSE OF POLITICAL ECONOMY 1. Has political economy anything to do with woman suffrage, the liquor problem, a republican _vs._ a monarchical form of government, the silver question? 2. Is political economy a study of things or of men? 3. Shall a piece of coal be studied in geology, botany, physics, chemistry, or economics? 4. Do you expect to acquire wealth more easily as a result of the study of political economy? 5. Of what practical use do you think political economy is? 6. Is political economy necessary to the understanding of the business world, or vice versa? 7. How wide a knowledge would a complete understanding of industrial society require? 8. Did the discovery of America make the study of political economy more important? CHAPTER 2. THE ECONOMIC MOTIVES 1. If you found $10 to-day on the street, what would you do with it? 2. What would be the chief differences between your use of it now and at the age of five or the age of twelve? 3. Name Crusoe's wants in the order of their importance. 4. Is it well to be contented with your lot? Is it well to be discontented? 5. Why does a horse like hay and a man prefer meat? 6. Are the wants of a savage more easily satisfied than those of civilized men? Why? 7. How many motives led you to come to college? 8. If you ever worked for wages, or a salary, was that the only motive? What else? 9. James Bryce says that the incomes of American university professors are much less than those of men of corresponding ability in law and medicine. If true, why? 10. If you could, would you do nothing always? Why? 11. Which would you prefer, to clerk in a store at $1.50 a day, or to lay masonry at $2? Why? 12. Do men work better under threat or when their pride is appealed to? 13. Is pride as powerful a motive as greed, in economic action? 14. Do you know any persons that work from a sense of duty alone? 15. Are charity workers usually well paid? Why? CHAPTER 3. WEALTH AND WELFARE 1. What is it to be economical of money? 2. Why did Crusoe work at all? 3. When he began to work at one thing, why did he ever stop to work at another? 4. What is the difference in utility between the water in a solid mountain reservoir and the same water when it is flooding the valley? 5. Does it change the utility of a load of powder to touch a match to it? 6. Is water useful? Is dynamite? 7. Is the last bait worth more when the fish are biting well? 8. Are the following wealth: food, tobacco, medicine, whisky, good looks, good health, a wooden leg? 9. Is a book full of useful information, wealth? Is a head full of useful knowledge, wealth? 10. Is a ship at the bottom of the ocean, or gold in the mine, wealth? 11. Is well-being in proportion to wealth? Why? 12. Are services, music, a theatrical performance, a gambler's pack of cards, wealth? NOTE.--The theory of marginal utility broadly outlined in chapters 3-5 has been worked out in detail by the group of writers called the Austrian economists. The mechanism, or the technique, of marginal utility and exchange as they conceive of it, is essentially what this text seeks to explain. Our application and development of the conception of marginal utility differs from theirs, however, in ways that will appear as the text advances. For more detailed discussion of many points in chapter 3, see Smart, _Introduction to the Theory of Value_, pp. 9-17; Wieser, _Natural Value_, pp. 3-16; Böhm-Bawerk, _Positive Theory of Capital_, pp. 129-153. CHAPTER 4. THE NATURE OF DEMAND 1. Give illustrations of the difference between desire and demand. 2. Do people actually expend their incomes so as to get the maximum utility judged by a standard they would admit to be morally sound? 3. What causes a demand for an additional supply of food? Of books? 4. If you never eat corn-bread, will the failure of the corn-crop affect your grocery bill? 5. Give examples you have seen of a higher price of one thing causing an increasing use of another. 6. Do you buy what you most desire? 7. Give examples of cases where supply is fixed, and demand varies. 8. Give examples of demand shifting from one product to another. NOTE.--For a more detailed discussion see works cited: Smart, 18-33; Böhm-Bawerk, 159-169; Wieser, 16-36. CHAPTER 5. EXCHANGE IN A MARKET 1. Are merchants producers of wealth, or are their profits merely subtracted from the wealth already produced? 2. Is the railroad productive? Why? 3. Give examples within your observation of improved productive processes increasing exchange; of the reverse. 4. Why is exchange profitable if it is fair? 5. Would doubling all commodities affect their exchange value? 6. Is part of a stock of goods ever worth more than the whole? Examples. 7. Do you ever take account of a difference of five cents in deciding whether to purchase? 8. Is barter more or less frequent now in America than formerly? In the world? 9. Is there any causal relationship between commerce and manufactures? If so, in what way? 10. In a time of high excitement gold was sold for more at one side of the room than at the other side; how account for this? 11. Give examples of, and reasons for, two prices in the same market. 12. What effect on prices should be expected from an invention that makes possible the carrying of fresh meat from South America to England? 13. Describe the method of selling any product you know about. What is the market in which it is sold? NOTE.--See works cited: Smart, pp. 40-63; Böhm-Bawerk, 193-222; Wieser, 39-53. CHAPTER 6. PSYCHIC INCOME 1. Is it possible to compare the value of the portrait-painter's service with that of the gardener? 2. To call the teacher's work unproductive, and the ditch-digger's work productive was once usual, but is so no longer; give reasons for either view. 3. It is usual to call the use of a house for business purposes a productive use, but its use as a residence an unproductive one. What reasons are there for and against this? 4. Give a list of material agents that are yielding non-material uses. 5. Give examples of personal services that are most immediately expressed as gratifications. NOTE.--The phrase "psychic income," used here for the first time, expresses a conception long neglected, but essential to the advancement of psychological economics. The idea has been recognized in the writings of Edwin Cannan, Irving Fisher, W. M. Daniels, and perhaps of late by others. It was discussed by the author in the _Quarterly Journal of Economics_, Vol. XV, pp. 19-30, especially pp. 25-26, in an article called "Recent Discussion of the Capital Concept" (November, 1900). CHAPTER 7. WEALTH AND ITS INDIRECT USES 1. Give reasons for attributing exchange value to the waves of the ocean; to a waterfall, a water-wheel, a loom, a piece of cloth, a dress made of the cloth. 2. Show the connection between these things. 3. How can the use of a flock of sheep be of value to one who must return them all to the owner? 4. Why should the use of a machine that never can be a direct cause of gratification, have a value that men will pay for? 5. Give examples of wealth never becoming a direct cause of gratification, yet whose possession is greatly valued. NOTE.--The conception in this chapter was ably presented by Böhm-Bawerk in _Capital and Interest_, Bk. III, ch. v, pp. 219-227. He does not, however, make use of it in a theory of rent. CHAPTER 8. THE RENTING CONTRACT 1. What things beside land are rented? 2. What is the form of contract used in the renting of farms, business buildings, and residences, in the community where you live? 3. Does the rent of pianos, type-writers, or masquerade-suits depend on the value of the thing rented? Is the rental a moderate return on the investment? 4. What are the difficulties in determining tenants' improvements? NOTE.--Various writers have recognized that social, class distinctions had an influence on the conceptions of rent and capital in England in the eighteenth century; see Fetter, article on "The Next Decade of Economic Theory," in _American Economic Association_, 3d ser., Vol. III, pp. 236-246, especially 243-4; also A. S. Johnson, _Rent in Modern Economic Theory_, p. 19, and references there given. Heretofore, however, there has not been assigned to the form of the contract the significance here given it. A discussion of the points at issue will be found in _The Relations between Rent and Interest_, by F. A. Fetter and others (published by Macmillan, New York, 1904), pp. 8-10, on the renting contract. CHAPTER 9. THE LAW OF DIMINISHING RETURNS 1. Is it possible to do twice the amount of business in any store-room by doubling the stock and the force of clerks? 2. Is it possible to expand a university indefinitely by increasing the force of teachers and the equipment, without enlarging the buildings? 3. Why do men cultivate two acres instead of one? Where land is plentiful, why do not men cultivate two acres instead of one? 4. Are there any things, not free goods, that could be indefinitely increased without increasing difficulty? 5. English farmers raise thirty-five bushels of wheat per acre, Americans perhaps fifteen; why this difference? 6. Why did people go to Dakota and Iowa when there was still room in New England? 7. Why put up a twenty-story building? Why not build a fifty-story one? NOTE.--The broad reading here given to the law of diminishing returns is so recent that even the latest texts have recognized it only in a partial manner, defining "the law" in the old terms confined to land. For the old statement see J. S. Mill, _Principles of Political Economy_ (1846), Bk. I, ch. XII. Writers even so advanced as Alfred Marshall follow Mill with no essential modification. For a good historical account of the doctrine see Edwin Cannan, _History of the Theories of Production and Distribution_, pp. 147-182 (1893; 2d ed., with additions, 1903), which advances no positive theory, but makes evident many inconsistencies in the older view. A keen analysis and important contribution to economic thought was made by J. R. Commons, _Distribution of Wealth_, pp. 116-159 (1895). John B. Clark, in various earlier articles, and in his _Distribution of Wealth_ (1900), has done more than any one else to develop the conception of "a universal law of economic variation." In magazine articles by various writers, the same idea has been developed, but no thorough-going application of it has been made in the available text-books. CHAPTER 10. THE THEORY OF RENT 1. Is competition severe in the renting of land in your community? 2. Give examples you have seen of a rise of rent; the cause. Of a fall of rent; the cause. 3. Does the existence of the land of California have any effect on rents in New York city? On agricultural rents in New York state? 4. If all the land on an island were equally fertile and equally convenient of access, would any of it pay a rent? 5. If you owned the Golden Gate, or the harbor of New York, could you rent it? 6. How does the hire of a team of horses resemble the rent of land? 7. How do livery charges in a college town in commencement week illustrate the subject of rent? 8. Show how a change of circumstances may raise the rent of machinery. NOTE.--Although most texts still present the older, narrow conception of land rent, its defects have been revealed by many critics. J. B. Clark has been the chief champion of the broader conception; _American Economic Association_, 1st ser., Vol. III, No. 2, _Capital and Its Earnings_ (1888); and _Distribution of Wealth_, ch. IX and ch. XIII. See our summary of the present situation, _American Economic Association_, 3d ser., Vol. II, p. 241 (1900). Alfred Marshall's effort to save the older conception by compromise on a "quasi-rent" doctrine has many supporters, but this doctrine is examined in detail and criticized adversely by the writer in an article entitled "The Passing of the Old Rent Concept," _Quarterly Journal of Economics_, Vol. XV, pp. 416-455 (1901). For both negative and positive reasons for a change in the concept, see _The Relations between Rent and Interest_, before cited (in note to ch. 8). CHAPTER 11. REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH 1. What is the difficulty in the definition: Rent is the payment for the original and indestructible powers of the soil? 2. If the value of improvements on land is all counted, is there anything over? Examples. 3. What is stumpage? Does it differ from rent? 4. What do you know about the methods of renting mines? 5. What methods are adopted to keep up the efficiency of factories? NOTE.--Compare and note the inconsistent use of the term "rent" by Ricardo, pp. 34-5 and 45-6, McCulloch's edition. See also article, "Depreciation," in _Palgrave's Dictionary_. CHAPTER 12. INCREASE OF RENT-BEARERS AND OF RENTS 1. What are the most obvious ways of increasing the productiveness of land? 2. How does a new railroad affect the value of the land it passes through? 3. How would the rent of a rocky island be affected if it became a summer resort? 4. Mention any cases you may have seen where a greater value was imparted to land by a newly discovered use. 5. A tunnel was made to drain a mine; the stock doubled in price. Was it really the stock, the old mine, or the new hole in the mountain-side that had increased in value? 6. Criticize the statement that, in an economic sense, land is a "fixed stock for all time." NOTE.--The changes which the rent concept is undergoing can be traced in the work of Alfred Marshall. See _Principles of Economics_, Bk. V, ch. IX on "Quasi-rent," and ch. X on "Situation Rent," and Bk. VI, ch. IX, Secs. 6-7, in which Marshall modifies the older conception of rent. This is discussed in "The Passing of the Old Rent Concept," cited above (in note to ch. 10). CHAPTER 13. MONEY AS A TOOL IN EXCHANGE 1. Why do you value money? Do you value it more than the things it buys? 2. What functions does money perform in society? 3. Could a country better do without money, horses, or roads? 4. If money is a tool, what does it make? 5. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 6. Are men wealthy in proportion to the money they have? Are countries? 7. Would a nation be poorer if, like Sparta, it prohibited all money? CHAPTER 14. THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL 1. Are national bonds or promissory notes, wealth? 2. Is it money or things that the borrower wants? 3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why? 4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings? 5. What is the meaning of the phrase, "a capitalistic age"? NOTE.--We are indebted to the economic historians for a better understanding of the important influence money has had on economic organization. See Hildebrand's notable article in the first number of the _Jahrbücher_, and Ashley, _English Economic History_. J. B. Clark was the first among contemporary economists to emphasize the value concept of capital. The scholarly and judicial article by Irving Fisher on "Precedents for Defining Capital" in _Quarterly Journal of Economics_, May, 1904, makes possible better understanding and agreement on the subject. I am pleased to say that in this article, and in personal correspondence, Professor Fisher disavows the interpretation I had thought (see "Recent Discussion," etc.) that his words required. His conception of capital is thus, in essentials, the one here employed, differing from it not in thought, but merely in terminology. Professor Fisher's original studies of the capital concept, in the _Economic Journal_ in 1896-7, are indispensable to an understanding of the development of this important phase of the new economic theory. The connection between the conclusions of economic history and the value concept of capital in economic theory has been made by the author in essays before cited under chapters 6 and 8: "Recent Discussion of the Capital Concept"; "The Next Decade of Economic Theory," and "The Relations between Rent and Interest." CHAPTER 15. THE CAPITALIZATION OF ALL FORMS OF RENT 1. What relation is there between the rate of interest and the price of land bearing a given rental? 2. If a $100 share of railroad stock sells at par when interest on loans is at 5%, what will be its price when interest rises to 6%? When interest falls to 4%? 3. If a business is very successful and its dividends double, what will be the effect on the selling price of its stock? NOTE.--The subject is almost foreign to the standard works on economics, which have continued to look upon capital as primary, and its income as derived. Numerous recent articles will be found, however, dealing with concrete problems where the logical and the practical views are seen to be the same; _e.g._, W. Z. Ripley, _Quarterly Journal of Economics_, Vol. XV, p. 106 (1900), article on "The Capitalization of Public Service Corporations"; also article in _Engineering News_, Vol. XXVIII, p. 492 (November, 1892). CHAPTER 16. INTEREST ON MONEY LOANS 1. Some money-lenders in cities get 10% a day from fruit-vendors for the advance of small sums of money, and the losses are very slight. Pawnbroking pays frequently 25 to 100% per year. In these cases what affects the rate of interest? 2. Through what agency does the Western farmer borrow Eastern capital? 3. How do Englishmen invest in American railroads? 4. In what ways can a lender collect a high rate of interest without appearing to do so? 5. What would be the effect upon the rate of interest in a new state if it passed a law preventing the collection of loans by outside lenders? 6. Why has interest been about 10% in the West, 7% in the Central States, 5% in New York, 4% in Germany? 7. What is the money market? Who are the buyers and sellers, and what do they buy and sell? 8. In a panic, interest rises on short loans and prices fall, while it is almost impossible to borrow money; does this show that the amount of money determines the interest rate? 9. When gold is leaving England, the bank raises the rate of discount (interest); does this show that the quantity of money determines the rate of interest? CHAPTER 17. THE THEORY OF TIME-VALUE 1. Give examples of a high cost for the use of wealth without the borrowing of money. 2. Give some examples of the neglect of repairs through lack of resources, and show how it involved time-value. 3. What would be some of the first effects on production if interest on money loans fell to one half its present rate? 4. Which is the more important for the rate of interest, the amount of money in the banks or the amount of goods in the country? 5. How would the rate of interest be affected if the amount of money were doubled at once? NOTE.--In an interesting article on "Prestige Value," by L. M. Keasbey, in _Quarterly Journal of Economics_, May, 1903, has been developed one phase of the thought in Sec. II, proposition 2. The very active recent discussion of "the interest problem" has done much to clarify economic theory; but almost the entire recent literature of the subject (as seen from our point of view) is based on a defective concept of capital. See in _Quarterly Journal of Economics_, Vol. XVII, pp. 163-180 (November, 1902), article entitled "The 'Roundabout Process' in the Interest Theory," the author's criticism of Böhm-Bawerk's _Positive Theory_. All the recent "marginal productivity" interest theories are at fault, we venture to say, in trying to derive income from capital instead of deriving the amount of capital from rent. CHAPTER 18. RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL 1. Why not raise seals in California and fruit in Alaska? 2. Has the rainfall any relation to the density of population? 3. Has the isothermal line any relation to the number of millionaires? 4. What physical reasons account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Is all land useful? Is all land wealth? 6 Is there a different term for land that is wealth and land that is not? 7. Are there different economic terms for hewn and unhewn blocks of stone? What makes the difference? NOTE.--A meritorious though fragmentary essay to rethink the old conception of natural resources and to express them in new terms, is _Natural Economy_, by A. H. Gibson, 1901, reviewed by the writer in _Journal of Political Economy_, March, 1902. CHAPTER 19. SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST 1. The savings of the people of the United States are nearly a billion dollars a year. What and where are they? 2. What are the main social conditions necessary to saving? 3. What influence has commercial morality on saving? 4. Do savings-banks and insurance companies stimulate saving, or do they exist because of a disposition to save? 5. What influence has the formation of joint-stock companies on saving? 6. Will you save more or less if the rate of interest falls? 7. Distinguish between hoarding and saving. 8. A woman cut the wool from a sheep's back, spun and wove it by old hand-methods, and within twenty-four hours wore the dress made of it. Is more or less time needed in production with the best machinery and processes? 9. Ricardo said that on account of the cheapness of food in America there was less temptation to employ machines than in England, where food was high. What is the fact about this temptation in America? NOTE.--The older abstinence theory of interest is given by F. A. Walker, _Political Economy_, Secs. 87-93. A noteworthy advance was the able article, by T. N. Carver, in _Quarterly Journal of Economics_, Vol. VIII, p. 40 (1893), "The Place of Abstinence in the Theory of Interest." A number of writers have written (fallaciously, in our judgment) on the "fallacy of saving," arguing that the capital-market easily becomes glutted; the contrary view is well presented by Cassel, _The Nature and Necessity of Interest_ (1903), pp. 96-157, in chapters on what he calls "The Demand for Waiting," and "The Supply of Waiting." CHAPTER 20. LABOR AND CLASSES OF LABORERS 1. Is dancing labor? Is the dancing of a dancing-master labor? If he would rather dance than eat, is it labor? 2. Enumerate some kinds of labor necessary to produce bread. 3. "Washing of clothes is unproductive labor; therefore as little of it should be done as possible." Criticize the argument. 4. Would you say that differences in ability at manual trades are due to practice or to native talent? If to both, in what proportion? 5. Do sons usually follow the father's trade? Is it more or less common than formerly for them to do so? 6. Do you know from personal observation whether a Mexican, a German, or an American, is the best workman? 7. What important personal traits are needed to make a man an efficient market-gardener? 8. Which would be of the greatest economic advantage, to increase by 50% the intelligence, the physical strength, or the integrity of the workers of this country? CHAPTER 21. THE SUPPLY OF LABOR 1. Has the principle of the survival of the fittest any influence on the population of America? 2. What limits the number of wild rabbits? Of tame pigeons? Do the same influences act in the case of men? 3. What other influences affect population? 4. What relation is there between population and mountains, temperature and water-supply? 5. It has been said that the supply of labor is fixed by biologic laws. Is it therefore not subject to economic influences? 6. What application do you think the principle of diminishing returns has to the question of population? 7. What is meant by the standard of life? NOTE.--The subject of population generally is discussed under the name of "The Malthusian Doctrine" and much space is given to it in the texts. So much useless controversy has been occasioned by the ambiguities of Malthus's argument that it seemed best not to introduce this difficulty into the text. The subject is discussed with broadest view by A. T. Hadley, _Economics_, Secs. 47-60. The writer attempted to make a judicial study of Malthus and his work in _Versuch einer Bevölkerungslehre_, Jena, 1894, and sought to put the discussion on higher ground in an article in the _Yale Review_, August, 1898, "The Essay of Malthus, a Centennial Review." CHAPTER 22. CONDITIONS FOR EFFICIENT LABOR 1. Is hunger the cause of food? 2. Is there any relation between a republican form of government and the growth of manufactures. 3. What are the necessary conditions to the building of a house: (_a_) natural forces; (_b_) changes in material things; (_c_) human activities; (_d_) social conditions? 4. Is the public school system an economic factor? Where among the four preceding heads would you classify it? 5. From an economic standpoint, can we say that robbery really reduces the wealth in existence? 6. When does an industrious man stop working on his own farm, and why? 7. With a given number of workers, what may be causes of differences in the labor-supply? 8. Would men work better if they ate more? 9. What moral agencies increase the efficiency of labor? 10. Is there a strong selfish motive for men to increase their efficiency in most industries? How effective is it? 11. What effect has republican government on the efficiency of labor? 12. Why is the variety of occupations greater or less than formerly? What is influencing the change? 13. What cases have you seen where great skill came from practice? 14. What gain is it for men to work together instead of singly? 15. With increasing division of labor is there greater or less opportunity for the payment of laborers according to the piece-wage plan? 16. Discuss the following statement: Under the piece-work system the foreman looks out for the quality and the operative for the quantity of the work; under the time-wage system the foreman looks out for the quantity and the laborer for the quality of the work. 17. What remedy has the foreman for an inefficient laborer working under the time-wage system? 18. Is time- or piece-work best adapted to the following kinds of laborers: coal-miners, coopers, farm-hands, printers, engravers, shoe-factory hands, railroad brakemen, telegraph operators? CHAPTER 23. THE LAW OF WAGES 1. What is the effect of free common schools on the comparative wages of skilled and of unskilled laborers? 2. What would be the effect of technical and industrial schools on the wages of artisans? 3. If a man is not content with $2 a day, why does he not do work that is paid $5 a day? 4. What is the effect on wages of differences in the danger, pleasurableness, social distinction, expense of preparation, of occupation? 5. If women are paid less than men for the same work, why are men employed at all? 6. What is the difference between these definitions: wages is the share of labor; wages is the payment by one man to another for his services? 7. If the supply of labor of any class were to be decreased 10% would wages rise in like proportion? 8. Since under the piece-work system a man is paid only for what he does, is there any reason for discharging a workman employed under this plan whose efficiency falls below the average? CHAPTER 24. THE RELATION OF LABOR TO VALUE 1. May a singer of songs or a mixer of drinks be called a productive laborer? 2. Are fine products high in price because wages are high, or vice versa? 3. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? 4. Can a manufacturer pay the same to laborers if the product will be marketed next year, as he can if it is to be marketed to-morrow? If so, how is the value of the labor adjusted to its product? NOTE.--An able discussion of the effect of discounting in the sale of labor in the market is given by Böhm-Bawerk, _Positive Theory of Capital_, pp. 313-318 _et seq._; see also Wieser, _Natural Value_, numerous passages. The changes in industrial organization are treated with historic insight by Hadley, _Economics_, Secs. 341-354. F. W. Taussig's _Wages and Capital_ (1896) gives a sympathetic interpretation of the wage-fund doctrine; the work is especially valuable for its excellent review of the history of the subject and for the chapters analyzing the modern industrial process. CHAPTER 25. THE WAGE SYSTEM AND ITS RESULTS 1. Why has machinery changed the relations of workman to master? 2. In what ways does labor get paid for its share, and who pays it? 3. Will a day's work of a common laborer buy more to-day than it would a half century ago? Why? 4. Are the opportunities for workmen to rise to the rank of masters as great as formerly? 5. Are wages independent of the other kinds of income? CHAPTER 26. MACHINERY AND LABOR 1. Do you think that the amount of work is reduced by new machinery? Point out ambiguities in the question. 2. What is the difference to the workman whether he becomes more efficient or works with a better machine? 3. Is the work of any kind fixed in quantity? What would cause it to change? 4. What kinds of laborers were thrown out of employment by the invention of the type-writer? What kinds of labor found employment as a result of its invention? Was the net result a gain or a loss of employment? 5. Answer the same questions with regard to the invention of railroads, mowing-, binding-, and threshing-machines; or the new roller-process of flour milling. 6. Can you describe from your own experience any example of readjustment of labor due to introduction of new machinery? CHAPTER 27. TRADE-UNIONS 1. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 2. Is there any similarity between the methods of trade-unions and the etiquette of the medical and the legal professions? 3. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 4. If you can do more work in two hours than in one, can you do more continuously in sixteen consecutive hours than in eight? 5. What determines the maximum study-time for the earnest student? 6. If as much is produced in a general eight-hour day, who benefits? 7. If production is reduced one fourth by shorter hours, is "work made" to that degree for the unemployed? 8. If all day-laborers should agree to work with one hand tied behind them, would their wages go up or down? Would it be good or bad for the whole class of laborers? CHAPTER 28. PRODUCTION AND THE COMBINATION OF THE FACTORS 1. What is production? Does the economic idea of production conflict with the physical principle that matter cannot be created? 2. Is it production to buy fifty cents' worth of yarn and knit a pair of socks worth twenty-five cents if you enjoy doing it? If you do not enjoy it? 3. Give examples of factors of production. 4. What factors of production must be combined by a savage to produce a canoe? 5. Outline the combination of factors that has produced New York bread made from Minnesota wheat. 6. What is the largest manufacturing establishment in your home town? Would a number of smaller establishments of the same sort and with the same aggregate capacity succeed as well? Why? 7. Have you observed the growth of any local industry from a small beginning to large proportions? If so, how do you account for it? 8. Would you prefer to begin your business career with a large company or with a small merchant? Why? 9. Through what historic stages has production passed? 10. Give examples of the industrial advantages of America as compared with Europe. CHAPTER 29. BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION 1. What is the relative importance of organization in sawing wood, building houses, running a small store, or a large factory? 2. Which wins the battle: the general, the soldiers, or the armament? 3. What determines whether a crop is poor or good: the ground, the weather, or the farmer? 4. Why do some businesses give increasing returns as they grow? 5. One has said: "The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature." Is this sound in an economic sense? 6. Who runs the business in a large store owned by a large family? Who has the risk? 7. Who is the enterpriser in a stock company where there is a superintendent elected by a board of directors, themselves elected by shareholders with one vote per share? 8. Who is the employer in a coöperative cooper-shop whose superintendent is elected by the workmen? 9. Has "a good chance in life" much to do with success? 10. What are the chief elements of business success? 11. Is modern business competition a competition of men only? CHAPTER 30. COST OF PRODUCTION 1. What is the cost of a good you have made entirely with your own labor? 2. What is the difference to the employer between rent, interest, and wages as items of cost? 3. Is there anything in common between "cost, the onerous exertion necessary to get goods," and cost as the money expenses of production? 4. Why does a merchant engage in one business rather than in another? 5. When prices fall, what determines which factories shall close, and which workmen shall be discharged? 6. Does the value of a product conform to the capital that has been put into it. NOTE.--For a fuller treatment of the more recent view of the subject, see Smart, pp. 64-83; Wieser, _Natural Value_, pp. 171-214; Böhm-Bawerk, _Positive Theory of Capital_, pp. 179-189, 223-234. The defects of such revisions as that attempted by Alfred Marshall are pointed out in _Quarterly Journal of Economics_, Vol. XV, pp. 432-452, article "The Passing of the Old Rent Concept." CHAPTER 31. THE LAW OF PROFITS 1. Business being poor, one employer is making good profits; how different will be the wages he pays from those paid by the unsuccessful employer? 2. How many of the men you know at the head of large businesses started life poor? 3. Was the rise in fortune due most often to chance, inheritance of wealth, or exceptional ability and power of work? 4. How should the income of an inventor be classified, as wages or profits? 5. Are the profits of the employer deducted from wages? Are the high wages of skilled labor deducted from the wages of unskilled? CHAPTER 32. PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION 1. Describe any case of profit-sharing you may have seen in operation. 2. Is advertising of any social service or is its sole purpose to divert trade from one merchant to another? 3. In what ways are retail stores wasteful in their expenditures? Can this be avoided? 4. If you have seen a coöperative store in operation tell what was its success. 5. Are you willing to pay more for goods in order to have a choice of stores? CHAPTER 33. MONOPOLY PROFITS 1. How is the blacksmith free to compete with the physician and how not? In what sense have we assumed that competition exists? 2. Is there competition between the owner of good land and the owner of poor land? 3. Has the owner of a poor gold-mine a monopoly? Has the owner of a rich mine a monopoly? 4. Does the ownership of land give a monopoly? The ownership of a horse? 5. In what sense is a street-railway a monopoly? What is the value of its franchise? 6. Why does the public consent to grant patents or public franchises? 7. If one company controlled all the petroleum in the world, what would it consider in fixing the selling price? 8. Why will railroads issue commutation tickets? NOTE.--Of the very large recent literature bearing on monopoly and trusts may be mentioned as especially useful: J. B. Clark, _Control of Trusts_; R. T. Ely, _Monopolies and Trusts_; J. W. Jenks, _The Trust Problem_ (a summary by the expert for the Industrial Commission); J. E. le Rossignol, _Monopolies, Past and Present_; _Report of the Chicago Conference on Trusts, 1899_; _Report of the United States Industrial Commission_, 19 vols., 1900-2 (a mine of information). CHAPTER 34. GROWTH OF TRUSTS AND COMBINATIONS 1. What advantages are there to manufacturers in combination? What to the public? 2. What relation has improved transportation and other means of communication to trusts? 3. Name as many economic monopolies as you can. 4. What large trusts have recently been formed? 5. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it? CHAPTER 35. EFFECT OF TRUSTS ON PRICES 1. Can the large factory always outsell the small one? Why? 2. Why are trusts or selling agreements formed? 3. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. How would the effects on society be different if prices were reduced by better organization and the prevention of waste? 6. Is it good public policy to allow a trust to undersell its smaller competitor in one district while it keeps up its prices elsewhere? CHAPTER 36. GAMBLING, SPECULATION, AND PROMOTERS' PROFITS 1. Do you think that store-keepers fix the price of the produce they buy of the farmers? If so, to what extent? 2. Can brokers fix the price of grain on the market? How, and to what extent? 3. What is speculation? Give examples you have seen. 4. Were they, on the whole, good for the community? 5. Give other examples showing the difference between a gambling-house and an insurance company? 6. Is the immorality of betting based on economic grounds? 7. Ought lotteries to be permitted by law? 8. Ought speculation in mines to be permitted by law? 9. Ought the profits of the farmer from a sudden rise in the value of wheat be confiscated to the public? NOTE.--The ablest study of the subject is by H. C. Emery, _Speculation on the Stock and Produce Exchanges of the United States_, in Columbia University Studies in History, Economics, and Public Law, Vol. VII, No. 2, 1896. CHAPTER 37. CRISES AND INDUSTRIAL DEPRESSIONS 1. What is a financial crisis? An industrial depression? 2. Define the expressions "over-production" and "under-consumption." 3. In a period of depression is there less money than usual in the country? In the banks? 4. If there were twice as much money in the world, would panics take place? 5. Before a financial crisis how are prices, high or low? After a panic? 6. What economic changes occurred in your own community in the panic of 1893-4, or in the years 1903-4? 7. Do people save more in good times or hard times? CHAPTER 38. PRIVATE PROPERTY AND INHERITANCE 1. If the law permits certain classes to be fleeced without redress, is wealth thereby reduced? 2. What are vested rights? Do they ever stand in the way of progress? Examples. 3. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 4. Is it right that an inventor should by patent laws be able to keep the profits of his business high? 5. Do you know of any father who created more wealth because he could bequeath it to his son? 6. Does the son work as hard when he inherits his father's wealth? 7. What is the effect of private property on saving? 8. If capital is needed in production why is the question of justice raised when its use is paid for? CHAPTER 39. INCOME AND SOCIAL SERVICE 1. What is it to earn a living? How many people do it? 2. When is a man poor? 3. Would it be a good thing if the boot-black got a dollar a shine? 4. Does luck have greater influence on business success in an old country or a new one? 5. Ditto in agriculture, mining, commerce, or manufactures? 6. A rare coin and a piece of land sold for the same price one year, and the next year both sold for double the amount. Was there an unearned increment in both cases, and of the same kind? 7. If rewards were equal, what would determine the choice of work? NOTE.--The most important contributions to the theory of consumption have been made by S. N. Patten in his numerous writings, among them: _The Consumption of Wealth_ (1889); _Theory of Dynamic Economics_ (1892); _The Theory of Prosperity_ (1902). A number of the ideas are well restated in more simple terms by E. T. Devine in _Economics_, especially pp. 375-396, and 73-111 (applies to chapter 41). CHAPTER 40. WASTE AND LUXURY 1. Can we determine what luxury is, or give the notion definiteness? 2. Do you feel a sense of injustice when you read of a millionaire's ball if you are not a millionaire? 3. Can you excuse the sense of injustice felt by the hungry man when he sees you wear patent-leather shoes and kid gloves? 4. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 5. Is luxury necessary to give employment to labor? 6. Is the spendthrift the best friend of labor? 7. Ought legislation attempt to prevent luxury, or can public opinion affect it? 8. Is smoking high-priced cigars economically justifiable, assuming that the smoker is wealthy and does not injure his health thereby? 9. Wines, balls, pensions are said to be good because they put money into circulation. Criticize. 10. What is the difference between the consumption of wealth and its destruction? 11. In what ways can a piece of iron be consumed, economically speaking? 12. Was the great Chicago fire, which led to the rebuilding of the city, a good thing economically? CHAPTER 41. REACTION OF CONSUMPTION ON PRODUCTION 1. What are complementary goods? Give some illustrations. 2. Can people live on the future, consuming in advance of production? How is it with the nation in time of war? 3. Does economic theory throw any light on the ethics of miserliness? 4. It is said that the demand of the day-laborer for cheap white shirts has reduced the wages of the women who make them. Criticize. 5. What effect on wealth would a change of climate have, whereby the consumption of coal would be decreased? 6. If manna fell from heaven daily in a climate where clothing and shelter were unnecessary, what effect on wealth would result? CHAPTER 42. DISTRIBUTION OF THE SOCIAL INCOME 1. What different ideas does the expression "distribution of wealth" suggest to you? 2. What different methods of obtaining an income have you noted among the men you know? 3. How can a yard of cloth be said to be distributed to the labor and capital producing it? 4. If two men of equal skill go fishing together, how would they find a rule for dividing the catch? 5. If one is more skilful or stronger, or owns the boat and the tackle, how would it affect the division? Would any rule be attainable? 6. If socialism reduced the total product, would it still be desirable because of the better distribution? 7. What classes of thinkers are most inclined to take up socialism? (Classes considered socially, industrially, as to race, as to economic and historical training.) CHAPTER 43. SURVEY OF THE THEORY OF VALUE 1. Mention any cases you can think of where merely changing the place of things added to their value; or changing their form; or where the mere lapse of time added to the value of the thing. 2. What effect on wages and interest does the bringing in of foreign capital have? 3. If, through greater efficiency of labor, wealth increases, which share benefits? 4. What would be the effect on wages, interest, and land rent of a sudden addition of rich land to the country? 5. What would be the effect on interest, land rent, and wages of a great increase of national saving? 6. What concern have the poor in the abundance of capital? The rich in the abundance of labor? 7. Walker says that the laborer gets what is left after the other shares are deducted according to their law; wages are the residual claimant. Are the other shares independent of wages? 8. Can wage-earners be shut out from all advantages in the land of the country? 9. Are high wages and high interest seen to go together? Give such examples as you think of. 10. Do improvements in agriculture increase or decrease the rent of land? CHAPTER 44. FREE COMPETITION AND STATE ACTION 1. What is economic freedom? How different from political freedom? 2. Does the presence of a policeman increase or diminish competition among men? 3. Are most positive laws intended to hinder competition or make it freer? 4. In what ways does competition reduce the total product? 5. Is custom a better regulator of economic action than competition? 6. Criticize the doctrine of economic harmony, giving examples. CHAPTER 45. USE, COINAGE, AND VALUE OF MONEY 1. If gold were to become as plentiful as iron, would it be worth more or less than iron? 2. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 3. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 4. Who makes coins? Would jewelers make better ones? 5. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 6. Does gold cost the day-laborer as much in California as in New York? 7. What are the principal things besides money uses that cause a demand for gold and silver? 8. The mint price of an ounce of gold, .900 fine, is alike at San Francisco and Philadelphia, $18.604. Why is gold ever shipped from California to New York? 9. Give examples of things that increase the demand for money. 10. Note any habits of friends that result in their carrying more or less money than others of the same income. 11. What determines the amount of money needed by different persons, towns, states, and nations? 12. When goods are exchanged for money or money for goods, what is the gain? 13. On an isolated island would it make any difference as to the value of money if there were but one gold-mine or several competing ones, supposing that the output were the same? CHAPTER 46. TOKEN COINAGE AND GOVERNMENT PAPER MONEY 1. Define legal-tender as applied to money. What is meant by fiat money? 2. Show the difference between convertible and inconvertible money. 3. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (This is from Sumner's _Problems in Political Economy_.) CHAPTER 47. THE STANDARD OF DEFERRED PAYMENTS 1. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 2. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 3. What gives rise to the belief sometimes held that money is an invariable standard of value? 4. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 5. Is the value of gold and silver due to the action of government? 6. Does the principle of the substitution of goods have any bearing on the value of metals under bimetallism? 7. Note carefully, and indicate the different meanings of bimetallism; of demonetization. 8. What is the extent of the influence one nation can have on the ratio of the two precious metals? 9. If money wages are higher and general prices are lower, how is the laborer affected? Is this due to the appreciation of money? 10. Can you get a kind of money that will make the things that are sold, dearer, and the things that are bought, cheaper? 11. What are the main reasons given for the ratio of 16 to 1? CHAPTER 48. BANKING AND CREDIT 1. What does a bank do for a community? 2. What are the sources of income to a bank? 3. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 4. What is discount and deposit? 5. Do all banks issue notes? Why? 6. What is the function of a clearing-house? 7. If there are twenty banks in a town and no clearing-house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 8. Does a clearing-house enable the banks that belong to it to get along with a smaller cash reserve? 9. What element of security is furnished by clearing-houses during panics? CHAPTER 49. TAXATION IN ITS RELATION TO VALUE 1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 5. The parts of an estate divided into fifteen equal shares by expert real estate agents were soon after assessed variously from $900 to $2850 for purposes of taxation. What does this indicate? (From Sumner's _Problems_.) 6. In what ways may we understand the proposition that taxation should be proportioned to ability? 7. Can taxation be used to secure some of the profits of large corporations? CHAPTER 50. THE GENERAL THEORY OF INTERNATIONAL TRADE 1. Is it bad policy to let the people of Palo Alto spend money in San Francisco for things that could be produced at home? 2. Pensions are defended as putting money in circulation. Is this like any tariff arguments you have heard? 3. Is it bad policy for California to buy New England manufactures? 4. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 5. A nation with _n_ dollars in circulation has to pay a war indemnity of _n_ dollars to another country having the same circulation, how much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (From Davenport.) 6. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York? 7. What effect on exchange has the holding of American bonds abroad? CHAPTER 51. THE PROTECTIVE TARIFF 1. If all trade is exchange do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? 3. Can it be of advantage to trade freely with one nation if general free trade is bad? 4. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 5. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country? 6. What have you read this year about reciprocity? CHAPTER 52. OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION 1. Is granting patents an interference with trade similar to tariffs? 2. What reasons are given in justification of laws closing barbershops on Sundays? 3. Can a person owning a lot on a residence street of a city erect a glue-factory on it? 4. What have you noted as to the benefits or hardships of restricting child labor in factories? 5. Are men less able to bargain for the loan of money than for other things? 6. Can law fix the rate of interest at any point desired? If so, then why not at zero; if not, then why fix any maximum rate of interest? 7. Are interest rates changing in America? 8. In what ways is the rate of interest affected by the rise or fall of the value of money? CHAPTER 53. PUBLIC OWNERSHIP OF INDUSTRY 1. What are municipal franchises? Where are they? 2. What kinds of municipal industries have you seen in operation? How successful were they? 3. What are the main arguments for and against the city ownership and control of gas and waterworks? 4. What troubles arise from city politics? 5. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. 6. Which of them are most satisfactory in your judgment? Which the least so? 7. What is the public sentiment in your home community as to the ownership of industries by the town or city? 8. What forms of state activity favor survival of unfit men and bad traits of character? What forms help the fittest to survive? NOTE.--For exhaustive and well-arranged references on all aspects of municipal control and municipal ownership see R. C. Brooks, _Bibliography of Municipal Problems_, pp. 157-169, in _Municipal Affairs_, Vol. V, No. 1 (March, 1901). CHAPTER 54. RAILROADS AND INDUSTRY 1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. What interests favor and what oppose the building of an isthmian canal? 5. Mention in order of economic importance four things that would happen if all American railroads were suddenly to be destroyed. 6. What cases have you seen where the railways impose unjustly on the public? 7. Give instances you have seen or heard of where two shippers paid different rates for the same service. 8. Why should preachers get half-fare rates? 9. If your neighbor rides on a pass and you pay your fare, are you helping to pay for his ride? 10. Do you know any large cities that are more favorable shipping-points than neighboring towns? Give reasons. CHAPTER 55. THE PUBLIC NATURE OF RAILROADS 1. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 2. Can you see any clear distinction between the public nature of a railroad and of a horse and carriage? 3. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 4. Ought the law prohibit the sale of tickets by "scalpers"? 5. Who has the greater political power, the president of the Pennsylvania Railroad, or the governor of that state? CHAPTER 56. PUBLIC POLICY AS TO CONTROL OF INDUSTRY 1. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? 2. Or should reduce rents for the less capable merchants and manufacturers? 3. Is there any rule for determining the limits of state interference? 4. Why does the question of the control of the railways in the interest of the public present especial difficulties in America? CHAPTER 57. FUTURE TREND OF VALUES 1. Make a list of the things discussed in this course that tend toward improving the average condition of men. 2. Make a list of those that tend toward worse conditions for the mass of men. 3. State what kinds of material agents will probably increase in value relative to other kinds, giving reasons. 4. State what to your mind are three important economic problems whose answer is most uncertain, giving reasons. 5. If you had the power, what single public measure that you believe would be practicable and effective would you put on the statute books, in order to make a juster division of the social income? Give reasons. NOTE.--On the subject of this chapter, see Devine, _Economics_, ch. XVII (disposition of the social surplus); Jenks, _The Trust Problem_, pp. 190-211; Marshall, Bk. VI, chs. XI and XII. INDEX Ability, variety, 177-83; physical differences, 178; intelligence, 179; training, 180; moral qualities, 180; inequality, 181; scarcity, 182; and occupation, 203; grades, 212; types, 264; selection, 270-2; sterilization, 561-2 Abstinence, definition, kinds, 163; see Saving Acquisition vs. social production, 259 Affection in personal distribution, 402 Agricultural classes, opposition to commercial, 113 Agricultural stage, 261 Agriculture, machinery in, 238 Alternative uses, relation to costs, 277 America, farms let on shares, 59; land changes hands, 60; exhaustion of the lands, 82; use of interchangeable parts, 85; destruction of forests, 87; coal deposits, 88-9; improvement of horses, 91; watch-factory, 92; price of horses in Boer War, 95; discovery of mines, 102; varied industrial conditions, 108; use of money, 109; expression of wealth, 114; land became part of world's supply, 155; standard of living, 192; size of families, 193; food supply, 194; increase of population, 194; army rations, 196; standard of food, 196; caste, 199; democracy and efficiency, 200; wage system dominant, 227; wages, 232; changing occupations, 234; favorable effect of machinery, 242; difference of race among workers, 247; industrial superiority, 262; Oriental competition, 263; fortunes, 271; profit-sharing, 283; producers' coöperation, 296; consumers' coöperation, 300; industrial stage, 313; crises, 352; gifts by wealthy men, 368; law of inheritance, 373; fortunes, 375; dress of workers, 397; colonial policy toward, 425, 426; custom, 426; gold standard, 432; silver supplies from, 441; gold supplies, 442; paper money, 448-9; effect of silver supplies from, 454, 457; effect of gold output, 457; banks, 468-70; discussion of taxation, 479; prices in California, 483; in different sections, 484; protective tariff, 491-503; growth of manufactures, 497; factory laws, 509-12; state enterprise, 514-17; early settlement on the coast, 526; trade in War of 1812, 526; canals, 528; railroad building, 529; aid to railroads, 535 American Federation of Labor, 245; claims of, 254 American Revolution, economic issues in, 8 Animal economy, provision for wants, 40 Animals, problem of numbers, 185-6 Antisocial profits, 289; of monopoly, 311; from speculation, 377; antisocial use of ability, 378 Appropriation stage, 261 Ashley, W. J., 575 Assignats, 448 Attribution of product, 176 Austrian economists, 570 Authoritative distribution, 406-8; use of, 410-11 Balance of trade, international, 486-7; so-called favorable, 493 Bank-notes, and paper money compared, 447; typical, 465-8; in United States, 469 Banks, and credit, 462-70; functions, 462-5; in United States, 468-70 Barter, definition, 31; under simple conditions, 32-5; difficulty of, 99; decline, 108-14; economy in Middle Ages, 110 Bequest, limitation of right, 368 Bets, see Gambling Bimetallism, international, 457-9; national, 459-61 Biologic doctrine of population, 186, 187 Biology, shows inequality of talents, 181 Birth-rate, of animals, 187; decreasing American, 193, 561 Böhm-Bawerk, E. von, 570, 571, 572, 577, 580, 583 Boycott, 251 Brooks, R. C., 593 Building laws, 505 Bullock, C. J., 568 Buyers, bidding, 34; margin of advantage, 35 Canadian bank-notes, 468, 470 Canals, as carriers, 528-9 Cannan, Edwin, 571, 573 Capital, origin of term, 112; concept in modern business, 114-7; definition, 115; not identical with money, 115; purpose of borrowing, 116; sum, expressed in years' purchase, 121; sum of expected rents, 122; value not primary, 123; stock, 127; value of stocks fluctuate, 134; time-value and, 142; fixed and increasable forms, 152-3; use by enterprisers, 285; insured by enterprisers, 286; in coöperation, 295; large, 312; amount in factories, 315; value affected by protection, 501 Capitalistic, age, 114, 117; monopoly, 306 Capitalization, of all forms of rent, 118-30; rent-charges as an example of, 118; of land rents, 124; of uniform or varying series of rents, 125-6; increasing role, 127; of any continuing income, 128; of franchises, 129; of corporate incomes, 130; rate, 147; and interest, 168; influenced by taxation, 475 Capitalization, theory of crises, 353-4 Carlyle, T., on wage, 229 Carnegie, Andrew, 268, 270, 372, 377; economies of gifts to libraries, 387, 390 Carver, T. N., 578 Cassel, 578 Caste, and efficiency, 199 Chance, unavoidable, 333; average in industry, 334; artificial, 334; legitimate and illegitimate, 335 Character, affected by expenditure, 398; highest point of production, 400; unity of choice determining, 401 Charitable distribution, 405-6 Charity, public, 507 Cheating and gambling, 335 Child-labor legislation, 509 Choice, of goods, harmony in, 400 Cities, wealth of, contrasted with feudal estates, 111, 113; growth, 504; large, on waterways, 528 City ownership, 514-5; see Public ownership Clark, J. B., 398; theory of profits and wages, 418, 573, 575, 584 Clews, Henry, on Wall Street finance, 378 Climate, and income, 48 Closed shop, 249-50 Clothing and efficiency, 196; effect of choice of, 396 Coal, use and exhaustion, 88, 558; strike of 1902, 251, 252 Coinage, 433-6; definition, 433; free or gratuitous, 434-6; token, 443-7; free and gratuitous, 443 Coins, light-weight, 443-7 Collective bargaining, 248 Collective enjoyment, as a mode of distribution, 408 Collectivism, 552 Combination and wages, 253-6; of the factors, 260; opposes competition, 429; of capital, see Trusts Comforts, relative meaning, 11; and luxury, 388 Commercial monopoly, 306 Commercial paper, discounting of, 132 Commissions, to control railroads; 541-3; to control corporations, 545 Commodity-money theory, 450 Common denominator of values, see Money Commons, J. R., 573 Communism, among Germanic tribes, questioned, 365 Comparative costs, doctrine of, 482-3 Competition, definition, 33; one-sided, 33; present limitations on, 228; the worker in, 229; reduced by trade-unions, 248-50; costly in mercantile business, 298; free, not equality of efficiency, 303; alleged cause of trusts, 322; persistence of, 331; and state action, 422-30; and custom, 422-5; economic harmony through, 425-8; social limiting of, 428-30; modern restrictions, 504 Competitive distribution, 409-10 Competitive price, forces governing, 308 Complementary agents, and value, 78; intensive use of, 78; labor and wealth, 175 Compulsory distribution, 404 Conquest theory of property, 363 Consolidation of railroads, 539-40 Consumers, determining costs, 280; gain from trusts, 325 Consumers', choice influences value, 392; choice influences wages, 394; coöperation, 298-301; League, 394 Consumption, reaction upon production, 392-401; definition of economic, 392; reaction upon material agents, 392-5; reaction upon efficiency of workers, 395-410; effects on consumer, 398; as a conventional division of political economy, 419 Consumption, tax on, 475 Consumption goods, definition, 20; immediately enjoyable, 21; a part of income, 41; differential advantages, 73-5; diagram, grades by quality, 75; proposed uses, 161; saved, 166; see Goods Continental notes, 448 Contracting out, forbidden, 512 Contract interest, see Interest Contract rent, see Rent Contract wages, see Wages Coöperation, producers', 295-7; consumers', 298-301 Corporation, securities, 127-8; public-service, 129; increase of, 133 Cost, involved in improvements, 90; of operation, 168; in larger production, 319; of government, 474; see Comparative costs Cost of production, 273-81; from the enterpriser's point of view, 273-6; psychic, 273; alternative, 274; money, 274; and price 276; from the economist's standpoint, 276-81, 422 Courts and industrial legislation, 543, 550-1 Credit, sales involve interest, 134; and banking, 462-70 Crises and industrial depressions, 345-55; caused by sudden tariff changes, 502-3 Crusoe economy, subjective valuations, 30; time-value, 131, 140; saving, 166; economic wages, 208; present and future goods, 219-20; need of judgment, 265 Cultivation, margin of, 64; see Utilization Custom, and rents, 56; and efficiency, 199, 200; affecting distribution, 409; and competition, 422-5, 429 Daniels, Winthrop M., 571 Davenport, Herbert J., 567 Death-rate, decreasing, 192 Debts, public, as investments, 133 Deferred payments, standard of, 453-61; definition, 453; ideals for a standard, 455-7 Demand, definition, 27; social aspect of choice, 28; law of, 28; curve, 29; elasticity, 29; reciprocal, becomes exchange, 30; curve, diagram, 35 Democracy, and efficiency, 199; effect on race progress, 561, 563 Deposit and discount, 462 Depreciation and rent, 85-7 Desire, see Wants Destruction, and rent, of wealth, 87-9; accidental, of wealth, 381-2; intentional, 382-3 Devine, Edward T., 587, 594 Dewey, Davis R., 568 Differential advantages, in consumption goods, 73-5; in indirect goods, 75-80 Diminishing returns, law, 61-72; definition, 61; of all agents, 62; technical, 62; economic, 63; other meanings of term, 66-9; general application to space relations, 67-8; confused with large production, 68; technical, 68; historical, 68; development of the concept, 69-72; applies to all wealth, 70; and population, 184; and productivity of labor, 215; the broadest principle of value, 420 Diminishing utility, law, 22; diagram, 24; relation to diminishing returns, 71 Directors, of railroads, obligations of, 539 Discount, commercial, 132, 135 Discovery enlarges natural resources, 156 Discrimination in rates, by monopoly, 310; in railroad rates, 530-3 Distribution, personal and functional, 359; impersonal, 360; personal, nature of, 402-3; definition, 402; of the social income, 402-11; methods of, 404-11; as a conventional division of political economy, 419 Dividends, manipulation of, 130 Division of labor, 201-4; definition, 201; kinds, 201; advantages, 202; calls for directive ability, 264; growth of territorial, 480-2 Dollar, meaning of, 435 Drink, effect of, 396 Durable agents, see Goods Durableness of rented agents, 55 Economic goods, definition of, 19; see Goods Economic harmony, through competition, 425-8; definition, 427 Economic law, nature of, 206 Economic monopoly, 306 Economic motives, see Wants Economic production, 258; see Production Economic rent, see Rent Economic wages, see Wages Economics, nature and purpose 3-8; definition, 3, 4; subject matter, 4; place among social sciences, 5, 6; as a science, 7; synonym for political economy, 7; democratic in aim, 8; importance, 8; aim of study, 412; a part only of social science, 413; central point of, 413; redefined, 555; relation to practical life, 555 Economy, involves choice, 27; the barter, 108; the money, 108-14 Education, free public, 507 Efficiency, talent, and training as factors in, 180; resultant of many qualities, 181; of labor, 195-204; equality of, not essential to competition, 423; see Ability Ely, Richard T., 568, 584 Emery, Henry C., 585 Employer, adjusts labor to interest rate, 220; see Enterpriser Employment, no lack of, 183 Energy, sources of, and income, 50 Engels, Frederick, 416 England, idea of rent in, 59; long leases, 59; food supply during Napoleonic wars, 69; coal deposits, 89; wages, 232; changes in 18th century, 237; loans, 240; abnormal effect of machinery, 241; coöperation, 296, 299; use of term monopoly, 304; cotton crisis, 345; crises, 348; endowments limited, 368; grants to royal families, 373; gold standard, 432; prices in Napoleonic wars, 442; bank restriction act, 448-9; balance of imports, 493; discussion of protection, 496 Enjoyable goods, see Consumption goods Enterprise, income, and social service, 376-7 Enterpriser, function of, 265-72; qualities of, 267-70; selection of, 270-2; his task, 273-5; his costs, 275; medium for consumers' estimates, 280; profits of, 283; origin of term, 284; his services reviewed, 285-8; his risk, 287; intermediary in industry, 287; lacking in coöperation, 297; relation to profit-sharing and coöperation, 300; as risk-taker, 338 Environment, betterment, 92, 162 Ethics, definition, 6; and economics of time-value, 144; of consumption, 395, 398, 401; of railroad problem, 532, 539; see Morality Europe, industrial methods of, 262 Exchange, in a market, 30-8; and demand, 30, 31; advantage, 31; isolated, 32; of present and future goods, 145-9; as a conventional division of political economy, 419; foreign and domestic, of money, 463; international, see International trade Extensive margin of indirect goods, 78-9; see Utilization Extravagance to give employment, 386 Factors, definition, 260; combination of, 260-4; cost of, 274; proportioning of, 275; mutual employment of, 420 Factory, system, growth and effect, 243-4; change in number, 314; limits to growth, 319; legislation, 509-13 Farmers and the tariff, 498-9 Fauna and income, 49 Feeling and utility, 26 Fiat-money theory, 450-1 Fisher, Irving, 571, 575 Fixed charges, 168 Flora and income, 49 Food, and income, 50; and efficiency, 196; effect of, 396; laws and inspection of goods, 506 Foreign exchanges, theory of, 485-8 Forestry, need of, 88 Forests, destruction of, 87-8 Franchises, for public utilities, 96; capitalizing of, 129; granting monopolies, 522 Free competition, see Competition Free coinage, money value, 435 Freedom, economic, 422-30; definition, 422 Free goods, definition, 19; on the margin of utilization, 75 Free-silver movement in America, 459-61 Free trade, see International trade Future rents capitalized, 125 Gambling vs. insurance, 333-8; definition of typical, 334; economic theory of 336 George, Henry, his theory of value, 417 Gibson, A. H., 577 Gilman, N. P., on profit-sharing, 293 Glut theory of crises, 351-2 Gold, fitness as money, 102; as money, 432-3; supply of, 435; discoveries, 442; as a standard, 455, 457; increased output, 461; shipping point, 485 Goods, definition, 19; adjustment to wants, 21; shifting series, 27; substitution, 27; series of, 39; relation of indirect to gratification, 46; enjoyable, 47; durable, 47; unripened, 47; degrees of durableness, 48; limited number, 52; free and unlimited, 152 Government, a condition of efficient labor, 198; as consumptive good and productive agent, 473; paper money, see Paper money Granger stores, 300 Gratification, defined, 16; and marginal utility, 22; temporary, 39; at different times, 45; time-value of, 141, 143 Greenbacks, 448, 451 Gresham's law, 446-7 Hadley, A. T., 579, 580 Happiness, and wealth, 18; and ostentation, 388; and character, 401 Hildebrand, 575 Historical diminishing returns, 68; confused with technical, 70; see Diminishing returns Home-market argument for protection, 498-9 Honesty, a condition of efficiency, 198; of public officials, 551 Household industry in America, 313 Immigration and protection, 498 Improvements to increase products, 90 Incidence of taxation, 476 Income, as a flow of goods, 39-42; national, social, individual, private, objective, money, 40; gross, net, 41; of consumption goods, 41; present, future, 41; funded, unfunded, 42; as a series of gratifications, 43; psychic, 43-5; all sources of, are productive, 43; affected by objective conditions, 48-52; affected by increasing capital, 152; and social service, 370-80; from property, 370-6; from personal services, 376-80; justice of large, 389-91; distribution of the social, 402-11; and taxation, 474-7; affected by crises, 354-5; personal and impersonal shares, 359-62; personal, 361; complex sources of psychic, 403 Increasable agents, 153-5; scale of increasableness, 158 Increase, of product, 90; of agents, 92, 95; of rent-bearer affects others, 93 Indestructibility imputed to rented agents, 55 Indirect goods, see Goods Individualism, extreme, its ideal of competition, 410 Industrial depressions, definition, 346 Industrial revolution caused by machinery, 237 Industrial stage, 261 Industry, changes in, affecting money, 101; money reacts upon, 102; diversity of condition in America, 108; changes in Europe, 109; growing complexity as interest falls, 168 Infant-industry argument for protection, 497 Inheritance, effect on industry, 12; social effects, 369-73 Insurance, origin, 337; economic theory of, 338; sound conditions in, 338 Integration of industry, 321 Intensive margin, see Utilization Interest, opposition to, in Middle Ages, 112; the modern contract forms for borrowing wealth, 114; contract and rent contract, 116; on loans contrasted with rent-charges, 120; increased use of, 121; permitted by Rome, 122; two modes of approach, 123; "the prevailing rate" and capitalization, 124; on money loans, 131-7; gross and net, 132; in credit sales, 134; concealed, 135; evasion of legal rate, 135; adjustment of business to the rate, 140; rate of contract, 147-8; in sacrifice sale, 149; and time-value, 150; relation to rent, 150; first use of term, 151; rate divides present and future uses, 159; and future goods, diagram, 160; equalizer of time-values, 162; rate of, and saving, 165; and capitalization, 168; and improvements, 168; rate relates present and future, 220; contract, with enterpriser, 285; conventional conception of, 413; contract, and deferred payments, 454 Intermediate products and costs, 279 Internal revenue, 475 International demand, ratio of, 484-5 International trade, general theory of, 480-90; as a case of exchange, 480-5; definition, 480; equation of international exchange, definition, 483; cash balance of, 486; real benefits of, 488-90 Interstate Commerce Act, discussion of, 537, 542; workings of, 543; importance of, 545 Inventions, affect rent, 85-6; to increase rent-bearers, 91; adds to supply, 156 Investment, and rate of interest, 148; and saving, 165; in stock of corporation, 342 Ireland, tenants' improvements in, 59 Iron law of wages, 216 Jenks, J. W., on trusts, 327, 584, 594 Jevons, W. S., on the coal-supply, 88 Johnson, A. S., 572 Justice in taxation, 477 Just price, 547 Keasbey, L. M., 576 Knights of Labor, 245 Labor, the old distinction between productive and unproductive, 43, 260; and classes of laborers, 173-83; definition, 173; and play, 173; pleasurable, 174; and wealth, 175; direct and indirect services, 176; grades of, 177; scarcity, 182; supply of, 184-194; employer's and social view, 184; conditions for efficient, 195-204; objective physical conditions, 195-8; social conditions, 198-201; division of, 201-4; of different grades, 212; relation to value, 215-25; productivity of, 215; distance from gratification, 219; no unit of, 224; value of product insured by enterpriser, 286; economized in large production, 318; legislation, 509-13 Labor theory of property, 364 _Laissez faire_, ideal of, 518 Land, rented in Middle Ages, 57, 110; and diminishing returns, 69, 70; and repairs, 81-2; continues to be rented, 113; products of increasing cost, 154; relatively fixed in quantity, 154-5; economic supply of, 155-6; produced, 157; not monopoly, 303 Land grants, to railroads, 535 Large industry, social effects of, 244; in United States, 312-7; advantages of, 318-20; economics of combination, 321 Large production, confused with diminishing returns, 68; sharing of the economics of, 325 Lasalle, Ferdinand, 416 Latin Union, 458 Law, definition, 6; nature of economic, 206; in relation to wealth, 361 Legislation and local interests, 549 Liberty of wage-worker, 231 Lloyd, Henry D., on coöperation, 296 Legal theory of property, 364 Legal-tender, quality of paper money, 447 Loans, short-time, 132, 137; long-time, 133, 138 Luck and profits, 289 Lump of labor, error of notion, 240 Luxury, relative meaning, 11; 385-91; definition, 385; fallacy of, 386-7 Machinery, need of repairs, 83-4; and natural resources, 91; definition, 236; and labor, 236-44; extent of use, 236-8; age of, 237; effect on wages, 239-44; evils of sudden introduction, 239; economy in large production, 318 Malthus, Robert, on fixity of land, 154; on population, 579 Malthusian doctrine, 578 Manual workers, social service of, 379 Manufactures, fallacious contrast with agriculture, 67; do not fix interest rate, 124-5; machinery in, 283 Marx Karl, 416, 417 Marginal contribution of labor, 213 Marginal labor, 210 Marginal pair, 34; diagram, 35 Marginal utility, definition, 23-7; in barter, 32; in use of goods, 64; of consumption goods, 75; of indirect goods, 78-9; of wages, 211, 213; fixes cost of factors, 277; applied to gambling, 336-7; in insurance, 338; of income, 399; extension of the principle, 420-1 Margin of advantage, 34; diagram, 35 Markets, definition, 36; exchange in, 36-8; widening, 36-7; growth, 263 Market value, built on subjective valuation, 35, 38; of time, 145 Marriage, postponement, 190 Marshall, Alfred, 573, 574, 583, 594 Material resources, relation to efficiency, 195 Material wants as motives, 9 Medium of exchange, see Money Merchants impart utility, 31 Middle Ages, markets, 36; customary rents, 56; renting contract, 57-9; limited use of money, 109-13; rent-charges, 118-22; use of term interest, 151; death-rate, 192; caste, 199; system of labor, 227; industrial changes, 237; marine insurance, 337; no crises, 348; favored classes, 373; sumptuary laws, 390; custom, 424; competition, 425; prices, 441; depreciation of money, 444-5; small political units in, 481; control of industry in, 553 Mill, John Stuart, on fixity of land, 155; on coöperation, 296, 361, 368, 398, 417, 572 Money, as a tool in exchange, 98-107; origin, 98-103; nature of use, 103-5; value, 105-10; as medium of exchange, 99; qualities, 100; materials, 101; an indirect agent, 103; as common denominator, 104; as storehouse of saving, 105; commodities with monetary use, 106; general use of, 107; defined, 107, 431-2; and the concept of capital, 108-17; use in various countries, 109; increasing use in medieval cities, 111; not identical with capital, 115; time-value and, 142; form taken by saving, 167; movement of, before a crisis, 346; use, coinage, and value, 431-42; the precious metals as, 431-6; quantity theory of, 436-42; standard, or primary, 432; fundamental use, 436; average demand for, 437; effect of changes in supply, 454, 457, 459; territorial distribution, 487-8; and foreign trade, 484 Money-changing, 463 Money market, for short-time loans, 137; for productive loans, 139 Money theories of crises, 352-3 Monopoly, of labor, 253; profits, 302-11; nature of, 302-5; definition, 304; kinds of, 305-8; test of, 308; price fixed by, 308-11; meaning, 312; and supply, 324; profits, social burden, 326; in protective tariff, 500-1; in localized public utilities, 519-21; public gain from, 522; power of the railroad, 530, 533 Moral qualities in industry, 180 Morality, as motive, 13-14; of luxury, 389; opposes competition, 429 Mortgages, nature of security, 133 Motives, economic, 9-14; see Wants Nail trust, 329 Natural economy, 110 Natural law, philosophy of, 426 Natural resources, and income, 49; exhaustion of, 89, 558; adapted and improved, 90; machinery an adaption of, 91; development of, 560; see Land Natural-rights theory of property, 364 National ownership, 516-7; see Public ownership Necessities, relative meaning, 11 Negro, simple wants, 11; caste sentiment regarding, 199; working hours, 201 Normal price, 37 Occupation and talent, 203 Occupation theory of property, 363 Oil trust, 328 Open shop, 249-50 Organization, of workers, need of, 246; required for efficiency, 262; and the enterpriser's function, 265-72 Orthodox economists, 415, 416; predictions of, 557 Over-production theory of crises, 351 Ownership, forms of, 363 Paper money, bank-notes as political, 466; experiments, 447-9; definition, 447; theories of, 450-2 Par of exchange, definition, 485, 486 Pastoral stage, 261 Patten, S. N., 586 Permanent possession, 53; see Capitalization, Property Personal distribution, see Distribution Physiocratic school, 415 Political corruption and industrial legislation, 550 Political economy, see Economics Political money, see Paper money Political monopoly, 305 Political security, and saving, 163; a condition of efficiency, 198 Politics, definition, 6; and the tariff, 503; influence of railroads in, 538 Population, growth in Europe in 18th century, 69; doctrine of, 184-7; related to resources, 184; animal stage of problem, 185; human population, 186; in human society, 187-90; excess, 188; control, 188; current aspect of, 191-4; resultant of many forces, 191; growth not fatalistic, 191; quality, 193, 561, 562; increase in the 19th century, 194 Present and future, wants, 44; rents, 125; goods, 145; competing for labor, 220-21 Price, definition, 36; market and normal, 37; under competition, 308; under monopoly, 309-310; of trusts affected by competition, 331; a social fact, 360; changes, see Money Primitive society, war in, 188; custom in, 424 Private property, and saving, 164; and monopoly, 306; and inheritance, 359-69; origin, 362-6; limitations, 367-9; vs. socialism, 376 Producers injured by trusts, 330 Producers' coöperation, 295-7; definition, 295 Production, and rate of interest, 166-9; agents of, 175; two sources of economic, 222; and the combination of the factors, 257-64; nature of, 257; economic and personal, 258; social, 259; vs. welfare, 398; unity of process, 418; as a conventional division of political economy, 419; by transportation, 525 Productive goods, definition, 20; affect output of labor, 195 Productive and unproductive industries, 260 Productive labor, see Labor Profits, unearned, by some directors, 130; on purchase of capital, 138; margin of, 275; loss of, 282-91; definition, 282, 291; meaning of terms, 282-5; a species of economic wages, 284; fluctuation of, 288; statement of law, 289; pseudo, 289; chance, 289-90; conditioned on skill, 290; risk theory of, 291; to promoters of trusts, 322; of promoter, 342; of trustee, 343; before and after a crisis, 347; relation to wages, 415; Clark's theory, 418; in foreign trade, 495 Profit-sharing, 292-5; definition, 292 Progress, of the masses, 232; cause of, 232-3; must grow out of wage system, 234; marked by control over nature, 261; stimulated by luxury, 388; and refinement of desire, 399; by wise method of distribution, 411; due to temporary conditions, 558; social vs. racial, 560; depends on race quality, 561; depends on competition, 562; endangered by status and envy, 563 Promoter, services of, 342; profits, 342-3 Property, private, effect on industry, 12; effect on population, 189, 190; and wealth, 361-2; definition, 362; and social expediency, 370; in land, 374; defense of, 374-5; see Private property Property tax, 475 Protective social and labor legislation, 504-13 Protective tariff, claimed to be socially expedient, 374, 491-503; definition, 491; nature and claims of protection, 491-6; measure of justification in, 496-501; values as affected by, 501-3; compared with other social legislation, 512 Psychic income, 39-45; complex sources of, 403; see Income Psychology of crises, 354 Public control of industry, examples, 544-8; difficulties, 548-51 Public interests, limiting private property, 367; paramount in social legislation, 505-9 Public officers, interested in corporations, 343 Public ownership of industry, 514-24; examples of, 514-7; economic aspects of, 517-24 Public policy as to control of industry, see Public control Public utilities, increase of rents from, 96 Public wants, development of, 472 Publicity of corporation management, 546-7 Quantity theory of money, 436-42; definition, 438; objections to, 439-41 Railroad, need of repairs, 83; and industry, 525-33; as a carrier, 527-30; economic vs. technical efficiency, 527; public nature of, 534-43; privileges of, 534-8; obligations of, 536-8; political and economic power of, 538-40; commissions to control, 541-3 Railroad rates, discrimination in, 530-3; similarity to taxes, 538 Rank of goods, technical, 46 Rapp, George, 266 Real wages, definition, 207; raised by machinery, 242 Recreation, influence on efficiency, 397 Religion, as economic motive, 13-14; opposes competition, 429 Remuneration, profit-sharing as a method, 295; methods of, see Wages Rent, the renting contract, 53-60; origin of term, 53; several meanings, 54; essence, 55; as usufruct, 55; imputed durableness of rented agents, 55; gross and net, 55; economic and contract, 56-7; history of contract, 56-60; rent charge, 58; economic rent wider than renting contract, 60; connection with gratification, 73; varies with quality, 75; with quantity, diagram, 77; limits of, 79; economic and contract, 79-80; of wealth, affected by repair, depreciation, and destruction, 81-9; changes in, 90-7; of money, 106; basis of capitalization, 122-4; discounted, 123; relation to time-discount, 150-1; and wages, mutually influence, 175; "of ability," 178; and wages, 205; "of labor," 205; relation to wages, 215-8, 221; as personal or impersonal income, 359; conventional conception of, 413; as usufruct, 414; in Middle Ages, 424 Rent-bearers and rents, 90-7 Rent-charges, 58; sale and purchase, 118-22 Renting contract, 53-60; definition, 57; in the Middle Ages, 57; narrow use, 58, 59, 60; and economic rent, 60; hindered improvements, 110; contrasted with interest contract, 116 Repairs, and rent, 81-84; do not prevent decay, 85; and time-value, 143 Replenishing agents, 154 Rhodes, Cecil, 372 Ricardo, David, on fixity of land, 155; labor theory of value, 224, 398, 417, 442, 574 Ripley, W. Z., 575 Risk by enterpriser, 287 Risk theory of profits, 291 Risk-taking, legitimate and illegitimate, 335 Roosevelt, Theodore, efforts to control corporations, 546 Rossignol, J. E. le, 584 Roundabout process, 46, 576 Sage, Russell, on great corporations, 377 Satisfaction, see Gratification Saturation point for coinage, 443 Saving, and rate of interest, 159-63; conditions favorable to, 163-6; influence on methods of production, 166-9; benefits, 169; future effect of, 560 Scarcity, basis of economy, 19; effect on utility, 73; of various goods, 76; of present goods, 146; of common materials, 153; of all economic goods, 153; of human services, 182; of labor, 207, 225; not synonymous with monopoly, 302 Seager, H. R., 568 Seigniorage, definition, 434; and value, 443-7 Self-interest, social effects of, 427 Sellers' margin of advantage, 35 Serfdom, conditions, 227; see Middle Ages Services, a condition of income, 207; and wages, 210, 213; social and individual estimates of, 379; see Labor Shifting of taxes, 476 Silver, fitness as money, 102; as money, 432-3; as a standard, 455 Single-tax, purpose, 374; theory of value, 417 Skill, condition of continuing profits, 290; of labor, see Ability Slavery, as a system of labor, 227 Smart, 570, 571, 583 Smith, Adam, on money, 103, 181, 182; his "Wealth of Nations," 425-6, 484, 557 Social amelioration, various kinds, 504-9 Social changes, and rents, 94; temporary, 95 Social classes, volitional control in, 190 Social control, progress of, 551-4; see Public control Social effects of a tariff, 498 Social-expediency theory of property, 365-6; basis of private property, 370; of inheritance, 370-3; of class legislation, 373; of protective tariffs, 374; of rewarding talent, 378; in taxation, 478 Social institutions and personal incomes, 360 Social legislation, growing need, 197, 504 Social sciences, nature, 5; complexity, 5, 6 Socialism, extreme, its ideal of distribution, 410; radical, vs. social reform, 552 Socialistic theory of value, 416 Socialists, predictions of, 553 Social prophecy, 553 Social regulation of bank-notes, 467, 470 Social service and income, 370-80 Specialization, and size of market, 263; of risk-taking, 339-40 Speculation, in goods, 336; as risk-taking, 338-42; in all business, 339; as insurance, 340; by lambs, 341; legitimate and illegitimate, 344; income from, 376-7 Spencer, Herbert, 518 Spiritual needs as economic motives, 13-4 Stages of industry, 313 Standard of deferred payments, see Deferred payments Standard of living, definition, 191; Asiatic, 191; American, 192; theory of wages, 216; result of sudden change in, 387-8; change in 19th century, 557 State, function to direct competition, 429-30; function of the, 471-3; regulates railroads, 541-2; regulates corporate industry, 544-8; increasing functions, 548 State ownership, 515-6; see Public ownership State socialism, growth of, 551-2 Status, as method of distribution, 409 Storehouse of saving, see Money Strength of men and women, 179 Strikes, 251; violence, 252; cost, 252 Subsidiary coinage, 445-6 Subsistence theory of wages, 217 Sugar trust, 328 Sumner, W. G., 567 Supply, relation to utility, 24-6; curve, diagram, 35; of land in economic sense, 155; limitation of better qualities, 158; of labor, 184; and monopoly, 324; and trust prices, 331 Sympathy, as an economic force, 13, 235 Talent and occupation, 203; see Ability Tariff for revenue, 491; see Protective tariff Taussig, F. W., 580 Taxation, in its relation to value, 471-9; definition, 471; purposes of, 471-4; forms of, 474-7; principles and practice, 477-9 Taxes, as a mode of distribution, 407 Technical diminishing returns, 68; confused with historical, 70; refers to limited time, 71 Technical rank of goods, 46 Temperance legislation, 507 Temporary use, 53; see Rent Tenement-house laws, 505 Time, in relation to wants, 44; relation to gratification, 161 Time-discount, of future rents, 125-6; rate fixed in practice, 126 Time relations of goods to wants, 46 Time-value, and interest, 131; theory of, 141-51; definition and scope, 141-5; fixing of rate, 145-51; and rate of interest, 159-50; relation to wages, 219-22; the highest problem of value, 414 Tin-plate trust, 329 Token coins, 445-6 Trade-unions, 245-56; objects, 245-8; methods, 248-53; claims of, 254; effects, on wages, 253-6; and profit-sharing, 294; monopoly of labor, 308 Transportation, as a form of production, 525; changes in 19th century, 529-30 Trant, book on trade-unions, 254-5 Trustee, speculating, 343 Trusts, in United States, growth of, 312-22; recent organization of, 315-7; economic possibilities of consolidation, 321; causes of, 320-2; in legal and popular sense, 320; effect on prices, 323-32; control of, 332 Under-consumption theory of crises, 351 Unearned increments, various kinds, 96 Unions, see Trade-unions United States, see America Unproductive labor, see Labor Unripe goods, see Goods Usufruct, see Rent Usury, in Middle Ages, 113; usury laws, 508 Utility, broad sense, 19; see Marginal utility Utilization, intensive margin, 64; extensive, 65; diagram, 65; equilibrium of two margins, 66; of indirect goods, 78-9 Value, definition, 20; relation of labor to, 222-5; characteristics of, 258; cost of production explanation, 277; genealogy of, (diagram) 278-80; law of, and monopoly price, 311; law of, and trusts, 323; survey of the theory, 412; the unit of, 413; stages of value, 414; various aspects, 419; generality of the law, 420; effect of taxation on, 475-7; future trend of, 555-63 Value theories, relation to social reforms, 415-8 Volitional control, of population, 188, 189, 191, 193, 561 Wage contract, terms of, 229 Wage-fund theory of wages, 217 Wages, related to scarcity, 182; and efficiency, 196; law of, 205-14; nature of, 205-8; and rent, 205; economic and contract, 206; real and nominal, 207; modes of earning, 208-11; methods of remuneration, 211; and the general law of value, 211-4; term "general rate," 211; differences in, 212; statement of law, 213; and rent, 215-8; and time-value, 219-22; law of wages, 215; iron law, 216; and ambition, 230; rise of money form of, 232; real, changes in, 232; more better-paid callings, 233; raised by machinery, 242; in general industry determined by impersonal economic forces, 255; and profits, 284; and profit-sharing, 295; as personal or impersonal income, 359; influenced by consumers' choice, 394; relation to profits, 415; and protective tariff, 495; laws regulating payment, 511 Wages system, and its result, 226-35; defined, 226; development, 227; as it is, 229-31; progress under, 232-5; gloomy view of, 233 Walker, Francis A., theory of wages, 417, 578 Wants, material, 9-12; non-material, 13-4; of animals, 9; primitive, 10; civilized, 10; and progress, 11; growth, 12; refinement, 12; complex, 14; dependence on things, 15; relation to goods, 16; kinds, 21; changing, 26; recurrence, 39; in series, 39; present and future, 44; see Consumption War, to remedy over-population, 188; affects productive agents, 394 Waste, and luxury, 381-91; of wealth, 381-5; individual, 384; in public outlay, 384-5; fallacy of, 385 Water routes, influence on local advantages, 526-7; economy of, 528 Wealth, and welfare, 15-20; definition, 17, 18; and income, 41; related to gratification, 44; and its indirect uses, 46-52; conditions of economic, 48-52; in city and country, contrasted, 111; loan of, in Middle Ages, 112; concept, and capital concept, 116; and property, 362; inequality of, 375 Welfare, and wealth, 15-20; and instinctive choice, 395; vs. production, 398 Wieser, 570, 571, 580, 583 Wind and water as sources of power, 51 Woman's work, 510 Work, see Labor Workers, effect of machinery on, 239-44; need of organization, 246; need of direction, 265-7; and profit-sharing, 294; gains from trusts, 325; health in factories, 509-10 Years' purchase, 120 
38194	----	scanned images of public domain material from the Google Print project.) HARVARD COLLEGE LIBRARY AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. BY ADAM SMITH LL.D. F.R.S. WITH A LIFE OF THE AUTHOR. ALSO, A VIEW OF THE DOCTRINE OF SMITH, COMPARED WITH THAT OF THE FRENCH ECONOMISTS; WITH A METHOD OF FACILITATING THE STUDY OF HIS WORKS; FROM THE FRENCH OF M. GARNIER. COMPLETE IN ONE VOLUME London: T. NELSON AND SONS, PATERNOSTER ROW; AND EDINBURGH. MDCCCLII. CONTENTS _Page_ Life of the Author i Short View of the Doctrine of Smith, compared with that of the French Economists xvii Introduction 1 BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAP. I. Of the Division of Labour 2 CHAP. II. Of the Principle which gives occasion to the Division of Labour 6 CHAP. III. That the Division of Labour is limited by the Extent of the Market 8 CHAP. IV. Of the Origin and Use of Money 9 CHAP. V. Of the real and nominal Price of Commodities, or of their Price in Labour, and their Price in Money 12 CHAP. VI. Of the Component Parts of the Price of Commodities 20 CHAP. VII. Of the Natural and Market Price of Commodities 23 CHAP. VIII. Of the Wages of Labour 27 CHAP. IX. Of the Profits of Stock 36 CHAP. X. Of Wages and Profit in the different Employments of Labour and Stock 41 PART I. Inequalities arising from the Nature of the Employments themselves ib. PART II. Inequalities occasioned by the Policy of Europe 50 CHAP. XI. Of the Rent of Land 60 PART I. Of the Produce of Land which always affords Rent 61 PART II. Of the Produce of Land which sometimes does, and sometimes does not, afford Rent 68 PART III. Of the Variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent 74 Digression concerning the Variations in the Value of Silver during the course of the four last centuries ib. First Period ib. Second Period 81 Third Period ib. Variations in the Proportion between the respective Values of Gold and Silver 89 Grounds of the Suspicion that the Value of Silver still continues to decrease 91 Different Effects of the Progress of Improvement upon the real Price of three different sorts of rude Produce ib. First Sort 92 Second Sort ib. Third Sort 97 Conclusion of the Digression concerning the Variations in the Value of Silver 101 Effects of the Progress of Improvement upon the real Price of Manufactures 103 Conclusion of the Chapter 105 BOOK II. OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK. Introduction 111 CHAP. I. Of the Division of Stock 112 CHAP. II. Of Money considered as a particular Branch of the general Stock of the Society, or of the Expense of maintaining the National Capital 115 CHAP. III. Of the Accumulation of Capital, or of productive and unproductive Labour 135 CHAP. IV. Of Stock lent at Interest 144 CHAP. V. Of the different Employment of Capitals 147 BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS. CHAP. I. Of the Natural Progress of Opulence 155 CHAP. II. Of the Discouragement of Agriculture in the ancient States of Europe, after the fall of the Roman Empire 157 CHAP. III. Of the Rise and Progress of Cities and Towns, after the fall of the Roman Empire 162 CHAP. IV. How the Commerce of the Towns contributed to the Improvement of the Country 167 BOOK IV. OF THE SYSTEMS OF POLITICAL ECONOMY. Introduction 173 CHAP. I. Of the Principle of the Commercial or Mercantile system ib. CHAP. II. Of Restraints upon the Importation from Foreign Countries, of such Goods as can be produced at Home 183 CHAP. III. Of the extraordinary Restraints upon the Importation of Goods of almost all kinds, from those Countries with which the Balance is supposed to be disadvantageous 192 PART I. Of the Unreasonableness of those Restraints, even upon the Principles of the Commercial System ib. Digression concerning Banks of Deposit, particularly concerning that of Amsterdam 194 PART II. Of the Unreasonableness of these extraordinary Restraints, upon other Principles 199 CHAP. IV. Of Drawbacks 203 CHAP. V. Of Bounties 205 Digression concerning the Corn Trade and Corn Laws 213 CHAP. VI. Of Treaties of Commerce 222 CHAP. VII. Of Colonies 227 PART I. Of the Motives for establishing new Colonies ib. PART II. Causes of the Prosperity of new Colonies 231 PART III. Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope 243 CHAP. VIII. Conclusion of the Mercantile System 266 CHAP. IX. Of the Agricultural Systems, or of those Systems of Political Economy which represent the Produce of Land as either the sole or the principal Source of the Revenue and Wealth of every Country 275 APPENDIX. Account of Herring Busses fitted out in Scotland, the Amount of the Cargoes and the Bounties on them 287 Account of Foreign Salt imported into Scotland, and of Scotch Salt delivered duty free, for the Herring Fishery 288 BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH. CHAP. I. Of the Expenses of the Sovereign or Commonwealth 289 PART I. Of the Expense of Defence ib. PART II. Of the Expense of Justice 297 PART III. Of the Expense of Public Works and Public Institutions 302 ART. I. Of the Public Works and Institutions for facilitating the Commerce of Society.--1st, For facilitating the general Commerce of the Society.-- 2d, For facilitating particular Branches of Commerce 303 ART. II. Of the Expense of the Institutions for the Education of Youth 318 ART. III. Of the Expense of the Institutions for the Instruction of People of all Ages 330 PART IV. Of the Expense of supporting the Dignity of the Sovereign 342 Conclusion of the Chapter ib. CHAP. II. Of the Sources of the general or Public Revenue of the Society 343 PART I. Of the Funds or Sources of Revenue which may particularly belong to the Sovereign or Commonwealth ib. PART II. Of Taxes 347 ART. I. Taxes upon rent; Taxes upon the Rent of Land 348 Taxes which are proportioned, not to the Rent, but to the Produce of Land 352 Taxes upon the Rent of Houses 354 ART. II. Taxes upon Profit, or upon the Revenue arising from Stock 357 Taxes upon the Profit of particular Employments 359 APPENDIX to Articles I. and II.--Taxes upon the Capital Value of Lands, Houses, and Stock 362 ART. III. Taxes upon the Wages of Labour 365 ART. IV. Taxes which, it is intended, should fall indifferently upon every different Species of Revenue 366 Capitation Taxes 367 Taxes upon consumable Commodities 368 CHAP. III. Of Public Debts 385 SHORT ACCOUNT OF THE LIFE AND WRITINGS OF DR. ADAM SMITH Adam Smith, the celebrated author of 'An Inquiry into the Nature and Causes of the Wealth of Nations,' was born in the town of Kirkaldy, on the 5th of June 1723. His father, at an early period of life, practised as a writer to the signet in Edinburgh, and officiated as private secretary to the Earl of Loudon, during the time his Lordship was principal secretary of state in Scotland, and keeper of the great seal; but afterwards settled at Kirkaldy, where, for some time before his death, he held the office of comptroller of the customs. He died a few months before the birth of his son. The constitution of young Smith, during infancy, was so sickly as to require all the care and solicitude of his surviving parent, whose only child he was. The duty which thus devolved on his mother, it is allowed, she discharged in the most ample manner; and, indeed, carried her indulgence so far as to have drawn on herself, it has been said, some degree of blame. But it certainly does not appear that any bad consequences resulted, on this occasion, from unbounded parental fondness; nor can it be said, that any permanent disadvantage was felt by the retirement, and even seclusion, which long-continued weakness rendered necessary. To the inability of young Smith to engage in the active sports of his early companions, we ought, perhaps, to trace the foundation of those habits, and love of retirement, which distinguished him, in a peculiar manner, during a long life[1]. We are informed that Smith received the rudiments of education at the grammar-school of Kirkaldy; and, at that time, attracted some notice by his passion for books, and by the extraordinary powers of his memory. He was also observed, even at this early period of life, to have contracted those habits of absence in company, and of talking to himself, for which he was afterwards so remarkable. In 1737, he was sent to the university of Glasgow, where, it is said, he evinced an uncommon partiality for the study of mathematics and natural philosophy. Being designed for the English church, he left that place in about three years, and entered, in 1740, an exhibitioner on Snell's foundation, at Baliol college, Oxford. But to this celebrated seminary he acknowledged very slender obligations. He had, however, attained a solid foundation of knowledge, and also the precious habits of attention, and the most industrious application. Here he diligently pursued his favourite speculations in private, interrupted only by the regular calls of scholastic discipline. He cultivated, with the greatest assiduity and success, the study of the languages, both ancient and modern; and formed an intimate acquaintance with the works of the poets of his own country, as well as with those of Greece and Rome, France and Italy. Of the turns and delicacies of the English tongue, it has been observed, he then gained such a critical knowledge, as was scarcely to be expected from his northern education. With the view of improving his style, he employed himself in frequent translations, particularly from the French; a practice which he used to recommend to all who cultivate the art of writing. His modest deportment, and his secret studies, however, provoked, it has been said, the jealousy or the suspicion of his superiors. It has been mentioned, that the heads of the college having thought proper to visit his chamber, found him engaged in perusing Hume's Treatise of Human Nature, then recently published. This the reverend inquisitors seized, while they severely reprimanded the young philosopher. After a residence of seven years at Oxford, he returned, against the wishes of his friends, to Kirkaldy, the place of his nativity, where he lived for some time with his mother, without determining on any fixed plan of life; Mr. Smith having thus chosen to forego every prospect of church preferment, rather than do violence to his conscience by preaching a particular system of tenets. In 1748, being then in the twenty-fifth year of his age, he took up his residence in the capital of Scotland, when he first entered into public life, by delivering lectures, under the patronage of Lord Kames, on rhetoric and the belles lettres, which he continued for two years. These lectures were never published; but the substance of them appears to have been afterwards communicated to Dr. Blair, as he acknowledges, in his Lectures, to have been indebted to Dr. Smith for a manuscript treatise, from which he had taken several ideas in the eighteenth lecture, on the general characters of style, particularly the plain and the simple; and also the characters of those English authors belonging to the several classes in that and the following lecture. In 1751, he was chosen professor of logic in the university of Glasgow. Of the manner in which he discharged the duties of this important situation, it would be difficult now to present a more satisfactory account than that which has been given by one of his own pupils 'In the professorship of logic,' it is observed, 'Mr. Smith soon saw the necessity of departing widely from the plan that had been followed by his predecessors, and of directing the attention of his pupils to studies of a more interesting and useful nature than the logic and metaphysics of the schools. Accordingly, after exhibiting a general view of the powers of the mind, and explaining so much of the ancient logic as was requisite to gratify curiosity, with respect to an artificial mode of reasoning, which had once occupied the universal attention of the learned, he dedicated all the rest of his time to the delivery of a system of rhetoric and belles lettres.' During the following year, he was nominated professor of moral philosophy in the same university. By this appointment he was peculiarly gratified, and the duties of it he was well fitted to discharge, as it embraced the study of his favourite science, political economy, many of the doctrines of which, even then, had been familiarised to his mind. After entering on the duties of his new situation, he appears to have turned his attention to the division of the science of morals, which he was induced to divide into four parts. The _first_ contained Natural Theology, in which he considered the proofs of the being and attributes of God, and those principles of the human mind upon which religion is founded. The _second_ comprehended Ethics, strictly so called. In the _third_, he treated, at more length, of that branch of morality which relates to Justice, and which, being susceptible of precise and accurate rules, is capable of a more systematic demonstration. In the _fourth_, he examined these political regulations which are founded upon Expediency, and which are calculated to increase the riches, the power, and the prosperity of a state. His lectures on these subjects were always distinguished by a luminous division of the subject, and by fulness and variety of illustration; and as they were delivered in a plain unaffected manner, they were well calculated to afford pleasure as well as instruction. They, accordingly, excited a degree of interest, and gave rise to a spirit of inquiry in the great commercial city of Glasgow, from which the most favourable consequences resulted. His reputation extended so widely, that, on his account alone, a considerable number of students, from different parts of the country, were attracted to the university of that city; and the science which he taught became so popular, that even the trifling peculiarities in his pronunciation and manner of speaking, were often objects of imitation. During the time Mr. Smith was thus successfully engaged in his academical labours, he was gradually laying the foundation of a more extensive reputation. In the year 1759, he published his 'Theory of Moral Sentiments, or An Essay towards an Analysis of the Principles by which Men naturally judge concerning the Conduct and Character, first of their Neighbours, and afterwards of Themselves.' This work was founded on the second division of his lectures, and was divided into six parts:--The propriety of action: Merit and demerit, or the objects of reward and punishment: The foundation of our judgments concerning our own sentiments and conduct, and of the sense of duty: The effect of utility upon the sentiment of approbation: The influence of custom and fashion upon the sentiments of moral approbation and disapprobation: And, lastly, The character of virtue. To these were added, a brief view of the different systems of ancient and modern philosophy, which is universally acknowledged to be the most candid and luminous that has yet appeared. This Essay soon attracted a great share of the public attention, by the ingenuity of the reasonings, and the perspicuity with which they were displayed. The principle on which it is founded may be said to be, That the primary objects of our moral perceptions are the actions of other men; and that our moral judgments, with respect to our own conduct, are only applications to ourselves of decisions which we have already passed on the conduct of others. With this doctrine the author thinks all the most celebrated theories of morality coincide in part, and from some partial view of it he apprehends they are all derived. To the same work was subjoined a short treatise on the first formation of language, and considerations on the different genius of those which were original and compounded. The Theory of Moral Sentiments, immediately on its publication, procured a splendid reputation to the author, and led to a change in his situation in life, that was to him no less pleasing in itself, than gratifying from the means by which it was brought about. But the following lively letter to him, at that time, from his friend Mr. Hume, dated London, 12th April, 1759, will best show the manner in which this work was received, and the influence which it had in deciding on the future life of its author:-- 'I give you thanks for the agreeable present of your Theory. Wedderburn and I made presents of our copies to such of our acquaintances as we thought good judges, and proper to spread the reputation of the book. I sent one to the Duke of Argyll, to Lord Lyttleton, Horace Walpole, Soame Jenyns, and Burke, an Irish gentleman, who wrote lately a very pretty treatise on the sublime, Millar desired my permission to send one, in your name, to Dr. Warburton. I have delayed writing to you till I could tell you something of the success of the book, and could prognosticate, with some probability, whether it should be finally damned to oblivion, or should be registered in the temple of immortality. Though it has been published only a few weeks, I think there appear already such strong symptoms, that I can almost venture to foretel its fate. It is, in short, this----But I have been interrupted in my letter, by a foolish, impertinent visit of one who has lately come from Scotland. He tells me, that the university of Glasgow intend to declare Rouet's office vacant, upon his going abroad with Lord Hope. I question not but you will have our friend Fergusson in your eye, in case another project for procuring him a place in the university of Edinburgh should fail. Fergusson has very much polished and improved his treatise on Refinement, and with some amendments, it will make an admirable book, and discovers an elegant and a singular genius. The Epigoniad, I hope, will do; but it is somewhat up-hill work. As I doubt not but you consult the reviewers sometimes at present, you will see in the Critical Review a letter upon that poem, and I desire you to employ your conjectures in finding out the author. Let me see a sample of your skill in knowing hands, by your guessing at the person. I am afraid of Lord Kames's Law Tracts. A man might as well think of making a fine sauce by a mixture of wormwood and aloes, as an agreeable composition by joining metaphysics and Scotch law. However, the book, I believe, has merit, though few people will take the pains of diving into it. But to return to your book and its success in this town, I must tell you----A plague of interruptions! I ordered myself to be denied; and yet here is one that has broke in upon me again. He is a man of letters, and we have had a good deal of literary conversation. You told me that you was curious of literary anecdotes, and therefore I shall inform you of a few that have come to my knowledge. I believe I have mentioned to you already Helvetius's book _De l'Esprit_. It is worth your reading, not for its philosophy, which I do not highly value, but for its agreeable composition. I had a letter from him a few days ago, wherein he tells me that my name was much oftener in the manuscript, but that the censor of books at Paris obliged him to strike it out. Voltaire has lately published a small work, called _Candide, ou l'Optimisme_ I shall give a detail of it----But what is all this to my book? say you.----My dear Mr. Smith, have patience; compose yourself to tranquillity; show yourself a philosopher in practice as well as profession; think on the emptiness, and rashness, and futility of the common judgments of men; how little they are regulated by reason in any subject, much more in philosophical subjects, which so far exceed the comprehension of the vulgar. ----Non si quid turbida Roma Elevat, accedas; examenve improbum in illa Castiges trutina; nec te quæsiveris extra. A wise man's kingdom is his own breast, or if he ever looks farther, it will only be to the judgment of a select few, who are free from prejudices, and capable of examining his work. Nothing, indeed, can be a stronger presumption of falsehood than the approbation of the multitude; and Phocion, you know, always suspected himself of some blunder when he was attended with the applauses of the populace. 'Supposing, therefore, that you have duly prepared yourself for the worst, by all these reflections, I proceed to tell you the melancholy news,--that your book has been very unfortunate; for the public seem disposed to applaud it extremely. It was looked for by the foolish people with some impatience and the mob of literati are beginning already to be very loud in its praises. Three bishops called yesterday at Millar's shop, in order to buy copies, and to ask questions about the author. The bishop of Peterborough said he had passed the evening in a company where he heard it extolled above all books in the world. The Duke of Argyll is more decisive than he uses to be in its favour I suppose he either considers it as an exotic, or thinks the author will be serviceable to him in the Glasgow elections. Lord Lyttleton says, that Robertson, and Smith, and Bower, are the glories of English literature. Oswald protests, he does not know whether he has reaped more instruction or entertainment from it. But you may easily judge what reliance can be put on his judgment, who has been engaged all his life in public business, and who never sees any faults in his friends. Millar exults, and brags that two thirds of the edition are already sold, and that he is now sure of success. You see what a son of the earth that is, to value books only by the profit they bring him. In that view, I believe, it may prove a very good book. 'Charles Townsend, who passes for the cleverest fellow in England, is so taken with the performance, that he said to Oswald, he would put the Duke or Buccleugh under the author's care, and would make it worth his while to accept of that charge. As soon as I heard this, I called on him twice with a view of talking with him about the matter, and of convincing him of the propriety of sending that young nobleman to Glasgow; for I could not hope, that he could offer you any terms which would tempt you to renounce your professorship. But I missed him. Mr. Townsend passes for being a little uncertain in his resolutions; so, perhaps, you need not build much on this sally. 'In recompense for so many mortifying things, which nothing but truth could have extorted from me, and which I could easily have multiplied to a greater number, I doubt not but you are so good a christian as to return good for evil, and to flatter my vanity, by telling me, that all the godly in Scotland abuse me for my account of John Knox and the reformation.' Mr. Smith having completed, and given to the world his system of ethics, that subject afterwards occupied but a small part of his lectures. His attention was now chiefly directed to the illustration of those other branches of science which he taught; and, accordingly, he seems to have taken up the resolution, even at that early period, of publishing an investigation into the principles of what he considered to be the only other branch of Moral Philosophy,--Jurisprudence, the subject of which formed the third division of his lectures. At the conclusion of the Theory of Moral Sentiments, after treating of the importance of a system of Natural Jurisprudence, and remarking that Grotius was the first, and perhaps the only writer, who had given any thing like a system of those principles which ought to run through, and be the foundation of the law of nations, Mr. Smith promised, in another discourse, to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the object of law. Four years after the publication of this work, and after a residence of thirteen years in Glasgow, Mr. Smith, in 1763, was induced to relinquish his professorship, by an invitation from the Hon. Mr. Townsend, who had married the Duchess of Buccleugh, to accompany the young Duke, her son, in his travels. Being indebted for this invitation to his own talents alone, it must have appeared peculiarly flattering to him. Such an appointment was, besides, the more acceptable, as it afforded him a better opportunity of becoming acquainted with the internal policy of other states, and of completing that system of political economy, the principles of which he had previously delivered in his lectures, and which it was then the leading object of his studies to perfect. Mr. Smith did not, however, resign his professorship till the day after his arrival in Paris, in February 1764. He then addressed the following letter to the Right Honourable Thomas Millar, lord advocate of Scotland, and then rector of the college of Glasgow:-- 'MY LORD,--I take this first opportunity after my arrival in this place, which was not till yesterday, to resign my office into the hands of your lordship, of the dean of faculty, of the principal of the college, and of all my other most respectable and worthy colleagues. Into your and their hands, therefore, I do resign my office of professor of moral philosophy in the university of Glasgow, and in the college thereof, with all the emoluments, privileges, and advantages, which belong to it. I reserve, however, my right to the salary for the current half-year, which commenced at the 10th of October, for one part of my salary, and at Martinmas last for another; and I desire that this salary may be paid to the gentleman who does that part of my duty which I was obliged to leave undone, in the manner agreed on between my very worthy colleagues before we parted. I never was more anxious for the good of the college than at this moment; and I sincerely wish, that whoever is my successor, he may not only do credit to the office by his abilities, but be a comfort to the very excellent men with whom he is likely to spend his life, by the probity of his heart and the goodness of his temper.' His lordship having transmitted the above to the professors, a meeting was held; on which occasion the following honourable testimony of the sense they entertained of the worth of their former colleague was entered in their minutes:-- 'The meeting accept of Dr. Smith's resignation in terms of the above letter; and the office of professor of moral philosophy in this university is therefore hereby declared to be vacant. The university at the same time, cannot help expressing their sincere regret at the removal of Dr. Smith, whose distinguished probity and amiable qualities procured him the esteem and affection of his colleagues; whose uncommon genius, great abilities, and extensive learning, did so much honour to this society. His elegant and ingenious Theory of Moral Sentiments having recommended him to the esteem of men of taste and literature throughout Europe, his happy talents in illustrating abstracted subjects, and faithful assiduity in communicating useful knowledge, distinguished him as a professor, and at once afforded the greatest pleasure, and the most important instruction, to the youth under his care.' In the first visit that Mr. Smith and his noble pupil made to Paris, they only remained ten or twelve days; after which, they proceeded to Thoulouse, where, during a residence of eighteen months, Mr. Smith had an opportunity of extending his information concerning the internal policy of France, by the intimacy in which he lived with some of the members of the parliament. After visiting several other places in the south of France, and residing two months at Geneva, they returned about Christmas to Paris. Here Mr. Smith ranked among his friends many of the highest literary characters, among whom were several of the most distinguished of those political philosophers who were denominated Economists. Before Mr. Smith left Paris, he received a flattering letter from the unfortunate Duke of Rochefoucault, with a copy of a new edition of the Maxims of his grandfather. Notwithstanding the unfavourable manner in which the opinions of the author of that work were mentioned in the Theory of Moral Sentiments, the Duke informed Mr. Smith, on this occasion, that he had been prevented only from finishing a translation, which he had begun, of his estimable system of morals, into French, by the knowledge of having been anticipated in the design. He also observed, that some apology might be made for his ancestor, when it was considered, that he formed his opinions of mankind in two of the worst situations of life,--a court and a camp. The last communication Mr. Smith had with this nobleman was in 1789, when he gave him to understand, that he would no longer rank the name of Rochefoncault with that of the author of the Fable of the Bees; and, accordingly, in the first edition that was afterwards published of the Theory of Moral Sentiments, this promised alteration was made. The next ten years of his life, after his arrival from the continent, Mr. Smith passed with his mother at Kirkaldy, though he occasionally, during that time, visited London and Edinburgh. Mr. Hume, who considered a town as the proper scene for a man of letters, made many attempts to prevail on him to leave his retirement. At length, in the beginning of the year 1776, Mr. Smith accounted to the world for his long retreat, by the publication of his 'Inquiry into the Nature and Causes of the Wealth of Nations.' This work chiefly comprehended the subject of the fourth and last division of his lectures, namely, those political regulations that have their origin in expediency. For about twenty years of his life, his attention had been chiefly devoted to the study of subjects connected with the science of political economy. His long residence in the mercantile city of Glasgow afforded him opportunities of deriving information, in many particulars, from the best sources; his travels on the continent contributed to extend his knowledge, and correct many of those misapprehensions of life and manners which the best descriptions of them are found to convey; and the intimacy in which he lived with some of the leaders of the sect of economists, and other writers on the subject of political economy, could not fail to assist him in methodizing his speculations, and of adding to the soundness of his conclusions.--After his arrival in this country, he wanted nothing more than leisure, to arrange his materials, and prepare them for publication: and for this purpose he passed in retirement the subsequent ten years. The great aim of Mr. Smith's Inquiry, the fruit of so much research, and the work of so many years, is, as Professor Stewart observes, to direct the policy of nations with respect to one most important class of its laws,--those which form its system of political economy: 'and he has unquestionably,' the same eloquent writer adds, 'had the merit of presenting to the world the most comprehensive and perfect work that has yet appeared on the general principles of any branch of legislation.' 'A great and leading object of Mr. Smith's speculations,' as Mr. Stewart also observes, 'is to demonstrate, that the most effectual plan for advancing a people to greatness, is to maintain that order of things which nature has pointed out, by allowing every man, as long as he observes the rules of justice, to pursue his own interest in his own way, and to bring both his industry and his capital into the freest competition with these of his fellow citizens.' Several authors, in this country, had before written on commercial affairs, but Mr. Smith was the first who reduced to a regular form and order the information that was to be obtained on that subject, and deduced from it the policy which an enlightened commercial nation ought to adopt. The successful manner in which he has treated this unlimited freedom of trade, as well as some others, and his able exposure of the errors of the commercial system, have rendered the science of which he treats highly interesting to the great body of the people; and a spirit of inquiry, on every branch of political economy, has, in consequence, been excited, which promises now, more than ever, to be attended with the most beneficial effects. This intricate science, the most important to the interests of mankind though long neglected, Dr. Smith has had the merit of advancing so far, as to lay a foundation, on which, it may safely be said, investigation may for a long time proceed. It has frequently been alleged, that Dr. Smith was indebted for a large portion of the reasonings in his Inquiry to the French economists, and that the coincidence between some branches of his doctrine and theirs, particularly those which relate to freedom of trade and the powers of labour, is more than casual. But Professor Stewart has ably vindicated him from this charge, and established his right to the general principles of his doctrine, which, he thinks, were altogether original, and the result of his own reflections. That he, however, derived some advantage from his intimacy with Turgot, and those great men who were at the head of the sect of economists, and, perhaps, adopted some of their illustrations, it would be as unnecessary to deny, as it would he far from discreditable to his talents to acknowledge. There is also a similar, or perhaps a greater coincidence between many parts of his doctrine and the opinions of Sir James Stewart, as detailed in his 'Inquiry into the Principles of Political Economy.' This congruity of opinion is chiefly apparent in their respective conclusions concerning the effects of competition,--the principles of exchangeable value,--the relation between the interest of money and the profit of stock,--the functions of coin,--the rise and progress of credit,--and the sources and limits of taxation. As this author had published his Inquiry many years before Dr. Smith's work appeared, and had, besides, lived in great intimacy with him, there was some reason to believe, what has been often asserted, that he possessed a just claim to some of the doctrines contained in that work, though Dr. Smith never once mentioned his name in any part of his work. But the present Sir James Stewart, who has recently published a full edition of the writings of his father, relinquishes, on his part, all such pretensions. With the partiality of a friend, in ranking his father with Dr. Smith, he gives it as his opinion, however, that both had, with original powers of equal strength, drawn their knowledge from the same source, the French economists. Dr. Mandeville has also, of late, got the credit of being the author of those Principles of Political Economy, which have interested the world for the last fifty years, and to him alone, it is said, not only the English, but also the French writers, are indebted for their doctrines in that science. In the work of this eccentric writer, there seems, indeed, a similarity of opinion on some of the more obvious sources of wealth, particularly in the division of labour, which Dr. Smith investigates so fully; and in the erroneous doctrine of productive and non-productive labour; and also, perhaps, on some other points: but it would be difficult to show, that he ought, on this account, to be considered the author of all, or even the chief part of what has been written on the subject. On this, as well as on all questions of a similar nature, a great diversity of opinions will subsist. But it may be a matter of curiosity to those who are unacquainted with his work, the Fable of the Bees, not only to trace the connection of that author's sentiments with what is advanced by subsequent writers on this important subject, but also to learn his peculiar notions of morality, that attracted, at one time, so much attention. These last, Dr. Smith says, though described by a lively and humorous, yet coarse and rustic eloquence, which throws an air of truth and probability on them, are, almost in every respect, erroneous. Soon after the publication of the Wealth of Nations, Mr. Smith received the following congratulatory letter from Mr. Hume, six months before his death, dated Edinburgh, 1st April 1776. '_Euge! Belle!_ Dear Mr. Smith--I am much pleased with your performance, and the perusal of it has taken me from a state of great anxiety. It was a work of so much expectation, by yourself, by your friends, and by the public, that I trembled for its appearance; but am now much relieved; not but that the reading of it necessarily requires so much attention, and the public is disposed to give so little, that I shall still doubt for some time of its being at first very popular. But it has depth, and solidity, and acuteness, and is so much illustrated by curious facts, that it must at last take the public attention. It is probably much improved by your last abode in London. If you were here at my fireside, I should dispute some of your principles. But these, and a hundred other points, are fit, only to be discussed in conversation. I hope it will be soon, for I am in a very bad state of health, and cannot afford a long delay.' The publication of this great work drew praise to its author, indeed, from many different quarters.--Dr. Barnard, in a political epistle, addressed to Sir Joshua Reynolds, where the characteristic qualities of some eminent literary men of that time are brought forward, spoke of Smith as one who would teach him how to think. Gibbon made honourable mention of him in his Roman history; and Mr. Fox contributed, in no small degree, to extend his reputation, by observing in the House of Commons, that 'the way, as my learned friend Dr. Adam Smith says, for a nation, as well as an individual, to be rich, is for both to live within their income.' The opinion which Dr. Johnson delivered, at that time, on its being alleged by Sir John Pringle, that a person who, like Dr. Smith, was not practically acquainted with trade, could not be qualified to write on that subject, may also be mentioned here, though somewhat erroneous, as far as it respects the received doctrines of Political Economy:--'He is mistaken,' said Johnson. 'A man who has never been engaged in trade himself, may undoubtedly write well on trade; and there is nothing which requires more to be illustrated by philosophy than trade does. As to mere wealth, that is to say, money, it is clear that one nation, or one individual, cannot increase its store but by making another poorer; but trade procures what is more valuable, the reciprocation of the peculiar advantages of different countries. A merchant seldom thinks of any but his own trade. To write a good book upon it, a man must have extensive views. It is not necessary to have practised, to write well upon a subject.'[2] On the Inquiry into the Causes of the Wealth of Nations, it only remains farther to be observed, that its success has been every way commensurate to its merits. It has, however, been often regretted, that the author did not live to favour the world with his reasonings on those important events which have taken place since 1784, when he put the last hand to his invaluable work. That another, with competent talents, and a mind disposed to the task, should soon appear, to treat of these occurrences, and give a satisfactory view of the progress of the science from that time to the present, is not to be expected. But as the honour to be gained from a successful execution of such an undertaking is very considerable, it is not to be wondered at that an attempt of this kind should be made. Accordingly, Mr Playfair of London has had the boldness to follow Smith, by endeavouring to supply, in part, this desideratum, by adding supplementary chapters and notes to the Treatise on the Wealth of Nations. But it is greatly to be feared, that there are few persons who have read this improved edition, as it is called, of Dr. Smith's Inquiry, but will still look forward to the accomplishment of the wishes they must previously have formed, for a continuation, and probably an illustration, of the discussions contained in that work. Leaving, therefore, the supplementary chapters and elucidations of Mr Playfair, it must be observed, that Dr. Smith has, on this occasion, been equally unfortunate in a biographer. The detail of his peaceful life is almost lost among dissertations on the wickedness of atheism and the horrors of a revolution. But these dissertations, strangely misplaced as they appear to be, would certainly not alone have been sufficient to attract observation here, whatever latitude the author might have allowed to himself on such subjects. When he goes on, however, to apologise for Dr. Smith's acquaintance with some individuals among the economists, and to connect the whole of that sect with those philosophers to whom he ascribes the evils which have so long afflicted France, his opinions become still more insupportable. It will, perhaps, be said, and with some reason, that, in this instance, at least, the writer has followed those alarmists, who, on any men of learning belonging to that country being mentioned, immediately ally them to the revolutionists without regard to difference of opinion, or distance of time. The reputation, however, of the economists is too well established to be affected, either by the clamours of the ignorant, or the mad intemperance of political alarmists. The doctrine of the great men who formed the school of the economists, was, that the produce of the land is the sole or principal source of the revenue and wealth of every country; and this doctrine, with the manner of deriving from it the greatest possible advantage, it is almost universally acknowledged, engaged entirely their attention. Dr. Smith, who lived in great intimacy with many of the founders of that sect, does ample justice, on every occasion, to the purity of their views; and indeed they, as well as himself, it has always been said, by the impartial and well informed, were ever animated by a zeal for the best interests of society. M. Quesnai, the first of that sect, and the author of the Economical Table, a work of the greatest profoundness and originality, was, in particular, represented by Mr. Smith as a man of the greatest modesty and simplicity; and his system he pronounced, with all its imperfections, to be the nearest approximation to the truth, of any that had then been published on the principles of political science. His veneration for this worthy man was even so great, that had he lived, it was his intention to have inscribed to him the Inquiry into the Causes of the Wealth of Nations. Nor will the memory of those illustrious men be soon forgotten, notwithstanding the calumnies with which it has been charged. It may safely be predicted, in the words of a highly respectable periodical publication, that 'Those prospects of political improvements which flattered the benevolent anticipations of the economists, will soon be recognised as sound conclusions of science; and it will at length be acknowledged that Turgot, Mirabeau, and Quesnai, were the friends of mankind, and that their genius and their labours were devoted to the refinement of social happiness and the consolidation of the political fabric.'[3] The life of Mr. Smith, after the publication of his Inquiry, might be said to draw towards a close. The following particulars of the last years, are mostly extracted from Professor Stewart's Life of this incomparable writer. After residing some time in London, he was appointed one of the commissioners of customs in Scotland, in 1778, when he removed to Edinburgh. He was accompanied by his mother, who, though in extreme old age, possessed a considerable share of good health; and his cousin, Miss Douglass, who had long resided with him at Glasgow, undertook to superintend his domestic economy. The Duke of Buccleugh had continued to allow Mr. Smith L.300 a-year, and the accession which he now received to his income enabled him to live, not only with comfort and independence, but to indulge the benevolence of his heart, in making numerous private benefactions. During the remaining period of his life, he appears to have done little more than to discharge, with peculiar exactness, the duties of his office, which, though they required no great exertion, were sufficient to divert his attention from his studies. He very early felt the infirmities of old age, but his health and strength were not greatly affected till he was left alone, by the death of his mother, in 1784, and of his cousin four years after. They had been the objects of his affection for more than sixty years; and in their society he had enjoyed, from his infancy, all that he ever knew of the endearments of a family. In return for the anxious and watchful solicitude of his mother during infancy, he had the singular good fortune of being able to show his gratitude to her during a very long life; and it was often observed, that the nearest avenue to his heart was through his mother. He now gradually declined till the period of his death, which happened in 1790. His last illness, which arose from a chronic obstruction in the bowels, was lingering and painful; but he had every consolation to soothe it which he could desire, from the tenderest sympathy of his friends, and from the completest resignation of his own mind. His friends had been in use to sup with him every Sunday. The last time he received them, which was a few days before his death, there was a pretty numerous meeting; but not being able to sit up as usual, he retired to bed before supper. On going away, he took leave of the company, by saying, 'I believe we must adjourn this meeting to some other place.' In a letter addressed, in the year 1787, to the principal of the university of Glasgow, in consequence of his being elected rector of that learned body, a pleasing memorial remains of the satisfaction with which he always recollected that period of his literary career, which had been more peculiarly consecrated to his academical studies. On that occasion he writes:-- 'No preferment could have given me so much real satisfaction. No man can owe greater obligations to a society than I do to the university of Glasgow. They educated me; they sent me to Oxford. Soon after my return to Scotland, they elected me one of their own members, and afterwards preferred me to another office, to which the abilities and virtues of the never-to-be-forgotten Dr. Hutcheson had given a superior degree of illustration. The period of thirteen years, which I spent as a member of that society, I remember as by far the most useful, and therefore, as by far the happiest and most honourable period of my life; and now, after three-and-twenty years absence, to be remembered in so very agreeable a manner by my old friends and protectors, gives me a heart-felt joy which I cannot easily express to you.' Not long before the death of Smith, finding his end approach rapidly, he gave orders to destroy all his manuscripts, excepting some detached essays, which he entrusted to the care of his executors. With the exception of these essays, all his papers were committed to the flames. What were the particular contents of these papers was not known, even to his most intimate friends. The additions to the Theory of Moral Sentiments, most of which were composed under severe illness, had fortunately been sent to the press in the beginning of the preceding winter; and the author lived to see the publication of this new edition.[4] Some time before his last illness, when he had occasion to go to London, he enjoined his friends, to whom he had entrusted the disposal of his manuscripts, to destroy, in the event of his death, all the volumes of his lectures, doing with the rest what they pleased. When he had become weak, and saw the last period of his life approach, he spoke to his friends again upon the same subject. They entreated him to make his mind easy, as he might depend upon their fulfilling his desire. Though he then seemed to be satisfied, he, some days afterwards, begged that the volume might be immediately destroyed; which was accordingly done. Mr. Riddell, an intimate friend of Mr. Smith, mentions, that on one of these occasions he regretted he had done so little; 'but I meant,' he added, 'to have done more; and there are materials in my papers of which I could make a great deal.--But that is now out of the question.' That the idea of destroying such unfinished works as might be in his possession at the time of his death, was not the effect of any sudden or hasty resolution, appears from the following letter to Mr. Hume, written in 1773, at the time when he was preparing for a journey to London, with the prospect of a pretty long absence from Scotland. 'My dear friend,--As I have left the care of all my literary papers to you, I must tell you, that except those which I carry along with me, there are none worth the publication, but a fragment of a great work, which contains a history of the astronomical systems that were successively in fashion down to the time of Descartes. Whether that might not be published as a fragment of an intended juvenile work, I leave entirely to your judgment, though I begin to suspect myself, that there is more refinement than solidity in some parts of it. This little work you will find in a thin folio paper book in my back-room. All the other loose papers which you will find in that desk, or within the glass folding-doors of a bureau, which stands in my bed-room, together with about eighteen thin paper folio books, which you will likewise find within the same glass folding doors, I desire may be destroyed without any examination. Unless I die very suddenly, I shall take care that the papers I carry with me shall he carefully sent to you.' But he himself long survived his friend Mr. Hume. The persons entrusted with his remaining papers were Dr. Black and Dr. Hutton, his executors, with whom he had long lived in habits of the closest friendship. These gentlemen afterwards collected into a volume, such of the writings of Dr. Smith as were fitted for publication: and they appeared in 1795, under the title of _Essays on Philosophical Subjects_. These essays had been composed early in life, and were designed to illustrate the principles of the human mind, by a theoretical deduction of the progress of the sciences and the liberal arts. The most considerable piece in this volume is, on the principles which lead and direct philosophical inquiries, illustrated by the history of astronomy, ancient physics, and ancient logic and metaphysics. The others, with the exception of an essay on the external senses, relate to the imitative and liberal arts. The contents of this volume, Mr. Smith's executors observe, appear to be parts of a plan he once had formed for giving a connected history of the liberal sciences and elegant arts; but which he had been obliged to abandon, as being far too extensive; and these parts lay beside him neglected till after his death. In them, however, will be found that happy connection, that full and accurate expression, and the same copiousness and facility of illustration, which are conspicuous in the rest of his writings. As a writer, the character of Mr. Smith is so well known, that any observation on his merits, must appear almost unnecessary. His literary fame is circumscribed by no ordinary limits. To the voice of his own country, is added the testimony of Europe, and, indeed, of the civilized world. And had even only one volume of his inestimable writings appeared, his name would have been carried down to posterity in the first rank of those illustrious characters that adorn the last century. In the words of Professor Stewart, it may be said, that,--of the intellectual gifts and attainments by which he was so eminently distinguished;--of the originality and comprehensiveness of his views; the extent, the variety, and the correctness of his information; the inexhaustible fertility of his invention; and the ornaments which his rich and beautiful imagination had borrowed from classical culture;--he has left behind him lasting monuments. One observation more may he added to what is now said on his writings, that, whatever be the nature of his subject, he seldom misses an opportunity of indulging his curiosity, in tracing, from the principles of human nature, or from the circumstances of society, the origin of the opinions and the institutions which he describes. With regard to the private character of this amiable and enlightened philosopher, it fortunately happens, that the most certain of all testimonies to his private worth may be found in the confidence, respect, and attachment which followed him through all the various relations of life. There were many peculiarities, indeed, both in his manners and in his intellectual habits; but to those who knew him, these peculiarities, so far from detracting from the respect which his abilities commanded, added an irresistible charm to his conversation, and strongly displayed the artless simplicity of his heart. The comprehensive speculations with which he had always been occupied, and the variety of materials which his own invention continually supplied to his thoughts, rendered him habitually inattentive to familiar objects, and to common occurrences. On this account, he was remarkable, throughout the whole of life, for speaking to himself when alone, and for being so absent in company, as, on some occasions, to exceed almost what the fancy of a Bruyere could imagine. In company, he was apt to be engrossed by his studies; and appeared, at times, by the motion of his lips, as well as by his looks and gestures, to be in the fervour of composition. It was observed, that he rarely started a topic himself, or even fell in easily with the common dialogue of conversation. When he did speak, however, he was somewhat apt to convey his ideas in the form of a lecture; but this never proceeded from a wish to engross the discourse, or to gratify his vanity. His own inclination disposed him so strongly to enjoy, in silence, the gaiety of those around him, that his friends were often led to concert little schemes, in order to bring on the subjects most likely to interest him. SHORT VIEW OF THE DOCTRINE OF SMITH, COMPARED WITH THAT OF THE FRENCH ECONOMISTS. TRANSLATED FROM THE FRENCH OF M. GARNIER. The ancient philosophers were little accustomed to employ themselves in the observation of those laws which regulate the distribution of riches among the different orders of society in a nation, or in the search after the sources of the increase of its wealth. In fact, political economy is a science of very modern origin; for although, towards the end of the seventeenth century, several writers, both of France and England, had begun to discuss the comparative advantages of agriculture and commerce, yet it was not till the middle of the eighteenth, that any thing like a complete system appeared upon the growth and distribution of national wealth. At this period, the philosophical Quesnai directed his attention to this very abstract subject, and became the founder of a celebrated school, which may boast among its adherents many distinguished men of talents and extensive knowledge. All philosophical sects owe their first origin and foundation to the discovery of some great truth; and it is the madness inspiring their members, to deduce every thing from this new discovery, that contributes most to their downfal. Thus it was with the economists. They saw that the original source of all wealth was the soil, and that the labour of its cultivation produced not only the means of subsisting the labourer, but also a neat surplus, which went to the increase of the existing stock: while, on the other hand, the labour applied to the productions of the earth, the labour of manufactures and commerce, can only add to the material a value exactly equal to that expended during the execution of the work; by which means, in the end, this species of labour operates no real change on the total sum of national riches. They perceived that the landed proprietors are the first receivers of the whole wealth of the community; and that, whatever is consumed by those who are not possessed of land, must come, directly or indirectly, from the former; and hence, that these receive wages from the proprietors, and that the circulation of national wealth, is, in fact, only a succession of exchanges between these two classes of men, the proprietors furnishing their wealth, and the non-proprietors giving as an equivalent their labour and industry. They perceived that a tax, being a portion of the national wealth applied to public use, in every instance, however levied, bears finally upon the landed proprietors, inasmuch as they are the distributors of that wealth, either by retrenching their luxuries, or by loading them with an additional expense; and that, therefore, every tax which is not levied directly on the rude produce of the earth, falls in the end on the landed proprietors, with a surplus produce, from which the amount of the revenue receives no addition. These assertions are almost all incontestible, and capable of a rigorous demonstration; and those who have attempted to shew their falsity, have, in general, opposed them only with idle sophistry. Why, then, has this doctrine met with so little success, and why does every day diminish its reputation? because it agrees in no one point with the moral condition, either of societies or of individuals; because it is continually contradicted by experience, and by the infallible instinct of self-interest; because it does not possess that indispensible sanction of all truths, utility. In fact, of what consequence is it, that the labour of agriculture produces not only what covers its own expenses, but new beings which would never have existed without it, and that it has this advantage over the labour of manufactures and commerce? Does it by any means follow from this, that the former kind of labour is more profitable to the community than the latter? The real essence of all wealth, and that which determines its value, is the necessity under which the consumer lies to purchase it; for, in truth, there is no such thing as wealth properly so called, nor absolute value; but the words wealth and value are really nothing more than the co-relatives of consumption and demand. Even the necessaries of life, in a country which is inhabited, but incapable of commercial intercourse, will not form wealth; and to whatever degree of civilization that country may have reached, still the same principle will hold without alteration. If the sum of national wealth shall in any case have exceeded the sum of demands, then a part of the former sum will cease to bear the name of wealth, and will again be without value. In vain, then, will agriculture multiply her produce; for the instant that it exceeds the bounds of actual consumption, a part will lose its value; and self-interest, that prime director of all labour and industry, seeing herself thus deceived in her expectations, will not fail to turn her activity and efforts to another quarter. In almost every instance, it is an idle refinement to distinguish between the labour of those employed in agriculture, and of those employed in manufactures and commerce; for wealth is necessarily the result of both descriptions of labour, and consumption can no more take place independently of the one, than it can independently of the other. It is by their simultaneous concurrence that any thing becomes consumable, and, of course, that it comes to constitute wealth. How then are we entitled to compare their respective products, since it is impossible to distinguish these in the joint product, and thus appreciate the separate value of each? The value of growing wheat results as much from the industry of the reaper who gathers it in, of the thrasher who separates it from the chaff and straw, of the miller and baker who convert it successively into flour and bread, as it does from that of the ploughman and of the sower. Without the labour of the weaver, the raw material of flax would lose all its value, and be regarded as no way superior to the most useless weed that grows. What then can we gain by any attempts to determine which of these two species of labour conduces most to the advancement of national wealth; or, are they not as idle, as if we busied ourselves in inquiring, whether the right or the left foot is the most useful in walking? It is true, indeed, that in every species of manufacture, the workman adds to the value of the raw material a value exactly equal to that which was expended during the process of manufacture; and what is the conclusion we are to draw this? It is merely, that a certain exchange has taken place and that the food consumed by the manufacturer is now represented by the increase of value resulting from his manual labour. Thus wool, when converted into cloth, has gained a value precisely equal to that expended by the manufacturer during the conversion. But, if it is shown that, without this exchange, the wool would have remained without value, while, on the other hand, the food of the manufacturer would have been without a consumer; it will then appear, that this exchange has, in fact, done what is equivalent to creating these two values, and that it has proved to the society an operation infinitely more useful, than if an equal quantity of labour had been spent in the increase of that rude produce, which already existed in overabundance. The first description of labour has been truly productive; while the last would have been altogether unproductive, since it would not have created any value. 'The soil,' say the economists, 'is the source of all wealth.' But, to prevent this assertion from leading us into erroneous conclusions, it will be necessary to explain it. The materials of all wealth originate primarily in the bosom of the earth; but it is only by the aid of labour that they can ever truly constitute wealth. The earth furnishes the means of wealth; but wealth itself cannot possibly have any existence, unless through that industry and labour which modifies, divides, connects, and combines the various productions of the soil, so as to render them fit for consumption. Commerce, indeed, regards those rude productions as real wealth; but it is only from the consideration, that the proprietor has it always in his power to convert them, at will, into consumable goods, by submitting them to the necessary operations of manufacture. They possess, as yet, merely the virtual value of a promissory-note, which passes current, because the bearer is assured that he can, at pleasure, convert it into cash. Many gold mines, which are well known, are not worked, because their whole produce would not cover the incidental expenses; but the gold which they contain is, in reality, the same with that of our coin; and yet no one would be foolish enough to call it wealth, for there is no probability it will ever be extracted from the mine, or purified; and, of course, it possesses no value. The wild fowl becomes wealth the moment it is in the possession of the sportsman; while those of the very same species, that have escaped his attempts, remain without any title to the term. It is further, without question, true, that all who do not possess property in land must draw their subsistence from wages received, directly or indirectly, from the proprietors, unless they violate all rights, and become robbers. In this respect, every service is alike; the most honourable and the most disgraceful receives each its wages. It is certain, too, that if the circumstances determining the rate of the various kinds of wages remain the same, that is if the offers of service, and the demand, preserve the same proportion to each other, after as well as before the imposition of a tax; then, of course, the wages will continue at the same rate, and thus the tax, however imposed, will uniformly, in the end, fall on that class in the community who furnish the wages; so that they must suffer, either an addition to their former expenses, or a retrenchment of those luxuries they enjoyed. And according as the tax is less directly levied, the greater will be the burden they are subjected to; for besides indemnifying all the other classes who have advanced the tax-money, a further expense must be incurred, in the additional number of persons now necessary to collect it. The natural conclusion we must draw from the theory is, that a tax, directly levied on the neat revenue of the land proprietors, is that which agrees best with reason and justice, and that which bears lightest on the contributors. If, however, this theory should be found to throw entirely out of consideration a multitude of circumstances, which possess a powerful influence over the facility of collecting a tax, as well an over its consequences; and if the general result of this influence be of far more importance than the single advantage of a less burden; then the theory, inasmuch as it neglects a part of those particulars which have their weight in the practice, is contradicted by this last. And this is exactly what happens in the question respecting the comparative advantages and inconveniencies of the two modes of levying taxes. The habit which men have acquired, of viewing money as the representation of every thing which contributes to the support or comfort of life, makes them naturally very unwilling to part with what portion of it they possess, unless it be to procure some necessary or enjoyment. We spend money with pleasure, but it requires an effort to pay a debt, and particularly so when the value received in exchange is not very obvious to the generality, as in the case of a tax. But by levying the tax on some object of consumption, by thus confounding it with the price of the latter, and by making the payment of the duty and of the price of enjoyment become one and the same act, we render the consumer desirous to pay the impost. It is amid the profusion of entertainments, that the duties on wine, salt, &c. are paid; the public treasury thus finding a source of gain in the excitements to expense produced by the extravagance and gaiety of feasts. Another advantage of the same nature, possessed by the indirect mode of taxation, is its extreme divisibility into minute parts, and the facility which it affords to the individual, of paying it off day by day, or even minute by minute. Thus the mechanic, who sups on a portion of his day's wages, will sometimes in one quarter of an hour, pay part of four or five different duties. In the plan of direct taxation, the impost appears without any disguise; it comes upon us unexpectedly, from the imprudence so common to the bulk of mankind, and never fails to carry with it constraint and discouragement. All these considerations are overlooked by the friends of direct taxation; and yet their importance must be well known to all who have ever attended to the art of governing men. But, perhaps, this is not all. An indirect tax, by increasing from time to time the price of the objects of general consumption, when the members of the community have contracted the habit of this consumption, renders these objects a little more costly, and thus gives birth to that increase of labour and industry which is now required to obtain them. But if this tax be so proportioned as not to discourage the consumption, will it not then operate as a universal stimulus upon the active and industrious part of the community? Will it not incite that part to redoubled efforts, by which it may still enjoy those luxuries which, by habit, have become almost necessaries, and, of course, produce a further developement of the productive powers of labour, and of the resources of industry? Are we not, in such a case, to conclude, that after the imposition of a tax, there will exist not only the quantity of labour and industry which was formerly requisite to procure the necessaries and habitual enjoyments of the active class of mankind, but also such an addition to this, as will suffice for the payment of the tax? And will not this tax, or increase of produce required for the tax--as it is spent by the government that receives it--will it not serve to support a new class of consumers, requiring a variety of commodities which the impost enables them to pay? If these conjectures are well founded, it will follow, that indirect taxation, far from having any hurtful influence on wealth and population, must, when wisely regulated, tend to increase and strengthen these two great foundations of national prosperity and power. And it will tend to do this, inasmuch as it bears immediately on the body of the people, and operates on the working and industrious class, which forms the active part of the community; while, on the other hand, direct taxation operates solely on the idle class of landed proprietors--which furnishes us with the characteristic difference existing between these two modes of taxation.[5] These hints, which seem to afford an explanation of that most extraordinary phenomenon in political economy, viz. the rapid and prodigious increase of wealth in those nations which are most loaded with indirect taxes, deserve to be discussed at greater length than our limits will allow. Enough, however, has been said to shew, that no rigorous and purely mathematical calculation will ever enable us to appreciate the real influence of taxes upon the prosperity of a nation. Thus, some of the truths perceived by the economists are of little use in practice; while others are found to be contradicted in their application, by those accessory circumstances which were overlooked in the calculations of the theory. While this sect of philosophers filled all Europe with their speculations, an observer of more depth and ability directed his researches to the same subject, and laboured to establish, on a true and lasting foundation, the doctrines of political economy. Dr. Smith succeeded in discovering a great truth,--the most fruitful in consequences, the most useful in practice, the origin of all the principles of the science, and one which unveiled to him all the mysteries of the growth and distribution of wealth. This great man perceived, that the universal agent in the creation of wealth is labour; and was thence led to analyse the powers of this agent, and to search after the causes to which they owe their origin and increase. The great difference between the doctrine of Smith and of the economists, lies in the point from which they set out, in the reduction of their consequences. The latter go back to the soil as the primary source of all wealth; while the former regards labour as the universal agent which, in every case, produces it. It will appear, at first sight, how very superior the school of the Scotch professor is to that of the French philosophers, with regard to the practical utility, as well as to the application of its precepts. Labour is a power of which man is the machine; and, of course, the increase of this power can only be limited by the indefinite bounds of human intelligence and industry; and it possesses, like these faculties, a susceptibility of being directed by design, and perfected by the aid of study. The earth, on the contrary, if we set aside the influence which labour has over the nature and quantity of its productions, is totally out of our power, in every respect which can render it more or less useful--in its extent, in its situation, and in its physical properties. Thus the science of political economy, considered according to the view of the French economists, must be classed with the natural sciences, which are purely speculative, and can have no other end than the knowledge of the laws which regulate the object of their researches; while, viewed according to the doctrine of Smith, political economy becomes connected with the other moral sciences, which tend to ameliorate the condition of their object, and to carry it to the highest perfection of which it is susceptible. A few words will suffice to explain the grounds of the doctrine of Smith. The power by which a nation creates its wealth is its labour; and the quantity of wealth created will increase in direct proportion as the power increases. But the increase of this last may take place in two ways--in energy, and in extent. Labour increases in energy, when the same quantity of labour furnishes a more abundant product; and the two great means of effecting the increase, or of perfecting the productive powers of labour, are the division of labour, and the invention of such machines as shorten and facilitate the manual operations of industry. Labour increases in extent, when the number of those engaged in it augments in proportion to the increasing number of the consumers, which can take place only in consequence of an increase of capitals, and of those branches of business in which they are employed. Now, to accomplish the increase of labour in both these ways, and to conduct it gradually to the utmost pitch of energy and extent to which it can reach in any nation, considering the situation, the nature, and the peculiarities of its territories, what are the exertions to be made by its government? The subdivision of labour, and the invention and perfecting of machines. These two great means of augmenting the energy of labour, advance in proportion to the extent of the market, or, in other words, in proportion to the number of exchanges which can be made, and to the ease and readiness with which these can take place. Let the government, then, direct all its attention to the enlargement of the market, by forming safe and convenient roads, by the circulation of sterling coin, and by securing the faithful fulfilment of contracts; all of which are indispensible measures, at the same time that, when put in practice, they will never fail to attain the desired end. And the nearer a government approaches to perfection in each of these three points, the more certainly will it produce every possible increase of the national market. The first of the three means is, without doubt, the most essential, as no other expedient whatever can possibly supply its place. The gradual accumulation of capitals is a necessary consequence of the increased productive powers of labour, and it becomes also a cause of still farther increase in these powers; but, in proportion as this accumulation becomes greater and greater, it serves to increase the extent of labour, inasmuch as it multiplies the number of labourers, or the sum of national industry. This increase, however, of the number of hands in the nation employed, will always be regulated by the nature of the business to which the capitals are dedicated. Under this second head of the increase of the products of labour, the exertions of government are much more easy. In fact, it has only to refrain from doing harm. It is only required of it, that it shall protect the natural liberty of industry; that it shall leave open every channel into which, by its own tendencies, industry may be carried; that government shall abandon it to its own direction, and shall not attempt to point its efforts one way more than another; for private interest, that infallible instinct which guides the exertions of all industry, is infinitely better suited than any legislator to judge of the direction which it will with most advantage follow. Let government, then, renounce alike the system of prohibitions and of bounties; let it no longer attempt to impede the efforts of industry by regulations, or to accelerate her progress by rewards; let it leave in the most perfect freedom the exertions of labour and the employment of capital; let its protecting influence extend only to the removal of such obstacles as avarice or ignorance have raised up to the unlimited liberty of industry and commerce;--then capitals will naturally develope themselves, by their own movement, in those directions which are at once most agreeable to the private interest of the capitalist, and most favourable to the increase of the national wealth. METHOD OF FACILITATING THE STUDY OF DR. SMITH'S WORK. Such are the results of the doctrine of Smith, and the fruits we are to reap from his immortal work. The proofs of the principle upon which his opinions are grounded, and the natural and easy manner in which his deductions flow from it, give it an air of simplicity and truth, which render it no less admirable than convincing. This simplicity, however, to be fully perceived, requires much study and consideration; for it cannot be denied that the 'Wealth of Nations' exhibits a striking instance of that defect for which English authors have so often been blamed, viz. a want of method, and a neglect, in their scientific works, of those divisions and arrangements which serve to assist the memory of the reader, and to guide his understanding. The author seems to have seized the pen at the moment when he was most elevated with the importance of his subject, and with the extent of his discoveries. He begins, by displaying before the eyes of his reader the innumerable wonders effected by the division of labour; and with this magnificent and impressive picture, he opens his course of instructions. He then goes back, to consider those circumstances which give rise to or limit this division; and is led by his subject to the definition of values--to the laws which regulate them, to the analysis of their several elements, and to the relations subsisting between those of different natures and origin; all of which are preliminary ideas, which ought naturally to have been explained to the reader before exhibiting to him the complicated instrument of the multiplication of wealth, or unveiling the prodigies of the most powerful of its resources. On the other hand, he has often introduced long digressions, which interrupt the thread of his discussion, and, in many cases, completely destroy the connection of its several parts. Of this description is the digression On the variations in the value of the precious metals during the four last centuries, with a critical examination of the opinions that their value is decreasing--book 1, chap. xi. Upon banks of circulation and paper money--book 2, chap. ii. Upon banks of deposit, and particularly that of Amsterdam--book 4, chap. iii. Upon the advantage of seignorage in the coining of money--book 4, chap. vi. Upon the commerce of grain, and the laws regarding this trade--book 4, chap. v. These different treatises, although they are unquestionably the best that have ever been written on the subjects to which they relate, are, however, so introduced, as to distract the reader's attention--to make him lose sight of the principal object of the work--and to lessen the general effect of it as a whole. To remedy, as far as I am able, these inconveniencies, and to facilitate to beginners the study of the doctrine of Smith, I have thought proper to point out the order which appears to me most agreeable to the natural progress of ideas, and, on this account, best calculated for the purpose of instruction. I would begin by remarking, that the whole doctrine of Smith, upon the origin, multiplication, and distribution of wealth, is contained in his two first books; and that the three others may be read separately, as so many detached treatises, which, no doubt, confirm and develope his opinions, but do not by any means add to them. The third book is an historical and political discussion on the progress which wealth would make in a country where labour and industry were left free; and upon the different causes which have tended, in all the countries of Europe, to reverse this progress. In the fourth book, the author has endeavoured to combat the various systems of political economy which were popular previous to his time; and, in a particular manner, that which is denominated the mercantile system, which has exercised so strong an influence over the financial regulations of the European governments, and particularly over those of England. In the fifth and last book, he considers the expenses of government; the most equitable and convenient modes of providing for these expenses; and lastly, public debts, and the influence they have over national prosperity. The three last books may be read and studied in the same order and arrangement in which they were written, without any difficulty, by one who is completely master of the general doctrine contained in the two first. I regard, then, the two first books, as a complete work, which I would divide into three parts. The 1st relates to values in particular. It contains their definition; the laws which regulate them; the analysis of the elements which constitute a value, or enter into its composition; and the relations which values of different origin bear to each other. The 2d part treats of the general mass of national wealth, which is here divided into separate classes, according to its destination or employment. The 3d and last part explains the manner in which the growth and distribution of national wealth takes place. PART FIRST.--OF VALUES IN PARTICULAR. The essential quality which constitutes wealth, and without which it would not be entitled to the name, is its _exchangeable value_. Exchangeable value differs from the value of utility--book 1, end of chap. iv. The relation existing between two exchangeable values, when expressed by a value generally agreed upon, is denominated _price_. The value generally agreed on among civilized nations, is that of metals. Motives to this preference. Origin of money--book 1, chap. iv. Relation between money and the metal in the state of bullion--book 1, chap. v. The price in money, or _nominal_ price of a thing, differs from its _real_ price, which is its valuation by the quantity of labour expended upon it, or which it represents--ibid. Laws, according to which the price of wealth is naturally fixed; and those accidental circumstances which occasion the actual to differ from the natural price, and which gave rise to a distinction between the _natural_ and the _market price_--book 1, chap. vii. The price of a thing, in most cases, consists of three distinct elements--the wages of the labour, the profit of the master who directs the labour, and the rent of the ground that furnishes the materials on which it is erected. There are, however, some descriptions of merchandize in which the rent forms no part of the price; and others, in which the profit forms no part of it; but none, in which it is not formed principally by the wages--book 1, chap. vi. Of _wages_. Laws, according to which the natural rate of wages is fixed; accidental circumstances which cause them to vary, during a short period, from that natural rate--book 1, chap. viii. Of the _profit_ of capitals. Laws, by which the natural right of profit is fixed; accidental circumstances which, for a long while, increase or diminish it beyond that rate--book 1, chap. ix. Labour and capitals tend naturally to diffuse themselves through every species of employment; and, as certain employments are, by their nature, accompanied with inconveniencies and difficulties which do not occur in others, while these, on the contrary, offer some real or imaginary advantages which are peculiar to themselves; wages and profits should rise and fall in proportion to these advantages and disadvantages; thus forming a complete equilibrium between the various kinds of employment. The arbitrary and oppressive policy of Europe, in many instances, opposes the establishment of this equilibrium, which is conformable to the order of nature--book 1, chap. x. Of the _rent_ of the ground. The nature of rent: the manner in which it enters into the price of wealth; and according to what principles it in some cases forms an integral part of that price, while in others it does not--book 1, chap. xi. Division of the rude produce of the earth into two great classes: 1. That produce which is always necessarily disposed of in such a way as to bring a rent to the landed proprietor. 2. That which, according to circumstances, may be disposed of so as to bring, or so as not to bring, a rent. The produce of the first description is derived from the ground appropriated to furnishing subsistence for man, or for those animals which he uses as food. The value of the produce of the ground cultivated for the support of man, determines the value of the produce of all other ground proper for this species of culture. This general rule allows of some exceptions. Causes of these exceptions. The produce of the second class consists of the materials of clothing, lodging, fuel, and the ornaments of dress and furniture. The value of this species of produce depends on that of the first description. Some circumstances render it possible that the produce of the second kind may be disposed of in such a way as to furnish a rent to the landed proprietor. Principles which regulate the proportion of the price of these products, which is formed by the rent--book 1, chap. xi. Relation between the respective values of the produce of the first class, and those of the produce of the second. Variations which may take place in this relation, and the causes of such variations--ibid. Relation existing between the values of the two descriptions of rude produce above mentioned, and the values of the produce of manufacture. Variations which may occur in this relation--ibid. Certain kinds of rude produce, procured from very different sources, are, however, intended for the same kind of consumption; and hence it happens, the value of one determines and limits that of another--ibid. The relations between values of different natures vary according to the state of society. This state is _improving_, _declining_, or _stationary_; that is to say, society is either increasing in wealth, or falling into poverty, or remaining in the same unchanged state of opulence. Of the effects of these different states of society, Upon the price of wages--book 1, chap. viii. Upon the rate of profit--book 1, chap. ix. Upon the value of the rude produce of the earth, and on that of the produce of manufacture--book 1, chap. xi. Difference, in this respect, between the various kinds of rude produce, viz. 1. Those which the industry of man cannot multiply: 2. Those which his industry can always multiply in proportion to the demand: 3. Those over which human exertions have only an uncertain or limited influence--ibid. PART SECOND.--OF STOCK AND ITS EMPLOYMENT. Wealth, accumulated in the possession of an individual, is of two descriptions, according to its destination or employment: 1. That reserved for immediate consumption. 2. That employed as capital, for the production of a revenue--book 2, chap. i. Capital is also of two kinds: 1. Fixed capital, which produces a revenue and still remains in the same hands 2. Circulating capital, which yields no revenue unless it be employed in trade--book 2 chap. i. The whole accumulated wealth of any community may be divided into three parts: 1. The fund appropriated to the immediate consumption of the proprietors of wealth. 2. The fixed capital of the community. 3. Its circulating capital. The _fixed capital_ of the society consists, 1. Of all machines and instruments of labour; 2. Of all buildings and edifices erected for the purposes of industry; 3. Of every kind of agricultural improvement which can tend to render the soil more productive; 4. Of the talents and skill which certain members of the community have acquired by time and expense. The _circulating capital_ of a community consists, 1. In the money in circulation; 2. In the stock of provisions in the hands both of the producers and of the merchants, and from the sale of which they expect to derive a profit; 3. In the materials of lodging, clothing, dress, and ornament, more or less manufactured, which are in the hands of those who are employed in rendering them fit for use and consumption; 4. In the goods more completely fit for consumption, and preserved in warehouses and shops, by merchants who propose to sell them with a profit--book 2, chap. i. Of the relation existing between the employment of these two kinds of capital--ibid. Of the mode in which the capital withdrawn from circulation is disposed of--ibid. The sources which continually renew the circulating capital, as soon as it enters into the fixed capital, or the stock for immediate consumption, are, 1. Lands; 2. Mines and quarries; 3. Fisheries--ibid. Of the purposes accomplished by circulating coin--book 2, chap. ii; and the expedients which may be resorted to, in order to attain these with less expense, and fewer of those inconveniencies to which money is subjected--ibid. Of the stock lent at interest; and of those things which regulate the proportion that this kind of stock bears to the whole existing stock of the community. The quantity of stock which may be lent depends in no degree upon the quantity of money in circulation--book 2, chap. iv. Of the principles which determine the rate of interest--ibid. There exists a necessary relation between this and the price of land--ibid. PART THIRD--OF THE MANNER IN WHICH THE MULTIPLICATION AND DISTRIBUTION OF WEALTH TAKES PLACE. Wealth uniformly increases in proportion to the augmentation which the power producing it receives, whether that be in _energy_ or in _extent_--book I. introduction. Labour, in which this power increases in _energy_, 1. By the division of the parts of the same work; 2. By the invention of such machines as abridge and facilitate labour--book I, chap. i. The division of labour adds to its energy, 1. By the skill which the workman in this way acquires; 2. By the saving of time--ibid. The invention of machines is itself an effect of the division of labour--ibid. The natural disposition of mankind to exchange with each other the different productions of their respective labours and talents, is the principle which has given birth to the division of labour--book I, chap. ii. The division of labour must of course be limited by the extent of the market; therefore, whatever tends to widen the market, facilitates the progress of a nation towards opulence--book I, chap. iii. Labour gains in _extent_, 1. In proportion to the accumulation of capital; 2. In proportion to the manner in which these are employed--book I, introduction. The accumulation of capitals is hastened by the increase of the proportion existing between the productive and unproductive consumers--book 2, chap. iii. The proportion between these two classes of consumers is determined by the proportion existing between that part of the annual produce destined to the replacement of capital, and that destined for the purpose of revenue--ibid. The proportion between that part of the annual produce which goes to form capital, and that which goes to form revenue, is great in a rich country, and small in a poor one--ibid. In a wealthy country, the rent of land, taken absolutely, is much greater than in a poor country; but, taken in relation to the capital employed, it is much less--book 2, chap. iii. In a wealthy country, the whole profits of its capital are infinitely greater than in one that is poor; although a given quantity of capital will, in a country of the latter description, produce profits much greater than in an opulent one--ibid. It is industry that furnishes the produce; but it is economy that places in the capital that part of it which would otherwise have become revenue--ibid. The economy of individuals arises from a principle which is universally diffused, and one that is continually in action; the desire of ameliorating their condition. This principle supports the existence and increase of national wealth, in spite of the prodigality of some individuals; and even triumphs over the profusion and errors of governments--ibid. Of the different modes of spending money, some are more favourable than others to the increase of national wealth--ibid. Those branches of employment which require a capital, never fail to call forth more or less labour; and thus contribute, in a greater or less degree, to increase the extent of national labour. Capital can be employed only in four ways: 1. In cultivating and improving the earth, or, in other words, multiplying its rude produce; 2. In supporting manufactures; 3. In buying by the gross, to sell in the same manner; 4. In buying by the gross, to sell by retail. These four modes of employing capital are equally necessary to, and serve mutually to support, each other. The first supports, beyond all comparison, the greatest number of productive hands; the second occupies more than the two remaining; and the fourth the fewest of any. Capital may be employed, according to the third mode, in three different ways; each contributing in a very different degree to the support and encouragement of national industry. When capital is employed in exchanging one description of the produce of national industry for another, it then supports as great a portion of industry as can be done by any capital employed in commerce. When it is employed in exchanging the produce of national for that of foreign industry, for the purposes of home consumption, half of it goes to the support of foreign industry; by which means, it is only of half that service to the industry of the nation which it would have been had it been employed another way. Lastly, when it is employed in exchanging one description of the produce of foreign industry for another, or in what is termed the _carrying trade_, it then serves wholly for the support and encouragement of the industry of the two foreign nations, and adds only to the annual produce of the country the profits of the merchant--book 2, chap. v. Self-interest, when left uncontrouled, will necessarily lead the proprietors of capitals to prefer that species of employment which is most favourable to national industry, because it is, at the same time, most profitable for themselves--ibid. For, when capitals have been employed in a way different from that suggested by the infallible instinct of self-interest, it has always been in consequence of the peculiar circumstances of the European governments, and of that influence which the vulgar prejudices of merchants have had over the system of administration which these governments have adopted. The account of these circumstances, with the discussion of the errors of this system, form the matter of the third and fourth books. * * * * * Political Economy is, of all sciences, that which affords most room for prejudices, and in which they are most liable to become deeply rooted. The desire of improving our condition, that universal principle, which continually acts upon every member of the community, is ever directing the thoughts of each individual to the means of increasing his private fortune. But should this individual ever chance to raise his views to the management of the public money, he would naturally be led to reason from analogy, and apply to the general interest of his country those principles which reflection and experience have led him to regard as the best guides in the conduct of his own private affairs. Thus, from attending to the fact, that money constitutes a part of the productive stock in the fortune of an individual, and that his fortune increases in proportion to the increase of this article, there arises that erroneous opinion so generally received, that money is a constituent part of national wealth, and that a country becomes rich, in proportion as it receives money from those countries with which it has commercial connections. Merchants who have been accustomed to retire each night to their desks, to count, with eagerness, the quantity of currency, or of good debts, which their day's sale has produced, calculating their profits only by this result, and confident that such a calculation has never deceived them, are naturally led to think that the affairs of the nation must follow the same rule; and they have been strengthened in this opinion by that unshaken confidence which a long and never-failing experience, that has been the source of wealth and prosperity, inspires. Hence those extravagant opinions respecting the advantages and profits of foreign commerce, and the importance of money; hence those absurd calculations that have been made regarding what is termed the balance of trade, the thermometer of public prosperity; hence those systems of regulations, and those oppressive monopolies, which are resorted to for the purpose of making one side of the balance preponderate; hence, too, those bloody and destructive wars, which have raged in both hemispheres, from the period in which the road to the Indies, and to the new world, became familiar to European nations. When we observe, that the many bloody wars that have been waged in the different parts of the world for these two last centuries, and even the present war, in many points of view, have had, as their principal end, the maintenance of some monopoly, contrary even to the interest of the nation armed to protect it; we shall feel the full importance of those benefits which the illustrious author of the 'Wealth of Nations' has endeavoured to confer upon mankind, by victoriously combating such strong and baneful prejudices. But we cannot help deeply lamenting, to see how slowly, and with what difficulty, reason in all its strength, and truth in all its clearness, regain the possession of these territories which error and passion have so rapidly overrun. The prejudices so successfully attacked by Dr. Smith, appear again and again, with undiminished assurance, in the tribunals of legislature, in the councils of administration, in the cabinets of ministry, and in the writings of politicians. They still talk of the importance of foreign and colonial commerce; they still attempt to determine the balance of trade; they renew all the reveries of political arithmetic, as if these questions had not been determined by Smith, in a way which renders them no longer capable of controversy. It was in the midst of a country, the most deeply imbued with mercantile prejudices; the most completely subjected to its prohibitory policy, that Dr. Smith sapped the foundations of this absurd and tyrannical system; it was at the very moment when England, in alarm, saw, with terror, the possibility of a separation from her American colonies: it was then that he derided the universal fear, and proudly prophesied the success of the colonists, and their approaching independence; and that he confidently announced, what experience has since completely affirmed, the happy consequences which this separation and this independence, so much dreaded, would produce upon the prosperity, both of Great Britain and her colonies--book 4, chap. vii. part 3. The wealth of communities is so intimately connected with their civil and political existence, that the author has been drawn by his subject into numerous other discussions, which seem more or less removed from it; and in which we discover the same sagacity of observation, the same depth of research, and the same force of reasoning. The advantages of a complete and permanent freedom in the corn trade have never been better shown; and they have been proved by Dr. Smith, to arise from that fruitful source of wealth, the division of labour--book 4, chap. v. The national defence and public education, two objects of very high importance, have also been discussed at length by our author. He proves, that, in conformity to that desire to better our condition, by which all men are directed, and upon which the author has founded his whole doctrine, the teacher, whose wages are a fixed salary, will have no other end than to spare himself every trouble, and dedicate as little attention as possible to his pupils; while he that is paid in proportion to his labour, will naturally endeavour, by every means in his power, to increase his success, at the same time that he confers a great advantage on his scholars and on society. He confirms his theoretical opinions by incontestible examples---book 5, chap. i. part 3. The superiority of regular troops over national militia is proved in theory, by the division of labour; and in practice, by the most remarkable facts in history--book 5, chap. i, part 1. AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. INTRODUCTION AND PLAN OF THE WORK. The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations. According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion. But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances. The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go a-hunting and fishing. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire. The causes of this improvement in the productive powers of labour, and the order according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, and judgment, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; and those plans have not all been equally favourable to the greatness of its produce. The policy of some nations has given extraordinary encouragement to the industry of the country; that of others to the industry of towns. Scarce any nation has dealt equally and impartially with every sort of industry. Since the downfall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce, the industry of towns, than to agriculture, the industry of the country. The circumstances which seem to have introduced and established this policy are explained in the third book. Though those different plans were, perhaps, first introduced by the private interests and prejudices of particular orders of men, without any regard to, or foresight of, their consequences upon the general welfare of the society; yet they have given occasion to very different theories of political economy; of which some magnify the importance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. I have endeavoured, in the fourth book, to explain as fully and distinctly as I can those different theories, and the principal effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these four first books. The fifth and last book treats of the revenue of the sovereign, or commonwealth. In this book I have endeavoured to shew, first, what are the necessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of the whole society, and which of them, by that of some particular part only, or of some particular members of it: secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society, and what are the principal advantages and inconveniencies of each of those methods; and, thirdly and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society. BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAP. I. OF THE DIVISION OF LABOUR. The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is anywhere directed, or applied, seem to have been the effects of the division of labour. The effects of the division of labour, in the general business of society, will be more easily understood, by considering in what manner it operates in some particular manufactures. It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried further in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed. To take an example, therefore, from a very trifling manufacture, but one in which the division of labour has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind, where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth, part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations. In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one, though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another, seems to have taken place in consequence of this advantage. This separation, too, is generally carried furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man, in a rude state of society, being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour, too, which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn-provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France in perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures, at least if those manufactures suit the soil, climate, and situation, of the rich country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the present high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hardware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper, too, in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist. This great increase in the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. First, the improvement of the dexterity of the workmen, necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man's business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman. A common smith, who, though accustomed to handle the hammer, has never been used to make nails, if, upon some particular occasion, he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those, too, very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom, with his utmost diligence, make more than eight hundred or a thousand nails in a day. I have seen several boys, under twenty years of age, who had never exercised any other trade but that of making nails, and who, when they exerted themselves, could make, each of them, upwards of two thousand three hundred nails in a day. The making of a nail, however, is by no means one of the simplest operations. The same person blows the bellows, stirs or mends the fire as there is occasion, heats the iron, and forges every part of the nail: in forging the head, too, he in obliged to change his tools. The different operations into which the making of a pin, or of a metal button, is subdivided, are all of them much more simple, and the dexterity of the person, of whose life it has been the sole business to perform them, is usually much greater. The rapidity with which some of the operations of those manufactures are performed, exceeds what the human hand could, by those who had never seen them, be supposed capable of acquiring. Secondly, The advantage which is gained by saving the time commonly lost in passing from one sort of work to another, is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools. A country weaver, who cultivates a small farm, must loose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is, no doubt, much less. It is, even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another. When he first begins the new work, he is seldom very keen and hearty; his mind, as they say, does not go to it, and for some time he rather trifles than applies to good purpose. The habit of sauntering, and of indolent careless application, which is naturally, or rather necessarily, acquired by every country workman who is obliged to change his work and his tools every half hour, and to apply his hand in twenty different ways almost every day of his life, renders him almost always slothful and lazy, and incapable of any vigorous application, even on the most pressing occasions. Independent, therefore, of his deficiency in point of dexterity, this cause alone must always reduce considerably the quantity of work which he is capable of performing. Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by which labour is to much facilitated and abridged, seems to have been originally owing to the division of labour. Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things. But, in consequence of the division of labour, the whole of every man's attention comes naturally to be directed towards some one very simple object. It is naturally to be expected, therefore, that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular work, wherever the nature of it admits of such improvement. A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shewn very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work. In the first fire engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour. All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers, or men of speculation, whose trade it is not to do any thing, but to observe every thing, and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects. In the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment, too, it is subdivided into a great number of different branches, each of which affords occupation to a peculiar tribe or class of philosophers; and this subdivision of employment in philosophy, as well as in every other business, improves dexterity, and saves time. Each individual becomes more expert in his own peculiar branch, more work is done upon the whole, and the quantity of science is considerably increased by it. It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of the society. Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people, of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country? How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world? What a variety of labour, too, is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brickmaker, the bricklayer, the workmen who attend the furnace, the millwright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him, perhaps, by a long sea and a long land-carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that, without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to, what we very falsely imagine, the easy and simple manner in which he is commonly accommodated. Compared, indeed, with the more extravagant luxury of the great, his accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king, the absolute masters of the lives and liberties of ten thousand naked savages. CHAP. II. OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR. This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature, which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of these original principles in human nature, of which no further account can be given, or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquire. It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts. Two greyhounds, in running down the same hare, have sometimes the appearance of acting in some sort of concert. Each turns her towards his companion, or endeavours to intercept her when his companion turns her towards himself. This, however, is not the effect of any contract, but of the accidental concurrence of their passions in the same object at that particular time. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal, by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something either of a man, or of another animal, it has no other means of persuasion, but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours, by a thousand attractions, to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals, each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old clothes which another bestows upon him he exchanges for other clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion. As it is by treaty, by barter, and by purchase, that we obtain from one another the greater part of those mutual good offices which we stand in need of, so it is this same trucking disposition which originally gives occasion to the division of labour. In a tribe of hunters or shepherds, a particular person makes bows and arrows, for example, with more readiness and dexterity than any other. He frequently exchanges them for cattle or for venison, with his companions; and he finds at last that he can, in this manner, get more cattle and venison, than if he himself went to the field to catch them. From a regard to his own interest, therefore, the making of bows and arrows grows to be his chief business, and he becomes a sort of armourer. Another excels in making the frames and covers of their little huts or moveable houses. He is accustomed to be of use in this way to his neighbours, who reward him in the same manner with cattle and with venison, till at last he finds it his interest to dedicate himself entirely to this employment, and to become a sort of house-carpenter. In the same manner a third becomes a smith or a brazier; a fourth, a tanner or dresser of hides or skins, the principal part of the clothing of savages. And thus the certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent of genius he may possess for that particular species of business. The difference of natural talents in different men, is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they were, perhaps, very much alike, and neither their parents nor playfellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents. As it is this disposition which forms that difference of talents, so remarkable among men of different professions, so it is this same disposition which renders that difference useful. Many tribes of animals, acknowledged to be all of the same species, derive from nature a much more remarkable distinction of genius, than what, antecedent to custom and education, appears to take place among men. By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last from a shepherd's dog. Those different tribes of animals, however, though all of the same species, are of scarce any use to one another. The strength of the mastiff is not in the least supported either by the swiftness of the grey-hound, or by the sagacity of the spaniel, or by the docility of the shepherd's dog. The effects of those different geniuses and talents, for want of the power or disposition to barter and exchange, cannot be brought into a common stock, and do not in the least contribute to the better accommodation and conveniency of the species. Each animal is still obliged to support and defend itself, separately and independently, and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. Among men, on the contrary, the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other men's talents he has occasion for. CHAP. III. THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET. As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. There are some sorts of industry, even of the lowest kind, which can be carried on nowhere but in a great town. A porter, for example, can find employment and subsistence in no other place. A village is by much too narrow a sphere for him; even an ordinary market-town is scarce large enough to afford him constant occupation. In the lone houses and very small villages which are scattered about in so desert a country as the highlands of Scotland, every farmer must be butcher, baker, and brewer, for his own family. In such situations we can scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of another of the same trade. The scattered families that live at eight or ten miles distance from the nearest of them, must learn to perform themselves a great number of little pieces of work, for which, in more populous countries, they would call in the assistance of these workmen. Country workmen are almost everywhere obliged to apply themselves to all the different branches of industry that have so much affinity to one another as to be employed about the same sort of materials. A country carpenter deals in every sort of work that is made of wood; a country smith in every sort of work that is made of iron. The former is not only a carpenter, but a joiner, a cabinet-maker, and even a carver in wood, as well as a wheel-wright, a plough-wright, a cart and waggon-maker. The employments of the latter are still more various. It is impossible there should be such a trade as even that of a nailer in the remote and inland parts of the highlands of Scotland. Such a workman at the rate of a thousand nails a-day, and three hundred working days in the year, will make three hundred thousand nails in the year. But in such a situation it would be impossible to dispose of one thousand, that is, of one day's work in the year. As by means of water-carriage, a more extensive market is opened to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. A broad-wheeled waggon, attended by two men, and drawn by eight horses, in about six weeks time, carries and brings back between London and Edinburgh near four ton weight of goods. In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back two hundred ton weight of goods. Six or eight men, therefore, by the help of water-carriage, can carry and bring back, in the same time, the same quantity of goods between London and Edinburgh as fifty broad-wheeled waggons, attended by a hundred men, and drawn by four hundred horses. Upon two hundred tons of goods, therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be charged the maintenance of a hundred men for three weeks, and both the maintenance and what is nearly equal to maintenance the wear and tear of four hundred horses, as well as of fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be charged only the maintenance of six or eight men, and the wear and tear of a ship of two hundred tons burthen, together with the value of the superior risk, or the difference of the insurance between land and water-carriage. Were there no other communication between those two places, therefore, but by land-carriage, as no goods could be transported from the one to other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce which at present subsists between them, and consequently could give but a small part of that encouragement which they at present mutually afford to each other's industry. There could be little or no commerce of any kind between the distant parts of the world. What goods could bear the expense of land-carriage between London and Calcutta? Or if there were any so precious as to be able to support this expense, with what safety could they be transported through the territories of so many barbarous nations? Those two cities, however, at present carry on a very considerable commerce with each other, and by mutually affording a market, give a good deal of encouragement to each other's industry. Since such, therefore, are the advantages of water-carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labour, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods, but the country which lies round about them, and separates them from the sea-coast, and the great navigable rivers. The extent of the market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies, the plantations have constantly followed either the sea-coast or the banks of the navigable rivers, and have scarce anywhere extended themselves to any considerable distance from both. The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves, except such as are caused by the wind only, was, by the smoothness of its surface, as well as by the multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to the infant navigation of the world; when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship-building, to abandon themselves to the boisterous waves of the ocean. To pass beyond the pillars of Hercules, that is, to sail out of the straits of Gibraltar, was, in the ancient world, long considered as a most wonderful and dangerous exploit of navigation. It was late before even the Phoenicians and Carthaginians, the most skilful navigators and ship-builders of those old times, attempted it; and they were, for a long time, the only nations that did attempt it. Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. Upper Egypt extends itself nowhere above a few miles from the Nile; and in Lower Egypt, that great river breaks itself into many different canals, which, with the assistance of a little art, seem to have afforded a communication by water-carriage, not only between all the great towns, but between all the considerable villages, and even to many farm-houses in the country, nearly in the same manner as the Rhine and the Maese do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt. The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal in the East Indies, and in some of the eastern provinces of China, though the great extent of this antiquity is not authenticated by any histories of whose authority we, in this part of the world, are well assured. In Bengal, the Ganges, and several other great rivers, form a great number of navigable canals, in the same manner as the Nile does in Egypt. In the eastern provinces of China, too, several great rivers form, by their different branches, a multitude of canals, and, by communicating with one another, afford an inland navigation much more extensive than that either of the Nile or the Ganges, or, perhaps, than both of them put together. It is remarkable, that neither the ancient Egyptians, nor the Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their great opulence from this inland navigation. All the inland parts of Africa, and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas, the ancient Scythia, the modern Tartary and Siberia, seem, in all ages of the world, to have been in the same barbarous and uncivilized state in which we find them at present. The sea of Tartary is the frozen ocean, which admits of no navigation; and though some of the greatest rivers in the world run through that country, they are at too great a distance from one another to carry commerce and communication through the greater part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulfs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of that great continent; and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. The commerce, besides, which any nation can carry on by means of a river which does not break itself into any great number of branches or canals, and which runs into another territory before it reaches the sea, can never be very considerable, because it is always in the power of the nations who possess that other territory to obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to the different states of Bavaria, Austria, and Hungary, in comparison of what it would be, if any of them possessed the whole of its course, till it falls into the Black sea. CHAP. IV. OF THE ORIGIN AND USE OF MONEY. When the division of labor has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes, in some measure, a merchant, and the society itself grows to be what is properly a commercial society. But when the division of labour first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in in operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former, consequently, would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant, nor they his customers; and they are all of them thus mutually less serviceable to one another. In order to avoid the inconveniency of such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. Many different commodities, it is probable, were successively both thought of and employed for this purpose. In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most inconvenient one, yet, in old times, we find things were frequently valued according to the number of cattle which had been given in exchange for them. The armour of Diomede, says Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland, where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker's shop or the ale-house. In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference, for this employment, to metals above every other commodity. Metals can not only be kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be re-united again; a quality which no other equally durable commodities possess, and which, more than any other quality, renders them fit to be the instruments of commerce and circulation. The man who wanted to buy salt, for example, and had nothing but cattle to give in exchange for it, must have been obliged to buy salt to the value of a whole ox, or a whole sheep, at a time. He could seldom buy less than this, because what he was to give for it could seldom be divided without loss; and if he had a mind to buy more, he must, for the same reasons, have been obliged to buy double or triple the quantity, the value, to wit, of two or three oxen, or of two or three sheep. If, on the contrary, instead of sheep or oxen, he had metals to give in exchange for it, he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for. Different metals have been made use of by different nations for this purpose. Iron was the common instrument of commerce among the ancient Spartans, copper among the ancient Romans, and gold and silver among all rich and commercial nations. Those metals seem originally to have been made use of for this purpose in rude bars, without any stamp or coinage. Thus we are told by Pliny[6], upon the authority of Timæus, an ancient historian, that, till the time of Servius Tullius, the Romans had no coined money, but made use of unstamped bars of copper, to purchase whatever they had occasion for. These rude bars, therefore, performed at this time the function of money. The use of metals in this rude state was attended with two very considerable inconveniences; first, with the trouble of weighing, and secondly, with that of assaying them. In the precious metals, where a small difference in the quantity makes a great difference in the value, even the business of weighing, with proper exactness, requires at least very accurate weights and scales. The weighing of gold, in particular, is an operation of some nicety. In the coarser metals, indeed, where a small error would be of little consequence, less accuracy would, no doubt, be necessary. Yet we should find it excessively troublesome if every time a poor man had occasion either to buy or sell a farthing's worth of goods, he was obliged to weigh the farthing. The operation of assaying is still more difficult, still more tedious; and, unless part of the metal is fairly melted in the crucible, with proper dissolvents, any conclusion that can be drawn from it is extremely uncertain. Before the institution of coined money, however, unless they went through this tedious and difficult operation, people must always have been liable to the grossest frauds and impositions; and instead of a pound weight of pure silver, or pure copper, might receive, in exchange for their goods, an adulterated composition of the coarsest and cheapest materials, which had, however, in their outward appearance, been made to resemble these metals. To prevent such abuses, to facilitate exchanges, and thereby to encourage all sorts of industry and commerce, it has been found necessary, in all countries that have made any considerable advances towards improvement, to affix a public stamp upon certain quantities of such particular metals, as were in those countries commonly made use of to purchase goods. Hence the origin of coined money, and of those public offices called mints; institutions exactly of the same nature with these of the aulnagers and stamp-masters of woollen and linen cloth. All of them are equally meant to ascertain, by means of a public stamp, the quantity and uniform goodness of those different commodities when brought to market. The first public stamps of this kind that were affixed to the current metals, seem in many cases to have been intended to ascertain, what it was both most difficult and most important to ascertain, the goodness or fineness of the metal, and to have resembled the sterling mark which is at present affixed to plate and bars of silver, or the Spanish mark which is sometimes affixed to ingots of gold, and which, being struck only upon one side of the piece, and not covering the whole surface, ascertains the fineness, but not the weight of the metal. Abraham weighs to Ephron the four hundred shekels of silver which he had agreed to pay for the field of Machpelah. They are said, however, to be the current money of the merchant, and yet are received by weight, and not by tale, in the same manner as ingots of gold and bars of silver are at present. The revenues of the ancient Saxon kings of England are said to have been paid, not in money, but in kind, that is, in victuals and provisions of all sorts. William the Conqueror introduced the custom of paying them in money. This money, however, was for a long time, received at the exchequer, by weight, and not by tale. The inconveniency and difficulty of weighing those metals with exactness, gave occasion to the institution of coins, of which the stamp, covering entirely both sides of the piece, and sometimes the edges too, was supposed to ascertain not only the fineness, but the weight of the metal. Such coins, therefore, were received by tale, as at present, without the trouble of weighing. The denominations of those coins seem originally to have expressed the weight or quantity of metal contained in them. In the time of Servius Tullius, who first coined money at Rome, the Roman as or pondo contained a Roman pound of good copper. It was divided, in the same manner as our Troyes pound, into twelve ounces, each of which contained a real ounce of good copper. The English pound sterling, in the time of Edward I. contained a pound, Tower weight, of silver of a known fineness. The Tower pound seems to have been something more than the Roman pound, and something less than the Troyes pound. This last was not introduced into the mint of England till the 18th of Henry the VIII. The French livre contained, in the time of Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair of Troyes in Champaign was at that time frequented by all the nations of Europe, and the weights and measures of so famous a market were generally know and esteemed. The Scots money pound contained, from the time of Alexander the First to that of Robert Bruce, a pound of silver of the same weight and fineness with the English pound sterling. English, French, and Scots pennies, too, contained all of them originally a real penny-weight of silver, the twentieth part of an ounce, and the two hundred-and-fortieth part of a pound. The shilling, too, seems originally to have been the denomination of a weight. _When wheat is at twelve shillings the quarter_, says an ancient statute of Henry III. _then wastel bread of a farthing shall weigh eleven shillings and fourpence_. The proportion, however, between the shilling, and either the penny on the one hand, or the pound on the other, seems not to have been so constant and uniform as that between the penny and the pound. During the first race of the kings of France, the French sou or shilling appears upon different occasions to have contained five, twelve, twenty, and forty pennies. Among the ancient Saxons, a shilling appears at one time to have contained only five pennies, and it is not improbable that it may have been as variable among them as among their neighbours, the ancient Franks. From the time of Charlemagne among the French, and from that of William the Conqueror among the English, the proportion between the pound, the shilling, and the penny, seems to have been uniformly the same as at present, though the value of each has been very different; for in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins. The Roman as, in the latter ages of the republic, was reduced to the twenty-fourth part of its original value, and, instead of weighing a pound, came to weigh only half an ounce. The English pound and penny contain at present about a third only; the Scots pound and penny about a thirty-sixth; and the French pound and penny about a sixty-sixth part of their original value. By means of those operations, the princes and sovereign states which performed them were enabled, in appearance, to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. It was indeed in appearance only; for their creditors were really defrauded of a part of what was due to them. All other debtors in the state were allowed the same privilege, and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. Such operations, therefore, have always proved favourable to the debtor, and ruinous to the creditor, and have sometimes produced a greater and more universal revolution in the fortunes of private persons, than could have been occasioned by a very great public calamity. It is in this manner that money has become, in all civilized nations, the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another. What are the rules which men naturally observe, in exchanging them either for money, or for one another, I shall now proceed to examine. These rules determine what may be called the relative or exchangeable value of goods. The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water; but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. In order to investigate the principles which regulate the exchangeable value of commodities, I shall endeavour to shew, First, what is the real measure of this exchangeable value; or wherein consists the real price of all commodities. Secondly, what are the different parts of which this real price is composed or made up. And, lastly, what are the different circumstances which sometimes raise some or all of these different parts of price above, and sometimes sink them below, their natural or ordinary rate; or, what are the causes which sometimes hinder the market price, that is, the actual price of commodities, from coinciding exactly with what may be called their natural price. I shall endeavour to explain, as fully and distinctly as I can, those three subjects in the three following chapters, for which I must very earnestly entreat both the patience and attention of the reader: his patience, in order to examine a detail which may, perhaps, in some places, appear unnecessarily tedious; and his attention, in order to understand what may perhaps, after the fullest explication which I am capable of giving it, appear still in some degree obscure. I am always willing to run some hazard of being tedious, in order to be sure that I am perspicuous; and, after taking the utmost pains that I can to be perspicuous, some obscurity may still appear to remain upon a subject, in its own nature extremely abstracted. CHAP. V. OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY. Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man's own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour therefore, is the real measure of the exchangeable value of all commodities. The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money, or with goods, is purchased by labour, as much as what we acquire by the toil of our own body. That money, or those goods, indeed, save us this toil. They contain the value of a certain quantity of labour, which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. Wealth, as Mr Hobbes says, is power. But the person who either acquires, or succeeds to a great fortune, does not necessarily acquire or succeed to any political power, either civil or military. His fortune may, perhaps, afford him the means of acquiring both; but the mere possession of that fortune does not necessarily convey to him either. The power which that possession immediately and directly conveys to him, is the power of purchasing a certain command over all the labour, or over all the produce of labour which is then in the market. His fortune is greater or less, precisely in proportion to the extent of this power, or to the quantity either of other men's labour, or, what is the same thing, of the produce of other men's labour, which it enables him to purchase or command. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner. But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hours easy business; or in an hour's application to a trade which it cost ten years labour to learn, than in a month's industry, at an ordinary and obvious employment. But it is not easy to find any accurate measure either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality which, though not exact, is sufficient for carrying on the business of common life. Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities, than with labour. It is more natural, therefore, to estimate its exchangeable value by the quantity of some other commodity, than by that of the labour which it can produce. The greater part of people, too, understand better what is meant by a quantity of a particular commodity, than by a quantity of labour. The one is a plain palpable object; the other an abstract notion, which, though it can be made sufficiently intelligible, is not altogether so natural and obvious. But when barter ceases, and money has become the common instrument of commerce, every particular commodity is more frequently exchanged for money than for any other commodity. The butcher seldom carries his beef or his mutton to the baker or the brewer, in order to exchange them for bread or for beer; but he carries them to the market, where he exchanges them for money, and afterwards exchanges that money for bread and for beer. The quantity of money which he gets for them regulates, too, the quantity of bread and beer which he can afterwards purchase. It is more natural and obvious to him, therefore, to estimate their value by the quantity of money, the commodity for which he immediately exchanges them, than by that of bread and beer, the commodities for which he can exchange them only by the intervention of another commodity; and rather to say that his butcher's meat is worth threepence or fourpence a-pound, than that it is worth three or four pounds of bread, or three or four quarts of small beer. Hence it comes to pass, that the exchangeable value of every commodity is more frequently estimated by the quantity of money, than by the quantity either of labour or of any other commodity which can be had in exchange for it. Gold and silver, however, like every other commodity, vary in their value; are sometimes cheaper and sometimes dearer, sometimes of easier and sometimes of more difficult purchase. The quantity of labour which any particular quantity of them can purchase or command, or the quantity of other goods which it will exchange for, depends always upon the fertility or barrenness of the mines which happen to be known about the time when such exchanges are made. The discovery of the abundant mines of America, reduced, in the sixteenth century, the value of gold and silver in Europe to about a third of what it had been before. As it cost less labour to bring those metals from the mine to the market, so, when they were brought thither, they could purchase or command less labour; and this revolution in their value, though perhaps the greatest, is by no means the only one of which history gives some account. But as a measure of quantity, such as the natural foot, fathom, or handful, which is continually varying in its own quantity, can never be an accurate measure of the quantity of other things; so a commodity which is itself continually varying in its own value, can never be an accurate measure of the value of other commodities. Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only. But though equal quantities of labour are always of equal value to the labourer, yet to the person who employs him they appear sometimes to be of greater, and sometimes of smaller value. He purchases them sometimes with a greater, and sometimes with a smaller quantity of goods, and to him the price of labour seems to vary like that of all other things. It appears to him dear in the one case, and cheap in the other. In reality, however, it is the goods which are cheap in the one case, and dear in the other. In this popular sense, therefore, labour, like commodities, may be said to have a real and a nominal price. Its real price may be said to consist in the quantity of the necessaries and conveniencies of life which are given for it; its nominal price, in the quantity of money. The labourer is rich or poor, is well or ill rewarded, in proportion to the real, not to the nominal price of his labour. The distinction between the real and the nominal price of commodities and labour is not a matter of mere speculation, but may sometimes be of considerable use in practice. The same real price is always of the same value; but on account of the variations in the value of gold and silver, the same nominal price is sometimes of very different values. When a landed estate, therefore, is sold with a reservation of a perpetual rent, if it is intended that this rent should always be of the same value, it is of importance to the family in whose favour it is reserved, that it should not consist in a particular sum of money. Its value would in this case be liable to variations of two different kinds: first, to those which arise from the different quantities of gold and silver which are contained at different times in coin of the same denomination; and, secondly, to those which arise from the different values of equal quantities of gold and silver at different times. Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their coins; but they seldom have fancied that they had any to augment it. The quantity of metal contained in the coins, I believe of all nations, has accordingly been almost continually diminishing, and hardly ever augmenting. Such variations, therefore, tend almost always to diminish the value of a money rent. The discovery of the mines of America diminished the value of gold and silver in Europe. This diminution, it is commonly supposed, though I apprehend without any certain proof, is still going on gradually, and is likely to continue to do so for a long time. Upon this supposition, therefore, such variations are more likely to diminish than to augment the value of a money rent, even though it should be stipulated to be paid, not in such a quantity of coined money of such a denomination (in so many pounds sterling, for example), but in so many ounces, either of pure silver, or of silver of a certain standard. The rents which have been reserved in corn, have preserved their value much better than those which have been reserved in money, even where the denomination of the coin has not been altered. By the 18th of Elizabeth, it was enacted, that a third of the rent of all college leases should be reserved in corn, to be paid either in kind, or according to the current prices at the nearest public market. The money arising from this corn rent, though originally but a third of the whole, is, in the present times, according to Dr. Blackstone, commonly near double of what arises from the other two-thirds. The old money rents of colleges must, according to this account, have sunk almost to a fourth part of their ancient value, or are worth little more than a fourth part of the corn which they were formerly worth. But since the reign of Philip and Mary, the denomination of the English coin has undergone little or no alteration, and the same number of pounds, shillings, and pence, have contained very nearly the same quantity of pure silver. This degradation, therefore, in the value of the money rents of colleges, has arisen altogether from the degradation in the price of silver. When the degradation in the value of silver is combined with the diminution of the quantity of it contained in the coin of the same denomination, the loss is frequently still greater. In Scotland, where the denomination of the coin has undergone much greater alterations than it ever did in England, and in France, where it has undergone still greater than it ever did in Scotland, some ancient rents, originally of considerable value, have, in this manner, been reduced almost to nothing. Equal quantities of labour will, at distant times, be purchased more nearly with equal quantities of corn, the subsistence of the labourer, than with equal quantities of gold and silver, or, perhaps, of any other commodity. Equal quantities of corn, therefore, will, at distant times, be more nearly of the same real value, or enable the possessor to purchase or command more nearly the same quantity of the labour of other people. They will do this, I say, more nearly than equal quantities of almost any other commodity; for even equal quantities of corn will not do it exactly. The subsistence of the labourer, or the real price of labour, as I shall endeavour to shew hereafter, is very different upon different occasions; more liberal in a society advancing to opulence, than in one that is standing still, and in one that is standing still, than in one that is going backwards. Every other commodity, however, will, at any particular time, purchase a greater or smaller quantity of labour, in proportion to the quantity of subsistence which it can purchase at that time. A rent, therefore, reserved in corn, is liable only to the variations in the quantity of labour which a certain quantity of corn can purchase. But a rent reserved in any other commodity is liable, not only to the variations in the quantity of labour which any particular quantity of corn can purchase, but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. Though the real value of a corn rent, it is to be observed, however, varies much less from century to century than that of a money rent, it varies much more from year to year. The money price of labour, as I shall endeavour to shew hereafter, does not fluctuate from year to year with the money price of corn, but seems to be everywhere accommodated, not to the temporary or occasional, but to the average or ordinary price of that necessary of life. The average or ordinary price of corn, again is regulated, as I shall likewise endeavour to shew hereafter, by the value of silver, by the richness or barrenness of the mines which supply the market with that metal, or by the quantity of labour which must be employed, and consequently of corn which must be consumed, in order to bring any particular quantity of silver from the mine to the market. But the value of silver, though it sometimes varies greatly from century to century, seldom varies much from year to year, but frequently continues the same, or very nearly the same, for half a century or a century together. The ordinary or average money price of corn, therefore, may, during so long a period, continue the same, or very nearly the same, too, and along with it the money price of labour, provided, at least, the society continues, in other respects, in the same, or nearly in the same, condition. In the mean time, the temporary and occasional price of corn may frequently be double one year of what it had been the year before, or fluctuate, for example, from five-and-twenty to fifty shillings the quarter. But when corn is at the latter price, not only the nominal, but the real value of a corn rent, will be double of what it is when at the former, or will command double the quantity either of labour, or of the greater part of other commodities; the money price of labour, and along with it that of most other things, continuing the same during all these fluctuations. Labour, therefore, it appears evidently, is the only universal, as well as the only accurate, measure of value, or the only standard by which we can compare the values of different commodities, at all times, and at all places. We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were given for them. We cannot estimate it from year to year by the quantities of corn. By the quantities of labour, we can, with the greatest accuracy, estimate it, both from century to century, and from year to year. From century to century, corn is a better measure than silver, because, from century to century, equal quantities of corn will command the same quantity of labour more nearly than equal quantities of silver. From year to year, on the contrary, silver is a better measure than corn, because equal quantities of it will more nearly command the same quantity of labour. But though, in establishing perpetual rents, or even in letting very long leases, it may be of use to distinguish between real and nominal price; it is of none in buying and selling, the more common and ordinary transactions of human life. At the same time and place, the real and the nominal price of all commodities are exactly in proportion to one another. The more or less money you get for any commodity, in the London market, for example, the more or less labour it will at that time and place enable you to purchase or command. At the same time and place, therefore, money is the exact measure of the real exchangeable value of all commodities. It is so, however, at the same time and place only. Though at distant places there is no regular proportion between the real and the money price of commodities, yet the merchant who carries goods from the one to the other, has nothing to consider but the money price, or the difference between the quantity of silver for which he buys them, and that for which he is likely to sell them. Half an ounce of silver at Canton in China may command a greater quantity both of labour and of the necessaries and conveniencies of life, than an ounce at London. A commodity, therefore, which sells for half an ounce of silver at Canton, may there be really dearer, of more real importance to the man who possesses it there, than a commodity which sells for an ounce at London is to the man who possesses it at London. If a London merchant, however, can buy at Canton, for half an ounce of silver, a commodity which he can afterwards sell at London for an ounce, he gains a hundred per cent. by the bargain, just as much as if an ounce of silver was at London exactly of the same value as at Canton. It is of no importance to him that half an ounce of silver at Canton would have given him the command of more labour, and of a greater quantity of the necessaries and conveniencies of life than an ounce can do at London. An ounce at London will always give him the command of double the quantity of all these, which half an ounce could have done there, and this is precisely what he wants. As it is the nominal or money price of goods, therefore, which finally determines the prudence or imprudence of all purchases and sales, and thereby regulates almost the whole business of common life in which price is concerned, we cannot wonder that it should have been so much more attended to than the real price. In such a work as this, however, it may sometimes be of use to compare the different real values of a particular commodity at different times and places, or the different degrees of power over the labour of other people which it may, upon different occasions, have given to those who possessed it. We must in this case compare, not so much the different quantities of silver for which it was commonly sold, as the different quantities of labour which those different quantities of silver could have purchased. But the current prices of labour, at distant times and places, can scarce ever be known with any degree of exactness. Those of corn, though they have in few places been regularly recorded, are in general better known, and have been more frequently taken notice of by historians and other writers. We must generally, therefore, content ourselves with them, not as being always exactly in the same proportion as the current prices of labour, but as being the nearest approximation which can commonly be had to that proportion. I shall hereafter have occasion to make several comparisons of this kind. In the progress of industry, commercial nations have found it convenient to coin several different metals into money; gold for larger payments, silver for purchases of moderate value, and copper, or some other coarse metal, for those of still smaller consideration. They have always, however, considered one of those metals as more peculiarly the measure of value than any of the other two; and this preference seems generally to have been given to the metal which they happen first to make use of as the instrument of commerce. Having once begun to use it as their standard, which they must have done when they had no other money, they have generally continued to do so even when the necessity was not the same. The Romans are said to have had nothing but copper money till within five years before the first Punic war[7], when they first began to coin silver. Copper, therefore, appears to have continued always the measure of value in that republic. At Rome all accounts appear to have been kept, and the value of all estates to have been computed, either in _asses_ or in _sestertii_. The _as_ was always the denomination of a copper coin. The word _sestertius_ signifies two _asses_ and a half. Though the _sestertius_, therefore, was originally a silver coin, its value was estimated in copper. At Rome, one who owed a great deal of money was said to have a great deal of other people's copper. The northern nations who established themselves upon the ruins of the Roman empire, seem to have had silver money from the first beginning of their settlements, and not to have known either gold or copper coins for several ages thereafter. There were silver coins in England in the time of the Saxons; but there was little gold coined till the time of of Edward III. nor any copper till that of James I. of Great Britain. In England, therefore, and for the same reason, I believe, in all other modern nations of Europe, all accounts are kept, and the value of all goods and of all estates is generally computed, in silver: and when we mean to express the amount of a person's fortune, we seldom mention the number of guineas, but the number of pounds sterling which we suppose would be given for it. Originally, in all countries, I believe, a legal tender of payment could be made only in the coin of that metal which was peculiarly considered as the standard or measure of value. In England, gold was not considered as a legal tender for a long time after it was coined into money. The proportion between the values of gold and silver money was not fixed by any public law or proclamation, but was left to be settled by the market. If a debtor offered payment in gold, the creditor might either reject such payment altogether, or accept of it at such a valuation of the gold as he and his debtor could agree upon. Copper is not at present a legal tender, except in the change of the smaller silver coins. In this state of things, the distinction between the metal which was the standard, and that which was not the standard, was something more than a nominal distinction. In process of time, and as people became gradually more familiar with the use of the different metals in coin, and consequently better acquainted with the proportion between their respective values, it has, in most countries, I believe, been found convenient to ascertain this proportion, and to declare by a public law, that a guinea, for example, of such a weight and fineness, should exchange for one-and-twenty shillings, or be a legal tender for a debt of that amount. In this state of things, and during the continuance of any one regulated proportion of this kind, the distinction between the metal, which is the standard, and that which is not the standard, becomes little more than a nominal distinction. In consequence of any change, however, in this regulated proportion, this distinction becomes, or at least seems to become, something more than nominal again. If the regulated value of a guinea, for example, was either reduced to twenty, or raised to two-and-twenty shillings, all accounts being kept, and almost all obligations for debt being expressed, in silver money, the greater part of payments could in either case be made with the same quantity of silver money as before; but would require very different quantities of gold money; a greater in the one case, and a smaller in the other. Silver would appear to be more invariable in its value than gold. Silver would appear to measure the value of gold, and gold would not appear to measure the value of silver. The value of gold would seem to depend upon the quantity of silver which it would exchange for, and the value of silver would not seem to depend upon the quantity of gold which it would exchange for. This difference, however, would be altogether owing to the custom of keeping accounts, and of expressing the amount of all great and small sums rather in silver than in gold money. One of Mr Drummond's notes for five-and-twenty or fifty guineas would, after an alteration of this kind, be still payable with five-and-twenty or fifty guineas, in the same manner as before. It would, after such an alteration, be payable with the same quantity of gold as before, but with very different quantities of silver. In the payment of such a note, gold would appear to be more invariable in its value than silver. Gold would appear to measure the value of silver, and silver would not appear to measure the value of gold. If the custom of keeping accounts, and of expressing promissory-notes and other obligations for money, in this manner should ever become general, gold, and not silver, would be considered as the metal which was peculiarly the standard or measure of value. In reality, during the continuance of any one regulated proportion between the respective values of the different metals in coin, the value of the most precious metal regulates the value of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the best quality, which, before it is coined, is seldom worth sevenpence in silver. But as, by the regulation, twelve such pence are ordered to exchange for a shilling, they are in the market considered as worth a shilling, and a shilling can at any time be had for them. Even before the late reformation of the gold coin of Great Britain, the gold, that part of it at least which circulated in London and its neighbourhood, was in general less degraded below its standard weight than the greater part of the silver. One-and-twenty worn and defaced shillings, however, were considered as equivalent to a guinea, which, perhaps, indeed, was worn and defaced too, but seldom so much so. The late regulations have brought the gold coin as near, perhaps, to its standard weight as it is possible to bring the current coin of any nation; and the order to receive no gold at the public offices but by weight, is likely to preserve it so, as long as that order is enforced. The silver coin still continues in the same worn and degraded state as before the reformation of the gold coin. In the market, however, one-and-twenty shillings of this degraded silver coin are still considered as worth a guinea of this excellent gold coin. The reformation of the gold coin has evidently raised the value of the silver coin which can be exchanged for it. In the English mint, a pound weight of gold is coined into forty-four guineas and a half, which at one-and-twenty shillings the guinea, is equal to forty-six pounds fourteen shillings and sixpence. An ounce of such gold coin, therefore, is worth L.3 : 17 : 10-1/2 in silver. In England, no duty or seignorage is paid upon the coinage, and he who carries a pound weight or an ounce weight of standard gold bullion to the mint, gets back a pound weight or an ounce weight of gold in coin, without any deduction. Three pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is said to be the mint price of gold in England, or the quantity of gold coin which the mint gives in return for standard gold bullion. Before the reformation of the gold coin, the price of standard gold bullion in the market had, for many years, been upwards of L.3 : 18s. sometimes L.3 : 19s. and very frequently L.4 an ounce; that sum, it is probable, in the worn and degraded gold coin, seldom containing more than an ounce of standard gold. Since the reformation of the gold coin, the market price of standard gold bullion seldom exceeds L.3 : 17 : 7 an ounce. Before the reformation of the gold coin, the market price was always more or less above the mint price. Since that reformation, the market price has been constantly below the mint price. But that market price is the same whether it is paid in gold or in silver coin. The late reformation of the gold coin, therefore, has raised not only the value of the gold coin, but likewise that of the silver coin in proportion to gold bullion, and probably, too, in proportion to all other commodities; though the price of the greater part of other commodities being influenced by so many other causes, the rise in the value of either gold or silver coin in proportion to them may not be so distinct and sensible. In the English mint, a pound weight of standard silver bullion is coined into sixty-two shillings, containing, in the same manner, a pound weight of standard silver. Five shillings and twopence an ounce, therefore, is said to be the mint price of silver in England, or the quantity of silver coin which the mint gives in return for standard silver bullion. Before the reformation of the gold coin, the market price of standard silver bullion was, upon different occasions, five shillings and fourpence, five shillings and fivepence, five shillings and sixpence, five shillings and sevenpence, and very often five shillings and eightpence an ounce. Five shillings and sevenpence, however, seems to have been the most common price. Since the reformation of the gold coin, the market price of standard silver bullion has fallen occasionally to five shillings and threepence, five shillings and fourpence, and five shillings and fivepence an ounce, which last price it has scarce ever exceeded. Though the market price of silver bullion has fallen considerably since the reformation of the gold coin, it has not fallen so low as the mint price. In the proportion between the different metals in the English coin, as copper is rated very much above its real value, so silver is rated somewhat below it. In the market of Europe, in the French coin and in the Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of fine silver. In the English coin, it exchanges for about fifteen ounces, that is, for more silver than it is worth, according to the common estimation of Europe. But as the price of copper in bars is not, even in England, raised by the high price of copper in English coin, so the price of silver in bullion is not sunk by the low rate of silver in English coin. Silver in bullion still preserves its proper proportion to gold, for the same reason that copper in bars preserves its proper proportion to silver. Upon the reformation of the silver coin, in the reign of William III., the price of silver bullion still continued to be somewhat above the mint price. Mr Locke imputed this high price to the permission of exporting silver bullion, and to the prohibition of exporting silver coin. This permission of exporting, he said, rendered the demand for silver bullion greater than the demand for silver coin. But the number of people who want silver coin for the common uses of buying and selling at home, is surely much greater than that of those who want silver bullion either for the use of exportation or for any other use. There subsists at present a like permission of exporting gold bullion, and a like prohibition of exporting gold coin; and yet the price of gold bullion has fallen below the mint price. But in the English coin, silver was then, in the same manner as now, under-rated in proportion to gold; and the gold coin (which at that time, too, was not supposed to require any reformation) regulated then, as well as now, the real value of the whole coin. As the reformation of the silver coin did not then reduce the price of silver bullion to the mint price, it is not very probable that a like reformation will do so now. Were the silver coin brought back as near to its standard weight as the gold, a guinea, it is probable, would, according to the present proportion, exchange for more silver in coin than it would purchase in bullion. The silver coin containing its full standard weight, there would in this case, be a profit in melting it down, in order, first to sell the bullion for gold coin, and afterwards to exchange this gold coin for silver coin, to be melted down in the same manner. Some alteration in the present proportion seems to be the only method of preventing this inconveniency. The inconveniency, perhaps, would be less, if silver was rated in the coin as much above its proper proportion to gold as it is at present rated below it, provided it was at the same time enacted, that silver should not be a legal tender for more than the change of a guinea, in the same manner as copper is not a legal tender for more than the change of a shilling. No creditor could, in this case, be cheated in consequence of the high valuation of silver in coin; as no creditor can at present be cheated in consequence of the high valuation of copper. The bankers only would suffer by this regulation. When a run comes upon them, they sometimes endeavour to gain time, by paying in sixpences, and they would be precluded by this regulation from this discreditable method of evading immediate payment. They would be obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at present; and though this might, no doubt, be a considerable inconveniency to them, it would, at the same time, be a considerable security to their creditors. Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly does not contain, even in our present excellent gold coin, more than an ounce of standard gold, and it may be thought, therefore, should not purchase more standard bullion. But gold in coin is more convenient than gold in bullion; and though, in England, the coinage is free, yet the gold which is carried in bullion to the mint, can seldom be returned in coin to the owner till after a delay of several weeks. In the present hurry of the mint, it could not be returned till after a delay of several months. This delay is equivalent to a small duty, and renders gold in coin somewhat more valuable than an equal quantity of gold in bullion. If, in the English coin, silver was rated according to its proper proportion to gold, the price of silver bullion would probably fall below the mint price, even without any reformation of the silver coin; the value even of the present worn and defaced silver coin being regulated by the value of the excellent gold coin for which it can be changed. A small seignorage or duty upon the coinage of both gold and silver, would probably increase still more the superiority of those metals in coin above an equal quantity of either of them in bullion. The coinage would, in this case, increase the value of the metal coined in proportion to the extent of this small duty, for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. The superiority of coin above bullion would prevent the melting down of the coin, and would discourage its exportation. If, upon any public exigency, it should become necessary to export the coin, the greater part of it would soon return again, of its own accord. Abroad, it would sell only for its weight in bullion. At home, it would buy more than that weight. There would be a profit, therefore, in bringing it home again. In France, a seignorage of about eight per cent. is imposed upon the coinage, and the French coin, when exported, is said to return home again, of its own accord. The occasional fluctuations in the market price of gold and silver bullion arise from the same causes as the like fluctuations in that of all other commodities. The frequent loss of those metals from various accidents by sea and land, the continual waste of them in gilding and plating, in lace and embroidery, in the wear and tear of coin, and in that of plate, require, in all countries which possess no mines of their own, a continual importation, in order to repair this lose and this waste. The merchant importers, like all other merchants, we may believe, endeavour, as well as they can, to suit their occasional importations to what they judge is likely to be the immediate demand. With all their attention, however, they sometimes overdo the business, and sometimes underdo it. When they import more bullion than is wanted, rather than incur the risk and trouble of exporting it again, they are sometimes willing to sell a part of it for something less than the ordinary or average price. When, on the other hand, they import less than is wanted, they get something more than this price. But when, under all those occasional fluctuations, the market price either of gold or silver bullion continues for several years together steadily and constantly, either more or less above, or more or less below the mint price, we may be assured that this steady and constant, either superiority or inferiority of price, is the effect of something in the state of the coin, which, at that time, renders a certain quantity of coin either of more value or of less value than precise quantity of bullion which it ought to contain. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause. The money of any particular country is, at any particular time and place, more or less an accurate measure or value, according as the current coin is more or less exactly agreeable to its standard, or contains more or less exactly the precise quantity of pure gold or silver which it ought to contain. If in England, for example, forty-four guineas and a half contained exactly a pound weight of standard gold, or eleven ounces of fine gold, and one ounce of alloy, the gold coin of England would be as accurate a measure of the actual goods at any particular time and place as the nature of the thing would admit. But if, by rubbing and wearing, forty-four guineas and a half generally contain less than a pound weight of standard gold, the diminution, however, being greater in some pieces than in others, the measure of value comes to be liable to the same sort of uncertainty to which all other weights and measures are commonly exposed. As it rarely happens that these are exactly agreeable to their standard, the merchant adjusts the price of his goods as well as he can, not to what those weights and measures ought to be, but to what, upon an average, he finds, by experience, they actually are. In consequence of a like disorder in the coin, the price of goods comes, in the same manner, to be adjusted, not to the quantity of pure gold or silver which the coin ought to contain, but to that which, upon an average, it is found, by experience, it actually does contain. By the money price of goods, it is to be observed, I understand always the quantity of pure gold or silver for which they are sold, without any regard to the denomination of the coin. Six shillings and eight pence, for example, in the time of Edward I., I consider as the same money price with a pound sterling in the present times, because it contained, as nearly as we can judge, the same quantity of pure silver. CHAP. VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES. In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be worth double of what is usually the produce of one day's or one hour's labour. If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hour's labour in the other. Or if the one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents, will naturally give a value to their produce, superior to what would be due to the time employed about it. Such talents can seldom be acquired but in consequence of long application, and the superior value of their produce may frequently be no more than a reasonable compensation for the time and labour which must be spent in acquiring them. In the advanced state of society, allowances of this kind, for superior hardship and superior skill, are commonly made in the wages of labour; and something of the same kind must probably have taken place in its earliest and rudest period. In this state of things, the whole produce of labour belongs to the labourer; and the quantity of labour commonly employed in acquiring or producing any commodity, is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for. As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials. In exchanging the complete manufacture either for money, for labour, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work, who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this case into two parts of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced. He could have no interest to employ them, unless he expected from the sale of their work something more than what was sufficient to replace his stock to him; and he could have no interest to employ a great stock rather than a small one, unless his profits were to bear some proportion to the extent of his stock. The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular sort of labour, the labour of inspection and direction. They are, however, altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock. Let us suppose, for example, that in some particular place, where the common annual profits of manufacturing stock are ten per cent. there are two different manufactures, in each of which twenty workmen are employed, at the rate of fifteen pounds a year each, or at the expense of three hundred a-year in each manufactory. Let us suppose, too, that the coarse materials annually wrought up in the one cost only seven hundred pounds, while the finer materials in the other cost seven thousand. The capital annually employed in the one will, in this case, amount only to one thousand pounds; whereas that employed in the other will amount to seven thousand three hundred pounds. At the rate of ten per cent. therefore, the undertaker of the one will expect a yearly profit of about one hundred pounds only; while that of the other will expect about seven hundred and thirty pounds. But though their profits are so very different, their labour of inspection and direction may be either altogether or very nearly the same. In many great works, almost the whole labour of this kind is committed to some principal clerk. His wages properly express the value of this labour of inspection and direction. Though in settling them some regard is had commonly, not only to his labour and skill, but to the trust which is reposed in him, yet they never bear any regular proportion to the capital of which he oversees the management; and the owner of this capital, though he is thus discharged of almost all labour, still expects that his profit should bear a regular proportion to his capital. In the price of commodities, therefore, the profits of stock constitute a component part altogether different from the wages of labour, and regulated by quite different principles. In this state of things, the whole produce of labour does not always belong to the labourer. He must in most cases share it with the owner of the stock which employs him. Neither is the quantity of labour commonly employed in acquiring or producing any commodity, the only circumstance which can regulate the quantity which it ought commonly to purchase, command or exchange for. An additional quantity, it is evident, must be due for the profits of the stock which advanced the wages and furnished the materials of that labour. As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them, and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities, makes a third component part. The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour measures the value, not only of that part of price which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit. In every society, the price of every commodity finally resolves itself into some one or other, or all of those three parts; and in every improved society, all the three enter, more or less, as component parts, into the price of the far greater part of commodities. In the price of corn, for example, one part pays the rent of the landlord, another pays the wages or maintenance of the labourers and labouring cattle employed in producing it, and the third pays the profit of the farmer. These three parts seem either immediately or ultimately to make up the whole price of corn. A fourth part, it may perhaps be thought is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered, that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts; the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer, who advances both the rent of this land, and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself, either immediately or ultimately, into the same three parts of rent, labour, and profit. In the price of flour or meal, we must add to the price of the corn, the profits of the miller, and the wages of his servants; in the price of bread, the profits of the baker, and the wages of his servants; and in the price of both, the labour of transporting the corn from the house of the farmer to that of the miller, and from that of the miller to that of the baker, together with the profits of those who advance the wages of that labour. The price of flax resolves itself into the same three parts as that of corn. In the price of linen we must add to this price the wages of the flax-dresser, of the spinner, of the weaver, of the bleacher, &c. together with the profits of their respective employers. As any particular commodity comes to be more manufactured, that part of the price which resolves itself into wages and profit, comes to be greater in proportion to that which resolves itself into rent. In the progress of the manufacture, not only the number of profits increase, but every subsequent profit is greater than the foregoing; because the capital from which it is derived must always be greater. The capital which employs the weavers, for example, must be greater than that which employs the spinners; because it not only replaces that capital with its profits, but pays, besides, the wages of the weavers: and the profits must always bear some proportion to the capital. In the most improved societies, however, there are always a few commodities of which the price resolves itself into two parts only, the wages of labour, and the profits of stock; and a still smaller number, in which it consists altogether in the wages of labour. In the price of sea-fish, for example, one part pays the labour of the fisherman, and the other the profits of the capital employed in the fishery. Rent very seldom makes any part of it, though it does sometimes, as I shall shew hereafter. It is otherwise, at least through the greater part of Europe, in river fisheries. A salmon fishery pays a rent; and rent, though it cannot well be called the rent of land, makes a part of the price of a salmon, as well as wages and profit. In some parts of Scotland, a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch pebbles. The price which is paid to them by the stone-cutter, is altogether the wages of their labour; neither rent nor profit makes any part of it. But the whole price of any commodity must still finally resolve itself into some one or other or all of those three parts; as whatever part of it remains after paying the rent of the land, and the price of the whole labour employed in raising, manufacturing, and bringing it to market, must necessarily be profit to somebody. As the price or exchangeable value of every particular commodity, taken separately, resolves itself into some one or other, or all of those three parts; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. The whole of what is annually either collected or produced by the labour of every society, or, what comes to the same thing, the whole price of it, is in this manner originally distributed among some of its different members. Wages, profit, and rent, are the three original sources of all revenue, as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these. Whoever derives his revenue from a fund which is his own, must draw it either from his labour, from his stock, or from his land. The revenue derived from labour is called wages; that derived from stock, by the person who manages or employs it, is called profit; that derived from it by the person who does not employ it himself, but lends it to another, is called the interest or the use of money. It is the compensation which the borrower pays to the lender, for the profit which he has an opportunity of making by the use of the money. Part of that profit naturally belongs to the borrower, who runs the risk and takes the trouble of employing it, and part to the lender, who affords him the opportunity of making this profit. The interest of money is always a derivative revenue, which, if it is not paid from the profit which is made by the use of the money, must be paid from some other source of revenue, unless perhaps the borrower is a spendthrift, who contracts a second debt in order to pay the interest of the first. The revenue which proceeds altogether from land, is called rent, and belongs to the landlord. The revenue of the farmer is derived partly from his labour, and partly from his stock. To him, land is only the instrument which enables him to earn the wages of this labour, and to make the profits of this stock. All taxes, and all the revenue which is founded upon them, all salaries, pensions, and annuities of every kind, are ultimately derived from some one or other of those three original sources of revenue, and are paid either immediately or mediately from the wages of labour, the profits of stock, or the rent of land. When those three different sorts of revenue belong to different persons, they are readily distinguished; but when they belong to the same, they are sometimes confounded with one another, at least in common language. A gentleman who farms a part of his own estate, after paying the expense of cultivation, should gain both the rent of the landlord and the profit of the farmer. He is apt to denominate, however, his whole gain, profit, and thus confounds rent with profit, at least in common language. The greater part of our North American and West Indian planters are in this situation. They farm, the greater part of them, their own estates; and accordingly we seldom hear of the rent of a plantation, but frequently of its profit. Common farmers seldom employ any overseer to direct the general operations of the farm. They generally, too, work a good deal with their own hands, as ploughmen, harrowers, &c. What remains of the crop, after paying the rent, therefore, should not only replace to them their stock employed in cultivation, together with its ordinary profits, but pay them the wages which are due to them, both as labourers and overseers. Whatever remains, however, after paying the rent and keeping up the stock, is called profit. But wages evidently make a part of it. The farmer, by saving these wages, must necessarily gain them. Wages, therefore, are in this case confounded with profit. An independent manufacturer, who has stock enough both to purchase materials, and to maintain himself till he can carry his work to market, should gain both the wages of a journeyman who works under a master, and the profit which that master makes by the sale of that journeyman's work. His whole gains, however, are commonly called profit, and wages are, in this case, too, confounded with profit. A gardener who cultivates his own garden with his own hands, unites in his own person the three different characters, of landlord, farmer, and labourer. His produce, therefore, should pay him the rent of the first, the profit of the second, and the wages of the third. The whole, however, is commonly considered as the earnings of his labour. Both rent and profit are, in this case, confounded with wages. As in a civilized country there are but few commodities of which the exchangeable value arises from labour only, rent and profit contributing largely to that of the far greater part of them, so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising, preparing, and bringing that produce to market. If the society were annually to employ all the labour which it can annually purchase, as the quantity of labour would increase greatly every year, so the produce of every succeeding year would be of vastly greater value than that of the foregoing. But there is no country in which the whole annual produce is employed in maintaining the industrious. The idle everywhere consume a great part of it; and, according to the different proportions in which it is annually divided between these two different orders of people, its ordinary or average value must either annually increase or diminish, or continue the same from one year to another. CHAP. VII. OF THE NATURAL AND MARKET PRICE OF COMMODITIES. There is in every society or neighbourhood an ordinary or average rate, both of wages and profit, in every different employment of labour and stock. This rate is naturally regulated, as I shall show hereafter, partly by the general circumstances of the society, their riches or poverty, their advancing, stationary, or declining condition, and partly by the particular nature of each employment. There is likewise in every society or neighbourhood an ordinary or average rate of rent, which is regulated, too, as I shall shew hereafter, partly by the general circumstances of the society or neighbourhood in which the land is situated, and partly by the natural improved fertility of the land. These ordinary or average rates may be called the natural rates of wages, profit and rent, at the time and place in which they commonly prevail. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price. The commodity is then sold precisely for what it is worth, or for what it really costs the person who brings it to market; for though, in common language, what is called the prime cost of any commodity does not comprehend the profit of the person who is sell it again, yet, if he sells it at a price which does not allow him the ordinary rate of profit in his neighbourhood, he is evidently a loser by the trade; since, by employing his stock in some other way, he might have made that profit. His profit, besides, is his revenue, the proper fund of his subsistence. As, while he is preparing and bringing the goods to market, he advances to his workmen their wages, or their subsistence, so he advances to himself, in the same manner, his own subsistence, which is generally suitable to the profit which he may reasonably expect from the sale of his goods. Unless they yield him this profit, therefore, they do not repay him what they may very properly be said to have really cost him. Though the price, therefore, which leaves him this profit, is not always the lowest at which a dealer may sometimes sell his goods, it is the lowest at which he is likely to sell them for any considerable time; at least where there is perfect liberty, or where he may change his trade as often as he pleases. The actual price at which any commodity is commonly sold, is called its market price. It may either be above, or below, or exactly the same with its natural price. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither, Such people may be called the effectual demanders, and their demand the effectual demand; since it may be sufficient to effectuate the bringing of the commodity to market. It is different from the absolute demand. A very poor man may be said, in some sense, to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the commodity can never he brought to market in order to satisfy it. When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profit, which must he paid in order to bring it thither, cannot be supplied with the quantity which they want. Rather than want it altogether, some of them will be willing to give more. A competition will immediately begin among them, and the market price will rise more or less above the natural price, according as either the greatness of the deficiency, or the wealth and wanton luxury of the competitors, happen to animate more or less the eagerness of the competition. Among competitors of equal wealth and luxury, the same deficiency will generally occasion a more or less eager competition, according as the acquisition of the commodity happens to be of more or less importance to them. Hence the exorbitant price of the necessaries of life during the blockade of a town, or in a famine. When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages, and profit, which must be paid in order to bring it thither. Some part must be sold to those who are willing to pay less, and the low price which they give for it must reduce the price of the whole. The market price will sink more or less below the natural price, according as the greatness of the excess increases more or less the competition of the sellers, or according as it happens to be more or less important to them to get immediately rid of the commodity. The same excess in the importation of perishable, will occasion a much greater competition than in that of durable commodities; in the importation of oranges, for example, than in that of old iron. When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally comes to be either exactly, or as nearly as can be judged of, the same with the natural price. The whole quantity upon hand can be disposed of for this price, and cannot be disposed of for more. The competition of the different dealers obliges them all to accept of this price, but does not oblige them to accept of less. The quantity of every commodity brought to market naturally suits itself to the effectual demand. It is the interest of all those who employ their land, labour, or stock, in bringing any commodity to market, that the quantity never should exceed the effectual demand; and it is the interest of all other people that it never should fall short of that demand. If at any time it exceeds the effectual demand, some of the component parts of its price must be paid below their natural rate. If it is rent, the interest of the landlords will immediately prompt them to withdraw a part of their land; and if it is wages or profit, the interest of the labourers in the one case, and of their employers in the other, will prompt them to withdraw a part of their labour or stock, from this employment. The quantity brought to market will soon be no more than sufficient to supply the effectual demand. All the different parts of its price will rise to their natural rate, and the whole price to its natural price. If, on the contrary, the quantity brought to market should at any time fall short of the effectual demand, some of the component parts of its price must rise above their natural rate. If it is rent, the interest of all other landlords will naturally prompt them to prepare more land for the raising of this commodity; if it is wages or profit, the interest of all other labourers and dealers will soon prompt them to employ more labour and stock in preparing and bringing it to market. The quantity brought thither will soon be sufficient to supply the effectual demand. All the different parts of its price will soon sink to their natural rate, and the whole price to its natural price. The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance, they are constantly tending towards it. The whole quantity of industry annually employed in order to bring any commodity to market, naturally suits itself in this manner to the effectual demand. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply, and no more than supply, that demand. But, in some employments, the same quantity of industry will, in different years, produce very different quantities of commodities; while, in others, it will produce always the same, or very nearly the same. The same number of labourers in husbandry will, in different years, produce very different quantities of corn, wine, oil, hops, &c. But the same number of spinners or weavers will every year produce the same, or very nearly the same, quantity of linen and woollen cloth. It is only the average produce of the one species of industry which can be suited, in any respect, to the effectual demand; and as its actual produce is frequently much greater, and frequently much less, than its average produce, the quantity of the commodities brought to market will sometimes exceed a good deal, and sometimes fall short a good deal, of the effectual demand. Even though that demand, therefore, should continue always the same, their market price will be liable to great fluctuations, will sometimes fall a good deal below, and sometimes rise a good deal above, their natural price. In the other species of industry, the produce of equal quantities of labour being always the same, or very nearly the same, it can be more exactly suited to the effectual demand. While that demand continues the same, therefore, the market price of the commodities is likely to do so too, and to be either altogether, or as nearly as can be judged of, the same with the natural price. That the price of linen and woollen cloth is liable neither to such frequent, nor to such great variations, as the price of corn, every man's experience will inform him. The price of the one species of commodities varies only with the variations in the demand; that of the other varies not only with the variations in the demand, but with the much greater, and more frequent, variations in the quantity of what is brought to market, in order to supply that demand. The occasional and temporary fluctuations in the market price of any commodity fall chiefly upon those parts of its price which resolve themselves into wages and profit. That part which resolves itself into rent is less affected by them. A rent certain in money is not in the least affected by them, either in its rate or in its value. A rent which consists either in a certain proportion, or in a certain quantity, of the rude produce, is no doubt affected in its yearly value by all the occasional and temporary fluctuations in the market price of that rude produce; but it is seldom affected by them in its yearly rate. In settling the terms of the lease, the landlord and farmer endeavour, according to their best judgment, to adjust that rate, not to the temporary and occasional, but to the average and ordinary price of the produce. Such fluctuations affect both the value and the rate, either of wages or of profit, according as the market happens to be either overstocked or understocked with commodities or with labour, with work done, or with work to be done. A public mourning raises the price of black cloth (with which the market is almost always understocked upon such occasions), and augments the profits of the merchants who possess any considerable quantity of it. It has no effect upon the wages of the weavers. The market is understocked with commodities, not with labour, with work done, not with work to be done. It raises the wages of journeymen tailors. The market is here understocked with labour. There is an effectual demand for more labour, for more work to be done, than can be had. It sinks the price of coloured silks and cloths, and thereby reduces the profits of the merchants who have any considerable quantity of them upon hand. It sinks, too, the wages of the workmen employed in preparing such commodities, for which all demand is stopped for six months, perhaps for a twelvemonth. The market is here overstocked both with commodities and with labour. But though the market price of every particular commodity is in this manner continually gravitating, if one may say so, towards the natural price; yet sometimes particular accidents, sometimes natural causes, and sometimes particular regulations of police, may, in many commodities, keep up the market price, for a long time together, a good deal above the natural price. When, by an increase in the effectual demand, the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market, are generally careful to conceal this change. If it was commonly known, their great profit would tempt so many new rivals to employ their stocks in the same way, that, the effectual demand being fully supplied, the market price would soon be reduced to the natural price, and, perhaps, for some time even below it. If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept. Secrets in manufactures are capable of being longer kept than secrets in trade. A dyer who has found the means of producing a particular colour with materials which cost only half the price of those commonly made use of, may, with good management, enjoy the advantage of his discovery as long as he lives, and even leave it as a legacy to his posterity. His extraordinary gains arise from the high price which is paid for his private labour. They properly consist in the high wages of that labour. But as they are repeated upon every part of his stock, and as their whole amount bears, upon that account, a regular proportion to it, they are commonly considered as extraordinary profits of stock. Such enhancements of the market price are evidently the effects of particular accidents, of which, however, the operation may sometimes last for many years together. Some natural productions require such a singularity of soil and situation, that all the land in a great country, which is fit for producing them, may not be sufficient to supply the effectual demand. The whole quantity brought to market, therefore, may be disposed of to those who are willing to give more than what is sufficient to pay the rent of the land which produced them, together with the wages of the labour and the profits of the stock which were employed in preparing and bringing them to market, according to their natural rates. Such commodities may continue for whole centuries together to be sold at this high price; and that part of it which resolves itself into the rent of land, is in this case the part which is generally paid above its natural rate. The rent of the land which affords such singular and esteemed productions, like the rent of some vineyards in France of a peculiarly happy soil and situation, bears no regular proportion to the rent of other equally fertile and equally well cultivated land in its neighbourhood. The wages of the labour, and the profits of the stock employed in bringing such commodities to market, on the contrary, are seldom out of their natural proportion to those of the other employments of labour and stock in their neighbourhood. Such enhancements of the market price are evidently the effect of natural causes, which may hinder the effectual demand from ever being fully supplied, and which may continue, therefore, to operate for ever. A monopoly granted either to an individual or to a trading company, has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together. The one is upon every occasion the highest which can be squeezed out of the buyers, or which it is supposed they will consent to give; the other is the lowest which the sellers can commonly afford to take, and at the same time continue their business. The exclusive privileges of corporations, statutes of apprenticeship, and all those laws which restrain in particular employments, the competition to a smaller number than might otherwise go into them, have the same tendency, though in a less degree. They are a sort of enlarged monopolies, and may frequently, for ages together, and in whole classes of employments, keep up the market price of particular commodities above the natural price, and maintain both wages of the labour and the profits of the stock employed about them somewhat above their natural rate. Such enhancements of the market price may last as long as the regulations of police which give occasion to them. The market price of any particular commodity, though it may continue long above, can seldom continue long below, its natural price. Whatever part of it was paid below the natural rate, the persons whose interest is affected would immediately feel the loss, and would immediately withdraw either so much land or so much labour, or so much stock, from being employed about it, that the quantity brought to market would soon be no more than sufficient to supply the effectual demand. Its market price, therefore, would soon rise to the natural price; this at least would be the case where there was perfect liberty. The same statutes of apprenticeship and other corporation laws, indeed, which, when a manufacture is in prosperity, enable the workman to raise his wages a good deal above their natural rate, sometimes oblige him, when it decays, to let them down a good deal below it. As in the one case they exclude many people from his employment, so in the other they exclude him from many employments. The effect of such regulations, however, is not near so durable in sinking the workman's wages below, as in raising them above their natural rate. Their operation in the one way may endure for many centuries, but in the other it can last no longer than the lives of some of the workmen who were bred to the business in the time of prosperity. When they are gone, the number of those who are afterwards educated to the trade will naturally suit itself to the effectual demand. The police must be as violent as that of Indostan or ancient Egypt (where every man was bound by a principle of religion to follow the occupation of his father, and was supposed to commit the most horrid sacrilege if he changed it for another), which can in any particular employment, and for several generations together, sink either the wages of labour or the profits of stock below their natural rate. This is all that I think necessary to be observed at present concerning the deviations, whether occasional or permanent, of the market price of commodities from the natural price. The natural price itself varies with the natural rate of each of its component parts, or wages, profit, and rent; and in every society this rate varies according to their circumstances, according to their riches and poverty, their advancing, stationary, or declining condition. I shall, in the four following chapters, endeavour to explain, as fully and distinctly as I can, the causes of those different variations. First, I shall endeavour to explain what are the circumstances which naturally determine the rate of wages, and in what manner those circumstances are affected by the riches or poverty, by the advancing, stationary, or declining state of the society. Secondly, I shall endeavour to shew what are the circumstances which naturally determine the rate of profit; and in what manner, too, those circumstances are affected by the like variations in the state of the society. Though pecuniary wages and profit are very different in the different employments of labour and stock; yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour, and the pecuniary profits in all the different employments of stock. This proportion, it will appear hereafter, depends partly upon the nature of the different employments, and partly upon the different laws and policy of the society in which they are carried on. But though in many respects dependent upon the laws and policy, this proportion seems to be little affected by the riches or poverty of that society, by its advancing, stationary, or declining condition, but to remain the same, or very nearly the same, in all those different states. I shall, in the third place, endeavour to explain all the different circumstances which regulate this proportion. In the fourth and last place, I shall endeavour to shew what are the circumstances which regulate the rent of land, and which either raise or lower the price of all the different substances which it produces. CHAP. VIII. OF THE WAGES OF LABOUR. The produce of labour constitutes the natural recompence or wages of labour. In that original state of things which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither landlord nor master to share with him. Had this state continued, the wages of labour would have augmented with all those improvements in its productive powers, to which the division of labour gives occasion. All things would gradually have become cheaper. They would have been produced by a smaller quantity of labour; and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another, they would have been purchased likewise with the produce of a smaller quantity. But though all things would have become cheaper in reality, in appearance many things might have become dearer, than before, or have been exchanged for a greater quantity of other goods. Let us suppose, for example, that in the greater part of employments the productive powers of labour had been improved to tenfold, or that a day's labour could produce ten times the quantity of work which it had done originally; but that in a particular employment they had been improved only to double, or that a day's labour could produce only twice the quantity of work which it had done before. In exchanging the produce of a day's labour in the greater part of employments for that of a day's labour in this particular one, ten times the original quantity of work in them would purchase only twice the original quantity of it. Any particular quantity in it, therefore, a pound weight, for example, would appear to be five times dearer than before. In reality, however, it would be twice as cheap. Though it required five times the quantity of other goods to purchase it, it would require only half the quantity of labour either to purchase or to produce it. The acquisition, therefore, would be twice as easy as before. But this original state of things, in which the labourer enjoyed the whole produce of his own labour, could not last beyond the first introduction of the appropriation of land and the accumulation of stock. It was at an end, therefore, long before the most considerable improvements were made in the productive powers of labour; and it would be to no purpose to trace further what might have been its effects upon the recompence or wages of labour. As soon as land becomes private property, the landlord demands a share of almost all the produce which the labourer can either raise or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon land. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. His maintenance is generally advanced to him from the stock of a master, the farmer who employs him, and who would have no interest to employ him, unless he was to share in the produce of his labour, or unless his stock was to be replaced to him with a profit. This profit makes a second deduction from the produce of the labour which is employed upon land. The produce of almost all other labour is liable to the like deduction of profit. In all arts and manufactures, the greater part of the workmen stand in need of a master, to advance them the materials of their work, and their wages and maintenance, till it be completed. He shares in the produce of their labour, or in the value which it adds to the materials upon which it is bestowed; and in this share consists his profit. It sometimes happens, indeed, that a single independent workman has stock sufficient both to purchase the materials of his work, and to maintain himself till it be completed. He is both master and workman, and enjoys the whole produce of his own labour, or the whole value which it adds to the materials upon which it is bestowed. It includes what are usually two distinct revenues, belonging to two distinct persons, the profits of stock, and the wages of labour. Such cases, however, are not very frequent; and in every part of Europe twenty workmen serve under a master for one that is independent, and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another. What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate. We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbors and equals. We seldom, indeed, hear of this combination, because it is the usual, and, one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen, who sometimes, too, without any provocation of this kind, combine, of their own accord, to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions, sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters, upon these occasions, are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing but the punishment or ruin of the ringleaders. But though, in disputes with their workmen, masters must generally have the advantage, there is, however, a certain rate, below which it seems impossible to reduce, for any considerable time, the ordinary wages even of the lowest species of labour. A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation. Mr. Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that, one with another, they may be enabled to bring up two children; the labour of the wife, on account of her necessary attendance on the children, being supposed no more than sufficient to provide for herself. But one half the children born, it is computed, die before the age of manhood. The poorest labourers, therefore, according to this account, must, one with another, attempt to rear at least four children, in order that two may have an equal chance of living to that age. But the necessary maintenance of four children, it is supposed, may be nearly equal to that of one man. The labour of an able-bodied slave, the same author adds, is computed to be worth double his maintenance; and that of the meanest labourer, he thinks, cannot be worth less than that of an able-bodied slave. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what in precisely necessary for their own maintenance; but in what proportion, whether in that above-mentioned, or in any other, I shall not take upon me to determine. There are certain circumstances, however, which sometimes give the labourers an advantage, and enable them to raise their wages considerably above this rate, evidently the lowest which is consistent with common humanity. When in any country the demand for those who live by wages, labourers, journeymen, servants of every kind, is continually increasing; when every year furnishes employment for a greater number than had been employed the year before, the workmen have no occasion to combine in order to raise their wages. The scarcity of hands occasions a competition among masters, who bid against one another in order to get workmen, and thus voluntarily break through the natural combination of master not to raise wages. The demand for those who live by wages, it is evident, cannot increase but in proportion to the increase of the funds which are destined to the payment of wages. These funds are of two kinds; first, the revenue which is over and above what is necessary for the maintenance; and, secondly, the stock which is over and above what is necessary for the employment of their masters. When the landlord, annuitant, or monied man, has a greater revenue than what he judges sufficient to maintain his own family, he employs either the whole or a part of the surplus in maintaining one or more menial servants. Increase this surplus, and he will naturally increase the number of those servants. When an independent workman, such as a weaver or shoemaker, has got more stock than what is sufficient to purchase the materials of his own work, and to maintain himself till he can dispose of it, he naturally employs one or more journeymen with the surplus, in order to make a profit by their work. Increase this surplus, and he will naturally increase the number of his journeymen. The demand for those who live by wages, therefore, necessarily increases with the increase of the revenue and stock of every country, and cannot possibly increase without it. The increase of revenue and stock is the increase of national wealth. The demand for those who live by wages, therefore, naturally increases with the increase of national wealth, and cannot possibly increase without it. It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest. England is certainly, in the present times, a much richer country than any part of North America. The wages of labour, however, are much higher in North America than in any part of England. In the province of New York, common labourers earn[8] three shillings and sixpence currency, equal to two shillings sterling, a-day; ship-carpenters, ten shillings and sixpence currency, with a pint of rum, worth sixpence sterling, equal in all to six shillings and sixpence sterling; house-carpenters and bricklayers, eight shillings currency, equal to four shillings and sixpence sterling; journeymen tailors, five shillings currency, equal to about two shillings and tenpence sterling. These prices are all above the London price; and wages are said to be as high in the other colonies as in New York. The price of provisions is everywhere in North America much lower than in England. A dearth has never been known there. In the worst seasons they have always had a sufficiency for themselves, though less for exportation. If the money price of labour, therefore, be higher than it is anywhere in the mother-country, its real price, the real command of the necessaries and conveniencies of life which it conveys to the labourer, must be higher in a still greater proportion. But though North America is not yet so rich as England, it is much more thriving, and advancing with much greater rapidity to the further acquisition of riches. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. In Great Britain, and most other European countries, they are not supposed to double in less than five hundred years. In the British colonies in North America, it has been found that they double in twenty or five-and-twenty years. Nor in the present times is this increase principally owing to the continual importation of new inhabitants, but to the great multiplication of the species. Those who live to old age, it is said, frequently see there from fifty to a hundred, and sometimes many more, descendants from their own body. Labour is there so well rewarded, that a numerous family of children, instead of being a burden, is a source of opulence and prosperity to the parents. The labour of each child, before it can leave their house, is computed to be worth a hundred pounds clear gain to them. A young widow with four or five young children, who, among the middling or inferior ranks of people in Europe, would have so little chance for a second husband, is there frequently courted as a sort of fortune. The value of children is the greatest of all encouragements to marriage. We cannot, therefore, wonder that the people in North America should generally marry very young. Notwithstanding the great increase occasioned by such early marriages, there is a continual complaint of the scarcity of hands in North America. The demand for labourers, the funds destined for maintaining them increase, it seems, still faster than they can find labourers to employ. Though the wealth of a country should be very great, yet if it has been long stationary, we must not expect to find the wages of labour very high in it. The funds destined for the payment of wages, the revenue and stock of its inhabitants, may be of the greatest extent; but if they have continued for several centuries of the same, or very nearly of the same extent, the number of labourers employed every year could easily supply, and even more than supply, the number wanted the following year. There could seldom be any scarcity of hands, nor could the masters be obliged to bid against one another in order to get them. The hands, on the contrary, would, in this case, naturally multiply beyond their employment. There would be a constant scarcity of employment, and the labourers would be obliged to bid against one another in order to get it. If in such a country the wages of labour had ever been more than sufficient to maintain the labourer, and to enable him to bring up a family, the competition of the labourers and the interest of the masters would soon reduce them to the lowest rate which is consistent with common humanity. China has been long one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous, countries in the world. It seems, however, to have been long stationary. Marco Polo, who visited it more than five hundred years ago, describes its cultivation, industry, and populousness, almost in the same terms in which they are described by travellers in the present times. It had, perhaps, even long before his time, acquired that full complement of riches which the nature of its laws and institutions permits it to acquire. The accounts of all travellers, inconsistent in many other respects, agree in the low wages of labour, and in the difficulty which a labourer finds in bringing up a family in China. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening, he is contented. The condition of artificers is, if possible, still worse. Instead of waiting indolently in their work-houses for the calls of their customers, as in Europe, they are continually running about the streets with the tools of their respective trades, offering their services, and, as it were, begging employment. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. In the neighborhood of Canton, many hundred, it is commonly said, many thousand families have no habitation on the land, but live constantly in little fishing-boats upon the rivers and canals. The subsistence which they find there is so scanty, that they are eager to fish up the nastiest garbage thrown overboard from any European ship. Any carrion, the carcase of a dead dog or cat, for example, though half putrid and stinking, is as welcome to them as the most wholesome food to the people of other countries. Marriage is encouraged in China, not by the profitableness of children, but by the liberty of destroying them. In all great towns, several are every night exposed in the street, or drowned like puppies in the water. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence. China, however, though it may, perhaps, stand still, does not seem to go backwards. Its towns are nowhere deserted by their inhabitants. The lands which had once been cultivated, are nowhere neglected. The same, or very nearly the same, annual labour, must, therefore, continue to be performed, and the funds destined for maintaining it must not, consequently, be sensibly diminished. The lowest class of labourers, therefore, notwithstanding their scanty subsistence, must some way or other make shift to continue their race so far as to keep up their usual numbers. But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. Every year the demand for servants and labourers would, in all the different classes of employments, be less than it had been the year before. Many who had been bred in the superior classes, not being able to find employment in their own business, would be glad to seek it in the lowest. The lowest class being not only overstocked with its own workmen, but with the overflowings of all the other classes, the competition for employment would be so great in it, as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence, either by begging, or by the perpetration, perhaps, of the greatest enormities. Want, famine, and mortality, would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it, and which had escaped either the tyranny or calamity which had destroyed the rest. This, perhaps, is nearly the present state of Bengal, and of some other of the English settlements in the East Indies. In a fertile country, which had before been much depopulated, where subsistence, consequently, should not be very difficult, and where, notwithstanding, three or four hundred thousand people die of hunger in one year, we may be assured that the funds destined for the maintenance of the labouring poor are fast decaying. The difference between the genius of the British constitution, which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies, cannot, perhaps, be better illustrated than by the different state of those countries. The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards. In Great Britain, the wages of labour seem, in the present times, to be evidently more than what is precisely necessary to enable the labourer to bring up a family. In order to satisfy ourselves upon this point, it will not be necessary to enter into any tedious or doubtful calculation of what may be the lowest sum upon which it is possible to do this. There are many plain symptoms, that the wages of labour are nowhere in this country regulated by this lowest rate, which is consistent with common humanity. First, in almost every part of Great Britain there is a distinction, even in the lowest species of labour, between summer and winter wages. Summer wages are always highest. But, on account of the extraordinary expense of fuel, the maintenance of a family is most expensive in winter. Wages, therefore, being highest when this expense is lowest, it seems evident that they are not regulated by what is necessary for this expense, but by the quantity and supposed value of the work. A labourer, it may be said, indeed, ought to save part of his summer wages, in order to defray his winter expense; and that, through the whole year, they do not exceed what is necessary to maintain his family through the whole year. A slave, however, or one absolutely dependent on us for immediate subsistence, would not be treated in this manner. His daily subsistence would be proportioned to his daily necessities. Secondly, the wages of labour do not, in Great Britain, fluctuate with the price of provisions. These vary everywhere from year to year, frequently from month to month. But in many places, the money price of labour remains uniformly the same, sometimes for half a century together. If, in these places, therefore, the labouring poor can maintain their families in dear years, they must be at their ease in times of moderate plenty, and in affluence in those of extraordinary cheapness. The high price of provisions during these ten years past, has not, in many parts of the kingdom, been accompanied with any sensible rise in the money price of labour. It has, indeed, in some; owing, probably, more to the increase of the demand for labour, than to that of the price of provisions. Thirdly, as the price of provisions varies more from year to year than the wages of labour, so, on the other hand, the wages of labour vary more from place to place than the price of provisions. The prices of bread and butchers' meat are generally the same, or very nearly the same, through the greater part of the united kingdom. These, and most other things which are sold by retail, the way in which the labouring poor buy all things, are generally fully as cheap, or cheaper, in great towns than in the remoter parts of the country, for reasons which I shall have occasion to explain hereafter. But the wages of labour in a great town and its neighbourhood, are frequently a fourth or a fifth part, twenty or five-and-twenty per cent. higher than at a few miles distance. Eighteen pence a day may be reckoned the common price of labour in London and its neighborhood. At a few miles distance, it falls to fourteen and fifteen pence. Tenpence may be reckoned its price in Edinburgh and its neighbourhood. At a few miles distance, it falls to eightpence, the usual price of common labour through the greater part of the low country of Scotland, where it varies a good deal less than in England. Such a difference of prices, which, it seems, is not always sufficient to transport a man from one parish to another, would necessarily occasion so great a transportation of the most bulky commodities, not only from one parish to another, but from one end of the kingdom, almost from one end of the world to the other, as would soon reduce them more nearly to a level. After all that has been said of the levity and inconstancy of human nature, it appears evidently from experience, that man is, of all sorts of luggage, the most difficult to be transported. If the labouring poor, therefore, can maintain their families in those parts of the kingdom where the price of labour is lowest, they must be in affluence where it is highest. Fourthly, the variations in the price of labour not only do not correspond, either in place or time, with those in the price of provisions, but they are frequently quite opposite. Grain, the food of the common people, is dearer in Scotland than in England, whence Scotland receives almost every year very large supplies. But English corn must be sold dearer in Scotland, the country to which it is brought, than in England, the country from which it comes; and it proportion to its quality it cannot be sold dearer in Scotland than the Scotch corn that comes to the same market in competition with it. The quality of grain depends chiefly upon the quantity of flour or meal which it yields at the mill; and, in this respect, English grain is so much superior to the Scotch, that though often dearer in appearance, or in proportion to the measure of its bulk, it is generally cheaper in reality, or in proportion to its quality, or even to the measure of its weight. The price of labour, on the contrary, is dearer in England than in Scotland. If the labouring poor, therefore, can maintain their families in the one part of the united kingdom, they must be in affluence in the other. Oatmeal, indeed, supplies the common people in Scotland with the greatest and the best part of their food, which is, in general, much inferior to that of their neighbours of the same rank in England. This difference, however, in the mode of their subsistence, is not the cause, but the effect, of the difference in their wages; though, by a strange misapprehension, I have frequently heard it represented as the cause. It is not because one man keeps a coach, while his neighbour walks a-foot, that one is rich, and the other poor; but because the one is rich, he keeps a coach, and because the other is poor, he walks a-foot. During the course of the last century, taking one year with another, grain was dearer in both parts of the united kingdom than during that of the present. This is a matter of fact which cannot now admit of any reasonable doubt; and the proof of it is, if possible, still more decisive with regard to Scotland than with regard to England. It is in Scotland supported by the evidence of the public fiars, annual valuations made upon oath, according to the actual state of the markets, of all the different sorts of grain in every different county of Scotland. If such direct proof could require any collateral evidence to confirm it, I would observe, that this has likewise been the case in France, and probably in most other parts of Europe. With regard to France, there is the clearest proof. But though it is certain, that in both parts of the united kingdom grain was somewhat dearer in the last century than in the present, it is equally certain that labour was much cheaper. If the labouring poor, therefore, could bring up their families then, they must be much more at their ease now. In the last century, the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer, and fivepence in winter. Three shillings a-week, the same price, very nearly still continues to be paid in some parts of the Highlands and Western islands. Through the greater part of the Low country, the most usual wages of common labour are now eightpence a-day; tenpence, sometimes a shilling, about Edinburgh, in the counties which border upon England, probably on account of that neighbourhood, and in a few other places where there has lately been a considerable rise in the demand for labour, about Glasgow, Carron, Ayrshire, &c. In England, the improvements of agriculture, manufactures, and commerce, began much earlier than in Scotland. The demand for labour, and consequently its price, must necessarily have increased with those improvements. In the last century, accordingly, as well as in the present, the wages of labour were higher in England than in Scotland. They have risen, too, considerably since that time, though, on account of the greater variety of wages paid there in different places, it is more difficult to ascertain how much. In 1614, the pay of a foot soldier was the same as in the present times, eightpence a-day. When it was first established, it would naturally be regulated by the usual wages of common labourers, the rank of people from which foot soldiers are commonly drawn. Lord-chief-justice Hales, who wrote in the time of Charles II. computes the necessary expense of a labourer's family, consisting of six persons, the father and mother, two children able to do something, and two not able, at ten shillings a-week, or twenty-six pounds a-year. If they cannot earn this by their labour, they must make it up, he supposes, either by begging or stealing. He appears to have enquired very carefully into this subject[9]. In 1688, Mr Gregory King, whose skill in political arithmetic is so much extolled by Dr Davenant, computed the ordinary income of labourers and out-servants to be fifteen pounds a-year to a family, which he supposed to consist, one with another, of three and a half persons. His calculation, therefore, though different in appearance, corresponds very nearly at bottom with that of Judge Hales. Both suppose the weekly expense of such families to be about twenty-pence a-head. Both the pecuniary income and expense of such families have increased considerably since that time through the greater part of the kingdom, in some places more, and in some less, though perhaps scarce anywhere so much as some exaggerated accounts of the present wages of labour have lately represented them to the public. The price of labour, it must be observed, cannot be ascertained very accurately anywhere, different prices being often paid at the same place and for the same sort of labour, not only according to the different abilities of the workman, but according to the easiness or hardness of the masters. Where wages are not regulated by law, all that we can pretend to determine is, what are the most usual; and experience seems to shew that law can never regulate them properly, though it has often pretended to do so. The real recompence of labour, the real quantity of the necessaries and conveniencies of life which it can procure to the labourer, has, during the course of the present century, increased perhaps in a still greater proportion than its money price. Not only grain has become somewhat cheaper, but many other things, from which the industrious poor derive an agreeable and wholesome variety of food, have become a great deal cheaper. Potatoes, for example, do not at present, through the greater part of the kingdom, cost half the price which they used to do thirty or forty years ago. The same thing may be said of turnips, carrots, cabbages; things which were formerly never raised but by the spade, but which are now commonly raised by the plough. All sort of garden stuff, too, has become cheaper. The greater part of the apples, and even of the onions, consumed in Great Britain, were, in the last century, imported from Flanders. The great improvements in the coarser manufactories of both linen and woollen cloth furnish the labourers with cheaper and better clothing; and those in the manufactories of the coarser metals, with cheaper and better instruments of trade, as well as with many agreeable and convenient pieces of household furniture. Soap, salt, candles, leather, and fermented liquors, have, indeed, become a good deal dearer, chiefly from the taxes which have been laid upon them. The quantity of these, however, which the labouring poor are under any necessity of consuming, is so very small, that the increase in their price does not compensate the diminution in that of so many other things. The common complaint, that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing, and lodging, which satisfied them in former times, may convince us that it is not the money price of labour only, but its real recompence, which has augmented. Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage, or as an inconveniency, to the society? The answer seems at first abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part, can never be regarded as any inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged. Poverty, though it no doubt discourages, does not always prevent, marriage. It seems even to be favourable to generation. A half-starved Highland woman frequently bears more than twenty children, while a pampered fine lady is often incapable of bearing any, and is generally exhausted by two or three. Barrenness, so frequent among women of fashion, is very rare among those of inferior station. Luxury, in the fair sex, while it inflames, perhaps, the passion for enjoyment, seems always to weaken, and frequently to destroy altogether, the powers of generation. But poverty, though it does not prevent the generation, is extremely unfavourable to the rearing of children. The tender plant is produced; but in so cold a soil, and so severe a climate, soon withers and dies. It is not uncommon, I have been frequently told, in the Highlands of Scotland, for a mother who has born twenty children not to have two alive. Several officers of great experience have assured me, that, so far from recruiting their regiment, they have never been able to supply it with drums and fifes, from all the soldiers' children that were born in it. A greater number of fine children, however, is seldom seen anywhere than about a barrack of soldiers. Very few of them, it seems, arrive at the age of thirteen or fourteen. In some places, one half the children die before they are four years of age, in many places before they are seven, and in almost all places before they are nine or ten. This great mortality, however will everywhere be found chiefly among the children of the common people, who cannot afford to tend them with the same care as those of better station. Though their marriages are generally more fruitful than those of people of fashion, a smaller proportion of their children arrive at maturity. In foundling hospitals, and among the children brought up by parish charities, the mortality is still greater than among those of the common people. Every species of animals naturally multiplies in proportion to the means of their subsistence, and no species can ever multiply beyond it. But in civilized society, it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species; and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce. The liberal reward of labour, by enabling them to provide better for their children, and consequently to bring up a greater number, naturally tends to widen and extend those limits. It deserves to be remarked, too, that it necessarily does this as nearly as possible in the proportion which the demand for labour requires. If this demand is continually increasing, the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers, as may enable them to supply that continually increasing demand by a continually increasing population. If the reward should at any time be less than what was requisite for this purpose, the deficiency of hands would soon raise it; and if it should at any time be more, their excessive multiplication would soon lower it to this necessary rate. The market would be so much understocked with labour in the one case, and so much overstocked in the other, as would soon force back its price to that proper rate which the circumstances of the society required. It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men, quickens it when it goes on too slowly, and stops it when it advances too fast. It is this demand which regulates and determines the state of propagation in all the different countries of the world; in North America, in Europe, and in China; which renders it rapidly progressive in the first, slow and gradual in the second, and altogether stationary in the last. The wear and tear of a slave, it has been said, is at the expense of his master; but that of a free servant is at his own expense. The wear and tear of the latter, however, is, in reality, as much at the expense of his master as that of the former. The wages paid to journeymen and servants of every kind must be such as may enable them, one with another to continue the race of journeymen and servants, according as the increasing, diminishing, or stationary demand of the society, may happen to require. But though the wear and tear of a free servant be equally at the expense of his master, it generally costs him much less than that of a slave. The fund destined for replacing or repairing, if I may say so, the wear and tear of the slave, is commonly managed by a negligent master or careless overseer. That destined for performing the same office with regard to the freeman is managed by the freeman himself. The disorders which generally prevail in the economy of the rich, naturally introduce themselves into the management of the former; the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. Under such different management, the same purpose must require very different degrees of expense to execute it. It appears, accordingly, from the experience of all ages and nations, I believe, that the work done by freemen comes cheaper in the end than that performed by slaves. It is found to do so even at Boston, New-York, and Philadelphia, where the wages of common labour are so very high. The liberal reward of labour, therefore, as it is the effect of increasing wealth, so it is the cause of increasing population. To complain of it, is to lament over the necessary cause and effect of the greatest public prosperity. It deserves to be remarked, perhaps, that it is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is, in reality, the cheerful and the hearty state to all the different orders of the society; the stationary is dull; the declining melancholy. The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days, perhaps, in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low; in England, for example, than in Scotland; in the neighbourhood of great towns, than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part. Workmen, on the contrary, when they are liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years. A carpenter in London, and in some other places, is not supposed to last in his utmost vigour above eight years. Something of the same kind happens in many other trades, in which the workmen are paid by the piece; as they generally are in manufactures, and even in country labour, wherever wages are higher than ordinary. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. Ramuzzini, an eminent Italian physician, has written a particular book concerning such diseases. We do not reckon our soldiers the most industrious set of people among us; yet when soldiers have been employed in some particular sorts of work, and liberally paid by the piece, their officers have frequently been obliged to stipulate with the undertaker, that they should not be allowed to earn above a certain sum every day, according to the rate at which they were paid. Till this stipulation was made, mutual emulation, and the desire of greater gain, frequently prompted them to overwork themselves, and to hurt their health by excessive labour. Excessive application, during four days of the week, is frequently the real cause of the idleness of the other three, so much and so loudly complained of. Great labour, either of mind or body, continued for several days together is, in most men, naturally followed by a great desire of relaxation, which, if not restrained by force, or by some strong necessity, is almost irresistible. It is the call of nature, which requires to be relieved by some indulgence, sometimes of ease only, but sometimes too of dissipation and diversion. If it is not complied with, the consequences are often dangerous and sometimes fatal, and such as almost always, sooner or later, bring on the peculiar infirmity of the trade. If masters would always listen to the dictates of reason and humanity, they have frequently occasion rather to moderate, than to animate the application of many of their workmen. It will be found, I believe, in every sort of trade, that the man who works so moderately, as to be able to work constantly, not only preserves his health the longest, but, in the course of the year, executes the greatest quantity of work. In cheap years it is pretended, workmen are generally more idle, and in dear times more industrious than ordinary. A plentiful subsistence, therefore, it has been concluded, relaxes, and a scanty one quickens their industry. That a little more plenty than ordinary may render some workmen idle, cannot be well doubted; but that it should have this effect upon the greater part, or that men in general should work better when they are ill fed, than when they are well fed, when they are disheartened than when they are in good spirits, when they are frequently sick than when they are generally in good health, seems not very probable. Years of dearth, it is to be observed, are generally among the common people years of sickness and mortality, which cannot fail to diminish the produce of their industry. In years of plenty, servants frequently leave their masters, and trust their subsistence to what they can make by their own industry. But the same cheapness of provisions, by increasing the fund which is destined for the maintenance of servants, encourages masters, farmers especially, to employ a greater number. Farmers, upon such occasions, expect more profit from their corn by maintaining a few more labouring servants, than by selling it at a low price in the market. The demand for servants increases, while the number of those who offer to supply that demand diminishes. The price of labour, therefore, frequently rises in cheap years. In years of scarcity, the difficulty and uncertainty of subsistence make all such people eager to return to service. But the high price of provisions, by diminishing the funds destined for the maintenance of servants, disposes masters rather to diminish than to increase the number of those they have. In dear years, too, poor independent workmen frequently consume the little stock with which they had used to supply themselves with the materials of their work, and are obliged to become journeymen for subsistence. More people want employment than easily get it; many are willing to take it upon lower terms than ordinary; and the wages of both servants and journeymen frequently sink in dear years. Masters of all sorts, therefore, frequently make better bargains with their servants in dear than in cheap years, and find them more humble and dependent in the former than in the latter. They naturally, therefore, commend the former as more favourable to industry. Landlords and farmers, besides, two of the largest classes of masters, have another reason for being pleased with dear years. The rents of the one, and the profits of the other, depend very much upon the price of provisions. Nothing can be more absurd, however, than to imagine that men in general should work less when they work for themselves, than when they work for other people. A poor independent workman will generally be more industrious than even a journeyman who works by the piece. The one enjoys the whole produce of his own industry, the other shares it with his master. The one, in his separate independent state, is less liable to the temptations of bad company, which, in large manufactories, so frequently ruin the morals of the other. The superiority of the independent workman over those servants who are hired by the month or by the year, and whose wages and maintenance are the same, whether they do much or do little, is likely to be still greater. Cheap years tend to increase the proportion of independent workmen to journeymen and servants of all kinds, and dear years to diminish it. A French author of great knowledge and ingenuity, Mr Messance, receiver of the tallies in the election of St Etienne, endeavours to shew that the poor do more work in cheap than in dear years, by comparing the quantity and value of the goods made upon those different occasions in three different manufactures; one of coarse woollens, carried on at Elbeuf; one of linen, and another of silk, both which extend through the whole generality of Rouen. It appears from his account, which is copied from the registers of the public offices, that the quantity and value of the goods made in all those three manufactories has generally been greater in cheap than in dear years, and that it has always been greatest in the cheapest, and least in the dearest years. All the three seem to be stationary manufactures, or which, though their produce may vary somewhat from year to year, are, upon the whole, neither going backwards nor forwards. The manufacture of linen in Scotland, and that of coarse woollens in the West Riding of Yorkshire, are growing manufactures, of which the produce is generally, though with some variations, increasing both in quantity and value. Upon examining, however, the accounts which have been published of their annual produce, I have not been able to observe that its variations have had any sensible connection with the dearness or cheapness of the seasons. In 1740, a year of great scarcity, both manufactures, indeed, appear to have declined very considerably. But in 1756, another year of great scarcity, the Scotch manufactures made more than ordinary advances. The Yorkshire manufacture, indeed, declined, and its produce did not rise to what it had been in 1755, till 1766, after the repeal of the American stamp act. In that and the following year, it greatly exceeded what it had ever been before, and it has continued to advance ever since. The produce of all great manufactures for distant sale must necessarily depend, not so much upon the dearness or cheapness of the seasons in the countries where they are carried on, as upon the circumstances which affect the demand in the countries where they are consumed; upon peace or war, upon the prosperity or declension of other rival manufactures, and upon the good or bad humour of their principal customers. A great part of the extraordinary work, besides, which is probably done in cheap years, never enters the public registers of manufactures. The men-servants, who leave their masters, become independent labourers. The women return to their parents, and commonly spin, in order to make clothes for themselves and their families. Even the independent workmen do not always work for public sale, but are employed by some of their neighbours in manufactures for family use. The produce of their labour, therefore, frequently makes no figure in those public registers, of which the records are sometimes published with so much parade, and from which our merchants and manufacturers would often vainly pretend to announce the prosperity or declension of the greatest empires. Though the variations in the price of labour not only do not always correspond with those in the price of provisions, but are frequently quite opposite, we must not, upon this account, imagine that the price of provisions has no influence upon that of labour. The money price of labour is necessarily regulated by two circumstances; the demand for labour, and the price of the necessaries and conveniencies of life. The demand for labour, according as it happens to be increasing, stationary, or declining, or to require an increasing, stationary, or declining population, determines the quantities of the necessaries and conveniencies of life which must be given to the labourer; and the money price of labour is determined by what is requisite for purchasing this quantity. Though the money price of labour, therefore, is sometimes high where the price of provisions is low, it would be still higher, the demand continuing the same, if the price of provisions was high. It is because the demand for labour increases in years of sudden and extraordinary plenty, and diminishes in those of sudden and extraordinary scarcity, that the money price of labour sometimes rises in the one, and sinks in the other. In a year of sudden and extraordinary plenty, there are funds in the hands of many of the employers of industry, sufficient to maintain and employ a greater number of industrious people than had been employed the year before; and this extraordinary number cannot always be had. Those masters, therefore, who want more workmen, bid against one another, in order to get them, which sometimes raises both the real and the money price of their labour. The contrary of this happens in a year of sudden and extraordinary scarcity. The funds destined for employing industry are less than they had been the year before. A considerable number of people are thrown out of employment, who bid one against another, in order to get it, which sometimes lowers both the real and the money price of labour. In 1740, a year of extraordinary scarcity, many people were willing to work for bare subsistence. In the succeeding years of plenty, it was more difficult to get labourers and servants. The scarcity of a dear year, by diminishing the demand for labour, tends to lower its price, as the high price of provisions tends to raise it. The plenty of a cheap year, on the contrary, by increasing the demand, tends to raise the price of labour, as the cheapness of provisions tends to lower it. In the ordinary variations of the prices of provisions, those two opposite causes seem to counterbalance one another, which is probably, in part, the reason why the wages of labour are everywhere so much more steady and permanent than the price of provisions. The increase in the wages of labour necessarily increases the price of many commodities, by increasing that part of it which resolves itself into wages, and so far tends to diminish their consumption, both at home and abroad. The same cause, however, which raises the wages of labour, the increase of stock, tends to increase its productive powers, and to make a smaller quantity of labour produce a greater quantity of work. The owner of the stock which employs a great number of labourers necessarily endeavours, for his own advantage, to make such a proper division and distribution of employment, that they may be enabled to produce the greatest quantity of work possible. For the same reason, he endeavours to supply them with the best machinery which either he or they can think of. What takes place among the labourers in a particular workhouse, takes place, for the same reason, among those of a great society. The greater their number, the more they naturally divide themselves into different classes and subdivisions of employments. More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. There are many commodities, therefore, which, in consequence of these improvements, come to be produced by so much less labour than before, that the increase of its price is more than compensated by the diminution of its quantity. CHAP. IX. OF THE PROFITS OF STOCK. The rise and fall in the profits of stock depend upon the same causes with the rise and fall in the wages of labour, the increasing or declining state of the wealth of the society; but those causes affect the one and the other very differently. The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all. It is not easy, it has already been observed, to ascertain what are the average wages of labour, even in a particular place, and at a particular time. We can, even in this case, seldom determine more than what are the most usual wages. But even this can seldom be done with regard to the profits of stock. Profit is so very fluctuating, that the person who carries on a particular trade, cannot always tell you himself what is the average of his annual profit. It is affected, not only by every variation of price in the commodities which he deals in, but by the good or bad fortune both of his rivals and of his customers, and by a thousand other accidents, to which goods, when carried either by sea or by land, or even when stored in a warehouse, are liable. It varies, therefore, not only from year to year, but from day to day, and almost from hour to hour. To ascertain what is the average profit of all the different trades carried on in a great kingdom, must be much more difficult; and to judge of what it may have been formerly, or in remote periods of time, with any degree of precision, must be altogether impossible. But though it may be impossible to determine, with any degree of precision, what are or were the average profits of stock, either in the present or in ancient times, some notion may be formed of them from the interest of money. It may be laid down as a maxim, that wherever a great deal can be made by the use of money, a great deal will commonly be given for the use of it; and that, wherever little can be made by it, less will commonly be given for it. Accordingly, therefore, as the usual market rate of interest varies in any country, we may be assured that the ordinary profits of stock must vary with it, must sink as it sinks, and rise as it rises. The progress of interest, therefore, may lead us to form some notion of the progress of profit. By the 37th of Henry VIII. all interest above ten per cent. was declared unlawful. More, it seems, had sometimes been taken before that. In the reign of Edward VI. religious zeal prohibited all interest. This prohibition, however, like all others of the same kind, is said to have produced no effect, and probably rather increased than diminished the evil of usury. The statute of Henry VIII. was revived by the 13th of Elizabeth, cap. 8. and ten per cent. continued to be the legal rate of interest till the 21st of James I. when it was restricted to eight per cent. It was reduced to six per cent. soon after the Restoration, and by the 12th of Queen Anne, to five per cent. All these different statutory regulations seem to have been made with great propriety. They seem to have followed, and not to have gone before, the market rate of interest, or the rate at which people of good credit usually borrowed. Since the time of Queen Anne, five per cent. seems to have been rather above than below the market rate. Before the late war, the government borrowed at three per cent.; and people of good credit in the capital, and in many other parts of the kingdom, at three and a-half, four, and four and a-half per cent. Since the time of Henry VIII. the wealth and revenue of the country have been continually advancing, and in the course of their progress, their pace seems rather to have been gradually accelerated than retarded. They seem not only to have been going on, but to have been going on faster and faster. The wages of labour have been continually increasing during the same period, and, in the greater part of the different branches of trade and manufactures, the profits of stock have been diminishing. It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. The great stock employed in every branch of trade, and the number of rich competitors, generally reduce the rate of profit in the former below what it is in the latter. But the wages of labour are generally higher in a great town than in a country village. In a thriving town, the people who have great stocks to employ, frequently cannot get the number of workmen they want, and therefore bid against one another, in order to get as many as they can, which raises the wages of labour, and lowers the profits of stock. In the remote parts of the country, there is frequently not stock sufficient to employ all the people, who therefore bid against one another, in order to get employment, which lowers the wages of labour, and raises the profits of stock. In Scotland, though the legal rate of interest is the same as in England, the market rate is rather higher. People of the best credit there seldom borrow under five per cent. Even private bankers in Edinburgh give four per cent. upon their promissory-notes, of which payment, either in whole or in part may be demanded at pleasure. Private bankers in London give no interest for the money which is deposited with them. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. The common rate of profit, therefore, must be somewhat greater. The wages of labour, it has already been observed, are lower in Scotland than in England. The country, too, is not only much poorer, but the steps by which it advances to a better condition, for it is evidently advancing, seem to be much slower and more tardy. The legal rate of interest in France has not, during the course of the present century, been always regulated by the market rate[10]. In 1720, interest was reduced from the twentieth to the fiftieth penny, or from five to two per cent. In 1724, it was raised to the thirtieth penny, or to three and a third per cent. In 1725, it was again raised to the twentieth penny, or to five per cent. In 1766, during the administration of Mr Laverdy, it was reduced to the twenty-fifth penny, or to four per cent. The Abbé Terray raised it afterwards to the old rate of five per cent. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts; a purpose which has sometimes been executed. France is, perhaps, in the present times, not so rich a country as England; and though the legal rate of interest has in France frequently been lower than in England, the market rate has generally been higher; for there, as in other countries, they have several very safe and easy methods of evading the law. The profits of trade, I have been assured by British merchants who had traded in both countries, are higher in France than in England; and it is no doubt upon this account, that many British subjects chuse rather to employ their capitals in a country where trade is in disgrace, than in one where it is highly respected. The wages of labour are lower in France than in England. When you go from Scotland to England, the difference which you may remark between the dress and countenance of the common people in the one country and in the other, sufficiently indicates the difference in their condition. The contrast is still greater when you return from France. France, though no doubt a richer country than Scotland, seems not to be going forward so fast. It is a common and even a popular opinion in the country, that it is going backwards; an opinion which I apprehend, is ill-founded, even with regard to France, but which nobody can possibly entertain with regard to Scotland, who sees the country now, and who saw it twenty or thirty years ago. The province of Holland, on the other hand, in proportion to the extent of its territory and the number of its people, is a richer country than England. The government there borrow at two per cent. and private people of good credit at three. The wages of labour are said to be higher in Holland than in England, and the Dutch, it is well known, trade upon lower profits than any people in Europe. The trade of Holland, it has been pretended by some people, is decaying, and it may perhaps be true that some particular branches of it are so; but these symptoms seem to indicate sufficiently that there is no general decay. When profit diminishes, merchants are very apt to complain that trade decays, though the diminution of profit is the natural effect of its prosperity, or of a greater stock being employed in it than before. During the late war, the Dutch gained the whole carrying trade of France, of which they still retain a very large share. The great property which they possess both in French and English funds, about forty millions, it is said in the latter (in which, I suspect, however, there is a considerable exaggeration), the great sums which they lend to private people, in countries where the rate of interest is higher than in their own, are circumstances which no doubt demonstrate the redundancy of their stock, or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country; but they do not demonstrate that that business has decreased. As the capital of a private man, though acquired by a particular trade, may increase beyond what he can employ in it, and yet that trade continue to increase too, so may likewise the capital of a great nation. In our North American and West Indian colonies, not only the wages of labour, but the interest of money, and consequently the profits of stock, are higher than in England. In the different colonies, both the legal and the market rate of interest run from six to eight per cent. High wages of labour and high profits of stock, however, are things, perhaps, which scarce ever go together, except in the peculiar circumstances of new colonies. A new colony must always, for some time, be more understocked in proportion to the extent of its territory, and more underpeopled in proportion to the extent of its stock, than the greater part of other countries. They have more land than they have stock to cultivate. What they have, therefore, is applied to the cultivation only of what is most fertile and most favourably situated, the land near the sea-shore and along the banks of navigable rivers. Such land, too, is frequently purchased at a price below the value even of its natural produce. Stock employed in the purchase and improvement of such lands, must yield a very large profit, and, consequently, afford to pay a very large interest. Its rapid accumulation in so profitable an employment enables the planter to increase the number of his hands faster than he can find them in a new settlement. Those whom he can find, therefore, are very liberally rewarded. As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded for the stock which is so employed. In the greater part of our colonies, accordingly, both the legal and the market rate of interest have been considerably reduced during the course of the present century. As riches, improvement, and population, have increased, interest has declined. The wages of labour do not sink with the profits of stock. The demand for labour increases with the increase of stock, whatever be its profits; and after these are diminished, stock may not only continue to increase, but to increase much faster than before. It is with industrious nations, who are advancing in the acquisition of riches, as with industrious individuals. A great stock, though with small profits, generally increases faster than a small stock with great profits. Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little. The connection between the increase of stock and that of industry, or of the demand for useful labour, has partly been explained already, but will be explained more fully hereafter, in treating of the accumulation of stock. The acquisition of new territory, or of new branches of trade, may sometimes raise the profits of stock, and with them the interest of money, even in a country which is fast advancing in the acquisition of riches. The stock of the country, not being sufficient for the whole accession of business which such acquisitions present to the different people among whom it is divided, is applied to those particular branches only which afford the greatest profit. Part of what had before been employed in other trades, is necessarily withdrawn from them, and turned into some of the new and more profitable ones. In all those old trades, therefore, the competition comes to be less than before. The market comes to be less fully supplied with many different sorts of goods. Their price necessarily rises more or less, and yields a greater profit to those who deal in them, who can, therefore, afford to borrow at a higher interest. For some time after the conclusion of the late war, not only private people of the best credit, but some of the greatest companies in London, commonly borrowed at five per cent. who, before that, had not been used to pay more than four, and four and a half per cent. The great accession both of territory and trade by our acquisitions in North America and the West Indies, will sufficiently account for this, without supposing any diminution in the capital stock of the society. So great an accession of new business to be carried on by the old stock, must necessarily have diminished the quantity employed in a great number of particular branches, in which the competition being less, the profits must have been greater. I shall hereafter have occasion to mention the reasons which dispose me to believe that the capital stock of Great Britain was not diminished, even by the enormous expense of the late war. The diminution of the capital stock of the society, or of the funds destined for the maintenance of industry, however, as it lowers the wages of labour, so it raises the profits of stock, and consequently the interest of money. By the wages of labour being lowered, the owners of what stock remains in the society can bring their goods at less expense to market than before; and less stock being employed in supplying the market than before, they can sell them dearer. Their goods cost them less, and they get more for them. Their profits, therefore, being augmented at both ends, can well afford a large interest. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies, may satisfy us, that as the wages of labour are very low, so the profits of stock are very high in those ruined countries. The interest of money is proportionably so. In Bengal, money is frequently lent to the farmers at forty, fifty, and sixty per cent. and the succeeding crop is mortgaged for the payment. As the profits which can afford such an interest must eat up almost the whole rent of the landlord, so such enormous usury must in its turn eat up the greater part of those profits. Before the fall of the Roman republic, a usury of the same kind seems to have been common in the provinces, under the ruinous administration of their proconsuls. The virtuous Brutus lent money in Cyprus at eight-and-forty per cent. as we learn from the letters of Cicero. In a country which had acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other countries, allowed it to acquire, which could, therefore, advance no further, and which was not going backwards, both the wages of labour and the profits of stock would probably be very low. In a country fully peopled in proportion to what either its territory could maintain, or its stock employ, the competition for employment would necessarily be so great as to reduce the wages of labour to what was barely sufficient to keep up the number of labourers, and the country being already fully peopled, that number could never be augmented. In a country fully stocked in proportion to all the business it had to transact, as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. The competition, therefore, would everywhere be as great, and, consequently, the ordinary profit as low as possible. But, perhaps, no country has ever yet arrived at this degree of opulence. China seems to have been long stationary, and had, probably, long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. But this complement may be much inferior to what, with other laws and institutions, the nature of its soil, climate, and situation, might admit of. A country which neglects or despises foreign commerce, and which admits the vessels of foreign nations into one or two of its ports only, cannot transact the same quantity of business which it might do with different laws and institutions. In a country, too, where, though the rich, or the owners of large capitals, enjoy a good deal of security, the poor, or the owners of small capitals, enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins, the quantity of stock employed in all the different branches of business transacted within it, can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by engrossing the whole trade to themselves, will be able to make very large profits. Twelve per cent. accordingly, is said to be the common interest of money in China, and the ordinary profits of stock must be sufficient to afford this large interest. A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country, as to wealth or poverty, would require. When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the same footing with bankrupts, or people of doubtful credit, in better regulated countries. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. Among the barbarous nations who overran the western provinces of the Roman empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of justice of their kings seldom intermeddled in it. The high rate of interest which took place in those ancient times, may perhaps, be partly accounted for from this cause. When the law prohibits interest altogether, it does not prevent it. Many people must borrow, and nobody will lend without such a consideration for the use of their money as is suitable, not only to what can be made by the use of it, but to the difficulty and danger of evading the law. The high rate of interest among all Mahometan nations is accounted for by M. Montesquieu, not from their poverty, but partly from this, and partly from the difficulty of recovering the money. The lowest ordinary rate of profit must always be something more than what is sufficient to compensate the occasional losses to which every employment of stock is exposed. It is this surplus only which is neat or clear profit. What is called gross profit, comprehends frequently not only this surplus, but what is retained for compensating such extraordinary losses. The interest which the borrower can afford to pay is in proportion to the clear profit only. The lowest ordinary rate of interest must, in the same manner, be something more than sufficient to compensate the occasional losses to which lending, even with tolerable prudence, is exposed. Were it not, mere charity or friendship could be the only motives for lending. In a country which had acquired its full complement of riches, where, in every particular branch of business, there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. It would be necessary that almost every man should be a man of business, or engage in some sort of trade. The province of Holland seems to be approaching near to this state. It is there unfashionable not to be a man of business. Necessity makes it usual for almost every man to be so, and custom everywhere regulates fashion. As it is ridiculous not to dress, so is it, in some measure, not to be employed like other people. As a man of a civil profession seems awkward in camp or a garrison, and is even in some danger of being despised there, so does an idle man among men of business. The highest ordinary rate of profit may be such as, in the price of the greater part of commodities, eats up the whole of what should go to the rent of the land, and leaves only what is sufficient to pay the labour of preparing and bringing them to market, according to the lowest rate at which labour can anywhere be paid, the bare subsistence of the labourer. The workman must always have been fed in some way or other while he was about the work, but the landlord may not always have been paid. The profits of the trade which the servants of the East India Company carry on in Bengal may not, perhaps, be very far from this rate. The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit, necessarily varies as profit rises or falls. Double interest is in Great Britain reckoned what the merchants call a good, moderate, reasonable profit; terms which, I apprehend, mean no more than a common and usual profit. In a country where the ordinary rate of clear profit is eight or ten per cent. it may be reasonable that one half of it should go to interest, wherever business is carried on with borrowed money. The stock is at the risk of the borrower, who, as it were, insures it to the lender; and four or five per cent. may, in the greater part of trades, be both a sufficient profit upon the risk of this insurance, and a sufficient recompence for the trouble of employing the stock. But the proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a good deal lower, or a good deal higher. If it were a good deal lower, one half of it, perhaps, could not be afforded for interest; and more might be afforded if it were a good deal higher. In countries which are fast advancing to riches, the low rate of profit may, in the price of many commodities, compensate the high wages of labour, and enable those countries to sell as cheap as their less thriving neighbours, among whom the wages of labour may be lower. In reality, high profits tend much more to raise the price of work than high wages. If, in the linen manufacture, for example, the wages of the different working people, the flax-dressers, the spinners, the weavers, &c. should all of them be advanced twopence a-day, it would be necessary to heighten the price of a piece of linen only by a number of twopences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been so employed. That part of the price of the commodity which resolved itself into the wages, would, through all the different stages of the manufacture, rise only in arithmetical proportion to this rise of wages. But if the profits of all the different employers of those working people should be raised five per cent. that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit. The employer of the flax-dressers would, in selling his flax, require an additional five per cent. upon the whole value of the materials and wages which he advanced to his workmen. The employer of the spinners would require an additional five per cent. both upon the advanced price of the flax, and upon the wages of the spinners. And the employer of the weavers would require a like five per cent. both upon the advanced price of the linen-yarn, and upon the wages of the weavers. In raising the price of commodities, the rise of wages operates in the same manner as simple interest does in the accumulation of debt. The rise of profit operates like compound interest. Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods, both at home and abroad. They say nothing concerning the bad effects of high profits; they are silent with regard to the pernicious effects of their own gains; they complain only of those of other people. CHAP. X. OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK. The whole of the advantages and disadvantages of the different employments of labour and stock, must, in the same neighbourhood, be either perfectly equal, or continually tending to equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This, at least, would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man's interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. Pecuniary wages and profit, indeed, are everywhere in Europe extremely different, according to the different employments of labour and stock. But this difference arises, partly from certain circumstances in the employments themselves, which, either really, or at least in the imagination of men, make up for a small pecuniary gain in some, and counterbalance a great one in others, and partly from the policy of Europe, which nowhere leaves things at perfect liberty. The particular consideration of those circumstances, and of that policy, will divide this Chapter into two parts. PART I.--_Inequalities arising from the nature of the employments themselves._ The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others. First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them. First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours, as a collier, who is only a labourer, does in eight. His work is not quite so dirty, is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to shew by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever. Hunting and fishing, the most important employments of mankind in the rude state of society, become, in its advanced state, their most agreeable amusements, and they pursue for pleasure what they once followed from necessity. In the advanced state of society, therefore, they are all very poor people who follow as a trade, what other people pursue as a pastime. Fishermen have been so since the time of Theocritus[11]. A poacher is everywhere a very poor man in Great Britain. In countries where the rigour of the law suffers no poachers, the licensed hunter is not in a much better condition. The natural taste for those employments makes more people follow them, than can live comfortably by them; and the produce of their labour, in proportion to its quantity, comes always too cheap to market, to afford any thing but the most scanty subsistence to the labourers. Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. The keeper of an inn or tavern, who is never master of his own house, and who is exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very creditable business. But there is scarce any common trade in which a small stock yields so great a profit. Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business. When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines. The work which he learns to perform, it must be expected, over and above the usual wages of common labour, will replace to him the whole expense of his education, with at least the ordinary profits of an equally valuable capital. It must do this too in a reasonable time, regard being had to the very uncertain duration of human life, in the same manner as to the more certain duration of the machine. The difference between the wages of skilled labour and those of common labour, is founded upon this principle. The policy of Europe considers the labour of all mechanics, artificers, and manufacturers, as skilled labour; and that of all country labourers as common labour. It seems to suppose that of the former to be of a more nice and delicate nature than that of the latter. It is so perhaps in some cases; but in the greater part it is quite otherwise, as I shall endeavour to shew by and by. The laws and customs of Europe, therefore, in order to qualify any person for exercising the one species of labour, impose the necessity of an apprenticeship, though with different degrees of rigour in different places. They leave the other free and open to every body. During the continuance of the apprenticeship, the whole labour of the apprentice belongs to the master. In the meantime he must, in many cases, be maintained by his parents or relations, and, in almost all cases, must be clothed by them. Some money, too, is commonly given to the master for teaching him his trade. They who cannot give money, give time, or become bound for more than the usual number of years; a consideration which, though it is not always advantageous to the master, on account of the usual idleness of apprentices, is always disadvantageous to the apprentice. In country labour, on the contrary, the labourer, while he is employed about the easier, learns the more difficult parts of his business, and his own labour maintains him through all the different stages of his employment. It is reasonable, therefore, that in Europe the wages of mechanics, artificers, and manufacturers, should be somewhat higher than those of common labourers. They are so accordingly, and their superior gains make them, in most places, be considered as a superior rank of people. This superiority, however, is generally very small: the daily or weekly earnings of journeymen in the more common sorts of manufactures, such as those of plain linen and woollen cloth, computed at an average, are, in most places, very little more than the day-wages of common labourers. Their employment, indeed, is more steady and uniform, and the superiority of their earnings, taking the whole year together, may be somewhat greater. It seems evidently, however, to be no greater than what is sufficient to compensate the superior expense of their education. Education in the ingenious arts, and in the liberal professions, is still more tedious and expensive. The pecuniary recompence, therefore, of painters and sculptors, of lawyers and physicians, ought to be much more liberal; and it is so accordingly. The profits of stock seem to be very little affected by the easiness or difficulty of learning the trade in which it is employed. All the different ways in which stock is commonly employed in great towns seem, in reality, to be almost equally easy and equally difficult to learn. One branch, either of foreign or domestic trade, cannot well be a much more intricate business than another. Thirdly, the wages of labour in different occupations vary with the constancy or inconstancy of employment. Employment is much more constant in some trades than in others. In the greater part of manufactures, a journeyman may be pretty sure of employment almost every day in the year that he is able to work. A mason or bricklayer, on the contrary, can work neither in hard frost nor in foul weather, and his employment at all other times depends upon the occasional calls of his customers. He is liable, in consequence, to be frequently without any. What he earns, therefore, while he is employed, must not only maintain him while he is idle, but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. Where the computed earnings of the greater part of manufacturers, accordingly, are nearly upon a level with the day-wages of common labourers, those of masons and bricklayers are generally from one-half more to double those wages. Where common labourers earn four of five shillings a week, masons and bricklayers frequently earn seven and eight; where the former earn six, the latter often earn nine and ten; and where the former earn nine and ten, as in London, the latter commonly earn fifteen and eighteen. No species of skilled labour, however, seems more easy to learn than that of masons and bricklayers. Chairmen in London, during the summer season, are said sometimes to be employed as bricklayers. The high wages of those workmen, therefore, are not so much the recompence of their skill, as the compensation for the inconstancy of their employment. A house-carpenter seems to exercise rather a nicer and a more ingenious trade than a mason. In most places, however, for it is not universally so, his day-wages are somewhat lower. His employment, though it depends much, does not depend so entirely upon the occasional calls of his customers; and it is not liable to be interrupted by the weather. When the trades which generally afford constant employment, happen in a particular place not to do so, the wages of the workmen always rise a good deal above their ordinary proportion to those of common labour. In London, almost all journeymen artificers are liable to be called upon and dismissed by their masters from day to day, and from week to week, in the same manner as day-labourers in other places. The lowest order of artificers, journeymen tailors, accordingly, earn their half-a-crown a-day, though eighteen pence may be reckoned the wages of common labour. In small towns and country villages, the wages of journeymen tailors frequently scarce equal those of common labour; but in London they are often many weeks without employment, particularly during the summer. When the inconstancy of employment is combined with the hardship, disagreeableness, and dirtiness of the work, it sometimes raises the wages of the most common labour above those of the most skilful artificers. A collier working by the piece is supposed, at Newcastle, to earn commonly about double, and, in many parts of Scotland, about three times, the wages of common labour. His high wages arise altogether from the hardship, disagreeableness, and dirtiness of his work. His employment may, upon most occasions, be as constant as he pleases. The coal-heavers in London exercise a trade which, in hardship, dirtiness, and disagreeableness, almost equals that of colliers; and, from the unavoidable irregularity in the arrivals of coal-ships, the employment of the greater part of them is necessarily very inconstant. If colliers, therefore, commonly earn double and triple the wages of common labour, it ought not to seem unreasonable that coal-heavers should sometimes earn four and five times those wages. In the inquiry made into their condition a few years ago, it was found that, at the rate at which they were paid, they could earn from six to ten shillings a-day. Six shillings are about four times the wages of common labour in London; and, in every particular trade, the lowest common earnings may always be considered as those of the far greater number. How extravagant soever those earnings may appear, if they were more than sufficient to compensate all the disagreeable circumstances of the business, there would soon be so great a number of competitors, as, in a a trade which has no exclusive privilege, would quickly reduce them to a lower rate. The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any particular trade. Whether the stock is or is not constantly employed, depends, not upon the trade, but the trader. Fourthly, the wages of labour vary according to the small or great trust which must be reposed in the workmen. The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen, not only of equal, but of much superior ingenuity, on account of the precious materials with which they are entrusted. We trust our health to the physician, our fortune, and sometimes our life and reputation, to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour. When a person employs only his own stock in trade, there is no trust; and the credit which he may get from other people, depends, not upon the nature of the trade, but upon their opinion of his fortune, probity and prudence. The different rates of profit, therefore, in the different branches of trade, cannot arise from the different degrees of trust reposed in the traders. Fifthly, the wages of labour in different employments vary according to the probability or improbability of success in them. The probability that any particular person shall ever be qualified for the employments to which he is educated, is very different in different occupations. In the greatest part of mechanic trades, success is almost certain; but very uncertain in the liberal professions. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it as at least twenty to one if he ever makes such proficiency as will enable him to live by the business. In a perfectly fair lottery, those who draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty. The counsellor at law, who, perhaps, at near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but of that of more than twenty others, who are never likely to make any thing by it. How extravagant soever the fees of counsellors at law may sometimes appear, their real retribution is never equal to this. Compute, in any particular place, what is likely to be annually gained, and what is likely to be annually spent, by all the different workmen in any common trade, such as that of shoemakers or weavers, and you will find that the former sum will generally exceed the latter. But make the same computation with regard to all the counsellors and students of law, in all the different Inns of court, and you will find that their annual gains bear but a very small proportion to their annual expense, even though you rate the former as high, and the latter as low, as can well be done. The lottery of the law, therefore, is very far from being a perfectly fair lottery; and that, as well as many other liberal and honourable professions, is, in point of pecuniary gain, evidently under-recompensed. Those professions keep their level, however, with other occupations; and, notwithstanding these discouragements, all the most generous and liberal spirits are eager to crowd into them. Two different causes contribute to recommend them. First, the desire of the reputation which attends upon superior excellence in any of them; and, secondly, the natural confidence which every man has, more or less, not only in his own abilities, but in his own good fortune. To excel in any profession, in which but few arrive at mediocrity, it is the most decisive mark of what is called genius, or superior talents. The public admiration which attends upon such distinguished abilities makes always a part of their reward; a greater of smaller, in proportion as it is higher or lower in degree. It makes a considerable part of that reward in the profession of physic; a still greater, perhaps, in that of law; in poetry and philosophy it makes almost the whole. There are some very agreeable and beautiful talents, of which the possession commands a certain sort of admiration, but of which the exercise, for the sake of gain, is considered, whether from reason or prejudice, as a sort of public prostitution. The pecuniary recompence, therefore, of those who exercise them in this manner, must be sufficient, not only to pay for the time, labour, and expense for acquiring the talents, but for the discredit which attends the employment of them as the means of subsistence. The exorbitant rewards of players, opera-singers, opera-dancers, &c. are founded upon those two principles; the rarity and beauty of the talent, and the discredit of employing them in this manner. It seems absurd at first sight, that we should despise their persons, and yet reward their talents with the most profuse liberality. While we do the one, however, we must of necessity do the other. Should the public opinion of prejudice ever alter with regard to such occupations, their pecuniary recompence would quickly diminish. More people would apply to them, and the competition would quickly reduce the price of their labour. Such talents, though far from being common, are by no means so rare as imagined. Many people possess them in great perfection, who disdain to make this use of them; and many more are capable of acquiring them, if any thing could be made honourably by them. The over-weening conceit which the great part of men have of their own abilities, is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of. It is, however, if possible, still more universal. There is no man living, who, when in tolerable health and spirits, has not some share of it. The chance of gain is by every man more or less over-valued, and the chance of loss is by most men under-valued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth. That the chance of gain is naturally over-valued, we may learn from the universal success of lotteries. The world neither ever saw, nor ever will see, a perfectly fair lottery, or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it. In the state lotteries, the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent. advance. The vain hopes of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds, though they know that even that small sum is perhaps twenty or thirty per cent. more than the chance is worth. In a lottery in which no prize exceeded twenty pounds, though in other respects it approached much nearer to a perfectly fair one than the common state lotteries, there would not be the same demand for tickets. In order to have a better chance for some of the great prizes, some people purchase several tickets; and others, small shares in a still greater number. There is not, however, a more certain proposition in mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets, the nearer your approach to this certainty. That the chance of loss is frequently under-valued, and scarce ever valued more than it is worth, we may learn from the very moderate profit of insurers. In order to make insurance, either from fire or sea-risk, a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expense of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade. The person who pays no more than this, evidently pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it. But though many people have made a little money by insurance, very few have made a great fortune; and, from this consideration alone, it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades, by which so many people make fortunes. Moderate, however, as the premium of insurance commonly is, many people despise the risk too much to care to pay it. Taking the whole kingdom at an average, nineteen houses in twenty, or rather, perhaps, ninety-nine in a hundred, are not insured from fire. Sea-risk is more alarming to the greater part of people; and the proportion of ships insured to those not insured is much greater. Many sail, however, at all seasons, and even in time of war, without any insurance. This may sometimes, perhaps, be done without any imprudence. When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved up on them all may more than compensate such losses as they are likely to meet with in the common course of chances. The neglect of insurance upon shipping, however, in the same manner as upon houses, is, in most cases, the effect of no such nice calculation, but of mere thoughtless rashness, and presumptuous contempt of the risk. The contempt of risk, and the presumptuous hope of success, are in no period of life more active than at the age at which young people choose their professions. How little the fear of misfortune is then capable of balancing the hope of good luck, appears still more evidently in the readiness of the common people to enlist as soldiers, or to go to sea, than in the eagerness of those of better fashion to enter into what are called the liberal professions. What a common soldier may lose is obvious enough. Without regarding the danger, however, young volunteers never enlist so readily as at the beginning of a new war; and though they have scarce any chance of preferment, they figure to themselves, in their youthful fancies, a thousand occasions of acquiring honour and distinction which never occur. These romantic hopes make the whole price of their blood. Their pay is less than that of common labourers, and, in actual service, their fatigues are much greater. The lottery of the sea is not altogether so disadvantageous as that of the army. The son of a creditable labourer or artificer may frequently go to sea with his father's consent; but if he enlists as a soldier, it is always without it. Other people see some chance of his making something by the one trade; nobody but himself sees any of his making any thing by the other. The great admiral is less the object of public admiration than the great general; and the highest success in the sea service promises a less brilliant fortune and reputation than equal success in the land. The same difference runs through all the inferior degrees of preferment in both. By the rules of precedency, a captain in the navy ranks with a colonel in the army; but he does not rank with him in the common estimation. As the great prizes in the lottery are less, the smaller ones must be more numerous. Common sailors, therefore, more frequently get some fortune and preferment than common soldiers; and the hope of those prizes is what principally recommends the trade. Though their skill and dexterity are much superior to that of almost any artificers: and though their whole life is one continual scene of hardship and danger; yet for all this dexterity and skill, for all those hardships and dangers, while they remain in the condition of common sailors, they receive scarce any other recompence but the pleasure of exercising the one and of surmounting the other. Their wages are not greater than those of common labourers at the port which regulates the rate of seamen's wages. As they are continually going from port to port, the monthly pay of those who sail from all the different ports of Great Britain, is more nearly upon a level than that of any other workmen in those different places; and the rate of the port to and from which the greatest number sail, that is, the port of London, regulates that of all the rest. At London, the wages of the greater part of the different classes of workmen are about double those of the same classes at Edinburgh. But the sailors who sail from the port of London, seldom earn above three or four shillings a-month more than those who sail from the port of Leith, and the difference is frequently not so great. In time of peace, and in the merchant-service, the London price is from a guinea to about seven-and-twenty shillings the calendar month. A common labourer in London, at the rate of nine or ten shillings a-week, may earn in the calendar month from forty to five-and-forty shillings. The sailor, indeed, over and above his pay, is supplied with provisions. Their value, however, may not perhaps always exceed the difference between his pay and that of the common labourer; and though it sometimes should, the excess will not be clear gain to the sailor, because he cannot share it with his wife and family, whom he must maintain out of his wages at home. The dangers and hair-breadth escapes of a life of adventures, instead of disheartening young people, seem frequently to recommend a trade to them. A tender mother, among the inferior ranks of people, is often afraid to send her son to school at a sea-port town, lest the sight of the ships, and the conversation and adventures of the sailors, should entice him to go to sea. The distant prospect of hazards, from which we can hope to extricate ourselves by courage and address, is not disagreeable to us, and does not raise the wages of labour in any employment. It is otherwise with those in which courage and address can be of no avail. In trades which are known to be very unwholesome, the wages of labour are always remarkably high. Unwholesomeness is a species of disagreeableness, and its effects upon the wages of labour are to be ranked under that general head. In all the different employments of stock, the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns. These are, in general, less uncertain in the inland than in the foreign trade, and in some branches of foreign trade than in others; in the trade to North America, for example, than in that to Jamaica. The ordinary rate of profit always rises more or less with the risk. It does not, however, seem to rise in proportion to it, or so as to compensate it completely. Bankruptcies are most frequent in the most hazardous trades. The most hazardous of all trades, that of a smuggler, though, when the adventure succeeds, it is likewise the most profitable, is the infallible road to bankruptcy. The presumptuous hope of success seems to act here as upon all other occasions, and to entice so many adventurers into those hazardous trades, that their competition reduces the profit below what is sufficient to compensate the risk. To compensate it completely, the common returns ought, over and above the ordinary profits of stock, not only to make up for all occasional losses, but to afford a surplus profit to the adventurers, of the same nature with the profit of insurers. But if the common returns were sufficient for all this, bankruptcies would not be more frequent in these than in other trades. Of the five circumstances, therefore, which vary the wages of labour, two only affect the profits of stock; the agreeableness or disagreeableness of the business, and the risk or security with which it is attended. In point of agreeableness or disagreeableness, there is little or no difference in the far greater part of the different employments of stock, but a great deal in those of labour; and the ordinary profit of stock, though it rises with the risk, does not always seem to rise in proportion to it. It should follow from all this, that, in the same society or neighbourhood, the average and ordinary rates of profit in the different employments of stock should be more nearly upon a level than the pecuniary wages of the different sorts of labour. They are so accordingly. The difference between the earnings of a common labourer and those of a well employed lawyer or physician, is evidently much greater than that between the ordinary profits in any two different branches of trade. The apparent difference, besides, in the profits of different trades, is generally a deception arising from our not always distinguishing what ought to be considered as wages, from what ought to be considered as profit. Apothecaries' profit is become a bye-word, denoting something uncommonly extravagant. This great apparent profit, however, is frequently no more than the reasonable wages of labour. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever; and the trust which is reposed in him is of much greater importance. He is the physician of the poor in all cases, and of the rich when the distress or danger is not very great. His reward, therefore, ought to be suitable to his skill and his trust; and it arises generally from the price at which he sells his drugs. But the whole drugs which the best employed apothecary in a large market-town, will sell in a year, may not perhaps cost him above thirty or forty pounds. Though he should sell them, therefore, for three or four hundred, or at a thousand per cent, profit, this may frequently be no more than the reasonable wages of his labour, charged, in the only way in which he can charge them, upon the price of his drugs. The greater part of the apparent profit is real wages disguised in the garb of profit. In a small sea-port town, a little grocer will make forty or fifty per cent. upon a stock of a single hundred pounds, while a considerable wholesale merchant in the same place will scarce make eight or ten per cent. upon a stock of ten thousand. The trade of the grocer may be necessary for the conveniency of the inhabitants, and the narrowness of the market may not admit the employment of a larger capital in the business. The man, however, must not only live by his trade, but live by it suitably to the qualifications which it requires. Besides possessing a little capital, he must be able to read, write, and account, and must be a tolerable judge, too, of perhaps fifty or sixty different sorts of goods, their prices, qualities, and the markets where they are to be had cheapest. He must have all the knowledge, in short, that is necessary for a great merchant, which nothing hinders him from becoming but the want of a sufficient capital. Thirty or forty pounds a-year cannot be considered as too great a recompence for the labour of a person so accomplished. Deduct this from the seemingly great profits of his capital, and little more will remain, perhaps, than the ordinary profits of stock. The greater part of the apparent profit is, in this case too, real wages. The difference between the apparent profit of the retail and that of the wholesale trade, is much less in the capital than in small towns and country villages. Where ten thousand pounds can be employed in the grocery trade, the wages of the grocer's labour must be a very trifling addition to the real profits of so great a stock. The apparent profits of the wealthy retailer, therefore, are there more nearly upon a level with these of the wholesale merchant. It is upon this account that goods sold by retail are generally and frequently much cheaper, in the capital than in small towns and country villages. Grocery goods, for example, are generally much cheaper; bread and butchers' meat frequently as cheap. It costs no more to bring grocery goods to the great town than to the country village; but it costs a great deal more to bring corn and cattle, as the greater part of them must be brought from a much greater distance. The prime cost of grocery goods, therefore, being the same in both places, they are cheapest where the least profit is charged upon them. The prime cost of bread and butchers' meat is greater in the great town than in the country village; and though the profit is less, therefore they are not always cheaper there, but often equally cheap. In such articles as bread and butchers' meat, the the same cause which diminishes apparent profit, increases prime cost. The extent of the market, by giving employment to greater stocks, diminishes apparent profit; but by requiring supplies from a greater distance, it increases prime cost. This diminution of the one and increase of the other, seem, in most cases, nearly to counterbalance one another, which is probably the reason that, though the prices of corn and cattle are commonly very different in different parts of the kingdom, those of bread and butchers' meat are generally very nearly the same through the greater part of it. Though the profits of stock, both in the wholesale and retail trade, are generally less in the capital than in small towns and country villages, yet great fortunes are frequently acquired from small beginnings in the former, and scarce ever in the latter. In small towns and country villages, on account of the narrowness of the market, trade cannot always be extended as stock extends. In such places, therefore, though the rate of a particular person's profits may be very high, the sum or amount of them can never be very great, nor consequently that of his annual accumulation. In great towns, on the contrary, trade can be extended as stock increases, and the credit of a frugal and thriving man increases much faster than his stock. His trade is extended in proportion to the amount of both; and the sum or amount of his profits is in proportion to the extent of his trade, and his annual accumulation in proportion to the amount of his profits. It seldom happens, however, that great fortunes are made, even in great towns, by any one regular, established, and well-known branch of business, but in consequence of a long life of industry, frugality, and attention. Sudden fortunes, indeed, are sometimes made in such places, by what is called the trade of speculation. The speculative merchant exercises no one regular, established, or well-known branch of business. He is a corn merchant this year, and a wine merchant the next, and a sugar, tobacco, or tea merchant the year after. He enters into every trade, when he foresees that it is likely to be more than commonly profitable, and he quits it when he foresees that its profits are likely to return to the level of other trades. His profits and losses, therefore, can bear no regular proportion to those of any one established and well-known branch of business. A bold adventurer may sometimes acquire a considerable fortune by two or three successful speculations, but is just as likely to lose one by two or three unsuccessful ones. This trade can be carried on nowhere but in great towns. It is only in places of the most extensive commerce and correspondence that the intelligence requisite for it can he had. The five circumstances above mentioned, though they occasion considerable inequalities in the wages of labour and profits of stock, occasion none in the whole of the advantages and disadvantages, real or imaginary, of the different employments of either. The nature of those circumstances is such, that they make up for a small pecuniary gain in some, and counterbalance a great one in others. In order, however, that this equality may take place in the whole of their advantages or disadvantages, three things are requisite, even where there is the most perfect freedom. First, the employments must be well known and long established in the neighbourhood; secondly, they must be in their ordinary, or what may be called their natural state; and, thirdly, they must be the sole or principal employments of those who occupy them. First, This equality can lake place only in those employments which are well known, and have been long established in the neighbourhood. Where all other circumstances are equal, wages are generally higher in new than in old trades. When a projector attempts to establish a new manufacture, he must at first entice his workmen from other employments, by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require; and a considerable time must pass away before he can venture to reduce them to the common level. Manufactures for which the demand arises altogether from fashion and fancy, are continually changing, and seldom last long enough to be considered as old established manufactures. Those, on the contrary, for which the demand arises chiefly from use or necessity, are less liable to change, and the same form of fabric may continue in demand for whole centuries together. The wages of labour, therefore, are likely to be higher in manufactures of the former, than in those of the latter kind. Birmingham deals chiefly in manufactures of the former kind; Sheffield in those of the latter; and the wages of labour in those two different places are said to be suitable to this difference in the nature of their manufactures. The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture, is always a speculation from which the projector promises himself extraordinary profits. These profits sometimes are very great, and sometimes, more frequently, perhaps, they are quite otherwise; but, in general, they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades. Secondly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in the ordinary, or what may be called the natural state of those employments. The demand for almost every different species of labour is sometimes greater, and sometimes less than usual. In the one case, the advantages of the employment rise above, in the other they fall below the common level. The demand for country labour is greater at hay-time and harvest than during the greater part of the year; and wages rise with the demand. In time of war, when forty or fifty thousand sailors are forced from the merchant service into that of the king, the demand for sailors to merchant ships necessarily rises with their scarcity; and their wages, upon such occasions, commonly rise from a guinea and seven-and-twenty shillings to forty shillings and three pounds a-month. In a decaying manufacture, on the contrary, many workmen, rather than quit their own trade, are contented with smaller wages than would be suitable to the nature of their employment. The profits of stock vary with the price of the commodities in which it is employed. As the price of any commodity rises above the ordinary or average rate, the profits of at least some part of the stock that is employed in bringing it to market, rise above their proper level, and as it falls they sink below it. All commodities are more or less liable to variations of price, but some are much more so than others. In all commodities which are produced by human industry, the quantity of industry annually employed is necessarily regulated by the annual demand, in such a manner that the average annual produce may, as nearly as possible, be equal to the average annual consumption. In some employments, it has already been observed, the same quantity of industry will always produce the same, or very nearly the same quantity of commodities. In the linen or woollen manufactures, for example, the same number of hands will annually work up very nearly the same quantity of linen and woollen cloth. The variations in the market price of such commodities, therefore, can arise only from some accidental variation in the demand. A public mourning raises the price of black cloth. But as the demand for most sorts of plain linen and woollen cloth is pretty uniform, so is likewise the price. But there are other employments in which the same quantity of industry will not always produce the same quantity of commodities. The same quantity of industry, for example, will, in different years, produce very different quantities of corn, wine, hops, sugar, tobacco, &c. The price of such commodities, therefore, varies not only with the variations of demand, but with the much greater and more frequent variations of quantity, and is consequently extremely fluctuating; but the profit of some of the dealers must necessarily fluctuate with the price of the commodities. The operations of the speculative merchant are principally employed about such commodities. He endeavours to buy them up when he foresees that their price is likely to rise, and to sell them when it is likely to fall. Thirdly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in such as are the sole or principal employments of those who occupy them. When a person derives his subsistence from one employment, which does not occupy the greater part of his time, in the intervals of his leisure he is often willing to work at another for less wages than would otherwise suit the nature of the employment. There still subsists, in many parts of Scotland, a set of people called _cottars_ or _cottagers_, though they were more frequent some years ago than they are now. They are a sort of out-servants of the landlords and farmers. The usual reward which they receive from their master is a house, a small garden for pot-herbs, as much grass as will feed a cow, and, perhaps, an acre or two of bad arable land. When their master has occasion for their labour, he gives them, besides, two pecks of oatmeal a-week, worth about sixteen pence sterling. During a great part of the year, he has little or no occasion for their labour, and the cultivation of their own little possession is not sufficient to occupy the time which is left at their own disposal. When such occupiers were more numerous than they are at present, they are said to have been willing to give their spare time for a very small recompence to any body, and to have wrought for less wages than other labourers. In ancient times, they seem to have been common all over Europe. In countries ill cultivated, and worse inhabited, the greater part of landlords and farmers could not otherwise provide themselves with the extraordinary number of hands which country labour requires at certain seasons. The daily or weekly recompence which such labourers occasionally received from their masters, was evidently not the whole price of their labour. Their small tenement made a considerable part of it. This daily or weekly recompence, however, seems to have been considered as the whole of it, by many writers who have collected the prices of labour and provisions in ancient times, and who have taken pleasure in representing both as wonderfully low. The produce of such labour comes frequently cheaper to market than would otherwise be suitable to its nature. Stockings, in many parts of Scotland, are knit much cheaper than they can anywhere be wrought upon the loom. They are the work of servants and labourers, who derive the principal part of their subsistence from some other employment. More than a thousand pair of Shetland stockings are annually imported into Leith, of which the price is from fivepence to sevenpence a pair. At Lerwick, the small capital of the Shetland islands, tenpence a-day, I have been assured, is a common price of common labour. In the same islands, they knit worsted stockings to the value of a guinea a pair and upwards. The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of stockings, by servants, who are chiefly hired for other purposes. They earn but a very scanty subsistence, who endeavour to get their livelihood by either of those trades. In most parts of Scotland, she is a good spinner who can earn twentypence a-week. In opulent countries, the market is generally so extensive, that any one trade is sufficient to employ the whole labour and stock of those who occupy it. Instances of people living by one employment, and, at the same time, deriving some little advantage from another, occur chiefly in poor countries. The following instance, however, of something of the same kind, is to be found in the capital of a very rich one. There is no city in Europe, I believe, in which house-rent is dearer than in London, and yet I know no capital in which a furnished apartment can be hired so cheap. Lodging is not only much cheaper in London than in Paris; it is much cheaper than in Edinburgh, of the same degree of goodness; and, what may seem extraordinary, the dearness of house-rent is the cause of the cheapness of lodging. The dearness of house-rent in London arises, not only from those causes which render it dear in all great capitals, the dearness of labour, the dearness of all the materials of building, which must generally be brought from a great distance, and, above all, the dearness of ground-rent, every landlord acting the part of a monopolist, and frequently exacting a higher rent for a single acre of bad land in a town, than can be had for a hundred of the best in the country, but it arises in part from the peculiar manners and customs of the people, which oblige every master of a family to hire a whole house from top to bottom. A dwelling-house in England means every thing that is contained under the same roof. In France, Scotland, and many other parts of Europe, it frequently means no more than a single storey. A tradesman in London is obliged to hire a whole house in that part of the town where his customers live. His shop is upon the ground floor, and he and his family sleep in the garret; and he endeavours to pay a part of his house-rent by letting the two middle storeys to lodgers. He expects to maintain his family by his trade, and not by his lodgers. Whereas at Paris and Edinburgh, people who let lodgings have commonly no other means of subsistence; and the price of the lodging must pay, not only the rent of the house, but the whole expense of the family. PART II.--_Inequalities occasioned by the Policy of Europe._ Such are the inequalities in the whole of the advantages and disadvantages of the different employments of labour and stock, which the defect of any of the three requisites above mentioned must occasion, even where there is the most perfect liberty. But the policy of Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater importance. It does this chiefly in the three following ways. First, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them; secondly, by increasing it in others beyond what it naturally would be; and, thirdly, by obstructing the free circulation of labour and stock, both from employment to employment, and from place to place. First, The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock, by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. The exclusive privileges of corporations are the principal means it makes use of for this purpose. The exclusive privilege of an incorporated trade necessarily restrains the competition, in the town where it is established, to those who are free of the trade. To have served an apprenticeship in the town, under a master properly qualified, is commonly the necessary requisite for obtaining this freedom. The bye-laws of the corporation regulate sometimes the number of apprentices which any master is allowed to have, and almost always the number of years which each apprentice is obliged to serve. The intention of both regulations is to restrain the competition to a much smaller number than might otherwise be disposed to enter into the trade. The limitation of the number of apprentices restrains it directly. A long term of apprenticeship restrains it more indirectly, but as effectually, by increasing the expense of education. In Sheffield, no master cutler can have more than one apprentice at a time, by a bye-law of the corporation. In Norfolk and Norwich, no master weaver can have more than two apprentices, under pain of forfeiting five pounds a-month to the king. No master hatter can have more than two apprentices anywhere in England, or in the English plantations, under pain of forfeiting five pounds a-month, half to the king, and half to him who shall sue in any court of record. Both these regulations, though they have been confirmed by a public law of the kingdom, are evidently dictated by the same corporation-spirit which enacted the bye-law of Sheffield. The silk-weavers in London had scarce been incorporated a year, when they enacted a bye-law, restraining any master from having more than two apprentices at a time. It required a particular act of parliament to rescind this bye-law. Seven years seem anciently to have been, all over Europe, the usual term established for the duration of apprenticeships in the greater part of incorporated trades. All such incorporations were anciently called universities, which, indeed, is the proper Latin name for any incorporation whatever. The university of smiths, the university of tailors, &c. are expressions which we commonly meet with in the old charters of ancient towns. When those particular incorporations, which are now peculiarly called universities, were first established, the term of years which it was necessary to study, in order to obtain the degree of master of arts, appears evidently to have been copied from the term of apprenticeship in common trades, of which the incorporations were much more ancient. As to have wrought seven years under a master properly qualified, was necessary, in order to entitle any person to become a master, and to have himself apprentices in a common trade; so to have studied seven years under a master properly qualified, was necessary to entitle him to become a master, teacher, or doctor (words anciently synonymous), in the liberal arts, and to have scholars or apprentices (words likewise originally synonymous) to study under him. By the 5th of Elizabeth, commonly called the Statute of Apprenticeship, it was enacted, that no person should, for the future, exercise any trade, craft, or mystery, at that time exercised in England, unless he had previously served to it an apprenticeship of seven years at least; and what before had been the bye-law of many particular corporations, became in England the general and public law of all trades carried on in market towns. For though the words of the statute are very general, and seem plainly to include the whole kingdom, by interpretation its operation has been limited to market towns; it having been held that, in country villages, a person may exercise several different trades, though he has not served a seven years apprenticeship to each, they being necessary for the conveniency of the inhabitants, and the number of people frequently not being sufficient to supply each with a particular set of hands. By a strict interpretation of the words, too, the operation of this statute has been limited to those trades which were established in England before the 5th of Elizabeth, and has never been extended to such as have been introduced since that time. This limitation has given occasion to several distinctions, which, considered as rules of police, appear as foolish as can well be imagined. It has been adjudged, for example, that a coachmaker can neither himself make nor employ journeymen to make his coach-wheels, but must buy them of a master wheel-wright; this latter trade having been exercised in England before the 5th of Elizabeth. But a wheel-wright, though he has never served an apprenticeship to a coachmaker, may either himself make or employ journeymen to make coaches; the trade of a coachmaker not being within the statute, because not exercised in England at the time when it was made. The manufactures of Manchester, Birmingham, and Wolverhampton, are many of them, upon this account, not within the statute, not having been exercised in England before the 5th of Elizabeth. In France, the duration of apprenticeships is different in different towns and in different trades. In Paris, five years is the term required in a great number; but, before any person can be qualified to exercise the trade as a master, he must, in many of them, serve five years more as a journeyman. During this latter term, he is called the companion of his master, and the term itself is called his companionship. In Scotland, there is no general law which regulates universally the duration of apprenticeships. The term is different in different corporations. Where it is long, a part of it may generally be redeemed by paying a small fine. In most towns, too, a very small fine is sufficient to purchase the freedom of any corporation. The weavers of linen and hempen cloth, the principal manufactures of the country, as well as all other artificers subservient to them, wheel-makers, reel-makers, &c. may exercise their trades in any town-corporate, without paying any fine. In all towns-corporate, all persons are free to sell butchers' meat upon any lawful day of the week. Three years is, in Scotland, a common term of apprenticeship, even in some very nice trades; and, in general, I know of no country in Europe, in which corporation laws are so little oppressive. The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury to his neighbour, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty, both of the workman, and of those who might be disposed to employ him. As it hinders the one from working at what he thinks proper, so it hinders the others from employing whom they think proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of the employers, whose interest it so much concerns. The affected anxiety of the lawgiver, lest they should employ an improper person, is evidently as impertinent as it is oppressive. The institution of long apprenticeships can give no security that insufficient workmanship shall not frequently be exposed to public sale. When this is done, it is generally the effect of fraud, and not of inability; and the longest apprenticeship can give no security against fraud. Quite different regulations are necessary to prevent this abuse. The sterling mark upon plate, and the stamps upon linen and woollen cloth, give the purchaser much greater security than any statute of apprenticeship. He generally looks at these, but never thinks it worth while to enquire whether the workman had served a seven years apprenticeship. The institution of long apprenticeships has no tendency to form young people to industry. A journeyman who works by the piece is likely to be industrious, because he derives a benefit from every exertion of his industry. An apprentice is likely to be idle, and almost always is so, because he has no immediate interest to be otherwise. In the inferior employments, the sweets of labour consist altogether in the recompence of labour. They who are soonest in a condition to enjoy the sweets of it, are likely soonest to conceive a relish for it, and to acquire the early habit of industry. A young man naturally conceives an aversion to labour, when for a long time he receives no benefit from it. The boys who are put out apprentices from public charities are generally bound for more than the usual number of years, and they generally turn out very idle and worthless. Apprenticeships were altogether unknown to the ancients. The reciprocal duties of master and apprentice make a considerable article in every modern code. The Roman law is perfectly silent with regard to them. I know no Greek or Latin word (I might venture, I believe, to assert that there is none) which expresses the idea we now annex to the word apprentice, a servant bound to work at a particular trade for the benefit of a master, during a term of years, upon condition that the master shall teach him that trade. Long apprenticeships are altogether unnecessary. The arts, which are much superior to common trades, such as those of making clocks and watches, contain no such mystery as to require a long course of instruction. The first invention of such beautiful machines, indeed, and even that of some of the instruments employed in making them, must no no doubt have been the work of deep thought and long time, and may justly be considered as among the happiest efforts of human ingenuity. But when both have been fairly invented, and are well understood, to explain to any young man, in the completest manner, how to apply the instruments, and how to construct the machines, cannot well require more than the lessons of a few weeks; perhaps those of a few days might be sufficient. In the common mechanic trades, those of a few days might certainly be sufficient. The dexterity of hand, indeed, even in common trades, cannot be acquired without much practice and experience. But a young man would practice with much more diligence and attention, if from the beginning he wrought as a journeyman, being paid in proportion to the little work which he could execute, and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. His education would generally in this way be more effectual, and always less tedious and expensive. The master, indeed, would be a loser. He would lose all the wages of the apprentice, which he now saves, for seven years together. In the end, perhaps, the apprentice himself would be a loser. In a trade so easily learnt he would have more competitors, and his wages, when he came to be a complete workman, would be much less than at present. The same increase of competition would reduce the profits of the masters, as well as the wages of workmen. The trades, the crafts, the mysteries, would all be losers. But the public would be a gainer, the work of all artificers coming in this way much cheaper to market. It is to prevent this reduction of price, and consequently of wages and profit, by restraining that free competition which would most certainly occasion it, that all corporations, and the greater part of corporation laws, have been established. In order to erect a corporation, no other authority in ancient times was requisite, in many parts of Europe, but that of the town-corporate in which it was established. In England, indeed, a charter from the king was likewise necessary. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject, than for the defence of the common liberty against such oppressive monopolies. Upon paying a fine to the king, the charter seems generally to have been readily granted; and when any particular class of artificers or traders thought proper to act as a corporation, without a charter, such adulterine guilds, as they were called, were not always disfranchised upon that account, but obliged to fine annually to the king, for permission to exercise their usurped privileges[12]. The immediate inspection of all corporations, and of the bye-laws which they might think proper to enact for their own government, belonged to the town-corporate in which they were established; and whatever discipline was exercised over them, proceeded commonly, not from the king, but from that greater incorporation of which those subordinate ones were only parts or members. The government of towns-corporate was altogether in the hands of traders and artificers, and it was the manifest interest of every particular class of them, to prevent the market from being overstocked, as they commonly express it, with their own particular species of industry; which is in reality to keep it always understocked. Each class was eager to establish regulations proper for this purpose, and, provided it was allowed to do so, was willing to consent that every other class should do the same. In consequence of such regulations, indeed, each class was obliged to buy the goods they had occasion for from every other within the town, somewhat dearer than they otherwise might have done. But, in recompence, they were enabled to sell their own just as much dearer; so that, so far it was as broad as long, as they say; and in the dealings of the different classes within the town with one another, none of them were losers by these regulations. But in their dealings with the country they were all great gainers; and in these latter dealings consist the whole trade which supports and enriches every town. Every town draws its whole subsistence, and all the materials of its industry, from the country. It pays for these chiefly in two ways. First, by sending back to the country a part of those materials wrought up and manufactured; in which case, their price is augmented by the wages of the workmen, and the profits of their masters or immediate employers; secondly, by sending to it a part both of the rude and manufactured produce, either of other countries, or of distant parts of the same country, imported into the town; in which case, too, the original price of those goods is augmented by the wages of the carriers or sailors, and by the profits of the merchants who employ them. In what is gained upon the first of those branches of commerce, consists the advantage which the town makes by its manufactures; in what is gained upon the second, the advantage of its inland and foreign trade. The wages of the workmen, and the profits of their different employers, make up the whole of what is gained upon both. Whatever regulations, therefore, tend to increase those wages and profits beyond what they otherwise would be, tend to enable the town to purchase, with a smaller quantity of its labour, the produce of a greater quantity of the labour of the country. They give the traders and artificers in the town an advantage over the landlords, farmers, and labourers, in the country, and break down that natural equality which would otherwise take place in the commerce which is carried on between them. The whole annual produce of the labour of the society is annually divided between these two different sets of people. By means of those regulations, a greater share of it is given to the inhabitants of the town than would otherwise fall to them, and a less to those of the country. The price which the town really pays for the provisions and materials annually imported into it, is the quantity of manufactures and other goods annually exported from it. The dearer the latter are sold, the cheaper the former are bought. The industry of the town becomes more, and that of the country less advantageous. That the industry which is carried on in towns is, everywhere in Europe, more advantageous than that which is carried on in the country, without entering into any very nice computations, we may satisfy ourselves by one very simple and obvious observation. In every country of Europe, we find at least a hundred people who have acquired great fortunes, from small beginnings, by trade and manufactures, the industry which properly belongs to towns, for one who has done so by that which properly belongs to the country, the raising of rude produce by the improvement and cultivation of land. Industry, therefore, must be better rewarded, the wages of labour and the profits of stock must evidently be greater, in the one situation than in the other. But stock and labour naturally seek the most advantageous employment. They naturally, therefore, resort as much as they can to the town, and desert the country. The inhabitants of a town being collected into one place, can easily combine together. The most insignificant trades carried on in towns have, accordingly, in some place or other, been incorporated; and even where they have never been incorporated, yet the corporation-spirit, the jealousy of strangers, the aversion to take apprentices, or to communicate the secret of their trade, generally prevail in them, and often teach them, by voluntary associations and agreements, to prevent that free competition which they cannot prohibit by bye-laws. The trades which employ but a small number of hands, run most easily into such combinations. Half-a-dozen wool-combers, perhaps, are necessary to keep a thousand spinners and weavers at work. By combining not to take apprentices, they can not only engross the employment, but reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their labour much above what is due to the nature of their work. The inhabitants of the country, dispersed in distant places, cannot easily combine together. They have not only never been incorporated, but the incorporation spirit never has prevailed among them. No apprenticeship has ever been thought necessary to qualify for husbandry, the great trade of the country. After what are called the fine arts, and the liberal professions, however, there is perhaps no trade which requires so great a variety of knowledge and experience. The innumerable volumes which have been written upon it in all languages, may satisfy us, that among the wisest and most learned nations, it has never been regarded as a matter very easily understood. And from all those volumes we shall in vain attempt to collect that knowledge of its various and complicated operations which is commonly possessed even by the common farmer; how contemptuously soever the very contemptible authors of some of them may sometimes affect to speak of him. There is scarce any common mechanic trade, on the contrary, of which all the operations may not be as completely and distinctly explained in a pamphlet of a very few pages, as it is possible for words illustrated by figures to explain them. In the history of the arts, now publishing by the French Academy of Sciences, several of them are actually explained in this manner. The direction of operations, besides, which must be varied with every change of the weather, as well as with many other accidents, requires much more judgment and discretion, than that of those which are always the same, or very nearly the same. Not only the art of the farmer, the general direction of the operations of husbandry, but many inferior branches of country labour require much more skill and experience than the greater part of mechanic trades. The man who works upon brass and iron, works with instruments, and upon materials of which the temper is always the same, or very nearly the same. But the man who ploughs the ground with a team of horses or oxen, works with instruments of which the health, strength, and temper, are very different upon different occasions. The condition of the materials which he works upon, too, is as variable as that of the instruments which he works with, and both require to be managed with much judgment and discretion. The common ploughman, though generally regarded as the pattern of stupidity and ignorance, is seldom defective in this judgment and discretion. He is less accustomed, indeed, to social intercourse, than the mechanic who lives in a town. His voice and language are more uncouth, and more difficult to be understood by those who are not used to them. His understanding, however, being accustomed to consider a greater variety of objects, is generally much superior to that of the other, whose whole attention, from morning till night is commonly occupied in performing one or two very simple operations. How much the lower ranks of people in the country are really superior to those of the town, is well known to every man whom either business or curiosity has led to converse much with both. In China and Indostan, accordingly, both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. They would probably be so everywhere, if corporation laws and the corporation spirit did not prevent it. The superiority which the industry of the towns has everywhere in Europe over that of the country, is not altogether owing to corporations and corporation laws. It is supported by many other regulations. The high duties upon foreign manufactures, and upon all goods imported by alien merchants, all tend to the same purpose. Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen. Those other regulations secure them equally against that of foreigners. The enhancement of price occasioned by both is everywhere finally paid by the landlords, farmers, and labourers, of the country, who have seldom opposed the establishment of such monopolies. They have commonly neither inclination nor fitness to enter into combinations; and the clamour and sophistry of merchants and manufacturers easily persuade them, that the private interest of a part, and of a subordinate part, of the society, is the general interest of the whole. In Great Britain, the superiority of the industry of the towns over that of the country seems to have been greater formerly than in the present times. The wages of country labour approach nearer to those of manufacturing labour, and the profits of stock employed in agriculture to those of trading and manufacturing stock, than they are said to have done in the last century, or in the beginning of the present. This change may be regarded as the necessary, though very late consequence of the extraordinary encouragement given to the industry of the towns. The stocks accumulated in them come in time to be so great, that it can no longer be employed with the ancient profit in that species of industry which in peculiar to them. That industry has its limits like every other; and the increase of stock, by increasing the competition, necessarily reduces the profit. The lowering of profit in the town forces out stock to the country, where, by creating a new demand for country labour, it necessarily raises its wages. It then spreads itself, if I may say so, over the face of the land, and, by being employed in agriculture, is in part restored to the country, at the expense of which, in a great measure, it had originally been accumulated in the town. That everywhere in Europe the greatest improvements of the country have been owing to such overflowings of the stock originally accumulated in the towns, I shall endeavour to shew hereafter, and at the same time to demonstrate, that though some countries have, by this course, attained to a considerable degree of opulence, it is in itself necessarily slow, uncertain, liable to be disturbed and interrupted by innumerable accidents, and, in every respect, contrary to the order of nature and reason. The interests, prejudices, laws, and customs, which have given occasion to it, I shall endeavour to explain as fully and distinctly as I can in the third and fourth books of this Inquiry. People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it. A regulation which enables those of the same trade to tax themselves, in order to provide for their poor, their sick, their widows and orphans, by giving them a common interest to manage, renders such assemblies necessary. An incorporation not only renders them necessary, but make the act of the majority binding upon the whole. In a free trade, an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation can enact a bye-law, with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever. The pretence that corporations are necessary for the better government of the trade, is without any foundation. The real and effectual discipline which is exercised over a workman, is not that of his corporation, but that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence. An exclusive corporation necessarily weakens the force of this discipline. A particular set of workmen must then be employed, let them behave well or ill. It is upon this account that, in many large incorporated towns, no tolerable workmen are to be found, even in some of the most necessary trades. If you would have your work tolerably executed, it must be done in the suburbs, where the workmen, having no exclusive privilege, have nothing but their character to depend upon, and you must then smuggle it into the town as well as you can. It is in this manner that the policy of Europe, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them, occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. Secondly, The policy of Europe, by increasing the competition in some employments beyond what it naturally would be, occasions another inequality, of an opposite kind, in the whole of the advantages and disadvantages of the different employments of labour and stock. It has been considered as of so much importance that a proper number of young people should be educated for certain professions, that sometimes the public, and sometimes the piety of private founders, have established many pensions, scholarships, exhibitions, bursaries, &c. for this purpose, which draw many more people into those trades than could otherwise pretend to follow them. In all Christian countries, I believe, the education of the greater part of churchmen is paid for in this manner. Very few of them are educated altogether at their own expense. The long, tedious, and expensive education, therefore, of those who are, will not always procure them a suitable reward, the church being crowded with people, who, in order to get employment, are willing to accept of a much smaller recompence than what such an education would otherwise have entitled them to; and in this manner the competition of the poor takes away the reward of the rich. It would be indecent, no doubt, to compare either a curate or a chaplain with a journeyman in any common trade. The pay of a curate or chaplain, however, may very properly be considered as of the same nature with the wages of a journeyman. They are all three paid for their work according to the contract which they may happen to make with their respective superiors. Till after the middle of the fourteenth century, five merks, containing about as much silver as ten pounds of our present money, was in England the usual pay of a curate or a stipendiary parish priest, as we find it regulated by the decrees of several different national councils. At the same period, fourpence a-day, containing the same quantity of silver as a shilling of our present money, was declared to be the pay of a master mason; and threepence a-day, equal to ninepence of our present money, that of a journeyman mason[13]. The wages of both these labourers, therefore, supposing them to have been constantly employed, were much superior to those of the curate. The wages of the master mason, supposing him to have been without employment one-third of the year, would have fully equalled them. By the 12th of Queen Anne, c. 12. it is declared, 'That whereas, for want of sufficient maintenance and encouragement to curates, the cures have, in several places, been meanly supplied, the bishop is, therefore, empowered to appoint, by writing under his hand and seal, a sufficient certain stipend or allowance, not exceeding fifty, and not less than twenty pounds a-year.' Forty pounds a-year is reckoned at present very good pay for a curate; and, notwithstanding this act of parliament, there are many curacies under twenty pounds a-year. There are journeymen shoemakers in London who earn forty pounds a-year, and there is scarce an industrious workman of any kind in that metropolis who does not earn more than twenty. This last sum, indeed, does not exceed what is frequently earned by common labourers in many country parishes. Whenever the law has attempted to regulate the wages of workmen, it has always been rather to lower them than to raise them. But the law has, upon many occasions, attempted to raise the wages of curates, and, for the dignity of the church, to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. And, in both cases, the law seems to have been equally ineffectual, and has never either been able to raise the wages of curates, or to sink those of labourers to the degree that was intended; because it has never been able to hinder either the one from being willing to accept of less than the legal allowance, on account of the indigence of their situation and the multitude of their competitors, or the other from receiving more, on account of the contrary competition of those who expected to derive either profit or pleasure from employing them. The great benefices and other ecclesiastical dignities support the honour of the church, notwithstanding the mean circumstances of some of its inferior members. The respect paid to the profession, too, makes some compensation even to them for the meanness of their pecuniary recompence. In England, and in all Roman catholic countries, the lottery of the church is in reality much more advantageous than is necessary. The example of the churches of Scotland, of Geneva, and of several other protestant churches, may satisfy us, that in so creditable a profession, in which education is so easily procured, the hopes of much more moderate benefices will draw a sufficient number of learned, decent, and respectable men into holy orders. In professions in which there are no benefices, such as law and physic, if an equal proportion of people were educated at the public expense, the competition would soon be so great as to sink very much their pecuniary reward. It might then not be worth any man's while to educate his son to either of those professions at his own expense. They would be entirely abandoned to such as had been educated by those public charities, whose numbers and necessities would oblige them in general to content themselves with a very miserable recompence, to the entire degradation of the now respectable professions of law and physic. That unprosperous race of men, commonly called men of letters, are pretty much in the situation which lawyers and physicians probably would be in, upon the foregoing supposition. In every part of Europe, the greater part of them have been educated for the church, but have been hindered by different reasons from entering into holy orders. They have generally, therefore, been educated at the public expense; and their numbers are everywhere so great, as commonly to reduce the price of their labour to a very paltry recompence. Before the invention of the art of printing, the only employment by which a man of letters could make any thing by his talents, was that of a public or private teacher, or by communicating to other people the curious and useful knowledge which he had acquired himself; and this is still surely a more honourable, a more useful, and, in general, even a more profitable employment than that other of writing for a bookseller, to which the art of printing has given occasion. The time and study, the genius, knowledge, and application requisite to qualify an eminent teacher of the sciences, are at least equal to what is necessary for the greatest practitioners in law and physic. But the usual reward of the eminent teacher bears no proportion to that of the lawyer or physician, because the trade of the one is crowded with indigent people, who have been brought up to it at the public expense; whereas those of the other two are encumbered with very few who have not been educated at their own. The usual recompence, however, of public and private teachers, small as it may appear, would undoubtedly be less than it is, if the competition of those yet more indigent men of letters, who write for bread, was not taken out of the market. Before the invention of the art of printing, a scholar and a beggar seem to have been terms very nearly synonymous. The different governors of the universities, before that time, appear to have often granted licences to their scholars to beg. In ancient times, before any charities of this kind had been established for the education of indigent people to the learned professions, the rewards of eminent teachers appear to have been much more considerable. Isocrates, in what is called his discourse against the sophists, reproaches the teachers of his own times with inconsistency. "They make the most magnificent promises to their scholars," says he, "and undertake to teach them to be wise, to be happy, and to be just; and, in return for so important a service, they stipulate the paltry reward of four or five minæ." "They who teach wisdom," continues he, "ought certainly to be wise themselves; but if any man were to sell such a bargain for such a price, he would be convicted of the most evident folly." He certainly does not mean here to exaggerate the reward, and we may be assured that it was not less than he represents it. Four minæ were equal to thirteen pounds six shillings and eightpence; five minæ to sixteen pounds thirteen shillings and fourpence.--Something not less than the largest of those two sums, therefore, must at that time have been usually paid to the most eminent teachers at Athens. Isocrates himself demanded ten minæ, or L.33 : 6 : 8 from each scholar. When he taught at Athens, he is said to have had a hundred scholars. I understand this to be the number whom he taught at one time, or who attended what we would call one course of lectures; a number which will not appear extraordinary from so great a city to so famous a teacher, who taught, too, what was at that time the most fashionable of all sciences, rhetoric. He must have made, therefore, by each course of lectures, a thousand minæ, or L.3333 : 6 : 8. A thousand minæ, accordingly, is said by Plutarch, in another place, to have been his didactron, or usual price of teaching. Many other eminent teachers in those times appear to have acquired great fortunes. Georgias made a present to the temple of Delphi of his own statue in solid gold. We must not, I presume, suppose that it was as large as the life. His way of living, as well as that of Hippias and Protagoras, two other eminent teachers of those times, is represented by Plato as splendid, even to ostentation. Plato himself is said to have lived with a good deal of magnificence. Aristotle, after having been tutor to Alexander, and most munificently rewarded, as it is universally agreed, both by him and his father, Philip, thought it worth while, notwithstanding, to return to Athens, in order to resume the teaching of his school. Teachers of the sciences were probably in those times less common than they came to be in an age or two afterwards, when the competition had probably somewhat reduced both the price of their labour and the admiration for their persons. The most eminent of them, however, appear always to have enjoyed a degree of consideration much superior to any of the like profession in the present times. The Athenians sent Carneades the academic, and Diogenes the stoic, upon a solemn embassy to Rome; and though their city had then declined from its former grandeur, it was still an independent and considerable republic. Carneades, too, was a Babylonian by birth; and as there never was a people more jealous of admitting foreigners to public offices than the Athenians, their consideration for him must have been very great. This inequality is, upon the whole, perhaps rather advantageous than hurtful to the public. It may somewhat degrade the profession of a public teacher; but the cheapness of literary education is surely an advantage which greatly overbalances this trifling inconveniency. The public, too, might derive still greater benefit from it, if the constitution of those schools and colleges, in which education is carried on, was more reasonable than it is at present through the greater part of Europe. Thirdly, the policy of Europe, by obstructing the free circulation of labour and stock, both from employment to employment, and from place to place, occasions, in some cases, a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments. The statute of apprenticeship obstructs the free circulation of labour from one employment to another, even in the same place. The exclusive privileges of corporations obstruct it from one place to another, even in the same employment. It frequently happens, that while high wages are given to the workmen in one manufacture, those in another are obliged to content themselves with bare subsistence. The one is in an advancing state, and has therefore a continual demand for new hands; the other is in a declining state, and the superabundance of hands is continually increasing. Those two manufactures may sometimes be in the same town, and sometimes in the same neighbourhood, without being able to lend the least assistance to one another. The statute of apprenticeship may oppose it in the one case, and both that and an exclusive corporation in the other. In many different manufactures, however, the operations are so much alike, that the workmen could easily change trades with one another, if those absurd laws did not hinder them. The arts of weaving plain linen and plain silk, for example, are almost entirely the same. That of weaving plain woollen is somewhat different; but the difference is so insignificant, that either a linen or a silk weaver might become a tolerable workman in a very few days. If any of those three capital manufactures, therefore, were decaying, the workmen might find a resource in one of the other two which was in a more prosperous condition; and their wages would neither rise too high in the thriving, nor sink too low in the decaying manufacture. The linen manufacture, indeed, is in England, by a particular statute, open to every body; but as it is not much cultivated through the greater part of the country, it can afford no general resource to the workmen of other decaying manufactures, who, wherever the statute of apprenticeship takes place, have no other choice, but either to come upon the parish, or to work as common labourers; for which, by their habits, they are much worse qualified than for any sort of manufacture that bears any resemblance to their own. They generally, therefore, chuse to come upon the parish. Whatever obstructs the free circulation of labour from one employment to another, obstructs that of stock likewise; the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it. Corporation laws, however, give less obstruction to the free circulation of stock from one place to another, than to that of labour. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town-corporate, than for a poor artificer to obtain that of working in it. The obstruction which corporation laws give to the free circulation of labour is common, I believe, to every part of Europe. That which is given to it by the poor laws is, so far as I know, peculiar to England. It consists in the difficulty which a poor man finds in obtaining a settlement, or even in being allowed to exercise his industry in any parish but that to which he belongs. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. The difficulty of obtaining settlements obstructs even that of common labour. It may be worth while to give some account of the rise, progress, and present state of this disorder, the greatest, perhaps, of any in the police of England. When, by the destruction of monasteries, the poor had been deprived of the charity of those religious houses, after some other ineffectual attempts for their relief, it was enacted, by the 43d of Elizabeth, c. 2. that every parish should be bound to provide for its own poor, and that overseers of the poor should be annually appointed, who, with the church-wardens, should raise, by a parish rate, competent sums for this purpose. By this statute, the necessity of providing for their own poor was indispensably imposed upon every parish. Who were to be considered as the poor of each parish became, therefore, a question of some importance. This question, after some variation, was at last determined by the 13th and 14th of Charles II. when it was enacted, that forty days undisturbed residence should gain any person a settlement in any parish; but that within that time it should be lawful for two justices of the peace, upon complaint made by the church-wardens or overseers of the poor, to remove any new inhabitant to the parish where he was last legally settled; unless he either rented a tenement of ten pounds a-year, or could give such security for the discharge of the parish where he was then living, as those justices should judge sufficient. Some frauds, it is said, were committed in consequence of this statute; parish officers sometimes bribing their own poor to go clandestinely to another parish, and, by keeping themselves concealed for forty days, to gain a settlement there, to the discharge of that to which they properly belonged. It was enacted, therefore, by the 1st of James II. that the forty days undisturbed residence of any person necessary to gain a settlement, should be accounted only from the time of his delivering notice, in writing, of the place of his abode and the number of his family, to one of the church-wardens or overseers of the parish where he came to dwell. But parish officers, it seems, were not always more honest with regard to their own than they had been with regard to other parishes, and sometimes connived at such intrusions, receiving the notice, and taking no proper steps in consequence of it. As every person in a parish, therefore, was supposed to have an interest to prevent as much as possible their being burdened by such intruders, it was further enacted by the 3d of William III. that the forty days residence should be accounted only from the publication of such notice in writing on Sunday in the church, immediately after divine service. "After all," says Doctor Burn, "this kind of settlement, by continuing forty days after publication of notice in writing, is very seldom obtained; and the design of the acts is not so much for gaining of settlements, as for the avoiding of them by persons coming into a parish clandestinely, for the giving of notice is only putting a force upon the parish to remove. But if a person's situation is such, that it is doubtful whether he is actually removable or not, he shall, by giving of notice, compel the parish either to allow him a settlement uncontested, by suffering him to continue forty days, or by removing him to try the right." This statute, therefore, rendered it almost impracticable for a poor man to gain a new settlement in the old way, by forty days inhabitancy. But that it might not appear to preclude altogether the common people of one parish from ever establishing themselves with security in another, it appointed four other ways by which a settlement might be gained without any notice delivered or published. The first was, by being taxed to parish rates and paying them; the second, by being elected into an annual parish office, and serving in it a year; the third, by serving an apprenticeship in the parish; the fourth, by being hired into service there for a year, and continuing in the same service during the whole of it. Nobody can gain a settlement by either of the first two ways, but by the public deed of the whole parish, who are too well aware of the consequences to adopt any new-comer, who has nothing but his labour to support him, either by taxing him to parish rates, or by electing him into a parish office. No married man can well gain any settlement in either of the two last ways. An apprentice is scarce ever married; and it is expressly enacted, that no married servant shall gain any settlement by being hired for a year. The principal effect of introducing settlement by service, has been to put out in a great measure the old fashion of hiring for a year; which before had been so customary in England, that even at this day, if no particular term is agreed upon, the law intends that every servant is hired for a year. But masters are not always willing to give their servants a settlement by hiring them in this manner; and servants are not always willing to be so hired, because, as every last settlement discharges all the foregoing, they might thereby lose their original settlement in the places of their nativity, the habitation of their parents and relations. No independent workman, it is evident, whether labourer or artificer, is likely to gain any new settlement, either by apprenticeship or by service. When such a person, therefore, carried his industry to a new parish, he was liable to be removed, how healthy and industrious soever, at the caprice of any church-warden or overseer, unless he either rented a tenement of ten pounds a-year, a thing impossible for one who has nothing but his labour to live by, or could give such security for the discharge of the parish as two justices of the peace should judge sufficient. What security they shall require, indeed, is left altogether to their discretion; but they cannot well require less than thirty pounds, it having been enacted, that the purchase even of a freehold estate of less than thirty pounds value, shall not gain any person a settlement, as not being sufficient for the discharge of the parish. But this is a security which scarce any man who lives by labour can give; and much greater security is frequently demanded. In order to restore, in some measure, that free circulation of labour which those different statutes had almost entirely taken away, the invention of certificates was fallen upon. By the 8th and 9th of William III. it was enacted that if any person should bring a certificate from the parish where he was last legally settled, subscribed by the church-wardens and overseers of the poor, and allowed by two justices of the peace, that every other parish should be obliged to receive him; that he should not be removable merely upon account of his being likely to become chargeable, but only upon his becoming actually chargeable; and that then the parish which granted the certificate should be obliged to pay the expense both of his maintenance, and of his removal. And in order to give the most perfect security to the parish where such certificated man should come to reside, it was further enacted by the same statute, that he should gain no settlement there by any means whatever, except either by renting a tenement of ten pounds a-year, or by serving upon his account in an annual parish office for one whole year; and consequently neither by notice nor by service, nor by apprenticeship, nor by paying parish rates. By the 12th of Queen Anne, too, stat. 1, c. 18, it was further enacted, that neither the servants nor apprentices of such certificated man should gain any settlement in the parish where he resided under such certificate. How far this invention has restored that free circulation of labour, which the preceding statutes had almost entirely taken away, we may learn from the following very judicious observation of Doctor Burn. "It is obvious," says he, "that there are divers good reasons for requiring certificates with persons coming to settle in any place; namely, that persons residing under them can gain no settlement, neither by apprenticeship, nor by service, nor by giving notice, nor by paying parish rates; that they can settle neither apprentices nor servants; that if they become chargeable, it is certainly known whither to remove them, and the parish shall be paid for the removal, and for their maintenance in the mean time; and that, if they fall sick, and cannot be removed, the parish which gave the certificate must maintain them, none of all which can be without a certificate. Which reasons will hold proportionably for parishes not granting certificates in ordinary cases; for it is far more than an equal chance, but that they will have the certificated persons again, and in a worse condition." The moral of this observation seems to be, that certificates ought always to be required by the parish where any poor man comes to reside, and that they ought very seldom to be granted by that which he purposes to leave. "There is somewhat of hardship in this matter of certificates," says the same very intelligent author, in his History of the Poor Laws, "by putting it in the power of a parish officer to imprison a man as it were for life, however inconvenient it may be for him to continue at that place where he has had the misfortune to acquire what is called a settlement, or whatever advantage he may propose to himself by living elsewhere." Though a certificate carries along with it no testimonial of good behaviour, and certifies nothing but that the person belongs to the parish to which he really does belong, it is altogether discretionary in the parish officers either to grant or to refuse it. A mandamus was once moved for, says Doctor Burn, to compel the church-wardens and overseers to sign a certificate; but the Court of King's Bench rejected the motion as a very strange attempt. The very unequal price of labour which we frequently find in England, in places at no great distance from one another, is probably owing to the obstruction which the law of settlements gives to a poor man who would carry his industry from one parish to another without a certificate. A single man, indeed, who is healthy and industrious, may sometimes reside by sufferance without one, but a man with a wife and family who should attempt to do so, would, in most parishes, be sure of being removed; and, if the single man should afterwards marry, he would generally be removed likewise. The scarcity of hands in one parish, therefore, cannot always be relieved by their superabundance in another, as it is constantly in Scotland, and, I believe, in all other countries where there is no difficulty of settlement. In such countries, though wages may sometimes rise a little in the neighbourhood of a great town, or wherever else there is an extraordinary demand for labour, and sink gradually as the distance from such places increases, till they fall back to the common rate of the country; yet we never meet with those sudden and unaccountable differences in the wages of neighbouring places which we sometimes find in England, where it is often more difficult for a poor man to pass the artificial boundary of a parish, than an arm of the sea, or a ridge of high mountains, natural boundaries which sometimes separate very distinctly different rates of wages in other countries. To remove a man who has committed no misdemeanour, from the parish where he chooses to reside, is an evident violation of natural liberty and justice. The common people of England, however, so jealous of their liberty, but like the common people of most other countries, never rightly understanding wherein it consists, have now, for more than a century together, suffered themselves to be exposed to this oppression without a remedy. Though men of reflection, too, have sometimes complained of the law of settlements as a public grievance; yet it has never been the object of any general popular clamour, such as that against general warrants, an abusive practice undoubtedly, but such a one as was not likely to occasion any general oppression. There is scarce a poor man in England, of forty years of age, I will venture to say, who has not, in some part of his life, felt himself most cruelly oppressed by this ill-contrived law of settlements. I shall conclude this long chapter with observing, that though anciently it was usual to rate wages, first by general laws extending over the whole kingdom, and afterwards by particular orders of the justices of peace in every particular county, both these practices have now gone entirely into disuse "By the experience of above four hundred years," says Doctor Burn, "it seems time to lay aside all endeavours to bring under strict regulations, what in its own nature seems incapable of minute limitation; for if all persons in the same kind of work were to receive equal wages, there would be no emulation, and no room left for industry or ingenuity." Particular acts of parliament, however, still attempt sometimes to regulate wages in particular trades, and in particular places. Thus the 8th of George III. prohibits, under heavy penalties, all master tailors in London, and five miles round it, from giving, and their workmen from accepting, more than two shillings and sevenpence halfpenny a-day, except in the case of a general mourning. Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters. Thus the law which obliges the masters in several different trades to pay their workmen in money, and not in goods, is quite just and equitable. It imposes no real hardship upon the masters. It only obliges them to pay that value in money, which they pretended to pay, but did not always really pay, in goods. This law is in favour of the workmen; but the 8th of George III. is in favour of the masters. When masters combine together, in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage, under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept of a certain wage, under a certain penalty, the law would punish them very severely, and, if it dealt impartially, it would treat the masters in the same manner. But the 8th of George III. enforces by law that very regulation which masters sometimes attempt to establish by such combinations. The complaint of the workmen, that it puts the ablest and most industrious upon the same footing with an ordinary workman, seems perfectly well founded. In ancient times, too, it was usual to attempt to regulate the profits of merchants and other dealers, by regulating the price of provisions and other goods. The assize of bread is, so far as I know, the only remnant of this ancient usage. Where there is an exclusive corporation, it may, perhaps, he proper to regulate the price of the first necessary of life; but, where there is none, the competition will regulate it much better than any assize. The method of fixing the assize of bread, established by the 81st of George II. could not be put in practice in Scotland, on account of a defect in the law, its execution depending upon the office of clerk of the market, which does not exist there. This defect was not remedied till the third of George III. The want of an assize occasioned no sensible inconveniency; and the establishment of one in the few places where it has yet taken place has produced no sensible advantage. In the greater part of the towns in Scotland, however, there is an incorporation of bakers, who claim exclusive privileges, though they are not very strictly guarded. The proportion between the different rates, both of wages and profit, in the different employments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must, in the end, affect them equally in all different employments. The proportion between them, therefore, must remain the same, and cannot well be altered, as least for any considerable time, by any such revolutions. CHAP. XI. OF THE RENT OF LAND. Rent, considered as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. In adjusting the terms of the lease, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself, without being a loser, and the landlord seldom means to leave him any more. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavours to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. Sometimes, indeed, the liberality, more frequently the ignorance, of the landlord, makes him accept of somewhat less than this portion; and sometimes, too, though more rarely, the ignorance of the tenant makes him undertake to pay somewhat more, or to content himself with somewhat less, than the ordinary profits of farming stock in the neighbourhood. This portion, however, may still be considered as the natural rent of land, or the rent at which it is naturally meant that land should, for the most part, be let. The rent of land, it may be thought, is frequently no more than a reasonable profit or interest for the stock laid out by the landlord upon its improvement. This, no doubt, may be partly the case upon some occasions; for it can scarce ever be more than partly the case. The landlord demands a rent even for unimproved land, and the supposed interest or profit upon the expense of improvement is generally an addition to this original rent. Those improvements, besides, are not always made by the stock of the landlord, but sometimes by that of the tenant. When the lease comes to be renewed, however, the landlord commonly demands the same augmentation of rent as if they had been all made by his own. He sometimes demands rent for what is altogether incapable of human improvements. Kelp is a species of sea-weed, which, when burnt, yields an alkaline salt, useful for making glass, soup, and for several other purposes. It grows in several parts of Great Britain, particularly in Scotland, upon such rocks only as lie within the high-water mark, which are twice every day covered with the sea, and of which the produce, therefore, was never augmented by human industry. The landlord, however, whose estate is bounded by a kelp shore of this kind, demands a rent for it as much as for his corn-fields. The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which makes a great part of the subsistence of their inhabitants. But, in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what the farmer can make by the land, but to what he can make both by the land and the water. It is partly paid in sea-fish; and one of the very few instances in which rent makes a part of the price of that commodity, is to be found in that country. The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take, but to what the farmer can afford to give. Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is, or is not more, depends upon the demand. There are some parts of the produce of land, for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market, and there are others for which it either may or may not be such as to afford this greater price. The former must always afford a rent to the landlord. The latter sometimes may and sometimes may not, according to different circumstances. Rent, it is to be observed, therefore, enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit are the causes of high or low price; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low, a great deal more, or very little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all. The particular consideration, first, of those parts of the produce of land which always afford some rent; secondly, of those which sometimes may and sometimes may not afford rent; and, thirdly, of the variations which, in the different periods of improvement, naturally take place in the relative value of those two different sorts of rude produce, when compared both with one another and with manufactured commodities, will divide this chapter into three parts. PART I.--_Of the Produce of Land which always affords Rent._ As men, like all other animals, naturally multiply in proportion to the means of their subsistence, food is always more or less in demand. It can always purchase or command a greater or smaller quantity of labour, and somebody can always be found who is willing to do something in order to obtain it. The quantity of labour, indeed, which it can purchase, is not always equal to what it could maintain, if managed in the most economical manner, on account of the high wages which are sometimes given to labour; but it can always purchase such a quantity of labour as it can maintain, according to the rate at which that sort of labour is commonly maintained in the neighbourhood. But land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus, too, is always more than sufficient to replace the stock which employed that labour, together with its profit. Something, therefore, always remains for a rent to the landlord. The most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient, not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer or the owner of the herd or flock, but to afford some small rent to the landlord. The rent increases in proportion to the goodness of the pasture. The same extent of ground not only maintains a greater number of cattle, but as they are brought within a smaller compass, less labour becomes requisite to tend them, and to collect their produce. The landlord gains both ways; by the increase of the produce, and by the diminution of the labour which must be maintained out of it. The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility. Land in the neighbourhood of a town gives a greater rent than land equally fertile in a distant part of the country. Though it may cost no more labour to cultivate the one than the other, it must always cost more to bring the produce of the distant land to market. A greater quantity of labour, therefore, must be maintained out of it; and the surplus, from which are drawn both the profit of the farmer and the rent of the landlord, must be diminished. But in remote parts of the country, the rate of profit, as has already been shewn, is generally higher than in the neighbourhood of a large town. A smaller proportion of this diminished surplus, therefore, must belong to the landlord. Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. They are upon that account the greatest of all improvements. They encourage the cultivation of the remote, which must always be the most extensive circle of the country. They are advantageous to the town by breaking down the monopoly of the country in its neighbourhood. They are advantageous even to that part of the country. Though they introduce some rival commodities into the old market, they open many new markets to its produce. Monopoly, besides, is a great enemy to good management, which can never be universally established, but in consequence of that free and universal competition which forces every body to have recourse to it for the sake of self-defence. It is not more than fifty years ago, that some of the counties in the neighbourhood of London petitioned the parliament against the extension of the turnpike roads into the remoter counties. Those remoter counties, they pretended, from the cheapness of labour, would be able to sell their grass and corn cheaper in the London market than themselves, and would thereby reduce their rents, and ruin their cultivation. Their rents, however, have risen, and their cultivation has been improved since that time. A corn field of moderate fertility produces a much greater quantity of food for man, than the best pasture of equal extent. Though its cultivation requires much more labour, yet the surplus which remains after replacing the seed and maintaining all that labour, is likewise much greater. If a pound of butcher's meat, therefore, was never supposed to be worth more than a pound of bread, this greater surplus would everywhere be of greater value and constitute a greater fund, both for the profit of the farmer and the rent of the landlord. It seems to have done so universally in the rude beginnings of agriculture. But the relative values of those two different species of food, bread and butcher's meat, are very different in the different periods of agriculture. In its rude beginnings, the unimproved wilds, which then occupy the far greater part of the country, are all abandoned to cattle. There is more butcher's meat than bread; and bread, therefore, is the food for which there is the greatest competition, and and which consequently brings the greatest price. At Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty pence halfpenny sterling, was, forty or fifty years ago, the ordinary price of an ox, chosen from a herd of two or three hundred. He says nothing of the price of bread, probably because he found nothing remarkable about it. An ox there, he says, costs little more than the labour of catching him. But corn can nowhere be raised without a great deal of labour; and in a country which lies upon the river Plate, at that time the direct road from Europe to the silver mines of Potosi, the money-price of labour could be very cheap. It is otherwise when cultivation is extended over the greater part of the country. There is then more bread than butcher's meat. The competition changes its direction, and the price of butcher's meat becomes greater than the price of bread. By the extension, besides, of cultivation, the unimproved wilds become insufficient to supply the demand for butcher's meat. A great part of the cultivated lands must be employed in rearing and fattening cattle; of which the price, therefore, must be sufficient to pay, not only the labour necessary for tending them, but the rent, which the landlord, and the profit which the farmer, could have drawn from such land employed in tillage. The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as these which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle. It is not more than a century ago, that in many parts of the Highlands of Scotland, butcher's meat was as cheap or cheaper than even bread made of oatmeal. The Union opened the market of England to the Highland cattle. Their ordinary price, at present, is about three times greater than at the beginning of the century, and the rents of many Highland estates have been tripled and quadrupled in the same time. In almost every part of Great Britain, a pound of the best butcher's meat is, in the present times generally worth more than two pounds of the best white bread; and in plentiful years it is sometimes worth three or four pounds. It is thus that, in the progress of improvement, the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved, and these again by the rent and profit of corn. Corn is an annual crop; butcher's meat, a crop which requires four or five years to grow. As an acre of land, therefore, will produce a much smaller quantity of the one species of food than of the other, the inferiority of the quantity must be compensated by the superiority of the price. If it was more than compensated, more corn-land would be turned into pasture; and if it was not compensated, part of what was in pasture would be brought back into corn. This equality, however, between the rent and profit of grass and those of corn; of the land of which the immediate produce is food for cattle, and of that of which the immediate produce is food for men, must be understood to take place only through the greater part of the improved lands of a great country. In some particular local situations it is quite otherwise, and the rent and profit of grass are much superior to what can be made by corn. Thus, in the neighbourhood of a great town, the demand for milk, and for forage to horses, frequently contribute, together with the high price of butcher's meat, to raise the value of grass above what may be called its natural proportion to that of corn. This local advantage, it is evident, cannot be communicated to the lands at a distance. Particular circumstances have sometimes rendered some countries so populous, that the whole territory, like the lands in the neighbourhood of a great town, has not been sufficient to produce both the grass and the corn necessary for the subsistence of their inhabitants. Their lands, therefore, have been principally employed in the production of grass, the more bulky commodity, and which cannot be so easily brought from a great distance; and corn, the food of the great body of the people, has been chiefly imported from foreign countries. Holland is at present in this situation; and a considerable part of ancient Italy seems to have been so during the prosperity of the Romans. To feed well, old Cato said, as we are told by Cicero, was the first and most profitable thing in the management of a private estate; to feed tolerably well, the second; and to feed ill, the third. To plough, he ranked only in the fourth place of profit and advantage. Tillage, indeed, in that part of ancient Italy which lay in the neighbourhood of Rome, must have been very much discouraged by the distributions of corn which were frequently made to the people, either gratuitously, or at a very low price. This corn was brought from the conquered provinces, of which several, instead of taxes, were obliged to furnish a tenth part of their produce at a stated price, about sixpence a-peck, to the republic. The low price at which this corn was distributed to the people, must necessarily have sunk the price of what could be brought to the Roman market from Latium, or the ancient territory of Rome, and must have discouraged its cultivation in that country. In an open country, too, of which the principal produce is corn, a well-inclosed piece of grass will frequently rent higher than any corn field in its neighbourhood. It is convenient for the maintenance of the cattle employed in the cultivation of the corn; and its high rent is, in this case, not so properly paid from the value of its own produce, as from that of the corn lands which are cultivated by means of it. It is likely to fall, if ever the neighbouring lands are completely inclosed. The present high rent of inclosed land in Scotland seems owing to the scarcity of inclosure, and will probably last no longer than that scarcity. The advantage of inclosure is greater for pasture than for corn. It saves the labour of guarding the cattle, which feed better, too, when they are not liable to be disturbed by their keeper or his dog. But where these is no local advantage of this kind, the rent and profit of corn, or whatever else is the common vegetable food of the people, must naturally regulate upon the land which is fit for producing it, the rent and profit of pasture. The use of the artificial grasses, of turnips, carrots, cabbages, and the other expedients which have been fallen upon to make an equal quantity of land feed a greater number of cattle than when in natural grass, should somewhat reduce, it might be expected, the superiority which, in an improved country, the price of butcher's meat naturally has over that of bread. It seems accordingly to have done so, and there is some reason for believing that, at least in the London market, the price of butcher's meat, in proportion to the price of bread, is a good deal lower in the present times than it was in the beginning of the last century. In the Appendix to the life of Prince Henry, Doctor Birch has given us an account of the prices of butcher's meat as commonly paid by that prince. It is there said, that the four quarters of an ox, weighing six hundred pounds, usually cost him nine pounds ten shillings, or thereabouts; that is thirty-one shillings and eight-pence per hundred pounds weight. Prince Henry died on the 6th of November 1612, in the nineteenth year of his age. In March 1764, there was a parliamentary inquiry into the causes of the high price of provisions at that time. It was then, among other proof to the same purpose, given in evidence by a Virginia merchant, that in March 1763, he had victualled his ships for twenty-four or twenty-five shillings the hundred weight of beef, which he considered as the ordinary price; whereas, in that dear year, he had paid twenty-seven shillings for the same weight and sort. This high price in 1764 is, however, four shillings and eight-pence cheaper than the ordinary price paid by Prince Henry; and it is the best beef only, it must be observed, which is fit to be salted for those distant voyages. The price paid by Prince Henry amounts to 3d. 4-5ths per pound weight of the whole carcase, coarse and choice pieces taken together; and at that rate the choice pieces could not have been sold by retail for less than 4-1/2d. or 5d. the pound. In the parliamentary inquiry in 1764, the witnesses stated the price of the choice pieces of the best beef to be to the consumer 4d. and 4-1/2d. the pound; and the coarse pieces in general to be from seven farthings to 2-1/2d. and 2-3/4d.; and this, they said, was in general one halfpenny dearer than the same sort of pieces had usually been sold in the month of March. But even this high price is still a good deal cheaper than what we can well suppose the ordinary retail price to have been in the time of Prince Henry. During the first twelve years of the last century, the average price of the best wheat at the Windsor market was L.1 : 18 : 3-1/2d. the quarter of nine Winchester bushels. But in the twelve years preceding 1764, including that year, the average price of the same measure of the best wheat at the same market was L.2 : 1 : 9-1/2d. In the first twelve years of the last century, therefore, wheat appears to have been a good deal cheaper, and butcher's meat a good deal dearer, than in the twelve years preceding 1764, including that year. In all great countries, the greater part of the cultivated lands are employed in producing either food for men or food for cattle. The rent and profit of these regulate the rent and profit of all other cultivated land. If any particular produce afforded less, the land would soon be turned into corn or pasture; and if any afforded more, some part of the lands in corn or pasture would soon be turned to that produce. Those productions, indeed, which require either a greater original expense of improvement, or a greater annual expense of cultivation in order to fit the land for them, appear commonly to afford, the one a greater rent, the other a greater profit, than corn pasture. This superiority, however, will seldom be found to amount to more than a reasonable interest or compensation for this superior expense. In a hop garden, a fruit garden, a kitchen garden, both the rent of the landlord, and the profit of the farmer, are generally greater than in a corn or grass field. But to bring the ground into this condition requires more expense. Hence a greater rent becomes due to the landlord. It requires, too, a more attentive and skilful management. Hence a greater profit becomes due to the farmer. The crop, too, at least in the hop and fruit garden, is more precarious. Its price, therefore, besides compensating all occasional losses, must afford something like the profit of insurance. The circumstances of gardeners, generally mean, and always moderate, may satisfy us that their great ingenuity is not commonly over-recompensed. Their delightful art is practised by so many rich people for amusement, that little advantage is to be made by these who practise it for profit; because the persons who should naturally be their best customers, supply themselves with all their most precious productions. The advantage which the landlord derives from such improvements, seems at no time to have been greater than what was sufficient to compensate the original expense of making them. In the ancient husbandry, after the vineyard, a well-watered kitchen garden seems to have been the part of the farm which was supposed to yield the most valuable produce. But Democritus, who wrote upon husbandry about two thousand years ago, and who was regarded by the ancients as one of the fathers the of the art, thought they did not act wisely who inclosed a kitchen garden. The profit, he said, would not compensate the expense of a stone-wall: and bricks (he meant, I suppose, bricks baked in the sun) mouldered with the rain and the winter-storm, and required continual repairs. Columella, who reports this judgment of Democritus, does not controvert it, but proposes a very frugal method of inclosing with a hedge of brambles and briars, which he says he had found by experience to be both a lasting and an impenetrable fence; but which, it seems, was not commonly known in the time of Democritus. Palladius adopts the opinion of Columella, which had before been recommended by Varro. In the judgment of these ancient improvers, the produce of a kitchen garden had, it seems, been little more than sufficient to pay the extraordinary culture and the expense of watering; for in countries so near the sun, it was thought proper, in those times as in the present, to have the command of a stream of water, which could be conducted to every bed in the garden. Through the greater part of Europe, a kitchen garden is not at present supposed to deserve a better inclosure than that recommended by Columella. In Great Britain, and some other northern countries, the finer fruits cannot be brought to perfection but by the assistance of a wall. Their price, therefore, in such countries, must be sufficient to pay the expense of building and maintaining what they cannot be had without. The fruit-wall frequently surrounds the kitchen garden, which thus enjoys the benefit of an inclosure which its own produce could seldom pay for. That the vineyard, when properly planted and brought to perfection, was the most valuable part of the farm, seems to have been an undoubted maxim in the ancient agriculture, as it is in the modern, through all the wine countries. But whether it was advantageous to plant a new vineyard, was a matter of dispute among the ancient Italian husbandmen, as we learn from Columella. He decides, like a true lover of all curious cultivation, in favour of the vineyard; and endeavours to shew, by a comparison of the profit and expense, that it was a most advantageous improvement. Such comparisons, however, between the profit and expense of new projects are commonly very fallacious; and in nothing more so than in agriculture. Had the gain actually made by such plantations been commonly as great as he imagined it might have been, there could have been no dispute about it. The same point is frequently at this day a matter of controversy in the wine countries. Their writers on agriculture, indeed, the lovers and promoters of high cultivation, seem generally disposed to decide with Columella in favour of the vineyard. In France, the anxiety of the proprietors of the old vineyards to prevent the planting of any new ones, seems to favour their opinion, and to indicate a consciousness in those who must have the experience, that this species of cultivation is at present in that country more profitable than any other. It seems, at the same time, however, to indicate another opinion, that this superior profit can last no longer than the laws which at present restrain the free cultivation of the vine. In 1731, they obtained an order of council, prohibiting both the planting of new vineyards, and the renewal of these old ones, of which the cultivation had been interrupted for two years, without a particular permission from the king, to be granted only in consequence of an information from the intendant of the province, certifying that he had examined the land, and that it was incapable of any other culture. The pretence of this order was the scarcity of corn and pasture, and the superabundance of wine. But had this superabundance been real, it would, without any order of council, have effectually prevented the plantation of new vineyards, by reducing the profits of this species of cultivation below their natural proportion to those of corn and pasture. With regard to the supposed scarcity of corn occasioned by the multiplication of vineyards, corn is nowhere in France more carefully cultivated than in the wine provinces, where the land is fit for producing it: as in Burgundy, Guienne, and the Upper Languedoc. The numerous hands employed in the one species of cultivation necessarily encourage the other, by affording a ready market for its produce. To diminish the number of those who are capable of paying it, is surely a most unpromising expedient for encouraging the cultivation of corn. It is like the policy which would promote agriculture, by discouraging manufactures. The rent and profit of those productions, therefore, which require either a greater original expense of improvement in order to fit the land for them, or a greater annual expense of cultivation, though often much superior to those of corn and pasture, yet when they do no more than compensate such extraordinary expense, are in reality regulated by the rent and profit of those common crops. It sometimes happens, indeed, that the quantity of land which can be fitted for some particular produce, is too small to supply the effectual demand. The whole produce can be disposed of to those who are willing to give somewhat more than what is sufficient to pay the whole rent, wages, and profit, necessary for raising and bringing it to market, according to their natural rates, or according to the rates at which they are paid in the greater part of other cultivated land. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation, may commonly, in this case, and in this case only, bear no regular proportion to the like surplus in corn or pasture, but may exceed it in almost any degree; and the greater part of this excess naturally goes to the rent of the landlord. The usual and natural proportion, for example, between the rent and profit of wine, and those of corn and pasture, must be understood to take place only with regard to those vineyards which produce nothing but good common wine, such as can be raised almost anywhere, upon any light, gravelly, or sandy soil, and which has nothing to recommend it but its strength and wholesomeness. It is with such vineyards only, that the common land of the country can be brought into competition; for with those of a peculiar quality it is evident that it cannot. The vine is more affected by the difference of soils than any other fruit-tree. From some it derives a flavour which no culture or management can equal, it is supposed, upon any other. This flavour, real or imaginary, is sometimes peculiar to the produce of a few vineyards; sometimes it extends through the greater part of a small district, and sometimes through a considerable part of a large province. The whole quantity of such wines that is brought to market falls short of the effectual demand, or the demand of those who would be willing to pay the whole rent, profit, and wages, necessary for preparing and bringing them thither, according to the ordinary rate, or according to the rate at which they are paid in common vineyards. The whole quantity, therefore, can be disposed of to those who are willing to pay more, which necessarily raises their price above that of common wine. The difference is greater or less, according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager. Whatever it be, the greater part of it goes to the rent of the landlord. For though such vineyards are in general more carefully cultivated than most others, the high price of the wine seems to be, not so much the effect, as the cause of this careful cultivation. In so valuable a produce, the loss occasioned by negligence is so great, as to force even the most careless to attention. A small part of this high price, therefore, is sufficient to pay the wages of the extraordinary labour bestowed upon their cultivation, and the profits of the extraordinary stock which puts that labour into motion. The sugar colonies possessed by the European nations in the West Indies may be compared to those precious vineyards. Their whole produce falls short of the effectual demand of Europe, and can be disposed of to those who are willing to give more than what is sufficient to pay the whole rent, profit, and wages, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid by any other produce. In Cochin China, the finest white sugar generally sells for three piastres the quintal, about thirteen shillings and sixpence of our money, as we are told by Mr Poivre[14], a very careful observer of the agriculture of that country. What is there called the quintal, weighs from a hundred and fifty to two hundred Paris pounds, or a hundred and seventy-five Paris pounds at a medium, which reduces the price of the hundred weight English to about eight shillings sterling; not a fourth part of what is commonly paid for the brown or muscovada sugars imported from our colonies, and not a sixth part of what is paid for the finest white sugar. The greater part of the cultivated lands in Cochin China are employed in producing corn and rice, the food of the great body of the people. The respective prices of corn, rice, and sugar, are there probably in the natural proportion, or in that which naturally takes place in the different crops of the greater part of cultivated land, and which recompenses the landlord and farmer, as nearly as can be computed, according to what is usually the original expense of improvement, and the annual expense of cultivation. But in our sugar colonies, the price of sugar bears no such proportion to that of the produce of a rice or corn field either in Europe or America. It is commonly said that a sugar planter expects that the rum and the molasses should defray the whole expense of his cultivation, and that his sugar should be all clear profit. If this be true, for I pretend not to affirm it, it is as if a corn farmer expected to defray the expense of his cultivation with the chaff and the straw, and that the grain should be all clear profit. We see frequently societies of merchants in London, and other trading towns, purchase waste lands in our sugar colonies, which they expect to improve and cultivate with profit, by means of factors and agents, notwithstanding the great distance and the uncertain returns, from the defective administration of justice in those countries. Nobody will attempt to improve and cultivate in the same manner the most fertile lands of Scotland, Ireland, or the corn provinces of North America, though, from the more exact administration of justice in these countries, more regular returns might be expected. In Virginia and Maryland, the cultivation of tobacco is preferred, as most profitable, to that of corn. Tobacco might be cultivated with advantage through the greater part of Europe; but, in almost every part of Europe, it has become a principal subject of taxation; and to collect a tax from every different farm in the country where this plant might happen to be cultivated, would be more difficult, it has been supposed, than to levy one upon its importation at the custom-house. The cultivation of tobacco has, upon this account, been most absurdly prohibited through the greater part of Europe, which necessarily gives a sort of monopoly to the countries where it is allowed; and as Virginia and Maryland produce the greatest quantity of it, they share largely, though with some competitors, in the advantage of this monopoly. The cultivation of tobacco, however, seems not to be so advantageous as that of sugar. I have never even heard of any tobacco plantation that was improved and cultivated by the capital of merchants who resided in Great Britain; and our tobacco colonies send us home no such wealthy planters as we see frequently arrive from our sugar islands. Though, from the preference given in those colonies to the cultivation of tobacco above that of corn, it would appear that the effectual demand of Europe for tobacco is not completely supplied, it probably is more nearly so than that for sugar; and though the present price of tobacco is probably more than sufficient to pay the whole rent, wages, and profit, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid in corn land, it must not be so much more as the present price of sugar. Our tobacco planters, accordingly, have shewn the same fear of the superabundance of tobacco, which the proprietors of the old vineyards in France have of the superabundance of wine. By act of assembly, they have restrained its cultivation to six thousand plants, supposed to yield a thousand weight of tobacco, for every negro between sixteen and sixty years of age. Such a negro, over and above this quantity of tobacco, can manage, they reckon, four acres of Indian corn. To prevent the market from being overstocked, too, they have sometimes, in plentiful years, we are told by Dr Douglas[15] (I suspect he has been ill informed), burnt a certain quantity of tobacco for every negro, in the same manner as the Dutch are said to do of spices. If such violent methods are necessary to keep up the present price of tobacco, the superior advantage of its culture over that of corn, if it still has any, will not probably be of long continuance. It is in this manner that the rent of the cultivated land, of which the produce is human food, regulates the rent of the greater part of other cultivated land. No particular produce can long afford less, because the land would immediately be turned to another use; and if any particular produce commonly affords more, it is because the quantity of land which can be fitted for it is too small to supply the effectual demand. In Europe, corn is the principal produce of land, which serves immediately for human food. Except in particular situations, therefore, the rent of corn land regulates in Europe that of all other cultivated land. Britain need envy neither the vineyards of France, nor the olive plantations of Italy. Except in particular situations, the value of these is regulated by that of corn, in which the fertility of Britain is not much inferior to that of either of those two countries. If, in any country, the common and favourite vegetable food of the people should be drawn from a plant, of which the most common land, with the same, or nearly the same culture, produced a much greater quantity than the most fertile does of corn; the rent of the landlord, or the surplus quantity of food which would remain to him, after paying the labour, and replacing the stock of the farmer, together with its ordinary profits, would necessarily be much greater. Whatever was the rate at which labour was commonly maintained in that country, this greater surplus could always maintain a greater quantity of it, and, consequently, enable the landlord to purchase or command a greater quantity of it. The real value of his rent, his real power and authority, his command of the necessaries and conveniencies of life with which the labour of other people could supply him, would necessarily be much greater. A rice field produces a much greater quantity of food than the most fertile corn field. Two crops in the year, from thirty to sixty bushels each, are said to be the ordinary produce of an acre. Though its cultivation, therefore, requires more labour, a much greater surplus remains after maintaining all that labour. In those rice countries, therefore, where rice is the common and favourite vegetable food of the people, and where the cultivators are chiefly maintained with it, a greater share of this greater surplus should belong to the landlord than in corn countries. In Carolina, where the planters, as in other British colonies, are generally both farmers and landlords, and where rent, consequently, is confounded with profit, the cultivation of rice is found to be more profitable than that of corn, though their fields produce only one crop in the year, and though, from the prevalence of the customs of Europe, rice is not there the common and favourite vegetable food of the people. A good rice field is a bog at all seasons, and at one season a bog covered with water. It is unfit either for corn, or pasture, or vineyard, or, indeed, for any other vegetable produce that is very useful to men; and the lands which are fit for those purposes are not fit for rice. Even in the rice countries, therefore, the rent of rice lands cannot regulate the rent of the other cultivated land which can never be turned to that produce. The food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice, and much superior to what is produced by a field of wheat. Twelve thousand weight of potatoes from an acre of land is not a greater produce than two thousand weight of wheat. The food or solid nourishment, indeed, which can be drawn from each of those two plants, is not altogether in proportion to their weight, on account of the watery nature of potatoes. Allowing, however, half the weight of this root to go to water, a very large allowance, such an acre of potatoes will still produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat. An acre of potatoes is cultivated with less expense than an acre of wheat; the fallow, which generally precedes the sowing of wheat, more than compensating the hoeing and other extraordinary culture which is always given to potatoes. Should this root ever become in any part of Europe, like rice in some rice countries, the common and favourite vegetable food of the people, so as to occupy the same proportion of the lands in tillage, which wheat and other sorts of grain for human food do at present, the same quantity of cultivated land would maintain a much greater number of people; and the labourers being generally fed with potatoes, a greater surplus would remain after replacing all the stock, and maintaining all the labour employed in cultivation. A greater share of this surplus, too, would belong to the landlord. Population would increase, and rents would rise much beyond what they are at present. The land which is fit for potatoes, is fit for almost every other useful vegetable. If they occupied the same proportion of cultivated land which corn does at present, they would regulate, in the same manner, the rent of the greater part of other cultivated land. In some parts of Lancashire, it is pretended, I have been told, that bread of oatmeal is a heartier food for labouring people than wheaten bread, and I have frequently heard the same doctrine held in Scotland. I am, however, somewhat doubtful of the truth of it. The common people in Scotland, who are fed with oatmeal, are in general neither so strong nor so handsome as the same rank of people in England, who are fed with wheaten bread. They neither work so well, nor look so well; and as there is not the same difference between the people of fashion in the two countries, experience would seem to shew, that the food of the common people in Scotland is not so suitable to the human constitution as that of their neighbours of the same rank in England. But it seems to be otherwise with potatoes. The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root. No food can afford a more decisive proof of its nourishing quality, or of its being peculiarly suitable to the health of the human constitution. It is difficult to preserve potatoes through the year, and impossible to store them like corn, for two or three years together. The fear of not being able to sell them before they rot, discourages their cultivation, and is, perhaps, the chief obstacle to their ever becoming in any great country, like bread, the principal vegetable food of all the different ranks of the people. PART II.--_Of the Produce of Land, which sometimes does, and sometimes does not, afford Rent._ Human food seems to be the only produce of land, which always and necessarily affords some rent to the landlord. Other sorts of produce sometimes may, and sometimes may not, according to different circumstances. After food, clothing and lodging are the two great wants of mankind. Land, in its original rude state, can afford the materials of clothing and lodging to a much greater number of people than it can feed. In its improved state, it can sometimes feed a greater number of people than it can supply with those materials; at least in the way in which they require them, and are willing to pay for them. In the one state, therefore, there is always a superabundance of those materials, which are frequently, upon that account, of little or no value. In the other, there is often a scarcity, which necessarily augments their value. In the one state, a great part of them is thrown away as useless; and the price of what is used is considered as equal only to the labour and expense of fitting it for use, and can, therefore, afford no rent to the landlord. In the other, they are all made use of, and there is frequently a demand for more than can be had. Somebody is always willing to give more for every part of them, than what is sufficient to pay the expense of bringing them to market. Their price, therefore, can always afford some rent to the landlord. The skins of the larger animals were the original materials of clothing. Among nations of hunters and shepherds, therefore, whose food consists chiefly in the flesh of those animals, every man, by providing himself with food, provides himself with the materials of more clothing than he can wear. If there was no foreign commerce, the greater part of them would be thrown away as things of no value. This was probably the case among the hunting nations of North America, before their country was discovered by the Europeans, with whom they now exchange their surplus peltry, for blankets, fire-arms, and brandy, which gives it some value. In the present commercial state of the known world, the most barbarous nations, I believe, among whom land property is established, have some foreign commerce of this kind, and find among their wealthier neighbours such a demand for all the materials of clothing, which their land produces, and which can neither be wrought up nor consumed at home, as raises their price above what it costs to send them to those wealthier neighbors. It affords, therefore, some rent to the landlord. When the greater part of the Highland cattle were consumed on their own hills, the exportation of their hides made the most considerable article of the commerce of that country, and what they were exchanged for afforded some addition to the rent of the Highland estates. The wool of England, which in old times, could neither be consumed nor wrought up at home, found a market in the then wealthier and more industrious country of Flanders, and its price afforded something to the rent of the land which produced it. In countries not better cultivated than England was then, or than the Highlands of Scotland are now, and which had no foreign commerce, the materials of clothing would evidently be so superabundant, that a great part of them would be thrown away as useless, and no part could afford any rent to the landlord. The materials of lodging cannot always be transported to so great a distance as those of clothing, and do not so readily become an object of foreign commerce. When they are superabundant in the country which produces them, it frequently happens, even in the present commercial state of the world, that they are of no value to the landlord. A good stone quarry in the neighbourhood of London would afford a considerable rent. In many parts of Scotland and Wales it affords none. Barren timber for building is of great value in a populous and well-cultivated country, and the land which produces it affords a considerable rent. But in many parts of North America, the landlord would be much obliged to any body who would carry away the greater part of his large trees. In some parts of the Highlands of Scotland, the bark is the only part of the wood which, for want of roads and water-carriage, can be sent to market; the timber is left to rot upon the ground. When the materials of lodging are so superabundant, the part made use of is worth only the labour and expense of fitting it for that use. It affords no rent to the landlord, who generally grants the use of it to whoever takes the trouble of asking it. The demand of wealthier nations, however, sometimes enables him to get a rent for it. The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before. The woods of Norway, and of the coasts of the Baltic, find a market in many parts of Great Britain, which they could not find at home, and thereby afford some rent to their proprietors. Countries are populous, not in proportion to the number of people whom their produce can clothe and lodge, but in proportion to that of those whom it can feed. When food is provided, it is easy to find the necessary clothing and lodging. But though these are at hand, it may often be difficult to find food. In some parts of the British dominions, what is called a house may be built by one day's labour of one man. The simplest species of clothing, the skins of animals, require somewhat more labour to dress and prepare them for use. They do not, however, require a great deal. Among savage or barbarous nations, a hundredth, or little more than a hundredth part of the labour of the whole year, will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. All the other ninety-nine parts are frequently no more than enough to provide them with food. But when, by the improvement and cultivation of land, the labour of one family can provide food for two, the labour of half the society becomes sufficient to provide food for the whole. The other half, therefore, or at least the greater part of them, can be employed in providing other things, or in satisfying the other wants and fancies of mankind. Clothing and lodging, household furniture, and what is called equipage, are the principal objects of the greater part of those wants and fancies. The rich man consumes no more food than his poor neighbour. In quality it may be very different, and to select and prepare it may require more labour and art; but in quantity it is very nearly the same. But compare the spacious palace and great wardrobe of the one, with the hovel and the few rags of the other, and you will be sensible that the difference between their clothing, lodging, and household furniture, is almost as great in quantity as it is in quality. The desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniencies and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary. Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of this other kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labour, the quantity of materials which they can work up, increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones. Food is, in this manner, not only the original source of rent, but every other part of the produce of land which afterwards affords rent, derives that part of its value from the improvement of the powers of labour in producing food, by means of the improvement and cultivation of land. Those other parts of the produce of land, however, which afterwards afford rent, do not afford it always. Even in improved and cultivated countries, the demand for them is not always such as to afford a greater price than what is sufficient to pay the labour, and replace, together with its ordinary profits, the stock which must be employed in bringing them to market. Whether it is or is not such, depends upon different circumstances. Whether a coal mine, for example, can afford any rent, depends partly upon its fertility, and partly upon its situation. A mine of any kind may be said to be either fertile or barren, according as the quantity of mineral which can be brought from it by a certain quantity of labour, as greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. Some coal mines, advantageously situated, cannot be wrought on account of their barrenness. The produce does not pay the expense. They can afford neither profit nor rent. There are some, of which the produce is barely sufficient to pay the labour, and replace, together with its ordinary profits, the stock employed in working them. They afford some profit to the undertaker of the work, but no rent to the landlord. They can be wrought advantageously by nobody but the landlord, who, being himself the undertaker of the work, gets the ordinary profit of the capital which he employs in it. Many coal mines in Scotland are wrought in this manner, and can be wrought in no other. The landlord will allow nobody else to work them without paying some rent, and nobody can afford to pay any. Other coal mines in the same country, sufficiently fertile, cannot be wrought on account of their situation. A quantity of mineral, sufficient to defray the expense of working, could be brought from the mine by the ordinary, or even less than the ordinary quantity of labour: but in an inland country, thinly inhabited, and without either good roads or water-carriage, this quantity could not be sold. Coals are a less agreeable fuel than wood: they are said too to be less wholesome. The expense of coals, therefore, at the place where they are consumed, must generally be somewhat less than that of wood. The price of wood, again, varies with the state of agriculture, nearly in the same manner, and exactly for the same reason, as the price of cattle. In its rude beginnings, the greater part of every country is covered with wood, which is then a mere incumbrance, of no value to the landlord, who would gladly give it to any body for the cutting. As agriculture advances, the woods are partly cleared by the progress of tillage, and partly go to decay in consequence of the increased number of cattle. These, though they do not increase in the same proportion as corn, which is altogether the acquisition of human industry, yet multiply under the care and protection of men, who store up in the season of plenty what may maintain them in that of scarcity; who, through the whole year, furnish them with a greater quantity of food than uncultivated nature provides for them; and who, by destroying and extirpating their enemies, secure them in the free enjoyment of all that she provides. Numerous herds of cattle, when allowed to wander through the woods, though they do not destroy the old trees, hinder any young ones from coming up; so that, in the course of a century or two, the whole forest goes to ruin. The scarcity of wood then raises its price. It affords a good rent; and the landlord sometimes finds that he can scarce employ his best lands more advantageously than in growing barren timber, of which the greatness of the profit often compensates the lateness of the returns. This seems, in the present times, to be nearly the state of things in several parts of Great Britain, where the profit of planting is found to be equal to that of either corn or pasture. The advantage which the landlord derives from planting can nowhere exceed, at least for any considerable time, the rent which these could afford him; and in an inland country, which is highly cultivated, it will frequently not fall much short of this rent. Upon the sea-coast of a well-improved country, indeed, if coals can conveniently be had for fuel, it may sometimes be cheaper to bring barren timber for building from less cultivated foreign countries than to raise it at home. In the new town of Edinburgh, built within these few years, there is not, perhaps, a single stick of Scotch timber. Whatever may be the price of wood, if that of coals is such that the expense of a coal fire is nearly equal to that of a wood one, we may be assured, that at that place, and in these circumstances, the price of coals is as high as it can be. It seems to be so in some of the inland parts of England, particularly in Oxfordshire, where it is usual, even in the fires of the common people, to mix coals and wood together, and where the difference in the expense of those two sorts of fuel cannot, therefore, be very great. Coals, in the coal countries, are everywhere much below this highest price. If they were not, they could not bear the expense of a distant carriage, either by land or by water. A small quantity only could be sold; and the coal masters and the coal proprietors find it more for their interest to sell a great quantity at a price somewhat above the lowest, than a small quantity at the highest. The most fertile coal mine, too, regulates the price of coals at all the other mines in its neighbourhood. Both the proprietor and the undertaker of the work find, the one that he can get a greater rent, the other that he can get a greater profit, by somewhat underselling all their neighbours. Their neighbours are soon obliged to sell at the same price, though they cannot so well afford it, and though it always diminishes, and sometimes takes away altogether, both their rent and their profit. Some works are abandoned altogether; others can afford no rent, and can be wrought only by the proprietor. The lowest price at which coals can be sold for any considerable time, is, like that of all other commodities, the price which is barely sufficient to replace, together with its ordinary profits, the stock which must be employed in bringing them to market. At a coal mine for which the landlord can get no rent, but which he must either work himself or let it alone altogether, the price of coals must generally be nearly about this price. Rent, even where coals afford one, has generally a smaller share in their price than in that of most other parts of the rude produce of land. The rent of an estate above ground, commonly amounts to what is supposed to be a third of the gross produce; and it is generally a rent certain and independent of the occasional variations in the crop. In coal mines, a fifth of the gross produce is a very great rent, a tenth the common rent; and it is seldom a rent certain, but depends upon the occasional variations in the produce. These are so great, that in a country where thirty years purchase is considered as a moderate price for the property of a landed estate, ten years purchase is regarded as a good price for that of a coal mine. The value of a coal mine to the proprietor, frequently depends as much upon its situation as upon its fertility. That of a metallic mine depends more upon its fertility, and less upon its situation. The coarse, and still more the precious metals, when separated from the ore, are so valuable, that they can generally bear the expense of a very long land, and of the most distant sea carriage. Their market is not confined to the countries in the neighbourhood of the mine, but extends to the whole world. The copper of Japan makes an article of commerce in Europe; the iron of Spain in that of Chili and Peru. The silver of Peru finds its way, not only to Europe, but from Europe to China. The price of coals in Westmoreland or Shropshire can have little effect on their price at Newcastle; and their price in the Lionnois can have none at all. The productions of such distant coal mines can never be brought into competition with one another. But the productions of the most distant metallic mines frequently may, and in fact commonly are. The price, therefore, of the coarse, and still more that of the precious metals, at the most fertile mines in the world, must necessarily more or less affect their price at every other in it. The price of copper in Japan must have some influence upon its price at the copper mines in Europe. The price of silver in Peru, or the quantity either of labour or of other goods which it will purchase there, must have some influence on its price, not only at the silver mines of Europe, but at those of China. After the discovery of the mines of Peru, the silver mines of Europe were, the greater part of them, abandoned. The value of silver was so much reduced, that their produce could no longer pay the expense of working them, or replace, with a profit, the food, clothes, lodging, and other necessaries which were consumed in that operation. This was the case, too, with the mines of Cuba and St. Domingo, and even with the ancient mines of Peru, after the discovery of those of Potosi. The price of every metal, at every mine, therefore, being regulated in some measure by its price at the most fertile mine in the world that is actually wrought, it can, at the greater part of mines, do very little more than pay the expense of working, and can seldom afford a very high rent to the landlord. Rent accordingly, seems at the greater part of mines to have but a small share in the price of the coarse, and a still smaller in that of the precious metals. Labour and profit make up the greater part of both. A sixth part of the gross produce may be reckoned the average rent of the tin mines of Cornwall, the most fertile that are known in the world, as we are told by the Rev. Mr. Borlace, vice-warden of the stannaries. Some, he says, afford more, and some do not afford so much. A sixth part of the gross produce is the rent, too, of several very fertile lead mines in Scotland. In the silver mines of Peru, we are told by Frezier and Ulloa, the proprietor frequently exacts no other acknowledgment from the undertaker of the mine, but that he will grind the ore at his mill, paying him the ordinary multure or price of grinding. Till 1736, indeed, the tax of the king of Spain amounted to one fifth of the standard silver, which till then might be considered as the real rent of the greater part of the silver mines of Peru, the richest which have been known in the world. If there had been no tax, this fifth would naturally have belonged to the landlord, and many mines might have been wrought which could not then be wrought, because they could not afford this tax. The tax of the duke of Cornwall upon tin is supposed to amount to more than five per cent. or one twentieth part of the value; and whatever may be his proportion, it would naturally, too, belong to the proprietor of the mine, if tin was duty free. But if you add one twentieth to one sixth, you will find that the whole average rent of the tin mines of Cornwall, was to the whole average rent of the silver mines of Peru, as thirteen to twelve. But the silver mines of Peru are not now able to pay even this low rent; and the tax upon silver was, in 1736, reduced from one fifth to one tenth. Even this tax upon silver, too, gives more temptation to smuggling than the tax of one twentieth upon tin; and smuggling must be much easier in the precious than in the bulky commodity. The tax of the king of Spain, accordingly, is said to be very ill paid, and that of the duke of Cornwall very well. Rent, therefore, it is probable, makes a greater part of the price of tin at the must fertile tin mines than it does of silver at the most fertile silver mines in the world. After replacing the stock employed in working those different mines, together with its ordinary profits, the residue which remains to the proprietor is greater, it seems, in the coarse, than in the precious metal. Neither are the profits of the undertakers of silver mines commonly very great in Peru. The same most respectable and well-informed authors acquaint us, that when any person undertakes to work a new mine in Peru, he is universally looked upon as a man destined to bankruptcy and ruin, and is upon that account shunned and avoided by every body.--Mining, it seems, is considered there in the same light as here, as a lottery, in which the prizes do not compensate the blanks, though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects. As the sovereign, however, derives a considerable part of his revenue from the produce of silver mines, the law in Peru gives every possible encouragement to the discovery and working of new ones. Whoever discovers a new mine, is entitled to measure off two hundred and forty-six feet in length, according to what he supposes to be the direction of the vein, and half as much in breadth. He becomes proprietor of this portion of the mine, and can work it without paying any acknowledgment to the landlord. The interest of the duke of Cornwall has given occasion to a regulation nearly of the same kind in that ancient dutchy. In waste and uninclosed lands, any person who discovers a tin mine may mark out its limits to a certain extent, which is called bounding a mine. The bounder becomes the real proprietor of the mine, and may either work it himself, or give it in lease to another, without the consent of the owner of the land, to whom, however, a very small acknowledgment must be paid upon working it. In both regulations, the sacred rights of private property are sacrificed to the supposed interests of public revenue. The same encouragement is given in Peru to the discovery and working of new gold mines; and in gold the king's tax amounts only to a twentieth part of the standard rental. It was once a fifth, and afterwards a tenth, as in silver; but it was found that the work could not bear even the lowest of these two taxes. If it is rare, however, say the same authors, Frezier and Ulloa, to find a person who has made his fortune by a silver, it is still much rarer to find one who has done so by a gold mine. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines of Chili and Peru. Gold, too, is much more liable to be smuggled than even silver; not only on account of the superior value of the metal in proportion to its bulk, but on account of the peculiar way in which nature produces it. Silver is very seldom found virgin, but, like most other metals, is generally mineralized with some other body, from which it is impossible to separate it in such quantities as will pay for the expense, but by a very laborious and tedious operation, which cannot well be carried on but in work-houses erected for the purpose, and, therefore, exposed to the inspection of the king's officers. Gold, on the contrary, is almost always found virgin. It is sometimes found in pieces of some bulk; and, even when mixed, in small and almost insensible particles, with sand, earth, and other extraneous bodies, it can be separated from them by a very short and simple operation, which can be carried on in any private house by any body who is possessed of a small quantity of mercury. If the king's tax, therefore, is but ill paid upon silver, it is likely to be much worse paid upon gold; and rent must make a much smaller part of the price of gold than that of silver. The lowest price at which the precious metals can be sold, or the smallest quantity of other goods for which they can be exchanged, during any considerable time, is regulated by the same principles which fix the lowest ordinary price of all other goods. The stock which must commonly be employed, the food, clothes, and lodging, which must commonly be consumed in bringing them from the mine to the market, determine it. It must at least be sufficient to replace that stock, with the ordinary profits. Their highest price, however, seems not to be necessarily determined by any thing but the actual scarcity or plenty of these metals themselves. It is not determined by that of any other commodity, in the same manner as the price of coals is by that of wood, beyond which no scarcity can ever raise it. Increase the scarcity of gold to a certain degree, and the smallest bit of it may become more precious than a diamond, and exchange for a greater quantity of other goods. The demand for those metals arises partly from their utility, and partly from their beauty. If you except iron, they are more useful than, perhaps, any other metal. As they are less liable to rust and impurity, they can more easily be kept clean; and the utensils, either of the table or the kitchen, are often, upon that account, more agreeable when made of them. A silver boiler is more cleanly than a lead, copper, or tin one; and the same quality would render a gold boiler still better than a silver one. Their principal merit, however, arises from their beauty, which renders them peculiarly fit for the ornaments of dress and furniture. No paint or dye can give so splendid a colour as gilding. The merit of their beauty is greatly enhanced by their scarcity. With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches; which, in their eye, is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. In their eyes, the merit of an object, which is in any degree either useful or beautiful, is greatly enhanced by its scarcity, or by the great labour which it requires to collect any considerable quantity of it; a labour which nobody can afford to pay but themselves. Such objects they are willing to purchase at a higher price than things much more beautiful and useful, but more common. These qualities of utility, beauty, and scarcity, are the original foundation of the high price of those metals, or of the great quantity of other goods for which they can everywhere be exchanged. This value was antecedent to, and independent of their being employed as coin, and was the quality which fitted them for that employment. That employment, however, by occasioning a new demand, and by diminishing the quantity which could be employed in any other way, may have afterwards contributed to keep up or increase their value. The demand for the precious stones arises altogether from their beauty. They are of no use but as ornaments; and the merit of their beauty is greatly enhanced by their scarcity, or by the difficulty and expense of getting them from the mine. Wages and profit accordingly make up, upon most occasions, almost the whole of the high price. Rent comes in but for a very small share, frequently for no share; and the most fertile mines only afford any considerable rent. When Tavernier, a jeweller, visited the diamond mines of Golconda and Visiapour, he was informed that the sovereign of the country, for whose benefit they were wrought, had ordered all of them to be shut up except those which yielded the largest and finest stones. The other, it seems, were to the proprietor not worth the working. As the prices, both of the precious metals and of the precious stones, is regulated all over the world by their price at the most fertile mine in it, the rent which a mine of either can afford to its proprietor is in proportion, not to its absolute, but to what may be called its relative fertility, or to its superiority over other mines of the same kind. If new mines were discovered, as much superior to those of Potosi, as they were superior to those of Europe, the value of silver might be so much degraded as to render even the mines of Potosi not worth the working. Before the discovery of the Spanish West Indies, the most fertile mines in Europe may have afforded as great a rent to their proprietors as the richest mines in Peru do at present. Though the quantity of silver was much less, it might have exchanged for an equal quantity of other goods, and the proprietor's share might have enabled him to purchase or command an equal quantity either of labour or of commodities. The value, both of the product and of the rent, the real revenue which they afforded, both to the public and to the proprietor, might have been the same. The most abundant mines, either of the precious metals, or of the precious stones, could add little to the wealth of the world. A produce, of which the value is principally derived from its scarcity, is necessarily degraded by its abundance. A service of plate, and the other frivolous ornaments of dress and furniture, could be purchased for a smaller quantity of labour, or for a smaller quantity of commodities; and in this would consist the sole advantage which the world could derive from that abundance. It is otherwise in estates above ground. The value, both of their produce and of their rent, is in proportion to their absolute, and not to their relative fertility. The land which produces certain quantity of food, clothes, and lodging, can always feed, clothe, and lodge, a certain number of people; and whatever may be the proportion of the landlord, it will always give him a proportionable command of the labour of those people, and of the commodities with which that labour can supply him. The value of the most barren land is not diminished by the neighbourhood of the most fertile. On the contrary, it is generally increased by it. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren, which they could never have found among those whom their own produce could maintain. Whatever increases the fertility of land in producing food, increases not only the value of the lands upon which the improvement is bestowed, but contributes likewise to increase that or many other lands, by creating a new demand for their produce. That abundance of food, of which, in consequence of the improvement of land, many people have the disposal beyond what they themselves can consume, is the great cause of the demand, both for the precious metals and the precious stones, as well as for every other conveniency and ornament of dress, lodging, household furniture, and equipage. Food not only constitutes the principal part of the riches of the world, but it is the abundance of food which gives the principal part of their value to many other sorts of riches. The poor inhabitants of Cuba and St. Domingo, when they were first discovered by the Spaniards, used to wear little bits of gold as ornaments in their hair and other parts of their dress. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty, and to consider them as just worth the picking up, but not worth the refusing to any body who asked them. They gave them to their new guests at the first request, without seeming to think that they had made them any very valuable present. They were astonished to observe the rage of the Spaniards to obtain them; and had no notion that there could anywhere be a country in which many people had the disposal of so great a superfluity of food; so scanty always among themselves, that, for a very small quantity of those glittering baubles, they would willingly give as much as might maintain a whole family for many years. Could they have been made to understand this, the passion of the Spaniards would not have surprised them. PART III.--_Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent._ The increasing abundance of food, in consequence of the increasing improvement and cultivation, must necessarily increase the demand for every part of the produce of land which is not food, and which can be applied either to use or to ornament. In the whole progress of improvement, it might, therefore, be expected there should be only one variation in the comparative values of those two different sorts of produce. The value of that sort which sometimes does, and sometimes does not afford rent, should constantly rise in proportion to that which always affords some rent. As art and industry advance, the materials of clothing and lodging, the useful fossils and materials of the earth, the precious metals and the precious stones, should gradually come to be more and more in demand, should gradually exchange for a greater and a greater quantity of food; or, in other words, should gradually become dearer and dearer. This, accordingly, has been the case with most of these things upon most occasions, and would have been the case with all of them upon all occasions, if particular accidents had not, upon some occasions, increased the supply of some of them in a still greater proportion than the demand. The value of a free-stone quarry, for example, will necessarily increase with the increasing improvement and population of the country round about it, especially if it should be the only one in the neighbourhood. But the value of a silver mine, even though there should not be another within a thousand miles of it, will not necessarily increase with the improvement of the country in which it is situated. The market for the produce of a free-stone quarry can seldom extend more than a few miles round about it, and the demand must generally be in proportion to the improvement and population of that small district; but the market for the produce of a silver mine may extend over the whole known world. Unless the world in general, therefore, be advancing in improvement and population, the demand for silver might not be at all increased by the improvement even of a large country in the neighbourhood of the mine. Even though the world in general were improving, yet if, in the course of its improvements, new mines should be discovered, much more fertile than any which had been known before, though the demand for silver would necessarily increase, yet the supply might increase in so much a greater proportion, that the real price of that metal might gradually fall; that is, any given quantity, a pound weight of it, for example, might gradually purchase or command a smaller and a smaller quantity of labour, or exchange for a smaller and a smaller quantity of corn, the principal part of the subsistence of the labourer. The great market for silver is the commercial and civilized part of the world. If, by the general progress of improvement, the demand of this market should increase, while, at the same time, the supply did not increase in the same proportion, the value of silver would gradually rise in proportion to that of corn. Any given quantity of silver would exchange for a greater and a greater quantity of corn; or, in other words, the average money price of corn would gradually become cheaper and cheaper. If, on the contrary, the supply, by some accident, should increase, for many years together, in a greater proportion than the demand, that metal would gradually become cheaper and cheaper; or, in other words, the average money price of corn would, in spite of all improvements, gradually become dearer and dearer. But if, on the other hand, the supply of that metal should increase nearly in the same proportion as the demand, it would continue to purchase or exchange for nearly the same quantity of corn; and the average money price of corn would, in spite of all improvements, continue very nearly the same. These three seem to exhaust all the possible combinations of events which can happen in the progress of improvement; and during the course of the four centuries preceding the present, if we may judge by what has happened both in France and Great Britain, each of those three different combinations seems to have taken place in the European market, and nearly in the same order, too, in which I have here set them down. _Digression concerning the Variations in the value of Silver during the Course of the Four last Centuries._ _First Period._--In 1350, and for some time before, the average price of the quarter of wheat in England seems not to have been estimated lower than four ounces of silver, Tower weight, equal to about twenty shillings of our present money. From this price it seems to have fallen gradually to two ounces of silver, equal to about ten shillings of our present money, the price at which we find it estimated in the beginning of the sixteenth century, and at which it seems to have continued to be estimated till about 1570. In 1350, being the 25th of Edward III. was enacted what is called the Statute of Labourers. In the preamble, it complains much of the insolence of servants, who endeavoured to raise their wages upon their masters. It therefore ordains, that all servants and labourers should, for the future, be contented with the same wages and liveries (liveries in those times signified not only clothes, but provisions) which they had been accustomed to receive in the 20th year of the king, and the four preceding years; that, upon this account, their livery-wheat should nowhere be estimated higher than tenpence a-bushel, and that it should always be in the option of the master to deliver them either the wheat or the money. Tenpence a-bushel, therefore, had, in the 25th of Edward III. been reckoned a very moderate price of wheat, since it required a particular statute to oblige servants to accept of it in exchange for their usual livery of provisions; and it had been reckoned a reasonable price ten years before that, or in the 16th year of the king, the term to which the statute refers. But in the 16th year of Edward III. tenpence contained about half an ounce of silver, Tower weight, and was nearly equal to half-a-crown of our present money. Four ounces of silver, Tower weight, therefore, equal to six shillings and eightpence of the money of those times, and to near twenty shillings of that of the present, must have been reckoned a moderate price for the quarter of eight bushels. This statute is surely a better evidence of what was reckoned, in those times, a moderate price of grain, than the prices of some particular years, which have generally been recorded by historians and other writers, on account of their extraordinary dearness or cheapness, and from which, therefore, it is difficult to form any judgment concerning what may have been the ordinary price. There are, besides, other reasons for believing that, in the beginning of the fourteenth century, and for some time before, the common price of wheat was not less than four ounces of silver the quarter, and that of other grain in proportion. In 1309, Ralph de Born, prior of St. Augustine's, Canterbury, gave a feast upon his installation-day, of which William Thorn has preserved, not only the bill of fare, but the prices of many particulars. In that feast were consumed, 1st, fifty-three quarters of wheat, which cost nineteen pounds, or seven shillings and twopence a-quarter, equal to about one-and-twenty shillings and sixpence of our present money; 2dly, fifty-eight quarters of malt, which cost seventeen pounds ten shillings, or six shillings a-quarter, equal to about eighteen shillings of our present money; 3dly, twenty quarters of oats, which cost four pounds, or four shillings a-quarter, equal to about twelve shillings of our present money. The prices of malt and oats seem here to be higher than their ordinary proportion to the price of wheat. These prices are not recorded, on account of their extraordinary dearness or cheapness, but are mentioned accidentally, as the prices actually paid for large quantities of grain consumed at a feast, which was famous for its magnificence. In 1262, being the 51st of Henry III. was revived an ancient statute, called _the assize of bread and ale_, which, the king says in the preamble, had been made in the times of his progenitors, some time kings of England. It is probably, therefore, as old at least as the time of his grandfather, Henry II. and may have been as old as the Conquest. It regulates the price of bread according as the prices of wheat may happen to be, from one shilling to twenty shillings the quarter of the money of those times. But statutes of this kind are generally presumed to provide with equal care for all deviations from the middle price, for those below it, as well as for those above it. Ten shillings, therefore, containing six ounces of silver, Tower weight, and equal to about thirty shillings of our present money, must, upon this supposition, have been reckoned the middle price of the quarter of wheat when this statute was first enacted, and must have continued to be so in the 51st of Henry III. We cannot, therefore, be very wrong in supposing that the middle price was not less than one-third of the highest price at which this statute regulates the price of bread, or than six shillings and eightpence of the money of those times, containing four ounces of silver, Tower weight. From these different facts, therefore, we seem to have some reason to conclude that, about the middle of the fourteenth century, and for a considerable time before, the average or ordinary price of the quarter of wheat was not supposed to be less than four ounces of silver, Tower weight. From about the middle of the fourteenth to the beginning of the sixteenth century, what was reckoned the reasonable and moderate, that is, the ordinary or average price of wheat, seems to have sunk gradually to about one half of this price; so as at last to have fallen to about two ounces of silver, Tower weight, equal to about ten shillings of our present money. It continued to be estimated at this price till about 1570. In the household book of Henry, the fifth earl of Northumberland, drawn up in 1512, there are two different estimations of wheat. In one of them it is computed at six shillings and eightpence the quarter, in the other at five shillings and eightpence only. In 1512, six shillings and eightpence contained only two ounces of silver, Tower weight, and were equal to about ten shillings of our present money. From the 25th of Edward III. to the beginning of the reign of Elizabeth, during the space of more than two hundred years, six shillings and eightpence, it appears from several different statutes, had continued to be considered as what is called the moderate and reasonable, that is, the ordinary or average price of wheat. The quantity of silver, however, contained in that nominal sum was, during the course of this period, continually diminishing, in consequence of some alterations which were made in the coin. But the increase of the value of silver had, it seems, so far compensated the diminution of the quantity of it contained in the same nominal sum, that the legislature did not think it worth while to attend to this circumstance. Thus, in 1436, it was enacted, that wheat might be exported without a licence when the price was so low as six shillings and eightpence: and in 1463, it was enacted, that no wheat should be imported if the price was not above six shillings and eightpence the quarter. The legislature had imagined, that when the price was so low, there could be no inconveniency in exportation, but that when it rose higher, it became prudent to allow of importation. Six shillings and eightpence, therefore, containing about the same quantity of silver as thirteen shillings and fourpence of our present money (one-third part less than the same nominal sum contained in the time of Edward III.), had, in those times, been considered as what is called the moderate and reasonable price of wheat. In 1554, by the 1st and 2d of Philip and Mary, and in 1558, by the 1st of Elizabeth, the exportation of wheat was in the same manner prohibited, whenever the price of the quarter should exceed six shillings and eightpence, which did not then contain two penny worth more silver than the same nominal sum does at present. But it had soon been found, that to restrain the exportation of wheat till the price was so very low, was, in reality, to prohibit it altogether. In 1562, therefore, by the 5th of Elizabeth, the exportation of wheat was allowed from certain ports, whenever the price of the quarter should not exceed ten shillings, containing nearly the same quantity of silver as the like nominal sum does at present. This price had at this time, therefore, been considered as what is called the moderate and reasonable price of wheat. It agrees nearly with the estimation of the Northumberland book in 1512. That in France the average price of grain was, in the same manner, much lower in the end of the fifteenth and beginning of the sixteenth century, than in the two centuries preceding, has been observed both by Mr Dupré de St Maur, and by the elegant author of the Essay on the Policy of Grain. Its price, during the same period, had probably sunk in the same manner through the greater part of Europe. This rise in the value of silver, in proportion to that of corn, may either have been owing altogether to the increase of the demand for that metal, in consequence of increasing improvement and cultivation, the supply, in the mean time, continuing the same as before; or, the demand continuing the same as before, it may have been owing altogether to the gradual diminution of the supply: the greater part of the mines which were then known in the world being much exhausted, and, consequently, the expense of working them much increased; or it may have been owing partly to the one, and partly to the other of those two circumstances. In the end of the fifteenth and beginning of the sixteenth centuries, the greater part of Europe was approaching towards a more settled form of government than it had enjoyed for several ages before. The increase of security would naturally increase industry and improvement; and the demand for the precious metals, as well as for every other luxury and ornament, would naturally increase with the increase of riches. A greater annual produce would require a greater quantity of coin to circulate it; and a greater number of rich people would require a greater quantity of plate and other ornaments of silver. It is natural to suppose, too, that the greater part of the mines which then supplied the European market with silver might be a good deal exhausted, and have become more expensive in the working. They had been wrought, many of them, from the time of the Romans. It has been the opinion, however, of the greater part of those who have written upon the prices of commodities in ancient times, that, from the Conquest, perhaps from the invasion of Julius Cæsar, till the discovery of the mines of America, the value of silver was continually diminishing. This opinion they seem to have been led into, partly by the observations which they had occasion to make upon the prices both of corn and of some other parts of the rude produce of land, and partly by the popular notion, that as the quantity of silver naturally increases in every country with the increase of wealth, so its value diminishes as its quantity increases. In their observations upon the prices of corn, three different circumstances seem frequently to have misled them. First, in ancient times, almost all rents were paid in kind; in a certain quantity of corn, cattle, poultry, &c. It sometimes happened, however, that the landlord would stipulate, that he should be at liberty to demand of the tenant, either the annual payment in kind or a certain sum of money instead of it. The price at which the payment in kind was in this manner exchanged for a certain sum of money, is in Scotland called the conversion price. As the option is always in the landlord to take either the substance or the price, it is necessary, for the safety of the tenant, that the conversion price should rather be below than above the average market price. In many places, accordingly, it is not much above one half of this price. Through the greater part of Scotland this custom still continues with regard to poultry, and in some places with regard to cattle. It might probably have continued to take place, too, with regard to corn, had not the institution of the public fiars put an end to it. These are annual valuations, according to the judgment of an assize, of the average price of all the different sorts of grain, and of all the different qualities of each, according to the actual market price in every different county. This institution rendered it sufficiently safe for the tenant, and much more convenient for the landlord, to convert, as they call it, the corn rent, rather at what should happen to be the price of the fiars of each year, than at any certain fixed price. But the writers who have collected the prices of corn in ancient times seem frequently to have mistaken what is called in Scotland the conversion price for the actual market price. Fleetwood acknowledges, upon one occasion, that he had made this mistake. As he wrote his book, however, for a particular purpose, he does not think proper to make this acknowledgment till after transcribing this conversion price fifteen times. The price is eight shillings the quarter of wheat. This sum in 1423, the year at which he begins with it, contained the same quantity of silver as sixteen shillings of our present money. But in 1562, the year at which he ends with it, it contained no more than the same nominal sum does at present. Secondly, they have been misled by the slovenly manner in which some ancient statutes of assize had been sometimes transcribed by lazy copiers, and sometimes, perhaps, actually composed by the legislature. The ancient statutes of assize seem to have begun always with determining what ought to be the price of bread and ale when the price of wheat and barley were at the lowest; and to have proceeded gradually to determine what it ought to be, according as the prices of those two sorts of grain should gradually rise above this lowest price. But the transcribers of those statutes seem frequently to have thought it sufficient to copy the regulation as far as the three or four first and lowest prices; saving in this manner their own labour, and judging, I suppose, that this was enough to show what proportion ought to be observed in all higher prices. Thus, in the assize of bread and ale, of the 51st of Henry III. the price of bread was regulated according to the different prices of wheat, from one shilling to twenty shillings the quarter of the money of those times. But in the manuscripts from which all the different editions of the statutes, preceding that of Mr Ruffhead, were printed, the copiers had never transcribed this regulation beyond the price of twelve shillings. Several writers, therefore, being misled by this faulty transcription, very naturally conclude that the middle price, or six shillings the quarter, equal to about eighteen shillings of our present money, was the ordinary or average price of wheat at that time. In the statute of Tumbrel and Pillory, enacted nearly about the same time, the price of ale is regulated according to every sixpence rise in the price of barley, from two shillings, to four shillings the quarter. That four shillings, however, was not considered as the highest price to which barley might frequently rise in those times and that these prices were only given as an example of the proportion which ought to be observed in all other prices, whether higher or lower, we may infer from the last words of the statute: "_Et sic deinceps crescetur vel diminuetur per sex denarios._" The expression is very slovenly, but the meaning is plain enough, "that the price of ale is in this manner to be increased or diminished according to every sixpence rise or fall in the price of barley." In the composition of this statute, the legislature itself seems to have been as negligent as the copiers were in the transcription of the other. In an ancient manuscript of the Regiam Majestatem, an old Scotch law book, there is a statute of assize, in which the price of bread is regulated according to all the different prices of wheat, from tenpence to three shillings the Scotch boll, equal to about half an English quarter. Three shillings Scotch, at the time when this assize is supposed to have been enacted, were equal to about nine shillings sterling of our present money. Mr Ruddiman seems[16] to conclude from this, that three shillings was the highest price to which wheat ever rose in those times, and that tenpence, a shilling, or at most two shillings, were the ordinary prices. Upon consulting the manuscript, however, it appears evidently, that all these prices are only set down as examples of the proportion which ought to be observed between the respective prices of wheat and bread. The last words of the statute are "_reliqua judicabis secundum præscripta, habendo respectum ad pretium bladi_."--"You shall judge of the remaining cases, according to what is above written, having respect to the price of corn." Thirdly, they seem to have been misled too, by the very low price at which wheat was sometimes sold in very ancient times; and to have imagined, that as its lowest price was then much lower than in later times its ordinary price must likewise have been much lower. They might have found, however, that in those ancient times its highest price was fully as much above, as its lowest price was below any thing that had ever been known in later times. Thus, in 1270, Fleetwood gives us two prices of the quarter of wheat. The one is four pounds sixteen shillings of the money of those times, equal to fourteen pounds eight shillings of that of the present; the other is six pounds eight shillings, equal to nineteen pounds four shillings of our present money. No price can be found in the end of the fifteenth, or beginning of the sixteenth century, which approaches to the extravagance of these. The price of corn, though at all times liable to variation, varies most in those turbulent and disorderly societies, in which the interruption of all commerce and communication hinders the plenty of one part of the country from relieving the scarcity of another. In the disorderly state of England under the Plantagenets, who governed it from about the middle of the twelfth till towards the end of the fifteenth century, one district might be in plenty, while another, at no great distance, by having its crop destroyed, either by some accident of the seasons, or by the incursion of some neighbouring baron, might be suffering all the horrors of a famine; and yet if the lands of some hostile lord were interposed between them, the one might not be able to give the least assistance to the other. Under the vigorous administration of the Tudors, who governed England during the latter part of the fifteenth, and through the whole of the sixteenth century, no baron was powerful enough to dare to disturb the public security. The reader will find at the end of this chapter all the prices of wheat which have been collected by Fleetwood, from 1202 to 1597, both inclusive, reduced to the money of the present times, and digested, according to the order of time, into seven divisions of twelve years each. At the end of each division, too, he will find the average price of the twelve years of which it consists. In that long period of time, Fleetwood has been able to collect the prices of no more than eighty years; so that four years are wanting to make out the last twelve years. I have added, therefore, from the accounts of Eton college, the prices of 1598, 1599, 1600, and 1601. It is the only addition which I have made. The reader will see, that from the beginning of the thirteenth till after the middle of the sixteenth century, the average price of each twelve years grows gradually lower and lower; and that towards the and of the sixteenth century it begins to rise again. The prices, indeed, which Fleetwood has been able to collect, seem to have been those chiefly which were remarkable for extraordinary dearness or cheapness; and I do not pretend that any very certain conclusion can be drawn from them. So far, however, as they prove any thing at all, they confirm the account which I have been endeavouring to give. Fleetwood himself, however, seems, with most other writers, to have believed, that, during all this period, the value of silver, in consequence of its increasing abundance, was continually diminishing. The prices of corn, which he himself has collected, certainly do not agree with this opinion. They agree perfectly with that of Mr Dupré de St Maur, and with that which I have been endeavouring to explain. Bishop Fleetwood and Mr Dupré de St Maur are the two authors who seem to have collected, with the greatest diligence and fidelity, the prices of things in ancient times. It is somewhat curious that, though their opinions are so very different, their facts, so far as they relate to the price of corn at least, should coincide so very exactly. It is not, however, so much from the low price of corn, as from that of some other parts of the rude produce of land, that the most judicious writers have inferred the great value of silver in those very ancient times. Corn, it has been said, being a sort of manufacture, was, in those rude ages, much dearer in proportion than the greater part of other commodities; it is meant, I suppose, than the greater part of unmanufactured commodities, such as cattle, poultry, game of all kinds, &c. That in those times of poverty and barbarism these were proportionably much cheaper than corn, is undoubtedly true. But this cheapness was not the effect of the high value of silver, but of the low value of those commodities. It was not because silver would in such time purchase or represent a greater quantity of labour, but because such commodities would purchase or represent a much smaller quantity than in times of more opulence and improvement. Silver must certainly be cheaper in Spanish America than in Europe; in the country where it is produced, than in the country to which it is brought, at the expense of a long carriage both by land and by sea, of a freight, and an insurance. One-and-twenty pence halfpenny sterling, however, we are told by Ulloa, was, not many years ago, at Buenos Ayres, the price of an ox chosen from a herd of three or four hundred. Sixteen shillings sterling, we are told by Mr Byron, was the price of a good horse in the capital of Chili. In a country naturally fertile, but of which the far greater part is altogether uncultivated, cattle, poultry, game of all kinds, &c. as they can be acquired with a very small quantity of labour, so they will purchase or command but a very small quantity. The low money price for which they may be sold, is no proof that the real value of silver is there very high, but that the real value of those commodities is very low. Labour, it must always be remembered, and not any particular commodity, or set of commodities, is the real measure of the value both of silver and of all other commodities. But in countries almost waste, or but thinly inhabited, cattle, poultry, game of all kinds, &c. as they are the spontaneous productions of Nature, so she frequently produces them in much greater quantities than the consumption of the inhabitants requires. In such a state of things, the supply commonly exceeds the demand. In different states of society, in different states of improvement, therefore, such commodities will represent, or be equivalent, to very different quantities of labour. In every state of society, in every stage of improvement, corn is the production of human industry. But the average produce of every sort of industry is always suited, more or less exactly, to the average consumption; the average supply to the average demand. In every different stage of improvement, besides, the raising of equal quantities of corn in the same soil and climate, will, at an average, require nearly equal quantities of labour; or, what comes to the same thing, the price of nearly equal quantities; the continual increase of the productive powers of labour, in an improved state of cultivation, being more or less counterbalanced by the continual increasing price of cattle, the principal instruments of agriculture. Upon all these accounts, therefore, we may rest assured, that equal quantities of corn will, in every state of society, in every stage of improvement, more nearly represent, or be equivalent to, equal quantities of labour, than equal quantities of any other part of the rude produce of land. Corn, accordingly, it has already been observed, is, in all the different stages of wealth and improvement, a more accurate measure of value than any other commodity or set of commodities. In all those different stages, therefore, we can judge better of the real value of silver, by comparing it with corn, than by comparing it with any other commodity or set of commodities. Corn, besides, or whatever else is the common and favourite vegetable food of the people, constitutes, in every civilized country, the principal part of the subsistence of the labourer. In consequence of the extension of agriculture, the land of every country produces a much greater quantity of vegetable than of animal food, and the labourer everywhere lives chiefly upon the wholesome food that is cheapest and most abundant. Butcher's meat, except in the most thriving countries, or where labour is most highly rewarded, makes but an insignificant part of his subsistence; poultry makes a still smaller part of it, and game no part of it. In France, and even in Scotland, where labour is somewhat better rewarded than in France, the labouring poor seldom eat butcher's meat, except upon holidays, and other extraordinary occasions. The money price of labour, therefore, depends much more upon the average money price of corn, the subsistence of the labourer, than upon that of butcher's meat, or of any other part of the rude produce of land. The real value of gold and silver, therefore, the real quantity of labour which they can purchase or command, depends much more upon the quantity of corn which they can purchase or command, than upon that of butcher's meat, or any other part of the rude produce of land. Such slight observations, however, upon the prices either of corn or of other commodities, would not probably have misled so many intelligent authors, had they not been influenced at the same time by the popular notion, that as the quantity of silver naturally increases in every country with the increase of wealth, so its value diminishes as its quantity increases. This notion, however, seems to be altogether groundless. The quantity of the precious metals may increase in any country from two different causes; either, first, from the increased abundance of the mines which supply it; or, secondly, from the increased wealth of the people, from the increased produce of their annual labour. The first of these causes is no doubt necessarily connected with the diminution of the value of the precious metals; but the second is not. When more abundant mines are discovered, a greater quantity of the precious metals is brought to market; and the quantity of the necessaries and conveniencies of life for which they must be exchanged being the same as before, equal quantities of the metals must be exchanged for smaller quantities of commodities. So far, therefore, as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines, it is necessarily connected with some diminution of their value. When, on the contrary, the wealth of any country increases, when the annual produce of its labour becomes gradually greater and greater, a greater quantity of coin becomes necessary in order to circulate a greater quantity of commodities: and the people, as they can afford it, as they have more commodities to give for it, will naturally purchase a greater and a greater quantity of plate. The quantity of their coin will increase from necessity; the quantity of their plate from vanity and ostentation, or from the same reason that the quantity of fine statues, pictures, and of every other luxury and curiosity, is likely to increase among them. But as statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity, than in times of poverty and depression, so gold and silver are not likely to be worse paid for. The price of gold and silver, when the accidental discovery of more abundant mines does not keep it down, as it naturally rises with the wealth of every country; so, whatever be the state of the mines, it is at all times naturally higher in a rich than in a poor country. Gold and silver, like all other commodities, naturally seek the market where the best price is given for them, and the best price is commonly given for every thing in the country which can best afford it. Labour, it must be remembered, is the ultimate price which is paid for every thing; and in countries where labour is equally well rewarded, the money price of labour will be in proportion to that of the subsistence of the labourer. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country; in a country which abounds with subsistence, than in one which is but indifferently supplied with it. If the two countries are at a great distance, the difference may be very great; because, though the metals naturally fly from the worse to the better market, yet it may be difficult to transport them in such quantities as to bring their price nearly to a level in both. If the countries are near, the difference will be smaller, and may sometimes be scarce perceptible; because in this case the transportation will be easy. China is a much richer country than any part of Europe, and the difference between the price of subsistence in China and in Europe is very great. Rice in China is much cheaper than wheat is anywhere in Europe. England is a much richer country than Scotland, but the difference between the money price of corn in those two countries is much smaller, and is but just perceptible. In proportion to the quantity or measure, Scotch corn generally appears to be a good deal cheaper than English; but, in proportion to its quality, it is certainly somewhat dearer. Scotland receives almost every year very large supplies from England, and every commodity must commonly be somewhat dearer in the country to which it is brought than in that from which it comes. English corn, therefore, must be dearer in Scotland than in England; and yet in proportion to its quality, or to the quantity and goodness of the flour or meal which can be made from it, it cannot commonly be sold higher there than the Scotch corn which comes to market in competition with it. The difference between the money price of labour in China and in Europe, is still greater than that between the money price of subsistence; because the real recompence of labour is higher in Europe than in China, the greater part of Europe being in an improving state, while China seems to be standing still. The money price of labour is lower in Scotland than in England, because the real recompence of labour is much lower: Scotland, though advancing to greater wealth, advances much more slowly than England. The frequency of emigration from Scotland, and the rarity of it from England, sufficiently prove that the demand for labour is very different in the two countries. The proportion between the real recompence of labour in different countries, it must be remembered, is naturally regulated, not by their actual wealth or poverty, but by their advancing, stationary, or declining condition. Gold and silver, as they are naturally of the greatest value among the richest, so they are naturally of the least value among the poorest nations. Among savages, the poorest of all nations, they are scarce of any value. In great towns, corn is always dearer than in remote parts of the country. This, however, is the effect, not of the real cheapness of silver, but of the real dearness of corn. It does not cost less labour to bring silver to the great town than to the remote parts of the country; but it costs a great deal more to bring corn. In some very rich and commercial countries, such as Holland and the territory of Genoa, corn is dear for the same reason that it is dear in great towns. They do not produce enough to maintain their inhabitants. They are rich in the industry and skill of their artificers and manufacturers, in every sort of machinery which can facilitate and abridge labour; in shipping, and in all the other instruments and means of carriage and commerce: but they are poor in corn, which, as it must be brought to them from distant countries, must, by an addition to its price, pay for the carriage from these countries. It does not cost less labour to bring silver to Amsterdam than to Dantzic; but it costs a great deal more to bring corn. The real cast of silver must be nearly the same in both places; but that of corn must be very different. Diminish the real opulence either of Holland or of the territory of Genoa, while the number of their inhabitants remains the same; diminish their power of supplying themselves from distant countries; and the price of corn, instead of sinking with that diminution in the quantity of their silver, which must necessarily accompany this declension, either as its cause or as its effect, will rise to the price of a famine. When we are in want of necessaries, we must part with all superfluities, of which the value, as it rises in times of opulence and prosperity, so it sinks in times of poverty and distress. It is otherwise with necessaries. Their real price, the quantity of labour which they can purchase or command, rises in times of poverty and distress, and sinks in times of opulence and prosperity, which are always times of great abundance; for they could not otherwise be times of opulence and prosperity Corn is a necessary, silver is only a superfluity. Whatever, therefore, may have been the increase in the quantity of the precious metals, which, during the period between the middle of the fourteenth and that of the sixteenth century, arose from the increase of wealth and improvement, it could have no tendency to diminish their value, either in Great Britain, or in any other part of Europe. If those who have collected the prices of things in ancient times, therefore, had, during this period, no reason to infer the diminution of the value of silver from any observations which they had made upon the prices either of corn, or of other commodities, they had still less reason to infer it from any supposed increase of wealth and improvement. _Second Period._--But how various soever may have been the opinions of the learned concerning the progress of the value of silver during the first period, they are unanimous concerning it during the second. From about 1570 to about 1640, during a period of about seventy years, the variation in the proportion between the value of silver and that of corn held a quite opposite course. Silver sunk in its real value, or would exchange for a smaller quantity of labour than before; and corn rose in its nominal price, and, instead of being commonly sold for about two ounces of silver the quarter, or about ten shillings of our present money, came to be sold for six and eight ounces of silver the quarter, or about thirty and forty shillings of our present money. The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver, in proportion to that of corn. It is accounted for, accordingly, in the same manner by every body; and there never has been any dispute, either about the fact, or about the cause of it. The greater part of Europe was, during this period, advancing in industry and improvement, and the demand for silver must consequently have been increasing; but the increase of the supply had, it seems, so far exceeded that of the demand, that the value of that metal sunk considerably. The discovery of the mines of America, it is to be observed, does not seem to have had any very sensible effect upon the prices of things in England, till after 1570; even though the mines of Potosi had been discovered more than twenty years before. From 1595 to 1620, both inclusive, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, from the accounts of Eton college, to have been L.2 : 1 : 6-9/13. From which sum, neglecting the fraction, and deducting a ninth, or 4s. 7-1/3d., the price of the quarter of eight bushels comes out to have been L.1 : 16 : 10-2/3. And from this sum, neglecting likewise the fraction, and deducting a ninth, or 4s. 1-1/9d., for the difference between the price of the best wheat and that of the middle wheat, the price of the middle wheat comes out to have been about L.1 : 12 : 8-8/9, or about six ounces and one-third of an ounce of silver. From 1621 to 1636, both inclusive, the average price of the same measure of the best wheat, at the same market, appears, from the same accounts, to have been L.2 : 10s.; from which, making the like deductions as in the foregoing case, the average price of the quarter of eight bushels of middle wheat comes out to have been L.1 : 19 : 6, or about seven ounces and two-thirds of an ounce of silver. _Third Period._--Between 1630 and 1640, or about 1636, the effect of the discovery of the mines of America, is reducing the value of silver, appears to have been completed, and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. It seems to have risen somewhat in the course of the present century, and it had probably begun to do so, even some time before the end of the last. From 1637 to 1700, both inclusive, being the sixty-four last years of the last century, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, from the same accounts, to have been L.2 : 11 : 0-1/3, which is only 1s. 0-1/3d. dearer than it had been during the sixteen years before. But, in the course of these sixty-four years, there happened two events, which must have produced a much greater scarcity of corn than what the course of the seasons would otherwise have occasioned, and which, therefore, without supposing any further reduction in the value of silver, will much more than account for this very small enhancement of price. The first of these events was the civil war, which, by discouraging tillage and interrupting commerce, must have raised the price of corn much above what the course of the seasons would otherwise have occasioned. It must have had this effect, more or less, at all the different markets in the kingdom, but particularly at those in the neighborhood of London, which require to be supplied from the greatest distance. In 1648, accordingly, the price of the best wheat, at Windsor market, appears, from the same accounts, to have been L.4 : 5s., and, in 1649, to have been L.4, the quarter of nine bushels. The excess of those two years above L.2 10s. (the average price of the sixteen years preceding 1637) is L.3 5s., which, divided among the sixty-four last years of the last century, will alone very nearly account for that small enhancement of price which seems to have taken place in them. These, however, though the highest, are by no means the only high prices which seem to have been occasioned by the civil wars. The second event was the bounty upon the exportation of corn, granted in 1688. The bounty, it has been thought by many people, by encouraging tillage, may, in a long course of years, have occasioned a greater abundance, and, consequently, a greater cheapness of corn in the home market, than what would otherwise have taken place there. How far the bounty could produce this effect at any time I shall examine hereafter: I shall only observe at present, that between 1688 and 1700, it had not time to produce any such effect. During this short period, its only effect must have been, by encouraging the exportation of the surplus produce of every year, and thereby hindering the abundance of one year from compensating the scarcity of another, to raise the price in the home market. The scarcity which prevailed in England, from 1693 to 1699, both inclusive, though no doubt principally owing to the badness of the seasons, and, therefore, extending through a considerable part of Europe, must have been somewhat enhanced by the bounty. In 1699, accordingly, the further exportation of corn was prohibited for nine months. There was a third event which occurred in the course of the same period, and which, though it could not occasion any scarcity of corn, nor, perhaps, any augmentation in the real quantity of silver which was usually paid for it, must necessarily have occasioned some augmentation in the nominal sum. This event was the great debasement of the silver coin, by clipping and wearing. This evil had begun in the reign of Charles II. and had gone on continually increasing till 1695; at which time, as we may learn from Mr Lowndes, the current silver coin was, at an average, near five-and-twenty per cent. below its standard value. But the nominal sum which constitutes the market price of every commodity is necessarily regulated, not so much by the quantity of silver, which, according to the standard, ought to be contained in it, as by that which, it is found by experience, actually is contained in it. This nominal sum, therefore, is necessarily higher when the coin is much debased by clipping and wearing, than when near to its standard value. In the course of the present century, the silver coin has not at any time been more below its standard weight than it is at present. But though very much defaced, its value has been kept up by that of the gold coin, for which it is exchanged. For though, before the late recoinage, the gold coin was a good deal defaced too, it was less so than the silver. In 1695, on the contrary, the value of the silver coin was not kept up by the gold coin; a guinea then commonly exchanging for thirty shillings of the worn and clipt silver. Before the late recoinage of the gold, the price of silver bullion was seldom higher than five shillings and sevenpence an ounce, which is but fivepence above the mint price. But in 1695, the common price of silver bullion was six shillings and fivepence an ounce,[17] which is fifteen pence above the mint price. Even before the late recoinage of the gold, therefore, the coin, gold and silver together, when compared with silver bullion, was not supposed to be more than eight per cent below its standard value. In 1695, on the contrary, it had been supposed to be near five-and-twenty per cent. below that value. But in the beginning of the present century, that is, immediately after the great recoinage in King William's time, the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. In the course of the present century, too, there has been no great public calamity, such as a civil war, which could rather discourage, or interrupt the interior commerce of the country. And though the bounty which has taken place through the greater part of this century, must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage; yet, as in the course of this century, the bounty has had full time to produce all the good effects commonly imputed to it to encourage tillage, and thereby to increase the quantity of corn in the home market, it may, open the principles of a system which I shall explain and examine hereafter, be supposed to have done something to lower the price of that commodity the one way, as well as to raise it the other. It is by many people supposed to have done more. In the sixty-four years of the present century, accordingly, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, by the accounts of Eton college, to have been L.2 : 0 : 6-10/32, which is about ten shillings and sixpence, or more than five-and-twenty per cent. cheaper than it had been during the sixty-four last years of the last century; and about nine shillings and sixpence cheaper than is had been during the sixteen years preceding 1636, when the discovery of the abundant mines of America may be supposed to have produced its full effect; and about one shilling cheaper than it had been in the twenty-six years preceding 1620, before that discovery can well be supposed to have produced its full effect. According to this account, the average price of middle wheat, during these sixty-four first years of the present century, comes out to have been about thirty-two shillings the quarter of eight bushels. The value of silver, therefore, seems to have risen somewhat in proportion to that of corn during the course of the present century, and it had probably begun to do so even some time before the end of the last. In 1687, the price of the quarter of nine bushels of the best wheat, at Windsor market, was L.1 : 5 : 2, the lowest price at which it had ever been from 1595. In 1688, Mr Gregory King, a man famous for his knowledge in matters of this kind, estimated the average price of wheat, in years of moderate plenty, to be to the grower 3s. 6d. the bushel, or eight-and-twenty shillings the quarter. The grower's price I understand to be the same with what is sometimes called the contract price, or the price at which a farmer contracts for a certain number of years to deliver a certain quantity of corn to a dealer. As a contract of this kind saves the farmer the expense and trouble of marketing, the contract price is generally lower than what is supposed to be the average market price. Mr King had judged eight-and-twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. Before the scarcity occasioned by the late extraordinary course of bad seasons, it was, I have been assured, the ordinary contract price in all common years. In 1688 was granted the parliamentary bounty upon the exportation of corn. The country gentlemen, who then composed a still greater proportion of the legislature than they do at present, had felt that the money price of corn was falling. The bounty was an expedient to raise it artificially to the high price at which it had frequently been sold in times of Charles I. and II. It was to take place, therefore, till wheat was so high as forty-eight shillings the quarter; that is, twenty shillings, or 5-7ths dearer than Mr King had, in that very year, estimated the grower's price to be in times of moderate plenty. If his calculations deserve any part of the reputation which they have obtained very universally, eight-and-forty shillings the quarter was a price which, without some such expedient as the bounty, could not at that time be expected, except in years of extraordinary scarcity. But the government of King William was not then fully settled. It was in no condition to refuse any thing to the country gentlemen, from whom it was, at that very time, soliciting the first establishment of the annual land-tax. The value of silver, therefore, in proportion to that of corn, had probably risen somewhat before the end of the last century, and it seems to have continued to do so during the course of the greater part of the present, though the necessary operation of the bounty must have hindered that time from being so sensible as it otherwise would have been in the actual state of tillage. In plentiful years, the bounty, by occasioning an extraordinary exportation, necessarily raises the price of corn above what it otherwise would be in those years. To encourage tillage, by keeping up the price of corn, even in the most plentiful years, was the avowed end of the institution. In years of great scarcity, indeed, the bounty has generally been suspended. It must, however, have had some effect upon the prices of many of these years. By the extraordinary exportation which it occasions in years of plenty, it must frequently hinder the plenty of one year from compensating the scarcity of another. Both in years of plenty and in years of scarcity, therefore, the bounty raises the price of corn above what it naturally would be in the actual state of tillage. If during the sixty-four first years of the present century, therefore, the average price has been lower than during the sixty-four last years of the last century, it must, in the same state of tillage, have been much more so, had it not been for this operation of the bounty. But, without the bounty, it maybe said the state of tillage would not have been the same. What may have been the effects of this institution upon the agriculture of the country, I shall endeavour to explain hereafter, when I come to treat particularly of bounties. I shall only observe at present, that this rise in the value of silver, in proportion to that of corn, has not been peculiar to England. It has been observed to have taken place in France during the same period, and nearly in the same proportion, too, by three very faithful, diligent, and laborious collectors of the prices of corn, Mr Dupré de St Maur, Mr Messance, and the author of the Essay on the Police of Grain. But in France, till 1764, the exportation of grain was by law prohibited; and it is somewhat difficult to suppose, that nearly the same diminution of price which took place in one country, notwithstanding this prohibition, should, in another, be owing to the extraordinary encouragement given to exportation. It would be more proper, perhaps, to consider this variation in the average money price of corn as the effect rather of some gradual rise in the real value of silver in the European market, than of any fall in the real average value of corn. Corn, it has already been observed, is, at distant periods of time, a more accurate measure of value than either silver or, perhaps, any other commodity. When, after the discovery of the abundant mines of America, corn rose to three and four times its former money price, this change was universally ascribed, not to any rise in the real value of corn, but to a fall in the real value of silver. If, during the sixty-four first years of the present century, therefore, the average money price of corn has fallen somewhat below what it had been during the greater part of the last century, we should, in the same manner, impute this change, not to any fall in the real value of corn, but to some rise in the real value of silver in the European market. The high price of corn during these ten or twelve years past, indeed, has occasioned a suspicion that the real value of silver still continues to fall in the European market. This high price of corn, however, seems evidently to have been the effect of the extraordinary unfavourableness of the seasons, and ought, therefore, to be regarded, not as a permanent, but as a transitory and occasional event. The seasons, for these ten or twelve years past, have been unfavourable through the greater part of Europe; and the disorders of Poland have very much increased the scarcity in all those countries, which, in dear years, used to be supplied from that market. So long a course of bad seasons, though not a very common event, is by no means a singular one; and whoever has inquired much into the history of the prices of corn in former times, will be at no loss to recollect several other examples of the same kind. Ten years of extraordinary scarcity, besides, are not more wonderful than ten years of extraordinary plenty. The low price of corn, from 1741 to 1750, both inclusive, may very well be set in opposition to its high price during these last eight or ten years. From 1741 to 1750, the average price of the quarter of nine bushels of the best wheat, at Windsor market, it appears from the accounts of Eton College, was only L.1 : 13 : 9-4/5, which is nearly 6s. 3d. below the average price of the sixty-four first years of the present century. The average price of the quarter of eight bushels of middle wheat comes out, according to this account, to have been, during these ten years, only L.1 : 6 : 8. Between 1741 and 1750, however, the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. During these ten years, the quantity of all sorts of grain exported, it appears from the custom-house books, amounted to no less than 8,029,156 quarters, one bushel. The bounty paid for this amounted to L.1,514,962 : 17 : 4-1/2. In 1749, accordingly, Mr Pelham, at that time prime minister, observed to the house of commons, that, for the three years preceding, a very extraordinary sum had been paid as bounty for the exportation of corn. He had good reason to make this observation, and in the following year he might have had still better. In that single year, the bounty paid amounted to no less than L.324,176 : 10 : 6.[18] It is unnecessary to observe how much this forced exportation must have raised the price of corn above what it otherwise would have been in the home market. At the end of the accounts annexed to this chapter the reader will find the particular account of those ten years separated from the rest. He will find there, too, the particular account of the preceding ten years, of which the average is likewise below, though not so much below, the general average of the sixty-four first years of the century. The year 1740, however, was a year of extraordinary scarcity. These twenty years preceding 1750 may very well be set in opposition to the twenty preceding 1770. As the former were a good deal below the general average of the century, notwithstanding the intervention of one or two dear years; so the latter have been a good deal above it, notwithstanding the intervention of one or two cheap ones, of 1759, for example. If the former have not been as much below the general average as the latter have been above it, we ought probably to impute it to the bounty. The change has evidently been too sudden to be ascribed to any change in the value of silver, which is always slow and gradual. The suddenness of the effect can be accounted for only by a cause which can operate suddenly, the accidental variations of the seasons. The money price of labour in Great Britain has, indeed, risen during the course of the present century. This, however, seems to be the effect, not so much of any diminution in the value of silver in the European market, as of an increase in the demand for labour in Great Britain, arising from the great, and almost universal prosperity of the country. In France, a country not altogether so prosperous, the money price of labour has, since the middle of the last century, been observed to sink gradually with the average money price of corn. Both in the last century and in the present, the day wages of common labour are there said to have been pretty uniformly about the twentieth part of the average price of the septier of wheat; a measure which contains a little more than four Winchester bushels. In Great Britain, the real recompence of labour, it has already been shewn, the real quantities of the necessaries and conveniencies of life which are given to the labourer, has increased considerably during the course of the present century. The rise in its money price seems to have been the effect, not of any diminution of the value of silver in the general market of Europe, but of a rise in the real price of labour, in the particular market of Great Britain, owing to the peculiarly happy circumstances of the country. For some time after the first discovery of America, silver would continue to sell at its former, or not much below its former price. The profits of mining would for some time be very great, and much above their natural rate. Those who imported that metal into Europe, however, would soon find that the whole annual importation could not be disposed of at this high price. Silver would gradually exchange for a smaller and a smaller quantity of goods. Its price would sink gradually lower and lower, till it fell to its natural price; or to what was just sufficient to pay, according to their natural rates, the wages of the labour, the profits of the stock, and the rent of the land, which must be paid in order to bring it from the mine to the market. In the greater part of the silver mines of Peru, the tax of the king of Spain, amounting to a tenth of the gross produce, eats up, it has already been observed, the whole rent of the land. This tax was originally a half; it soon afterwards fell to a third, then to a fifth, and at last to a tenth, at which rate it still continues. In the greater part of the silver mines of Peru, this, it seems, is all that remains, after replacing the stock of the undertaker of the work, together with its ordinary profits; and it seems to be universally acknowledged that these profits, which were once very high, are now as low as they can well be, consistently with carrying on the works. The tax of the king of Spain was reduced to a fifth of the registered silver in 1504[19], one-and-forty years before 1545, the date of the the discovery of the mines of Potosi. In the course of ninety years, or before 1636, these mines, the most fertile in all America, had time sufficient to produce their full effect, or to reduce the value of silver in the European market as low as it could well fall, while it continued to pay this tax to the king of Spain. Ninety years is time sufficient to reduce any commodity, of which there is no monopoly, to its natural price, or to the lowest price at which, while it pays a particular tax, it can continue to be sold for any considerable time together. The price of silver in the European market might, perhaps, have fallen still lower, and it might have become necessary either to reduce the tax upon it, not only to one-tenth, as in 1736, but to one twentieth, in the same manner as that upon gold, or to give up working the greater part of the American mines which are now wrought. The gradual increase of the demand for silver, or the gradual enlargement of the market for the produce of the silver mines of America, is probably the cause which has prevented this from happening, and which has not only kept up the value of silver in the European market, but has perhaps even raised it somewhat higher than it was about the middle of the last century. Since the first discovery of America, the market for the produce of its silver mines has been growing gradually more and more extensive. First, the market of Europe has become gradually more and more extensive. Since the discovery of America, the greater part of Europe has been much improved. England, Holland, France, and Germany; even Sweden, Denmark, and Russia, have all advanced considerably, both in agriculture and in manufactures. Italy seems not to have gone backwards. The fall of Italy preceded the conquest of Peru. Since that time it seems rather to have recovered a little. Spain and Portugal, indeed, are supposed to have gone backwards. Portugal, however, is but a very small part of Europe, and the declension of Spain is not, perhaps, so great as is commonly imagined. In the beginning of the sixteenth century, Spain was a very poor country, even in comparison with France, which has been so much improved since that time. It was the well known remark of the emperor Charles V. who had travelled so frequently through both countries, that every thing abounded in France, but that every thing was wanting in Spain. The increasing produce of the agriculture and manufactures of Europe must necessarily have required a gradual increase in the quantity of silver coin to circulate it; and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver. Secondly, America is itself a new market, for the produce of its own silver mines; and as its advances in agriculture, industry, and population, are much more rapid than those of the most thriving countries in Europe, its demand must increase much more rapidly. The English colonies are altogether a new market, which, partly for coin, and partly for plate, requires a continual augmenting supply of silver through a great continent where there never was any demand before. The greater part, too, of the Spanish and Portuguese colonies, are altogether new markets. New Granada, the Yucatan, Paraguay, and the Brazils, were, before discovered by the Europeans, inhabited by savage nations, who had neither arts nor agriculture. A considerable degree of both has now been introduced into all of them. Even Mexico and Peru, though they cannot be considered as altogether new markets, are certainly much more extensive ones than they ever were before. After all the wonderful tales which have been published concerning the splendid state of those countries in ancient times, whoever reads, with any degree of sober judgment, the history of their first discovery and conquest, will evidently discern that, in arts, agriculture, and commerce, their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. Even the Peruvians, the more civilized nation of the two, though they made use of gold and silver as ornaments, had no coined money of any kind. Their whole commerce was carried on by barter, and there was accordingly scarce any division of labour among them. Those who cultivated the ground, were obliged to build their own houses, to make their own household furniture, their own clothes, shoes, and instruments of agriculture. The few artificers among them are said to have been all maintained by the sovereign, the nobles, and the priests, and were probably their servants or slaves. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. The Spanish armies, though they scarce ever exceeded five hundred men, and frequently did not amount to half that number, found almost everywhere great difficulty in procuring subsistence. The famines which they are said to have occasioned almost wherever they went, in countries, too, which at the same time are represented as very populous and well cultivated, sufficiently demonstrate that the story of this populousness and high cultivation is in a great measure fabulous. The Spanish colonies are under a government in many respects less favourable to agriculture, improvement, and population, than that of the English colonies. They seem, however, to be advancing in all those much more rapidly than any country in Europe. In a fertile soil and happy climate, the great abundance and cheapness of land, a circumstance common to all new colonies, is, it seems, so great an advantage, as to compensate many defects in civil government. Frezier, who visited Peru in 1713, represents Lima as containing between twenty-five and twenty-eight thousand inhabitants. Ulloa, who resided in the same country between 1740 and 1746, represents it as containing more than fifty thousand. The difference in their accounts of the populousness of several other principal towns of Chili and Peru is nearly the same; and as there seems to be no reason to doubt of the good information of either, it marks an increase which is scarce inferior to that of the English colonies. America, therefore, is a new market for the produce of its own silver mines, of which the demand must increase much more rapidly than that of the most thriving country in Europe. Thirdly, the East Indies is another market for the produce of the silver mines of America, and a market which, from the time of the first discovery of those mines, has been continually taking off a greater and a greater quantity of silver. Since that time, the direct trade between America and the East Indies, which is carried on by means of the Acapulco ships, has been continually augmenting, and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. During the sixteenth century, the Portuguese were the only European nation who carried on any regular trade to the East Indies. In the last years of that century, the Dutch began to encroach upon this monopoly, and in a few years expelled them from their principal settlements in India. During the greater part of the last century, those two nations divided the most considerable part of the East India trade between them; the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. The English and French carried on some trade with India in the last century, but it has been greatly augmented in the course of the present. The East India trade of the Swedes and Danes began in the course of the present century. Even the Muscovites now trade regularly with China, by a sort of caravans which go over land through Siberia and Tartary to Pekin. The East India trade of all these nations, if we except that of the French, which the last war had well nigh annihilated, has been almost continually augmenting. The increasing consumptions of East India goods in Europe is, it seems, so great, as to afford a gradual increase of employment to them all. Tea, for example, was a drug very little used in Europe, before the middle of the last century. At present, the value of the tea annually imported by the English East India company, for the use of their own countrymen, amounts to more than a million and a half a year; and even this is not enough; a great deal more being constantly smuggled into the country from the ports of Holland, from Gottenburgh in Sweden, and from the coast of France, too, as long as the French East India company was in prosperity. The consumption of the porcelain of China, of the spiceries of the Moluccas, of the piece goods of Bengal, and of innumerable other articles, has increased very nearly in a like proportion. The tonnage, accordingly, of all the European shipping employed in the East India trade, at any one time during the last century, was not, perhaps, much greater than that of the English East India company before the late reduction of their shipping. But in the East Indies, particularly in China and Indostan, the value of the precious metals, when the Europeans first began to trade to those countries, was much higher than in Europe; and it still continues to be so. In rice countries, which generally yield two, sometimes three crops in the year, each of them more plentiful than any common crop of corn, the abundance of food must be much greater than in any corn country of equal extent. Such countries are accordingly much more populous. In them, too, the rich, having a greater superabundance of food to dispose of beyond what they themselves can consume, have the means of purchasing a much greater quantity of the labour of other people. The retinue of a grandee in China or Indostan accordingly is, by all accounts, much more numerous and splendid than that of the richest subjects in Europe. The same superabundance of food, of which they have the disposal, enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities; such as the precious metals and the precious stones, the great objects of the competition of the rich. Though the mines, therefore, which supplied the Indian market, had been as abundant as those which supplied the European, such commodities would naturally exchange for a greater quantity of food in India than in Europe. But the mines which supplied the Indian market with the precious metals seem to have been a good deal less abundant, and those which supplied it with the precious stones a good deal more so, than the mines which supplied the European. The precious metals, therefore, would naturally exchange in India for a somewhat greater quantity of the precious stones, and for a much greater quantity of food than in Europe. The money price of diamonds, the greatest of all superfluities, would be somewhat lower, and that of food, the first of all necessaries, a great deal lower in the one country than in the other. But the real price of labour, the real quantity of the necessaries of life which is given to the labourer, it has already been observed, is lower both in China and Indostan, the two great markets of India, than it is through the greater part of Europe. The wages of the labourer will there purchase a smaller quantity of food: and as the money price of food is much lower in India than in Europe, the money price of labour is there lower upon a double account; upon account both of the small quantity of food which it will purchase, and of the low price of that food. But in countries of equal art and industry, the money price of the greater part of manufactures will be in proportion to the money price of labour; and in manufacturing art and industry, China and Indostan, though inferior, seem not to be much inferior to any part of Europe. The money price of the the greater part of manufactures, therefore, will naturally be much lower in those great empires than it is anywhere in Europe. Through the greater part of Europe, too, the expense of land-carriage increases very much both the and real and nominal price of most manufactures. It costs more labour, and therefore more money, to bring first the materials, and afterwards the complete manufacture to market. In China and Indostan, the extent and variety of inland navigations save the greater part of this labour, and consequently of this money, and thereby reduce still lower both the real and the nominal price of the greater part of their manufactures. Upon all these accounts, the precious metals are a commodity which it always has been, and still continues to be, extremely advantageous to carry from Europe to India. There is scarce any commodity which brings a better price there; or which, in proportion to the quantity of labour and commodities which it costs in Europe, will purchase or command a greater quantity of labour and commodities in India. It is more advantageous, too, to carry silver thither than gold; because in China, and the greater part of the other markets of India, the proportion between fine silver and fine gold is but as ten, or at most as twelve to one; whereas in Europe it is as fourteen or fifteen to one. In China, and the greater part of the other markets of India, ten, or at most twelve ounces of silver, will purchase an ounce of gold; in Europe, it requires from fourteen to fifteen ounces. In the cargoes, therefore, of the greater part of European ships which sail to India, silver has generally been one of the most valuable articles. It is the most valuable article in the Acapulco ships which sail to Manilla. The silver of the new continent seems, in this manner, to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on; and it is by means of it, in a great measure, that those distant parts of the world are connected with one another. In order to supply so very widely extended a market, the quantity of silver annually brought from the mines must not only be sufficient to support that continued increase, both of coin and of plate, which is required in all thriving countries; but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used. The continual consumption of the precious metals in coin by wearing, and in plate both by wearing and cleaning, is very sensible; and in commodities of which the use is so very widely extended, would alone require a very great annual supply. The consumption of those metals in some particular manufactures, though it may not perhaps be greater upon the whole than this gradual consumption, is, however, much more sensible, as it is much more rapid. In the manufactures of Birmingham alone, the quantity of gold and silver annually employed in gilding and plating, and thereby disqualified from ever afterwards appearing in the shape of those metals, is said to amount to more than fifty thousand pounds sterling. We may from thence form some notion how great must be the annual consumption in all the different parts of the world, either in manufactures of the same kind with those of Birmingham, or in laces, embroideries, gold and silver stuffs, the gilding of books, furniture, &c. A considerable quantity, too, must be annually lost in transporting those metals from one place to another both by sea and by land. In the greater part of the governments of Asia, besides, the almost universal custom of concealing treasures in the bowels of the earth, of which the knowledge frequently dies with the person who makes the concealment, must occasion the loss of a still greater quantity. The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register, but what may be supposed to be smuggled) amounts, according to the best accounts, to about six millions sterling a-year. According to Mr Meggens[20], the annual importation of the precious metals into Spain, at an average of six years, viz. from 1748 to 1753, both inclusive, and into Portugal, at an average of seven years, viz. from 1747 to 1753, both inclusive, amounted in silver to 1,101,107 pounds weight, and in gold to 49,940 pounds weight. The silver, at sixty-two shillings the pound troy, amounts to L.3,413,431 : 10s. sterling. The gold, at forty-four guineas and a half the pound troy, amounts to L.2,333,446 : 14s. sterling. Both together amount to L.5,746,878 : 4s. sterling. The account of what was imported under register, he assures us, is exact. He gives us the detail of the particular places from which the gold and silver were brought, and of the particular quantity of each metal, which, according to the register, each of them afforded. He makes an allowance, too, for the quantity of each metal which, he supposes, may have been smuggled. The great experience of this judicious merchant renders his opinion of considerable weight. According to the eloquent, and sometimes well-informed, author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies, the annual importation of registered gold and silver into Spain, at an average of eleven years, viz. from 1754 to 1764, both inclusive, amounted to 13,984,185-3/5 piastres of ten reals. On account of what may have been smuggled, however, the whole annual importation, he supposes, may have amounted to seventeen millions of piastres, which, at 4s. 6d. the piastre, is equal to L.3,825,000 sterling. He gives the detail, too, of the particular places from which the gold and silver were brought, and of the particular quantities of each metal, which according to the register, each of them afforded. He informs us, too, that if we were to judge of the quantity of gold annually imported from the Brazils to Lisbon, by the amount of the tax paid to the king of Portugal, which it seems, is one-fifth of the standard metal, we might value it at eighteen millions of cruzadoes, or forty-five millions of French livres, equal to about twenty millions sterling. On account of what may have been smuggled, however, we may safely, he says, add to this sum an eighth more, or L.250,000 sterling, so that the whole will amount to L.2,250,000 sterling. According to this account, therefore, the whole annual importation of the precious metals into both Spain and Portugal, amounts to about L.6,075,000 sterling. Several other very well authenticated, though manuscript accounts, I have been assured, agree in making this whole annual importation amount, at an average, to about six millions sterling; sometimes a little more, sometimes a little less. The annual importation of the precious metals into Cadiz and Lisbon, indeed, is not equal to the whole annual produce of the mines of America. Some part is sent annually by the Acapulco ships to Manilla; some part is employed in a contraband trade, which the Spanish colonies carry on with those of other European nations; and some part, no doubt, remains in the country. The mines of America, besides, are by no means the only gold and silver mines in the world. They, are, however, by far the most abundant. The produce of all the other mines which are known is insignificant, it is acknowledged, in comparison with their's; and the far greater part of their produce, it is likewise acknowledged, is annually imported into Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of fifty thousand pounds a-year, is equal to the hundred-and-twentieth part of this annual importation, at the rate of six millions a-year. The whole annual consumption of gold and silver, therefore, in all the different countries of the world where those metals are used, may, perhaps, be nearly equal to the whole annual produce. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. It may even have fallen so far short of this demand, as somewhat to raise the price of those metals in the European market. The quantity of brass and iron annually brought from the mine to the market, is out of all proportion greater than that of gold and silver. We do not, however, upon this account, imagine that those coarse metals are likely to multiply beyond the demand, or to become gradually cheaper and cheaper. Why should we imagine that the precious metals are likely to do so? The course metals, indeed, though harder, are put to much harder uses, and, as they are of less value, less care is employed in their preservation. The precious metals, however, are not necessarily immortal any more than they, but are liable, too, to be lost, wasted, and consumed, in a great variety of ways. The price of all metals, though liable to slow and gradual variations, varies less from year to year than that of almost any other part of the rude produce of land: and the price of the precious metals is even less liable to sudden variations than that of the coarse ones. The durableness of metals is the foundation of this extraordinary steadiness of price. The corn which was brought to market last year will be all, or almost all, consumed, long before the end of this year. But some part of the iron which was brought from the mine two or three hundred years ago, may be still in use, and, perhaps, some part of the gold which was brought from it two or three thousand years ago. The different masses of corn, which, in different years, must supply the consumption of the world, will always be nearly in proportion to the respective produce of those different years. But the proportion between the different masses of iron which may be in use in two different years, will be very little affected by any accidental difference in the produce of the iron mines of those two years; and the proportion between the masses of gold will be still less affected by any such difference in the produce of the gold mines. Though the produce of the greater part of metallic mines, therefore, varies, perhaps, still more from year to year than that of the greater part of corn fields, these variations have not the same effect upon the price of the species of commodities as upon that of the other. _Variations in the Proportion between the respective Values of Gold and Silver._ Before the discovery of the mines of America, the value of fine gold to fine silver was regulated in the different mines of Europe, between the proportions of one to ten and one to twelve; that is, an ounce of fine gold was supposed to be worth from ten to twelve ounces of fine silver. About the middle of the last century, it came to be regulated, between the proportions of one to fourteen and one to fifteen; that is, an ounce of fine gold came to be supposed worth between fourteen and fifteen ounces of fine silver. Gold rose in its nominal value, or in the quantity of silver which was given for it. Both metals sunk in their real value, or in the quantity of labour which they could purchase; but silver sunk more than gold. Though both the gold and silver mines of America exceeded in fertility all those which had ever been known before, the fertility of the silver mines had, it seems, been proportionally still greater than that of the gold ones. The great quantities of silver carried annually from Europe to India, have, in some of of the English settlements, gradually reduced the value of that metal in proportion to gold. In the mint of Calcutta, an ounce of fine gold is supposed to be worth fifteen ounces of fine silver, in the same manner as in Europe. It is in the mint, perhaps, rated too high for the value which it bears in the market of Bengal. In China, the proportion of gold to silver still continues as one to ten, or one to twelve. In Japan, it is said to be as one to eight. The proportion between the quantities of gold and silver annually imported into Europe, according to Mr Meggens' account, is as one to twenty-two nearly; that is, for one ounce of gold there are imported a little more than twenty-two ounces of silver. The great quantity of silver sent annually to the East Indies reduces, he supposes, the quantities of those metals which remain in Europe to the proportion of one to fourteen or fifteen, the proportion of their values. The proportion between their values, he seems to think, must necessarily be the same as that between their quantities, and would therefore be as one to twenty-two, were it not for this greater exportation of silver. But the ordinary proportion between the respective values of two commodities is not necessarily the same as that between the quantities of them which are commonly in the market. The price of an ox, reckoned at ten guineas, is about three score times the price of a lamb, reckoned at 3s. 6d. It would be absurd, however, to infer from thence, that there are commonly in the market three score lambs for one ox; and it would be just as absurd to infer, because an ounce of gold will commonly purchase from fourteen or fifteen ounces of silver, that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold. The quantity of silver commonly in the market, it is probable, is much greater in proportion to that of gold, than the value of a certain quantity of gold is to that of an equal quantity of silver. The whole quantity of a cheap commodity brought to market is commonly not only greater, but of greater value, than the whole quantity of a dear one. The whole quantity of bread annually brought to market, is not only greater, but of greater value, than the whole quantity of butcher's meat; the whole quantity of butcher's meat, than the whole quantity of poultry; and the whole quantity of poultry, than the whole quantity of wild fowl. There are so many more purchasers for the cheap than for the dear commodity, that, not only a greater quantity of it, but a greater value can commonly be disposed of. The whole quantity, therefore, of the cheap commodity, must commonly be greater in proportion to the whole quantity of the dear one, than the value of a certain quantity of the dear one, is to the value of an equal quantity of the cheap one. When we compare the precious metals with one another, silver is a cheap, and gold a dear commodity. We ought naturally to expect, therefore, that there should always be in the market, not only a greater quantity, but a greater value of silver than of gold. Let any man, who has a little of both, compare his own silver with his gold plate, and he will probably find, that not only the quantity, but the value of the former, greatly exceeds that of the latter. Many people, besides, have a good deal of silver who have no gold plate, which, even with those who have it, is generally confined to watch-cases, snuff-boxes, and such like trinkets, of which the whole amount is seldom of great value. In the British coin, indeed, the value of the gold preponderates greatly, but it is not so in that of all countries. In the coin of some countries, the value of the two metals is nearly equal. In the Scotch coin, before the union with England, the gold preponderated very little, though it did somewhat[21], as it appears by the accounts of the mint. In the coin of many countries the silver preponderates. In France, the largest sums are commonly paid in that metal, and it in there difficult to get more gold than what is necessary to carry about in your pocket. The superior value, however, of the silver plate above that of the gold, which takes place in all countries, will much more than compensate the preponderancy of the gold coin above the silver, which takes place only in some countries. Though, in one sense of the word, silver always has been, and probably always will be, much cheaper than gold; yet, in another sense, gold may perhaps, in the present state of the Spanish market, be said to be somewhat cheaper than silver. A commodity may be said to be dear or cheap not only according to the absolute greatness or smallness of its usual price, but according as that price is more or less above the lowest for which it is possible to bring it to market for any considerable time together. This lowest price is that which barely replaces, with a moderate profit, the stock which must be employed in bringing of the commodity thither. It is the price which affords nothing to the landlord, of which rent makes not any component part, but which resolves itself altogether into wages and profit. But, in the present state of the Spanish market, gold is certainly somewhat nearer to this lowest price than silver. The tax of the king of Spain upon gold is only one-twentieth part of the standard metal, or five per cent.; whereas his tax upon silver amounts to one-tenth part of it, or to ten per cent. In these taxes, too, it has already been observed, consists the whole rent of the greater part of the gold and silver mines of Spanish America; and that upon gold is still worse paid than that upon silver. The profits of the undertakers of gold mines, too, as they more rarely make a fortune, must, in general, be still more moderate than those of the undertakers of silver mines. The price of Spanish gold, therefore, as it affords both less rent and less profit, must, in the Spanish market, be somewhat nearer to the lowest price for which it is possible to bring it thither, than the price of Spanish silver. When all expenses are computed, the whole quantity of the one metal, it would seem, cannot, in the Spanish market, be disposed of so advantageously as the whole quantity of the other. The tax, indeed, of the king of Portugal upon the gold of the Brazils, is the same with the ancient tax of the king of Spain upon the silver of Mexico and Peru; or one-fifth part of the standard metal. It may therefore be uncertain, whether, to the general market of Europe, the whole mass of American gold comes at a price nearer to the lowest for which it is possible to bring it thither, than the whole mass of American silver. The price of diamonds and other precious stones may, perhaps, be still nearer to the lowest price at which it is possible to bring them to market, than even the price of gold. Though it is not very probable that any part of a tax, which is not only imposed upon one of the most proper subjects of taxation, a mere luxury and superfluity, but which affords so very important a revenue as the tax upon silver, will ever be given up us long as it is possible to pay it; yet the same impossibility of paying it, which, in 1736, made it necessary to reduce it from one-fifth to one-tenth, may in time make it necessary to reduce it still further; in the same manner as it made it necessary to reduce the tax upon gold to one-twentieth. That the silver mines of Spanish America, like all other mines, become gradually more expensive in the working, on account of the greater depths at which it is necessary to carry on the works, and of the greater expense of drawing out the water, and of supplying them with fresh air at those depths, is acknowledged by every body who has inquired into the state of those mines. These causes, which are equivalent to a growing scarcity of silver (for a commodity may be said to grow scarcer when it becomes more difficult and expensive to collect a certain quantity of it), must, in time, produce one or other of the three following events: The increase of the expense must either, first, be compensated altogether by a proportionable increase in the price of the metal; or, secondly, it must be compensated altogether by a proportionable diminution of the tax upon silver; or thirdly, it must be compensated partly by the one and partly by the other of those two expedients. This third event is very possible. As gold rose in its price in proportion to silver, notwithstanding a great diminution of the tax upon gold, so silver might rise in its price in proportion to labour and commodities, notwithstanding an equal diminution of the tax upon silver. Such successive reductions of the tax, however, though they may not prevent altogether, must certainly retard, more or less, the rise of the value of silver in the European market. In consequence of such reductions, many mines may be wrought which could not be wrought before, because they could not afford to pay the old tax; and the quantity of silver annually brought to market, must always be somewhat greater, and, therefore, the value of any given quantity somewhat less, than it otherwise would have been. In consequence of the reduction in 1736, the value of silver in the European market, though it may not at this day be lower than before that reduction, is, probably, at least ten per cent. lower than it would have been, had the court of Spain continued to exact the old tax. That, notwithstanding this reduction, the value of silver has, during the course of the present century, begun to rise somewhat in the European market, the facts and arguments which have been alleged above, dispose me to believe, or more properly to suspect and conjecture; for the best opinion which I can form upon this subject, scarce, perhaps, deserves the name of belief. The rise, indeed, supposing there has been any, has hitherto been so very small, that after all that has been said, it may, perhaps, appear to many people uncertain, not only whether this event has actually taken place, but whether the contrary may not have taken place, or whether the value of silver may not still continue to fall in the European market. It must be observed, however, that whatever may be the supposed annual importation of gold and silver, there must be a certain period at which the annual consumption of those metals will be equal to that annual importation. Their consumption must increase as their mass increases, or rather in a much greater proportion. As their mass increases, their value diminishes. They are more used, and less cared for, and their consumption consequently increases in a greater proportion than their mass. After a certain period, therefore, the annual consumption of these metals must, in this manner, become equal to their annual importation, provided that importation is not continually increasing; which, in the present times, is not supposed to be the case. If, when the annual consumption has become equal to the annual importation, the annual importation should gradually diminish, the annual consumption may, for some time, exceed the annual importation. The mass of those metals may gradually and insensibly diminish, and their value gradually and insensibly rise, till the annual importation becoming again stationary, the annual consumption will gradually and insensibly accommodate itself to what that annual importation can maintain. _Grounds of the suspicion that the Value of Silver still continues to decrease._ The increase of the wealth of Europe, and the popular action, that as the quantity of the precious metals naturally increases with the increase of wealth, so their value diminishes as their quantity increases, may, perhaps, dispose many people to believe that their value still continues to fall in the European market; and the still gradually increasing price of many parts of the rude produce of land may confirm them still farther in this opinion. That that increase in the quantity of the precious metals, which arises in any country from the increase of wealth, has no tendency to diminish their value, I have endeavoured to shew already. Gold and silver naturally resort to a rich country, for the same reason that all sorts of luxuries and curiosities resort to it; not because they are cheaper there than in poorer countries, but because they are dearer, or because a better price is given for them. It is the superiority of price which attracts them; and as soon as that superiority ceases, they necessarily cease to go thither. If you except corn, and such other vegetables as are raised altogether by human industry, that all other sorts of rude produce, cattle, poultry, game of all kinds, the useful fossils and minerals of the earth, &c. naturally grow dearer, as the society advances in wealth and improvement, I have endeavoured to shew already. Though such commodities, therefore, come to exchange for a greater quantity of silver than before, it will not from thence follow that silver has become really cheaper, or will purchase less labour than before; but that such commodities have become really dearer, or will purchase more labour than before. It is not their nominal price only, but their real price, which rises in the progress of improvement. The rise of their nominal price is the effect, not of any degradation of the value of silver, but of the rise in their real price. _Different Effects of the Progress of Improvement upon three different sorts of rude Produce._ These different sorts of rude produce may be divided into three classes. The first comprehends those which it is scarce in the power of human industry to multiply at all. The second, those which it can multiply in proportion to the demand. The third, those in which the efficacy of industry is either limited or uncertain. In the progress of wealth and improvement, the rent price of the first may rise to any degree of extravagance, and seems not to be limited by any certain boundary. That of the second, though it may rise greatly, has, however, a certain boundary, beyond which it cannot well pass for any considerable time together. That of the third, though its natural tendency is to rise in the progress of improvement, yet in the same degree of improvement it may sometimes happen even to fall, some times to continue the same, and sometimes to rise more or less, according as different accidents render the efforts of human industry, in multiplying this sort of rude produce, more or less successful. _First Sort._--The first sort of rude produce, of which the price rises in the progress of improvement, is that which it is scarce in the power of human industry to multiply at all. It consists in those things which nature produces only in certain quantities, and which being of a very perishable nature, it is impossible to accumulate together the produce of many different seasons. Such are the greater part of rare and singular birds and fishes, many different sorts of game, almost all wild-fowl, all birds of passage in particular, as well as many other things. When wealth, and the luxury which accompanies it, increase, the demand for these is likely to increase with them, and no effort of human industry may be able to increase the supply much beyond what it was before this increase of the demand. The quantity of such commodities, therefore, remaining the same, or nearly the same, while the competition to purchase them is continually increasing, their price may rise to any degree of extravagance, and seems not to be limited by any certain boundary. If woodcocks should become so fashionable as to sell for twenty guineas a-piece, no effort of human industry could increase the number of those brought to market, much beyond what it is at present. The high price paid by the Romans, in the time of their greatest grandeur, for rare birds and fishes, may in this manner easily be accounted for. These prices were not the effects of the low value of silver in those times, but of the high value of such rarities and curiosities as human industry could not multiply at pleasure. The real value of silver was higher at Rome, for some time before, and after the fall of the republic, than it is through the greater part of Europe at present. Three sestertii equal to about sixpence sterling, was the price which the republic paid for the modius or peck of the tithe wheat of Sicily. This price, however, was probably below the average market price, the obligation to deliver their wheat at this rate being considered as a tax upon the Sicilian farmers. When the Romans, therefore, had occasion to order more corn than the tithe of wheat amounted to, they were bound by capitulation to pay for the surplus at the rate of four sestertii, or eightpence sterling the peck; and this had probably been reckoned the moderate and reasonable, that is, the ordinary or average contract price of those times; it is equal to about one-and-twenty shillings the quarter. Eight-and-twenty shillings the quarter was, before the late years of scarcity, the ordinary contract price of English wheat, which in quality is inferior to the Sicilian, and generally sells for a lower price in the European market. The value of silver, therefore, in those ancient times, must have been to its value in the present, as three to four inversely; that is, three ounces of silver would then have purchased the same quantity of labour and commodities which four ounces will do at present. When we read in Pliny, therefore, that Seius[22] bought a white nightingale, as a present for the empress Agrippina, at the price of six thousand sestertii, equal to about fifty pounds of our present money; and that Asinius Celer[23] purchased a surmullet at the price of eight thousand sestertii, equal to about sixty-six pounds thirteen shillings and fourpence of our present money; the extravagance of those prices, how much soever it may surprise us, is apt, notwithstanding, to appear to us about one third less than it really was. Their real price, the quantity of labour and subsistence which was given away for them, was about one-third more than their nominal price is apt to express to us in the present times. Seius gave for the nightingale the command of a quantity or labour and subsistence, equal to what L.66 : 13 : 4d. would purchase in the present times; and Asinius Celer gave for a surmullet the command of a quantity equal to what L.88 : 17 : 9d. would purchase. What occasioned the extravagance of those high prices was, not so much the abundance of silver, as the abundance of labour and subsistence, of which those Romans had the disposal, beyond what was necessary for their own use. The quantity of silver, of which they had the disposal, was a good deal less than what the command of the same quantity of labour and subsistence would have procured to them in the present times. _Second sort._--The second sort of rude produce, of which the price rises in the progress of improvement, is that which human industry can multiply in proportion to the demand. It consists in those useful plants and animals, which, in uncultivated countries, nature produces with such profuse abundance, that they are of little or no value, and which, as cultivation advances, are therefore forced to give place to some more profitable produce. During a long period in the progress of improvement, the quantity of these is continually diminishing, while, at the same time, the demand for them is continually increasing. Their real value, therefore, the real quantity of labour which they will purchase or command, gradually rises, till at last it gets so high as to render them as profitable a produce as any thing else which human industry can raise upon the most fertile and best cultivated land. When it has got so high, it cannot well go higher. If it did, more land and more industry would soon be employed to increase their quantity. When the price of cattle, for example, rises so high, that it is as profitable to cultivate land in order to raise food for them as in order to raise food for man, it cannot well go higher. If it did, more corn land would soon be turned into pasture. The extension of tillage, by diminishing the quantity of wild pasture, diminishes the quantity of butcher's meat, which the country naturally produces without labour or cultivation; and, by increasing the number of those who have either corn, or, what comes to the same thing, the price of corn, to give in exchange for it, increases the demand. The price of butcher's meat, therefore, and, consequently, of cattle, must gradually rise, till it gets so high, that it becomes as profitable to employ the most fertile and best cultivated lands in raising food for them as in raising corn. But it must always be late in the progress of improvement before tillage can be so far extended as to raise the price of cattle to this height; and, till it has got to this height, if the country is advancing at all, their price must be continually rising. There are, perhaps, some parts of Europe in which the price of cattle has not yet got to this height. It had not got to this height in any part of Scotland before the Union. Had the Scotch cattle been always confined to the market of Scotland, in a country in which the quantity of land, which can be applied to no other purpose but the feeding of cattle, is so great in proportion to what can be applied to other purposes, it is scarce possible, perhaps, that their price could ever have risen so high as to render it profitable to cultivate land for the sake of feeding them. In England, the price of cattle, it has already been observed, seems, in the neighbourhood of London, to have got to this height about the beginning of the last century; but it was much later, probably, before it got through the greater part of the remoter counties, in some of which, perhaps, it may scarce yet have got to it. Of all the different substances, however, which compose this second sort of rude produce, cattle is, perhaps, that of which the price, in the progress of improvement, rises first to this height. Till the price of cattle, indeed, has got to this height, it seems scarce possible that the greater part, even of those lands which are capable of the highest cultivation, can be completely cultivated. In all farms too distant from any town to carry manure from it, that is, in the far greater part of those of every extensive country, the quantity of well cultivated land must be in proportion to the quantity of manure which the farm itself produces; and this, again, must be in proportion to the stock of cattle which are maintained upon it. The land is manured, either by pasturing the cattle upon it, or by feeding them in the stable, and from thence carrying out their dung to it. But unless the price of the cattle be sufficient to pay both the rent and profit of cultivated land, the farmer cannot afford to pasture them upon it; and he can still less afford to feed them in the stable. It is with the produce of improved and cultivated land only that cattle can be fed in the stable; because, to collect the scanty and scattered produce of waste and unimproved lands, would require too much labour, and be too expensive. If the price of the cattle, therefore, is not sufficient to pay for the produce of improved and cultivated land, when they are allowed to pasture it, that price will be still less sufficient to pay for that produce, when it must be collected with a good deal of additional labour, and brought into the stable to them. In these circumstances, therefore, no more cattle can with profit be fed in the stable than what are necessary for tillage. But these can never afford manure enough for keeping constantly in good condition all the lands which they are capable of cultivating. What they afford, being insufficient for the whole farm, will naturally be reserved for the lands to which it can be most advantageously or conveniently applied; the most fertile, or those, perhaps, in the neighbourhood of the farm-yard. These, therefore, will be kept constantly in good condition, and fit for tillage. The rest will, the greater part of them, be allowed to lie waste, producing scarce any thing but some miserable pasture, just sufficient to keep alive a few straggling, half-starved cattle; the farm, though much overstocked in proportion to what would be necessary for its complete cultivation, being very frequently overstocked in proportion to its actual produce. A portion of this waste land, however, after having been pastured in this wretched manner for six or seven years together, may be ploughed up, when it will yield, perhaps, a poor crop or two of bad oats, or of some other coarse grain; and then, being entirely exhausted, it must be rested and pastured again as before, and another portion ploughed up, to be in the same manner exhausted and rested again in its turn. Such, accordingly, was the general system of management all over the low country of Scotland before the Union. The lands which were kept constantly well manured and in good condition seldom exceeded a third or fourth part of the whole farm, and sometimes did not amount to a fifth or a sixth part of it. The rest were never manured, but a certain portion of them was in its turn, notwithstanding, regularly cultivated and exhausted. Under this system of management, it is evident, even that part of the lands of Scotland which is capable of good cultivation, could produce but little in comparison of what it may be capable of producing. But how disadvantageous soever this system may appear, yet, before the Union, the low price of cattle seems to have rendered it almost unavoidable. If, notwithstanding a great rise in the price, it still continues to prevail through a considerable part of the country, it is owing in many places, no doubt, to ignorance and attachment to old customs, but, in most places, to the unavoidable obstructions which the natural course of things opposes to the immediate or speedy establishment of a better system: first, to the poverty of the tenants, to their not having yet had time to acquire a stock of cattle sufficient to cultivate their lands more completely, the same rise of price, which would render it advantageous for them to maintain a greater stock, rendering it more difficult for them to acquire it; and, secondly, to their not having yet had time to put their lands in condition to maintain this greater stock properly, supposing they were capable of acquiring it. The increase of stock and the improvement of land are two events which must go hand in hand, and of which the one can nowhere much outrun the other. Without some increase of stock, there can be scarce any improvement of land, but there can be no considerable increase of stock, but in consequence of a considerable improvement of land; because otherwise the land could not maintain it. These natural obstructions to the establishment of a better system, cannot be removed but by a long course of frugality and industry; and half a century or a century more, perhaps, must pass away before the old system, which is wearing out gradually, can be completely abolished through all the different parts of the country. Of all the commercial advantages, however, which Scotland has derived from the Union with England, this rise in the price of cattle is, perhaps, the greatest. It has not only raised the value of all highland estates, but it has, perhaps, been the principal cause of the improvement of the low country. In all new colonies, the great quantity of waste land, which can for many years be applied to no other purpose but the feeding of cattle, soon renders them extremely abundant; and in every thing great cheapness is the necessary consequence of great abundance. Though all the cattle of the European colonies in America were originally carried from Europe, they soon multiplied so much there, and became of so little value, that even horses were allowed to run wild in the woods, without any owner thinking it worth while to claim them. It must be a long time after the first establishment of such colonies, before it can become profitable to feed cattle upon the produce of cultivated land. The same causes, therefore, the want of manure, and the disproportion between the stock employed in cultivation and the land which it is destined to cultivate, are likely to introduce there a system of husbandry, not unlike that which still continues to take place in so many parts of Scotland. Mr Kalm, the Swedish traveller, when he gives an account of the husbandry of some of the English colonies in North America, as he found it in 1749, observes, accordingly, that he can with difficulty discover there the character of the English nation, so well skilled in all the different branches of agriculture. They make scarce any manure for their corn fields, he says; but when one piece of ground has been exhausted by continual cropping, they clear and cultivate another piece of fresh land; and when that is exhausted, proceed to a third. Their cattle are allowed to wander through the woods and other uncultivated grounds, where they are half-starved; having long ago extirpated almost all the annual grasses, by cropping them too early in the spring, before they had time to form their flowers, or to shed their seeds.[24] The annual grasses were, it seems, the best natural grasses in that part of North America; and when the Europeans first settled there, they used to grow very thick, and to rise three or four feet high. A piece of ground which, when he wrote, could not maintain one cow, would in former times, he was assured, have maintained four, each of which would have given four times the quantity of milk which that one was capable of giving. The poorness of the pasture had, in his opinion, occasioned the degradation of their cattle, which degenerated sensibly from one generation to another. They were probably not unlike that stunted breed which was common all over Scotland thirty or forty years ago, and which is now so much mended through the greater part of the low country, not so much by a change of the breed, though that expedient has been employed in some places, as by a more plentiful method of feeding them. Though it is late, therefore, in the progress of improvement, before cattle can bring such a price as to render it profitable to cultivate land for the sake of feeding them; yet of all the different parts which compose this second sort of rude produce, they are perhaps the first which bring this price; because, till they bring it, it seems impossible that improvement can be brought near even to that degree of perfection to which it has arrived in many parts of Europe. As cattle are among the first, so perhaps venison is among the last parts of this sort of rude produce which bring this price. The price of venison in Great Britain, how extravagant soever it may appear, is not near sufficient to compensate the expense of a deer park, as is well known to all those who have had any experience in the feeding of deer. If it was otherwise, the feeding of deer would soon become an article of common farming, in the same manner as the feeding of those small birds, called turdi, was among the ancient Romans. Varro and Columella assure us, that it was a most profitable article. The fattening of ortolans, birds of passage which arrive lean in the country, is said to be so in some parts of France. If venison continues in fashion, and the wealth and luxury of Great Britain increase as they have done for some time past, its price may very probably rise still higher than it is at present. Between that period in the progress of improvement, which brings to its height the price of so necessary an article as cattle, and that which brings to it the price of such a superfluity as venison, there is a very long interval, in the course of which many other sorts of rude produce gradually arrive at their highest price, some sooner and some later, according to different circumstances. Thus, in every farm, the offals of the barn and stable will maintain a certain number of poultry. These, as they are fed with what would otherwise be lost, are a mere save-all; and as they cost the farmer scarce any thing, so he can afford to sell them for very little. Almost all that he gets is pure gain, and their price can scarce be so low as to discourage him from feeding this number. But in countries ill cultivated, and therefore but thinly inhabited, the poultry, which are thus raised without expense, are often fully sufficient to supply the whole demand. In this state of things, therefore, they are often as cheap as butcher's meat, or any other sort of animal food. But the whole quantity of poultry which the farm in this manner produces without expense, must always be much smaller than the whole quantity of butcher's meat which is reared upon it; and in times of wealth and luxury, what is rare, with only nearly equal merit, is always preferred to what is common. As wealth and luxury increase, therefore, in consequence of improvement and cultivation, the price of poultry gradually rises above that of butcher's meat, till at last it gets so high, that it becomes profitable to cultivate land for the sake of feeding them. When it has got to this height, it cannot well go higher. If it did, more land would soon be turned to this purpose. In several provinces of France, the feeding of poultry is considered as a very important article in rural economy, and sufficiently profitable to encourage the farmer to raise a considerable quantity of Indian corn and buckwheat for this purpose. A middling farmer will there sometimes have four hundred fowls in his yard. The feeding of poultry seems scarce yet to be generally considered as a matter of so much importance in England. They are certainly, however, dearer in England than in France, as England receives considerable supplies from France. In the progress of improvements, the period at which every particular sort of animal food in dearest, must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it. For some time before this practice becomes general, the scarcity must necessarily raise the price. After it has become general, new methods of feeding are commonly fallen upon, which enable the farmer to raise upon the same quantity of ground a much greater quantity of that particular sort of animal food. The plenty not only obliges him to sell cheaper, but, in consequence of these improvements, he can afford to sell cheaper; for if he could not afford it, the plenty would not be of long continuance. It has been probably in this manner that the introduction of clover, turnips, carrots, cabbages, &c. has contributed to sink the common price of butcher's meat in the London market, somewhat below what it was about the beginning of the last century. The hog, that finds his food among ordure, and greedily devours many things rejected by every other useful animal, is, like poultry, originally kept as a save-all. As long as the number of such animals, which can thus be reared at little or no expense, is fully sufficient to supply the demand, this sort of butcher's meat comes to market at a much lower price than any other. But when the demand rises beyond what this quantity can supply, when it becomes necessary to raise food on purpose for feeding and fattening hogs, in the same manner as for feeding and fattening other cattle, the price necessarily rises, and becomes proportionably either higher or lower than that of other butcher's meat, according as the nature of the country, and the state of its agriculture, happen to render the feeding of hogs more or less expensive than that of other cattle. In France, according to Mr Buffon, the price of pork is nearly equal to that of beef. In most parts of Great Britain it is at present somewhat higher. The great rise in the price both of hogs and poultry, has, in Great Britain, been frequently imputed to the diminution of the number of cottagers and other small occupiers of land; an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation, but which at the same time may have contributed to raise the price of those articles, both somewhat sooner and somewhat faster than it would otherwise have risen. As the poorest family can often maintain a cat or a dog without any expense, so the poorest occupiers of land can commonly maintain a few poultry, or a sow and a few pigs, at very little. The little offals of their own table, their whey, skimmed milk, and butter milk, supply those animals with a part of their food, and they find the rest in the neighbouring fields, without doing any sensible damage to any body. By diminishing the number of those small occupiers, therefore, the quantity of this sort of provisions, which is thus produced at little or no expense, must certainly have been a good deal diminished, and their price must consequently have been raised both sooner and faster than it would otherwise have risen. Sooner or later, however, in the progress of improvement, it must at any rate have risen to the utmost height to which it is capable of rising; or to the price which pays the labour and expense of cultivating the land which furnishes them with food, as well as these are paid upon the greater part of other cultivated land. The business of the dairy, like the feeding of hogs and poultry, is originally carried on as a save-all. The cattle necessarily kept upon the farm produce more milk than either the rearing of their own young, or the consumption of the farmer's family requires; and they produce most at one particular season. But of all the productions of land, milk is perhaps the most perishable. In the warm season, when it is most abundant, it will scarce keep four-and-twenty hours. The farmer, by making it into fresh butter, stores a small part of it for a week; by making it into salt butter, for a year; and by making it into cheese, he stores a much greater part of it for several years. Part of all these is reserved for the use of his own family, the rest goes to market, in order to find the best price which is to be had, and which can scarce be so low as to discourage him from sending thither whatever is over and above the use of his own family. If it is very low indeed, he will be likely to manage his dairy in a very slovenly and dirty manner, and will scarce, perhaps, think it worth while to have a particular room or building on purpose for it, but will suffer the business to be carried on amidst the smoke, filth, and nastiness of his own kitchen, as was the case of almost all the farmers' dairies in Scotland thirty or forty years ago, and as is the case of many of them still. The same causes which gradually raise the price of butcher's meat, the increase of the demand, and, in consequence of the improvement of the country, the diminution of the quantity which can be fed at little or no expense, raise, in the same manner, that of the produce of the dairy, of which the price naturally connects with that of butcher's meat, or with the expense of feeding cattle. The increase of price pays for more labour, care, and cleanliness. The dairy becomes more worthy of the farmer's attention, and the quality of its produce gradually improves. The price at last gets so high, that it become worth while to employ some of the most fertile and best cultivated lands in feeding cattle merely for the purpose of the dairy; and when it has got to this height, it cannot well go higher. If it did, more land would soon be turned to this purpose. It seems to have got to this height through the greater part of England, where much good land is commonly employed in this manner. If you except the neighbourhood of a few considerable towns, it seems not yet to have got to this height anywhere in Scotland, where common farmers seldom employ much good land in raising food for cattle, merely for the purpose of the dairy. The price of the produce, though it has risen very considerably within these few years, is probably still too low to admit of it. The inferiority of the quality, indeed, compared with that of the produce of English dairies, is fully equal to that of the price. But this inferiority of quality is, perhaps, rather the effect of this lowness of price, than the cause of it. Though the quality was much better, the greater part of what is brought to market could not, I apprehend, in the present circumstances of the country, be disposed of at a much better price; and the present price, it is probable, would not pay the expense of the land and labour necessary for producing a much better quality. Through the greater part of England, notwithstanding the superiority of price, the dairy is not reckoned a more profitable employment of land than the raising of corn, or the fattening of cattle, the two great objects of agriculture. Through the greater part of Scotland, therefore, it cannot yet be even so profitable. The lands of no country, it is evident, can ever be completely cultivated and improved, till once the price of every produce, which human industry in obliged to raise upon them, has got so high as to pay for the expense of complete improvement and cultivation. In order to do this, the price of each particular produce must be sufficient, first, to pay the rent of good corn land, as it is that which regulates the rent of the greater part of other cultivated land; and, secondly, to pay the labour and expense of the farmer, as well as they are commonly paid upon good corn land; or, in other words, to replace with the ordinary profits the stock which he employs about it. This rise in the price of each particular produce, must evidently be previous to the improvement and cultivation of the land which is destined for raising it. Gain is the end of all improvement; and nothing could deserve that name, of which loss was to be the necessary consequence. But loss must be the necessary consequence of improving land for the sake of a produce of which the price could never bring back the expense. If the complete improvement and cultivation of the country be, as it most certainly is, the greatest of all public advantages, this rise in the price of all those different sorts of rude produce, instead of being considered as a public calamity, ought to be regarded as the necessary forerunner and attendant of the greatest of all public advantages. This rise, too, in the nominal or money price of all these different sorts of rude produce, has been the effect, not of any degradation in the value of silver, but of a rise in their real price. They have become worth, not only a greater quantity of silver, but a greater quantity of labour and subsistence than before. As it costs a greater quantity of labour and subsistence to bring them to market, so, when they are brought thither they represent, or are equivalent to a greater quantity. _Third Sort._--The third and last sort of rude produce, of which the price naturally rises in the progress of improvement, is that in which the efficacy of human industry, in augmenting the quantity, is either limited or uncertain. Though the real price of this sort of rude produce, therefore, naturally tends to rise in the progress of improvement, yet, according as different accidents happen to render the efforts of human industry more or less successful in augmenting the quantity, it may happen sometimes even to fall, sometimes to continue the same, in very different periods of improvement, and sometimes to rise more or less in the same period. There are some sorts of rude produce which nature has rendered a kind of appendages to other sorts; so that the quantity of the one which any country can afford, is necessarily limited by that of the other. The quantity of wool or of raw hides, for example, which any country can afford, is necessarily limited by the number of great and small cattle that are kept in it. The state of its improvement, and the nature of its agriculture, again necessarily determine this number. The same causes which, in the progress of improvement, gradually raise the price of butcher's meat, should have the same effect, it may be thought, upon the prices of wool and raw hides, and raise them, too, nearly in the same proportion. It probably would be so, if, in the rude beginnings of improvement, the market for the latter commodities was confined within as narrow bounds as that for the former. But the extent of their respective markets is commonly extremely different. The market for butcher's meat is almost everywhere confined to the country which produces it. Ireland, and some part of British America, indeed, carry on a considerable trade in salt provisions; but they are, I believe, the only countries in the commercial world which do so, or which export to other countries any considerable part of their butcher's meat. The market for wool and raw hides, on the contrary, is, in the rude beginnings of improvement, very seldom confined to the country which produces them. They can easily be transported to distant countries; wool without any preparation, and raw hides with very little; and as they are the materials of many manufactures, the industry of other countries may occasion a demand for them, though that of the country which produces them might not occasion any. In countries ill cultivated, and therefore but thinly inhabited, the price of the wool and the hide bears always a much greater proportion to that of the whole beast, than in countries where, improvement and population being further advanced, there is more demand for butcher's meat. Mr Hume observes, that in the Saxon times, the fleece was estimated at two-fifths of the value of the whole sheep, and that this was much above the proportion of its present estimation. In some provinces of Spain, I have been assured, the sheep is frequently killed merely for the sake of the fleece and the tallow. The carcase is often left to rot upon the ground, or to be devoured by beasts and birds of prey. If this sometimes happens even in Spain, it happens almost constantly in Chili, at Buenos Ayres, and in many other parts of Spanish America, where the horned cattle are almost constantly killed merely for the sake of the hide and the tallow. This, too, used to happen almost constantly in Hispaniola, while it was infested by the buccaneers, and before the settlement, improvement, and populousness of the French plantations (which now extend round the coast of almost the whole western half of the island) had given some value to the cattle of the Spaniards, who still continue to possess, not only the eastern part of the coast, but the whole inland mountainous part of the country. Though, in the progress of improvement and population, the price of the whole beast necessarily rises, yet the price of the carcase is likely to be much more affected by this rise than that of the wool and the hide. The market for the carcase being in the rude state of society confined always to the country which produces it, must necessarily be extended in proportion to the improvement and population of that country. But the market for the wool and the hides, even of a barbarous country, often extending to the whole commercial world, it can very seldom be enlarged in the same proportion. The state of the whole commercial world can seldom be much affected by the improvement of any particular country; and the market for such commodities may remain the same, or very nearly the same, after such improvements, as before. It should, however, in the natural course of things, rather, upon the whole, be somewhat extended in consequence of them. If the manufactures, especially, of which those commodities are the materials, should ever come to flourish in the country, the market, though it might not be much enlarged, would at least be brought much nearer to the place of growth than before; and the price of those materials might at least be increased by what had usually been the expense of transporting them to distant countries. Though it might not rise, therefore, in the same proportion as that of butcher's meat, it ought naturally to rise somewhat, and it ought certainly not to fall. In England, however, notwithstanding the flourishing state of its woollen manufacture, the price of English wool has fallen very considerably since the time of Edward III. There are many authentic records which demonstrate that, during the reign of that prince (towards the middle of the fourteenth century, or about 1339), what was reckoned the moderate and reasonable price of the tod, or twenty-eight pounds of English wool, was not less than ten shillings of the money of those times[25], containing, at the rate of twenty-pence the ounce, six ounces of silver, Tower weight, equal to about thirty shillings of our present money. In the present times, one-and-twenty shillings the tod may be reckoned a good price for very good English wool. The money price of wool, therefore, in the time of Edward III. was to its money price in the present times as ten to seven. The superiority of its real price was still greater. At the rate of six shillings and eightpence the quarter, ten shillings was in those ancient times the price of twelve bushels of wheat. At the rate of twenty-eight shillings the quarter, one-and-twenty shillings is in the present times the price of six bushels only. The proportion between the real price of ancient and modern times, therefore, is as twelve to six, or as two to one. In those ancient times, a tod of wool would have purchased twice the quantity of subsistence which it will purchase at present, and consequently twice the quantity of labour, if the real recompence of labour had been the same in both periods. This degradation, both in the real and nominal value of wool, could never have happened in consequence of the natural course of things. It has accordingly been the effect of violence and artifice. First, of the absolute prohibition of exporting wool from England: secondly, of the permission of importing it from Spain, duty free: thirdly, of the prohibition of exporting it from Ireland to any other country but England. In consequence of these regulations, the market for English wool, instead of being somewhat extended, in consequence of the improvement of England, has been confined to the home market, where the wool of several other countries is allowed to come into competition with it, and where that of Ireland is forced into competition with it. As the woollen manufactures, too, of Ireland, are fully as much discouraged as is consistent with justice and fair dealing, the Irish can work up but a smaller part of their own wool at home, and are therefore obliged to send a greater proportion of it to Great Britain, the only market they are allowed. I have not been able to find any such authentic records concerning the price of raw hides in ancient times. Wool was commonly paid as a subsidy to the king, and its valuation in that subsidy ascertains, at least in some degree, what was its ordinary price. But this seems not to have been the case with raw hides. Fleetwood, however, from an account in 1425, between the prior of Burcester Oxford and one of his canons, gives us their price, at least as it was stated upon that particular ocassion, viz. five ox hides at twelve shillings; five cow hides at seven shillings and threepence; thirty-six sheep skins of two years old at nine shillings; sixteen calf skins at two shillings. In 1425, twelve shillings contained about the same quantity of silver as four-and-twenty shillings of our present money. An ox hide, therefore, was in this account valued at the same quantity of silver as 4s. 4/5ths of our present money. Its nominal price was a good deal lower than at present. But at the rate of six shillings and eightpence the quarter, twelve shillings would in those times have purchased fourteen bushels and four-fifths of a bushel of wheat, which, at three and sixpence the bushel, would in the present times cost 51s. 4d. An ox hide, therefore, would in those times have purchased as much corn as ten shillings and threepence would purchase at present. Its real value was equal to ten shillings and threepence of our present money. In those ancient times, when the cattle were half starved during the greater part of the winter, we cannot suppose that they were of a very large size. An ox hide which weighs four stone of sixteen pounds of avoirdupois, is not in the present times reckoned a bad one; and in those ancient times would probably have been reckoned a very good one. But at half-a-crown the stone, which at this moment (February 1773) I understand to be the common price, such a hide would at present cost only ten shillings.--Though its nominal price, therefore, is higher in the present than it was in those ancient times, its real price, the real quantity of subsistence which it will purchase or command, is rather somewhat lower. The price of cow hides, as stated in the above account, is nearly in the common proportion to that of ox hides. That of sheep skins is a good deal above it. They had probably been sold with the wool. That of calves skins, on the contrary, is greatly below it. In countries where the price of cattle is very low, the calves, which are not intended to be reared in order to keep up the stock, are generally killed very young, as was the case in Scotland twenty or thirty years ago. It saves the milk, which their price would not pay for. Their skins, therefore, are commonly good for little. The price of raw hides is a good deal lower at present than it was a few years ago; owing probably to the taking off the duty upon seal skins, and to the allowing, for a limited time, the importation of raw hides from Ireland, and from the plantations, duty free, which was done in 1769. Take the whole of the present century at an average, their real price has probably been somewhat higher than it was in those ancient times. The nature of the commodity renders it not quite so proper for being transported to distant markets as wool. It suffers more by keeping. A salted hide is reckoned inferior to a fresh one, and sells for a lower price. This circumstance must necessarily have some tendency to sink the price of raw hides produced in a country which does not manufacture them, but is obliged to export them, and comparatively to raise that of those produced in a country which does manufacture them. It must have some tendency to sink their price in a barbarous, and to raise it in an improved and manufacturing country. It must have had some tendency, therefore, to sink it in ancient, and to raise it in modern times. Our tanners, besides, have not been quite so successful as our clothiers, in convincing the wisdom of the nation, that the safety of the commonwealth depends upon the prosperity of their particular manufacture. They have accordingly been much less favoured. The exportation of raw hides has, indeed, been prohibited, and declared a nuisance; but their importation from foreign countries has been subjected to a duty; and though this duty has been taken off from those of Ireland and the plantations (for the limited time of five years only), yet Ireland has not been confined to the market of Great Britain for the sale of its surplus hides, or of these which are not manufactured at home. The hides of common cattle have, but within these few years, been put among the enumerated commodities which the plantations can send nowhere but to the mother country; neither has the commerce of Ireland been in this case oppressed hitherto, in order to support the manufactures of Great Britain. Whatever regulations tend to sink the price, either of wool or of raw hides, below what it naturally would be, must, in an improved and cultivated country, have some tendency to raise the price of butcher's meat. The price both of the great and small cattle, which are fed on improved and cultivated land, must be sufficient to pay the rent which the landlord, and the profit which the farmer, has reason to expect from improved and cultivated land. If it is not, they will soon cease to feed them. Whatever part of this price, therefore, is not paid by the wool and the hide, must be paid by the carcase. The less there is paid for the one, the more must be paid for the other. In what manner this price is to be divided upon the different parts of the beast, is indifferent to the landlords and farmers, provided it is all paid to them. In an improved and more cultivated country, therefore, their interest as landlords and farmers cannot be much affected by such regulations, though their interest as consumers may, by the rise in the price of provisions. It would be quite otherwise, however, in an unimproved and uncultivated country, where the greater part of the lands could be applied to no other purpose but the feeding of cattle, and where the wool and the hide made the principal part of the value of those cattle. Their interest as landlords and farmers would in this case be very deeply affected by such regulations, and their interest as consumers very little. The fall in the price of the wool and the hide would not in this case raise the price of the carcase; because the greater part of the lands of the country being applicable to no other purpose but the feeding of cattle, the same number would still continue to be fed. The same quantity of butcher's meat would still come to market. The demand for it would be no greater than before. Its price, therefore, would be the same as before. The whole price of cattle would fall, and along with it both the rent and the profit of all those lands of which cattle was the principal produce, that is, of the greater part of the lands of the country. The perpetual prohibition of the exportation of wool, which is commonly, but very falsely, ascribed to Edward III., would, in the then circumstances of the country, have been the most destructive regulation which could well have been thought of. It would not only have reduced the actual value of the greater part of the lands in the kingdom, but by reducing the price of the most important species of small cattle, it would have retarded very much its subsequent improvement. The wool of Scotland fell very considerably in its price in consequence of the union with England, by which it was excluded from the great market of Europe, and confined to the narrow one of Great Britain. The value of the greater part of the lands in the southern counties of Scotland, which are chiefly a sheep country, would have been very deeply affected by this event, had not the rise in the price of butcher's meat fully compensated the fall in the price of wool. As the efficacy of human industry, in increasing the quantity either of wool or of raw hides, is limited, so far as it depends upon the produce of the country where it is exerted; so it is uncertain so far as it depends upon the produce of other countries. It so far depends not so much upon the quantity which they produce, as upon that which they do not manufacture; and upon the restraints which they may or may not think proper to impose upon the exportation of this sort of rude produce. These circumstances, as they are altogether independent of domestic industry, so they necessarily render the efficiency of its efforts more or less uncertain. In multiplying this sort of rude produce, therefore, the efficacy of human industry is not only limited, but uncertain. In multiplying another very important sort of rude produce, the quantity of fish that is brought to market, it is likewise both limited and uncertain. It is limited by the local situation of the country, by the proximity or distance of its different provinces from the sea, by the number of its lakes and rivers, and by what may be called the fertility or barrenness of those seas, lakes, and rivers, as to this sort of rude produce. As population increases, as the annual produce of the land and labour of the country grows greater and greater, there come to be more buyers of fish; and those buyers, too, have a greater quantity and variety of other goods, or, what is the same thing, the price of a greater quantity and variety of other goods, to buy with. But it will generally be impossible to supply the great and extended market, without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one. A market which, from requiring only one thousand, comes to require annually ten thousand ton of fish, can seldom be supplied, without employing more than ten times the quantity of labour which had before been sufficient to supply it. The fish must generally be sought for at a greater distance, larger vessels must be employed, and more expensive machinery of every kind made use of. The real price of this commodity, therefore, naturally rises in the progress of improvement. It has accordingly done so, I believe, more or less in every country. Though the success of a particular day's fishing may be a very uncertain matter, yet the local situation of the country being supposed, the general efficacy of industry in bringing a certain quantity of fish to market, taking the course of a year, or of several years together, it may, perhaps, be thought is certain enough; and it, no doubt, is so. As it depends more, however, upon the local situation of the country, than upon the state of its wealth and industry; as upon this account it may in different countries be the same in very different periods of improvement, and very different in the same period; its connection with the state of improvement is uncertain; and it is of this sort of uncertainty that I am here speaking. In increasing the quantity of the different minerals and metals which are drawn from the bowels of the earth, that of the more precious ones particularly, the efficacy of human industry seems not to be limited, but to be altogether uncertain. The quantity of the precious metals which is to be found in any country, is not limited by any thing in its local situation, such as the fertility or barrenness of its own mines. Those metals frequently abound in countries which possess no mines. Their quantity, in every particular country, seems to depend upon two different circumstances; first, upon its power of purchasing, upon the state of its industry, upon the annual produce of its land and labour, in consequence of which it can afford to employ a greater or a smaller quantity of labour and subsistence, in bringing or purchasing such superfluities as gold and silver, either from its own mines, or from those of other countries; and, secondly, upon the fertility or barrenness of the mines which may happen at any particular time to supply the commercial world with those metals. The quantity of those metals in the countries most remote from the mines, must be more or less affected by this fertility or barrenness, on account of the easy and cheap transportation of those metals, of their small bulk and great value. Their quantity in China and Indostan must have been more or less affected by the abundance of the mines of America. So far as their quantity in any particular country depends upon the former of those two circumstances (the power of purchasing), their real price, like that of all other luxuries and superfluities, is likely to rise with the wealth and improvement of the country, and to fall with its poverty and depression. Countries which have a great quantity of labour and subsistence to spare, can afford to purchase any particular quantity of those metals at the expense of a greater quantity of labour and subsistence, than countries which have less to spare. So far as their quantity in any particular country depends upon the latter of those two circumstances (the fertility or barrenness of the mines which happen to supply the commercial world), their real price, the real quantity of labour and subsistence which they will purchase or exchange for, will, no doubt, sink more or less in proportion to the fertility, and rise in proportion to the barrenness of those mines. The fertility or barrenness of the mines, however, which may happen at any particular time to supply the commercial world, is a circumstance which, it is evident, may have no sort of connection with the state of industry in a particular country. It seems even to have no very necessary connection with that of the world in general. As arts and commerce, indeed, gradually spread themselves over a greater and a greater part of the earth, the search for new mines, being extended over a wider surface, may have somewhat a better chance for being successful than when confined within narrower bounds. The discovery of new mines, however, as the old ones come to be gradually exhausted, is a matter of the greatest uncertainty, and such as no human skill or industry can insure. All indications, it is acknowledged, are doubtful; and the actual discovery and successful working of a new mine can alone ascertain the reality of its value, or even of its existence. In this search there seem to be no certain limits, either to the possible success, or to the possible disappointment of human industry. In the course of a century or two, it is possible that new mines may be discovered, more fertile than any that have ever yet been known, and it is just equally possible, that the most fertile mine then known may be more barren than any that was wrought before the discovery of the mines of America. Whether the one or the other of those two events may happen to take place, is of very little importance to the real wealth and prosperity of the world, to the real value of the annual produce of the land and labour of mankind. Its nominal value, the quantity of gold and silver by which this annual produce could be expressed or represented, would, no doubt, be very different; but its real value, the real quantity of labour which it could purchase or command, would be precisely the same. A shilling might, in the one case, represent no more labour than a penny does at present; and a penny, in the other, might represent as much as a shilling does now. But in the one case, he who had a shilling in his pocket would be no richer than he who has a penny at present; and in the other, he who had a penny would be just as rich as he who has a shilling now. The cheapness and abundance of gold and silver plate would be the sole advantage which the world could derive from the one event; and the dearness and scarcity of those trifling superfluities, the only inconveniency it could suffer from the other. _Conclusion of the Digression concerning the Variations in the Value of Silver._ The greater part of the writers who have collected the money price of things in ancient times, seem to have considered the low money price of corn, and of goods in general, or, in other words, the high value of gold and silver, as a proof, not only of the scarcity of those metals, but of the poverty and barbarism of the country at the time when it took place. This notion is connected with the system of political economy, which represents national wealth as consisting in the abundance and national poverty in the scarcity, of gold and silver; a system which I shall endeavour to explain and examine at great length in the fourth book of this Inquiry. I shall only observe at present, that the high value of the precious metals can be no proof of the poverty or barbarism of any particular country at the time when it took place. It is a proof only of the barrenness of the mines which happened at that time to supply the commercial world. A poor country, as it cannot afford to buy more, so it can as little afford to pay dearer for gold and silver than a rich one; and the value of those metals, therefore, is not likely to be higher in the former than in the latter. In China, a country much richer than any part of Europe, the value of the precious metals is much higher than in any part of Europe. As the wealth of Europe, indeed, has increased greatly since the discovery of the mines of America, so the value of gold and silver has gradually diminished. This diminution of their value, however, has not been owing to the increase of the real wealth of Europe, of the annual produce of its land and labour, but to the accidental discovery of more abundant mines than any that were known before. The increase of the quantity of gold and silver in Europe, and the increase of its manufactures and agriculture, are two events which, though they have happened nearly about the same time, yet have arisen from very different causes, and have scarce any natural connection with one another. The one has arisen from a mere accident, in which neither prudence nor policy either had or could have any share; the other, from the fall of the feudal system, and from the establishment of a government which afforded to industry the only encouragement which it requires, some tolerable security that it shall enjoy the fruits of its own labour. Poland, where the feudal system still continues to take place, is at this day as beggarly a country as it was before the discovery of America. The money price of corn, however, has risen; the real value of the precious metals has fallen in Poland, in the same manner as in other parts of Europe. Their quantity, therefore, must have increased there as in other places, and nearly in the same proportion to the annual produce of its land and labour. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants. Spain and Portugal, the countries which possess the mines, are, after Poland, perhaps the two most beggarly countries in Europe. The value of the precious metals, however, must be lower in Spain and Portugal than in any other part of Europe, as they come from those countries to all other parts of Europe, loaded, not only with a freight and an insurance, but with the expense of smuggling, their exportation being either prohibited or subjected to a duty. In proportion to the annual produce of the land and labour, therefore, their quantity must be greater in those countries than in any other part of Europe; those countries, however, are poorer than the greater part of Europe. Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better. As the low value of gold and silver, therefore, is no proof of the wealth and flourishing state of the country where it takes place; so neither is their high value, or the low money price either of goods in general, or of corn in particular, any proof of its poverty and barbarism. But though the low money price, either of goods in general, or of corn in particular, be no proof of the poverty or barbarism of the times, the low money price, of some particular sorts of goods, such as cattle, poultry game of all kinds, &c. in proportion to that of corn, is a most decisive one. It clearly demonstrates, first, their great abundance in proportion to that of corn, and, consequently, the great extent of the land which they occupied in proportion to what was occupied by corn; and, secondly, the low value of this land in proportion to that of corn land, and, consequently, the uncultivated and unimproved state of the far greater part of the lands of the country. It clearly demonstrates, that the stock and population of the country did not bear the same proportion to the extent of its territory, which they commonly do in civilized countries; and that society was at that time, and in that country, but in its infancy. From the high or low money price, either of goods in general, or of corn in particular, we can infer only, that the mines, which at that time happened to supply the commercial world with gold and silver, were fertile or barren, not that the country was rich or poor. But from the high or low money price of some sorts of goods in proportion to that of others, we infer, with a degree of probability that approaches almost to certainty, that it was rich or poor, that the greater part of its lands were improved or unimproved, and that it was either in a more or less barbarous state, or in a more or less civilised one. Any rise in the money price of goods which proceeded altogether from the degradation of the value of silver, would affect all sorts of goods equally, and raise their price universally, a third, or a fourth, or a fifth part higher, according as silver happened to lose a third, or a fourth, or a fifth part of its former value. But the rise in the price of provisions, which has been the subject of so much reasoning and conversation, does not affect all sorts of provisions equally. Taking the course of the present century at an average, the price of corn, it is acknowledged, even by those who account for this rise by the degradation of the value of silver, has risen much less than that of some other sorts of provisions. The rise in the price of those other sorts of provisions, therefore, cannot be owing altogether to the degradation of the value of silver. Some other causes must be taken into the account; and those which have been above assigned, will, perhaps, without having recourse to the supposed degradation of the value of silver, sufficiently explain this rise in those particular sorts of provisions, of which the price has actually risen in proportion to that of corn. As to the price of corn itself, it has, during the sixty-four first years of the present century, and before the late extraordinary course of bad seasons, been somewhat lower than was during the sixty-four last years of the preceding century. This fact is attested, not only by the accounts of Windsor market, but by the public fiars of all the different counties of Scotland, and by the accounts of several different markets in France, which have been collected with great diligence and fidelity by Mr Messance, and by Mr Dupré de St Maur. The evidence is more complete than could well have been expected in a matter which is naturally so very difficult to be ascertained. As to the high price of corn during these last ten or twelve years, it can be sufficiently accounted for from the badness of the seasons, without supposing any degradation in the value of silver. The opinion, therefore, that silver is continually sinking in its value, seems not to be founded upon any good observations, either upon the prices of corn, or upon those of other provisions. The same quantity of silver, it may perhaps be said, will, in the present times, even according to the account which has been here given, purchase a much smaller quantity of several sorts of provisions than it would have done during some part of the last century; and to ascertain whether this change be owing to a rise in the value of those goods, or to a fall in the value of silver, is only to establish a vain and useless distinction, which can be of no sort of service to the man who has only a certain quantity of silver to go to market with, or a certain fixed revenue in money. I certainly do not pretend that the knowledge of this distinction will enable him to buy cheaper. It may not, however, upon that account be altogether useless. It may be of some use to the public, by affording an easy proof of the prosperous condition of the country. If the rise in the price of some sorts of provisions be owing altogether to a fall in the value of silver, it is owing to a circumstance, from which nothing can be inferred but the fertility of the American mines. The real wealth of the country, the annual produce of its land and labour, may, notwithstanding this circumstance, be either gradually declining, as in Portugal and Poland; or gradually advancing, as in most other parts of Europe. But if this rise in the price of some sorts of provisions be owing to a rise in the real value of the land which produces them, to its increased fertility, or, in consequence of more extended improvement and good cultivation, to its having been rendered fit for producing corn; it is owing to a circumstance which indicates, in the clearest manner, the prosperous and advancing state of the country. The land constitutes by far the greatest, the most important, and the most durable part of the wealth of every extensive country. It may surely be of some use, or, at least, it may give some satisfaction to the public, to have so decisive a proof of the increasing value of by far the greatest, the most important, and the most durable part of its wealth. It may, too, be of some use to the public, in regulating the pecuniary reward of some of its inferior servants. If this rise in the price of some sorts of provisions be owing to a fall in the value of silver, their pecuniary reward, provided it was not too large before, ought certainly to be augmented in proportion to the extent of this fall. If it is not augmented, their real recompence will evidently be so much diminished. But if this rise of price is owing in the increased value, in consequence of the improved fertility of the land which produces such provisions, it becomes a much nicer matter to judge, either in what proportion any pecuniary reward ought to be augmented, or whether it ought to be augmented at all. The extension of improvement and cultivation, as it necessarily raises more or less, in proportion to the price of corn, that of every sort of animal food, so it as necessarily lowers that of, I believe, every sort of vegetable food. It raises the price of animal food; because a great part of the land which produces it, being rendered fit for producing corn, must afford to the landlord and farmer the rent and profit of corn land. It lowers the price of vegetable food; because, by increasing the fertility of the land, it increases its abundance. The improvements of agriculture, too, introduce many sorts of vegetable food, which requiring less land, and not more labour than corn, come much cheaper to market. Such are potatoes and maize, or what is called Indian corn, the two most important improvements which the agriculture of Europe, perhaps, which Europe itself, has received from the great extension of its commerce and navigation. Many sorts of vegetable food, besides, which in the rude state of agriculture are confined to the kitchen-garden, and raised only by the spade, come, in its improved state, to be introduced into common fields, and to be raised by the plough; such as turnips, carrots, cabbages, &c. If, in the progress of improvement, therefore, the real price of one species of food necessarily rises, that of another as necessarily falls; and it becomes a matter of more nicety to judge how far the rise in the one may be compensated by the fall in the other. When the real price of butcher's meat has once got to its height (which, with regard to every sort, except perhaps that of hogs flesh, it seems to have done through a great part of England more than a century ago), any rise which can afterwards happen in that of any other sort of animal food, cannot much affect the circumstances of the inferior ranks of people. The circumstances of the poor, through a great part of England, cannot surely be so much distressed by any rise in the price of poultry, fish, wild-fowl, or venison, as they must he relieved by the fall in that of potatoes. In the present season of scarcity, the high price of corn no doubt distresses the poor. But in times of moderate plenty, when corn is at its ordinary or average price, the natural rise in the price of any other sort of rude produce cannot much affect them. They suffer more, perhaps, by the artificial rise which has been occasioned by taxes in the price of some manufactured commodities, as of salt, soap, leather, candles, malt, beer, ale, &c. _Effects of the Progress of Improvement upon the real Price of Manufactures._ It is the natural effect of improvement, however, to diminish gradually the real price of almost all manufactures. That of the manufacturing workmanship diminishes, perhaps, in all of them without exception. In consequence of better machinery, of greater dexterity, and of a more proper division and distribution of work, all of which are the natural effects of improvement, a much smaller quantity of labour becomes requisite for executing any particular piece of work; and though, in consequence of the flourishing circumstances of the society, the real price of labour should rise very considerably, yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price. There are, indeed, a few manufactures, in which the necessary rise in the real price of the rude materials will more than compensate all the advantages which improvement can introduce into the execution of the work. In carpenters' and joiners' work, and in the coarser sort of cabinet work, the necessary rise in the real price of barren timber, in consequence of the improvement of land, will more than compensate all the advantages which can be derived from the best machinery, the greatest dexterity, and the most proper division and distribution of work. But in all cases in which the real price of the rude material either does not rise at all, or does not rise very much, that of the manufactured commodity sinks very considerably. This diminution of price has, in the course of the present and preceding century, been most remarkable in these manufactures of which the materials are the coarser metals. A better movement of a watch, than about the middle of the last century could have been bought for twenty pounds, may now perhaps be had for twenty shillings. In the work of cutlers and locksmiths, in all the toys which are made of the coarser metals, and in all those goods which are commonly known by the name of Birmingham and Sheffield ware, there has been, during the same period, a very great reduction of price, though not altogether so great as in watch-work. It has, however, been sufficient to astonish the workmen of every other part of Europe, who in many cases acknowledge that they can produce no work of equal goodness for double or even for triple the price. There are perhaps no manufactures, in which the division of labour can be carried further, or in which the machinery employed admits of a greater variety of improvements, than those of which the materials are the coarser metals. In the clothing manufacture there has, during the same period, been no such sensible reduction of price. The price of superfine cloth, I have been assured, on the contrary, has, within these five-and-twenty or thirty years, risen somewhat in proportion to its quality, owing, it was said, to a considerable rise in the price of the material, which consists altogether of Spanish wool. That of the Yorkshire cloth, which is made altogether of English wool, is said, indeed, during the course of the present century, to have fallen a good deal in proportion to its quality. Quality, however, is so very disputable a matter, that I look upon all information of this kind as somewhat uncertain. In the clothing manufacture, the division of labour is nearly the same now as it was a century ago, and the machinery employed is not very different. There may, however, have been some small improvements in both, which may have occasioned some reduction of price. But the reduction will appear much more sensible and undeniable, if we compare the price of this manufacture in the present times with what it was in a much remoter period, towards the end of the fifteenth century, when the labour was probably much less subdivided, and the machinery employed much more imperfect, than it is at present. In 1487, being the 4th of Henry VII., it was enacted, that "whosoever shall sell by retail a broad yard of the finest scarlet grained, or of other grained cloth of the finest making, above sixteen shillings, shall forfeit forty shillings for every yard so sold." Sixteen shillings, therefore, containing about the same quantity of silver as four-and-twenty shillings of our present money, was, at that time, reckoned not an unreasonable price for a yard of the finest cloth; and as this is a sumptuary law, such cloth, it is probable, had usually been sold somewhat dearer. A guinea may be reckoned the highest price in the present times. Even though the quality of the cloths, therefore, should be supposed equal, and that of the present times is most probably much superior, yet, even upon this supposition, the money price of the finest cloth appears to have been considerably reduced since the end of the fifteenth century. But its real price has been much more reduced. Six shillings and eightpence was then, and long afterwards, reckoned the average price of a quarter of wheat. Sixteen shillings, therefore, was the price of two quarters and more than three bushels of wheat. Valuing a quarter of wheat in the present times at eight-and-twenty shillings, the real price of a yard of fine cloth must, in those times, have been equal to at least three pounds six shillings and sixpence of our present money. The man who bought it must have parted with the command of a quantity of labour and subsistence equal to what that sum would purchase in the present times. The reduction in the real price of the coarse manufacture, though considerable, has not been so great as in that of the fine. In 1463, being the 3d of Edward IV. it was enacted, that "no servant in husbandry nor common labourer, nor servant to any artificer inhabiting out of a city or burgh, shall use or wear in their clothing any cloth above two shillings the broad yard." In the 3d of Edward IV., two shillings contained very nearly the same quantity of silver as four of our present money. But the Yorkshire cloth which is now sold at four shillings the yard, is probably much superior to any that was then made for the wearing of the very poorest order of common servants. Even the money price of their clothing, therefore, may, in proportion to the quality, be somewhat cheaper in the present than it was in those ancient times. The real price is certainly a good deal cheaper. Tenpence was then reckoned what is called the moderate and reasonable price of a bushel of wheat. Two shillings, therefore, was the price of two bushels and near two pecks of wheat, which in the present times, at three shillings and sixpence the bushel, would be worth eight shillings and ninepence. For a yard of this cloth the poor servant must have parted with the power of purchasing a quantity of subsistence equal to what eight shillings and ninepence would purchase in the present times. This is a sumptuary law, too, restraining the luxury and extravagance of the poor. Their clothing, therefore, had commonly been much more expensive. The same order of people are, by the same law, prohibited from wearing hose, of which the price should exceed fourteen-pence the pair, equal to about eight-and-twenty pence of our present money. But fourteen-pence was in those times the price of a bushel and near two pecks of wheat; which in the present times, at three and sixpence the bushel, would cost five shillings and threepence. We should in the present times consider this a very high price for a pair of stockings to a servant of the poorest and lowest order. He must, however, in these times, have paid what was really equivalent to this price for them. In the time of Edward IV. the art of knitting stockings was probably not known in any part of Europe. Their hose were made of common cloth, which may have been one of the causes of their dearness. The first person that wore stockings in England is said to have been Queen Elizabeth. She received them as a present from the Spanish ambassador. Both in the coarse and in the fine woollen manufacture, the machinery employed was much more imperfect in those ancient, than it is in the present times. It has since received three very capital improvements, besides, probably, many smaller ones, of which it may be difficult to ascertain either the number or the importance. The three capital improvements are, first, the exchange of the rock and spindle for the spinning-wheel, which, with the same quantity of labour, will perform more than double the quantity of work. Secondly, the use of several very ingenious machines, which facilitate and abridge, in a still greater proportion, the winding of the worsted and woollen yarn, or the proper arrangement of the warp and woof before they are put into the loom, an operation which, previous to the invention of those machines, must have been extremely tedious and troublesome.--Thirdly, the employment of the fulling-mill for thickening the cloth, instead of treading it in water. Neither wind nor water mills of any kind were known in England so early as the beginning of the sixteenth century, nor, so far as I know, in any other part of Europe north of the Alps. They had been introduced into Italy some time before. The consideration of these circumstances may, perhaps, in some measure, explain to us why the real price both of the course and of the fine manufacture was so much higher in those ancient than it is in the present times. It cost a greater quantity of labour to bring the goods to market. When they were brought thither, therefore, they must have purchased, or exchanged for the price of, a greater quantity. The coarse manufacture probably was, in these ancient times, carried on in England in the same manner as it always has been in countries where arts and manufactures are in their infancy. It was probably a household manufacture, in which every different part of the work was occasionally performed by all the different members of almost every private family, but so as to be their work only when they had nothing else to do, and not to be the principal business from which any of them derived the greater part of their subsistence. The work which is performed in this manner, it has already been observed, comes always much cheaper to market than that which is the principal or sole fund of the workman's subsistence. The fine manufacture, on the other hand, was not, in those times, carried on in England, but in the rich and commercial country of Flanders; and it was probably conducted then, in the same manner as now, by people who derived the whole, or the principal part of their subsistence from it. It was, besides, a foreign manufacture, and must have paid some duty, the ancient custom of tonnage and poundage at least, to the king. This duty, indeed, would not probably be very great. It was not then the policy of Europe to restrain, by high duties, the importation of foreign manufactures, but rather to encourage it, in order that merchants might be enabled to supply, at as easy a rate as possible, the great men with the conveniencies and luxuries which they wanted, and which the industry of their own country could not afford them. The consideration of these circumstances may, perhaps, in some measure explain to us why, in those ancient times, the real price of the coarse manufacture was, in proportion to that of the fine, so much lower than in the present times. _Conclusion of the Chapter._ I shall conclude this very long chapter with observing, that every improvement in the circumstances of the society tends, either directly or indirectly, to raise the real rent of land, to increase the real wealth of the landlord, his power of purchasing the labour, or the produce of the labour of other people. The extension of improvement and cultivations tends to raise it directly. The landlord's share of the produce necessarily increases with the increase of the produce. That rise in the real price of these parts of the rude produce of land, which is first the effect of the extended improvement and cultivation, and afterwards the cause of their being still further extended, the rise in the price of cattle, for example, tends, too, to raise the rent of land directly, and in a still greater proportion. The real value of the landlord's share, his real command of the labour of other people, not only rises with the real value of the produce, but the proportion of his share to the whole produce rises with it. That produce, after the rise in its real price, requires no more labour to collect it than before. A smaller proportion of it will, therefore, be sufficient to replace, with the ordinary profit, the stock which employs that labour. A greater proportion of it must consequently belong to the landlord. All those improvements in the productive powers of labour, which tend directly to reduce the rent price of manufactures, tend indirectly to raise the real rent of land. The landlord exchanges that part of his rude produce, which is over and above his own consumption, or, what comes to the same thing, the price of that part of it, for manufactured produce. Whatever reduces the real price of the latter, raises that of the former. An equal quantity of the former becomes thereby equivalent to a greater quantity of the latter; and the landlord is enabled to purchase a greater quantity of the conveniencies, ornaments, or luxuries which he has occasion for. Every increase in the real wealth of the society, every increase in the quantity of useful labour employed within it, tends indirectly to raise the real rent of land. A certain proportion of this labour naturally goes to the land. A greater number of men and cattle are employed in its cultivation, the produce increases with the increase of the stock which is thus employed in raising it, and the rent increases with the produce. The contrary circumstances, the neglect of cultivation and improvement, the fall in the real price of any part of the rude produce of land, the rise in the real price of manufactures from the decay of manufacturing art and industry, the declension of the real wealth of the society, all tend, on the other hand, to lower the real rent of land, to reduce the real wealth of the landlord, to diminish his power of purchasing either the labour, or the produce of the labour, of other people. The whole annual produce of the land and labour of every country, or, what comes to the same thing, the whole price of that annual produce, naturally divides itself, it has already been observed, into three parts; the rent of land, the wages of labour, and the profits of stock; and constitutes a revenue to three different orders of people; to those who live by rent, to these who live by wages, and to those who live by profit. These are the three great, original, and constituent, orders of every civilized society, from whose revenue that of every other order is ultimately derived. The interest of the first of those three great orders, it appears from what has been just now said, is strictly and inseparably connected with the general interest of the society. Whatever either promotes or obstructs the one, necessarily promotes or obstructs the other. When the public deliberates concerning any regulation of commerce or police, the proprietors of land never can mislead it, with a view to promote the interest of their own particular order; at least, if they have any tolerable knowledge of that interest. They are, indeed, too often defective in this tolerable knowledge. They are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. That indolence which is the natural effect of the ease and security of their situation, renders them too often, not only ignorant, but incapable of that application of mind, which is necessary in order to foresee and understand the consequence of any public regulation. The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first. The wages of the labourer, it has already been shewn, are never so high as when the demand for labour is continually rising, or when the quantity employed is every year increasing considerably. When this real wealth of the society becomes stationary, his wages are soon reduced to what is barely enough to enable him to bring up a family, or to continue the race of labourers. When the society declines, they fall even below this. The order of proprietors may perhaps gain more by the prosperity of the society than that of labourers; but there is no order that suffers so cruelly from its decline. But though the interest of the labourer is strictly connected with that of the society, he is incapable either of comprehending that interest, or of understanding its connexion with his own. His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge, even though he was fully informed. In the public deliberations, therefore, his voice is little heard, and less regarded; except upon particular occasions, when his clamour is animated, set on, and supported by his employers, not for him, but their own particular purposes. His employers constitute the third order, that of those who live by profit. It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connexion with the general interest of the society, as that of the other two. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion), is much more to be depended upon with regard to the former of those two objects, than with regard to the latter. Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market, and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. PRICES OF WHEAT. ===================================================================== | Price of the | Average of | The Average Years | Quarter of | the different | Price of each XII. | Wheat each | Prices of the | Year in Money | Year. | same Year. | of the present | | | times. -----------+-------------------+-------------------+----------------- | L. s. d. | L. s. d. | L. s. d. 1202 | 0 12 0 | - - - | 1 16 0 | | | | {0 12 0} | | 1205 | {0 13 4} | 0 13 5 | 2 0 3 | {0 15 0} | | | | | 1223 | 0 12 0 | - - - | 1 16 0 1237 | 0 3 4 | - - - | 0 10 0 1243 | 0 2 0 | - - - | 0 6 0 1244 | 0 2 0 | - - - | 0 6 0 1246 | 0 16 0 | - - - | 2 8 0 1247 | 0 13 5 | - - - | 2 0 0 1257 | 1 4 0 | - - - | 3 12 0 | | | | {1 0 0} | | 1258 | {0 15 0} | 0 17 0 | 2 11 0 | {0 16 0} | | | | | | {4 16 0} | | 1270 | {6 8 0} | 5 12 0 | 16 16 0 | | | 1286 | {0 2 8} | 0 9 4 | 1 8 0 | {0 16 0} | | | | | | | +----------------- | | Total, 35 9 3 | | ----------------- | | Average price, 2 19 1-1/4 ===================================================================== | | | 1287 | 0 3 4 | - - - | 0 10 0 | | | | {0 0 8} | | | {0 1 0} | | | {0 1 4} | | 1288 | {0 1 6} | 0 3 0-1/4 | 0 9 1-3/4 | {0 1 8} | | | {0 2 0} | | | {0 3 4} | | | {0 9 4} | | | | | | {0 12 0} | | | {0 6 0} | | 1289 | {0 2 0} | 0 10 1-1/2 | 1 10 4-1/2 | {0 10 8} | | | {1 0 0} | | | | | 1290 | 0 16 0 | - - - | 2 8 0 1294 | 0 16 0 | - - - | 2 8 0 1302 | 0 4 0 | - - - | 0 12 0 1309 | 0 7 2 | - - - | 1 1 6 1315 | 1 0 0 | - - - | 3 0 0 | | | | {1 0 0} | | | {1 10 0} | | 1316 | {1 12 0} | 1 10 6 | 4 11 6 | {2 0 0} | | | | | | {2 4 0} | | | {0 14 0} | | 1317 | {2 13 0} | 1 19 6 | 5 18 6 | {4 0 0} | | | {0 6 8} | | | | | 1336 | 0 2 0 | - - - | 0 6 0 1338 | 0 3 4 | - - - | 0 10 0 | | +----------------- | | Total, 23 4 11-1/4 | | ----------------- | | Average price, 1 18 8 ===================================================================== | | | 1339 | 0 9 0 | - - - | 1 7 0 1349 | 0 2 0 | - - - | 0 5 2 1359 | 1 6 8 | - - - | 3 2 2 1361 | 0 2 0 | - - - | 0 4 8 1363 | 0 15 0 | - - - | 1 15 0 | | | 1369 | {1 0 0} | 1 2 0 | 2 9 4 | {1 4 0} | | | | | 1379 | 0 4 0 | - - - | 0 9 4 1387 | 0 2 0 | - - - | 0 4 8 | | | | {0 13 4} | | 1390 | {0 14 0} | 0 14 5 | 1 13 7 | {0 16 0} | | | | | 1401 | 0 16 0 | - - - | 1 17 6 | | | | {0 4 4-3/4}| | 1407 | {0 3 4 }| 0 3 10 | 0 8 11 | | | 1416 | 0 16 0 | - - - | 1 12 0 | | +----------------- | | Total, 15 9 4 | | ----------------- | | Aver. price, 1 5 9-1/2 ===================================================================== | | | 1423 | 0 8 0 | - - - | 0 16 0 1425 | 0 4 0 | - - - | 0 8 0 1434 | 1 6 8 | - - - | 2 13 4 1435 | 0 5 4 | - - - | 0 10 8 | | | | {1 0 0} | 1 3 4 | 2 6 8 1439 | {1 6 8} | | | | | 1440 | 1 4 0 | - - - | 2 8 0 | | | | {0 4 4} | - - - | 2 8 0 1444 | {0 4 0} | 0 4 2 | 0 8 4 | | | 1445 | 0 4 6 | - - - | 0 9 0 1447 | 0 8 0 | - - - | 0 16 0 1448 | 0 6 8 | - - - | 0 13 4 1449 | 0 5 0 | - - - | 0 10 0 1451 | 0 8 0 | - - - | 0 16 0 | | +----------------- | | Total, 12 15 4 | | ----------------- | | Aver. price, 1 1 3-1/3 ===================================================================== | | | 1453 | 0 5 4 | - - - | 0 10 8 1455 | 0 1 2 | - - - | 0 2 4 1457 | 0 7 8 | - - - | 0 15 4 1459 | 0 5 0 | - - - | 0 10 0 1460 | 0 8 0 | - - - | 0 16 0 | | | | {0 2 0} | | 1463 | {0 1 8} | 0 1 10 | 0 3 8 | | | 1464 | 0 6 8 | - - - | 0 10 0 1486 | 1 4 0 | - - - | 1 17 0 1491 | 0 14 8 | - - - | 1 2 0 1494 | 0 4 0 | - - - | 0 6 0 1495 | 0 3 4 | - - - | 0 5 0 1497 | 1 0 0 | - - - | 1 11 0 | | +----------------- | | Total, 8 9 0 | | ----------------- | | Aver. price, 0 14 1 ===================================================================== | | | 1499 | 0 4 0 | - - - | 0 6 0 1504 | 0 5 8 | - - - | 0 8 6 1521 | 1 0 0 | - - - | 1 10 0 1551 | 0 8 0 | - - - | 0 8 0 1553 | 0 8 0 | - - - | 0 8 0 1554 | 0 8 0 | - - - | 0 8 0 1555 | 0 8 0 | - - - | 0 8 0 1556 | 0 8 0 | - - - | 0 8 0 | | | | {0 4 0} | | 1957 | {0 5 0} | 0 17 8-1/2 | 0 17 8-1/2 | {0 8 0} | | | {2 13 4} | | | | | 1558 | 0 8 0 | - - - | 0 8 0 1559 | 0 8 0 | - - - | 0 8 0 1560 | 0 8 0 | - - - | 0 8 0 | | +----------------- | | Total, 6 0 2-1/2 | | ----------------- | | Average price, 0 10 0-5/12 ===================================================================== | | | 1561 | 0 8 0 | - - - | 0 8 0 1562 | 0 8 0 | - - - | 0 8 0 | | | 1574 | {2 16 0} | 2 0 0 | 2 0 0 | {1 4 0} | | | | | 1587 | 3 4 0 | - - - | 3 4 0 1594 | 2 16 0 | - - - | 2 16 0 1595 | 2 13 0 | - - - | 2 13 0 1596 | 4 0 0 | - - - | 4 0 0 | | | 1597 | {5 4 0} | 4 12 0 | 4 12 0 | {4 0 0} | | | | | 1598 | 2 16 8 | - - - | 2 16 8 1599 | 1 19 2 | - - - | 1 19 2 1600 | 1 17 8 | - - - | 1 17 8 1601 | 1 14 10 | - - - | 1 14 10 | | +----------------- | | Total, 28 9 4 | | ----------------- | | Average price, 2 7 5-1/3 ===================================================================== PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST PRICED WHEAT AT WINDSOR MARKET, ON LADY-DAY AND MICHAELMAS, FROM 1595 TO 1764, BOTH INCLUSIVE; THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THOSE TWO MARKET-DAYS. Wheat per Quarter. Years. L. s. d. 1595 2 0 0 1596 2 8 0 1597 3 9 6 1598 2 16 8 1599 1 19 2 1600 1 17 8 1601 1 14 10 1602 1 9 4 1603 1 15 4 1604 1 10 8 1605 1 15 10 1606 1 13 0 1607 1 16 8 1608 2 16 8 1609 2 10 0 1610 1 15 10 1611 1 18 8 1612 2 2 4 1613 2 8 8 1614 2 1 8-1/2 1615 1 18 8 1616 2 0 4 1617 2 8 8 1618 2 6 8 1619 1 15 4 1620 1 10 4 ----------- 26)54 0 6-1/2 ----------- 2 1 6-9/13 Wheat per Quarter. Years. L. s. d. 1621 1 10 4 1622 2 18 8 1623 2 12 0 1624 2 8 0 1625 2 12 0 1626 2 9 4 1627 1 16 0 1628 1 8 0 1629 2 2 0 1630 2 15 8 1631 3 8 0 1632 2 13 4 1633 2 18 0 1634 2 16 0 1635 2 16 0 1636 2 16 8 ----------- 16)40 0 0 ----------- 2 10 0 Wheat per Quarter. Years. L. s. d. 1637 2 13 0 1638 2 17 4 1639 2 4 10 1640 2 4 8 1641 2 8 0 1642[26] 0 0 0 1643[26] 0 0 0 1644[26] 0 0 0 1645[26] 0 0 0 1646 2 8 0 1647 3 13 0 1648 4 5 0 1649 4 0 0 1650 3 16 8 1651 3 13 4 1652 2 9 6 1653 1 15 6 1654 1 6 0 1655 1 13 4 1656 2 3 0 1657 2 6 8 1658 3 5 0 1659 3 6 0 1660 2 16 6 1661 3 10 0 1662 3 14 0 1663 2 17 0 1664 2 0 6 1665 2 9 4 1666 1 16 0 1667 1 16 0 1668 2 0 0 1669 2 4 4 1670 2 1 8 1671 2 2 0 1672 2 1 0 1673 2 6 8 1674 3 8 8 1675 3 4 8 1676 1 18 0 1677 2 2 0 1678 2 19 0 1679 3 0 0 1680 2 5 0 1681 2 6 8 1682 2 4 0 1683 2 0 0 1684 2 4 0 1685 2 6 8 1686 1 14 0 1687 1 5 2 1688 2 6 0 1689 1 10 0 1690 1 14 8 1691 1 14 0 1692 2 6 8 1693 3 7 8 1694 3 4 0 1695 2 13 0 1696 3 11 0 1697 3 0 0 1698 3 8 4 1699 3 4 0 1700 2 0 0 ------------ 60)153 1 8 ------------ 2 11 0-1/2 Wheat per Quarter. Years. L. s. d. 1701 1 17 8 1702 1 9 6 1703 1 16 0 1704 2 6 6 1705 1 10 0 1706 1 6 0 1707 1 8 6 1708 2 1 6 1709 3 18 6 1710 3 18 0 1711 2 14 0 1712 2 6 4 1713 2 11 0 1714 2 10 4 1715 2 3 0 1716 2 8 0 1717 2 5 8 1718 1 18 10 1719 1 15 0 1720 1 17 0 1721 1 17 6 1722 1 16 0 1723 1 14 8 1724 1 17 0 1725 2 8 6 1726 2 6 0 1727 2 2 0 1728 2 14 6 1729 2 6 10 1730 1 16 6 1731 1 12 10 1732 1 6 8 1733 1 8 4 1734 1 18 10 1735 2 3 0 1736 2 0 4 1737 1 18 0 1738 1 15 6 1739 1 18 6 1740 2 10 8 1741 2 6 8 1742 1 14 0 1743 1 4 10 1744 1 4 10 1745 1 7 6 1746 1 19 0 1747 1 14 10 1748 1 17 0 1749 1 17 0 1750 1 12 6 1751 1 18 6 1752 2 1 10 1753 2 4 8 1754 1 14 8 1755 1 13 10 1756 2 5 3 1757 3 0 0 1758 2 10 0 1759 1 19 10 1760 1 16 6 1761 1 10 3 1762 1 19 0 1763 2 0 9 1764 2 6 9 ------------ 64)129 13 6 ------------ 2 0 6-18/64 Wheat per Quarter. Years. L. s. d. 1731 1 12 10 1732 1 6 8 1733 1 8 4 1734 1 18 10 1735 2 3 0 1736 2 0 4 1737 1 18 0 1738 1 15 6 1739 1 18 6 1740 2 10 8 ----------- 10)18 12 8 ----------- 1 17 3-1/5 Wheat per Quarter. Years. L. s. d. 1741 2 6 8 1742 1 14 0 1743 1 4 10 1744 1 4 10 1745 1 7 6 1746 1 19 0 1747 1 14 10 1748 1 17 0 1749 1 17 0 1750 1 12 6 ----------- 10)16 18 2 ----------- 1 13 9-4/5 BOOK II. OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK. INTRODUCTION. In that rude state of society, in which there is no division of labour, in which exchanges are seldom made, and in which every man provides every thing for himself, it is not necessary that any stock should be accumulated, or stored up before-hand, in order to carry on the business of the society. Every man endeavours to supply, by his own industry, his own occasional wants, as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills; and when his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the turf that are nearest it. But when the division of labour has once been thoroughly introduced, the produce of a man's own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men's labour, which he purchases with the produce, or, what is the same thing, with the price of the produce, of his own. But this purchase cannot be made till such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere, sufficient to maintain him, and to supply him with the materials and tools of his work, till such time at least as both these events can be brought about. A weaver cannot apply himself entirely to his peculiar business, unless there is before-hand stored up somewhere, either in his own possession, or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business. As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. The quantity of materials which the same number of people can work up, increases in a great proportion as labour comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a greater degree of simplicity, a variety of new machines come to be invented for facilitating and abridging these operations. As the division of labour advances, therefore, in order to give constant employment to an equal number of workman, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated before-hand. But the number of workmen in every branch of business generally increases with the division of labour in that branch; or rather it is the increase of their number which enables them to class and subdivide themselves in this manner. As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour, so that accumulation naturally leads to this improvement. The person who employs his stock in maintaining labour, necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. He endeavours, therefore, both to make among his workmen the most proper distribution of employment, and to furnish them with the best machines which he can either invent or afford to purchase. His abilities, in both these respects, are generally in proportion to the extent of his stock, or to the number of people whom it can employ. The quantity of industry, therefore, not only increases in every country with the increase of the stock which employs it, but, in consequence of that increase, the same quantity of industry produces a much greater quantity of work. Such are in general the effects of the increase of stock upon industry and its productive powers. In the following book, I have endeavoured to explain the nature of stock, the effects of its accumulation into capital of different kinds, and the effects of the different employments of those capitals. This book is divided into five chapters. In the first chapter, I have endeavoured to shew what are the different parts or branches into which the stock, either of an individual, or of a great society, naturally divides itself. In the second, I have endeavoured to explain the nature and operation of money, considered as a particular branch of the general stock of the society. The stock which is accumulated into a capital, may either be employed by the person to whom it belongs, or it may be lent to some other person. In the third and fourth chapters, I have endeavoured to examine the manner in which it operates in both these situations. The fifth and last chapter treats of the different effects which the different employments of capital immediately produce upon the quantity, both of national industry, and of the annual produce of land and labour. CHAP. I. OF THE DIVISION OF STOCK. When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours, by his labour, to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries. But when he possesses stock sufficient to maintain him for months or years, he naturally endeavours to derive a revenue from the greater part of it, reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which he expects is to afford him this revenue is called his capital. The other is that which supplies his immediate consumption, and which consists either, first, in that portion of his whole stock which was originally reserved for this purpose; or, secondly, in his revenue, from whatever source derived, as it gradually comes in; or, thirdly, in such things as had been purchased by either of these in former years, and which are not yet entirely consumed, such as a stock of clothes, household furniture, and the like. In one or other, or all of these three articles, consists the stock which men commonly reserve for their own immediate consumption. There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession, or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another; and it is only by means of such circulation, or successive changes, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capitals. Secondly, it may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals. Different occupations require very different proportions between the fixed and circulating capitals employed in them. The capital of a merchant, for example, is altogether a circulating capital. He has occasion for no machines or instruments of trade, unless his shop or warehouse be considered as such. Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very great in others. A master tailor requires no other instruments of trade but a parcel of needles. Those of the master shoemaker are a little, though but a very little, more expensive. Those of the weaver rise a good deal above those of the shoemaker. The far greater part of the capital of all such master artificers, however, is circulated either in the wages of their workmen, or in the price of their materials, and repaid, with a profit, by the price of the work. In other works a much greater fixed capital is required. In a great iron-work, for example, the furnace for melting the ore, the forge, the slit-mill, are instruments of trade which cannot be erected without a very great expense. In coal works, and mines of every kind, the machinery necessary, both for drawing out the water, and for other purposes, is frequently still more expensive. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed, that which is employed in the wages and maintenance of his labouring servants is a circulating capital. He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his labouring cattle is a fixed capital, in the same manner as that of the instruments of husbandry; their maintenance is a circulating capital, in the same manner as that of the labouring servants. The farmer makes his profit by keeping the labouring cattle, and by parting with their maintenance. Both the price and the maintenance of the cattle which are bought in and fattened, not for labour, but for sale, are a circulating capital. The farmer makes his profit by parting with them. A flock of sheep or a herd of cattle, that, in a breeding country, is brought in neither for labour nor for sale, but in order to make a profit by their wool, by their milk, and by their increase, is a fixed capital. The profit is made by keeping them. Their maintenance is a circulating capital. The profit is made by parting with it; and it comes back with both its own profit and the profit upon the whole price of the cattle, in the price of the wool, the milk, and the increase. The whole value of the seed, too, is properly a fixed capital. Though it goes backwards and forwards between the ground and the granary, it never changes masters, and therefore does not properly circulate. The farmer makes his profit, not by its sale, but by its increase. The general stock of any country or society is the same with that of all its inhabitants or members; and, therefore, naturally divides itself into the same three portions, each of which has a distinct function or office. The first is that portion which is reserved for immediate consumption, and of which the characteristic is, that it affords no revenue or profit. It consists in the stock of food, clothes, household furniture, &c. which have been purchased by their proper consumers, but which are not yet entirely consumed. The whole stock of mere dwelling-houses, too, subsisting at any one time in the country, make a part of this first portion. The stock that is laid out in a house, if it is to be the dwelling-house of the proprietor, ceases from that moment to serve in the function of a capital, or to afford any revenue to its owner. A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue, which he derives, either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it. Clothes and household furniture, in the same manner, sometimes yield a revenue, and thereby serve in the function of a capital to particular persons. In countries where masquerades are common, it is a trade to let out masquerade dresses for a night. Upholsterers frequently let furniture by the month or by the year. Undertakers let the furniture of funerals by the day and by the week. Many people let furnished houses, and get a rent, not only for the use of the house, but for that of the furniture. The revenue, however, which is derived from such things, must always be ultimately drawn from some other source of revenue. Of all parts of the stock, either of an individual or of a society, reserved for immediate consumption, what is laid out in houses is most slowly consumed. A stock of clothes may last several years; a stock of furniture half a century or a century; but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or household furniture. The second of the three portions into which the general stock of the society divides itself, is the fixed capital; of which the characteristic is, that it affords a revenue or profit without circulating or changing masters. It consists chiefly of the four following articles. First, of all useful machines and instruments of trade, which facilitate and abridge labour. Secondly, of all those profitable buildings which are the means of procuring a revenue, not only to the proprietor who lets them for a rent, but to the person who possesses them, and pays that rent for them; such as shops, warehouses, workhouses, farm-houses, with all their necessary buildings, stables, granaries, &c. These are very different from mere dwelling-houses. They are a sort of instruments of trade, and may be considered in the same light. Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, inclosing, manuring, and reducing it into the condition most proper for tillage and culture. An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labour, and by means of which an equal circulating capital can afford a much greater revenue to its employer. An improved farm is equally advantageous and more durable than any of those machines, frequently requiring no other repairs than the most profitable application of the farmer's capital employed in cultivating it. Fourthly, of the acquired and useful abilities of all the inhabitants and members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realised, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit. The third and last of the three portions into which the general stock of the society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. It is composed likewise of four parts. First, of the money, by means of which all the other three are circulated and distributed to their proper consumers. Secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer, the corn-merchant, the brewer, &c. and from the sale of which they expect to derive a profit. Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building which are not yet made up into any of those three shapes, but which remain in the hands of the growers, the manufacturers, the mercers, and drapers, the timber-merchants, the carpenters and joiners, the brick-makers, &c. Fourthly, and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer, and not yet disposed of or distributed to the proper consumers; such as the finished work which we frequently find ready made in the shops of the smith, the cabinet-maker, the goldsmith, the jeweller, the china-merchant, &c. The circulating capital consists, in this manner, of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them. Of these four parts, three--provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made, and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair. No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing, without the circulating capital, which affords the materials they are employed upon, and the maintenance of the workmen who employ them. Land, however improved, will yield no revenue without a circulating capital, which maintains the labourers who cultivate and collect its produce. To maintain and augment the stock which may be reserved for immediate consumption, is the sole end and purpose both of the fixed and circulating capitals. It is this stock which feeds, clothes, and lodges the people. Their riches or poverty depend upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. So great a part of the circulating capital being continually withdrawn from it, in order to be placed in the other two branches of the general stock of the society, it must in its turn require continual supplies without which it would soon cease to exist. These supplies are principally drawn from three sources; the produce of land, of mines, and of fisheries. These afford continual supplies of provisions and materials, of which part is afterwards wrought up into finished work and by which are replaced the provisions, materials, and finished work, continually withdrawn from the circulating capital. From mines, too, is drawn what is necessary for maintaining and augmenting that part of it which consists in money. For though, in the ordinary course of business, this part is not, like the other three, necessarily withdrawn from it, in order to be placed in the other two branches of the stock of the society, it must, however, like all other things, be wasted and worn out at last, and sometimes, too, be either lost or sent abroad, and must, therefore, require continual, though no doubt much smaller, supplies. Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them; and their produce replaces, with a profit not only those capitals, but all the others in the society. Thus the farmer annually replaces to the manufacturer the provisions which he had consumed, and the materials which he had wrought up the year before; and the manufacturer replaces to the farmer the finished work which he had wasted and worn out in the same time. This is the real exchange that is annually made between those two orders of people, though it seldom happens that the rude produce of the one, and the manufactured produce of the other, are directly bartered for one another; because it seldom happens that the farmer sells his corn and his cattle, his flax and his wool, to the very same person of whom he chuses to purchase the clothes, furniture, and instruments of trade, which he wants. He sells, therefore, his rude produce for money, with which he can purchase, wherever it is to be had, the manufactured produce he has occasion for. Land even replaces, in part at least, the capitals with which fisheries and mines are cultivated. It is the produce of land which draws the fish from the waters; and it is the produce of the surface of the earth which extracts the minerals from its bowels. The produce of land, mines, and fisheries, when their natural fertility is equal, is in proportion to the extent and proper application of the capitals employed about them. When the capitals are equal, and equally well applied, it is in proportion to their natural fertility. In all countries where there is a tolerable security, every man of common understanding will endeavour to employ whatever stock he can command, in procuring either present enjoyment or future profit. If it is employed in procuring present enjoyment, it is a stock reserved for immediate consumption. If it is employed in procuring future profit, it must procure this profit either by staying with him, or by going from him. In the one case it is a fixed, in the other it is a circulating capital. A man must be perfectly crazy, who, where there is a tolerable security, does not employ all the stock which he commands, whether it be his own, or borrowed of other people, in some one or other of those three ways. In those unfortunate countries, indeed, where men are continually afraid of the violence of their superiors, they frequently bury or conceal a great part of their stock, in order to have it always at hand to carry with them to some place of safety, in case of their being threatened with any of those disasters to which they consider themselves at all times exposed. This is said to be a common practice in Turkey, in Indostan, and, I believe, in most other governments of Asia. It seems to have been a common practice among our ancestors during the violence of the feudal government. Treasure-trove was, in these times, considered as no contemptible part of the revenue of the greatest sovereigns in Europe. It consisted in such treasure as was found concealed in the earth, and to which no particular person could prove any right. This was regarded, in those times, as so important an object, that it was always considered as belonging to the sovereign, and neither to the finder nor to the proprietor of the land, unless the right to it had been conveyed to the latter by an express clause in his charter. It was put upon the same footing with gold and silver mines, which, without a special clause in the charter, were never supposed to be comprehended in the general grant of the lands, though mines of lead, copper, tin, and coal were, as things of smaller consequence. CHAP II. OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL. It has been shown in the First Book, that the price of the greater part of commodities resolves itself into three parts, of which one pays the wages of the labour, another the profits of the stock, and a third the rent of the land which had been employed in producing and bringing them to market: that there are, indeed, some commodities of which the price is made up of two of those parts only, the wages of labour, and the profits of stock; and a very few in which it consists altogether in one, the wages of labour; but that the price of every commodity necessarily resolves itself into some one or other, or all, of those three parts; every part of it which goes neither to rent nor to wages, being necessarily profit to somebody. Since this is the case, it has been observed, with regard to every particular commodity, taken separately, it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country, taken complexly. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their their stock, or the rent of their land. But though the whole value of the annual produce of the land and labour of every country, is thus divided among, and constitutes a revenue to, its different inhabitants; yet, as in the rent of a private estate, we distinguish between the gross rent and the neat rent, so may we likewise in the revenue of all the inhabitants of a great country. The gross rent of a private estate comprehends whatever is paid by the farmer; the neat rent, what remains free to the landlord, after deducting the expense of management, of repairs, and all other necessary charges; or what, without hurting his estate, he can afford to place in his stock reserved for immediate consumption, or to spend upon his table, equipage, the ornaments of his house and furniture, his private enjoyments and amusements. His real wealth is in proportion, not to his gross, but to his neat rent. The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them, after deducting the expense of maintaining, first, their fixed, and, secondly, their circulating capital, or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniencies, and amusements. Their real wealth, too, is in proportion, not to their gross, but to their neat revenue. The whole expense of maintaining the fixed capital must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, &c. nor the produce of the labour necessary for fashioning those materials into the proper form, can ever make any part of it. The price of that labour may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. But in other sorts of labour, both the price and the produce go to this stock; the price to that of the workmen, the produce to that of other people, whose subsistence, conveniencies, and amusements, are augmented by the labour of those workmen. The intention of the fixed capital is to increase the productive powers of labour, or to enable the same number of labourers to perform a much greater quantity of work. In a farm where all the necessary buildings, fences, drains, communications, &c. are in the most perfect good order, the same number of labourers and labouring cattle will raise a much greater produce, than in one of equal extent and equally good ground, but not furnished with equal conveniencies. In manufactures, the same number of hands, assisted with the best machinery, will work up a much greater quantity of goods than with more imperfect instruments of trade. The expense which is properly laid out upon a fixed capital of any kind, is always repaid with great profit, and increases the annual produce by a much greater value than that of the support which such improvements require. This support, however, still requires a certain portion of that produce. A certain quantity of materials, and the labour of a certain number of workmen, both of which might have been immediately employed to augment the food, clothing, and lodging, the subsistence and conveniencies of the society, are thus diverted to another employment, highly advantageous indeed, but still different from this one. It is upon this account that all such improvements in mechanics, as enable the same number of workmen to perform an equal quantity of work with cheaper and simpler machinery than had been usual before, are always regarded as advantageous to every society. A certain quantity of materials, and the labour of a certain number of workmen, which had before been employed in supporting a more complex and expensive machinery, can afterwards be applied to augment the quantity of work which that or any other machinery is useful only for performing. The undertaker of some great manufactory, who employs a thousand a-year in the maintenance of his machinery, if he can reduce this expense to five hundred, will naturally employ the other five hundred in purchasing an additional quantity of materials, to be wrought up by an additional number of workmen. The quantity of that work, therefore, which his machinery was useful only for performing, will naturally be augmented, and with it all the advantage and conveniency which the society can derive from that work. The expense of maintaining the fixed capital in a great country, may very properly be compared to that of repairs in a private estate. The expense of repairs may frequently be necessary for supporting the produce of the estate, and consequently both the gross and the neat rent of the landlord. When by a more proper direction, however, it can be diminished without occasioning any diminution of produce, the gross rent remains at least the same as before, and the neat rent is necessarily augmented. But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed, money, provisions, materials, and finished work, the three last, it has already been observed, are regularly withdrawn from it, and placed either in the fixed capital of the society, or in their stock reserved for immediate consumption. Whatever portion of those consumable goods is not employed in maintaining the former, goes all to the latter, and makes a part of the neat revenue of the society. The maintenance of those three parts of the circulating capital, therefore, withdraws no portion of the annual produce from the neat revenue of the society, besides what is necessary for maintaining the fixed capital. The circulating capital of a society is in this respect different from that of an individual. That of an individual is totally excluded from making any part of his neat revenue, which must consist altogether in his profits. But though the circulating capital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenue. Though the whole goods in a merchant's shop must by no means be placed in his own stock reserved for immediate consumption, they may in that of other people, who, from a revenue derived from other funds, may regularly replace their value to him, together with its profits, without occasioning any diminution either of his capital or of theirs. Money, therefore, is the only part of the circulating capital of a society, of which the maintenance can occasion any diminution in their neat revenue. The fixed capital, and that part of the circulating capital which consists in money, so far as they affect the revenue of the society, bear a very great resemblance to one another. First, as those machines and instruments of trade, &c. require a certain expense, first to erect them, and afterwards to support them, both which expenses, though they make a part of the gross, are deductions from the neat revenue of the society; so the stock of money which circulates in any country must require a certain expense, first to collect it, and afterwards to support it; both which expenses, though they make a part of the gross, are, in the same manner, deductions from the neat revenue of the society. A certain quantity of very valuable materials, gold and silver, and of very curious labour, instead of augmenting the stock reserved for immediate consumption, the subsistence, conveniencies, and amusements of individuals, is employed in supporting that great but expensive instrument of commerce, by means of which every individual in the society has his subsistence, conveniencies, and amusements, regularly distributed to him in their proper proportions. Secondly, as the machines and instruments of trade, &c. which compose the fixed capital either of an individual or of a society, make no part either of the gross or of the neat revenue of either; so money, by means of which the whole revenue of the society is regularly distributed among all its different members, makes itself no part of that revenue. The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them. In computing either the gross or the neat revenue of any society, we must always, from the whole annual circulation of money and goods, deduct the whole value of the money, of which not a single farthing can ever make any part of either. It is the ambiguity of language only which can make this proposition appear either doubtful or paradoxical. When properly explained and understood, it is almost self-evident. When we talk of any particular sum of money, we sometimes mean nothing but the metal pieces of which it is composed, and sometimes we include in our meaning some obscure reference to the goods which can be had in exchange for it, or to the power of purchasing which the possession of it conveys. Thus, when we say that the circulating money of England has been computed at eighteen millions, we mean only to express the amount of the metal pieces, which some writers have computed, or rather have supposed, to circulate in that country. But when we say that a man is worth fifty or a hundred pounds a-year, we mean commonly to express, not only the amount of the metal pieces which are annually paid to him, but the value of the goods which he can annually purchase or consume; we mean commonly to assertain what is or ought to be his way of living, or the quantity and quality of the necessaries and conveniencies of life in which he can with propriety indulge himself. When, by any particular sum of money, we mean not only to express the amount of the metal pieces of which it is composed, but to include in its signification some obscure reference to the goods which can be had in exchange for them, the wealth or revenue which it in this case denotes, is equal only to one of the two values which are thus intimated somewhat ambiguously by the same word, and to the latter more properly than to the former, to the money's worth more properly than to the money. Thus, if a guinea be the weekly pension of a particular person, he can in the course of the week purchase with it a certain quantity of subsistence, conveniencies, and amusements. In proportion as this quantity is great or small, so are his real riches, his real weekly revenue. His weekly revenue is certainly not equal both to the guinea and to what can be purchased with it, but only to one or other of those two equal values, and to the latter more properly than to the former, to the guinea's worth rather than to the guinea. If the pension of such a person was paid to him, not in gold, but in a weekly bill for a guinea, his revenue surely would not so properly consist in the piece of paper, as in what he could get for it. A guinea may be considered as a bill for a certain quantity of necessaries and conveniencies upon all the tradesmen in the neighbourhood. The revenue of the person to whom it is paid, does not so properly consist in the piece of gold, as in what he can get for it, or in what he can exchange it for. If it could be exchanged for nothing, it would, like a bill upon a bankrupt, be of no more value than the most useless piece of paper. Though the weekly or yearly revenue of all the different inhabitants of any country, in the same manner, may be, and in reality frequently is, paid to them in money, their real riches, however, the real weekly or yearly revenue of all of them taken together, must always be great or small, in proportion to the quantity of consumable goods which they can all of them purchase with this money. The whole revenue of all of them taken together is evidently not equal to both the money and the consumable goods, but only to one or other of those two values, and to the latter more properly than to the former. Though we frequently, therefore, express a person's revenue by the metal pieces which are annually paid to him, it is because the amount of those pieces regulates the extent of his power of purchasing, or the value of the goods which he can annually afford to consume. We still consider his revenue as consisting in this power of purchasing or consuming, and not in the pieces which convey it. But if this is sufficiently evident, even with regard to an individual, it is still more so with regard to a society. The amount of the metal pieces which are annually paid to an individual, is often precisely equal to his revenue, and is upon that account the shortest and best expression of its value. But the amount of the metal pieces which circulate in a society, can never be equal to the revenue of all its members. As the same guinea which pays the weekly pension of one man to-day, may pay that of another to-morrow, and that of a third the day thereafter, the amount of the metal pieces which annually circulate in any country, must always be of much less value than the whole money pensions annually paid with them. But the power of purchasing, or the goods which can successively be bought with the whole of those money pensions, as they are successively paid, must always be precisely of the same value with those pensions; as must likewise be the revenue of the different persons to whom they are paid. That revenue, therefore, cannot consist in those metal pieces, of which the amount is so much inferior to its value, but in the power of purchasing, in the goods which can successively be bought with them as they circulate from hand to hand. Money, therefore, the great wheel of circulation, the great instrument of commerce, like all other instruments of trade, though it makes a part, and a very valuable part, of the capital, makes no part of the revenue of the society to which it belongs; and though the metal pieces of which it is composed, in the course of their annual circulation, distribute to every man the revenue which properly belongs to him, they make themselves no part of that revenue. Thirdly, and lastly, the machines and instruments of trade, &c. which compose the fixed capital, bear this further resemblance to that part of the circulating capital which consists in money; that as every saving in the expense of erecting and supporting those machines, which does not diminish the introductive powers of labour, is an improvement of the neat revenue of the society; so every saving in the expense of collecting and supporting that part of the circulating capital which consists in money is an improvement of exactly the same kind. It is sufficiently obvious, and it has partly, too, been explained already, in what manner every saving in the expense of supporting the fixed capital is an improvement of the neat revenue of the society. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital. While his whole capital remains the same, the smaller the one part, the greater must necessarily be the other. It is the circulating capital which furnishes the materials and wages of labour, and puts industry into motion. Every saving, therefore, in the expense of maintaining the fixed capital, which does not diminish the productive powers of labour, must increase the fund which puts industry into motion, and consequently the annual produce of land and labour, the real revenue of every society. The substitution of paper in the room of gold and silver money, replaces a very expensive instrument of commerce with one much less costly, and sometimes equally convenient. Circulation comes to be carried on by a new wheel, which it costs less both to erect and to maintain than the old one. But in what manner this operation is performed, and in what manner it tends to increase either the gross or the neat revenue of the society, is not altogether so obvious, and may therefore require some further explication. There are several different sorts of paper money; but the circulating notes of banks and bankers are the species which is best known, and which seems best adapted for this purpose. When the people of any particular country have such confidence in the fortune, probity and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him, those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them. A particular banker lends among his customers his own promissory notes, to the extent, we shall suppose, of a hundred thousand pounds. As those notes serve all the purposes of money, his debtors pay him the same interest as if he had lent them so much money. This interest is the source of his gain. Though some of those notes are continually coming back upon him for payment, part of them continue to circulate for months and years together. Though he has generally in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may, frequently, be a sufficient provision for answering occasional demands. By this operation, therefore, twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. The same exchanges may be made, the same quantity of consumable goods may be circulated and distributed to their proper consumers, by means of his promissory notes, to the value of a hundred thousand pounds, as by an equal value of gold and silver money. Eighty thousand pounds of gold and silver, therefore, can in this manner be spared from the circulation of the country; and if different operations of the same kind should, at the same time, be carried on by many different banks and bankers, the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite. Let us suppose, for example, that the whole circulating money of some particular country amounted, at a particular time, to one million sterling, that sum being then sufficient for circulating the whole annual produce of their land and labour; let us suppose, too, that some time thereafter, different banks and bankers issued promissory notes payable to the bearer, to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands; there would remain, therefore, in circulation, eight hundred thousand pounds in gold and silver, and a million of bank notes, or eighteen hundred thousand pounds of paper and money together. But the annual produce of the land and labour of the country had before required only one million to circulate and distribute it to its proper consumers, and that annual produce cannot be immediately augmented by those operations of banking. One million, therefore, will be sufficient to circulate it after them. The goods to be bought and sold being precisely the same as before, the same quantity of money will be sufficient for buying and selling them. The channel of circulation, if I may be allowed such an expression, will remain precisely the same as before. One million we have supposed sufficient to fill that channel. Whatever, therefore, is poured into it beyond this sum, cannot run into it, but must overflow. One million eight hundred thousand pounds are poured into it. Eight hundred thousand pounds, therefore, must overflow, that sum being over and above what can be employed in the circulation of the country. But though this sum cannot be employed at home, it is too valuable to be allowed to lie idle. It will, therefore, be sent abroad, in order to seek that profitable employment which it cannot find at home. But the paper cannot go abroad; because at a distance from the banks which issue it, and from the country in which payment of it can be exacted by law, it will not be received in common payments. Gold and silver, therefore, to the amount of eight hundred thousand pounds, will be sent abroad, and the channel of home circulation will remain filled with a million of paper instead of a million of those metals which filled it before. But though so great a quantity of gold and silver is thus sent abroad, we must not imagine that it is sent abroad for nothing, or that its proprietors make a present of it to foreign nations. They will exchange it for foreign goods of some kind or another, in order to supply the consumption either of some other foreign country, or of their own. If they employ it in purchasing goods in one foreign country, in order to supply the consumption of another, or in what is called the carrying trade, whatever profit they make will be in addition to the neat revenue of their own country. It is like a new fund, created for carrying on a new trade; domestic business being now transacted by paper, and the gold and silver being converted into a fund for this new trade. If they employ it in purchasing foreign goods for home consumption, they may either, first, purchase such goods as are likely to be consumed by idle people, who produce nothing, such as foreign wines, foreign silks, &c.; or, secondly, they may purchase an additional stock of materials, tools, and provisions, in order to maintain and employ an additional number of industrious people, who reproduce, with a profit, the value of their annual consumption. So far as it is employed in the first way, is promotes prodigality, increases expense and consumption, without increasing production, or establishing any permanent fund for supporting that expense, and is in every respect hurtful to the society. So far as it is employed in the second way, it promotes industry; and though it increases the consumption of the society, it provides a permanent fund for supporting that consumption; the people who consume reproducing, with a profit, the whole value of their annual consumption. The gross revenue of the society, the annual produce of their land and labour, is increased by the whole value which the labour of these workmen adds to the materials upon which they are employed, and their neat revenue by what remains of this value, after deducting what is necessary for supporting the tools and instruments of their trade. That the greater part of the gold and silver which being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is, and must be, employed in purchasing those of this second kind, seems not only probable, but almost unavoidable. Though some particular men may sometimes increase their expense very considerably, though their revenue does not increase at all, we may be assured that no class or order of men ever does so; because, though the principles of common prudence do not always govern the conduct of every individual, they always influence that of the majority of every class or order. But the revenue of idle people, considered as a class or order, cannot, in the smallest degree, be increased by those operations of banking. Their expense in general, therefore, cannot be much increased by them, though that of a few individuals among them may, and in reality sometimes is. The demand of idle people, therefore, for foreign goods, being the same, or very nearly the same as before, a very small part of the money which, being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is likely to be employed in purchasing those for their use. The greater part of it will naturally be destined for the employment of industry, and not for the maintenance of idleness. When we compute the quantity of industry which the circulating capital of any society can employ, we must always have regard to those parts of it only which consist in provisions, materials, and finished work; the other, which consists in money, and which serves only to circulate those three, must always be deducted. In order to put industry into motion, three things are requisite; materials to work upon, tools to work with, and the wages or recompence for the sake of which the work is done. Money is neither a material to work upon, nor a tool to work with; and though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in the money, but in the money's worth; not in the metal pieces, but in what can be got for them. The quantity of industry which any capital can employ, must evidently be equal to the number of workmen whom it can supply with materials, tools, and a maintenance suitable to the nature of the work. Money may be requisite for purchasing the materials and tools of the work, as well as the maintenance of the workmen; but the quantity of industry which the whole capital can employ, is certainly not equal both to the money which purchases, and to the materials, tools, and maintenance, which are purchased with it, but only to one or other of those two values, and to the latter more properly than to the former. When paper is substituted in the room of gold and silver money, the quantity of the materials, tools, and maintenance, which the whole circulating capital can supply, may be increased by the whole value of gold and silver which used to be employed in purchasing them. The whole value of the great wheel of circulation and distribution is added to the goods which are circulated and distributed by means of it. The operation, in some measure, resembles that of the undertaker of some great work, who, in consequence of some improvement in mechanics, takes down his old machinery, and adds the difference between its price and that of the new to his circulating capital, to the fund from which he furnishes materials and wages to his workmen. What is the proportion which the circulating money of any country bears to the whole value of the annual produce circulated by means of it, it is perhaps impossible to determine. It has been computed by different authors at a fifth, at a tenth, at a twentieth, and at a thirtieth, part of that value. But how small soever the proportion which the circulating money may bear to the whole value of the annual produce, as but a part, and frequently but a small part, of that produce, is ever destined for the maintenance of industry, it must always bear a very considerable proportion to that part. When, therefore, by the substitution of paper, the gold and silver necessary for circulation is reduced to, perhaps, a fifth part of the former quantity, if the value of only the greater part of the other four-fifths be added to the funds which are destined for the maintenance of industry, it must make a very considerable addition to the quantity of that industry, and, consequently, to the value of the annual produce of land and labour. An operation of this kind has, within these five-and-twenty or thirty years, been performed in Scotland, by the erection of new banking companies in almost every considerable town, and even in some country villages. The effects of it have been precisely those above described. The business of the country is almost entirely carried on by means of the paper of those different banking companies, with which purchases and payments of all kinds are commonly made. Silver very seldom appears, except in the change of a twenty shilling bank note, and gold still seldomer. But though the conduct of all those different companies has not been unexceptionable, and has accordingly required an act of parliament to regulate it, the country, notwithstanding, has evidently derived great benefit from their trade. I have heard it asserted, that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there; and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh; of which the one, called the Bank of Scotland, was established by act of parliament in 1695, and the other, called the Royal Bank, by royal charter in 1727. Whether the trade, either of Scotland in general, or of the city of Glasgow in particular, has really increased in so great a proportion, during so short a period, I do not pretend to know. If either of them has increased in this proportion, it seems to be an effect too great to be accounted for by the sole operation of this cause. That the trade and industry of Scotland, however, have increased very considerably during this period, and that the banks have contributed a good deal to this increase, cannot be doubted. The value of the silver money which circulated in Scotland before the Union in 1707, and which, immediately after it, was brought into the Bank of Scotland, in order to be recoined, amounted to £411,117 : 10 : 9 sterling. No account has been got of the gold coin; but it appears from the ancient accounts of the mint of Scotland, that the value of the gold annually coined somewhat exceeded that of the silver[27]. There were a good many people, too, upon this occasion, who, from a diffidence of repayment, did not bring their silver into the Bank of Scotland; and there was, besides, some English coin, which was not called in. The whole value of the gold and silver, therefore, which circulated in Scotland before the Union, cannot be estimated at less than a million sterling. It seems to have constituted almost the whole circulation of that country; for though the circulation of the Bank of Scotland, which had then no rival, was considerable, it seems to have made but a very small part of the whole. In the present times, the whole circulation of Scotland cannot be estimated at less than two millions, of which that part which consists in gold and silver, most probably, does not amount to half a million. But though the circulating gold and silver of Scotland have suffered so great a diminution during this period, its real riches and prosperity do not appear to have suffered any. Its agriculture, manufactures, and trade, on the contrary, the annual produce of its land and labour, have evidently been augmented. It is chiefly by discounting bills of exchange, that is, by advancing money upon them before they are due, that the greater part of banks and bankers issue their promissory notes. They deduct always, upon whatever sum they advance, the legal interest till the bill shall become due. The payment of the bill, when it becomes due, replaces to the bank the value of what had been advanced, together with a clear profit of the interest. The banker, who advances to the merchant whose bill he discounts, not gold and silver, but his own promissory notes, has the advantage of being able to discount to a greater amount by the whole value of his promissory notes, which he finds, by experience, are commonly in circulation. He is thereby enabled to make his clear gain of interest on so much a larger sum. The commerce of Scotland, which at present is not very great, was still more inconsiderable when the two first banking companies were established; and those companies would have had but little trade, had they confined their business to the discounting of bills of exchange. They invented, therefore, another method of issuing their promissory notes; by granting what they called cash accounts, that is, by giving credit, to the extent of a certain sum (two or three thousand pounds for example), to any individual who could procure two persons of undoubted credit and good landed estate to become surety for him, that whatever money should be advanced to him, within the sum for which the credit had been given, should be repaid upon demand, together with the legal interest. Credits of this kind are, I believe, commonly granted by banks and bankers in all different parts of the world. But the easy terms upon which the Scotch banking companies accept of repayment are, so far as I know, peculiar to them, and have, perhaps, been the principal cause, both of the great trade of those companies, and of the benefit which the country has received from it. Whoever has a credit of this kind with one of those companies, and borrows a thousand pounds upon it, for example, may repay this sum piece-meal, by twenty and thirty pounds at a time, the company discounting a proportionable part of the interest of the great sum, from the day on which each of those small sums is paid in, till the whole be in this manner repaid. All merchants, therefore, and almost all men of business, find it convenient to keep such cash accounts with them, and are thereby interested to promote the trade of those companies, by readily receiving their notes in all payments, and by encouraging all those with whom they have any influence to do the same. The banks, when their customers apply to them for money, generally advance it to them in their own promissory notes. These the merchants pay away to the manufacturers for goods, the manufacturers to the farmers for materials and provisions, the farmers to their landlords for rent; the landlords repay them to the merchants for the conveniencies and luxuries with which they supply them, and the merchants again return them to the banks in order to balance their cash accounts, or to replace what they may have borrowed of them; and thus almost the whole money business of the country is transacted by means of them. Hence the great trade of those companies. By means of those cash accounts, every merchant can, without imprudence, carry on a greater trade than he otherwise could do. If there are two merchants, one in London and the other in Edinburgh, who employ equal stocks in the same branch of trade, the Edinburgh merchant can, without imprudence, carry on a greater trade, and give employment to a greater number of people, than the London merchant. The London merchant must always keep by him a considerable sum of money, either in his own coffers, or in those of his banker, who gives him no interest for it, in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. Let the ordinary amount of this sum be supposed five hundred pounds; the value of the goods in his warehouse must always be less, by five hundred pounds, than it would have been, had he not been obliged to keep such a sum unemployed. Let us suppose that he generally disposes of his whole stock upon hand, or of goods to the value of his whole stock upon hand, once in the year. By being obliged to keep so great a sum unemployed, he must sell in a year five hundred pounds worth less goods than he might otherwise have done. His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods; and the number of people employed in preparing his goods for the market must be less by all those that five hundred pounds more stock could have employed. The merchant in Edinburgh, on the other hand, keeps no money unemployed for answering such occasional demands. When they actually come upon him, he satisfies them from his cash account with the bank, and gradually replaces the sum borrowed with the money or paper which comes in from the occasional sales of his goods. With the same stock, therefore, he can, without imprudence, have at all times in his warehouse a larger quantity of goods than the London merchant; and can thereby both make a greater profit himself, and give constant employment to a greater number of industrious people who prepare those goods for the market. Hence the great benefit which the country has derived from this trade. The facility of discounting bills of exchange, it may be thought, indeed, gives the English merchants a conveniency equivalent to the cash accounts of the Scotch merchants. But the Scotch merchants, it must be remembered, can discount their bills of exchange as easily as the English merchants; and have, besides, the additional conveniency of their cash accounts. The whole paper money of every kind which can easily circulate in any country, never can exceed the value of the gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there, if there was no paper money. If twenty shilling notes, for example, are the lowest paper money current in Scotland, the whole of that currency which can easily circulate there, cannot exceed the sum of gold and silver which would be necessary for transacting the annual exchanges of twenty shillings value and upwards usually transacted within that country. Should the circulating paper at any time exceed that sum, as the excess could neither be sent abroad nor be employed in the circulation of the country, it must immediately return upon the banks, to be exchanged for gold and silver. Many people would immediately perceive that they had more of this paper than was necessary for transacting their business at home; and as they could not send it abroad, they would immediately demand payment for it from the banks. When this superfluous paper was converted into gold and silver, they could easily find a use for it, by sending it abroad; but they could find none while it remained in the shape of paper. There would immediately, therefore, be a run upon the banks to the whole extent of this superfluous paper, and if they showed any difficulty or backwardness in payment, to a much greater extent; the alarm which this would occasion necessarily increasing the run. Over and above the expenses which are common to every branch of trade, such as the expense of house-rent, the wages of servants, clerks, accountants, &c. the expenses peculiar to a bank consist chiefly in two articles: first, in the expense of keeping at all times in its coffers, for answering the occasional demands of the holders of its notes, a large sum of money, of which it loses the interest; and, secondly, in the expense of replenishing those coffers as fast as they are emptied by answering such occasional demands. A banking company which issues more paper than can be employed in the circulation of the country, and of which the excess is continually returning upon them for payment, ought to increase the quantity of gold and silver which they keep at all times in their coffers, not only in proportion to this excessive increase of their circulation, but in a much greater proportion; their notes returning upon them much faster than in proportion to the excess of their quantity. Such a company, therefore, ought to increase the first article of their expense, not only in proportion to this forced increase of their business, but in a much greater proportion. The coffers of such a company, too, though they ought to be filled much fuller, yet must empty themselves much faster than if their business was confined within more reasonable bounds, and must require not only a more violent, but a more constant and uninterrupted exertion of expense, in order to replenish them. The coin, too, which is thus continually drawn in such large quantities from their coffers, cannot be employed in the circulation of the country. It comes in place of a paper which is over and above what can be employed in that circulation, and is, therefore, over and above what can be employed in it too. But as that coin will not be allowed to lie idle, it must, in one shape or another, be sent abroad, in order to find that profitable employment which it cannot find at home; and this continual exportation of gold and silver, by enhancing the difficulty, must necessarily enhance still farther the expense of the bank, in finding new gold and silver in order to replenish those coffers, which empty themselves so very rapidly. Such a company, therefore, must in proportion to this forced increase of their business, increase the second article of their expense still more than the first. Let us suppose that all the paper of a particular bank, which the circulation of the country can easily absorb and employ, amounts exactly to forty thousand pounds, and that, for answering occasional demands, this bank is obliged to keep at all times in its coffers ten thousand pounds in gold and silver. Should this bank attempt to circulate forty-four thousand pounds, the four thousand pounds which are over and above what the circulation can easily absorb and employ, will return upon it almost as fast as they are issued. For answering occasional demands, therefore, this bank ought to keep at all times in its coffers, not eleven thousand pounds only, but fourteen thousand pounds. It will thus gain nothing by the interest of the four thousand pounds excessive circulation; and it will lose the whole expense of continually collecting four thousand pounds in gold and silver, which will be continually going out of its coffers as fast as they are brought into them. Had every particular banking company always understood and attended to its own particular interest, the circulation never could have been overstocked with paper money. But every particular banking company has not always understood or attended to its own particular interest, and the circulation has frequently been overstocked with paper money. By issuing too great a quantity of paper, of which the excess was continually returning, in order to be exchanged for gold and silver, the Bank of England was for many years together obliged to coin gold to the extent of between eight hundred thousand pounds and a million a-year; or, at an average, about eight hundred and fifty thousand pounds. For this great coinage, the bank (in consequence of the worn and degraded state into which the gold coin had fallen a few years ago) was frequently obliged to purchase gold bullion at the high price of four pounds an ounce, which it soon after issued in coin at L.3 : 17 : 10-1/2 an ounce, losing in this manner between two and a half and three per cent. upon the coinage of so very large a sum. Though the bank, therefore, paid no seignorage, though the government was properly at the expense of this coinage, this liberality of government did not prevent altogether the expense of the bank. The Scotch banks, in consequence of an excess of the same kind, were all obliged to employ constantly agents at London to collect money for them, at an expense which was seldom below one and a half or two per cent. This money was sent down by the waggon, and insured by the carriers at an additional expense of three quarters per cent. or fifteen shillings on the hundred pounds. Those agents were not always able to replenish the coffers of their employers so fast as they were emptied. In this case, the resource of the banks was, to draw upon their correspondents in London bills of exchange, to the extent of the sum which they wanted. When those correspondents afterwards drew upon them for the payment of this sum, together with the interest and commission, some of those banks, from the distress into which their excessive circulation had thrown them, had sometimes no other means of satisfying this draught, but by drawing a second set of bills, either upon the same, or upon some other correspondents in London; and the same sum, or rather bills for the same sum, would in this manner make sometimes more than two or three journeys; the debtor bank paying always the interest and commission upon the whole accumulated sum. Even those Scotch banks which never distinguished themselves by their extreme imprudence, were sometimes obliged to employ this ruinous resource. The gold coin which was paid out, either by the Bank of England or by the Scotch banks, in exchange for that part of their paper which was over and above what could be employed in the circulation of the country, being likewise over and above what could be employed in that circulation, was sometimes sent abroad in the shape of coin, sometimes melted down and sent abroad in the shape of bullion, and sometimes melted down and sold to the Bank of England at the high price of four pounds an ounce. It was the newest, the heaviest, and the best pieces only, which were carefully picked out of the whole coin, and either sent abroad or melted down. At home, and while they remained in the shape of coin, these heavy pieces were of no more value than the light; but they were of more value abroad, or when melted down into bullion at home. The Bank of England, notwithstanding their great annual coinage, found, to their astonishment, that there was every year the same scarcity of coin as there had been the year before; and that, notwithstanding the great quantity of good and new coin which was every year issued from the bank, the state of the coin, instead of growing better and better, became every year worse and worse. Every year they found themselves under the necessity of coining nearly the same quantity of gold as they had coined the year before; and from the continual rise in the price of gold bullion, in consequence of the continual wearing and clipping of the coin, the expense of this great annual coinage became, every year, greater and greater. The Bank of England, it is to be observed, by supplying its own coffers with coin, is indirectly obliged to supply the whole kingdom, into which coin is continually flowing from those coffers in a great variety of ways. Whatever coin, therefore, was wanted to support this excessive circulation both of Scotch and English paper money, whatever vacuities this excessive circulation occasioned in the necessary coin of the kingdom, the Bank of England was obliged to supply them. The Scotch banks, no doubt, paid all of them very dearly for their own imprudence and inattention: but the Bank of England paid very dearly, not only for its own imprudence, but for the much greater imprudence of almost all the Scotch banks. The over-trading of some bold projectors in both parts of the united kingdom, was the original cause of this excessive circulation of paper money. What a bank can with propriety advance to a merchant or undertaker of any kind, is not either the whole capital with which he trades, or even any considerable part of that capital; but that part of it only which he would otherwise be obliged to keep by him unemployed and in ready money, for answering occasional demands. If the paper money which the bank advances never exceeds this value, it can never exceed the value of the gold and silver which would necessarily circulate in the country if there was no paper money; it can never exceed the quantity which the circulation of the country can easily absorb and employ. When a bank discounts to a merchant a real bill of exchange, drawn by a real creditor upon a real debtor, and which, as soon as it becomes due, is really paid by that debtor; it only advances to him a part of the value which he would otherwise be obliged to keep by him unemployed and in ready money, for answering occasional demands. The payment of the bill, when it becomes due, replaces to the bank the value of what it had advanced, together with the interest. The coffers of the bank, so far as its dealings are confined to such customers, resemble a water-pond, from which, though a stream is continually running out, yet another is continually running in, fully equal to that which runs out; so that, without any further care or attention, the pond keeps always equally, or very near equally full. Little or no expense can ever be necessary for replenishing the coffers of such a bank. A merchant, without over-trading, may frequently have occasion for a sum of ready money, even when he has no bills to discount. When a bank, besides discounting his bills, advances him likewise, upon such occasions, such sums upon his cash account, and accepts of a piece-meal repayment, as the money comes in from the occasional sale of his goods, upon the easy terms of the banking companies of Scotland; it dispenses him entirely from the necessity of keeping any part of his stock by him unemployed and in ready money for answering occasional demands. When such demands actually come upon him, he can answer them sufficiently from his cash account. The bank, however, in dealing with such customers, ought to observe with great attention, whether, in the course of some short period (of four, five, six, or eight months, for example), the sum of the repayments which it commonly receives from them, is, or is not, fully equal to that of the advances which it commonly makes to them. If, within the course of such short periods, the sum of the repayments from certain customers is, upon most occasions, fully equal to that of the advances, it may safely continue to deal with such customers. Though the stream which is in this case continually running out from its coffers may be very large, that which is continually running into them must be at least equally large: so that, without any further care or attention, those coffers are likely to be always equally or very near equally full, and scarce ever to require any extraordinary expense to replenish them. If, on the contrary, the sum of the repayments from certain other customers, falls commonly very much short of the advances which it makes to them, it cannot with any safety continue to deal with such customers, at least if they continue to deal with it in this manner. The stream which is in this case continually running out from its coffers, is necessarily much larger than that which is continually running in; so that, unless they are replenished by some great and continual effort of expense, those coffers must soon be exhausted altogether. The banking companies of Scotland, accordingly, were for a long time very careful to require frequent and regular repayments from all their customers, and did not care to deal with any person, whatever might be his fortune or credit, who did not make, what they called, frequent and regular operations with them. By this attention, besides saving almost entirely the extraordinary expense of replenishing their coffers, they gained two other very considerable advantages. First, by this attention they were enabled to make some tolerable judgment concerning the thriving or declining circumstances of their debtors, without being obliged to look out for any other evidence besides what their own books afforded them; men being, for the most part, either regular or irregular in their repayments, according as their circumstances are either thriving or declining. A private man who lends out his money to perhaps half a dozen or a dozen of debtors, may, either by himself or his agents, observe and inquire both constantly and carefully into the conduct and situation of each of them. But a banking company, which lends money to perhaps five hundred different people, and of which the attention is continually occupied by objects of a very different kind, can have no regular information concerning the conduct and circumstances of the greater part of its debtors, beyond what its own books afford it. In requiring frequent and regular repayments from all their customers, the banking companies of Scotland had probably this advantage in view. Secondly, by this attention they secured themselves from the possibility of issuing more paper money than what the circulation of the country could easily absorb and employ. When they observed, that within moderate periods of time, the repayments of a particular customer were, upon most occasions, fully equal to the advances which they had made to him, they might he assured that the paper money which they had advanced to him had not, at any time, exceeded the quantity of gold and silver which he would otherwise have been obliged to keep by him for answering occasional demands; and that, consequently, the paper money, which they had circulated by his means, had not at any time exceeded the quantity of gold and silver which would have circulated in the country, had there been no paper money. The frequency, regularity, and amount of his repayments, would sufficiently demonstrate that the amount of their advances had at no time exceeded that part of his capital which he would otherwise have been obliged to keep by him unemployed, and in ready money, for answering occasional demands; that is, for the purpose of keeping the rest of his capital in constant employment. It is this part of his capital only which, within moderate periods of time, is continually returning in every dealer in the shape of money, whether paper or coin, and continually going from him in the same shape. If the advances of the bank had commonly exceeded this part of his capital, the ordinary amount of his repayments could not, within moderate periods of time, have equalled the ordinary amount of its advances. The stream which, by means of his dealings, was continually running into the coffers of the bank, could not have been equal to the stream which, by means of the same dealings was continually running out. The advances of the bank paper, by exceeding the quantity of gold and silver which, had there been no such advances, he would have been obliged to keep by him for answering occasional demands, might soon come to exceed the whole quantity of gold and silver which (the commerce being supposed the same) would have circulated in the country, had there been no paper money; and, consequently, to exceed the quantity which the circulation of the country could easily absorb and employ; and the excess of this paper money would immediately have returned upon the bank, in order to be exchanged for gold and silver. This second advantage, though equally real, was not, perhaps, so well understood by all the different banking companies in Scotland as the first. When, partly by the conveniency of discounting bills, and partly by that of cash accounts, the creditable traders of any country can be dispensed from the necessity of keeping any part of their stock by them unemployed, and in ready money, for answering occasional demands, they can reasonably expect no farther assistance from banks and bankers, who, when they have gone thus far, cannot, consistently with their own interest and safety, go farther. A bank cannot, consistently with its own interest, advance to a trader the whole, or even the greater part of the circulating capital with which he trades; because, though that capital is continually returning to him in the shape of money, and going from him in the same shape, yet the whole of the returns is too distant from the whole of the outgoings, and the sum of his the repayments could not equal the sum of his advances within much moderate periods of time as suit the conveniency of a bank. Still less could a bank afford to advance him any considerable part of his fixed capital; of the capital which the undertaker of an iron forge, for example, employs in erecting his forge and smelting-houses, his work-houses, and warehouses, the dwelling-houses of his workmen, &c.; of the capital which the undertaker of a mine employs in sinking his shafts, in erecting engines for drawing out the water, in making roads and waggon-ways, &c.; of the capital which the person who undertakes to improve land employs in clearing, draining, inclosing, manuring, and ploughing waste and uncultivated fields; in building farm-houses, with all their necessary appendages of stables, granaries, &c. The returns of the fixed capital are, in almost all cases, much slower than those of the circulating capital: and such expenses, even when laid out with the greatest prudence and judgment, mean very seldom return to the undertaker till after period of many years, a period by far too distant to suit the conveniency of a bank. Traders and other undertakers may, no doubt with great propriety, carry on a very considerable part of their projects with borrowed money. In justice to their creditors, however, their own capital ought in this case to be sufficient to insure, if I may say so, the capital of those creditors; or to render it extremely improbable that those creditors should incur any loss, even though the success of the project should fall very much short of the expectation of the projectors. Even with this precaution, too, the money which is borrowed, and which it is meant should not be repaid till after a period of several years, ought not to be borrowed of a bank, but ought to be borrowed upon bond or mortgage, of such private people as propose to live upon the interest of their money, without taking the trouble themselves to employ the capital, and who are, upon that account, willing to lend that capital to such people of good credit as are likely lo keep it for several years. A bank, indeed, which lends its money without the expense of stamped paper, or of attorneys' fees for drawing bonds and mortgages, and which accepts of repayment upon the easy terms of the banking companies of Scotland, would, no doubt, be a very convenient creditor to such traders and undertakers. But such traders and undertakers would surely be most inconvenient debtors to such a bank. It is now more than five and twenty years since the paper money issued by the different banking companies of Scotland was fully equal, or rather was somewhat more than fully equal, to what the circulation of the country could easily absorb and employ. Those companies, therefore, had so long ago given all the assistance to the traders and other undertakers of Scotland which it is possible for banks and bankers, consistently with their own interest, to give. They had even done somewhat more. They had over-traded a little, and had brought upon themselves that loss, or at least that diminution of profit, which, in this particular business, never fails to attend the smallest degree of over-trading. Those traders and other undertakers, having got so much assistance from banks and bankers, wished to get still more. The banks, they seem to have thought, could extend their credits to whatever sum might be wanted, without incurring any other expense besides that of a few reams of paper. They complained of the contracted views and dastardly spirit of the directors of those banks, which did not, they said, extend their credits in proportion to the extension of the trade of the country; meaning, no doubt, by the extension of that trade, the extension of their own projects beyond what they could carry on either with their own capital, or with what they had credit to borrow of private people in the usual way of bond or mortgage. The banks, they seem to have thought, were in honour bound to supply the deficiency, and to provide them with all the capital which they wanted to trade with. The banks, however, were of a different opinion and upon their refusing to extend their credits, some of those traders had recourse to an expedient which, for a time, served their purpose, though at a much greater expense, yet as effectually as the utmost extension of bank credits could have done. This expedient was no other than the well known shift of drawing and redrawing; the shift to which unfortunate traders have sometimes recourse, when they are upon the brink of bankruptcy. The practice of raising money in this manner had been long known in England; and, during the course of the late war, when the high profits of trade afforded a great temptation to over-trading, is said to have been carried on to a very great extent. From England it was brought into Scotland, where, in proportion to the very limited commerce, and to the very moderate capital of the country, it was soon carried on to a much greater extent than it ever had been in England. The practice of drawing and redrawing is so well known to all men of business, that it may, perhaps, be thought unnecessary to give any account of it. But as this book may come into the hands of many people who are not men of business, and as the effects of this practice upon the banking trade are not, perhaps, generally understood, even by men of business themselves, I shall endeavour to explain it as distinctly as I can. The customs of merchants, which were established when the barbarous laws of Europe did not enforce the performance of their contracts, and which, during the course of the two last centuries, have been adopted into the laws of all European nations, have given such extraordinary privileges to bills of exchange, that money is more readily advanced upon them than upon any other species of obligation; especially when they are made payable within so short a period as two or three months after their date. If, when the bill becomes due, the acceptor does not pay it as soon as it is presented, he becomes from that moment a bankrupt. The bill is protested, and returns upon the drawer, who, if he does not immediately pay it, becomes likewise a bankrupt. If, before it came to the person who presents it to the acceptor for payment, it had passed through the hands of several other persons, who had successively advanced to one another the contents of it, either in money or goods, and who, to express that each of them had in his turn received those contents, had all of them in their order indorsed, that is, written their names upon the back of the bill; each indorser becomes in his turn liable to the owner of the bill for those contents, and, if he fails to pay, he becomes too, from that moment, a bankrupt. Though the drawer, acceptor, and indorsers of the bill, should all of them be persons of doubtful credit; yet, still the shortness of the date gives some security to the owner of the bill. Though all of them may be very likely to become bankrupts, it is a chance if they all become so in so short a time. The house is crazy, says a weary traveller to himself, and will not stand very long; but it is a chance if it falls to-night, and I will venture, therefore, to sleep in it to-night. The trader A in Edinburgh, we shall suppose, draws a bill upon B in London, payable two months after date. In reality B in London owes nothing to A in Edinburgh; but he agrees to accept of A's bill, upon condition, that before the term of payment he shall redraw upon A in Edinburgh for the same sum, together with the interest and a commission, another bill, payable likewise two months after date. B accordingly, before the expiration of the first two months, redraws this bill upon A in Edinburgh; who, again before the expiration of the second two months, draws a second bill upon B in London, payable likewise two months after date; and before the expiration of the third two months, B in London redraws upon A in Edinburgh another bill payable also two months after date. This practice has sometimes gone on, not only for several months, but for several years together, the bill always returning upon A in Edinburgh with the accumulated interest and commission of all the former bills. The interest was five per cent. in the year, and the commission was never less than one half per cent. on each draught. This commission being repeated more than six times in the year, whatever money A might raise by this expedient might necessarily have cost him something more than eight per cent in the year and sometimes a great deal more, when either the price of the commission happened to rise, or when he was obliged to pay compound interest upon the interest and commission of former bills. This practice was called raising money by circulation. In a country where the ordinary profits of stock, in the greater part of mercantile projects, are supposed to run between six and ten per cent. it must have been a very fortunate speculation, of which the returns could not only repay the enormous expense at which the money was thus borrowed for carrying it on, but afford, besides, a good surplus profit to the projector. Many vast and extensive projects, however, were undertaken, and for several years carried on, without any other fund to support them besides what was raised at this enormous expense. The projectors, no doubt, had in their golden dreams the most distinct vision of this great profit. Upon their awakening, however, either at the end of their projects, or when they were no longer able to carry them on, they very seldom, I believe, had the good fortune to find it.[28] The bills which A in Edinburgh drew upon B in London, he regularly discounted two months before they were due, with some bank or banker in Edinburgh; and the bills which B in London redrew upon A in Edinburgh, he as regularly discounted, either with the Bank of England, or with some other banker in London. Whatever was advanced upon such circulating bills was in Edinburgh advanced in the paper of the Scotch banks; and in London, when they were discounted at the Bank of England in the paper of that bank. Though the bills upon which this paper had been advanced were all of them repaid in their turn as soon as they became due, yet the value which had been really advanced upon the last bill was never really returned to the banks which advanced it, because, before each bill became due, another bill was always drawn to somewhat a greater amount than the bill which was soon to be paid: and the discounting of this other bill was essentially necessary towards the payment of that which was soon to be due. This payment, therefore, was altogether fictitious. The stream which, by means of those circulating bills of exchange, had once been made to run out from the coffers of the banks, was never replaced by any stream which really run into them. The paper which was issued upon those circulating bills of exchange amounted, upon many occasions, to the whole fund destined for carrying on some vast and extensive project of agriculture, commerce, or manufactures; and not merely to that part of it which, had there been no paper money, the projector would have been obliged to keep by him unemployed, and in ready money, for answering occasional demands. The greater part of this paper was, consequently, over and above the value of the gold and silver which would have circulated in the country, had there been no paper money. It was over and above, therefore, what the circulation of the country could easily absorb and employ, and upon that account, immediately returned upon the banks, in order to be exchanged for gold and silver, which they were to find as they could. It was a capital which those projectors had very artfully contrived to draw from those banks, not only without their knowledge or deliberate consent, but for some time, perhaps, without their having the most distant suspicion that they had really advanced it. When two people, who are continually drawing and redrawing upon one another, discount their bills always with the same banker, he must immediately discover what they are about, and see clearly that they are trading, not with any capital of their own, but with the capital which he advances to them. But this discovery is not altogether so easy when they discount their bills sometimes with one banker, and sometimes with another, and when the two same persons do not constantly draw and redraw upon one another, but occasionally run the round of a great circle of projectors, who find it for their interest to assist one another in this method of raising money and to render it, upon that account, as difficult as possible to distinguish between a real and a fictitious bill of exchange, between a bill drawn by a real creditor upon a real debtor, and a bill for which there was properly no real creditor but the bank which discounted it, nor any real debtor but the projector who made use of the money. When a banker had even made this discovery, he might sometimes make it too late, and might find that he had already discounted the bills of those projectors to so great an extent, that, by refusing to discount any more, he would necessarily make them all bankrupts; and thus by ruining them, might perhaps ruin himself. For his own interest and safety, therefore, he might find it necessary, in this very perilous situation, to go on for some time, endeavouring, however, to withdraw gradually, and, upon that account, making every day greater and greater difficulties about discounting, in order to force these projectors by degrees to have recourse, either to other bankers, or to other methods of raising money: so as that he himself might, as soon as possible, get out of the circle. The difficulties, accordingly, which the Bank of England, which the principal bankers in London, and which even the more prudent Scotch banks began, after a certain time, and when all of them had already gone too far, to make about discounting, not only alarmed, but enraged, in the highest degree, those projectors. Their own distress, of which this prudent and necessary reserve of the banks was, no doubt, the immediate occasion, they called the distress of the country; and this distress of the country, they said, was altogether owing to the ignorance, pusillanimity, and bad conduct of the banks, which did not give a sufficiently-liberal aid to the spirited undertakings of those who exerted themselves in order to beautify, improve, and enrich the country. It was the duty of the banks, they seemed to think, to lend for as long a time, and to as great an extent, as they might wish to borrow. The banks, however, by refusing in this manner to give more credit to those to whom they had already given a great deal too much, took the only method by which it was now possible to save either their own credit, or the public credit of the country. In the midst of this clamour and distress, a new bank was established in Scotland, for the express purpose of relieving the distress of the country. The design was generous; but the execution was imprudent, and the nature and causes of the distress which it meant to relieve, were not, perhaps, well understood. This bank was more liberal then any other had ever been, both in granting cash-accounts, and in discounting bills of exchange. With regard to the latter, it seems to have made scarce any distinction between real and circulating bills, but to have discounted all equally. It was the avowed principle of this bank to advance upon any reasonable security, the whole capita, which was to be employed in those improvements of which the returns are the most slow and distant, such as the improvements of land. To promote such improvements was even said to be the chief or the public-spirited purposes for which it was instituted. By its liberality in granting cash-accounts, and in discounting bills of exchange, it, no doubt, issued great quantities of its bank notes. But those bank notes being, the greater part of them, over and above what the circulation of the country could easily absorb and employ, returned upon it, in order to be exchanged for gold and silver, as fast as they were issued. Its coffers were never well filled. The capital which had been subscribed to this bank, at two different subscriptions, amounted to one hundred and sixty thousand pounds, of which eighty per cent. only was paid up. This sum ought to have been paid in at several different instalments. A great part of the proprietors, when they paid in their first instalment, opened a cash-account with the bank; and the directors, thinking themselves obliged to treat their own proprietors with the same liberality with which they treated all other man, allowed many of them to borrow upon this cash-account what they paid in upon all their subsequent instalments. Such payments, therefore, only put into one coffer what had the moment before been taken out of another. But had the coffers of this bank been filled ever so well, its excessive circulation must have emptied them faster than they could have been replenished by any other expedient but the ruinous one of drawing upon London; and when the bill became due, paying it, together with interest and commission, by another draught upon the same place. Its coffers having been filled so very ill, it is said to have been driven to this resource within a very few months after it began to do business. The estates of the proprietors of this bank were worth several millions, and, by their subscription to the original bond or contract of the bank, were really pledged for answering all its engagements. By means of the great credit which so great a pledge necessarily gave it, it was, notwithstanding its too liberal conduct, enabled to entry on business for more than two years. When it was obliged to stop, it had in the circulation about two hundred thousand pounds in bank notes. In order to support the circulation of those notes, which were continually returning upon it as fast as they were issued, it had been constantly in the practice of drawing bills of exchange upon London, of which the number and value were continually increasing, and, when it stopt, amounted to upwards of six hundred thousand pounds. This bank, therefore, had, in little more than the course of two years, advanced to different people upwards of eight hundred thousand pounds at five per cent. Upon the two hundred thousand pounds which it circulated in bank notes, this five per cent. might perhaps be considered as a clear gain, without any other deduction besides the expense of management. But upon upwards of six hundred thousand pounds, for which it was continually drawing bills of exchange upon London, it was paying, in the way of interest and commission, upwards of eight per cent. and was consequently losing more than three per cent. upon more than three-fourths of all its dealings. The operations of this bank seem to have produced effects quite opposite to those which were intended by the particular persons who planned and directed it. They seem to have intended to support the spirited undertakings, for as such they considered them, which were at that time carrying on in different parts of the country; and, at the some time, by drawing the whole banking business to themselves, to supplant all the other Scotch banks, particularly those established at Edinburgh, whose backwardness in discounting bills of exchange had given some offence. This bank, no doubt, gave some temporary relief to those projectors, and enabled them to carry on their projects for about two years longer than they could otherwise have done. But it thereby only enabled them to get so much deeper into debt; so that, when rain came, it fell so much the heavier both upon them and upon their their creditors. The operations of this bank, therefore, instead of relieving, in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon their country. It would have been much better for themselves, their creditors, and their country, had the greater part of them been obliged to stop two years sooner than they actually did. The temporary relief, however, which this bank afforded to those projectors, proved a real and permanent relief to the other Scotch banks. All the dealers in circulating bills of exchange, which those other banks had become so backward in discounting, had recourse to this new bank, where they were received with open arms. Those other banks, therefore, were enabled to get very easily out of that fatal circle, from which they could not otherwise have disengaged themselves without incurring a considerable loss, and perhaps, too, even some degree of discredit. In the long-run, therefore, the operations of this bank increased the real distress of the country, which it meant to relieve; and effectually relieved, from a very great distress, those rivals whom it meant to supplant. At the first setting out of this bank, it was the opinion of some people, that how fast soever its coffers might be emptied, it might easily replenish them, by raising money upon the securities of those to whom it had advanced its paper. Experience, I believe, soon convinced them that this method of raising money was by much too slow to answer their purpose; and that coffers which originally were so ill filled, and which emptied themselves so very fast, could be replenished by no other expedient but the ruinous one of drawing bills upon London, and when they became due, paying them by other draughts on the same place, with accumulated interest and commission. But though they had been able by this method to raise money as fast as they wanted it, yet, instead of making a profit, they must have suffered a loss of every such operation; so that in the long-run they must have ruined themselves as a mercantile company, though perhaps not so soon as by the more expensive practice of drawing and redrawing. They could still have made nothing by the interest of the paper, which, being over and above what the circulation of the country could absorb and employ, returned upon them in order to be exchanged for gold and silver, as fast as they issued it; and for the payment of which they were themselves continually obliged to borrow money. On the contrary, the whole expense of this borrowing, of employing agents to look out for people who had money to lend, of negotiating with those people, and of drawing the proper bond or assignment, must have fallen upon them, and have been so much clear loss upon the balance of their accounts. The project of replenishing their coffers in this manner may be compared to that of a man who had a water-pond from which a stream was continually running out, and into which no stream was continually running, but who proposed to keep it always equally full, by employing a number of people to go continually with buckets to a well at some miles distance, in order to bring water to replenish it. But though this operation had proved not only practicable, but profitable to the bank, as a mercantile company; yet the country could have derived no benefit from it, but, on the contrary, must have suffered a very considerable loss by it. This operation could not augment, in the smallest degree, the quantity of money to be lent. It could only have erected this bank into a sort of general loan office for the whole country. Those who wanted to borrow must have applied to this bank, instead of applying to the private persons who had lent it their money. But a bank which lends money, perhaps to five hundred different people, the greater part of whom its directors can know very little about, is not likely to be more judicious in the choice of its debtors than a private person who lends out his money among a few people whom he knows, and in whose sober and frugal conduct he thinks he has good reason to confide. The debtors of such a bank as that whose conduct I have been giving some account of were likely, the greater part of them, to be chimerical projectors, the drawers and redrawers of circulating bills of exchange, who would employ the money in extravagant undertakings, which, with all the assistance that could be given them, they would probably never be able to complete, and which, if they should be completed, would never repay the expense which they had really cost, would never afford a fund capable of maintaining a quantity of labour equal to that which had been employed about them. The sober and frugal debtors of private persons, on the contrary, would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals, and which, though they might have less of the grand and the marvellous, would have more of the solid and the profitable; which would repay with a large profit whatever had been laid out upon them, and which would thus afford a fund capable of maintaining a much greater quantity of labour than that which had been employed about them. The success of this operation, therefore, without increasing in the smallest degree the capital of the country, would only have transferred a great part of it from prudent and profitable to imprudent and unprofitable undertakings. That the industry of Scotland languished for want of money to employ it, was the opinion of the famous Mr Law. By establishing a bank of a particular kind, which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country, he proposed to remedy this want of money. The parliament of Scotland, when he first proposed his project, did not think proper to adopt it. It was afterwards adopted, with some variations, by the Duke of Orleans, at that time regent of France. The idea of the possibility of multiplying paper money to almost any extent was the real foundation of what is called the Mississippi scheme, the most extravagant project, both of banking and stock-jobbing, that perhaps the world ever saw. The different operations of this scheme are explained so fully, so clearly, and with so much order and distinctness, by Mr Du Verney, in his Examination of the Political Reflections upon commerce and finances of Mr Du Tot, that I shall not give any account of them. The principles upon which it was founded are explained by Mr Law himself, in a discourse concerning money and trade, which he published in Scotland when he first proposed his project. The splendid but visionary ideas which are set forth in that and some other works upon the same principles, still continue to make an impression upon many people, and have, perhaps, in part, contributed to that excess of banking, which has of late been complained of, both in Scotland and in other places. The Bank of England is the greatest bank of circulation in Europe. It was incorporated, in pursuance of an act of parliament, by a charter under the great seal, dated the 27th of July 1694. It at that time advanced to government the sum of L.1,200,000 for an annuity of L.100,000, or for L.96,000 a-year, interest at the rate of eight per cent. and L.4,000 a-year for the expense of management. The credit of the new government, established by the Revolution, we may believe, must have been very low, when it was obliged to borrow at so high an interest. In 1697, the bank was allowed to enlarge its capital stock, by an ingraftment of L.1,001,171 : 10s. Its whole capital stock, therefore, amounted at this time to L.2,201,171 : 10s. This ingraftment is said to have been for the support of public credit. In 1696, tallies had been at forty, and fifty, and sixty per cent. discount, and bank notes at twenty per cent.[29] During the great re-coinage of the silver, which was going on at this time, the bank had thought proper to discontinue the payment of its notes, which necessarily occasioned their discredit. In pursuance of the 7th Anne, c. 7, the bank advanced and paid into the exchequer the sum of L.400,000; making in all the sum of L.1,600,000, which it had advanced upon its original annuity of L.96,000 interest, and L.4,000 for expense of management. In 1708, therefore, the credit of government was as good as that of private persons, since it could borrow at six per cent. interest, the common legal and market rate of those times. In pursuance of the same act, the bank cancelled exchequer bills to the amount of L.1,775,027 17s. 10-1/2d. at six per cent. interest, and was at the same time allowed to take in subscriptions for doubling its capital. In 1708, therefore, the capital of the bank amounted to L.4,402,343; and it had advanced to government the sum of L.3,375,027 : 17 : 10-1/2. By a call of fifteen per cent. in 1709, there was paid in, and made stock, L.656,204 : 1 : 9d.; and by another of ten per cent. in 1710, L.501,448 : 12 : 11. In consequence of those two calls, therefore, the bank capital amounted to L.5,559,995 : 14 : 8. In pursuance of the 3d George I. c. 8, the bank delivered up two millions of exchequer bills to be cancelled. It had at this time, therefore, advanced to government L.5,375,027 : 17 : 10d. In pursuance of the 8th George I. c. 21, the bank purchased of the South-sea company, stock to the amount of L.4,000,000; and in 1722, in consequence of the subscriptions which it had taken in for enabling it to make this purchase, its capital stock was increased by L.3,400,000. At this time, therefore, the bank had advanced to the public L.9,375,027 17s. 10-1/2d.; and its capital stock amounted only to L.8,959,995 : 14 : 8. It was upon this occasion that the sum which the bank had advanced to the public, and for which it received interest, began first to exceed its capital stock, or the sum for which it paid a dividend to the proprietors of bank stock; or, in other words, that the bank began to have an undivided capital, over and above its divided one. It has continued to have an undivided capital of the same kind ever since. In 1746, the bank had, upon different occasions, advanced to the public L.11,686,800, and its divided capital had been raised by different calls and subscriptions to L.10,780,000. The state of those two sums has continued to be the same ever since. In pursuance of the 4th of George III. c. 25, the bank agreed to pay to government for the renewal of its charter L.110,000, without interest or re-payment. This sum, therefore did not increase either of these two other sums. The dividend of the bank has varied according to the variations in the rate of the interest which it has, at different times, received for the money it had advanced to the public, as well as according to other circumstances. This rate of interest has gradually been reduced from eight to three per cent. For some years past, the bank dividend has been at five and a half per cent. The stability of the bank of England is equal to that of the British government. All that it has advanced to the public must be lost before its creditors can sustain any loss. No other banking company in England can be established by act of parliament, or can consist of more than six members. It acts, not only as an ordinary bank, but as a great engine of state. It receives and pays the greater part of the annuities which are due to the creditors of the public; it circulates exchequer bills; and it advances to government the annual amount of the land and malt taxes, which are frequently not paid up till some years thereafter. In these different operations, its duty to the public may sometimes have obliged it, without any fault of its directors, to overstock the circulation with paper money. It likewise discounts merchants' bills, and has upon several different occasions, supported the credit of the principal houses, not only of England, but of Hamburgh and Holland. Upon one occasion, in 1768, it is said to have advanced for this purpose, in one week, about L.1,600,000, a great part of it in bullion. I do not, however, pretend to warrant either the greatness of the sum, or the shortness of the time. Upon other occasions, this great company has been reduced to the necessity of paying in sixpences. It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the must judicious operations of banking can increase the industry of the country. That part of his capital which a dealer is obliged to keep by him unemployed and in ready money, for answering occasional demands, is so much dead stock, which, so long as it remains in this situation, produces nothing, either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stock; into materials to work upon; into tools to work with and into provisions and subsistence to work for; into stock which produces something both to himself and to his country. The gold and silver money which circulates in any country, and by means of which, the produce of its land and labour is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock; into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour. The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Dædalian wings of paper money, as when they travel about upon the solid ground of gold and silver. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them. An unsuccessful war, for example, in which the enemy got possession of the capital, and consequently of that treasure which supported the credit of the paper money, would occasion much greater confusion in a country where the whole circulation was carried on by paper, than in one where the greater part of it was carried on by gold and silver. The usual instrument of commerce having lost its value, no exchanges could be made but either by barter or upon credit. All taxes having been usually paid in paper money, the prince would not have wherewithal either to pay his troops, or to furnish his magazines; and the state of the country would be much more irretrievable than if the greater part of its circulation had consisted in gold and silver. A prince, anxious to maintain his dominions at all times in the state in which he can most easily defend them, ought upon this account to guard not only against that excessive multiplication of paper money which ruins the very banks which issue it, but even against that multiplication of it which enables them to fill the greater part of the circulation of the country with it. The circulation of every country may be considered as divided into two different branches; the circulation of the dealers with one another, and the circulation between the dealers and the consumers. Though the same pieces of money, whether paper or metal, may be employed sometimes in the one circulation and sometimes in the other; yet as both are constantly going on at the same time, each requires a certain stock of money, of one kind or another, to carry it on. The value of the goods circulated between the different dealers never can exceed the value of those circulated between the dealers and the consumers; whatever is bought by the dealers being ultimately destined to be sold to the consumers. The circulation between the dealers, as it is carried on by wholesale, requires generally a pretty large sum for every particular transaction. That between the dealers and the consumers, on the contrary, as it is generally carried on by retail, frequently requires but very small ones, a shilling, or even a halfpenny, being often sufficient. But small sums circulate much faster than large ones. A shilling changes masters more frequently than a guinea, and a halfpenny more frequently than a shilling. Though the annual purchases of all the consumers, therefore, are at least equal in value to those of all the dealers, they can generally be transacted with a much smaller quantity of money; the same pieces, by a more rapid circulation, serving as the instrument of many more purchases of the one kind than of the other. Paper money may be so regulated as either to confine itself very much to the circulation between the different dealers, or to extend itself likewise to a great part of that between the dealers and the consumers. Where no bank notes are circulated under £10 value, as in London, paper money confines itself very much to the circulation between the dealers. When a ten pound bank note comes into the hands of a consumer, he is generally obliged to change it at the first shop where he has occasion to purchase five shillings worth of goods; so that it often returns into the hands of a dealer before the consumer has spent the fortieth part of the money. Where bank notes are issued for so small sums as 20s. as in Scotland, paper money extends itself to considerable part of the circulation between dealers and consumers. Before the act of parliament which put a stop to the circulation of ten and five shilling notes, it filled a still greater part of that circulation. In the currencies of North America, paper was commonly issued for so small a sum as a shilling, and filled almost the whole of that circulation. In some paper currencies of Yorkshire, it was issued even for so small a sum as a sixpence. Where the issuing of bank notes for such very small sums is allowed, and commonly practised, many mean people are both enabled and encouraged to become bankers. A person whose promissory note for £5, or even for 20s. would be rejected by everybody, will get it to be received without scruple when it is issued for so small a sum as a sixpence. But the frequent bankruptcies to which such beggarly bankers must be liable, may occasion a very considerable inconveniency, and sometimes even a very great calamity, to many poor people who had received their notes in payment. It were better, perhaps, that no bank notes were issued in any part of the kingdom for a smaller sum than £5. Paper money would then, probably, confine itself, in every part of the kingdom, to the circulation between the different dealers, as much as it does at present in London, where no bank notes are issued under L.10 value; L.5 being, in most part of the kingdom, a sum which, though it will purchase, perhaps, little more than half the quantity of goods, is as much considered, and is as seldom spent all at once, as L.10 are amidst the profuse expense of London. Where paper money, it is to be observed, is pretty much confined to the circulation between dealers and dealers, as at London, there is always plenty of gold and silver. Where it extends itself to a considerable part of the circulation between dealers and consumers, as in Scotland, and still more in North America, it banishes gold and silver almost entirely from the country; almost all the ordinary transactions of its interior commerce being thus carried on by paper. The suppression of ten and five shilling bank notes, somewhat relieved the scarcity of gold and silver in Scotland; and the suppression of twenty shilling notes will probably relieve it still more. Those metals are said to have become more abundant in America, since the suppression or some of their paper currencies. They are said, likewise, to have been more abundant before the institution of those currencies. Though paper money should be pretty much confined to the circulation between dealers and dealers, yet banks and bankers might still be able to give nearly the same assistance to the industry and commerce of the country, as they had done when paper money filled almost the whole circulation. The ready money which a dealer is obliged to keep by him, for answering occasional demands, is destined altogether for the circulation between himself and other dealers of whom he buys goods. He has no occasion to keep any by him for the circulation between himself and the consumers, who are his customers, and who bring ready money to him, instead of taking any from him. Though no paper money, therefore, was allowed to be issued, but for such sums as would confine it pretty much to the circulation between dealers and dealers; yet partly by discounting real bills of exchange, and partly by lending upon cash-accounts, banks and bankers might still be able to relieve the greater part of those dealers from the necessity of keeping any considerable part of their stock by them unemployed, and in ready money, for answering occasional demands. They might still be able to give the utmost assistance which banks and bankers can with propriety give to traders of every kind. To restrain private people, it may be said, from receiving in payment the promissory notes of a banker for any sum, whether great or small, when they themselves are willing to receive them; or, to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty, which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed. A paper money, consisting in bank notes, issued by people of undoubted credit, payable upon demand, without any condition, and, in fact, always readily paid as soon as presented, is, in every respect, equal in value to gold and silver money, since gold and silver money can at any time be had for it. Whatever is either bought or sold for such paper, must necessarily be bought or sold as cheap as it could have been for gold and silver. The increase of paper money, it has been said, by augmenting the quantity, and consequently diminishing the value, of the whole currency, necessarily augments the money price of commodities. But as the quantity of gold and silver, which is taken from the currency, is always equal to the quantity of paper which is added to it, paper money does not necessarily increase the quantity of the whole currency. From the beginning of the last century to the present time, provisions never were cheaper in Scotland than in 1759, though, from the circulation of ten and five shilling bank notes, there was then more paper money in the country than at present. The proportion between the price of provisions in Scotland and that in England is the same now as before the great multiplication of banking companies in Scotland. Corn is, upon most occasions, fully as cheap in England as in France, though there is a great deal of paper money in England, and scarce any in France. In 1751 and 1752, when Mr Hume published his Political Discourses, and soon after the great multiplication of paper money in Scotland, there was a very sensible rise in the price of provisions, owing, probably, to the badness of the seasons, and not to the multiplication of paper money. It would be otherwise, indeed, with a paper money, consisting in promissory notes, of which the immediate payment depended, in any respect, either upon the good will of those who issued them, or upon a condition which the holder of the notes might not always have it in his power to fulfil, or of which the payment was not exigible till after a certain number of years, and which, in the meantime, bore no interest. Such a paper money would, no doubt, fall more or less below the value of gold and silver, according as the difficulty or uncertainty of obtaining immediate payment was supposed to be greater or less, or according to the greater or less distance of time at which payment was exigible. Some years ago the different banking companies of Scotland were in the practice of inserting into their bank notes, what they called an optional clause; by which they promised payment to the bearer, either as soon as the note should be presented, or, in the option of the directors, six months after such presentment, together with the legal interest for the said six months. The directors of some of those banks sometimes took advantage of this optional clause, and sometimes threatened those who demanded gold and silver in exchange for a considerable number of their notes, that they would take advantage of it, unless such demanders would content themselves with a part of what they demanded. The promissory notes of those banking companies constituted, at that time, the far greater part of the currency of Scotland, which this uncertainty of payment necessarily degraded below the value of gold and silver money. During the continuance of this abuse (which prevailed chiefly in 1762, 1763, and 1764), while the exchange between London and Carlisle was at par, that between London and Dumfries would sometimes be four per cent. against Dumfries, though this town is not thirty miles distant from Carlisle. But at Carlisle, bills were paid in gold and silver; whereas at Dumfries they were paid in Scotch bank notes; and the uncertainty of getting those bank notes exchanged for gold and silver coin, had thus degraded them four per cent. below the value of that coin. The same act of parliament which suppressed ten and five shilling bank notes, suppressed likewise this optional clause, and thereby restored the exchange between England and Scotland to its natural rate, or to what the course of trade and remittances might happen to make it. In the paper currencies of Yorkshire, the payment of so small a sum as 6d. sometimes depended upon the condition, that the holder of the note should bring the change of a guinea to the person who issued it; a condition which the holders of such notes might frequently find it very difficult to fulfil, and which must have degraded this currency below the value of gold and silver money. An act of parliament, accordingly, declared all such clauses unlawful, and suppressed, in the same manner as in Scotland, all promissory notes, payable to the bearer, under 20s. value. The paper currencies of North America consisted, not in bank notes payable to the bearer on demand, but in a government paper, of which the payment was not exigible till several years after it was issued; and though the colony governments paid no interest to the holders of this paper, they declared it to be, and in fact rendered it, a legal tender of payment for the full value for which it was issued. But allowing the colony security to be perfectly good, L.100, payable fifteen years hence, for example, in a country where interest is at six per cent., is worth little more than L.40 ready money. To oblige a creditor, therefore, to accept of this as full payment for a debt of L.100, actually paid down in ready money, was an act of such violent injustice, as has scarce, perhaps, been attempted by the government of any other country which pretended to be free. It bears the evident marks of having originally been, what the honest and downright Doctor Douglas assures us it was, a scheme of fraudulent debtors to cheat their creditors. The government of Pennsylvania, indeed, pretended, upon their first emission of paper money, in 1722, to render their paper of equal value with gold and silver, by enacting penalties against all those who made any difference in the price of their goods when they sold them for a colony paper, and when they sold them for gold and silver; a regulation equally tyrannical, but much less effectual, than that which it was meant to support. A positive law may render a shilling a legal tender for a guinea, because it may direct the courts of justice to discharge the debtor who has made that tender; but no positive law can oblige a person who sells goods, and who is at liberty to sell or not to sell as he pleases, to accept of a shilling as equivalent to a guinea in the price of them. Notwithstanding any regulation of this kind, it appeared, by the course of exchange with Great Britain, that L.100 sterling was occasionally considered an equivalent, in some of the colonies, to L.130, and in others to so great a sum as L.1100 currency; this difference in the value arising from the difference in the quantity of paper emitted in the different colonies, and in the distance and probability of the term of its final discharge and redemption. No law, therefore, could be more equitable than the act of parliament, so unjustly complained of in the colonies, which declared, that no paper currency to be emitted there in time coming, should be a legal tender of payment. Pennsylvania was always more moderate in its emissions of paper money than any other of our colonies. Its paper currency, accordingly, is said never to have sunk below the value of the gold and silver which was current in the colony before the first emission of its paper money. Before that emission, the colony had raised the denomination of its coin, and had, by act of assembly, ordered 5s. sterling to pass in the colonies for 6s. 3d., and afterwards for 6s. 8d. A pound, colony currency, therefore, even when that currency was gold and silver, was more than thirty per cent. below the value of L.1 sterling; and when that currency was turned into paper, it was seldom much more than thirty per cent. below that value. The pretence for raising the denomination of the coin was to prevent the exportation of gold and silver, by making equal quantities of those metals pass for greater sums in the colony than they did in the mother country. It was found, however, that the price of all goods from the mother country rose exactly in proportion as they raised the denomination of their coin, so that their gold and silver were exported as fast as ever. The paper of each colony being received in the payment of the provincial taxes, for the full value for which it had been issued, it necessarily derived from this use some additional value, over and above what it would have had, from the real or supposed distance of the term of its final discharge and redemption. This additional value was greater or less, according as the quantity of paper issued was more or less above what could be employed in the payment of the taxes of the particular colony which issued it. It was in all the colonies very much above what could be employed in this manner. A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind, might thereby give a certain value to this paper money, even though the term of its final discharge and redemption should depend altogether upon the will of the prince. If the bank which issued this paper was careful to keep the quantity of it always somewhat below what could easily be employed in this manner, the demand for it might be such as to make it even bear a premium, or sell for somewhat more in the market than the quantity of gold or silver currency for which it was issued. Some people account in this manner for what is called the agio of the bank of Amsterdam, or for the superiority of bank money over current money, though this bank money, as they pretend, cannot be taken out of the bank at the will of the owner. The greater part of foreign bills of exchange must be paid in bank money, that is, by a transfer in the books of the bank, and the directors of the bank, they allege, are careful to keep the whole quantity of bank money always below what this use occasions a demand for. It is upon this account, they say, the bank money sells for a premium, or bears an agio of four or five per cent. above the same nominal sum of the gold and silver currency of the country. This account of the bank of Amsterdam, however, it will appear hereafter, is in a great measure chimerical. A paper currency which falls below the value of gold and silver coin, does not thereby sink the value of those metals, or occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind. The proportion between the value of gold and silver and that of goods of any other kind, depends in all cases, not upon the nature and quantity of any particular paper money, which may be current in any particular country, but upon the richness or poverty of the mines, which happen at any particular time to supply the great market of the commercial world with those metals. It depends upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary in order to bring thither a certain quantity of any other sort of goods. If bankers are restrained from issuing any circulating bank notes, or notes payable to the bearer, for less than a certain sum; and if they are subjected to the obligation of an immediate and unconditional payment of such bank notes as soon as presented, their trade may, with safety to the public, be rendered in all other respects perfectly free. The late multiplication of banking companies in both parts of the united kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public. It obliges all of them to be more circumspect in their conduct, and, by not extending their currency beyond its due proportion to their cash, to guard themselves against those malicious runs, which the rivalship of so many competitors is always ready to bring upon them. It restrains the circulation of each particular company within a narrower circle, and reduces their circulating notes to a smaller number. By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must sometimes happen, becomes of less consequence to the public. This free competition, too, obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so. CHAP. III. OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR. There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former as it produces a value, may be called productive, the latter, unproductive[30] labour. Thus the labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance, and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured. The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence, of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence, for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions; churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, &c. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production. Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country. This produce, how great soever, can never be infinite, but must have certain limits. According, therefore, as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands, the more in the one case, and the less in the other, will remain for the productive, and the next year's produce will be greater or smaller accordingly; the whole annual produce, if we except the spontaneous productions of the earth, being the effect of productive labour. Though the whole annual produce of the land and labour of every country is no doubt ultimately destined for supplying the consumption of its inhabitants, and for procuring a revenue to them; yet when it first comes either from the ground, or from the hands of the productive labourers, it naturally divides itself into two parts. One of them, and frequently the largest, is, in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock, or to some other person, as the rent of his land. Thus, of the produce of land, one part replaces the capital of the farmer; the other pays his profit and the rent of the landlord; and thus constitutes a revenue both to the owner of this capital, as the profits of his stock, and to some other person as the rent of his land. Of the produce of a great manufactory, in the same manner, one part, and that always the largest, replaces the capital of the undertaker of the work; the other pays his profit, and thus constitutes a revenue to the owner of this capital. That part of the annual produce of the land and labour of any country which replaces a capital, never is immediately employed to maintain any but productive hands. It pays the wages of productive labour only. That which is immediately destined for constituting a revenue, either as profit or as rent, may maintain indifferently either productive or unproductive hands. Whatever part of his stock a man employs as a capital, he always expects it to be replaced to him with a profit. He employs it, therefore, in maintaining productive hands only; and after having served in the function of a capital to him, it constitutes a revenue to them. Whenever he employs any part of it in maintaining unproductive hands of any kind, that part is from that moment withdrawn from his capital, and placed in his stock reserved for immediate consumption. Unproductive labourers, and those who do not labour at all, are all maintained by revenue; either, first, by that part of the annual produce which is originally destined for constituting a revenue to some particular persons, either as the rent of land, or as the profits of stock; or, secondly, by that part which, though originally destined for replacing a capital, and for maintaining productive labourers only, yet when it comes into their hands, whatever part of it is over and above their necessary subsistence, may be employed in maintaining indifferently either productive or unproductive hands. Thus, not only the great landlord or the rich merchant, but even the common workman, if his wages are considerable, may maintain a menial servant; or he may sometimes go to a play or a puppet-show, and so contribute his share towards maintaining one set of unproductive labourers; or he may pay some taxes, and thus help to maintain another set, more honourable and useful, indeed, but equally unproductive. No part of the annual produce, however, which had been originally destined to replace a capital, is ever directed towards maintaining unproductive hands, till after it has put into motion its full complement of productive labour, or all that it could put into motion in the way in which it was employed. The workman must have earned his wages by work done, before he can employ any part of them in this manner. That part, too, is generally but a small one. It is his spare revenue only, of which productive labourers have seldom a great deal. They generally have some, however; and in the payment of taxes, the greatness of their number may compensate, in some measure, the smallness of their contribution. The rent of land and the profits of stock are everywhere, therefore, the principal sources from which unproductive hands derive their subsistence. These are the two sorts of revenue of which the owners have generally most to spare. They might both maintain indifferently, either productive or unproductive hands. They seem, however, to have some predilection for the latter. The expense of a great lord feeds generally more idle than industrious people. The rich merchant, though with his capital he maintains industrious people only, yet by his expense, that is, by the employment of his revenue, he feeds commonly the very same sort as the great lord. The proportion, therefore, between the productive and unproductive hands, depends very much in every country upon the proportion between that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, and that which is destined for constituting a revenue, either as rent or as profit. This proportion is very different in rich from what it is in poor countries. Thus, at present, in the opulent countries of Europe, every large, frequently the largest, portion of the produce of the land, is destined for replacing the capital of the rich and independent farmer; the other for paying his profits, and the rent of the landlord. But anciently, during the prevalency of the feudal government, a very small portion of the produce was sufficient to replace the capital employed in cultivation. It consisted commonly in a few wretched cattle, maintained altogether by the spontaneous produce of uncultivated land, and which might, therefore, be considered as a part of that spontaneous produce. It generally, too, belonged to the landlord, and was by him advanced to the occupiers of the land. All the rest of the produce properly belonged to him too, either as rent for his land, or as profit upon this paltry capital. The occupiers of land were generally bondmen, whose persons and effects were equally his property. Those who were not bondmen were tenants at will; and though the rent which they paid was often nominally little more than a quit-rent, it really amounted to the whole produce of the land. Their lord could at all times command their labour in peace and their service in war. Though they lived at a distance from his house, they were equally dependent upon him as his retainers who lived in it. But the whole produce of the land undoubtedly belongs to him, who can dispose of the labour and service of all those whom it maintains. In the present state of Europe, the share of the landlord seldom exceeds a third, sometimes not a fourth part of the whole produce of the land. The rent of land, however, in all the improved parts of the country, has been tripled and quadrupled since those ancient times; and this third or fourth part of the annual produce is, it seems, three or four times greater than the whole had been before. In the progress of improvement, rent, though it increases in proportion to the extent, diminishes in proportion to the produce of the land. In the opulent countries of Europe, great capitals are at present employed in trade and manufactures. In the ancient state, the little trade that was stirring, and the few homely and coarse manufactures that were carried on, required but very small capitals. These, however, must have yielded very large profits. The rate of interest was nowhere less than ten per cent. and their profits must have been sufficient to afford this great interest. At present, the rate of interest, in the improved parts of Europe, is nowhere higher than six per cent.; and in some of the most improved, it is so low as four, three, and two per cent. Though that part of the revenue of the inhabitants which is derived from the profits of stock, is always much greater in rich than in poor countries, it is because the stock is much greater; in proportion to the stock, the profits are generally much less. That part of the annual produce, therefore, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, is not only much greater in rich than in poor countries, but bears a much greater proportion to that which is immediately destined for constituting a revenue either as rent or as profit. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter, but bear a much greater proportion to those which, though they may be employed to maintain either productive or unproductive hands, have generally a predilection for the latter. The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. We are more industrious than our forefathers, because, in the present times, the funds destined for the maintenance of industry are much greater in proportion to those which are likely to be employed in the maintenance of idleness, than they were two or three centuries ago. Our ancestors were idle for want of a sufficient encouragement to industry. It is better, says the proverb, to play for nothing, than to work for nothing. In mercantile and manufacturing towns, where the inferior ranks of people are chiefly maintained by the employment of capital, they are in general industrious, sober, and thriving; as in many English, and in most Dutch towns. In those towns which are principally supported by the constant or occasional residence of a court, and in which the inferior ranks of people are chiefly maintained by the spending of revenue, they are in general idle, dissolute, and poor; as at Rome, Versailles, Compeigne, and Fontainbleau. If you except Rouen and Bourdeaux, there is little trade or industry in any of the parliament towns of France; and the inferior ranks of people, being chiefly maintained by the expense of the members of the courts of justice, and of those who come to plead before them, are in general idle and poor. The great trade of Rouen and Bourdeaux seems to be altogether the effect of their situation. Rouen is necessarily the entrepot of almost all the goods which are brought either from foreign countries, or from the maritime provinces of France, for the consumption of the great city of Paris. Bourdeaux is, in the same manner, the entrepot of the wines which grow upon the banks of the Garronne, and of the rivers which run into it, one of the richest wine countries in the world, and which seems to produce the wine fittest for exportation, or best suited to the taste of foreign nations. Such advantageous situations necessarily attract a great capital by the great employment which they afford it; and the employment of this capital is the cause of the industry of those two cities. In the other parliament towns of France, very little more capital seems to be employed than what is necessary for supplying their own consumption; that is, little more than the smallest capital which can be employed in them. The same thing may be said of Paris, Madrid, and Vienna. Of those three cities, Paris is by far the most industrious, but Paris itself is the principal market of all the manufactures established at Paris, and its own consumption is the principal object of all the trade which it carries on. London, Lisbon, and Copenhagen, are, perhaps, the only three cities in Europe, which are both the constant residence of a court, and can at the same time be considered as trading cities, or as cities which trade not only for their own consumption, but for that of other cities and countries. The situation of all the three is extremely advantageous, and naturally fits them to be the entrepots of a great part of the goods destined for the consumption of distant places. In a city where a great revenue is spent, to employ with advantage a capital for any other purpose than for supplying the consumption of that city, is probably more difficult than in one in which the inferior ranks of people have no other maintenance but what they derive from the employment of such a capital. The idleness of the greater part of the people who are maintained by the expense of revenue, corrupts, it is probable, the industry of those who ought to be maintained by the employment of capital, and renders it less advantageous to employ a capital there than in other places. There was little trade or industry in Edinburgh before the Union. When the Scotch parliament was no longer to be assembled in it, when it ceased to be the necessary residence of the principal nobility and gentry of Scotland, it became a city of some trade and industry. It still continues, however, to be the residence of the principal courts of justice in Scotland, of the boards of customs and excise, &c. A considerable revenue, therefore, still continues to be spent in it. In trade and industry, it is much inferior to Glasgow, of which the inhabitants are chiefly maintained by the employment of capital. The inhabitants of a large village, it has sometimes been observed, after having made considerable progress in manufactures, have become idle and poor, in consequence of a great lord's having taken up his residence in their neighbourhood. The proportion between capital and revenue, therefore, seems everywhere to regulate the proportion between industry and idleness. Wherever capital predominates, industry prevails; wherever revenue, idleness. Every increase or diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry, the number of productive hands, and consequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants. Capitals are increased by parsimony, and diminished by prodigality and misconduct. Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner. Parsimony, and not industry, is the immediate cause of the increase of capital. Industry, indeed, provides the subject which parsimony accumulates; but whatever industry might acquire, if parsimony did not save and store up, the capital would never be the greater. Parsimony, by increasing the fund which is destined for the maintenance of productive hands, tends to increase the number of those hands whose labour adds to the value of the subject upon which it is bestowed. It tends, therefore, to increase the exchangeable value of the annual produce of the land and labour of the country. It puts into motion an additional quantity of industry, which gives an additional value to the annual produce. What is annually saved, is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people. That portion of his revenue which a rich man annually spends, is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, as, for the sake of the profit, it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time too, but by a different set of people: by labourers, manufacturers, and artificers, who re-produce, with a profit, the value of their annual consumption. His revenue, we shall suppose, is paid him in money. Had he spent the whole, the food, clothing, and lodging, which the whole could have purchased, would have been distributed among the former set of people. By saving a part of it, as that part is, for the sake of the profit, immediately employed as a capital, either by himself or by some other person, the food, clothing, and lodging, which may be purchased with it, are necessarily reserved for the latter. The consumption is the same, but the consumers are different. By what a frugal man annually saves, he not only affords maintenance to an additional number of productive hands, for that of the ensuing year, but like the founder of a public work-house he establishes, as it were, a perpetual fund for the maintenance of an equal number in all times to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right or deed of mortmain. It is always guarded, however, by a very powerful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can ever afterwards be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination. The prodigal perverts it in this manner: By not confining his expense within his income, he encroaches upon his capital. Like him who perverts the revenues of some pious foundation to profane purposes, he pays the wages of idleness with those funds which the frugality of his forefathers had, as it were, consecrated to the maintenance of industry. By diminishing the funds destined for the employment of productive labour, he necessarily diminishes, so far as it depends upon him, the quantity of that labour which adds a value to the subject upon which it is bestowed, and, consequently, the value of the annual produce of the land and labour of the whole country, the real wealth and revenue of its inhabitants. If the prodigality of some was not compensated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the industrious, tends not only to beggar himself, but to impoverish his country. Though the expense of the prodigal should be altogether in home made, and no part of it in foreign commodities, its effect upon the productive funds of the society would still be the same. Every year there would still be a certain quantity of food and clothing, which ought to have maintained productive, employed in maintaining unproductive hands. Every year, therefore, there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country. This expense, it may be said, indeed, not being in foreign goods, and not occasioning any exportation of gold and silver, the same quantity of money would remain in the country as before. But if the quantity of food and clothing, which were thus consumed by unproductive, had been distributed among productive hands, they would have reproduced, together with a profit, the full value of their consumption. The same quantity of money would, in this case, equally have remained in the country, and there would, besides, have been a reproduction of an equal value of consumable goods. There would have been two values instead of one. The same quantity of money, besides, cannot long remain in any country in which the value of the annual produce diminishes. The sole use of money is to circulate consumable goods. By means of it, provisions, materials, and finished work, are bought and sold, and distributed to their proper consumers. The quantity of money, therefore, which can be annually employed in any country, must be determined by the value of the consumable goods annually circulated within it. These must consist, either in the immediate produce of the land and labour of the country itself, or in something which had been purchased with some part of that produce. Their value, therefore, must diminish as the value of that produce diminishes, and along with it the quantity of money which can be employed in circulating them. But the money which, by this annual diminution of produce, is annually thrown out of domestic circulation, will not be allowed to lie idle. The interest of whoever possesses it requires that it should be employed; but having no employment at home, it will, in spite of all laws and prohibitions, be sent abroad, and employed in purchasing consumable goods, which may be of some use at home. Its annual exportation will, in this manner, continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. What in the days of its prosperity had been saved from that annual produce, and employed in purchasing gold and silver will contribute, for some little time, to support its consumption in adversity. The exportation of gold and silver is, in this case, not the cause, but the effect of its declension, and may even, for some little time, alleviate the misery of that declension. The quantity of money, on the contrary, must in every country naturally increase as the value of the annual produce increases. The value of the consumable goods annually circulated within the society being greater, will require a greater quantity of money to circulate them. A part of the increased produce, therefore, will naturally be employed in purchasing, wherever it is to be had, the additional quantity of gold and silver necessary for circulating the rest. The increase of those metals will, in this case, be the effect, not the cause, of the public prosperity. Gold and silver are purchased everywhere in the same manner. The food, clothing, and lodging, the revenue and maintenance, of all those whose labour or stock is employed in bringing them from the mine to the market, is the price paid for them in Peru as well as in England. The country which has this price to pay, will never be long without the quantity of those metals which it has occasion for; and no country will ever long retain a quantity which it has no occasion for. Whatever, therefore, we may imagine the real wealth and revenue of a country to consist in, whether in the value of the annual produce of its land and labour, as plain reason seems to dictate, or in the quantity of the precious metals which circulate within it, as vulgar prejudices suppose; in either view of the matter, every prodigal appears to be a public enemy, and every frugal man a public benefactor. The effects of misconduct are often the same as those of prodigality. Every injudicious and unsuccessful project in agriculture, mines, fisheries, trade, or manufactures, tends in the same manner to diminish the funds destined for the maintenance of productive labour. In every such project, though the capital is consumed by productive hands only, yet as, by the injudicious manner in which they are employed, they do not reproduce the full value of their consumption, there must always be some diminution in what would otherwise have been the productive funds of the society. It can seldom happen, indeed, that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals; the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others. With regard to profusion, the principle which prompts to expense is the passion for present enjoyment; which, though sometimes violent and very difficult to be restrained, is in general only momentary occasional. But the principle which prompts to save, is the desire of bettering our condition; a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval which separates those two moments, there is scarce, perhaps, a single instance, in which any man is so perfectly and completely satisfied with his situation, as to be without any wish of alteration or improvement of any kind. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious; and the most likely way of augmenting their fortune, is to save and accumulate some part of what they acquire, either regularly and annually, or upon some extraordinary occasion. Though the principle of expense, therefore, prevails in almost all men upon some occasions, and in some men upon almost all occasions; yet in the greater part of men, taking the whole course of their life at an average, the principle of frugality seems not only to predominate, but to predominate very greatly. With regard to misconduct, the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune, make but a very small part of the whole number engaged in trade, and all other sorts of business; not much more, perhaps, than one in a thousand. Bankruptcy is, perhaps, the greatest and most humiliating calamity which can befal an innocent man. The greater part of men, therefore, are sufficiently careful to avoid it. Some, indeed, do not avoid it; as some do not avoid the gallows. Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts. Such people, as they themselves produce nothing, are all maintained by the produce of other men's labour. When multiplied, therefore, to an unnecessary number, they may in a particular year consume so great a share of this produce, as not to leave a sufficiency for maintaining the productive labourers, who should reproduce it next year. The next year's produce, therefore, will be less than that of the foregoing; and if the same disorder should continue, that of the third year will be still less than that of the second. Those unproductive hands who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labour, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment. This frugality and good conduct, however, is upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite not only of the disease, but of the absurd prescriptions of the doctor. The annual produce of the land and labour of any nation can be increasing in its value by no other means, but by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. The number of its productive labourers, it is evident, can never be much increased, but in consequence of an increase of capital, or of the funds destined for maintaining them. The productive powers of the same number of labourers cannot be increased, but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour, or of more proper division and distribution of employment. In either case, an additional capital is almost always required. It is by means of an additional capital only, that the undertaker of any work can either provide his workmen with better machinery, or make a more proper distribution of employment among them. When the work to be done consists of a number of parts, to keep every man constantly employed in one way, requires a much greater capital than where every man is occasionally employed in every different part of the work. When we compare, therefore, the state of a nation at two different periods, and find that the annual produce of its land and labour is evidently greater at the latter than at the former, that its lands are better cultivated, its manufactures more numerous and more flourishing, and its trade more extensive; we may be assured that its capital must have increased during the interval between those two periods, and that more must have been added to it by the good conduct of some, than had been taken from it either by the private misconduct of others, or by the public extravagance of government. But we shall find this to have been the case of almost all nations, in all tolerably quiet and peaceable times, even of those who have not enjoyed the most prudent and parsimonious governments. To form a right judgment of it, indeed, we must compare the state of the country at periods somewhat distant from one another. The progress is frequently so gradual, that, at near periods, the improvement is not only not sensible, but, from the declension either of certain branches of industry, or of certain districts of the country, things which sometimes happen, though the country in general is in great prosperity, there frequently arises a suspicion, that the riches and industry of the whole are decaying. The annual produce of the land and labour of England, for example, is certainly much greater than it was a little more than a century ago, at the restoration of Charles II. Though at present few people, I believe, doubt of this, yet during this period five years have seldom passed away, in which some book or pamphlet has not been published, written, too, with such abilities as to gain some authority with the public, and pretending to demonstrate that the wealth of the nation was fast declining; that the country was depopulated, agriculture neglected, manufactures decaying, and trade undone. Nor have these publications been all party pamphlets, the wretched offspring of falsehood and venality. Many of them have been written by very candid and very intelligent people, who wrote nothing but what they believed, and for no other reason but because they believed it. The annual produce of the land and labour of England, again, was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before, at the accession of Elizabeth. At this period, too, we have all reason to believe, the country was much more advanced in improvement, than it had been about a century before, towards the close of the dissensions between the houses of York and Lancaster. Even then it was, probably, in a better condition than it had been at the Norman conquest: and at the Norman conquest, than during the confusion of the Saxon heptarchy. Even at this early period, it was certainly a more improved country than at the invasion of Julius Cæsar, when its inhabitants were nearly in the same state with the savages in North America. In each of those periods, however, there was not only much private and public profusion, many expensive and unnecessary wars, great perversion of the annual produce from maintaining productive to maintain unproductive hands; but sometimes, in the confusion of civil discord, such absolute waste and destruction of stock, as might he supposed, not only to retard, as it certainly did, the natural accumulation of riches, but to have left the country, at the end of the period, poorer than at the beginning, Thus, in the happiest and most fortunate period of them all, that which has passed since the Restoration, how many disorders and misfortunes have occurred, which, could they have been foreseen, not only the impoverishment, but the total ruin of the country would have been expected from them? The fire and the plague of London, the two Dutch wars, the disorders of the revolution, the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and 1756, together with the two rebellions of 1715 and 1745. In the course of the four French wars, the nation has contracted more than L.145,000,000 of debt, over and above all the other extraordinary annual expense which they occasioned; so that the whole cannot be computed at less than L.200,000,000. So great a share of the annual produce of the land and labour of the country, has, since the Revolution, been employed upon different occasions, in maintaining an extraordinary number of unproductive hands. But had not those wars given this particular direction to so large a capital, the greater part of it would naturally have been employed in maintaining productive hands, whose labour would have replaced, with a profit, the whole value of their consumption. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year, and every year's increase would have augmented still more that of the following year. More houses would have been built, more lands would have been improved, and those which had been improved before would have been better cultivated; more manufactures would have been established, and those which had been established before would have been more extended; and to what height the real wealth and revenue of the country might by this time have been raised, it is not perhaps very easy even to imagine. But though the profusion of government must undoubtedly have retarded the natural progress of England towards wealth and improvement, it has not been able to stop it. The annual produce of its land and labour is undoubtedly much greater at present than it was either at the Restoration or at the Revolution. The capital, therefore, annually employed in cultivating this land, and in maintaining this labour, must likewise be much greater. In the midst of all the exactions of government, this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law, and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times, and which, it is to be hoped, will do so in all future times. England, however, as it has never been blessed with a very parsimonious government, so parsimony has at no time been the characteristic virtue of its inhabitants. It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will. As frugality increases, and prodigality diminishes, the public capital, so the conduct of those whose expense just equals their revenue, without either accumulating or encroaching, neither increases nor diminishes it. Some modes of expense, however, seem to contribute more to the growth of public opulence than others. The revenue of an individual may be spent, either in things which are consumed immediately, and in which one day's expense can neither alleviate nor support that of another; or it may be spent in things more durable, which can therefore be accumulated, and in which every every day's expense may, as he chooses, either alleviate, or support and heighten, the effect of that of the following day. A man of fortune, for example, may either spend his revenue in a profuse and sumptuous table, and in maintaining a great number of menial servants, and a multitude of dogs and horses; or, contenting himself with a frugal table, and few attendants, he may lay out the greater part of it in adorning his house or his country villa, in useful or ornamental buildings, in useful or ornamental furniture, in collecting books, statues, pictures; or in things more frivolous, jewels, baubles, ingenious trinkets of different kinds; or, what is must trifling of all, in amassing a great wardrobe of fine clothes, like the favourite and minister of a great prince who died a few years ago. Were two men of equal fortune to spend their revenue, the one chiefly in the one way, the other in the other, the magnificence of the person whose expense had been chiefly in durable commodities, would be continually increasing, every day's expense contributing something to support and heighten the effect of that of the following day; that of the other, on the contrary, would be no greater at the end of the period than at the beginning. The former too would, at the end of the period, be the richer man of the two. He would have a stock of goods of some kind or other, which, though it might not be worth all that it cost, would always be worth something. No trace or vestige of the expense of the latter would remain, and the effects of ten or twenty years' profusion would be as completely annihilated as if they had never existed. As the one mode of expense is more favourable than the other to the opulence of an individual, so is it likewise to that of a nation. The houses, the furniture, the clothing of the rich, in a little time, become useful to the inferior and middling ranks of people. They are able to purchase them when their superiors grow weary of them; and the general accommodation of the whole people is thus gradually improved, when this mode of expense becomes universal among men of fortune. In countries which have long been rich, you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire, but of which neither the one could have been built, nor the other have been made for their use. What was formerly a seat of the family of Seymour, is now an inn upon the Bath road. The marriage-bed of James I. of Great Britain, which his queen brought with her from Denmark, as a present fit for a sovereign to make to a sovereign, was, a few years ago, the ornament of an alehouse at Dunfermline. In some ancient cities, which either have been long stationary, or have gone somewhat to decay, you will sometimes scarce find a single house which could have been built for its present inhabitants. If you go into those houses, too, you will frequently find many excellent, though antiquated pieces of furniture, which are still very fit for use, and which could as little have been made for them. Noble palaces, magnificent villas, great collections of books, statues, pictures, and other curiosities, are frequently both an ornament and an honour, not only to the neighbourhood, but to the whole country to which they belong. Versailles is an ornament and an honour to France, Stowe and Wilton to England. Italy still continues to command some sort of veneration, by the number of monuments of this kind which it possesses, though the wealth which produced them has decayed, and though the genius which planned them seems to be extinguished, perhaps from not having the same employment. The expense, too, which is laid out in durable commodities, is favourable not only to accumulation, but to frugality. If a person should at any time exceed in it, he can easily reform without exposing himself to the censure of the public. To reduce very much the number of his servants, to reform his table from great profusion to great frugality, to lay down his equipage after he has once set it up, are changes which cannot escape the observation of his neighbours, and which are supposed to imply some acknowledgment of preceding bad conduct. Few, therefore, of those who have once been so unfortunate as to launch out too far into this sort of expense, have afterwards the courage to reform, till ruin and bankruptcy oblige them. But if a person has, at any time, been at too great an expense in building, in furniture, in books, or pictures, no imprudence can be inferred from his changing his conduct. These are things in which further expense is frequently rendered unnecessary by former expense; and when a person stops short, he appears to do so, not because he has exceeded his fortune, but because he has satisfied his fancy. The expense, besides, that is laid out in durable commodities, gives maintenance, commonly, to a greater number of people than that which is employed in the most profuse hospitality. Of two or three hundred weight of provisions, which may sometimes be served up at a great festival, one half, perhaps, is thrown to the dunghill, and there is always a great deal wasted and abused. But if the expense of this entertainment had been employed in setting to work masons, carpenters, upholsterers, mechanics, &c. a quantity of provisions of equal value would have been distributed among a still greater number of people, who would have bought them in pennyworths and pound weights, and not have lost or thrown away a single ounce of them. In the one way, besides, this expense maintains productive, in the other unproductive hands. In the one way, therefore, it increases, in the other it does not increase the exchangeable value of the annual produce of the land and labour of the country. I would not, however, by all this, be understood to mean, that the one species of expense always betokens a more liberal or generous spirit than the other. When a man of fortune spends his revenue chiefly in hospitality, he shares the greater part of it with his friends and companions; but when he employs it in purchasing such durable commodities, he often spends the whole upon his own person, and gives nothing to any body without an equivalent. The latter species of expense, therefore, especially when directed towards frivolous objects, the little ornaments of dress and furniture, jewels, trinkets, gewgaws, frequently indicates, not only a trifling, but a base and selfish disposition. All that I mean is, that the one sort of expense, as it always occasions some accumulation of valuable commodities, as it is more favourable to private frugality, and, consequently, to the increase of the public capital, and as it maintains productive rather than unproductive hands, conduces more than the other to the growth of public opulence. CHAP. IV. OF STOCK LENT AT INTEREST. The stock which is lent at interest is always considered as a capital by the lender. He expects that in due time it is to be restored to him, and that, in the mean time, the borrower is to pay him a certain annual rent for the use of it. The borrower may use it either as a capital, or as a stock reserved for immediate consumption. If he uses it as a capital, he employs it in the maintenance of productive labourers, who reproduce the value, with a profit. He can, in this case, both restore the capital, and pay the interest, without alienating or encroaching upon any other source of revenue. If he uses it as a stock reserved for immediate consumption, he acts the part of a prodigal, and dissipates, in the maintenance of the idle, what was destined for the support of the industrious. He can, in this case, neither restore the capital nor pay the interest, without either alienating or encroaching upon some other source of revenues such as the property or the rent of land. The stock which is lent at interest is, no doubt, occasionally employed in both these ways, but in the former much more frequently than in the latter. The man who borrows in order to spend will soon be ruined, and he who lends to him will generally have occasion to repent of his folly. To borrow or to lend for such a purpose, therefore, is, in all cases, where gross usury is out of the question, contrary to the interest of both parties; and though it no doubt happens sometimes, that people do both the one and the other, yet, from the regard that all men have for their own interest, we may be assured, that it cannot happen so very frequently as we are sometimes apt to imagine. Ask any rich man of common prudence, to which of the two sorts of people he has lent the greater part of his stock, to those who he thinks will employ it profitably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle. The only people to whom stock is commonly lent, without their being expected to make any very profitable use of it, are country gentlemen, who borrow upon mortgage. Even they scarce ever borrow merely to spend. What they borrow, one may say, is commonly spent before they borrow it. They have generally consumed so great a quantity of goods, advanced to them upon credit by shop-keepers and tradesmen, that they find it necessary to borrow at interest, in order to pay the debt. The capital borrowed replaces the capitals of those shop-keepers and tradesmen which the country gentlemen could not have replaced from the rents of their estates. It is not properly borrowed in order to be spent, but in order to replace a capital which had been spent before. Almost all loans at interest are made in money, either of paper, or of gold and silver; but what the borrower really wants, and what the lender readily supplies him with, is not the money, but the money's worth, or the goods which it can purchase. If he wants it as a stock for immediate consumption, it is those goods only which he can place in that stock. If he wants it as a capital for employing industry, it is from those goods only that the industrious can be furnished with the tools, materials, and maintenance necessary for carrying on their work. By means of the loan, the lender, as it were, assigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country, to be employed as the borrower pleases. The quantity of stock, therefore, or, as it is commonly expressed, of money, which can be lent at interest in any country, is not regulated by the value of the money, whether paper or coin, which serves as the instrument of the different loans made in that country, but by the value of that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined, not only for replacing a capital, but such a capital as the owner does not care to be at the trouble of employing himself. As such capitals are commonly lent out and paid back in money, they constitute what is called the monied interest. It is distinct, not only from the landed, but from the trading and manufacturing interests, as in these last the owners themselves employ their own capitals. Even in the monied interest, however, the money is, as it were, but the deed or assignment, which conveys from one hand to another those capitals which the owners do not care to employ themselves. Those capitals may be greater, in almost any proportion, than the amount of the money which serves as the instrument of their conveyance; the same pieces of money successively serving for many different loans, as well as for many different purchases. A, for example, lends to W L.1000, with which W immediately purchases of B L.1000 worth of goods. B having no occasion for the money himself, lends the identical pieces to X, with which X immediately purchases of C another L.1000 worth of goods. C, in the same manner, and for the same reason, lends them to Y, who again purchases goods with them of D. In this manner, the same pieces, either of coin or of paper, may, in the course of a few days, serve as the instrument of three different loans, and of three different purchases, each of which is, in value, equal to the whole amount of those pieces. What the three monied men, A, B, and C, assigned to the three borrowers, W, X, and Y, is the power of making those purchases. In this power consist both the value and the use of the loans. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it, and is three times greater than that of the money with which the purchases are made. Those loans, however, may be all perfectly well secured, the goods purchased by the different debtors being so employed as, in due time, to bring back, with a profit, an equal value either of coin or of paper. And as the same pieces of money can thus serve as the instrument of different loans to three, or, for the same reason, to thirty times their value, so they may likewise successively serve as the instrument of repayment. A capital lent at interest may, in this manner, be considered as an assignment, from the lender to the borrower, of a certain considerable portion of the annual produce, upon condition that the borrower in return shall, during the continuation of the loan, annually assign to the lender a small portion, called the interest; and, at the end of it, a portion equally considerable with that which had originally been assigned to him, called the repayment. Though money, either coin or paper, serves generally as the deed of assignment, both to the smaller and to the more considerable portion, it is itself altogether different from what is assigned by it. In proportion as that share of the annual produce which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, increases in any country, what is called the monied interest naturally increases with it. The increase of those particular capitals from which the owners wish to derive a revenue, without being at the trouble of employing them themselves, naturally accompanies the general increase of capitals; or, in other words, as stock increases, the quantity of stock to be lent at interest grows gradually greater and greater. As the quantity of stock to be lent at interest increases, the interest, or the price which must be paid for the use of that stock, necessarily diminishes, not only from those general causes which make the market price of things commonly diminish as their quantity increases, but from other causes which are peculiar to this particular case. As capitals increase in any country, the profits which can be made by employing them necessarily diminish. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. There arises, in consequence, a competition between different capitals, the owner of one endeavouring to get possession of that employment which is occupied by another; but, upon most occasions, he can hope to justle that other out of this employment by no other means but by dealing upon more reasonable terms. He must not only sell what he deals in somewhat cheaper, but, in order to get it to sell, he must sometimes, too, buy it dearer. The demand for productive labour, by the increase of the funds which are destined for maintaining it, grows every day greater and greater. Labourers easily find employment; but the owners of capitals find it difficult to get labourers to employ. Their competition raises the wages of labour, and sinks the profits of stock. But when the profits which can be made by the use of a capital are in this manner diminished, as it were, at both ends, the price which can be paid for the use of it, that is, the rate of interest, must necessarily be diminished with them. Mr Locke, Mr Lawe, and Mr Montesquieu, as well as many other writers, seem to have imagined that the increase of the quantity of gold and silver, in consequence of the discovery of the Spanish West Indies, was the real cause of the lowering of the rate of interest through the greater part of Europe. Those metals, they say, having become of less value themselves, the use of any particular portion of them necessarily became of less value too, and, consequently, the price which could be paid for it. This notion, which at first sight seems so plausible, has been so fully exposed by Mr Hume, that it is, perhaps, unnecessary to say any thing more about it. The following very short and plain argument, however, may serve to explain more distinctly the fallacy which seems to have misled those gentlemen. Before the discovery of the Spanish West Indies, ten per cent. seems to have been the common rate of interest through the greater part of Europe. It has since that time, in different countries, sunk to six, five, four, and three per cent. Let us suppose, that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest; and that in those countries, for example, where interest has been reduced from ten to five per cent. the same quantity of silver can now purchase just half the quantity of goods which it could have purchased before. This supposition will not, I believe, be found anywhere agreeable to the truth; but it is the most favourable to the opinion which we are going to examine; and, even upon this supposition, it is utterly impossible that the lowering of the value of silver could have the smallest tendency to lower the rate of interest. If £100 are in those countries now of no more value than £50 were then, £10 must now be of no more value than £5 were then. Whatever were the causes which lowered the value of the capital, the same must necessarily have lowered that of the interest, and exactly in the same proportion. The proportion between the value of the capital and that of the interest must have remained the same, though the rate had never been altered. By altering the rate, on the contrary, the proportion between those two values is necessarily altered. If L.100 now are worth no more than L.50 were then, L.5 now can be worth no more than L.2, 10s. were then. By reducing the rate of interest, therefore, from ten to five per cent. we give for the use of a capital, which is supposed to be equal to one half of its former value, an interest which is equal to one fourth only of the value of the former interest. An increase in the quantity of silver, while that of the commodities circulated by means of it remained the same, could have no other effect than to diminish the value of that metal. The nominal value of all sorts of goods would be greater, but their real value would be precisely the same as before. They would be exchanged for a greater number of pieces of silver; but the quantity of labour which they could command, the number of people whom they could maintain and employ, would be precisely the same. The capital of the country would be the same, though a greater number of pieces might be requisite for conveying any equal portion of it from one hand to another. The deeds of assignment, like the conveyances of a verbose attorney, would be more cumbersome; but the thing assigned would be precisely the same as before, and could produce only the same effects. The funds for maintaining productive labour being the same, the demand for it would be the same. Its price or wages, therefore, though nominally greater, would really be the same. They would be paid in a greater number of pieces of silver, but they would purchase only the same quantity of goods. The profits of stock would be the same, both nominally and really. The wages of labour are commonly computed by the quantity of silver which is paid to the labourer. When that is increased, therefore, his wages appear to be increased, though they may sometimes be no greater than before. But the profits of stock are not computed by the number of pieces of silver with which they are paid, but by the proportion which those pieces bear to the whole capital employed. Thus, in a particular country, 5s. a-week are said to be the common wages of labour, and ten per cent. the common profits of stock; but the whole capital of the country being the same as before, the competition between the different capitals of individuals into which it was divided would likewise be the same. They would all trade with the same advantages and disadvantages. The common proportion between capital and profit, therefore, would be the same, and consequently the common interest of money; what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it. Any increase in the quantity of commodities annually circulated within the country, while that of the money which circulated them remained the same, would, on the contrary, produce many other important effects, besides that of raising the value of the money. The capital of the country, though it might nominally be the same, would really be augmented. It might continue to be expressed by the same quantity of money, but it would command a greater quantity of labour. The quantity of productive labour which it could maintain and employ would be increased, and consequently the demand for that labour. Its wages would naturally rise with the demand, and yet might appear to sink. They might be paid with a smaller quantity of money, but that smaller quantity might purchase a greater quantity of goods than a greater had done before. The profits of stock would be diminished, both really and in appearance. The whole capital of the country being augmented, the competition between the different capitals of which it was composed would naturally be augmented along with it. The owners of those particular capitals would be obliged to content themselves with a smaller proportion of the produce of that labour which their respective capitals employed. The interest of money, keeping pace always with the profits of stock, might, in this manner, be greatly diminished, though the value of money, or the quantity of goods which any particular sum could purchase, was greatly augmented. In some countries the interest of money has been prohibited by law. But as something can everywhere be made by the use of money, something ought everywhere to be paid for the use of it. This regulation, instead of preventing, has been found from experience to increase the evil of usury. The debtor being obliged to pay, not only for the use of the money, but for the risk which his creditor runs by accepting a compensation for that use, he is obliged, if one may say so, to insure his creditor from the penalties of usury. In countries where interest is permitted, the law in order to prevent the extortion of usury, generally fixes the highest rate which can be taken without incurring a penalty. This rate ought always to be somewhat above the lowest market price, or the price which is commonly paid for the use of money by those who can give the most undoubted security. If this legal rate should be fixed below the lowest market rate, the effects of this fixation must be nearly the same as those of a total prohibition of interest. The creditor will not lend his money for less than the use of it is worth, and the debtor must pay him for the risk which he runs by accepting the full value of that use. If it is fixed precisely at the lowest market price, it ruins, with honest people who respect the laws of their country, the credit of all those who cannot give the very best security, and obliges them to have recourse to exorbitant usurers. In a country such as Great Britain, where money is lent to government at three per cent. and to private people, upon good security, at four and four and a-half, the present legal rate, five per cent. is perhaps as proper as any. The legal rate, it is to be observed, though it ought to be somewhat above, ought not to be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent. the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal rate of interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred, as borrowers, to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage. No law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law is made. Notwithstanding the edict of 1766, by which the French king attempted to reduce the rate of interest from five to four per cent. money continued to be lent in France at five per cent. the law being evaded in several different ways. The ordinary market price of land, it is to be observed, depends everywhere upon the ordinary market rate of interest. The person who has a capital from which he wishes to derive a revenue, without taking the trouble to employ it himself, deliberates whether he should buy land with it, or lend it out at interest. The superior security of land, together with some other advantages which almost everywhere attend upon this species of property, will generally dispose him to content himself with a smaller revenue from land, than what he might have by lending out his money at interest. These advantages are sufficient to compensate a certain difference of revenue; but they will compensate a certain difference only; and if the rent of land should fall short of the interest of money by a greater difference, nobody would buy land, which would soon reduce its ordinary price. On the contrary, if the advantages should much more than compensate the difference, everybody would buy land, which again would soon raise its ordinary price. When interest was at ten per cent. land was commonly sold for ten or twelve years purchase. As interest sunk to six, five, and four per cent. the price of land rose to twenty, five-and-twenty, and thirty years purchase. The market rate of interest is higher in France than in England, and the common price of land is lower. In England it commonly sells at thirty, in France at twenty years purchase. CHAP. V. OF THE DIFFERENT EMPLOYMENTS OF CAPITALS. Though all capitals are destined for the maintenance of productive labour only, yet the quantity of that labour which equal capitals are capable of putting into motion, varies extremely according to the diversity of their employment; as does likewise the value which that employment adds to the annual produce of the land and labour of the country. A capital may be employed in four different ways; either, first, in procuring the rude produce annually required for the use and consumption of the society; or, secondly, in manufacturing and preparing that rude produce for immediate use and consumption; or, thirdly in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. In the first way are employed the capitals of all those who undertake improvement or cultivation of lands, mines, or fisheries; in the second, those of all master manufacturers; in the third, those of all wholesale merchants; and in the fourth, those of all retailers. It is difficult to conceive that a capital should be employed in any way which may not be classed under some one or other of these four. Each of those four methods of employing a capital is essentially necessary, either to the existence or extension of the other three, or to the general conveniency of the society. Unless a capital was employed in furnishing rude produce to a certain degree of abundance, neither manufactures nor trade of any kind could exist. Unless a capital was employed in manufacturing that part of the rude produce which requires a good deal of preparation before it can be fit for use and consumption, it either would never he produced, because there could be no demand for it; or if it was produced spontaneously, it would be of no value in exchange, and could add nothing to the wealth of the society. Unless a capital was employed in transporting either the rude or manufactured produce from the places where it abounds to those where it is wanted, no more of either could be produced than was necessary for the consumption of the neighbourhood. The capital of the merchant exchanges the surplus produce of one place for that of another, and thus encourages the industry, and increases the enjoyments of both. Unless a capital was employed in breaking and dividing certain portions either of the rude or manufactured produce into such small parcels as suit the occasional demands of those who want them, every man would be obliged to purchase a greater quantity of the goods he wanted than his immediate occasions required. If there was no such trade as a butcher, for example, every man would be obliged to purchase a whole ox or a whole sheep at a time. This would generally be inconvenient to the rich, and much more so to the poor. If a poor workman was obliged to purchase a month's or six months' provisions at a time, a great part of the stock which he employs as a capital in the instruments of his trade, or in the furniture of his shop, and which yields him a revenue, he would be forced to place in that part of his stock which is reserved for immediate consumption, and which yields him no revenue. Nothing can be more convenient for such a person than to be able to purchase his subsistence from day to day, or even from hour to hour, as he wants it. He is thereby enabled to employ almost his whole stock as a capital. He is thus enabled to furnish work to a greater value; and the profit which he makes by it in this way much more than compensates the additional price which the profit of the retailer imposes upon the goods. The prejudices of some political writers against shopkeepers and tradesmen are altogether without foundation. So far is it from being necessary either to tax them, or to restrict their numbers, that they can never be multiplied so as to hurt the public, though they may so as to hurt one another. The quantity of grocery goods, for example, which can be sold in a particular town, is limited by the demand of that town and its neighbourhood. The capital, therefore, which can be employed in the grocery trade, cannot exceed what is sufficient to purchase that quantity. If this capital is divided between two different grocers, their competition will tend to make both of them sell cheaper than if it were in the hands of one only; and if it were divided among twenty, their competition would be just so much the greater, and the chance of their combining together, in order to raise the price, just so much the less. Their competition might, perhaps, ruin some of themselves; but to take care of this, is the business of the parties concerned, and it may safely be trusted to their discretion. It can never hurt either the consumer or the producer; on the contrary, it must tend to make the retailers both sell cheaper and buy dearer, than if the whole trade was monopolized by one or two persons. Some of them, perhaps, may sometimes decoy a weak customer to buy what he has no occasion for. This evil, however, is of too little importance to deserve the public attention, nor would it necessarily be prevented by restricting their numbers. It is not the multitude of alehouses, to give the most suspicious example, that occasions a general disposition to drunkenness among the common people; but that disposition, arising from other causes, necessarily gives employment to a multitude of alehouses. The persons whose capitals are employed in any of those four ways, are themselves productive labourers. Their labour, when properly directed, fixes and realizes itself in the subject or vendible commodity upon which it is bestowed, and generally adds to its price the value at least of their own maintenance and consumption. The profits of the farmer, of the manufacturer, of the merchant, and retailer, are all drawn from the price of the goods which the two first produce, and the two last buy and sell. Equal capitals, however, employed in each of those four different ways, will immediately put into motion very different quantities of productive labour; and augment, too, in very different proportions, the value of the annual produce of the land and labour of the society to which they belong. The capital of the retailer replaces, together with its profits, that of the merchant of whom he purchases goods, and thereby enables him to continue his business. The retailer himself is the only productive labourer whom it immediately employs. In his profit consists the whole value which its employment adds to the annual produce of the land and labour of the society. The capital of the wholesale merchant replaces, together with their profits, the capitals of the farmers and manufacturers of whom he purchases the rude and manufactured produce which he deals in, and thereby enables them to continue their respective trades. It is by this service chiefly that he contributes indirectly to support the productive labour of the society, and to increase the value of its annual produce. His capital employs, too, the sailors and carriers who transport his goods from one place to another; and it augments the price of those goods by the value, not only of his profits, but of their wages. This is all the productive labour which it immediately puts into motion, and all the value which it immediately adds to the annual produce. Its operation in both these respects is a good deal superior to that of the capital of the retailer. Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade, and replaces, together with its profits, that of some other artificer of whom he purchases them. Part of his circulating capital is employed in purchasing materials, and replaces, with their profits, the capitals of the farmers and miners of whom he purchases them. But a great part of it is always, either annually, or in a much shorter period, distributed among the different workmen whom he employs. It augments the value of these materials by their wages, and by their masters' profits upon the whole stock of wages, materials, and instruments of trade employed in the business. It puts immediately into motion, therefore, a much greater quantity of productive labour, and adds a much greater value to the annual produce of the land and labour of the society, than an equal capital in the hands of any wholesale merchant. No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Not only his labouring servants, but his labouring cattle, are productive labourers. In agriculture, too, Nature labours along with man; and though her labour cost no expense, its produce has its value, as well as that of the must expensive workmen. The most important operations of agriculture seem intended, not so much to increase, though they do that too, as to direct the fertility of Nature towards the production of the plants must profitable to man. A field overgrown with briars and brambles, may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. Planting and tillage frequently regulate more than they animate the active fertility of Nature; and after all their labour, a great part of the work always remains to be done by her. The labourers and labouring cattle, therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer, and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of Nature, the use of which the landlord lends to the farmer. It is greater or smaller, according to the supposed extent of those powers, or, in other words, according to the supposed natural or improved fertility of the land. It is the work of Nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third, of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great reproduction. In them Nature does nothing; man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures; but in proportion, too, to the quantity of productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to society. The capitals employed in the agriculture and in the retail trade of any society, must always reside within that society. Their employment is confined almost to a precise spot, to the farm, and to the shop of the retailer. They must generally, too, though there are some exceptions to this, belong to resident members of the society. The capital of a wholesale merchant, on the contrary, seems to have no fixed or necessary residence anywhere, but may wander about from place to place, according as it can either buy cheap or sell dear. The capital of the manufacturer must, no doubt, reside where the manufacture is carried on; but where this shall be, is not always necessarily determined. It may frequently be at a great distance, both from the place where the materials grow, and from that where the complete manufacture is consumed. Lyons is very distant, both from the places which afford the materials of its manufactures, and from those which consume them. The people of fashion in Sicily are clothed in silks made in other countries, from the materials which their own produces. Part of the wool of Spain is manufactured in Great Britain, and some part of that cloth is afterwards sent back to Spain. Whether the merchant whose capital exports the surplus produce of any society, be a native or a foreigner, is of very little importance. If he is a foreigner, the number of their productive labourers is necessarily less than if he had been a native, by one man only; and the value of their annual produce, by the profits of that one man. The sailors or carriers whom he employs, may still belong indifferently either to his country, or to their country, or to some third country, in the same manner as if he had been a native. The capital of a foreigner gives a value to their surplus produce equally with that of a native, by exchanging it for something for which there is a demand at home. It as effectually replaces the capital of the person who produces that surplus, and as effectually enables him to continue his business, the service by which the capital of a wholesale merchant chiefly contributes to support the productive labour, and to augment the value of the annual produce of the society to which he belongs. It is of more consequence that the capital of the manufacturer should reside within the country. It necessarily puts into motion a greater quantity of productive labour, and adds a greater value to the annual produce of the land and labour of the society. It may, however, be very useful to the country, though it should not reside within it. The capitals of the British manufacturers who work up the flax and hemp annually imported from the coasts of the Baltic, are surely very useful to the countries which produce them. Those materials are a part of the surplus produce of those countries, which, unless it was annually exchanged for something which is in demand there, would be of no value, and would soon cease to be produced. The merchants who export it, replace the capitals of the people who produce it, and thereby encourage them to continue the production; and the British manufacturers replace the capitals of those merchants. A particular country, in the same manner as a particular person, may frequently not have capital sufficient both to improve cultivate all its lands, to manufacture and prepare their whole rude produce for immediate use and consumption, and to transport the surplus part either of the rude or manufactured produce to those distant markets, where it can be exchanged for something for which there is a demand at home. The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. The wool of the southern counties of Scotland is, a great part of it, after a long land carriage through very bad roads, manufactured in Yorkshire, for want of a capital to manufacture it at home. There are many little manufacturing towns in Great Britain, of which the inhabitants have not capital sufficient to transport the produce of their own industry to those distant markets where there is demand and consumption for it. If there are any merchants among them, they are, properly, only the agents of wealthier merchants who reside in some of the great commercial cities. When the capital of any country is not sufficient for all those three purposes, in proportion as a greater share of it is employed in agriculture, the greater will be the quantity of productive labour which it puts into motion within the country; as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. After agriculture, the capital employed in manufactures puts into motion the greatest quantity of productive labour, and adds the greatest value to the annual produce. That which is employed in the trade of exportation has the least effect of any of the three. The country, indeed, which has not capital sufficient for all those three purposes, has not arrived at that degree of opulence for which it seems naturally destined. To attempt, however, prematurely, and with an insufficient capital, to do all the three, is certainly not the shortest way for a society, no more than it would be for an individual, to acquire a sufficient one. The capital of all the individuals of a nation has its limits, in the same manner as that of a single individual, and is capable of executing only certain purposes. The capital of all the individuals of a nation is increased in the same manner as that of a single individual, by their continually accumulating and adding to it whatever they save out of their revenue. It is likely to increase the fastest, therefore, when it is employed in the way that affords the greatest revenue to all the inhabitants of the country, as they will thus be enabled to make the greatest savings. But the revenue of all the inhabitants of the country is necessarily in proportion to the value of the annual produce of their land and labour. It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness, that almost their whole capitals have hitherto been employed in agriculture. They have no manufactures, those household and coarser manufactures excepted, which necessarily accompany the progress of agriculture, and which are the work of the women and children in every private family. The greater part, both of the exportation and coasting trade of America, is carried on by the capitals of merchants who reside in Great Britain. Even the stores and warehouses from which goods are retailed in some provinces, particularly in Virginia and Maryland, belong many of them to merchants who reside in the mother country, and afford one of the few instances of the retail trade of a society being carried on by the capitals of those who are not resident members of it. Were the Americans, either by combination, or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard, instead of accelerating, the further increase in the value of their annual produce, and would obstruct, instead of promoting, the progress of their country towards real wealth and greatness. This would be still more the case, were they to attempt, in the same manner, to monopolize to themselves their whole exportation trade. The course of human prosperity, indeed, seems scarce ever to have been of so long continuance as to enable any great country to acquire capital sufficient for all those three purposes; unless, perhaps, we give credit to the wonderful accounts of the wealth and cultivation of China, of those of ancient Egypt, and of the ancient state of Indostan. Even those three countries, the wealthiest, according to all accounts, that ever were in the world, are chiefly renowned for their superiority in agriculture and manufactures. They do not appear to have been eminent for foreign trade. The ancient Egyptians had a superstitious antipathy to the sea; a superstition nearly of the same kind prevails among the Indians; and the Chinese have never excelled in foreign commerce. The greater part of the surplus produce of all those three countries seems to have been always exported by foreigners, who gave in exchange for it something else, for which they found a demand there, frequently gold and silver. It is thus that the same capital will in any country put into motion a greater or smaller quantity of productive labour, and add a greater or smaller value to the annual produce of its land and labour, according to the different proportions in which it is employed in agriculture, manufactures, and wholesale trade. The difference, too, is very great, according to the different sorts of wholesale trade in which any part of it is employed. All wholesale trade, all buying in order to sell again by wholesale, may be reduced to three different sorts: the home trade, the foreign trade of consumption, and the carrying trade. The home trade is employed in purchasing in one part of the same country, and selling in another, the produce of the industry of that country. It comprehends both the inland and the coasting trade. The foreign trade of consumption is employed in purchasing foreign goods for home consumption. The carrying trade is employed in transacting the commerce of foreign countries, or in carrying the surplus produce of one to another. The capital which is employed in purchasing in one part of the country, in order to sell in another, the produce of the industry of that country, generally replaces, by every such operation, two distinct capitals, that had both been employed in the agriculture or manufactures of that country, and thereby enables them to continue that employment. When it sends out from the residence of the merchant a certain value of commodities, it generally brings back in return at least an equal value of other commodities. When both are the produce of domestic industry, it necessarily replaces, by every such operation, two distinct capitals, which had both been employed in supporting productive labour, and thereby enables them to continue that support. The capital which sends Scotch manufactures to London, and brings back English corn and manufactures to Edinburgh, necessarily replaces, by every such operation, two British capitals, which had both been employed in the agriculture or manufactures of Great Britain. The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces, too, by every such operation, two distinct capitals; but one of them only is employed in supporting domestic industry. The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces, by every such operation, only one British capital. The other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption, should be as quick as those of the home trade, the capital employed in it will give but one half the encouragement to the industry or productive labour of the country. But the returns of the foreign trade of consumption are very seldom so quick as those of the home trade. The returns of the home trade generally come in before the end of the year, and sometimes three or four times in the year. The returns of the foreign trade of consumption seldom come in before the end of the year, and sometimes not till after two or three years. A capital, therefore, employed in the home trade, will sometimes make twelve operations, or be sent out and returned twelve times, before a capital employed in the foreign trade of consumption has made one. If the capitals are equal, therefore, the one will give four-and-twenty times more encouragement and support to the industry of the country than the other. The foreign goods for home consumption may sometimes be purchased, not with the produce of domestic industry, but with some other foreign goods. These last, however, must have been purchased, either immediately with the produce of domestic industry, or with something else that had been purchased with it; for, the case of war and conquest excepted, foreign goods can never be acquired, but in exchange for something that had been produced at home, either immediately, or after two or more different exchanges. The effects, therefore, of a capital employed in such a round-about foreign trade of consumption, are, in every respect, the same as those of one employed in the most direct trade of the same kind, except that the final returns are likely to be still more distant, as they must depend upon the returns of two or three distinct foreign trades. If the hemp and flax of Riga are purchased with the tobacco of Virginia, which had been purchased with British manufactures, the merchant must wait for the returns of two distinct foreign trades, before he can employ the same capital in repurchasing a like quantity of British manufactures. If the tobacco of Virginia had been purchased, not with British manufactures, but with the sugar and rum of Jamaica, which had been purchased with those manufactures, he must wait for the returns of three. If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants, of whom the second buys the goods imported by the first, and the third buys those imported by the second, in order to export them again, each merchant, indeed, will, in this case, receive the returns of his own capital more quickly; but the final returns of the whole capital employed in the trade will be just as slow as ever. Whether the whole capital employed in such a round-about trade belong to one merchant or to three, can make no difference with regard to the country, though it may with regard to the particular merchants. Three times a greater capital must in both cases be employed, in order to exchange a certain value of British manufactures for a certain quantity of flax and hemp, than would have been necessary, had the manufactures and the flax and hemp been directly exchanged for one another. The whole capital employed, therefore, in such a round-about foreign trade of consumption, will generally give less encouragement and support to the productive labour of the country, than an equal capital employed in a more direct trade of the same kind. Whatever be the foreign commodity with which the foreign goods for home consumption are purchased, it can occasion no essential difference, either in the nature of the trade, or in the encouragement and support which it can give to the productive labour of the country from which it is carried on. If they are purchased with the gold of Brazil, for example, or with the silver of Peru, this gold and silver, like the tobacco of Virginia, must have been purchased with something that either was the produce of the industry of the country, or that had been purchased with something else that was so. So far, therefore, as the productive labour of the country is concerned, the foreign trade of consumption, which is carried on by means of gold and silver, has all the advantages and all the inconveniences of any other equally round-about foreign trade of consumption; and will replace, just as fast, or just as slow, the capital which is immediately employed in supporting that productive labour. It seems even to have one advantage over any other equally round-about foreign trade. The transportation of those metals from one place to another, on account of their small bulk and great value, is less expensive than that of almost any other foreign goods of equal value. Their freight is much less, and their insurance not greater; and no goods, besides, are less liable to suffer by the carriage. An equal quantity of foreign goods, therefore, may frequently be purchased with a smaller quantity of the produce of domestic industry, by the intervention of gold and silver, than by that of any other foreign goods. The demand of the country may frequently, in this manner, be supplied more completely, and at a smaller expense, than in any other. Whether, by the continual exportation of those metals, a trade of this kind is likely to impoverish the country from which it is carried on in any other way, I shall have occasion to examine at great length hereafter. That part of the capital of any country which is employed in the carrying trade, is altogether withdrawn from supporting the productive labour of that particular country, to support that of some foreign countries. Though it may replace, by every operation, two distinct capitals, yet neither of them belongs to that particular country. The capital of the Dutch merchant, which carries the corn of Poland to Portugal, and brings back the fruits and wines of Portugal to Poland, replaces by every such operation two capitals, neither of which had been employed in supporting the productive labour of Holland; but one of them in supporting that of Poland, and the other that of Portugal. The profits only return regularly to Holland, and constitute the whole addition which this trade necessarily makes to the annual produce of the land and labour of that country. When, indeed, the carrying trade of any particular country is carried on with the ships and sailors of that country, that part of the capital employed in it which pays the freight is distributed among, and puts into motion, a certain number of productive labourers of that country. Almost all nations that have had any considerable share of the carrying trade have, in fact, carried it on in this manner. The trade itself has probably derived its name from it, the people of such countries being the carriers to other countries. It does not, however, seem essential to the nature of the trade that it should be so. A Dutch merchant may, for example, employ his capital in transacting the commerce of Poland and Portugal, by carrying part of the surplus produce of the one to the other, not in Dutch, but in British bottoms. It may be presumed, that he actually does so upon some particular occasions. It is upon this account, however, that the carrying trade has been supposed peculiarly advantageous to such a country as Great Britain, of which the defence and security depend upon the number of its sailors and shipping. But the same capital may employ as many sailors and shipping, either in the foreign trade of consumption, or even in the home trade, when carried on by coasting vessels, as it could in the carrying trade. The number of sailors and shipping which any particular capital can employ, does not depend upon the nature of the trade, but partly upon the bulk of the goods, in proportion to their value, and partly upon the distance of the ports between which they are to be carried; chiefly upon the former of those two circumstances. The coal trade from Newcastle to London, for example, employs more shipping than all the carrying trade of England, though the ports are at no great distance. To force, therefore, by extraordinary encouragements, a larger share of the capital of any country into the carrying trade, than what would naturally go to it, will not always necessarily increase the shipping of that country. The capital, therefore, employed in the home trade of any country, will generally give encouragement and support to a greater quantity of productive labour in that country, and increase the value of its annual produce, more than an equal capital employed in the foreign trade of consumption; and the capital employed in this latter trade has, in both these respects, a still greater advantage over an equal capital employed in the carrying trade. The riches, and so far as power depends upon riches, the power of every country must always be in proportion to the value of its annual produce, the fund from which all taxes must ultimately be paid. But the great object of the political economy of every country, is to increase the riches and power of that country. It ought, therefore, to give no preference nor superior encouragement to the foreign trade of consumption above the home trade, nor to the carrying trade above either of the other two. It ought neither to force nor to allure into either of those two channels a greater share of the capital of the country, than what would naturally flow into them of its own accord. Each of those different branches of trade, however, is not only advantageous, but necessary and unavoidable, when the course of things, without any constraint or violence, naturally introduces it. When the produce of any particular branch of industry exceeds what the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. Without such exportation, a part of the productive labour of the country must cease, and the value of its annual produce diminish. The land and labour of Great Britain produce generally more corn, woollens, and hardware, than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such exportation, that this surplus can acquire a value sufficient to compensate the labour and expense of producing it. The neighbourhood of the sea-coast, and the banks of all navigable rivers, are advantageous situations for industry, only because they facilitate the exportation and exchange of such surplus produce for something else which is more in demand there. When the foreign goods which are thus purchased with the surplus produce of domestic industry exceed the demand of the home market, the surplus part of them must be sent abroad again, and exchanged for something more in demand at home. About 96,000 hogsheads of tobacco are annually purchased in Virginia and Maryland with a part of the surplus produce of British industry. But the demand of Great Britain does not require, perhaps, more than 14,000. If the remaining 82,000, therefore, could not be sent abroad, and exchanged for something more in demand at home, the importation of them must cease immediately, and with it the productive labour of all those inhabitants of Great Britain who are at present employed in preparing the goods with which these 82,000 hogsheads are annually purchased. Those goods, which are part of the produce of the land and labour of Great Britain, having no market at home, and being deprived of that which they had abroad, must cease to be produced. The most round-about foreign trade of consumption, therefore, may, upon some occasions, be as necessary for supporting the productive labour of the country, and the value of its annual produce, as the most direct. When the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country, the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries. The carrying trade is the natural effect and symptom of great national wealth; but it does not seem to be the natural cause of it. Those statesmen who have been disposed to favour it with particular encouragement, seem to have mistaken the effect and symptom for the cause. Holland, in proportion to the extent of the land and the number of its inhabitants, by far the richest country in Europe, has accordingly the greatest share of the carrying trade of Europe. England, perhaps the second richest country of Europe, is likewise supposed to have a considerable share in it; though what commonly passes for the carrying trade of England will frequently, perhaps, be found to be no more than a round-about foreign trade of consumption. Such are, in a great measure, the trades which carry the goods of the East and West Indies and of America to the different European markets. Those goods are generally purchased, either immediately with the produce of British industry, or with something else which had been purchased with that produce, and the final returns of those trades are generally used or consumed in Great Britain. The trade which is carried on in British bottoms between the different ports of the Mediterranean, and some trade of the same kind carried on by British merchants between the different parts of India, make, perhaps, the principal branches of what is properly the carrying trade of Great Britain. The extent of the home trade, and of the capital which can be employed in it, is necessarily limited by the value of the surplus produce of all those distant places within the country which have occasion to exchange their respective productions with one another; that of the foreign trade of consumption, by the value of the surplus produce of the whole country, and of what can be purchased with it; that of the carrying trade, by the value of the surplus produce of all the different countries in the world. Its possible extent, therefore, is in a manner infinite in comparison of that of the other two, and is capable of absorbing the greatest capitals. The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture, in manufactures, or in some particular branch of the wholesale or retail trade. The different quantities of productive labour which it may put into motion, and the different values which it may add to the annual produce of the land and labour of the society, according as it is employed in one or other of those different ways, never enter into his thoughts. In countries, therefore, where agriculture is the most profitable of all employments, and farming and improving the most direct roads to a splendid fortune, the capitals of individuals will naturally be employed in the manner most advantageous to the whole society. The profits of agriculture, however, seem to have no superiority over those of other employments in any part of Europe. Projectors, indeed, in every corner of it, have, within these few years, amused the public with most magnificent accounts of the profits to be made by the cultivation and improvement of land. Without entering into any particular discussion of their calculations, a very simple observation may satisfy us that the result of them must be false. We see, every day, the most splendid fortunes, that have been acquired in the course of a single life, by trade and manufactures, frequently from a very small capital, sometimes from no capital. A single instance of such a fortune, acquired by agriculture in the same time, and from such a capital, has not, perhaps, occurred in Europe, during the course of the present century. In all the great countries of Europe, however, much good land still remains uncultivated; and the greater part of what is cultivated, is far from being improved to the degree of which it is capable. Agriculture, therefore, is almost everywhere capable of absorbing a much greater capital than has ever yet been employed in it. What circumstances in the policy of Europe have given the trades which are carried on in towns so great an advantage over that which is carried on in the country, that private persons frequently find it more for their advantage to employ their capitals in the most distant carrying trades of Asia and America, than in the improvement and cultivation of the most fertile fields in their own neighbourhood, I shall endeavour to explain at full length in the two following books. BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS CHAP. I. OF THE NATURAL PROGRESS OF OPULENCE. The great commerce of every civilized society is that carried on between the inhabitants of the town and those of the country. It consists in the exchange of rude for manufactured produce, either immediately, or by the intervention of money, or of some sort of paper which represents money. The country supplies the town with the means of subsistence and the materials of manufacture. The town repays this supply, by sending back a part of the manufactured produce to the inhabitants of the country. The town, in which there neither is nor can be any reproduction of substances, may very properly be said to gain its whole wealth and subsistence from the country. We must not, however, upon this account, imagine that the gain of the town is the loss of the country. The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. The inhabitants of the country purchase of the town a greater quantity of manufactured goods with the produce of a much smaller quantity of their own labour, than they must have employed had they attempted to prepare them themselves. The town affords a market for the surplus produce of the country, or what is over and above the maintenance of the cultivators; and it is there that the inhabitants of the country exchange it for something else which is in demand among them. The greater the number and revenue of the inhabitants of the town, the more extensive is the market which it affords to those of the country; and the more extensive that market, it is always the more advantageous to a great number. The corn which grows within a mile of the town, sells there for the same price with that which comes from twenty miles distance. But the price of the latter must, generally, not only pay the expense of raising it and bringing it to market, but afford, too, the ordinary profits of agriculture to the farmer. The proprietors and cultivators of the country, therefore, which lies in the neighbourhood of the town, over and above the ordinary profits of agriculture, gain, in the price of what they sell, the whole value of the carriage of the like produce that is brought from more distant parts; and they save, besides, the whole value of this carriage in the price of what they buy. Compare the cultivation of the lands in the neighbourhood of any considerable town, with that of those which lie at some distance from it, and you will easily satisfy yourself how much the country is benefited by the commerce of the town. Among all the absurd speculations that have been propagated concerning the balance of trade, it has never been pretended that either the country loses by its commerce with the town, or the town by that with the country which maintains it. As subsistence is, in the nature of things, prior to conveniency and luxury, so the industry which procures the former, must necessarily be prior to that which ministers to the latter. The cultivation and improvement of the country, therefore, which affords subsistence, must, necessarily, be prior to the increase of the town, which furnishes only the means of conveniency and luxury. It is the surplus produce of the country only, or what is over and above the maintenance of the cultivators, that constitutes the subsistence of the town, which can therefore increase only with the increase of the surplus produce. The town, indeed, may not always derive its whole subsistence from the country in its neighbourhood, or even from the territory to which it belongs, but from very distant countries; and this, though it forms no exception from the general rule, has occasioned considerable variations in the progress of opulence in different ages and nations. That order of things which necessity imposes, in general, though not in every particular country, is in every particular country promoted by the natural inclinations of man. If human institutions had never thwarted those natural inclinations, the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support; till such time, at least, as the whole of that territory was completely cultivated and improved. Upon equal, or nearly equal profits, most men will choose to employ their capitals, rather in the improvement and cultivation of land, than either in manufactures or in foreign trade. The man who employs his capital in land, has it more under his view and command; and his fortune is much less liable to accidents than that of the trader, who is obliged frequently to commit it, not only to the winds and the waves, but to the more uncertain elements of human folly and injustice, by giving great credits, in distant countries, to men with whose character and situation he can seldom be thoroughly acquainted. The capital of the landlord, on the contrary, which is fixed in the improvement of his land, seems to be as well secured as the nature of human affairs can admit of. The beauty of the country, besides, the pleasure of a country life, the tranquillity of mind which it promises, and, wherever the injustice of human laws does not disturb it, the independency which it really affords, have charms that, more or less, attract everybody; and as to cultivate the ground was the original destination of man, so, in every stage of his existence, he seems to retain a predilection for this primitive employment. Without the assistance of some artificers, indeed, the cultivation of land cannot be carried on, but with great inconveniency and continual interruption. Smiths, carpenters, wheelwrights and ploughwrights, masons and bricklayers, tanners, shoemakers, and tailors, are people whose service the farmer has frequent occasion for. Such artificers, too, stand occasionally in need of the assistance of one another; and as their residence is not, like that of the farmer, necessarily tied down to a precise spot, they naturally settle in the neighbourhood of one another, and thus form a small town or village. The butcher, the brewer, and the baker, soon join them, together with many other artificers and retailers, necessary or useful for supplying their occasional wants, and who contribute still further to augment the town. The inhabitants of the town, and those of the country, are mutually the servants of one another. The town is a continual fair or market, to which the inhabitants of the country resort, in order to exchange their rude for manufactured produce. It is this commerce which supplies the inhabitants of the town, both with the materials of their work, and the means of their subsistence. The quantity of the finished work which they sell to the inhabitants of the country, necessarily regulates the quantity of the materials and provisions which they buy. Neither their employment nor subsistence, therefore, can augment, but in proportion to the augmentation of the demand from the country for finished work; and this demand can augment only in proportion to the extension of improvement and cultivation. Had human institutions, therefore, never disturbed the natural course of things, the progressive wealth and increase of the towns would, in every political society, be consequential, and in proportion to the improvement and cultivation of the territory or country. In our North American colonies, where uncultivated land is still to be had upon easy terms, no manufactures for distant sale have ever yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country, he does not, in North America, attempt to establish with it a manufacture for more distant sale, but employs it in the purchase and improvement of uncultivated land. From artificer he becomes planter; and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him rather to work for other people than for himself. He feels that an artificer is the servant of his customers, from whom he derives his subsistence; but that a planter who cultivates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and independent of all the world. In countries, on the contrary, where there is either no uncultivated land, or none that can be had upon easy terms, every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood, endeavours to prepare work for more distant sale. The smith erects some sort of iron, the weaver some sort of linen or woollen manufactory. Those different manufactures come, in process of time, to be gradually subdivided, and thereby improved and refined in a great variety of ways, which may easily be conceived, and which it is therefore unnecessary to explain any further. In seeking for employment to a capital, manufactures are, upon equal or nearly equal profits, naturally preferred to foreign commerce, for the same reason that agriculture is naturally preferred to manufactures. As the capital of the landlord or farmer is more secure than that of the manufacturer, so the capital of the manufacturer, being at all times more within his view and command, is more secure than that of the foreign merchant. In every period, indeed, of every society, the surplus part both of the rude and manufactured produce, or that for which there is no demand at home, must be sent abroad, in order to be exchanged for something for which there is some demand at home. But whether the capital which carries this surplus produce abroad be a foreign or a domestic one, is of very little importance. If the society has not acquired sufficient capital, both to cultivate all its lands, and to manufacture in the completest manner the whole of its rude produce, there is even a considerable advantage that the rude produce should be exported by a foreign capital, in order that the whole stock of the society may be employed in more useful purposes. The wealth of ancient Egypt, that of China and Indostan, sufficiently demonstrate that a nation may attain a very high degree of opulence, though the greater part of its exportation trade be carried on by foreigners. The progress of our North American and West Indian colonies, would have been much less rapid, had no capital but what belonged to themselves been employed in exporting their surplus produce. According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and, last of all, to foreign commerce. This order of things is so very natural, that in every society that had any territory, it has always, I believe, been in some degree observed. Some of their lands must have been cultivated before any considerable towns could be established, and some sort of coarse industry of the manufacturing kind must have been carried on in those towns, before they could well think of employing themselves in foreign commerce. But though this natural order of things must have taken place in some degree in every such society, it has, in all the modern states of Europe, been in many respects entirely inverted. The foreign commerce of some of their cities has introduced all their finer manufactures, or such as were fit for distant sale; and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. The manners and customs which the nature of their original government introduced, and which remained after that government was greatly altered, necessarily forced them into this unnatural and retrograde order. CHAP. II. OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE. When the German and Scythian nations overran the western provinces of the Roman empire, the confusions which followed so great a revolution lasted for several centuries. The rapine and violence which the barbarians exercised against the ancient inhabitants, interrupted the commerce between the towns and the country. The towns were deserted, and the country was left uncultivated; and the western provinces of Europe, which had enjoyed a considerable degree of opulence under the Roman empire, sunk into the lowest state of poverty and barbarism. During the continuance of those confusions, the chiefs and principal leaders of those nations acquired, or usurped to themselves, the greater part of the lands of those countries. A great part of them was uncultivated; but no part of them, whether cultivated or uncultivated, was left without a proprietor. All of them were engrossed, and the greater part by a few great proprietors. This original engrossing of uncultivated lands, though a great, might have been but a transitory evil. They might soon have been divided again, and broke into small parcels, either by succession or by alienation. The law of primogeniture hindered them from being divided by succession; the introduction of entails prevented their being broke into small parcels by alienation. When land, like moveables, is considered as the means only of subsistence and enjoyment, the natural law of succession divides it, like them, among all the children of the family; of all of whom the subsistence and enjoyment may be supposed equally dear to the father. This natural law of succession, accordingly, took place among the Romans, who made no more distinction between elder and younger, between male and female, in the inheritance of lands, than we do in the distribution of moveables. But when land was considered as the means, not of subsistence merely, but of power and protection, it was thought better that it should descend undivided to one. In those disorderly times, every great landlord was a sort of petty prince. His tenants were his subjects. He was their judge, and in some respects their legislator in peace and their leader in war. He made war according to his own discretion, frequently against his neighbours, and sometimes against his sovereign. The security of a landed estate, therefore, the protection which its owner could afford to those who dwelt on it, depended upon its greatness. To divide it was to ruin it, and to expose every part of it to be oppressed and swallowed up by the incursions of its neighbours. The law of primogeniture, therefore, came to take place, not immediately indeed, but in process of time, in the succession of landed estates, for the same reason that it has generally taken place in that of monarchies, though not always at their first institution. That the power, and consequently the security of the monarchy, may not be weakened by division, it must descend entire to one of the children. To which of them so important a preference shall be given, must be determined by some general rule, founded not upon the doubtful distinctions of personal merit, but upon some plain and evident difference which can admit of no dispute. Among the children of the same family there can be no indisputable differences but that of sex, and that of age. The male sex is universally preferred to the female; and when all other things are equal, the elder everywhere takes place of the younger. Hence the origin of the right of primogeniture, and of what is called lineal succession. Laws frequently continue in force long after the circumstances which first gave occasion to them, and which could alone render them reasonable, are no more. In the present state of Europe, the proprietor of a single acre of land is as perfectly secure in his possession as the proprietor of 100,000. The right of primogeniture, however, still continues to be respected; and as of all institutions it is the fittest to support the pride of family distinctions, it is still likely to endure for many centuries. In every other respect, nothing can be more contrary to the real interest of a numerous family, than a right which, in order to enrich one, beggars all the rest of the children. Entails are the natural consequences of the law of primogeniture. They were introduced to preserve a certain lineal succession, of which the law of primogeniture first gave the idea, and to hinder any part of the original estate from being carried out of the proposed line, either by gift, or device, or alienation; either by the folly, or by the misfortune of any of its successive owners. They were altogether unknown to the Romans. Neither their substitutions, nor fidei-commisses, bear any resemblance to entails, though some French lawyers have thought proper to dress the modern institution in the language and garb of those ancient ones. When great landed estates were a sort of principalities, entails might not be unreasonable. Like what are called the fundamental laws of some monarchies, they might frequently hinder the security of thousands from being endangered by the caprice or extravagance of one man. But in the present state of Europe, when small as well as great estates derive their security from the laws of their country, nothing can be more completely absurd. They are founded upon the most absurd of all suppositions, the supposition that every successive generation of men have not an equal right to the earth, and to all that it possesses; but that the property of the present generation should be restrained and regulated according to the the fancy of those who died, perhaps five hundred years ago. Entails, however, are still respected, through the greater part of Europe; in those countries, particularly, in which noble birth is a necessary qualification for the enjoyment either of civil or military honours. Entails are thought necessary for maintaining this exclusive privilege of the nobility to the great offices and honours of their country; and that order having usurped one unjust advantage over the rest of their fellow-citizens, lest their poverty should render it ridiculous, it is thought reasonable that they should have another. The common law of England, indeed, is said to abhor perpetuities, and they are accordingly more restricted there than in any other European monarchy; though even England is not altogether without them. In Scotland, more than one fifth, perhaps more one third part of the whole lands in the country, are at present supposed to be under strict entail. Great tracts of uncultivated land were in this manner not only engrossed by particular families, but the possibility of their being divided again was as much as possible precluded for ever. It seldom happens, however, that a great proprietor is a great improver. In the disorderly times which gave birth to those barbarous institutions, the great proprietor was sufficiently employed in defending his own territories, or in extending his jurisdiction and authority over those of his neighbours. He had no leisure to attend to the cultivation and improvement of land. When the establishment of law and order afforded this leisure, he often wanted the inclination, and almost always the requisite abilities. If the expense of his house and person either equalled or exceeded his revenue, as it did very frequently, he had no stock to employ in this manner. If he was an economist, he generally found it more profitable to employ his annual savings in new purchases than in the improvement of his old estate. To improve land with profit, like all other commercial projects, requires an exact attention to small savings and small gains, of which a man born to a great fortune, even though naturally frugal, is very seldom capable. The situation of such a person naturally disposes him to attend rather to ornament, which pleases his fancy, than to profit, for which he has so little occasion. The elegance of his dress, of his equipage, of his house and household furniture, are objects which, from his infancy, he has been accustomed to have some anxiety about. The turn of mind which this habit naturally forms, follows him when he comes to think of the improvement of land. He embellishes, perhaps, four or five hundred acres in the neighbourhood of his house, at ten times the expense which the land is worth after all his improvements; and finds, that if he was to improve his whole estate in the same manner, and he has little taste for any other, he would be a bankrupt before he had finished the tenth part of it. There still remain, in both parts of the united kingdom, some great estates which have continued, without interruption, in the hands of the same family since the times of feudal anarchy. Compare the present condition of those estates with the possessions of the small proprietors in their neighbourhood, and you will require no other argument to convince you how unfavourable such extensive property is to improvement. If little improvement was to be expected from such great proprietors, still less was to be hoped for from those who occupied the land under them. In the ancient state of Europe, the occupiers of land were all tenants at will. They were all, or almost all, slaves, but their slavery was of a milder kind than that known among the ancient Greeks and Romans, or even in our West Indian colonies. They were supposed to belong more directly to the land than to their master. They could, therefore, be sold with it, but not separately. They could marry, provided it was with the consent of their master; and he could not afterwards dissolve the marriage by selling the man and wife to different persons. If he maimed or murdered any of them, he was liable to some penalty, though generally but to a small one. They were not, however, capable of acquiring property. Whatever they acquired was acquired to their master, and he could take it from them at pleasure. Whatever cultivation and improvement could be carried on by means of such slaves, was properly carried on by their master. It was at his expense. The seed, the cattle, and the instruments of husbandry, were all his. It was for his benefit. Such slaves could acquire nothing but their daily maintenance. It was properly the proprietor himself, therefore, that in this case occupied his own lands, and cultivated them by his own bondmen. This species of slavery still subsists in Russia, Poland, Hungary, Bohemia, Moravia, and other parts of Germany. It is only in the western and south-western provinces of Europe that it has gradually been abolished altogether. But if great improvements are seldom to be expected from great proprietors, they are least of all to be expected when they employ slaves for their workmen. The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any. A person who can acquire no property can have no other interest but to eat as much and to labour as little as possible. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own. In ancient Italy, how much the cultivation of corn degenerated, how unprofitable it became to the master, when is fell under the management of slaves, is remarked both by Pliny and Columella. In the time of Aristotle, it had not been much better in ancient Greece. Speaking of the ideal republic described in the laws of Plato, to maintain 5000 idle men (the number of warriors supposed necessary for its defence), together with their women and servants, would require, he says, a territory of boundless extent and fertility, like the plains of Babylon. The pride of man makes him love to domineer, and nothing mortifies him to much as to be obliged to condescend to persuade his inferiors. Wherever the law allows it, and the nature of the work can afford it, therefore, he will generally prefer the service of slaves to that of freemen. The planting of sugar and tobacco can afford the expense of slave cultivation. The raising of corn, it seems, in the present times, cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by freemen. The late resolution of the Quakers in Pennsylvania, to set at liberty all their negro slaves, may satisfy us that their number cannot be very great. Had they made any considerable part of their property, such a resolution could never have been agreed to. In our sugar colonies, on the contrary, the whole work is done by slaves, and in our tobacco colonies a very great part of it. The profits of a sugar plantation in any of our West Indian colonies, are generally much greater than those of any other cultivation that is known either in Europe or America; and the profits of a tobacco plantation, though inferior to those of sugar, are superior to those of corn, as has already been observed. Both can afford the expense of slave cultivation, but sugar can afford it still better than tobacco. The number of negroes, accordingly, is much greater, in proportion to that of whites, in our sugar than in our tobacco colonies. To the slave cultivators of ancient times, gradually succeeded a species of farmers, known at present in France by the name of metayers. They are called in Latin _Coloni Partiarii_. They have been so long in disuse in England, that at present I know no English name for them. The proprietor furnished them with the seed, cattle, and instruments of husbandry, the whole stock, in short, necessary for cultivating the farm. The produce was divided equally between the proprietor and the farmer, after setting aside what was judged necessary for keeping up the stock, which was restored to the proprietor, when the farmer either quitted or was turned out of the farm. Land occupied by such tenants is properly cultivated at the expense of the proprietors, as much as that occupied by slaves. There is, however, one very essential difference between them. Such tenants being freemen, are capable of acquiring property; and having a certain proportion of the produce of the land, they have a plain interest that the whole produce should be as great as possible, in order that their own proportion may be so. A slave, on the contrary, who can acquire nothing but his maintenance, consults his own ease, by making the land produce as little as possible over and above that maintenance. It is probable that it was partly upon account of this advantage, and partly upon account of the encroachments which the sovereigns, always jealous of the great lords, gradually encouraged their villains to make upon their authority, and which seem, at least, to have been such as rendered this species of servitude altogether inconvenient, that tenure in villanage gradually wore out through the greater part of Europe. The time and manner, however, in which so important a revolution was brought about, is one of the most obscure points in modern history. The church of Rome claims great merit in it; and it is certain, that so early as the twelfth century, Alexander III. published a bull for the general emancipation of slaves. It seems, however, to have been rather a pious exhortation, than a law to which exact obedience was required from the faithful. Slavery continued to take place almost universally for several centuries afterwards, till it was gradually abolished by the joint operation of the two interests above mentioned; that of the proprietor on the one hand, and that of the sovereign on the other. A villain, enfranchised, and at the same time allowed to continue in possession of the land, having no stock of his own, could cultivate it only by means of what the landlord advanced to him, and must therefore have been what the French call a metayer. It could never, however, be the interest even of this last species of cultivators, to lay out, in the further improvement of the land, any part of the little stock which they might save from their own share of the produce; because the landlord, who laid out nothing, was to get one half of whatever it produced. The tithe, which is but a tenth of the produce, is found to be a very great hindrance to improvement. A tax, therefore, which amounted to one half, must have been an effectual bar to it. It might be the interest of a metayer to make the land produce as much as could be brought out of it by means of the stock furnished by the proprietor; but it could never be his interest to mix any part of his own with it. In France, where five parts out of six of the whole kingdom are said to be still occupied by this species of cultivators, the proprietors complain, that their metayers take every opportunity of employing their master's cattle rather in carriage than in cultivation; because, in the one case, they get the whole profits to themselves, in the other they share them with their landlord. This species of tenants still subsists in some parts of Scotland. They are called steel-bow tenants. Those ancient English tenants, who are said by Chief-Baron Gilbert and Dr Blackstone to have been rather bailiffs of the landlord than farmers, properly so called, were probably of the same kind. To this species of tenantry succeeded, though by very slow degrees, farmers, properly so called, who cultivated the land with their own stock, paying a rent certain to the landlord. When such farmers have a lease for a term of years, they may sometimes find it for their interest to lay out part of their capital in the further improvement of the farm; because they may sometimes expect to recover it, with a large profit, before the expiration of the lease. The possession, even of such farmers, however, was long extremely precarious, and still is so in many parts of Europe. They could, before the expiration of their term, be legally ousted of their leases by a new purchaser; in England, even, by the fictitious action of a common recovery. If they were turned out illegally by the violence of their master, the action by which they obtained redress was extremely imperfect. It did not always reinstate them in the possession of the land, but gave them damages, which never amounted to a real loss. Even in England, the country, perhaps of Europe, where the yeomanry has always been most respected, it was not till about the 14th of Henry VII. that the action of ejectment was invented, by which the tenant recovers, not damages only, but possession, and in which his claim is not necessarily concluded by the uncertain decision of a single assize. This action has been found so effectual a remedy, that, in the modern practice, when the landlord has occasion to sue for the possession of the land, he seldom makes use of the actions which properly belong to him as a landlord, the writ of right or the writ of entry, but sues in the name of his tenant, by the writ of ejectment. In England, therefore the security of the tenant is equal to that of the proprietor. In England, besides, a lease for life of forty shillings a-year value is a freehold, and entitles the lessee to a vote for a member of parliament; and as a great part of the yeomanry have freeholds of this kind, the whole order becomes respectable to their landlords, on account of the political consideration which this gives them. There is, I believe, nowhere in Europe, except in England, any instance of the tenant building upon the land of which he had no lease, and trusting that the honour of his landlord would take no advantage of so important an improvement. Those laws and customs, so favourable to the yeomanry, have perhaps contributed more to the present grandeur of England, than all their boasted regulations of commerce taken together. The law which secures the longest leases against successors of every kind, is, so far as I know, peculiar to Great Britain. It was introduced into Scotland so early as 1449, by a law of James II. Its beneficial influence, however, has been much obstructed by entails; the heirs of entail being generally restrained from letting leases for any long term of years, frequently for more than one year. A late act of parliament has, in this respect, somewhat slackened their fetters, though they are still by much too strait. In Scotland, besides, as no leasehold gives a vote for a member of parliament, the yeomanry are upon this account less respectable to their landlords than in England. In other parts of Europe, after it was found convenient to secure tenants both against heirs and purchasers, the term of their security was still limited to a very short period; in France, for example, to nine years from the commencement of the lease. It has in that country, indeed, been lately extended to twenty-seven, a period still too short to encourage the tenant to make the most important improvements. The proprietors of land were anciently the legislators of every part of Europe. The laws relating to land, therefore, were all calculated for what they supposed the interest of the proprietor. It was for his interest, they had imagined, that no lease granted by any of his predecessors should hinder him from enjoying, during a long term of years, the full value of his land. Avarice and injustice are always short-sighted, and they did not foresee how much this regulation must obstruct improvement, and thereby hurt, in the long-run, the real interest of the landlord. The farmers, too, besides paying the rent, were anciently, it was supposed, bound to perform a great number of services to the landlord, which were seldom either specified in the lease, or regulated by any precise rule, but by the use and wont of the manor or barony. These services, therefore, being almost entirely arbitrary, subjected the tenant to many vexations. In Scotland the abolition of all services not precisely stipulated in the lease, has, in the course of a few years, very much altered for the better the condition of the yeomanry of that country. The public services to which the yeomanry were bound, were not less arbitrary than the private ones. To make and maintain the high roads, a servitude which still subsists, I believe, everywhere, though with different degrees of oppression in different countries, was not the only one. When the king's troops, when his household, or his officers of any kind, passed through any part of the country, the yeomanry were bound to provide them with horses, carriages, and provisions, at a price regulated by the purveyor. Great Britain is, I believe, the only monarchy in Europe where the oppression of purveyance has been entirely abolished. It still subsists in France and Germany. The public taxes, to which they were subject, were as irregular and oppressive as the services. The ancient lords, though extremely unwilling to grant, themselves, any pecuniary aid to their sovereign, easily allowed him to tallage, as they called it, their tenants, and had not knowledge enough to foresee how much this must, in the end, affect their own revenue. The taille, as it still subsists in France, may serve as an example of those ancient tallages. It is a tax upon the supposed profits of the farmer, which they estimate by the stock that he has upon the farm. It is his interest, therefore, to appear to have as little as possible, and consequently to employ as little as possible in its cultivation, and none in its improvement. Should any stock happen to accumulate in the hands of a French farmer, the taille is almost equal to a prohibition of its ever being employed upon the land. This tax, besides, is supposed to dishonour whoever is subject to it, and to degrade him below, not only the rank of a gentleman, but that of a burgher; and whoever rents the lands of another becomes subject to it. No gentleman, nor even any burgher, who has stock, will submit to this degradation. This tax, therefore, not only hinders the stock which accumulates upon the land from being employed in its improvement, but drives away all other stock from it. The ancient tenths and fifteenths, so usual in England in former times, seem, so far as they affected the land, to have been taxes of the same nature with the taille. Under all these discouragements, little improvement could be expected from the occupiers of land. That order of people, with all the liberty and security which law can give, must always improve under great disadvantage. The farmer, compared with the proprietor, is as a merchant who trades with borrowed money, compared with one who trades with his own. The stock of both may improve; but that of the one, with only equal good conduct, must always improve more slowly than that of the other, on account of the large share of the profits which is consumed by the interest of the loan. The lands cultivated by the farmer must, in the same manner, with only equal good conduct, be improved more slowly than those cultivated by the proprietor, on account of the large share of the produce which is consumed in the rent, and which, had the farmer been proprietor, he might have employed in the further improvement of the land. The station of a farmer, besides, is, from the nature of things, inferior to that of a proprietor. Through the greater part of Europe, the yeomanry are regarded as an inferior rank of people, even to the better sort of tradesmen and mechanics, and in all parts of Europe to the great merchants and master manufacturers. It can seldom happen, therefore, that a man of any considerable stock should quit the superior, in order to place himself in an inferior station. Even in the present state of Europe, therefore, little stock is likely to go from any other profession to the improvement of land in the way of farming. More does, perhaps, in Great Britain than in any other country, though even there the great stocks which are in some places employed in farming, have generally been acquired by farming, the trade, perhaps, in which, of all others, stock is commonly acquired most slowly. After small proprietors, however, rich and great farmers are in every country the principal improvers. There are more such, perhaps, in England than in any other European monarchy. In the republican governments of Holland, and of Berne in Switzerland, the farmers are said to be not inferior to those of England. The ancient policy of Europe was, over and above all this, unfavourable to the improvement and cultivation of land, whether carried on by the proprietor or by the farmer; first, by the general prohibition of the exportation of corn, without a special licence, which seems to have been a very universal regulation; and, secondly, by the restraints which were laid upon the inland commerce, not only of corn, but of almost every other part of the produce of the farm, by the absurd laws against engrossers, regraters, and forestallers, and by the privileges of fairs and markets. It has already been observed in what manner the prohibition of the exportation of corn, together with some encouragement given to the importation of foreign corn, obstructed the cultivation of ancient Italy, naturally the most fertile country in Europe, and at that time the seat of the greatest empire in the world. To what degree such restraints upon the inland commerce of this commodity, joined to the general prohibition of exportation, must have discouraged the cultivation of countries less fertile, and less favourably circumstanced, it is not, perhaps, very easy to imagine. CHAP. III. OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE. The inhabitants of cities and towns were, after the fall of the Roman empire, not more favoured than those of the country. They consisted, indeed, of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. These last were composed chiefly of the proprietors of lands, among whom the public territory was originally divided, and who found it convenient to build their houses in the neighbourhood of one another, and to surround them with a wall, for the sake of common defence. After the fall of the Roman empire, on the contrary, the proprietors of land seem generally to have lived in fortified castles on their own estates, and in the midst of their own tenants and dependents. The towns were chiefly inhabited by tradesmen and mechanics, who seem, in those days, to have been of servile, or very nearly of servile condition. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe, sufficiently show what they were before those grants. The people to whom it is granted as a privilege, that they might give away their own daughters in marriage without the consent of their lord, that upon their death their own children, and not their lord, should succeed to their goods, and that they might dispose of their own effects by will, must, before those grants, have been either altogether, or very nearly, in the same state of villanage with the occupiers of land in the country. They seem, indeed, to have been a very poor, mean set of people, who seemed to travel about with their goods from place to place and from fair to fair, like the hawkers and pedlars of the present times. In all the different countries of Europe then, in the same manner as in several of the Tartar governments of Asia at present, taxes used to be levied upon the persons and goods of travellers, when they passed through certain manors, when they went over certain bridges, when they carried about their goods from place to place in a fair, when they erected in it a booth or stall to sell them in. These different taxes were known in England by the names of passage, pontage, lastage, and stallage. Sometimes the king, sometimes a great lord, who had, it seems, upon some occasions, authority to do this, would grant to particular traders, to such particularly as lived in their own demesnes, a general exemption from such taxes. Such traders, though in other respects of servile, or very nearly of servile condition, were upon this account called free traders. They, in return, usually paid to their protector a sort of annual poll-tax. In those days protection was seldom granted without a valuable consideration, and this tax might perhaps be considered as compensation for what their patrons might lose by their exemption from other taxes. At first, both those poll-taxes and those exemptions seem to have been altogether personal, and to have affected only particular individuals, during either their lives, or the pleasure of their protectors. In the very imperfect accounts which have been published from Doomsday-book, of several of the towns of England, mention is frequently made, sometimes of the tax which particular burghers paid, each of them, either to the king, or to some other great lord, for this sort of protection, and sometimes of the general amount only of all those taxes.[31] But how servile soever may have been originally the condition of the inhabitants of the towns, it appears evidently, that they arrived at liberty and independency much earlier than the occupiers of land in the country. That part of the king's revenue which arose from such poll-taxes in any particular town, used commonly to be let in farm, during a term of years, for a rent certain, sometimes to the sheriff of the county, and sometimes to other persons. The burghers themselves frequently got credit enough to be admitted to farm the revenues of this sort which arose out of their own town, they becoming jointly and severally answerable for the whole rent.[32] To let a farm in this manner, was quite agreeable to the usual economy of, I believe, the sovereigns of all the different countries of Europe, who used frequently to let whole manors to all the tenants of those manors, they becoming jointly and severally answerable for the whole rent; but in return being allowed to collect it in their own way, and to pay it into the king's exchequer by the hands of their own bailiff, and being thus altogether freed from the insolence of the king's officers; a circumstance in those days regarded as of the greatest importance. At first, the farm of the town was probably let to the burghers, in the same manner as it had been to other farmers, for a term of years only. In process of time, however, it seems to have become the general practice to grant it to them in fee, that is for ever, reserving a rent certain, never afterwards to be augmented. The payment having thus became perpetual, the exemptions, in return, for which it was made, naturally became perpetual too. Those exemptions, therefore, ceased to be personal, and could not afterwards be considered as belonging to individuals, as individuals, but as burghers of a particular burgh, which, upon this account, was called a free burgh, for the same reason that they had been called free burghers or free traders. Along with this grant, the important privileges, above mentioned, that they might give away their own daughters in marriage, that their children should succeed to them, and that they might dispose of their own effects by will, were generally bestowed upon the burghers of the town to whom it was given. Whether such privileges had before been usually granted, along with the freedom of trade, to particular burghers, as individuals, I know not. I reckon it not improbable that they were, though I cannot produce any direct evidence of it. But however this may have been, the principal attributes of villanage and slavery being thus taken away from them, they now at least became really free, in our present sense of the word freedom. Nor was this all. They were generally at the same time erected into a commonalty or corporation, with the privilege of having magistrates and a town-council of their own, of making bye-laws for their own government, of building walls for their own defence, and of reducing all their inhabitants under a sort of military discipline, by obliging them to watch and ward; that is, as anciently understood, to guard and defend those walls against all attacks and surprises, by night as well as by day. In England they were generally exempted from suit to the hundred and county courts; and all such pleas as should arise among them, the pleas of the crown excepted, were left to the decision of their own magistrates. In other countries, much greater and more extensive jurisdictions were frequently granted to them.[33] It might, probably, be necessary to grant to such towns as were admitted to farm their own revenues, some sort of compulsive jurisdiction to oblige their own citizens to make payment. In those disorderly times, it might have been extremely inconvenient to have left them to seek this sort of justice from any other tribunal. But it must seem extraordinary, that the sovereigns of all the different countries of Europe should have exchanged in this manner for a rent certain, never more to be augmented, that branch of their revenue, which was, perhaps, of all others, the most likely to be improved by the natural course of things, without either expense or attention of their own; and that they should, besides, have in this manner voluntarily erected a sort of independent republics in the heart of their own dominions. In order to understand this, it must be remembered, that, in those days, the sovereign of perhaps no country in Europe was able to protect, through the whole extent of his dominions, the weaker part of his subjects from the oppression of the great lords. Those whom the law could not protect, and who were not strong enough to defend themselves, were obliged either to have recourse to the protection of some great lord, and in order to obtain it, to become either his slaves or vassals; or to enter into a league of mutual defence for the common protection of one another. The inhabitants of cities and burghs, considered as single individuals, had no power to defend themselves; but by entering into a league of mutual defence with their neighbours, they were capable of making no contemptible resistance. The lords despised the burghers, whom they considered not only as a different order, but as a parcel of emancipated slaves, almost of a different species from themselves. The wealth of the burghers never failed to provoke their envy and indignation, and they plundered them upon every occasion without mercy or remorse. The burghers naturally hated and feared the lords. The king hated and feared them too; but though, perhaps, he might despise, he had no reason either to hate or fear the burghers. Mutual interest, therefore, disposed them to support the king, and the king to support them against the lords. They were the enemies of his enemies, and it was his interest to render them as secure and independent of those enemies as he could. By granting them magistrates of their own, the privilege of making bye-laws for their own government, that of building walls for their own defence, and that of reducing all their inhabitants under a sort of military discipline, he gave them all the means of security and independency of the barons which it was in his power to bestow. Without the establishment of some regular government of this kind, without some authority to compel their inhabitants to act according to some certain plan or system, no voluntary league of mutual defence could either have afforded them any permanent security, or have enabled them to give the king any considerable support. By granting them the farm of their own town in fee, he took away from those whom he wished to have for his friends, and, if one may say so, for his allies, all ground of jealousy and suspicion, that he was ever afterwards to oppress them, either by raising the farm-rent of their town, or by granting it to some other farmer. The princes who lived upon the worst terms with their barons, seem accordingly to have been the most liberal in grants of this kind to their burghs. King John of England, for example, appears to have been a most munificent benefactor to his towns.[34] Philip I. of France lost all authority over his barons. Towards the end of his reign, his son Lewis, known afterwards by the name of Lewis the Fat, consulted, according to Father Daniel, with the bishops of the royal demesnes, concerning the most proper means of restraining the violence of the great lords. Their advice consisted of two different proposals. One was to erect a new order of jurisdiction, by establishing magistrates and a town-council in every considerable town of his demesnes. The other was to form a new militia, by making the inhabitants of those towns, under the command of their own magistrates, march out upon proper occasions to the assistance of the king. It is from this period, according to the French antiquarians, that we are to date the institution of the magistrates and councils of cities in France. It was during the unprosperous reigns of the princes of the house of Suabia, that the greater part of the free towns of Germany received the first grants of their privileges, and that the famous Hanseatic league first became formidable.[35] The militia of the cities seems, in those times, not to have been inferior to that of the country; and as they could be more readily assembled upon any sudden occasion, they frequently had the advantage in their disputes with the neighbouring lords. In countries such as Italy or Switzerland, in which, on account either of their distance from the principal seat of government, of the natural strength of the country itself, or of some other reason, the sovereign came to lose the whole of his authority; the cities generally became independent republics, and conquered all the nobility in their neighbourhood; obliging them to pull down their castles in the country, and to live, like other peaceable inhabitants, in the city. This is the short history of the republic of Berne, as well as of several other cities in Switzerland. If you except Venice, for of that city the history is somewhat different, it is the history of all the considerable Italian republics, of which so great a number arose and perished between the end of the twelfth and the beginning of the sixteenth century. In countries such as France and England, where the authority of the sovereign, though frequently very low, never was destroyed altogether, the cities had no opportunity of becoming entirely independent. They became, however, so considerable, that the sovereign could impose no tax upon them, besides the stated farm-rent of the town, without their own consent. They were, therefore, called upon to send deputies to the general assembly of the states of the kingdom, where they might join with the clergy and the barons in granting, upon urgent occasions, some extraordinary aid to the king. Being generally, too, more favourable to his power, their deputies seem sometimes to have been employed by him as a counterbalance in these assemblies to the authority of the great lords. Hence the origin of the representation of burghs in the states-general of all great monarchies in Europe. Order and good government, and along with them the liberty and security of individuals, were in this manner established in cities, at a time when the occupiers of land in the country, were exposed to every sort of violence. But men in this defenceless state naturally content themselves with their necessary subsistence; because, to acquire more, might only tempt the injustice of their oppressors. On the contrary, when they are secure of enjoying the fruits of their industry, they naturally exert it to better their condition, and to acquire not only the necessaries, but the conveniencies and elegancies of life. That industry, therefore, which aims at something more than necessary subsistence, was established in cities long before it was commonly practised by the occupiers of land in the country. If, in the hands of a poor cultivator, oppressed with the servitude of villanage, some little stock should accumulate, he would naturally conceal it with great care from his master, to whom it would otherwise have belonged, and take the first opportunity of running away to a town. The law was at that time so indulgent to the inhabitants of towns, and so desirous of diminishing the authority of the lords over those of the country, that if he could conceal himself there from the pursuit of his lord for a year, he was free for ever. Whatever stock, therefore, accumulated in the hands of the industrious part of the inhabitants of the country, naturally took refuge in cities, as the only sanctuaries in which it could be secure to the person that acquired it. The inhabitants of a city, it is true, must always ultimately derive their subsistence, and the whole materials and means of their industry, from the country. But those of a city, situated near either the sea-coast or the banks of a navigable river, are not necessarily confined to derive them from the country in their neighbourhood. They have a much wider range, and may draw them from the most remote corners of the world, either in exchange for the manufactured produce of their own industry, or by performing the office of carriers between distant countries, and exchanging the produce of one for that of another. A city might, in this manner, grow up to great wealth and splendour, while not only the country in its neighbourhood, but all those to which it traded, were in poverty and wretchedness. Each of those countries, perhaps, taken singly, could afford it but a small part, either of its subsistence or of its employment; but all of them taken together, could afford it both a great subsistence and a great employment. There were, however, within the narrow circle of the commerce of those times, some countries that were opulent and industrious. Such was the Greek empire as long as it subsisted, and that of the Saracens during the reigns of the Abassides. Such, too, was Egypt till it was conquered by the Turks, some part of the coast of Barbary, and all those provinces of Spain which were under the government of the Moors. The cities of Italy seem to have been the first in Europe which were raised by commerce to any considerable degree of opulence. Italy lay in the centre of what was at that time the improved and civilized part of the world. The crusades, too, though, by the great waste of stock and destruction of inhabitants which they occasioned, they must necessarily have retarded the progress of the greater part of Europe, were extremely favourable to that of some Italian cities. The great armies which marched from all parts to the conquest of the Holy Land, gave extraordinary encouragement to the shipping of Venice, Genoa, and Pisa, sometimes in transporting them thither, and always in supplying them with provisions. They were the commissaries, if one may say so, of those armies; and the most destructive frenzy that ever befel the European nations, was a source of opulence to those republics. The inhabitants of trading cities, by importing the improved manufactures and expensive luxuries of richer countries, afforded some food to the vanity of the great proprietors, who eagerly purchased them with great quantities of the rude produce of their own lands. The commerce of a great part of Europe in those times, accordingly, consisted chiefly in the exchange of their own rude, for the manufactured produce of more civilized nations. Thus the wool of England used to be exchanged for the wines of France, and the fine cloths of Flanders, in the same manner as the corn in Poland is at this day, exchanged for the wines and brandies of France, and for the silks and velvets of France and Italy. A taste for the finer and more improved manufactures was, in this manner, introduced by foreign commerce into countries where no such works were carried on. But when this taste became so general as to occasion a considerable demand, the merchants, in order to save the expense of carriage, naturally endeavoured to establish some manufactures of the same kind in their own country. Hence the origin of the first manufactures for distant sale, that seem to have been established in the western provinces of Europe, after the fall of the Roman empire. No large country, it must be observed, ever did or could subsist without some sort of manufactures being carried on in it; and when it is said of any such country that it has no manufactures, it must always be understood of the finer and more improved, or of such as are fit for distant sale. In every large country, both the clothing and household furniture of the far greater part of the people, are the produce of their own industry. This is even more universally the case in those poor countries which are commonly said to have no manufactures, than in those rich ones that are said to abound in them. In the latter you will generally find, both in the clothes and household furniture of the lowest rank of people, a much greater proportion of foreign productions than in the former. Those manufactures which are fit for distant sale, seem to have been introduced into different countries in two different ways. Sometimes they have been introduced in the manner above mentioned, by the violent operation, if one may say so, of the stocks of particular merchants and undertakers, who established them in imitation of some foreign manufactures of the same kind. Such manufactures, therefore, are the offspring of foreign commerce; and such seem to have been the ancient manufactures of silks, velvets, and brocades, which flourished in Lucca during the thirteenth century. They were banished from thence by the tyranny of one of Machiavel's heroes, Castruccio Castracani. In 1810, nine hundred families were driven out of Lucca, of whom thirty-one retired to Venice, and offered to introduce there the silk manufacture.[36] Their offer was accepted, many privileges were conferred upon them, and they began the manufacture with three hundred workmen. Such, too, seem to have been the manufactures of fine cloths that anciently flourished in Flanders, and which were introduced into England in the beginning of the reign of Elizabeth, and such are the present silk manufactures of Lyons and Spitalfields. Manufactures introduced in this manner are generally employed upon foreign materials, being imitations of foreign manufactures. When the Venetian manufacture was first established, the materials were all brought from Sicily and the Levant. The more ancient manufacture of Lucca was likewise carried on with foreign materials. The cultivation of mulberry trees, and the breeding of silk-worms, seem not to have been common in the northern parts of Italy before the sixteenth century. Those arts were not introduced into France till the reign of Charles IX. The manufactures of Flanders were carried on chiefly with Spanish and English wool. Spanish wool was the material, not of the first woollen manufacture of England, but of the first that was fit for distant sale. More than one half the materials of the Lyons manufacture is at this day foreign silk; when it was first established, the whole, or very nearly the whole, was so. No part of the materials of the Spitalfields manufacture is ever likely to be the produce of England. The seat of such manufactures, as they are generally introduced by the scheme and project of a few individuals, is sometimes established in a maritime city, and sometimes in an inland town, according as their interest, judgment, or caprice, happen to determine. At other times, manufactures for distant sale grow up naturally, and as it were of their own accord, by the gradual refinement of those household and coarser manufactures which must at all times be carried on even in the poorest and rudest countries. Such manufactures are generally employed upon the materials which the country produces, and they seem frequently to have been first refined and improved in such inland countries as were not, indeed, at a very great, but at a considerable distance from the sea-coast, and sometimes even from all water carriage. An inland country, naturally fertile and easily cultivated, produces a great surplus of provisions beyond what is necessary for maintaining the cultivators; and on account of the expense of land carriage, and inconveniency of river navigation, it may frequently be difficult to send this surplus abroad. Abundance, therefore, renders provisions cheap, and encourages a great number of workmen to settle in the neighbourhood, who find that their industry can there procure them more of the necessaries and conveniences of life than in other places. They work up the materials of manufacture which the land produces, and exchange their finished work, or, what is the same thing, the price of it, for more materials and provisions. They give a new value to the surplus part of the rude produce, by saving the expense of carrying it to the water-side, or to some distant market; and they furnish the cultivators with something in exchange for it, that is either useful or agreeable to them, upon easier terms than they could have obtained it before. The cultivators get a better price for their surplus produce, and can purchase cheaper other conveniences which they have occasion for. They are thus both encouraged and enabled to increase this surplus produce by a further improvement and better cultivation of the land; and as the fertility of the land had given birth to the manufacture, so the progress of the manufacture re-acts upon the land, and increases still further its fertility. The manufacturers first supply the neighbourhood, and afterwards, as their work improves and refines, more distant markets. For though neither the rude produce, nor even the coarse manufacture, could, without the greatest difficulty, support the expense of a considerable land-carriage, the refined and improved manufacture easily may. In a small bulk it frequently contains the price of a great quantity of rude produce. A piece of fine cloth, for example which weighs only eighty pounds, contains in it the price, not only of eighty pounds weight of wool, but sometimes of several thousand weight of corn, the maintenance of the different working people, and of their immediate employers. The corn which could with difficulty have been carried abroad in its own shape, is in this manner virtually exported in that of the complete manufacture, and may easily be sent to the remotest corners of the world. In this manner have grown up naturally, and, as it were, of their own accord, the manufactures of Leeds, Halifax, Sheffield, Birmingham, and Wolverhampton. Such manufactures are the offspring of agriculture. In the modern history of Europe, their extension and improvement have generally been posterior to those which were the offspring of foreign commerce. England was noted for the manufacture of fine cloths made of Spanish wool, more than a century before any of those which now flourish in the places above mentioned were fit for foreign sale. The extension and improvement of these last could not take place but in consequence of the extension and improvement of agriculture, the last and greatest effect of foreign commerce, and of the manufactures immediately introduced by it, and which I shall now proceed to explain. CHAP. IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY. The increase and riches of commercial and manufacturing towns contributed to the improvement and cultivation of the countries to which they belonged, in three different ways: First, by affording a great and ready market for the rude produce of the country, they gave encouragement to its cultivation and further improvement. This benefit was not even confined to the countries in which they were situated, but extended more or less to all those with which they had any dealings. To all of them they afforded a market for some part either of their rude or manufactured produce, and, consequently, gave some encouragement to the industry and improvement of all. Their own country, however, on account of its neighbourhood, necessarily derived the greatest benefit from this market. Its rude produce being charged with less carriage, the traders could pay the growers a better price for it, and yet afford it as cheap to the consumers as that of more distant countries. Secondly, the wealth acquired by the inhabitants of cities was frequently employed in purchasing such lands as were to be sold, of which a great part would frequently be uncultivated. Merchants are commonly ambitious of becoming country gentlemen, and, when they do, they are generally the best of all improvers. A merchant is accustomed to employ his money chiefly in profitable projects; whereas a mere country gentleman is accustomed to employ it chiefly in expense. The one often sees his money go from him, and return to him again with a profit; the other, when once he parts with it, very seldom expects to see any more of it. Those different habits naturally affect their temper and disposition in every sort of business. The merchant is commonly a bold, a country gentleman a timid undertaker. The one is not afraid to lay out at once a large capital upon the improvement of his land, when he has a probable prospect of raising the value of it in proportion to the expense; the other, if he has any capital, which is not always the case, seldom ventures to employ it in this manner. If he improves at all, it is commonly not with a capital, but with what he can save out of his annual revenue. Whoever has had the fortune to live in a mercantile town, situated in an unimproved country, must have frequently observed how much more spirited the operations of merchants were in this way, than those of mere country gentlemen. The habits, besides, of order, economy, and attention, to which mercantile business naturally forms a merchant, render him much fitter to execute, with profit and success, any project of improvement. Thirdly, and lastly, commerce and manufactures gradually introduced order and good government, and with them the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours, and of servile dependency upon their superiors. This, though it has been the least observed, is by far the most important of all their effects. Mr Hume is the only writer who, so far as I know, has hitherto taken notice of it. In a country which has neither foreign commerce nor any of the finer manufactures, a great proprietor, having nothing for which he can exchange the greater part of the produce of his lands which is over and above the maintenance of the cultivators, consumes the whole in rustic hospitality at home. If this surplus produce is sufficient to maintain a hundred or a thousand men, he can make use of it in no other way than by maintaining a hundred or a thousand men. He is at all times, therefore, surrounded with a multitude of retainers and dependents, who, having no equivalent to give in return for their maintenance, but being fed entirely by his bounty, must obey him, for the same reason that soldiers obey the prince who pays them. Before the extension of commerce and manufactures in Europe, the hospitality of the rich and the great, from the sovereign down to the smallest baron, exceeded every thing which, in the present times, we can easily form a notion of. Westminster-hall was the dining-room of William Rufus, and might frequently, perhaps, not be too large for his company. It was reckoned a piece of magnificence in Thomas Becket, that he strewed the floor of his hall with clean hay or rushes in the season, in order that the knights and squires, who could not get seats, might not spoil their fine clothes when they sat down on the floor to eat their dinner. The great Earl of Warwick is said to have entertained every day, at his different manors, 30,000 people; and though the number here may have been exaggerated, it must, however, have been very great to admit of such exaggeration. A hospitality nearly of the same kind was exercised not many years ago in many different parts of the Highlands of Scotland. It seems to be common in all nations to whom commerce and manufactures are little known. I have seen, says Doctor Pocock, an Arabian chief dine in the streets of a town where he had come to sell his cattle, and invited all passengers, even common beggars, to sit down with him and partake of his banquet. The occupiers of land were in every respect as dependent upon the great proprietor as his retainers. Even such of them as were not in a state of villanage, were tenants at will, who paid a rent in no respect equivalent to the subsistence which the land afforded them. A crown, half a crown, a sheep, a lamb, was some years ago, in the Highlands of Scotland, a common rent for lands which maintained a family. In some places it is so at this day; nor will money at present purchase a greater quantity of commodities there than in other places. In a country where the surplus produce of a large estate must be consumed upon the estate itself, it will frequently be more convenient for the proprietor, that part of it be consumed at a distance from his own house, provided they who consume it are as dependent upon him as either his retainers or his menial servants. He in thereby saved from the embarrassment of either too large a company, or too large a family. A tenant at will, who possesses land sufficient to maintain his family for little more than a quit-rent, is as dependent upon the proprietor as any servant or retainer whatever, and must obey him with as little reserve. Such a proprietor, as he feeds his servants and retainers at his own house, so he feeds his tenants at their houses. The subsistence of both is derived from his bounty, and its continuance depends upon his good pleasure. Upon the authority which the great proprietors necessarily had, in such a state of things, over their tenants and retainers, was founded the power of the ancient barons. They necessarily became the judges in peace, and the leaders in war, of all who dwelt upon their estates. They could maintain order, and execute the law, within their respective demesnes, because each of them could there turn the whole force of all the inhabitants against the injustice of any one. No other person had sufficient authority to do this. The king, in particular, had not. In those ancient times, he was little more than the greatest proprietor in his dominions, to whom, for the sake of common defence against their common enemies, the other great proprietors paid certain respects. To have enforced payment of a small debt within the lands of a great proprietor, where all the inhabitants were armed, and accustomed to stand by one another, would have cost the king, had he attempted it by his own authority, almost the same effort as to extinguish a civil war. He was, therefore, obliged to abandon the administration of justice, through the greater part of the country, to those who were capable of administering it; and, for the same reason, to leave the command of the country militia to those whom that militia would obey. It is a mistake to imagine that those territorial jurisdictions took their origin from the feudal law. Not only the highest jurisdictions, both civil and criminal, but the power of levying troops, of coining money, and even that of making bye-laws for the government of their own people, were all rights possessed allodially by the great proprietors of land, several centuries before even the name of the feudal law was known in Europe. The authority and jurisdiction of the Saxon lords in England appear to have been as great before the Conquest as that of any of the Norman lords after it. But the feudal law is not supposed to have become the common law of England till after the Conquest. That the most extensive authority and jurisdictions were possessed by the great lords in France allodially, long before the feudal law was introduced into that country, is a matter of fact that admits of no doubt. That authority, and those jurisdictions, all necessarily flowed from the state of property and manners just now described. Without remounting to the remote antiquities of either the French or English monarchies, we may find, in much later times, many proofs that such effects must always flow from such causes. It is not thirty years ago since Mr Cameron of Lochiel, a gentleman of Lochaber in Scotland, without any legal warrant whatever, not being what was then called a lord of regality, nor even a tenant in chief, but a vassal of the Duke of Argyll, and without being so much as a justice of peace, used, notwithstanding, to exercise the highest criminal jurisdictions over his own people. He is said to have done so with great equity, though without any of the formalities of justice; and it is not improbable that the state of that part of the country at that time made it necessary for him to assume this authority, in order to maintain the public peace. That gentleman, whose rent never exceeded L.500 a-year, carried, in 1745, 800 of his own people into the rebellion with him. The introduction of the feudal law, so far from extending, may be regarded as an attempt to moderate, the authority of the great allodial lords. It established a regular subordination, accompanied with a long train of services and duties, from the king down to the smallest proprietor. During the minority of the proprietor, the rent, together with the management of his lands, fell into the hands of his immediate superior; and, consequently, those of all great proprietors into the hands of the king, who was charged with the maintenance and education of the pupil, and who, from his authority as guardian, was supposed to have a right of disposing of him in marriage, provided it was in a manner not unsuitable to his rank. But though this institution necessarily tended to strengthen the authority of the king, and to weaken that of the great proprietors, it could not do either sufficiently for establishing order and good government among the inhabitants of the country; because it could not alter sufficiently that state of property and manners from which the disorders arose. The authority of government still continued to be, as before, too weak in the head, and too strong in the inferior members; and the excessive strength of the inferior members was the cause of the weakness of the head. After the institution of feudal subordination, the king was as incapable of restraining the violence of the great lords as before. They still continued to make war according to their own discretion, almost continually upon one another, and very frequently upon the king; and the open country still continued to be a scene of violence, rapine, and disorder. But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves, without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or, what in the same thing, the price of the maintenance of 1000 men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas, in the more ancient method of expense, they must have shared with at least 1000 people. With the judges that were to determine the preference, this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities they gradually bartered their whole power and authority. In a country where there is no foreign commerce, nor any of the finer manufactures, a man of L.10,000 a-year cannot well employ his revenue in any other way than in maintaining, perhaps, 1000 families, who are all of them necessarily at his command. In the present state of Europe, a man of L.10,000 a-year can spend his whole revenue, and he generally does so, without directly maintaining twenty people, or being able to command more than ten footmen, not worth the commanding. Indirectly, perhaps, he maintains as great, or even a greater number of people, than he could have done by the ancient method of expense. For though the quantity of precious productions for which he exchanges his whole revenue be very small, the number of workmen employed in collecting and preparing it must necessarily have been very great. Its great price generally arises from the wages of their labour, and the profits of all their immediate employers. By paying that price, he indirectly pays all those wages and profits, and thus indirectly contributes to the maintenance of all the workmen and their employers. He generally contributes, however, but a very small proportion to that of each; to a very few, perhaps, not a tenth, to many not a hundredth, and to some not a thousandth, or even a ten thousandth part of their whole annual maintenance. Though he contributes, therefore, to the maintenance of them all, they are all more or less independent of him, because generally they can all be maintained without him. When the great proprietors of land spend their rents in maintaining their tenants and retainers, each of them maintains entirely all his own tenants and all his own retainers. But when they spend them in maintaining tradesmen and artificers, they may, all of them taken together, perhaps maintain as great, or, on account of the waste which attends rustic hospitality, a greater number of people than before. Each of them, however, taken singly, contributes often but a very small share to the maintenance of any individual of this greater number. Each tradesman or artificer derives his subsistence from the employment, not of one, but of a hundred or a thousand different customers. Though in some measure obliged to them all, therefore, he is not absolutely dependent upon any one of them. The personal expense of the great proprietors having in this manner gradually increased, it was impossible that the number of their retainers should not as gradually diminish, till they were at last dismissed altogether. The same cause gradually led them to dismiss the unnecessary part of their tenants. Farms were enlarged, and the occupiers of land, notwithstanding the complaints of depopulation, reduced to the number necessary for cultivating it, according to the imperfect state of cultivation and improvement in those times. By the removal of the unnecessary mouths, and by exacting from the farmer the full value of the farm, a greater surplus, or, what is the same thing, the price of a greater surplus, was obtained for the proprietor, which the merchants and manufacturers soon furnished him with a method of spending upon his own person, in the same manner as he had done the rest. The cause continuing to operate, he was desirous to raise his rents above what his lands, in the actual state of their improvement, could afford. His tenants could agree to this upon one condition only, that they should be secured in their possession for such a term of years as might give them time to recover, with profit, whatever they should lay out in the further improvement of the land. The expensive vanity of the landlord made him willing to accept of this condition; and hence the origin of long leases. Even a tenant at will, who pays the full value of the land, is not altogether dependent upon the landlord. The pecuniary advantages which they receive from one another are mutual and equal, and such a tenant will expose neither his life nor his fortune in the service of the proprietor. But if he has a lease for a long term of years, he is altogether independent; and his landlord must not expect from him even the most trifling service, beyond what is either expressly stipulated in the lease, or imposed upon him by the common and known law of the country. The tenants having in this manner become independent, and the retainers being dismissed, the great proprietors were no longer capable of interrupting the regular execution of justice, or of disturbing the peace of the country. Having sold their birth-right, not like Esau, for a mess of pottage in time of hunger and necessity, but, in the wantonness of plenty, for trinkets and baubles, fitter to be the playthings of children than the serious pursuits of men, they became as insignificant as any substantial burgher or tradesmen in a city. A regular government was established in the country as well as in the city, nobody having sufficient power to disturb its operations in the one, any more than in the other. It does not, perhaps, relate to the present subject, but I cannot help remarking it, that very old families, such as have possessed some considerable estate from father to son for many successive generations, are very rare in commercial countries. In countries which have little commerce, on the contrary, such as Wales, or the Highlands of Scotland, they are very common. The Arabian histories seem to be all full of genealogies; and there is a history written by a Tartar Khan, which has been translated into several European languages, and which contains scarce any thing else; a proof that ancient families are very common among those nations. In countries where a rich man can spend his revenue in no other way than by maintaining as many people as it can maintain, he is apt to run out, and his benevolence, it seems, is seldom so violent as to attempt to maintain more than he can afford. But where he can spend the greatest revenue upon his own person, he frequently has no bounds to his expense, because he frequently has no bounds to his vanity, or to his affection for his own person. In commercial countries, therefore, riches, in spite of the most violent regulations of law to prevent their dissipation, very seldom remain long in the same family. Among simple nations, on the contrary, they frequently do, without any regulations of law; for among nations of shepherds, such as the Tartars and Arabs, the consumable nature of their property necessarily renders all such regulations impossible. A revolution of the greatest importance to the public happiness, was in this manner brought about by two different orders of people, who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one, and the industry of the other, was gradually bringing about. It was thus, that, through the greater part of Europe, the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country. This order, however, being contrary to the natural course of things, is necessarily both slow and uncertain. Compare the slow progress of those European countries of which the wealth depends very much upon their commerce and manufactures, with the rapid advances of our North American colonies, of which the wealth is founded altogether in agriculture. Through the greater part of Europe, the number of inhabitants is not supposed to double in less than five hundred years. In several of our North American colonies, it is found to double in twenty or five-and-twenty years. In Europe, the law of primogeniture, and perpetuities of different kinds, prevent the division of great estates, and thereby hinder the multiplication of small proprietors. A small proprietor, however, who knows every part of his little territory, views it with all the affection which property, especially small property, naturally inspires, and who upon that account takes pleasure, not only in cultivating, but in adorning it, is generally of all improvers the most industrious, the most intelligent, and the most successful. The same regulations, besides, keep so much land out of the market, that there are always more capitals to buy than there is land to sell, so that what is sold always sells at a monopoly price. The rent never pays the interest of the purchase money, and is, besides, burdened with repairs and other occasional charges, to which the interest of money is not liable. To purchase land, is, everywhere in Europe, a most unprofitable employment of a small capital. For the sake of the superior security, indeed, a man of moderate circumstances, when he retires from business, will sometimes choose to lay out his little capital in land. A man of profession, too, whose revenue is derived from another source, often loves to secure his savings in the same way. But a young man, who, instead of applying to trade or to some profession, should employ a capital of two or three thousand pounds in the purchase and cultivation of a small piece of land, might indeed expect to live very happily and very independently, but must bid adieu for ever to all hope of either great fortune or great illustration, which, by a different employment of his stock, he might have had the same chance of acquiring with other people. Such a person, too, though he cannot aspire at being a proprietor, will often disdain to be a farmer. The small quantity of land, therefore, which is brought to market, and the high price of what is brought thither, prevents a great number of capitals from being employed in its cultivation and improvement, which would otherwise have taken that direction. In North America, on the contrary, fifty or sixty pounds is often found a sufficient stock to begin a plantation with. The purchase and improvement of uncultivated land is there the most profitable employment of the smallest as well as of the greatest capitals, and the most direct road to all the fortune and illustration which can be acquired in that country. Such land, indeed, is in North America to be had almost for nothing, or at a price much below the value of the natural produce; a thing impossible in Europe, or indeed in any country where all lands have long been private property. If landed estates, however, were divided equally among all the children, upon the death of any proprietor who left a numerous family, the estate would generally be sold. So much land would come to market, that it could no longer sell at a monopoly price. The free rent of the land would go no nearer to pay the interest of the purchase-money, and a small capital might be employed in purchasing land as profitable as in any other way. England, on account of the natural fertility of the soil, of the great extent of the sea-coast in proportion to that of the whole country, and of the many navigable rivers which run through it, and afford the conveniency of water carriage to some of the most inland parts of it, is perhaps as well fitted by nature as any large country in Europe to be the seat of foreign commerce, of manufactures for distant sale, and of all the improvements which these can occasion. From the beginning of the reign of Elizabeth, too, the English legislature has been peculiarly attentive to the interest of commerce and manufactures, and in reality there is no country in Europe, Holland itself not excepted, of which the law is, upon the whole, more favourable to this sort of industry. Commerce and manufactures have accordingly been continually advancing during all this period. The cultivation and improvement of the country has, no doubt, been gradually advancing too; but it seems to have followed slowly, and at a distance, the more rapid progress of commerce and manufactures. The greater part of the country must probably have been cultivated before the reign of Elizabeth; and a very great part of it still remains uncultivated, and the cultivation of the far greater part much inferior to what it might be. The law of England, however, favours agriculture, not only indirectly, by the protection of commerce, but by several direct encouragements. Except in times of scarcity, the exportation of corn is not only free, but encouraged by a bounty. In times of moderate plenty, the importation of foreign corn is loaded with duties that amount to a prohibition. The importation of live cattle, except from Ireland, is prohibited at all times; and it is but of late that it was permitted from thence. Those who cultivate the land, therefore, have a monopoly against their countrymen for the two greatest and most important articles of land produce, bread and butcher's meat. These encouragements, though at bottom, perhaps, as I shall endeavour to show hereafter, altogether illusory, sufficiently demonstrate at least the good intention of the legislature to favour agriculture. But what is of much more importance than all of them, the yeomanry of England are rendered as secure, as independent, and as respectable, as law can make them. No country, therefore, in which the right of primogeniture takes place, which pays tithes, and where perpetuities, though contrary to the spirit of the law, are admitted in some cases, can give more encouragement to agriculture than England. Such, however, notwithstanding, is the state of its cultivation. What would it have been, had the law given no direct encouragement to agriculture besides what arises indirectly from the progress of commerce, and had left the yeomanry in the same condition as in most other countries of Europe? It is now more than two hundred years since the beginning of the reign of Elizabeth, a period as long as the course of human prosperity usually endures. France seems to have had a considerable share of foreign commerce, near a century before England was distinguished as a commercial country. The marine of France was considerable, according to the notions of the times, before the expedition of Charles VIII. to Naples. The cultivation and improvement of France, however, is, upon the whole, inferior to that of England. The law of the country has never given the same direct encouragement to agriculture. The foreign commerce of Spain and Portugal to the other parts of Europe, though chiefly carried on in foreign ships, is very considerable. That to their colonies is carried on in their own, and is much greater, on account of the great riches and extent of those colonies. But it has never introduced any considerable manufactures for distant sale into either of those countries, and the greater part of both still remains uncultivated. The foreign commerce of Portugal is of older standing than that of any great country in Europe, except Italy. Italy is the only great country of Europe which seems to have been cultivated and improved in every part, by means of foreign commerce and manufactures for distant sale. Before the invasion of Charles VIII., Italy, according to Guicciardini, was cultivated not less in the most mountainous and barren parts of the country, than in the plainest and most fertile. The advantageous situation of the country, and the great number of independent states which at that time subsisted in it, probably contributed not a little to this general cultivation. It is not impossible, too, notwithstanding this general expression of one of the most judicious and reserved of modern historians, that Italy was not at that time better cultivated than England is at present. The capital, however, that is acquired to any country by commerce and manufactures, is always a very precarious and uncertain possession, till some part of it has been secured and realized in the cultivation and improvement of its lands. A merchant, it has been said very properly, is not necessarily the citizen of any particular country. It is in a great measure indifferent to him from what place he carries on his trade; and a very trifling disgust will make him remove his capital, and, together with it, all the industry which it supports, from one country to another. No part of it can be said to belong to any particular country, till it has been spread, as it were, over the face of that country, either in buildings, or in the lasting improvement of lands. No vestige now remains of the great wealth said to have been possessed by the greater part of the Hanse Towns, except in the obscure histories of the thirteenth and fourteenth centuries. It is even uncertain where some of them were situated, or to what towns in Europe the Latin names given to some of them belong. But though the misfortunes of Italy, in the end of the fifteenth and beginning of the sixteenth centuries, greatly diminished the commerce and manufactures of the cities of Lombardy and Tuscany, those countries still continue to be among the most populous and best cultivated in Europe. The civil wars of Flanders, and the Spanish government which succeeded them, chased away the great commerce of Antwerp, Ghent, and Bruges. But Flanders still continues to be one of the richest, best cultivated, and most populous provinces of Europe. The ordinary revolutions of war and government easily dry up the sources of that wealth which arises from commerce only. That which arises from the more solid improvements of agriculture is much more durable, and cannot be destroyed but by those more violent convulsions occasioned by the depredations of hostile and barbarous nations continued for a century or two together; such as those that happened for some time before and after the fall of the Roman empire in the western provinces of Europe. BOOK IV. OF SYSTEMS OF POLITICAL ECONOMY. INTRODUCTION. Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects; first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign. The different progress of opulence in different ages and nations, has given occasion to two different systems of political economy, with regard to enriching the people. The one may be called the system of commerce, the other that of agriculture. I shall endeavour to explain both as fully and distinctly as I can, and shall begin with the system of commerce. It is the modern system, and is best understood in our own country and in our own times. CHAP. I. OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM. That wealth consists in money, or in gold and silver, is a popular notion which naturally arises from the double function of money, as the instrument of commerce, and as the measure of value. In consequence of its being the instrument of commerce, when we have money we can more readily obtain whatever else we have occasion for, than by means of any other commodity. The great affair, we always find, is to get money. When that is obtained, there is no difficulty in making any subsequent purchase. In consequence of its being the measure of value, we estimate that of all other commodities by the quantity of money which they will exchange for. We say of a rich man, that he is worth a great deal, and of a poor man, that he is worth very little money. A frugal man, or a man eager to be rich, is said to love money; and a careless, a generous, or a profuse man, is said to be indifferent about it. To grow rich is to get money; and wealth and money, in short, are, in common language, considered as in every respect synonymous. A rich country, in the same manner as a rich man, is supposed to be a country abounding in money; and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. For some time after the discovery of America, the first inquiry of the Spaniards, when they arrived upon any unknown coast, used to be, if there was any gold or silver to be found in the neighbourhood? By the information which they received, they judged whether it was worth while to make a settlement there, or if the country was worth the conquering. Plano Carpino, a monk sent ambassador from the king of France to one of the sons of the famous Gengis Khan, says, that the Tartars used frequently to ask him, if there was plenty of sheep and oxen in the kingdom of France? Their inquiry had the same object with that of the Spaniards. They wanted to know if the country was rich enough to be worth the conquering. Among the Tartars, as among all other nations of shepherds, who are generally ignorant of the use of money, cattle are the instruments of commerce and the measures of value. Wealth, therefore, according to them, consisted in cattle, as, according to the Spaniards, it consisted in gold and silver. Of the two, the Tartar notion, perhaps, was the nearest to the truth. Mr Locke remarks a distinction between money and other moveable goods. All other moveable goods, he says, are of so consumable a nature, that the wealth which consists in them cannot be much depended on; and a nation which abounds in them one year may, without any exportation, but merely by their own waste and extravagance, be in great want of them the next. Money, on the contrary, is a steady friend, which, though it may travel about from hand to hand, yet if it can be kept from going out of the country, is not very liable to be wasted and consumed. Gold and silver, therefore, are, according to him, the most solid and substantial part of the moveable wealth of a nation; and to multiply those metals ought, he thinks, upon that account, to be the great object of its political economy. Others admit, that if a nation could be separated from all the world, it would be of no consequence how much or how little money circulated in it. The consumable goods, which were circulated by means of this money, would only be exchanged for a greater or a smaller number of pieces; but the real wealth or poverty of the country, they allow, would depend altogether upon the abundance or scarcity of those consumable goods. But it is otherwise, they think, with countries which have connections with foreign nations, and which are obliged to carry on foreign wars, and to maintain fleets and armies in distant countries. This, they say, cannot be done, but by sending abroad money to pay them with; and a nation cannot send much money abroad, unless it has a good deal at home. Every such nation, therefore, must endeavour, in time of peace, to accumulate gold and silver, that when occasion requires, it may have wherewithal to carry on foreign wars. In consequence of these popular notions, all the different nations of Europe have studied, though to little purpose, every possible means of accumulating gold and silver in their respective countries. Spain and Portugal, the proprietors of the principal mines which supply Europe with those metals, have either prohibited their exportation under the severest penalties, or subjected it to a considerable duty. The like prohibition seems anciently to have made a part of the policy of most other European nations. It is even to be found, where we should least of all expect to find it, in some old Scotch acts of Parliament, which forbid, under heavy penalties, the carrying gold or silver _forth of the kingdom_. The like policy anciently took place both in France and England. When those countries became commercial, the merchants found this prohibition, upon many occasions, extremely inconvenient. They could frequently buy more advantageously with gold and silver, than with any other commodity, the foreign goods which they wanted, either to import into their own, or to carry to some other foreign country. They remonstrated, therefore, against this prohibition as hurtful to trade. They represented, first, that the exportation of gold and silver, in order to purchase foreign goods, did not always diminish the quantity of those metals in the kingdom; that, on the contrary, it might frequently increase the quantity; because, if the consumption of foreign goods was not thereby increased in the country, those goods might be re-exported to foreign countries, and being there sold for a large profit, might bring back much more treasure than was originally sent out to purchase them. Mr Mun compares this operation of foreign trade to the seed-time and harvest of agriculture. 'If we only behold,' says he, 'the actions of the husbandman in the seed-time, when he casteth away much good corn into the ground, we shall account him rather a madman than a husbandman. But when we consider his labours in the harvest, which is the end of his endeavours, we shall find the worth and plentiful increase of his actions.' They represented, secondly, that this prohibition could not hinder the exportation of gold and silver, which, on account of the smallness of their bulk in proportion to their value, could easily be smuggled abroad. That this exportation could only be prevented by a proper attention to what they called the balance of trade. That when the country exported to a greater value than it imported, a balance became due to it from foreign nations, which was necessarily paid to it in gold and silver, and thereby increased the quantity of those metals in the kingdom. But that when it imported to a greater value than it exported, a contrary balance became due to foreign nations, which was necessarily paid to them in the same manner, and thereby diminished that quantity: that in this case, to prohibit the exportation of those metals, could not prevent it, but only, by making it more dangerous, render it more expensive: that the exchange was thereby turned more against the country which owed the balance, than it otherwise might have been; the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it, not only for the natural risk, trouble, and expense of sending the money thither, but for the extraordinary risk arising from the prohibition; but that the more the exchange was against any country, the more the balance of trade became necessarily against it; the money of that country becoming necessarily of so much less value, in comparison with that of the country to which the balance was due. That if the exchange between England and Holland, for example, was five per cent. against England, it would require 105 ounces of silver in England to purchase a bill for 100 ounces of silver in Holland: that 105 ounces of silver in England, therefore, would be worth only 100 ounces of silver in Holland, and would purchase only a proportionable quantity of Dutch goods; but that 100 ounces of silver in Holland, on the contrary, would be worth 105 ounces in England, and would purchase a proportionable quantity of English goods; that the English goods which were sold to Holland would be sold so much cheaper, and the Dutch goods which were sold to England so much dearer, by the difference of the exchange: that the one would draw so much less Dutch money to England, and the other so much more English money to Holland, as this difference amounted to: and that the balance of trade, therefore, would necessarily be so much more against England, and would require a greater balance of gold and silver be exported to Holland. Those arguments were partly solid and some partly sophistical. They were solid, so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. They were solid, too, in asserting that no prohibition could prevent their exportation, when private people found any advantage in exporting them. But they were sophistical, in supposing, that either to preserve or to augment the quantity of those metals required more the attention of government, than to preserve or to augment the quantity of any other useful commodities, which the freedom of trade, without any such attention, never fails to supply in the proper quantity. They were sophistical, too, perhaps, in asserting that the high price of exchange necessarily increased what they called the unfavourable balance of trade, or occasioned the exportation of a greater quantity of gold and silver. That high price, indeed, was extremely disadvantageous to the merchants who had any money to pay in foreign countries. They paid so much dearer for the bills which their bankers granted them upon those countries. But though the risk arising from the prohibition might occasion some extraordinary expense to the bankers, it would not necessarily carry any more money out of the country. This expense would generally be all laid out in the country, in smuggling the money out of it, and could seldom occasion the exportation of a single sixpence beyond the precise sum drawn for. The high price of exchange, too, would naturally dispose the merchants to endeavour to make their exports nearly balance their imports, in order that they might have this high exchange to pay upon as small a sum as possible. The high price of exchange, besides, must necessarily have operated as a tax, in raising the price of foreign goods, and thereby diminishing their consumption. It would tend, therefore, not to increase, but to diminish, what they called the unfavourable balance of trade, and consequently the exportation of gold and silver. Such as they were, however, those arguments convinced the people to whom they were addressed. They were addressed by merchants to parliaments and to the councils of princes, to nobles, and to country gentlemen; by those who were supposed to understand trade, to those who were conscious to themselves that they knew nothing about the matter. That foreign trade enriched the country, experience demonstrated to the nobles and country gentlemen, as well as to the merchants; but how, or in what manner, none of them well knew. The merchants knew perfectly in what manner it enriched themselves, it was their business to know it. But to know in what manner it enriched the country, was no part of their business. The subject never came into their consideration, but when they had occasion to apply to their country for some change in the laws relating to foreign trade. It then became necessary to say something about the beneficial effects of foreign trade, and the manner in which those effects were obstructed by the laws as they then stood. To the judges who were to decide the business, it appeared a most satisfactory account of the matter, when they were told that foreign trade brought money into the country, but that the laws in question hindered it from bringing so much as it otherwise would do. Those arguments, therefore, produced the wished-for effect. The prohibition of exporting gold and silver was, in France and England, confined to the coin of those respective countries. The exportation of foreign coin and of bullion was made free. In Holland, and in some other places, this liberty was extended even to the coin of the country. The attention of government was turned away from guarding against the exportation of gold and silver, to watch over the balance of trade, as the only cause which could occasion any augmentation or diminution of these metals. From one fruitless care, it was turned away to another care much more intricate, much more embarrassing, and just equally fruitless. The title of Mun's book, England's Treasure in Foreign Trade, became a fundamental maxim in the political economy, not of England only, but of all other commercial countries. The inland or home trade, the most important of all, the trade in which an equal capital affords the greatest revenue, and creates the greatest employment to the people of the country, was considered as subsidiary only to foreign trade. It neither brought money into the country, it was said, nor carried any out of it. The country, therefore, could never become either richer or poorer by means of it, except so far as its prosperity or decay might indirectly influence the state of foreign trade. A country that has no mines of its own, must undoubtedly draw its gold and silver from foreign countries, in the same manner as one that has no vineyards of its own must draw its wines. It does not seem necessary, however, that the attention of government should be more turned towards the one than towards the other object. A country that has wherewithal to buy wine, will always get the wine which it has occasion for; and a country that has wherewithal to buy gold and silver, will never be in want of those metals. They are to be bought for a certain price, like all commodities; and as they are the price of all other commodities, so all other commodities are the price of those metals. We trust, with perfect security, that the freedom of trade, without any attention of government, will always supply us with the wine which we have occasion for; and we may trust, with equal security, that it will always supply us with all the gold and silver which we can afford to purchase or to employ, either in circulating our commodities or in other uses. The quantity of every commodity which human industry can either purchase or produce, naturally regulates itself in every country according to the effectual demand, or according to the demand of those who are willing to pay the whole rent, labour, and profits, which must be paid in order to prepare and bring it to market. But no commodities regulate themselves more easily or more exactly, according to this effectual demand, than gold and silver; because, on account of the small bulk and great value of those metals, no commodities can be more easily transported from one place to another; from the places where they are cheap, to those where they are dear; from the places where they exceed, to those where they fall short of this effectual demand. If there were in England, for example, an effectual demand for an additional quantity of gold, a packet-boat could bring from Lisbon, or from wherever else it was to be had, fifty tons of gold, which could be coined into more than five millions of guineas. But if there were an effectual demand for grain to the same value, to import it would require, at five guineas a-ton, a million of tons of shipping, or a thousand ships of a thousand tons each. The navy of England would not be sufficient. When the quantity of gold and silver imported into any country exceeds the effectual demand, no vigilance of government can prevent their exportation. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. The continual importations from Peru and Brazil exceed the effectual demand of those countries, and sink the price of those metals there below that in the neighbouring countries. If, on the contrary, in any particular country, their quantity fell short of the effectual demand, so as to raise their price above that of the neighbouring countries, the government would have no occasion to take any pains to import them. If it were even to take pains to prevent their importation, it would not be able to effectuate it. Those metals, when the Spartans had got wherewithal to purchase them, broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedæmon. All the sanguinary laws of the customs are not able to prevent the importation of the teas of the Dutch and Gottenburg East India companies; because somewhat cheaper than those of the British company. A pound of tea, however, is about a hundred times the bulk of one of the highest prices, sixteen shillings, that is commonly paid for it in silver, and more than two thousand times the bulk of the same price in gold, and, consequently, just so many times more difficult to smuggle. It is partly owing to the easy transportation of gold and silver, from the places where they abound to those where they are wanted, that the price of those metals does not fluctuate continually, like that of the greater part of other commodities, which are hindered by their bulk from shifting their situation, when the market happens to be either over or understocked with them. The price of those metals, indeed, is not altogether exempted from variation; but the changes to which it is liable are generally slow, gradual, and uniform. In Europe, for example, it is supposed, without much foundation, perhaps, that during the course of the present and preceding century, they have been constantly, but gradually, sinking in their value, on account of the continual importations from the Spanish West Indies. But to make any sudden change in the price of gold and silver, so as to raise or lower at once, sensibly and remarkably, the money price of all other commodities, requires such a revolution in commerce as that occasioned by the discovery of America. If, notwithstanding all this, gold and silver should at any time fall short in a country which has wherewithal to purchase them, there are more expedients for supplying their place, than that of almost any other commodity. If the materials of manufacture are wanted, industry must stop. If provisions are wanted, the people must starve. But if money is wanted, barter will supply its place, though with a good deal of inconveniency. Buying and selling upon credit, and the different dealers compensating their credits with one another, once a-month, or once a-year, will supply it with less inconveniency. A well-regulated paper-money will supply it not only without any inconveniency, but, in some cases, with some advantage. Upon every account, therefore, the attention of government never was so unnecessarily employed, as when directed to watch over the preservation or increase of the quantity of money in any country. No complaint, however, is more common than that of a scarcity of money. Money, like wine, must always be scarce with those who have neither wherewithal to buy it, nor credit to borrow it. Those who have either, will seldom be in want either of the money, or of the wine which they have occasion for. This complaint, however, of the scarcity of money, is not always confined to improvident spendthrifts. It is sometimes general through a whole mercantile town and the country in its neighbourhood. Over-trading is the common cause of it. Sober men, whose projects have been disproportioned to their capitals, are as likely to have neither wherewithal to buy money, nor credit to borrow it, as prodigals, whose expense has been disproportioned to their revenue. Before their projects can be brought to bear, their stock is gone, and credit with it. They run about everywhere to borrow money, and everybody tells them that they have none to lend. Even such general complaints of the scarcity of money do not always prove that the usual number of gold and silver pieces are not circulating in the country, but that many people want those pieces who have nothing to give for them. When the profits of trade happen to be greater than ordinary over-trading becomes a general error, both among great and small dealers. They do not always send more money abroad than usual, but they buy upon credit, both at home and abroad, an unusual quantity of goods, which they send to some distant market, in hopes that the returns will come in before the demand for payment. The demand comes before the returns, and they have nothing at hand with which they can either purchase money or give solid security for borrowing. It is not any scarcity of gold and silver, but the difficulty which such people find in borrowing, and which their creditor find in getting payment, that occasions the general complaint of the scarcity of money. It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing. Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it. It is not because wealth consists more essentially in money than in goods, that the merchant finds it generally more easy to buy goods with money, than to buy money with goods; but because money is the known and established instrument of commerce, for which every thing is readily given in exchange, but which is not always with equal readiness to be got in exchange for every thing. The greater part of goods, besides, are more perishable than money, and he may frequently sustain a much greater loss by keeping them. When his goods are upon hand, too, he is more liable to such demands for money as he may not be able to answer, than when he has got their price in his coffers. Over and above all this, his profit arises more directly from selling than from buying; and he is, upon all these accounts, generally much more anxious to exchange his goods for money than his money for goods. But though a particular merchant, with abundance of goods in his warehouse, may sometimes be ruined by not being able to sell them in time, a nation or country is not liable to the same accident. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. But it is but a very small part of the annual produce of the land and labour of a country, which can ever be destined for purchasing gold and silver from their neighbours. The far greater part is circulated and consumed among themselves; and even of the surplus which is sent abroad, the greater part is generally destined for the purchase of other foreign goods. Though gold and silver, therefore, could not be had in exchange for the goods destined to purchase them, the nation would not be ruined. It might, indeed, suffer some loss and inconveniency, and be forced upon some of those expedients which are necessary for supplying the place of money. The annual produce of its land and labour, however, would be the same, or very nearly the same as usual; because the same, or very nearly the same consumable capital would be employed in maintaining it. And though goods do not always draw money so readily as money draws goods, in the long-run they draw it more necessarily than even it draws them. Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods. Money, therefore, necessarily runs after goods, but goods do not always necessarily run after money. The man who buys, does not always mean to sell again, but frequently to use or to consume; whereas he who sells always means to buy again. The one may frequently have done the whole, but the other can never have done more than the one half of his business. It is not for its own sake that men desire money, but for the sake of what they can purchase with it. Consumable commodities, it is said, are soon destroyed; whereas gold and silver are of a the more durable nature, and were it not for this continual exportation, might be accumulated for ages together, to the incredible augmentation of the real wealth of the country. Nothing, therefore, it is pretended, can be more disadvantageous to any country, than the trade which consists in the exchange of such lasting for such perishable commodities. We do not, however, reckon that trade disadvantageous, which consists in the exchange of the hardware of England for the wines of France, and yet hardware is a very durable commodity, and were it not for this continual exportation, might too be accumulated for ages together, to the incredible augmentation of the pots and pans of the country. But it readily occurs, that the number of such utensils is in every country necessarily limited by the use which there is for them; that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there; and that, if the quantity of victuals were to increase, the number of pots and pans would readily increase along with it; a part of the increased quantity of victuals being employed in purchasing them, or in maintaining an additional number of workmen whose business it was to make them. It should as readily occur, that the quantity of gold and silver is in every country limited by the use which there is for those metals; that their use consists in circulating commodities, as coin, and in affording a species of household furniture, as plate; that the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it; increase that value, and immediately a part of it will be sent abroad to purchase, wherever it is to be had, the additional quantity of coin requisite for circulating them: that the quantity of plate is regulated by the number and wealth of those private families who choose to indulge themselves in that sort of magnificence; increase the number and wealth of such families, and a part of this increased wealth will most probably be employed in purchasing, wherever it is to be found, an additional quantity of plate; that to attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils. As the expense of purchasing those unnecessary utensils would diminish, instead of increasing, either the quantity or goodness of the family provisions; so the expense of purchasing an unnecessary quantity of gold and silver must, in every country, as necessarily diminish the wealth which feeds, clothes, and lodges, which maintains and employs the people. Gold and silver, whether in the shape of coin or of plate, are utensils, it must be remembered, as much as the furniture of the kitchen. Increase the use of them, increase the consumable commodities which are to be circulated, managed, and prepared by means of them, and you will infallibly increase the quantity; but if you attempt by extraordinary means to increase the quantity, you will as infallibly diminish the use, and even the quantity too, which in these metals can never he greater than what the use requires. Were they ever to be accumulated beyond this quantity, their transportation is so easy, and the loss which attends their lying idle and unemployed so great, that no law could prevent their being immediately sent out of the country. It is not always necessary to accumulate gold and silver, in order to enable a country to carry on foreign wars, and to maintain fleets and armies in distant countries. Fleets and armies are maintained, not with gold and silver, but with consumable goods. The nation which, from the annual produce of its domestic industry, from the annual revenue arising out of its lands, and labour, and consumable stock, has wherewithal to purchase those consumable goods in distant countries, can maintain foreign wars there. A nation may purchase the pay and provisions of an army in a distant country three different ways; by sending abroad either, first, some part of its accumulated gold and silver; or, secondly, some part of the annual produce of its manufactures; or, last of all, some part of its annual rude produce. The gold and silver which can properly be considered as accumulated, or stored up in any country, may be distinguished into three parts; first, the circulating money; secondly, the plate of private families; and, last of all, the money which may have been collected by many years parsimony, and laid up in the treasury of the prince. It can seldom happen that much can be spared from the circulating money of the country; because in that there can seldom be much redundancy. The value of goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more. Something, however, is generally withdrawn from this channel in the case of foreign war. By the great number of people who are maintained abroad, fewer are maintained at home. Fewer goods are circulated there, and less money becomes necessary to circulate them. An extraordinary quantity of paper money of some sort or other, too, such as exchequer notes, navy bills, and bank bills, in England, is generally issued upon such occasions, and, by supplying the place of circulating gold and silver, gives an opportunity of sending a greater quantity of it abroad. All this, however, could afford but a poor resource for maintaining a foreign war, of great expense, and several years duration. The melting down of the plate of private families has, upon every occasion, been found a still more insignificant one. The French, in the beginning of the last war, did not derive so much advantage from this expedient as to compensate the loss of the fashion. The accumulated treasures of the prince have in former times afforded a much greater and more lasting resource. In the present times, if you except the king of Prussia, to accumulate treasure seems to be no part of the policy of European princes. The funds which maintained the foreign wars of the present century, the most expensive perhaps which history records, seem to have had little dependency upon the exportation either of the circulating money, or of the plate of private families, or of the treasure of the prince. The last French war cost Great Britain upwards of £90,000,000, including not only the £75,000,000 of new debt that was contracted, but the additional 2s. in the pound land-tax, and what was annually borrowed of the sinking fund. More than two-thirds of this expense were laid out in distant countries; in Germany, Portugal, America, in the ports of the Mediterranean, in the East and West Indies. The kings of England had no accumulated treasure. We never heard of any extraordinary quantity of plate being melted down. The circulating gold and silver of the country had not been supposed to exceed L.18,000,000. Since the late recoinage of the gold, however, it is believed to have been a good deal under-rated. Let us suppose, therefore, according to the most exaggerated computation which I remember to have either seen or heard of, that, gold and silver together, it amounted to L.30,000,000. Had the war been carried on by means of our money, the whole of it must, even according to this computation, have been sent out and returned again, at least twice in a period of between six and seven years. Should this be supposed, it would afford the most decisive argument, to demonstrate how unnecessary it is for government to watch over the preservation of money, since, upon this supposition, the whole money of the country must have gone from it, and returned to it again, two different times in so short a period, without any body's knowing any thing of the matter. The channel of circulation, however, never appeared more empty than usual during any part of this period. Few people wanted money who had wherewithal to pay for it. The profits of foreign trade, indeed, were greater than usual during the whole war, but especially towards the end of it. This occasioned, what it always occasions, a general over-trading in all the ports of Great Britain; and this again occasioned the usual complaint of the scarcity of money, which always follows over-trading. Many people wanted it, who had neither wherewithal to buy it, nor credit to borrow it; and because the debtors found it difficult to borrow, the creditors found it difficult to get payment. Gold and silver, however, were generally to be had for their value, by those who had that value to give for them. The enormous expense of the late war, therefore, must have been chiefly defrayed, not by the exportation of gold and silver, but by that of British commodities of some kind or other. When the government, or those who acted under them, contracted with a merchant for a remittance to some foreign country, he would naturally endeavour to pay his foreign correspondent, upon whom he granted a bill, by sending abroad rather commodities than gold and silver. If the commodities of Great Britain were not in demand in that country, he would endeavour to send them to some other country in which he could purchase a bill upon that country. The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any. When those metals are sent abroad in order to purchase foreign commodities, the merchant's profit arises, not from the purchase, but from the sale of the returns. But when they are sent abroad merely to pay a debt, he gets no returns, and consequently no profit. He naturally, therefore, exerts his invention to find out a way of paying his foreign debts, rather by the exportation of commodities, than by that of gold and silver. The great quantity of British goods, exported during the course of the late war, without bringing back any returns, is accordingly remarked by the author of the Present State of the Nation. Besides the three sorts of gold and silver above mentioned, there is in all great commercial countries a good deal of bullion alternately imported and exported, for the purposes of foreign trade. This bullion, as it circulates among different commercial countries, in the same manner as the national coin circulates in every country, may be considered as the money of the great mercantile republic. The national coin receives its movement and direction from the commodities circulated within the precincts of each particular country; the money in the mercantile republic, from those circulated between different countries. Both are employed in facilitating exchanges, the one between different individuals of the same, the other between those of different nations. Part of this money of the great mercantile republic may have been, and probably was, employed in carrying on the late war. In time of a general war, it is natural to suppose that a movement and direction should be impressed upon it, different from what it usually follows in profound peace, that it should circulate more about the seat of the war, and be more employed in purchasing there, and in the neighbouring countries, the pay and provisions of the different armies. But whatever part of this money of the mercantile republic Great Britain may have annually employed in this manner, it must have been annually purchased, either with British commodities, or with something else that had been purchased with them; which still brings us back to commodities, to the annual produce of the land and labour of the country, as the ultimate resources which enabled us to carry on the war. It is natural, indeed, to suppose, that so great an annual expense must have been defrayed from a great annual produce. The expense of 1761, for example, amounted to more than £19,000,000. No accumulation could have supported so great an annual profusion. There is no annual produce, even of gold and silver, which could have supported it. The whole gold and silver annually imported into both Spain and Portugal, according to the best accounts, does not commonly much exceed £6,000,000 sterling, which, in some years, would scarce have paid four months expense of the late war. The commodities most proper for being transported to distant countries, in order to purchase there either the pay and provisions of an army, or some part of the money of the mercantile republic to be employed in purchasing them, seem to be the finer and more improved manufactures; such as contain a great value in a small bulk, and can therefore be exported to a great distance at little expense. A country whose industry produces a great annual surplus of such manufactures, which are usually exported to foreign countries, may carry on for many years a very expensive foreign war, without either exporting any considerable quantity of gold and silver, or even having any such quantity to export. A considerable part of the annual surplus of its manufactures must, indeed, in this case, be exported without bringing back any returns to the country, though it does to the merchant; the government purchasing of the merchant his bills upon foreign countries, in order to purchase there the pay and provisions of an army. Some part of this surplus, however, may still continue to bring back a return. The manufacturers during the war will have a double demand upon them, and be called upon first to work up goods to be sent abroad, for paying the bills drawn upon foreign countries for the pay and provisions of the army; and, secondly, to work up such as are necessary for purchasing the common returns that had usually been consumed in the country. In the midst of the most destructive foreign war, therefore, the greater part of manufactures may frequently flourish greatly; and, on the contrary, they may decline on the return of peace. They may flourish amidst the ruin of their country, and begin to decay upon the return of its prosperity. The different state of many different branches of the British manufactures during the late war, and for some time after the peace, may serve as an illustration of what has been just now said. No foreign war, of great expense or duration, could conveniently be carried on by the exportation of the rude produce of the soil. The expense of sending such a quantity of it into a foreign country as might purchase the pay and provisions of an army would be too great. Few countries, too, produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people. It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported. Mr Hume frequently takes notice of the inability of the ancient kings of England to carry on, without interruption, any foreign war of long duration. The English in those days had nothing wherewithal to purchase the pay and provisions of their armies in foreign countries, but either the rude produce of the soil, of which no considerable part could be spared from the home consumption, or a few manufactures of the coarsest kind, of which, as well as of the rude produce, the transportation was too expensive. This inability did not arise from the want of money, but of the finer and more improved manufactures. Buying and selling was transacted by means of money in England then as well as now. The quantity of circulating money must have borne the same proportion to the number and value of purchases and sales usually transacted at that time, which it does to those transacted at present; or, rather, it must have borne a greater proportion, because there was then no paper, which now occupies a great part of the employment of gold and silver. Among nations to whom commerce and manufactures are little known, the sovereign, upon extraordinary occasions, can seldom draw any considerable aid from his subjects, for reasons which shall be explained hereafter. It is in such countries, therefore, that he generally endeavours to accumulate a treasure, as the only resource against such emergencies. Independent of this necessity, he is, in such a situation, naturally disposed to the parsimony requisite for accumulation. In that simple state, the expense even of a sovereign is not directed by the vanity which delights in the gaudy finery of a court, but is employed in bounty to his tenants, and hospitality to his retainers. But bounty and hospitality very seldom lead to extravagance; though vanity almost always does. Every Tartar chief, accordingly, has a treasure. The treasures of Mazepa, chief of the Cossacks in the Ukraine, the famous ally of Charles XII., are said to have been very great. The French kings of the Merovingian race had all treasures. When they divided their kingdom among their different children, they divided their treasure too. The Saxon princes, and the first kings after the Conquest, seem likewise to have accumulated treasures. The first exploit of every new reign was commonly to seize the treasure of the preceding king, as the most essential measure for securing the succession. The sovereigns of improved and commercial countries are not under the same necessity of accumulating treasures, because they can generally draw from their subjects extraordinary aids upon extraordinary occasions. They are likewise less disposed to do so. They naturally, perhaps necessarily, follow the mode of the times; and their expense comes to be regulated by the same extravagant vanity which directs that of all the other great proprietors in their dominions. The insignificant pageantry of their court becomes every day more brilliant; and the expense of it not only prevents accumulation, but frequently encroaches upon the funds destined for more necessary expenses. What Dercyllidas said of the court of Persia, may be applied to that of several European princes, that he saw there much splendour, but little strength, and many servants, but few soldiers. The importation of gold and silver is not the principal, much less the sole benefit, which a nation derives from its foreign trade. Between whatever places foreign trade is carried on, they all of them derive two distinct benefits from it. It carries out that surplus part of the produce of their land and labour for which there is no demand among them, and brings back in return for it something else for which there is a demand. It gives a value to their superfluities, by exchanging them for something else, which may satisfy a part of their wants and increase their enjoyments. By means of it, the narrowness of the home market does not hinder the division of labour in any particular branch of art or manufacture from being carried to the highest perfection. By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption, it encourages them to improve its productive power, and to augment its annual produce to the utmost, and thereby to increase the real revenue and wealth of the society. These great and important services foreign trade is continually occupied in performing to all the different countries between which it is carried on. They all derive great benefit from it, though that in which the merchant resides generally derives the greatest, as he is generally more employed in supplying the wants, and carrying out the superfluities of his own, than of any other particular country. To import the gold and silver which may be wanted into the countries which have no mines, is, no doubt, a part of the business of foreign commerce. It is, however, a most insignificant part of it. A country which carried on foreign trade merely upon this account, could scarce have occasion to freight a ship in a century. It is not by the importation of gold and silver that the discovery of America has enriched Europe. By the abundance of the American mines, those metals have become cheaper. A service of plate can now be purchased for about a third part of the corn, or a third part of the labour, which it would have cost in the fifteenth century. With the same annual expense of labour and commodities, Europe can annually purchase about three times the quantity of plate which it could have purchased at that time. But when a commodity comes to be sold for a third part of what had been its usual price, not only those who purchased it before can purchase three times their former quantity, but it is brought down to the level of a much greater number of purchasers, perhaps to more than ten, perhaps to more than twenty times the former number. So that there may be in Europe at present, not only more than three times, but more than twenty or thirty times the quantity of plate which would have been in it, even in its present state of improvement, had the discovery of the American mines never been made. So far Europe has, no doubt, gained a real conveniency, though surely a very trifling one. The cheapness of gold and silver renders those metals rather less fit for the purposes of money than they were before. In order to make the same purchases, we must load ourselves with a greater quantity of them, and carry about a shilling in our pocket, where a groat would have done before. It is difficult to say which is most trifling, this inconveniency, or the opposite conveniency. Neither the one nor the other could have made any very essential change in the state of Europe. The discovery of America, however, certainly made a most essential one. By opening a new and inexhaustible market to all the commodities of Europe, it gave occasion to new divisions of labour and improvements of art, which in the narrow circle of the ancient commerce could never have taken place, for want of a market to take off the greater part of their produce. The productive powers of labour were improved, and its produce increased in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants. The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new set of exchanges, therefore, began to take place, which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several of those unfortunate countries. The discovery of a passage to the East Indies by the Cape of Good Hope, which happened much about the same time, opened perhaps a still more extensive range to foreign commerce, than even that of America, notwithstanding the greater distance. There were but two nations in America, in any respect, superior to the savages, and these were destroyed almost as soon as discovered. The rest were mere savages. But the empires of China, Indostan, Japan, as well as several others in the East Indies, without having richer mines of gold or silver, were, in every other respect, much richer, better cultivated, and more advanced in all arts and manufactures, than either Mexico or Peru, even though we should credit, what plainly deserves no credit, the exaggerated accounts of the Spanish writers concerning the ancient state of those empires. But rich and civilized nations can always exchange to a much greater value with one another, than with savages and barbarians. Europe, however, has hitherto derived much less advantage from its commerce with the East Indies, than from that with America. The Portuguese monopolized the East India trade to themselves for about a century; and it was only indirectly, and through them, that the other nations of Europe could either send out or receive any goods from that country. When the Dutch, in the beginning of the last century, began to encroach upon them, they vested their whole East India commerce in an exclusive company. The English, French, Swedes, and Danes, have all followed their example; so that no great nation of Europe has ever yet had the benefit of a free commerce to the East Indies. No other reason need be assigned why it has never been so advantageous as the trade to America, which, between almost every nation of Europe and its own colonies, is free to all its subjects. The exclusive privileges of those East India companies, their great riches, the great favour and protection which these have procured them from their respective governments, have excited much envy against them. This envy has frequently represented their trade as altogether pernicious, on account of the great quantities of silver which it every year exports from the countries from which it is carried on. The parties concerned have replied, that their trade by this continual exportation of silver, might indeed tend to impoverish Europe in general, but not the particular country from which it was carried on; because, by the exportation of a part of the returns to other European countries, it annually brought home a much greater quantity of that metal than it carried out. Both the objection and the reply are founded in the popular notion which I have been just now examining. It is therefore unnecessary to say any thing further about either. By the annual exportation of silver to the East Indies, plate is probably somewhat dearer in Europe than it otherwise might have been; and coined silver probably purchases a larger quantity both of labour and commodities. The former of these two effects is a very small loss, the latter a very small advantage; both too insignificant to deserve any part of the public attention. The trade to the East Indies, by opening a market to the commodities of Europe, or, what comes nearly to the same thing, to the gold and silver which is purchased with those commodities, must necessarily tend to increase the annual production of European commodities, and consequently the real wealth and revenue of Europe. That it has hitherto increased them so little, is probably owing to the restraints which it everywhere labours under. I thought it necessary, though at the hazard of being tedious, to examine at full length this popular notion, that wealth consists in money or in gold and silver. Money, in common language, as I have already observed, frequently signifies wealth; and this ambiguity of expression has rendered this popular notion so familiar to us, that even they who are convinced of its absurdity, are very apt to forget their own principles, and, in the course of their reasonings, to take it for granted as a certain and undeniable truth. Some of the best English writers upon commerce set out with observing, that the wealth of a country consists, not in its gold and silver only, but in its lands, houses, and consumable goods of all different kinds. In the course of their reasonings, however, the lands, houses, and consumable goods, seem to slip out of their memory; and the strain of their argument frequently supposes that all wealth consists in gold and silver, and that to multiply those metals is the great object of national industry and commerce. The two principles being established, however, that wealth consisted in gold and silver, and that those metals could be brought into a country which had no mines, only by the balance of trade, or by exporting to a greater value than it imported; it necessarily became the great object of political economy to diminish as much as possible the importation of foreign goods for home consumption, and to increase as much as possible the exportation of the produce of domestic industry. Its two great engines for enriching the country, therefore, were restraints upon importation, and encouragement to exportation. The restraints upon importation were of two kinds. First, restraints upon the importation of such foreign goods for home consumption as could be produced at home, from whatever country they were imported. Secondly, restraints upon the importation of goods of almost all kinds, from those particular countries with which the balance of trade was supposed to be disadvantageous. Those different restraints consisted sometimes in high duties, and sometimes in absolute prohibitions. Exportation was encouraged sometimes by drawbacks, sometimes by bounties, sometimes by advantageous treaties of commerce with foreign states, and sometimes by the establishment of colonies in distant countries. Drawbacks were given upon two different occasions. When the home manufactures were subject to any duty or excise, either the whole or a part of it was frequently drawn back upon their exportation; and when foreign goods liable to a duty were imported, in order to be exported again, either the whole or a part of this duty was sometimes given back upon such exportation. Bounties were given for the encouragement, either of some beginning manufactures, or of such sorts of industry of other kinds as were supposed to deserve particular favour. By advantageous treaties of commerce, particular privileges were procured in some foreign state for the goods and merchants of the country, beyond what were granted to those of other countries. By the establishment of colonies in distant countries, not only particular privileges, but a monopoly was frequently procured for the goods and merchants of the country which established them. The two sorts of restraints upon importation above mentioned, together with these four encouragements to exportation, constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country, by turning the balance of trade in its favour. I shall consider each of them in a particular chapter, and, without taking much farther notice of their supposed tendency to bring money into the country, I shall examine chiefly what are likely to be the effects of each of them upon the annual produce of its industry. According as they tend either to increase or diminish the value of this annual produce, they must evidently tend either to increase or diminish the real wealth and revenue of the country. CHAP. II. OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME. By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus the prohibition of importing either live cattle or salt provisions from foreign countries, secures to the graziers of Great Britain the monopoly of the home market for butcher's meat. The high duties upon the importation of corn, which, in times of moderate plenty, amount to a prohibition, give a like advantage to the growers of that commodity. The prohibition of the importation of foreign woollens is equally favourable to the woollen manufacturers. The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage. The linen manufacture has not yet obtained it, but is making great strides towards it. Many other sorts of manufactures have, in the same manner obtained in Great Britain, either altogether, or very nearly, a monopoly against their countrymen. The variety of goods, of which the importation into Great Britain is prohibited, either absolutely, or under certain circumstances, greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs. That this monopoly of the home market frequently gives great encouragement to that particular species of industry which enjoys it, and frequently turns towards that employment a greater share of both the labour and stock of the society than would otherwise have gone to it, cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not, perhaps, altogether so evident. The general industry of the society can never exceed what the capital of the society can employ. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of the society, and never can exceed that proportion. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society, than that into which it would have gone of its own accord. Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry, provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock. Thus, upon equal, or nearly equal profits, every wholesale merchant naturally prefers the home trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home trade, his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts; and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command. The capital which an Amsterdam merchant employs in carrying corn from Koningsberg to Lisbon, and fruit and wine from Lisbon to Koningsberg, must generally be the one half of it at Koningsberg, and the other half at Lisbon. No part of it need ever come to Amsterdam. The natural residence of such a merchant should either be at Koningsberg or Lisbon; and it can only be some very particular circumstances which can make him prefer the residence of Amsterdam. The uneasiness, however, which he feels at being separated so far from his capital, generally determines him to bring part both of the Koningsberg goods which he destines for the market of Lisbon, and of the Lisbon goods which he destines for that of Koningsberg, to Amsterdam; and though this necessarily subjects him to a double charge of loading and unloading as well as to the payment of some duties and customs, yet, for the sake of having some part of his capital always under his own view and command, he willingly submits to this extraordinary charge; and it is in this manner that every country which has any considerable share of the carrying trade, becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on. The merchant, in order to save a second loading and unloading, endeavours always to sell in the home market, as much of the goods of all those different countries as he can; and thus, so far as he can, to convert his carrying trade into a foreign trade of consumption. A merchant, in the same manner, who is engaged in the foreign trade of consumption, when he collects goods for foreign markets, will always be glad, upon equal or nearly equal profits, to sell as great a part of them at home as he can. He saves himself the risk and trouble of exportation, when, so far as he can, he thus converts his foreign trade of consumption into a home trade. Home is in this manner the centre, if I may say so, round which the capitals of the inhabitants of every country are continually circulating, and towards which they are always tending, though, by particular causes, they may sometimes be driven off and repelled from it towards more distant employments. But a capital employed in the home trade, it has already been shown, necessarily puts into motion a greater quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of the country, than an equal capital employed in the foreign trade of consumption; and one employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade. Upon equal, or only nearly equal profits, therefore, every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country. Secondly, every individual who employs his capital in the support of domestic industry, necessarily endeavours so to direct that industry, that its produce may be of the greatest possible value. The produce of industry is what it adds to the subject or materials upon which it is employed. In proportion as the value of this produce is great or small, so will likewise be the profits of the employer. But it is only for the sake of profit that any man employs a capital in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money or of other goods. But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can in his local situation judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be as dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or, what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it, will not thereby be diminished, no more than that of the above-mentioned artificers; but only left to find out the way in which it can be employed with the greatest advantage. It is certainly not employed to the greatest advantage, when it is thus directed towards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or less diminished, when it is thus turned away from producing commodities evidently of more value than the commodity which it is directed to produce. According to the supposition, that commodity could be purchased from foreign countries cheaper than it can be made at home; it could therefore have been purchased with a part only of the commodities, or, what is the same thing, with a part only of the price of the commodities, which the industry employed by an equal capital would have produced at home, had it been left to follow its natural course. The industry of the country, therefore, is thus turned away from a more to a less advantageous employment; and the exchangeable value of its annual produce, instead of being increased, according to the intention of the lawgiver, must necessarily be diminished by every such regulation. By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap, or cheaper, than in the foreign country. But though the industry of the society may be thus carried with advantage into a particular channel sooner than it could have been otherwise, it will by no means follow that the sum-total, either of its industry, or of its revenue, can ever be augmented by any such regulation. The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue. But the immediate effect of every such regulation is to diminish its revenue; and what diminishes its revenue is certainly not very likely to augment its capital faster than it would have augmented of its own accord, had both capital and industry been left to find out their natural employments. Though, for want of such regulations, the society should never acquire the proposed manufacture, it would not upon that account necessarily be the poorer in any one period of its duration. In every period of its duration its whole capital and industry might still have been employed, though upon different objects, in the manner that was most advantageous at the time. In every period its revenue might have been the greatest which its capital could afford, and both capital and revenue might have been augmented with the greatest possible rapidity. The natural advantages which one country has over another, in producing particular commodities, are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hot-beds, and hot-walls, very good grapes can be raised in Scotland, and very good wine, too, be made of them, at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and Burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment thirty times more of the capital and industry of the country than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three hundredth part more of either. Whether the advantages which one country has over another be natural or acquired, is in this respect of no consequence. As long as the one country has those advantages, and the other wants them, it will always be more advantageous for the latter rather to buy of the former than to make. It is an acquired advantage only, which one artificer has over his neighbour, who exercises another trade; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades. Merchants and manufacturers are the people who derive the greatest advantage from this monopoly of the home market. The prohibition of the importation of foreign cattle and of salt provisions, together with the high duties upon foreign corn, which in times of moderate plenty amount to a prohibition, are not near so advantageous to the graziers and farmers of Great Britain, as other regulations of the same kind are to its merchants and manufacturers. Manufactures, those of the finer kind especially, are more easily transported from one country to another than corn or cattle. It is in the fetching and carrying manufactures, accordingly, that foreign trade is chiefly employed. In manufactures, a very small advantage will enable foreigners to undersell our own workmen, even in the home market. It will require a very great one to enable them to do so in the rude produce of the soil. If the free importation of foreign manufactures were permitted, several of the home manufactures would probably suffer, and some of them perhaps go to ruin altogether, and a considerable part of the stock and industry at present employed in them, would be forced to find out some other employment. But the freest importation of the rude produce of the soil could have no such effect upon the agriculture of the country. If the importation of foreign cattle, for example, were made ever so free, so few could be imported, that the grazing trade of Great Britain could be little affected by it. Live cattle are, perhaps, the only commodity of which the transportation is more expensive by sea than by land. By land they carry themselves to market. By sea, not only the cattle, but their food and their water too, must be carried at no small expense and inconveniency. The short sea between Ireland and Great Britain, indeed, renders the importation of Irish cattle more easy. But though the free importation of them, which was lately permitted only for a limited time, were rendered perpetual, it could have no considerable effect upon the interest of the graziers of Great Britain. Those parts of Great Britain which border upon the Irish sea are all grazing countries. Irish cattle could never be imported for their use, but must be drove through those very extensive countries, at no small expense and inconveniency, before they could arrive at their proper market. Fat cattle could not be drove so far. Lean cattle, therefore, could only be imported; and such importation could interfere not with the interest of the feeding or fattening countries, to which, by reducing the price of lean cattle it would rather be advantageous, but with that of the breeding countries only. The small number of Irish cattle imported since their importation was permitted, together with the good price at which lean cattle still continue to sell, seem to demonstrate, that even the breeding countries of Great Britain are never likely to be much affected by the free importation of Irish cattle. The common people of Ireland, indeed, are said to have sometimes opposed with violence the exportation of their cattle. But if the exporters had found any great advantage in continuing the trade, they could easily, when the law was on their side, have conquered this mobbish opposition. Feeding and fattening countries, besides, must always be highly improved, whereas breeding countries are generally uncultivated. The high price of lean cattle, by augmenting the value of uncultivated land, is like a bounty against improvement. To any country which was highly improved throughout, it would be more advantageous to import its lean cattle than to breed them. The province of Holland, accordingly, is said to follow this maxim at present. The mountains of Scotland, Wales, and Northumberland, indeed, are countries not capable of much improvement, and seem destined by nature to be the breeding countries of Great Britain. The freest importation of foreign cattle could have no other effect than to hinder those breeding countries from taking advantage of the increasing population and improvement of the rest of the kingdom, from raising their price to an exorbitant height, and from laying a real tax upon all the more improved and cultivated parts of the country. The freest importation of salt provisions, in the same manner, could have as little effect upon the interest of the graziers of Great Britain as that of live cattle. Salt provisions are not only a very bulky commodity, but when compared with fresh meat they are a commodity both of worse quality, and, as they cost more labour and expense, of higher price. They could never, therefore, come into competition with the fresh meat, though they might with the salt provisions of the country. They might be used for victualling ships for distant voyages, and such like uses, but could never make any considerable part of the food of the people. The small quantity of salt provisions imported from Ireland since their importation was rendered free, is an experimental proof that our graziers have nothing to apprehend from it. It does not appear that the price of butcher's meat has ever been sensibly affected by it. Even the free importation of foreign corn could very little affect the interest of the farmers of Great Britain. Corn is a much more bulky commodity than butcher's meat. A pound of wheat at a penny is as dear as a pound of butcher's meat at fourpence. The small quantity of foreign corn imported even in times of the greatest scarcity, may satisfy our farmers that they can have nothing to fear from the freest importation. The average quantity imported, one year with another, amounts only, according to the very well informed author of the Tracts upon the Corn Trade, to 23,728 quarters of all sorts of grain, and does not exceed the five hundredth and seventy-one part of the annual consumption. But as the bounty upon corn occasions a greater exportation in years of plenty, so it must, of consequence, occasion a greater importation in years of scarcity, than in the actual state of tillage would otherwise take place. By means of it, the plenty of one year does not compensate the scarcity of another; and as the average quantity exported is necessarily augmented by it, so must likewise, in the actual state of tillage, the average quantity imported. If there were no bounty, as less corn would be exported, so it is probable that, one year with another, less would be imported than at present. The corn-merchants, the fetchers and carriers of corn between Great Britain and foreign countries, would have much less employment, and might suffer considerably; but the country gentlemen and farmers could suffer very little. It is in the corn-merchants, accordingly, rather than the country gentlemen and farmers, that I have observed the greatest anxiety for the renewal and continuation of the bounty. Country gentlemen and farmers are, to their great honour, of all people, the least subject to the wretched spirit of monopoly. The undertaker of a great manufactory is sometimes alarmed if another work of the same kind is established within twenty miles of him; the Dutch undertaker of the woollen manufacture at Abbeville, stipulated that no work of the same kind should be established within thirty leagues of that city. Farmers and country gentlemen, on the contrary, are generally disposed rather to promote, than to obstruct, the cultivation and improvement of their neighbours farms and estates. They have no secrets, such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours, and of extending as far as possible any new practice which they may have found to be advantageous. _Pius quæstus_, says old Cato, _stabilissimusque, minimeque invidiosus; minimeque male cogitantes sunt, qui in eo studio occupati sunt._ Country gentlemen and farmers, dispersed in different parts of the country, cannot so easily combine as merchants and manufacturers, who being collected into towns, and accustomed to that exclusive corporation spirit which prevails in them, naturally endeavour to obtain, against all their countrymen, the same exclusive privilege which they generally possess against the inhabitants of their respective towns. They accordingly seem to have been the original inventors of those restraints upon the importation of foreign goods, which secure to them the monopoly of the home market. It was probably in imitation of them, and to put themselves upon a level with those who, they found, were disposed to oppress them, that the country gentlemen and farmers of Great Britain so far forgot the generosity which is natural to their station, as to demand the exclusive privilege of supplying their countrymen with corn and butcher's meat. They did not, perhaps, take time to consider how much less their interest could be affected by the freedom of trade, than that of the people whose example they followed. To prohibit, by a perpetual law, the importation of foreign corn and cattle, is in reality to enact, that the population and industry of the country shall, at no time, exceed what the rude produce of its own soil can maintain. There seem, however, to be two cases, in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry. The first is, when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others, by heavy burdens upon the shipping of foreign countries. The following are the principal dispositions of this act. First, All ships, of which the owners, masters, and three-fourths of the mariners, are not British subjects, are prohibited, upon pain of forfeiting ship and cargo, from trading to the British settlements and plantations, or from being employed in the coasting trade of Great Britain. Secondly, A great variety of the most bulky articles of importation can be brought into Great Britain only, either in such ships as are above described, or in ships of the country where those goods are produced, and of which the owners, masters, and three-fourths of the mariners, are of that particular country; and when imported even in ships of this latter kind, they are subject to double aliens duty. If imported in ships of any other country, the penalty is forfeiture of ship and goods. When this act was made, the Dutch were, what they still are, the great carriers of Europe; and by this regulation they were entirely excluded from being the carriers to Great Britain, or from importing to us the goods of any other European country. Thirdly, A great variety of the most bulky articles of importation are prohibited from being imported, even in British ships, from any country but that in which they are produced, under pain of forfeiting ship and cargo. This regulation, too, was probably intended against the Dutch. Holland was then, as now, the great emporium for all European goods; and by this regulation, British ships were hindered from loading in Holland the goods of any other European country. Fourthly, Salt fish of all kinds, whale-fins, whalebone, oil, and blubber, not caught by and cured on board British vessels, when imported into Great Britain, are subject to double aliens duty. The Dutch, as they are still the principal, were then the only fishers in Europe that attempted to supply foreign nations with fish. By this regulation, a very heavy burden was laid upon their supplying Great Britain. When the act of navigation was made, though England and Holland were not actually at war, the most violent animosity subsisted between the two nations. It had begun during the government of the long parliament, which first framed this act, and it broke out soon after in the Dutch wars, during that of the Protector and of Charles II. It is not impossible, therefore, that some of the regulations of this famous act may have proceeded from national animosity. They are as wise, however, as if they had all been dictated by the most deliberate wisdom. National animosity, at that particular time, aimed at the very same object which the most deliberate wisdom would have recommended, the diminution of the naval power of Holland, the only naval power which could endanger the security of England. The act of navigation is not favourable to foreign commerce, or to the growth of that opulence which can arise from it. The interest of a nation, in its commercial relations to foreign nations, is, like that of a merchant with regard to the different people with whom he deals, to buy as cheap, and to sell as dear as possible. But it will be most likely to buy cheap, when, by the most perfect freedom of trade, it encourages all nations to bring to it the goods which it has occasion to purchase; and, for the same reason, it will be most likely to sell dear, when its markets are thus filled with the greatest number of buyers. The act of navigation, it is true, lays no burden upon foreign ships that come to export the produce of British industry. Even the ancient aliens duty, which used to be paid upon all goods, exported as well as imported, has, by several subsequent acts, been taken off from the greater part of the articles of exportation. But if foreigners, either by prohibitions or high duties, are hindered from coming to sell, they cannot always afford to come to buy; because, coming without a cargo, they must lose the freight from their own country to Great Britain. By diminishing the number of sellers, therefore, we necessarily diminish that of buyers, and are thus likely not only to buy foreign goods dearer, but to sell our own cheaper, than if there was a more perfect freedom of trade. As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England. The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, is when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the home market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it. In Great Britain, when any such tax is laid upon the produce of domestic industry, it is usual, at the same time, in order to stop the clamorous complaints of our merchants and manufacturers, that they will be undersold at home, to lay a much heavier duty upon the importation of all foreign goods of the same kind. This second limitation of the freedom of trade, according to some people, should, upon most occasions, be extended much farther than to the precise foreign commodities which could come into competition with those which had been taxed at home. When the necessaries of life have been taxed in any country, it becomes proper, they pretend, to tax not only the like necessaries of life imported from other countries, but all sorts of foreign goods which can come into competition with any thing that is the produce of domestic industry. Subsistence, they say, becomes necessarily dearer in consequence of such taxes; and the price of labour must always rise with the price of the labourer's subsistence. Every commodity, therefore, which is the produce of domestic industry, though not immediately taxed itself, becomes dearer in consequence of such taxes, because the labour which produces it becomes so. Such taxes, therefore, are really equivalent, they say, to a tax upon every particular commodity produced at home. In order to put domestic upon the same footing with foreign industry, therefore, it becomes necessary, they think, to lay some duty upon every foreign commodity, equal to this enhancement of the price of the home commodities with which it can come into competition. Whether taxes upon the necessaries of life, such as those in Great Britain upon soap, salt, leather, candles, &c. necessarily raise the price of labour, and consequently that of all other commodities, I shall consider hereafter, when I come to treat of taxes. Supposing, however, in the mean time, that they have this effect, and they have it undoubtedly, this general enhancement of the price of all commodities, in consequence of that labour, is a case which differs in the two following respects from that of a particular commodity, of which the price was enhanced by a particular tax immediately imposed upon it. _First_, It might always be known with great exactness, how far the price of such a commodity could be enhanced by such a tax, but how far the general enhancement of the price of labour might affect that of every different commodity about which labour was employed, could never be known with any tolerable exactness. It would be impossible, therefore, to proportion, with any tolerable exactness, the tax of every foreign, to the enhancement of the price of every home commodity. _Secondly_, Taxes upon the necessaries of life have nearly the same effect upon the circumstances of the people as a poor soil and a bad climate. Provisions are thereby rendered dearer, in the same manner as if it required extraordinary labour and expense to raise them. As, in the natural scarcity arising from soil and climate, it would be absurd to direct the people in what manner they ought to employ their capitals and industry, so is it likewise in the artificial scarcity arising from such taxes. To be left to accommodate, as well as they could, their industry to their situation, and to find out those employments in which, notwithstanding their unfavourable circumstances, they might have some advantage either in the home or in the foreign market, is what, in both cases, would evidently be most for their advantage. To lay a new tax upon them, because they are already overburdened with taxes, and because they already pay too dear for the necessaries of life, to make them likewise pay too dear for the greater part of other commodities, is certainly a most absurd way of making amends. Such taxes, when they have grown up to a certain height, are a curse equal to the barrenness of the earth, and the inclemency of the heavens, and yet it is in the richest and most industrious countries that they have been most generally imposed. No other countries could support so great a disorder. As the strongest bodies only can live and enjoy health under an unwholesome regimen, so the nations only, that in every sort of industry have the greatest natural and acquired advantages, can subsist and prosper under such taxes. Holland is the country in Europe in which they abound most, and which, from peculiar circumstances, continues to prosper, not by means of them, as has been most absurdly supposed, but in spite of them. As there are two cases in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, so there are two others in which it may sometimes be a matter of deliberation, in the one, how far it is proper to continue the free importation of certain foreign goods; and, in the other, how far, or in what manner, it may be proper to restore that free importation, after it has been for some time interrupted. The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods, is when some foreign nation restrains, by high duties or prohibitions, the importation of some of our manufactures into their country. Revenge, in this case, naturally dictates retaliation, and that we should impose the like duties and prohibitions upon the importation of some or all of their manufactures into ours. Nations, accordingly, seldom fail to retaliate in this manner. The French have been particularly forward to favour their own manufactures, by restraining the importation of such foreign goods as could come into competition with them. In this consisted a great part of the policy of Mr. Colbert, who, notwithstanding his great abilities, seems in this case to have been imposed upon by the sophistry of merchants and manufacturers, who are always demanding a monopoly against their countrymen. It is at present the opinion of the most intelligent men in France, that his operations of this kind have not been beneficial to his country. That minister, by the tariff of 1667, imposed very high duties upon a great number of foreign manufactures. Upon his refusing to moderate them in favour of the Dutch, they, in 1671, prohibited the importation of the wines, brandies, and manufactures of France. The war of 1672 seems to have been in part occasioned by this commercial dispute. The peace of Nimeguen put an end to it in 1678, by moderating some of those duties in favour of the Dutch, who in consequence took off their prohibition. It was about the same time that the French and English began mutually to oppress each other's industry, by the like duties and prohibitions, of which the French, however, seem to have set the first example. The spirit of hostility which has subsisted between the two nations ever since, has hitherto hindered them from being moderated on either side. In 1697, the English prohibited the importation of bone lace, the manufacture of Flanders. The government of that country, at that time under the domination of Spain, prohibited, in return, the importation of English woollens. In 1700, the prohibition of importing bone lace into England was taken off, upon condition that the importation of English woollens into Flanders should be put on the same footing as before. There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles, which are always the same, as to the skill of that insidious and crafty animal vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs. When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all the other classes of them. When our neighbours prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may, no doubt, give encouragement to some particular class of workmen among ourselves, and, by excluding some of their rivals, may enable them to raise their price in the home market. Those workmen however, who suffered by our neighbours prohibition, will not be benefited by ours. On the contrary, they, and almost all the other classes of our citizens, will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favour of that particular class of workmen who were injured by our neighbours prohibitions, but of some other class. The case in which it may sometimes be a matter of deliberation, how far, or in what manner, it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is when particular manufactures, by means of high duties or prohibitions upon all foreign goods which can come into competition with them, have been so far extended as to employ a great multitude of hands. Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence. The disorder which this would occasion might no doubt be very considerable. It would in all probability, however, be much less than is commonly imagined, for the two following reasons. _First_, All those manufactures of which any part is commonly exported to other European countries without a bounty, could be very little affected by the freest importation of foreign goods. Such manufactures must be sold as cheap abroad as any other foreign goods of the same quality and kind, and consequently must be sold cheaper at home. They would still, therefore, keep possession of the home market; and though a capricious man of fashion might sometimes prefer foreign wares, merely because they were foreign, to cheaper and better goods of the same kind that were made at home, this folly could, from the nature of things, extend to so few, that it could make no sensible impression upon the general employment of the people. But a great part of all the different branches of our woollen manufacture, of our tanned leather, and of our hardware, are annually exported to other European countries without any bounty, and these are the manufactures which employ the greatest number of hands. The silk, perhaps, is the manufacture which would suffer the most by this freedom of trade, and after it the linen, though the latter much less than the former. _Secondly_, Though a great number of people should, by thus restoring the freedom of trade, be thrown all at once out of their ordinary employment and common method of subsistence, it would by no means follow that they would thereby be deprived either of employment or subsistence. By the reduction of the army and navy at the end of the late war, more than 100,000 soldiers and seamen, a number equal to what is employed in the greatest manufactures, were all at once thrown out of their ordinary employment: but though they no doubt suffered some inconveniency, they were not thereby deprived of all employment and subsistence. The greater part of the seamen, it is probable, gradually betook themselves to the merchant service as they could find occasion, and in the mean time both they and the soldiers were absorbed in the great mass of the people, and employed in a great variety of occupations. Not only no great convulsion, but no sensible disorder, arose from so great a change in the situation of more than 100,000 men, all accustomed to the use of arms, and many of them to rapine and plunder. The number of vagrants was scarce anywhere sensibly increased by it; even the wages of labour were not reduced by it in any occupation, so far as I have been able to learn, except in that of seamen in the merchant service. But if we compare together the habits of a soldier and of any sort of manufacturer, we shall find that those of the latter do not tend so much to disqualify him from being employed in a new trade, as those of the former from being employed in any. The manufacturer has always been accustomed to look for his subsistence from his labour only; the soldier to expect it from his pay. Application and industry have been familiar to the one; idleness and dissipation to the other. But it is surely much easier to change the direction of industry from one sort of labour to another, than to turn idleness and dissipation to any. To the greater part of manufactures, besides, it has already been observed, there are other collateral manufactures of so similar a nature, that a workman can easily transfer his industry from one of them to another. The greater part of such workmen, too, are occasionally employed in country labour. The stock which employed them in a particular manufacture before, will still remain in the country, to employ an equal number of people in some other way. The capital of the country remaining the same, the demand for labour will likewise be the same, or very nearly the same, though it may be exerted in different places, and for different occupations. Soldiers and seamen, indeed, when discharged from the king's service, are at liberty to exercise any trade within any town or place of Great Britain or Ireland. Let the same natural liberty of exercising what species of industry they please, be restored to all his Majesty's subjects, in the same manner as to soldiers and seamen; that is, break down the exclusive privileges of corporations, and repeal the statute of apprenticeship, both which are really encroachments upon natural liberty, and add to those the repeal of the law of settlements, so that a poor workman, when thrown out of employment, either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal; and neither the public nor the individuals will suffer much more from the occasional disbanding some particular classes of manufacturers, than from that of the soldiers. Our manufacturers have no doubt great merit with their country, but they cannot have more than those who defend it with their blood, nor deserve to be treated with more delicacy. To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but, what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose, with the same zeal and unanimity, any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter inflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish, in any respect, the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and, upon many occasions, intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more, if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists. The undertaker of a great manufacture, who, by the home markets being suddenly laid open to the competition of foreigners, should be obliged to abandon his trade, would no doubt suffer very considerably. That part of his capital which had usually been employed in purchasing materials, and in paying his workmen, might, without much difficulty, perhaps, find another employment; but that part of it which was fixed in workhouses, and in the instruments of trade, could scarce be disposed of without considerable loss. The equitable regard, therefore, to his interest, requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning. The legislature, were it possible that its deliberations could be always directed, not by the clamorous importunity of partial interests, but by an extensive view of the general good, ought, upon this very account, perhaps, to be particularly careful, neither to establish any new monopolies of this kind, nor to extend further those which are already established. Every such regulation introduces some degree of real disorder into the constitution of the state, which it will be difficult afterwards to cure without occasioning another disorder. How far it may be proper to impose taxes upon the importation of foreign goods, in order not to prevent their importation, but to raise a revenue for government, I shall consider hereafter when I come to treat of taxes. Taxes imposed with a view to prevent, or even to diminish importation, are evidently as destructive of the revenue of the customs as of the freedom of trade. CHAP. III. OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS. PART I.--_Of the Unreasonableness of those Restraints, even upon the Principles of the Commercial System._ To lay extraordinary restraints upon the importation of goods of almost all kinds, from these particular countries with which the balance of trade is supposed to be disadvantageous, is the second expedient by which the commercial system proposes to increase the quantity of gold and silver. Thus, in Great Britain, Silesia lawns may be imported for home consumption, upon paying certain duties; but French cambrics and lawns are prohibited to be imported, except into the port of London, there to be warehoused for exportation. Higher duties are imposed upon the wines of France than upon those of Portugal, or indeed of any other country. By what is called the impost 1692, a duty of five-and-twenty per cent. of the rate or value, was laid upon all French goods; while the goods of other nations were, the greater part of them, subjected to much lighter duties, seldom exceeding five per cent. The wine, brandy, salt, and vinegar of France, were indeed excepted; these commodities being subjected to other heavy duties, either by other laws, or by particular clauses of the same law. In 1696, a second duty of twenty-five per cent. the first not having been thought a sufficient discouragement, was imposed upon all French goods, except brandy; together with a new duty of five-and-twenty pounds upon the ton of French wine, and another of fifteen pounds upon the ton of French vinegar. French goods have never been omitted in any of those general subsidies or duties of five per cent. which have been imposed upon all, or the greater part, of the goods enumerated in the book of rates. If we count the one-third and two-third subsidies as making a complete subsidy between them, there have been five of these general subsidies; so that, before the commencement of the present war, seventy-five per cent. may be considered as the lowest duty to which the greater part of the goods of the growth, produce, or manufacture of France, were liable. But upon the greater part of goods, those duties are equivalent to a prohibition. The French, in their turn, have, I believe, treated our goods and manufactures just as hardly; though I am not so well acquainted with the particular hardships which they have imposed upon them. Those mutual restraints have put an end to almost all fair commerce between the two nations; and smugglers are now the principal importers, either of British goods into France, or of French goods into Great Britain. The principles which I have been examining, in the foregoing chapter, took their origin from private interest and the spirit of monopoly; those which I am going to examine in this, from national prejudice and animosity. They are, accordingly, as might well be expected, still more unreasonable. They are so, even upon the principles of the commercial system. _First_, Though it were certain that in the case of a free trade between France and England, for example, the balance would be in favour of France, it would by no means follow that such a trade would be disadvantageous to England, or that the general balance of its whole trade would thereby be turned more against it. If the wines of France are better and cheaper than these of Portugal, or its linens than those of Germany, it would be more advantageous for Great Britain to purchase both the wine and the foreign linen which it had occasion for of France, than of Portugal and Germany. Though the value of the annual importations from France would thereby be greatly augmented, the value of the whole annual importations would be diminished, in proportion as the French goods of the same quality were cheaper than those of the other two countries. This would be the case, even upon the supposition that the whole French goods imported were to be consumed in Great Britain. But, _Secondly_, A great part of them might be re-exported to other countries, where, being sold with profit, they might bring back a return, equal in value, perhaps, to the prime cost of the whole French goods imported. What has frequently been said of the East India trade, might possibly be true of the French; that though the greater part of East India goods were bought with gold and silver, the re-exportation of a part of them to other countries brought back more gold and silver to that which carried on the trade, than the prime cost of the whole amounted to. One of the most important branches of the Dutch trade at present, consists in the carriage of French goods to other European countries. Some part even of the French wine drank in Great Britain, is clandestinely imported from Holland and Zealand. If there was either a free trade between France and England, or if French goods could be imported upon paying only the same duties as those of other European nations, to be drawn back upon exportation, England might have some share of a trade which is found so advantageous to Holland. _Thirdly_, and _lastly_, There is no certain criterion by which we can determine on which side what is called the balance between any two countries lies, or which of them exports to the greatest value. National prejudice and animosity, prompted always by the private interest of particular traders, are the principles which generally direct our judgment upon all questions concerning it. There are two criterions, however, which have frequently been appealed to upon such occasions, the custom-house books and the course of exchange. The custom-house books, I think, it is now generally acknowledged, are a very uncertain criterion, on account of the inaccuracy of the valuation at which the greater part of goods are rated in them. The course of exchange is, perhaps, almost equally so. When the exchange between two places, such as London and Paris, is at par, it is said to be a sign that the debts due from London to Paris are compensated by those due from Paris to London. On the contrary, when a premium is paid at London for a bill upon Paris, it is said to be a sign that the debts due from London to Paris are not compensated by those due from Paris to London, but that a balance in money must be sent out from the latter place; for the risk, trouble, and expense, of exporting which, the premium is both demanded and given. But the ordinary state of debt and credit between those two cities must necessarily be regulated, it is said, by the ordinary course of their dealings with one another. When neither of them imports from the other to a greater amount than it exports to that other, the debts and credits of each may compensate one another. But when one of them imports from the other to a greater value than it exports to that other, the former necessarily becomes indebted to the latter in a greater sum than the latter becomes indebted to it: the debts and credits of each do not compensate one another, and money must be sent out from that place of which the debts overbalance the credits. The ordinary course of exchange, therefore, being an indication of the ordinary state of debt and credit between two places, must likewise be an indication of the ordinary course of their exports and imports, as these necessarily regulate that state. But though the ordinary course of exchange shall be allowed to be a sufficient indication of the ordinary state of debt and credit between any two places, it would not from thence follow, that the balance of trade was in favour of that place which had the ordinary state of debt and credit in its favour. The ordinary state of debt and credit between any two places is not always entirely regulated by the ordinary course of their dealings with one another, but is often influenced by that of the dealings of either with many other places. If it is usual, for example, for the merchants of England to pay for the goods which they buy of Hamburg, Dantzic, Riga, &c. by bills upon Holland, the ordinary state of debt and credit between England and Holland will not be regulated entirely by the ordinary course of the dealings of those two countries with one another, but will be influenced by that of the dealings in England with those other places. England may he obliged to send out every year money to Holland, though its annual exports to that country may exceed very much the annual value of its imports from thence, and though what is called the balance of trade may be very much in favour of England. In the way, besides, in which the par of exchange has hitherto been computed, the ordinary course of exchange can afford no sufficient indication that the ordinary state of debt and credit is in favour of that country which seems to have, or which is supposed to have, the ordinary course of exchange in its favour; or, in other words, the real exchange may be, and in fact often is, so very different from the computed one, that, from the course of the latter, no certain conclusion can, upon many occasions, be drawn concerning that of the former. When for a sum of money paid in England, containing, according to the standard of the English mint, a certain number of ounces of pure silver, you receive a bill for a sum of money to be paid in France, containing, according to the standard of the French mint, an equal number of ounces of pure silver, exchange is said to be at par between England and France. When you pay more, you are supposed to given premium, and exchange is said to be against England, and in favour of France. When you pay less, you are supposed to get a premium, and exchange is said to be against France, and in favour of England. But, _first_, We cannot always judge of the value of the current money of different countries by the standard of their respective mints. In some it is more, in others it in less worn, clipt, and otherwise degenerated from that standard. But the value of the current coin of every country, compared with that of any other country, is in proportion, not to the quantity of pure silver which it ought to contain, but to that which it actually does contain. Before the reformation of the silver coin in King William's time, exchange between England and Holland, computed in the usual manner, according to the standard of their respective mints, was five-and-twenty per cent. against England. But the value of the current coin of England, as we learn from Mr Lowndes, was at that time rather more than five-and-twenty per cent. below its standard value. The real exchange, therefore, may even at that time have been in favour of England, notwithstanding the computed exchange so much against it; a smaller number of ounces of pure silver, actually paid in England, may have purchased a bill for a greater number of ounces of pure silver to be paid in Holland, and the man who was supposed to give, may in reality have got the premium. The French coin was, before the late reformation of the English gold coin, much less wore than the English, and was perhaps two or three per cent. nearer its standard. If the computed exchange with France, therefore, was not more than two or three per cent. against England, the real exchange might have been in its favour. Since the reformation of the gold coin, the exchange has been constantly in favour of England, and against France. _Secondly_, In some countries the expense of coinage is defrayed by the government; in others, it is defrayed by the private people, who carry their bullion to the mint, and the government even derives some revenue from the coinage. In England it is defrayed by the government; and if you carry a pound weight of standard silver to the mint, you get back sixty-two shillings, containing a pound weight of the like standard silver. In France a duty of eight per cent. is deducted for the coinage, which not only defrays the expense of it, but affords a small revenue to the government. In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanship, as you pay for it, adds to the value, in the same manner as to that of wrought plate. A sum of French money, therefore, containing an equal weight of pure silver, is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective mints, a sum of English money could not well purchase a sum of French money containing an equal number of ounces of pure silver, nor consequently, a bill upon France for such a sum. If, for such a bill, no more additional money was paid than what was sufficient to compensate the expense of the French coinage, the real exchange might be at par between the two countries; their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France. _Thirdly_, and _lastly_, In some places, as at Amsterdam, Hamburg, Venice, &c. foreign bills of exchange are paid in what they call bank money; while in others, as at London, Lisbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank money, is always of more value than the same nominal sum of common currency. A thousand guilders in the bank of Amsterdam, for example, are of more value than a thousand guilders of Amsterdam currency. The difference between them is called the agio of the bank, which at Amsterdam is generally about five per cent. Supposing the current money of the two countries equally near to the standard of their respective mints, and that the one pays foreign bills in this common currency, while the other pays them in bank money, it is evident that the computed exchange may be in favour of that which pays in bank money, though the real exchange should be in favour of that which pays in current money; for the same reason that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own standard, though the real exchange should be in favour of that which pays in worse. The computed exchange, before the late reformation of the gold coin, was generally against London with Amsterdam, Hamburg, Venice, and, I believe, with all other places which pay in what is called bank money. It will by no means follow, however, that the real exchange was against it. Since the reformation of the gold coin, it has been in favour of London, even with those places. The computed exchange has generally been in favour of London with Lisbon, Antwerp, Leghorn, and, if you except France, I believe with most other parts of Europe that pay in common currency; and it is not improbable that the real exchange was so too. _Digression concerning Banks of Deposit, particularly concerning that of Amsterdam._ The currency of a great state, such as France or England, generally consists almost entirely of its own coin. Should this currency, therefore, be at any time worn, clipt, or otherwise degraded below its standard value, the state, by a reformation of its coin, can effectually re-establish its currency. But the currency of a small state, such as Genoa or Hamburg, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin, will not always be able to reform its currency. If foreign bills of exchange are paid in this currency, the uncertain value of any sum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being in all foreign states necessarily valued even below what it is worth. In order to remedy the inconvenience to which this disadvantageous exchange must have subjected their merchants, such small states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value should be paid, not in common currency, but by an order upon, or by a transfer in the books of a certain bank, established upon the credit, and under the protection of the state, this bank being always obliged to pay, in good and true money, exactly according to the standard of the state. The banks of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have been all originally established with this view, though some of them may have afterwards been made subservient to other purposes. The money of such banks, being better than the common currency of the country, necessarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburg, for example, which is said to be commonly about fourteen per cent. is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency, poured into it from all the neighbouring states. Before 1609, the great quantity of clipt and worn foreign coin which the extensive trade of Amsterdam brought from all parts of Europe, reduced the value of its currency about nine per cent. below that of good money fresh from the mint. Such money no sooner appeared, than it was melted down or carried away, as it always is in such circumstances. The merchants, with plenty of currency, could not always find a sufficient quantity of good money to pay their bills of exchange; and the value of those bills, in spite of several regulations which were made to prevent it, became in a great measure uncertain. In order to remedy these inconveniences, a bank was established in 1609, under the guarantee of the city. This bank received both foreign coin, and the light and worn coin of the country, at its real intrinsic value in the good standard money of the country, deducting only so much as was necessary for defraying the expense of coinage and the other necessary expense of management. For the value which remained after this small deduction was made, it gave a credit in its books. This credit was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the same real value, and intrinsically worth more than current money. It was at the same time enacted, that all bills drawn upon or negociated at Amsterdam, of the value of 600 guilders and upwards, should be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in consequence of this regulation, was obliged to keep an account with the bank, in order to pay his foreign bills of exchange, which necessarily occasioned a certain demand for bank money. Bank money, over and above both its intrinsic superiority to currency, and the additional value which this demand necessarily gives it, has likewise some other advantages. It is secure from fire, robbery, and other accidents; the city of Amsterdam is bound for it; it can be paid away by a simple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In consequence of those different advantages, it seems from the beginning to have borne an agio; and it is generally believed that all the money originally deposited in the bank, was allowed to remain there, nobody caring to demand payment of a debt which he could sell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lose this premium. As a shilling fresh from the mint will buy no more goods in the market than one of our common worn shillings, so the good and true money which might be brought from the coffers of the bank into those of a private person, being mixed and confounded with the common currency of the country, would be of no more value than that currency, from which it could no longer be readily distinguished. While it remained in the coffers of the bank, its superiority was known and ascertained. When it had come into those of a private person, its superiority could not well be ascertained without more trouble than perhaps the difference was worth. By being brought from the coffers of the bank, besides, it lost all the other advantages of bank money; its security, its easy and safe transferability, its use in paying foreign bills of exchange. Over and above all this, it could not be brought from those coffers, as will appear by and by, without previously paying for the keeping. Those deposits of coin, or those deposits which the bank was bound to restore in coin, constituted the original capital of the bank, or the whole value of what was represented by what is called bank money. At present they are supposed to constitute but a very small part of it. In order to facilitate the trade in bullion, the bank has been for these many years in the practice of giving credit in its books, upon deposits of gold and silver bullion. This credit is generally about five per cent. below the mint price of such bullion. The bank grants at the same time what is called a recipice or receipt, entitling the person who makes the deposit, or the bearer, to take out the bullion again at any time within six months, upon transferring to the bank a quantity of bank money equal to that for which credit had been given in its books when the deposit was made, and upon paying one-fourth per cent. for the keeping, if the deposit was in silver; and one-half per cent. if it was in gold; but at the same time declaring, that in default of such payment, and upon the expiration of this term, the deposit should belong to the bank, at the price at which it had been received, or for which credit had been given in the transfer books. What is thus paid for the keeping of the deposit may be considered as a sort of warehouse rent; and why this warehouse rent should be so much dearer for gold than for silver, several different reasons have been assigned. The fineness of gold, it has been said, is more difficult to be ascertained than that of silver. Frauds are more easily practised, and occasion a greater loss in the most precious metal. Silver, besides, being the standard metal, the state, it has been said, wishes to encourage more the making of deposits of silver than those of gold. Deposits of bullion are most commonly made when the price is somewhat lower than ordinary, and they are taken out again when it happens to rise. In Holland the market price of bullion is generally above the mint price, for the same reason that it was so in England before the late reformation of the gold coin. The difference is said to be commonly from about six to sixteen stivers upon the mark, or eight ounces of silver, of eleven parts of fine and one part alloy. The bank price, or the credit which the bank gives for the deposits of such silver (when made in foreign coin, of which the fineness is well known and ascertained, such as Mexico dollars), is twenty-two guilders the mark; the mint price is about twenty-three guilders, and the market price is from twenty-three guilders six, to twenty-three guilders sixteen stivers, or from two to three per cent. above the mint price.[37] The proportions between the bank price, the mint price, and the market price of gold bullion, are nearly the same. A person can generally sell his receipt for the difference between the mint price of bullion and the market price. A receipt for bullion is almost always worth something, and it very seldom happens, therefore, that anybody suffers his receipts to expire, or allows his bullion to fall to the bank at the price at which it had been received, either by not taking it out before the end of the six months, or by neglecting to pay one fourth or one half per cent. in order to obtain a new receipt for another six months. This, however, though it happens seldom, is said to happen sometimes, and more frequently with regard to gold than with regard to silver, on account of the higher warehouse rent which is paid for the keeping of the more precious metal. The person who, by making a deposit of bullion, obtains both a bank credit and a receipt, pays his bills of exchange as they become due, with his bank credit; and either sells or keeps his receipt, according as he judges that the price of bullion is likely to rise or to fall. The receipt and the bank credit seldom keep long together, and there is no occasion that they should. The person who has a receipt, and who wants to take out bullion, finds always plenty of bank credits, or bank money, to buy at the ordinary price, and the person who has bank money, and wants to take out bullion, finds receipts always in equal abundance. The owners of bank credits, and the holders of receipts, constitute two different sorts of creditors against the bank. The holder of a receipt cannot draw out the bullion for which it is granted, without re-assigning to the bank a sum of bank money equal to the price at which the bullion had been received. If he has no bank money of his own, he must purchase it of those who have it. The owner of bank money cannot draw out bullion, without producing to the bank receipts for the quantity which he wants. If he has none of his own, he must buy them of those who have them. The holder of a receipt, when he purchases bank money, purchases the power of taking out a quantity of bullion, of which the mint price is five per cent. above the bank price. The agio of five per cent. therefore, which he commonly pays for it, is paid, not for an imaginary, but for a real value. The owner of bank money, when he purchases a receipt, purchases the power of taking out a quantity of bullion, of which the market price is commonly from two to three per cent. above the mint price. The price which he pays for it, therefore, is paid likewise for a real value. The price of the receipt, and the price of the bank money, compound or make up between them the full value or price of the bullion. Upon deposits of the coin current in the country, the bank grant receipts likewise, as well as bank credits; but those receipts are frequently of no value and will bring no price in the market. Upon ducatoons, for example, which in the currency pass for three guilders three stivers each, the bank gives a credit of three guilders only, or five per cent. below their current value. It grants a receipt likewise, entitling the bearer to take out a number of ducatoons deposited at any time within six months, upon paying one fourth per cent. for the keeping. This receipt will frequently bring no price in the market. Three guilders, bank money, generally sell in the market for three guilders three stivers, the full value of the ducatoons, if they were taken out of the bank; and before they can be taken out, one-fourth per cent. must be paid for the keeping, which would be mere loss to the holder of the receipt. If the agio of the bank, however, should at any time fall to three per cent. such receipts might bring some price in the market, and might sell for one and three-fourths per cent. But the agio of the bank being now generally about five per cent. such receipts are frequently allowed to expire, or, as they express it, to fall to the bank. The receipts which are given for deposits of gold ducats fall to it yet more frequently, because a higher warehouse rent, or one half per cent. must be paid for the keeping of them, before they can be taken out again. The five per cent. which the bank gains, when deposits either of coin or bullion are allowed to fall to it, may be considered as the warehouse rent for the perpetual keeping of such deposits. The sum of bank money, for which the receipts are expired, must be very considerable. It must comprehend the whole original capital of the bank, which, it is generally supposed, has been allowed to remain there from the time it was first deposited, nobody caring either to renew his receipt, or to take out his deposit, as, for the reasons already assigned, neither the one nor the other could be done without loss. But whatever may be the amount of this sum, the proportion which it bears to the whole mass of bank money is supposed to be very small. The bank of Amsterdam has, for these many years past, been the great warehouse of Europe for bullion, for which the receipts are very seldom allowed to expire, or, as they express it, to fall to the bank. The far greater part of the bank money, or of the credits upon the books of the bank, is supposed to have been created, for these many years past, by such deposits, which the dealers in bullion are continually both making and withdrawing. No demand can be made upon the bank, but by means of a recipice or receipt. The smaller mass of bank money, for which the receipts are expired, is mixed and confounded with the much greater mass for which they are still in force; so that, though there may be a considerable sum of bank money, for which there are no receipts, there is no specific sum or portion of it which may not at any time be demanded by one. The bank cannot be debtor to two persons for the same thing; and the owner of bank money who has no receipt, cannot demand payment of the bank till he buys one. In ordinary and quiet times, he can find no difficulty in getting one to buy at the market price, which generally corresponds with the price at which he can sell the coin or bullion it entitles him to take out of the bank. It might be otherwise during a public calamity; an invasion, for example, such as that of the French in 1672. The owners of bank money being then all eager to draw it out of the bank, in order to have it in their own keeping, the demand for receipts might raise their price to an exorbitant height. The holders of them might form extravagant expectations, and, instead of two or three per cent. demand half the bank money for which credit had been given upon the deposits that the receipts had respectively been granted for. The enemy, informed of the constitution of the bank, might even buy them up, in order to prevent the carrying away of the treasure. In such emergencies, the bank, it is supposed, would break through its ordinary rule of making payment only to the holders of receipts. The holders of receipts, who had no bank money, must have received within two or three per cent. of the value of the deposit for which their respective receipts had been granted. The bank, therefore, it is said, would in this case make no scruple of paying, either with money or bullion, the full value of what the owners of bank money, who could get no receipts, were credited for in its books; paying, at the same time, two or three per cent. to such holders of receipts as had no bank money, that being the whole value which, in this state of things, could justly be supposed due to them. Even in ordinary and quiet times, it is the interest of the holders of receipts to depress the agio, in order either to buy bank money (and consequently the bullion which their receipts would then enable them to take out of the bank) so much cheaper, or to sell their receipts to these who have bank money, and who want to take out bullion, so much dearer; the price of a receipt being generally equal to the difference between the market price of bank money and that of the coin or bullion for which the receipt had been granted. It is the interest of the owners of bank money, on the contrary, to raise the agio, in order either to sell their bank money so much dearer, or to buy a receipt so much cheaper. To prevent the stock-jobbing tricks which those opposite interests might sometimes occasion, the bank has of late years come to the resolution, to sell at all times bank money for currency at five per cent. agio, and to buy it in again at four per cent. agio. In consequence of this resolution, the agio can never either rise above five, or sink below four per cent.; and the proportion between the market price of bank and that of current money is kept at all times very near the proportion between their intrinsic values. Before this resolution was taken, the market price of bank money used sometimes to rise so high as nine per cent. agio, and sometimes to sink so low as par, according as opposite interests happened to influence the market. The bank of Amsterdam professes to lend out no part of what is deposited with it, but, for every guilder for which it gives credit in its books, to keep in its repositories the value of a guilder either in money or bullion. That it keeps in its repositories all the money or bullion for which there are receipts in force, for which it is at all times liable to be called upon, and which in reality is continually going from it, and returning to it again, cannot well be doubted. But whether it does so likewise with regard to that part of its capital for which the receipts are long ago expired, for which, in ordinary and quiet times, it cannot be called upon, and which, in reality, is very likely to remain with it for ever, or as long as the states of the United Provinces subsist, may perhaps appear more uncertain. At Amsterdam, however, no point of faith is better established than that, for every guilder circulated as bank money, there is a correspondent guilder in gold or silver to be found in the treasures of the bank. The city is guarantee that it should be so. The bank is under the direction of the four reigning burgomasters, who are changed every year. Each new set of burgomasters visits the treasure, compares it with the books, receives it upon oath, and delivers it over, with the same awful solemnity, to the set which succeeds; and in that sober and religious country, oaths are not yet disregarded. A rotation of this kind seems alone a sufficient security against any practices which cannot be avowed. Amidst all the revolutions which faction has ever occasioned in the government of Amsterdam, the prevailing party has at no time accused their predecessors of infidelity in the administration of the bank. No accusation could have affected more deeply the reputation and fortune of the disgraced party; and if such an accusation could have been supported, we may be assured that it would have been brought. In 1672, when the French king was at Utrecht, the bank of Amsterdam paid so readily, as left no doubt of the fidelity with which it had observed its engagements. Some of the pieces which were then brought from its repositories, appeared to have been scorched with the fire which happened in the town-house soon after the bank was established. Those pieces, therefore, must have lain there from that time. What may be the amount of the treasure in the bank, is a question which has long employed the speculations of the curious. Nothing but conjecture can be offered concerning it. It is generally reckoned, that there are about 2000 people who keep accounts with the bank; and allowing them to have, one with another, the value of L.1500 sterling lying upon their respective accounts (a very large allowance), the whole quantity of bank money, and consequently of treasure in the bank, will amount to about L.3,000,000 sterling, or, at eleven guilders the pound sterling, 33,000,000 of guilders; a great sum, and sufficient to carry on a very extensive circulation, but vastly below the extravagant ideas which some people have formed of this treasure. The city of Amsterdam derives a considerable revenue from the bank. Besides what may be called the warehouse rent above mentioned, each person, upon first opening an account with the bank, pays a fee of ten guilders; and for every new account, three guilders three stivers; for every transfer, two stivers; and if the transfer is for less than 300 guilders, six stivers, in order to discourage the multiplicity of small transactions. The person who neglects to balance his account twice in the year, forfeits twenty-five guilders. The person who orders a transfer for more than is upon his account, is obliged to pay three per cent. for the sum overdrawn, and his order is set aside into the bargain. The bank is supposed, too, to make a considerable profit by the sale of the foreign coin or bullion which sometimes falls to it by the expiring of receipts, and which is always kept till it can be sold with advantage. It makes a profit, likewise, by selling bank money at five per cent. agio, and buying it in at four. These different emoluments amount to a good deal more than what is necessary for paying the salaries of officers, and defraying the expense of management. What is paid for the keeping of bullion upon receipts, is alone supposed to amount to a neat annual revenue of between 150,000 and 200,000 guilders. Public utility, however, and not revenue, was the original object of this institution. Its object was to relieve the merchants from the inconvenience of a disadvantageous exchange. The revenue which has arisen from it was unforeseen, and may be considered as accidental. But it is now time to return from this long digression, into which I have been insensibly led, in endeavouring to explain the reasons why the exchange between the countries which pay in what is called bank money, and those which pay in common currency, should generally appear to be in favour of the former, and against the latter. The former pay in a species of money, of which the intrinsic value is always the same, and exactly agreeable to the standard of their respective mints; the latter is a species of money, of which the intrinsic value is continually varying, and is almost always more or less below that standard. PART II.--_Of the Unreasonableness of those extraordinary Restraints, upon other Principles._ In the foregoing part of this chapter, I have endeavoured to show, even upon the principles of the commercial system, how unnecessary it is to lay extraordinary restraints upon the importation of goods from those countries with which the balance of trade is supposed to be disadvantageous. Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce, are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses, and the other gains, in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade, which is forced by means of bounties and monopolies, may be, and commonly is, disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to show hereafter. But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both. By advantage or gain, I understand, not the increase of the quantity of gold or silver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants. If the balance be even, and if the trade between the two places consist altogether in the exchange of their native commodities, they will, upon most occasions, not only both gain, but they will gain equally, or very nearly equally; each will, in this case, afford a market for a part of the surplus produce of the other; each will replace a capital which had been employed in raising and preparing for the market this part of the surplus produce of the other, and which had been distributed among, and given revenue and maintenance to, a certain number of its inhabitants. Some part of the inhabitants of each, therefore, will directly derive their revenue and maintenance from the other. As the commodities exchanged, too, are supposed to be of equal value, so the two capitals employed in the trade will, upon most occasions, be equal or very nearly equal; and both being employed in raising the native commodities of the two countries, the revenue and maintenance which their distribution will afford to the inhabitants of each will be equal, or very nearly equal. This revenue and maintenance, this mutually afforded, will be greater or smaller, in proportion to the extent of their dealings. If these should annually amount to L.100,000, for example, or to L.1,000,000, on each side, each of them will afford an annual revenue, in the one case, of L.100,000, and, in the other, of L.1,000,000, to the inhabitants of the other. If their trade should be of such a nature, that one of them exported to the other nothing but native commodities, while the returns of that other consisted altogether in foreign goods; the balance, in this case, would still be supposed even, commodities being paid for with commodities. They would, in this case too, both gain, but they would not gain equally; and the inhabitants of the country which exported nothing but native commodities, would derive the greatest revenue from the trade. If England, for example, should import from France nothing but the native commodities of that country, and not having such commodities of its own as were in demand there, should annually repay them by sending thither a large quantity of foreign goods, tobacco, we shall suppose, and East India goods; this trade, though it would give some revenue to the inhabitants of both countries, would give more to those of France than to those of England. The whole French capital annually employed in it would annually be distributed among the people of France; but that part of the English capital only, which was employed in producing the English commodities with which those foreign goods were purchased, would be annually distributed among the people of England. The greater part of it would replace the capitals which had been employed in Virginia, Indostan, and China, and which had given revenue and maintenance to the inhabitants of those distant countries. If the capitals were equal, or nearly equal, therefore, this employment of the French capital would augment much more the revenue of the people of France, than that of the English capital would the revenue of the people of England. France would, in this case, carry on a direct foreign trade of consumption with England; whereas England would carry on a round-about trade of the same kind with France. The different effects of a capital employed in the direct, and of one employed in the round-about foreign trade of consumption, have already been fully explained. There is not, probably, between any two countries, a trade which consists altogether in the exchange, either of native commodities on both sides, or of native commodities on one side, and of foreign goods on the other. Almost all countries exchange with one another, partly native and partly foreign goods. That country, however, in whose cargoes there is the greatest proportion of native, and the least of foreign goods, will always be the principal gainer. If it was not with tobacco and East India goods, but with gold and silver, that England paid for the commodities annually imported from France, the balance, in this case, would be supposed uneven, commodities not being paid for with commodities, but with gold and silver. The trade, however, would in this case, as in the foregoing, give some revenue to the inhabitants of both countries, but more to those of France than to those of England. It would give some revenue to those of England. The capital which had been employed in producing the English goods that purchased this gold and silver, the capital which had been distributed among, and given revenue to, certain inhabitants of England, would thereby be replaced, and enabled to continue that employment. The whole capital of England would no more be diminished by this exportation of gold and silver, than by the exportation of an equal value of any other goods. On the contrary, it would, in most cases, be augmented. No goods are sent abroad but those for which the demand is supposed to be greater abroad than at home, and of which the returns, consequently, it is expected, will be of more value at home than the commodities exported. If the tobacco which in England is worth only L.100,000, when sent to France, will purchase wine which is in England worth L.110,000, the exchange will equally augment the capital of England by L.10,000. If L.100,000 of English gold, in the same manner, purchase French wine, which in England is worth L.110,000, this exchange will equally augment the capital of England by L.10,000. As a merchant, who has L.110,000 worth of wine in his cellar, is a richer man than he who has only L.100,000 worth of tobacco in his warehouse, so is he likewise a richer man than he who has only L.100,000 worth of gold in his coffers. He can put into motion a greater quantity of industry, and give revenue, maintenance, and employment, to a greater number of people, than either of the other two. But the capital of the country is equal to the capital of all its different inhabitants; and the quantity of industry which can be annually maintained in it is equal to what all those different capitals can maintain. Both the capital of the country, therefore, and the quantity of industry which can be annually maintained in it, must generally be augmented by this exchange. It would, indeed, be more advantageous for England that it could purchase the wines of France with its own hardware and broad cloth, than with either the tobacco of Virginia, or the gold and silver of Brazil and Peru. A direct foreign trade of consumption is always more advantageous than a round-about one. But a round-about foreign trade of consumption, which is carried on with gold and silver, does not seem to be less advantageous than any other equally round-about one. Neither is a country which has no mines, more likely to be exhausted of gold and silver by this annual exportation of those metals, than one which does not grow tobacco by the like annual exportation of that plant. As a country which has wherewithal to buy tobacco will never be long in want of it, so neither will one be long in want of gold and silver which has wherewithal to purchase those metals. It is a losing trade, it is said, which a workman carries on with the alehouse; and the trade which a manufacturing nation would naturally carry on with a wine country, may be considered as a trade of the same nature. I answer, that the trade with the alehouse is not necessarily a losing trade. In its own nature it is just as advantageous as any other, though, perhaps, somewhat more liable to be abused. The employment of a brewer, and even that of a retailer of fermented liquors, are as necessary divisions of labour as any other. It will generally be more advantageous for a workman to buy of the brewer the quantity he has occasion for, than to brew it himself; and if he is a poor workman, it will generally be more advantageous for him to buy it by little and little of the retailer, than a large quantity of the brewer. He may no doubt buy too much of either, as he may of any other dealers in his neighbourhood; of the butcher, if he is a glutton; or of the draper, if he affects to be a beau among his companions. It is advantageous to the great body of workmen, notwithstanding, that all these trades should be free, though this freedom may be abused in all of them, and is more likely to be so, perhaps, in some than in others. Though individuals, besides, may sometimes ruin their fortunes by an excessive consumption of fermented liquors, there seems to be no risk that a nation should do so. Though in every country there are many people who spend upon such liquors more than they can afford, there are always many more who spend less. It deserves to be remarked, too, that if we consult experience, the cheapness of wine seems to be a cause, not of drunkenness, but of sobriety. The inhabitants of the wine countries are in general the soberest people of Europe; witness the Spaniards, the Italians, and the inhabitants of the southern provinces of France. People are seldom guilty of excess in what is their daily fare. Nobody affects the character of liberality and good fellowship, by being profuse of a liquor which is as cheap as small beer. On the contrary, in the countries which, either from excessive heat or cold, produce no grapes, and where wine consequently is dear and a rarity, drunkenness is a common vice, as among the northern nations, and all those who live between the tropics, the negroes, for example, on the coast of Guinea. When a French regiment comes from some of the northern provinces of France, where wine is somewhat dear, to be quartered in the southern, where it is very cheap, the soldiers, I have frequently heard it observed, are at first debauched by the cheapness and novelty of good wine; but after a few months residence, the greater part of them become as sober as the rest of the inhabitants. Were the duties upon foreign wines, and the excises upon malt, beer, and ale, to be taken away all at once, it might, in the same manner, occasion in Great Britain a pretty general and temporary drunkenness among the middling and inferior ranks of people, which would probably be soon followed by a permanent and almost universal sobriety. At present, drunkenness is by no means the vice of people of fashion, or of those who can easily afford the most expensive liquors. A gentleman drunk with ale has scarce ever been seen among us. The restraints upon the wine trade in Great Britain, besides, do not so much seem calculated to hinder the people from going, if I may say so, to the alehouse, as from going where they can buy the best and cheapest liquor. They favour the wine trade of Portugal, and discourage that of France. The Portuguese, it is said, indeed, are better customers for our manufactures than the French, and should therefore be encouraged in preference to them. As they give us their custom, it is pretended we should give them ours. The sneaking arts of underling tradesman are thus erected into political maxims for the conduct of a great empire; for it is the most underling tradesmen only who make it a rule to employ chiefly their own customers. A great trader purchases his goods always where they are cheapest and best, without regard to any little interest of this kind. By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe, than the impertinent jealousy of merchants and manufacturers. The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit of a remedy: but the mean rapacity, the monopolizing spirit, of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot, perhaps, be corrected, may very easily be prevented from disturbing the tranquillity of anybody but themselves. That it was the spirit of monopoly which originally both invented and propagated this doctrine, cannot be doubted: and they who first taught it, were by no means such fools as they who believed it. In every country it always is, and must be, the interest of the great body of the people, to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people. As it is the interest of the freemen of a corporation to hinder the rest of the inhabitants from employing any workmen but themselves; so it is the interest of the merchants and manufacturers of every country to secure to themselves the monopoly of the home market. Hence, in Great Britain, and in most other European countries, the extraordinary duties upon almost all goods imported by alien merchants. Hence the high duties and prohibitions upon all those foreign manufactures which can come into competition with our own. Hence, too, the extraordinary restraints upon the importation of almost all sorts of goods from those countries with which the balance of trade is supposed to be disadvantageous; that is, from those against whom national animosity happens to be most violently inflamed. The wealth of neighbouring nations, however, though dangerous in war and politics, is certainly advantageous in trade. In a state of hostility, it may enable our enemies to maintain fleets and armies superior to our own; but in a state of peace and commerce, it must likewise enable them to exchange with us to a greater value, and to afford a better market, either for the immediate produce of our own industry, or for whatever is purchased with that produce. As a rich man is likely to be a better customer to the industrious people in his neighbourhood, than a poor, so is likewise a rich nation. A rich man, indeed, who is himself a manufacturer, is a very dangerous neighbour to all those who deal in the same way. All the rest of the neighbourhood, however, by far the greatest number, profit by the good market which his expense affords them. They even profit by his underselling the poorer workmen who deal in the same way with him. The manufacturers of a rich nation, in the same manner, may no doubt be very dangerous rivals to those of their neighbours. This very competition, however, is advantageous to the great body of the people, who profit greatly, besides, by the good market which the great expense of such a nation affords them in every other way. Private people, who want to make a fortune, never think of retiring to the remote and poor provinces of the country, but resort either to the capital, or to some of the great commercial towns. They know, that where little wealth circulates, there is little to be got; but that where a great deal is in motion, some share of it may fall to them. The same maxim which would in this manner direct the common sense of one, or ten, or twenty individuals, should regulate the judgment of one, or ten, or twenty millions, and should make a whole nation regard the riches of its neighbours, as a probable cause and occasion for itself to acquire riches. A nation that would enrich itself by foreign trade, is certainly most likely to do so, when its neighbours are all rich, industrious and commercial nations. A great nation, surrounded on all sides by wandering savages and poor barbarians, might, no doubt, acquire riches by the cultivation of its own lands, and by its own interior commerce, but not by foreign trade. It seems to have been in this manner that the ancient Egyptians and the modern Chinese acquired their great wealth. The ancient Egyptians, it is said, neglected foreign commerce, and the modern Chinese, it is known, hold it in the utmost contempt, and scarce deign to afford it the decent protection of the laws. The modern maxims of foreign commerce, by aiming at the impoverishment of all our neighbours, so far as they are capable of producing their intended effect, tend to render that very commerce insignificant and contemptible. It is in consequence of these maxims, that the commerce between France and England has, in both countries, been subjected to so many discouragements and restraints. If those two countries, however, were to consider their real interest, without either mercantile jealousy or national animosity, the commerce of France might be more advantageous to Great Britain than that of any other country, and, for the same reason, that of Great Britain to France. France is the nearest neighbour to Great Britain. In the trade between the southern coast of England and the northern and north-western coast of France, the returns might be expected, in the same manner as in the inland trade, four, five, or six times in the year. The capital, therefore, employed in this trade could, in each of the two countries, keep in motion four, five, or six times the quantity of industry, and afford employment and subsistence to four, five, or six times the number of people, which an equal capital could do in the greater part of the other branches of foreign trade. Between the parts of France and Great Britain most remote from one another, the returns might be expected, at least, once in the year; and even this trade would so far be at least equally advantageous, as the greater part of the other branches of our foreign European trade. It would be, at least, three times more advantageous than the boasted trade with our North American colonies, in which the returns were seldom made in less than three years, frequently not in less than four or five years. France, besides, is supposed to contain 24,000,000 of inhabitants. Our North American colonies were never supposed to contain more than 3,000,000; and France is a much richer country than North America; though, on account of the more unequal distribution of riches, there is much more poverty and beggary in the one country than in the other. France, therefore, could afford a market at least eight times more extensive, and, on account of the superior frequency of the returns, four-and-twenty times more advantageous than that which our North American colonies ever afforded. The trade of Great Britain would be just as advantageous to France, and, in proportion to the wealth, population, and proximity of the respective countries, would have the same superiority over that which France carries on with her own colonies. Such is the very great difference between that trade which the wisdom of both nations has thought proper to discourage, and that which it has favoured the most. But the very same circumstances which would have rendered an open and free commerce between the two countries so advantageous to both, have occasioned the principal obstructions to that commerce. Being neighbours, they are necessarily enemies, and the wealth and power of each becomes, upon that account, more formidable to the other; and what would increase the advantage of national friendship, serves only to inflame the violence of national animosity. They are both rich and industrious nations; and the merchants and manufacturers of each dread the competition of the skill and activity of those of the other. Mercantile jealousy is excited, and both inflames, and is itself inflamed, by the violence of national animosity, and the traders of both countries have announced, with all the passionate confidence of interested falsehood, the certain ruin of each, in consequence of that unfavourable balance of trade, which, they pretend, would be the infallible effect of an unrestrained commerce with the other. There is no commercial country in Europe, of which the approaching ruin has not frequently been foretold by the pretended doctors of this system, from an unfavourable balance of trade. After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favour, and against their neighbours, it does not appear that any one nation in Europe has been, in any respect, impoverished by this cause. Every town and country, on the contrary, in proportion as they have opened their ports to all nations, instead of being ruined by this free trade, as the principles of the commercial system would lead us to expect, have been enriched by it. Though there are in Europe, indeed, a few towns which, in some respects, deserve the name of free ports, there is no country which does so. Holland, perhaps, approaches the nearest to this character of any, though still very remote from it; and Holland, it is acknowledged, not only derives its whole wealth, but a great part of its necessary subsistence, from foreign trade. There is another balance, indeed, which has already been explained, very different from the balance of trade, and which, according as it happens to be either favourable or unfavourable, necessarily occasions the prosperity or decay of every nation. This is the balance of the annual produce and consumption. If the exchangeable value of the annual produce, it has already been observed, exceeds that of the annual consumption, the capital of the society must annually increase in proportion to this excess. The society in this case lives within its revenue; and what is annually saved out of its revenue, is naturally added to its capital, and employed so as to increase still further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expense of the society, in this case, exceeds its revenue, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and, together with it, the exchangeable value of the annual produce of its industry. This balance of produce and consumption is entirely different from what is called the balance of trade. It might take place in a nation which had no foreign trade, but which was entirely separated from all the world. It may take place in the whole globe of the earth, of which the wealth, population, and improvement, may be either gradually increasing or gradually decaying. The balance of produce and consumption may be constantly in favour of a nation, though what is called the balance of trade be generally against it. A nation may import to a greater value than it exports for half a century, perhaps, together; the gold and silver which comes into it during all this time, may be all immediately sent out of it; its circulating coin may gradually decay, different sorts of paper money being substituted in its place, and even the debts, too, which it contracts in the principal nations with whom it deals, may be gradually increasing; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may, during the same period, have been increasing in a much greater proportion. The state of our North American colonies, and of the trade which they carried on with Great Britain, before the commencement of the present disturbances,[38] may serve as a proof that this is by no means an impossible supposition. CHAP. IV. OF DRAWBACKS. Merchants and manufacturers are not contented with the monopoly of the home market, but desire likewise the most extensive foreign sale for their goods. Their country has no jurisdiction in foreign nations, and therefore can seldom procure them any monopoly there. They are generally obliged, therefore, to content themselves with petitioning for certain encouragements to exportation. Of these encouragements, what are called drawbacks seem to be the most reasonable. To allow the merchant to draw back upon exportation, either the whole, or a part of whatever excise or inland duty is imposed upon domestic industry, can never occasion the exportation of a greater quantity of goods than what would have been exported had no duty been imposed. Such encouragements do not tend to turn towards any particular employment a greater share of the capital of the country, than what would go to that employment of its own accord, but only to hinder the duty from driving away any part of that share to other employments. They tend not to overturn that balance which naturally establishes itself among all the various employments of the society, but to hinder it from being overturned by the duty. They tend not to destroy, but to preserve, what it is in most cases advantageous to preserve, the natural division and distribution of labour in the society. The same thing may be said of the drawbacks upon the re-exportation of foreign goods imported, which, in Great Britain, generally amount to by much the largest part of the duty upon importation. By the second of the rules, annexed to the act of parliament, which imposed what is now called the old subsidy, every merchant, whether English or alien, was allowed to draw back half that duty upon exportation; the English merchant, provided the exportation took place within twelve months; the alien, provided it took place within nine months. Wines, currants, and wrought silks, were the only goods which did not fall within this rule, having other and more advantageous allowances. The duties imposed by this act of parliament were, at that time, the only duties upon the importation of foreign goods. The term within which this, and all other drawbacks could be claimed, was afterwards (by 7 Geo. I. chap. 21. sect. 10.) extended to three years. The duties which have been imposed since the old subsidy, are, the greater part of them, wholly drawn back upon exportation. This general rule, however, is liable to a great number of exceptions; and the doctrine of drawbacks has become a much less simple matter than it was at their first institution. Upon the exportation of some foreign goods, of which it was expected that the importation would greatly exceed what was necessary for the home consumption, the whole duties are drawn back, without retaining even half the old subsidy. Before the revolt of our North American colonies, we had the monopoly of the tobacco of Maryland and Virginia. We imported about ninety-six thousand hogsheads, and the home consumption was not supposed to extend fourteen thousand. To facilitate the great exportation which was necessary, in order to rid us of the rest, the whole duties were drawn back, provided the exportation took place within three years. We still have, though not altogether, yet very nearly, the monopoly of the sugars of our West Indian islands. If sugars are exported within a year, therefore, all the duties, upon importation are drawn back; and if exported within three years, all the duties, except half the old subsidy, which still continues to be retained upon the exportation of the greater part of goods. Though the importation of sugar exceeds a good deal what is necessary for the home consumption, the excess is inconsiderable, in comparison of what it used to be in tobacco. Some goods, the particular objects of the jealousy of our own manufacturers, are prohibited to be imported for home consumption. They may, however, upon paying certain duties, be imported and warehoused for exportation. But upon such exportation no part of these duties is drawn back. Our manufacturers are unwilling, it seems, that even this restricted importation should be encouraged, and are afraid lest some part of these goods should be stolen out of the warehouse, and thus came into competition with their own. It is under these regulations only that we can import wrought silks, French cambrics and lawns, calicoes, painted, printed, stained, or dyed, &c. We are unwilling even to be the carriers of French goods, and choose rather to forego a profit to ourselves than to suffer those whom we consider as our enemies to make any profit by our means. Not only half the old subsidy, but the second twenty-five per cent. is retained upon the exportation of all French goods. By the fourth of the rules annexed to the old subsidy, the drawback allowed upon the exportation of all wines amounted to a great deal more than half the duties which were at that time paid upon their importation; and it seems at that time to have been the object of the legislature to give somewhat more than ordinary encouragement to the carrying trade in wine. Several of the other duties, too, which were imposed either at the same time or subsequent to the old subsidy, what is called the additional duty, the new subsidy, the one-third and two-thirds subsidies, the impost 1692, the tonnage on wine, were allowed to be wholly drawn back upon exportation. All those duties, however, except the additional duty and impost 1692, being paid down in ready money upon importation, the interest of so large a sum occasioned an expense, which made it unreasonable to expect any profitable carrying trade in this article. Only a part, therefore of the duty called the impost on wine, and no part of the twenty-five pounds the ton upon French wines, or of the duties imposed in 1745, in 1763, and in 1778, were allowed to be drawn back upon exportation. The two imposts of five per cent. imposed in 1779 and 1781, upon all the former duties of customs, being allowed to be wholly drawn back upon the exportation of all other goods, were likewise allowed to be drawn back upon that of wine. The last duty that has been particularly imposed upon wine, that of 1780, is allowed to be wholly drawn back; an indulgence which, when so many heavy duties are retained, most probably could never occasion the exportation of a single ton of wine. These rules took place with regard to all places of lawful exportation, except the British colonies in America. The 15th Charles II, chap. 7, called an act for the encouragement of trade, had given Great Britain the monopoly of supplying the colonies with all the commodities of the growth or manufacture of Europe, and consequently with wines. In a country of so extensive a coast as our North American and West Indian colonies, where our authority was always so very slender, and where the inhabitants were allowed to carry out in their own ships their non-enumerated commodities, at first to all parts of Europe, and afterwards to all parts of Europe south of Cape Finisterre, it is not very probable that this monopoly could ever be much respected; and they probably at all times found means of bringing back some cargo from the countries to which they were allowed to carry out one. They seem, however, to have found some difficulty in importing European wines from the places of their growth; and they could not well import them from Great Britain, where they were loaded with many heavy duties, of which a considerable part was not drawn back upon exportation. Madeira wine, not being an European commodity, could be imported directly into America and the West Indies, countries which, in all their non-enumerated commodities, enjoyed a free trade to the island of Madeira. These circumstances had probably introduced that general taste for Madeira wine, which our officers found established in all our colonies at the commencement of the war which began in 1755, and which they brought back with them to the mother country, where that wine had not been much in fashion before. Upon the conclusion of that war, in 1763 (by the 4th Geo. III, chap. 15, sect. 12), all the duties except L.3, 10s. were allowed to be drawn back upon the exportation to the colonies of all wines, except French wines, to the commerce and consumption of which national prejudice would allow no sort of encouragement. The period between the granting of this indulgence and the revolt of our North American colonies, was probably too short to admit of any considerable change in the customs of those countries. The same act which, in the drawbacks upon all wines, except French wines, thus favoured the colonies so much more than other countries, in those upon the greater part of other commodities, favoured them much less. Upon the exportation of the greater part of commodities to other countries, half the old subsidy was drawn back. But this law enacted, that no part of that duty should be drawn back upon the exportation to the colonies of any commodities of the growth or manufacture either of Europe or the East Indies, except wines, white calicoes, and muslins. Drawbacks were, perhaps, originally granted for the encouragement of the carrying trade, which, as the freight of the ship is frequently paid by foreigners in money, was supposed to be peculiarly fitted for bringing gold and silver into the country. But though the carrying trade certainly deserves no peculiar encouragement, though the motive of the institution was, perhaps, abundantly foolish, the institution itself seems reasonable enough. Such drawbacks cannot force into this trade a greater share of the capital of the country than what would have gone to it of its own accord, had there been no duties upon importation; they only prevent its being excluded altogether by those duties. The carrying trade, though it deserves no preference, ought not to be precluded, but to be left free, like all other trades. It is a necessary resource to those capitals which cannot find employment, either in the agriculture or in the manufactures of the country, either in its home trade, or in its foreign trade of consumption. The revenue of the customs, instead of suffering, profits from such drawbacks, by that part of the duty which is retained. If the whole duties had been retained, the foreign goods upon which they are paid could seldom have been exported, nor consequently imported, for want of a market. The duties, therefore, of which a part is retained, would never have been paid. These reasons seem sufficiently to justify drawbacks, and would justify them, though the whole duties, whether upon the produce of domestic industry or upon foreign goods, were always drawn back upon exportation. The revenue of excise would, in this case indeed, suffer a little, and that of the customs a good deal more; but the natural balance of industry, the natural division and distribution of labour, which is always more or less disturbed by such duties, would be more nearly re-established by such a regulation. These reasons, however, will justify drawbacks only upon exporting goods to those countries which are altogether foreign and independent, not to those in which our merchants and manufacturers enjoy a monopoly. A drawback, for example, upon the exportation of European goods to our American colonies, will not always occasion a greater exportation than what would have taken place without it. By means of the monopoly which our merchants and manufacturers enjoy there, the same quantity might frequently, perhaps, be sent thither, though the whole duties were retained. The drawback, therefore, may frequently be pure loss to the revenue of excise and customs, without altering the state of the trade, or rendering it in any respect more extensive. How far such drawbacks can be justified as a proper encouragement to the industry of our colonies, or how far it is advantageous to the mother country that they should be exempted from taxes which are paid by all the rest of their fellow-subjects, will appear hereafter, when I come to treat of colonies. Drawbacks, however, it must always be understood, are useful only in those cases in which the goods, for the exportation of which they are given, are really exported to some foreign country, and not clandestinely re-imported into our own. That some drawbacks, particularly those upon tobacco, have frequently been abused in this manner, and have given occasion to many frauds, equally hurtful both to the revenue and to the fair trader, is well known. CHAP. V. OF BOUNTIES. Bounties upon exportation are, in Great Britain, frequently petitioned for, and sometimes granted, to the produce of particular branches of domestic industry. By means of them, our merchants and manufacturers, it is pretended, will be enabled to sell their goods as cheap or cheaper than their rivals in the foreign market. A greater quantity, it is said, will thus be exported, and the balance of trade consequently turned more in favour of our own country. We cannot give our workmen a monopoly in the foreign, as we have done in the home market. We cannot force foreigners to buy their goods as we have done our own countrymen. The next best expedient, it has been thought, therefore, is to pay them for buying. It is in this manner that the mercantile system proposes to enrich the whole country, and to put money into all our pockets by means of the balance of trade. Bounties, it is allowed, ought to be given to those branches of trade only which cannot be carried on without them. But every branch of trade in which the merchant can sell his goods for a price which replaces to him, with the ordinary profits of stock, the whole capital employed in preparing and sending them to market, can be carried on without a bounty. Every such branch is evidently upon a level with all the other branches of trade which are carried on without bounties, and cannot, therefore, require one more than they. Those trades only require bounties in which the merchant is obliged to sell his goods for a price which does not replace to him his capital, together with the ordinary profit, or in which he is obliged to sell them for less than it really costs him to send them to market. The bounty is given in order to make up this loss, and to encourage him to continue, or, perhaps, to begin a trade, of which the expense is supposed to be greater than the returns, of which every operation eats up a part of the capital employed in it, and which is of such a nature, that if all other trades resembled it, there would soon be no capital left in the country. The trades, it is to be observed, which are carried on by means of bounties, are the only ones which can be carried on between two nations for any considerable time together, in such a manner as that one of them shall always and regularly lose, or sell its goods for less than it really costs to send them to market. But if the bounty did not repay to the merchant what he would otherwise lose upon the price of his goods, his own interest would soon oblige him to employ his stock in another way, or to find out a trade in which the price of the goods would replace to him, with the ordinary profit, the capital employment in sending them to market. The effect of bounties, like that of all the other expedients of the mercantile system, can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord. The ingenious and well-informed author of the Tracts upon the Corn Trade has shown very clearly, that since the bounty upon the exportation of corn was first established, the price of the corn exported, valued moderately enough, has exceeded that of the corn imported, valued very high, by a much greater sum than the amount of the whole bounties which have been paid during that period. This, he imagines, upon the true principles of the mercantile system, is a clear proof that this forced corn trade is beneficial to the nation, the value of the exportation exceeding that of the importation by a much greater sum than the whole extraordinary expense which the public has been at in order to get it exported. He does not consider that this extraordinary expense, or the bounty, is the smallest part of the expense which the exportation of corn really costs the society. The capital which the farmer employed in raising it must likewise be taken into the account. Unless the price of the corn, when sold in the foreign markets replaces, not only the bounty, but this capital, together with the ordinary profits of stock, the society is a loser by the difference, or the national stock is so much diminished. But the very reason for which it has been thought necessary to grant a bounty, is the supposed insufficiency of the price to do this. The average price of corn, it has been said, has fallen considerably since the establishment of the bounty. That the average price of corn began to fall somewhat towards the end of the last century, and has continued to do so during the course of the sixty-four first years of the present, I have already endeavoured to show. But this event, supposing it to be real, as I believe it to be, must have happened in spite of the bounty, and cannot possibly have happened in consequence of it. It has happened in France, as well as in England, though in France there was not only no bounty, but, till 1764, the exportation of corn was subjected to a general prohibition. This gradual fall in the average price of grain, it is probable, therefore, is ultimately owing neither to the one regulation nor to the other, but to that gradual and insensible rise in the real value of silver, which, in the first book of this discourse, I have endeavoured to show, has taken place in the general market of Europe during the course of the present century. It seems to be altogether impossible that the bounty could ever contribute to lower the price of grain. In years of plenty, it has already been observed, the bounty, by occasioning an extraordinary exportation, necessarily keeps up the price of corn in the home market above what it would naturally fall to. To do so was the avowed purpose of the institution. In years of scarcity, though the bounty is frequently suspended, yet the great exportation which it occasions in years of plenty, must frequently hinder, more or less, the plenty of one year from relieving the scarcity of another. Both in years of plenty and in years of scarcity, therefore, the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market. That, in the actual state of tillage, the bounty must necessarily have this tendency, will not I apprehend, be disputed by any reasonable person. But it has been thought by many people, that it tends to encourage tillage, and that in two different ways; first, by opening a more extensive foreign market to the corn of the farmer, it tends, they imagine, to increase the demand for, and consequently the production of, that commodity; and, secondly, by securing to him a better price than he could otherwise expect in the actual state of tillage, it tends, they suppose, to encourage tillage. This double encouragement must, they imagine, in a long period of years, occasion such an increase in the production of corn, as may lower its price in the home market, much more than the bounty can raise it, in the actual state which tillage may, at the end of that period, happen to be in. I answer, that whatever extension of the foreign market can be occasioned by the bounty must, in every particular year, be altogether at the expense of the home market; as every bushel of corn, which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and, secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchasers of corn, must, in this particular commodity, be paid by the whole body of the people. In this particular commodity, therefore, this second tax is by much the heaviest of the two. Let us suppose that, taking one year with another, the bounty of 5s. upon the exportation of the quarter of wheat raises the price of that commodity in the home market only 6d. the bushel, or 4s. the quarter higher than it otherwise would have been in the actual state of the crop. Even upon this very moderate supposition, the great body of the people, over and above contributing the tax which pays the bounty of 5s. upon every quarter of wheat exported, must pay another of 4s. upon every quarter which they themselves consume. But according to the very well informed author of the Tracts upon the Corn Trade, the average proportion of the corn exported to that consumed at home, is not more than that of one to thirty-one. For every 5s. therefore, which they contribute to the payment of the first tax, they must contribute L.6, 4s. to the payment of the second. So very heavy a tax upon the first necessary of life must either reduce the subsistence of the labouring poor, or it must occasion some augmentation in their pecuniary wages, proportionable to that in the pecuniary price of their subsistence. So far as it operates in the one way, it must reduce the ability of the labouring poor to educate and bring up their children, and must, so far, tend to restrain the population of the country. So far as it operates in the other, it must reduce the ability of the employers of the poor, to employ so great a number as they otherwise might do, and must so far tend to restrain the industry of the country. The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stint and restrain the gradual extension of the home market; and thereby, in the long-run, rather to diminish than to augment the whole market and consumption of corn. This enhancement of the money price of corn, however, it has been thought, by rendering that commodity more profitable to the farmer, must necessarily encourage its production. I answer, that this might be the case, if the effect of the bounty was to raise the real price of corn, or to enable the farmer, with an equal quantity of it, to maintain a greater number of labourers in the same manner, whether liberal, moderate, or scanty, than other labourers are commonly maintained in his neighbourhood. But neither the bounty, it is evident, nor any other human institution, can have any such effect. It is not the real, but the nominal price of corn, which can in any considerable degree be affected by the bounty. And though the tax, which that institution imposes upon the whole body of the people, may be very burdensome to those who pay it, it is of very little advantage to those who receive it. The real effect of the bounty is not so much to raise the real value of corn, as to degrade the real value of silver; or to make an equal quantity of it exchange for a smaller quantity, not only of corn, but of all other home made commodities; for the money price of corn regulates that of all other home made commodities. It regulates the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family, either in the liberal, moderate, or scanty manner, in which the advancing, stationary, or declining circumstances of the society, oblige his employers to maintain him. It regulates the money price of all the other parts of the rude produce of land, which, in every period of improvement, must bear a certain proportion to that of corn, though this proportion is different in different periods. It regulates, for example, the money price of grass and hay, of butcher's meat, of horses, and the maintenance of horses, of land carriage consequently, or of the greater part of the inland commerce of the country. By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of almost all manufactures; by regulating the money price of labour, it regulates that of manufacturing art and industry; and by regulating both, it regulates that of the complete manufacture. The money price of labour, and of every thing that is the produce, either of land or labour, must necessarily either rise or fall in proportion to the money price of corn. Though in consequence of the bounty, therefore, the farmer should be enabled to sell his corn for 4s. the bushel, instead of 3s 6d. and to pay his landlord a money rent proportionable to this rise in the money price of his produce; yet if, in consequence of this rise in the price of corn, 4s. will purchase no more home made goods of any other kind than 3s. 6d. would have done before, neither the circumstances of the farmer, nor those of the landlord, will be much mended by this change. The farmer will not be able to cultivate much better; the landlord will not be able to live much better. In the purchase of foreign commodities, this enhancement in the price of corn may give them some little advantage. In that of home made commodities, it can give them none at all. And almost the whole expense of the farmer, and the far greater part even of that of the landlord, is in home made commodities. That degradation in the value of silver, which is the effect of the fertility of the mines, and which operates equally, or very nearly equally, through the greater part of the commercial world, is a matter of very little consequence to any particular country. The consequent rise of all money prices, though it does not make those who receive them really richer, does not make them really poorer. A service of plate becomes really cheaper, and every thing else remains precisely of the same real value as before. But that degradation in the value of silver, which, being the effect either of the peculiar situation or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that country, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them, not only in the foreign, but even in the home market. It is the peculiar situation of Spain and Portugal, as proprietors of the mines, to be the distributers of gold and silver to all the other countries of Europe. Those metals ought naturally, therefore, to be somewhat cheaper in Spain and Portugal than in any other part of Europe. The difference, however, should be no more than the amount of the freight and insurance; and, on account of the great value and small bulk of those metals, their freight is no great matter, and their insurance is the same as that of any other goods of equal value. Spain and Portugal, therefore, could suffer very little from their peculiar situation, if they did not aggravate its disadvantages by their political institutions. Spain by taxing, and Portugal by prohibiting, the exportation of gold and silver, load that exportation with the expense of smuggling, and raise the value of those metals in other countries so much more above what it is in their own, by the whole amount of this expense. When you dam up a stream of water, as soon as the dam is full, as much water must run over the dam-head as if there was no dam at all. The prohibition of exportation cannot detain a greater quantity of gold and silver in Spain and Portugal, than what they can afford to employ, than what the annual produce of their land and labour will allow them to employ, in coin, plate, gilding, and other ornaments of gold and silver. When they have got this quantity, the dam is full, and the whole stream which flows in afterwards must run over. The annual exportation of gold and silver from Spain and Portugal, accordingly, is, by all accounts, notwithstanding these restraints, very near equal to the whole annual importation. As the water, however, must always be deeper behind the dam-head than before it, so the quantity of gold and silver which these restraints detain in Spain and Portugal, must, in proportion to the annual produce of their land and labour, be greater than what is to be found in other countries. The higher and stronger the dam-head, the greater must be the difference in the depth of water behind and before it. The higher the tax, the higher the penalties with which the prohibition is guarded, the more vigilant and severe the police which looks after the execution of the law, the greater must be the difference in the proportion of gold and silver to the annual produce of the land and labour of Spain and Portugal, and to that of other countries. It is said, accordingly, to be very considerable, and that you frequently find there a profusion of plate in houses, where there is nothing else which would in other countries be thought suitable or correspondent to this sort of magnificence. The cheapness of gold and silver, or, what is the same thing, the dearness of all commodities, which is the necessary effect of this redundancy of the precious metals, discourages both the agriculture and manufactures of Spain and Portugal, and enables foreign nations to supply them with many sorts of rude, and with almost all sorts of manufactured produce, for a smaller quantity of gold and silver than what they themselves can either raise or make them for at home. The tax and prohibition operate in two different ways. They not only lower very much the value of the precious metals in Spain and Portugal, but by detaining there a certain quantity of those metals which would otherwise flow over other countries, they keep up their value in those other countries somewhat above what it otherwise would be, and thereby give those countries a double advantage in their commerce with Spain and Portugal. Open the flood-gates, and there will presently be less water above, and more below the dam-head, and it will soon come to a level in both places. Remove the tax and the prohibition, and as the quantity of gold and silver will diminish considerably in Spain and Portugal, so it will increase somewhat in other countries; and the value of those metals, their proportion to the annual produce of land and labour, will soon come to a level, or very near to a level, in all. The loss which Spain and Portugal could sustain by this exportation of their gold and silver, would be altogether nominal and imaginary. The nominal value of their goods, and of the annual produce of their land and labour, would fall, and would be expressed or represented by a smaller quantity of silver than before; but their real value would be the same as before, and would be sufficient to maintain, command, and employ the same quantity of labour. As the nominal value of their goods would fall, the real value of what remained of their gold and silver would rise, and a smaller quantity of those metals would answer all the same purposes of commerce and circulation which had employed a greater quantity before. The gold and silver which would go abroad would not go abroad for nothing, but would bring back an equal value of goods of some kind or other. Those goods, too, would not be all matters of mere luxury and expense, to be consumed by idle people, who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so neither would their consumption be much augmented by it. Those goods would probably, the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce, with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before. The annual produce of their land and labour would immediately be augmented a little, and in a few years would probably be augmented a great deal; their industry being thus relieved from one of the most oppressive burdens which it at present labours under. The bounty upon the exportation of corn necessarily operates exactly in the same way as this absurd policy of Spain and Portugal. Whatever be the actual state of tillage, it renders our corn somewhat dearer in the home market than it otherwise would be in that state, and somewhat cheaper in the foreign; and as the average money price of corn regulates, more or less, that of all other commodities, it lowers the value of silver considerably in the one, and tends to raise it a little in the other. It enables foreigners, the Dutch in particular, not only to eat our corn cheaper than they otherwise could do, but sometimes to eat it cheaper than even our own people can do upon the same occasions; as we are assured by an excellent authority, that of Sir Matthew Decker. It hinders our own workmen from furnishing their goods for so small a quantity of silver as they otherwise might do, and enables the Dutch to furnish theirs for a smaller. It tends to render our manufactures somewhat dearer in every market, and theirs somewhat cheaper, than they otherwise would be, and consequently to give their industry a double advantage over our own. The bounty, as it raises in the home market, not so much the real, as the nominal price of our corn; as it augments, not the quantity of labour which a certain quantity of corn can maintain and employ, but only the quantity of silver which it will exchange for; it discourages our manufactures, without rendering any considerable service, either to our farmers or country gentlemen. It puts, indeed, a little more money into the pockets of both, and it will perhaps be somewhat difficult to persuade the greater part of them that this is not rendering them a very considerable service. But if this money sinks in its value, in the quantity of labour, provisions, and home-made commodities of all different kinds which it is capable of purchasing, as much as it rises in its quantity, the service will be little more than nominal and imaginary. There is, perhaps, but one set of men in the whole commonwealth to whom the bounty either was or could be essentially serviceable. These were the corn merchants, the exporters and importers of corn. In years of plenty, the bounty necessarily occasioned a greater exportation than would otherwise have taken place; and by hindering the plenty of the one year from relieving the scarcity of another, it occasioned in years of scarcity a greater importation than would otherwise have been necessary. It increased the business of the corn merchant in both; and in the years of scarcity, it not only enabled him to import a greater quantity, but to sell it for a better price, and consequently with a greater profit, than he could otherwise have made, if the plenty of one year had not been more or less hindered from relieving the scarcity of another. It is in this set of men, accordingly, that I have observed the greatest zeal for the continuance or renewal of the bounty. Our country gentlemen, when they imposed the high duties upon the exportation of corn, which in times of moderate plenty amount to a prohibition, and when they established the bounty, seem to have imitated the conduct of our manufacturers. By the one institution, they secured to themselves the monopoly of the home market, and by the other they endeavoured to prevent that market from ever being overstocked with their commodity. By both they endeavoured to raise its real value, in the same manner as our manufacturers had, by the like institutions, raised the real value of many different sorts of manufactured goods. They did not, perhaps, attend to the great and essential difference which nature has established between corn and almost every other sort of goods. When, either by the monopoly of the home market, or by a bounty upon exportation, you enable our woollen or linen manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise, not only the nominal, but the real price of those goods; you render them equivalent to a greater quantity of labour and subsistence; you increase not only the nominal, but the real profit, the real wealth and revenue of these manufacturers; and you enable them, either to live better themselves, or to employ a greater quantity of labour in those particular manufactures. You really encourage those manufactures, and direct towards them a greater quantity of the industry of the country than what would properly go to them of its own accord. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value; you do not increase the real wealth, the real revenue, either of our farmers or country gentlemen; you do not encourage the growth of corn, because you do not enable them to maintain and employ more labourers in raising it. The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. No bounty upon exportation, no monopoly of the home market, can raise that value. The freest competition cannot lower it. Through the world in general, that value is equal to the quantity of labour which it can maintain, and in every particular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined; corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another; it is the real value of silver which varies with them. Bounties upon the exportation of any home-made commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord; and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production. When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people. They loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity; and by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country. To encourage the production of any commodity, a bounty upon production, one should imagine, would have a more direct operation than one upon exportation. It would, besides, impose only one tax upon the people, that which they must contribute in order to pay the bounty. Instead of raising, it would tend to lower the price of the commodity in the home market; and thereby, instead of imposing a second tax upon the people, it might, at least in part, repay them for what they had contributed to the first. Bounties upon production, however, have been very rarely granted. The prejudices established by the commercial system have taught us to believe, that national wealth arises more immediately from exportation than from production. It has been more favoured, accordingly, as the more immediate means of bringing money into the country. Bounties upon production, it has been said too, have been found by experience more liable to frauds than those upon exportation. How far this is true, I know not. That bounties upon exportation have been abused, to many fraudulent purposes, is very well known. But it is not the interest of merchants and manufacturers, the great inventors of all these expedients, that the home market should be overstocked with their goods; an event which a bounty upon production might sometimes occasion. A bounty upon exportation, by enabling them to send abroad their surplus part, and to keep up the price of what remains in the home market, effectually prevents this. Of all the expedients of the mercantile system, accordingly, it is the one of which they are the fondest. I have known the different undertakers of some particular works agree privately among themselves to give a bounty out of their own pockets upon the exportation of a certain proportion of goods which they dealt in. This expedient succeeded so well, that it more than doubled the price of their goods in the home market, notwithstanding a very considerable increase in the produce. The operation of the bounty upon corn must have been wonderfully different, if it has lowered the money price of that commodity. Something like a bounty upon production, however, has been granted upon some particular occasions. The tonnage bounties given to the white herring and whale fisheries may, perhaps, be considered as somewhat of this nature. They tend directly, it may be supposed, to render the goods cheaper in the home market than they otherwise would be. In other respects, their effects, it must be acknowledged, are the same as those of bounties upon exportation. By means of them, a part of the capital of the country is employed in bringing goods to market, of which the price does not repay the cost, together with the ordinary profits of stock. But though the tonnage bounties to those fisheries do not contribute to the opulence of the nation, it may, perhaps, be thought that they contribute to its defence, by augmenting the number of its sailors and shipping. This, it may be alleged, may sometimes be done by means of such bounties, at a much smaller expense than by keeping up a great standing navy, if I may use such an expression, in the same way as a standing army. Notwithstanding these favourable allegations, however, the following considerations dispose me to believe, that in granting at least one of these bounties, the legislature has been very grossly imposed upon: _First._ The herring-buss bounty seems too large. From the commencement of the winter fishing 1771, to the end of the winter fishing 1781, the tonnage bounty upon the herring-buss fishery has been at thirty shillings the ton. During these eleven years, the whole number of barrels caught by the herring-buss fishery of Scotland amounted to 378,347. The herrings caught and cured at sea are called sea-sticks. In order to render them what are called merchantable herrings, it is necessary to repack them with an additional quantity of salt; and in this case, it is reckoned, that three barrels of sea-sticks are usually repacked into two barrels of merchantable herrings. The number of barrels of merchantable herrings, therefore, caught during these eleven years, will amount only, according to this account, to 252,231-1/4. During these eleven years, the tonnage bounties paid amounted to L.155,463 : 11s. or 8s. 2-1/4d. upon every barrel of sea-sticks, and to 12s. 3-3/4d. upon every barrel of merchantable herrings. The salt with which these herrings are cured is sometimes Scotch, and sometimes foreign salt; both which are delivered, free of all excise duty, to the fish-curers. The excise duty upon Scotch salt is at present 1s. 6d., that upon foreign salt 10s. the bushel. A barrel of herrings is supposed to require about one bushel and one-fourth of a bushel foreign salt. Two bushels are the supposed average of Scotch salt. If the herrings are entered for exportation, no part of this duty is paid up; if entered for home consumption, whether the herrings were cured with foreign or with Scotch salt, only one shilling the barrel is paid up. It was the old Scotch duty upon a bushel of salt, the quantity which, at a low estimation, had been supposed necessary for curing a barrel of herrings. In Scotland, foreign salt is very little used for any other purpose but the curing of fish. But from the 5th April 1771 to the 5th April 1782, the quantity of foreign salt imported amounted to 936,974 bushels, at eighty-four pounds the bushel; the quantity of Scotch salt delivered from the works to the fish-curers, to no more than 168,226, at fifty-six pounds the bushel only. It would appear, therefore, that it is principally foreign salt that is used in the fisheries. Upon every barrel of herrings exported, there is, besides, a bounty of 2s. 8d. and more than two-thirds of the buss-caught herrings are exported. Put all these things together, and you will find that, during these eleven years, every barrel of buss-caught herrings, cured with Scotch salt, when exported, has cost government 17s. 11-3/4d.; and, when entered for home consumption, 14s. 3-3/4d.; and that every barrel cured with foreign salt, when exported, has cost government L.1 : 7 : 5-3/4d.; and, when entered for home consumption, L.1 : 3 : 9-3/4d. The price of a barrel of good merchantable herrings runs from seventeen and eighteen to four and five-and-twenty shillings; about a guinea at an average.[39] _Secondly_, The bounty to the white-herring fishery is a tonnage bounty, and is proportioned to the burden of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for the vessels to fit out for the sole purpose of catching, not the fish, but the bounty. In the year 1759, when the bounty was at fifty shillings the ton, the whole buss fishery of Scotland brought in only four barrels of sea-sticks. In that year, each barrel of sea-sticks cost government, in bounties alone, L.113 : 15s.; each barrel of merchantable herrings L.159 : 7 : 6. _Thirdly_, The mode of fishing, for which this tonnage bounty in the white herring fishery has been given (by busses or decked vessels from twenty to eighty tons burden), seems not so well adapted to the situation of Scotland, as to that of Holland, from the practice of which country it appears to have been borrowed. Holland lies at a great distance from the seas to which herrings are known principally to resort, and can, therefore, carry on that fishery only in decked vessels, which can carry water and provisions sufficient for a voyage to a distant sea; but the Hebrides, or Western Islands, the islands of Shetland, and the northern and north-western coasts of Scotland, the countries in whose neighborhood the herring fishery is principally carried on, are everywhere intersected by arms of the sea, which run up a considerable way into the land, and which, in the language of the country, are called sea-lochs. It is to these sea-lochs that the herrings principally resort during the seasons in which they visit those seas; for the visits of this, and, I am assured, of many other sorts of fish, are not quite regular and constant. A boat-fishery, therefore, seems to be the mode of fishing best adapted to the peculiar situation of Scotland, the fishers carrying the herrings on shore as fast as they are taken, to be either cured or consumed fresh. But the great encouragement which a bounty of 30s. the ton gives to the buss-fishery, is necessarily a discouragement to the boat-fishery, which, having no such bounty, cannot bring its cured fish to market upon the same terms as the buss-fishery. The boat-fishery, accordingly, which, before the establishment of the buss-bounty, was very considerable, and is said to have employed a number of seamen, not inferior to what the buss-fishery employs at present, is now gone almost entirely to decay. Of the former extent, however, of this now ruined and abandoned fishery, I must acknowledge that I cannot pretend to speak with much precision. As no bounty was paid upon the outfit of the boat-fishery, no account was taken of it by the officers of the customs or salt duties. _Fourthly_, In many parts of Scotland, during certain seasons of the year, herrings make no inconsiderable part of the food of the common people. A bounty which tended to lower their price in the home market, might contribute a good deal to the relief of a great number of our fellow-subjects, whose circumstances are by no means affluent. But the herring-buss bounty contributes to no such good purpose. It has ruined the boat-fishery, which is by far the best adapted for the supply of the home market; and the additional bounty of 2s. 8d. the barrel upon exportation, carries the greater part, more than two-thirds, of the produce of the buss-fishery abroad. Between thirty and forty years ago, before the establishment of the buss-bounty, 16s. the barrel, I have been assured, was the common price of white herrings. Between ten and fifteen years ago, before the boat-fishery was entirely ruined, the price was said to have run from seventeen to twenty shillings the barrel. For these last five years, it has, at an average, been at twenty-five shillings the barrel. This high price, however, may have been owing to the real scarcity of the herrings upon the coast of Scotland. I must observe, too, that the cask or barrel, which is usually sold with the herrings, and of which the price is included in all the foregoing prices, has, since the commencement of the American war, risen to about double its former price, or from about 3s. to about 6s. I must likewise observe, that the accounts I have received of the prices of former times, have been by no means quite uniform and consistent, and an old man of great accuracy and experience has assured me, that, more than fifty years ago, a guinea was the usual price of a barrel of good merchantable herrings; and this, I imagine, may still be looked upon as the average price. All accounts, however, I think, agree that the price has not been lowered in the home market in consequence of the buss-bounty. When the undertakers of fisheries, after such liberal bounties have been bestowed upon them, continue to sell their commodity at the same, or even at a higher price than they were accustomed to do before, it might be expected that their profits should be very great; and it is not improbable that those of some individuals may have been so. In general, however, I have every reason to believe they have been quite otherwise. The usual effect of such bounties is, to encourage rash undertakers to adventure in a business which they do not understand; and what they lose by their own negligence and ignorance, more than compensates all that they can gain by the utmost liberality of government. In 1750, by the same act which first gave the bounty of 30s. the ton for the encouragement of the white herring fishery (the 23d Geo. II. chap. 24), a joint stock company was erected, with a capital of L.500,000, to which the subscribers (over and above all other encouragements, the tonnage bounty just now mentioned, the the exportation bounty of 2s. 8d. the barrel, the delivery of both British and foreign salt duty free) were, during the space of fourteen years, for every hundred pounds which they subscribed and paid into the stock of the society, entitled to three pounds a-year, to be paid by the receiver-general of the customs in equal half-yearly payments. Besides this great company, the residence of whose governor and directors was to be in London, it was declared lawful to erect different fishing chambers in all the different out-ports of the kingdom, provided a sum not less than L.10,000 was subscribed into the capital of each, to be managed at its own risk, and for its own profit and loss. The same annuity, and the same encouragements of all kinds, were given to the trade of those inferior chambers as to that of the great company. The subscription of the great company was soon filled up, and several different fishing chambers were erected in the different out-ports of the kingdom. In spite of all these encouragements, almost all those different companies, both great and small, lost either the whole or the greater part of their capitals; scarce a vestige now remains of any of them, and the white-herring fishery is now entirely, or almost entirely, carried on by private adventurers. If any particular manufacture was necessary, indeed, for the defence of the society, it might not always be prudent to depend upon our neighbours for the supply; and if such manufacture could not otherwise be supported at home, it might not be unreasonable that all the other branches of industry should be taxed in order to support it. The bounties upon the exportation of British made sail-cloth, and British made gunpowder, may, perhaps, both be vindicated upon this principle. But though it can very seldom be reasonable to tax the industry of the great body of the people, in order to support that of some particular class of manufacturers; yet, in the wantonness of great prosperity, when the public enjoys a greater revenue than it knows well what to do with, to give such bounties to favourite manufactures, may, perhaps, be as natural as to incur any other idle expense. In public, as well as in private expenses, great wealth, may, perhaps, frequently be admitted as an apology for great folly. But there must surely be something more than ordinary absurdity in continuing such profusion in times of general difficulty and distress. What is called a bounty, is sometimes no more than a drawback, and, consequently, is not liable to the same objections as what is properly a bounty. The bounty, for example, upon refined sugar exported, may be considered as a drawback of the duties upon the brown and Muscovado sugars, from which it is made; the bounty upon wrought silk exported, a drawback of the duties upon raw and thrown silk imported; the bounty upon gunpowder exported, a drawback of the duties upon brimstone and saltpetre imported. In the language of the customs, those allowances only are called drawbacks which are given upon goods exported in the same form in which they are imported. When that form has been so altered by manufacture of any kind as to come under a new denomination, they are called bounties. Premiums given by the public to artists and manufacturers, who excel in their particular occupations, are not liable to the same objections as bounties. By encouraging extraordinary dexterity and ingenuity, they serve to keep up the emulation of the workmen actually employed in those respective occupations, and are not considerable enough to turn towards any one of them a greater share of the capital of the country than what would go to it of its own accord. Their tendency is not to overturn the natural balance of employments, but to render the work which is done in each as perfect and complete as possible. The expense of premiums, besides, is very trifling, that of bounties very great. The bounty upon corn alone has sometimes cost the public, in one year, more than L.300,000. Bounties are sometimes called premiums, as drawbacks are sometimes called bounties. But we must, in all cases, attend to the nature of the thing, without paying any regard to the word. _Digression concerning the Corn Trade and Corn Laws._ I cannot conclude this chapter concerning bounties, without observing, that the praises which have been bestowed upon the law which establishes the bounty upon the exportation of corn, and upon that system of regulations which is connected with it, are altogether unmerited. A particular examination of the nature of the corn trade, and of the principal British laws which relate to it, will sufficiently demonstrate the truth of this assertion. The great importance of this subject must justify the length of the digression. The trade of the corn merchant is composed of four different branches, which, though they may sometimes be all carried on by the same person, are, in their own nature, four separate and distinct trades. These are, first, the trade of the inland dealer; secondly, that of the merchant-importer for home consumption; thirdly, that of the merchant-exporter of home produce for foreign consumption; and, fourthly, that of the merchant-carrier, or of the importer of corn, in order to export it again. I. The interest of the inland dealer, and that of the great body of the people, how opposite soever they may at first appear, are, even in years of the greatest scarcity, exactly the same. It is his interest to raise the price of his corn as high as the real scarcity of the season requires, and it can never be his interest to raise it higher. By raising the price, he discourages the consumption, and puts every body more or less, but particularly the inferior ranks of people, upon thrift and good management. If, by raising it too high, he discourages the consumption so much that the supply of the season is likely to go beyond the consumption of the season, and to last for some time after the next crop begins to come in, he runs the hazard, not only of losing a considerable part of his corn by natural causes, but of being obliged to sell what remains of it for much less than what he might have had for it several months before. If, by not raising the price high enough, he discourages the consumption so little, that the supply of the season is likely to fall short of the consumption of the season, he not only loses a part of the profit which he might otherwise have made, but he exposes the people to suffer before the end of the season, instead of the hardships of a dearth, the dreadful horrors of a famine. It is the interest of the people that their daily, weekly, and monthly consumption should be proportioned as exactly as possible to the supply of the season. The interest of the inland corn dealer is the same. By supplying them, as nearly as he can judge, in this proportion, he is likely to sell all his corn for the highest price, and with the greatest profit; and his knowledge of the state of the crop, and of his daily, weekly, and monthly sales, enables him to judge, with more or less accuracy, how far they really are supplied in this manner. Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniencies which his crew can thereby suffer are inconsiderable, in comparison of the danger, misery, and ruin, to which they might sometimes be exposed by a less provident conduct. Though, from excess of avarice, in the same manner, the inland corn merchant should sometimes raise the price of his corn somewhat higher than the scarcity of the season requires, yet all the inconveniencies which the people can suffer from this conduct, which effectually secures them from a famine in the end of the season, are inconsiderable, in comparison of what they might have been exposed to by a more liberal way of dealing in the beginning of it. The corn merchant himself is likely to suffer the most by this excess of avarice; not only from the indignation which it generally excites against him, but, though he should escape the effects of this indignation, from the quantity of corn which it necessarily leaves upon his hands in the end of the season, and which, if the next season happens to prove favourable, he must always sell for a much lower price than he might otherwise have had. Were it possible, indeed, for one great company of merchants to possess themselves of the whole crop of an extensive country, it might perhaps be their interest to deal with it, as the Dutch are said to do with the spiceries of the Moluccas, to destroy or throw away a considerable part of it, in order to keep up the price of the rest. But it is scarce possible, even by the violence of law, to establish such an extensive monopoly with regard to corn; and wherever the law leaves the trade free, it is of all commodities the least liable to be engrossed or monopolized by the force of a few large capitals, which buy up the greater part of it. Not only its value far exceeds what the capitals of a few private men are capable of purchasing; but, supposing they were capable of purchasing it, the manner in which it is produced renders this purchase altogether impracticable. As, in every civilized country, it is the commodity of which the annual consumption is the greatest; so a greater quantity of industry is annually employed in producing corn than in producing any other commodity. When it first comes from the ground, too, it is necessarily divided among a greater number of owners than any other commodity; and these owners can never be collected into one place, like a number of independent manufacturers, but are necessarily scattered through all the different corners of the country. These first owners either immediately supply the consumers in their own neighbourhood, or they supply other inland dealers, who supply those consumers. The inland dealers in corn, therefore, including both the farmer and the baker, are necessarily more numerous than the dealers in any other commodity; and their dispersed situation renders it altogether impossible for them to enter into any general combination. If, in a year of scarcity, therefore, any of them should find that he had a good deal more corn upon hand than, at the current price, he could hope to dispose of before the end of the season, he would never think of keeping up this price to his own loss, and to the sole benefit of his rivals and competitors, but would immediately lower it, in order to get rid of his corn before the new crop began to come in. The same motives, the same interests, which would thus regulate the conduct of any one dealer, would regulate that of every other, and oblige them all in general to sell their corn at the price which, according to the best of their judgment, was most suitable to the scarcity or plenty of the season. Whoever examines, with attention, the history of the dearths and famines which have afflicted any part of Europe during either the course of the present or that of the two preceding centuries, of several of which we have pretty exact accounts, will find, I believe, that a dearth never has arisen from any combination among the inland dealers in corn, nor from any other cause but a real scarcity, occasioned sometimes, perhaps, and in some particular places, by the waste of war, but in by far the greatest number of cases by the fault of the seasons; and that a famine has never arisen from any other cause but the violence of government attempting, by improper means, to remedy the inconveniencies of a dearth. In an extensive corn country, between all the different parts of which there is a free commerce and communication, the scarcity occasioned by the most unfavourable seasons can never be so great as to produce a famine; and the scantiest crop, if managed with frugality and economy, will maintain, through the year, the same number of people that are commonly fed in a more affluent manner by one of moderate plenty. The seasons most unfavourable to the crop are those of excessive drought or excessive rain. But as corn grows equally upon high and low lands, upon grounds that are disposed to be too wet, and upon those that are disposed to be too dry, either the drought or the rain, which is hurtful to one part of the country, is favourable to another; and though, both in the wet and in the dry season, the crop is a good deal less than in one more properly tempered; yet, in both, what is lost in one part of the country is in some measure compensated by what is gained in the other. In rice countries, where the crop not only requires a very moist soil, but where, in a certain period of its growing, it must be laid under water, the effects of a drought are much more dismal. Even in such countries, however, the drought is, perhaps, scarce ever so universal as necessarily to occasion a famine, if the government would allow a free trade. The drought in Bengal, a few years ago, might probably have occasioned a very great dearth. Some improper regulations, some injudicious restraints, imposed by the servants of the East India Company upon the rice trade, contributed, perhaps, to turn that dearth into a famine. When the government, in order to remedy the inconveniencies of a dearth, orders all the dealers to sell their corn at what it supposes a reasonable price, it either hinders them from bringing it to market, which may sometimes produce a famine even in the beginning of the season; or, if they bring it thither, it enables the people, and thereby encourages them to consume it so fast as must necessarily produce a famine before the end of the season. The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventive of the miseries of a famine, so it is the best palliative of the inconveniencies of a dearth; for the inconveniencies of a real scarcity cannot be remedied; they can only be palliated. No trade deserves more the full protection of the law, and no trade requires it so much; because no trade is so much exposed to popular odium. In years of scarcity, the inferior ranks of people impute their distress to the avarice of the corn merchant, who becomes the object of their hatred and indignation. Instead of making profit upon such occasions, therefore, he is often in danger of being utterly ruined, and of having his magazines plundered and destroyed by their violence. It is in years of scarcity, however, when prices are high, that the corn merchant expects to make his principal profit. He is generally in contract with some farmers to furnish him, for a certain number of years, with a certain quantity of corn, at a certain price. This contract price is settled according to what is supposed to be the moderate and reasonable, that is, the ordinary or average price, which, before the late years of scarcity, was commonly about 28s. for the quarter of wheat, and for that of other grain in proportion. In years of scarcity, therefore, the corn merchant buys a great part of his corn for the ordinary price, and sells it for a much higher. That this extraordinary profit, however, is no more them sufficient to put his trade upon a fair level with other trades, and to compensate the many losses which be sustains upon other occasions, both from the perishable nature of the commodity itself, and from the frequent and unforeseen fluctuations of its price, seems evident enough, from this single circumstance, that great fortunes are as seldom made in this as in any other trade. The popular odium, however, which attends it in years of scarcity, the only years in which it can be very profitable, renders people of character and fortune averse to enter into it. It is abandoned to an inferior set of dealers; and millers, bakers, meal-men, and meal-factors, together with a number of wretched hucksters, arr almost the only middle people that, in the home market, come between the grower and the consumer. The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the public, seems, on the contrary, to have authorised and encouraged it. By the 5th and 6th of Edward VI. cap. 14, it was enacted, that whoever should buy any corn or grain, with intent to sell it again, should be reputed an unlawful engrosser, and should, for the first fault, suffer two months imprisonment, and forfeit the value of the corn; for the second, suffer six months imprisonment, and forfeit double the value; and, for the third, be set in the pillory, suffer imprisonment during the king's pleasure, and forfeit all his goods and chattels. The ancient policy of most other parts of Europe was no better than that of England. Our ancestors seem to have imagined, that the people would buy their corn cheaper of the farmer than of the corn merchant, who, they were afraid, would require, over and above, the price which he paid to the farmer, an exorbitant profit to himself. They endeavoured, therefore, to annihilate his trade altogether. They even endeavoured to hinder, as much as possible, any middle man of any kind from coming in between the grower and the consumer; and this was the meaning of the many restraints which they imposed upon the trade of those whom they called kidders, or carriers of corn; a trade which nobody was allowed to exercise without a licence, ascertaining his qualifications as a man of probity and fair dealing. The authority of three justices of the peace was, by the statute of Edward VI. necessary in order to grant this licence. But even this restraint was afterwards thought insufficient, and, by a statute of Elizabeth, the privilege of granting it was confined to the quarter-sessions. The ancient policy of Europe endeavoured, in this manner, to regulate agriculture, the great trade of the country, by maxims quite different from those which it established with regard to manufactures, the great trade of the towns. By leaving a farmer no other customers but either the consumers or their immediate factors, the kidders and carriers of corn, it endeavoured to force him to exercise the trade, not only of a farmer, but of a corn merchant, or corn retailer. On the contrary, it, in many cases, prohibited the manufacturer from exercising the trade of a shopkeeper, or from selling his own goods by retail. It meant, by the one law, to promote the general interest of the country, or to render corn cheap, without, perhaps, its being well understood how this was to be done. By the other, it meant to promote that of a particular order of men, the shopkeepers, who would be so much undersold by the manufacturer, it was supposed, that their trade would be ruined, if he was allowed to retail at all. The manufacturer, however, though he had been allowed to keep a shop, and to sell his own goods by retail, could not have undersold the common shopkeeper. Whatever part of his capital he might have placed in his shop, he must have withdrawn it from his manufacture. In order to carry on his business on a level with that of other people, as he must have had the profit of a manufacturer on the one part, so he must have had that of a shopkeeper upon the other. Let us suppose, for example, that in the particular town where he lived, ten per cent. was the ordinary profit both of manufacturing and shopkeeping stock; he must in this case have charged upon every piece of his own goods, which he sold in his shop, a profit of twenty per cent. When he carried them from his workhouse to his shop, he must have valued them at the price for which he could have sold them to a dealer or shopkeeper, who would have bought them by wholesale. If he valued them lower, he lost a part of the profit of his manufacturing capital. When, again, he sold them from his shop, unless he got the same price at which a shopkeeper would have sold them, he lost a part of the profit of his shopkeeping capital. Though he might appear, therefore, to make a double profit upon the same piece of goods, yet, as these goods made successively a part of two distinct capitals, he made but a single profit upon the whole capital employed about them; and if he made less than his profit, he was a loser, and did not employ his whole capital with the same advantage as the greater of part of his neighbours. What the manufacturer was prohibited to do, the farmer was in some measure enjoined to do; to divide his capital between two different employments; to keep one part of it in his granaries and stack-yard, for supplying the occasional demands of the market, and to employ the other in the cultivation of his land. But as he could not afford to employ the latter for less than the ordinary profits of farming stock, so he could as little afford to employ the former for less than the ordinary profits of mercantile stock. Whether the stock which really carried on the business of a corn merchant belonged to the person who was called a farmer, or to the person who was called a corn merchant, an equal profit was in both cases requisite, in order to indemnify its owner for employing it in this manner, in order to put his business on a level with other trades, and in order to hinder him from having an interest to change it as soon as possible for some other. The farmer, therefore, who was thus forced to exercise the trade of a corn merchant, could not afford to sell his corn cheaper than any other corn merchant would have been obliged to do in the case a free competition. The dealer who can employ his whole stock in one single branch of business, has an advantage of the same kind with the workman who can employ his whole labour in one single operation. As the latter acquires a dexterity which enables him, with the same two hands, to perform a much greater quantity of work, so the former acquires so easy and ready a method of transacting his business, of buying and disposing of his goods, that, with the same capital he can transact a much greater quantity of business. As the one can commonly afford his work a good deal cheaper, so the other can commonly afford his goods somewhat cheaper, than if his stock and attention were both employed about a greater variety of objects. The greater part of manufacturers could not afford to retail their own goods so cheap as a vigilant and active shopkeeper, whose sole business it was to buy them by wholesale and to retail them again. The greater part of farmers could still less afford to retail their own corn, to supply the inhabitants of a town, at perhaps four or five miles distance from the greater part of them, so cheap as a vigilant and active corn merchant, whose sole business it was to purchase corn by wholesale, to collect it into a great magazine, and to retail it again. The law which prohibited the manufacturer from exercising the trade of a shopkeeper, endeavoured to force this division in the employment of stock to go on faster than it might otherwise have done. The law which obliged the farmer to exercise the trade of a corn merchant, endeavoured to hinder it from going on so fast. Both laws were evident violations of natural liberty, and therefore unjust; and they were both, too, as impolitic as they were unjust. It is the interest of every society, that things of this kind should never either be forced or obstructed. The man who employs either his labour or his stock in a greater variety of ways than his situation renders necessary, can never hurt his neighbour by underselling him. He may hurt himself, and he generally does so. Jack-of-all-trades will never be rich, says the proverb. But the law ought always to trust people with the care of their own interest, as in their local situations they must generally be able to judge better of it than the legislature can do. The law, however, which obliged the farmer to exercise the trade of a corn merchant was by far the most pernicious of the two. It obstructed not only that division in the employment of stock which is so advantageous to every society, but it obstructed likewise the improvement and cultivation of the land. By obliging the farmer to carry on two trades instead of one, it forced him to divide his capital into two parts, of which one only could be employed in cultivation. But if he had been at liberty to sell his whole crop to a corn merchant as fast as he could thresh it out, his whole capital might have returned immediately to the land, and have been employed in buying more cattle, and hiring more servants, in order to improve and cultivate it better. But by being obliged to sell his corn by retail, he was obliged to keep a great part of his capital in his granaries and stack-yard through the year, and could not therefore cultivate so well as with the same capital he might otherwise have done. This law, therefore, necessarily obstructed the improvement of the land, and, instead of tending to render corn cheaper, must have tended to render it scarcer, and therefore dearer, than it would otherwise have been. After the business of the farmer, that of the corn merchant is in reality the trade which, if properly protected and encouraged, would contribute the most to the raising of corn. It would support the trade of the farmer, in the same manner as the trade of the wholesale dealer supports that of the manufacturer. The wholesale dealer, by affording a ready market to the manufacturer, by taking his goods off his hand as fast as he can make them, and by sometimes even advancing their price to him before he has made them, enables him to keep his whole capital, and sometimes even more than his whole capital, constantly employed in manufacturing, and consequently to manufacture a much greater quantity of goods than if he was obliged to dispose of them himself to the immediate consumers, or even to the retailers. As the capital of the wholesale merchant, too, is generally sufficient to replace that of many manufacturers, this intercourse between him and them interests the owner of a large capital to support the owners of a great number of small ones, and to assist them in those losses and misfortunes which might otherwise prove ruinous to them. An intercourse of the same kind universally established between the farmers and the corn merchants, would be attended with effects equally beneficial to the farmers. They would be enabled to keep their whole capitals, and even more than their whole capitals constantly employed in cultivation. In case of any of those accidents to which no trade is more liable than theirs, they would find in their ordinary customer, the wealthy corn merchant, a person who had both an interest to support them, and the ability to do it; and they would not, as at present, be entirely dependent upon the forbearance of their landlord, or the mercy of his steward. Were it possible, as perhaps it is not, to establish this intercourse universally, and all at once; were it possible to turn all at once the whole farming stock of the kingdom to its proper business, the cultivation of land, withdrawing it from every other employment into which any part of it may be at present diverted; and were it possible, in order to support and assist, upon occasion, the operations of this great stock, to provide all at once another stock almost equally great; it is not, perhaps, very easy to imagine how great, how extensive, and how sudden, would be the improvement which this change of circumstances would alone produce upon the whole face of the country. The statute of Edward VI. therefore, by prohibiting as much as possible any middle man from coming in between the grower and the consumer, endeavoured to annihilate a trade, of which the free exercise is not only the best palliative of the inconveniencies of a dearth, but the best preventive of that calamity; after the trade of the farmer, no trade contributing so much to the growing of corn as that of the corn merchant. The rigour of this law was afterwards softened by several subsequent statutes, which successively permitted the engrossing of corn when the prices of wheat should not exceed 20s. and 24s. 32s. and 40s. the quarter. At last, by the 15th of Charles II. c. 7, the engrossing or buying of corn, in order to sell it again, as long as the price of wheat did not exceed 48s. the quarter, and that of other grain in proportion, was declared lawful to all persons not being forestallers, that is, not selling again in the same market within three months. All the freedom which the trade of the inland corn dealer has ever yet enjoyed was bestowed upon it by this statute. The statute of the twelfth of the present king, which repeals almost all the other ancient laws against engrossers and forestallers, does not repeal the restrictions of this particular statute, which therefore still continue in force. This statute, however, authorises in some measure two very absurd popular prejudices. _First_, It supposes, that when the price of wheat has risen so high as 48s. the quarter, and that of other grain in proportion, corn is likely to be so engrossed as to hurt the people. But, from what has been already said, it seems evident enough, that corn can at no price be so engrossed by the inland dealers as to hurt the people; and 48s. the quarter, besides, though it may be considered as a very high price, yet, in years of scarcity, it is a price which frequently takes place immediately after harvest, when scarce any part of the new crop can be sold off, and when it is impossible even for ignorance to suppose that any part of it can be so engrossed as to hurt the people. _Secondly_, It supposes that there is a certain price at which corn is likely to be forestalled, that is, bought up in order to be sold again soon after in the same market, so as to hurt the people. But if a merchant ever buys up corn, either going to a particular market, or in a particular market, in order to sell it again soon after in the same market, it must be because he judges that the market cannot be so liberally supplied through the whole season as upon that particular occasion, and that the price, therefore, must rise. If he judges wrong in this, and if the price does not rise, he not only loses the whole profit of the stock which he employs in this manner, but a part of the stock itself, by the expense and loss which necessarily attend the storing and keeping of corn. He hurts himself, therefore, much more essentially than he can hurt even the particular people whom he may hinder from supplying themselves upon that particular market day, because they may afterwards supply themselves just as cheap upon any other market day. If he judges right, instead of hurting the great body of the people, he renders them a most important service. By making them feel the inconveniencies of a dearth somewhat earlier than they otherwise might do, he prevents their feeling them afterwards so severely as they certainly would do, if the cheapness of price encouraged them to consume faster than suited the real scarcity of the season. When the scarcity is real, the best thing that can be done for people is, to divide the inconvenience of it as equally as possible, through all the different months and weeks and days of the year. The interest of the corn merchant makes him study to do this as exactly as he can; and as no other person can have either the same interest, or the same knowledge, or the same abilities, to do it so exactly as he, this most important operation of commerce ought to be trusted entirely to him; or, in other words, the corn trade, so far at least as concerns the supply of the home market, ought to be left perfectly free. The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft. The unfortunate wretches accused of this latter crime were not more innocent of the misfortunes imputed to them, than those who have been accused of the former. The law which put an end to all prosecutions against witchcraft, which put it out of any man's power to gratify his own malice by accusing his neighbour of that imaginary crime, seems effectually to have put an end to those fears and suspicions, by taking away the great cause which encouraged and supported them. The law which would restore entire freedom to the inland trade of corn, would probably prove as effectual to put an end to the popular fears of engrossing and forestalling. The 15th of Charles II. c. 7, however, with all its imperfections, has, perhaps, contributed more, both to the plentiful supply of the home market, and to the increase of tillage, than any other law in the statute book. It is from this law that the inland corn trade has derived all the liberty and protection which it has ever yet enjoyed; and both the supply of the home market and the interest of tillage are much more effectually promoted by the inland, than either by the importation or exportation trade. The proportion of the average quantity of all sorts of grain imported into Great Britain to that of all sorts of grain consumed, it has been computed by the author of the Tracts upon the Corn Trade, does not exceed that of one to five hundred and seventy. For supplying the home market, therefore, the importance of the inland trade must be to that of the importation trade as five hundred and seventy to one. The average quantity of all sorts of grain exported from Great Britain does not, according to the same author, exceed the one-and-thirtieth part of the annual produce. For the encouragement of tillage, therefore, by providing a market for the home produce, the importance of the inland trade must be to that of the exportation trade as thirty to one. I have no great faith in political arithmetic, and I mean not to warrant the exactness of either of these computations. I mention them only in order to show of how much less consequence, in the opinion of the most judicious and experienced persons, the foreign trade of corn is than the home trade. The great cheapness of corn in the years immediately preceding the establishment of the bounty may, perhaps with reason, be ascribed in some measure to the operation of this statute of Charles II. which had been enacted about five-and-twenty years before, and which had, therefore, full time to produce its effect. A very few words will sufficiently explain all that I have to say concerning the other three branches of the corn trade. II. The trade of the merchant-importer of foreign corn for home consumption, evidently contributes to the immediate supply of the home market, and must so far be immediately beneficial to the great body of the people. It tends, indeed, to lower somewhat the average money price of corn, but not to diminish its real value, or the quantity of labour which it is capable of maintaining. If importation was at all times free, our farmers and country gentlemen would probably, one year with another, get less money for their corn than they do at present, when importation is at most times in effect prohibited; but the money which they got would be of more value, would buy more goods of all other kinds, and would employ more labour. Their real wealth, their real revenue, therefore, would be the same as at present, though it might be expressed by a smaller quantity of silver, and they would neither be disabled nor discouraged from cultivating corn as much as they do at present. On the contrary, as the rise in the real value of silver, in consequence of lowering the money price of corn, lowers somewhat the money price of all other commodities, it gives the industry of the country where it takes place some advantage in all foreign markets, and thereby tends to encourage and increase that industry. But the extent of the home market for corn must be in proportion to the general industry of the country where it grows, or to the number of those who produce something else, and, therefore, have something else, or, what comes to the same thing, the price of something else, to give in exchange for corn. But in every country, the home market, as it is the nearest and most convenient, so is it likewise the greatest and most important market for corn. That rise in the real value of silver, therefore, which is the effect of lowering the average money price of corn, tends to enlarge the greatest and most important market for corn, and thereby to encourage, instead of discouraging its growth. By the 22nd of Charles II. c. 13, the importation of wheat, whenever the price in the home market did not exceed 53s. 4d. the quarter, was subjected to a duty of 16s. the quarter; and to a duty of 8s. whenever the price did not exceed L.4. The former of these two prices has, for more than a century past, taken place only in times of very great scarcity; and the latter has, so far as I know, not taken place at all. Yet, till wheat had risen above this latter price, it was, by this statute, subjected to a very high duty; and, till it had risen above the former, to a duty which amounted to a prohibition. The importation of other sorts of grain was restrained at rates and by duties, in proportion to the value of the grain, almost equally high.[40] Subsequent laws still further increased those duties. The distress which, in years of scarcity, the strict execution of those laws might have brought upon the people, would probably have been very great; but, upon such occasions, its execution was generally suspended by temporary statutes, which permitted, for a limited time, the importation of foreign corn. The necessity of these temporary statutes sufficiently demonstrates the impropriety of this general one. These restraints upon importation, though prior to the establishment of the bounty, were dictated by the same spirit, by the same principles, which afterwards enacted that regulation. How hurtful soever in themselves, these, or some other restraints upon importation, became necessary in consequence of that regulation. If, when wheat was either below 48s. the quarter, or not much above it, foreign corn could have been imported, either duty free, or upon paying only a small duty, it might have been exported again, with the benefit of the bounty, to the great loss of the public revenue, and to the entire perversion of the institution, of which the object was to extend the market for the home growth, not that for the growth of foreign countries. III. The trade of the merchant-exporter of corn for foreign consumption, certainly does not contribute directly to the plentiful supply of the home market. It does so, however, indirectly. From whatever source this supply may be usually drawn, whether from home growth, or from foreign importation, unless more corn is either usually grown, or usually imported into the country, than what is usually consumed in it, the supply of the home market can never be very plentiful. But unless the surplus can, in all ordinary cases, be exported, the growers will be careful never to grow more, and the importers never to import more, than what the bare consumption of the home market requires. That market will very seldom be overstocked; but it will generally be understocked; the people, whose business it is to supply it, being generally afraid lest their goods should be left upon their hands. The prohibition of exportation limits the improvement and cultivation of the country to what the supply of its own inhabitants require. The freedom of exportation enables it to extend cultivation for the supply of foreign nations. By the 12th of Charles II. c. 4, the exportation of corn was permitted whenever the price of wheat did not exceed 40s. the quarter, and that of other grain in proportion. By the 15th of the same prince, this liberty was extended till the price of wheat exceeded 48s. the quarter, and by the 22d, to all higher prices. A poundage, indeed, was to be paid to the king upon such exportation; but all grain was rated so low in the book of rates, that this poundage amounted only, upon wheat to 1s. upon oats to 4d. and upon all other grain to 6d. the quarter. By the 1st of William and Mary, the act which established this bounty, this small duty was virtually taken off whenever the price of wheat did not exceed 48s. the quarter; and by the 11th and 12th of William III. c. 20, it was expressly taken off at all higher prices. The trade of the merchant-exporter was, in this manner, not only encouraged by a bounty, but rendered much more free than that of the inland dealer. By the last of these statutes, corn could be engrossed at any price for exportation; but it could not be engrossed for inland sale, except when the price did not exceed 48s. the quarter. The interest of the inland dealer, however, it has already been shown, can never be opposite to that of the great body of the people. That of the merchant-exporter may, and in fact sometimes is. If, while his own country labours under a dearth, a neighbouring country should be afflicted with a famine, it might be his interest to carry corn to the latter country, in such quantities as might very much aggravate the calamities of the dearth. The plentiful supply of the home market was not the direct object of those statutes; but, under the pretence of encouraging agriculture, to raise the money price of corn as high as possible, and thereby to occasion, as much as possible, a constant dearth in the home market. By the discouragement of importation, the supply of that market, even in times of great scarcity, was confined to the home growth; and by the encouragement of exportation, when the price was so high as 48s. the quarter, that market was not, even in times of considerable scarcity, allowed to enjoy the whole of that growth. The temporary laws, prohibiting, for a limited time, the exportation of corn, and taking off, for a limited time, the duties upon its importation, expedients to which Great Britain has been obliged so frequently to have recourse, sufficiently demonstrate the impropriety of her general system. Had that system been good, she would not so frequently have been reduced to the necessity of departing from it. Were all nations to follow the liberal system of free exportation and free importation, the different states into which a great continent was divided, would so far resemble the different provinces of a great empire. As among the different provinces of a great empire, the freedom of the inland trade appears, both from reason and experience, not only the best palliative of a dearth, but the most effectual preventive of a famine; so would the freedom of the exportation and importation trade be among the different states into which a great continent was divided. The larger the continent, the easier the communication through all the different parts of it, both by land and by water, the less would any one particular part of it ever he exposed to either of these calamities, the scarcity of any one country being more likely to be relieved by the plenty of some other. But very few countries have entirely adopted this liberal system. The freedom of the corn trade is almost everywhere more or less restrained, and in many countries is confined by such absurd regulations, as frequently aggravate the unavoidable misfortune of a dearth into the dreadful calamity of a famine. The demand of such countries for corn may frequently become so great and so urgent, that a small state in their neighbourhood, which happened at the same time to be labouring under some degree of dearth, could not venture to supply them without exposing itself to the like dreadful calamity. The very bad policy of one country may thus render it, in some measure, dangerous and imprudent to establish what would otherwise be the best policy in another. The unlimited freedom of exportation, however, would be much less dangerous in great states, in which the growth being much greater, the supply could seldom be much affected by any quantity of corn that was likely to be exported. In a Swiss canton, or in some of the little states in Italy, it may, perhaps, sometimes be necessary to restrain the exportation of corn. In such great countries as France or England, it scarce ever can. To hinder, besides, the farmer from sending his goods at all times to the best market, is evidently to sacrifice the ordinary laws of justice to an idea of public utility, to a sort of reasons of state; an act of legislative authority which ought to be exercised only, which can be pardoned only, in cases of the most urgent necessity. The price at which exportation of corn is prohibited, if it is ever to be prohibited, ought always to be a very high price. The laws concerning corn may everywhere be compared to the laws concerning religion. The people feel themselves so much interested in what relates either to their subsistence in this life, or to their happiness in a life to come, that government must yield to their prejudices, and, in order to preserve the public tranquillity, establish that system which they approve of. It is upon this account, perhaps, that we so seldom find a reasonable system established with regard to either of those two capital objects. IV. The trade of the merchant-carrier, or of the importer of foreign corn, in order to export it again, contributes to the plentiful supply of the home market. It is not, indeed, the direct purpose of his trade to sell his corn there; but he will generally be willing to do so, and even for a good deal less money than he might expect in a foreign market; because he saves in this manner the expense of loading and unloading, of freight and insurance. The inhabitants of the country which, by means of the carrying trade, becomes the magazine and storehouse for the supply of other countries, can very seldom be in want themselves. Though the carrying trade must thus contribute to reduce the average money price of corn in the home market, it would not thereby lower its real value; it would only raise somewhat the real value of silver. The carrying trade was in effect prohibited in Great Britain, upon all ordinary occasions, by the high duties upon the importation of foreign corn, of the greater part of which there was no drawback; and upon extraordinary occasions, when a scarcity made it necessary to suspend those duties by temporary statutes, exportation was always prohibited. By this system of laws, therefore, the carrying trade was in effect prohibited. That system of laws, therefore, which is connected with the establishment of the bounty, seems to deserve no part of the praise which has been bestowed upon it. The improvement and prosperity of Great Britain, which has been so often ascribed to those laws, may very easily be accounted for by other causes. That security which the laws in Great Britain give to every man, that he shall enjoy the fruits of his own labour, is alone sufficient to make any country flourish, notwithstanding these and twenty other absurd regulations of commerce; and this security was perfected by the Revolution, much about the same time that the bounty was established. The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions, with which the folly of human laws too often encumbers its operations: though the effect of those obstructions is always, more or less, either to encroach upon its freedom, or to diminish its security. In Great Britain industry is perfectly secure; and though it is far from being perfectly free, it is as free or freer than in any other part of Europe. Though the period of the greatest prosperity and improvement of Great Britain has been posterior to that system of laws which is connected with the bounty, we must not upon that account, impute it to those laws. It has been posterior likewise to the national debt; but the national debt has most assuredly not been the cause of it. Though the system of laws which is connected with the bounty, has exactly the same tendency with the practice of Spain and Portugal, to lower somewhat the value of the precious metals in the country where it takes place; yet Great Britain is certainly one of the richest countries in Europe, while Spain and Portugal are perhaps amongst the most beggarly. This difference of situation, however, may easily be accounted for from two different causes. First, the tax in Spain, the prohibition in Portugal of exporting gold and silver, and the vigilant police which watches over the execution of those laws, must, in two very poor countries, which between them import annually upwards of six millions sterling, operate not only more directly, but much more forcibly, in reducing the value of those metals there, than the corn laws can do in Great Britain. And, secondly, this bad policy is not in these countries counterbalanced by the general liberty and security of the people. Industry is there neither free nor secure; and the civil and ecclesiastical governments of both Spain and Portugal are such as would alone be sufficient to perpetuate their present state of poverty, even though their regulations of commerce were as wise as the greatest part of them are absurd and foolish. The 13th of the present king, c. 43, seems to have established a new system with regard to the corn laws, in many respects better than the ancient one, but in one or two respects perhaps not quite so good. By this statute, the high duties upon importation for home consumption are taken off, so soon as the price of middling wheat rises to 48s. the quarter; that of middling rye, pease, or beans, to 32s.; that of barley to 24s.; and that of oats to 16s.; and instead of them, a small duty is imposed of only 6d. upon the quarter of wheat, and upon that of other grain in proportion. With regard to all those different sorts of grain, but particularly with regard to wheat, the home market is thus opened to foreign supplies, at prices considerably lower than before. By the same statute, the old bounty of 5s. upon the exportation of wheat, ceases so soon as the price rises to 44s. the quarter, instead of 48s. the price at which it ceased before; that of 2s. 6d. upon the exportation of barley, ceases so soon as the price rises to 22s. instead of 24s. the price at which it ceased before; that of 2s. 6d. upon the exportation of oatmeal, ceases so soon as the price rises to 14s. instead of 15s. the price at which it ceased before. The bounty upon rye is reduced from 3s. 6d. to 3s. and it ceases so soon as the price rises to 28s. instead of 32s. the price at which it ceased before. If bounties are as improper as I have endeavoured to prove them to be, the sooner they cease, and the lower they are, so much the better. The same statute permits, at the lowest prices, the importation of corn in order to be exported again, duty free, provided it is in the mean time lodged in a warehouse under the joint locks of the king and the importer. This liberty, indeed, extends to no more than twenty-five of the different parts of Great Britain. They are, however, the principal ones; and there may not, perhaps, be warehouses proper for this purpose in the greater part of the others. So far this law seems evidently an improvement upon the ancient system. But by the same law, a bounty of 2s. the quarter is given for the exportation of oats, whenever the price does not exceed fourteen shillings. No bounty had ever been given before for the exportation of this grain, no more than for that of pease or beans. By the same law, too, the exportation of wheat is prohibited so soon as the price rises to forty-four shillings the quarter; that of rye so soon as it rises to twenty-eight shillings; that of barley so soon as it rises to twenty-two shillings; and that of oats so soon as they rise to fourteen shillings. Those several prices seem all of them a good deal too low; and there seems to be an impropriety, besides, in prohibiting exportation altogether at those precise prices at which that bounty, which was given in order to force it, is withdrawn. The bounty ought certainly either to have been withdrawn at a much lower price, or exportation ought to have been allowed at a much higher. So far, therefore, this law seems to be inferior to the ancient system. With all its imperfections, however, we may perhaps say of it what was said of the laws of Solon, that though not the best in itself, it is the best which the interest, prejudices, and temper of the times, would admit of. It may perhaps in due time prepare the way for a better. CHAP. VI. OF TREATIES OF COMMERCE. When a nation binds itself by treaty, either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country which is so indulgent to them. That country becomes a market, both more extensive and more advantageous for their goods: more extensive, because the goods of other nations being either excluded or subjected to heavier duties, it takes off a greater quantity of theirs; more advantageous, because the merchants of the favoured country, enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations. Such treaties, however, though they may be advantageous to the merchants and manufacturers of the favoured, are necessarily disadvantageous to those of the favouring country. A monopoly is thus granted against them to a foreign nation; and they must frequently buy the foreign goods they have occasion for, dearer than if the free competition of other nations was admitted. That part of its own produce with which such a nation purchases foreign goods, must consequently be sold cheaper; because, when two things are exchanged for one another, the cheapness of the one is a necessary consequence, or rather is the same thing, with the dearness of the other. The exchangeable value of its annual produce, therefore, is likely to be diminished by every such treaty. This diminution, however, can scarce amount to any positive loss, but only to a lessening of the gain which it might otherwise make. Though it sells its goods cheaper than it otherwise might do, it will not probably sell them for less than they cost; nor, as in the case of bounties, for a price which will not replace the capital employed in bringing them to market, together with the ordinary profits of stock. The trade could not go on long if it did. Even the favouring country, therefore, may still gain by the trade, though less than if there was a free competition. Some treaties of commerce, however, have been supposed advantageous, upon principles very different from these; and a commercial country has sometimes granted a monopoly of this kind, against itself, to certain goods of a foreign nation, because it expected, that in the whole commerce between them, it would annually sell more than it would buy, and that a balance in gold and silver would be annually returned to it. It is upon this principle that the treaty of commerce between England and Portugal, concluded in 1703 by Mr Methuen, has been so much commended. The following is a literal translation of that treaty, which consists of three articles only. ART. I. His sacred royal majesty of Portugal promises, both in his own name and that of his successors, to admit for ever hereafter, into Portugal, the woollen cloths, and the rest of the woollen manufactures of the British, as was accustomed, till they were prohibited by the law; nevertheless upon this condition: ART. II. That is to say, that her sacred royal majesty of Great Britain shall, in her own name, and that of her successors, be obliged, for ever hereafter, to admit the wines of the growth of Portugal into Britain; so that at no time, whether there shall be peace or war between the kingdoms of Britain and France, any thing more shall be demanded for these wines by the name of custom or duty, or by whatsoever other title, directly or indirectly, whether they shall be imported into Great Britain in pipes or hogsheads, or other casks, than what shall be demanded for the like quantity or measure of French wine, deducting or abating a third part of the custom or duty. But if, at any time, this deduction or abatement of customs, which is to be made as aforesaid, shall in any manner be attempted and prejudiced, it shall be just and lawful for his sacred royal majesty of Portugal, again to prohibit the woollen cloths, and the rest of the British woollen manufactures. ART. III. The most excellent lords the plenipotentiaries promise and take upon themselves, that their above named masters shall ratify this treaty; and within the space of two months the ratification shall be exchanged. By this treaty, the crown of Portugal becomes bound to admit the English woollens upon the same footing as before the prohibition; that is, not to raise the duties which had been paid before that time. But it does not become bound to admit them upon any better terms than those of any other nation, of France or Holland, for example. The crown of Great Britain, on the contrary, becomes bound to admit the wines of Portugal, upon paying only two-thirds of the duty which is paid for those of France, the wines most likely to come into competition with them. So far this treaty, therefore, is evidently advantageous to Portugal, and disadvantageous to Great Britain. It has been celebrated, however, as a masterpiece of the commercial policy of England. Portugal receives annually from the Brazils a greater quantity of gold than can be employed in its domestic commerce, whether in the shape of coin or of plate. The surplus is too valuable to be allowed to lie idle and locked up in coffers; and as it can find no advantageous market at home, it must, notwithstanding any prohibition, be sent abroad, and exchanged for something for which there is a more advantageous market at home. A large share of it comes annually to England, in return either for English goods, or for those of other European nations that receive their returns through England. Mr Barretti was informed, that the weekly packet-boat from Lisbon brings, one week with another, more than L.50,000 in gold to England. The sum had probably been exaggerated. It would amount to more than L.2,600,000 a-year, which is more than the Brazils are supposed to afford. Our merchants were, some years ago, out of humour with the crown of Portugal. Some privileges which had been granted them, not by treaty, but by the free grace of that crown, at the solicitation, indeed, it is probable, and in return for much greater favours, defence and protection from the crown of Great Britain, had been either infringed or revoked. The people, therefore, usually most interested in celebrating the Portugal trade, were then rather disposed to represent it as less advantageous than it had commonly been imagined. The far greater part, almost the whole, they pretended, of this annual importation of gold, was not on account of Great Britain, but of other European nations; the fruits and wines of Portugal annually imported into Great Britain nearly compensating the value of the British goods sent thither. Let us suppose, however, that the whole was on account of Great Britain, and that it amounted to a still greater sum than Mr Barretti seems to imagine; this trade would not, upon that account, be more advantageous than any other, in which, for the same value sent out, we received an equal value of consumable goods in return. It is but a very small part of this importation which, it can be supposed, is employed as an annual addition, either to the plate or to the coin of the kingdom. The rest must all be sent abroad, and exchanged for consumable goods of some kind or other. But if those consumable goods were purchased directly with the produce of English industry, it would be more for the advantage of England, than first to purchase with that produce the gold of Portugal, and afterwards to purchase with that gold those consumable goods. A direct foreign trade of consumption is always more advantageous than a round-about one; and to bring the same value of foreign goods to the home market, requires a much smaller capital in the one way than in the other. If a smaller share of its industry, therefore, had been employed in producing goods fit for the Portugal market, and a greater in producing those fit for the other markets, where those consumable goods for which there is a demand in Great Britain are to be had, it would have been more for the advantage of England. To procure both the gold which it wants for its own use, and the consumable goods, would, in this way, employ a much smaller capital than at present. There would be a spare capital, therefore, to be employed for other purposes, in exciting an additional quantity of industry, and in raising a greater annual produce. Though Britain were entirely excluded from the Portugal trade, it could find very little difficulty in procuring all the annual supplies of gold which it wants, either for the purposes of plate, or of coin, or of foreign trade. Gold, like every other commodity, is always somewhere or another to be got for its value by those who have that value to give for it. The annual surplus of gold in Portugal, besides, would still be sent abroad, and though not carried away by Great Britain, would be carried away by some other nation, which would be glad to sell it again for its price, in the same manner as Great Britain does at present. In buying gold of Portugal, indeed, we buy it at the first hand; whereas, in buying it of any other nation, except Spain, we should buy it at the second, and might pay somewhat dearer. This difference, however, would surely be too insignificant to deserve the public attention. Almost all our gold, it is said, comes from Portugal. With other nations, the balance of trade is either against us, or not much in our favour. But we should remember, that the more gold we import from one country, the less we must necessarily import from all others. The effectual demand for gold, like that for every other commodity, is in every country limited to a certain quantity. If nine-tenths of this quantity are imported from one country, there remains a tenth only to be imported from all others. The more gold, besides, that is annually imported from some particular countries, over and above what is requisite for plate and for coin, the more must necessarily be exported to some others: and the more that most insignificant object of modern policy, the balance of trade, appears to be in our favour with some particular countries, the more it must necessarily appear to be against us with many others. It was upon this silly notion, however, that England could not subsist without the Portugal trade, that, towards the end of the late war, France and Spain, without pretending either offence or provocation, required the king of Portugal to exclude all British ships from his ports, and, for the security of this exclusion, to receive into them French or Spanish garrisons. Had the king of Portugal submitted to those ignominious terms which his brother-in-law the king of Spain proposed to him, Britain would have been freed from a much greater inconveniency than the loss of the Portugal trade, the burden of supporting a very weak ally, so unprovided of every thing for his own defence, that the whole power of England, had it been directed to that single purpose, could scarce, perhaps, have defended him for another campaign. The loss of the Portugal trade would, no doubt, have occasioned a considerable embarrassment to the merchants at that time engaged in it, who might not, perhaps, have found out, for a year or two, any other equally advantageous method of employing their capitals; and in this would probably have consisted all the inconveniency which England could have suffered from this notable piece of commercial policy. The great annual importation of gold and silver is neither for the purpose of plate nor of coin, but of foreign trade. A round-about foreign trade of consumption can be carried on more advantageously by means of these metals than of almost any other goods. As they are the universal instruments of commerce, they are more readily received in return for all commodities than any other goods; and, on account of their small bulk and great value, it costs less to transport them backward and forward from one place to another than almost any other sort of merchandize, and they lose less of their value by being so transported. Of all the commodities, therefore, which are bought in one foreign country, for no other purpose but to be sold or exchanged again for some other goods in another, there are none so convenient as gold and silver. In facilitating all the different round-about foreign trades of consumption which are carried on in Great Britain, consists the principal advantage of the Portugal trade; and though it is not a capital advantage, it is, no doubt, a considerable one. That any annual addition which, it can reasonably be supposed, is made either to the plate or to the coin of the kingdom, could require but a very small annual importation of gold and silver, seems evident enough; and though we had no direct trade with Portugal, this small quantity could always, somewhere or another, be very easily got. Though the goldsmiths trade be very considerable in Great Britain, the far greater part of the new plate which they annually sell, is made from other old plate melted down; so that the addition annually made to the whole plate of the kingdom cannot be very great, and could require but a very small annual importation. It is the same case with the coin. Nobody imagines, I believe, that even the greater part of the annual coinage, amounting, for ten years together, before the late reformation of the gold coin, to upwards of L.800,000 a-year in gold, was an annual addition to the money before current in the kingdom. In a country where the expense of the coinage is defrayed by the government, the value of the coin, even when it contains its full standard weight of gold and silver, can never be much greater than that of an equal quantity of those metals uncoined, because it requires only the trouble of going to the mint, and the delay, perhaps, of a few weeks, to procure for any quantity of uncoined gold and silver an equal quantity of those metals in coin; but in every country the greater part of the current coin is almost always more or less worn, or otherwise degenerated from its standard. In Great Britain it was, before the late reformation, a good deal so, the gold being more than two per cent., and the silver more than eight per cent. below its standard weight. But if forty-four guineas and a-half, containing their full standard weight, a pound weight of gold, could purchase very little more than a pound weight of uncoined gold; forty-four guineas and a-half, wanting a part of their weight, could not purchase a pound weight, and something was to be added, in order to make up the deficiency. The current price of gold bullion at market, therefore, instead of being the same with the mint price, or L.46 : 14 : 6, was then about L.47 : 14s., and sometimes about L.48. When the greater part of the coin, however, was in this degenerate condition, forty-four guineas and a-half, fresh from the mint, would purchase no more goods in the market than any other ordinary guineas; because, when they came into the coffers of the merchant, being confounded with other money, they could not afterwards be distinguished without more trouble than the difference was worth. Like other guineas, they were worth no more than L.46 : 14 : 6. If thrown into the melting pot, however, they produced, without any sensible loss, a pound weight of standard gold, which could be sold at any time for between L.47 : 14s. and L.48, either in gold or silver, as fit for all the purposes of coin as that which had been melted down. There was an evident profit, therefore, in melting down new-coined money; and it was done so instantaneously, that no precaution of government could prevent it. The operations of the mint were, upon this account, somewhat like the web of Penelopé; the work that was done in the day was undone in the night. The mint was employed, not so much in making daily additions to the coin, as in replacing the very best part of it, which was daily melted down. Were the private people who carry their gold and silver to the mint to pay themselves for the coinage, it would add to the value of those metals, in the same manner as the fashion does to that of plate. Coined gold and silver would be more valuable than uncoined. The seignorage, if it was not exorbitant, would add to the bullion the whole value of the duty; because, the government having everywhere the exclusive privilege of coining, no coin can come to market cheaper than they think proper to afford it. If the duty was exorbitant, indeed, that is, if it was very much above the real value of the labour and expense requisite for coinage, false coiners, both at home and abroad, might be encouraged, by the great difference between the value of bullion and that of coin, to pour in so great a quantity of counterfeit money as might reduce the value of the government money. In France, however, though the seignorage is eight per cent., no sensible inconveniency of this kind is found to arise from it. The dangers to which a false coiner is everywhere exposed, if he lives in the country of which he counterfeits the coin, and to which his agents or correspondents are exposed, if he lives in a foreign country, are by far too great to be incurred for the sake of a profit of six or seven per cent. The seignorage in France raises the value of the coin higher than in proportion to the quantity of pure gold which it contains. Thus, by the edict of January 1726, the[41] mint price of fine gold of twenty-four carats was fixed at seven hundred and forty livres nine sous and one denier one-eleventh the mark of eight Paris ounces. The gold coin of France, making an allowance for the remedy of the mint, contains twenty-one carats and three-fourths of fine gold, and two carats one-fourth of alloy. The mark of standard gold, therefore, is worth no more than about six hundred and seventy-one livres ten deniers. But in France this mark of standard gold is coined into thirty louis d'ors of twenty-four livres each, or into seven hundred and twenty livres. The coinage, therefore, increases the value of a mark of standard gold bullion, by the difference between six hundred and seventy-one livres ten deniers and seven hundred and twenty livres, or by forty-eight livres nineteen sous and two deniers. A seignorage will, in many cases, take away altogether, and will in all cases diminish, the profit of melting down the new coin. This profit always arises from the difference between the quantity of bullion which the common currency ought to contain and that which it actually does contain. If this difference is less than the seignorage, there will be loss instead of profit. If it is equal to the seignorage, there will be neither profit nor loss. If it is greater than the seignorage, there will, indeed, be some profit, but less than if there was no seignorage. If, before the late reformation of the gold coin, for example, there had been a seignorage of five per cent. upon the coinage, there would have been a loss of three per cent. upon the melting down of the gold coin. If the seignorage had been two per cent, there would have been neither profit nor loss. If the seignorage had been one per cent., there would have been a profit but of one per cent. only, instead of two per cent. Wherever money is received by tale, therefore, and not by weight, a seignorage is the most effectual preventive of the melting down of the coin, and, for the same reason, of its exportation. It is the best and heaviest pieces that are commonly either melted down or exported, because it is upon such that the largest profits are made. The law for the encouragement of the coinage, by rendering it duty-free, was first enacted during the reign of Charles II. for a limited time, and afterwards continued, by different prolongations, till 1769, when it was rendered perpetual. The bank of England, in order to replenish their coffers with money, are frequently obliged to carry bullion to the mint; and it was more for their interest, they probably imagined, that the coinage should be at the expense of the government than at their own. It was probably out of complaisance to this great company, that the government agreed to render this law perpetual. Should the custom of weighing gold, however, come to be disused, as it is very likely to be on account of its inconveniency; should the gold coin of England come to be received by tale, as it was before the late recoinage, this great company may, perhaps, find that they have, upon this, as upon some other occasions, mistaken their own interest not a little. Before the late recoinage, when the gold currency of England was two per cent. below its standard weight, as there was no seignorage, it was two per cent. below the value of that quantity of standard gold bullion which it ought to have contained. When this great company, therefore, bought gold bullion in order to have it coined, they were obliged to pay for it two per cent. more than it was worth after the coinage. But if there had been a seignorage of two per cent upon the coinage, the common gold currency, though two per cent. below its standard weight, would, notwithstanding, have been equal in value to the quantity of standard gold which it ought to have contained; the value of the fashion compensating in this case the diminuation of the weight. They would, indeed, have had the seignorage to pay, which being two per cent., their loss upon the whole transaction would have been two per cent., exactly the same, but no greater than it actually was. If the seignorage had been five per cent., and the gold currency only two per cent. below its standard weight, the bank would, in this case, have gained three per cent. upon the price of the bullion; but as they would have had a seignorage of five per cent. to pay upon the coinage, their loss upon the whole transaction would, in the same manner, have been exactly two per cent. If the seignorage had been only one per cent., and the gold currency two per cent. below its standard weight, the bank would, in this case, have lost only one per cent. upon the price of the bullion; but as they would likewise have had a seignorage of one per cent. to pay, their loss upon the whole transaction would have been exactly two per cent., in the same manner as in all other cases. If there was a reasonable seignorage, while at the same time the coin contained its full standard weight, as it has done very nearly since the late recoinage, whatever the bank might lose by the seignorage, they would gain upon the price of the bullion; and whatever they might gain upon the price of the bullion, they would lose by the seignorage. They would neither lose nor gain, therefore, upon the whole transaction, and they would, in this, as in all the foregoing cases, be exactly in the same situation as if there was no seignorage. When the tax upon a commodity is so moderate as not to encourage smuggling, the merchant who deals in it, though he advances, does not properly pay the tax, as he gets it back in the price of the commodity. The tax is finally paid by the last purchaser or consumer. But money is a commodity, with regard to which every man is a merchant. Nobody buys it but in order to sell it again; and with regard to it there is, in ordinary cases, no last purchaser or consumer. When the tax upon coinage, therefore, is so moderate as not to encourage false coining, though every body advances the tax, nobody finally pays it; because every body gets it back in the advanced value of the coin. A moderate seignorage, therefore, would not, in any case, augment the expense of the bank, or of any other private persons who carry their bullion to the mint in order to be coined; and the want of a moderate seignorage does not in any case diminish it. Whether there is or is not a seignorage, if the currency contains its full standard weight, the coinage costs nothing to any body; and if it is short of that weight, the coinage must always cost the difference between the quantity of bullion which ought to be contained in it, and that which actually is contained in it. The government, therefore, when it defrays the expense of coinage, not only incurs some small expense, but loses some small revenue which it might get by a proper duty; and neither the bank, nor any other private persons, are in the smallest degree benefited by this useless piece of public generosity. The directors of the bank, however, would probably be unwilling to agree to the imposition of a seignorage upon the authority of a speculation which promises them no gain, but only pretends to insure them from any loss. In the present state of the gold coin, and as long as it continues to be received by weight, they certainly would gain nothing by such a change. But if the custom of weighing the gold coin should ever go into disuse, as it is very likely to do, and if the gold coin should ever fall into the same state of degradation in which it was before the late recoinage, the gain, or more properly the savings, of the bank, in consequence of the imposition of a seignorage, would probably be very considerable. The bank of England is the only company which sends any considerable quantity of bullion to the mint, and the burden of the annual coinage falls entirely, or almost entirely, upon it. If this annual coinage had nothing to do but to repair the unavoidable losses and necessary wear and tear of the coin, it could seldom exceed fifty thousand, or at most a hundred thousand pounds. But when the coin is degraded below its standard weight, the annual coinage must, besides this, fill up the large vacuities which exportation and the melting pot are continually making in the current coin. It was upon this account, that during the ten or twelve years immediately preceding the late reformation of the gold coin, the annual coinage amounted, at an average, to more than L.850,000. But if there had been a seignorage of four or five per cent. upon the gold coin, it would probably, even in the state in which things then were, have put an effectual stop to the business both of exportation and of the melting pot. The bank, instead of losing every year about two and a half per cent. upon the bullion which was to be coined into more than eight hundred and fifty thousand pounds, or incurring an annual loss of more than twenty-one thousand two hundred and fifty pounds, would not probably have incurred the tenth part of that loss. The revenue allotted by parliament for defraying the expense of the coinage is but fourteen thousand pounds a-year; and the real expense which it costs the government, or the fees of the officers of the mint, do not, upon ordinary occasions, I am assured, exceed the half of that sum. The saving of so very small a sum, or even the gaining of another, which could not well be much larger, are objects too inconsiderable, it may be thought, to deserve the serious attention of government. But the saving of eighteen or twenty thousand pounds a-year, in case of an event which is not improbable, which has frequently happened before, and which in very likely to happen again, is surely an object which well deserves the serious attention, even of so great a company as the bank of England. Some of the foregoing reasonings and observations might, perhaps, have been more properly placed in those chapters of the first book which treat of the origin and use of money, and of the difference between the real and the nominal price of commodities. But as the law for the encouragement of coinage derives its origin from these vulgar prejudices which have been introduced by the mercantile system, I judged it more proper to reserve them for this chapter. Nothing could be more agreeable to the spirit of that system than a sort of bounty upon the production of money, the very thing which, it supposes, constitutes the wealth of every nation. It is one of its many admirable expedients for enriching the country. CHAP. VII. OF COLONIES. PART I. _Of the Motives for Establishing New Colonies._ The interest which occasioned the first settlement of the different European colonies in America and the West Indies, was not altogether so plain and distinct as that which directed the establishment of those of ancient Greece and Rome. All the different states of ancient Greece possessed, each of them, but a very small territory; and when the people in any one of them multiplied beyond what that territory could easily maintain, a part of them were sent in quest of a new habitation, in some remote and distant part of the world; the war-like neighbours who surrounded them on all sides, rendering it difficult for any of them to enlarge very much its territory at home. The colonies of the Dorians resorted chiefly to Italy and Sicily, which, in the times preceding the foundation of Rome, were inhabited by barbarous and uncivilized nations; those of the Ionians and �olians, the two other great tribes of the Greeks, to Asia Minor and the islands of the �gean sea, of which the inhabitants seem at that time to have been pretty much in the same state as those of Sicily and Italy. The mother city, though she considered the colony as a child, at all times entitled to great favour and assistance, and owing in return much gratitude and respect, yet considered it as an emancipated child, over whom she pretended to claim no direct authority or jurisdiction. The colony settled its own form of government, enacted its own laws, elected its own magistrates, and made peace or war with its neighbours, as an independent state, which had no occasion to wait for the approbation or consent of the mother city. Nothing can be more plain and distinct than the interest which directed every such establishment. Rome, like most of the other ancient republics, was originally founded upon an agrarian law, which divided the public territory, in a certain proportion, among the different citizens who composed the state. The course of human affairs, by marriage, by succession, and by alienation, necessarily deranged this original division, and frequently threw the lands which had been allotted for the maintenance of many different families, into the possession of a single person. To remedy this disorder, for such it was supposed to be, a law was made, restricting the quantity of land which any citizen could possess to five hundred _jugera_, about 350 English acres. This law, however, though we read of its having been executed upon one or two occasions, was either neglected or evaded, and the inequality of fortunes went on continually increasing. The greater part of the citizens had no land; and without it the manners and customs of those times rendered it difficult for a freeman to maintain his independency. In the present times, though a poor man has no land of his own, if he has a little stock, he may either farm the lands of another, or he may carry on some little retail trade; and if he has no stock, he may find employment either as a country labourer, or as an artificer. But among the ancient Romans, the lands of the rich were all cultivated by slaves, who wrought under an overseer, who was likewise a slave; so that a poor freeman had little chance of being employed either as a farmer or as a labourer. All trades and manufactures, too, even the retail trade, were carried on by the slaves of the rich for the benefit of their masters, whose wealth, authority, and protection, made it difficult for a poor freeman to maintain the competition against them. The citizens, therefore, who had no land, had scarce any other means of subsistence but the bounties of the candidates at the annual elections. The tribunes, when they had a mind to animate the people against the rich and the great, put them in mind of the ancient divisions of lands, and represented that law which restricted this sort of private property as the fundamental law of the republic. The people became clamorous to get land, and the rich and the great, we may believe, were perfectly determined not to give them any part of theirs. To satisfy them in some measure, therefore, they frequently proposed to send out a new colony. But conquering Rome was, even upon such occasions, under no necessity of turning out her citizens to seek their fortune, if one may so, through the wide world, without knowing where they were to settle. She assigned them lands generally in the conquered provinces of Italy, where, being within the dominions of the republic, they could never form any independent state, but were at best but a sort of corporation, which, though it had the power of enacting bye-laws for its own government, was at all times subject to the correction, jurisdiction, and legislative authority of the mother city. The sending out a colony of this kind not only gave some satisfaction to the people, but often established a sort of garrison, too, in a newly conquered province, of which the obedience might otherwise have been doubtful. A Roman colony, therefore, whether we consider the nature of the establishment itself, or the motives for making it, was altogether different from a Greek one. The words, accordingly, which in the original languages denote those different establishments, have very different meanings. The Latin word (_colonia_) signifies simply a plantation. The Greek word ([Greek: apoikia]), on the contrary, signifies a separation of dwelling, a departure from home, a going out of the house. But though the Roman colonies were, in many respects, different from the Greek ones, the interest which prompted to establish them was equally plain and distinct. Both institutions derived their origin, either from irresistible necessity, or from clear and evident utility. The establishment of the European colonies in America and the West Indies arose from no necessity; and though the utility which has resulted from them has been very great, it is not altogether so clear and evident. It was not understood at their first establishment, and was not the motive, either of that establishment, or of the discoveries which gave occasion to it; and the nature, extent, and limits of that utility, are not, perhaps, well understood at this day. The Venetians, during the fourteenth and fifteenth centuries, carried on a very advantageous commerce in spiceries and other East India goods, which they distributed among the other nations of Europe. They purchased them chiefly in Egypt, at that time under the dominion of the Mamelukes, the enemies of the Turks, of whom the Venetians were the enemies: and this union of interest, assisted by the money of Venice, formed such a connexion as gave the Venetians almost a monopoly of the trade. The great profits of the Venetians tempted the avidity of the Portuguese. They had been endeavouring, during the course of the fifteenth century, to find out by sea a way to the countries from which the Moors brought them ivory and gold dust across the desert. They discovered the Madeiras, the Canaries, the Azores, the Cape de Verd islands, the coast of Guinea, that of Loango, Congo, Angola, and Benguela, and, finally, the Cape of Good Hope. They had long wished to share in the profitable traffic of the Venetians, and this last discovery opened to them a probable prospect of doing so. In 1497, Vasco de Gamo sailed from the port of Lisbon with a fleet of four ships, and, after a navigation of eleven months, arrived upon the coast of Indostan; and thus completed a course of discoveries which had been pursued with great steadiness, and with very little interruption, for near a century together. Some years before this, while the expectations of Europe were in suspense about the projects of the Portuguese, of which the success appeared yet to be doubtful, a Genoese pilot formed the yet more daring project of sailing to the East Indies by the west. The situation of those countries was at that time very imperfectly known in Europe. The few European travellers who had been there, had magnified the distance, perhaps through simplicity and ignorance; what was really very great, appearing almost infinite to those who could not measure it; or, perhaps, in order to increase somewhat more the marvellous of their own adventures in visiting regions so immensely remote from Europe. The longer the way was by the east, Columbus very justly concluded, the shorter it would be by the west. He proposed, therefore, to take that way, as both the shortest and the surest, and he had the good fortune to convince Isabella of Castile of the probability of his project. He sailed from the port of Palos in August 1492, near five years before the expedition of Vasco de Gamo set out from Portugal; and, after a voyage of between two and three months, discovered first some of the small Bahama or Lucyan islands, and afterwards the great island of St. Domingo. But the countries which Columbus discovered, either in this or in any of his subsequent voyages, had no resemblance to those which he had gone in quest of. Instead of the wealth, cultivation, and populousness of China and Indostan, he found, in St. Domingo, and in all the other parts of the new world which he ever visited, nothing but a country quite covered with wood, uncultivated, and inhabited only by some tribes of naked and miserable savages. He was not very willing, however, to believe that they were not the same with some of the countries described by Marco Polo, the first European who had visited, or at least had left behind him any description of China or the East Indies; and a very slight resemblance, such as that which he found between the name of Cibao, a mountain in St. Domingo, and that of Cipange, mentioned by Marco Polo, was frequently sufficient to make him return to this favourite prepossession, though contrary to the clearest evidence. In his letters to Ferdinand and Isabella, he called the countries which he had discovered the Indies. He entertained no doubt but that they were the extremity of those which had been described by Marco Polo, and that they were not very distant from the Ganges, or from the countries which had been conquered by Alexander. Even when at last convinced that they were different, he still flattered himself that those rich countries were at no great distance; and in a subsequent voyage, accordingly, went in quest of them along the coast of Terra Firma, and towards the Isthmus of Darien. In consequence of this mistake of Columbus, the name of the Indies has stuck to those unfortunate countries ever since; and when it was at last clearly discovered that the new were altogether different from the old Indies, the former were called the West, in contradistinction to the latter, which were called the East Indies. It was of importance to Columbus, however, that the countries which he had discovered, whatever they were, should be represented to the court of Spain as of very great consequence; and, in what constitutes the real riches of every country, the animal and vegetable productions of the soil, there was at that time nothing which could well justify such a representation of them. The cori, something between a rat and a rabbit, and supposed by Mr Buffon to be the same with the aperea of Brazil, was the largest viviparous quadruped in St. Domingo. This species seems never to have been very numerous; and the dogs and cats of the Spaniards are said to have long ago almost entirely extirpated it, as well as some other tribes of a still smaller size. These, however, together with a pretty large lizard, called the ivana or iguana, constituted the principal part of the animal food which the land afforded. The vegetable food of the inhabitants, though, from their want of industry, not very abundant, was not altogether so scanty. It consisted in Indian corn, yams, potatoes, bananas, &c., plants which were then altogether unknown in Europe, and which have never since been very much esteemed in it, or supposed to yield a sustenance equal to what is drawn from the common sorts of grain and pulse, which have been cultivated in this part of the world time out of mind. The cotton plant, indeed, afforded the material of a very important manufacture, and was at that time, to Europeans, undoubtedly the most valuable of all the vegetable productions of those islands. But though, in the end of the fifteenth century, the muslins and other cotton goods of the East Indies were much esteemed in every part of Europe, the cotton manufacture itself was not cultivated in any part of it. Even this production, therefore, could not at that time appear in the eyes of Europeans to be of very great consequence. Finding nothing, either in the animals or vegetables of the newly discovered countries which could justify a very advantageous representation of them, Columbus turned his view towards their minerals; and in the richness of their productions of this third kingdom, he flattered himself he had found a full compensation for the insignificancy of those of the other two. The little bits of gold with which the inhabitants ornamented their dress, and which, he was informed, they frequently found in the rivulets and torrents which fell from the mountains, were sufficient to satisfy him that those mountains abounded with the richest gold mines. St. Domingo, therefore, was represented as a country abounding with gold, and upon that account (according to the prejudices not only of the present times, but of those times), an inexhaustible source of real wealth to the crown and kingdom of Spain. When Columbus, upon his return from his first voyage, was introduced with a sort of triumphal honours to the sovereigns of Castile and Arragon, the principal productions of the countries which he had discovered were carried in solemn procession before him. The only valuable part of them consisted in some little fillets, bracelets, and other ornaments of gold, and in some bales of cotton. The rest were mere objects of vulgar wonder and curiosity; some reeds of an extraordinary size, some birds of a very beautiful plumage, and some stuffed skins of the huge alligator and manati; all of which were preceded by six or seven of the wretched natives, whose singular colour and appearance added greatly to the novelty of the show. In consequence of the representations of Columbus, the council of Castile determined to take possession of the countries of which the inhabitants were plainly incapable of defending themselves. The pious purpose of converting them to Christianity sanctified the injustice of the project. But the hope of finding treasures of gold there was the sole motive which prompted to undertake it; and to give this motive the greater weight, it was proposed by Columbus, that the half of all the gold and silver that should be found there, should belong to the crown. This proposal was approved of by the council. As long as the whole, or the greater part of the gold which the first adventurers imported into Europe was got by so very easy a method as the plundering of the defenceless natives, it was not perhaps very difficult to pay even this heavy tax; but when the natives were once fairly stript of all that they had, which, in St. Domingo, and in all the other countries discovered by Columbus, was done completely in six or eight years, and when, in order to find more, it had become necessary to dig for it in the mines, there was no longer any possibility of paying this tax. The rigorous exaction of it, accordingly, first occasioned, it is said, the total abandoning of the mines of St. Domingo, which have never been wrought since. It was soon reduced, therefore, to a third; then to a fifth; afterwards to a tenth; and at last to a twentieth part of the gross produce of the gold mines. The tax upon silver continued for a long time to be a fifth of the gross produce. It was reduced to a tenth only in the course of the present century. But the first adventurers do not appear to have been much interested about silver. Nothing less precious than gold seemed worthy of their attention. All the other enterprizes of the Spaniards in the New World, subsequent to those of Columbus, seem to have been prompted by the same motive. It was the sacred thirst of gold that carried Ovieda, Nicuessa, and Vasco Nugnes de Balboa, to the Isthmus of Darien; that carried Cortes to Mexico, Almagro and Pizarro to Chili and Peru. When those adventurers arrived upon any unknown coast, their first inquiry was always if there was any gold to be found there; and according to the information which they received concerning this particular, they determined either to quit the country or to settle in it. Of all those expensive and uncertain projects, however, which bring bankruptcy up on the greater part of the people who engage in them, there is none, perhaps, more perfectly ruinous than the search after new silver and gold mines. It is, perhaps, the most disadvantageous lottery in the world, or the one in which the gain of those who draw the prizes bears the least proportion to the loss of those who draw the blanks; for though the prizes are few, and the blanks many, the common price of a ticket is the whole fortune of a very rich man. Projects of mining, instead of replacing the capital employed in them, together with the ordinary profits of stock, commonly absorb both capital and profit. They are the projects, therefore, to which, of all others, a prudent lawgiver, who desired to increase the capital of his nation, would least choose to give any extraordinary encouragement, or to turn towards them a greater share of that capital than what would go to them of its own accord. Such, in reality, is the absurd confidence which almost all men have in their own good fortune, that wherever there is the least probability of success, too great a share of it is apt to go to them of its own accord. But though the judgment of sober reason and experience concerning such projects has always been extremely unfavourable, that of human avidity has commonly been quite otherwise. The same passion which has suggested to so many people the absurd idea of the philosopher's stone, has suggested to others the equally absurd one of immense rich mines of gold and silver. They did not consider that the value of those metals has, in all ages and nations, arisen chiefly from their scarcity, and that their scarcity has arisen from the very small quantities of them which nature has anywhere deposited in one place, from the hard and intractable substances with which she has almost everywhere surrounded those small quantities, and consequently from the labour and expense which are everywhere necessary in order to penetrate, and get at them. They flattered themselves that veins of those metals might in many places be found, as large and as abundant as those which are commonly found of lead, or copper, or tin, or iron. The dream of Sir Walter Raleigh, concerning the golden city and country of El Dorado, may satisfy us, that even wise men are not always exempt from such strange delusions. More than a hundred years after the death of that great man, the Jesuit Gumila was still convinced of the reality of that wonderful country, and expressed, with great warmth, and, I dare say, with great sincerity, how happy he should be to carry the light of the gospel to a people who could so well reward the pious labours of their missionary. In the countries first discovered by the Spaniards, no gold or silver mines are at present known which are supposed to be worth the working. The quantities of those metals which the first adventurers are said to have found there, had probably been very much magnified, as well as the fertility of the mines which were wrought immediately after the first discovery. What those adventurers were reported to have found, however, was sufficient to inflame the avidity of all their countrymen. Every Spaniard who sailed to America expected to find an El Dorado. Fortune, too, did upon this what she has done upon very few other occasions. She realized in some measure the extravagant hopes of her votaries; and in the discovery and conquest of Mexico and Peru (of which the one happened about thirty, and the other about forty, years after the first expedition of Columbus), she presented them with something not very unlike that profusion of the precious metals which they sought for. A project of commerce to the East Indies, therefore, gave occasion to the first discovery of the West. A project of conquest gave occasion to all the establishments of the Spaniards in those newly discovered countries. The motive which excited them to this conquest was a project of gold and silver mines; and a course of accidents which no human wisdom could foresee, rendered this project much more successful than the undertakers had any reasonable grounds for expecting. The first adventurers of all the other nations of Europe who attempted to make settlements in America, were animated by the like chimerical views; but they were not equally successful. It was more than a hundred years after the first settlement of the Brazils, before any silver, gold, or diamond mines, were discovered there. In the English, French, Dutch, and Danish colonies, none have ever yet been discovered, at least none that are at present supposed to be worth the working. The first English settlers in North America, however, offered a fifth of all the gold and silver which should be found there to the king, as a motive for granting them their patents. In the patents of Sir Walter Raleigh, to the London and Plymouth companies, to the council of Plymouth, &c. this fifth was accordingly reserved to the crown. To the expectation of finding gold and silver mines, those first settlers, too, joined that of discovering a north-west passage to the East Indies. They have hitherto been disappointed in both. PART II. _Causes of the Prosperity of New Colonies._ The colony of a civilized nation which takes possession either of a waste country, or of one so thinly inhabited that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society. The colonies carry out with them a knowledge of agriculture and of other useful arts, superior to what can grow up of its own accord, in the course of many centuries, among savage and barbarous nations. They carry out with them, too, the habit of subordination, some notion of the regular government which takes place in their own country, of the system of laws which support it, and of a regular administration of justice; and they naturally establish something of the same kind in the new settlement. But among savage and barbarous nations, the natural progress of law and government is still slower than the natural progress of arts, after law and government have been so far established as is necessary for their protection. Every colonist gets more land than he can possibly cultivate. He has no rent, and scarce any taxes, to pay. No landlord shares with him in its produce, and, the share of the sovereign is commonly but a trifle. He has every motive to render as great as possible a produce which is thus to be almost entirely his own. But his land is commonly so extensive, that, with all his own industry, and with all the industry of other people whom he can get to employ, he can seldom make it produce the tenth part of what it is capable of producing. He is eager, therefore, to collect labourers from all quarters, and to reward them with the most liberal wages. But those liberal wages, joined to the plenty and cheapness of land, soon make those labourers leave him, in order to become landlords themselves, and to reward with equal liberality other labourers, who soon leave them for the same reason that they left their first master. The liberal reward of labour encourages marriage. The children, during the tender years of infancy, are well fed and properly taken care of; and when they are grown up, the value of their labour greatly overpays their maintenance. When arrived at maturity, the high price of labour, and the low price of land, enable them to establish themselves in the same manner as their fathers did before them. In other countries, rent and profit eat up wages, and the two superior orders of people oppress the inferior one; but in new colonies, the interest of the two superior orders obliges them to treat the inferior one with more generosity and humanity, at least where that inferior one is not in a state of slavery. Waste lands, of the greatest natural fertility, are to be had for a trifle. The increase of revenue which the proprietor, who is always the undertaker, expects from their improvement, constitutes his profit, which, in these circumstances, is commonly very great; but this great profit cannot be made, without employing the labour of other people in clearing and cultivating the land; and the disproportion between the great extent of the land and the small number of the people, which commonly takes place in new colonies, makes it difficult for him to get this labour. He does not, therefore, dispute about wages, but is willing to employ labour at any price. The high wages of labour encourage population. The cheapness and plenty of good land encourage improvement, and enable the proprietor to pay those high wages. In those wages consists almost the whole price of the land; and though they are high, considered as the wages of labour, they are low, considered as the price of what is so very valuable. What encourages the progress of population and improvement, encourages that of real wealth and greatness. The progress of many of the ancient Greek colonies towards wealth and greatness seems accordingly to have been very rapid. In the course of a century or two, several of them appear to have rivalled, and even to have surpassed, their mother cities. Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy, Ephesus and Miletus in Lesser Asia, appear, by all accounts, to have been at least equal to any of the cities of ancient Greece. Though posterior in their establishment, yet all the arts of refinement, philosophy, poetry, and eloquence, seem to have been cultivated as early, and to have been improved as highly in them as in any part of the mother country. The schools of the two oldest Greek philosophers, those of Thales and Pythagoras, were established, it is remarkable, not in ancient Greece, but the one in an Asiatic, the other in an Italian colony. All those colonies had established themselves in countries inhabited by savage and barbarous nations, who easily gave place to the new settlers. They had plenty of good land; and as they were altogether independent of the mother city, they were at liberty to manage their own affairs in the way that they judged was most suitable to their own interest. The history of the Roman colonies is by no means so brilliant. Some of them, indeed, such as Florence, have, in the course of many ages, and after the fall of the mother city, grown up to be considerable states. But the progress of no one of them seems ever to have been very rapid. They were all established in conquered provinces, which in most cases had been fully inhabited before. The quantity of land assigned to each colonist was seldom very considerable, and, as the colony was not independent, they were not always at liberty to manage their own affairs in the way that they judged was most suitable to their own interest. In the plenty of good land, the European colonies established in America and the West Indies resemble, and even greatly surpass, those of ancient Greece. In their dependency upon the mother state, they resemble those of ancient Rome; but their great distance from Europe has in all of them alleviated more or less the effects of this dependency. Their situation has placed them less in the view, and less in the power of their mother country. In pursuing their interest their own way, their conduct has upon many occasions been overlooked, either because not known or not understood in Europe; and upon some occasions it has been fairly suffered and submitted to, because their distance rendered it difficult to restrain it. Even the violent and arbitrary government of Spain has, upon many occasion, been obliged to recall or soften the orders which had been given for the government of her colonies, for fear of a general insurrection. The progress of all the European colonies in wealth, population, and improvement, has accordingly been very great. The crown of Spain, by its share of the gold and silver, derived some revenue from its colonies from the moment of their first establishment. It was a revenue, too, of a nature to excite in human avidity the most extravagant expectation of still greater riches. The Spanish colonies, therefore, from the moment of their first establishment, attracted very much the attention of their mother country; while those of the other European nations were for a long time in a great measure neglected. The former did not, perhaps, thrive the better in consequence of this attention, nor the latter the worse in consequence of this neglect. In proportion to the extent of the country which they in some measure possess, the Spanish colonies are considered as less populous and thriving than those of almost any other European nation. The progress even of the Spanish colonies, however, in population and improvement, has certainly been very rapid and very great. The city of Lima, founded since the conquest, is represented by Ulloa as containing fifty thousand inhabitants near thirty years ago. Quito, which had been but a miserable hamlet of Indians, is represented by the same author as in his time equally populous. Gemel i Carreri, a pretended traveller, it is said, indeed, but who seems everywhere to have written upon extreme good information, represents the city of Mexico as containing a hundred thousand inhabitants; a number which, in spite of all the exaggerations of the Spanish writers, is probably more than five times greater than what it contained in the time of Montezuma. These numbers exceed greatly these of Boston, New York, and Philadelphia, the three greatest cities of the English colonies. Before the conquest of the Spaniards, there were no cattle fit for draught, either in Mexico or Peru. The lama was their only beast of burden, and its strength seems to have been a good deal inferior to that of a common ass. The plough was unknown among them. They were ignorant of the use of iron. They had no coined money, nor any established instrument of commerce of any kind. Their commerce was carried on by barter. A sort of wooden spade was their principal instrument of agriculture. Sharp stones served them for knives and hatchets to cut with; fish bones, and the hard sinews of certain animals, served them with needles to sew with; and these seem to have been their principal instruments of trade. In this state of things, it seems impossible that either of those empires could have been so much improved or so well cultivated as at present, when they are plentifully furnished with all sorts of European cattle, and when the use of iron, of the plough, and of many of the arts of Europe, have been introduced among them. But the populousness of every country must be in proportion to the degree of its improvement and cultivation. In spite of the cruel destruction of the natives which followed the conquest, these two great empires are probably more populous now than they ever were before; and the people are surely very different; for we must acknowledge, I apprehend, that the Spanish creoles are in many respects superior to the ancient Indians. After the settlements of the Spaniards, that of the Portuguese in Brazil is the oldest of any European nation in America. But as for a long time after the first discovery neither gold nor silver mines were found in it, and as it afforded upon that account little or no revenue to the crown, it was for a long time in a great measure neglected; and during this state of neglect, it grew up to be a great and powerful colony. While Portugal was under the dominion of Spain, Brazil was attacked by the Dutch, who got possession of seven of the fourteen provinces into which it is divided. They expected soon to conquer the other seven, when Portugal recovered its independency by the elevation of the family of Braganza to the throne. The Dutch, then, as enemies to the Spaniards, became friends to the Portuguese, who were likewise the enemies of the Spaniards. They agreed, therefore, to leave that part of Brazil which they had not conquered to the king of Portugal, who agreed to leave that part which they had conquered to them, as a matter not worth disputing about, with such good allies. But the Dutch government soon began to oppress the Portuguese colonists, who, instead of amusing themselves with complaints, took arms against their new masters, and by their own valour and resolution, with the connivance, indeed, but without any avowed assistance from the mother country, drove them out of Brazil. The Dutch, therefore, finding it impossible to keep any part of the country to themselves, were contented that it should be entirely restored to the crown of Portugal. In this colony there are said to be more than six hundred thousand people, either Portuguese or descended from Portuguese, creoles, mulattoes, and a mixed race between Portuguese and Brazilians. No one colony in America is supposed to contain so great a number of people of European extraction. Towards the end of the fifteenth, and during the greater part of the sixteenth century, Spain and Portugal were the two great naval powers upon the ocean; for though the commerce of Venice extended to every part of Europe, its fleet had scarce ever sailed beyond the Mediterranean. The Spaniards, in virtue of the first discovery, claimed all America as their own; and though they could not hinder so great a naval power as that of Portugal from settling in Brazil, such was at that time the terror of their name, that the greater part of the other nations of Europe were afraid to establish themselves in any other part of that great continent. The French, who attempted to settle in Florida, were all murdered by the Spaniards. But the declension of the naval power of this latter nation, in consequence of the defeat or miscarriage of what they called their invincible armada, which happened towards the end of the sixteenth century, put it out of their power to obstruct any longer the settlements of the other European nations. In the course of the seventeenth century, therefore, the English, French, Dutch, Danes, and Swedes, all the great nations who had any ports upon the ocean, attempted to make some settlements in the new world. The Swedes established themselves in New Jersey; and the number of Swedish families still to be found there sufficiently demonstrates, that this colony was very likely to prosper, had it been protected by the mother country. But being neglected by Sweden, it was soon swallowed up by the Dutch colony of New York, which again, in 1674, fell under the dominion of the English. The small islands of St. Thomas and Santa Cruz, are the only countries in the new world that have been possessed by the Danes. These little settlements, too, were under the government of an exclusive company, which had the sole right, both of purchasing the surplus produce of the colonies, and of supplying them with such goods of other countries as they wanted, and which, therefore, both in its purchases and sales, had not only the power of oppressing them, but the greatest temptation to do so. The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever. It was not, however, able to stop altogether the progress of these colonies, though it rendered it more slow and languid. The late king of Denmark dissolved this company, and since that time the prosperity of these colonies has been very great. The Dutch settlements in the West, as well as those in the East Indies, were originally put under the government of an exclusive company. The progress of some of them, therefore, though it has been considerable in comparison with that of almost any country that has been long peopled and established, has been languid and slow in comparison with that of the greater part of new colonies. The colony of Surinam, though very considerable, is still inferior to the greater part of the sugar colonies of the other European nations. The colony of Nova Belgia, now divided into the two provinces of New York and New Jersey, would probably have soon become considerable too, even though it had remained under the government of the Dutch. The plenty and cheapness of good land are such powerful causes of prosperity, that the very worst government is scarce capable of checking altogether the efficacy of their operation. The great distance, too, from the mother country, would enable the colonists to evade more or less, by smuggling, the monopoly which the company enjoyed against them. At present, the company allows all Dutch ships to trade to Surinam, upon paying two and a-half per cent. upon the value of their cargo for a license; and only reserves to itself exclusively, the direct trade from Africa to America, which consists almost entirely in the slave trade. This relaxation in the exclusive privileges of the company, is probably the principal cause of that degree of prosperity which that colony at present enjoys. Curaçoa and Eustatia, the two principal islands belonging to the Dutch, are free ports, open to the ships of all nations; and this freedom, in the midst of better colonies, whose ports are open to those of one nation only, has been the great cause of the prosperity of those two barren islands. The French colony of Canada was, during the greater part of the last century, and some part of the present, under the government of an exclusive company. Under so unfavourable administration, its progress was necessarily very slow, in comparison with that of other new colonies; but it became much more rapid when this company was dissolved, after the fall of what is called the Mississippi scheme. When the English got possession of this country, they found in it near double the number of inhabitants which father Charlevoix had assigned to it between twenty and thirty years before. That jesuit had travelled over the whole country, and had no inclination to represent it as less inconsiderable than it really was. The French colony of St. Domingo was established by pirates and freebooters, who, for a long time, neither required the protection, nor acknowledged the authority of France; and when that race of banditti became so far citizens as to acknowledge this authority, it was for a long time necessary to exercise it with very great gentleness. During this period, the population and improvement of this colony increased very fast. Even the oppression of the exclusive company, to which it was for some time subjected with all the other colonies of France, though it no doubt retarded, had not been able to stop its progress altogether. The course of its prosperity returned as soon as it was relieved from that oppression. It is now the most important of the sugar colonies of the West Indies, and its produce is said to be greater than that of all the English sugar colonies put together. The other sugar colonies of France are in general all very thriving. But there are no colonies of which the progress has been more rapid than that of the English in North America. Plenty of good land, and liberty to manage their own affairs their own way, seem to be the two great causes of the prosperity of all new colonies. In the plenty of good land, the English colonies of North America, though no doubt very abundantly provided, are, however, inferior to those of the Spaniards and Portuguese, and not superior to some of those possessed by the French before the last war. But the political institutions of the English colonies have been more favourable to the improvement and cultivation of this land, than those of the other three nations. _First_, The engrossing of uncultivated land, though it has by no means been prevented altogether, has been more restrained in the English colonies than in any other. The colony law, which imposes upon every proprietor the obligation of improving and cultivating, within a limited time, a certain proportion of his lands, and which, in case of failure, declares those neglected lands grantable to any other person; though it has not perhaps been very strictly executed, has, however, had some effect. _Secondly_, In Pennsylvania there is no right of primogeniture, and lands, like moveables, are divided equally among all the children of the family. In three of the provinces of New England, the oldest has only a double share, as in the Mosaical law. Though in those provinces, therefore, too great a quantity of land should sometimes be engrossed by a particular individual, it is likely, in the course of a generation or two, to be sufficiently divided again. In the other English colonies, indeed, the right of primogeniture takes place, as in the law of England: But in all the English colonies, the tenure of the lands, which are all held by free soccage, facilitates alienation; and the grantee of an extensive tract of land generally finds it for his interest to alienate, as fast as he can, the greater part of it, reserving only a small quit-rent. In the Spanish and Portuguese colonies, what is called the right of majorazzo takes place in the succession of all those great estates to which any title of honour is annexed. Such estates go all to one person, and are in effect entailed and unalienable. The French colonies, indeed, are subject to the custom of Paris, which, in the inheritance of land, is much more favourable to the younger children than the law of England. But, in the French colonies, if any part of an estate, held by the noble tenure of chivalry and homage, is alienated, it is, for a limited time, subject to the right of redemption, either by the heir of the superior, or by the heir of the family; and all the largest estates of the country are held by such noble tenures, which necessarily embarrass alienation. But, in a new colony, a great uncultivated estate is likely to be much more speedily divided by alienation than by succession. The plenty and cheapness of good land, it has already been observed, are the principal causes of the rapid prosperity of new colonies. The engrossing of land, in effect, destroys this plenty and cheapness. The engrossing of uncultivated land, besides, is the greatest obstruction to its improvement; but the labour that is employed in the improvement and cultivation of land affords the greatest and most valuable produce to the society. The produce of labour, in this case, pays not only its own wages and the profit of the stock which employs it, but the rent of the land too upon which it is employed. The labour of the English colonies, therefore, being more employed in the improvement and cultivation of land, is likely to afford a greater and more valuable produce than that of any of the other three nations, which, by the engrossing of land, is more or less diverted towards other employments. _Thirdly_, The labour of the English colonists is not only likely to afford a greater and more valuable produce, but, in consequence of the moderation of their taxes, a greater proportion of this produce belongs to themselves, which they may store up and employ in putting into motion a still greater quantity of labour. The English colonists have never yet contributed any thing towards the defence of the mother country, or towards the support of its civil government. They themselves, on the contrary, have hitherto been defended almost entirely at the expense of the mother country; but the expense of fleets and armies is out of all proportion greater than the necessary expense of civil government. The expense of their own civil government has always been very moderate. It has generally been confined to what was necessary for paying competent salaries to the governor, to the judges, and to some other officers of police, and for maintaining a few of the must useful public works. The expense of the civil establishment of Massachusetts Bay, before the commencement of the present disturbances, used to be but about L.18,000 a-year; that of New Hampshire and Rhode Island, L.3500 each; that of Connecticut, L.4000; that of New York and Pennsylvania, L.4500 each; that of New Jersey, L.1200; that of Virginia and South Carolina, L.8000 each. The civil establishments of Nova Scotia and Georgia are partly supported by an annual grant of parliament; but Nova Scotia pays, besides, about L.7000 a-year towards the public expenses of the colony, and Georgia about L.2500 a-year. All the different civil establishments in North America, in short, exclusive of those of Maryland and North Carolina, of which no exact account has been got, did not, before the commencement of the present disturbances, cost the inhabitants above L.64,700 a-year; an ever memorable example, at how small an expense three millions of people may not only be governed but well governed. The must important part of the expense of government, indeed, that of defence and protection, has constantly fallen upon the mother country. The ceremonial, too, of the civil government in the colonies, upon the reception of a new governor, upon the opening of a new assembly, &c. though sufficiently decent, is not accompanied with any expensive pomp or parade. Their ecclesiastical government is conducted upon a plan equally frugal. Tithes are unknown among them; and their clergy, who are far from being numerous, are maintained either by moderate stipends, or by the voluntary contributions of the people. The power of Spain and Portugal, on the contrary, derives some support from the taxes levied upon their colonies. France, indeed, has never drawn any considerable revenue from its colonies, the taxes which it levies upon them being generally spent among them. But the colony government of all these three nations is conducted upon a much more extensive plan, and is accompanied with a much more expensive ceremonial. The sums spent upon the reception of a new viceroy of Peru, for example, have frequently been enormous. Such ceremonials are not only real taxes paid by the rich colonists upon those particular occasions, but they serve to introduce among them the habit of vanity and expense upon all other occasions. They are not only very grievous occasional taxes, but they contribute to establish perpetual taxes, of the same kind, still more grievous; the ruinous taxes of private luxury and extravagance. In the colonies of all those three nations, too, the ecclesiastical government is extremely oppressive. Tithes take place in all of them, and are levied with the utmost rigour in those of Spain and Portugal. All of them, besides, are oppressed with numerous race of mendicant friars, whose beggary being not only licensed but consecrated by religion, is a most grievous tax upon the poor people, who are most carefully taught that it is a duty to give, and a very great sin to refuse them their charity. Over and above all this, the clergy are, in all of them, the greatest engrossers of land. _Fourthly_, In the disposal of their surplus produce, or of what is over and above their own consumption, the English colonies have been more favoured, and have been allowed a more extensive market, than those of any other European nation. Every European nation has endeavoured, more or less, to monopolize to itself the commerce of its colonies, and, upon that account, has prohibited the ships of foreign nations from trading to them, and has prohibited them from importing European goods from any foreign nation. But the manner in which this monopoly has been exercised in different nations, has been very different. Some nations have given up the whole commerce of their colonies to an exclusive company, of whom the colonists were obliged to buy all such European goods as they wanted, and to whom they were obliged to sell the whole of their surplus produce. It was the interest of the company, therefore, not only to sell the former as dear, and to buy the latter as cheap as possible, but to buy no more of the latter, even at this low price, than what they could dispose of for a very high price in Europe. It was their interest not only to degrade in all cases the value of the surplus produce of the colony, but in many cases to discourage and keep down the natural increase of its quantity. Of all the expedients that can well be contrived to stunt the natural growth of a new colony, that of an exclusive company is undoubtedly the most effectual. This, however, has been the policy of Holland, though their company, in the course of the present century, has given up in many respects the exertion of their exclusive privilege. This, too, was the policy of Denmark, till the reign of the late king. It has occasionally been the policy of France; and of late, since 1755, after it had been abandoned by all other nations on account of its absurdity, it has become the policy of Portugal, with regard at least to two of the principal provinces of Brazil, Pernambucco, and Marannon. Other nations, without establishing an exclusive company, have confined the whole commerce of their colonies to a particular port of the mother country, from whence no ship was allowed to sail, but either in a fleet and at a particular season, or, if single, in consequence of a particular license, which in most cases was very well paid for. This policy opened, indeed, the trade of the colonies to all the natives of the mother country, provided they traded from the proper port, at the proper season, and in the proper vessels. But as all the different merchants, who joined their stocks in order to fit out those licensed vessels, would find it for their interest to act in concert, the trade which was carried on in this manner would necessarily be conducted very nearly upon the same principles as that of an exclusive company. The profit of those merchants would be almost equally exorbitant and oppressive. The colonies would be ill supplied, and would be obliged both to buy very dear, and to sell very cheap. This, however, till within these few years, had always been the policy of Spain; and the price of all European goods, accordingly, is said to have been enormous in the Spanish West Indies. At Quito, we are told by Ulloa, a pound of iron sold for about 4s. 6d., and a pound of steel for about 6s. 9d. sterling. But it is chiefly in order to purchase European goods that the colonies part with their own produce. The more, therefore, they pay for the one, the less they really get for the other, and the dearness of the one is the same thing with the cheapness of the other. The policy of Portugal is, in this respect, the same as the ancient policy of Spain, with regard to all its colonies, except Pernambucco and Marannon; and with regard to these it has lately adopted a still worse. Other nations leave the trade of their colonies free to all their subjects, who may carry it on from all the different ports of the mother country, and who have occasion for no other license than the common despatches of the custom-house. In this case the number and dispersed situation of the different traders renders it impossible for them to enter into any general combination, and their competition is sufficient to hinder them from making very exorbitant profits. Under so liberal a policy, the colonies are enabled both to sell their own produce, and to buy the goods of Europe at a reasonable price; but since the dissolution of the Plymouth company, when our colonies were but in their infancy, this has always been the policy of England. It has generally, too, been that of France, and has been uniformly so since the dissolution of what in England is commonly called their Mississippi company. The profits of the trade, therefore, which France and England carry on with their colonies, though no doubt somewhat higher than if the competition were free to all other nations, are, however, by no means exorbitant; and the price of European goods, accordingly, is not extravagantly high in the greater part of the colonies of either of those nations. In the exportation of their own surplus produce, too, it is only with regard to certain commodities that the colonies of Great Britain are confined to the market of the mother country. These commodities having been enumerated in the act of navigation, and in some other subsequent acts, have upon that account been called _enumerated commodities_. The rest are called _non-enumerated_, and may be exported directly to other countries, provided it is in British or plantation ships, of which the owners and three fourths of the mariners are British subjects. Among the non-enumerated commodities are some of the most important productions of America and the West Indies, grain of all sorts, lumber, salt provisions, fish, sugar, and rum. Grain is naturally the first and principal object of the culture of all new colonies. By allowing them a very extensive market for it, the law encourages them to extend this culture much beyond the consumption of a thinly inhabited country, and thus to provide beforehand an ample subsistence for a continually increasing population. In a country quite covered with wood, where timber consequently is of little or no value, the expense of clearing the ground is the principal obstacle to improvement. By allowing the colonies a very extensive market for their lumber, the law endeavours to facilitate improvement by raising the price of a commodity which would otherwise be of little value, and thereby enabling them to make some profit of what would otherwise be mere expense. In a country neither half peopled nor half cultivated, cattle naturally multiply beyond the consumption of the inhabitants, and are often, upon that account, of little or no value. But it is necessary, it has already been shown, that the price of cattle should bear a certain proportion to that of corn, before the greater part of the lands of any country can be improved. By allowing to American cattle, in all shapes, dead and alive, a very extensive market, the law endeavours to raise the value of a commodity, of which the high price is so very essential to improvement. The good effects of this liberty, however, must be somewhat diminished by the 4th of Geo. III. c. 15, which puts hides and skins among the enumerated commodities and thereby tends to reduce the value of American cattle. To increase the shipping and naval power of Great Britain by the extension of the fisheries of our colonies, is an object which the legislature seems to have had almost constantly in view. Those fisheries, upon this account, have had all the encouragement which freedom can give them, and they have flourished accordingly. The New England fishery, in particular, was, before the late disturbances, one of the most important, perhaps, in the world. The whale fishery which, notwithstanding an extravagant bounty, is in Great Britain carried on to so little purpose, that in the opinion of many people (which I do not, however, pretend to warrant), the whole produce does not much exceed the value of the bounties which are annually paid for it, is in New England carried on, without any bounty, to a very great extent. Fish is one of the principal articles with which the North Americans trade to Spain, Portugal, and the Mediterranean. Sugar was originally an enumerated commodity, which could only be exported to Great Britain; but in 1731, upon a representation of the sugar-planters, its exportation was permitted to all parts of the world. The restrictions, however, with which this liberty was granted, joined to the high price of sugar in Great Britain, have rendered it in a great measure ineffectual. Great Britain and her colonies still continue to be almost the sole market for all sugar produced in the British plantations. Their consumption increases so fast, that, though in consequence of the increasing improvement of Jamaica, as well as of the ceded islands, the importation of sugar has increased very greatly within these twenty years, the exportation to foreign countries is said to be not much greater than before. Rum is a very important article in the trade which the Americans carry on to the coast of Africa, from which they bring back negro slaves in return. If the whole surplus produce of America, in grain of all sorts, in salt provisions, and in fish, had been put into the enumeration, and thereby forced into the market of Great Britain, it would have interfered too much with the produce of the industry of our own people. It was probably not so much from any regard to the interest of America, as from a jealousy of this interference, that those important commodities have not only been kept out of the enumeration, but that the importation into Great Britain of all grain, except rice, and of all salt provisions, has, in the ordinary state of the law, been prohibited. The non-enumerated commodities could originally be exported to all parts of the world. Lumber and rice having been once put into the enumeration, when they were afterwards taken out of it, were confined, as to the European market, to the countries that lie south of Cape Finisterre. By the 6th of George III. c. 52, all non-enumerated commodities were subjected to the like restriction. The parts of Europe which lie south of Cape Finisterre are not manufacturing countries, and we are less jealous of the colony ships carrying home from them any manufactures which could interfere with our own. The enumerated commodities are of two sorts; first, such as are either the peculiar produce of America, or as cannot be produced, or at least are not produced in the mother country. Of this kind are molasses, coffee, cocoa-nuts, tobacco, pimento, ginger, whale-fins, raw silk, cotton, wool, beaver, and other peltry of America, indigo, fustick, and other dyeing woods; secondly, such as are not the peculiar produce of America, but which are, and may be produced in the mother country, though not in such quantities as to supply the greater part of her demand, which is principally supplied from foreign countries. Of this kind are all naval stores, masts, yards, and bowsprits, tar, pitch, and turpentine, pig and bar iron, copper ore, hides and skins, pot and pearl ashes. The largest importation of commodities of the first kind could not discourage the growth, or interfere with the sale, of any part of the produce of the mother country. By confining them to the home market, our merchants, it was expected, would not only be enabled to buy them cheaper in the plantations, and consequently to sell them with a better profit at home, but to establish between the plantations and foreign countries an advantageous carrying trade, of which Great Britain was necessarily to be the centre or emporium, as the European country into which those commodities were first to be imported. The importation of commodities of the second kind might be so managed too, it was supposed, as to interfere, not with the sale of those of the same kind which were produced at home, but with that of those which were imported from foreign countries; because, by means of proper duties, they might be rendered always somewhat dearer than the former, and yet a good deal cheaper than the latter. By confining such commodities to the home market, therefore, it was proposed to discourage the produce, not of Great Britain, but of some foreign countries with which the balance of trade was believed to be unfavourable to Great Britain. The prohibition of exporting from the colonies to any other country but Great Britain, masts, yards, and bowsprits, tar, pitch, and turpentine, naturally tended to lower the price of timber in the colonies, and consequently to increase the expense of clearing their lands, the principal obstacle to their improvement. But about the beginning of the present century, in 1703, the pitch and tar company of Sweden endeavoured to raise the price of their commodities to Great Britain, by prohibiting their exportation, except in their own ships, at their own price, and in such quantities as they thought proper. In order to counteract this notable piece of mercantile policy, and to render herself as much as possible independent, not only of Sweden, but of all the other northern powers, Great Britain gave a bounty upon the importation of naval stores from America; and the effect of this bounty was to raise the price of timber in America much more than the confinement to the home market could lower it; and as both regulations were enacted at the same time, their joint effect was rather to encourage than to discourage the clearing of land in America. Though pig and bar iron, too, have been put among the enumerated commodities, yet as, when imported from America, they are exempted from considerable duties to which they are subject when imported from any other country, the one part of the regulation contributes more to encourage the erection of furnaces in America than the other to discourage it. There is no manufacture which occasions so great a consumption of wood as a furnace, or which can contribute so much to the clearing of a country overgrown with it. The tendency of some of these regulations to raise the value of timber in America, and thereby to facilitate the clearing of the land, was neither, perhaps, intended nor understood by the legislature. Though their beneficial effects, however, have been in this respect accidental, they have not upon that account been less real. The most perfect freedom of trade is permitted between the British colonies of America and the West Indies, both in the enumerated and in the non-enumerated commodities. Those colonies are now become so populous and thriving, that each of them finds in some of the others a great and extensive market for every part of its produce. All of them taken together, they make a great internal market for the produce of one another. The liberality of England, however, towards the trade of her colonies, has been confined chiefly to what concerns the market for their produce, either in its rude state, or in what may be called the very first stage of manufacture. The more advanced or more refined manufactures, even of the colony produce, the merchants and manufacturers of Great Britain chuse to reserve to themselves, and have prevailed upon the legislature to prevent their establishment in the colonies, sometimes by high duties, and sometimes by absolute prohibitions. While, for example, Muscovado sugars from the British plantations pay, upon importation, only 6s. 4d. the hundred weight, white sugars pay L.1 : 1 : 1; and refined, either double or single, in loaves, L.4 : 2 : 5-8/20ths. When those high duties were imposed, Great Britain was the sole, and she still continues to be, the principal market, to which the sugars of the British colonies could be exported. They amounted, therefore, to a prohibition, at first of claying or refining sugar for any foreign market, and at present of claying or refining it for the market which takes off, perhaps, more than nine-tenths of the whole produce. The manufacture of claying or refining sugar, accordingly, though it has flourished in all the sugar colonies of France, has been little cultivated in any of those of England, except for the market of the colonies themselves. While Grenada was in the hands of the French, there was a refinery of sugar, by claying, at least upon almost every plantation. Since it fell into those of the English, almost all works of this kind have been given up; and there are at present (October 1773), I am assured, not above two or three remaining in the island. At present, however, by an indulgence of the custom-house, clayed or refined sugar, if reduced from loaves into powder, is commonly imported as Muscovado. While Great Britain encourages in America the manufacturing of pig and bar iron, by exempting them from duties to which the like commodities are subject when imported from any other country, she imposes an absolute prohibition upon the erection of steel furnaces and slit-mills in any of her American plantations. She will not suffer her colonies to work in those more refined manufactures, even for their own consumption; but insists upon their purchasing of her merchants and manufacturers all goods of this kind which they have occasion for. She prohibits the exportation from one province to another by water, and even the carriage by land upon horseback, or in a cart, of hats, of wools, and woollen goods, of the produce of America; a regulation which effectually prevents the establishment of any manufacture of such commodities for distant sale, and confines the industry of her colonists in this way to such coarse and household manufactures as a private family commonly makes for its own use, or for that of some of its neighbours in the same province. To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind. Unjust, however, as such prohibitions may be, they have not hitherto been very hurtful to the colonies. Land is still so cheap, and, consequently, labour so dear among them, that they can import from the mother country almost all the more refined or more advanced manufactures cheaper than they could make them for themselves. Though they had not, therefore, been prohibited from establishing such manufactures, yet, in their present state of improvement, a regard to their own interest would probably have prevented them from doing so. In their present state of improvement, those prohibitions, perhaps, without cramping their industry, or restraining it from any employment to which it would have gone of its own accord, are only impertinent badges of slavery imposed upon them, without any sufficient reason, by the groundless jealousy of the merchants and manufacturers of the mother country. In a more advanced state, they might be really oppressive and insupportable. Great Britain, too, as she confines to her own market some of the most important productions of the colonies, so, in compensation, she gives to some of them an advantage in that market, sometimes by imposing higher duties upon the like productions when imported from other countries, and sometimes by giving bounties upon their importation from the colonies. In the first way, she gives an advantage in the home market to the sugar, tobacco, and iron of her own colonies; and, in the second, to their raw silk, to their hemp and flax, to their indigo, to their naval stores, and to their building timber. This second way of encouraging the colony produce, by bounties upon importation, is, so far as I have been able to learn, peculiar to Great Britain: the first is not. Portugal does not content herself with imposing higher duties upon the importation of tobacco from any other country, but prohibits it under the severest penalties. With regard to the importation of goods from Europe, England has likewise dealt more liberally with her colonies than any other nation. Great Britain allows a part, almost always the half, generally a larger portion, and sometimes the whole, of the duty which is paid upon the importation of foreign goods, to be drawn back upon their exportation to any foreign country. No independent foreign country, it was easy to foresee, would receive them, if they came to it loaded with the heavy duties to which almost all foreign goods are subjected on their importation into Great Britain. Unless, therefore, some part of those duties was drawn back upon exportation, there was an end of the carrying trade; a trade so much favoured by the mercantile system. Our colonies, however, are by no means independent foreign countries; and Great Britain having assumed to herself the exclusive right of supplying them with all goods from Europe, might have forced them (in the same manner as other countries have done their colonies) to receive such goods loaded with all the same duties which they paid in the mother country. But, on the contrary, till 1763, the same drawbacks were paid upon the exportation of the greater part of foreign goods to our colonies, as to any independent foreign country. In 1763, indeed, by the 4th of Geo. III. c. 15, this indulgence was a good deal abated, and it was enacted, "That no part of the duty called the old subsidy should be drawn back for any goods of the growth, production, or manufacture of Europe or the East Indies, which should be exported from this kingdom to any British colony or plantation in America; wines, white calicoes, and muslins, excepted." Before this law, many different sorts of foreign goods might have been bought cheaper in the plantations than in the mother country, and some may still. Of the greater part of the regulations concerning the colony trade, the merchants who carry it on, it must be observed, have been the principal advisers. We must not wonder, therefore, if, in a great part of them, their interest has been more considered than either that of the colonies or that of the mother country. In their exclusive privilege of supplying the colonies with all the goods which they wanted from Europe, and of purchasing all such parts of their surplus produce as could not interfere with any of the trades which they themselves carried on at home, the interest of the colonies was sacrificed to the interest of those merchants. In allowing the same drawbacks upon the re-exportation of the greater part of European and East India goods to the colonies, as upon their re-exportation to any independent country, the interest of the mother country was sacrificed to it, even according to the mercantile ideas of that interest. It was for the interest of the merchants to pay as little as possible for the foreign goods which they sent to the colonies, and, consequently, to get back as much as possible of the duties which they advanced upon their importation into Great Britain. They might thereby be enabled to sell in the colonies, either the some quantity of goods with a greater profit, or a greater quantity with the same profit, and, consequently, to gain something either in the one way or the other. It was likewise for the interest of the colonies to get all such goods as cheap, and in as great abundance as possible. But this might not always be for the interest of the mother country. She might frequently suffer, both in her revenue, by giving back a great part of the duties which had been paid upon the importation of such goods; and in her manufactures, by being undersold in the colony market in consequence of the easy terms upon which foreign manufactures could be carried thither by means of those drawbacks. The progress of the linen manufacture of Great Britain, it is commonly said, has been a good deal retarded by the drawbacks upon the re-exportation of German linen to the American colonies. But though the policy of Great Britain, with regard to the trade of her colonies, has been dictated by the same mercantile spirit as that of other nations, it has, however, upon the whole, been less illiberal and oppressive than that of any of them. In every thing except their foreign trade, the liberty of the English colonists to manage their own affairs their own way, is complete. It is in every respect equal to that of their fellow-citizens at home, and is secured in the same manner, by an assembly of the representatives of the people, who claim the sole right of imposing taxes for the support of the colony government. The authority of this assembly overawes the executive power; and neither the meanest nor the most obnoxious colonist, as long as he obeys the law, has any thing to fear from the resentment, either of the governor, or of any other civil or military officer in the province. The colony assemblies, though, like the house of commons in England, they are not always a very equal representation of the people, yet they approach more nearly to that character; and as the executive power either has not the means to corrupt them, or, on account of the support which it receives from the mother country, is not under the necessity of doing so, they are, perhaps, in general more influenced by the inclinations of their constituents. The councils, which, in the colony legislatures, correspond to the house of lords in Great Britain, are not composed of a hereditary nobility. In some of the colonies, as in three of the governments of New England, those councils are not appointed by the king, but chosen by the representatives of the people. In none of the English colonies is there any hereditary nobility. In all of them, indeed, as in all other free countries, the descendant of an old colony family is more respected than an upstart of equal merit and fortune; but he is only more respected, and he has no privileges by which he can be troublesome to his neighbours. Before the commencement of the present disturbances, the colony assemblies had not only the legislative, but a part of the executive power. In Connecticut and Rhode Island, they elected the governor. In the other colonies, they appointed the revenue officers, who collected the taxes imposed by those respective assemblies, to whom those officers were immediately responsible. There is more equality, therefore, among the English colonists than among the inhabitants of the mother country. Their manners are more republican; and their governments, those of three of the provinces of New England in particular, have hitherto been more republican too. The absolute governments of Spain, Portugal, and France, on the contrary, take place in their colonies; and the discretionary powers which such governments commonly delegate to all their inferior officers are, on account of the great distance, naturally exercised there with more than ordinary violence. Under all absolute governments, there is more liberty in the capital than in any other part of the country. The sovereign himself can never have either interest or inclination to pervert the order of justice, or to oppress the great body of the people. In the capital, his presence overawes, more or less, all his inferior officers, who, in the remoter provinces, from whence the complaints of the people are less likely to reach him, can exercise their tyranny with much more safety. But the European colonies in America are more remote than the most distant provinces of the greatest empires which had ever been known before. The government of the English colonies is, perhaps, the only one which, since the world began, could give perfect security to the inhabitants of so very distant a province. The administration of the French colonies, however, has always been conducted with much more gentleness and moderation than that of the Spanish and Portuguese. This superiority of conduct is suitable both to the character of the French nation, and to what forms the character of every nation, the nature of their government, which, though arbitrary and violent in comparison with that of Great Britain, is legal and free in comparison with those of Spain and Portugal. It is in the progress of the North American colonies, however, that the superiority of the English policy chiefly appears. The progress of the sugar colonies of France has been at least equal, perhaps superior, to that of the greater part of those of England; and yet the sugar colonies of England enjoy a free government, nearly of the same kind with that which takes place in her colonies of North America. But the sugar colonies of France are not discouraged, like those of England, from refining their own sugar; and what is still of greater importance, the genius of their government naturally introduces a better management of their negro slaves. In all European colonies, the culture of the sugar-cane is carried on by negro slaves. The constitution of those who have been born in the temperate climate of Europe could not, it is supposed, support the labour of digging the ground under the burning sun of the West Indies; and the culture of the sugar-cane, as it is managed at present, is all hand labour; though, in the opinion of many, the drill plough might be introduced into it with great advantage. But, as the profit and success of the cultivation which is carried on by means of cattle, depend very much upon the good management of those cattle; so the profit and success of that which is carried on by slaves must depend equally upon the good management of those slaves; and in the good management of their slaves the French planters, I think it is generally allowed, are superior to the English. The law, so far as it gives some weak protection to the slave against the violence of his master, is likely to be better executed in a colony where the government is in a great measure arbitrary, than in one where it is altogether free. In every country where the unfortunate law of slavery is established, the magistrate, when he protects the slave, intermeddles in some measure in the management of the private property of the master; and, in a free country, where the master is, perhaps, either a member of the colony assembly, or an elector of such a member, he dares not do this but with the greatest caution and circumspection. The respect which he is obliged to pay to the master, renders it more difficult for him to protect the slave. But in a country where the government is in a great measure arbitrary, where it is usual for the magistrate to intermeddle even in the management of the private property of individuals, and to send them, perhaps, a lettre de cachet, if they do not manage it according to his liking, it is much easier for him to give some protection to the slave; and common humanity naturally disposes him to do so. The protection of the magistrate renders the slave less contemptible in the eyes of his master, who is thereby induced to consider him with more regard, and to treat him with more gentleness. Gentle usage renders the slave not only more faithful, but more intelligent, and, therefore, upon a double account, more useful. He approaches more to the condition of a free servant, and may possess some degree of integrity and attachment to his master's interest; virtues which frequently belong to free servants, but which never can belong to a slave, who is treated as slaves commonly are in countries where the master is perfectly free and secure. That the condition of a slave is better under an arbitrary than under a free government, is, I believe, supported by the history of all ages and nations. In the Roman history, the first time we read of the magistrate interposing to protect the slave from the violence of his master, is under the emperors. When Vidius Pollio, in the presence of Augustus, ordered one of his slaves, who had committed a slight fault, to be cut into pieces and thrown into his fish-pond, in order to feed his fishes, the emperor commanded him, with indignation, to emancipate immediately, not only that slave, but all the others that belonged to him. Under the republic no magistrate could have had authority enough to protect the slave, much less to punish the master. The stock, it is to be observed, which has improved the sugar colonies of France, particularly the great colony of St Domingo, has been raised almost entirely from the gradual improvement and cultivation of those colonies. It has been almost altogether the produce of the soil and of the industry of the colonists, or, what comes to the same thing, the price of that produce, gradually accumulated by good management, and employed in raising a still greater produce. But the stock which has improved and cultivated the sugar colonies of England, has, a great part of it, been sent out from England, and has by no means been altogether the produce of the soil and industry of the colonists. The prosperity of the English sugar colonies has been in a great measure owing to the great riches of England, of which a part has overflowed, if one may say so, upon these colonies. But the prosperity of the sugar colonies of France has been entirely owing to the good conduct of the colonists, which must therefore have had some superiority over that of the English; and this superiority has been remarked in nothing so much as in the good management of their slaves. Such have been the general outlines of the policy of the different European nations with regard to their colonies. The policy of Europe, therefore, has very little to boast of, either in the original establishment, or, so far as concerns their internal government, in the subsequent prosperity of the colonies of America. Folly and injustice seem to have been the principles which presided over and directed the first project of establishing those colonies; the folly of hunting after gold and silver mines, and the injustice of coveting the possession of a country whose harmless natives, far from having ever injured the people of Europe, had received the first adventurers with every mark of kindness and hospitality. The adventurers, indeed, who formed some of the latter establishments, joined to the chimerical project of finding gold and silver mines, other motives more reasonable and more laudable; but even these motives do very little honour to the policy of Europe. The English puritans, restrained at home, fled for freedom to America, and established there the four governments of New England. The English catholics, treated with much greater injustice, established that of Maryland; the quakers, that of Pennsylvania. The Portuguese Jews, persecuted by the inquisition, stript of their fortunes, and banished to Brazil, introduced, by their example, some sort of order and industry among the transported felons and strumpets by whom that colony was originally peopled, and taught them the culture of the sugar-cane. Upon all these different occasions, it was not the wisdom and policy, but the disorder and injustice of the European governments, which peopled and cultivated America. In effectuating some of the most important of these establishments, the different governments of Europe had as little merit as in projecting them. The conquest of Mexico was the project, not of the council of Spain, but of a governor of Cuba; and it was effectuated by the spirit of the bold adventurer to whom it was entrusted, in spite of every thing which that governor, who soon repented of having trusted such a person, could do to thwart it. The conquerors of Chili and Peru, and of almost all the other Spanish settlements upon the continent of America, carried out with them no other public encouragement, but a general permission to make settlements and conquests in the name of the king of Spain. Those adventures were all at the private risk and expense of the adventurers. The government of Spain contributed scarce any thing to any of them. That of England contributed as little towards effectuating the establishment of some of its most important colonies in North America. When those establishments were effectuated, and had become so considerable as to attract the attention of the mother country, the first regulations which she made with regard to them, had always in view to secure to herself the monopoly of their commerce; to confine their market, and to enlarge her own at their expense, and, consequently, rather to damp and discourage, than to quicken and forward the course of their prosperity. In the different ways in which this monopoly has been exercised, consists one of the most essential differences in the policy of the different European nations with regard to their colonies. The best of them all, that of England, is only somewhat less illiberal and oppressive than that of any of the rest. In what way, therefore, has the policy of Europe contributed either to the first establishment, or to the present grandeur of the colonies of America? In one way, and in one way only, it has contributed a good deal. _Magna virûm mater!_ It bred and formed the men who were capable of achieving such great actions, and of laying the foundation of so great an empire; and there is no other quarter of the world, of which the policy is capable of forming, or has ever actually, and in fact, formed such men. The colonies owe to the policy of Europe the education and great views of their active and enterprising founders; and some of the greatest and most important of them, so far as concerns their internal government, owe to it scarce any thing else. PART III. _Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope._ Such are the advantages which the colonies of America have derived from the policy of Europe. What are these which Europe has derived from the discovery and colonization of America? Those advantages may be divided, first, into the general advantages which Europe, considered as one great country, has derived from those great events; and, secondly, into the particular advantages which each colonizing country has derived from the colonies which particularly belong to it, in consequence of the authority or dominion which it exercises over them. The general advantages which Europe, considered as one great country, has derived from the discovery and colonization of America, consist, first, in the increase of its enjoyments; and, secondly, in the augmentation of its industry. The surplus produce of America imported into Europe, furnishes the inhabitants of this great continent with a variety of commodities which they could not otherwise have possessed; some for conveniency and use, some for pleasure, and some for ornament; and thereby contributes to increase their enjoyments. The discovery and colonization of America, it will readily be allowed, have contributed to augment the industry, first, of all the countries which trade to it directly, such as Spain, Portugal, France, and England; and, secondly, of all those which, without trading to it directly, send, through the medium of other countries, goods to it of their own produce, such as Austrian Flanders, and some provinces of Germany, which, through the medium of the countries before mentioned, send to it a considerable quantity of linen and other goods. All such countries have evidently gained a more extensive market for their surplus produce, and must consequently have been encouraged to increase its quantity. But that those great events should likewise have contributed to encourage the industry of countries such as Hungary and Poland, which may never, perhaps, have sent a single commodity of their own produce to America, is not, perhaps, altogether so evident. That those events have done so, however, cannot be doubted. Some part of the produce of America is consumed in Hungary and Poland, and there in some demand there for the sugar, chocolate, and tobacco, of that new quarter of the world. But those commodities must be purchased with something which is either the produce of the industry of Hungary and Poland, or with something which had been purchased with some part of that produce. Those commodities of America are new values, new equivalents, introduced into Hungary and Poland, to be exchanged there for the surplus produce of these countries. By being carried thither, they create a new and more extensive market for that surplus produce. They raise its value, and thereby contribute to encourage its increase. Though no part of it may ever be carried to America, it may be carried to other countries, which purchase it with a part of their share of the surplus produce of America, and it may find a market by means of the circulation of that trade which was originally put into motion by the surplus produce of America. Those great events may even have contributed to increase the enjoyments, and to augment the industry, of countries which not only never sent any commodities to America, but never received any from it. Even such countries may have received a greater abundance of other commodities from countries, of which the surplus produce had been augmented by means of the American trade. This greater abundance, as it must necessarily have increased their enjoyments, so it must likewise have augmented their industry. A greater number of new equivalents, of some kind or other, must have been presented to them to be exchanged for the surplus produce of that industry. A more extensive market must have been created for that surplus produce, so as to raise its value, and thereby encourage its increase. The mass of commodities annually thrown into the great circle of European commerce, and by its various revolutions annually distributed among all the different nations comprehended within it, must have been augmented by the whole surplus produce of America. A greater share of this greater mass, therefore, is likely to have fallen to each of those nations, to have increased their enjoyments, and augmented their industry. The exclusive trade of the mother countries tends to diminish, or at least to keep down below what they would otherwise rise to, both the enjoyments and industry of all those nations in general, and of the American colonies in particular. It is a dead weight upon the action of one of the great springs which puts into motion a great part of the business of mankind. By rendering the colony produce dearer in all other countries, it lessens its consumption, and thereby cramps the industry of the colonies, and both the enjoyments and the industry or all other countries, which both enjoy less when they pay more for what they enjoy, and produce less when they get less for what they produce. By rendering the produce of all other countries dearer in the colonies, it cramps in the same manner the industry of all other colonies, and both the enjoyments and the industry of the colonies. It is a clog which, for the supposed benefit of some particular countries, embarrasses the pleasures and encumbers the industry of all other countries, but of the colonies more than of any other. It not only excludes as much as possible all other countries from one particular market, but it confines as much as possible the colonies to one particular market; and the difference is very great between being excluded from one particular market when all others are open, and being confined to one particular market when all others are shut up. The surplus produce of the colonies, however, is the original source of all that increase of enjoyments and industry which Europe derives from the discovery and colonization of America, and the exclusive trade of the mother countries tends to render this source much less abundant than it otherwise would be. The particular advantages which each colonizing country derives from the colonies which particularly belong to it, are of two different kinds; first, those common advantages which every empire derives from the provinces subject to its dominion; and, secondly, those peculiar advantages which are supposed to result from provinces of so very peculiar a nature as the European colonies of America. The common advantages which every empire derives from the provinces subject to its dominion consist, first, in the military force which they furnish for its defence; and, secondly, in the revenue which they furnish for the support of its civil government. The Roman colonies furnished occasionally both the one and the other. The Greek colonies sometimes furnished a military force, but seldom any revenue. They seldom acknowledged themselves subject to the dominion of the mother city. They were generally her allies in war, but very seldom her subjects in peace. The European colonies of America have never yet furnished any military force for the defence of the mother country. The military force has never yet been sufficient for their own defence; and in the different wars in which the mother countries have been engaged, the defence of their colonies has generally occasioned a very considerable distraction of the military force of those countries. In this respect, therefore, all the European colonies have, without exception, been a cause rather of weakness than of strength to their respective mother countries. The colonies of Spain and Portugal only have contributed any revenue towards the defence of the mother country, or the support of her civil government. The taxes which have been levied upon those of other European nations, upon those of England in particular, have seldom been equal to the expense laid out upon them in time of peace, and never sufficient to defray that which they occasioned in time of war. Such colonies, therefore, have been a source of expense, and not of revenue, to their respective mother countries. The advantages of such colonies to their respective mother countries, consist altogether in those peculiar advantages which are supposed to result from provinces of so very peculiar a nature as the European colonies of America; and the exclusive trade, it is acknowledged, is the sole source of all those peculiar advantages. In consequence of this exclusive trade, all that part of the surplus produce of the English colonies, for example, which consists in what are called enumerated commodities, can be sent to no other country but England. Other countries must afterwards buy it of her. It must be cheaper, therefore, in England than it can be in any other country, and must contribute more to increase the enjoyments of England than those of any other country. It must likewise contribute more to encourage her industry. For all those parts of her own surplus produce which England exchanges for those enumerated commodities, she must get a better price than any other countries can get for the like parts of theirs, when they exchange them for the same commodities. The manufactures of England, for example, will purchase a greater quantity of the sugar and tobacco of her own colonies than the like manufactures of other countries can purchase of that sugar and tobacco. So far, therefore, as the manufactures of England and those of other countries are both to be exchanged for the sugar and tobacco of the English colonies, this superiority of price gives an encouragement to the former beyond what the latter can, in these circumstances, enjoy. The exclusive trade of the colonies, therefore, as it diminishes, or at least keeps down below what they would otherwise rise to, both the enjoyments and the industry of the countries which do not possess it, so it gives an evident advantage to the countries which do possess it over those other countries. This advantage, however, will, perhaps, be found to be rather what may be called a relative than an absolute advantage, and to give a superiority to the country which enjoys it, rather by depressing the industry and produce of other countries, than by raising those of that particular country above what they would naturally rise to in the case of a free trade. The tobacco of Maryland and Virginia, for example, by means of the monopoly which England enjoys of it, certainly comes cheaper to England than it can do to France, to whom England commonly sells a considerable part of it. But had France and all other European countries been at all times allowed a free trade to Maryland and Virginia, the tobacco of those colonies might by this time have come cheaper than it actually does, not only to all those other countries, but likewise to England. The produce of tobacco, in consequence of a market so much more extensive than any which it has hitherto enjoyed, might, and probably would, by this time have been so much increased as to reduce the profits of a tobacco plantation to their natural level with those of a corn plantation, which it is supposed they are still somewhat above. The price of tobacco might, and probably would, by this time have fallen somewhat lower than it is at present. An equal quantity of the commodities, either of England or of those other countries, might have purchased in Maryland and Virginia a greater quantity of tobacco than it can do at present, and consequently have been sold there for so much a better price. So far as that weed, therefore, can, by its cheapness and abundance, increase the enjoyments, or augment the industry, either of England or of any other country, it would probably, in the case of a free trade, have produced both these effects in somewhat a greater degree than it can do at present. England, indeed, would not, in this case, have had any advantage over other countries. She might have bought the tobacco of her colonies somewhat cheaper, and consequently have sold some of her own commodities somewhat dearer, than she actually does; but she could neither have bought the one cheaper, nor sold the other dearer, than any other country might have done. She might, perhaps, have gained an absolute, but she would certainly have lost a relative advantage. In order, however, to obtain this relative advantage in the colony trade, in order to execute the invidious and malignant project of excluding, as much as possible, other nations from any share in it, England, there are very probable reasons for believing, has not only sacrificed a part of the absolute advantage which she, as well as every other nation, might have derived from that trade, but has subjected herself both to an absolute and to a relative disadvantage in almost every other branch of trade. When, by the act of navigation, England assumed to herself the monopoly of the colony trade, the foreign capitals which had before been employed in it, were necessarily withdrawn from it. The English capital, which had before carried on but a part of it, was now to carry on the whole. The capital which had before supplied the colonies with but a part of the goods which they wanted from Europe, was now all that was employed to supply them with the whole. But it could not supply them with the whole; and the goods with which it did supply them were necessarily sold very dear. The capital which had before bought but a part of the surplus produce of the colonies, was now all that was employed to buy the whole. But it could not buy the whole at anything near the old price; and therefore, whatever it did buy, it necessarily bought very cheap. But in an employment of capital, in which the merchant sold very dear, and bought very cheap, the profit must have been very great, and much above the ordinary level of profit in other branches of trade. This superiority of profit in the colony trade could not fail to draw from other branches of trade a part of the capital which had before been employed in them. But this revulsion of capital, as it must have gradually increased the competition of capitals in the colony trade, so it must have gradually diminished that competition in all those other branches of trade; as it must have gradually lowered the profits of the one, so it must have gradually raised those of the other, till the profits of all came to a new level, different from, and somewhat higher, than that at which they had been before. This double effect of drawing capital from all other trades, and of raising the rate of profit somewhat higher than it otherwise would have been in all trades, was not only produced by this monopoly upon its first establishment, but has continued to be produced by it ever since. _First_, This monopoly has been continually drawing capital from all other trades, to be employed in that of the colonies. Though the wealth of Great Britain has increased very much since the establishment of the act of navigation, it certainly has not increased in the same proportion as that of the colonies. But the foreign trade of every country naturally increases in proportion to its wealth, its surplus produce in proportion to its whole produce; and Great Britain having engrossed to herself almost the whole of what may be called the foreign trade of the colonies, and her capital not having increased in the same proportion as the extent of that trade, she could not carry it on without continually withdrawing from other branches of trade some part of the capital which had before been employed in them, as well as withholding from them a great deal more which would otherwise have gone to them. Since the establishment of the act of navigation, accordingly, the colony trade has been continually increasing, while many other branches of foreign trade, particularly of that to other parts of Europe, have been continually decaying. Our manufactures for foreign sale, instead of being suited, as before the act of navigation, to the neighbouring market of Europe, or to the more distant one of the countries which lie round the Mediterranean sea, have, the greater part of them, been accommodated to the still more distant one of the colonies; to the market in which they have the monopoly, rather than to that in which they have many competitors. The causes of decay in other branches of foreign trade, which, by Sir Matthew Decker and other writers, have been sought for in the excess and improper made of taxation, in the high price of labour, in the increase of luxury, &c. may all be found in the overgrowth of the colony trade. The mercantile capital of Great Britain, though very great, yet not being infinite, and though greatly increased since the act of navigation, yet not being increased in the same proportion as the colony trade, that trade could not possibly be carried on without withdrawing some part of that capital from other branches of trade, nor consequently without some decay of those other branches. England, it must be observed, was a great trading country, her mercantile capital was very great, and likely to become still greater and greater every day, not only before the act of navigation had established the monopoly of the corn trade, but before that trade was very considerable. In the Dutch war, during the government of Cromwell, her navy was superior to that of Holland; and in that which broke out in the beginning of the reign of Charles II., it was at least equal, perhaps superior to the united navies of France and Holland. Its superiority, perhaps, would scarce appear greater in the present times, at least if the Dutch navy were to bear the same proportion to the Dutch commerce now which it did then. But this great naval power could not, in either of those wars, be owing to the act of navigation. During the first of them, the plan of that act had been but just formed; and though, before the breaking out of the second, it had been fully enacted by legal authority, yet no part of it could have had time to produce any considerable effect, and least of all that part which established the exclusive trade to the colonies. Both the colonies and their trade were inconsiderable then, in comparison of what they are now. The island of Jamaica was an unwholesome desert, little inhabited, and less cultivated. New York and New Jersey were in the possession of the Dutch, the half of St. Christopher's in that of the French. The island of Antigua, the two Carolinas, Pennsylvania, Georgia, and Nova Scotia, were not planted. Virginia, Maryland, and New England were planted; and though they were very thriving colonies, yet there was not perhaps at that time, either in Europe or America, a single person who foresaw, or even suspected, the rapid progress which they have since made in wealth, population, and improvement. The island of Barbadoes, in short, was the only British colony of any consequence, of which the condition at that time bore any resemblance to what it is at present. The trade of the colonies, of which England, even for some time after the act of navigation, enjoyed but a part (for the act of navigation was not very strictly executed till several years after it was enacted), could not at that time be the cause of the great trade of England, nor of the great naval power which was supported by that trade. The trade which at that time supported that great naval power was the trade of Europe, and of the countries which lie round the Mediterranean sea. But the share which Great Britain at present enjoys of that trade could not support any such great naval power. Had the growing trade of the colonies been left free to all nations, whatever share of it might have fallen to Great Britain, and a very considerable share would probably have fallen to her, must have been all an addition to this great trade of which she was before in possession. In consequence of the monopoly, the increase of the colony trade has not so much occasioned an addition to the trade which Great Britain had before, as a total change in its direction. _Secondly_, This monopoly has necessarily contributed to keep up the rate of profit, in all the different branches of British trade, higher than it naturally would have been, had all nations been allowed a free trade to the British colonies. The monopoly of the colony trade, as it necessarily drew towards that trade a greater proportion of the capital of Great Britain than what would have gone to it of its own accord, so, by the expulsion of all foreign capitals, it necessarily reduced the whole quantity of capital employed in that trade below what it naturally would have been in the case of a free trade. But, by lessening the competition of capitals in that branch of trade, it necessarily raised the rate of profit in that branch. By lessening, too, the competition of British capitals in all other branches of trade, it necessarily raised the rate of British profit in all those other branches. Whatever may have been, at any particular period since the establishment of the act of navigation, the state or extent of the mercantile capital of Great Britain, the monopoly of the colony trade must, during the continuance of that state, have raised the ordinary rate of British profit higher than it otherwise would have been, both in that and in all the other branches of British trade. If, since the establishment of the act of navigation, the ordinary rate of British profit has fallen considerably, as it certainly has, it must have fallen still lower, had not the monopoly established by that act contributed to keep it up. But whatever raises, in any country, the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. It subjects her to an absolute disadvantage; because, in such branches of trade, her merchants cannot get this greater profit without selling dearer than they otherwise would do, both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less, and sell less; must both enjoy less and produce less, than she otherwise would do. It subjects her to a relative disadvantage; because, in such branches of trade, it sets other countries, which are not subject to the same absolute disadvantage, either more above her or less below her, than they otherwise would be. It enables them both to enjoy more and to produce more, in proportion to what she enjoys and produces. It renders their superiority greater, or their inferiority less, than it otherwise would be. By raising the price of her produce above what it otherwise would be, it enables the merchants of other countries to undersell her in foreign markets, and thereby to justle her out of almost all those branches of trade, of which she has not the monopoly. Our merchants frequently complain of the high wages of British labour, as the cause of their manufactures being undersold in foreign markets; but they are silent about the high profits of stock. They complain of the extravagant gain of other people; but they say nothing of their own. The high profits of British stock, however, may contribute towards raising the price of British manufactures, in many cases, as much, and in some perhaps more, than the high wages of British labour. It is in this manner that the capital of Great Britain, one may justly say, has partly been drawn and partly been driven from the greater part of the different branches of trade of which she has not the monopoly; from the trade of Europe, in particular, and from that of the countries which lie round the Mediterranean sea. It has partly been drawn from those branches of trade, by the attraction of superior profit in the colony trade, in consequence of the continual increase of that trade, and of the continual insufficiency of the capital which had carried it on one year to carry it on the next. It has partly been driven from them, by the advantage which the high rate of profit established in Great Britain gives to other countries, in all the different branches of trade of which Great Britain has not the monopoly. As the monopoly of the colony trade has drawn from those other branches a part of the British capital, which would otherwise have been employed in them, so it has forced into them many foreign capitals which would never have gone to them, had they not been expelled from the colony trade. In those other branches of trade, it has diminished the competition of British capitals, and thereby raised the rate of British profit higher than it otherwise would have been. On the contrary, it has increased the competition of foreign capitals, and thereby sunk the rate of foreign profit lower than it otherwise would have been. Both in the one way and in the other, it must evidently have subjected Great Britain to a relative disadvantage in all those other branches of trade. The colony trade, however, it may perhaps be said, is more advantageous to Great Britain than any other; and the monopoly, by forcing into that trade a greater proportion of the capital of Great Britain than what would otherwise have gone to it, has turned that capital into an employment, more advantageous to the country than any other which it could have found. The most advantageous employment of any capital to the country to which it belongs, is that which maintains there the greatest quantity of productive labour, and increases the most the annual produce of the land and labour of that country. But the quantity of productive labour which any capital employed in the foreign trade of consumption can maintain, is exactly in proportion, it has been shown in the second book, to the frequency of its returns. A capital of a thousand pounds, for example, employed in a foreign trade of consumption, of which the returns are made regularly once in the year, can keep in constant employment, in the country to which it belongs, a quantity of productive labour, equal to what a thousand pounds can maintain there for a year. If the returns are made twice or thrice in the year, it can keep in constant employment a quantity of productive labour, equal to what two or three thousand pounds can maintain there for a year. A foreign trade of consumption carried on with a neighbouring, is, upon that account, in general, more advantageous than one carried on with a distant country; and, for the same reason, a direct foreign trade of consumption, as it has likewise been shown in the second book, is in general more advantageous than a round-about one. But the monopoly of the colony trade, so far as it has operated upon the employment of the capital of Great Britain, has, in all cases, forced some part of it from a foreign trade of consumption carried on with a neighbouring, to one carried on with a more distant country, and in many cases from a direct foreign trade of consumption to a round-about one. _First_, The monopoly of the colony trade has, in all cases, forced some part of the capital of Great Britain from a foreign trade of consumption carried on with a neighbouring, to one carried on with a more distant country. It has, in all cases, forced some part of that capital from the trade with Europe, and with the countries which lie round the Mediterranean sea, to that with the more distant regions of America and the West Indies; from which the returns are necessarily less frequent, not only on account of the greater distance, but on account of the peculiar circumstances of those countries. New colonies, it has already been observed, are always understocked. Their capital in always much less than what they could employ with great profit and advantage in the improvement and cultivation of their land. They have a constant demand, therefore, for more capital than they have of their own; and, in order to supply the deficiency of their own, they endeavour to borrow as much as they can of the mother country, to whom they are, therefore, always in debt. The most common way in which the colonies contract this debt, is not by borrowing upon bond of the rich people of the mother country, though they sometimes do this too, but by running as much in arrear to their correspondents, who supply them with goods from Europe, as those correspondents will allow them. Their annual returns frequently do not amount to more than a third, and sometimes not to so great a proportion of what they owe. The whole capital, therefore, which their correspondents advance to them, is seldom returned to Britain in less than three, and sometimes not in less than four or five years. But a British capital of a thousand pounds, for example, which is returned to Great Britain only once in five years, can keep in constant employment only one-fifth part of the British industry which it could maintain, if the whole was returned once in the year; and, instead of the quantity of industry which a thousand pounds could maintain for a year, can keep in constant employment the quantity only which two hundred pounds can maintain for a year. The planter, no doubt, by the high price which he pays for the goods from Europe, by the interest upon the bills which he grants at distant dates, and by the commission upon the renewal of those which he grants at near dates, makes up, and probably more than makes up, all the loss which his correspondent can sustain by this delay. But, though he make up the loss of his correspondent, he cannot make up that of Great Britain. In a trade of which the returns are very distant, the profit of the merchant may be as great or greater than in one in which they are very frequent and near; but the advantage of the country in which he resides, the quantity of productive labour constantly maintained there, the annual produce of the land and labour, must always be much less. That the returns of the trade to America, and still more those of that to the West Indies, are, in general, not only more distant, but more irregular and more uncertain, too, than those of the trade to any part of Europe, or even of the countries which lie round the Mediterranean sea, will readily be allowed, I imagine, by every body who has any experience of these different branches of trade. _Secondly_, The monopoly of the colony trade, has, in many cases, forced some part of the capital of Great Britain from a direct foreign trade of consumption, into a round-about one. Among the enumerated commodities which can be sent to no other market but Great Britain, there are several of which the quantity exceeds very much the consumption of Great Britain, and of which, a part, therefore, must be exported to other countries. But this cannot be done without forcing some part of the capital of Great Britain into a round-about foreign trade of consumption. Maryland, and Virginia, for example, send annually to Great Britain upwards of ninety-six thousand hogsheads of tobacco, and the consumption of Great Britain is said not to exceed fourteen thousand. Upwards of eighty-two thousand hogsheads, therefore, must be exported to other countries, to France, to Holland, and, to the countries which lie round the Baltic and Mediterranean seas. But that part of the capital of Great Britain which brings those eighty-two thousand hogsheads to Great Britain, which re-exports them from thence to those other countries, and which brings back from those countries to Great Britain either goods or money in return, is employed in a round-about foreign trade of consumption; and is necessarily forced into this employment, in order to dispose of this great surplus. If we would compute in how many years the whole of this capital is likely to come back to Great Britain, we must add to the distance of the American returns that of the returns from those other countries. If, in the direct foreign trade of consumption which we carry on with America, the whole capital employed frequently does not come back in less than three or four years, the whole capital employed in this round-about one is not likely to come back in less than four or five. If the one can keep in constant employment but a third or a fourth part of the domestic industry which could be maintained by a capital returned once in the year, the other can keep in constant employment but a fourth or a fifth part of that industry. At some of the out-ports a credit is commonly given to those foreign correspondents to whom they export their tobacco. At the port of London, indeed, it is commonly sold for ready money: the rule is Weigh and pay. At the port of London, therefore, the final returns of the whole round-about trade are more distant than the returns from America, by the time only which the goods may lie unsold in the warehouse; where, however, they may sometimes lie long enough. But, had not the colonies been confined to the market of Great Britain for the sale of their tobacco, very little more of it would probably have come to us than what was necessary for the home consumption. The goods which Great Britain purchases at present for her own consumption with the great surplus of tobacco which she exports to other countries, she would, in this case, probably have purchased with the immediate produce of her own industry, or with some part of her own manufactures. That produce, those manufactures, instead of being almost entirely suited to one great market, as at present, would probably have been fitted to a great number of smaller markets. Instead of one great round-about foreign trade of consumption, Great Britain would probably have carried on a great number of small direct foreign trades of the same kind. On account of the frequency of the returns, a part, and probably but a small part, perhaps not above a third or a fourth of the capital which at present carries on this great round-about trade, might have been sufficient to carry on all those small direct ones; might have kept in constant employment an equal quantity of British industry; and have equally supported the annual produce of the land and labour of Great Britain. All the purposes of this trade being, in this manner, answered by a much smaller capital, there would have been a large spare capital to apply to other purposes; to improve the lands, to increase the manufactures, and to extend the commerce of Great Britain; to come into competition at least with the other British capitals employed in all those different ways, to reduce the rate of profit in them all, and thereby to give to Great Britain, in all of them, a superiority over other countries, still greater than what she at present enjoys. The monopoly of the colony trade, too, has forced some part of the capital of Great Britain from all foreign trade of consumption to a carrying trade; and, consequently from supporting more or less the industry of Great Britain, to be employed altogether in supporting partly that of the colonies, and partly that of some other countries. The goods, for example, which are annually purchased with the great surplus of eighty-two thousand hogsheads of tobacco annually re-exported from Great Britain, are not all consumed in Great Britain. Part of them, linen from Germany and Holland, for example, is returned to the colonies for their particular consumption. But that part of the capital of Great Britain which buys the tobacco with which this linen is afterwards bought, is necessarily withdrawn from supporting the industry of Great Britain, to be employed altogether in supporting, partly that of the colonies, and partly that of the particular countries who pay for this tobacco with the produce of their own industry. The monopoly of the colony trade, besides, by forcing towards it a much greater proportion of the capital of Great Britain than what would naturally have gone to it, seems to have broken altogether that natural balance which would otherwise have taken place among all the different branches of British industry. The industry of Great Britain, instead of being accommodated to a great number of small markets, has been principally suited to one great market. Her commerce, instead of running in a great number of small channels, has been taught to run principally in one great channel. But the whole system of her industry and commerce has thereby been rendered less secure; the whole state of her body politic less healthful than it otherwise would have been. In her present condition, Great Britain resembles one of those unwholesome bodies in which some of the vital parts are overgrown, and which, upon that account, are liable to many dangerous disorders, scarce incident to those in which all the parts are more properly proportioned. A small stop in that great blood-vessel, which has been artificially swelled beyond its natural dimensions, and through which an unnatural proportion of the industry and commerce of the country has been forced to circulate, is very likely to bring on the most dangerous disorders upon the whole body politic. The expectation of a rupture with the colonies, accordingly, has struck the people of Great Britain with more terror than they ever felt for a Spanish armada, or a French invasion. It was this terror, whether well or ill grounded, which rendered the repeal of the stamp act, among the merchants at least, a popular measure. In the total exclusion from the colony market, was it to last only for a few years, the greater part of our merchants used to fancy that they foresaw an entire stop to their trade; the greater part of our master manufacturers, the entire ruin of their business; and the greater part of our workmen, an end of their employment. A rupture with any of our neighbours upon the continent, though likely, too, to occasion some stop or interruption in the employments of some of all these different orders of people, is foreseen, however, without any such general emotion. The blood, of which the circulation is stopt in some of the smaller vessels, easily disgorges itself into the greater, without occasioning any dangerous disorder; but, when it is stopt in any of the greater vessels, convulsions, apoplexy, or death, are the immediate and unavoidable consequences. If but one of those overgrown manufactures, which, by means either of bounties or of the monopoly of the home and colony markets, have been artificially raised up to any unnatural height, finds some small stop or interruption in its employment, it frequently occasions a mutiny and disorder alarming to government, and embarrassing even to the deliberations of the legislature. How great, therefore, would be the disorder and confusion, it was thought, which must necessarily be occasioned by a sudden and entire stop in the employment of so great a proportion of our principal manufacturers? Some moderate and gradual relaxation of the laws which give to Great Britain the exclusive trade to the colonies, till it is rendered in a great measure free, seems to be the only expedient which can, in all future times, deliver her from this danger; which can enable her, or even force her, to withdraw some part of her capital from this overgrown employment, and to turn it, though with less profit, towards other employments; and which, by gradually diminishing one branch of her industry, and gradually increasing all the rest, can, by degrees, restore all the different branches of it to that natural, healthful, and proper proportion, which perfect liberty necessarily establishes, and which perfect liberty can alone preserve. To open the colony trade all at once to all nations, might not only occasion some transitory inconveniency, but a great permanent loss, to the greater part of those whose industry or capital is at present engaged in it. The sudden loss of the employment, even of the ships which import the eighty-two thousand hogsheads of tobacco, which are over and above the consumption of Great Britain, might alone be felt very sensibly. Such are the unfortunate effects of all the regulations of the mercantile system. They not only introduce very dangerous disorders into the state of the body politic, but disorders which it is often difficult to remedy, without occasioning, for a time at least, still greater disorders. In what manner, therefore, the colony trade ought gradually to be opened; what are the restraints which ought first, and what are those which ought last, to be taken away; or in what manner the natural system of perfect liberty and justice ought gradually to be restored, we must leave to the wisdom of future statesmen and legislators to determine. Five different events, unforeseen and unthought of, have very fortunately concurred to hinder Great Britain from feeling, so sensibly as it was generally expected she would, the total exclusion which has now taken place for more than a year (from the first of December 1774) from a very important branch of the colony trade, that of the twelve associated provinces of North America. First, those colonies, in preparing themselves for their non-importation agreement, drained Great Britain completely of all the commodities which were fit for their market; secondly, the extraordinary demand of the Spanish flota has, this year, drained Germany and the north of many commodities, linen in particular, which used to come into competition, even in the British market, with the manufactures of Great Britain; thirdly, the peace between Russia and Turkey has occasioned an extraordinary demand from the Turkey market, which, during the distress of the country, and while a Russian fleet was cruising in the Archipelago, had been very poorly supplied; fourthly, the demand of the north of Europe for the manufactures of Great Britain has been increasing from year to year, for some time past; and, fifthly, the late partition, and consequential pacification of Poland, by opening the market of that great country, have, this year, added an extraordinary demand from thence to the increasing demand of the north. These events are all, except the fourth, in their nature transitory and accidental; and the exclusion from so important a branch of the colony trade, if unfortunately it should continue much longer, may still occasion some degree of distress. This distress, however, as it will come on gradually, will be felt much less severely than if it had come on all at once; and, in the mean time, the industry and capital of the country may find a new employment and direction, so as to prevent this distress from ever rising to any considerable height. The monopoly of the colony trade, therefore, so far as it has turned towards that trade a greater proportion of the capital of Great Britain than what would otherwise have gone to it, has in all cases turned it, from a foreign trade of consumption with a neighbouring, into one with a more distant country; in many cases from a direct foreign trade of consumption into a round-about one; and, in some cases, from all foreign trade of consumption into a carrying trade. It has, in all cases, therefore, turned it from a direction in which it would have maintained a greater quantity of productive labour, into one in which it can maintain a much smaller quantity. By suiting, besides, to one particular market only, so great a part of the industry and commerce of Great Britain, it has rendered the whole state of that industry and commerce more precarious and less secure, than if their produce had been accommodated to a greater variety of markets. We must carefully distinguish between the effects of the colony trade and those of the monopoly of that trade. The former are always and necessarily beneficial; the latter always and necessarily hurtful. But the former are so beneficial, that the colony trade, though subject to a monopoly, and, notwithstanding the hurtful effects of that monopoly, is still, upon the whole, beneficial, and greatly beneficial, though a good deal less so than it otherwise would be. The effect of the colony trade, in its natural and free state, is to open a great though distant market, for such parts of the produce of British industry as may exceed the demand of the markets nearer home, of those of Europe, and of the countries which lie round the Mediterranean sea. In its natural and free state, the colony trade, without drawing from those markets any part of the produce which had ever been sent to them, encourages Great Britain to increase the surplus continually, by continually presenting new equivalents to be exchanged for it. In its natural and free state, the colony trade tends to increase the quantity of productive labour in Great Britain, but without altering in any respect the direction of that which had been employed there before. In the natural and free state of the colony trade, the competition of all other nations would hinder the rate of profit from rising above the common level, either in the new market, or in the new employment. The new market, without drawing any thing from the old one, would create, if one may say so, a new produce for its own supply; and that new produce would constitute a new capital for carrying on the new employment, which, in the same manner, would draw nothing from the old one. The monopoly of the colony trade, on the contrary, by excluding the competition of other nations, and thereby raising the rate of profit, both in the new market and in the new employment, draws produce from the old market, and capital from the old employment. To augment our share of the colony trade beyond what it otherwise would be, is the avowed purpose of the monopoly. If our share of that trade were to be no greater with, than it would have been without the monopoly, there could have been no reason for establishing the monopoly. But whatever forces into a branch of trade, of which the returns are slower and more distant than those of the greater part of other trades, a greater proportion of the capital of any country, than what of its own accord would go to that branch, necessarily renders the whole quantity of productive labour annually maintained there, the whole annual produce of the land and labour of that country, less than they otherwise would be. It keeps down the revenue of the inhabitants of that country below what it would naturally rise to, and thereby diminishes their power of accumulation. It not only hinders, at all times, their capital from maintaining so great a quantity of productive labour as it would otherwise maintain, but it hinders it from increasing so fast as it would otherwise increase, and, consequently, from maintaining a still greater quantity of productive labour. The natural good effects of the colony trade, however, more than counterbalance to Great Britain the bad effects of the monopoly; so that, monopoly and altogether, that trade, even as it is carried on at present, is not only advantageous, but greatly advantageous. The new market and the new employment which are opened by the colony trade, are of much greater extent than that portion of the old market and of the old employment which is lost by the monopoly. The new produce and the new capital which has been created, if one may say so, by the colony trade, maintain in Great Britain a greater quantity of productive labour than what can have been thrown out of employment by the revulsion of capital from other trades of which the returns are more frequent. If the colony trade, however, even as it is carried on at present, is advantageous to Great Britain, it is not by means of the monopoly, but in spite of the monopoly. It is rather for the manufactured than for the rude produce of Europe, that the colony trade opens a new market. Agriculture is the proper business of all new colonies; a business which the cheapness of land renders more advantageous than any other. They abound, therefore, in the rude produce of land; and instead of importing it from other countries, they have generally a large surplus to export. In new colonies, agriculture either draws hands from all other employments, or keeps them from going to any other employment. There are few hands to spare for the necessary, and none for the ornamental manufactures. The greater part of the manufactures of both kinds they find it cheaper to purchase of other countries than to make for themselves. It is chiefly by encouraging the manufactures of Europe, that the colony trade indirectly encourages its agriculture. The manufacturers of Europe, to whom that trade gives employment, constitute a new market for the produce of the land, and the most advantageous of all markets; the home market for the corn and cattle, for the bread and butcher's meat of Europe, is thus greatly extended by means of the trade to America. But that the monopoly of the trade of populous and thriving colonies is not alone sufficient to establish, or even to maintain, manufactures in any country, the examples of Spain and Portugal sufficiently demonstrate. Spain and Portugal were manufacturing countries before they had any considerable colonies. Since they had the richest and most fertile in the world, they have both ceased to be so. In Spain and Portugal, the bad effects of the monopoly, aggravated by other causes, have, perhaps, nearly overbalanced the natural good effects of the colony trade. These causes seem to be other monopolies of different kinds: the degradation of the value of gold and silver below what it is in most other countries; the exclusion from foreign markets by improper taxes upon exportation, and the narrowing of the home market, by still more improper taxes upon the transportation of goods from one part of the country to another; but above all, that irregular and partial administration of justice which often protects the rich and powerful debtor from the pursuit of his injured creditor, and which makes the industrious part of the nation afraid to prepare goods for the consumption of those haughty and great men, to whom they dare not refuse to sell upon credit, and from whom they are altogether uncertain of repayment. In England, on the contrary, the natural good effects of the colony trade, assisted by other causes, have in a great measure conquered the bad effects of the monopoly. These causes seem to be, the general liberty of trade, which, notwithstanding some restraints, is at least equal, perhaps superior, to what it is in any other country; the liberty of exporting, duty free, almost all sorts of goods which are the produce of domestic industry, to almost any foreign country; and what, perhaps, is of still greater importance, the unbounded liberty of transporting them from one part of our own country to any other, without being obliged to give any account to any public office, without being liable to question or examination of any kind; but, above all, that equal and impartial administration of justice, which renders the rights of the meanest British subject respectable to the greatest, and which, by securing to every man the fruits of his own industry, gives the greatest and most effectual encouragement to every sort of industry. If the manufactures of Great Britain, however, have been advanced, as they certainly have, by the colony trade, it has not been by means of the monopoly of that trade, but in spite of the monopoly. The effect of the monopoly has been, not to augment the quantity, but to alter the quality and shape of a part of the manufactures of Great Britain, and to accommodate to a market, from which the returns are slow and distant, what would otherwise have been accommodated to one from which the returns are frequent and near. Its effect has consequently been, to turn a part of the capital of Great Britain from an employment in which it would have maintained a greater quantity of manufacturing industry, to one in which it maintains a much smaller, and thereby to diminish, instead of increasing, the whole quantity of manufacturing industry maintained in Great Britain. The monopoly of the colony trade, therefore, like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without in the least increasing, but on the contrary diminishing, that of the country in whose favour it is established. The monopoly hinders the capital of that country, whatever may, at any particular time, be the extent of that capital, from maintaining so great a quantity of productive labour as it would otherwise maintain, and from affording so great a revenue to the industrious inhabitants as it would otherwise afford. But as capital can be increased only by savings from revenue, the monopoly, by hindering it from affording so great a revenue as it would otherwise afford, necessarily hinders it from increasing so fast as it would otherwise increase, and consequently from maintaining a still greater quantity of productive labour, and affording a still greater revenue to the industrious inhabitants of that country. One great original source of revenue, therefore, the wages of labour, the monopoly must necessarily have rendered, at all times, less abundant than it otherwise would have been. By raising the rate of mercantile profit, the monopoly discourages the improvement of land. The profit of improvement depends upon the difference between what the land actually produces, and what, by the application of a certain capital, it can be made to produce. If this difference affords a greater profit than what can be drawn from an equal capital in any mercantile employment, the improvement of land will draw capital from all mercantile employments. If the profit in less, mercantile employments will draw capital from the improvement of land. Whatever, therefore, raises the rate of mercantile profit, either lessens the superiority, or increases the inferiority of the profit of improvement: and, in the one case, hinders capital from going to improvement, and in the other draws capital from it; but by discouraging improvement, the monopoly necessarily retards the natural increase of another great original source of revenue, the rent of land. By raising the rate of profit, too, the monopoly necessarily keeps up the market rate of interest higher than it otherwise would be. But the price of land, in proportion to the rent which it affords, the number of years purchase which is commonly paid for it, necessarily falls as the rate of interest rises, and rises as the rate of interest falls. The monopoly, therefore, hurts the interest of the landlord two different ways, by retarding the natural increase, first, of his rent, and, secondly, of the price which he would get for his land, in proportion to the rent which it affords. The monopoly, indeed, raises the rate of mercantile profit, and thereby augments somewhat the gain of our merchants. But as it obstructs the natural increase of capital, it tends rather to diminish than to increase the sum total of the revenue which the inhabitants of the country derive from the profits of stock; a small profit upon a great capital generally affording a greater revenue than a great profit upon a small one. The monopoly raises the rate of profit, but it hinders the sum of profit from rising so high as it otherwise would do. All the original sources of revenue, the wages of labour, the rent of land, and the profits of stock, the monopoly renders much less abundant than they otherwise would be. To promote the little interest of one little order of men in one country, it hurts the interest of all other orders of men in that country, and of all the men in all other countries. It is solely by raising the ordinary rate of profit, that the monopoly either has proved, or could prove, advantageous to any one particular order of men. But besides all the bad effects to the country in general, which have already been mentioned as necessarily resulting from a higher rate of profit, there is one more fatal, perhaps, than all these put together, but which, if we may judge from experience, is inseparably connected with it. The high rate of profit seems everywhere to destroy that parsimony which, in other circumstances, is natural to the character of the merchant. When profits are high, that sober virtue seems to be superfluous, and expensive luxury to suit better the affluence of his situation. But the owners of the great mercantile capitals are necessarily the leaders and conductors of the whole industry of every nation; and their example has a much greater influence upon the manners of the whole industrious part of it than that of any other order of men. If his employer is attentive and parsimonious, the workman is very likely to be so too; but if the master in dissolute and disorderly, the servant, who shapes his work according to the pattern which his master prescribes to him, will shape his life, too, according to the example which he sets him. Accumulation is thus prevented in the hands of all those who are naturally the most disposed to accumulate; and the funds destined for the maintenance of productive labour, receive no augmentation from the revenue of those who ought naturally to augment them the most. The capital of the country, instead of increasing, gradually dwindles away, and the quantity of productive labour maintained in it grows every day less and less. Have the exorbitant profits of the merchants of Cadiz and Lisbon augmented the capital of Spain and Portugal? Have they alleviated the poverty, have they promoted the industry, of those two beggarly countries? Such has been the tone of mercantile expense in those two trading cities, that those exorbitant profits, far from augmenting the general capital of the country, seem scarce to have been sufficient to keep up the capitals upon which they were made. Foreign capitals are every day intruding themselves, if I may say so, more and more into the trade of Cadiz and Lisbon. It is to expel those foreign capitals from a trade which their own grows every day more and more insufficient for carrying on, that the Spaniards and Portuguese endeavour every day to straiten more and more the galling bands of their absurd monopoly. Compare the mercantile manners of Cadiz and Lisbon with those of Amsterdam, and you will be sensible how differently the conduct and character of merchants are affected by the high and by the low profits of stock. The merchants of London, indeed, have not yet generally become such magnificent lords as those of Cadiz and Lisbon; but neither are they in general such attentive and parsimonious burghers as those of Amsterdam. They are supposed, however, many of them, to be a good deal richer than the greater part of the former, and not quite so rich as many of the latter: but the rate of their profit is commonly much lower than that of the former, and a good deal higher than that of the latter. Light come, light go, says the proverb; and the ordinary tone of expense seems everywhere to be regulated, not so much according to the real ability of spending, as to the supposed facility of getting money to spend. It is thus that the single advantage which the monopoly procures to a single order of men, is in many different ways hurtful to the general interest of the country. To found a great empire for the sole purpose of raising up a people of customers, may at first sight, appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers, but extremely fit for a nation whose government is influenced by shopkeepers. Such statesmen, and such statesmen only, are capable of fancying that they will find some advantage in employing the blood and treasure of their fellow-citizens, to found and maintain such an empire. Say to a shopkeeper, Buy me a good estate, and I shall always buy my clothes at your shop, even though I should pay somewhat dearer than what I can have them for at other shops; and you will not find him very forward to embrace your proposal. But should any other person buy you such an estate, the shopkeeper will be much obliged to your benefactor if he would enjoin you to buy all your clothes at his shop. England purchased for some of her subjects, who found themselves uneasy at home, a great estate in a distant country. The price, indeed, was very small, and instead of thirty years purchase, the ordinary price of land in the present times, it amounted to little more than the expense of the different equipments which made the first discovery, reconoitered the coast, and took a fictitious possession of the country. The land was good, and of great extent; and the cultivators having plenty of good ground to work upon, and being for some time at liberty to sell their produce where they pleased, became, in the course of little more than thirty or forty years (between 1620 and 1660), so numerous and thriving a people, that the shopkeepers and other traders of England wished to secure to themselves the monopoly of their custom. Without pretending, therefore, that they had paid any part, either of the original purchase money, or of the subsequent expense of improvement, they petitioned the parliament, that the cultivators of America might for the future be confined to their shop; first, for buying all the goods which they wanted from Europe; and, secondly, for selling all such parts of their own produce as these traders might find it convenient to buy. For they did not find it convenient to buy every part of it. Some parts of it imported into England, might have interfered with some of the trades which they themselves carried on at home. Those particular parts of it, therefore, they were willing that the colonists should sell where they could; the farther off the better; and upon that account proposed that their market should be confined to the countries south of Cape Finisterre. A clause in the famous act of navigation established this truly shopkeeper proposal into a law. The maintenance of this monopoly has hitherto been the principal, or more properly, perhaps, the sole end and purpose of the dominion which Great Britain assumes over her colonies. In the exclusive trade, it is supposed, consists the great advantage of provinces, which have never yet afforded either revenue or military force for the support of the civil government, or the defence of the mother country. The monopoly is the principal badge of their dependency, and it is the sole fruit which has hitherto been gathered from that dependency. Whatever expense Great Britain has hitherto laid out in maintaining this dependency, has really been laid out in order to support this monopoly. The expense of the ordinary peace establishment of the colonies amounted, before the commencement of the present disturbances to the pay of twenty regiments of foot; to the expense of the artillery, stores, and extraordinary provisions, with which it was necessary to supply them; and to the expense of a very considerable naval force, which was constantly kept up, in order to guard from the smuggling vessels of other nations, the immense coast of North America, and that of our West Indian islands. The whole expense of this peace establishment was a charge upon the revenue of Great Britain, and was, at the same time, the smallest part of what the dominion of the colonies has cost the mother country. If we would know the amount of the whole, we must add to the annual expense of this peace establishment, the interest of the sums which, in consequence of their considering her colonies as provinces subject to her dominion, Great Britain has, upon different occasions, laid out upon their defence. We must add to it, in particular, the whole expense of the late war, and a great part of that of the war which preceded it. The late war was altogether a colony quarrel; and the whole expense of it, in whatever part of the world it might have been laid out, whether in Germany or the East Indies, ought justly to be stated to the account of the colonies. It amounted to more than ninety millions sterling, including not only the new debt which was contracted, but the two shillings in the pound additional land tax, and the sums which were every year borrowed from the sinking fund. The Spanish war which began in 1739 was principally a colony quarrel. Its principal object was to prevent the search of the colony ships, which carried on a contraband trade with the Spanish Main. This whole expense is, in reality, a bounty which has been given in order to support a monopoly. The pretended purpose of it was to encourage the manufactures, and to increase the commerce of Great Britain. But its real effect has been to raise the rate of mercantile profit, and to enable our merchants to turn into a branch of trade, of which the returns are more slow and distant than those of the greater part of other trades, a greater proportion of their capital than they otherwise would have done; two events which, if a bounty could have prevented, it might perhaps have been very well worth while to give such a bounty. Under the present system of management, therefore, Great Britain derives nothing but loss from the dominion which she assumes over her colonies. To propose that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war, as they might think proper, would be to propose such a measure as never was, and never will be, adopted by any nation in the world. No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expense which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation; and, what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it, who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province, seldom fails to afford. The most visionary enthusiasts would scarce be capable of proposing such a measure, with any serious hopes at least of its ever being adopted. If it was adopted, however, Great Britain would not only be immediately freed from the whole annual expense of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys. By thus parting good friends, the natural affection of the colonies to the mother country, which, perhaps our late dissensions have well nigh extinguished, would quickly revive. It might dispose them not only to respect, for whole centuries together, that treaty of commerce which they had concluded with us at parting, but to favour us in war as in trade, and instead of turbulent and factious subjects, to become our most faithful, affectionate, and generous allies; and the same sort of parental affection on the one side, and filial respect on the other, might revive between Great Britain and her colonies, which used to subsist between those of ancient Greece and the mother city from which they descended. In order to render any province advantageous to the empire to which it belongs, it ought to afford, in time of peace, a revenue to the public, sufficient not only for defraying the whole expense of its own peace establishment, but for contributing its proportion to the support of the general government of the empire. Every province necessarily contributes, more or less, to increase the expense of that general government. If any particular province, therefore, does not contribute its share towards defraying this expense, an unequal burden must be thrown upon some other part of the empire. The extraordinary revenue, too, which every province affords to the public in time of war, ought, from parity of reason, to bear the same proportion to the extraordinary revenue of the whole empire, which its ordinary revenue does in time of peace. That neither the ordinary nor extraordinary revenue which Great Britain derives from her colonies, bears this proportion to the whole revenue of the British empire, will readily be allowed. The monopoly, it has been supposed, indeed, by increasing the private revenue of the people of Great Britain, and thereby enabling them to pay greater taxes, compensates the deficiency of the public revenue of the colonies. But this monopoly, I have endeavoured to show, though a very grievous tax upon the colonies, and though it may increase the revenue of a particular order of men in Great Britain, diminishes, instead of increasing, that of the great body of the people, and consequently diminishes, instead of increasing, the ability of the great body of the people to pay taxes. The men, too, whose revenue the monopoly increases, constitute a particular order, which it is both absolutely impossible to tax beyond the proportion of other orders, and extremely impolitic even to attempt to tax beyond that proportion, as I shall endeavour to show in the following book. No particular resource, therefore, can be drawn from this particular order. The colonies may be taxed either by their own assemblies, or by the parliament of Great Britain. That the colony assemblies can never be so managed as to levy upon their constituents a public revenue, sufficient, not only to maintain at all times their own civil and military establishment, but to pay their proper proportion of the expense of the general government of the British empire, seems not very probable. It was a long time before even the parliament of England, though placed immediately under the eye of the sovereign, could be brought under such a system of management, or could be rendered sufficiently liberal in their grants for supporting the civil and military establishments even of their own country. It was only by distributing among the particular members of parliament a great part either of the offices, or of the disposal of the offices arising from this civil and military establishment, that such a system of management could be established, even with regard to the parliament of England. But the distance of the colony assemblies from the eye of the sovereign, their number, their dispersed situation, and their various constitutions, would render it very difficult to manage them in the same manner, even though the sovereign had the same means of doing it; and those means are wanting. It would be absolutely impossible to distribute among all the leading members of all the colony assemblies such a share, either of the offices, or of the disposal of the offices, arising from the general government of the British empire, as to dispose them to give up their popularity at home, and to tax their constituents for the support of that general government, of which almost the whole emoluments were to be divided among people who were strangers to them. The unavoidable ignorance of administration, besides, concerning the relative importance of the different members of those different assemblies, the offences which must frequently be given, the blunders which must constantly be committed, in attempting to manage them in this manner, seems to render such a system of management altogether impracticable with regard to them. The colony assemblies, besides, cannot be supposed the proper judges of what is necessary for the defence and support of the whole empire. The care of that defence and support is not entrusted to them. It is not their business, and they have no regular means of information concerning it. The assembly of a province, like the vestry of a parish, may judge very properly concerning the affairs of its own particular district, but can have no proper means of judging concerning those of the whole empire. It cannot even judge properly concerning the proportion which its own province bears to the whole empire, or concerning the relative degree of its wealth and importance, compared with the other provinces; because those other provinces are not under the inspection and superintendency of the assembly of a particular province. What is necessary for the defence and support of the whole empire, and in what proportion each part ought to contribute, can be judged of only by that assembly which inspects and superintends the affairs of the whole empire. It has been proposed, accordingly, that the colonies should be taxed by requisition, the parliament of Great Britain determining the sum which each colony ought to pay, and the provincial assembly assessing and levying it in the way that suited best the circumstances of the province. What concerned the whole empire would in this way be determined by the assembly which inspects and superintends the affairs of the whole empire; and the provincial affairs of each colony might still be regulated by its own assembly. Though the colonies should, in this case, have no representatives in the British parliament, yet, if we may judge by experience, there is no probability that the parliamentary requisition would be unreasonable. The parliament of England has not, upon any occasion, shewn the smallest disposition to overburden those parts of the empire which are not represented in parliament. The islands of Guernsey and Jersey, without any means of resisting the authority of parliament, are more lightly taxed than any part of Great Britain. Parliament, in attempting to exercise its supposed right, whether well or ill grounded, of taxing the colonies, has never hitherto demanded of them any thing which even approached to a just proportion to what was paid by their fellow-subjects at home. If the contribution of the colonies, besides, was to rise or fall in proportion to the rise or fall of the land-tax, parliament could not tax them without taxing, at the same time, its own constituents, and the colonies might, in this case, be considered as virtually represented in parliament. Examples are not wanting of empires in which all the different provinces are not taxed, if I may be allowed the expression, in one mass; but in which the sovereign regulates the sum which each province ought to pay, and in some provinces assesses and levies it as he thinks proper; while in others he leaves it to be assessed and levied as the respective states of each province shall determine. In some provinces of France, the king not only imposes what taxes he thinks proper, but assesses and levies them in the way he thinks proper. From others he demands a certain sum, but leaves it to the states of each province to assess and levy that sum as they think proper. According to the scheme of taxing by requisition, the parliament of Great Britain would stand nearly in the same situation towards the colony assemblies, as the king of France does towards the states of those provinces which still enjoy the privilege of having states of their own, the provinces of France which are supposed to be the best governed. But though, according to this scheme, the colonies could have no just reason to fear that their share of the public burdens should ever exceed the proper proportion to that of their fellow-citizens at home, Great Britain might have just reason to fear that it never would amount to that proper proportion. The parliament of Great Britain has not, for some time past, had the same established authority in the colonies, which the French king has in those provinces of France which still enjoy the privilege of having states of their own. The colony assemblies, if they were not very favourably disposed (and unless more skilfully managed than they ever have been hitherto, they are not very likely to be so), might still find many pretences for evading or rejecting the most reasonable requisitions of parliament. A French war breaks out, we shall suppose; ten millions must immediately be raised, in order to defend the seat of the empire. This sum must be borrowed upon the credit of some parliamentary fund mortgaged for paying the interest. Part of this fund parliament proposes to raise by a tax to be levied in Great Britain, and part of it by a requisition to all the different colony assemblies of America and the West Indies. Would people readily advance their money upon the credit of a fund which partly depended upon the good humour of all these assemblies, far distant from the seat of the war, and sometimes, perhaps, thinking themselves not much concerned in the event of it? Upon such a fund, no more money would probably be advanced than what the tax to be levied in Great Britain might be supposed to answer for. The whole burden of the debt contracted on account of the war would in this manner fall, as it always has done hitherto, upon Great Britain; upon a part of the empire, and not upon the whole empire. Great Britain is, perhaps, since the world began, the only state which, as it has extended its empire, has only increased its expense, without once augmenting its resources. Other states have generally disburdened themselves, upon their subject and subordinate provinces, of the most considerable part of the expense of defending the empire. Great Britain has hitherto suffered her subject and subordinate provinces to disburden themselves upon her of almost this whole expense. In order to put Great Britain upon a footing of equality with her own colonies, which the law has hitherto supposed to be subject and subordinate, it seems necessary, upon the scheme of taxing them by parliamentary requisition, that parliament should have some means of rendering its requisitions immediately effectual, in case the colony assemblies should attempt to evade or reject them; and what those means are, it is not very easy to conceive, and it has not yet been explained. Should the parliament of Great Britain, at the same time, be ever fully established in the right of taxing the colonies, even independent of the consent of their own assemblies, the importance of those assemblies would, from that moment, be at an end, and with it, that of all the leading men of British America. Men desire to have some share in the management of public affairs, chiefly on account of the importance which it gives them. Upon the power which the greater part of the leading men, the natural aristocracy of every country, have of preserving or defending their respective importance, depends the stability and duration of every system of free government. In the attacks which those leading men are continually making upon the importance of one another, and in the defence of their own, consists the whole play of domestic faction and ambition. The leading men of America, like those of all other countries, desire to preserve their own importance. They feel, or imagine, that if their assemblies, which they are fond of calling parliaments, and of considering as equal in authority to the parliament of Great Britain, should be so far degraded as to become the humble ministers and executive officers of that parliament, the greater part of their own importance would be at an end. They have rejected, therefore, the proposal of being taxed by parliamentary requisition, and, like other ambitious and high-spirited men, have rather chosen to draw the sword in defence of their own importance. Towards the declension of the Roman republic, the allies of Rome, who had borne the principal burden of defending the state and extending the empire, demanded to be admitted to all the privileges of Roman citizens. Upon being refused, the social war broke out. During the course of that war, Rome granted those privileges to the greater part of them, one by one, and in proportion as they detached themselves from the general confederacy. The parliament of Great Britain insists upon taxing the colonies; and they refuse to be taxed by a parliament in which they are not represented. If to each colony which should detach itself from the general confederacy, Great Britain should allow such a number of representatives as suited the proportion of what it contributed to the public revenue of the empire, in consequence of its being subjected to the same taxes, and in compensation admitted to the same freedom of trade with its fellow-subjects at home; the number of its representatives to be augmented as the proportion of its contribution might afterwards augment; a new method of acquiring importance, a new and more dazzling object of ambition, would be presented to the leading men of each colony. Instead of piddling for the little prizes which are to be found in what may be called the paltry raffle of colony faction, they might then hope, from the presumption which men naturally have in their own ability and good fortune, to draw some of the great prizes which sometimes come from the wheel of the great state lottery of British politics. Unless this or some other method is fallen upon, and there seems to be none more obvious than this, of preserving the importance and of gratifying the ambition of the leading men of America, it is not very probable that they will ever voluntarily submit to us; and we ought to consider, that the blood which must be shed in forcing them to do so, is, every drop of it, the blood either of those who are, or of those whom we wish to have for our fellow-citizens. They are very weak who flatter themselves that, in the state to which things have come, our colonies will be easily conquered by force alone. The persons who now govern the resolutions of what they call their continental congress, feel in themselves at this moment a degree of importance which, perhaps, the greatest subjects in Europe scarce feel. From shopkeepers, tradesmen, and attorneys, they are become statesmen and legislators, and are employed in contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world. Five hundred different people, perhaps, who, in different ways, act immediately under the continental congress, and five hundred thousand, perhaps, who act under those five hundred, all feel, in the same manner, a proportionable rise in their own importance. Almost every individual of the governing party in America fills, at present, in his own fancy, a station superior, not only to what he had ever filled before, but to what he had ever expected to fill; and unless some new object of ambition is presented either to him or to his leaders, if he has the ordinary spirit of a man, he will die in defence of that station. It is a remark of the President Heynaut, that we now read with pleasure the account of many little transactions of the Ligue, which, when they happened, were not, perhaps, considered as very important pieces of news. But every man then, says he, fancied himself of some importance; and the innumerable memoirs which have come down to us from those times, were the greater part of them written by people who took pleasure in recording and magnifying events, in which they flattered themselves they had been considerable actors. How obstinately the city of Paris, upon that occasion, defended itself, what a dreadful famine it supported, rather than submit to the best, and afterwards the most beloved of all the French kings, is well known. The greater part of the citizens, or those who governed the greater part of them, fought in defence of their own importance, which, they foresaw, was to be at an end whenever the ancient government should be re-established. Our colonies, unless they can be induced to consent to a union, are very likely to defend themselves, against the best of all mother countries, as obstinately as the city of Paris did against one of the best of kings. The idea of representation was unknown in ancient times. When the people of one state were admitted to the right of citizenship in another, they had no other means of exercising that right, but by coming in a body to vote and deliberate with the people of that other state. The admission of the greater part of the inhabitants of Italy to the privileges of Roman citizens, completely ruined the Roman republic. It was no longer possible to distinguish between who was, and who was not, a Roman citizen. No tribe could know its own members. A rabble of any kind could be introduced into the assemblies of the people, could drive out the real citizens, and decide upon the affairs of the republic, as if they themselves had been such. But though America were to send fifty or sixty new representatives to parliament, the door-keeper of the house of commons could not find any great difficulty in distinguishing between who was and who was not a member. Though the Roman constitution, therefore, was necessarily ruined by the union of Rome with the allied states of Italy, there is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies. That constitution, on the contrary, would be completed by it, and seems to be imperfect without it. The assembly which deliberates and decides concerning the affairs of every part of the empire, in order to be properly informed, ought certainly to have representatives from every part of it. That this union, however, could be easily effectuated, or that difficulties, and great difficulties, might not occur in the execution, I do not pretend. I have yet heard of none, however, which appear insurmountable. The principal, perhaps, arise, not from the nature of things, but from the prejudices and opinions of the people, both on this and on the other side of the Atlantic. We on this side of the water are afraid lest the multitude of American representatives should overturn the balance of the constitution, and increase too much either the influence of the crown on the one hand, or the force of the democracy on the other. But if the number of American representatives were to be in proportion to the produce of American taxation, the number of people to be managed would increase exactly in proportion to the means of managing them, and the means of managing to the number of people to be managed. The monarchical and democratical parts of the constitution would, after the union, stand exactly in the same degree of relative force with regard to one another as they had done before. The people on the other side of the water are afraid lest their distance from the seat of government might expose them to many oppressions; but their representatives in parliament, of which the number ought from the first to be considerable, would easily be able to protect them from all oppression. The distance could not much weaken the dependency of the representative upon the constituent, and the former would still feel that he owed his seat in parliament, and all the consequence which he derived from it, to the good-will of the latter. It would be the interest of the former, therefore, to cultivate that good-will, by complaining, with all the authority of a member of the legislature, of every outrage which any civil or military officer might be guilty of in those remote parts of the empire. The distance of America from the seat of government, besides, the natives of that country might flatter themselves, with some appearance of reason too, would not be of very long continuance. Such has hitherto been the rapid progress of that country in wealth, population, and improvement, that in the course of little more than a century, perhaps, the produce of the American might exceed that of the British taxation. The seat of the empire would then naturally remove itself to that part of the empire which contributed most to the general defence and support of the whole. The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind. Their consequences have already been great; but, in the short period of between two and three centuries which has elapsed since these discoveries were made, it is impossible that the whole extent of their consequences can have been seen. What benefits or what misfortunes to mankind may hereafter result from those great events, no human wisdom can foresee. By uniting in some measure the most distant parts of the world, by enabling them to relieve one another's wants, to increase one another's enjoyments, and to encourage one another's industry, their general tendency would seem to be beneficial. To the natives, however, both of the East and West Indies, all the commercial benefits which can have resulted from those events have been sunk and lost in the dreadful misfortunes which they have occasioned. These misfortunes, however, seem to have arisen rather from accident than from any thing in the nature of those events themselves. At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans, that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker; and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which, by inspiring mutual fear, can alone overawe the injustice of independent nations into some sort of respect for the rights of one another. But nothing seems more likely to establish this equality of force, than that mutual communication of knowledge, and of all sorts of improvements, which an extensive commerce from all countries to all countries naturally, or rather necessarily, carries along with it. In the mean time, one of the principal effects of those discoveries has been, to raise the mercantile system to a degree of splendour and glory which it could never otherwise have attained to. It is the object of that system to enrich a great nation, rather by trade and manufactures than by the improvement and cultivation of land, rather by the industry of the towns than by that of the country. But in consequence of those discoveries, the commercial towns of Europe, instead of being the manufacturers and carriers for but a very small part of the world (that part of Europe which is washed by the Atlantic ocean, and the countries which lie round the Baltic and Mediterranean seas), have now become the manufacturers for the numerous and thriving cultivators of America, and the carriers, and in some respects the manufacturers too, for almost all the different nations of Asia, Africa, and America. Two new worlds have been opened to their industry, each of them much greater and more extensive than the old one, and the market of one of them growing still greater and greater every day. The countries which possess the colonies of America, and which trade directly to the East Indies, enjoy indeed the whole show and splendour of this great commerce. Other countries, however, notwithstanding all the invidious restraints by which it is meant to exclude them, frequently enjoy a greater share of the real benefit of it. The colonies of Spain and Portugal, for example, give more real encouragement to the industry of other countries than to that of Spain and Portugal. In the single article of linen alone, the consumption of those colonies amounts, it is said (but I do not pretend to warrant the quantity), to more than three millions sterling a-year. But this great consumption is almost entirely supplied by France, Flanders, Holland, and Germany. Spain and Portugal furnish but a small part of it. The capital which supplies the colonies with this great quantity of linen, is annually distributed among, and furnishes a revenue to, the inhabitants of those other countries. The profits of it only are spent in Spain and Portugal, where they help to support the sumptuous profusion of the merchants of Cadiz and Lisbon. Even the regulations by which each nation endeavours to secure to itself the exclusive trade of its own colonies, are frequently more hurtful to the countries in favour of which they are established, than to those against which they are established. The unjust oppression of the industry of other countries falls back, if I may say so, upon the heads of the oppressors, and crushes their industry more than it does that of those other countries. By those regulations, for example, the merchant of Hamburg must send the linen which he destines for the American market to London, and he must bring back from thence the tobacco which he destines for the German market; because he can neither send the one directly to America, nor bring the other directly from thence. By this restraint he is probably obliged to sell the one somewhat cheaper, and to buy the other somewhat dearer, than he otherwise might have done; and his profits are probably somewhat abridged by means of it. In this trade, however, between Hamburg and London, he certainly receives the returns of his capital much more quickly than he could possibly have done in the direct trade to America, even though we should suppose, what is by no means the case, that the payments of America were as punctual as those of London. In the trade, therefore, to which those regulations confine the merchant of Hamburg, his capital can keep in constant employment a much greater quantity of German industry than he possibly could have done in the trade from which he is excluded. Though the one employment, therefore, may to him perhaps be less profitable than the other, it cannot be less advantageous to his country. It is quite otherwise with the employment into which the monopoly naturally attracts, if I may say so, the capital of the London merchant. That employment may, perhaps, be more profitable to him than the greater part of other employments; but on account of the slowness of the returns, it cannot be more advantageous to his country. After all the unjust attempts, therefore, of every country in Europe to engross to itself the whole advantage of the trade of its own colonies, no country has yet been able to engross to itself any thing but the expense of supporting in time of peace, and of defending in time of war, the oppressive authority which it assumes over them. The inconveniencies resulting from the possession of its colonies, every country has engrossed to itself completely. The advantages resulting from their trade, it has been obliged to share with many other countries. At first sight, no doubt, the monopoly of the great commerce of America naturally seems to be an acquisition of the highest value. To the undiscerning eye of giddy ambition it naturally presents itself, amidst the confused scramble of politics and war, as a very dazzling object to fight for. The dazzling splendour of the object, however, the immense greatness of the commerce, is the very quality which renders the monopoly of it hurtful, or which makes one employment, in its own nature necessarily less advantageous to the country than the greater part of other employments, absorb a much greater proportion of the capital of the country than what would otherwise have gone to it. The mercantile stock of every country, it has been shown in the second book, naturally seeks, if one may say so, the employment most advantageous to that country. If it is employed in the carrying trade, the country to which it belongs becomes the emporium of the goods of all the countries whose trade that stock carries on. But the owner of that stock necessarily wishes to dispose of as great a part of those goods as he can at home. He thereby saves himself the trouble, risk, and expense of exportation; and he will upon that account be glad to sell them at home, not only for a much smaller price, but with somewhat a smaller profit, than he might expect to make by sending them abroad. He naturally, therefore, endeavours as much as he can to turn his carrying trade into a foreign trade of consumption. If his stock, again, is employed in a foreign trade of consumption, he will, for the same reason, be glad to dispose of, at home, as great a part as he can of the home goods which he collects in order to export to some foreign market, and he will thus endeavour, as much as he can, to turn his foreign trade of consumption into a home trade. The mercantile stock of every country naturally courts in this manner the near, and shuns the distant employment; naturally courts the employment in which the returns are frequent, and shuns that in which they are distant and slow; naturally courts the employment in which it can maintain the greatest quantity of productive labour in the country to which it belongs, or in which its owner resides, and shuns that in which it can maintain there the smallest quantity. It naturally courts the employment which in ordinary cases is most advantageous, and shuns that which in ordinary cases is least advantageous to that country. But if, in any one of these distant employments, which in ordinary cases are less advantageous to the country, the profit should happen to rise somewhat higher than what is sufficient to balance the natural preference which is given to nearer employments, this superiority of profit will draw stock from those nearer employments, till the profits of all return to their proper level. This superiority of profit, however, is a proof that, in the actual circumstances of the society, those distant employments are somewhat understocked in proportion to other employments, and that the stock of the society is not distributed in the properest manner among all the different employments carried on in it. It is a proof that something is either bought cheaper or sold dearer than it ought to be, and that some particular class of citizens is more or less oppressed, either by paying more, or by getting less than what is suitable to that equality which ought to take place, and which naturally does take place, among all the different classes of them. Though the same capital never will maintain the same quantity of productive labour in a distant as in a near employment, yet a distant employment may be as necessary for the welfare of the society as a near one; the goods which the distant employment deals in being necessary, perhaps, for carrying on many of the nearer employments. But if the profits of those who deal in such goods are above their proper level, those goods will be sold dearer than they ought to be, or somewhat above their natural price, and all those engaged in the nearer employments will be more or less oppressed by this high price. Their interest, therefore, in this case, requires, that some stock should be withdrawn from those nearer employments, and turned towards that distant one, in order to reduce its profits to their proper level, and the price of the goods which it deals in to their natural price. In this extraordinary case, the public interest requires that some stock should be withdrawn from those employments which, in ordinary cases, are more advantageous, and turned towards one which, in ordinary cases, is less advantageous to the public; and, in this extraordinary case, the natural interests and inclinations of men coincide as exactly with the public interests as in all other ordinary cases, and lead them to withdraw stock from the near, and to turn it towards the distant employments. It is thus that the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in ordinary cases, are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them, and the rise of it in all others, immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it, as nearly as possible in the proportion which is most agreeable to the interest of the whole society. All the different regulations of the mercantile system necessarily derange more or less this natural and most advantageous distribution of stock. But those which concern the trade to America and the East Indies derange it, perhaps, more than any other; because the trade to those two great continents absorbs a greater quantity of stock than any two other branches of trade. The regulations, however, by which this derangement is effected in those two different branches of trade, are not altogether the same. Monopoly is the great engine of both; but it is a different sort of monopoly. Monopoly of one kind or another, indeed, seems to be the sole engine of the mercantile system. In the trade to America, every nation endeavours to engross as much as possible the whole market of its own colonies, by fairly excluding all other nations from any direct trade to them. During the greater part of the sixteenth century, the Portuguese endeavoured to manage the trade to the East Indies in the same manner, by claiming the sole right of sailing in the Indian seas, on account of the merit of having first found out the road to them. The Dutch still continue to exclude all other European nations from any direct trade to their spice islands. Monopolies of this kind are evidently established against all other European nations, who are thereby not only excluded from a trade to which it might be convenient for them to turn some part of their stock, but are obliged to buy the goods which that trade deals in, somewhat dearer than if they could import them themselves directly from the countries which produced them. But since the fall of the power of Portugal, no European nation has claimed the exclusive right of sailing in the Indian seas, of which the principal ports are now open to the ships of all European nations. Except in Portugal, however, and within these few years in France, the trade to the East Indies has, in every European country, been subjected to an exclusive company. Monopolies of this kind are properly established against the very nation which erects them. The greater part of that nation are thereby not only excluded from a trade to which it might be convenient for them to turn some part of their stock, but are obliged to buy the goods which that trade deals in somewhat dearer than if it was open and free to all their countrymen. Since the establishment of the English East India company, for example, the other inhabitants of England, over and above being excluded from the trade, must have paid, in the price of the East India goods which they have consumed, not only for all the extraordinary profits which the company may have made upon those goods in consequence of their monopoly, but for all the extraordinary waste which the fraud and abuse inseparable from the management of the affairs of so great a company must necessarily have occasioned. The absurdity of this second kind of monopoly, therefore, is much more manifest than that of the first. Both these kinds of monopolies derange more or less the natural distribution of the stock of the society; but they do not always derange it in the same way. Monopolies of the first kind always attract to the particular trade in which they are established a greater proportion of the stock of the society than what would go to that trade of its own accord. Monopolies of the second kind may sometimes attract stock towards the particular trade in which they are established, and sometimes repel it from that trade, according to different circumstances. In poor countries, they naturally attract towards the trade more stock than would otherwise go to it. In rich countries, they naturally repel from it a good deal of stock which would otherwise go to it. Such poor countries as Sweden and Denmark, for example, would probably have never sent a single ship to the East Indies, had not the trade been subjected to an exclusive company. The establishment of such a company necessarily encourages adventurers. Their monopoly secures them against all competitors in the home market, and they have the same chance for foreign markets with the traders of other nations. Their monopoly shows them the certainty of a great profit upon a considerable quantity of goods, and the chance of a considerable profit upon a great quantity. Without such extraordinary encouragement, the poor traders of such poor countries would probably never have thought of hazarding their small capitals in so very distant and uncertain an adventure as the trade to the East Indies must naturally have appeared to them. Such a rich country as Holland, on the contrary, would probably, in the case of a free trade, send many more ships to the East Indies than it actually does. The limited stock of the Dutch East India company probably repels from that trade many great mercantile capitals which would otherwise go to it. The mercantile capital of Holland is so great, that it is, as it were, continually overflowing, sometimes into the public funds of foreign countries, sometimes into loans to private traders and adventurers of foreign countries, sometimes into the most round-about foreign trades consumption, and sometimes into the carrying trade. All near employments being completely filled up, all the capital which can be placed in them with any tolerable profit being already placed in them, the capital of Holland necessarily flows towards the most distant employments. The trade to the East Indies, if it were altogether free, would probably absorb the greater part of this redundant capital. The East Indies offer a market both for the manufactures of Europe, and for the gold and silver, as well as for the several other productions of America, greater and more extensive than both Europe and America put together. Every derangement of the natural distribution of stock is necessarily hurtful to the society in which it takes place; whether it be by repelling from a particular trade the stock which would otherwise go to it, or by attracting towards a particular trade that which would not otherwise come to it. If, without any exclusive company, the trade of Holland to the East Indies would be greater than it actually is, that country must suffer a considerable loss, by part of its capital being excluded from the employment most convenient for that port. And, in the same manner, if, without an exclusive company, the trade of Sweden and Denmark to the East Indies would be less than it actually is, or, what perhaps is more probable, would not exist at all, those two countries must likewise suffer a considerable loss, by part of their capital being drawn into an employment which must be more or less unsuitable to their present circumstances. Better for them, perhaps, in the present circumstances, to buy East India goods of other nations, even though they should pay somewhat dearer, than to turn so great a part of their small capital to so very distant a trade, in which the returns are so very slow, in which that capital can maintain so small a quantity of productive labour at home, where productive labour is so much wanted, where so little is done, and where so much is to do. Though without an exclusive company, therefore, a particular country should not be able to carry on any direct trade to the East Indies, it will not from thence follow, that such a company ought to be established there, but only that such a country ought not, in these circumstances, to trade directly to the East Indies. That such companies are not in general necessary for carrying on the East India trade, is sufficiently demonstrated by the experience of the Portuguese, who enjoyed almost the whole of it for more than a century together, without any exclusive company. No private merchant, it has been said, could well have capital sufficient to maintain factors and agents in the different ports of the East Indies, in order to provide goods for the ships which he might occasionally send thither; and yet, unless he was able to do this, the difficulty of finding a cargo might frequently make his ships lose the season for returning; and the expense of so long a delay would not only eat up the whole profit of the adventure, but frequently occasion a very considerable loss. This argument, however, if it proved any thing at all, would prove that no one great branch of trade could be carried on without an exclusive company, which is contrary to the experience of all nations. There is no great branch of trade, in which the capital of any one private merchant is sufficient for carrying on all the subordinate branches which must be carried on, in order to carry on the principal one. But when a nation is ripe for any great branch of trade, some merchants naturally turn their capitals towards some principal, and some towards the subordinate branches of it; and though all the different branches of it are in this manner carried on, yet it very seldom happens that they are all carried on by the capital of one private merchant. If a nation, therefore, is ripe for the East India trade, a certain portion of its capital will naturally divide itself among all the different branches of that trade. Some of its merchants will find it for their interest to reside in the East Indies, and to employ their capitals there in providing goods for the ships which are to be sent out by other merchants who reside in Europe. The settlements which different European nations have obtained in the East Indies, if they were taken from the exclusive companies to which they at present belong, and put under the immediate protection of the sovereign, would render this residence both safe and easy, at least to the merchants of the particular nations to whom those settlements belong. If, at any particular time, that part of the capital of any country which of its own accord tended and inclined, if I may say so, towards the East India trade, was not sufficient for carrying on all those different branches of it, it would be a proof that, at that particular time, that country was not ripe for that trade, and that it would do better to buy for some time, even at a higher price, from other European nations, the East India goods it had occasion for, than to import them itself directly from the East Indies. What it might lose by the high price of those goods, could seldom be equal to the loss which it would sustain by the distraction of a large portion of its capital from other employments more necessary, or more useful, or more suitable to its circumstances and situation, than a direct trade to the East Indies. Though the Europeans possess many considerable settlements both upon the coast of Africa and in the East Indies, they have not yet established, in either of those countries, such numerous and thriving colonies as those in the islands and continent of America. Africa, however, as well as several of the countries comprehended under the general name of the East Indies, is inhabited by barbarous nations. But those nations were by no means so weak and defenceless as the miserable and helpless Americans; and in proportion to the natural fertility of the countries which they inhabited, they were, besides, much more populous. The most barbarous nations, either of Africa or of the East Indies, were shepherds; even the Hottentots were so. But the natives of every part of America, except Mexico and Peru, were only hunters; and the difference is very great between the number of shepherds and that of hunters, whom the same extent of equally fertile territory can maintain. In Africa and the East Indies, therefore, it was more difficult to displace the natives, and to extend the European plantations over the greater part of the lands of the original inhabitants. The genius of exclusive companies, besides, is unfavourable, it has already been observed, to the growth of new colonies, and has probably been the principal cause of the little progress which they have made in the East Indies. The Portuguese carried on the trade both to Africa and the East Indies, without any exclusive companies; and their settlements at Congo, Angola, and Benguela, on the coast of Africa, and at Goa in the East Indies, though much depressed by superstition and every sort of bad government, yet bear some resemblance to the colonies of America, and are partly inhabited by Portuguese who have been established there for several generations. The Dutch settlements at the Cape of Good Hope and at Batavia, are at present the most considerable colonies which the Europeans have established, either in Africa or in the East Indies; and both those settlements are peculiarly fortunate in their situation. The Cape of Good Hope was inhabited by a race of people almost as barbarous, and quite as incapable of defending themselves, as the natives of America. It is, besides, the half-way house, if one may say so, between Europe and the East Indies, at which almost every European ship makes some stay, both in going and returning. The supplying of those ships with every sort of fresh provisions, with fruit, and sometimes with wine, affords alone a very extensive market for the surplus produce of the colonies. What the Cape of Good Hope is between Europe and every part of the East Indies, Batavia is between the principal countries of the East Indies. It lies upon the most frequented road from Indostan to China and Japan, and is nearly about mid-way upon that road. Almost all the ships too, that sail between Europe and China, touch at Batavia; and it is, over and above all this, the centre and principal mart of what is called the country trade of the East Indies; not only of that part of it which is carried on by Europeans, but of that which is carried on by the native Indians; and vessels navigated by the inhabitants of China and Japan, of Tonquin, Malacca, Cochin-China, and the island of Celebes, are frequently to be seen in its port. Such advantageous situations have enabled those two colonies to surmount all the obstacles which the oppressive genius of an exclusive company may have occasionally opposed to their growth. They have enabled Batavia to surmount the additional disadvantage of perhaps the most unwholesome climate in the world. The English and Dutch companies, though they have established no considerable colonies, except the two above mentioned, have both made considerable conquests in the East Indies. But in the manner in which they both govern their new subjects, the natural genius of an exclusive company has shewn itself most distinctly. In the spice islands, the Dutch are said to burn all the spiceries which a fertile season produces, beyond what they expect to dispose of in Europe with such a profit as they think sufficient. In the islands where they have no settlements, they give a premium to those who collect the young blossoms and green leaves of the clove and nutmeg trees, which naturally grow there, but which this savage policy has now, it is said, almost completely extirpated. Even in the islands where they have settlements, they have very much reduced, it is said, the number of those trees. If the produce even of their own islands was much greater than what suited their market, the natives, they suspect, might find means to convey some part of it to other nations; and the best way, they imagine, to secure their own monopoly, is to take care that no more shall grow than what they themselves carry to market. By different arts of oppression, they have reduced the population of several of the Moluccas nearly to the number which is sufficient to supply with fresh provisions, and other necessaries of life, their own insignificant garrisons, and such of their ships as occasionally come there for a cargo of spices. Under the government even of the Portuguese, however, those islands are said to have been tolerably well inhabited. The English company have not yet had time to establish in Bengal so perfectly destructive a system. The plan of their government, however, has had exactly the same tendency. It has not been uncommon, I am well assured, for the chief, that is, the first clerk of a factory, to order a peasant to plough up a rich field of poppies, and sow it with rice, or some other grain. The pretence was, to prevent a scarcity of provisions; but the real reason, to give the chief an opportunity of selling at a better price a large quantity of opium which he happened then to have upon hand. Upon other occasions, the order has been reversed; and a rich field of rice or other grain has been ploughed up, in order to make room for a plantation of poppies, when the chief foresaw that extraordinary profit was likely to be made by opium. The servants of the company have, upon several occasions, attempted to establish in their own favour the monopoly of some of the most important branches, not only of the foreign, but of the inland trade of the country. Had they been allowed to go on, it is impossible that they should not, at some time or another, have attempted to restrain the production of the particular articles of which they had thus usurped the monopoly, not only to the quantity which they themselves could purchase, but to that which they could expect to sell with such a profit as they might think sufficient. In the course of a century or two, the policy of the English company would, in this manner, have probably proved as completely destructive as that of the Dutch. Nothing, however, can be more directly contrary to the real interest of those companies, considered as the sovereigns of the countries which they have conquered, than this destructive plan. In almost all countries, the revenue of the sovereign is drawn from that of the people. The greater the revenue of the people, therefore, the greater the annual produce of their land and labour, the more they can afford to the sovereign. It is his interest, therefore, to increase as much as possible that annual produce. But if this is the interest of every sovereign, it is peculiarly so of one whose revenue, like that of the sovereign of Bengal, arises chiefly from a land-rent. That rent must necessarily be in proportion to the quantity and value of the produce; and both the one and the other must depend upon the extent of the market. The quantity will always be suited, with more or less exactness, to the consumption of those who can afford to pay for it; and the price which they will pay will always be in proportion to the eagerness of their competition. It is the interest of such a sovereign, therefore, to open the most extensive market for the produce of his country, to allow the most perfect freedom of commerce, in order to increase as much as possible the number and competition of buyers; and upon this account to abolish, not only all monopolies, but all restraints upon the transportation of the home produce from one part of the country to another, upon its exportation to foreign countries, or upon the importation of goods of any kind for which it can be exchanged. He is in this manner most likely to increase both the quantity and value of that produce, and consequently of his own share of it, or of his own revenue. But a company of merchants, are, it seems, incapable of considering themselves as sovereigns, even after they have become such. Trade, or buying in order to sell again, they still consider as their principal business, and by a strange absurdity, regard the character of the sovereign as but an appendix to that of the merchant; as something which ought to be made subservient to it, or by means of which they may be enabled to buy cheaper in India, and thereby to sell with a better profit in Europe. They endeavour, for this purpose, to keep out as much as possible all competitors from the market of the countries which are subject to their government, and consequently to reduce, at least, some part of the surplus produce of those countries to what is barely sufficient for supplying their own demand, or to what they can expect to sell in Europe, with such a profit as they may think reasonable. Their mercantile habits draw them in this manner, almost necessarily, though perhaps insensibly, to prefer, upon all ordinary occasions, the little and transitory profit of the monopolist to the great and permanent revenue of the sovereign; and would gradually lead them to treat the countries subject to their government nearly as the Dutch treat the Moluccas. It is the interest of the East India company, considered as sovereigns, that the European goods which are carried to their Indian dominions should be sold there as cheap as possible; and that the Indian goods which are brought from thence should bring there as good a price, or should be sold there as dear as possible. But the reverse of this is their interest as merchants. As sovereigns, their interest is exactly the same with that of the country which they govern. As merchants, their interest is directly opposite to that interest. But if the genius of such a government, even as to what concerns its direction in Europe, is in this manner essentially, and perhaps incurably faulty, that of its administration in India is still more so. That administration is necessarily composed of a council of merchants, a profession no doubt extremely respectable, but which in no country in the world carries along with it that sort of authority which naturally overawes the people, and without force commands their willing obedience. Such a council can command obedience only by the military force with which they are accompanied; and their government is, therefore, necessarily military and despotical. Their proper business, however, is that of merchants. It is to sell, upon their master's account, the European goods consigned to them, and to buy, in return, Indian goods for the European market. It is to sell the one as dear, and to buy the other as cheap as possible, and consequently to exclude, as much as possible, all rivals from the particular market where they keep their shop. The genius of the administration, therefore, so far as concerns the trade of the company, is the same as that of the direction. It tends to make government subservient to the interest of monopoly, and consequently to stunt the natural growth of some parts, at least, of the surplus produce of the country, to what is barely sufficient for answering the demand of the company. All the members of the administration, besides, trade more or less upon their own account; and it is in vain to prohibit them from doing so. Nothing can be more completely foolish than to expect that the clerks of a great counting-house, at ten thousand miles distance, and consequently almost quite out of sight, should, upon a simple order from their master, give up at once doing any sort of business upon their own account; abandon for ever all hopes of making a fortune, of which they have the means in their hands; and content themselves with the moderate salaries which those masters allow them, and which, moderate as they are, can seldom be augmented, being commonly as large as the real profits of the company trade can afford. In such circumstances, to prohibit the servants of the company from trading upon their own account, can have scarce any other effect than to enable its superior servants, under pretence of executing their master's order, to oppress such of the inferior ones as have had the misfortune to fall under their displeasure. The servants naturally endeavour to establish the same monopoly in favour of their own private trade as of the public trade of the company. If they are suffered to act as they could wish, they will establish this monopoly openly and directly, by fairly prohibiting all other people from trading in the articles in which they choose to deal; and this, perhaps, is the best and least oppressive way of establishing it. But if, by an order from Europe, they are prohibited from doing this, they will, notwithstanding, endeavour to establish a monopoly of the same kind secretly and indirectly, in a way that is much more destructive to the country. They will employ the whole authority of government, and pervert the administration of justice, in order to harass and ruin those who interfere with them in any branch of commerce, which by means of agents, either concealed, or at least not publicly avowed, they may choose to carry on. But the private trade of the servants will naturally extend to a much greater variety of articles than the public trade of the company. The public trade of the company extends no further than the trade with Europe, and comprehends a part only of the foreign trade of the country. But the private trade of the servants may extend to all the different branches both of its inland and foreign trade. The monopoly of the company can tend only to stunt the natural growth of that part of the surplus produce which, in the case of a free trade, would be exported to Europe. That of the servants tends to stunt the natural growth of every part of the produce in which they choose to deal; of what is destined for home consumption, as well as of what is destined for exportation; and consequently to degrade the cultivation of the whole country, and to reduce the number of its inhabitants. It tends to reduce the quantity of every sort of produce, even that of the necessaries of life, whenever the servants of the country choose to deal in them, to what those servants can both afford to buy and expect to sell with such a profit as pleases them. From the nature of their situation, too, the servants must be more disposed to support with rigourous severity their own interest, against that of the country which they govern, than their masters can be to support theirs. The country belongs to their masters, who cannot avoid having some regard for the interest of what belongs to them; but it does not belong to the servants. The real interest of their masters, if they were capable of understanding it, is the same with that of the country;[42] and it is from ignorance chiefly, and the meanness of mercantile prejudice, that they ever oppress it. But the real interest of the servants is by no means the same with that of the country, and the most perfect information would not necessarily put an end to their oppressions. The regulations, accordingly, which have been sent out from Europe, though they have been frequently weak, have upon most occasions been well meaning. More intelligence, and perhaps less good meaning, has sometimes appeared in those established by the servants in India. It is a very singular government in which every member of the administration wishes to get out of the country, and consequently to have done with the government, as soon as he can, and to whose interest, the day after he has left it, and carried his whole fortune with him, it is perfectly indifferent though the whole country was swallowed up by an earthquake. I mean not, however, by any thing which I have here said, to throw any odious imputation upon the general character of the servants of the East India company, and much less upon that of any particular persons. It is the system of government, the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves. In war and negotiation, the councils of Madras and Calcutta, have upon several occasions, conducted themselves with a resolution and decisive wisdom, which would have done honour to the senate of Rome in the best days of that republic. The members of those councils, however, had been bred to professions very different from war and politics. But their situation alone, without education, experience, or even example, seems to have formed in them all at once the great qualities which it required, and to have inspired them both with abilities and virtues which they themselves could not well know that they possessed. If upon some occasions, therefore, it has animated them to actions of magnanimity which could not well have been expected from them, we should not wonder if, upon others, it has prompted them to exploits of somewhat a different nature. Such exclusive companies, therefore, are nuisances in every respect; always more or less inconvenient to the countries in which they are established, and destructive to those which have the misfortune to fall under their government. CHAP. VIII. CONCLUSION OF THE MERCANTILE SYSTEM. Though the encouragement of exportation, and the discouragement of importation, are the two great engines by which the mercantile system proposes to enrich every country, yet, with regard to some particular commodities, it seems to follow an opposite plan: to discourage exportation, and to encourage importation. Its ultimate object, however, it pretends, is always the same, to enrich the country by an advantageous balance of trade. It discourages the exportation of the materials of manufacture, and of the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets; and by restraining, in this manner, the exportation of a few commodities, of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities. I do not observe, at least in our statute book, any encouragement given to the importation of the instruments of trade. When manufactures have advanced to a certain pitch of greatness, the fabrication of the instruments of trade becomes itself the object of a great number of very important manufactures. To give any particular encouragement to the importation of such instruments, would interfere too much with the interest of those manufactures. Such importation, therefore, instead of being encouraged, has frequently been prohibited. Thus the importation of wool cards, except from Ireland, or when brought in as wreck or prize goods, was prohibited by the 3d of Edward IV.; which prohibition was renewed by the 39th of Elizabeth, and has been continued and rendered perpetual by subsequent laws. The importation of the materials of manufacture has sometimes been encouraged by an exemption from the duties to which other goods are subject, and sometimes by bounties. The importation of sheep's wool from several different countries, of cotton wool from all countries, of undressed flax, of the greater part of dyeing drugs, of the greater part of undressed hides from Ireland, or the British colonies, of seal skins from the British Greenland fishery, of pig and bar iron from the British colonies, as well as of several other materials of manufacture, has been encouraged by an exemption from all duties, if properly entered at the custom-house. The private interest of our merchants and manufacturers may, perhaps, have extorted from the legislature these exemptions, as well as the greater part of our other commercial regulations. They are, however, perfectly just and reasonable; and if, consistently with the necessities of the state, they could be extended to all the other materials of manufacture, the public would certainly be a gainer. The avidity of our great manufacturers, however, has in some cases extended these exemptions a good deal beyond what can justly be considered as the rude materials of their work. By the 24th Geo. II. chap. 46, a small duty of only 1d. the pound was imposed upon the importation of foreign brown linen yarn, instead of much higher duties, to which it had been subjected before, viz. of 6d. the pound upon sail yarn, of 1s. the pound upon all French and Dutch yarn, and of L.2 : 13 : 4 upon the hundred weight of all spruce or Muscovia yarn. But our manufacturers were not long satisfied with this reduction: by the 29th of the same king, chap. 15, the same law which gave a bounty upon the exportation of British and Irish linen, of which the price did not exceed 18d. the yard, even this small duty upon the importation of brown linen yarn was taken away. In the different operations, however, which are necessary for the preparation of linen yarn, a good deal more industry is employed, than in the subsequent operation of preparing linen cloth from linen yarn. To say nothing of the industry of the flax-growers and flax-dressers, three or four spinners at least are necessary in order to keep one weaver in constant employment; and more than four-fifths of the whole quantity of labour necessary for the preparation of linen cloth, is employed in that of linen yarn; but our spinners are poor people; women commonly scattered about in all different parts of the country, without support or protection. It is not by the sale of their work, but by that of the complete work of the weavers, that our great master manufactures make their profits. As it is their interest to sell the complete manufacture as dear, so it is to buy the materials as cheap as possible. By extorting from the legislature bounties upon the exportation of their own linen, high duties upon the importation of all foreign linen, and a total prohibition of the home consumption of some sorts of French linen, they endeavour to sell their own goods as dear as possible. By encouraging the importation of foreign linen yarn, and thereby bringing it into competition with that which is made by our own people, they endeavour to buy the work of the poor spinners as cheap as possible. They are as intent to keep down the wages of their own weavers, as the earnings of the poor spinners; and it is by no means for the benefit of the workmen that they endeavour either to raise the price of the complete work, or to lower that of the rude materials. It is the industry which is carried on for the benefit of the rich and the powerful, that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and the indigent is too often either neglected or oppressed. Both the bounty upon the exportation of linen, and the exemption from the duty upon the importation of foreign yarn, which were granted only for fifteen years, but continued by two different prolongations, expire with the end of the session of parliament which shall immediately follow the 24th of June 1786. The encouragement given to the importation of the materials of manufacture by bounties, has been principally confined to such as were imported from our American plantations. The first bounties of this kind were those granted about the beginning of the present century, upon the importation of naval stores from America. Under this denomination were comprehended timber fit for masts, yards, and bowsprits; hemp, tar, pitch, and turpentine. The bounty, however, of L.1 the ton upon masting-timber, and that of L.6 the ton upon hemp, were extended to such as should be imported into England from Scotland. Both these bounties continued, without any variation, at the same rate, till they were severally allowed to expire; that upon hemp on the 1st of January 1741, and that upon masting-timber at the end of the session of parliament immediately following the 24th June 1781. The bounties upon the importation of tar, pitch, and turpentine, underwent, during their continuance, several alterations. Originally, that upon tar was L.4 the ton; that upon pitch the same; and that upon turpentine L.3 the ton. The bounty of L.4 the ton upon tar was afterwards confined to such as had been prepared in a particular manner; this upon other good, clean, and merchantable tar was reduced to L.2, 4s. the ton. The bounty upon pitch was likewise reduced to L.1, and that upon turpentine to L.1 : 10s. the ton. The second bounty upon the importation of any of the materials of manufacture, according to the order of time, was that granted by the 21st Geo. II. chap. 30, upon the importation of indigo from the British plantations. When the plantation indigo was worth three-fourths of the price of the best French indigo, it was, by this act, entitled to a bounty of 6d. the pound. This bounty, which, like most others was granted only for a limited time, was continued by several prolongations, but was reduced to 4d. the pound. It was allowed to expire with the end of the session of parliament which followed the 25th March 1781. The third bounty of this kind was that granted (much about the time that we were beginning sometimes to court, and sometimes to quarrel with our American colonies), by the 4th Geo. III. chap. 26, upon the importation of hemp, or undressed flax, from the British plantations. This bounty was granted for twenty-one years, from the 24th June 1764 to the 24th June 1785. For the first seven years, it was to be at the rate of L.8 the ton; for the second at L.6; and for the third at L.4. It was not extended to Scotland, of which the climate (although hemp is sometimes times raised there in small quantities, and of an inferior quality) is not very fit for that produce. Such a bounty upon the importation of Scotch flax in England would have been too great a discouragement to the native produce of the southern part of the united kingdom. The fourth bounty of this kind was that granted by the 5th Geo. III. chap. 45, upon the importation of wood from America. It was granted for nine years from the 1st January 1766 to the 1st January 1775. During the first three years, it was to be for every hundred-and-twenty good deals, at the rate of L.1, and for every load containing fifty cubic feet of other square timber, at the rate of 12s. For the second three years, it was for deals, to be at the rate of 15s., and for other squared timber at the rate of 8s.; and for the third three years, it was for deals, to be at the rate of 10s.; and for every other squared timber at the rate of 5s. The fifth bounty of this kind was that granted by the 9th Geo. III. chap. 38, upon the importation of raw silk from the British plantations. It was granted for twenty-one years, from the 1st January 1770, to the 1st January 1791. For the first seven years, it was to be at the rate of L.25 for every hundred pounds value; for the second, at L.20; and for the third, at L.15. The management of the silk-worm, and the preparation of silk, requires so much hand-labour, and labour is so very dear in America, that even this great bounty, I have been informed, was not likely to produce any considerable effect. The sixth bounty of this kind was that granted by 11th Geo. III. chap. 50, for the importation of pipe, hogshead, and barrel-staves and heading from the British plantations. It was granted for nine years, from 1st January 1772 to the 1st January 1781. For the first three years, it was, for a certain quantity of each, to be at the rate of L.6; for the second three years at L.4; and for the third three years at L.2. The seventh and last bounty of this kind was that granted by the 19th Geo. III. chap. 37, upon the importation of hemp from Ireland. It was granted in the same manner as that for the importation of hemp and undressed flax from America, for twenty-one years, from the 24th June 1779 to the 24th June 1800. The term is divided likewise into three periods, of seven years each; and in each of those periods, the rate of the Irish bounty is the same with that of the American. It does not, however, like the American bounty, extend to the importation of undressed flax. It would have been too great a discouragement to the cultivation of that plant in Great Britain. When this last bounty was granted, the British and Irish legislatures were not in much better humour with one another, than the British and American had been before. But this boon to Ireland, it is to be hoped, has been granted under more fortunate auspices than all those to America. The same commodities, upon which we thus gave bounties, when imported from America, were subjected to considerable duties when imported from any other country. The interest of our American colonies was regarded as the same with that of the mother country. Their wealth was considered as our wealth. Whatever money was sent out to them, it was said, came all back to us by the balance of trade, and we could never become a farthing the poorer by any expense which we could lay out upon them. They were our own in every respect, and it was an expense laid out upon the improvement of our own property, and for the profitable employment of our own people. It is unnecessary, I apprehend, at present to any any thing further, in order to expose the folly of a system which fatal experience has now sufficiently exposed. Had our American colonies really been a part of Great Britain, those bounties might have been considered as bounties upon production, and would still have been liable to all the objections to which such bounties are liable, but to no other. The exportation of the materials of manufacture is sometimes discouraged by absolute prohibitions, and sometimes by high duties. Our woollen manufacturers have been more successful than any other class of workmen, in persuading the legislature that the prosperity of the nation depended upon the success and extension of their particular business. They have not only obtained a monopoly against the consumers, by an absolute prohibition of importing woollen cloths from any foreign country; but they have likewise obtained another monopoly against the sheep farmers and growers of wool, by a similar prohibition of the exportation of live sheep and wool. The severity of many of the laws which have been enacted for the security of the revenue is very justly complained of, as imposing heavy penalties upon actions which, antecedent to the statutes that declared them to be crimes, had always been understood to be innocent. But the cruellest of our revenue laws, I will venture to affirm, are mild and gentle, in comparison to some of those which the clamour of our merchants and manufacturers has extorted from the legislature, for the support of their own absurd and oppressive monopolies. Like the laws of Draco, these laws may be said to be all written in blood. By the 8th of Elizabeth, chap. 3, the exporter of sheep, lambs, or rams, was for the first offence, to forfeit all his goods for ever, to suffer a year's imprisonment, and then to have his left hand cut off on a market town, upon a market day, to be there nailed up; and for the second offence, to be adjudged a felon, and to suffer death accordingly. To prevent the breed of our sheep from being propagated in foreign countries, seems to have been the object of this law. By the 13th and 14th of Charles II. chap. 18, the exportation of wool was made felony, and the exporter subjected to the same penalties and forfeitures as a felon. For the honour of the national humanity, it is to be hoped that neither of these statutes was ever executed. The first of them, however, so far as I know, has never been directly repealed, and serjeant Hawkins seems to consider it as still in force. It may, however, perhaps be considered as virtually repealed by the 12th of Charles II. chap. 32, sect. 3, which, without expressly taking away the penalties imposed by former statutes, imposes a new penalty, viz. that of 20s. for every sheep exported, or attempted to be exported, together with the forfeiture of the sheep, and of the owner's share of the sheep. The second of them was expressly repealed by the 7th and 8th of William III. chap. 28, sect. 4, by which it is declared that 'Whereas the statute of the 13th and 14th of king Charles II. made against the exportation of wool, among other things in the said act mentioned, doth enact the same to be deemed felony, by the severity of which penalty the prosecution of offenders hath not been so effectually put in execution; be it therefore enacted, by the authority aforesaid, that so much of the said act, which relates to the making the said offence felony, be repealed and made void.' The penalties, however, which are either imposed by this milder statute, or which, though imposed by former statutes, are not repealed by this one, are still sufficiently severe. Besides the forfeiture of the goods, the exporter incurs the penalty of 3s. for every pound weight of wool, either exported or attempted to be exported, that is, about four or five times the value. Any merchant, or other person convicted of this offence, is disabled from requiring any debt or account belonging to him from any factor or other person. Let his fortune be what it will, whether he is or is not able to pay those heavy penalties, the law means to ruin him completely. But, as the morals of the great body of people are not yet so corrupt as those of the contrivers of this statute, I have not heard that any advantage has ever been taken of this clause. If the person convicted of this offence is not able to pay the penalties within three months after judgment, he is to be transported for seven years; and if he returns before the expiration of that time, he is liable to the pains of felony, without benefit of clergy. The owner of the ship, knowing this offence, forfeits all his interest in the ship and furniture. The master and mariners knowing this offence, forfeit all their goods and chattels, and suffer three months imprisonment. By a subsequent statute, the master suffers six months imprisonment. In order to prevent exportation, the whole inland commerce of wool is laid under very burdensome and oppressive restrictions. It cannot be packed in any box, barrel, cask, case, chest, or any other package, but only in packs of leather or pack-cloth, on which must be marked on the outside the words WOOL or YARN, in large letters, not less than three inches long, on pain of forfeiting the same and the package, and 3s. for every pound weight, to be paid by the owner or packer. It cannot be loaden on any horse or cart, or carried by land within five miles of the coast, but between sun-rising, and sun-setting, on pain of forfeiting the same, the horses and carriages. The hundred next adjoining to the sea coast, out of, or through which the wool is carried or exported, forfeits L.20, if the wool is under the value of L.10; and if of greater value, then treble that value, together with treble costs, to be sued for within the year. The execution to be against any two of the inhabitants, whom the sessions must reimburse, by an assessment on the other inhabitants, as in the cases of robbery. And if any person compounds with the hundred for less than this penalty, he is to be imprisoned for five years, and any other person may prosecute. These regulations take place through the whole kingdom. But in the particular counties of Kent and Sussex, the restrictions are still more troublesome. Every owner of wool within ten miles of the sea coast must give an account in writing, three days after shearing, to the next officer of the customs, of the number of his fleeces, and of the places where they are lodged. And before he removes any part of them, he must give the like notice of the number and weight of the fleeces, and of the name and abode of the person to whom they are sold, and of the place to which it is intended they should be carried. No person within fifteen miles of the sea, in the said counties, can buy any wool, before he enters into bond to the king, that no part of the wool which he shall so buy shall be sold by him to any other person within fifteen miles of the sea. If any wool is found carrying towards the sea side in the said counties, unless it has been entered and security given as aforesaid, it is forfeited, and the offender also forfeits 3s. for every pound weight. If any person lay any wool, not entered as aforesaid, within fifteen miles of the sea, it must be seized and forfeited; and if, after such seizure, any person shall claim the same, he must give security to the exchequer, that if he is cast upon trial he shall pay treble costs, besides all other penalties. When such restrictions are imposed upon the inland trade, the coasting trade, we may believe, cannot be left very free. Every owner of wool, who carrieth, or causeth to be carried, any wool to any part or place on the sea coast, in order to be from thence transported by sea to any other place or port on the coast, must first cause an entry thereof to be made at the port from whence it is intended to be conveyed, containing the weight, marks, and number, of the packages, before he brings the same within five miles of that part, on pain of forfeiting the same, and also the horses, carts, and other carriages; and also of suffering and forfeiting, as by the other laws in force against the exportation of wool. This law, however (1st of William III. chap. 32), is so very indulgent as to declare, that 'this shall not hinder any person from carrying his wool home from the place of shearing, though it be within five miles of the sea, provided that in ten days after shearing, and before he remove the wool, he do under his hand certify to the next officer of the customs the true number of fleeces, and where it is housed; and do not remove the same, without certifying to such officer, under his hand, his intention so to do, three days before.' Bond must be given that the wool to be carried coast-ways is to be landed at the particular port for which it is entered outwards; and if any part of it is landed without the presence of an officer, not only the forfeiture of the wool is incurred, as in other goods, but the usual additional penalty of 3s. for every pound weight is likewise incurred. Our woollen manufacturers, in order to justify their demand of such extraordinary restrictions and regulations, confidently asserted, that English wool was of a peculiar quality, superior to that of any other country; that the wool of other countries could not, without some mixture of it, be wrought up into any tolerable manufacture; that fine cloth could not be made without it; that England, therefore, if the exportation of it could be totally prevented, could monopolize to herself almost the whole woollen trade of the world; and thus, having no rivals, could sell at what price she pleased, and in a short time acquire the most incredible degree of wealth by the most advantageous balance of trade. This doctrine, like most other doctrines which are confidently asserted by any considerable number of people, was, and still continues to be, most implicitly believed by a much greater number: by almost all those who are either unacquainted with the woollen trade, or who have not made particular inquiries. It is, however, so perfectly false, that English wool is in any respect necessary for the making of fine cloth, that it is altogether unfit for it. Fine cloth is made altogether of Spanish wool. English wool, cannot be even so mixed with Spanish wool, as to enter into the composition without spoiling and degrading, in some degree, the fabric of the cloth. It has been shown in the foregoing part of this work, that the effect of these regulations has been to depress the price of English wool, not only below what it naturally would be in the present times, but very much below what it actually was in the time of Edward III. The price of Scotch wool, when, in consequence of the Union, it became subject to the same regulations, is said to have fallen about one half. It is observed by the very accurate and intelligent author of the Memoirs of Wool, the Reverend Mr. John Smith, that the price of the best English wool in England, is generally below what wool of a very inferior quality commonly sells for in the market of Amsterdam. To depress the price of this commodity below what may be called its natural and proper price, was the avowed purpose of those regulations; and there seems to be no doubt of their having produced the effect that was expected from them. This reduction of price, it may perhaps be thought, by discouraging the growing of wool, must have reduced very much the annual produce of that commodity, though not below what it formerly was, yet below what, in the present state of things, it would probably have been, had it, in consequence of an open and free market, been allowed to rise to the natural and proper price. I am, however, disposed to believe, that the quantity of the annual produce cannot have been much, though it may, perhaps, have been a little affected by these regulations. The growing of wool is not the chief purpose for which the sheep farmer employs his industry and stock. He expects his profit, not so much from the price of the fleece, as from that of the carcase; and the average or ordinary price of the latter must even, in many cases, make up to him whatever deficiency there may be in the average or ordinary price of the former. It has been observed, in the foregoing part of this work, that 'whatever regulations tend to sink the price, either of wool or of raw hides, below what it naturally would be, must, in an improved and cultivated country, have some tendency to raise the price of butcher's meat. The price, both of the great and small cattle which are fed on improved and cultivated land, must be sufficient to pay the rent which the landlord, and the profit which the farmer, has reason to expect from improved and cultivated land. If it is not, they will soon cease to feed them. Whatever part of this price, therefore, is not paid by the wool and the hide, must be paid by the carcase. The less there is paid for the one, the more must be paid for the other. In what manner this price is to be divided upon the different parts of the beast, is indifferent to the landlords and farmers, provided it is all paid to them. In an improved and cultivated country, therefore, their interest as landlords and farmers cannot be much affected by such regulations, though their interest as consumers may, by the rise in the price of provisions.' According to this reasoning, therefore, this degradation in the price of wool is not likely, in an improved and cultivated country, to occasion any diminution in the annual produce of that commodity; except so far as, by raising the price of mutton, it may somewhat diminish the demand for, and consequently the production of, that particular species of butcher's meat. Its effect, however, even in this way, it is probable, is not very considerable. But though its effect upon the quantity of the annual produce may not have been very considerable, its effect upon the quality, it may perhaps be thought, must necessarily have been very great. The degradation in the quality of English wool, if not below what it was in former times, yet below what it naturally would have been in the present state of improvement and cultivation, must have been, it may perhaps be supposed, very nearly in proportion to the degradation of price. As the quality depends upon the breed, upon the pasture, and upon the management and cleanliness of the sheep, during the whole progress of the growth of the fleece, the attention to these circumstances, it may naturally enough be imagined, can never be greater than in proportion to the recompence which the price of the fleece is likely to make for the labour and expense which that attention requires. It happens, however, that the goodness of the fleece depends, in great measure, upon the health, growth, and bulk of the animal: the same attention which is necessary for the improvement of the carcase is, in some respect, sufficient for that of the fleece. Notwithstanding the degradation of price, English wool is said to have been improved considerably during the course even of the present century. The improvement, might, perhaps, have been greater if the price had been better; but the lowness of price, though it may have obstructed, yet certainly it has not altogether prevented that improvement. The violence of these regulations, therefore, seems to have affected neither the quantity nor the quality of the annual produce of wool, so much as it might have been expected to do (though I think it probable that it may have affected the latter a good deal more than the former); and the interest of the growers of wool, though it must have been hurt in some degree, seems upon the whole, to have been much less hurt than could well have been imagined. These considerations, however, will not justify the absolute prohibition of the exportation of wool; but they will fully justify the imposition of a considerable tax upon that exportation. To hurt, in any degree, the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects. But the prohibition certainly hurts, in some degree, the interest of the growers of wool, for no other purpose but to promote that of the manufacturers. Every different order of citizens is bound to contribute to the support of the sovereign or commonwealth. A tax of five, or even of ten shillings, upon the exportation of every tod of wool, would produce a very considerable revenue to the sovereign. It would hurt the interest of the growers somewhat less than the prohibition, because it would not probably lower the price of wool quite so much. It would afford a sufficient advantage to the manufacturer, because, though he might not buy his wool altogether so cheap as under the prohibition, he would still buy it at least five or ten shillings cheaper than any foreign manufacturer could buy it, besides saving the freight and insurance which the other would be obliged to pay. It is scarce possible to devise a tax which could produce any considerable revenue to the sovereign, and at the same time occasion so little inconveniency to any body. The prohibition, notwithstanding all the penalties which guard it, does not prevent the exportation of wool. It is exported, it is well known, in great quantities. The great difference between the price in the home and that in the foreign market, presents such a temptation to smuggling, that all the rigour of the law cannot prevent it. This illegal exportation is advantageous to nobody but the smuggler. A legal exportation, subject to a tax, by affording a revenue to the sovereign, and thereby saving the imposition of some other, perhaps more burdensome and inconvenient taxes, might prove advantageous to all the different subjects of the state. The exportation of fuller's earth, or fuller's clay, supposed to be necessary for preparing and cleansing the woollen manufactures, has been subjected to nearly the same penalties as the exportation of wool. Even tobacco-pipe clay, though acknowledged to be different from fuller's clay, yet, on account of their resemblance, and because fuller's clay might sometimes be exported as tobacco-pipe clay, has been laid under the same prohibitions and penalties. By the 13th and 14th of Charles II. chap. 7, the exportation, not only of raw hides, but of tanned leather, except in the shape of boots, shoes, or slippers, was prohibited; and the law gave a monopoly to our boot-makers and shoe-makers, not only against our graziers, but against our tanners. By subsequent statutes, our tanners have got themselves exempted from this monopoly, upon paying a small tax of only one shilling on the hundred weight of tanned leather, weighing one hundred and twelve pounds. They have obtained likewise the drawback of two-thirds of the excise duties imposed upon their commodity, even when exported without further manufacture. All manufactures of leather may be exported duty free; and the exporter is besides entitled to the drawback of the whole duties of excise. Our graziers still continue subject to the old monopoly. Graziers, separated from one another, and dispersed through all the different corners of the country, cannot, without great difficulty, combine together for the purpose either of imposing monopolies upon their fellow-citizens, or of exempting themselves from such as may have been imposed upon them by other people. Manufacturers of all kinds, collected together in numerous bodies in all great cities, easily can. Even the horns of cattle are prohibited to be exported; and the two insignificant trades of the horner and comb-maker enjoy, in this respect, a monopoly against the graziers. Restraints, either by prohibitions, or by taxes, upon the exportation of goods which are partially, but not completely manufactured, are not peculiar to the manufacture of leather. As long as any thing remains to be done, in order to fit any commodity for immediate use and consumption, our manufacturers think that they themselves ought to the doing of it. Woollen yarn and worsted are prohibited to be exported, under the same penalties as wool. Even white cloths are subject to a duty upon exportation; and our dyers have so far obtained a monopoly against our clothiers. Our clothiers would probably have been able to defend themselves against it; but it happens that the greater part of our principal clothiers are themselves likewise dyers. Watch-cases, clock-cases, and dial-plates for clocks and watches, have been prohibited to be exported. Our clock-makers and watch-makers are, it seems, unwilling that the price of this sort of workmanship should be raised upon them by the competition of foreigners. By some old statutes of Edward III. Henry VIII. and Edward VI. the exportation of all metals was prohibited. Lead and tin were alone excepted, probably on account of the great abundance of those metals; in the exportation of which a considerable part of the trade of the kingdom in those days consisted. For the encouragement of the mining trade, the 5th of William and Mary, chap. 17, exempted from this prohibition iron, copper, and mundic metal made from British ore. The exportation of all sorts of copper bars, foreign as well as British, was afterwards permitted by the 9th and 10th of William III. chap 26. The exportation of unmanufactured brass, of what is called gun-metal, bell-metal, and shroff-metal, still continues to be prohibited. Brass manufactures of all sorts may be exported duty free. The exportation of the materials of manufacture, where it is not altogether prohibited, is, in many cases, subjected to considerable duties. By the 8th Geo. I. chap. 15, the exportation of all goods, the produce or manufacture of Great Britain, upon which any duties had been imposed by former statutes, was rendered duty free. The following goods, however, were excepted: alum, lead, lead-ore, tin, tanned leather, copperas, coals, wool, cards, white woolen cloths, lapis calaminaris, skins of all sorts, glue, coney hair or wool, hares wool, hair of all sorts, horses, and litharge of lead. If you expect horses, all these are either materials of manufacture, or incomplete manufactures (which may be considered as materials for still further manufacture), or instruments of trade. This statute leaves them subject to all the old duties which had ever been imposed upon them, the old subsidy, and one per cent. outwards. By the same statute, a great number of foreign drugs for dyers use are exempted from all duties upon importation. Each of them, however, is afterwards subjected to a certain duty, not indeed a very heavy one, upon exportation. Our dyers, it seems, while they thought it for their interest to encourage the importation of those drugs, by an exemption from all duties, thought it likewise for their own interest to throw some small discouragement upon their exportation. The avidity, however, which suggested this notable piece of mercantile ingenuity, most probably disappointed itself of its object. It necessarily taught the importers to be more careful than they might otherwise have been, that their importation should not exceed what was necessary for the supply of the home market. The home market was at all times likely to be more scantily supplied; the commodities were at all times likely to be somewhat dearer there than they would have been, had the exportation been rendered as free as the importation. By the above-mentioned statute, gum senega, or gum arabic, being among the enumerated dyeing drugs, might be imported duty free. They were subjected, indeed, to a small poundage duty, amounting only to threepence in the hundred weight, upon their re-exportation. France enjoyed, at that time, an exclusive trade to the country most productive of those drugs, that which lies in the neighbourhood of the Senegal; and the British market could not easily be supplied by the immediate importation of them from the place of growth. By the 25th Geo. II. therefore, gum senega was allowed to be imported (contrary to the general dispositions of the act of navigation) from any part of Europe. As the law, however, did not mean to encourage this species of trade, so contrary to the general principles of the mercantile policy of England, it imposed a duty of ten shillings the hundred weight upon such importation, and no part of this duty was to be afterwards drawn back upon its exportation. The successful war which began in 1755 gave Great Britain the same exclusive trade to those countries which France had enjoyed before. Our manufactures, as soon as the peace was made, endeavoured to avail themselves of this advantage, and to establish a monopoly in their own favour both against the growers and against the importers of this commodity. By the 5th Geo. III. therefore, chap. 37, the exportation of gum senega, from his majesty's dominions in Africa, was confined to Great Britain, and was subjected to all the same restrictions, regulations, forfeitures, and penalties, as that of the enumerated commodities of the British colonies in America and the West Indies. Its importation, indeed, was subjected to a small duty of sixpence the hundred weight, but its re-exportation was subjected to the enormous duty of one pound ten shillings the hundred weight. It was the intention of our manufacturers, that the whole produce of those countries should be imported into Great Britain; and in order that they themselves might be enabled to buy it at their own price, that no part of it should be exported again, but at such an expense as would sufficiently discourage that exportation. Their avidity, however, upon this, as well as upon many other occasions, disappointed itself of its object. This enormous duty presented such a temptation to smuggling, that great quantities of this commodity were clandestinely exported, probably to all the manufacturing countries of Europe, but particularly to Holland, not only from Great Britain, but from Africa. Upon this account, by the 14th Geo. III. chap. 10, this duty upon exportation was reduced to five shillings the hundred weight. In the book of rates, according to which the old subsidy was levied, beaver skins were estimated at six shillings and eight pence a-piece; and the different subsidies and imposts which, before the year 1722, had been laid upon their importation, amounted to one-fifth part of the rate, or to sixteen pence upon each skin; all of which, except half the old subsidy, amounting only to twopence, was drawn back upon exportation. This duty, upon the importation of so important a material of manufacture, had been thought too high; and, in the year 1722, the rate was reduced to two shillings and sixpence, which reduced the duty upon importation to sixpence, and of this only one-half was to be drawn back upon exportation. The same successful war put the country most productive of beaver under the dominion of Great Britain; and beaver skins being among the enumerated commodities, the exportation from America was consequently confined to the market of Great Britain. Our manufacturers soon bethought themselves of the advantage which they might make of this circumstance; and in the year 1764, the duty upon the importation of beaver skin was reduced to one penny, but the duty upon exportation was raised to sevenpence each skin, without any drawback of the duty upon importation. By the same law, a duty of eighteen pence the pound was imposed upon the exportation of beaver wool or woumbs, without making any alteration in the duty upon the importation of that commodity, which, when imported by British, and in British shipping, amounted at that time to between fourpence and fivepence the piece. Coals may be considered both as a material of manufacture, and as an instrument of trade. Heavy duties, accordingly, have been imposed upon their exportation, amounting at present (1783) to more than five shillings the ton, or more than fifteen shillings the chaldron, Newcastle measure; which is, in most cases, more than the original value of the commodity at the coal-pit, or even at the shipping port for exportation. The exportation, however, of the instruments of trade, properly so called, is commonly restrained, not by high duties, but by absolute prohibitions. Thus, by the 7th and 8th of William III. chap. 20, sect. 8, the exportation of frames or engines for knitting gloves or stockings, is prohibited, under the penalty, not only of the forfeiture of such frames or engines, so exported, or attempted to be exported, but of forty pounds, one half to the king, the other to the person who shall inform or sue for the same. In the same manner, by the 14th Geo. III. chap. 71, the exportation to foreign parts, of any utensils made use of in the cotton, linen, woollen, and silk manufacturers, is prohibited under the penalty, not only of the forfeiture of such utensils, but of two hundred pounds, to be paid by the person who shall offend in this manner; and likewise of two hundred pounds, to be paid by the master of the ship, who shall knowingly suffer such utensils to be loaded on board his ship. When such heavy penalties were imposed upon the exportation of the dead instruments of trade, it could not well be expected that the living instrument, the artificer, should be allowed to go free. Accordingly, by the 5th Geo. I. chap. 27, the person who shall be convicted of enticing any artificer, of or in any of the manufactures of Great Britain, to go into any foreign parts, in order to practise or teach his trade, is liable, for the first offence, to be fined in any sum not exceeding one hundred pounds, and to three months imprisonment, and until the fine shall be paid; and for the second offence, to be fined in any sum, at the discretion of the court, and to imprisonment for twelve months, and until the fine shall be paid. By the 23d Geo. II. chap. 13, this penalty is increased, for the first offence, to five hundred pounds for every artificer so enticed, and to twelve months imprisonment, and until the fine shall be paid; and for the second offence, to one thousand pounds, and to two years imprisonment, and until the fine shall be paid. By the former of these two statutes, upon proof that any person has been enticing any artificer, or that any artificer has promised or contracted to go into foreign parts, for the purposes aforesaid, such artificer may be obliged to give security, at the discretion of the court, that he shall not go beyond the seas, and may be committed to prison until he give such security. If any artificer has gone beyond the seas, and is exercising or teaching his trade in any foreign country, upon warning being given to him by any of his majesty's ministers or consuls abroad, or by one of his majesty's secretaries of state, for the time being, if he does not, within six months after such warning, return into this realm, and from henceforth abide and inhabit continually within the same, he is from thenceforth declared incapable of taking any legacy devised to him within this kingdom, or of being executor or administrator to any person, or of taking any lands within this kingdom, by descent, devise, or purchase. He likewise forfeits to the king all his lands, goods, and chattels; is declared an alien in every respect; and is put out of the king's protection. It is unnecessary, I imagine, to observe how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers. The laudable motive of all these regulations, is to extend our own manufactures, not by their own improvement, but by the depression of those of all our neighbours, and by putting an end, as much as possible, to the troublesome competition of such odious and disagreeable rivals. Our master manufacturers think it reasonable that they themselves should have the monopoly of the ingenuity of all their countrymen. Though by restraining, in some trades, the number of apprentices which can be employed at one time, and by imposing the necessity of a long apprenticeship in all trades, they endeavour, all of them, to confine the knowledge of their respective employments to as small a number as possible; they are unwilling, however, that any part of this small number should go abroad to instruct foreigners. Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce. In the restraints upon the importation of all foreign commodities which can come into competition with those of our own growth or manufacture, the interest of the home consumer is evidently sacrificed to that of the producer. It is altogether for the benefit of the latter, that the former is obliged to pay that enhancement of price which this monopoly almost always occasions. It is altogether for the benefit of the producer, that bounties are granted upon the exportation of some of his productions. The home consumer is obliged to pay, first, the tax which is necessary for paying the bounty; and, secondly, the still greater tax which necessarily arises from the enhancement of the price of the commodity in the home market. By the famous treaty of commerce with Portugal, the consumer is prevented by high duties from purchasing of a neighbouring country, a commodity which our own climate does not produce; but is obliged to purchase it of a distant country, though it is acknowledged, that the commodity of the distant country is of a worse quality than that of the near one. The home consumer is obliged to submit to this inconvenience, in order that the producer may import into the distant country some of his productions, upon more advantageous terms than he otherwise would have been allowed to do. The consumer, too, is obliged to pay whatever enhancement in the price of those very productions this forced exportation may occasion in the home market. But in the system of laws which has been established for the management of our American and West Indies colonies, the interest of the home consumer has been sacrificed to that of the producer, which a more extravagant profusion than in all our other commercial regulations. A great empire has been established for the sole purpose of raising up a nation of customers, who should be obliged to buy, from the shops of our different producers, all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose only, in the last two wars, more than two hundred millions have been spent, and a new debt of more than a hundred and seventy millions has been contracted, over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit which, it never could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods which, at an average, have been annually exported to the colonies. It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class, our merchants and manufacturers have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it. CHAP. IX. OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY. The agricultural systems of political economy will not require so long an explanation as that which I have thought it necessary to bestow upon the mercantile or commercial system. That system which represents the produce of land as the sole source of the revenue and wealth of every country, has, so far as I know, never been adopted by any nation, and it at present exists only in the speculations of a few men of great learning and ingenuity in France. It would not, surely, be worth while to examine at great length the errors of a system which never has done, and probably never will do, any harm in any part of the world. I shall endeavour to explain, however, as distinctly as I can, the great outlines of this very ingenious system. Mr. Colbert, the famous minister of Lewis XIV. was a man of probity, of great industry, and knowledge of detail; of great experience and acuteness in the examination of public accounts; and of abilities, in short, every way fitted for introducing method and good order into the collection and expenditure of the public revenue. That minister had unfortunately embraced all the prejudices of the mercantile system, in its nature and essence a system of restraint and regulation, and such as could scarce fail to be agreeable to a laborious and plodding man of business, who had been accustomed to regulate the different departments of public offices, and to establish the necessary checks and controuls for confining each to its proper sphere. The industry and commerce of a great country, he endeavoured to regulate upon the same model as the departments of a public office; and instead of allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice, he bestowed upon certain branches of industry extraordinary privileges, while he laid others under as extraordinary restraints. He was not only disposed, like other European ministers, to encourage more the industry of the towns than that of the country; but, in order to support the industry of the towns, he was willing even to depress and keep down that of the country. In order to render provisions cheap to the inhabitants of the towns, and thereby to encourage manufactures and foreign commerce, he prohibited altogether the exportation of corn, and thus excluded the inhabitants of the country from every foreign market, for by far the most important part of the produce of their industry. This prohibition, joined to the restraints imposed by the ancient provincial laws of France upon the transportation of corn from one province to another, and to the arbitrary and degrading taxes which are levied upon the cultivators in almost all the provinces, discouraged and kept down the agriculture of that country very much below the state to which it would naturally have risen in so very fertile a soil, and so very happy a climate. This state of discouragement and depression was felt more or less in every different part of the country, and many different inquiries were set on foot concerning the causes of it. One of those causes appeared to be the preference given, by the institutions of Mr. Colbert, to the industry of the towns above that of the country. If the rod be bent too much one way, says the proverb, in order to make it straight, you must bend it as much the other. The French philosophers, who have proposed the system which represents agriculture as the sole source of the revenue and wealth of every country, seem to have adopted this proverbial maxim; and, as in the plan of Mr. Colbert, the industry of the towns was certainly overvalued in comparison with that of the country, so in their system it seems to be as certainly under-valued. The different orders of people, who have ever been supposed to contribute in any respect towards the annual produce of the land and labour of the country, they divide into three classes. The first is the class of the proprietors of land. The second is the class of the cultivators, of farmers and country labourers, whom they honour with the peculiar appellation of the productive class. The third is the class of artificers, manufacturers, and merchants, whom they endeavour to degrade by the humiliating appellation of the barren or unproductive class. The class of proprietors contributes to the annual produce, by the expense which they may occasionally lay out upon the improvement of the land, upon the buildings, drains, inclosures, and other ameliorations, which they may either make or maintain upon it, and by means of which the cultivators are enabled, with the same capital, to raise a greater produce, and consequently to pay a greater rent. This advanced rent may be considered as the interest or profit due to the proprietor, upon the expense or capital which he thus employs in the improvement of his land. Such expenses are in this system called ground expenses (_depenses foncieres_). The cultivators or farmers contribute to the annual produce, by what are in this system called the original and annual expenses (_depenses primitives, et depenses annuelles_), which they lay out upon the cultivation of the land. The original expenses consist in the instruments of husbandry, in the stock of cattle, in the seed, and in the maintenance of the farmer's family, servants, and cattle, during at least a great part of the first year of his occupancy, or till he can receive some return from the land. The annual expenses consist in the seed, in the wear and tear of instruments of husbandry, and in the annual maintenance of the farmer's servants and cattle, and of his family too, so far as any part of them can be considered as servants employed in cultivation. That part of the produce of the land which remains to him after paying the rent, ought to be sufficient, first, to replace to him, within a reasonable time, at least during the term of his occupancy, the whole of his original expenses, together with the ordinary profits of stock; and, secondly, to replace to him annually the whole of his annual expenses, together likewise with the ordinary profits of stock. Those two sorts of expenses are two capitals which the farmer employs in cultivation; and unless they are regularly restored to him, together with a reasonable profit, he cannot carry on his employment upon a level with other employments; but, from a regard to his own interest, must desert it as soon as possible, and see some other. That part of the produce of the land which is thus necessary for enabling the farmer to continue his business, ought to be considered as a fund sacred to cultivation, which, if the landlord violates, he necessarily reduces the produce of his own land, and, in a few years, not only disables the farmer from paying this racked rent, but from paying the reasonable rent which he might otherwise have got for his land. The rent which properly belongs to the landlord, is no more than the neat produce which remains after paying, in the completest manner, all the necessary expenses which must be previously laid out, in order to raise the gross or the whole produce. It is because the labour of the cultivators, over and above paying completely all those necessary expenses, affords a neat produce of this kind, that this class of people are in this system peculiarly distinguished by the honourable appellation of the productive class. Their original and annual expenses are for the same reason called, in this system, productive expenses, because, over and above replacing their own value, they occasion the annual reproduction of this neat produce. The ground expenses, as they are called, or what the landlord lays out upon the improvement of his land, are, in this system, too, honoured with the appellation of productive expenses. Till the whole of those expenses, together with the ordinary profits of stock, have been completely repaid to him by the advanced rent which he gets from his land, that advanced rent ought to be regarded as sacred and inviolable, both by the church and by the king; ought to be subject neither to tithe nor to taxation. If it is otherwise, by discouraging the improvement of land, the church discourages the future increase of her own tithes, and the king the future increase of his own taxes. As in a well ordered state of things, therefore, those ground expenses, over and above reproducing in the completest manner their own value, occasion likewise, after a certain time, a reproduction of neat produce, they are in this system considered as productive expenses. The ground expenses of the landlord, however, together with the original and the annual expenses of the farmer, are the only three sorts of expenses which in this system are considered as productive. All other expenses, and all other orders of people, even those who, in the common apprehensions of men, are regarded as the most productive, are, in this account of things, represented as altogether barren and unproductive. Artificers and manufacturers, in particular, whose industry, in the common apprehensions of men, increases so much the value of the rude produce of land, are in this system represented as a class of people altogether barren and unproductive. Their labour, it is said, replaces only the stock which employs them, together with its ordinary profits. That stock consists in the materials, tools, and wages, advanced to them by their employer; and is the fund destined for their employment and maintenance. Its profits are the fund destined for the maintenance of their employer. Their employer, as he advances to them the stock of materials, tools, and wages, necessary for their employment, so he advances to himself what is necessary for his own maintenance; and this maintenance he generally proportions to the profit which he expects to make by the price of their work. Unless its price repays to him the maintenance which he advances to himself, as well as the materials, tools, and wages, which he advances to his workmen, it evidently does not repay to him the whole expense which he lays out upon it. The profits of manufacturing stock, therefore, are not, like the rent of land, a neat produce which remains after completely repaying the whole expense which must be laid out in order to obtain them. The stock of the farmer yields him a profit, as well as that of the master manufacturer; and it yields a rent likewise to another person, which that of the master manufacturer does not. The expense, therefore, laid out in employing and maintaining artificers and manufacturers, does no more than continue, if one may say so, the existence of its own value, and does not produce any new value. It is, therefore, altogether a barren and unproductive expense. The expense, on the contrary, laid out in employing farmers and country labourers, over and above continuing the existence of its own value, produces a new value the rent of the landlord. It is, therefore, a productive expense. Mercantile stock is equally barren and unproductive with manufacturing stock. It only continues the existence of its own value, without producing any new value. Its profits are only the repayment of the maintenance which its employer advances to himself during the time that he employs it, or till he receives the returns of it. They are only the repayment of a part of the expense which must be laid out in employing it. The labour of artificers and manufacturers never adds any thing to the value of the whole annual amount of the rude produce of the land. It adds, indeed, greatly to the value of some particular parts of it. But the consumption which, in the mean time, it occasions of other parts, is precisely equal to the value which it adds to those parts; so that the value of the whole amount is not, at any one moment of time, in the least augmented by it. The person who works the lace of a pair of fine ruffles for example, will sometimes raise the value of, perhaps, a pennyworth of flax to L.30 sterling. But though, at first sight, he appears thereby to multiply the value of a part of the rude produce about seven thousand and two hundred times, he in reality adds nothing to the value of the whole annual amount of the rude produce. The working of that lace costs him, perhaps, two years labour. The L.30 which he gets for it when it is finished, is no more than the repayment of the subsistence which he advances to himself during the two years that he is employed about it. The value which, by every day's, month's, or year's labour, he adds to the flax, does no more than replace the value of his own consumption during that day, month, or year. At no moment of time, therefore, does he add any thing to the value of the whole annual amount of the rude produce of the land: the portion of that produce which he is continually consuming, being always equal to the value which he is continually producing. The extreme poverty of the greater part of the persons employed in this expensive, though trifling manufacture, may satisfy us that the price of their work does not, in ordinary cases, exceed the value of their subsistence. It is otherwise with the work of farmers and country labourers. The rent of the landlord is a value which, in ordinary cases, it is continually producing over and above replacing, in the most complete manner, the whole consumption, the whole expense laid out upon the employment and maintenance both of the workmen and of their employer. Artificers, manufacturers, and merchants, can augment the revenue and wealth of their society by parsimony only; or, as it is expressed in this system, by privation, that is, by depriving themselves of a part of the funds destined for their own subsistence. They annually reproduce nothing but those funds. Unless, therefore, they annually save some part of them, unless they annually deprive themselves of the enjoyment of some part of them, the revenue and wealth of their society can never be, in the smallest degree, augmented by means of their industry. Farmers and country labourers, on the contrary, may enjoy completely the whole funds destined for their own subsistence, and yet augment, at the same time, the revenue and wealth of their society. Over and above what is destined for their own subsistence, their industry annually affords a neat produce, of which the augmentation necessarily augments the revenue and wealth of their society. Nations, therefore, which like France or England, consist in a great measure, of proprietors and cultivators, can be enriched by industry and enjoyment. Nations, on the contrary which, like Holland and Hamburgh, are composed chiefly of merchants, artificers, and manufacturers, can grow rich only through parsimony and privation. As the interest of nations so differently circumstanced is very different, so is likewise the common character of the people. In those of the former kind, liberality, frankness, and good fellowship, naturally make a part of their common character; in the latter, narrowness, meanness, and a selfish disposition, averse to all social pleasure and enjoyment. The unproductive class, that of merchants, artificers, and manufacturers, is maintained and employed altogether at the expense of the two other classes, of that of proprietors, and of that of cultivators. They furnish it both with the materials of its work, and with the fund of its subsistence, with the corn and cattle which it consumes while it is employed about that work. The proprietors and cultivators finally pay both the wages of all the workmen of the unproductive class, and the profits of all their employers. Those workmen and their employers are properly the servants of the proprietors and cultivators. They are only servants who work without doors, as menial servants work within. Both the one and the other, however, are equally maintained at the expense of the same masters. The labour of both is equally unproductive. It adds nothing to the value of the sum total of the rude produce of the land. Instead of increasing the value of that sum total, it is a charge and expense which must be paid out of it. The unproductive class, however, is not only useful, but greatly useful, to the other two classes. By means of the industry of merchants, artificers, and manufacturers, the proprietors and cultivators can purchase both the foreign goods and the manufactured produce of their own country, which they have occasion for, with the produce of a much smaller quantity of their own labour, than what they would be obliged to employ, if they were to attempt, in an awkward and unskilful manner, either to import the one, or to make the other, for their own use. By means of the unproductive class, the cultivators are delivered from many cares, which would otherwise distract their attention from the cultivation of land. The superiority of produce, which in consequence of this undivided attention, they are enabled to raise, is fully sufficient to pay the whole expense which the maintenance and employment of the unproductive class costs either the proprietors or themselves. The industry of merchants, artificers, and manufacturers, though in its own nature altogether unproductive, yet contributes in this manner indirectly to increase the produce of the land. It increases the productive powers of productive labour, by leaving it at liberty to confine itself to its proper employment, the cultivation of land; and the plough goes frequently the easier and the better, by means of the labour of the man whose business is most remote from the plough. It can never be the interest of the proprietors and cultivators, to restrain or to discourage, in any respect, the industry of merchants, artificers, and manufacturers. The greater the liberty which this unproductive class enjoys, the greater will be the competition in all the different trades which compose it, and the cheaper will the other two classes be supplied, both with foreign goods and with the manufactured produce of their own country. It can never be the interest of the unproductive class to oppress the other two classes. It is the surplus produce of the land, or what remains after deducting the maintenance, first of the cultivators, and afterwards of the proprietors, that maintains and employs the unproductive class. The greater this surplus, the greater must likewise be the maintenance and employment of that class. The establishment of perfect justice, of perfect liberty, and of perfect equality, is the very simple secret which most effectually secures the highest degree of prosperity to all the three classes. The merchants, artificers, and manufacturers of those mercantile states, which, like Holland and Hamburgh, consist chiefly of this unproductive class, are in the same manner maintained and employed altogether at the expense of the proprietors and cultivators of land. The only difference is, that those proprietors and cultivators are, the greater part of them, placed at a most inconvenient distance from the merchants, artificers, and manufacturers, whom they supply with the materials of their work and the fund of their subsistence; are the inhabitants of other countries, and the subjects of other governments. Such mercantile states, however, are not only useful, but greatly useful, to the inhabitants of these other countries. They fill up, in some measure, a very important void; and supply the place of the merchants, artificers, and manufacturers, whom the inhabitants of those countries ought to find at home, but whom, from some defect in their policy, they do not find at home. It can never be the interest of those landed nations, if I may call them so, to discourage or distress the industry of such mercantile states, by imposing high duties upon their trade, or upon the commodities which they furnish. Such duties, by rendering those commodities dearer, could serve only to sink the real value of the surplus produce of their own land, with which, or, what comes to the same thing, with the price of which those commodities are purchased. Such duties could only serve to discourage the increase of that surplus produce, and consequently the improvement and cultivation of their own land. The most effectual expedient, on the contrary, for raising the value of that surplus produce, for encouraging its increase, and consequently the improvement and cultivation of their own land, would be to allow the most perfect freedom to the trade of all such mercantile nations. This perfect freedom of trade would even be the most effectual expedient for supplying them, in due time, with all the artificers, manufacturers, and merchants, whom they wanted at home; and for filling up, in the properest and most advantageous manner, that very important void which they felt there. The continual increase of the surplus produce of their land would, in due time, create a greater capital than what would be employed with the ordinary rate of profit in the improvement and cultivation of land; and the surplus part of it would naturally turn itself to the employment of artificers and manufacturers, at home. But these artificers and manufacturers, finding at home both the materials of their work and the fund of their subsistence, might immediately, even with much less art and skill be able to work as cheap as the little artificers and manufacturers of such mercantile states, who had both to bring from a greater distance. Even though, from want of art and skill, they might not for some time be able to work as cheap, yet, finding a market at home, they might be able to sell their work there as cheap as that of the artificers and manufacturers of such mercantile states, which could not be brought to that market but from so great a distance; and as their art and skill improved, they would soon be able to sell it cheaper. The artificers and manufacturers of such mercantile states, therefore, would immediately be rivalled in the market of those landed nations, and soon after undersold and justled out of it altogether. The cheapness of the manufactures of those landed nations, in consequence of the gradual improvements of art and skill, would, in due time, extend their sale beyond the home market, and carry them to many foreign markets, from which they would, in the same manner, gradually justle out many of the manufacturers of such mercantile nations. This continual increase, both of the rude and manufactured produce of those landed nations, would, in due time, create a greater capital than could, with the ordinary rate of profit, be employed either in agriculture or in manufactures. The surplus of this capital would naturally turn itself to foreign trade, and be employed in exporting, to foreign countries, such parts of the rude and manufactured produce of its own country, as exceeded the demand of the home market. In the exportation of the produce of their own country, the merchants of a landed nation would have an advantage of the same kind over those of mercantile nations, which its artificers and manufacturers had over the artificers and manufacturers of such nations; the advantage of finding at home that cargo, and those stores and provisions, which the others were obliged to seek for at a distance. With inferior art and skill in navigation, therefore, they would be able to sell that cargo as cheap in foreign markets as the merchants of such mercantile nations; and with equal art and skill they would be able to sell it cheaper. They would soon, therefore, rival those mercantile nations in this branch of foreign trade, and, in due time, would justle them out of it altogether. According to this liberal and generous system, therefore, the most advantageous method in which a landed nation can raise up artificers, manufacturers, and merchants of its own, is to grant the most perfect freedom of trade to the artificers, manufacturers, and merchants of all other nations. It thereby raises the value of the surplus produce of its own land, of which the continual increase gradually establishes a fund, which, in due time, necessarily raises up all the artificers, manufacturers, and merchants, whom it has occasion for. When a landed nation on the contrary, oppresses, either by high duties or by prohibitions, the trade of foreign nations, it necessarily hurts its own interest in two different ways. First, by raising the price of all foreign goods, and of all sorts of manufactures, it necessarily sinks the real value of the surplus produce of its own land, with which, or, what comes to the same thing, with the price of which, it purchases those foreign goods and manufactures. Secondly, by giving a sort of monopoly of the home market to its own merchants, artificers, and manufacturers, it raises the rate of mercantile and manufacturing profit, in proportion to that of agricultural profit; and, consequently, either draws from agriculture a part of the capital which had before been employed in it, or hinders from going to it a part of what would otherwise have gone to it. This policy, therefore, discourages agriculture in two different ways; first, by sinking the real value of its produce, and thereby lowering the rate of its profits; and, secondly, by raising the rate of profit in all other employments. Agriculture is rendered less advantageous, and trade and manufactures more advantageous, than they otherwise would be; and every man is tempted by his own interest to turn, as much as he can, both his capital and his industry from the former to the latter employments. Though, by this oppressive policy, a landed nation should be able to raise up artificers, manufacturers, and merchants of its own, somewhat sooner than it could do by the freedom of trade; a matter, however, which is not a little doubtful; yet it would raise them up, if one may say so, prematurely, and before it was perfectly ripe for them. By raising up too hastily one species of industry, it would depress another more valuable species of industry. By raising up too hastily a species of industry which only replaces the stock which employs it, together with the ordinary profit, it would depress a species of industry which, over and above replacing that stock, with its profit, affords likewise a neat produce, a free rent to the landlord. It would depress productive labour, by encouraging too hastily that labour which is altogether barren and unproductive. In what manner, according to this system, the sum total of the annual produce of the land is distributed among the three classes above mentioned, and in what manner the labour of the unproductive class does no more than replace the value of its own consumption, without increasing in any respect the value of that sum total, is represented by Mr Quesnai, the very ingenious and profound author of this system, in some arithmetical formularies. The first of these formularies, which, by way of eminence, he peculiarly distinguishes by the name of the Economical Table, represents the manner in which he supposes this distribution takes place, in a state of the most perfect liberty, and, therefore, of the highest prosperity; in a state where the annual produce is such as to afford the greatest possible neat produce, and where each class enjoys its proper share of the whole annual produce. Some subsequent formularies represent the manner in which he supposes this distribution is made in different states of restraint and regulation; in which, either the class of proprietors, or the barren and unproductive class, is more favoured than the class of cultivators; and in which either the one or the other encroaches, more or less, upon the share which ought properly to belong to this productive class. Every such encroachment, every violation of that natural distribution, which the most perfect liberty would establish, must, according to this system, necessarily degrade, more or less, from one year to another, the value and sum total of the annual produce, and must necessarily occasion a gradual declension in the real wealth and revenue of the society; a declension, of which the progress must be quicker or slower, according to the degree of this encroachment, according as that natural distribution, which the most perfect liberty would establish, is more or less violated. Those subsequent formularies represent the different degrees of declension which, according to this system, correspond to the different degrees in which this natural distribution of things is violated. Some speculative physicians seem to have imagined that the health of the human body could be preserved only by a certain precise regimen of diet and exercise, of which every, the smallest violation, necessarily occasioned some degree of disease or disorder proportionate to the degree of the violation. Experience, however, would seem to shew, that the human body frequently preserves, to all appearance at least, the most perfect state of health under a vast variety of different regimens; even under some which are generally believed to be very far from being perfectly wholesome. But the healthful state of the human body, it would seem, contains in itself some unknown principle of preservation, capable either of preventing or of correcting, in many respects, the bad effects even of a very faulty regimen. Mr Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered, that in the political body, the natural effort which every man is continually making to better his own condition, is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political economy, in some degree both partial and oppressive. Such a political economy, though it no doubt retards more or less, is not always capable of stopping altogether, the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man; in the same manner as it has done in the natural body, for remedying those of his sloth and intemperance. The capital error of this system, however, seems to lie in its representing the class of artificers, manufacturers, and merchants, as altogether barren and unproductive. The following observations may serve to shew the impropriety of this representation:-- First, this class, it is acknowledged, reproduces annually the value of its own annual consumption, and continues, at least, the existence of the stock or capital which maintains and employs it. But, upon this account alone, the denomination of barren or unproductive should seem to be very improperly applied to it. We should not call a marriage barren or unproductive, though it produced only a son and a daughter, to replace the father and mother, and though it did not increase the number of the human species, but only continued it as it was before. Farmers and country labourers, indeed, over and above the stock which maintains and employs them, reproduce annually a neat produce, a free rent to the landlord. As a marriage which affords three children is certainly more productive than one which affords only two, so the labour of farmers and country labourers is certainly more productive than that of merchants, artificers, and manufacturers. The superior produce of the one class, however, does not, render the other barren or unproductive. Secondly, it seems, on this account, altogether improper to consider artificers, manufacturers, and merchants, in the same light as menial servants. The labour of menial servants does not continue the existence of the fund which maintains and employs them. Their maintenance and employment is altogether at the expense of their masters, and the work which they perform is not of a nature to repay that expense. That work consists in services which perish generally in the very instant of their performance, and does not fix or realize itself in any vendible commodity, which can replace the value of their wages and maintenance. The labour, on the contrary, of artificers, manufacturers, and merchants, naturally does fix and realize itself in some such vendible commodity. It is upon this account that, in the chapter in which I treat of productive and unproductive labour, I have classed artificers, manufacturers, and merchants among the productive labourers, and menial servants among the barren or unproductive. Thirdly, it seems, upon every supposition, improper to say, that the labour of artificers, manufacturers, and merchants, does not increase the real revenue of the society. Though we should suppose, for example, as it seems to be supposed in this system, that the value of the daily, monthly, and yearly consumption of this class was exactly equal to that of its daily, monthly, and yearly production; yet it would not from thence follow, that its labour added nothing to the real revenue, to the real value of the annual produce of the land and labour of the society. An artificer, for example, who, in the first six months after harvest, executes ten pounds worth of work, though he should, in the same time, consume ten pounds worth of corn and other necessaries, yet really adds the value of ten pounds to the annual produce of the land and labour of the society. While he has been consuming a half-yearly revenue of ten pounds worth of corn and other necessaries, he has produced an equal value of work, capable of purchasing, either to himself, or to some other person, an equal half-yearly revenue. The value, therefore, of what has been consumed and produced during these six months, is equal, not to ten, but to twenty pounds. It is possible, indeed, that no more than ten pounds worth of this value may ever have existed at any one moment of time. But if the ten pounds worth of corn and other necessaries which were consumed by the artificer, had been consumed by a soldier, or by a menial servant, the value of that part of the annual produce which existed at the end of the six months, would have been ten pounds less than it actually is in consequence of the labour of the artificer. Though the value of what the artificer produces, therefore, should not, at any one moment of time, be supposed greater than the value he consumes, yet, at every moment of time, the actually existing value of goods in the market is, in consequence of what he produces, greater than it otherwise would be. When the patrons of this system assert, that the consumption of artificers, manufacturers, and merchants, is equal to the value of what they produce, they probably mean no more than that their revenue, or the fund destined for their consumption, is equal to it. But if they had expressed themselves more accurately, and only asserted, that the revenue of this class was equal to the value of what they produced, it might readily have occurred to the reader, that what would naturally be saved out of this revenue, must necessarily increase more or less the real wealth of the society. In order, therefore, to make out something like an argument, it was necessary that they should express themselves as they have done; and this argument, even supposing things actually were as it seems to presume them to be, turns out to be a very inconclusive one. Fourthly, farmers and country labourers can no more augment, without parsimony, the real revenue, the annual produce of the land and labour of their society, than artificers, manufacturers, and merchants. The annual produce of the land and labour of any society can be augmented only in two ways; either, first, by some improvement in the productive powers of the useful labour actually maintained within it; or, secondly, by some increase in the quantity of that labour. The improvement in the productive powers of useful labour depends, first, upon the improvement in the ability of the workman; and, secondly, upon that of the machinery with which he works. But the labour of artificers and manufacturers, as it is capable of being more subdivided, and the labour of each workman reduced to a greater simplicity of operation, than that of farmers and country labourers; so it is likewise capable of both these sorts of improvement in a much higher degree.[43] In this respect, therefore, the class of cultivators can have no sort of advantage over that of artificers and manufacturers. The increase in the quantity of useful labour actually employed within any society must depend altogether upon the increase of the capital which employs it; and the increase of that capital, again, must be exactly equal to the amount of the savings from the revenue, either of the particular persons who manage and direct the employment of that capital, or of some other persons, who lend it to them. If merchants, artificers, and manufacturers are, as this system seems to suppose, naturally more inclined to parsimony and saving than proprietors and cultivators, they are, so far, more likely to augment the quantity of useful labour employed within their society, and consequently to increase its real revenue, the annual produce of its land and labour. Fifthly and lastly, though the revenue of the inhabitants of every country was supposed to consist altogether, as this system seems to suppose, in the quantity of subsistence which their industry could procure to them; yet, even upon this supposition, the revenue of a trading and manufacturing country must, other things being equal, always be much greater than that of one without trade or manufactures. By means of trade and manufactures, a greater quantity of subsistence can be annually imported into a particular country, than what its own lands, in the actual state of their cultivation, could afford. The inhabitants of a town, though they frequently possess no lands of their own, yet draw to themselves, by their industry, such a quantity of the rude produce of the lands of other people, as supplies them, not only with the materials of their work, but with the fund of their subsistence. What a town always is with regard to the country in its neighbourhood, one independent state or country may frequently be with regard to other independent states or countries. It is thus that Holland draws a great part of its subsistence from other countries; live cattle from Holstein and Jutland, and corn from almost all the different countries of Europe. A small quantity of manufactured produce, purchases a great quantity of rude produce. A trading and manufacturing country, therefore, naturally purchases, with a small part of its manufactured produce, a great part of the rude produce of other countries; while, on the contrary, a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries. The one exports what can subsist and accommodate but a very few, and imports the subsistence and accommodation of a great number. The other exports the accommodation and subsistence of a great number, and imports that of a very few only. The inhabitants of the one must always enjoy a much greater quantity of subsistence than what their own lands, in the actual state of their cultivation, could afford. The inhabitants of the other most always enjoy a much smaller quantity. This system, however, with all its imperfections, is perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy; and is upon that account, well worth the consideration of every man who wishes to examine with attention the principles of that very important science. Though in representing the labour which is employed upon land as the only productive labour, the notions which it inculcates are, perhaps, too narrow and confined; yet in representing the wealth of nations as consisting, not in the unconsumable riches of money, but in the consumable goods annually reproduced by the labour of the society, and in representing perfect liberty as the only effectual expedient for rendering this annual reproduction the greatest possible, its doctrine seems to be in every respect as just as it is generous and liberal. Its followers are very numerous; and as men are fond of paradoxes, and of appearing to understand what surpasses the comprehensions of ordinary people, the paradox which it maintains, concerning the unproductive nature of manufacturing labour, has not, perhaps, contributed a little to increase the number of its admirers. They have for some years past made a pretty considerable sect, distinguished in the French republic of letters by the name of the Economists. Their works have certainly been of some service to their country; not only by bringing into general discussion, many subjects which had never been well examined before, but by influencing, in some measure, the public administration in favour of agriculture. It has been in consequence of their representations, accordingly, that the agriculture of France has been delivered from several of the oppressions which it before laboured under. The term, during which such a lease can be granted, as will be valid against every future purchaser or proprietor of the land, has been prolonged from nine to twenty-seven years. The ancient provincial restraints upon the transportation of corn from one province of the kingdom to another, have been entirely taken away; and the liberty of exporting it to all foreign countries, has been established as the common law of the kingdom in all ordinary cases. This sect, in their works, which are very numerous, and which treat not only of what is properly called Political Economy, or of the nature and causes of the wealth of nations, but of every other branch of the system of civil government, all follow implicitly, and without any sensible variation, the doctrine of Mr. Quesnai. There is, upon this account, little variety in the greater part of their works. The most distinct and best connected account of this doctrine is to be found in a little book written by Mr. Mercier de la Riviere, some time intendant of Martinico, entitled, The natural and essential Order of Political Societies. The admiration of this whole sect for their master, who was himself a man of the greatest modesty and simplicity, is not inferior to that of any of the ancient philosophers for the founders of their respective systems. 'There have been since the world began,' says a very diligent and respectable author, the Marquis de Mirabeau, 'three great inventions which have principally given stability to political societies, independent of many other inventions which have enriched and adorned them. The first is the invention of writing, which alone gives human nature the power of transmitting, without alteration, its laws, its contracts, its annals, and its discoveries. The second is the invention of money, which binds together all the relations between civilized societies. The third is the economical table, the result of the other two, which completes them both by perfecting their object; the great discovery of our age, but of which our posterity will reap the benefit.' As the political economy of the nations of modern Europe has been more favourable to manufactures and foreign trade, the industry of the towns, than to agriculture, the industry of the country; so that of other nations has followed a different plan, and has been more favourable to agriculture than to manufactures and foreign trade. The policy of China favours agriculture more than all other employments. In China, the condition of a labourer is said to be as much superior to that of an artificer, as in most parts of Europe that of an artificer is to that of a labourer. In China, the great ambition of every man is to get possession of a little bit of land, either in property or in lease; and leases are there said to be granted upon very moderate terms, and to be sufficiently secured to the lessees. The Chinese have little respect for foreign trade. Your beggarly commerce! was the language in which the mandarins of Pekin used to talk to Mr. De Lange, the Russian envoy, concerning it[44]. Except with Japan, the Chinese carry on, themselves, and in their own bottoms, little or no foreign trade; and it is only into one or two ports of their kingdom that they even admit the ships of foreign nations. Foreign trade, therefore, is, in China, every way confined within a much narrower circle than that to which it would naturally extend itself, if more freedom was allowed to it, either in their own ships, or in those of foreign nations. Manufactures, as in a small bulk they frequently contain a great value, and can upon that account be transported at less expense from one country to another than most parts of rude produce, are, in almost all countries, the principal support of foreign trade. In countries, besides, less extensive, and less favourably circumstanced for inferior commerce than China, they generally require the support of foreign trade. Without an extensive foreign market, they could not well flourish, either in countries so moderately extensive as to afford but a narrow home market, or in countries where the communication between one province and another was so difficult, as to render it impossible for the goods of any particular place to enjoy the whole of that home market which the country could afford. The perfection of manufacturing industry, it must be remembered, depends altogether upon the division of labour; and the degree to which the division of labour can be introduced into any manufacture, is necessarily regulated, it has already been shewn, by the extent of the market. But the great extent of the empire of China, the vast multitude of its inhabitants, the variety of climate, and consequently of productions in its different provinces, and the easy communication by means of water-carriage between the greater part of them, render the home market of that country of so great extent, as to be alone sufficient to support very great manufactures, and to admit of very considerable subdivisions of labour. The home market of China is, perhaps, in extent, not much inferior to the market of all the different countries of Europe put together. A more extensive foreign trade, however, which to this great home market added the foreign market of all the rest of the world, especially if any considerable part of this trade was carried on in Chinese ships, could scarce fail to increase very much the manufactures of China, and to improve very much the productive powers of its manufacturing industry. By a more extensive navigation, the Chinese would naturally learn the art of using and constructing, themselves, all the different machines made use of in other countries, as well as the other improvements of art and industry which are practised in all the different parts of the world. Upon their present plan, they have little opportunity of improving themselves by the example of any other nation, except that of the Japanese. The policy of ancient Egypt, too, and that of the Gentoo government of Indostan, seem to have favoured agriculture more than all other employments. Both in ancient Egypt and Indostan, the whole body of the people was divided into different casts or tribes each of which was confined, from father to son, to a particular employment, or class of employments. The son of a priest was necessarily a priest; the son of a soldier, a soldier; the son of a labourer, a labourer; the son of a weaver, a weaver; the son of a tailor, a tailor, &c. In both countries, the cast of the priests holds the highest rank, and that of the soldiers the next; and in both countries the cast of the farmers and labourers was superior to the casts of merchants and manufacturers. The government of both countries was particularly attentive to the interest of agriculture. The works constructed by the ancient sovereigns of Egypt, for the proper distribution of the waters of the Nile, were famous in antiquity, and the ruined remains of some of them are still the admiration of travellers. Those of the same kind which were constructed by the ancient sovereigns of Indostan, for the proper distribution of the waters of the Ganges, as well as of many other rivers, though they have been less celebrated, seem to have been equally great. Both countries accordingly, though subject occasionally to dearths, have been famous for their great fertility. Though both were extremely populous, yet, in years of moderate plenty, they were both able to export great quantities of grain to their neighbours. The ancient Egyptians had a superstitious aversion to the sea; and as the Gentoo religion does not permit its followers to light a fire, nor consequently to dress any victuals, upon the water, it, in effect, prohibits them from all distant sea voyages. Both the Egyptians and Indians must have depended almost altogether upon the navigation of other nations for the exportation of their surplus produce; and this dependency, as it must have confined the market, so it must have discouraged the increase of this surplus produce. It must have discouraged, too, the increase of the manufactured produce, more than that of the rude produce. Manufactures require a much more extensive market than the most important parts of the rude produce of the land. A single shoemaker will make more than 300 pairs of shoes in the year; and his own family will not, perhaps, wear out six pairs. Unless, therefore, he has the custom of, at least, 50 such families as his own, he cannot dispose of the whole produce of his own labour. The most numerous class of artificers will seldom, in a large country, make more than one in 50, or one in a 100, of the whole number of families contained in it. But in such large countries, as France and England, the number of people employed in agriculture has, by some authors, been computed at a half, by others at a third, and by no author that I know of, at less than a fifth of the whole inhabitants of the country. But as the produce of the agriculture of both France and England is, the far greater part of it, consumed at home, each person employed in it must, according to these computations, require little more than the custom of one, two, or, at most, of four such families as his own, in order in dispose of the whole produce of his own labour. Agriculture, therefore, can support itself under the discouragement of a confined market much better than manufactures. In both ancient Egypt and Indostan, indeed, the confinement of the foreign market was in some measure compensated by the conveniency of many inland navigations, which opened, in the most advantageous manner, the whole extent of the home market to every part of the produce of every different district of those countries. The great extent of Indostan, too, rendered the home market of that country very great, and sufficient to support a great variety of manufactures. But the small extent of ancient Egypt, which was never equal to England, must at all times, have rendered the home market of that country too narrow for supporting any great variety of manufactures. Bengal accordingly, the province of Indostan which commonly exports the greatest quantity of rice, has always been more remarkable for the exportation of a great variety of manufactures, than for that of its grain. Ancient Egypt, on the contrary, though it exported some manufactures, fine linen in particular, as well as some other goods, was always most distinguished for its great exportation of grain. It was long the granary of the Roman empire. The sovereigns of China, of ancient Egypt, and of the different kingdoms into which Indostan has, at different times, been divided, have always derived the whole, or by far the most considerable part, of their revenue, from some sort of land tax or land rent. This land tax, or land rent, like the tithe in Europe, consisted in a certain proportion, a fifth it is said, of the produce of the land, which was either delivered in kind, or paid in money, according to a certain valuation, and which, therefore, varied from year to year, according to all the variations of the produce. It was natural, therefore, that the sovereigns of those countries should be particularly attentive to the interests of agriculture, upon the prosperity or declension of which immediately depended the yearly increase or diminution of their own revenue. The policy of the ancient republics of Greece, and that of Rome, though it honoured agriculture more than manufactures or foreign trade, yet seems rather to have discouraged the latter employments, than to have given any direct or intentional encouragement to the former. In several of the ancient states of Greece, foreign trade was prohibited altogether; and in several others the employments of artificers and manufacturers were considered as hurtful to the strength and agility of the human body, as rendering it incapable of those habits which their military and gymnastic exercises endeavoured to form in it, and as thereby disqualifying it, more or less, for undergoing the fatigues and encountering the dangers of war. Such occupations were considered as fit only for slaves, and the free citizens of the states were prohibited from exercising them. Even in those states where no such prohibition took place, as in Rome and Athens, the great body of the people were in effect excluded from all the trades which are now commonly exercised by the lower sort of the inhabitants of towns. Such trades were, at Athens and Rome, all occupied by the slaves of the rich, who exercised them for the benefit of their masters, whose wealth, power, and protection, made it almost impossible for a poor freeman to find a market for his work, when it came into competition with that of the slaves of the rich. Slaves, however, are very seldom inventive; and all the most important improvements, either in machinery, or in the arrangement and distribution of work, which facilitate and abridge labour have been the discoveries of freemen. Should a slave propose any improvement of this kind, his master would be very apt to consider the proposal as the suggestion of laziness, and of a desire to save his own labour at the master's expense. The poor slave, instead of reward would probably meet with much abuse, perhaps with some punishment. In the manufactures carried on by slaves, therefore, more labour must generally have been employed to exercise the same quantity of work, than in those carried on by freemen. The work of the former must, upon that account, generally have been dearer than that of the latter. The Hungarian mines, it is remarked by Mr. Montesquieu, though not richer, have always been wrought with less expense, and therefore with more profit, than the Turkish mines in their neighbourhood. The Turkish mines are wrought by slaves; and the arms of those slaves are the only machines which the Turks have ever thought of employing. The Hungarian mines are wrought by freemen, who employ a great deal of machinery, by which they facilitate and abridge their own labour. From the very little that is known about the price of manufactures in the times of the Greeks and Romans, it would appear that those of the finer sort were excessively dear. Silk sold for its weight in gold. It was not, indeed, in those times an European manufacture; and as it was all brought from the East Indies, the distance of the carriage may in some measure account for the greatness of the price. The price, however, which a lady, it is said, would sometimes pay for a piece of very fine linen, seems to have been equally extravagant; and as linen was always either an European, or at farthest, an Egyptian manufacture, this high price can be accounted for only by the great expense of the labour which must have been employed about it, and the expense of this labour again could arise from nothing but the awkwardness of the machinery which is made use of. The price of fine woollens, too, though not quite so extravagant, seems, however, to have been much above that of the present times. Some cloths, we are told by Pliny[45], dyed in a particular manner, cost a hundred denarii, or L.3 6s. 8d. the pound weight. Others, dyed in another manner, cost a thousand denarii the pound weight, or L.33 6s. 8d. The Roman pound, it must be remembered, contained only twelve of our avoirdupois ounces. This high price, indeed, seems to have been principally owing to the dye. But had not the cloths themselves been much dearer than any which are made in the present times, so very expensive a dye would not probably have been bestowed upon them. The disproportion would have been too great between the value of the accessory and that of the principal. The price mentioned by the same author[46], of some triclinaria, a sort of woollen pillows or cushions made use of to lean upon as they reclined upon their couches at table, passes all credibility; some of them being said to have cost more than L.30,000, others more than L.300,000. This high price, too, is not said to have arisen from the dye. In the dress of the people of fashion of both sexes, there seems to have been much less variety, it is observed by Dr. Arbuthnot, in ancient than in modern times; and the very little variety which we find in that of the ancient statues, confirms his observation. He infers from this, that their dress must, upon the whole, have been cheaper than ours; but the conclusion does not seem to follow. When the expense of fashionable dress is very great, the variety must be very small. But when, by the improvements in the productive powers of manufacturing art and industry, the expense of any one dress comes to be very moderate, the variety will naturally be very great. The rich, not being able to distinguish themselves by the expense of any one dress, will naturally endeavour to do so by the multitude and variety of their dresses. The greatest and most important branch of the commerce of every nation, it has already been observed, is that which is carried on between the inhabitants of the town and those of the country. The inhabitants of the town draw from the country the rude produce, which constitutes both the materials of their work and the fund of their subsistence; and they pay for this rude produce, by sending back to the country a certain portion of it manufactured and prepared for immediate use. The trade which is carried on between these two different sets of people, consists ultimately in a certain quantity of rude produce exchanged for a certain quantity of manufactured produce. The dearer the latter, therefore, the cheaper the former; and whatever tends in any country to raise the price of manufactured produce, tends to lower that of the rude produce of the land, and thereby to discourage agriculture. The smaller the quantity of manufactured produce, which any given quantity of rude produce, or, what comes to the same thing, which the price of any given quantity of rude produce, is capable of purchasing, the smaller the exchangeable value of that given quantity of rude produce; the smaller the encouragement which either the landlord has to increase its quantity by improving, or the farmer by cultivating the land. Whatever, besides, tends to diminish in any country the number of artificers and manufacturers, tends to diminish the home market, the most important of all markets, for the rude produce of the land, and thereby still further to discourage agriculture. Those systems, therefore, which preferring agriculture to all other employments, in order to promote it, impose restraints upon manufactures and foreign trade, act contrary to the very end which they propose, and indirectly discourage that very species of industry which they mean to promote. They are so far, perhaps, more inconsistent than even the mercantile system. That system, by encouraging manufactures and foreign trade more than agriculture, turns a certain portion of the capital of the society, from supporting a more advantageous, to support a less advantageous species of industry. But still it really, and in the end, encourages that species of industry which it means to promote. Those agricultural systems, on the contrary, really, and in the end, discourage their own favourite species of industry. It is thus that every system which endeavours, either, by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it, is, in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour. All systems, either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which, no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works, and certain public institutions, which it can never be for the interest of any individual, or small number of individuals to erect and maintain; because the profit could never repay the expense to any individual, or small number of individuals, though it may frequently do much more than repay it to a great society. The proper performance of those several duties of the sovereign necessarily supposes a certain expense; and this expense again necessarily requires a certain revenue to support it. In the following book, therefore, I shall endeavour to explain, first, what are the necessary expenses of the sovereign or commonwealth; and which of those expenses ought to be defrayed by the general contribution of the whole society; and which of them, by that of some particular part only, or of some particular members of the society; secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society; and what are the principal advantages and inconveniences of each of those methods; and thirdly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society. The following book, therefore, will naturally be divided into three chapters. INDEX. The two following accounts are subjoined, in order to illustrate and confirm what is said in the fifth chapter of the fourth book, concerning the Tonnage Bounty to the White-herring Fishery. The reader, I believe, may depend upon the accuracy of both accounts. _An Account of Busses fitted out in Scotland for eleven Years, with the Number of empty Barrels carried out, and the Number of Barrels of Herrings caught; also the Bounty, at a Medium, on each Barrel of Sea-sticks, and on each Barrel when fully packed._ +-------------------------------------------------------------------+ |Years.|Number of|Empty Barrels| Barrels of | Bounty paid on | | | Busses. |carried out. |Herrings caught.| the Busses. | +------+---------+-------------+----------------+-------------------+ | | | | | L. s. d.| | 1771 | 29 | 5,948 | 2,832 | 2,885 0 0 | | 1772 | 168 | 41,316 | 22,237 | 11,055 7 6 | | 1773 | 190 | 42,333 | 42,055 | 12,510 8 6 | | 1774 | 240 | 59,303 | 56,365 | 26,952 2 6 | | 1775 | 275 | 69,144 | 52,879 | 19,315 15 0 | | 1776 | 294 | 76,329 | 51,863 | 21,290 7 6 | | 1777 | 240 | 62,679 | 45,313 | 17,592 2 6 | | 1778 | 220 | 56,390 | 40,958 | 16,316 2 6 | | 1779 | 206 | 55,194 | 29,367 | 15,287 0 0 | | 1780 | 181 | 48,315 | 19,885 | 13,445 12 6 | | 1781 | 135 | 33,992 | 16,593 | 9,613 15 6 | +------+---------+-------------+----------------+-------------------+ | Total, 2,186 | 550,943 | 378,347 |L.165,463 14 0 | +----------------+-------------+----------------+-------------------+ Sea-sticks, 378,347 1-3d deducted, 126,115-2/3 ----------- Barrels fully packed, 252,231-1/3 Bounty, at a medium, for each barrel of sea-sticks, L.0 8 2-1/4 But a barrel of sea-sticks being only reckoned two thirds of a barrel fully packed, one third is to be deducted, which brings the bounty to L.0 12 3-3/4 And if the herrings are exported, there is besides, a premium of L.0 2 8 -------------- So that the bounty paid by government in money, for each barrel, is L.0 14 11-3/4 But if to this, the duty of the salt usually taken credit for as expended in curing each barrel, which, at a medium, is, of foreign, one bushel and one-fourth of a bushel, at 10s. a-bushel, be added. viz. 0 12 6 -------------- the bounty on each barrel would amount to L.1 7 5-3/4 -------------- If the herrings are cured with British salt, it will stand thus, viz. Bounty, as before L.0 14 11-3/4 But if to this bounty, the duty on two bushels of Scotch salt, at 1s. 6d. per bushel, supposed to be the quantity, at a medium, used in curing each barrel, is added, viz. 0 3 0 -------------- the bounty on each barrel will amount to L.0 17 11-3/4 -------------- And when buss herrings are entered for home consumption in Scotland, and pay the shilling a-barrel of duty, the bounty stands thus, to wit, as before L.0 12 3 From which the 1s. a-barrel is to be deducted 0 1 0 -------------- L.0 11 3-3/4 But to that there is to be added again, the duty of the foreign salt used in curing a barrel of herrings, viz. 0 12 6 -------------- So that the premium allowed for each barrel of herrings entered for home consumption is L.1 3 9-3/4 -------------- If the herrings are cured with British salt, it will stand as follows, viz. Bounty on each barrel brought in by the busses, as above L.0 12 3-3/4 From which deduct the 1s. a-barrel, paid at the time they are entered for home consumption 0 1 0 -------------- L.0 11 3-3/4 But if to the bounty, the duty on two bushels of Scotch salt, at 1s. 6d. per bushel, supposed to be the quantity, at a medium, used in curing each barrel, is added, viz. 0 3 0 -------------- the premium for each barrel entered for home consumption will be L.0 14 3-3/4 Though the loss of duties upon herrings exported cannot, perhaps, properly be considered as bounty, that upon herrings entered for home consumption certainly may. _An Account of the Quantity of Foreign Salt imported into Scotland, and of Scotch Salt delivered Duty-free from the Works there, for the Fishery, from the 5th of April 1771 to the 5th of April 1782, with the Medium of both for one Year._ +-----------------------------------+-------------+----------------+ | | | Scotch Salt | | | Foreign Salt| delivered from | | PERIOD. | imported. | the Works. | | +-------------+----------------+ | | Bushels | Bushels | +-----------------------------------+-------------+----------------+ |From the 5th of April 1771 to the }| | | | 5th April 1782. }| 936,974 | 168,226 | | +-------------+----------------+ |Medium for one year | 85,179-5/11 | 15,293-3/11 | +-----------------------------------+-------------+----------------+ It is to be observed, that the bushel of foreign salt weighs 48lb. that of British salt, 56lb. only. BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH. CHAP. I. OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH. PART I. _Of the Expense of Defence._ The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies, can be performed only by means of a military force. But the expense both of preparing this military force in time of peace, and of employing it in time of war, is very different in the different states of society, in the different periods of improvement. Among nations of hunters, the lowest and rudest state of society, such as we find it among the native tribes of North America, every man is a warrior, as well as a hunter. When he goes to war, either to defend his society, or to revenge the injuries which have been done to it by other societies, he maintains himself by his own labour, in the same manner as when he lives at home. His society (for in this state of things there is properly neither sovereign nor commonwealth) is at no sort of expense, either to prepare him for the field, or to maintain him while he is in it. Among nations of shepherds, a more advanced state of society, such as we find it among the Tartar and Arabs, every man is, in the same manner a warrior. Such nations have commonly no fixed habitation, but live either in tents, or in a sort of covered wagons, which are easily transported from place to place. The whole tribe, or nation, changes its situation according to the different seasons of the year, as well as according to other accidents. When its herds and flocks have consumed the forage of one part of the country, it removes to another, and from that to a third. In the dry season, it comes down to the banks of the rivers; in the wet season, it retires to the upper country. When such a nation goes to war, the warriors will not trust their herds and flocks to the feeble defence of their old men, their women and children; and their old men, their women and children, will not be left behind without defence, and without subsistence. The whole nation, besides, being accustomed to a wandering life, even in time of peace, easily takes the field in time of war. Whether it marches as an army, or moves about as a company of herdsmen, the way of life is nearly the same, though the object proposed by it be very different. They all go to war together, therefore, and every one does as well as he can. Among the Tartars, even the women have been frequently known to engage in battle. If they conquer, whatever belongs to the hostile tribe is the recompence of the victory; but if they are vanquished, all is lost; and not only their herds and flocks, but their women and children, become the booty of the conqueror. Even the greater part of those who survive the action are obliged to submit to him for the sake of immediate subsistence. The rest are commonly dissipated and dispersed in the desert. The ordinary life, the ordinary exercise of a Tartar or Arab, prepare him sufficiently for war. Running, wrestling, cudgel-playing, throwing the javelin, drawing the bow, &c. are the common pastimes of those who live in the open air, and are all of them the images of war. When a Tartar or Arab actually goes to war, he is maintained by his own herds and flocks, which he carries with him, in the same manner as in peace. His chief or sovereign (for those nations have all chiefs or sovereigns) is at no sort of expense in preparing him for the field; and when he is in it, the chance of plunder is the only pay which he either expects or requires. An army of hunters can seldom exceed two or three hundred men. The precarious subsistence which the chace affords, could seldom allow a greater number to keep together for any considerable time. An army of shepherds, on the contrary, may sometimes amount to two or three hundred thousand. As long as nothing stops their progress, as long as they can go on from one district, of which they have consumed the forage, to another, which is yet entire; there seems to be scarce any limit to the number who can march on together. A nation of hunters can never be formidable to the civilized nations in their neighbourhood; a nation of shepherds may. Nothing can be more contemptible than an Indian war in North America; nothing, on the contrary, can be more dreadful than a Tartar invasion has frequently been in Asia. The judgement of Thucydides, that both Europe and Asia could not resist the Scythians united, has been verified by the experience of all ages. The inhabitants of the extensive, but defenceles plains of Scythia or Tartary, have been frequently united under the dominion of the chief of some conquering horde or clan; and the havock and devastation of Asia have always signalized their union. The inhabitants of the inhospitable deserts of Arabia, the other great nation of shepherds, have never been united but once, under Mahomet and his immediate successors. Their union, which was more the effect of religious enthusiasm than of conquest, was signalized in the same manner. If the hunting nations of America should ever become shepherds, their neighbourhood would be much more dangerous to the European colonies than it is at present. In a yet more advanced state of society, among those nations of husbandmen who have little foreign commerce, and no other manufactures but those coarse and household ones, which almost every private family prepares for its own use, every man, in the same manner, either is a warrior, or easily becomes such. Those who live by agriculture generally pass the whole day in the open air, exposed to all the inclemencies of the seasons. The hardiness of their ordinary life prepares them for the fatigues of war, to some of which their necessary occupations bear a great analogy. The necessary occupation of a ditcher prepares him to work in the trenches, and to fortify a camp, as well as to inclose a field. The ordinary pastimes of such husbandmen are the same as those of shepherds, and are in the same manner the images of war. But as husbandmen have less leisure than shepherds, they are not so frequently employed in those pastimes. They are soldiers, but soldiers not quite so much masters of their exercise. Such as they are, however, it seldom costs the sovereign or commonwealth any expense to prepare them for the field. Agriculture, even in its rudest and lowest state, supposes a settlement, some sort of fixed habitation, which cannot be abandoned without great loss. When a nation of mere husbandmen, therefore, goes to war, the whole people cannot take the field together. The old men, the women and children, at least, must remain at home, to take care of the habitation. All the men of the military age, however, may take the field, and in small nations of this kind, have frequently done so. In every nation, the men of the military age are supposed to amount to about a fourth or a fifth part of the whole body of the people. If the campaign, too, should begin after seed-time, and end before harvest, both the husbandman and his principal labourers can be spared from the farm without much loss. He trusts that the work which must be done in the mean time, can be well enough executed by the old men, the women, and the children. He is not unwilling, therefore, to serve without pay during a short campaign; and it frequently costs the sovereign or commonwealth as little to maintain him in the field as to prepare him for it. The citizens of all the different states of ancient Greece seem to have served in this manner till after the second Persian war; and the people of Peloponnesus till after the Peloponnesian war. The Peloponnesians, Thucydides observes, generally left the field in the summer, and returned home to reap the harvest. The Roman people, under their kings, and during the first ages of the republic, served in the same manner. It was not till the siege of Veii, that they who staid at home began to contribute something towards maintaining those who went to war. In the European monarchies, which were founded upon the ruins of the Roman empire, both before, and for some time after, the establishment of what is properly called the feudal law, the great lords, with all their immediate dependents, used to serve the crown at their own expense. In the field, in the same manner as at home, they maintained themselves by their own revenue, and not by any stipend or pay which they received from the king upon that particular occasion. In a more advanced state of society, two different causes contribute to render it altogether impossible that they who take the field should maintain themselves at their own expense. Those two causes are, the progress of manufactures, and the improvement in the art of war. Though a husbandman should be employed in an expedition, provided it begins after seed-time, and ends before harvest, the interruption of his business will not always occasion any considerable diminution of his revenue. Without the intervention of his labour, Nature does herself the greater part of the work which remains to be done. But the moment that an artificer, a smith, a carpenter, or a weaver, for example, quits his workhouse, the sole source of his revenue is completely dried up. Nature does nothing for him; he does all for himself. When he takes the field, therefore, in defence of the public, as he has no revenue to maintain himself, he must necessarily be maintained by the public. But in a country, of which a great part of the inhabitants are artificers and manufacturers, a great part the people who go to war must be drawn from those classes, and must, therefore, be maintained by the public as long as they are employed in its service. When the art of war, too, has gradually grown up to be a very intricate and complicated science; when the event of war ceases to be determined, as in the first ages of society, by a single irregular skirmish or battle; but when the contest is generally spun out through several different campaigns, each of which lasts during the greater part of the year; it becomes universally necessary that the public should maintain those who serve the public in war, at least while they are employed in that service. Whatever, in time of peace, might be the ordinary occupation of those who go to war, so very tedious and expensive a service would otherwise be by far too heavy a burden upon them. After the second Persian war, accordingly, the armies of Athens seem to have been generally composed of mercenary troops, consisting, indeed, partly of citizens, but partly, too, of foreigners; and all of them equally hired and paid at the expense of the state. From the time of the siege of Veii, the armies of Rome received pay for their service during the time which they remained in the field. Under the feudal governments, the military service, both of the great lords, and of their immediate dependents, was, after a certain period, universally exchanged for a payment in money, which was employed to maintain those who served in their stead. The number of those who can go to war, in proportion to the whole number of the people, is necessarily much smaller in a civilized than in a rude state of society. In a civilized society, as the soldiers are maintained altogether by the labour of those who are not soldiers, the number of the former can never exceed what the latter can maintain, over and above maintaining, in a manner suitable to their respective stations, both themselves and the other officers of government and law, whom they are obliged to maintain. In the little agrarian states of ancient Greece, a fourth or a fifth part of the whole body of the people considered themselves as soldiers, and would sometimes, it is said, take the field. Among the civilized nations of modern Europe, it is commonly computed, that not more than the one hundredth part of the inhabitants of any country can be employed as soldiers, without ruin to the country which pays the expense of their service. The expense of preparing the army for the field seems not to have become considerable in any nation, till long after that of maintaining it in the field had devolved entirely upon the sovereign or commonwealth. In all the different republics of ancient Greece, to learn his military exercises, was a necessary part of education imposed by the state upon every free citizen. In every city there seems to have been a public field, in which, under the protection of the public magistrate, the young people were taught their different exercises by different masters. In this very simple institution consisted the whole expense which any Grecian state seems ever to have been at, in preparing its citizens for war. In ancient Rome, the exercises of the Campus Martius answered the same purpose with those of the Gymnasium in ancient Greece. Under the feudal governments, the many public ordinances, that the citizens of every district should practise archery, as well as several other military exercises, were intended for promoting the same purpose, but do not seem to have promoted it so well. Either from want of interest in the officers entrusted with the execution of those ordinances, or from some other cause, they appear to have been universally neglected; and in the progress of all those governments, military exercises seem to have gone gradually into disuse among the great body of the people. In the republic of ancient Greece and Rome, during the whole period of their existence, and under the feudal governments, for a considerable time after their first establishment, the trade of a soldier was not a separate, distinct trade, which constituted the sole or principal occupation of a particular class of citizens; every subject of the state, whatever might be the ordinary trade or occupation by which he gained his livelihood, considered himself, upon all ordinary occasions, as fit likewise to exercise the trade of a soldier, and, upon many extraordinary occasions, as bound to exercise it. The art of war, however, as it is certainly the noblest of all arts, so, in the progress of improvement, it necessarily becomes one of most complicated among them. The state of the mechanical, as well as some other arts, with which it is necessarily connected, determines the degree of perfection to which it is capable of being carried at any particular time. But in order to carry it to this degree of perfection, it is necessary that it should become the sole or principal occupation of a particular class of citizens; and the division of labour is as necessary for the improvement of this, as of every other art. Into other arts, the division of labour is naturally introduced by the prudence of individuals, who find that they promote their private interest better by confining themselves to a particular trade, than by exercising a great number. But it is the wisdom of the state only, which can render the trade of a soldier a particular trade, separate and distinct from all others. A private citizen, who, in time of profound peace, and without any particular encouragement from the public, should spend the greater part of his time in military exercises, might, no doubt, both improve himself very much in them, and amuse himself very well; but he certainly would not promote his own interest. It is the wisdom of the state only, which can render it for his interest to give up the greater part of his time to this peculiar occupation; and states have not always had this wisdom, even when their circumstances had become such, that the preservation of their existence required that they should have it. A shepherd has a great deal of leisure; a husbandman, in the rude state of husbandry, has some; an artificer or manufacturer has none at all. The first may, without any loss, employ a great deal of his time in martial exercises; the second may employ some part of it; but the last cannot employ a single hour in them without some loss, and his attention to his own interest naturally leads him to neglect them altogether. Those improvements in husbandry, too, which the progress of arts and manufacturers necessarily introduces, leave the husbandman as little leisure as the artificer. Military exercises come to be as much neglected by the inhabitants of the country as by those of the town, and the great body of the people becomes altogether unwarlike. That wealth, at the same time, which always follows the improvements of agriculture and manufactures, and which, in reality, is no more than the accumulated produce of those improvements, provokes the invasion of all their neighbours. An industrious, and, upon that account, a wealthy nation, is of all nations the most likely to be attacked; and unless the states takes some new measure for the public defence, the natural habits of the people render them altogether incapable of defending themselves. In these circumstances, there seem to be but two methods by which the state can make any tolerable provision for the public defence. If may either, first, by means of a very rigorous police, and in spite of the whole bent of the interest, genius, and inclinations of the people, enforce the practice of military exercises, and oblige either all the citizens of the military age, or a certain number of them, to join in some measure the trade of a soldier to whatever other trade or profession they may happen to carry on. Or, secondly, by maintaining and employing a certain number of citizens in the constant practice of military exercises, it may render the trade of a soldier a particular trade, separate and distinct from all others. If the state has recourse to the first of those two expedients, its military force is said to consist in a militia; if to the second, it is said to consist in a standing army. The practice of military exercises is the sole or principal occupation of the soldiers of a standing army, and the maintenance or pay which the state affords them is the principal and ordinary fund of their subsistence. The practice of military exercises is only the occasional occupation of the soldiers of a militia, and they derive the principal and ordinary fund of their subsistence from some other occupation. In a militia, the character of the labourer, artificer, or tradesman, predominates over that of the soldier; in a standing army, that of the soldier predominates over every other character; and in this distinction seems to consist the essential difference between those two different species of military force. Militias have been of several different kinds. In some countries, the citizens destined for defending the state seem to have been exercised only, without being, if I may say so, regimented; that is, without being divided into separate and distinct bodies of troops, each of which performed its exercises under its own proper and permanent officers. In the republics of ancient Greece and Rome, each citizen, as long as he remained at home, seems to have practiced his exercises, either separately and independently, or with such of his equals as he liked best; and not to have been attached to any particular body of troops, till he was actually called upon to take the field. In other countries, the militia has not only been exercised, but regimented. In England, in Switzerland, and, I believe, in every other country of modern Europe, where any imperfect military force of this kind has been established, every militiaman is, even in time of peace, attached to a particular body of troops, which performs its exercises under its own proper and permanent officers. Before the invention of fire-arms, that army was superior in which the soldiers had, each individually, the greatest skill and dexterity in the use of their arms. Strength and agility of body were of the highest consequence, and commonly determined the fate of battles. But this skill and dexterity in the use of their arms could be acquired only, in the same manner as fencing is at present, by practising, not in great bodies, but each man separately, in a particular school, under a particular master, or with his own particular equals and companions. Since the invention of fire-arms, strength and agility of body, or even extraordinary dexterity and skill in the use of arms, though they are far from being of no consequence, are, however, of less consequence. The nature of the weapon, though it by no means puts the awkward upon a level with the skilful, puts him more nearly so than he ever was before. All the dexterity and skill, it is supposed, which are necessary for using it, can be well enough acquired by practising in great bodies. Regularity, order, and prompt obedience to command, are qualities which, in modern armies, are of more importance towards determining the fate of battles, than the dexterity and skill of the soldiers in the use of their arms. But the noise of fire-arms, the smoke, and the invisible death to which every man feels himself every moment exposed, as soon as he comes within cannon-shot, and frequently a long time before the battle can be well said to be engaged, must render it very difficult to maintain any considerable degree of this regularity, order, and prompt obedience, even in the beginning of a modern battle. In an ancient battle, there was no noise but what arose from the human voice; there was no smoke, there was no invisible cause of wounds or death. Every man, till some mortal weapon actually did approach him, saw clearly that no such weapon was near him. In these circumstances, and among troops who had some confidence in their own skill and dexterity in the use of their arms, it must have been a good deal less difficult to preserve some degree of regularity and order, not only in the beginning, but through the whole progress of an ancient battle, and till one of the two armies was fairly defeated. But the habits of regularity, order, and prompt obedience to command, can be acquired only by troops which are exercised in great bodies. A militia, however, in whatever manner it may be either disciplined or exercised, must always be much inferior to a well disciplined and well exercised standing army. The soldiers who are exercised only once a-week, or once a-month, can never be so expert in the use of their arms, as those who are exercised every day, or every other day; and though this circumstance may not be of so much consequence in modern, as it was in ancient times, yet the acknowledged superiority of the Prussian troops, owing, it is said, very much to their superior expertness in their exercise, may satisfy us that it is, even at this day, of very considerable consequence. The soldiers, who are bound to obey their officer only once a-week, or once a-month, and who are at all other times at liberty to manage their own affairs their own way, without being, in any respect, accountable to him, can never be under the same awe in his presence, can never have the same disposition to ready obedience, with those whose whole life and conduct are every day directed by him, and who every day even rise and go to bed, or at least retire to their quarters, according to his orders. In what is called discipline, or in the habit of ready obedience, a militia must always be still more inferior to a standing army, than it may sometimes be in what is called the manual exercise, or in the management and use of its arms. But, in modern war, the habit of ready and instant obedience is of much greater consequence than a considerable superiority in the management of arms. Those militias which, like the Tartar or Arab militia, go to war under the same chieftains whom they are accustomed to obey in peace, are by far the best. In respect for their officers, in the habit of ready obedience, they approach nearest to standing armies. The Highland militia, when it served under its own chieftains, had some advantage of the same kind. As the Highlanders, however, were not wandering, but stationary shepherds, as they had all a fixed habitation, and were not, in peaceable times, accustomed to follow their chieftain from place to place; so, in time of war, they were less willing to follow him to any considerable distance, or to continue for any long time in the field. When they had acquired any booty, they were eager to return home, and his authority was seldom sufficient to detain them. In point of obedience, they were always much inferior to what is reported of the Tartars and Arabs. As the Highlanders, too, from their stationary life, spend less of their time in the open air, they were always less accustomed to military exercises, and were less expert in the use of their arms than the Tartars and Arabs are said to be. A militia of any kind, it must be observed, however, which has served for several successive campaigns in the field, becomes in every respect a standing army. The soldiers are every day exercised in the use of their arms, and, being constantly under the command of their officers, are habituated to the same prompt obedience which takes place in standing armies. What they were before they took the field, is of little importance. They necessarily become in every respect a standing army, after they have passed a few campaigns in it. Should the war in America drag out through another campaign, the American militia may become, in every respect, a match for that standing army, of which the valour appeared, in the last war at least, not inferior to that of the hardiest veterans of France and Spain. This distinction being well understood, the history of all ages, it will be found, bears testimony to the irresistible superiority which a well regulated standing army has over a militia. One of the first standing armies, of which we have any distinct account in any well authenticated history, is that of Philip of Macedon. His frequent wars with the Thracians, Illyrians, Thessalians, and some of the Greek cities in the neighbourhood of Macedon, gradually formed his troops, which in the beginning were probably militia, to the exact discipline of a standing army. When he was at peace, which he was very seldom, and never for any long time together, he was careful not to disband that army. It vanquished and subdued, after a long and violent struggle, indeed, the gallant and well exercised militias of the principal republics of ancient Greece; and afterwards, with very little struggle, the effeminate and ill exercised militia of the great Persian empire. The fall of the Greek republics, and of the Persian empire was the effect of the irresistible superiority which a standing army has over every other sort of militia. It is the first great revolution in the affairs of mankind of which history has preserved any distinct and circumstantial account. The fall of Carthage, and the consequent elevation of Rome, is the second. All the varieties in the fortune of those two famous republics may very well be accounted for from the same cause. From the end of the first to the beginning of the second Carthaginian war, the armies of Carthage were continually in the field, and employed under three great generals, who succeeded one another in the command; Amilcar, his son-in-law Asdrubal, and his son Annibal: first in chastising their own rebellious slaves, afterwards in subduing the revolted nations of Africa; and lastly, in conquering the great kingdom of Spain. The army which Annibal led from Spain into Italy must necessarily, in those different wars, have been gradually formed to the exact discipline of standing army. The Romans, in the meantime, though they had not been altogether at peace, yet they had not, during this period, been engaged in any war of very great consequence; and their military discipline, it is generally said, was a good deal relaxed. The Roman armies which Annibal encountered at Trebi, Thrasymenus, and Cannæ, were militia opposed to a standing army. This circumstance, it is probable, contributed more than any other to determine the fate of those battles. The standing army which Annibal left behind him in Spain had the like superiority over the militia which the Romans sent to oppose it; and, in a few years, under the command of his brother, the younger Asdrubal, expelled them almost entirely from that country. Annibal was ill supplied from home. The Roman militia, being continually in the field, became, in the progress of the war, a well disciplined and well exercised standing army; and the superiority of Annibal grew every day less and less. Asdrubal judged it necessary to lead the whole, or almost the whole, of the standing army which he commanded in Spain, to the assistance of his brother in Italy. In this march, he is said to have been misled by his guides; and in a country which he did not know, was surprised and attacked, by another standing army, in every respect equal or superior to his own, and was entirely defeated. When Asdrubal had left Spain, the great Scipio found nothing to oppose him but a militia inferior to his own. He conquered and subdued that militia, and, in the course of the war, his own militia necessarily became a well disciplined and well exercised standing army. That standing army was afterwards carried to Africa, where it found nothing but a militia to oppose it. In order to defend Carthage, it became necessary to recal the standing army of Annibal. The disheartened and frequently defeated African militia joined it, and, at the battle of Zama, composed the greater part of the troops of Annibal. The event of that day determined the fate of the two rival republics. From the end of the second Carthaginian war till the fall of the Roman republic, the armies of Rome were in every respect standing armies. The standing army of Macedon made some resistance to their arms. In the height of their grandeur, it cost them two great wars, and three great battles, to subdue that little kingdom, of which the conquest would probably have been still more difficult, had it not been for the cowardice of its last king. The militias of all the civilized nations of the ancient word, of Greece, of Syria, and of Egypt, made but a feeble resistance to the standing armies of Rome. The militias of some barbarous nations defended themselves much better. The Scythian or Tartar militia, which Mithridates drew from the countries north of the Euxine and Caspian seas, were the most formidable enemies whom the Romans had to encounter after the second Carthaginian war. The Parthian and German militias, too, were always respectable, and upon several occasions, gained very considerable advantages over the Roman armies. In general, however, and when the Roman armies were well commanded, they appear to have been very much superior; and if the Romans did not pursue the final conquest either of Parthia or Germany, it was probably because they judged that it was not worth while to add those two barbarous countries to an empire which was already too large. The ancient Parthians appear to have been a nation of Scythian or Tartar extraction, and to have always retained a good deal of the manners of their ancestors. The ancient Germans were, like the Scythians or Tartars, a nation of wandering shepherds, who went to war under the same chiefs whom they were accustomed to follow in peace. Their militia was exactly of the same kind with that of the Scythians or Tartars, from whom, too, they were probably descended. Many different causes contributed to relax the discipline of the Roman armies. Its extreme severity was, perhaps, one of those causes. In the days of their grandeur, when no enemy appeared capable of opposing them, their heavy armour was laid aside as unnecessarily burdensome, their laborious exercises were neglected, as unnecessarily toilsome. Under the Roman emperors, besides, the standing armies of Rome, those particularly which guarded the German and Pannonian frontiers, became dangerous to their masters, against whom they used frequently to set up their own generals. In order to render them less formidable, according to some authors, Dioclesian, according to others, Constantine, first withdrew them from the frontier, where they had always before been encamped in great bodies, generally of two or three legions each, and dispersed them in small bodies through the different provincial towns, from whence they were scarce ever removed, but when it became necessary to repel an invasion. Small bodies of soldiers, quartered in trading and manufacturing towns, and seldom removed from those quarters, became themselves tradesmen, artificers, and manufacturers. The civil came to predominate over the military character; and the standing armies of Rome gradually degenerated into a corrupt, neglected, and undisciplined militia, incapable of resisting the attack of the German and Scythian militias, which soon afterwards invaded the western empire. It was only by hiring the militia of some of those nations to oppose to that of others, that the emperors were for some time able to defend themselves. The fall of the western empire is the third great revolution in the affairs of mankind, of which ancient history has preserved any distinct or circumstantial account. It was brought about by the irresistible superiority which the militia of a barbarous has over that of a civilized nation; which the militia of a nation of shepherds has over that of a nation of husbandmen, artificers, and manufacturers. The victories which have been gained by militias have generally been, not over standing armies, but over other militias, in exercise and discipline inferior to themselves. Such were the victories which the Greek militia gained over that of the Persian empire; and such, too, were those which, in later times, the Swiss militia gained over that of the Austrians and Burgundians. The military force of the German and Scythian nations, who established themselves upon the ruins of the western empire, continued for some time to be of the same kind in their new settlements, as it had been in their original country. It was a militia of shepherds and husbandmen, which, in time of war, took the field under the command of the same chieftains whom it was accustomed to obey in peace. It was, therefore, tolerably well exercised, and tolerably well disciplined. As arts and industry advanced, however, the authority of the chieftains gradually decayed, and the great body of the people had less time to spare for military exercises. Both the discipline and the exercise of the feudal militia, therefore, went gradually to ruin, and standing armies were gradually introduced to supply the place of it. When the expedient of a standing army, besides, had once been adopted by one civilized nation, it became necessary that all its neighbors should follow the example. They soon found that their safety depended upon their doing so, and that their own militia was altogether incapable of resisting the attack of such an army. The soldiers of a standing army, though they may never have seen an enemy, yet have frequently appeared to possess all the courage of veteran troops, and, the very moment that they took the field, to have been fit to face the hardiest and most experienced veterans. In 1756, when the Russian army marched into Poland, the valour of the Russian soldiers did not appear inferior to that of the Prussians, at that time supposed to be the hardiest and most experienced veterans in Europe. The Russian empire, however, had enjoyed a profound peace for near twenty years before, and could at that time have very few soldiers who had ever seen an enemy. When the Spanish war broke out in 1739, England had enjoyed a profound peace for about eight-and-twenty years. The valour of her soldiers, however, far from being corrupted by that long peace, was never more distinguished than in the attempt upon Carthagena, the first unfortunate exploit of that unfortunate war. In a long peace, the generals, perhaps, may sometimes forget their skill; but where a well regulated standing army has been kept up, the soldiers seem never to forget their valour. When a civilized nation depends for its defence upon a militia, it is at all times exposed to be conquered by any barbarous nation which happens to be in its neighbourhood. The frequent conquests of all the civilized countries in Asia by the Tartars, sufficiently demonstrates the natural superiority which the militia of a barbarous has over that of a civilized nation. A well regulated standing army is superior to every militia. Such an army, as it can best be maintained by an opulent and civilized nation, so it can alone defend such a nation against the invasion of a poor and barbarous neighbour. It is only by means of a standing army, therefore, that the civilization of any country can be perpetuated, or even preserved, for any considerable time. As it is only by means of a well regulated standing army, that a civilized country can be defended, so it is only by means of it that a barbarous country can be suddenly and tolerably civilised. A standing army establishes, with an irresistible force, the law of the sovereign through the remotest provinces of the empire, and maintains some degree of regular government in countries which could not otherwise admit of any. Whoever examines with attention, the improvements which Peter the Great introduced into the Russian empire, will find that they almost all resolve themselves into the establishment of a well regulated standing army. It is the instrument which executes and maintains all his other regulations. That degree of order and internal peace, which that empire has ever since enjoyed, is altogether owing to the influence of that army. Men of republican principles have been jealous of a standing army, as dangerous to liberty. It certainly is so, wherever the interest of the general, and that of the principal officers, are not necessarily connected with the support of the constitution of the state. The standing army of Cæsar destroyed the Roman republic. The standing army of Cromwell turned the long parliament out of doors. But where the sovereign is himself the general, and the principal nobility and gentry of the country the chief officers of the army; where the military force is placed under the command of those who have the greatest interest in the support of the civil authority, because they have themselves the greatest share of that authority, a standing army can never be dangerous to liberty. On the contrary, it may, in some cases, be favourable to liberty. The security which it gives to the sovereign renders unnecessary that troublesome jealousy, which, in some modern republics, seems to watch over the minutest actions, and to be at all times ready to disturb the peace of every citizen. Where the security of the magistrate, though supported by the principal people of the country, is endangered by every popular discontent; where a small tumult is capable of bringing about in a few hours a great revolution, the whole authority of government must be employed to suppress and punish every murmur and complaint against it. To a sovereign, on the contrary, who feels himself supported, not only by the natural aristocracy of the country, but by a well regulated standing army, the rudest, the most groundless, and the must licentious remonstrances, can give little disturbance. He can safely pardon or neglect them, and his consciousness of his own superiority naturally disposes him to do so. That degree of liberty which approaches to licentiousness, can be tolerated only in countries where the sovereign is secured by a well regulated standing army. It is in such countries only, that the public safety does not require that the sovereign should be trusted with any discretionary power, for suppressing even the impertinent wantonness of this licentious liberty. The first duty of the sovereign, therefore, that of defending the society from the violence and injustice of other independent societies, grows gradually more and more expensive, as the society advances in civilization. The military force of the society, which originally cost the sovereign no expense, either in time of peace, or in time of war, must, in the progress of improvement, first be maintained by him in time of war, and afterwards even in time of peace. The great change introduced into the art of war by the invention of fire-arms, has enhanced still further both the expense of exercising and disciplining any particular number of soldiers in time of peace, and that of employing them in time of war. Both their arms and their ammunition are become more expensive. A musket is a more expensive machine than a javelin or a bow and arrows; a cannon or a mortar, than a balista or a catapulta. The powder which is spent in a modern review is lost irrecoverably, and occasions a very considerable expense. The javelins and arrows which were thrown or shot in an ancient one, could easily be picked up again, and were, besides, of very little value. The cannon and the mortar are not only much dearer, but much heavier machines than the balista or catapulta; and require a greater expense, not only to prepare them for the field, but to carry them to it. As the superiority of the modern artillery, too, over that of the ancients, is very grant; it has become much more difficult, and consequently much more expensive, to fortify a town, so as to resist, even for a few weeks, the attack of that superior artillery. In modern times, many different causes contribute to render the defence of the society more expensive. The unavoidable effects of the natural progress of improvement have, in this respect, been a good deal enhanced by a great revolution in the the art of war, to which a mere accident, the invention of gunpowder, seems to have given occasion. In modern war, the great expense of fire-arms gives an evident advantage to the nation which can best afford that expense; and consequently, to an opulent and civilized, over a poor and barbarous nation. In ancient times, the opulent and civilized found it difficult to defend themselves against the poor and barbarous nations. In modern times, the poor and barbarous find it difficult to defend themselves against the opulent and civilized. The invention of fire-arms, an invention which at first sight appears to be so pernicious, is certainly favourable, both to the permanency and to the extension of civilisation. PART II. _Of the Expense of Justice._ The second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice, requires two very different degrees of expense in the different periods of society. Among nations of hunters, as there is scarce any property, or at least none that exceeds the value of two or three days labour; so there is seldom any established magistrate, or any regular administration of justice. Men who have no property, can injure one another only in their persons or reputations. But when one man kills, wounds, beats, or defames another, though he to whom the injury is done suffers, he who does it receives no benefit. It is otherwise with the injuries to property. The benefit of the person who does the injury is often equal to the loss of him who suffers it. Envy, malice, or resentment, are the only passions which can prompt one man to injure another in his person or reputation. But the greater part of men are not very frequently under the influence of those passions; and the very worst men are so only occasionally. As their gratification, too, how agreeable soever it may be to certain characters, is not attended with any real or permanent advantage, it is, in the greater part of men, commonly restrained by prudential considerations. Men may live together in society with some tolerable degree of security, though there is no civil magistrate to protect them from the injustice of those passions. But avarice and ambition in the rich, in the poor the hatred of labour and the love of present ease and enjoyment, are the passions which prompt to invade property; passions much more steady in their operation, and much more universal in their influence. Wherever there is a great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions. It is only under the shelter of the civil magistrate, that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The requisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes, which naturally introduce subordination, gradually grow up with the growth of that valuable property. The causes or circumstances which naturally introduce subordination, or which naturally and antecedent to any civil institution, give some men some superiority over the greater part of their brethren, seem to be four in number. The first of those causes or circumstances, is the superiority of personal qualifications, of strength, beauty, and agility of body; of wisdom and virtue of prudence, justice, fortitude, and moderation of mind. The qualifications of the body, unless supported by those of the mind, can give little authority in any period of society. He is a very strong man, who, by mere strength of body, can force two weak ones to obey him. The qualifications of the mind can alone give very great authority. They are however, invisible qualities; always disputable, and generally disputed. No society, whether barbarous or civilized, has ever found it convenient to settle the rules of precedency of rank and subordination, according to those invisible qualities; but according to something that is more plain and palpable. The second of those causes or circumstances is the superiority of age. An old man, provided his age is not so far advanced as to give suspicion of dotage, is everywhere more respected than a young man of equal rank, fortune, and abilities. Among nations of hunters, such as the native tribes of North America, age is the sole foundation of rank and precedency. Among them, father is the appellation of a superior; brother, of an equal; and son, of an inferior. In the most opulent and civilized nations, age regulates rank among those who are in every other respect equal; and among whom, therefore, there is nothing else to regulate it. Among brothers and among sisters, the eldest always takes place; and in the succession of the paternal estate, every thing which cannot be divided, but must go entire to one person, such as a title of honour, is in most cases given to the eldest. Age is a plain and palpable quality, which admits of no dispute. The third of those causes or circumstances, is the superiority of fortune. The authority of riches, however, though great in every age of society, is, perhaps, greatest in the rudest ages of society, which admits of any considerable inequality of fortune. A Tartar chief, the increase of whose flocks and herds is sufficient to maintain a thousand men, cannot well employ that increase in any other way than in maintaining a thousand men. The rude state of his society does not afford him any manufactured produce; any trinkets or baubles of any kind, for which he can exchange that part of his rude produce which is over and above his own consumption. The thousand men whom he thus maintains, depending entirely upon him for their subsistence, must both obey his orders in war, and submit to his jurisdiction in peace. He is necessarily both their general and their judge, and his chieftainship is the necessary effect of the superiority of his fortune. In an opulent and civilized society, a man may possess a much greater fortune, and yet not be able to command a dozen of people. Though the produce of his estate may be sufficient to maintain, and may, perhaps, actually maintain, more than a thousand people, yet, as those people pay for every thing which they get from him, as he gives scarce any thing to any body but in exchange for an equivalent, there is scarce any body who considers himself as entirely dependent upon him, and his authority extends only over a few menial servants. The authority of fortune, however, is very great, even in an opulent and civilized society. That it is much greater than that either of age or of personal qualities, has been the constant complaint of every period of society which admitted of any considerable inequality of fortune. The first period of society, that of hunters, admits of no such inequality. Universal poverty establishes their universal equality; and the superiority, either of age or of personal qualities, are the feeble, but the sole foundations of authority and subordination. There is, therefore, little or no authority or subordination in this period of society. The second period of society, that of shepherds, admits of very great inequalities of fortune, and there is no period in which the superiority of fortune gives so great authority to those who possess it. There is no period, accordingly, in which authority and subordination are more perfectly established. The authority of an Arabian scherif is very great; that of a Tartar khan altogether despotical. The fourth of those causes or circumstances, is the superiority of birth. Superiority of birth supposes an ancient superiority of fortune in the family of the person who claims it. All families are equally ancient; and the ancestors of the prince, though they may be better known, cannot well be more numerous than those of the beggar. Antiquity of family means everywhere the antiquity either of wealth, or of that greatness which is commonly either founded upon wealth, or accompanied with it. Upstart greatness is everywhere less respected than ancient greatness. The hatred of usurpers, the love of the family of an ancient monarch, are in a great measure founded open the contempt which men naturally have for the former, and upon their veneration for the latter. As a military officer submits, without reluctance, to the authority of a superior by whom he has always been commanded, but cannot bear that his inferior should be set over his head; so men easily submit to a family to whom they and their ancestors have always submitted; but are fired with indignation when another family, in whom they had never acknowledged any such superiority, assumes a dominion over them. The distinction of birth, being subsequent to the inequality of fortune, can have no place in nations of hunters, among whom all men, being equal in fortune, must likewise be very nearly equal in birth. The son of a wise and brave man may, indeed, even among them, be somewhat more respected than a man of equal merit, who has the misfortune to be the son of a fool or a coward. The difference, however, will not be very great; and there never was, I believe, a great family in the world, whose illustration was entirely derived from the inheritance of wisdom and virtue. The distinction of birth not only may, but always does, take place among nations of shepherds. Such nations are always strangers to every sort of luxury, and great wealth can scarce ever be dissipated among them by improvident profusion. There are no nations, accordingly, who abound more in families revered and honoured on account of their descent from a long race of great and illustrious ancestors; because there are no nations among whom wealth is likely to continue longer in the same families. Birth and fortune are evidently the two circumstances which principally set one man above another. They are the two great sources of personal distinction, and are, therefore, the principal causes which naturally establish authority and subordination among men. Among nations of shepherds, both those causes operate with their full force. The great shepherd or herdsman, respected on account of his great wealth, and of the great number of those who depend upon him for subsistence, and revered on account of the nobleness of his birth, and of the immemorial antiquity of his illustrious family, has a natural authority over all the inferior shepherds or herdsmen of his horde or clan. He can command the united force of a greater number of people than any of them. His military power is greater than that of any of them. In time of war, they are all of them naturally disposed to muster themselves under his banner, rather than under that of any other person; and his birth and fortune thus naturally procure to him some sort of executive power. By commanding, too, the united force of a greater number of people than any of them, he is best able to compel any one of them, who may have injured another, to compensate the wrong. He is the person, therefore, to whom all those who are too weak to defend themselves naturally look up for protection. It is to him that they naturally complain of the injuries which they imagine have been done to them; and his interposition, in such cases, is more easily submitted to, even by the person complained of, than that of any other person would be. His birth and fortune thus naturally procure him some sort of judicial authority. It is in the age of shepherds, in the second period of society, that the inequality of fortune first begins to take place, and introduces among men a degree of authority and subordination, which could not possibly exist before. It thereby introduces some degree of that civil government which is indispensably necessary for its own preservation; and it seems to do this naturally, and even independent of the consideration of that necessity. The consideration of that necessity comes, no doubt, afterwards, to contribute very much to maintain and secure that authority and subordination. The rich, in particular, are necessarily interested to support that order of things, which can alone secure them in the possession of their own advantages. Men of inferior wealth combine to defend those of superior wealth in the possession of their property, in order that men of superior wealth may combine to defend them in the possession of theirs. All the inferior shepherds and herdsmen feel, that the security of their own herds and flocks depends upon the security of those of the great shepherd or herdsman; that the maintenance of their lesser authority depends upon that of his greater authority; and that upon their subordination to him depends his power of keeping their inferiors in subordination to them. They constitute a sort of little nobility, who feel themselves interested to defend the property, and to support the authority, of their own little sovereign, in order that he may be able to defend their property, and to support their authority. Civil government, so far as it is instituted for the security of property, is, in reality, instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all. The judicial authority of such a sovereign, however, far from being a cause of expense, was, for a long time, a source of revenue to him. The persons who applied to him for justice were always willing to pay for it, and a present never failed to accompany a petition. After the authority of the sovereign, too, was thoroughly established, the person found guilty, over and above the satisfaction which he was obliged to make to the party, was likewise forced to pay an amercement to the sovereign. He had given trouble, he had disturbed, he had broke the peace of his lord the king, and for those offences an amercement was thought due. In the Tartar governments of Asia, in the governments of Europe which were founded by the German and Scythian nations who overturned the Roman empire, the administration of justice was a considerable source of revenue, both to the sovereign, and to all the lesser chiefs or lords who exercised under him any particular jurisdiction, either over some particular tribe or clan, or over some particular territory or district. Originally, both the sovereign and the inferior chiefs used in exercise this jurisdiction in their own persons. Afterwards, they universally found it convenient to delegate it to some substitute, bailiff, or judge. This substitute, however, was still obliged to account to his principal or constituent for the profits of the jurisdiction. Whoever reads the instructions[47] which were given to the judges of the circuit in the time of Henry II. will see clearly that those judges were a sort of itinerant factors, sent round the country for the purpose of levying certain branches of the king's revenue. In those days, the administration of justice not only afforded a certain revenue to the sovereign, but, to procure this revenue, seems to have been one of the principal advantages which he proposed to obtain by the administration of justice. This scheme of making the administration of justice subservient to the purposes of revenue, could scarce fail to be productive of several very gross abuses. The person who applied for justice with a large present in his hand, was likely to get something more than justice; while he who applied for it with a small one was likely to get something less. Justice, too, might frequently be delayed, in order that this present might be repeated. The amercement, besides, of the person complained of, might frequently suggest a very strong reason for finding him in the wrong, even when he had not really been so. That such abuses were far from being uncommon, the ancient history of every country in Europe bears witness. When the sovereign or chief exercises his judicial authority in his own person, how much soever he might abuse it, it must have been scarce possible to get any redress; because there could seldom be any body powerful enough to call him to account. When he exercised it by a bailiff, indeed, redress might sometimes be had. If it was for his own benefit only, that the bailiff had been guilty of an act of injustice, the sovereign himself might not always be unwilling to punish him, or to oblige him to repair the wrong. But if it was for the benefit of his sovereign; if it was in order to make court to the person who appointed him, and who might prefer him, that he had committed any act of oppression; redress would, upon most occasions be as impossible as if the sovereign had committed it himself. In all barbarous governments, accordingly, in all those ancient governments of Europe in particular, which were founded upon the ruins of the Roman empire, the administration of justice appears for a long time to have been extremely corrupt; far from being quite equal and impartial, even under the best monarchs, and altogether profligate under the worst. Among nations of shepherds, where the sovereign or chief is only the greatest shepherd or herdsman of the horde or clan, he is maintained in the same manner as any of his vassals or subjects, by the increase of his own herds or flocks. Among those nations of husbandmen, who are but just come out of the shepherd state, and who are not much advanced beyond that state, such as the Greek tribes appear to have been about the time of the Trojan war, and our German and Scythian ancestors, when they first settled upon the ruins of the western empire; the sovereign or chief is, in the same manner, only the greatest landlord of the country, and is maintained in the same manner as any other landlord, by a revenue derived from his own private estate, or from what, in modern Europe, was called the demesne of the crown. His subjects, upon ordinary occasions, contribute nothing to his support, except when, in order to protect them from the oppression of some of their fellow-subjects, they stand in need of his authority. The presents which they make him upon such occasions constitute the whole ordinary revenue, the whole of the emoluments which, except, perhaps, upon some very extraordinary emergencies, he derives from his dominion over them. When Agamemnon, in Homer, offers to Achilles, for his friendship, the sovereignty of seven Greek cities, the sole advantage which he mentions as likely to be derived from it was, that the people would honour him with presents. As long as such presents, as long as the emoluments of justice, or what may be called the fees of court, constituted, in this manner, the whole ordinary revenue which the sovereign derived from his sovereignty, it could not well be expected, it could not even decently be proposed, that he should give them up altogether. It might, and it frequently was proposed, that he should regulate and ascertain then. But after they had been so regulated and ascertained, how to hinder a person who was all-powerful from extending them beyond those regulations, was still very difficult, not to say impossible. During the continuance of this state of things, therefore, the corruption of justice, naturally resulting from the arbitrary and uncertain nature of those presents, scarce admitted of any effectual remedy. But when, from different causes, chiefly from the continually increasing expense of defending the nation against the invasion of other nations, the private estate of the sovereign had become altogether insufficient for defraying the expense of the sovereignty; and when it had become necessary that the people should, for their own security, contribute towards this expense by taxes of different kinds; it seems to have been very commonly stipulated, that no present for the administration of justice should, under any pretence, be accepted either by the sovereign, or by his bailiffs and substitutes, the judges. Those presents, it seems to have been supposed, could more easily be abolished altogether, than effectually regulated and ascertained. Fixed salaries were appointed to the judges, which were supposed to compensate to them the loss of whatever might have been their share of the ancient emoluments of justice; as the taxes more than compensated to the sovereign the loss of his. Justice was then said to be administered gratis. Justice, however, never was in reality administered gratis in any country. Lawyers and attorneys, at least, must always be paid by the parties; and if they were not, they would perform their duty still worse than they actually perform it. The fees annually paid to lawyers and attorneys, amount, in every court, to a much greater sum than the salaries of the judges. The circumstance of those salaries being paid by the crown, can nowhere much diminish the necessary expense of a law-suit. But it was not so much to diminish the expense, as to prevent the corruption of justice, that the judges were prohibited from receiving any present or fee from the parties. The office of judge is in itself so very honourable, that men are willing to accept of it, though accompanied with very small emoluments. The inferior office of justice of peace, though attended with a good deal of trouble, and in most cases with no emoluments at all, is an object of ambition to the greater part of our country gentlemen. The salaries of all the different judges, high and low, together with the whole expense of the administration and execution of justice, even where it is not managed with very good economy, makes, in any civilized country, but a very inconsiderable part of the whole expense of government. The whole expense of justice, too, might easily be defrayed by the fees of court; and, without exposing the administration of justice to any real hazard of corruption, the public revenue might thus be entirely discharged from a certain, though perhaps but a small incumbrance. It is difficult to regulate the fees of court effectually, where a person so powerful as the sovereign is to share in them, and to derive any considerable part of his revenue from them. It is very easy, where the judge is the principal person who can reap any benefit from them. The law can very easily oblige the judge to respect the regulation, though it might not always be able to make the sovereign respect it. Where the fees of court are precisely regulated and ascertained; where they are paid all at once, at a certain period of every process, into the hands of a cashier or receiver, to be by him distributed in certain known proportions among the different judges after the process is decided, and not till it is decided; there seems to be no more danger of corruption than where such fees are prohibited altogether. Those fees, without occasioning any considerable increase in the expense of a law-suit, might be rendered fully sufficient for defraying the whole expense of justice. But not being paid to the judges till the process was determined, they might be some incitement to the diligence of the court in examining and deciding it. In courts which consisted of a considerable number of judges, by proportioning the share of each judge to the number of hours and days which he had employed in examining the process, either in the court, or in a committee, by order of the court, those fees might give some encouragement to the diligence of each particular judge. Public services are never better performed, than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them. In the different parliaments of France, the fees of court (called epices and vacations) constitute the far greater part of the emoluments of the judges. After all deductions are made, the neat salary paid by the crown to a counsellor or judge in the parliament of Thoulouse, in rank and dignity the second parliament of the kingdom, amounts only to 150 livres, about L.6. 11s. sterling a-year. About seven years ago, that sum was in the same place the ordinary yearly wages of a common footman. The distribution of these epices, too, is according to the diligence of the judges. A diligent judge gains a comfortable, though moderate revenue, by his office; an idle one gets little more than his salary. Those parliaments are, perhaps, in many respects, not very convenient courts of justice, but they have never been accused; they seem never even to have been suspected of corruption. The fees of court seem originally to have been the principal support of the different courts of justice in England. Each court endeavoured to draw to itself as much business as it could, and was, upon that account, willing to take cognizance of many suits which were not originally intended to fall under its jurisdiction. The court of king's bench, instituted for the trial of criminal causes only, took cognizance of civil suits; the plaintiff pretending that the defendant, in not doing him justice, had been guilty of some trespass or misdemeanour. The court of exchequer, instituted for the levying of the king's revenue, and for enforcing the payment of such debts only as were due to the king, took cognizance of all other contract debts; the plaintiff alleging that he could not pay the king, because the defendant would not pay him. In consequence of such fictions, it came, in many cases, to depend altogether upon the parties, before what court they would choose to have their cause tried, and each court endeavoured, by superior dispatch and impartiality, to draw to itself as many causes as it could. The present admirable constitution of the courts of justice in England was, perhaps, originally, in a great measure, formed by this emulation, which anciently took place between their respective judges; each judge endeavouring to give, in his own court, the speediest and most effectual remedy which the law would admit, for every sort of injustice. Originally, the courts of law gave damages only for breach of contract. The court of chancery, as a court of conscience, first took upon it to enforce the specific performance of agreements. When the breach of contract consisted in the non-payment of money, the damage sustained could be compensated in no other way than by ordering payment, which was equivalent to a specific performance of the agreement. In such cases, therefore, the remedy of the courts of law was sufficient. It was not so in others. When the tenant sued his lord for having unjustly outed him of his lease, the damages which he recovered were by no means equivalent to the possession of the land. Such causes, therefore, for some time, went all to the court of chancery, to the no small loss of the courts of law. It was to draw back such causes to themselves, that the courts of law are said to have invented the artificial and fictitious writ of ejectment, the most effectual remedy for an unjust outer or dispossession of land. A stamp-duty upon the law proceedings by each particular court, to be levied by that court, and applied towards the maintenance of the judges, and other officers belonging to it, might in the same manner, afford a revenue sufficient for defraying the expense of the administration of justice, without bringing any burden upon the general revenue of the society. The judges, indeed, might in this case, be under the temptation of multiplying unnecessarily the proceedings upon every cause, in order to increase, as much as possible, the produce of such a stamp-duty. It has been the custom in modern Europe to regulate, upon most occasions, the payment of the attorneys and clerks of court according to the number of pages which they had occasion to write; the court, however, requiring that each page should contain so many lines, and each line so many words. In order to increase their payment, the attorneys and clerks have contrived to multiply words beyond all necessity, to the corruption of the law language of, I believe, every court of justice in Europe. A like temptation might, perhaps, occasion a like corruption in the form of law proceedings. But whether the administration of justice be so contrived as to defray its own expense, or whether the judges be maintained by fixed salaries paid to them from some other fund, it does not seem necessary that the person or persons entrusted with the executive power should be charged with the management of that fund, or with the payment of those salaries. That fund might arise from the rent of landed estates, the management of each estate being entrusted to the particular court which was to be maintained by it. That fund might arise even from the interest of a sum of money, the lending out of which might, in the same manner, be entrusted to the court which was to be maintained by it. A part, though indeed but a small part of the salary of the judges of the court of session in Scotland, arises from the interest of a sum of money. The necessary instability of such a fund seems, however, to render it an improper one for the maintenance of an institution which ought to last for ever. The separation of the judicial from the executive power, seems originally to have arisen from the increasing business of the society, in consequence of its increasing improvement. The administration of justice became so laborious and so complicated a duty, as to require the undivided attention of the person to whom it was entrusted. The person entrusted with the executive power, not having leisure to attend to the decision of private causes himself, a deputy was appointed to decide them in his stead. In the progress of the Roman greatness, the consul was too much occupied with the political affairs of the state, to attend to the administration of justice. A prætor, therefore, was appointed to administer it in his stead. In the progress of the European monarchies, which were founded upon the ruins of the Roman empire, the sovereigns and the great lords came universally to consider the administration of justice as an office both too laborious and too ignoble for them to execute in their own persons. They universally, therefore, discharged themselves of it, by appointing a deputy, bailiff, or judge. When the judicial is united to the executive power, it is scarce possible that justice should not frequently be sacrificed to what is vulgarly called politics. The persons entrusted with the great interests of the state may even without any corrupt views, sometimes imagine it necessary to sacrifice to those interests the rights of a private man. But upon the impartial administration of justice depends the liberty of every individual, the sense which he has of his own security. In order to make every individual feel himself perfectly secure in the possession of every right which belongs to him, it is not only necessary that the judicial should be separated from the executive power, but that it should be rendered as much as possible independent of that power. The judge should not be liable to be removed from his office according to the caprice of that power. The regular payment of his salary should not depend upon the good will, or even upon the good economy of that power. PART III. _Of the Expense of public Works and public Institutions._ The third and last duty of the sovereign or commonwealth, is that of erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual, or small number of individuals; and which it, therefore, cannot be expected that any individual, or small number of individuals, should erect or maintain. The performance of this duty requires, too, very different degrees of expense in the different periods of society. After the public institutions and public works necessary for the defence of the society, and for the administration of justice, both of which have already been mentioned, the other works and institutions of this kind are chiefly for facilitating the commerce of the society, and those for promoting the instruction of the people. The institutions for instruction are of two kinds: those for the education of the youth, and those for the instruction of people of all ages. The consideration of the manner in which the expense of those different sorts of public works and institutions may be most properly defrayed will divide this third part of the present chapter into three different articles. ART. I.--_Of the public Works and Institutions for facilitating the Commerce of the Society._ _And, first, of those which are necessary for facilitating Commerce in general._ That the erections and maintenance of the public works which facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbours, &c. must require very different degrees of expense in the different periods of society, is evident without any proof. The expense of making and maintaining the public roads of any country must evidently increase with the annual produce of the land and labour of that country, or with the quantity and weight of the goods which it becomes necessary to fetch and carry upon those roads. The strength of a bridge must be suited to the number and weight of the carriages which are likely to pass over it. The depth and the supply of water for a navigable canal must be proportional to the number and tonnage of the lighters which are likely to carry goods upon it; the extent of a harbour, to the number of the shipping which are likely to take shelter in it. It does not seem necessary that the expense of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries, assigned to the executive power. The greater part of such public works may easily be so managed, as to afford a particular revenue, sufficient for defraying their own expense, without bringing any burden upon the general revenue of the society. A highway, a bridge, a navigable canal, for example, may, in most cases, be both made and maintained by a small toll upon the carriages which make use of them; a harbour, by a moderate port-duty upon the tonnage of the shipping which load or unload in it. The coinage, another institution for facilitating commerce, in many countries, not only defrays its own expense, but affords a small revenue or a seignorage to the sovereign. The post-office, another institution for the same purpose, over and above defraying its own expense, affords, in almost all countries, a very considerable revenue to the sovereign. When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of these public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works. This tax or toll, too, though it is advanced by the carrier, is finally paid by the consumer, to whom it must always be charged in the price of the goods. As the expense of carriage, however, is very much reduced by means of such public works, the goods, notwithstanding the toll, come cheaper to the consumer than they could otherwise have done, their price not being so much raised by the toll, as it is lowered by the cheapness of the carriage. The person who finally pays this tax, therefore, gains by the application more than he loses by the payment of it. His payment is exactly in proportion to his gain. It is, in reality, no more than a part of that gain which he is obliged to give up, in order to get the rest. It seems impossible to imagine a more equitable method of raising a tax. When the toll upon carriages of luxury, upon coaches, post-chaises, &c. is made somewhat higher in proportion to their weight, than upon carriages of necessary use, such as carts, waggons, &c. the indolence and vanity of the rich is made to contribute, in a very easy manner, to the relief of the poor, by rendering cheaper the transportation of heavy goods to all the different parts of the country. When high-roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and, consequently, where it is proper to make them, Their expense, too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made, consequently, as it is proper to make them. A magnificent high-road cannot be made through a desert country, where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord, to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace; things which sometimes happen in countries, where works of this kind are carried on by any other revenue than that which they themselves are capable of affording. In several different parts of Europe, the toll or lock-duty upon a canal is the property of private persons, whose private interest obliges them to keep up the canal. If it is not kept in tolerable order, the navigation necessarily ceases altogether, and, along with it, the whole profit which they can make by the tolls. If those tolls were put under the the management of commissioners, who had themselves no interest in them, they might be less attentive to the maintenance of the works which produced them. The canal of Languedoc cost the king of France and the province upwards of thirteen millions of livres, which (at twenty-eight livres the mark of silver, the value of French money in the end of the last century) amounted to upwards of nine hundred thousand pounds sterling. When that great work was finished, the most likely method, it was found, of keeping it in constant repair, was to make a present of the tolls to Riquet, the engineer who planned and conducted the work. Those tolls constitute, at present, a very large estate to the different branches of the family of that gentleman, who have, therefore, a great interest to keep the work in constant repair. But had those tolls been put under the management of commissioners, who had no such interest, they might perhaps, have been dissipated in ornamental and unnecessary expenses, while the most essential parts of the works were allowed to go to ruin. The tolls for the maintenance of a high-road cannot, with any safety, be made the property of private persons. A high-road, though entirely neglected, does not become altogether impassable, though a canal does. The proprietors of the tolls upon a high-road, therefore, might neglect altogether the repair of the road, and yet continue to levy very nearly the same tolls. It is proper, therefore, that the tolls for the maintenance of such a work should be put under the management of commissioners or trustees. In Great Britain, the abuses which the very trustees have committed in the management of those tolls, have, in many cases, been very justly complained of. At many turnpikes, it has been said, the money levied is more than double of what is necessary for executing, in the completest manner, the work, which is often executed in a very slovenly manner, and sometimes not executed at all. The system of repairing the high-roads by tolls of this kind, it must be observed, is not of very long standing. We should not wonder, therefore, if it has not yet been brought that degree of perfection of which it seems capable. If mean and improper persons are frequently appointed trustees; and if proper courts of inspection and account have not yet been established for controlling their conduct, and for reducing the tolls to what is barely sufficient for executing the work to be done by them; the recency of the institution both accounts and apologizes for those defects, of which, by the wisdom of parliament, the greater part may, in due time, be gradually remedied. The money levied at the different turnpikes in Great Britain, is supposed to exceed so much what is necessary for repairing the roads, that the savings which, with proper economy, might be made from it, have been considered, even by some ministers, as a very great resource, which might, at some time or another, be applied to the exigencies of the state. Government, it has been said, by taking the management of the turnpikes into its own hands, and by employing the soldiers, who would work for a very small addition to their pay, could keep the roads in good order, at a much less expense than it can be done by trustees, who have no other workmen to employ, but such as derive their whole subsistence from their wages. A great revenue, half a million, perhaps[48], it has been pretended, might in this manner be gained, without laying any new burden upon the people; and the turnpike roads might be made to contribute to the general expense of the state, in the same manner as the post-office does at present. That a considerable revenue might be gained in this manner, I have no doubt, though probably not near so much as the projectors of this plan have supposed. The plan itself, however, seems liable to several very important objections. First, If the tolls which are levied at the turnpikes should ever be considered as one of the resources for supplying the exigencies of the state, they would certainly be augmented as those exigencies were supposed to require. According to the policy of Great Britain, therefore, they would probably be augmented very fast. The facility with which a great revenue could be drawn from them, would probably encourage administration to recur very frequently to this resource. Though it may, perhaps, be more than doubtful, whether half a million could by any economy be saved out of the present tolls, it can scarcely be doubted, but that a million might be saved out of them, if they were doubled; and perhaps two millions, if they were tripled[49]. This great revenue, too, might be levied without the appointment of a single new officer to collect and receive it. But the turnpike tolls, being continually augmented in this manner, instead of facilitating the inland commerce of the country, as at present, would soon become a very great incumbrance upon it. The expense of transporting all heavy goods from one part of the country to another, would soon be so much increased, the market for all such goods, consequently, would soon be so much narrowed, that their production would be in a great measure discouraged, and the most important branches of the domestic industry of the country annihilated altogether. Secondly, A tax upon carriages, in proportion to their weight, though a very equal tax when applied to the sole purpose of repairing the roads, is a very unequal one when applied to any other purpose, or to supply the common exigencies of the state. When it is applied to the sole purpose above mentioned, each carriage is supposed to pay exactly for the wear and tear which that carriage occasions of the roads. But when it is applied to any other purpose, each carriage is supposed to pay for more than that wear and tear, and contributes to the supply of some other exigency of the state. But as the turnpike toll raises the price of goods in proportion to their weight and not to their value, it is chiefly paid by the consumers of coarse and bulky, not by those of precious and light commodities. Whatever exigency of the state, therefore, this tax might be intended to supply, that exigency would be chiefly supplied at the expense of the poor, not of the rich; at the expense of those who are least able to supply it, not of those who are most able. Thirdly, If government should at any time neglect the reparation of the high-roads, it would be still more difficult, than it is at present, to compel the proper application of any part of the turnpike tolls. A large revenue might thus be levied upon the people, without any part of it being applied to the only purpose to which a revenue levied in this manner ought ever to be applied. If the meanness and poverty of the trustees of turnpike roads render it sometimes difficult, at present, to oblige them to repair their wrong; their wealth and greatness would render it ten times more so in the case which is here supposed. In France, the funds destined for the reparation of the high-roads are under the immediate direction of the executive power. Those funds consist, partly in a certain number of days labour, which the country people are in most parts of Europe obliged to give to the reparation of the highways; and partly in such a portion of the general revenue of the state as the king chooses to spare from his other expenses. By the ancient law of France, as well as by that of most other parts of Europe, the labour of the country people was under the direction of a local or provincial magistracy, which had no immediate dependency upon the king's council. But, by the present practice, both the labour of the country people, and whatever other fund the king may choose to assign for the reparation of the high-roads in any particular province or generality, are entirely under the management of the intendant; an officer who is appointed and removed by the king's council who receives his orders from it, and is in constant correspondence with it. In the progress of despotism, the authority of the executive power gradually absorbs that of every other power in the state, and assumes to itself the management of every branch of revenue which is destined for any public purpose. In France, however, the great post-roads, the roads which make the communication between the principal towns of the kingdom, are in general kept in good order; and, in some provinces, are even a good deal superior to the greater part of the turnpike roads of England. But what we call the cross roads, that is, the far greater part of the roads in the country, are entirely neglected, and are in many places absolutely impassable for any heavy carriage. In some places it is even dangerous to travel on horseback, and mules are the only conveyance which can safely be trusted. The proud minister of an ostentatious court, may frequently take pleasure in executing a work of splendour and magnificence, such as a great highway, which is frequently seen by the principal nobility, whose applauses not only flatter his vanity, but even contribute to support his interest at court. But to execute a great number of little works, in which nothing that can be done can make any great appearance, or excite the smallest degree of admiration in any traveller, and which, in short, have nothing to recommend them but their extreme utility, is a business which appears, in every respect, too mean and paltry to merit the attention of so great a magistrate. Under such an administration, therefore, such works are almost always entirely neglected. In China, and in several other governments of Asia, the executive power charges itself both with the reparation of the high-roads, and with the maintenance of the navigable canals. In the instructions which are given to the governor of each province, those objects, it is said, are constantly recommended to him, and the judgment which the court forms of his conduct is very much regulated by the attention which he appears to have paid to this part of his instructions. This branch of public police, accordingly, is said to be very much attended to in all those countries, but particularly in China, where the high-roads, and still more the navigable canals, it is pretended, exceed very much every thing of the same kind which is known in Europe. The accounts of those works, however, which have been transmitted to Europe, have generally been drawn up by weak and wondering travellers; frequently by stupid and lying missionaries. If they had been examined by more intelligent eyes, and if the accounts of them had been reported by more faithful witnesses, they would not, perhaps, appear to be so wonderful. The account which Bernier gives of some works of this kind in Indostan, falls very short of what had been reported of them by other travellers, more disposed to the marvellous than he was. It may too, perhaps, be in those countries, as it is in France, where the great roads, the great communications, which are likely to be the subjects of conversation at the court and in the capital, are attended to, and all the rest neglected. In China, besides, in Indostan, and in several other governments of Asia, the revenue of the sovereign arises almost altogether from a land tax or land rent, which rises or falls with the rise and fall of the annual produce of the land. The great interest of the sovereign, therefore, his revenue, is in such countries necessarily and immediately connected with the cultivation of the land, with the greatness of its produce, and with the value of its produce. But in order to render that produce both as great and as valuable as possible, it is necessary to procure to it as extensive a market as possible, and consequently to establish the freest, the easiest, and the least expensive communication between all the different parts of the country; which can be done only by means of the best roads and the best navigable canals. But the revenue of the sovereign does not, in any part of Europe, arise chiefly from a land tax or land rent. In all the great kingdoms of Europe, perhaps, the greater part of it may ultimately depend upon the produce of the land: but that dependency is neither so immediate nor so evident. In Europe, therefore, the sovereign does not feel himself so directly called upon to promote the increase, both in quantity and value of the produce of the land, or, by maintaining good roads and canals, to provide the most extensive market for that produce. Though it should be true, therefore, what I apprehend is not a little doubtful, that in some parts of Asia this department of the public police is very properly managed by the executive power, there is not the least probability that, during the present state of things, it could be tolerably managed by that power in any part of Europe. Even those public works, which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the conveniency is nearly confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state, of which the executive power must always have the management. Were the streets of London to be lighted and paved at the expense of the treasury, is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expense? The expense, besides, instead of being raised by a local tax upon the inhabitants of each particular street, parish, or district in London, would, in this case, be defrayed out of the general revenue of the state, and would consequently be raised by a tax upon all the inhabitants of the kingdom, of whom the greater part derive no sort of benefit from the lighting and paving of the streets of London. The abuses which sometimes creep into the local and provincial administration of a local and provincial revenue, how enormous soever they may appear, are in reality, however, almost always very trifling in comparison of those which commonly take place in the administration and expenditure of the revenue of a great empire. They are, besides, much more easily corrected. Under the local or provincial administration of the justices of the peace in Great Britain, the six days labour which the country people are obliged to give to the reparation of the highways, is not always, perhaps, very judiciously applied, but it is scarce ever exacted with any circumstance of cruelty or oppression. In France, under the administration of the intendants, the application is not always more judicious, and the exaction is frequently the most cruel and oppressive. Such corvees, as they are called, make one of the principal instruments of tyranny by which these officers chastise any parish or communeaute, which has had the misfortune to fall under their displeasure. _Of the public Works and Institutions which are necessary for facilitating particular Branches of Commerce._ The object of the public works and institutions above mentioned, is to facilitate commerce in general. But in order to facilitate some particular branches of it, particular institutions are necessary, which again require a particular and extraordinary expense. Some particular branches of commerce which are carried on with barbarous and uncivilized nations, require extraordinary protection. An ordinary store or counting-house could give little security to the goods of the merchants who trade to the western coast of Africa. To defend them from the barbarous natives, it is necessary that the place where they are deposited should be in same measure fortified. The disorders in the government of Indostan have been supposed to render a like precaution necessary, even among that mild and gentle people; and it was under pretence of securing their persons and property from violence, that both the English and French East India companies were allowed to erect the first forts which they possessed in that country. Among other nations, whose vigorous government will suffer no strangers to possess any fortified place within their territory, it may be necessary to maintain some ambassador, minister, or consul, who may both decide, according to their own customs, the differences arising among his own countrymen; and, in their disputes with the natives, may by means of his public character, interfere with more authority and afford them a more powerful protection than they could expect from any private man. The interests of commerce have frequently made it necessary to maintain ministers in foreign countries, where the purposes either of war or alliance would not have required any. The commerce of the Turkey company first occasioned the establishment of an ordinary ambassador at Constantinople. The first English embassies to Russia arose altogether from commercial interests. The constant interference with those interests, necessarily occasioned between the subjects of the different states of Europe, has probably introduced the custom of keeping, in all neighbouring countries, ambassadors or ministers constantly resident, even in the time of peace. This custom, unknown to ancient times, seems not to be older than the end of the fifteenth, or beginning of the sixteenth century; that is, than the time when commerce first began to extend itself to the greater part of the nations of Europe, and when they first began to attend to its interests. It seems not unreasonable, that the extraordinary expense which the protection of any particular branch of commerce may occasion, should be defrayed by a moderate tax upon that particular branch; by a moderate fine, for example, to be paid by the traders when they first enter into it; or, what is more equal, by a particular duty of so much per cent. upon the goods which they either import into, or export out of, the particular countries with which it is carried on. The protection of trade, in general, from pirates and freebooters, is said to have given occasion to the first institution of the duties of customs. But, if it was thought reasonable to lay a general tax upon trade, in order to defray the expense of protecting trade in general, it should seem equally reasonable to lay a particular tax upon a particular branch of trade, in order to defray the extraordinary expense of protecting that branch. The protection of trade, in general, has always been considered as essential to the defence of the commonwealth, and, upon that account, a necessary part of the duty of the executive power. The collection and application of the general duties of customs, therefore, have always been left to that power. But the protection of any particular branch of trade is a part of the general protection of trade; a part, therefore, of the duty of that power; and if nations always acted consistently, the particular duties levied for the purposes of such particular protection, should always have been left equally to its disposal. But in this respect, as well as in many others, nations have not always acted consistently; and in the greater part of the commercial states of Europe, particular companies of merchants have had the address to persuade the legislature to entrust to them the performance of this part of the duty of the sovereign, together with all the powers which are necessarily connected with it. These companies, though they may, perhaps, have been useful for the first introduction of some branches of commerce, by making, at their own expense, an experiment which the state might not think it prudent to make, have in the long-run proved, universally, either burdensome or useless, and have either mismanaged or confined the trade. When those companies do not trade upon a joint stock, but are obliged to admit any person, properly qualified, upon paying a certain fine, and agreeing to submit to the regulations of the company, each member trading upon his own stock, and at his own risk, they are called regulated companies. When they trade upon a joint stock, each member sharing in the common profit or loss, in proportion to his share in this stock, they are called joint-stock companies. Such companies, whether regulated or joint-stock, sometimes have, and sometimes have not, exclusive privileges. Regulated companies resemble, in every respect, the corporation of trades, so common in the cities and towns of all the different countries of Europe; and are a sort of enlarged monopolies of the same kind. As no inhabitant of a town can exercise an incorporated trade, without first obtaining his freedom in the incorporation, so, in most cases, no subject of the state can lawfully carry on any branch of foreign trade, for which a regulated company is established, without first becoming a member of that company. The monopoly is more or less strict, according as the terms of admission are more or less difficult, and according as the directors of the company have more or less authority, or have it more or less in their power to manage in such a manner as to confine the greater part of the trade to themselves and their particular friends. In the most ancient regulated companies, the privileges of apprenticeship were the same as in other corporations, and entitled the person who had served his time to a member of the company, to become himself a member, either without paying any fine, or upon paying a much smaller one than what was exacted of other people. The usual corporation spirit, wherever the law does not restrain it, prevails in all regulated companies. When they have been allowed to act according to their natural genius, they have always, in order to confine the competition to as small a number of persons as possible, endeavoured to subject the trade to many burdensome regulations. When the law has restrained them from doing this, they have become altogether useless and insignificant. The regulated companies for foreign commerce which at present subsist in Great Britain, are the ancient merchant-adventurers company, now commonly called the Hamburgh company, the Russia company, the Eastland company, the Turkey company, and the African company. The terms of admission into the Hamburgh company are now said to be quite easy; and the directors either have it not in their power to subject the trade to any troublesome restraint or regulations, or, at least, have not of late exercised that power. It has not always been so. About the middle of the last century, the fine for admission was fifty, and at one time one hundred pounds, and the conduct of the company was said to be extremely oppressive. In 1643, in 1645, and in 1661, the clothiers and free traders of the west of England complained of them to parliament, as of monopolists, who confined the trade, and oppressed the manufactures of the country. Though those complaints produced no act of parliament, they had probably intimidated the company so far, as to oblige them to reform their conduct. Since that time, at least, there have been no complaints against them. By the 10th and 11th of William III. c. 6, the fine for admission into the Russia company was reduced to five pounds; and by the 25th of Charles II. c. 7, that for admission into the Eastland company to forty shillings; while, at the same time, Sweden, Denmark, and Norway, all the countries on the north side of the Baltic, were exempted from their exclusive charter. The conduct of those companies had probably given occasion to those two acts of parliament. Before that time, Sir Josiah Child had represented both these and the Hamburgh company as extremely oppressive, and imputed to their bad management the low state of the trade, which we at that time carried on to the countries comprehended within their respective charters. But though such companies may not, in the present times, be very oppressive, they are certainly altogether useless. To be merely useless, indeed, is perhaps, the highest eulogy which can ever justly be bestowed upon a regulated company; and all the three companies above mentioned seem, in their present state, to deserve this eulogy. The fine for admission into the Turkey company was formerly twenty-five pounds for all persons under twenty-six years of age, and fifty pounds for all persons above that age. Nobody but mere merchants could be admitted; a restriction which excluded all shop-keepers and retailers. By a bye-law, no British manufactures could be exported to Turkey but in the general ships of the company; and as those ships sailed always from the port of London, this restriction confined the trade to that expensive port, and the traders in those who lived in London and in its neighbourhood. By another bye-law, no person living within twenty miles of London, and not free of the city could be admitted a member; another restriction which, joined to the foregoing, necessarily excluded all but the freemen of London. As the time for the loading and sailing of those general ships depended altogether upon the directors, they could easily fill them with their own goods, and those of their particular friends, to the exclusion of others, who, they might pretend, had made their proposals too late. In this state of things, therefore, this company was, in every respect, a strict and oppressive monopoly. Those abuses gave occasion to the act of the 26th of George II. c. 18, reducing the fine for admission to twenty pounds for all persons, without any distinction of ages, or any restriction, either to mere merchants, or to the freemen of London; and granting to all such persons the liberty of exporting, from all the ports of Great Britain, to any port in Turkey, all British goods, of which the exportation was not prohibited, upon paying both the general duties of customs, and the particular duties assessed for defraying the necessary expenses of the company; and submitting, at the same time, to the lawful authority of the British ambassador and consuls resident in Turkey, and to the bye-laws of the company duly enacted. To prevent any oppression by those bye-laws, it was by the same act ordained, that if any seven members of the company conceived themselves aggrieved by any bye-law which should be enacted after the passing of this act, they might appeal to the board of trade and plantations (to the authority of which a committee of the privy council has now succeeded), provided such appeal was brought within twelve months after the bye-law was enacted; and that, if any seven members conceived themselves aggrieved by any bye-law which had been enacted before the passing of this act, they might bring a like appeal, provided it was within twelve months after the day on which this act was to take place. The experience of one year, however, may not always be sufficient to discover to all the members of a great company the pernicious tendency of a particular bye-law; and if several of them should afterwards discover it, neither the board of trade, nor the committee of council, can afford them any redress. The object, besides, of the greater part of the bye-laws of all regulated companies, as well as of all other corporations, is not so much to oppress those who are already members, as to discourage others from becoming so; which may be done, not only by a high fine, but by many other contrivances. The constant view of such companies is always to raise the rate of their own profit as high as they can; to keep the market, both for the goods which they export, and for those which they import, as much understocked as they can; which can be done only by restraining the competition, or by discouraging new adventurers from entering into the trade. A fine, even of twenty pounds, besides, though it may not, perhaps, be sufficient to discourage any man from entering into the Turkey trade, with an intention to continue in it, may be enough to discourage a speculative merchant from hazarding a single adventure in it. In all trades, the regular established traders, even though not incorporated, naturally combine to raise profits, which are noway so likely to be kept, at all times, down to their proper level, as by the occasional competition of speculative adventurers. The Turkey trade, though in some measure laid open by this act of parliament, is still considered by many people as very far from being altogether free. The Turkey company contribute to maintain an ambassador and two or three consuls, who, like other public ministers, ought to be maintained altogether by the state, and the trade laid open to all his majesty's subjects. The different taxes levied by the company, for this and other corporation purposes, might afford a revenue much more than sufficient to enable a state to maintain such ministers. Regulated companies, it was observed by Sir Josiah Child, though they had frequently supported public ministers, had never maintained any forts or garrisons in the countries to which they traded; whereas joint-stock companies frequently had. And, in reality, the former seem to be much more unfit for this sort of service than the latter. First, the directors of a regulated company have no particular interest in the prosperity of the general trade of the company, for the sake of which such forts and garrisons are maintained. The decay of that general trade may even frequently contribute to the advantage of their own private trade; as, by diminishing the number of their competitors, it may enable them both to buy cheaper, and to sell dearer. The directors of a joint-stock company, on the contrary, having only their share in the profits which are made upon the common stock committed to their management, have no private trade of their own, of which the interest can be separated from that of the general trade of the company. Their private interest is connected with the prosperity of the general trade of the company, and with the maintenance of the forts and garrisons which are necessary for its defence. They are more likely, therefore, to have that continual and careful attention which that maintenance necessarily requires. Secondly, The directors of a joint-stock company have always the management of a large capital, the joint stock of the company, a part of which they may frequently employ, with propriety, in building, repairing, and maintaining such necessary forts and garrisons. But the directors of a regulated company, having the management of no common capital, have no other fund to employ in this way, but the casual revenue arising from the admission fines, and from the corporation duties imposed upon the trade of the company. Though they had the same interest, therefore, to attend to the maintenance of such forts and garrisons, they can seldom have the same ability to render that attention effectual. The maintenance of a public minister, requiring scarce any attention, and but a moderate and limited expense, is a business much more suitable both to the temper and abilities of a regulated company. Long after the time of Sir Josiah Child, however, in 1750, a regulated company was established, the present company of merchants trading to Africa; which was expressly charged at first with the maintenance of all the British forts and garrisons that lie between Cape Blanc and the Cape of Good Hope, and afterwards with that of those only which lie between Cape Rouge and the Cape of Good Hope. The act which establishes this company (the 23d of George II. c. 31), seems to have had two distinct objects in view; first, to restrain effectually the oppressive and monopolizing spirit which is natural to the directors of a regulated company; and, secondly, to force them, as much as possible, to give an attention, which is not natural to them, towards the maintenance of forts and garrisons. For the first of these purposes, the fine for admission is limited to forty shillings. The company is prohibited from trading in their corporate capacity, or upon a joint stock; from borrowing money upon common seal, or from laying any restraints upon the trade, which may be carried on freely from all places, and by all persons being British subjects, and paying the fine. The government is in a committee of nine persons, who meet at London, but who are chosen annually by the freemen of the company at London, Bristol, and Liverpool; three from each place. No committee-man can be continued in office for more than three years together. Any committee-man might be removed by the board of trade and plantations, now by a committee of council, after being heard in his own defence. The committee are forbid to export negroes from Africa, or to import any African goods into Great Britain. But as they are charged with the maintenance of forts and garrisons, they may, for that purpose export from Great Britain to Africa goods and stores of different kinds. Out of the moneys which they shall receive from the company, they are allowed a sum, not exceeding eight hundred pounds, for the salaries of their clerks and agents at London, Bristol, and Liverpool, the house-rent of their offices at London, and all other expenses of management, commission, and agency, in England. What remains of this sum, after defraying these different expenses, they may divide among themselves, as compensation for their trouble, in what manner they think proper. By this constitution, it might have been expected, that the spirit of monopoly would have been effectually restrained, and the first of these purposes sufficiently answered. It would seem, however, that it had not. Though by the 4th of George III. c. 20, the fort of Senegal, with all its dependencies, had been invested in the company of merchants trading to Africa, yet, in the year following (by the 5th of George III. c. 44), not only Senegal and its dependencies, but the whole coast, from the port of Sallee, in South Barbary, to Cape Rouge, was exempted from the jurisdiction of that company, was vested in the crown, and the trade to it declared free to all his majesty's subjects. The company had been suspected of restraining the trade and of establishing some sort of improper monopoly. It is not, however, very easy to conceive how, under the regulations of the 23d George II. they could do so. In the printed debates of the house of commons, not always the most authentic records of truth, I observe, however, that they have been accused of this. The members of the committee of nine being all merchants, and the governors and factors in their different forts and settlements being all dependent upon them, it is not unlikely that the latter might have given peculiar attention to the consignments and commissions of the former, which would establish a real monopoly. For the second of these purposes, the maintenance of the forts and garrisons, an annual sum has been allotted to them by parliament, generally about L.13,000. For the proper application of this sum, the committee is obliged to account annually to the cursitor baron of exchequer; which account is afterwards to be laid before parliament. But parliament, which gives so little attention to the application of millions, is not likely to give much to that of L.13,000 a-year; and the cursitor baron of exchequer, from his profession and education, is not likely to be profoundly skilled in the proper expense of forts and garrisons. The captains of his majesty's navy, indeed, or any other commissioned officers, appointed by the board of admiralty, may inquire into the condition of the forts and garrisons, and report their observations to that board. But that board seems to have no direct jurisdiction over the committee, nor any authority to correct those whose conduct it may thus inquire into; and the captains of his majesty's navy, besides, are not supposed to be always deeply learned in the science of fortification. Removal from an office, which can be enjoyed only for the term of three years, and of which the lawful emoluments, even during that term, are so very small, seems to be the utmost punishment to which any committee-man is liable, for any fault, except direct malversation, or embezzlement, either of the public money, or of that of the company; and the fear of the punishment can never be a motive of sufficient weight to force a continual and careful attention to a business to which he has no other interest to attend. The committee are accused of having sent out bricks and stones from England for the reparation of Cape Coast Castle, on the coast of Guinea; a business for which parliament had several times granted an extraordinary sum of money. These bricks and stones, too, which had thus been sent upon so long a voyage, were said to have been of so bad a quality, that it was necessary to rebuild, from the foundation, the walls which had been repaired with them. The forts and garrisons which lie north of Cape Rouge, are not only maintained at the expense of the state, but are under the immediate government of the executive power; and why those which lie south of that cape, and which, too, are, in part at least, maintained at the expense of the state, should be under a different government, it seems not very easy even to imagine a good reason. The protection of the Mediterranean trade was the original purpose or pretence of the garrisons of Gibraltar and Minorca; and the maintenance and government of those garrisons have always been, very properly, committed, not to the Turkey company, but to the executive power. In the extent of its dominion consists, in a great measure, the pride and dignity of that power; and it is not very likely to fail in attention to what is necessary for the defence of that dominion. The garrisons at Gibraltar and Minorca, accordingly, have never been neglected. Though Minorca has been twice taken, and is now probably lost for ever, that disaster has never been imputed to any neglect in the executive power. I would not, however, be understood to insinuate, that either of those expensive garrisons was ever, even in the smallest degree, necessary for the purpose for which they were originally dismembered from the Spanish monarchy. That dismemberment, perhaps, never served any other real purpose than to alienate from England her natural ally the king of Spain, and to unite the two principal branches of the house of Bourbon in a much stricter and more permanent alliance than the ties of blood could ever have united them. Joint-stock companies, established either by royal charter, or by act of parliament, are different in several respects, not only from regulated companies, but from private copartneries. First, In a private copartnery, no partner without the consent of the company, can transfer his share to another person, or introduce a new member into the company. Each member, however, may, upon proper warning, withdraw from the copartnery, and demand payment from them of his share of the common stock. In a joint-stock company, on the contrary, no member can demand payment of his share from the company; but each member can, without their consent, transfer his share to another person, and thereby introduce a new member. The value of a share in a joint stock is always the price which it will bring in the market; and this may be either greater or less in any proportion, than the sum which its owner stands credited for in the stock of the company. Secondly, In a private copartnery, each partner is bound for the debts contracted by the company, to the whole extent of his fortune. In a joint-stock company, on the contrary, each partner is bound only to the extent of his share. The trade of a joint-stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of these proprietors seldom pretend to understand any thing of the business of the company; and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint-stock companies, who would, upon no account, hazard their fortunes in any private copartnery. Such companies, therefore, commonly draw to themselves much greater stocks, than any private copartnery can boast of. The trading stock of the South Sea company at one time amounted to upwards of thirty-three millions eight hundred thousand pounds. The divided capital of the Bank of England amounts, at present, to ten millions seven hundred and eighty thousand pounds. The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. It is upon this account, that joint-stock companies for foreign trade have seldom been able to maintain the competition against private adventurers. They have, accordingly, very seldom succeeded without an exclusive privilege; and frequently have not succeeded with one. Without an exclusive privilege, they have commonly mismanaged the trade. With an exclusive privilege, they have both mismanaged and confined it. The Royal African company, the predecessors of the present African company, had an exclusive privilege by charter; but as that charter had not been confirmed by act of parliament, the trade, in consequence of the declaration of rights, was, soon after the Revolution, laid open to all his majesty's subjects. The Hudson's Bay company are, as to their legal rights, in the same situation as the Royal African company. Their exclusive charter has not been confirmed by act of parliament. The South Sea company, as long as they continued to be a trading company, had an exclusive privilege confirmed by act of parliament; as have likewise the present united company of merchants trading to the East Indies. The Royal African company soon found that they could not maintain the competition against private adventurers, whom, notwithstanding the declaration of rights, they continued for some time to call interlopers, and to persecute as such. In 1698, however, the private adventurers were subjected to a duty of ten per cent. upon almost all the different branches of their trade, to be employed by the company in the maintenance of their forts and garrisons. But, notwithstanding this heavy tax, the company were still unable to maintain the competition. Their stock and credit gradually declined. In 1712, their debts had become so great, that a particular act of parliament was thought necessary, both for their security and for that of their creditors. It was enacted, that the resolution of two-thirds of these creditors in number and value should bind the rest, both with regard to the time which should be allowed to the company for the payment of their debts, and with regard to any other agreement which it might be thought proper to make with them concerning those debts. In 1730, their affairs were in so great disorder, that they were altogether incapable of maintaining their forts and garrisons, the sole purpose and pretext of their institution. From that year till their final dissolution, the parliament judged it necessary to allow the annual sum of ten thousand pounds for that purpose. In 1732, after having been for many years losers by the trade of carrying negroes to the West Indies, they at last resolved to give it up altogether; to sell to the private traders to America the negroes which they purchased upon the coast; and to employ their servants in a trade to the inland parts of Africa for gold dust, elephants teeth, dyeing drugs, &c. But their success in this more confined trade was not greater than in their former extensive one. Their affairs continued to go gradually to decline, till at last, being in every respect a bankrupt company, they were dissolved by act of parliament, and their forts and garrisons vested in the present regulated company of merchants trading to Africa. Before the erection of the Royal African company, there had been three other joint-stock companies successively established, one after another, for the African trade. They were all equally unsuccessful. They all, however, had exclusive charters, which, though not confirmed by act of parliament, were in those days supposed to convey a real exclusive privilege. The Hudson's Bay company, before their misfortunes in the late war, had been much more fortunate than the Royal African company. Their necessary expense is much smaller. The whole number of people whom they maintain in their different settlements and habitations, which they have honoured with the name of forts, is said not to exceed a hundred and twenty persons. This number, however, is sufficient to prepare beforehand the cargo of furs and other goods necessary for loading their ships, which, on account of the ice, can seldom remain above six or eight weeks in those seas. This advantage of having a cargo ready prepared, could not, for several years, be acquired by private adventurers; and without it there seems to be no possibility of trading to Hudson's Bay. The moderate capital of the company, which, it is said, does not exceed one hundred and ten thousand pounds, may, besides, be sufficient to enable them to engross the whole, or almost the whole trade and surplus produce, of the miserable though extensive country comprehended within their charter. No private adventurers, accordingly, have ever attempted to trade to that country in competition with them. This company, therefore, have always enjoyed an exclusive trade, in fact, though they may have no right to it in law. Over and above all this, the moderate capital of this company is said to be divided among a very small number of proprietors. But a joint-stock company, consisting of a small number of proprietors, with a moderate capital, approaches very nearly to the nature of a private copartnery, and may be capable of nearly the same degree of vigilance and attention. It is not to be wondered at, therefore, if, in consequence of these different advantages, the Hudson's Bay company had, before the late war, been able to carry on their trade with a considerable degree of success. It does not seem probable, however, that their profits ever approached to what the late Mr Dobbs imagined them. A much more sober and judicious writer, Mr Anderson, author of the Historical and Chronological Deduction of Commerce, very justly observes, that upon examining the accounts which Mr Dobbs himself has given for several years together, of their exports and imports, and upon making proper allowances for their extraordinary risk and expense, it does not appear that their profits deserve to be envied, or that they can much, if at all, exceed the ordinary profits of trade. The South Sea company never had any forts or garrisons to maintain, and therefore were entirely exempted from one great expense, to which other joint-stock companies for foreign trade are subject; but they had an immense capital divided among an immense number of proprietors. It was naturally to be expected, therefore, that folly, negligence, and profusion, should prevail in the whole management of their affairs. The knavery and extravagance of their stock-jobbing projects are sufficiently known, and the explication of them would be foreign to the present subject. Their mercantile projects were not much better conducted. The first trade which they engaged in, was that of supplying the Spanish West Indies with negroes, of which (in consequence of what was called the Assiento Contract granted them by the treaty of Utrecht) they had the exclusive privilege. But as it was not expected that much profit could be made by this trade, both the Portuguese and French companies, who had enjoyed it upon the same terms before them, having been ruined by it, they were allowed, as compensation, to send annually a ship of a certain burden, to trade directly to the Spanish West Indies. Of the ten voyages which this annual ship was allowed to make, they are said to have gained considerably by one, that of the Royal Caroline, in 1731; and to have been losers, more or less, by almost all the rest. Their ill success was imputed, by their factors and agents, to the extortion and oppression of the Spanish government; but was, perhaps, principally owing to the profusion and depredations of those very factors and agents; some of whom are said to have acquired great fortunes, even in one year. In 1734, the company petitioned the king, that they might be allowed to dispose of the trade and tonnage of their annual ship, on account of the little profit which they made by it, and to accept of such equivalent as they could obtain from the king of Spain. In 1724, this company had undertaken the whale fishery. Of this, indeed, they had no monopoly; but as long as they carried it on, no other British subjects appear to have engaged in it. Of the eight voyages which their ships made to Greenland, they were gainers by one, and losers by all the rest. After their eighth and last voyage, when they had sold their ships, stores, and utensils, they found that their whole loss upon this branch, capital and interest included, amounted to upwards of two hundred and thirty-seven thousand pounds. In 1722, this company petitioned the parliament to be allowed to divide their immense capital of more than thirty-three millions eight hundred thousand pounds, the whole of which been lent to government, into two equal parts; the one half, or upwards of sixteen millions nine hundred thousand pounds, to be put upon the same footing with other government annuities, and not to be subject to the debts contracted, or losses incurred, by the directors of the company, in the prosecution of their mercantile projects; the other half to remain as before, a trading stock, and to be subject to those debts and losses. The petition was too reasonable not to be granted. In 1733, they again petitioned the parliament, that three-fourths of their trading stock might be turned into annuity stock, and only one-fourth remain as trading stock, or exposed to the hazards arising from the bad management of their directors. Both their annuity and trading stocks had, by this time, been reduced more than two millions each, by several different payments from government; so that this fourth amounted only to L.3,662,784 : 8 : 6. In 1748, all the demands of the company upon the king of Spain, in consequence of the assiento contract, were, by the treaty of Aix-la-Chapelle, given up for what was supposed an equivalent. An end was put to their trade with the Spanish West Indies; the remainder of their trading stock was turned into an annuity stock; and the company ceased, in every respect, to be a trading company. It ought to be observed, that in the trade which the South Sea company carried on by means of their annual ship, the only trade by which it ever was expected that they could make any considerable profit, they were not without competitors, either in the foreign or in the home market. At Carthagena, Porto Bello, and La Vera Cruz, they had to encounter the competition of the Spanish merchants, who brought from Cadiz to those markets European goods, of the same kind with the outward cargo of their ship; and in England they had to encounter that of the English merchants, who imported from Cadiz goods of the Spanish West Indies, of the same kind with the inward cargo. The goods, both of the Spanish and English merchants, indeed, were, perhaps, subject to higher duties. But the loss occasioned by the negligence, profusion, and malversation of the servants of the company, had probably been a tax much heavier than all those duties. That a joint-stock company should be able to carry on successfully any branch of foreign trade, when private adventurers can come into any sort of open and fair competition with them, seems contrary to all experience. The old English East India company was established in 1600, by a charter from Queen Elizabeth. In the first twelve voyages which they fitted out for India, they appear to have traded as a regulated company, with separate stocks, though only in the general ships of the company. In 1612, they united into a joint stock. Their charter was exclusive, and, though not confirmed by act of parliament, was in those days supposed to convey a real exclusive privilege. For many years, therefore, they were not much disturbed by interlopers. Their capital, which never exceeded seven hundred and fourty-four thousand pounds, and of which fifty pounds was a share, was not so exorbitant, nor their dealings so extensive, as to afford either a pretext for gross negligence and profusion, or a cover to gross malversation. Notwithstanding some extraordinary losses, occasioned partly by the malice of the Dutch East India company, and partly by other accidents, they carried on for many years a successful trade. But in process of time, when the principles of liberty were better understood, it became every day more and more doubtful, how far a royal charter, not confirmed by act of parliament, could convey an exclusive privilege. Upon this question the decisions of the courts of justice were not uniform, but varied with the authority of government, and the humours of the times. Interlopers multiplied upon them; and towards the end of the reign of Charles II., through the whole of that of James II., and during a part of that of William III., reduced them to great distress. In 1698, a proposal was made to parliament, of advancing two millions to government, at eight per cent. provided the subscribers were erected into a new East India company, with exclusive privileges. The old East India company offered seven hundred thousand pounds, nearly the amount of their capital, at four per cent. upon the same conditions. But such was at that time the state of public credit, that it was more convenient for government to borrow two millions at eight per cent. than seven hundred thousand pounds at four. The proposal of the new subscribers was accepted, and a new East India company established in consequence. The old East India company, however, had a right to continue their trade till 1701. They had, at the same time, in the name of their treasurer, subscribed very artfully three hundred and fifteen thousand pounds into the stock of the new. By a negligence in the expression of the act of parliament, which vested the East India trade in the subscribers to this loan of two millions, it did not appear evident that they were all obliged to unite into a joint stock. A few private traders, whose subscriptions amounted only to seven thousand two hundred pounds, insisted upon the privilege of trading separately upon their own stocks, and at their own risks. The old East India company had a right to a separate trade upon their own stock till 1701; and they had likewise, both before and after that period, a right, like that of other private traders, to a separate trade upon the three hundred and fifteen thousand pounds, which they had subscribed into the stock of the new company. The competition of the two companies with the private traders, and with one another, is said to have well nigh ruined both. Upon a subsequent occasion, in 1730, when a proposal was made to parliament for putting the trade under the management of a regulated company, and thereby laying it in some measure open, the East India company, in opposition to this proposal, represented, in very strong terms, what had been, at this time, the miserable effects, as they thought them, of this competition. In India, they said, it raised the price of goods so high, that they were not worth the buying; and in England, by overstocking the market, it sunk their price so low, that no profit could be made by them. That by a more plentiful supply, to the great advantage and conveniency of the public, it must have reduced very much the price of India goods in the English market, cannot well be doubted; but that it should have raised very much their price in the Indian market, seems not very probable, as all the extraordinary demand which that competition could occasion must have been but as a drop of water in the immense ocean of Indian commerce. The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the long-run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art, which might never otherwise have been thought of. The miserable effects of which the company complained, were the cheapness of consumption, and the encouragement given to production; precisely the two effects which it is the great business of political economy to promote. The competition, however, of which they gave this doleful account, had not been allowed to be of long continuance. In 1702, the two companies were, in some measure, united by an indenture tripartite, to which the queen was the third party; and in 1708, they were by act of parliament, perfectly consolidated into one company, by their present name of the United Company of Merchants trading to the East Indies. Into this act it was thought worth while to insert a clause, allowing the separate traders to continue their trade till Michaelmas 1711; but at the same time empowering the directors, upon three years notice, to redeem their little capital of seven thousand two hundred pounds, and thereby to convert the whole stock of the company into a joint stock. By the same act, the capital of the company, in consequence of a new loan to government, was augmented from two millions to three millions two hundred thousand pounds. In 1743, the company advanced another million to government. But this million being raised, not by a call upon the proprietors, but by selling annuities and contracting bond-debts, it did not augment the stock upon which the proprietors could claim a dividend. It augmented, however, their trading stock, it being equally liable with the other three millions two hundred thousand pounds, to the losses sustained, and debts contracted by the company in prosecution of their mercantile projects. From 1708, or at least from 1711, this company, being delivered from all competitors, and fully established in the monopoly of the English commerce to the East Indies, carried on a successful trade, and from their profits, made annually a moderate dividend to their proprietors. During the French war, which began in 1741, the ambition of Mr. Dupleix, the French governor of Pondicherry, involved them in the wars of the Carnatic, and in the politics of the Indian princes. After many signal successes, and equally signal losses, they at last lost Madras, at that time their principal settlement in India. It was restored to them by the treaty of Aix-la-Chapelle; and, about this time the spirit of war and conquest seems to have taken possession of their servants in India, and never since to have left them. During the French war, which began in 1755, their arms partook of the general good fortune of those of Great Britain. They defended Madras, took Pondicherry, recovered Calcutta, and acquired the revenues of a rich and extensive territory, amounting, it was then said, to upwards of three millions a-year. They remained for several years in quiet possession of this revenue; but in 1767, administration laid claim to their territorial acquisitions, and the revenue arising from them, as of right belonging to the crown; and the company, in compensation for this claim, agreed to pay to government four hundred thousand pounds a-year. They had, before this, gradually augmented their dividend from about six to ten per cent.; that is, upon their capital of three millions two hundred thousand pounds, they had increased it by a hundred and twenty-eight thousand pounds, or had raised it from one hundred and ninety-two thousand to three hundred and twenty thousand pounds a-year. They were attempting about this time to raise it still further, to twelve and a-half per cent., which would have made their annual payments to their proprietors equal to what they had agreed to pay annually to government, or to four hundred thousand pounds a-year. But during the two years in which their agreement with government was to take place, they were restrained from any further increase of dividend by two successive acts of parliament, of which the object was to enable them to make a speedier progress in the payment of their debts, which were at this time estimated at upwards of six or seven millions sterling. In 1769, they renewed their agreement with government for five years more, and stipulated, that during the course of that period, they should be allowed gradually to increase their dividend to twelve and a-half per cent; never increasing it, however, more than one per cent. in one year. This increase of dividend, therefore, when it had risen to its utmost height, could augment their annual payments, to their proprietors and government together, but by six hundred and eight thousand pounds, beyond what they had been before their late territorial acquisitions. What the gross revenue of those territorial acquisitions was supposed to amount to, has already been mentioned; and by an account brought by the Cruttenden East Indiaman in 1769, the neat revenue, clear of all deductions and military charges, was stated at two millions forty-eight thousand seven hundred and forty-seven pounds. They were said, at the same time, to possess another revenue, arising partly from lands, but chiefly from the customs established at their different settlements, amounting to four hundred and thirty-nine thousand pounds. The profits of their trade, too, according to the evidence of their chairman before the house of commons, amounted, at this time, to at least four hundred thousand pounds a-year; according to that of their accountant, to at least five hundred thousand; according to the lowest account, at least equal to the highest dividend that was to be paid to their proprietors. So great a revenue might certainly have afforded augmentation of six hundred and eight thousand pounds in their annual payments; and, at the same time, have left a large sinking fund, sufficient for the speedy reduction of their debt. In 1773, however, their debts, instead of being reduced, were augmented by an arrear to the treasury in the payment of the four hundred thousand pounds; by another to the custom-house for duties unpaid; by a large debt to the bank, for money borrowed; and by a fourth, for bills drawn upon them from India, and wantonly accepted, to the amount of upwards of twelve hundred thousand pounds. The distress which these accumulated claims brought upon them, obliged them not only to reduce all at once their dividend to six per cent. but to throw themselves upon the mercy of government, and to supplicate, first, a release from the further payment of the stipulated four hundred thousand pounds a-year; and, secondly, a loan of fourteen hundred thousand, to save them from immediate bankruptcy. The great increase of their fortune had, it seems, only served to furnish their servants with a pretext for greater profusion, and a cover for greater malversation, than in proportion even to that increase of fortune. The conduct of their servants in India, and the general state of their affairs both in India and in Europe, became the subject of a parliamentary inquiry: in consequence of which, several very important alterations were made in the constitution of their government, both at home and abroad. In India, their principal settlements of Madras, Bombay, and Calcutta, which had before been altogether independent of one another, were subjected to a governor-general, assisted by a council of four assessors, parliament assuming to itself the first nomination of this governor and council, who were to reside at Calcutta; that city having now become, what Madras was before, the most important of the English settlements in India. The court of the Mayor of Calcutta, originally instituted for the trial of mercantile causes, which arose in the city and neighbourhood, had gradually extended its jurisdiction with the extension of the empire. It was now reduced and confined to the original purpose of its institution. Instead of it, a new supreme court of judicature was established, consisting of a chief justice and three judges, to be appointed by the crown. In Europe, the qualification necessary to entitle a proprietor to vote at their general courts was raised, from five hundred pounds, the original price of a share in the stock of the company, to a thousand pounds. In order to vote upon this qualification, too, it was declared necessary, that he should have possessed it, if acquired by his own purchase, and not by inheritance, for at least one year, instead of six months, the term requisite before. The court of twenty-four directors had before been chosen annually; but it was now enacted, that each director should, for the future, be chosen for four years; six of them, however, to go out of office by rotation every year, and not be capable of being re-chosen at the election of the six new directors for the ensuing year. In consequence of these alterations, the courts, both of the proprietors and directors, it was expected, would be likely to act with more dignity and steadiness than they had usually done before. But it seems impossible, by any alterations, to render those courts, in any respect, fit to govern, or even to share in the government of a great empire; because the greater part of their members must always have too little interest in the prosperity of that empire, to give any serious attention to what may promote it. Frequently a man of great, sometimes even a man of small fortune, is willing to purchase a thousand pounds share in India stock, merely for the influence which he expects to acquire by a vote in the court of proprietors. It gives him a share, though not in the plunder, yet in the appointment of the plunderers of India; the court of directors, though they make that appointment, being necessarily more or less under the influence of the proprietors, who not only elect those directors, but sometimes over-rule the appointments of their servants in India. Provided he can enjoy this influence for a few years, and thereby provide for a certain number of his friends, he frequently cares little about the dividend, or even about the value of the stock upon which his vote in founded. About the prosperity of the great empire, in the government of which that vote gives him a share, he seldom cares at all. No other sovereigns ever were, or, from the nature of things, ever could be, so perfectly indifferent about the happiness or misery of their subjects, the improvement or waste of their dominions, the glory or disgrace of their administration, as, from irresistible moral causes, the greater part of the proprietors of such a mercantile company are, and necessarily must be. This indifference, too, was more likely to be increased than diminished by some of the new regulations which were made in consequence of the parliamentary inquiry. By a resolution of the house of commons, for example, it was declared, that when the L.1,400,000 lent to the company by government, should be paid, and their bond-debts be reduced to L.1,500,000, they might then, and not till then, divide eight per cent. upon their capital; and that whatever remained of their revenues and neat profits at home should be divided into four parts; three of them to be paid into the exchequer for the use of the public, and the fourth to be reserved as a fund, either for the further reduction of their bond-debts, or for the discharge of other contingent exigencies which the company might labour under. But if the company were bad stewards and bad sovereigns, when the whole of their neat revenue and profits belonged to themselves, and were at their own disposal, they were surely not likely to be better when three-fourths of them were to belong to other people, and the other fourth, though to be laid out for the benefit of the company, yet to be so under the inspection and with the approbation of other people. It might be more agreeable to the company, that their own servants and dependants should have either the pleasure of wasting, or the profit of embezzling, whatever surplus might remain, after paying the proposed dividend of eight per cent. than that it should come into the hands of a set of people with whom those resolutions could scarce fail to set them in some measure at variance. The interest of those servants and dependants might so far predominate in the court of proprietors, as sometimes to dispose it to support the authors of depredations which had been committed in direct violation of its own authority. With the majority of proprietors, the support even of the authority of their own court might sometimes be a matter of less consequence than the support of those who had set that authority at defiance. The regulations of 1773, accordingly, did not put an end to the disorder of the company's government in India. Notwithstanding that, during a momentary fit of good conduct, they had at one time collected into the treasury of Calcutta more than L.3,000,000 sterling; notwithstanding that they had afterwards extended either their dominion or their depredations over a vast accession of some of the richest and most fertile countries in India, all was wasted and destroyed. They found themselves altogether unprepared to stop or resist the incursion of Hyder Ali; and in consequence of those disorders, the company is now (1784) in greater distress than ever; and, in order to prevent immediate bankruptcy, is once more reduced to supplicate the assistance of government. Different plans have been proposed by the different parties in parliament for the better management of its affairs; and all those plans seem to agree in supposing, what was indeed always abundantly evident, that it is altogether unfit to govern its territorial possessions. Even the company itself seems to be convinced of its own incapacity so far, and seems, upon that account willing to give them up to government. With the right of possessing forts and garrisons in distant and barbarous countries, is necessarily connected the right of making peace and war in those countries. The joint-stock companies, which have had the one right, have constantly exercised the other, and have frequently had it expressly conferred upon them. How unjustly, how capriciously, how cruelly, they have commonly exercised it, is too well known from recent experience. When a company of merchants undertake, at their own risk and expense, to establish a new trade with some remote and barbarous nation, it may not be unreasonable to incorporate them into a joint-stock company, and to grant them, in case of their success, a monopoly of the trade for a certain number of years. It is the easiest and most natural way in which the state can recompense them for hazarding a dangerous and expensive experiment, of which the public is afterwards to reap the benefit. A temporary monopoly of this kind may be vindicated, upon the same principles upon which a like monopoly of a new machine is granted to its inventor, and that of a new book to its author. But upon the expiration of the term, the monopoly ought certainly to determine; the forts and garrisons, if it was found necessary to establish any, to be taken into the hands of government, their value to be paid to the company, and the trade to be laid open to all the subjects of the state. By a perpetual monopoly, all the other subjects of the state are taxed very absurdly in two different ways: first, by the high price of goods, which, in the case of a free trade, they could buy much cheaper; and, secondly, by their total exclusion from a branch of business which it might be both convenient and profitable for many of them to carry on. It is for the most worthless of all purposes, too, that they are taxed in this manner. It is merely to enable the company to support the negligence, profusion, and malversation of their own servants, whose disorderly conduct seldom allows the dividend of the company to exceed the ordinary rate of profit in trades which are altogether free, and very frequently makes it fall even a good deal short of that rate. Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell with profit in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people; and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare, of which the operations are continually changing, and which can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company. The East India company, upon the redemption of their funds, and the expiration of their exclusive privilege, have a right, by act of parliament, to continue a corporation with a joint stock, and to trade in their corporate capacity to the East Indies, in common with the rest of their fellow subjects. But in this situation, the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade. An eminent French author, of great knowledge in matters of political economy, the Abbé Morellet, gives a list of fifty-five joint-stock companies for foreign trade, which have been established in different parts of Europe since the year 1600, and which, according to him, have all failed from mismanagement, notwithstanding they had exclusive privileges. He has been misinformed with regard to the history of two or three of them, which were not joint-stock companies and have not failed. But, in compensation, there have been several joint-stock companies which have failed, and which he has omitted. The only trades which it seems possible for a joint-stock company to carry on successfully, without an exclusive privilege, are those, of which all the operations are capable of bring reduced to what is called a routine, or to such a uniformity of method as admits of little or no variation. Of this kind is, first, the banking trade; secondly, the trade of insurance from fire and from sea risk, and capture in time of war; thirdly, the trade of making and maintaining a navigable cut or canal; and, fourthly, the similar trade of bringing water for the supply of a great city. Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from those rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous and frequently fatal to the banking company which attempts it. But the constitution of joint-stock companies renders them in general, more tenacious of established rules than any private copartnery. Such companies, therefore, seem extremely well fitted for this trade. The principal banking companies in Europe, accordingly, are joint-stock companies, many of which manage their trade very successfully without any exclusive privilege. The bank of England has no other exclusive privilege, except that no other banking company in England shall consist of more than six persons. The two banks of Edinburgh are joint-stock companies, without any exclusive privilege. The value of the risk, either from fire, or from loss by sea, or by capture, though it cannot, perhaps, be calculated very exactly, admits, however, of such a gross estimation, as renders it, in some degree, reducible to strict rule and method. The trade of insurance, therefore, may be carried on successfully by a joint-stock company, without any exclusive privilege. Neither the London Assurance, nor the Royal Exchange Assurance companies, have any such privilege. When a navigable cut or canal has been once made, the management of it becomes quite simple and easy, and it is reducible to strict rule and method. Even the making of it is so, as it may be contracted for with undertakers, at so much a mile, and so much a lock. The same thing may be said of a canal, an aqueduct, or a great pipe for bringing water to supply a great city. Such undertakings, therefore, may be, and accordingly frequently are, very successfully managed by joint-stock companies, without any exclusive privilege. To establish a joint-stock company, however, for any undertaking, merely because such a company might be capable of managing it successfully; or, to exempt a particular set of dealers from some of the general laws which take place with regard to all their neighbours, merely because they might be capable of thriving, if they had such an exemption, would certainly not be reasonable. To render such an establishment perfectly reasonable, with the circumstance of being reducible to strict rule and method, two other circumstances ought to concur. First, it ought to appear with the clearest evidence, that the undertaking is of greater and more general utility than the greater part of common trades; and, secondly, that it requires a greater capital than can easily be collected into a private copartnery. If a moderate capital were sufficient, the great utility of the undertaking would not be a sufficient reason for establishing a joint-stock company; because, in this case, the demand for what it was to produce, would readily and easily be supplied by private adventurers. In the four trades above mentioned, both those circumstances concur. The great and general utility of the banking trade, when prudently managed, has been fully explained in the second book of this Inquiry. But a public bank, which is to support public credit, and, upon particular emergencies, to advance to government the whole produce of a tax, to the amount, perhaps, of several millions, a year or two before it comes in, requires a greater capital than can easily be collected into any private copartnery. The trade of insurance gives great security to the fortunes of private people, and, by dividing among a great many that loss which would ruin an individual, makes it fall light and easy upon the whole society. In order to give this security, however, it is necessary that the insurers should have a very large capital. Before the establishment of the two joint-stock companies for insurance in London, a list, it is said, was laid before the attorney-general, of one hundred and fifty private insurers, who had failed in the course of a few years. That navigable cuts and canals, and the works which are sometimes necessary for supplying a great city with water, are of great and general utility, while, at the same time, they frequently require a greater expense than suits the fortunes of private people, is sufficiently obvious. Except the four trades above mentioned, I have not been able to recollect any other, in which all the three circumstances requisite for rendering reasonable the establishment of a joint-stock company concur. The English copper company of London, the lead-smelting company, the glass-grinding company, have not even the pretext of any great or singular utility in the object which they pursue; nor does the pursuit of that object seem to require any expense unsuitable to the fortunes of many private men. Whether the trade which those companies carry on, is reducible to such strict rule and method as to render it fit for the management of a joint-stock company, or whether they have any reason to boast of their extraordinary profits, I do not pretend to know. The mine-adventurers company has been long ago bankrupt. A share in the stock of the British Linen company of Edinburgh sells, at present, very much below par, though less so than it did some years ago. The joint-stock companies, which are established for the public-spirited purpose of promoting some particular manufacture, over and above managing their own affairs ill, to the diminution of the general stock of the society, can, in other respects, scarce ever fail to do more harm than good. Notwithstanding the most upright intentions, the unavoidable partiality of their directors to particular branches of the manufacture, of which the undertakers mislead and impose upon them, is a real discouragement to the rest, and necessarily breaks, more or less, that natural proportion which would otherwise establish itself between judicious industry and profit, and which, to the general industry of the country, is of all encouragements the greatest and the most effectual. ART. II.--_Of the Expense of the Institution for the Education of Youth._ The institutions for the education of the youth may, in the same manner, furnish a revenue sufficient for defraying their own expense. The fee or honorary, which the scholar pays to the master, naturally constitutes a revenue of this kind. Even where the reward of the master does not arise altogether from this natural revenue, it still is not necessary that it should be derived from that general revenue of the society, of which the collection and application are, in most countries, assigned to the executive power. Through the greater part of Europe, accordingly, the endowment of schools and colleges makes either no charge upon that general revenue, or but a very small one. It everywhere arises chiefly from some local or provincial revenue, from the rent of some landed estate, or from the interest of some sum of money, allotted and put under the management of trustees for this particular purpose, sometimes by the sovereign himself, and sometimes by some private donor. Have those public endowments contributed in general, to promote the end of their institution? Have they contributed to encourage the diligence, and to improve the abilities, of the teachers? Have they directed the course of education towards objects more useful, both to the individual and to the public, than those to which it would naturally have gone of its own accord? It should not seem very difficult to give at least a probable answer to each of those questions. In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion. This necessity is greatest with those to whom the emoluments of their profession are the only source from which they expect their fortune, or even their ordinary revenue and subsistence. In order to acquire this fortune, or even to get this subsistence, they must, in the course of a year, execute a certain quantity of work of a known value; and, where the competition is free, the rivalship of competitors, who are all endeavouring to justle one another out of employment, obliges every man to endeavour to execute his work with a certain degree of exactness. The greatness of the objects which are to be acquired by success in some particular professions may, no doubt, sometimes animate the exertion of a few men of extraordinary spirit and ambition. Great objects, however, are evidently not necessary, in order to occasion the greatest exertions. Rivalship and emulation render excellency, even in mean professions, an object of ambition, and frequently occasion the very greatest exertions. Great objects, on the contrary, alone and unsupported by the necessity of application, have seldom been sufficient to occasion any considerable exertion. In England, success in the profession of the law leads to some very great objects of ambition; and yet how few men, born to easy fortunes, have ever in this country been eminent in that profession? The endowments of schools and colleges have necessarily diminished, more or less, the necessity of application in the teachers. Their subsistence, so far as it arises from their salaries, is evidently derived from a fund, altogether independent of their success and reputation in their particular professions. In some universities, the salary makes but a part, and frequently but a small part, of the emoluments of the teacher, of which the greater part arises from the honoraries or fees of his pupils. The necessity of application, though always more or less diminished, is not, in this case, entirely taken away. Reputation in his profession is still of some importance to him, and he still has some dependency upon the affection, gratitude, and favourable report of those who have attended upon his instructions; and these favourable sentiments he is likely to gain in no way so well as by deserving them, that is, by the abilities and diligence with which he discharges every part of his duty. In other universities, the teacher is prohibited from receiving any honorary or fee from his pupils, and his salary constitutes the whole of the revenue which he derives from his office. His interest is, in this case, set as directly in opposition to his duty as it is possible to set it. It is the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same, whether he does or does not perform some very laborious duty, it is certainly his interest, at least as interest is vulgarly understood, either to neglect it altogether, or, if he is subject to some authority which will not suffer him to do this, to perform it in as careless and slovenly a manner as that authority will permit. If he is naturally active and a lover of labour, it is his interest to employ that activity in any way from which he can derive some advantage, rather than in the performance of his duty, from which he can derive none. If the authority to which he is subject resides in the body corporate, the college, or university, of which he himself is a member, and in which the greater part of the other members are, like himself, persons who either are, or ought to be teachers, they are likely to make a common cause, to be all very indulgent to one another, and every man to consent that his neighbour may neglect his duty, provided he himself is allowed to neglect his own. In the university of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching. If the authority to which he is subject resides, not so much in the body corporate, of which he is a member, as in some other extraneous persons, in the bishop of the diocese, for example, in the governor of the province, or, perhaps, in some minister of state, it is not, indeed, in this case, very likely that he will be suffered to neglect his duty altogether. All that such superiors, however, can force him to do, is to attend upon his pupils a certain number of hours, that is, to give a certain number of lectures in the week, or in the year. What those lectures shall be, must still depend upon the diligence of the teacher; and that diligence is likely to be proportioned to the motives which he has for exerting it. An extraneous jurisdiction of this kind, besides, is liable to be exercised both ignorantly and capriciously. In its nature, it is arbitrary and discretionary; and the persons who exercise it, neither attending upon the lectures of the teacher themselves, nor perhaps understanding the sciences which it is his business to teach, are seldom capable of exercising it with judgment. From the insolence of office, too, they are frequently indifferent how they exercise it, and are very apt to censure or deprive him of his office wantonly and without any just cause. The person subject to such jurisdiction is necessarily degraded by it, and, instead of being one of the most respectable, is rendered one of the meanest and most contemptible persons in the society. It is by powerful protection only, that he can effectually guard himself against the bad usage to which he is at all times exposed; and this protection he is most likely to gain, not by ability or diligence in his profession, but by obsequiousness to the will of his superiors, and by being ready, at all times, to sacrifice to that will the rights, the interest, and the honour of the body corporate, of which he is a member. Whoever has attended for any considerable time to the administration of a French university, must have had occasion to remark the effects which naturally result from an arbitrary and extraneous jurisdiction of this kind. Whatever forces a certain number of students to any college or university, independent of the merit or reputation of the teachers, tends more or less to diminish the necessity of that merit or reputation. The privileges of graduates in arts, in law, physic, and divinity, when they can be obtained only by residing a certain number of years in certain universities, necessarily force a certain number of students to such universities, independent of the merit or reputation of the teachers. The privileges of graduates are a sort of statutes of apprenticeship, which have contributed to the improvement of education, just as the other statutes of apprenticeship have to that of arts and manufactures. The charitable foundations of scholarships, exhibitions, bursaries, &c. necessarily attach a certain number of students to certain colleges, independent altogether of the merit of those particular colleges. Were the students upon such charitable foundations left free to choose what college they liked best, such liberty might perhaps contribute to excite some emulation among different colleges. A regulation, on the contrary, which prohibited even the independent members of every particular college from leaving it, and going to any other, without leave first asked and obtained of that which they meant to abandon, would tend very much to extinguish that emulation. If in each college, the tutor or teacher, who was to instruct each student in all arts and sciences, should not be voluntarily chosen by the student, but appointed by the head of the college; and if, in case of neglect, inability, or bad usage, the student should not be allowed to change him for another, without leave first asked and obtained; such a regulation would not only tend very much to extinguish all emulation among the different tutors of the same college, but to diminish very much, in all of them, the necessity of diligence and of attention to their respective pupils. Such teachers, though very well paid by their students, might be as much disposed to neglect them, as those who are not paid by them at all or who have no other recompense but their salary. If the teacher happens to be a man of sense, it must be an unpleasant thing to him to be conscious, while he is lecturing to his students, that he is either speaking or reading nonsense, or what is very little better than nonsense. It must, too, be unpleasant to him to observe, that the greater part of his students desert his lectures; or perhaps, attend upon them with plain enough marks of neglect, contempt, and derision. If he is obliged, therefore, to give a certain number of lectures, these motives alone, without any other interest, might dispose him to take some pains to give tolerably good ones. Several different expedients, however, may be fallen upon, which will effectually blunt the edge of all those incitements to diligence. The teacher, instead of explaining to his pupils himself the science in which he proposes to instruct them, may read some book upon it; and if this book is written in a foreign and dead language, by interpreting it to them into their own, or, what would give him still less trouble, by making them interpret it to him, and by now and then making an occasional remark upon it, he may flatter himself that he is giving a lecture. The slightest degree of knowledge and application will enable him to do this, without exposing himself to contempt or derision, by saying any thing that is really foolish, absurd, or ridiculous. The discipline of the college, at the same time, may enable him to force all his pupils to the most regular attendance upon his sham lecture, and to maintain the most decent and respectful behaviour during the whole time of the performance. The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or, more properly speaking, for the ease of the masters. Its object is, in all cases, to maintain the authority of the master, and, whether he neglects or performs his duty, to oblige the students in all cases to behave to him as if he performed it with the greatest diligence and ability. It seems to presume perfect wisdom and virtue in the one order, and the greatest weakness and folly in the other. Where the masters, however, really perform their duty, there are no examples, I believe, that the greater part of the students ever neglect theirs. No discipline is ever requisite to force attendance upon lectures which are really worth the attending, as is well known wherever any such lectures are given. Force and restraint may, no doubt, be in some degree requisite, in order to oblige children, or very young boys, to attend to those parts of education, which it is thought necessary for them to acquire during that early period of life; but after twelve or thirteen years of age, provided the master does his duty, force or restraint can scarce ever be necessary to carry on any part of education. Such is the generosity of the greater part of young men, that so far from being disposed to neglect or despise the instructions of their master, provided he shews some serious intention of being of use to them, they are generally inclined to pardon a great deal of incorrectness in the performance of his duty, and sometimes even to conceal from the public a good deal of gross negligence. Those parts of education, it is to be observed, for the teaching of which there are no public institutions, are generally the best taught. When a young man goes to a fencing or a dancing school, he does not, indeed, always learn to fence or to dance very well; but he seldom fails of learning to fence or to dance. The good effects of the riding school are not commonly so evident. The expense of a riding school is so great, that in most places it is a public institution. The three most essential parts of literary education, to read, write, and account, it still continues to be more common to acquire in private than in public schools; and it very seldom happens, that anybody fails of acquiring them to the degree in which it is necessary to acquire them. In England, the public schools are much less corrupted than the universities. In the schools, the youth are taught, or at least may be taught, Greek and Latin; that is, every thing which the masters pretend to teach, or which it is expected they should teach. In the universities, the youth neither are taught, nor always can find any proper means of being taught the sciences, which it is the business of those incorporated bodies to teach. The reward of the schoolmaster, in most cases, depends principally, in some cases almost entirely, upon the fees or honoraries of his scholars. Schools have no exclusive privileges. In order to obtain the honours of graduation, it is not necessary that a person should bring a certificate of his having studied a certain number of years at a public school. If, upon examination, he appears to understand what is taught there, no questions are asked about the place where he learnt it. The parts of education which are commonly taught in universities, it may perhaps be said, are not very well taught. But had it not been for those institutions, they would not have been commonly taught at all; and both the individual and the public would have suffered a good deal from the want of those important parts of education. The present universities of Europe were originally, the greater part of them, ecclesiastical corporations, instituted for the education of churchmen. They were founded by the authority of the pope; and were so entirely under his immediate protection, that their members, whether masters or students, had all of them what was then called the benefit of clergy, that is, were exempted from the civil jurisdiction of the countries in which their respective universities were situated, and were amenable only to the ecclesiastical tribunals. What was taught in the greater part of those universities was suitable to the end of their institution, either theology, or something that was merely preparatory to theology. When Christianity was first established by law, a corrupted Latin had become the common language of all the western parts of Europe. The service of the church, accordingly, and the translation of the Bible which were read in churches, were both in that corrupted Latin; that is, in the common language of the country. After the irruption of the barbarous nations who overturned the Roman empire, Latin gradually ceased to be the language of any part of Europe. But the reverence of the people naturally preserves the established forms and ceremonies of religion long after the circumstances which first introduced and rendered them reasonable, are no more. Though Latin, therefore, was no longer understood anywhere by the great body of the people, the whole service of the church still continued to be performed in that language. Two different languages were thus established in Europe, in the same manner as in ancient Egypt: a language of the priests, and a language of the people; a sacred and a profane, a learned and an unlearned language. But it was necessary that the priests should understand something of that sacred and learned language in which they were to officiate; and the study of the Latin language therefore made, from the beginning, an essential part of university education. It was not so with that either of the Greek or of the Hebrew language. The infallible decrees of the church had pronounced the Latin translation of the Bible, commonly called the Latin Vulgate, to have been equally dictated by divine inspiration, and therefore of equal authority with the Greek and Hebrew originals. The knowledge of those two languages, therefore, not being indispensably requisite to a churchman, the study of them did not for a long time make a necessary part of the common course of university education. There are some Spanish universities, I am assured, in which the study of the Greek language has never yet made any part of that course. The first reformers found the Greek text of the New Testament, and even the Hebrew text of the Old, more favourable to their opinions than the vulgate translation, which, as might naturally be supposed, had been gradually accommodated to support the doctrines of the Catholic Church. They set themselves, therefore, to expose the many errors of that translation, which the Roman catholic clergy were thus put under the necessity of defending or explaining. But this could not well be done without some knowledge of the original languages, of which the study was therefore gradually introduced into the greater part of universities; both of those which embraced, and of those which rejected, the doctrines of the reformation. The Greek language was connected with every part of that classical learning, which, though at first principally cultivated by catholics and Italians, happened to come into fashion much about the same time that the doctrines of the reformation were set on foot. In the greater part of universities, therefore, that language was taught previous to the study of philosophy, and as soon as the student had made some progress in the Latin. The Hebrew language having no connection with classical learning, and, except the Holy Scriptures, being the language of not a single book in any esteem the study of it did not commonly commence till after that of philosophy, and when the student had entered upon the study of theology. Originally, the first rudiments, both of the Greek and Latin languages, were taught in universities; and in some universities they still continue to be so. In others, it is expected that the student should have previously acquired, at least, the rudiments of one or both of those languages, of which the study continues to make everywhere a very considerable part of university education. The ancient Greek philosophy was divided into three great branches; physics, or natural philosophy; ethics, or moral philosophy; and logic. This general division seems perfectly agreeable to the nature of things. The great phenomenon of nature, the revolutions of the heavenly bodies, eclipses, comets; thunder and lightning, and other extraordinary meteors; the generation, the life, growth, and dissolution of plants and animals; are objects which, as they necessarily excite the wonder, so they naturally call forth the curiosity of mankind to inquire into their causes. Superstition first attempted to satisfy this curiosity, by referring all those wonderful appearances to the immediate agency of the gods. Philosophy afterwards endeavoured to account for them from more familiar causes, or from such as mankind were better acquainted with, than the agency of the gods. As those great phenomena are the first objects of human curiosity, so the science which pretends to explain them must naturally have been the first branch of philosophy that was cultivated. The first philosophers, accordingly, of whom history has preserved any account, appears to have been natural philosophers. In every age and country of the world, men must have attended to the characters, designs, and actions of one another; and many reputable rules and maxims for the conduct of human life must have been laid down and approved of by common consent. As soon as writing came into fashion, wise men, or those who fancied themselves such, would naturally endeavour to increase the number of those established and respected maxims, and to express their own sense of what was either proper or improper conduct, sometimes in the more artificial form of apologues, like what are called the fables of �sop; and sometimes in the more simple one of apophthegms or wise sayings, like the proverbs of Solomon, the verses of Theognis and Phocyllides, and some part of the works of Hesiod. They might continue in this manner, for a long time, merely to multiply the number of those maxims of prudence and morality, without even attempting to arrange them in any very distinct or methodical order, much less to connect them together by one or more general principles, from which they were all deducible, like effects from their natural causes. The beauty of a systematical arrangement of different observations, connected by a few common principles, was first seen in the rude essays of those ancient times towards a system of natural philosophy. Something of the same kind was afterwards attempted in morals. The maxims of common life were arranged in some methodical order, and connected together by a few common principles, in the same manner as they had attempted to arrange and connect the phenomena of nature. The science which pretends to investigate and explain those connecting principles, is what is properly called Moral Philosophy. Different authors gave different systems, both of natural and moral philosophy. But the arguments by which they supported those different systems, far from being always demonstrations, were frequently at best but very slender probabilities, and sometimes mere sophisms, which had no other foundation but the inaccuracy and ambiguity of common language. Speculative systems, have, in all ages of the world, been adopted for reasons too frivolous to have determined the judgment of any man of common sense, in a matter of the smallest pecuniary interest. Gross sophistry has scarce ever had any influence upon the opinions of mankind, except in matters of philosophy and speculation; and in these it has frequently had the greatest. The patrons of each system of natural and moral philosophy, naturally endeavoured to expose the weakness of the arguments adduced to support the systems which were opposite to their own. In examining those arguments, they were necessarily led to consider the difference between a probable and a demonstrative argument, between a fallacious and a conclusive one; and logic, or the science of the general principles of good and bad reasoning, necessarily arose out of the observations which a scrutiny of this kind gave occasion to; though, in its origin, posterior both to physics and to ethics, it was commonly taught, not indeed in all, but in the greater part of the ancient schools of philosophy, previously to either of those sciences. The student, it seems to have been thought, ought to understand well the difference between good and bad reasoning, before he was led to reason upon subjects of so great importance. This ancient division of philosophy into three parts was, in the greater part of the universities of Europe, changed for another into five. In the ancient philosophy, whatever was taught concerning the nature either of the human mind or of the Deity, made a part of the system of physics. Those beings, in whatever their essence might be supposed to consist, were parts of the great system of the universe, and parts, too, productive of the most important effects. Whatever human reason could either conclude or conjecture concerning them, made, as it were, two chapters, though no doubt two very important ones, of the science which pretended to give an account of the origin and revolutions of the great system of the universe. But in the universities of Europe, where philosophy was taught only as subservient to theology, it was natural to dwell longer upon these two chapters than upon any other of the science. They were gradually more and more extended, and were divided into many inferior chapters; till at last the doctrine of spirits, of which so little can be known, came to take up as much room in the system of philosophy as the doctrine of bodies, of which so much can be known. The doctrines concerning those two subjects were considered as making two distinct sciences. What are called metaphysics, or pneumatics, were set in opposition to physics, and were cultivated not only as the more sublime, but, for the purposes of a particular profession, as the more useful science of the two. The proper subject of experiment and observation, a subject in which a careful attention is capable of making so many useful discoveries, was almost entirely neglected. The subject in which, after a very few simple and almost obvious truths, the most careful attention can discover nothing but obscurity and uncertainty, and can consequently produce nothing but subtleties and sophisms, was greatly cultivated. When these two sciences had thus been set in opposition to one another, the comparison between them naturally gave birth to a third, to what was called ontology, or the science which treated of the qualities and attributes which were common to both the subjects of the other two sciences. But if subtleties and sophisms composed the greater part of the metaphysics or pneumatics of the schools, they composed the whole of this cobweb science of ontology, which was likewise sometimes called metaphysics. Wherein consisted the happiness and perfection of a man, considered not only as an individual, but as the member of a family, of a state, and of the great society of mankind, was the object which the ancient moral philosophy proposed to investigate. In that philosophy, the duties of human life were treated of as subservient to the happiness and perfection of human life. But when moral, as well as natural philosophy, came to be taught only as subservient to theology, the duties of human life were treated of as chiefly subservient to the happiness of a life to come. In the ancient philosophy, the perfection of virtue was represented as necessarily productive, to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy, it was frequently represented as generally, or rather as almost always, inconsistent with any degree of happiness in this life; and heaven was to be earned only by penance and mortification, by the austerities and abasement of a monk, not by the liberal, generous, and spirited conduct of a man. Casuistry, and an ascetic morality, made up, in most cases, the greater part of the moral philosophy of the schools. By far the most important of all the different branches of philosophy became in this manner by far the most corrupted. Such, therefore, was the common course of philosophical education in the greater part of the universities in Europe. Logic was taught first; ontology came in the second place; pneumatology, comprehending the doctrine concerning the nature of the human soul and of the Deity, in the third; in the fourth followed a debased system of moral philosophy, which was considered as immediately connected with the doctrines of pneumatology, with the immortality of the human soul, and with the rewards and punishments which, from the justice of the Deity, were to be expected in a life to come: a short and superficial system of physics usually concluded the course. The alterations which the universities of Europe thus introduced into the ancient course of philosophy were all meant for the education of ecclesiastics, and to render it a more proper introduction to the study of theology. But the additional quantity of subtlety and sophistry, the casuistry and ascetic morality which those alterations introduced into it, certainly did not render it more for the education of gentlemen or men of the world, or more likely either to improve the understanding or to mend the heart. This course of philosophy is what still continues to be taught in the greater part of the universities of Europe, with more or less diligence, according as the constitution of each particular university happens to render diligence more or less necessary to the teachers. In some of the richest and best endowed universities, the tutors content themselves with teaching a few unconnected shreds and parcels of this corrupted course; and even these they commonly teach very negligently and superficially. The improvements which, in modern times, have been made in several different branches of philosophy, have not, the greater part of them, been made in universities, though some, no doubt, have. The greater part of universities have not even been very forward to adopt those improvements after they were made; and several of those learned societies have chosen to remain, for a long time, the sanctuaries in which exploded systems and obsolete prejudices found shelter and protection, after they had been hunted out of every other corner of the world. In general, the richest and best endowed universities have been slowest in adopting those improvements, and the most averse to permit any considerable change in the established plan of education. Those improvements were more easily introduced into some of the poorer universities, in which the teachers, depending upon their reputation for the greater part of their subsistence, were obliged to pay more attention to the current opinions of the world. But though the public schools and universities of Europe were originally intended only for the education of a particular profession, that of churchmen; and though they were not always very diligent in instructing their pupils, even in the sciences which were supposed necessary for that profession; yet they gradually drew to themselves the education of almost all other people, particularly of almost all gentlemen and men of fortune. No better method, it seems, could be fallen upon, of spending, with any advantage, the long interval between infancy and that period of life at which men begin to apply in good earnest to the real business of the world, the business which is to employ them during the remainder of their days. The greater part of what is taught in schools and universities, however, does not seem to be the most proper preparation for that business. In England, it becomes every day more and more the custom to send young people to travel in foreign countries immediately upon their leaving school, and without sending them to any university. Our young people, it is said, generally return home much improved by their travels. A young man, who goes abroad at seventeen or eighteen, and returns home at one-and-twenty, returns three or four years older than he was when he went abroad; and at that age it is very difficult not to improve a good deal in three or four years. In the course of his travels, he generally acquires some knowledge of one or two foreign languages; a knowledge, however, which is seldom sufficient to enable him either to speak or write them with propriety. In other respects, he commonly returns home more conceited, more unprincipled, more dissipated, and more incapable of any serious application, either to study or to business, than he could well have become in so short a time had he lived at home. By travelling so very young, by spending in the must frivolous dissipation the most precious years of his life, at a distance from the inspection and controul of his parents and relations, every useful habit, which the earlier parts of his education might have had some tendency to form in him, instead of being riveted and confirmed, is almost necessarily either weakened or effaced. Nothing but the discredit into which the universities are allowing themselves to fall, could ever have brought into repute so very absurd a practice as that of travelling at this early period of life. By sending his son abroad, a father delivers himself, at least for some time, from so disagreeable an object as that of a son unemployed, neglected, and going to ruin before his eyes. Such have been the effects of some of the modern institutions for education. Different plans and different institutions for education seem to have taken place in other ages and nations. In the republics of ancient Greece, every free citizen was instructed, under the direction of the public magistrate, in gymnastic exercises and in music. By gymnastic exercises, it was intended to harden his body, to sharpen his courage, and to prepare him for the fatigues and dangers of war; and as the Greek militia was, by all accounts, one of the best that ever was in the world, this part of their public education must have answered completely the purpose for which it was intended. By the other part, music, it was proposed, at least by the philosophers and historians, who have given us an account of those institutions, to humanize the mind, to soften the temper, and to dispose it for performing all the social and moral duties of public and private life. In ancient Rome, the exercises of the Campus Martius answered the same purpose as those of the Gymnasium in ancient Greece, and they seem to have answered it equally well. But among the Romans there was nothing which corresponded to the musical education of the Greeks. The morals of the Romans, however, both in private and public life, seem to have been, not only equal, but, upon the whole, a good deal superior to those of the Greeks. That they were superior in private life, we have the express testimony of Polybius, and of Dionysius of Halicarnassus, two authors well acquainted with both nations; and the whole tenor of the Greek and Roman history bears witness to the superiority of the public morals of the Romans. The good temper and moderation of contending factions seem to be the most essential circumstances in the public morals of a free people. But the factions of the Greeks were almost always violent and sanguinary; whereas, till the time of the Gracchi, no blood had ever been shed in any Roman faction; and from the time of the Gracchi, the Roman republic may be considered as in reality dissolved. Notwithstanding, therefore, the very respectable authority of Plato, Aristotle, and Polybius, and notwithstanding the very ingenious reasons by which Mr. Montesquieu endeavours to support that authority, it seems probable that the musical education of the Greeks had no great effect in mending their morals, since, without any such education, those of the Romans were, upon the whole, superior. The respect of those ancient sages for the institutions of their ancestors had probably disposed them to find much political wisdom in what was, perhaps, merely an ancient custom, continued, without interruption, from the earliest period of those societies, to the times in which they had arrived at a considerable degree of refinement. Music and dancing are the great amusements of almost all barbarous nations, and the great accomplishments which are supposed to fit any man for entertaining his society. It is so at this day among the negroes on the coast of Africa. It was so among the ancient Celtes, among the ancient Scandinavians, and, as we may learn from Homer, among the ancient Greeks, in the times preceding the Trojan war. When the Greek tribes had formed themselves into little republics, it was natural that the study of those accomplishments should for a long time make a part of the public and common education of the people. The masters who instructed the young people, either in music or in military exercises, do not seem to have been paid, or even appointed by the state, either in Rome or even at Athens, the Greek republic of whose laws and customs we are the best informed. The state required that every free citizen should fit himself for defending it in war, and should upon that account, learn his military exercises. But it left him to learn them of such masters as he could find; and it seems to have advanced nothing for this purpose, but a public field or place of exercise, in which he should practise and perform them. In the early ages, both of the Greek and Roman republics, the other parts of education seem to have consisted in learning to read, write, and account, according to the arithmetic of the times. These accomplishments the richer citizens seem frequently to have acquired at home, by the assistance of some domestic pedagogue, who was, generally, either a slave or a freedman; and the poorer citizens in the schools of such masters as made a trade of teaching for hire. Such parts of education, however, were abandoned altogether to the care of the parents or guardians of each individual. It does not appear that the state ever assumed any inspection or direction of them. By a law of Solon, indeed, the children were acquitted from maintaining those parents who had neglected to instruct them in some profitable trade or business. In the progress of refinement, when philosophy and rhetoric came into fashion, the better sort of people used to send their children to the schools of philosophers and rhetoricians, in order to be instructed in these fashionable sciences. But those schools were not supported by the public. They were, for a long time, barely tolerated by it. The demand for philosophy and rhetoric was, for a long time, so small, that the first professed teachers of either could not find constant employment in any one city, but were obliged to travel about from place to place. In this manner lived Zeno of Elea, Protagoras, Gorgias, Hippias, and many others. As the demand increased, the schools, both of philosophy and rhetoric, became stationary, first in Athens, and afterwards in several other cities. The state, however, seems never to have encouraged them further, than by assigning to some of them a particular place to teach in, which was sometimes done, too, by private donors. The state seems to have assigned the Academy to Plato, the Lyceum to Aristotle, and the Portico to Zeno of Citta, the founder of the Stoics. But Epicurus bequeathed his gardens to his own school. Till about the time of Marcus Antoninus, however, no teacher appears to have had any salary from the public, or to have had any other emoluments, but what arose from the honoraries or fees of his scholars. The bounty which that philosophical emperor, as we learn from Lucian, bestowed upon one of the teachers of philosophy, probably lasted no longer than his own life. There was nothing equivalent to the privileges of graduation; and to have attended any of those schools was not necessary, in order to be permitted to practise any particular trade or profession. If the opinion of their own utility could not draw scholars to them, the law neither forced anybody to go to them, nor rewarded anybody for having gone to them. The teachers had no jurisdiction over their pupils, nor any other authority besides that natural authority which superior virtue and abilities never fail to procure from young people towards those who are entrusted with any part of their education. At Rome, the study of the civil law made a part of the education, not of the greater part of the citizens, but of some particular families. The young people, however, who wished to acquire knowledge in the law, had no public school to go to, and had no other method of studying it, than by frequenting the company of such of their relations and friends as were supposed to understand it. It is, perhaps, worth while to remark, that though the laws of the twelve tables were many of them copied from those of some ancient Greek republics, yet law never seems to have grown up to be a science in any republic of ancient Greece. In Rome it became a science very early, and gave a considerable degree of illustration to those citizens who had the reputation of understanding it. In the republics of ancient Greece, particularly in Athens, the ordinary courts of justice consisted of numerous, and therefore disorderly, bodies of people, who frequently decided almost at random, or as clamour, faction, and party-spirit, happened to determine. The ignominy of an unjust decision, when it was to be divided among five hundred, a thousand, or fifteen hundred people (for some of their courts were so very numerous), could not fall very heavy upon any individual. At Rome, on the contrary, the principal courts of justice consisted either of a single judge, or of a small number of judges, whose characters, especially as they deliberated always in public, could not fail to be very much affected by any rash or unjust decision. In doubtful cases such courts, from their anxiety to avoid blame, would naturally endeavour to shelter themselves under the example or precedent of the judges who had sat before them, either in the same or in some other court. This attention to practice and precedent, necessarily formed the Roman law into that regular and orderly system in which it has been delivered down to us; and the like attention has had the like effects upon the laws of every other country where such attention has taken place. The superiority of character in the Romans over that of the Greeks, so much remarked by Polybius and Dionysius of Halicarnassus, was probably more owing to the better constitution of their courts of justice, than to any of the circumstances to which those authors ascribe it. The Romans are said to have been particularly distinguished for their superior respect to an oath. But the people who were accustomed to make oath only before some diligent and well informed court of justice, would naturally be much more attentive to what they swore, than they who were accustomed to do the same thing before mobbish and disorderly assemblies. The abilities, both civil and military, of the Greeks and Romans, will readily be allowed to have been at least equal to those of any modern nation. Our prejudice is perhaps rather to overrate them. But except in what related to military exercises, the state seems to have been at no pains to form those great abilities; for I cannot be induced to believe that the musical education of the Greeks could be of much consequence in forming them. Masters, however, had been found, it seems, for instructing the better sort of people among those nations, in every art and science in which the circumstances of their society rendered it necessary or convenient for them to be instructed. The demand for such instruction produced, what it always produces, the talent for giving it; and the emulation which an unrestrained competition never fails to excite, appears to have brought that talent to a very high degree of perfection. In the attention which the ancient philosophers excited, in the empire which they acquired over the opinions and principles of their auditors, in the faculty which they possessed of giving a certain tone and character to the conduct and conversation of those auditors, they appear to have been much superior to any modern teachers. In modern times, the diligence of public teachers is more or less corrupted by the circumstances which render them more or less independent of their success and reputation in their particular professions. Their salaries, too, put the private teacher, who would pretend to come into competition with them, in the same state with a merchant who attempts to trade without a bounty, in competition with those who trade with a considerable one. If he sells his goods at nearly the same price, he cannot have the same profit; and poverty and beggary at least, if not bankruptcy and ruin, will infallibly be his lot. If he attempts to sell them much dearer, he is likely to have so few customers, that his circumstances will not be much mended. The privileges of graduation, besides, are in many countries necessary, or at least extremely convenient, to most men of learned professions, that is, to the far greater part of those who have occasion for a learned education. But those privileges can be obtained only by attending the lectures of the public teachers. The most careful attendance upon the ablest instructions of any private teacher cannot always give any title to demand them. It is from these different causes that the private teacher of any of the sciences, which are commonly taught in universities, is, in modern times, generally considered as in the very lowest order of men of letters. A man of real abilities can scarce find out a more humiliating or a more unprofitable employment to turn them to. The endowments of schools and colleges have in this manner not only corrupted the diligence of public teachers, but have rendered it almost impossible to have any good private ones. Were there no public institutions for education, no system, no science, would be taught, for which there was not some demand, or which the circumstances of the times did not render it either necessary or convenient, or at least fashionable to learn. A private teacher could never find his account in teaching either an exploded and antiquated system of a science acknowledged to be useful, or a science universally believed to be a mere useless and pedantic heap of sophistry and nonsense. Such systems, such sciences, can subsist nowhere but in those incorporated societies for education, whose prosperity and revenue are in a great measure independent of their industry. Were there no public institutions for education, a gentleman, after going through, with application and abilities, the most complete course of education which the circumstances of the times were supposed to afford, could not come into the world completely ignorant of every thing which is the common subject of conversation among gentlemen and men of the world. There are no public institutions for the education of women, and there is accordingly nothing useless, absurd, or fantastical, in the common course of their education. They are taught what their parents or guardians judge it necessary or useful for them to learn, and they are taught nothing else. Every part of their education tends evidently to some useful purpose; either to improve the natural attractions of their person, or to form their mind to reserve, to modesty, to chastity, and to economy; to render them both likely to become the mistresses of a family, and to behave properly when they have become such. In every part of her life, a woman feels some conveniency or advantage from every part of her education. It seldom happens that a man, in any part of his life, derives any conveniency or advantage from some of the most laborious and troublesome parts of his education. Ought the public, therefore, to give no attention, it may be asked, to the education of the people? Or, if it ought to give any, what are the different parts of education which it ought to attend to in the different orders of the people? and in what manner ought it to attend to them? In some cases, the state of society necessarily places the greater part of individuals in such situations as naturally form in them, without any attention of government, almost all the abilities and virtues which that state requires, or perhaps can admit of. In other cases, the state of the society does not place the greater part of individuals in such situations; and some attention of government is necessary, in order to prevent the almost entire corruption and degeneracy of the great body of the people. In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard, with abhorrence, the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment, than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it. It is otherwise in the barbarous societies, as they are commonly called, of hunters, of shepherds, and even of husbandmen in that rude state of husbandry which precedes the improvement of manufactures, and the extension of foreign commerce. In such societies, the varied occupations of every man oblige every man to exert his capacity, and to invent expedients for removing difficulties which are continually occurring. Invention is kept alive, and the mind is not suffered to fall into that drowsy stupidity, which, in a civilized society, seems to benumb the understanding of almost all the inferior ranks of people. In those barbarous societies, as they are called, every man, it has already been observed, is a warrior. Every man, too, is in some measure a statesman, and can form a tolerable judgment concerning the interest of the society, and the conduct of those who govern it. How far their chiefs are good judges in peace, or good leaders in war, is obvious to the observation of almost every single man among them. In such a society, indeed, no man can well acquire that improved and refined understanding which a few men sometimes possess in a more civilized state. Though in a rude society there is a good deal of variety in the occupations of every individual, there is not a great deal in those of the whole society. Every man does, or is capable of doing, almost every thing which any other man does, or is capable of doing. Every man has a considerable degree of knowledge, ingenuity, and invention; but scarce any man has a great degree. The degree, however, which is commonly possessed, is generally sufficient for conducting the whole simple business of the society. In a civilized state, on the contrary, though there is little variety in the occupations of the greater part of individuals, there is an almost infinite variety in those of the whole society. These varied occupations present an almost infinite variety of objects to the contemplation of those few, who, being attached to no particular occupation themselves, have leisure and inclination to examine the occupations of other people. The contemplation of so great a variety of objects necessarily exercises their minds in endless comparisons end combinations, and renders their understandings, in an extraordinary degree, both acute and comprehensive. Unless those few, however, happen to be placed in some very particular situations, their great abilities, though honourable to themselves, may contribute very little to the good government or happiness of their society. Notwithstanding the great abilities of those few, all the nobler parts of the human character may be, in a great measure, obliterated end extinguished in the great body of the people. The education of the common people requires, perhaps, in a civilized and commercial society, the attention of the public, more than that of people of some rank and fortune. People of some rank and fortune are generally eighteen or nineteen years of age, before they enter upon that particular business, profession, or trade, by which they propose to distinguish themselves in the world. They have, before that, full time to acquire, or at least to fit themselves for afterwards acquiring, every accomplishment which can recommend them to the public esteem, or render them worthy of it. Their parents or guardians are generally sufficiently anxious that they should be so accomplished, and are, in most cases, willing enough to lay out the expense which is necessary for that purpose. If they are not always properly educated, it is seldom from the want of expense laid out upon their education, but from the improper application of that expense. It is seldom from the want of masters, but from the negligence and incapacity of the masters who are to be had, and from the difficulty, or rather from the impossibility, which there is, in the present state of things, of finding any better. The employments, too, in which people of some rank or fortune spend the greater part of their lives, are not, like those of the common people, simple and uniform. They are almost all of them extremely complicated, and such as exercise the head more than the hands. The understandings of those who are engaged in such employments, can seldom grow torpid for want of exercise. The employments of people of some rank and fortune, besides, are seldom such as harass them from morning to night. They generally have a good deal of leisure, during which they may perfect themselves in every branch, either of useful or ornamental knowledge, of which they may have laid the foundation, or for which they may have acquired some taste in the earlier part of life. It is otherwise with the common people. They have little time to spare for education. Their parents can scarce afford to maintain them, even in infancy. As soon as they are able to work, they must apply to some trade, by which they can earn their subsistence. That trade, too, is generally so simple and uniform, as to give little exercise to the understanding; while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of any thing else. But though the common people cannot, in any civilized society, be so well instructed as people of some rank and fortune; the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life, that the greater part, even of those who are to be bred to the lowest occupations, have time to acquire them before they can be employed in those occupations. For a very small expense, the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most essential parts of education. The public can facilitate this acquisition, by establishing in every parish or district a little school, where children may be taught for a reward so moderate, that even a common labourer may afford it; the master being partly, but not wholly, paid by the public; because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business. In Scotland, the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account. In England, the establishment of charity schools has had an effect of the same kind, though not so universally, because the establishment is not so universal. If, in those little schools, the books by which the children are taught to read, were a little more instructive than they commonly are; and if, instead of a little smattering in Latin, which the children of the common people are sometimes taught there, and which can scarce ever be of any use to them, they were instructed in the elementary parts of geometry and mechanics; the literary education of this rank of people would, perhaps, be as complete as can be. There is scarce a common trade, which does not afford some opportunities of applying to it the principles of geometry and mechanics, and which would not, therefore, gradually exercise and improve the common people in those principles, the necessary introduction to the most sublime, as well as to the most useful sciences. The public can encourage the acquisition of those most essential parts of education, by giving small premiums, and little badges of distinction, to the children of the common people who excel in them. The public can impose upon almost the whole body of the people the necessity of acquiring the most essential parts of education, by obliging every man to undergo an examination or probation in them, before he can obtain the freedom in any corporation, or be allowed to set up any trade, either in a village or town corporate. It was in this manner, by facilitating the acquisition of their military and gymnastic exercises, by encouraging it, and even by imposing upon the whole body of the people the necessity of learning those exercises, that the Greek and Roman republics maintained the martial spirit of their respective citizens. They facilitated the acquisition of those exercises, by appointing a certain place for learning and practising them, and by granting to certain masters the privilege of teaching in that place. Those masters do not appear to have had either salaries or exclusive privileges of any kind. Their reward consisted altogether in what they got from their scholars; and a citizen, who had learnt his exercises in the public gymnasia, had no sort of legal advantage over one who had learnt them privately, provided the latter had learned them equally well. Those republics encouraged the acquisition of those exercises, by bestowing little premiums and badges of distinction upon those who excelled in them. To have gained a prize in the Olympic, Isthmian, or Nemæan games, gave illustration, not only to the person who gained it, but to his whole family and kindred. The obligation which every citizen was under, to serve a certain number of years, if called upon, in the armies of the republic, sufficient imposed the necessity of learning those exercises, without which he could not be fit for that service. That in the progress of improvement, the practice of military exercises, unless government takes proper pains to support it, goes gradually to decay, and, together with it, the martial spirit of the great body of the people, the example of modern Europe sufficiently demonstrates. But the security of every society must always depend, more or less, upon the martial spirit of the great body of the people. In the present times, indeed, that martial spirit alone, and unsupported by a well-disciplined standing army, would not, perhaps, be sufficient for the defence and security of any society. But where every citizen had the spirit of a soldier, a smaller standing army would surely be requisite. That spirit, besides, would necessarily diminish very much the dangers to liberty, whether real or imaginary, which are commonly apprehended from a standing army. As it would very much facilitate the operations of that army against a foreign invader; so it would obstruct them as much, if unfortunately they should ever be directed against the constitution of the state. The ancient institutions of Greece and Rome seem to have been much more effectual for maintaining the martial spirit of the great body of the people, than the establishment of what are called the militias of modern times. They were much more simple. When they were once established, they executed themselves, and it required little or no attention from government to maintain them in the most perfect vigour. Whereas to maintain, even in tolerable execution, the complex regulations of any modern militia, requires the continual and painful attention of government, without which they are constantly falling into total neglect and disuse. The influence, besides, of the ancient institutions, was much more universal. By means of them, the whole body of the people was completely instructed in the use of arms; whereas it is but a very small part of them who can ever be so instructed by the regulations of any modern militia, except, perhaps, that of Switzerland. But a coward, a man incapable either of defending or of revenging himself, evidently wants one of the most essential parts of the character of a man. He is as much mutilated and deformed in his mind as another is in his body, who is either deprived of some of its most essential members, or has lost the use of them. He is evidently the more wretched and miserable of the two; because happiness and misery, which reside altogether in the mind, must necessarily depend more upon the healthful or unhealthful, the mutilated or entire state of the mind, than upon that of the body. Even though the martial spirit of the people were of no use towards the defence of the society, yet, to prevent that sort of mental mutilation, deformity, and wretchedness, which cowardice necessarily involves in it, from spreading themselves through the great body of the people, would still deserve the most serious attention of government; in the same manner as it would deserve its most serious attention to prevent a leprosy, or any other loathsome and offensive disease, though neither mortal nor dangerous, from spreading itself among them; though, perhaps, no other public good might result from such attention, besides the prevention of so great a public evil. The same thing may be said of the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable, and more likely to obtain the respect of their lawful superiors, and they are, therefore, more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition; and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance, that they should not be disposed to judge rashly or capriciously concerning it. ART. III.--_Of the Expense of the Institutions for the Instruction of People of all Ages._ The institutions for the instruction of people of all ages, are chiefly those for religious instruction. This is a species of instruction, which the object is not so much to render the people good citizens in this world, as to prepare them for another and a better world in the life to come. The teachers of the doctrine which contains this instruction, in the same manner as other teachers, may either depend altogether for their subsistence upon the voluntary contributions of their hearers; or they may derive it from some other fund, to which the law of their country may entitle them; such as a landed estate, a tythe or land tax, an established salary or stipend. Their exertion, their zeal and industry, are likely to be much greater in the former situation than in the latter. In this respect, the teachers of a new religion have always had a considerable advantage in attacking these ancient and established systems, of which the clergy, reposing themselves upon their benefices, had neglected to keep up the fervour of faith and devotion in the great body of the people; and having given themselves up to indolence, were become altogether incapable of making any vigorous exertion in defence even of their own establishment. The clergy of an established and well endowed religion frequently become men of learning and elegance, who possess all the virtues of gentlemen, or which can recommend them to the esteem of gentlemen; but they are apt gradually to lose the qualities, both good and bad, which gave them authority and influence with the inferior ranks of people, and which had perhaps been the original causes of the success and establishment of their religion. Such a clergy, when attacked by a set of popular and bold, though perhaps stupid and ignorant enthusiasts, feel themselves as perfectly defenceless as the indolent, effeminate, and full fed nations of the southern parts of Asia, when they were invaded by the active, hardy, and hungry Tartars of the north. Such a clergy, upon such an emergency, have commonly no other resource than to call upon the civil magistrate to persecute, destroy, or drive out their adversaries, as disturbers of the public peace. It was thus that the Roman catholic clergy called upon the civil magistrate to persecute the protestants, and the church of England to persecute the dissenters; and that in general every religious sect, when it has once enjoyed, for a century or two, the security of a legal establishment, has found itself incapable of making any vigorous defence against any new sect which chose to attack its doctrine or discipline. Upon such occasions, the advantage, in point of learning and good writing, may sometimes be on the side of the established church. But the arts of popularity, all the arts of gaining proselytes, are constantly on the side of its adversaries. In England, those arts have been long neglected by the well endowed clergy of the established church, and are at present chiefly cultivated by the dissenters and by the methodists. The independent provisions, however, which in many places have been made for dissenting teachers, by means of voluntary subscriptions, of trust rights, and other evasions of the law, seem very much to have abated the zeal and activity of those teachers. They have many of them become very learned, ingenious, and respectable men; but they have in general ceased to be very popular preachers. The methodists, without half the learning of the dissenters, are much more in vogue. In the church of Rome the industry and zeal of the inferior clergy are kept more alive by the powerful motive of self-interest, than perhaps in any established protestant church. The parochial clergy derive many of them, a very considerable part of their subsistence from the voluntary oblations of the people; a source of revenue, which confession gives them many opportunities of improving. The mendicant orders derive their whole subsistence from such oblations. It is with them as with the hussars and light infantry of some armies; no plunder, no pay. The parochial clergy are like those teachers whose reward depends partly upon their salary, and partly upon the fees or honoraries which they get from their pupils; and these must always depend, more or less, upon their industry and reputation. The mendicant orders are like those teachers whose subsistence depends altogether upon their industry. They are obliged, therefore, to use every art which can animate the devotion of the common people. The establishment of the two great mendicant orders of St. Dominic and St. Francis, it is observed by Machiavel, revived, in the thirteenth and fourteenth centuries, the languishing faith and devotion of the catholic church. In Roman catholic countries, the spirit of devotion is supported altogether by the monks, and by the poorer parochial clergy. The great dignitaries of the church, with all the accomplishments of gentlemen and men of the world, and sometimes with those of men of learning, are careful to maintain the necessary discipline over their inferiors, but seldom give themselves any trouble about the instruction of the people. "Most of the arts and professions in a state," says by far the most illustrious philosopher and historian of the present age, "are of such a nature, that, while they promote the interests of the society, they are also useful or agreeable to some individuals; and, in that case, the constant rule of the magistrate, except, perhaps, on the first introduction of any art, is, to leave the profession to itself, and trust its encouragement to the individuals who reap the benefit of it. The artisans, finding their profits to rise by the favour of their customers, increase, as much as possible, their skill and industry; and as matters are not disturbed by any injudicious tampering, the commodity is always sure to be at all times nearly proportioned to the demand." "But there are also some callings which, though useful and even necessary in a state, bring no advantage or pleasure to any individual; and the supreme power is obliged to alter its conduct with regard to the retainers of those professions. It must give them public encouragement in order to their subsistence; and it must provide against that negligence to which they will naturally be subject, either by annexing particular honours to profession, by establishing a long subordination of ranks, and a strict dependence, or by some other expedient. The persons employed in the finances, fleets, and magistracy, are instances of this order of men. "It may naturally be thought, at first sight, that the ecclesiastics belong to the first class, and that their encouragement, as well as that of lawyers and physicians, may safely be entrusted to the liberality of individuals, who are attached to their doctrines, and who find benefit or consolation from their spiritual ministry and assistance. Their industry and vigilance will, no doubt, be whetted by such an additional motive; and their skill in the profession, as well as their address in governing the minds of the people, must receive daily increase, from their increasing practice, study, and attention. "But if we consider the matter more closely, we shall find that this interested diligence of the clergy is what every wise legislator will study to prevent; because, in every religion except the true, it is highly pernicious, and it has even a natural tendency to pervert the truth, by infusing into it a strong mixture of superstition, folly, and delusion. Each ghostly practitioner, in order to render himself more precious and sacred in the eyes of his retainers, will inspire them with the most violent abhorrence of all other sects, and continually endeavour, by some novelty, to excite the languid devotion of his audience. No regard will be paid to truth, morals, or decency, in the doctrines inculcated. Every tenet will be adopted that best suits the disorderly affections of the human frame. Customers will be drawn in each conventicle by new industry and address, in practising on the passions and credulity of the populace. And, in the end, the civil magistrate will find that he has dearly paid for his intended frugality, in saving a fixed establishment for the priests; and that, in reality, the most decent and advantageous composition, which he can make with the spiritual guides, is to bribe their indolence, by assigning stated salaries to their profession, and rendering it superfluous for them to be farther active, than merely to prevent their flock from straying in quest of new pastors. And in this manner ecclesiastical establishments, though commonly they arose at first from religious views, prove in the end advantageous to the political interests of society." But whatever may have been the good or bad effects of the independent provision of the clergy, it has, perhaps, been very seldom bestowed upon them from any view to those effects. Times of violent religious controversy have generally been times of equally violent political faction. Upon such occasions, each political party has either found it, or imagined it, for his interest, to league itself with some one or other of the contending religious sects. But this could be done only by adopting, or, at least, by favouring the tenets of that particular sect. The sect which had the good fortune to be leagued with the conquering party necessarily shared in the victory of its ally, by whose favour and protection it was soon enabled, in some degree, to silence and subdue all its adversaries. Those adversaries had generally leagued themselves with the enemies of the conquering party, and were, therefore the enemies of that party. The clergy of this particular sect having thus become complete masters of the field, and their influence and authority with the great body of the people being in its highest vigour, they were powerful enough to overawe the chiefs and leaders of their own party, and to oblige the civil magistrate to respect their opinions and inclinations. Their first demand was generally that he should silence and subdue all their adversaries; and their second, that he should bestow an independent provision on themselves. As they had generally contributed a good deal to the victory, it seemed not unreasonable that they should have some share in the spoil. They were weary, besides, of humouring the people, and of depending upon their caprice for a subsistence. In making this demand, therefore, they consulted their own ease and comfort, without troubling themselves about the effect which it might have, in future times, upon the influence and authority of their order. The civil magistrate, who could comply with their demand only by giving them something which he would have chosen much rather to take, or to keep to himself, was seldom very forward to grant it. Necessity, however, always forced him to submit at last, though frequently not till after many delays, evasions, and affected excuses. But if politics had never called in the aid of religion, had the conquering party never adopted the tenets of one sect more than those of another, when it had gained the victory, it would probably have dealt equally and impartially with all the different sects, and have allowed every man to choose his own priest, and his own religion, as he thought proper. There would, and, in this case, no doubt, have been, a great multitude of religious sects. Almost every different congregation might probably have had a little sect by itself, or have entertained some peculiar tenets of its own. Each teacher, would, no doubt, have felt himself under the necessity of making the utmost exertion, and of using every art, both to preserve and to increase the number of his disciples. But as every other teacher would have felt himself under the same necessity, the success of no one teacher, or sect of teachers, could have been very great. The interested and active zeal of religious teachers can be dangerous and troublesome only where there is either but one sect tolerated in the society, or where the whole of a large society is divided into two or three great sects; the teachers of each acting by concert, and under a regular discipline and subordination. But that zeal must be altogether innocent, where the society is divided into two or three hundred, or, perhaps, into as many thousand small sects, of which no one could be considerable enough to disturb the public tranquillity. The teachers of each sect, seeing themselves surrounded on all sides with more adversaries than friends, would be obliged to learn that candour and moderation which are so seldom to be found among the teachers of those great sects, whose tenets, being supported by the civil magistrate, are held in veneration by almost all the inhabitants of extensive kingdoms and empires, and who, therefore, see nothing round them but followers, disciples, and humble admirers. The teachers of each little sect, finding themselves almost alone, would be obliged to respect those of almost every other sect; and the concessions which they would mutually find in both convenient and agreeable to make one to another, might in time, probably reduce the doctrine of the greater part of them to that pure and rational religion, free from every mixture of absurdity, imposture, or fanaticism, such as wise men have, in all ages of the world, wished to see established; but such as positive law has, perhaps, never yet established, and probably never will establish in any country; because, with regard to religion, positive law always has been, and probably always will be, more or less influenced by popular superstition and enthusiasm. This plan of ecclesiastical government, or, more properly, of no ecclesiastical government, was what the sect called Independents (a sect, no doubt, of very wild enthusiasts), proposed to establish in England towards the end of the civil war. If it had been established, though of a very unphilosophical origin, it would probably, by this time, have been productive of the most philosophical good temper and moderation with regard to every sort of religious principle. It has been established in Pennsylvania, where, though the quakers happen to be the most numerous, the law, in reality, favours no one sect more than another; and it is there said to have been productive of this philosophical good temper and moderation. But though this equality of treatment should not be productive of this good temper and moderation in all, or even in the greater part of the religious sects of a particular country; yet, provided those sects were sufficiently numerous, and each of them consequently too small to disturb the public tranquillity, the excessive zeal of each for its particular tenets could not well be productive of any very hurtful effects, but, on the contrary, of several good ones; and if the government was perfectly decided, both to let them all alone, and to oblige them all to let alone one another, there is little danger that they would not of their own accord, subdivide themselves fast enough, so as soon to become sufficiently numerous. In every civilized society, in every society where the distinction of ranks has once been completely established, there have been always two different schemes or systems of morality current at the same time; of which the one may be called the strict or austere; the other the liberal, or, if you will, the loose system. The former is generally admired and revered by the common people; the latter is commonly more esteemed and adopted by what are called the people of fashion. The degree of disapprobation with which we ought to mark the vices of levity, the vices which are apt to arise from great prosperity, and from the excess of gaiety and good humour, seems to constitute the principal distinction between those two opposite schemes or systems. In the liberal or loose system, luxury, wanton, and even disorderly mirth, the pursuit of pleasure to some degree of intemperance, the breach of chastity, at least in one of the two sexes, &c. provided they are not accompanied with gross indecency, and do not lead to falsehood and injustice, are generally treated with a good deal of indulgence, and are easily either excused or pardoned altogether. In the austere system, on the contrary, those excesses are regarded with the utmost abhorrence and detestation. The vices of levity are always ruinous to the common people, and a single week's thoughtlessness and dissipation is often sufficient to undo a poor workman for ever, and to drive him, through despair, upon committing the most enormous crimes. The wiser and better sort of the common people, therefore, have always the utmost abhorrence and detestation of such excesses, which their experience tells them are so immediately fatal to people of their condition. The disorder and extravagance of several years, on the contrary, will not always ruin a man of fashion; and people of that rank are very apt to consider the power of indulging in some degree of excess, as one of the advantages of their fortune; and the liberty of doing so without censure or reproach, as one of the privileges which belong to their station. In people of their own station, therefore, they regard such excesses with but a small degree of disapprobation, and censure them either very slightly or not at all. Almost all religious sects have begun among the common people, from whom they have generally drawn their earliest, as well as their most numerous proselytes. The austere system of morality has, accordingly, been adopted by those sects almost constantly, or with very few exceptions; for there have been some. It was the system by which they could best recommend themselves to that order of people, to whom they first proposed their plan of reformation upon what had been before established. Many of them, perhaps the greater part of them, have even endeavoured to gain credit by refining upon this austere system, and by carrying it to some degree of folly and extravagance; and this excessive rigour has frequently recommended them, more than any thing else, to the respect and veneration of the common people. A man of rank and fortune is, by his station, the distinguished member of a great society, who attend to every part of his conduct, and who thereby oblige him to attend to every part of it himself. His authority and consideration depend very much upon the respect which this society bears to him. He dares not do any thing which would disgrace or discredit him in it; and he is obliged to a very strict observation of that species of morals, whether liberal or austere, which the general consent of this society prescribes to persons of his rank and fortune. A man of low condition, on the contrary, is far from being a distinguished member of any great society. While he remains in a country village, his conduct may be attended to, and he may be obliged to attend to it himself. In this situation, and in this situation only, he may have what is called a character to lose. But as soon as he comes into a great city, he is sunk in obscurity and darkness. His conduct is observed and attended to by nobody; and he is, therefore, very likely to neglect it himself, and to abandon himself to every sort of low profligacy and vice. He never emerges so effectually from this obscurity, his conduct never excites so much the attention of any respectable society, as by his becoming the member of a small religious sect. He from that moment acquires a degree of consideration which he never had before. All his brother sectaries are, for the credit of the sect, interested to observe his conduct; and, if he gives occasion to any scandal, if he deviates very much from those austere morals which they almost always require of one another, to punish him by what is always a very severe punishment, even where no evil effects attend it, expulsion or excommunication from the sect. In little religious sects, accordingly, the morals of the common people have been almost always remarkably regular and orderly; generally much more so than in the established church. The morals of those little sects, indeed, have frequently been rather disagreeably rigorous and unsocial. There are two very easy and effectual remedies, however, by whose joint operation the state might, without violence, correct whatever was unsocial or disagreeably rigorous in the morals of all the little sects into which the country was divided. The first of those remedies is the study of science and philosophy, which the state might render almost universal among all people of middling or more than middling rank and fortune; not by giving salaries to teachers in order to make them negligent and idle, but by instituting some sort of probation, even in the higher and more difficult sciences, to be undergone by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honourable office, of trust or profit. If the state imposed upon this order of men the necessity of learning, it would have no occasion to give itself any trouble about providing them with proper teachers. They would soon find better teachers for themselves, than any whom the state could provide for them. Science is the great antidote to the poison of enthusiasm and superstition; and where all the superior ranks of people were secured from it, the inferior ranks could not be much exposed to it. The second of those remedies is the frequency and gaiety of public diversions. The state, by encouraging, that is, by giving entire liberty to all those who, from their own interest, would attempt, without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions; would easily dissipate, in the greater part of them, that melancholy and gloomy humour which is almost always the nurse of popular superstition and enthusiasm. Public diversions have always been the objects of dread and hatred to all the fanatical promoters of those popular frenzies. The gaiety and good humour which those diversions inspire, were altogether inconsistent with that temper of mind which was fittest for their purpose, or which they could best work upon. Dramatic representations, besides, frequently exposing their artifices to public ridicule, and sometimes even to public execration, were, upon that account, more than all other diversions, the objects of their peculiar abhorrence. In a country where the law favoured the teachers of no one religion more than those of another, it would not be necessary that any of them should have any particular or immediate dependency upon the sovereign or executive power; or that he should have any thing to do either in appointing or in dismissing them from their offices. In such a situation, he would have no occasion to give himself any concern about them, further than to keep the peace among them, in the same manner as among the rest of his subjects, that is, to hinder them from persecuting, abusing, or oppressing one another. But it is quite otherwise in countries where there is an established or governing religion. The sovereign can in this case never be secure, unless he has the means of influencing in a considerable degree the greater part of the teachers of that religion. The clergy of every established church constitute a great incorporation. They can act in concert, and pursue their interest upon one plan, and with one spirit as much as if they were under the direction of one man; and they are frequently, too, under such direction. Their interest as an incorporated body is never the same with that of the sovereign, and is sometimes directly opposite to it. Their great interest is to maintain their authority with the people, and this authority depends upon the supposed certainty and importance of the whole doctrine which they inculcate, and upon the supposed necessity of adopting every part of it with the most implicit faith, in order to avoid eternal misery. Should the sovereign have the imprudence to appear either to deride, or doubt himself of the most trifling part of their doctrine, or from humanity, attempt to protect those who did either the one or the other, the punctilious honour of a clergy, who have no sort of dependency upon him, is immediately provoked to proscribe him as a profane person, and to employ all the terrors of religion, in order to oblige the people to transfer their allegiance to some more orthodox and obedient prince. Should he oppose any of their pretensions or usurpations, the danger is equally great. The princes who have dared in this manner to rebel against the church, over and above this crime of rebellion, have generally been charged, too, with the additional crime of heresy, notwithstanding their solemn protestations of their faith, and humble submission to every tenet which she thought proper to prescribe to them. But the authority of religion is superior to every other authority. The fears which it suggests conquer all other fears. When the authorized teachers of religion propagate through the great body of the people, doctrines subversive of the authority of the sovereign, it is by violence only, or by the force of a standing army, that he can maintain his authority. Even a standing army cannot in this case give him any lasting security; because if the soldiers are not foreigners, which can seldom be the case, but drawn from the great body of the people, which must almost always be the case, they are likely to be soon corrupted by those very doctrines. The revolutions which the turbulence of the Greek clergy was continually occasioning at Constantinople, as long as the eastern empire subsisted; the convulsions which, during the course of several centuries, the turbulence of the Roman clergy was continually occasioning in every part of Europe, sufficiently demonstrate how precarious and insecure must always be the situation of the sovereign, who has no proper means of influencing the clergy of the established and governing religion of his country. Articles of faith, as well as all other spiritual matters, it is evident enough, are not within the proper department of a temporal sovereign, who, though he may be very well qualified for protecting, is seldom supposed to be so for instructing the people. With regard to such matters, therefore, his authority can seldom be sufficient to counterbalance the united authority of the clergy of the established church. The public tranquillity, however, and his own security, may frequently depend upon the doctrines which they may think proper to propagate concerning such matters. As he can seldom directly oppose their decision, therefore, with proper weight and authority, it is necessary that he should be able to influence it; and he can influence it only by the fears and expectations which he may excite in the greater part of the individuals of the order. Those fears and expectations may consist in the fear of deprivation or other punishment, and in the expectation of further preferment. In all Christian churches, the benefices of the clergy are a sort of freeholds, which they enjoy, not during pleasure, but during life or good behaviour. If they held them by a more precarious tenure, and were liable to be turned out upon every slight disobligation either of the sovereign or of his ministers, it would perhaps be impossible for them to maintain their authority with the people, who would then consider them as mercenary dependents upon the court, in the sincerity of whose instructions they could no longer have any confidence. But should the sovereign attempt irregularly, and by violence, to deprive any number of clergymen of their freeholds, on account, perhaps, of their having propagated, with more than ordinary zeal, some factious or seditious doctrine, he would only render, by such persecution, both them and their doctrine ten times more popular, and therefore ten times more troublesome and dangerous, than they had been before. Fear is in almost all cases a wretched instrument of government, and ought in particular never to be employed against any order of men who have the smallest pretensions to independency. To attempt to terrify them, serves only to irritate their bad humour, and to confirm them in an opposition, which more gentle usage, perhaps, might easily induce them either to soften, or to lay aside altogether. The violence which the French government usually employed in order to oblige all their parliaments, or sovereign courts of justice, to enregister any unpopular edict, very seldom succeeded. The means commonly employed, however, the imprisonment of all the refractory members, one would think, were forcible enough. The princes of the house of Stuart sometimes employed the like means in order to influence some of the members of the parliament of England, and they generally found them equally intractable. The parliament of England is now managed in another manner; and a very small experiment, which the duke of Choiseul made, about twelve years ago, upon the parliament of Paris, demonstrated sufficiently that all the parliaments of France might have been managed still more easily in the same manner. That experiment was not pursued. For though management and persuasion are always the easiest and safest instruments of government as force and violence are the worst and the most dangerous; yet such, it seems, is the natural insolence of man, that he almost always disdains to use the good instrument, except when he cannot or dare not use the bad one. The French government could and durst use force, and therefore disdained to use management and persuasion. But there is no order of men, it appears I believe, from the experience of all ages, upon whom it is so dangerous or rather so perfectly ruinous, to employ force and violence, as upon the respected clergy of an established church. The rights, the privileges, the personal liberty of every individual ecclesiastic, who is upon good terms with his own order, are, even in the most despotic governments, more respected than those of any other person of nearly equal rank and fortune. It is so in every gradation of despotism, from that of the gentle and mild government of Paris, to that of the violent and furious government of Constantinople. But though this order of men can scarce ever be forced, they may be managed as easily as any other; and the security of the sovereign, as well as the public tranquillity, seems to depend very much upon the means which he has of managing them; and those means seem to consist altogether in the preferment which he has to bestow upon them. In the ancient constitution of the Christian church, the bishop of each diocese was elected by the joint votes of the clergy and of the people of the episcopal city. The people did not long retain their right of election; and while they did retain it, they almost always acted under the influence of the clergy, who, in such spiritual matters, appeared to be their natural guides. The clergy, however, soon grew weary of the trouble of managing them, and found it easier to elect their own bishops themselves. The abbot, in the same manner, was elected by the monks of the monastery, at least in the greater part of abbacies. All the inferior ecclesiastical benefices comprehended within the diocese were collated by the bishop, who bestowed them upon such ecclesiastics as he thought proper. All church preferments were in this manner in the disposal of the church. The sovereign, though he might have some indirect influence in those elections, and though it was sometimes usual to ask both his consent to elect, and his approbation of the election, yet had no direct or sufficient means of managing the clergy. The ambition of every clergyman naturally led him to pay court, not so much to his sovereign as to his own order, from which only he could expect preferment. Through the greater part of Europe, the pope gradually drew to himself, first the collation of almost all bishoprics and abbacies, or of what were called consistorial benefices, and afterwards, by various machinations and pretences, of the greater part of inferior benefices comprehended within each diocese, little more being left to the bishop than what was barely necessary to give him a decent authority with his own clergy. By this arrangement the condition of the sovereign was still worse than it bad been before. The clergy of all the different countries of Europe were thus formed into a sort of spiritual army, dispersed in different quarters, indeed, but of which all the movements and operations could now be directed by one head, and conducted upon one uniform plan. The clergy of each particular country might be considered as a particular detachment of that army, of which the operations could easily be supported and seconded by all the other detachments quartered in the different countries round about. Each detachment was not only independent of the sovereign of the country in which it was quartered, and by which it was maintained, but dependent upon a foreign sovereign, who could at any time turn its arms against the sovereign of that particular country, and support them by the arms of all the other detachments. Those arms were the most formidable that can well be imagined. In the ancient state of Europe, before the establishment of arts and manufactures, the wealth of the clergy gave them the same sort of influence over the common people which that of the great barons gave them over their respective vassals, tenants, and retainers. In the great landed estates, which the mistaken piety both of princes and private persons had bestowed upon the church, jurisdictions were established, of the same kind with those of the great barons, and for the same reason. In those great landed estates, the clergy, or their bailiffs, could easily keep the peace, without the support or assistance either of the king or of any other person; and neither the king nor any other person could keep the peace there without the support and assistance of the clergy. The jurisdictions of the clergy, therefore, in their particular baronies or manors, were equally independent, and equally exclusive of the authority of the king's courts, as those of the great temporal lords. The tenants of the clergy were, like those of the great barons, almost all tenants at will, entirely dependent upon their immediate lords, and, therefore, liable to be called out at pleasure, in order to fight in any quarrel in which the clergy might think proper to engage them. Over and above the rents of those estates, the clergy possessed in the tithes a very large portion of the rents of all the other estates in every kingdom of Europe. The revenues arising from both those species of rents were, the greater part of them, paid in kind, in corn, wine, cattle, poultry, &c. The quantity exceeded greatly what the clergy could themselves consume; and there were neither arts nor manufactures, for the produce of which they could exchange the surplus. The clergy could derive advantage from this immense surplus in no other way than by employing it, as the great barons employed the like surplus of their revenues, in the most profuse hospitality, and in the most extensive charity. Both the hospitality and the charity of the ancient clergy, accordingly, are said to have been very great. They not only maintained almost the whole poor of every kingdom, but many knights and gentlemen had frequently no other means of subsistence than by travelling about from monastery to monastery, under pretence of devotion, but in reality to enjoy the hospitality of the clergy. The retainers of some particular prelates were often as numerous as those of the greatest lay-lords; and the retainers of all the clergy taken together were, perhaps, more numerous than those of all the lay-lords. There was always much more union among the clergy than among the lay-lords. The former were under a regular discipline and subordination to the papal authority. The latter were under no regular discipline or subordination, but almost always equally jealous of one another, and of the king. Though the tenants and retainers of the clergy, therefore, had both together been less numerous than those of the great lay-lords, and their tenants were probably much less numerous, yet their union would have rendered them more formidable. The hospitality and charity of the clergy, too, not only gave them the command of a great temporal force, but increased very much the weight of their spiritual weapons. Those virtues procured them the highest respect and veneration among all the inferior ranks of people, of whom many were constantly, and almost all occasionally, fed by them. Every thing belonging or related to so popular an order, its possessions, its privileges, its doctrines, necessarily appeared sacred in the eyes of the common people; and every violation of them, whether real or pretended, the highest act of sacrilegious wickedness and profaneness. In this state of things, if the sovereign frequently found it difficult to resist the confederacy of a few of the great nobility, we cannot wonder that he should find it still more so to resist the united force of the clergy of his own dominions, supported by that of the clergy of all the neighbouring dominions. In such circumstances, the wonder is, not that he was sometimes obliged to yield, but that he ever was able to resist. The privileges of the clergy in those ancient times (which to us, who live in the present times, appear the most absurd), their total exemption from the secular jurisdiction, for example, or what in England was called the benefit of clergy, were the natural, or rather the necessary, consequences of this state of things. How dangerous must it have been for the sovereign to attempt to punish a clergyman for any crime whatever, if his order were disposed to protect him, and to represent either the proof as insufficient for convicting so holy a man, or the punishment as too severe to be inflicted upon one whose person had been rendered sacred by religion? The sovereign could, in such circumstances, do no better than leave him to be tried by the ecclesiastical courts, who, for the honour of their own order, were interested to restrain, as much as possible, every member of it from committing enormous crimes, or even from giving occasion to such gross scandal as might disgust the minds of the people. In the state in which things were, through the greater part of Europe, during the tenth, eleventh, twelfth, and thirteenth centuries, and for some time both before and after that period, the constitution of the church of Rome may be considered as the must formidable combination that ever was formed against the authority and security of civil government, as well as against the liberty, reason, and happiness of mankind, which can flourish only where civil government is able to protect them. In that constitution, the grossest delusions of superstition were supported in such a manner by the private interests of so great a number of people, as put them out of all danger from any assault of human reason; because, though human reason might, perhaps, have been able to unveil, even to the eyes of the common people, some of the delusions of superstition, it could never have dissolved the ties of private interest. Had this constitution been attacked by no other enemies but the feeble efforts of human reason, it must have endured for ever. But that immense and well-built fabric, which all the wisdom and virtue of man could never have shaken, much less have overturned, was, by the natural course of things, first weakened, and afterwards in part destroyed; and is now likely, in the course of a few centuries more, perhaps, to crumble into ruins altogether. The gradual improvements of arts, manufactures, and commerce, the same causes which destroyed the power of the grant barons, destroyed, in the same manner, through the greater part of Europe, the whole temporal power of the clergy. In the produce of arts, manufactures, and commerce, the clergy, like the great barons, found something for which they could exchange their rude produce, and thereby discovered the means of spending their whole revenues upon their own persons, without giving any considerable share of them to other people. Their charity became gradually less extensive, their hospitality less liberal, or less profuse. Their retainers became consequently less numerous, and, by degrees, dwindled away altogether. The clergy, too, like the great barons, wished to get a better rent from their landed estates, in order to spend it, in the same manner, upon the gratification of their own private vanity and folly. But this increase of rent could be got only by granting leases to their tenants, who thereby became, in a great measure, independent of them. The ties of interest, which bound the inferior ranks of people to the clergy, were in this manner gradually broken and dissolved. They were even broken and dissolved sooner than those which bound the same ranks of people to the great barons; because the benefices of the church being, the greater part of them, much smaller than the estates of the great barons, the possessor of each benefice was much sooner able to spend the whole of its revenue upon his own person. During the greater part of the fourteenth and fifteenth centuries, the power of the great barons was, through the greater part of Europe, in full vigour. But the temporal power of the clergy, the absolute command which they had once had over the great body of the people was very much decayed. The power of the church was, by that time, very nearly reduced, through the greater part of Europe, to what arose from their spiritual authority; and even that spiritual authority was much weakened, when it ceased to be supported by the charity and hospitality of the clergy. The inferior ranks of people no longer looked upon that order as they had done before; as the comforters of their distress, and the relievers of their indigence. On the contrary, they were provoked and disgusted by the vanity, luxury, and expense of the richer clergy, who appeared to spend upon their own pleasures what had always before been regarded as the patrimony of the poor. In this situation of things, the sovereigns in the different states of Europe endeavoured to recover the influence which they had once had in the disposal of the great benefices of the church; by procuring to the deans and chapters of each diocese the restoration of their ancient right of electing the bishop; and to the monks of each abbacy that of electing the abbot. The reestablishing this ancient order was the object of several statutes enacted in England during the course of the fourteenth century, particularly of what is called the statute of provisors; and of the pragmatic sanction, established in France in the fifteenth century. In order to render the election valid, it was necessary that the sovereign should both consent to it before hand, and afterwards approve of the person elected; and though the election was still supposed to be free, he had, however all the indirect means which his situation necessarily afforded him, of influencing the clergy in his own dominions. Other regulations, of a similar tendency, were established in other parts of Europe. But the power of the pope, in the collation of the great benefices of the church, seems, before the reformation, to have been nowhere so effectually and so universally restrained as in France and England. The concordat afterwards, in the sixteenth century, gave to the kings of France the absolute right of presenting to all the great, or what are called the consistorial, benefices of the Gallican church. Since the establishment of the pragmatic sanction and of the concordat, the clergy of France have, in general shewn less respect to the decrees of the papal court, than the clergy of any other catholic country. In all the disputes which their sovereign has had with the pope, they have almost constantly taken part with the former. This independency of the clergy of France upon the court of Rome seems to be principally founded upon the pragmatic sanction and the concordat. In the earlier periods of the monarchy, the clergy of France appear to have been as much devoted to the pope as those of any other country. When Robert, the second prince of the Capetian race, was most unjustly excommunicated by the court of Rome, his own servants, it is said, threw the victuals which came from his table to the dogs, and refused to taste any thing themselves which had been polluted by the contact of a person in his situation. They were taught to do so, it may very safely be presumed, by the clergy of his own dominions. The claim of collating to the great benefices of the church, a claim in defence of which the court of Rome had frequently shaken, and sometimes overturned, the thrones of some of the greatest sovereigns in Christendom, was in this manner either restrained or modified, or given up altogether, in many different parts of Europe, even before the time of the reformation. As the clergy had now less influence over the people, so the state had more influence over the clergy. The clergy, therefore, had both less power, and less inclination, to disturb the state. The authority of the church of Rome was in this state of declension, when the disputes which gave birth to the reformation began in Germany, and soon spread themselves through every part of Europe. The new doctrines were everywhere received with a high degree of popular favour. They were propagated with all that enthusiastic zeal which commonly animates the spirit of party, when it attacks established authority. The teachers of those doctrines, though perhaps, in other respects, not more learned than many of the divines who defended the established church, seem in general to have been better acquainted with ecclesiastical history, and with the origin and progress of that system of opinions upon which the authority of the church was established; and they had thereby the advantage in almost every dispute. The austerity of their manners gave them authority with the common people, who contrasted the strict regularity of their conduct with the disorderly lives of the greater part of their own clergy. They possessed, too, in a much higher degree than their adversaries, all the arts of popularity and of gaining proselytes; arts which the lofty and dignified sons of the church had long neglected, as being to them in a great measure useless. The reason of the new doctrines recommended them to some, their novelty to many; the hatred and contempt of the established clergy to a still greater number: but the zealous, passionate, and fanatical, though frequently coarse and rustic eloquence, with which they were almost everywhere inculcated, recommended them to by far the greatest number. The success of the new doctrines was almost everywhere so great, that the princes, who at that time happened to be on bad terms with the court of Rome, were, by means of them, easily enabled, in their own dominions, to overturn the church, which having lost the respect and veneration of the inferior ranks of people, could make scarce any resistance. The court of Rome had disobliged some of the smaller princes in the northern parts of Germany, whom it had probably considered as too insignificant to be worth the managing. They universally, therefore, established the reformation in their own dominions. The tyranny of Christiern II., and of Troll archbishop of Upsal, enabled Gustavus Vasa to expel them both from Sweden. The pope favoured the tyrant and the archbishop, and Gustavus Vasa found no difficulty in establishing the reformation in Sweden. Christiern II. was afterwards deposed from the throne of Denmark, where his conduct had rendered him as odious as in Sweden. The pope, however, was still disposed to favour him; and Frederic of Holstein, who had mounted the throne in his stead, revenged himself, by following the example of Gustavus Vasa. The magistrates of Berne and Zurich, who had no particular quarrel with the pope, established with great ease the reformation in their respective cantons, where just before some of the clergy had, by an imposture somewhat grosser than ordinary, rendered the whole order both odious and contemptible. In this critical situation of its affairs the papal court was at sufficient pains to cultivate the friendship of the powerful sovereigns of France and Spain, of whom the latter was at that time emperor of Germany. With their assistance, it was enabled, though not without great difficulty, and much bloodshed, either to suppress altogether, or obstruct very much, the progress of the reformation in their dominions. It was well enough inclined, too, to be complaisant to the king of England. But from the circumstances of the times, it could not be so without giving offense to a still greater sovereign, Charles V., king of Spain and emperor of Germany. Henry VIII., accordingly, though he did not embrace himself the greater part of the doctrines of the reformation was yet enabled, by their general prevalence, to suppress all the monasteries, and to abolish the authority of the church of Rome in his dominions. That he should go so far, though he went no further, gave some satisfaction to the patrons of the reformation, who, having got possession of the government in the reign of his son and successor, completed, without any difficulty, the work which Henry VIII. had begun. In some countries, as in Scotland, where the government was weak, unpopular, and not very firmly established, the reformation was strong enough to overturn, not only the church, but the state likewise, for attempting to support the church. Among the followers of the reformation, dispersed in all the different countries of Europe, there was no general tribunal, which, like that of the court of Rome, or an oecumenical council, could settle all disputes among them, and, with irresistible authority, prescribe to all of them the precise limits of orthodoxy. When the followers of the reformation in one country, therefore, happened to differ from their brethren in another, as they had no common judge to appeal to, the dispute could never be decided; and many such disputes arose among them. Those concerning the government of the church, and the right of conferring ecclesiastical benefices, were perhaps the most interesting to the peace and welfare of civil society. They gave birth, accordingly, to the two principal parties or sects among the followers of the reformation, the Lutheran and Calvinistic sects, the only sects among them, of which the doctrine and discipline have ever yet been established by law in any part of Europe. The followers of Luther, together with what is called the church of England, preserved more or less of the episcopal government, established subordination among the clergy, gave the sovereign the disposal of all the bishoprics, and other consistorial benefices within his dominions, and thereby rendered him the real head of the church; and without depriving the bishop of the right of collating to the smaller benefices within his diocese, they, even to those benefices, not only admitted, but favoured the right of presentation, both in the sovereign and in all other lay patrons. This system of church government was, from the beginning, favourable to peace and good order, and to submission to the civil sovereign. It has never, accordingly, been the occasion of any tumult or civil commotion in any country in which it has once been established. The church of England, in particular, has always valued herself, with great reason, upon the unexceptionable loyalty of her principles. Under such a government, the clergy naturally endeavour to recommend themselves to the sovereign, to the court, and to the nobility and gentry of the country, by whose influence they chiefly expect to obtain preferment. They pay court to those patrons, sometimes, no doubt, by the vilest flattery and assentation; but frequently, too, by cultivating all those arts which best deserve, and which are therefore most likely to gain them, the esteem of people of rank and fortune; by their knowledge in all the different branches of useful and ornamental learning, by the decent liberality of their manners, by the social good humour of their conversation, and by their avowed contempt of those absurd and hypocritical austerities which fanatics inculcate and pretend to practise, in order to draw upon themselves the veneration, and upon the greater part of men of rank and fortune, who avow that they do not practise them, the abhorrence of the common people. Such a clergy, however, while they pay their court in this manner to the higher ranks of life, are very apt to neglect altogether the means of maintaining their influence and authority with the lower. They are listened to, esteemed, and respected by their superiors; but before their inferiors they are frequently incapable of defending, effectually, and to the conviction of such hearers, their own sober and moderate doctrines, against the most ignorant enthusiast who chooses to attack them. The followers of Zuinglius, or more properly those of Calvin, on the contrary, bestowed upon the people of each parish, whenever the church became vacant, the right of electing their own pastor; and established, at the same time, the most perfect equality among the clergy. The former part of this institution, as long as it remained in vigour, seems to have been productive of nothing but disorder and confusion, and to have tended equally to corrupt the morals both of the clergy and of the people. The latter part seems never to have had any effects but what were perfectly agreeable. As long as the people of each parish preserved the right of electing their own pastors, they acted almost always under the influence of the clergy, and generally of the most factious and fanatical of the order. The clergy, in order to preserve their influence in those popular elections, became, or affected to become, many of them, fanatics themselves, encouraged fanaticism among the people, and gave the preference almost always to the most fanatical candidate. So small a matter as the appointment of a parish priest, occasioned almost always a violent contest, not only in one parish, but in all the neighbouring parishes who seldom failed to take part in the quarrel. When the parish happened to be situated in a great city, it divided all the inhabitants into two parties; and when that city happened, either to constitute itself a little republic, or to be the head and capital of a little republic, as in the case with many of the considerable cities in Switzerland and Holland, every paltry dispute of this kind, over and above exasperating the animosity of all their other factions, threatened to leave behind it, both a new schism in the church, and a new faction in the state. In those small republics, therefore, the magistrate very soon found it necessary, for the sake of preserving the public peace, to assume to himself the right of presenting to all vacant benefices. In Scotland, the most extensive country in which this presbyterian form of church government has ever been established, the rights of patronage were in effect abolished by the act which established presbytery in the beginning of the reign of William III. That act, at least, put in the power of certain classes of people in each parish to purchase, for a very small price, the right of electing their own pastor. The constitution which this act established, was allowed to subsist for about two-and-twenty years, but was abolished by the 10th of queen Anne, ch. 12, on account of the confusions and disorders which this more popular mode of election had almost everywhere occasioned. In so extensive a country as Scotland, however, a tumult in a remote parish was not so likely to give disturbance to government as in a smaller state. The 10th of queen Anne restored the rights of patronage. But though, in Scotland, the law gives the benefice, without any exception to the person presented by the patron; yet the church requires sometimes (for she has not in this respect been very uniform in her decisions) a certain concurrence of the people, before she will confer upon the presentee what is called the cure of souls, or the ecclesiastical jurisdiction in the parish. She sometimes, at least, from an affected concern for the peace of the parish, delays the settlement till this concurrence can be procured. The private tampering of some of the neighbouring clergy, sometimes to procure, but more frequently to prevent this concurrence, and the popular arts which they cultivate, in order to enable them upon such occasions to tamper more effectually, are perhaps the causes which principally keep up whatever remains of the old fanatical spirit, either in the clergy or in the people of Scotland. The equality which the presbyterian form of church government establishes among the clergy, consists, first, in the equality of authority or ecclesiastical jurisdiction; and, secondly, in the equality of benefice. In all presbyterian churches, the equality of authority is perfect; that of benefice is not so. The difference, however, between one benefice and another, is seldom so considerable, as commonly to tempt the possessor even of the small one to pay court to his patron, by the vile arts of flattery and assentation, in order to get a better. In all the presbyterian churches, where the rights of patronage are thoroughly established, it is by nobler and better arts, that the established clergy in general endeavour to gain the favour of their superiors; by their learning, by the irreproachable regularity of their life, and by the faithful and diligent discharge of their duty. Their patrons even frequently complain of the independency of their spirit, which they are apt to construe into ingratitude for past favours, but which, at worst, perhaps, is seldom any more than that indifference which naturally arises from the consciousness that no further favours of the kind are ever to be expected. There is scarce, perhaps, to be found anywhere in Europe, a more learned, decent, independent, and respectable set of men, than the greater part of the presbyterian clergy of Holland, Geneva, Switzerland, and Scotland. Where the church benefices are all nearly equal, none of them can be very great; and this mediocrity of benefice, though it may be, no doubt, carried too far, has, however, some very agreeable effects. Nothing but exemplary morals can give dignity to a man of small fortune. The vices of levity and vanity necessarily render him ridiculous, and are, besides, almost as ruinous to him as they are to the common people. In his own conduct, therefore, he is obliged to follow that system of morals which the common people respect the most. He gains their esteem and affection, by that plan of life which his own interest and situation would lead him to follow. The common people look upon him with that kindness with which we naturally regard one who approaches somewhat to our own condition, but who, we think, ought to be in a higher. Their kindness naturally provokes his kindness. He becomes careful to instruct them, and attentive to assist and relieve them. He does not even despise the prejudices of people who are disposed to be so favourable to him, and never treats them with those contemptuous and arrogant airs, which we so often meet with in the proud dignitaries of opulent and well endowed churches. The presbyterian clergy, accordingly, have more influence over the minds of the common people, than perhaps the clergy of any other established church. It is, accordingly, in presbyterian countries only, that we ever find the common people converted, without persecution completely, and almost to a man, to the established church. In countries where church benefices are, the greater part of them, very moderate, a chair in a university is generally a better establishment than a church benefice. The universities have, in this case, the picking and chusing of their members from all the churchmen of the country, who, in every country, constitute by far the most numerous class of men of letters. Where church benefices, on the contrary, are many of them very considerable, the church naturally draws from the universities the greater part of their eminent men of letters; who generally find some patron, who does himself honour by procuring them church preferment. In the former situation, we are likely to find the universities filled with the most eminent men of letters that are to be found in the country. In the latter, we are likely to find few eminent men among them, and those few among the youngest members of the society, who are likely, too, to be drained away from it, before they can have acquired experience and knowledge enough to be of much use to it. It is observed by Mr. de Voltaire, that father Porée, a jesuit of no great eminence in the republic of letters, was the only professor they had ever had in France, whose works were worth the reading. In a country which has produced so many eminent men of letters, it must appear somewhat singular, that scarce one of them should have been a professor in a university. The famous Cassendi was, in the beginning of his life, a professor in the university of Aix. Upon the first dawning of his genius, it was represented to him, that by going into the church he could easily find a much more quiet and comfortable subsistence, as well as a better situation for pursuing his studies; and he immediately followed the advice. The observation of Mr. de Voltaire may be applied, I believe, not only to France, but to all other Roman Catholic countries. We very rarely find in any of them an eminent man of letters, who is a professor in a university, except, perhaps, in the professions of law and physic; professions from which the church is not so likely to draw them. After the church of Rome, that of England is by far the richest and best endowed church in Christendom. In England, accordingly, the church is continually draining the universities of all their best and ablest members; and an old college tutor who is known and distinguished in Europe as an eminent man of letters, is as rarely to be found there as in any Roman catholic country. In Geneva, on the contrary, in the protestant cantons of Switzerland, in the protestant countries of Germany, in Holland, in Scotland, in Sweden, and Denmark, the most eminent men of letters whom those countries have produced, have, not all indeed, but the far greater part of them, been professors in universities. In those countries, the universities are continually draining the church of all its most eminent men of letters. It may, perhaps, be worth while to remark, that, if we except the poets, a few orators, and a few historians, the far greater part of the other eminent men of letters, both of Greece and Rome, appear to have been either public or private teachers; generally either of philosophy or of rhetoric. This remark will be found to hold true, from the days of Lysias and Isocrates, of Plato and Aristotle, down to those of Plutarch and Epictetus, Suetonius, and Quintilian. To impose upon any man the necessity of teaching, year after year, in any particular branch of science seems in reality to be the most effectual method for rendering him completely master of it himself. By being obliged to go every year over the same ground, if he is good for any thing, he necessarily becomes, in a few years, well acquainted with every part of it: and if, upon any particular point, he should form too hasty an opinion one year, when he comes, in the course of his lectures to reconsider the same subject the year thereafter, he is very likely to correct it. As to be a teacher of science is certainly the natural employment of a mere man of letters; so is it likewise, perhaps, the education which is most likely to render him a man of solid learning and knowledge. The mediocrity of church benefices naturally tends to draw the greater part of men of letters in the country where it takes place, to the employment in which they can be the most useful to the public, and at the same time to give them the best education, perhaps, they are capable of receiving. It tends to render their learning both as solid as possible, and as useful as possible. The revenue of every established church, such parts of it excepted as may arise from particular lands or manors, is a branch, it ought to be observed, of the general revenue of the state, which is thus diverted to a purpose very different from the defence of the state. The tithe, for example, is a real land-tax, which puts it out of the power of the proprietors of land to contribute so largely towards the defence of the state as they otherwise might be able to do. The rent of land, however, is, according to some, the sole fund; and, according to others, the principal fund, from which, in all great monarchies, the exigencies of the state must be ultimately supplied. The more of this fund that is given to the church, the less, it is evident, can be spared to the state. It may be laid down as a certain maxim, that all other things being supposed equal, the richer the church, the poorer must necessarily be, either the sovereign on the one hand, or the people on the other; and, in all cases, the less able must the state be to defend itself. In several protestant countries, particularly in all the protestant cantons of Switzerland, the revenue which anciently belonged to the Roman catholic church, the tithes and church lands, has been found a fund sufficient, not only to afford competent salaries to the established clergy, but to defray, with little or no addition, all the other expenses of the state. The magistrates of the powerful canton of Berne, in particular, have accumulated, out of the savings from this fund, a very large sum, supposed to amount to several millions; part of which is deposited in a public treasure, and part is placed at interest in what are called the public funds of the different indebted nations of Europe; chiefly in those of France and Great Britain. What may be the amount of the whole expense which the church, either of Berne, or of any other protestant canton, costs the state, I do not pretend to know. By a very exact account it appears, that, in 1755, the whole revenue of the clergy of the church of Scotland, including their glebe or church lands, and the rent of their manses or dwelling-houses, estimated according to a reasonable valuation, amounted only to L.68,514, 1s. 5-1/12d. This very moderate revenue affords a decent subsistence to nine hundred and forty-four ministers. The whole expense of the church, including what is occasionally laid out for the building and reparation of churches, and of the manses of ministers, cannot well be supposed to exceed eighty or eighty-five thousand pounds a-year. The most opulent church in Christendom does not maintain better the uniformity of faith, the fervour of devotion, the spirit of order, regularity, and austere morals, in the great body of the people, than this very poorly endowed church of Scotland. All the good effects, both civil and religious, which an established church can be supposed to produce, are produced by it as completely as by any other. The greater part of the protestant churches of Switzerland, which, in general, are not better endowed than the church of Scotland, produce those effects in a still higher degree. In the greater part of the protestant cantons, there is not a single person to be found, who does not profess himself to be of the established church. If he professes himself to be of any other, indeed, the law obliges him to leave the canton. But so severe, or, rather, indeed, so oppressive a law, could never have been executed in such free countries, had not the diligence of the clergy beforehand converted to the established church the whole body of the people, with the exception of, perhaps, a few individuals only. In some parts of Switzerland, accordingly, where, from the accidental union of a protestant and Roman catholic country, the conversion has not been so complete, both religions are not only tolerated, but established by law. The proper performance of every service seems to require, that its pay or recompence should be, as exactly as possible, proportioned to the nature of the service. If any service is very much underpaid, it is very apt to suffer by the meanness and incapacity of the greater part of those who are employed in it. If it is very much overpaid, it is apt to suffer, perhaps still more, by their negligence and idleness. A man of a large revenue, whatever may be his profession, thinks he ought to live like other men of large revenues; and to spend a great part of his time in festivity, in vanity, and in dissipation. But in a clergyman, this train of life not only consumes the time which ought to be employed in the duties of his function, but in the eyes of the common people, destroys almost entirely that sanctity of character, which can alone enable him to perform these duties with proper weight and authority. PART IV. _Of the Expense of supporting the Dignity of the Sovereign._ Over and above the expenses necessary for enabling the sovereign to perform his several duties, a certain expense is requisite for the support of his dignity. This expense varies, both with the different periods of improvement, and with the different forms of government. In an opulent and improved society, where all the different orders of people are growing every day more expensive in their houses, in their furniture, in their tables, in their dress, and in their equipage; it cannot well be expected that the sovereign should alone hold out against the fashion. He naturally, therefore, or rather necessarily, becomes more expensive in all those different articles too. His dignity even seems to require that he should become so. As, in point of dignity, a monarch is more raised above his subjects than the chief magistrate of any republic is ever supposed to be above his fellow-citizens; so a greater expense is necessary for supporting that higher dignity. We naturally expect more splendour in the court of a king, than in the mansion-house of a doge or burgo-master. CONCLUSION. The expense of defending the society, and that of supporting the dignity of the chief magistrate, are both laid out for the general benefit of the whole society. It is reasonable, therefore, that they should be defrayed by the general contribution of the whole society; all the different members contributing, as nearly as possible, in proportion to their respective abilities. The expense of the administration of justice, too, may no doubt be considered as laid out for the benefit of the whole society. There is no impropriety, therefore, in its being defrayed by the general contribution of the whole society. The persons, however, who give occasion to this expense, are those who, by their injustice in one way or another, make it necessary to seek redress or protection from the courts of justice. The persons, again, most immediately benefited by this expense, are those whom the courts of justice either restore to their rights, or maintain in their rights. The expense of the administration of justice, therefore, may very properly be defrayed by the particular contribution of one or other, or both, of those two different sets of persons, according as different occasions may require, that is, by the fees of court. It cannot be necessary to have recourse to the general contribution of the whole society, except for the conviction of those criminals who have not themselves any estate or fund sufficient for paying those fees. Those local or provincial expenses, of which the benefit is local or provincial (what is laid out, for example, upon the police of a particular town or district), ought to be defrayed by a local or provincial revenue, and ought to be no burden upon the general revenue of the society. It is unjust that the whole society should contribute towards an expense, of which the benefit is confined to a part of the society. The expense of maintaining good roads and communications is, no doubt, beneficial to the whole society, and may, therefore, without any injustice, be defrayed by the general contributions of the whole society. This expense, however, is most immediately and directly beneficial to those who travel or carry goods from one place to another, and to those who consume such goods. The turnpike tolls in England, and the duties called peages in other countries, lay it altogether upon those two different sets of people, and thereby discharge the general revenue of the society from a very considerable burden. The expense of the institutions for education and religious instruction, is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. This expense, however, might, perhaps, with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other. When the institutions, or public works, which are beneficial to the whole society, either cannot be maintained altogether, or are not maintained altogether, by the contribution of such particular members of the society as are most immediately benefited by them; the deficiency must, in most cases, be made up by the general contribution of the whole society. The general revenue of the society, over and above defraying the expense of defending the society, and of supporting the dignity of the chief magistrate, must make up for the deficiency of many particular branches of revenue. The sources of this general or public revenue, I shall endeavour to explain in the following chapter. CHAP. II. OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY. The revenue which must defray, not only the expense of defending the society and of supporting the dignity of the chief magistrate, but all the other necessary expenses of government, for which the constitution of the state has not provided any particular revenue may be drawn, either, first, from some fund which peculiarly belongs to the sovereign or commonwealth, and which is independent of the revenue of the people; or, secondly, from the revenue of the people. PART I. _Of the Funds, or Sources, of Revenue, which may peculiarly belong to the Sovereign or Commonwealth._ The funds, or sources, of revenue, which may peculiarly belong to the sovereign or commonwealth, must consist, either in stock, or in land. The sovereign, like any other owner of stock, may derive a revenue from it, either by employing it himself, or by lending it. His revenue is, in the one case, profit, in the other interest. The revenue of a Tartar or Arabian chief consists in profit. It arises principally from the milk and increase of his own herds and flocks, of which he himself superintends the management, and is the principal shepherd or herdsman of his own horde or tribe. It is, however, in this earliest and rudest state of civil government only, that profit has ever made the principal part of the public revenue of a monarchical state. Small republics have sometimes derived a considerable revenue from the profit of mercantile projects. The republic of Hamburgh is said to do so from the profits of a public wine-cellar and apothecary's shop.[50] That state cannot be very great, of which the sovereign has leisure to carry on the trade of a wine-merchant or an apothecary. The profit of a public bank has been a source of revenue to more considerable states. It has been so, not only to Hamburgh, but to Venice and Amsterdam. A revenue of this kind has even by some people been thought not below the attention of so great an empire as that of Great Britain. Reckoning the ordinary dividend of the bank of England at five and a-half per cent., and its capital at ten millions seven hundred and eighty thousand pounds, the net annual profit, after paying the expense of management, must amount, it is said, to five hundred and ninety-two thousand nine hundred pounds. Government, it is pretended, could borrow this capital at three per cent. interest, and, by taking the management of the bank into its own hands, might make a clear profit of two hundred and sixty-nine thousand five hundred pounds a-year. The orderly, vigilant, and parsimonious administration of such aristocracies as those of Venice and Amsterdam, is extremely proper, it appears from experience, for the management of a mercantile project of this kind. But whether such a government as that of England, which, whatever may be its virtues, has never been famous for good economy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is, perhaps, natural to monarchies; and, in time of war, has constantly acted with all the thoughtless extravagance that democracies are apt to fall into, could be safely trusted with the management of such a project, must at least be good deal more doubtful. The post-office is properly a mercantile project. The government advances the expense of establishing the different offices, and of buying or hiring the necessary horses or carriages, and is repaid, with a large profit, by the duties upon what is carried. It is, perhaps, the only mercantile project which has been successfully managed by, I believe, every sort of government. The capital to be advanced is not very considerable. There is no mystery in the business. The returns are not only certain, but immediate. Princes, however, have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes, by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The profusion with which the affairs of princes are always managed, renders it almost impossible that they should. The agents of a prince regard the wealth of their master as inexhaustible; are careless at what price they buy, are careless at what price they sell, are careless at what expense they transport his goods from one place to another. Those agents frequently live with the profusion of princes; and sometimes, too, in spite of that profusion, and by a proper method of making up their accounts, acquire the fortunes of princes. It was thus, as we are told by Machiavel, that the agents of Lorenzo of Medicis, not a prince of mean abilities, carried on his trade. The republic of Florence was several times obliged to pay the debt into which their extravagance had involved him. He found it convenient, accordingly to give up the business of merchant, the business to which his family had originally owed their fortune, and, in the latter part of his life, to employ both what remained of that fortune, and the revenue of the state, of which he had the disposal, in projects and expenses more suitable to his station. No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India company renders them very bad sovereigns, the spirit of sovereignty seems to have rendered them equally bad traders. While they were traders only, they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg the ordinary assistance of government, in order to avoid immediate bankruptcy. In their former situation, their servants in India considered themselves as the clerks of merchants; in their present situation, those servants consider themselves as the ministers of sovereigns. A state may sometimes derive some part of its public revenue from the interest of money, as well as from the profits of stock. If it has amassed a treasure, it may lend a part of that treasure, either to foreign states, or to its own subjects. The canton of Berne derives a considerable revenue by lending a part of its treasure to foreign states, that is, by placing it in the public funds of the different indebted nations of Europe, chiefly in those of France and England. The security of this revenue must depend, first, upon the security of the funds in which it is placed, or upon the good faith of the government which has the management of them; and, secondly, upon the certainty or probability of the continuance of peace with the debtor nation. In the case of a war, the very first act of hostility on the part of the debtor nation might be the forfeiture of the funds of its creditor. This policy of lending money to foreign states is, so far as I know peculiar to the canton of Berne. The city of Hamburgh[51] has established a sort of public pawn-shop, which lends money to the subjects of the state, upon pledges, at six per cent. interest. This pawn-shop, or lombard, as it is called, affords a revenue, it is pretended, to the state, of a hundred and fifty thousand crowns, which, at four and sixpence the crown, amounts to L.33,750 sterling. The government of Pennsylvania, without amassing any treasure, invented a method of lending, not money, indeed, but what is equivalent to money, to its subjects. By advancing to private people, at interest, and upon land security to double the value, paper bills of credit, to be redeemed fifteen years after their date; and, in the mean time, made transferable from hand to hand, like banknotes, and declared by act of assembly to be a legal tender in all payments from one inhabitant of the province to another, it raised a moderate revenue, which went a considerable way towards defraying an annual expense of about L.4500, the whole ordinary expense of that frugal and orderly government. The success of an expedient of this kind must have depended upon three different circumstances: first, upon the demand for some other instrument of commerce, besides gold and silver money, or upon the demand for such a quantity of consumable stock as could not be had without sending abroad the greater part of their gold and silver money, in order to purchase it; secondly, upon the good credit of the government which made use of this expedient; and, thirdly, upon the moderation with which it was used, the whole value of the paper bills of credit never exceeding that of the gold and silver money which would have been necessary for carrying on their circulation, had there been no paper bills of credit. The same expedient was, upon different occasions, adopted by several other American colonies; but, from want of this moderation, it produced, in the greater part of them, much more disorder than conveniency. The unstable and perishable nature of stock and credit, however, renders them unfit to be trusted to as the principal funds of that sure, steady, and permanent revenue, which can alone give security and dignity to government. The government of no great nation, that was advanced beyond the shepherd state, seems ever to have derived the greater part of its public revenue from such sources. Land is a fund of more stable and permanent nature; and the rent of public lands, accordingly, has been the principal source of the public revenue of many a great nation that was much advanced beyond the shepherd state. From the produce or rent of the public lands, the ancient republics of Greece and Italy derived for a long time the greater part of that revenue which defrayed the necessary expenses of the commonwealth. The rent of the crown lands constituted for a long time the greater part of the revenue of the ancient sovereigns of Europe. War, and the preparation for war, are the two circumstances which, in modern times, occasion the greater part of the necessary expense of all great states. But in the ancient republics of Greece and Italy, every citizen was a soldier, and both served, and prepared himself for service, at his own expense. Neither of those two circumstances, therefore, could occasion any very considerable expense to the state. The rent of a very moderate landed estate might be fully sufficient for defraying all the other necessary expenses of government. In the ancient monarchies of Europe, the manners and customs of the times sufficiently prepared the great body of the people for war; and when they took the field, they were, by the condition of their feudal tenures, to be maintained either at their own expense, or at that of their immediate lords, without bringing any new charge upon the sovereign. The other expenses of government were, the greater part of them, very moderate. The administration of justice, it has been shewn, instead of being a cause of expense was a source of revenue. The labour of the country people, for three days before, and for three days after, harvest, was thought a fund sufficient for making and maintaining all the bridges, highways, and other public works, which the commerce of the country was supposed to require. In those days the principal expense of the sovereign seems to have consisted in the maintenance of his own family and household. The officers of his household, accordingly, were then the great officers of state. The lord treasurer received his rents. The lord steward and lord chamberlain looked after the expense of his family. The care of his stables was committed to the lord constable and the lord marshal. His houses were all built in the form of castles, and seem to have been the principal fortresses which he possessed. The keepers of those houses or castles might be considered as a sort of military governors. They seem to have been the only military officers whom it was necessary to maintain in time of peace. In these circumstances, the rent of a great landed estate might, upon ordinary occasions, very well defray all the necessary expenses of government. In the present state of the greater part of the civilized monarchies of Europe, the rent of all the lands in the country, managed as they probably would be, if they all belonged to one proprietor, would scarce, perhaps, amount to the ordinary revenue which they levy upon the people even in peaceable times. The ordinary revenue of Great Britain, for example, including not only what is necessary for defraying the current expense of the year, but for paying the interest of the public debts, and for sinking a part of the capital of those debts, amounts to upwards of ten millions a-year. But the land tax, at four shillings in the pound, falls short of two millions a-year. This land tax, as it is called, however, is supposed to be one-fifth, not only of the rent of all the land, but of that of all the houses, and of the interest of all the capital stock of Great Britain, that part of it only excepted which is either lent to the public, or employed as farming stock in the cultivation of land. A very considerable part of the produce of this tax arises from the rent of houses and the interest of capital stock. The land tax of the city of London, for example, at four shillings in the pound, amounts to L.123,399 : 6 : 7; that of the city of Westminster to L.63,092 : 1 : 5; that of the palaces of Whitehall and St. James's to L.30,754 : 6 : 3. A certain proportion of the land tax is, in the same manner, assessed upon all the other cities and towns corporate in the kingdom; and arises almost altogether, either from the rent of houses, or from what is supposed to be the interest of trading and capital stock. According to the estimation, therefore, by which Great Britain is rated to the land tax, the whole mass of revenue arising from the rent of all the lands, from that of all the houses, and from the interest of all the capital stock, that part of it only excepted which is either lent to the public, or employed in the cultivation of land, does not exceed ten millions sterling a-year, the ordinary revenue which government levies upon the people even in peaceable times. The estimation by which Great Britain is rated to the land tax is, no doubt, taking the whole kingdom at an average, very much below the real value; though in several particular counties and districts it is said to be nearly equal to that value. The rent of the lands alone, exclusive of that of houses and of the interest of stock, has by many people been estimated at twenty millions; an estimation made in a great measure at random, and which, I apprehend, is as likely to be above as below the truth. But if the lands of Great Britain, in the present state of their cultivation, do not afford a rent of more than twenty millions a-year, they could not well afford the half, most probably not the fourth part of that rent, if they all belonged to a single proprietor, and were put under the negligent, expensive, and oppressive management of his factors and agents. The crown lands of Great Britain do not at present afford the fourth part of the rent which could probably be drawn from them if they were the property of private persons. If the crown lands were more extensive, it is probable, they would be still worse managed. The revenue which the great body of the people derives from land is, in proportion, not to the rent, but to the produce of the land. The whole annual produce of the land of every country, if we except what is reserved for seed, is either annually consumed by the great body of the people, or exchanged for something else that is consumed by them. Whatever keeps down the produce of the land below what it would otherwise rise to, keeps down the revenue of the great body of the people, still more than it does that of the proprietors of land. The rent of land, that portion of the produce which belongs to the proprietors, is scarce anywhere in Great Britain supposed to be more than a third part of the whole produce. If the land which, in one state of cultivation, affords a revenue of ten millions sterling a-year, would in another afford a rent of twenty millions; the rent being, in both cases, supposed a third part of the produce, the revenue of the proprietors would be less than it otherwise might be, by ten millions a-year only; but the revenue of the great body of the people would be less than it otherwise might be, by thirty millions a-year, deducting only what would be necessary for seed. The population of the country would be less by the number of people which thirty millions a-year, deducting always the seed, could maintain, according to the particular mode of living, and expense which might take place in the different ranks of men, among whom the remainder was distributed. Though there is not at present in Europe, any civilized state of any kind which derives the greater part of its public revenue from the rent of lands which are the property of the state; yet, in all the great monarchies of Europe, there are still many large tracts of land which belong to the crown. They are generally forest, and sometimes forests where, after travelling several miles, you will scarce find a single tree; a mere waste and loss of country, in respect both of produce and population. In every great monarchy of Europe, the sale of the crown lands would produce a very large sum of money, which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown. In countries where lands, improved and cultivated very highly, and yielding, at the time of sale, as great a rent as can easily be got from them, commonly sell at thirty years purchase; the unimproved, uncultivated, and low-rented crown lands, might well be expected to sell at forty, fifty, or sixty years purchase. The crown might immediately enjoy the revenue which this great price would redeem from mortgage. In the course of a few years, it would probably enjoy another revenue. When the crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated. The increase of their produce would increase the population of the country, by augmenting the revenue and consumption of the people. But the revenue which the crown derives from the duties of custom and excise, would necessarily increase with the revenue and consumption of the people. The revenue which, in any civilized monarchy, the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the crown enjoys. It would, in all cases, be for the interest of the society, to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better, perhaps, than by exposing them to public sale. Lands, for the purposes of pleasure and magnificence, parks, gardens, public walks, &c. possessions which are everywhere considered as causes of expense, not as sources of revenue, seem to be the only lands which, in a great and civilized monarchy, ought to belong to the crown. Public stock and public lands, therefore, the two sources of revenue which may peculiarly belong to the sovereign or commonwealth, being both improper and insufficient funds for defraying the necessary expense of any great and civilized state; it remains that this expense must, the greater part of it, be defrayed by taxes of one kind or another; the people contributing a part of their own private revenue, in order to make up a public revenue to the sovereign or commonwealth. PART II. _Of Taxes._ The private revenue of individuals, it has been shown in the first book of this Inquiry, arises, ultimately from the three different sources; rent, profit, and wages. Every tax must finally be paid from some one or other of those three different sources of revenue, or from all of them indifferently. I shall endeavour to give the best account I can, first, of those taxes which, it is intended should fall upon rent; secondly, of those which, it is intended should fall upon profit; thirdly, of those which, it is intended should fall upon wages; and fourthly, of those which, it is intended should fall indifferently upon all those three different sources of private revenue. The particular consideration of each of these four different sources of taxes will divide the second part of the present chapter into four articles, three of which will require several other subdivisions. Many of these taxes, it will appear from the following review, are not finally paid from the fund, or source of revenue, upon which it is intended they should fall. Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general. 1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim, consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal, in so far as it does not affect the other two. In the following examination of different taxes, I shall seldom take much farther notice of this sort of inequality; but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally upon that particular sort of private revenue which is affected by it. 2. The tax which each individual is bound to pay, ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-getherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence, and favours the corruption, of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty. 3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury, are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes. 4. Every tax ought to be so contrived, as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur, who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals. An injudicious tax offers a great temptation to smuggling. But the penalties of smuggling must arise in proportion to the temptation. The law, contrary to all the ordinary principles of justice, first creates the temptation, and then punishes those who yield to it; and it commonly enhances the punishment, too, in proportion to the very circumstance which ought certainly to alleviate it, the temptation to commit the crime.[52] Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not, strictly speaking, expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. It is in some one or other of these four different ways, that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign. The evident justice and utility of the foregoing maxims have recommended them, more or less, to the attention of all nations. All nations have endeavoured, to the best of their judgment, to render their taxes as equal as they could contrive; as certain, as convenient to the contributor, both the time and the mode of payment, and in proportion to the revenue which they brought to the prince, as little burdensome to the people. The following short review of some of the principal taxes which have taken place in different ages and countries, will show, that the endeavours of all nations have not in this respect been equally successful. ART. I.--_Taxes upon Rent--Taxes upon the Rent of Land._ A tax upon the rent of land may either be imposed according to a certain canon, every district being valued at a certain rent, which valuation is not afterwards to be altered; or it may be imposed in such a manner, as to vary with every variation in the real rent of the land, and to rise or fall with the improvement or declaration of its cultivation. A land tax which, like that of Great Britain, is assessed upon each district according to a certain invariable canon, though it should be equal at the time of its first establishment, necessarily becomes unequal in process of time, according to the unequal degrees of improvement or neglect in the cultivation of the different parts of the country. In England, the valuation, according to which the different counties and parishes were assessed to the land tax by the 4th of William and Mary, was very unequal even at its first establishment. This tax, therefore, so far offends against the first of the four maxims above mentioned. It is perfectly agreeable to the other three. It is perfectly certain. The time of payment for the tax, being the same as that for the rent, is as convenient as it can be to the contributor. Though the landlord is, in all cases, the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in the payment of the rent. This tax is levied by a much smaller number of officers than any other which affords nearly the same revenue. As the tax upon each district does not rise with the rise of the rent, the sovereign does not share in the profits of the landlord's improvements. Those improvements sometimes contribute, indeed, to the discharge of the other landlords of the district. But the aggravation of the tax, which this may sometimes occasion upon a particular estate, is always so very small, that it never can discourage those improvements, nor keep down the produce of the land below what it would otherwise rise to. As it has no tendency to diminish the quantity, it can have none to raise the price of that produce. It does not obstruct the industry of the people; it subjects the landlord to no other inconveniency besides the unavoidable one of paying the tax. The advantage, however, which the landlord has derived from the invariable constancy of the valuation, by which all the lands of Great Britain are rated to the land-tax, has been principally owing to some circumstances altogether extraneous to the nature of the tax. It has been owing in part, to the great prosperity of almost every part of the country, the rents of almost all the estates of Great Britain having, since the time when this valuation was first established, been continually rising, and scarce any of them having fallen. The landlords, therefore, have almost all gained the difference between the tax which they would have paid, according to the present rent of their estates, and that which they actually pay according to the ancient valuation. Had the state of the country been different, had rents been gradually falling in consequence of the declension of cultivation, the landlords would almost all have lost this difference. In the state of things which has happened to take place since the revolution, the constancy of the valuation has been advantageous to the landlord and hurtful to the sovereign. In a different state of things it might have been advantageous to the sovereign and hurtful to the landlord. As the tax is made payable in money, so the valuation of the land is expressed in money. Since the establishment of this valuation, the value of silver has been pretty uniform, and there has been no alteration in the standard of the coin, either as to weight or fineness. Had silver risen considerably in its value, as it seems to have done in the course of the two centuries which preceded the discovery of the mines of America, the constancy of the valuation might have proved very oppressive to the landlord. Had silver fallen considerably in its value, as it certainly did for about a century at least after the discovery of those mines, the same constancy of valuation would have reduced very much this branch of the revenue of the sovereign. Had any considerable alteration been made in the standard of the money, either by sinking the same quantity of silver to a lower denomination, or by raising it to a higher; had an ounce of silver, for example, instead of being coined into five shillings and two pence, been coined either into pieces which bore so low a denomination as two shillings and seven pence, or into pieces which bore so high a one as ten shillings and four pence, it would, in the one case, have hurt the revenue of the proprietor, in the other that of the sovereign. In circumstances, therefore, somewhat different from those which have actually taken place, this constancy of valuation might have been a very great inconveniency, either to the contributors or to the commonwealth. In the course of ages, such circumstances, however, must at some time or other happen. But though empires, like all the other works of men, have all hitherto proved mortal, yet every empire aims at immortality. Every constitution, therefore, which it is meant should be as permanent as the empire itself, ought to be convenient, not in certain circumstances only, but in all circumstances; or ought to be suited, not to those circumstances which are transitory, occasional, or accidental, but to those which are necessary, and therefore always the same. A tax upon the rent of land, which varies with every variation of the rent, or which rises and falls according to the improvement or neglect of cultivation, is recommended by that sect of men of letters in France, who call themselves the economists, as the most equitable of all taxes. All taxes, they pretend, fall ultimately upon the rent of land, and ought, therefore, to be imposed equally upon the fund which must finally pay them. That all taxes ought to fall as equally as possible upon the fund which must finally pay them, is certainly true. But without entering into the disagreeable discussion of the metaphysical arguments by which they support their very ingenious theory, it will sufficiently appear, from the following review, what are the taxes which fall finally upon the rent of the land, and what are those which fall finally upon some other fund. In the Venetian territory, all the arable lands which are given in lease to farmers are taxed at a tenth of the rent.[53] The leases are recorded in a public register, which is kept by the officers of revenue in each province or district. When the proprietor cultivates his own lands, they are valued according to an equitable estimation, and he is allowed a deduction of one-fifth of the tax; so that for such land he pays only eight instead of ten per cent. of the supposed rent. A land-tax of this kind is certainly more equal than the land-tax of England. It might not, perhaps, be altogether so certain, and the assessment of the tax might frequently occasion a good deal more trouble to the landlord. It might, too, be a good deal more expensive in the levying. Such a system of administration, however, might, perhaps, be contrived, as would in a great measure both prevent this uncertainty, and moderate this expense. The landlord and tenant, for example, might jointly be obliged to record their lease in a public register. Proper penalties might be enacted against concealing or misrepresenting any of the conditions; and if part of those penalties were to be paid to either of the two parties who informed against and convicted the other of such concealment or misrepresentation, it would effectually deter them from combining together in order to defraud the public revenue. All the conditions of the lease might be sufficiently known from such a record. Some landlords, instead of raising the rent, take a fine for the renewal of the lease. This practice is, in most cases, the expedient of a spendthrift, who, for a sum of ready money sells a future revenue of much greater value. It is, in most cases, therefore, hurtful to the landlord; it is frequently hurtful to the tenant; and it is always hurtful to the community. It frequently takes from the tenant so great a part of his capital, and thereby diminishes so much his ability to cultivate the land, that he finds it more difficult to pay a small rent than it would otherwise have been to pay a great one. Whatever diminishes his ability to cultivate, necessarily keeps down, below what it would otherwise have been, the most important part of the revenue of the community. By rendering the tax upon such fines a good deal heavier than upon the ordinary rent, this hurtful practice might be discouraged, to the no small advantage of all the different parties concerned, of the landlord, of the tenant, of the sovereign, and of the whole community. Some leases prescribe to the tenant a certain mode of cultivation, and a certain succession of crops, during the whole continuance of the lease. This condition, which is generally the effect of the landlord's conceit of his own superior knowledge (a conceit in most cases very ill-founded), ought always to be considered as an additional rent, as a rent in service, instead of a rent in money. In order to discourage the practice, which is generally a foolish one, this species of rent might be valued rather high, and consequently taxed somewhat higher than common money-rents. Some landlords, instead of a rent in money, require a rent in kind, in corn, cattle, poultry, wine, oil, &c.; others, again, require a rent in service. Such rents are always more hurtful to the tenant than beneficial to the landlord. They either take more, or keep more out of the pocket of the former, than they put into that of the latter. In every country where they take place, the tenants are poor and beggarly, pretty much according to the degree in which they take place. By valuing, in the same manner, such rents rather high, and consequently taxing them somewhat higher than common money-rents, a practice which is hurtful to the whole community, might, perhaps, be sufficiently discouraged. When the landlord chose to occupy himself a part of his own lands, the rent might be valued according to an equitable arbitration of the farmers and landlords in the neighbourhood, and a moderate abatement of the tax might be granted to him, in the same manner as in the Venetian territory, provided the rent of the lands which he occupied did not exceed a certain sum. It is of importance that the landlord should be encouraged to cultivate a part of his own land. His capital is generally greater than that of the tenant, and, with less skill, he can frequently raise a greater produce. The landlord can afford to try experiments, and in generally disposed to do so. His unsuccessful experiments occasion only a moderate loss to himself. His successful ones contribute to the improvement and better cultivation of the whole country. It might be of importance, however, that the abatement of the tax should encourage him to cultivate to a certain extent only. If the landlords should, the greater part of them, be tempted to farm the whole of their own lands, the country (instead of sober and industrious tenants, who are bound by their own interest to cultivate as well as their capital and skill will allow them) would be filled with idle and profligate bailiffs, whose abusive management would soon degrade the cultivation, and reduce the annual produce of the land, to the diminution, not only of the revenue of their masters, but of the most important part of that of the whole society. Such a system of administration might, perhaps, free a tax of this kind from any degree of uncertainty, which could occasion either oppression or inconveniency to the contributor; and might, at the same time, serve to introduce into the common management of land such a plan of policy as might contribute a good deal to the general improvement and good cultivation of the country. The expense of levying a land-tax, which varied with every variation of the rent, would, no doubt, be somewhat greater than that of levying one which was always rated according to a fixed valuation. Some additional expense would necessarily be incurred, both by the different register-offices which it would be proper to establish in the different districts of the country, and by the different valuations which might occasionally be made of the lands which the proprietor chose to occupy himself. The expense of all this, however, might be very moderate, and much below what is incurred in the levying of many other taxes, which afford a very inconsiderable revenue in comparison of what might easily be drawn from a tax of this kind. The discouragement which a variable land-tax of this kind might give to the improvement of land, seems to be the most important objection which can be made to it. The landlord would certainly be less disposed to improve, when the sovereign, who contributed nothing to the expense, was to share in the profit of the improvement. Even this objection might, perhaps, be obviated, by allowing the landlord, before he began his improvement, to ascertain, in conjunction with the officers of revenue, the actual value of his lands, according to the equitable arbitration of a certain number of landlords and farmers in the neighbourhood, equally chosen by both parties: and by rating him, according to this valuation, for such a number of years as might be fully sufficient for his complete indemnification. To draw the attention of the sovereign towards the improvement of the land, from a regard to the increase of his own revenue, is one of the principal advantages proposed by this species of land-tax. The term, therefore, allowed, for the indemnification of the landlord, ought not to be a great deal longer than what was necessary for that purpose, lest the remoteness of the interest should discourage too much this attention. It had better, however, be somewhat too long, than in any respect too short. No incitement to the attention of the sovereign can ever counterbalance the smallest discouragement to that of the landlord. The attention of the sovereign can be, at best, but a very general and vague consideration of what is likely to contribute to the better cultivation of the greater part of his dominions. The attention of the landlord is a particular and minute consideration of what is likely to be the most advantageous application of every inch of ground upon his estate. The principal attention of the sovereign ought to be, to encourage, by every means in his power, the attention both of the landlord and of the farmer, by allowing both to pursue their own interest in their own way, and according to their own judgment; by giving to both the most perfect security that they shall enjoy the full recompence of their own industry; and by procuring to both the most extensive market for every part of their produce, in consequence of establishing the easiest and safest communications, both by land and by water, through every part of his own dominions, as well as the most unbounded freedom of exportation to the dominions of all other princes. If, by such a system of administration, a tax of this kind could be so managed as to give, not only no discouragement, but, on the contrary, some encouragement to the improvement of land, it does not appear likely to occasion any other inconveniency to the landlord, except always the unavoidable one of being obliged to pay the tax. In all the variations of the state of the society, in the improvement and in the declension of agriculture; in all the variations in the value of silver, and in all those in the standard of the coin, a tax of this kind would, of its own accord, and without any attention of government, readily suit itself to the actual situation of things, and would be equally just and equitable in all those different changes. It would, therefore, be much more proper to be established as a perpetual and unalterable regulation, or as what is called a fundamental law of the commonwealth, than any tax which was always to be levied according to a certain valuation. Some states, instead of the simple and obvious expedient of a register of leases, have had recourse to the laborious and expensive one of an actual survey and valuation of all the lands in the country. They have suspected, probably, that the lessor and lessee, in order to defraud the public revenue, might combine to conceal the real terms of the lease. Doomsday-book seems to have been the result of a very accurate survey of this kind. In the ancient dominions of the king of Prussia, the land-tax is assessed according to an actual survey and valuation, which is reviewed and altered from time to time.[54] According to that valuation, the lay proprietors pay from twenty to twenty-five per cent. of their revenue; ecclesiastics from forty to forty-five per cent. The survey and valuation of Silesia was made by order of the present king, it is said, with great accuracy. According to that valuation, the lands belonging to the bishop of Breslaw are taxed at twenty-five per cent. of their rent. The other revenues of the ecclesiastics of both religions at fifty per cent. The commanderies of the Teutonic order, and of that of Malta, at forty per cent. Lands held by a noble tenure, at thirty-eight and one-third per cent. Lands held by a base tenure, at thirty-five and one-third per cent. The survey and valuation of Bohemia is said to have been the work of more than a hundred years. It was not perfected till after the peace of 1748, by the orders of the present empress queen.[55] The survey of the duchy of Milan, which was begun in the time of Charles VI., was not perfected till after 1760. It is esteemed one of the most accurate that has ever been made. The survey of Savoy and Piedmont was executed under the orders of the late king of Sardinia.[56] In the dominions of the king of Prussia, the revenue of the church is taxed much higher than that of lay proprietors. The revenue of the church is, the greater part of it, a burden upon the rent of land. It seldom happens that any part of it is applied towards the improvement of land; or is so employed as to contribute, in any respect, towards increasing the revenue of the great body of the people. His Prussian majesty had probably, upon that account, thought it reasonable that it should contribute a good deal more towards relieving the exigencies of the state. In some countries, the lands of the church are exempted from all taxes. In others, they are taxed more lightly than other lands. In the duchy of Milan, the lands which the church possessed before 1575, are rated to the tax at a third only of their value. In Silesia, lands held by a noble tenure are taxed three per cent. higher than those held by a base tenure. The honours and privileges of different kinds annexed to the former, his Prussian majesty had probably imagined, would sufficiently compensate to the proprietor a small aggravation of the tax; while, at the same time, the humiliating inferiority of the latter would be in some measure alleviated, by being taxed somewhat more lightly. In other countries, the system of taxation, instead of alleviating, aggravates this inequality. In the dominions of the king of Sardinia, and in those provinces of France which are subject to what is called the real or predial taille, the tax falls altogether upon the lands held by a base tenure. Those held by a noble one are exempted. A land tax assessed according to a general survey and valuation, how equal soever it may be at first, must, in the course of a very moderate period of time, become unequal. To prevent its becoming so would require the continual and painful attention of government to all the variations in the state and produce of every different farm in the country. The governments of Prussia, of Bohemia, of Sardinia, and of the duchy of Milan, actually exert an attention of this kind; an attention so unsuitable to the nature of government, that it is not likely to be of long continuance, and which, if it is continued, will probably, in the long-run, occasion much more trouble and vexation then it can possibly bring relief to the contributors. In 1666, the generality of Montauban was assessed to the real or predial taille, according, it is said, to a very exact survey and valuation.[57] By 1727, this assessment had become altogether unequal. In order to remedy this inconveniency, government has found no better expedient, than to impose upon the whole generality an additional tax of a hundred and twenty thousand livres. This additional tax is rated upon all the different districts subject to the taille according to the old assessment. But it is levied only upon those which, in the actual state of things, are by that assessment under-taxed; and it is applied to the relief of those which, by the same assessment, are over-taxed. Two districts, for example, one of which ought, in the actual state of things, to be taxed at nine hundred, the other at eleven hundred livres, are, by the old assessment, both taxed at a thousand livres. Both these districts are, by the additional tax, rated at eleven hundred livres each. But this additional tax is levied only upon the district under-charged, and it is applied altogether to the relief of that overcharged, which consequently pays only nine hundred livres. The government neither gains nor loses by the additional tax, which is applied altogether to remedy the inequalities arising from the old assessment. The application is pretty much regulated according to the discretion of the intendant of the generality, and must, therefore, be in a great measure arbitrary. _Taxes which are proportioned, not to the Rent, but to the Produce of Land._ Taxes upon the produce of land are, in reality, taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord. When a certain portion of the produce is to be paid away for a tax, the farmer computes as well as he can, what the value of this portion is, one year with another, likely to amount to, and he makes a proportionable abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute before hand what the church tythe, which is a land tax of this kind, is, one year with another, likely to amount to. The tythe, and every other land tax of this kind, under the appearance of perfect equality, are very unequal taxes; a certain portion of the produce being in different situations, equivalent to a very different portion of the rent. In some very rich lands, the produce is so great, that the one half of it is fully sufficient to replace to the farmer his capital employed in cultivation, together with the ordinary profits of farming stock in the neighbourhood. The other half, or, what comes to the same thing, the value of the other half, he could afford to pay as rent to the landlord, if there was no tythe. But if a tenth of the produce is taken from him in the way of tythe, he must require an abatement of the fifth part of his rent, otherwise he cannot get back his capital with the ordinary profit. In this case, the rent of the landlord, instead of amounting to a half, or five-tenths of the whole produce, will amount only to four-tenths of it. In poorer lands, on the contrary, the produce is sometimes so small, and the expense of cultivation so great, that it requires four-fifths of the whole produce, to replace to the farmer his capital with the ordinary profit. In this case, though there was no tythe, the rent of the landlord could amount to no more than one-fifth or two-tenths of the whole produce. But if the farmer pays one-tenth of the produce in the way of tythe, he must require an equal abatement of the rent of the landlord, which will thus be reduced to one-tenth only of the whole produce. Upon the rent of rich lands the tythe may sometimes be a tax of no more than one-fifth part, or four shillings in the pound; whereas upon that of poorer lands, it may sometimes be a tax of one half, or of ten shillings in the pound. The tythe, as it is frequently a very unequal tax upon the rent, so it is always a great discouragement, both to the improvements of the landlord, and to the cultivation of the farmer. The one cannot venture to make the most important, which are generally the most expensive improvements; nor the other to raise the most valuable, which are generally, too, the most expensive crops; when the church, which lays out no part of the expense, is to share so very largely in the profit. The cultivation of madder was, for a long time, confined by the tythe to the United Provinces, which, being presbyterian countries, and upon that account exempted from this destructive tax, enjoyed a sort of monopoly of that useful dyeing drug against the rest of Europe. The late attempts to introduce the culture of this plant into England, have been made only in consequence of the statute, which enacted that five shillings an acre should be received in lieu of all manner of tythe upon madder. As through the greater part of Europe, the church, so in many different countries of Asia, the state, is principally supported by a land tax, proportioned not to the rent, but to the produce of the land. In China, the principal revenue of the sovereign consists in a tenth part of the produce of all the lands of the empire. This tenth part, however, is estimated so very moderately, that, in many provinces, it is said not to exceed a thirtieth part of the ordinary produce. The land tax or land rent which used to be paid to the Mahometan government of Bengal, before that country fell into the hands of the English East India company, is said to have amounted to about a fifth part of the produce. The land tax of ancient Egypt is said likewise to have amounted to a fifth part. In Asia, this sort of land tax is said to interest the sovereign in the improvement and cultivation of land. The sovereigns of China, those of Bengal while under the Mahometan government, and those of ancient Egypt, are said, accordingly, to have been extremely attentive to the making and maintaining of good roads and navigable canals, in order to increase, as much as possible, both the quantity and value of every part of the produce of the land, by procuring to every part of it the most extensive market which their own dominions could afford. The tythe of the church is divided into such small portions that no one of its proprietors can have any interest of this kind. The parson of a parish could never find his account in making a road or canal to a distant part of the country, in order to extend the market for the produce of his own particular parish. Such taxes, when destined for the maintenance of the state, have some advantages, which may serve in some measure to balance their inconveniency. When destined for the maintenance of the church, they are attended with nothing but inconveniency. Taxes upon the produce of land may be levied, either in kind, or, according to a certain valuation in money. The person of a parish, or a gentleman of small fortune who lives upon his estate, may sometimes, perhaps find some advantage in receiving, the one his tythe, and the other his rent, in kind. The quantity to be collected, and the district within which it is to be collected, are so small, that they both can oversee, with their own eyes, the collection and disposal of every part of what is due to them. A gentleman of great fortune, who lived in the capital, would be in danger of suffering much by the neglect, and more by the fraud, of his factors and agents, if the rents of an estate in a distant province were to be paid to him in this manner. The loss of the sovereign, from the abuse and depredation of his tax-gatherers, would necessarily be much greater. The servants of the most careless private person are, perhaps, more under the eye of their master than those of the most careful prince; and a public revenue, which was paid in kind, would suffer so much from the mismanagement of the collectors, that a very small part of what was levied upon the people would ever arrive at the treasury of the prince. Some part of the public revenue of China, however, is said to be paid in this manner. The mandarins and other tax-gatherers will, no doubt, find their advantage in continuing the practice of a payment, which is so much more liable to abuse than any payment in money. A tax upon the produce of land, which is levied in money, may be levied, either according to a valuation, which varies with all the variations of the market price; or according to a fixed valuation, a bushel of wheat, for example, being always valued at one and the same money price, whatever may be the state of the market. The produce of a tax levied in the former way will vary only according to the variations in the real produce of the land, according to the improvement or neglect of cultivation. The produce of a tax levied in the latter way will vary, not only according to the variations in the produce of the land, but according both to those in the value of the precious metals, and those in the quantity of those metals, which is at different times contained in coin of the same denomination. The produce of the former will always bear the same proportion to the value of the real produce of the land. The produce of the latter may, at different times, bear very different proportions to that value. When, instead either of a certain portion of the produce of land, or of the price of a certain portion, a certain sum of money is to be paid in full compensation for all tax or tythe; the tax becomes, in this case, exactly of the same nature with the land tax of England. It neither rises nor falls with the rent of the land. It neither encourages nor discourages improvement. The tythe in the greater part of those parishes which pay what is called a modus, in lieu of all other tythe, is a tax of this kind. During the Mahometan government of Bengal, instead of the payment in kind of the fifth part of the produce, a modus, and, it is said, a very moderate one, was established in the greater part of the districts or zemindaries of the country. Some of the servants of the East India company, under pretence of restoring the public revenue to its proper value, have, in some provinces, exchanged this modus for a payment in kind. Under their management, this change is likely both to discourage cultivation, and to give new opportunities for abuse in the collection of the public revenue, which has fallen very much below what it was said to have been when it first fell under the management of the company. The servants of the company may, perhaps, have profited by the change, but at the expense, it is probable, both of their masters and of the country. _Taxes upon the Rent of Houses._ The rent of a house may be distinguished into two parts, of which the one may very properly be called the building-rent; the other is commonly called the ground-rent. The building-rent is the interest or profit of the capital expended in building the house. In order to put the trade of a builder upon a level with other trades, it is necessary that this rent should be sufficient, first, to pay him the same interest which he would have got for his capital, if he had lent it upon good security; and, secondly, to keep the house in constant repair, or, what comes to the same thing, to replace, within a certain term of years, the capital which had been employed in building it. The building-rent, or the ordinary profit of building, is, therefore, everywhere regulated by the ordinary interest of money. Where the market rate of interest is four per cent. the rent of a house, which, over and above paying the ground-rent, affords six or six and a-half per cent. upon the whole expense of building, may, perhaps, afford a sufficient profit to the builder. Where the market rate of interest is five per cent. it may perhaps require seven or seven and a-half per cent. If, in proportion to the interest of money, the trade of the builders affords at any time much greater profit than this, it will soon draw so much capital from other trades as will reduce the profit to its proper level. If it affords at any time much less than this, other trades will soon draw so much capital from it as will again raise that profit. Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit, naturally goes to the ground-rent; and, where the owner of the ground and the owner of the building are two different persons, is, in most cases, completely paid to the former. This surplus rent is the price which the inhabitant of the house pays for some real or supposed advantage of the situation. In country houses, at a distance from any great town, where there is plenty of ground to chuse upon, the ground-rent is scarce any thing, or no more than what the ground which the house stands upon would pay, if employed in agriculture. In country villas, in the neighbourhood of some great town, it is sometimes a good deal higher; and the peculiar conveniency or beauty of situation is there frequently very well paid for. Ground-rents are generally highest in the capital, and in those particular parts of it where there happens to be the greatest demand for houses, whatever be the reason of that demand, whether for trade and business, for pleasure and society, or for mere vanity and fashion. A tax upon house-rent, payable by the tenant, and proportioned to the whole rent of each house, could not, for any considerable time at least, affect the building-rent. If the builder did not get his reasonable profit, he would be obliged to quit the trade; which, by raising the demand for building, would, in a short time, bring back his profit to its proper level with that of other trades. Neither would such a tax fall altogether upon the ground-rent; but it would divide itself in such a manner, as to fall partly upon the inhabitant of the house, and partly upon the owner of the ground. Let us suppose, for example, that a particular person judges that he can afford for house-rent an expense of sixty pounds a-year; and let us suppose, too, that a tax of four shillings in the pound, or of one-fifth, payable by the inhabitant, is laid upon house-rent. A house of sixty pounds rent will, in that case, cost him seventy-two pounds a-year, which is twelve pounds more than he thinks he can afford. He will, therefore, content himself with a worse house, or a house of fifty pounds rent, which, with the additional ten pounds that he must pay for the tax, will make up the sum of sixty pounds a-year, the expense which he judges he can afford, and, in order to pay the tax, he will give up a part of the additional conveniency which he might have had from a house of ten pounds a-year more rent. He will give up, I say, a part of this additional conveniency; for he will seldom be obliged to give up the whole, but will, in consequence of the tax, get a better house for fifty pounds a-year, than he could have got if there had been no tax. For as a tax of this kind, by taking away this particular competitor, must diminish the competition for houses of sixty pounds rent, so it must likewise diminish it for those of fifty pounds rent, and in the same manner for those of all other rents, except the lowest rent, for which it would for some time increase the competition. But the rents of every class of houses for which the competition was diminished, would necessarily be more or less reduced. As no part of this reduction, however, could for any considerable time at least, affect the building-rent, the whole of it must, in the long-run, necessarily fall upon the ground-rent. The final payment of this tax, therefore, would fall partly upon the inhabitant of the house, who, in order to pay his share, would be obliged to give up part of his conveniency; and partly upon the owner of the ground, who, in order to pay his share, would be obliged to give up a part of his revenue. In what proportion this final payment would be divided between them, it is not, perhaps, very easy to ascertain. The division would probably be very different in different circumstances, and a tax of this kind might, according to those different circumstances, affect very unequally, both the inhabitant of the house and the owner of the ground. The inequality with which a tax of this kind might fall upon the owners of different ground-rents, would arise altogether from the accidental inequality of this division. But the inequality with which it might fall upon the inhabitants of different houses, would arise, not only from this, but from another cause. The proportion of the expense of house-rent to the whole expense of living, is different in the different degrees of fortune. It is, perhaps, highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. The rent of houses, though it in some respects resembles the rent of land, is in one respect essentially different from it. The rent of land is paid for the use of a productive subject. The land which pays it produces it. The rent of houses is paid for the use of an unproductive subject. Neither the house, nor the ground which it stands upon, produce any thing. The person who pays the rent, therefore, must draw it from some other source of revenue, distinct from and independent of this subject. A tax upon the rent of houses, so far as it falls upon the inhabitants, must be drawn from the same source as the rent itself, and must be paid from their revenue, whether derived from the wages of labour, the profits of stock, or the rent of land. So far as it falls upon the inhabitants, it is one of those taxes which fall, not upon one only, but indifferently upon all the three different sources of revenue; and is, in every respect, of the same nature as a tax upon any any other sort of consumable commodities. In general, there is not perhaps, any one article of expense or consumption by which the liberality or narrowness of a man's whole expense can be better judged of than by his house-rent. A proportional tax upon this particular article of expense might, perhaps, produce a more considerable revenue than any which has hitherto been drawn from it in any part of Europe. If the tax, indeed, was very high, the greater part of people would endeavour to evade it as much as they could, by contenting themselves with smaller houses, and by turning the greater part of their expense into some other channel. The rent of houses might easily be ascertained with sufficient accuracy, by a policy of the same kind with that which would be necessary for ascertaining the ordinary rent of land. Houses not inhabited ought to pay no tax. A tax upon them would fall altogether upon the proprietor, who would thus be taxed for a subject which afforded him neither conveniency nor revenue. Houses inhabited by the proprietor ought to be rated, not according to the expense which they might have cost in building, but according to the rent which an equitable arbitration might judge them likely to bring if leased to a tenant. If rated according to the expense which they might have cost in building, a tax of three or four shillings in the pound, joined with other taxes, would ruin almost all the rich and great families of this, and, I believe, of every other civilized country. Whoever will examine with attention the different town and country houses of some of the richest and greatest families in this country, will find that, at the rate of only six and a-half, or seven per cent. upon the original expense of building, their house-rent is nearly equal to the whole neat rent of their estates. It is the accumulated expense of several successive generations, laid out upon objects of great beauty and magnificence, indeed, but, in proportion to what they cost, of very small exchangeable value.[58] Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rent of houses; it would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it, according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country, the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. The ground-rents of uninhabited houses ought to pay no tax. Both ground-rents, and the ordinary rent of land, are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. Ground-rents seem, in this respect, a more proper subject of peculiar taxation, than even the ordinary rent of land. The ordinary rent of land is, in many cases, owing partly, at least, to the attention and good management of the landlord. A very heavy tax might discourage, too much, this attention and good management. Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon; or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable, than that a fund, which owes its existence to the good government of the state, should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government. Though, in many different countries of Europe, taxes have been imposed upon the rent of houses, I do not know of any in which ground-rents have been considered as a separate subject of taxation. The contrivers of taxes have, probably, found some difficulty in ascertaining what part of the rent ought to be considered as ground-rent, and what part ought to be considered as building-rent. It should not, however, seem very difficult to distinguish those two parts of the rent from one another. In Great Britain the rent of houses is supposed to be taxed in the same proportion as the rent of land, by what is called the annual land tax. The valuation, according to which each different parish and district is assessed to this tax, is always the same. It was originally extremely unequal, and it still continues to be so. Through the greater part of the kingdom this tax falls still more lightly upon the rent of houses than upon that of land. In some few districts only, which were originally rated high, and in which the rents of houses have fallen considerably, the land tax of three or four shillings in the pound is said to amount to an equal proportion of the real rent of houses. Untenanted houses, though by law subject to the tax, are, in most districts, exempted from it by the favour of assessors; and this exemption sometimes occasions some little variation in the rate of particular houses, though that of the district is always the same. Improvements of rent, by new buildings, repairs, &c. go to the discharge of the district, which occasions still further variations in the rate of particular houses. In the province of Holland,[59] every house is taxed at two and a-half per cent. of its value, without any regard, either to the rent which it actually pays, or to the circumstance of its being tenanted or untenanted. There seems to be a hardship in obliging the proprietor to pay a tax for an untenanted house, from which he can derive no revenue, especially so very heavy a tax. In Holland, where the market rate of interest does not exceed three per cent., two and a-half per cent. upon the whole value of the house must, in most cases, amount to more than a third of the building-rent, perhaps of the whole rent. The valuation, indeed, according to which the houses are rated, though very unequal, in said to be always below the real value. When a house is rebuilt, improved, or enlarged, there is a new valuation, and the tax is rated accordingly. The contrivers of the several taxes which in England have, at different times, been imposed upon houses, seem to have imagined that there was some great difficulty in ascertaining, with tolerable exactness, what was the real rent of every house. They have regulated their taxes, therefore, according to some more obvious circumstance, such as they had probably imagined would, in most cases, bear some proportion to the rent. The first tax of this kind was hearth-money; or a tax of two shillings upon every hearth. In order to ascertain how many hearths were in the house, it was necessary that the tax-gatherer should enter every room in it. This odious visit rendered the tax odious. Soon after the Revolution, therefore, it was abolished as a badge of slavery. The next tax of this kind was a tax of two shillings upon every dwelling-house inhabited. A house with ten windows to pay four shillings more. A house with twenty windows and upwards to pay eight shillings. This tax was afterwards so far altered, that houses with twenty windows, and with less than thirty, were ordered to pay ten shillings, and those with thirty windows and upwards to pay twenty shillings. The number of windows can, in most cases, be counted from the outside, and, in all cases, without entering every room in the house. The visit of the tax-gatherer, therefore, was less offensive in this tax than in the hearth-money. This tax was afterwards repealed, and in the room of it was established the window-tax, which has undergone two several alterations and augmentations. The window tax, as it stands at present (January 1775), over and above the duty of three shillings upon every house in England, and of one shilling upon every house in Scotland, lays a duty upon every window, which in England augments gradually from twopence, the lowest rate upon houses with not more than seven windows, to two shillings, the highest rate upon houses with twenty-five windows and upwards. The principal objection to all such taxes is their inequality; an inequality of the worst kind, as they must frequently fall much heavier upon the poor than upon the rich. A house of ten pounds rent in a country town, may sometimes have more windows than a house of five hundred pounds rent in London; and though the inhabitant of the former in likely to be a much poorer man than that of the latter, yet, so far as his contribution is regulated by the window tax, he must contribute more to the support of the state. Such taxes are, therefore, directly contrary to the first of the four maxims above mentioned. They do not seem to offend much against any of the other three. The natural tendency of the window tax, and of all other taxes upon houses, is to lower rents. The more a man pays for the tax, the less, it is evident, he can afford to pay for the rent. Since the imposition of the window tax, however, the rents of houses have, upon the whole, risen more or less, in almost every town and village of Great Britain, with which I am acquainted. Such has been, almost everywhere, the increase of the demand for houses, that it has raised the rents more than the window tax could sink them; one of the many proofs of the great prosperity of the country, and of the increasing revenue of its inhabitants. Had it not been for the tax, rents would probably have risen still higher. ART. II.--_Taxes upon Profit, or upon the Revenue arising from Stock._ The revenue or profit arising from stock naturally divides itself into two parts; that which pays the interest, and which belongs to the owner of the stock; and that surplus part which is over and above what is necessary for paying the interest. This latter part of profit is evidently a subject not taxable directly. It is the compensation, and, in most cases, it is no more than a very moderate compensation for the risk and trouble of employing the stock. The employer must have this compensation, otherwise he cannot, consistently with his own interest, continue the employment. If he was taxed directly, therefore, in proportion to the whole profit, he would be obliged either to raise the rate of his profit, or to charge the tax upon the interest of money; that is, to pay less interest. If he raised the rate of his profit in proportion to the tax, the whole tax, though it might be advanced by him, would be finally paid by one or other of two different sets of people, according to the different ways in which he might employ the stock of which he had the management. If he employed it as a farming stock, in the cultivation of land, he could raise the rate of his profit only by retaining a greater portion, or, what comes to the same thing, the price of a greater portion, of the produce of the land; and as this could be done only by a reduction of rent, the final payment of the tax would fall upon the landlord. If he employed it as a mercantile or manufacturing stock, he could raise the rate of his profit only by raising the price of his goods; in which case, the final payment of the tax would fall altogether upon the consumers of those goods. If he did not raise the rate of his profit, he would be obliged to charge the whole tax upon that part of it which was allotted for the interest of money. He could afford less interest for whatever stock he borrowed, and the whole weight of the tax would, in this case, fall ultimately upon the interest of money. So far as he could not relieve himself from the tax in the one way, he would be obliged to relieve himself in the other. The interest of money seems, at first sight, a subject equally capable of being taxed directly as the rent of land. Like the rent of land, it is a neat produce, which remains, after completely compensating the whole risk and trouble of employing the stock. As a tax upon the rent of land cannot raise rents, because the neat produce which remains, after replacing the stock of the farmer, together with his reasonable profit, cannot be greater after the tax than before it, so, for the same reason, a tax upon the interest of money could not raise the rate of interest; the quantity of stock or money in the country, like the quantity of land, being supposed to remain the same after the tax as before it. The ordinary rate of profit, it has been shewn, in the first book, is everywhere regulated by the quantity of stock to be employed, in proportion to the quantity of the employment, or of the business which must be done by it. But the quantity of the employment, or of the business to be done by stock, could neither be increased nor diminished by any tax upon the interest of money. If the quantity of the stock to be employed, therefore, was neither increased nor diminished by it, the ordinary rate of profit would necessarily remain the same. But the portion of this profit, necessary for compensating the risk and trouble of the employer, would likewise remain the same; that risk and trouble being in no respect altered. The residue, therefore, that portion which belongs to the owner of the stock, and which pays the interest of money, would necessarily remain the same too. At first sight, therefore, the interest of money seems to be a subject as fit to be taxed directly as the rent of land. There are, however, two different circumstances, which render the interest of money a much less proper subject of direct taxation than the rent of land. First, the quantity and value of the land which any man possesses, can never be a secret, and can always be ascertained with great exactness. But the whole amount of the capital stock which he possesses is almost always a secret, and can scarce ever be ascertained with tolerable exactness. It is liable, besides, to almost continual variations. A year seldom passes away, frequently not a month, sometimes scarce a single day, in which it does not rise or fall more or less. An inquisition into every man's private circumstances, and an inquisition which, in order to accommodate the tax to them, watched over all the fluctuations of his fortune, would be a source of such continual and endless vexation as no person could support. Secondly, land is a subject which cannot be removed; whereas stock easily may. The proprietor of land is necessarily a citizen of the particular country in which his estate lies. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax; and would remove his stock to some other country, where he could either carry on his business, or enjoy his fortune more at his ease. By removing his stock, he would put an end to all the industry which it had maintained in the country which he left. Stock cultivates land; stock employs labour. A tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society. Not only the profits of stock, but the rent of land, and the wages of labour, would necessarily be more or less diminished by its removal. The nations, accordingly, who have attempted to tax the revenue arising from stock, instead of any severe inquisition of this kind, have been obliged to content themselves with some very loose, and, therefore, more or less arbitrary estimation. The extreme inequality and uncertainty of a tax assessed in this manner, can be compensated only by its extreme moderation; in consequence of which, every man finds himself rated so very much below his real revenue, that he gives himself little disturbance though his neighbour should be rated somewhat lower. By what is called the land tax in England, it was intended that the stock should be taxed in the same proportion as land. When the tax upon land was at four shillings in the pound, or at one-fifth of the supposed rent, it was intended that stock should be taxed at one-fifth of the supposed interest. When the present annual land tax was first imposed, the legal rate of interest was six per cent. Every hundred pounds stock, accordingly, was supposed to be taxed at twenty-four shillings, the fifth part of six pounds. Since the legal rate of interest has been reduced to five per cent. every hundred pounds stock is supposed to be taxed at twenty shillings only. The sum to be raised, by what is called the land tax, was divided between the country and the principal towns. The greater part of it was laid upon the country; and of what was laid upon the towns, the greater part was assessed upon the houses. What remained to be assessed upon the stock or trade of the towns (for the stock upon the land was not meant to be taxed) was very much below the real value of that stock or trade. Whatever inequalities, therefore, there might be in the original assessment, gave little disturbance. Every parish and district still continues to be rated for its land, its houses, and its stock, according to the original assessment; and the almost universal prosperity of the country, which, in most places, has raised very much the value of all these, has rendered those inequalities of still less importance now. The rate, too, upon each district, continuing always the same, the uncertainty of this tax, so far as it might be assessed upon the stock of any individual, has been very much diminished, as well as rendered of much less consequence. If the greater part of the lands of England are not rated to the land tax at half their actual value, the greater part of the stock of England is, perhaps, scarce rated at the fiftieth part of its actual value. In some towns, the whole land tax is assessed upon houses; as in Westminster, where stock and trade are free. It is otherwise in London. In all countries, a severe inquisition into the circumstances of private persons has been carefully avoided. At Hamburg,[60] every inhabitant is obliged to pay to the state one fourth per cent. of all that he possesses; and as the wealth of the people of Hamburg consists principally in stock, this tax may be considered as a tax upon stock. Every man assesses himself, and, in the presence of the magistrate, puts annually into the public coffer a certain sum of money, which he declares upon oath, to be one fourth per cent. of all that he possesses, but without declaring what it amounts to, or being liable to any examination upon that subject. This tax is generally supposed to be paid with great fidelity. In a small republic, where the people have entire confidence in their magistrates, are convinced of the necessity of the tax for the support of the state, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment may sometimes be expected. It is not peculiar to the people of Hamburg. The canton of Underwald, in Switzerland, is frequently ravaged by storms and inundations, and it is thereby exposed to extraordinary expenses. Upon such occasions the people assemble, and every one is said to declare with the greatest frankness what he is worth, in order to be taxed accordingly. At Zurich, the law orders, that in cases of necessity, every one should be taxed in proportion to his revenue; the amount of which he is obliged to declare upon oath. They have no suspicion, it is said, that any of their fellow-citizens will deceive them. At Basil, the principal revenue of the state arises from a small custom upon goods exported. All the citizens make oath, that they will pay every three months all the taxes imposed by law. All merchants, and even all inn-keepers, are trusted with keeping themselves the account of the goods which they sell, either within or without the territory. At the end of every three months, they send this account to the treasurer, with the amount of the tax computed at the bottom of it. It is not suspected that the revenue suffers by this confidence.[61] To oblige every citizen to declare publicly upon oath, the amount of his fortune, must not, it seems, in those Swiss cantons, be reckoned a hardship. At Hamburg it would be reckoned the greatest. Merchants engaged in the hazardous projects of trade, all tremble at the thoughts of being obliged, at all times, to expose the real state of their circumstances. The ruin of their credit, and the miscarriage of their projects, they foresee, would too often be the consequence. A sober and parsimonious people, who are strangers to all such projects, do not feel that they have occasion for any such concealment. In Holland, soon after the exaltation of the late prince of Orange to the stadtholdership, a tax of two per cent. or the fiftieth penny, as it was called, was imposed upon the whole substance of every citizen. Every citizen assessed himself, and paid his tax, in the same manner as at Hamburg, and it was in general supposed to have been paid with great fidelity. The people had at that time the greatest affection for their new government, which they had just established by a general insurrection. The tax was to be paid but once, in order to relieve the state in a particular exigency. It was, indeed, too heavy to be permanent. In a country where the market rate of interest seldom exceeds three per cent., a tax of two per cent. amounts to thirteen shillings and four pence in the pound, upon the highest neat revenue which is commonly drawn from stock. It is a tax which very few people could pay, without encroaching more or less upon their capitals. In a particular exigency, the people may, from great public zeal, make a great effort, and give up even a part of their capital, in order to relieve the state. But it is impossible that they should continue to do so for any considerable time; and if they did, the tax would soon ruin them so completely, as to render them altogether incapable of supporting the state. The tax upon stock, imposed by the land tax bill in England, though it is proportioned to the capital, is not intended to diminish or take away any part of that capital. It is meant only to be a tax upon the interest of money, proportioned to that upon the rent of land; so that when the latter is at four shillings in the pound, the former may be at four shillings in the pound too. The tax at Hamburg, and the still more moderate taxes of Underwald and Zurich, are meant, in the same manner, to be taxes, not upon the capital, but upon the interest or neat revenue of stock. That of Holland was meant to be a tax upon the capital. _Taxes upon the Profit of particular Employments._ In some countries, extraordinary taxes are imposed upon the profits of stock; sometimes when employed in particular branches of trade, and sometimes when employed in agriculture. Of the former kind, are in England, the tax upon hawkers and pedlars, that upon hackney-coaches and chairs, and that which the keepers of ale-houses pay for a licence to retail ale and spiritous liquors. During the late war, another tax of the same kind was proposed upon shops. The war having been undertaken, it was said, in defence of the trade of the country, the merchants, who were to profit by it, ought to contribute towards the support of it. A tax, however, upon the profits of stock employed in any particular branch of trade, can never fall finally upon the dealers (who must in all ordinary cases have their reasonable profit, and, where the competition is free, can seldom have more than that profit), but always upon the consumers, who must be obliged to pay in the price of the goods the tax which the dealer advances; and generally with some overcharge. A tax of this kind, when it is proportioned to the trade of the dealer, is finally paid by the consumer, and occasions no oppression to the dealer. When it is not so proportioned, but is the same upon all dealers, though in this case, too, it is finally paid by the consumer, yet it favours the great, and occasions some oppression to the small dealer. The tax of five shillings a-week upon every hackney coach, and that of ten shillings a-year upon every hackney chair, so far as it is advanced by the different keepers of such coaches and chairs, is exactly enough proportioned to the extent of their respective dealings. It neither favours the great, nor oppresses the smaller dealer. The tax of twenty shillings a-year for a licence to sell ale; of forty shillings for a licence to sell spiritous liquors; and of forty shillings more for a licence to sell wine, being the same upon all retailers, must necessarily give some advantage to the great, and occasion some oppression to the small dealers. The former must find it more easy to get back the tax in the price of their goods than the latter. The moderation of the tax, however, renders this inequality of less importance; and it may to many people appear not improper to give some discouragement to the multiplication of little ale-houses. The tax upon shops, it was intended, should be the same upon all shops. It could not well have been otherwise. It would have been impossible to proportion, with tolerable exactness, the tax upon a shop to the extent of the trade carried on in it, without such an inquisition as would have been altogether insupportable in a free country. If the tax had been considerable, it would have oppressed the small, and forced almost the whole retail trade into the hands of the great dealers. The competition of the former being taken away, the latter would have enjoyed a monopoly of the trade; and, like all other monopolists, would soon have combined to raise their profits much beyond what was necessary for the payment of the tax. The final payment, instead of falling upon the shop-keeper, would have fallen upon the consumer, with a considerable overcharge to the profit of the shop-keeper. For these reasons, the project of a tax upon shops was laid aside, and in the room of it was substituted the subsidy, 1759. What in France is called the personal taille, is perhaps, the most important tax upon the profits of stock employed in agriculture, that is levied in any part of Europe. In the disorderly state of Europe, during the prevalence of the feudal government, the sovereign was obliged to content himself with taxing those who were too weak to refuse to pay taxes. The great lords, though willing to assist him upon particular emergencies, refused to subject themselves to any constant tax, and he was not strong enough to force them. The occupiers of land all over Europe were, the greater part of them, originally bond-men. Through the greater part of Europe, they were gradually emancipated. Some of them acquired the property of landed estates, which they held by some base or ignoble tenure, sometimes under the king, and sometimes under some other great lord, like the ancient copy-holders of England. Others, without acquiring the property, obtained leases for terms of years, of the lands which they occupied under their lord, and thus became less dependent upon him. The great lords seem to have beheld the degree of prosperity and independency, which this inferior order of men had thus come to enjoy, with a malignant and contemptuous indignation, and willingly consented that the sovereign should tax them. In some countries, this tax was confined to the lands which were held in property by an ignoble tenure; and, in this case, the taille was said to be real. The land tax established by the late king of Sardinia, and the taille in the provinces of Languedoc, Provence, Dauphine, and Brittany; in the generality of Montauban, and in the elections of Agen and Condom, as well as in some other districts of France; are taxes upon lands held in property by an ignoble tenure. In other countries, the tax was laid upon the supposed profits of all those who held, in farm or lease, lands belonging to other people, whatever might be the tenure by which the proprietor held them; and in this case, the taille was said to be personal. In the greater part of those provinces of France, which are called the countries of elections, the taille is of this kind. The real taille, as it is imposed only upon a part of the lands of the country, is necessarily an unequal, but it is not always an arbitrary tax, though it is so upon some occasions. The personal taille, as it is intended to be proportioned to the profits of a certain class of people, which can only be guessed at, is necessarily both arbitrary and unequal. In France, the personal taille at present (1775) annually imposed upon the twenty generalities, called the countries of elections, amounts to 40,107,239 livres, 16 sous.[62] The proportion in which this sum is assessed upon those different provinces, varies from year to year, according to the reports which are made to the king's council concerning the goodness or badness of the crops, as well as other circumstances, which may either increase or diminish their respective abilities to pay. Each generality is divided into a certain number of elections; and the proportion in which the sum imposed upon the whole generality is divided among those different elections, varies likewise from year to year, according to the reports made to the council concerning their respective abilities. It seems impossible, that the council, with the best intentions, can ever proportion, with tolerable exactness, either of these two assessments to the real abilities of the province or district upon which they are respectively laid. Ignorance and misinformation must always, more or less, mislead the most upright council. The proportion which each parish ought to support of what is assessed upon the whole election, and that which each individual ought to support of what is assessed upon his particular parish, are both in the same manner varied from year to year, according as circumstances are supposed to require. These circumstances are judged of, in the one case, by the officers of the election, in the other, by those of the parish; and both the one and the other are, more or less, under the direction and influence of the intendant. Not only ignorance and misinformation, but friendship, party animosity, and private resentment, are said frequently to mislead such assessors. No man subject to such a tax, it is evident, can ever be certain, before he is assessed, of what he is to pay. He cannot even be certain after he is assessed. If any person has been taxed who ought to have been exempted, or if any person has been taxed beyond his proportion, though both must pay in the mean time, yet if they complain, and make good their complaints, the whole parish is reimposed next year, in order to reimburse them. If any of the contributors become bankrupt or insolvent, the collector is obliged to advance his tax; and the whole parish is reimposed next year, in order to reimburse the collector. If the collector himself should become bankrupt, the parish which elects him must answer for his conduct to the receiver-general of the election. But, as it might be troublesome for the receiver to prosecute the whole parish, he takes at his choice five or six of the richest contributors, and obliges them to make good what had been lost by the insolvency of the collector. The parish is afterwards reimposed, in order to reimburse those five or six. Such reimpositions are always over and above the taille of the particular year in which they are laid on. When a tax is imposed upon the profits of stock in a particular branch of trade, the traders are all careful to bring no more goods to market than what they can sell at a price sufficient to reimburse them from advancing the tax. Some of them withdraw a part of their stocks from the trade, and the market is more sparingly supplied than before. The price of the goods rises, and the final payment of the tax falls upon the consumer. But when a tax is imposed upon the profits of stock employed in agriculture, it is not the interest of the farmers to withdraw any part of their stock from that employment. Each farmer occupies a certain quantity of land, for which he pays rent. For the proper cultivation of this land, a certain quantity of stock is necessary; and by withdrawing any part of this necessary quantity, the farmer is not likely to be more able to pay either the rent or the tax. In order to pay the tax, it can never be his interest to diminish the quantity of his produce, nor consequently to supply the market more sparingly than before. The tax, therefore, will never enable him to raise the price of his produce, so as to reimburse himself, by throwing the final payment upon the consumer. The farmer, however, must have his reasonable profit as well as every other dealer, otherwise he must give up the trade. After the imposition of a tax of this kind, he can get this reasonable profit only by paying less rent to the landlord. The more he is obliged to pay in the way of tax, the less he can afford to pay in the way of rent. A tax of this kind, imposed during the currency of a lease, may, no doubt, distress or ruin the farmer. Upon the renewal of the lease, it must always fall upon the landlord. In the countries where the personal taille takes place, the farmer is commonly assessed in proportion to the stock which he appears to employ in cultivation. He is, upon this account, frequently afraid to have a good team of horses or oxen, but endeavours to cultivate with the meanest and most wretched instruments of husbandry that he can. Such is his distrust in the justice of his assessors, that he counterfeits poverty, and wishes to appear scarce able to pay any thing, for fear of being obliged to pay too much. By this miserable policy, he does not, perhaps, always consult his own interest in the most effectual manner; and he probably loses more by the diminution of his produce, than he saves by that of his tax. Though, in consequence of this wretched cultivation, the market is, no doubt, somewhat worse supplied; yet, the small rise of price which this may occasion, as it is not likely even to indemnify the farmer for the diminution of his produce, it is still less likely to enable him to pay more rent to the landlord. The public, the farmer, the landlord, all suffer more or less by this degraded cultivation. That the personal taille tends, in many different ways, to discourage cultivation, and consequently to dry up the principal source of the wealth of every great country, I have already had occasion to observe in the third book of this Inquiry. What are called poll-taxes in the southern provinces of North America, and the West India islands, annual taxes of so much a-head upon every negro, are properly taxes upon the profits of a certain species of stock employed in agriculture. As the planters, are the greater part of them, both farmers and landlords, the final payment of the tax falls upon them in their quality of landlords, without any retribution. Taxes of so much a head upon the bondmen employed in cultivation, seem anciently to have been common all over Europe. There subsists at present a tax of this kind in the empire of Russia. It is probably upon this account that poll-taxes of all kinds have often been represented as badges of slavery. Every tax, however, is to the person who pays it, a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed; but that, as he has some property, he cannot himself be the property of a master. A poll-tax upon slaves is altogether different from a poll-tax upon freemen. The latter is paid by the persons upon whom it is imposed; the former, by a different set of persons. The latter is either altogether arbitrary, or altogether unequal, and, in most cases, is both the one and the other; the former, though in some respects unequal, different slaves being of different values, is in no respect arbitrary. Every master, who knows the number of his own slaves, knows exactly what he has to pay. Those different taxes, however, being called by the same name, have been considered as of the same nature. The taxes which in Holland are imposed upon men and maid servants, are taxes, not upon stock, but upon expense; and so far resemble the taxes upon consumable commodities. The tax of a guinea a-head for every man-servant, which has lately been imposed in Great Britain, is of the same kind. It falls heaviest upon the middling rank. A man of two hundred a-year may keep a single man-servant. A man of ten thousand a-year will not keep fifty. It does not affect the poor. Taxes upon the profits of stock, in particular employments, can never affect the interest of money. Nobody will lend his money for less interest to those who exercise the taxed, than to those who exercise the untaxed employments. Taxes upon the revenue arising from stock in all employments, where the government attempts to levy them with any degree of exactness, will, in many cases, fall upon the interest of money. The vingtieme, or twentieth penny, in France, is a tax of the same kind with what is called the land tax in England, and is assessed, in the same manner, upon the revenue arising upon land, houses, and stock. So far as it affects stock, it is assessed, though not with great rigour, yet with much more exactness than that part of the land tax in England which is imposed upon the same fund. It, in many cases, falls altogether upon the interest of money. Money is frequently sunk in France, upon what are called contracts for the constitution of a rent; that is, perpetual annuities, redeemable at any time by the debtor, upon payment of the sum originally advanced, but of which this redemption is not exigible by the creditor except in particular cases. The vingtieme seems not to have raised the rate of those annuities, though it is exactly levied upon them all. APPENDIX TO ARTICLES I. AND II.--_Taxes upon the Capital Value of Lands, Houses, and Stock._ While property remains in the possession of the same person, whatever permanent taxes may have been imposed upon it, they have never been intended to diminish or take away any part of its capital value, but only some part of the revenue arising from it. But when property changes hands, when it is transmitted either from the dead to the living, or from the living to the living, such taxes have frequently been imposed upon it as necessarily take away some part of its capital value. The transference of all sorts of property from the dead to the living, and that of immoveable property of land and houses from the living to the living, are transactions which are in their nature either public and notorious, or such as cannot be long concealed. Such transactions, therefore, may be taxed directly. The transference of stock or moveable property, from the living to the living, by the lending of money, is frequently a secret transaction, and may always be made so. It cannot easily, therefore, be taxed directly. It has been taxed indirectly in two different ways; first, by requiring that the deed, containing the obligation to repay, should be written upon paper or parchment which had paid a certain stamp duty, otherwise not to be valid; secondly, by requiring, under the like penalty of invalidity, that it should be recorded either in a public or secret register, and by imposing certain duties upon such registration. Stamp duties, and duties of registration, have frequently been imposed likewise upon the deeds transferring property of all kinds from the dead to the living, and upon those transferring immoveable property from the living to the living; transactions which might easily have been taxed directly. The vicesima hereditatum, or the twentieth penny of inheritances, imposed by Augustus upon the ancient Romans, was a tax upon the transference of property from the dead to the living. Dion Cassius,[63] the author who writes concerning it the least indistinctly, says, that it was imposed upon all successions, legacies and donations, in case of death, except upon those to the nearest relations, and to the poor. Of the same kind is the Dutch tax upon successions.[64] Collateral successions are taxed according to the degree of relation, from five to thirty per cent. upon the whole value of the succession. Testamentary donations, or legacies to collaterals, are subject to the like duties. Those from husband to wife, or from wife to husband, to the fiftieth penny. The luctuosa hereditas, the mournful succession of ascendants to descendants, to the twentieth penny only. Direct successions, or those of descendants to ascendants, pay no tax. The death of a father, to such of his children as live in the same house with him, is seldom attended with any increase, and frequently with a considerable diminution of revenue; by the loss of his industry, of his office, or of some life-rent estate, of which he may have been in possession. That tax would be cruel and oppressive, which aggravated their loss, by taking from them any part of his succession. It may, however, sometimes be otherwise with those children, who, in the language of the Roman law, are said to be emancipated; in that of the Scotch law, to be foris-familiated; that is, who have received their portion, have got families of their own, and are supported by funds separate and independent of those of their father. Whatever part of his succession might come to such children, would be a real addition to their fortune, and might, therefore, perhaps, without more inconveniency than what attends all duties of this kind, be liable to some tax. The casualties of the feudal law were taxes upon the transference of land, both from the dead to the living, and from the living to the living. In ancient times, they constituted, in every part of Europe, one of the principal branches of the revenue of the crown. The heir of every immediate vassal of the crown paid a certain duty, generally a year's rent, upon receiving the investiture of the estate. If the heir was a minor, the whole rents of the estate, during the continuance of the minority, devolved to the superior, without any other charge besides the maintenance of the minor, and the payment of the widow's dower, when there happened to be a dowage upon the land. When the minor came to be of age, another tax, called relief, was still due to the superior, which generally amounted likewise to a year's rent. A long minority, which, in the present times, so frequently disburdens a great estate of all its incumbrances, and restores the family to their ancient splendour, could in those times have no such effect. The waste, and not the disincumbrance of the estate, was the common effect of a long minority. By a feudal law, the vassal could not alienate without the consent of his superior, who generally extorted a fine or composition on granting it. This fine, which was at first arbitrary, came, in many countries, to be regulated at a certain portion of the price of the land. In some countries, where the greater part of the other feudal customs have gone into disuse, this tax upon the alienation of land still continues to make a very considerable branch of the revenue of the sovereign. In the canton of Berne it is so high as a sixth part of the price of all noble fiefs, and a tenth part of that of all ignoble ones.[65] In the canton of Lucern, the tax upon the sale of land is not universal, and takes place only in certain districts. But if any person sells his land in order to remove out of the territory, he pays ten per cent. upon the whole price of the sale.[66] Taxes of the same kind, upon the sale either of all lands, or of lands held by certain tenures, take place in many other countries, and make a more or less considerable branch of the revenue of the sovereign. Such transactions may be taxed indirectly, by means either of stamp duties, or of duties upon registration; and those duties either may, or may not, be proportioned to the value of the subject which is transferred. In Great Britain, the stamp duties are higher or lower, not so much according to the value of the property transferred (an eighteen-penny or half-crown stamp being sufficient upon a bond for the largest sum of money), as according to the nature of the deed. The highest do not exceed six pounds upon every sheet of paper, or skin of parchment; and these high duties fall chiefly upon grants from the crown, and upon certain law proceedings, without any regard to the value of the subject. There are, in Great Britain, no duties on the registration of deeds or writings, except the fees of the officers who keep the register; and these are seldom more than a reasonable recompense for their labour. The crown derives no revenue from them. In Holland[67] there are both stamp duties and duties upon registration; which in some cases are, and in some are not, proportioned to the value of the property transferred. All testaments must be written upon stamped paper, of which the price is proportioned to the property disposed of; so that there are stamps which cost from three pence or three stivers a-sheet, to three hundred florins, equal to about twenty-seven pounds ten shillings of our money. If the stamp is of an inferior price to what the testator ought to have made use of, his succession is confiscated. This is over and above all their other taxes on succession. Except bills of exchange, and some other mercantile bills, all other deeds, bonds, and contracts, are subject to a stamp duty. This duty, however, does not rise in proportion to the value of the subject. All sales of land and of houses, and all mortgages upon either, must be registered, and, upon registration, pay a duty to the state of two and a-half per cent. upon the amount of the price or of the mortgage. This duty is extended to the sale of all ships and vessels of more than two tons burden, whether decked or undecked. These, it seems, are considered as a sort of houses upon the water. The sale of moveables, when it is ordered by a court of justice, is subject to the like duty of two and a-half per cent. In France, there are both stamp duties and duties upon registration. The former are considered as a branch of the aids of excise, and, in the provinces where those duties take place, are levied by the excise officers. The latter are considered as a branch of the domain of the crown, and are levied by a different set of officers. Those modes of taxation by stamp duties and by duties upon registration, are of very modern invention. In the course of little more than a century, however, stamp duties have, in Europe, become almost universal, and duties upon registration extremely common. There is no art which one government sooner learns of another, than that of draining money from the pockets of the people. Taxes upon the transference of property from the dead to the living, fall finally, as well as immediately, upon the persons to whom the property is transferred. Taxes upon the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must, therefore, take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will, therefore, only give such a price as he likes. He considers what the land will cost him, in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must, therefore, be frequently very cruel and oppressive. Taxes upon the sale of new-built houses, where the building is sold without the ground, fall generally upon the buyer, because the builder must generally have his profit; otherwise he must give up the trade. If he advances the tax, therefore, the buyer must generally repay it to him. Taxes upon the sale of old houses, for the same reason as those upon the sale of land, fall generally upon the seller; whom, in most cases, either conveniency or necessity obliges to sell. The number of new-built houses that are annually brought to market, is more or less regulated by the demand. Unless the demand is such as to afford the builder his profit, after paying all expenses, he will build no more houses. The number of old houses which happen at any time to come to market, is regulated by accidents, of which the greater part have no relation to the demand. Two or three great bankruptcies in a mercantile town, will bring many houses to sale, which must be sold for what can be got for them. Taxes upon the sale of ground-rents fall altogether upon the seller, for the same reason as those upon the sale of lands. Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and, in fact, are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the neat value of it when acquired. All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour. They are all more or less unthrifty taxes that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers, at the expense of the capital of the people, which maintains none but productive. Such taxes, even when they are proportioned to the value of the property transferred, are still unequal; the frequency of transference not being always equal in property of equal value. When they are not proportioned to this value, which is the case with the greater part of the stamp duties and duties of registration, they are still more so. They are in no respect arbitrary, but are, or may be, in all cases, perfectly clear and certain. Though they sometimes fall upon the person who is not very able to pay, the time of payment is, in most cases, sufficiently convenient for him. When the payment becomes due, he must, in most cases, have the money to pay. They are levied at very little expense, and in general subject the contributors to no other inconveniency, besides always the unavoidable one of paying the tax. In France, the stamp duties are not much complained of. Those of registration, which they call the Controle, are. They give occasion, it is pretended, to much extortion in the officers of the farmers-general who collect the tax, which is in a great measure arbitrary and uncertain. In the greater part of the libels which have been written against the present system of finances in France, the abuses of the controle make a principal article. Uncertainty, however, does not seem to be necessarily inherent in the nature of such taxes. If the popular complaints are well founded, the abuse must arise, not so much from the nature of the tax as from the want of precision and distinctness in the words of the edicts or laws which impose it. The registration of mortgages, and in general of all rights upon immoveable property, as it gives great security both to creditors and purchasers, is extremely advantageous to the public. That of the greater part of deeds of other kinds, is frequently inconvenient and even dangerous to individuals, without any advantage to the public. All registers which, it is acknowledged, ought to be kept secret, ought certainly never to exist. The credit of individuals ought certainly never to depend upon so very slender a security, as the probity and religion of the inferior officers of revenue. But where the fees of registration have been made a source of revenue to the sovereign, register-offices have commonly been multiplied without end, both for the deeds which ought to be registered, and for those which ought not. In France there are several different sorts of secret registers. This abuse, though not perhaps a necessary, it must be acknowledged, is a very natural effect of such taxes. Such stamp duties as those in England upon cards and dice, upon newspapers and periodical pamphlets, &c. are properly taxes upon consumption; the final payment falls upon the persons who use or consume such commodities. Such stamp duties as those upon licences to retail ale, wine, and spiritous liquors, though intended, perhaps, to fall upon the profits of the retailers, are likewise finally paid by the consumers of those liquors. Such taxes, though called by the same name, and levied by the same officers, and in the same manner with the stamp duties above mentioned upon the transference of property, are, however, of a quite different nature, and fall upon quite different funds. ART. III.--_Taxes upon the Wages of Labour._ The wages of the inferior classes of workmen, I have endeavoured to show in the first book are everywhere necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary or declining; or to require an increasing, stationary, or declining population; regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The ordinary average price of provisions determines the quantity of money which must be paid to the workman, in order to enable him, one year with another, to purchase this liberal, moderate, or scanty subsistence. While the demand for the labour and the price of provisions, therefore, remain the same, a direct tax upon the wages of labour can have no other effect, than to raise them somewhat higher than the tax. Let us suppose, for example, that, in particular place, the demand for labour and the price of provisions were such as to render ten shillings a-week the ordinary wages of labour; and that a tax of one-fifth, or four shillings in the pound, was imposed upon wages. If the demand for labour and the price of provisions remained the same, it would still be necessary that the labourer should, in that place, earn such a subsistence as could be bought only for ten shillings a-week; or that, after paying the tax, he should have ten shillings a-week free wages. But, in order to leave him such free wages, after paying such a tax, the price of labour must, in that place, soon rise, not to twelve shillings a-week only, but to twelve and sixpence; that is, in order to enable him to pay a tax of one-fifth, his wages must necessarily soon rise, not one-fifth part only, but one-fourth. Whatever was the proportion of the tax, the wages of labour must, in all cases rise, not only in that proportion, but in a higher proportion. If the tax for example, was one-tenth, the wages of labour must necessarily soon rise, not one-tenth part only, but one-eighth. A direct tax upon the wages of labour, therefore, though the labourer might, perhaps, pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would, in different cases, fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods. The final payment of this rise of wages, therefore, together with the additional profit of the master manufacturer, would fall upon the consumer. The rise which such a tax might occasion in the wages of country labour would be advanced by the farmer, who, in order to maintain the name number of labourers as before, would he obliged to employ a greater capital. In order to get back this greater capital, together with the ordinary profits of stock, it would be necessary that he should retain a larger portion, or, what comes to the same thing, the price of a larger portion, of the produce of the land, and, consequently, that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would, in this case, fall upon the landlord, together with the additional profit of the farmer who had advanced it. In all cases, a direct tax upon the wages of labour must, in the long-run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods than would have followed from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities. If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand of labour. The declension of industry, the decrease of employment for the poor, the diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes. In consequence of them, however, the price of labor must always be higher than it otherwise would have been in the actual state of the demand; and this enhancement of price, together with the profit of those who advance it, must always be finally paid by the landlords and consumers. A tax upon the wages of country labour does not raise the price of the rude produce of land in proportion to the tax; for the same reason that a tax upon the farmer's profit does not raise that price in that proportion. Absurd and destructive as such taxes are, however, they take place in many countries. In France, that part of the taille which is charged upon the industry of workmen and day-labourers in country villages, is properly a tax of this kind. Their wages are computed according to the common rate of the district in which they reside; and, that they may be as little liable as possible to any overcharge, their yearly gains are estimated at no more than two hundred working days in the year.[68] The tax of each individual is varied from year to year, according to different circumstances, of which the collector or the commissary, whom the intendant appoints to assist him, are the judges. In Bohemia, in consequence of the alteration in the system of finances which was begun in 1748, a very heavy tax is imposed upon the industry of artificers. They are divided into four classes. The highest class pay a hundred florins a-year, which, at two-and-twenty pence half penny a-florin, amounts to L.9 : 7 : 6. The second class are taxed at seventy; the third at fifty; and the fourth, comprehending artificers in villages, and the lowest class of those in towns, at twenty-five florins.[69] The recompence of ingenious artists, and of men of liberal professions, I have endeavoured to show in the first book, necessarily keeps a certain proportion to the emoluments of inferior trades. A tax upon this recompence, therefore, could have no other effect than to raise it somewhat higher than in proportion to the tax. If it did not rise in this manner, the ingenious arts and the liberal professions, being no longer upon a level with other trades, would be so much deserted, that they would soon return to that level. The emoluments of offices are not, like those of trades and professions, regulated by the free competition of the market, and do not, therefore, always bear a just proportion to what the nature of the employment requires. They are, perhaps, in most countries, higher than it requires; the persons who have the administration of government being generally disposed to regard both themselves and their immediate dependents, rather more than enough. The emoluments offices, therefore, can, in most cases, very well bear to be taxed. The persons, besides, who enjoy public offices, especially the more lucrative, are, in all countries, the objects of general envy; and a tax upon their emoluments, even though it should be somewhat higher than upon any other sort of revenue, is always a very popular tax. In England, for example, when, by the land-tax, every other sort of revenue was supposed to be assessed at four shillings in the pound, it was very popular to lay a real tax of five shillings and sixpence in the pound upon the salaries of offices which exceeded a hundred pounds a-year; the pensions of the younger branches of the royal family, the pay of the officers of the army and navy, and a few others less obnoxious to envy, excepted. There are in England no other direct taxes upon the wages of labour. ART. IV.--_Taxes which it is intended should fall indifferently upon every different Species of Revenue._ The taxes which it is intended should fall indifferently upon every different species of revenue, are capitation taxes, and taxes upon consumable commodities. These must be paid indifferently, from whatever revenue the contributors may possess; from the rent of their land, from the profits of their stock, or from the wages of their labour. _Capitation Taxes._ Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man's fortune varies from day to day; and, without an inquisition, more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must, in most cases, depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain. Capitation taxes, if they are proportioned, not to the supposed fortune, but to the rank of each contributor, become altogether unequal; the degrees of fortune being frequently unequal in the same degree of rank. Such taxes, therefore, if it is attempted to render them equal, become altogether arbitrary and uncertain; and if it is attempted to render them certain and not arbitrary, become altogether unequal. Let the tax be light or heavy, uncertainty is always a great grievance. In a light tax, a considerable degree of inequality may be supported; in a heavy one, it is altogether intolerable. In the different poll-taxes which took place in England during the reign of William III. the contributors were, the greater part of them, assessed according to the degree of their rank; as dukes, marquises, earls, viscounts, barons, esquires, gentlemen, the eldest and youngest sons of peers, &c. All shop-keepers and tradesmen worth more than three hundred pounds, that is, the better sort of them, were subject to the same assessment, how great soever might be the difference in their fortunes. Their rank was more considered than their fortune. Several of those who, in the first poll-tax, were rated according to their supposed fortune, were afterwards rated according to their rank. Serjeants, attorneys, and proctors at law, who, in the first poll-tax, were assessed at three shillings in the pound of their supposed income, were afterwards assessed as gentlemen. In the assessment of a tax which was not very heavy, a considerable degree of inequality had been found less insupportable than any degree of uncertainty. In the capitation which has been levied in France, without any interruption, since the beginning of the present century, the highest orders of people are rated according to their rank, by an invariable tariff; the lower orders of people, according to what is supposed to be their fortune, by an assessment which varies from year to year. The officers of the king's court, the judges, and other officers in the superior courts of justice, the officers of the troops, &c. are assessed in the first manner. The inferior ranks of people in the provinces are assessed in the second. In France, the great easily submit to a considerable degree of inequality in a tax which, so far as it affects them, is not a very heavy one; but could not brook the arbitrary assessment of an intendant. The inferior ranks of people must, in that country, suffer patiently the usage which their superiors think proper to give them. In England, the different poll-taxes never produced the sum which had been expected from them, or which it was supposed they might have produced, had they been exactly levied. In France, the capitation always produces the sum expected from it. The mild government of England, when it assessed the different ranks of people to the poll-tax, contented itself with what that assessment happened to produce, and required no compensation for the loss which the state might sustain, either by those who could not pay, or by those who would not pay (for there were many such), and who, by the indulgent execution of the law, were not forced to pay. The more severe government of France assesses upon each generality a certain sum, which the intendant must find as he can. If any province complains of being assessed too high, it may, in the assessment of next year, obtain an abatement proportioned to the overcharge of the year before; but it must pay in the mean time. The intendant, in order to be sure of finding the sum assessed upon his generality, was empowered to assess it in a larger sum, that the failure or inability of some of the contributors might be compensated by the overcharge of the rest; and till 1765, the fixation of this surplus assessment was left altogether to his discretion. In that year, indeed, the council assumed this power to itself. In the capitation of the provinces, it is observed by the perfectly well informed author of the Memoirs upon the Impositions in France, the proportion which falls upon the nobility, and upon those whose privileges exempt them from the taille, is the least considerable. The largest falls upon those subject to the taille, who are assessed to the capitation at so much a-pound of what they pay to that other tax. Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour, and are attended with all the inconveniencies of such taxes. Capitation taxes are levied at little expense; and, where they are rigorously exacted, afford a very sure revenue to the state. It is upon this account that, in countries where the ease, comfort, and security of the inferior ranks of people are little attended to, capitation taxes are very common. It is in general, however, but a small part of the public revenue, which, in a great empire, has ever been drawn from such taxes; and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people. _Taxes upon Consumable Commodities._ The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavours to tax it indirectly by taxing their expense, which, it is supposed, will, in most cases, be nearly in proportion to their revenue. Their expense is taxed, by taxing the consumable commodities upon which it is laid out. Consumable commodities are either necessaries or luxuries. By necessaries I understand, not only the commodities which are indispensibly necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person, of either sex, would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France, they are necessaries neither to men nor to women; the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning, by this appellation, to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life; and custom nowhere renders it indecent to live without them. As the wages of labour are everywhere regulated, partly by the demand for it, and partly by the average price of the necessary articles of subsistence; whatever raises this average price must necessarily raise those wages; so that the labourer may still be able to purchase that quantity of those necessary articles which the state of the demand for labour, whether increasing, stationary, or declining, requires that he should have.[70] A tax upon those articles necessarily raises their price somewhat higher than the amount of the tax, because the dealer, who advances the tax, must generally get it back, with a profit. Such a tax must, therefore, occasion a rise in the wages of labour, proportionable to this rise of price. It is thus that a tax upon the necessaries of life operates exactly in the same manner as a direct tax upon the wages of labour. The labourer, though he may pay it out of his hand, cannot, for any considerable time at least, be properly said even to advance it. It must always, in the long-run, be advanced to him by his immediate employer, in the advanced state of wages. His employer, if he is a manufacturer, will charge upon the price of his goods the rise of wages, together with a profit, so that the final payment of the tax, together with this overcharge, will fall upon the consumer. If his employer is a farmer, the final payment, together with a like overcharge, will fall upon the rent of the landlord. It is otherwise with taxes upon what I call luxuries, even upon those of the poor. The rise in the price of the taxed commodities, will not necessarily occasion any rise in the wages of labour. A tax upon tobacco, for example, though a luxury of the poor, as well as of the rich, will not raise wages. Though it is taxed in England at three times, and in France at fifteen times its original price, those high duties seem to have no effect upon the wages of labour. The same thing may be said of the taxes upon tea and sugar, which, in England and Holland, have become luxuries of the lowest ranks of people; and of those upon chocolate, which, in Spain, is said to have become so. The different taxes which, in Great Britain, have, in the course of the present century, been imposed upon spiritous liquors, are not supposed to have had any effect upon the wages of labour. The rise in the price of porter, occasioned by an additional tax of three shillings upon the barrel of strong beer, has not raised the wages of common labour in London. These were about eighteen pence or twenty pence a-day before the tax, and they are not more now. The high price of such commodities does not necessarily diminish the ability of the inferior ranks of people to bring up families. Upon the sober and industrious poor, taxes upon such commodities act as sumptuary laws, and dispose them either to moderate, or to refrain altogether from the use of superfluities which they can no longer easily afford. Their ability to bring up families, in consequence of this forced frugality, instead of being diminished, is frequently, perhaps, increased by the tax. It is the sober and industrious poor who generally bring up the most numerous families, and who principally supply the demand for useful labour. All the poor, indeed, are not sober and industrious; and the dissolute and disorderly might continue to indulge themselves in the use of such commodities, after this rise of price, in the same manner as before, without regarding the distress which this indulgence might bring upon their families. Such disorderly persons, however, seldom rear up numerous families, their children generally perishing from neglect, mismanagement, and the scantiness or unwholesomeness of their food. If, by the strength of their constitution, they survive the hardships to which the bad conduct of their parents exposes them, yet the example of that bad conduct commonly corrupts their morals; so that, instead of being useful to society by their industry, they become public nuisances by their vices and disorders. Though the advanced price of the luxuries of the poor, therefore, might increase somewhat the distress of such disorderly families, and thereby diminish somewhat their ability to bring up children, it would not probably diminish much the useful population of the country. Any rise in the average price of necessaries, unless it be compensated by a proportionable rise in the wages of labour, must necessarily diminish, more or less, the ability of the poor to bring up numerous families, and, consequently, to supply the demand for useful labour; whatever may be the state of that demand, whether increasing, stationary, or declining; or such as requires an increasing, stationary, or declining population. Taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed. Taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures, and consequently to diminish the extent of their sale and consumption. Taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution. They fall indifferently upon every species of revenue, the wages of labour, the profits of stock, and the rent of land. Taxes upon necessaries, so far as they affect the labouring poor, are finally paid, partly by landlords, in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods; and always with a considerable overcharge. The advanced price of such manufactures as are real necessaries of life, and are destined for the consumption of the poor, of coarse woollens, for example, must be compensated to the poor by a farther advancement of their wages. The middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all taxes upon the wages of labour. The final payment of both the one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity; in that of landlords, by the reduction, of their rent; and in that of rich consumers, by the increase of their expense. The observation of Sir Matthew Decker, that certain taxes are, in the price of certain goods, sometimes repeated and accumulated four or five times, is perfectly just with regard to taxes upon the necessaries of life. In the price of leather, for example, you must pay not only for the tax upon the leather of your own shoes, but for a part of that upon those of the shoemaker and the tanner. You must pay, too, for the tax upon the salt, upon the soap, and upon the candles which those workmen consume while employed in your service; and for the tax upon the leather, which the salt-maker, the soap-maker, and the candle-maker consume, while employed in their service. In Great Britain, the principal taxes upon the necessaries of life, are those upon the four commodities just now mentioned, salt, leather, soap, and candles. Salt is a very ancient and a very universal subject of taxation. It was taxed among the Romans, and it is so at present in, I believe, every part of Europe. The quantity annually consumed by any individual is so small, and may be purchased so gradually, that nobody, it seems to have been thought, could feel very sensibly even a pretty heavy tax upon it. It is in England taxed at three shillings and fourpence a bushel; about three times the original price of the commodity. In some other countries, the tax is still higher. Leather is a real necessary of life. The use of linen renders soap such. In countries where the winter nights are long, candles are a necessary instrument of trade. Leather and soap are in Great Britain taxed at three halfpence a-pound; candles at a penny; taxes which, upon the original price of leather, may amount to about eight or ten per cent.; upon that of soap, to about twenty or five-and-twenty per cent.; and upon that of candles to about fourteen or fifteen per cent.; taxes which, though lighter than that upon salt, are still very heavy. As all those four commodities are real necessaries of life, such heavy taxes upon them must increase some what the expense of the sober and industrious poor, and must consequently raise more or less the wages of their labour. In a country where the winters are so cold as in Great Britain, fuel is, during that season, in the strictest sense of the word, a necessary of life, not only for the purpose of dressing victuals, but for the comfortable subsistence of many different sorts of workmen who work within doors; and coals are the cheapest of all fuel. The price of fuel has so important an influence upon that of labour, that all over Great Britain, manufactures have confined themselves principally to the coal countries; other parts of the country, on account of the high price of this necessary article, not being able to work so cheap. In some manufactures, besides, coal is a necessary instrument of trade; as in those of glass, iron, and all other metals. If a bounty could in any case be reasonable, it might perhaps be so upon the transportation of coals from those parts of the country in which they abound, to those in which they are wanted. But the legislature, instead of a bounty, has imposed a tax of three shillings and threepence a-ton upon coals carried coastways; which, upon most sorts of coal, is more than sixty per cent. of the original price at the coal pit. Coals carried, either by land or by inland navigation, pay no duty. Where they are naturally cheap, they are consumed duty free; where they are naturally dear, they are loaded with a heavy duty. Such taxes, though they raise the price of subsistence, and consequently the wages of labour, yet they afford a considerable revenue to government, which it might not be easy to find in any other way. There may, therefore, be good reasons for continuing them. The bounty upon the exportation of corn, so far as it tends, in the actual state of tillage, to raise the price of that necessary article, produces all the like bad effects; and instead of affording any revenue, frequently occasions a very great expense to government. The high duties upon the importation of foreign corn, which, in years of moderate plenty, amount to a prohibition; and the absolute prohibition of the importation, either of live cattle, or of salt provisions, which takes place in the ordinary state of the law, and which, on account of the scarcity, is at present suspended for a limited time with regard to Ireland and the British plantations, have all had the bad effects of taxes upon the necessaries of life, and produce no revenue to government. Nothing seems necessary for the repeal of such regulations, but to convince the public of the futility of that system in consequence of which they have been established. Taxes upon the necessaries of life are much higher in many other countries than in Great Britain. Duties upon flour and meal when ground at the mill, and upon bread when baked at the oven, take place in many countries. In Holland the money-price of the bread consumed in towns is supposed to be doubled by means of such taxes. In lieu of a part of them, the people who live in the country, pay every year so much a-head, according to the sort of bread they are supposed to consume. Those who consume wheaten bread pay three guilders fifteen stivers; about six shillings and ninepence halfpenny. These, and some other taxes of the same kind, by raising the price of labour, are said to have ruined the greater part of the manufactures of Holland[71]. Similar taxes, though not quite so heavy, take place in the Milanese, in the states of Genoa, in the duchy of Modena, in the duchies of Parma, Placentia, and Guastalla, and the Ecclesiastical state. A French author[72] of some note, has proposed to reform the finances of his country, by substituting in the room of the greater part of other taxes, this most ruinous of all taxes. There is nothing so absurd, says Cicero, which has not sometimes been asserted by some philosophers. Taxes upon butcher's meat are still more common than those upon bread. It may indeed be doubted, whether butcher's meat is any where a necessary of life. Grain and other vegetables, with the help of milk, cheese, and butter, or oil, where butter is not to be had, it is known from experience, can, without any butcher's meat, afford the most plentiful, the most wholesome, the most nourishing, and the most invigorating diet. Decency nowhere requires that any man should eat butcher's meat, as it in most places requires that he should wear a linen shirt or a pair of leather shoes. Consumable commodities, whether necessaries or luxuries, may be taxed in two different ways. The consumer may either pay an annual sum on account of his using or consuming goods of a certain kind; or the goods may be taxed while they remain in the hands of the dealer, and before they are delivered to the consumer. The consumable goods which last a considerable time before they are consumed altogether, are most properly taxed in the one way; those of which the consumption is either immediate or more speedy, in the other. The coach-tax and plate-tax are examples of the former method of imposing; the greater part of the other duties of excise and customs, of the latter. A coach may, with good management, last ten or twelve years. It might be taxed, once for all, before it comes out of the hands of the coach-maker. But it is certainly more convenient for the buyer to pay four pounds a-year for the privilege of keeping a coach, than to pay all at once forty or forty-eight pounds additional price to the coach-maker; or a sum equivalent to what the tax is likely to cost him during the time he uses the same coach. A service of plate in the same manner, may last more than a century. It is certainly easier for the consumer to pay five shillings a-year for every hundred ounces of plate, near one per cent. of the value, than to redeem this long annuity at five-and-twenty of thirty years purchase, which would enhance the price at least five-and-twenty or thirty per cent. The different taxes which affect houses, are certainly more conveniently paid by moderate annual payments, than by a heavy tax of equal value upon the first building or sale of the house. It was the well-known proposal of Sir Matthew Decker, that all commodities, even those of which the consumption is either immediate or speedy, should be taxed in this manner; the dealer advancing nothing, but the consumer paying a certain annual sum for the licence to consume certain goods. The object of his scheme was to promote all the different branches of foreign trade, particularly the carrying trade, by taking away all duties upon importation and exportation, and thereby enabling the merchant to employ his whole capital and credit in the purchase of goods and the freight of ships, no part of either being diverted towards the advancing of taxes. The project, however, of taxing, in this manner, goods of immediate or speedy consumption, seems liable to the four following very important objections. First, the tax would be more unequal, or not so well proportioned to the expense and consumption of the different contributors, as in the way in which it is commonly imposed. The taxes upon ale, wine, and spiritous liquors, which are advanced by the dealers, are finally paid by the different consumers, exactly in proportion to their respective consumption. But if the tax were to be paid by purchasing a licence to drink those liquors, the sober would, in proportion to his consumption, be taxed much more heavily than the drunken consumer. A family which exercised great hospitality, would be taxed much more lightly than one who entertained fewer guests. Secondly, this mode of taxation, by paying for an annual, half-yearly, or quarterly licence to consume certain goods, would diminish very much one of the principal conveniences of taxes upon goods of speedy consumption; the piece-meal payment. In the price of threepence halfpenny, which is at present paid for a pot of porter, the different taxes upon malt, hops, and beer, together with the extraordinary profit which the brewer charges for having advanced them, may perhaps amount to about three halfpence. If a workman can conveniently spare those three halfpence, he buys a pot of porter. If he cannot, he contents himself with a pint; and, as a penny saved is a penny got, he thus gains a farthing by his temperance. He pays the tax piece-meal, as he can afford to pay it, and when he can afford to pay it, and every act of payment is perfectly voluntary, and what he can avoid if he chuses to do so. Thirdly, such taxes would operate less as sumptuary laws. When the licence was once purchased, whether the purchaser drunk much or drunk little, his tax would he the same. Fourthly, if a workman were to pay all at once, by yearly, half-yearly, or quarterly payments, a tax equal to what he at present pays, with little or no inconveniency, upon all the different pots and pints of porter which he drinks in any such period of time, the sum might frequently distress him very much. This mode of taxation, therefore, it seems evident, could never, without the most grievous oppression, produce a revenue nearly equal to what is derived from the present mode without any oppression. In several countries, however, commodities of an immediate or very speedy consumption are taxed in this manner. In Holland, people pay so much a-head for a licence to drink tea. I have already mentioned a tax upon bread, which, so far as it is consumed in farm houses and country villages, is there levied in the same manner. The duties of excise are imposed chiefly upon goods of home produce, destined for home consumption. They are imposed only upon a few sorts of goods of the most general use. There can never be any doubt, either concerning the goods which are subject to those duties, or concerning the particular duty which each species of goods is subject to. They fall almost altogether upon what I call luxuries, excepting always the four duties above mentioned, upon salt, soap, leather, candles, and perhaps that upon green glass. The duties of customs are much more ancient than those of excise. They seem to have been called customs, as denoting customary payments, which had been in use for time immemorial. They appear to have been originally considered as taxes upon the profits of merchants. During the barbarous times of feudal anarchy, merchants, like all the other inhabitants of burghs, were considered as little better than emancipated bondmen, whose persons were despised, and whose gains were envied. The great nobility, who had consented that the king should tallage the profits of their own tenants, were not unwilling that he should tallage likewise those of an order of men whom it was much less their interest to protect. In those ignorant times, it was not understood, that the profits of merchants are a subject not taxable directly; or that the final payment of all such taxes must fall, with a considerable overcharge, upon the consumers. The gains of alien merchants were looked upon more unfavourably than those of English merchants. It was natural, therefore, that those of the former should be taxed more heavily than those of the latter. This distinction between the duties upon aliens and those upon English merchants, which was begun from ignorance, has been continued from the spirit of monopoly, or in order to give our own merchants an advantage, both in the home and in the foreign market. With this distinction, the ancient duties of customs were imposed equally upon all sorts of goods, necessaries as well as luxuries, goods exported as well as goods imported. Why should the dealers in one sort of goods, it seems to have been thought, be more favoured than those in another? or why should the merchant exporter be more favoured than the merchant importer? The ancient customs were divided into three branches. The first, and, perhaps, the most ancient of all those duties, was that upon wool and leather. It seems to have been chiefly or altogether an exportation duty. When the woollen manufacture came to be established in England, lest the king should lose any part of his customs upon wool by the exportation of woollen cloths, a like duty was imposed upon them. The other two branches were, first, a duty upon wine, which being imposed at so much a-ton, was called a tonnage; and, secondly, a duty upon all other goods, which being imposed at so much a-pound of their supposed value, was called a poundage. In the forty-seventh year of Edward III., a duty of sixpence in the pound was imposed upon all goods exported and imported, except wools, wool-felts, leather, and wines which were subject to particular duties. In the fourteenth of Richard II., this duty was raised to one shilling in the pound; but, three years afterwards, it was again reduced to sixpence. It was raised to eightpence in the second year of Henry IV.; and, in the fourth of the same prince, to one shilling. From this time to the ninth year of William III., this duty continued at one shilling in the pound. The duties of tonnage and poundage were generally granted to the king by one and the same act of parliament, and were called the subsidy of tonnage and poundage. The subsidy of poundage having continued for so long a time at one shilling in the pound, or at five per cent., a subsidy came, in the language of the customs, to denote a general duty of this kind of five per cent. This subsidy, which is now called the old subsidy, still continues to be levied, according to the book of rates established by the twelfth of Charles II. The method of ascertaining, by a book of rates, the value of goods subject to this duty, is said to be older than the time of James I. The new subsidy, imposed by the ninth and tenth of William III., was an additional five per cent. upon the greater part of goods. The one-third and the two-third subsidy made up between them another five per cent. of which they were proportionable parts. The subsidy of 1747 made a fourth five per cent. upon the greater part of goods; and that of 1759, a fifth upon some particular sorts of goods. Besides those five subsidies, a great variety of other duties have occasionally been imposed upon particular sorts of goods in order sometimes to relieve the exigencies of the state, and sometimes to regulate the trade of the country, according to the principles of the mercantile system. That system has come gradually more and more into fashion. The old subsidy was imposed indifferently upon exportation, as well as importation. The four subsequent subsidies, as well as the other duties which have since been occasionally imposed upon particular sorts of goods, have, with a few exceptions, been laid altogether upon importation. The greater part of the ancient duties which had been imposed upon the exportation of the goods of home produce and manufacture, have either been lightened or taken away altogether. In most cases, they have been taken away. Bounties have even been given upon the exportation of some of them. Drawbacks, too, sometimes of the whole, and, in most cases, or a part of the duties which are paid upon the importation of foreign goods, have been granted upon their exportation. Only half the duties imposed by the old subsidy upon importation, are drawn back upon exportation; but the whole of those imposed by the latter subsidies and other imports are, upon the greater parts of the goods, drawn back in the same manner. This growing favour of exportation, and discouragement of importation, have suffered only a few exceptions, which chiefly concern the materials of some manufactures. These our merchants and manufacturers are willing should come as cheap as possible to themselves, and as dear as possible to their rivals and competitors in other countries. Foreign materials are, upon this account, sometimes allowed to be imported duty-free; Spanish wool, for example, flax, and raw linen yarn. The exportation of the materials of home produce, and of those which are the particular produce of our colonies, has sometimes been prohibited, and sometimes subjected to higher duties. The exportation of English wool has been prohibited. That of beaver skins, of beaver wool, and of gum-senega, has been subjected to higher duties; Great Britain, by the conquests of Canada and Senegal, having got almost the monopoly of those commodities. That the mercantile system has not been very favourable to the revenue of the great body of the people, to the annual produce of the land and labour of the country, I have endeavoured to show in the fourth book of this Inquiry. It seems not to have been more favourable to the revenue of the sovereign; so far, at least, as that revenue depends upon the duties of customs. In consequence of that system, the importation of several sorts of goods has been prohibited altogether. This prohibition has, in some cases, entirely prevented, and in others has very much diminished, the importation of those commodities, by reducing the importers to the necessity of smuggling. It has entirely prevented the importation of foreign wollens; and it has very much diminished that of foreign silks and velvets. In both cases, it has entirely annihilated the revenue of customs which might have been levied upon such importation. The high duties which have been imposed upon the importation of many different sorts of foreign goods in order to discourage their consumption in Great Britain, have, in many cases, served only to encourage smuggling, and, in all cases, have reduced the revenues of the customs below what more moderate duties would have afforded. The saying of Dr. Swift, that in the arithmetic of the customs, two and two, instead of making four, make sometimes only one, holds perfectly true with regard to such heavy duties, which never could have been imposed, had not the mercantile system taught us, in many cases, to employ taxation as an instrument, not of revenue, but of monopoly. The bounties which are sometimes given upon the exportation of home produce and manufactures, and the drawbacks which are paid upon the re-exportation of the greater part of foreign goods, have given occasion to many frauds, and to a species of smuggling, more destructive of the public revenue than any other. In order to obtain the bounty or drawback, the goods, it is well known, are sometimes shipped, and sent to sea, but soon afterwards clandestinely re-landed in some other part of the country. The defalcation of the revenue of customs occasioned by bounties and drawbacks, of which a great part are obtained fraudulently, is very great. The gross produce of the customs, in the year which ended on the 5th of January 1755, amounted to L.5,068,000. The bounties which were paid out of this revenue, though in that year there was no bounty upon corn, amounted to L.167,800. The drawbacks which were paid upon debentures and certificates, to L.2,156,800. Bounties and drawbacks together amounted to L.2,324,600. In consequence of these deductions, the revenue of the customs amounted only to L.2,743,400; from which deducting L.287,900 for the expense of management, in salaries and other incidents, the neat revenue of the customs for that year comes out to be L.2,455,500. The expense of management, amounts, in this manner, to between five and six per cent. upon the gross revenue of the customs; and to something more than ten per cent. upon what remains of that revenue, after deducting what is paid away in bounties and drawbacks. Heavy duties being imposed upon almost all goods imported, our merchant importers smuggle as much, and make entry of as little as they can. Our merchant exporters, on the contrary, make entry of more than they export; sometimes out of vanity, and to pass for great dealers in goods which pay no duty and sometimes to gain a bounty or a drawback. Our exports, in consequence of these different frauds, appear upon the custom-house books greatly to overbalance our imports, to the unspeakable comfort of those politicians, who measure the national prosperity by what they call the balance of trade. All goods imported, unless particularly exempted, and such exemptions are not very numerous, are liable to some duties of customs. If any goods are imported, not mentioned in the book of rates, they are taxed at 4s. 9-9/20d. for every twenty shillings value, according to the oath of the importer, that is, nearly at five subsidies, or five poundage duties. The book of rates is extremely comprehensive, and enumerates a great variety of articles, many of them little used, and, therefore, not well known. It is, upon this account, frequently uncertain under what article a particular sort of goods ought to be classed, and, consequently what duty they ought to pay. Mistakes with regard to this sometimes ruin the custom-house officer, and frequently occasion much trouble, expense, and vexation to the importer. In point of perspicuity, precision, and distinctness, therefore, the duties of customs are much more inferior to those of excise. In order that the greater part of the members of any society should contribute to the public revenue, in proportion to their respective expense, it does not seem necessary that every single article of that expense should be taxed. The revenue which is levied by the duties of excise is supposed to fall as equally upon the contributors as that which is levied by the duties of customs; and the duties of excise are imposed upon a few articles only of the most general use and consumption. It has been the opinion of many people, that, by proper management, the duties of customs might likewise, without any loss to the public revenue, and with great advantage to foreign trade, be confined to a few articles only. The foreign articles, of the most general use and consumption in Great Britain, seem at present to consist chiefly in foreign wines and brandies; in some of the productions of America and the West Indies, sugar, rum, tobacco, cocoa-nuts, &c. and in some of those of the East Indies, tea, coffee, china-ware, spiceries of all kinds, several sorts of piece-goods, &c. These different articles afford, perhaps, at present, the greater part of the revenue which is drawn from the duties of customs. The taxes which at present subsist upon foreign manufactures, if you except those upon the few contained in the foregoing enumeration, have, the greater part of them, been imposed for the purpose, not of revenue, but of monopoly, or to give our own merchants an advantage in the home market. By removing all prohibitions, and by subjecting all foreign manufactures to such moderate taxes, as it was found from experience, afforded upon each article the greatest revenue to the public, our own workmen might still have a considerable advantage in the home market; and many articles, some of which at present afford no revenue to government, and others a very inconsiderable one, might afford a very great one. High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to government than what might be drawn from more moderate taxes. When the diminution of revenue is the effect of the diminution of consumption, there can be but one remedy, and that is the lowering of the tax. When the diminution of revenue is the effect of the encouragement given to smuggling, it may, perhaps, be remedied in two ways; either by diminishing the temptation to smuggle, or by increasing the difficulty of smuggling. The temptation to smuggle can be be diminished only by the lowering of the tax; and the difficulty of smuggling can be increased only by establishing that system of administration which is most proper for preventing it. The excise laws, it appears, I believe, from experience, obstruct and embarrass the operations of the smuggler much more effectually than those of the customs. By introducing into the customs a system of administration as similar to that of the excise as the nature of the different duties will admit, the difficulty of smuggling might be very much increased. This alteration, it has been supposed by many people, might very easily be brought about. The importer of commodities liable to any duties of customs, it has been said, might, at his option, he allowed either to carry them to his own private warehouse; or to lodge them in a warehouse, provided either at his own expense or at that of the public, but under the key of the custom-house officer, and never to be opened but in his presence. If the merchant carried them to his own private warehouse, the duties to be immediately paid, and never afterwards to be drawn back; and that warehouse to be at all times subject to the visit and examination of the custom-house officer, in order to ascertain how far the quantity contained in it corresponded with that for which the duty had been paid. If he carried them to the public warehouse, no duty to be paid till they were taken out for home consumption. If taken out for exportation, to be duty-free; proper security being always given that they should be so exported. The dealers in those particular commodities, either by wholesale or retail, to be at all times subject to the visit and examination of the custom-house officer; and to be obliged to justify, by proper certificates, the payment of the duty upon the whole quantity contained in their shops or warehouses. What are called the excise duties upon rum imported, are at present levied in this manner; and the same system of administration might, perhaps, be extended to all duties upon goods imported; provided always that those duties were, like the duties of excise, confined to a few sorts of goods of the most general use and consumption. If they were extended to almost all sorts of goods, as at present, public warehouses of sufficient extent could not easily be provided; and goods of a very delicate nature, or of which the preservation required much care and attention, could not safely be trusted by the merchant in any warehouse but his own. If, by such a system of administration, smuggling to any considerable extent could be prevented, even under pretty high duties; if every duty was occasionally either heightened or lowered according as it was likely, either the one way or the other, to afford the greatest revenue to the state; taxation being always employed as an instrument of revenue, and never of monopoly; it seems not improbable that a revenue, at least equal to the present neat revenue of the customs, might be drawn from duties upon the importation of only a few sorts of goods of the most general use and consumption; and that the duties of customs might thus be brought to the same degree of simplicity, certainty, and precision, as those of excise. What the revenue at present loses by drawbacks upon the re-exportation of foreign goods, which are afterwards re-landed and consumed at home, would, under this system, be saved altogether. If to this saving, which would alone be very considerable, were added the abolition of all bounties upon the exportation of home produce; in all cases in which those bounties were not in reality drawbacks of some duties of excise which had before been advanced; it cannot well be doubted, but that the neat revenue of customs might, after an alteration of this kind, be fully equal to what it had ever been before. If, by such a change of system, the public revenue suffered no loss, the trade and manufactures of the country would certainly gain a very considerable advantage. The trade in the commodities not taxed, by far the greatest number would be perfectly free, and might be carried on to and from all parts of the world with every possible advantage. Among those commodities would be comprehended all the necessaries of life, and all the materials of manufacture. So far as the free importation of the necessaries of life reduced their average money price in the home market, it would reduce the money price of labour, but without reducing in any respect its real recompense. The value of money is in proportion to the quantity of the necessaries of life which it will purchase. That of the necessaries of life is altogether independent of the quantity of money which can be had for them. The reduction in the money price of labour would necessarily be attended with a proportionable one in that of all home manufactures, which would thereby gain some advantage in all foreign markets. The price of some manufactures would be reduced, in a still greater proportion, by the free importation of the raw materials. If raw silk could be imported from China and Indostan, duty-free, the silk manufacturers in England could greatly undersell those of both France and Italy. There would be no occasion to prohibit the importation of foreign silks and velvets. The cheapness of their goods would secure to our own workmen, not only the possession of a home, but a very great command of the foreign market. Even the trade in the commodities taxed, would be carried on with much more advantage than at present. If those commodities were delivered out of the public warehouse for foreign exportation, being in this case exempted from all taxes, the trade in them would be perfectly free. The carrying trade, in all sorts of goods, would, under this system, enjoy every possible advantage. If these commodities were delivered out for home consumption, the importer not being obliged to advance the tax till he had an opportunity of selling his goods, either to some dealer, or to some consumer, he could always afford to sell them cheaper than if he had been obliged to advance it at the moment of importation. Under the same taxes, the foreign trade of consumption, even in the taxed commodities, might in this manner be carried on with much more advantage than it is at present. It was the object of the famous excise scheme of Sir Robert Walpole, to establish, with regard to wine and tobacco, a system not very unlike that which is here proposed. But though the bill which was then brought into Parliament, comprehended those two commodities only, it was generally supposed to be meant as an introduction to a more extensive scheme of the same kind. Faction, combined with the interest of smuggling merchants, raised so violent, though so unjust a clamour, against that bill, that the minister thought proper to drop it; and, from a dread of exciting a clamour of the same kind, none of his successors have dared to resume the project. The duties upon foreign luxuries, imported for home consumption, though they sometimes fall upon the poor, fall principally upon people of middling or more than middling fortune. Such are, for example, the duties upon foreign wines, upon coffee, chocolate, tea, sugar, &c. The duties upon the cheaper luxuries of home produce, destined for home consumption, fall pretty equally upon people of all ranks, in proportion to their respective expense. The poor pay the duties upon malt, hops, beer, and ale, upon their own consumption; the rich, upon both their own consumption and that of their servants. The whole consumption of the inferior ranks of people, or of those below the middling rank, it must be observed, is, in every country, much greater, not only in quantity, but in value, than that of the middling, and of those above the middling rank. The whole expense of the inferior is much greater than that of the superior ranks. In the first place, almost the whole capital of every country is annually distributed among the inferior ranks of people, as the wages of productive labour. Secondly, a great part of the revenue, arising from both the rent of land and the profits of stock, is annually distributed among the same rank, in the wages and maintenance of menial servants, and other unproductive labourers. Thirdly, some part of the profits of stock belongs to the same rank, as a revenue arising from the employment of their small capitals. The amount of the profits annually made by small shopkeepers, tradesmen, and retailers of all kinds, is everywhere very considerable, and makes a very considerable portion of the annual produce. Fourthly and lastly, some part even of the rent of land belongs to the same rank; a considerable part to those who are somewhat below the middling rank, and a small part even to the lowest rank; common labourers sometimes possessing in property an acre or two of land. Though the expense of those inferior ranks of people, therefore, taking them individually, is very small, yet the whole mass of it, taking them collectively, amounts always to by much the largest portion of the whole expense of the society; what remains of the annual produce of the land and labour of the country, for the consumption of the superior ranks, being always much less, not only in quantity, but in value. The taxes upon expense, therefore, which fall chiefly upon that of the superior ranks of people, upon the smaller portion of the annual produce, are likely to be much less productive than either those which fall indifferently upon the expense of all ranks, or even those which fall chiefly upon that of the inferior ranks, than either those which fall indifferently upon the whole annual produce, or those which fall chiefly upon the larger portion of it. The excise upon the materials and manufacture of home-made fermented and spiritous liquors, is, accordingly, of all the different taxes upon expense, by far the most productive; and this branch of the excise falls very much, perhaps principally, upon the expense of the common people. In the year which ended on the 5th of July 1775, the gross produce of this branch of the excise amounted to L.3,341,837 : 9 : 9. It must always be remembered, however, that it is the luxuries, and not the necessary expense of the inferior ranks of people, that ought ever to be taxed. The final payment of any tax upon their necessary expense, would fall altogether upon the superior ranks of people; upon the smaller portion of the annual produce, and not upon the greater. Such a tax must, in all cases, either raise the wages of labour, or lessen the demand for it. It could not raise the wages of labour, without throwing the final payment of the tax upon the superior ranks of people. It could not lessen the demand for labour, without lessening the annual produce of the land and labour of the country, the fund upon which all taxes must be finally paid. Whatever might be the state to which a tax of this kind reduced the demand for labour, it must always raise wages higher than they otherwise would be in that state; and the final payment of this enhancement of wages must, in all cases, fall upon the superior ranks of people. Fermented liquors brewed, and spiritous liquors distilled, not for sale, but for private use, are not in Great Britain liable to any duties of excise. This exemption, of which the object is to save private families from the odious visit and examination of the tax-gatherer, occasions the burden of those duties to fall frequently much lighter upon the rich than upon the poor. It is not, indeed, very common to distil for private use, though it is done sometimes. But in the country, many middling, and almost all rich and great families, brew their own beer. Their strong beer, therefore, costs them eight shillings a-barrel less than it costs the common brewer, who must have his profit upon the tax, as well as upon all the other expense which he advances. Such families, therefore, must drink their beer at least nine or ten shillings a-barrel cheaper than any liquor of the same quality can be drank by the common people, to whom it is everywhere more convenient to buy their beer, by little and little, from the brewery or the alehouse. Malt, in the same manner, that is made for the use of a private family, is not liable to the visit or examination of the tax-gatherer; but, in this case the family must compound at seven shillings and sixpence a-head for the tax. Seven shillings and sixpence are equal to the excise upon ten bushels of malt; a quantity fully equal to what all the different members of any sober family, men, women, and children, are, at an average, likely to consume. But in rich and great families, where country hospitality is much practised, the malt liquors consumed by the members of the family make but a small part of the consumption of the house. Either on account of this composition, however, or for other reasons, it is not near so common to malt as to brew for private use. It is difficult to imagine any equitable reason, why those who either brew or distil for private use should not be subject to a composition of the same kind. A greater revenue than what is at present drawn from all the heavy taxes upon malt, beer, and ale, might be raised, it has frequently been said, by a much lighter tax upon malt; the opportunities of defrauding the revenue being much greater in a brewery than in a malt-house; and those who brew for private use being exempted from all duties or composition for duties, which is not the case with those who malt for private use. In the porter brewery of London, a quarter of malt is commonly brewed into more than two barrels and a-half, sometimes into three barrels of porter. The different taxes upon malt amount to six shillings a-quarter; those upon strong ale and beer to eight shillings a-barrel. In the porter brewery, therefore, the different taxes upon malt, beer, and ale, amount to between twenty-six and thirty shillings upon the produce of a quarter of malt. In the country brewery for common country sale, a quarter of malt is seldom brewed into less than two barrels of strong, and one barrel of small beer; frequently into two barrels and a-half of strong beer. The different taxes upon small beer amount to one shilling and fourpence a-barrel. In the country brewery, therefore, the different taxes upon malt, beer, and ale, seldom amount to less than twenty-three shillings and fourpence, frequently to twenty-six shillings, upon the produce of a quarter of malt. Taking the whole kingdom at an average, therefore, the whole amount of the duties upon malt, beer, and ale, cannot be estimated at less than twenty-four or twenty-five shillings upon the produce of a quarter of malt. But by taking off all the different duties upon beer and ale, and by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, a greater revenue, it is said, might be raised by this single tax, than what is at present drawn from all those heavier taxes. L. s. d. In 1772, the old malt tax produced 722,023 11 11 The additional 356,776 7 9-3/4 In 1773, the old tax produced 561,627 3 7-1/2 The additional 278,650 15 3-3/4 In 1774, the old tax produced 624,614 17 5-3/4 The additional 310,745 2 8-1/2 In 1775, the old tax produced 657,357 0 8-1/4 The additional 323,785 12 6-1/4 ____________________________ 4)3,835,580 12 0-3/4 ____________________________ Average of these four years 958,895 3 0-3/16 ____________________________ In 1772, the country excise produced 1,243,120 5 3 The London brewery 408,260 7 2-3/4 In 1773, the country excise 1,245,808 3 3 The London brewery 405,406 17 10-1/2 In 1774, the country excise 1,246,373 14 5-1/2 The London brewery 320,601 18 0-1/4 In 1775, the country excise 1,214,583 6 1-1/4 The London brewery 463,670 7 0-1/4 ____________________________ 4)6,547,832 19 2-1/4 ____________________________ Average of these four years 1,636,958 4 9-1/2 To which adding the average malt-tax, or 958,895 3 0-3/16 ____________________________ The whole amount of those different taxes comes out to be 2,595,853 7 9-11/16 ____________________________ But, by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, that single tax would produce 2,876,685 9 0-9/16 A sum which exceeds the foregoing by 280,832 1 2-14/16 Under the old malt tax, indeed, is comprehended a tax of four shillings upon the hogshead of cyder, and another of ten shillings upon the barrel of mum. In 1774, the tax upon cyder produced only L.3083 : 6 : 8. It probably fell somewhat short of its usual amount; all the different taxes upon cyder, having, that year, produced less than ordinary. The tax upon mum, though much heavier, is still less productive, on account of the smaller consumption of that liquor. But to balance whatever may be the ordinary amount of those two taxes, there is comprehended under what is called the country excise, first, the old excise of six shillings and eightpence upon the hogshead of cyder; secondly, a like tax of six shillings and eightpence upon the hogshead of verjuice; thirdly, another of eight shillings and ninepence upon the hogshead of vinegar; and, lastly, a fourth tax of elevenpence upon the gallon of mead or metheglin. The produce of those different taxes will probably much more than counterbalance that of the duties imposed, by what is called the annual malt tax, upon cyder and mum. Malt is consumed, not only in the brewery of beer and ale, but in the manufacture of low wines and spirits. If the malt tax were to be raised to eighteen shillings upon the quarter, it might be necessary to make some abatement in the different excises which are imposed upon those particular sorts of low wines and spirits, of which malt makes any part of the materials. In what are called malt spirits, it makes commonly but a third part of the materials; the other two-thirds being either raw barley, or one-third barley and one-third wheat. In the distillery of malt spirits, both the opportunity and the temptation to smuggle are much greater than either in a brewery or in a malt-house; the opportunity, on account of the smaller bulk and greater value of the commodity, and the temptation, on account of the superior height of the duties, which amounted to 3s. 10-2/3d.[73] upon the gallon of spirits. By increasing the duties upon malt, and reducing those upon the distillery, both the opportunities and the temptation to smuggle would be diminished, which might occasion a still further augmentation of revenue. It has for some time past been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people. According to this policy, the abatement of the taxes upon the distillery ought not to be so great as to reduce, in any respect, the price of those liquors. Spirituous liquors might remain as dear as ever; while, at the same time, the wholesome and invigorating liquors of beer and ale might be considerably reduced in their price. The people might thus be in part relieved from one of the burdens of which they at present complain the most; while, at the same time, the revenue might be considerably augmented. The objections of Dr. Davenant to this alteration in the present system of excise duties, seem to be without foundation. Those objections are, that the tax, instead of dividing itself, as at present, pretty equally upon the profit of the maltster, upon that of the brewer, and upon that of the retailer, would so far as it affected profit, fall altogether upon that of the maltster; that the maltster could not so easily get back the amount of the tax in the advanced price of his malt, as the brewer and retailer in the advanced price of their liquor; and that so heavy a tax upon malt might reduce the rent and profit of barley land. No tax can ever reduce, for any considerable time, the rate of profit in any particular trade, which must always keep its level with other trades in the neighbourhood. The present duties upon malt, beer, and ale, do not affect the profits of the dealers in those commodities, who all get back the tax with an additional profit, in the enhanced price of their goods. A tax, indeed, may render the goods upon which it is imposed so dear, as to diminish the consumption of them. But the consumption of malt is in malt liquors; and a tax of eighteen shillings upon the quarter of malt could not well render those liquors dearer than the different taxes, amounting to twenty-four or twenty-five shillings, do at present. Those liquors, on the contrary, would probably become cheaper, and the consumption of them would be more likely to increase than to diminish. It is not very easy to understand why it should be more difficult for the maltster to get back eighteen shillings in the advanced price of his malt, than it is at present for the brewer to get back twenty-four or twenty-five, sometimes thirty shillings, in that of his liquor. The maltster, indeed, instead of a tax of six shillings, would be obliged to advance one of eighteen shillings upon every quarter of malt. But the brewer is at present obliged to advance a tax of twenty-four or twenty-five, sometimes thirty shillings, upon every quarter of malt which he brews. It could not be more inconvenient for the maltster to advance a lighter tax, than it is at present for the brewer to advance a heavier one. The maltster does not always keep in his granaries a stock of malt, which it will require a longer time to dispose of than the stock of beer and ale which the brewer frequently keeps in his cellars. The former, therefore, may frequently get the returns of his money as soon as the latter. But whatever inconveniency might arise to the maltster from being obliged to advance a heavier tax, it could easily be remedied, by granting him a few months longer credit than is at present commonly given to the brewer. Nothing could reduce the rent and profit of barley land, which did not reduce the demand for barley. But a change of system, which reduced the duties upon a quarter of malt brewed into beer and ale, from twenty-four and twenty-five shillings to eighteen shillings, would be more likely to increase than diminish that demand. The rent and profit of barley land, besides, must always be nearly equal to those of other equally fertile and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand, that its price is always above the natural proportion to that of the produce of other equally fertile and equally well cultivated land, would necessarily reduce the rent and profit of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity; and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit; properly upon the rent of the vineyard. When it has been proposed to lay any new tax upon sugar, our sugar planters have frequently complained that the whole weight of such taxes fell not upon the consumer, but upon the producer; they never having been able to raise the price of their sugar after the tax higher than it was before. The price had, it seems, before the tax, been a monopoly price; and the arguments adduced to show that sugar was an improper subject of taxation, demonstrated perhaps that it was a proper one; the gains of monopolists, whenever they can be come at, being certainly of all subjects the most proper. But the ordinary price of barley has never been a monopoly price; and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land. The different taxes which have been imposed upon malt, beer, and ale, have never lowered the price of barley; have never reduced the rent and profit of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it; and those taxes, together with the different duties upon beer and ale, have constantly either raised the price, or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer, and not upon the producer. The only people likely to suffer by the change of system here proposed, are those who brew for their own private use. But the exemption, which this superior rank of people at present enjoy, from very heavy taxes which are paid by the poor labourer and artificer, is surely most unjust and unequal, and ought to be taken away, even though this change was never to take place. It has probably been the interest of this superior order of people, however, which has hitherto prevented a change of system that could not well fail both to increase the revenue and to relieve the people. Besides such duties as those of customs and excise above mentioned, there are several others which affect the price of goods more unequally and more indirectly. Of this kind are the duties, which, in French, are called peages, which in old Saxon times were called the duties of passage, and which seem to have been originally established for the same purpose as our turnpike tolls, or the tolls upon our canals and navigable rivers, for the maintenance of the road or of the navigation. Those duties, when applied to such purposes, are most properly imposed according to the bulk or weight of the goods. As they were originally local and provincial duties, applicable to local and provincial purposes, the administration of them was, in most cases, entrusted to the particular town, parish, or lordship, in which they were levied; such communities being, in some way or other, supposed to be accountable for the application. The sovereign, who is altogether unaccountable, has in many countries assumed to himself the administration of those duties; and though he has in most cases enhanced very much the duty, he has in many entirely neglected the application. If the turnpike tolls of Great Britain should ever become one of the resources of government, we may learn, by the example of many other nations, what would probably be the consequence. Such tolls, no doubt, are finally paid by the consumer; but the consumer is not taxed in proportion to his expense, when he pays, not according to the value, but according to the bulk or weight of what he consumes. When such duties are imposed, not according to the bulk or weight, but according to the supposed value of the goods, they become properly a sort of inland customs or excise, which obstruct very much the most important of all branches of commerce, the interior commerce of the country. In some small states, duties similar to those passage duties are imposed upon goods carried across the territory, either by land or by water, from one foreign country to another. These are in some countries called transit-duties. Some of the little Italian states which are situated upon the Po, and the rivers which run into it, derive some revenue from duties of this kind, which are paid altogether by foreigners, and which, perhaps, are the only duties that one state can impose upon the subjects of another, without obstructing, in any respect, the industry or commerce of its own. The most important transit-duty in the world, is that levied by the king of Denmark upon all merchant ships which pass through the Sound. Such taxes upon luxuries, as the greater part of the duties of customs and excise, though they all fall indifferently upon every different species of revenue, and are paid finally, or without any retribution, by whoever consumes the commodities upon which they are imposed, yet they do not always fall equally or proportionally upon the revenue of every individual. As every man's humour regulates the degree of his consumption, every man contributes rather according to his humour, than in proportion to his revenue: the profuse contribute more, the parsimonious less, than their proper proportion. During the minority of a man of great fortune, he contributes commonly very little, by his consumption, towards the support of that state from whose protection he derives a great revenue. Those who live in another country, contribute nothing by their consumption towards the support of the government of that country, in which is situated the source of their revenue. If in this latter country there should be no land tax, nor any considerable duty upon the transference either of moveable or immoveable property, as is the case in Ireland, such absentees may derive a great revenue from the protection of a government, to the support of which they do not contribute a single shilling. This inequality is likely to be greatest in a country of which the government is, in some respects, subordinate and dependant upon that of some other. The people who possess the most extensive property in the dependant, will, in this case, generally chuse to live in the governing country. Ireland is precisely in this situation; and we cannot therefore wonder, that the proposal of a tax upon absentees should be so very popular in that country. It might, perhaps, be a little difficult to ascertain either what sort, or what degree of absence, would subject a man to be taxed as an absentee, or at what precise time the tax should either begin or end. If you except, however, this very peculiar situation, any inequality in the contribution of individuals which can arise from such taxes, is much more than compensated by the very circumstance which occasions that inequality; the circumstance that every man's contribution is altogether voluntary; it being altogether in his power, either to consume, or not to consume, the commodity taxed. Where such taxes, therefore, are properly assessed, and upon proper commodities, they are paid with less grumbling than any other. When they are advanced by the merchant or manufacturer, the consumer, who finally pays them, soon comes to confound them with the price of the commodities, and almost forgets that he pays any tax. Such taxes are, or may be, perfectly certain; or may be assessed, so as to leave no doubt concerning either what ought to be paid, or when it ought to be paid; concerning either the quantity or the time of payment. Whatever uncertainty there may sometimes be, either in the duties of customs in Great Britain, or in other duties of the same kind in other countries, it cannot arise from the nature of those duties, but from the inaccurate or unskilful manner in which the law that imposes them is expressed. Taxes upon luxuries generally are, and always may be, paid piece-meal, or in proportion as the contributors have occasion to purchase the goods upon which they are imposed. In the time and mode of payment, they are, or may be, of all taxes the most convenient. Upon the whole, such taxes, therefore, are perhaps as agreeable to the three first of the four general maxims concerning taxation, as any other. They offend in every respect against the fourth. Such taxes, in proportion to what they bring into the public treasury of the state, always take out, or keep out, of the pockets of the people, more than almost any other taxes. They seem to do this in all the four different ways in which it is possible to do it. First, the levying of such taxes, even when imposed in the most judicious manner, requires a great number of custom-house and excise officers, whose salaries and perquisites are a real tax upon the people, which brings nothing into the treasury of the state. This expense, however, it must be acknowledged, is more moderate in Great Britain than in most other countries. In the year which ended on the 5th of July, 1775, the gross produce of the different duties, under the management of the commissioners of excise in England, amounted to L.5,507,308 : 18 : 8-1/4, which was levied at an expense of little more than five and a-half per cent. From this gross produce, however, there must be deducted what was paid away in bounties and drawbacks upon the exportation of exciseable goods, which will reduce the neat produce below five millions.[74] The levying of the salt duty, and excise duty, but under a different management, is much more expensive. The neat revenue of the customs does not amount to two millions and a-half, which is levied at an expense of more than ten per cent., in the salaries of officers and other incidents. But the perquisites of custom-house officers are everywhere much greater than their salaries; at some ports more than double or triple those salaries. If the salaries of officers, and other incidents, therefore, amount to more than ten per cent. upon the neat revenue of the customs, the whole expense of levying that revenue may amount, in salaries and perquisites together, to more than twenty or thirty per cent. The officers of excise receive few or no perquisites; and the administration of that branch of the revenue being of more recent establishment, is in general less corrupted than that of the customs, into which length of time has introduced and authorized many abuses. By charging upon malt the whole revenue which is at present levied by the different duties upon malt and malt liquors, a saving, it is supposed, of more than L.50,000, might be made in the annual expense of the excise. By confining the duties of customs to a few sorts of goods, and by levying those duties according to the excise laws, a much greater saving might probably be made in the annual expense of the customs. Secondly, such taxes necessarily occasion some obstruction or discouragement to certain branches of industry. As they always raise the price of the commodity taxed, they so far discourage its consumption, and consequently its production. If it is a commodity of home growth or manufacture, less labour comes to be employed in raising and producing it. If it is a foreign commodity of which the tax increases in this manner the price, the commodities of the same kind which are made at home may thereby, indeed, gain some advantage in the home market, and a greater quantity of domestic industry may thereby be turned toward preparing them. But though this rise of price in a foreign commodity, may encourage domestic industry in one particular branch, it necessarily discourages that industry in almost every other. The dearer the Birmingham manufacturer buys his foreign wine, the cheaper he necessarily sells that part of his hardware with which, or, what comes to the same thing, with the price of which, he buys it. That part of his hardware, therefore, becomes of less value to him, and he has less encouragement to work at it. The dearer the consumers in one country pay for the surplus produce of another, the cheaper they necessarily sell that part of their own surplus produce with which, or, what comes to the same thing, with the price of which, they buy it. That part of their own surplus produce becomes of less value to them, and they have less encouragement to increase its quantity. All taxes upon consumable commodities, therefore, tend to reduce the quantity of productive labour below what it otherwise would be, either in preparing the commodities taxed, if they are home commodities, or in preparing these with which they are purchased, if they are foreign commodities. Such taxes, too, always alter, more or less, the natural direction of national industry, and turn it into a channel always different from, and generally less advantageous, than that in which is would have run of its own accord. Thirdly, the hope of evading such taxes by smuggling, gives frequent occasion to forfeitures and other penalties, which entirely ruin the smuggler; a person who, though no doubt highly blameable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so. In those corrupted governments, where there is at least a general suspicion of much unnecessary expense, and great misapplication of the public revenue, the laws which guard it are little respected. Not many people are scrupulous about smuggling, when, without perjury, they can find an easy and safe opportunity of doing so. To pretend to have any scruple about buying smuggled goods, though a manifest encouragement to the violation of the revenue laws, and to the perjury which almost always attends it, would, in most countries, be regarded as one of those pedantic pieces of hypocrisy which, instead of gaining credit with anybody, serve only to expose the person who affects to practise them to the suspicion of being a greater knave than most of his neighbours. By this indulgence of the public, the smuggler is often encouraged to continue a trade, which he is thus taught to consider as in some measure innocent; and when the severity of the revenue laws is ready to fall upon him, he is frequently disposed to defend with violence, what he has been accustomed to regard as his just property. From being at first, perhaps, rather imprudent than criminal, he at last too often becomes one of the hardiest and most determined violators of the laws of society. By the ruin of the smuggler, his capital, which had before been employed in maintaining productive labour, is absorbed either in the revenue of the state, or in that of the revenue officer; and is employed in maintaining unproductive, to the diminution of the general capital of the society, and of the useful industry which it might otherwise have maintained. Fourthly, such taxes, by subjecting at least the dealers in the taxed commodities, to the frequent visits and odious examination of the tax-gatherers, expose them sometimes, no doubt, to some degree of oppression, and always to much trouble and vexation; and though vexation, as has already been said, is not strictly speaking expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. The laws of excise, though more effectual for the purpose for which they were instituted, are, in this respect, more vexatious than those of the customs. When a merchant has imparted goods subject to certain duties of customs; when he has paid those duties, and lodged the goods in his warehouse; he is not, in most cases, liable to any further trouble or vexation from the custom-house officer. It is otherwise with goods subject to duties of excise. The dealers have no respite from the continual visits and examination of the excise officers. The duties of excise are, upon this account, more unpopular than those of the customs; and so are the officers who levy them. Those officers, it is pretended, though in general, perhaps, they do their duty fully as well as those of the customs; yet, as that duty obliges them to be frequently very troublesome to some of their neighbours, commonly contract a certain hardness of character, which the others frequently have not. This observation, however, may very probably be the mere suggestion of fraudulent dealers, whose smuggling is either prevented or detected by their diligence. The inconveniencies, however, which are, perhaps, in some degree inseparable from taxes upon consumable commodities, fall as light upon the people of Great Britain as upon those of any other country of which the government is nearly as expensive. Our state is not perfect, and might be mended; but it is as good, or better, than that of most of our neighbours. In consequence of the notion, that duties upon consumable goods were taxes upon the profits of merchants, those duties have, in some countries, been repeated upon every successive sale of the goods. If the profits of the merchant-importer or merchant-manufacturer were taxed, equality seemed to require that those of all the middle buyers, who intervened between either of them and the consumer, should likewise be taxed. The famous alcavala of Spain seems to have been established upon this principle. It was at first a tax of ten per cent, afterwards of fourteen per cent. and it is at present only six per cent. upon the sale of every sort of property, whether moveable or immoveable; and it is repeated every time the property is sold.[75] The levying of this tax requires a multitude of revenue officers, sufficient to guard the transportation of goods, not only from one province to another, but from one shop to another. It subjects, not only the dealers in some sorts of goods, but those in all sorts, every farmer, every manufacturer, every merchant and shopkeeper, to the continual visit and examination of the tax-gatherers. Through the greater part of the country in which a tax of this kind is established, nothing can be produced for distant sale. The produce of every part of the country must be proportioned to the consumption of the neighbourhood. It is to the alcavala, accordingly, that Ustaritz imputes the ruin of the manufactures of Spain. He might have imputed to it, likewise, the declension of agriculture, it being imposed not only upon manufactures, but upon the rude produce of the land. In the kingdom of Naples, there is a similar tax of three per cent. upon the value of all contracts, and consequently upon that of all contracts of sale. It is both lighter than the Spanish tax, and the greater part of towns and parishes are allowed to pay a composition in lieu of it. They levy this composition in what manner they please, generally in a way that gives no interruption to the interior commerce of the place. The Neapolitan tax, therefore, is not near so ruinous as the Spanish one. The uniform system of taxation, which, with a few exceptions of no great consequence, takes place in all the different parts of the united kingdom of Great Britain, leaves the interior commerce of the country, the inland and coasting trade, almost entirely free. The inland trade is almost perfectly free; and the greater part of goods may be carried from one end of the kingdom to the other, without requiring any permit or let-pass, without being subject to question, visit or examination, from the revenue officers. There are a few exceptions, but they are such as can give no interruption to any important branch of inland commerce of the country. Goods carried coastwise, indeed, require certificates or coast-cockets. If you except coals, however, the rest are almost all duty-free. This freedom of interior commerce, the effect of the uniformity of the system of taxation, is perhaps one of the principal causes of the prosperity of Great Britain; every great country being necessarily the best and most extensive market for the greater part of the productions of its own industry. If the same freedom in consequence of the same uniformity, could be extended to Ireland and the plantations, both the grandeur of the state, and the prosperity of every part of the empire, would probably be still greater than at present. In France, the different revenue laws which take place in the different provinces, require a multitude of revenue officers to surround, not only the frontiers of the kingdom, but those of almost each particular province, in order either to prevent the importation of certain goods, or to subject it to the payment of certain duties, to the no small interruption of the interior commerce of the country. Some provinces are allowed to compound for the gabelle, or salt tax; others are exempted from it altogether. Some provinces are exempted from the exclusive sale of tobacco, which the farmers-general enjoy through the greater part of the kingdom. The aides, which correspond to the excise in England, are very different in different provinces. Some provinces are exempted from them, and pay a composition or equivalent. In those in which they take place, and are in farm, there are many local duties which do not extend beyond a particular town or district. The traites, which correspond to our customs, divide the kingdom into three great parts; first, the provinces subject to the tariff of 1664, which are called the provinces of the five great farms, and under which are comprehended Picardy, Normandy, and the greater part of the interior provinces of the kingdom; secondly, the provinces subject to the tariff of 1667, which are called the provinces reckoned foreign, and under which are comprehended the greater part of the frontier provinces; and, thirdly, those provinces which are said to be treated as foreign, or which, because they are allowed a free commerce with foreign countries, are, in their commerce with the other provinces of France, subjected to the same duties as other foreign countries. These are Alsace, the three bishoprics of Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great farms (called so on account of an ancient division of the duties of customs into five great branches, each of which was originally the subject of a particular farm, though they are now all united into one), and in those which are said to be reckoned foreign, there are many local duties which do not extend beyond a particular town or district. There are some such even in the provinces which are said to be treated as foreign, particularly in the city of Marseilles. It is unnecessary to observe how much both the restraints upon the interior commerce of the country, and the number of the revenue officers, must be multiplied, in order to guard the frontiers of those different provinces and districts which are subject to such different systems of taxation. Over and above the general restraints arising from this complicated system of revenue laws, the commerce of wine (after corn, perhaps, the most important production of France) is, in the greater part of the provinces, subject to particular restraints arising from the favour which has been shown to the vineyards of particular provinces and districts above those of others. The provinces most famous for their wines, it will be found, I believe, are those in which the trade in that article is subject to the fewest restraints of this kind. The extensive market which such provinces enjoy, encourages good management both in the cultivation of their vineyards, and in the subsequent preparation of their wines. Such various and complicated revenue laws are not peculiar to France. The little duchy of Milan is divided into six provinces, in each of which there is a different system of taxation, with regard to several different sorts of consumable goods. The still smaller territories of the duke of Parma are divided into three or four, each of which has, in the same manner, a system of its own. Under such absurd management, nothing but the great fertility of the soil, and happiness of the climate, could preserve such countries from soon relapsing into the lowest state of poverty and barbarism. Taxes upon consumable commodities may either be levied by an administration, of which the officers are appointed by government, and immediately accountable to government, of which the revenue must, in this case, vary from year to year, according to the occasional variations in the produce of the tax; or they may be let in farm for a rent certain, the farmer being allowed to appoint his own officers, who, though obliged to levy the tax in the manner directed by the law, are under his immediate inspection, and are immediately accountable to him. The best and most frugal way of levying a tax can never be by farm. Over and above what is necessary for paying the stipulated rent, the salaries of the officers, and the whole expense of administration, the farmer must always draw from the produce of the tax a certain profit, proportioned at least to the advance which he makes, to the risk which he runs, to the trouble which he is at, and to the knowledge and skill which it requires to manage so very complicated a concern. Government, by establishing an administration under their own immediate inspection, of the same kind with that which the farmer establishes, might at least save this profit, which is almost always exorbitant. To farm any considerable branch of the public revenue requires either a great capital, or a great credit; circumstances which would alone restrain the competition for such an undertaking to a very small number of people. Of the few who have this capital or credit, a still smaller number have the necessary knowledge or experience; another circumstance which restrains the competition still further. The very few who are in condition to become competitors, find it more for their interest to combine together; to become copartners, instead of competitors; and, when the farm is set up to auction, to offer no rent but what is much below the rent value. In countries where the public revenues are in farm, the farmers are generally the most opulent people. Their wealth would alone excite the public indignation; and the vanity which almost always accompanies such upstart fortunes, the foolish ostentation with which they commonly display that wealth, excite that indignation still more. The farmers of the public revenue never find the laws too severe, which punish any attempt to evade the payment of a tax. They have no bowels for the contributors, who are not their subjects, and whose universal bankruptcy, if it should happen the day after the farm is expired, would not much affect their interest. In the greatest exigencies of the state, when the anxiety of the sovereign for the exact payment of his revenue is necessarily the greatest, they seldom fail to complain, that without laws more rigorous than those which actually took place, it will be impossible for them to pay even the usual rent. In those moments of public distress, their commands cannot be disputed. The revenue laws, therefore, become gradually more and more severe. The most sanguinary are always to be found in countries where the greater part of the public revenue is in farm; the mildest, in countries where it is levied under the immediate inspection of the sovereign. Even a bad sovereign feels more compassion for his people than can ever be expected from the farmers of his revenue. He knows that the permanent grandeur of his family depends upon the prosperity of his people, and he will never knowingly ruin that prosperity for the sake of any momentary interest of his own. It is otherwise with the farmers of his revenue, whose grandeur may frequently be the effect of the ruin, and not of the prosperity, of his people. A tax is sometimes not only farmed for a certain rent, but the farmer has, besides, the monopoly of the commodity taxed. In France, the duties upon tobacco and salt are levied in this manner. In such cases, the farmer, instead of one, levies two exorbitant profits upon the people; the profit of the farmer, and the still more exorbitant one of the monopolist. Tobacco being a luxury, every man is allowed to buy or not to buy as he chuses; but salt being a necessary, every man is obligated to buy of the farmer a certain quantity of it; because, if he did not buy this quantity of the farmer, he would, it is presumed, buy it of some smuggler. The taxes upon both commodities are exorbitant. The temptation to smuggle, consequently, is to many people irresistible; while, at the same time, the rigour of the law, and the vigilance of the farmer's officers, render the yielding to the temptation almost certainly ruinous. The smuggling of salt and tobacco sends every year several hundred people to the galleys, besides a very considerable number whom it sends to the gibbet. Those taxes, levied in this manner, yield a very considerable revenue to government. In 1767, the farm of tobacco was let for twenty-two millions five hundred and forty-one thousand two hundred and seventy-eight livres a-year; that of salt for thirty-six millions four hundred and ninety-two thousand four hundred and four livres. The farm, in both cases, was to commence in 1768, and to last for six years. These who consider the blood of the people as nothing, in comparison with the revenue of the prince, may, perhaps, approve of this method of levying taxes. Similar taxes and monopolies of salt and tobacco have been established in many other countries, particularly in the Austrian and Prussian dominions, and in the greater part of the states of Italy. In France, the greater part of the actual revenue of the crown is derived from eight different sources; the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the farm of tobacco. The five last are, in the greater part of the provinces, under farm. The three first are everywhere levied by an administration, under the immediate inspection and direction of government; and it is universally acknowledged, that in proportion to what they take out of the pockets of the people, they bring more into the treasury of the prince than the other five, of which the administration is much more wasteful and expensive. The finances of France seem, in their present state, to admit of three very obvious reformations. First, by abolishing the taille and the capitation, and by increasing the number of the vingtiemes, so as to produce an additional revenue equal to the amount of those other taxes, the revenue of the crown might be preserved; the expense of collection might be much diminished; the vexation of the inferior ranks of people, which the taille and capitation occasion, might be entirely prevented; and the superior ranks might not be more burdened than the greater part of them are at present. The vingtieme, I have already observed, is a tax very nearly of the same kind with what is called the land tax of England. The burden of the taille, it is acknowledged, falls finally upon the proprietors of land; and as the greater part of the capitation is assessed upon those who are subject to the taille, at so much a-pound of that other tax, the final payment of the greater part of it must likewise fall upon the same order of people. Though the number of the vingtiemes, therefore, was increased, so as to produce an additional revenue equal to the amount of both those taxes, the superior ranks of people might not be more burdened than they are at present; many individuals, no doubt, would, on account of the great inequalities with which the taille is commonly assessed upon the estates and tenants of different individuals. The interest and opposition of such favoured subjects, are the obstacles most likely to prevent this, or any other reformation of the same kind. Secondly, by rendering the gabelle, the aides, the traites, the taxes upon tobacco, all the different customs and excises, uniform in all the different parts of the kingdom, those taxes might be levied at much less expense, and the interior commerce of the kingdom might be rendered as free as that of England. Thirdly, and lastly, by subjecting all those taxes to an administration under the immediate inspection and direction of government, the exorbitant profits of the farmers-general might be added to the revenue of the state. The opposition arising from the private interest of individuals, is likely to be as effectual for preventing the two last as the first-mentioned scheme of reformation. The French system of taxation seems, in every respect, inferior to the British. In Great Britain, ten millions sterling are annually levied upon less than eight millions of people, without its being possible to say that any particular order is oppressed. From the Collections of the Abbé Expilly, and the observations of the author of the Essay upon the Legislation and Commerce of Corn, it appears probable that France, including the provinces of Lorraine and Bar, contains about twenty-three or twenty-four millions of people; three times the number, perhaps, contained in Great Britain. The soil and climate of France are better than those of Great Britain. The country has been much longer in a state of improvement and cultivation, and is, upon that account, better stocked with all those things which it requires a long time to raise up and accumulate; such as great towns, and convenient and well-built houses, both in town and country. With these advantages, it might be expected, that in France a revenue of thirty millions might be levied for the support of the state, with as little inconvenience as a revenue of ten millions is in Great Britain. In 1765 and 1766, the whole revenue paid into the treasury of France, according to the best, though, I acknowledge, very imperfect accounts which I could get of it, usually run between 308 and 325 millions of livres; that is, it did not amount to fifteen millions sterling; not the half of what might have been expected, had the people contributed in the same proportion to their numbers as the people of Great Britain. The people of France, however, it is generally acknowledged, are much more oppressed by taxes than the people of Great Britain. France, however, is certainly the great empire in Europe, which, after that of Great Britain, enjoys the mildest and most indulgent government. In Holland, the heavy taxes upon the necessaries of life have ruined, it is said, their principal manufacturers, and are likely to discourage, gradually, even their fisheries and their trade in ship-building. The taxes upon the necessaries of life are inconsiderable in Great Britain, and no manufacture has hitherto been ruined by them. The British taxes which bear hardest on manufactures, are some duties upon the importation of raw materials, particularly upon that of raw silk. The revenue of the States-General and of the different cities, however, is said to amount to more than five millions two hundred and fifty thousand pounds sterling; and as the inhabitants of the United Provinces cannot well be supposed to amount to more than a third part of those of Great Britain, they must, in proportion to their number, be much more heavily taxed. After all the proper subjects of taxation have been exhausted, if the exigencies of the state still continue to require new taxes, they must be imposed upon improper ones. The taxes upon the necessaries of life, therefore, may be no impeachment of the wisdom of that republic, which, in order to acquire and to maintain its independency, has, in spite of its great frugality, been involved in such expensive wars as have obliged it to contract great debts. The singular countries of Holland and Zealand, besides, require a considerable expense even to preserve their existence, or to prevent their being swallowed up by the sea, which must have contributed to increase considerably the load of taxes in those two provinces. The republican form of government seems to be the principal support of the present grandeur of Holland. The owners of great capitals, the great mercantile families, have generally either some direct share, or some indirect influence, in the administration of that government. For the sake of the respect and authority which they derive from this situation, they are willing to live in a country where their capital, if they employ it themselves, will bring them less profit, and if they lend it to another, less interest; and where the very moderate revenue which they can draw from it will purchase less of the necessaries and conveniencies of life than in any other part of Europe. The residence of such wealthy people necessarily keeps alive, in spite of all disadvantages, a certain degree of industry in the country. Any public calamity which should destroy the republican form of government, which should throw the whole administration into the hands of nobles and of soldiers, which should annihilate altogether the importance of those wealthy merchants, would soon render it disagreeable to them to live in a country where they were no longer likely to be much respected. They would remove both their residence and their capital to some other country, and the industry and commerce of Holland would soon follow the capitals which supported them. CHAP. III. OF PUBLIC DEBTS. In that rude state of society which precedes the extension of commerce and the improvement of manufactures; when those expensive luxuries, which commerce and manufactures can alone introduce, are altogether unknown; the person who possesses a large revenue, I have endeavoured to show in the third book of this Inquiry, can spend or enjoy that revenue in no other way than by maintaining nearly as many people as it can maintain. A large revenue may at all times be said to consist in the command of a large quantity of the necessaries of life. In that rude state of things, it is commonly paid in a large quantity of those necessaries, in the materials of plain food and coarse clothing, in corn and cattle, in wool and raw hides. When neither commerce nor manufactures furnish any thing for which the owner can exchange the greater part of those materials which are over and above his own consumption, he can do nothing with the surplus, but feed and clothe nearly as many people as it will feed and clothe. A hospitality in which there is no luxury, and a liberality in which there is no ostentation, occasion, in this situation of things, the principal expenses of the rich and the great. But these I have likewise endeavoured to show, in the same book, are expenses by which people are not very apt to ruin themselves. There is not, perhaps, any selfish pleasure so frivolous, of which the pursuit has not sometimes ruined even sensible men. A passion for cock-fighting has ruined many. But the instances, I believe, are not very numerous, of people who have been ruined by a hospitality or liberality of this kind; though the hospitality of luxury, and the liberality of ostentation have ruined many. Among our feudal ancestors, the long time during which estates used to continue in the same family, sufficiently demonstrates the general disposition of people to live within their income. Though the rustic hospitality, constantly exercised by the great landholders, may not, to us in the present times, seem consistent with that order which we are apt to consider as inseparably connected with good economy; yet we must certainly allow them to have been at least so far frugal, as not commonly to have spent their whole income. A part of their wool and raw hides, they had generally an opportunity of selling for money. Some part of this money, perhaps, they spent in purchasing the few objects of vanity and luxury, with which the circumstances of the times could furnish them; but some part of it they seem commonly to have hoarded. They could not well, indeed, do any thing else but hoard whatever money they saved. To trade, was disgraceful to a gentleman; and to lend money at interest, which at that time was considered as usury, and prohibited by law, would have been still more so. In those times of violence and disorder, besides, it was convenient to have a hoard of money at hand, that in case they should be driven from their own home, they might have something of known value to carry with them to some place of safety. The same violence which made it convenient to hoard, made it equally convenient to conceal the hoard. The frequency of treasure-trove, or of treasure found, of which no owner was known, sufficiently demonstrates the frequency, in those times, both of hoarding and of concealing the hoard. Treasure-trove was then considered as an important branch of the revenue of the sovereign. All the treasure-trove of the kingdom would scarce, perhaps, in the present times, make an important branch of the revenue of a private gentleman of a good estate. The same disposition, to save and to hoard, prevailed in the sovereign, as well as in the subjects. Among nations, to whom commerce and manufactures are little known, the sovereign, it has already been observed in the fourth book, is in a situation which naturally disposes him to the parsimony requisite for accumulation. In that situation, the expense, even of a sovereign, cannot be directed by that vanity which delights in the gaudy finery of a court. The ignorance of the times affords but few of the trinkets in which that finery consists. Standing armies are not then necessary; so that the expense, even of a sovereign, like that of any other great lord, can be employed in scarce any thing but bounty to his tenants, and hospitality to his retainers. But bounty and hospitality very seldom lead to extravagance; though vanity almost always does. All the ancient sovereigns of Europe, accordingly, it has already been observed, had treasures. Every Tartar chief, in the present times, is said to have one. In a commercial country, abounding with every sort of expensive luxury, the sovereign, in the same manner as almost all the great proprietors in his dominions, naturally spends a great part of his revenue in purchasing those luxuries. His own and the neighbouring countries supply him abundantly with all the costly trinkets which compose the splendid, but insignificant, pageantry of a court. For the sake of an inferior pageantry of the same kind, his nobles dismiss their retainers, make their tenants independent, and become gradually themselves as insignificant as the greater part of the wealthy burghers in his dominions. The same frivolous passions, which influence their conduct, influence his. How can it be supposed that he should be the only rich man in his dominions who is insensible to pleasures of this kind? If he does not, what he is very likely to do, spend upon those pleasures so great a part of his revenue as to debilitate very much the defensive power of the state, it cannot well be expected that he should not spend upon them all that part of it which is over and above what is necessary for supporting that defensive power. His ordinary expense becomes equal to his ordinary revenue, and it is well if it does not frequently exceed it. The amassing of treasure can no longer be expected; and when extraordinary exigencies require extraordinary expenses, he must necessarily call upon his subjects for an extraordinary aid. The present and the late king of Prussia are the only great princes of Europe, who, since the death of Henry IV. of France, in 1610, are supposed to have amassed any considerable treasure. The parsimony which leads to accumulation has become almost as rare in republican as in monarchical governments. The Italian republics, the United Provinces of the Netherlands, are all in debt. The canton of Berne is the single republic in Europe which has amassed any considerable treasure. The other Swiss republics have not. The taste for some sort of pageantry, for splendid buildings, at least, and other public ornaments, frequently prevails as much in the apparently sober senate-house of a little republic, as in the dissipated court of the greatest king. The want of parsimony, in time of peace, imposes the necessity of contracting debt in time of war. When war comes, there is no money in the treasury, but what is necessary for carrying on the ordinary expense of the peace establishment. In war, an establishment of three or four times that expense becomes necessary for the defence of the state; and consequently, a revenue three or four times greater than the peace revenue. Supposing that the sovereign should have, what he scarce ever has, the immediate means of augmenting his revenue in proportion to the augmentation of his expense; yet still the produce of the taxes, from which this increase of revenue must be drawn, will not begin to come into the treasury, till perhaps ten or twelve months after they are imposed. But the moment in which war begins, or rather the moment in which it appears likely to begin, the army must be augmented, the fleet must be fitted out, the garrisoned towns must be put into a posture of defence; that army, that fleet, those garrisoned towns, must be furnished with arms, ammunition, and provisions. An immediate and great expense must be incurred in that moment of immediate danger, which will not wait for the gradual and slow returns of the new taxes. In this exigency, government can have no other resource but in borrowing. The same commercial state of society which, by the operation of moral causes, brings government in this manner into the necessity of borrowing, produces in the subjects both an ability and an inclination to lend. If it commonly brings along with it the necessity of borrowing, it likewise brings with it the facility of doing so. A country abounding with merchants and manufacturers, necessarily abounds with a set of people through whose hands, not only their own capitals, but the capitals of all those who either lend them money, or trust them with goods, pass as frequently, or more frequently, than the revenue of a private man, who, without trade or business, lives upon his income, passes through his hands. The revenue of such a man can regularly pass through his hands only once in a year. But the whole amount of the capital and credit of a merchant, who deals in a trade of which the returns are very quick, may sometimes pass through his hands two, three, or four times in a year. A country abounding with merchants and manufacturers, therefore, necessarily abounds with a set of people, who have it at all times in their power to advance, if they chuse to do so, a very large sum of money to government. Hence the ability in the subjects of a commercial state to lend. Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice; in which the people do not feel themselves secure in the possession of their property; in which the faith of contracts is not supported by law; and in which the authority of the state is not supposed to be regularly employed in enforcing the payment of debts from all those who are able to pay. Commerce and manufactures, in short, can seldom flourish in any state, in which there is not a certain degree of confidence in the justice of government. The same confidence which disposes great merchants and manufacturers upon ordinary occasions, to trust their property to the protection of a particular government, disposes them, upon extraordinary occasions, to trust that government with the use of their property. By lending money to government, they do not even for a moment diminish their ability to carry on their trade and manufactures; on the contrary, they commonly augment it. The necessities of the state render government, upon most occasions willing to borrow upon terms extremely advantageous to the lender. The security which it grants to the original creditor, is made transferable to any other creditor; and from the universal confidence in the justice of the state, generally sells in the market for more than was originally paid for it. The merchant or monied man makes money by lending money to government, and instead of diminishing, increases his trading capital. He generally considers it as a favour, therefore, when the administration admits him to a share in the first subscription for a new loan. Hence the inclination or willingness in the subjects of a commercial state to lend. The government of such a state is very apt to repose itself upon this ability and willingness of its subjects to lend it their money on extraordinary occasions. It foresees the facility of borrowing, and therefore dispenses itself from the duty of saving. In a rude state of society, there are no great mercantile or manufacturing capitals. The individuals, who hoard whatever money they can save, and who conceal their hoard, do so from a distrust of the justice of government; from a fear, that if it was known that they had a hoard, and where that hoard was to be found, they would quickly be plundered. In such a state of things, few people would be able, and nobody would be willing to lend their money to government on extraordinary exigencies. The sovereign feels that he must provide for such exigencies by saving, because he foresees the absolute impossibility of borrowing. This foresight increases still further his natural disposition to save. The progress of the enormous debts which at present oppress, and will in the long-run probably ruin, all the great nations of Europe, has been pretty uniform. Nations, like private men, have generally begun to borrow upon what may be called personal credit, without assigning or mortgaging any particular fund for the payment of the debt; and when this resource has failed them, they have gone on to borrow upon assignments or mortgages of particular funds. What is called the unfunded debt of Great Britain, is contracted in the former of those two ways. It consists partly in a debt which bears, or is supposed to bear, no interest, and which resembles the debts that a private man contracts upon account; and partly in a debt which bears interest, and which resembles what a private man contracts upon his bill or promissory-note. The debts which are due, either for extraordinary services, or for services either not provided for, or not paid at the time when they are performed; part of the extraordinaries of the army, navy, and ordnance, the arrears of subsidies to foreign princes, those of seamen's wages, &c. usually constitute a debt of the first kind. Navy and exchequer bills, which are issued sometimes in payment of a part of such debts, and sometimes for other purposes, constitutes a debt of the second kind; exchequer bills bearing interest from the day on which they are issued, and navy bills six months after they are issued. The bank of England, either by voluntarily discounting those bills at their current value, or by agreeing with government for certain considerations to circulate exchequer bills, that is, to receive them at par, paying the interest which happens to be due upon them, keeps up the value, and facilitates their circulation, and thereby frequently enables government to contract a very large debt of this kind. In France, where there is no bank, the state bills (billets d'etat[76]) have sometimes sold at sixty and seventy per cent. discount. During the great recoinage in king William's time, when the bank of England thought proper to put a stop to its usual transactions, exchequer bills and tallies are said to have sold from twenty-five to sixty per cent. discount; owing partly, no doubt, to the supposed instability of the new government established by the Revolution, but partly, too, to the want of the support of the bank of England. When this resource is exhausted, and it becomes necessary, in order to raise money, to assign or mortgage some particular branch of the public revenue for the payment of the debt, government has, upon different occasions, done this in two different ways. Sometimes it has made this assignment or mortgage for a short period of time only, a year, or a few years, for example; and sometimes for perpetuity. In the one case, the fund was supposed sufficient to pay, within the limited time, both principal and interest of the money borrowed. In the other, it was supposed sufficient to pay the interest only, or a perpetual annuity equivalent to the interest, government being at liberty to redeem, at any time, this annuity, upon paying back the principal sum borrowed. When money was raised in the one way, it was said to be raised by anticipation; when in the other, by perpetual funding, or, more shortly, by funding. In Great Britain, the annual land and malt taxes are regularly anticipated every year, by virtue of a borrowing clause constantly inserted into the acts which impose them. The bank of England generally advances at an interest, which, since the Revolution, has varied from eight to three per cent., the sums of which those taxes are granted, and receives payment as their produce gradually comes in. If there is a deficiency, which there always is, it is provided for in the supplies of the ensuing year. The only considerable branch of the public revenue which yet remains unmortgaged, is thus regularly spent before it comes in. Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money. In the reign of king William, and during a great part of that of queen Anne, before we had become so familiar as we are now with the practice of perpetual funding, the greater part of the new taxes were imposed but for a short period of time (for four, five, six, or seven years only), and a great part of the grants of every year consisted in loans upon anticipations of the produce of those taxes. The produce being frequently insufficient for paying, within the limited term, the principal and interest of the money borrowed, deficiencies arose; to make good which, it became necessary to prolong the term. In 1697, by the 8th of William III., c. 20, the deficiencies of several taxes were charged upon what was then called the first general mortgage or fund, consisting of a prolongation to the first of August 1706, of several different taxes, which would have expired within a shorter term, and of which the produce was accumulated into one general fund. The deficiencies charged upon this prolonged term amounted to L.5,160,459 : 14 : 9-1/2. In 1701, those duties, with some others, were still further prolonged, for the like purposes, till the first of August 1710, and were called the second general mortgage or fund. The deficiencies charged upon it amounted to L.2,055,999 : 7 : 11-1/2. In 1707, those duties were still further prolonged, as a fund for new loans, to the first of August 1712, and were called the third general mortgage or fund. The sum borrowed upon it was L.983,254 : 11 : 9-1/4. In 1708, those duties were all (except the old subsidy of tonnage and poundage, of which one moiety only was made a part of this fund, and a duty upon the importation of Scotch linen, which had been taken off by the articles of union) still further continued, as a fund for new loans, to the first of August 1714, and were called the fourth general mortgage or fund. The sum borrowed upon it was L.925,176 : 9 : 2-1/4. In 1709, those duties were all (except the old subsidy of tonnage and poundage, which was now left out of this fund altogether) still further continued, for the same purpose, to the first of August 1716, and were called the fifth general mortgage or fund. The sum borrowed upon it was L.922,029 : 6s. In 1710, those duties were again prolonged to the first of August 1720, and were called the sixth general mortgage or fund. The sum borrowed upon it was L.1,296,552 : 9 : 11-3/4. In 1711, the same duties (which at this time were thus subject to four different anticipations), together with several others, were continued for ever, and made a fund for paying the interest of the capital of the South-sea company, which had that year advanced to government, for paying debts, and making good deficiencies, the sum of L.9,177,967 : 15 : 4, the greatest loan which at that time had ever been made. Before this period, the principal, so far as I have been able to observe, the only taxes, which, in order to pay the interest of a debt, had been imposed for perpetuity, were these for paying the interest of the money which had been advanced to government by the bank and East-India company, and of what it was expected would be advanced, but which was never advanced, by a projected land bank. The bank fund at this time amounted to L.3,375,027 : 17 : 10-1/2, for which was paid an annuity or interest of L.206,501 : 13 : 5. The East-India fund amounted to L.3,200,000, for which was paid an annuity or interest of L.160,000; the bank fund being at six per cent., the East-India fund at five per cent. interest. In 1715, by the first of George I., c. 12, the different taxes which had been mortgaged for paying the bank annuity, together with several others, which, by this act, were likewise rendered perpetual, were accumulated into one common fund, called the aggregate fund, which was charged not only with the payment of the bank annuity, but with several other annuities and burdens of different kinds. This fund was afterwards augmented by the third of George I., c. 8., and by the fifth of George I., c. 3, and the different duties which were then added to it were likewise rendered perpetual. In 1717, by the third of George I., c. 7, several other taxes were rendered perpetual, and accumulated into another common fund, called the general fund, for the payment of certain annuities, amounting in the whole to L.724,849 : 6 : 10-1/2. In consequence of those different acts, the greater part of the taxes, which before had been anticipated only for a short term of years were rendered perpetual, as a fund for paying, not the capital, but the interest only, of the money which had been borrowed upon them by different successive anticipations. Had money never been raised but by anticipation, the course of a few years would have liberated the public revenue, without any other attention of government besides that of not overloading the fund, by charging it with more debt than it could pay within the limited term, and not of anticipating a second time before the expiration of the first anticipation. But the greater part of European governments have been incapable of those attentions. They have frequently overloaded the fund, even upon the first anticipation; and when this happened not to be the case, they have generally taken care to overload it, by anticipating a second and a third time, before the expiration of the first anticipation. The fund becoming in this manner altogether insufficient for paying both principal and interest of the money borrowed upon it, it became necessary to charge it with the interest only, or a perpetual annuity equal to the interest; and such improvident anticipations necessarily gave birth to the more ruinous practice of perpetual funding. But though this practice necessarily puts off the liberation of the public revenue from a fixed period, to one so indefinite that it is not very likely ever to arrive; yet, as a greater sum can, in all cases, be raised by this new practice than by the old one of anticipation, the former, when men have once become familiar with it, has, in the great exigencies of the state, been universally preferred to the latter. To relieve the present exigency, is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of the public revenue they leave to the care of posterity. During the reign of queen Anne, the market rate of interest had fallen from six to five per cent.; and, in the twelfth year of her reign, five per cent. was declared to be the highest rate which could lawfully be taken for money borrowed upon private security. Soon after the greater part of the temporary taxes of Great Britain had been rendered perpetual, and distributed into the aggregate, South-sea, and general funds, the creditors of the public, like those of private persons, were induced to accept of five per cent. for the interest of their money, which occasioned a saving of one per cent. upon the capital of the greater part of the debts which had been thus funded for perpetuity, or of one-sixth of the greater part of the annuities which were paid out of the three great funds above mentioned. This saving left a considerable surplus in the produce of the different taxes which had been accumulated into those funds, over and above what was necessary for paying the annuities which were now charged upon them, and laid the foundation of what has since been called the sinking fund. In 1717, it amounted to L.323,434 : 7 : 7-1/2. In 1727, the interest of the greater part of the public debts was still further reduced to four per cent.; and, in 1753 and 1757, to three and a-half, and three per cent., which reductions still further augmented the sinking fund. A sinking fund, though instituted for the payment of old, facilitates very much the contracting of new debts. It is a subsidiary fund, always at hand, to be mortgaged in aid of any other doubtful fund, upon which money is proposed to be raised in any exigency of the state. Whether the sinking fund of Great Britain has been more frequently applied to the one or to other of those two purposes, will sufficiently appear by and by. Besides these two methods of borrowing, by anticipations and by a perpetual funding, there are two other methods, which hold a sort of middle place between them; these are, that of borrowing upon annuities for terms of years, and that of borrowing upon annuities for lives. During the reigns of king William and queen Anne, large sums were frequently borrowed upon annuities for terms of years, which were sometimes longer and sometimes shorter. In 1693, an act was passed for borrowing one million upon an annuity of fourteen per cent., or L.140,000 a-year, for sixteen years. In 1691, an act was passed for borrowing a million upon annuities for lives, upon terms which, in the present times, would appear very advantageous; but the subscription was not filled up. In the following year, the deficiency was made good, by borrowing upon annuities for lives, at fourteen per cent. or a little more than seven years purchase. In 1695, the persons who had purchased those annuities were allowed to exchange them for others of ninety-six years, upon paying into the exchequer sixty-three pounds in the hundred; that is, the difference between fourteen per cent. for life, and fourteen per cent. for ninety-six years, was sold for sixty-three pounds, or for four and a-half years purchase. Such was the supposed instability of government, that even these terms procured few purchasers. In the reign of queen Anne, money was, upon different occasions, borrowed both upon annuities for lives, and upon annuities for terms of thirty-two, of eighty-nine, of ninety-eight, and of ninety-nine years. In 1719, the proprietors of the annuities for thirty-two years were induced to accept, in lieu of them, South-sea stock to the amount of eleven and a-half years purchase of the annuities, together with an additional quantity of stock, equal to the arrears which happened then to be due upon them. In 1720, the greater part of the other annuities for terms of years, both long and short, were subscribed into the same fund. The long annuities, at that time, amounted to L.666,821 : 8 : 3-1/2 a-year. On the 5th of January 1775, the remainder of them, or what was not subscribed at that time, amounted only to L.136,453 : 12 : 8. During the two wars which began in 1739 and in 1755, little money was borrowed, either upon annuities for terms of years, or upon those for lives. An annuity for ninety-eight or ninety-nine years, however, is worth nearly as much as a perpetuity, and should therefore, one might think, be a fund for borrowing nearly as much. But those who, in order to make family settlements, and to provide for remote futurity, buy into the public stocks, would not care to purchase into one of which the value was continually diminishing; and such people make a very considerable proportion, both of the proprietors and purchasers of stock. An annuity for a long term of years, therefore, though its intrinsic value may be very nearly the same with that of a perpetual annuity, will not find nearly the same number of purchasers. The subscribers to a new loan, who mean generally to sell their subscription as soon as possible, prefer greatly a perpetual annuity, redeemable by parliament, to an irredeemable annuity, for a long term of years, of only equal amount. The value of the former may be supposed always the same, or very nearly the same; and it makes, therefore, a more convenient transferable stock than the latter. During the two last-mentioned wars, annuities, either for terms of years or for lives, were seldom granted, but as premiums to the subscribers of a new loan, over and above the redeemable annuity or interest, upon the credit of which the loan was supposed to be made. They were granted, not as the proper fund upon which the money was borrowed, but as an additional encouragement to the lender. Annuities for lives have occasionally been granted in two different ways; either upon separate lives, or upon lots of lives, which, in French, are called tontines, from the name of their inventor. When annuities are granted upon separate lives, the death of every individual annuitant disburdens the public revenue, so far as it was affected by his annuity. When annuities are granted upon tontines, the liberation of the public revenue does not commence till the death of all the annuitants comprehended in one lot, which may, sometimes consist of twenty or thirty persons, of whom the survivors succeed to the annuities of all those who die before them; the last survivor succeeding to the annuities of the whole lot. Upon the same revenue, more money can always be raised by tontines than by annuities for separate lives. An annuity, with a right of survivorship, is really worth more than an equal annuity for a separate life; and, from the confidence which every man naturally has in his own good fortune, the principle upon which is founded the success of all lotteries, such an annuity generally sells for something more than it is worth. In countries where it is usual for government to raise money by granting annuities, tontines are, upon this account, generally preferred to annuities for separate lives. The expedient which will raise most money, is almost always preferred to that which is likely to bring about, in the speediest manner, the liberation of the public revenue. In France, a much greater proportion of the public debts consists in annuities for lives than in England. According to a memoir presented by the parliament of Bourdeaux to the king, in 1764, the whole public debt of France is estimated at twenty-four hundred millions of livres; of which the capital, for which annuities for lives had been granted, is supposed to amount to three hundred millions, the eighth part of the whole public debt. The annuities themselves are computed to amount to thirty millions a-year, the fourth part of one hundred and twenty millions, the supposed interest of that whole debt. These estimations, I know very well, are not exact; but having been presented by so very respectable a body as approximations to the truth, they may, I apprehend, be considered as such. It is not the different degrees of anxiety in the two governments of France and England for the liberation of the public revenue, which occasions this difference in their respective modes of borrowing; it arises altogether from the different views and interests of the lenders. In England, the seat of government being in the greatest mercantile city in the world, the merchants are generally the people who advance money to government. By advancing it, they do not mean to diminish, but, on the contrary, to increase their mercantile capitals; and unless they expected to sell, with some profit, their share in the subscription for a new loan, they never would subscribe. But if, by advancing their money, they were to purchase, instead of perpetual annuities, annuities for lives only, whether their own or those of other people, they would not always be so likely to sell them with a profit. Annuities upon their own lives they would always sell with loss; because no man will give for an annuity upon the life of another, whose age and state of health are nearly the same with his own, the same price which he would give for one upon his own. An annuity upon the life of a third person, indeed, is, no doubt, of equal value to the buyer and the seller; but its real value begins to diminish from the moment it is granted, and continues to do so, more and more, as long as it subsists. It can never, therefore, make so convenient a transferable stock as a perpetual annuity, of which the real value may be supposed always the same, or very nearly the same. In France, the seat of government not being in a great mercantile city, merchants do not make so great a proportion of the people who advance money to government. The people concerned in the finances, the farmers-general, the receivers of the taxes which are not in farm, the court-bankers, &c. make the greater part of those who advance their money in all public exigencies. Such people are commonly men of mean birth, but of great wealth, and frequently of great pride. They are too proud to marry their equals, and women of quality disdain to marry them. They frequently resolve, therefore, to live bachelors; and having neither any families of their own, nor much regard for those of their relations, whom they are not always very fond of acknowledging, they desire only to live in splendour during their own time, and are not unwilling that their fortune should end with themselves. The number of rich people, besides, who are either averse to marry, or whose condition of life renders it either improper or inconvenient for them to do so, is much greater in France than in England. To such people, who have little or no care for posterity, nothing can be more convenient than to exchange their capital for a revenue, which is to last just as long, and no longer, than they wish it to do. The ordinary expense of the greater part of modern governments, in time of peace, being equal, or nearly equal, to their ordinary revenue, when war comes, they are both unwilling and unable to increase their revenue in proportion to the increase of their expense. They are unwilling, for fear of offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war; and they are unable, from not well knowing what taxes would be sufficient to produce the revenue wanted. The facility of borrowing delivers them from the embarrassment which this fear and inability would otherwise occasion. By means of borrowing, they are enabled, with a very moderate increase of taxes, to raise, from year to year, money sufficient for carrying on the war; and by the practice of perpetual funding, they are enabled, with the smallest possible increase of taxes, to raise annually the largest possible sum of money. In great empires, the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war, but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war. The return of peace, indeed, seldom relieves them from the greater part of the taxes imposed during the war. These are mortgaged for the interest of the debt contracted, in order to carry it on. If, over and above paying the interest of this debt, and defraying the ordinary expense of government, the old revenue, together with the new taxes, produce some surplus revenue, it may, perhaps, be converted into a sinking fund for paying off the debt. But, in the first place, this sinking fund, even supposing it should be applied to no other purpose, is generally altogether inadequate for paying, in the course of any period during which it can reasonably be expected that peace should continue, the whole debt contracted during the war; and, in the second place, this fund is almost always applied to other purposes. The new taxes were imposed for the sole purpose of paying the interest of the money borrowed upon them. If they produce more, it is generally something which was neither intended nor expected, and is, therefore, seldom very considerable. Sinking funds have generally arisen, not so much from any surplus of the taxes which was over and above what was necessary for paying the interest or annuity originally charged upon them, as from a subsequent reduction of that interest; that of Holland in 1655, and that of the ecclesiastical state in 1685, were both formed in this manner. Hence the usual insufficiency of such funds. During the most profound peace, various events occur, which require an extraordinary expense; and government finds it always more convenient to defray this expense by misapplying the sinking fund, than by imposing a new tax. Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition. The more taxes may have been multiplied, the higher they may have been raised upon every different subject of taxation; the more loudly the people complain of every new tax, the more difficult it becomes, too, either to find out new subjects of taxation, or to raise much higher the taxes already imposed upon the old. A momentary suspension of the payment of debt is not immediately felt by the people, and occasions neither murmur nor complaint. To borrow of the sinking fund is always an obvious and easy expedient for getting out of the present difficulty. The more the public debts may have been accumulated, the more necessary it may have become to study to reduce them; the more dangerous, the more ruinous it may be to missapply any part of the sinking fund; the less likely is the public debt to be reduced to any considerable degree, the more likely, the more certainly, is the sinking fund to be misapplied towards defraying all the extraordinary expenses which occur in time of peace. When a nation is already overburdened with taxes, nothing but the necessities of a new war, nothing but either the animosity of national vengeance, or the anxiety for national security, can induce the people to submit, with tolerable patience, to a new tax. Hence the usual misapplication of the sinking fund. In Great Britain, from the time that we had first recourse to the ruinous expedient of perpetual funding, the reduction of the public debt, in time of peace, has never borne any proportion to its accumulation in time of war. It was in the war which began in 1668, and was concluded by the treaty of Ryswick, in 1697, that the foundation of the present enormous debt of Great Britain was first laid. On the 31st of December 1697, the public debts of Great Britain, funded and unfunded, amounted to L.21,515,742 : 13 : 8-1/2. A great part of those debts had been contracted upon short anticipations, and some part upon annuities for lives; so that, before the 31st of December 1701, in less than four years, there had partly been paid off, and partly reverted to the public, the sum of L.5,121,041 : 12 : 0-3/4; a greater reduction of the public debt than has ever since been brought about in so short a period of time. The remaining debt, therefore, amounted only to L.16,394,701 : 1 : 7-1/4. In the war which began in 1702, and which was concluded by the treaty of Utrecht, the public debts were still more accumulated. On the 31st of December 1714, they amounted to L.53,681,076 : 5 : 6-1/12. The subscription into the South-sea fund, of the short and long annuities, increased the capital of the public debt; so that, on the 31st of December 1722, it amounted to L.55,282,978 : 1 : 3-5/6. The reduction of the debt began in 1723, and went on so slowly, that, on the 31st of December 1739, during seventeen years of profound peace, the whole sum paid off was no more than L.8,328,354 : 17 : 11-3/12, the capital of the public debt, at that time, amounting to L.46,954,623 : 3 : 4-7/12. The Spanish war, which began in 1739, and the French war which soon followed it, occasioned a further increase of the debt, which, on the 31st of December 1748, after the war had been concluded by the treaty of Aix-la-Chapelle, amounted to L.78,293,313 : 1 : 10-3/4. The most profound peace of 17 years continuance, had taken no more than L.8,328,354 : 17 : 11-1/4 from it. A war, of less than nine years continuance, added L.31,338,689 : 18 : 6-1/6 to it.[77] During the administration of Mr. Pelham, the interest of the public debt was reduced, or at least measures were taken for reducing it, from four to three per cent.; the sinking fund was increased, and some part of the public debt was paid off. In 1755, before the breaking out of the late war, the funded debt of Great Britain amounted to L.72,289,673. On the 5th of January 1763, at the conclusion of the peace, the funded debt amounted to L.122,603,336 : 8 : 2-1/4. The unfunded debt has been stated at L.13,927,589 : 2 : 2. But the expense occasioned by the war did not end with the conclusion of the peace; so that, though on the 5th of January 1764, the funded debt was increased (partly by a new loan, and partly by funding a part of the unfunded debt) to L.129,586,789 : 10 : 1-3/4, there still remained (according to the very well informed author of Considerations on the Trade and Finances of Great Britain) an unfunded debt, which was brought to account in that and the following year, of L.9,975,017, 12s. 2-15/44d. In 1764, therefore, the public debt of Great Britain, funded and unfunded together, amounted, according to this author, to L.139,561,807 : 2 : 4. The annuities for lives, too, which had been granted as premiums to the subscribers to the new loans in 1757, estimated at fourteen-years purchase, were valued at L.472,500; and the annuities for long terms of years, granted as premiums likewise, in 1761 and 1762, estimated at twenty-seven years and a-half purchase, were valued at L.6,826,875. During a peace of about seven years continuance, the prudent and truly patriotic administration of Mr. Pelham was not able to pay off an old debt of six millions. During a war of nearly the same continuance, a new debt of more than seventy-five millions was contracted. On the 5th of January 1775, the funded debt of Great Britain amounted to L.124,996,086, 1s. 6-1/4d. The unfunded, exclusive of a large civil-list debt, to L.4,150,236 : 3 : 11-7/8. Both together, to L.129,146,322 : 5 : 6. According to this account, the whole debt paid off, during eleven years of profound peace, amounted only to L.10,415,476 : 16 : 9-7/8. Even this small reduction of debt, however, has not been all made from the savings out of the ordinary revenue of the state. Several extraneous sums, altogether independent of that ordinary revenue, have contributed towards it. Amongst these we may reckon an additional shilling in the pound land tax, for three years; the two millions received from the East-India company, as indemnification for their territorial acquisitions; and the one hundred and ten thousand pounds received from the bank for the renewal of their charter. To these must be added several other sums, which, as they arose out of the late war, ought perhaps to be considered as deductions from the expenses of it. The principal are, The produce of French prizes L.690,449 18 9 Composition for French prisoners 670,000 0 0 What has been received from the sale of the ceded 95,500 0 0 islands ______________ Total, L.1,455,949 18 9 If we add to this sum the balance of the earl of Chatham's and Mr. Calcraft's accounts, and other army savings of the same kind, together with what has been received from the bank, the East-India company, and the additional shilling in the pound land tax, the whole must be a good deal more than five millions. The debt, therefore, which, since the peace, has been paid out of the savings from the ordinary revenue of the state, has not, one year with another, amounted to half a million a-year. The sinking fund has, no doubt, been considerably augmented since the peace, by the debt which had been paid off, by the reduction of the redeemable four per cents to three per cents, and by the annuities for lives which have fallen in; and, if peace were to continue, a million, perhaps, might now be annually spared out of it towards the discharge of the debt. Another million, accordingly, was paid in the course of last year; but at the same time, a large civil-list debt was left unpaid, and we are now involved in a new war, which, in its progress, may prove as expensive as any of our former wars.[78] The new debt which will probably be contracted before the end of the next campaign, may, perhaps, be nearly equal to all the old debt which has been paid off from the savings out of the ordinary revenue of the state. It would be altogether chimerical, therefore, to expect that the public debt should ever be completely discharged, by any savings which are likely to be made from that ordinary revenue as it stands at present. The public funds of the different indebted nations of Europe, particularly those of England, have, by one author, been represented as the accumulation of a great capital, superadded to the other capital of the country, by means of which its trade is extended, its manufactures are multiplied, and its lands cultivated and improved, much beyond what they could have been by means of that other capital only. He does not consider that the capital which the first creditors of the public advanced to government, was, from the moment in which he advanced it, a certain portion of the annual produce, turned away from serving in the function of a capital, to serve in that of a revenue; from maintaining productive labourers, to maintain unproductive ones, and to be spent and wasted, generally in the course of the year, without even the hope of any future reproduction. In return for the capital which they advanced, they obtained, indeed, an annuity of the public funds, in most cases, of more than equal value. This annuity, no doubt, replaced to them their capital, and enabled them to carry on their trade and business to the same, or, perhaps, to a greater extent than before; that is, they were enabled, either to borrow of other people a new capital, upon the credit of this annuity or, by selling it, to get from other people a new capital of their own, equal, or superior, to that which they had advanced to government. This new capital, however, which they in this manner either bought or borrowed of other people, must have existed in the country before, and must have been employed, as all capitals are, in maintaining productive labour. When it came into the hands of those who had advanced their money to government, though it was, in some respects, a new capital to them, it was not so to the country, but was only a capital withdrawn from certain employments, in order to be turned towards others. Though it replaced to them what they had advanced to government, it did not replace it to the country. Had they not advanced this capital to government, there would have been in the country two capitals, two portions of the annual produce, instead of one, employed in maintaining productive labour. When, for defraying the expense of government, a revenue is raised within the year, from the produce of free or unmortgaged taxes, a certain portion of the revenue of private people is only turned away from maintaining one species of unproductive labour, towards maintaining another. Some part of what they pay in those taxes, might, no doubt, have been accumulated into capital, and consequently employed in maintaining productive labour; but the greater part would probably have been spent, and consequently employed in maintaining unproductive labour. The public expense, however, when defrayed in this manner, no doubt hinders, more or less, the further accumulation of new capital; but it does not necessarily occasion the destruction of any actually-existing capital. When the public expense is defrayed by funding, it is defrayed by the annual destruction of some capital which had before existed in the country; by the perversion of some portion of the annual produce which had before been destined for the maintenance of productive labour, towards that of unproductive labour. As in this case, however, the taxes are lighter than they would have been, had a revenue sufficient for defraying the same expense been raised within the year; the private revenue of individuals is necessarily less burdened, and consequently their ability to save and accumulate some part of that revenue into capital, is a good deal less impaired. If the method of funding destroys more old capital, it, at the same time, hinders less the accumulation or acquisition of new capital, than that of defraying the public expense by a revenue raised within the year. Under the system of funding, the frugality and industry of private people can more easily repair the breaches which the waste and extravagance of government may occasionally make in the general capital of the society. It is only during the continuance of war, however, that the system of funding has this advantage over the other system. Were the expense of war to be defrayed always by a revenue raised within the year, the taxes from which that extraordinary revenue was drawn would last no longer than the war. The ability of private people to accumulate, though less during the war, would have been greater during the peace, than under the system of funding. War would not necessarily have occasioned the destruction of any old capitals, and peace would have occasioned the accumulation of many more new. Wars would, in general, be more speedily concluded, and less wantonly undertaken. The people feeling, during continuance of war, the complete burden of it, would soon grow weary of it; and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired, would occur more rarely, and be of shorter continuance. Those, on the contrary, during which that ability was in the highest vigour, would be of much longer duration than they can well be under the system of funding. When funding, besides, has made a certain progress, the multiplication of taxes which it brings along with it, sometimes impairs as much the ability of private people to accumulate, even in time of peace, as the other system would in time of war. The peace revenue of Great Britain amounts at present to more than ten millions a year. If free and unmortgaged, it might be sufficient, with proper management, and without contracting a shilling of new debt, to carry on the most vigorous war. The private revenue of the inhabitants of Great Britain is at present as much incumbered in time of peace, their ability to accumulate is as much impaired, as it would have been in the time of the most expensive war, had the pernicious system of funding never been adopted. In the payment of the interest of the public debt, it has been said, it is the right hand which pays the left. The money does not go out of the country. It is only a part of the revenue of one set of the inhabitants which is transferred to another; and the nation is not a farthing the poorer. This apology is founded altogether in the sophistry of the mercantile system; and, after the long examinatior, which I have already bestowed upon that system, it may, perhaps, be unnecessary to say any thing further about it. It supposes, besides, that the whole public debt is owing to the inhabitants of the country, which happens not to be true; the Dutch, as well as several other foreign nations, having a very considerable share in our public funds. But though the whole debt were owing to the inhabitants of the country, it would not, upon that account, be less pernicious. Land and capital stock are the two original sources of all revenue, both private and public. Capital stock pays the wages of productive labour, whether employed in agriculture, manufactures, or commerce. The management of those two original sources of revenue belongs to two different sets of people; the proprietors of land, and the owners or employers of capital stock. The proprietor of land is interested, for the sake of his own revenue, to keep his estate in as good condition as he can, by building and repairing his tenants houses, by making and maintaining the necessary drains and inclosures, and all those other expensive improvements which it properly belongs to the landlord to make and maintain. But, by different land taxes, the revenue of the landlord may be so much diminished, and, by different duties upon the necessaries and conveniencies of life, that diminished revenue maybe rendered of so little real value, that he may find himself altogether unable to make or maintain those expensive improvements. When the landlord, however, ceases to do his part, it is altogether impossible that the tenant should continue to do his. As the distress of the landlord increases, the agriculture of the country must necessarily decline. When, by different taxes upon the necessaries and conveniencies of life, the owners and employers of capital stock find, that whatever revenue they derive from it, will not, in a particular country, purchase the same quantity of those necessaries and conveniencies which an equal revenue would in almost any other, they will be disposed to remove to some other. And when, in order to raise those taxes, all or the greater part of merchants and manufacturers, that is, all or the greater part of the employers of great capitals, come to be continually exposed to the mortifying and vexatious visits of the tax-gatherers, this disposition to remove will soon be changed into an actual removing. The industry of the country will necessarily fall with the removal of the capital which supported it, and the ruin of trade and manufactures will follow the declension of agriculture. To transfer from the owners of those two great sources of revenue, land, and capital stock, from the persons immediately interested in the good condition of every particular portion of land, and in the good management of every particular portion of capital stock, to another set of persons (the creditors of the public, who have no such particular interest), the greater part of the revenue arising from either, must, in the long-run, occasion both the neglect of land, and the waste or removal of capital stock. A creditor of the public has, no doubt, a general interest in the prosperity of the agriculture, manufactures, and commerce of the country; and consequently in the good condition of its land, and in the good management of its capital stock. Should there be any general failure or declension in any of these things, the produce of the different taxes might no longer be sufficient to pay him the annuity or interest which is due to him. But a creditor of the public, considered merely as such, has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. As a creditor of the public, he has no knowledge of any such particular portion. He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him, and cannot directly affect him. The practice of funding has gradually enfeebled every state which has adopted it. The Italian republics seem to have begun it. Genoa and Venice, the only two remaining which can pretend to an independent existence, have both been enfeebled by it. Spain seems to have learned the practice from the Italian republics, and (its taxes being probably less judicious than theirs) it has, in proportion to its natural strength, been still more enfeebled. The debts of Spain are of very old standing. It was deeply in debt before the end of the sixteenth century, about a hundred years before England owed a shilling. France, notwithstanding all its natural resources, languishes under an oppressive load of the same kind. The republic of the United Provinces is as much enfeebled by its debts as either Genoa or Venice. Is it likely that, in Great Britain alone, a practice, which has brought either weakness or dissolution into every other country, should prove altogether innocent? The system of taxation established in those different countries, it may be said, is inferior to that of England. I believe it is so. But it ought to be remembered, that when the wisest government has exhausted all the proper subjects of taxation, it must, in cases of urgent necessity, have recourse to improper ones. The wise republic of Holland has, upon some occasions, been obliged to have recourse to taxes as inconvenient as the greater part of those of Spain. Another war, begun before any considerable liberation of the public revenue had been brought about, and growing in its progress as expensive as the last war, may, from irresistible necessity, render the British system of taxation as oppressive as that of Holland, or even as that of Spain. To the honour of our present system of taxation, indeed, it has hitherto given so little embarrassment to industry, that, during the course even of the most expensive wars, the frugality and good conduct of individuals seem to have been able, by saving and accumulation, to repair all the breaches which the waste and extravagance of government had made in the general capital of the society. At the conclusion of the late war, the most expensive that Great Britain ever waged, her agriculture was as flourishing, her manufacturers as numerous and as fully employed, and her commerce as extensive, as they had ever been before. The capital, therefore, which supported all those different branches of industry, must have been equal to what it had ever been before. Since the peace, agriculture has been still further improved; the rents of houses have risen in every town and village of the country, a proof of the increasing wealth and revenue of the people; and the annual amount of the greater part of the old taxes, of the principal branches of the excise and customs, in particular, has been continually increasing, an equally clear proof of an increasing consumption, and consequently of an increasing produce, which could alone support that consumption. Great Britain seems to support with ease, a burden which, half a century ago, nobody believed her capable of supporting. Let us not, however, upon this account, rashly conclude that she is capable of supporting any burden; not even be too confident that she could support, without great distress, a burden a little greater than what has already been laid upon her. When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, though frequently by a pretended payment. The raising of the denomination of the coin has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment. If a sixpence, for example, should, either by act of parliament or royal proclamation, be raised to the denomination of a shilling, and twenty sixpences to that of a pound sterling; the person who, under the old denomination, had borrowed twenty shillings, or near four ounces of silver, would, under the new, pay with twenty sixpences, or with something less than two ounces. A national debt of about a hundred and twenty-eight millions, near the capital of the funded and unfunded debt of Great Britain, might, in this manner, be paid with about sixty-four millions of our present money. It would, indeed, be a pretended payment only, and the creditors of the public would really be defrauded of ten shillings in the pound of what was due to them. The calamity, too, would extend much further than to the creditors of the public, and those of every private person would suffer a proportionable loss; and this without any advantage, but in most cases with a great additional loss, to the creditors of the public. If the creditors of the public, indeed, were generally much in debt to other people, they might in some measure compensate their loss by paying their creditors in the same coin in which the public had paid them. But in most countries, the creditors of the public are, the greater part of them, wealthy people, who stand more in the relation of creditors than in that of debtors, towards the rest of their fellow-citizens. A pretended payment of this kind, therefore, instead of alleviating, aggravates, in most cases, the loss of the creditors of the public; and, without any advantage to the public, extends the calamity to a great number of other innocent people. It occasions a general and most pernicious subversion of the fortunes of private people; enriching, in most cases, the idle and profuse debtor, at the expense of the industrious and frugal creditor; and transporting a great part of the national capital from the hands which were likely to increase and improve it, to those who are likely to dissipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy, is always the measure which is both least dishonourable to the debtor, and least hurtful to the creditor. The honour of a state is surely very poorly provided for, when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious. Almost all states, however, ancient as well as modern, when reduced to this necessity, have, upon some occasions, played this very juggling trick. The Romans, at the end of the first Punic war, reduced the As, the coin or denomination by which they computed the value of all their other coins, from containing twelve ounces of copper, to contain only two ounces; that is, they raised two ounces of copper to a denomination which had always before expressed the value of twelve ounces. The republic was, in this manner, enabled to pay the great debts which it had contracted with the sixth part of what it really owed. So sudden and so great a bankruptcy, we should in the present times be apt to imagine, must have occasioned a very violent popular clamour. It does not appear to have occasioned any. The law which enacted it was, like all other laws relating to the coin, introduced and carried through the assembly of the people by a tribune, and was probably a very popular law. In Rome, as in all other ancient republics, the poor people were constantly in debt to the rich and the great, who, in order to secure their votes at the annual elections, used to lend them money at exorbitant interest, which, being never paid, soon accumulated into a sum too great for the debtor to pay, or for any body else to pay for him. The debtor, for fear of a very severe execution, was obliged, without any further gratuity, to vote for the candidate whom the creditor recommended. In spite of all the laws against bribery and corruption, the bounty of the candidates, together with the occasional distributions of coin which were ordered by the senate, were the principal funds from which, during the latter times of the Roman republic, the poorer citizens derived their subsistence. To deliver themselves from this subjection to their creditors, the poorer citizens were continually calling out, either for an entire abolition of debts, or for what they called new tables; that is, for a law which should entitle them to a complete acquittance, upon paying only a certain proportion of their accumulated debts. The law which reduced the coin of all denominations to a sixth part of its former value, as it enabled them to pay their debts with a sixth part of what they really owed, was equivalent to the most advantageous new tables. In order to satisfy the people, the rich and the great were, upon several different occasions, obliged to consent to laws, both for abolishing debts, and for introducing new tables; and they probably were induced to consent to this law, partly for the same reason, and partly that, by liberating the public revenue, they might restore vigour to that government, of which they themselves had the principal direction. An operation of this kind would at once reduce a debt of L.128,000,000 to L.21,333,333 : 6 : 8. In the course of the second Punic war, the As was still further reduced, first, from two ounces of copper to one ounce, and afterwards from one ounce to half an ounce; that is, to the twenty-fourth part of its original value. By combining the three Roman operations into one, a debt of a hundred and twenty-eight millions of our present money, might in this manner be reduced all at once to a debt of L.5,333,333 : 6 : 8. Even the enormous debt of Great Britain might in this manner soon be paid. By means of such expedients, the coin of, I believe, all nations, has been gradually reduced more and more below its original value, and the same nominal sum has been gradually brought to contain a smaller and a smaller quantity of silver. Nations have sometimes, for the same purpose, adulterated the standard of their coin; that is, have mixed a greater quantity of alloy in it. If in the pound weight of our silver coin, for example, instead of eighteen penny-weight, according to the present standard, there were mixed eight ounces of alloy; a pound sterling, or twenty shillings of such coin, would be worth little more than six shillings and eightpence of our present money. The quantity of silver contained in six shillings and eightpence of our present money, would thus be raised very nearly to the denomination of a pound sterling. The adulteration of the standard has exactly the same effect with what the French call an augmentation, or a direct raising of the denomination of the coin. An augmentation, or a direct raising of the denomination of the coin, always is, and from its nature must be, an open and avowed operation. By means of it, pieces of a smaller weight and bulk are called by the same name, which had before been given to pieces of a greater weight and bulk. The adulteration of the standard, on the contrary, has generally been a concealed operation. By means of it, pieces are issued from the mint, of the same denomination, and, as nearly as could be contrived, of the same weight, bulk, and appearance, with pieces which had been current before of much greater value. When king John of France,[79] in order to pay his debts, adulterated his coin, all the officers of his mint were sworn to secrecy. Both operations are unjust. But a simple augmentation is an injustice of open violence; whereas an adulteration is an injustice of treacherous fraud. This latter operation, therefore, as soon as it has been discovered, and it could never be concealed very long, has always excited much greater indignation than the former. The coin, after any considerable augmentation, has very seldom been brought back to its former weight; but after the greatest adulterations, it has almost always been brought back to its former fineness. It has scarce ever happened, that the fury and indignation of the people could otherwise be appeased. In the end of the reign of Henry VIII., and in the beginning of that of Edward VI., the English coin was not only raised in its denomination, but adulterated in its standard. The like frauds were practised in Scotland during the minority of James VI. They have occasionally been practised in most other countries. That the public revenue of Great Britain can never be completely liberated, or even that any considerable progress can ever be made towards that liberation, while the surplus of that revenue, or what is over and above defraying the annual expense of the peace establishment, is so very small, it seems altogether in vain to expect. That liberation, it is evident, can never be brought about, without either some very considerable augmentation of the public revenue, or some equally considerable reduction of the public expense. A more equal land tax, a more equal tax upon the rent of houses, and such alterations in the present system of customs and excise as those which have been mentioned in the foregoing chapter, might, perhaps, without increasing the burden of the greater part of the people, but only distributing the weight of it more equally upon the whole, produce a considerable augmentation of revenue. The most sanguine projector, however, could scarce flatter himself, that any augmentation of this kind would be such as could give any reasonable hopes, either of liberating the public revenue altogether, or even of making such progress towards that liberation in time of peace, as either to prevent or to compensate the further accumulation of the public debt in the next war. By extending the British system of taxation to all the different provinces of the empire, inhabited by people either of British or European extraction, a much greater augmentation of revenue might be expected. This, however, could scarce, perhaps, be done, consistently with the principles of the British constitution, without admitting into the British parliament, or, if you will, into the states-general of the British empire, a fair and equal representation of all those different provinces; that of each province bearing the same proportion to the produce of its taxes, as the representation of Great Britain might bear to the produce of the taxes levied upon Great Britain. The private interest of many powerful individuals, the confirmed prejudices of great bodies of people, seem, indeed, at present, to oppose to so great a change, such obstacles as it may be very difficult, perhaps altogether impossible, to surmount. Without, however, pretending to determine whether such a union be practicable or impracticable, it may not, perhaps, be improper, in a speculative work of this kind, to consider how far the British system of taxation might be applicable to all the different provinces of the empire; what revenue might be expected from it, if so applied; and in what manner a general union of this kind might be likely to affect the happiness and prosperity of the different provinces comprehended within it. Such a speculation, can, at worst, be regarded but as a new Utopia, less amusing, certainly, but no more useless and chimerical than the old one. The land tax, the stamp duties, and the different duties of customs and excise, constitute the four principal branches of the British taxes. Ireland is certainly as able, and our American and West India plantations more able, to pay a land tax, than Great Britain. Where the landlord is subject neither to tythe nor poor's rate, he must certainly be more able to pay such a tax, than where he is subject to both those other burdens. The tythe, where there is no modus, and where it is levied in kind, diminishes more what would otherwise be the rent of the landlord, than a land tax which really amounted to five shillings in the pound. Such a tythe will be found, in most cases, to amount to more than a fourth part of the real rent of the land, or of what remains after replacing completely the capital of the farmer, together with his reasonable profit. If all moduses and all impropriations were taken away, the complete church tythe of Great Britain and Ireland could not well be estimated at less than six or seven millions. If there was no tythe either in Great Britain or Ireland, the landlords could afford to pay six or seven millions additional land tax, without being more burdened than a very great part of them are at present. America pays no tythe, and could, therefore, very well afford to pay a land tax. The lands in America and the West Indies, indeed, are, in general, not tenanted nor leased out to farmers. They could not, therefore, be assessed according to any rent roll. But neither were the lands of Great Britain, in the 4th of William and Mary, assessed according to any rent roll, but according to a very loose and inaccurate estimation. The lands in America might be assessed either in the same manner, or in according to an equitable valuation, in consequence of an accurate survey, like that which was lately made in the Milanese, and in the dominions of Austria, Prussia, and Sardinia. Stamp duties, it is evident, might be levied without any variation, in all countries where the forms of law process, and the deeds by which property, both real and personal, is transferred, are the same, or nearly the same. The extension of the custom-house laws of Great Britain to Ireland and the plantations, provided it was accompanied, as in justice it ought to be, with an extension of the freedom of trade, would be in the highest degree advantageous to both. All the invidious restraints which at present oppress the trade of Ireland, the distinction between the enumerated and non-enumerated commodities of America, would be entirely at an end. The countries north of Cape Finisterre would be as open to every part of the produce of America, as those south of that cape are to some parts of that produce at present. The trade between all the different parts of the British empire would, in consequence of this uniformity in the customs-house laws, be as free as the coasting trade of Great Britain is at present. The British empire would thus afford, within itself, an immense internal market for every part of the produce of all its different provinces. So great an extension of market would soon compensate, both to Ireland and the plantations, all that they could suffer from the increase of the duties of customs. The excise is the only part of the British system of taxation, which would require to be varied in any respect, according as it was applied to the different provinces of the empire. It might be applied to Ireland without any variation; the produce and consumption of that kingdom being exactly of the same nature with those of Great Britain. In its application to America and the West Indies, of which the produce and consumption are so very different from those of Great Britain, some modification might be necessary, in the same manner as in its application to the cyder and beer counties of England. A fermented liquor, for example, which is called beer, but which, as it is made of molasses, bears very little resemblance to our beer, makes a considerable part of the common drink of the people in America. This liquor, as it can be kept only for a few days, cannot, like our beer, be prepared and stored up for sale in great breweries, but every private family must brew it for their own use, in the same manner as they cook their victuals. But to subject every private family to the odious visits and examination of the tax-gatherers, in the same manner as we subject the keepers of alehouses and the brewers for public sale, would be altogether inconsistent with liberty. If, for the sake of equality, it was thought necessary to lay a tax upon this liquor, it might be taxed by taxing the material of which it is made, either at the place of manufacture, or, if the circumstances of the trade rendered such an excise improper, by laying a duty upon its importation into the colony in which it was to be consumed. Besides the duty of one penny a-gallon imposed by the British parliament upon the importation of molasses into America, there is a provincial tax of this kind upon their importation into Massachusetts Bay, in ships belonging to any other colony, of eightpence the hogshead; and another upon their importation from the northern colonies into South Carolina, of fivepence the gallon. Or, if neither of these methods was found convenient, each family might compound for its consumption of this liquor, either according to the number of persons of which it consisted, in the same manner as private families compound for the malt tax in England; or according to the different ages and sexes of those persons, in the same manner as several different taxes are levied in Holland; or, nearly as Sir Matthew Decker proposes, that all taxes upon consumable commodities should be levied in England. This mode of taxation, it has already been observed, when applied to objects of a speedy consumption, is not a very convenient one. It might be adopted, however, in cases where no better could be done. Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are, therefore, extremely proper subjects of taxation. If a union with the colonies were to take place, those commodities might be taxed, either before they go out of the hands of the manufacturer or grower; or, if this mode of taxation did not suit the circumstances of those persons, they might be deposited in public warehouses, both at the place of manufacture, and at all the different ports of the empire, to which they might afterwards be transported, to remain there, under the joint custody of the owner and the revenue officer, till such time as they should be delivered out, either to the consumer, to the merchant-retailer for home consumption, or to the merchant-exporter; the tax not to be advanced till such delivery. When delivered out for exportation, to go duty-free, upon proper security being given, that they should really be exported out of the empire. These are, perhaps, the principal commodities, with regard to which the union with the colonies might require some considerable change in the present system of British taxation. What might be the amount of the revenue which this system of taxation, extended to all the different provinces of the empire, might produce, it must, no doubt, be altogether impossible to ascertain with tolerable exactness. By means of this system, there is annually levied in Great Britain, upon less than eight millions of people, more than ten millions of revenue. Ireland contains more than two millions of people, and, according to the accounts laid before the congress, the twelve associated provinces of America contain more than three. Those accounts, however, may have been exaggerated, in order, perhaps, either to encourage their own people, or to intimidate those of this country; and we shall suppose, therefore, that our North American and West Indian colonies, taken together, contain no more than three millions; or that the whole British empire, in Europe and America, contains no more than thirteen millions of inhabitants. If, upon less than eight millions of inhabitants, this system of taxation raises a revenue of more than ten millions sterling; it ought, upon thirteen millions of inhabitants, to raise a revenue of more than sixteen millions two hundred and fifty thousand pounds sterling. From this revenue, supposing that this system could produce it, must be deducted the revenue usually raised in Ireland and the plantations, for defraying the expense of the respective civil governments. The expense of the civil and military establishment of Ireland, together with the interest of the public debt, amounts, at a medium of the two years which ended March 1775, to something less than seven hundred and fifty thousand pounds a-year. By a very exact account of the revenue of the principal colonies of America and the West Indies, it amounted, before the commencement of the present disturbances, to a hundred and forty-one thousand eight hundred pounds. In this account, however, the revenue of Maryland, of North Carolina, and of all our late acquisitions, both upon the continent, and in the islands, is omitted; which may, perhaps, make a difference of thirty or forty thousand pounds. For the sake of even numbers, therefore, let us suppose that the revenue necessary for supporting the civil government of Ireland and the plantations may amount to a million. There would remain, consequently, a revenue of fifteen millions two hundred and fifty thousand pounds, to be applied towards defraying the general expense of the empire, and towards paying the public debt. But if, from the present revenue of Great Britain, a million could, in peaceable times, be spared towards the payment of that debt, six millions two hundred and fifty thousand pounds could very well be spared from this improved revenue. This great sinking fund, too, might be augmented every year by the interest of the debt which had been discharged the year before; and might, in this manner, increase so very rapidly, as to be sufficient in a few years to discharge the whole debt, and thus to restore completely the at-present debilitated and languishing vigour of the empire. In the mean time, the people might be relieved from some of the most burdensome taxes; from those which are imposed either upon the necessaries of life, or upon the materials of manufacture. The labouring poor would thus be enabled to live better, to work cheaper, and to send their goods cheaper to market. The cheapness of their goods would increase the demand for them, and consequently for the labour of those who produced them. This increase in the demand for labour would both increase the numbers, and improve the circumstances of the labouring poor. Their consumption would increase, and, together with it, the revenue arising from all those articles of their consumption upon which the taxes might be allowed to remain. The revenue arising from this system of taxation, however, might not immediately increase in proportion to the number of people who were subjected to it. Great indulgence would for some time be due to those provinces of the empire which were thus subjected to burdens to which they had not before been accustomed; and even when the same taxes came to be levied everywhere as exactly as possible, they would not everywhere produce a revenue proportioned to the numbers of the people. In a poor country, the consumption of the principal commodities subject to the duties of customs and excise, is very small; and in a thinly inhabited country, the opportunities of smuggling are very great. The consumption of malt liquors among the inferior ranks of people in Scotland is very small; and the excise upon malt, beer, and ale, produces less there than in England, in proportion to the numbers of the people and the rate of the duties, which upon malt is different, on account of a supposed difference of quality. In these particular branches of the excise, there is not, I apprehend, much more smuggling in the one country than in the other. The duties upon the distillery, and the greater part of the duties of customs, in proportion to the numbers of people in the respective countries, produce less in Scotland than in England, not only on account of the smaller consumption of the taxed commodities, but of the much greater facility of smuggling. In Ireland, the inferior ranks of people are still poorer than in Scotland, and many parts of the country are almost as thinly inhabited. In Ireland, therefore, the consumption of the taxed commodities might, in proportion to the number of the people, be still less than in Scotland, and the facility of smuggling nearly the same. In America and the West Indies, the white people, even of the lowest rank, are in much better circumstances than those of the same rank in England; and their consumption of all the luxuries in which they usually indulge themselves, is probably much greater. The blacks, indeed, who make the greater part of the inhabitants, both of the southern colonies upon the continent and of the West India islands, as they are in a state of slavery, are, no doubt, in a worse condition than the poorest people either in Scotland or Ireland. We must not, however, upon that account, imagine that they are worse fed, or that their consumption of articles which might be subjected to moderate duties, is less than that even of the lower ranks of people in England. In order that they may work well, it is the interest of their master that they should be fed well, and kept in good heart, in the same manner as it is his interest that his working cattle should be so. The blacks, accordingly, have almost everywhere their allowance of rum, and of molasses or spruce-beer, in the same manner as the white servants; and this allowance would not probably be withdrawn, though those articles should be subjected to moderate duties. The consumption of the taxed commodities, therefore, in proportion to the number of inhabitants, would probably be as great in America and the West Indies as in any part of the British empire. The opportunities of smuggling, indeed, would be much greater; America, in proportion to the extent of the country, being much more thinly inhabited than either Scotland or Ireland. If the revenue, however, which is at present raised by the different duties upon malt and malt liquors, were to be levied by a single duty upon malt, the opportunity of smuggling in the most important branch of the excise would be almost entirely taken away; and if the duties of customs, instead of being imposed upon almost all the different articles of importation, were confined to a few of the most general use and consumption, and if the levying of those duties were subjected to the excise laws, the opportunity of smuggling, though not so entirely taken away, would be very much diminished. In consequence of those two apparently very simple and easy alterations, the duties of customs and excise might probably produce a revenue as great, in proportion to the consumption of the most thinly inhabited province, as they do at present, in proportion to that of the most populous. The Americans, it has been said, indeed, have no gold or silver money, the interior commerce of the country being carried on by a paper currency; and the gold and silver, which occasionally come among them, being all sent to Great Britain, in return for the commodities which they receive from us. But without gold and silver, it is added, there is no possibility of paying taxes. We already get all the gold and silver which they have. How is it possible to draw from them what they have not? The present scarcity of gold and silver money in America, is not the effect of the poverty of that country, or of the inability of the people there to purchase those metals. In a country where the wages of labour are so much higher, and the price of provisions so much lower than in England, the greater part of the people must surely have wherewithal to purchase a greater quantity, if it were either necessary or convenient for them to do so. The scarcity of those metals, therefore, must be the effect of choice, and not of necessity. It is for transacting either domestic or foreign business, that gold or silver money is either necessary or convenient. The domestic business of every country, it has been shewn in the second book of this Inquiry, may, at least in peaceable times, be transacted by means of a paper currency, with nearly the same degree of conveniency as by gold and silver money. It is convenient for the Americans, who could always employ with profit, in the improvement of their lands, a greater stock than they can easily get, to save as much as possible the expense of so costly an instrument of commerce as gold and silver; and rather to employ that part of their surplus produce which would be necessary for purchasing those metals, in purchasing the instruments of trade, the materials of clothing, several parts of household furniture, and the iron work necessary for building and extending their settlements and plantations; in purchasing not dead stock, but active and productive stock. The colony governments find it for their interest to supply the people with such a quantity of paper money as is fully sufficient, and generally more than sufficient, for transacting their domestic business. Some of those governments, that of Pennsylvania, particularly, derive a revenue from lending this paper money to their subjects, at an interest of so much per cent. Others, like that of Massachusetts Bay, advance, upon extraordinary emergencies, a paper money of this kind for defraying the public expense; and afterwards, when it suits the conveniency of the colony, redeem it at the depreciated value to which it gradually falls. In 1747,[80] that colony paid in this manner the greater part of its public debts, with the tenth part of the money for which its bills had been granted. It suits the conveniency of the planters, to save the expense of employing gold and silver money in their domestic transactions; and it suits the conveniency of the colony governments, to supply them with a medium, which, though attended with some very considerable disadvantages, enables them to save that expense. The redundancy of paper money necessarily banishes gold and silver from the domestic transactions of the colonies, for the same reason that it has banished those metals from the greater part of the domestic transactions in Scotland; and in both countries, it is not the poverty, but the enterprizing and projecting spirit of the people, their desire of employing all the stock which they can get, as active and productive stock, which has occasioned this redundancy of paper money. In the exterior commerce which the different colonies carry on with Great Britain, gold and silver are more or less employed, exactly in proportion as they are more or less necessary. Where those metals are not necessary, they seldom appear. Where they are necessary, they are generally found. In the commerce between Great Britain and the tobacco colonies, the British goods are generally advanced to the colonists at a pretty long credit, and are afterwards paid for in tobacco, rated at a certain price. It is more convenient for the colonists to pay in tobacco than in gold and silver. It would be more convenient for any merchant to pay for the goods which his correspondents had sold to him, in some other sort of goods which he might happen to deal in, than in money. Such a merchant would have no occasion to keep any part of his stock by him unemployed, and in ready money, for answering occasional demands. He could have, at all times, a larger quantity of goods in his shop or warehouse, and he could deal to a greater extent. But it seldom happens to be convenient for all the correspondents of a merchant to receive payment for the goods which they sell to him, in goods of some other kind which he happens to deal in. The British merchants who trade to Virginia and Maryland, happen to be a particular set of correspondents, to whom it is more convenient to receive payment for the goods which they sell to those colonies in tobacco, than in gold and silver. They expect to make a profit by the sale of the tobacco; they could make none by that of the gold and silver. Gold and silver, therefore, very seldom appear in the commerce between Great Britain and the tobacco colonies. Maryland and Virginia have as little occasion for those metals in their foreign, as in their domestic commerce. They are said, accordingly, to have less gold and silver money than any other colonies in America. They are reckoned, however, as thriving, and consequently as rich, as any of their neighbours. In the northern colonies, Pennsylvania, New York, New Jersey, the four governments of New England, &c. the value of their own produce which they export to Great Britain is not equal to that of the manufactures which they import for their own use, and for that of some of the other colonies, to which they are the carriers. A balance, therefore, must be paid to the mother-country in gold and silver, and this balance they generally find. In the sugar colonies, the value of the produce annually exported to Great Britain is much greater than that of all the goods imported from thence. If the sugar and rum annually sent to the mother-country were paid for in those colonies, Great Britain would be obliged to send out, every year, a very large balance in money; and the trade to the West Indies would, by a certain species of politicians, be considered as extremely disadvantageous. But it so happens, that many of the principal proprietors of the sugar plantations reside in Great Britain. Their rents are remitted to them in sugar and rum, the produce of their estates. The sugar and rum which the West India merchants purchase in those colonies upon their own account, are not equal in value to the goods which they annually sell there. A balance, therefore, must necessarily he paid to them in gold and silver, and this balance, too, is generally found. The difficulty and irregularity of payment from the different colonies to Great Britain, have not been at all in proportion to the greatness or smallness of the balances which were respectively due from them. Payments have, in general, been more regular from the northern than from the tobacco colonies, though the former have generally paid a pretty large balance in money, while the latter have either paid no balance, or a much smaller one. The difficulty of getting payment from our different sugar colonies has been greater or less in proportion, not so much to the extent of the balances respectively due from them, as to the quantity of uncultivated land which they contained; that is, to the greater or smaller temptation which the planters have been under of over-trading, or of undertaking the settlement and plantation of greater quantities of waste land than suited the extent of their capitals. The returns from the great island of Jamaica, where there is still much uncultivated land, have, upon this account, been, in general, more irregular and uncertain than those from the smaller islands of Barbadoes, Antigua, and St. Christopher's, which have, for these many years, been completely cultivated, and have, upon that account, afforded less field for the speculations of the planter. The new acquisitions of Grenada, Tobago, St. Vincent's, and Dominica, have opened a new field for speculations of this kind; and the returns from those islands have of late been as irregular and uncertain as those from the great island of Jamaica. It is not, therefore, the poverty of the colonies which occasions, in the greater part of them, the present scarcity of gold and silver money. Their great demand for active and productive stock makes it convenient for them to have as little dead stock as possible, and disposes them, upon that account, to content themselves with a cheaper, though less commodious instrument of commerce, than gold and silver. They are thereby enabled to convert the value of that gold and silver into the instruments of trade, into the materials of clothing, into household furniture, and into the iron work necessary for building and extending their settlements and plantations. In those branches of business which cannot be transacted without gold and silver money, it appears, that they can always find the necessary quantity of those metals; and if they frequently do not find it, their failure is generally the effect, not of their necessary poverty, but of their unnecessary and excessive enterprise. It is not because they are poor that their payments are irregular and uncertain, but because they are too eager to become excessively rich. Though all that part of the produce of the colony taxes, which was over and above what was necessary for defraying the expense of their own civil and military establishments, were to be remitted to Great Britain in gold and silver, the colonies have abundantly wherewithal to purchase the requisite quantity of those metals. They would in this case be obliged, indeed, to exchange a part of their surplus produce, with which they now purchase active and productive stock, for dead stock. In transacting their domestic business, they would be obliged to employ a costly, instead of a cheap instrument of commerce; and the expense of purchasing this costly instrument might damp somewhat the vivacity and ardour of their excessive enterprise in the improvement of land. It might not, however, be necessary to remit any part of the American revenue in gold and silver. It might be remitted in bills drawn upon, and accepted by, particular merchants or companies in Great Britain, to whom a part of the surplus produce of America had been consigned, who would pay into the treasury the American revenue in money, after having themselves received the value of it in goods; and the whole business might frequently be transacted without exporting a single ounce of gold or silver from America. It is not contrary to justice, that both Ireland and America should contribute towards the discharge of the public debt of Great Britain. That debt has been contracted in support of the government established by the Revolution; a government to which the protestants of Ireland owe, not only the whole authority which they at present enjoy in their own country, but every security which they possess for their liberty, their property, and their religion; a government to which several of the colonies of America owe their present charters, and consequently their present constitution; and to which all the colonies of America owe the liberty, security, and property, which they have ever since enjoyed. That public debt has been contracted in the defence, not of Great Britain alone, but of all the different provinces of the empire. The immense debt contracted in the late war in particular, and a great part of that contracted in the war before, were both properly contracted in defence of America. By a union with Great Britain, Ireland would gain, besides the freedom of trade, other advantages much more important, and which would much more than compensate any increase of taxes that might accompany that union. By the union with England, the middling and inferior ranks of people in Scotland gained a complete deliverance from the power of an aristocracy, which had always before oppressed them. By a union with Great Britain, the greater part of people of all ranks in Ireland would gain an equally complete deliverance from a much more oppressive aristocracy; an aristocracy not founded, like that of Scotland, in the natural and respectable distinctions of birth and fortune, but in the most odious of all distinctions, those of religious and political prejudices; distinctions which, more than any other, animate both the insolence of the oppressors, and the hatred and indignation of the oppressed, and which commonly render the inhabitants of the same country more hostile to one another than those of different countries ever are. Without a union with Great Britain, the inhabitants of Ireland are not likely, for many ages, to consider themselves as one people. No oppressive aristocracy has ever prevailed in the colonies. Even they, however, would, in point of happiness and tranquillity, gain considerably by a union with Great Britain. It would, at least, deliver them from those rancourous and virulent factions which are inseparable from small democracies, and which have so frequently divided the affections of their people, and disturbed the tranquillity of their governments, in their form so nearly democratical. In the case of a total separation from Great Britain, which, unless prevented by a union of this kind, seems very likely to take place, those factions would be ten times more virulent than ever. Before the commencement of the present disturbances, the coercive power of the mother-country had always been able to restrain those factions from breaking out into any thing worse than gross brutality and insult. If that coercive power were entirely taken away, they would probably soon break out into open violence and bloodshed. In all great countries which are united under one uniform government, the spirit of party commonly prevails less in the remote provinces than in the centre of the empire. The distance of those provinces from the capital, from the principal seat of the great scramble of faction and ambition, makes them enter less into the views of any of the contending parties, and renders them more indifferent and impartial spectators of the conduct of all. The spirit of party prevails less in Scotland than in England. In the case of a union, it would probably prevail less in Ireland than in Scotland; and the colonies would probably soon enjoy a degree of concord and unanimity, at present unknown in any part of the British empire. Both Ireland and the colonies, indeed, would be subjected to heavier taxes than any which they at present pay. In consequence, however, of a diligent and faithful application of the public revenue towards the discharge of the national debt, the greater part of those taxes might not be of long continuance, and the public revenue of Great Britain might soon be reduced to what was necessary for maintaining a moderate peace-establishment. The territorial acquisitions of the East-India Company, the undoubted right of the Crown, that is, of the state and people of Great Britain, might be rendered another source of revenue, more abundant, perhaps, than all those already mentioned. Those countries are represented as more fertile, more extensive, and, in proportion to their extent, much richer and more populous than Great Britain. In order to draw a great revenue from them, it would not probably be necessary to introduce any new system of taxation into countries which are already sufficiently, and more than sufficiently, taxed. It might, perhaps, be more proper to lighten than to aggravate the burden of those unfortunate countries, and to endeavour to draw a revenue from them, not by imposing new taxes, but by preventing the embezzlement and misapplication of the greater part of those which they already pay. If it should be found impracticable for Great Britain to draw any considerable augmentation of revenue from any of the resources above mentioned, the only resource which can remain to her, is a diminution of her expense. In the mode of collecting and in that of expending the public revenue, though in both there may be still room for improvement, Great Britain seems to be at least as economical as any of her neighbours. The military establishment which she maintains for her own defence in time of peace, is more moderate than that of any European state, which can pretend to rival her either in wealth or in power. None of those articles, therefore, seem to admit of any considerable reduction of expense. The expense of the peace-establishment of the colonies was, before the commencement of the present disturbances, very considerable, and is an expense which may, and, if no revenue can be drawn from them, ought certainly to be saved altogether. This constant expense in time of peace, though very great, is insignificant in comparison with what the defence of the colonies has cost us in time of war. The last war, which was undertaken altogether on account of the colonies, cost Great Britain, it has already been observed, upwards of ninety millions. The Spanish war of 1739 was principally undertaken on their account; in which, and in the French war that was the consequence of it, Great Britain, spent upwards of forty millions; a great part of which ought justly to be charged to the colonies. In those two wars, the colonies cost Great Britain much more than double the sum which the national debt amounted to before the commencement of the first of them. Had it not been for those wars, that debt might, and probably would by this time, have been completely paid; and had it not been for the colonies, the former of those wars might not, and the latter certainly would not, have been undertaken. It was because the colonies were supposed to be provinces of the British Empire, that this expense was laid out upon them. But countries which contribute neither revenue nor military force towards the support of the empire, cannot be considered as provinces. They may, perhaps, be considered as appendages, as a sort of splendid and shewy equipage of the empire. But if the empire can no longer support the expense of keeping up this equipage, it ought certainly to lay it down; and if it cannot raise its revenue in proportion to its expense, it ought at least to accommodate its expense to its revenue. If the colonies, notwithstanding their refusal to submit to British taxes, are still to be considered as provinces of the British empire, their defence, in some future war, may cost Great Britain as great an expense as it ever has done in any former war. The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost, immense expense, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shewn, are to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people; or that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be completed, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expense of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace; and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances. FOOTNOTES: [1] It is mentioned, that when about three years old, he was stolen from the door of his uncle, Mr. Douglas, in Strathenry, where his mother had been on a visit, by some tinkers, or gypsies. He was rescued in Leslie wood by his uncle, who was thus the happy instrument, Mr. Stewart observes, of preserving to the world, a genius, which was destined, not only to extend the boundaries of science, but to enlighten and reform the commercial policy of Europe. [2] Boswell's Life of Johnson, vol. iv. p. 17 [3] Edinburgh Review, vol. i. p. 432. [4] It may not be uninteresting to mention what has been said of the manner in which the writings of Mr. Smith were composed.--'Mr. Smith observed to me, not long before his death,' says Mr. Stewart, 'that after all his practice in writing, he composed as slowly, and with as great difficulty as at first.' He added, at the same time, that Mr. Hume had acquired so great a facility in this respect, that the last volume of his History was printed from the original copy, with a few marginal corrections. Mr. Smith, when be was employed in composition, generally walked up and down his apartment, dictating to a secretary. All Mr. Hume's works, it has been said, were written with his own hand. [5] This observation, as may easily be perceived, cannot apply in certain indirect imposts, such as those for the support of the roads; which, as they cannot be confounded with the price of any consumable commodity, combine all the inconveniencies of indirect, with those of direct imposts. [6] Plin. Hist. Nat. lib. 33, cap. 3. [7] Pliny, lib. xxxiii. cap. 3. [8] This was written in 1773, before the commencement of the late disturbances. [9] See his scheme for the maintenance of the poor, in Burn's History of the Poor Laws. [10] See Denisart, Article Taux des Interests, tom. iii, p. 18. [11] See Idyllium xxi. [12] See Madox Firma Burgi p. 26 &c. [13] See the Statute of Labourers, 25, Ed. III. [14] Voyages d'un Philosophe. [15] Douglas's Summary, vol. ii, p. 372, 373. [16] See his Preface to Anderson's Diplomata Scotiæ. [17] Lowndes's Essay on the Silver Coin, 68. [18] See Tracts on the Corn Trade, Tract 3. [19] Solorzano, vol. ii. [20] Postscript to the Universal Merchant, p. 15 and 16. This postscript was not printed till 1756, three years after the publication of the book, which has never had a second edition. The postscript is, therefore, to be found in few copies; it corrects several error in the book. [21] See Ruddiman's Preface to Anderson's Diplomata, &c. Scotiæ. [22] Lib. x, c. 29. [23] Lib. ix, c. 17. [24] Kalm's Travels, vol. i, p. 343, 344. [25] See Smith's Memoirs of Wool, vol. i. c. 5, 6, 7. also vol. ii. [26] Wanting in the account. The year 1646 supplied by Bishop Fleetwood. [27] See Ruddiman's Preface to Anderson's Diplomata, &c. Scotiæ. [28] The method described in the text was by no means either the must common or the most expensive one in which those adventurers sometimes raised money by circulation. It frequently happened, that A in Edinburgh would enable B in London to pay the first bill of exchange, by drawing, a few days before it became due, a second bill at three months date upon the same B in London. This bill, being payable to his own order, A sold in Edinburgh at par; and with its contents purchased bills upon London, payable at sight to the order of B, to whom he sent them by the post. Towards the end of the late war, the exchange between Edinburgh and London was frequently three per cent. against Edinburgh, and those bills at sight must frequently have cost A that premium. This transaction, therefore, being repeated at least four times in the year, and being loaded with a commission of at least one half per cent, upon each repetition, must at that period have cost A, at least, fourteen per cent. in the year. At other times A would enable B to discharge the first bill of exchange, by drawing, a few days before it became due, a second bill at two months date, not upon B, but upon some third person, C, for example, in London. This other bill was made payable to the order of B, who, upon its being accepted by C, discounted it with some banker in London; and A enabled C to discharge it, by drawing, a few days before it became due, a third bill likewise at two months date, sometimes upon his first correspondent B and sometimes upon some fourth or fifth person, D or E, for example. This third bill was made payable to the order of C, who, as soon as it was accepted, discounted it in the same manner with some banker in London. Such operations being repeated at least six times in the year, and being loaded with a commission of at least one half per cent. upon each repetition, together with legal interest of five per cent. this method of raising money, in the same manner as described in the text, must have cost A something more than eight per cent. By saving, however, the exchange between Edinburgh and London, it was less expensive than that mentioned in the foregoing part of this note; but then it required an established credit with more houses than one in London, an advantage which many of these adventurers could not always find it easy to procure. [29] James Postlethwaite's History of the Public Revenue, p. 301 [30] Some French authors of great learning and ingenuity have used those words in a different sense. In the last chapter of the fourth book, I shall endeavour to shew that their sense is an improper one. [31] See Brady's Historical Treatise of Cities and Boroughs, p. 3. &c. [32] See Madox, Firma Burgi, p. 18; also History of the Exchequer, chap. 10, sect. v, p. 223, first edition. [33] See Madox, Firma Burgi. See also Pfeffel in the Remarkable events under Frederick II. and his Successors of the House of Suabia. [34] See Madox [35] See Pfeffel [36] See Sandi Istoria civile de Vinezia, part 2, vol. i, page 247 and 256. [37] The following are the prices at which the bank of Amsterdam at present (September 1775) receives bullion and coin of different kinds: SILVER. Mexico dollars } Guilders. French crowns } B--22 per mark. English silver coin } Mexico dollars, new coin 21 10 Ducatoons 3 0 Rix-dollars 2 8 Bar silver, containing 11-12ths fine silver, 21 per mark, and in this proportion down to 1-4th fine, on which 5 guilders are given. Fine bars, 28 per mark. GOLD. Portugal coin } Guineas } B--310 per mark. Louis d'ors, new } Ditto old 300 New ducats 4 19 8 per ducat. Bar or ingot gold is received in proportion to its fineness, compared with the above foreign gold coin. Upon fine bars the bank gives 340 per mark. In general, however, something more is given upon coin of a known fineness, than upon gold and silver bars, of which the fineness cannot be ascertained but by a process of melting and assaying. [38] This paragraph was written in the year 1775. [39] See the accounts at the end of this Book. [40] Before the 13th of the present king, the following were the duties payable upon the importation of the different sorts of grain: _Grain._ _Duties._ _Duties._ _Duties._ Beans to 28s. per qr. 19s. 10d. after till 40s. 16s. 8d. then 12d. Barley to 28s. 19s. 10d. 32s. 16s. 12d. Malt is prohibited by the annual malt-tax bill. Oats to 16s. 5s. 10d. after 9-1/2d. Pease to 40s. 16s. 0d. after 9-3/4d. Rye to 36s. 19s. 10d. till 40s. 16s. 8d. then 12d. Wheat to 44s. 21s. 9d. till 53s. 4d. 17s. then 8s. till L 4, and after that about 1s. 4d. Buck-wheat to 32s. per qr. to pay 16s. These different duties were imposed, partly by the 22d of Charles II. in place of the old subsidy, partly by the new subsidy, by the one-third and two-thirds subsidy, and by the subsidy 1747. [41] See Dictionnaire des Monnoies, tom. ii. article Seigneurage, p. 489, par M. Abbot de Baringhen, Conseiller-Commissaire en la Cour des Monnoies à Paris. [42] The interest of every proprietor of India stock, however, is by no means the same with that of the country in the government of which his vote gives him some influence.--See book v, chap. i, part ii. [43] See book I chap. I [44] See the Journal of Mr. De Lange, in Bell's Travels, vol. ii. p. 258, 276, 293. [45] Plin. 1. ix. c. 30. [46] Plin. 1. viii. c. 48. [47] They are to be found in Tyrol's History of England. [48] Since publishing the first two editions of this book, I have got good reasons to believe that all the turnpike tolls levied in Great Britain do not produce a neat revenue that amounts to half a million; a sum which, under the management of government, would not be sufficient to keep in repair five of the principal roads in the kingdom. [49] I have now good reason to believe that all those conjectural sums are by much too large. [50] See Memoires concernant les Droits et Impositions en Europe, tome i. page 73. This work was compiled by the order of the court, for the use of a commission employed for some years past in considering the proper means for reforming the finances of France. The account of the French taxes, which takes up three volumes in quarto, may be regarded as perfectly authentic. That of those of other European nations was compiled from such information as the French ministers at the different courts could procure. It is much shorter, and probably not quite so exact as that of the French taxes. [51] See Memoires concernant les Droits et Impositions en Europe tome i. p. 73. [52] See Sketches of the History of Man page 474, and Seq. [53] Memoires concernant les Droits, p. 240, 241. [54] Memoires concernant les Droits, &c. tom. i. p. 114, 115, 116, &c. [55] Id. tom. i. p. 83, 84. [56] Id. p. 280, &c.; also p. 287, &c. to 316. [57] Memoires concernant les Droits, &c. tom. ii. p. 139, &c. [58] Since the first publication of this book, a tax nearly upon the above-mentioned principles has been imposed. [59] Memoires concernant les Droits, &c. p. 223. [60] Memoires concernant les Droits, tom. i, p. 74. [61] Memoires concernant les Droits, tom. i, p. 163, 167, 171. [62] Memoires concernant les Droits, &c. tom. ii. p. 17. [63] Lib. 55. See also Burman, de Vectigalibus Pop. Rom. cap. xi. and Bouchaud de l'impot du vingtieme sur les successions. [64] See Memoires concernant les Droits, &c. tom. i. p. 225. [65] Memoires concernant les Droits, &c. tom. i. p. 154. [66] Id. p. 157. [67] Memoires concernant les Droits, &c. tom. i. p. 223, 224, 225. [68] Memoires concernant les Droits, &c. tom. ii. p. 108. [69] Memoires concernant les Droits, &c. tom. iii. p. 87. [70] See book i. chap. 8. [71] Memoires concernant les Droits, &c., p. 210, 211. [72] Le Reformateur [73] Though the duties directly imposed upon proof spirits amount only to 2s. 6d. per gallon, these, added to the duties upon the low wines, from which they are distilled, amount to 3s. 10-2/3d. Both low wines and proof spirits are, to prevent frauds, now rated according to what they gauge in the wash. [74] The neat production of that year, after deducting all expenses and allowances, amounted to L.4,975,652 : 19 : 6. [75] Memoires concernant les Droits, &c. tom. 1, p. 45 [76] See Examen des Reflections Politiques sut les Finances. [77] See James Postlethwaite's History of the Public Revenue. [78] It has proved more expensive than any one of our former wars, and has involved us in an additional debt of more than one hundred millions. During a profound peace of eleven years, little more than ten millions of debt was paid; during a war of seven years, more than one hundred millions was contracted. [79] See Du Cange Glossary, voce Moneta; the Benedictine Edition. [80] See Hutchinson's History of Massachusetts Bay vol. ii, page 436, et seq. INDEX. A _Absentee_ tax, the propriety of, considered with reference to Ireland, 379. _Accounts_ of money, in modern Europe, all kept, and the value of goods computed, in silver, 16. _Actors_, public, paid for the contempt attending their profession, 44. _Africa_, cause assigned for the barbarous state of the interior parts of that continent, 9. _African company_, establishment and constitution of, 309. Receive an annual allowance from parliament for forts and garrisons, 310. The company not under sufficient controul, ib. History of the Royal African company, 311. Decline of, ib. Rise of the present company, ib. _Age_, the foundation of rank and precedency in rude as well as civilized societies, 297. _Aggregate fund_, in the British finances, explained, 388. _Agio_ of the bank of Amsterdam explained, 194. Of the bank of Hamburgh, 195. The agio at Amsterdam, how kept at a medium rate, 197. _Agriculture_, the labour of, does not admit of such subdivisions as manufactures, 3. This impossibility of separation prevents agriculture from improving equally with manufactures, ib. Natural state of, in a new colony, 38. Requires more knowledge and experience than most mechanical professions, and yet is carried on without any restrictions, 53. The terms of rent, how adjusted between landlord and tenant, 60. Is extended by good roads and navigable canals, 62. Under what circumstances pasture land is more valuable than arable, 63. Gardening not a very gainful employment, 64. Vines the most profitable article of culture, 65. Estimates of profit from projects very fallacious, ib. Cattle and tillage mutually improve each other, 93. Remarks on that of Scotland, ib. On that of North America, 94. Poultry, a profitable article in husbandry, ib. Hogs, 95. Dairy, 96. Evidences of land being completely improved, ib. The extension of cultivation, as it raises the price of animal food, reduces that of vegetables, 103. By whom and how practised under feudal government, 137. Its operations not so much intended to increase, as to direct the fertility of nature, 149. Has been the cause of the prosperity of the British colonies in America, 150. The profits of, exaggerated by projectors, 154. On equal terms, is naturally preferred to trade, 156. Artificers necessary to the carrying it on, ib. Was not attended to by the northern destroyers of the Roman empire, 157. The ancient policy of Europe unfavourable to, 162. Was promoted by the commerce and manufactures of towns, 170. The wealth arising from, more solid and durable than that which proceeds from commerce, 172. Is not encouraged by the bounty on the exportation of corn, 207. Why the proper business of new companies, 251. The present agricultural system of political economy adopted in France, described, 275. Is discouraged by restrictions and prohibitions in trade, 279. Is favoured beyond manufactures in China, 282. And in Indostan, 283. Does not require so extensive a market as manufactures, 284. To check manufactures in order to promote agriculture, false policy, 285. Landlords ought to be encouraged to cultivate part of their own land, 350. _Alcavala_, the tax in Spain so called, explained and considered, 381. The ruin of the Spanish manufactures attributed to this tax, ib. _Alehouses_, the number of, not the efficient cause of drunkenness, 148, 200. _Allodial rights_, mistaken for feudal rights, 168. The introduction of the feudal law tended to moderate the authority of the allodial lords, ib. _Ambassadors_, the first motive of their appointment, 307. _America_, why labour is dearer in North America than in England, 29. Great increase of population there, ib. Common rate of interest there, 38. Is a new market for the produce of its own silver mines, 85. The first accounts of the two empires of Peru and Mexico greatly exaggerated, ib. Improving state of the Spanish colonies there, 86. Account of the paper currency of the British colonies, 134. Cause of the rapid prosperity of the British colonies there, 150. Why manufactures for distant sale have never been established there, 156. Its speedy improvement owing to assistance from foreign capitals, 157. The purchase and improvement of uncultivated land the most profitable employment of capitals, 171. Commercial alterations produced by the discovery of, 181. But two civilized nations found on the whole continent, ib. The wealth of the North American colonies increased, though the balance of trade continued against them, 203. Madeira wine, how introduced there, 204. Historical review of the European settlements in, 229. Of Spain, 232, 233. Of Holland, 234. Of France, ib. Of Britain, ib. Ecclesiastical government in the several European colonies, 235. Fish a principal article of trade from North America to Spain, Portugal, and the Mediterranean, 237. Naval stores to Britain, 238. Little credit due to the policy of Europe from the success of the colonies, 242. The discovery and colonization of, how far advantageous to Europe, 243. And to America, ib. The colonies in, governed by a spirit of monopoly, 261. The interest of the consumer in Britain sacrificed to that of the producer, by the system of colonization, 274. Plan for extending the British system of taxation, over all the provinces of, 397, 398. The question, how the Americans could pay taxes without specie, considered, 402. Ought in justice to contribute to discharge the public debt in Britain, 402. Expediency of their union with Britain, 403. The British empire there a mere project, 404. _Amsterdam_, agio of the bank of, explained, 194. Occasion of its establishment, 195. Advantages attending payments there, ib. Rate demanded for keeping money there, ib. Prices at which bullion and coin are received, 196, _note_. This bank the great warehouse of Europe for bullion, 197. Demands upon, how made and answered, ib. The agio, how kept at a medium rate, ib. The treasure of, whether all preserved in its repositories, 198. The amount of its treasure only to be conjectured, ib. Fees paid to the bank for transacting business, ib. _Annuities_, for terms of years, and for lives, in the British finances, historical account of, 389. _Apothecaries_, the profit on their drugs, unjustly stigmatized as exorbitant, 46. _Apprenticeship_, the nature and intention of this bond of servitude, explained, 42. The limitations imposed on various trades as to the number of apprentices, 50. The statute of apprenticeship in England, ib. Apprenticeships in France and Scotland, 51. General remarks on the tendency and operation of long apprenticeships, ib. The statute of, ought to be repealed, 191. _Arabs_, their manner of supporting war, 289. _Army_, three different ways by which a nation may maintain one in a distant country, 178. Standing, distinction between and a militia, 292. Historical review of, 294. The Macedonian army, ib. Carthaginian army, ib. Roman army, ib. Is alone able to perpetuate the civilization of a country, 296. Is the speediest engine for civilizing a barbarous country, ib. Under what circumstances dangerous to, and under what favourable to liberty, ib. _Artificers_ prohibited by law from going to foreign countries, 273. Residing abroad, and not returning on notice, exposed to outlawry, ib. See _Manufactures_. _Asdrubal_, his army greatly improved by discipline, 294. How defeated, ib. _Assembly_, houses of, in the British colonies, the constitutional freedom of, shewn, 240. _Assiento Contract_, 312. _Assize_ of bread and ale, remarks on that statute, 75, 77. _Augustus_, emperor, emancipates the slaves of Vedius Pollio for his cruelty, 241. B _Balance_ of annual produce and consumption explained, 203. May be in favour of a nation, when the balance of trade is against it, ib. _Balance_ of trade, no certain criterion to determine on which side it turns between two countries, 192. The current doctrine of, on which most regulations of trade are founded, absurd, 199. If even, by the exchange of their native commodities, both sides may be gainers, ib. How the balance would stand if native commodities on one side were paid with foreign commodities on the other, ib. How the balance stands when commodities are purchased with gold and silver, ib., 200. The ruin of countries often predicted from the doctrine of an unfavourable balance of trade, 202. _Banks_, great increase of trade in Scotland since the establishment of them in the principal towns, 120. Their usual course of business, 121. Consequences of their issuing too much paper, 122. Necessary caution for some time observed by them with regard to giving credit to their customers, 124. Limits of the advances they may imprudently make to traders, 125. How injured by the practice of drawing and redrawing bills, 126, 127. History of the Ayr bank, 128. History of the bank of England, 130. The nature and public advantage of banks considered, 131. Bankers might carry on their business with less paper, 132. Effects of the optional clauses in the Scotch notes, 133. Origin of their establishment, 194. Bank money explained, 195. Bank of England, the conduct of, in regard to the coinage, 226. Joint stock companies, why well adapted to the trade of banking, 317, 318. A doubtful question, whether the government of Great Britain is equal to the management of the bank to profit, 344. _Bankers_, the credit of their notes how established, 118. The nature of the banking business explained, ib., 121. The multiplication and competition of bankers, under proper regulations of service to public credit, 135. _Baretti_, Mr. his account of the quantity of Portugal gold sent weekly to England, 225. _Barons_, feudal, their power contracted by the grant of municipal privileges, 163. Their extensive authority, 168. How they lost their authority over their vassals, 169. And the power to disturb their country, 170. _Barter_, the exchange of one commodity for another, the propensity to, of extensive operation, and peculiar to man, 6. Is not sufficient to carry on the mutual intercourse of mankind, 10. See _Commerce_. _Batavia_, causes of the prosperity of the Dutch settlement there, 263. _Beaver skins_, review of the policy used in the trade for, 273. _Beef_, cheaper now in London than in the reign of James I., 63. Compared with the prices of wheat at the corresponding times, 64. _Benefices_, ecclesiastical, the tenure of, why rendered secure, 335. The power of collating to, how taken from the pope, in England and France, 338. General equality of, among the presbyterians, 340. Good effects of this equality, ib. _Bengal_, to what circumstances its early improvement in agriculture and manufactures was owing, 9. Present miserable state of the country, 30. Remarks on the high rates of interest there, 39. Oppressive conduct of the English there, to suit their trade in opium, 263. Why more remarkable for the exportation of manufactures than of grain, 284. _Berne_, brief history of the republic of, 164. Establishment of the reformation there, 338. Application of the revenue of the catholic clergy, 341. Derives a revenue from the interest of its treasure, 344. _Bills of Exchange_, punctuality in the payment of, how secured, 126. The pernicious practice of drawing and redrawing explained, ib. The arts made use of to disguise this mutual traffic in bills, 127. _Birth_, superiority of, how it confers respect and authority, 298. _Bishops_, the ancient mode of electing them, and how altered, 335, 337. _Body_, natural and political, analogy between, 280. _Bohemia_, account of the tax there on the industry of artificers, 366. _Bounty_, on the exportation of corn, the tendency of this measure examined, 81. _Bounties_, why given in commerce, 183. On exportation, the policy of granting them considered, 205. On the exportation of corn, 206. This bounty imposes two taxes on the people, 207. Evil tendency of this bounty, 209. The bounty only beneficial to the exporter and importer, ib. Motives of the country gentlemen in granting the bounty, 210. A trade which requires a bounty, necessarily a losing trade, ib. Tonnage bounties to the fisheries considered, 211. Account of the white-herring fishery, 212. Remarks on other bounties, 213. A review of the principles on which they are generally granted, 267. Those granted on American produce founded on mistaken policy, 268. How they affect the consumer, 274. _Bourdeaux_, why a town of great trade, 138. _Brazil_ grew to be a powerful colony under neglect, 233. The Dutch invaders expelled by the Portuguese colonists, ib. Computed number of inhabitants there, ib. The trade of the principal provinces oppressed by the Portuguese, 236. _Bread_, its relative value with butcher's meat compared, 62, 63. _Brewery_, reasons for transferring the taxes on to the malt, 376. _Bridges_, how to be erected and maintained, 303. _Britain_, Great, evidences that labour is sufficiently paid for there, 30. The price of provisions nearly the same in most places, 31. Great variations in the price of labour, ib. Vegetables imported from Flanders in the last century, 32. Historical account of the alterations interest of money has undergone, 37. Double interest deemed a reasonable mercantile profit, 40. In what respects the carrying trade is advantageous to, 152, 153. Appears to enjoy more of the carrying trade of Europe than it really has, 153. It is the only country of Europe in which the obligation of purveyance is abolished, 161. Its funds for the support of foreign wars inquired into, 178, 179. Why never likely to be much affected by the free importation of Irish cattle, 186. Nor salt provisions, ib. Could be little affected by the importation of foreign corn, 187. The policy of the commercial restraints on the trade with France examined, 192. The trade with France might be more advantageous to each country than that with any other, 202. Why one of the richest countries in Europe, while Spain and Portugal are among the poorest, 221. Review of her American colonies, 234. The trade of her colonies, how regulated, 236. Distinction between enumerated and non-enumerated commodities explained, 237. Restrains manufactures in America, 238, 239. Indulgences granted to the colonists, 239. Constitutional freedom of her colony government, 240. The sugar colonies of, worse governed than those of France, 241. Disadvantages resulting from retaining the exclusive trade of tobacco with Maryland and Virginia, 244, 245. The navigation act has increased the colony trade, at the expense of many other branches of foreign trade, 245. The advantage of the colony trade estimated, 247. A gradual relaxation of the exclusive trade recommended, 250. Events which have concurred to prevent the ill effects of the loss of the colony trade, ib. The natural good effects of the colony trade more than counterbalance the bad effects of the monopoly, 251. To maintain a monopoly, the principal end of the dominion assumed over the colonies, 254. Has derived nothing but loss from this dominion, ib. Is perhaps the only state which has only increased its expenses by extending its empire, 256. The constitution of, would have been completed by admitting of American representation, 258. Review of the administration of the East India Company, 264, 265. The interest of the consumer sacrificed to that of the producer in raising an empire in America, 274. The annual revenue of, compared with its annual rents and interest of capital stock, 345, 346. The land-tax of, considered, 348. Tithes, 352. Window-tax, 357. Stamp-duties, 363, 365. Poll-taxes in the reign of William III., 367. The uniformity of taxation in, favourable to internal trade, 382. The system of taxation in, compared with that in France, 384. Account of the unfunded debt of, 387. Funded debt, 388. Aggregate and general funds, ib. Sinking fund, 389. Annuities for terms of years and for lives, ib. Perpetual annuities the best transferable stock, 391. The reduction of the public debts during peace bears no proportion to their accumulation during war, 392. The trade with the tobacco colonies, how carried on, without the intervention of specie, 401. The trade with the sugar colonies explained, ib. Ireland and America ought in justice to contribute towards the discharge of her public debts, 402. How the territorial acquisitions of the East India Company might be rendered a source of revenue, 403. If no such assistance can be obtained, her only resource pointed out, ib. _Bullion_, the money of the great mercantile republic, 179. See _Gold_ and _Silver_. _Burghs_, free, the origin of, 163. To what circumstances they owed their corporate jurisdictions, ib. Why admitted to send representatives to parliament, 164. Are allowed to protect refugees from the country, 165. _Burn_, Dr. his observation on the laws relating to the settlements of the poor, 58, 59. _Butcher's meat_, nowhere a necessary of life, 370. C _Calvinists_, origin of that sect, 339. Their principles of church government, ib. _Cameron_, Mr. of Lochiel, exercised, within thirty years since, a criminal jurisdiction over his own tenants, 168. _Canada_, the French colony there, long under the government of an exclusive company, 234. But improved speedily after the dissolution of the company, ib. _Canals_, navigable, the advantages of, 62. How to be made and maintained, 303. That of Languedoc, the support of, how secured, ib. May be successfully managed by joint stock companies, 317. _Cantillon_, Mr. remarks on his account of the earnings of the labouring poor, 28. _Cape of Good Hope_, causes of the prosperity of the Dutch settlement there, 263. _Capital_, in trade, explained, and how employed, 112. Distinguished into circulating and, fixed capitals, ib. Characteristic of fixed capitals, 113. The several kinds of fixed capitals specified, ib. Characteristic of circulating capitals, and the several kinds of, 114. Fixed capitals supported by those which are circulating, ib. Circulating capitals how supported, ib. Intention of a fixed capital, 116. The expense of maintaining the fixed and circulating capitals illustrated, ib. Money, as an article of circulating capital, considered, ib. Money no measure of capital, 118. What quantity of industry any capital can employ, 120. Capitals, how far they may be extended by paper credit, 125. Must always be replaced with profit by the annual produce of land and labour, 136. The proportion between capital and revenue regulates the proportion between industry and idleness, 138. How it is increased or diminished, ib. National evidences of the increase of, 141. In what instances private expenses contribute to enlarge the national capital, 142. The increase of, reduces profits by competition, 145. The different ways of employing a capital, 147. How replaced to the different classes of traders, 148. That employed in agriculture puts into motion a greater quantity of productive labour than any equal capital employed in manufacturers, 149. That of a manufacturer should reside within the country, 150. The operation of capitals employed in agriculture, manufactures, and foreign trade compared, ib. The prosperity of a country depends on the due proportion of its capital applied to these three grand objects, 151. Different returns of capitals employed in foreign trade, 152. Is rather employed in agriculture than in trade and manufactures, on equal terms, 155, 156. Is rather employed in manufactures than in foreign trade, 156. The natural progress of the employment of, 157. Acquired by trade, is very precarious, until realized by the cultivation and improvement of land, 172. The employment of, in the different species of trade, how determined, 183. _Capitation taxes_, the nature of, considered, 367. In England, ib. In France, ib. _Carriage_, land and water, compared, 8. Water carriage contributes to improve arts and industry in all countries where it can be used, 9, 62, 87. Land, how facilitated and reduced in price by public works, 303. _Carrying trade_, the nature and operation of, examined, 152. Is the symptom, but not the cause of national wealth, and hence points out the two richest countries in Europe, 153. Trades may appear to be carrying trades which are not so, ib. The disadvantages of, to individuals, 183. The Dutch, how excluded from being the carriers to Great Britain, 187, 188. Drawbacks of duties originally granted for the encouragement of, 205. _Carthaginian army_, its superiority over the Roman army accounted for, 294. _Cattle_ and _Corn_, their value compared, in the different stages of agriculture, 62. The price of, reduced by artificial grasses, 63. To what height the price of cattle may rise in an improving country, 92, 93. The raising a stock of, necessary for the supply of manure to farms, 93. Cattle must bear a good price to be well fed, ib. The price of, rises in Scotland in consequence of the union with England ib. Great multiplication of European cattle in America, 94. Are killed in some countries merely for the sake of the hides and tallow, 97. The market for these articles more extensive than for the carcase, ib. This market sometimes brought nearer home by the establishment of manufactures, ib. How the extension of cultivation raises the price of animal food, 103. Is perhaps the only commodity more expensive to transport by sea than by land, 186. Great Britain never likely to be much affected by the free importation of Irish cattle, ib. _Certificates_, parish, the laws relating to, with observations on them, 58. _Child_, Sir Josiah, his observation on trading companies, 309. _Children_, riches unfavourable to the production, and extreme poverty to the raising, of them, 33. The mortality still greater among those maintained by charity, ib. _China_, to what the early improvement in arts and industry there was owing, 9. Concurrent testimonies of the misery of the lower ranks of the Chinese, 30. Is not, however, a declining country, ib. High rate of interest of money there, 40. Great state assumed by the grandees, 86. The price of labour there lower than in the greater mpart of Europe, 87. Silver the most profitable article to send thither, ib. The proportional value of gold to silver, how rated there, 89. The value of gold and silver much higher there than in any part of Europe, 101. Agriculture favoured there beyond manufactures, 282. Foreign trade not favoured there, 283. Extension of the home market, ib. Great attention paid to the roads there, 305, 306. In what the principal revenue of the sovereign consists, 353. The revenue of, partly raised in kind, ib. _Church_, the richer the church the poorer the state, 341. Amount of the revenue of church of Scotland, 342. The revenue of the church heavier taxed in Prussia than lay proprietors, 351. The nature and effect of tithes considered, 352. _Circulation_, the dangerous practice of raising money by, explained, 127. In traffic, the two different branches of, considered, 132. _Cities_, circumstances which contributed to their opulence, 165. Those of Italy the first that rose to consequence, ib. The commerce and manufactures of, have occasioned the improvement and cultivation of the country, 170. _Clergy_, a supply of, provided for, by public and private foundations for their education, 55. Curates worse paid than many mechanics, ib. Of an established religion, why unsuccessful against the teachers of a new religion, 330. Why they persecute their adversaries, ib. The zeal of the inferior clergy of the church of Rome, how kept alive, ib. Utility of ecclesiastical establishments, 331. How connected with the civil magistrate, ib., 332. Unsafe for the civil magistrate to differ with them, 334. Must be managed without violence, ib., 335. Of the church of Rome, one great army cantoned over Europe, ib., 336. Their power similar to that of the temporal barons during the feudal monkish ages, ib. How the power of the Romish clergy declined, 337. Evils attending allowing parishes to elect their own ministers, 339. _Clothing_, more plentiful than food in uncultivated countries, 68. The materials for, the first articles rude nations have to offer, ib. _Coal_ must generally be cheaper than wood to gain the preference for fuel, 70. The price of, how reduced, ib. The exportation of, subjected to a duty higher than the prime cost of, at the pit, 273. The cheapest of all fuel, 370. The tax on absurdly regulated, ib. _Coal mines_, their different degrees of fertility, 70. When fertile, are sometimes unprofitable by situation, ib. The proportion of rent generally paid for, ib., 71. The machinery necessary to, expensive, 112. _Coal trade_ from Newcastle to London employs more shipping than all the other carrying trade of England, 153. _Cochin China_, remarks on the principal article of cultivation there, 66. _Coin_, stamped, the origin and peculiar advantages of, in commerce, 11. The different species of, in different ages and countries, ib. Causes of the alterations in the value of, ib., 12, 13, 14. How the standard coin of different nations came to be of different metals, 16. A reform in the English coinage suggested, 19. Silver, consequences attending the debasement of, 82. Coinage of France and Britain examined, 193. Why coin is privately melted down, 225. The mint chiefly employed to keep up the quantity thus diminished, ib. A duty to pay the coinage would preserve money from being melted or counterfeited, ib. Standard of the gold coin in France, ib. How a seignorage on coin would operate, 226. A tax upon coinage is advanced by every body, and finally paid by nobody, ib. A revenue lost by government defraying the expense of coinage, 227. Amount of the annual coinage before the late reformation of the gold coin, ib. The law for the encouragement of, founded on prejudice, ib. Consequences of raising the denomination as an expedient to facilitate the payment of public debts, 395. Adulteration of, 397. _Colbert_, M., the policy of his commercial regulations disputed, 189, 275. His character, 275. _Colleges_, cause of the depreciation of their money rents inquired into, 14. The endowments of, from whence they generally arise, 318. Whether they have in general answered the purposes of their institution, ib. These endowments have diminished the necessity of application in the teachers, 319. The privileges of graduates by residence, and charitable foundation of scholarships, injurious to collegiate education, 320. Discipline of, ib. _Colliers_ and _Coal-heavers_, their high earnings accounted for, 43. _Colonies_, new, the natural progress of, 38. Modern, the commercial advantages derived from them, 183. Ancient, on what principles founded, 227, 228. Ancient Grecian colonies not retained under subjection to the parent states, ib. Distinction between the Roman and Greek colonies, 228. Circumstances that led to the establishment of European colonies in the East Indies and America, ib. The East Indies discovered by Vasco de Gama, 229. The West, Indies discovered by Columbus, ib. Gold the object of the first Spanish enterprises there, 230. And of all those of all other European nations, 231. Causes of the prosperity of new colonies, ib. Rapid progress of the ancient Greek colonies, 232. The Roman colonies slow in improvement, ib. The remoteness of America and the West Indies greatly in favour of the European colonies there, ib. Review of the British American colonies, 234. Expense of the civil establishments in British America, 235. Ecclesiastical government, ib. General view of the restraints laid upon the trade of the European colonies, 236. The trade of the British colonies, how regulated, ib. The different kinds of non-enumerated commodities specified, 237. Enumerated commodities, 238. Restraints upon their manufactures, ib. Indulgences granted them by Britain, 239. Were free in every other respect except as to their foreign trade, 240. Little credit due to the policy of Europe from the success of the colonies, 242. Throve by the disorder and injustice of the European governments, ib. Have contributed to augment the industry of all the countries of Europe, 243. Exclusive privileges of trade a dead weight upon all these exertions both in Europe and America, ib. Have in general been a source of expense instead of revenue to their mother countries, 244. Have only benefited their mother countries by the exclusive trade carried on with them, ib. Consequences of the navigation act, 245. The advantage of the colony trade to Britain estimated, 247. A gradual relaxation of the exclusive commerce recommended, 250. Events which have prevented Britain from sensibly feeling the loss of the colony trade, ib. The effects of the colony trade, and the monopoly of that trade, distinguished, ib. To maintain a monopoly, the principal end of the dominion Great Britain assumes over the colonies, 254. Amount of the ordinary peace establishment of, ib. The two late wars Britain sustained, colony wars, to support a monopoly, ib. Two modes by which they might be taxed, 255. Their assemblies not likely to tax them, ib. Taxes by parliamentary requisition as little likely to be raised, 256. Representatives of, might he seated into the British parliament with good effect, 257. Answer to objections against American representation, 258. The interest of the consumer in Britain sacrificed to that of the producer in raising an empire in America, 274. _Columbus_, the motive that led to his discovery of Americas, 229. Why he gave the name of Indies to the islands he discovered, ib. His triumphal exhibition of their productions, 230. _Columella_, his instructions for fencing a kitchen garden, 64. Advises the planting of vineyards, 65. _Commerce_, the different common standards or mediums made use of to facilitate the exchange of commodities in the early stages of, 10. Origin of money, ib. Definition of the term value, 12. Treaties of, though advantageous to the merchants and manufacturers of the favoured countries, necessarily, disadvantageous to those of the favouring country, 222. Translation of the commercial treaty between England and Portugal, concluded in 1703, by Mr. Methuen, 223. Restraints laid upon the European colonies in America, 236. The present splendour of the mercantile system owing to the discovery and colonization of America, 259. Review of the plan by which it proposes to enrich a country, 266. The interest of the consumer constantly sacrificed to that of the producer, 274. See _Agriculture_, _Banks_, _Capital_, _Manufactures_, _Merchant_, _Money_, _Stock_, _Trade_, &c. _Commodities_, the barter of, insufficient for the mutual supply of the wants of mankind, 10. Metals found to be the best medium to facilitate the exchange of, ib. Labour an invariable standard for the value of, 14. Real and nominal prices of, distinguished, ib. Component parts of the prices of, explained and illustrated, 21. Natural and market prices of, distinguished and how regulated, 23. The ordinary proportion between the value of two commodities, not necessarily the same as between the quantities of them commonly in the market, 89. The price of rude produce, how affected by the advance of wealth and improvement, 91, 92. Foreign are primarily purchased with the produce of domestic industry, 151. When advantageously exported in a rude state, even by a foreign capital, 156. The quantity of, in every country, naturally regulated by the demand, 176. Wealth in goods, and in money, compared, 177. Exportation of, to a proper market, always attended with more profit than that of gold and silver, 179. The natural advantages of countries in particular productions sometimes not possible to struggle against, 185. _Company_, mercantile, incapable of consulting their true interests when they become sovereigns, 264. An exclusive company a public nuisance, 265. Trading, how first formed, 307. Regulated and joint-stock companies distinguished, ib. Regulated companies in Great Britain specified, ib., 308. Are useless, 308. Constant view of such companies, ib. Forts and garrisons, why never maintained by regulated companies, 309. The nature of joint-stock companies explained, 310, 311, 316. A monopoly necessary to enable a joint-stock company to carry on a foreign trade, 317. What kind of joint-stock companies need no exclusive privileges, ib. Joint-stock companies, why well adapted to the trade of banking, ib. The trade of insurance may be carried on successfully by a joint-stock company, ib. Also, inland navigations, and the supply of water to a great city, ib. Ill success of joint-stock companies in other undertakings, 318. _Competition_, the effect of, in the purchase of commodities, 23. Among the venders, ib., 37. _Concordat_ in France, its object, 337. _Congress_, American, its strength owing to the important characters it confers on the members of it, 257. _Conversion price_, in the payment of rents in Scotland, explained, 76, 77. _Copper_, the standard measure of value among the ancient Romans, 16. Is no legal tender in England, ib. _Cori_, the largest quadruped on the island of St. Domingo, described, 229. _Corn_, the raising of, in different countries, not subject to the same degree of rivalship, as manufactures, 3, 4. Is the best standard for reserved rents, 14. The price of, how regulated, 15. The price of, the best standard for comparing the different values of particular commodities at different times and places, 16. The three component parts in the price of, 21. Is dearer in Scotland than in England, 31. Its value compared with that of butcher's meat, in the different periods of agriculture, 62. Compared with silver, 75. Circumstances in a historical view of the prices of corn that have misled writers in treating of the value of silver at different periods, 76. Is always a more accurate measure of value than any other commodity, 79. Why dearer in great towns than in the country, 80. Why dearer in some rich commercial countries, as Holland and Genoa, ib. Rose in its nominal price on the discovery of the American mines, 81. And in consequence of the civil war under king Charles I., ib. And in consequence of the bounty on the exportation of, 82. Tendency of the bounty examined, 83. Chronological table of the prices of, 108. The least profitable article of growth in the British West Indian colonies, 159. The restraints formerly laid upon the trade of, unfavourable to the cultivation of land, 162. The free importation of, could little affect the farmers of Great Britain, 187. The policy of the bounty on the exportation of, examined, 206. The reduction in the price of, not produced by the bounty, ib. Tillage not encouraged by the bounty, ib. The money price of, regulates that of all other home-made commodities, 207. Illustration, 208. Ill effects of the bounty, ib. Motives of the country gentlemen in granting the bounty, 209. The natural value of not to be altered by altering the money price, 210. The four several branches of the corn trade specified, 213. The inland dealer, for his own interest, will not raise the price of, higher than the scarcity of the season requires, ib. Corn a commodity the least liable to be monopolised, 214. The inland dealers too numerous and dispersed to form a general combination, ib. Dearths, never artificial, but when government interferes improperly to prevent them, ib. The freedom of the corn trade the best security against a famine, 215. Old English statute to prohibit the corn trade, ib. Consequences of farmers being forced to become corn dealers, ib. The use of corn dealers to the farmers, 216. The prohibitory statute against the corn trade softened, 217. But still under the influence of popular prejudices, ib., 218. The average quantity imported and exported compared with the consumption and annual produce, ib. Tendency of a free importation of, 219. The home-market the most important one for corn, ib. Impropriety of the statute 22 Car. II. for regulating the importation of wheat, confessed by the suspension of its execution by temporary statutes, ib. Duties payable on the importation of grain before 13 Geo. III. ib. _note_, ib. The home-market indirectly supplied by the exportation of corn, ib. How a liberal system of free exportation and importation and among all nations would operate, 220. The laws concerning corn, similar to those relating to religion, 221. The home-market supplied by the carrying trade, ib. The system of laws connected with the establishment of the bounty, undeserving of praise, ib. Remarks on the statute 13 Geo. III. ib. _Corporations_, tendency of the exclusive privileges of, on trade, 26. By what authority erected, 50, 52. The advantages they derive from the surrounding country, ib. Check the operations of competition, 54. Their internal regulations combinations against the public, ib. Are injurious even to the members of them, ib. The laws of, obstruct the free circulation of labour from one employment to another, 57. Origin of, 163. Are exempted by their privileges from the power of the feudal barons, 164. The European East India companies disadvantageous to the eastern commerce, 181, 182. The exclusive privileges of corporations ought to be destroyed, 191. _Cottagers_, in Scotland, their situation described, 49. Are cheap manufacturers of stockings, ib. The diminution of, in England, considered, 95. _Coward_, character of, 329. _Credit_. See _Paper Money_. _Crusades_, to the Holy land, favourable to the revival of commerce, 165. _Currency of states_, remarks on, 194. _Customs_, the motives and tendency of drawbacks from the duties of, 203. The revenue of the customs increased by drawbacks, 205. Occasion of first imposing the duties of, 307. Origin of those duties, 371. Three ancient branches of, 372. Drawbacks of, ib. Are regulated according to the mercantile system, ib., 373. Frauds practised to obtain drawbacks and bounties, ib. The duties of, in many instances uncertain, ib. Improvement of, suggested, 374. Computation of the expense of collecting them, 380. D _Dairy_, the business of, generally carried on as a save-all, 96. Circumstances which impede or promote the attention to it, ib. English and Scotch dairies, ib. _Danube_, the navigation of that river, why of little use to the interior parts of the country from whence it flows, 9. _Davenant_, Dr. his objections to the transferring the duties on beer to the malt considered, 377. _Dearths_, never caused by combinations among the dealers in corn, but by some general calamity, 214. The free exercise of the corn trade the best palliative against the inconveniencies of a dearth, 217. Corn dealers the best friends to the people at such seasons, 218. _Debts_, public, the origin of, traced, 386. Are accelerated by the expenses attending war, ib. Account of the unfunded debt of Great Britain, 387. The funded debt, 388. Aggregate and general funds, 389. Sinking fund, ib. Annuities for terms of years and for lives, ib. The reduction of, during peace, bears no proportion to its accumulation during war, 391. The plea of the interest being no burden to the nation considered, 394. Are seldom fairly paid when accumulated to a certain degree, 396. Might easily be discharged, by extending the British system of taxation over all the provinces of the empire, 397. Ireland and America ought to contribute to discharge the public debts of Britain, 402. _Decker_, Sir Matthew, his observations on the accumulation of taxes, 369. His proposal for transferring all taxes to the consumer, by annual payments, considered, 371. _Demand_, though the increase of, may at first raise the price of goods, it never fails to reduce it afterwards, 314. _Denmark_, account of the settlements of, in the West Indies, 234. _Diamonds_, the mines of, not always worth working for, 73. _Discipline_, the great importance of, in war, 293. Instances of, ib. _Diversions_, public, their political use, 334. _Domingo_, St. mistaken by Columbus for a part of the East Indies, 229. Its principal productions, ib. The natives soon stripped of all their gold, 230. Historical view of the French colony there, 234. _Doomsday-book_, the intention of that compilation, 351. _Dorians_, ancient, where the colonies of, settled, 227. _Dramatic exhibitions_, the political use of, 334. _Drawbacks_, in commerce, explained, 182. The motives to, and tendency of, explained, 203. On wines, currants, and wrought silks, ib. On tobacco and sugar, 204. On wines, particularly considered, ib. Were originally granted to encourage the carrying trade, 205. The revenue of the customs increased by them, ib. Drawbacks allowed in favour of the colonies, 213. _Drugs_, regulations of their importation and exportation, 272. _Drunkenness_, the motive to this vice inquired into, 200. _Dutch_, their settlements in America slow in in improvement, because under the government of an exclusive company, 234. Their East India trade checked by monopoly, 261. Measures taken by, to secure the monopoly of the spice trade. See _Holland_. E _East Indies_, representation of the miserable state of the provinces of, under the English government there, 30. Historical view of the European trade with those countries, 86. Rice countries more populous and rich than corn countries, ib. The real price of labour lower in China and Indostan than in the greater part of Europe, 87. Gold and silver the most profitable commodities to carry thither, ib. The proportional value of gold to silver, how rated there, 89. Great extension of foreign commerce by the discovery of a passage to, round the Cape of Good Hope, 181. Historical review of the intercourse with, ib., 182. Effect of the annual exportation of silver to, from Europe, ib. The trade with, chiefly carried on by exclusive companies, 261. Tendency of their monopolies, ib. _East India company_, a monopoly against the very nation in which it is erected, 261. The operation of such a company in a poor and in a rich country compared, ib. That country whose capital is not large enough to extend to such a distant trade ought not to engage in it, 262. The mercantile habits of trading companies render them incapable of consulting their true interests when they become sovereigns, 264. The genius of the administration of the English company, ib. Subordinate practices of their agents and clerks, 265. The bad conduct of agents in India owing to their situation, ib. Such an exclusive company a nuisance in every respect, 266. Brief review of their history, 313. Their privileges invaded, ib. A rival company formed, ib. The two companies united, 314. Are infected by the spirit of war and conquest, ib. Agreements between the company and government, ib. Interference of government in their territorial administration, 315. And in the direction at home, ib. Why unfit to govern a great empire, ib. Their sovereign and commercial characters incompatible, 344. How the territorial acquisitions of, might be rendered a source of revenue, 403. _Economists_, sect of, in France, their political tenets, 275. _Edinburgh_, its present share of trade owing to the removal of the court and parliament, 138. _Education_, the principal cause of the various talents observable in different men, 7. Those parts of, for which there are no public institutions, generally the best taught, 320. In universities, a view of, 323. Of travelling for, 324. Course of, in the republics of ancient Greece, ib. In ancient Rome, ib. The ancient teachers superior to those in modern times, 326. Public institutions injurious to good education, ib. Inquiry how far the public ought to attend to the education of the people, 327. The different opportunities of education in the different ranks of the people, 328. The advantages of proper attention in the state to the education of the people, 329. _Egypt_, the first country in which agriculture and manufactures appear to have been cultivated, 9. Agriculture was greatly favoured there, 283. Was long the granary of the Roman empire, 284. _Ejectment_, action of, in England, when invented, and its operation, 160. _Employments_, the advantages and disadvantages of the different kinds of, in the same neighbourhood, continually tend to equality, 41. The differences or inequalities among, specified, ib. The constancy or precariousness of, influences the rate of wages, 43. _England_, the dates of its several species of coinage, silver, gold, and copper, 16. Why labour is cheaper there than in North America, 29. The rate of population in both countries compared, ib. The produce and labour of, have gradually increased from the earliest accounts in history, while writers are representing the country as rapidly declining, 141. Enumeration of obstructions and calamities which the prosperity of the country has surmounted, ib. Circumstances that favour commerce and manufactures, 171. Laws in favour of agriculture, ib. Why formerly unable to carry on foreign wars of long duration, 180. Why the commerce with France has been subjected to so many discouragements, 202. Foundation of the enmity between these countries, ib. Translation of the commercial treaty concluded in 1703 with Portugal, 223. Inquiry into the value of the trade with Portugal, ib., 224. Might procure gold without the Portugal trade, ib. Consequences of securing the colony trade by the navigation act, 245. _Engrossing_. See _Forstalling_. _Entails_, the law of, prevents the division of land by alienation, 157. Intention of, 158. _Europe_, general review of the several nations of, as to their improvement since the discovery of America, 85. The two richest countries in, enjoy the greatest shares of the carrying trade, 153. Inquiry into the advantages derived by, from the discovery and colonization of America, 243. The particular advantages derived by each colonizing country, 244. And by others which have no colonies, 259. _Exchange_, the operation of, in the commercial intercourse of different countries, 174. The course of, an uncertain criterion of the balance of trade between two countries, 192, 193. Is generally in favour of those countries which pay in bank money, against those which pay in common currency, 198. _Excise_, the principal objects of, 371. The duties of, more clear and distinct than the customs, 373. Affects only a few articles of the most general consumption, ib. The scheme of Sir Robert Walpole defended, 375. The excise upon home-made fermented and spiritous liquors the most productive, 376. Expense of levying excise duties computed, 380. The laws of, more vexatious than those of the customs, 381. _Exercise_, military, alteration in, produced by the invention of fire-arms, 292. _Expenses_, private, how they influence the national capital, 33. Advantage of bestowing them on durable commodities, ib. _Export trade_, the principles of, explained, 153. When rude produce may be advantageously exported, even by a foreign capital, 156, 157. Why encouraged by European nations, 182, 183. By what means promoted, ib. The motives to, and tendency of, drawbacks of duties, 203. The grants of bounties on, considered, 205. Exportation of the materials of manufactures, review of the restraints and prohibitions of, 268. F _Faith_, articles of, how regulated by the civil magistrate, 354. _Families_ seldom remain on large estates many generations in commercial countries, 170. _Famine_. See _Dearth_. _Farmers of land_, the several articles that compose their gain distinguished, 22. Require more knowledge and experience than the generality of manufacturers, 53. In what their capitals consist, 112. The great quantity of productive labour put into motion by their capitals, 149. Artificers necessary to them, 156. Their situation better in England than in any other part of Europe, 160. Labour under great disadvantages everywhere, 161. Origin of long leases of farms, 170. Are a class of men least subject to the wretched spirit of monopoly, 187. Were forced by old statutes to become the only dealers in corn, 215. Could not sell corn cheaper than any other corn merchant, 216. Could seldom sell it so cheap, ib. The culture of land obstructed by this division of their capitals, 217. The use of corn-dealers to the farmers, ib. How they contribute to the annual production of the land, according to the French agricultural system of political economy, 275. _Farmers_ of the public revenue, their character, 383, 391. _Feudal government_, miserable state of the occupiers of land under, 137. Trade and interest of money under, ib. Chiefs, their power, 157. Slaves, their situation, 159. Tenures of land, ib. Taxation, 161. Original poverty and servile state of the tradesmen in towns, 162. Immunities seldom granted but for valuable considerations, 163. Origin of free burghs, ib. The power of the barons reduced by municipal privileges, ib. The cause and effect of ancient hospitality, 167. Extensive power of the ancient barons, 168. Was not established in England until the Norman conquest, ib. Was silently subverted by manufactures and commerce, 169. _Feudal wars_, how supported, 290. Military exercises not well attended to, under, 291. Standing armies gradually introduced to supply the place of the feudal militia, 295. Account of the casualties or taxes under, 363. Revenues under, how enjoyed by the great landholders, 385. _Fairs_, public, in Scotland, the nature of the institution, explained, 76, 77. _Fines_ for the renewal of leases, the motive for exacting them, and their tendency, 349. _Fire-arms_, alteration in the art of war effected by the invention of, 292, 295. The invention of, favourable to the extension of civilisation, 296. _Fish_, the component parts of the price of, explained, 21. The multiplication of, at market, by human industry, both limited and uncertain, 99. How an increase of demand raises the price of fish, 100. _Fisheries_, observations on the tonnage bounties granted to, 211. To the herring fishery ib. The boat fishery ruined by this bounty, 212. _Flanders_, the ancient commercial prosperity of, perpetuated by the solid improvements of agriculture, 172. _Flax_, the component parts of the price of, explained, 21. _Fleetwood_, Bishop, remarks on his Chronicon Pretiosum, 77, 78. _Flour_, the component parts of the price of, explained, 21. _Food_, will always purchase as much labor as it can maintain on the spot, 61. Bread and butcher's meat compared, 62, 63. Is the original source of every other production, 69. The abundance of, constitutes the principal part of the riches of the world, and gives the principal value to many other kinds of riches, 73. _Forestalling_ and _engrossing_, the popular fear of, like the suspicions of witchcraft, 218. _Forts_, when necessary for the protection of commerce, 306. _France_, fluctuations in the legal rate of interest for money there during the course of the present century, 37, 38. Remarks on the trade and riches of, ib. The nature of apprenticeships there, 51. The propriety of restraining the planting of vineyards examined, 65. Variations in the price of grain there, 73. The money price of labour has sunk gradually with the money price of corn, 84. Foundation of the Mississippi scheme, 130. Little trade or industry to be found in the parliament towns of, 138. Description of the class of farmers called metayers, 159. Laws relating to the tenure of land, 161. Services formerly exacted besides rent, ib. The taille, what, and in operation in checking the cultivation of land, ib. Origin of the magistrates and councils of cities, 164. No direct legal encouragement given to agriculture, 171. Ill policy of M. Colbert's commercial regulations, 189. French goods heavily taxed in Great Britain, 192. The commercial intercourse between France and England, now chiefly carried on by smugglers, ib. The policy of the commercial restraints between France and Britain considered, ib. State of the coinage there, 194. Why the commerce with England has been subjected to discouragement, 202. Foundation of the enmity between these countries, ib. Remarks concerning the seignorage on coin, 225. Standard of the gold coin there, ib. The trade of the French colonies, how regulated, 237. The government of the colonies conducted with moderation, 241. The sugar colonies of, better governed than those of Britain, ib. The kingdom of, how taxed, 256. The members of the league fought more in defence of their own importance than for any other cause, 258. The present agricultural system of political economy adopted by philosophers there described, 275. Under what direction the funds for the repair of the roads are placed, 305. General state of the roads, ib. The universities badly governed, 319. Remarks on the management of the parliaments of, 335. Measures taken in, to reduce the power of the clergy, 337. Account of the mode of rectifying the inequalities of the predial taille in the generality of Montauban, 352. The personal taille explained, 360. The inequalities in, how remedied, 361. How the personal taille discourages cultivation, ib. The vingtieme, 362. Stamp duties and the controle, 364, 365. The capitation tax, how rated, 367. Restraints upon the interior trade of the country by the local variety of the revenue laws, 382. The duties on tobacco and salt, how levied, 383. The different sources of revenue in, 384. How the finances of, might be reformed, ib. The French system of taxation compared with that in Britain, ib. The nature of tontines explained, 390. Estimate of the whole national debt of, ib. _Frugality_, generally a predominating principle in human nature, 140. _Fuller's earth_, the exportation of why prohibited, 271. _Funds_, British, brief historical view of, 387. Operation of, politically considered, 393. The practice of funding has gradually enfeebled every state that has adopted it, 395. _Fur trade_, the first principles of, 68. G _Gama_, Vasco de, the first European who discovered a naval track to the East Indies, 229. _Gardening_, the gains from, distinguished into the component parts, 22. Not a profitable employment, 64. _Gems_, See _Stones_. _General_ fund in the British finances explained, 389. _Genoa_, why corn is dear in the territory of, 80. _Glasgow_, the trade of, doubled in fifteen years, by erecting banks there, 120. Why a city of greater trade than Edinburgh, 138. _Gold_, not the standard value in England, 16. Its value measured by silver, 17. Reformation of the gold coin, ib. Mint price of gold in England, ib. The working the mines of, in Peru, very unprofitable, 71. Qualities for which this metal is valued, 72. The proportionate value of, to silver, how rated before and after the discovery of the American mines, 89. Is cheaper in the Spanish market than silver, 90. Great quantities of, remitted annually from Portugal to England, 223. Why little of it remains in England, ib. Is always to be had for its value, 224. _Gold_ and _Silver_, the prices of, how affected by the increase of the quantity of the metals, 79. Are commodities that naturally seek the best market, 80. Are metals of the least value among the poorest nations, ib. The increase in the quantity of, by means of wealth and improvement, has no tendency to diminish their value, 81. The annual consumption of those metals very considerable, 87. Annual importation of, into Spain and Portugal, 88. Are not likely to multiply beyond the demand, ib. The durability of, the cause of the steadiness of their price, ib. On what circumstances the quantity of, in every particular country, depends, 100. The low value of these metals in a country no evidence of its wealth, nor their high value of its poverty, 101. If not employed at home, will be sent abroad notwithstanding all prohibitions, 139. The reason why European nations have studied to accumulate these metals, 174. Commercial arguments in favour of their exportation, ib. These and all other commodities are mutually the prices of each other, 175. The quantity of, in every country, regulated by the effectual demand, 176. Why the prices of these metals do not fluctuate so much as those of other commodities, ib. To preserve a due quantity of, in a country, no proper object of attention for the government, 176. The accumulated gold and silver in a country distinguished into three parts, 178. A great quantity of bullion alternately exported and imported for the purposes of foreign trade, 179. Annual amount of these metals imported into Spain and Portugal, 180. The importation of, not the principal benefit derived from foreign trade, 181. The value of, how affected by the discovery of the American mines, ib. And by the passage round the Cape of Good Hope to the East Indies, ib. Effect of the annual exportation of silver to the East Indies, 182. The commercial means pursued to increase the quantity of these metals in a country, ib., 192. Bullion, how received and paid at the bank of Amsterdam, 195. At what prices, 196, _note_. A trading country without mines not likely to be exhausted by an annual exportation of these metals, 200. The value of, in Spain and Portugal, depreciated by restraining the exportation of them, 208. Are not imported for the purposes of plate or coin, but for foreign trade, 224. The search after mines of, the most ruinous of all projects, 230. Are valuable because scarce and difficult to be procured, 231. _Gorgias_, evidence of the wealth he acquired by teaching, 56. _Government_, civil, indispensibly necessary for the security of private property, 297. Subordination in society, by what means introduced, ib. Inequality of fortune introduces civil government for its preservation, 299. The administration of justice a source of revenue in early times, ib. Why government ought not to have the management of turnpikes, 304. Nor of other public works, 306. Want of parsimony during peace imposes a necessity of contracting debts, to carry on a war, 386. Must support a regular administration of justice to cause manufactures and commerce to flourish, 387. Origin of a national debt, ib. Progression of public debts, ib. War, why generally agreeable to the people, 391. _Governors_, political, the greatest spendthrifts in society, 142. _Grasses_, artificial, tend to reduce the price of butcher's meat, 63. _Graziers_, subject to monopolies obtained by manufactures to their prejudice, 271. _Greece_, foreign trade promoted in several of the ancient states of, 284. Military exercises a part of general education, 291. Soldiers not a distinct profession in, ib. Course of education in the republics of, 324. The morals of the Greeks inferior to those of the Romans, ib. Schools of the philosophers and rhetoricians, 325. Law no science among the Greeks, ib. Courts, of justice, ib. The martial spirit of the people, how supported, 329. _Greek colonies_, how distinguished from Roman colonies, 227, 228. Rapid progress of these colonies, 232. _Greek language_, how introduced as a part of university education, 322. Philosophy, the three great branches of, ib. _Ground rents_, great variations of, according to situation, 354. Are a more proper subject of taxation, than houses, 355. _Gum senega_, review of the regulations imposed on the trade for, 272. _Gunpowder_, great revolution effected in the art of war by the invention of, 292, 296. This invention favourable to the extension of civilization, 296. _Gustavus Vasa_, how enabled to establish the Reformation in Sweden, 338. H _Hanseatic league_, causes that rendered it formidable, 164. Why no vestige remains of the wealth of the Hans towns, 172. _Hamburgh_, agio of the bank of, explained, 195. Sources of the revenue of that city, 343, 344. The inhabitants of, how taxed to the state, 359. _Hamburgh company_, some account of, 308. _Hearth money_, why abolished in England, 356, 357. _Henry VIII._ of England, prepares the way for the Reformation, by shutting out the authority of the pope, 338. _Herring buss bounty_, remarks on, 211. Fraudulent claims of the bounty, ib. The boat fishery the most natural and profitable, 212. Account of the British white herring fishery, ib. Account of the busses fitted out in Scotland, the amount of their cargoes, and the bounties on them, 287, _Append._ _Hides_, the produce of rude countries commonly carried to a distant market, 97. Price of, in England three centuries ago, 98. Salted hides inferior to fresh ones, 98, 99. The price of, how affected by circumstances in cultivated and in uncultivated countries, ib. _Highlands of Scotland_, interesting remarks on the population of, 33. Military character of the Highlanders, 293. _Hobbes_, Mr. remarks on his definition of wealth, 13. _Hogs_, circumstances which render their flesh cheap or dear, 95. _Holland_, observations on the riches, and trade of the republic of, 38. Not to follow some business unfashionable there, 40. Cause of the dearness of corn there, 80. Enjoys the greatest share in the carrying trade of Europe, 153. How the Dutch were excluded from being the carriers to Great Britain, 188. Is a country that prospers under the heaviest taxation, 189. Account of the bank of Amsterdam, 194, 195. This republic derives even its subsistence from foreign trade, 202, 203. Tax paid on houses there, 356. Account of the tax upon successions, 363. Stamp duties, 364. High amount of the taxes in, 370, 384. Its prosperity depends on the republican form of government, 385. _Honoraries_, from pupils to teachers in colleges tendency of, to quicken their diligence, 319. _Hose_, in the time of Edward IV., how made, 104. _Hospitality_, ancient, the cause and effect of, 169, 385. _House_, different acceptations of the term in England, and some other countries, 49. Houses considered as part of the national stock, 113. Houses produce no revenue, ib. The rent of, distinguished into two parts, 354. Operation of a tax upon house rent, payable by the tenant, ib. House rent, the best test of the tenant's circumstances, 355. Proper regulation of a tax on, ib. How taxed in Holland, 356. Hearth money, ib. Window tax, 357. _Hudson's Bay company_, the nature of their establishment and trade, 312. Their profits not so high as has been reported, ib. _Hunters_, war, how supported by a nation of, 289. Cannot be very numerous, 290. No established administration of justice needful among them, 297. Age the sole foundation of rank and precedency among, ib. No considerable inequality of fortune or subordination to be found among them, 298. No hereditary honours in such a society, ib. _Husbandmen_, war, how supported by a nation of, 290. _Husbandry._ See _Agriculture_. I, J _Jamaica_, the returns of trade from that island, why irregular, 402. _Idleness_ unfashionable in Holland, 40. _Jewels._ See _Stones_. _Importation_, why restraints have been imposed on, with the two kinds of, 182. How restrained to secure a monopoly of the home market to domestic industry, 183. The true policy of these restraints doubtful, ib. The free importation of foreign manufactures more dangerous than that of raw materials, 186. How far it may be proper to continue the free importation of certain foreign goods, 189. How far it may be proper to restore the free importation of goods, after it has been interrupted, ib. Of the materials of manufacture, review of the legal encouragements given to, 266. _Independents_, the principles of that sect, explained, 332. _Indies._ See _East_ and _West_. _Indostan_, the several classes of people there kept distinct, 283. The natives of, how prevented from undertaking long sea voyages, ib. _Industry_, the different kinds of, seldom dealt impartially with by any nation, 1, 2. The species of, frequently local, 8. Naturally suited to the demand, 24. Is increased by the liberal reward of labour, 34. How affected by seasons of plenty and scarcity, ib., 35. Is more advantageously exerted in towns than in the country, 53. The average produce of, always suited to the average consumption, 79. Is promoted by the circulation of paper money, 119. Three requisites to putting industry in motion, 120. How the general character of nations is estimated by, 137. And idleness, the proportion between, how regulated, ib. Is employed for subsistence before it extends to conveniencies and luxury, 155. Whether the general industry of a society is promoted by commercial restraints on importation, 183. Private interest naturally points to that employment most advantageous to the society, ib. But without intending or knowing it, 184. Legal regulations of private industry dangerous assumptions of power, 185. Domestic industry ought not to be employed on what can be purchased cheaper from abroad, ib. Of the society, can augment only in proportion as its capital augments, ib. When it may be necessary to impose some burden upon foreign industry to favour that at home, 187. The free exercise of industry ought to be allowed to all, 191. The natural effort of every individual to better his condition, will, if unrestrained, result in the prosperity of the society, 221. _Insurance_, from fire and sea risks, the nature and profits of examined, 45. The trade of insurance may be successfully carried on by a joint-stock company, 317, 318. _Interest_, landed, monied, and trading, distinguished, 144. _Interest_ for the use of money, the foundation of that allowance explained, 22. Historical view of the alterations of, in England, and other countries, 37. Remarks on the high rates of, in Bengal, 39. And in China, 40. May be raised by defective laws, independent on the influence of wealth or poverty, ib. The lowest ordinary rate of, must somewhat more than compensate occasional losses, ib. The common relative proportion between interest and mercantile profits inquired into, ib. Was not lowered, in consequence of the discovery of the American mines, 145. How the legal rate of, ought to be fixed, 146. Consequences of its being fixed too high or too low, ib., 147. The market rate of, regulates the price of land, ib. Whether a proper object of taxation, 357. _Ireland_, why never likely to furnish cattle to the prejudice of Great Britain, 186. The proposed absentee tax there considered, 379. Ought in justice to contribute towards the discharge of the public debt of Great Britain, 402. Expediency of an union with Great Britain, ib. _Isocrates_, the handsome income he made by teaching, 56. _Italy_, the only great country in Europe which has been cultivated and improved in every part by means of its foreign commerce, 172. Was originally colonized by the Dorians, 227. _Jurisdictions_, territorial, did not originate in the feudal law, 168. _Justice_, the administration of, a duty of the sovereign, 297. In early times a source of revenue to him, 299. The making justice subservient to the revenue a source of great abuses, ib. Is never administered gratis, 300. The whole administration of, but an inconsiderable part of the expense of government, ib. How the whole expense of justice might be defrayed from the fees of court, ib. The interference of the jurisdictions of the several English courts of law accounted for, 301. Law language, how corrupted, 302. The judicial and executive power, why divided, ib. By whom the expense of administration of, ought to be borne, 342. K _Kalm_, the Swedish traveller, his account of the husbandry of the British colonies in North America, 94. _Kelp_, a rent demanded for the rocks on which it grows, 61. _King_, Mr. his account of the average price of wheat, 83. _King_, under feudal institutions, no more than the greatest baron in the nation, 168. Was unable to restrain the violence of his barons, 169. Treasure-trove an important branch of revenue to, 385, 386. His situation, how favourable for the accumulating treasure, ib. In a commercial country, naturally spends his revenue in luxuries, ib. Is hence driven to call upon his subjects for extraordinary aids, ib. _Kings_ and their ministers the greatest spendthrifts in a country, 149. L _Labour_, the fund which originally supplies every nation with its annual consumption, 1. How the proportion between labour and consumption in regulated, ib. The different kinds of industry seldom dealt impartially with by any nation, 2. The division of labour considered, ib., 3. This division increases the quantity of work, 4. Instances in illustration, 5. From what principle the division of labour originates, 6. The divisibility of governed by the market, 8. Labour the real measure of the exchangeable value of commodities, 12. Different kinds of, not easily estimated by immediate comparison, 13. Is compared by the intermediate standard of money, ib. In an invariable standard for the value of commodities, 14. Has a real and a nominal price, ib. The quantity of labour employed on different objects, the only rule for exchanging them in the rude stages of society, 20. Difference between the wages of labour and profits on stock in manufactures, ib. The whole labour of a country never exerted, 22. Is in every instance suited to the demand, 24. The effect of extraordinary calls for, 25. The deductions made from the produce of labour employed upon land, 27. Why dearer in North America than in England, 29. Is cheap in countries that are stationary, ib. The demand for, would continually decrease, in a declining country, 30. The province of Bengal cited as an instance, ib. Is not badly paid for in Great Britain, ib., 31. An increasing demand for, favourable to population, 33. That of freemen cheaper to the employers than that of slaves, ib. The money price of, how regulated, 36. Is liberally rewarded in new colonies, 38. Common labour and skilful labour distinguished, 42. The free circulation of, from one employment to another, obstructed by corporation laws, 57. The unequal prices of, in different places, probably owing to the law of settlements, 59. Can always procure subsistence on the spot, where it is purchased, 61. The money price of, in different countries, how governed, 80. Is set into motion by stock employed for profit, 106. The division of, depends on the accumulation of stock, 111. Machines to facilitate labour advantageous to society, 116. Productive and unproductive distinguished, 135. Various orders of men specified whose labour in unproductive, 136. Unproductive labourers all maintained by revenue, ib. The price of, how raised by the increase of the national capital, 145. Its price, though nominally raised, may continue the same, 146. Is liberally rewarded in new colonies, 231. Of artificers and manufacturers, never adds any value to the whole amount of the rude produce of the land, according to the French agricultural system of political economy, 277. This doctrine shewn to be erroneous, 281. The productive powers of labour, how to be improved, ib. _Labourers_, useful and productive, everywhere proportioned to the capital stock on which they are employed, 1, 2. Share the produce of their labour, in most cases, with the owners of the stock on which they are employed, 20. Their wages a continued subject of contest between them and their masters, 28. Are seldom successful in their outrageous combinations, ib. The sufficiency of their earnings a point not easily determined, ib. Their wages sometimes raised by increase of work, ib. Their demands limited by the funds destined for payment, 29. Are continually wanted in North America, ib. Miserable condition of those in China, ib., 30. Are not ill paid in Great Britain, ib., 31. If able to maintain their families in dear years, they must be at their ease in plentiful seasons, ib. A proof furnished in the complaints of their luxury, 33. Why worse paid than artificers, 42. Their interests, strictly connected with the interests of the society, 106. Labour the only source of their revenue, 112. Effects of a life of labour on the understandings of the poor, 327. _Land_, the demand of rent for, how founded, 21. The rent paid enters into the greater part of all commodities, ib. Generally produces more food than will maintain the labour necessary to bring it to market, 61. Good roads and navigable canals equalize difference of situation, 62. That employed in raising food for men and cattle regulates the rent of all other cultivated land, 64, 67. Can clothe and lodge more than it can feed while uncultivated, and the contrary when improved, 68. The culture of land producing food creates a demand for the produce of other lands, 73. Produces by agriculture a much greater quantity of vegetable than of animal food, 79. The full improvement of, requires a stock of cattle to supply manure, 93. Cause and effect of the diminution of cottagers, 95. Signs of the land being completely improved, 96. The whole annual produce, or the price of it, naturally divides itself into rent, wages, and profit of stock, 106. The usual price of, depends on the common rate of interest for money, 147. The profits of cultivation exaggerated by projectors, 154. The cultivation of, naturally preferred to trade and manufactures, on equal terms, 155. Artificers necessary to the cultivation of, 156. Was all appropriated, though not cultivated, by the northern destroyers of the Roman empire, 157. Origin of the law of primogeniture under the feudal government, ib. Entails, 158. Obstacles to the improvement of land under feudal proprietors, ib. Feudal tenures, 159, 160. Feudal taxation, 161. The improvement of land checked in France, by the taille, ib. Occupiers of, labour under great disadvantages, ib. Origin of long leases of, 169. Small proprietors the best improvers of, 170. Small purchasers of, cannot hope to raise fortunes by cultivation, ib., 171. Tenures of, in the British American colonies, 235. Is the most permanent source of revenue, 345. The rent of a whole country not equal to the ordinary levy upon the people, ib. The revenue from, proportioned not to the rent, but to the produce, 346. Reasons for selling the crown lands, ib. The land tax of Great Britain considered, 348. An improved land-tax suggested, 349. A land-tax, however equally rated by a general survey, will soon become unequal, 352. Tithes a very unequal tax, ib. Tithes discourage improvement, ib. _Landholders_, why frequently inattentive to their own particular interests, 106. How they contribute to the annual production of the land, according to the French agricultural system of political economy, 275. Should be encouraged to cultivate a part of their own land, 350. _Latin language_, how it became an essential part of university education, 321. _Law_, the language of, how corrupted, 302. Did not improve into a science in ancient Greece, 325. Remarks on the courts of justice in Greece and Rome, ib., 326. _Law_, Mr. account of his banking scheme for the improvement of Scotland, 130. _Lawyers_, why amply rewarded for their labour, 44. Great amount of their fees, 300. _Leases_, the various usual conditions of, 349, 350. _Leather_, restrictions on the exportation of unmanufactured, 271. _Lectures_ in universities frequently improper for instruction, 320. _Levity_, the vices of, ruinous to the common people, and therefore severely censured by them, 332, 333. _Liberty_, three duties only necessary for a sovereign to attend to for supporting a system of, 286. _Lima_, computed number of inhabitants in that city, 233. _Linen manufacture_, narrow policy of the master manufacturers in, 266. _Literature_, the rewards of, reduced by competition, 56. Was more profitable in ancient Greece, ib. The cheapness of literary education an advantage to the public, 57. _Loans of money_, the nature of, analysed, 144. The extensive operation of, ib. _Locke_, Mr. remarks on his opinion of the difference between the market and mint prices of silver bullion, 18. His account of the cause of lowering the rates of interest for money, examined, 145. His distinction between money and moveable goods, 173. _Lodgings_, cheaper in London than in any other capital city in Europe, 49. _Logic_, the origin and employment of, 322. _Lotteries_, the true nature of, and the causes of their success, explained, 45. _Luck_, instances of the universal reliance mankind have on it, 45. _Lutherans_, origin and principles of that sect, 339. _Luxuries_, distinguished from necessaries, 368. Operation of taxes on, ib. The good and bad properties of taxes on, 380. M _Macedon_, Philip of, the superiority that discipline gave his army over that of his enemies, 294. _Machines_ for facilitating mechanical operations, how invented and improved, 4, 5. Are advantageous to every society, 116. _Madder_, the cultivation of, long confined to Holland by English tithes, 353. _Madeira wines_, how introduced into North America and Britain, 204. _Malt_, reasons for transferring the duties on brewing to, 378. Distillery, how to prevent smuggling, 377. _Manufactures_, the great advantages resulting from a division of labour in, 3. Instances in illustration, 5. Why profits increase in the higher stages of, 21. Of what parts the gain consists, 22. The private advantages of secrets in, 25. Peculiar advantages of soil and situation, ib. Monopolies, ib. Corporation privileges, 26. The deductions made from labour employed on manufactures, 27. Inquiry how far they are affected by seasons of plenty and scarcity, 35. Are not no materially affected by circumstances in the country where they are carried on, as in the places where they are consumed, ib. New manufactures generally give higher wages than old ones, 48. Are more profitably carried on in towns than in the open country, 53. By what means the prices of, are reduced while the society continues improving, 103. Instances in hardware, ib. Instances in the woollen manufacture, 104. What fixed capitals are required to carry on particular manufactures, 112. Manufactures for distant sale, why not established in North America, 156. Why preferred to foreign trade for the employment of a capital, ib. Motives to the establishment of manufactures for distant sale, 165. How shifted from one country to another, ib., 166. Natural circumstances which contribute to the establishment of them, ib. Their effect on the government and manners of a country, 167. The independence of artisans explained, 169. May flourish amidst the ruin of a country, and begin to decay on the return of its prosperity, 180. Inquiry how far manufactures might be affected by a freedom of trade, 190. British restraints on manufactures in North America, 238, 239. The exportation of instruments in, prohibited, 273. By the principal support of foreign trade, 283. Require a more extensive market than rude produce of the land, ib. Were exercised by slaves in ancient Greece, 284. High prices of, in Greece and at Rome, 285. False policy to check manufactures in order to promote agriculture, ib. In Great Britain, why principally fixed in the coal countries, 370. _Manufacturers_, those thrown out of one business can transfer their industry to colateral employments, 190. A spirit of combination among them to support monopolies, 191. Manufacturers prohibited by old statutes from keeping a shop, or selling their own goods by retail, 215, 216. The use of wholesale dealers to manufacturers, 217. An unproductive class of the people, according to the French agricultural system of political economy, 276. The error of this doctrine shewn, 280. How manufacturers augment the revenue of a country, 281. _Manure_, the supply of, in most places depends on the stock of cattle raised, 93. _Maritime countries_, why the first that are civilized and improved, 9. _Martial spirit_, how supported in the ancient republics of Greece and Rome, 329. The want of it now supplied by standing armies, ib. The establishment of a militia little able to support it, ib. _Mediterranean sea_, peculiarly favourable for the first attempts in navigation, 9. _Meggens_, Mr. his account of the annual importation of gold and silver into Spain and Portugal, 88. His relative proportion of each, 89. _Mercantile system_ explained, 372. _Mercenary troops_, origin and reason of, 291. The numbers of, how limited, ib. _Merchants_, their judgments more to be depended on respecting the interest of their particular branches of trade, than with regard to the public interest, 106, 107. Their capitals altogether circulating, 112. Their dealings extended by the aid of bankers notes, 121, 124. Customs of, first established to supply the want of laws, and afterwards admitted as laws, 126. The manner of negociating bills of exchange, explained, ib. The pernicious tendency of drawing and redrawing, ib., 127. In what method their capitals are employed, 147. Their capitals, dispersed and unfixed, 149. The principles of foreign trade examined, 153. Are the best of improvers when they turn country gentlemen, 167. Their preference among the different species of trade, how determined, 183. Are actuated by a narrow spirit of monopoly, 201. The several branches of the corn trade specified and considered, 215. The government of a company of, the worst a country can be under, 234. Of London, not good economists, 253. An unproductive class of men, according to the present agricultural system of political economy in France, 277. The quick return of mercantile capitals enables merchants to advance money to government, 386, 387. Their capitals increased by lending money to the state, 387. _Mercier_, de la Riviere, M. character of his natural and essential order of political societies, 282. _Metals_, why the best medium of commerce, 10. Origin of stamped coins, 11. Why different metals became the standard of value among different nations, 16. The durability of, the cause of the steadiness of their price, 88. On what the quantity of precious metals in every particular country depends, 100. Restraints upon the exportation of, 272. _Metaphysics_, the science of, explained, 323. _Metayers_, description of the class of farmers so called in France, 159. _Methodists_, the teachers among, why popular preachers, 330. _Methuen_, Mr. translation of the commercial treaty concluded by him between England and Portugal, 223. _Mexico_, was a less civilized country than Peru, when first visited by the Spaniards, 85. Present populousness of the capital city, 233. Low state of arts at the first discovery of that empire, ib. _Militia_, why allowed to be formed in cities, and its formidable nature, 164. The origin and nature of, explained, 292. How distinguished from a regular standing army, ib. Must always be inferior to a standing army, 293. A few campaigns of service may make a militia equal to a standing army, ib. Instances, 294. _Milk_, a most perishable commodity, how manufactured for store, 96. _Mills_, wind and water, their late introduction into England, 105. _Mines_, distinguished by their fertility or barrenness, 70. Comparison between those of coal and those of metals, 71. The competition between, extends to all parts of the world, ib. The working of, a lottery, 72. Diamond mines not always worth working, 73. Tax paid to the king of Spain from the Peruvian mines, 85. The discovery of mines not dependent on human skill or industry, 100. In Hungary, why worked at less expense than the neighbouring ones in Turkey, 284. _Mining_, projects of, uncertain and ruinous, and unfit for legal encouragement, 230. _Mirabeau_, Marquis de, his character of the economical table, 282. _Mississippi_ scheme in France, the real foundation of, 130. _Modus_ for tithe, a relief to the farmer, 353. _Money_, the origin of, traced, 10. Is the representative of labour, 13. The value of, greatly depreciated by the discovery of the American mines, 14. How different metals became the standard money of different nations, 16. The only part of the circulating capital of a society, of which the maintenance can diminish their neat revenue, 116. Makes no part of the revenue of a society, 117. The term money, in common acceptation, of ambiguous meaning, ib. The circulating money, in society, no measure of its revenue, 118. Paper money, ib. Effect of paper on the circulation of cash, ib., 119. Inquiry into the proportion the circulating money of any country bears to the annual produce circulated by it, 120. Paper can never exceed the value of the cash, of which it supplies the place, in any country, 122. The pernicious practice of raising money by circulation, explained, 126. The true cause of its exportation, 139. Loans of, the principles of, analysed, 144. Monied interest distinguished from the landed and trading interest, ib. Inquiry into the real causes of the reduction of interest, 145. Money and wealth synonymous terms in popular language, 173. And moveable goods compared, ib. The accumulation of, studied by the European nations, 174. The mercantile arguments for liberty to export gold and silver, ib. The validity of these arguments examined, 175. Money and goods mutually the price of each other, ib. Over-trading causes complaints of the scarcity of money, 176. Why more easy to buy goods with money, than to buy money with goods, 177. Inquiry into the circulating quantity of, in Great Britain, 178. Effect of the discovery of the American mines on the value of, 181. Money and wealth different things, 182. Bank money explained, 195. See _Coins_, _Gold_, and _Silver_. _Monopolies_ in trade or manufactures, the tendency of, 25. Are enemies to good management, 62. Tendency of making a monopoly, of colony trade, 251. Countries which have colonies obliged to share their advantages with many other countries, 260. The chief engine in the mercantile system, 261. How monopolies derange the natural distribution of the stock of the society, ib. Are supported by unjust and cruel laws, 268. Of a temporary nature, how far justifiable, 316. Perpetual monopolies injurious to the people at large, ib. _Montauban_, the inequalities in the predial taille in that generality, how rectified, 352. _Montesquieu_, reasons given by him for the high rates of interest among all Mahometan nations, 40. Examination of his idea of the cause of lowering the rate of interest of money, 145. _Morality_, two different systems of, in every civilized society, 332. The principal points of distinction between them, 333. The ties of obligation in each system, ib. Why the morals of the common people are more regular in sectaries than under the established church, ib. The excesses of, how to be corrected, ib. _Morellet_, M. his account of joint-stock companies, defective, 317. _Mun_, Mr. his illustration of the operation of money exported for commercial purposes, 174. _Music_, why a part of the ancient Grecian education, 324. And dancing, great amusement among barbarous nations, ib. N _Nations_, sometimes driven to inhuman customs, by poverty, 1. The number of useful and productive labourers in, always proportioned to the capital stock on which they are employed, 1, 2. The several sorts of industry seldom dealt impartially by, 2. Maritime nations, why the first improved, 8. How ruined by a neglect of public economy, 140. Evidences of the increase of a national capital, 141. How the expenses of individuals may increase the national capital, 142. _Navigation_, inland, a great means of improving a country in arts and industry, 9. The advantages of, 62. May be successfully managed by joint-stock companies, 317. _Navigation act of England_, the principal dispositions of, 187. Motives that dictated, this law, 188. Its political and commercial tendency, ib. Its consequences, so far as it affected the colony trade with England, 245. Diminished the foreign trade with Europe, 246. Has kept up high profits in the British trade, ib. Subjects Britain to a disadvantage in every branch of trade of which she has not the monopoly, ib., 247. _Necessaries_ distinguished from luxuries, 368. Operation of taxes on, ib. Principal necessaries taxed, 369. _Negro slaves_, why not much employed in raising corn in the English colonies, 159. Why more numerous on sugar than on tobacco plantations, ib. _Nile_, river, the cause of the early improvement of agriculture and manufactures in Egypt, 9. O _Oats_, bread made of, not so suitable to the human constitution as that made of wheat, 68. _Ontology_, the science of, explained, 323. _Oxford_, the professorships there, sinecures, 319. P _Paper money_, the credit of, how established, 118. Its operation explained, ib. Its effect on the circulation of cash, ib., 119. Promotes industry, ib. Operation of the several banking companies established in Scotland, 120. Can never exceed the value of the gold and silver, of which it supplies the place in any country, 122. Consequences of too much paper being issued, ib. The practice of drawing and redrawing explained, with its pernicious effects, 126. The advantages and disadvantages of paper credit, stated, 131. Ill effects of notes issued for small sums, 132. Suppressing small notes renders money more plentiful, ib. The currency of, does not affect the prices of goods, 133. Account of the paper currency in North America, 134. Expedient of the government of Pennsylvania to raise money, 345. Why convenient for the domestic purposes of the North Americans, 400. _Paris_ enjoys a little more trade than is necessary for the consumption of its inhabitants, 138. _Parish ministers_, evils attending vesting the election of, in the people, 339. _Parsimony_ is the immediate cause of the increase of capitals, 138. Promotes industry, ib. Frugal men public benefactors, 140. Is the only means by which artificers and manufacturers can add to the revenue and wealth of society, according to the French agricultural system of political economy, 277. _Pasture land_, under what circumstances more profitable than arable land, 62, 63. Why it ought to be inclosed, 63. _Patronage_, the right of, why established in Scotland, 340. _Pay_, military, origin and reason of, 291. _Pennsylvania_, account of the paper currency there, 134. Good consequences of the government there having no religious establishment, 332. Derive a revenue from their paper currency, 401. _People_, how divided into productive and unproductive classes according to the present French system of agricultural political economy, 275. The unproductive class greatly useful to the others, 277. The great body of, how rendered unwarlike, 292. The different opportunities of education in the different ranks of, 328. The inferior ranks of, the greatest consumers, 375. The luxurious expenses of these ranks ought only to be taxed, 376. _Persecution_ for religious opinions, the true cause of, 330. _Peru_, the discovery of the silver mines in, occasioned those in Europe to be in a great measure abandoned, 71. These mines yield but small profit to the proprietors, ib. Tax paid to the king of Spain from these mines, 85. The early accounts of the splendour and state of arts, in this country greatly exaggerated, 85, 86. Present state of, under the Spanish government, 86. The working of the mines there becomes gradually more expensive, 90. Low state of arts there when first discovered, 233. Is probably more populous now than at any former period, ib. _Philosophy_, natural, the origin and objects of, 322. Moral, the nature of, explained, ib. Logic, the origin and employment of, ib. _Physicians_, why amply rewarded for their labour, 43, 44. _Physics_, the ancient system of, explained, 322. _Pin-making_, the extraordinary advantage of a division of labour in this art, 3. _Plate_ of private families, the melting it down to supply state exigencies, an insignificant resource, 178. New plate is chiefly made from old, 225. _Ploughmen_, their knowledge more extensive than the generality of mechanics, 53. _Pneumatics_, the science of, explained, 323. _Poivre_, M. his account of the agriculture of Chochin-China, 66. _Poland_, a country still kept in poverty by the feudal system of its government, 101. _Political economy_, the two distinct objects and two different systems of, 173. The present agricultural system of, adopted by French philosophers, described, 275. Classes of the people who contribute to the annual produce of the land, ib. How proprietors contribute, ib. How cultivators contribute, ib. Artificers and manufacturers unproductive, 276. The unproductive classes maintained by the others, 277. Bad tendency of restrictions and prohibitions in trade, 279. How this system is delineated by M. Quesnai. The bad effects of an injudicious political economy, how corrected, 280. The capital error in this system pointed out, ib. _Poll-taxes_, origin of, under the feudal government, 162, 163. Why esteemed badges of slavery, 362. The nature of, considered, 367. _Poor_, history of the laws made for the provision of, in England, 57. _Pope of Rome_, the great power formerly assumed by, 335. His power how reduced, 337. Rapid progress of the Reformation, 338. _Population_, riches and extreme poverty equally unfavourable to, 33. Is limited by the means of subsistence, ib., 69. _Porter_, the proportion of malt used in the brewing of, 376. _Portugal_, the cultivation of the country not advanced by its commerce, 171, 172. The value of gold and silver there depreciated by prohibiting their exportation, 208. Translation of the commercial treaty concluded in 1703 with England, 223. A large share of the Portugal gold sent annually to England, ib. Motives that led to the discovery of a passage to the East round the Cape of Good Hope, 229. Lost its manufactures by acquiring rich and fertile colonies, 251. _Post-office_, a mercantile project, well calculated for being managed by a government, 344. _Potatoes_, remarks on, as an article of food, 67. Culture and great produce of, ib. The difficulty of preserving them the great obstacle to cultivating them for general diet, 68. _Poverty_, sometimes urges nations to inhuman customs, 1. Is no check to the production of children, 33. But very unfavourable to raising them, ib. _Poultry_, the cause of their cheapness, 95. Is a more important article of rural economy in France than in England, ib. _Pragmatic sanction in France_, the object of, 337. Is followed by the concordat, ib. _Preferments_, ecclesiastical, the means by which a national clergy ought to be managed by the civil magistrate, 335. Alterations in the mode of electing to them, ib., 337. _Presbyterian church government_, the nature of, described, 340. Character of the clergy of, ib., 341. _Prices_, real and nominal, of commodities, distinguished, 14. Money price of goods explained, 19. Rent for land enters into the price of the greater part of all commodities, 21. The component parts of the price of goods explained, ib. Natural and market prices distinguished, and how governed, 23, 36. Though raised at first by an increase of demand, always reduced by it in the result, 314. _Primogeniture_, origin and motive of the law of succession by, under the feudal government, 157. In contrary to the real interest of families, 158. _Princes_, why not well calculated to manage mercantile projects for the sake of a revenue, 344. _Prodigality_, the natural tendency of, both to the individual and to the public, 138. Prodigal men enemies to their country, 140. _Produce_ of land and labour the source of all revenue, 136. The value of, how to be increased, 141. _Professors in Universities_, circumstances which determine their merit, 340, 341. _Profit_, the various articles of gain that pass under the common idea of, 22. An average rate of, in all countries, 23. Averages of, extremely difficult to ascertain, 37. Interest of money the best standard of, ib. The diminution of, a natural consequence of prosperity, 38. Clear and gross profit distinguished, 40. The nature of the highest ordinary rate of, defined, ib. Double interest deemed in Great Britain a reasonable mercantile profit, ib. In thriving countries low profit may compensate the high wages of labour, 41. The operation of high profits and high wages compared, ib. Compensates inconvenience and disgrace, 42. Of stock, how affected, 46. Large profits must be made from small capitals, 47. Why goods are cheaper in the metropolis than in country villages, ib. Great fortunes more frequently made by trade in large towns than in small ones, ib. Is naturally low in rich, and high in poor countries, 106. How that of the different classes of traders is raised, 148. Private, the sole motive of employing capitals in any branch of business, 154. When raised by monopolies, encourage luxury, 253. _Projects_, unsuccessful in arts, injurious to a country, 140. _Property_, passions which prompt mankind to the invasion of, 297. Civil government necessary for the production of, ib. Wealth a source of authority, 298. _Provisions_, how far the variations in the price of, affect labour and industry, 30, 34, 36. Whether cheaper in the metropolis or in country villages, 47. The prices of, better regulated by competition than by law, 60. A rise in the prices of, must be uniform, to shew that it proceeds from a depreciation of the value of silver, 102. _Provisers_, object of the statute of, in England, 337. _Prussia_, mode of assessing the land-tax there, 351. _Public works_ and _institutions_, how to be maintained, 302. Equity of tolls for passage over roads, bridges and canals, 303. Why government ought not to have the management of turnpikes, 304. Nor of other public works, 306. _Purveyance_, a service still exacted in most parts of Europe, 161. Q _Quakers of Pennsylvania_, inference from their resolution to emancipate all their negro slaves, 159. _Quesnai_, M. view of his agricultural system of political economy, 279. His doctrine generally subscribed to, 282. _Quito_, populousness of that city, 233. R _Reformation_, rapid progress of the doctrines of, in Germany, 338. In Sweden and Switzerland, ib. In England and Scotland, ib. 339. Origin of the Lutheran and the Calvinistic sects, ib. _Regulated companies_. See _Companies_. _Religion_, the object of instruction in, 330. Advantage the teachers of a new religion enjoy over those of one that is established, ib. Origin of persecutions for heretical opinions, ib. How the zeal of the inferior clergy of the church of Rome is kept alive, ib. Utility of ecclesiastical establishments, 331. How united with the civil power, ib., 332. _Rent_, reserved, ought not to consist of money, 14. But of corn, ib. Of land, constitutes a third part of the price of most kinds of goods, 21. An average rate of, in all countries, and how regulated, 23. Makes the first deduction from the produce of labour employed upon land, 27. The terms of, how adjusted between landlord and tenant, 60, 61. Is sometimes demanded for what is altogether incapable of human improvement, 61. Is paid for, and produced, by land in almost all situations, ib. The general proportion paid for coal mines, 71. And metal mines, ib. Mines of precious stones frequently yield no rent, 73. How paid in ancient times, 76. Is raised, either directly or indirectly, by every improvement in the circumstances of society, 105. Gross and neat rent distinguished, 115. How raised and paid under feudal governments, 137. Present average proportion of, compared with the produce of the land, ib. Of houses distinguished into two parts, 354. Difference between rent of house and rent of land, 355. Rent of a house the best estimate of a tenants circumstances, ib. _Retainers_, under the feudal system of government described, 167. How the connection between them and their lords was broken, 169. _Revenue_, the original source of, pointed out, 22. Of a country, of what it consists, 115. The neat revenue of a society diminished by supporting a circulating stock of money, 116. Money no part of revenue, 117. Is not to be computed in money, but in what money will purchase, ib. How produced, and how appropriated, in the first instance. 136. Produce of land, ib. Produce of manufactures, ib. Must always replace capital, ib. The proportion between revenue and capital regulates the proportion between idleness and industry, 138. Both the savings and the spendings of, annually, consumed, ib. Of every society, equal to the exchangeable value of the whole produce of its industry, 184. Of the customs, increase by drawbacks, 205. Why government ought not to take the management of turnpikes, to derive a revenue from them, 304. Public works of a local nature always better maintained by provincial revenues than by the general revenue of the state, 306. The abuses in provincial revenues trifling, when compared with those in the revenue of a great empire, ib. The greater the revenue of the church, the smaller must be that of the state, 341. The revenue of the state ought to be raised proportionably from the whole society, 342. Local expenses ought to be defrayed by a local revenue, 343. Inquiry into the sources of public revenue, ib. Of the republic of Hamburgh, ib., 344. Whether the government of Britain could undertake the management of the bank, to derive a revenue from it, ib. The post office, a mercantile project, well calculated for being managed by government, ib. Princes not well qualified to improve their fortunes by trade, ib. The English East India Company good traders before they became sovereigns, but each character now spoils the other, ib. Expedient of the government of Pennsylvania to raise money, 345. Rent of land the most permanent fund, ib. Feudal revenues, ib. Of Great Britain, ib. Revenue from land proportioned not to the rent but to the produce, 346. Reasons for selling the crown lands, ib., 347. An improved land-tax suggested, 349. The nature and effect of tithes explained, 352. Why a revenue cannot be raised in kind, 353. When raised in money, how affected by different modes of valuation, ib. A proportionable tax on houses the best source of revenue, 355. Remedies for the diminution of, according to their causes, 374. Bad effects of farming out public revenues, 381. The different sources of revenue in France, 384. How expended in the rude state of society, 385. _Rice_, a very productive article of cultivation, 67. Requires a soil unfit for raising any other kind of food, ib. Rice countries more populous than corn countries, 86. _Riches_, the chief enjoyment of, consists in the parade of, 72, 73. _Risk_, instances of the inattention mankind pay to it, 45. _Roads_, good, the public advantages of, 62. How to be made and maintained, 303. The maintenance of, why improper to be trusted to private interest, 304. General state of, in France, 305. In China, ib. _Romans_, why copper became the standard of value among them, 16. The extravagant prices paid by them for certain luxuries for the table accounted for, 92. The value of silver higher among them than at the present time, ib. The republic of, founded on a division of land among the citizens, 228. The Agrarian law only executed upon one or two occasions, ib. How the citizens who had no land subsisted, ib. Distinction between the Roman and Greek colonies, ib. The improvement of the former slower than that of the latter, 232. Origin of the social war, 257. The republic ruined by extending the privilege of Roman citizens to the greater part of the inhabitants of Italy, 258. When contributions were first raised to maintain those who went to the wars, 290. Soldiers not a distinct profession there, 291. Improvement of the Roman armies by discipline, 294. How that discipline was lost, 295. The fall of the western empire, how effected, ib. Remarks on the education of the ancient Romans, 324. Their morals superior to those of the Greeks, ib. State of law, and forms of justice, 325. The martial spirit of the people, how supported, 329. Great reductions of the coin practised by, at particular exigencies, 396. _Rome_, modern, how the zeal of the inferior clergy of, is kept alive, 330. The clergy of, one great spiritual army dispersed in different quarters over Europe, 335. Their power during the feudal monkish ages similar to that of the temporal barons, 336. Their power, how reduced, 337. _Rouen_, why a town of great trade, 138. _Ruddiman_, Mr. remarks on his account of the ancient price of wheat in Scotland, 77. _Russia_, was civilized under Peter the Great by a standing army, 296. S _Sailors_, why no sensible inconvenience felt by the great numbers disbanded at the close of a war, 190. _Salt_, account of foreign salt imported into Scotland, and of Scotch salt delivered duty free for the fishery, 288, _Append_. Is an object of heavy taxation everywhere, 369. The collection of the duty on, expensive, 380. _Sardinia_, the land-tax how assessed there, 352. _Saxon lords_, their authority and jurisdiction as great before the Conquest as those of the Normans were afterwards, 168. _Schools_, parochial, observations on, 328. _Science_ is the great antidote to the poison of enthusiasm and superstition, 333. _Scipio_, his Spanish militia rendered superior to the Carthaginian militia by discipline and service, 294. _Scotland_, compared with England as to the prices of labour and provisions, 31. Remarks on the population of the Highlands, 33. The market rate of interest higher than the legal rate, 37. The situation of cottagers there described, 49. Apprenticeships and corporations, 51. The common people of, why neither so strong nor so handsome as the same class in England, 68. Cause of the frequent emigrations from, 80. Progress of agriculture there before the union with England, 93. Present obstructions to better husbandry, ib., 94. The price of wool reduced by the Union, 99. Operation of the several banking companies established there, 120. Amount of the circulating money there before the Union, ib. Amount of the present circulating cash, 121. Course of dealings in the Scotch banks ib. Difficulties occasioned by these banks issuing too much paper, 123. Necessary caution for some time observed by the banks in giving credit to their customers, with the good effects of it, 124. The scheme of drawing and redrawing adopted by traders, 126. Its pernicious tendency explained, ib., 127. History of the Ayr bank. 128. Mr. Law's scheme to improve the country, 130. The prices of goods in, not altered by paper currency, 133. Effect of the optional clauses in their notes, ib. Cause of the speedy establishment of the Reformation there, 339. The disorders attending popular elections of the clergy there, occasioned the right of patronage to be established, ib. Amount of the whole revenue of the clergy, 342. _Sea service_ and military service by land, compared, 45. _Sects in religion_, the more numerous, the better for society, 332. Why they generally profess the austere system of morality, 333. _Self-love_ the governing principle in the intercourse of human society, 6. _Servants_, menial, distinguished from hired workmen, 135. The various orders of men who rank in the former class in reference to their labour, 136. Their labour unproductive, 280. _Settlements_ of the poor, brief review of the English laws relating to, 57. The removals of the poor a violation of natural liberty, 59. The law of, ought to be repealed, 191. _Sheep_, frequently killed in Spain for the sake of the fleece and the tallow, 97. Severe laws against the exportation of them and their wool, 268. _Shepherds_, war, how supported by a nation of, 289. Inequality of fortune among, the source of great authority, 298. Birth and family highly honoured in nations of shepherds, ib. Inequality of fortune first began to take place in the age of shepherds, 299. And introduced civil government, ib. _Shetland_, how rents are estimated and paid there, 61. _Silk manufacture_, how transferred from Lucca to Venice, 166. _Silver_, the first standard coinage of the northern subverters of the Roman empires, 16. Its proportional value to gold regulated by law, 17. Is the measure of the value of gold, ib. Mint price of silver in England, ib. Inquiry into the difference between the mint and market price of bullion, ib., 18. How to preserve the silver coin from being melted down for profit, 18. The mines of, in Europe, why generally abandoned, 71. Evidences of the small profit they yield to the proprietors in Peru, ib. Qualities for which this metal is valued, 72. The most abundant mines of, would add little to the wealth of the world, 73. But the increase in the quantity of, would depreciate its own value, 74. Circumstances that might counteract this effect, ib. Historical view of the variations in the value of, during the four last centuries, ib., 75. Remarks on its rise in value compared with corn, 76. Circumstances that might have misled writers in reviewing the value of silver, ib. Corn the best standard for judging of the real value of silver, 79. The price of, how affected by the increase of quantity, ib. The value of, sunk by the discovery of the American mines, 81. When the reduction of its value from this cause appears to have been completed, ib. Tax paid from the Peruvian mines to the king of Spain, 85. The value of silver kept up by an extension of the market, ib. Is the most profitable commodity that can be sent to China, 86. The value of, how proportioned to that of gold before and after the discovery of the American mines, 89. The quantity commonly in the market in proportion to that of gold probably greater than their relative values indicate, ib. The value of, probably rising, and why, 90, 91. The opinion of a depreciation of its value not well founded, 100. The real value of, degraded by the bounty on the exportation of corn, 207. _Sinking fund_ in the British finances explained, 389. Is inadequate to the discharge of former debts, and almost wholly applied to other purposes, 391. Motives to the misapplication of it, ib., 392. _Slaves_, the labour of, dearer to the masters than that of freemen, 53. Under feudal lords, circumstances of their situation, 159. Countries where this order of men still remains, ib. Why the service of slave is preferred to that of freemen, ib. Their labour why unprofitable, ib. Causes of the abolishing of slavery throughout the greater part of Europe, 160. Receive more protection from the magistrate in an arbitrary government than in one that is free, 241. Why employed in manufactures by the ancient Grecians, 284. Why no improvements are to be expected from them, ib. _Smuggling_, a tempting, but generally a ruinous employment, 46. Encouraged by high duties, 373. Remedies against, 374. The crime of, morally considered, 381. _Society_, human, the first principles of, 6. _Soldiers_, remarks on their motives for engaging in the military line, 45. Comparison between the land and sea service, ib. Why no sensible inconvenience felt by the disbanding of great numbers after a war is over, 190. Reason of their first serving for pay, 291. How they became a distinct class of the people, 292. How distinguished from the militia, ib. Alteration in their exercise produced by the invention of fire-arms, ib. _South Sea company_, amazing capital once enjoyed by, 311. Mercantile and stock-jobbing projects of, 312. Assiento contract, ib. Whale fishery, ib. The capital of, turned into annuity stock, ib., 388. _Sovereign_ and _trader_, inconsistent characters, 344. _Sovereign_, three duties only necessary for him to attend to for supporting a system of natural liberty, 286. How he is to protect the society from external violence, 289, 296. And the members of it from the injustice and oppression of each other, 297. And to maintain public works and institutions, 302. _Spain_, One of the poorest countries in Europe, notwithstanding its rich mines, 101. Its commerce has produced no considerable manufactures for distant sale, and the greater part of the country remains uncultivated, 171, 172. Spanish mode of estimating their American discoveries, 173. The value of gold, and silver there depreciated by laying a tax on the exportation of them, 208. Agriculture and manufactures there discouraged by the redundancy of gold and silver, ib., 209. Natural consequences that would result from taking away this tax, ib. The real and pretended motives of the court of Castile for taking possession of the countries discovered by Columbus, 230. The tax on gold and silver, how reduced, ib. Gold the object of all the enterprises to the new world, ib. The colonies of, less populous than those of any other European nation, 232, 233. Asserted an exclusive claim to all America, until the miscarriage of their invincible armada, ib. Policy of the trade with the colonies, 236. The American establishments of, effected by private adventurers, who received little beyond permission from the government, 242. Lost its manufactures by acquiring rich and fertile colonies, 251. The alcavala tax there explained, 381. The ruin of the Spanish manufactures attributed to it, ib. _Speculation_, a distinct employment in improved society, 5. Speculative merchants described, 47. _Stage_, public performers on, paid for the contempt attending their profession, 44. The political use of dramatic representations, 334. _Stamp duties_ in England and Holland, remarks on, 363, 364, 365. _Steel-bow_ tenants in Scotland, what, 160. _Stock_, the profits raised on, in manufactures, explained, 20. In trade, an increase of, raises wages, and diminishes profit, 36. Must be larger in a great town than in a country village, 37. Natural consequences of a deficiency of stock in new colonies, 38. The profits on, little affected by the easiness or difficulty of learning a trade, 43. But by the risk or disagreeableness of the business, 46. Stock employed for profit sets into motion the greater part of useful labour, 106. No accumulation of, necessary in the rude state of society, 111. The accumulation of, necessary to the division of labour, ib. Stock distinguished into two parts, 112. The general stock of a country or society explained, 113. Houses, ib. Improved land, ib. Personal abilities, ib. Money and provisions, 114. Raw materials and manufactured goods, ib. Stock of individuals, how employed, 115. Is frequently buried or concealed in arbitrary countries, ib. The profits on, decrease in proportion as the quantity increases, 137. On what principles stock is lent and borrowed at interest, 144. That of every society divided among different employments, in the proportion most agreeable to the public interest, by the private views of individuals, 260. The natural distribution of, deranged by monopolizing systems, 261. Every derangement of, injurious to the society, 262. Mercantile, is barren and unproductive, according to the French agricultural system of political economy, 277. How far the revenue from, is an object of taxation, 357. A tax on, intended under the land-tax, 358. _Stockings_, why cheaply manufactured in Scotland, 49. When first introduced into England, 104. _Stone quarries_, their value depends on situation, 69, 74. _Stones_, precious, of no use but for ornament, and how the price of, is regulated, 73. The most abundant mines, would add little to the wealth of the world, ib. _Subordination_, how introduced into society, 297. Personal qualifications, ib. Age and fortune, ib. Birth, 298. Birth and fortune two great sources of personal distinction, ib. _Subsidy_, old, in the English customs, the drawbacks upon, 203. Origin and import of the term, 372. _Sugar_, a very profitable article of cultivation, 66, 159. Drawbacks on the importation of, from England, 204. Might be cultivated by the drill-plough, instead of all hand-labour by slaves, 241. A proper subject for taxation, as an article sold at monopoly price, 378. _Sumptuary laws_, superfluous restraints on the common people, 142. _Surinam_, present state of the Dutch colony there, 234. _Switzerland_, establishment of the Reformation in Berne and Zurich, 338. The clergy there zealous and industrious, 342. Taxes how paid there, 359, 363. T _Taille_, in France, the nature of that tax, and its operation, explained, 161. _Talents_, natural, not so various in different men as is supposed, 7. _Tartars_, their manner of conducting war, 289. Their invasions dreadful, ib. _Tavernier_, his account of the diamond mines of Golconda and Visiapour, 73. _Taxes_, the origin of, under the feudal government, 162. The sources from whence they must arise, 347. Unequal taxes, ib. Ought to be clear and certain, ib. Ought to be levied at the times most convenient for payment, ib. Ought to take as little as possible out of the pockets of the people more than is brought into the public treasury, 348. How they may be made more burdensome to the people than beneficial to the sovereign, ib. The land-tax of Great Britain, ib. Land-tax of Venice, 349. Improvements suggested for a land-tax, ib. Mode of assessing the land-tax in Prussia, 351. Tithes a very unequal tax, and a discouragement to improvement, 352. Operation of tax on house rent, payable by the tenant, 354. A proportionable tax on houses the best source of revenue, 355. How far the revenue from stock is a proper object of taxation, 357. Whether interest of money is proper for taxation, ib. How taxes are paid at Hamburgh, 339. In Switzerland, ib. Taxes upon particular employments, ib. Poll-taxes, 362. Taxes badges of liberty, ib. Taxes upon the transfer of property, 362. Stamp duties, 363. On whom the several kinds of taxes principally fall, 364. Taxes upon the wages of labour, 365. Capitation taxes, 367. Taxes upon consumable commodities, 368. Upon necessaries, ib. Upon luxuries, ib. Principal necessaries taxed, 369. Absurdities in taxation, 370. Different parts of Europe very highly taxed, ib. Two different methods of taxing consumable commodities, ib. Sir Matthew Decker's scheme of taxation considered, 371. Excise and customs, ib. Taxation sometimes not an instrument of revenue, but of monopoly, 373. Improvements of the customs suggested, 374. Taxes paid in the price of a commodity little adverted to, 379, 380. On luxuries, the good and bad properties of, ib. Bad effects of farming them out, 383. How the finances of France might be reformed, 384. French and English taxations compared, ib. New taxes always generate discontent, 391, 392. How far the British system of taxation might be applicable to all the different provinces of the empire, 397. Such a plan might speedily discharge the national debt, 399. _Tea_, great importation and consumption of that drug in Britain, 86. _Teachers in Universities_, tendency of endowments to diminish their application, 319. The jurisdictions to which they are subject little calculated to quicken their diligence, ib. Are frequently obliged to gain protection by servility, ib. Defects in their establishments, ib., 320. Teachers among the ancient Greeks and Romans superior to those of modern times, 326. Circumstances which draw good ones to, or drain them from, the universities, 340. Their employment naturally renders them eminent in letters, 341. _Tenures_, feudal, general observations on, 137. Described, 157. _Theology_, monkish, the complexion of, 323. _Thoulouse_, salary paid to counsellor or judge in the parliament of, 301. _Tin_, average rent of the mines of in Cornwall, 71. Yield a greater profit to the proprietors than the silver mines of Peru, ib., 72. Regulations under which tin mines are worked, ib. _Tobacco_, the culture of, why restrained in Europe, 66. Not so profitable an article of cultivation in the West Indies as sugar, ib. The amount and course of the British trade with, explained, 153. The whole duty upon, drawn back on exportation, 204. Consequences of the exclusive trade Britain enjoys with Maryland and Virginia in this article, 244. _Tolls_, for passage over roads, bridges, and navigable canals, the equity of, shewn, 303. Upon carriages of luxury, ought to be higher than upon carriages of utility, ib. The management of turnpikes often an object of just complaint, 304. Why government ought not to have the management of turnpikes, ib., 379. _Tonnage_ and _poundage_, origin of those duties, 372. _Tontine_ in the French finances, what, with the derivation of the name, 390. _Towns_, the places where industry is most profitably exerted, 53. The spirit of combination prevalent among manufacturers, ib., 54. According to what circumstances the general character of the inhabitants as to industry is formed, 137. The reciprocal nature of the trade between them and the country explained, 155. Subsist on the surplus produce of the country, ib. How first formed, 156. Are continual fairs, ib. The original poverty and servile state of the inhabitants of, 162. Their early exemptions and privileges, how obtained, ib. The inhabitants of, obtained liberty much earlier than the occupiers of land in the country, 163. Origin of free burghs, ib. Origin of corporations, ib. Why allowed to form militia, 164. How the increase and riches of commercial towns contributed to the improvement of the countries to which they belonged, 167. _Trade_, double interest deemed a reasonable mercantile profit in, 40. Four general classes of, equally necessary to, and dependent on, each other, 147. Wholesale, three different sorts of, 151. The different returns of home and foreign trade, ib. The nature and operation of the carrying trade examined, 152. The principles of foreign trade examined, 153. The trade between town and country explained, 155. Original poverty and servile state of the inhabitants of towns under feudal government, 162. Exemptions and privileges granted to them, ib. Extension of commerce by rude nations selling their own raw produce for the manufactures of more civilised countries, 165. Its salutary effects on the government and manners of a country, 167. Subverted the feudal authority, 168. The independence of tradesmen and artizans explained, 169. The capitals acquired by, very precarious, until some part has been realised by the cultivation and improvement of land, 172. Over-trading, the cause of complaints of the scarcity of money, 176. The importation of gold and silver not the principal benefit derived from foreign trade, 181. Effect produced in trade and manufactures by the discovery of America, ib. And by the discovery of a passage to the East Indies round the Cape of Good Hope, ib. Error of commercial writers in estimating national wealth by gold and silver, 182. Inquiry into the cause and effect of restraints upon trade, ib. Individuals, by pursuing their own interest, unknowingly promote that of the public, 184. Legal regulations, of trade unsafe, ib. Retaliatory regulations between nations, 189. Measures for laying trade open ought to be carried into execution slowly, 191. Policy of the restraints on trade between France and Britain considered, 192. No certain criterion to determine on which side the balance of trade between two countries turns, ib. Most of the regulations of, founded on a mistaken doctrine of the balance of trade, 199. Is generally founded on narrow principles of policy, 201. Drawbacks of duties, 203. The dealer who employs his whole stock on one single branch of business has an advantage of the same kind with the workman who employs his whole labour on a single operation, 216. Consequences of drawing it from a number of small channels into one great channel, 249. Colony trade, and the monopoly of that trade distinguished, 250. The interest of the consumer constantly sacrificed to that of the producer, 274. Advantages attending a perfect freedom of, to landed nations, according to the present agricultural system of political economy in France, 278. Origin of foreign trade, 279. Consequences of high duties and prohibitions in landed nations, ib. How trade augments the revenue of a country, 281. Nature of the trading intercourse between the inhabitants of towns and those of the country, 285. _Trades_, cause and effect of the separation of, 3. Origin of, 7. _Transit duties_ explained, 379. _Travelling_ for education, summary view of the effects of, 324. _Treasures_, why formerly accumulated by princes, 180. _Treasure-trove_, the term explained, 115. Why an important branch of revenue under the ancient feudal governments, 385. _Turkey company_, short historical view of, 308. _Turnpikes_. See _Tolls_. _Tithes_, why an unequal tax, 352. The levying of, a great discouragement to improvements, ib. The fixing a modus for, a relief to the farmer, 353. V _Value_, the term defined, 12. _Vedius Pollio_, his cruelty to his slaves checked by the Roman emperor Augustus, which could not have been done under the republican form of government, 241. _Venice_, origin of the silk manufacture in that city, 166. Traded in East India goods before the sea track round the Cape of Good Hope was discovered, 228, 229. Nature of the land-tax in that republic, 349. _Venison_, the price of, in Britain, does not compensate the expense of a deer park, 94. _Vicesima hereditatum_ among the ancient Romans, the nature of, explained, 363. _Villages_, how first formed, 156. _Villenage_, probable cause of the wearing out of that tenure in Europe, 160, 161. _Vineyard_, the most profitable part of agriculture, both among the ancients and moderns, 65. Great advantages derived from peculiarities of soil in, ib. _Universities_, the emoluments of the teachers in, how far calculated to promote their diligence, 319. The professors at Oxford have mostly given up teaching, ib. Those in France subject to incompetent jurisdictions, ib. The privileges of graduates improperly obtained, 320. Abuse of lectureships, ib. The discipline of, seldom calculated for the benefit of the students, ib. Are in England more corrupted than the public schools, 321. Original foundation of, ib. How Latin became an essential article in academical education, ib. How the study of the Greek language was introduced, ib., 322. The three great branches of the Greek philosophy, ib. Are now divided into five branches, ib. The monkish course of education in, 323. Have not been very ready to adopt improvements, ib. Are not well calculated to prepare men for the world, 324. How filled with good professors or drained of them, 340. Where the worst and best professors are generally to be met with, ib., 341.--See _Colleges_ and _Teachers_. W _Wages_ of labour, how settled between masters and workmen, 27. The workmen generally obliged to comply with the terms of their employers, ib. The opposition of workmen outrageous, and seldom successful, 28. Circumstances which operate to raise wages, ib. The extent of wages limited by the funds from which they arise, ib. Why higher in North America than in England, ib. Are low in countries that are stationary, ib. Not oppressively low in Great Britain, 30. A distinction made here between the wages in summer and in winter, 31. If sufficient in dear years, they must be ample in seasons of plenty, ib. Different rates of, in different places, ib. Liberal wages encourage industry and propagation, 33. An advance of, necessarily raises the price of many commodities, 36. An average of, not easily ascertained, 37. The operation of high wages and high profits compared, 41. Causes of the variations of, in different employments, ib. Are generally higher in new, than in old trades, 48, 57. Legal regulations of, destroy industry and ingenuity, 59, 60. Natural effect of a direct tax upon, 365. _Walpole_, Sir Robert, his excise scheme defended, 375. _Wants_ of mankind, how supplied through the operation of labour, 9, 10. How extended, in proportion to their supply, 69. The far greater part of them supplied from the produce of other men's labour, 111. _Wars_, foreign, the funds for the maintenance of, in the present century, have little dependence on the quantity of gold and silver in a nation, 178, 179. How supported by a nation of hunters, 289. By a nation of shepherds, ib. By a nation of husbandmen, 290. Men of military age, what proportion they bear to the whole society, ib. Feudal wars, how supported, ib. Causes which, in the advanced state of society, rendered it impossible for those who took the field, to maintain themselves, ib. How the art of war became a distinct profession, 291. Distinction between the militia and regular forces, 292. Alteration in the art of war produced by the invention of fire-arms, ib., 296. Importance of discipline, 293. Macedonian army, 294. Carthaginian army, ib. Roman army, ib. Feudal armies, 295. A well regulated standing army, the only defence of a civilized country, and the only means for speedily civilizing a barbarous country, 296. The want of parsimony during peace, imposes on states the necessity of contracting debts to carry on war, 386, 391. Why war is agreeable to those who live secure from the immediate calamities of it, 391. Advantages of raising the supplies for, within the year, 394. _Watch_ movements, great reduction in the prices of, owing to mechanical improvements, 103. _Wealth_ and money, synonymous terms, in popular language, 173, 182. Spanish and Tartarian estimate of, compared, 173. The great authority conferred by the possession of, 298. _Weavers_, the profits of, why necessarily greater than those of spinners, 21. _West Indies_, discovered by Columbus, 229. How they obtained this name, ib. The original native productions of, ib. The thirst of gold the object of all the Spanish enterprises there, 230. And of those of every other European nation, 231. The remoteness of, greatly in favour of the European colonies there, 232. The sugar colonies of France better governed than those of Britain, 241. _Wheat_. See _Corn_. _Window-tax_ in Britain, how rated, 357. Tends to reduce house rent, ib. _Windsor_ market, chronological table of the prices of corn at, 109. _Wine_, the cheapness of, would be a cause of sobriety, 200. The carrying trade in, encouraged by English statutes, 204. _Wood_, the price of, rises in proportion as a country is cultivated, 70. The growth of young trees prevented by cattle, ib. When the planting of trees becomes a profitable employment, ib. _Wool_, the produce of rude countries, commonly carried to a distant market, 97. The price of, in England, has fallen considerably since the time of Edward III., ib. Causes of this diminution in price, 98. The price of, considerably reduced in Scotland, by the Union with England, 99. Severity of the laws against the exportation of, 268. Restraints upon the inland commerce of, 269. Restraints upon the coasting trade of, ib. Pleas on which these restraints are founded, ib. The price of wool depressed by these regulations, 270. The exportation of, ought to be allowed, subject to a duty, 271. _Woollen_ cloth, the present prices of, compared with those at the close of the fifteenth century, 104. Three mechanical improvements introduced in the manufacture of, ib., 105. THE END. STEREOTYPED. _Edinburgh_:--_DUNCAN STEVENSON_, Printer to the University. TRANSCRIBER'S NOTES: 1. Passages in italics are surrounded by _underscores_. 2. Footnotes have been renumbered moved to the end of this text version. 3. The original text includes one Greek word, the letters of which have been replaced with transliterations. 4. A couple of words use oe ligature in the original. 5. The mixed fractions are represnted using hyphen and forward slash in this text version. For example, 10-1/2 indicates ten and a half. 6. Obvious errors in punctuation have been silently corrected. 7. Missing letters/words in improperly scanned images have been silently added. 8. The following misprints have been corrected: Pg xiv, "ralate" changed to "relate" (relate to the imitative) Pg xviii, "uxuries" changed to "luxuries" (their luxuries,) Pg xx, "induustry" changed to "industry" (resources of industry?) Pg xxiii, "exhibting" changed to "exhibiting" (exhibiting to him) Pg xxx, "beeen" changed to "been" (never been better shown;) Pg 17, "cold" changed to "gold" (of the gold coin. In the market,) Pg 30, "poplousness" changed to "populousness" (and populousness,) Pg 35, "taillies" changed to "tallies" (tallies in the election) Pg 101, "barrennes" changed to "barrenness" (only of the barrenness) Pg 112, "requirs" changed to "requires" (master tailor requires) Pg 118, "the the" changed to "the" (different operations of the) Pg 147, "univesally" changed to "universally" (are universally) Pg 153, "natrually" changed to "naturally" (violence, naturally) Pg 176, "god" changed to "good" (though with a good deal) Pg 210, "wich" changed to "which" (value of silver which varies) Pg 237, "interferred" changed to "interfered" (interfered too much) Pg 246, "fallan" changed to "fallen" (British profit has fallen) Pg 259, "restrain" changed to "restraint" (By this restraint) Pg 281, "manufacterers" changed to "manufacturers" (over that of artificers and manufacturers.) Pg 288, "85,159-5/11" changed to "85,179-5/11" Pg 290, "seige" changed to "siege" (till the siege of Veii,) Pg 342, "re-respective" changed to "respective" (to their respective abilities.) Pg 353, "pruduce" changed to "produce" (fifth part of the produce.) Pg 364, "more" changed to "money" (have the money to pay.) Pg 406, "dicovery" changed to "discovery" (The discovery and colonization of,) Pg 415, "evidince" changed to "evidence" (evidence of its wealth,) Pg 415, "of of" changed to "of" (restraining the exportation of) Pg 415, "for for" changed to "for" (but for foreign trade,) 9. Other than the corrections listed above, printer's inconsistencies in spelling and hyphenation have been retained.